10-K 1 FORM 10-K
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, 1994 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) 64 Perimeter Center East Atlanta, Georgia 30346 (404) 393-0650 1-3164 Alabama Power Company 63-0004250 (An Alabama Corporation) 600 North 18th Street Birmingham, Alabama 35291 (205) 250-1000 1-6468 Georgia Power Company 58-0257110 (A Georgia Corporation) 333 Piedmont Avenue, N.E. Atlanta, Georgia 30308 (404) 526-6526 0-2429 Gulf Power Company 59-0276810 (A Maine Corporation) 500 Bayfront Parkway Pensacola, Florida 32501 (904) 444-6111 0-6849 Mississippi Power Company 64-0205820 (A Mississippi Corporation) 2992 West Beach Gulfport, Mississippi 39501 (601) 864-1211 1-5072 Savannah Electric and Power Company 58-0418070 (A Georgia Corporation) 600 Bay Street, East Savannah, Georgia 31401 (912) 232-7171
Securities registered pursuant to Section 12(b) of the Act: Each of the following securities registered pursuant to Section 12(b) of the Act are registered on the New York Stock Exchange. Title of each class Registrant Common Stock, $5 par value The Southern Company --------------------------- Class A preferred, cumulative, $25 stated capital Alabama Power Company 7.60% (First 1992 Series) 6.80% Series 7.60% (Second 1992 Series) 6.40% Series Adjustable Rate (1993 Series) First mortgage bonds 9 1/4% Series due 2021 --------------------------- Preferred stock, cumulative, $100 stated value Georgia Power Company $7.72 Series $7.80 Series Class A preferred, cumulative, $25 stated value $2.125 Series $1.9375 Series $1.90 Series Adjustable Rate (First 1993 Series) $1.9875 Series Adjustable Rate (Second 1993 Series) $1.925 Series Preferred securities, cumulative, $25 liquidation preference (Note) 9% Monthly Income Preferred Security, Series A First mortgage bonds 6 1/8% Series due 1999 6 7/8% Series due 2002 ---------------------------
Preferred stock, cumulative, $100 par value Mississippi Power Company Depositary Preferred Shares, each representing one-fourth of a share of: 7.25% Series 6.32% Series 6.65% Series ---------------------------
Preferred stock, cumulative, $25 par value Savannah Electric and Power Company 6.64% Series (Note) Issued by Georgia Power Capital, L.P., and unconditionally guaranteed by Georgia Power Company.
Securities registered pursuant to Section 12(g) of the Act:
Title of each class Registrant Preferred stock, cumulative, $100 par value Alabama Power Company 4.20% Series 4.60% Series 4.72% Series 5.96% Series 4.52% Series 4.64% Series 4.92% Series 6.88% 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 $4.60 Series (1964) $4.96 Series $6.48 Series $4.60 Series (1962) $4.72 Series $5.00 Series $6.60 Series $4.60 Series (1963) 4.92 Series $5.64 Series ---------------------------
Preferred stock, cumulative, $100 par value Gulf Power Company 4.64% Series 5.44% Series 7.88% Series 5.16% Series 7.52% Series Class A preferred, cumulative, $10 par, $25 stated capital 7.00% Series 7.30% Series 6.72% Series Adjustable Rate (1993 Series)
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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, 1995: $13.7 billion. Each of such other registrants are wholly-owned subsidiaries of The Southern Company and have no voting stock other than their common stock. A description of registrants' common stock follows:
Description of Shares Outstanding Registrant Common Stock at February 28, 1995 The Southern Company Par Value $5 Per Share 661,856,138 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 1995 Annual Meeting of Stockholders 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- The SOUTHERN System.................................................................................. I-1 New Business Development............................................................................. I-2 Certain Factors Affecting the Industry............................................................... I-3 Construction Programs................................................................................ I-3 Financing Programs................................................................................... I-4 Fuel Supply.......................................................................................... I-7 Territory Served..................................................................................... I-8 Competition.......................................................................................... I-12 Regulation........................................................................................... I-13 Rate Matters......................................................................................... I-16 Employee Relations................................................................................... I-16 Item 2 Properties............................................................................................. I-18 Item 3 Legal Proceedings...................................................................................... I-23 Item 4 Submission of Matters to a Vote of Security Holders.................................................... I-25 Executive Officers of SOUTHERN......................................................................... I-26 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 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-13 Item 12 Security Ownership of Certain Beneficial Owners and Management.......................................................................................... III-30 Item 13 Certain Relationships and Related Transactions........................................................ III-36 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. Other defined terms specific only to Item 11 are found on page III-13.
Term Meaning AEC........................................... Alabama Electric Cooperative, Inc. AFUDC ........................................ Allowance for Funds Used During Construction ALABAMA....................................... Alabama Power Company Alicura....................................... Hidroelectrica Alicura, S.A. (Argentina) AMEA ......................................... Alabama Municipal Electric Authority Clean Air Act ................................ Clean Air Act Amendments of 1990 Communications................................ Southern Communications Services, Inc. Dalton ....................................... City of Dalton, Georgia DOE .......................................... United States Department of Energy Edelnor....................................... Empressa, Electrica del Norte Grande, S.A. (Chile) Energy Act.................................... Energy Policy Act of 1992 EMF........................................... Electromagnetic field EPA .......................................... United States Environmental Protection Agency FERC ......................................... Federal Energy Regulatory Commission FPC .......................................... Florida Power Corporation FP&L ......................................... Florida Power & Light Company Freeport...................................... Freeport Power Company (Bahamas) GEORGIA ...................................... Georgia Power Company GULF ......................................... Gulf Power Company Gulf States .................................. Gulf States Utilities Company Holding Company Act .......................... Public Utility Holding Company Act of 1935, as amended IBEW ......................................... International Brotherhood of Electrical Workers IRS........................................... Internal Revenue Service JEA .......................................... Jacksonville Electric Authority MEAG ......................................... Municipal Electric Authority of Georgia MISSISSIPPI .................................. Mississippi Power Company NRC ......................................... Nuclear Regulatory Commission OPC .......................................... Oglethorpe Power Corporation operating affiliates.......................... ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH PSC .......................................... Public Service Commission REA .......................................... Rural Electrification Administration RICO.......................................... Racketeer Influenced and Corrupt Organizations Act SAVANNAH ..................................... Savannah Electric and Power Company SCS .......................................... Southern Company Services, Inc. SDIG.......................................... The Southern Development and Investment Group, Inc. SEC .......................................... Securities and Exchange Commission SEGCO ........................................ Southern Electric Generating Company SEI .......................................... Southern Electric International, Inc. SEPA ......................................... Southeastern Power Administration SERC ......................................... Southeastern Electric Reliability Council SMEPA ........................................ South Mississippi Electric Power Association SOUTHERN...................................... The Southern Company Southern Nuclear.............................. Southern Nuclear Operating Company, Inc. SOUTHERN system............................... SOUTHERN, the operating affiliates, SEGCO, SEI Southern Nuclear, SCS, Communications, SDIG and ............................... other subsidiaries T & TEC....................................... Trinidad and Tobago Electricity Commission TVA........................................... Tennessee Valley Authority
ii 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. ALABAMA and GEORGIA each own 50% of the outstanding common stock of SEGCO. The operating affiliates supply electric service in the states of Alabama, Georgia, Florida, Mississippi and Georgia, respectively, and SEGCO owns generating units at a large electric generating station which supplies power to ALABAMA and GEORGIA. More particular information relating to each of the operating affiliates 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 SEI, Communications, Southern Nuclear, SCS (the system service company), SDIG and various other subsidiaries related to foreign operations and domestic non-utility operations (see Exhibit 21 herein). At this time, the operations of the other subsidiaries are not material. SEI designs, builds, owns and operates power production facilities and provides a broad range of technical services to industrial companies and utilities in the United States and a number of international markets. A further description of SEI's business and organization follows later in this section. Communications, beginning in mid-1995, will provide digital wireless communications services -- over the 800-megahertz frequency band -- to SOUTHERN's subsidiaries and also will market these services to the public within the Southeast. Southern Nuclear provides services to the Southern electric system's nuclear plants. SDIG develops new business opportunities related to energy products and services. 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. The SOUTHERN System The transmission facilities of each of the operating affiliates and SEGCO 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 operating affiliates 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" herein.) Operating contracts covering arrangements in effect with principal neighboring utility systems provide for capacity exchanges, capacity purchases I-1 and sales, transfers of economy energy and other similar transactions. Additionally, the operating affiliates 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 Power Company, 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 operating affiliates 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 operating affiliates are represented on the National Electric Reliability Council. An intra-system interchange agreement provides for coordinating operations of the power producing facilities of the operating affiliates and SEGCO 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 operating affiliates to provide the most economical sources of power consistent with good operation. The resulting benefits and savings are apportioned among the operating affiliates. SCS has contracted with SOUTHERN, each operating affiliate, SEI, 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. SEI, SDIG and Communications have also secured from the operating affiliates certain services which are furnished at cost. Southern Nuclear has contracted with ALABAMA to operate its Farley Nuclear Plant, as authorized by amendments to the plant operating licenses. Southern Nuclear also has a contract to provide GEORGIA with technical and other services to support GEORGIA's operation of plants Hatch and Vogtle. Applications are now pending before the NRC for amendments to the Hatch and Vogtle operating licenses which would authorize Southern Nuclear to become the operator. See Item 1 - BUSINESS - "Regulation - Atomic Energy Act of 1954" herein. New Business Development SOUTHERN continues to consider new business opportunities, particularly those which allow use of the expertise and resources developed through its regulated utility experience. These endeavors began in 1981 and are conducted through SEI and other existing subsidiaries. SEI's primary business focus is international and domestic cogeneration, the independent power market, and the privatization and development of generation facilities in the international market. SEI currently operates three domestic independent power production projects totaling 280 megawatts and is one-third owner of one of these (which produces 180 megawatts). SEI (through subsidiaries) has a contract to sell electric energy to Virginia Electric and Power Company from a facility it is constructing in King George, Virginia. Upon completion, currently planned for 1996, SEI will operate the 220 megawatt coal-fired plant. SOUTHERN owns 50% of the project. In April 1993, SOUTHERN completed the purchase of a 50% interest in Freeport, an electric utility on the Island of Grand Bahama, for a purchase price of $35.5 million. Freeport has generating capacity of about 112 megawatts. In August 1993, SOUTHERN completed the purchase of a 55% interest in Alicura, an entity that owns the right to use the generation from a 1,000 megawatt hydroelectric generating facility in Argentina, for a net purchase price of approximately $188 million. In 1993, SOUTHERN completed the purchase of a 38% interest in Edelnor for the purchase price of $73 million. In December 1994, SOUTHERN purchased an additional 27% interest in Edelnor for $80 million. Edelnor is a utility located in Northern Chile that owns and operates a transmission grid and 96 megawatts of generating facilities and is building an additional 150 megawatt facility. I-2 Also in December 1994, SOUTHERN completed the acquisition of a 39% interest in a partnership that acquired the generation operations of the T&TEC, comprising approximately 1,178 megawatts of generating capacity for a purchase price of $85.6 million. Additionally, SOUTHERN purchased a 100% interest in an energy and recovery complex from Scott Paper Company for a purchase price of $350 million, which included the assumption of $85 million of outstanding tax-exempt debt. This complex is used to generate substantially all of the steam and electricity requirements of Scott's integrated pulp and paper mill located in Mobile, Alabama and has a generating capacity of 105 megawatts. Most of the facility's fuel needs are met from waste and by-products generated by Scott's pulping and woodlands operations. SEI and SDIG render consulting services and market SOUTHERN system expertise in the United States and throughout the world. They contract with other public utilities, commercial concerns and government agencies for the rendition of services and the licensing of intellectual property. In addition, SDIG engages in energy management-related services and activities. At year-end, the SEC authorized SOUTHERN to form a new subsidiary, Communications, and to invest up to $179 million in Communications. Communications has contracted with a prime vendor for the installation and construction of a wireless communications system in order to provide services to the general public, including SOUTHERN subsidiaries. The technology selected is new and still under development. Communications will be subject to both market and technology risks. It is anticipated that the operations of Communications, at least in its early years, will negatively affect earnings and cash flow. Furthermore, there can be no assurance that Communications will ultimately recover the cost of constructing its wireless communications system. 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 1995-1997 in these and other new businesses. Certain Factors Affecting the Industry Various factors are currently affecting the electric utility industry in general, including increasing competition, 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 - "New Business Development,"- - "Competition" and -- "Environmental Regulation". 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 1995 through 1997 by the operating affiliates, SEGCO, SCS and Southern Nuclear are estimated as follows: (in millions) =========================================================== 1995 1996 1997 ---------------------------- ALABAMA $ 604 $ 500 $ 502 GEORGIA 579 626 724 GULF 62 76 84 MISSISSIPPI 78 73 72 SAVANNAH 34 27 26 SEGCO 10 11 11 SCS 26 19 14 Southern Nuclear 2 2 1 ---------------------------------------------------------- SOUTHERN system* $1,395 $1,267 $1,362 ========================================================== *System totals for years 1996 and 1997 are less than the sum of the subsidiaries due to changes made in GEORGIA's construction budget subsequent to approval of the SOUTHERN system construction budget. However, GEORGIA's management has adopted an initiative to reduce its 1996 and 1997 construction expenditures by approximately 10% from currently estimated amounts. There can be no assurance that such reductions will be achieved. Reference is made to Note 4 to the financial statements of each registrant in Item 8 herein for the amounts of AFUDC included in the above estimates. The construction estimates do not include amounts which may be spent by Communications or SEI (or the subsidiary(s) created to effect such project(s)) on future power production projects or the projects discussed earlier under "New Business Development." (See also Item 1 - BUSINESS - "Financing Programs" herein.) I-3 Estimated construction costs in 1995 are expected to be apportioned approximately as follows: (in millions)
============================================================================================================================ SOUTHERN system* ALABAMA GEORGIA GULF MISSISSIPPI SAVANNAH ----------------------------------------------------------------------------------------- Combustion turbines $ 135 $100 $ 35 $ - $ - $ - Other generating facilities including associated plant substations 246 98 90 20 16 12 New business 323 134 155 14 13 7 Transmission 214 91 105 2 15 1 Joint line and substation 30 - 28 1 1 - Distribution 155 77 41 11 18 8 Nuclear fuel 99 40 59 - - - General plant 193 64 66 14 15 6 ---------------------------------------------------------------------------------------- $1,395 $604 $579 $62 $78 $34 ========================================================================================
*SCS and Southern Nuclear plan capital additions to general plant in 1995 of $26 million and $2 million, respectively, while SEGCO plans capital additions of $10 million to generating facilities. 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; revised load growth estimates; changes in environmental regulations; changes in existing nuclear plants to meet new regulatory requirements; increasing cost of labor, equipment and materials; and cost of capital. Also, the SOUTHERN system construction estimates do not reflect expenditures by Communications or the possibility of SEI securing a contract(s) to buy or build additional generating facilities. The operating affiliates do not have any baseload generating plants under construction. However, within the service area, the construction of combustion turbine peaking units with an aggregate capacity of approximately 1,100 megawatts is planned to be completed by 1997. In addition, significant construction will continue related to transmission and distribution facilities and the upgrading and extension of the useful lives of generating plants. During 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. (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. Rocky Mountain Hydroelectric Project For information regarding GEORGIA's Rocky Mountain Project, including a joint ownership agreement with OPC and the uncertain recovery of GEORGIA's costs in this project, reference is made to Note 4 to SOUTHERN's and to GEORGIA's financial statements in Item 8 herein. Stockholder Suit For information concerning a suit against certain current and former directors and officers of SOUTHERN involving allegations related to Plant Vogtle, the Rocky Mountain project and other matters, see Item 3 - LEGAL PROCEEDINGS herein. Financing Programs In early 1995, SOUTHERN sold - through a public offering - common stock for proceeds totaling approximately $103 million. SOUTHERN may require additional I-4 equity capital during the remainder of 1995. The amount and timing of additional equity capital to be raised in 1995, 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 operating affiliates' construction programs are expected to be financed primarily from internal sources. Short-term debt will be utilized if necessary. The operating affiliates may issue additional long-term debt and preferred stock primarily for the purposes of debt maturities and for redeeming higher-cost securities if market conditions permit. In order to issue first mortgage bonds and preferred stock, each of the operating affiliates must comply with earnings coverage requirements contained in its respective mortgage and charter. These provisions require, for the issuance of additional first mortgage bonds, a minimum, before income tax, earnings coverage of twice the pro forma annual interest charges on first mortgage bonds and indebtedness secured by prior or equal ranking lien and, for the issuance of additional preferred stock, a minimum, after income tax, earnings coverage of one and one-half times pro forma annual interest charges and preferred stock dividends, in each case for a period of twelve consecutive calendar months within the fifteen calendar months immediately preceding the proposed new issue. The ability to issue securities in the future will depend on coverages at that time. Currently each of the operating affiliates expect to have adequate coverage ratios for anticipated requirements through at least 1997. The amounts of securities representing short-term unsecured indebtedness allowable under the respective charters, and the maximum amounts of short-term indebtedness authorized by the appropriate regulatory authorities, are shown in the following table: ====================================================== Short-term Unsecured Indebtedness ------------------------------------------------------ Allowable Under Charter at December 31, 1994 -------------------- Percent of Secured Indebtedness and Other Amount Capital (2) -------- ------------------- (Millions) ALABAMA $ 1,108 20% GEORGIA 1,752 20 GULF 89 10 MISSISSIPPI 146 20 SAVANNAH 70 20 SOUTHERN (1) (1) ------------------------------------------------------ ====================================================== Short-term Indebtedness ------------------------------------------------------ Maximum Regulatory Authorization ------------- Outstanding at Amount December 31, 1994 ------ ----------------- (Millions) ALABAMA $530 (3) $180 GEORGIA 900 (3) 425 GULF 150 (3) 54 MISSISSIPPI 140 (3) - SAVANNAH 70 (3) 3 SOUTHERN 500 (3) 305 ------------------------------------------------------ Notes: (1) No limitation. (2) Under the provisions of the respective charters, GEORGIA's, MISSISSIPPI's and SAVANNAH's preferred stockholders have approved increases in the amounts of securities representing short-term unsecured indebtedness which the companies may have outstanding until July 1 in 2003, 1999 and 1999, respectively. Such limitations were raised from 10% of secured indebtedness and other capital to 20% thereof. These approved increases are reflected in the above table. I-5 (3) ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH 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 March 31, 1996, except for GULF, which date is December 31, 1996. Reference is made to Note 5, 5, 8, 5, 5 and 5 to the financial statements for SOUTHERN, ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH, respectively, in Item 8 herein for information regarding the registrants' credit arrangements. I-6 Fuel Supply The operating affiliates' and SEGCO's supply of electricity is derived predominantly from coal. The sources of generation for the years 1992 through 1994 and the estimates for 1995 are shown below: Oil and ALABAMA Coal Nuclear Hydro Gas Total ----------------------------------------- 1992 70% 21% 9% *% 100% 1993 70 22 8 * 100 1994 68 23 9 * 100 1995 74 19 7 * 100 GEORGIA 1992 76 21 3 * 100 1993 77 20 3 * 100 1994 75 22 3 * 100 1995 76 21 2 1 100 GULF 1992 100 ** ** * 100 1993 99 ** ** 1 100 1994 100 ** ** * 100 1995 100 ** ** * 100 MISSISSIPPI 1992 91 ** ** 9 100 1993 90 ** ** 10 100 1994 85 ** ** 15 100 1995 83 ** ** 17 100 SAVANNAH 1992 81 ** ** 19 100 1993 83 ** ** 17 100 1994 91 ** ** 9 100 1995 89 ** ** 11 100 SEGCO 1992 100 ** ** * 100 1993 100 ** ** * 100 1994 100 ** ** * 100 1995 100 ** ** * 100 SOUTHERN system 1992 77 17 5 1 100 1993 78 17 4 1 100 1994 75 19 5 1 100 1995 78 17 4 1 100 ------------------------------------------------------------- *Less than 0.5% **Not applicable The average costs of fuel in cents per net kilowatt-hour generated are shown below: Oil and Weighted ALABAMA Coal Nuclear Gas Average ------------------------------------------- 1992 1.99 0.44 * 1.64 1993 2.11 0.51 * 1.73 1994 1.92 0.49 * 1.56 GEORGIA 1992 1.75 0.63 * 1.52 1993 1.75 0.58 * 1.52 1994 1.67 0.63 * 1.44 GULF 1992 2.07 ** * 2.07 1993 2.03 ** 4.50 2.05 1994 2.00 ** * 2.01 MISSISSIPPI 1992 1.59 ** 3.05 1.60 1993 1.66 ** 2.97 1.71 1994 1.67 ** 2.60 1.71 SAVANNAH 1992 2.28 ** 3.55 2.53 1993 2.02 ** 4.70 2.49 1994 2.19 ** 4.72 2.42 SEGCO 1992 1.81 ** * 1.81 1993 1.80 ** * 1.81 1994 1.83 ** * 1.83 SOUTHERN system 1992 1.86 0.54 4.81 1.62 1993 1.90 0.54 4.34 1.67 1994 1.80 0.56 3.99 1.56 ---------------------------------------------------------------- *Not meaningful because of minimal generation from fuel source. **Not applicable. ***See SELECTED FINANCIAL DATA in Item 6 herein for each registrant's source of energy supply. I-7 At March 3, 1995, the operating affiliates and SEGCO had stockpiles of coal on hand at their respective coal-fired plants which represented an estimated 38 day recoverable supply, based on projected 1995 nameplate burn requirements. It is estimated that approximately 56.8 million tons of coal will be consumed in 1995 by the operating affiliates and SEGCO (including those units GEORGIA owns jointly with OPC, MEAG, Dalton, FP&L and JEA and the units ALABAMA owns jointly with AEC). The operating affiliates and SEGCO currently have 32 coal contracts. These contracts cover remaining terms of up to 16 years. Approximately 20% of 1995 estimated coal requirements will be purchased in the spot market. Management has set a goal whereby the spot market should be utilized, absent the transition from coal contract expirations, for 20 to 25% of the SOUTHERN system's coal supply. Additionally, it has been determined that approximately 35 days of recoverable supply of coal is the appropriate level for coal stockpiles. During 1994, the operating affiliates' and SEGCO's average price of coal delivered was approximately $42 per ton. The typical sulfur content of coal purchased under contracts ranges from approximately 0.7% to 3.0% sulfur by weight. Fuel sulfur restrictions and other environmental limitations have increased significantly and may increase further the difficulty and cost of obtaining an adequate coal supply. 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 owns coal lands and mineral rights in the Warrior Coal Field, located northwest of Birmingham in the vicinity of its Gorgas Steam Plant. SEGCO also owns coal reserves in the Warrior Coal Field and in the Cahaba Coal Field, which is located southwest of Birmingham. ALABAMA has an agreement with a non-affiliated industrial and mining firm to mine coal from ALABAMA's reserves, as well as its own reserves, for supply to ALABAMA's generating units. The operating affiliates have renegotiated, bought out or otherwise terminated various coal supply contracts. For more information on certain of these transactions see Note 5 to the financial statements of SOUTHERN, GULF and MISSISSIPPI in Item 8 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 up to the year 2014, but 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, which was scheduled to begin in 1998. However, the actual year this service will begin is uncertain. Sufficient storage capacity currently is available to permit operation into 2003 at Plant Hatch, into 2009 at Plant Vogtle, and into 2012 and 2014 at Plant Farley units 1 and 2, respectively. 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. Territory Served The territory in which the operating affiliates 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 operating affiliates. 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 owns coal reserves near I-8 its steam-electric generating plant at Gorgas and uses the output of coal from these reserves in its generating plants. 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 (including Athens, Atlanta, Augusta, Columbus, Macon, Rome and Valdosta), as well as in rural areas, and at wholesale currently to 39 electric cooperative associations through OPC, a corporate cooperative of electric membership cooperatives in Georgia, and to 50 municipalities, 47 of which are served through MEAG, a public corporation and an instrumentality of the State of Georgia. 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. GULF also sells electric appliances. 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 and four rural electric cooperative associations. 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. I-9 The sources of revenues for the SOUTHERN system and each of SOUTHERN's operating affiliates are shown in Item 6 herein. For the year ended December 31, 1994, the registrants derived their respective industrial revenues as shown in the following table.
====================================================================================================================== SOUTHERN system ALABAMA GEORGIA GULF MISSISSIPPI SAVANNAH ---------------------------------------------------------------------------------------------------------------------- Textiles 13% 10% 19% *% 3% *% Chemical 10 14 6 21 14 36 Paper 10 10 10 11 5 28 Primary metal 7 13 5 1 2 * Stone, clay, glass and concrete 6 6 8 2 1 4 Utility services 8 8 8 3 9 6 Food 5 3 6 1 5 9 Government 5 2 5 38 10 * Transportation equipment 3 1 4 1 7 10 Lumber and wood products 4 5 3 2 8 2 Other** 29 28 26 20 36 5 ---------------------------------------------------------------------------------------------------------------------- 100% 100% 100% 100% 100% 100% ======================================================================================================================
* Less than 0.5% **Other major sources (5% or more) of industrial revenues were: ALABAMA, coal mining (5%); GULF, oil and gas extraction (8%); and MISSISSIPPI, petroleum refining (23%) and electric machinery (5%). A portion of the area served by SOUTHERN's operating affiliates 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 REA 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 70 electric cooperative organizations operating in the territory in which the operating affiliates 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 REA 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. Four electric cooperative associations, financed by the REA, operate within GULF's service area. These cooperatives purchase their full requirements from AEC and SEPA. A non-affiliated utility also operates within GULF's service area and purchases a portion of its requirements from GULF. ALABAMA and GULF have entered into separate agreements with AEC involving interconnection between the respective systems and, in the case of ALABAMA, the delivery of capacity and energy from AEC to certain distributing cooperatives. The rates for the various services provided by ALABAMA and GULF to AEC are based on formulary approaches which result in the charges by each company being updated annually, subject to FERC approval. See Item 2 - PROPERTIES - "Jointly-Owned Facilities" herein for details of ALABAMA's joint-ownership with AEC of a portion of Plant Miller. Another of the 70 electric cooperatives is SMEPA, also a generating and transmitting cooperative. SMEPA has a generating capacity of 739,000 kilowatts I-10 and a transmission system estimated to be 1,357 miles in length. MISSISSIPPI has an interchange agreement with SMEPA pursuant to which various services are provided, including the furnishing of protective capacity by MISSISSIPPI to SMEPA. 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 an agreement with OPC pursuant to which, effective in September 1991, OPC ceased to be a 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. During 1994, OPC gave GEORGIA notice of its intent to decrease its purchases of capacity by 250 megawatts beginning in the fall of 1996. There are 65 municipally-owned electric distribution systems operating in the territory in which SOUTHERN's operating affiliates 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 beginning 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 7 to ALABAMA's financial statements to Item 8 herein for further information on these contracts. Forty-six municipally-owned electric distribution systems formerly served on a full requirements wholesale basis by GEORGIA and one county-owned system now 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 through purchases of capacity and energy from GEORGIA under partial requirements rates. Similarly, since 1977 Dalton has filled its requirements from generation facilities acquired from GEORGIA and through partial requirements purchases. The full requirements of two municipally-owned electric distribution systems are still served at wholesale by GEORGIA. (See Item 2 - PROPERTIES - "Jointly-Owned Facilities" herein.) GULF and MISSISSIPPI provide wholesale requirements for one municipal system each. GEORGIA has entered into substantially similar agreements with OPC, 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.) ALABAMA, GEORGIA, GULF and MISSISSIPPI also have contracts with SEPA (a federal power marketing agency) 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 I-11 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. 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. No other electric utility operates in competition with SAVANNAH in its service area. Pursuant to the 1956 Utility Act, the Mississippi PSC issued "Grandfather Certificates" of 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 290,000 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 Agreements Reference is made to Note 8, 7, 6, 7, 7 and 6 to the financial statements for SOUTHERN, ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH, respectively, in Item 8 herein for information regarding contracts for the sales of capacity and energy to non-territorial customers. Competition The electric utility industry in general has become, and is expected to continue to be, increasingly competitive as the result of factors including regulatory and technological developments. The Energy Act, enacted in 1992, was intended to foster competition in the wholesale market by, among other things, facilitating participation by independent power producers. The Energy Act includes provisions authorizing the FERC under certain conditions to order utilities owning transmission facilities to provide wholesale transmission services for other utilities or entities that generate energy. 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. Reference is made to each registrant's "Management's Discussion and Analysis - Future Earnings Potential" in Item 7 herein for further discussion of competition. ALABAMA currently has cogeneration contracts in effect with nine industrial customers. Under the terms of these contracts, ALABAMA purchases excess generation of such companies. During 1994, ALABAMA purchased 82.1 million kilowatt-hours from such companies at a cost of $1.5 million. GEORGIA currently has cogeneration contracts in effect with seven industrial customers. Under the terms of these contracts, GEORGIA purchases excess generation of such companies. During 1994, GEORGIA purchased 4.1 million kilowatt-hours from such companies at a cost of $56,000. GEORGIA has also reached an agreement on major terms and conditions of a purchase power I-12 arrangement whereby GEORGIA would buy electricity during peak periods from a proposed 200 megawatt cogeneration facility, starting in June 1998. A final agreement is expected to be completed and filed with the Georgia PSC for certification during 1995. GULF currently has cogeneration agreements for "as available" energy in effect with two industrial customers. During 1994, GULF purchased 237 million kilowatt-hours from such companies for $3.8 million. SAVANNAH currently has cogeneration contracts in effect with four industrial customers. Under the terms of these contracts, SAVANNAH purchases excess generation of such companies. During 1994, SAVANNAH purchased 2.0 million kilowatt-hours from such companies at a cost of $43,000. 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, political and environmental considerations, taxation and supply. The operating affiliates 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" herein for information concerning suppliers of electricity operating within or near the areas served at retail by the operating affiliates.) In addition, while the Energy Act does not provide for "retail wheeling" (i.e., the transmission and distribution by an electric utility to retail customers within its service territory of energy produced by another entity), applicable legislative and regulatory bodies may consider imposing such a requirement in the future, the effect of which may be adverse or, conversely, prove to be beneficial. Some form of retail wheeling has been mandated in the states of California and Michigan. Any form of retail wheeling which may be adopted would need to address a variety of complex issues, including stranded investments and the utility's obligation to serve a particular customer or customers. Regulation State Commissions The operating affiliates and SEGCO 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" 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. In light of heightened competition in the electric utility industry and development of the "information superhighway", public debate has increasingly suggested enacting legislation which would repeal, in whole or in part, the Holding Company Act. Federal Power Act The Federal Power Act subjects the operating affiliates 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 1,582,725 kilowatts and 17 existing GEORGIA generating stations having an aggregate installed capacity of 859,440 kilowatts. I-13 In December 1991, ALABAMA and GEORGIA filed with the FERC their applications for new licenses on six of their existing hydroelectric projects. The six projects, ALABAMA's Yates and Thurlow and GEORGIA's Lloyd Shoals, Langdale, Riverview and North Georgia, totaling 272,340 kilowatts of capacity, had licenses that expired December 31, 1993. Although the possibility of competition existed for these licenses, no competing applications were filed prior to the filing deadline of December 31, 1991. The Lloyd Shoals, Langdale and Riverview projects were granted new 30-year licenses that expire 2023. Each of the remaining projects are operating on annual licenses under the same terms and conditions as their original licenses. Additionally, the FERC has issued an order granting a combined, 40-year license for the Yates and Thurlow projects. ALABAMA appealed the FERC order to the U.S. Court of Appeals for the District of Columbia Circuit with respect to certain provisions of this license. However, in December 1994 the FERC, in a separate proceeding, issued an order deleting the contested provisions, but ALABAMA's appeal remains pending before the Court. As a part of the application for the combined, 40-year license for the Yates and Thurlow projects, ALABAMA agreed to expand the capacity of these units by a total of approximately 10 megawatts. In August 1995, GEORGIA will file with the FERC its application for a new license for its Sinclair Project which has 45,000 kilowatts of capacity. GEORGIA's current license for this project expires September 1, 1997. Certain environmental issues raised during the licensing process may result in the FERC including license terms and conditions that could have a substantial effect on the peaking capability of the project. In July 1994, flooding of the Flint River in and around Albany, Georgia and the Flint River Project (5,400 kilowatts of capacity) resulted in substantial damage to the dam and power house. Under the FERC oversight, GEORGIA is undertaking repairs to the facilities. In the event GEORGIA elects to file for a new license for the Flint River Project, it is required to file a notice of intent with the FERC by September 1996. GEORGIA will then be required to file an application for a new license for such project by September 1999. GEORGIA and OPC also have a license, expiring in 2027, for the Rocky Mountain Project, a pure pumped storage facility of 847,800 kilowatt capacity scheduled to begin commercial operation in 1995. In 1988, the FERC approved an amendment to GEORGIA's license for the project, adding OPC as co-licensee and extending the commercial operation date to 1996. (See Item 1 - BUSINESS - "Construction Programs - Rocky Mountain Hydroelectric Project" and Item 2 - PROPERTIES - "Jointly-Owned Facilities" herein.) Licenses for all projects, excluding those discussed above, expire in the period 2007-2023 in the case of ALABAMA's projects and in the period 2005-2020 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. In addition, the FERC recently has issued a policy statement addressing decommissioning of a licensed project. What may be required to decommission a project has not been determined. 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. Reference is made to Notes 1 and 13 to SOUTHERN's, Notes 1 and 11 to ALABAMA's and Notes 1 and 4 to GEORGIA's financial statements in Item 8 herein for information on nuclear decommissioning costs and nuclear insurance. I-14 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 operating affiliates and SEGCO 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 operating affiliates 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. Possible adverse health effects of EMFs from various sources, including transmission and distribution lines, have been the subject of a number of studies and increasing public discussion. The scientific research currently is inconclusive as to whether EMFs may cause adverse health effects. However, there is the possibility of passage of legislation and promulgation of rulemaking that would require measures to mitigate EMFs, with resulting increases in capital and operating costs. In addition, the potential exists for public liability with respect to lawsuits brought by plaintiffs alleging damages caused by EMFs. The operating affiliates' and SEGCO's estimated capital expenditures for environmental quality control facilities for the years 1995, 1996 and 1997 are as follows: (in millions) ======================================================== 1995 1996 1997 ------------------------------- ALABAMA $28.4 $26.4 $33.4 GEORGIA 21.5 30.7 40.3 GULF 1.4 13.7 17.2 MISSISSIPPI 6.3 0.8 2.1 SAVANNAH 0.5 1.6 0.3 SEGCO 6.5 5.8 3.2 ------------------------------- SOUTHERN system $64.6 $79.0 $96.5 ======================================================== *Such estimates are included in the current construction programs. (See Item 1 - BUSINESS - "Construction Programs" herein.) Additionally, each operating affiliate (excluding SAVANNAH) and SEGCO have incurred costs for environmental remediation of various sites. Reference is made to each applicable 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 Note 4 to GEORGIA's financial statements in Item 8 herein for information regarding the identification of sites that may require environmental remediation by GEORGIA. The operating affiliates 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. I-15 Rate Matters Rate Structure The rates and service regulations of the operating affiliates 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 (without differentiation between industrial and commercial classifications) including those with special features to encourage off-peak usage. Additionally, the operating affiliates are allowed by their respective PSCs to negotiate the terms and compensation of service to large customers. With respect to GULF's and MISSISSIPPI's retail rates, fuel and purchased power costs above base levels included in the various rate schedules are billed to such customers under the fuel and energy adjustment clauses. 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's recovery of such costs is based upon projections thereof for six-month periods; any over/under recovery during any such period is reflected in the subsequent six-month period. The adjustment factors for MISSISSIPPI's retail and wholesale rates are 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. Integrated Resource Planning During 1991, the Georgia legislature passed certain legislation under which both GEORGIA and SAVANNAH must file Integrated Resource Plans for approval by the Georgia PSC. The plans must specify how GEORGIA and SAVANNAH each intend 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 will be recoverable through rates. In 1992, the Georgia PSC approved Integrated Resource Plans for GEORGIA and SAVANNAH. See Note 3 to SOUTHERN's and GEORGIA's financial statements in Item 8 herein for information regarding the recovery of GEORGIA's costs incurred from various demand-side option programs. 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 GULF's and MISSISSIPPI's notes to the financial statements in Item 8 herein. Rate Increase Applications Reference is made to Note 3 to each registrant's notes to the financial statements in Item 8 herein for a discussion of retail and wholesale rate proceedings. Also discussed therein are the proceedings initiated by the FERC concerning the reasonableness of the Southern electric system's wholesale rate schedules and contracts that have a return on equity of 13.75% or greater. Employee Relations The companies of the SOUTHERN system had a total of 27,826 employees on their payrolls at December 31, 1994. ========================================================== Employees at December 31, 1994 -------------------- ALABAMA 7,996 GEORGIA 11,765 GULF 1,540 MISSISSIPPI 1,535 SAVANNAH 616 SCS 2,612 Southern Nuclear 1,401 Other 361 ---------------------------------------------------------- Total 27,826 ========================================================== I-16 The operating affiliates 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 15, 1995. 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. GEORGIA has an agreement with the IBEW covering wages and working conditions which is in effect through June 30, 1996. GEORGIA also has a contract with the United Plant Guard Workers of America with respect to Plant Hatch which extends through September 30, 1995. GULF has an agreement with a local union of the IBEW on a three-year contract extending to August 15, 1995. MISSISSIPPI has agreements with local unions of the IBEW on a contract extending to August 16, 1995. Southern Nuclear has an agreement with the IBEW on a three-year contract extending to August 15, 1995. 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. SAVANNAH has three-year labor agreements with the IBEW and the Office and Professional Employees International Union that expire April 15, 1996 and December 1, 1996, respectively. SEI has agreements with local unions of the IBEW and the United Paperworkers International Union which covers employees of its energy and recovery complex in Mobile, Alabama. These agreements extend to May 31, 1997. I-17 Item 2. PROPERTIES Electric Properties The operating affiliates and SEGCO, at December 31, 1994, operated 33 hydroelectric generating stations, 31 fossil fuel generating stations and three nuclear generating stations. The amounts of capacity owned by each company are shown in the table below. ============================================================ Nameplate Generating Station Location Capacity ------------------------------------------------------------ (Kilowatts) Fossil Steam Gadsden Gadsden, AL 120,000 Gorgas Jasper, AL 1,221,250 Barry Mobile, AL 1,525,000 Chickasaw Chickasaw, AL 40,000 Greene County Demopolis, AL 300,000 (1) Gaston Unit 5 Wilsonville, AL 880,000 Miller Birmingham, AL 2,532,288 (2) --------- ALABAMA Total 6,618,538 --------- 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 886,303 (3) Wansley Carrollton, GA 925,550 (4) Yates Newnan, GA 1,250,000 --------- GEORGIA Total 9,676,553 --------- Crist Pensacola, FL 1,045,000 Lansing Smith Panama City, FL 305,000 Scholz Chattahoochee, FL 80,000 Daniel Pascagoula, MS 500,000 (5) Scherer Unit 3 Macon, GA 204,500 (3) --------- 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 (5) Greene County Demopolis, AL 200,000 (1) --------- 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) 1,000,000 (6) ---------- Total Fossil Steam 21,835,622 ---------- Nuclear Steam Farley Dothan, AL (ALABAMA) 1,720,000 ---------- Hatch Baxley, GA 816,630 (7) Vogtle Augusta, GA 1,060,240 (8) ---------- GEORGIA Total 1,876,870 ---------- Total Nuclear Steam 3,596,870 ---------- Combustion Turbines Arkwright Macon, GA 30,580 Atkinson Atlanta, GA 78,720 Bowen Cartersville, GA 39,400 McDonough Atlanta, GA 78,800 McIntosh Units 3, 4, 7, 8 Effingham County, GA 320,000 McManus Brunswick, GA 481,700 Mitchell Albany, GA 118,200 Wilson Augusta, GA 354,100 Wansley Carrollton, GA 26,322 (4) ---------- GEORGIA Total 1,527,822 ---------- Lansing Smith Unit A (GULF) Panama City, FL 39,400 ---------- Chevron Cogenerating Station Pascagoula, MS 147,292 (9) Sweatt Meridian, MS 39,400 Watson Gulfport, MS 39,360 ---------- MISSISSIPPI Total 226,052 ---------- Boulevard Savannah, GA 59,100 Kraft Port Wentworth, GA 22,000 McIntosh Units 5&6 Effingham County, GA 160,000 ---------- SAVANNAH Total 241,100 ---------- ============================================================ I-18 ============================================================ Nameplate Generating Station Location Capacity ------------------------------------------------------------ (Kilowatts) Gaston (SEGCO) Wilsonville, AL 19,680 (6) ---------- Total Combustion Turbines 2,054,054 ---------- 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 58,000 Lewis Smith Jasper, AL 157,500 Bankhead Holt, AL 45,125 Holt Holt, AL 40,000 ---------- ALABAMA Total 1,582,725 ---------- 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 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 (10) ---------- GEORGIA Total 862,480 ---------- Total Hydroelectric Facilities 2,445,205 ---------- Total Generating Capacity 29,931,751 ========== ============================================================ Notes: (1) Owned by ALABAMA and MISSISSIPPI as tenants in common in the proportions of 60% and 40%, respectively. (2) Excludes the capacity owned by AEC. (See Item 2- PROPERTIES - "Jointly-Owned Facilities" herein.) (3) Capacity shown is GEORGIA's or GULF's (Unit 3 only) current portion: 8.4% of Units 1 and 2, 75% (25% for GULF) for Unit 3 and 16.55% for Unit 4 of total plant capacity. See Item 2 - PROPERTIES - "Proposed Sale of Property" and "Jointly-Owned Facilities" herein. (4) Capacity shown is GEORGIA's portion (53.5%) of total plant capacity. (5) Represents 50% of the plant which is owned as tenants in common by GULF and MISSISSIPPI. (6) SEGCO is jointly-owned by ALABAMA and GEORGIA. (See Item 1 - BUSINESS herein.) (7) Capacity shown is GEORGIA's portion (50.1%) of total plant capacity. (8) Capacity shown is GEORGIA's portion (45.7%) of total plant capacity. (9) Generation is dedicated to a single industrial customer. (10) Includes 5,400 megawatts of capacity for the Flint River Project damaged by flooding. See Item 1 - BUSINESS - "Regulation - Federal Power Act" herein. Except as discussed below under "Titles to Property", the principal plants and other important units of the SOUTHERN system are owned in fee by the operating affiliates and SEGCO. 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 Gulf States. The line, completed in 1984, extends from Plant Daniel to the Louisiana state line. 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. The all-time maximum demand on the SOUTHERN system was 25,936,900 kilowatts and occurred in July 1993. This amount excludes demand served by generation retained by MEAG and Dalton and excludes demand associated with power purchased from OPC and SEPA by its preference customers. At that time, 27,342,700 kilowatts were supplied by SOUTHERN system generation and 1,405,800 kilowatts (net) were sold to other parties through net purchased and interchanged power. I-19 The reserve margin for the Southern electric system at that time was 13.2%. The SOUTHERN system's maximum demand for 1994 of 24,545,700 kilowatts occurred in August. For information on the other registrant's 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 - "Regulations - Atomic Energy Act of 1954" and Note 1 to SOUTHERN's, ALABAMA's and GEORGIA's financial statements in Item 8 herein.) I-20 Other Electric Generation Facilities Through special purpose subsidiaries, SOUTHERN owns interests in or operates independent power production facilities and foreign utility companies. For further discussion of other SEI projects, see Item 1 - BUSINESS - "New Business Development" herein. The generating capacity of these utilities (or facilities) at December 31, 1994, was as follows:
Facilities in Operation -------------------------------------------------------------------------------------------------------------------- Megawatts of Capacity ------------------------ Facility Location Units Owned Operated Fuel -------- -------- ----- ----- ---------- ------ Alicura' Argentina 4 551 (1) 1,000 Hydro Edelnor Chile 22 41 64 Oil Edelnor Chile 1 14 22 Diesel Edelnor Chile 2 7 10 Hydro Freeport Grand Bahama 5 56 113 Oil & Gas Goodyear New York 1 - 50 Coal (2) Kalaeloa Hawaii 1 60 180 Oil (2) Las Vegas Nevada 1 - 50 Gas (2) Mobile Alabama 3 105 105 Waste & by-products (2) Penal Trinidad and Tobago 5 92 236 Gas Port of Spain Trinidad and Tobago 6 120 308 Gas Pt. Lisas Trinidad and Tobago 10 247 634 Gas -------------------------------------------------------------------------------------------------------------------- Total Capacity 1,293 2,772 ====================================================================================================================
Facilities Under Development -------------------------------------------------------------------------------------------------------------------- Megawatts of Capacity -------------------------------- Facility Location Owned Operated Fuel -------- -------- ------- ---------- ------ Birchwood Virginia 110 220 Coal (2) Edelnor Chile 98 150 Coal -------------------------------------------------------------------------------------------------------------------- Total Capacity 208 370 ====================================================================================================================
Notes: (1) Represents megawatts of capacity under a concession agreement expiring in the year 2023. (2) Cogeneration facility. I-21 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 FP&L JEA FPC -------- ----------------------------------------------------------------------------- (Megawatts) Plant Miller Units 1 and 2 1,320 91.8% 8.2% -% -% -% -% -% -% -% Plant Hatch 1,630 - - 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 - - - Unit 4 818 - - 16.6 - - - 65.7 17.7 - Plant Wansley 1,779 - - 53.5 30.0 15.1 1.4 - - - Rocky Mountain 848 - - 25.0* 75.0 - - - - - Intercession City, FL 150 - - 33.3* - - - - - 66.7 *Estimated ownership at completion. ==========================================================================================================================
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. See "Proposed Sale of Property" below for a description of the proposed sale of GEORGIA's remaining unsold ownership interest in Plant Scherer Unit 4. In connection with the joint ownership arrangements for Plant Vogtle, GEORGIA has remaining commitments to purchase declining fractions of OPC's and MEAG's capacity and energy until 1996 for Unit 2 and, with regard to a portion of a 5% interest owned by MEAG, 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 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 in the Statements of Income in Item 8 herein. In December 1988, GEORGIA and OPC completed a joint ownership agreement for the Rocky Mountain project under which GEORGIA will retain its present investment in the project and OPC will finance, complete and operate the facility. Upon completion (scheduled for 1995), GEORGIA will own an undivided interest in the project equal to the proportion its investment bears to the total investment in the project (excluding each party's cost of funds and ad valorem taxes). For purposes of the ownership formula, GEORGIA's investment will be expressed in nominal dollars and OPC's investment will be expressed in constant 1987 dollars. Based on current cost estimates, GEORGIA's final ownership is estimated at approximately 25% of the project at completion. In 1994, GEORGIA and FPC entered into a joint ownership agreement regarding the Intercession City combustion turbine unit. The unit is scheduled to be in commercial operation in early 1996, and will be constructed, operated, and maintained by FPC. GEORGIA will have a one-third interest in the 150-megawatt unit, with retention of 100% of the capacity from June through September. FPC will have the capacity the remainder of the year. GEORGIA's investment in the unit at completion is estimated to be $14 million. Also, GEORGIA entered into a separate four-year purchase power contract with FPC. Beginning in 1996, GEORGIA will purchase 400 megawatts of capacity. In 1998, this amount will decline to 200 megawatts for the remaining two years. I-22 Proposed Sale of Property GEORGIA has completed three of four separate transactions to sell Unit 4 of Plant Scherer to FP&L and JEA for a total price of approximately $808 million, including any gains on these transactions. FP&L would eventually own approximately 76.4% of this unit, with JEA owning the remainder. GEORGIA will continue to operate the unit. The completed and scheduled remaining transactions are as follows: ======================================================== Percentage Closing of Sales Date Capacity Ownership Price -------------------------------------------------------- (Megawatts) (in millions) July 1991 290 35.46% $291 June 1993 258 31.44 253 June 1994 135 16.55 133 June 1995 135 16.55 131 -------------------------------------------------------- Total 818 100.00% $808 ======================================================== Plant Scherer, a jointly owned coal-fired generating plant, has four units with a total capacity of 3,272 megawatts. Unit 4 was completed in 1989. Titles to Property The operating affiliates' 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 four 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 operating affiliates 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. Property Additions and Retirements During the period from January 1, 1990, to December 31, 1994, the operating affiliates, SEGCO, and others (i.e. SCS, Southern Nuclear and, beginning in 1993, various of the special purpose subsidiaries) recorded gross property additions and retirements as follows: ============================================================ Gross Property Additions Retirements -------------- ----------- (in millions) ALABAMA (1) $2,182 $ 336 GEORGIA (2) 2,928 2,030 GULF 349 118 MISSISSIPPI 415 69 SAVANNAH 173 15 SEGCO 81 12 Other (3) 262 87 ------------------------------------------------------------ SOUTHERN system $6,390 $2,667 ============================================================ (1) Includes approximately $62 million attributable to property sold to AEC in 1992. (2) Includes approximately $612 million attributable to property sold to OPC, FP&L and JEA, but excludes $231 million from the write-off of certain Plant Vogtle costs in 1990. (3) Net of intercompany eliminations. Item 3. LEGAL PROCEEDINGS (1) Stepak v. certain SOUTHERN officials (U.S. District Court for the Southern District of Georgia) In April 1991, two SOUTHERN stockholders filed a derivative action suit against certain current and former directors and officers of SOUTHERN. The suit alleges violations of RICO by officers and breaches of fiduciary duty and gross negligence by all defendants resulting from alleged fraudulent accounting for spare parts, illegal political campaign contributions, violations of federal securities laws involving misrepresentations and omissions in SEC filings, and concealment of the I-23 foregoing acts. The complaint seeks damages, including treble damages pursuant to RICO, in an unspecified amount, which if awarded, would be payable to SOUTHERN. The plaintiffs' amended complaint was dismissed by the court in March 1992. The court ruled the plaintiffs had failed to present adequately their allegation that the SOUTHERN board of directors' refusal of an earlier demand by the plaintiffs was wrongful. In April 1994, the U. S. Court of Appeals for the Eleventh Circuit reversed the dismissal and remanded the case to the trial court, finding that allegations by the plaintiffs created a reasonable doubt that the board validly exercised its business judgment in refusing the earlier demand. This action is still pending. (2) Johnson v. ALABAMA (Circuit Court of Shelby County, Alabama) In September 1990, two customers of ALABAMA filed a civil complaint in the Circuit Court of Shelby County, Alabama, against ALABAMA seeking to represent all persons who, prior to June 23, 1989, entered into agreements with ALABAMA for the financing of heat pumps and other merchandise purchased from vendors other than ALABAMA. The plaintiffs contended that ALABAMA was required to obtain a license under the Alabama Consumer Finance Act to engage in the business of making consumer loans. The plaintiffs were seeking an order declaring these agreements null and void and requiring ALABAMA to refund all payments, principal and interest, made under these agreements. The aggregate amount under these agreements, together with interest paid, currently is estimated to be $40 million. In June 1993, the court ordered ALABAMA to refund or forfeit interest of approximately $10 million because of ALABAMA's failure to obtain such license. However, the court's order did not require any refund or forfeiture with respect to any principal payments under the agreements at issue. ALABAMA has appealed the court's order to the Supreme Court of Alabama. The final outcome of this matter cannot be determined; however, in management's opinion, the final outcome will not have a material adverse effect on SOUTHERN's or ALABAMA's financial statements. (3) In January 1995, GEORGIA 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. While GEORGIA believes that the total amount of costs required for the cleanup of this site may be substantial, it is unable at this time to estimate either such total or the portion for which GEORGIA may be ultimately responsible. The final outcome of this matter cannot now be determined; however, in management's opinion, based on the nature and extent of GEORGIA's activities relating to the site, the final outcome will not have a material adverse effect on SOUTHERN's or GEORGIA's financial statements. (4) In June 1994, a tax deficiency notice was received from the IRS for the years 1984 through 1987 with regard to the tax accounting by GEORGIA for the sale in 1984 of an interest in Plant Vogtle and related capacity and energy buyback commitments. The potential tax deficiency and interest arising from this issue currently amount to approximately $28 million and $32 million, respectively. The tax deficiency relates to a timing issue as to when taxes are paid; therefore, only the interest portion could affect future income. Management believes that the IRS position is incorrect, and GEORGIA has filed a petition with the U. S. Tax Court challenging the IRS position. In order to minimize additional interest charges should the IRS's position prevail, GEORGIA made a payment to the IRS related to the potential tax deficiency in September 1994. I-24 The final outcome of this matter cannot now be determined; however, in management's opinion, the final outcome will not have a material adverse effect on SOUTHERN's or GEORGIA's financial statements. See Item 1 - BUSINESS - "Construction Programs," "Fuel Supply," "Regulation - Federal Power Act" and "Rate Matters" for a description of certain other administrative and legal proceedings discussed therein. Additionally, each of the operating affiliates, SEI, SCS, Southern Nuclear, SDIG and Communications 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. In management's opinion these various actions will not have a material adverse effect on any of the registrants' financial statements. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. I-25 EXECUTIVE OFFICERS OF SOUTHERN (Inserted in Part I in accordance with Regulation S-K, Item 401(b), Instruction 3) A. W. Dahlberg Chairman, President and Chief Executive Officer Age 54 Elected in 1985; President and Chief Executive Officer of GEORGIA from 1988 through 1993. He was elected Executive Vice President of SOUTHERN in 1991. He was elected President of SOUTHERN effective January 1994. He was elected Chairman and Chief Executive Officer effective March 1995. Paul J. DeNicola Executive Vice President and Director Age 46 Elected in 1989; Executive Vice President of SOUTHERN since 1991. Elected President and Chief Executive Officer of SCS effective January 1994. He previously served as Executive Vice President of SCS from 1991 to 1993 and President and Chief Executive Officer of MISSISSIPPI from 1989 to 1991. H. Allen Franklin Executive Vice President and Director Age 50 Elected in 1988; President and Chief Executive Officer of SCS from 1988 through 1993 and, beginning 1991, Executive Vice President of SOUTHERN. He was elected President and Chief Executive Officer of GEORGIA effective January 1994. Elmer B. Harris Executive Vice President and Director Age 55 Elected in 1989; President and Chief Executive Officer of ALABAMA since 1989 and, beginning 1991, Executive Vice President of SOUTHERN. David M. Ratcliffe Senior Vice President Age 46 Elected in 1995; President and Chief Executive Officer of MISSISSIPPI since 1991. He also serves as Executive Vice President of SCS beginning in 1995 and previously held that position from 1989 to 1991. W. L. Westbrook Financial Vice President and Chief Financial Officer Age 55 Elected in 1986; responsible primarily for all aspects of financing for SOUTHERN. He has served as Executive Vice President of SCS since 1986. Bill M. Guthrie Vice President Age 61 Elected in 1991; serves as Chief Production Officer for the SOUTHERN system. Senior Executive Vice President of SCS effective January 1994. He has also served as Executive Vice President of ALABAMA since 1988. Each of the above is currently an officer of SOUTHERN, serving a term running from the last annual meeting of the directors (May 25, 1994) for one year until the next annual meeting or until his successor is elected and qualified. I-26 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 and as adjusted to reflect a two-for-one stock split in the form of a stock distribution for each share held as of February 7, 1994, during each quarter for the past two years were as follows: =================================================== High Low ------ ----- 1994 First Quarter $22 $18-1/2 Second Quarter 20-1/2 17-3/4 Third Quarter 20 17 Fourth Quarter 21 18-1/4 1993 First Quarter $21-3/8 $18-3/8 Second Quarter 22-1/2 19-3/8 Third Quarter 23 20-1/2 Fourth Quarter 23-5/8 20-3/4 --------------------------------------------------- There is no market for the other registrants' common stock, all of which is owned by SOUTHERN. On February 28, 1995, the closing price of SOUTHERN's common stock was $20-5/8. (b) Number of SOUTHERN's common stockholders at December 31, 1994: 234,927 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 paid and/or declared by SOUTHERN and the operating affiliates to their stockholder(s) for the past two years were as follows: (in thousands) ==================================================== Registrant Quarter 1994 1993 ---------------------------------------------------- SOUTHERN First $191,262 $180,381 Second 191,262 180,948 Third 191,475 181,892 Fourth 192,758 182,351 ALABAMA First 66,500 62,900 Second 67,000 63,100 Third 66,900 63,400 Fourth 67,600 63,500 GEORGIA First 106,600 100,100 Second 107,200 100,400 Third 107,200 100,800 Fourth 108,300 101,100 GULF First 10,900 10,400 Second 11,000 10,400 Third 11,000 10,500 Fourth 11,100 10,500 MISSISSIPPI First 8,500 7,200 Second 8,500 7,200 Third 8,500 7,300 Fourth 8,600 7,300 SAVANNAH First 4,100 4,500 Second 4,100 5,500 Third 4,100 5,500 Fourth 4,000 5,500 ----------------------------------------------------- In January 1994, SOUTHERN's board of directors authorized a two-for-one common stock split in the form of a stock distribution for each share held as of February 7, 1994. For all reported common stock data, the number of common shares outstanding and per share amounts for earnings, dividends, and market price have been adjusted to reflect the stock distribution. II-1 The dividend paid per share by SOUTHERN was 28.5(cent) for each quarter of 1993 and 29.5(cent) for each quarter of 1994. The dividend paid on SOUTHERN's common stock for the first quarter of 1995 was raised to 30.5(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 respective first mortgage bond indenture and charter. The amounts of earnings retained in the business and the amounts restricted against the payment of cash dividends on common stock at December 31, 1994, were as follows: ======================================================== Retained Restricted Earnings Amount ---------- ----------- (in millions) ALABAMA $1,085 $ 807 GEORGIA 1,413 742 GULF 169 101 MISSISSIPPI 144 94 SAVANNAH 99 57 Consolidated 3,191 1,805 -------------------------------------------------------- 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-38 through II-49. ALABAMA. Reference is made to information under the heading "Selected Financial and Operating Data," contained herein at pages II-79 through II-92. GEORGIA. Reference is made to information under the heading "Selected Financial and Operating Data," contained herein at pages II-127 through II-141. GULF. Reference is made to information under the heading "Selected Financial and Operating Data," contained herein at pages II-170 through II-183. MISSISSIPPI. Reference is made to information under the heading "Selected Financial and Operating Data," contained herein at pages II-210 through II-223. SAVANNAH. Reference is made to information under the heading "Selected Financial and Operating Data," contained herein at pages II-247 through II-260. 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-15. 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-53 through II-59. 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-96 through II-103. 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-145 through II-151. 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-187 through II-193. 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-227 through II-232. II-2 Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO 1994 FINANCIAL STATEMENTS
Page The Southern Company and Subsidiary Companies: Report of Independent Public Accountants (in which their opinion on the financial statements includes an explanatory paragraph which states that an uncertainty exists with respect to the actions of the regulators regarding recoverability of the investment in the Rocky Mountain pumped storage hydroelectric project) II-7 Consolidated Statements of Income for the Years Ended December 31, 1994, 1993 and 1992 II-16 Consolidated Statements of Retained Earnings for the Years Ended December 31, 1994, 1993 and 1992 II-16 Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1993 and 1992 II-17 Consolidated Balance Sheets at December 31, 1994 and 1993 II-18 Consolidated Statements of Capitalization at December 31, 1994 and 1993 II-20 Consolidated Statements of Paid-In Capital for the Years Ended December 31, 1994, 1993 and 1992 II-21 Notes to Financial Statements II-22 ALABAMA: Report of Independent Public Accountants II-52 Statements of Income for the Years Ended December 31, 1994, 1993 and 1992 II-60 Statements of Cash Flows for the Years Ended December 31, 1994, 1993 and 1992 II-61 Balance Sheets at December 31, 1994 and 1993 II-62 Statements of Capitalization at December 31, 1994 and 1993 II-64 Statements of Retained Earnings for the Years Ended December 31, 1994, 1993 and 1992 II-65 Notes to Financial Statements II-66 GEORGIA: Report of Independent Public Accountants (in which their opinion on the financial statements includes an explanatory paragraph which states that an uncertainty exists with respect to the actions of the regulators regarding the recoverability of Georgia Power's investment in the Rocky Mountain pumped storage hydroelectric project) II-95 Statements of Income for the Years Ended December 31, 1994, 1993 and 1992 II-104 Statements of Cash Flows for the Years Ended December 31, 1994, 1993 and 1992 II-105 Balance Sheets at December 31, 1994 and 1993 II-106 Statements of Capitalization at December 31, 1994 and 1993 II-108 Statements of Retained Earnings for the Years Ended December 31, 1994, 1993 and 1992 II-109 Statements of Paid-In Capital for the Years Ended December 31, 1994, 1993 and 1992 II-109 Notes to Financial Statements II-110
II-3
Page GULF: Report of Independent Public Accountants II-144 Statements of Income for the Years Ended December 31, 1994, 1993 and 1992 II-152 Statements of Cash Flows for the Years Ended December 31, 1994, 1993 and 1992 II-153 Balance Sheets at December 31, 1994 and 1993 II-154 Statements of Capitalization at December 31, 1994 and 1993 II-156 Statements of Retained Earnings for the Years Ended December 31, 1994, 1993 and 1992 II-158 Statements of Paid-In Capital for the Years Ended December 31, 1994, 1993 and 1992 II-158 Notes to Financial Statements II-159 MISSISSIPPI: Report of Independent Public Accountants II-186 Statements of Income for the Years Ended December 31, 1994, 1993 and 1992 II-194 Statements of Cash Flows for the Years Ended December 31, 1994, 1993 and 1992 II-195 Balance Sheets at December 31, 1994 and 1993 II-196 Statements of Capitalization at December 31, 1994 and 1993 II-198 Statements of Retained Earnings for the Years Ended December 31, 1994, 1993 and 1992 II-199 Statements of Paid-In Capital for the Years Ended December 31, 1994, 1993 and 1992 II-199 Notes to Financial Statements II-200 SAVANNAH: Report of Independent Public Accountants II-226 Statements of Income for the Years Ended December 31, 1994, 1993 and 1992 II-233 Statements of Cash Flows for the Years Ended December 31, 1994, 1993 and 1992 II-234 Balance Sheets at December 31, 1994 and 1993 II-235 Statements of Capitalization at December 31, 1994 and 1993 II-237 Statements of Retained Earnings for the Years Ended December 31, 1994, 1993 and 1992 II-238 Statements of Paid-In Capital for the Years Ended December 31, 1994, 1993 and 1992 II-238 Notes to Financial Statements II-239 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 The Southern Company and Subsidiary Companies 1994 Annual Report The management of The 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 generally accepted accounting principles appropriate in the circumstances 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 books and 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 four 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 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 The Southern Company and its subsidiary companies in conformity with generally accepted accounting principles. As discussed in Note 4 to the financial statements, an uncertainty exists with respect to the actions of regulators regarding recoverability of the investment in the Rocky Mountain pumped storage hydroelectric project. The outcome of this uncertainty cannot be determined until a regulatory review is completed. Accordingly, no provision for any write-down of the costs associated with the Rocky Mountain project resulting from the potential actions of the Georgia Public Service Commission has been made in the accompanying financial statements. /s/ A. W. Dahlberg A. W. Dahlberg Chairman, President, and Chief Executive Officer /s/ W. L. Westbrook W. L. Westbrook Financial Vice President and Chief Financial Officer II-6 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and to the Stockholders of The Southern Company: We have audited the accompanying consolidated balance sheets and consolidated statements of capitalization of The Southern Company (a Delaware corporation) and subsidiary companies as of December 31, 1994 and 1993, and the related consolidated statements of income, retained earnings, paid-in capital, and cash flows for each of the three years in the period ended December 31, 1994. 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 generally accepted auditing standards. 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 11-16 through II-37) referred to above present fairly, in all material respects, the financial position of The Southern Company and subsidiary companies as of December 31, 1994 and 1993, and the results of their operations and their cash flows for the periods stated, in conformity with generally accepted accounting principles. As explained in Notes 2 and 9 to the financial statements, effective January 1, 1993, The Southern Company changed its methods of accounting for postretirement benefits other than pensions and for income taxes. As more fully discussed in Note 4 to the financial statements, an uncertainty exists with respect to the actions of the regulators regarding recoverability of the investment in the Rocky Mountain pumped storage hydroelectric project. The outcome of this uncertainty cannot be determined until a regulatory review is completed. Accordingly, no provision for any write-down of the costs associated with the Rocky Mountain project resulting from the potential actions of the Georgia Public Service Commission has been made in the accompanying financial statements. /s/ Arthur Andersen LLP Atlanta, Georgia February 15, 1995 II-7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The Southern Company and Subsidiary Companies 1994 Annual Report RESULTS OF OPERATIONS Earnings and Dividends The Southern Company's 1994 earnings were $989 million or $1.52 per share, a decrease of $13 million or 5 cents per share from the year 1993. Earnings were significantly affected in 1994 by efforts related to the company's strategy to remain a low-cost producer of electricity and a high-quality investment. These efforts included work force reduction programs in 1994 and additional investments in companies related to the core business of electricity. These investments have put downward pressure on earnings and return on equity, and that trend will continue in the near term. However, the investments should support growth and strength in the financial condition of the company as it emerges into a more competitive and global environment. Costs related to the work force reduction programs decreased earnings by $61 million or 9 cents per share. These costs should be recovered through future savings in about two years. Additional non-operating or non-recurring items affected earnings in 1994 and 1993. After excluding these items in both years, 1994 earnings from operations of the ongoing business of selling electricity were $1.0 billion -- or $1.58 per share -- an increase of $11 million compared with 1993. The non-operating items that affected earnings were as follows: Consolidated Earnings Net Income Per Share ----------------- ----------------- 1994 1993 1994 1993 ----------------- ----------------- (in millions) Earnings as reported $ 989 $1,002 $1.52 $1.57 ----------------------------------------------------------------- Work force reduction programs in 1994 61 - .09 - Sale of facilities (28) (18) (.04) (.03) Environmental cleanup 5 25 .01 .04 Transportation fleet reduction - 13 - .02 Gulf States related - (6) - (.01) ----------------------------------------------------------------- Total non-operating 38 14 .06 .02 ----------------------------------------------------------------- Earnings from operations $1,027 $1,016 $1.58 $1.59 ================================================================= Amount and percent change $11 1.1% $(0.01) (0.6)% ----------------------------------------------------------------- In 1994, non-operating items -- both positive and negative -- had an impact on earnings, which resulted in a net reduction of $38 million. These items were: (1) Costs associated with work force reduction programs implemented in 1994 decreased earnings. (2) The third in a series of four separate transactions to sell Plant Scherer Unit 4 to two Florida utilities and the sale of a 50 percent interest in a cogeneration facility in Virginia increased earnings. (3) Environmental cleanup costs decreased earnings. Items not discussed above that affected 1993 earnings were: (1) Costs associated with a transportation fleet reduction program decreased earnings. (2) Transactions related to a 1991 settlement agreement with Gulf States Utilities Company increased earnings. In January 1994, The Southern Company board of directors approved a two-for-one common stock split in the form of a stock distribution. All common stock data reported reflect the stock distribution. Dividends paid on common stock during 1994 were $1.18 per share or 29 1/2 cents per quarter. During 1993 and 1992, dividends paid per share were $1.14 and $1.10, respectively. In January 1995, The Southern Company board of directors raised the quarterly dividend to 30 1/2 cents per share or an annual rate of $1.22 per share. Revenues Operating revenues decreased in 1994 and increased in 1993 and 1992 as a result of the following factors: Increase (Decrease) From Prior Year ---------------------------- 1994 1993 1992 ---------------------------- (in millions) Retail -- Change in base rates $ 3 $ 3 $ 137 Sales growth 153 104 138 Weather (177) 198 (113) Fuel recovery and other (107) 199 (55) --------------------------------------------------------------- Total retail (128) 504 107 --------------------------------------------------------------- Sales for resale -- Within service area (87) 38 (8) Outside service area (108) (184) (87) --------------------------------------------------------------- Total sales for resale (195) (146) (95) Other operating revenues 131 58 11 --------------------------------------------------------------- Total operating revenues $(192) $416 $ 23 ============================================================== Percent change (2.3)% 5.2% 0.3% -------------------------------------------------------------- Retail revenues of $7.1 billion in 1994 decreased 1.8 percent from last year, compared with an increase of 7.4 percent in 1993. Under fuel cost recovery II-8 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) The Southern Company and Subsidiary Companies 1994 Annual Report provisions, fuel revenues generally equal fuel expense -- including the fuel component of purchased energy -- and do not affect net income. Revenues from sales for resale within the service area were $360 million in 1994, down 19 percent from the prior year. The decrease resulted from certain municipalities and cooperatives in the service area retaining more of their own generation at facilities jointly owned with Georgia Power. Sales for resale revenues within the service area were $447 million in 1993, up 9.2 percent from the prior year. This increase resulted primarily from the prolonged hot summer weather, which increased the demand for electricity. 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 were as follows: 1994 1993 1992 -------------------------------- (in millions) Capacity $276 $350 $457 Energy 176 230 330 ----------------------------------------------------- Total $452 $580 $787 ===================================================== Capacity revenues decreased in 1994 and 1993 because the amount of capacity under contract declined by some 400 megawatts and 500 megawatts, respectively. In 1995, the contracted capacity will decline another 100 megawatts. Additional declines in capacity are not scheduled until after 1999. Changes in revenues are influenced heavily by the amount of energy sold each year. Kilowatt-hour sales for 1994 and the percent change by year were as follows: (billions of Amount Percent Change kilowatt-hours) ------ ------------------------ 1994 1994 1993 1992 ---- ------------------------ Residential 35.8 (2.6)% 9.5% 0.0% Commercial 34.1 3.8 5.9 2.1 Industrial 50.3 3.2 1.9 3.8 Other 0.9 3.8 4.6 (4.8) ----- Total retail 121.1 1.6 5.3 2.1 Sales for resale -- Within service area 8.1 (38.5) 9.5 (1.7) Outside service area 10.8 (13.5) (25.2) (16.2) ----- Total 140.0 (3.4) 2.1 (0.7) ================================================================= The rate of increase in 1994 retail energy sales was suppressed by the impact of weather. Residential energy sales registered the first annual decrease in more than a decade as a result of milder-than-normal summer weather in 1994, compared with the extremely hot summer of 1993. Commercial and industrial sales continue to show moderate gains in excess of the national average. This reflects the strength of business and economic conditions in The Southern Company's service area. Energy sales to retail customers are projected to increase at an average annual rate of 1.9 percent during the period 1995 through 2005. Energy sales for resale outside the service area are predominantly unit power sales under long-term contracts to Florida utilities. Economy sales and amounts sold under short-term contracts are also sold for resale outside the service area. Sales to customers outside the service area continue to decrease, primarily as a result of the scheduled decline in megawatts of capacity under contract. Expenses Total operating expenses of $6.6 billion for 1994 declined 2.1 percent compared with the prior year. The costs to produce and deliver electricity in 1994 declined by $297 million, primarily as a result of less energy being sold and continued effective cost controls. However, certain other expenses in 1994 increased compared with expenses in 1993. Depreciation expenses and property taxes increased by $41 million as a result of additional utility plant being placed into service. The work force reduction programs in 1994 increased expenses by $100 million. The amortization of deferred expenses related to Plant Vogtle increased by $39 million in 1994 when compared with the prior year. For additional information concerning Plant Vogtle, see Note 1 to the financial statements under "Plant Vogtle Phase-In Plans." In 1993, operating expenses of $6.7 billion were up 6.5 percent compared with 1992. The increase was attributable to higher production expenses of $75 million to meet increased energy demands and an additional $50 million in depreciation expenses and property taxes. The transportation fleet reduction program and environmental cleanup costs discussed earlier increased expenses by some $62 million. Also, a $67 million change in deferred Plant Vogtle expenses compared with the amount in 1992 contributed to the rise in total operating expenses. Fuel costs constitute the single largest expense for The Southern 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 II-9 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) The Southern Company and Subsidiary Companies 1994 Annual Report nuclear generating units. The amount and sources of generation and the average cost of fuel per net kilowatt-hour generated were as follows: 1994 1993 1992 ---------------------- Total generation (billions of kilowatt-hours) 142 144 140 Sources of generation (percent) -- Coal 75 78 77 Nuclear 19 17 17 Hydro 5 4 5 Oil and gas 1 1 1 Average cost of fuel per net kilowatt-hour generated (cents) -- Coal 1.80 1.90 1.86 Nuclear 0.56 0.54 0.54 Oil and gas 3.99 4.34 4.81 Total 1.56 1.67 1.62 ------------------------------------------------------------ Fuel and purchased power costs of $2.3 billion in 1994 decreased $266 million or 10 percent compared with 1993, primarily because 3.1 billion fewer kilowatt-hours were needed to meet customer requirements. Also, the decrease in these costs was attributable to a lower average cost of fuel per net kilowatt-hour generated. Fuel and purchased power expenses of $2.6 billion in 1993 increased 1.3 percent compared with the prior year because of increased energy demands and a slightly higher average cost of fuel per net kilowatt-hour generated. For 1994, income taxes rose $8 million or 1.3 percent above the amount reported for 1993. The increase resulted primarily from the sale of interests in generating plant facilities discussed earlier. For 1993, income taxes increased $69 million compared with the prior year. The increase was primarily attributable to a 1 percent increase in the corporate federal income tax rate effective January 1993, and the increase in taxable income from operations. Total gross interest charges and preferred stock dividends continued to decline from amounts reported in the previous year. The declines are attributable to lower interest rates and significant refinancing activities in 1993 and 1992. In 1994, these costs were $765 million -- down $66 million or 8.0 percent. These costs for 1993 decreased $21 million. As a result of favorable market conditions, $1.0 billion in 1994, $3.0 billion in 1993, and $2.4 billion in 1992 of senior securities were issued for the primary purpose of retiring higher-cost securities. Effects of Inflation The Southern 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 Southern Company because of the large investment in long-lived utility plant. 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 stock. 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 growth in energy sales to a less regulated, more competitive environment. Georgia Power has completed three of four separate transactions to sell Unit 4 of Plant Scherer to two Florida utilities. The remaining transaction is scheduled to take place in 1995 with the after-tax gain currently estimated to total approximately $12 million. See Note 7 to the financial statements for additional information. In 1994, work force reduction programs were implemented, reducing earnings by $61 million. These actions will assist in efforts to control growth in future operating expenses. See Note 4 to the financial statements for information on an uncertainty regarding full recovery of an investment in the Rocky Mountain pumped storage hydroelectric project scheduled to be in commercial operation in 1995. Future earnings in the near term will depend upon growth in energy sales, which are subject to a number of factors. Traditionally, these factors have included changes in contracts with neighboring utilities, energy conservation practiced by customers, the elasticity of demand, weather, competition, and the rate of economic growth in the company's service area. However, the Energy Policy Act of 1992 (Energy Act) is beginning to have a dramatic effect on the future of the electric utility industry. The Energy Act promotes energy efficiency, alternative fuel use, and increased competition for electric II-10 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) The Southern Company and Subsidiary Companies 1994 Annual Report utilities. The Southern Company is positioning the business to meet the challenge of this major change in the traditional practice of selling electricity. The Energy Act allows independent power producers (IPPs) to access a utility's transmission network in order to sell electricity to other utilities. This may enhance the incentive for IPPs to build cogeneration plants for a utility's large industrial and commercial customers and sell excess energy generation to other utilities. Although the Energy Act does not require transmission access to retail customers, retail wheeling initiatives are rapidly evolving and becoming very prominent issues in several states. In order to address these initiatives, numerous questions must be resolved with the most complex ones relating to transmission pricing and recovery of stranded investments. As the initiatives become a reality, the structure of the utility industry could radically change. Therefore, unless The Southern Company remains a low-cost producer and provides quality service, the company's retail energy sales growth could be limited, and this could significantly erode earnings. Conversely, being the low-cost producer could provide significant opportunities to increase market share and profitability. The Energy Act amended the Public Utility Holding Company Act of 1935 (PUHCA). The amendment allows holding companies to form exempt wholesale generators and foreign utility companies to sell power largely free of regulation under PUHCA. These entities are able to sell power to affiliates -- under certain restrictions -- and to own and operate power generating facilities in other domestic and international markets. To take advantage of these opportunities, Southern Electric International (Southern Electric) -- founded in 1981 -- is focusing on international and domestic cogeneration, the independent power market, and the privatization of generating facilities in the international market. During 1994, additional investments were made in entities that own and operate generating facilities in domestic and various international markets. At December 31, 1994, Southern Electric's investment in these facilities amounted to $436 million. In the near term, Southern Electric is expected to have minimal effect on earnings, but the potential exists that it could be a prime contributor to future earnings growth. Southern Communications Services is constructing a wireless communications system to provide services beginning in 1995 to Southern Company subsidiaries and to other parties. It is anticipated that the operations of this new subsidiary, at least in its early years, will negatively affect earnings and cash flow. Demand-side options -- programs that enable customers to lower or alter their peak energy requirements -- have been implemented by some of the system operating companies and are a significant part of integrated resource planning. See Note 3 to the financial statements under "Georgia Power Demand-Side Conservation Programs" for information concerning the recovery of certain costs. Customers can receive cash incentives for participating in these programs as well as reduce their energy requirements. Besides promoting energy efficiency, another benefit of these programs could be the ability to defer the need to construct costly baseload generating facilities further into the future. The ability to defer major construction projects in conjunction with regulatory precertification approval processes for both new plant additions and purchase power contracts should minimize the possibility of not being able to fully recover additional costs. Rates to retail customers served by the system operating companies are regulated by the respective state public service commissions in Alabama, Florida, Georgia, and Mississippi. Rates for Alabama Power and Mississippi Power are adjusted periodically within certain limitations based on earned retail rate of return compared with an allowed return. See Note 3 to the financial statements for information about other retail and wholesale regulatory matters. The Southern 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. See Note 1 to the financial statements under "Regulatory Assets and Liabilities" for additional information. The staff of the Securities and Exchange Commission has questioned certain of the current accounting practices of the electric utility industry -- including the company -- regarding the recognition, measurement, and classification of decommissioning costs for nuclear generating facilities in the financial statements. In response to these questions, the FASB has decided to review the accounting for nuclear decommissioning. If current electric utility industry accounting practices for decommissioning are changed: (1) Annual provisions for decommissioning could increase. (2) The estimated cost for decommissioning may be required to be recorded as a liability in the Consolidated Balance Sheets. In II-11 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) The Southern Company and Subsidiary Companies 1994 Annual Report management's opinion -- should these changes be required -- the changes would not have a significant adverse effect on results of operations because of the company's current and expected future ability to recover decommissioning costs through rates. See Note 1 to the financial statements under "Depreciation and Nuclear Decommissioning" for additional information. 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 the Clean Air Act Amendments of 1990 (Clean Air Act) 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." FINANCIAL CONDITION Overview The Southern Company's financial condition continues to remain at the strongest level since the mid-1980s. Earnings from operations continued to increase in 1994 and exceeded $1 billion. Based on this performance, in January 1995, The Southern Company board of directors increased the common stock dividend for the fourth consecutive year. Another major change in The Southern Company's financial condition was gross property additions of $1.5 billion to utility plant. The majority of funds needed for gross property additions since 1991 have been provided from operating activities, principally from earnings and non-cash charges to income such as depreciation and deferred income taxes. The Consolidated Statements of Cash Flows provide additional details. The Southern Company has a policy that financial derivatives are to be used only to mitigate business risks and not for speculative purposes. Derivatives have been used by the company on a very limited basis. At December 31, 1994, the credit risk for derivatives outstanding was not material. Capital Structure The company achieved a ratio of common equity to total capitalization -- including short-term debt -- of 44.4 percent in 1994, compared with 43.8 percent in 1993 and 42.8 percent in 1992. The company's goal is to maintain the common equity ratio generally within a range of 40 percent to 45 percent. During 1994, the operating companies sold $185 million of first mortgage bonds and, through public authorities, $749 million of pollution control revenue bonds. Preferred securities of $100 million were issued in 1994. The operating companies continued to reduce financing costs by retiring higher-cost bonds. Retirements, including maturities, of bonds totaled $973 million during 1994, $2.5 billion during 1993, and $2.8 billion during 1992. Retirements of preferred stock totaled $1 million during 1994, $516 million during 1993, and $326 million during 1992. As a result, the composite interest rate on long-term debt decreased from 8.8 percent at December 31, 1991, to 7.2 percent at December 31, 1994. During this same period, the composite dividend rate on preferred stock declined from 7.7 percent to 6.7 percent. In 1994, The Southern Company raised $159 million from the issuance of new common stock under the company's various stock plans. An additional $120 million of new common stock was issued through a public offering in early 1994. At the close of 1994, the company's common stock had a market value of $20.00 per share, compared with a book value of $12.47 per share. The market-to-book value ratio was 160 percent at the end of 1994, compared with 184 percent at year-end 1993 and 168 percent at year-end 1992. Capital Requirements for Construction The construction program of the operating companies is budgeted at $1.4 billion for 1995, $1.3 billion for 1996, and $1.3 billion for 1997. The total is $4.0 billion for the three years. Actual construction costs may vary from this estimate because of factors such as changes in environmental regulations; changes in existing nuclear plants to meet new regulations; revised 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. II-12 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) The Southern Company and Subsidiary Companies 1994 Annual Report The operating companies do not have any baseload generating plants under construction, and current energy demand forecasts do not require any additional baseload facilities until well into the future. However, within the service area, the construction of combustion turbine peaking units of approximately 1,100 megawatts of capacity is planned to be completed by 1997 to meet increased peak-hour demands. In addition, significant construction of 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 $718 million will be required by the end of 1997 for present sinking fund requirements and maturities of long-term debt. Also, the operating 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 In November 1990, the Clean Air Act was signed into law. Title IV of the Clean Air Act -- the acid rain compliance provision of the law -- will have a significant impact on The Southern Company. Specific reductions in sulfur dioxide and nitrogen oxide emissions from fossil-fired generating plants will be required in two phases. Phase I compliance began in 1995 and affected eight generating plants -- some 10,000 megawatts of capacity or 35 percent of total capacity -- in the Southern electric system. Phase II compliance is required in 2000, and all fossil-fired generating plants in the Southern electric system will be affected. In 1995, the Environmental Protection Agency (EPA) began issuing annual sulfur dioxide emission allowances through the allowance trading program. An emission allowance is the authority to emit one ton of sulfur dioxide during a calendar year. The method for issuing allowances is based on the fossil fuel consumed from 1985 through 1987 for each affected generating unit. Emission allowances are transferable and can be bought, sold, or banked and used in the future. The sulfur dioxide emission allowance program is expected to minimize the cost of compliance. The Southern Company's sulfur dioxide compliance strategy is designed to use allowances as a compliance option. The Southern Company expects to achieve Phase I sulfur dioxide compliance at the eight affected plants by switching to low-sulfur coal, which has required some equipment upgrades. This compliance strategy is expected to result in unused emission allowances being banked for later use. Additional construction expenditures were required to install equipment for the control of nitrogen oxide emissions at these eight plants. Also, continuous emissions monitoring equipment will be installed on all fossil-fired units. Construction expenditures for Phase I compliance are estimated to total approximately $300 million through 1995. For Phase II sulfur dioxide compliance, The Southern Company could use emission allowances banked during Phase I, increase fuel switching, install flue gas desulfurization equipment at selected plants, and/or purchase more allowances, depending on the price and availability of allowances. Also, in Phase II, equipment to control nitrogen oxide emissions will be installed on additional system fossil-fired plants as required to meet anticipated Phase II limits. Therefore, during the period 1996 to 2000, current compliance strategy could require total estimated construction expenditures of approximately $150 million. However, the full impact of Phase II compliance cannot now be determined with certainty, pending the continuing development of a market for emission allowances, the completion of EPA regulations, and the possibility of new emission reduction technologies. An average increase of up to 2 percent in revenue requirements from customers could be necessary to fully recover the cost of compliance for both Phase I and Phase II of Title IV of the Clean Air Act. Compliance costs include construction expenditures, increased costs for switching to low-sulfur coal, and costs related to emission allowances. Metropolitan Atlanta is classified as a non-attainment area with regard to the ozone ambient air quality standards. Title I of the Clean Air Act requires the state of Georgia to conduct specific studies and establish new control rules -- affecting sources of nitrogen oxides and volatile organic compounds -- to achieve attainment by 1999. As the required first step, the state has issued II-13 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) The Southern Company and Subsidiary Companies 1994 Annual Report rules for the application of reasonably available control technology to reduce nitrogen oxide emissions by May 31, 1995. The results of these new rules require nitrogen oxide controls, above Title IV requirements, on some Georgia Power plants. Final attainment rules, based on modeling studies, could require installation of additional controls for nitrogen oxide emissions to meet the 1999 deadline. A decision on new requirements is expected in 1996. Compliance with any new rules could result in significant additional costs. The actual impact of new rules will depend on the development and implementation of such rules. Title III of the Clean Air Act requires a multi-year EPA study of power plant emissions of hazardous air pollutants. The EPA is scheduled to submit a report to Congress on the results of this study by November 1995. The report will include a decision on whether additional regulatory control of these substances is warranted. Compliance with any new control standards could result in significant additional costs. The impact of new standards -- if any -- will depend on the development and implementation of applicable regulations. A significant portion of costs related to the acid rain provision 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. The EPA continues to evaluate the need for a new short-term ambient air quality standard for sulfur dioxide. Preliminary results from an EPA study on the impact of a new standard indicate that a number of plants could be required to install sulfur dioxide controls. These controls would be in addition to the controls already required to meet the acid rain provision of the Clean Air Act. The EPA issued proposed rules in November 1994 and is required to take final action on this issue in 1996. The impact of any new standard will depend on the level chosen for the standard and cannot be determined at this time. In addition, the EPA is evaluating the need to revise the ambient air quality standards for particulate matter, nitrogen oxides, and ozone. The impact of any new standard will depend on the level chosen for the standard and cannot be determined at this time. In 1995, the EPA may issue revised rules on air quality control regulations related to stack height requirements of the Clean Air Act. The full impact of the final rules cannot be determined at this time, pending their development and implementation. In 1993, the EPA issued a ruling confirming the non-hazardous status of coal ash. However, the EPA has until 1998 to classify co-managed utility wastes -- coal ash and other utility wastes -- as either non-hazardous or hazardous. If the EPA classifies the co-managed wastes as hazardous, then substantial additional costs for the management of such wastes may be required. The full impact of any change in the regulatory status will depend on the subsequent development of co-managed waste requirements. The Southern Company subsidiaries 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 The Southern Company amounted to $8 million, $41 million, and $3 million in 1994, 1993, and 1992, respectively. 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 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 Southern Company's operations. The full impact of these requirements cannot be determined at this time, pending the development and implementation of applicable regulations. II-14 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) The Southern Company and Subsidiary Companies 1994 Annual Report Compliance with possible additional legislation related to global climate change, electromagnetic fields, and other environmental and health concerns could significantly affect The Southern 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 In early 1995, The Southern Company sold -- through a public offering -- common stock with proceeds totaling $103 million. The company may require additional equity capital during the remainder of 1995. The amount and timing of additional equity capital to be raised in 1995 -- as well as in subsequent years -- will be contingent on The Southern Company's investment opportunities. Equity capital can be provided from any combination of public offerings, private placements, or the company's stock plans. Any portion of the common stock required during 1995 for the company's stock plans that is not provided from the issuance of new stock will be acquired on the open market in accordance with the terms of such plans. The operating subsidiaries plan to obtain the funds required for construction and other purposes from sources similar to those used in the past, which was primarily from internal sources. However, the type and timing of any financings -- if needed -- will depend on market conditions and regulatory approval. Completing the sale of Unit 4 of Plant Scherer in 1995 will provide some $130 million of cash. To meet short-term cash needs and contingencies, the system companies had approximately $139 million of cash and cash equivalents and $1.4 billion of unused credit arrangements with banks at the beginning of 1995. To issue additional first mortgage bonds and preferred stock, the operating companies must comply with certain earnings coverage requirements designated in their mortgage indentures and corporate charters. The ability to issue securities in the future will depend on coverages at that time. Currently, each of the operating companies expects to have adequate coverage ratios for anticipated requirements through at least 1997. II-15 CONSOLIDATED STATEMENTS OF INCOME For the Years Ended December 31, 1994, 1993, and 1992 The Southern Company and Subsidiary Companies 1994 Annual Report
========================================================================================================================== 1994 1993 1992 -------------------------------------------------------------------------------------------------------------------------- (in millions) Operating Revenues $8,297 $8,489 $8,073 -------------------------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 2,058 2,265 2,114 Purchased power 277 336 454 Other 1,505 1,445 1,310 Maintenance 660 653 613 Depreciation and amortization 821 793 768 Amortization of deferred Plant Vogtle expenses, net (Note 1) 75 36 (31) Taxes other than income taxes 475 462 436 Federal and state income taxes 711 734 647 -------------------------------------------------------------------------------------------------------------------------- Total operating expenses 6,582 6,724 6,311 -------------------------------------------------------------------------------------------------------------------------- Operating Income 1,715 1,765 1,762 Other Income (Expense): Allowance for equity funds used during construction 11 9 10 Interest income 32 30 32 Other, net (48) (41) (50) Income taxes applicable to other income 26 57 39 -------------------------------------------------------------------------------------------------------------------------- Income Before Interest Charges 1,736 1,820 1,793 -------------------------------------------------------------------------------------------------------------------------- Interest Charges and Preferred Dividends: Interest on long-term debt 568 595 684 Allowance for debt funds used during construction (18) (13) (12) Interest on notes payable 33 30 16 Amortization of debt discount, premium, and expense, net 30 26 14 Other interest charges 47 87 34 Preferred dividends of subsidiary companies 87 93 104 -------------------------------------------------------------------------------------------------------------------------- Net interest charges and preferred dividends 747 818 840 -------------------------------------------------------------------------------------------------------------------------- Consolidated Net Income $ 989 $1,002 $ 953 ========================================================================================================================== Common Stock Data: (Note 10) Average number of shares of common stock outstanding (in millions) 650 637 632 Earnings per share of common stock $ 1.52 $1.57 $1.51 Cash dividends paid per share of common stock $ 1.18 $1.14 $1.10 -------------------------------------------------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF RETAINED EARNINGS For the Years Ended December 31, 1994, 1993, and 1992 ========================================================================================================================== 1994 1993 1992 -------------------------------------------------------------------------------------------------------------------------- (in millions) Balance at Beginning of Year $2,968 $2,721 $2,490 Consolidated net income 989 1,002 953 -------------------------------------------------------------------------------------------------------------------------- 3,957 3,723 3,443 Cash dividends on common stock 766 726 695 Capital and preferred stock transactions, net - 29 27 -------------------------------------------------------------------------------------------------------------------------- Balance at End of Year (Note 10) $3,191 $2,968 $2,721 ========================================================================================================================== The accompanying notes are an integral part of these statements.
II-16 CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1994, 1993, and 1992 The Southern Company and Subsidiary Companies 1994 Annual Report
================================================================================================= 1994 1993 1992 ------------------------------------------------------------------------------------------------- (in millions) Operating Activities: Consolidated net income $ 989 $1,002 $ 953 Adjustments to reconcile consolidated net income to net cash provided by operating activities -- Depreciation and amortization 1,050 1,011 969 Deferred income taxes and investment tax credits (4) 189 215 Allowance for equity funds used during construction (11) (9) (10) Deferred Plant Vogtle costs (Note 1) 75 36 (31) Gain on asset sales (52) (36) -- Other, net 45 (9) (32) Changes in certain current assets and liabilities -- Receivables, net 114 (55) (10) Fossil fuel stock (110) 138 53 Materials and supplies (18) (2) (76) Accounts payable 81 43 35 Other (48) (61) (71) ------------------------------------------------------------------------------------------------- Net cash provided from operating activities 2,111 2,247 1,995 ------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (1,536) (1,441) (1,105) Southern Electric's investments (405) (465) -- Sales of property 171 262 44 Other (87) (37) 61 ------------------------------------------------------------------------------------------------- Net cash used for investing activities (1,857) (1,681) (1,000) ------------------------------------------------------------------------------------------------- Financing Activities: Proceeds -- Common stock 279 205 30 Preferred securities 100 -- -- Preferred stock -- 426 410 First mortgage bonds 185 2,185 1,815 Other long-term debt 1,188 592 256 Retirements -- Preferred stock (1) (516) (326) First mortgage bonds (241) (2,178) (2,575) Other long-term debt (1,039) (450) (296) Increase in notes payable, net 37 114 525 Payment of common stock dividends (766) (726) (695) Miscellaneous (35) (137) (148) ------------------------------------------------------------------------------------------------- Net cash used for financing activities (293) (485) (1,004) ------------------------------------------------------------------------------------------------- Net Increase (Decrease) in Cash and Cash Equivalents (39) 81 (9) Cash and Cash Equivalents at Beginning of Year 178 97 106 ------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 139 $ 178 $ 97 ================================================================================================= Supplemental Cash Flow Information: Cash paid during the year for -- Interest (net of amount capitalized) $618 $673 $743 Income taxes 716 530 458 ------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these statements.
II-17 CONSOLIDATED BALANCE SHEETS At December 31, 1994 and 1993 The Southern Company and Subsidiary Companies 1994 Annual Report
============================================================================================= Assets 1994 1993 --------------------------------------------------------------------------------------------- (in millions) Utility Plant: Plant in service (Note 1) $29,209 $27,687 Less accumulated provision for depreciation 9,577 8,934 --------------------------------------------------------------------------------------------- 19,632 18,753 Nuclear fuel, at amortized cost 238 229 Construction work in progress (Note 4) 1,247 1,031 --------------------------------------------------------------------------------------------- Total 21,117 20,013 --------------------------------------------------------------------------------------------- Other Property and Investments: Argentine operating concession, being amortized (Note 5) 446 469 Nuclear decommissioning trusts 125 88 Miscellaneous 224 179 --------------------------------------------------------------------------------------------- Total 795 736 --------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 139 178 Special deposits 36 - Receivables, less accumulated provisions for uncollectible accounts of $9 million in 1994 and in 1993 1,022 1,147 Fossil fuel stock, at average cost 354 254 Materials and supplies, at average cost 553 535 Prepayments 194 148 Vacation pay deferred (Note 1) 70 73 --------------------------------------------------------------------------------------------- Total 2,368 2,335 --------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes (Note 9) 1,454 1,546 Deferred Plant Vogtle costs (Note 1) 432 507 Debt expense, being amortized 48 33 Premium on reacquired debt, being amortized 298 288 Miscellaneous 530 453 --------------------------------------------------------------------------------------------- Total 2,762 2,827 --------------------------------------------------------------------------------------------- Total Assets $27,042 $25,911 ============================================================================================= The accompanying notes are an integral part of these balance sheets.
II-18 CONSOLIDATED BALANCE SHEETS (continued) At December 31, 1994 and 1993 The Southern Company and Subsidiary Companies 1994 Annual Report
============================================================================================= Capitalization and Liabilities 1994 1993 --------------------------------------------------------------------------------------------- (in millions) Capitalization (See accompanying statements): Common stock equity $ 8,186 $ 7,684 Preferred stock 1,332 1,333 Preferred securities 100 - Long-term debt 7,593 7,412 --------------------------------------------------------------------------------------------- Total 17,211 16,429 --------------------------------------------------------------------------------------------- Current Liabilities: Amount of securities due within one year 229 157 Notes payable 978 941 Accounts payable 806 698 Customer deposits 102 103 Taxes accrued- Federal and state income - 34 Other 153 172 Interest accrued 190 186 Vacation pay accrued 87 90 Miscellaneous 233 190 --------------------------------------------------------------------------------------------- Total 2,778 2,571 --------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes (Note 9) 4,007 3,979 Deferred credits related to income taxes (Note 9) 987 1,051 Accumulated deferred investment tax credits 858 900 Prepaid capacity revenues 138 144 Department of Energy assessments 92 98 Disallowed Plant Vogtle capacity buyback costs 60 63 Storm damage reserves 53 22 Miscellaneous 858 654 --------------------------------------------------------------------------------------------- Total 7,053 6,911 --------------------------------------------------------------------------------------------- Commitments and Contingent Matters (Notes 1, 2, 3, 4, 5, 6, 7, 8, and 13) Total Capitalization and Liabilities $27,042 $25,911 ============================================================================================= The accompanying notes are an integral part of these balance sheets.
II-19 CONSOLIDATED STATEMENTS OF CAPITALIZATION At December 31, 1994 and 1993 The Southern Company and Subsidiary Companies 1994 Annual Report
================================================================================================ 1994 1993 1994 1993 ------------------------------------------------------------------------------------------------ (in millions) (percent of total) Common Stock Equity: Common stock, par value $5 per share -- Authorized -- 1 billion shares Outstanding -- 1994: 657 million shares, 1993: 643 million shares (Note 10) $ 3,283 $ 3,213 Paid-in capital 1,712 1,503 Retained earnings (Note 10) 3,191 2,968 ------------------------------------------------------------------------------------------------- Total common stock equity 8,186 7,684 47.6 % 46.8 % ------------------------------------------------------------------------------------------------- Cumulative Preferred Stock of Subsidiaries: $100 par or stated value -- 4.20% to 5.96% 199 199 6.32% to 7.88% 205 205 11.36% -- 1 $25 par or stated value -- $1.90 to $2.125 295 295 6.40% to 7.60% 323 323 Auction rates -- at January 1, 1995: 4.59% to 4.64% 70 70 Adjustable rates -- January 1, 1995: 6.07% to 6.86% 240 240 ------------------------------------------------------------------------------------------------- Total (annual dividend requirement -- $90 million) 1,332 1,333 7.7 8.1 ------------------------------------------------------------------------------------------------- Cumulative Preferred Securities of Subsidiaries: $25 stated value -- 9% 100 -- ------------------------------------------------------------------------------------------------- Total (annual distribution requirement -- $9 million) 100 -- 0.6 -- -------------------------------------------------------------------------------------------------
II-20 CONSOLIDATED STATEMENTS OF CAPITALIZATION (continued) At December 31, 1994 and 1993 The Southern Company and Subsidiary Companies 1994 Annual Report
========================================================================================================= 1994 1993 1994 1993 --------------------------------------------------------------------------------------------------------- (in millions) (percent of total) Long-Term Debt of Subsidiaries: First mortgage bonds -- Maturity Interest Rates -------- -------------- 1994 4 5/8% -- 26 1995 4 3/4 % -- 11 1995 5 1/8 % 130 130 1996 4 1/2 % to 6% 210 235 1997 5 7/8 % 25 25 1998 5% to 9.2% 230 249 1999 6 1/8% to 6 3/8% 365 365 2000 through 2004 6% to 7% 1,250 1,215 2005 through 2009 6 7/8% to 9% 228 230 2015 through 2019 9.23% to 10 5/8% 65 215 2020 through 2024 7.3% to 9 3/8% 1,921 1,779 2032 Variable rates 200 200 --------------------------------------------------------------------------------------------------------- Total first mortgage bonds 4,624 4,680 Other long-term debt (Note 11) 3,261 2,962 Unamortized debt premium (discount), net (63) (74) --------------------------------------------------------------------------------------------------------- Total long-term debt (annual interest requirement -- $570 million) 7,822 7,568 Less amount due within one year (Note 12) 229 156 -------------------------------------------------------------------------------------------------------- Long-term debt excluding amount due within one year 7,593 7,412 44.1 45.1 --------------------------------------------------------------------------------------------------------- Total Capitalization $17,211 $16,429 100.0 % 100.0% =========================================================================================================
CONSOLIDATED STATEMENTS OF PAID-IN CAPITAL For the Years Ended December 31, 1994, 1993, and 1992
========================================================================================================= 1994 1993 1992 --------------------------------------------------------------------------------------------------------- (in millions) Balance at Beginning of Year $1,503 $2,931 $2,908 Proceeds from sales of common stock over the par value -- 13.9 million, 9.7 million, and 1.6 million shares in 1994, 1993, and 1992, respectively 209 179 23 Two-for-one stock split (Note 10) -- (1,607) -- ----------------------------------------------------------------------------------------------------------- Balance at End of Year $1,712 $1,503 $2,931 =========================================================================================================== The accompanying notes are an integral part of these statements.
II-21 NOTES TO FINANCIAL STATEMENTS The Southern Company and Subsidiary Companies 1994 Annual Report 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General The Southern Company is the parent company of five operating companies, a system service company, Southern Communications Services (Southern Communications), Southern Electric International (Southern Electric), Southern Nuclear Operating Company (Southern Nuclear), and The Southern Development and Investment Group (SDIG). The operating companies provide electric service in four Southeastern states. Contracts among the companies -- dealing with 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). The system service company provides, at cost, specialized services to The Southern Company and subsidiary companies. Southern Communications, beginning in mid-1995, will provide digital wireless communications services -- over the 800-megahertz frequency band -- to The Southern Company's subsidiaries and also will market these services to the public within the Southeast. Southern Electric designs, builds, owns, and operates power production facilities and provides a broad range of technical services to industrial companies and utilities in the United States and a number of international markets. Southern Nuclear provides services to The Southern Company's nuclear power plants. SDIG develops new business opportunities related to energy products and services. The 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 operating companies also are subject to regulation by the FERC and their respective state regulatory commissions. The companies follow generally accepted accounting principles and comply with the accounting policies and practices prescribed by their respective commissions. All material intercompany items have been eliminated in consolidation. Consolidated retained earnings at December 31, 1994, include $2.8 billion of undistributed retained earnings of subsidiaries. Certain prior years' data presented in the consolidated financial statements have been reclassified to conform with current year presentation. Regulatory Assets and Liabilities The Southern 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 to be credited to customers through the ratemaking process. Regulatory assets and (liabilities) reflected in the Consolidated Balance Sheets at December 31 relate to: 1994 1993 ---------------- (in millions) Deferred income taxes $1,454 $1,546 Deferred Plant Vogtle costs 432 507 Premium on reacquired debt 298 288 Demand-side programs 97 49 Department of Energy assessments 79 87 Vacation pay 70 73 Deferred fuel charges 51 83 Postretirement benefits 41 22 Work force reduction costs 15 5 Deferred income tax credits (987) (1,051) Storm damage reserve (53) (22) Other, net 108 91 ------------------------------------------------------------- Total $1,605 $1,678 ============================================================= 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. In addition, the company would be required to determine any impairment to other assets, including plant, and write down the assets to their fair value. Revenues and Fuel Costs The operating companies accrue revenues for service rendered but unbilled at the end of each fiscal period. Fuel costs are expensed as the fuel is used. The operating companies' electric rates include provisions to adjust billings for fluctuations in fuel and the energy component of purchased power 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. In 1994, uncollectible accounts continued to average less than 1 percent of revenues. II-22 NOTES (continued) The Southern Company and Subsidiary Companies 1994 Annual Report 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 $152 million in 1994, $137 million in 1993, and $132 million in 1992. 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, which was scheduled to begin in 1998. However, the actual year this service will begin is uncertain. Sufficient storage capacity currently is available to permit operation into 2003 at Plant Hatch, into 2009 at Plant Vogtle, and into 2012 and 2014 at Plant Farley units 1 and 2, respectively. Also, the Energy Policy Act of 1992 required the establishment in 1993 of a Uranium Enrichment Decontamination and Decommissioning Fund, which is to be funded in part by a special assessment on utilities with nuclear plants. This 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. Alabama Power and Georgia Power -- based on its ownership interests -- estimate their remaining liability at December 31, 1994, under this law to be approximately $43 million and $33 million, respectively. These obligations are recorded in the Consolidated 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 1994 and 3.3 percent in both 1993 and 1992. 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 costs of decommissioning nuclear facilities. In 1988, the Nuclear Regulatory Commission (NRC) adopted regulations requiring 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 set periods of time as 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 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 -- at December 31, 1994, 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) 1993 1994 1994 Decommissioning periods: Beginning year 2017 2014 2027 Completion year 2029 2027 2038 -------------------------------------------------------------- (in millions) Site study costs: Radiated structures $409 $241 $193 Non-radiated structures 75 34 43 Other 94 60 49 -------------------------------------------------------------- Total $578 $335 $285 ============================================================== (in millions) Ultimate costs: Radiated structures $1,258 $641 $ 843 Non-radiated structures 231 91 190 Other 289 160 215 -------------------------------------------------------------- Total $1,778 $892 $1,248 ============================================================== II-23 NOTES (continued) The Southern Company and Subsidiary Companies 1994 Annual Report Plant Plant Plant Farley Hatch Vogtle --------------------------- (in millions) Amount expensed in 1994 $18 $6 $6 Accumulated provisions: Balance in external trust funds $ 71 $33 $22 Balance in internal reserves 51 29 10 ---------------------------------------------------------------- Total $122 $62 $32 ================================================================ Assumed in ultimate costs: Inflation rate 4.5% 4.4% 4.4% Trust earning rate 7.0 6.0 6.0 ---------------------------------------------------------------- Annual provisions for nuclear decommissioning are based on an annuity -- sinking fund -- method as approved by the respective state public service commissions. The decommissioning costs approved for ratemaking are $578 million for Plant Farley, $184 million for Plant Hatch, and $155 million for Plant Vogtle. These amounts for Georgia Power are the costs to decommission the radioactive portions of the plants based on 1990 site studies. Georgia Power's estimated ultimate costs, based on the 1990 studies, were $872 million and $1.4 billion for plants Hatch and Vogtle, respectively. Georgia Power expects the GPSC to periodically review and adjust, if necessary, the amounts collected in rates for the anticipated cost of decommissioning. 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 regulatory requirements, changes in technology, and changes in costs of labor, materials, and equipment. Income Taxes The companies provide 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. Effective January 1, 1993, The Southern Company adopted FASB Statement No. 109, Accounting for Income Taxes. Statement No. 109 required, among other things, conversion to the liability method of accounting for accumulated deferred income taxes. See Note 9 for additional information about Statement No. 109. Plant Vogtle Phase-In Plans In 1987 and 1989, the GPSC ordered that the allowed costs of Plant Vogtle, a two-unit nuclear facility of which Georgia Power owns 45.7 percent, be phased into rates under plans that meet the requirements of FASB Statement No. 92, Accounting for Phase-In Plans. Under these plans, Georgia Power deferred financing costs and depreciation expense until the allowed investment was fully reflected in rates as of October 1991. In 1991, the GPSC modified the Plant Vogtle phase-in plan to begin earlier amortization of the costs deferred under the plan. Also, the GPSC levelized capacity buyback expense from co-owners of Plant Vogtle. See Note 3 for additional information regarding Georgia Power's 1991 rate order. Previously, pursuant to two separate interim accounting orders by the GPSC, Georgia Power deferred substantially all operating expenses and financing costs related to Plant Vogtle. Under phase-in plans and accounting orders from the GPSC, Georgia Power deferred and began amortizing the costs -- recovered through rates -- related to Plant Vogtle as follows: 1994 1993 1992 ------------------------------- (in millions) Deferred capacity buybacks $ 10 $ 38 $100 Amortization of deferred costs (85) (74) (69) Income taxes - - (23) ------------------------------------------------------------------- Net (amortization) deferred (75) (36) 8 Effect of adoption of FASB Statement No. 109 - 160 - Deferred costs at beginning of year 507 383 375 ------------------------------------------------------------------ Deferred costs at end of year $432 $507 $383 ================================================================== Each GPSC order called for recovery of deferred costs within 10 years. Also, the orders authorized Georgia Power to impute a return similar to allowance for funds used during construction (AFUDC) on its investment in Plant Vogtle units 1 and 2 after the units began commercial operation. 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 II-24 NOTES (continued) The Southern Company and Subsidiary Companies 1994 Annual Report depreciation expense. The composite rates used by the operating companies to calculate AFUDC during the years 1992 through 1994 ranged from a before-income-tax rate of 5.0 percent to 11.3 percent. AFUDC, net of income tax, as a percent of consolidated net income was 2.3 percent in 1994, 1.7 percent in 1993, and 1.8 percent in 1992. Utility Plant Utility plant is stated at original cost less regulatory disallowances. 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 For purposes of the Consolidated 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 In accordance with FASB Statement No. 107, Disclosure About Fair Value of Financial Instruments, The Southern Company's only financial instrument that the carrying amount did not approximate fair value at December 31 was as follows: Long-Term Debt ----------------------- Carrying Fair Year Amount Value ---- -------- ----- (in millions) 1994 $7,674 $7,373 1993 7,321 7,729 ---------------------------------------------------------------- The fair value of long-term debt was based on either closing market price or closing price 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. Vacation Pay The operating companies' employees earn their vacation in one year and take it in the subsequent year. However, for ratemaking purposes, vacation pay is recognized as an allowable expense only when paid. Consistent with this ratemaking treatment, the companies accrue a current liability for earned vacation pay and record a current regulatory asset representing the future recoverability of this cost. The amount was $70 million and $73 million at December 31, 1994 and 1993, respectively. In 1995, an estimated 69 percent of the 1994 deferred vacation cost will be expensed, and the balance will be charged to construction and other accounts. 2. RETIREMENT BENEFITS Pension Plan The system companies have defined benefit, trusteed, non-contributory pension plans that cover substantially all regular employees. Benefits are based on the greater of amounts resulting from two different formulas: years of service and final average pay or years of service and a flat-dollar benefit. Primarily, the companies use the "entry age normal method with a frozen initial liability" actuarial method for funding purposes, subject to limitations under federal income tax regulations. Amounts funded to the pension trusts are primarily invested in equity and fixed-income securities. FASB Statement No. 87, Employers' Accounting for Pensions, requires use of the "projected unit credit" actuarial method for financial reporting purposes. Postretirement Benefits The system companies also provide certain medical care and life insurance benefits for retired employees. Substantially all employees may become eligible for these benefits when they retire. Qualified trusts are funded to the extent deductible under federal income tax regulations or to the extent required by the operating companies' respective regulatory commissions. Amounts funded are primarily invested in debt and equity securities. Effective January 1, 1993, the system companies adopted FASB Statement No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, on a prospective basis. Statement No. 106 requires that medical care and life insurance benefits for retired employees be accounted for on an accrual basis II-25 NOTES (continued) The Southern Company and Subsidiary Companies 1994 Annual Report using a specified actuarial method, "benefit/years-of-service." In October 1993, the GPSC ordered Georgia Power to phase in the adoption of Statement No. 106 to cost of service over a five-year period, whereby one-fifth of the additional costs would be expensed in 1993 and the remaining costs would be deferred. An additional one-fifth of the costs would be expensed each succeeding year until the costs are fully reflected in cost of service in 1997. The costs deferred during the five-year period will be amortized to expense over a 15-year period beginning in 1998. For the other operating companies, the cost of postretirement benefits is reflected in rates on a current basis. Prior to 1993, the system companies, except for Georgia Power and Savannah Electric, recognized these benefit costs on an accrual basis using the "aggregate cost" actuarial method, which spreads the expected cost of such benefits over the remaining periods of employees' service as a level percentage of payroll costs. Consistent with regulatory treatment in those years, Georgia Power and Savannah Electric recognized these costs on a cash basis as payments were made. The total costs of such benefits recognized by system companies in 1992 were $42 million. Funded Status and Cost of Benefits Shown in the following tables are actuarial results and assumptions for pension and postretirement medical and life insurance benefits as computed under the requirements of FASB Statement Nos. 87 and 106, respectively. The funded status of the plans at December 31 was as follows: Pension -------------------- 1994 1993 -------------------- (in millions) Actuarial present value of benefit obligation: Vested benefits $1,593 $1,534 Non-vested benefits 68 76 ---------------------------------------------------------------------- Accumulated benefit obligation 1,661 1,610 Additional amounts related to projected salary increases 638 558 ---------------------------------------------------------------------- Projected benefit obligation 2,299 2,168 Less: Fair value of plan assets 3,171 3,337 Unrecognized net gain (789) (1,060) Unrecognized prior service cost 64 72 Unrecognized transition asset (139) (152) ---------------------------------------------------------------------- Prepaid asset recognized in the Consolidated Balance Sheets $ 8 $ 29 ====================================================================== Postretirement Medical ----------------------- 1994 1993 ----------------------- (in millions) Actuarial present value of benefit obligation: Retirees and dependents $293 $243 Employees eligible to retire 40 48 Other employees 367 389 ------------------------------------------------------------------- Accumulated benefit obligation 700 680 Less: Fair value of plan assets 128 95 Unrecognized net loss (gain) 22 76 Unrecognized transition obligation 394 419 ------------------------------------------------------------------- Accrued liability recognized in the Consolidated Balance Sheets $156 $ 90 =================================================================== Postretirement Life -------------------- 1994 1993 -------------------- (in millions) Actuarial present value of benefit obligation: Retirees and dependents $ 82 $ 75 Employees eligible to retire - - Other employees 92 96 ------------------------------------------------------------------- Accumulated benefit obligation 174 171 Less: Fair value of plan assets 12 2 Unrecognized net loss (gain) (19) (13) Unrecognized transition obligation 106 113 ------------------------------------------------------------------- Accrued liability recognized in the Consolidated Balance Sheets $ 75 $ 69 =================================================================== The weighted average rates assumed in the actuarial calculations were: 1994 1993 1992 -------------------------------------- Discount 8.0% 7.5% 8.0% Annual salary increase 5.5 5.0 6.0 Long-term return on plan assets 8.5 8.5 8.5 -------------------------------------------------------------------- An additional assumption used in measuring the accumulated postretirement medical benefit obligation was a weighted average medical care cost trend rate of 10.5 percent for 1994 decreasing gradually to 6.0 percent through the year 2000 and remaining at that level thereafter. An annual increase in the assumed II-26 NOTES (continued) The Southern Company and Subsidiary Companies 1994 Annual Report medical care cost trend rate of 1 percent would increase the accumulated medical benefit obligation at December 31, 1994, by $130 million and the aggregate of the service and interest cost components of the net retiree medical cost by $18 million. Components of the plans' net costs are shown below: Pension ----------------------- 1994 1993 1992 ------------------------ (in millions) Benefits earned during the year $ 77 $ 76 $ 75 Interest cost on projected benefit obligation 160 156 146 Actual (return) loss on plan assets 75 (432) (135) Net amortization and deferral (351) 186 (85) ---------------------------------------------------------------- Net pension cost (income) $ (39) $ (14) $ 1 ================================================================ Of the above net pension amounts, pension income of $29 million in 1994 and $9 million in 1993, and pension expense of $2 million in 1992, were recorded in operating expenses, and the remainder was recorded in construction and other accounts. Postretirement Medical ---------------------- 1994 1993 ---------------------- (in millions) Benefits earned during the year $ 26 $ 21 Interest cost on accumulated benefit obligation 51 43 Amortization of transition obligation 21 22 Actual (return) loss on plan assets 2 (12) Net amortization and deferral (10) 5 ----------------------------------------------------------------- Net postretirement cost $ 90 $ 79 ================================================================= Postretirement Life --------------------- 1994 1993 -------------------- (in millions) Benefits earned during the year $ 5 $ 6 Interest cost on accumulated benefit obligation 13 13 Amortization of transition obligation 6 6 Actual (return) loss on plan assets - - Net amortization and deferral - - ----------------------------------------------------------------- Net postretirement cost $24 $25 ================================================================= Of the above net postretirement medical and life insurance costs recorded in 1994 and 1993, $77 million and $64 million were charged to operating expenses, $18 million and $21 million were deferred, and the remainder was charged to construction and other accounts, respectively. Work Force Reduction Programs The system companies have incurred additional costs for work force reduction programs. The costs related to these programs were $112 million, $35 million, and $37 million for the years 1994, 1993, and 1992, respectively. A portion of the cost of these programs was deferred and is being amortized in accordance with regulatory treatment. The unamortized balance of these costs was $15 million at December 31, 1994. 3. LITIGATION AND REGULATORY MATTERS Stockholder Suit In April 1991, two Southern Company stockholders filed a derivative action suit in the U.S. District Court for the Southern District of Georgia against certain current and former directors and officers of The Southern Company. The suit alleges violations of the Federal Racketeer Influenced and Corrupt Organizations Act (RICO) by officers and breaches of fiduciary duty and gross negligence by all defendants resulting from alleged fraudulent accounting for spare parts, illegal political campaign contributions, violations of federal securities laws involving misrepresentations and omissions in SEC filings, and concealment of the foregoing acts. The complaint seeks damages -- including treble damages pursuant to RICO -- in an unspecified amount, which if awarded, would be payable to The Southern Company. The plaintiffs' amended complaint was dismissed by the court in March 1992. The court ruled the plaintiffs had failed to present adequately their allegation that The Southern Company board of directors' refusal of an earlier demand by the plaintiffs was wrongful. In April 1994, the U.S. Court of Appeals for the 11th Circuit reversed the dismissal and remanded the case to the trial court, finding that allegations by the plaintiffs created a reasonable doubt that the board validly exercised its business judgment in refusing the earlier demand. This action is still pending. Alabama Power Heat Pump Financing Suit In September 1990, two customers of Alabama Power filed a civil complaint in the Circuit Court of Shelby County, Alabama, against Alabama Power seeking to represent all persons who, prior to June 23, 1989, entered into agreements with Alabama Power for the financing of heat pumps and other merchandise purchased from vendors other than Alabama Power. The plaintiffs contended that Alabama Power was required to obtain a license under the Alabama Consumer Finance Act to II-27 NOTES (continued) The Southern Company and Subsidiary Companies 1994 Annual Report engage in the business of making consumer loans. The plaintiffs were seeking an order declaring these agreements null and void and requiring Alabama Power to refund all payments -- principal and interest -- made under these agreements. The aggregate amount under these agreements, together with interest paid, currently is estimated to be $40 million. In June 1993, the court ordered Alabama Power to refund or forfeit interest of approximately $10 million because of Alabama Power's failure to obtain such license. However, the court's order did not require any refund or forfeiture with respect to any principal payments under the agreements at issue. Alabama Power has appealed the court's order to the Supreme Court of Alabama. The final outcome of this matter cannot now be determined; however, in management's opinion, the final outcome will not have a material adverse effect on the company's financial statements. Georgia Power Potentially Responsible Party Status In January 1995, Georgia Power 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. While Georgia Power believes that the total amount of costs required for the cleanup of this site may be substantial, it is unable at this time to estimate either such total or the portion for which Georgia Power may be ultimately responsible. The final outcome of this matter cannot now be determined; however, in management's opinion -- based on the nature and extent of Georgia Power's activities relating to the site -- the final outcome will not have a material adverse effect on the company's financial statements. Georgia Power Tax Litigation In June 1994, a tax deficiency notice was received from the Internal Revenue Service (IRS) for the years 1984 through 1987 with regard to the tax accounting by Georgia Power for the sale in 1984 of an interest in Plant Vogtle and related capacity and energy buyback commitments. The potential tax deficiency and interest arising from this issue currently amount to approximately $28 million and $32 million, respectively. The tax deficiency relates to a timing issue as to when taxes are paid; therefore only the interest portion could affect future income. Management believes that the IRS position is incorrect, and Georgia Power has filed a petition with the U. S. Tax Court challenging the IRS position. In order to minimize additional interest charges should the IRS's position prevail, Georgia Power made a payment to the IRS related to the potential tax deficiency in September 1994. The final outcome of this matter cannot now be determined; however, in management's opinion, the final outcome will not have a material adverse effect on the company's financial statements. 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 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 last rate adjustment was effective in January 1992. 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. In 1994, the APSC issued an order -- at Alabama Power's request -- allowing Alabama Power to establish a natural disaster reserve not to exceed $32 million and to change the procedure for estimating the accrual of revenues for service rendered but unbilled at the end of each month. This change increased unbilled revenues for September 1994 by $28 million, which offset the initial accrual for the natural disaster reserve for the same amount. Additional monthly accruals of $250 thousand will be made until the reserve maximum is attained. In addition, a moratorium on rate increases through the third quarter of 1995 was approved. The ratemaking procedures will remain in effect until the APSC votes to modify or discontinue them. Georgia Power Demand-Side Conservation Programs In October 1993, a Superior Court of Fulton County, Georgia, judge ruled that rate riders previously approved by the GPSC for recovery of Georgia Power's costs incurred in connection with demand-side conservation programs were unlawful. The judge held that the GPSC lacked statutory authority to approve II-28 NOTES (continued) The Southern Company and Subsidiary Companies 1994 Annual Report such rate riders except through general rate case proceedings and that those procedures had not been followed. Georgia Power suspended collection of the demand-side conservation costs and appealed the court's decision to the Georgia Court of Appeals. In December 1993, the GPSC approved Georgia Power's request for an accounting order allowing Georgia Power to defer all current unrecovered and future costs related to these programs until the superior court's decision is reversed or until the next general rate case proceedings. An association of industrial customers filed a petition for review of the accounting order in superior court. In July 1994, the Georgia Court of Appeals upheld the legality of the rate riders. In November 1994, the Supreme Court of Georgia denied petitions for review of this ruling. As a result, Georgia Power resumed collection under the rate riders in December 1994. In early 1995, the GPSC initiated a true-up proceeding to review Georgia Power's demand-side conservation program costs both incurred and expected to be incurred during 1995 in order to adjust rate riders accordingly. The proceeding will also address a plan for recovery of costs deferred under the accounting order. Georgia Power's costs related to these conservation programs through 1994 were $115 million, of which $18 million has been collected and the remainder deferred. The final outcome of this matter cannot now be determined; however, in management's opinion, the final outcome will not have a material adverse effect on the company's financial statements. Georgia Power 1991 Rate Order; Phase-In Plan Modifications Georgia Power received a rate order in 1991 from the GPSC that modified the Plant Vogtle phase-in plans to begin earlier amortization of the costs deferred under the plans. The amortization period began October 1991 -- rather than October 1994 as originally scheduled -- and extends through September 1999. In addition, the GPSC ordered the levelization of capacity buyback expense from the co-owners of Plant Vogtle over a six-year period beginning October 1991. This results in net cost deferrals during the first three years and subsequent amortization of the deferred amounts in the last three years. Mississippi Power Retail Rate Adjustment Plan Mississippi Power's retail base rates have been set under a Performance Evaluation Plan (PEP) since 1986 with various modifications. In January 1994, the Mississippi Public Service Commission (MPSC) approved PEP-2. Under PEP-2, Mississippi Power's rate of return is measured on retail net investment. Also, three indicators are used to evaluate Mississippi Power's performance with emphasis on price and service to the customer. In addition, PEP-2 provides for the sharing of rate adjustments based on low rates and on the performance rating. The evaluation periods for PEP-2 are semiannual. Any change in rates is limited to 2 percent of retail revenues per period. PEP-2 will remain in effect until the MPSC modifies or terminates the plan. FERC Reviews Equity Returns In May 1991, the FERC ordered that hearings be conducted concerning the reasonableness of the Southern electric system's wholesale rate schedules and contracts that have a return on common equity of 13.75 percent or greater. The contracts that could be affected by the hearings include substantially all of the transmission, unit power, long-term power, and other similar contracts. Any change in the rate of return on common equity that may require refunds as a result of this proceeding would be substantially for the period beginning in July 1991 and ending in October 1992. In August 1992, a FERC administrative law judge issued an opinion that changes in rate schedules and contracts were not necessary and that the FERC staff failed to show how any changes were in the public interest. The FERC staff has filed exceptions to the administrative law judge's opinion, and the matter remains pending before the FERC. In August 1994, the FERC instituted another proceeding based on substantially the same issues as in the 1991 proceeding. The second period under review for possible refunds began in October 1994 and is scheduled to continue until January 1996. If the rates of return on common equity recommended by the FERC staff were applied to all of the schedules and contracts involved in both proceedings, and refunds were ordered, the amount of refunds could range up to approximately $77 million at December 31, 1994. Although the final outcome of this matter cannot now be determined, in management's opinion, the final outcome will not result in II-29 NOTES (continued) The Southern Company and Subsidiary Companies 1994 Annual Report changes that would have a material adverse effect on the company's financial statements. 4. CONSTRUCTION PROGRAM General The operating companies are engaged in continuous construction programs, currently estimated to total some $1.4 billion in 1995, $1.3 billion in 1996, and $1.3 billion in 1997. These estimates include AFUDC of $40 million in 1995, $30 million in 1996, and $33 million in 1997. 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; 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, 1994, significant purchase commitments were outstanding in connection with the construction program. The operating companies do not have any new baseload generating plants under construction. However, within the service area, the construction of combustion turbine peaking units of approximately 1,100 megawatts is planned to be completed by 1997. In addition, significant construction will continue related to transmission and distribution facilities and the upgrading and extension of the useful lives of generating plants. See Management's Discussion and Analysis under "Environmental Matters" for information on the impact of the Clean Air Act Amendments of 1990 and other environmental matters. Rocky Mountain Project Status In its 1985 financing order, the GPSC concluded that completion of the Rocky Mountain pumped storage hydroelectric project in 1991 as then planned was not economically justifiable and reasonable and withheld authorization for Georgia Power to spend funds from approved securities issuances on that project. In 1988, Georgia Power and Oglethorpe Power Corporation (OPC) entered into a joint ownership agreement for OPC to assume responsibility for the construction and operation of the project, as discussed in Note 6. However, full recovery of Georgia Power's costs depends on the GPSC's treatment of the project's costs and the disposition of the project's capacity output. In the event the GPSC does not allow full recovery of the project costs, then the portion not allowed may have to be written off. AFUDC accrued on the Rocky Mountain project has not been credited to income or included in the project cost since December 1985. If accrual of AFUDC is not resumed, Georgia Power's portion of the estimated total plant additions at completion would be approximately $200 million. The plant is scheduled to be in commercial operation in 1995. The ultimate outcome of this matter cannot now be determined. 5. FINANCING, INVESTMENT, AND COMMITMENTS General In early 1995, The Southern Company sold -- through a public offering -- 5 million shares of common stock with proceeds totaling $103 million. The company may require additional equity capital during the remainder of 1995. The amount and timing of additional equity capital to be raised in 1995 -- as well as in subsequent years --will be contingent on The 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 operating companies' construction programs are expected to be financed primarily from internal sources. Short-term debt will be utilized if necessary; the amounts available are discussed below. The subsidiary companies may issue additional long-term debt and preferred stock primarily for the purposes of debt maturities and for redeeming higher-cost securities if market conditions permit. Southern Electric Investments Southern Electric's investments in generating facilities in domestic and various foreign markets were approximately $436 million at December 31, 1994. The consolidated financial statements reflect these investments in majority-owned or controlled subsidiaries on a consolidated basis and other investments on an equity basis. II-30 NOTES (continued) The Southern Company and Subsidiary Companies 1994 Annual Report Bank Credit Arrangements At the beginning of 1995, unused credit arrangements with banks totaled $1.4 billion, of which approximately $875 million expires at various times during 1995 and 1996; $41 million expires at May 1, 1997; $25 million expires at May 31, 1997; $400 million expires at June 30, 1997; and $40 million expires at December 1, 1997. Georgia Power's revolving credit agreements of $60 million, of which $41 million remained unused as of December 31, 1994, expire May 1, 1997. During the term of these agreements, Georgia Power may convert short-term borrowings 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 Georgia Power's option. In connection with these credit arrangements, Georgia Power agrees to pay commitment fees based on the unused portions of the commitments or to maintain compensating balances with the banks. Gulf Power has $25 million of revolving credit agreements expiring May 31, 1997. These agreements allow short-term and/or term borrowings with various terms and conditions regarding repayment. In connection with these credit arrangements, Gulf Power agrees to pay commitment fees based on the unused portions of the commitments or to maintain compensating balances with the banks. The $400 million expiring June 30, 1997, is under revolving credit arrangements with several banks providing The Southern Company, Alabama Power, and Georgia Power up to the total credit amount of $400 million. To provide liquidity support to commercial paper programs, $135 million and $165 million of the $400 million available credit are currently dedicated to the exclusive use of Alabama Power and Georgia Power, respectively. During the term of these agreements, short-term borrowings may 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 companies' option. In addition, these agreements require payment of commitment fees based on the unused portions of the commitments or the maintenance of compensating balances with the banks. Mississippi Power has $40 million of revolving credit agreements expiring December 1, 1997. 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 Mississippi Power's option. In connection with these credit arrangements, Mississippi Power agrees to pay commitment fees based on the unused portions of the commitments or to maintain compensating balances with the banks. Savannah Electric's revolving credit arrangements of $20 million, of which $11 million remained unused as of December 31, 1994, expire December 31, 1996. 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 Savannah Electric's option. In connection with these credit arrangements, Savannah Electric agrees to pay commitment fees based on the unused portions of the commitments. A portion of the $1.4 billion unused credit arrangements with banks -- discussed earlier -- is dedicated to provide liquidity support to the companies' variable rate pollution control bonds. The amount of credit lines dedicated at December 31, 1994, was $293 million. In connection with all other lines of credit, the companies have the option of paying fees or maintaining compensating balances, which are substantially all the cash of the companies except for daily working funds and similar items. These balances are not legally restricted from withdrawal. In addition, the companies from time to time borrow under uncommitted lines of credit with banks, and in the case of Alabama Power and Georgia Power, through commercial paper programs that have the liquidity support of committed bank credit arrangements. II-31 NOTES (continued) The Southern Company and Subsidiary Companies 1994 Annual Report Assets Subject to Lien The operating 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. Fuel Commitments To supply a portion of the fuel requirements of the system's generating plants, the subsidiary companies have 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 were approximately $16 billion at December 31, 1994. Additional commitments for coal and nuclear fuel will be required in the future to supply the operating companies' fuel needs. To take advantage of lower-cost coal supplies, agreements were reached in 1986 for the payment of $121 million to terminate two contracts for the supply of coal to Plant Daniel, which is jointly owned by Gulf Power and Mississippi Power. Also, in March 1988, Gulf Power made an advance payment of $60 million to a coal supplier under an agreement to lower the cost of future coal purchased under an existing contract. These amounts are being amortized to expense. Operating Leases The operating companies have entered into coal rail car rental agreements with various terms and expiration dates. These expenses totaled $15 million, $11 million, and $9 million for 1994, 1993, and 1992, respectively. At December 31, 1994, estimated minimum rental commitments for noncancelable operating leases were as follows: Year Amounts --- ----------- (in millions) 1995 $ 18 1996 17 1997 17 1998 17 1999 17 2000 and thereafter 242 ------------------------------------------------------- Total minimum payments $328 ======================================================= 6. FACILITY SALES AND JOINT OWNERSHIP AGREEMENTS In 1992, Alabama Power sold an undivided interest in units 1 and 2 of Plant Miller and related facilities to Alabama Electric Cooperative, Inc. Since 1975, Georgia Power has sold undivided interests in plants Vogtle, Hatch, Scherer, and Wansley in varying amounts, together with transmission facilities, to OPC, the Municipal Electric Authority of Georgia (MEAG), and the city of Dalton, Georgia. Georgia Power has completed three of four separate transactions to sell Unit 4 of Plant Scherer to two Florida utilities. See Note 7 for additional information concerning these sales. In addition, Georgia Power has joint ownership agreements with OPC for the Rocky Mountain project and with Florida Power Corporation (FPC) for a combustion turbine unit at Intercession City, Florida, both of which are discussed later. At December 31, 1994, 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 ---------- ----------- ------------ Plant Vogtle (in millions) (nuclear) 45.7% $3,289 $628 Plant Hatch (nuclear) 50.1 842 346 Plant Miller (coal) Units 1 and 2 91.8 708 264 Plant Scherer (coal) Units 1 and 2 8.4 112 36 Unit 4 16.6 119 18 Plant Wansley (coal) 53.5 287 129 Rocky Mountain (pumped storage) 25.0* 199 - ------------------------------------------------------------- *Estimated ownership at date of completion. Georgia Power and OPC have a joint ownership agreement regarding the 848-megawatt Rocky Mountain pumped storage hydroelectric project. Under the agreement, Georgia Power will retain its present investment in the project and OPC will finance, complete, and operate the facility. Upon completion, Georgia II-32 NOTES (continued) The Southern Company and Subsidiary Companies 1994 Annual Report Power will own an undivided interest in the project equal to the proportion its investment bears to the total investment in the project (excluding each party's cost of funds and ad valorem taxes). Based on current cost estimates, Georgia Power's final ownership is estimated at approximately 25 percent of the project at completion. The plant is scheduled to be in commercial operation in 1995. In 1994, Georgia Power and FPC entered into a joint ownership agreement regarding the Intercession City combustion turbine unit. The unit is scheduled to be in commercial operation in early 1996, and will be constructed, operated, and maintained by FPC. Georgia Power will have a 33 percent interest in the 150-megawatt unit, with retention of 100 percent of the capacity from June through September. FPC will have the capacity the remainder of the year. Georgia Power's investment in the unit at completion is estimated to be $14 million. Also, Georgia Power entered into a separate four-year purchase power contract with FPC. Beginning in 1996, Georgia Power will purchase 400 megawatts of capacity. In 1998, this amount will decline to 200 megawatts for the remaining two years. 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. In connection with a joint ownership arrangement at Plant Vogtle, Georgia Power has remaining commitments to purchase declining fractions of OPC's and MEAG's capacity and energy from this plant for periods of up to 10 years following commercial operation (and, with regard to a portion of the 5 percent additional interest in Plant Vogtle owned by MEAG, 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 such capacity are required whether any capacity is available. The energy cost of these purchases 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 in the Consolidated Statements of Income. Capacity payments totaled $129 million, $183 million, and $289 million for 1994, 1993, and 1992, respectively. Projected capacity payments for the next five years are as follows: $77 million in 1995; $70 million in 1996; $59 million in 1997; $59 million in 1998; and $59 million in 1999. Also, a portion of the above capacity payments relates to Plant Vogtle costs that were written off after being disallowed for retail ratemaking purposes. In 1991, the GPSC ordered that the Plant Vogtle capacity buyback expense be levelized over a six-year period. The amounts deferred and not expensed in the year paid totaled $38 million in 1993 and $100 million in 1992. In 1994, the amount deferred was exceeded by the amortization of amounts previously deferred by almost $1 million. The projected net amortization of the deferred expense is $49 million in 1995, $62 million in 1996, and $57 million in 1997. 7. SALES OF INTERESTS IN PLANT SCHERER Georgia Power has completed three of four separate transactions to sell Unit 4 of Plant Scherer to Florida Power & Light Company (FP&L) and Jacksonville Electric Authority (JEA) for a total price of approximately $808 million, including any gains on these transactions. FP&L would eventually own approximately 76.4 percent of the unit, with JEA owning the remainder. Georgia Power will continue to operate the unit. The completed and scheduled remaining transactions are as follows: Closing Percent Date Capacity Ownership Amount ------ -------- --------- ------- (megawatts) (in millions) July 1991 290 35.46% $291 June 1993 258 31.44 253 June 1994 135 16.55 133 June 1995 135 16.55 131 ------------------------------------------------------------- Total 818 100.00% $808 ============================================================= Plant Scherer -- a jointly owned coal-fired generating plant -- has four units with a total capacity of 3,272 megawatts. Unit 4 was completed in 1989. See Note 6 for information regarding current plant ownership. 8. LONG-TERM POWER SALES AGREEMENTS The operating subsidiaries of The Southern Company 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. The II-33 NOTES (continued) The Southern Company and Subsidiary Companies 1994 Annual Report agreements for non-firm capacity expired in 1994. Other 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, revenues from capacity sales primarily affect profitability. The capacity revenues have been as follows: Unit Other Year Power Long-Term Total ---- ---------------------------------- (in millions) 1994 $257 $19 $276 1993 312 38 350 1992 435 22 457 In 1994, long-term non-firm power of 200 megawatts was sold to FPC under a contract that expired at year-end. In January 1995, the amount of unit power sales to FPC increased by 200 megawatts. Unit power from specific generating plants is currently being sold to FP&L, FPC, JEA, and the city of Tallahassee, Florida. Under these agreements, approximately 1,700 megawatts of capacity is scheduled to be sold during 1995. Thereafter, these sales will decline to some 1,600 megawatts and remain at that approximate level -- unless reduced by FP&L, FPC, and JEA for the periods after 1999 -- until the expiration of the contracts in 2010. 9. INCOME TAXES Effective January 1, 1993, The Southern Company adopted FASB Statement No. 109, Accounting for Income Taxes. The adoption resulted in the recording of additional deferred income taxes and related regulatory assets and liabilities. At December 31, 1994, the tax- related regulatory assets and liabilities were $1.5 billion and $1.0 billion, respectively. These assets are attributable to tax benefits flowed through to customers in prior years and to taxes applicable to capitalized AFUDC. 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: 1994 1993 1992 ------------------------- (in millions) Total provision for income taxes: Federal -- Currently payable $603 $424 $343 Deferred -- current year 67 224 225 -- reversal of prior years (75) (51) (41) Deferred investment tax credits - (20) (6) ------------------------------------------------------------------- 595 577 521 ------------------------------------------------------------------- State -- Currently payable 86 64 50 Deferred -- current year 15 39 46 -- reversal of prior years (11) (3) (9) ------------------------------------------------------------------- 90 100 87 ------------------------------------------------------------------- Total 685 677 608 Less income taxes charged (credited) to other income (26) (57) (39) ------------------------------------------------------------------- Federal and state income taxes charged to operations $711 $734 $647 =================================================================== 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: 1994 1993 ----------------------- (in millions) Deferred tax liabilities: Accelerated depreciation $2,637 $2,496 Property basis differences 1,647 1,741 Deferred plant costs 141 161 Other 271 289 ------------------------------------------------------------------ Total 4,696 4,687 ------------------------------------------------------------------ Deferred tax assets: Federal effect of state deferred taxes 104 102 Other property basis differences 278 292 Deferred costs 79 69 Pension and other benefits 63 46 Other 225 210 ------------------------------------------------------------------ Total 749 719 ------------------------------------------------------------------ Net deferred tax liabilities 3,947 3,968 Portion included in current assets, net 60 11 ------------------------------------------------------------------ Accumulated deferred income taxes in the Consolidated Balance Sheet $4,007 $3,979 ================================================================== II-34 NOTES (continued) The Southern Company and Subsidiary Companies 1994 Annual Report 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 Consolidated Statements of Income. Credits amortized in this manner amounted to $42 million in 1994, $36 million in 1993, and $41 million in 1992. At December 31, 1994, 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: 1994 1993 1992 --------------------------- Federal statutory rate 35.0% 35.0% 34.0% State income tax, net of federal deduction 3.3 3.7 3.4 Non-deductible book depreciation 1.8 1.9 2.2 Difference in prior years' deferred and current tax rate (1.5) (1.3) (1.5) Other 0.3 (1.1) (1.6) --------------------------------------------------------------- Effective income tax rate 38.9% 38.2% 36.5% =============================================================== The Southern Company and its subsidiaries file a consolidated federal income tax return. Under a joint consolidated income tax agreement, each company's current and deferred tax expense is computed on a stand-alone basis, and consolidated tax savings are allocated to each company based on its ratio of taxable income to total consolidated taxable income. 10. COMMON STOCK Stock Distribution In January 1994, The Southern Company board of directors authorized a two-for-one common stock split in the form of a stock distribution for each share held as of February 7, 1994. For all reported common stock data, the number of common shares outstanding and per share amounts for earnings, dividends, and market price reflect the stock distribution. Shares Reserved At December 31, 1994, a total of 15 million shares was reserved for issuance pursuant to the Dividend Reinvestment and Stock Purchase Plan, the Employee Savings Plan, Outside Directors Stock Plan, and the Executive Stock Option Plan. Executive Stock Option Plan The Southern Company's Executive Stock Option Plan authorizes the granting of non-qualified stock options to key employees of The Southern Company, including officers. Currently, 36 employees are eligible to participate in the plan. As of December 31, 1994, 42 current and former employees participated in the plan. The maximum number of shares of common stock that may be issued under the Executive Stock Option Plan may not exceed 6 million. The price of options granted to date has been at the fair market value of the shares on the date of grant. Options granted to date become exercisable pro rata over a maximum period of four years from date of grant. Options outstanding will expire no later than 10 years after the date of grant, unless terminated earlier by the board of directors in accordance with the plan. Stock option activity in 1993 and 1994 is summarized below: Shares Average Subject Option Price To Option Per Share --------------------------- Balance at December 31, 1992 1,189,122 $15.02 Options granted 359,492 21.22 Options canceled -- -- Options exercised (183,804) 14.14 -------------------------------------------------------------------- Balance at December 31, 1993 1,364,810 16.77 Options granted 446,443 18.88 Options canceled - - Options exercised (74,649) 14.81 -------------------------------------------------------------------- Balance at December 31, 1994 1,736,604 $17.39 ==================================================================== Shares reserved for future grants: At December 31, 1992 4,073,936 At December 31, 1993 3,714,444 At December 31, 1994 3,268,001 -------------------------------------------------------------------- Options exercisable: At December 31, 1993 475,795 At December 31, 1994 793,989 -------------------------------------------------------------------- Common Stock Dividend Restrictions The income of The Southern Company is derived primarily from equity in earnings of its operating subsidiaries. At December 31, 1994, $1.8 billion of consolidated retained earnings was restricted against the payment by the operating companies of cash dividends on common stock under terms of bond indentures or charters. II-35 NOTES (continued) The Southern Company and Subsidiary Companies 1994 Annual Report 11. OTHER LONG-TERM DEBT Details of other long-term debt at December 31 are as follows: 1994 1993 ----------------- (in millions) Obligations incurred in connection with the sale by public authorities of tax-exempt pollution control revenue bonds: Collateralized -- 5.375% to 9.375% due 2004-2024 $1,179 $ 708 Variable rate (5% to 6.25% at 1/1/95) due 2011-2024 412 63 Non-collateralized -- 7.2 % to 12.25% due 2003-2014 1 650 6.75% to 10.6% due 2015-2017 828 890 5.8% due 2022 10 10 Variable rate (2.95% to 3.7% at 1/1/94) due 2011-2022 - 92 ----------------------------------------------------------------- 2,430 2,413 ----------------------------------------------------------------- Capitalized lease obligations 148 247 ----------------------------------------------------------------- Notes payable: 4.15% to 9.75% due 1994-1998 153 144 8.375% to 10% due 1997-1999 196 - Adjustable rates (14.04% at 1/1/95) due 1995 26 - Adjustable rates (4% to 7.8% at 1/1/95) due 1994-1996 133 115 Adjustable rates (5.5% to 8.14% at 1/1/95) due 1998-2019 175 43 ----------------------------------------------------------------- 683 302 ----------------------------------------------------------------- Total $3,261 $2,962 ================================================================= With respect to the collateralized pollution control revenue bonds, the operating companies 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. Assets acquired under capital leases are recorded as utility plant in service, and the related obligation is classified as other long-term debt. The net book value of capitalized leases was $126 million and $217 million at December 31, 1994 and 1993, respectively. At December 31, 1994, the composite interest rates for buildings and other were 9.7 percent and 10.7 percent, respectively. Sinking fund requirements and/or serial maturities through 1999 applicable to other long-term debt are as follows: $97 million in 1995; $166 million in 1996; $46 million in 1997; $29 million in 1998; and $23 million in 1999. 12. 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: 1994 1993 ------------- (in millions) Bond improvement fund requirements $ 48 $ 51 Less: Portion to be satisfied by certifying property additions 46 3 Reacquired bonds - 25 ---------------------------------------------------------------- Cash sinking fund requirements 2 23 First mortgage bond maturities and redemptions 130 44 Other long-term debt maturities (Note 11) 97 89 ---------------------------------------------------------------- Total $229 $156 ================================================================ The first mortgage bond improvement (sinking) fund requirements amount to 1 percent of each outstanding series of bonds authenticated under the indentures 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 166 2/3 percent of such requirements. 13. 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 $8.9 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 $79 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 II-36 NOTES (continued) The Southern Company and Subsidiary Companies 1994 Annual Report taxes, for Alabama Power and Georgia Power -- based on its ownership and buyback interests -- is $159 million and $163 million, respectively, per incident but not more than an aggregate of $20 million and $21 million, respectively, to be paid for each incident in any one year. Alabama Power and Georgia Power are members of Nuclear Mutual Limited (NML), a mutual insurer established to provide property damage insurance in an amount up to $500 million for members' nuclear generating facilities. The members are subject to a retrospective premium assessment in the event that losses exceed accumulated reserve funds. Alabama Power's and Georgia Power's maximum annual assessments are limited to $12 million and $15 million, respectively, under current policies. 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 NML coverage. This excess insurance is provided by Nuclear Electric Insurance Limited (NEIL), a mutual insurance company. 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 21 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 maximum annual assessments under current policies for Alabama Power and Georgia Power for excess property damage would be $27 million and $25 million, respectively. The maximum replacement power assessments are $10 million for Alabama Power and $13 million for Georgia Power. For all on-site property damage insurance policies for commercial nuclear power plants, the NRC requires that the proceeds of such policies issued or renewed on or after April 2, 1991, 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. Alabama Power and Georgia Power participate in an insurance program for nuclear workers that provides coverage for worker tort claims filed for bodily injury caused at commercial nuclear power plants. In the event that claims for this insurance exceed the accumulated reserve funds, Alabama Power and Georgia Power could be subject to a maximum total assessment of approximately $6 million each. All retrospective assessments -- whether generated for liability, property, or replacement power -- may be subject to applicable state premium taxes. 14. QUARTERLY FINANCIAL INFORMATION (Unaudited) Summarized quarterly financial data for 1994 and 1993 are as follows:
Per Common Share* ------------------------------------------------ Operating Operating Consolidated Price Range Quarter Ended Revenues Income Net Income Earnings Dividends High Low ------------- ----------------------------------------- ------------------------------------------------ (in millions) March 1994 $1,932 $330 $142 $0.22 $0.295 22 18 1/2 June 1994 2,069 440 256 0.39 0.295 20 1/2 17 3/4 September 1994 2,381 607 416 0.64 0.295 20 17 December 1994 1,915 338 175 0.27 0.295 21 18 1/4 March 1993 $1,840 $377 $177 $0.28 $0.285 21 3/8 18 3/8 June 1993 2,068 426 250 0.39 0.285 22 1/2 19 3/8 September 1993 2,636 637 442 0.70 0.285 23 20 1/2 December 1993 1,945 325 133 0.20 0.285 23 5/8 20 3/4 --------------------------------------------------------------------------------------------------------------------------------
Earnings for 1994 declined by $61 million or 9 cents per share as a result of work force reduction programs primarily recorded in the first quarter. *Common stock data reflect a two-for-one stock split in the form of a stock distribution for each share held as of February 7, 1994. The company's business is influenced by seasonal weather conditions. II-37 SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA The Southern Company and Subsidiary Companies 1994 Annual Report (See Note Below)
========================================================================================================== 1994 1993 1992 ---------------------------------------------------------------------------------------------------------- Operating Revenues (in millions) $8,297 $8,489 $8,073 Consolidated Net Income (in millions) $989 $1,002 $953 Earnings Per Share of Common Stock $1.52 $1.57 $1.51 Cash Dividends Paid Per Share of Common Stock $1.18 $1.14 $1.10 Return on Average Common Equity (percent) 12.47 13.43 13.42 Total Assets (in millions) $27,042 $25,911 $20,038 Gross Property Additions (in millions) $1,536 $1,441 $1,105 ---------------------------------------------------------------------------------------------------------- Capitalization (in millions): Common stock equity $8,186 $7,684 $7,234 Preferred stock 1,332 1,333 1,351 Preferred and preference stock subject to mandatory redemption -- -- 8 Preferred securities 100 -- -- Long-term debt 7,593 7,412 7,241 ---------------------------------------------------------------------------------------------------------- Total excluding amounts due within one year $17,211 $16,429 $15,834 ========================================================================================================== Capitalization Ratios (percent): Common stock equity 47.6 46.8 45.7 Preferred stock 8.3 8.1 8.6 Long-term debt 44.1 45.1 45.7 ---------------------------------------------------------------------------------------------------------- Total excluding amounts due within one year 100.0 100.0 100.0 ========================================================================================================== Other Common Stock Data: Book value per share (year-end) $12.47 $11.96 $11.43 Market price per share: High 22 23 5/8 19 1/2 Low 17 18 3/8 15 1/8 Close 20 22 19 1/4 Market-to-book ratio (year-end) (percent) 160.4 183.9 168.4 Price-earnings ratio (year-end) (times) 13.2 14.0 12.7 Dividends paid (in millions) $766 $726 $695 Dividend yield (year-end) (percent) 5.9 5.2 5.7 Dividend payout ratio (percent) 77.5 72.4 72.9 Cash coverage of dividends (year-end) (times) 2.7 2.9 2.8 Proceeds from sales of stock (in millions) $279 $204 $30 Shares outstanding (in thousands): Average 649,927 637,319 631,844 Year-end 656,528 642,662 632,917 Stockholders of record (year-end) 234,927 237,105 247,378 ---------------------------------------------------------------------------------------------------------- First Mortgage Bonds (in millions): Issued $185 $2,185 $1,815 Retired 241 2,178 2,575 Preferred Stock (in millions): Issued $-- $426 $410 Retired 1 516 326 ---------------------------------------------------------------------------------------------------------- Customers (year-end) (in thousands): Residential 3,046 2,996 2,950 Commercial 439 427 414 Industrial 17 18 18 Other 5 4 4 ---------------------------------------------------------------------------------------------------------- Total 3,507 3,445 3,386 ========================================================================================================== Employees (year-end) 27,826 28,743 29,085 ---------------------------------------------------------------------------------------------------------- Note: Common stock data reflect a two-for-one stock split in the form of a stock distribution for each share held as of February 7, 1994.
II-38 SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA The Southern Company and Subsidiary Companies 1994 Annual Report (See Note Below)
========================================================================================================== 1991 1990 1989 ---------------------------------------------------------------------------------------------------------- Operating Revenues (in millions) $8,050 $8,053 $7,620 Consolidated Net Income (in millions) $876 $604 $846 Earnings Per Share of Common Stock $1.39 $0.96 $1.34 Cash Dividends Paid Per Share of Common Stock $1.07 $1.07 $1.07 Return on Average Common Equity (percent) 12.74 8.85 12.49 Total Assets (in millions) $19,863 $19,955 $20,092 Gross Property Additions (in millions) $1,123 $1,185 $1,346 ---------------------------------------------------------------------------------------------------------- Capitalization (in millions): Common stock equity $6,976 $6,783 $6,861 Preferred stock 1,207 1,207 1,209 Preferred and preference stock subject to mandatory redemption 126 151 191 Preferred securities -- -- -- Long-term debt 7,992 8,458 8,575 ---------------------------------------------------------------------------------------------------------- Total excluding amounts due within one year $16,301 $16,599 $16,836 ========================================================================================================== Capitalization Ratios (percent): Common stock equity 42.8 40.9 40.8 Preferred stock 8.2 8.2 8.3 Long-term debt 49.0 50.9 50.9 ---------------------------------------------------------------------------------------------------------- Total excluding amounts due within one year 100.0 100.0 100.0 ========================================================================================================== Other Common Stock Data: Book value per share (year-end) $11.05 $10.74 $10.87 Market price per share: High 17 3/8 14 5/8 14 7/8 Low 12 7/8 11 1/2 11 Close 17 1/8 13 7/8 14 1/2 Market-to-book ratio (year-end) (percent) 155.5 129.7 134.0 Price-earnings ratio (year-end) (times) 12.4 14.6 10.9 Dividends paid (in millions) $676 $676 $675 Dividend yield (year-end) (percent) 6.2 7.7 7.3 Dividend payout ratio (percent) 77.1 111.8 79.8 Cash coverage of dividends (year-end) (times) 2.5 2.8 2.6 Proceeds from sales of stock (in millions) $-- $-- $4 Shares outstanding (in thousands): Average 631,307 631,307 631,303 Year-end 631,307 631,307 631,307 Stockholders of record (year-end) 254,568 263,046 273,751 ---------------------------------------------------------------------------------------------------------- First Mortgage Bonds (in millions): Issued $380 $300 $280 Retired 881 146 201 Preferred Stock (in millions): Issued $100 $-- $-- Retired 125 96 21 ---------------------------------------------------------------------------------------------------------- Customers (year-end) (in thousands): Residential 2,903 2,865 2,824 Commercial 403 396 392 Industrial 18 18 18 Other 4 4 4 ---------------------------------------------------------------------------------------------------------- Total 3,328 3,283 3,238 ========================================================================================================== Employees (year-end) 30,402 30,263 30,530 ---------------------------------------------------------------------------------------------------------- Note: Common stock data reflect a two-for-one stock split in the form of a stock distribution for each share held as of February 7, 1994.
II-39A SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA The Southern Company and Subsidiary Companies 1994 Annual Report (See Note Below)
========================================================================================================== 1988 1987 1986 ---------------------------------------------------------------------------------------------------------- Operating Revenues (in millions) $7,287 $7,204 $7,033 Consolidated Net Income (in millions) $846 $577 $903 Earnings Per Share of Common Stock $1.36 $0.96 $1.56 Cash Dividends Paid Per Share of Common Stock $1.07 $1.07 $1.0325 Return on Average Common Equity (percent) 13.03 9.27 15.61 Total Assets (in millions) $19,731 $19,518 $18,483 Gross Property Additions (in millions) $1,754 $1,853 $2,367 ---------------------------------------------------------------------------------------------------------- Capitalization (in millions): Common stock equity $6,686 $6,307 $6,133 Preferred stock 1,259 1,139 1,214 Preferred and preference stock subject to mandatory redemption 206 224 178 Preferred securities -- -- -- Long-term debt 8,433 8,333 7,812 ---------------------------------------------------------------------------------------------------------- Total excluding amounts due within one year $16,584 $16,003 $15,337 ========================================================================================================== Capitalization Ratios (percent): Common stock equity 40.3 39.4 40.0 Preferred stock 8.8 8.5 9.1 Long-term debt 50.9 52.1 50.9 ---------------------------------------------------------------------------------------------------------- Total excluding amounts due within one year 100.0 100.0 100.0 ========================================================================================================== Other Common Stock Data: Book value per share (year-end) $10.60 $10.28 $10.35 Market price per share: High 12 1/8 14 1/2 13 5/8 Low 10 1/8 8 7/8 10 1/8 Close 11 1/8 11 1/8 12 5/8 Market-to-book ratio (year-end) (percent) 105.5 108.8 122.5 Price-earnings ratio (year-end) (times) 8.2 11.7 8.2 Dividends paid (in millions) $661 $628 $583 Dividend yield (year-end) (percent) 9.6 9.6 8.4 Dividend payout ratio (percent) 78.1 108.9 64.6 Cash coverage of dividends (year-end) (times) 2.3 2.0 2.7 Proceeds from sales of stock (in millions) $194 $247 $379 Shares outstanding (in thousands): Average 622,292 601,390 580,252 Year-end 630,898 613,565 592,364 Stockholders of record (year-end) 290,725 296,079 297,302 ---------------------------------------------------------------------------------------------------------- First Mortgage Bonds (in millions): Issued $335 $700 $735 Retired 273 369 875 Preferred Stock (in millions): Issued $120 $125 $100 Retired 10 160 53 ---------------------------------------------------------------------------------------------------------- Customers (year-end) (in thousands): Residential 2,781 2,733 2,675 Commercial 384 374 362 Industrial 18 18 17 Other 4 4 4 Total 3,187 3,129 3,058 ========================================================================================================== Employees (year-end) 32,523 32,612 32,358 ---------------------------------------------------------------------------------------------------------- Note: Common stock data reflect a two-for-one stock split in the form of a stock distribution for each share held as of February 7, 1994.
II-39B SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA The Southern Company and Subsidiary Companies 1994 Annual Report (See Note Below)
============================================================================================== 1985 1984 ---------------------------------------------------------------------------------------------- Operating Revenues (in millions) $6,999 $6,350 Consolidated Net Income (in millions) $845 $735 Earnings Per Share of Common Stock $1.56 $1.47 Cash Dividends Paid Per Share of Common Stock $0.975 $0.915 Return on Average Common Equity (percent) 16.59 16.55 Total Assets (in millions) $16,855 $15,327 Gross Property Additions (in millions) $2,242 $2,130 ---------------------------------------------------------------------------------------------- Capitalization (in millions): Common stock equity $5,443 $4,741 Preferred stock 1,114 1,004 Preferred and preference stock subject to mandatory redemption 194 206 Preferred securities -- -- Long-term debt 7,220 6,774 ---------------------------------------------------------------------------------------------- Total excluding amounts due within one year $13,971 $12,725 Capitalization Ratios (percent): Common stock equity 38.9 37.3 Preferred stock 9.4 9.5 Long-term debt 51.7 53.2 ---------------------------------------------------------------------------------------------- Total excluding amounts due within one year 100.0 100.0 Other Common Stock Data: Book value per share (year-end) $9.72 $9.08 Market price per share: High 11 5/8 9 3/8 Low 8 7/8 7 1/8 Close 11 1/8 9 3/8 Market-to-book ratio (year-end) (percent) 114.5 103.9 Price-earnings ratio (year-end) (times) 7.1 6.4 Dividends paid (in millions) $512 $444 Dividend yield (year-end) (percent) 9.2 10.2 Dividend payout ratio (percent) 60.6 60.4 Cash coverage of dividends (year-end) (times) 2.6 3.1 Proceeds from sales of stock (in millions) $373 $318 Shares outstanding (in thousands): Average 541,244 501,313 Year-end 560,063 522,018 Stockholders of record (year-end) 318,221 336,165 ---------------------------------------------------------------------------------------------- First Mortgage Bonds (in millions): Issued $20 $150 Retired 69 71 Preferred Stock (in millions): Issued $150 $50 Retired 6 6 ---------------------------------------------------------------------------------------------- Customers (year-end) (in thousands): Residential 2,611 2,541 Commercial 348 336 Industrial 17 17 Other 4 4 ---------------------------------------------------------------------------------------------- Total 2,980 2,898 ============================================================================================== Employees (year-end) 32,354 31,753 ---------------------------------------------------------------------------------------------- Note: Common stock data reflect a two-for-one stock split in the form of a stock distribution for each share held as of February 7, 1994.
II-39C SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA (continued) The Southern Company and Subsidiary Companies 1994 Annual Report
========================================================================================================== 1994 1993 1992 ---------------------------------------------------------------------------------------------------------- Operating Revenues (in millions): Residential $2,560 $2,696 $2,402 Commercial 2,357 2,313 2,181 Industrial 2,162 2,200 2,126 Other 70 68 64 ---------------------------------------------------------------------------------------------------------- Total retail 7,149 7,277 6,773 Sales for resale within service area 360 447 409 Sales for resale outside service area 505 613 797 ---------------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 8,014 8,337 7,979 Other revenues 283 152 94 ---------------------------------------------------------------------------------------------------------- Total $8,297 $8,489 $8,073 ========================================================================================================== Kilowatt-Hour Sales (in millions): Residential 35,836 36,807 33,627 Commercial 34,080 32,847 31,025 Industrial 50,311 48,738 47,816 Other 844 814 777 ---------------------------------------------------------------------------------------------------------- Total retail 121,071 119,206 113,245 Sales for resale within service area 8,151 13,258 12,107 Sales for resale outside service area 10,769 12,445 16,632 ---------------------------------------------------------------------------------------------------------- Total 139,991 144,909 141,984 ========================================================================================================== Average Revenue Per Kilowatt-Hour (cents): Residential 7.14 7.32 7.14 Commercial 6.92 7.04 7.03 Industrial 4.30 4.51 4.45 Total retail 5.90 6.10 5.98 Sales for resale 4.57 4.12 4.20 Total sales 5.72 5.75 5.62 Average Annual Kilowatt-Hour Use Per Residential Customer 11,851 12,378 11,490 Average Annual Revenue Per Residential Customer $846.48 $906.60 $820.67 Plant Nameplate Capacity Ratings (year-end) (megawatts) 29,932 29,513 29,830 Maximum Peak-Hour Demand (megawatts): Winter 22,254 19,432 19,121 Summer 24,546 25,937 24,146 System Reserve Margin (at peak) (percent) 19.3 13.2 14.3 Annual Load Factor (percent) 63.5 59.4 60.3 Plant Availability (percent): Fossil-steam 85.2 87.9 88.6 Nuclear 89.8 85.9 85.2 ---------------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 70.8 73.0 71.7 Nuclear 17.9 16.3 16.2 Hydro 4.7 3.9 4.6 Oil and gas 0.9 0.9 0.5 Purchased power 5.7 5.9 7.0 ---------------------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 ========================================================================================================== Total Fuel Economy Data: BTU per net kilowatt-hour generated 10,010 9,994 9,976 Cost of fuel per million BTU (cents) 155.81 166.85 162.58 Average cost of fuel per net kilowatt-hour generated (cents) 1.56 1.67 1.62 ----------------------------------------------------------------------------------------------------------
II-40 SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA (continued) The Southern Company and Subsidiary Companies 1994 Annual Report
========================================================================================================== 1991 1990 1989 ---------------------------------------------------------------------------------------------------------- Operating Revenues (in millions): Residential $2,391 $2,342 $2,194 Commercial 2,122 2,062 1,965 Industrial 2,088 2,085 2,011 Other 65 64 60 ---------------------------------------------------------------------------------------------------------- Total retail 6,666 6,553 6,230 Sales for resale within service area 417 412 401 Sales for resale outside service area 884 977 928 ---------------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 7,967 7,942 7,559 Other revenues 83 111 61 ---------------------------------------------------------------------------------------------------------- Total $8,050 $8,053 $7,620 ========================================================================================================== Kilowatt-Hour Sales (in millions): Residential 33,622 33,118 31,627 Commercial 30,379 29,658 28,454 Industrial 46,050 45,974 45,022 Other 817 806 787 ---------------------------------------------------------------------------------------------------------- Total retail 110,868 109,556 105,890 Sales for resale within service area 12,320 11,134 11,419 Sales for resale outside service area 19,839 24,402 24,228 ---------------------------------------------------------------------------------------------------------- Total 143,027 145,092 141,537 ========================================================================================================== Average Revenue Per Kilowatt-Hour (cents): Residential 7.11 7.07 6.94 Commercial 6.99 6.96 6.91 Industrial 4.53 4.53 4.47 Total retail 6.01 5.98 5.88 Sales for resale 4.05 3.91 3.73 Total sales 5.57 5.47 5.34 Average Annual Kilowatt-Hour Use Per Residential Customer 11,659 11,637 11,287 Average Annual Revenue Per Residential Customer $829.18 $822.93 $782.90 Plant Nameplate Capacity Ratings (year-end) (megawatts) 29,915 29,532 29,532 Maximum Peak-Hour Demand (megawatts): Winter 19,166 17,629 20,772 Summer 25,261 25,981 24,399 System Reserve Margin (at peak) (percent) 16.5 14.0 21.0 Annual Load Factor (percent) 58.3 56.6 58.6 Plant Availability (percent): Fossil-steam 91.3 91.9 92.2 Nuclear 83.4 83.0 87.0 ---------------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 72.6 72.1 71.5 Nuclear 16.2 15.6 15.7 Hydro 4.4 4.4 5.2 Oil and gas 0.6 1.3 1.1 Purchased power 6.2 6.6 6.5 ---------------------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 ========================================================================================================== Total Fuel Economy Data: BTU per net kilowatt-hour generated 10,022 10,065 10,086 Cost of fuel per million BTU (cents) 168.28 172.81 171.00 Average cost of fuel per net kilowatt-hour generated (cents) 1.69 1.74 1.72 ----------------------------------------------------------------------------------------------------------
II-41A SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA (continued) The Southern Company and Subsidiary Companies 1994 Annual Report
========================================================================================================== 1988 1987 1986 ---------------------------------------------------------------------------------------------------------- Operating Revenues (in millions): Residential $2,103 $2,042 $1,996 Commercial 1,835 1,692 1,613 Industrial 1,945 1,870 1,845 Other 56 54 52 ---------------------------------------------------------------------------------------------------------- Total retail 5,939 5,658 5,506 Sales for resale within service area 480 461 511 Sales for resale outside service area 777 1,028 957 ---------------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 7,196 7,147 6,974 Other revenues 91 57 59 ---------------------------------------------------------------------------------------------------------- Total $7,287 $7,204 $7,033 ========================================================================================================== Kilowatt-Hour Sales (in millions): Residential 31,041 30,583 29,501 Commercial 27,005 25,593 24,166 Industrial 43,675 42,113 40,503 Other 763 737 723 ---------------------------------------------------------------------------------------------------------- Total retail 102,484 99,026 94,893 Sales for resale within service area 14,806 13,282 14,347 Sales for resale outside service area 15,860 22,905 16,909 ---------------------------------------------------------------------------------------------------------- Total 133,150 135,213 126,149 ========================================================================================================== Average Revenue Per Kilowatt-Hour (cents): Residential 6.77 6.68 6.77 Commercial 6.79 6.61 6.67 Industrial 4.45 4.44 4.56 Total retail 5.80 5.71 5.80 Sales for resale 4.10 4.11 4.69 Total sales 5.40 5.29 5.53 Average Annual Kilowatt-Hour Use Per Residential Customer 11,255 11,307 11,157 Average Annual Revenue Per Residential Customer $762.42 $754.96 $754.93 Plant Nameplate Capacity Ratings (year-end) (megawatts) 27,552 27,610 26,262 Maximum Peak-Hour Demand (megawatts): Winter 18,685 18,185 19,665 Summer 23,641 23,194 23,255 System Reserve Margin (at peak) (percent) 15.0 16.2 11.4 Annual Load Factor (percent) 59.8 58.7 57.2 Plant Availability (percent): Fossil-steam 91.3 91.2 90.3 Nuclear 78.4 84.5 74.2 ---------------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 77.7 77.8 79.4 Nuclear 14.5 13.1 11.5 Hydro 2.3 3.3 2.2 Oil and gas 0.7 0.6 0.9 Purchased power 4.8 5.2 6.0 ---------------------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 ========================================================================================================== Total Fuel Economy Data: BTU per net kilowatt-hour generated 10,094 10,122 10,171 Cost of fuel per million BTU (cents) 170.36 176.64 185.89 Average cost of fuel per net kilowatt-hour generated (cents) 1.72 1.78 1.89 ----------------------------------------------------------------------------------------------------------
II-41B SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA (continued) The Southern Company and Subsidiary Companies 1994 Annual Report
============================================================================================== 1985 1984 ---------------------------------------------------------------------------------------------- Operating Revenues (in millions): Residential $1,825 $1,751 Commercial 1,512 1,410 Industrial 1,830 1,790 Other 50 47 ---------------------------------------------------------------------------------------------- Total retail 5,217 4,998 Sales for resale within service area 436 456 Sales for resale outside service area 1,289 854 ---------------------------------------------------------------------------------------------- Total revenues from sales of electricity 6,942 6,308 Other revenues 57 42 ---------------------------------------------------------------------------------------------- Total $6,999 $6,350 ============================================================================================== Kilowatt-Hour Sales (in millions): Residential 27,088 26,163 Commercial 22,512 20,816 Industrial 39,804 39,055 Other 713 663 ---------------------------------------------------------------------------------------------- Total retail 90,117 86,697 Sales for resale within service area 11,079 11,193 Sales for resale outside service area 27,881 21,374 ---------------------------------------------------------------------------------------------- Total 129,077 119,264 ============================================================================================== Average Revenue Per Kilowatt-Hour (cents): Residential 6.74 6.69 Commercial 6.71 6.77 Industrial 4.60 4.58 Total retail 5.79 5.76 Sales for resale 4.43 4.02 Total sales 5.38 5.29 Average Annual Kilowatt-Hour Use Per Residential Customer 10,515 10,434 Average Annual Revenue Per Residential Customer $708.46 $698.26 Plant Nameplate Capacity Ratings (year-end) (megawatts) 26,262 25,397 Maximum Peak-Hour Demand (megawatts): Winter 19,347 16,353 Summer 21,778 20,210 System Reserve Margin (at peak) (percent) 17.6 32.8 Annual Load Factor (percent) 57.4 58.9 Plant Availability (percent): Fossil-steam 90.5 90.5 Nuclear 80.3 66.9 ---------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 78.5 77.3 Nuclear 12.0 11.8 Hydro 3.1 5.6 Oil and gas 0.3 0.2 Purchased power 6.1 5.1 ---------------------------------------------------------------------------------------------- Total 100.0 100.0 ============================================================================================== Total Fuel Economy Data: BTU per net kilowatt-hour generated 10,193 10,208 Cost of fuel per million BTU (cents) 191.24 191.44 Average cost of fuel per net kilowatt-hour generated (cents) 1.95 1.95 ----------------------------------------------------------------------------------------------
II-41C CONSOLIDATED STATEMENTS OF INCOME The Southern Company and Subsidiary Companies
======================================================================================================= For the Years Ended December 31, 1994 1993 1992 ------------------------------------------------------------------------------------------------------- (Millions of Dollars) ------------------------------------------------------------------------------------------------------- Operating Revenues $ 8,297 $ 8,489 $ 8,073 ------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 2,058 2,265 2,114 Purchased power 277 336 454 Proceeds from settlement of disputed contracts - (3) (7) Other 1,505 1,448 1,317 Maintenance 660 653 613 Depreciation and amortization 821 793 768 Deferred Plant Vogtle expenses, net 75 36 (31) Taxes other than income taxes 475 462 436 Federal and state income taxes 711 734 647 ------------------------------------------------------------------------------------------------------- Total operating expenses 6,582 6,724 6,311 ------------------------------------------------------------------------------------------------------- Operating Income 1,715 1,765 1,762 Other Income (Expense): Allowance for equity funds used during construction 11 9 10 Deferred return on Plant Vogtle - - - Write-off of Plant Vogtle costs - - - Income tax reduction for write-off of Plant Vogtle costs - - - Interest income 32 30 32 Other, net (48) (41) (50) Income taxes applicable to other income 26 57 39 ------------------------------------------------------------------------------------------------------- Income Before Interest Charges 1,736 1,820 1,793 ------------------------------------------------------------------------------------------------------- Interest Charges and Preferred Dividends: Interest on long-term debt 568 595 684 Allowance for debt funds used during construction (18) (13) (12) Interest on interim obligations 33 30 16 Amortization of debt discount, premium, and expense, net 30 26 14 Other interest charges 47 87 34 Preferred and preference dividends of subsidiary companies 87 93 104 ------------------------------------------------------------------------------------------------------- Net interest charges and preferred and preference dividends 747 818 840 ------------------------------------------------------------------------------------------------------- Consolidated Net Income $ 989 $ 1,002 $ 953 ======================================================================================================= Earnings Per Share of Common Stock $1.52 $1.57 $1.51 Average Number of Shares of Common Stock Outstanding (Thousands) 649,927 637,319 631,844 =======================================================================================================
II-42 CONSOLIDATED STATEMENTS OF INCOME The Southern Company and Subsidiary Companies
=============================================================================================================== For the Years Ended December 31, 1991 1990 1989 1988 (Millions of Dollars) --------------------------------------------------------------------------------------------------------------- Operating Revenues $ 8,050 $ 8,053 $ 7,620 $ 7,287 --------------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 2,237 2,327 2,241 2,213 Purchased power 468 642 575 562 Proceeds from settlement of disputed contracts (181) - - - Other 1,321 1,161 1,103 1,167 Maintenance 637 602 542 547 Depreciation and amortization 763 749 698 632 Deferred Plant Vogtle expenses, net 16 31 (39) (8) Taxes other than income taxes 432 397 356 362 Federal and state income taxes 618 520 525 412 --------------------------------------------------------------------------------------------------------------- Total operating expenses 6,311 6,429 6,001 5,887 --------------------------------------------------------------------------------------------------------------- Operating Income 1,739 1,624 1,619 1,400 Other Income (Expense): Allowance for equity funds used during construction 13 33 71 138 Deferred return on Plant Vogtle 35 83 48 107 Write-off of Plant Vogtle costs - (281) - - Income tax reduction for write-off of Plant Vogtle costs - 63 - - Interest income 30 28 28 46 Other, net (57) (55) (50) (30) Income taxes applicable to other income 21 36 30 23 --------------------------------------------------------------------------------------------------------------- Income Before Interest Charges 1,781 1,531 1,746 1,684 --------------------------------------------------------------------------------------------------------------- Interest Charges and Preferred Dividends: Interest on long-term debt 757 788 791 784 Allowance for debt funds used during construction (18) (34) (63) (130) Interest on interim obligations 20 22 12 22 Amortization of debt discount, premium, and expense, net 9 10 11 10 Other interest charges 29 26 26 32 Preferred and preference dividends of subsidiary companies 108 115 123 120 --------------------------------------------------------------------------------------------------------------- Net interest charges and preferred and preference dividends 905 927 900 838 --------------------------------------------------------------------------------------------------------------- Consolidated Net Income $ 876 $ 604 $ 846 $ 846 =============================================================================================================== Earnings Per Share of Common Stock $1.39 $0.96 $1.34 $1.36 Average Number of Shares of Common Stock Outstanding (Thousands) 631,307 631,307 631,303 622,292 ===============================================================================================================
II-43A CONSOLIDATED STATEMENTS OF INCOME The Southern Company and Subsidiary Companies
=============================================================================================================== For the Years Ended December 31, 1987 1986 1985 1984 (Millions of Dollars) --------------------------------------------------------------------------------------------------------------- Operating Revenues $ 7,204 $ 7,033 $ 6,999 $ 6,350 --------------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 2,303 2,316 2,431 2,197 Purchased power 552 386 456 435 Proceeds from settlement of disputed contracts - - - - Other 1,219 1,045 941 840 Maintenance 574 576 562 494 Depreciation and amortization 563 510 471 444 Deferred Plant Vogtle expenses, net (142) - - - Taxes other than income taxes 349 315 303 283 Federal and state income taxes 517 672 649 576 --------------------------------------------------------------------------------------------------------------- Total operating expenses 5,935 5,820 5,813 5,269 --------------------------------------------------------------------------------------------------------------- Operating Income 1,269 1,213 1,186 1,081 Other Income (Expense): Allowance for equity funds used during construction 190 312 269 212 Deferred return on Plant Vogtle 115 - - - Write-off of Plant Vogtle costs (358) - - - Income tax reduction for write-off of Plant Vogtle costs 129 - - - Interest income 77 66 70 61 Other, net (59) (20) - 46 Income taxes applicable to other income 19 - (19) (42) --------------------------------------------------------------------------------------------------------------- Income Before Interest Charges 1,382 1,571 1,506 1,358 --------------------------------------------------------------------------------------------------------------- Interest Charges and Preferred Dividends: Interest on long-term debt 776 782 755 679 Allowance for debt funds used during construction (157) (260) (254) (199) Interest on interim obligations 24 4 21 16 Amortization of debt discount, premium, and expense, net 8 6 3 2 Other interest charges 29 15 17 15 Preferred and preference dividends of subsidiary companies 125 121 119 110 --------------------------------------------------------------------------------------------------------------- Net interest charges and preferred and preference dividends 805 668 661 623 --------------------------------------------------------------------------------------------------------------- Consolidated Net Income $ 577 $ 903 $ 845 $ 735 =============================================================================================================== Earnings Per Share of Common Stock $0.96 $1.56 $1.56 $1.47 Average Number of Shares of Common Stock Outstanding (Thousands) 601,390 580,252 541,244 501,313 ===============================================================================================================
II-43B CONSOLIDATED STATEMENTS OF CASH FLOWS The Southern Company and Subsidiary Companies
============================================================================================ For the Years Ended December 31, 1994 1993 1992 -------------------------------------------------------------------------------------------- (Millions of Dollars) Operating Activities: Net income $ 989 $ 1,002 $ 953 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 1,050 1,011 969 Deferred income taxes, net (3) 209 221 Deferred investment tax credits, net (1) (20) (6) Allowance for equity funds used during construction (11) (9) (10) Deferred Plant Vogtle costs 75 36 (31) Write-off of Plant Vogtle costs - - - Non-cash proceeds from settlement of disputed contracts - - (7) Other, net (7) (45) (25) Changes in certain current assets and liabilities -- Receivables 114 (55) (10) Inventories (128) 136 (23) Payables 81 43 35 Taxes accrued - 3 (62) Other (48) (64) (9) -------------------------------------------------------------------------------------------- Net cash provided from operating activities 2,111 2,247 1,995 -------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (1,536) (1,441) (1,105) Foreign utility operations (405) (465) - Sales of property 171 262 44 Other (87) (37) 61 -------------------------------------------------------------------------------------------- Net cash used for investing activities (1,857) (1,681) (1,000) -------------------------------------------------------------------------------------------- Financing Activities: Proceeds: Common stock 279 205 30 Preferred securities of subsidiary 100 - - Preferred stock - 426 410 First mortgage bonds 185 2,185 1,815 Pollution control bonds 749 386 208 Other long-term debt 439 206 48 Prepaid capacity revenues - - - Retirements: Preferred and preference stock (1) (516) (326) First mortgage bonds (241) (2,178) (2,575) Pollution control bonds (732) (351) (208) Other long-term debt (307) (99) (88) Interim obligations, net 37 114 525 Payment of common stock dividends (766) (726) (695) Miscellaneous (35) (137) (148) -------------------------------------------------------------------------------------------- Net cash provided from (used for) financing activities (293) (485) (1,004) -------------------------------------------------------------------------------------------- Net Increase (Decrease) in Cash and Cash Equivalents (39) 81 (9) Cash and Cash Equivalents at Beginning of Year 178 97 106 -------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 139 $ 178 $ 97 ============================================================================================ ( ) Denotes use of cash.
II-44 CONSOLIDATED STATEMENTS OF CASH FLOWS The Southern Company and Subsidiary Companies
====================================================================================================== For the Years Ended December 31, 1991 1990 1989 1988 ------------------------------------------------------------------------------------------------------ (Millions of Dollars) Operating Activities: Net income $ 876 $ 604 $ 846 $ 846 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 968 982 951 837 Deferred income taxes, net 26 158 225 206 Deferred investment tax credits, net (11) - (1) 27 Allowance for equity funds used during construction (13) (33) (71) (138) Deferred Plant Vogtle costs (19) (52) (87) (115) Write-off of Plant Vogtle costs - 281 - - Non-cash proceeds from settlement of disputed contracts (141) - - - Other, net 45 (10) (28) 46 Changes in certain current assets and liabilities -- Receivables 68 8 (123) (21) Inventories 20 (82) 6 (47) Payables (13) (41) (23) (6) Taxes accrued 107 (5) (15) 29 Other (46) (34) 156 (40) ------------------------------------------------------------------------------------------------------ Net cash provided from operating activities 1,867 1,776 1,836 1,624 ------------------------------------------------------------------------------------------------------ Investing Activities: Gross property additions (1,123) (1,185) (1,346) (1,754) Foreign utility operations - - - - Sales of property 291 35 - - Other (45) 14 54 (2) ------------------------------------------------------------------------------------------------------ Net cash used for investing activities (877) (1,136) (1,292) (1,756) ------------------------------------------------------------------------------------------------------ Financing Activities: Proceeds: Common stock - - 4 194 Preferred securities of subsidiary - - - - Preferred stock 100 - - 120 First mortgage bonds 380 300 280 335 Pollution control bonds 126 - 104 73 Other long-term debt 14 74 74 68 Prepaid capacity revenues 53 - - - Retirements: Preferred and preference stock (125) (96) (21) (10) First mortgage bonds (881) (146) (201) (273) Pollution control bonds (130) (3) (55) (1) Other long-term debt (70) (207) (83) (108) Interim obligations, net 180 78 27 (300) Payment of common stock dividends (676) (676) (675) (661) Miscellaneous (41) (8) (10) (20) ------------------------------------------------------------------------------------------------------ Net cash provided from (used for) financing activities (1,070) (684) (556) (583) ------------------------------------------------------------------------------------------------------ Net Increase (Decrease) in Cash and Cash Equivalents (80) (44) (12) (715) Cash and Cash Equivalents at Beginning of Year 186 230 242 957 ------------------------------------------------------------------------------------------------------ Cash and Cash Equivalents at End of Year $ 106 $ 186 $ 230 $ 242 ====================================================================================================== ( ) Denotes use of cash.
II-45A CONSOLIDATED STATEMENTS OF CASH FLOWS The Southern Company and Subsidiary Companies
====================================================================================================== For the Years Ended December 31, 1987 1986 1985 1984 ------------------------------------------------------------------------------------------------------ (Millions of Dollars) Operating Activities: Net income $ 577 $ 903 $ 845 $ 735 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 742 674 623 581 Deferred income taxes, net 198 465 242 243 Deferred investment tax credits, net 20 132 184 245 Allowance for equity funds used during construction (190) (312) (269) (212) Deferred Plant Vogtle costs (257) - - - Write-off of Plant Vogtle costs 358 - - - Non-cash proceeds from settlement of disputed contracts - - - - Other, net 87 15 17 (190) Changes in certain current assets and liabilities -- Receivables (113) 38 (89) (27) Inventories (62) (37) 127 (69) Payables 125 48 38 187 Taxes accrued (34) 24 (65) 32 Other 42 (56) 84 70 ------------------------------------------------------------------------------------------------------ Net cash provided from operating activities 1,493 1,894 1,737 1,595 ------------------------------------------------------------------------------------------------------ Investing Activities: Gross property additions (1,853) (2,367) (2,242) (2,130) Foreign utility operations - - - - Sales of property 12 - 1 321 Other 64 46 126 110 ------------------------------------------------------------------------------------------------------ Net cash used for investing activities (1,777) (2,321) (2,115) (1,699) ------------------------------------------------------------------------------------------------------ Financing Activities: Proceeds: Common stock 247 379 373 318 Preferred securities of subsidiary - - - - Preferred stock 125 100 150 50 First mortgage bonds 700 735 20 150 Pollution control bonds 228 386 635 368 Other long-term debt 81 367 68 28 Prepaid capacity revenues - 100 - - Retirements: Preferred and preference stock (160) (53) (6) (6) First mortgage bonds (369) (875) (69) (71) Pollution control bonds (122) (21) - (4) Other long-term debt (56) (55) (54) (99) Interim obligations, net 313 (37) (77) 118 Payment of common stock dividends (628) (583) (512) (444) Miscellaneous (58) (82) (24) (22) ------------------------------------------------------------------------------------------------------ Net cash provided from (used for) financing activities 301 361 504 386 ------------------------------------------------------------------------------------------------------ Net Increase (Decrease) in Cash and Cash Equivalents 17 (66) 126 282 Cash and Cash Equivalents at Beginning of Year 940 1,006 880 598 ------------------------------------------------------------------------------------------------------ Cash and Cash Equivalents at End of Year $ 957 $ 940 $ 1,006 $ 880 ====================================================================================================== ( ) Denotes use of cash.
II-45B CONSOLIDATED BALANCE SHEETS The Southern Company and Subsidiary Companies
==================================================================================================== At December 31, 1994 1993 1992 ---------------------------------------------------------------------------------------------------- (Millions of Dollars) ASSETS Electric Plant: Production- Fossil $ 8,778 $ 8,006 $ 8,033 Nuclear 5,942 5,930 5,912 Hydro 1,341 1,263 1,253 ---------------------------------------------------------------------------------------------------- Total production 16,061 15,199 15,198 Transmission 3,504 3,224 3,093 Distribution 7,243 6,848 6,430 General 2,380 2,395 2,291 Construction work in progress 1,247 1,031 665 Nuclear fuel, at amortized cost 238 229 257 ---------------------------------------------------------------------------------------------------- Total electric plant 30,673 28,926 27,934 ---------------------------------------------------------------------------------------------------- Steam Heat Plant 21 21 21 ---------------------------------------------------------------------------------------------------- Total utility plant 30,694 28,947 27,955 ---------------------------------------------------------------------------------------------------- Accumulated Provision for Depreciation: Electric 9,567 8,924 8,271 Steam heat 10 10 9 ---------------------------------------------------------------------------------------------------- Total accumulated provision for depreciation 9,577 8,934 8,280 ---------------------------------------------------------------------------------------------------- Total 21,117 20,013 19,675 ---------------------------------------------------------------------------------------------------- Less property-related accumulated deferred income taxes - - 3,186 ---------------------------------------------------------------------------------------------------- Total 21,117 20,013 16,489 ---------------------------------------------------------------------------------------------------- Other Property and Investments: Securities received from settlement of disputed contracts - - - Argentine operating concession, being amortized 446 469 - Nuclear decommissioning trusts 125 88 52 Miscellaneous 224 179 75 ---------------------------------------------------------------------------------------------------- Total 795 736 127 ---------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 139 178 97 Investment securities - - 199 Receivables, net 840 962 742 Accrued utility revenues 218 185 177 Fossil fuel stock, at average cost 354 254 392 Materials and supplies, at average cost 553 535 533 Prepayments 194 148 220 Vacation pay deferred 70 73 70 ---------------------------------------------------------------------------------------------------- Total 2,368 2,335 2,430 ---------------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes 1,454 1,546 - Deferred Plant Vogtle costs 432 507 383 Deferred fuel charges 47 70 89 Debt expense, being amortized 48 33 28 Premium on reacquired debt, being amortized 298 288 222 Miscellaneous 483 383 270 ---------------------------------------------------------------------------------------------------- Total 2,762 2,827 992 ---------------------------------------------------------------------------------------------------- Total Assets $ 27,042 $25,911 $20,038 ====================================================================================================
II-46 CONSOLIDATED BALANCE SHEETS The Southern Company and Subsidiary Companies
================================================================================================================ At December 31, 1991 1990 1989 1988 ---------------------------------------------------------------------------------------------------------------- (Millions of Dollars) ASSETS Electric Plant: Production- Fossil $ 7,997 $ 7,661 $ 7,565 $ 6,226 Nuclear 5,902 5,820 5,976 4,995 Hydro 1,247 1,222 1,215 1,197 ---------------------------------------------------------------------------------------------------------------- Total production 15,146 14,703 14,756 12,418 Transmission 2,955 2,824 2,683 2,500 Distribution 6,092 5,738 5,365 4,944 General 2,196 2,078 2,026 1,865 Construction work in progress 603 1,092 1,006 3,071 Nuclear fuel, at amortized cost 301 354 402 481 ---------------------------------------------------------------------------------------------------------------- Total electric plant 27,293 26,789 26,238 25,279 ---------------------------------------------------------------------------------------------------------------- Steam Heat Plant 20 20 20 20 ---------------------------------------------------------------------------------------------------------------- Total utility plant 27,313 26,809 26,258 25,299 ---------------------------------------------------------------------------------------------------------------- Accumulated Provision for Depreciation: Electric 7,676 7,079 6,492 5,885 Steam heat 8 8 7 6 ---------------------------------------------------------------------------------------------------------------- Total accumulated provision for depreciation 7,684 7,087 6,499 5,891 ---------------------------------------------------------------------------------------------------------------- Total 19,629 19,722 19,759 19,408 ---------------------------------------------------------------------------------------------------------------- Less property-related accumulated deferred income taxes 3,020 2,911 2,759 2,559 ---------------------------------------------------------------------------------------------------------------- Total 16,609 16,811 17,000 16,849 ---------------------------------------------------------------------------------------------------------------- Other Property and Investments: Securities received from settlement of disputed contracts 202 - - - Argentine operating concession, being amortized - - - - Nuclear decommissioning trusts 26 2 - - Miscellaneous 83 83 85 88 ---------------------------------------------------------------------------------------------------------------- Total 311 85 85 88 ---------------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 106 186 230 242 Investment securities - - - - Receivables, net 723 793 765 687 Accrued utility revenues 160 151 189 148 Fossil fuel stock, at average cost 445 467 427 490 Materials and supplies, at average cost 457 456 413 348 Prepayments 222 193 192 174 Vacation pay deferred 70 64 65 63 ---------------------------------------------------------------------------------------------------------------- Total 2,183 2,310 2,281 2,152 ---------------------------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes - - - - Deferred Plant Vogtle costs 375 364 322 270 Deferred fuel charges 106 126 143 157 Debt expense, being amortized 23 23 24 24 Premium on reacquired debt, being amortized 126 99 103 102 Miscellaneous 130 137 134 89 ---------------------------------------------------------------------------------------------------------------- Total 760 749 726 642 ---------------------------------------------------------------------------------------------------------------- Total Assets $ 19,863 $19,955 $20,092 $19,731 ================================================================================================================
II-47A CONSOLIDATED BALANCE SHEETS The Southern Company and Subsidiary Companies
================================================================================================================ At December 31, 1987 1986 1985 1984 ---------------------------------------------------------------------------------------------------------------- (Millions of Dollars) ASSETS Electric Plant: Production- Fossil $ 6,157 $ 5,415 $ 5,274 $ 4,740 Nuclear 4,987 2,490 2,341 2,312 Hydro 1,192 1,184 1,162 863 --------------------------------------------------------------------------------------------------------------- Total production 12,336 9,089 8,777 7,915 Transmission 2,388 2,254 2,001 1,878 Distribution 4,510 4,131 3,793 3,491 General 1,674 1,504 1,243 1,037 Construction work in progress 2,519 5,162 4,278 3,830 Nuclear fuel, at amortized cost 479 520 497 455 ---------------------------------------------------------------------------------------------------------------- Total electric plant 23,906 22,660 20,589 18,606 ---------------------------------------------------------------------------------------------------------------- Steam Heat Plant 20 35 32 26 ---------------------------------------------------------------------------------------------------------------- Total utility plant 23,926 22,695 20,621 18,632 ---------------------------------------------------------------------------------------------------------------- Accumulated Provision for Depreciation: Electric 5,355 4,879 4,472 4,056 Steam heat 6 13 11 11 ---------------------------------------------------------------------------------------------------------------- Total accumulated provision for depreciation 5,361 4,892 4,483 4,067 ---------------------------------------------------------------------------------------------------------------- Total 18,565 17,803 16,138 14,565 ---------------------------------------------------------------------------------------------------------------- Less property-related accumulated deferred income taxes 2,371 2,212 1,976 1,792 ---------------------------------------------------------------------------------------------------------------- Total 16,194 15,591 14,162 12,773 ---------------------------------------------------------------------------------------------------------------- Other Property and Investments: Securities received from settlement of disputed contracts - - - - Argentine operating concession, being amortized - - - - Nuclear decommissioning trusts - - - - Miscellaneous 70 69 36 32 ---------------------------------------------------------------------------------------------------------------- Total 70 69 36 32 ---------------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 957 940 1,006 880 Investment securities - - - - Receivables, net 687 657 685 613 Accrued utility revenues 139 83 92 76 Fossil fuel stock, at average cost 513 501 503 649 Materials and supplies, at average cost 278 228 188 169 Prepayments 136 70 22 18 Vacation pay deferred 59 56 53 49 ---------------------------------------------------------------------------------------------------------------- Total 2,769 2,535 2,549 2,454 ---------------------------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes - - - - Deferred Plant Vogtle costs 173 - - - Deferred fuel charges 112 121 - - Debt expense, being amortized 25 24 24 22 Premium on reacquired debt, being amortized 95 70 - - Miscellaneous 80 73 84 46 ---------------------------------------------------------------------------------------------------------------- Total 485 288 108 68 ---------------------------------------------------------------------------------------------------------------- Total Assets $ 19,518 $18,483 $16,855 $15,327 ================================================================================================================
II-47B CONSOLIDATED BALANCE SHEETS The Southern Company and Subsidiary Companies
==================================================================================================== At December 31, 1994 1993 1992 ---------------------------------------------------------------------------------------------------- (Millions of Dollars) CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 3,283 $ 3,213 $ 1,582 Paid-in capital 1,711 1,502 2,929 Premium on preferred stock 1 1 2 Retained Earnings 3,191 2,968 2,721 ---------------------------------------------------------------------------------------------------- Total common equity 8,186 7,684 7,234 Preferred stock 1,332 1,332 1,351 Preferred stock subject to mandatory redemption - 1 8 Preferred securities of subsidiary 100 - - Long-term debt 7,593 7,412 7,241 ---------------------------------------------------------------------------------------------------- Total (excluding amount due within one year) 17,211 16,429 15,834 ---------------------------------------------------------------------------------------------------- Current Liabilities: Notes payable to banks 575 865 567 Commercial paper 403 76 260 Preferred stock due within one year 1 1 65 Long-term debt due within one year 228 156 188 Accounts payable 806 698 646 Customer deposits 102 103 99 Taxes accrued 153 206 172 Interest accrued 190 186 191 Vacation pay accrued 87 90 86 Miscellaneous 233 190 242 ---------------------------------------------------------------------------------------------------- Total 2,778 2,571 2,516 ---------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes 4,007 3,979 - Deferred credits related to income taxes 987 1,051 - Accumulated deferred investment tax credits 858 900 957 Prepaid capacity revenues, net 138 144 148 Disallowed Plant Vogtle capacity buyback costs 60 63 72 Miscellaneous 1,003 774 511 ---------------------------------------------------------------------------------------------------- Total 7,053 6,911 1,688 ---------------------------------------------------------------------------------------------------- Total Capitalization and Liabilities $ 27,042 $25,911 $20,038 ====================================================================================================
II-48 CONSOLIDATED BALANCE SHEETS The Southern Company and Subsidiary Companies
================================================================================================================ At December 31, 1991 1990 1989 1988 ---------------------------------------------------------------------------------------------------------------- (Millions of Dollars) CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 1,578 $ 1,578 $ 1,578 $ 1,577 Paid-in capital 2,906 2,906 2,906 2,903 Premium on preferred stock 2 3 3 3 Retained Earnings 2,490 2,296 2,374 2,203 ---------------------------------------------------------------------------------------------------------------- Total common equity 6,976 6,783 6,861 6,686 Preferred stock 1,207 1,207 1,209 1,259 Preferred stock subject to mandatory redemption 126 151 191 206 Preferred securities of subsidiary - - - - Long-term debt 7,992 8,458 8,575 8,433 ---------------------------------------------------------------------------------------------------------------- Total (excluding amount due within one year) 16,301 16,599 16,836 16,584 ---------------------------------------------------------------------------------------------------------------- Current Liabilities: Notes payable to banks 302 122 44 17 Commercial paper - - - - Preferred stock due within one year 7 7 61 17 Long-term debt due within one year 217 308 169 190 Accounts payable 585 616 676 728 Customer deposits 95 91 89 83 Taxes accrued 215 144 181 203 Interest accrued 221 246 233 240 Vacation pay accrued 84 75 75 74 Miscellaneous 229 233 252 104 ---------------------------------------------------------------------------------------------------------------- Total 1,955 1,842 1,780 1,656 ---------------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes - - - - Deferred credits related to income taxes - - - - Accumulated deferred investment tax credits 1,004 1,063 1,111 1,161 Prepaid capacity revenues, net 149 100 102 81 Disallowed Plant Vogtle capacity buyback costs 110 136 73 104 Miscellaneous 344 215 190 145 ---------------------------------------------------------------------------------------------------------------- Total 1,607 1,514 1,476 1,491 ---------------------------------------------------------------------------------------------------------------- Total Capitalization and Liabilities $ 19,863 $19,955 $20,092 $19,731 ================================================================================================================
II-49A CONSOLIDATED BALANCE SHEETS The Southern Company and Subsidiary Companies
================================================================================================================ At December 31, 1987 1986 1985 1984 ---------------------------------------------------------------------------------------------------------------- (Millions of Dollars) CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 1,534 $ 1,481 $ 1,400 $ 1,305 Paid-in capital 2,752 2,558 2,259 1,981 Premium on preferred stock 3 5 7 7 Retained Earnings 2,018 2,089 1,777 1,448 ---------------------------------------------------------------------------------------------------------------- Total common equity 6,307 6,133 5,443 4,741 Preferred stock 1,139 1,214 1,114 1,004 Preferred stock subject to mandatory redemption 224 177 194 205 Preferred securities of subsidiary - - - - Long-term debt 8,333 7,813 7,220 6,775 ---------------------------------------------------------------------------------------------------------------- Total (excluding amount due within one year) 16,003 15,337 13,971 12,725 ---------------------------------------------------------------------------------------------------------------- Current Liabilities: Notes payable to banks 317 4 41 118 Commercial paper - - - - Preferred stock due within one year 9 15 51 6 Long-term debt due within one year 192 251 303 162 Accounts payable 747 737 689 651 Customer deposits 86 82 80 83 Taxes accrued 221 259 144 208 Interest accrued 233 221 226 208 Vacation pay accrued 68 66 63 58 Miscellaneous 110 111 117 91 ---------------------------------------------------------------------------------------------------------------- Total 1,983 1,746 1,714 1,585 ---------------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes - - - - Deferred credits related to income taxes - - - - Accumulated deferred investment tax credits 1,180 1,208 1,114 968 Prepaid capacity revenues, net 104 101 - - Disallowed Plant Vogtle capacity buyback costs 79 - - - Miscellaneous 169 91 56 49 ---------------------------------------------------------------------------------------------------------------- Total 1,532 1,400 1,170 1,017 ---------------------------------------------------------------------------------------------------------------- Total Capitalization and Liabilities $ 19,518 $18,483 $16,855 $15,327 ================================================================================================================
II-49B ALABAMA POWER COMPANY FINANCIAL SECTION II-50 MANAGEMENT'S REPORT Alabama Power Company 1994 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 generally accepted accounting principles appropriate in the circumstances 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 books and 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 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 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 generally accepted accounting principles. /s/ Elmer B. Harris Elmer B. Harris President and Chief Executive Officer /s/ William B. Hutchins, III William B. Hutchins, III Executive Vice President and Chief Financial Officer II-51 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of Alabama Power Company: We have audited the accompanying balance sheets and statements of capitalization of Alabama Power Company (an Alabama corporation and wholly owned subsidiary of The Southern Company) as of December 31, 1994 and 1993, and the related statements of income, retained earnings, and cash flows for each of the three years in the period ended December 31, 1994. 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 generally accepted auditing standards. 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-60 through II-78) referred to above present fairly, in all material respects, the financial position of Alabama Power Company as of December 31, 1994 and 1993, and the results of its operations and its cash flows for the periods stated, in conformity with generally accepted accounting principles. As explained in Notes 2 and 8 to the financial statements, effective January 1, 1993, the company changed its methods of accounting for postretirement benefits other than pensions and for income taxes. /s/ Arthur Andersen LLP Birmingham, Alabama February 15, 1995 II-52 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Alabama Power Company 1994 Annual Report RESULTS OF OPERATIONS Earnings Alabama Power Company's 1994 net income after dividends on preferred stock was $356 million, representing a $10 million (2.8 percent) increase from the prior year. This improvement can be attributed to lower operating expenses which decreased 3.0 percent from the previous year as a result of the company's strategy to remain a low-cost producer of electricity. This improvement was partially offset by reduced capacity sales to nonterritorial utilities. Net income was also impacted by the mild weather in 1994. In 1993, earnings were $346 million, representing a 2.3 percent increase over the prior year. This increase was due to higher retail energy sales and lower financing costs. These positive factors were partially offset by higher operating costs and a scheduled reduction in capacity sales to non-affiliated utilities. The return on average common equity for 1994 was 13.86 percent compared to 13.94 percent in 1993, and 14.02 percent in 1992. Revenues The following table summarizes the principal factors that affected operating revenues for the past three years: =============================================================== Increase (Decrease) From Prior Year ------------------------------------- 1994 1993 1992 ------------------------------------- (in thousands) Retail -- Change in base rates $ -- $ -- $ 36,348 Unbilled adjustment 28,000 -- -- Sales growth 45,304 24,960 36,237 Weather (39,964) 58,536 (42,709) Fuel cost recovery and other (84,344) 96,437 (31,318) ---------------------------------------------------------------- Total retail (51,004) 179,933 (1,442) ---------------------------------------------------------------- Sales for Resale -- Non-affiliates (9,345) (43,686) (121) Affiliates (17,213) 23,887 (1,287) ---------------------------------------------------------------- Total sales for resale (26,558) (19,799) (1,408) Other operating revenues 5,095 635 2,896 ---------------------------------------------------------------- Total operating revenues $(72,467) $160,769 $ 46 ================================================================ Percent change (2.4)% 5.6% -- % ================================================================ Retail revenues of $2.4 billion in 1994 decreased $51 million (2.1 percent) from the prior year, compared with an increase of $180 million (8.0 percent) in 1993. The mild weather during the summer of 1994 and lower fuel cost recovery were the primary reasons for the decrease in retail revenues from 1993. The extreme weather during 1993 and sales growth contributed to the increase in retail revenues over 1992. Fuel revenues, which decreased substantially in 1994, generally represent the direct recovery of fuel expense, including the fuel component of purchased energy, and therefore have no effect on net income. In September 1994, the company recorded an additional $28 million (679 million kilowatt-hours) in estimated unbilled revenues due to a change in the estimating procedure for unbilled kilowatt-hours (KWHs) and associated revenues. For additional information concerning unbilled revenues and an offsetting expense, see Note 3 under "Retail Rate Adjustment Procedures." II-53 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Alabama Power Company 1994 Annual Report 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. These capacity and energy components, as well as the components of the sales to affiliated companies, were: ============================================================ 1994 1993 1992 ------------------------------------------ (in thousands) Capacity $165,063 $187,062 $216,113 Energy 222,579 233,253 239,622 ------------------------------------------------------------ Total $387,642 $420,315 $455,735 ============================================================ Capacity revenues from non-affiliates remained relatively constant in 1994 but decreased in 1993 due to a scheduled reduction in capacity dedicated to unit power sales customers for the first five months of the year. Capacity revenues from sales to affiliates decreased $22 million in 1994. Sales to affiliated companies within the Southern electric system will vary from year to year depending on demand, the availability, and the variable production cost of generating resources at each company. KWH sales for 1994 and the percent change by year were as follows: =============================================================== KWH Percent Change ----------------------------------------- 1994 1994 1993 1992 ----------------------------------------- (millions) Residential 12,955 (1.7)% 9.2% (2.1)% Commercial 9,495 3.4 6.4 1.2 Industrial 19,181 3.2 1.8 4.3 Unbilled adjustment 679 - - - Other 184 1.1 2.8 1.2 --------- Total retail 42,494 3.3 5.1 1.6 Sales for resale - Non-affiliates 6,775 (5.2) (14.8) (4.9) Affiliates 8,433 4.3 12.1 (7.4) --------- Total 57,702 2.4% 3.0% (0.7)% =============================================================== Expenses Total operating expenses of $2.3 billion for 1994 were down 3.0 percent compared with the prior year. The decrease was mainly due to less coal-fired generation and a lower average cost of fuel consumed. Coal-fired generation decreased because it was displaced with lower cost nuclear and hydro generation. Total operating expenses for 1993 were up 7.0 percent over those recorded in 1992. The increase was mainly attributable to higher production expenses of $95 million to meet increased energy demands. Fuel costs are 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. Fuel expense decreased in 1994 by $75 million (8.6 percent) from the previous year. This decrease is attributable to the increase in availability of nuclear and hydro generation and a decrease in the cost of fuel. Fuel expense increased in 1993 as a result of increased energy demands during the summer. Fuel cost per KWH generated was 1.56 cents in 1994, 1.73 cents in 1993 and 1.64 cents in 1992. Purchased power consists primarily of purchases from the affiliates of the Southern electric system. 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. Purchased capacity from affiliates increased $5 million in 1994. KWH purchases from affiliates decreased 27 percent from the prior year. Other operation expenses decreased 2.5 percent in 1994 following a 5.6 percent increase in 1993. The increase in 1993 was primarily the result of environmental cleanup costs, net expenses of a March snowstorm, and the one-time cost of a transportation fleet reduction program, which together totaled $16.1 million. Maintenance expenses increased 3.8 percent in 1994 over the previous year due to the establishment of a Natural Disaster Reserve. For additional information concerning the Natural Disaster Reserve, see Note 3 under "Retail Rate Adjustment Procedures." Depreciation and amortization expense remained virtually unchanged from the previous year. This is the result of lower average depreciation rates effective January 1994 offset by growth in depreciable plant in service. Depreciation and II-54 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Alabama Power Company 1994 Annual Report amortization expense increased 3.4 percent in 1993 due principally to growth in depreciable plant in service. Income taxes increased in 1994 by $17 million (8.2 percent). This is due to higher taxable income. The increase in income tax expense of 2.6 percent for 1993 was primarily attributable to a one percent increase in the corporate federal income tax rate effective January 1, 1993. The company contributed $13.5 million to the Alabama Power Foundation, Inc. in 1994, which represents an increase of $10.5 million from the previous year. The Foundation makes distributions to qualified entities which are organized exclusively for charitable, educational, literary, and scientific purposes. Total net interest charges and preferred stock dividends continued to decline from amounts reported in the previous year. The declines reflect the significant refinancing activities in 1993 and 1992. In 1994, these costs were $236 million -- down $23 million (9.0 percent). These costs decreased $7.5 million (2.8 percent) in 1993. 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 long-lived utility plant. 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 stock. 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 growth in energy sales to a less regulated, more competitive environment. Future earnings in the near term will depend upon growth in electric sales, which are subject to a number of factors. Traditionally, these factors have included changes in contracts with neighboring utilities, energy conservation practiced by customers, the elasticity of demand, weather, competition, and the rate of economic growth in the company's service area. However, the Energy Policy Act of 1992 (Energy Act) is beginning to have a dramatic effect on the future of the electric utility industry. The Energy Act promotes energy efficiency, alternative fuel use, and increased competition for electric utilities. The company is posturing the business to meet the challenge of this major change in the traditional practice of selling electricity. The Energy Act allows independent power producers (IPPs) to access a utility's transmission network in order to sell electricity to other utilities. This may enhance the incentive for IPPs to build cogeneration plants for a utility's large industrial and commercial customers and sell excess energy generation to other utilities. Although the Energy Act does not require transmission access to retail customers, retail wheeling initiatives are rapidly evolving and becoming very prominent issues in several states. In order to address these initiatives, numerous questions must be resolved with the most complex ones relating to transmission pricing, recovery of stranded investments, and developing rate structures for different market segments that reflect the economic costs of serving that market. As the initiatives become a reality, the structure of the utility industry could radically change. Therefore, unless the company remains a low-cost producer and provides quality service, the company's retail energy sales growth could be limited, and this could significantly erode earnings. Conversely, being the low-cost producer could provide significant opportunities to increase market share and profitability. The scheduled addition of five combustion turbine generating units in 1995 and four more in 1996 will increase related operation and maintenance expenses and depreciation expenses. These additions are to ensure reliable service to its customers during critical peak times. Rates to retail customers served by the company are regulated by the Alabama Public Service Commission (APSC). Rates for the company can be adjusted II-55 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Alabama Power Company 1994 Annual Report periodically within certain limitations based on earned retail rate of return compared with an allowed return. See Note 3 to the financial statements for information about other regulatory 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. See Note 1 to the financial statements under "Regulatory Assets and Liabilities" for additional information. The staff of the Securities and Exchange Commission has questioned certain of the current accounting practices of the electric utility industry -- including the company -- regarding the recognition, measurement, and classification of decommissioning costs for nuclear generating facilities in the financial statements. In response to these questions, the FASB is currently reviewing the accounting for nuclear decommissioning. If current electric utility industry accounting practices for decommissioning are changed: (1) Annual provisions for decommissioning could increase. (2) The estimated cost for decommissioning may be required to be recorded as a liability in the Balance Sheets. In management's opinion -- should these changes be required -- the changes would not have a significant adverse effect on results of operations because of the company's current and expected future ability to recover decommissioning costs through rates. See Note 1 to the financial statements under "Depreciation and Nuclear Decommissioning" for additional information. The Federal Energy Regulatory Commission (FERC) regulates wholesale rate schedules and power sales contracts that the company has with its sales for resale customers. The FERC currently is reviewing the rate of return on common equity included in these schedules and contracts and may require such returns to be lowered, possibly retroactively. See Note 3 to the financial statements under "FERC Reviews Equity Returns" for additional information. Compliance costs related to the Clean Air Act Amendments of 1990 (Clean Air Act) 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." FINANCIAL CONDITION Overview The company's financial condition remained stable in 1994. This stability is the continuation over recent years of growth in 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 $537 million in 1994. The majority of funds needed for gross property additions since 1991 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 was 47.4 percent in 1994 and 1993, compared to 47.6 percent in 1992. In 1994, the company issued $150 million of first mortgage bonds and through public authorities, $180 million of pollution control revenue refunding bonds. Composite financing rates as of year-end for 1992 through 1994 were as follows: ================================================================ 1994 1993 1992 ------------------------------ Composite interest rate on long-term debt 7.39% 7.35% 8.00% Composite dividend rate on preferred stock 6.23% 5.80% 6.76% ================================================================ The company's current securities ratings are as follows: ============================================================== Duff & Standard Phelps Moody's & Poor's --------------------------------- First Mortgage Bonds A+ A1 A Preferred Stock A- a2 A- ============================================================== II-56 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Alabama Power Company 1994 Annual Report Capital Requirements Capital expenditures are estimated to be $604 million for 1995, $500 million for 1996, and $502 million for 1997. The total is $1.6 billion for the three years. Actual capital costs may vary from this estimate because of factors such as changes in environmental regulations; changes in the existing nuclear plant to meet new regulations; revised 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. The company does not have any baseload generating plants under construction, and current energy demand forecasts do not require any additional baseload generating units until well into the future. However, the construction of combustion turbine peaking units of approximately 720 megawatts of capacity is planned by 1996 to meet increased peak-hour demands. In addition, significant construction of transmission and distribution facilities and upgrading of generating plants will continue. Other Capital Requirements In addition to the funds needed for the capital budget, approximately $60 million will be required by the end of 1997 for maturities of first mortgage bonds. Also, the company will continue to retire higher-cost debt and preferred stock and replace these obligations with lower-cost capital, as market conditions permit. Environmental Matters In November 1990, the Clean Air Act was signed into law. Title IV of the Clean Air Act -- the acid rain compliance provision of the law -- will have a significant impact on the Southern electric system. Specific reductions in sulfur dioxide and nitrogen oxide emissions from fossil-fired generating plants will be required in two phases. Phase I compliance began in 1995 and affected eight generating plants -- some 10,000 megawatts of capacity or 35 percent of total capacity -- in the Southern electric system. Phase II compliance is required in 2000, and all fossil-fired generating plants in the Southern electric system will be affected. In 1995, the Environmental Protection Agency (EPA) began issuing annual sulfur dioxide emission allowances through the allowance trading program. An emission allowance is the authority to emit one ton of sulfur dioxide during a calendar year. The method for issuing allowances is based on the fossil fuel consumed from 1985 through 1987 for each affected generating unit. Emission allowances are transferable and can be bought, sold, or banked and used in the future. The sulfur dioxide emission allowance program is expected to minimize the cost of compliance. The Southern Company's sulfur dioxide compliance strategy is designed to use allowances as a compliance option. The Southern Company expects to achieve Phase I sulfur dioxide compliance at the eight affected plants by switching to low-sulfur coal, which has required some equipment upgrades. This compliance strategy is expected to result in unused emission allowances being banked for later use. Additional construction expenditures were required to install equipment for the control of nitrogen oxide emissions at these eight plants. Also, continuous emissions monitoring equipment will be installed on all fossil-fired units. Construction expenditures for Phase I compliance are estimated to total approximately $300 million through 1995 for The Southern Company, of which the company's portion is approximately $30 million. For Phase II sulfur dioxide compliance, The Southern Company could use emission allowances banked during Phase I, increase fuel switching, install flue gas desulfurization equipment at selected plants, and/or purchase more allowances, depending on the price and availability of allowances. Also, in Phase II, equipment to control nitrogen oxide emissions will be installed on additional system fossil-fired plants as required to meet anticipated Phase II limits. Therefore, during the period 1996 to 2000, compliance could require total estimated construction expenditures of $150 million for The Southern Company, of which the company's portion is approximately $80 million. However, the full impact of Phase II compliance cannot now be determined with certainty, pending the continuing development of a market for emission allowances, the completion of EPA regulations, and the possibility of new emission reduction technologies. II-57 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Alabama Power Company 1994 Annual Report An average increase of up to 2 percent in annual revenue requirements from customers could be necessary to fully recover the company's cost of compliance for both Phase I and Phase II of Title IV of the Clean Air Act. Compliance costs include construction expenditures, increased costs for switching to low-sulfur coal, and costs related to emission allowances. Title III of the Clean Air Act requires a multi-year EPA study of power plant emissions of hazardous air pollutants. The EPA is scheduled to submit a report to Congress on the results of this study by November 1995. The report will include a decision on whether additional regulatory control of these substances is warranted. Compliance with any new control standards could result in significant additional costs. The impact of new standards -- if any -- will depend on the development and implementation of applicable regulations. A significant portion of costs related to the acid rain provision 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. The EPA continues to evaluate the need for a new short-term ambient air quality standard for sulfur dioxide. Preliminary results from an EPA study on the impact of a new standard indicate that a number of plants could be required to install sulfur dioxide controls. These controls would be in addition to the controls already required to meet the acid rain provision of the Clean Air Act. The EPA issued proposed rules in November 1994 and is required to take final action on this issue in 1996. The impact of any new standard will depend on the level chosen for the standard and cannot be determined at this time. In addition, the EPA is evaluating the need to revise the ambient air quality standards for particulate matter, nitrogen oxides, and ozone. The impact of any new standard will depend on the level chosen for the standard and cannot be determined at this time. In 1995, the EPA may issue revised rules on air quality control regulations related to stack height requirements of the Clean Air Act. The full impact of the final rules cannot be determined at this time, pending their development and implementation. In 1993, the EPA issued a ruling confirming the non-hazardous status of coal ash. However, the EPA has until 1998 to classify co-managed utility wastes -- coal ash and other utility wastes -- as either non-hazardous or hazardous. If the EPA classifies the co-managed wastes as hazardous, then substantial additional costs for the management of such wastes may be required. The full impact of any change in the regulatory status will depend on the subsequent development of co-managed waste requirements. 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 cleanup costs and has recognized 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 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 Southern Company's operations. The full impact of these requirements cannot be determined at this time, pending the development and implementation of applicable regulations. Compliance with possible additional legislation related to global climate change, electromagnetic fields, and other environmental and health concerns could significantly affect the Southern electric system. 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 It is anticipated that the funds required will be derived from sources in form and quantity similar to those used in the past. To issue additional first mortgage bonds and preferred stock, the company must comply with certain earnings coverage requirements designated in its mortgage indenture and II-58 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Alabama Power Company 1994 Annual Report corporate charter. The company's coverages are at a level that would permit any necessary amount of security sales at current interest and dividend rates. 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." II-59
STATEMENTS OF INCOME For the Years Ended December 31, 1994, 1993, and 1992 Alabama Power Company 1994 Annual Report ==================================================================================================== 1994 1993 1992 ---------------------------------------------------------------------------------------------------- (in thousands) Operating Revenues (Notes 1, 3 and 7): Revenues $2,770,380 $2,825,634 $2,688,752 Revenues from affiliates 164,762 181,975 158,088 ---------------------------------------------------------------------------------------------------- Total operating revenues 2,935,142 3,007,609 2,846,840 ---------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 801,948 877,099 794,438 Purchased power from non-affiliates 15,158 15,230 14,242 Purchased power from affiliates 100,888 120,330 107,230 Other 458,917 470,815 445,836 Maintenance 262,102 252,506 237,071 Depreciation and amortization 292,420 290,310 280,881 Taxes other than income taxes 183,425 178,997 172,095 Federal and state income taxes (Note 8) 224,280 207,210 201,925 ---------------------------------------------------------------------------------------------------- Total operating expenses 2,339,138 2,412,497 2,253,718 ---------------------------------------------------------------------------------------------------- Operating Income 596,004 595,112 593,122 Other Income (Expense): Allowance for equity funds used during construction (Note 1) 3,239 3,260 2,071 Income from subsidiary (Note 6) 3,588 4,127 4,635 Charitable foundation (13,500) (3,000) (6,887) Interest income 16,944 20,775 14,804 Other, net (30,569) (24,420) (11,019) Income taxes applicable to other income 16,834 10,239 8,947 ---------------------------------------------------------------------------------------------------- Income Before Interest Charges 592,540 606,093 605,673 ---------------------------------------------------------------------------------------------------- Interest Charges: Interest on long-term debt 178,045 184,861 206,871 Allowance for debt funds used during construction (Note 1) (3,548) (2,992) (2,416) Interest on interim obligations 5,939 3,760 3,704 Amortization of debt discount, premium, and expense, net 9,623 8,937 4,392 Other interest charges 19,908 35,474 19,381 ---------------------------------------------------------------------------------------------------- Net interest charges 209,967 230,040 231,932 ---------------------------------------------------------------------------------------------------- Net Income 382,573 376,053 373,741 Dividends on Preferred Stock 26,235 29,559 35,186 ---------------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred Stock $ 356,338 $ 346,494 $ 338,555 ==================================================================================================== The accompanying notes are an integral part of these statements.
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STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1994, 1993, and 1992 Alabama Power Company 1994 Annual Report ============================================================================================= 1994 1993 1992 --------------------------------------------------------------------------------------------- (in thousands) Operating Activities: Net income $ 382,573 $ 376,053 $ 373,741 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 359,791 356,499 338,421 Deferred income taxes and investment tax credits (32,613) 32,994 23,514 Allowance for equity funds used during construction (3,239) (3,260) (2,071) Other, net 28,656 36,493 (3,298) Changes in certain current assets and liabilities -- Receivables, net 19,390 19,215 (11,010) Inventories (38,946) 51,630 12,704 Payables (21,240) 31,544 2,158 Taxes accrued 6,856 (9,959) (21,120) Energy cost recovery, retail 16,907 (56,128) 45,509 Other (14,235) (21,110) 10,629 --------------------------------------------------------------------------------------------- Net cash provided from operating activities 703,900 813,971 769,177 --------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (536,785) (435,843) (367,463) Sale of property - - 43,556 Other (26,632) (741) (13,379) --------------------------------------------------------------------------------------------- Net cash used for investing activities (563,417) (436,584) (337,286) --------------------------------------------------------------------------------------------- Financing Activities: Proceeds: Preferred stock - 158,000 150,000 First mortgage bonds 150,000 860,000 745,000 Other long-term debt 208,720 180,314 48,382 Retirements: Preferred stock - (207,000) (145,000) First mortgage bonds (20,387) (699,788) (931,797) Other long-term debt (305,380) (181,329) (54,223) Interim obligations, net 139,882 (156,917) 120,917 Payment of preferred stock dividends (25,431) (32,099) (35,704) Payment of common stock dividends (268,000) (252,900) (273,300) Miscellaneous (8,444) (56,064) (53,697) --------------------------------------------------------------------------------------------- Net cash used for financing activities (129,040) (387,783) (429,422) --------------------------------------------------------------------------------------------- Net Change in Cash 11,443 (10,396) 2,469 Cash at Beginning of Year 3,233 13,629 11,160 --------------------------------------------------------------------------------------------- Cash at End of Year $ 14,676 $ 3,233 $ 13,629 ============================================================================================= Supplemental Cash Flow Information: Cash paid during the year for -- Interest (net of amount capitalized) $ 183,445 $ 176,805 $ 219,263 Income taxes 231,831 175,591 197,693 --------------------------------------------------------------------------------------------- ( ) Denotes use of cash. The accompanying notes are an integral part of these statements.
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BALANCE SHEETS At December 31, 1994 and 1993 Alabama Power Company 1994 Annual Report =============================================================================================== ASSETS 1994 1993 ----------------------------------------------------------------------------------------------- (in thousands) Utility Plant: Plant in service, at original cost (Note 1) $10,052,772 $9,757,141 Less accumulated provision for depreciation 3,598,604 3,384,156 ----------------------------------------------------------------------------------------------- 6,454,168 6,372,985 Nuclear fuel, at amortized cost 101,630 93,551 Construction work in progress 317,779 225,786 ----------------------------------------------------------------------------------------------- Total 6,873,577 6,692,322 ----------------------------------------------------------------------------------------------- Other Property and Investments: Southern Electric Generating Company, at equity (Note 6) 26,985 29,201 Nuclear decommissioning trusts (Note 1) 71,014 49,550 Miscellaneous 16,970 20,434 ----------------------------------------------------------------------------------------------- Total 114,969 99,185 ----------------------------------------------------------------------------------------------- Current Assets: Cash 14,676 3,233 Receivables- Customer accounts receivable 308,561 312,090 Other accounts and notes receivable 22,547 48,808 Affiliated companies 29,303 40,216 Accumulated provision for uncollectible accounts (2,297) (2,632) Refundable income taxes 16,011 11,940 Fossil fuel stock, at average cost 119,555 88,481 Materials and supplies, at average cost 184,600 176,728 Prepayments- Income taxes 19,196 18,980 Other 84,354 60,227 Vacation pay deferred 20,442 22,680 ----------------------------------------------------------------------------------------------- Total 816,948 780,751 ----------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes (Note 8) 451,886 469,010 Debt expense, being amortized 7,370 7,064 Premium on reacquired debt, being amortized 101,851 102,634 Uranium enrichment decontamination and decommissioning fund (Note 1) 42,996 45,554 Miscellaneous 49,620 52,163 ----------------------------------------------------------------------------------------------- Total 653,723 676,425 ----------------------------------------------------------------------------------------------- Total Assets $8,459,217 $8,248,683 =============================================================================================== The accompanying notes are an integral part of these statements.
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BALANCE SHEETS At December 31, 1994 and 1993 Alabama Power Company 1994 Annual Report =============================================================================================== CAPITALIZATION AND LIABILITIES 1994 1993 ----------------------------------------------------------------------------------------------- (in thousands) Capitalization (See accompanying statements): Common stock equity $2,614,405 $2,526,348 Preferred stock 440,400 440,400 Long-term debt 2,455,013 2,362,852 ----------------------------------------------------------------------------------------------- Total 5,509,818 5,329,600 ----------------------------------------------------------------------------------------------- Current Liabilities: Long-term debt due within one year (Note 10) 796 58,998 Notes payable to banks - 40,000 Commercial paper 179,882 - Accounts payable- Affiliated companies 60,334 62,507 Other 258,657 272,491 Customer deposits 30,245 31,198 Taxes accrued- Federal and state income 6,848 25,730 Other 15,589 14,414 Interest accrued 52,516 52,809 Vacation pay accrued 20,442 22,680 Miscellaneous 57,047 50,426 ----------------------------------------------------------------------------------------------- Total 682,356 631,253 ----------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes (Note 8) 1,181,342 1,165,127 Accumulated deferred investment tax credits 317,018 329,909 Prepaid capacity revenues, net (Note 7) 138,421 143,762 Uranium enrichment decontamination and decommissioning fund (Note 1) 39,413 39,644 Deferred credits related to income taxes (Note 8) 405,256 440,945 Natural disaster reserve 28,750 - Miscellaneous 156,843 168,443 ----------------------------------------------------------------------------------------------- Total 2,267,043 2,287,830 ----------------------------------------------------------------------------------------------- Commitments and Contingent Matters (Notes 1, 3, 4, 5, 6, 7, and 11) Total Capitalization and Liabilities $8,459,217 $8,248,683 =============================================================================================== The accompanying notes are an integral part of these statements.
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STATEMENTS OF CAPITALIZATION At December 31, 1994 and 1993 Alabama Power Company 1994 Annual Report ================================================================================================= 1994 1993 1994 1993 ------------------------------------------------------------------------------------------------- (in thousands) (percent of total) Common Stock Equity: Common stock, par value $40 per share -- Authorized -- 6,000,000 shares Outstanding -- 5,608,955 shares in 1994 and 1993 $ 224,358 $ 224,358 Paid-in capital 1,304,645 1,304,645 Premium on preferred stock 146 146 Retained earnings (Note 12) 1,085,256 997,199 ------------------------------------------------------------------------------------------------- Total common stock equity 2,614,405 2,526,348 47.4 % 47.4 % ------------------------------------------------------------------------------------------------- Cumulative Preferred Stock: $1 par value -- Authorized -- 27,500,000 shares Outstanding -- 12,020,200 shares $25 stated capital -- 6.40% 50,000 50,000 6.80% 38,000 38,000 7.60% 150,000 150,000 Adjustable rate 6.26% - at January 1, 1995 50,000 50,000 $100 stated capital -- Auction rate - at January 1, 1995: 4.59% 50,000 50,000 $100,000 stated capital -- Auction rate - at January 1, 1995: 4.64% 20,000 20,000 $100 par value -- Authorized -- 3,850,000 shares Outstanding -- 824,000 shares 4.20% to 4.52% 41,400 41,400 4.60% to 4.92% 29,000 29,000 5.96% to 6.88% 12,000 12,000 ------------------------------------------------------------------------------------------------- Total (annual dividend requirement -- $27,421,000) 440,400 440,400 8.0 8.3 ------------------------------------------------------------------------------------------------- Long-Term Debt: First mortgage bonds -- Maturity Interest Rates -------- -------------- March 1, 1996 4 1/2% 60,000 60,000 February 1, 1998 5 1/2% 50,000 50,000 August 1, 1999 6 3/8% 170,000 170,000 2000 through 2003 6% to 7% 500,000 500,000 2007 7 1/4% 175,000 175,000 2017 10 5/8% - 15,243 2021 through 2024 7.30% to 9 1/4% 1,044,856 900,000 ------------------------------------------------------------------------------------------------- Total first mortgage bonds 1,999,856 1,870,243 Pollution control obligations 476,140 476,140 Other long-term debt 9,754 106,414 Unamortized debt premium (discount), net (29,941) (30,947) ------------------------------------------------------------------------------------------------- Total long-term debt (annual interest requirement -- $183,592,000) 2,455,809 2,421,850 Less amount due within one year (Note 10) 796 58,998 ------------------------------------------------------------------------------------------------- Long-term debt excluding amount due within one year 2,455,013 2,362,852 44.6 44.3 ------------------------------------------------------------------------------------------------- Total Capitalization $5,509,818 $5,329,600 100.0 % 100.0 % ================================================================================================= The accompanying notes are an integral part of these statements.
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STATEMENTS OF RETAINED EARNINGS For the Years Ended December 31, 1994, 1993, and 1992 Alabama Power Company 1994 Annual Report ===================================================================================== 1994 1993 1992 ------------------------------------------------------------------------------------- (in thousands) Balance at Beginning of Year $ 997,199 $ 914,148 $ 857,734 Net income after dividends on preferred stock 356,338 346,494 338,555 Cash dividends on common stock (268,000) (252,900) (273,300) Preferred stock transactions, net (118) (10,587) (8,732) Other adjustments to retained earnings (163) 44 (109) ------------------------------------------------------------------------------------- Balance at End of Year (Note 12) $1,085,256 $ 997,199 $ 914,148 ===================================================================================== The accompanying notes are an integral part of these statements.
II-65 NOTES TO FINANCIAL STATEMENTS Alabama Power Company 1994 Annual Report 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Alabama Power Company (the company) is a wholly owned subsidiary of The Southern Company, which is the parent company of five operating companies, a system service company, Southern Communications Services (Southern Communications), Southern Electric International (Southern Electric), Southern Nuclear Operating Company (Southern Nuclear), and The Southern Development and Investment Group (SDIG). The operating companies (Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, and Savannah Electric and Power Company) provide electric service in four Southeastern states. Contracts among the companies -- dealing with 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). The system service company provides, at cost, specialized services upon request to The Southern Company and to the subsidiary companies. Southern Communications, beginning in mid-1995, will provide digital wireless communications services -- over the 800-megahertz frequency band -- to The Southern Company's subsidiaries and also will market these services to the public within the Southeast. Southern Electric designs, builds, owns and operates power production facilities and provides a broad range of technical services to industrial companies and utilities in the United States and a number of international markets. Southern Nuclear provides services to The Southern Company's nuclear power plants. SDIG develops new business opportunities related to energy products and services. The Southern Company is registered as a holding company under the Public Utility Holding Company Act of 1935 (PUHCA). Both The Southern Company and its subsidiaries are subject to the regulatory provisions of the PUHCA. The company is also regulated by the FERC and the Alabama Public Service Commission (APSC). The company follows generally accepted accounting principles and complies with the accounting policies and practices prescribed by the respective regulatory commissions. Certain prior years' data presented in the financial statements have been reclassified to conform with current year presentation. 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 to be credited to customers through the ratemaking process. Regulatory assets and (liabilities) reflected in the Balance Sheets at December 31 relate to: ================================================================ 1994 1993 -------------------- (in thousands) Deferred income taxes $451,886 $469,010 Premium on reacquired debt 101,620 102,216 Department of Energy assessments 42,996 45,554 Vacation pay 20,442 22,680 Work force reduction costs 3,664 5,468 Deferred income tax credits (405,256) (440,945) Natural disaster reserve (28,750) - Other, net 45,956 26,824 ---------------------------------------------------------------- Total $232,558 $230,807 ================================================================ In the event that a portion of the company's operations are no longer subject to the provisions of Statement No. 71, the company would be required to write off related regulatory assets and liabilities. In addition, the company would be required to determine any impairment to other assets, including plant, and write down the assets to their fair value. Revenues and Fuel Costs The company accrues revenues for services rendered but unbilled at the end of each fiscal period. For additional information concerning unbilled revenues, see Note 3 under "Retail Rate Adjustment Procedures." The company has a diversified base of customers. No single customer or industry comprises 10 percent or more of revenues. In 1994, uncollectible II-66 NOTES (continued) Alabama Power Company 1994 Annual Report accounts continued to average less than 1 percent of revenues. Fuel costs are expensed as the fuel is used. The company's electric rates include provisions to adjust billings for fluctuations in fuel and the energy component of purchased power costs. Revenues are adjusted for differences between recoverable fuel costs and amounts actually recovered in current rates. 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 $65 million in 1994, $62 million in 1993, and $48 million in 1992. The company has a contract with the U.S. Department of Energy (DOE) that provides for the permanent disposal of spent nuclear fuel, which was scheduled to begin in 1998. However, the actual year this service will begin is uncertain. Sufficient storage capacity currently is available to permit operation into 2012 and 2014 at Plant Farley units 1 and 2, respectively. Also, the Energy Policy Act of 1992 required the establishment in 1993 of a Uranium Enrichment Decontamination and Decommissioning Fund, which is to be funded in part by a special assessment on utilities with nuclear plants. This 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 estimates its remaining liability at December 31, 1994, under this law to be approximately $43 million. 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 1994 and 3.3 percent in both 1993 and 1992. 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 decommissioning nuclear facilities. In 1988, the Nuclear Regulatory Commission (NRC) adopted regulations requiring 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 set periods of time as approved by the APSC. Earnings on the trust fund 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. 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 cost of decommissioning -- both site study costs and ultimate costs -- at December 31, 1994, for Plant Farley were as follows: ============================================================== Plant Farley ------------- Site study basis (year) 1993 Decommissioning periods: Beginning year 2017 Completion year 2029 -------------------------------------------------------------- (in millions) Site study costs: Radiated structures $409 Non-radiated structures 75 Other 94 -------------------------------------------------------------- Total $578 ============================================================== (in millions) Ultimate costs: Radiated structures $1,258 Non-radiated structures 231 Other 289 -------------------------------------------------------------- Total $1,778 ============================================================== II-67 NOTES (continued) Alabama Power Company 1994 Annual Report (in millions) Amount expensed in 1994 $18 -------------------------------------------------------------- Accumulated provisions: Balance in external trust funds $ 71 Balance in internal reserves 51 -------------------------------------------------------------- Total $122 ============================================================== Assumed in ultimate costs: Inflation rate 4.5% Trust earning rate 7.0 -------------------------------------------------------------- Annual provisions for nuclear decommissioning are based on an annuity -- sinking fund -- method as approved by the APSC. The decommissioning costs approved for ratemaking are $578 million for Plant Farley. 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 regulatory requirements, changes in technology, and changes in costs of labor, materials, and equipment. Income Taxes The company 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. Effective January 1, 1993, the company adopted FASB Statement No. 109, Accounting for Income Taxes. Statement No. 109 required, among other things, conversion to the liability method of accounting for accumulated deferred income taxes. See Note 8 for additional information about Statement No. 109. 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 rate used to determine the amount of allowance was 7.9 percent in 1994, 7.8 percent in 1993, and 7.9 percent in 1992. AFUDC, net of income tax, as a percent of net income after dividends on preferred stock was 1.5 percent in both 1994 and 1993 and 1.1 percent in 1992. Utility Plant Utility plant 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. Financial Instruments In accordance with FASB Statement No. 107, Disclosure About Fair Value of Financial Instruments, the company's only financial instrument that the carrying amount did not approximate fair value at December 31 was as follows: ============================================================== Long-Term Debt ------------------------- Carrying Fair Year Amount Value ------------- ---------- (in millions) 1994 $2,446 $2,323 1993 2,315 2,439 ============================================================== The fair value for long-term debt was based on either closing market price or closing price 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. Vacation Pay The company's employees earn their vacation in one year and take it in the subsequent year. However, for ratemaking purposes, vacation pay is recognized as II-68 NOTES (continued) Alabama Power Company 1994 Annual Report an allowable expense only when paid. Consistent with this ratemaking treatment, the company accrues a current liability for earned vacation pay and records a current regulatory asset representing future recoverability of this cost. The amount was $20 million and $23 million at December 31, 1994 and 1993, respectively. In 1995, an estimated 64 percent of the 1994 deferred vacation cost will be expensed and the balance will be charged to construction and other accounts. Natural Disaster Reserve In September 1994, in response to a request by the company, the APSC issued an order allowing the company to establish a Natural Disaster Reserve. As of December 31, 1994, the accumulated provision amounted to $28.8 million. Regulatory treatment by the APSC allows the company to accrue $250 thousand per month until the maximum accumulated provision of $32 million is attained. For additional information concerning the Natural Disaster Reserve, see Note 3 under "Retail Rate Adjustment Procedures." 2. RETIREMENT BENEFITS Pension Plan The company has a defined benefit, trusteed, non-contributory pension plan that covers substantially all regular employees. Benefits are based on the greater of amounts resulting from two different formulas: years of service and final average pay or years of service and a flat-dollar benefit. The company uses the "entry age normal method with a frozen initial liability" actuarial method for funding purposes, subject to limitations under federal income tax regulations. Amounts funded to the pension trusts are primarily invested in equity and fixed-income securities. FASB Statement No. 87, Employers' Accounting for Pensions, requires use of the "projected unit credit" actuarial method for financial reporting purposes. Postretirement Benefits The company also provides certain medical care and life insurance benefits for retired employees. Substantially all employees may become eligible for these benefits when they retire. Qualified trusts are funded to the extent deductible under federal income tax regulations. Amounts funded are primarily invested in debt and equity securities. In December 1993, the APSC issued an accounting policy statement which requires the company to externally fund net annual postretirement benefits. Effective January 1, 1993, the company adopted FASB Statement No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, on a prospective basis. Statement No. 106 requires that medical care and life insurance benefits for retired employees be accounted for on an accrual basis using a specified actuarial method, "benefit/years-of-service." Because the adoption of Statement No. 106 was reflected in rates, it did not have a material impact on net income. Prior to 1993, the company recognized these benefit costs on an accrual basis using the "aggregate cost" actuarial method, which spreads the expected cost of such benefits over the remaining periods of employees' service as a level percentage of payroll costs. The total costs of such benefits recognized by the company in 1992 were $15.2 million. Funded Status and Cost of Benefits Shown in the following tables are actuarial results and assumptions for pension and postretirement medical and life insurance benefits as computed under the requirements of Statement Nos. 87 and 106, respectively. The funded status of the plans at December 31 was as follows: ============================================================ Pension ------------------ 1994 1993 ------------------ (in millions) Actuarial present value of benefit obligations: Vested benefits $ 522 $ 523 Non-vested benefits 18 20 ------------------------------------------------------------ Accumulated benefit obligation 540 543 Additional amounts related to projected salary increases 174 153 ------------------------------------------------------------ Projected benefit obligation 714 696 Less: Fair value of plan assets 1,059 1,121 Unrecognized net gain (251) (349) Unrecognized prior service cost 23 25 Unrecognized transition asset (51) (56) ============================================================ Prepaid asset recognized in the Balance Sheets $ 66 $ 45 ============================================================ II-69 NOTES (continued) Alabama Power Company 1994 Annual Report =========================================================== Postretirement Medical ------------------- 1994 1993 ------------------- (in millions) Actuarial present value of benefit obligation: Retirees and dependents $ 69 $ 67 Employees eligible to retire 22 21 Other employees 90 95 ----------------------------------------------------------- Accumulated benefit obligation 181 183 Less: Fair value of plan assets 56 39 Unrecognized net loss 6 18 Unrecognized transition obligation 96 102 ----------------------------------------------------------- Accrued liability recognized in the Balance Sheets $ 23 $ 24 =========================================================== =========================================================== Postretirement Life ------------------ 1994 1993 ------------------ (in millions) Actuarial present value of benefit obligation: Retirees and dependents $ 27 $ 27 Other employees 29 29 ----------------------------------------------------------- Accumulated benefit obligation 56 56 Less: Fair value of plan assets 5 1 Unrecognized net gain (6) (4) Unrecognized transition obligation 24 26 ----------------------------------------------------------- Accrued liability recognized in the Balance Sheets $ 33 $ 33 =========================================================== The weighted average rates assumed in the actuarial calculations were: =========================================================== 1994 1993 1992 ---------------------------- Discount 8.0% 7.5% 8.0% Annual salary increase 5.5 5.0 6.0 Long-term return on plan assets 8.5 8.5 8.5 =========================================================== An additional assumption used in measuring the accumulated postretirement medical benefit obligation was a weighted average medical care cost trend rate of 10.5 percent for 1994, decreasing gradually to 6.0 percent through the year 2000 and remaining at that level thereafter. An annual increase in the assumed medical care cost trend rate of 1.0 percent would increase the accumulated medical benefit obligation as of December 31, 1994, by $33 million and the aggregate of the service and interest cost components of the net retiree medical cost by $4 million. Components of the plans' net income are shown below: ================================================================== Pension ------------------------------------------------------------------ 1994 1993 1992 ----------------------------- (in millions) Benefits earned during the year $ 20.8 $ 20.6 $ 20.6 Interest cost on projected benefit obligation 51.2 50.4 48.2 Actual (return) loss on plan assets 23.5 (146.3) (45.8) Net amortization and deferral (116.2) 63.3 (29.3) ------------------------------------------------------------------ Net pension cost (income) $ (20.7)$ (12.0) $ (6.3) ================================================================== Of the above net pension amounts, $(15.7) million in 1994, $(8.9) million in 1993, and $(5.1) million in 1992 were recorded in operating expenses, and the remainder was recorded in construction and other accounts. ============================================================ Postretirement Medical ------------------ 1994 1993 ------------------ (in millions) Benefits earned during the year $ 6 $ 5 Interest cost on accumulated benefit obligation 14 12 Amortization of transition obligation 5 5 Actual (return) loss on plan assets 1 (5) Net amortization and deferral (4) 2 ------------------------------------------------------------ Net postretirement cost $22 $19 ============================================================ II-70 NOTES (continued) Alabama Power Company 1994 Annual Report ============================================================= Postretirement Life ------------------ 1994 1993 ------------------ (in millions) Benefits earned during the year $2 $2 Interest cost on accumulated benefit obligation 4 4 Amortization of transition obligation 1 1 ------------------------------------------------------------- Net postretirement cost $7 $7 ============================================================= Of the above net postretirement medical and life insurance costs recorded in 1994 and 1993, $23 million and $22 million, respectively, were charged to operating expenses and the remainder was charged to construction and other accounts. Work Force Reduction Programs The company has incurred additional costs for work force reduction programs. The costs related to these programs were $8.2 million, $16.1 million and $13.4 million for the years 1994, 1993 and 1992, respectively. A portion of the cost of these programs was deferred and is being amortized in accordance with regulatory treatment. The unamortized balance of these costs was $3.7 million at December 31, 1994. 3. LITIGATION AND REGULATORY MATTERS Retail Rate Adjustment Procedures In November 1982, the APSC 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 in retail service. Both increases and decreases have been placed into effect since the adoption of these rates. The last rate adjustment was effective in January 1992. 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. In February 1993, the APSC ordered - at the company's request - a moratorium on rate increases for the first two quarters of 1993, which facilitated the transition of an accounting change. This accounting change permitted the accrual of estimated operation and maintenance expenses related to nuclear refueling outages during the period between outages rather than at the time the expenses are incurred. Also, in 1994, the APSC issued an order - at the company's request - allowing the company to establish a natural disaster reserve not to exceed $32 million and to change the estimating procedure for unbilled kilowatt-hours and associated revenues for service rendered but unbilled at the end of each month. This change in estimate resulted in an increase in unbilled revenues for September 1994 of $28 million, which offset the initial accrual for the natural disaster reserve for the same amount. Additional monthly accruals of $250 thousand will be made until the reserve maximum is attained. In addition, a moratorium on rate increases through the third quarter of 1995 was approved. The ratemaking procedures will remain in effect until the APSC votes to modify or discontinue them. Heat Pump Financing Suit In September 1990, two customers of the company filed a civil complaint in the Circuit Court of Shelby County, Alabama, against the company seeking to represent all persons who, prior to June 23, 1989, entered into agreements with the company for the financing of heat pumps and other merchandise purchased from vendors other than the company. The plaintiffs contended that the company was required to obtain a license under the Alabama Consumer Finance Act to engage in the business of making consumer loans. The plaintiffs were seeking an order declaring these agreements null and void and requiring the company to refund all payments -- principal and interest -- made under these agreements. The aggregate amount under these agreements, together with interest paid, currently is estimated to be $40 million. In June 1993, the court ordered the company to refund or forfeit interest of approximately $10 million because of the company's failure to obtain such license. However, the court's order did not require any refund or forfeiture with respect to any principal payments under the agreements at issue. The company has appealed the court's order to the Supreme Court of Alabama. The final outcome of this matter cannot now be determined; however, in management's opinion, the final outcome will not have a material effect on the II-71 NOTES (continued) Alabama Power Company 1994 Annual Report company's financial statements. FERC Reviews Equity Returns In May 1991, the FERC ordered that hearings be conducted concerning the reasonableness of the Southern electric system's wholesale rate schedules and contracts that have a return on common equity of 13.75 percent or greater. The contracts that could be affected by the hearings include substantially all of the transmission, unit power, long-term power and other similar contracts. Any changes in the rate of return on common equity that may require refunds as a result of this proceeding would be substantially for the period beginning in July 1991 and ending in October 1992. In August 1992, a FERC administrative law judge issued an opinion that changes in rate schedules and contracts were not necessary and that the FERC staff failed to show how any changes were in the public interest. The FERC staff has filed exceptions to the administrative law judge's opinion, and the matter remains pending before the FERC. In August 1994, the FERC instituted another proceeding based on substantially the same issues as in the 1991 proceeding. The second period under review for possible refunds began in October 1994 and is scheduled to continue until January 1996. If the rates of return on common equity recommended by the FERC staff were applied to all of the schedules and contracts involved in both proceedings, and refunds were ordered, the amount of refunds could range up to approximately $34 million at December 31, 1994. Although the final outcome of this matter cannot now be determined; in management's opinion, the final outcome will not have a material effect on the company's financial statements. 4. CAPITAL BUDGET The company's capital expenditures are currently estimated to total $604 million in 1995, $500 million in 1996, and $502 million in 1997. The estimates include AFUDC of $10 million in 1995 and $9 million in both 1996 and 1997. The estimates for property additions for the three-year period includes $42.5 million committed to meeting the requirements of the Clean Air Act. The capital budget is subject to periodic review and revision, and actual capital cost incurred may vary from the above estimates because of numerous factors. These factors include changes in business conditions; revised load growth projections; changes in environmental regulations; changes in the existing nuclear plant to meet new regulatory requirements; increasing costs of labor, equipment, and materials; and cost of capital. At December 31, 1994, significant purchase commitments were outstanding in connection with the construction program. The company does not have any new baseload generating plants under construction. However, the construction of combustion turbine peaking units of approximately 720 megawatts is planned to be completed by 1996. In addition, significant construction will continue related to transmission and distribution facilities and the upgrading and extension of the useful lives of generating plants. 5. FINANCING, INVESTMENT, AND COMMITMENTS General To the extent possible, the company's construction program is expected to be financed primarily from internal sources. Short-term debt will be utilized at appropriate levels. The amounts available are discussed below. The company may issue additional long-term debt and preferred stock for the purposes of debt maturities, redeeming higher-cost securities, and meeting additional capital requirements. 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's primary sources of external financing are sales of first mortgage bonds and preferred stock to the public and receipt of additional paid-in capital from The Southern Company. In order to issue additional first mortgage bonds and preferred stock, the company must comply with certain earnings coverage requirements contained in its mortgage indenture and corporate charter. The most restrictive of these provisions requires, for the issuance of additional first mortgage bonds, that before-income-tax earnings, as defined, cover pro forma annual interest charges on outstanding first mortgage bonds at II-72 NOTES (continued) Alabama Power Company 1994 Annual Report least twice; and for the issuance of additional preferred stock, that gross income available for interest cover pro forma annual interest charges and preferred stock dividends at least one and one-half times. The company's coverages are at a level that would permit any necessary amount of security sales at current interest and dividend rates. Bank Credit Arrangements The company, along with The Southern Company and Georgia Power Company, has entered into agreements with several banks outside the service area to provide $400 million of revolving credit to the companies through June 30, 1997. To provide liquidity support for commercial paper programs, the company and Georgia Power Company have exclusive right to $135 million and $165 million, respectively, of the available credit. The companies have the option of converting the short-term borrowings 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 companies' option. In addition, these agreements provide for payment of commitment fees based on the unused portions of the commitments or the maintenance of compensating balances with the banks. Additionally, the company maintains committed lines of credit in the amount of $349 million which expire at various times during 1995 and, in certain cases, provide for average annual compensating balances. 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, 1994, the company had regulatory approval to have outstanding up to $530 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. 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 through year 2013 were approximately $9.4 billion at December 31, 1994. Additional commitments for coal and for nuclear fuel will be required in the future to supply the company's fuel needs. Operating Leases The company has entered into coal rail car rental agreements with various terms and expiration dates. At December 31, 1994, estimated minimum rental commitments for noncancellable operating leases were as follows: ============================================================ Year Amounts ---- --------------- (in millions) 1995 $ 0.5 1996 2.8 1997 2.8 1998 2.8 1999 2.8 2000 and thereafter 59.5 ------------------------------------------------------------ Total minimum payments $71.2 ============================================================ 6. FACILITY SALES AND 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 1,019,680 kilowatts, 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 company's share of expenses totaled $74 million in 1994, $86 million in 1993 and $73 million in 1992, and is included in "Purchased power from affiliates" in the Statements of Income. II-73 NOTES (continued) Alabama Power Company 1994 Annual Report 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, 1994, the capitalization of SEGCO consisted of $54 million of equity and $78 million of long-term debt on which the annual interest requirement is $5.1 million. SEGCO paid dividends totaling $11.6 million in 1994, $11.3 million in 1993, and $12.0 million in 1992, of which one-half of each was paid to the company. SEGCO's net income was $7.2 million, $8.3 million, and $9.3 million for 1994, 1993 and 1992, respectively. The company's percentage ownership and investment in jointly-owned generating plants at December 31, 1994, 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 $ 89 $ 39 Plant Miller Units 1 and 2 $708 $264 ---------------------------------------------------------------- 7. LONG-TERM POWER SALES AGREEMENTS General The company and the operating affiliates of The 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. The agreements for non-firm capacity expired in 1994. Other 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, revenues from capacity sales primarily affect profitability. The company's capacity revenues have been as follows: ================================================================ Unit Other Year Power Long-Term Total ---------------------------------------------------------------- (in millions) 1994 $152 $ 7 $159 1993 144 15 159 1992 177 9 186 ================================================================ Unit power from Plant Miller is being sold to Florida Power Corporation (FPC), Florida Power & Light Company (FP&L), Jacksonville Electric Authority (JEA) and the City of Tallahassee, Florida. Under these agreements, approximately 1,200 megawatts of capacity, a slight increase over 1994, is scheduled to be sold during 1995 and will remain at that approximate level -- unless reduced by FP&L, FPC, and JEA for the periods after 1999 -- until the expiration of the contracts in 2010. Alabama Municipal Electric Authority (AMEA) Capacity Contracts In August 1986, the company entered into a firm power purchase 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 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 (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 II-74 NOTES (continued) Alabama Power Company 1994 Annual Report 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 are returned to the company. At December 31, 1994, $146 million of such bonds was held by the escrow agent under the contracts. 8. INCOME TAXES Effective January 1, 1993, the company adopted FASB Statement No. 109, Accounting for Income Taxes. The adoption resulted in the recording of additional deferred income taxes and related regulatory assets and liabilities. At December 31, 1994, the tax-related regulatory assets and liabilities were $452 million and $405 million, respectively. These assets are attributable to tax benefits flowed through to customers in prior years and to taxes applicable to capitalized AFUDC. 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: ================================================================= 1994 1993 1992 ------------------------------- (in thousands) Total provision for income taxes: Federal -- Currently payable $219,494 $149,680 $152,481 Deferred -- current year (48,153) 9,636 27,760 reversal of prior years 15,932 19,653 (7,827) Deferred investment tax credits (1) (2,106) - ----------------------------------------------------------------- 187,272 176,863 172,414 ----------------------------------------------------------------- State -- Currently payable 20,565 14,297 16,983 Deferred -- current year (4,067) 1,898 6,387 reversal of prior years 3,676 3,913 (2,806) ----------------------------------------------------------------- 20,174 20,108 20,564 ----------------------------------------------------------------- Total 207,446 196,971 192,978 Less income taxes credited to other income (16,834) (10,239) (8,947) ----------------------------------------------------------------- Federal and state income taxes charged to operations $224,280 $207,210 $201,925 ================================================================= II-75 NOTES (continued) Alabama Power Company 1994 Annual Report 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: =============================================================== 1994 1993 -------------------- (in millions) Deferred tax liabilities: Accelerated depreciation $ 734 $ 697 Property basis differences 513 536 Premium on reacquired debt 38 38 Fuel clause underrecovered 4 11 Other 26 17 --------------------------------------------------------------- Total 1,315 1,299 --------------------------------------------------------------- Deferred tax assets: Capacity prepayments 36 44 Other deferred costs 27 8 Postretirement benefits 24 15 Accrued nuclear outage costs 7 7 Unbilled revenue 13 7 Other 44 39 --------------------------------------------------------------- Total 151 120 --------------------------------------------------------------- Net deferred tax liabilities 1,164 1,179 Portion included in current assets (liabilities), net 17 (14) --------------------------------------------------------------- Accumulated deferred income taxes in the Balance Sheets $1,181 $1,165 =============================================================== 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 $13 million in 1994 and 1993 and $18 million in 1992. At December 31, 1994, 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: ============================================================== 1994 1993 1992 -------------------------- Federal statutory rate 35.0% 35.0% 34.0% State income tax, net of federal deduction 2.2 2.3 2.4 Non-deductible book depreciation 1.6 1.6 1.6 Differences in prior years' deferred and current tax rates (2.9) (1.6) (1.9) Other (0.7) (2.9) (2.0) -------------------------------------------------------------- Effective income tax rate 35.2% 34.4% 34.1% ============================================================== The Southern Company and its subsidiaries file a consolidated federal income tax return. Under a joint consolidated income tax agreement, each company's current and deferred tax expense is computed on a stand-alone basis, and consolidated tax savings are allocated to each company based on its ratio of taxable income to total consolidated taxable income. 9. OTHER LONG-TERM DEBT Details of other long-term debt at December 31 are as follows: ============================================================== 1994 1993 -------------------------- (in thousands) Obligations incurred in connection with the sale of tax-exempt pollution control revenue bonds by public authorities- 2003-2013--6% to 9.375% $ 1,000 $ 27,050 2014-2024--3.05% to 10.875% 475,140 449,090 -------------------------------------------------------------- 476,140 476,140 -------------------------------------------------------------- Capitalized lease obligations: Nuclear fuel - 95,943 Office buildings 7,312 7,710 Street light 2,442 2,761 -------------------------------------------------------------- 9,754 106,414 -------------------------------------------------------------- Total $485,894 $582,554 ============================================================== 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 $312.8 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. II-76 NOTES (continued) Alabama Power Company 1994 Annual Report The company has capitalized certain office building leases and a street light lease. Monthly principal payments plus interest are required, and at December 31, 1994, the interest rate was 9.5 percent for office buildings and 13.0 percent for street lights. In December 1994, the company discontinued capital leases pertaining to nuclear fuel. The net book value of capitalized leases included in utility plant in service was $6.2 million and $94.7 million at December 31, 1994 and 1993, respectively. The estimated aggregate annual maturities of other long-term debt through 1999 are as follows: $0.8 million in 1995, $0.9 million in 1996, $1.0 million in 1997, $1.0 million in 1998 and $1.2 million in 1999. 10. 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: ================================================================= 1994 1993 ------------------------ (in thousands) Bond improvement fund requirements $20,047 $20,135 Less: Portion to be satisfied by certifying property additions 20,047 - ----------------------------------------------------------------- Cash sinking fund requirements - $20,135 Other long-term debt maturities (Note 9) 796 38,863 ----------------------------------------------------------------- Total $ 796 $58,998 ================================================================= The annual first mortgage bond improvement fund requirement is one percent of the aggregate principal amount of bonds of each series authenticated, so long 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. The 1995 requirement of $20.0 million was satisfied by certification of property additions. In addition, maturing in 1995 are other long-term debt of $796 thousand consisting primarily of capitalized office building leases and a street light lease. 11. NUCLEAR INSURANCE Under the Price-Anderson Amendments Act of 1988 (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 $8.9 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. A company could be assessed up to $79 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 $159 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 Mutual Limited (NML), a mutual insurer established to provide property damage insurance in an amount up to $500 million for members' nuclear generating facilities. The members are subject to a retrospective premium assessment in the event that losses exceed accumulated reserve funds. The company's maximum annual assessment per incident is limited to $12 million under the current policy. 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 NML coverage. This excess insurance is provided by Nuclear Electric Insurance Limited (NEIL), a mutual insurance company. 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 cost of replacement power in an amount up to $3.5 million per week (starting 21 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 II-77 NOTES (continued) Alabama Power Company 1994 Annual Report that policy. The maximum annual assessments per incident under current policies for the company would be $27 million for excess property damage and $10 million for replacement power. For all on-site property damage insurance policies for commercial nuclear power plants, the NRC requires that the proceeds of such policies issued or renewed on or after April 2, 1991, 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 then, any further remaining proceeds are to be paid either to the company or to its bond trustees as may be appropriate under applicable trust indentures. The company participates in an insurance program for nuclear workers that provides coverage for worker tort claims filed for bodily injury caused at commercial nuclear power plants. In the event that claims for this insurance exceed the accumulated reserve funds, the company could be subject to a maximum total assessment of $6.4 million. 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, 1994, $807 million of retained earnings was restricted against the payment of cash dividends on common stock under terms of the mortgage indenture. Supplemental indentures in connection with future first mortgage bond issues may contain more stringent common stock dividend restrictions than those currently in effect. 13. QUARTERLY FINANCIAL INFORMATION (Unaudited) Summarized quarterly financial data for 1994 and 1993 are as follows: ================================================================== Net Income After Dividends Quarter Operating Operating on Preferred Ended Revenues Income Stock ------------------- --------- --------- -------------- (in thousands) March 1994 $686,847 $128,623 $ 72,031 June 1994 759,399 162,696 98,668 September 1994 838,927 199,736 141,214 December 1994 649,969 104,949 44,425 March 1993 $635,559 $124,356 $ 57,856 June 1993 733,589 159,023 91,448 September 1993 919,934 205,151 150,818 December 1993 718,527 106,582 46,372 ================================================================== The company's business is influenced by seasonal weather conditions. II-78
SELECTED FINANCIAL AND OPERATING DATA Alabama Power Company 1994 Annual Report ===================================================================================================== 1994 1993 1992 ----------------------------------------------------------------------------------------------------- Operating Revenues (in thousands) $2,935,142 $3,007,609 $2,846,840 Net Income after Dividends on Preferred Stock (in thousands) $356,338 $346,494 $338,555 Cash Dividends on Common Stock (in thousands) $268,000 $252,900 $273,300 Return on Average Common Equity (percent) 13.86 13.94 14.02 Total Assets (in thousands) $8,459,217 $8,248,683 $6,593,618 Gross Property Additions (in thousands) $536,785 $435,843 $367,463 ----------------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $2,614,405 $2,526,348 $2,443,493 Preferred stock 440,400 440,400 489,400 Preferred stock subject to mandatory redemption - - - Long-term debt 2,455,013 2,362,852 2,202,473 ----------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $5,509,818 $5,329,600 $5,135,366 ===================================================================================================== Capitalization Ratios (percent): Common stock equity 47.4 47.4 47.6 Preferred stock 8.0 8.3 9.5 Long-term debt 44.6 44.3 42.9 ----------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 100.0 ===================================================================================================== First Mortgage Bonds (in thousands): Issued 150,000 860,000 745,000 Retired 20,387 699,788 931,797 Preferred Stock (in thousands): Issued - 158,000 150,000 Retired - 207,000 145,000 ----------------------------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's A1 A1 A1 Standard and Poor's A A A Duff & Phelps A+ A+ A Preferred Stock - Moody's a2 a2 a2 Standard and Poor's A- A- A- Duff & Phelps A- A- A- ----------------------------------------------------------------------------------------------------- Customers (year-end): Residential 1,042,974 1,027,130 1,012,294 Commercial 162,239 157,337 152,530 Industrial 5,341 5,391 5,434 Other 716 713 704 ----------------------------------------------------------------------------------------------------- Total 1,211,270 1,190,571 1,170,962 ===================================================================================================== Employees (year-end) 7,996 8,009 8,116
II-79
SELECTED FINANCIAL AND OPERATING DATA Alabama Power Company 1994 Annual Report ===================================================================================================== 1991 1990 1989 ----------------------------------------------------------------------------------------------------- Operating Revenues (in thousands) $2,846,794 $2,722,424 $2,629,354 Net Income after Dividends on Preferred Stock (in thousands) $339,666 $312,803 $311,146 Cash Dividends on Common Stock (in thousands) $232,900 $220,800 $217,300 Return on Average Common Equity (percent) 14.55 14.00 14.53 Total Assets (in thousands) $6,549,462 $6,362,293 $6,279,431 Gross Property Additions (in thousands) $397,011 $444,680 $459,199 ----------------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $2,387,198 $2,280,590 $2,188,811 Preferred stock 484,400 484,400 484,400 Preferred stock subject to mandatory redemption - 12,500 17,500 Long-term debt 2,382,635 2,397,931 2,435,129 ----------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $5,254,233 $5,175,421 $5,125,840 ===================================================================================================== Capitalization Ratios (percent): Common stock equity 45.4 44.1 42.7 Preferred stock 9.2 9.6 9.8 Long-term debt 45.4 46.3 47.5 ----------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 100.0 ===================================================================================================== First Mortgage Bonds (in thousands): Issued 250,000 - - Retired 227,695 33,122 75,650 Preferred Stock (in thousands): Issued - - - Retired 17,500 5,000 5,000 ----------------------------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's A1 A1 A1 Standard and Poor's A A A Duff & Phelps A A A Preferred Stock - Moody's a2 a2 a2 Standard and Poor's A- A- A- Duff & Phelps A- A- A- ----------------------------------------------------------------------------------------------------- Customers (year-end): Residential 997,585 985,566 974,622 Commercial 148,228 144,340 141,265 Industrial 5,496 5,322 5,200 Other 697 690 684 ----------------------------------------------------------------------------------------------------- Total 1,152,006 1,135,918 1,121,771 ===================================================================================================== Employees (year-end) 8,513 9,473 9,698
II-80A
SELECTED FINANCIAL AND OPERATING DATA Alabama Power Company 1994 Annual Report ===================================================================================================== 1988 1987 1986 ----------------------------------------------------------------------------------------------------- Operating Revenues (in thousands) $2,476,626 $2,574,634 $2,549,574 Net Income after Dividends on Preferred Stock (in thousands) $283,475 $257,239 $273,456 Cash Dividends on Common Stock (in thousands) $212,700 $201,100 $191,300 Return on Average Common Equity (percent) 14.03 13.56 15.12 Total Assets (in thousands) $6,180,945 $5,912,000 $5,570,653 Gross Property Additions (in thousands) $643,892 $600,589 $553,767 ----------------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $2,094,815 $1,946,747 $1,847,608 Preferred stock 484,400 384,400 384,400 Preferred stock subject to mandatory redemption 22,500 27,500 30,000 Long-term debt 2,496,492 2,386,258 2,210,108 ----------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $5,098,207 $4,744,905 $4,472,116 ===================================================================================================== Capitalization Ratios (percent): Common stock equity 41.1 41.0 41.3 Preferred stock 9.9 8.7 9.3 Long-term debt 49.0 50.3 49.4 ----------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 100.0 ===================================================================================================== First Mortgage Bonds (in thousands): Issued 150,000 200,000 125,000 Retired 42,445 108,082 405,765 Preferred Stock (in thousands): Issued 100,000 - - Retired 2,500 5,000 42,224 ----------------------------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's A1 A1 A1 Standard and Poor's A A A Duff & Phelps 6 6 6 Preferred Stock - Moody's a2 a2 a2 Standard and Poor's A- A- A- Duff & Phelps 7 7 7 ----------------------------------------------------------------------------------------------------- Customers (year-end): Residential 964,581 950,101 934,798 Commercial 137,955 134,533 130,540 Industrial 5,120 4,955 4,725 Other 678 713 697 ----------------------------------------------------------------------------------------------------- Total 1,108,334 1,090,302 1,070,760 ===================================================================================================== Employees (year-end) 10,302 10,457 10,367
II-80B
SELECTED FINANCIAL AND OPERATING DATA Alabama Power Company 1994 Annual Report ========================================================================================= 1985 1984 ----------------------------------------------------------------------------------------- Operating Revenues (in thousands) $2,518,699 $2,236,560 Net Income after Dividends on Preferred Stock (in thousands) $264,562 $233,252 Cash Dividends on Common Stock (in thousands) $185,700 $161,900 Return on Average Common Equity (percent) 15.41 14.74 Total Assets (in thousands) $5,722,263 $5,496,197 Gross Property Additions (in thousands) $568,073 $575,173 ----------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $1,770,156 $1,664,295 Preferred stock 384,400 424,400 Preferred stock subject to mandatory redemption 35,000 37,224 Long-term debt 2,349,373 2,402,713 ----------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $4,538,929 $4,528,632 ========================================================================================= Capitalization Ratios (percent): Common stock equity 39.0 36.7 Preferred stock 9.3 10.2 Long-term debt 51.7 53.1 ----------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 ========================================================================================= First Mortgage Bonds (in thousands): Issued - - Retired 39,460 21,250 Preferred Stock (in thousands): Issued - - Retired - 810 ----------------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's A1 A2 Standard and Poor's A A- Duff & Phelps 6 7 Preferred Stock - Moody's a2 a3 Standard and Poor's A- BBB+ Duff & Phelps 7 8 ----------------------------------------------------------------------------------------- Customers (year-end): Residential 918,777 905,239 Commercial 126,644 123,561 Industrial 4,619 4,467 Other 755 759 ----------------------------------------------------------------------------------------- Total 1,050,795 1,034,026 ========================================================================================= Employees (year-end) 10,212 10,144
II-80C
SELECTED FINANCIAL AND OPERATING DATA (continued) Alabama Power Company 1994 Annual Report ===================================================================================================== 1994 1993 1992 ----------------------------------------------------------------------------------------------------- Operating Revenues (in thousands): Residential $913,146 $947,277 $845,660 Commercial 647,202 634,895 589,816 Industrial 803,587 832,938 800,311 Other 13,515 13,344 12,734 ----------------------------------------------------------------------------------------------------- Total retail 2,377,450 2,428,454 2,248,521 Sales for resale - non-affiliates 354,760 364,105 407,791 Sales for resale - affiliates 164,762 181,975 158,088 ----------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 2,896,972 2,974,534 2,814,400 Other revenues 38,170 33,075 32,440 ----------------------------------------------------------------------------------------------------- Total $2,935,142 $3,007,609 $2,846,840 ===================================================================================================== Kilowatt-Hour Sales (in thousands): Residential 13,183,147 13,185,062 12,069,268 Commercial 9,645,798 9,185,462 8,629,869 Industrial 19,479,364 18,595,237 18,260,274 Other 185,876 181,673 176,798 ----------------------------------------------------------------------------------------------------- Total retail 42,494,185 41,147,434 39,136,209 Sales for resale - non-affiliates 6,775,176 7,143,672 8,382,571 Sales for resale - affiliates 8,432,533 8,081,324 7,210,697 ----------------------------------------------------------------------------------------------------- Total 57,701,894 56,372,430 54,729,477 ===================================================================================================== Average Revenue Per Kilowatt-Hour (cents): Residential 6.93 7.18 7.01 Commercial 6.71 6.91 6.83 Industrial 4.13 4.48 4.38 Total retail 5.59 5.90 5.75 Sales for resale 3.42 3.59 3.63 Total sales 5.02 5.28 5.14 Residential Average Annual Kilowatt-Hour Use Per Customer 12,746 12,936 12,017 Residential Average Annual Revenue Per Customer $882.88 $929.36 $842.00 Plant Nameplate Capacity Ratings (Note 1) (year-end) (megawatts) 10,431 10,431 10,431 Territorial Peak-Hour Demand (megawatts) (Note 2): Winter 8,217 7,152 7,077 Summer 9,028 9,457 8,801 Annual Load Factor (percent) (Note 2) 62.2 58.6 59.6 Plant Availability (percent): Fossil-steam 86.9 89.7 88.9 Nuclear 92.5 86.6 80.2 ----------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 62.9 63.9 64.3 Nuclear 21.7 20.1 19.0 Hydro 8.4 6.9 8.5 Oil and gas * * * Purchased power - From non-affiliates 1.3 1.1 1.2 From affiliates 5.7 8.0 7.0 ----------------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 ===================================================================================================== Total Fuel Economy Data (Note 1): BTU per net kilowatt-hour generated 9,961 10,003 10,000 Cost of fuel per million BTU (cents) 157.62 173.66 164.57 Average cost of fuel per net kilowatt-hour generated (cents) 1.57 1.74 1.65 ===================================================================================================== Notes: (1) Generating capacity and fuel data includes Alabama Power Company's 50% portion of SEGCO. (2) Includes Southeastern Power Administration allotment. * Less than one-tenth of one percent.
II-81
SELECTED FINANCIAL AND OPERATING DATA (continued) Alabama Power Company 1994 Annual Report ===================================================================================================== 1991 1990 1989 ----------------------------------------------------------------------------------------------------- Operating Revenues (in thousands): Residential $864,347 $825,645 $781,982 Commercial 582,730 551,634 533,487 Industrial 790,224 777,580 762,274 Other 12,662 12,103 11,743 ----------------------------------------------------------------------------------------------------- Total retail 2,249,963 2,166,962 2,089,486 Sales for resale - non-affiliates 407,912 434,996 409,202 Sales for resale - affiliates 159,375 93,473 104,488 ----------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 2,817,250 2,695,431 2,603,176 Other revenues 29,544 26,993 26,178 ----------------------------------------------------------------------------------------------------- Total $2,846,794 $2,722,424 $2,629,354 ===================================================================================================== Kilowatt-Hour Sales (in thousands): Residential 12,324,898 11,996,794 11,346,736 Commercial 8,526,131 8,201,534 7,915,685 Industrial 17,511,579 17,713,153 17,360,791 Other 174,760 170,420 166,485 ----------------------------------------------------------------------------------------------------- Total retail 38,537,368 38,081,901 36,789,697 Sales for resale - non-affiliates 8,810,442 10,277,060 10,292,329 Sales for resale - affiliates 7,784,285 4,519,275 5,048,743 ----------------------------------------------------------------------------------------------------- Total 55,132,095 52,878,236 52,130,769 ===================================================================================================== Average Revenue Per Kilowatt-Hour (cents): Residential 7.01 6.88 6.89 Commercial 6.83 6.73 6.74 Industrial 4.51 4.39 4.39 Total retail 5.84 5.69 5.68 Sales for resale 3.42 3.57 3.35 Total sales 5.11 5.10 4.99 Residential Average Annual Kilowatt-Hour Use Per Customer 12,435 12,256 11,717 Residential Average Annual Revenue Per Customer $872.04 $843.50 $807.50 Plant Nameplate Capacity Ratings (Note 1) (year-end) (megawatts) 10,539 9,879 9,879 Territorial Peak-Hour Demand (megawatts) (Note 2): Winter 6,586 6,293 7,264 Summer 8,627 8,878 8,256 Annual Load Factor (percent) (Note 2) 59.9 57.4 59.5 Plant Availability (percent): Fossil-steam 93.1 92.2 90.7 Nuclear 87.0 86.5 83.1 ----------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 61.5 57.0 54.1 Nuclear 20.8 21.6 21.0 Hydro 8.2 8.7 11.0 Oil and gas * 0.1 0.1 Purchased power - From non-affiliates 1.6 0.9 1.8 From affiliates 7.9 11.7 12.0 ----------------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 ===================================================================================================== Total Fuel Economy Data (Note 1): BTU per net kilowatt-hour generated 9,985 10,072 10,061 Cost of fuel per million BTU (cents) 170.49 171.55 172.20 Average cost of fuel per net kilowatt-hour generated (cents) 1.70 1.73 1.73 ===================================================================================================== Notes: (1) Generating capacity and fuel data includes Alabama Power Company's 50% portion of SEGCO. (2) Includes Southeastern Power Administration allotment. * Less than one-tenth of one percent.
II-82A
SELECTED FINANCIAL AND OPERATING DATA (continued) Alabama Power Company 1994 Annual Report ===================================================================================================== 1988 1987 1986 ----------------------------------------------------------------------------------------------------- Operating Revenues (in thousands): Residential $761,805 $759,957 $738,864 Commercial 510,910 501,088 481,676 Industrial 738,755 721,298 705,395 Other 11,255 10,968 10,811 ----------------------------------------------------------------------------------------------------- Total retail 2,022,725 1,993,311 1,936,746 Sales for resale - non-affiliates 355,362 443,880 472,938 Sales for resale - affiliates 76,691 118,746 120,911 ----------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 2,454,778 2,555,937 2,530,595 Other revenues 21,848 18,697 18,979 ----------------------------------------------------------------------------------------------------- Total $2,476,626 $2,574,634 $2,549,574 ===================================================================================================== Kilowatt-Hour Sales (in thousands): Residential 11,332,285 11,149,225 10,606,698 Commercial 7,711,092 7,476,924 7,015,589 Industrial 16,881,342 15,969,075 15,025,806 Other 165,122 159,422 153,282 ----------------------------------------------------------------------------------------------------- Total retail 36,089,841 34,754,646 32,801,375 Sales for resale - non-affiliates 7,905,750 10,523,554 9,064,049 Sales for resale - affiliates 3,551,142 4,963,997 4,456,360 ----------------------------------------------------------------------------------------------------- Total 47,546,733 50,242,197 46,321,784 ===================================================================================================== Average Revenue Per Kilowatt-Hour (cents): Residential 6.72 6.82 6.97 Commercial 6.63 6.70 6.87 Industrial 4.38 4.52 4.69 Total retail 5.60 5.74 5.90 Sales for resale 3.77 3.63 4.39 Total sales 5.16 5.09 5.46 Residential Average Annual Kilowatt-Hour Use Per Customer 11,839 11,848 11,457 Residential Average Annual Revenue Per Customer $795.84 $807.61 $798.09 Plant Nameplate Capacity Ratings (Note 1) (year-end) (megawatts) 9,279 9,337 9,337 Territorial Peak-Hour Demand (megawatts) (Note 2): Winter 6,377 6,138 6,257 Summer 7,991 7,886 7,892 Annual Load Factor (percent) (Note 2) 59.6 58.3 56.2 Plant Availability (percent): Fossil-steam 91.3 90.2 88.5 Nuclear 91.9 83.3 83.8 ----------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 53.9 52.5 58.8 Nuclear 26.1 21.7 23.8 Hydro 4.8 6.3 4.2 Oil and gas 0.1 0.2 0.1 Purchased power - From non-affiliates 0.5 0.2 2.0 From affiliates 14.6 19.1 11.1 ----------------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 ===================================================================================================== Total Fuel Economy Data (Note 1): BTU per net kilowatt-hour generated 10,137 10,214 10,209 Cost of fuel per million BTU (cents) 168.21 176.72 179.65 Average cost of fuel per net kilowatt-hour generated (cents) 1.71 1.80 1.83 ===================================================================================================== Notes: (1) Generating capacity and fuel data includes Alabama Power Company's 50% portion of SEGCO. (2) Includes Southeastern Power Administration allotment. * Less than one-tenth of one percent.
II-82B
SELECTED FINANCIAL AND OPERATING DATA (continued) Alabama Power Company 1994 Annual Report ========================================================================================= 1985 1984 ----------------------------------------------------------------------------------------- Operating Revenues (in thousands): Residential $684,970 $664,286 Commercial 453,651 430,400 Industrial 717,078 692,177 Other 10,129 9,615 ----------------------------------------------------------------------------------------- Total retail 1,865,828 1,796,478 Sales for resale - non-affiliates 539,343 317,890 Sales for resale - affiliates 95,733 108,812 ----------------------------------------------------------------------------------------- Total revenues from sales of electricity 2,500,904 2,223,180 Other revenues 17,795 13,380 ----------------------------------------------------------------------------------------- Total $2,518,699 $2,236,560 ========================================================================================= Kilowatt-Hour Sales (in thousands): Residential 9,814,814 9,634,285 Commercial 6,593,645 6,270,899 Industrial 15,215,276 15,134,188 Other 146,119 143,785 ----------------------------------------------------------------------------------------- Total retail 31,769,854 31,183,157 Sales for resale - non-affiliates 12,158,464 8,587,936 Sales for resale - affiliates 3,588,338 4,270,493 ----------------------------------------------------------------------------------------- Total 47,516,656 44,041,586 ========================================================================================= Average Revenue Per Kilowatt-Hour (cents): Residential 6.98 6.90 Commercial 6.88 6.86 Industrial 4.71 4.57 Total retail 5.87 5.76 Sales for resale 4.03 3.32 Total sales 5.26 5.05 Residential Average Annual Kilowatt-Hour Use Per Customer 10,781 10,755 Residential Average Annual Revenue Per Customer $752.43 $741.58 Plant Nameplate Capacity Ratings (Note 1) (year-end) (megawatts) 9,337 8,580 Territorial Peak-Hour Demand (megawatts) (Note 2): Winter 6,191 5,696 Summer 7,570 6,946 Annual Load Factor (percent) (Note 2) 57.2 59.8 Plant Availability (percent): Fossil-steam 90.5 91.2 Nuclear 81.0 86.5 ----------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 55.7 51.5 Nuclear 22.4 26.1 Hydro 6.2 11.0 Oil and gas 0.1 * Purchased power - From non-affiliates 1.7 0.2 From affiliates 13.9 11.2 ----------------------------------------------------------------------------------------- Total 100.0 100.0 ========================================================================================= Total Fuel Economy Data (Note 1): BTU per net kilowatt-hour generated 10,229 10,367 Cost of fuel per million BTU (cents) 185.74 179.40 Average cost of fuel per net kilowatt-hour generated (cents) 1.90 1.86 ========================================================================================= Notes: (1) Generating capacity and fuel data includes Alabama Power Company's 50% portion of SEGCO. (2) Includes Southeastern Power Administration allotment. * Less than one-tenth of one percent.
II-82C
STATEMENTS OF INCOME Alabama Power Company ======================================================================================================= For the Years Ended December 31, 1994* 1993* 1992* ------------------------------------------------------------------------------------------------------- (Thousands of Dollars) Operating Revenues: Revenues $ 2,770,380 $ 2,825,634 $ 2,688,752 Revenues from affiliates 164,762 181,975 158,088 ------------------------------------------------------------------------------------------------------- Total operating revenues 2,935,142 3,007,609 2,846,840 ------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 801,948 877,099 794,438 Purchased power from non-affiliates 15,158 15,230 14,242 Purchased power from affiliates 100,888 120,330 107,230 Proceeds from settlement of disputed contracts - (2,568) (641) Other 458,917 473,383 446,477 Maintenance 262,102 252,506 237,071 Depreciation and amortization 292,420 290,310 280,881 Taxes other than income taxes 183,425 178,997 172,095 Federal and state income taxes 224,280 207,210 201,925 ------------------------------------------------------------------------------------------------------- Total operating expenses 2,339,138 2,412,497 2,253,718 ------------------------------------------------------------------------------------------------------- Operating Income 596,004 595,112 593,122 Other Income (Expense): Allowance for equity funds used during construction 3,239 3,260 2,071 Income from subsidiary 3,588 4,127 4,635 Charitable foundation (13,500) (3,000) (6,887) Interest income 16,944 20,775 14,804 Other, net (30,569) (24,420) (11,019) Income taxes applicable to other income 16,834 10,239 8,947 ------------------------------------------------------------------------------------------------------- Income Before Interest Charges 592,540 606,093 605,673 ------------------------------------------------------------------------------------------------------- Interest Charges: Interest on long-term debt 178,045 184,861 206,871 Allowance for debt funds used during construction (3,548) (2,992) (2,416) Interest on interim obligations 5,939 3,760 3,704 Amortization of debt discount, premium, and expense, net 9,623 8,937 4,392 Other interest charges 19,908 35,474 19,381 ------------------------------------------------------------------------------------------------------- Net interest charges 209,967 230,040 231,932 ------------------------------------------------------------------------------------------------------- Net Income 382,573 376,053 373,741 Dividends on Preferred Stock 26,235 29,559 35,186 ------------------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred Stock $ 356,338 $ 346,494 $ 338,555 ======================================================================================================= * Includes the effect of recognizing, beginning in 1987, retail service rendered but not yet billed to customers.
II-83
STATEMENTS OF INCOME Alabama Power Company ====================================================================================================================== For the Years Ended December 31, 1991* 1990* 1989* 1988* ---------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) Operating Revenues: Revenues $ 2,687,419 $ 2,628,951 $ 2,524,866 $ 2,399,935 Revenues from affiliates 159,375 93,473 104,488 76,691 ---------------------------------------------------------------------------------------------------------------------- Total operating revenues 2,846,794 2,722,424 2,629,354 2,476,626 ---------------------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 812,667 756,501 712,453 676,423 Purchased power from non-affiliates 21,080 11,185 28,272 8,407 Purchased power from affiliates 119,602 165,982 163,267 185,390 Proceeds from settlement of disputed contracts (14,819) - - - Other 435,908 411,559 380,536 400,879 Maintenance 229,114 215,304 202,633 197,225 Depreciation and amortization 271,433 262,817 247,973 225,123 Taxes other than income taxes 169,639 163,567 154,398 148,681 Federal and state income taxes 200,612 185,954 188,507 143,614 ---------------------------------------------------------------------------------------------------------------------- Total operating expenses 2,245,236 2,172,869 2,078,039 1,985,742 ---------------------------------------------------------------------------------------------------------------------- Operating Income 601,558 549,555 551,315 490,884 Other Income (Expense): Allowance for equity funds used during construction 2,368 25,487 29,515 39,047 Income from subsidiary 4,576 4,182 3,750 3,302 Charitable foundation (6,500) (17,500) (25,000) - Interest income 14,356 12,006 10,871 9,914 Other, net (9,926) (8,235) (4,313) (13,694) Income taxes applicable to other income 7,523 11,081 13,629 8,034 ---------------------------------------------------------------------------------------------------------------------- Income Before Interest Charges 613,955 576,576 579,767 537,487 ---------------------------------------------------------------------------------------------------------------------- Interest Charges: Interest on long-term debt 214,107 221,527 230,046 225,522 Allowance for debt funds used during construction (6,903) (23,339) (27,627) (31,830) Interest on interim obligations 13,385 10,252 9,098 5,714 Amortization of debt discount, premium, and expense, net 2,634 3,706 4,469 4,411 Other interest charges 14,927 13,115 13,112 13,715 ---------------------------------------------------------------------------------------------------------------------- Net interest charges 238,150 225,261 229,098 217,532 ---------------------------------------------------------------------------------------------------------------------- Net Income 375,805 351,315 350,669 319,955 Dividends on Preferred Stock 36,139 38,512 39,523 36,480 ---------------------------------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred Stock $ 339,666 $ 312,803 $ 311,146 $ 283,475 ====================================================================================================================== * Includes the effect of recognizing, beginning in 1987, retail service rendered but not yet billed to customers.
II-84A
STATEMENTS OF INCOME Alabama Power Company ====================================================================================================================== For the Years Ended December 31, 1987* 1986 1985 1984 ---------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) Operating Revenues: Revenues $ 2,455,888 $ 2,428,663 $ 2,422,966 $ 2,127,748 Revenues from affiliates 118,746 120,911 95,733 108,812 ---------------------------------------------------------------------------------------------------------------------- Total operating revenues 2,574,634 2,549,574 2,518,699 2,236,560 ---------------------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 696,763 738,367 743,463 657,183 Purchased power from non-affiliates 6,703 23,889 25,990 4,592 Purchased power from affiliates 257,052 156,091 187,041 156,180 Proceeds from settlement of disputed contracts - - - - Other 410,575 350,671 308,437 287,647 Maintenance 199,617 203,972 210,143 182,957 Depreciation and amortization 212,072 201,803 183,779 174,514 Taxes other than income taxes 141,422 135,248 128,648 122,928 Federal and state income taxes 190,575 255,400 248,774 224,726 ---------------------------------------------------------------------------------------------------------------------- Total operating expenses 2,114,779 2,065,441 2,036,275 1,810,727 ---------------------------------------------------------------------------------------------------------------------- Operating Income 459,855 484,133 482,424 425,833 Other Income (Expense): Allowance for equity funds used during construction 27,663 27,455 32,985 45,704 Income from subsidiary 3,440 2,967 3,417 3,181 Charitable foundation - - - - Interest income 7,044 11,422 20,874 12,432 Other, net (816) (3,738) (4,447) (666) Income taxes applicable to other income 849 185 (4,941) (3,088) ---------------------------------------------------------------------------------------------------------------------- Income Before Interest Charges 498,035 522,424 530,312 483,396 ---------------------------------------------------------------------------------------------------------------------- Interest Charges: Interest on long-term debt 205,824 226,110 248,073 245,684 Allowance for debt funds used during construction (24,235) (24,334) (29,048) (42,868) Interest on interim obligations 7,221 1,159 - - Amortization of debt discount, premium, and expense, net 4,405 3,313 1,145 996 Other interest charges 14,662 8,695 4,234 4,291 ---------------------------------------------------------------------------------------------------------------------- Net interest charges 207,877 214,943 224,404 208,103 ---------------------------------------------------------------------------------------------------------------------- Net Income 290,158 307,481 305,908 275,293 Dividends on Preferred Stock 32,919 34,025 41,346 42,041 ---------------------------------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred Stock $ 257,239 $ 273,456 $ 264,562 $ 233,252 ====================================================================================================================== * Includes the effect of recognizing, beginning in 1987, retail service rendered but not yet billed to customers.
II-84B
STATEMENTS OF CASH FLOWS Alabama Power Company ============================================================================================================ For the Years Ended December 31, 1994 1993 1992 ------------------------------------------------------------------------------------------------------------ (Thousands of Dollars) Operating Activities: Net income $ 382,573 $ 376,053 $ 373,741 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 359,791 356,499 338,421 Deferred income taxes, net (32,612) 35,100 23,514 Deferred investment tax credits, net (1) (2,106) - Allowance for equity funds used during construction (3,239) (3,260) (2,071) Non-cash proceeds from settlement of disputed contracts - - (641) Other, net 28,656 36,493 (2,657) Changes in certain current assets and liabilities -- Receivables, net 19,390 19,215 (11,010) Inventories (38,946) 51,630 12,704 Payables (21,240) 31,544 2,158 Taxes accrued 6,856 (9,959) (21,120) Energy cost recovery, retail 16,907 (56,128) 45,509 Other (14,235) (21,110) 10,629 ------------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 703,900 813,971 769,177 ------------------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (536,785) (435,843) (367,463) Sales of property - - 43,556 Other (26,632) (741) (13,379) ------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (563,417) (436,584) (337,286) ------------------------------------------------------------------------------------------------------------- Financing Activities and Capital Contributions: Proceeds: Preferred stock - 158,000 150,000 First mortgage bonds 150,000 860,000 745,000 Pollution control bonds - - - Other long-term debt 208,720 180,314 48,382 Capital contributions from parent company - - - Prepaid capacity revenues - - - Retirements: Preferred stock - (207,000) (145,000) First mortgage bonds (20,387) (699,788) (931,797) Pollution control bonds (179,750) (135,315) (335) Other long-term debt (125,630) (46,014) (53,888) Interim obligations, net 139,882 (156,917) 120,917 Payment of preferred stock dividends (25,431) (32,099) (35,704) Payment of common stock dividends (268,000) (252,900) (273,300) Miscellaneous (8,444) (56,064) (53,697) ------------------------------------------------------------------------------------------------------------- Net cash provided from (used for) financing activities (129,040) (387,783) (429,422) ------------------------------------------------------------------------------------------------------------- Net Change in Cash 11,443 (10,396) 2,469 Cash at Beginning of Year 3,233 13,629 11,160 ------------------------------------------------------------------------------------------------------------- Cash at End of Year $ 14,676 $ 3,233 $ 13,629 ============================================================================================================= ( ) Denotes use of cash.
II-85
STATEMENTS OF CASH FLOWS Alabama Power Company ======================================================================================================================== For the Years Ended December 31, 1991 1990 1989 1988 ------------------------------------------------------------------------------------------------------------------------ (Thousands of Dollars) Operating Activities: Net income $ 375,805 $ 351,315 $ 350,669 $ 319,955 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 337,978 331,858 322,042 296,234 Deferred income taxes, net (5,779) 64,480 31,715 37,952 Deferred investment tax credits, net (1,089) 132 6,917 15,019 Allowance for equity funds used during construction (2,368) (25,487) (29,515) (39,047) Non-cash proceeds from settlement of disputed contracts (13,750) - - - Other, net 26,614 19,899 (5,297) 16,106 Changes in certain current assets and liabilities -- Receivables, net 9,178 12,005 (10,436) 8,822 Inventories (17,374) (40,901) 20,408 (23,182) Payables 28,889 6,597 16,259 (12,957) Taxes accrued 24,828 (6,167) 1,547 (7,754) Energy cost recovery, retail (12,304) (42,535) 39,164 - Other (37,906) 14,144 28,701 (18,658) ------------------------------------------------------------------------------------------------------------------------ Net cash provided from operating activities 712,722 685,340 772,174 592,490 ------------------------------------------------------------------------------------------------------------------------ Investing Activities: Gross property additions (397,011) (444,680) (459,199) (643,892) Sales of property - - - - Other (36,083) 6,935 3,768 23,161 ------------------------------------------------------------------------------------------------------------------------ Net cash used for investing activities (433,094) (437,745) (455,431) (620,731) ------------------------------------------------------------------------------------------------------------------------ Financing Activities and Capital Contributions: Proceeds: Preferred stock - - - 100,000 First mortgage bonds 250,000 - - 150,000 Pollution control bonds - - 53,700 - Other long-term debt 12,906 54,831 55,176 62,515 Capital contributions from parent company - - - 79,500 Prepaid capacity revenues 52,900 - - - Retirements: Preferred stock (17,500) (5,000) (5,000) (2,500) First mortgage bonds (227,695) (33,122) (75,650) (42,445) Pollution control bonds (250) (250) (53,950) - Other long-term debt (48,428) (56,895) (57,316) (56,748) Interim obligations, net (13,500) 59,500 30,000 (15,000) Payment of preferred stock dividends (36,829) (38,245) (40,105) (35,362) Payment of common stock dividends (232,900) (220,800) (217,300) (212,700) Miscellaneous (17,732) (293) (4,576) (5,581) ------------------------------------------------------------------------------------------------------------------------ Net cash provided from (used for) financing activities (279,028) (240,274) (315,021) 21,679 ------------------------------------------------------------------------------------------------------------------------ Net Change in Cash 600 7,321 1,722 (6,562) Cash at Beginning of Year 10,560 3,239 1,517 8,079 ------------------------------------------------------------------------------------------------------------------------ Cash at End of Year $ 11,160 $ 10,560 $ 3,239 $ 1,517 ======================================================================================================================== ( ) Denotes use of cash.
II-86A
STATEMENTS OF CASH FLOWS Alabama Power Company ======================================================================================================================== For the Years Ended December 31, 1987 1986 1985 1984 ------------------------------------------------------------------------------------------------------------------------ (Thousands of Dollars) Operating Activities: Net income $ 290,158 $ 307,481 $ 305,908 $ 275,293 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 270,492 292,569 266,657 266,479 Deferred income taxes, net 107,824 135,364 104,259 85,426 Deferred investment tax credits, net 23,477 19,736 57,096 165,020 Allowance for equity funds used during construction (27,663) (27,455) (32,985) (45,704) Non-cash proceeds from settlement of disputed contracts - - - - Other, net 67,445 4,251 (18,971) (4,573) Changes in certain current assets and liabilities -- Receivables, net (133,468) 15,238 (13,531) (16,403) Inventories (26,255) (2,040) 29,823 25,159 Payables 39,645 (56,720) 26,360 39,964 Taxes accrued 516 (1,487) (6,325) (8,198) Energy cost recovery, retail - - - - Other 4,464 (35,293) 4,358 29,836 ------------------------------------------------------------------------------------------------------------------------ Net cash provided from operating activities 616,635 651,644 722,649 812,299 ------------------------------------------------------------------------------------------------------------------------ Investing Activities: Gross property additions (600,589) (553,767) (568,073) (575,173) Sales of property - - - - Other 17,010 10,115 22,028 26,175 ------------------------------------------------------------------------------------------------------------------------ Net cash used for investing activities (583,579) (543,652) (546,045) (548,998) ------------------------------------------------------------------------------------------------------------------------ Financing Activities and Capital Contributions: Proceeds: Preferred stock - - - - First mortgage bonds 200,000 125,000 - - Pollution control bonds 432 26,232 115,577 161,134 Other long-term debt 69,786 95,017 12,998 25,654 Capital contributions from parent company 43,000 - 27,000 93,000 Prepaid capacity revenues - 100,000 - - Retirements: Preferred stock (5,000) (42,224) - (810) First mortgage bonds (108,082) (405,765) (39,460) (21,250) Pollution control bonds - (21,000) - (3,500) Other long-term debt (32,500) (43,561) (35,023) (128,060) Interim obligations, net 15,000 - - - Payment of preferred stock dividends (32,837) (36,014) (41,566) (42,061) Payment of common stock dividends (201,100) (191,300) (185,700) (161,900) Miscellaneous (2,581) (38,052) (4,438) (2,727) ------------------------------------------------------------------------------------------------------------------------ Net cash provided from (used for) financing activities (53,882) (431,667) (150,612) (80,520) ------------------------------------------------------------------------------------------------------------------------ Net Change in Cash (20,826) (323,675) 25,992 182,781 Cash at Beginning of Year 28,905 352,580 326,588 143,807 ------------------------------------------------------------------------------------------------------------------------ Cash at End of Year $ 8,079 $ 28,905 $ 352,580 $ 326,588 ======================================================================================================================== ( ) Denotes use of cash.
II-86B
BALANCE SHEETS Alabama Power Company =========================================================================================================== At December 31, 1994* 1993* 1992* ----------------------------------------------------------------------------------------------------------- (Thousands of Dollars) ASSETS Electric Plant: Production- Fossil $ 3,027,956 $ 2,987,010 $ 2,953,683 Nuclear 1,866,750 1,860,842 1,860,832 Hydro 836,256 819,848 818,363 ----------------------------------------------------------------------------------------------------------- Total production 5,730,962 5,667,700 5,632,878 Transmission 1,087,452 1,051,130 1,013,464 Distribution 2,366,477 2,206,834 2,072,165 General 847,111 810,551 751,652 Construction work in progress 317,745 225,743 164,555 Nuclear fuel, at amortized cost 101,630 93,551 101,128 ----------------------------------------------------------------------------------------------------------- Total electric plant 10,451,377 10,055,509 9,735,842 ----------------------------------------------------------------------------------------------------------- Steam Heat Plant: Plant in service 20,770 20,926 20,924 Construction work in progress 34 43 33 ----------------------------------------------------------------------------------------------------------- Total steam heat plant 20,804 20,969 20,957 ----------------------------------------------------------------------------------------------------------- Total utility plant 10,472,181 10,076,478 9,756,799 ----------------------------------------------------------------------------------------------------------- Accumulated provision for depreciation: Electric 3,588,363 3,374,310 3,122,332 Steam heat 10,241 9,846 9,211 ----------------------------------------------------------------------------------------------------------- Total accumulated provision for depreciation 3,598,604 3,384,156 3,131,543 ----------------------------------------------------------------------------------------------------------- Total 6,873,577 6,692,322 6,625,256 Less property-related accumulated deferred income taxes - - 1,170,982 ----------------------------------------------------------------------------------------------------------- Total 6,873,577 6,692,322 5,454,274 ----------------------------------------------------------------------------------------------------------- Other Property and Investments: Securities received from settlement of disputed contracts - - - Nuclear decommissioning trusts 71,014 49,550 32,390 Miscellaneous 43,955 49,635 49,892 ----------------------------------------------------------------------------------------------------------- Total 114,969 99,185 82,282 ----------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 14,676 3,233 13,629 Investment securities - - 64,832 Receivables, net 374,125 410,422 344,934 Fossil fuel stock, at average cost 119,555 88,481 134,328 Materials and supplies, at average cost 184,600 176,728 182,511 Prepayments 103,550 79,207 108,254 Vacation pay deferred 20,442 22,680 21,879 ----------------------------------------------------------------------------------------------------------- Total 816,948 780,751 870,367 ----------------------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes 451,886 469,010 - Debt expense, being amortized 7,370 7,064 6,118 Premium on reacquired debt, being amortized 101,851 102,634 74,835 Uranium enrichment decontamination and decommissioning fund 42,996 45,554 47,730 Miscellaneous 49,620 52,163 58,012 ----------------------------------------------------------------------------------------------------------- Total 653,723 676,425 186,695 ----------------------------------------------------------------------------------------------------------- Total Assets $ 8,459,217 $ 8,248,683 $ 6,593,618 =========================================================================================================== *Includes the effect of recognizing, beginning in 1987, retail service rendered but not yet billed to customers.
II-87
BALANCE SHEETS Alabama Power Company ========================================================================================================================== At December 31, 1991* 1990* 1989* 1988* -------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) ASSETS Electric Plant: Production- Fossil $ 2,991,876 $ 2,462,100 $ 2,428,146 $ 1,820,966 Nuclear 1,851,317 1,794,540 1,786,877 1,769,093 Hydro 814,301 809,578 803,901 789,617 -------------------------------------------------------------------------------------------------------------------------- Total production 5,657,494 5,066,218 5,018,924 4,379,676 Transmission 977,239 925,368 882,933 844,003 Distribution 1,947,972 1,815,265 1,692,426 1,587,690 General 713,948 660,217 646,523 613,498 Construction work in progress 148,564 654,055 557,150 1,023,019 Nuclear fuel, at amortized cost 109,259 143,711 147,997 174,130 --------------------------------------------------------------------------------------------------------------------------- Total electric plant 9,554,476 9,264,834 8,945,953 8,622,016 --------------------------------------------------------------------------------------------------------------------------- Steam Heat Plant: Plant in service 20,214 20,091 20,083 20,076 Construction work in progress 181 74 71 58 -------------------------------------------------------------------------------------------------------------------------- Total steam heat plant 20,395 20,165 20,154 20,134 -------------------------------------------------------------------------------------------------------------------------- Total utility plant 9,574,871 9,284,999 8,966,107 8,642,150 -------------------------------------------------------------------------------------------------------------------------- Accumulated provision for depreciation: Electric 2,913,385 2,676,957 2,458,747 2,257,696 Steam heat 8,492 7,861 7,154 6,456 -------------------------------------------------------------------------------------------------------------------------- Total accumulated provision for depreciation 2,921,877 2,684,818 2,465,901 2,264,152 -------------------------------------------------------------------------------------------------------------------------- Total 6,652,994 6,600,181 6,500,206 6,377,998 Less property-related accumulated deferred income taxes 1,140,303 1,106,664 1,051,877 1,001,173 -------------------------------------------------------------------------------------------------------------------------- Total 5,512,691 5,493,517 5,448,329 5,376,825 -------------------------------------------------------------------------------------------------------------------------- Other Property and Investments: Securities received from settlement of disputed contracts 69,550 - - - Nuclear decommissioning trusts 15,864 - - - Miscellaneous 48,254 40,604 34,710 29,677 -------------------------------------------------------------------------------------------------------------------------- Total 133,668 40,604 34,710 29,677 -------------------------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 11,160 10,560 3,239 1,517 Investment securities - - - - Receivables, net 349,599 346,473 355,107 344,671 Fossil fuel stock, at average cost 154,798 144,960 131,942 173,858 Materials and supplies, at average cost 174,745 167,209 139,326 117,818 Prepayments 95,832 50,364 54,613 28,412 Vacation pay deferred 21,691 22,845 22,021 21,871 -------------------------------------------------------------------------------------------------------------------------- Total 807,825 742,411 706,248 688,147 -------------------------------------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes - - - - Debt expense, being amortized 5,957 6,083 6,491 6,831 Premium on reacquired debt, being amortized 40,174 26,504 28,778 27,329 Uranium enrichment decontamination and decommissioning fund - - - - Miscellaneous 49,147 53,174 54,875 52,136 -------------------------------------------------------------------------------------------------------------------------- Total 95,278 85,761 90,144 86,296 -------------------------------------------------------------------------------------------------------------------------- Total Assets $ 6,549,462 $ 6,362,293 $ 6,279,431 $ 6,180,945 ========================================================================================================================== *Includes the effect of recognizing, beginning in 1987, retail service rendered but not yet billed to customers.
II-88A
BALANCE SHEETS Alabama Power Company ========================================================================================================================== At December 31, 1987* 1986 1985 1984 -------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) ASSETS Electric Plant: Production- Fossil $ 1,787,979 $ 1,748,226 $ 1,678,117 $ 1,203,447 Nuclear 1,765,854 1,749,981 1,687,766 1,664,849 Hydro 788,046 784,445 773,682 559,696 -------------------------------------------------------------------------------------------------------------------------- Total production 4,341,879 4,282,652 4,139,565 3,427,992 Transmission 817,065 773,142 699,980 642,968 Distribution 1,481,845 1,384,576 1,295,930 1,221,003 General 535,148 506,228 349,249 300,043 Construction work in progress 750,907 497,491 502,455 972,832 Nuclear fuel, at amortized cost 191,493 205,768 243,468 223,818 -------------------------------------------------------------------------------------------------------------------------- Total electric plant 8,118,337 7,649,857 7,230,647 6,788,656 -------------------------------------------------------------------------------------------------------------------------- Steam Heat Plant: Plant in service 20,217 19,508 17,056 9,780 Construction work in progress 89 123 64 901 -------------------------------------------------------------------------------------------------------------------------- Total steam heat plant 20,306 19,631 17,120 10,681 -------------------------------------------------------------------------------------------------------------------------- Total utility plant 8,138,643 7,669,488 7,247,767 6,799,337 -------------------------------------------------------------------------------------------------------------------------- Accumulated provision for depreciation: Electric 2,068,176 1,877,124 1,697,547 1,525,893 Steam heat 5,938 5,261 3,874 3,619 -------------------------------------------------------------------------------------------------------------------------- Total accumulated provision for depreciation 2,074,114 1,882,385 1,701,421 1,529,512 -------------------------------------------------------------------------------------------------------------------------- Total 6,064,529 5,787,103 5,546,346 5,269,825 Less property-related accumulated deferred income taxes 933,932 857,081 758,150 664,591 -------------------------------------------------------------------------------------------------------------------------- Total 5,130,597 4,930,022 4,788,196 4,605,234 -------------------------------------------------------------------------------------------------------------------------- Other Property and Investments: Securities received from settlement of disputed contracts - - - - Nuclear decommissioning trusts - - - - Miscellaneous 31,402 30,735 24,849 22,288 -------------------------------------------------------------------------------------------------------------------------- Total 31,402 30,735 24,849 22,288 -------------------------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 8,079 28,905 352,580 326,588 Investment securities - - - - Receivables, net 353,493 220,025 235,263 221,732 Fossil fuel stock, at average cost 164,671 152,640 163,899 206,232 Materials and supplies, at average cost 103,823 89,599 76,300 63,790 Prepayments 10,595 12,320 9,741 8,801 Vacation pay deferred 21,317 20,002 18,859 17,599 -------------------------------------------------------------------------------------------------------------------------- Total 661,978 523,491 856,642 844,742 -------------------------------------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes - - - - Debt expense, being amortized 6,695 6,308 6,607 6,774 Premium on reacquired debt, being amortized 30,767 34,170 524 109 Uranium enrichment decontamination and decommissioning fund - - - - Miscellaneous 50,561 45,927 45,445 17,050 -------------------------------------------------------------------------------------------------------------------------- Total 88,023 86,405 52,576 23,933 -------------------------------------------------------------------------------------------------------------------------- Total Assets $ 5,912,000 $ 5,570,653 $ 5,722,263 $ 5,496,197 ========================================================================================================================== *Includes the effect of recognizing, beginning in 1987, retail service rendered but not yet billed to customers.
II-88B
BALANCE SHEETS Alabama Power Company =========================================================================================================== At December 31, 1994* 1993* 1992* ----------------------------------------------------------------------------------------------------------- (Thousands of Dollars) CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 224,358 $ 224,358 $ 224,358 Paid-in capital 1,304,645 1,304,645 1,304,645 Premium on preferred stock 146 146 342 Earnings retained in the business 1,085,256 997,199 914,148 ----------------------------------------------------------------------------------------------------------- Total common equity 2,614,405 2,526,348 2,443,493 Preferred stock 440,400 440,400 489,400 Preferred stock subject to mandatory redemption - - - Long-term debt 2,455,013 2,362,852 2,202,473 ----------------------------------------------------------------------------------------------------------- Total 5,509,818 5,329,600 5,135,366 (excluding amount due within one year) ----------------------------------------------------------------------------------------------------------- Current Liabilities: Notes payable to banks - 40,000 71,000 Commercial paper 179,882 - 125,917 Preferred stock due within one year - - - Long-term debt due within one year 796 58,998 67,379 Accounts payable 318,991 334,998 296,731 Customer deposits 30,245 31,198 31,286 Taxes accrued 22,437 40,144 24,373 Interest accrued 52,516 52,809 41,675 Vacation pay accrued 20,442 22,680 21,879 Miscellaneous 57,047 50,426 93,836 ----------------------------------------------------------------------------------------------------------- Total 682,356 631,253 774,076 ----------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes 1,181,342 1,165,127 - Accumulated deferred investment tax credits 317,018 329,909 344,707 Prepaid capacity revenues, net 138,421 143,762 147,658 Deferred revenues from settlement of disputed contracts - 19,871 46,721 Uranium enrichment decontamination and decommissioning fund 39,413 39,644 44,548 Deferred credits related to income taxes 405,256 440,945 - Natural disaster reserve 28,750 - - Miscellaneous 156,843 148,572 100,542 ----------------------------------------------------------------------------------------------------------- Total 2,267,043 2,287,830 684,176 ----------------------------------------------------------------------------------------------------------- Total Capitalization and Liabilities $ 8,459,217 $ 8,248,683 $ 6,593,618 =========================================================================================================== *Includes the effect of recognizing, beginning in 1987, retail service rendered but not yet billed to customers.
II-89
BALANCE SHEETS Alabama Power Company ========================================================================================================================== At December 31, 1991* 1990* 1989* 1988* -------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 224,358 $ 224,358 $ 224,358 $ 224,358 Paid-in capital 1,304,645 1,304,645 1,304,645 1,304,645 Premium on preferred stock 461 461 461 461 Earnings retained in the business 857,734 751,126 659,347 565,351 -------------------------------------------------------------------------------------------------------------------------- Total common equity 2,387,198 2,280,590 2,188,811 2,094,815 Preferred stock 484,400 484,400 484,400 484,400 Preferred stock subject to mandatory redemption - 12,500 17,500 22,500 Long-term debt 2,382,635 2,397,931 2,435,129 2,496,492 -------------------------------------------------------------------------------------------------------------------------- Total 5,254,233 5,175,421 5,125,840 5,098,207 (excluding amount due within one year) -------------------------------------------------------------------------------------------------------------------------- Current Liabilities: Notes payable to banks 76,000 89,500 30,000 - Commercial paper - - - - Preferred stock due within one year - 5,000 5,000 5,000 Long-term debt due within one year 85,077 83,989 81,031 96,242 Accounts payable 295,333 271,776 267,645 259,443 Customer deposits 30,165 29,571 28,450 25,964 Taxes accrued 45,493 20,665 26,832 25,285 Interest accrued 49,288 49,820 49,926 50,174 Vacation pay accrued 21,691 22,845 22,021 21,871 Miscellaneous 37,699 64,547 91,022 28,944 -------------------------------------------------------------------------------------------------------------------------- Total 640,746 637,713 601,927 512,923 -------------------------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes - - - - Accumulated deferred investment tax credits 362,672 379,990 399,097 412,771 Prepaid capacity revenues, net 149,534 99,835 102,346 104,211 Deferred revenues from settlement of disputed contracts 59,937 - - - Uranium enrichment decontamination and decommissioning fund - - - - Deferred credits related to income taxes - - - - Natural disaster reserve - - - - Miscellaneous 82,340 69,334 50,221 52,833 -------------------------------------------------------------------------------------------------------------------------- Total 654,483 549,159 551,664 569,815 -------------------------------------------------------------------------------------------------------------------------- Total Capitalization and Liabilities $ 6,549,462 $ 6,362,293 $ 6,279,431 $ 6,180,945 ========================================================================================================================== *Includes the effect of recognizing, beginning in 1987, retail service rendered but not yet billed to customers.
II-90A
BALANCE SHEETS Alabama Power Company ========================================================================================================================== At December 31, 1987* 1986 1985 1984 -------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 224,358 $ 224,358 $ 224,358 $ 224,358 Paid-in capital 1,225,145 1,182,145 1,182,145 1,155,145 Premium on preferred stock 461 461 1,937 1,938 Earnings retained in the business 496,783 440,644 361,716 282,854 -------------------------------------------------------------------------------------------------------------------------- Total common equity 1,946,747 1,847,608 1,770,156 1,664,295 Preferred stock 384,400 384,400 384,400 424,400 Preferred stock subject to mandatory redemption 27,500 30,000 35,000 37,224 Long-term debt 2,386,258 2,210,108 2,349,373 2,402,713 -------------------------------------------------------------------------------------------------------------------------- Total 4,744,905 4,472,116 4,538,929 4,528,632 (excluding amount due within one year) -------------------------------------------------------------------------------------------------------------------------- Current Liabilities: Notes payable to banks 15,000 - - - Commercial paper - - - - Preferred stock due within one year 2,500 5,000 42,224 - Long-term debt due within one year 95,140 142,394 224,918 120,077 Accounts payable 273,613 238,606 295,326 268,966 Customer deposits 32,220 30,333 29,436 28,498 Taxes accrued 72,118 50,757 27,368 36,788 Interest accrued 49,489 47,648 66,193 66,201 Vacation pay accrued 21,317 20,002 18,859 17,599 Miscellaneous 24,660 25,567 42,622 38,474 -------------------------------------------------------------------------------------------------------------------------- Total 586,057 560,307 746,946 576,603 -------------------------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes - - - - Accumulated deferred investment tax credits 418,370 418,275 418,222 379,433 Prepaid capacity revenues, net 103,947 101,143 - - Deferred revenues from settlement of disputed contracts - - - - Uranium enrichment decontamination and decommissioning fund - - - - Deferred credits related to income taxes - - - - Natural disaster reserve - - - - Miscellaneous 58,721 18,812 18,166 11,529 -------------------------------------------------------------------------------------------------------------------------- Total 581,038 538,230 436,388 390,962 -------------------------------------------------------------------------------------------------------------------------- Total Capitalization and Liabilities $ 5,912,000 $ 5,570,653 $ 5,722,263 $ 5,496,197 ========================================================================================================================== *Includes the effect of recognizing, beginning in 1987, retail service rendered but not yet billed to customers.
II-90B ALABAMA POWER COMPANY OUTSTANDING SECURITIES AT DECEMBER 31, 1994 First Mortgage Bonds Amount Interest Amount Series Issued Rate Outstanding Maturity -------------------------------------------------------------------------- (Thousands) (Thousands) 1993 $ 60,000 4-1/2% $ 60,000 3/1/96 1993 50,000 5-1/2% 50,000 2/1/98 1992 170,000 6-3/8% 170,000 8/1/99 1993 100,000 6% 100,000 3/1/00 1992 100,000 6.85% 100,000 8/1/02 1993 125,000 7% 125,000 1/1/03 1993 175,000 6-3/4% 175,000 2/1/03 1992 175,000 7-1/4% 175,000 8/1/07 1991 100,000 9-1/4% 98,748 5/1/21 1991 150,000 8-3/4% 148,500 12/1/21 1992 200,000 8-1/2% 198,000 5/1/22 1992 100,000 8.30% 99,608 7/1/22 1993 100,000 7-3/4% 100,000 2/1/23 1993 150,000 7.45% 150,000 7/1/23 1993 100,000 7.30% 100,000 11/1/23 1994 150,000 9% 150,000 12/1/24 ---------- ---------- $2,005,000 $1,999,856 ========== ========== Pollution Control Bonds Amount Interest Amount Series Issued Rate Outstanding Maturity -------------------------------------------------------------------------- (Thousands) (Thousands) 1978 $ 5,600 7-1/4% $ 1,000 5/1/03 1985 50,000 9-3/8% 50,000 6/1/15 1985 81,500 9-1/4% 81,500 12/1/15 1986 21,000 7.40% 21,000 11/1/16 1993 12,100 Variable 12,100 8/1/17 1993 12,000 Variable 12,000 8/1/17 1993 12,000 Variable 12,000 8/1/17 1993 96,990 6.05% 96,990 5/1/23 1993 9,800 5.80% 9,800 6/1/22 1994 24,400 5-1/2% 24,400 1/1/24 1994 53,700 Variable 53,700 6/1/15 1994 101,650 6-1/2% 101,650 9/1/23 ---------- ---------- $ 480,740 $ 476,140 ========== ========== Preferred Stock Shares Dividend Amount Series Outstanding Rate Outstanding -------------------------------------------------------------------------- (Thousands) 1946-1952 364,000 4.20% $ 36,400 1950 100,000 4.60% 10,000 1961 80,000 4.92% 8,000 1963 50,000 4.52% 5,000 1964 60,000 4.64% 6,000 1965 50,000 4.72% 5,000 1966 70,000 5.96% 7,000 1968 50,000 6.88% 5,000 1988 500,000 Auction 50,000 1992 4,000,000 7.60% 100,000 1992 2,000,000 7.60% 50,000 1993 1,520,000 6.80% 38,000 1993 2,000,000 6.40% 50,000 1993 200 Auction 20,000 1993 2,000,000 Adjustable 50,000 ---------- ---------- 12,844,200 $ 440,400 ========== ========== II-91 ALABAMA POWER COMPANY SECURITIES RETIRED DURING 1994 First Mortgage Bonds Principal Interest Series Amount Rate ---------------------------------------------------- (Thousands) 1987 $ 15,243 10-5/8% 1991 1,252 9-1/4% 1991 1,500 8-3/4% 1992 2,000 8-1/2% 1992 392 8.30% -------- $ 20,387 ======== Pollution Control Bonds Principal Interest Series Amount Rate --------------------------------------------------- (Thousands) 1974 $ 18,550 6% 1976 2,900 7.20% 1978 4,600 7-1/4% 1984 100,000 10-7/8% 1989 35,000 7.20% 1989 18,700 7.20% -------- $179,750 ======== II-92 GEORGIA POWER COMPANY FINANCIAL SECTION II-93 MANAGEMENT'S REPORT Georgia Power Company 1994 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 generally accepted accounting principles appropriate in the circumstances, 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 books and 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 five directors who are not employees, 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 generally accepted accounting principles. As discussed in Note 4 to the financial statements, an uncertainty exists with respect to the actions of regulators regarding recoverability of the Company's investment in the Rocky Mountain pumped storage hydroelectric project. The outcome of this uncertainty cannot be determined until a regulatory review is completed. Accordingly, no provision for any write-down of the costs associated with the Rocky Mountain project resulting from the potential actions of the Georgia Public Service Commission has been made in the accompanying financial statements. /s/ H. Allen Franklin H. Allen Franklin President and Chief Executive Officer /s/ Warren Y. Jobe Warren Y. Jobe Executive Vice President, Treasurer and Chief Financial Officer II-94 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of Georgia Power Company: We have audited the accompanying balance sheets and statements of capitalization of Georgia Power Company (a Georgia corporation and wholly owned subsidiary of The Southern Company) as of December 31, 1994 and 1993, and the related statements of income, retained earnings, paid-in capital, and cash flows for each of the three years in the period ended December 31, 1994. 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 generally accepted auditing standards. 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-104 through II-126) referred to above present fairly, in all material respects, the financial position of Georgia Power Company as of December 31, 1994 and 1993, and the results of its operations and its cash flows for the periods stated, in conformity with generally accepted accounting principles. As explained in Notes 2 and 7 to the financial statements, effective January 1, 1993, the Company changed its methods of accounting for postretirement benefits other than pensions and for income taxes. As more fully discussed in Note 4 to the financial statements, an uncertainty exists with respect to the actions of the regulators regarding recoverability of the Company's investment in the Rocky Mountain pumped storage hydroelectric project. The outcome of this uncertainty cannot be determined until a regulatory review is completed. Accordingly, no provision for any write-down of the costs associated with the Rocky Mountain project resulting from the potential actions of the Georgia Public Service Commission has been made in the accompanying financial statements. /s/ Arthur Andersen LLP Atlanta, Georgia February 15, 1995 II-95 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Georgia Power Company 1994 Annual Report RESULTS OF OPERATIONS Earnings Georgia Power Company's 1994 earnings totaled $526 million, representing a $44 million (7.8 percent) decrease from the prior year. This decline is primarily the result of a $55 million after-tax charge associated with the 1994 work force reduction programs. The Company had lower operating expenses and financing costs in 1994, partially offset by lower retail revenues due to the mild weather. Also, during the period, the Company had an $11 million after-tax gain on the sale of a portion of Plant Scherer Unit 4 compared to an $18 million after-tax gain on the sale of a portion of the plant in the prior year. Earnings for 1993 increased over the prior year primarily as a result of higher retail revenues due to the exceptionally hot summer weather during 1993 and lower financing costs. Also, as previously discussed, 1993 earnings included an $18 million after-tax gain on the sale of a portion of Plant Scherer. These positive events were partially offset by higher operating expenses. Revenues The following table summarizes the factors impacting operating revenues for the 1992-1994 period: ========================================================== Increase (Decrease) From Prior Year ---------------------------------------------------------- 1994 1993 1992 -------------------------- Retail - (in millions) Change in base rates $ - $ - $ 95 Sales growth 67 45 76 Weather (128) 126 (58) Fuel cost recovery (35) 76 (26) Demand-side programs (12) 15 - ---------------------------------------------------------- Total retail (108) 262 87 ---------------------------------------------------------- Sales for resale - Non-affiliates (183) (106) (96) Affiliates (1) (6) 2 ---------------------------------------------------------- Total sales for resale (184) (112) (94) ---------------------------------------------------------- Other operating revenues 3 4 3 ---------------------------------------------------------- Total operating revenues $(289) $ 154 $ (4) ========================================================== Percent change (6.5)% 3.6% (0.1)% ---------------------------------------------------------- Retail revenues of $3.7 billion in 1994 decreased $108 million (2.8 percent) from the prior year, compared with an increase of $262 million (7.4 percent) in 1993. The milder-than-normal weather during the summer of 1994, compared to the hot summer of 1993, was the primary reason for the decrease in retail revenues. The hot weather during the summer of 1993 was the primary factor affecting the increase in retail revenues over 1992. Fuel revenues generally represent the direct recovery of fuel expense, including the fuel component of purchased energy, and do not affect net income. Revenues from demand-side option programs generally represent the direct recovery of program costs. See Note 3 to the financial statements under "Demand-Side Conservation Programs" for further information on these programs. Revenues from sales to non-affiliated utilities decreased in both 1994 and 1993. Sales to municipalities and cooperatives in Georgia decreased in 1994 as these customers retained more of their own generation at jointly owned facilities, and as a result of a new agreement with territorial wholesale customers. Revenues from sales to non-affiliated 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 were as follows: ============================================================== 1994 1993 1992 -------------------------- (in millions) Capacity $84 $152 $233 Energy 82 113 168 -------------------------------------------------------------- Total $166 $265 $401 ============================================================== Contractual unit power sales to Florida utilities for 1994 and 1993 are down compared with prior years, primarily due to scheduled reductions that corresponded with the sales to these utilities of portions of Plant Scherer Unit 4 in June 1994 and June 1993. The amount of capacity under these contracts declined by 427 megawatts and 533 megawatts in 1994 and 1993, respectively. In 1995, the contracted capacity will decline another 155 megawatts. II-96 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 1994 Annual Report Revenues from sales to affiliated companies within the Southern electric system will vary from year to year depending on demand and the availability and cost of generating resources at each company. Sales to affiliated companies do not have a significant impact on earnings. Kilowatt-hour (KWH) sales for 1994 and the percent change by year were as follows: ======================================================================= Percent Change ---------------------------------- 1994 KWH 1994 1993 1992 ------ ---------------------------------- (in billions) Residential 15.7 (5.8)% 11.5% 0.8% Commercial 18.7 2.5 5.9 2.2 Industrial 24.3 3.0 2.9 3.1 Other 0.5 5.0 5.7 1.7 ------ Total retail 59.2 0.4 6.1 2.2 ------ Sales for resale - Non-affiliates 8.0 (44.3) (9.8) (15.2) Affiliates 3.1 0.9 (8.8) (14.6) ------ Total sales for resale 11.1 (36.4) (9.7) (15.1) ------ Total sales 70.3 (8.0) 2.1 (2.9) ====== ----------------------------------------------------------------------- The sales decline in the residential class was primarily the result of milder-than-normal summer weather in 1994, compared to the extremely hot summer of 1993. Industrial and commercial sales were positively impacted by continued improvement in economic conditions. Residential and commercial energy sales growth in 1993 reflected hot summer weather. Industrial sales growth in 1993 is attributable to improved economic conditions which also positively influenced commercial sales. Assuming normal weather, sales to retail customers are projected to grow approximately 2 percent annually on average during 1995 through 1997. Energy sales to non-affiliated utilities reflect reductions in contractual unit power sales and energy sales to municipalities and cooperatives, as discussed earlier. 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 kilowatt-hour generated were as follows: =============================================================================== 1994 1993 1992 ---------------------------------- Total generation (billions of kilowatt-hours) 62 64 63 Sources of generation (percent) -- Coal 74.8 76.9 75.9 Nuclear 21.9 20.0 20.9 Hydro 3.1 2.8 3.1 Oil and gas 0.2 0.3 0.1 Average cost of fuel per net kilowatt-hour generated (cents) -- Coal 1.67 1.75 1.75 Nuclear 0.63 0.58 0.63 Oil and gas * * * Total 1.44 1.52 1.52 ------------------------------------------------------------------------------- * Not meaningful because of minimal generation from fuel source. Fuel expense decreased 8.5 percent in 1994 due to lower fuel costs, lower generation, and the displacement of coal-fired generation with lower cost nuclear generation. In 1993, fuel expense increased 2.3 percent due to higher generation, which was partially offset by lower nuclear fuel costs. Purchased power expense has decreased significantly since 1992, reflecting declining contractual capacity purchases from the co-owners of plants Vogtle and Scherer. Purchased power expense decreased $156 million in 1994 and $88 million in 1993. The decline in 1994 also results from decreased purchases from affiliated companies and energy purchases from territorial wholesale customers. The declines in Plant Vogtle contractual capacity purchases did not have a significant impact on earnings in 1994 or 1993 since these costs are being levelized over six years under the terms of the 1991 Georgia Public Service Commission (GPSC) retail rate order. The levelization is reflected in the amortization of deferred Plant Vogtle expenses in the income statements. See Note 3 to the financial statements under "Plant Vogtle Phase-In Plans" for additional information. II-97 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 1994 Annual Report Other Operation and Maintenance (O & M) expenses, excluding the provision for separation benefits, decreased 4.5 percent in 1994. The decrease is primarily due to environmental remediation costs at various sites of $32 million in 1993, compared to $8 million in 1994, recognition in 1993 of the one-time cost of an automotive fleet reduction program, and lower maintenance expenses and pension costs during 1994. Other O & M expenses increased 9.0 percent in 1993 primarily as a result of environmental remediation costs and the automotive fleet reduction program, and the recognition of higher employee benefit costs under new accounting rules adopted in 1993. See Note 2 to the financial statements under "Postretirement Benefits" for additional information concerning the new accounting rules. Also, during 1993, O & M expenses reflected costs associated with new demand-side option programs. These program costs were offset by increases in retail revenues. See Note 3 to the financial statements under "Demand-Side Conservation Programs" for additional information on the recovery of these program costs. Taxes other than income taxes increased 1.0 percent in 1994 and 7.4 percent in 1993, reflecting primarily higher ad valorem taxes. The 1993 increase also includes higher franchise taxes paid to municipalities as a result of increased sales. Income tax expense decreased $24 million in 1994 primarily due to lower earnings and the recognition of $17 million in tax expense associated with the sale of a portion of Plant Scherer Unit 4 in 1994, compared to $27 million in tax expense associated with the sale of a portion of the plant in the prior year. The sales resulted in after-tax gains of $11 million in 1994 and $18 million in 1993. Income tax expense increased $62 million in 1993 due primarily to higher earnings, the effect of a one percent increase in the federal tax rate effective January, 1993, and as previously discussed, the sale of a portion of Plant Scherer Unit 4. Interest expense and dividends on preferred stock decreased $63 million (13.7 percent) and $19 million (4.0 percent) in 1994 and 1993, respectively. These reductions are primarily due to refinancing of long-term debt and preferred stock. The Company refinanced $510 million and $1.5 billion of securities in 1994 and 1993, respectively. The Company also retired $386 million of long-term debt with the proceeds from the 1994 and 1993 Plant Scherer Unit 4 sales. Other interest charges in 1993 include interest related to the settlement of an Internal Revenue Service (IRS) audit. The settlement had no effect on 1993 net income. The Company has deferred certain expenses and recorded a deferred return related to Plant Vogtle under phase-in plans. See Note 3 to the financial statements under "Plant Vogtle Phase-In Plans" for information regarding the deferral and subsequent amortization of costs related to Plant Vogtle. 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 long-lived utility plant. Conventional accounting for historical cost does not recognize either this economic loss or the partially offsetting gain that arises through financing facilities with fixed-money obligations such as long-term debt and preferred stock. 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 energy sales and regulatory matters. 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, and the rate of economic growth in the Company's service area. Assuming normal weather, retail sales growth is projected to be approximately 2 percent annually on average during 1995 through 1997. The scheduled addition of four combustion turbine generating units and the Rocky Mountain pumped storage hydroelectric project in 1995 and one jointly owned combustion turbine unit in 1996, will increase related O & M and II-98 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 1994 Annual Report depreciation expenses. In addition, the Company has entered into a four-year purchase power agreement to meet peaking needs. Beginning in 1996, the Company will purchase 400 megawatts of capacity. In 1998, this amount will decline to 200 megawatts for the remaining two years. Capacity payments are projected to be $6 million in 1996 and 1997 and $3 million in 1998 and 1999. These costs will be recorded in purchased power expenses in the Statements of Income. The Company has also reached an agreement on major terms and conditions of a purchase power arrangement whereby the Company would buy electricity during peak periods from a proposed 200 megawatt cogeneration facility, starting in June 1998. A final agreement is expected to be completed and filed with the GPSC for certification during 1995. In 1994, work force reduction programs were implemented, reducing earnings by $55 million. These reductions will assist in efforts to control growth in future operating expenses. As discussed in Note 4 to the financial statements, regulatory uncertainties exist related to the Rocky Mountain pumped storage hydroelectric project. In the event the GPSC does not allow full recovery of the project's costs, then the portion not allowed may have to be written off. The Company's total investment in the project at completion is estimated to be approximately $200 million. See Note 3 to the financial statements for information regarding proceedings with respect to the Company's recovery of demand-side conservation program costs and litigation currently pending in the U. S. Tax Court. The Company has completed three in a series of four separate transactions to sell Unit 4 of Plant Scherer to two Florida utilities. The remaining transaction is scheduled to take place in 1995. If the sale takes place as planned, the Company would realize an additional after-tax gain estimated to total approximately $12 million. This transaction coincides with scheduled reductions in capacity revenues from Florida utilities under contractual unit power sales contracts of approximately $18 million in 1995 and an additional $10 million in 1996. Additionally, the expiration in 1994 of the contract for the sale of long-term non-firm power to Florida Power Corporation will result in a $9 million decrease in capacity revenues in 1995. See Notes 5 and 6 to the financial statements for additional information. During 1994, Oglethorpe Power Corporation (OPC) gave the Company notice of its intent to decrease its purchases of capacity under a power supply agreement. As a result, the Company's capacity revenues from OPC will decline approximately $8 million in 1996 and an additional $16 million in 1997. OPC and the Municipal Electric Authority of Georgia (MEAG) have filed joint complaints in two separate venues seeking to recover from the Company approximately $16.5 million in alleged overcharges, plus approximately $6.3 million in interest. See Note 3 to the financial statements under "Wholesale Litigation" for further discussion of this matter. The Clean Air Act and other environmental issues are discussed later under "Environmental Issues." The Energy Policy Act of 1992 (Energy Act) is beginning to have a dramatic effect on the future of the electric utility industry. The Energy Act promotes energy efficiency, alternative fuel use, and increased competition for electric utilities. The Company is posturing the business to meet the challenge of this major change in the traditional practice of selling electricity. The Energy Act allows independent power producers (IPPs) to access a utility's transmission network in order to sell electricity to other utilities. This may enhance the incentive for IPPs to build cogeneration plants for a utility's large industrial and commercial customers and sell excess energy generation to other utilities. Although the Energy Act does not require transmission access to retail customers, retail wheeling initiatives are rapidly evolving and becoming very prominent issues in several states. In order to address these initiatives, numerous questions must be resolved with the most complex ones relating to transmission pricing and recovery of stranded investments. As the initiatives become a reality, the structure of the utility industry could radically change. Therefore, unless the Company remains a low-cost producer and provides quality service, the Company's retail energy sales growth could be limited, and this could significantly erode earnings. Conversely, being the low-cost producer could provide significant opportunities to increase market share and profitability. The Company continues to compete with other electric suppliers within the state. In Georgia, most new retail customers with at least 900 kilowatts of II-99 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 1994 Annual Report connected load may choose their electricity supplier. In addition, the bulk power market has become very competitive as utilities, IPPs and cogenerators seek to supply future capacity needs. Competition can create new business opportunities, but it increases risk and has the potential to adversely affect earnings. The Federal Energy Regulatory Commission (FERC) regulates wholesale rate schedules and power sales contracts that the Company has with its sales for resale customers. The FERC currently is reviewing the rate of return on common equity included in these schedules and contracts and may require such returns to be lowered, possibly retroactively. See Note 3 to the financial statements under "FERC Review of Equity Returns" for additional information. 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. See Note 1 to the financial statements under "Regulatory Assets and Liabilities" for additional information. The staff of the Securities and Exchange Commission has questioned certain of the current accounting practices of the electric utility industry -- including the Company -- regarding the recognition, measurement, and classification of decommissioning costs for nuclear generating facilities in the financial statements. In response to these questions, the FASB has decided to review the accounting for nuclear decommissioning. If current electric utility industry accounting practices for decommissioning are changed: (1) annual provisions for decommissioning could increase, and (2) the estimated cost for decommissioning may be required to be recorded as a liability in the Balance Sheets. In management's opinion -- should these changes be required -- the changes would not have a significant adverse effect on results of operations because of the Company's current and expected future ability to recover decommissioning costs through rates. See Note 1 to the financial statements under "Depreciation and Nuclear Decommissioning" for additional information. FINANCIAL CONDITION Overview The principal changes in the Company's financial condition in 1994 were gross utility plant additions of $638 million and the lowering of the cost of capital achieved through the refinancing or retirement of $654 million of long-term debt. The funds needed for gross property additions are currently provided from operations. The Statements of Cash Flows provide additional details. Financing Activities In 1994, the Company continued to lower its financing costs by refinancing higher-cost issues. New issues during 1992 through 1994 totaled $3.5 billion and retirement or repayment of securities totaled $4.1 billion. The retirements included the redemption of $133 million and $253 million in 1994 and 1993, respectively, of first mortgage bonds with the proceeds from the Plant Scherer Unit 4 sales. Composite financing rates for the years 1992 through 1994, as of year-end, were as follows: ============================================================== 1994 1993 1992 ---------------------------------- Composite interest rate on long-term debt 7.14% 7.86% 8.49% Composite preferred stock dividend rate 7.11% 6.76% 7.52% ============================================================== The Company's current securities ratings are as follows: ============================================================== Duff & Standard & Phelps Moody's Poor's First Mortgage Bonds A+ A2 A Preferred Stock A- a3 A- Unsecured Bonds A A3 A- Commercial Paper D1 P1 A1 ============================================================== Liquidity and Capital Requirements Cash provided from operations decreased by $128 million in 1994, primarily due to lower retail sales, higher tax payments, and the receipt in 1993 of cash payments from Gulf States as partial settlement of litigation. II-100 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 1994 Annual Report The Company estimates that construction expenditures for the years 1995 through 1997 will total $579 million, $626 million and $724 million, respectively. The Company will continue to invest in transmission and distribution facilities and enhance existing generating plants. These expenditures also include amounts for five combustion turbine generating units and equipment that will be required to comply with the provisions of the Clean Air Act. The Company's annual contractual capacity purchases will decline by $70 million over the next three years. Cash requirements for sinking fund requirements, redemptions announced, and maturities of long-term debt are expected to total $360 million during 1995 through 1997. As a result of requirements by the Nuclear Regulatory Commission, the Company has established external trust funds for the purpose of funding nuclear decommissioning costs. For 1995 through 1997, the amount to be funded totals $16 million annually. For additional information concerning nuclear decommissioning costs, see Note 1 to the financial statements under "Depreciation and Nuclear Decommissioning." As a result of the Energy Policy Act of 1992, the Company is required to pay a special assessment over a 15-year period beginning in 1993 into a fund which will be used by the U. S. Department of Energy for the decontamination and decommissioning of its nuclear enrichment facilities. The Company estimates its remaining liability to be approximately $33 million as of December 31, 1994. See Note 1 to the financial statements under "Revenues and Fuel Costs" for additional information. Sources of Capital The Company expects to meet future capital requirements primarily using funds generated from operations 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 $709 million of unused credit arrangements with banks at the beginning of 1995. See Note 8 to the financial statements for additional information. Completing the remaining transaction for the sale of Plant Scherer Unit 4 will generate approximately $131 million in 1995. Georgia Power Capital, a limited partnership, was formed on November 10, 1994, for the purpose of issuing preferred securities and subsequently lending the proceeds to the Company. In December 1994, Georgia Power Capital issued four million shares of preferred securities at 9 percent and subsequently loaned the proceeds of $100 million to the Company. This subordinated debt of the Company is due December 19, 2024. 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 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. Environmental Issues In November 1990, the Clean Air Act was signed into law. Title IV of the Clean Air Act -- the acid rain compliance provision of the law -- will have a significant impact on The Southern Company. Specific reductions in sulfur dioxide and nitrogen oxide emissions from fossil-fired generating plants will be required in two phases. Phase I compliance began in 1995 and affected eight generating plants -- some 10,000 megawatts of capacity or 35 percent of total capacity -- in the Southern electric system. Phase II compliance is required in 2000, and all fossil-fired generating plants in the Southern electric system will be affected. In 1995, the Environmental Protection Agency (EPA) began issuing annual sulfur dioxide emission allowances through the newly established allowance trading program. An emission allowance is the authority to emit one ton of sulfur dioxide during a calendar year. The method for issuing allowances is based on the fossil fuel consumed from 1985 through 1987 for each affected generating unit. Emission allowances are transferable and can be bought, sold, or banked and used in the future. The sulfur dioxide emission allowance program is expected to minimize the cost of compliance. The Southern Company's sulfur dioxide compliance strategy is II-101 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 1994 Annual Report designed to use allowances as a compliance option. The Southern Company expects to achieve Phase I sulfur dioxide compliance at the eight affected plants by switching to low-sulfur coal, which has required some equipment upgrades. This compliance strategy is expected to result in unused emission allowances being banked for later use. Additional construction expenditures were required to install equipment for the control of nitrogen oxide emissions at these eight plants. Also, continuous emissions monitoring equipment will be installed on all fossil-fired units. Under this Phase I compliance approach, Georgia Power's construction expenditures are estimated to total approximately $175 million through 1995. For Phase II sulfur dioxide compliance, The Southern Company could use emission allowances banked during Phase I, increase fuel switching, install flue gas desulfurization equipment at selected plants, and/or purchase more allowances depending on the price and availability of allowances. Also, in Phase II, equipment to control nitrogen oxide emissions will be installed on additional system fossil-fired plants as required to meet anticipated Phase II limits. During the period 1996 to 2000, current compliance strategy could require total estimated Georgia Power construction expenditures of approximately $20 million. However, the full impact of Phase II compliance cannot now be determined with certainty, pending the continuing development of a market for emission allowances, the completion of EPA regulations, and the possibility of new emission reduction technologies. An increase of up to 2 percent in Georgia Power's annual revenue requirements from customers could be necessary to fully recover the cost of compliance for both Phase I and Phase II of Title IV of the Clean Air Act. Compliance costs include construction expenditures, increased costs for switching to low-sulfur coal, and costs related to emission allowances. Metropolitan Atlanta is classified as a non-attainment area with regard to the ozone ambient air quality standards. Title I of the Clean Air Act requires the state of Georgia to conduct specific studies and establish new control rules -- affecting sources of nitrogen oxides and volatile organic compounds -- to achieve attainment by 1999. As the required first step, the state has issued rules for the application of reasonably available control technology to reduce nitrogen oxide emissions by May 31, 1995. The results of these new rules require nitrogen oxide controls, above Title IV requirements, on some of the Company's plants. Final attainment rules, based on modeling studies, could require installation of additional controls for nitrogen oxide emissions to meet the 1999 deadline. A decision on new requirements is expected in 1996. Compliance with any new rules could result in significant additional costs. The actual impact of new rules will depend on the development and implementation of such rules. Title III of the Clean Air Act requires a multi-year EPA study of power plant emissions of hazardous air pollutants. The EPA is scheduled to submit a report to Congress on the results of this study by November 1995. The report will include a decision on whether additional regulatory control of these substances is warranted. Compliance with any new control standards could result in significant additional costs. The impact of new standards -- if any -- will depend on the development and implementation of applicable regulations. The EPA continues to evaluate the need for a new short-term ambient air quality standard for sulfur dioxide. Preliminary results from an EPA study on the impact of a new standard indicate that a number of plants could be required to install sulfur dioxide controls. These controls would be in addition to the controls already required to meet the acid rain provision of the Clean Air Act. The EPA issued proposed rules in November 1994 and is required to take final action on this issue in 1996. The impact of any new standard will depend on the level chosen for the standard and cannot be determined at this time. In addition, the EPA is evaluating the need to revise the ambient air quality standards for particulate matter, nitrogen oxides, and ozone. The impact of any new standard will depend on the level chosen for the standard and cannot be determined at this time. In 1995, the EPA may issue revised rules on air quality control regulations related to stack height requirements of the Clean Air Act. The full impact of the final rules cannot be determined at this time, pending their development and implementation. II-102 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Georgia Power Company 1994 Annual Report In 1993, the EPA issued a ruling confirming the non-hazardous status of coal ash. However, the EPA has until 1998 to classify co-managed utility wastes -- coal ash and other utility wastes -- as either non-hazardous or hazardous. If the EPA classifies the co-managed wastes as hazardous, then substantial additional costs for the management of such wastes may be required. The full impact of any change in the regulatory status will depend on the subsequent development of co-managed waste requirements. 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 $8 million, $32 million, and $3 million in 1994, 1993, and 1992, respectively. Additional sites may require environmental remediation for which the Company may be liable for a portion or all required cleanup costs. See Note 4 to the financial statements under "Certain Environmental Contingencies" for information regarding the Company's potentially responsible party status at a site in Brunswick, Georgia and another environmental matter. Several major pieces of environmental legislation are being considered for reauthorization or amendment by Congress. These include: 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 these requirements cannot be determined at this time, pending the development and implementation of applicable regulations. Compliance with possible new 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. II-103
STATEMENTS OF INCOME For the Years Ended December 31, 1994, 1993, and 1992 Georgia Power Company 1994 Annual Report ================================================================================================== 1994 1993 1992 -------------------------------------------------------------------------------------------------- (in thousands) Operating Revenues: Revenues (Note 1) $4,101,504 $4,389,513 $4,229,601 Revenues from affiliates 60,899 61,668 67,835 -------------------------------------------------------------------------------------------------- Total operating revenues 4,162,403 4,451,181 4,297,436 -------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 870,653 951,507 929,780 Purchased power from non-affiliates 193,130 313,170 436,761 Purchased power from affiliates 158,063 194,024 158,306 Provision for separation benefits 82,238 - 9,778 Other 643,375 675,284 611,134 Maintenance 272,818 284,521 264,757 Depreciation and amortization 379,158 379,425 375,460 Amortization of deferred Plant Vogtle expenses, net (Note 3) 74,888 36,284 (30,804) Taxes other than income taxes 194,566 192,671 179,460 Federal and state income taxes 399,413 452,122 377,542 -------------------------------------------------------------------------------------------------- Total operating expenses 3,268,302 3,479,008 3,312,174 -------------------------------------------------------------------------------------------------- Operating Income 894,101 972,173 985,262 Other Income (Expense): Allowance for equity funds used during construction 5,663 3,168 5,855 Equity in earnings of unconsolidated subsidiary (Note 5) 3,588 4,127 4,635 Interest income 3,254 3,806 12,475 Other, net 10,626 11,902 (30,527) Income taxes applicable to other income 7,975 37,661 25,163 -------------------------------------------------------------------------------------------------- Income Before Interest Charges 925,207 1,032,837 1,002,863 -------------------------------------------------------------------------------------------------- Interest Charges: Interest on long-term debt 306,473 343,634 402,541 Allowance for debt funds used during construction (11,571) (8,271) (8,310) Interest on interim obligations 17,529 15,530 9,694 Amortization of debt discount, premium, and expense, net 15,743 14,024 8,033 Other interest charges 23,483 47,393 12,425 -------------------------------------------------------------------------------------------------- Net interest charges 351,657 412,310 424,383 -------------------------------------------------------------------------------------------------- Net Income 573,550 620,527 578,480 Dividends on Preferred Stock 48,006 50,674 57,942 -------------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred Stock $ 525,544 $ 569,853 $ 520,538 ================================================================================================== The accompanying notes are an integral part of these statements.
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STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1994, 1993, and 1992 Georgia Power Company 1994 Annual Report ================================================================================================== 1994 1993 1992 -------------------------------------------------------------------------------------------------- (in thousands) Operating Activities: Net income $ 573,550 $ 620,527 $ 578,480 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 484,032 475,152 471,014 Deferred income taxes and investment tax credits, net 33,567 150,735 189,251 Allowance for equity funds used during construction (5,663) (3,168) (5,855) Deferred Plant Vogtle costs 74,888 36,284 (30,804) Provision for separation benefits 68,599 - - Gain on asset sales (22,717) (35,514) (12) Other, net (72,597) (10,713) (14,738) Changes in certain current assets and liabilities -- Receivables, net 67,218 27,088 (31,348) Inventories (63,545) 82,433 (65,621) Payables 5,409 17,364 25,303 Taxes accrued (60,474) 15,377 (22,828) Energy cost recovery, retail 55,505 (74,260) (46,615) Other (706) (35,691) (16,518) ------------------------------------------------------------------------------------------------ Net cash provided from operating activities 1,137,066 1,265,614 1,029,709 ------------------------------------------------------------------------------------------------ Investing Activities: Gross property additions (638,426) (674,432) (508,444) Sales of property 132,644 261,687 46 Other (41,273) (43,154) 42,892 ------------------------------------------------------------------------------------------------ Net cash used for investing activities (547,055) (455,899) (465,506) ------------------------------------------------------------------------------------------------ Financing Activities and Capital Contributions: Proceeds: Preferred securities of subsidiary 100,000 - - Preferred stock - 175,000 195,000 First mortgage bonds - 1,135,000 975,000 Pollution control bonds 527,210 145,425 161,955 Long-term notes - 37,000 - Retirements: Preferred stock - (245,005) (165,004) First mortgage bonds (133,559) (1,337,822) (1,381,300) Pollution control bonds (510,320) (145,465) (160,205) Other long-term debt (10,187) (19,451) (567) Interim obligations, net (57,425) (51,444) 334,671 Payment of preferred stock dividends (47,147) (53,123) (60,475) Payment of common stock dividends (429,300) (402,400) (384,000) Miscellaneous (22,640) (63,648) (70,986) ------------------------------------------------------------------------------------------------ Net cash used for financing activities (583,368) (825,933) (555,911) ------------------------------------------------------------------------------------------------ Net Change in Cash and Cash Equivalents 6,643 (16,218) 8,292 Cash and Cash Equivalents at Beginning of Year 5,896 22,114 13,822 ------------------------------------------------------------------------------------------------ Cash and Cash Equivalents at End of Year $ 12,539 $ 5,896 $ 22,114 ================================================================================================ Supplemental Cash Flow Information: Cash paid during the year for -- Interest (net of amount capitalized) $ 336,155 $ 420,107 $ 435,203 Income taxes 386,653 275,867 190,674 ------------------------------------------------------------------------------------------------ The accompanying notes are an integral part of these statements.
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BALANCE SHEETS At December 31, 1994 and 1993 Georgia Power Company 1994 Annual Report =========================================================================================== ASSETS 1994 1993 ------------------------------------------------------------------------------------------- (in thousands) Utility Plant: Plant in service (Note 1) $ 14,054,917 $ 13,743,521 Less accumulated provision for depreciation 4,054,986 3,822,344 ------------------------------------------------------------------------------------------- 9,999,931 9,921,177 Nuclear fuel, at amortized cost (Note 1) 136,425 135,742 Construction work in progress (Note 4) 541,889 584,013 ------------------------------------------------------------------------------------------- Total 10,678,245 10,640,932 ------------------------------------------------------------------------------------------- Other Property and Investments: Southern Electric Generating Company, at equity (Note 5) 26,985 29,201 Nuclear decommissioning trusts (Note 1) 54,297 37,937 Miscellaneous 89,542 31,941 ------------------------------------------------------------------------------------------- Total 170,824 99,079 ------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 12,539 5,896 Receivables- Customer accounts receivable 377,570 486,947 Other accounts and notes receivable 104,989 117,249 Affiliated companies 14,443 14,832 Accumulated provision for uncollectible accounts (4,500) (4,300) Fossil fuel stock, at average cost 169,252 111,620 Materials and supplies, at average cost 293,464 287,551 Prepayments 55,383 65,269 Vacation pay deferred (Note 1) 40,823 41,575 ------------------------------------------------------------------------------------------- Total 1,063,963 1,126,639 ------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes (Note 7) 919,750 992,510 Deferred Plant Vogtle costs (Note 3) 432,092 506,980 Premium on reacquired debt, being amortized 164,676 153,146 Debt expense, being amortized 26,223 20,730 Miscellaneous 256,885 196,094 ------------------------------------------------------------------------------------------- Total 1,799,626 1,869,460 ------------------------------------------------------------------------------------------- Total Assets $ 13,712,658 $ 13,736,110 =========================================================================================== The accompanying notes are an integral part of these statements.
II-106
BALANCE SHEETS At December 31, 1994 and 1993 Georgia Power Company 1994 Annual Report =========================================================================================== CAPITALIZATION AND LIABILITIES 1994 1993 ------------------------------------------------------------------------------------------- (in thousands) Capitalization (See accompanying statements): Common stock equity $ 4,141,554 $ 4,045,458 Preferred stock 692,787 692,787 Preferred securities of subsidiary 100,000 - Long-term debt 3,757,823 4,031,387 ------------------------------------------------------------------------------------------- Total 8,692,164 8,769,632 ------------------------------------------------------------------------------------------- Current Liabilities: Long-term debt due within one year (Note 8) 167,420 10,543 Notes payable to banks (Note 8) 202,200 406,700 Commercial paper (Note 8) 222,602 75,527 Accounts payable- Affiliated companies 41,760 38,115 Other 313,307 285,929 Customer deposits 47,017 45,922 Taxes accrued- Federal and state income 2,856 31,639 Other 90,163 121,854 Interest accrued 110,256 110,497 Vacation pay accrued 39,720 40,060 Miscellaneous 70,006 64,527 ------------------------------------------------------------------------------------------- Total 1,307,307 1,231,313 ------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes (Note 7) 2,477,661 2,479,720 Accumulated deferred investment tax credits 453,121 478,334 Deferred credits related to income taxes (Note 7) 433,334 452,819 Disallowed Plant Vogtle capacity buyback costs (Note 5) 60,490 63,067 Miscellaneous 288,581 261,225 ------------------------------------------------------------------------------------------- Total 3,713,187 3,735,165 ------------------------------------------------------------------------------------------- Commitments and Contingent Matters (Notes 1, 2, 3, 4, 5, and 6) Total Capitalization and Liabilities $ 13,712,658 $ 13,736,110 =========================================================================================== The accompanying notes are an integral part of these statements.
II-107
STATEMENTS OF CAPITALIZATION At December 31, 1994 and 1993 Georgia Power Company 1994 Annual Report ==================================================================================================== 1994 1993 1994 1993 ---------------------------------------------------------------------------------------------------- (in thousands) (percent of total) Common Stock Equity: Common stock, without par value -- Authorized -- 15,000,000 shares Outstanding -- 7,761,500 shares $ 344,250 $ 344,250 Paid-in capital 2,384,348 2,384,348 Premium on preferred stock 413 413 Retained earnings (Note 8) 1,412,543 1,316,447 ---------------------------------------------------------------------------------------------------- Total common stock equity 4,141,554 4,045,458 47.6 % 46.1 % ---------------------------------------------------------------------------------------------------- Cumulative Preferred Stock, without par value: Authorized -- 55,000,000 shares in 1994 and 1993; Outstanding -- 21,027,865 shares in 1994; $100 stated value -- 4.60% to 6.60% 117,787 117,787 7.72% to 7.80% 105,000 105,000 $25 stated value -- $1.90 to $2.125 295,000 295,000 Adjustable rate -- at January 1, 1995: 6.30% 100,000 100,000 6.86% 75,000 75,000 ---------------------------------------------------------------------------------------------------- Total (annual dividend requirement -- $49,251,000) 692,787 692,787 8.0 7.9 ---------------------------------------------------------------------------------------------------- Cumulative Preferred Securities of Subsidiary (Note 8): $25 stated value -- 9% 100,000 - ---------------------------------------------------------------------------------------------------- Total (annual distribution requirement -- $9,000,000) 100,000 - 1.2 - ---------------------------------------------------------------------------------------------------- Long-Term Debt: First mortgage bonds -- Maturity Interest Rates -------- -------------- September 1, 1995 5 1/8% 130,000 130,000 March 1, 1996 4 3/4% 150,000 150,000 April 1, 1998 5 1/2% 100,000 100,000 September 1, 1999 6 1/8% 195,000 195,000 2000 through 2003 6% to 7% 625,000 625,000 2008 6 7/8% 50,000 50,000 2016 through 2019 9.23% to 10% 36,157 169,716 2022 through 2023 7.55% to 8 3/4% 660,000 660,000 2032 variable rates 200,000 200,000 ---------------------------------------------------------------------------------------------------- Total first mortgage bonds 2,146,157 2,279,716 Pollution control obligations (Note 8) 1,678,140 1,661,250 Other long-term debt (Note 8) 124,686 135,058 Unamortized debt premium (discount), net (23,740) (34,094) ---------------------------------------------------------------------------------------------------- Total long-term debt (annual interest requirement -- $282,112,000) 3,925,243 4,041,930 Less amount due within one year (Note 8) 167,420 10,543 ---------------------------------------------------------------------------------------------------- Long-term debt excluding amount due within one year 3,757,823 4,031,387 43.2 46.0 ---------------------------------------------------------------------------------------------------- Total Capitalization $ 8,692,164 $ 8,769,632 100.0 % 100.0 % ==================================================================================================== The accompanying notes are an integral part of these statements.
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STATEMENTS OF RETAINED EARNINGS For the Years Ended December 31, 1994, 1993, and 1992 Georgia Power Company 1994 Annual Report =============================================================================================== 1994 1993 1992 ----------------------------------------------------------------------------------------------- (in thousands) Balance at Beginning of Period $ 1,316,447 $ 1,159,380 $ 1,038,012 Net income after dividends on preferred stock 525,544 569,853 520,538 Cash dividends on common stock (429,300) (402,400) (384,000) Preferred stock transactions, net (148) (10,386) (15,170) ----------------------------------------------------------------------------------------------- Balance at End of Period (Note 8) $ 1,412,543 $ 1,316,447 $ 1,159,380 =============================================================================================== STATEMENTS OF PAID-IN CAPITAL For the Years Ended December 31, 1994, 1993, and 1992 Georgia Power Company 1994 Annual Report =============================================================================================== 1994 1993 1992 ----------------------------------------------------------------------------------------------- (in thousands) Balance at Beginning of Period $ 2,384,348 $ 2,384,140 $ 2,383,800 Contributions to capital by parent company - 208 340 ----------------------------------------------------------------------------------------------- Balance at End of Period $ 2,384,348 $ 2,384,348 $ 2,384,140 =============================================================================================== The accompanying notes are an integral part of these financial statements.
II-109 NOTES TO FINANCIAL STATEMENTS Georgia Power Company 1994 Annual Report 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General The Company is a wholly owned subsidiary of The Southern Company, which is the parent company of five operating companies, Southern Company Services (SCS), a system service company, Southern Communications Services (Southern Communications), Southern Electric International (Southern Electric), and Southern Nuclear Operating Company (Southern Nuclear), and The Southern Development and Investment Group (SDIG). The operating companies (Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, and Savannah Electric and Power Company) provide electric service in four southeastern states. Intracompany contracts dealing with jointly owned generating facilities, transmission lines and exchange of electric power are regulated by the Federal Energy Regulatory Commission (FERC) or the Securities and Exchange Commission. SCS provides, at cost, specialized services to The Southern Company and each of the subsidiary companies. Southern Communications, beginning in mid-1995, will provide digital wireless communications services to The Southern Company's subsidiaries and also will market these services to the public within the Southeast. Southern Electric designs, builds, owns, and operates power production facilities and provides a broad range of technical services to industrial companies and utilities in the United States and a number of international markets. Southern Nuclear provides services to The Southern Company's nuclear power plants. SDIG develops new business opportunities related to energy products and services. The Southern Company is registered as a holding company under the Public Utility Holding Company Act of 1935. Both The Southern Company and its subsidiaries are subject to the regulatory provisions of this act. The Company is also subject to regulation by the FERC and the Georgia Public Service Commission (GPSC). The Company follows generally accepted accounting principles and complies with the accounting policies and practices prescribed by the respective regulatory commissions. Certain prior years' data presented in the financial statements have been reclassified to conform with current year presentation. 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 to be credited to customers through the ratemaking process. Regulatory assets and (liabilities) reflected in the Company's Balance Sheets at December 31 relate to the following: =============================================================== 1994 1993 -------------------- (in millions) Deferred income taxes $ 920 $ 993 Deferred income tax credits (433) (453) Deferred Plant Vogtle costs 432 507 Premium on reacquired debt 165 153 Demand-side program costs 97 49 Corporate building lease 48 47 Postretirement benefits 41 22 Vacation pay 41 42 Inventory conversions (39) (47) Department of Energy assessments 36 41 Other, net 52 61 --------------------------------------------------------------- Total $1,360 $1,415 =============================================================== 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. In addition, the Company would be required to determine any impairment to other assets, including plant, and write down the assets to their fair value. II-110 NOTES (continued) Georgia Power Company 1994 Annual Report Revenues and Fuel Costs The Company accrues revenues for service rendered but unbilled at the end of each fiscal period. Fuel costs are expensed as the fuel is used. The Company's electric rates include provisions to adjust billings for fluctuations in fuel and the energy component of purchased power costs. Revenues are adjusted for differences between recoverable fuel costs and amounts actually recovered in current rates. Fuel costs were under recovered by $23 million and $79 million at December 31, 1994, and 1993, respectively. These amounts are included in customer accounts receivable on the Balance Sheets. The fuel cost recovery rate was increased effective December 6, 1993. The Company has a diversified base of customers. No single customer or industry comprises 10 percent or more of revenues. In 1994, 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 $87 million in 1994, $75 million in 1993, and $84 million in 1992. The Company has a contract with the U.S. Department of Energy (DOE) that provides for the permanent disposal of spent nuclear fuel, which was scheduled to begin in 1998. However, the actual year this service will begin is uncertain. Sufficient storage capacity currently is available to permit operation into 2003 at Plant Hatch and into 2009 at Plant Vogtle. Also, the Energy Policy Act of 1992 required the establishment in 1993 of a Uranium Enrichment Decontamination and Decommissioning Fund, which is to be funded in part by a special assessment on utilities with nuclear plants. This fund will be used by the DOE for the decontamination and decommissioning of its nuclear fuel enrichment facilities. The assessment will be paid over a 15-year period, which began in 1993. 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 to be approximately $33 million. This obligation is recognized in the accompanying Balance Sheets and is being recovered through the fuel cost recovery provisions. 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 3.1 percent in 1994, 1993, and 1992. 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 costs of decommissioning nuclear facilities. In 1988, the Nuclear Regulatory Commission (NRC) adopted regulations requiring 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 a set period of time as approved 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. II-111 NOTES (continued) Georgia Power Company 1994 Annual Report 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 at December 31, 1994, -- based on the Company's ownership interests -- were as follows: =========================================================== Plant Plant Hatch Vogtle -------------------- Site study basis (year) 1994 1994 Decommissioning periods: Beginning year 2014 2027 Completion year 2027 2038 ----------------------------------------------------------- Site study costs: (in millions) Radiated structures $241 $193 Non-radiated structures 34 43 Other 60 49 ----------------------------------------------------------- Total $335 $285 =========================================================== Ultimate costs: (in millions) Radiated structures $641 $ 843 Non-radiated structures 91 190 Other 160 215 ----------------------------------------------------------- Total $892 $1,248 =========================================================== (in millions) Amount expensed in 1994 $6 $6 Accumulated provisions: Balance in external trust funds $33 $22 Balance in internal reserves 29 10 ----------------------------------------------------------- Total $62 $32 =========================================================== Assumed in ultimate costs: Inflation rate 4.4% 4.4% Trust earning rate 6.0 6.0 ----------------------------------------------------------- Annual provisions for nuclear decommissioning are based on an annuity -- sinking fund -- method as approved by the GPSC. The decommissioning costs approved for ratemaking are $184 million for Plant Hatch and $155 million for Plant Vogtle. These amounts are based on costs to decommission the radioactive portions of the plants based on 1990 site studies. The estimated ultimate costs based on the 1990 studies were $872 million and $1.4 billion for plants Hatch and Vogtle, respectively. The Company expects the GPSC to periodically review and adjust, if necessary, the amounts collected in rates for the anticipated cost of decommissioning. 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 assumed date of decommissioning, changes in regulatory requirements, changes in technology, and changes in costs of labor, materials, and equipment. Plant Vogtle Phase-In Plans In 1987 and 1989, the GPSC ordered that the allowed costs of Plant Vogtle Units 1 and 2 be phased into rates under plans that meet the requirements of FASB Statement No. 92, Accounting for Phase-In Plans. In 1991, the GPSC modified the phase-in plans. In addition, the Company deferred certain Plant Vogtle operating expenses and financing costs under accounting orders issued by the GPSC. See Note 3 for further information. Income Taxes The Company 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. Effective January 1, 1993, the Company adopted FASB Statement No. 109, Accounting for Income Taxes. Statement No. 109 required, among other things, conversion to the liability method of accounting for accumulated deferred income taxes. See Note 7 for additional information about Statement No. 109. II-112 NOTES (continued) Georgia Power Company 1994 Annual Report 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. For the years 1994, 1993 and 1992, the average AFUDC rates were 6.18 percent, 4.96 percent and 7.16 percent, respectively. The reduction in the average AFUDC rate in 1993 reflects the Company's greater use of lower cost short-term debt. The increase in 1994 is primarily the result of the higher short-term borrowing rates. AFUDC, net of taxes, as a percentage of net income after dividends on preferred stock, was less than 2.5 percent for 1994, 1993 and 1992, respectively. Utility Plant Utility plant is stated at original cost with the exception of Plant Vogtle, which is stated at cost less regulatory disallowances. Original cost includes materials; labor; appropriate administrative and general costs; 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 replacement of property (exclusive of minor items of property) is charged to utility plant. The Company's investment in generating plant, based on its ownership interests and net of the accumulated provision for depreciation, by type of generation as of December 31 was as follows: ================================================================== Nameplate Type of Generation Net Investment Capacity -------------------- ----------------- ---------------- 1994 1993 1994 1993 ----------------- ---------------- (in millions) (megawatts) Steam $1,674 $1,718 9,676 9,812 Nuclear 3,113 3,215 1,877 1,877 Hydro 335 338 862 862 Other 123 18 1,528 1,208 ----------------------------------------------------------------- Total $5,245 $5,289 13,943 13,759 ================================================================= 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 In accordance with FASB Statement No. 107, Disclosure About Fair Value of Financial Instruments, the Company's financial instruments for which the carrying amounts did not approximate fair value at December 31 are as follows: ============================================================= Long-Term Debt ------------------------- Carrying Fair Amount Value ------------------------ Year (in millions) 1994 $3,838 $3,697 1993 3,954 4,197 The fair values for long-term debt 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. Vacation Pay Company employees earn vacation in one year and take it in the subsequent year. However, for ratemaking purposes, vacation pay is recognized as an allowable expense only when paid. Consistent with this ratemaking treatment, the Company accrues a current liability for earned vacation pay and records a current regulatory asset representing the future recoverability of this cost. This amount was $41 million at December 31, 1994, and $42 million at December 31, 1993. In 1995, approximately 70 percent of the 1994 deferred vacation costs will be expensed, and the balance will be charged to construction and other accounts. II-113 NOTES (continued) Georgia Power Company 1994 Annual Report 2. RETIREMENT BENEFITS Pension Plan The Company has a defined benefit, trusteed, non-contributory pension plan covering substantially all regular employees. Benefits are based on the greater of amounts resulting from two different formulas: years of service and final average pay or years of service and a flat dollar benefit. The Company uses the "entry age normal method with a frozen initial liability" actuarial method for funding purposes, subject to limitations under federal income tax regulations. Amounts funded to the pension trusts are primarily invested in equity and fixed-income securities. FASB Statement No. 87, Employers' Accounting for Pensions, requires use of the projected unit credit actuarial method for financial reporting purposes. Postretirement Benefits The Company also provides certain medical care and life insurance benefits for retired employees. Substantially all employees may become eligible for these benefits when they retire. Qualified trusts are funded to the extent deductible under federal income tax regulations and to the extent required by the GPSC and FERC. During 1994, the Company funded $22 million to the qualified trusts. Amounts funded are primarily invested in debt and equity securities. Effective January 1, 1993, the Company adopted FASB Statement No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, on a prospective basis. Statement No. 106 requires that medical care and life insurance benefits for retired employees be accounted for on an accrual basis using a specified actuarial method, "benefit/years-of-service." In October 1993, the GPSC ordered the Company to phase in the adoption of Statement No. 106 to cost of service over a five-year period, whereby one-fifth of the additional expense was recognized in 1993 and the remaining additional expense was deferred. An additional one-fifth of the costs will be expensed each succeeding year until the costs are fully reflected in cost of service in 1997. The cost deferred during the five-year period will be amortized to expense over a 15-year period beginning in 1998. As a result of the regulatory treatment allowed by the GPSC, the adoption of Statement No. 106 did not have a material impact on net income. Prior to 1993, the Company recognized these costs on a cash basis as payments were made. The total costs of such benefits recognized by the Company in 1992 were $13 million. Funded Status and Cost of Benefits Shown in the following tables are actuarial results and assumptions for pension and postretirement medical and life insurance benefits as computed under the requirements of Statement Nos. 87 and 106, respectively. The funded status of the plans at December 31 was as follows: Pension =============================================================== 1994 1993 --------------------- Actuarial present value of (in millions) benefit obligations: Vested benefits $ 689 $ 655 Non-vested benefits 32 35 --------------------------------------------------------------- Accumulated benefit obligation 721 690 Additional amounts related to projected salary increases 294 257 --------------------------------------------------------------- Projected benefit obligation 1,015 947 Less: Fair value of plan assets 1,419 1,495 Unrecognized net gain (371) (490) Unrecognized prior service cost 28 31 Unrecognized transition asset (58) (62) --------------------------------------------------------------- Prepaid asset recognized in the Balance Sheets $ 3 $ 27 =============================================================== II-114 NOTES (continued) Georgia Power Company 1994 Annual Report Postretirement Medical =============================================================== 1994 1993 -------------------- (in millions) Actuarial present value of benefit obligation: Retirees and dependents $168 $136 Employees eligible to retire 7 12 Other employees 191 206 --------------------------------------------------------------- Accumulated benefit obligation 366 354 Less: Fair value of plan assets 46 30 Unrecognized net loss 7 40 Unrecognized transition obligation 236 251 --------------------------------------------------------------- Accrued liability recognized in the Balance Sheets $ 77 $ 33 =============================================================== Postretirement Life =============================================================== 1994 1993 --------------- (in millions) Actuarial present value of benefit obligation: Retirees and dependents $35 $32 Employees eligible to retire - - Other employees 38 40 --------------------------------------------------------------- Accumulated benefit obligation 73 72 Less: Fair value of plan assets 6 1 Unrecognized net gain (8) (6) Unrecognized transition obligation 65 69 --------------------------------------------------------------- Accrued liability recognized in the Balance Sheets $10 $ 8 =============================================================== Weighted average rates used in actuarial calculations: ============================================================= 1994 1993 1992 ------------------------------ Discount 8.0% 7.5% 8.0% Annual salary increase 5.5 5.0 6.0 Long-term return on plan assets 8.5 8.5 8.5 ------------------------------------------------------------- An additional assumption used in measuring the accumulated postretirement medical benefit obligation was a weighted average medical care cost trend rate of 10.5 percent for 1994, decreasing gradually to 6 percent through the year 2000 and remaining at that level thereafter. An annual increase in the assumed medical care cost trend rate of 1.0 percent would increase the accumulated medical benefit obligation as of December 31, 1994, by $68 million and the aggregate of the service and interest cost components of the net retiree medical cost by $10 million. The components of the plans' net costs are shown below: Pension ============================================================================== 1994 1993 1992 ---------------------------- (in millions) Benefits earned during the year $ 34 $ 33 $ 34 Interest cost on projected benefit obligation 71 69 65 Actual (return) loss on plan assets 35 (194) (61) Net amortization and deferral (160) 84 (38) ------------------------------------------------------------------------------ Net pension cost $ (20) $ (8) $ - ============================================================================== Net pension costs were negative in 1994 and 1993. Of net pension costs recorded, $15 million in 1994 and $6 million in 1993, were recorded as a reduction to operating expense, with the balance being recorded as a reduction to construction and other accounts. Postretirement Medical =============================================================================== 1994 1993 -------------- (in millions) Benefits earned during the year $ 13 $ 11 Interest cost on accumulated benefit obligation 27 23 Amortization of transition obligation over 20 years 12 12 Actual (return) loss on plan assets 1 (4) Net amortization and deferral (3) 2 ------------------------------------------------------------------------------- Net postretirement cost $ 50 $ 44 =============================================================================== Postretirement Life =============================================================================== 1994 1993 ----------- (in millions) Benefits earned during the year $ 2 $ 3 Interest cost on accumulated benefit obligation 6 6 Amortization of transition obligation over 20 years 3 3 Actual return on plan assets - - Net amortization and deferral - - ------------------------------------------------------------------------------- Net postretirement cost $11 $12 =============================================================================== II-115 NOTES (continued) Georgia Power Company 1994 Annual Report Of the above net postretirement medical and life insurance costs recorded in 1994, $28 million was charged to operating expenses, $18 million was deferred, and the remainder was charged to construction and other accounts. In 1993, $21 million was charged to operating expenses, $21 million was deferred, and the remainder was charged to construction and other accounts. Work Force Reduction Programs The Company has incurred additional costs for work force reduction programs. The costs related to the Company's programs were $82 million and $10 million for the years 1994 and 1992, respectively. Additionally, in 1994, the Company recognized $8 million for its share of costs associated with SCS's work force reduction program. 3. LITIGATION AND REGULATORY MATTERS Demand-Side Conservation Programs In October 1993, a Superior Court of Fulton County, Georgia, judge ruled that rate riders previously approved by the GPSC for recovery of the Company's costs incurred in connection with demand-side conservation programs were unlawful. The judge held that the GPSC lacked statutory authority to approve such rate riders except through general rate case proceedings and that those procedures had not been followed. The Company suspended collection of the demand-side conservation costs and appealed the court's decision to the Georgia Court of Appeals. In December 1993, the GPSC approved the Company's request for an accounting order allowing the Company to defer all current unrecovered and future costs related to these programs until the superior court's decision is reversed or until the next general rate case proceedings. An association of industrial customers filed a petition for review of the accounting order in superior court. In July 1994, the Georgia Court of Appeals upheld the legality of the rate riders. In November 1994, the Supreme Court of Georgia denied petitions for review of this ruling. As a result, the Company resumed collection under the rate riders in December 1994. In February 1995, the GPSC initiated a true-up proceeding to review program costs which have been incurred by the Company and costs expected to be incurred during 1995 in order to adjust the rate riders accordingly. The proceeding will also address a plan for recovery of costs deferred under the accounting order. The Company's costs related to these conservation programs through 1994 were $115 million, of which $18 million has been collected and the remainder deferred. The final outcome of this matter cannot now be determined; however, in management's opinion, the final outcome will not have a material adverse effect on the Company's financial statements. Tax Litigation In June 1994, a tax deficiency notice was received from the Internal Revenue Service (IRS) for the years 1984 through 1987 with regard to the tax accounting by the Company for the sale in 1984 of an interest in Plant Vogtle and related capacity and energy buyback commitments. The potential tax deficiency and interest arising from this issue currently amount to $28 million and $32 million, respectively. The tax deficiency relates to a timing issue as to when taxes are paid; therefore, only the interest portion could affect future income. Management believes that the IRS position is incorrect, and the Company has filed a petition with the U. S. Tax Court challenging the IRS position. In order to minimize additional interest charges should the IRS's position prevail, the Company made a payment to the IRS related to the potential tax deficiency for the years 1984 through 1987 in September 1994. The final outcome of this matter cannot now be determined; however, in management's opinion, the final outcome will not have a material adverse effect on the Company's financial statements. FERC Review of Equity Returns In May 1991, the FERC ordered that hearings be conducted concerning the reasonableness of the Southern electric system's wholesale rate schedules and contracts that have a return on common equity of 13.75 percent or greater. The contracts that could be affected by the hearings include substantially all of the transmission, unit power, long-term power, and other similar contracts. Any change in the rate of return on common equity that could potentially require refunds as a result of this proceeding would be substantially for the period beginning in July 1991 and ending in October 1992. II-116 NOTES (continued) Georgia Power Company 1994 Annual Report In August 1992, a FERC administrative law judge issued an opinion that changes in rate schedules and contracts were not necessary and that the FERC staff failed to show how any changes were in the public interest. The FERC staff has filed exceptions to the administrative law judge's opinion, and the matter remains pending before the FERC. In August 1994, the FERC instituted another proceeding based on substantially the same issues as in the 1991 proceeding. The second period under review for possible refunds began in October 1994 and is scheduled to continue until January 1996. If the rates of return on common equity recommended by the FERC staff were applied to all the schedules and contracts involved in both proceedings and refunds were ordered, the amount of refunds could range up to approximately $35 million at December 31, 1994. Although the final outcome of this matter cannot now be determined, in management's opinion, the final outcome will not result in changes that would have a material adverse effect on the Company's financial statements. Wholesale Litigation In July 1994, Oglethorpe Power Corporation (OPC) and the Municipal Electric Authority of Georgia (MEAG) filed a joint complaint with the FERC seeking to recover from the Company an aggregate of approximately $16.5 million in alleged partial requirements rates overcharges, plus approximately $6.3 million in interest. OPC and MEAG claimed that the Company improperly reflected in such rates costs associated with capacity that had previously been sold to Gulf States pursuant to a unit power sales contract or, alternatively, that they should be allocated a portion of the proceeds received by the Company as a result of a settlement with Gulf States of litigation arising out of such contract. The Company's response sought dismissal of the complaint by the FERC. Dismissal was ordered in November 1994. OPC and MEAG filed a request for rehearing in December 1994, and such request is pending before the FERC. In August 1994, OPC and MEAG also filed a complaint in the Superior Court of Fulton County, Georgia, urging substantially the same claims and asking the court to hear the matter in the event the FERC declines jurisdiction. Such court proceeding was subsequently stayed pending resolution of the FERC filing. While the outcome of this matter cannot be determined, in management's opinion, it will not have a material adverse effect on the Company's financial statements. Plant Vogtle Phase-In Plans Pursuant to orders from the GPSC, the Company recorded a deferred return under phase-in plans for Plant Vogtle Units 1 and 2 until October 1991 when the allowed investment was fully reflected in rates. In addition, the GPSC issued two separate accounting orders that required the Company to defer substantially all operating and financing costs related to both units until rate orders addressed these costs. These GPSC orders provide for the recovery of deferred costs within 10 years. The GPSC modified the phase-in plans in 1991 to accelerate the recognition of costs previously deferred under the Plant Vogtle Unit 2 phase-in plan and to levelize the remaining Plant Vogtle declining capacity buyback expenses. Under these orders, the Company has deferred and amortized these costs (as recovered through rates) as follows: ============================================================= 1994 1993 1992 --------------------------- (in millions) Deferred costs at beginning of year $507 $383 $375 -------------------------------------------------------------- Deferred capacity buyback expenses 10 38 100 Amortization of previously deferred costs (85) (74) (69) Less income taxes - - (23) -------------------------------------------------------------- Net (amortization) deferral (75) (36) 8 -------------------------------------------------------------- Effect of adoption of FASB Statement No. 109 - 160 - -------------------------------------------------------------- Deferred costs at end of year $432 $507 $383 ============================================================== II-117 NOTES (continued) Georgia Power Company 1994 Annual Report Nuclear Performance Standards In October 1989, the GPSC adopted a nuclear performance standard for the Company's nuclear generating units under which the performance of plants Hatch and Vogtle will be evaluated every three years. The performance standard is based on each unit's capacity factor as compared to the average of all U.S. nuclear units 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 reward or penalty under the performance standards criteria. The first evaluation was conducted in 1993 for performance during the 1990-92 period. During this three-year period, the Company's units performed at an average capacity factor of 81 percent compared to an industry average of approximately 73 percent. Based on these results, the GPSC approved a performance reward of approximately $8.5 million for the Company. This reward is being collected through the retail fuel cost recovery provision and recognized in income over a 36-month period beginning November, 1993. At December 31, 1994, the remaining amount to be collected was $5 million. 4. COMMITMENTS AND CONTINGENCIES Rocky Mountain Project Status In its 1985 financing order, the GPSC concluded that completion of the Rocky Mountain pumped storage hydroelectric project in 1991 as then planned was not economically justifiable and reasonable and withheld authorization for the Company to spend funds from approved securities issuances on that project. In 1988, the Company and OPC entered into a joint ownership agreement for OPC to assume responsibility for the construction and operation of the project, as discussed in Note 5. However, full recovery of the Company's costs depends on the GPSC's treatment of the project's costs and disposition of the project's capacity output. In the event the GPSC does not allow full recovery of the project's costs, then the portion not allowed may have to be written off. AFUDC accrued on the Rocky Mountain project has not been credited to income or included in the project cost since December 1985. If accrual of AFUDC is not resumed, the Company's estimated total investment in the project at completion would be approximately $200 million. The plant is scheduled to begin commercial operation in 1995. The ultimate outcome of this matter cannot now be determined. Construction Program While the Company has no new baseload generating plants under construction, the construction of five combustion turbine peaking units is planned to be completed by 1996. In addition, significant construction of transmission and distribution facilities, and projects to upgrade and extend the useful life of generating plants will continue. The Company currently estimates property additions to be approximately $579 million in 1995, $626 million in 1996 and $724 million in 1997. These estimated additions include AFUDC of $27 million in 1995, $17 million in 1996, and $22 million in 1997. The estimates for property additions for the three-year period include $92 million committed to meeting the requirements of the Clean Air Act. 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 commitments were approximately $4.6 billion at December 31, 1994. Additional commitments for coal and for nuclear fuel will be required in the future to supply the Company's fuel needs. II-118 NOTES (continued) Georgia Power Company 1994 Annual Report Operating Leases The Company has entered into coal rail car rental agreements with various terms and expiration dates. These expenses totaled $13 million, $8 million, and $7 million for 1994, 1993, and 1992, respectively. At December 31, 1994, estimated minimum rental commitments for noncancelable operating leases were as follows: ====================================================== Amounts -------------- Year (in millions) ---- 1995 $ 12 1996 11 1997 10 1998 10 1999 10 2000 and thereafter 136 ------------------------------------------------------ Total minimum payments $189 ====================================================== Certain 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. While the Company believes that the total amount of costs required for the clean up of this site may be substantial, it is unable at this time to estimate either such total or the portion for which the Company may ultimately be responsible. The final outcome of this matter cannot now be determined. In management's opinion, however, based upon the nature and extent of the Company's activities relating to the site, the final outcome will not have a material adverse effect on the Company's financial statements. In compliance with the recently enacted Georgia Hazardous Site Response Act, 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 24 sites which may require environmental remediation by the Company. The majority of these 24 sites are electrical power substations and power generation facilities. The Company has recognized $4 million in expenses for the anticipated clean-up cost for two sites that the Company plans to remediate. The Company will conduct studies at each of the remaining sites to determine the extent of remediation and associated clean-up costs, if any, that may be required. The Company has recognized $3 million in expenses for the anticipated cost of completing such studies. Any cost of remediating the remaining sites cannot presently be determined until such studies are completed for each site, and the State of Georgia determines whether remediation is required. If all sites were required to be remediated, the Company could incur expenses of up to approximately $25 million in additional clean-up costs, and construction expenditures of up to $100 million to develop new waste management facilities or install additional pollution control devices. The final outcome of this matter cannot now be determined; however, in management's opinion, the final outcome will not have a material adverse effect on the Company's financial statements. 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 $8.9 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 $79 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 -- based on its ownership and buyback interests -- is $163 million per incident but not more than an aggregate of $21 million to be paid for each incident in any one year. II-119 NOTES (continued) Georgia Power Company 1994 Annual Report The Company is a member of Nuclear Mutual Limited (NML), a mutual insurer established to provide property damage insurance in an amount up to $500 million for members' nuclear generating facilities. The members are subject to a retrospective premium assessment in the event that losses exceed accumulated reserve funds. The Company's maximum annual assessment is limited to $15 million under current policies. 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 NML coverage. This excess insurance is provided by Nuclear Electric Insurance Limited (NEIL), a mutual insurance company. 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 21 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 maximum annual assessments under the current policies for the Company would be $25 million for excess property damage and $13 million for replacement power. For all on-site property damage insurance policies for commercial nuclear power plants, the NRC requires that the proceeds of such policies issued or renewed on or after April 2, 1991, 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. The Company participates in an insurance program for nuclear workers that provides coverage for worker tort claims filed for bodily injury caused at commercial nuclear power plants. In the event that claims for this insurance exceed the accumulated reserve funds, the Company could be subject to a maximum total assessment of $6 million. All retrospective assessments, whether generated for liability, property or replacement power may be subject to applicable state premium taxes. 5. FACILITY SALES AND JOINT OWNERSHIP AGREEMENTS Since 1975, the Company has sold undivided interests in plants Hatch, Wansley, Vogtle, and Scherer Units 1 and 2, together with transmission facilities, to OPC, an electric membership generation and transmission corporation; MEAG, a public corporation and an instrumentality of the state of Georgia; and the City of Dalton, Georgia. The Company has sold an interest in Plant Scherer Unit 3 to Gulf Power, an affiliate. Additionally, the Company has completed three of four separate transactions to sell Unit 4 of Plant Scherer to Florida Power & Light Company (FPL) and Jacksonville Electric Authority (JEA) for a total price of approximately $808 million, including any gains on these transactions. FPL will eventually own approximately 76.4 percent of the unit, with JEA owning the remainder. Georgia Power will continue to operate the unit. The completed and scheduled remaining transactions are as follows: ============================================================= Closing Percent After-Tax Date Capacity Ownership Amount Gain ------------------------------------------------------------- (in megawatts) (in millions) July 1991 290 35.46% $291 $14 June 1993 258 31.44 253 18 June 1994 135 16.55 133 11 June 1995 135 16.55 131 12 ------------------------------------------------------------- Total 818 100.00% $808 $55 ============================================================= Except as otherwise noted, the Company has contracted to operate and maintain all jointly owned facilities. The Company includes its proportionate share of plant operating expenses in the corresponding operating expenses in the Statements of Income. As discussed in Note 4, the Company and OPC have a joint ownership arrangement for the Rocky Mountain pumped storage hydroelectric project under which the Company will retain its present investment in the project and OPC will II-120 NOTES (continued) Georgia Power Company 1994 Annual Report finance and complete the remainder of the project and operate the completed facility. Based on current cost estimates the Company's ownership will be approximately 25 percent of the project (194 megawatts of capacity) at completion. The Company will own six of eight 80 megawatt combustion turbine generating units and 75 percent of the related common facilities being jointly constructed at Plant McIntosh with Savannah Electric, an affiliate. The Company's investment in the project at December 31, 1994, was $149 million and is expected to total approximately $182 million when the project is completed. Four of the Company's six units began commercial operation during 1994, and the remaining two units are expected to be completed by June, 1995. Savannah Electric will operate these units. In 1994, the Company and FPC entered into a joint ownership agreement regarding a 150 megawatt combustion turbine unit to be constructed near Orlando, Florida. The unit is scheduled to be in commercial operation in early 1996, and will be constructed, operated, and maintained by FPC. The Company will have a one-third interest in the unit, with use of 100 percent of the unit's capacity from June through September. FPC will have the capacity the remainder of the year. The Company's investment in the project is expected to be approximately $14 million at completion. In connection with the joint ownership arrangements for plants Vogtle and Scherer, the Company has made commitments to purchase declining fractions of OPC's and MEAG's capacity and energy from these units. These commitments are in effect during periods of up to 10 years following commercial operation (and with regard to a portion of a 5 percent interest in Plant Vogtle owned by MEAG, 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 $129 million, $183 million and $289 million in 1994, 1993 and 1992, respectively. The Plant Scherer buyback agreements ended in 1993. The current projected Plant Vogtle capacity payments for the next five years are as follows: $77 million in 1995, $70 million in 1996, $59 million in 1997, $59 million in 1998, and $59 million in 1999. 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. Additionally, the Plant Vogtle declining capacity buyback expense is being levelized over a six-year period. See Note 3 for further information. At December 31, 1994, the Company's percentage ownership and investment (exclusive of nuclear fuel) in jointly owned facilities in commercial operation, were as follows: ================================================================ Total Nameplate Company Facility (Type) Capacity Ownership ---------------------------------------------------------------- (megawatts) Plant Vogtle (nuclear) 2,320 45.7% Plant Hatch (nuclear) 1,630 50.1 Plant Wansley (coal) 1,779 53.5 Plant Scherer (coal) Units 1 and 2 1,636 8.4 Unit 3 818 75.0 Unit 4 818 16.6 Plant McIntosh Common Facilities N/A 75.0 (combustion-turbine) ================================================================= Accumulated Facility (Type) Investment Depreciation ----------------------------------------------------------------- (in millions) Plant Vogtle (nuclear) $3,289* $628 Plant Hatch (nuclear) 842 346 Plant Wansley (coal) 287 129 Plant Scherer (coal) Units 1 and 2 112 36 Unit 3 540 121 Unit 4 119 18 Plant McIntosh Common Facilities (combustion-turbine) 17 ** ----------------------------------------------------------------- * Investment net of write-offs. ** Less than $1 million. II-121 NOTES (continued) Georgia Power Company 1994 Annual Report The Company and an affiliate, Alabama Power, 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, as well as associated transmission facilities. The capacity of the units has been sold equally to the Company and Alabama Power 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: ============================================================ 1994 1993 1992 ------------------------------------------------------------ (in millions) Energy $43 $60 $47 Capacity 33 30 28 ------------------------------------------------------------ Total $76 $90 $75 ============================================================ Kilowatt-hours 2,429 3,352 2,664 ------------------------------------------------------------ At December 31, 1994, the capitalization of SEGCO consisted of $54 million of equity and $78 million of long-term debt on which the annual interest requirement is $5 million. 6. LONG-TERM POWER SALES AGREEMENTS The Company and the operating affiliates of The Southern Company have entered into long-term contractual agreements for the sale of capacity and energy to non-affiliated utilities located outside the system's service territory. These agreements consist of firm unit power sales pertaining to capacity from specific generating units and non-firm sales based on the capacity of the Southern system. 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 have been as follows: ============================================================== Year Unit Power Sales Non-firm Sales -------------------------------------------------------------- (in millions) (megawatts) (in millions) (megawatts) 1994 $ 75 403 $ 9 101 1993 135 830 17 200 1992 223 1,363 10 124 Long-term non-firm power of 200 megawatts was sold by the Southern electric system in 1994 to FPC, of which the Company's share was 101 megawatts, under a contract that expired at year-end. Sales under these long-term non-firm power sales agreements are made from available power pool energy, and the revenues from the sales are shared by the operating affiliates. Unit power from specific generating plants is being sold to FPL, JEA, and the City of Tallahassee, Florida and beginning in 1994 to FPC. Under these agreements, the Company sold approximately 403 megawatts of capacity in 1994 and is scheduled to sell approximately 248 megawatts of capacity in 1995. Thereafter, these sales will decline to an estimated 172 megawatts in 1996 then will remain at an approximate level of 158 megawatts through 1999. After 2000, capacity sales will decline to approximately 102 megawatts -- unless reduced by FPL, FPC, and JEA -- until the expiration of the contracts in 2010. II-122 NOTES (continued) Georgia Power Company 1994 Annual Report 7. INCOME TAXES Effective January 1, 1993, the Company adopted FASB Statement No. 109, Accounting for Income Taxes. The adoption resulted in the recording of additional deferred income taxes and related regulatory assets and liabilities. At December 31, 1994, the tax-related regulatory assets were $920 million and the tax-related regulatory liabilities were $433 million. The assets are attributable to tax benefits flowed through to customers in prior years and to taxes applicable to capitalized AFUDC. 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: ============================================================== 1994 1993 1992 --------------------------- Total provision for income taxes: (in millions) Federal: Currently payable $306 $223 $139 Deferred - Current year 86 181 170 Reversal of prior years (57) (40) (6) Deferred investment tax credits (1) (18) (6) -------------------------------------------------------------- 334 346 297 -------------------------------------------------------------- State: Currently payable 52 41 24 Deferred - Current year 15 31 35 Reversal of prior years (10) (3) (3) -------------------------------------------------------------- 57 69 56 -------------------------------------------------------------- Total 391 415 353 -------------------------------------------------------------- Less: Income taxes charged (credited) to other income (8) (37) (25) -------------------------------------------------------------- Federal and state income taxes charged to operations $399 $452 $378 ============================================================== The tax effects of temporary differences between the carrying amounts of assets and liabilities in the financial statements and their respective tax basis, which give rise to deferred tax assets and liabilities are as follows: =============================================================== 1994 1993 ----------------- (in millions) Deferred tax liabilities: Accelerated depreciation $1,541 $1,458 Property basis differences 1,085 1,163 Deferred Plant Vogtle costs 141 161 Premium on reacquired debt 68 63 Deferred regulatory costs 48 24 Fuel clause underrecovered 9 32 Other 23 38 --------------------------------------------------------------- Total 2,915 2,939 --------------------------------------------------------------- Deferred tax assets: Other property basis differences 250 263 Federal effect of state deferred taxes 94 92 Other deferred costs 79 61 Disallowed Plant Vogtle buybacks 26 29 Accrued interest 10 24 Other 13 12 --------------------------------------------------------------- Total 472 481 --------------------------------------------------------------- Net deferred tax liabilities 2,443 2,458 Portion included in current assets 35 22 --------------------------------------------------------------- Accumulated deferred income taxes in the Balance Sheets $2,478 $2,480 =============================================================== 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 $25 million in 1994, $19 million in 1993, and $19 million in 1992. At December 31, 1994, all investment tax credits available to reduce federal income taxes payable had been utilized. II-123 NOTES (continued) Georgia Power Company 1994 Annual Report A reconciliation of the federal statutory tax rate to the effective income tax rate is as follows: ============================================================= 1994 1993 1992 ------------------------ Federal statutory rate 35% 35% 34% State income tax, net of federal deduction 4 4 4 Non-deductible book depreciation 3 3 3 Difference in prior years' deferred and current tax rate (1) (1) (1) Other - (1) (2) ------------------------------------------------------------- Effective income tax rate 41% 40% 38% ============================================================= The Southern Company and its subsidiaries file a consolidated federal income tax return. Under a joint consolidated income tax agreement, each company's current and deferred tax expense is computed on a stand-alone basis, and consolidated tax savings are allocated to each company based on its ratio of taxable income to total consolidated taxable income. 8. CAPITALIZATION 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, 1994, $742 million of retained earnings were restricted against the payment of cash dividends on common stock under terms of the mortgage indenture. Supplemental indentures in connection with future first mortgage bond issues may contain more stringent common stock dividend restrictions than those currently in effect. The Company's charter limits cash dividends on common stock to the lesser of the retained earnings balance or 75 percent of net income available for such stock during a prior period of 12 months if the ratio of common stock equity to total capitalization, including retained earnings, adjusted to reflect the payment of the proposed dividend, is below 25 percent, and to 50 percent of such net income if such ratio is less than 20 percent. At December 31, 1994, the ratio as defined was 47.3 percent. Preferred Securities Georgia Power Capital, a limited partnership, was formed November 10, 1994, for the purpose of issuing preferred securities and subsequently lending the proceeds to the Company. In December 1994, Georgia Power Capital issued four million shares of preferred securities at 9 percent and subsequently loaned the proceeds of $100 million to the Company. This subordinated debt of the Company is due December 19, 2024. Pollution Control Bonds The Company has incurred obligations in connection with the sale by public authorities of tax-exempt pollution control and industrial development revenue bonds. The Company has authenticated and delivered to trustees an aggregate of $1 billion of its first mortgage bonds, which are pledged as security for its obligations under pollution control and industrial development contracts. No interest on these first mortgage bonds is payable unless and until a default occurs on the installment purchase or loan agreements. An aggregate of approximately $651 million of the pollution control and industrial development bonds is secured by a subordinated interest in specific property of the Company. Details of pollution control bonds are as follows: ============================================================ Maturity Interest Rates 1994 1993 ------------------------------------------------------------ (in millions) 2004 5.70% $ 39 $ 39 2005-2008 5.375% to 6.75% 59 59 2011-2014 11.75% & Variable 10 477 2015-2019 6.00% to 10.60% & Variable 786 830 2021-2024 5.40% to 7.25% & Variable 784 256 ------------------------------------------------------------ Total pollution control bonds $1,678 $1,661 ============================================================ Bank Credit Arrangements At the beginning of 1995, the Company had unused credit arrangements with banks totaling $709 million, of which $268 million expires at various times during 1995, $41 million expires at May 1, 1997, and $400 million expires at June 30, 1997. II-124 NOTES (continued) Georgia Power Company 1994 Annual Report The $400 million expiring June 30, 1997, is under revolving credit arrangements with several banks providing the Company, Alabama Power, and The Southern Company up to a total credit amount of $400 million. To provide liquidity support for commercial paper programs and for other short-term cash needs, $165 million and $135 million of the $400 million available credit are currently dedicated for the Company and Alabama Power, respectively. However, the allocations can be changed among the borrowers by notifying the respective banks. During the term of the agreements expiring in 1997, short-term borrowings may 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 companies' option. In addition, these agreements require payment of commitment fees based on the unused portions of the commitments or the maintenance of compensating balances with the banks. Of the Company's total $709 million in unused credit arrangements, a portion of the lines are dedicated to provide liquidity support to variable rate pollution control bonds. The credit lines dedicated as of December 31, 1994, is $219 million. In connection with all other lines of credit, the Company has the option of paying fees or maintaining compensating balances. These balances are not legally restricted from withdrawal. In addition, the Company borrows under uncommitted lines of credit with banks and through a $225 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 1994. 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, 1994 and 1993, the Company had a capitalized lease obligation for its corporate headquarters building of $88 million with an interest rate of 8.1 percent. The maturity of this capital lease obligation through 1999 is approximately as follows: $310 thousand in 1995, $336 thousand in 1996, $365 thousand in 1997, $395 thousand in 1998, and $429 thousand in 1999. The lease agreement for the corporate headquarters building 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, 1994, and 1993, the interest and lease amortization deferred on the Balance Sheets are $48 million and $47 million, respectively. In December 1993, the Company borrowed $37 million through a long-term note due in 1995. 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. Long-Term Debt Due Within One Year The current portion of the Company's long-term debt is as follows: ================================================================ 1994 1993 -------------- (in millions) First mortgage bond maturity $130 $ - Other long-term debt 37 11 ---------------------------------------------------------------- Total $167 $11 ================================================================ 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 or reacquired bonds, or by pledging additional property equal to 1 2/3 times the requirement. The 1994 requirement was funded in December 1993. The 1995 requirement of $23 million II-125 NOTES (continued) Georgia Power Company 1994 Annual Report will be satisfied by pledging additional property. Redemption of Securities The Company plans to continue a program of redeeming or replacing debt and preferred stock 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 and sinking fund requirements, to meet replacement provisions of the mortgage, or through use of proceeds from the sale of property pledged under the mortgage. In general, for the first five years a series is outstanding the Company is prohibited from redeeming for improvement fund purposes more than 1 percent annually of the original issue amount. 9. QUARTERLY FINANCIAL DATA (UNAUDITED) Summarized quarterly financial information for 1994 and 1993 is as follows: ================================================================== Net Income After Dividends on Operating Operating Preferred Quarter Ended Revenues Income Stock ------------------------------------------------------------------ (in millions) March 1994 $ 992 $157 $ 58 June 1994 1,030 227 140 September 1994 1,213 331 233 December 1994 927 179 95 March 1993 $1,004 $221 $108 June 1993 1,096 219 141 September 1993 1,376 356 245 December 1993 975 176 76 ------------------------------------------------------------------ Earnings in 1994 declined by $55 million as a result of work force reduction programs. Of this amount, $52 million was recorded in the first quarter of 1994. The Company's business is influenced by seasonal weather conditions. II-126
SELECTED FINANCIAL AND OPERATING DATA Georgia Power Company 1994 Annual Report =================================================================================================== 1994 1993 1992 --------------------------------------------------------------------------------------------------- Operating Revenues (in thousands) $4,162,403 $4,451,181 $4,297,436 Net Income after Dividends on Preferred Stock (in thousands) $525,544 $569,853 $520,538 Cash Dividends on Common Stock (in thousands) $429,300 $402,400 $384,000 Return on Average Common Equity (percent) 12.84 14.37 13.60 Total Assets (in thousands) $13,712,658 $13,736,110 $10,964,442 Gross Property Additions (in thousands) $638,426 $674,432 $508,444 --------------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $4,141,554 $4,045,458 $3,888,237 Preferred stock 692,787 692,787 692,792 Preferred stock subject to mandatory redemption - - 6,250 Preferred securities of subsidiary 100,000 - - Long-term debt 3,757,823 4,031,387 4,131,016 --------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $8,692,164 $8,769,632 $8,718,295 =================================================================================================== Capitalization Ratios (percent): Common stock equity 47.6 46.1 44.6 Preferred stock 8.0 7.9 8.0 Preferred securities of subsidiary 1.2 - - Long-term debt 43.2 46.0 47.4 --------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 100.0 =================================================================================================== First Mortgage Bonds (in thousands): Issued - 1,135,000 975,000 Retired 133,559 1,337,822 1,381,300 Preferred Stock (in thousands): Issued - 175,000 195,000 Retired - 245,005 165,004 Preferred Securities of subsidiary (in thousands): Issued 100,000 - - Retired - - - --------------------------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's A2 A3 A3 Standard and Poor's A A- A- Duff & Phelps A+ A+ A- Preferred Stock - Moody's a3 baa1 baa1 Standard and Poor's A- BBB+ BBB+ Duff & Phelps A- A- BBB --------------------------------------------------------------------------------------------------- Customers (year-end): Residential 1,466,382 1,441,972 1,421,175 Commercial 193,648 188,820 183,784 Industrial 10,976 11,217 11,479 Other 2,426 2,322 2,269 --------------------------------------------------------------------------------------------------- Total 1,673,432 1,644,331 1,618,707 =================================================================================================== Employees (year-end) 11,765 12,528 12,600
II-127
SELECTED FINANCIAL AND OPERATING DATA Georgia Power Company 1994 Annual Report =================================================================================================== 1991 1990 1989 --------------------------------------------------------------------------------------------------- Operating Revenues (in thousands) $4,301,428 $4,445,809 $4,145,240 Net Income after Dividends on Preferred Stock (in thousands) $474,855 $208,066 $449,099 Cash Dividends on Common Stock (in thousands) $375,200 $389,600 $394,500 Return on Average Common Equity (percent) 12.76 5.52 11.72 Total Assets (in thousands) $10,842,538 $11,176,619 $11,372,346 Gross Property Additions (in thousands) $548,051 $558,727 $727,631 --------------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $3,766,551 $3,673,913 $3,860,657 Preferred stock 607,796 607,796 607,844 Preferred stock subject to mandatory redemption 118,750 125,000 155,000 Preferred securities of subsidiary - - - Long-term debt 4,553,189 5,000,225 5,054,001 --------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $9,046,286 $9,406,934 $9,677,502 =================================================================================================== Capitalization Ratios (percent): Common stock equity 41.7 39.1 39.9 Preferred stock 8.0 7.8 7.9 Preferred securities of subsidiary - - - Long-term debt 50.3 53.1 52.2 --------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 100.0 =================================================================================================== First Mortgage Bonds (in thousands): Issued - 300,000 250,000 Retired 598,384 91,117 91,516 Preferred Stock (in thousands): Issued 100,000 - - Retired 100,000 83,750 7,500 Preferred Securities of subsidiary (in thousands): Issued - - - Retired - - - --------------------------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's Baa1 Baa1 Baa2 Standard and Poor's BBB+ BBB+ BBB+ Duff & Phelps BBB+ BBB BBB Preferred Stock - Moody's baa1 baa1 baa2 Standard and Poor's BBB BBB BBB Duff & Phelps BBB- BBB- BBB- --------------------------------------------------------------------------------------------------- Customers (year-end): Residential 1,397,682 1,378,888 1,355,211 Commercial 179,933 178,391 177,814 Industrial 11,946 12,115 12,311 Other 2,190 2,114 2,050 --------------------------------------------------------------------------------------------------- Total 1,591,751 1,571,508 1,547,386 =================================================================================================== Employees (year-end) 13,700 13,746 13,900
II-128A
SELECTED FINANCIAL AND OPERATING DATA Georgia Power Company 1994 Annual Report =================================================================================================== 1988 1987 1986 --------------------------------------------------------------------------------------------------- Operating Revenues (in thousands) $3,897,479 $3,786,485 $3,561,603 Net Income after Dividends on Preferred Stock (in thousands) $479,532 $240,057 $535,003 Cash Dividends on Common Stock (in thousands) $386,600 $377,800 $325,500 Return on Average Common Equity (percent) 13.06 6.85 16.51 Total Assets (in thousands) $11,130,539 $11,197,494 $10,465,063 Gross Property Additions (in thousands) $929,019 $1,034,059 $1,598,309 --------------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $3,806,070 $3,538,182 $3,469,201 Preferred stock 657,844 657,844 732,844 Preferred stock subject to mandatory redemption 162,500 166,250 112,500 Preferred securities of subsidiary - - - Long-term debt 4,861,378 4,825,760 4,464,857 --------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $9,487,792 $9,188,036 $8,779,402 =================================================================================================== Capitalization Ratios (percent): Common stock equity 40.1 38.5 39.5 Preferred stock 8.6 9.0 9.6 Preferred securities of subsidiary - - - Long-term debt 51.3 52.5 50.9 --------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 100.0 =================================================================================================== First Mortgage Bonds (in thousands): Issued 150,000 500,000 500,000 Retired 206,677 217,949 377,538 Preferred Stock (in thousands): Issued - 125,000 100,000 Retired 3,750 150,000 7,500 Preferred Securities of subsidiary (in thousands): Issued - - - Retired - - - --------------------------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's Baa2 Baa2 Baa1 Standard and Poor's BBB BBB BBB+ Duff & Phelps 9 9 9 Preferred Stock - Moody's baa2 baa2 baa1 Standard and Poor's BBB- BBB- BBB Duff & Phelps 10 10 10 --------------------------------------------------------------------------------------------------- Customers (year-end): Residential 1,329,173 1,303,721 1,268,983 Commercial 174,147 169,014 162,258 Industrial 12,353 12,307 12,315 Other 1,993 1,858 1,816 --------------------------------------------------------------------------------------------------- Total 1,517,666 1,486,900 1,445,372 =================================================================================================== Employees (year-end) 15,110 14,924 14,773
II-128B
SELECTED FINANCIAL AND OPERATING DATA Georgia Power Company 1994 Annual Report ====================================================================================== 1985 1984 -------------------------------------------------------------------------------------- Operating Revenues (in thousands) $3,609,140 $3,319,699 Net Income after Dividends on Preferred Stock (in thousands) $493,717 $421,719 Cash Dividends on Common Stock (in thousands) $277,500 $225,500 Return on Average Common Equity (percent) 17.95 18.43 Total Assets (in thousands) $9,030,618 $7,880,072 Gross Property Additions (in thousands) $1,384,182 $1,396,846 -------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $3,013,707 $2,486,172 Preferred stock 632,844 482,844 Preferred stock subject to mandatory redemption 120,000 127,500 Preferred securities of subsidiary - - Long-term debt 3,878,066 3,432,606 -------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $7,644,617 $6,529,122 ====================================================================================== Capitalization Ratios (percent): Common stock equity 39.4 38.1 Preferred stock 9.9 9.3 Preferred securities of subsidiary - - Long-term debt 50.7 52.6 -------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 ====================================================================================== First Mortgage Bonds (in thousands): Issued - 150,000 Retired 17,738 26,084 Preferred Stock (in thousands): Issued 150,000 50,000 Retired 3,750 Preferred Securities of subsidiary (in thousands): Issued - - Retired - - -------------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's Baa1 Baa1 Standard and Poor's BBB+ BBB+ Duff & Phelps 9 8 Preferred Stock - Moody's baa1 baa1 Standard and Poor's BBB BBB Duff & Phelps 10 9 -------------------------------------------------------------------------------------- Customers (year-end): Residential 1,231,140 1,189,670 Commercial 155,399 148,536 Industrial 12,309 12,276 Other 1,789 1,753 -------------------------------------------------------------------------------------- Total 1,400,637 1,352,235 ====================================================================================== Employees (year-end) 14,947 14,562
II-128C
SELECTED FINANCIAL AND OPERATING DATA (continued) Georgia Power Company 1994 Annual Report =================================================================================================== 1994 1993 1992 --------------------------------------------------------------------------------------------------- Operating Revenues (in thousands): Residential $1,180,358 $1,291,035 $1,128,396 Commercial 1,367,315 1,354,130 1,285,681 Industrial 1,100,995 1,113,067 1,083,856 Other 42,983 41,399 39,504 --------------------------------------------------------------------------------------------------- Total retail 3,691,651 3,799,631 3,537,437 Sales for resale - non-affiliates 351,591 534,370 640,308 Sales for resale - affiliates 60,899 61,668 67,835 --------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 4,104,141 4,395,669 4,245,580 Other revenues 58,262 55,512 51,856 --------------------------------------------------------------------------------------------------- Total $4,162,403 $4,451,181 $4,297,436 =================================================================================================== Kilowatt-Hour Sales (in thousands): Residential 15,680,709 16,649,859 14,939,172 Commercial 18,738,461 18,278,508 17,260,614 Industrial 24,337,632 23,635,363 22,978,312 Other 484,009 460,801 436,144 --------------------------------------------------------------------------------------------------- Total retail 59,240,811 59,024,531 55,614,242 Sales for resale - non-affiliates 7,968,475 14,307,030 15,870,222 Sales for resale - affiliates 3,056,050 3,027,733 3,320,060 --------------------------------------------------------------------------------------------------- Total 70,265,336 76,359,294 74,804,524 =================================================================================================== Average Revenue Per Kilowatt-Hour (cents): Residential 7.53 7.75 7.55 Commercial 7.30 7.41 7.45 Industrial 4.52 4.71 4.72 Total retail 6.23 6.44 6.36 Sales for resale 3.74 3.44 3.69 Total sales 5.84 5.76 5.68 Residential Average Annual Kilowatt-Hour Use Per Customer 10,766 11,630 10,603 Residential Average Annual Revenue Per Customer $810.39 $901.79 $800.88 Plant Nameplate Capacity Ratings (year-end) (megawatts) 13,943 13,759 14,076 Maximum Peak-Hour Demand (megawatts) (Note): Winter 10,509 9,067 8,938 Summer 11,758 12,573 11,448 Annual Load Factor (percent) 63.0 58.5 60.5 Plant Availability (percent): Fossil-steam 83.1 85.9 86.6 Nuclear 88.4 85.5 87.7 --------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 61.3 62.1 61.4 Nuclear 18.0 16.2 17.0 Hydro 2.6 2.3 2.5 Oil and gas 0.1 0.2 * Purchased power - From non-affiliates 9.7 10.2 12.2 From affiliates 8.3 9.0 6.9 --------------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 =================================================================================================== Total Fuel Economy Data: BTU per net kilowatt-hour generated 9,915 9,912 9,900 Cost of fuel per million BTU (cents) 145.33 153.62 153.08 Average cost of fuel per net kilowatt-hour generated (cents) 1.44 1.52 1.52 =================================================================================================== Note: As of 9/1/91, Georgia Power Company's sales to Oglethorpe Power Company are not included in Peak-Hour Demand. * Less than one-tenth of one percent.
II-129
SELECTED FINANCIAL AND OPERATING DATA (continued) Georgia Power Company 1994 Annual Report =================================================================================================== 1991 1990 1989 --------------------------------------------------------------------------------------------------- Operating Revenues (in thousands): Residential $1,111,358 $1,109,165 $1,022,781 Commercial 1,243,067 1,218,441 1,143,727 Industrial 1,057,702 1,061,830 1,006,416 Other 37,861 36,773 34,775 --------------------------------------------------------------------------------------------------- Total retail 3,449,988 3,426,209 3,207,699 Sales for resale - non-affiliates 736,643 784,086 760,809 Sales for resale - affiliates 65,586 168,251 150,394 --------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 4,252,217 4,378,546 4,118,902 Other revenues 49,211 67,263 26,338 --------------------------------------------------------------------------------------------------- Total $4,301,428 $4,445,809 $4,145,240 =================================================================================================== Kilowatt-Hour Sales (in thousands): Residential 14,815,089 14,771,648 14,134,195 Commercial 16,885,833 16,627,128 15,843,181 Industrial 22,298,062 22,126,604 21,801,404 Other 429,016 428,459 414,107 --------------------------------------------------------------------------------------------------- Total retail 54,428,000 53,953,839 52,192,887 Sales for resale - non-affiliates 18,719,924 20,158,681 20,479,412 Sales for resale - affiliates 3,885,892 8,272,528 7,489,948 --------------------------------------------------------------------------------------------------- Total 77,033,816 82,385,048 80,162,247 =================================================================================================== Average Revenue Per Kilowatt-Hour (cents): Residential 7.50 7.51 7.24 Commercial 7.36 7.33 7.22 Industrial 4.74 4.80 4.62 Total retail 6.34 6.35 6.15 Sales for resale 3.55 3.35 3.26 Total sales 5.52 5.31 5.14 Residential Average Annual Kilowatt-Hour Use Per Customer 10,675 10,795 10,530 Residential Average Annual Revenue Per Customer $800.78 $810.56 $761.96 Plant Nameplate Capacity Ratings (year-end) (megawatts) 14,076 14,366 14,366 Maximum Peak-Hour Demand (megawatts) (Note): Winter 10,001 8,977 10,101 Summer 13,090 13,196 12,735 Annual Load Factor (percent) 55.2 55.5 56.3 Plant Availability (percent): Fossil-steam 93.3 92.5 93.0 Nuclear 81.6 81.3 89.2 --------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 63.6 65.1 64.0 Nuclear 15.3 13.7 14.1 Hydro 2.3 2.2 2.1 Oil and gas * 0.1 0.1 Purchased power - From non-affiliates 10.3 11.0 10.2 From affiliates 8.5 7.9 9.5 --------------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 =================================================================================================== Total Fuel Economy Data: BTU per net kilowatt-hour generated 9,960 9,939 10,020 Cost of fuel per million BTU (cents) 157.97 166.22 164.27 Average cost of fuel per net kilowatt-hour generated (cents) 1.57 1.65 1.65 =================================================================================================== Note: As of 9/1/91, Georgia Power Company's sales to Oglethorpe Power Company are not included in Peak-Hour Demand. *Less than one-tenth of one percent.
II-130A
SELECTED FINANCIAL AND OPERATING DATA (continued) Georgia Power Company 1994 Annual Report =================================================================================================== 1988 1987 1986 --------------------------------------------------------------------------------------------------- Operating Revenues (in thousands): Residential $979,047 $904,218 $874,231 Commercial 1,054,995 915,540 854,755 Industrial 983,822 911,933 897,646 Other 31,743 29,350 27,948 --------------------------------------------------------------------------------------------------- Total retail 3,049,607 2,761,041 2,654,580 Sales for resale - non-affiliates 707,076 822,696 780,049 Sales for resale - affiliates 86,751 159,998 91,753 --------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 3,843,434 3,743,735 3,526,382 Other revenues 54,045 42,750 35,221 --------------------------------------------------------------------------------------------------- Total $3,897,479 $3,786,485 $3,561,603 =================================================================================================== Kilowatt-Hour Sales (in thousands): Residential 13,800,038 13,675,730 13,234,248 Commercial 14,790,561 13,799,379 12,945,926 Industrial 21,412,845 20,884,454 20,339,235 Other 397,669 385,514 381,917 --------------------------------------------------------------------------------------------------- Total retail 50,401,113 48,745,077 46,901,326 Sales for resale - non-affiliates 18,544,705 20,910,185 18,198,186 Sales for resale - affiliates 3,327,814 6,032,889 3,160,242 --------------------------------------------------------------------------------------------------- Total 72,273,632 75,688,151 68,259,754 =================================================================================================== Average Revenue Per Kilowatt-Hour (cents): Residential 7.09 6.61 6.61 Commercial 7.13 6.63 6.60 Industrial 4.59 4.37 4.41 Total retail 6.05 5.66 5.66 Sales for resale 3.63 3.65 4.08 Total sales 5.32 4.95 5.17 Residential Average Annual Kilowatt-Hour Use Per Customer 10,484 10,623 10,577 Residential Average Annual Revenue Per Customer $743.82 $702.36 $698.72 Plant Nameplate Capacity Ratings (year-end) (megawatts) 13,018 13,018 11,875 Maximum Peak-Hour Demand (megawatts) (Note): Winter 9,866 9,446 10,551 Summer 12,295 12,390 11,910 Annual Load Factor (percent) 59.1 56.1 57.5 Plant Availability (percent): Fossil-steam 94.5 92.7 91.2 Nuclear 69.4 85.4 64.7 --------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 72.0 70.9 74.6 Nuclear 9.6 9.1 5.0 Hydro 1.2 1.7 1.2 Oil and gas 0.1 0.1 0.6 Purchased power - From non-affiliates 8.2 8.5 8.9 From affiliates 8.9 9.7 9.7 --------------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 =================================================================================================== Total Fuel Economy Data: BTU per net kilowatt-hour generated 9,969 9,932 10,016 Cost of fuel per million BTU (cents) 166.28 168.81 175.81 Average cost of fuel per net kilowatt-hour generated (cents) 1.66 1.68 1.76 =================================================================================================== Note: As of 9/1/91, Georgia Power Company's sales to Oglethorpe Power Company are not included in Peak-Hour Demand. * Less than one-tenth of one percent.
II-130B
SELECTED FINANCIAL AND OPERATING DATA (continued) Georgia Power Company 1994 Annual Report ====================================================================================== 1985 1984 -------------------------------------------------------------------------------------- Operating Revenues (in thousands): Residential $786,500 $754,163 Commercial 797,540 739,035 Industrial 873,554 858,536 Other 26,766 24,388 -------------------------------------------------------------------------------------- Total retail 2,484,360 2,376,122 Sales for resale - non-affiliates 941,743 779,028 Sales for resale - affiliates 149,463 136,047 -------------------------------------------------------------------------------------- Total revenues from sales of electricity 3,575,566 3,291,197 Other revenues 33,574 28,502 -------------------------------------------------------------------------------------- Total $3,609,140 $3,319,699 ====================================================================================== Kilowatt-Hour Sales (in thousands): Residential 12,006,462 11,548,787 Commercial 11,945,938 10,902,163 Industrial 19,517,543 18,862,531 Other 382,238 342,047 -------------------------------------------------------------------------------------- Total retail 43,852,181 41,655,528 Sales for resale - non-affiliates 21,526,865 19,138,575 Sales for resale - affiliates 5,999,834 4,970,928 -------------------------------------------------------------------------------------- Total 71,378,880 65,765,031 ====================================================================================== Average Revenue Per Kilowatt-Hour (cents): Residential 6.55 6.53 Commercial 6.68 6.78 Industrial 4.48 4.55 Total retail 5.67 5.70 Sales for resale 3.96 3.80 Total sales 5.01 5.00 Residential Average Annual Kilowatt-Hour Use Per Customer 9,923 9,855 Residential Average Annual Revenue Per Customer $650.01 $643.53 Plant Nameplate Capacity Ratings (year-end) (megawatts) 11,875 11,767 Maximum Peak-Hour Demand (megawatts) (Note): Winter 10,049 8,462 Summer 11,079 10,443 Annual Load Factor (percent) 56.3 56.9 Plant Availability (percent): Fossil-steam 91.2 91.0 Nuclear 79.5 47.3 -------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 72.7 74.4 Nuclear 6.7 4.0 Hydro 1.5 2.7 Oil and gas * * Purchased power - From non-affiliates 9.4 9.2 From affiliates 9.7 9.7 -------------------------------------------------------------------------------------- Total 100.0 100.0 ====================================================================================== Total Fuel Economy Data: BTU per net kilowatt-hour generated 10,089 10,002 Cost of fuel per million BTU (cents) 178.11 184.63 Average cost of fuel per net kilowatt-hour generated (cents) 1.80 1.85 Note: As of 9/1/91, Georgia Power Company's sales to Oglethorpe Power Company are not included in Peak-Hour Demand. * Less than one-tenth of one percent.
II-130C
STATEMENTS OF INCOME Georgia Power Company ==================================================================================================== For the Years Ended December 31, 1994 1993 1992 ---------------------------------------------------------------------------------------------------- (Thousands of Dollars) Operating Revenues: Revenues $4,101,504 $4,389,513 $4,229,601 Revenues from affiliates 60,899 61,668 67,835 ---------------------------------------------------------------------------------------------------- Total operating revenues 4,162,403 4,451,181 4,297,436 ---------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 870,653 951,507 929,780 Purchased power from non-affiliates 193,130 313,170 436,761 Purchased power from affiliates 158,063 194,024 158,306 Provision for separation benefits 82,238 - 9,778 Proceeds from settlement of disputed contracts - - (4,982) Other 643,375 675,284 616,116 Maintenance 272,818 284,521 264,757 Depreciation and amortization 379,158 379,425 375,460 Deferred Plant Vogtle expenses, net 74,888 36,284 (30,804) Taxes other than income taxes 194,566 192,671 179,460 Federal and state income taxes 399,413 452,122 377,542 ---------------------------------------------------------------------------------------------------- Total operating expenses 3,268,302 3,479,008 3,312,174 ---------------------------------------------------------------------------------------------------- Operating Income 894,101 972,173 985,262 Other Income (Expense): Allowance for equity funds used during construction 5,663 3,168 5,855 Income from subsidiary 3,588 4,127 4,635 Deferred return on Plant Vogtle - - - Write-off of Plant Vogtle costs - - - Income tax reduction for write-off of Plant Vogtle costs - - - Interest income 3,254 3,806 12,475 Other, net (See note) 10,626 11,902 (30,527) Income taxes applicable to other income 7,975 37,661 25,163 ---------------------------------------------------------------------------------------------------- Income Before Interest Charges 925,207 1,032,837 1,002,863 ---------------------------------------------------------------------------------------------------- Interest Charges: Interest on long-term debt 306,473 343,634 402,541 Allowance for debt funds used during construction (11,571) (8,271) (8,310) Interest on interim obligations 17,529 15,530 9,694 Amortization of debt discount, premium, and expense, net 15,743 14,024 8,033 Other interest charges 23,483 47,393 12,425 ---------------------------------------------------------------------------------------------------- Net interest charges 351,657 412,310 424,383 ---------------------------------------------------------------------------------------------------- Net Income 573,550 620,527 578,480 Dividends on Preferred Stock 48,006 50,674 57,942 ---------------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred Stock $ 525,544 $ 569,853 $ 520,538 ==================================================================================================== Note: Reflects major sales of facilities to JEA, FP&L, OPC, MEAG, and Dalton. Increases in net income, after total taxes, from these sales were $11,275,000 in 1994, $23,191,000 in 1993, $14,542,000 in 1991, $6,336,000 in 1990, $3,851,000 in 1987, and $21,250,000 in 1984.
II-131
STATEMENTS OF INCOME Georgia Power Company =============================================================================================================== For the Years Ended December 31, 1991 1990 1989 1988 --------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) Operating Revenues: Revenues $4,235,842 $4,277,558 $3,994,846 $3,810,728 Revenues from affiliates 65,586 168,251 150,394 86,751 --------------------------------------------------------------------------------------------------------------- Total operating revenues 4,301,428 4,445,809 4,145,240 3,897,479 --------------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 998,701 1,120,933 1,078,586 1,023,173 Purchased power from non-affiliates 444,920 626,989 543,448 546,511 Purchased power from affiliates 193,114 173,716 195,355 164,873 Provision for separation benefits 52,952 - - - Proceeds from settlement of disputed contracts (142,183) - - - Other 596,565 524,665 504,743 541,975 Maintenance 295,012 280,304 233,680 246,877 Depreciation and amortization 382,549 380,394 346,091 306,492 Deferred Plant Vogtle expenses, net 16,008 31,146 (39,211) (8,333) Taxes other than income taxes 172,893 151,124 128,518 146,759 Federal and state income taxes 349,284 270,561 273,287 204,222 --------------------------------------------------------------------------------------------------------------- Total operating expenses 3,359,815 3,559,832 3,264,497 3,172,549 --------------------------------------------------------------------------------------------------------------- Operating Income 941,613 885,977 880,743 724,930 Other Income (Expense): Allowance for equity funds used during construction 9,083 6,985 40,525 96,530 Income from subsidiary 4,576 4,182 3,750 3,302 Deferred return on Plant Vogtle 34,549 82,721 48,096 107,310 Write-off of Plant Vogtle costs - (281,254) - - Income tax reduction for write-off of Plant Vogtle costs - 63,231 - - Interest income 10,563 7,552 10,333 28,445 Other, net (See note) 13,551 (21,199) (20,603) (3,746) Income taxes applicable to other income (7,522) 20,859 15,573 6,583 --------------------------------------------------------------------------------------------------------------- Income Before Interest Charges 1,006,413 769,054 978,417 963,354 --------------------------------------------------------------------------------------------------------------- Interest Charges: Interest on long-term debt 459,184 480,174 475,991 471,897 Allowance for debt funds used during construction (10,385) (9,325) (34,244) (95,818) Interest on interim obligations 4,906 8,512 1,059 15,084 Amortization of debt discount, premium, and expense, net 6,214 6,100 5,865 5,466 Other interest charges 9,938 9,404 8,868 14,556 --------------------------------------------------------------------------------------------------------------- Net interest charges 469,857 494,865 457,539 411,185 --------------------------------------------------------------------------------------------------------------- Net Income 536,556 274,189 520,878 552,169 Dividends on Preferred Stock 61,701 66,123 71,779 72,637 --------------------------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred Stock $ 474,855 $ 208,066 $ 449,099 $ 479,532 =============================================================================================================== Note: Reflects major sales of facilities to JEA, FP&L, OPC, MEAG, and Dalton. Increases in net income, after total taxes, from these sales were $11,275,000 in 1994, $23,191,000 in 1993, $14,542,000 in 1991, $6,336,000 in 1990, $3,851,000 in 1987, and $21,250,000 in 1984.
II-132A
STATEMENTS OF INCOME Georgia Power Company =============================================================================================================== For the Years Ended December 31, 1987 1986 1985 1984 --------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) Operating Revenues: Revenues $3,626,487 $3,469,850 $3,459,677 $3,183,652 Revenues from affiliates 159,998 91,753 149,463 136,047 --------------------------------------------------------------------------------------------------------------- Total operating revenues 3,786,485 3,561,603 3,609,140 3,319,699 --------------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 1,064,552 1,012,949 1,077,092 1,000,434 Purchased power from non-affiliates 530,051 344,708 415,406 427,403 Purchased power from affiliates 199,831 192,297 204,848 188,938 Provision for separation benefits - - - - Proceeds from settlement of disputed contracts - - - - Other 575,182 513,974 482,468 412,803 Maintenance 274,672 275,533 254,510 228,377 Depreciation and amortization 254,929 215,763 201,524 191,205 Deferred Plant Vogtle expenses, net (141,977) - - - Taxes other than income taxes 143,289 119,768 120,320 106,908 Federal and state income taxes 250,093 319,374 311,151 268,654 --------------------------------------------------------------------------------------------------------------- Total operating expenses 3,150,622 2,994,366 3,067,319 2,824,722 --------------------------------------------------------------------------------------------------------------- Operating Income 635,863 567,237 541,821 494,977 Other Income (Expense): Allowance for equity funds used during construction 159,414 275,183 227,950 162,057 Income from subsidiary 3,440 2,967 3,417 3,181 Deferred return on Plant Vogtle 115,028 - - - Write-off of Plant Vogtle costs (357,821) - - - Income tax reduction for write-off of Plant Vogtle costs 128,923 - - - Interest income 55,388 44,615 41,546 34,074 Other, net (See note) (55,081) (28,464) (6,815) 45,132 Income taxes applicable to other income 17,344 5,154 (9,114) (37,678) --------------------------------------------------------------------------------------------------------------- Income Before Interest Charges 702,498 866,692 798,805 701,743 --------------------------------------------------------------------------------------------------------------- Interest Charges: Interest on long-term debt 480,519 472,744 421,764 351,855 Allowance for debt funds used during construction (130,756) (225,897) (216,233) (150,931) Interest on interim obligations 16,362 1,954 20,516 13,387 Amortization of debt discount, premium, and expense, net 3,573 2,681 2,335 1,680 Other interest charges 12,239 4,610 10,593 8,416 --------------------------------------------------------------------------------------------------------------- Net interest charges 381,937 256,092 238,975 224,407 --------------------------------------------------------------------------------------------------------------- Net Income 320,561 610,600 559,830 477,336 Dividends on Preferred Stock 80,504 75,597 66,113 55,617 --------------------------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred Stock $ 240,057 $ 535,003 $ 493,717 $ 421,719 =============================================================================================================== Note: Reflects major sales of facilities to JEA, FP&L, OPC, MEAG, and Dalton. Increases in net income, after total taxes, from these sales were $11,275,000 in 1994, $23,191,000 in 1993, $14,542,000 in 1991, $6,336,000 in 1990, $3,851,000 in 1987, and $21,250,000 in 1984.
II-132B
STATEMENTS OF CASH FLOWS Georgia Power Company ========================================================================================================== For the Years Ended December 31, 1994 1993 1992 ---------------------------------------------------------------------------------------------------------- (Thousands of Dollars) Operating Activities: Net income $ 573,550 $ 620,527 $ 578,480 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 484,032 475,152 471,014 Deferred income taxes, net 33,567 169,009 194,955 Deferred investment tax credits, net - (18,274) (5,704) Allowance for equity funds used during construction (5,663) (3,168) (5,855) Deferred Plant Vogtle costs 74,888 36,284 (30,804) Write-off of Plant Vogtle costs - - - Provision for separation benefits 68,599 - - Non-cash proceeds from settlement of disputed contracts - - (4,982) Other, net (95,314) (46,227) (9,768) Changes in certain current assets and liabilities: Receivables, net 67,218 27,088 (31,348) Inventories (63,545) 82,433 (65,621) Payables 5,409 17,364 25,303 Other (5,675) (94,574) (85,961) ---------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 1,137,066 1,265,614 1,029,709 ---------------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (638,426) (674,432) (508,444) Sales of property 132,644 261,687 46 Other (41,273) (43,154) 42,892 ---------------------------------------------------------------------------------------------------------- Net cash used for investing activities (547,055) (455,899) (465,506) ---------------------------------------------------------------------------------------------------------- Financing Activities and Capital Contributions: Proceeds: Preferred securities of subsidiary 100,000 - - Preferred stock - 175,000 195,000 First mortgage bonds - 1,135,000 975,000 Pollution control bonds 527,210 145,425 161,955 Other long-term debt - 37,000 - Capital contributions from parent company - - - Retirements: Preferred stock - (245,005) (165,004) First mortgage bonds (133,559) (1,337,822) (1,381,300) Pollution control bonds (510,320) (145,465) (160,205) Other long-term debt (10,187) (19,451) (567) Interim obligations, net (57,425) (51,444) 334,671 Payment of preferred stock dividends (47,147) (53,123) (60,475) Payment of common stock dividends (429,300) (402,400) (384,000) Miscellaneous (22,640) (63,648) (70,986) ---------------------------------------------------------------------------------------------------------- Net cash provided from (used for) financing activities (583,368) (825,933) (555,911) ---------------------------------------------------------------------------------------------------------- Net Change in Cash and Cash Equivalents 6,643 (16,218) 8,292 Cash and Cash Equivalents at Beginning of Year 5,896 22,114 13,822 Cash and Cash Equivalents at End of Year $ 12,539 $ 5,896 $ 22,114 ========================================================================================================== ( ) Denotes use of cash.
II-133
STATEMENTS OF CASH FLOWS Georgia Power Company ======================================================================================================================== For the Years Ended December 31, 1991 1990 1989 1988 ------------------------------------------------------------------------------------------------------------------------ (Thousands of Dollars) Operating Activities: Net income $ 536,556 $ 274,189 $ 520,878 $ 552,169 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 480,318 502,098 484,870 400,665 Deferred income taxes, net 53,219 88,667 184,490 160,774 Deferred investment tax credits, net (9,524) (52) (8,017) 11,605 Allowance for equity funds used during construction (9,083) (6,985) (40,525) (96,530) Deferred Plant Vogtle costs (18,541) (51,575) (87,307) (115,643) Write-off of Plant Vogtle costs - 281,254 - - Provision for separation benefits - - - - Non-cash proceeds from settlement of disputed contracts (103,846) - - - Other, net (26,024) (50,804) (38,046) 6,983 Changes in certain current assets and liabilities: Receivables, net 23,920 1,444 (59,035) 11,225 Inventories 24,130 (23,498) (33,123) (10,044) Payables (23,075) (43,470) (38,976) (2,065) Other 54,777 (9,991) 36,015 1,161 ------------------------------------------------------------------------------------------------------------------------ Net cash provided from operating activities 982,827 961,277 921,224 920,300 ------------------------------------------------------------------------------------------------------------------------ Investing Activities: Gross property additions (548,051) (558,727) (727,631) (929,019) Sales of property 291,075 34,573 - - Other 931 1,937 47,260 35,328 ------------------------------------------------------------------------------------------------------------------------ Net cash used for investing activities (256,045) (522,217) (680,371) (893,691) ------------------------------------------------------------------------------------------------------------------------ Financing Activities and Capital Contributions: Proceeds: Preferred securities of subsidiary - - - - Preferred stock 100,000 - - - First mortgage bonds - 300,000 250,000 150,000 Pollution control bonds 80,420 - 50,000 69,526 Other long-term debt - - - - Capital contributions from parent company - - - 175,000 Retirements: Preferred stock (100,000) (83,750) (7,500) (3,750) First mortgage bonds (598,384) (91,117) (91,516) (206,677) Pollution control bonds (83,265) (535) (505) (475) Other long-term debt (1,130) (114,452) (3,806) (2,878) Interim obligations, net 199,000 - - (302,261) Payment of preferred stock dividends (60,766) (67,757) (72,259) (72,931) Payment of common stock dividends (375,200) (389,600) (394,500) (386,600) Miscellaneous (17,613) (7,663) (4,742) (13,440) ------------------------------------------------------------------------------------------------------------------------ Net cash provided from (used for) financing activities (856,938) (454,874) (274,828) (594,486) ------------------------------------------------------------------------------------------------------------------------ Net Change in Cash and Cash Equivalents (130,156) (15,814) (33,975) (567,877) Cash and Cash Equivalents at Beginning of Year 143,978 159,792 193,767 761,644 Cash and Cash Equivalents at End of Year $ 13,822 $ 143,978 $ 159,792 $ 193,767 ======================================================================================================================== ( ) Denotes use of cash.
II-134A
STATEMENTS OF CASH FLOWS Georgia Power Company ======================================================================================================================== For the Years Ended December 31, 1987 1986 1985 1984 ------------------------------------------------------------------------------------------------------------------------ (Thousands of Dollars) Operating Activities: Net income $ 320,561 $ 610,600 $ 559,830 $ 477,336 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 336,647 260,945 248,256 219,301 Deferred income taxes, net 76,445 236,822 104,102 145,266 Deferred investment tax credits, net (5,075) 106,407 115,144 61,252 Allowance for equity funds used during construction (159,414) (275,183) (227,950) (162,057) Deferred Plant Vogtle costs (257,005) - - - Write-off of Plant Vogtle costs 357,821 - - - Provision for separation benefits - - - - Non-cash proceeds from settlement of disputed contracts - - - - Other, net (759) 5,554 34,311 (81,166) Changes in certain current assets and liabilities: Receivables, net (6,880) (7,474) (27,928) (68,325) Inventories (72,540) (26,863) 77,667 (65,772) Payables 74,341 133,044 (9,182) 161,479 Other 2,751 19,682 21,289 99,191 ------------------------------------------------------------------------------------------------------------------------ Net cash provided from operating activities 666,893 1,063,534 895,539 786,505 ------------------------------------------------------------------------------------------------------------------------ Investing Activities: Gross property additions (1,034,059) (1,598,309) (1,384,182) (1,396,846) Sales of property 12,276 - - 320,708 Other 45,801 168,518 92,826 82,741 ------------------------------------------------------------------------------------------------------------------------ Net cash used for investing activities (975,982) (1,429,791) (1,291,356) (993,397) ------------------------------------------------------------------------------------------------------------------------ Financing Activities and Capital Contributions: Proceeds: Preferred securities of subsidiary - - - - Preferred stock 125,000 100,000 150,000 50,000 First mortgage bonds 500,000 500,000 - 150,000 Pollution control bonds 191,736 350,001 500,962 190,577 Other long-term debt - 113,000 - - Capital contributions from parent company 228,000 250,000 315,000 202,000 Retirements: Preferred stock (150,000) (7,500) (3,750) (2,380) First mortgage bonds (217,949) (377,538) (17,738) (26,084) Pollution control bonds (90,000) - - - Other long-term debt (2,824) (108) (843) (276) Interim obligations, net 302,261 (36,715) (72,956) 109,356 Payment of preferred stock dividends (80,420) (73,665) (62,337) (55,433) Payment of common stock dividends (377,800) (325,500) (277,500) (225,500) Miscellaneous (51,745) (33,773) (17,503) (17,975) ------------------------------------------------------------------------------------------------------------------------ Net cash provided from (used for) financing activities 376,259 458,202 513,335 374,285 ------------------------------------------------------------------------------------------------------------------------ Net Change in Cash and Cash Equivalents 67,170 91,945 117,518 167,393 Cash and Cash Equivalents at Beginning of Year 694,474 602,529 485,011 317,618 Cash and Cash Equivalents at End of Year $ 761,644 $ 694,474 $ 602,529 $ 485,011 ======================================================================================================================== ( ) Denotes use of cash.
II-134B
BALANCE SHEETS Georgia Power Company =================================================================================================== At December 31, 1994 1993 1992 --------------------------------------------------------------------------------------------------- (Thousands of Dollars) ASSETS Electric Plant: Production- Fossil $ 3,077,470 $ 2,976,806 $ 3,144,405 Nuclear 4,075,339 4,069,299 4,051,020 Hydro 443,466 442,888 434,341 --------------------------------------------------------------------------------------------------- Total production 7,596,275 7,488,993 7,629,766 Transmission 1,754,945 1,713,122 1,646,904 Distribution 3,777,279 3,600,115 3,413,681 General 926,418 941,291 923,010 Construction work in progress 541,889 584,013 405,606 Nuclear fuel, at amortized cost 136,425 135,742 155,194 --------------------------------------------------------------------------------------------------- Total electric plant 14,733,231 14,463,276 14,174,161 --------------------------------------------------------------------------------------------------- Steam Heat Plant - - - --------------------------------------------------------------------------------------------------- Total utility plant 14,733,231 14,463,276 14,174,161 --------------------------------------------------------------------------------------------------- Accumulated Provision for Depreciation: Electric 4,054,986 3,822,344 3,569,717 Steam heat - - - --------------------------------------------------------------------------------------------------- Total accumulated provision for depreciation 4,054,986 3,822,344 3,569,717 --------------------------------------------------------------------------------------------------- Total 10,678,245 10,640,932 10,604,444 --------------------------------------------------------------------------------------------------- Less property-related accumulated deferred income taxes - - 1,589,743 --------------------------------------------------------------------------------------------------- Total 10,678,245 10,640,932 9,014,701 --------------------------------------------------------------------------------------------------- Other Property and Investments: Securities received from settlement of disputed contracts - - - Nuclear decommissioning trusts 54,297 37,937 20,311 Miscellaneous 116,527 61,142 55,463 --------------------------------------------------------------------------------------------------- Total 170,824 99,079 75,774 --------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 12,539 5,896 22,114 Investment securities - - 108,206 Receivables, net 389,279 515,178 385,227 Accrued utility revenues 103,223 99,550 88,164 Fossil fuel stock, at average cost 169,252 111,620 197,332 Materials and supplies, at average cost 293,464 287,551 284,272 Prepayments 55,383 65,269 91,447 Vacation pay deferred 40,823 41,575 40,169 --------------------------------------------------------------------------------------------------- Total 1,063,963 1,126,639 1,216,931 --------------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes 919,750 992,510 - Deferred Plant Vogtle costs 432,092 506,980 383,025 Debt expense, being amortized 26,223 20,730 17,719 Premium on reacquired debt, being amortized 164,676 153,146 116,940 Miscellaneous 256,885 196,094 139,352 --------------------------------------------------------------------------------------------------- Total 1,799,626 1,869,460 657,036 --------------------------------------------------------------------------------------------------- Total Assets $13,712,658 $13,736,110 $10,964,442 ===================================================================================================
II-135
BALANCE SHEETS Georgia Power Company ============================================================================================================== At December 31, 1991 1990 1989 1988 -------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) ASSETS Electric Plant: Production- Fossil $ 3,128,594 $ 3,350,018 $ 3,319,876 $ 2,638,725 Nuclear 4,051,043 4,025,862 4,189,723 3,225,945 Hydro 432,674 412,157 411,235 407,771 -------------------------------------------------------------------------------------------------------------- Total production 7,612,311 7,788,037 7,920,834 6,272,441 Transmission 1,566,173 1,522,157 1,431,485 1,322,034 Distribution 3,252,111 3,056,825 2,863,011 2,598,714 General 896,477 876,989 859,013 737,621 Construction work in progress 390,437 370,243 403,365 1,963,283 Nuclear fuel, at amortized cost 191,726 210,320 254,101 307,109 -------------------------------------------------------------------------------------------------------------- Total electric plant 13,909,235 13,824,571 13,731,809 13,201,202 -------------------------------------------------------------------------------------------------------------- Steam Heat Plant - - - - -------------------------------------------------------------------------------------------------------------- Total utility plant 13,909,235 13,824,571 13,731,809 13,201,202 -------------------------------------------------------------------------------------------------------------- Accumulated Provision for Depreciation: Electric 3,315,247 3,040,298 2,762,937 2,445,404 Steam heat - - - - -------------------------------------------------------------------------------------------------------------- Total accumulated provision for depreciation 3,315,247 3,040,298 2,762,937 2,445,404 -------------------------------------------------------------------------------------------------------------- Total 10,593,988 10,784,273 10,968,872 10,755,798 -------------------------------------------------------------------------------------------------------------- Less property-related accumulated deferred income taxes 1,465,408 1,397,647 1,313,626 1,178,291 -------------------------------------------------------------------------------------------------------------- Total 9,128,580 9,386,626 9,655,246 9,577,507 -------------------------------------------------------------------------------------------------------------- Other Property and Investments: Securities received from settlement of disputed contracts 107,993 - - - Nuclear decommissioning trusts 10,007 - - - Miscellaneous 71,880 78,895 69,839 66,677 -------------------------------------------------------------------------------------------------------------- Total 189,880 78,895 69,839 66,677 -------------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 13,822 143,978 159,792 193,767 Investment securities - - - - Receivables, net 330,411 356,236 347,899 320,018 Accrued utility revenues 79,099 78,067 93,786 66,265 Fossil fuel stock, at average cost 200,248 225,966 214,487 225,274 Materials and supplies, at average cost 215,735 220,103 208,084 164,174 Prepayments 96,750 121,646 116,342 121,840 Vacation pay deferred 39,769 33,677 35,238 34,418 -------------------------------------------------------------------------------------------------------------- Total 975,834 1,179,673 1,175,628 1,125,756 -------------------------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes - - - - Deferred Plant Vogtle costs 375,028 364,446 322,116 269,958 Debt expense, being amortized 12,368 12,708 13,032 12,476 Premium on reacquired debt, being amortized 70,855 60,653 61,889 62,352 Miscellaneous 89,993 93,618 74,596 15,813 -------------------------------------------------------------------------------------------------------------- Total 548,244 531,425 471,633 360,599 -------------------------------------------------------------------------------------------------------------- Total Assets $10,842,538 $11,176,619 $11,372,346 $11,130,539 ==============================================================================================================
II-136A
BALANCE SHEETS Georgia Power Company ============================================================================================================== At December 31, 1987 1986 1985 1984 -------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) ASSETS Electric Plant: Production- Fossil $ 2,616,741 $ 2,138,511 $ 2,118,863 $ 2,105,551 Nuclear 3,220,632 739,835 652,756 647,020 Hydro 404,291 399,120 388,832 303,334 -------------------------------------------------------------------------------------------------------------- Total production 6,241,664 3,277,466 3,160,451 3,055,905 Transmission 1,248,976 1,176,479 1,004,329 949,802 Distribution 2,318,185 2,096,498 1,892,127 1,722,546 General 657,258 578,236 501,477 452,119 Construction work in progress 1,710,769 4,430,152 3,581,065 2,694,628 Nuclear fuel, at amortized cost 287,492 314,225 253,418 231,456 -------------------------------------------------------------------------------------------------------------- Total electric plant 12,464,344 11,873,056 10,392,867 9,106,456 -------------------------------------------------------------------------------------------------------------- Steam Heat Plant 7 15,266 14,709 15,419 -------------------------------------------------------------------------------------------------------------- Total utility plant 12,464,351 11,888,322 10,407,576 9,121,875 -------------------------------------------------------------------------------------------------------------- Accumulated Provision for Depreciation: Electric 2,193,395 2,001,605 1,851,649 1,693,788 Steam heat (5) 7,841 7,517 7,696 -------------------------------------------------------------------------------------------------------------- Total accumulated provision for depreciation 2,193,390 2,009,446 1,859,166 1,701,484 -------------------------------------------------------------------------------------------------------------- Total 10,270,961 9,878,876 8,548,410 7,420,391 -------------------------------------------------------------------------------------------------------------- Less property-related accumulated deferred income taxes 1,077,747 1,020,271 920,047 873,024 -------------------------------------------------------------------------------------------------------------- Total 9,193,214 8,858,605 7,628,363 6,547,367 -------------------------------------------------------------------------------------------------------------- Other Property and Investments: Securities received from settlement of disputed contracts - - - - Nuclear decommissioning trusts - - - - Miscellaneous 54,148 50,749 39,357 38,143 -------------------------------------------------------------------------------------------------------------- Total 54,148 50,749 39,357 38,143 -------------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 761,644 694,474 602,529 485,011 Investment securities - - - - Receivables, net 342,315 374,590 367,226 350,197 Accrued utility revenues 68,370 55,513 55,403 44,504 Fossil fuel stock, at average cost 262,752 220,206 210,604 289,807 Materials and supplies, at average cost 116,652 86,658 69,397 67,861 Prepayments 113,381 44,800 8,506 6,697 Vacation pay deferred 30,100 29,800 28,700 26,600 -------------------------------------------------------------------------------------------------------------- Total 1,695,214 1,506,041 1,342,365 1,270,677 -------------------------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes - - - - Deferred Plant Vogtle costs 172,990 - - - Debt expense, being amortized 12,985 12,860 12,450 11,218 Premium on reacquired debt, being amortized 51,509 26,914 - - Miscellaneous 17,434 9,894 8,083 12,667 -------------------------------------------------------------------------------------------------------------- Total 254,918 49,668 20,533 23,885 -------------------------------------------------------------------------------------------------------------- Total Assets $11,197,494 $10,465,063 $ 9,030,618 $ 7,880,072 ==============================================================================================================
II-136B
BALANCE SHEETS Georgia Power Company ================================================================================================== At December 31, 1994 1993 1992 -------------------------------------------------------------------------------------------------- (Thousands of Dollars) CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 344,250 $ 344,250 $ 344,250 Paid-in capital 2,384,348 2,384,348 2,384,140 Premium on preferred stock 413 413 467 Earnings retained in the business 1,412,543 1,316,447 1,159,380 -------------------------------------------------------------------------------------------------- Total common equity 4,141,554 4,045,458 3,888,237 Preferred stock 692,787 692,787 692,792 Preferred stock subject to mandatory redemption - - 6,250 Preferred securities of subsidiary 100,000 - - Long-term debt 3,757,823 4,031,387 4,131,016 -------------------------------------------------------------------------------------------------- Total (excluding amount due within one year) 8,692,164 8,769,632 8,718,295 -------------------------------------------------------------------------------------------------- Current Liabilities: Notes payable to banks 202,200 406,700 400,200 Commercial paper 222,602 75,527 133,471 Preferred stock due within one year - - 63,750 Long-term debt due within one year 167,420 10,543 95,823 Accounts payable 355,067 324,044 317,351 Customer deposits 47,017 45,922 45,145 Taxes accrued 93,019 153,493 138,289 Interest accrued 110,256 110,497 132,319 Vacation pay accrued 39,720 40,060 38,694 Miscellaneous 70,006 64,527 89,355 -------------------------------------------------------------------------------------------------- Total 1,307,307 1,231,313 1,454,397 -------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes 2,477,661 2,479,720 - Accumulated deferred investment tax credits 453,121 478,334 515,539 Disallowed Plant Vogtle capacity buyback costs 60,490 63,067 72,201 Deferred credits related to income taxes 433,334 452,819 - Miscellaneous 288,581 261,225 204,010 -------------------------------------------------------------------------------------------------- Total 3,713,187 3,735,165 791,750 -------------------------------------------------------------------------------------------------- Total Capitalization and Liabilities $13,712,658 $13,736,110 $10,964,442 ==================================================================================================
II-137
BALANCE SHEETS Georgia Power Company ============================================================================================================== At December 31, 1991 1990 1989 1988 -------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 344,250 $ 344,250 $ 344,250 $ 344,250 Paid-in capital 2,383,800 2,383,800 2,383,800 2,383,800 Premium on preferred stock 489 1,089 1,089 1,089 Earnings retained in the business 1,038,012 944,774 1,131,518 1,076,931 -------------------------------------------------------------------------------------------------------------- Total common equity 3,766,551 3,673,913 3,860,657 3,806,070 Preferred stock 607,796 607,796 607,844 657,844 Preferred stock subject to mandatory redemption 118,750 125,000 155,000 162,500 Preferred securities of subsidiary - - - - Long-term debt 4,553,189 5,000,225 5,054,001 4,861,378 -------------------------------------------------------------------------------------------------------------- Total (excluding amount due within one year) 9,046,286 9,406,934 9,677,502 9,487,792 -------------------------------------------------------------------------------------------------------------- Current Liabilities: Notes payable to banks 199,000 - - - Commercial paper - - - - Preferred stock due within one year 6,250 - 53,750 3,750 Long-term debt due within one year 54,976 204,906 54,712 42,001 Accounts payable 275,932 310,676 372,968 429,807 Customer deposits 41,623 38,144 36,255 34,221 Taxes accrued 161,117 84,185 91,424 130,686 Interest accrued 151,171 175,959 162,513 170,090 Vacation pay accrued 38,531 33,677 35,238 34,418 Miscellaneous 106,810 135,392 130,546 51,289 -------------------------------------------------------------------------------------------------------------- Total 1,035,410 982,939 937,406 896,262 -------------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes - - - - Accumulated deferred investment tax credits 540,134 576,837 601,248 632,111 Disallowed Plant Vogtle capacity buyback costs 109,537 135,926 73,111 80,585 Deferred credits related to income taxes - - - - Miscellaneous 111,171 73,983 83,079 33,789 -------------------------------------------------------------------------------------------------------------- Total 760,842 786,746 757,438 746,485 -------------------------------------------------------------------------------------------------------------- Total Capitalization and Liabilities $10,842,538 $11,176,619 $11,372,346 $11,130,539 ==============================================================================================================
II-138A
BALANCE SHEETS Georgia Power Company ============================================================================================================== At December 31, 1987 1986 1985 1984 -------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 344,250 $ 344,250 $ 344,250 $ 344,250 Paid-in capital 2,208,800 1,980,800 1,730,800 1,415,800 Premium on preferred stock 1,089 3,074 3,074 3,058 Earnings retained in the business 984,043 1,141,077 935,583 723,064 -------------------------------------------------------------------------------------------------------------- Total common equity 3,538,182 3,469,201 3,013,707 2,486,172 Preferred stock 657,844 732,844 632,844 482,844 Preferred stock subject to mandatory redemption 166,250 112,500 120,000 127,500 Preferred securities of subsidiary - - - - Long-term debt 4,825,760 4,464,857 3,878,066 3,432,606 -------------------------------------------------------------------------------------------------------------- Total (excluding amount due within one year) 9,188,036 8,779,402 7,644,617 6,529,122 -------------------------------------------------------------------------------------------------------------- Current Liabilities: Notes payable to banks 302,261 - 36,400 109,356 Commercial paper - - - - Preferred stock due within one year 3,750 7,500 7,500 3,750 Long-term debt due within one year 65,774 47,683 48,229 21,324 Accounts payable 446,004 488,910 355,866 365,048 Customer deposits 31,106 29,520 29,752 34,838 Taxes accrued 114,947 140,968 92,028 151,438 Interest accrued 162,439 150,145 136,279 117,759 Vacation pay accrued 30,100 29,800 28,700 26,600 Miscellaneous 62,364 70,595 60,965 37,874 -------------------------------------------------------------------------------------------------------------- Total 1,218,745 965,121 795,719 867,987 -------------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes - - - - Accumulated deferred investment tax credits 640,694 665,447 572,509 471,640 Disallowed Plant Vogtle capacity buyback costs 79,376 - - - Deferred credits related to income taxes - - - - Miscellaneous 70,643 55,093 17,773 11,323 -------------------------------------------------------------------------------------------------------------- Total 790,713 720,540 590,282 482,963 -------------------------------------------------------------------------------------------------------------- Total Capitalization and Liabilities $11,197,494 $10,465,063 $ 9,030,618 $ 7,880,072 ==============================================================================================================
II-138B GEORGIA POWER COMPANY OUTSTANDING SECURITIES AT DECEMBER 31, 1994 First Mortgage Bonds Amount Interest Amount Series Issued Rate Outstanding Maturity ------------------------------------------------------------------- (Thousands) (Thousands) 1992 $ 130,000 5-1/8% $ 130,000 9/1/95 1993 150,000 4-3/4% 150,000 3/1/96 1993 100,000 5-1/2% 100,000 4/1/98 1992 195,000 6-1/8% 195,000 9/1/99 1993 100,000 6% 100,000 3/1/00 1992 100,000 7% 100,000 10/1/00 1992 150,000 6-7/8% 150,000 9/1/02 1993 200,000 6-5/8% 200,000 4/1/03 1993 75,000 6.35% 75,000 8/1/03 1993 50,000 6-7/8% 50,000 4/1/08 1989 250,000 9.23% 36,157 12/1/19 1992 100,000 8-3/4% 100,000 4/1/22 1992 100,000 8-5/8% 100,000 6/1/22 1993 160,000 7.95% 160,000 2/1/23 1993 100,000 7-5/8% 100,000 3/1/23 1993 75,000 7-3/4% 75,000 4/1/23 1993 125,000 7.55% 125,000 8/1/23 1992 100,000 Variable 100,000 4/1/32 1992 100,000 Variable 100,000 7/1/32 ---------- ---------- $2,360,000 $2,146,157 ========== ========== Pollution Control Bonds Amount Interest Amount Series Issued Rate Outstanding Maturity ------------------------------------------------------------------- (Thousands) (Thousands) 1992 $ 38,800 5.70% $ 38,800 9/1/04 1993 46,790 5-3/8% 46,790 3/1/05 1976 40,800 6-3/4% 1,940 11/1/06 1977 24,100 6.40% 1,960 6/1/07 1978 21,600 6-3/8% 8,130 4/1/08 1991 10,450 Variable 10,450 7/1/11 1985 150,000 10-1/8% 148,535 6/1/15 1985 200,000 10-1/2% 156,580 9/1/15 1985 100,000 10.60% 100,000 10/1/15 1985 100,000 10-1/2% 99,585 11/1/15 1986 56,400 8% 56,400 10/1/16 1987 90,000 8-3/8% 90,000 7/1/17 1987 50,000 9-3/8% 50,000 12/1/17 1993 26,700 6% 26,700 3/1/18 1989 50,000 6.35% 50,000 5/1/19 1991 8,500 Variable 8,500 7/1/19 1991 51,345 7.25% 51,345 7/1/21 1991 10,125 Variable 10,125 7/1/21 1992 13,155 Variable 13,155 5/1/22 1992 75,000 6.20% 75,000 8/1/22 1992 35,000 6.20% 35,000 9/1/22 1993 11,935 5-3/4% 11,935 9/1/23 1993 60,000 5-3/4% 60,000 9/1/23 1994 28,065 5.40% 28,065 1/1/24 1994 175,000 Variable 175,000 7/1/24 1994 125,000 6.60% 125,000 7/1/24 1994 60,000 6-3/8% 60,000 8/1/24 1994 43,420 6-3/4% 43,420 10/1/24 1994 20,000 Variable 20,000 10/1/24 1994 20,000 Variable 20,000 10/1/24 1994 38,725 6-5/8% 38,725 10/1/24 1994 10,000 Variable 10,000 12/1/24 1994 7,000 Variable 7,000 12/1/24 ---------- ---------- $1,797,910 $1,678,140 ========== ========== II-139 GEORGIA POWER COMPANY OUTSTANDING SECURITIES AT DECEMBER 31, 1994 (Continued) Preferred Securities (1) Preferred Securities Interest Amount Series Outstanding Rate Outstanding --------------------------------------------------------------- (Thousands) 1994 4,000,000 9% $100,000 Preferred Stock Shares Dividend Amount Series Outstanding Rate Outstanding --------------------------------------------------------------- (Thousands) (2) 14,090 $5.00 $ 1,409 1953 100,000 $4.92 10,000 1954 433,775 $4.60 43,378 1961 70,000 $4.96 7,000 1962 70,000 $4.60 7,000 1963 70,000 $4.60 7,000 1964 50,000 $4.60 5,000 1965 60,000 $4.72 6,000 1966 90,000 $5.64 9,000 1967 120,000 $6.48 12,000 1968 100,000 $6.60 10,000 1971 300,000 $7.72 30,000 1972 750,000 $7.80 75,000 1991 4,000,000 $2.125 100,000 1992 2,000,000 $1.90 50,000 1992 2,200,000 $1.9875 55,000 1992 2,400,000 $1.9375 60,000 1992 1,200,000 $1.925 30,000 1993 3,000,000 Adjustable 75,000 1993 4,000,000 Adjustable 100,000 ---------- -------- 21,027,865 $692,787 ========== ======== (1)Issued by Georgia Power Capital, L.P., and unconditionally guaranteed by GEORGIA. (2)Issued in exchange for $5.00 preferred outstanding at the time of company formation. II-140 GEORGIA POWER COMPANY SECURITIES RETIRED DURING 1994 First Mortgage Bonds Principal Interest Series Amount Rate ----------------------------------------------------- (Thousands) 1986 $ 69,716 10.00% 1989 63,843 9.23% -------- $133,559 ======== Pollution Control Bonds Principal Interest Series Amount Rate ----------------------------------------------------- (Thousands) 1976 $ 20 6-3/4% 1977 20 6.40% 1978 70 6-3/8% 1984 28,065 11-5/8% 1984 113,745 12-1/4% 1984 123,175 11-5/8% 1984 126,735 12% 1984 75,070 11-3/4% 1985 43,420 10-1/2% -------- $510,320 ======== II-141 GULF POWER COMPANY FINANCIAL SECTION II-142 MANAGEMENT'S REPORT Gulf Power Company 1994 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 generally accepted accounting principles appropriate in the circumstances 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 books and 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 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 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 generally accepted accounting principles. /s/ Travis J. Bowden Travis J. Bowden President and Chief Executive Officer /s/ Arlan E. Scarbrough Arlan E. Scarbrough Chief Financial Officer II-143 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of 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 The Southern Company) as of December 31, 1994 and 1993, and the related statements of income, retained earnings, paid-in capital, and cash flows for each of the three years in the period ended December 31, 1994. 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 generally accepted auditing standards. 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-152 through II-169) referred to above present fairly, in all material respects, the financial position of Gulf Power Company as of December 31, 1994 and 1993, and the results of its operations and its cash flows for the periods stated, in conformity with generally accepted accounting principles. As explained in Notes 2 and 8 to the financial statements, effective January 1, 1993, Gulf Power Company changed its methods of accounting for postretirement benefits other than pensions and for income taxes. /s/ Arthur Andersen LLP Atlanta, Georgia February 15, 1995 II-144 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Gulf Power Company 1994 Annual Report RESULTS OF OPERATIONS Earnings Gulf Power Company's net income after dividends on preferred stock for 1994 totaled $55.2 million, representing a $0.9 million increase from the prior year. Major factors affecting earnings were a decrease in interest charges on long-term debt as a result of security refinancings and an increase in customers. These positive factors were offset by lower revenues primarily due to mild summer weather, and an increase in other operation expenses and taxes. Also, earnings decreased approximately $3.0 million, reflecting the first full year of decreased industrial sales due to the Company's largest industrial customer, Monsanto, installing its own cogeneration facility in August, 1993. Earnings for 1994 increased from the 1993 level, even though 1993 earnings included $4.0 million of unusual items pertaining to the gain on sale of Gulf States Utilities Company (Gulf States) stock and the reversal of a wholesale rate refund discussed below. In 1993, earnings were $54.3 million, representing a $0.2 million increase compared to the prior year. This increase resulted primarily from a $2.3 million gain on the sale of Gulf States' stock and the reversal of a $1.7 million wholesale rate refund as the result of a court order. The Company also experienced growth in residential and commercial sales and a decrease in interest expense on long-term debt as a result of security refinancings. These positive events were offset by higher operation and maintenance expense and decreased industrial sales, reflecting the loss of Monsanto, which is discussed above. The Company's return on average common equity was 13.15 percent for 1994, a slight decrease from the 13.29 percent return earned in 1993. Revenues Changes in operating revenues over the last three years are the result of the following factors: =========================================================== Increase (Decrease) From Prior Year ------------------------------- 1994 1993 1992 ------------------------------- (in thousands) Retail -- Change in base rates $ 0 $ 1,571 $ 722 Sales growth 7,126 7,671 12,965 Weather (4,631) 4,049 (6,448) Regulatory cost recovery and other 8,938 (3,079) (1,839) ----------------------------------------------------------- Total retail 11,433 10,212 5,400 ----------------------------------------------------------- Sales for resale-- Non-affiliates (6,098) 2,131* 442 Affiliates (5,813) (909) (5,268) ----------------------------------------------------------- Total sales for resale (11,911) 1,222 (4,826) ----------------------------------------------------------- Other operating revenues (3,851) 806 5,121 ----------------------------------------------------------- Total operating revenues $(4,329) $12,240 $ 5,695 =========================================================== Percent change (0.7)% 2.1% 1.0% ----------------------------------------------------------- * Includes the non-interest portion of the wholesale rate refund reversal discussed in "Earnings." Retail revenues of $483.1 million in 1994 increased $11.4 million or 2.4 percent from last year, compared with an increase of 2.2 percent in 1993 and 1.2 percent in 1992. Revenues increased in the residential and commercial classes primarily due to customer growth and favorable economic conditions, partially offset by the effect of milder weather. Revenues in the industrial class declined in 1994 and 1993 primarily due to the loss of Monsanto as discussed in "Earnings." Also, in 1994, industrial sales decreased due to an unexpected six month plant shutdown -- which ended in October 1994 -- by another major industrial customer. The change in base rates for 1993 and 1992 reflects the expiration of a retail rate penalty in September 1992. The increase in regulatory cost recovery and other retail revenue is primarily attributable to the first year of recovery under the Environmental Cost Recovery (ECR) clause. Regulatory cost recovery and other primarily includes recovery provisions for fuel expense and the energy component of purchased power costs; energy conservation costs; purchased power capacity II-145 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Gulf Power Company 1994 Annual Report costs; and environmental compliance costs. The recovery provisions 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 $83.5 million in 1994, decreasing $11.9 million or 12.5 percent from 1993. The majority of non-affiliated energy sales arise from long-term contractual agreements. Non-affiliated long-term contracts include capacity and energy components. Capacity revenues reflect the recovery of fixed costs and return on investment. Energy is sold at its variable cost. The capacity and energy components under these long-term contracts were as follows: =========================================================== 1994 1993 1992 ------------------------------------ (in thousands) Capacity $30,926 $33,805 $34,180 Energy 18,456 21,202 22,933 ----------------------------------------------------------- $49,382 $55,007 $57,113 =========================================================== Capacity revenues decreased in 1994, reflecting the decline in capacity under long-term contracts. 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. The changes in other operating revenues for 1994 and 1993 are primarily due to adjustments of regulatory cost recovery clauses for differences between recoverable costs and the amounts actually reflected in revenues. See Notes 1 and 3 to the financial statements under "Revenues and Regulatory Cost Recovery Clauses" and "Environmental Cost Recovery," respectively, for further discussion. Kilowatt-hour sales for 1994 and percent changes in sales since 1992 are reported below. ============================================================= (millions of Amount Percent Change kilowatt-hours) ------ ---------------------- 1994 1994 1993 1992 ------ ---------------------- Residential 3,752 1.1% 3.2% 4.1% Commercial 2,549 4.8 2.7 4.2 Industrial 1,847 (9.0) (6.9) 2.9 Other 17 - - (2.7) ------ Total retail 8,165 (0.3) 0.4 3.8 Sales for resale Non-affiliates 1,419 (2.8) 2.0 (7.7) Affiliates 874 (15.2) (14.8) (2.2) ------ Total 10,458 (2.1) (1.1) 1.4 ============================================================= Retail sales decreased in 1994 primarily due to mild summer weather and a decline in sales in the industrial class, which reflects the loss of Monsanto and a lengthy shutdown of another major customer. The decline in sales was partially offset by a 2.4 percent increase in residential customers, a 2.9 percent increase in commercial customers, and an improving economy. Retail sales were relatively flat in 1993. In 1994, energy sales for resale to non-affiliates decreased 2.8 percent and are predominantly related to unit power sales under long-term contracts to Florida utilities, which are discussed above. Energy sales to affiliated companies vary from year to year as mentioned previously. Expenses Total operating expenses for 1994 decreased $4.0 million or 0.8 percent from 1993. The decrease is primarily due to decreased fuel and purchased power expenses, offset by an increase in other operation expenses and taxes. In 1993, total operating expenses increased $16.6 million or 3.5 percent from 1992 primarily due to increased operation and maintenance expenses and higher taxes. Fuel and purchased power expenses for 1994 declined $13.4 million or 6.5 percent from 1993. The decline reflects the decrease in generation due to the mild weather experienced in 1994 and the lower cost of fuel. In 1993, fuel and purchased power expenses decreased $3.8 million or 1.8 percent from 1992, reflecting the lower cost of fuel. II-146 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Gulf Power Company 1994 Annual Report In 1994, other operation expenses increased $4.7 million or 4.3 percent from the 1993 level. The increase is primarily attributable to additional costs of $6.4 million related to the buyouts and renegotiation of coal supply contracts and $1.3 million for the Company's pro rata share of affiliated companies' workforce reduction costs. These costs are further discussed in Notes 2 and 5 to the financial statements under "Work Force Reduction Programs" and "Fuel Commitments," respectively. The increase in coal buyouts and workforce reductions costs were partially offset by a decrease in various administrative and general expenses. In 1993, other operation expenses increased $11.9 million or 12.2 percent from the previous year, reflecting $7.4 million of additional costs related to the buyouts and renegotiation of coal supply contracts. In addition, in 1993, other operation expenses increased $3.5 million due to higher employee benefit costs, the Company's pro rata share of the Southern electric system's environmental cleanup costs of a research facility site, and costs related to an automotive fleet reduction program. Maintenance expense remained relatively flat in 1994 reflecting no major changes in the scheduling of maintenance of production facilities. In 1993, maintenance expense increased $4.1 million or 9.7 percent over 1992 due to scheduled maintenance of production facilities. Federal and state income taxes increased $1.2 million or 3.8 percent in 1994 primarily due to an increase in taxable income. Other taxes increased $1.5 million or 3.7 percent due to higher property taxes, gross receipt taxes, and franchise fee collections. In 1993, federal income taxes increased $0.7 million primarily due to a corporate federal income tax rate increase from 34 percent to 35 percent. Taxes other than income taxes increased $2.3 million in 1993, an increase of 6.1 percent over the 1992 expense primarily due to increases in property and gross receipt taxes. Changes in gross receipt taxes and franchise fee collections, which are collected from customers, have no impact on earnings. In 1994, interest expense decreased $3.8 million or 10.5 percent under the prior year. Interest expense in 1993 decreased $3.2 million or 8.1 percent from the 1992 level. The decrease in both years is primarily attributable to the refinancing of some of the Company's higher-cost securities. 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 recent years, it continues to have an adverse effect on the Company because of the large investment in long-lived utility plant. 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 stock. 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 a number of factors ranging from growth in energy sales to the effects of a less regulated, more competitive environment. Future earnings in the near term will depend upon growth in energy sales, which is subject to a number of factors. Traditionally, these factors included changes in contracts with neighboring utilities, energy conservation practiced by customers, the elasticity of demand, weather, competition, and the rate of economic growth in the Company's service area. However, the Energy Policy Act of 1992 (Energy Act) is beginning to have a dramatic effect on the future of the electric utility industry. The Energy Act promotes energy efficiency, alternative fuel use, and increased competition for electric utilities. The Company is posturing the business to meet the challenge of this major change in the traditional practice of selling electricity. The Energy Act allows independent power producers (IPPs) to access the Company's transmission network in order to sell electricity to other utilities. This may enhance the incentive for IPPs to build cogeneration plants for industrial and commercial customers and sell excess energy generation to utilities. Presently, Florida law does not permit retail wheeling. Although the Energy Act does not require transmission access to retail customers, retail wheeling initiatives are rapidly evolving and becoming very prominent issues in several states. In order to address these initiatives, numerous questions must be resolved, with the most complex ones II-147 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Gulf Power Company 1994 Annual Report relating to transmission pricing and recovery of stranded investments. As the initiatives become a reality, the structure of the utility industry could radically change. Therefore, unless the Company remains a low-cost producer and provides quality service, the Company's retail energy sales growth could be limited and this could significantly erode earnings. Conversely, being the low-cost producer could provide significant opportunities to increase market share and profitability. The future effect of cogeneration and small-power production facilities cannot be fully determined at this time. One effect of cogeneration which the Company has experienced is the loss of its largest industrial customer, Monsanto, which is discussed in "Earnings." The Company's strategy is to identify and pursue profitable cogeneration projects in Northwest Florida. The Florida Public Service Commission (FPSC) has set conservation goals for the Company to reduce 148 megawatts of peak demand by the year 2003. The Company will file conservation programs in 1995 to accomplish these goals. In response to these goals and seeking to remain competitive with other electric utilities, the Company has developed initiatives which emphasize price flexibility and competitive offering of energy efficiency products and services. These initiatives will enable customers to lower or alter their peak energy requirements. Besides promoting energy efficiency, another benefit of these initiatives could be the ability to defer the need to construct some generating facilities further into the future. 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. See Note 1 to the financial statements under "Regulatory Assets and Liabilities" for additional information. The Federal Energy Regulatory Commission (FERC) regulates wholesale rate schedules and power sales contracts that the Company has with its sales for resale customers. The FERC is currently reviewing the rate of return on common equity included in these schedules and contracts that have a return on common equity of 13.75 percent or greater, and may require such returns to be lowered, possibly retroactively. See Note 3 to the financial statements under "FERC Reviews Equity Returns" for additional information. Compliance costs related to the Clean Air Act Amendments of 1990 (Clean Air Act) could reduce earnings if such costs are not fully recovered. The Clean Air Act is discussed later under "Environmental Matters." Also, state of 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." FINANCIAL CONDITION Overview The principal changes in the Company's financial condition during 1994 were gross property additions of $78.9 million and an increase of $47.4 million in notes payable. Funds for the property additions were provided by internal sources. The Company continued to refinance higher-cost securities to lower the Company's cost of capital. See "Financing Activities" below and the Statements of Cash Flows for further details. Financing Activities The Company continued to lower its financing costs by issuing new securities and other debt, and retiring higher-cost issues in 1994. The Company sold through public authorities, $42 million of pollution control revenue bonds and obtained $32.1 million of long-term bank notes. Retirements, including maturities during 1994, totaled $48.9 million of first mortgage bonds, $42.1 million of pollution control bonds, $24.2 million of bank notes and other long-term debt, and $1 million of preferred stock. (See the Statements of Cash Flows for further details.) II-148 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Gulf Power Company 1994 Annual Report Composite financing rates for the years 1992 through 1994 as of year end were as follows: =========================================================== 1994 1993 1992 ------------------------- Composite interest rate on long-term debt 6.5% 7.1% 8.0% Composite preferred stock dividend rate 6.6% 6.5% 7.3% =========================================================== The continued decrease in the composite interest rate on long-term debt reflects the Company's continued efforts to refinance higher-cost debt, which is discussed above. The slight increase in the composite preferred dividend rate is primarily due to an increase in dividends on the Company's adjustable rate preferred stock, reflecting the recent rise in interest rates. Capital Requirements for Construction The Company's gross property additions, including those amounts related to environmental compliance, are budgeted at $222 million for the three years beginning 1995 ($62 million in 1995, $76 million in 1996, and $84 million in 1997). The estimates of property additions for the three-year period include $13 million committed to meeting the requirements of the Clean Air Act, the cost of which is expected to be recovered through the ECR clause, which is discussed in Note 3 to the financial statements under "Environmental Cost Recovery." Actual construction costs may vary from this estimate because of factors such as the granting of timely and adequate rate increases; changes in environmental regulations; revised load projections; the cost and efficiency of construction labor, equipment, and materials; and the cost of capital. The Company does not have any baseload generating plants under construction. However, significant construction related to maintaining and upgrading transmission and distribution facilities and generating plants will continue. Other Capital Requirements In addition to the funds needed for the construction program, approximately $74.3 million will be required by the end of 1997 in connection with maturities of long-term debt and preferred stock subject to mandatory redemption. Also, the Company plans to continue a program to retire higher-cost debt and preferred stock and replace these obligations with lower-cost capital as market conditions and terms of the instruments permit. Environmental Matters In November 1990, the Clean Air Act was signed into law. Title IV of the Clean Air Act -- the acid rain compliance provision of the law -- will have a significant impact on the Company. Specific reductions in sulfur dioxide and nitrogen oxide emissions from fossil-fired generating plants will be required in two phases. Phase I compliance began in 1995 and affects eight generating plants -- some 10,000 megawatts of capacity or 35 percent of total capacity -- in the Southern electric system. Phase II compliance is required by 2000, and all fossil-fired generating plants in the Southern electric system will be affected. 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 rate-adjustment clause. 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 legislation discussed below is expected to be recovered through the Environmental Cost Recovery clause. In 1995, the Environmental Protection Agency (EPA) will begin issuing annual sulfur dioxide emission allowances through the allowance trading program. An emission allowance is the authority to emit one ton of sulfur dioxide during a calendar year. The method for issuing allowances is based on the fossil fuel consumed from 1985 through 1987 for each affected generating unit. Emission allowances are transferable and can be bought, sold, or banked and used in the future. The sulfur dioxide emission allowance program is expected to minimize the cost of compliance. The Southern Company's sulfur dioxide compliance strategy is designed to use allowances as a compliance option. The Southern Company expects to achieve Phase I sulfur dioxide compliance at the eight affected plants by switching to low-sulfur coal, which has required some equipment upgrades. This compliance strategy is expected to result in unused emission allowances being banked for later use. Additional construction II-149 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Gulf Power Company 1994 Annual Report expenditures are required to install equipment for the control of nitrogen oxide emissions at these eight plants. Also, continuous emissions monitoring equipment has been installed on all fossil-fired units. Construction expenditures for Phase I are estimated to total approximately $300 million for The Southern Company through 1995. Through 1994, the Company's construction expenditures for Phase I were approximately $51 million. For Phase II sulfur dioxide compliance, The Southern Company could use emission allowances banked during Phase I, increase fuel switching, install flue gas desulfurization equipment at selected plants, and/or purchase more allowances depending on the price and availability of allowances. Also, in Phase II, equipment to control nitrogen oxide emissions will be installed on additional system fossil-fired plants as required to meet anticipated Phase II limits. Therefore, during the period 1996 to 2000, the current compliance strategy could require total construction expenditures of approximately $150 million for The Southern Company, including approximately $19 million for the Company. However, the full impact of Phase II compliance cannot be determined with certainty, pending the continuing development of a market for emission allowances, the completion of EPA regulations, and the possibility of new emission reduction technologies. Following adoption of legislation in April of 1992 allowing electric utilities in Florida to seek FPSC approval of their Clean Air Act Compliance Plans, the Company filed its petition for approval. The FPSC approved the Company's plan for Phase I compliance, deferring until a later date approval of its Phase II Plan. An average increase of up to 4 percent in annual revenue requirements from the Company's customers could be necessary to fully recover the cost of compliance for both Phase I and Phase II of Title IV of the Clean Air Act. Compliance costs include construction expenditures, increased costs for switching to low-sulfur coal, and costs related to emission allowances. Title III of the Clean Air Act requires a multi-year EPA study of power plant emissions of hazardous air pollutants. The EPA is scheduled to submit a report to Congress on the results of this study by November 1995. The report will include a decision on whether additional regulatory control of these substances is warranted. Compliance with any new control standards could result in significant additional costs. The impact of new standards -- if any -- will depend on the development and implementation of applicable regulations. The EPA continues to evaluate the need for a new short-term ambient air quality standard for sulfur dioxide. Preliminary results from an EPA study on the impact of a new standard indicate that a number of plants could be required to install sulfur dioxide controls. These controls would be in addition to the controls already required to meet the acid rain provision of the Clean Air Act. The EPA issued proposed rules in November 1994 and is required to take final action on this issue in 1996. The impact of any new standard will depend on the level chosen for the standard and cannot be determined at this time. In addition, the EPA is evaluating the need to revise the ambient air quality standards for particulate matter, nitrogen oxides, and ozone. The impact of any new standard will depend on the level chosen for the standard and cannot be determined at this time. In 1995, the EPA may issue revised rules on air quality control regulations related to stack height requirements of the Clean Air Act. The full impact of the final rules cannot be determined at this time, pending their development and implementation. In 1993, the EPA issued a ruling confirming the non-hazardous status of coal ash. However, the EPA has until 1998 to classify co-managed utility wastes -- coal ash and other utility wastes -- as either non-hazardous or hazardous. If the EPA classifies the co-managed wastes as hazardous, then substantial additional costs for the management of such wastes may be required. The full impact of any change in the regulatory status will depend on the subsequent development of co-managed waste requirements. 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 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." II-150 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Gulf Power Company 1994 Annual Report Several major pieces of environmental legislation are being considered for reauthorization or amendment by Congress. These include: 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 these requirements cannot be determined at this time, pending the development and implementation of applicable regulations. Compliance with possible new 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 for lawsuits alleging damages caused by electromagnetic fields exists. Sources of Capital At December 31, 1994, the Company had $0.9 million of cash and cash equivalents to meet its short-term cash needs. It is anticipated that the funds required for construction and other purposes, including compliance with environmental regulations, will be derived from operations; the sale of additional first mortgage bonds, pollution control bonds, and preferred stock; bank notes; and capital contributions from The Southern Company. 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 sufficient to permit, at present interest and preferred dividend 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. II-151
STATEMENTS OF INCOME For the Years Ended December 31, 1994, 1993, and 1992 Gulf Power Company 1994 Annual Report ========================================================================================= 1994 1993 1992 ----------------------------------------------------------------------------------------- (in thousands) Operating Revenues: Revenues $ 561,460 $ 559,976 $ 546,827 Revenues from affiliates 17,353 23,166 24,075 ----------------------------------------------------------------------------------------- Total operating revenues 578,813 583,142 570,902 ----------------------------------------------------------------------------------------- Operating Expenses: Operation- Fuel 161,168 170,485 182,754 Purchased power from non-affiliates 6,761 4,386 1,394 Purchased power from affiliates 25,819 32,273 26,788 Other 113,879 109,164 97,310 Maintenance 46,700 46,004 41,947 Depreciation and amortization 56,615 55,309 53,758 Taxes other than income taxes 41,701 40,204 37,898 Federal and state income taxes (Note 8) 33,957 32,730 32,078 ----------------------------------------------------------------------------------------- Total operating expenses 486,600 490,555 473,927 ----------------------------------------------------------------------------------------- Operating Income 92,213 92,587 96,975 Other Income (Expense): Allowance for equity funds used during construction (Note 1) 450 512 14 Interest income 1,429 1,328 2,733 Other, net (780) (1,238) (1,487) Gain on sale of investment securities - 3,820 - Income taxes applicable to other income 95 (921) 187 ----------------------------------------------------------------------------------------- Income Before Interest Charges 93,407 96,088 98,422 ----------------------------------------------------------------------------------------- Interest Charges: Interest on long-term debt 27,124 31,344 35,792 Other interest charges 2,442 2,877 1,410 Interest on notes payable 1,509 870 1,041 Amortization of debt discount, premium, and expense, net 1,834 1,412 1,032 Allowance for debt funds used during construction (Note 1) (656) (454) (46) ----------------------------------------------------------------------------------------- Net interest charges 32,253 36,049 39,229 ----------------------------------------------------------------------------------------- Net Income 61,154 60,039 59,193 Dividends on Preferred Stock 5,925 5,728 5,103 ----------------------------------------------------------------------------------------- Net Income After Dividends on Preferred Stock $ 55,229 $ 54,311 $ 54,090 ========================================================================================= The accompanying notes are an integral part of these statements.
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STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1994, 1993, and 1992 Gulf Power Company 1994 Annual Report ================================================================================================= 1994 1993 1992 ------------------------------------------------------------------------------------------------- (in thousands) Operating Activities: Net income $ 61,154 $ 60,039 $ 59,193 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 86,098 72,111 68,021 Deferred income taxes and investment tax credits (6,986) 5,347 3,322 Allowance for equity funds used during construction (450) (512) (14) Other, net 4,898 (864) (735) Changes in certain current assets and liabilities -- Receivables, net 3,540 12,867 (11,041) Inventories (13,901) 5,574 23,560 Payables (10,159) 5,386 1,580 Other 610 (9,504) (13,637) ------------------------------------------------------------------------------------------------- Net cash provided from operating activities 124,804 150,444 130,249 ------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (78,869) (78,562) (64,671) Other (3,493) (5,328) 3,970 ------------------------------------------------------------------------------------------------- Net cash used for investing activities (82,362) (83,890) (60,701) ------------------------------------------------------------------------------------------------- Financing Activities and Capital Contributions: Proceeds: Preferred stock - 35,000 29,500 First mortgage bonds - 75,000 25,000 Pollution control bonds 42,000 53,425 8,930 Capital contributions from parent 98 11 121 Other long-term debt 32,108 25,000 - Retirements: Preferred stock (1,000) (21,060) (15,500) First mortgage bonds (48,856) (88,809) (117,693) Pollution control bonds (42,100) (40,650) (9,205) Other long-term debt (24,240) (7,736) (5,783) Notes payable, net 47,447 (37,947) 44,000 Payment of preferred stock dividends (5,925) (5,728) (5,103) Payment of common stock dividends (44,000) (41,800) (39,900) Miscellaneous (2,648) (6,888) (8,760) ------------------------------------------------------------------------------------------------- Net cash used for financing activities (47,116) (62,182) (94,393) ------------------------------------------------------------------------------------------------- Net Increase (Decrease) in Cash and Cash Equivalents (4,674) 4,372 (24,845) Cash and Cash Equivalents at Beginning of Year 5,576 1,204 26,049 ------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 902 $ 5,576 $ 1,204 ================================================================================================= Supplemental Cash Flow Information: Cash paid during the year for -- Interest (net of amount capitalized) $30,139 $28,470 $38,164 Income taxes $43,089 $27,865 $37,569 ------------------------------------------------------------------------------------------------- ( ) Denotes use of cash. The accompanying notes are an integral part of these statements.
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BALANCE SHEETS At December 31, 1994 and 1993 Gulf Power Company 1994 Annual Report ======================================================================================== ASSETS 1994 1993 ---------------------------------------------------------------------------------------- (in thousands) Utility Plant: Plant in service (Notes 1 and 6) $ 1,656,367 $ 1,611,704 Less accumulated provision for depreciation 622,911 610,542 ---------------------------------------------------------------------------------------- 1,033,456 1,001,162 Construction work in progress 24,288 34,591 ---------------------------------------------------------------------------------------- Total 1,057,744 1,035,753 ---------------------------------------------------------------------------------------- Other Property and Investments 7,997 13,242 ---------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 902 5,576 Receivables- Customer accounts receivable 57,637 57,226 Other accounts and notes receivable 2,268 5,904 Affiliated companies 1,079 1,241 Accumulated provision for uncollectible accounts (600) (447) Fossil fuel stock, at average cost 35,686 20,652 Materials and supplies, at average cost 35,257 36,390 Current portion of deferred coal contract costs (Note 5) 2,521 12,535 Regulatory clauses under recovery (Note 1) 5,002 3,244 Prepayments 4,354 2,160 Vacation pay deferred (Note 1) 4,172 4,022 ---------------------------------------------------------------------------------------- Total 148,278 148,503 ---------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes (Note 8) 30,433 31,334 Debt expense and loss, being amortized 22,119 21,247 Deferred coal contract costs (Note 5) 38,169 52,884 Miscellaneous 10,802 4,846 ---------------------------------------------------------------------------------------- Total 101,523 110,311 ---------------------------------------------------------------------------------------- Total Assets $ 1,315,542 $ 1,307,809 ======================================================================================== The accompanying notes are an integral part of these statements.
II-154
BALANCE SHEETS (continued) At December 31, 1994 and 1993 Gulf Power Company 1994 Annual Report ======================================================================================== CAPITALIZATION AND LIABILITIES 1994 1993 ---------------------------------------------------------------------------------------- (in thousands) Capitalization (See accompanying statements): Common stock equity (Note 11) $ 425,472 $ 414,196 Preferred stock 89,602 89,602 Preferred stock subject to mandatory redemption - 1,000 Long-term debt 356,393 369,259 ---------------------------------------------------------------------------------------- Total 871,467 874,057 ---------------------------------------------------------------------------------------- Current Liabilities: Preferred stock due within one year 1,000 1,000 Long-term debt due within one year (Note 10) 13,439 41,552 Notes payable 53,500 6,053 Accounts payable- Affiliated companies 9,132 18,560 Other 14,524 20,139 Customer deposits 13,609 15,082 Taxes accrued- Federal and state income 5,990 10,330 Other 7,475 2,685 Interest accrued 6,106 5,420 Regulatory clauses over recovery (Note 1) 3,960 840 Vacation pay accrued (Note 1) 4,172 4,022 Miscellaneous 7,828 8,527 ---------------------------------------------------------------------------------------- Total 140,735 134,210 ---------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes (Note 8) 151,681 151,743 Deferred credits related to income taxes (Note 8) 71,964 76,876 Accumulated deferred investment tax credits 38,391 40,770 Accumulated provision for property damage (Note 1) 11,522 10,509 Accumulated provision for postretirement benefits (Note 2) 13,680 10,749 Miscellaneous 16,102 8,895 ---------------------------------------------------------------------------------------- Total 303,340 299,542 ---------------------------------------------------------------------------------------- Commitments and Contingent Matters (Notes 1, 2, 3, 4, 5, and 7) Total Capitalization and Liabilities $ 1,315,542 $ 1,307,809 ======================================================================================== The accompanying notes are an integral part of these statements.
II-155
STATEMENTS OF CAPITALIZATION At December 31, 1994 and 1993 Gulf Power Company 1994 Annual Report ================================================================================================= 1994 1993 1994 1993 ------------------------------------------------------------------------------------------------- (in thousands) (percent of total) Common Stock Equity: Common stock, without par value -- Authorized and outstanding -- 992,717 shares in 1994 and 1993 $ 38,060 $ 38,060 Paid-in capital 218,380 218,282 Premium on preferred stock 81 81 Retained earnings (Note 11) 168,951 157,773 ------------------------------------------------------------------------------------------------- Total common stock equity 425,472 414,196 48.8 % 47.4 % ------------------------------------------------------------------------------------------------- Cumulative Preferred Stock: $10 par value, authorized 10,000,000 shares, Outstanding 2,580,000 shares at December 31, 1994 $25 stated capital -- 6.72% 20,000 20,000 7.00% 14,500 14,500 7.30% 15,000 15,000 Adjustable Rate -- at January 1, 1995: 6.07% 15,000 15,000 $100 par value -- Authorized -- 791,626 shares Outstanding -- 251,026 shares at December 31, 1994 4.64% 5,102 5,102 5.16% 5,000 5,000 5.44% 5,000 5,000 7.52% 5,000 5,000 7.88% 5,000 5,000 ------------------------------------------------------------------------------------------------- Total (annual dividend requirement -- $5,901,300) 89,602 89,602 10.3 10.3 ------------------------------------------------------------------------------------------------- Cumulative Preferred Stock Subject to Mandatory Redemption: $100 par value -- Authorized -- 10,000 shares Outstanding -- 10,000 shares at December 31, 1994 11.36% Series 1,000 2,000 ------------------------------------------------------------------------------------------------- Total (annual dividend requirement -- $113,600) 1,000 2,000 ------------------------------------------------------------------------------------------------- Less amount due within one year 1,000 1,000 ------------------------------------------------------------------------------------------------- Total excluding amount due within one year - 1,000 - 0.1 -------------------------------------------------------------------------------------------------
II-156
STATEMENTS OF CAPITALIZATION (continued) At December 31, 1994 and 1993 Gulf Power Company 1994 Annual Report ================================================================================================= 1994 1993 1994 1993 ------------------------------------------------------------------------------------------------- (in thousands) (percent of total) First mortgage bonds -- Maturity Interest Rates -------- -------------- October 1, 1994 4.625% - 12,000 June 1, 1996 6% - 15,000 August 1, 1997 5.875% 25,000 25,000 April 1, 1998 9.20% - 19,486 April 1, 1998 5.55% 15,000 15,000 July 1, 1998 5.00% 30,000 30,000 July 1, 2003 6.125% 30,000 30,000 September 1, 2008 9% 2,680 5,050 December 1, 2021 8.75% 50,000 50,000 ------------------------------------------------------------------------------------------------- Total first mortgage bonds 152,680 201,536 Pollution control obligations (Note 9) 169,755 169,855 Other long-term debt (Note 9) 50,388 42,520 Unamortized debt premium (discount), net (2,991) (3,100) ------------------------------------------------------------------------------------------------- Total long-term debt (annual interest requirement -- $23,777,000) 369,832 410,811 Less amount due within one year (Note 10) 13,439 41,552 ------------------------------------------------------------------------------------------------- Long-term debt excluding amount due within one year 356,393 369,259 40.9 42.2 ------------------------------------------------------------------------------------------------- Total Capitalization $871,467 $874,057 100.0 % 100.0 % ================================================================================================= The accompanying notes are an integral part of these statements.
II-157
STATEMENTS OF RETAINED EARNINGS For the Years Ended December 31, 1994, 1993, and 1992 Gulf Power Company 1994 Annual Report ======================================================================================== 1994 1993 1992 ---------------------------------------------------------------------------------------- (in thousands) Balance at Beginning of Year $ 157,773 $ 146,771 $ 134,372 Net income after dividends on preferred stock 55,229 54,311 54,090 Cash dividends on common stock (44,000) (41,800) (39,900) Preferred stock transactions, net (51) (1,509) (1,791) ---------------------------------------------------------------------------------------- Balance at End of Year (Note 11) $ 168,951 $ 157,773 $ 146,771 ======================================================================================== STATEMENTS OF PAID-IN CAPITAL For the Years Ended December 31, 1994, 1993, and 1992 Gulf Power Company 1994 Annual Report ======================================================================================== 1994 1993 1992 ---------------------------------------------------------------------------------------- (in thousands) Balance at Beginning of Year $ 218,282 $ 218,271 $ 218,150 Contributions to capital by parent company 98 11 121 ---------------------------------------------------------------------------------------- Balance at End of Year $ 218,380 $ 218,282 $ 218,271 ======================================================================================== The accompanying notes are an integral part of these financial statements.
II-158 NOTES TO FINANCIAL STATEMENTS At December 31, 1994, 1993, and 1992 Gulf Power Company 1994 Annual Report 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Gulf Power Company is a wholly owned subsidiary of The Southern Company, which is the parent company of five operating companies, a system service company, Southern Communications Services (Southern Communications), Southern Electric International (Southern Electric), Southern Nuclear Operating Company (Southern Nuclear) and The Southern Development and Investment Group (SDIG). The operating companies (Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, and Savannah Electric and Power Company) provide electric service in four Southeastern states. Contracts among the companies -- dealing with 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). The system service company provides, at cost, specialized services to The Southern Company and subsidiary companies. Southern Communications, beginning in mid-1995, will provide digital wireless communications services -- over the 800-megahertz frequency band--to The Southern Company's subsidiaries and also will market these services to the public within the Southeast. Southern Electric designs, builds, owns and operates power production facilities and provides a broad range of technical services to industrial companies and utilities in the United States and a number of international markets. Southern Nuclear provides services to The Southern Company's nuclear power plants. SDIG develops new business opportunities related to energy products and services. The Southern Company is registered as a holding company under the Public Utility Holding Company Act of 1935 (PUHCA). Both The 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 generally accepted accounting principles and complies with the accounting policies and practices prescribed by the FPSC. Certain prior years' data presented in the financial statements have been reclassified to conform with current year presentation. 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 to be credited to customers through the ratemaking process. Regulatory assets and (liabilities) reflected in the Balance Sheets at December 31 relate to: =========================================================== 1994 1993 ----------------------- (in thousands) Current & deferred fuel charges $ 40,690 $ 65,419 Deferred income taxes 30,433 31,334 Premium on reacquired debt 18,494 17,554 Environmental remediation 7,800 - Vacation pay 4,172 4,022 Regulatory clauses under (over) recovery, net 1,042 2,404 Deferred income tax credits (71,964) (76,876) Accumulated provision for property damage (11,522) (10,509) Other, net (2,691) (1,697) ----------------------------------------------------------- Total $ 16,454 $ 31,651 =========================================================== In the event that a portion of the Company's operations are no longer subject to the provisions of Statement No. 71, the Company would be required to write off related regulatory assets and liabilities. In addition, the Company would be required to determine any impairment to other assets, including plant, and write down the assets to their fair value. II-159 NOTES (continued) Gulf Power Company 1994 Annual Report Revenues and Regulatory Cost Recovery Clauses The Company accrues revenues for service rendered but unbilled at the end of each fiscal period. The Company's electric rates include provisions to periodically adjust billings for fluctuations in fuel and the energy component of purchased power costs; purchased power capacity costs; energy conservation costs; and environmental compliance costs. Revenues are adjusted monthly for differences between recoverable costs and amounts actually reflected in current rates. Depreciation and Amortization Depreciation of the original cost of depreciable utility plant in service is provided primarily by using composite straight-line rates which approximated 3.8 percent in 1994, 1993, and 1992. 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. Income Taxes The Company 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. Effective January 1, 1993, the Company adopted FASB Statement No. 109, Accounting for Income Taxes. Statement No. 109 required, among other things, conversion to the liability method of accounting for accumulated deferred income taxes. See Note 8 for additional information about Statement No. 109. The Company is included in the consolidated federal income tax return of The Southern Company. 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 FPSC-approved composite rate used to calculate AFUDC was 7.27 percent for 1994 and the second half of 1993, and 8.03 percent for the first half of 1993 and all of 1992. AFUDC amounts for 1994, 1993, and 1992 were $1.1 million, $966 thousand, and $60 thousand, respectively. The increase in 1994 and 1993 is primarily due to an increase in construction projects at Plant Daniel. Utility Plant Utility plant 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 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. II-160 NOTES (continued) Gulf Power Company 1994 Annual Report Financial Instruments In accordance with FASB Statement No. 107, Disclosure About Fair Values of Financial Instruments, all financial instruments of the Company -- for which the carrying amount does not approximate fair value -- are shown in the table below as of December 31: ============================================================ 1994 ----------------------- Carrying Fair Amount Value ----------------------- (in thousands) Long-term debt $369,832 $355,019 Preferred stock subject to mandatory redemption 1,000 1,030 ============================================================ ============================================================ 1993 ----------------------- Carrying Fair Amount Value ----------------------- (in thousands) Long-term debt $410,811 $431,251 Preferred stock subject to mandatory redemption 2,000 2,040 ============================================================ The fair values for long-term debt and preferred stock subject to mandatory redemption 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. Vacation Pay The Company's employees earn their vacation in one year and take it in the subsequent year. However, for ratemaking purposes, vacation pay is recognized as an allowable expense only when paid. Consistent with this ratemaking treatment, the Company accrues a current liability for earned vacation pay and records a current asset representing the future recoverability of this cost. The amount was $4.2 million and $4.0 million at December 31, 1994, and 1993, respectively. In 1995, an estimated 81.3 percent of the 1994 deferred vacation cost will be expensed and the balance will be charged to construction and other accounts. 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 $2.5 million and $2.2 million at December 31, 1994, and 1993, respectively, is included in miscellaneous current liabilities in the accompanying Balance Sheets. Provision for Property Damage Due to a significant increase in the cost of traditional insurance, effective in 1993, the Company became self-insured for the full cost of storm and other damage to its transmission and distribution property. As permitted by regulatory authorities, the Company provides for the estimated cost of uninsured property damage by charges to income amounting to $1.2 million annually. At December 31, 1994, and 1993, the accumulated provision for property damage amounted to $11.5 million and $10.5 million, respectively. The expense of repairing such damage as occurs from time to time is charged to the provision to the extent it is available. 2. RETIREMENT BENEFITS Pension Plan The Company has a defined benefit, trusteed, non-contributory pension plan that covers substantially all regular employees. Benefits are based on the greater of amounts resulting from two different formulas: years of service and final average pay or years of service and a flat-dollar benefit. The Company uses the "entry age normal method with a frozen initial liability" actuarial method for funding purposes, subject to limitations under federal income tax regulations. Amounts funded to the pension trust fund are primarily invested in equity and fixed-income securities. FASB Statement No. 87, Employers' Accounting for Pensions, requires use of the "projected unit credit" actuarial method for financial reporting purposes. II-161 NOTES (continued) Gulf Power Company 1994 Annual Report Postretirement Benefits The Company also provides certain medical care and life insurance benefits for retired employees. Substantially all employees may become eligible for these benefits when they retire. A qualified trust for medical benefits is funded to the extent deductible under federal income tax regulations. Amounts funded are primarily invested in debt and equity securities. Effective January 1, 1993, the Company adopted FASB Statement No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, on a prospective basis. Statement No. 106 requires that medical care and life insurance benefits for retired employees be accounted for on an accrual basis using a specified actuarial method, "benefit/years-of-service." The costs of such benefits recognized by the Company in 1994 and 1993 were $4.3 million and $3.9 million, respectively. Prior to 1993, the Company recognized these benefit costs on an accrual basis using the "aggregate cost" actuarial method, which spreads the expected cost of such benefits over the remaining periods of employees' service as a level percentage of payroll costs. The cost of such benefits recognized by the Company in 1992 was $3.1 million. Status and Cost of Benefits Shown in the following tables are actuarial results and assumptions for pension and postretirement medical and life insurance benefits as computed under the requirements of FASB Statement Nos. 87 and 106, respectively. The funded status of the plans at December 31 was as follows: ================================================================= Pension ------------------------- 1994 1993 ------------------------- (in thousands) Actuarial present value of benefit obligation: Vested benefits $ 73,552 $ 73,925 Non-vested benefits 3,016 3,217 ----------------------------------------------------------------- Accumulated benefit obligation 76,568 77,142 Additional amounts related to projected salary increases 29,451 25,648 ----------------------------------------------------------------- Projected benefit obligation 106,019 102,790 Less: Fair value of plan assets 151,337 159,192 Unrecognized net gain (36,599) (49,376) Unrecognized prior service cost 2,802 3,152 Unrecognized transition asset (8,034) (8,765) ----------------------------------------------------------------- Prepaid asset recognized in the Balance Sheets $ 3,487 $ 1,413 ================================================================= ================================================================= Postretirement Medical ------------------------- 1994 1993 ------------------------- (in thousands) Actuarial present value of benefit obligation: Retirees and dependents $ 7,768 $ 7,857 Employees eligible to retire 4,043 4,054 Other employees 14,598 14,927 ----------------------------------------------------------------- Accumulated benefit obligation 26,409 26,838 Less: Fair value of plan assets 5,655 5,638 Unrecognized net loss (gain) 615 2,653 Unrecognized transition obligation 12,714 13,420 ----------------------------------------------------------------- Accrued liability recognized in the Balance Sheets $ 7,425 $ 5,127 ================================================================= II-162 NOTES (continued) Gulf Power Company 1994 Annual Report ================================================================= Postretirement Life -------------------- 1994 1993 -------------------- (in thousands) Actuarial present value of benefit obligation: Retirees and dependents $3,032 $2,929 Employees eligible to retire - - Other employees 5,041 5,058 ----------------------------------------------------------------- Accumulated benefit obligation 8,073 7,987 Less: Fair value of plan assets 85 52 Unrecognized net loss (gain) (1,073) (641) Unrecognized transition obligation 2,806 2,954 ----------------------------------------------------------------- Accrued liability recognized in the Balance Sheets $6,255 $5,622 ================================================================= The weighted average rates assumed in the actuarial calculations were: ================================================================= 1994 1993 1992 --------------------------- Discount 8.0% 7.5% 8.0% Annual salary increase 5.5% 5.0% 6.0% Long-term return on plan assets 8.5% 8.5% 8.5% ================================================================= An additional assumption used in measuring the accumulated postretirement medical benefit obligation was a weighted average medical care cost trend rate of 10.5 percent for 1994, decreasing to 6.0 percent through the year 2000 and remaining at that level thereafter. An annual increase in the assumed medical care cost trend rate of 1 percent would increase the accumulated medical benefit obligation at December 31,1994, by $4.8 million and the aggregate of the service and interest cost components of the net retiree medical cost by $660 thousand. Components of the plans' net costs are shown below: ================================================================= Pension ----------------------------------- 1994 1993 1992 ----------------------------------- (in thousands) Benefits earned during the year $ 3,775 $ 3,710 $ 3,550 Interest cost on projected benefit obligation 7,484 7,319 6,939 Actual (return) loss on plan assets 3,721 (20,672) (6,431) Net amortization and deferral (17,054) 8,853 (4,054) ----------------------------------------------------------------- Net pension cost (income) $ (2,074) $ (790) $ 4 ================================================================= Of the above net pension amounts, pension expense/(income) of $(1.5) million in 1994, $(601) thousand in 1993, and $3 thousand in 1992, were recorded in operating expenses, and the remainder was recorded in construction and other accounts. ================================================================= Postretirement Medical ----------------------- 1994 1993 ----------------------- (in thousands) Benefits earned during the year $1,092 $ 874 Interest cost on accumulated benefit obligation 1,952 1,714 Amortization of transition obligation 706 706 Actual (return) loss on plan assets 117 (726) Net amortization and deferral (575) 309 ----------------------------------------------------------------- Net postretirement cost $3,292 $2,877 ================================================================= ================================================================= Postretirement Life ----------------------- 1994 1993 ----------------------- (in thousands) Benefits earned during the year $270 $ 292 Interest cost on accumulated benefit obligation 583 625 Amortization of transition obligation 148 148 Actual (return) loss on plan assets 12 (5) Net amortization and deferral (16) 1 ----------------------------------------------------------------- Net postretirement cost $997 $1,061 ================================================================= II-163 NOTES (continued) Gulf Power Company 1994 Annual Report Of the above net postretirement medical and life insurance amounts, $3.1 million in 1994 and $3.0 million in 1993, were charged to operating expenses, and the remainder was recorded in construction and other accounts. Work Force Reduction Programs The Company has not had a work force reduction program but has incurred its pro rata share of affiliated companies' costs. The costs related to these programs were $1.3 million, $109 thousand, and $138 thousand for the years 1994, 1993, and 1992, respectively. 3. LITIGATION AND REGULATORY MATTERS FERC Reviews Equity Returns In May 1991, the FERC ordered that hearings be conducted concerning the reasonableness of the Southern electric system's wholesale rate schedules and contracts that have a return on common equity of 13.75 percent or greater. The contracts that could be affected by the hearings include substantially all of the transmission, unit power, long-term power and other similar contracts. Any change in the rate of return on common equity that may require refunds as a result of this proceeding would be substantially for the period beginning in July 1991 and ending in October 1992. In August 1992, a FERC administrative law judge issued an opinion that changes in rate schedules and contracts were not necessary and that the FERC staff failed to show how any changes were in the public interest. The FERC staff has filed exceptions to the administrative law judge's opinion, and the matter remains pending before the FERC. In August 1994, the FERC instituted another proceeding based on substantially the same issues as in the 1991 proceeding. The second period under review for possible refunds began in October 1994 and is scheduled to continue until January 1996. If the rates of return on common equity recommended by the FERC staff were applied to all of the schedules and contracts involved in both proceedings and refunds were ordered, the amount of refunds could range up to approximately $5.4 million at December 31, 1994. Although the final outcome of this matter cannot now be determined, in management's opinion, the final outcome will not result in changes that would have a material adverse effect on the Company's financial statements. Environmental Cost Recovery In April 1993, the Florida Legislature adopted legislation for an Environmental Cost Recovery (ECR) clause, 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 rate-adjustment clause. Such environmental costs include operation and maintenance expense, depreciation, and a return on invested capital. On January 12, 1994, the FPSC approved the Company's initial petition under the ECR clause for recovery of environmental costs that were projected to be incurred from July 1993 through September 1994. After this initial period, recovery under the ECR clause is determined semi-annually and includes a true-up of the prior period and a projection of the ensuing six month period. During 1994 and 1993, the Company recorded $7.2 million and $2.6 million, respectively, of ECR revenues net of over/under recovery true-up amounts. In 1994, the Company accrued a liability of $7.8 million for the estimated costs of environmental remediation projects for known sites. These estimated costs are expected to be expended during the period 1995 to 1999. These projects have been approved by the FPSC for recovery through the ECR clause discussed above. Therefore, the Company recorded $2.1 million in current assets and $5.7 million in deferred charges representing the future recoverability of these costs. 4. CONSTRUCTION PROGRAM The Company is engaged in a continuous construction program, the cost of which is currently estimated to total $62 million in 1995, $76 million in 1996, and $84 million in 1997. 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, 1994, significant purchase commitments were outstanding in connection with the construction program. The Company does not have any new II-164 NOTES (continued) Gulf Power Company 1994 Annual Report baseload generating plants under construction. However, significant construction will continue related to transmission and distribution facilities and the upgrading and extension of the useful lives of generating plants. See Management's Discussion and Analysis under "Environmental Matters" for information on the impact of the Clean Air Act Amendments of 1990 and other environmental matters. 5. FINANCING AND COMMITMENTS General Current projections indicate that funds required for construction and other purposes, including compliance with environmental regulations, will be derived primarily from internal sources. Requirements not met from internal sources will be financed from the sale of additional first mortgage bonds and preferred stock; bank notes; and capital contributions from The Southern Company. In addition, the Company may issue additional long-term debt and preferred stock primarily for the purposes of debt maturities and redemptions of higher-cost securities. If the attractiveness of current short-term interest rates continues, the Company may maintain a higher level of short-term indebtedness than has historically been true. Bank Credit Arrangements At December 31, 1994, the Company had $25 million in revolving credit lines subject to renewal June 1, 1997, and $22 million of lines of credit with banks subject to renewal June 1 of each year. In connection with these credit lines, the Company has agreed to pay certain fees and/or maintain compensating balances with the banks. The compensating balances, which represent substantially all the cash of the Company except for daily working funds and like items, are not legally restricted from withdrawal. The Company had $19 million of these lines of credit committed at December 31, 1994. In addition, the Company has bid-loan facilities with fourteen major money center banks that total $275 million, of which $34.5 million was committed at December 31, 1994. 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. Fuel 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. Total estimated long-term obligations were approximately $1.1 billion at December 31, 1994. Additional commitments will be required in the future to supply the Company's fuel needs. To take advantage of lower-cost coal supplies, agreements were reached in 1986 to terminate two long-term contracts for the supply of coal to Plant Daniel, which is jointly owned by the Company and Mississippi Power, an operating affiliate. The Company's portion of this payment was $60 million. This amount is being amortized to expense on a per ton basis over a nine-year period ending in 1995. The remaining unamortized amount was $10.1 million at December 31, 1994. In 1988, the Company made an advance payment of $60 million to another coal supplier under an arrangement to lower the cost of future coal purchased under an existing contract. This amount is being amortized to expense on a per ton basis over a ten-year period. The remaining unamortized amount was $30.5 million at December 31, 1994. Also, in 1993, the Company made a payment of $16.4 million to a coal supplier under an arrangement to suspend the purchase of coal under an existing contract for one year. This amount was amortized to expense on a per ton basis during 1993 and 1994, with a remainder of $118 thousand to be amortized to expense in the first quarter of 1995. The amortization expense of these contract buyouts and renegotiations is being recovered through the fuel cost recovery clause discussed under "Revenues and Regulatory Cost Recovery Clauses" in Note 1. II-165 NOTES (continued) Gulf Power Company 1994 Annual Report Lease Agreements In 1989, the Company and Mississippi Power Company jointly entered into a twenty-two year operating lease agreement for the use of 495 aluminum railcars. In 1995, a second lease agreement for the use of 250 additional aluminum railcars will begin and continue for twenty-two years. Both of these leases are for the transportation of coal to Plant Daniel. 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 inventory were $1.2 million in 1994, 1993, and 1992. For the year 1995, the Company's annual lease payments associated with both leases will be approximately $2.6 million. The Company's annual lease payments for 1996 through 1999 will be approximately $1.7 million and after 1999, lease payments total approximately $26.0 million. The Company has the option after three years from the date of the original contract on each lease to purchase the respective number of railcars at the greater of the termination value or the fair market value. Additionally, at the end of each lease term, the Company has the option to renew the lease. 6. 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 an 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, a steam-electric generating plant, located near Forsyth, Georgia. In accordance with an 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, 1994, the Company's percentage ownership and its amount of 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 $185,339(1) $220,125 Accumulated Depreciation $45,814 $93,110 Construction Work in Progress $941 $1,163 Nameplate Capacity (2) (In 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 7. LONG-TERM POWER SALES AGREEMENTS General The Company and the other operating affiliates of The Southern Company 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. The agreements for non-firm capacity expired in 1994. Other 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, revenues from capacity sales primarily affect profitability. The Company's capacity revenues have been as follows: ================================================================ Other Unit Long- Year Power Term Total ---- ----------------------------------------- (in thousands) 1994 $29,653 $1,273 $30,926 1993 31,162 2,643 33,805 1992 32,679 1,501 34,180 ================================================================ II-166 NOTES (continued) Gulf Power Company 1994 Annual Report In 1994, long-term non-firm power of 200 megawatts was sold to Florida Power Corporation (FPC) under a contract that expired at year-end. Capacity and energy sales under these long-term non-firm power sales agreements were made from available power pool capacity, and the revenues from the sales were shared by the operating affiliates. Unit power from specific generating plants is currently being sold to FPC, Florida Power & Light Company (FP&L), Jacksonville Electric Authority (JEA), and the City of Tallahassee, Florida. Under these agreements, 210 megawatts of net dependable capacity were sold by the Company during 1994, and sales will remain at that level until the expiration of the contracts in 2010, unless reduced by FPC, FP&L and JEA after 1999. Capacity and energy sales to FP&L, the Company's largest single customer, provided revenues of $29.3 million in 1994, $39.5 million in 1993, and $46.2 million in 1992, or 5.1 percent, 6.8 percent, and 8.1 percent of operating revenues, respectively. 8. INCOME TAXES Effective January 1, 1993, the Company adopted FASB Statement No. 109, Accounting for Income Taxes. The adoption resulted in the recording of additional deferred income taxes and related regulatory assets and liabilities. At December 31, 1994, the tax-related regulatory assets to be recovered from customers were $30.4 million. These assets are attributable to tax benefits flowed through to customers in prior years and to taxes applicable to capitalized AFUDC. At December 31, 1994, the tax-related regulatory liabilities to be refunded to customers were $72.0 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: ================================================================= 1994 1993 1992 ----------------------------- (in thousands) Total provision for income taxes: Federal-- Currently payable $34,941 $24,354 $24,287 Deferred--current year 18,556 26,396 18,173 --reversal of prior years (24,787) (22,102) (15,506) ----------------------------------------------------------------- 28,710 28,648 26,954 ----------------------------------------------------------------- State-- Currently payable 5,907 3,950 4,282 Deferred--current year 2,549 3,838 2,662 --reversal of prior years (3,304) (2,785) (2,007) ----------------------------------------------------------------- 5,152 5,003 4,937 ----------------------------------------------------------------- Total 33,862 33,651 31,891 Less income taxes charged (credited) to other income (95) 921 (187) ----------------------------------------------------------------- Federal and state income taxes charged to operations $33,957 $32,730 $32,078 ================================================================= 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: ===================================================================== 1994 1993 ----------------------- (in thousands) Deferred tax liabilities: Accelerated depreciation $146,686 $146,657 Property basis differences 18,468 15,140 Coal contract buyout 6,896 15,427 Other 11,846 6,724 --------------------------------------------------------------------- Total 183,896 183,948 --------------------------------------------------------------------- Federal effect of state deferred taxes 9,732 10,136 Postretirement benefits 4,383 3,406 Property insurance 5,200 4,730 Other 7,566 6,500 --------------------------------------------------------------------- Total 26,881 24,772 --------------------------------------------------------------------- Net deferred tax liabilities 157,015 159,176 Portion included in current liabilities, net 5,334 7,433 --------------------------------------------------------------------- Accumulated deferred income taxes in the Balance Sheets $151,681 $151,743 ===================================================================== II-167 NOTES (continued) Gulf Power Company 1994 Annual Report 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 $2.3 million in 1994, 1993 and 1992. At December 31, 1994, 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: ============================================================= 1994 1993 1992 -------------------------- Federal statutory rate 35% 35% 34% State income tax, net of federal deduction 4 3 4 Non-deductible book depreciation 1 1 1 Difference in prior years' deferred and current tax rate (2) (2) (2) Other (2) (1) (2) ------------------------------------------------------------- Effective income tax rate 36% 36% 35% ============================================================= The Company and the other subsidiaries of The Southern Company file a consolidated federal tax return. Under a joint consolidated income tax agreement, each company's current and deferred tax expense is computed on a stand-alone basis, and consolidated tax savings are allocated to each company based on its ratio of taxable income to total consolidated taxable income. 9. POLLUTION CONTROL OBLIGATIONS AND OTHER LONG-TERM DEBT Details of long-term debt are as follows: ============================================================== December 31, 1994 1993 ---------------------- (in thousands) Obligations incurred in connection with the sale by public authorities of tax-exempt pollution control revenue bonds: Collateralized 6% due 2006* $ 12,200 $ 12,300 8.25% due 2017 32,000 32,000 7.125% due 2021 21,200 21,200 6.75% due 2022 8,930 8,930 5.70% due 2023 7,875 7,875 5.80% due 2023 32,550 32,550 6.20% due 2023 13,000 13,000 6.30% due 2024 22,000 - Variable Rate Remarketed daily 20,000 - Non-collateralized 10.50% due 2014 - 42,000 -------------------------------------------------------------- $169,755 $169,855 -------------------------------------------------------------- Notes payable: 5.39% due 1995 4,500 - 5.72% due 1995 4,500 - 4.69% due 1996 25,000 25,000 6.44% due 1994-1998 16,388 - 8.25% due 1995 - 17,520 -------------------------------------------------------------- 50,388 42,520 -------------------------------------------------------------- Total $220,143 $212,375 ============================================================== * Sinking fund requirement applicable to the 6 percent pollution control bonds is $125 thousand for 1995 with increasing increments thereafter through 2005, with the remaining balance due in 2006. Pollution control obligations represent installment purchases of pollution control facilities financed by funds derived from sales by public authorities of revenue bonds. With respect to the collateralized pollution control revenue bonds, the Company has authenticated and delivered to trustees a like principal amount of first mortgage bonds as security for obligations under collateralized installment agreements. The principal and interest on the first mortgage bonds will be payable only in the event of default under the agreements. II-168 NOTES (continued) Gulf Power Company 1994 Annual Report The 5.39 percent and 5.72 percent notes payable are the Company's portion of notes payable issued in connection with the termination of Plant Daniel coal contracts (see Note 5 under "Fuel Commitments" for further information). These notes refinanced the remaining balance of the 8.25 percent note payable. The proceeds from the 6.44 percent note were used to refinance the remaining balance of the 9.2 percent first mortgage bond, which was redeemed in June, 1994. The estimated annual maturities of the notes payable through 1998 are as follows: $13.3 million in 1995, $29.6 million in 1996, $4.9 million in 1997, and $2.6 million in 1998. 10. LONG-TERM DEBT DUE WITHIN ONE YEAR A summary of the improvement fund requirement and scheduled maturities and redemptions of long-term debt due within one year is as follows: ============================================================== December 31 1994 1993 -------------------- (in thousands) Bond improvement fund requirement $ 1,750 $ 2,370 Less: Portion to be satisfied by cash or certifying property additions 1,750 - -------------------------------------------------------------- Cash sinking fund requirement - 2,370 Maturities of first mortgage bonds - 3,676 Redemptions of first mortgage bonds - 27,000 Current portion of notes payable 13,314 8,406 (Note 9) Pollution control bond maturity 125 100 (Note 9) -------------------------------------------------------------- Total $13,439 $41,552 ============================================================== The first mortgage bond improvement (sinking) 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 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. 11. 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, 1994, $101 million of retained earnings was restricted against the payment of cash dividends on common stock under the terms of the mortgage indenture. The Company's charter limits cash dividends on common stock to 50 percent of net income available for such stock during a prior period of 12 months if the capitalization ratio is below 20 percent, and to 75 percent of such net income if such ratio is 20 percent or more but less than 25 percent. The capitalization ratio is defined as the ratio of common stock equity to total capitalization, including retained earnings, adjusted to reflect the payment of the proposed dividend. At December 31, 1994, the ratio was 47.2 percent. 12. QUARTERLY FINANCIAL DATA (Unaudited) Summarized quarterly financial data for 1994 and 1993 are as follows: ================================================================= Net Income After Dividends Operating Operating on Preferred Quarter Ended Revenues Income Stock ----------------------------------------------------------------- (in thousands) March 31, 1994 $138,088 $19,154 $10,117 June 30, 1994 146,769 19,957 8,886 Sept. 30, 1994 162,143 31,123 21,831 Dec. 31, 1994 131,813 21,979 14,395 March 31, 1993 $127,036 $17,646 $10,426 June 30, 1993 138,863 19,562 7,312 Sept. 30, 1993 175,964 32,783 22,366 Dec. 31, 1993 141,279 22,596 14,207 ================================================================= The Company's business is influenced by seasonal weather conditions and the timing of rate changes, among other factors. II-169
SELECTED FINANCIAL AND OPERATING DATA Gulf Power Company 1994 Annual Report ==================================================================================================== 1994 1993 1992 ---------------------------------------------------------------------------------------------------- Operating Revenues (in thousands) $578,813 $583,142 $570,902 Net Income after Dividends on Preferred Stock (in thousands) $55,229 $54,311 $54,090 Cash Dividends on Common Stock (in thousands) $44,000 $41,800 $39,900 Return on Average Common Equity (percent) 13.15 13.29 13.62 Total Assets (in thousands) $1,315,542 $1,307,809 $1,062,699 Gross Property Additions (in thousands) $78,869 $78,562 $64,671 ---------------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $425,472 $414,196 $403,190 Preferred stock 89,602 89,602 74,662 Preferred stock subject to mandatory redemption - 1,000 2,000 Long-term debt 356,393 369,259 382,047 ---------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $871,467 $874,057 $861,899 ---------------------------------------------------------------------------------------------------- Capitalization Ratios (percent): Common stock equity 48.8 47.4 46.8 Preferred stock 10.3 10.4 8.9 Long-term debt 40.9 42.2 44.3 ---------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 100.0 ==================================================================================================== First Mortgage Bonds (in thousands): Issued - 75,000 25,000 Retired 48,856 88,809 117,693 Preferred Stock (in thousands): Issued - 35,000 29,500 Retired 1,000 21,060 15,500 ---------------------------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's A2 A2 A2 Standard and Poor's A A A Duff & Phelps A+ A+ A Preferred Stock - Moody's a2 a2 a2 Standard and Poor's A- A- A- Duff & Phelps A A A- ---------------------------------------------------------------------------------------------------- Customers (year-end): Residential 280,859 274,194 267,591 Commercial 40,398 39,253 37,105 Industrial 283 274 270 Other 106 86 74 ---------------------------------------------------------------------------------------------------- Total 321,646 313,807 305,040 ==================================================================================================== Employees (year-end) 1,540 1,565 1,613
II-170
SELECTED FINANCIAL AND OPERATING DATA Gulf Power Company 1994 Annual Report ==================================================================================================== 1991 1990 1989 ---------------------------------------------------------------------------------------------------- Operating Revenues (in thousands) $565,207 $567,825 $527,821 Net Income after Dividends on Preferred Stock (in thousands) $57,796 $38,714 $37,361 Cash Dividends on Common Stock (in thousands) $38,000 $37,000 $37,200 Return on Average Common Equity (percent) 15.17 10.51 10.32 Total Assets (in thousands) $1,095,736 $1,084,579 $1,093,430 Gross Property Additions (in thousands) $64,323 $62,462 $70,726 ---------------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $390,981 $371,185 $365,471 Preferred stock 55,162 55,162 55,162 Preferred stock subject to mandatory redemption 7,500 9,250 11,000 Long-term debt 434,648 475,284 484,608 ---------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $888,291 $910,881 $916,241 ---------------------------------------------------------------------------------------------------- Capitalization Ratios (percent): Common stock equity 44.0 40.8 39.9 Preferred stock 7.1 7.1 7.2 Long-term debt 48.9 52.1 52.9 ---------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 100.0 ==================================================================================================== First Mortgage Bonds (in thousands): Issued 50,000 - - Retired 32,807 6,455 9,344 Preferred Stock (in thousands): Issued - - - Retired 2,500 1,750 1,250 ---------------------------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's A2 A2 A1 Standard and Poor's A A A Duff & Phelps A A AA- Preferred Stock - Moody's a2 a2 a1 Standard and Poor's A- A- A- Duff & Phelps A- A- A+ ---------------------------------------------------------------------------------------------------- Customers (year-end): Residential 261,210 256,111 251,341 Commercial 34,685 34,019 33,678 Industrial 264 252 240 Other 72 67 67 ---------------------------------------------------------------------------------------------------- Total 296,231 290,449 285,326 ==================================================================================================== Employees (year-end) 1,598 1,615 1,614
II-171A
SELECTED FINANCIAL AND OPERATING DATA Gulf Power Company 1994 Annual Report ==================================================================================================== 1988 1987 1986 ---------------------------------------------------------------------------------------------------- Operating Revenues (in thousands) $550,827 $587,860 $542,919 Net Income after Dividends on Preferred Stock (in thousands) $45,698 $42,217 $46,421 Cash Dividends on Common Stock (in thousands) $35,400 $34,200 $33,100 Return on Average Common Equity (percent) 13.41 13.23 15.06 Total Assets (in thousands) $1,097,225 $1,051,182 $1,028,864 Gross Property Additions (in thousands) $67,042 $97,511 $90,160 ---------------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $358,310 $323,012 $314,995 Preferred stock 55,162 55,162 55,162 Preferred stock subject to mandatory redemption 12,750 14,000 16,500 Long-term debt 497,069 474,640 482,869 ---------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $923,291 $866,814 $869,526 ---------------------------------------------------------------------------------------------------- Capitalization Ratios (percent): Common stock equity 38.8 37.2 36.2 Preferred stock 7.4 8.0 8.3 Long-term debt 53.8 54.8 55.5 ---------------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 100.0 ==================================================================================================== First Mortgage Bonds (in thousands): Issued 35,000 - 50,000 Retired 9,369 - 46,640 Preferred Stock (in thousands): Issued - - - Retired 1,750 2,500 750 ---------------------------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's A1 A1 A1 Standard and Poor's A A A+ Duff & Phelps 4 4 4 Preferred Stock - Moody's a1 a1 a1 Standard and Poor's A- A- A Duff & Phelps 5 5 5 ---------------------------------------------------------------------------------------------------- Customers (year-end): Residential 246,450 241,138 235,329 Commercial 33,030 32,139 31,142 Industrial 206 206 197 Other 61 61 62 ---------------------------------------------------------------------------------------------------- Total 279,747 273,544 266,730 ==================================================================================================== Employees (year-end) 1,601 1,603 1,544
II-171B
SELECTED FINANCIAL AND OPERATING DATA Gulf Power Company 1994 Annual Report ====================================================================================== 1985 1984 -------------------------------------------------------------------------------------- Operating Revenues (in thousands) $562,068 $505,812 Net Income after Dividends on Preferred Stock (in thousands) $45,484 $40,336 Cash Dividends on Common Stock (in thousands) $30,800 $27,200 Return on Average Common Equity (percent) 15.61 15.11 Total Assets (in thousands) $921,635 $892,924 Gross Property Additions (in thousands) $92,541 $156,443 -------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $301,674 $280,990 Preferred stock 55,162 55,162 Preferred stock subject to mandatory redemption 18,250 19,000 Long-term debt 410,917 394,859 -------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $786,003 $750,011 -------------------------------------------------------------------------------------- Capitalization Ratios (percent): Common stock equity 38.4 37.5 Preferred stock 9.3 9.9 Long-term debt 52.3 52.6 -------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 ====================================================================================== First Mortgage Bonds (in thousands): Issued - - Retired 2,860 10,415 Preferred Stock (in thousands): Issued - - Retired 750 1,500 -------------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's A1 A1 Standard and Poor's A+ A+ Duff & Phelps 4 4 Preferred Stock - Moody's a1 a1 Standard and Poor's A A Duff & Phelps 5 5 -------------------------------------------------------------------------------------- Customers (year-end): Residential 227,845 217,138 Commercial 29,603 27,939 Industrial 183 177 Other 62 63 -------------------------------------------------------------------------------------- Total 257,693 245,317 ====================================================================================== Employees (year-end) 1,509 1,460
II-171C
SELECTED FINANCIAL AND OPERATING DATA (continued) Gulf Power Company 1994 Annual Report ==================================================================================================== 1994 1993 1992 ---------------------------------------------------------------------------------------------------- Operating Revenues (in thousands): Residential $252,598 $244,967 $235,296 Commercial 146,394 137,308 133,071 Industrial 82,169 87,526 91,320 Other 1,955 1,882 1,784 ---------------------------------------------------------------------------------------------------- Total retail 483,116 471,683 461,471 Sales for resale - non-affiliates 66,111 72,209 70,078 Sales for resale - affiliates 17,353 23,166 24,075 ---------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 566,580 567,058 555,624 Other revenues 12,233 16,084 15,278 ---------------------------------------------------------------------------------------------------- Total $578,813 $583,142 $570,902 ==================================================================================================== Kilowatt-Hour Sales (in thousands): Residential 3,751,932 3,712,980 3,596,515 Commercial 2,548,846 2,433,382 2,369,236 Industrial 1,847,114 2,029,936 2,179,435 Other 17,354 16,944 16,649 ---------------------------------------------------------------------------------------------------- Total retail 8,165,246 8,193,242 8,161,835 Sales for resale - non-affiliates 1,418,977 1,460,105 1,430,908 Sales for resale - affiliates 874,050 1,029,787 1,208,771 ---------------------------------------------------------------------------------------------------- Total 10,458,273 10,683,134 10,801,514 ==================================================================================================== Average Revenue Per Kilowatt-Hour (cents): Residential 6.73 6.60 6.54 Commercial 5.74 5.64 5.62 Industrial 4.45 4.31 4.19 Total retail 5.92 5.76 5.65 Sales for resale 3.64 3.83 3.57 Total sales 5.42 5.31 5.14 Average Annual Kilowatt-Hour Use Per Residential Customer 13,486 13,671 13,553 Average Annual Revenue Per Residential Customer $907.92 $901.96 $886.66 Plant Nameplate Capacity Ratings (year-end) (megawatts) 2,174 2,174 2,174 Maximum Peak-Hour Demand (megawatts): Winter 1,801 1,571 1,533 Summer 1,795 1,898 1,828 Annual Load Factor (percent) 56.7 54.5 55.0 Plant Availability - Fossil-Steam (percent) 92.2 88.9 91.2 ---------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 87.2 84.5 87.7 Oil and gas 0.2 0.5 0.1 Purchased power - From non-affiliates 2.8 1.5 0.8 From affiliates 9.8 13.5 11.4 ---------------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 ==================================================================================================== Total Fuel Economy Data: BTU per net kilowatt-hour generated 10,614 10,390 10,347 Cost of fuel per million BTU (cents) 189.55 197.37 200.30 Average cost of fuel per net kilowatt-hour generated (cents) 2.01 2.05 2.07 ====================================================================================================
II-172
SELECTED FINANCIAL AND OPERATING DATA (continued) Gulf Power Company 1994 Annual Report ==================================================================================================== 1991 1990 1989 ---------------------------------------------------------------------------------------------------- Operating Revenues (in thousands): Residential $231,220 $217,843 $203,781 Commercial 130,691 124,066 118,897 Industrial 92,300 91,041 84,671 Other 1,860 1,805 1,586 ---------------------------------------------------------------------------------------------------- Total retail 456,071 434,755 408,935 Sales for resale - non-affiliates 69,636 73,855 67,554 Sales for resale - affiliates 29,343 38,563 39,244 ---------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 555,050 547,173 515,733 Other revenues 10,157 20,652 12,088 ---------------------------------------------------------------------------------------------------- Total $565,207 $567,825 $527,821 ==================================================================================================== Kilowatt-Hour Sales (in thousands): Residential 3,455,100 3,360,838 3,293,750 Commercial 2,272,690 2,217,568 2,169,497 Industrial 2,117,408 2,177,872 2,094,670 Other 17,118 18,866 17,209 ---------------------------------------------------------------------------------------------------- Total retail 7,862,316 7,775,144 7,575,126 Sales for resale - non-affiliates 1,550,018 1,775,703 1,640,355 Sales for resale - affiliates 1,236,223 1,435,558 1,461,036 ---------------------------------------------------------------------------------------------------- Total 10,648,557 10,986,405 10,676,517 ==================================================================================================== Average Revenue Per Kilowatt-Hour (cents): Residential 6.69 6.48 6.19 Commercial 5.75 5.59 5.48 Industrial 4.36 4.18 4.04 Total retail 5.80 5.59 5.40 Sales for resale 3.55 3.50 3.44 Total sales 5.21 4.98 4.83 Average Annual Kilowatt-Hour Use Per Residential Customer 13,320 13,173 13,173 Average Annual Revenue Per Residential Customer $891.38 $853.86 $815.00 Plant Nameplate Capacity Ratings (year-end) (megawatts) 2,174 2,174 2,174 Maximum Peak-Hour Demand (megawatts): Winter 1,418 1,310 1,814 Summer 1,740 1,778 1,691 Annual Load Factor (percent) 57.0 55.2 52.6 Plant Availability - Fossil-Steam (percent) 92.2 89.2 89.1 ---------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 82.0 69.8 78.3 Oil and gas 0.1 0.5 0.2 Purchased power - From non-affiliates 0.5 0.6 0.4 From affiliates 17.4 29.1 21.1 ---------------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 ==================================================================================================== Total Fuel Economy Data: BTU per net kilowatt-hour generated 10,636 10,765 10,621 Cost of fuel per million BTU (cents) 203.60 206.06 193.70 Average cost of fuel per net kilowatt-hour generated (cents) 2.17 2.22 2.06 ====================================================================================================
II-173A
SELECTED FINANCIAL AND OPERATING DATA (continued) Gulf Power Company 1994 Annual Report ==================================================================================================== 1988 1987 1986 ---------------------------------------------------------------------------------------------------- Operating Revenues (in thousands): Residential $184,036 $199,701 $200,725 Commercial 107,615 116,057 116,253 Industrial 72,634 80,295 79,873 Other 1,402 1,357 1,343 ---------------------------------------------------------------------------------------------------- Total retail 365,687 397,410 398,194 Sales for resale - non-affiliates 117,466 134,456 106,892 Sales for resale - affiliates 48,277 55,955 27,113 ---------------------------------------------------------------------------------------------------- Total revenues from sales of electricity 531,430 587,821 532,199 Other revenues 19,397 39 10,720 ---------------------------------------------------------------------------------------------------- Total $550,827 $587,860 $542,919 ==================================================================================================== Kilowatt-Hour Sales (in thousands): Residential 3,154,541 3,055,041 2,963,502 Commercial 2,088,598 1,986,332 1,913,139 Industrial 1,968,091 1,839,931 1,745,074 Other 16,257 15,241 14,903 ---------------------------------------------------------------------------------------------------- Total retail 7,227,487 6,896,545 6,636,618 Sales for resale - non-affiliates 1,911,759 2,138,390 1,609,146 Sales for resale - affiliates 2,326,238 2,689,487 1,078,500 ---------------------------------------------------------------------------------------------------- Total 11,465,484 11,724,422 9,324,264 ==================================================================================================== Average Revenue Per Kilowatt-Hour (cents): Residential 5.83 6.54 6.77 Commercial 5.15 5.84 6.08 Industrial 3.69 4.36 4.58 Total retail 5.06 5.76 6.00 Sales for resale 3.91 3.94 4.99 Total sales 4.64 5.01 5.71 Average Annual Kilowatt-Hour Use Per Residential Customer 12,883 12,763 12,729 Average Annual Revenue Per Residential Customer $751.60 $834.31 $862.16 Plant Nameplate Capacity Ratings (year-end) (megawatts) 2,174 2,174 1,969 Maximum Peak-Hour Demand (megawatts): Winter 1,395 1,354 1,406 Summer 1,613 1,617 1,678 Annual Load Factor (percent) 56.5 54.4 50.5 Plant Availability - Fossil-Steam (percent) 88.2 92.8 90.5 ---------------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 93.2 93.5 85.8 Oil and gas 0.4 0.4 0.5 Purchased power - From non-affiliates 0.4 0.4 1.9 From affiliates 6.0 5.7 11.8 ---------------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 ==================================================================================================== Total Fuel Economy Data: BTU per net kilowatt-hour generated 10,461 10,512 10,639 Cost of fuel per million BTU (cents) 178.00 197.53 239.26 Average cost of fuel per net kilowatt-hour generated (cents) 1.86 2.08 2.55 ====================================================================================================
II-173B
SELECTED FINANCIAL AND OPERATING DATA (continued) Gulf Power Company 1994 Annual Report ====================================================================================== 1985 1984 -------------------------------------------------------------------------------------- Operating Revenues (in thousands): Residential $186,415 $174,302 Commercial 109,631 98,408 Industrial 81,621 83,538 Other 1,346 1,334 -------------------------------------------------------------------------------------- Total retail 379,013 357,582 Sales for resale - non-affiliates 126,789 106,802 Sales for resale - affiliates 43,844 35,712 -------------------------------------------------------------------------------------- Total revenues from sales of electricity 549,646 500,096 Other revenues 12,422 5,716 -------------------------------------------------------------------------------------- Total $562,068 $505,812 ====================================================================================== Kilowatt-Hour Sales (in thousands): Residential 2,736,432 2,560,648 Commercial 1,777,418 1,559,344 Industrial 1,770,587 1,771,100 Other 14,702 14,555 -------------------------------------------------------------------------------------- Total retail 6,299,139 5,905,647 Sales for resale - non-affiliates 2,388,591 2,183,631 Sales for resale - affiliates 1,562,452 1,308,410 -------------------------------------------------------------------------------------- Total 10,250,182 9,397,688 ====================================================================================== Average Revenue Per Kilowatt-Hour (cents): Residential 6.81 6.81 Commercial 6.17 6.31 Industrial 4.61 4.72 Total retail 6.02 6.05 Sales for resale 4.32 4.08 Total sales 5.36 5.32 Average Annual Kilowatt-Hour Use Per Residential Customer 12,221 12,057 Average Annual Revenue Per Residential Customer $832.55 $820.71 Plant Nameplate Capacity Ratings (year-end) (megawatts) 1,969 1,969 Maximum Peak-Hour Demand (megawatts): Winter 1,517 1,209 Summer 1,448 1,381 Annual Load Factor (percent) 53.4 54.9 Plant Availability - Fossil-Steam (percent) 84.8 87.7 -------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 79.7 83.9 Oil and gas 0.2 0.2 Purchased power - From non-affiliates 0.4 (1.4) From affiliates 19.7 17.3 -------------------------------------------------------------------------------------- Total 100.0 100.0 ====================================================================================== Total Fuel Economy Data: BTU per net kilowatt-hour generated 10,609 10,639 Cost of fuel per million BTU (cents) 254.53 240.40 Average cost of fuel per net kilowatt-hour generated (cents) 2.70 2.60 =======================================================================================
II-173C
STATEMENTS OF INCOME Gulf Power Company ============================================================================================== For the Years Ended December 31, 1994 1993 1992 ---------------------------------------------------------------------------------------------- (Thousands of Dollars) Operating Revenues: Revenues $ 561,460 $559,976 $546,827 Revenues from affiliates 17,353 23,166 24,075 ---------------------------------------------------------------------------------------------- Total operating revenues 578,813 583,142 570,902 ---------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 161,168 170,485 182,754 Purchased power from non-affiliates 6,761 4,386 1,394 Purchased power from affiliates 25,819 32,273 26,788 Proceeds from settlement of disputed contracts - - (920) Other 113,879 109,164 98,230 Maintenance 46,700 46,004 41,947 Depreciation and amortization 56,615 55,309 53,758 Taxes other than income taxes 41,701 40,204 37,898 Federal and state income taxes 33,957 32,730 32,078 ---------------------------------------------------------------------------------------------- Total operating expenses 486,600 490,555 473,927 ---------------------------------------------------------------------------------------------- Operating Income 92,213 92,587 96,975 Other Income (Expense): Allowance for equity funds used during construction 450 512 14 Interest income 1,429 1,328 2,733 Other, net (780) (1,238) (1,487) Gain on sale of investment securities - 3,820 - Income taxes applicable to other income 95 (921) 187 ---------------------------------------------------------------------------------------------- Income Before Interest Charges 93,407 96,088 98,422 ---------------------------------------------------------------------------------------------- Interest Charges: Interest on long-term debt 27,124 31,344 35,792 Allowance for debt funds used during construction (656) (454) (46) Interest on notes payable 1,509 870 1,041 Amortization of debt discount, premium, and expense, net 1,834 1,412 1,032 Other interest charges 2,442 2,877 1,410 ---------------------------------------------------------------------------------------------- Net interest charges 32,253 36,049 39,229 ---------------------------------------------------------------------------------------------- Net Income 61,154 60,039 59,193 Dividends on Preferred Stock 5,925 5,728 5,103 ---------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred Stock $ 55,229 $ 54,311 $ 54,090 ==============================================================================================
II-174
STATEMENTS OF INCOME Gulf Power Company ====================================================================================================== For the Years Ended December 31, 1991 1990 1989 1988 ------------------------------------------------------------------------------------------------------ (Thousands of Dollars) Operating Revenues: Revenues $ 535,864 $529,262 $488,577 $502,550 Revenues from affiliates 29,343 38,563 39,244 48,277 ------------------------------------------------------------------------------------------------------ Total operating revenues 565,207 567,825 527,821 550,827 ------------------------------------------------------------------------------------------------------ Operating Expenses: Operation -- Fuel 176,038 156,712 158,858 191,687 Purchased power from non-affiliates 896 1,427 1,251 1,468 Purchased power from affiliates 32,579 67,729 48,972 27,267 Proceeds from settlement of disputed contracts (20,385) - - - Other 94,411 90,045 82,231 93,028 Maintenance 45,468 45,491 44,295 41,919 Depreciation and amortization 52,195 50,899 48,760 47,530 Taxes other than income taxes 42,359 39,110 30,718 27,087 Federal and state income taxes 33,893 24,780 23,621 26,239 ------------------------------------------------------------------------------------------------------ Total operating expenses 457,454 476,193 438,706 456,225 ------------------------------------------------------------------------------------------------------ Operating Income 107,753 91,632 89,115 94,602 Other Income (Expense): Allowance for equity funds used during construction 54 - (446) 457 Interest income 2,427 4,508 3,271 2,858 Other, net (3,484) (6,360) (3,800) (3,491) Gain on sale of investment securities - - - - Income taxes applicable to other income 1,104 1,303 779 1,001 ------------------------------------------------------------------------------------------------------ Income Before Interest Charges 107,854 91,083 88,919 95,427 ------------------------------------------------------------------------------------------------------ Interest Charges: Interest on long-term debt 41,665 43,215 43,265 42,538 Allowance for debt funds used during construction (95) 1 242 (808) Interest on notes payable 280 693 180 182 Amortization of debt discount, premium, and expense, net 699 603 613 600 Other interest charges 2,272 2,422 1,636 1,456 ------------------------------------------------------------------------------------------------------ Net interest charges 44,821 46,934 45,936 43,968 ------------------------------------------------------------------------------------------------------ Net Income 63,033 44,149 42,983 51,459 Dividends on Preferred Stock 5,237 5,435 5,622 5,761 ------------------------------------------------------------------------------------------------------ Net Income After Dividends on Preferred Stock $ 57,796 $ 38,714 $ 37,361 $ 45,698 ======================================================================================================
II-175A
STATEMENTS OF INCOME Gulf Power Company ====================================================================================================== For the Years Ended December 31, 1987 1986 1985 1984 ------------------------------------------------------------------------------------------------------ (Thousands of Dollars) Operating Revenues: Revenues $ 531,905 $515,806 $518,224 $470,100 Revenues from affiliates 55,955 27,113 43,844 35,712 ------------------------------------------------------------------------------------------------------ Total operating revenues 587,860 542,919 562,068 505,812 ------------------------------------------------------------------------------------------------------ Operating Expenses: Operation -- Fuel 227,233 215,262 230,944 214,885 Purchased power from non-affiliates 1,792 4,533 1,638 (3,698) Purchased power from affiliates 28,326 37,172 55,119 42,967 Proceeds from settlement of disputed contracts - - - - Other 100,032 70,117 59,851 56,352 Maintenance 38,748 35,251 35,654 28,773 Depreciation and amortization 44,619 39,386 37,775 33,061 Taxes other than income taxes 26,246 24,854 22,886 21,696 Federal and state income taxes 31,703 39,948 40,061 35,831 ------------------------------------------------------------------------------------------------------ Total operating expenses 498,699 466,523 483,928 429,867 ------------------------------------------------------------------------------------------------------ Operating Income 89,161 76,396 78,140 75,945 Other Income (Expense): Allowance for equity funds used during construction 1,013 7,809 6,893 2,877 Interest income 4,507 2,445 3,235 8,777 Other, net (1,207) (1,077) (1,131) (704) Gain on sale of investment securities - - - - Income taxes applicable to other income (642) (648) (862) (3,524) ------------------------------------------------------------------------------------------------------ Income Before Interest Charges 92,832 84,925 86,275 83,371 ------------------------------------------------------------------------------------------------------ Interest Charges: Interest on long-term debt 43,689 39,479 40,769 36,952 Allowance for debt funds used during construction (1,004) (8,651) (7,676) (3,261) Interest on notes payable - 106 - 1,628 Amortization of debt discount, premium, and expense, net 555 488 287 265 Other interest charges 1,350 869 1,120 1,111 ------------------------------------------------------------------------------------------------------ Net interest charges 44,590 32,291 34,500 36,695 ------------------------------------------------------------------------------------------------------ Net Income 48,242 52,634 51,775 46,676 Dividends on Preferred Stock 6,025 6,213 6,291 6,340 ------------------------------------------------------------------------------------------------------ Net Income After Dividends on Preferred Stock $ 42,217 $ 46,421 $ 45,484 $ 40,336 ======================================================================================================
II-175B
STATEMENTS OF CASH FLOWS Gulf Power Company ============================================================================================================ For the Years Ended December 31, 1994 1993 1992 ------------------------------------------------------------------------------------------------------------ (Thousands of Dollars) Operating Activities: Net income $ 61,154 $ 60,039 $ 59,193 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 86,098 72,111 68,021 Deferred income taxes, net (6,986) 5,347 3,322 Deferred investment tax credits, net - - - Allowance for equity funds used during construction (450) (512) (14) Non-cash proceeds from settlement of disputed contracts - - (920) Other, net 4,898 (864) 185 Changes in certain current assets and liabilities -- Receivables, net 3,540 12,867 (11,041) Inventories (13,901) 5,574 23,560 Payables (10,159) 5,386 1,580 Other 610 (9,504) (13,637) ------------------------------------------------------------------------------------------------------------ Net cash provided from operating activities 124,804 150,444 130,249 ------------------------------------------------------------------------------------------------------------ Investing Activities: Gross property additions (78,869) (78,562) (64,671) Other (3,493) (5,328) 3,970 ------------------------------------------------------------------------------------------------------------ Net cash used for investing activities (82,362) (83,890) (60,701) ------------------------------------------------------------------------------------------------------------ Financing Activities and Capital Contributions: Proceeds: Preferred stock - 35,000 29,500 First mortgage bonds - 75,000 25,000 Pollution control bonds 42,000 53,425 8,930 Capital contributions from parent company 98 11 121 Other long-term debt 32,108 25,000 - Retirements: Preferred stock (1,000) (21,060) (15,500) First mortgage bonds (48,856) (88,809) (117,693) Pollution control bonds (42,100) (40,650) (9,205) Other long-term debt (24,240) (7,736) (5,783) Notes payable, net 47,447 (37,947) 44,000 Payment of preferred stock dividends (5,925) (5,728) (5,103) Payment of common stock dividends (44,000) (41,800) (39,900) Miscellaneous (2,648) (6,888) (8,760) ------------------------------------------------------------------------------------------------------------ Net cash provided from (used for) financing activities (47,116) (62,182) (94,393) ------------------------------------------------------------------------------------------------------------ Net Increase (Decrease) in Cash and Cash Equivalents (4,674) 4,372 (24,845) Cash and Cash Equivalents at Beginning of Year 5,576 1,204 26,049 ------------------------------------------------------------------------------------------------------------ Cash and Cash Equivalents at End of Year $ 902 $ 5,576 $ 1,204 ============================================================================================================ ( ) Denotes use of cash.
II-176
STATEMENTS OF CASH FLOWS Gulf Power Company ========================================================================================================================== For the Years Ended December 31, 1991 1990 1989 1988 -------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) Operating Activities: Net income $ 63,033 $ 44,149 $ 42,983 $ 51,459 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 65,584 63,650 59,955 56,260 Deferred income taxes, net (3,392) 1,837 5,319 10,138 Deferred investment tax credits, net - - - - Allowance for equity funds used during construction (54) - 446 (457) Non-cash proceeds from settlement of disputed contracts (19,734) - - - Other, net 3,079 1,544 3,827 11,449 Changes in certain current assets and liabilities -- Receivables, net 12,421 (2,468) 492 8,984 Inventories (2,397) (11,807) 16,306 (16,160) Payables (2,003) (3,440) 6,142 (5,340) Other 8,012 5,781 4,466 (18,432) -------------------------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 124,549 99,246 139,936 97,901 -------------------------------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (64,323) (62,462) (70,726) (67,042) Other (8,097) (1,597) 419 (62,782) -------------------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (72,420) (64,059) (70,307) (129,824) -------------------------------------------------------------------------------------------------------------------------- Financing Activities and Capital Contributions: Proceeds: Preferred stock - - - - First mortgage bonds 50,000 - - 35,000 Pollution control bonds 21,200 - - 3,677 Capital contributions from parent company - 4,000 7,000 25,000 Other long-term debt - - - - Retirements: Preferred stock (2,500) (1,750) (1,250) (1,750) First mortgage bonds (32,807) (6,455) (9,344) (9,369) Pollution control bonds (21,250) (50) (50) (50) Other long-term debt (7,981) (6,083) (5,611) (5,175) Notes payable, net - - - - Payment of preferred stock dividends (5,237) (5,435) (5,622) (5,761) Payment of common stock dividends (38,000) (37,000) (37,200) (35,400) Miscellaneous (3,715) 5 (3) (233) -------------------------------------------------------------------------------------------------------------------------- Net cash provided from (used for) financing activities (40,290) (52,768) (52,080) 5,939 -------------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) in Cash and Cash Equivalents 11,839 (17,581) 17,549 (25,984) Cash and Cash Equivalents at Beginning of Year 14,210 31,791 14,242 40,226 -------------------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 26,049 $ 14,210 $ 31,791 $ 14,242 ========================================================================================================================== ( ) Denotes use of cash.
II-177A
STATEMENTS OF CASH FLOWS Gulf Power Company =========================================================================================================================== For the Years Ended December 31, 1987 1986 1985 1984 -------------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) Operating Activities: Net income $ 48,242 $ 52,634 $ 51,775 $ 46,676 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 51,672 41,619 39,595 34,784 Deferred income taxes, net 2,377 45,213 18,467 3,877 Deferred investment tax credits, net 868 1,634 5,716 10,667 Allowance for equity funds used during construction (1,013) (7,809) (6,893) (2,877) Non-cash proceeds from settlement of disputed contracts - - - - Other, net 12,913 5,860 (2,535) 243 Changes in certain current assets and liabilities -- Receivables, net (8,849) (6,012) (5,401) 19,173 Inventories 23,691 (1,342) 1,870 2,053 Payables 10,173 449 1,756 601 Other 6,208 (113) (13,331) 11,169 -------------------------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 146,282 132,133 91,019 126,366 -------------------------------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (97,511) (90,160) (92,541) (156,443) Other (692) (55,652) 7,693 2,086 -------------------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (98,203) (145,812) (84,848) (154,357) -------------------------------------------------------------------------------------------------------------------------- Financing Activities and Capital Contributions: Proceeds: Preferred stock - - - - First mortgage bonds - 50,000 - - Pollution control bonds 35,996 9,900 18,776 16,424 Capital contributions from parent company - - 6,000 15,000 Other long-term debt - 60,663 - - Retirements: Preferred stock (2,500) (750) (750) (1,500) First mortgage bonds - (46,640) (2,860) (10,415) Pollution control bonds (32,050) (50) (50) (50) Other long-term debt (4,774) - - - Notes payable, net - - - - Payment of preferred stock dividends (6,025) (6,213) (6,291) (6,340) Payment of common stock dividends (34,200) (33,100) (30,800) (27,200) Miscellaneous (1,632) (6,064) (227) (680) -------------------------------------------------------------------------------------------------------------------------- Net cash provided from (used for) financing activities (45,185) 27,746 (16,202) (14,761) -------------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) in Cash and Cash Equivalents 2,894 14,067 (10,031) (42,752) Cash and Cash Equivalents at Beginning of Year 37,332 23,265 33,296 76,048 -------------------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 40,226 $ 37,332 $ 23,265 $ 33,296 ========================================================================================================================== ( ) Denotes use of cash.
II-177B
BALANCE SHEETS Gulf Power Company ============================================================================================================ At December 31, 1994 1993 1992 ------------------------------------------------------------------------------------------------------------ (Thousands of Dollars) ASSETS Utility Plant: Production-fossil $ 896,236 $ 863,223 $ 841,489 Transmission 155,967 154,304 148,824 Distribution 487,986 464,182 443,352 General 116,178 129,995 127,826 Construction work in progress 24,288 34,591 29,564 ------------------------------------------------------------------------------------------------------------ Total utility plant 1,680,655 1,646,295 1,591,055 Accumulated provision for depreciation 622,911 610,542 578,851 ------------------------------------------------------------------------------------------------------------ Total 1,057,744 1,035,753 1,012,204 Less property-related accumulated deferred income taxes - - 200,904 ------------------------------------------------------------------------------------------------------------ Total 1,057,744 1,035,753 811,300 ------------------------------------------------------------------------------------------------------------ Other Property and Investments: Securities received from settlement of disputed contracts - - - Miscellaneous 7,997 13,242 7,074 ------------------------------------------------------------------------------------------------------------ Total 7,997 13,242 7,074 ------------------------------------------------------------------------------------------------------------ Current Assets: Cash and cash equivalents 902 5,576 1,204 Investment securities - - 22,322 Receivables, net 60,384 63,924 60,047 Fossil fuel stock, at average cost 35,686 20,652 29,492 Materials and supplies, at average cost 35,257 36,390 33,124 Current portion of deferred coal contract costs 2,521 12,535 3,071 Regulatory clauses under recovery 5,002 3,244 1,680 Prepayments 4,354 2,160 1,395 Vacation pay deferred 4,172 4,022 3,779 ------------------------------------------------------------------------------------------------------------ Total 148,278 148,503 156,114 ------------------------------------------------------------------------------------------------------------ Deferred Charges: Deferred charges related to income taxes 30,433 31,334 - Debt expense, being amortized 3,625 3,693 3,253 Premium on reacquired debt, being amortized 18,494 17,554 15,319 Deferred coal contract costs 38,169 52,884 63,723 Miscellaneous 10,802 4,846 5,916 ------------------------------------------------------------------------------------------------------------ Total 101,523 110,311 88,211 ------------------------------------------------------------------------------------------------------------ Total Assets $ 1,315,542 $1,307,809 $1,062,699 ============================================================================================================
II-178
BALANCE SHEETS Gulf Power Company ======================================================================================================================= At December 31, 1991 1990 1989 1988 ----------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) ASSETS Utility Plant: Production-fossil $ 837,712 $ 817,490 $ 807,546 $ 796,052 Transmission 143,275 136,813 133,926 113,177 Distribution 419,228 400,016 375,521 343,421 General 125,330 123,059 119,779 115,273 Construction work in progress 13,684 16,868 10,166 29,572 ----------------------------------------------------------------------------------------------------------------------- Total utility plant 1,539,229 1,494,246 1,446,938 1,397,495 Accumulated provision for depreciation 535,408 501,739 464,944 425,520 ----------------------------------------------------------------------------------------------------------------------- Total 1,003,821 992,507 981,994 971,975 Less property-related accumulated deferred income taxes 197,138 192,749 186,084 178,657 ----------------------------------------------------------------------------------------------------------------------- Total 806,683 799,758 795,910 793,318 ----------------------------------------------------------------------------------------------------------------------- Other Property and Investments: Securities received from settlement of disputed contracts 19,938 - - - Miscellaneous 6,410 5,439 6,933 6,756 ----------------------------------------------------------------------------------------------------------------------- Total 26,348 5,439 6,933 6,756 ----------------------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 26,049 14,210 31,791 14,242 Investment securities - - - - Receivables, net 49,006 61,427 58,959 59,451 Fossil fuel stock, at average cost 52,106 50,469 37,526 55,286 Materials and supplies, at average cost 34,070 33,310 34,446 32,992 Current portion of deferred coal contract costs 4,626 6,212 5,534 6,194 Regulatory clauses under recovery - 7,008 4,503 1,218 Prepayments 1,410 2,168 2,490 3,577 Vacation pay deferred 3,776 3,631 3,425 3,340 ----------------------------------------------------------------------------------------------------------------------- Total 171,043 178,435 178,674 176,300 ----------------------------------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes - - - - Debt expense, being amortized 3,232 2,954 3,117 3,281 Premium on reacquired debt, being amortized 8,855 6,256 6,574 6,892 Deferred coal contract costs 74,502 87,102 97,833 106,263 Miscellaneous 5,073 4,635 4,389 4,415 ----------------------------------------------------------------------------------------------------------------------- Total 91,662 100,947 111,913 120,851 ----------------------------------------------------------------------------------------------------------------------- Total Assets $ 1,095,736 $1,084,579 $1,093,430 $1,097,225 =======================================================================================================================
II-179A
BALANCE SHEETS Gulf Power Company ======================================================================================================================= At December 31, 1987 1986 1985 1984 ----------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) ASSETS Utility Plant: Production-fossil $ 801,600 $ 608,340 $ 599,613 $ 582,139 Transmission 106,352 99,507 98,683 96,686 Distribution 325,037 295,052 274,656 241,557 General 102,664 66,092 56,427 43,539 Construction work in progress 10,113 188,966 148,969 130,027 ----------------------------------------------------------------------------------------------------------------------- Total utility plant 1,345,766 1,257,957 1,178,348 1,093,948 Accumulated provision for depreciation 388,248 350,117 318,308 287,349 ----------------------------------------------------------------------------------------------------------------------- Total 957,518 907,840 860,040 806,599 Less property-related accumulated deferred income taxes 166,707 152,589 135,388 112,684 ----------------------------------------------------------------------------------------------------------------------- Total 790,811 755,251 724,652 693,915 ----------------------------------------------------------------------------------------------------------------------- Other Property and Investments: Securities received from settlement of disputed contracts - - - - Miscellaneous 2,932 2,619 601 2,216 ----------------------------------------------------------------------------------------------------------------------- Total 2,932 2,619 601 2,216 ----------------------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 40,226 37,332 23,265 33,296 Investment securities - - - - Receivables, net 68,435 59,586 53,574 48,173 Fossil fuel stock, at average cost 43,290 69,785 73,890 76,039 Materials and supplies, at average cost 28,828 26,024 20,577 20,298 Current portion of deferred coal contract costs 2,642 - - - Regulatory clauses under recovery - - - - Prepayments 677 788 633 474 Vacation pay deferred 3,200 3,000 2,775 2,517 ----------------------------------------------------------------------------------------------------------------------- Total 187,298 196,515 174,714 180,797 ----------------------------------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes - - - - Debt expense, being amortized 3,203 2,736 2,768 2,636 Premium on reacquired debt, being amortized 7,210 - - - Deferred coal contract costs 55,889 60,663 - - Miscellaneous 3,839 11,080 18,900 13,360 ----------------------------------------------------------------------------------------------------------------------- Total 70,141 74,479 21,668 15,996 ----------------------------------------------------------------------------------------------------------------------- Total Assets $ 1,051,182 $1,028,864 $ 921,635 $ 892,924 =======================================================================================================================
II-179B
BALANCE SHEETS Gulf Power Company ============================================================================================================ At December 31, 1994 1993 1992 ------------------------------------------------------------------------------------------------------------ (Thousands of Dollars) CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 38,060 $ 38,060 $ 38,060 Paid-in capital 218,380 218,282 218,271 Premium on preferred stock 81 81 88 Earnings retained in the business 168,951 157,773 146,771 ------------------------------------------------------------------------------------------------------------ Total common equity 425,472 414,196 403,190 Preferred stock 89,602 89,602 74,662 Preferred stock subject to mandatory redemption - 1,000 2,000 Long-term debt 356,393 369,259 382,047 ------------------------------------------------------------------------------------------------------------ Total (excluding amount due within one year) 871,467 874,057 861,899 ------------------------------------------------------------------------------------------------------------ Current Liabilities: Notes payable to banks 53,500 6,053 44,000 Preferred stock due within one year 1,000 1,000 1,000 Long-term debt due within one year 13,439 41,552 13,820 Accounts payable 23,656 38,699 33,461 Customer deposits 13,609 15,082 15,532 Taxes accrued 13,465 13,015 11,419 Interest accrued 6,106 5,420 6,370 Regulatory clauses over recovery 3,960 840 - Vacation pay accrued 4,172 4,022 3,779 Miscellaneous 7,828 8,527 3,950 ------------------------------------------------------------------------------------------------------------ Total 140,735 134,210 133,331 ------------------------------------------------------------------------------------------------------------ Deferred Credits and Other Liabilities: Accumulated deferred income taxes 151,681 151,743 - Deferred credits related to income taxes 71,964 76,876 - Accumulated deferred investment tax credits 38,391 40,770 43,117 Miscellaneous 41,304 30,153 24,352 ------------------------------------------------------------------------------------------------------------ Total 303,340 299,542 67,469 ------------------------------------------------------------------------------------------------------------ Total Capitalization and Liabilities $ 1,315,542 $1,307,809 $1,062,699 ============================================================================================================
II-180
BALANCE SHEETS Gulf Power Company ======================================================================================================================== At December 31, 1991 1990 1989 1988 ------------------------------------------------------------------------------------------------------------------------ (Thousands of Dollars) CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 38,060 $ 38,060 $ 38,060 $ 38,060 Paid-in capital 218,150 218,150 214,150 207,150 Premium on preferred stock 399 399 399 399 Earnings retained in the business 134,372 114,576 112,862 112,701 ------------------------------------------------------------------------------------------------------------------------ Total common equity 390,981 371,185 365,471 358,310 Preferred stock 55,162 55,162 55,162 55,162 Preferred stock subject to mandatory redemption 7,500 9,250 11,000 12,750 Long-term debt 434,648 475,284 484,608 497,069 ------------------------------------------------------------------------------------------------------------------------ Total (excluding amount due within one year) 888,291 910,881 916,241 923,291 ------------------------------------------------------------------------------------------------------------------------ Current Liabilities: Notes payable to banks - - - - Preferred stock due within one year 1,000 1,750 1,750 1,250 Long-term debt due within one year 59,111 9,452 12,588 15,005 Accounts payable 25,315 27,447 34,764 29,595 Customer deposits 15,513 15,551 15,752 15,316 Taxes accrued 19,274 19,610 12,388 10,683 Interest accrued 9,720 10,820 10,105 10,247 Regulatory clauses over recovery 1,114 - - - Vacation pay accrued 3,776 3,631 3,425 3,340 Miscellaneous 3,545 12,177 7,759 2,748 ------------------------------------------------------------------------------------------------------------------------ Total 138,368 100,438 98,531 88,184 ------------------------------------------------------------------------------------------------------------------------ Deferred Credits and Other Liabilities: Accumulated deferred income taxes 1,775 6,736 13,381 17,678 Deferred credits related to income taxes - - - - Accumulated deferred investment tax credits 45,446 47,776 50,109 52,451 Miscellaneous 21,856 18,748 15,168 15,621 ------------------------------------------------------------------------------------------------------------------------ Total 69,077 73,260 78,658 85,750 ------------------------------------------------------------------------------------------------------------------------ Total Capitalization and Liabilities $ 1,095,736 $1,084,579 $1,093,430 $1,097,225 ========================================================================================================================
II-181A
BALANCE SHEETS Gulf Power Company ======================================================================================================================== At December 31, 1987 1986 1985 1984 ------------------------------------------------------------------------------------------------------------------------ (Thousands of Dollars) CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 38,060 $ 38,060 $ 38,060 $ 38,060 Paid-in capital 182,150 182,150 182,150 176,150 Premium on preferred stock 399 399 399 399 Earnings retained in the business 102,403 94,386 81,065 66,381 ------------------------------------------------------------------------------------------------------------------------ Total common equity 323,012 314,995 301,674 280,990 Preferred stock 55,162 55,162 55,162 55,162 Preferred stock subject to mandatory redemption 14,000 16,500 18,250 19,000 Long-term debt 474,640 482,869 410,917 394,859 ------------------------------------------------------------------------------------------------------------------------ Total (excluding amount due within one year) 866,814 869,526 786,003 750,011 ------------------------------------------------------------------------------------------------------------------------ Current Liabilities: Notes payable to banks - - - - Preferred stock due within one year 1,750 1,750 750 750 Long-term debt due within one year 13,225 4,823 2,910 2,910 Accounts payable 34,500 24,014 23,565 21,809 Customer deposits 15,565 14,715 13,753 12,624 Taxes accrued 7,850 10,986 13,240 22,038 Interest accrued 9,584 11,024 11,783 11,707 Regulatory clauses over recovery 9,330 - - - Vacation pay accrued 3,200 3,000 2,775 2,517 Miscellaneous 2,144 3,869 4,966 4,474 ------------------------------------------------------------------------------------------------------------------------ Total 97,148 74,181 73,742 78,829 ------------------------------------------------------------------------------------------------------------------------ Deferred Credits and Other Liabilities: Accumulated deferred income taxes 22,992 23,550 - - Deferred credits related to income taxes - - - - Accumulated deferred investment tax credits 54,597 55,843 55,846 53,242 Miscellaneous 9,631 5,764 6,044 10,842 ------------------------------------------------------------------------------------------------------------------------ Total 87,220 85,157 61,890 64,084 ------------------------------------------------------------------------------------------------------------------------ Total Capitalization and Liabilities $ 1,051,182 $1,028,864 $ 921,635 $ 892,924 ========================================================================================================================
II-181B GULF POWER COMPANY OUTSTANDING SECURITIES AT DECEMBER 31, 1994 First Mortgage Bonds Amount Interest Amount Series Issued Rate Outstanding Maturity ---------------------------------------------------------------- (Thousands) (Thousands) 1992 $ 25,000 5-7/8% $ 25,000 8/1/97 1993 15,000 5.55% 15,000 4/1/98 1993 30,000 5% 30,000 7/1/98 1993 30,000 6-1/8% 30,000 7/1/03 1978 25,000 9% 2,680 9/1/08 1991 50,000 8-3/4% 50,000 12/1/21 --------- -------- $ 175,000 $152,680 ========= ======== Pollution Control Bonds Amount Interest Amount Series Issued Rate Outstanding Maturity ---------------------------------------------------------------- (Thousands) (Thousands) 1976 $ 12,500 6% $ 12,200 10/1/06 1987 32,000 8-1/4% 32,000 6/1/17 1991 21,200 7-1/8% 21,200 4/1/21 1992 8,930 6-3/4% 8,930 3/1/22 1993 13,000 6.20% 13,000 4/1/23 1993 32,550 5.80% 32,550 6/1/23 1993 7,875 5.70% 7,875 11/1/23 1994 22,000 6.30% 22,000 9/1/24 1994 20,000 Variable 20,000 9/1/24 --------- -------- $ 170,055 $169,755 ========= ======== Preferred Stock Shares Dividend Amount Series Outstanding Rate Outstanding ---------------------------------------------------------------- (Thousands) 1950 51,026 4.64% $ 5,102 1960 50,000 5.16% 5,000 1966 50,000 5.44% 5,000 1969 50,000 7.52% 5,000 1972 50,000 7.88% 5,000 1980 (1) 10,000 11.36% 1,000 1992 580,000 7% 14,500 1992 600,000 7.30% 15,000 1993 800,000 6.72% 20,000 1993 600,000 Adjustable 15,000 --------- -------- 2,841,026 $ 90,602 ========= ======== (1) The outstanding balance of $1 million was redeemed on February 1, 1995. II-182 GULF POWER COMPANY SECURITIES RETIRED DURING 1994 First Mortgage Bonds Principal Interest Series Amount Rate ----------------------------------------------------- (Thousands) 1964 $12,000 4-5/8% 1966 15,000 6% 1978 2,370 9% 1988 19,486 9.20% ------- $48,856 ======= Pollution Control Bonds Principal Interest Series Amount Rate ----------------------------------------------------- (Thousands) 1976 $ 100 6% 1984 42,000 10-1/2% ------- $42,100 ======= Preferred Stock Principal Dividend Series Amount Rate ----------------------------------------------------- (Thousands) 1980 $ 1,000 11.36% II-183 MISSISSIPPI POWER COMPANY FINANCIAL SECTION II-184 MANAGEMENT'S REPORT Mississippi Power Company 1994 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 generally accepted accounting principles appropriate in the circumstances 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 books and records reflect only authorized transactions of the Company. Limitations exist in any system of internal controls, however, based upon a recognition that the cost of the system should not exceed its benefits. The Company believes its system of internal accounting control maintains an appropriate cost/benefit relationship. The Company's system of internal accounting controls is evaluated on an ongoing basis by the 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 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 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 generally accepted accounting principles. /s/ David M. Ratcliffe David M. Ratcliffe President and Chief Executive Officer /s/ Michael W. Southern Michael W. Southern Vice President, Secretary, Treasurer and Chief Financial Officer II-185 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of 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 The Southern Company) as of December 31, 1994 and 1993, and the related statements of income, retained earnings, paid-in capital, and cash flows for each of the three years in the period ended December 31, 1994. 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 generally accepted auditing standards. 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-194 through II-209) referred to above present fairly, in all material respects, the financial position of Mississippi Power Company as of December 31, 1994 and 1993, and the results of its operations and its cash flows for the periods stated, in conformity with generally accepted accounting principles. As explained in Notes 2 and 8 to the financial statements, effective January 1, 1993, Mississippi Power changed its methods of accounting for postretirement benefits other than pensions and for income taxes. /S/ ARTHUR ANDERSEN LLP Atlanta, Georgia February 15, 1995 II-186 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Mississippi Power Company 1994 Annual Report RESULTS OF OPERATIONS Earnings Mississippi Power Company's net income after dividends on preferred stock for 1994 totaled $49.2 million, an increase of $6.7 million over the prior year. This improvement is attributable primarily to increased energy sales and rate increases. A retail rate increase under the Company's Performance Evaluation Plan (PEP) of $6.4 million annually became effective in July 1993. Under the Environmental Compliance Overview Plan (ECO Plan), retail rates increased by $7.6 million annually effective April 1994. Also, effective in April 1994 was a $3.6 million wholesale rate increase. A comparison of 1993 to 1992 reflects an increase in 1993 earnings of $5.6 million. As was the case in 1994, earnings in 1993 increased because of higher energy sales and retail rate increases. Revenues The following table summarizes the factors impacting operating revenues for the past three years: ================================================================ Increase (Decrease) from Prior Year ----------------------------------- 1994 1993 1992 ----------------------------------- (in thousands) Retail -- Change in base rates $ 9,314* $ 5,079* $ 6,605 Sales growth 9,560 5,606 7,181 Weather 1,752 4,735 (3,915) Fuel cost recovery and other 6,594 15,028 (2,743) ---------------------------------------------------------------- Total retail 27,220 30,448 7,128 ---------------------------------------------------------------- Sales for resale -- Non-affiliates 4,611 3,298 1,387 Affiliates (5,981) 5,464 (7,989) ---------------------------------------------------------------- Total sales for resale (1,370) 8,762 (6,602) Other operating revenues (1,571) 1,226 1,535 ---------------------------------------------------------------- Total operating revenues $ 24,279 $ 40,436 $ 2,061 ================================================================ Percent change 5.1% 9.3% 0.5% ---------------------------------------------------------------- *Includes the effect of the retail rate increases approved under the ECO Plan. Retail revenues of $395 million in 1994 increased 7.4 percent over the prior year, compared with increases of 9.0 percent and 2.2 percent in 1993 and 1992, respectively. The increase in retail revenues for 1994 was a result of growth in energy sales and customers and retail rate increases. Changes in base rates reflect rate changes made under PEP and the ECO Plan as approved by the Mississippi Public Service Commission (MPSC). Under the fuel cost recovery provision, recorded fuel revenues are equal to recorded fuel expenses, including the fuel component and the operation and maintenance component of purchased energy. Therefore, changes in recoverable fuel expenses are offset with corresponding changes in fuel revenues and have no effect on net income. II-187 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 1994 Annual Report 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 7.8 percent in 1994 and 9.0 percent in 1993 with the related revenues rising 14.0 percent and 14.1 percent, respectively. The customer demand experienced by these utilities is determined by factors very similar to Mississippi Power's. Sales for resale to non-affiliated non-territorial utilities are primarily under long-term contracts consisting 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. Under these long-term contracts, the capacity and energy components were: ============================================================= 1994 1993 1992 ---------------------------------------- (in thousands) Capacity $ 1,965 $ 4,191 $ 3,573 Energy 8,473 12,120 19,538 ------------------------------------------------------------- Total $10,438 $16,311 $23,111 ============================================================= Capacity revenues for Mississippi Power varied due to changes in the contracts and in the allocation of transmission capacity revenues throughout the Southern electric system. Most of the Company's capacity revenues are derived from transmission charges. Sales to affiliated companies within the Southern 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 1994 and the percent change for the last three years: ================================================================== Amount Percent Change (millions of -------- ----------------------------- kilowatt-hours 1994 1994 1993 1992 -------- ----------------------------- Residential 1,922 (0.4)% 6.9 % (1.5)% Commercial 2,101 8.6 6.8 2.4 Industrial 3,847 6.2 2.5 7.3 Other 38 (0.5) 0.3 (57.2) ----- Total retail 7,908 5.1 4.7 2.9 Sales for resale -- Non-affiliates 2,556 0.4 (5.3) (0.7) Affiliates 174 (59.2) 52.2 (54.6) ------ Total 10,638 1.3% 3.3% (1.5)% ================================================================== Total retail energy sales in 1994 increased, compared to the previous year, due primarily to the improvement in the economy. The most notable factor that increased commercial energy sales was the recent establishment of casinos within the Company's service area. It is expected that the establishment of new casinos should slow appreciably. However, growth in ancillary services (lodging, food, transportation, etc.) should continue. Also, energy demand is expected to grow as a result of a larger and more fully employed population. The improvement in the economy also carried over to the industrial sector. Retail energy sales in 1993 increased due to an improving economy and weather influences. Industrial sales increased in 1992 as a result of new contracts with two large industrial customers. In addition to the previously discussed long-term contracts, 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 -- oil and natural gas. Expenses Total operating expenses for 1994 were higher than the previous year because of higher taxes and an increase in maintenance expenses and depreciation and amortization. Additionally, included in other operation expenses are increased costs associated with work force reduction programs. (See Note 2 to the financial statements for information on these programs.) Expenses in 1993 were higher than 1992 primarily because of higher production expenses stemming from II-188 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 1994 Annual Report increased demand, an increase in the federal income tax rate, and higher employee related costs. Fuel costs constitute the single largest expense for Mississippi Power. These costs decreased in 1994 due to a 5.5 percent decrease in generation, which reflects lower demand on the rest of the Southern electric system and, hence, the availability of lower cost generation from affiliates. Fuel expenses in 1993, compared to 1992, were higher because of increased generation reflecting higher demand. Purchased power consists primarily of energy purchases from the affiliates of the Southern electric system. Purchased power transactions (both sales and purchases) among Mississippi Power and its affiliates will vary from period to period depending on demand and the availability and variable production cost at each generating unit in the Southern electric system. The increase in depreciation and amortization is primarily the result of the commercial operation of a 75 megawatt combustion turbine unit in May 1994. Taxes other than income taxes increased in 1994 because of higher ad valorem taxes, which are property based, and municipal franchise taxes, which are revenue based. The change in income taxes for 1994 reflected the change in operating income. Income tax expense in 1993 increased because of the enactment of a higher corporate income tax rate retroactive to January 1, 1993, coupled with higher earnings. Effects of Inflation Mississippi Power 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 long-lived utility plant. Conventional accounting for historical costs 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 stock. 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 regulatory matters to growth in energy sales to a less regulated, more competitive environment. Expenses are subject to constant review and cost control programs. Among the efforts to control costs are utilizing employees more effectively through a functionalization program for the Southern electric system, redesigning compensation and benefit packages, and re-engineering work processes. Mississippi Power is also maximizing the utility of invested capital and minimizing the need for capital by refinancing, decreasing the average fuel stockpile, raising generating plant availability and efficiency, and managing the construction budget. Operating revenues will be affected by any changes in rates under the PEP, the Company's performance based ratemaking plan. PEP has proven to be a stabilizing force on electric rates, with only moderate changes in rates taking place. The ECO Plan, approved by the MPSC in 1992, provides for recovery of costs 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. The Clean Air Act and other important environmental items are discussed later under "Environmental Matters." The Federal Energy Regulatory Commission (FERC) regulates wholesale rate schedules and power sales contracts that Mississippi Power has with its sales for resale customers. The FERC is currently reviewing the rate of return on common equity included in these schedules and contracts and may require such returns to be lowered, possibly retroactively. Further discussion of PEP, the ECO Plan, and proceedings before the FERC is made in Note 3 to the financial statements herein. II-189 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 1994 Annual Report Future earnings in the near term will depend upon growth in energy sales, which are subject to a number of factors. Traditionally, these factors have included changes in contracts with neighboring utilities, energy conservation practiced by customers, the elasticity of demand, weather, competition, and the rate of economic growth in Mississippi Power's service area. However, the Energy Policy Act of 1992 (Energy Act) is beginning to have a dramatic effect on the future of the electric utility industry. The Energy Act promotes energy efficiency, alternative fuel use, and increased competition for electric utilities. The Southern Company is positioning the business to meet the challenge of this major change in the traditional practice of selling electricity. The Energy Act allows Independent Power Producers (IPPs) to access a utility's transmission network in order to sell electricity to other utilities. This may enhance the incentive of IPPs to build cogeneration plants for a utility's large industrial and commercial customers and sell excess generation to other utilities. Although the Energy Act does not require transmission access to retail customers, retail wheeling initiatives are rapidly evolving and becoming very prominent issues in several states. In order to address these initiatives, numerous questions must be resolved with the most complex ones relating to transmission pricing and recovery of stranded investments. As the initiatives become a reality, the structure of the utility industry could radically change. Therefore, unless Mississippi Power remains a low-cost producer and provides quality service, the Company's retail energy sales growth could be limited, and this could significantly erode earnings. Conversely, being the low-cost producer could provide significant opportunities to increase market share and profitability. Mississippi Power is subject to the provisions of Financial Accounting Standards Board 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. See Note 1 to the financial statements under "Regulatory Assets and Liabilities," for additional information. FINANCIAL CONDITION Overview The principal changes in Mississippi Power's financial condition during 1994 were gross property additions to utility plant of $104 million, including the commercial operation of a 75 megawatt capacity combustion turbine unit. Funding for gross property additions and other capital requirements came primarily from capital contributions from The Southern Company, the sale of first mortgage bonds, the issuance of long-term notes payable, earnings and other operating cash flows. The Statements of Cash Flows provide additional details. Financing Activity Mississippi Power continued to lower its financing costs in 1994 by issuing new debt securities and retiring high-cost issues. The Company sold $35 million of first mortgage bonds and issued $85 million in term notes. Retirements, including maturities during 1994, totaled some $42 million of such securities. (See the Statements of Cash Flows for further details.) Composite financing rates for the years 1992 through 1994 as of year-end were as follows: =========================================================== 1994 1993 1992 --------------------------- Composite interest rate on long-term debt 6.44% 6.57% 6.91% Composite preferred stock dividend rate 6.58% 6.58% 7.29% =========================================================== Capital Structure At year-end 1994, the Company's ratio of common equity to total capitalization was 48.7 percent, compared to 49.8 percent in 1993 and 47.3 percent in 1992. The lower equity ratio in 1994 can be attributed primarily to additional long-term debt. Capital Requirements for Construction The Company's projected construction expenditures for the next three years total $223 million ($78 million in 1995, $73 million in 1996, and $72 million in 1997). The major emphasis within the construction program will be on upgrading existing facilities. Also included in the estimates for property additions for II-190 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 1994 Annual Report the three-year period is $2.9 million committed to meeting the requirements of Clean Air Act regulations. Revisions may be necessary because of factors such as revised load projections, the availability and cost of capital, and changes in environmental regulations. Other Capital Requirements In addition to the funds required for the Company's construction program, approximately $96 million will be required by the end of 1997 for present sinking fund requirements and maturities of long-term debt. Mississippi Power plans to continue, when economically feasible, to retire higher cost debt and preferred stock and replace these obligations with lower-cost capital. Environmental Matters In November 1990, the Clean Air Act was signed into law. Title IV of the Clean Air Act -- the acid rain compliance provision of the law -- will have a significant impact on Mississippi Power and the other operating companies of The Southern Company. Specific reductions in sulfur dioxide and nitrogen oxide emissions from fossil-fired generating plants will be required in two phases. Phase I compliance began in 1995 and affects eight generating plants -- some 10 thousand megawatts of capacity or 35 percent of total capacity -- in the Southern electric system. Phase II compliance is required in 2000, and all fossil-fired generating plants in the Southern electric system will be affected. In 1995, the Environmental Protection Agency (EPA) began issuing annual sulfur dioxide emission allowances through the allowance trading program. An emission allowance is the authority to emit one ton of sulfur dioxide during a calendar year. The method for issuing allowances is based on the fossil fuel consumed from 1985 through 1987 for each affected generating unit. Emission allowances are transferable and can be bought, sold, or banked and used in the future. The sulfur dioxide emission allowance program is expected to minimize the cost of compliance. The Southern Company's sulfur dioxide compliance strategy is designed to take advantage of allowances as a compliance option. The Southern Company expects to achieve Phase I sulfur dioxide compliance at the eight affected plants by switching to low-sulfur coal, which has required some equipment upgrades. This compliance strategy is expected to result in unused emission allowances being banked for later use. Additional construction expenditures were required to install equipment for the control of nitrogen oxide emissions at these eight plants. Also, continuous emissions monitoring equipment will be installed on all fossil-fired units. Under this Phase I compliance approach, additional construction expenditures are estimated to total approximately $300 million through 1995 for The Southern Company, of which Mississippi Power's portion is approximately $65 million. For Phase II sulfur dioxide compliance, The Southern Company could use emission allowances banked during Phase I, increase fuel switching, install flue gas desulfurization equipment at selected plants, and/or purchase more allowances depending on the price and availability of allowances. Also, in Phase II, equipment to control nitrogen oxide emissions will be installed on additional system fossil-fired plants as required to meet anticipated Phase II limits. Therefore, during the period 1996 to 2000, current compliance strategy for The Southern Company could require total construction expenditures of approximately $150 million, of which Mississippi Power's portion is approximately $5 million. However, the full impact of Phase II compliance cannot now be determined with certainty, pending the continuing development of a market for emission allowances, the completion of EPA regulations, and the possibility of new emission reduction technologies. An average increase of up to 2 percent in revenue requirements from customers could be necessary to fully recover the Company's cost of compliance for both Phase I and II of Title IV of the Clean Air Act. Compliance costs include construction expenditures, increased costs for switching to low-sulfur coal, and costs related to emission allowances. Mississippi Power'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 II-191 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 1994 Annual Report the annual revenue requirement is limited to 2 percent of retail revenues. However, the plan also provides for carryover of any amount over the 2 percent limit into the next year's revenue requirement. Mississippi Power's management believes that the ECO Plan provides for recovery of the Clean Air Act costs. Title III of the Clean Air Act requires a multi-year EPA study of power plant emissions of hazardous air pollutants. The EPA is scheduled to submit a report to Congress on the results of this study by November 1995. The report will include a decision on whether additional regulatory control of these substances is warranted. Compliance with any new control standard could result in significant additional costs. The impact of new standards -- if any -- will depend on the development and implementation of applicable regulations. The EPA continues to evaluate the need for a new short-term ambient air quality standard for sulfur dioxide. Preliminary results from an EPA study on the impact of a new standard indicate that a number of plants could be required to install sulfur dioxide controls. These controls would be in addition to the controls already required to meet the acid rain provisions of the Clean Air Act. The EPA issued proposed rules in November 1994 and is required to take final action on this issue in 1996. The impact of any new standard will depend on the level chosen for the standard and cannot be determined at this time. In addition, the EPA is evaluating the need to revise the ambient air quality standards for particulate matter, nitrogen oxides, and ozone. The impact of any new standard will depend on the level chosen for the standard and cannot be determined at this time. In 1995, the EPA may issue revised rules on air quality control regulations related to stack height requirements of the Clean Air Act. The full impact of the final rules cannot be determined at this time, pending their development and implementation. In 1993, the EPA issued a ruling confirming the non-hazardous status of coal ash. However, the EPA has until 1998 to classify co-managed utility wastes -- coal ash and other utility wastes -- as either non-hazardous or hazardous. If the EPA classifies the co-managed wastes as hazardous, then substantial additional costs for the management of such wastes may be required. The full impact of any change in the regulatory status will depend on the subsequent development of co-managed waste requirements. 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. Should remediation be determined to be probable, reasonable estimates of costs to clean up such sites are developed and recognized in the financial statements. A currently owned site where manufactured gas plant operations were located prior to the Company's ownership is under investigation for potential remediation, but no prediction can presently be made regarding the extent, if any, of contamination or possible cleanup. Results of this investigation are expected to be available in early 1995. If this site were required to be remediated, industry studies show the Company could incur cleanup costs ranging from $1.5 million to $10 million before giving consideration to possible recovery of clean-up costs from other parties. Accordingly, no accrual has been made for remediation in the accompanying financial statements. Several major pieces of environmental legislation are in the process of being reauthorized or amended by Congress. These include: the Clean Water Act; the Resource Conservation and Recovery Act; the Comprehensive Environmental Response, Compensation, and Liability Act; and the Endangered Species Act. Changes to these laws could affect many areas of the Company's operations. The full impact of these requirements cannot be determined at this time, pending the development and implementation of applicable regulations. Compliance with possible new 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 for lawsuits alleging damages caused by electromagnetic fields exists. II-192 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Mississippi Power Company 1994 Annual Report Sources of Capital At December 31, 1994, the Company had $70 million of committed credit in revolving credit agreements and also had $27 million of committed short-term credit lines. The Company had no short-term notes payable outstanding at year end 1994. It is anticipated that the funds required for construction and other purposes, including compliance with environmental regulations, will be derived from operations, the sale of additional first mortgage bonds, pollution control obligations, and preferred stock, and the receipt of additional capital contributions from The Southern Company. Mississippi Power 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 sufficiently 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. II-193 STATEMENTS OF INCOME For the Years Ended December 31, 1994, 1993, and 1992 Mississippi Power Company 1994 Annual Report
========================================================================================== 1994 1993 1992 ------------------------------------------------------------------------------------------ (in thousands) Operating Revenues (Notes 1 and 3): Revenues $ 489,624 $ 459,364 $ 424,392 Revenues from affiliates 9,538 15,519 10,055 ------------------------------------------------------------------------------------------ Total operating revenues 499,162 474,883 434,447 ------------------------------------------------------------------------------------------ Operating Expenses: Operation -- Fuel 102,216 113,986 96,743 Purchased power from non-affiliates 2,711 2,198 1,337 Purchased power from affiliates 68,543 58,019 60,689 Other 97,988 100,381 90,392 Maintenance 45,785 44,001 43,165 Depreciation and amortization 35,716 33,099 32,789 Taxes other than income taxes 41,742 37,145 34,664 Federal and state income taxes (Note 8) 31,386 22,668 16,378 ------------------------------------------------------------------------------------------ Total operating expenses 426,087 411,497 376,157 ------------------------------------------------------------------------------------------ Operating Income 73,075 63,386 58,290 Other Income (Expense): Allowance for equity funds used during construction 1,099 1,010 642 Interest income 87 517 766 Other, net 2,033 3,971 5,501 Income taxes applicable to other income (227) (1,158) (1,427) ------------------------------------------------------------------------------------------ Income Before Interest Charges 76,067 67,726 63,772 ------------------------------------------------------------------------------------------ Interest Charges: Interest on long-term debt 19,725 17,688 22,357 Allowance for debt funds used during construction (1,039) (788) (563) Interest on notes payable 1,442 1,000 362 Amortization of debt discount, premium, and expense 1,479 1,262 630 Other interest charges 404 728 339 ------------------------------------------------------------------------------------------ Net interest charges 22,011 19,890 23,125 ------------------------------------------------------------------------------------------ Net Income 54,056 47,836 40,647 Dividends on Preferred Stock 4,899 5,400 3,857 ------------------------------------------------------------------------------------------ Net Income After Dividends on Preferred Stock $ 49,157 $ 42,436 $ 36,790 ========================================================================================== The accompanying notes are an integral part of these statements.
II-194 STATEMENTS OF CASH FLOWS For the Years ended December 31, 1994, 1993, and 1992 Mississippi Power Company 1994 Annual Report
========================================================================================== 1994 1993 1992 ------------------------------------------------------------------------------------------ (in thousands) Operating Activities: Net income $ 54,056 $ 47,836 $ 40,647 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 47,827 45,660 41,472 Deferred income taxes 1,563 5,039 (5,473) Allowance for equity funds used during construction (1,099) (1,010) (642) Other, net 5,230 3,005 7,904 Changes in certain current assets and liabilities -- Receivables, net 3,066 (4,347) 1,002 Inventories (9,856) 11,119 975 Payables (8,754) 4,133 460 Other 3,334 (8,033) 6,095 ------------------------------------------------------------------------------------------ Net cash provided from operating activities 95,367 103,402 92,440 ------------------------------------------------------------------------------------------ Investing Activities: Gross property additions (104,014) (139,976) (68,189) Other (14,087) 7,562 4,235 ------------------------------------------------------------------------------------------ Net cash used for investing activities (118,101) (132,414) (63,954) ------------------------------------------------------------------------------------------ Financing Activities: Proceeds: Capital contributions 25,000 30,036 26 Preferred stock - 23,404 35,000 First mortgage bonds 35,000 70,000 40,000 Pollution control bonds - 38,875 23,300 Other long-term debt 85,310 - - Retirements: Preferred stock - (23,404) - First mortgage bonds (32,628) (51,300) (104,703) Pollution control bonds (10) (25,885) (23,650) Other long-term debt (9,299) (8,170) (6,212) Notes payable, net (40,000) 9,000 26,500 Payment of preferred stock dividends (4,899) (5,400) (3,857) Payment of common stock dividends (34,100) (29,000) (28,000) Miscellaneous (1,201) (5,683) (7,821) ------------------------------------------------------------------------------------------ Net cash provided from (used for) financing activities 23,173 22,473 (49,417) ------------------------------------------------------------------------------------------ Net Change in Cash and Cash Equivalents 439 (6,539) (20,931) Cash and Cash Equivalents at Beginning of Year 878 7,417 28,348 ------------------------------------------------------------------------------------------ Cash and Cash Equivalents at End of Year $ 1,317 $ 878 $ 7,417 ========================================================================================== Supplemental Cash Flow Information: Cash paid during the year for -- Interest (net of amount capitalized) $19,196 $15,697 $22,941 Income taxes 31,115 29,009 19,514 ------------------------------------------------------------------------------------------ ( ) Denotes use of cash. The accompanying notes are an integral part of these statements.
II-195 BALANCE SHEETS At December 31, 1994 and 1993 Mississippi Power Company 1994 Annual Report
============================================================================================ ASSETS 1994 1993 -------------------------------------------------------------------------------------------- (in thousands) Utility Plant: Plant in service, at original cost (Notes 1 and 6) $ 1,385,032 $ 1,238,847 Less accumulated provision for depreciation 477,098 462,725 -------------------------------------------------------------------------------------------- 907,934 776,122 Construction work in progress 44,838 108,063 -------------------------------------------------------------------------------------------- Total 952,772 884,185 -------------------------------------------------------------------------------------------- Other Property and Investments 3,353 11,289 -------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 1,317 878 Receivables- Customer accounts receivable 27,865 31,376 Other accounts and notes receivable 6,599 5,581 Affiliated companies 6,058 6,698 Accumulated provision for uncollectible accounts (670) (737) Fossil fuel stock, at average cost 16,885 11,185 Materials and supplies, at average cost 25,301 21,145 Current portion of deferred fuel charges (Note 5) 1,068 440 Current portion of accumulated deferred income taxes (Note 8) 5,410 4,316 Prepaid federal income taxes 5,019 3,648 Prepayments 760 1,007 Vacation pay deferred (Note 1) 4,588 4,797 -------------------------------------------------------------------------------------------- Total 100,200 90,334 -------------------------------------------------------------------------------------------- Deferred Charges: Debt expense and loss, being amortized 10,929 11,666 Deferred fuel charges (Note 5) 9,000 17,520 Deferred charges related to income taxes (Note 8) 25,036 25,267 Deferred early retirement program costs (Note 2) 11,286 - Miscellaneous 11,135 10,073 -------------------------------------------------------------------------------------------- Total 67,386 64,526 -------------------------------------------------------------------------------------------- Total Assets $ 1,123,711 $ 1,050,334 ============================================================================================ The accompanying notes are an integral part of these statements.
II-196 BALANCE SHEETS At December 31, 1994 and 1993 Mississippi Power Company 1994 Annual Report
============================================================================================ CAPITALIZATION AND LIABILITIES 1994 1993 -------------------------------------------------------------------------------------------- (in thousands) Capitalization (See accompanying statements): Common stock equity $ 361,753 $ 321,768 Preferred stock 74,414 74,414 Long-term debt 306,522 250,391 -------------------------------------------------------------------------------------------- Total 742,689 646,573 -------------------------------------------------------------------------------------------- Current Liabilities: Long-term debt due within one year (Note 10) 41,199 19,345 Notes payable (Note 5) - 40,000 Accounts payable- Affiliated companies 3,337 10,197 Other 31,144 50,731 Customer deposits 2,712 2,786 Taxes accrued- Federal and state income (Note 8) 433 186 Other 31,224 26,952 Interest accrued 4,427 4,237 Miscellaneous 14,613 14,120 -------------------------------------------------------------------------------------------- Total 129,089 168,554 -------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes (Note 8) 129,505 124,334 Accumulated deferred investment tax credits 31,228 32,710 Deferred credits related to income taxes (Note 8) 45,832 48,228 Accumulated provision for property damage (Note 1) 10,905 10,538 Miscellaneous 34,463 19,397 -------------------------------------------------------------------------------------------- Total 251,933 235,207 -------------------------------------------------------------------------------------------- Commitments and Contingent Matters (Notes 2, 3, 4, and 5) Total Capitalization and Liabilities $ 1,123,711 $ 1,050,334 ============================================================================================ The accompanying notes are an integral part of these statements.
II-197 STATEMENTS OF CAPITALIZATION At December 31, 1994 and 1993 Mississippi Power Company 1994 Annual Report
========================================================================================================= 1994 1993 1994 1993 --------------------------------------------------------------------------------------------------------- (in thousands) (percent of total) Common Stock Equity: Common stock, without par value -- Authorized -- 1,130,000 shares Outstanding -- 1,121,000 shares in 1994 and 1993 $ 37,691 $ 37,691 Paid-in capital 179,362 154,362 Premium on preferred stock 372 372 Retained earnings (Note 11) 144,328 129,343 --------------------------------------------------------------------------------------------------------- Total common stock equity 361,753 321,768 48.7 % 49.8 % --------------------------------------------------------------------------------------------------------- Cumulative Preferred Stock: $100 par value -- Authorized -- 1,244,139 shares Outstanding -- 744,139 shares in 1994 and 1993 4.40% 4,000 4,000 4.60% 2,010 2,010 4.72% 5,000 5,000 6.32% 15,000 15,000 6.65% 8,404 8,404 7.00% 5,000 5,000 7.25% 35,000 35,000 -------------------------------------------------------------------------------------------------------- Total (annual dividend requirement -- $4,899,000) 74,414 74,414 10.0 11.5 -------------------------------------------------------------------------------------------------------- Long-Term Debt: First mortgage bonds -- Maturity Interest Rates -------- -------------- June 1, 1994 4 5/8% - 10,000 July 1, 1995 4 3/4% - 11,000 August 1, 1996 6% - 10,000 March 1, 1998 5 3/8% 35,000 35,000 2000 to 2003 6 5/8% to 7 5/8% 40,000 40,000 March 1, 2004 6.60% 35,000 - May 1, 2021 9 1/4% 47,072 48,700 June 1, 2023 7.45% 35,000 35,000 -------------------------------------------------------------------------------------------------------- Total first mortgage bonds 192,072 189,700 Pollution control obligations (Note 9) 63,155 63,165 Other long-term debt (Note 9) 95,689 19,678 Unamortized debt premium (discount), net (3,195) (2,807) -------------------------------------------------------------------------------------------------------- Total long-term debt (annual interest requirement--$22,606,000) 347,721 269,736 Less amount due within one year (Note 10) 41,199 19,345 -------------------------------------------------------------------------------------------------------- Long-term debt excluding amount due within one year 306,522 250,391 41.3 38.7 -------------------------------------------------------------------------------------------------------- Total Capitalization $ 742,689 $ 646,573 100.0% 100.0% ======================================================================================================== The accompanying notes are an integral part of these statements.
II-198 STATEMENTS OF RETAINED EARNINGS For the Years Ended December 31, 1994, 1993, and 1992 Mississippi Power Company 1994 Annual Report
=========================================================================================== 1994 1993 1992 ------------------------------------------------------------------------------------------ (in thousands) Balance at Beginning of Period $ 129,343 $ 118,429 $ 111,670 Net income after dividends on preferred stock 49,157 42,436 36,790 Cash dividends on common stock (34,100) (29,000) (28,000) Preferred stock transactions and other, net (72) (2,522) (2,031) ------------------------------------------------------------------------------------------- Balance at End of Period (Note 11) $ 144,328 $ 129,343 $ 118,429 =========================================================================================== STATEMENTS OF PAID-IN CAPITAL For the Years Ended December 31, 1994, 1993, and 1992 =========================================================================================== 1994 1993 1992 ------------------------------------------------------------------------------------------- (in thousands) Balance at Beginning of Period $ 154,362 $ 124,326 $ 124,300 Contributions to capital by parent company 25,000 30,036 26 ------------------------------------------------------------------------------------------- Balance at End of Period $ 179,362 $ 154,362 $ 124,326 =========================================================================================== The accompanying notes are an integral part of these statements.
II-199 NOTES TO FINANCIAL STATEMENTS Mississippi Power Company 1994 Annual Report 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: General Mississippi Power Company is a wholly owned subsidiary of The Southern Company, which is the parent company of five operating companies, Southern Company Services (SCS), Southern Communications Services (Southern Communications), Southern Electric International (Southern Electric), Southern Nuclear Operating Company (Southern Nuclear), and The Southern Development and Investment Group (SDIG). The operating companies (Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, and Savannah Electric and Power Company) provide electric service in four southeastern states. Contracts among the companies--dealing with 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. SCS provides, at cost, specialized services to The Southern Company and to the subsidiary companies. Southern Communications, beginning in mid-1995, will provide digital wireless communications services--over the 800-megahertz frequency band--to The Southern Company's subsidiaries and also will market these services to the public within the Southeast. Southern Electric designs, builds, owns, and operates power production facilities and provides a broad range of technical services to industrial companies and utilities in the United States and a number of international markets. Southern Nuclear provides services to The Southern Company's nuclear power plants. SDIG develops new business opportunities related to energy products and services. The Southern Company is registered as a holding company under the Public Utility Holding Company Act of 1935 (PUHCA). Both The Southern Company and its subsidiaries are subject to the regulatory provisions of the PUHCA. Mississippi Power is also subject to regulation by the FERC and the Mississippi Public Service Commission (MPSC). The Company follows generally accepted accounting principles and complies with the accounting policies and practices prescribed by the respective commissions. Certain prior years' data presented in the financial statements have been reclassified to conform with current year presentation. Regulatory Assets and Liabilities Mississippi Power 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 to be credited to customers through the ratemaking process. Regulatory assets and (liabilities) reflected in the Balance Sheets as of December 31 relate to: (in thousands) =============================================================== 1994 1993 ------------------------ Deferred income taxes $25,036 $25,267 Vacation pay 4,588 4,797 Work force reduction costs 11,286 - Deferred fuel charges 10,068 17,960 Premium on reacquired debt 9,571 10,563 Property damage reserve (10,905) (10,538) Deferred income tax credits (45,832) (48,228) Other, net (3,383) (3,653) --------------------------------------------------------------- Total $ 429 $(3,832) =============================================================== 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 the related regulatory assets and liabilities. In addition, the Company would be required to determine any impairment to other assets, including plant, and write down the assets to their fair value. Revenues Mississippi Power accrues revenues for service rendered but unbilled at the end of each fiscal period. The Company's retail and wholesale rates include provisions to adjust billings for fluctuations in fuel and the energy component of purchased power. Retail rates also include provisions to adjust billings for fluctuations in costs for ad valorem taxes and certain qualifying environmental II-200 NOTES (continued) Mississippi Power Company 1994 Annual Report 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 comprised 10 percent or more of revenues. In 1994, uncollectible accounts continued to average less than 1 percent of revenues. Depreciation Depreciation of the original cost of depreciable utility plant in service is provided by using composite straight-line rates which approximated 3.2 percent in 1994, 3.1 percent in 1993, and 3.3 percent in 1992. 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. Income Taxes Mississippi Power 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. Effective January 1, 1993, Mississippi Power adopted FASB Statement No. 109, Accounting for Income Taxes. Statement No. 109 required, among other things, conversion to the liability method of accounting for accumulated deferred income taxes. See Note 8 to the financial statements for additional information about Statement No. 109. 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 to capitalize the cost of funds devoted to construction were 6.9 percent in 1994, 6.8 percent in 1993, and 8.2 percent in 1992. AFUDC (net of income taxes), as a percent of net income after dividends on preferred stock, was 3.5 percent in 1994 and 1993 and 2.7 percent in 1992. Utility Plant Utility plant is stated at original cost. This 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 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 charged to utility plant. 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 In accordance with FASB Statement No. 107, Disclosure About Fair Value of Financial Instruments, all financial instruments of the Company for which the carrying amount does not approximate fair value, must be disclosed. At December 31, 1994, the fair value of long-term debt was $331 million and the carrying amount was $348 million. At December 31, 1993, the fair value of long-term debt was $278 million and the carrying amount was $270 million. The fair value for long-term debt was based on either closing market price or closing price 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 used or installed. II-201 NOTES (continued) Mississippi Power Company 1994 Annual Report Vacation Pay Mississippi Power's employees earn their vacation in one year and take it in the subsequent year. However, for ratemaking purposes, vacation pay is recognized as an allowable expense only when paid. Consistent with this ratemaking treatment, the Company accrues a current liability for earned vacation pay and records a current asset representing the future recoverability of this cost. Such amounts were $4.6 million and $4.8 million at December 31, 1994 and 1993, respectively. In 1995, an estimated 78 percent of the 1994 deferred vacation cost will be expensed, and the balance will be charged to construction and other accounts. Provision for Property Damage Mississippi Power 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 provided for such costs by charges to income of $1.1 million in 1994 and $1.5 million in 1993 and 1992. The cost of repairing damage resulting from such events that individually exceed $50 thousand is charged to the accumulated provision to the extent it is available. As of December 31, 1994, the accumulated provision amounted to $10.9 million, the maximum allowed for 1994. Effective January 1995, regulatory treatment by the MPSC allows a maximum accumulated provision of $18 million. 2. RETIREMENT BENEFITS: Pension Plan Mississippi Power has a defined benefit, trusteed, non-contributory pension plan that covers substantially all regular employees. Benefits are based on the greater of amounts resulting from two different formulas: years of service and final average pay or years of service and a flat-dollar benefit. The Company uses the "entry age normal method with a frozen initial liability" actuarial method for funding purposes, subject to limitations under federal income tax regulations. Amounts funded to the pension trust are primarily invested in equity and fixed-income securities. FASB Statement No. 87, Employers' Accounting for Pensions, requires use of the "projected unit credit" actuarial method for financial reporting purposes. Postretirement Benefits Mississippi Power also provides certain medical care and life insurance benefits for retired employees. Substantially all employees may become eligible for these benefits when they retire. Qualified trusts are funded to the extent required by the Company's regulatory commissions. Amounts funded are primarily invested in debt and equity securities. Effective January 1, 1993, Mississippi Power adopted FASB Statement No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, on a prospective basis. Statement No. 106 requires that medical care and life insurance benefits for retired employees be accounted for on an accrual basis using a specified actuarial method, "benefit/years-of-service." The cost of postretirement benefits is reflected in rates on a current basis. Prior to 1993, Mississippi Power recognized these benefit costs on an accrual basis using the "aggregate cost" actuarial method, which spreads the expected cost of such benefits over the remaining periods of employees' service as a level percentage of payroll costs. The total cost of such benefits recognized by the Company was $3.6 million in 1992. Funded Status and Cost of Benefits Shown in the following tables are actuarial results and assumptions for pension and postretirement medical and life insurance benefits as computed under the requirements of FASB Statement Nos. 87 and 106, respectively. The funded status of the plans at December 31 was as follows: II-202 NOTES (continued) Mississippi Power Company 1994 Annual Report =============================================================== Pension ------------------- 1994 1993 ------------------- (in thousands) Actuarial present value of benefit obligation: Vested benefits $80,603 $73,735 Non-vested benefits 2,966 3,245 -------------------------------------------------------------- Accumulated benefit obligation 83,569 76,980 Additional amounts related to projected salary increases 27,292 24,434 --------------------------------------------------------------- Projected benefit obligation 110,861 101,414 Less: Fair value of plan assets 145,598 154,224 Unrecognized net gain (37,485) (49,239) Unrecognized prior service cost 3,109 3,590 Unrecognized transition asset (6,635) (7,188) --------------------------------------------------------------- Prepaid asset (accrued liability) recognized in the Balance Sheets $(6,274) $ (27) =============================================================== Postretirement Medical ------------------------ 1994 1993 ------------------------ (in thousands) Actuarial present value of benefit obligation: Retirees and dependents $18,106 $10,408 Employees eligible to retire 774 3,752 Other employees 19,124 19,389 --------------------------------------------------------------- Accumulated benefit obligation 38,004 33,549 Less: Fair value of plan assets 6,460 6,271 Unrecognized net loss (gain) 2,301 3,500 Unrecognized transition obligation 15,319 16,540 --------------------------------------------------------------- Accrued liability recognized in the Balance Sheets $13,924 $ 7,238 =============================================================== Postretirement Life ---------------------- 1994 1993 ---------------------- (in thousands) Actuarial present value of benefit obligation: Retirees $4,727 $3,315 Other employees 3,727 4,596 ----------------------------------------------------------- Accumulated benefit obligation 8,454 7,911 Less: Fair value of plan assets 148 84 Unrecognized net loss (gain) (550) (632) Unrecognized transition obligation 3,349 3,606 ----------------------------------------------------------- Accrued liability recognized in the Balance Sheets $5,507 $4,853 =========================================================== The weighted average rates assumed in the above actuarial calculations were: ========================================================== 1994 1993 1992 ---------------------------- Discount 8.0% 7.5% 8.0% Annual salary increase 5.5 5.0 6.0 Long-term return on plan assets 8.5 8.5 8.5 ---------------------------------------------------------- An additional assumption used in measuring the accumulated postretirement medical benefit obligation was a weighted average medical care cost trend rate of 10.5 percent for 1994 decreasing gradually to 6.0 percent through the year 2000 and remaining at that level thereafter. An annual increase in the assumed medical care cost trend rate of 1 percent would increase the accumulated medical benefit obligation as of December 31, 1994, by $6.7 million and the aggregate of the service and interest cost components of the net retiree medical cost by $1.1 million. II-203 NOTES (continued) Mississippi Power Company 1994 Annual Report Components of the plans' net cost are shown below: ================================================================ Pension ------------------------------ 1994 1993 1992 ------------------------------ (in thousands) Benefits earned during the year $ 3,780 $ 3,792 $ 3,595 Interest cost on projected benefit obligation 7,503 7,296 6,886 Actual (return) loss on plan assets 3,244 (20,017) (5,812) Net amortization and deferral (16,048) 8,741 (4,265) ---------------------------------------------------------------- Net pension cost (income) $(1,521) $ (188) $ 404 ================================================================ Of the above net pension amounts recorded, $(1.1) million in 1994, $(170) thousand in 1993, and $269 thousand in 1992, and were recorded in operating expenses, and the remainder was recorded in construction and other accounts. Postretirement Medical --------------------------- 1994 1993 --------------------------- (in thousands) Benefits earned during the year $1,486 $1,149 Interest cost on accumulated benefit obligation 2,666 2,187 Amortization of transition obligation over 20 years 864 871 Actual (return) loss on plan assets 127 (808) Net amortization and deferral (562) 343 ---------------------------------------------------------------- Net postretirement cost $4,581 $3,742 ================================================================ Postretirement Life --------------------- 1994 1993 --------------------- (in thousands) Benefits earned during the year $ 274 $ 299 Interest cost on accumulated benefit obligation 585 624 Amortization of transition obligation over 20 years 179 180 Actual (return) loss on plan assets 5 (6) Net amortization and deferral (13) - --------------------------------------------------------------- Net postretirement cost $1,030 $1,097 =============================================================== Of the above net postretirement medical and life insurance costs recorded, $4.4 million in 1994 and $3.9 million in 1993 was charged to operating expense and the remainder was charged to construction and other accounts. Work Force Reduction Programs During 1994, Mississippi Power and SCS instituted work force reduction programs. The costs of the SCS work force reduction program were apportioned among the various entities that form the Southern electric system, with the Company's portion amounting to $1.4 million. The Company instituted an early retirement incentive program in April 1994 and deferred the related costs of approximately $12.9 million. The Company received authority from the MPSC to defer these costs, as well as its portion of the costs of the SCS program, and to amortize over a period not to exceed 60 months, beginning no later than January 1995. During 1994, the Company expensed $3.0 million of the cost of these programs. 3. LITIGATION AND REGULATORY MATTERS: Retail Rate Adjustment Plans Mississippi Power's retail base rates are set under a Performance Evaluation Plan (PEP). The current version, PEP-2 was approved by the MPSC in January 1994. PEP-2 was designed with the MPSC objectives that the plan would reduce the impact of rate changes on the customer and provide incentives for Mississippi Power to keep customer prices low. PEP-2 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 indicators that emphasize price and service to the customer. PEP-2 provides for semiannual evaluations of Mississippi's performance-based return on investment. Any change in rates is limited to 2 percent of retail revenues per evaluation period. PEP-2 will remain in effect until the MPSC modifies or terminates the plan. During 1994, there was no increase under PEP-2. Environmental Compliance Overview Plan The MPSC approved Mississippi Power's ECO Plan in 1992. The plan establishes procedures to facilitate the MPSC's overview of the Company's environmental strategy and provides for recovery of costs 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 plan also provides for carryover of any amount over the 2 percent limit into the next year's revenue requirement. The ECO Plan has resulted in annual retail rate increases, the latest being a $7.6 million increase effective April 1994. On II-204 NOTES (continued) Mississippi Power Company 1994 Annual Report January 31, 1995, the Company filed the ECO Plan with the MPSC requesting an annual retail rate increase of $3.7 million, which included $1.6 million of 1994 carryover. Mississippi Power conducts studies, when possible, to determine the extent of any required clean-up costs. Should remediation be determined to be probable, reasonable estimates of costs to clean up such sites are developed and recognized in the financial statements. See "Environmental Matters" in the Management's Discussion and Analysis for information on a manufactured gas plant site. FERC Reviews Equity Returns In May 1991, the FERC ordered that hearings be conducted concerning the reasonableness of the Southern electric system's wholesale rate schedules and contracts that have a return on equity of 13.75 percent or greater. The contracts that could be affected by the hearings include substantially all of the transmission, unit power, long-term power and other similar contracts, including the Company's Transmission Facilities Agreement (TFA) discussed in Note 5 under "Lease Agreements." Any changes in the rate of return on common equity that may require refunds as a result of this proceeding would be substantially for the period beginning in July 1991 and ending in October 1992. In August 1992, a FERC administrative law judge issued an opinion that changes in rate schedules and contracts were not necessary and that the FERC staff failed to show how any changes were in the public interest. The FERC staff has filed exceptions to the administrative law judge's opinion, and the matter remains pending before the FERC. In August 1994, the FERC instituted another proceeding based on substantially the same issues as in the 1991 proceeding. The second period under review for possible refunds began in October 1994 and is scheduled to continue until January 1996. If the rates of return on common equity recommended by the FERC staff were applied to all of the schedules and contracts involved in both proceedings and refunds were ordered, the amount of refunds could range up to approximately $0.6 million at December 31, 1994. Although the final outcome of this matter cannot now be determined, in management's opinion, the final outcome will not result in changes that would have a material adverse effect on the Company's financial statements. 4. CONSTRUCTION PROGRAM: Mississippi Power is engaged in continuous construction programs, the costs of which are currently estimated to total some $78 million in 1995, $73 million in 1996, and $72 million in 1997. These estimates include AFUDC of $1.7 million in 1995, $2.2 million in 1996, and $1.5 million in 1997. 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. The Company does not have any new generating plants under construction. However, significant construction will continue related to transmission and distribution facilities and the upgrading and extension of the useful lives of generating plants. See "Environmental Matters" in Management's Discussion and Analysis for information on the impact of the Clean Air Act Amendments of 1990 and other environmental matters. 5. FINANCING AND COMMITMENTS: Financing Mississippi Power's construction program is expected to be financed from internal and other sources, such as the issuance of additional long-term debt and preferred stock and the receipt of capital contributions from The Southern Company. The amounts of first mortgage bonds and preferred stock which can be issued in the future will be contingent upon market conditions, adequate earnings levels, regulatory authorizations and other factors. See "Sources of Capital" in Management's Discussion and Analysis for information regarding the Company's coverage requirements. At December 31, 1994, Mississippi Power had unused committed credit agreements with banks for $27 million. Additionally, Mississippi Power had $70 million of unused committed credit agreements in the form of revolving credit II-205 NOTES (continued) Mississippi Power Company 1994 Annual Report agreements expiring at various dates during 1995 and in 1997. The agreements expiring December 31, 1997, for $40 million 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 agrees to pay commitment fees based on the unused portions of the commitments or to maintain compensating balances with the banks. The Company had no short-term borrowings outstanding at year-end 1994. Assets Subject to Lien Mississippi Power'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 the Company's fixed property and franchises. Lease Agreements In 1984, Mississippi Power and Gulf States Utilities Company (Gulf States) entered into a forty-year transmission facilities agreement whereby Gulf States 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 1994 use fees collected under this agreement, net of related expenses, amounted to $3.9 million each year, and are included with other income, net, in the Statements of Income. For other information see Note 3 under "FERC Reviews Equity Returns." In 1989, Mississippi Power entered into a twenty-two year 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. Both of these leases, totaling 745 railcars, were for the transport of coal at 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 is charged to fuel inventory and allocated to fuel expense as the fuel is consumed. The lease cost charged to inventory was $1.2 million in each of the past three years. For the year 1995, the Company's annual lease payment will be $2.6 million, of which $1.2 million was charged to inventory in 1994. Lease payments will be approximately $1.7 million per year for the years 1996 through 1999. Lease payments after 1999 total approximately $26.1 million. The Company has the option to purchase the 745 railcars at the greater of the termination value or the fair market value, or to renew the leases at the end of the lease term. Fuel Commitments To supply a portion of the fuel requirements of its generating plants, Mississippi Power 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 were approximately $393 million at December 31, 1994. Additional commitments for fuel will be required in the future to supply the Company's fuel needs. In order to take advantage of lower cost coal supplies, agreements were reached in 1986 to terminate two contracts for the supply of coal to Plant Daniel, which is jointly owned by Mississippi Power and Gulf Power, an operating affiliate. The Company's portion of this payment was about $60 million. In accordance with the ratemaking treatment, the cost to terminate the contracts is being amortized through 1995 to match costs with savings achieved. The remaining unamortized amount of Mississippi Power's share of principal payments to the suppliers totaled $10.1 million at December 31, 1994. 6. JOINT OWNERSHIP AGREEMENTS: Mississippi Power and Alabama Power own as tenants in common Greene County Electric Generating Plant (coal) located in Alabama; and Mississippi Power and Gulf Power own as tenants in common Daniel Electric Generating Plant (coal) located in Mississippi. At December 31, 1994, Mississippi Power'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 500 40% $ 57,567 $29,742 Daniel 1,000 50% 219,870 90,908 -------------------------------------------------------------------------- II-206 NOTES (continued) Mississippi Power Company 1994 Annual Report Mississippi Power's share of plant operating expenses is included in the corresponding operating expenses in the Statements of Income. 7. LONG-TERM POWER SALES AGREEMENTS: General Mississippi Power and the other operating affiliates of The Southern Company have entered into long-term contractual agreements for the sale of capacity and energy to certain non-affiliated utilities located outside of the system's service area. The agreements for non-firm capacity expired in 1994. Some of these agreements (unit power sales) are firm commitments and pertain to capacity related to specific generating units. Mississippi Power's participation in firm production capacity unit power sales ended in 1989. However, the Company continues to participate in transmission and energy sales under the unit power sales agreements. Because the energy is generally sold at variable costs under these agreements, only revenues from capacity sales affect profitability. Off-system capacity revenues for the Company have been as follows: ============================================================ Other Year Unit Power Long-Term Total ------------------------------------------------------------ (in thousands) 1994 $ 660 $1,305 $1,965 1993 1,571 2,620 4,191 1992 2,168 1,405 3,573 ------------------------------------------------------------ In 1994, long-term non-firm power of 200 megawatts was sold by the Southern electric system to Florida Power Corporation until the contract expired at year-end. 8. INCOME TAXES: Effective January 1, 1993, Mississippi Power adopted FASB Statement No. 109, Accounting for Income Taxes. The adoption resulted in the recording of additional deferred income taxes and related regulatory assets and liabilities. At December 31, 1994, the tax-related regulatory assets to be recovered from customers were $25 million. These assets are attributable to tax benefits flowed through to customers in prior years and to taxes applicable to capitalized AFUDC. At December 31, 1994, the tax-related regulatory liabilities to be refunded to customers were $46 million. These liabilities are attributable to deferred taxes previously recognized at rates higher than current enacted tax law and unamortized investment tax credits. Details of the federal and state income tax provisions are shown below: ================================================================== 1994 1993 1992 ------------------------------ (in thousands) Total provision for income taxes Federal -- Currently payable $26,072 $15,842 $20,286 Deferred --current year 6,313 5,158 (1,578) --reversal of prior years (5,161) (820) (3,931) ------------------------------------------------------------------ 27,224 20,180 14,777 ------------------------------------------------------------------ State -- Currently payable 3,978 2,945 2,992 Deferred --current 1,669 1,339 218 --reversal of prior years (1,258) (638) (182) ------------------------------------------------------------------ 4,389 3,646 3,028 ------------------------------------------------------------------ Total 31,613 23,826 17,805 Less income taxes charged to other income 227 1,158 1,427 ------------------------------------------------------------------ Federal and state income taxes charged to operations $31,386 $22,668 $16,378 ================================================================== The tax effects of temporary differences between the carrying amounts of assets and liabilities in the financial statements and their respective tax II-207 NOTES (continued) Mississippi Power Company 1994 Annual Report bases, which give rise to deferred tax assets and liabilities are as follows: =============================================================== 1994 1993 ------------------------- (in thousands) Deferred tax liabilities: Accelerated depreciation $138,281 $130,299 Basis differences 11,645 11,332 Coal contract buyouts 3,851 6,870 Other 17,908 18,719 --------------------------------------------------------------- Total 171,685 167,220 --------------------------------------------------------------- Deferred tax assets: Other property basis differences 27,375 28,779 Pension and other benefits 5,386 4,625 Property insurance 4,171 4,031 Unbilled fuel 3,649 4,205 Other 7,009 5,562 -------------------------------------------------------------- Total 47,590 47,202 -------------------------------------------------------------- Net deferred tax liabilities 124,095 120,018 Portion included in current assets, net 5,410 4,316 -------------------------------------------------------------- Accumulated deferred income taxes in the Balance Sheets $129,505 $124,334 ============================================================== In 1989, under order of the MPSC, Mississippi Power began amortizing deferred income taxes not covered by the Internal Revenue Service normalization requirements, that had been recorded at rates higher than those specified by the current statutory income tax rules. This amortization occurred over a 60-month period, the effect of which was a reduction of income tax expense of approximately $2.7 million per year. This tax rate differential has been fully amortized. 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 $1.5 million in both 1994 and 1993 and $1.4 million in 1992. At December 31, 1994, 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: ============================================================= 1994 1993 1992 ---------------------------- Total effective tax rate 37% 33% 30% State income tax, net of federal income tax benefit (3)% (3) (3) Tax rate differential 1 4 6 Other - 1 1 ------------------------------------------------------------- Statutory federal tax rate 35% 35% 34% ============================================================= Mississippi Power and its affiliates file a consolidated federal income tax return. Under a joint consolidated income tax agreement, each company's current and deferred tax expense is computed on a stand-alone basis, and consolidated tax savings are allocated to each company based on its ratio of taxable income to total consolidated taxable income. 9. OTHER LONG-TERM DEBT: Details of other long-term debt are as follows: ============================================================== December 31, 1994 1993 ------------------- (in thousands) Obligations incurred in connection with the sale by public authorities of tax-exempt pollution control revenue bonds: 5.80% due 2007 $ 980 $ 990 Variable rate due 2020 6,550 6,550 Variable rate due 2022 16,750 16,750 6.20% due 2023 13,000 13,000 5.65% due 2023 25,875 25,875 -------------------------------------------------------------- 63,155 63,165 -------------------------------------------------------------- Notes payable: 8.25% due 1994-1995 - 17,520 7.50% due 1994-1995 1,689 2,158 5.39% to 5.72% due 1995 9,000 - 4.15% to 5.89% due 1995-1996 50,000 - 6.0375% due 1996 35,000 - -------------------------------------------------------------- 95,689 19,678 -------------------------------------------------------------- Total $158,844 $82,843 ============================================================== Pollution control obligations represent installment or lease purchases of pollution control facilities financed by application of funds derived from sales by public authorities of tax-exempt revenue bonds. Mississippi Power has authenticated and delivered to the Trustee a like principal amount of first II-208 NOTES (continued) Mississippi Power Company 1994 Annual Report mortgage bonds as security for obligations under collateralized installment agreements. The principal and interest on the first mortgage bonds will be payable only in the event of default under these agreements. The 5.8% Series of pollution control obligations has a cash sinking fund requirement of $10 thousand annually through 1997 and $20 thousand annually in 1998 and 1999. 10. 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: =============================================================== 1994 1993 ------------------- (in thousands) Bond improvement fund requirements $ 1,931 $ 1,902 Less: Portion to be satisfied by certifying property additions 1,431 1,402 --------------------------------------------------------------- Cash improvement fund requirements 500 500 First mortgage bond maturities and redemptions - 10,000 Pollution control bond cash sinking fund requirements (Note 9) 10 10 Current portion of notes payable (Note 9) 40,689 8,835 --------------------------------------------------------------- Total $41,199 $19,345 =============================================================== The first mortgage bond improvement fund requirement is one percent of each outstanding series authenticated under the indenture of Mississippi Power 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. 11. COMMON STOCK DIVIDEND RESTRICTIONS: Mississippi Power's first mortgage bond indenture and the corporate charter contain various common stock dividend restrictions. At December 31, 1994, $94 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. 12. QUARTERLY FINANCIAL DATA (UNAUDITED): Summarized quarterly financial data for 1994 and 1993 are as follows: =================================================================== Net Income After Dividends Quarter Operating Operating On Ended Revenues Income Preferred Stock ------- ------------------------------------------------ March 1994 $114,134 $12,910 $ 8,266 June 1994 131,792 19,891 13,744 September 1994 142,340 26,212 21,357 December 1994 110,896 14,062 5,790 March 1993 $101,552 $ 9,529 $ 4,424 June 1993 117,764 18,147 11,852 September 1993 148,102 22,377 16,560 December 1993 107,465 13,333 9,600 Mississippi Power's business is influenced by seasonal weather conditions and the timing of rate changes. II-209 SELECTED FINANCIAL AND OPERATING DATA Mississippi Power Company 1994 Annual Report
================================================================================================ 1994 1993 1992 ------------------------------------------------------------------------------------------------ Operating Revenues (in thousands) $499,162 $474,883 $434,447 Net Income after Dividends on Preferred Stock (in thousands) $49,157 $42,436 $36,790 Cash Dividends on Common Stock (in thousands) $34,100 $29,000 $28,000 Return on Average Common Equity (percent) 14.38 14.09 13.27 Total Assets (in thousands) $1,123,711 $1,050,334 $791,283 Gross Property Additions (in thousands) $104,014 $139,976 $68,189 ------------------------------------------------------------------------------------------------ Capitalization (in thousands): Common stock equity $361,753 $321,768 $280,640 Preferred stock 74,414 74,414 74,414 Preferred stock subject to mandatory redemption - - - Long-term debt 306,522 250,391 238,650 ------------------------------------------------------------------------------------------------ Total (excluding amounts due within one year) $742,689 $646,573 $593,704 ================================================================================================ Capitalization Ratios (percent): Common stock equity 48.7 49.8 47.3 Preferred stock 10.0 11.5 12.5 Long-term debt 41.3 38.7 40.2 ------------------------------------------------------------------------------------------------ Total (excluding amounts due within one year) 100.0 100.0 100.0 ================================================================================================ First Mortgage Bonds (in thousands): Issued 35,000 70,000 40,000 Retired 32,628 51,300 104,703 Preferred Stock (in thousands): Issued - 23,404 35,000 Retired - 23,404 - ------------------------------------------------------------------------------------------------ Security Ratings: First Mortgage Bonds - Moody's Aa3 A1 A1 Standard and Poor's A+ A+ A+ Duff & Phelps A+ A+ A+ Preferred Stock - Moody's a1 a1 a1 Standard and Poor's A A A Duff & Phelps A A A ------------------------------------------------------------------------------------------------ Customers (year-end): Residential 152,891 151,692 150,248 Commercial 29,276 28,648 28,056 Industrial 650 570 573 Other 189 190 189 ------------------------------------------------------------------------------------------------ Total 183,006 181,100 179,066 ================================================================================================ Employees (year-end) 1,535 1,586 1,619 ------------------------------------------------------------------------------------------------
II-210 SELECTED FINANCIAL AND OPERATING DATA (continued) Mississippi Power Company 1994 Annual Report
================================================================================================ 1991 1990 1989 ------------------------------------------------------------------------------------------------ Operating Revenues (in thousands) $432,386 $446,871 $442,650 Net Income after Dividends on Preferred Stock (in thousands) $22,627 $34,176 $38,576 Cash Dividends on Common Stock (in thousands) $28,500 $27,500 $27,000 Return on Average Common Equity (percent) 8.17 12.36 14.43 Total Assets (in thousands) $790,641 $800,026 $786,570 Gross Property Additions (in thousands) $53,675 $49,009 $43,916 ------------------------------------------------------------------------------------------------ Capitalization (in thousands): Common stock equity $273,855 $279,833 $273,157 Preferred stock 39,414 39,414 39,414 Preferred stock subject to mandatory redemption - 3,750 4,500 Long-term debt 304,150 270,724 277,693 ------------------------------------------------------------------------------------------------ Total (excluding amounts due within one year) $617,419 $593,721 $594,764 ================================================================================================ Capitalization Ratios (percent): Common stock equity 44.4 47.1 45.9 Preferred stock 6.4 7.3 7.4 Long-term debt 49.2 45.6 46.7 ------------------------------------------------------------------------------------------------ Total (excluding amounts due within one year) 100.0 100.0 100.0 ================================================================================================ First Mortgage Bonds (in thousands): Issued 50,000 - - Retired - 4,000 3,823 Preferred Stock (in thousands): Issued - - - Retired 4,118 750 750 ------------------------------------------------------------------------------------------------ Security Ratings: First Mortgage Bonds - Moody's A1 A1 A1 Standard and Poor's A+ A+ A+ Duff & Phelps A+ A+ A+ Preferred Stock - Moody's a1 a1 a1 Standard and Poor's A A A Duff & Phelps A A A ------------------------------------------------------------------------------------------------ Customers (year-end): Residential 148,978 147,738 147,308 Commercial 27,441 27,134 26,867 Industrial 562 574 525 Other 400 411 404 ------------------------------------------------------------------------------------------------ Total 177,381 175,857 175,104 ================================================================================================ Employees (year-end) 1,630 1,842 1,750 ------------------------------------------------------------------------------------------------
II-211A SELECTED FINANCIAL AND OPERATING DATA (continued) Mississippi Power Company 1994 Annual Report
================================================================================================ 1988 1987 1986 ------------------------------------------------------------------------------------------------ Operating Revenues (in thousands) $437,939 $455,843 $476,265 Net Income after Dividends on Preferred Stock (in thousands) $36,081 $35,200 $33,814 Cash Dividends on Common Stock (in thousands) $27,600 $24,700 $23,700 Return on Average Common Equity (percent) 14.03 14.68 15.28 Total Assets (in thousands) $779,319 $764,068 $767,110 Gross Property Additions (in thousands) $54,550 $53,288 $62,488 ------------------------------------------------------------------------------------------------ Capitalization (in thousands): Common stock equity $261,473 $252,992 $226,601 Preferred stock 39,414 39,414 39,414 Preferred stock subject to mandatory redemption 5,250 6,750 8,250 Long-term debt 287,525 294,811 299,684 ------------------------------------------------------------------------------------------------ Total (excluding amounts due within one year) $593,662 $593,967 $573,949 ================================================================================================ Capitalization Ratios (percent): Common stock equity 44.1 42.6 39.5 Preferred stock 7.5 7.8 8.3 Long-term debt 48.4 49.6 52.2 ------------------------------------------------------------------------------------------------ Total (excluding amounts due within one year) 100.0 100.0 100.0 ================================================================================================ First Mortgage Bonds (in thousands): Issued - - 35,000 Retired - 29,701 29,250 Preferred Stock (in thousands): Issued - - - Retired 1,500 1,500 1,500 ------------------------------------------------------------------------------------------------ Security Ratings: First Mortgage Bonds - Moody's A1 A1 A1 Standard and Poor's A+ A+ A+ Duff & Phelps 5 5 5 ------------------------------------------------------------------------------------------------ Preferred Stock - Moody's a1 a1 a1 Standard and Poor's A A A Duff & Phelps 6 6 6 ------------------------------------------------------------------------------------------------ Customers (year-end): Residential 146,750 146,273 145,809 Commercial 26,751 26,342 26,217 Industrial 478 438 393 Other 399 389 363 ------------------------------------------------------------------------------------------------ Total 174,378 173,442 172,782 ================================================================================================ Employees (year-end) 1,831 1,898 1,882 ------------------------------------------------------------------------------------------------
II-211B SELECTED FINANCIAL AND OPERATING DATA (continued) Mississippi Power Company 1994 Annual Report
==================================================================================== 1985 1984 ------------------------------------------------------------------------------------ Operating Revenues (in thousands) $475,610 $442,507 Net Income after Dividends on Preferred Stock (in thousands) $33,330 $31,380 Cash Dividends on Common Stock (in thousands) $22,600 $21,000 Return on Average Common Equity (percent) 15.83 15.74 Total Assets (in thousands) $679,577 $660,530 Gross Property Additions (in thousands) $57,791 $37,290 ------------------------------------------------------------------------------------ Capitalization (in thousands): Common stock equity $216,087 $205,018 Preferred stock 39,414 39,414 Preferred stock subject to mandatory redemption 9,750 10,500 Long-term debt 261,594 267,051 ------------------------------------------------------------------------------------ Total (excluding amounts due within one year) $526,845 $521,983 ==================================================================================== Capitalization Ratios (percent): Common stock equity 41.0 39.3 Preferred stock 9.3 9.5 Long-term debt 49.7 51.2 ------------------------------------------------------------------------------------ Total (excluding amounts due within one year) 100.0 100.0 ==================================================================================== First Mortgage Bonds (in thousands): Issued - - Retired 250 250 Preferred Stock (in thousands): Issued - - Retired 1,111 639 ------------------------------------------------------------------------------------ Security Ratings: First Mortgage Bonds - Moody's A1 A1 Standard and Poor's A A Duff & Phelps 5 5 Preferred Stock - Moody's a1 a1 Standard and Poor's A A Duff & Phelps 6 6 ------------------------------------------------------------------------------------ Customers (year-end): Residential 145,071 142,846 Commercial 25,629 25,404 Industrial 371 348 Other 356 356 ------------------------------------------------------------------------------------ Total 171,427 168,954 ==================================================================================== Employees (year-end) 1,801 1,669 ------------------------------------------------------------------------------------
II-211C SELECTED FINANCIAL AND OPERATING DATA (continued) Mississippi Power Company 1994 Annual Report
================================================================================================ 1994 1993 1992 ------------------------------------------------------------------------------------------------ Operating Revenues (in thousands): Residential $124,257 $118,793 $109,781 Commercial 124,716 115,152 107,131 Industrial 142,268 130,198 117,010 Other 3,882 3,760 3,533 ------------------------------------------------------------------------------------------------ Total retail 395,123 367,903 337,455 Sales for resale - non-affiliates 88,122 83,511 80,213 Sales for resale - affiliates 9,538 15,519 10,055 ------------------------------------------------------------------------------------------------ Total revenues from sales of electricity 492,783 466,933 427,723 Other revenues 6,379 7,950 6,724 ------------------------------------------------------------------------------------------------ Total $499,162 $474,883 $434,447 ================================================================================================ Kilowatt-Hour Sales (in thousands): Residential 1,922,217 1,929,835 1,804,858 Commercial 2,100,625 1,933,685 1,811,042 Industrial 3,847,011 3,623,543 3,536,634 Other 38,147 38,357 38,261 ------------------------------------------------------------------------------------------------ Total retail 7,908,000 7,525,420 7,190,795 Sales for resale - non-affiliates 2,555,914 2,544,982 2,687,917 Sales for resale - affiliates 174,342 426,919 280,443 ------------------------------------------------------------------------------------------------ Total 10,638,256 10,497,321 10,159,155 ================================================================================================ Average Revenue Per Kilowatt-Hour (cents): Residential 6.46 6.16 6.08 Commercial 5.94 5.96 5.92 Industrial 3.70 3.59 3.31 Total retail 5.00 4.89 4.69 Total sales 4.63 4.45 4.21 Residential Average Annual Kilowatt-Hour Use Per Customer 12,611 12,780 12,066 Residential Average Annual Revenue Per Customer $815.21 $786.71 $733.90 Plant Nameplate Capacity Ratings (year-end) (megawatts) 2,086 2,011 2,011 Maximum Peak-Hour Demand (megawatts): Winter 1,636 1,401 1,386 Summer 1,874 1,872 1,755 Annual Load Factor (percent) 63.4 60.0 60.8 Plant Availability - Fossil-Steam (percent) 85.4 88.0 92.0 ------------------------------------------------------------------------------------------------ Source of Energy Supply (percent): Coal 56.0 63.5 60.4 Oil and gas 10.2 7.6 5.8 Purchased power - From non-affiliates 1.2 1.3 1.2 From affiliates 32.6 27.6 32.6 ------------------------------------------------------------------------------------------------ Total 100.0 100.0 100.0 ================================================================================================ Total Fuel Economy Data: BTU per net kilowatt-hour generated 10,295 10,075 9,888 Cost of fuel per million BTU (cents) 165.96 170.13 162.27 Average cost of fuel per net kilowatt-hour generated (cents) 1.71 1.71 1.60 ------------------------------------------------------------------------------------------------
II-212 SELECTED FINANCIAL AND OPERATING DATA (continued) Mississippi Power Company 1994 Annual Report
================================================================================================ 1991 1990 1989 ------------------------------------------------------------------------------------------------ Operating Revenues (in thousands): Residential $103,820 $102,243 $100,068 Commercial 103,666 103,352 103,403 Industrial 116,972 123,754 128,983 Other 5,869 6,078 5,992 ------------------------------------------------------------------------------------------------ Total retail 330,327 335,427 338,446 Sales for resale - non-affiliates 78,826 86,194 82,111 Sales for resale - affiliates 18,044 20,157 16,938 ------------------------------------------------------------------------------------------------ Total revenues from sales of electricity 427,197 441,778 437,495 Other revenues 5,189 5,093 5,155 ------------------------------------------------------------------------------------------------ Total $432,386 $446,871 $442,650 ================================================================================================ Kilowatt-Hour Sales (in thousands): Residential 1,832,266 1,804,838 1,741,855 Commercial 1,768,441 1,718,074 1,686,302 Industrial 3,297,247 3,311,460 3,204,208 Other 89,375 85,938 87,611 ------------------------------------------------------------------------------------------------ Total retail 6,987,329 6,920,310 6,719,976 Sales for resale - non-affiliates 2,706,320 2,883,581 2,798,086 Sales for resale - affiliates 617,696 714,365 527,970 ------------------------------------------------------------------------------------------------ Total 10,311,345 10,518,256 10,046,032 ================================================================================================ Average Revenue Per Kilowatt-Hour (cents): Residential 5.67 5.66 5.74 Commercial 5.86 6.02 6.13 Industrial 3.55 3.74 4.03 Total retail 4.73 4.85 5.04 Total sales 4.14 4.20 4.35 Residential Average Annual Kilowatt-Hour Use Per Customer 12,338 12,228 11,842 Residential Average Annual Revenue Per Customer $699.11 $692.70 $680.32 Plant Nameplate Capacity Ratings (year-end) (megawatts) 2,011 1,998 1,998 Maximum Peak-Hour Demand (megawatts): Winter 1,267 1,201 1,556 Summer 1,682 1,724 1,682 Annual Load Factor (percent) 61.5 59.0 58.8 Plant Availability - Fossil-Steam (percent) 89.8 93.3 94.0 ------------------------------------------------------------------------------------------------ Source of Energy Supply (percent): Coal 64.1 62.6 63.4 Oil and gas 8.1 14.0 13.5 Purchased power - From non-affiliates 0.7 0.8 0.5 From affiliates 27.1 22.6 22.6 ------------------------------------------------------------------------------------------------ Total 100.0 100.0 100.0 ================================================================================================ Total Fuel Economy Data: BTU per net kilowatt-hour generated 10,142 10,319 10,159 Cost of fuel per million BTU (cents) 177.52 183.27 178.38 Average cost of fuel per net kilowatt-hour generated (cents) 1.80 1.89 1.81 ------------------------------------------------------------------------------------------------
II-213A SELECTED FINANCIAL AND OPERATING DATA (continued) Mississippi Power Company 1994 Annual Report
================================================================================================ 1988 1987 1986 ------------------------------------------------------------------------------------------------ Operating Revenues (in thousands): Residential $96,711 $98,338 $101,984 Commercial 98,772 98,669 100,521 Industrial 123,038 129,004 134,501 Other 5,874 5,723 5,882 ------------------------------------------------------------------------------------------------ Total retail 324,395 331,734 342,888 Sales for resale - non-affiliates 75,525 88,060 107,270 Sales for resale - affiliates 33,747 31,278 21,669 ------------------------------------------------------------------------------------------------ Total revenues from sales of electricity 433,667 451,072 471,827 Other revenues 4,272 4,771 4,438 ------------------------------------------------------------------------------------------------ Total $437,939 $455,843 $476,265 ================================================================================================ Kilowatt-Hour Sales (in thousands): Residential 1,686,722 1,658,327 1,674,407 Commercial 1,607,988 1,555,044 1,544,899 Industrial 2,879,457 2,862,632 2,877,026 Other 86,049 81,153 81,352 ------------------------------------------------------------------------------------------------ Total retail 6,260,216 6,157,156 6,177,684 Sales for resale - non-affiliates 2,280,341 2,615,058 2,382,443 Sales for resale - affiliates 1,100,808 955,303 704,461 ------------------------------------------------------------------------------------------------ Total 9,641,365 9,727,517 9,264,588 ================================================================================================ Average Revenue Per Kilowatt-Hour (cents): Residential 5.73 5.93 6.09 Commercial 6.14 6.35 6.51 Industrial 4.27 4.51 4.68 Total retail 5.18 5.39 5.55 Total sales 4.50 4.64 5.09 Residential Average Annual Kilowatt-Hour Use Per Customer 11,499 11,356 11,498 Residential Average Annual Revenue Per Customer $659.30 $673.41 $700.32 Plant Nameplate Capacity Ratings (year-end) (megawatts) 1,966 1,966 1,966 Maximum Peak-Hour Demand (megawatts): Winter 1,284 1,224 1,208 Summer 1,621 1,548 1,612 Annual Load Factor (percent) 57.6 59.0 56.8 Plant Availability - Fossil-Steam (percent) 93.0 93.5 93.2 ------------------------------------------------------------------------------------------------ Source of Energy Supply (percent): Coal 86.3 79.4 74.1 Oil and gas 4.8 5.3 5.1 Purchased power - From non-affiliates 0.4 0.3 2.0 From affiliates 8.5 15.0 18.8 ------------------------------------------------------------------------------------------------ Total 100.0 100.0 100.0 ================================================================================================ Total Fuel Economy Data: BTU per net kilowatt-hour generated 10,220 10,525 10,569 Cost of fuel per million BTU (cents) 185.13 194.46 224.63 Average cost of fuel per net kilowatt-hour generated (cents) 1.89 2.05 2.37 ------------------------------------------------------------------------------------------------
II-213B SELECTED FINANCIAL AND OPERATING DATA (continued) Mississippi Power Company 1994 Annual Report
==================================================================================== 1985 1984 ------------------------------------------------------------------------------------ Operating Revenues (in thousands): Residential $96,878 $92,955 Commercial 96,883 91,500 Industrial 129,495 128,951 Other 5,884 5,704 ------------------------------------------------------------------------------------ Total retail 329,140 319,110 Sales for resale - non-affiliates 115,757 106,691 Sales for resale - affiliates 27,277 13,226 ------------------------------------------------------------------------------------ Total revenues from sales of electricity 472,174 439,027 Other revenues 3,436 3,480 ------------------------------------------------------------------------------------ Total $475,610 $442,507 ==================================================================================== Kilowatt-Hour Sales (in thousands): Residential 1,603,539 1,535,329 Commercial 1,500,972 1,415,153 Industrial 2,786,883 2,768,877 Other 83,142 78,198 ------------------------------------------------------------------------------------ Total retail 5,974,536 5,797,557 Sales for resale - non-affiliates 2,819,439 2,656,738 Sales for resale - affiliates 733,142 285,562 ------------------------------------------------------------------------------------ Total 9,527,117 8,739,857 ==================================================================================== Average Revenue Per Kilowatt-Hour (cents): Residential 6.04 6.05 Commercial 6.45 6.47 Industrial 4.65 4.66 Total retail 5.51 5.50 Total sales 4.96 5.02 Residential Average Annual Kilowatt-Hour Use Per Customer 11,135 10,814 Residential Average Annual Revenue Per Customer $672.71 $654.74 Plant Nameplate Capacity Ratings (year-end) (megawatts) 1,966 1,966 Maximum Peak-Hour Demand (megawatts): Winter 1,310 1,210 Summer 1,444 1,421 Annual Load Factor (percent) 61.0 59.8 Plant Availability - Fossil-Steam (percent) 92.4 93.1 ------------------------------------------------------------------------------------ Source of Energy Supply (percent): Coal 74.1 67.5 Oil and gas 2.8 2.5 Purchased power - From non-affiliates 0.4 0.2 From affiliates 22.7 29.8 ------------------------------------------------------------------------------------ Total 100.0 100.0 ==================================================================================== Total Fuel Economy Data: BTU per net kilowatt-hour generated 10,396 10,385 Cost of fuel per million BTU (cents) 235.24 236.45 Average cost of fuel per net kilowatt-hour generated (cents) 2.45 2.46 ------------------------------------------------------------------------------------
II-213C STATEMENTS OF INCOME Mississippi Power Company
======================================================================================================== For the Years Ended December 31, 1994 1993 1992 -------------------------------------------------------------------------------------------------------- (Thousands of Dollars) Operating Revenues: Revenues $ 489,624 $459,364 $424,392 Revenues from affiliates 9,538 15,519 10,055 -------------------------------------------------------------------------------------------------------- Total operating revenues 499,162 474,883 434,447 -------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 102,216 113,986 96,743 Purchased power from non-affiliates 2,711 2,198 1,337 Purchased power from affiliates 68,543 58,019 60,689 Proceeds from settlement of disputed contracts - - (189) Other 97,988 100,381 90,581 Maintenance 45,785 44,001 43,165 Depreciation and amortization 35,716 33,099 32,789 Taxes other than income taxes 41,742 37,145 34,664 Federal and state income taxes 31,386 22,668 16,378 -------------------------------------------------------------------------------------------------------- Total operating expenses 426,087 411,497 376,157 -------------------------------------------------------------------------------------------------------- Operating Income 73,075 63,386 58,290 Other Income (Expense): Allowance for equity funds used during construction 1,099 1,010 642 Interest income 87 517 766 Other, net 2,033 3,971 5,501 Income taxes applicable to other income (227) (1,158) (1,427) -------------------------------------------------------------------------------------------------------- Income Before Interest Charges 76,067 67,726 63,772 -------------------------------------------------------------------------------------------------------- Interest Charges: Interest on long-term debt 19,725 17,688 22,357 Allowance for debt funds used during construction (1,039) (788) (563) Interest on notes payable 1,442 1,000 362 Amortization of debt discount, premium, and expense, net 1,479 1,262 630 Other interest charges 404 728 339 -------------------------------------------------------------------------------------------------------- Net interest charges 22,011 19,890 23,125 -------------------------------------------------------------------------------------------------------- Net Income From Continuing Operations 54,056 47,836 40,647 -------------------------------------------------------------------------------------------------------- Discontinued Operations: Loss from operations of discontinued subsidiary, net of taxes - - - Loss on disposal of discontinued subsidiary, net of taxes - - - Net Loss From Discontinued Operations - - - -------------------------------------------------------------------------------------------------------- Net Income 54,056 47,836 40,647 Dividends on Preferred Stock 4,899 5,400 3,857 -------------------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred Stock $ 49,157 $ 42,436 $ 36,790 ========================================================================================================
II-214 STATEMENTS OF INCOME Mississippi Power Company
===================================================================================================================== For the Years Ended December 31, 1991 1990 1989 1988 --------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) Operating Revenues: Revenues $ 414,342 $426,714 $425,712 $404,192 Revenues from affiliates 18,044 20,157 16,938 33,747 --------------------------------------------------------------------------------------------------------------------- Total operating revenues 432,386 446,871 442,650 437,939 --------------------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 120,485 138,303 133,671 165,912 Purchased power from non-affiliates 851 1,406 1,266 1,257 Purchased power from affiliates 45,506 49,547 47,066 19,270 Proceeds from settlement of disputed contracts (4,205) - - - Other 86,932 83,730 84,820 83,542 Maintenance 44,166 33,368 35,658 33,412 Depreciation and amortization 32,147 30,770 28,001 26,610 Taxes other than income taxes 35,414 32,709 32,435 29,638 Federal and state income taxes 13,976 17,144 18,387 20,313 --------------------------------------------------------------------------------------------------------------------- Total operating expenses 375,272 386,977 381,304 379,954 --------------------------------------------------------------------------------------------------------------------- Operating Income 57,114 59,894 61,346 57,985 Other Income (Expense): Allowance for equity funds used during construction 728 307 903 850 Interest income 1,093 829 1,096 1,030 Other, net 3,845 6,297 6,013 6,399 Income taxes applicable to other income (863) (1,666) (1,392) (1,148) --------------------------------------------------------------------------------------------------------------------- Income Before Interest Charges 61,917 65,661 67,966 65,116 --------------------------------------------------------------------------------------------------------------------- Interest Charges: Interest on long-term debt 23,656 22,221 21,685 22,271 Allowance for debt funds used during construction (584) (600) (821) (595) Interest on notes payable 603 1,142 689 341 Amortization of debt discount, premium, and expense, net 377 359 362 363 Other interest charges 285 333 566 522 --------------------------------------------------------------------------------------------------------------------- Net interest charges 24,337 23,455 22,481 22,902 --------------------------------------------------------------------------------------------------------------------- Net Income From Continuing Operations 37,580 42,206 45,485 42,214 --------------------------------------------------------------------------------------------------------------------- Discontinued Operations: Loss from operations of discontinued subsidiary, net of taxes (6,404) (4,669) (3,459) (2,549) Loss on disposal of discontinued subsidiary, net of taxes (5,455) - - - Net Loss From Discontinued Operations (11,859) (4,669) (3,459) (2,549) --------------------------------------------------------------------------------------------------------------------- Net Income 25,721 37,537 42,026 39,665 Dividends on Preferred Stock 3,094 3,361 3,450 3,584 --------------------------------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred Stock $ 22,627 $ 34,176 $ 38,576 $ 36,081 =====================================================================================================================
II-215A STATEMENTS OF INCOME Mississippi Power Company
====================================================================================================================== For the Years Ended December 31, 1987 1986 1985 1984 ---------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) Operating Revenues: Revenues $ 424,565 $454,596 $448,333 $429,281 Revenues from affiliates 31,278 21,669 27,277 13,226 ---------------------------------------------------------------------------------------------------------------------- Total operating revenues 455,843 476,265 475,610 442,507 ---------------------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 167,165 183,515 188,477 158,793 Purchased power from non-affiliates 1,108 4,671 1,807 836 Purchased power from affiliates 36,114 46,322 56,522 70,202 Proceeds from settlement of disputed contracts - - - - Other 81,331 70,009 58,528 53,447 Maintenance 33,974 31,368 39,509 31,826 Depreciation and amortization 26,210 30,293 25,412 24,170 Taxes other than income taxes 27,882 26,145 23,930 24,495 Federal and state income taxes 23,888 30,881 29,142 26,525 ---------------------------------------------------------------------------------------------------------------------- Total operating expenses 397,672 423,204 423,327 390,294 ---------------------------------------------------------------------------------------------------------------------- Operating Income 58,171 53,061 52,283 52,213 Other Income (Expense): Allowance for equity funds used during construction 608 1,030 693 820 Interest income 1,121 864 1,326 1,325 Other, net 7,065 8,983 9,867 6,482 Income taxes applicable to other income (2,507) (3,517) (3,880) (2,555) ---------------------------------------------------------------------------------------------------------------------- Income Before Interest Charges 64,458 60,421 60,289 58,285 ---------------------------------------------------------------------------------------------------------------------- Interest Charges: Interest on long-term debt 24,139 22,707 22,684 22,678 Allowance for debt funds used during construction (652) (770) (434) (1,800) Interest on notes payable 558 252 - 1,082 Amortization of debt discount, premium, and expense, net 388 245 146 148 Other interest charges 601 283 562 754 ---------------------------------------------------------------------------------------------------------------------- Net interest charges 25,034 22,717 22,958 22,862 ---------------------------------------------------------------------------------------------------------------------- Net Income From Continuing Operations 39,424 37,704 37,331 35,423 ---------------------------------------------------------------------------------------------------------------------- Discontinued Operations: Loss from operations of discontinued subsidiary, net of taxes (487) - - - Loss on disposal of discontinued subsidiary, net of taxes - - - - Net Loss From Discontinued Operations (487) - - - ---------------------------------------------------------------------------------------------------------------------- Net Income 38,937 37,704 37,331 35,423 Dividends on Preferred Stock 3,737 3,890 4,001 4,043 ---------------------------------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred Stock $ 35,200 $ 33,814 $ 33,330 $ 31,380 ======================================================================================================================
II-215B STATEMENTS OF CASH FLOWS Mississippi Power Company
======================================================================================================= For the Years Ended December 31, 1994 1993 1992 ------------------------------------------------------------------------------------------------------- (Thousands of Dollars) Operating Activities: Net income $ 54,056 $ 47,836 $ 40,647 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 47,827 45,660 41,472 Deferred income taxes, net 1,563 5,039 (5,473) Deferred investment tax credits, net - - - Allowance for equity funds used during construction (1,099) (1,010) (642) Non-cash proceeds from settlement of disputed contracts - - (189) Other, net 5,230 3,005 8,093 Changes in certain current assets and liabilities -- Receivables, net 3,066 (4,347) 1,002 Inventories (9,856) 11,119 975 Payables (8,754) 4,133 460 Other 3,334 (8,033) 6,095 ------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 95,367 103,402 92,440 ------------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (104,014) (139,976) (68,189) Other (14,087) 7,562 4,235 ------------------------------------------------------------------------------------------------------- Net cash used for investing activities (118,101) (132,414) (63,954) ------------------------------------------------------------------------------------------------------- Financing Activities and Capital Contributions: Proceeds: Preferred stock - 23,404 35,000 First mortgage bonds 35,000 70,000 40,000 Pollution control bonds - 38,875 23,300 Other long-term debt 85,310 - - Capital contributions 25,000 30,036 26 Redemptions: Preferred stock - (23,404) - First mortgage bonds (32,628) (51,300) (104,703) Pollution control bonds (10) (25,885) (23,650) Other long-term debt (9,299) (8,170) (6,212) Notes payable, net (40,000) 9,000 26,500 Payment of preferred stock dividends (4,899) (5,400) (3,857) Payment of common stock dividends (34,100) (29,000) (28,000) Miscellaneous (1,201) (5,683) (7,821) ------------------------------------------------------------------------------------------------------- Net cash provided from (used for) financing activities 23,173 22,473 (49,417) ------------------------------------------------------------------------------------------------------- Net Change in Cash and Cash Equivalents 439 (6,539) (20,931) Cash and Cash Equivalents at Beginning of Year 878 7,417 28,348 ------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 1,317 $ 878 $ 7,417 ======================================================================================================= ( ) Denotes use of cash.
II-216 STATEMENTS OF CASH FLOWS Mississippi Power Company
================================================================================================================== For the Years Ended December 31, 1991 1990 1989 1988 ------------------------------------------------------------------------------------------------------------------ (Thousands of Dollars) Operating Activities: Net income $ 25,721 $ 37,537 $ 42,026 $ 39,665 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 41,773 41,079 35,878 34,440 Deferred income taxes, net (11,869) 2,756 (294) (3,053) Deferred investment tax credits, net (2) (26) (38) 571 Allowance for equity funds used during construction (728) (307) (903) (850) Non-cash proceeds from settlement of disputed contracts (4,071) - - - Other, net (4,982) 7,257 4,306 3,503 Changes in certain current assets and liabilities -- Receivables, net 35,343 (6,252) (18,506) 816 Inventories 10,518 (8,922) 3,687 283 Payables (4,949) (5,552) 1,307 (5,241) Other 11,433 (1,461) 2,172 (2,294) ------------------------------------------------------------------------------------------------------------------ Net cash provided from operating activities 98,187 66,109 69,635 67,840 ------------------------------------------------------------------------------------------------------------------ Investing Activities: Gross property additions (53,675) (49,009) (43,916) (54,550) Other 2,148 4,481 1,860 8,368 ------------------------------------------------------------------------------------------------------------------ Net cash used for investing activities (51,527) (44,528) (42,056) (46,182) ------------------------------------------------------------------------------------------------------------------ Financing Activities and Capital Contributions: Proceeds: Preferred stock - - - - First mortgage bonds 50,000 - - - Pollution control bonds - - - - Other long-term debt 844 - 844 - Capital contributions - - - - Redemptions: Preferred stock (4,118) (750) (750) (1,500) First mortgage bonds - (4,000) (3,823) - Pollution control bonds (300) (288) (62) (50) Other long-term debt (8,958) (6,416) (5,919) (5,401) Notes payable, net (25,603) 17,146 6,457 6,500 Payment of preferred stock dividends (3,094) (3,361) (3,450) (3,584) Payment of common stock dividends (28,500) (27,500) (27,000) (27,600) Miscellaneous (839) 2 - - ------------------------------------------------------------------------------------------------------------------ Net cash provided from (used for) financing activities (20,568) (25,167) (33,703) (31,635) ------------------------------------------------------------------------------------------------------------------ Net Change in Cash and Cash Equivalents 26,092 (3,586) (6,124) (9,977) Cash and Cash Equivalents at Beginning of Year 2,256 5,842 11,966 21,943 ------------------------------------------------------------------------------------------------------------------ Cash and Cash Equivalents at End of Year $ 28,348 $ 2,256 $ 5,842 $ 11,966 ================================================================================================================== ( ) Denotes use of cash.
II-217A STATEMENTS OF CASH FLOWS Mississippi Power Company
================================================================================================================== For the Years Ended December 31, 1987 1986 1985 1984 ------------------------------------------------------------------------------------------------------------------ (Thousands of Dollars) Operating Activities: Net income $ 38,937 $ 37,704 $ 37,331 $ 35,423 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 33,971 33,432 28,229 26,487 Deferred income taxes, net 10,035 41,059 11,246 10,156 Deferred investment tax credits, net 896 2,442 1,749 6,336 Allowance for equity funds used during construction (608) (1,030) (693) (820) Non-cash proceeds from settlement of disputed contracts - - - - Other, net 1,965 (14,162) (2,709) 3,802 Changes in certain current assets and liabilities -- Receivables, net 12,000 (1,708) (5,050) 8,734 Inventories 13,708 (8,499) 12,281 (23,307) Payables 7,487 (14,502) 4,656 (5,506) Other (9,342) 11,546 (3,725) (3,651) ------------------------------------------------------------------------------------------------------------------ Net cash provided from operating activities 109,049 86,282 83,315 57,654 ------------------------------------------------------------------------------------------------------------------ Investing Activities: Gross property additions (53,288) (62,488) (57,791) (37,290) Other (1,461) (61,162) 3,825 388 ------------------------------------------------------------------------------------------------------------------ Net cash used for investing activities (54,749) (123,650) (53,966) (36,902) ------------------------------------------------------------------------------------------------------------------ Financing Activities and Capital Contributions: Proceeds: Preferred stock - - - - First mortgage bonds - 35,000 - - Pollution control bonds - - - - Other long-term debt 130 60,663 1,000 - Capital contributions 16,000 400 400 1,000 Redemptions: Preferred stock (1,500) (1,500) (1,111) (639) First mortgage bonds (29,701) (29,250) (250) (250) Pollution control bonds (50) (50) (50) (50) Other long-term debt (4,974) (200) - - Notes payable, net - - - - Payment of preferred stock dividends (3,737) (3,890) (4,001) (4,043) Payment of common stock dividends (24,700) (23,700) (22,600) (21,000) Miscellaneous (2,696) (2,929) (18) - ------------------------------------------------------------------------------------------------------------------ Net cash provided from (used for) financing activities (51,228) 34,544 (26,630) (24,982) ------------------------------------------------------------------------------------------------------------------ Net Change in Cash and Cash Equivalents 3,072 (2,824) 2,719 (4,230) Cash and Cash Equivalents at Beginning of Year 18,871 21,695 18,976 23,206 ------------------------------------------------------------------------------------------------------------------ Cash and Cash Equivalents at End of Year $ 21,943 $ 18,871 $ 21,695 $ 18,976 ================================================================================================================== ( ) Denotes use of cash.
II-217B BALANCE SHEETS Mississippi Power Company
========================================================================================================= At December 31, 1994 1993 1992 --------------------------------------------------------------------------------------------------------- (Thousands of Dollars) ASSETS Utility Plant: Production-fossil $ 705,043 $ 597,425 $ 576,848 Transmission 202,503 188,375 173,278 Distribution 313,345 295,799 279,335 General 164,141 157,248 151,044 Construction work in progress 44,838 108,063 41,692 --------------------------------------------------------------------------------------------------------- Total utility plant 1,429,870 1,346,910 1,222,197 Accumulated provision for depreciation 477,098 462,725 440,777 --------------------------------------------------------------------------------------------------------- Total 952,772 884,185 781,420 --------------------------------------------------------------------------------------------------------- Less property-related accumulated deferred income taxes - - 142,338 --------------------------------------------------------------------------------------------------------- Total 952,772 884,185 639,082 --------------------------------------------------------------------------------------------------------- Other Property and Investments: Securities received from settlement of disputed contracts - - - Miscellaneous 3,353 11,289 4,539 --------------------------------------------------------------------------------------------------------- Total 3,353 11,289 4,539 --------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 1,317 878 7,417 Investment securities - - 3,622 Receivables, net 25,424 28,021 20,219 Accrued utility revenues 14,428 14,897 14,898 Fossil fuel stock, at average cost 16,885 11,185 21,341 Materials and supplies, at average cost 25,301 21,145 22,108 Current portion of deferred fuel commitments 1,068 440 1,861 Prepayments 11,189 8,971 5,869 Vacation pay deferred 4,588 4,797 4,651 --------------------------------------------------------------------------------------------------------- Total 100,200 90,334 101,986 --------------------------------------------------------------------------------------------------------- Deferred Charges: Debt expense, being amortized 1,358 1,103 804 Premium on reacquired debt, being amortized 9,571 10,563 10,102 Deferred fuel commitments 9,000 17,520 25,255 Deferred charges related to income taxes 25,036 25,267 - Miscellaneous 22,421 10,073 9,515 --------------------------------------------------------------------------------------------------------- Total 67,386 64,526 45,676 --------------------------------------------------------------------------------------------------------- Total Assets $1,123,711 $1,050,334 $ 791,283 =========================================================================================================
II-218 BALANCE SHEETS Mississippi Power Company
====================================================================================================================== At December 31, 1991 1990 1989 1988 ---------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) ASSETS Utility Plant: Production-fossil $ 567,588 $ 560,537 $ 547,946 $ 529,742 Transmission 162,379 151,949 147,288 134,674 Distribution 259,929 247,705 229,238 221,327 General 141,564 136,815 133,361 137,333 Construction work in progress 33,078 26,816 27,057 35,204 ---------------------------------------------------------------------------------------------------------------------- Total utility plant 1,164,538 1,123,822 1,084,890 1,058,280 Accumulated provision for depreciation 415,135 392,440 366,193 348,085 ---------------------------------------------------------------------------------------------------------------------- Total 749,403 731,382 718,697 710,195 ---------------------------------------------------------------------------------------------------------------------- Less property-related accumulated deferred income taxes 138,616 139,970 138,071 134,220 ---------------------------------------------------------------------------------------------------------------------- Total 610,787 591,412 580,626 575,975 ---------------------------------------------------------------------------------------------------------------------- Other Property and Investments: Securities received from settlement of disputed contracts 4,113 - - - Miscellaneous 3,954 8,631 7,792 8,153 ---------------------------------------------------------------------------------------------------------------------- Total 8,067 8,631 7,792 8,153 ---------------------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 28,348 2,256 5,842 11,966 Investment securities - - - - Receivables, net 27,152 67,734 58,425 43,246 Accrued utility revenues 12,420 10,797 13,854 10,527 Fossil fuel stock, at average cost 22,373 29,812 24,788 26,587 Materials and supplies, at average cost 22,051 25,130 21,232 23,120 Current portion of deferred fuel commitments 933 1,430 3,017 - Prepayments 6,137 11,392 12,512 12,341 Vacation pay deferred 4,406 3,955 3,910 3,815 ---------------------------------------------------------------------------------------------------------------------- Total 123,820 152,506 143,580 131,602 ---------------------------------------------------------------------------------------------------------------------- Deferred Charges: Debt expense, being amortized 981 824 886 949 Premium on reacquired debt, being amortized 4,676 4,919 5,161 5,404 Deferred fuel commitments 31,039 39,020 45,103 50,714 Deferred charges related to income taxes - - - - Miscellaneous 11,271 2,714 3,422 6,522 ---------------------------------------------------------------------------------------------------------------------- Total 47,967 47,477 54,572 63,589 ---------------------------------------------------------------------------------------------------------------------- Total Assets $ 790,641 $ 800,026 $ 786,570 $ 779,319 ======================================================================================================================
II-219A BALANCE SHEETS Mississippi Power Company
====================================================================================================================== At December 31, 1987 1986 1985 1984 ---------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) ASSETS Utility Plant: Production-fossil $ 524,198 $ 509,128 $ 485,665 $ 477,618 Transmission 130,963 125,304 121,405 118,552 Distribution 207,810 195,042 183,003 169,545 General 127,690 114,042 99,788 90,626 Construction work in progress 27,755 33,544 34,862 17,054 ---------------------------------------------------------------------------------------------------------------------- Total utility plant 1,018,416 977,060 924,723 873,395 Accumulated provision for depreciation 328,761 312,571 293,167 266,844 ---------------------------------------------------------------------------------------------------------------------- Total 689,655 664,489 631,556 606,551 ---------------------------------------------------------------------------------------------------------------------- Less property-related accumulated deferred income taxes 127,912 120,990 107,633 98,494 ---------------------------------------------------------------------------------------------------------------------- Total 561,743 543,499 523,923 508,057 ---------------------------------------------------------------------------------------------------------------------- Other Property and Investments: Securities received from settlement of disputed contracts - - - - Miscellaneous 4,122 1,738 641 630 ---------------------------------------------------------------------------------------------------------------------- Total 4,122 1,738 641 630 ---------------------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 21,943 18,871 21,695 18,976 Investment securities - - - - Receivables, net 42,218 48,158 42,407 39,137 Accrued utility revenues 12,371 18,431 22,474 20,694 Fossil fuel stock, at average cost 29,989 46,067 40,638 57,225 Materials and supplies, at average cost 20,001 17,631 14,561 10,255 Current portion of deferred fuel commitments - - - - Prepayments 830 973 805 497 Vacation pay deferred 3,956 3,559 3,337 2,910 ---------------------------------------------------------------------------------------------------------------------- Total 131,308 153,690 145,917 149,694 ---------------------------------------------------------------------------------------------------------------------- Deferred Charges: Debt expense, being amortized 1,012 1,212 1,208 1,260 Premium on reacquired debt, being amortized 5,647 2,800 - - Deferred fuel commitments 55,889 60,663 - - Deferred charges related to income taxes - - - - Miscellaneous 4,347 3,508 7,888 889 ---------------------------------------------------------------------------------------------------------------------- Total 66,895 68,183 9,096 2,149 ---------------------------------------------------------------------------------------------------------------------- Total Assets $ 764,068 $ 767,110 $ 679,577 $ 660,530 ======================================================================================================================
II-219B BALANCE SHEETS Mississippi Power Company
========================================================================================================= At December 31, 1994 1993 1992 --------------------------------------------------------------------------------------------------------- (Thousands of Dollars) CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 37,691 $ 37,691 $ 37,691 Paid-in capital 179,362 154,362 124,326 Premium on preferred stock 372 372 194 Earnings retained in the business 144,328 129,343 118,429 --------------------------------------------------------------------------------------------------------- Total common equity 361,753 321,768 280,640 Preferred stock 74,414 74,414 74,414 Preferred stock subject to mandatory redemption - - - Long-term debt 306,522 250,391 238,650 --------------------------------------------------------------------------------------------------------- Total (excluding amount due within one year) 742,689 646,573 593,704 --------------------------------------------------------------------------------------------------------- Current Liabilities: Notes payable to banks - 40,000 31,000 Preferred stock due within one year - - - Long-term debt due within one year 41,199 19,345 8,878 Accounts payable 34,481 60,928 43,550 Customer deposits 2,712 2,786 2,976 Taxes accrued 31,657 27,138 32,035 Interest accrued 4,427 4,237 3,961 Vacation pay accrued 4,588 4,797 4,651 Miscellaneous 10,025 9,323 10,963 --------------------------------------------------------------------------------------------------------- Total 129,089 168,554 138,014 --------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes 129,505 124,334 169 Accumulated deferred investment tax credits 31,228 32,710 34,242 Deferred credits related to income taxes 45,832 48,228 - Miscellaneous 45,368 29,935 25,154 --------------------------------------------------------------------------------------------------------- Total 251,933 235,207 59,565 --------------------------------------------------------------------------------------------------------- Total Capitalization and Liabilities $1,123,711 $1,050,334 $ 791,283 =========================================================================================================
II-220 BALANCE SHEETS Mississippi Power Company
====================================================================================================================== At December 31, 1991 1990 1989 1988 ---------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 37,691 $ 37,691 $ 37,691 $ 37,691 Paid-in capital 124,300 124,300 124,300 124,300 Premium on preferred stock 194 299 299 299 Earnings retained in the business 111,670 117,543 110,867 99,183 ---------------------------------------------------------------------------------------------------------------------- Total common equity 273,855 279,833 273,157 261,473 Preferred stock 39,414 39,414 39,414 39,414 Preferred stock subject to mandatory redemption - 3,750 4,500 5,250 Long-term debt 304,150 270,724 277,693 287,525 ---------------------------------------------------------------------------------------------------------------------- Total (excluding amount due within one year) 617,419 593,721 594,764 593,662 ---------------------------------------------------------------------------------------------------------------------- Current Liabilities: Notes payable to banks 4,500 30,103 12,957 6,500 Preferred stock due within one year - 368 368 368 Long-term debt due within one year 14,650 7,039 10,717 9,789 Accounts payable 38,213 45,763 47,019 46,937 Customer deposits 3,109 3,430 3,906 3,904 Taxes accrued 29,609 24,935 23,843 21,130 Interest accrued 4,602 4,315 4,280 4,016 Vacation pay accrued 4,406 3,955 3,910 3,815 Miscellaneous 10,236 6,833 7,746 9,347 ---------------------------------------------------------------------------------------------------------------------- Total 109,325 126,741 114,746 105,806 ---------------------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes 4,117 18,992 22,085 24,556 Accumulated deferred investment tax credits 35,657 37,187 38,752 40,435 Deferred credits related to income taxes - - - - Miscellaneous 24,123 23,385 16,223 14,860 ---------------------------------------------------------------------------------------------------------------------- Total 63,897 79,564 77,060 79,851 ---------------------------------------------------------------------------------------------------------------------- Total Capitalization and Liabilities $ 790,641 $ 800,026 $ 786,570 $ 779,319 ======================================================================================================================
II-221A BALANCE SHEETS Mississippi Power Company
====================================================================================================================== At December 31, 1987 1986 1985 1984 ---------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 37,691 $ 37,691 $ 37,691 $ 37,691 Paid-in capital 124,300 108,300 107,900 107,500 Premium on preferred stock 299 299 299 360 Earnings retained in the business 90,702 80,311 70,197 59,467 ---------------------------------------------------------------------------------------------------------------------- Total common equity 252,992 226,601 216,087 205,018 Preferred stock 39,414 39,414 39,414 39,414 Preferred stock subject to mandatory redemption 6,750 8,250 9,750 10,500 Long-term debt 294,811 299,684 261,594 267,051 ---------------------------------------------------------------------------------------------------------------------- Total (excluding amount due within one year) 593,967 573,949 526,845 521,983 ---------------------------------------------------------------------------------------------------------------------- Current Liabilities: Notes payable to banks - - - - Preferred stock due within one year 368 368 368 729 Long-term debt due within one year 5,451 34,724 6,532 300 Accounts payable 45,659 36,490 50,992 46,336 Customer deposits 3,857 3,720 3,521 4,240 Taxes accrued 21,351 29,029 32,015 24,850 Interest accrued 4,474 5,064 5,502 5,577 Vacation pay accrued 3,956 3,559 3,337 2,910 Miscellaneous 6,005 5,746 5,464 6,453 ---------------------------------------------------------------------------------------------------------------------- Total 91,121 118,700 107,731 91,395 ---------------------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes 27,411 25,922 - - Accumulated deferred investment tax credits 41,427 42,183 41,311 41,063 Deferred credits related to income taxes - - - - Miscellaneous 10,142 6,356 3,690 6,089 ---------------------------------------------------------------------------------------------------------------------- Total 78,980 74,461 45,001 47,152 ---------------------------------------------------------------------------------------------------------------------- Total Capitalization and Liabilities $ 764,068 $ 767,110 $ 679,577 $ 660,530 ======================================================================================================================
II-221B MISSISSIPPI POWER COMPANY OUTSTANDING SECURITIES AT DECEMBER 31, 1994 First Mortgage Bonds Amount Interest Amount Series Issued Rate Outstanding Maturity ---------------------------------------------------------------- (Thousands) (Thousands) 1993 $ 35,000 5-3/8% $ 35,000 3/1/98 1992 40,000 6-5/8% 40,000 8/1/00 1994 35,000 6.60% 35,000 3/1/04 1991 50,000 9-1/4% 47,072 5/1/21 1993 35,000 7.45% 35,000 6/1/23 -------- -------- $195,000 $192,072 ======== ======== Pollution Control Bonds Amount Interest Amount Series Issued Rate Outstanding Maturity ---------------------------------------------------------------- (Thousands) (Thousands) 1977 $ 1,000 5.80% $ 980 10/1/07 1992 6,550 Variable 6,550 12/1/20 1992 16,750 Variable 16,750 12/1/22 1993 13,000 6.20% 13,000 4/1/23 1993 25,875 5.65% 25,875 11/1/23 -------- -------- $ 63,175 $ 63,155 ======== ======== Preferred Stock Shares Dividend Amount Series Outstanding Rate Outstanding ---------------------------------------------------------------- (Thousands) 1947 20,099 4.60% $ 2,010 1956 40,000 4.40% 4,000 1965 50,000 4.72% 5,000 1968 50,000 7.00% 5,000 1992 350,000 7.25% 35,000 1993 150,000 6.32% 15,000 1993 84,040 6.65% 8,404 ------- -------- 744,139 $ 74,414 ======= ======== II-222 MISSISSIPPI POWER COMPANY SECURITIES RETIRED DURING 1994 First Mortgage Bonds Principal Interest Series Amount Rate ----------------------------------------------------------------------------- (Thousands) 1964 $10,000 4-5/8% 1965 11,000 4-3/4% 1966 10,000 6% 1991 1,628 9-1/4% ------- $32,628 ======= Pollution Control Bonds Principal Interest Series Amount Rate ----------------------------------------------------------------------------- (Thousands) 1977 $ 10 5.80% II-223 SAVANNAH ELECTRIC AND POWER COMPANY FINANCIAL SECTION II-224 MANAGEMENT'S REPORT Savannah Electric and Power Company 1994 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 generally accepted accounting principles appropriate in the circumstances 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 books and 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 four 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 generally accepted accounting principles. /s/ Arthur M. Gignilliat, Jr. Arthur M. Gignilliat, Jr. President and Chief Executive Officer /s/ K. R. Willis K. R. Willis Vice-President Treasurer and Chief Financial Officer II-225 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS Savannah Electric and Power Company 1994 Annual Report To the Board of Directors of 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 The Southern Company) as of December 31, 1994 and 1993, and the related statements of income, retained earnings, paid-in capital, and cash flows for each of the three years in the period ended December 31, 1994. 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 generally accepted auditing standards. 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-233 through II-246) referred to above present fairly, in all material respects, the financial position of Savannah Electric and Power Company as of December 31, 1994 and 1993, and the results of its operations and its cash flows for the periods stated, in conformity with generally accepted accounting principles. As explained in Notes 2 and 7 to the financial statements, effective January 1, 1993, the Company changed its methods of accounting for postretirement benefits other than pensions and for income taxes. /s/ Arthur Andersen LLP Atlanta, Georgia February 15, 1995 II-226 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Savannah Electric and Power Company 1994 Annual Report RESULTS OF OPERATIONS Earnings Savannah Electric and Power Company's net income after dividends on preferred stock for 1994 totaled $22.1 million, representing a $0.6 million (3.0 percent) increase over the prior year. This increase was primarily due to a decrease in operating expenses, offset somewhat by an increase in interest expense. In 1993, earnings were $21.5 million, representing a $1.0 million (4.6 percent) increase from the prior year. The revenue impact of an increase in retail energy sales due to exceptionally hot summer weather was partially offset by the implementation of a work force reduction program which resulted in a one-time charge to operating expenses of approximately $4.5 million. Revenues Total revenues for 1994 were $211.8 million, reflecting a 3.0 percent decrease compared to 1993. The revenue impact of an expanding customer base was offset by moderate weather, reduced industrial energy sales, and an associated decrease in fuel cost recovery revenues. The following table summarizes revenue increases and decreases compared to prior years: ============================================================== Increase (Decrease) From Prior Years -------------------------------- 1994 1993 1992 -------------------------------- Retail -- (in thousands) Change in base rates $ - $(1,450) $(1,350) Sales growth 7,884 5,980 5,467 Weather (6,589) 4,567 (3,116) Fuel cost recovery and other (9,214) 12,404 7,270 -------------------------------------------------------------- Total retail (7,919) 21,501 8,271 -------------------------------------------------------------- Sales for resale-- Non-affiliates (1,235) (1,800) 8 Affiliates 4,013 928 75 -------------------------------------------------------------- Total sales for resale 2,778 (872) 83 -------------------------------------------------------------- Other operating revenues (1,516) 52 (239) -------------------------------------------------------------- Total operating revenues $(6,657) $20,681 $ 8,115 ============================================================== Percent change (3.0)% 10.5% 4.3% -------------------------------------------------------------- Retail revenues decreased 3.8 percent in 1994, compared to an increase of 11.5 percent in 1993. The decrease in 1994 retail revenues is attributable to milder summer weather, reduced industrial energy sales, and substantially lower fuel cost recovery revenues, offset somewhat by customer growth. Industrial energ y sales turned down in the fourth quarter of 1994 when operations of a large industrial customer were temporarily curtailed due to a mechanical failure of a machine which was a major part of the customer's manufacturing operation. Under the Company's fuel cost recovery provisions, fuel revenues --including purchased energy-- generally equal fuel expense and have no effect on earnings. The $1.5 million decrease in other operating revenues reflects deferral of over recovery of demand-side management rider revenues during 1994. Revenues from demand-side management riders (included in retail revenues) recover demand-side management program costs and have little impact on earnings. The increase in 1993 retail revenues resulted from customer growth and an increase in the average annual kilowatt-hour use per customer which was substantially increased due to hot summer weather. 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. Capacity and energy revenues decreased in 1994 due to reductions in sales to Florida Power Corporation. The capacity and energy components were as follows: ======================================================== 1994 1993 1992 -------------------------------------------------------- (in thousands) Capacity $ 448 $ 978 $ 537 Energy 3,052 4,262 7,040 -------------------------------------------------------- Total $3,500 $5,240 $7,577 ======================================================== 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 sales have little impact on earnings. II-227 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Savannah Electric and Power Company 1994 Annual Report Kilowatt-hour sales for 1994 and the percent change by year were as follows: =============================================================== Percent Change ------------------------- 1994 KWH 1994 1993 1992 ---------- ------------------------ (in millions) Residential 1,298 (2.3)% 9.2% 1.8% Commercial 1,046 2.9 6.5 3.0 Industrial 800 (6.4) (0.8) 4.3 Other 119 3.1 5.2 3.4 ------ Total retail 3,263 (1.6) 5.5 2.9 Sales for resale - Non-affiliates 202 (18.4) (32.7) (1.3) Affiliates 93 23.4 100.3 15.5 ------ Total 3,558 (2.2)% 2.6% 2.6% ====== =============================================================== Expenses Total operating expenses for 1994 were $175.6 million, reflecting an $8.6 million decrease from 1993. This decrease includes a $5.8 million reduction in fuel and purchased power expenses, reflecting a decrease in total energy requirements. The $4.9 million reduction in 1994 in other operation and maintenance expenses reflects the $4.5 million work force reduction charge in 1993 and a $1.1 million reduction in power generation expenses in 1994. This was offset by an increase in depreciation expense because of additions to utility plant, principally two combustion turbine units. Interest expense increased $1.9 million primarily due to the sale in June 1993 of $45 million of first mortgage bonds. Total operating expenses for 1993 increased $20.3 million (12.4 percent) over the prior year. This increase includes a $10.8 million increase in fuel expense, and an $8.7 million increase in other operation expenses. Fuel expenses increased primarily because of higher generation due to extremely hot summer weather and the higher cost of fuel. The increase in other operation expenses reflects $4.5 million associated with the work force reduction program. The Company also recognized higher employee benefit costs under new accounting rules adopted in 1993. See Note 2 to the financial statements for additional information on these new rules. 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, the average cost of fuel per net kilowatt-hour generated, and the total average cost of energy supply (including purchased power) were as follows: =============================================================== 1994 1993 1992 ----------------------- Total energy supply (millions of kilowatt-hours) 3,768 3,863 3,764 Sources of energy supply (percent) Coal 18 21 12 Oil 1 2 1 Gas 1 3 2 Purchased Power 80 74 85 Average cost of fuel per net kilowatt-hour generated (cents) Coal 2.19 2.02 2.28 Oil 3.89 4.11 2.40 Gas 5.19 4.87 4.28 Total average cost of energy supply 2.02 2.12 1.78 =============================================================== 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 long-lived utility plant. 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 stock. Any recognition of inflation by regulatory authorities is reflected in the rate of return allowed. II-228 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Savannah Electric and Power Company 1994 Annual Report 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 growth in energy sales to a less regulated, more competitive environment. Future earnings in the near term will depend upon growth in energy sales, which is subject to a number of factors. Traditionally, these factors included changes in contracts with neighboring utilities, energy conservation practiced by customers, the elasticity of demand, weather, competition, and the rate of economic growth in the Company's service area. However, the Energy Policy Act of 1992 (Energy Act) is beginning to have a dramatic effect on the future of the electric utility industry. The Energy Act promotes energy efficiency, alternative fuel use, and increased competition for electric utilities. The Company is posturing the business to meet the challenge of this major change in the traditional practice of selling electricity. The Energy Act allows independent power producers (IPPs) to access a utility's transmission network to sell electricity to other utilities. This may enhance the incentives for IPPs to build cogeneration plants for the Company's large industrial and commercial customers. Although the Energy Act does not require transmission access to retail customers, retail wheeling initiatives are rapidly evolving and becoming very prominent issues in several states. In order to address these initiatives, numerous questions must be resolved with the most complex ones relating to transmission pricing and recovery of stranded investments. As the initiatives become a reality, the structure of the utility industry could radically change. Therefore, unless the Company remains a low-cost producer and provides quality service, the Company's retail energy sales growth could be limited, and this could significantly erode earnings. Conversely, being the low-cost producer could provide significant opportunities to increase market share and profitability. Demand-side options -- programs that enable customers to lower or alter their peak energy requirements -- have been initiated by the Company and are a significant part of integrated resource planning. Customers can receive cash incentives for participating in these programs in addition to reducing their energy requirements. Besides promoting energy efficiency, another benefit of these programs could be the ability to defer the need to construct costly baseload generating facilities further into the future. The ability to defer major construction projects in conjunction with regulatory precertification approval processes for both new plant additions and purchase power contracts should minimize the possibility of not being able to fully recover additional costs. 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. See Note 1 to the financial statements under "Regulatory Assets and Liabilities" for additional information. Compliance costs related to the Clean Air Act Amendments of 1990 (Clean Air Act) could reduce earnings if such costs are not fully recovered. The Clean Air Act is discussed later under "Environmental Matters." Rates to retail customers served by the Company are regulated by the Georgia Public Service Commission (GPSC). In May 1992, the Company requested, and subsequently received, approval by the GPSC to reduce annual base revenues by $2.8 million, effective June 1992. The reduction included a base rate reduction of approximately $2.5 million spread among all classes of retail customers. An additional $0.3 million reduction resulted from the implementation of an experimental, time-of-use rate for certain commercial customers. As part of this rate settlement, it was informally agreed that the Company's earned rate of return on common equity should be 12.95 percent. FINANCIAL CONDITION Overview The principal change in the Company's financial condition in 1994 was the addition of $30 million to utility plant. The majority of funds needed for gross property additions since 1992 have been provided from operating activities, II-229 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Savannah Electric and Power Company 1994 Annual Report principally from earnings and non-cash charges to income such as depreciation and deferred income taxes. See Statements of Cash Flows for additional information. Capital Structure As of December 31, 1994, the Company's capital structure consisted of 45.8 percent common equity, 9.9 percent preferred stock and 44.3 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 equity at 45 percent, preferred stock at 10 percent and debt at 45 percent. Maturities and retirements of long-term debt were $5 million in 1994, $4 million in 1993 and $53 million in 1992. The composite interest rates and dividend rates for the years 1992 through 1994 as of year-end were as follows: =================================================================== 1994 1993 1992 ----------------------------- Composite interest rates on long-term debt 8.0% 8.0% 8.5% Composite preferred stock dividend rate 6.6% 6.6% 9.5% =================================================================== The Company's current securities ratings are as follows: =================================================================== Standard Moody's & Poor's ------------------------ First Mortgage Bonds A1 A Preferred Stock "a2" A- -- -- =================================================================== Capital Requirements for Construction The Company's projected construction expenditures for the next three years total $87 million ($34 million in 1995, $27 million in 1996, and $26 million in 1997). Actual construction costs may vary from this estimate because of such factors as changes in environmental regulations; revised 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 In addition to the funds needed for the construction program, approximately $2.9 million will be needed by the end of 1997 for present sinking fund requirements and a capital lease buyout. Environmental Matters In November 1990, the Clean Air Act was signed into law. Title IV of the Clean Air Act -- the acid rain compliance provision of the new law --may have a significant impact on the Company and other subsidiaries of the Southern electric system. Specific reductions in sulfur dioxide and nitrogen oxide emissions from fossil-fired generating plants will be required in two phases. Phase I compliance began in 1995, and affects eight generating plants -- some 10,000 megawatts of capacity or 35 percent of total capacity -- in the Southern electric system. Phase II compliance is required in 2000, and all fossil-fired generating plants in the Southern electric system will be affected. In 1995, the Environmental Protection Agency (EPA) began issuing annual sulfur dioxide emission allowances through the allowance trading program. An emission allowance is the authority to emit one ton of sulfur dioxide during a calendar year. The method for issuing allowances is based on the fossil fuel consumed from 1985 through 1987 for each affected generating unit. Emission allowances are transferable and can be bought, sold, or banked and used in the future. The sulfur dioxide emission allowance program is expected to minimize the cost of compliance. The Southern Company's sulfur dioxide compliance strategy is designed to use allowances as a compliance option. The Southern Company expects to achieve Phase I sulfur dioxide compliance at the eight affected plants by switching to low-sulfur coal, and this would require some equipment upgrades. This compliance strategy is expected to result in unused emission allowances being banked for later use. Additional II-230 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Savannah Electric and Power Company 1994 Annual Report construction expenditures are required to install equipment for the control of nitrogen oxide emissions at these eight plants. Also, continuous emissions monitoring equipment has been installed on all fossil-fired units. Construction expenditures for Phase I compliance are estimated to total approximately $300 million through 1995 for The Southern Company, of which the Company's portion is approximately $2 million. For Phase II sulfur dioxide compliance, The Southern Company could use emission allowances banked during Phase I and increase fuel switching, install flue gas desulfurization equipment at selected plants, and/or purchase more allowances, depending on the price and availability of allowances. Also, in Phase II, equipment to control nitrogen oxide emissions will be installed on additional system fossil-fired plants as required to meet anticipated Phase II limits. Therefore, during the period 1996 through 2000, current compliance strategy could require total estimated construction expenditures of approximately $150 million. No construction expenditures are expected to be required of the Company to comply with Phase II requirements. However, the full impact of Phase II compliance cannot now be determined with certainty, pending the continuing development of a market for emission allowances, the completion of EPA regulations, and the possibility of new emission reduction technologies. An increase of up to 2 percent in annual revenue requirements from customers could be necessary to fully recover the Company's costs of compliance for both Phase I and II of the Clean Air Act. Compliance costs include construction expenditures, increased costs for switching to low-sulfur coal, and costs related to emission allowances. Title III of the Clean Air Act requires a multi-year EPA study of power plant emissions of hazardous air pollutants. The EPA is scheduled to submit a report to Congress on the results of this study by November 1995. The report will include a decision on whether additional regulatory control of these substances is warranted. Compliance with any new control standards could result in significant additional costs. The impact of new standards -- if any -- will depend on the development and implementation of applicable regulations. A significant portion of costs related to the acid rain provision 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. The EPA continues to evaluate the need for a new short-term ambient air quality standard for sulfur dioxide. Preliminary results from an EPA study on the impact of a new standard indicate that a number of plants could be required to install sulfur dioxide controls. These controls would be in addition to the controls already required to meet the acid rain provision of the Clean Air Act. The EPA issued proposed rules in November 1994 and is required to take final action on this issue in 1996. The impact of any new standard will depend on the level chosen for the standard and cannot be determined at this time. In addition, the EPA is evaluating the need to revise the ambient air quality standards for particulate matter, nitrogen oxides, and ozone. The impact of any new standard will depend on the level chosen for the standard and cannot be determined at this time. In 1995, the EPA may issue revised rules on air quality control regulations related to stack height requirements of the Clean Air Act. The full impact of the final rules cannot be determined at this time, pending their development and implementation. In 1993, the EPA issued a ruling confirming the non-hazardous status of coal ash. However, the EPA has until 1998 to classify co-managed utility wastes--coal ash and other utility wastes--as either non-hazardous or hazardous. If the EPA classifies the co-managed wastes as hazardous, then substantial additional costs for the management of such wastes may be required. The full impact of any change in the regulatory status will depend on the subsequent development of co-managed waste requirements. The Company must comply with other environmental laws and regulations that cover the handling and disposal of hazardous waste. Under these various laws and II-231 MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Savannah Electric and Power Company 1994 Annual Report regulations, the Company could incur substantial costs to clean up properties currently or previously owned. The Company conducts studies to determine the extent of any required cleanup costs and will recognize in the financial statements any 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 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 Southern Company's operations. The full impact of these requirements cannot be determined at this time, pending the development and implementation of applicable regulations. Compliance with possible new legislation related to global climate change, electromagnetic fields, and other environmental and health concerns could significantly affect The Southern 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, 1994, the Company had $1.6 million of cash and $18 million of unused credit arrangements with banks to meet its short-term cash needs. The Company had $2.5 million of short-term bank borrowings at December 31, 1994. In December 1994, the Company renegotiated a two-year revolving credit arrangement with three of its existing banks for a total credit line of $20 million. The primary purpose of this additional credit is to provide interim funding for the Company's construction program. It is anticipated that the funds required for construction and other purposes, including compliance with environmental regulations, will also be derived from operations and the sale of additional first mortgage bonds and preferred stock and capital contributions from The Southern Company. 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 sufficiently high enough to permit, at present interest 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. II-232 STATEMENTS OF INCOME For the Years Ended December 31, 1994, 1993, and 1992 Savannah Electric and Power Company 1994 Annual Report
============================================================================================= 1994 1993 1992 --------------------------------------------------------------------------------------------- (in thousands) Operating Revenues (Notes 1, 3, and 6): Revenues $ 205,339 $ 216,009 $ 196,256 Revenues from affiliates 6,446 2,433 1,505 --------------------------------------------------------------------------------------------- Total operating revenues 211,785 218,442 197,761 --------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 18,555 24,976 14,162 Purchased power from non-affiliates 1,839 793 494 Purchased power from affiliates 55,822 56,274 56,492 Other (Note 2) 41,623 45,610 36,884 Maintenance 12,560 13,516 14,232 Depreciation and amortization (Notes 1 and 7) 17,854 16,467 16,829 Taxes other than income taxes 11,074 11,136 10,231 Federal and state income taxes (Notes 1 and 7) 16,289 15,436 14,566 --------------------------------------------------------------------------------------------- Total operating expenses 175,616 184,208 163,890 --------------------------------------------------------------------------------------------- Operating Income 36,169 34,234 33,871 Other Income (Expense): Allowance for equity funds used during construction (Note 1) 831 958 446 Interest income 54 209 276 Other, net (Note 2) (1,032) (1,841) (1,450) Income taxes applicable to other income (Notes 1 and 7) 864 1,117 758 --------------------------------------------------------------------------------------------- Income Before Interest Charges 36,886 34,677 33,901 --------------------------------------------------------------------------------------------- Interest Charges: Interest on long-term debt 12,585 10,696 10,870 Allowance for debt funds used during construction (Note 1) (1,225) (699) (289) Interest on notes payable 205 240 15 Amortization of debt discount, premium, and expense, net 550 535 427 Other interest charges 337 340 466 --------------------------------------------------------------------------------------------- Net interest charges 12,452 11,112 11,489 --------------------------------------------------------------------------------------------- Net Income 24,434 23,565 22,412 Dividends on Preferred Stock 2,324 2,106 1,900 --------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred Stock $ 22,110 $ 21,459 $ 20,512 ============================================================================================= The accompanying notes are an integral part of these statements.
II-233 STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1994, 1993, and 1992 Savannah Electric and Power Company 1994 Annual Report
============================================================================================== 1994 1993 1992 ---------------------------------------------------------------------------------------------- (in thousands) Operating Activities: Net income $ 24,434 $ 23,565 $ 22,412 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 19,353 17,482 17,757 Deferred income taxes and investment tax credits 1,625 607 5,947 Allowance for equity funds used during construction (831) (958) (446) Other, net 826 2,853 (1,312) Changes in certain current assets and liabilities -- Receivables, net 18,481 (16,839) (4,107) Special deposits - - 350 Inventories 1,144 (3,947) 4,435 Payables (19,957) 18,742 351 Other (117) 3,282 2,083 ---------------------------------------------------------------------------------------------- Net cash provided from operating activities 44,958 44,787 47,470 ---------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (30,078) (72,858) (30,132) Other (841) 1,676 (1,073) ----------------------------------------------------------------------------------------------- Net cash used for investing activities (30,919) (71,182) (31,205) ----------------------------------------------------------------------------------------------- Financing Activities and Capital Contributions: Proceeds: First mortgage bonds - 45,000 30,000 Preferred stock - 35,000 - Pollution control bonds - 4,085 13,870 Other long-term debt 8,500 10,000 - Retirements: Preferred stock - (20,000) - First mortgage bonds (5,065) - (38,750) Pollution control bonds - (4,085) (14,550) Other long-term debt (823) (10,356) (217) Notes payable, net (500) (4,500) 7,500 Payment of preferred stock dividends (2,129) (2,222) (1,900) Payment of common stock dividends (16,300) (21,000) (22,000) Miscellaneous (74) (3,400) (3,985) ----------------------------------------------------------------------------------------------- Net cash provided from (used for) financing activities (16,391) 28,522 (30,032) ----------------------------------------------------------------------------------------------- Net Increase (Decrease) in Cash and Cash Equivalents (2,352) 2,127 (13,767) Cash and Cash Equivalents at Beginning of Year 3,915 1,788 15,555 ----------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 1,563 $ 3,915 $ 1,788 =============================================================================================== Supplemental Cash Flow Information: Cash paid during the year for- Interest (net of amount capitalized) $11,579 $10,712 $9,932 Income taxes 14,441 13,947 6,646 ----------------------------------------------------------------------------------------------- ( ) Denotes use of cash. The accompanying notes are an integral part of these statements.
II-234 BALANCE SHEETS At December 31, 1994 and 1993 Savannah Electric and Power Company 1994 Annual Report
================================================================================================= Assets 1994 1993 ------------------------------------------------------------------------------------------------- (in thousands) Utility Plant: Plant in service, at original cost (Notes 1, 4, 5, 7, and 9) $ 693,432 $ 622,521 Less accumulated provision for depreciation 267,590 251,565 ------------------------------------------------------------------------------------------------- 425,842 370,956 Construction work in progress 5,930 49,797 ------------------------------------------------------------------------------------------------- Total 431,772 420,753 ------------------------------------------------------------------------------------------------- Other Property and Investments 1,790 1,793 ------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 1,563 3,915 Receivables- Customer accounts receivable 17,581 18,551 Other accounts and notes receivable 216 790 Affiliated companies 177 12,924 Accumulated provision for uncollectible accounts (866) (762) Fuel cost under recovery 3,113 7,112 Fossil fuel stock, at average cost 7,557 8,419 Materials and supplies, at average cost (Note 1) 9,076 9,358 Prepayments 7,446 4,849 ------------------------------------------------------------------------------------------------- Total 45,863 65,156 ------------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes (Note 7) 23,521 24,890 Premium on reacquired debt, being amortized 3,295 3,792 Cash surrender value of life insurance for deferred compensation plan 7,028 5,907 Miscellaneous 5,036 4,896 ------------------------------------------------------------------------------------------------- Total 38,880 39,485 ------------------------------------------------------------------------------------------------- Total Assets $ 518,305 $ 527,187 ================================================================================================= The accompanying notes are an integral part of these statements.
II-235 BALANCE SHEETS At December 31, 1994 and 1993 Savannah Electric and Power Company 1994 Annual Report
================================================================================================ Capitalization and Liabilities 1994 1993 ------------------------------------------------------------------------------------------------ (in thousands) Capitalization (See accompanying statements): Common stock equity $ 161,581 $ 154,269 Preferred stock 35,000 35,000 Long-term debt 155,922 151,338 ------------------------------------------------------------------------------------------------- Total 352,503 340,607 ------------------------------------------------------------------------------------------------- Current Liabilities: Amount of securities due within one year (Note 10) 2,579 4,499 Notes payable (Note 5) 2,500 3,000 Accounts payable- Affiliated companies 5,162 6,041 Other 3,829 24,401 Customer deposits 4,698 4,714 Taxes accrued- Federal and state income 272 342 Other 861 1,187 Interest accrued 6,830 6,730 Vacation pay accrued 1,823 1,638 Pensions accrued (Note 2) 4,783 5,718 Miscellaneous 3,499 2,985 ------------------------------------------------------------------------------------------------- Total 36,836 61,255 ------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes (Note 7) 70,786 66,947 Accumulated deferred investment tax credits (Note 7) 14,637 15,301 Deferred credits related to income taxes (Note 7) 25,487 26,173 Deferred compensation plans 6,807 6,117 Deferred under-funded accrued benefit obligation (Note 2) 3,022 5,855 Postretirement benefits 3,808 2,074 Miscellaneous 4,419 2,858 ------------------------------------------------------------------------------------------------- Total 128,966 125,325 ------------------------------------------------------------------------------------------------- Commitments and Contingent Matters (Notes 1, 2, 4, 5, and 9) Total Capitalization and Liabilities $ 518,305 $ 527,187 ================================================================================================= The accompanying notes are an integral part of these statements. II-236 STATEMENTS OF CAPITALIZATION At December 31, 1994 and 1993 Savannah Electric and Power Company 1994 Annual Report
================================================================================================== 1994 1993 1994 1993 -------------------------------------------------------------------------------------------------- (in thousands) (percent of total) Common Stock Equity (Notes 2 and 11): Common stock, par value $5 per share -- Authorized -- 16,000,000 shares Outstanding -- 10,844,635 shares in 1994 and 1993 $ 54,223 $ 54,223 Paid-in capital 8,688 8,688 Additional minimum liability for under-funded pension obligations (546) (2,121) Retained Earnings 99,216 93,479 -------------------------------------------------------------------------------------------------- Total common stock equity 161,581 154,269 45.8 % 45.3 % -------------------------------------------------------------------------------------------------- Cumulative Preferred Stock (Note 8): $25 par value -- Authorized -- 2,200,000 shares 6.64% Series -- Outstanding -- 1,400,000 shares 35,000 35,000 ------------------------------------------------------------------------------------------------- Total (annual dividend requirement -- $2,324,000) 35,000 35,000 9.9 10.3 ------------------------------------------------------------------------------------------------- Long-Term Debt (Note 9): First mortgage bonds -- Maturity Interest Rates -------- -------------- April 1, 1994 4 5/8% - 3,715 July 1, 2003 6 3/8% 20,000 20,000 October 1, 2019 9 1/4% 28,950 30,000 July 1, 2021 9 3/8% 29,700 30,000 July 1, 2022 8.30% 30,000 30,000 July 1, 2023 7.40% 25,000 25,000 -------------------------------------------------------------------------------------------------- Total first mortgage bonds 133,650 138,715 Pollution control obligations (Note 9) 17,955 17,955 Other long-term debt (Note 9) 9,988 2,311 Unamortized debt premium (discount), net (3,092) (3,144) -------------------------------------------------------------------------------------------------- Total long-term debt (annual interest requirement -- $12,859,000) 158,501 155,837 Less amount due within one year (Note 10) 2,579 4,499 -------------------------------------------------------------------------------------------------- Long-term debt excluding amount due within one year 155,922 151,338 44.3 44.4 -------------------------------------------------------------------------------------------------- Total Capitalization $ 352,503 $ 340,607 100.0% 100.0% ================================================================================================== The accompanying notes are an integral part of these statements.
II-237 STATEMENTS OF RETAINED EARNINGS For the Years Ended December 31, 1994, 1993, and 1992 Savannah Electric and Power Company 1994 Annual Report
======================================================================================= 1994 1993 1992 --------------------------------------------------------------------------------------- (in thousands) Balance at Beginning of Period $ 93,479 $ 95,155 $ 96,643 Net income after dividends on preferred stock 22,110 21,459 20,512 Cash dividends on common stock (16,300) (21,000) (22,000) Preferred stock transactions, net (73) (2,135) - --------------------------------------------------------------------------------------- Balance at End of Period (Note 11) $ 99,216 $ 93,479 $ 95,155 ======================================================================================= STATEMENTS OF PAID-IN CAPITAL For the Years Ended December 31, 1994, 1993, and 1992 ========================================================================================= 1994 1993 1992 ----------------------------------------------------------------------------------------- (in thousands) Balance at Beginning of Period $ 8,688 $ 8,688 $ 8,665 Contributions to capital by parent company - - 23 ----------------------------------------------------------------------------------------- Balance at End of Period $ 8,688 $ 8,688 $ 8,688 ========================================================================================= The accompanying notes are an integral part of these statements.
II-238 NOTES TO FINANCIAL STATEMENTS Savannah Electric and Power Company 1994 Annual Report 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Savannah Electric and Power Company is a wholly owned subsidiary of The Southern Company, which is the parent company of five operating companies, a system service company, Southern Communications Services (Southern Communications), Southern Electric International (Southern Electric), Southern Nuclear Operating Company (Southern Nuclear), and The Southern Development and Investment Group (SDIG). The operating companies provide electric service in four southeastern states. Contracts among the companies -- dealing with 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). The system service company provides, at cost, specialized services to The Southern Company and subsidiary companies. Southern Communications, beginning in mid-1995, will provide digital wireless communications services -- over the 800-megahertz frequency band -- to The Southern Company's subsidiaries and also will market these services to the public within the Southeast. Southern Electric designs, builds, owns, and operates power production facilities and provides a broad range of technical services to industrial companies and utilities in the United States and a number of international markets. Southern Nuclear provides services to The Southern Company's nuclear power plants. SDIG develops new business opportunities related to energy products and services. The Southern Company is registered as a holding company under the Public Utility Holding Company Act of 1935 (PUHCA). Both The 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 generally accepted accounting principles and complies with the accounting policies and practices prescribed by the GPSC. Certain prior years' data presented in the financial statements have been reclassified to conform with current year presentation. Regulatory Assets and Liabilities The Company is subject to the provisions of 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 to be credited to customers through the ratemaking process. Regulatory assets and (liabilities) reflected in the Balance Sheets at December 31 relate to: =============================================================== 1994 1993 -------------------- (in thousands) Deferred income taxes $23,521 $24,890 Premium on reacquired debt 3,295 3,792 Deferred income tax credits (25,487) (26,173) --------------------------------------------------------------- Total $ 1,329 $ 2,509 =============================================================== 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. In addition, the Company would be required to determine any impairment to other assets, including plant, and write down the assets to their fair value. Revenues and Fuel Costs The Company accrues revenues for service rendered but unbilled at the end of each fiscal period. Fuel costs are expensed as the fuel is used. The Company's electric rates include provisions to adjust billings for fluctuations in fuel and purchased power costs. Revenues are adjusted for differences between recoverable fuel and demand-side management program 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. In 1994, uncollectible accounts continued to average less than 1 percent of revenues. II-239 NOTES (continued) Savannah Electric and Power Company 1994 Annual Report Depreciation and Amortization Depreciation of the original cost of depreciable utility plant in service is provided primarily by using composite straight-line rates, which approximated 2.9 percent in 1994, 2.9 percent in 1993, and 3.2 percent in 1992. The decrease in rates following 1992 reflects the Company's implementation of new depreciation rates approved by the GPSC. These new rates provide for a timely recovery of the investments in the Company's depreciable properties. 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. Income Taxes The Company, which is included in the consolidated federal income tax return filed by The Southern Company, 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. Effective January 1, 1993, the Company adopted FASB Statement No. 109, Accounting for Income Taxes. Statement No. 109 required, among other things, conversion to the liability method of accounting for accumulated deferred income taxes. See Note 7 for additional information about Statement No. 109. 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 8.04 percent in 1994, 8.77 percent in 1993, and 11.27 percent in 1992. Utility Plant Utility plant is stated at original cost, which 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 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 In accordance with FASB Statement No. 107, Disclosure About Fair Value of Financial Instruments, the Company's only financial instrument that the carrying amount did not approximate fair value at December 31 was as follows: ================================================================ Long-Term Debt ----------------------- Carrying Fair Year Amount Value ---- ----------------------- (in millions) 1994 $157 $153 1993 154 164 ================================================================ The fair value for long-term debt was 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. II-240 NOTES (continued) Savannah Electric and Power Company 1994 Annual Report 2. RETIREMENT BENEFITS Pension Plan The Company has a defined benefit, trusteed, non-contributory pension plan that covers substantially all regular employees. Benefits are based on the greater of amounts resulting from two different formulas: years of service and final average pay or years of service and a flat-dollar benefit. The Company uses the "projected unit credit" actuarial method for funding purposes, subject to limitations under federal income tax regulations. Amounts funded to the pension trust are primarily invested in equity and fixed-income securities. FASB Statement No. 87, Employers' Accounting for Pensions, requires use of the "projected unit credit" actuarial method for financial reporting purposes. Postretirement Benefits The Company also provides certain medical care and life insurance benefits for retired employees. Substantially all employees may become eligible for these benefits when they retire. A qualified trust for medical benefits is funded to the extent deductible under federal income tax regulations. Amounts funded are primarily invested in debt and equity securities. Effective January 1, 1993, the Company adopted FASB Statement No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, on a prospective basis. Statement No. 106 requires that medical care and life insurance benefits for retired employees be accounted for on an accrual basis using a specified actuarial method, "benefit/years-of-service." The cost of postretirement benefits is reflected in rates on a current basis. Prior to 1993, consistent with regulatory treatment, the Company recognized costs on a cash basis as payments were made. The total cost of such benefits recognized by the Company in 1992 was $375 thousand. Funded Status and Cost of Benefits Shown in the following tables are actuarial results and assumptions for pension and postretirement medical and life insurance benefits as computed under the requirements of FASB Statement Nos. 87 and 106, respectively. The funded status of the plans at December 31 was as follows: ================================================================== Pension ------------------- 1994 1993 ------------------- (in thousands) Actuarial present value of benefit obligation: Vested benefits $35,227 $35,818 Non-vested benefits 2,069 1,992 ------------------------------------------------------------------ Accumulated benefit obligation 37,296 37,810 Additional amounts related to projected salary increases 7,393 5,974 ------------------------------------------------------------------ Projected benefit obligation 44,689 43,784 Less: Fair value of plan assets 27,165 26,446 Unrecognized net loss 10,950 9,449 Unrecognized prior service cost 1,510 1,685 Unrecognized net transition obligation 621 710 Adjustment required to recognize additional minimum liability 5,688 5,871 ------------------------------------------------------------------ Accrued pension cost recognized in the Balance Sheets $10,131 $11,365 =================================================================== The weighted average rates assumed in the actuarial calculations for the pension plan were: ================================================================== 1994 1993 1992 ------------------------------ Discount 8.00% 7.50% 8.00% Annual salary increase 5.25 4.75 5.00 Long-term return on plan assets 9.00 9.25 9.25 =================================================================== In accordance with Statement No. 87, an additional liability related to under-funded accumulated benefit obligations was reflected at December 31, 1994 and December 31, 1993. Corresponding net-of-tax balances of $0.5 million and $2.1 million were recognized as separate components of Common Stock Equity in the 1994 and 1993 Statements of Capitalization. II-241 NOTES (continued) Savannah Electric and Power Company 1994 Annual Report ================================================================ Postretirement Medical --------------------- 1994 1993 --------------------- (in thousands) Actuarial present value of benefit obligation: Retirees and dependents $ 8,480 $ 8,632 Employees eligible to retire 825 898 Other employees 6,840 6,489 ----------------------------------------------------------------- Accumulated benefit obligation 16,145 16,019 Less: Fair value of plan assets 393 - Unrecognized net loss 3,106 4,124 Unrecognized transition obligation 9,817 10,362 ----------------------------------------------------------------- Accrued liability recognized in the Balance Sheets $ 2,829 $ 1,533 ================================================================= Postretirement Life ---------------------- 1994 1993 ---------------------- (in thousands) Actuarial present value of benefit obligation: Retirees and dependents $2,514 $2,536 Employees eligible to retire 59 - Other employees 1,645 1,577 ------------------------------------------------------------------- Accumulated benefit obligation 4,218 4,113 Less: Fair value of plan assets - - Unrecognized net loss 91 262 Unrecognized transition obligation 3,204 3,382 ------------------------------------------------------------------- Accrued liability recognized in the Balance Sheets $ 923 $ 469 =================================================================== The weighted average rates assumed in the actuarial calculations for the postretirement medical and life plans were: ======================================================= 1994 1993 ------------------ Discount 8.00% 7.50% Annual salary increase 5.50 5.00 Long-term return on plan assets 8.50 8.50 ======================================================= An additional assumption used in measuring the accumulated postretirement medical benefit obligation was a weighted average medical care cost trend rate of 10.5 percent for 1994, decreasing gradually to 6.0 percent through the year 2000 and remaining at that level thereafter. An annual increase in the assumed medical care cost trend rate of 1 percent would increase the accumulated medical benefit obligation at December 31, 1994, by $2.3 million and the aggregate of the service and interest cost components of the net retiree medical cost by $0.3 million. Components of the plans' net costs are shown below: =================================================================== Pension --------------------------- 1994 1993 1992 --------------------------- (in thousands) Benefits earned during the year $ 1,192 $1,188 $1,053 Interest cost on projected benefit obligation 3,279 2,741 2,429 Actual (return) loss on plan assets 27 (2,199) (1,266) Net amortization and deferral (1,474) 716 (227) ------------------------------------------------------------------- Net pension cost $ 3,024 $2,446 $1,989 =================================================================== Of the above net pension amounts, $2.6 million in 1994, $2.0 million in 1993 and $1.7 million in 1992 were recorded in operating expenses, and the remainder was recorded in construction and other accounts. ================================================================ Postretirement Medical ------------------ 1994 1993 ------------------ (in thousands) Benefits earned during the year $ 528 346 Interest cost on accumulated benefit obligation 1,185 855 Amortization of transition obligation 545 545 Actual (return) loss on plan assets 6 - Net amortization and deferral 111 - ---------------------------------------------------------------- Net postretirement cost $2,375 $1,746 ================================================================ ================================================================== Postretirement Life ---------------------- 1994 1993 ---------------------- (in thousands) Benefits earned during the year $104 $ 97 Interest cost on accumulated benefit obligation 307 279 Amortization of transition obligation 178 178 ------------------------------------------------------------------ Net postretirement cost $589 $554 ================================================================== II-242 NOTES (continued) Savannah Electric and Power Company 1994 Annual Report Of the above net postretirement medical and life insurance costs, $2.4 million in 1994 and $1.8 million in 1993 were charged to operating expenses, and the remainder was recorded in construction and other accounts. 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. Benefit costs associated with this plan for 1994, 1993 and 1992 were $377 thousand, $980 thousand and $316 thousand, respectively. The 1993 benefit costs reflect a one-time expense related to employees who were part of the work force reduction program. Work Force Reduction Program In 1993, the Company incurred additional costs for a one-time charge related to the implementation of a work force reduction program. In 1993, $4.5 million was charged to operating expenses and $0.6 million was charged to other income (expense). 3. REGULATORY MATTERS In May 1992, the Company filed for, and subsequently received, GPSC approval to implement new base rates designed to decrease base operating revenues by $2.8 million annually. The reduction included a base rate reduction of approximately $2.5 million spread among all classes of customers, effective June 1992. An additional $0.3 million reduction resulted from the implementation of an experimental, time-of-use rate for certain commercial customers in August 1992. 4. CONSTRUCTION PROGRAM The Company is engaged in a continuous construction program, currently estimated to total $34 million in 1995, $27 million in 1996 and $26 million in 1997. The estimates include AFUDC of $0.7 million in 1995 and 1996, and $0.6 million in 1997. 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 cost of labor, equipment and materials; and changes in cost of capital. The construction of two combustion turbine peaking units totaling 160 megawatts was completed during 1994. In addition, construction will continue related to transmission and distribution facilities and the upgrading and extension of the useful lives of generating plants. 5. FINANCING AND COMMITMENTS General 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 preferred stock and capital contributions from The Southern Company. Should the Company be unable to obtain funds from these sources, the Company would have to use short-term indebtedness or other alternative, and possibly costlier, means of financing. The amounts of long-term debt and preferred stock that can be issued in the future will be contingent on market conditions, the maintenance of adequate earnings levels, regulatory authorizations and other factors. See Management's Discussion and Analysis for information regarding the Company's earnings coverage requirements. Bank Credit Arrangements At the beginning of 1995, unused credit arrangements with five banks totaled $18 million and expire at various times during 1995 and 1996. The Company's revolving credit arrangements of $20 million, of which $11.5 million remained unused as of December 31, 1994, expire in December 1996. 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 II-243 NOTES (continued) Savannah Electric and Power Company 1994 Annual Report 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. Operating Leases The Company has rental agreements with various terms and expiration dates. Rental expenses totaled $1.5 million for 1994, 1993, and 1992. At December 31, 1994, estimated future minimum lease payments for non-cancelable operating leases were as follows: ======================================================== Amounts --------- (in millions) 1995 $1.1 1996 0.9 1997 0.7 1998 0.5 ======================================================== 6. LONG-TERM POWER SALES AGREEMENTS The operating subsidiaries of The Southern Company, including the 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. The agreements for non-firm capacity expired in 1994. Other agreements--expiring at various dates discussed below-- are firm and pertain to capacity related to specific generating units. Because energy is generally sold at cost under these agreements, revenues from capacity sales primarily affect profitability. The Company's portion of capacity revenues has been as follows: ================================================================= Unit Other Year Power Long-Term Total ---- ----------------------------------- (in thousands) 1994 $3 $445 $448 1993 2 976 978 1992 3 534 537 ================================================================= 7. INCOME TAXES Effective January 1, 1993, the Company adopted FASB Statement No. 109, Accounting for Income Taxes. The adoption resulted in the recording of additional deferred income taxes and related regulatory assets and liabilities. At December 31, 1994, the tax-related regulatory assets and liabilities were $24 million and $25 million, respectively. These assets are attributable to tax benefits flowed through to customers in prior years and to taxes applicable to capitalized AFUDC. 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: =============================================================== 1994 1993 1992 ---------------------------- (in thousands) Total provision for income taxes Federal -- Currently payable $11,736 $11,663 $ 6,630 Deferred - current year 2,106 1,906 7,407 - reversal of prior years (755) (1,383) (2,347) --------------------------------------------------------------- 13,087 12,186 11,690 --------------------------------------------------------------- State -- Currently payable 2,064 2,049 1,231 Deferred - current year 188 119 1,079 - reversal of prior years 86 (35) (192) --------------------------------------------------------------- 2,338 2,133 2,118 --------------------------------------------------------------- Total 15,425 14,319 13,808 Less income taxes charged (credited) to other income (864) (1,117) (758) --------------------------------------------------------------- Federal and state income taxes charged to operations $16,289 $15,436 $14,566 =============================================================== II-244 NOTES (continued) Savannah Electric and Power Company 1994 Annual Report 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: ================================================================ 1994 1993 ----------------- (in thousands) Deferred tax liabilities: Accelerated depreciation $57,830 $53,585 Property basis differences 12,956 13,871 Other 2,449 3,922 ---------------------------------------------------------------- Total 73,235 71,378 --------------------------------------------------------------- Deferred tax assets: Pension and other benefits 4,816 4,237 Other 3,959 4,616 ---------------------------------------------------------------- Total 8,775 8,853 ---------------------------------------------------------------- Net deferred tax liabilities 64,460 62,525 Portions included in current assets, net 6,326 4,422 ---------------------------------------------------------------- Accumulated deferred income taxes in the Balance Sheets $70,786 $66,947 ================================================================ 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 $0.7 million in 1994, 1993, and 1992. At December 31, 1994, 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: =============================================================== 1994 1993 1992 ----------------------------- Statutory federal tax rate 35% 35% 34% State income tax, net of federal income tax benefit 4 4 4 Other - (1) - --------------------------------------------------------------- Total effective tax rate 39% 38% 38% =============================================================== The Southern Company and its subsidiaries file a consolidated federal income tax return. Under a joint consolidated income tax agreement, each company's current and deferred tax expense is computed on a stand-alone basis, and consolidated tax savings are allocated to each company based on its ratio of taxable income to total consolidated taxable income. 8. CUMULATIVE PREFERRED STOCK In 1993, the Company issued 1,400,000 shares of 6.64% Series Preferred Stock which has redemption provisions of $26.66 per share plus accrued dividends if on or prior to November 1, 1998, and redemption provisions of $25 per share plus accrued dividends thereafter. In December 1993, the Company redeemed all 800,000 shares outstanding of its 9.5% Series Preferred Stock at the prescribed redemption price of $26.57 plus accrued dividends. Cumulative preferred stock dividends are preferential to the payment of dividends on common stock. 9. LONG-TERM DEBT 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. In April 1994, the Company retired the remaining outstanding principal amount of $3.7 million of its 4 5/8 percent series First Mortgage Bonds due April 1994. The sinking fund requirements of first mortgage bonds were satisfied by certification of property additions in 1993 and by cash redemption in 1994. See Note 10 "Long-Term Debt Due Within One Year" for details. Details of pollution control obligations and other long-term debt at December 31 are as follows: ================================================================= 1994 1993 ------------------ (in thousands) Collateralized obligations incurred in connection with the sale by public authorities of tax-exempt pollution control revenue bonds -- Variable rate (5.65% at 1/1/95) due 2016 $ 4,085 $ 4,085 6 3/4% due 2022 13,870 13,870 ----------------------------------------------------------------- Total pollution control obligations $17,955 $17,955 ----------------------------------------------------------------- Capital lease obligations -- Combustion turbine equipment $ 980 $ 1,403 Transportation fleet 508 908 Notes Payable: 6.04% due 1995 3,500 - 6.035% due 1995 5,000 - ----------------------------------------------------------------- Total other long-term debt $ 9,988 $ 2,311 ================================================================= II-245 NOTES (continued) Savannah Electric and Power Company 1994 Annual Report Sinking fund requirements and/or maturities through 1999 applicable to long-term debt are as follows: $2.6 million in 1995; $0.2 million in 1996; $0.1 million in 1997; and no requirement is needed in 1998 and 1999. 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. The Company leases combustion turbine generating equipment under a non-cancelable lease expiring in December 1995, with renewal options extending until 2010. The Company also leases a portion of its transportation fleet. Under the terms of these leases, the Company is responsible for taxes, insurance and other expenses. 10. LONG-TERM DEBT DUE WITHIN ONE YEAR A summary of the improvement fund/sinking fund requirements and scheduled maturities and redemptions of long-term debt due within one year at December 31 is as follows: ================================================================= 1994 1993 -------------------- (in thousands) Bond sinking fund requirements $1,350 $1,350 Less: Portion to be satisfied by certifying property additions - 1,350 ----------------------------------------------------------------- Cash sinking fund requirements 1,350 - Other long-term debt maturities 1,229 4,499 ----------------------------------------------------------------- Total $2,579 $4,499 ================================================================= The first mortgage bond improvement (sinking) fund requirements amount to 1 percent of each outstanding series of bonds authenticated under the indentures 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. 11. COMMON STOCK DIVIDEND RESTRICTIONS The Company's Charter and Indentures contain certain limitations on the payment of cash dividends on preferred and common stocks. At December 31, 1994, approximately $57 million of retained earnings was restricted against the payment of cash dividends on common stock under the terms of the Mortgage Indenture. 12. QUARTERLY FINANCIAL INFORMATION (Unaudited) Summarized quarterly financial data for 1994 and 1993 are as follows (in thousands): ================================================================== Net Income After Operating Operating Dividends on Quarter Ended Revenue Income Preferred Stock ------------------------------------------------------------------ March 1994 $46,717 $ 7,130 $ 3,898 June 1994 56,377 9,555 6,051 September 1994 63,674 13,495 9,547 December 1994 45,017 5,989 2,614 March 1993 $42,873 $ 6,123 $ 3,019 June 1993 52,875 9,301 6,211 September 1993 74,420 13,326 10,214 December 1993 48,274 5,484 2,015 ================================================================== The Company's business is influenced by seasonal weather conditions and a seasonal rate structure, among other factors. II-246 SELECTED FINANCIAL AND OPERATING DATA Savannah Electric and Power Company 1994 Annual Report
============================================================================================= 1994 1993 1992 --------------------------------------------------------------------------------------------- Operating Revenues (in thousands) $211,785 $218,442 $197,761 Net Income after Dividends on Preferred and Preference Stocks (in thousands) $22,110 $21,459 $20,512 Cash Dividends on Common Stock (in thousands) $16,300 $21,000 $22,000 Return on Average Common Equity (percent) 14.00 13.73 12.89 Total Assets (in thousands) $518,305 $527,187 $352,175 Gross Property Additions (in thousands) $30,078 $72,858 $30,132 --------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $161,581 $154,269 $158,376 Preferred stock 35,000 35,000 20,000 Preferred and preference stock subject to mandatory redemption - - - Long-term debt 155,922 151,338 110,767 --------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $352,503 $340,607 $289,143 ============================================================================================= Capitalization Ratios (percent): Common stock equity 45.8 45.3 54.8 Preferred and preference stock 9.9 10.3 6.9 Long-term debt 44.3 44.4 38.3 --------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 100.0 ============================================================================================= First Mortgage Bonds (in thousands): Issued - 45,000 30,000 Retired 5,065 - 38,750 Preferred and Preference Stock (in thousands): Issued - 35,000 - Retired - 20,000 - --------------------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's A1 A1 A1 Standard and Poor's A A A Preferred Stock - Moody's "a2" "a2" "a2" Standard and Poor's A- A- A- --------------------------------------------------------------------------------------------- Customers (year-end): Residential 103,199 101,032 99,164 Commercial 13,015 12,702 12,416 Industrial 65 69 73 Other 1,007 957 940 --------------------------------------------------------------------------------------------- Total 117,286 114,760 112,593 ============================================================================================= Employees (year-end) 616 665 688 Note: NR = Not Rated
II-247 SELECTED FINANCIAL AND OPERATING DATA Savannah Electric and Power Company 1994 Annual Report
============================================================================================= 1991 1990 1989 --------------------------------------------------------------------------------------------- Operating Revenues (in thousands) $189,646 $205,635 $201,799 Net Income after Dividends on Preferred and Preference Stocks (in thousands) $24,030 $26,254 $25,535 Cash Dividends on Common Stock (in thousands) $22,000 $22,000 $20,000 Return on Average Common Equity (percent) 15.13 16.85 16.88 Total Assets (in thousands) $352,505 $340,050 $349,887 Gross Property Additions (in thousands) $19,478 $20,086 $18,831 --------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $159,841 $157,811 $153,737 Preferred stock 20,000 20,000 22,300 Preferred and preference stock subject to mandatory redemption - - 2,884 Long-term debt 119,280 112,377 117,522 --------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $299,121 $290,188 $296,443 ============================================================================================= Capitalization Ratios (percent): Common stock equity 53.4 54.4 51.9 Preferred and preference stock 6.7 6.9 8.5 Long-term debt 39.9 38.7 39.6 --------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 100.0 ============================================================================================= First Mortgage Bonds (in thousands): Issued 30,000 - 30,000 Retired 22,500 9,135 18,275 Preferred and Preference Stock (in thousands): Issued - - - Retired - 5,374 6,591 --------------------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's A1 A1 A1 Standard and Poor's A A A Preferred Stock - Moody's "a2" "a2" "a2" Standard and Poor's A- A- A- --------------------------------------------------------------------------------------------- Customers (year-end): Residential 97,446 96,452 94,766 Commercial 12,153 12,045 12,298 Industrial 73 76 69 Other 897 867 856 --------------------------------------------------------------------------------------------- Total 110,569 109,440 107,989 ============================================================================================= Employees (year-end) 672 648 643 Note: NR = Not Rated
II-248A SELECTED FINANCIAL AND OPERATING DATA Savannah Electric and Power Company 1994 Annual Report
============================================================================================= 1988 1987 1986 --------------------------------------------------------------------------------------------- Operating Revenues (in thousands) $182,440 $174,707 $174,847 Net Income after Dividends on Preferred and Preference Stocks (in thousands) $24,272 $22,086 $20,452 Cash Dividends on Common Stock (in thousands) $11,700 $10,741 $9,353 Return on Average Common Equity (percent) 17.03 17.03 17.52 Total Assets (in thousands) $347,051 $340,109 $341,826 Gross Property Additions (in thousands) $23,254 $32,276 $26,800 --------------------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $148,883 $136,207 $123,133 Preferred stock 22,300 2,300 2,300 Preferred and preference stock subject to mandatory redemption 3,075 9,665 10,256 Long-term debt 98,285 129,329 137,821 --------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) $272,543 $277,501 $273,510 ============================================================================================= Capitalization Ratios (percent): Common stock equity 54.6 49.1 45.0 Preferred and preference stock 9.3 4.3 4.6 Long-term debt 36.1 46.6 50.4 --------------------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 100.0 ============================================================================================= First Mortgage Bonds (in thousands): Issued - - 25,000 Retired 12,231 10,239 10,160 Preferred and Preference Stock (in thousands): Issued 20,000 - - Retired 553 588 610 --------------------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's A1 A3 A3 Standard and Poor's A- A- A- Preferred Stock - Moody's "a2" NR NR Standard and Poor's BBB+ BBB+ BBB+ --------------------------------------------------------------------------------------------- Customers (year-end): Residential 93,486 92,094 89,951 Commercial 12,135 11,812 11,405 Industrial 69 67 67 Other 828 762 731 --------------------------------------------------------------------------------------------- Total 106,518 104,735 102,154 ============================================================================================= Employees (year-end) 655 655 658 Note: NR = Not Rated
II-248B SELECTED FINANCIAL AND OPERATING DATA Savannah Electric and Power Company 1994 Annual Report
================================================================================== 1985 1984 ---------------------------------------------------------------------------------- Operating Revenues (in thousands) $158,643 $148,721 Net Income after Dividends on Preferred and Preference Stocks (in thousands) $15,279 $14,907 Cash Dividends on Common Stock (in thousands) $8,387 $8,010 Return on Average Common Equity (percent) 14.41 15.31 Total Assets (in thousands) $323,686 $323,318 Gross Property Additions (in thousands) $30,700 $29,724 ---------------------------------------------------------------------------------- Capitalization (in thousands): Common stock equity $110,385 $101,664 Preferred stock 2,300 2,300 Preferred and preference stock subject to mandatory redemption 10,848 11,446 Long-term debt 128,850 136,709 ---------------------------------------------------------------------------------- Total (excluding amounts due within one year) $252,383 $252,119 ================================================================================== Capitalization Ratios (percent): Common stock equity 43.7 40.3 Preferred and preference stock 5.2 5.5 Long-term debt 51.1 54.2 ---------------------------------------------------------------------------------- Total (excluding amounts due within one year) 100.0 100.0 ================================================================================== First Mortgage Bonds (in thousands): Issued 20,000 - Retired 5,592 10,532 Preferred and Preference Stock (in thousands): Issued - - Retired 588 525 ---------------------------------------------------------------------------------- Security Ratings: First Mortgage Bonds - Moody's A3 A3 Standard and Poor's A- BBB+ Preferred Stock - Moody's NR NR Standard and Poor's BBB+ BBB+ ---------------------------------------------------------------------------------- Customers (year-end): Residential 88,101 86,366 Commercial 10,985 10,659 Industrial 66 76 Other 699 637 ---------------------------------------------------------------------------------- Total 99,851 97,738 ================================================================================== Employees (year-end) 653 632 Note: NR = Not Rated
II-248C SELECTED FINANCIAL AND OPERATING DATA (continued) Savannah Electric and Power Company 1994 Annual Report
============================================================================================= 1994 1993 1992 --------------------------------------------------------------------------------------------- Operating Revenues (in thousands): Residential $89,195 $93,883 $82,670 Commercial 71,227 71,320 64,756 Industrial 32,906 36,180 33,171 Other 7,946 7,810 7,095 --------------------------------------------------------------------------------------------- Total retail 201,274 209,193 187,692 Sales for resale - non-affiliates 4,786 6,021 7,821 Sales for resale - affiliates 6,446 2,433 1,505 --------------------------------------------------------------------------------------------- Total revenues from sales of electricity 212,506 217,647 197,018 Other revenues (721) 795 743 --------------------------------------------------------------------------------------------- Total $211,785 $218,442 $197,761 ============================================================================================= Kilowatt-Hour Sales (in thousands): Residential 1,298,122 1,329,362 1,216,993 Commercial 1,045,831 1,015,935 953,840 Industrial 799,543 854,324 861,121 Other 119,593 115,969 110,270 --------------------------------------------------------------------------------------------- Total retail 3,263,089 3,315,590 3,142,224 Sales for resale - non-affiliates 201,716 247,203 367,066 Sales for resale - affiliates 93,001 75,384 37,632 --------------------------------------------------------------------------------------------- Total 3,557,806 3,638,177 3,546,922 ============================================================================================= Average Revenue Per Kilowatt-Hour (cents): Residential 6.87 7.06 6.79 Commercial 6.81 7.02 6.79 Industrial 4.12 4.23 3.85 Total retail 6.17 6.31 5.97 Sale for resale 3.81 2.62 2.30 Total sales 5.97 5.98 5.55 Residential Average Annual Kilowatt-Hour Use Per Customer 12,686 13,269 12,369 Residential Average Annual Revenue Per Customer $871.68 $937.07 $840.23 Plant Nameplate Capacity Ratings (year-end) (megawatts) 788 628 628 Maximum Peak-Hour Demand (megawatts): Winter 617 524 533 Summer 729 747 695 Annual Load Factor (percent) 54.3 54.1 55.0 Plant Availability - Fossil-Steam (percent) 81.0 90.2 89.1 --------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 18.6 21.5 12.0 Oil and gas 1.8 4.5 2.9 Purchased power - From non-affiliates 1.5 0.9 1.0 From affiliates 78.1 73.1 84.1 --------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 ============================================================================================= Total Fuel Economy Data: BTU per net kilowatt-hour generated 11,786 11,515 12,547 Cost of fuel per million BTU (cents) 205.03 215.97 201.50 Average cost of fuel per net kilowatt-hour generated (cents) 2.42 2.49 2.53 =============================================================================================
II-249 SELECTED FINANCIAL AND OPERATING DATA (continued) Savannah Electric and Power Company 1994 Annual Report
============================================================================================= 1991 1990 1989 --------------------------------------------------------------------------------------------- Operating Revenues (in thousands): Residential $80,541 $87,063 $85,113 Commercial 61,827 65,462 65,474 Industrial 30,492 30,237 28,304 Other 6,561 6,782 6,892 --------------------------------------------------------------------------------------------- Total retail 179,421 189,544 185,783 Sales for resale - non-affiliates 7,813 9,482 8,814 Sales for resale - affiliates 1,430 5,566 6,025 Total revenues from sales of electricity 188,664 204,592 200,622 Other revenues 982 1,043 1,177 --------------------------------------------------------------------------------------------- Total $189,646 $205,635 $201,799 ============================================================================================= Kilowatt-Hour Sales (in thousands): Residential 1,195,005 1,183,486 1,109,976 Commercial 925,757 892,931 839,756 Industrial 825,862 644,704 561,063 Other 106,683 103,539 101,164 --------------------------------------------------------------------------------------------- Total retail 3,053,307 2,824,660 2,611,959 Sales for resale - non-affiliates 372,085 441,090 437,943 Sales for resale - affiliates 32,581 294,042 303,142 --------------------------------------------------------------------------------------------- Total 3,457,973 3,559,792 3,353,044 ============================================================================================= Average Revenue Per Kilowatt-Hour (cents): Residential 6.74 7.36 7.67 Commercial 6.68 7.33 7.80 Industrial 3.69 4.69 5.04 Total retail 5.88 6.71 7.11 Sale for resale 2.28 2.05 2.00 Total sales 5.46 5.75 5.98 Residential Average Annual Kilowatt-Hour Use Per Customer 12,323 12,339 11,781 Residential Average Annual Revenue Per Customer $830.54 $907.68 $903.37 Plant Nameplate Capacity Ratings (year-end) (megawatts) 605 605 605 Maximum Peak-Hour Demand (megawatts): Winter 526 428 548 Summer 691 648 613 Annual Load Factor (percent) 54.1 53.2 52.4 Plant Availability - Fossil-Steam (percent) 76.9 89.6 94.7 --------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 16.3 52.8 63.5 Oil and gas 1.7 3.4 1.4 Purchased power - From non-affiliates 0.4 0.8 1.5 From affiliates 81.6 43.0 33.6 --------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 ============================================================================================= Total Fuel Economy Data: BTU per net kilowatt-hour generated 10,917 10,741 10,611 Cost of fuel per million BTU (cents) 199.42 188.18 180.48 Average cost of fuel per net kilowatt-hour generated (cents) 2.18 2.02 1.92 =============================================================================================
II-250A SELECTED FINANCIAL AND OPERATING DATA (continued) Savannah Electric and Power Company 1994 Annual Report
============================================================================================= 1988 1987 1986 --------------------------------------------------------------------------------------------- Operating Revenues (in thousands): Residential $81,098 $79,785 $80,348 Commercial 62,640 60,285 59,547 Industrial 26,865 27,422 27,694 Other 6,557 6,315 6,300 --------------------------------------------------------------------------------------------- Total retail 177,160 173,807 173,889 Sales for resale - non-affiliates 808 - - Sales for resale - affiliates 3,567 - - --------------------------------------------------------------------------------------------- Total revenues from sales of electricity 181,535 173,807 173,889 Other revenues 905 900 958 --------------------------------------------------------------------------------------------- Total $182,440 $174,707 $174,847 ============================================================================================= Kilowatt-Hour Sales (in thousands): Residential 1,067,411 1,044,554 1,021,905 Commercial 806,687 775,643 746,133 Industrial 533,604 557,281 515,544 Other 97,072 94,949 92,471 --------------------------------------------------------------------------------------------- Total retail 2,504,774 2,472,427 2,376,053 Sales for resale - non-affiliates 24,168 - - Sales for resale - affiliates 156,106 - - --------------------------------------------------------------------------------------------- Total 2,685,048 2,472,427 2,376,053 ============================================================================================= Average Revenue Per Kilowatt-Hour (cents): Residential 7.60 7.64 7.86 Commercial 7.77 7.77 7.98 Industrial 5.03 4.92 5.37 Total retail 7.07 7.03 7.32 Sale for resale 2.43 - - Total sales 6.76 7.03 7.32 Residential Average Annual Kilowatt-Hour Use Per Customer 11,489 11,481 11,514 Residential Average Annual Revenue Per Customer $872.87 $876.95 $905.27 Plant Nameplate Capacity Ratings (year-end) (megawatts) 605 605 605 Maximum Peak-Hour Demand (megawatts): Winter 471 414 464 Summer 574 562 565 Annual Load Factor (percent) 53.4 53.6 51.1 Plant Availability - Fossil-Steam (percent) 77.1 81.2 86.9 --------------------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 79.8 74.3 81.9 Oil and gas 5.4 4.4 6.8 Purchased power - From non-affiliates 5.9 19.9 11.3 From affiliates 8.9 1.4 - --------------------------------------------------------------------------------------------- Total 100.0 100.0 100.0 ============================================================================================= Total Fuel Economy Data: BTU per net kilowatt-hour generated 10,683 10,551 10,607 Cost of fuel per million BTU (cents) 178.31 176.10 186.30 Average cost of fuel per net kilowatt-hour generated (cents) 1.90 1.86 1.98 =============================================================================================
II-250B SELECTED FINANCIAL AND OPERATING DATA (continued) Savannah Electric and Power Company 1994 Annual Report
================================================================================== 1985 1984 ---------------------------------------------------------------------------------- Operating Revenues (in thousands): Residential $70,377 $65,059 Commercial 53,696 50,538 Industrial 28,335 27,233 Other 5,823 5,505 ---------------------------------------------------------------------------------- Total retail 158,231 148,335 Sales for resale - non-affiliates - - Sales for resale - affiliates - - ---------------------------------------------------------------------------------- Total revenues from sales of electricity 158,231 148,335 Other revenues 412 386 ---------------------------------------------------------------------------------- Total $158,643 $148,721 ================================================================================== Kilowatt-Hour Sales (in thousands): Residential 926,988 883,498 Commercial 694,168 668,309 Industrial 513,270 518,118 Other 87,238 84,798 ---------------------------------------------------------------------------------- Total retail 2,221,664 2,154,723 Sales for resale - non-affiliates - - Sales for resale - affiliates - - ---------------------------------------------------------------------------------- Total 2,221,664 2,154,723 ================================================================================== Average Revenue Per Kilowatt-Hour (cents): Residential 7.59 7.36 Commercial 7.74 7.56 Industrial 5.52 5.26 Total retail 7.12 6.88 Sale for resale - - Total sales 7.12 6.88 Residential Average Annual Kilowatt-Hour Use Per Customer 10,536 10,357 Residential Average Annual Revenue Per Customer $799.90 $762.67 Plant Nameplate Capacity Ratings (year-end) (megawatts) 605 605 Maximum Peak-Hour Demand (megawatts): Winter 440 360 Summer 498 481 Annual Load Factor (percent) 54.7 54.1 Plant Availability - Fossil-Steam (percent) 92.0 86.1 ---------------------------------------------------------------------------------- Source of Energy Supply (percent): Coal 87.5 91.8 Oil and gas 2.6 2.2 Purchased power - From non-affiliates 9.9 6.0 From affiliates - - ---------------------------------------------------------------------------------- Total 100.0 100.0 ================================================================================== Total Fuel Economy Data: BTU per net kilowatt-hour generated 10,581 10,498 Cost of fuel per million BTU (cents) 198.80 196.20 Average cost of fuel per net kilowatt-hour generated (cents) 2.10 2.06 ==================================================================================
II-250C STATEMENTS OF INCOME Savannah Electric and Power Company
========================================================================================================== For the Years Ended December 31, 1994 1993 1992 ---------------------------------------------------------------------------------------------------------- (Thousands of Dollars) Operating Revenues: Revenues $ 205,339 $ 216,009 $ 196,256 Revenues from affiliates 6,446 2,433 1,505 ---------------------------------------------------------------------------------------------------------- Total operating revenues 211,785 218,442 197,761 ---------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 18,555 24,976 14,162 Purchased power from non-affiliates 1,839 793 494 Purchased power from affiliates 55,822 56,274 56,492 Other 41,623 45,610 36,884 Maintenance 12,560 13,516 14,232 Depreciation and amortization 17,854 16,467 16,829 Taxes other than income taxes 11,074 11,136 10,231 Federal and state income taxes 16,289 15,436 14,566 ---------------------------------------------------------------------------------------------------------- Total operating expenses 175,616 184,208 163,890 ---------------------------------------------------------------------------------------------------------- Operating Income 36,169 34,234 33,871 Other Income (Expense): Allowance for equity funds used during construction 831 958 446 Interest income 54 209 276 Other, net (1,032) (1,841) (1,450) Income taxes applicable to other income 864 1,117 758 ---------------------------------------------------------------------------------------------------------- Income Before Interest Charges 36,886 34,677 33,901 ---------------------------------------------------------------------------------------------------------- Interest Charges: Interest on long-term debt 12,585 10,696 10,870 Allowance for debt funds used during construction (1,225) (699) (289) Interest on notes payable 205 240 15 Amortization of debt discount, premium, and expense, net 550 535 427 Other interest charges 337 340 466 ---------------------------------------------------------------------------------------------------------- Net interest charges 12,452 11,112 11,489 ---------------------------------------------------------------------------------------------------------- Income Before Cumulative Effect of a Change in Method of Recording Revenues 24,434 23,565 22,412 Cumulative effect as of January 1, 1988, of accruing unbilled revenues--less income taxes of $1,164(000) - - - ---------------------------------------------------------------------------------------------------------- Net Income 24,434 23,565 22,412 Dividends on Preferred and Preference Stock 2,324 2,106 1,900 ---------------------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred and Preference Stock $ 22,110 $ 21,459 $ 20,512 ========================================================================================================== Pro Forma Net Income After Dividends on Preferred Stock Assuming Change in Method of Recording Revenues Was Applied Retroactively $ 22,110 $ 21,459 $ 20,512
II-251 STATEMENTS OF INCOME Savannah Electric and Power Company
==================================================================================================================== For the Years Ended December 31, 1991 1990 1989 1988 -------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) Operating Revenues: Revenues $ 188,216 $200,069 $195,774 $178,873 Revenues from affiliates 1,430 5,566 6,025 3,567 -------------------------------------------------------------------------------------------------------------------- Total operating revenues 189,646 205,635 201,799 182,440 -------------------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 14,415 42,630 44,224 46,578 Purchased power from non-affiliates 297 611 616 3,593 Purchased power from affiliates 49,007 34,648 26,361 6,586 Other 32,945 30,630 29,371 28,271 Maintenance 12,475 12,754 12,281 14,261 Depreciation and amortization 16,549 16,118 20,343 19,771 Taxes other than income taxes 10,122 9,798 9,152 9,209 Federal and state income taxes 16,195 17,611 17,571 14,017 -------------------------------------------------------------------------------------------------------------------- Total operating expenses 152,005 164,800 159,919 142,286 -------------------------------------------------------------------------------------------------------------------- Operating Income 37,641 40,835 41,880 40,154 Other Income (Expense): Allowance for equity funds used during construction 170 193 - 273 Interest income 589 741 719 355 Other, net (879) (803) (672) (1,423) Income taxes applicable to other income 722 187 192 459 -------------------------------------------------------------------------------------------------------------------- Income Before Interest Charges 38,243 41,153 42,119 39,818 -------------------------------------------------------------------------------------------------------------------- Interest Charges: Interest on long-term debt 11,486 12,052 12,287 15,603 Allowance for debt funds used during construction (103) (194) (112) (330) Interest on notes payable 25 116 402 230 Amortization of debt discount, premium, and expense, net 380 241 274 196 Other interest charges 525 665 1,313 336 -------------------------------------------------------------------------------------------------------------------- Net interest charges 12,313 12,880 14,164 16,035 -------------------------------------------------------------------------------------------------------------------- Income Before Cumulative Effect of a Change in Method of Recording Revenues 25,930 28,273 27,955 23,783 Cumulative effect as of January 1, 1988, of accruing unbilled revenues--less income taxes of $1,164(000) - - - 1,920 -------------------------------------------------------------------------------------------------------------------- Net Income 25,930 28,273 27,955 25,703 Dividends on Preferred and Preference Stock 1,900 2,019 2,420 1,431 -------------------------------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred and Preference Stock $ 24,030 $ 26,254 $ 25,535 $ 24,272 ==================================================================================================================== Pro Forma Net Income After Dividends on Preferred Stock Assuming Change in Method of Recording Revenues Was Applied Retroactively $ 24,030 $ 26,254 $ 25,535 $ 22,352
II-252A STATEMENTS OF INCOME Savannah Electric and Power Company
==================================================================================================================== For the Years Ended December 31, 1987 1986 1985 1984 -------------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) Operating Revenues: Revenues $ 174,707 $ 174,847 $ 158,643 $148,721 Revenues from affiliates - - - - -------------------------------------------------------------------------------------------------------------------- Total operating revenues 174,707 174,847 158,643 148,721 -------------------------------------------------------------------------------------------------------------------- Operating Expenses: Operation -- Fuel 38,597 44,393 45,232 44,183 Purchased power from non-affiliates 11,453 6,069 7,577 3,810 Purchased power from affiliates 1,186 2,071 1,526 2,255 Other 25,642 24,114 20,292 18,424 Maintenance 13,629 12,591 12,029 11,195 Depreciation and amortization 18,152 16,443 15,798 14,104 Taxes other than income taxes 9,088 7,863 6,724 6,098 Federal and state income taxes 16,969 21,405 15,495 15,026 -------------------------------------------------------------------------------------------------------------------- Total operating expenses 134,716 134,949 124,673 115,095 -------------------------------------------------------------------------------------------------------------------- Operating Income 39,991 39,898 33,970 33,626 Other Income (Expense): Allowance for equity funds used during construction 512 27 646 624 Interest income 925 924 943 1,200 Other, net (464) (553) (107) (173) Income taxes applicable to other income (317) (217) (389) (548) -------------------------------------------------------------------------------------------------------------------- Income Before Interest Charges 40,647 40,079 35,063 34,729 -------------------------------------------------------------------------------------------------------------------- Interest Charges: Interest on long-term debt 17,127 17,415 18,089 18,237 Allowance for debt funds used during construction (459) (73) (725) (551) Interest on notes payable 70 315 437 172 Amortization of debt discount, premium, and expense, net 237 234 302 241 Other interest charges 251 335 213 188 -------------------------------------------------------------------------------------------------------------------- Net interest charges 17,226 18,226 18,316 18,287 -------------------------------------------------------------------------------------------------------------------- Income Before Cumulative Effect of a Change in Method of Recording Revenues 23,421 21,853 16,747 16,442 Cumulative effect as of January 1, 1988, of accruing unbilled revenues--less income taxes of $1,164(000) - - - - -------------------------------------------------------------------------------------------------------------------- Net Income 23,421 21,853 16,747 16,442 Dividends on Preferred and Preference Stock 1,335 1,401 1,468 1,535 -------------------------------------------------------------------------------------------------------------------- Net Income After Dividends on Preferred and Preference Stock $ 22,086 $ 20,452 $ 15,279 $ 14,907 ==================================================================================================================== Pro Forma Net Income After Dividends on Preferred Stock Assuming Change in Method of Recording Revenues Was Applied Retroactively $ 21,865 $ 20,606 $ 15,744 $ 14,665
II-252B STATEMENTS OF CASH FLOWS Savannah Electric and Power Company
================================================================================================== For the Years Ended December 31, 1994 1993 1992 -------------------------------------------------------------------------------------------------- (Thousands of Dollars) Operating Activities: Net income $ 24,434 $ 23,565 $ 22,412 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 19,353 17,482 17,757 Deferred income taxes, net 1,625 607 5,947 Deferred investment tax credits, net - - - Allowance for equity funds used during construction (831) (958) (446) Other, net 826 2,853 (1,312) Changes in certain current assets and liabilities -- Receivables, net 18,481 (16,839) (4,107) Special deposits - - 350 Inventories 1,144 (3,947) 4,435 Payables (19,957) 18,742 351 Other (117) 3,282 2,083 -------------------------------------------------------------------------------------------------- Net cash provided from operating activities 44,958 44,787 47,470 -------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (30,078) (72,858) (30,132) Sales of property - - - Other (841) 1,676 (1,073) -------------------------------------------------------------------------------------------------- Net cash used for investing activities (30,919) (71,182) (31,205) -------------------------------------------------------------------------------------------------- Financing Activities: Proceeds: Preferred stock - 35,000 - First mortgage bonds - 45,000 30,000 Pollution control bonds - 4,085 13,870 Other long-term debt 8,500 10,000 - Common Stock - - - Retirements: Preferred and preference stock - (20,000) - First mortgage bonds (5,065) - (38,750) Pollution control bonds - (4,085) (14,550) Other long-term debt (823) (10,356) (217) Notes payable, net (500) (4,500) 7,500 Payment of preferred and preference stock dividends (2,129) (2,222) (1,900) Payment of common and class A stock dividends (16,300) (21,000) (22,000) Miscellaneous (74) (3,400) (3,985) -------------------------------------------------------------------------------------------------- Net cash provided from (used for) financing activities (16,391) 28,522 (30,032) -------------------------------------------------------------------------------------------------- Net Increase (Decrease) in Cash and Cash Equivalents (2,352) 2,127 (13,767) Cash and Cash Equivalents at Beginning of Year 3,915 1,788 15,555 -------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 1,563 $ 3,915 $ 1,788 ================================================================================================== ( ) Denotes use of cash.
II-253 STATEMENTS OF CASH FLOWS Savannah Electric and Power Company
============================================================================================================= For the Years Ended December 31, 1991 1990 1989 1988 ------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) Operating Activities: Net income $ 25,930 $ 28,273 $ 27,955 $ 25,703 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 17,501 16,995 21,310 20,592 Deferred income taxes, net 1,601 2,782 3,476 3,568 Deferred investment tax credits, net - - - - Allowance for equity funds used during construction (170) (193) - (273) Other, net (1,876) 511 (775) 718 Changes in certain current assets and liabilities -- Receivables, net 5,291 1,541 (6,949) (7,062) Special deposits 1,348 185 2,708 (558) Inventories (1,082) 1,246 (1,503) 3,063 Payables 568 (228) 1,086 (1,151) Other 3,710 (319) 1,544 (1,684) ------------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 52,821 50,793 48,852 42,916 ------------------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (19,478) (20,086) (18,831) (23,254) Sales of property - - - - Other 407 (120) 381 (4,042) ------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (19,071) (20,206) (18,450) (27,296) ------------------------------------------------------------------------------------------------------------- Financing Activities: Proceeds: Preferred stock - - - 20,000 First mortgage bonds 30,000 - 30,000 - Pollution control bonds - - - - Other long-term debt - - - - Common Stock - - - 403 Retirements: Preferred and preference stock - (5,374) (6,591) (553) First mortgage bonds (22,500) (9,135) (18,275) (12,231) Pollution control bonds (515) (485) (455) (430) Other long-term debt (275) (364) (7,656) (4,401) Notes payable, net (1,500) 1,500 - - Payment of preferred and preference stock dividends (1,900) (2,113) (2,318) (1,284) Payment of common and class A stock dividends (22,000) (22,000) (20,000) (14,407) Miscellaneous (477) 47 (1,071) (269) ------------------------------------------------------------------------------------------------------------- Net cash provided from (used for) financing activities (19,167) (37,924) (26,366) (13,172) ------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) in Cash and Cash Equivalents 14,583 (7,337) 4,036 2,448 Cash and Cash Equivalents at Beginning of Year 972 8,309 4,273 1,825 ------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 15,555 $ 972 $ 8,309 $ 4,273 ============================================================================================================= ( ) Denotes use of cash.
II-254A STATEMENTS OF CASH FLOWS Savannah Electric and Power Company
============================================================================================================== For the Years Ended December 31, 1987 1986 1985 1984 -------------------------------------------------------------------------------------------------------------- (Thousands of Dollars) Operating Activities: Net income $ 23,421 $ 21,853 $ 16,747 $ 16,442 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 19,126 16,855 16,484 14,216 Deferred income taxes, net 925 4,443 3,034 3,104 Deferred investment tax credits, net (5) 489 3,084 2,043 Allowance for equity funds used during construction (512) (27) (646) (624) Other, net (1,016) 474 (1,730) 35 Changes in certain current assets and liabilities -- Receivables, net 1,360 1,456 (1,122) 180 Special deposits (587) (53) (916) (27) Inventories (503) 663 5,563 (7,006) Payables (78) (1,750) 2,135 1,637 Other (757) 1,916 2 521 -------------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 41,374 46,319 42,635 30,521 -------------------------------------------------------------------------------------------------------------- Investing Activities: Gross property additions (32,276) (26,800) (30,700) (29,724) Sales of property - - 1,145 193 Other 1,296 (824) 2,682 1,561 -------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (30,980) (27,624) (26,873) (27,970) -------------------------------------------------------------------------------------------------------------- Financing Activities: Proceeds: Preferred stock - - - - First mortgage bonds - 25,000 20,000 - Pollution control bonds - - - - Other long-term debt - - - - Common Stock 1,693 1,691 1,777 1,639 Retirements: Preferred and preference stock (588) (610) (588) (525) First mortgage bonds (10,239) (10,160) (5,592) (10,532) Pollution control bonds (405) (380) (360) (335) Other long-term debt (3,954) (3,075) (17,721) (2,965) Notes payable, net - (4,500) (4,500) 9,000 Payment of preferred and preference stock dividends (1,351) (1,418) (1,485) (1,552) Payment of common and class A stock dividends (10,383) (9,114) (8,347) (7,763) Miscellaneous - (436) (383) - -------------------------------------------------------------------------------------------------------------- Net cash provided from (used for) financing activities (25,227) (3,002) (17,199) (13,033) -------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) in Cash and Cash Equivalents (14,833) 15,693 (1,437) (10,482) Cash and Cash Equivalents at Beginning of Year 16,658 965 2,402 12,884 -------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 1,825 $ 16,658 $ 965 $ 2,402 ============================================================================================================== ( ) Denotes use of cash.
II-254B BALANCE SHEETS Savannah Electric and Power Company
================================================================================================= At December 31, 1994 1993 1992 ------------------------------------------------------------------------------------------------- (Thousands of Dollars) ASSETS Utility Plant: Production-fossil $ 312,215 $ 257,708 $ 258,539 Transmission 100,956 99,791 93,182 Distribution 251,323 237,012 222,024 General 28,938 28,010 25,851 Construction work in progress 5,930 49,797 5,966 ------------------------------------------------------------------------------------------------- Total utility plant 699,362 672,318 605,562 Accumulated provision for depreciation 267,590 251,565 240,094 ------------------------------------------------------------------------------------------------- Total 431,772 420,753 365,468 Less property-related accumulated deferred income taxes - - 65,725 ------------------------------------------------------------------------------------------------- Total 431,772 420,753 299,743 ------------------------------------------------------------------------------------------------- Other Property and Investments 1,790 1,793 1,795 ------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 1,563 3,915 1,788 Receivables, net 12,328 27,714 14,480 Accrued unbilled revenues 4,780 3,789 3,401 Fuel cost under recovery 3,113 7,112 3,895 Fossil fuel stock, at average cost 7,557 8,419 4,895 Materials and supplies, at average cost 9,076 9,358 8,935 Prepayments 7,446 4,849 1,599 ------------------------------------------------------------------------------------------------- Total 45,863 65,156 38,993 ------------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes 23,521 24,890 - Miscellaneous 15,359 14,595 11,644 ------------------------------------------------------------------------------------------------- Total 38,880 39,485 11,644 ------------------------------------------------------------------------------------------------- Total Assets $ 518,305 $ 527,187 $ 352,175 =================================================================================================
II-255 BALANCE SHEETS Savannah Electric and Power Company
========================================================================================================== At December 31, 1991 1990 1989 1988 ---------------------------------------------------------------------------------------------------------- (Thousands of Dollars) ASSETS Utility Plant: Production-fossil $ 247,017 $246,278 $ 242,988 $241,833 Transmission 90,198 73,358 72,299 71,601 Distribution 212,576 217,913 204,611 192,335 General 24,283 22,990 22,482 21,686 Construction work in progress 4,211 1,354 2,880 1,684 ---------------------------------------------------------------------------------------------------------- Total utility plant 578,285 561,893 545,260 529,139 Accumulated provision for depreciation 225,605 211,725 198,228 178,888 ---------------------------------------------------------------------------------------------------------- Total 352,680 350,168 347,032 350,251 Less property-related accumulated deferred income taxes 62,737 58,106 54,418 51,487 ---------------------------------------------------------------------------------------------------------- Total 289,943 292,062 292,614 298,764 ---------------------------------------------------------------------------------------------------------- Other Property and Investments 39 39 49 49 ---------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 15,555 972 8,309 4,273 Receivables, net 14,549 14,450 14,300 15,714 Accrued unbilled revenues 3,252 3,831 4,501 3,889 Fuel cost under recovery - 5,662 6,881 1,838 Fossil fuel stock, at average cost 9,196 8,071 9,706 8,455 Materials and supplies, at average cost 9,069 9,112 8,723 8,471 Prepayments 4,544 1,492 585 1,240 ---------------------------------------------------------------------------------------------------------- Total 56,165 43,590 53,005 43,880 ---------------------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes - - - - Miscellaneous 6,358 4,359 4,219 4,358 ---------------------------------------------------------------------------------------------------------- Total 6,358 4,359 4,219 4,358 ---------------------------------------------------------------------------------------------------------- Total Assets $ 352,505 $340,050 $ 349,887 $347,051 ==========================================================================================================
II-256A BALANCE SHEETS Savannah Electric and Power Company
========================================================================================================== At December 31, 1987 1986 1985 1984 ---------------------------------------------------------------------------------------------------------- (Thousands of Dollars) ASSETS Utility Plant: Production-fossil $ 236,587 $232,316 $ 229,765 $215,908 Transmission 69,822 65,215 61,843 55,047 Distribution 177,163 160,346 147,563 136,807 General 17,513 14,838 13,153 10,585 Construction work in progress 7,214 5,270 1,915 10,609 ---------------------------------------------------------------------------------------------------------- Total utility plant 508,299 477,985 454,239 428,956 Accumulated provision for depreciation 161,531 144,232 130,279 116,576 ---------------------------------------------------------------------------------------------------------- Total 346,768 333,753 323,960 312,380 Less property-related accumulated deferred income taxes 49,255 46,496 41,026 32,859 ---------------------------------------------------------------------------------------------------------- Total 297,513 287,257 282,934 279,521 ---------------------------------------------------------------------------------------------------------- Other Property and Investments 49 39 39 52 ---------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents 1,825 16,658 965 2,402 Receivables, net 14,419 13,806 14,472 12,350 Accrued unbilled revenues - - - - Fuel cost under recovery - 787 1,524 1,609 Fossil fuel stock, at average cost 12,359 12,642 13,615 19,554 Materials and supplies, at average cost 7,630 6,844 6,534 6,157 Prepayments 2,786 978 383 117 ---------------------------------------------------------------------------------------------------------- Total 39,019 51,715 37,493 42,189 ---------------------------------------------------------------------------------------------------------- Deferred Charges: Deferred charges related to income taxes - - - - Miscellaneous 4,127 2,815 3,220 1,556 ---------------------------------------------------------------------------------------------------------- Total 4,127 2,815 3,220 1,556 ---------------------------------------------------------------------------------------------------------- Total Assets $ 340,708 $341,826 $ 323,686 $323,318 ==========================================================================================================
II-256B BALANCE SHEETS Savannah Electric and Power Company
================================================================================================ At December 31, 1994 1993 1992 ------------------------------------------------------------------------------------------------ (Thousands of Dollars) > CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 54,223 $ 54,223 $ 54,223 Paid-in capital 8,688 8,688 8,688 Additional minimum liability for under-funded pension obligations (546) (2,121) - Retained Earnings 99,216 93,479 95,465 ------------------------------------------------------------------------------------------------ Total common equity 161,581 154,269 158,376 Preferred stock 35,000 35,000 20,000 Preferred and preference stock subject to mandatory redemption - - - Long-term debt 155,922 151,338 110,767 ------------------------------------------------------------------------------------------------ Total (excluding amount due within one year) 352,503 340,607 289,143 ------------------------------------------------------------------------------------------------ Current Liabilities: Notes payable to banks 2,500 3,000 7,500 Preferred and preference stock due within one year - - - Long-term debt due within one year 2,579 4,499 1,319 Accounts payable 8,991 30,442 11,179 Customer deposits 4,698 4,714 4,541 Fuel cost over recovery - - - Taxes accrued 1,133 1,529 3,016 Interest accrued 6,830 6,730 5,733 Vacation pay accrued 1,823 1,638 1,790 Miscellaneous 8,282 8,703 5,025 ------------------------------------------------------------------------------------------------ Total 36,836 61,255 40,103 ------------------------------------------------------------------------------------------------ Deferred Credits and Other Liabilities: Accumulated deferred income taxes 70,786 66,947 - Accumulated deferred investment tax credits 14,637 15,301 15,964 Deferred credits related to income taxes 25,487 26,173 - Deferred under-funded accrued benefit obligation 3,022 5,855 - Miscellaneous 15,034 11,049 6,965 ------------------------------------------------------------------------------------------------ Total 128,966 125,325 22,929 ------------------------------------------------------------------------------------------------ Total Capitalization and Liabilities $ 518,305 $527,187 $ 352,175 ================================================================================================
II-257 BALANCE SHEETS Savannah Electric and Power Company
========================================================================================================== At December 31, 1991 1990 1989 1988 ---------------------------------------------------------------------------------------------------------- (Thousands of Dollars) CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 54,223 $ 54,223 $ 54,223 $ 54,223 Paid-in capital 8,665 8,665 8,665 8,665 Additional minimum liability for under-funded pension obligations - - - - Retained Earnings 96,953 94,923 90,849 85,995 ---------------------------------------------------------------------------------------------------------- Total common equity 159,841 157,811 153,737 148,883 Preferred stock 20,000 20,000 22,300 22,300 Preferred and preference stock subject to mandatory redemption - - 2,884 3,075 Long-term debt 119,280 112,377 117,522 98,285 ---------------------------------------------------------------------------------------------------------- Total (excluding amount due within one year) 299,121 290,188 296,443 272,543 ---------------------------------------------------------------------------------------------------------- Current Liabilities: Notes payable to banks - 1,500 - - Preferred and preference stock due within one year - - 190 6,590 Long-term debt due within one year 2,442 2,358 7,091 23,217 Accounts payable 10,176 8,786 9,078 7,950 Customer deposits 4,528 4,472 4,296 3,983 Fuel cost over recovery 1,603 - - - Taxes accrued 724 1,387 1,749 1,899 Interest accrued 4,657 3,415 4,287 4,154 Vacation pay accrued 1,672 1,604 1,477 1,412 Miscellaneous 4,823 3,398 2,880 1,705 ---------------------------------------------------------------------------------------------------------- Total 30,625 26,920 31,048 50,910 ---------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes - - - - Accumulated deferred investment tax credits 16,628 17,292 17,971 19,106 Deferred credits related to income taxes - - - - Deferred under-funded accrued benefit obligation - - - - Miscellaneous 6,131 5,650 4,425 4,492 --------------------------------------------------------------------------------------------------------- Total 22,759 22,942 22,396 23,598 ---------------------------------------------------------------------------------------------------------- Total Capitalization and Liabilities $ 352,505 $340,050 $ 349,887 $347,051 ==========================================================================================================
II-258A BALANCE SHEETS Savannah Electric and Power Company
========================================================================================================== At December 31, 1987 1986 1985 1984 ---------------------------------------------------------------------------------------------------------- (Thousands of Dollars) CAPITALIZATION AND LIABILITIES Capitalization: Common stock $ 54,131 $ 53,174 $ 52,332 $ 51,271 Paid-in capital 8,353 7,623 6,774 6,059 Additional minimum liability for under-funded pension obligations - - - - Retained Earnings 73,723 62,336 51,279 44,334 ---------------------------------------------------------------------------------------------------------- Total common equity 136,207 123,133 110,385 101,664 Preferred stock 2,300 2,300 2,300 2,300 Preferred and preference stock subject to mandatory redemption 9,665 10,256 10,848 11,446 Long-term debt 129,329 137,821 128,850 136,709 ---------------------------------------------------------------------------------------------------------- Total (excluding amount due within one year) 277,501 273,510 252,383 252,119 ---------------------------------------------------------------------------------------------------------- Current Liabilities: Notes payable to banks - - 4,500 9,000 Preferred and preference stock due within one year 553 550 568 558 Long-term debt due within one year 8,956 14,836 12,636 8,510 Accounts payable 9,427 10,329 12,584 9,956 Customer deposits 3,729 3,403 3,256 2,846 Fuel cost over recovery 599 - - - Taxes accrued 3,713 4,834 3,595 8,663 Interest accrued 4,599 4,906 4,984 5,253 Vacation pay accrued 1,306 1,255 1,150 1,086 Miscellaneous 6,257 3,650 3,356 3,336 ---------------------------------------------------------------------------------------------------------- Total 39,139 43,763 46,629 49,208 ---------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Accumulated deferred income taxes - - - - Accumulated deferred investment tax credits 20,264 21,663 22,265 20,117 Deferred credits related to income taxes - - - - Deferred under-funded accrued benefit obligation - - - - Miscellaneous 3,804 2,890 2,409 1,874 ---------------------------------------------------------------------------------------------------------- Total 24,068 24,553 24,674 21,991 ---------------------------------------------------------------------------------------------------------- Total Capitalization and Liabilities $ 340,708 $341,826 $ 323,686 $323,318 ==========================================================================================================
II-258B SAVANNAH ELECTRIC AND POWER COMPANY OUTSTANDING SECURITIES AT DECEMBER 31, 1994 First Mortgage Bonds Amount Interest Amount Series Issued Rate Outstanding Maturity ------------------------------------------------------------- (Thousands) (Thousands) 1993 $ 20,000 6-3/8% $ 20,000 7/1/03 1989 30,000 9-1/4% 28,950 10/1/19 1991 30,000 9-3/8% 29,700 7/1/21 1992 30,000 8.30% 30,000 7/1/22 1993 25,000 7.40% 25,000 7/1/23 -------- -------- $135,000 $133,650 ======== ======== Pollution Control Bonds Amount Interest Amount Series Issued Rate Outstanding Maturity ------------------------------------------------------------- (Thousands) (Thousands) 1993 $ 4,085 Variable $ 4,085 1/1/16 1992 13,870 6-3/4% 13,870 2/1/22 -------- -------- $ 17,955 $ 17,955 ======== ======== Preferred Stock Shares Dividend Amount Series Outstanding Rate Outstanding ------------------------------------------------------------- (Thousands) 1993 1,400,000 6.64% $ 35,000 II-259 SAVANNAH ELECTRIC AND POWER COMPANY SECURITIES RETIRED DURING 1994 First Mortgage Bonds Principal Interest Series Amount Rate --------------------------------------------------------------------- (Thousands) 1964 $3,715 4-5/8% 1989 1,050 9-1/4% 1991 300 9-3/8% ------ $5,065 ====== II-260 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 1995 annual meeting of stockholders. Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS ALABAMA (a)(1) Identification of directors of ALABAMA. Elmer B. Harris (1) President and Chief Executive Officer of ALABAMA Age 55 Served as Director since 3-1-89 Bill M. Guthrie Executive Vice President of ALABAMA Age 61 Served as Director since 12-16-88 Whit Armstrong (2) Age 47 Served as Director since 9-24-82 Philip E. Austin (2) Age 53 Served as Director since 1-25-91 Margaret A. Carpenter (2) Age 70 Served as Director since 2-26-93 A. W. Dahlberg (2) Age 54 Served as Director since 4-22-94 Peter V. Gregerson, Sr. (2) Age 66 Served as Director since 10-22-93 Crawford T. Johnson, III (2) Age 70 Served as Director since 4-18-69 Carl E. Jones, Jr. (2) Age 54 Served as Director since 4-22-88 Wallace D. Malone, Jr. (2) Age 58 Served as Director since 6-22-90 William V. Muse (2) Age 55 Served as Director since 2-26-93 John T. Porter (2) Age 63 Served as Director since 10-22-93 Gerald H. Powell (2) Age 68 Served as Director since 2-28-86 Robert D. Powers (2) Age 45 Served as Director since 1-24-92 John W. Rouse (2) Age 57 Served as Director since 4-22-88 William J. Rushton, III (2) Age 65 Served as Director since 9-18-70 James H. Sanford (2) Age 50 Served as Director since 8-1-83 John C. Webb, IV (2) Age 52 Served as Director since 4-22-77 John W. Woods (2) Age 63 Served as Director since 4-20-73 (1) Previously served as Director of ALABAMA from 1980 to 1985. (2) No position other than Director. Each of the above is currently a director of ALABAMA, serving a term running from the last annual meeting of ALABAMA's stockholder (April 22, 1994) for one year until the next annual meeting or until a successor is elected and qualified. III-1 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 a director or nominee, other than any arrangements or understandings with directors or officers of ALABAMA acting solely in their capacities as such. (b)(1) Identification of executive officers of ALABAMA. Elmer B. Harris (1) President, Chief Executive Officer and Director Age 55 Served as Executive Officer since 3-1-89 Banks H. Farris Executive Vice President Age 60 Served as Executive Officer since 12-3-91 William B. Hutchins, III Executive Vice President and Chief Financial Officer Age 51 Served as Executive Officer since 12-3-91 Charles D. McCrary Executive Vice President Age 43 Served as Executive Officer since 1-1-91 T. Harold Jones Senior Vice President Age 64 Served as Executive Officer since 12-1-91 (1) Previously served as executive officer of ALABAMA from 1979 to 1985. Each of the above is currently an executive officer of ALABAMA, serving a term running from the last annual meeting of the directors (April 22, 1994) for one year until the next annual meeting or until his 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 was or is to be selected as an officer, other than any arrangements or understandings with officers of ALABAMA acting solely in their capacities as such. (c)(1) Identification of certain significant employees. None. (d)(1) Family relationships. None. (e)(1) Business experience. Elmer B. Harris - Elected in 1989; Chief Executive Officer. He previously served as Senior Executive Vice President of GEORGIA from 1986 to 1989. Director of SOUTHERN and AmSouth Bancorporation. Bill M. Guthrie - Elected in 1988; also served since 1991 as Chief Production Officer of SOUTHERN system and Executive Vice President and Chief Production Officer of SCS; Vice President of SOUTHERN, GULF, MISSISSIPPI and SAVANNAH and Executive Vice President of GEORGIA. Responsible primarily for providing overall management of materials management, fuel services, operating and planning services, fossil, hydro and bulk power operations of the Southern electric system. Whit Armstrong - President, Chairman and Chief Executive Officer of The Citizens Bank, Enterprise, Alabama. Also, President and Chairman of the Board of Enterprise Capital Corporation, Inc. Philip E. Austin - Chancellor, The University of Alabama System. Previously President and Chancellor of Colorado State University. Margaret A. Carpenter - President, Compos-it, Inc. (typographics), Montgomery, Alabama. A. W. Dahlberg - Chairman, President and Chief Executive Officer of SOUTHERN effective March 1, 1995. He previously served as President of SOUTHERN from 1994 to 1995 and President and Chief Executive Officer of GEORGIA from 1988 through 1993. Director of SOUTHERN, GEORGIA, Trust Company Bank, Trust Company of Georgia, Protective Life Corporation and Equifax, Inc. Peter V. Gregerson, Sr. - Chairman Emeritus of Gregerson's Foods, Inc. (retail groceries), Gadsden, Alabama. Director of AmSouth Bank of Gadsden, Alabama. III-2 Crawford T. Johnson, III - Chairman of Coca-Cola Bottling Company United, Inc., Birmingham, Alabama. Director of Protective Life Corporation, AmSouth Bancorporation and Russell Corporation. Carl E. Jones, Jr. - Chairman and Chief Executive Officer of First Alabama Bank, Mobile, Alabama. Wallace D. Malone, Jr. - Chairman and Chief Executive Officer of SouthTrust Corporation, bank holding company, Birmingham, Alabama. William V. Muse - President and Chief Executive Officer of Auburn University. He previously served as President of the University of Akron from 1984 to 1992. John T. Porter - Pastor of Sixth Avenue Baptist Church, Birmingham, Alabama. Director of Citizen Federal Bank. Gerald H. Powell - President, Dixie Clay Company of Alabama, Inc. (refractory clay producer), Jacksonville, Alabama. Robert D. Powers - President, The Eufaula Agency, Inc. (real estate and insurance), Eufaula, Alabama. John W. Rouse - President and Chief Executive Officer of Southern Research Institute (non-profit research institute), Birmingham, Alabama. Director of Protective Life Corporation. William J. Rushton, III - Chairman Emeritus of the Board, Protective Life Corporation (insurance holding company), Birmingham, Alabama. Director of SOUTHERN and AmSouth Bancorporation. James H. Sanford - President, HOME Place Farms Inc. (diversified farmers and ginners), Prattville, Alabama. John C. Webb, IV - President, Webb Lumber Company, Inc. (wholesale lumber), Demopolis, Alabama. John W. Woods - Chairman and Chief Executive Officer, AmSouth Bancorporation (multi-bank holding company), Birmingham, Alabama. Director of Protective Life Corporation. Banks H. Farris - Elected in 1991; responsible primarily for providing the overall management of the Human Resources, Information Resources, Power Delivery and Marketing Departments and the six geographic divisions. He previously served as Senior Vice President from 1991 to 1994 and Vice President - Human Resources from 1989 to 1991. William B. Hutchins, III - Elected in 1991; Chief Financial Officer, responsible primarily for providing the overall management of accounting and financial planning activities. He previously served as Senior Vice President and Chief Financial Officer from 1991 to 1994 and Vice President and Treasurer from 1983 to 1991. Charles D. McCrary - Elected in 1991; responsible for the External Relations Department, Operating Services and Corporate Services. He previously served as Senior Vice President from 1991 to 1994 and Vice President of Administrative Services - Nuclear of SCS from 1988 to 1991. T. Harold Jones - Elected in 1991; responsible primarily for providing the overall management of the Fossil Generation, Hydro Generation, Power Generation Services and Fuels Departments. He previously served as Vice President - Fossil Generation from 1986 to 1991. (f)(1) Involvement in certain legal proceedings. None. III-3 GEORGIA (a)(2) Identification of directors of GEORGIA. H. Allen Franklin President and Chief Executive Officer. Age 50 Served as Director since 1-1-94. Warren Y. Jobe Executive Vice President, Treasurer and Chief Financial Officer. Age 54 Served as Director since 8-1-82 Bennett A. Brown (1) Age 65 Served as Director since 5-15-80 A. W. Dahlberg (1) Age 54 Served as Director since 6-1-88 William A. Fickling, Jr. (1) Age 62 Served as Director since 4-18-73 L. G. Hardman III (1) Age 55 Served as Director since 6-25-79 James R. Lientz, Jr. (1) Age 51 Served as Director since 7-1-93 William A. Parker, Jr. (1) Age 67 Served as Director since 5-19-65 G. Joseph Prendergast (1) Age 49 Served as Director since 1-20-93 Herman J. Russell (1) Age 64 Served as Director since 5-18-88 Gloria M. Shatto (1) Age 63 Served as Director since 2-20-80 William Jerry Vereen (1) Age 54 Served as Director since 5-18-88 Carl Ware (1) (2) Age 51 Served as Director since 2-15-95 Thomas R. Williams (1) Age 66 Served as Director since 3-17-82 (1) No position other than Director. (2) Previously served as Director of GEORGIA from 1980 to 1991. Each of the above is currently a director of GEORGIA, serving a term running from the last annual meeting of GEORGIA's stockholder (May 18, 1994) for one year until the next annual meeting or until a successor is elected and qualified, except for Mr. Ware whose election was effective on the date indicated. There are no arrangements or understandings between any of the individuals listed above and any other person pursuant to which he/she was or is to be selected as a director or nominee, other than any arrangements or understandings with directors or officers of GEORGIA acting solely in their capacities as such. (b)(2) Identification of executive officers of GEORGIA. H. Allen Franklin President, Chief Executive Officer and Director Age 50 Served as Executive Officer since 1-1-94 Warren Y. Jobe Executive Vice President, Treasurer, Chief Financial Officer and Director Age 54 Served as Executive Officer since 5-19-82 Dwight H. Evans Executive Vice President - External Affairs Age 46 Served as Executive Officer since 4-19-89 III-4 W. G. Hairston, III Executive Vice President - Nuclear Age 50 Served as Executive Officer since 6-1-93 Gene R. Hodges Executive Vice President - Customer Operations Age 56 Served as Executive Officer since 11-19-86 Wayne T. Dahlke Senior Vice President - Power Delivery Age 54 Served as Executive Officer since 4-19-89 James K. Davis Senior Vice President - Corporate Relations Age 54 Served as Executive Officer since 10-1-93 Robert H. Haubein Senior Vice President - Fossil/Hydro Power Age 55 Served as Executive Officer since 2-19-92 Gale E. Klappa Senior Vice President - Marketing Age 44 Served as Executive Officer since 2-19-92 Fred D. Williams Senior Vice President - Bulk Power Markets Age 50 Served as Executive Officer since 11-18-92 Each of the above is currently an executive officer of GEORGIA, serving a term running from the last annual meeting of the directors (May 18, 1994) for one year until the next annual meeting or until his 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 was or is to be selected as an officer, other than any arrangements or understandings with officers of GEORGIA acting solely in their capacities as such. (c)(2) Identification of certain significant employees. None. (d)(2) Family relationships. None. (e)(2) Business experience. H. Allen Franklin - President and Chief Executive Officer since January 1994. He previously served as President and Chief Executive Officer of SCS from 1988 through 1993. Director of SOUTHERN and SouthTrust Corporation. Warren Y. Jobe - Executive Vice President and Chief Financial Officer since 1982 and Treasurer since 1992. Responsible for financial and accounting operations and planning, internal auditing, procurement, corporate services, corporate secretary and treasury operations. Bennett A. Brown - Retired from serving as Chairman of the Board of NationsBank on December 31, 1992. Previously Chairman of the Board and Chief Executive Officer of C&S/Sovran Corporation. Director of Cousins Properties. A. W. Dahlberg - Chairman, President and Chief Executive Officer of SOUTHERN effective March 1, 1995. He previously served as President of SOUTHERN from 1994 to 1995 and President and Chief Executive Officer of GEORGIA from 1988 through 1993. Director of SOUTHERN, ALABAMA, Trust Company Bank, Trust Company of Georgia, Protective Life Corporation and Equifax, Inc. William A. Fickling, Jr. - Co-Chairman of the Board and Chief Executive Officer of Beech Street Corporation (provider of managed care services). L. G. Hardman III - Chairman of the Board of First National Bank of Commerce, Georgia and Chairman of the Board and Chief Executive Officer of First Commerce Bancorp, Inc. Chairman of the Board, President and Treasurer of Harmony Grove Mills, Inc. (real estate investments). Director of SOUTHERN. James R. Lientz, Jr. - President of NationsBank of Georgia since 1993. He previously served as President and Chief Executive Officer of former Citizens & Southern Bank of South Carolina (now NationsBank) from 1990 to 1993. III-5 William A. Parker, Jr. - Chairman of the Board, Seminole Investment Co., L.L.C. (private investments), Atlanta, Georgia. Director of SOUTHERN, Genuine Parts Company, Life Insurance Company of Georgia, Atlantic Realty Company, ING North America Insurance Company, Post Properties, Inc. and Haverty Furniture Companies, Inc. G. Joseph Prendergast - Chairman Wachovia Bank of Georgia, N.A. since April 1994. He previously served as President and Chief Executive Officer, Wachovia Corporation of Georgia and Wachovia Bank of Georgia, N.A. from 1993 to 1994 and from 1988 to 1993 as Executive Vice President of Wachovia Corporation and President of Wachovia Corporate Services, Inc. Herman J. Russell - Chairman of the Board and Chief Executive Officer, H. J. Russell & Company (construction), Atlanta, Georgia. Chairman of the Board, Citizens Trust Bank, and Citizens Bancshares Corporation Atlanta, Georgia. Director of Wachovia Corporation. Gloria M. Shatto - President, Berry College, Mount Berry, Georgia. Director of SOUTHERN, Becton Dickinson & Company, Kmart Corporation and Texas Instruments, Inc. William Jerry Vereen - President, Treasurer and Chief Executive Officer of Riverside Manufacturing Company (manufacture and sale of uniforms), Moultrie, Georgia. Director of Gerber Scientific, Inc., Textile Clothing Technology Group and Blue Cross/Blue Shield of Georgia. Carl Ware - President, Africa Group, Coca-Cola International; Senior Vice President, The Coca-Cola Co. Thomas R. Williams - President of The Wales Group, Inc. (investments), Atlanta, Georgia. Director of ConAgra, Inc., BellSouth Corporation, National Life Insurance Company of Vermont, AppleSouth, Inc., American Software, Inc. and The Fidelity Group of Funds. Dwight H. Evans - Executive Vice President - External Affairs since 1989. W. G. Hairston, III - Executive Vice President - Nuclear since 1993. Also, he has served as President and Chief Operating Officer of Southern Nuclear since May 1993 and Chief Executive Officer since December 1993. Executive Vice President of Southern Nuclear from 1992 to 1993 and Senior Vice President of Southern Nuclear from 1990 to 1992. Gene R. Hodges - Executive Vice President - Customer Operations since 1992. Senior Vice President - Region/Land Operations from 1990 to 1992. Wayne T. Dahlke - Senior Vice President - Power Delivery since 1992. Senior Vice President - Marketing from 1989 to 1992. James K. Davis - Senior Vice President - Corporate Relations since 1993. Vice President of Corporate Relations from 1988 to 1993. Robert H. Haubein - Senior Vice President - Fossil/ Hydro Power since June 1994. Senior Vice President - Administrative Services from 1992 to 1994 and Vice President - Northern Region from 1990 to 1992. Gale E. Klappa - Senior Vice President - Marketing since 1992. Vice President - Public Relations of SCS from 1981 to 1992. Fred D. Williams - Senior Vice President - Bulk Markets since 1992. Vice President - Bulk Power Markets from 1984 to 1992. (f)(2) Involvement in certain legal proceedings. None. III-6 GULF (a)(3) Identification of directors of GULF. Travis J. Bowden President and Chief Executive Officer Age 56 Served as Director since 2-1-94 Reed Bell, Sr., M.D. (1) Age 68 Served as Director since 1-17-86 Paul J. DeNicola (1) Age 46 Served as Director since 4-19-91 Fred C. Donovan (1) Age 54 Served as Director since 1-18-91 W. D. Hull, Jr. (1) Age 62 Served as Director since 10-14-83 C. W. Ruckel (1) Age 67 Served as Director since 4-20-62 J. K. Tannehill (1) Age 61 Served as Director since 7-19-85 (1) No position other than Director. Each of the above is currently a director of GULF, serving a term running from the last annual meeting of GULF's stockholder (June 28, 1994) 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 was or is to be selected as a director or nominee, other than any arrangements or understandings with directors or officers of GULF acting solely in their capacities as such. (b)(3) Identification of executive officers of GULF. Travis J. Bowden President, Chief Executive Officer and Director Age 56 Served as Executive Officer since 2-1-94 F. M. Fisher, Jr. Vice President - Employee and External Relations Age 46 Served as Executive Officer since 5-19-89 John E. Hodges, Jr. Vice President - Customer Operations Age 51 Served as Executive Officer since 5-19-89 G. Edison Holland, Jr. (1) Vice President - Power Generation/ Transmission and Corporate Counsel Age 42 Served as Executive Officer since 4-25-92 Earl B. Parsons, Jr. (2) Vice President - Power Generation and Transmission Age 56 Served as Executive Officer since 4-14-78 A. E. Scarbrough Vice President - Finance Age 58 Served as Executive Officer since 9-21-77 (1) Effective March 13, 1995. (2) Resigned effective March 11, 1995, to assume the position of Senior Vice President - Fossil and Hydro Generation at ALABAMA. Each of the above is currently an executive officer of GULF, serving a term running from the last annual meeting of the directors (July 22, 1994) for one year until the next annual meeting or until his successor is elected and qualified. III-7 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 GULF acting solely in their capacities as such. (c)(3) Identification of certain significant employees. None. (d)(3) Family relationships. None. (e)(3) Business experience. Travis J. Bowden - Elected President effective February 1994 and, effective May 1994, Chief Executive Officer. He previously served as Executive Vice President of ALABAMA from 1985 to 1994. Reed Bell, Sr., M.D. - Medical Doctor and since 1989, employee of the State of Florida. He serves as Medical Director of Children's Medical Services, District 1. He previously served as Medical Director of the Escambia County Public Health Unit until 1992. Paul J. DeNicola - President and Chief Executive Officer of SCS effective January 1994. He previously served as Executive Vice President of SCS from 1991 through 1993 and President and Chief Executive Officer of MISSISSIPPI from 1989 to 1991. Director of SOUTHERN, MISSISSIPPI and SAVANNAH. Fred C. Donovan - President of Baskerville - Donovan, Inc., Pensacola, Florida, an architectural and engineering firm. Director of Baptist Health Care, Inc. W. D. Hull, Jr. - Vice Chairman of the Sun Bank/West Florida, Panama City, Florida. He previously served as President and Chief Executive Officer and Director of the Sun Commercial Bank, Panama City, Florida from 1987 to 1992. C. W. Ruckel - Chairman of the Board of The Vanguard Bank and Trust Company, Valparaiso, Florida. President and owner of Ruckel Properties, Inc., Valparaiso, Florida. J. K. Tannehill - President and Chief Executive Officer of Tannehill International Industries, Lynn Haven, Florida. He previously served as President and Chief Executive Officer of Stock Equipment Company, Chagrin Falls, Ohio, until 1991. Director of Florida First Federal Savings Bank, Panama City, Florida. F. M. Fisher, Jr. - Elected Vice President - Employee and External Relations in 1989. John E. Hodges, Jr. - Elected Vice President - Customer Operations in 1989. Director of Barnett Bank of West Florida, Pensacola, Florida. G. Edison Holland, Jr. - Elected Vice President and Corporate Counsel in 1992 and Vice President - Power Generation/Transmission and Corporate Counsel in March 1995; responsible for generation and transmission of electric energy, all legal matters associated with GULF and serves as compliance officer. Also serves, since 1982, as a partner in the law firm, Beggs & Lane. Earl B. Parsons, Jr. - Elected Vice President - Power Generation and Transmission in 1989; responsible for generation and transmission of electrical energy. A. E. Scarbrough - Elected Vice President - Finance in 1980; responsible for all accounting and financial services of GULF. (f)(3) Involvement in certain legal proceedings. None. III-8 MISSISSIPPI (a)(4) Identification of directors of MISSISSIPPI. David M. Ratcliffe President and Chief Executive Officer Age 46 Served as Director since 4-24-91 Paul J. DeNicola (1) Age 46 Served as Director since 5-1-89 Edwin E. Downer (1) Age 63 Served as Director since 4-24-84 Robert S. Gaddis (1) Age 63 Served as Director since 1-21-86 Walter H. Hurt, III (1) Age 59 Served as Director since 4-6-82 Aubrey K. Lucas (1) Age 60 Served as Director since 4-24-84 Gerald J. St. Pe (1) Age 55 Served as Director since 1-21-86 Dr. Philip J. Terrell (1) Age 41 Served as Director since 2-22-95 N. Eugene Warr (1) Age 59 Served as Director since 1-21-86 (1) No position other than Director. Each of the above is currently a director of MISSISSIPPI, serving a term running from the last annual meeting of MISSISSIPPI's stockholder (April 5, 1994) for one year until the next annual meeting or until a successor is elected and qualified, except for Dr. Terrell whose election was effective on the date indicated. 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 MISSISSIPPI acting solely in their capacities as such. (b)(4) Identification of executive officers of MISSISSIPPI. David M. Ratcliffe (1) President, Chief Executive Officer and Director Age 46 Served as Executive Officer since 4-24-91 H. E. Blakeslee Vice President - Customer Services and Marketing Age 54 Served as Executive Officer since 1-25-84 F. D. Kuester Vice President - Power Generation and Delivery Age 44 Served as Executive Officer since 3-1-94 Don E. Mason Vice President - External Affairs and Corporate Services Age 53 Served as Executive Officer since 7-27-83 Michael W. Southern Vice President, Secretary, Treasurer and Chief Financial Officer Age 42 Served as Executive Officer since 1-1-95 (1) Elected Senior Vice President of SOUTHERN in March 1995, however, Mr. Ratcliffe will maintain his present position until his successor is elected. Each of the above is currently an executive officer of MISSISSIPPI, serving a term running from the last annual meeting of the directors (April 27, 1994) for one year until the next annual meeting or until a successor is elected and qualified, except for Mr. Southern whose election was effective on the date indicated. 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 MISSISSIPPI acting solely in their capacities as such. III-9 (c)(4) Identification of certain significant employees. None. (d)(4) Family relationships. None. (e)(4) Business experience. David M. Ratcliffe - President and Chief Executive Officer since 1991. He previously served as Executive Vice President of SCS from 1989 to 1991 and Vice President of SCS from 1985 to 1989. Paul J. DeNicola - President and Chief Executive Officer of SCS effective 1994. Executive Vice President of SCS from 1991 through 1993. He previously served as President and Chief Executive Officer of MISSISSIPPI from 1989 to 1991. Director of SOUTHERN, SAVANNAH and GULF. Edwin E. Downer - Business consultant specializing in economic analysis, management controls and procedural studies since 1990. President and Chief Executive Officer, Unifirst Bank for Savings, F.A., Midland Division, Meridian, Mississippi from 1985 to 1990. Robert S. Gaddis - President of the Trustmark National Bank - Laurel, Mississippi. Walter H. Hurt, III - President and Director of NPC Inc. (Investments). Vicar, All Saints Church, Inverness, Mississippi, and St. Thomas Church, Belzoni, Mississippi. Retired newspaper editor and publisher. Aubrey K. Lucas - President of the University of Southern Mississippi, Hattiesburg, Mississippi. Gerald J. St. Pe - President of Ingalls Shipbuilding and Senior Vice President of Litton Industries, Inc. since 1985. Director of Merchants and Marine Bank, Pascagoula, Mississippi. Dr. Philip J. Terrell - Superintendent of Pass Christian Public School District and adjunct professor at William Carey College. N. Eugene Warr - Retailer (Biloxi and Gulfport, Mississippi). Vice chairman of the Board of SouthTrust Bank of Mississippi, formerly The Jefferson Bank, Biloxi, Mississippi. H. E. Blakeslee - Elected Vice President in 1984. Primarily responsible for rate design, economic analysis and revenue forecasting, economic development, marketing and district operations. F. D. Kuester - Elected Vice President in 1994. Primarily responsible for generating plants, environmental quality, fuel services, power generation technical services, distribution, transmission, system planning, bulk power contracts, system operations and control, system protection and real estate. He previously served as Manager of Business and New Project Design/Development of SCS from 1993 to 1994 and Vice President of SCS from 1990 to 1993. Don E. Mason - Elected Vice President in 1983. Primarily responsible for the external affairs functions, including governmental and regulatory affairs, corporate communications, security, materials and general services, as well as the human resources function. Michael W. Southern - Elected Vice President, Secretary, Treasurer and Chief Financial Officer in 1995, responsible primarily for accounting, treasury, finance, information resources and risk management. He previously served as Director of Corporate Finance of SCS from 1994 to 1995 and Director of Financial Planning of SCS from 1990 to 1994. (f)(4) Involvement in certain legal proceedings. None. III-10 SAVANNAH (a)(5) Identification of directors of SAVANNAH. Arthur M. Gignilliat, Jr. President and Chief Executive Officer Age 62 Served as Director since 9-1-82 Helen Quattlebaum Artley (1) Age 67 Served as Director since 5-17-77 Paul J. DeNicola (1) Age 46 Served as Director since 3-14-91 Brian R. Foster (1) Age 45 Served as Director since 5-16-89 Walter D. Gnann (1) Age 59 Served as Director since 5-17-83 Robert B. Miller, III (1) Age 49 Served as Director since 5-17-83 James M. Piette (1) Age 70 Served as Director since 6-12-73 Arnold M. Tenenbaum (1) Age 58 Served as Director since 5-17-77 Frederick F. Williams, Jr. (1) Age 67 Served as Director since 7-2-75 (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, 1994) 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/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. (b)(5) Identification of executive officers of SAVANNAH. Arthur M. Gignilliat, Jr. President, Chief Executive Officer and Director Age 62 Served as Executive Officer since 2-15-72 W. Miles Greer Vice President - Marketing and Customer Services Age 51 Served as Executive Officer since 11-20-85 Larry M. Porter Vice President - Operations Age 50 Served as Executive Officer since 7-1-91 Kirby R. Willis Vice President, Treasurer and Chief Financial Officer Age 43 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 last annual meeting of the directors (May 17, 1994) for one year until the next annual meeting or until his 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 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. (c)(5) Identification of certain significant employees. None. (d)(5) Family relationships. None. (e)(5) Business experience. Arthur M. Gignilliat, Jr. - Elected President and Chief Executive Officer in 1984. Director of Savannah Foods and Industries, Inc. III-11 Helen Quattlebaum Artley - Homemaker and Civic Worker. Paul J. DeNicola - President and Chief Executive Officer of SCS effective January 1994. Executive Vice President of SCS from 1991 through 1993. He previously served as President and Chief Executive Officer of MISSISSIPPI from 1989 to 1991. Director of SOUTHERN, GULF and MISSISSIPPI. Brian R. Foster - President and Chief Executive Officer of NationsBank of Georgia, N.A., in Savannah since 1988. Walter D. Gnann - President of Walt's TV, Appliance and Furniture Co., Inc., Springfield, Georgia. Past Chairman of the Development Authority of Effingham County, Georgia. Robert B. Miller, III - President of American Builders of Savannah. James M. Piette - Retired Vice Chairman, Board of Directors, Union Camp Corporation. Arnold M. Tenenbaum - President and Director of Chatham Steel Corporation. Director of First Union National Bank of Georgia and Savannah Foods and Industries, Inc. Frederick F. Williams, Jr. - Retired Partner and Consultant, Hilb, Rogal and Hamilton Employee Benefits, Incorporated (Insurance Brokers), formerly Jones, Hill & Mercer. W. Miles Greer - Vice President - Marketing and Customer Services effective 1994. Formerly served as Vice President - Economic Development and Corporate Services from 1989 through 1993. Larry M. Porter - Vice President - Operations since 1991. Responsible for managing the areas of fuel procurement, power production, transmission and distribution, engineering and system operation. Previously he served as Assistant Plant Manager of GEORGIA's Plant Scherer from 1984 to 1991. Kirby R. Willis - Vice President, Treasurer and Chief Financial Officer since 1994. Responsible for all financial activities, Information Resources, Human Resources, Corporate Services, and Environmental Affairs and Safety. He previously served as Treasurer, Controller and Assistant Secretary from 1991 to 1993 and Treasurer and Secretary from 1987 to 1991. (f)(5) Involvement in certain legal proceedings. None. GEORGIA's Mr. Thomas R. Williams failed to file on a timely basis a single report disclosing one transaction on Forms 4 and 5 as required by Section 16 of the Securities Exchange Act of 1934. Mr. William G. Hairston, III also failed to file on a timely basis a Form 3 as required by Section 16 of the Securities Act of 1934. III-12 ITEM 11. EXECUTIVE COMPENSATION (a) Summary Compensation Tables. The following tables set forth information concerning any Chief Executive Officer and the four most highly compensated executive officers whose total annual salary and bonus exceeded $100,000 during 1994 for each of the operating affiliates (ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH).
Key terms used in this Item will have the following meanings:- AME.........................................Above-market earnings on deferred compensation ESP.........................................Employee Savings Plan ESOP........................................Employee Stock Ownership Plan SBP.........................................Supplemental Benefit Plan ERISA.......................................Employee Retirement Income Security Act
ALABAMA SUMMARY COMPENSATION TABLE ANNUAL COMPENSATION LONG-TERM COMPENSATION ------------------- ---------------------- Number of Securities Long- Name Underlying Term and Other Annual Stock Incentive All Other Principal Compensation Options Payouts Compensation Position Year Salary($) Bonus($) ($)1 (Shares) ($)2 ($)3 ----------------------------------------------------------------------------------------------------------------------- President, Chief Executive 1994 436,280 96,711 13,882 31,441 236,642 24,467 Officer, 1993 418,818 117,630 23,469 26,892 198,131 39,388 Director 1992 397,499 96,615 9,161 30,036 147,278 24,435 Banks H. Farris 1994 203,508 38,828 52,567 8,331 41,134 9,864 Executive Vice 1993 176,041 17,642 24,222 6,302 28,394 27,418 President 1992 165,746 27,274 6,211 6,906 19,021 8,916 Charles D. McCrary 1994 189,718 35,459 4,254 7,767 38,195 10,260 Executive Vice 1993 163,832 16,103 16,612 5,874 24,928 26,713 President 1992 152,877 24,893 2,087 5,528 15,438 8,023
III-13
ALABAMA SUMMARY COMPENSATION TABLE (Continued) 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 -------------------------------------------------------------------------------------------------------------------------- William B. Hutchins, III Executive Vice President, 1994 184,995 26,993 1,289 7,551 35,138 9,650 Chief Financial 1993 164,972 16,103 14,791 5,896 26,429 26,817 Officer 1992 156,520 24,893 973 5,652 17,347 8,307 T. Harold Jones 1994 177,367 22,994 1,573 7,101 35,052 8,986 Senior Vice 1993 170,266 11,400 4,032 6,074 27,350 14,093 President 1992 163,164 15,000 32,611 6,784 19,181 8,631 1 Tax reimbursement by ALABAMA and certain personal benefits, including membership fee of $44,014 for Mr. Farris in 1994 and membership fee of $28,402 for Mr. Jones in 1992. 2 Payouts made in 1993, 1994 and 1995 for the four-year performance periods ending December 31, 1992, 1993 and 1994, respectively. 3 ALABAMA contributions to the ESP, ESOP, and non-pension related accruals under the SBP (ERISA excess plan under which accruals are made to offset Internal Revenue Code imposed limitations under the ESP and ESOP), for the following:- Name ESP ESOP SBP ---- --- ---- --- Elmer B. Harris $6,750 $1,789 $15,928 Banks H. Farris 6,750 1,686 1,428 Charles D. McCrary 6,750 1,549 1,961 William B. Hutchins, III 6,750 1,572 1,328 T. Harold Jones 6,750 1,405 831
III-14
GEORGIA SUMMARY COMPENSATION TABLE ANNUAL COMPENSATION LONG-TERM COMPENSATION ------------------- ---------------------- Number of Securities Long- Name Underlying Term and Other Annual Stock Incentive All Other Principal Compensation Options Payouts Compensation Position Year Salary($) Bonus($) ($)1 (Shares) ($)2 ($)3 ------------------------------------------------------------------------------------------------------------------------ H. Allen Franklin President, 1994 415,954 87,763 30,078 31,386 203,201 100,201 Chief Executive 1993 365,000 73,584 16,438 23,408 140,650 37,298 Officer, Director 1992 328,198 84,096 2,704 19,366 90,200 17,669 William G. Hairston, III 1994 287,831 44,521 3,225 15,725 81,662 14,593 Executive 1993 234,454 53,202 15,925 11,782 54,126 30,475 Vice President 1992 198,392 27,990 34,425 8,414 37,320 10,697 Dwight H. Evans 1994 215,887 35,459 2,318 8,610 56,635 11,812 Executive 1993 210,544 34,763 14,642 7,498 48,282 29,519 Vice President 1992 206,980 40,598 3,505 8,414 36,284 10,925 Warren Y. Jobe Executive Vice President, Treasurer, 1994 215,809 27,579 2,744 8,610 56,635 11,736 Chief Financial 1993 210,200 27,038 15,645 7,480 48,282 29,258 Officer, Director 1992 209,249 30,521 2,566 8,434 37,320 11,535 Gene R. Hodges 1994 204,190 27,579 4,601 8,196 52,188 11,093 Executive 1993 206,727 4 28,228 14,903 6,878 35,285 30,629 Vice President 1992 177,966 27,666 2,471 7,212 29,367 9,600 1 Tax reimbursement by GEORGIA on certain personal benefits. 2 Payouts made in 1993, 1994 and 1995 for the four-year performance periods ending December 31, 1992, 1993 and 1994, respectively. 3 GEORGIA contributions to the ESP, ESOP, and non-pension related accruals under the SBP (ERISA excess plan under which accruals are made to offset Internal Revenue Code imposed limitations under the ESP and ESOP) for the following:- Name ESP ESOP SBP ---- --- ---- --- H. Allen Franklin $6,750 $1,789 $15,043 William G. Hairston, III 6,750 1,789 6,054 Dwight H. Evans 6,750 1,789 3,273 Warren Y. Jobe 6,750 1,789 3,197 Gene R. Hodges 6,750 1,789 2,554 Also included for Mr. Franklin is a relocation allowance of $76,619. 4 Mr. Hodges' 1993 salary included a retroactive pay adjustment of $15,717 to correct underpayment of his 1992 salary.
III-15
GULF SUMMARY COMPENSATION TABLE ANNUAL COMPENSATION LONG-TERM COMPENSATION ------------------- ---------------------- Number of Securities Long- Name Underlying Term and Other Annual Stock Incentive All Other Principal Compensation Options Payouts Compensation Position Year Salary($) Bonus($) ($)1 (Shares) ($)2 ($)3 ------------------------------------------------------------------------------------------------------------------------ Travis J. Bowden President, 1994 308,682 42,849 39,642 15,134 86,730 58,109 Chief Executive 1993 257,089 23,161 16,118 12,238 61,524 31,271 Officer, Director 1992 244,139 35,804 1,636 13,604 44,345 13,550 Douglas L. McCrary4 President, 1994 152,353 14,300 1,793 - 102,364 8,707 Chief Executive 1993 310,701 40,856 3,639 14,812 104,719 19,854 Officer, Director 1992 299,960 42,307 1,719 16,702 80,942 16,386 G. Edison Holland, Jr. 1994 172,092 21,352 1,512 6,893 18,888 9,307 Vice President, 1993 162,651 20,934 9,504 5,840 - 21,015 Corporate Counsel 1992 101,725 17,980 724 5,590 n/e5 - Earl B. Parsons, Jr. 1994 164,787 21,012 1,513 - 25,889 9,113 Vice President 1993 160,089 19,129 9,572 - 22,072 25,430 1992 155,495 22,050 420 - 17,875 8,460 Arlan E. Scarbrough 1994 163,548 19,511 1,185 - 25,889 8,612 Vice President 1993 155,565 19,129 11,582 - 22,072 24,729 1992 147,418 23,173 185 - 17,060 7,891 John E. Hodges, Jr. 1994 156,831 21,352 1,999 5,455 37,776 8,733 Vice President 1993 147,144 20,934 9,726 4,578 32,206 24,327 1992 139,296 25,360 448 5,064 23,218 7,425 1 Tax reimbursement by GULF on certain personal benefits. 2 Payouts made in 1993, 1994 and 1995 for the four-year performance periods ending December 31, 1992, 1993 and 1994, respectively. 3 GULF contributions to the ESP, ESOP, and non-pension related accruals under the SBP (ERISA excess plan under which accruals are made to offset Internal Revenue Code imposed limitations under the ESP and ESOP) for the following:- Name ESP ESOP SBP ---- --- ---- --- Travis J. Bowden $6,750 $1,789 $6,521 Douglas L. McCrary 5,422 1,709 1,576 G. Edison Holland, Jr. 6,750 1,572 985 Earl B. Parsons, Jr. 6,750 1,719 644 Arlan E. Scarbrough 6,750 1,711 151 John E. Hodges, Jr. 6,750 1,688 295 Also included for Mr. Bowden is a relocation allowance of $43,049. 4 Mr. McCrary retired effective May 1, 1994. 5 Employee and executive officer of GULF since April 25, 1992. Not eligible to participate in the Long-Term Incentive Plan until January 1, 1993.
III-16
MISSISSIPPI SUMMARY COMPENSATION TABLE ANNUAL COMPENSATION LONG-TERM COMPENSATION ------------------- ---------------------- Number of Securities Long- Name Underlying Term and Other Annual Stock Incentive All Other Principal Compensation Options Payouts Compensation Position Year Salary($) Bonus($) ($)1 (Shares) ($)2 ($)3 ------------------------------------------------------------------------------------------------------------------------ David M. Ratcliffe President, Chief 1994 240,291 61,989 2,581 13,137 100,336 13,349 Executive 1993 226,373 45,917 8,722 8,114 75,378 17,887 Officer, Director 1992 213,095 33,395 6,380 8,652 48,722 10,860 H. E. Blakeslee 1994 156,204 23,808 1,055 5,509 37,776 8,494 Vice President 1993 154,332 15,271 3,528 4,768 32,206 15,650 1992 151,176 15,558 507 5,284 23,728 7,756 Don E. Mason 1994 150,162 22,069 686 - 25,889 8,080 Vice President 1993 148,305 11,016 4,321 - 22,072 15,409 1992 146,153 9,951 1,352 - 17,060 7,505 Thomas A. Fanning4 Vice President, Chief Financial 1994 130,471 27,189 352 - 20,432 7,075 Officer, Secretary, 1993 122,724 28,244 3,016 - 15,233 14,655 Treasurer 1992 89,089 15,574 16,539 - 10,085 18,364 Frederick D. Kuester5 1994 127,590 16,481 1,781 - 16,588 19,121 Vice President 1993 - - - - - - 1992 - - - - - - 1 Tax reimbursement by MISSISSIPPI on certain personal benefits. 2 Payouts made in 1993, 1994 and 1995 for the four-year performance periods ending December 31, 1992, 1993 and 1994, respectively. 3 MISSISSIPPI contributions to the ESP, ESOP, and non-pension related accruals under the SBP (ERISA excess plan under which accruals are made to offset Internal Revenue Code imposed limitations under the ESP and ESOP) for the following:- Name ESP ESOP SBP ---- --- ---- --- David M. Ratcliffe $6,750 $1,789 $4,810 H. E. Blakeslee 6,750 1,744 - Don E. Mason 6,750 1,330 - Thomas A. Fanning 5,949 1,126 - Frederick D. Kuester 5,804 1,051 - Also included for Mr. Kuester is a relocation allowance of $12,266. 4 Effective December 31, 1994, Mr. Fanning resigned to become a vice president of SCS. 5 Mr. Kuester named an executive officer effective March 28, 1994.
III-17
SAVANNAH SUMMARY COMPENSATION TABLE ANNUAL COMPENSATION LONG-TERM COMPENSATION ------------------- ---------------------- Number of Securities Long- Name Underlying Term and Other Annual Stock Incentive All Other Principal Compensation Options Payouts Compensation Position Year Salary($) Bonus($) ($)1 (Shares) ($)2 ($)3 ------------------------------------------------------------------------------------------------------------------------ Arthur M. Gignilliat, Jr. President, 1994 206,964 37,384 194 8,253 76,164 18,617 Chief Executive 1993 202,259 26,470 12,231 7,198 64,932 31,512 Officer, Director 1992 201,338 27,409 - 8,116 50,269 14,466 Larry M. Porter 1994 130,619 15,249 198 - 15,070 7,561 Vice President 1993 126,133 10,070 7,251 - 7,810 21,570 1992 122,274 11,621 4,818 - n/e4 6,142 W. Miles Greer 1994 122,153 14,050 198 - 14,527 7,642 Vice President 1993 117,766 10,337 7,458 - 12,202 21,881 1992 115,114 10,776 34 - 9,243 6,599 Kirby R. Willis5 Vice President, 1994 111,653 14,207 46 - 8,257 6,840 Chief Financial 1993 - - - - - - Officer, Treasurer 1992 - - - - - - 1 Tax reimbursement by SAVANNAH on certain personal benefits. 2 Payouts made in 1993, 1994 and 1995 for the four-year performance periods ending December 31, 1992, 1993 and 1994, respectively. 3 SAVANNAH contributions to the ESP, under Section 401(k) of the Internal Revenue Code, ESOP, and AME for the following:- Name ESP ESOP AME ---- --- ---- --- Arthur M. Gignilliat $6,750 $1,590 $10,277 Larry M. Porter 5,230 946 1,385 W. Miles Greer 5,144 1,003 1,495 Kirby R. Willis 4,590 793 1,457 4 Not eligible to participate in the Long-term Incentive Plan until January 1, 1992. 5 Mr. Willis was named an executive officer effective in 1994.
III-18 STOCK OPTION GRANTS IN 1994 (b) Stock Option Grants. The following table sets forth all stock option grants to the named executive officers of each operating subsidiary during the year ending December 31, 1994.
Individual Grants Grant Date Value # of % of Total Securities Options Exercise Underlying Granted to or Options Employees in Base Price Expiration Grant Date Name Granted1 Fiscal Year2 ($/Sh)1 Date1 Present Value($)3 ------------------------------------------------------------------------------------------------------------ ALABAMA Elmer B. Harris 31,441 7.0% $18.8750 07/18/2004 80,175 Banks H. Farris 8,331 1.9% $18.8750 06/01/2003 21,244 Charles D. McCrary 7,767 1.7% $18.8750 07/18/2004 19,806 William B. Hutchins, III 7,551 1.7% $18.8750 07/18/2004 19,255 T. Harold Jones 7,101 1.6% $18.8750 04/01/1998 7,456 GEORGIA H. Allen Franklin 31,386 7.0% $18.8750 07/18/2004 80,034 William G. Hairston, III 15,725 3.5% $18.8750 07/18/2004 40,099 Dwight H. Evans 8,610 1.9% $18.8750 07/18/2004 21,956 Warren Y. Jobe 8,610 1.9% $18.8750 07/18/2004 20,900 Gene R. Hodges 8,196 1.8% $18.8750 07/18/2004 21,956 GULF Travis J. Bowden 15,134 3.4% $18.8750 07/18/2004 38,592 Douglas L. McCrary - - - - - G. Edison Holland, Jr. 6,893 1.5% $18.8750 07/18/2004 17,577 Earl B. Parsons, Jr. - - - - - A. E. Scarbrough - - - - - John E. Hodges, Jr. 5,455 1.2% $18.8750 07/18/2004 13,910 See next page for footnotes.
III-19
STOCK OPTION GRANTS IN 1994 Individual Grants Grant Date Value # of % of Total Securities Options Exercise Underlying Granted to or Options Employees in Base Price Expiration Grant Date Name Granted1 Fiscal Year2 ($/Sh)1 Date1 Present Value($)3 ----------------------------------------------------------------------------------------------------------- MISSISSIPPI David M. Ratcliffe 13,137 2.9% $18.8750 07/18/2004 33,499 H. E. Blakeslee 5,509 1.2% $18.8750 07/18/2004 14,048 Don E. Mason - - - - - Thomas A. Fanning - - - - - Frederick D. Kuester - - - - - SAVANNAH Arthur M. Gignilliat, Jr. 8,253 1.8% $18.8750 09/03/2000 17,084 Larry M. Porter - - - - - W. Miles Greer - - - - - Kirby R.Willis - - - - - ------------------------- 1 Grants were made on July 18, 1994, and vest 25% per year on the anniversary date of the grant. Grants fully vest upon termination incident to death, disability, or retirement. The exercie price is the average of the high and low fair market value of SOUTHERN's common stock on the date granted. In accordance with the terms of the Executive Stock Plan, Mr. Farris' unexercised options expire on June 1, 2003, three years after his normal retirement date; Mr. Jones' unexercised options expire on April 1, 1998, three years after his normal retirement date; and Mr. Gignilliat's unexercised options expire on September 3, 2000, three years after his normal retirement date. Mr. McCrary's unexercised options at December 31, 1994 expire on May 1, 1997 three years after his May 1, 1994 retirement date. 2 A total of 446,443 stock options were granted in 1994 to key executives participating in SOUTHERN's Executive Stock Plan. 3 Based on the Black-Scholes option valuation model. The actual value, if any, an executive officer may realize ultimately depends on the market value of SOUTHERN's common stock at a future date. This valuation is provided pursuant to SEC disclosure rules and there is no assurance that the value realized will be at or near the value estimated by the Black-Scholes model. Assumptions used to calculate this value: price volatility - 16.79%; risk-free rate of return - 7.3%; dividend yield - 6.25%; and time to exercise - 10 years.
III-20
AGGREGATED STOCK OPTION EXERCISES IN 1994 AND YEAR-END OPTION VALUES (c) Aggregated Stock Option Exercises. The following table sets forth information concerning options exercised during the year ending December 31, 1994, by the named executive officers and the value of unexercised options held by them as of December 31, 1994. Number of Securities Value of Underlying Unexercised Unexercised In-the-Money Options at Options at Fiscal Fiscal Year-End (#) Year-End($)1 Shares Acquired Value Exercisable/ Exercisable/ Name on Exercise (#) Realized($)2 Unexercisable Unexercisable -------------------------------------------------------------------------------------------------------------- ALABAMA Elmer B. Harris - - 58,867/75,800 276,376/120,463 Banks H. Farris - - 5,028/16,511 6,582/15,954 Charles D. McCrary - - 4,232/14,937 5,269/14,007 William B. Hutchins, III - - 4,300/14,799 5,387/13,882 T. Harold Jones - - 4,910/15,049 6,466/14,454 GEORGIA H. Allen Franklin - - 40,383/63,905 186,066/86,272 William G. Hairston, III 2,588 19,087 9,658/31,275 23,447/41,137 Dwight H. Evans - - 8,474/20,896 34,426/32,819 Warren Y. Jobe - - 9,416/21,062 41,270/33,885 Gene R. Hodges - - 7,627/19,143 31,287/29,527 GULF Travis J. Bowden - - 24,019/34,057 108,558/48,103 Douglas. L. McCrary 48,152 241,274 14,812/0 0/0 G. Edison Holland, Jr. - - 4,255/14,068 5,328/13,082 Earl B. Parsons, Jr. - - - - Arlan E. Scarbrough - - - - John E. Hodges, Jr. - - 15,714/12,615 85,878/18,314 See next page for footnotes.
III-21
AGGREGATED STOCK OPTION EXERCISES IN 1994 AND YEAR-END OPTION VALUES Number of Securities Value of Underlying Unexercised Unexercised In-the-Money Options at Options at Fiscal Fiscal Year-End (#) Year-End($)1 Shares Acquired Value Exercisable/ Exercisable/ Name on Exercise (#) Realized($)2 Unexercisable Unexercisable ------------------------------------------------------------------------------------------------------------- MISSISSIPPI David M. Ratcliffe - - 20,046/26,119 95,471/38,847 H. E. Blakeslee - - 6,812/13,371 26,162/21,355 Don E. Mason - - - - Thomas A. Fanning - - - - Frederick D. Kuester - - - - SAVANNAH Arthur M. Gignilliat, Jr. - - 26,133/20,236 140,184/32,571 Larry M. Porter - - - - W. Miles Greer - - - - Kirby R. Willis - - - - 1 This represents the excess of the fair market value of SOUTHERN's common stock of $20.00 per share, as of December 31, 1994, above the exercise price of the options. One column reports the "value" of options that are vested and therefore could be exercised; the other "value" of options that are not vested and therefore could not be exercised as of December 31, 1994. 2 The "Value Realized" is ordinary income, before taxes, and represents the amount equal to the excess of the fair market value of the shares at the time of exercise over the exercise price.
III-22
LONG-TERM INCENTIVE PLANS - AWARDS IN 1994 (d) Long-Term Incentive Plans. The following table sets forth the long-term incentive plan awards made to the named executive officers for the performance period January 1, 1994 through December 31, 1997. Estimated Future Payouts under Non-Stock Price-Based Plans ------------------------------ Number Performance or of Other Period Units Until Maturation Threshold Target Maximum Name (#)1 or Payout ($)2 ($)2 ($)2 ---------------------------------------------------------------------------------------------------------------- ALABAMA Elmer B. Harris 269,311 4 years 134,656 269,311 538,622 Banks H. Farris 95,170 4 years 47,585 95,170 190,340 Charles D. McCrary 77,251 4 years 38,626 77,251 154,502 William B. Hutchins, III 70,570 4 years 35,285 70,570 141,140 T. Harold Jones 56,360 4 years 28,180 56,360 112,720 GEORGIA H. Allen Franklin 305,573 4 years 152,787 305,573 611,146 William G. Hairston, III 157,500 4 years 78,750 157,500 315,000 Dwight H. Evans 77,251 4 years 38,626 77,251 154,502 Warren Y. Jobe 77,251 4 years 38,626 77,251 154,502 Gene R. Hodges 77,251 4 years 38,626 77,251 154,502 GULF Travis J. Bowden 129,576 4 years 64,788 129,576 259,152 Douglas L. McCrary 149,598 4 years 74,799 149,598 299,196 G. Edison Holland, Jr. 56,360 4 years 28,180 56,360 112,720 Earl B. Parsons, Jr. 51,500 4 years 25,750 51,500 103,000 Arlan E. Scarbrough 51,500 4 years 25,750 51,500 103,000 John E. Hodges, Jr. 56,360 4 years 28,180 56,360 112,720 See next page for footnotes.
III-23
LONG-TERM INCENTIVE PLANS - AWARDS IN 1994 Estimated Future Payouts under Non-Stock Price-Based Plans ------------------------------ Number Performance or of Other Period Units Until Maturation Threshold Target Maximum Name (#)1 or Payout ($)2 ($)2 ($)2 ------------------------------------------------------------------------------------------------------------------- MISSISSIPPI David M. Ratcliffe 127,038 4 years 63,519 127,038 254,076 H. E. Blakeslee 56,360 4 years 28,180 56,360 112,720 Don E. Mason 51,500 4 years 25,750 51,500 103,000 Thomas A. Fanning 40,298 4 years 20,149 40,298 80,596 Frederick D. Kuester 40,298 4 years 20,149 40,298 80,596 SAVANNAH Arthur M. Gignilliat, Jr. 92,760 4 years 46,380 92,760 185,520 Larry M. Porter 40,298 4 years 20,149 40,298 80,596 W. Miles Greer 37,156 4 years 18,578 37,156 74,312 Kirby R. Willis 37,156 4 years 18,578 37,156 74,312 1 A performance unit is a method of assigning a dollar value to a performance award opportunity. The actual number of units granted to a participant will be based on an award percentage of an individual's base salary range control mid-point at the beginning of the performance period. 2 The threshold, target and maximum value of a unit is $0.50, $1.00, and $2.00, respectively, and can vary based on SOUTHERN's return on common equity relative to a selected group of electric and gas utilities in the Southeastern United States. If certain minimum performance relative to the selected group is not achieved, there will be no payout; nor is there a payout if the current earnings of SOUTHERN are not sufficient to fund the dividend rate paid in the last calendar year. All awards are payable in cash at the end of the performance period.
III-24 DEFINED BENEFIT OR ACTUARIAL PLAN DISCLOSURE (e)(1) Pension Plan Table. The following table sets forth the estimated combined annual pension benefits under the pension and supplemental defined benefit plans in effect during 1994 for ALABAMA, GEORGIA, GULF and MISSISSIPPI. Employee compensation covered by the pension and supplemental benefit plans for pension purposes is limited to the average of the highest three of the final 10 years' base salary and wages (reported under column titled "Salary" in the Summary Compensation Tables on pages III-13 through III-18). 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 $3,000 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 ------------ ------------------------------------------------------------------ $ 50,000 $ 12,750 $ 17,000 $ 21,250 $ 25,500 $ 29,750 $ 34,000 $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 $950,000 242,250 323,000 403,750 484,500 565,250 646,000
As of December 31, 1994, the applicable compensation levels and years of accredited service are presented in the following tables:
ALABAMA Compensation Name Level Years of Service ---- ----- ---------------- Elmer B. Harris $421,620 36 Banks H. Farris 184,860 35 Charles D. McCrary 171,852 20 Williams B. Hutchins, III 171,396 24 T. Harold Jones 171,408 42
III-25
GEORGIA Compensation Name Level Years of Service ---- ----- ---------------- H. Allen Franklin $385,716 23 William G. Hairston, III 259,932 26 Dwight H. Evans 210,600 25 Warren Y. Jobe 210,588 23 Gene R. Hodges 191,616 30 GULF Compensation Name Level Years of Service ---- ----- ---------------- Travis J. Bowden $263,832 181 G. Edison Holland, Jr. 169,356 121 Earl B. Parsons, Jr. 161,100 33 Arlan E. Scarbrough 157,104 31 John E. Hodges, Jr. 149,604 28 MISSISSIPPI Compensation Name Level Years of Service ---- ----- ---------------- David M. Ratcliffe $228,432 22 H. E. Blakeslee 154,224 28 Don E. Mason 148,500 28 Thomas A. Fanning 125,820 13 Frederick D. Kuester 127,992 22
SAVANNAH has in effect a qualified, trusteed, noncontributory, defined benefit pension plan which provides pension benefits to employees upon retirement at the normal retirement age after designated periods of accredited service and at a specified compensation level. The plan provides pension benefits under a formula which includes each participant's years of service with the Southern system and average annual earnings of the highest three of the final ten years of service with the Southern system preceding retirement. Plan benefits are reduced by a portion of the benefits participants are entitled to receive under Social Security. The plan provides for reduced early retirement benefits at age 55 and a pension for the surviving spouse equal to one-half of the deceased retiree's pension. The following table sets forth the estimated annual pension benefits under the pension plan in effect during 1994 which are payable by SAVANNAH to employees upon retirement at the normal retirement age after designated periods of accredited service and at a specified compensation level. ----------------------------------- 1 The number of accredited years of service includes ten years credited to both Mr. Bowden and Mr. Holland pursuant to individual supplemental pension agreements. III-26
Average Annual Salary Annual Benefits Exclusive of Social Security1 for Last 36 Months of Years of Service Employment 15 25 35 ------------------------ -- -- -- $ 90,000 $22,505 $ 37,508 $ 52,511 $120,000 30,006 50,010 70,014 $150,000 37,508 62,513 87,518 $180,000 45,009 75,015 105,021 $210,000 52,511 87,518 122,525 $250,000 62,513 104,188 145,863
As of December 31, 1994, the applicable compensation levels and years of accredited service are presented in the following table:-
SAVANNAH Compensation Name Level Years of Service ---- ----- ---------------- Arthur M. Gignilliat $182,625 36 Larry M. Porter 115,500 17 W. Miles Greer 110,685 10 Kirby R. Willis 93,300 20
(e)(2) Deferred Compensation Plan; Supplemental Executive Retirement Plan. ------------------------------------------------------------------ SAVANNAH has in effect a voluntary deferred compensation plan for certain executive employees pursuant to which such employees may defer a portion of their respective annual salaries. In addition, SAVANNAH has a supplemental executive retirement plan for certain of its executive employees which became effective January 1, 1984. The deferred compensation plan is designed to provide supplemental retirement or survivor benefit payments. The supplemental executive retirement plan is also designed to provide retiring executives of SAVANNAH with a supplemental retirement benefit, which, in conjunction with social security and benefits under SAVANNAH's qualified pension plan, will equal 70 percent of the highest three of the final ten years average annual compensation (including deferrals under the deferred compensation plan). Both of these plans are unfunded and the liability is payable from general funds of SAVANNAH. The deferred compensation plan became effective December 1, 1983, and all of SAVANNAH's executive officers are participating in the plan. In addition, all executives are participating in the supplemental executive retirement plan. In order to provide for its liabilities under the deferred compensation plan and the supplemental executive retirement plan, SAVANNAH has purchased life insurance on participating executive employees in actuarially determined amounts which, based upon assumptions as to mortality experience, policy dividends, tax effects, and other factors which, if realized, along with compensation deferred by employees and the death benefits payable to SAVANNAH, are expected to cover all such insurance premium payments, and all benefit payments to participants, plus a factor for the cost of funds of SAVANNAH. ------------------------------- 1 The plan benefits are subject to the maximum benefit limitations set forth in Section 415 of the Internal Revenue Code. III-27 (f) Compensation of Directors. ------------------------- (1) Standard Arrangements. The following table presents compensation paid to the directors, during 1994 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. All or a portion of these fees may be deferred until membership on the board is terminated.
ALABAMA GEORGIA GULF MISSISSIPPI SAVANNAH Retainer Fee $15,000 $18,000 $12,000 $12,000 $12,000 Meeting Fee 800 900 750 750 750 Committees: Audit 800 900 750 750 750 Compensation 800 900 750 750 750 Executive 800 900 - - 750 Finance - 900 - 750 - Nominating 800 - - - - Nuclear Safety 800 - - - - Nuclear Operations Overview - 1,800 - - -
ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH also provide retirement benefits to non-employee directors who are credited with a minimum of 60 months of service on the board of directors of one or more system companies, under the Outside Directors Pension Plan. Eligible directors are entitled to benefits under the Plan upon retirement from the board on the retirement date designated in the respective companies' by-laws. The annual benefit payable ranges from 75 to 100 percent of the annual retainer fee in effect on the date of retirement, based upon length of service. Payments continue for the greater of the lifetime of the participant or 10 years. (2) Other Arrangements. No director received other compensation for services as a director during the year ending December 31, 1994 in addition to or in lieu of that specified by the standard arrangements specified above. (g) Employment Contracts and Termination of Employment and Change in Control Arrangements. None. III-28 (h) Report on Repricing of Options. ------------------------------ None. (i) Additional Information with Respect to Compensation Committee Interlocks and Insider Participation in Compensation Decisions. ALABAMA Elmer B. Harris serves on the Compensation Committee of AmSouth Bancorporation. John W. Woods, a director of ALABAMA, is Chairman and Chief Executive Officer of AmSouth Bancorporation. III-29 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (a) Security ownership of certain beneficial owners. ----------------------------------------------- SOUTHERN is the beneficial owner of 100% of the outstanding common stock of registrants: ALABAMA, GEORGIA, GULF, MISSISSIPPI and 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% 64 Perimeter Center East Atlanta, Georgia 30346 Registrants: ----------- ALABAMA 5,608,955 GEORGIA 7,761,500 GULF 992,717 MISSISSIPPI 1,121,000 SAVANNAH 10,844,635
(b) Security ownership of management. The following table shows the number of shares of SOUTHERN common stock and operating subsidiary preferred stock owned by the directors, nominees and executive officers as of December 31, 1994. 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 of the respective classes outstanding on December 31, 1994.
Name of Directors, Number of Shares Nominees and Beneficially Executive Officers Title of Class Owned 1,2 ------------------ -------------- ---------------- ALABAMA Whit Armstrong SOUTHERN Common 13,164 A. W. Dahlberg SOUTHERN Common 92,736 Bill M. Guthrie SOUTHERN Common 93,694 Elmer B. Harris SOUTHERN Common 104,175
III-30
Name of Directors, Number of Shares Nominees and Beneficially Executive Officers Title of Class Owned 1,2 ------------------ -------------- ----------------- Crawford T. Johnson, III SOUTHERN Common 607 Carl E. Jones, Jr. SOUTHERN Common 8,380 Gerald H. Powell SOUTHERN Common 5,604 Robert Davis Powers SOUTHERN Common 50 John W. Rouse, Jr. SOUTHERN Common 3,585 William J. Rushton, III SOUTHERN Common 6,201 ALABAMA Preferred 20 John C. Webb, IV SOUTHERN Common 7,798 ALABAMA Preferred 989 Banks H. Farris SOUTHERN Common 37,453 William B. Hutchins, III SOUTHERN Common 23,081 T. Harold Jones SOUTHERN Common 24,587 Charles D. McCrary SOUTHERN Common 15,986 The directors, nominees, and executive officers as a group SOUTHERN Common 437,101 shares ALABAMA Preferred 1,009 shares GEORGIA Edward L. Addison SOUTHERN Common 313,008 Bennett A. Brown SOUTHERN Common 9,000 A. W. Dahlberg SOUTHERN Common 92,736 W. A. Fickling, Jr. GEORGIA Preferred 50 H. Allen Franklin SOUTHERN Common 61,231 L. G. Hardman III SOUTHERN Common 6,779
III-31
Name of Directors, Number of Shares Nominees and Beneficially Executive Officers Title of Class Owned 1,2 ------------------ -------------- ------------------ Warren Y. Jobe SOUTHERN Common 36,589 GEORGIA Preferred 403 James R. Lientz, Jr. SOUTHERN Common 42 W. A. Parker, Jr. SOUTHERN Common 26,254 GEORGIA Preferred 2 Gloria M. Shatto SOUTHERN Common 13,351 GEORGIA Preferred 1,200 W. J. Vereen SOUTHERN Common 5,000 GEORGIA Preferred 1,701 Thomas R. Williams GEORGIA Preferred 1,000 Dwight E. Evans SOUTHERN Common 24,844 GEORGIA Preferred 300 William G. Hairston, III SOUTHERN Common 25,550 Gene R. Hodges SOUTHERN Common 33,328 GEORGIA Preferred 800 The directors, nominees and executive officers as a group SOUTHERN Common 743,594 shares GEORGIA Preferred 5,456 shares GULF Reed Bell SOUTHERN Common 43 Travis J. Bowden SOUTHERN Common 50,443 Paul J. DeNicola SOUTHERN Common 41,269 W. Deck Hull, Jr. SOUTHERN Common 2,139 C. Walter Ruckel SOUTHERN Common 43 Joseph K. Tannehill SOUTHERN Common 4,043
III-32
Name of Directors, Number of Shares Nominees and Beneficially Executive Officers Title of Class Owned 1,2 ------------------ -------------- ------------------ John E. Hodges, Jr. SOUTHERN Common 34,870 GULF Preferred 3 G. Edison Holland, Jr. SOUTHERN Common 4,929 Earl B. Parsons, Jr. SOUTHERN Common 14,736 Arlan E. Scarbrough SOUTHERN Common 19,820 The directors, nominees SOUTHERN Common 176,275 shares and executive officers GULF Preferred 5 shares as a group MISSISSIPPI Paul J. DeNicola SOUTHERN Common 41,269 Edwin E. Downer SOUTHERN Common 1,059 Robert S. Gaddis SOUTHERN Common 3,236 Walter H. Hurt, III SOUTHERN Common 843 MISSISSIPPI Preferred 33 Aubrey K. Lucas SOUTHERN Common 901 Earl D. McLean, Jr. SOUTHERN Common 14,451 David M. Ratcliffe SOUTHERN Common 32,896 Gerald J. St. Pe SOUTHERN Common 16,043 N. Eugene Warr SOUTHERN Common 86 H. E. Blakeslee SOUTHERN Common 15,846 Thomas A. Fanning SOUTHERN Common 4,253 Frederick D. Kuester SOUTHERN Common 9,899
III-33
Name of Directors, Number of Shares Nominees and Beneficially Executive Officers Title of Class Owned 1,2 ------------------ -------------- ------------------- Don E. Mason SOUTHERN Common 18,160 The directors, nominees and executive officers SOUTHERN Common 158,942 shares as a group MISSISSIPPI Preferred 33 shares SAVANNAH Helen Quattlebaum Artley SOUTHERN Common 2,461 Paul J. DeNicola SOUTHERN Common 41,269 Brian R. Foster SOUTHERN Common 43 Arthur M. Gignilliat, Jr. SOUTHERN Common 46,914 Walter D. Gnann SOUTHERN Common 1,550 Robert B. Miller, III SOUTHERN Common 2,025 James M. Piette SOUTHERN Common 1,281 Arnold M. Tenenbaum SOUTHERN Common 397 Fred F. Williams SOUTHERN Common 972 W. Miles Greer SOUTHERN Common 1,398
III-34
Name of Directors, Number of Shares Nominees and Beneficially Executive Officers Title of Class Owned 1,2 ------------------ -------------- ------------------- Larry M. Porter SOUTHERN Common 11,739 Kirby R. Willis SOUTHERN Common 3,547 The directors, nominees and executive officers as a group SOUTHERN Common 113,596 shares (c) Changes in control. SOUTHERN and the operating affiliates know of no arrangements which may at a subsequent date result in any change in control. -------- 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, as follows: Mr. Addison, 230,025 shares; Mr. Blakeslee, 6,812 shares; Mr. Bowden, 24,019 shares; Mr. Dahlberg, 45,847 shares; Mr. DeNicola, 12,139 shares; Mr. Evans, 8,474 shares; Mr. Farris, 5,028 shares; Mr. Franklin, 40,383 shares; Mr. Gignilliat, 26,133 shares; Mr. Guthrie, 44,968 shares; Mr. Hairston, 9,658 shares; Mr. Harris, 58,867 shares; Mr. G. R. Hodges, 7,627 shares; Mr. J. E. Hodges, 15,714 shares; Mr. Holland, 4,255 shares; Mr. Hutchins, 4,300 shares; Mr. Jobe, 9,416 shares; Mr. Jones, 4,910 shares; Mr. C. D. McCrary, 4,232 shares; Mr. Ratcliffe, 20,046 shares; and Mr. Williams, 1,416 shares. Also included are shares of SOUTHERN common stock held by the spouses of the following directors: Mr. Addison, 1,424 shares; Mr. Hardman, 100 shares; Mr. Harris, 310 shares; Mr. Parker, 48 shares; Mr. Powers, 50 shares; and Dr. Shatto, 11,157 shares. Also included are 1,200 shares of GEORGIA preferred stock held by Dr. Shatto's spouse.
III-35 Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ALABAMA (a) Transactions with management and others. During 1994, ALABAMA, in the ordinary course of business, paid premiums amounting to approximately $584,358 for various types of insurance policies purchased from Protective Life Insurance Company, a subsidiary of Protective Life Corporation, a company in which Mr. William J. Rushton, III, a director of ALABAMA, owns an interest and of which he served as Chairman. ALABAMA believes that these transactions have been on terms representing competitive market prices that are no less favorable than those available from others. (b) Certain business relationships. None. (c) Indebtedness of management. None. (d) Transactions with promoters. None. GEORGIA (a) Transactions with management and others. Mr. G. Joseph Prendergast is Chairman of Wachovia Bank of Georgia, N.A., and Mr. James R. Lientz, Jr. is President of NationsBank of Georgia. During 1994, these banks furnished a number of regular banking services in the ordinary course of business to GEORGIA. GEORGIA intends to maintain normal banking relations with all the aforesaid banks in the future. In 1994, GEORGIA leased a building from Riverside Manufacturing Co. for approximately $73,000. Mr. William J. Vereen is Chief Executive Officer, President, Treasurer and Director of Riverside Manufacturing Co. (b) Certain business relationships. None. (c) Indebtedness of management. None. (d) Transactions with promoters. None. GULF (a) Transactions with management and others. The firm of Beggs & Lane, P.A. serves as local counsel for GULF and received from GULF approximately $1,095,340 for services rendered. Mr. G. Edison Holland, Jr. is a partner in the firm and also serves as Vice President and Corporate Counsel of GULF. (b) Certain business relationships. None. (c) Indebtedness of management. None. (d) Transactions with promoters. None. MISSISSIPPI (a) Transactions with management and others. During 1994, MISSISSIPPI was indebted in a maximum amount of $9 million to Hancock Bank, of which Mr. Leo W. Seal, Jr. serves as Chairman of the Board and Chief Executive Officer. Mr. Seal retired from MISSISSIPPI's board of directors effective September 6, 1994. (b) Certain business relationships. None. (c) Indebtedness of management. None. (d) Transactions with promoters. None. III-36 SAVANNAH (a) Transactions with management and others. Mr. Tenenbaum is a Director of First Union National Bank of Georgia, and Mr. Foster is President of NationsBank of Georgia, N.A., in Savannah. During 1994, these banks furnished a number of regular banking services in the ordinary course of business to SAVANNAH. SAVANNAH intends to maintain normal banking relations with all of the aforesaid banks in the future. (b) Certain business relationships. None. (c) Indebtedness of management. None. (d) Transactions with promoters. None. III-37 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 1994 only the following registrant filed a Current Report on Form 8-K: ALABAMA filed a Form 8-K dated November 30, 1994 to facilitate a security sale. 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: A. W. Dahlberg, Chairman, President and Chief Executive Officer By: /s/ Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 23, 1995 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. A. W. Dahlberg Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer) W. L. Westbrook Financial Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) Directors: W. P. Copenhaver Elmer B. Harris. A. D. Correll Earl D. McLean, Jr. Paul J. DeNicola William A. Parker, Jr. Jack Edwards William J. Rushton, III H. Allen Franklin Gloria M. Shatto Bruce S. Gordon Herbert Stockham L. G. Hardman III By: /s/ Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 23, 1995 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: /s/ Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 23, 1995 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 (Principal Financial Officer) David L. Whitson Vice President and Comptroller (Principal Accounting Officer) Directors: Whit Armstrong Wallace D. Malone, Jr. Philip E. Austin William V. Muse Margaret A. Carpenter Gerald H. Powell A. W. Dahlberg Robert D. Powers Peter V. Gregerson, Sr. John W. Rouse Bill M. Guthrie James H. Sanford Crawford T. Johnson, III John Cox Webb, IV Carl E. Jones, Jr. John W. Woods By: /s/Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 23, 1995 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: H. Allen Franklin, President and Chief Executive Officer By: /s/ Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 23, 1995 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, Chief Executive Officer and Director (Principal Executive Officer) Warren Y. Jobe Executive Vice President, Treasurer, Chief Financial Officer and Director (Principal Financial Officer) C. B. Harreld Vice President and Comptroller (Principal Accounting Officer) Directors: Bennett A. Brown Herman J. Russell A. W. Dahlberg William Jerry Vereen L. G. Hardman III Carl Ware James R. Lientz, Jr. Thomas R. Williams G. Joseph Prendergast By: /s/Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 23, 1995 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: /s/Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 23, 1995 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) A. E. Scarbrough Vice President - Finance (Principal Financial and Accounting Officer) Directors: Reed Bell W. D. Hull, Jr. Paul J. DeNicola C. W. Ruckel Fred C. Donovan J. K. Tannehill By: /s/ Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 23, 1995 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: David M. Ratcliffe, President and Chief Executive Officer By: /s/ Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 23, 1995 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) Michael W. Southern Vice President, Secretary, Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer) Directors: Paul J. DeNicola Aubrey K. Lucas Edwin E. Downer Gerald J. St. Pe' Robert S. Gaddis N. Eugene Warr Walter H. Hurt, III By: /s/ Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 23, 1995 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: Arthur M. Gignilliat, Jr., President and Chief Executive Officer By: /s/ Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 23, 1995 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. Arthur M. Gignilliat, 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: Helen Q. Artley Robert B. Miller, III Paul J. DeNicola James M. Piette Brian R. Foster Arnold M. Tenenbaum Walter D. Gnann Frederick F. Williams, Jr. By: /s/ Wayne Boston (Wayne Boston, Attorney-in-fact) Date: March 23, 1995 IV-4 Exhibit 21. Subsidiaries of the Registrants.
Name of Company Jurisdiction of Organization ----------------------------------------------------------------- ---------------------------- Alabama Power Company Alabama Alabama Property Company Alabama Columbia Fuels, Inc. Alabama Southern Electric Generating Company Alabama Georgia Power Company Georgia Piedmont-Forrest Corporation Georgia Georgia Power L. P. Holdings Corp. Georgia Southern Electric Generating Company Alabama Gulf Power Company Maine Mississippi Power Company Mississippi Savannah Electric and Power Company Georgia Energia de Nuevo Leon, S.A. de C.V. Mexico Mobile Energy Services Company, Inc. Alabama SEI Holdings, Inc. Delaware Asociados de Electricidad, S. A. Argentina SEI y Asociados de Argentina, S. A. Argentina Hidroelectrica Alicura, S. A. Argentina SEI Holdings III, Inc. Delaware SEI Chile, S. A. Chile Inversiones SEI Chile Limitada Chile Electrica SEI Chile Limitada Chile Empresa Electrica del Norte Grande, S. A. (Edelnor) Chile SEI Holdings IV, Inc. Delaware Tesro Holding B.V. Netherlands SEI Bahamas Argentina II, Inc. Bahamas SEI Holdings VIII, Inc. Delaware Delaware SEI Beteiligungs GmbH Germany SEI Holdings IX, Inc. Delaware The Power Generation Company of Trinidad and Tobago Trinidad and Tobago SEI Holdings X, Inc. Delaware Southern Electric Brasil Participacoes, Ltda. Brazil SEI Holdings XI, Inc. Delaware Southern Electric Brasil Participacoes, Ltda. Brazil Southern Communications Services, Inc. Delaware Southern Company Services, Inc. Alabama Southern Electric Bahamas Holdings, Ltd. Bahamas Southern Electric Bahamas, Ltd. Bahamas Freeport Power Company Limited Bahamas Southern Electric, Inc. Delaware SEI Bahamas Argentina I, Inc. Bahamas SEI Inversora, S. A. Argentina Southern Electric International, Inc. Delaware SEI Operadora de Argentina, S.A. Argentina Southern Electric Railroad Company Delaware Southern Electric Wholesale Generators, Inc. Delaware Birchwood Development Corp. Delaware SEI Birchwood, Inc. Delaware Birchwood Power Partners, L.P. Delaware SEI Hawaiian Cogenerators, Inc. Delaware Kalaeloa Partners, L. P. Delaware Southern Nuclear Operating Company, Inc. Delaware The Southern Development and Investment Group, Inc. Georgia
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 15, 1995 on the financial statements of The Southern Company and its subsidiaries and the related financial statement schedules, included in this Form 10-K, into The Southern Company's previously filed Registration Statement File Nos. 2-78617, 33-3546, 33-23152, 33-30171, 33-23153, 33-51433, 33-54415, and 33-57951. /s/ ARTHUR ANDERSEN LLP Atlanta, Georgia March 23, 1995 IV-6 Exhibit 23(b) ARTHUR ANDERSEN LLP CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports dated February 15, 1995 on the financial statements of Alabama Power Company and the related financial statement schedules, included in this Form 10-K, into Alabama Power Company's previously filed Registration Statement File No. 33-49653. /s/ ARTHUR ANDERSEN LLP Birmingham, Alabama March 23, 1995 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 15, 1995 on the financial statements of Georgia Power Company and the related financial statement schedules, included in this Form 10-K, into Georgia Power Company's previously filed Registration Statement File No. 33-49661. /s/ ARTHUR ANDERSEN LLP Atlanta, Georgia March 23, 1995 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 15, 1995 on the financial statements of Gulf Power Company and the related financial statement schedules, included in this Form 10-K, into Gulf Power Company's previously filed Registration Statement File No. 33-50165. /s/ ARTHUR ANDERSEN LLP Atlanta, Georgia March 23, 1995 IV-9 Exhibit 23(e) ARTHUR ANDERSEN LLP CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports dated February 15, 1995 on the financial statements of Mississippi Power Company and the related financial statement schedules, included in this Form 10-K, into Mississippi Power Company's previously filed Registration Statement File Nos. 33-49320 and 33-49649. /s/ ARTHUR ANDERSEN LLP Atlanta, Georgia March 23, 1995 IV-10 Exhibit 23(f) ARTHUR ANDERSEN LLP CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports dated February 15, 1995 on the financial statements of Savannah Electric and Power Company and the related financial statement schedules, included in this Form 10-K, into Savannah Electric and Power Company's previously filed Registration Statement File Nos. 33-45757 and 33-52509. /s/ ARTHUR ANDERSEN LLP Atlanta, Georgia March 23, 1995 IV-11 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULES To The Southern Company: We have audited in accordance with generally accepted auditing standards, 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 15, 1995. Our report on the consolidated financial statements includes an explanatory paragraph which states that an uncertainty exists with respect to the actions of the regulators regarding recoverability of the investment in the Rocky Mountain pumped storage hydroelectric project, as discussed in Note 4 to The Southern Company's consolidated financial statements. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed under Item 14(a)(2) herein as it relates to The Southern Company and its subsidiaries (pages S-2 through S-4) are the responsibility of The Southern Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic consolidated financial statements. These schedules have been subjected to the auditing procedures applied in the audits of the basic consolidated financial statements and, in our opinion, fairly state 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 15, 1995 IV-12 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULES To Alabama Power Company: We have audited in accordance with generally accepted auditing standards, the financial statements of Alabama Power Company included in this Form 10-K, and have issued our report thereon dated February 15, 1995. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed under Item 14(a)(2) herein as it relates to Alabama Power Company (pages S-5 through S-7) are the responsibility of Alabama Power Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state 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 15, 1995 IV-13 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULES To Georgia Power Company: We have audited in accordance with generally accepted auditing standards, the financial statements of Georgia Power Company included in this Form 10-K, and have issued our report thereon dated February 15, 1995. Our report on the financial statements includes an explanatory paragraph which states that an uncertainty exists with respect to the actions of the regulators regarding the recoverability of Georgia Power Company's investment in the Rocky Mountain pumped storage hydroelectric project, as discussed in Note 4 to Georgia Power Company's financial statements. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed under Item 14(a)(2) herein as it relates to Georgia Power Company (pages S-8 through S-10) are the responsibility of Georgia Power Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state 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 15, 1995 IV-14 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULES To Gulf Power Company: We have audited in accordance with generally accepted auditing standards, the financial statements of Gulf Power Company included in this Form 10-K, and have issued our report thereon dated February 15, 1995. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed under Item 14(a)(2) herein as it relates to Gulf Power Company (pages S-11 through S-13) are the responsibility of Gulf Power Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state 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 15, 1995 IV-15 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULES To Mississippi Power Company: We have audited in accordance with generally accepted auditing standards, the financial statements of Mississippi Power Company included in this Form 10-K, and have issued our report thereon dated February 15, 1995. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed under Item 14(a)(2) herein as it relates to Mississippi Power Company (pages S-14 through S-16) are the responsibility of Mississippi Power Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state 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 15, 1995 IV-16 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULES To Savannah Electric and Power Company: We have audited in accordance with generally accepted auditing standards, the financial statements of Savannah Electric and Power Company included in this Form 10-K, and have issued our report thereon dated February 15, 1995. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed under Item 14(a)(2) herein as it relates to Savannah Electric and Power Company (pages S-17 through S-19) are the responsibility of Savannah Electric and Power Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state 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 15, 1995 IV-17 INDEX TO FINANCIAL STATEMENT SCHEDULES
Schedule Page II Valuation and Qualifying Accounts and Reserves 1994, 1993 and 1992 The Southern Company and Subsidiary Companies.......................................................... S-2 Alabama Power Company.................................................................................. S-5 Georgia Power Company.................................................................................. S-8 Gulf Power Company..................................................................................... S-11 Mississippi Power Company.............................................................................. S-14 Savannah Electric and Power Company.................................................................... S-17 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 AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1994 (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 $9,067 $23,322 $8 $23,268 (1) $9,129 Deferred credits: Provision for property insurance $22,047 $31,306 $236 $1,112 (2) $52,477 Other property and investments: Nuclear decommissioning trust (3) $87,487 $18,695 $19,129 - $125,311 Deferred charges: Uranium enrichment, decontamination and decommissioning fund (4) $86,342 - $(938) $6,514 $78,890 ------------------- Notes: (1) Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off. (2) Insurance recoveries net of charges to reserve for purposes for which reserve was created. (3) See Note 1 to SOUTHERN's financial statements under "Depreciation and Nuclear Decommissioning" in Item 8 herein for further information. (4) See Note 1 to SOUTHERN's financial statements under "Revenues and Fuel Costs" in Item 8 herein for further information.
S-2 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1993 (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 $7,255 $24,040 $2 $22,230 (1) $9,067 Deferred credits: Provision for property insurance $23,594 $4,164 - $5,711 (2) $22,047 Other property and investments: Nuclear decommissioning trust (3) $52,701 $15,759 $19,351 (4) $324 $87,487 Deferred charges: Uranium enrichment, decontamination and decommissioning fund (5) $90,099 - $1,219 $4,976 $86,342 ------------------------- Notes: (1) Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off. (2) Insurance recoveries net of charges to reserve for purposes for which reserve was created. (3) See Note 1 to SOUTHERN's financial statements under "Depreciation and Nuclear Decommissioning" in Item 8 herein for further information. (4) Represents additional funding to reserve. (5) See Note 1 to SOUTHERN's financial statements under "Revenues and Fuel Costs" in Item 8 herein for further information.
S-3 THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1992 (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 $12,568 $18,366 - $23,679 (1) $7,255 Deferred credits: Provision for property insurance $20,928 $3,298 $25 (4) $657 $23,594 Other property and investments: Nuclear decommissioning trust (2) $25,871 $14,782 $12,189 $141 $52,701 Deferred charges: Uranium enrichment, decontamination and decommissioning fund (3) - - $90,099 - $90,099 ------------------- Notes: (1) Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off. (2) See Note 1 to SOUTHERN's financial statements under "Depreciation and Nuclear Decommissioning" in Item 8 herein for further information. (3) See Note 1 to SOUTHERN's financial statements under "Revenues and Fuel Costs" in Item 8 herein for further information. (4) Capitalized.
S-4 ALABAMA POWER COMPANY SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1994 (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 $2,632 $4,967 - $5,302 (1) $2,297 Deferred credits: Provision for natural disaster reserve (4) - $28,750 - - $28,750 Other property and investments: Nuclear decommissioning trust (2) $49,550 $18,143 $3,321 - $71,014 Deferred charges: Uranium enrichment, decontamination and decommissioning fund (3) $45,554 - $69 $2,627 $42,996 ------------------- Notes: (1) Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off. (2) See Note 1 to ALABAMA's financial statements under "Depreciation and Nuclear Decommissioning" in Item 8 herein for further information. (3) See Note 1 to ALABAMA's financial statements under "Revenues and Fuel Costs" in Item 8 herein for further information. (4) See Note 1 to ALABAMA's financial statements under "Natural Disaster Reserve" in Item 8 herein for further information.
S-5 ALABAMA POWER COMPANY SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1993 (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 $1,482 $7,157 - $6,007(1) $2,632 Other property and investments: Nuclear decommissioning trust (2) $32,390 $13,617 $3,543 (3) - $49,550 Deferred charges: Uranium enrichment, decontamination and decommissioning fund (4) $47,730 - $1,873 $4,049 $45,554 -------------------- Notes: (1) Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off. (2) See Note 1 to ALABAMA's financial statements under "Depreciation and Nuclear Decommissioning" in Item 8 herein for further information. (3) Represents additional funding to reserve. (4) See Note 1 to ALABAMA's financial statements under "Revenues and Fuel Costs" in Item 8 herein for further information.
S-6 ALABAMA POWER COMPANY SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1992 (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 $1,721 $4,878 - $5,117(1) $1,482 Other property and investments: Nuclear decommissioning trust (2) $15,864 $13,617 $2,909 - $32,390 Deferred charges: Uranium enrichment, decontamination and decommissioning fund (3) - - $47,730 - $47,730 ------------------- Notes: (1) Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off. (2) See Note 1 to ALABAMA's financial statements under "Depreciation and Nuclear Decommissioning" in Item 8 herein for further information. (3) See Note 1 to ALABAMA's financial statements under "Revenues and Fuel Costs" in Item 8 herein for further Information.
S-7 GEORGIA POWER COMPANY SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1994 (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 $4,300 $15,424 - $15,224(1) $4,500 Other property and investments: Nuclear decommissioning trust (2) $37,937 $552 $15,808(3) - $54,297 Deferred charges: Uranium enrichment, decontamination and decommissioning fund (4) $40,788 - $(1,007) $3,887 $35,894 ------------------- Notes: (1) Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off. (2) See Note 1 to GEORGIA's financial statements under "Depreciation and Nuclear Decommissioning" in Item 8 herein for further information. (3) Represents additional funding to reserve. (4) See Note 1 to GEORGIA's financial statements under "Revenues and Fuel Costs" in Item 8 herein for further information.
S-8 GEORGIA POWER COMPANY SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1993 (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 $4,121 $14,310 - $14,131 (1) $4,300 Other property and investments: Nuclear decommissioning trust (2) $20,311 $2,142 $15,808 (3) $324 $37,937 Deferred charges: Uranium enrichment, decontamination and decommissioning fund (4) $42,369 - $(654) $927 $40,788 ------------------- Notes: (1) Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off. (2) See Note 1 to GEORGIA's financial statements under "Depreciation and Nuclear Decommissioning" in Item 8 herein for further information. (3) Represents additional funding to reserve. (4) See Note 1 to GEORGIA's financial statements under "Revenues and Fuel Costs" in Item 8 herein for further information.
S-9 GEORGIA POWER COMPANY SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1992 (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 $7,519 $11,440 - $14,838 (1) $4,121 Other property and investments: Nuclear decommissioning trust (2) $10,007 $1,165 $9,280 $141 $20,311 Deferred charges: Uranium enrichment, decontamination and decommissioning fund (3) - - $42,369 - $42,369 ------------------- Notes: (1) Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off. (2) See Note 1 to GEORGIA's financial statements under "Depreciation and Nuclear Decommissioning" in Item 8 herein for further information. (3) See Note 1 to GEORGIA's financial statements under "Revenues and Fuel Costs" in Item 8 herein for further information.
S-10 GULF POWER COMPANY SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1994 (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 $447 $1,195 $9 $1,051 (Note) $600 Deferred credit: Provision for property insurance $10,509 $1,200 $236 $423 $11,522 ------------------- Note: Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off.
S-11 GULF POWER COMPANY SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1993 (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 $356 $875 - $784 (Note) $447 Deferred credit: Provision for property insurance $9,692 $1,200 - $383 $10,509 ------------------- Note: Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off.
S-12 GULF POWER COMPANY SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1992 (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 $660 $356 - $660 (Note) $356 Deferred credit: Provision for property insurance $8,492 $1,200 - - $9,692 ------------------- Note: Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off.
S-13 MISSISSIPPI POWER COMPANY SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1994 (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 $737 $1,234 $ (1) $1,300 (1) $670 Deferred credit: Provision for property insurance $10,538 $1,056 - $689 (2) $10,905 ------------------- Notes: (1) Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off. (2) Net of insurance reimbursement.
S-14 MISSISSIPPI POWER COMPANY SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1993 (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 $508 $1,326 $2 $1,099 (Note) $737 Deferred credit: Provision for property insurance $9,294 $1,244 - - $10,538 ------------------- Note: Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off.
S-15 MISSISSIPPI POWER COMPANY SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1992 (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 $2,102 $1,173 - $2,767 (Note) $508 Deferred credit: Provision for property insurance $8,216 $1,078 - - $9,294 ------------------- Note: Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off.
S-16 SAVANNAH ELECTRIC AND POWER COMPANY SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1994 (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 $762 $419 - $315 (Note) $866 Deferred credit: Provision for property insurance $1,000 $300 - - $1,300 ------------------- Note: Represents write-off of accounts receivable considered to be uncollectible, less recoveries of amounts previously written off.
S-17 SAVANNAH ELECTRIC AND POWER COMPANY SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1993 (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 $536 $330 - $104 (Note) $762 Deferred credit: Provision for property insurance $300 $700 - - $1,000 ------------------- Note: Represents write-off of accounts receivable considered to be uncollectible, less recoveries of amounts previously written off.
S-18 SAVANNAH ELECTRIC AND POWER COMPANY SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED DECEMBER 31, 1992 (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 $339 $455 - $258 (Note) $536 Deferred credit: Provision for property insurance $300 - - - $300 -------------------- Note: Represents write-off of accounts receivable considered to be uncollectible, less recoveries of amounts previously written off.
S-19 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. 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. (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 October 14, 1994. (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) and in Certificate of Notification, File No. 70-8191, as Exhibit A.) (b) 2 - 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 October 25, 1993. (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) and in Form 8-K dated October 20, 1993, File No. 1-6468, as Exhibit 4(b).) E-1 (c) 2 - By-laws of GEORGIA as amended effective July 18, 1990, and as presently in effect. (Designated in GEORGIA's Form 10-K for the year ended December 31, 1990, File No. 1-6468, as Exhibit 3.) GULF (d) 1 - Restated Articles of Incorporation of GULF and amendments thereto through November 8, 1993. (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 and in Form 8-K dated November 3, 1993, File No. 0-2429, as Exhibit 4.) (d) 2 - By-laws of GULF as amended effective February 25, 1994, and as presently in effect. (Designated in GULF's Form 10-K for the year ended December 31, 1993, as Exhibit 3(d)2.) 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 August 19, 1993. (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 and in Form 8-K dated August 18, 1993, File No. 0-6849, as Exhibit 4(b)-3.) (e) 2 - By-laws of MISSISSIPPI as amended effective August 22, 1989, and as presently in effect. (Designated in MISSISSIPPI's Form 10-K for the year ended December 31, 1989, as Exhibit 3(b).) SAVANNAH (f) 1 - Charter of SAVANNAH and amendments thereto through November 10, 1993. (Designated in Registration Nos. 33-25183 as Exhibit 4(b)-(1), 33-45757 as Exhibit 4(b)-(2) and in Form 8-K dated November 9, 1993, File No. 1-5072, as Exhibit 4(b).) (f) 2 - By-laws of SAVANNAH as amended effective February 16, 1994, and as presently in effect. (Designated in SAVANNAH's Form 10-K for the year ended December 31, 1993, as Exhibit 3(f)2.) E-2 (4) Instruments Describing Rights of Security Holders, Including Indentures ALABAMA (b) - Indenture dated as of January 1, 1942, between ALABAMA and 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. 1-3436, as Exhibit 4(a)-3, in Form 8-K dated February 17, 1993, File No. 1-3436, as Exhibit 4(a)-3, in Form 8-K dated March 10, 1993, File No. 1-3436, 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. 1-3436, as Exhibit 4, in Certificate of Notification, File No. 70-8069, as Exhibit A, in Form 8-K dated November 16, 1993, File No. 1-3436, 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. 1-3436, as Exhibit 4.) GEORGIA (c) 1 - Indenture dated as of March 1, 1941, between GEORGIA and 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 December 1, 1994. (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 and in Certificate of Notification, File No. 70- 8443, as Exhibit E.) E-3 * (c) 2 - Supplemental Indenture dated as of June 1, 1994, between GEORGIA and Chemical Bank, as Trustee. * (c) 3 - Supplemental Indenture dated as of September 1, 1994, between GEORGIA and Chemical Bank, as Trustee. (c) 4 - Indenture dated as of December 1, 1994, between GEORGIA and Trust Company Bank, as Trustee. (Designated in Certificate of Notification, File No. 70-8461, as Exhibit E.) (c) 5 - First Supplemental Indenture dated as of December 15, 1994, between GEORGIA and Trust Company Bank, as Trustee. (Designated in Certificate of Notification, File No. 70- 8461, as Exhibit F.) GULF (d) - Indenture dated as of September 1, 1941, between GULF and The Chase Manhattan Bank (National Association), as Trustee, and indentures supplemental thereto through September 1, 1994. (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, 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 and in Certificate of Notification, File No. 70-8229, as Exhibits E and F.) MISSISSIPPI (e) - Indenture dated as of September 1, 1941, between MISSISSIPPI and Bankers Trust Company, as Successor Trustee, and indentures supplemental thereto through March 1, 1994. (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 and in Form 8- K dated March 8, 1994, File No. 0-6849, as Exhibit 4.) E-4 SAVANNAH (f) - Indenture dated as of March 1, 1945, between SAVANNAH and NationsBank of Georgia, National Association, as Trustee, and indentures supplemental thereto through July 1, 1993. (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) and in Form 8-K dated July 22, 1993, File No. 1-5072, as Exhibit 4.) (10) Material Contracts SOUTHERN (a) 1 - Service contracts dated as of January 1, 1984 and Amendment No. 1 dated as of September 6, 1985, between SCS and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SEGCO 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 SEI. (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 - Interchange contract dated October 28, 1988, effective January 1, 1989, between 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(b).) (a) 6 - Agreement dated as of January 27, 1959 and Amendment No. 1 dated as of October 27, 1982, among SEGCO, ALABAMA and GEORGIA. (Designated in Registration No. 2-59634 as Exhibit 5(c) and in GEORGIA's Form 10-K for the year ended December 31, 1982, File No. 1-6468, as Exhibit 10(d)(2).) E-5 (a) 7 - 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) 8 - 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).) (a) 9 - 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) 10 - 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) 11 - 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) 12 - 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) 13 - 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) 14 - 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) 15 - 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) 16 - 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) 17 - 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).) E-6 (a) 18 - 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) 19 - 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) 20 - Integrated Transmission System Agreement dated as of August 27, 1976, between GEORGIA and Dalton. (Designated in Form 8-K dated as of July 5, 1977, File No. 1-6468, as Exhibit (b)(8).) (a) 21 - Integrated Transmission System Agreement dated as of August 27, 1976, between GEORGIA and MEAG. (Designated in Form 8-K for February 1977, File No. 1-6468, as Exhibit (b)(4).) (a) 22 - 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) 23 - 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) 24 - 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) 25 - 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) 26 - 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.) E-7 (a) 27 - 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) 28 - 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) 29 - 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.) (a) 30 - 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. (Designated in Form U-1, File No. 70-7843, as Exhibit B-1.) (a) 31 - Plant Robert W. Scherer Unit No. Four Operating Agreement by and among GEORGIA, FP&L and JEA, dated as of December 31, 1990. (Designated in Form U-1, File No. 70-7843, as Exhibit B-2.) (a) 32 - Amended and Restated Unit Power Sales Agreement dated February 18, 1982 and Amendment No. 1 dated May 18, 1982, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI and SCS. (Designated in MISSISSIPPI's Form 10-K for the year ended December 31, 1981, File No. 0-6849, as Exhibit 10(c)(2) and in GEORGIA's Form 10-K for the year ended December 31, 1982, File No. 1-6468, as Exhibit 10(r)(3).) (a) 33 - Amended and Restated Unit Power Sales Agreement dated May 19, 1982, Amendment No. 1 dated August 30, 1984 and Amendment No. 2 dated October 30, 1987, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI and SCS. (Designated in GEORGIA's Form 10-K for the year ended December 31, 1982, File No. 1-6468, as Exhibit 10(s)(2), in SOUTHERN's Form 10-K for the year ended December 31, 1984, File No. 1-3526, as Exhibit 10(r)(2) and in GEORGIA's Form 10-K for the year ended December 31, 1990, File No. 1-6468, as Exhibit 10(s)(2).) (a) 34 - 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).) E-8 (a) 35 - 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) 36 - 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) 37 - Unit Power Sales Agreement dated December 8, 1990, between Tallahassee and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. (Designated in GEORGIA's Form 10-K for the year ended December 31, 1990, File No. 1-6468, as Exhibit 10(x).) (a) 38 - The Southern Company Executive Stock Plan For the Southern Electric System and the First Amendment thereto. (Designated in Registration No. 33-30171 as Exhibit 4(c).) (a) 39 - Transition Energy Agreement dated December 31, 1990, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. (Designated in GULF's Form 10-K for the year ended December 31, 1991, File No. 0-2429, as Exhibit 10(1).) (a) 40 - Transition Energy Agreement dated December 31, 1990, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. (Designated in GULF's Form 10-K for the year ended December 31, 1991, File No. 0-2429, as Exhibit 10(m).) (a) 41 - 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) 42 - 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) 43 - 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) 44 - 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-9 (a) 45 - 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) 46 - Form of commitment agreement, Amendment No. 1 and Amendment No. 2 with respect to SOUTHERN, ALABAMA, GEORGIA and MISSISSIPPI revolving credits. (Designated in Form U-1, File No. 70-7738, as Exhibit A-5 and in Form U-1, File No. 70-7937, as A-5(b).) (a) 47 - Block Power Sale 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(cc).) (a) 48 - Coordination Services 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(dd).) (a) 49 - 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) 50 - 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) 51 - 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) 52 - 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) 53 - 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.) E-10 (a) 54 - 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) 55 - 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.) (a) 56 - 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) 57 - Power Purchase Agreement dated as of December 3, 1993 between GEORGIA and FPC. (Designated in SOUTHERN's Form 10- K for the year ended December 31, 1993, File No. 1-3526, as Exhibit 10(a)59.) * (a) 58 - Service Contract dated as of December 12, 1994, between SCS and Mobile Energy Services Company, Inc. (a) 59 - The Southern Company Outside Directors Stock Plan. (Designated in Registration No. 33-54415 as Exhibit 4(c).) * (a) 60 - Amendment No. 1 dated as of June 15, 1994, to the Plant Robert W. Scherer Unit Number Four Amended and Restated Purchase and Ownership Participation Agreement. * (a) 61 - Amendment No. 1 dated as of June 15, 1994, to the Plant Robert W. Scherer Unit Number Four Operating Agreement. (a) 62 - 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) 63 - Nuclear Services Agreement between Southern Nuclear and GEORGIA dated as of October 31, 1991. (Designated in Form U-1, File No. 70-7530, as Exhibit B-6.) (a) 64 - Nuclear Managing Board Agreement among GEORGIA, OPC, MEAG and Dalton 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(ee).) * (a) 65 - The Southern Company Productivity Improvement Plan, Amended and Restated effective January 1, 1994. * (a) 66 - The Southern Company Executive Productivity Improvement Plan, effective January 1, 1994. E-11 (a) 67 - The Southern Company Employee Savings Plan, Amended and Restated effective January 1, 1989. (Designated in Registration No. 33-23152 as Exhibit 4(c).) (a) 68 - The Southern Company Employee Stock Ownership Plan, Amended and Restated effective January 1, 1989. (Designated in Form U-1, File No. 70-7654, as Exhibit B-1 and in Form U-1, File No. 70-8435, as Exhibit B-4(b).) * (a) 69 - Pension Plan For Employees of ALABAMA, Amended and Restated effective as of January 1, 1989. * (a) 70 - Pension Plan For Employees of GEORGIA, Amended and Restated effective as of January 1, 1989. * (a) 71 - Pension Plan For Employees of SCS, Amended and Restated effective as of January 1, 1989. * (a) 72 - The Southern Company Performance Pay Plan, Amended and Restated effective January 1, 1993. * (a) 73 - Supplemental Benefit Plan for ALABAMA. * (a) 74 - Supplemental Benefit Plan for GEORGIA. * (a) 75 - Supplemental Benefit Plan for SCS and SEI. * (a) 76 - The Deferred Compensation Plan for the Directors of The Southern Company. * (a) 77 - The Southern Company Outside Directors Pension Plan. * (a) 78 - The Deferred Compensation Plan for the Southern Electric System. ALABAMA (b) 1 - Service contracts dated as of January 1, 1984 and Amendment No. 1 dated as of September 6, 1985, between SCS and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SEGCO and SOUTHERN. See Exhibit 10(a)1 herein. (b) 2 - Interchange contract dated October 28, 1988, effective January 1, 1989, between ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)5 herein. (b) 3 - Agreement dated as of January 27, 1959 and Amendment No. 1 dated as of October 27, 1982, among SEGCO, ALABAMA and GEORGIA. See Exhibit 10(a)6 herein. (b) 4 - Amended and Restated Unit Power Sales Agreement dated February 18, 1982 and Amendment No. 1 dated May 18, 1982, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI and SCS. See Exhibit 10(a)32 herein. E-12 (b) 5 - Amended and Restated Unit Power Sales Agreement dated May 19, 1982, Amendment No. 1, dated August 30, 1984 and Amendment No. 2, dated October 30, 1987, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI and SCS. See Exhibit 10(a)33 herein. (b) 6 - Unit Power Sales Agreement dated July 19, 1988, between FPC and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)34 herein. (b) 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)35 herein. (b) 8 - Amended Unit Power Sales Agreement dated August 17, 1988, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)36 herein. (b) 9 - Unit Power Sales Agreement dated December 8, 1990, between Tallahassee and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)37 herein. (b) 10 - Transition Energy Agreement dated December 31, 1990, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)39 herein. (b) 11 - Transition Energy Agreement dated December 31, 1990, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)40 herein. (b) 12 - Firm Power Purchase Contract between ALABAMA and AMEA. (Designated in Certificate of Notification, File No. 70- 7212, as Exhibit B.) (b) 13 - 1991 Firm Power Purchase Contract between ALABAMA and AMEA. (Designated in Form U-1, File No. 70-7873, as Exhibit B-1.) (b) 14 - 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)43 herein. (b) 15 - 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)44 herein. (b) 16 - Form of commitment agreement, Amendment No. 1 and Amendment No. 2 with respect to SOUTHERN, ALABAMA, GEORGIA and MISSISSIPPI revolving credits. See Exhibit 10(a)46 herein. E-13 (b) 17 - Long Term Transmission Service Agreement between Entergy Power, Inc. and ALABAMA, MISSISSIPPI and SCS. See Exhibit 10(a)53 herein. * (b) 18 - Amendment No. 2 dated November 4, 1993 and effective June 1, 1994, to Agreement dated January 27, 1959, among SEGCO, ALABAMA and GEORGIA. (b) 19 - Operating Agreement for the Joseph M. Farley Nuclear Plant between ALABAMA and Southern Nuclear dated as of December 23, 1991. See Exhibit 10(a)62 herein. * (b) 20 - The Southern Company Productivity Improvement Plan, Amended and Restated effective January 1, 1994. See Exhibit 10(a)65 herein. * (b) 21 - The Southern Company Executive Productivity Improvement Plan, effective January 1, 1994. See Exhibit 10(a)66 herein. (b) 22 - The Southern Company Employee Savings Plan, Amended and Restated effective January 1, 1989. See Exhibit 10(a)67 herein. (b) 23 - The Southern Company Employee Stock Ownership Plan, Amended and Restated effective January 1, 1989. See Exhibit 10(a)68 herein. * (b) 24 - Pension Plan For Employees of ALABAMA, Amended and Restated effective as of January 1, 1989. See Exhibit 10(a)69 herein. * (b) 25 - The Southern Company Performance Pay Plan, Amended and Restated effective January 1, 1993. See Exhibit 10(a)72 herein. * (b) 26 - Supplemental Benefit Plan for ALABAMA. See Exhibit 10(a)73 herein. * (b) 27 - The Deferred Compensation Plan for the Southern Electric System. See Exhibit 10(a)78 herein. * (b) 28 - The Southern Company Outside Directors Pension Plan. See Exhibit 10(a)77 herein. GEORGIA (c) 1 - Service contracts dated as of January 1, 1984 and Amendment No. 1 dated as of September 6, 1985, between SCS and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SEGCO and SOUTHERN. See Exhibit 10(a)1 herein. (c) 2 - Interchange contract dated October 28, 1988, effective January 1, 1989, between ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)5 herein. E-14 (c) 3 - Agreement dated as of January 27, 1959 and Amendment No. 1 dated as of October 27, 1982, among SEGCO, ALABAMA and GEORGIA. See Exhibit 10(a)6 herein. (c) 4 - Joint Committee Agreement dated as of August 27, 1976, among GEORGIA, OPC, MEAG and Dalton. See Exhibit 10(a)7 herein. (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)8 herein. (c) 6 - Edwin I. Hatch Nuclear Plant Operating Agreement dated as of January 6, 1975, between GEORGIA and OPC. See Exhibit 10(a)9 herein. (c) 7 - Revised and Restated Integrated Transmission System Agreement dated as of November 12, 1990, between GEORGIA and OPC. See Exhibit 10(a)10 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)11 herein. (c) 9 - Plant Hal Wansley Operating Agreement dated as of March 26, 1976, between GEORGIA and OPC. See Exhibit 10(a)12 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)13 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)14 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)15 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)16 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)17 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)18 herein. E-15 (c) 16 - Plant Hal Wansley Operating Agreement dated as of August 27, 1976, between GEORGIA and MEAG. See Exhibit 10(a)19 herein. (c) 17 - Integrated Transmission System Agreement dated as of August 27, 1976, between GEORGIA and Dalton. See Exhibit 10(a)20 herein. (c) 18 - Integrated Transmission System Agreement dated as of August 27, 1976, between GEORGIA and MEAG. See Exhibit 10(a)21 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)22 herein. (c) 20 - Plant Hal Wansley Operating Agreement dated as of April 19, 1977, between GEORGIA and Dalton. See Exhibit 10(a)23 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)24 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)25 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)26 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)27 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)28 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)29 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. See Exhibit 10(a)30 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. See Exhibit 10(a)31 herein. E-16 (c) 29 - Amended and Restated Unit Power Sales Agreement dated February 18, 1982 and Amendment No. 1 dated May 18, 1982, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI and SCS. See Exhibit 10(a)32 herein. (c) 30 - Amended and Restated Unit Power Sales Agreement dated May 19, 1982, Amendment No. 1, dated August 30, 1984 and Amendment No. 2 dated October 30, 1987, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI and SCS. See Exhibit 10(a)33 herein. (c) 31 - Unit Power Sales Agreement dated July 19, 1988, between FPC and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)34 herein. (c) 32 - Amended Unit Power Sales Agreement dated July 20, 1988, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)35 herein. (c) 33 - Amended Unit Power Sales Agreement dated August 17, 1988, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)36 herein. (c) 34 - Unit Power Sales Agreement dated December 8, 1990, between Tallahassee and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)37 herein. (c) 35 - Power Purchase Agreement dated as of December 3, 1993 between GEORGIA and FPC. See Exhibit 10(a)57 herein. (c) 36 - Transition Energy Agreement dated December 31, 1990, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)39 herein. (c) 37 - Transition Energy Agreement dated December 31, 1990, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)40 herein. (c) 38 - Rocky Mountain Pumped Storage Hydroelectric Project Ownership Participation Agreement dated November 18, 1988, between OPC and GEORGIA. See Exhibit 10(a)41 herein. (c) 39 - Rocky Mountain Pumped Storage Hydroelectric Project Operating Agreement dated November 18, 1988, between OPC and GEORGIA. See Exhibit 10(a)42 herein. (c) 40 - Form of commitment agreement, Amendment No. 1 and Amendment No. 2 with respect to SOUTHERN, ALABAMA, GEORGIA and MISSISSIPPI revolving credits. See Exhibit 10(a)46 herein. E-17 (c) 41 - Block Power Sale Agreement between GEORGIA and OPC dated as of November 12, 1990. See Exhibit 10(a)47 herein. (c) 42 - Coordination Services Agreement between GEORGIA and OPC dated as of November 12, 1990. See Exhibit 10(a)48 herein. (c) 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. See Exhibit 10(a)49 herein. (c) 44 - Integrated Transmission System Agreement, Power Sale and Coordination Umbrella Agreement between GEORGIA and OPC dated as of November 12, 1990. See Exhibit 10(a)50 herein. (c) 45 - Revised and Restated Integrated Transmission System Agreement between GEORGIA and Dalton dated as of December 7, 1990. See Exhibit 10(a)51 herein. (c) 46 - Revised and Restated Integrated Transmission System Agreement between GEORGIA and MEAG dated as of December 7, 1990. See Exhibit 10(a)52 herein. (c) 47 - 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)54 herein. (c) 48 - Plant McIntosh Combustion Turbine Purchase and Ownership Participation Agreement between GEORGIA and SAVANNAH dated as of December 15, 1992. See Exhibit 10(a)55 herein. (c) 49 - Plant McIntosh Combustion Turbine Operating Agreement between GEORGIA and SAVANNAH dated as of December 15, 1992. See Exhibit 10(a)56 herein. (c) 50 - Certificate of Limited Partnership of Georgia Power Capital. (Designated in Certificate of Notification, File No. 70-8461, as Exhibit B.) (c) 51 - 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) 52 - 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) 53 - 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-18 * (c) 54 - Amendment No. 1 dated as of June 15, 1994, to the Plant Robert W. Scherer Unit Number Four Amended and Restated Purchase and Ownership Participation Agreement. See Exhibit 10(a)60 herein. * (c) 55 - Amendment No. 1 dated as of June 15, 1994, to the Plant Robert W. Scherer Unit Number Four Operating Agreement. See Exhibit 10(a)61 herein. * (c) 56 - Amendment No. 2 dated November 4, 1993 and effective June 1, 1994, to Agreement dated as of January 27, 1959, among SEGCO, ALABAMA and GEORGIA. See Exhibit 10(b)18 herein. (c) 57 - Nuclear Services Agreement between Southern Nuclear and GEORGIA dated as of October 31, 1991. See Exhibit 10(a)63 herein. (c) 58 - Nuclear Managing Board Agreement among GEORGIA, OPC, MEAG and Dalton dated as of November 12, 1990. See Exhibit 10(a)64 herein. * (c) 59 - The Southern Company Productivity Improvement Plan, Amended and Restated effective January 1, 1994. See Exhibit 10(a)65 herein. * (c) 60 - The Southern Company Executive Productivity Improvement Plan, effective January 1, 1994. See Exhibit 10(a)66 herein. (c) 61 - The Southern Company Employee Savings Plan, Amended and Restated effective January 1, 1989. See Exhibit 10(a)67 herein. (c) 62 - The Southern Company Employee Stock Ownership Plan, Amended and Restated effective January 1, 1989. See Exhibit 10(a)68 herein. * (c) 63 - Pension Plan For Employees of GEORGIA, Amended and Restated effective as of January 1, 1989. See Exhibit 10(a)70 herein. * (c) 64 - The Southern Company Performance Pay Plan, Amended and Restated effective January 1, 1993. See Exhibit 10(a)72 herein. * (c) 65 - Supplemental Benefit Plan for GEORGIA. See Exhibit 10(a)74 herein. * (c) 66 - The Deferred Compensation Plan for the Southern Electric System. See Exhibit 10(a)78 herein. * (c) 67 - The Southern Company Outside Directors Pension Plan. See Exhibit 10(a)77 herein. GULF (d) 1 - Service contracts dated as of January 1, 1984 and Amendment No. 1 dated as of September 6, 1985, between SCS and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SEGCO and SOUTHERN. See Exhibit 10(a)1 herein. E-19 (d) 2 - Interchange contract dated October 28, 1988, effective January 1, 1989, between ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)5 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)28 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)29 herein. (d) 5 - Amended and Restated Unit Power Sales Agreement dated February 18, 1982 and Amendment No. 1 dated May 18, 1982, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI and SCS. See Exhibit 10(a)32 herein. (d) 6 - Amended and Restated Unit Power Sales Agreement dated May 19, 1982, Amendment No. 1 dated August 30, 1984 and Amendment No. 2 dated October 30, 1987, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI and SCS. See Exhibit 10(a)33 herein. (d) 7 - Unit Power Sales Agreement dated July 19, 1988, between FPC and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)34 herein. (d) 8 - Amended Unit Power Sales Agreement dated July 20, 1988, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)35 herein. (d) 9 - Amended Unit Power Sales Agreement dated August 17, 1988, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)36 herein. (d) 10 - 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) 11 - Unit Power Sales Agreement dated December 8, 1990, between Tallahassee and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)37 herein. (d) 12 - Transition Energy Agreement dated December 31, 1990, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)39 herein. (d) 13 - Transition Energy Agreement dated December 31, 1990, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)40 herein. E-20 * (d) 14 - The Southern Company Productivity Improvement Plan, Amended and Restated effective January 1, 1994. See Exhibit 10(a)65 herein. * (d) 15 - The Southern Company Executive Productivity Improvement Plan, effective January 1, 1994. See Exhibit 10(a)66 herein. (d) 16 - The Southern Company Employee Savings Plan, Amended and Restated effective January 1, 1989. See Exhibit 10(a)67 herein. (d) 17 - The Southern Company Employee Stock Ownership Plan, Amended and Restated effective January 1, 1989. See Exhibit 10(a)68 herein. * (d) 18 - Pension Plan For Employees of GULF, Amended and Restated effective as of January 1, 1989. * (d) 19 - The Southern Company Performance Pay Plan, Amended and Restated effective January 1, 1993. See Exhibit 10(a)72 herein. * (d) 20 - Supplemental Benefit Plan for GULF. * (d) 21 - The Deferred Compensation Plan for the Southern Electric System. See Exhibit 10(a)78 herein. * (d) 22 - The Southern Company Outside Directors Pension Plan. See Exhibit 10(a)77 herein. MISSISSIPPI (e) 1 - Service contracts dated as of January 1, 1984 and Amendment No. 1 dated September 6, 1985, between SCS and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SEGCO and SOUTHERN. See Exhibit 10(a)1 herein. (e) 2 - Interchange contract dated October 28, 1988, effective January 1, 1989, between ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)5 herein. (e) 3 - Amended and Restated Unit Power Sales Agreement dated February 18, 1982 and Amendment No. 1 dated May 18, 1982, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI and SCS. See Exhibit 10(a)32 herein. (e) 4 - Amended and Restated Unit Power Sales Agreement dated May 19, 1982, Amendment No. 1 dated August 30, 1984, and Amendment No. 2 dated October 30, 1987, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI and SCS. See Exhibit 10(a)33 herein. (e) 5 - Unit Power Sales Agreement dated July 19, 1988, between FPC and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)34 herein. E-21 (e) 6 - Amended Unit Power Sales Agreement dated July 20, 1988, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)35 herein. (e) 7 - Amended Unit Power Sales Agreement dated August 17, 1988, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)36 herein. (e) 8 - Unit Power Sales Agreement dated December 8, 1990, between Tallahassee and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)37 herein. (e) 9 - Transition Energy Agreement dated December 31, 1990, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)39 herein. (e) 10 - Transition Energy Agreement dated December 31, 1990, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)40 herein. (e) 11 - 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)45 herein. (e) 12 - Form of commitment agreement, Amendment No. 1 and Amendment No. 2 with respect to SOUTHERN, ALABAMA, GEORGIA and MISSISSIPPI revolving credits. See Exhibit 10(a)46 herein. (e) 13 - Long Term Transmission Service Agreement between Entergy Power, Inc. and ALABAMA MISSISSIPPI and SCS. See Exhibit 10(a)53 herein. * (e) 14 - The Southern Company Productivity Improvement Plan, Amended and Restated effective January 1, 1994. See Exhibit 10(a)65 herein. * (e) 15 - The Southern Company Executive Productivity Improvement Plan, effective January 1, 1994. See Exhibit 10(a)66 herein. (e) 16 - The Southern Company Employee Savings Plan, Amended and Restated effective January 1, 1989. See Exhibit 10(a)67 herein. (e) 17 - The Southern Company Employee Stock Ownership Plan, Amended and Restated effective January 1, 1989. See Exhibit 10(a)68 herein. * (e) 18 - Pension Plan For Employees of MISSISSIPPI, Amended and Restated effective as of January 1, 1989. * (e) 19 - The Southern Company Performance Pay Plan, Amended and Restated effective January 1, 1993. See Exhibit 10(a)72 herein. E-22 * (e) 20 - Supplemental Benefit Plan for MISSISSIPPI. * (e) 21 - The Deferred Compensation Plan for the Southern Electric System. See Exhibit 10(a)78 herein. * (e) 22 - The Southern Company Outside Directors Pension Plan. See Exhibit 10(a)77 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 October 28, 1988, effective January 1, 1989, between ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)5 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)34 herein. (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)35 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)36 herein. (f) 6 - Unit Power Sales Agreement dated December 8, 1990, between Tallahassee and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)37 herein. (f) 7 - Transition Energy Agreement dated December 31, 1990, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)39 herein. (f) 8 - Transition Energy Agreement dated December 31, 1990, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)40 herein. (f) 9 - Plant McIntosh Combustion Turbine Purchase and Ownership Participation Agreement between GEORGIA and SAVANNAH dated as of December 15, 1992. See Exhibit 10(a)55 herein. (f) 10 - Plant McIntosh Combustion Turbine Operating Agreement between GEORGIA and SAVANNAH dated December 15, 1992. See Exhibit 10(a)56 herein. E-23 * (f) 11 - The Southern Company Productivity Improvement Plan, Amended and Restated effective January 1, 1994. See Exhibit 10(a)65 herein. * (f) 12 - The Southern Company Executive Productivity Improvement Plan, effective January 1, 1994. See Exhibit 10(a)66 herein. (f) 13 - The Southern Company Employee Savings Plan, Amended and Restated effective January 1, 1989. See Exhibit 10(a)67 herein. (f) 14 - The Southern Company Employee Stock Ownership Plan, Amended and Restated effective January 1, 1989. See Exhibit 10(a)68 herein. * (f) 15 - Employees' Retirement Plan of SAVANNAH, Amended and Restated effective January 1, 1989. * (f) 16 - Supplemental Executive Retirement Plan of SAVANNAH. * (f) 17 - Deferred Compensation Plan for Key Employees of SAVANNAH. * (f) 18 - The Southern Company Performance Pay Plan, Amended and Restated effective January 1, 1993. See Exhibit 10(a)72 herein. * (f) 19 - The Southern Company Outside Directors Pension Plan. See Exhibit 10(a)77 herein. * (f) 20 - Deferred Compensation Plan for Directors of SAVANNAH. (21) *Subsidiaries of Registrants - 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. GULF * (d) - The consent of Arthur Andersen LLP is contained herein at page IV-9. E-24 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. E-25 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. (27) Financial Data Schedule SOUTHERN (a) - Financial Data Schedule. (Designated in Form 8-K dated February 15, 1995, File No. 1-3526, as Exhibit 27.) ALABAMA (b) - Financial Data Schedule. (Designated in Form 8-K dated February 15, 1995, File No. 1-3164, as Exhibit 27.) GEORGIA (c) - Financial Data Schedule. (Designated in Form 8-K dated February 15, 1995, File No. 1-6468, as Exhibit 27.) GULF (d) - Financial Data Schedule. (Designated in Form 8-K dated February 15, 1995, File No. 0-2429, as Exhibit 27.) MISSISSIPPI (e) - Financial Data Schedule. (Designated in Form 8-K dated February 15, 1995, File No. 0-6849, as Exhibit 27.) SAVANNAH (f) - Financial Data Schedule. (Designated in Form 8-K dated February 15, 1995, File No. 1-5072, as Exhibit 27.) EX-4.(D)2 2 EXHIBIT 4(D)2 Exhibit 4(d)2 GEORGIA POWER COMPANY to CHEMICAL BANK (Successor by Merger to Chemical Bank New York Trust Company and The New York Trust Company), Trustee SUPPLEMENTAL INDENTURE Dated as of June 1, 1994 Providing among other things for FIRST MORTGAGE BONDS 6.35% Pollution Control Series due May 1, 2019 SUPPLEMENTAL INDENTURE, dated as of June 1, 1994, made and entered into by and between GEORGIA POWER COMPANY, a corporation organized and existing under the laws of the State of Georgia with its principal office in Atlanta, Fulton County, Georgia (hereinafter commonly referred to as the "Company"), and CHEMICAL BANK (successor by merger to Chemical Bank New York Trust Company and The New York Trust Company), a corporation organized and existing under the laws of the State of New York, with its principal corporate trust office in the Borough of Manhattan, The City of New York (hereinafter commonly referred to as the "Trustee"), as Trustee under the Indenture dated as of March 1, 1941 originally entered into between the Company and The New York Trust Company, as Trustee (hereinafter sometimes referred to as the "Original Indenture" and said The New York Trust Company being hereinafter sometimes referred to as the "Original Trustee"), securing bonds issued and to be issued as provided therein, which Original Indenture has heretofore been supplemented and amended by various supplemental indentures (which Original Indenture as so supplemented and amended is hereinafter sometimes referred to as the "Indenture"). WHEREAS the Company and the Original Trustee have executed and delivered the Original Indenture for the purpose of securing an issue of bonds of the 3-1/2% Series due 1971 described therein and such additional bonds as may from time to time be issued under and in accordance with the terms of the Indenture, the aggregate principal amount of bonds to be secured thereby being presently limited to $5,000,000,000 at any one time outstanding (except as provided in Section 2.01 of the Indenture), and the Original Indenture is of record in the public office of each county in the States of Georgia, Alabama, Tennessee and South Carolina, and in the public office of the District of Columbia, in which this Supplemental Indenture is to be recorded, and the Original Indenture is on file at the principal corporate trust office of the Trustee; and WHEREAS the Company and the Trustee have executed and delivered various supplemental indentures for the purpose, among others, of further securing said bonds and of creating the bonds of other series described therein, which supplemental indentures described and set forth additional property conveyed thereby and are also of record in the public offices of some or all of the counties in the States of Georgia, Alabama, Tennessee and South Carolina in which this Supplemental Indenture is to be recorded, and one of which supplemental indentures is also of record in the public office of the District of Columbia, and said supplemental indentures are also on file at the principal corporate trust office of the Trustee; and WHEREAS the Company and the Trustee have executed and delivered the Supplemental Indenture dated as of May 15, 1991, by which the third paragraph of Section 1.02 of the Indenture was amended to read as follows: "The term 'Board of Directors' shall mean the Board of Directors of the Company or any committee of the Board of Directors of the Company authorized, with respect to any particular matter, to exercise the power of the Board of Directors of the Company."; and WHEREAS the Indenture provides for the issuance of bonds thereunder in one or more series and the Company, by appropriate corporate action in conformity with the terms of the Indenture, has duly determined to create a series of bonds under the Indenture to be designated as "6.35% Pollution Control Series due May 1, 2019" (hereinafter sometimes referred to as the "new Bonds"), each of which bonds shall also bear the descriptive title "First Mortgage Bond", the bonds of such series to bear interest at the annual rate and to mature on the date designated in the title thereof; and WHEREAS by a Plan of Merger dated June 11, 1959, effective September 8, 1959, between The New York Trust Company and Chemical Corn Exchange Bank, said The New York Trust Company was merged into said Chemical Corn Exchange Bank which continued under the name and style of Chemical Bank New York Trust Company; and by a Plan of Merger dated November 26, 1968, effective February 17, 1969, among Chemical New York Corporation, Chemical Bank New York Trust Company and Chemical Bank, said Chemical Bank New York Trust Company was merged into said Chemical Bank which continued under the name and style of Chemical Bank; and by virtue of said mergers Chemical Bank has become successor to The New York Trust Company and Chemical Bank New York Trust Company, as Trustee under the Indenture, and has become vested with all of the title to the mortgaged property and trust estate; and with the trusts, powers, discretions, immunities, privileges and all other matters as were vested in said The New York Trust Company and said Chemical Bank New York Trust Company under the Indenture, with like effect as if originally named as Trustee therein; and WHEREAS each of the new Bonds is to be substantially in the following form, with appropriate insertions and deletions, to wit: -2- [FORM OF NEW BOND] GEORGIA POWER COMPANY FIRST MORTGAGE BOND, 6.35% POLLUTION CONTROL SERIES DUE MAY 1, 2019 No. $ Georgia Power Company, a Georgia corporation (hereinafter called the "Company"), for value received, hereby promises to pay to First Union National Bank of Georgia, Charlotte, North Carolina (as trustee under a Trust Indenture dated as of May 1, 1989 of the Development Authority of Burke County, relating to the Revenue Bonds (hereinafter mentioned)), or registered assigns, the principal sum of _____________________ Dollars on May 1, 2019, and to pay to the registered owner hereof interest on said sum from the latest semi-annual interest payment date to which interest has been paid on the bonds of this series preceding the date hereof, unless the date hereof be an interest payment date to which interest is being paid, in which case from the date hereof, or unless the date hereof is prior to November 1, 1994, in which case from June 21, 1994, at the rate per annum, until the principal hereof shall have become due and payable, specified in the title of this bond, payable on May 1 and November 1 in each year. The obligation of the Company to make payments with respect to the principal of and premium, if any, and interest on bonds of this series shall be fully or partially, as the case may be, satisfied and discharged to the extent that, at any time that any such payment shall be due, the Company shall have made payments as required by the Company's Note dated May 9, 1989 issued pursuant to Section 3.2 of the Loan Agreement dated as of May 1, 1989 between the Development Authority of Burke County and the Company, relating to the Revenue Bonds (hereinafter mentioned), sufficient to pay fully or partially the then due principal of and premium, if any, and interest on the Development Authority of Burke County (Georgia) Pollution Control Revenue Bonds (Georgia Power Company Plant Vogtle Project), First Series 1989 (hereinafter referred to as "Revenue Bonds") or there shall be in the Bond Fund established pursuant to the Trust Indenture dated as of May 1, 1989 of the Development Authority of Burke County to First Union National Bank of Georgia, Charlotte, North Carolina, as trustee, relating to the Revenue Bonds (hereinafter referred to as the "Revenue Indenture"), sufficient available funds to pay -3- fully or partially the then due principal of and premium, if any, and interest on the Revenue Bonds. This bond is one of the bonds issued and to be issued from time to time under and in accordance with and all secured by an indenture of mortgage or deed of trust dated as of March 1, 1941 given by the Company to The New York Trust Company, to which Chemical Bank is successor by merger (hereinafter sometimes referred to as the "Trustee"), as Trustee, and indentures supplemental thereto, to which indenture and indentures supplemental thereto (hereinafter referred to collectively as the "Indenture") reference is hereby made for a description of the property mortgaged and pledged, the nature and extent of the security and the rights, duties and immunities thereunder of the Trustee and the rights of the holders of said bonds and of the Trustee and of the Company in respect of such security. By the terms of the Indenture the bonds to be secured thereby are issuable in series which may vary as to date, amount, date of maturity, rate of interest and in other respects as in the Indenture provided. Upon notice given by mailing the same, by first class mail postage prepaid, not less than thirty nor more than forty-five days prior to the date fixed for redemption to each registered holder of a bond to be redeemed (in whole or in part) at the last address of such holder appearing on the registry books, any or all of the bonds of this series may be redeemed by the Company at any time and from time to time by the payment of the principal amount thereof and accrued interest thereon to the date fixed for redemption, if redeemed by the operation of the improvement fund or the replacement fund provisions of the Indenture or by the use of proceeds of released property, as more fully set forth in the Indenture. In the manner provided in the Indenture, the bonds of this series shall also be redeemable in whole, by payment of the principal amount thereof plus accrued interest thereon to the date fixed for redemption, upon receipt by the Trustee of a written demand from the trustee under the Revenue Indenture stating that the principal amount of all the Revenue Bonds then outstanding under the Revenue Indenture has been declared immediately due and payable pursuant to the provisions of Section 10.02 of the Revenue Indenture. As provided in the Indenture, the date fixed for such redemption may be not more than 180 days after receipt by the Trustee of the aforesaid written demand and shall be specified in a notice of redemption given not more than 10 nor less than 5 days prior to the date so fixed for such redemption. As in the Indenture provided, such notice of redemption shall be rescinded and become null and void -4- for all purposes under the Indenture upon rescission of the aforesaid written demand or the aforesaid declaration of maturity under the Revenue Indenture, and thereupon no redemption of the bonds of this series and no payments in respect thereof as specified in such notice of redemption shall be effected or required. In the manner provided in the Indenture, the bonds of this series are also redeemable in whole or in part upon receipt by the Trustee of a written demand from the trustee under the Revenue Indenture specifying a principal amount of Revenue Bonds which have been called for redemption pursuant to Section 4.01(c)(iv) of the Revenue Indenture. As provided in the Indenture, bonds of this series equal in principal amount to the principal amount of such Revenue Bonds to be redeemed will be redeemed on the date fixed for redemption of the Revenue Bonds at the principal amount of such bonds of this series and accrued interest thereon to the date fixed for redemption, together with a premium equal to a percentage of the principal amount thereof determined as set forth in the following tabulation: If Redeemed During the Twelve Months' Period Ending June 20 Regular Redemption Year Premium 2000 2 % 2001 1 1/2% 2002 1 % 2003 1/2% and without premium if redeemed on or after June 21, 2003. In case of certain defaults as specified in the Indenture, the principal of this bond may be declared or may become due and payable on the conditions, at the time, in the manner and with the effect provided in the Indenture. No recourse shall be had for the payment of the principal of or premium, if any, or interest on this bond, or for any claim based hereon, or otherwise in respect hereof or of the Indenture, to or against any incorporator, stockholder, director or officer, past, present or future, as such, of the Company, or of any predecessor or successor company, either directly or through the Company, or such predecessor or successor company, under any constitution or statute or rule of law, or by the enforcement of -5- any assessment or penalty, or otherwise, all such liability of incorporators, stockholders, directors and officers being waived and released by the holder and owner hereof by the acceptance of this bond and being likewise waived and released by the terms of the Indenture. This bond is transferable by the registered owner hereof, in person or by attorney duly authorized, at the principal corporate trust office of the Trustee, in the Borough of Manhattan, The City of New York, but only in the manner prescribed in the Indenture, upon the surrender and cancellation of this bond, and upon any such transfer a new registered bond or bonds, without coupons, of the same series and maturity date and for the same aggregate principal amount, in authorized denominations, will be issued to the transferee in exchange herefor. The Company and the Trustee may deem and treat the person in whose name this bond is registered as the absolute owner for the purpose of receiving payment of or on account of the principal, premium, if any, and interest due hereon and for all other purposes. Registered bonds of this series shall be exchangeable for registered bonds of other authorized denominations having the same aggregate principal amount, in the manner and upon the conditions prescribed in the Indenture. However, notwithstanding the provisions of the Indenture, no charge shall be made upon any transfer or exchange of bonds of this series other than for any tax or taxes or other governmental charge required to be paid by the Company. This bond shall not be valid or become obligatory for any purpose unless and until it shall have been authenticated by the execution by the Trustee or its successor in trust under the Indenture of the certificate hereon. IN WITNESS WHEREOF, Georgia Power Company has caused this bond to be executed in its name by its President or one of its Vice Presidents by his signature or a facsimile thereof, and its corporate seal or a facsimile thereof to be hereto affixed and attested by its Secretary or one of its Assistant Secretaries by his signature or a facsimile thereof. Dated, GEORGIA POWER COMPANY By: Attest: -6- TRUSTEE'S CERTIFICATE This bond is one of the bonds, of the series designated therein, described in the within-mentioned Indenture. CHEMICAL BANK, as Trustee By: Authorized Officer AND WHEREAS all acts and things necessary to make the new Bonds of each series, when authenticated by the Trustee and issued as in the Indenture and this Supplemental Indenture provided, the valid, binding and legal obligations of the Company, and to constitute the Indenture and this Supplemental Indenture valid, binding and legal instruments for the security thereof, have been done and performed, and the creation, execution and delivery of the Indenture and this Supplemental Indenture and the creation, execution and issue of bonds subject to the terms hereof and of the Indenture, have in all respects been duly authorized; NOW, THEREFORE, in consideration of the premises, and of the acceptance and purchase by the holders thereof of the bonds issued and to be issued under the Indenture and of the sum of One Dollar duly paid by the Trustee to the Company, and of other good and valuable considerations, the receipt whereof is hereby acknowledged, and for the purpose of further securing the due and punctual payment of the principal of and premium, if any, and interest on the bonds issued and now outstanding under the Indenture, and the $50,000,000 principal amount of new Bonds proposed to be issued and all other bonds which shall be issued under the Indenture, or the Indenture as supplemented and amended, and for the purpose of further securing the faithful performance and observance of all covenants and conditions therein and in any indenture supplemental thereto set forth, the Company has given, granted, bargained, sold, transferred, assigned, hypothecated, pledged, mortgaged, warranted, aliened and conveyed and by these presents does give, grant, bargain, sell, transfer, assign, hypothecate, pledge, mortgage, warrant, alien and convey unto Chemical Bank, as Trustee, as provided in the Indenture, and its successor or successors in the trust thereby and hereby created, and to its or their assigns forever, all the right, title and interest of the Company in and to all premises, property, franchises and rights of every kind and description, real, personal and mixed, tangible and intangible, now owned or hereafter acquired by the Company (excepting, -7- however, that which is by the Indenture expressly reserved from the lien and effect thereof), including but not limited to the property described in Exhibit "A" attached hereto and by this reference made a part hereof; unless otherwise noted, such property is located in the State of Georgia and unless otherwise noted, references herein to a county or counties shall mean such county or counties in the State of Georgia; TOGETHER WITH all and singular the tenements, hereditaments and appurtenances belonging or in anywise appertaining to the property, rights and franchises or any thereof, referred to in the foregoing granting clauses, with the reversion and reversions, remainder and remainders and (subject to the provisions of Article X of the Indenture) the tolls, rents, revenues, issues, earnings, income, products and profits thereof, and all the estate, right, title and interest and claim whatsoever, at law as well as in equity, which the Company now has or may hereafter acquire in and to the aforesaid property, rights and franchises and every part and parcel thereof. TO HAVE AND TO HOLD all said property, rights and franchises hereby conveyed, assigned, pledged or mortgaged, or intended so to be, unto the Trustee, its successor or successors in trust, and their assigns forever; BUT IN TRUST, NEVERTHELESS, with power of sale, for the equal and proportionate benefit and security of the holders of all bonds and interest coupons now or hereafter issued under the Indenture, as supplemented and amended, pursuant to the provisions thereof, and for the enforcement of the payment of said bonds and coupons when payable and for the performance of and compliance with the covenants and conditions of the Indenture, as supplemented and amended, without any preference, distinction or priority as to lien or otherwise of any bond or bonds over others by reason of the difference in time of the actual issue, sale or negotiation thereof or for any other reason whatsoever, except as otherwise expressly provided in the Indenture, as supplemented and amended; and so that each and every bond now or hereafter issued thereunder shall have the same lien; and so that the principal of and premium, if any, and interest on every such bond shall, subject to the terms thereof, be equally and proportionately secured thereby and hereby, as if it had been made, executed, delivered, sold and negotiated simultaneously with the execution and delivery of the Original Indenture. AND IT IS EXPRESSLY DECLARED that all bonds issued and secured under the Indenture and hereunder are to be issued, authenticated and delivered, and all said property, rights and -8- franchises hereby and by the Indenture conveyed, assigned, pledged or mortgaged, or intended so to be (including all the right, title and interest of the Company in and to any and all premises, property, franchises and rights of every kind and description, real, personal and mixed, tangible and intangible, thereafter acquired by the Company and whether or not specifically described in the Original Indenture or in any indenture supplemental thereto, except any therein expressly excepted), are to be dealt with and disposed of, under, upon and subject to the terms, conditions, stipulations, covenants, agreements, trusts and uses and purposes expressed in the Indenture and herein, and it is hereby agreed as follows: SECTION 1. There is hereby created a series of bonds designated as hereinabove in the fourth Whereas clause set forth, each of which shall contain suitable provisions with respect to the matters hereinafter in this Section specified, and the form thereof shall be substantially as hereinbefore set forth. New Bonds shall mature on the date specified in the title thereof, and the definitive bonds of such series may be issued only as registered bonds without coupons. New Bonds shall be in such denominations as the Board of Directors shall approve, and execution and delivery to the Trustee for authentication shall be conclusive evidence of such approval. The serial numbers of new Bonds shall be such as may be approved by any officer of the Company, the execution thereof by any such officer to be conclusive evidence of such approval. New Bonds, until the principal thereof shall have become due and payable, shall bear interest at the annual rate designated in the title thereof, payable semi-annually on May 1 and November 1 in each year, commencing November 1, 1994. New Bonds shall be dated the date of authentication. The principal of and premium, if any, and interest on the new Bonds shall be payable in any coin or currency of the United States of America which at the time of payment is legal tender for public and private debts, at the office or agency of the Company in the Borough of Manhattan, The City of New York, designated for that purpose. New Bonds may be transferred at the principal corporate trust office of the Trustee, in the Borough of Manhattan, The City of New York. New Bonds shall be exchangeable for other bonds of the same series, in the manner and upon the conditions prescribed in the Indenture, upon the surrender of such new Bonds at said principal corporate trust office of the Trustee. However, notwithstanding the provisions of Section 2.05 of the Indenture, no charge shall be made upon any transfer or exchange -9- of new Bonds other than for any tax or taxes or other governmental charge required to be paid by the Company. Any or all of the new Bonds shall be redeemable at any time and from time to time, prior to maturity, upon notice given by mailing the same, by first class mail postage prepaid, not less than thirty nor more than forty-five days prior to the date fixed for redemption to each registered holder of a bond to be redeemed (in whole or in part) at the last address of such holder appearing on the registry books, at the principal amount thereof and accrued interest thereon, if any, to the date fixed for redemption, if redeemed by the operation of Section 4 of the Supplemental Indenture dated as of November 1, 1962 or of the improvement fund provisions of any supplemental indenture or by the use of proceeds of released property. SECTION 2. The obligation of the Company to make payments with respect to the principal of and premium, if any, and interest on the new Bonds shall be fully or partially, as the case may be, satisfied and discharged, to the extent that, at the time that any such payment shall be due, the Company shall have made payments as required by the Company's Note dated May 9, 1989 issued pursuant to Section 3.2 of the Loan Agreement dated as of May 1, 1989 between the Development Authority of Burke County and the Company, relating to the Burke Bonds (hereinafter defined), sufficient to pay fully or partially the then due principal of and premium, if any, and interest on the Development Authority of Burke County (Georgia) Pollution Control Revenue Bonds (Georgia Power Company Plant Vogtle Project), First Series 1989 (hereinafter referred to as the "Burke Bonds") or there shall be in the related Bond Fund established pursuant to the Trust Indenture dated as of May 1, 1989 of the Development Authority of Burke County to First Union National Bank of Georgia, Charlotte, North Carolina, as trustee, relating to the Burke Bonds (hereinafter referred to as the "Burke Indenture"), sufficient available funds to pay fully or partially the then due principal of and premium, if any, and interest on the Burke Bonds. The Trustee may conclusively presume that the obligation of the Company to make payments with respect to the principal of and premium, if any, and interest on the new Bonds shall have been fully satisfied and discharged unless and until the Trustee shall have received a written notice from the trustee under the Burke Indenture stating (i) that timely payment of principal of or premium, if any, or interest on the Burke Bonds has not been made, (ii) that there are not sufficient available funds in such Bond Fund to make such payment and (iii) the amount of funds required to make such payment. -10- In addition to the redemption as provided in Section 1 hereof, the new Bonds shall also be redeemable in whole upon receipt by the Trustee of a written demand for the redemption of the new Bonds (hereinafter called "Redemption Demand") from the trustee under the Burke Indenture stating that the principal amount of all the Burke Bonds then outstanding under the Burke Indenture has been declared immediately due and payable pursuant to the provisions of Section 10.02 of the Burke Indenture, specifying the date from which unpaid interest on the Burke Bonds has then accrued and stating that such declaration of maturity has not been rescinded. The Trustee shall within 10 days of receiving the Redemption Demand mail a copy thereof to the Company stamped or otherwise marked to indicate the date of receipt by the Trustee. The Company shall fix a redemption date for the redemption so demanded (herein called the "Demand Redemption") and shall mail to the Trustee notice of such date at least 30 days prior thereto. The date fixed for Demand Redemption may be any day not more than 180 days after receipt by the Trustee of the Redemption Demand. If the Trustee does not receive such notice from the Company within 150 days after receipt by the Trustee of the Redemption Demand, the date for Demand Redemption shall be deemed fixed at the 180th day after such receipt. The Trustee shall mail notice of the date fixed for Demand Redemption (hereinafter called the "Demand Redemption Notice") to the trustee under the Burke Indenture (and the registered holders of the new Bonds if other than said trustee) not more than 10 nor less than 5 days prior to the date fixed for Demand Redemption, provided, however, that the Trustee shall mail no Demand Redemption Notice (and no Demand Redemption shall be made) if prior to the mailing of the Demand Redemption Notice the Trustee shall have received written notice of rescission of the Redemption Demand from the trustee under the Burke Indenture. Demand Redemption of the new Bonds shall be at the principal amount thereof, plus accrued interest thereon to the date fixed for redemption, and such amount shall become and be due and payable on the date fixed for Demand Redemption as above provided. Anything in this paragraph contained to the contrary notwithstanding, if, after mailing of the Demand Redemption Notice and prior to the date fixed for Demand Redemption, the Trustee shall have been advised in writing by the trustee under the Burke Indenture that the Redemption Demand has been rescinded, the Demand Redemption Notice shall thereupon, without further act of the Trustee or the Company, be rescinded and become null and void for all purposes hereunder and no redemption of the new Bonds and no payments in respect thereof as specified in the Demand Redemption Notice shall be effected or required. The new Bonds shall also be redeemable in whole at any time, or in part from time to time (hereinafter called the "Regular -11- Redemption"), upon receipt by the Trustee of a written demand (hereinafter referred to as the "Regular Redemption Demand") from the trustee under the Burke Indenture stating: (1) the principal amount of Burke Bonds to be redeemed pursuant to Section 4.01(c)(iv) of the Burke Indenture; (2) the date of such redemption and that notice thereof has been given as required by the Burke Indenture; (3) that the Trustee shall call for redemption on the stated date fixed for redemption of the Burke Bonds a principal amount of the new Bonds equal to the principal amount of Burke Bonds to be redeemed; and (4) that the trustee under the Burke Indenture, as holder of all the new Bonds then outstanding, waives notice of such redemption. The Trustee may conclusively presume the statements contained in the Regular Redemption Demand to be correct. Regular Redemption of the new Bonds shall be at the principal amount thereof and accrued interest thereon to the date fixed for redemption, together with a premium equal to a percentage of the principal amount thereof determined as set forth in the tabulation appearing in the form of the bond hereinbefore set forth, and such amount shall become and be due and payable, subject to the first paragraph of this Section 2, on the date fixed for such Regular Redemption, which shall be the date specified pursuant to item (2) of the Regular Redemption Demand as above provided. SECTION 3. The Company covenants that the provisions of Section 4 of the Supplemental Indenture dated as of November 1, 1962, shall be in full force and effect so long as any new Bonds shall be outstanding under the Indenture. SECTION 4. As supplemented by this Supplemental Indenture, the Indenture is in all respects ratified and confirmed, and the Indenture and this Supplemental Indenture shall be read, taken and construed as one and the same instrument. SECTION 5. Nothing in this Supplemental Indenture contained shall, or shall be construed to, confer upon any person other than a holder of bonds issued under the Indenture, as supplemented and amended, the Company and the Trustee any right or interest to avail himself of any benefit under any provision of the Indenture or of this Supplemental Indenture. SECTION 6. The Trustee assumes no responsibility for or in respect of the validity or sufficiency of this Supplemental Indenture or the due execution hereof by the Company or for or in respect of the recitals and statements contained herein, all of which recitals and statements are made solely by the Company. SECTION 7. This Supplemental Indenture may be executed in several counterparts and all such counterparts executed and -12- delivered, each as an original, shall constitute but one and the same instrument. SECTION 8. Although this Supplemental Indenture, for convenience and for the purposes of reference, is dated as of the day and year first above written, the actual dates of execution by the Company and the Trustee are as indicated by their respective acknowledgments hereto annexed. IN WITNESS WHEREOF, said Georgia Power Company has caused this Supplemental Indenture to be executed in its corporate name by its President or one of its Vice Presidents and its corporate seal to be hereunto affixed and to be attested by its Secretary or one of its Assistant Secretaries, and said Chemical Bank, to evidence its acceptance hereof, has caused this Supplemental Indenture to be executed in its corporate name by one of its Vice Presidents, Senior Trust Officers or Trust Officers and its corporate seal to be hereunto affixed and to be attested by one of its Senior Trust Officers, Trust Officers, Assistant Trust Officers or Assistant Secretaries, in several counterparts, all as of the day and year first above written. GEORGIA POWER COMPANY By: Vice President Attest: Assistant Secretary Signed, sealed and delivered this 15th day of June, 1994 by Georgia Power Company in the County of Fulton, State of Georgia, in the presence of Unofficial Witness Notary Public, Walton County, Georgia My Commission Expires August 2, 1996 (signatures continued on next page) -13- CHEMICAL BANK By: Vice President Attest: Senior Trust Officer Signed, sealed and delivered this 17th day of June, 1994 by Chemical Bank in the County of New York, State of New York, in the presence of Unofficial Witness ANNABELLE DeLUCA Notary Public, State of New York No. 01DE5013759 Qualified in Kings County Certificate filed in New York County Commission Expires July 15, 1995 -14- STATE OF GEORGIA ) ) SS.: COUNTY OF FULTON ) On the 15th day of June, 1994, personally appeared before me Jane F. Genske, a Notary Public in and for the State and County aforesaid, Sandy Laning, who made oath and said that she was present and saw the corporate seal of Georgia Power Company affixed to the above written instrument, that she saw Judy M. Anderson, Vice President, with Susan M. Carter, Assistant Secretary, known to her to be such officers of said corporation respectively, attest the same, and that she, deponent, with Jane F. Genske, witnessed the execution and delivery of the said instrument as the free act and deed of said Georgia Power Company. Subscribed and sworn to ) before me this 15th day ) of June, 1994 ) Notary Public, Walton County, Georgia My Commission Expires August 2, 1996 -15- STATE OF NEW YORK ) ) SS.: COUNTY OF NEW YORK ) On the 17th day of June, 1994, personally appeared before me Annabelle DeLuca, a Notary Public in and for the State and County aforesaid, R. Richards, who made oath and said that she was present and saw the corporate seal of Chemical Bank affixed to the above written instrument, that she saw P. J. Gilkeson, Vice President, with P. Morabito, Senior Trust Officer, known to her to be such officers of said corporation respectively, attest the same, and that she, deponent, with Annabelle DeLuca, witnessed the execution and delivery of the said instrument as the free act and deed of said Chemical Bank. Subscribed and sworn to ) before me this 17th day ) of June, 1994 ) ANNABELLE DeLUCA Notary Public, State of New York No. 01DE5013759 Qualified in Kings County Certificate filed in New York County Commission Expires July 15, 1995 -16- STATE OF GEORGIA ) ) SS.: COUNTY OF FULTON ) On the 15th day of June, in the year one thousand nine hundred and ninety-four, before me personally came Judy M. Anderson, to me known, who, being by me duly sworn, did depose and say that she resides at 199 14th Street, N.E., Atlanta, Georgia; that she is a Vice President of Georgia Power Company, one of the corporations described in and which executed the foregoing instrument; that she knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation; and that she signed her name thereto by like order. Notary Public, Walton County, Georgia My Commission Expires August 2, 1996 -17- STATE OF NEW YORK ) ) SS.: COUNTY OF NEW YORK ) On the 17th day of June, in the year one thousand nine hundred and ninety-four, before me personally came P. J. Gilkeson, to me known, who, being by me duly sworn, did depose and say that he resides at 452 Delafield Avenue, Staten Island, New York; that he is a Vice President of Chemical Bank, one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation; and that he signed his name thereto by like order. ANNABELLE DeLUCA Notary Public, State of New York No. 01DE5013759 Qualified in Kings County Certificate filed in New York County Commission Expires July 15, 1995 -18- STATE OF GEORGIA ) ) SS.: COUNTY OF FULTON ) On the 15th day of June, 1994, before me appeared Judy M. Anderson, to me personally known, who, being by me duly sworn, did say that she is a Vice President of Georgia Power Company, and that the seal affixed to said instrument is the corporate seal of said corporation and that said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and that said Judy M. Anderson acknowledged said instrument to be the free act and deed of said corporation. Given under my hand this 15th day of June, 1994. Notary Public, Walton County, Georgia My Commission Expires August 2, 1996 -19- STATE OF NEW YORK ) ) SS.: COUNTY OF NEW YORK ) On the 17th day of June, 1994, before me appeared P. J. Gilkeson, to me personally known, who, being by me duly sworn, did say that he is a Vice President of Chemical Bank, and that the seal affixed to said instrument is the corporate seal of said corporation and that said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and that said P. J. Gilkeson acknowledged said instrument to be the free act and deed of said corporation. Given under my hand this 17th day of June, 1994. ANNABELLE DeLUCA Notary Public, State of New York No. 01DE5013759 Qualified in Kings County Certificate filed in New York County Commission Expires July 15, 1995 -20- EX-4.(D)3 3 EXHIBIT 4(D)3 Exhibit 4(d)3 GEORGIA POWER COMPANY to CHEMICAL BANK (Successor by Merger to Chemical Bank New York Trust Company and The New York Trust Company), Trustee SUPPLEMENTAL INDENTURE Dated as of September 1, 1994 Providing among other things for FIRST MORTGAGE BONDS First Pollution Control Series due July 1, 2011 Second Pollution Control Series due July 1, 2011 First Pollution Control Series due July 1, 2019 Second Pollution Control Series due July 1, 2019 Second Pollution Control Series due July 1, 2021 Pollution Control Series due May 1, 2022 SUPPLEMENTAL INDENTURE, dated as of September 1, 1994, made and entered into by and between GEORGIA POWER COMPANY, a corporation organized and existing under the laws of the State of Georgia with its principal office in Atlanta, Fulton County, Georgia (hereinafter commonly referred to as the "Company"), and CHEMICAL BANK (successor by merger to Chemical Bank New York Trust Company and The New York Trust Company), a corporation organized and existing under the laws of the State of New York, with its principal corporate trust office in the Borough of Manhattan, The City of New York (hereinafter commonly referred to as the "Trustee"), as Trustee under the Indenture dated as of March 1, 1941 originally entered into between the Company and The New York Trust Company, as Trustee (hereinafter sometimes referred to as the "Original Indenture" and said The New York Trust Company being hereinafter sometimes referred to as the "Original Trustee"), securing bonds issued and to be issued as provided therein, which Original Indenture has heretofore been supplemented and amended by various supplemental indentures (which Original Indenture as so supplemented and amended is hereinafter sometimes referred to as the "Indenture"). WHEREAS the Company and the Original Trustee have executed and delivered the Original Indenture for the purpose of securing an issue of bonds of the 3-1/2% Series due 1971 described therein and such additional bonds as may from time to time be issued under and in accordance with the terms of the Indenture, the aggregate principal amount of bonds to be secured thereby being presently limited to $5,000,000,000 at any one time outstanding (except as provided in Section 2.01 of the Indenture), and the Original Indenture is of record in the public office of each county in the States of Georgia, Alabama, Tennessee and South Carolina, and in the public office of the District of Columbia, in which this Supplemental Indenture is to be recorded, and the Original Indenture is on file at the principal corporate trust office of the Trustee; and WHEREAS the Company and the Trustee have executed and delivered various supplemental indentures for the purpose, among others, of further securing said bonds and of creating the bonds of other series described therein, which supplemental indentures described and set forth additional property conveyed thereby and are also of record in the public offices of some or all of the counties in the States of Georgia, Alabama, Tennessee and South Carolina in which this Supplemental Indenture is to be recorded, and one of which supplemental indentures is also of record in the public office of the District of Columbia, and said supplemental indentures are also on file at the principal corporate trust office of the Trustee; and WHEREAS the Company and the Trustee have executed and delivered the Supplemental Indenture dated as of May 15, 1991, by which the third paragraph of Section 1.02 of the Indenture was amended to read as follows: "The term 'Board of Directors' shall mean the Board of Directors of the Company or any committee of the Board of Directors of the Company authorized, with respect to any particular matter, to exercise the power of the Board of Directors of the Company."; and WHEREAS the Indenture provides for the issuance of bonds thereunder in one or more series and the Company, by appropriate corporate action in conformity with the terms of the Indenture, has duly determined to create six series of bonds under the Indenture to be designated, respectively, as "First Pollution Control Series due July 1, 2011" (hereinafter sometimes referred to as the "new First 2011 Series Bonds"), "Second Pollution Control Series due July 1, 2011" (hereinafter sometimes referred to as the "new Second 2011 Series Bonds"), "First Pollution Control Series due July 1, 2019" (hereinafter sometimes referred to as the "new First 2019 Series Bonds"), "Second Pollution Control Series due July 1, 2019" (hereinafter sometimes referred to as the "new Second 2019 Series Bonds"), "Second Pollution Control Series due July 1, 2021" (hereinafter sometimes referred to as the "new Second 2021 Series Bonds") and "Pollution Control Series due May 1, 2022" (hereinafter sometimes referred to as the "new 2022 Series Bonds") (the new First 2011 Series Bonds, the new Second 2011 Series Bonds, the new First 2019 Series Bonds, the new Second 2019 Series Bonds, the new Second 2021 Series Bonds and the new 2022 Series Bonds being hereinafter sometimes referred to collectively as the "new Bonds"), each of which bonds shall also bear the descriptive title "First Mortgage Bond", the bonds of each such series to bear interest as herein provided and to mature on the date designated in the title thereof; and WHEREAS by a Plan of Merger dated June 11, 1959, effective September 8, 1959, between The New York Trust Company and Chemical Corn Exchange Bank, said The New York Trust Company was merged into said Chemical Corn Exchange Bank which continued under the name and style of Chemical Bank New York Trust Company; and by a Plan of Merger dated November 26, 1968, effective February 17, 1969, among Chemical New York Corporation, Chemical Bank New York Trust Company and Chemical Bank, said Chemical Bank New York Trust Company was merged into said Chemical Bank which continued under the name and style of Chemical Bank; and by virtue of said mergers Chemical Bank has become successor to The New York Trust Company and Chemical Bank New York Trust Company, as Trustee under the Indenture, and has become vested with all of the title to the mortgaged property and trust estate; and with the trusts, powers, discretions, immunities, privileges and all other matters as were vested in said The New York Trust Company and said Chemical Bank New York Trust Company under the -2- Indenture, with like effect as if originally named as Trustee therein; and WHEREAS each of the new Bonds of each series is to be substantially in the following form, with appropriate insertions and deletions, to wit: [FORM OF NEW BOND OF EACH SERIES] GEORGIA POWER COMPANY FIRST MORTGAGE BOND, [_____] POLLUTION CONTROL SERIES DUE ______ 1, ____ No. $ Georgia Power Company, a Georgia corporation (hereinafter called the "Company"), for value received, hereby promises to pay to NationsBank of Georgia, National Association, Atlanta, Georgia (as trustee under a Trust Indenture dated as of ______, ____ of [the Albany Dougherty Payroll Development Authority] [the Development Authority of _______ County], relating to the Revenue Bonds (hereinafter mentioned)), or registered assigns, the principal sum of _____________________ Dollars on _______ 1, ____, and to pay to the registered owner hereof interest on said sum from the latest interest payment date to which interest has been paid on the bonds of this series preceding the date hereof, unless the date hereof be an interest payment date to which interest is being paid, in which case from the date hereof, at the same rates, until the principal hereof shall have become due and payable, payable on the same dates, as the Revenue Bonds pursuant to the Revenue Indenture (hereinafter mentioned). The obligation of the Company to make payments with respect to the principal of and premium, if any, and interest on bonds of this series shall be fully or partially, as the case may be, satisfied and discharged to the extent that, at any time that any such payment shall be due, the Company shall have made payments as required by the Company's Note dated ________, ____ issued pursuant to Section 3.2 of the Loan Agreement dated as of _________ 1, ____ between [the Albany Dougherty Payroll Development Authority] [the Development Authority of _______ County] and the Company, relating to the Revenue Bonds (hereinafter mentioned), sufficient to pay fully or partially the then due principal of and premium, if any, and interest on [the Albany Dougherty Payroll Development Authority (Georgia)] [the Development Authority of _____ County (Georgia)] Pollution -3- Control Revenue Bonds (Georgia Power Company Plant ______ Project), _____ Series ____ (hereinafter referred to as the "Revenue Bonds") or there shall be on deposit with the trustee pursuant to the Trust Indenture dated as of _______ 1, ____ of [the Albany Dougherty Payroll Development Authority] [the Development Authority of _____ County] to NationsBank of Georgia, National Association, Atlanta, Georgia, as trustee, relating to the Revenue Bonds (hereinafter referred to as the "Revenue Indenture"), sufficient available funds to pay fully or partially the then due principal of and premium, if any, and interest on the Revenue Bonds. This bond is one of the bonds issued and to be issued from time to time under and in accordance with and all secured by an indenture of mortgage or deed of trust dated as of March 1, 1941 given by the Company to The New York Trust Company, to which Chemical Bank is successor by merger (hereinafter sometimes referred to as the "Trustee"), as Trustee, and indentures supplemental thereto, to which indenture and indentures supplemental thereto (hereinafter referred to collectively as the "Indenture") reference is hereby made for a description of the property mortgaged and pledged, the nature and extent of the security and the rights, duties and immunities thereunder of the Trustee and the rights of the holders of said bonds and of the Trustee and of the Company in respect of such security. By the terms of the Indenture the bonds to be secured thereby are issuable in series which may vary as to date, amount, date of maturity, rate of interest and in other respects as in the Indenture provided. Upon notice given by mailing the same, by first class mail postage prepaid, not less than thirty nor more than forty-five days prior to the date fixed for redemption to each registered holder of a bond to be redeemed (in whole or in part) at the last address of such holder appearing on the registry books, any or all of the bonds of this series may be redeemed by the Company at any time and from time to time by the payment of the principal amount thereof and accrued interest thereon to the date fixed for redemption, if redeemed by the operation of the improvement fund or the replacement fund provisions of the Indenture or by the use of proceeds of released property, as more fully set forth in the Indenture. In the manner provided in the Indenture, the bonds of this series shall also be redeemable in whole, by payment of the principal amount thereof plus accrued interest thereon to the date fixed for redemption, upon receipt by the Trustee of a written demand from the trustee under the Revenue Indenture stating that the principal amount of all the Revenue Bonds then -4- outstanding under the Revenue Indenture has been declared immediately due and payable pursuant to the provisions of Section ____ of the Revenue Indenture. As provided in the Indenture, the date fixed for such redemption may be not more than 180 days after receipt by the Trustee of the aforesaid written demand and shall be specified in a notice of redemption given not more than 10 nor less than 5 days prior to the date so fixed for such redemption. As in the Indenture provided, such notice of redemption shall be rescinded and become null and void for all purposes under the Indenture upon rescission of the aforesaid written demand or the aforesaid declaration of maturity under the Revenue Indenture, and thereupon no redemption of the bonds of this series and no payments in respect thereof as specified in such notice of redemption shall be effected or required. In the manner provided in the Indenture, the bonds of this series are also redeemable in whole or in part upon receipt by the Trustee of a written demand from the trustee under the Revenue Indenture specifying a principal amount of Revenue Bonds which have been called for redemption pursuant to Section 3.01(c) of the Revenue Indenture. As provided in the Indenture, bonds of this series equal in principal amount to the principal amount of such Revenue Bonds to be redeemed will be redeemed on the date fixed for redemption of the Revenue Bonds at the principal amount of such bonds of this series and accrued interest thereon to the date fixed for redemption, together with a premium equal to the redemption premium (if any) payable upon such redemption of Revenue Bonds. In case of certain defaults as specified in the Indenture, the principal of this bond may be declared or may become due and payable on the conditions, at the time, in the manner and with the effect provided in the Indenture. No recourse shall be had for the payment of the principal of or premium, if any, or interest on this bond, or for any claim based hereon, or otherwise in respect hereof or of the Indenture, to or against any incorporator, stockholder, director or officer, past, present or future, as such, of the Company, or of any predecessor or successor company, either directly or through the Company, or such predecessor or successor company, under any constitution or statute or rule of law, or by the enforcement of any assessment or penalty, or otherwise, all such liability of incorporators, stockholders, directors and officers being waived and released by the holder and owner hereof by the acceptance of this bond and being likewise waived and released by the terms of the Indenture. -5- This bond is transferable by the registered owner hereof, in person or by attorney duly authorized, at the principal corporate trust office of the Trustee, in the Borough of Manhattan, The City of New York, but only in the manner prescribed in the Indenture, upon the surrender and cancellation of this bond, and upon any such transfer a new registered bond or bonds, without coupons, of the same series and maturity date and for the same aggregate principal amount, in authorized denominations, will be issued to the transferee in exchange herefor. The Company and the Trustee may deem and treat the person in whose name this bond is registered as the absolute owner for the purpose of receiving payment of or on account of the principal, premium, if any, and interest due hereon and for all other purposes. Registered bonds of this series shall be exchangeable for registered bonds of other authorized denominations having the same aggregate principal amount, in the manner and upon the conditions prescribed in the Indenture. However, notwithstanding the provisions of the Indenture, no charge shall be made upon any transfer or exchange of bonds of this series other than for any tax or taxes or other governmental charge required to be paid by the Company. This bond shall not be valid or become obligatory for any purpose unless and until it shall have been authenticated by the execution by the Trustee or its successor in trust under the Indenture of the certificate hereon. IN WITNESS WHEREOF, Georgia Power Company has caused this bond to be executed in its name by its President or one of its Vice Presidents by his signature or a facsimile thereof, and its corporate seal or a facsimile thereof to be hereto affixed and attested by its Secretary or one of its Assistant Secretaries by his signature or a facsimile thereof. Dated, GEORGIA POWER COMPANY By: Attest: -6- TRUSTEE'S CERTIFICATE This bond is one of the bonds, of the series designated therein, described in the within-mentioned Indenture. CHEMICAL BANK, as Trustee By: Authorized Officer AND WHEREAS all acts and things necessary to make the new Bonds of each series, when authenticated by the Trustee and issued as in the Indenture and this Supplemental Indenture provided, the valid, binding and legal obligations of the Company, and to constitute the Indenture and this Supplemental Indenture valid, binding and legal instruments for the security thereof, have been done and performed, and the creation, execution and delivery of the Indenture and this Supplemental Indenture and the creation, execution and issue of bonds subject to the terms hereof and of the Indenture, have in all respects been duly authorized; NOW, THEREFORE, in consideration of the premises, and of the acceptance and purchase by the holders thereof of the bonds issued and to be issued under the Indenture and of the sum of One Dollar duly paid by the Trustee to the Company, and of other good and valuable considerations, the receipt whereof is hereby acknowledged, and for the purpose of further securing the due and punctual payment of the principal of and premium, if any, and interest on the bonds issued and now outstanding under the Indenture, and the $2,120,000 principal amount of new First 2011 Series Bonds, $8,330,000 principal amount of new Second 2011 Series Bonds, $3,200,000 principal amount of new First 2019 Series Bonds, $5,300,000 principal amount of new Second 2019 Series Bonds, $10,125,000 principal amount of new Second 2021 Series Bonds and $13,155,000 principal amount of new 2022 Series Bonds proposed to be issued and all other bonds which shall be issued under the Indenture, or the Indenture as supplemented and amended, and for the purpose of further securing the faithful performance and observance of all covenants and conditions therein and in any indenture supplemental thereto set forth, the Company has given, granted, bargained, sold, transferred, assigned, hypothecated, pledged, mortgaged, warranted, aliened and conveyed and by these presents does give, grant, bargain, sell, transfer, assign, hypothecate, pledge, mortgage, warrant, alien and convey unto Chemical Bank, as Trustee, as provided in the Indenture, and its successor or successors in the trust thereby and hereby created, and to its or their assigns forever, all the right, title and interest of the Company in and to all -7- premises, property, franchises and rights of every kind and description, real, personal and mixed, tangible and intangible, now owned or hereafter acquired by the Company (excepting, however, that which is by the Indenture expressly reserved from the lien and effect thereof); TOGETHER WITH all and singular the tenements, hereditaments and appurtenances belonging or in anywise appertaining to the property, rights and franchises or any thereof, referred to in the foregoing granting clauses, with the reversion and reversions, remainder and remainders and (subject to the provisions of Article X of the Indenture) the tolls, rents, revenues, issues, earnings, income, products and profits thereof, and all the estate, right, title and interest and claim whatsoever, at law as well as in equity, which the Company now has or may hereafter acquire in and to the aforesaid property, rights and franchises and every part and parcel thereof. TO HAVE AND TO HOLD all said property, rights and franchises hereby conveyed, assigned, pledged or mortgaged, or intended so to be, unto the Trustee, its successor or successors in trust, and their assigns forever; BUT IN TRUST, NEVERTHELESS, with power of sale, for the equal and proportionate benefit and security of the holders of all bonds and interest coupons now or hereafter issued under the Indenture, as supplemented and amended, pursuant to the provisions thereof, and for the enforcement of the payment of said bonds and coupons when payable and for the performance of and compliance with the covenants and conditions of the Indenture, as supplemented and amended, without any preference, distinction or priority as to lien or otherwise of any bond or bonds over others by reason of the difference in time of the actual issue, sale or negotiation thereof or for any other reason whatsoever, except as otherwise expressly provided in the Indenture, as supplemented and amended; and so that each and every bond now or hereafter issued thereunder shall have the same lien; and so that the principal of and premium, if any, and interest on every such bond shall, subject to the terms thereof, be equally and proportionately secured thereby and hereby, as if it had been made, executed, delivered, sold and negotiated simultaneously with the execution and delivery of the Original Indenture. AND IT IS EXPRESSLY DECLARED that all bonds issued and secured under the Indenture and hereunder are to be issued, authenticated and delivered, and all said property, rights and franchises hereby and by the Indenture conveyed, assigned, pledged or mortgaged, or intended so to be (including all the -8- right, title and interest of the Company in and to any and all premises, property, franchises and rights of every kind and description, real, personal and mixed, tangible and intangible, thereafter acquired by the Company and whether or not specifically described in the Original Indenture or in any indenture supplemental thereto, except any therein expressly excepted), are to be dealt with and disposed of, under, upon and subject to the terms, conditions, stipulations, covenants, agreements, trusts and uses and purposes expressed in the Indenture and herein, and it is hereby agreed as follows: SECTION 1. There are hereby created six series of bonds designated as hereinabove in the fourth Whereas clause set forth, each of which shall contain suitable provisions with respect to the matters hereinafter in this Section specified, and the form thereof shall be substantially as hereinbefore set forth. New Bonds of each such series shall mature on the date specified in the title thereof, and the definitive bonds of each such series may be issued only as registered bonds without coupons. New Bonds of each such series shall be in such denominations as the Board of Directors shall approve, and execution and delivery to the Trustee for authentication shall be conclusive evidence of such approval. The serial numbers of new Bonds of each such series shall be such as may be approved by any officer of the Company, the execution thereof by any such officer to be conclusive evidence of such approval. New Bonds, until the principal thereof shall have become due and payable, shall bear interest at the same rates, payable on the same dates, as (i) the Albany Dougherty Bonds pursuant to the Albany Dougherty Indenture (each as hereinafter defined) in the case of the new First 2011 Series Bonds, (ii) the Cobb Bonds pursuant to the Cobb Indenture (each as hereinafter defined) in the case of the new Second 2011 Series Bonds, (iii) the Bibb Bonds pursuant to the Bibb Indenture (each as hereinafter defined) in the case of the new First 2019 Series Bonds, (iv) the Monroe Bonds pursuant to the Monroe Indenture (each as hereinafter defined) in the case of the new Second 2019 Series Bonds, (v) the Coweta Bonds pursuant to the Coweta Indenture (each as hereinafter defined) in the case of the new Second 2021 Series Bonds and (vi) the Burke Bonds pursuant to the Burke Indenture (each as hereinafter defined) in the case of the new 2022 Series Bonds. New Bonds of each such series shall be dated the date of authentication. The principal of and premium, if any, and interest on the new Bonds of each such series shall be payable in any coin or currency of the United States of America which at the time of payment is legal tender for public and private debts, at the -9- office or agency of the Company in the Borough of Manhattan, The City of New York, designated for that purpose. New Bonds of each such series may be transferred at the principal corporate trust office of the Trustee, in the Borough of Manhattan, The City of New York. New Bonds of each such series shall be exchangeable for other bonds of the same series, in the manner and upon the conditions prescribed in the Indenture, upon the surrender of such new Bonds at said principal corporate trust office of the Trustee. However, notwithstanding the provisions of Section 2.05 of the Indenture, no charge shall be made upon any transfer or exchange of new Bonds of any of said series other than for any tax or taxes or other governmental charge required to be paid by the Company. Any or all of the new Bonds of each such series shall be redeemable at any time and from time to time, prior to maturity, upon notice given by mailing the same, by first class mail postage prepaid, not less than thirty nor more than forty-five days prior to the date fixed for redemption to each registered holder of a bond to be redeemed (in whole or in part) at the last address of such holder appearing on the registry books, at the principal amount thereof and accrued interest thereon, if any, to the date fixed for redemption, if redeemed by the operation of Section 4 of the Supplemental Indenture dated as of November 1, 1962 or of the improvement fund provisions of any supplemental indenture or by the use of proceeds of released property. SECTION 2. The obligation of the Company to make payments with respect to the principal of and premium, if any, and interest on the new First 2011 Series Bonds shall be fully or partially, as the case may be, satisfied and discharged, to the extent that, at the time that any such payment shall be due, the Company shall have made payments as required by the Company's Note dated July 30, 1991 issued pursuant to Section 3.2 of the Loan Agreement dated as of July 1, 1991 between the Albany Dougherty Payroll Development Authority and the Company, relating to the Albany Dougherty Bonds (hereinafter defined), sufficient to pay fully or partially the then due principal of and premium, if any, and interest on the Albany Dougherty Payroll Development Authority (Georgia) Pollution Control Revenue Bonds (Georgia Power Company Plant Mitchell Project), First Series 1991 (hereinafter referred to as the "Albany Dougherty Bonds") or there shall be on deposit with the trustee pursuant to the Trust Indenture dated as of July 1, 1991 of the Albany Dougherty Payroll Development Authority to NationsBank of Georgia, National Association, Atlanta, Georgia, as trustee, relating to the Albany Dougherty Bonds (hereinafter referred to as the "Albany Dougherty Indenture"), sufficient available funds to pay fully or partially -10- the then due principal of and premium, if any, and interest on the Albany Dougherty Bonds. The Trustee may conclusively presume that the obligation of the Company to make payments with respect to the principal of and premium, if any, and interest on the new First 2011 Series Bonds shall have been fully satisfied and discharged unless and until the Trustee shall have received a written notice from the trustee under the Albany Dougherty Indenture stating (i) that timely payment of principal of or premium, if any, or interest on the Albany Dougherty Bonds has not been made, (ii) that there are not sufficient available funds to make such payment and (iii) the amount of funds required to make such payment. In addition to the redemption as provided in Section 1 hereof, the new First 2011 Series Bonds shall also be redeemable in whole upon receipt by the Trustee of a written demand for the redemption of the new First 2011 Series Bonds (hereinafter called "First 2011 Series Redemption Demand") from the trustee under the Albany Dougherty Indenture stating that the principal amount of all the Albany Dougherty Bonds then outstanding under the Albany Dougherty Indenture has been declared immediately due and payable pursuant to the provisions of Section 9.02 of the Albany Dougherty Indenture, specifying the date from which unpaid interest on the Albany Dougherty Bonds has then accrued and stating that such declaration of maturity has not been rescinded. The Trustee shall within 10 days of receiving the First 2011 Series Redemption Demand mail a copy thereof to the Company stamped or otherwise marked to indicate the date of receipt by the Trustee. The Company shall fix a redemption date for the redemption so demanded (herein called the "First 2011 Series Demand Redemption") and shall mail to the Trustee notice of such date at least 30 days prior thereto. The date fixed for First 2011 Series Demand Redemption may be any day not more than 180 days after receipt by the Trustee of the First 2011 Series Redemption Demand. If the Trustee does not receive such notice from the Company within 150 days after receipt by the Trustee of the First 2011 Series Redemption Demand, the date for First 2011 Series Demand Redemption shall be deemed fixed at the 180th day after such receipt. The Trustee shall mail notice of the date fixed for First 2011 Series Demand Redemption (hereinafter called the "First 2011 Series Demand Redemption Notice") to the trustee under the Albany Dougherty Indenture (and the registered holders of the new First 2011 Series Bonds if other than said trustee) not more than 10 nor less than 5 days prior to the date fixed for First 2011 Series Demand Redemption, provided, however, that the Trustee shall mail no First 2011 Series Demand Redemption Notice (and no First 2011 Series Demand Redemption shall be made) if prior to the mailing of the First 2011 Series Demand Redemption Notice the Trustee shall have received written notice of -11- rescission of the First 2011 Series Redemption Demand from the trustee under the Albany Dougherty Indenture. First 2011 Series Demand Redemption of the new First 2011 Series Bonds shall be at the principal amount thereof, plus accrued interest thereon to the date fixed for redemption, and such amount shall become and be due and payable on the date fixed for First 2011 Series Demand Redemption as above provided. Anything in this paragraph contained to the contrary notwithstanding, if, after mailing of the First 2011 Series Demand Redemption Notice and prior to the date fixed for First 2011 Series Demand Redemption, the Trustee shall have been advised in writing by the trustee under the Albany Dougherty Indenture that the First 2011 Series Redemption Demand has been rescinded, the First 2011 Series Demand Redemption Notice shall thereupon, without further act of the Trustee or the Company, be rescinded and become null and void for all purposes hereunder and no redemption of the new First 2011 Series Bonds and no payments in respect thereof as specified in the First 2011 Series Demand Redemption Notice shall be effected or required. The new First 2011 Series Bonds shall also be redeemable in whole at any time, or in part from time to time (hereinafter called the "First 2011 Series Regular Redemption"), upon receipt by the Trustee of a written demand (hereinafter referred to as the "First 2011 Series Regular Redemption Demand") from the trustee under the Albany Dougherty Indenture stating: (1) the principal amount of Albany Dougherty Bonds to be redeemed pursuant to Section 3.01(c) of the Albany Dougherty Indenture; (2) the date of such redemption and that notice thereof has been given as required by the Albany Dougherty Indenture; (3) that the Trustee shall call for redemption on the stated date fixed for redemption of the Albany Dougherty Bonds a principal amount of the new First 2011 Series Bonds equal to the principal amount of Albany Dougherty Bonds to be redeemed; and (4) that the trustee under the Albany Dougherty Indenture, as holder of all the new First 2011 Series Bonds then outstanding, waives notice of such redemption. The Trustee may conclusively presume the statements contained in the First 2011 Series Regular Redemption Demand to be correct. First 2011 Series Regular Redemption of the new First 2011 Series Bonds shall be at the principal amount thereof and accrued interest thereon to the date fixed for redemption, together with a premium equal to the redemption premium (if any) payable upon such redemption of the Albany Dougherty Bonds, and such amount shall become and be due and payable, subject to the first paragraph of this Section 2, on the date fixed for such First 2011 Series Regular Redemption, which shall be the date specified pursuant to item (2) of the First 2011 Series Regular Redemption Demand as above provided. -12- SECTION 3. The obligation of the Company to make payments with respect to the principal of and premium, if any, and interest on the new Second 2011 Series Bonds shall be fully or partially, as the case may be, satisfied and discharged, to the extent that, at the time that any such payment shall be due, the Company shall have made payments as required by the Company's Note dated July 30, 1991 issued pursuant to Section 3.2 of the Loan Agreement dated as of July 1, 1991 between the Development Authority of Cobb County and the Company, relating to the Cobb Bonds (hereinafter defined), sufficient to pay fully or partially the then due principal of and premium, if any, and interest on the Development Authority of Cobb County (Georgia) Pollution Control Revenue Bonds (Georgia Power Company Plant McDonough Project), First Series 1991 (hereinafter referred to as the "Cobb Bonds") or there shall be on deposit with the trustee pursuant to the Trust Indenture dated as of July 1, 1991 of the Development Authority of Cobb County to NationsBank of Georgia, National Association, Atlanta, Georgia, as trustee, relating to the Cobb Bonds (hereinafter referred to as the "Cobb Indenture"), sufficient available funds to pay fully or partially the then due principal of and premium, if any, and interest on the Cobb Bonds. The Trustee may conclusively presume that the obligation of the Company to make payments with respect to the principal of and premium, if any, and interest on the new Second 2011 Series Bonds shall have been fully satisfied and discharged unless and until the Trustee shall have received a written notice from the trustee under the Cobb Indenture stating (i) that timely payment of principal of or premium, if any, or interest on the Cobb Bonds has not been made, (ii) that there are not sufficient available funds to make such payment and (iii) the amount of funds required to make such payment. In addition to the redemption as provided in Section 1 hereof, the new Second 2011 Series Bonds shall also be redeemable in whole upon receipt by the Trustee of a written demand for the redemption of the new Second 2011 Series Bonds (hereinafter called "Second 2011 Series Redemption Demand") from the trustee under the Cobb Indenture stating that the principal amount of all the Cobb Bonds then outstanding under the Cobb Indenture has been declared immediately due and payable pursuant to the provisions of Section 9.02 of the Cobb Indenture, specifying the date from which unpaid interest on the Cobb Bonds has then accrued and stating that such declaration of maturity has not been rescinded. The Trustee shall within 10 days of receiving the Second 2011 Series Redemption Demand mail a copy thereof to the Company stamped or otherwise marked to indicate the date of receipt by the Trustee. The Company shall fix a redemption date for the redemption so demanded (herein called the "Second 2011 Series Demand Redemption") and shall mail to the Trustee notice of such -13- date at least 30 days prior thereto. The date fixed for Second 2011 Series Demand Redemption may be any day not more than 180 days after receipt by the Trustee of the Second 2011 Series Redemption Demand. If the Trustee does not receive such notice from the Company within 150 days after receipt by the Trustee of the Second 2011 Series Redemption Demand, the date for Second 2011 Series Demand Redemption shall be deemed fixed at the 180th day after such receipt. The Trustee shall mail notice of the date fixed for Second 2011 Series Demand Redemption (hereinafter called the "Second 2011 Series Demand Redemption Notice") to the trustee under the Cobb Indenture (and the registered holders of the new Second 2011 Series Bonds if other than said trustee) not more than 10 nor less than 5 days prior to the date fixed for Second 2011 Series Demand Redemption, provided, however, that the Trustee shall mail no Second 2011 Series Demand Redemption Notice (and no Second 2011 Series Demand Redemption shall be made) if prior to the mailing of the Second 2011 Series Demand Redemption Notice the Trustee shall have received written notice of rescission of the Second 2011 Series Redemption Demand from the trustee under the Cobb Indenture. Second 2011 Series Demand Redemption of the new Second 2011 Series Bonds shall be at the principal amount thereof, plus accrued interest thereon to the date fixed for redemption, and such amount shall become and be due and payable on the date fixed for Second 2011 Series Demand Redemption as above provided. Anything in this paragraph contained to the contrary notwithstanding, if, after mailing of the Second 2011 Series Demand Redemption Notice and prior to the date fixed for Second 2011 Series Demand Redemption, the Trustee shall have been advised in writing by the trustee under the Cobb Indenture that the Second 2011 Series Redemption Demand has been rescinded, the Second 2011 Series Demand Redemption Notice shall thereupon, without further act of the Trustee or the Company, be rescinded and become null and void for all purposes hereunder and no redemption of the new Second 2011 Series Bonds and no payments in respect thereof as specified in the Second 2011 Series Demand Redemption Notice shall be effected or required. The new Second 2011 Series Bonds shall also be redeemable in whole at any time, or in part from time to time (hereinafter called the "Second 2011 Series Regular Redemption"), upon receipt by the Trustee of a written demand (hereinafter referred to as the "Second 2011 Series Regular Redemption Demand") from the trustee under the Cobb Indenture stating: (1) the principal amount of Cobb Bonds to be redeemed pursuant to Section 3.01(c) of the Cobb Indenture; (2) the date of such redemption and that notice thereof has been given as required by the Cobb Indenture; (3) that the Trustee shall call for redemption on the stated date fixed for redemption of the Cobb Bonds a principal amount of the new Second 2011 Series Bonds equal to the principal amount of -14- Cobb Bonds to be redeemed; and (4) that the trustee under the Cobb Indenture, as holder of all the new Second 2011 Series Bonds then outstanding, waives notice of such redemption. The Trustee may conclusively presume the statements contained in the Second 2011 Series Regular Redemption Demand to be correct. Second 2011 Series Regular Redemption of the new Second 2011 Series Bonds shall be at the principal amount thereof and accrued interest thereon to the date fixed for redemption, together with a premium equal to the redemption premium (if any) payable upon such redemption of the Cobb Bonds, and such amount shall become and be due and payable, subject to the first paragraph of this Section 3, on the date fixed for such Second 2011 Series Regular Redemption, which shall be the date specified pursuant to item (2) of the Second 2011 Series Regular Redemption Demand as above provided. SECTION 4. The obligation of the Company to make payments with respect to the principal of and premium, if any, and interest on the new First 2019 Series Bonds shall be fully or partially, as the case may be, satisfied and discharged, to the extent that, at the time that any such payment shall be due, the Company shall have made payments as required by the Company's Note dated July 30, 1991 issued pursuant to Section 3.2 of the Loan Agreement dated as of July 1, 1991 between the Development Authority of Bibb County and the Company, relating to the Bibb Bonds (hereinafter defined), sufficient to pay fully or partially the then due principal of and premium, if any, and interest on the Development Authority of Bibb County (Georgia) Pollution Control Revenue Bonds (Georgia Power Company Plant Arkwright Project), First Series 1991 (hereinafter referred to as the "Bibb Bonds") or there shall be on deposit with the trustee pursuant to the Trust Indenture dated as of July 1, 1991 of the Development Authority of Bibb County to NationsBank of Georgia, National Association, Atlanta, Georgia, as trustee, relating to the Bibb Bonds (hereinafter referred to as the "Bibb Indenture"), sufficient available funds to pay fully or partially the then due principal of and premium, if any, and interest on the Bibb Bonds. The Trustee may conclusively presume that the obligation of the Company to make payments with respect to the principal of and premium, if any, and interest on the new First 2019 Series Bonds shall have been fully satisfied and discharged unless and until the Trustee shall have received a written notice from the trustee under the Bibb Indenture stating (i) that timely payment of principal of or premium, if any, or interest on the Bibb Bonds has not been made, (ii) that there are not sufficient available funds to make such payment and (iii) the amount of funds required to make such payment. -15- In addition to the redemption as provided in Section 1 hereof, the new First 2019 Series Bonds shall also be redeemable in whole upon receipt by the Trustee of a written demand for the redemption of the new First 2019 Series Bonds (hereinafter called "First 2019 Series Redemption Demand") from the trustee under the Bibb Indenture stating that the principal amount of all the Bibb Bonds then outstanding under the Bibb Indenture has been declared immediately due and payable pursuant to the provisions of Section 9.02 of the Bibb Indenture, specifying the date from which unpaid interest on the Bibb Bonds has then accrued and stating that such declaration of maturity has not been rescinded. The Trustee shall within 10 days of receiving the First 2019 Series Redemption Demand mail a copy thereof to the Company stamped or otherwise marked to indicate the date of receipt by the Trustee. The Company shall fix a redemption date for the redemption so demanded (herein called the "First 2019 Series Demand Redemption") and shall mail to the Trustee notice of such date at least 30 days prior thereto. The date fixed for First 2019 Series Demand Redemption may be any day not more than 180 days after receipt by the Trustee of the First 2019 Series Redemption Demand. If the Trustee does not receive such notice from the Company within 150 days after receipt by the Trustee of the First 2019 Series Redemption Demand, the date for First 2019 Series Demand Redemption shall be deemed fixed at the 180th day after such receipt. The Trustee shall mail notice of the date fixed for First 2019 Series Demand Redemption (hereinafter called the "First 2019 Series Demand Redemption Notice") to the trustee under the Bibb Indenture (and the registered holders of the new First 2019 Series Bonds if other than said trustee) not more than 10 nor less than 5 days prior to the date fixed for First 2019 Series Demand Redemption, provided, however, that the Trustee shall mail no First 2019 Series Demand Redemption Notice (and no First 2019 Series Demand Redemption shall be made) if prior to the mailing of the First 2019 Series Demand Redemption Notice the Trustee shall have received written notice of rescission of the First 2019 Series Redemption Demand from the trustee under the Bibb Indenture. First 2019 Series Demand Redemption of the new First 2019 Series Bonds shall be at the principal amount thereof, plus accrued interest thereon to the date fixed for redemption, and such amount shall become and be due and payable on the date fixed for First 2019 Series Demand Redemption as above provided. Anything in this paragraph contained to the contrary notwithstanding, if, after mailing of the First 2019 Series Demand Redemption Notice and prior to the date fixed for First 2019 Series Demand Redemption, the Trustee shall have been advised in writing by the trustee under the Bibb Indenture that the First 2019 Series Redemption Demand has been rescinded, the First 2019 Series Demand Redemption Notice shall thereupon, without further act of the Trustee or the Company, be rescinded -16- and become null and void for all purposes hereunder and no redemption of the new First 2019 Series Bonds and no payments in respect thereof as specified in the First 2019 Series Demand Redemption Notice shall be effected or required. The new First 2019 Series Bonds shall also be redeemable in whole at any time, or in part from time to time (hereinafter called the "First 2019 Series Regular Redemption"), upon receipt by the Trustee of a written demand (hereinafter referred to as the "First 2019 Series Regular Redemption Demand") from the trustee under the Bibb Indenture stating: (1) the principal amount of Bibb Bonds to be redeemed pursuant to Section 3.01(c) of the Bibb Indenture; (2) the date of such redemption and that notice thereof has been given as required by the Bibb Indenture; (3) that the Trustee shall call for redemption on the stated date fixed for redemption of the Bibb Bonds a principal amount of the new First 2019 Series Bonds equal to the principal amount of Bibb Bonds to be redeemed; and (4) that the trustee under the Bibb Indenture, as holder of all the new First 2019 Series Bonds then outstanding, waives notice of such redemption. The Trustee may conclusively presume the statements contained in the First 2019 Series Regular Redemption Demand to be correct. First 2019 Series Regular Redemption of the new First 2019 Series Bonds shall be at the principal amount thereof and accrued interest thereon to the date fixed for redemption, together with a premium equal to the redemption premium (if any) payable upon such redemption of the Bibb Bonds, and such amount shall become and be due and payable, subject to the first paragraph of this Section 4, on the date fixed for such First 2019 Series Regular Redemption, which shall be the date specified pursuant to item (2) of the First 2019 Series Regular Redemption Demand as above provided. SECTION 5. The obligation of the Company to make payments with respect to the principal of and premium, if any, and interest on the new Second 2019 Series Bonds shall be fully or partially, as the case may be, satisfied and discharged, to the extent that, at the time that any such payment shall be due, the Company shall have made payments as required by the Company's Note dated July 30, 1991 issued pursuant to Section 3.2 of the Loan Agreement dated as of July 1, 1991 between the Development Authority of Monroe County and the Company, relating to the Monroe Bonds (hereinafter defined), sufficient to pay fully or partially the then due principal of and premium, if any, and interest on the Development Authority of Monroe County (Georgia) Pollution Control Revenue Bonds (Georgia Power Company Plant Scherer Project), First Series 1991 (hereinafter referred to as the "Monroe Bonds") or there shall be on deposit with the trustee pursuant to the Trust Indenture dated as of July 1, 1991 of the -17- Development Authority of Monroe County to NationsBank of Georgia, National Association, Atlanta, Georgia, as trustee, relating to the Monroe Bonds (hereinafter referred to as the "Monroe Indenture"), sufficient available funds to pay fully or partially the then due principal of and premium, if any, and interest on the Monroe Bonds. The Trustee may conclusively presume that the obligation of the Company to make payments with respect to the principal of and premium, if any, and interest on the new Second 2019 Series Bonds shall have been fully satisfied and discharged unless and until the Trustee shall have received a written notice from the trustee under the Monroe Indenture stating (i) that timely payment of principal of or premium, if any, or interest on the Monroe Bonds has not been made, (ii) that there are not sufficient available funds to make such payment and (iii) the amount of funds required to make such payment. In addition to the redemption as provided in Section 1 hereof, the new Second 2019 Series Bonds shall also be redeemable in whole upon receipt by the Trustee of a written demand for the redemption of the new Second 2019 Series Bonds (hereinafter called "Second 2011 Series Redemption Demand") from the trustee under the Monroe Indenture stating that the principal amount of all the Monroe Bonds then outstanding under the Monroe Indenture has been declared immediately due and payable pursuant to the provisions of Section 9.02 of the Monroe Indenture, specifying the date from which unpaid interest on the Monroe Bonds has then accrued and stating that such declaration of maturity has not been rescinded. The Trustee shall within 10 days of receiving the Second 2019 Series Redemption Demand mail a copy thereof to the Company stamped or otherwise marked to indicate the date of receipt by the Trustee. The Company shall fix a redemption date for the redemption so demanded (herein called the "Second 2019 Series Demand Redemption") and shall mail to the Trustee notice of such date at least 30 days prior thereto. The date fixed for Second 2019 Series Demand Redemption may be any day not more than 180 days after receipt by the Trustee of the Second 2019 Series Redemption Demand. If the Trustee does not receive such notice from the Company within 150 days after receipt by the Trustee of the Second 2019 Series Redemption Demand, the date for Second 2019 Series Demand Redemption shall be deemed fixed at the 180th day after such receipt. The Trustee shall mail notice of the date fixed for Second 2019 Series Demand Redemption (hereinafter called the "Second 2019 Series Demand Redemption Notice") to the trustee under the Monroe Indenture (and the registered holders of the new Second 2019 Series Bonds if other than said trustee) not more than 10 nor less than 5 days prior to the date fixed for Second 2019 Series Demand Redemption, provided, however, that the Trustee shall mail no Second 2019 Series Demand Redemption Notice (and no Second 2019 Series Demand Redemption shall be made) if -18- prior to the mailing of the Second 2019 Series Demand Redemption Notice the Trustee shall have received written notice of rescission of the Second 2019 Series Redemption Demand from the trustee under the Monroe Indenture. Second 2019 Series Demand Redemption of the new Second 2019 Series Bonds shall be at the principal amount thereof, plus accrued interest thereon to the date fixed for redemption, and such amount shall become and be due and payable on the date fixed for Second 2019 Series Demand Redemption as above provided. Anything in this paragraph contained to the contrary notwithstanding, if, after mailing of the Second 2019 Series Demand Redemption Notice and prior to the date fixed for Second 2019 Series Demand Redemption, the Trustee shall have been advised in writing by the trustee under the Monroe Indenture that the Second 2019 Series Redemption Demand has been rescinded, the Second 2019 Series Demand Redemption Notice shall thereupon, without further act of the Trustee or the Company, be rescinded and become null and void for all purposes hereunder and no redemption of the new Second 2019 Series Bonds and no payments in respect thereof as specified in the Second 2019 Series Demand Redemption Notice shall be effected or required. The new Second 2019 Series Bonds shall also be redeemable in whole at any time, or in part from time to time (hereinafter called the "Second 2019 Series Regular Redemption"), upon receipt by the Trustee of a written demand (hereinafter referred to as the "Second 2019 Series Regular Redemption Demand") from the trustee under the Monroe Indenture stating: (1) the principal amount of Monroe Bonds to be redeemed pursuant to Section 3.01(c) of the Monroe Indenture; (2) the date of such redemption and that notice thereof has been given as required by the Monroe Indenture; (3) that the Trustee shall call for redemption on the stated date fixed for redemption of the Monroe Bonds a principal amount of the new Second 2019 Series Bonds equal to the principal amount of Monroe Bonds to be redeemed; and (4) that the trustee under the Monroe Indenture, as holder of all the new Second 2019 Series Bonds then outstanding, waives notice of such redemption. The Trustee may conclusively presume the statements contained in the Second 2019 Series Regular Redemption Demand to be correct. Second 2019 Series Regular Redemption of the new Second 2019 Series Bonds shall be at the principal amount thereof and accrued interest thereon to the date fixed for redemption, together with a premium equal to the redemption premium (if any) payable upon such redemption of the Monroe Bonds, and such amount shall become and be due and payable, subject to the first paragraph of this Section 5, on the date fixed for such Second 2019 Series Regular Redemption, which shall be the date specified pursuant to item (2) of the Second 2019 Regular Redemption Demand as above provided. -19- SECTION 6. The obligation of the Company to make payments with respect to the principal of and premium, if any, and interest on the new Second 2021 Series Bonds shall be fully or partially, as the case may be, satisfied and discharged, to the extent that, at the time that any such payment shall be due, the Company shall have made payments as required by the Company's Note dated July 30, 1991 issued pursuant to Section 3.2 of the Loan Agreement dated as of July 1, 1991 between the Development Authority of Coweta County and the Company, relating to the Coweta Bonds (hereinafter defined), sufficient to pay fully or partially the then due principal of and premium, if any, and interest on the Development Authority of Coweta County (Georgia) Pollution Control Revenue Bonds (Georgia Power Company Plant Yates Project), First Series 1991 (hereinafter referred to as the "Coweta Bonds") or there shall be on deposit with the trustee pursuant to the Trust Indenture dated as of July 1, 1991 of the Development Authority of Coweta County to NationsBank of Georgia, National Association, Atlanta, Georgia, as trustee, relating to the Coweta Bonds (hereinafter referred to as the "Coweta Indenture"), sufficient available funds to pay fully or partially the then due principal of and premium, if any, and interest on the Coweta Bonds. The Trustee may conclusively presume that the obligation of the Company to make payments with respect to the principal of and premium, if any, and interest on the new Second 2021 Series Bonds shall have been fully satisfied and discharged unless and until the Trustee shall have received a written notice from the trustee under the Coweta Indenture stating (i) that timely payment of principal of or premium, if any, or interest on the Coweta Bonds has not been made, (ii) that there are not sufficient available funds to make such payment and (iii) the amount of funds required to make such payment. In addition to the redemption as provided in Section 1 hereof, the new Second 2021 Series Bonds shall also be redeemable in whole upon receipt by the Trustee of a written demand for the redemption of the new Second 2021 Series Bonds (hereinafter called "Second 2021 Series Redemption Demand") from the trustee under the Coweta Indenture stating that the principal amount of all the Coweta Bonds then outstanding under the Coweta Indenture has been declared immediately due and payable pursuant to the provisions of Section 8.02 of the Coweta Indenture, specifying the date from which unpaid interest on the Coweta Bonds has then accrued and stating that such declaration of maturity has not been rescinded. The Trustee shall within 10 days of receiving the Second 2021 Series Redemption Demand mail a copy thereof to the Company stamped or otherwise marked to indicate the date of receipt by the Trustee. The Company shall fix a redemption date for the redemption so demanded (herein called the "Second 2021 Series Demand Redemption") and shall mail to the Trustee notice -20- of such date at least 30 days prior thereto. The date fixed for Second 2021 Series Demand Redemption may be any day not more than 180 days after receipt by the Trustee of the Second 2021 Series Redemption Demand. If the Trustee does not receive such notice from the Company within 150 days after receipt by the Trustee of the Second 2021 Series Redemption Demand, the date for Second 2021 Series Demand Redemption shall be deemed fixed at the 180th day after such receipt. The Trustee shall mail notice of the date fixed for Second 2021 Series Demand Redemption (hereinafter called the "Second 2021 Series Demand Redemption Notice") to the trustee under the Coweta Indenture (and the registered holders of the new Second 2021 Series Bonds if other than said trustee) not more than 10 nor less than 5 days prior to the date fixed for Second 2021 Series Demand Redemption, provided, however, that the Trustee shall mail no Second 2021 Series Demand Redemption Notice (and no Second 2021 Series Demand Redemption shall be made) if prior to the mailing of the Second 2021 Series Demand Redemption Notice the Trustee shall have received written notice of rescission of the Second 2021 Series Redemption Demand from the trustee under the Coweta Indenture. Second 2021 Series Demand Redemption of the new Second 2021 Series Bonds shall be at the principal amount thereof, plus accrued interest thereon to the date fixed for redemption, and such amount shall become and be due and payable on the date fixed for Second 2021 Series Demand Redemption as above provided. Anything in this paragraph contained to the contrary notwithstanding, if, after mailing of the Second 2021 Series Demand Redemption Notice and prior to the date fixed for Second 2021 Series Demand Redemption, the Trustee shall have been advised in writing by the trustee under the Coweta Indenture that the Second 2021 Series Redemption Demand has been rescinded, the Second 2021 Series Demand Redemption Notice shall thereupon, without further act of the Trustee or the Company, be rescinded and become null and void for all purposes hereunder and no redemption of the new Second 2021 Series Bonds and no payments in respect thereof as specified in the Second 2021 Series Demand Redemption Notice shall be effected or required. The new Second 2021 Series Bonds shall also be redeemable in whole at any time, or in part from time to time (hereinafter called the "Second 2021 Series Regular Redemption"), upon receipt by the Trustee of a written demand (hereinafter referred to as the "Second 2021 Series Regular Redemption Demand") from the trustee under the Coweta Indenture stating: (1) the principal amount of Coweta Bonds to be redeemed pursuant to Section 3.01(c) of the Coweta Indenture; (2) the date of such redemption and that notice thereof has been given as required by the Coweta Indenture; (3) that the Trustee shall call for redemption on the stated date fixed for redemption of the Coweta Bonds a principal -21- amount of the new Second 2021 Series Bonds equal to the principal amount of Coweta Bonds to be redeemed; and (4) that the trustee under the Coweta Indenture, as holder of all the new Second 2021 Series Bonds then outstanding, waives notice of such redemption. The Trustee may conclusively presume the statements contained in the Second 2021 Series Regular Redemption Demand to be correct. Second 2021 Series Regular Redemption of the new Second 2021 Series Bonds shall be at the principal amount thereof and accrued interest thereon to the date fixed for redemption, together with a premium equal to the redemption premium (if any) payable upon such redemption of the Coweta Bonds, and such amount shall become and be due and payable, subject to the first paragraph of this Section 6, on the date fixed for such Second 2021 Series Regular Redemption, which shall be the date specified pursuant to item (2) of the Second 2021 Series Regular Redemption Demand as above provided. SECTION 7. The obligation of the Company to make payments with respect to the principal of and premium, if any, and interest on the new 2022 Series Bonds shall be fully or partially, as the case may be, satisfied and discharged, to the extent that, at the time that any such payment shall be due, the Company shall have made payments as required by the Company's Note dated May 14, 1992 issued pursuant to Section 3.2 of the Loan Agreement dated as of May 1, 1992 between the Development Authority of Burke County and the Company, relating to the Burke Bonds (hereinafter defined), sufficient to pay fully or partially the then due principal of and premium, if any, and interest on the Development Authority of Burke County (Georgia) Pollution Control Revenue Bonds (Georgia Power Company Plant Vogtle Project), First Series 1992 (hereinafter referred to as the "Burke Bonds") or there shall be on deposit with the trustee pursuant to the Trust Indenture dated as of May 1, 1992 of the Development Authority of Burke County to NationsBank of Georgia, National Association, Atlanta, Georgia, as trustee, relating to the Burke Bonds (hereinafter referred to as the "Burke Indenture"), sufficient available funds to pay fully or partially the then due principal of and premium, if any, and interest on the Burke Bonds. The Trustee may conclusively presume that the obligation of the Company to make payments with respect to the principal of and premium, if any, and interest on the new 2022 Series Bonds shall have been fully satisfied and discharged unless and until the Trustee shall have received a written notice from the trustee under the Burke Indenture stating (i) that timely payment of principal of or premium, if any, or interest on the Burke Bonds has not been made, (ii) that there are not sufficient available funds to make such payment and (iii) the amount of funds required to make such payment. -22- In addition to the redemption as provided in Section 1 hereof, the new 2022 Series Bonds shall also be redeemable in whole upon receipt by the Trustee of a written demand for the redemption of the new 2022 Series Bonds (hereinafter called "2022 Series Redemption Demand") from the trustee under the Burke Indenture stating that the principal amount of all the Burke Bonds then outstanding under the Burke Indenture has been declared immediately due and payable pursuant to the provisions of Section 9.02 of the Burke Indenture, specifying the date from which unpaid interest on the Burke Bonds has then accrued and stating that such declaration of maturity has not been rescinded. The Trustee shall within 10 days of receiving the 2022 Series Redemption Demand mail a copy thereof to the Company stamped or otherwise marked to indicate the date of receipt by the Trustee. The Company shall fix a redemption date for the redemption so demanded (herein called the "2022 Series Demand Redemption") and shall mail to the Trustee notice of such date at least 30 days prior thereto. The date fixed for 2022 Series Demand Redemption may be any day not more than 180 days after receipt by the Trustee of the 2022 Series Redemption Demand. If the Trustee does not receive such notice from the Company within 150 days after receipt by the Trustee of the 2022 Series Redemption Demand, the date for 2022 Series Demand Redemption shall be deemed fixed at the 180th day after such receipt. The Trustee shall mail notice of the date fixed for 2022 Series Demand Redemption (hereinafter called the "2022 Series Demand Redemption Notice") to the trustee under the Burke Indenture (and the registered holders of the new 2022 Series Bonds if other than said trustee) not more than 10 nor less than 5 days prior to the date fixed for 2022 Series Demand Redemption, provided, however, that the Trustee shall mail no 2022 Series Demand Redemption Notice (and no 2022 Series Demand Redemption shall be made) if prior to the mailing of the 2022 Series Demand Redemption Notice the Trustee shall have received written notice of rescission of the 2022 Series Redemption Demand from the trustee under the Burke Indenture. 2022 Series Demand Redemption of the new 2022 Series Bonds shall be at the principal amount thereof, plus accrued interest thereon to the date fixed for redemption, and such amount shall become and be due and payable on the date fixed for 2022 Series Demand Redemption as above provided. Anything in this paragraph contained to the contrary notwithstanding, if, after mailing of the 2022 Series Demand Redemption Notice and prior to the date fixed for 2022 Series Demand Redemption, the Trustee shall have been advised in writing by the trustee under the Burke Indenture that the 2022 Series Redemption Demand has been rescinded, the 2022 Series Demand Redemption Notice shall thereupon, without further act of the Trustee or the Company, be rescinded and become null and void for all purposes hereunder and no redemption of the new 2022 Series Bonds and no payments in -23- respect thereof as specified in the 2022 Series Demand Redemption Notice shall be effected or required. The new 2022 Series Bonds shall also be redeemable in whole at any time, or in part from time to time (hereinafter called the "2022 Series Regular Redemption"), upon receipt by the Trustee of a written demand (hereinafter referred to as the "2022 Series Regular Redemption Demand") from the trustee under the Burke Indenture stating: (1) the principal amount of Burke Bonds to be redeemed pursuant to Section 3.01(c) of the Burke Indenture; (2) the date of such redemption and that notice thereof has been given as required by the Burke Indenture; (3) that the Trustee shall call for redemption on the stated date fixed for redemption of the Burke Bonds a principal amount of the new 2022 Series Bonds equal to the principal amount of Burke Bonds to be redeemed; and (4) that the trustee under the Burke Indenture, as holder of all the new 2022 Series Bonds then outstanding, waives notice of such redemption. The Trustee may conclusively presume the statements contained in the 2022 Series Regular Redemption Demand to be correct. 2022 Series Regular Redemption of the new 2022 Series Bonds shall be at the principal amount thereof and accrued interest thereon to the date fixed for redemption, together with a premium equal to the redemption premium (if any) payable upon such redemption of the Burke Bonds, and such amount shall become and be due and payable, subject to the first paragraph of this Section 7, on the date fixed for such 2022 Series Regular Redemption, which shall be the date specified pursuant to item (2) of the 2022 Series Regular Redemption Demand as above provided. SECTION 8. The Company covenants that the provisions of Section 4 of the Supplemental Indenture dated as of November 1, 1962, shall be in full force and effect so long as any new Bonds of any series shall be outstanding under the Indenture. SECTION 9. As supplemented by this Supplemental Indenture, the Indenture is in all respects ratified and confirmed, and the Indenture and this Supplemental Indenture shall be read, taken and construed as one and the same instrument. SECTION 10. Nothing in this Supplemental Indenture contained shall, or shall be construed to, confer upon any person other than a holder of bonds issued under the Indenture, as supplemented and amended, the Company and the Trustee any right or interest to avail himself of any benefit under any provision of the Indenture or of this Supplemental Indenture. SECTION 11. The Trustee assumes no responsibility for or in respect of the validity or sufficiency of this Supplemental -24- Indenture or the due execution hereof by the Company or for or in respect of the recitals and statements contained herein, all of which recitals and statements are made solely by the Company. SECTION 12. This Supplemental Indenture may be executed in several counterparts and all such counterparts executed and delivered, each as an original, shall constitute but one and the same instrument. SECTION 13. Although this Supplemental Indenture, for convenience and for the purposes of reference, is dated as of the day and year first above written, the actual dates of execution by the Company and the Trustee are as indicated by their respective acknowledgments hereto annexed. -25- IN WITNESS WHEREOF, said Georgia Power Company has caused this Supplemental Indenture to be executed in its corporate name by its President or one of its Vice Presidents and its corporate seal to be hereunto affixed and to be attested by its Secretary or one of its Assistant Secretaries, and said Chemical Bank, to evidence its acceptance hereof, has caused this Supplemental Indenture to be executed in its corporate name by one of its Vice Presidents, Senior Trust Officers or Trust Officers and its corporate seal to be hereunto affixed and to be attested by one of its Senior Trust Officers, Trust Officers, Assistant Trust Officers or Assistant Secretaries, in several counterparts, all as of the day and year first above written. GEORGIA POWER COMPANY By: Vice President Attest: Assistant Secretary Signed, sealed and delivered this 7th day of September, 1994 by Georgia Power Company in the County of Fulton, State of Georgia, in the presence of Unofficial Witness Notary Public, Walton County, Georgia My Commission Expires August 2, 1996 (signatures continued on next page) CHEMICAL BANK By: Vice President Attest: Assistant Secretary Signed, sealed and delivered this 9th day of September, 1994 by Chemical Bank in the County of New York, State of New York, in the presence of Unofficial Witness ANNABELLE DeLUCA Notary Public, State of New York No. 01DE5013759 Qualified in Kings County Certificate filed in New York County Commission Expires July 15, 1995 STATE OF GEORGIA ) ) SS.: COUNTY OF FULTON ) On the 7th day of September, 1994, personally appeared before me Jane F. Genske, a Notary Public in and for the State and County aforesaid, David Williams, who made oath and said that he was present and saw the corporate seal of Georgia Power Company affixed to the above written instrument, that he saw Judy M. Anderson, Vice President, with Wayne Boston, Assistant Secretary, known to him to be such officers of said corporation respectively, attest the same, and that he, deponent, with Jane F. Genske, witnessed the execution and delivery of the said instrument as the free act and deed of said Georgia Power Company. Subscribed and sworn to ) before me this 7th day ) of September, 1994 ) Notary Public, Walton County, Georgia My Commission Expires August 2, 1996 STATE OF NEW YORK ) ) SS.: COUNTY OF NEW YORK ) On the 9th day of September, 1994, personally appeared before me Annabelle DeLuca, a Notary Public in and for the State and County aforesaid, P. Kelly, who made oath and said that she was present and saw the corporate seal of Chemical Bank affixed to the above written instrument, that she saw P. J. Gilkeson, Vice President, with L. O'Brien, Assistant Secretary, known to her to be such officers of said corporation respectively, attest the same, and that she, deponent, with Annabelle DeLuca, witnessed the execution and delivery of the said instrument as the free act and deed of said Chemical Bank. Subscribed and sworn to ) before me this 9th day ) of September, 1994 ) ANNABELLE DeLUCA Notary Public, State of New York No. 01DE5013759 Qualified in Kings County Certificate filed in New York County Commission Expires July 15, 1995 STATE OF GEORGIA ) ) SS.: COUNTY OF FULTON ) On the 7th day of September, in the year one thousand nine hundred and ninety-four, before me personally came Judy M. Anderson, to me known, who, being by me duly sworn, did depose and say that she resides at 199 14th Street, N.E., Atlanta, Georgia; that she is a Vice President of Georgia Power Company, one of the corporations described in and which executed the foregoing instrument; that she knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation; and that she signed her name thereto by like order. Notary Public, Walton County, Georgia My Commission Expires August 2, 1996 STATE OF NEW YORK ) ) SS.: COUNTY OF NEW YORK ) On the 9th day of September, in the year one thousand nine hundred and ninety-four, before me personally came P. J. Gilkeson, to me known, who, being by me duly sworn, did depose and say that he resides at 452 Delafield Avenue, Staten Island, New York; that he is a Vice President of Chemical Bank, one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation; and that he signed his name thereto by like order. ANNABELLE DeLUCA Notary Public, State of New York No. 01DE5013759 Qualified in Kings County Certificate filed in New York County Commission Expires July 15, 1995 STATE OF GEORGIA ) ) SS.: COUNTY OF FULTON ) On the 7th day of September, 1994, before me appeared Judy M. Anderson, to me personally known, who, being by me duly sworn, did say that she is a Vice President of Georgia Power Company, and that the seal affixed to said instrument is the corporate seal of said corporation and that said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and that said Judy M. Anderson acknowledged said instrument to be the free act and deed of said corporation. Given under my hand this 7th day of September, 1994. Notary Public, Walton County, Georgia My Commission Expires August 2, 1996 STATE OF NEW YORK ) ) SS.: COUNTY OF NEW YORK ) On the 9th day of September, 1994, before me appeared P. J. Gilkeson, to me personally known, who, being by me duly sworn, did say that he is a Vice President of Chemical Bank, and that the seal affixed to said instrument is the corporate seal of said corporation and that said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and that said P. J. Gilkeson acknowledged said instrument to be the free act and deed of said corporation. Given under my hand this 9th day of September, 1994. ANNABELLE DeLUCA Notary Public, State of New York No. 01DE5013759 Qualified in Kings County Certificate filed in New York County Commission Expires July 15, 1995 tjh:\wpdocs\25746\75980\supind EX-10.(A)58 4 EXHIBIT 10(A)58 Exhibit 10(a)58 AGREEMENT THIS AGREEMENT, made and entered into as of December 12, 1994, between SOUTHERN COMPANY SERVICES, INC., a corporation organized under the laws of the State of Alabama (hereinafter sometimes referred to as "Service Company"), and MOBILE ENERGY SERVICES COMPANY, INC. a corporation organized under the laws of the State of Alabama (hereinafter sometimes referred to as "Client Company"); W I T N E S S E T H: THAT, WHEREAS, the parties hereto desire to enter into this agreement providing for the performance by Service Company for Client Company of certain services more particularly set forth herein; NOW, THEREFORE, in consideration of the premises and of the mutual agreements herein, the parties hereto hereby agree as follows: 1. Agreement to Furnish Services Service Company agrees to furnish to Client Company, upon the terms and conditions hereinafter set forth, such of the services described in Article 2 hereof, at such times, for such periods and in such manner as Client Company may from time to time request. 2. Description of Services Service Company will, as and to the extent required for Client Company, keep itself and its personnel available and competent to render to Client Company, the following services; A. General Executive and Advisory Services To advise and assist the officers and employees of Client Company in connection with various phases of its business and operations, including particularly but not exclusively, those phases which involve coordination of planning or operation between Client Company and other client companies or otherwise have a direct effect not only on Client Company but also on the Southern System or other members thereof. B. General Engineering The maintenance of an organization staffed and equipped to perform for Client Company general engineering work, including system production and transmission studies, preparation and analysis of electrical apparatus specifications, distribution studies and standards, civil engineering and hydraulic studies and problems, fuel supply studies, advice and assistance in connection with analyses of operations and operating and construction budgets. The members of this group will keep informed as to improvements and developments in the art of generation, transmission and distribution of electricity through frequent contacts with the manufacturers of electrical equipment, through membership in the various national and regional -2- engineering societies and through participation in the committee work of such societies and trade associations of the utility industry. Service Company will make available to Client Company the information thus gained with respect to such developments. C. Design Engineering To perform detailed design work for Client Company for steam plants, hydro plants, transmission and distribution lines and substations and otherwise as required by Client Company; to make available to Client Company and other client companies as required, the services of a specialist or specialists on various phases of plant operation; and also to make available as required, inspection and supervision personnel for generating plant, transmission line and substation and other construction and operation. D. Purchasing To render services to Client Company in connection with purchasing, including the coordination of group purchasing, and to supply expediting services. All requests for bids shall be made by and purchases confirmed in the name of Client Company or of Service Company as agent therefor, and all contracts of purchase shall be likewise made. E. Accounting and Statistical To advise and assist Client Company in connection with the installation of new accounting systems and similar problems, appearances before regulatory commissions, requirements of Federal and State regulatory bodies with respect to accounting, -3- studies of accounting procedures and practices to improve efficiency, book entries resulting from unusual financial transactions, internal audits, employment of independent auditors, preparation and analyses of financial and operating reports and other statistical matters relating to Client Company and other client companies, analyses of securities of other utility companies, preparation of annual reports to stockholders, regulatory commissions, insurance companies and others, standardization of accounting and statistical forms in the interest of economy, and other accounting and statistical matters. F. Finance and Treasury To advise and assist Client Company on (a) financing matters, including determination of types and times of sale of long and short-term securities, refunding studies, sinking fund problems, and (b) all treasury matters, including banking problems and investment of surplus funds, and (c) maintenance of books of accounts and other related corporate records. G. Taxes To advise and assist Client Company in connection with tax matters, including preparation of Federal and State income and other tax returns and of protests, claims and briefs where necessary, tax accruals, and other matters in connection with Client Company's taxes. H. Insurance and Pensions -4- To advise and assist Client Company in connection with insurance and pension matters, including contracts with insurers, trustees and actuaries and the placing of blanket and group policies covering Client Company and other client companies, and other insurance problems as required. I. Corporate To advise and assist Client Company in connection with its corporate affairs, including assistance and suggestions in connection with the preparation of petitions and applications for the issuance of securities, contracts for the sale or underwriting of securities, preparation of schedules of steps required in connection with major financial and other corporate matters and the consummation thereof, and the preparation of various documents required in connection therewith, proceedings for release of property from mortgage and other mortgage requirements such as purchase or sale of property, sinking funds, maintenance and improvement funds, contacts with trustees, transfer agents and registrars; maintenance of minutes of directors' and stockholders' meetings and other proceedings and of other related corporate records; and also arrangements for stockholders's meetings, including notices, proxies and records thereof and for other types of meetings relating to its securities. J. Rates To study comparative rate levels for various classes of service, in different areas and for different operating -5- conditions, and keep in touch with trends in rate design, and to make such information available to Client Company; to advise Client Company on matters relating to rates and valuation, the design of new and improved rate schedules, and their effect upon Client Company's revenues, the cost of competitive services, earnings trends, the desirability of rate changes, rate audits, service rules and regulations, commodity and tax clauses, minimum charges, metering problems, special industrial contracts, resale rates and rural extension plans; and to assist Client Company in the preparation of petitions and applications required in connection with rate changes. K. Budgeting To advise and assist Client Company in matters involving the preparation and development of construction and operating budgets, cash and cost forecasts, and budgetary controls. L. Business Promotion and Public Relations To advise and assist Client Company in area development activities, in the development of residential, commercial and industrial sales programs, in the preparation and use of advertising, and in the determination and carrying out of public information programs, including those arising out of regulatory and legislative matters. M. Employee Relations To furnish Client Company with advisory services in connection with employee relations matters, including -6- recruitment, employee placement, training, compensation, safety, labor relations and health, welfare and employee benefits. N. Systems and Procedures To advise and assist Client Company in the formation of good operating practices and methods of procedure, the standardization of forms, the purchase, rental and use of mechanical and electronic data processing, computing and communications equipment, in conducting economic research and planning and in the development of special economic studies. O. Other Services To render advice and assistance in connection with such other matters as Client Company may request and Service Company may be able to perform with respect to Client Company's business and operations. 3. Compensation of Service Company As compensation for such services rendered to it by Service Company, Client Company hereby agrees to pay to Service Company the cost of such services. Bills will be rendered for the amount of such cost on or before the 10th day of the succeeding month and will be payable on or before the 20th day of such month. Cost of services to be paid by Client Company shall include direct charges and Client Company's pro rata share of certain of Service Company's costs, determined as set forth below: A. Direct Charges To the extent that the costs incurred by Service Company in connection with services rendered by it to Client Company can be -7- identified and related to a particular transaction, direct charges will be made by Service Company against Client Company. B. Prorated Charges Such costs incurred by Service Company each month as cannot be charged by Service Company directly to the companies for which it performs services will be distributed among such companies in a fair and equitable manner as set forth in the Southern Company Services, Inc. Cost Allocation Manual which is incorporated herein by reference. The Service Company may revise the Cost Allocation Manual from time to time, subject to the approval of the Client Company and to any necessary regulatory approval, and the revised Cost Allocation Manual shall be incorporated herein by reference upon the effective date of the revision. 4. Companies to be Served Service Company agrees that during the term hereof it will render services as required by companies in the Southern System and that all such companies will compensate Service Company as provided in Section 3 hereof. 5. Effective Date - Term - Cancellation After execution by the parties hereto this agreement shall become effective as of December 12, 1994, subject to receipt of any required regulatory approval, and shall remain in effect until terminated by mutual agreement of said parties. -8- It is also understood and agreed that nothing herein shall be construed to release the officers and directors of Client Company from the obligation to perform their respective duties, or to limit the exercise of their powers in accordance with the provisions of law or otherwise, and this agreement shall be cancelled to the extent and from the time that performance hereunder may conflict with any rule, regulation or order of the Securities and Exchange Commission adopted before or after the execution hereof. IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed by their duly authorized officers and their respective seals to be affixed as of the day and year first above written. SOUTHERN COMPANY SERVICES, INC. By: /s/W. Dean Hudson Attest: Its: Vice President and Comptroller /s/Sam H. Dabbs, Jr. Assistant Secretary MOBILE ENERGY SERVICES COMPANY, INC. By: /s/Thomas G. Boren Attest: Its: President James A. Ward Asst. Secretary -9- EX-10.(A)60 5 EXHIBIT 10(A)60 Exhibit 10(a)60 Execution Copy AMENDMENT NO.1, DATED AS OF JUNE 15, 1994, TO THE PLANT ROBERT W. SCHERER UNIT NUMBER FOUR AMENDED AND RESTATED PURCHASE AND OWNERSHIP PARTICIPATION AGREEMENT among GEORGIA POWER COMPANY FLORIDA POWER & LIGHT COMPANY and JACKSONVILLE ELECTRIC AUTHORITY THIS AMENDMENT NO.1, dated as of June 15, 1994, is among GEORGIA POWER COMPANY, a corporation organized and existing under the laws of the State of Georgia ("GPC"), FLORIDA POWER & LIGHT COMPANY, a corporation organized and existing under the laws of the State of Florida ("FPL"), and JACKSONVILLE ELECTRIC AUTHORITY, a body politic and corporate and an independent agency of the City of Jacksonville, Florida, organized and existing under the laws of the State of Florida, ("JEA"), and is Amendment No. 1 to that certain Plant Robert W. Scherer Unit Number Four Amended and Restated Purchase and Ownership Participation Agreement, dated as of December 31, 1990 (the "Ownership Agreement"), among GPC, FPL and JEA. W I T N E S S E T H : WHEREAS, GPC, FPL and JEA have previously entered into the Ownership Agreement providing, among other things, to establish their respective ownership rights in Scherer Unit No. 4, the Additional Unit Common Facilities, the Plant Scherer Common Facilities and in the Plant Scherer Coal Stockpile; and WHEREAS, the parties hereto desire to amend certain provisions of the Ownership Agreement; NOW, THEREFORE, in consideration of the mutual agreements herein set forth, the parties hereto hereby agree as follows: 1. Certain Definitions. Capitalized terms and phrases used and not otherwise defined in this Amendment shall have the respective meanings assigned to them by the Ownership Agreement, the Operating Agreement, or both, unless the context or use clearly indicates otherwise. The rules of interpretation, instruction, or both, set forth in the Ownership Agreement shall apply with equal force and effect to this Amendment. 2. Amendment to Section 1, DEFINITIONS. (a) Section 1(q), COMMON COAL STOCKPILE, is hereby amended to add the following to the end thereof, "pursuant to Section 6(i), COMMON COAL STOCKPILE AND SEPARATE COAL STOCKPILES, of this Ownership Agreement." (b) The first sentence of Section 1(r), COMMON COAL STOCKPILE COSTS, is hereby amended to delete the words "Section 3(d), FOSSIL FUEL," and to substitute the words "subsection (iii) of Section 3(c), SEPARATE FUEL PROCUREMENT" therefore. The second sentence of Section 1(r), COMMON COAL STOCKPILE COSTS, is hereby amended to add the words "Other Fuel Costs, Separate Coal Stockpile Costs and" after the words "shall not include." - 2 - (c) Section 1(u), COMMON PROCUREMENT PARTICIPANT, is hereby amended to add the words "subsection (iii) of" after the words "exercised its rights under" in subsection (i) thereof. Section 1(u), COMMON PROCUREMENT PARTICIPANT, is hereby amended to delete the words "undivided ownership interests" and "undivided percentage ownership interest" and to substitute the words "Pro Forma Ownership Interest in Plant Scherer" therefore. (d) The second sentence of Section 1(bo), OTHER FUEL COSTS, is hereby amended to add the words "Common Coal Stockpile Costs, Separate Coal Stockpile Costs and" after the words "shall not include." (e) Section 1(bz), PLANT SCHERER PARTICIPATION AGREEMENTS, is hereby amended to delete the words "William J. Wade as Owner Trustees" and to substitute the words "NationsBank of Georgia, N.A. (as successor to William J. Wade) as Owner Trustees, as amended" therefore. (f) Section 1(cc), PRO FORMA OWNERSHIP INTERESTS IN PLANT SCHERER, is hereby amended to add words "by four" after the words "obtained by dividing." - 3 - Section 1(cc), PRO FORMA OWNERSHIP INTEREST IN PLANT SCHERER, is hereby amended to delete "(i)" and the words "by (ii) four" therefrom. (g) Section 1(cu), SEPARATE COAL STOCKPILE COSTS, is hereby amended by deleting such Section 1(cu) in its entirety and by substituting, in lieu thereof, the following: "(cu) Separate Coal Stockpile Costs. "Separate Coal Stockpile Costs" shall mean with respect to each Separate Coal Stockpile Participant all costs incurred by the Agent for such Separate Coal Stockpile Participant (or by a Common Procurement Participant in connection with any contract for fuel entered into in accordance with the provisions of subsection (iii) of Section 3(c), SEPARATE FUEL PROCUREMENT, of the Operating Agreement) that are allocable to the acquisition, processing, transportation, delivering, handling, storage, accounting, analysis, measurement and disposal of coal for such Separate Coal Stockpile Participant, including, without limitation, all costs incurred by GPC as Agent in administering fuel and transportation contracts entered into by such Separate Coal Stockpile Participant pursuant to any one or more of Section 6(i), COMMON COAL STOCKPILE AND SEPARATE COAL STOCKPILES, hereof or subsection (ii) of Section - 4 - 3(c), SEPARATE FUEL PROCUREMENT, subsection (i) of Section 3(d), FOSSIL FUEL or Section 3(e), COMMON COAL STOCKPILE AND SEPARATE COAL STOCKPILES, of the Operating Agreement, and including any advance payments in connection therewith, less credits related to such costs applied as appropriate, and including that portion of administrative and general expenses which is properly and reasonably allocable to acquisition and management of coal for such Separate Coal Stockpile Participant's Separate Coal Stockpile and for which the incurring party has not otherwise been reimbursed. Separate Coal Stockpile Costs shall not include Common Coal Stockpile Costs, Other Fuel Costs and amortization of the Plant Scherer initial fossil fuel supply, including, without limitation, unrecoverable base coal." (h) Section 1(cw), SEPARATE PROCUREMENT PARTICIPANT, is hereby amended by deleting such Section 1(cw) in its entirety and by substituting, in lieu thereof, the following: "(cw) Separate Procurement Participant. "Separate Procurement Participant" shall mean each Separate Coal Stockpile Participant (i) which has exercised its rights under the applicable subsections - 5 - of Sections 3(c), SEPARATE FUEL PROCUREMENT of the Operating Agreement, Section 2(c) (iii) of the Units Operating Agreement, Section 3(c), SEPARATE FUEL PROCUREMENT of the Unit Three Operating Agreement or (ii) which has been found by a vote of a majority of the Pro Forma Ownership Interest in Plant Scherer of the Common Procurement Participants (excluding the Pro Forma Ownership Interest in Plant Scherer of the Common Procurement Participant under consideration) to have violated the policies and rules for Common Procurement Participants established from time to time by the Plant Scherer Managing Board; and which has not been reestablished as a Common Procurement Participant pursuant to subsection (i) of Section 3(d), FOSSIL FUEL, of the Operating Agreement." (i) Section 1(df), UNIFORM SYSTEM OF ACCOUNTS, is hereby amended to delete the words "(Class A and Class B)" and to substitute the words "subject to the provisions of the Federal Power Act" therefore. - 6 - 3. Amendment to Section 3, SALE TO FPL OF UNDIVIDED OWNERSHIP INTERESTS IN SCHERER UNIT NO. 4. (a) The first sentence of Section 3(c), CLOSINGS, is hereby amended to delete the words "June 30, 1991" and to substitute the words "July 2, 1991" therefore. (b) The fourth sentence of Section 3(c), CLOSINGS, is hereby amended to delete the words "June 30, 1991" and to substitute the words "July 2, 1991" therefore. 4. Amendment to Section 4, SALE TO JEA OF UNDIVIDED OWNERSHIP INTERESTS IN SCHERER UNIT NO. 4. (a) The first sentence of Section 4(c), CLOSINGS, is hereby amended to delete the words "June 30, 1991" and to substitute the words "July 2, 1991" therefore. (b) The third sentence of Section 4(c), CLOSINGS, is hereby amended to delete the words "June 30, 1991" and to substitute the words "July 2, 1991" therefore. 5. Amendment to Section 6, OWNERSHIP, RIGHTS AND OBLIGATIONS. (a) Subsection (vii) of Section 6(d), DAMAGE AND DESTRUCTION, is hereby amended to add the words - 7 - "actually incurred" after the words "cost of capital" and to add the following to the end thereof: "Except as otherwise agreed to by the Participants and the Additional Unit Participants, the Participants may not repair or reconstruct the Additional Units or the Additional Unit Common Facilities and the Additional Unit Participants may not repair or reconstruct the Units or the Unit Common Facilities." (b) Subsections (i), (ii) and (iii) of Section 6(g), FOSSIL FUEL, are hereby amended to add the words "5(b), SCHEDULING AND DISPATCHING," after the words "Sections 3(e), COMMON COAL STOCKPILE AND SEPARATE COAL STOCKPILES," in each of those subsections. (c) Subsection (ii) of Section 6(i), COMMON COAL STOCKPILE AND SEPARATE COAL STOCKPILES, is hereby amended to add the words "5(b), SCHEDULING AND DISPATCHING" after the words "Sections 3(e), COMMON COAL STOCKPILE AND SEPARATE COAL STOCKPILES." (d) Subsection (ii) of Section 6(i), COMMON COAL STOCKPILE AND SEPARATE COAL STOCKPILES, is hereby amended to add the following to the end thereof, "except as provided in subsection (viii) of this Section 6(i)." - 8 - (e) The last sentence of subsection (iii) of Section 6(i), COMMON COAL STOCKPILE AND SEPARATE COAL STOCKPILES, is hereby amended to delete the words "undivided ownership interests" and to substitute the words "Pro Forma Ownership Interest in Plant Scherer" therefore. (f) Subsection (vi) of Section 6(i), COMMON COAL STOCKPILE AND SEPARATE COAL STOCKPILES, is hereby amended to add the following to the end thereof, "under this Section 6(i)." 6. Amendment to Section 10, MISCELLANEOUS. The first sentence of Section 10(s), CERTAIN PROVISIONS APPLICABLE DURING BUY-BACK PERIOD, is hereby amended to delete the words "Section 5(c)" and to substitute the words "Section 5(b)" therefore. 7. Miscellaneous. This Amendment shall be construed in connection with and as a part of the Ownership Agreement, and all terms, conditions and covenants contained in the Ownership Agreement, except as herein modified, shall be and remain in full force and effect. The parties hereto agree that they are bound by the terms and conditions of the Ownership Agreement as amended hereby. - 9 - This Amendment may be executed in any number of counterparts, each executed counterpart constituting an original but altogether one and the same instrument. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] - 10 - IN WITNESS WHEREOF, the undersigned Parties hereto have duly executed this Amendment to the Ownership Agreement under seal as of the date first above written. Signed, sealed and delivered GEORGIA POWER COMPANY, as a in the presence of: Scherer Unit No. 4 Participant ___________________________ By: ________________________ ___________________________ Attest: ____________________ Notary Public (CORPORATE SEAL) Signed, sealed and delivered FLORIDA POWER & LIGHT COMPANY, in the presence of: as a Scherer Unit No. 4 Participant ___________________________ By: _________________________ ___________________________ Attest: _____________________ Notary Public (CORPORATE SEAL) Signed, sealed and delivered JACKSONVILLE ELECTRIC in the presence of: AUTHORITY, as a Scherer Unit No. 4 Participant ___________________________ By: _________________________ ___________________________ Attest: ____________________ Notary Public (CORPORATE SEAL) Signed, sealed and delivered GEORGIA POWER COMPANY, as in the presence of: Agent ___________________________ By: _________________________ ___________________________ Attest: _____________________ Notary Public (CORPORATE SEAL) H:\wpdocs\gpc\unit4\amends\owneramd.fnl - 11 - EX-10.(A)61 6 EXHIBIT 10(A)61 Exhibit 10(a)61 Execution Copy AMENDMENT NO.1, DATED AS OF JUNE 15, 1994, TO THE PLANT ROBERT W. SCHERER UNIT NUMBER FOUR OPERATING AGREEMENT among GEORGIA POWER COMPANY FLORIDA POWER & LIGHT COMPANY and JACKSONVILLE ELECTRIC AUTHORITY THIS AMENDMENT NO.1, dated as of June 15, 1994, is among GEORGIA POWER COMPANY, a corporation organized and existing under the laws of the State of Georgia ("GPC"), FLORIDA POWER & LIGHT COMPANY, a corporation organized and existing under the laws of the State of Florida ("FPL"), and JACKSONVILLE ELECTRIC AUTHORITY, a body politic and corporate and an independent agency of the City of Jacksonville, Florida, organized and existing under the laws of the State of Florida, ("JEA"), and is Amendment No. 1 to that certain Plant Robert W. Scherer Unit Number Four Operating Agreement, dated as of December 31, 1990 (the "Operating Agreement"), among GPC, FPL and JEA. W I T N E S S E T H : WHEREAS, GPC, FPL and JEA have previously entered into the Operating Agreement to provide, among other things, for the management, control, operation and maintenance of Scherer Unit No. 4, the Additional Unit Common Facilities, the Plant Scherer Common Facilities and in the Plant Scherer Coal Stockpile; and WHEREAS, the parties hereto desire to amend certain provisions of the Operating Agreement; NOW, THEREFORE, in consideration of the mutual agreements herein set forth, the parties hereto hereby agree as follows: 1. Certain Definitions. Capitalized terms and phrases used and not otherwise defined in this Amendment shall have the respective meanings assigned to them by the Ownership Agreement, the Operating Agreement, or both, unless the context or use clearly indicates otherwise. The rules of interpretation, instruction, or both, set forth in the Operating Agreement shall apply with equal force and effect to this Amendment. 2. Amendment to Section 1, DEFINITIONS. (a) Section 1(q), COMMON COAL STOCKPILE, is hereby amended to add the following to the end thereof, "pursuant to Section 6(i), COMMON COAL STOCKPILE AND SEPARATE COAL STOCKPILES, of the Ownership Agreement." (b) The first sentence of Section 1(r), COMMON COAL STOCKPILE COSTS, is hereby amended to delete the words "Section 3(d), FOSSIL FUEL," and to substitute the words "subsection (iii) of Section 3(c), SEPARATE FUEL PROCUREMENT" therefore. The second sentence of Section 1(r), COMMON COAL STOCKPILE COSTS, is hereby amended to add the words "Other Fuel Costs, Separate Coal Stockpile Costs and" after the words "shall not include." (c) Section 1(v), COMMON PROCUREMENT PARTICIPANT, is hereby amended to add the words "subsection (iii) of" after the words "exercised its rights under" in subsection (i) thereof. Section 1(v), COMMON PROCUREMENT PARTICIPANT, is hereby amended to delete the words "undivided ownership interests" and "undivided percentage ownership interest" and to substitute the words "Pro Forma Ownership Interest in Plant Scherer" therefore. (d) The second sentence of Section 1(bb), OTHER FUEL COSTS, is hereby amended to add the words "Common Coal Stockpile Costs, Separate Coal Stockpile Costs and" after the words "shall not include." (e) Section 1(bn), PLANT SCHERER PARTICIPATION AGREEMENTS, is hereby amended to delete the words "William J. Wade as Owner Trustees" and to substitute the words "NationsBank of Georgia, N.A. (as successor to William J. Wade) as Owner Trustees, as amended" therefore. (f) Section 1(bq), PRO FORMA OWNERSHIP INTERESTS IN PLANT SCHERER, is hereby amended to add words "by four" after the words "obtained by dividing." - 3 - Section 1(bq), PRO FORMA OWNERSHIP INTEREST IN PLANT SCHERER, is hereby amended to delete "(i)" and the words "by (ii) four" therefrom. (g) Section 1(cf), SEPARATE COAL STOCKPILE COSTS, is hereby amended by deleting such Section 1(cf) in its entirety and by substituting, in lieu thereof, the following: "(cf) Separate Coal Stockpile Costs. "Separate Coal Stockpile Costs" shall mean with respect to each Separate Coal Stockpile Participant all costs incurred by the Agent for such Separate Coal Stockpile Participant (or by a Common Procurement Participant in connection with any contract for fuel entered into in accordance with the provisions of subsection (iii) of Section 3(c), SEPARATE FUEL PROCUREMENT, hereof) that are allocable to the acquisition, processing, transportation, delivering, handling, storage, accounting, analysis, measurement and disposal of coal for such Separate Coal Stockpile Participant, including, without limitation, all costs incurred by GPC as Agent in administering fuel and transportation contracts entered into by such Separate Coal Stockpile Participant pursuant to any one or more of Section 6(i), COMMON COAL STOCKPILE AND SEPARATE COAL STOCKPILES, of the Ownership Agreement or subsection - 4 - (ii) of Section 3(c), SEPARATE FUEL PROCUREMENT, subsection (i) of Section 3(d), FOSSIL FUEL or Section 3(e), COMMON COAL STOCKPILE AND SEPARATE COAL STOCKPILES, hereof, and including any advance payments in connection therewith, less credits related to such costs applied as appropriate, and including that portion of administrative and general expenses which is properly and reasonably allocable to acquisition and management of coal for such Separate Coal Stockpile Participant's Separate Coal Stockpile and for which the incurring party has not otherwise been reimbursed. Separate Coal Stockpile Costs shall not include Common Coal Stockpile Costs, Other Fuel Costs and amortization of the Plant Scherer initial fossil fuel supply, including, without limitation, unrecoverable base coal." (h) Section 1(ch), SEPARATE PROCUREMENT PARTICIPANT, is hereby amended by deleting such Section 1(ch) in its entirety and by substituting, in lieu thereof, the following: "(ch) Separate Procurement Participant. "Separate Procurement Participant" shall mean each Separate Coal Stockpile Participant (i) which has exercised its rights under the applicable subsections - 5 - of Sections 3(c), SEPARATE FUEL PROCUREMENT hereof, Section 2(c)(iii) of the Units Operating Agreement, Section 3(c), SEPARATE FUEL PROCUREMENT of the Unit Three Operating Agreement or (ii) which has been found by a vote of a majority of the Pro Forma Ownership Interest in Plant Scherer of the Common Procurement Participants (excluding the Pro Forma Ownership Interest in Plant Scherer of the Common Procurement Participant under consideration) to have violated the policies and rules for Common Procurement Participants established from time to time by the Plant Scherer Managing Board; and which has not been reestablished as a Common Procurement Participant pursuant to subsection (i) of Section 3(d), FOSSIL FUEL, hereof." (i) Section 1(cl), SPOT COAL, is hereby amended by deleting such Section 1(cl) in its entirety and by substituting, in lieu thereof, the following: "(cl) SPOT COAL. "Spot Coal" shall mean all coal purchased for the Common Coal Stockpile or any Separate Coal Stockpile under an arrangement of acquisition for a period of less than one year, or some other period agreed to by the written approval or consent of those members of the Plant Scherer Managing Board which - 6 - collectively own at least a 76% Pro Forma Ownership Interest in Plant Scherer." (j) Section 1(df), UNIFORM SYSTEM OF ACCOUNTS, is hereby amended to delete the words "(Class A and Class B)" and to substitute the words "subject to the provisions of the Federal Power Act" therefore. 3. Amendment to Section 3, AUTHORITY AND RESPONSIBILITY FOR OPERATION. (a) The first paragraph of subsection (ii)(B) of Section 3(c), SEPARATE FUEL PROCUREMENT, is hereby amended to add the following to the end thereof, "including, without limitation, to extend, terminate or renegotiate the contract or exercise options thereunder and to sue the supplier." (b) Subsection (iii) of Section 3(c), SEPARATE FUEL PROCUREMENT, is hereby amended by deleting such subsection in its entirety and by substituting, in lieu thereof, the following: "(iii) Subject to amendment of the other Plant Scherer Participation Agreements to be consistent with - 7 - the following provisions, GPC, FPL and JEA agree as follows: In the event that any Common Procurement Participant (other than GPC, as Agent) should be able to locate and arrange for a source of coal for the Common Procurement Participants and (A) the total cost per Btu of such coal, including, without limitation, all brokerage, transportation, handling, testing and storage charges, is equal to or lower than that of the coal which GPC, as Agent, would be able to procure for the Common Procurement Participants for the same period of time; (B) the quality and characteristics of such coal are in all respects equal to or better than and compatible with those of the other coal being utilized or to be utilized in the Common Coal Stockpile during the period of such contract, and such coal is in all respects compatible with the Units and the Additional Units and will enable the Units and the Additional Units to operate at their normal operational levels in compliance with all Legal Requirements applying thereto; (C) transportation for such coal can be arranged which is at least as reliable as transportation which would be available for the other sources of coal for the Common Coal Stockpile for the same period of time, and such transportation is - 8 - compatible with the transportation and coal delivery facilities of the Units and the Additional Units; (D) all parties materially associated with the supply of such coal, including, without limitation, the vendor, broker, mine operator and transporter, are at least as reliable and technically and financially qualified as those with whom GPC, as Agent, would be able to contract for the other coal for the Common Coal Stockpile during the same period of time; (E) procurement of such coal would not interfere with, diminish any benefits of or replicate any other coal arrangement which GPC, as Agent, has procured for or entered into for the Common Procurement Participants, including, without limitation, any options or rights for renewals or extensions of contacts, and would not interfere with, diminish any benefits of or replicate any transportation arrangements, agreements or tariffs; (F) procurement of such coal would not increase or diminish the level of coal supply in the Common Coal Stockpile determined by GPC, as Agent, to be the appropriate level therefor; and (G) the vendor of such coal is willing to enter into a contract with GPC and such of the Separate Coal Stockpile Participants desiring to participate in such coal supply arrangement on terms and conditions no less favorable to the Common Procurement Participants than those then being - 9 - bargained for by GPC; then GPC, as Agent for the Common Procurement Participants, shall offer such coal supply arrangement to the Common Procurement Participants in accordance with the provisions of Section 3(d) hereof. If GPC, on behalf of the other Common Coal Stockpile Participants, or if a Separate Coal Stockpile Participant for its own account, shall enter into one or more contracts for such coal supply, then GPC shall thereafter exclusively administer such contract and all transportation arrangements associated therewith, and all costs and benefits of such coal supply arrangement shall be shared pursuant to the other provisions of this Agreement and of the Ownership Agreement. No Participant or Additional Unit Participant (other than GPC, as Agent, or a Separate Coal Stockpile Participant for its own account) shall enter into any arrangement or agreement with respect to the procurement of coal pursuant to this subsection (iii) of Section 3(c), and any Participant or Additional Unit Participant (other than GPC, as Agent, or a Separate Coal Stockpile Participant for its own account) which shall enter into any such arrangement or agreement (or which is charged in any suit, action or other proceeding with having done so) shall indemnify the other Participants and Additional Unit Participants for all costs, expenses, judgments and penalties associated therewith and - 10 - incurred by them, including, without limitation, all legal fees incurred in connection with any suit, action or other proceeding." (c) Subsection (i)(A) of Section 3(d), FOSSIL FUEL, is hereby amended as follows: (1) The title of such subsection is hereby amended to delete the word "Fuel" and to substitute the words "Coal and Transportation" therefore. (2) The first sentence of such subsection is hereby amended to add the words "Section 3(c), SEPARATE FUEL PROCUREMENT," after the words "Subject to the provisions of." (3) The second sentence of such subsection is hereby amended to add the word "and" after the words "Common Coal Stockpile." (d) Subsection (i)(B) of Section 3(d), FOSSIL FUEL, is hereby amended as follows: (1) The title of such subsection is hereby amended to delete the word "Fuel" and to substitute the words "Coal and Transportation" therefore. - 11 - (2) The third sentence of such subsection is hereby amended to add the following to the end thereof, "including, without limitation, to extend, terminate or renegotiate the contract or exercise options thereunder and to sue the supplier." (e) Subsection (i)(C) of Section 3(d), FOSSIL FUEL, is hereby amended by deleting the first sentence of such subsection in its entirety and by substituting, in lieu thereof, the following: "Upon (i) exercise by any Separate Coal Stockpile Participant of a procurement under subsection (ii) of Section 3(c), SEPARATE FUEL PROCUREMENT, hereof, or (ii) violation by any Separate Coal Stockpile Participant, which has been found by a vote of a majority of the Pro Forma Ownership Interest in Plant Scherer of the Common Procurement Participants (excluding the Pro Forma Ownership Interest in Plant Scherer of the Common Procurement Participant under consideration) of any policy or rule for Common Procurement Participants established from time to time by the Plant Scherer Managing Board, such Separate Coal Stockpile Participant shall immediately cease to be a Common Procurement Participant, and GPC shall have no obligation to procure coal or transportation on behalf - 12 - of such Separate Coal Stockpile Participant other than for Spot Coal." (f) Subsections (iii), (iv) and (v) of Section 3(d), FOSSIL FUEL are hereby amended to add the words "5(b), SCHEDULING AND DISPATCHING" after the words "Sections 3(e), COMMON COAL STOCKPILE AND SEPARATE COAL STOCKPILES" in each of those subsections. (g) Subsection (ii) of Section 3(e), COMMON COAL STOCKPILE AND SEPARATE COAL STOCKPILES, is hereby amended to add the words "5(b), SCHEDULING AND DISPATCHING," after the words "Sections 3(e), COMMON COAL STOCKPILE AND SEPARATE COAL STOCK PILES." (h) Subsection (ii) of Section 3(e), COMMON COAL STOCKPILE AND SEPARATE COAL STOCKPILES, is hereby amended to add the following to the end thereof, "except as provided in subsection (viii) of this Section 3(e)." (i) The fourth sentence of subsection (iii) of Section 3(e), COMMON COAL STOCKPILE AND SEPARATE COAL STOCKPILES, is hereby amended to add the word "undivided" after the words "will equal the." - 13 - (j) The last sentence of subsection (iii) of Section 3(e), COMMON COAL STOCKPILE AND SEPARATE COAL STOCKPILES, is hereby amended to delete the words "undivided ownership interests" and to substitute the words "Pro Forma Ownership Interest in Plant Scherer" therefore. (k) Subsection (vi) of Section 3(e), COMMON COAL STOCKPILE AND SEPARATE COAL STOCKPILES, is hereby amended by adding the following to the end thereof, "under this Section 3(e)." 4. Amendment to Section 5, OPERATION, RIGHTS AND OBLIGATIONS. (a) Section 5(i), BUSINESS PLAN; OPERATING BUDGET FOR COMMON FACILITIES, is hereby amended by adding the following after the second paragraph thereof: "Section 5.1 of the Plant Scherer Managing Board Agreement and Appendix A of the Plant Scherer Managing Board Agreement shall govern and control any conflicting provision of this Operating Agreement with regard to operating budgets for the Plant Scherer Common Facilities." - 14 - (b) Section 5(l), CAPITAL BUDGET FOR COMMON FACILITIES, is hereby amended by adding the following after the second paragraph thereof: "Section 5.1 of the Plant Scherer Managing Board Agreement and Appendix A of the Plant Scherer Managing Board Agreement shall govern and control any conflicting provision of this Operating Agreement with regard to capital budgets for the Plant Scherer Common Facilities." (d) The third sentence of Section 5(p), INSURANCE, is hereby amended to delete the words "Section 5(h) SHARING OF COSTS - GENERAL" and to substitute the words "Section 5(j), PAYMENT AND SETTLEMENT OF OPERATING COSTS," therefore. 5. Amendment to Section 6, CERTAIN ADDITIONAL AGREEMENTS AMONG SCHERER UNIT NO. 4 PARTICIPANTS. (a) The first sentence of subsection (v) of Section 6(c), LIABILITY, REMEDIES AND LIMITATIONS OF LIABILITY, is hereby amended to delete the word "possible" and to substitute the word "permissible" therefore. - 15 - (b) The first sentence of Section 6(e), AVAILABILITY OF RECORDS, is hereby amended to delete the word "Costs" after the words "with respect to its Separate Coal Stockpile" and to delete the word "as" before the word "appropriate" and substitute the word "are" therefore. 6. Miscellaneous. This Amendment shall be construed in connection with and as a part of the Operating Agreement, and all terms, conditions and covenants contained in the Operating Agreement, except as herein modified, shall be and remain in full force and effect. The parties hereto agree that they are bound by the terms and conditions of the Operating Agreement as amended hereby. This Amendment may be executed in any number of counterparts, each executed counterpart constituting an original but altogether one and the same instrument. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] - 16 - IN WITNESS WHEREOF, the undersigned Parties hereto have duly executed this Amendment to the Operating Agreement under seal as of the date first above written. Signed, sealed and delivered GEORGIA POWER COMPANY, as a in the presence of: Scherer Unit No. 4 Participant ___________________________ By: ________________________ ___________________________ Attest: ____________________ Notary Public (CORPORATE SEAL) Signed, sealed and delivered FLORIDA POWER & LIGHT COMPANY, in the presence of: as a Scherer Unit No. 4 Participant ___________________________ By: _________________________ ___________________________ Attest: _____________________ Notary Public (CORPORATE SEAL) Signed, sealed and delivered JACKSONVILLE ELECTRIC in the presence of: AUTHORITY, as a Scherer Unit No. 4 Participant ___________________________ By: _________________________ ___________________________ Attest: ____________________ Notary Public (CORPORATE SEAL) Signed, sealed and delivered GEORGIA POWER COMPANY, as in the presence of: Agent ___________________________ By: _________________________ ___________________________ Attest: _____________________ Notary Public (CORPORATE SEAL) H:\wpdocs\gpc\scherer\unit4\amends\operamd.fnl - 17 - EX-10.(A)65 7 EXHIBIT 10(A)65 Exhibit 10(a)65 THE SOUTHERN COMPANY PRODUCTIVITY IMPROVEMENT PLAN AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1994 THE SOUTHERN COMPANY PRODUCTIVITY IMPROVEMENT PLAN Amended and Restated Effective January 1, 1994 ARTICLE DESCRIPTION PAGE I Definitions . . . . . . . . . . . . . . . . . . 2 II Participants . . . . . . . . . . . . . . . . . . 4 III Corporate Financial Performance Award . . . . . 5 IV Election for Deferral of Payment . . . . . . . . 7 V Deferred Compensation Accounts . . . . . . . . . 9 VI Distribution of Deferred Amounts . . . . . . . 11 VII Miscellaneous Provisions . . . . . . . . . . . 13 THE SOUTHERN COMPANY PRODUCTIVITY IMPROVEMENT PLAN Purposes The purposes of The Southern Company Productivity Improvement Plan (the "Plan") are to provide a financial incentive which will focus the efforts of participants 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 key management employees. In order to achieve these objectives, the Plan will be based upon corporate performance. The effective date of this amendment and restatement of the Plan shall be January 1, 1994, and except as otherwise provided herein, the terms of the Plan as in effect prior to January 1, 1994 shall continue to be applicable until such date. 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 Corporate Financial Performance Award" shall mean the amount awarded to a Participant in accordance with Article III. 1.2 "Annual Salary" shall mean the wages paid to a Participant without including overtime and before deduction of taxes, FICA, etc. 1.3 "Award" shall mean an Annual Corporate Financial Performance Award. 1.4 "Award Opportunity" shall mean the standard award a Participant could receive as an Annual Corporate Financial Performance Award. 1.5 "Board of Directors" shall mean the Board of Directors of Southern Company Services, Inc. 1.6 "Chief Executive Officer" shall mean the individual designated as such by the Board of Directors of an Employing Company and of The Southern Company. 1.7 "Committee" or "Compensation Committee" shall mean the Compensation Committee of the Board of Directors of The Southern Company or the Employing Company. 1.8 "Common Stock" shall mean the common stock of The Southern Company. 1.9 "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. 1.10 "Deferral Election" shall mean the Participant's written election to defer all or a portion of his Award pursuant to Article IV. 1.11 "Deferred Productivity Improvement Plan Account" shall mean the account maintained for the Participant in accordance with Article V. 1.12 "Employee" shall mean any person who is currently employed by an Employing Company but shall not include any individual who is eligible to participate in The Southern Company Executive Productivity Improvement Plan. - 2 - 1.13 "Employing Company" shall mean Southern Company Services, Inc., 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. The Employing Companies as of January 1, 1994 are: 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. 1.14 "Investment Election" shall mean the Participant's written election to have his deferred Award invested pursuant to Section 5.3 or Section 5.4. 1.15 "Market Value" shall mean the average of the high and low sale 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). 1.16 "Participant" shall mean any Employee who satisfies the criteria referred to in Article II. 1.17 "Plan" shall mean The Southern Company Productivity Improvement Plan, as described herein or as from time to time amended. 1.18 "Grade Level" shall mean the evaluation assigned under the job evaluation system. 1.19 "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. 1.20 "Supervisor" shall mean the immediate person responsible for the supervision of the performance of the Participant. 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. - 3 - ARTICLE II Participants 2.1 The Participants in the Plan shall be limited to those Employees of an Employing Company who occupy Grade Level 19 and higher, as well as any other Employee who occupies a grade recommended for inclusion in the Plan by the Chief Executive Officer of an Employing Company with the concurrence of the Chief Executive Officer of The Southern Company, on January 1 of each calendar year; provided, however, that any additional Employees who are recommended for inclusion in the Plan by the Chief Executive Officer of an Employing Company with the concurrence of the Chief Executive Officer of The Southern Company shall be identified by Grade Level Value and/or title in an exhibit to the Plan each January 1. 2.2 A Participant who vacates an eligible grade during a Computation Period for one of the following reasons shall be included in the Plan on a pro-rata basis: (a) retirement, (b) total disability, as determined by the Social Security Administration, (c) death, (d) demotion due to health related reasons, or (e) termination of employment, but only in the event the Participant shall transfer to or be reemployed by Southern Electric International, Inc. during the same Computation Period. The pro-rata amount of an Award shall be determined for the Computation Period in which such termination occurs by a fraction which is the number of months employed by an Employing Company during the Computation Period prior to such termination, divided by the total number of months in the Computation Period (generally forty-eight (48)) which ends immediately after such termination. The actual Awards will be made as soon as practicable and in accordance with any Deferral Election in effect. A Participant who vacates an eligible grade for reasons other than those described above shall forfeit any Award for any Computation Periods that have not closed as of the date the Participant vacates such eligible grade. 2.3 The administration of Awards for Participants who are promoted or transferred from one grade included in the Plan to another grade included in the Plan, both within an Employing Company and between Employing Companies, shall be on a pro-rata basis in accordance with procedures adopted by the Employing Company or Companies. - 4 - ARTICLE III Corporate Financial Performance Award 3.1 The Award Opportunity for each Participant shall be based upon his Grade Level(s) and shall range from fifty percent (50%) to five percent (5%) of the Grade Level Value(s) for the Grade Level(s) held by the Participant during the Computation Period. In the event a Participant's Grade Level shall change during a Computation Period, a pro-rata amount of an Award Opportunity shall be determined for each Grade Level held by the Participant during the Computation Period. The Award Opportunity for each Grade Level shall be in the same proportion as the ratio of the number of months a Grade Level is held by the Participant during the Computation Period (determined as of the last day of the month) bears to the total number of months in such Computation Period (generally forty-eight (48) months). The Award Opportunity for each Grade Level held by a Participant shall be determined in accordance with the chart set forth in Exhibit A herein. 3.2 Each Award Opportunity shall be further adjusted by the award percentage based on The Southern Company's average return on common equity ranking during a Computation Period as compared to the average return on common equity ranking of certain other member companies of the Southeastern Electric Exchange, as set forth in Exhibit B herein. In the case of an individual becoming a Participant subsequent to the initial year of the Plan, said Participant will participate on a pro-rata basis in each Computation Period which ends not less than two (2) years after becoming a Participant. Said pro-rata portion shall be determined for each Computation Period by a fraction which is the number of months remaining in the Computation Period after qualifying as a Participant, divided by the total number of months in the Computation Period (generally forty-eight (48)). A new four-year measuring period begins 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. 3.3 Notwithstanding the above, an employee of Savannah Electric and Power Company ("SEPCO") who has been continuously employed by SEPCO since January 1, 1986 shall participate in the Award for the Computation Periods ending in 1989, 1990 and 1991 to the same extent he would have been eligible to participate based on his Grade Level then in effect, if SEPCO had been acquired by The Southern Company on January 1, 1986. - 5 - 3.4 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 The 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. 3.5 In the discretion of the Compensation Committee of the Board of Directors, the Award for one or more Computation Period(s) may be calculated without regard to any extraordinary item of income or expense incurred by the Southern Company or any Employing Company, provided such determination is made prior to the close of the Computation Period. 3.6 The Awards to the Participants will be paid in cash as soon as is practicable after all evaluations are completed. The Award payment may be deferred at the option of the Participant in accordance with Article IV. In the event a Participant shall not elect to defer a portion of his Award and shall die prior to the payment of such amount, payment shall be made to the beneficiary designated by the Participant. 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 Participant or former Participant. - 6 - ARTICLE IV Election for Deferral of Payment 4.1 A Participant may elect to defer payment of an Award until termination of service with an Employing Company by filing a Deferral Election with the Employing Company not later than December 31st of the year preceding the next succeeding Computation Period. 4.2 Participants may elect to defer payments of any whole percentage (1% - 100%) of any Award that might be made to him. If a Deferral Election is duly made pursuant to the provisions of this Article with respect to an Award, an individual account will be maintained by the Employing Company as of the date of the Award. 4.3 The Deferral Election shall be made in writing on a form prescribed by the Employing Company and said Deferral Election shall state: (a) That the Participant wishes to make an election to defer payment of the Award; (b) The percentage of the Award to be deferred; (c) The method of payment, which shall be the payment of a lump-sum or a series of annual payments not to exceed ten (10) years; and (d) The time for commencement of distribution of his Deferred Productivity Improvement Plan Account, but not later than the first day of the month coinciding with or next following the second (2nd) anniversary of his termination of employment with the Employing Company. 4.4 The Deferral Election shall be made by written notice to be delivered to the Employing Company prior to the first day of the next succeeding Computation Period and shall be effective on the first day of such succeeding Computation Period. A deferral Election for the Corporate Financial Performance Component shall be an election for the four-year computation period. A Participant's termination of participation in the Plan shall not affect Awards previously deferred. - 7 - 4.5 The initial Deferral Election made with respect to (a) the method of payment whether it be lump sum or installments, including the number of installments selected, and (b) the time for commencement of distribution of a Participant's Account may not be revoked and shall govern the distribution of a Participant's Deferred Productivity Improvement Account. Notwithstanding the foregoing, and except as provided below, upon application to the senior officer in charge of employee relations of an Employing Company and the approval of such officer in his sole discretion, a Participant's Deferral Election may be amended not prior to the 395th day nor later than the 365th day prior to a Participant's date of termination in order to change (a) the form, and/or (b) the time for distribution of his Deferred Productivity Improvement Plan 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, shall not be permitted to amend his Deferral Election during any time period for which such Participant is required to file any such reports. Each Participant making a Deferral Election in accordance with this Article IV and his successors, shall be bound as to any action taken pursuant to the terms thereof or pursuant to the Plan. Notwithstanding anything to the contrary above, if the time for distribution of a Participant's Deferred Productivity Improvement Plan Account is accelerated, such Account shall be discounted to reasonably reflect the time value of money. - 8 - ARTICLE V Deferred Compensation Accounts 5.1 An account shall be established on the Employing Company books for each Participant electing a deferral pursuant to Article IV, which shall be designated as the Deferred Productivity Improvement Plan Account of said Participant. The Awards deferred in accordance with Article IV, pursuant to each Participant's Investment Election, the amounts computed in accordance with Section 5.2 and/or the number of shares computed in accordance with Section 5.1 shall be credited to the Deferred Productivity Improvement Plan Account. 5.2 The Deferred Productivity Improvement Plan Account of each Participant electing to invest his deferred Awards for a Computation Period pursuant to this Section 5.2 shall be credited with an amount computed by the Employing Company by treating the Awards deferred as a sum certain to which the Employing Company will add in lieu of interest an amount equal to the prime rate of interest set by Wachovia Bank of Georgia, N.A.. Interest will be computed as if credited from the date such Award would otherwise have been paid and will be compounded quarterly at the end of each calendar quarter. The prime rate in effect on the first day of each calendar quarter shall be deemed the prime rate in effect for such calendar quarter. Interest will be treated as if accrued and will be compounded on any balance until such amount is fully distributed. 5.3 The Deferred Productivity Improvement Plan Account of each Participant electing to invest his deferred Award for a Computation Period pursuant to this Section 5.3 shall be credited with the number of shares (including fractional shares) of Common Stock which could have been purchased on the date such deferred Awards otherwise would have been paid based upon the Common Stock's Market Value. As of each date of payment of dividends on the Common Stock there shall be credited with respect to shares of Common Stock in the Participant's Deferred Productivity Improvement Plan Account such additional shares (including fractional shares) of Common Stock as follows: (a) In the case of cash dividends, such additional shares as could be purchased at the Market Value as of the payment date with the dividends which would have been payable if the credited shares had been outstanding; (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 payment date with the fair market value of the property which would have been payable if the credited shares had been outstanding; or - 9 - (c) 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. 5.4 The Investment Election by a Participant with respect to his Deferred Productivity Improvement Plan Account shall be made in writing on a form prescribed by the Employing Company. Any Investment Election shall be delivered to the Employing Company prior to the first day of the next succeeding Computation Period and shall be effective on the first day of such succeeding Computation Period. The Investment Election made in accordance with this Article V shall be irrevocable and shall continue from Computation Period to Computation Period unless the Participant changes the Investment Election regarding future deferred Awards by submitting a written request to the Employing Company on a form prescribed by the Employing Company. Any such change shall become effective as of the first day of the Computation Period next following the Computation Period in which such request is given. 5.5 At the end of each year, a report shall be issued to each Participant who has a Deferred Productivity Improvement Plan Account and said report will set forth the amount and the Market Value of any shares of Common Stock reflected in such Account. 5.6 The terms and provisions of Articles V and VI in effect prior to the effective date of this amendment and restatement shall remain in force and continue to apply to Individual Performance Annual Awards and Annual Corporate Financial Performance Awards deferred by Participants prior to January 1, 1994. - 10 - ARTICLE VI Distribution of Deferred Amounts 6.1 When a Participant terminates his employment with the Employing Company, said Participant shall be entitled to receive the entire amount and the Market Value of any shares of Common Stock (and Fractions thereof) reflected in his Deferred Productivity Improvement Plan Account maintained by the Employing Company in accordance with his Deferral Election made pursuant to Article IV of the Plan. No portion of a Participant's Deferred Productivity Improvement Plan Account shall be distributed in Common Stock. 6.2 In the event a Participant elected to receive annual installments, the first payment shall be made on the first day of the month selected by the Participant in accordance with the terms of the Plan, or as soon as reasonably possible thereafter, and shall be an amount equal to the balance in the Participant's Deferred Productivity Improvement Plan Account divided by the number of annual installment payments. Each subsequent annual payment shall be an amount equal to the balance in the Participant's Deferred Productivity Improvement Plan Account on the payment date, divided by the number of the remaining annual payments and shall be due on the anniversary of the preceding payment date. The Market Value of any shares of Common Stock credited to a Participant's Deferred Productivity Improvement Plan 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. 6.3 Upon the death or total disability of a Participant, or a former Participant prior to the payment of all amounts and the Market Value of any shares of Common Stock (and fractions thereof) credited to said Participant's Deferred Productivity Improvement Plan Account, the unpaid balance shall be paid in the sole discretion of the Employing Company (a) in a lump sum to the designated beneficiary of a Participant or former Participant within thirty (30) days of the date of death (or as soon as reasonably possible thereafter) or (b) in accordance with the Deferral Election made by such Participant or former 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 estate of the Participant or former Participant. The Market Value of any shares of Common Stock credited to a Participant's Deferred productivity Improvement Plan 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. 6.4 The beneficiary designation may be changed by the Participant or former Participant at any time, and without the consent of the prior beneficiary. - 11 - 6.5 The senior officer in charge of employee relations of an Employing Company, in his sole discretion upon application made to him, may determine to accelerate payments or, in the event of death or total disability (as determined by the Social Security Administration), to extend or otherwise make payments in a manner different from the manner in which they would be made in the absence of such determination; provided, however, that if a payment is accelerated in accordance with this Section 6.5, such payment shall be discounted to reasonably reflect the time value of money. - 12 - ARTICLE VII Miscellaneous Provisions 7.1 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. 7.2 The Employing Company shall not reserve or otherwise set aside funds for the payments of Awards deferred in accordance with Article IV. 7.3 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 Plan prior to such amendment, modification, or termination. 7.4 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. 7.5 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 the Employing Company to such governmental authority for the account of the person entitled to such distribution. 7.6 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. 7.7 This Plan, and all its rights under it, shall be governed by and construed in accordance with the laws of the State of Georgia. - 13 - IN WITNESS WHEREOF, Southern Company Services, Inc., through its officers duly authorized, hereby amends and restates The Southern Company Productivity Improvement Plan this ____ day of ____________________, 1994, to be effective January 1, 1994. SOUTHERN COMPANY SERVICES, INC. By: _______________________________ Its: Attest: By: ________________________ Its: [CORPORATE SEAL] (LLC) H:\southern\southern.pip - 14 - EXPLANATORY NOTES 1. Under the Corporate Financial Component, the average ROCE for a Computation Period will be determined by a) calculating the average ROCE for each year in the Computation Period, b) adding the average ROCE calculations for all years in the Computation Period; and c) dividing the total by the number of years in the Computation Period. 2. The peer group companies are as follows: THE SOUTHERN COMPANY PRODUCTIVITY IMPROVEMENT PLAN EXHIBIT A Annual Corporate CEO/Grade Level Financial Performance Opportunity President/CEO 50% President/CEO 35% 30 35% 29-28 30% 27-26 25% 25-24 20% 23-22 15% 21-20 10% 19 5% THE SOUTHERN COMPANY PRODUCTIVITY IMPROVEMENT PLAN EXHIBIT B AWARD PERCENTAGE SCHEDULE Position Ranking 12-14 15-17 18-20 Award Percentage Companies Companies Companies Above Above Above 125% Position 1 Position 1 Position 1 120 1 1 1 115 2 2 2 110 2.5 3 3 105 3 4 4 100 4 4.5 5 95 4.5 5 6 90 5 6 7 85 6 7 8 80 6.5 8 9 75 7 8.5 10 70 8 9 11 65 8.5 10 12 60 9 11 13 55 10 12 14 50 10.5 12.5 14.5 0 Below 10.5 Below 12.5 Below 14.5 EX-10.(A)66 8 EXHIBIT 10(A)66 Exhibit 10(a)66 THE SOUTHERN COMPANY EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN EFFECTIVE JANUARY 1, 1994 THE SOUTHERN COMPANY EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN Amended and Restated Effective January 1, 1994 ARTICLE DESCRIPTION PAGE I Definitions . . . . . . . . . . . . . . . . . 2 II Participants . . . . . . . . . . . . . . . . . 5 III Corporate Financial Performance Award . . . . 6 IV Election for Deferral of Payment . . . . . . . 8 V Deferred Compensation Accounts . . . . . . . . 10 VI Distribution of Deferred Amounts . . . . . . . 12 VII Miscellaneous Provisions . . . . . . . . . . . 14 THE 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. The effective date of this Plan shall be January 1, 1994. 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 Corporate Financial Performance Award" shall mean the amount awarded to a Participant in accordance with Article III. 1.2 "Annual Salary" shall mean the wages paid to a Participant without including overtime and before deduction of taxes, FICA, etc. 1.3 "Award" shall mean an Annual Corporate Financial Performance Award. 1.4 "Award Opportunity" shall mean the standard award a Participant could receive as an Annual Corporate Financial Performance Award. 1.5 "Board of Directors" shall mean the Board of Directors of Southern Company Services, Inc. 1.6 "Chief Executive Officer" shall mean the individual designated as such by the Board of Directors of an Employing Company and of The Southern Company. 1.7 "Committee" or "Compensation Committee" shall mean the Compensation Committee of the Board of Directors of The Southern Company or the Employing Company. 1.8 "Common Stock" shall mean the common stock of The Southern Company. 1.9 "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. 1.10 "Deferral Election" shall mean the Participant's written election to defer all or a portion of his Award pursuant to Article IV. 1.11 "Deferred Account" shall mean the account maintained for the Participant in accordance with Article V. 1.12 "Employing Company" shall mean Southern Company Services, Inc., or any affiliate or subsidiary (direct or indirect) of The Southern Company, which the Board of Directors - 2 - 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 Employing Companies as of January 1, 1994 are: 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. 1.13 "Executive Employee" shall mean any person who is currently employed by an Employing Company who is an "officer" as that term is defined in Regulation 16a-1 promulgated by the Securities Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended, excluding however any principal financial officer, principal accounting officer or controller unless the person holding such position otherwise meets the definition of "officer" set forth in such Regulation. 1.14 "Investment Election" shall mean the Participant's written election to have his deferred Award invested pursuant to Section 5.3 or Section 5.4. 1.15 "Market Value" shall mean the average of the high and low sale 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). 1.16 "Participant" shall mean an Executive Employee who satisfies the criteria referred to in Article II. 1.17 "Plan" shall mean The Southern Company Executive Productivity Improvement Plan, as described herein or as from time to time amended. 1.18 "Grade Level" shall mean the evaluation assigned under the job evaluation system. 1.19 "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. 1.20 "Supervisor" shall mean the immediate person responsible for the supervision of the performance of the Participant. - 3 - 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. - 4 - ARTICLE II Participants 2.1 Participation in the Plan shall be limited to Executive Employees of the Employing Companies. 2.2 A Participant who vacates an eligible grade during a Computation Period for one of the following reasons shall be included in the Plan on a pro-rata basis: (a) retirement, (b) total disability, as determined by the Social Security Administration, (c) death, (d) demotion due to health related reasons, or (e) termination of employment, but only in the event the Participant shall transfer to or be reemployed by Southern Electric International, Inc. during the same Computation Period. The pro-rata amount of an Award shall be determined for the Computation Period in which such termination occurs by a fraction which is the number of months employed by an Employing Company during the Computation Period prior to such termination, divided by the total number of months in the Computation Period (generally forty-eight (48)) which ends immediately after such termination. The actual Awards will be made as soon as practicable and in accordance with any Deferral Election in effect. A Participant who vacates an eligible grade for reasons other than those described above shall forfeit any Award for any Computation Periods that have not closed as of the date the Participant vacates such eligible grade. 2.3 The administration of Awards for Participants who are promoted or transferred from one grade included in the Plan to another grade included in the Plan, both within an Employing Company and between Employing Companies, shall be on a pro-rata basis in accordance with procedures adopted by the Employing Company or Companies. - 5 - ARTICLE III Corporate Financial Performance Award 3.1 The Award Opportunity for each Participant shall be based upon his Grade Level(s) and shall range from fifty percent (50%) to five percent (5%) of the Grade Level Value(s) for the Grade Level(s) held by the Participant during the Computation Period. In the event a Participant's Grade Level shall change during a Computation Period, a pro-rata amount of an Award Opportunity shall be determined for each Grade Level held by the Participant during the Computation Period. The Award Opportunity for each Grade Level shall be in the same proportion as the ratio of the number of months a Grade Level is held by the Participant during the Computation Period (determined as of the last day of the month) bears to the total number of months in such Computation Period (generally forty-eight (48) months). The Award Opportunity for each Grade Level held by a Participant shall be determined in accordance with the chart set forth in Exhibit A herein. 3.2 Each Award Opportunity shall be further adjusted by the award percentage based on The Southern Company's average return on common equity ranking during a Computation Period as compared to the average return on common equity ranking of the Peer Group Companies, as set forth in Exhibit B herein. The return on common equity of the companies set forth on Exhibit B 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 companies return on common equity may be accurately compared to that of The Southern Company. In the case of an individual becoming a Participant subsequent to the initial year of the Plan, said Participant will participate on a pro-rata basis in each Computation Period which ends not less than two (2) years after becoming a Participant. Said pro-rata portion shall be determined for each Computation Period by a fraction which is the number of months remaining in the Computation Period after qualifying as a Participant, divided by the total number of months in the Computation Period (generally forty-eight (48)). A new four-year measuring period begins 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. 3.3 Notwithstanding the above, an employee of Savannah Electric and Power Company ("SEPCO") who has been continuously employed by SEPCO since January 1, 1986 shall participate in the Award for the Computation Periods ending in 1989, 1990 and 1991 to the same extent he would have been eligible to participate based on his Grade Level then in effect, if SEPCO had been acquired by The Southern Company on January 1, 1986. - 6 - 3.4 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 The 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. 3.5 In the discretion of the Compensation Committee of the Board of Directors, the Award for one or more Computation Period(s) may be calculated without regard to any extraordinary item of income incurred by the Southern Company or any Employing Company, provided such determination is made prior to the close of the Computation Period. 3.6 The Awards to the Participants will be paid in cash as soon as is practicable after all evaluations are completed. The Award payment may be deferred at the option of the Participant in accordance with Article IV. In the event a Participant shall not elect to defer a portion of his Award and shall die prior to the payment of such amount, payment shall be made to the beneficiary designated by the Participant. 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 Participant or former Participant. - 7 - ARTICLE IV Election for Deferral of Payment 4.1 A Participant may elect to defer payment of an Award until termination of service with an Employing Company by filing a Deferral Election with the Employing Company not later than December 31st of the year preceding the next succeeding Computation Period. 4.2 Participants may elect to defer payments of any whole percentage (1% - 100%) of any Award that might be made to him. If a Deferral Election is duly made pursuant to the provisions of this Article with respect to an Award, an individual account will be maintained by the Employing Company as of the date of the Award. 4.3 The Deferral Election shall be made in writing on a form prescribed by the Employing Company and said Deferral Election shall state: (a) That the Participant wishes to make an election to defer payment of the Award; (b) The percentage of the Award to be deferred; (c) The method of payment, which shall be the payment of a lump-sum or a series of annual payments not to exceed ten (10) years; and (d) The time for commencement of distribution of his Deferred Account, but not later than the first day of the month coinciding with or next following the second (2nd) anniversary of his termination of employment with the Employing Company. 4.4 The Deferral Election shall be made by written notice to be delivered to the Employing Company prior to the first day of the next succeeding Computation Period and shall be effective on the first day of such succeeding Computation Period. A deferral Election for the Corporate Financial Performance Component shall be an election for the four-year computation period. A Participant's termination of participation in the Plan shall not affect Awards previously deferred. - 8 - 4.5 The initial Deferral Election made with respect to (a) the method of payment whether it be lump sum or installments, including the number of installments selected, and (b) the time for commencement of distribution of a Participant's Account may not be revoked and shall govern the distribution of a Participant's Deferred Productivity Improvement Account. Notwithstanding the foregoing, and except as provided below, upon application to the senior officer in charge of employee relations of an Employing Company and the approval of such officer in his sole discretion, a Participant's Deferral Election may be amended not prior to the 395th day nor later than the 365th day prior to a Participant's date of termination in order to change (a) the form, and/or (b) the time for distribution of his Deferred 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, shall not be permitted to amend his Deferral Election during any time period for which such Participant is required to file any such reports. Each Participant making a Deferral Election in accordance with this Article IV and his successors, shall be bound as to any action taken pursuant to the terms thereof or pursuant to the Plan. Notwithstanding anything to the contrary above, if the time for distribution of a Participant's Deferred Account is accelerated, such Account shall be discounted to reasonably reflect the time value of money. - 9 - ARTICLE V Deferred Compensation Accounts 5.1 An account shall be established on the Employing Company books for each Participant electing a deferral pursuant to Article IV, which shall be designated as the Deferred Account of said Participant. The Awards deferred in accordance with Article IV, pursuant to each Participant's Investment Election, the amounts computed in accordance with Section 5.2 and/or the number of shares computed in accordance with Section 5.1 shall be credited to the Deferred Account. 5.2 The Deferred Account of each Participant electing to invest his deferred Awards for a Computation Period pursuant to this Section 5.2 shall be credited with an amount computed by the Employing Company by treating the Awards deferred as a sum certain to which the Employing Company will add in lieu of interest an amount equal to the prime rate of interest set by Wachovia Bank of Georgia, N.A.. Interest will be computed as if credited from the date such Award would otherwise have been paid and will be compounded quarterly at the end of each calendar quarter. The prime rate in effect on the first day of each calendar quarter shall be deemed the prime rate in effect for such calendar quarter. Interest will be treated as if accrued and will be compounded on any balance until such amount is fully distributed. 5.3 The Deferred Account of each Participant electing to invest his deferred Award for a Computation Period pursuant to this Section 5.3 shall be credited with the number of shares (including fractional shares) of Common Stock which could have been purchased on the date such deferred Awards otherwise would have been paid based upon the Common Stock's Market Value. As of each date of payment of dividends on the Common Stock there shall be credited with respect to shares of Common Stock in the Participant's Deferred Account such additional shares (including fractional shares) of Common Stock as follows: (a) In the case of cash dividends, such additional shares as could be purchased at the Market Value as of the payment date with the dividends which would have been payable if the credited shares had been outstanding; (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 payment date with the fair market value of the property which would have been payable if the credited shares had been outstanding; or - 10 - (c) 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. 5.4 The Investment Election by a Participant with respect to his Deferred Account shall be made in writing on a form prescribed by the Employing Company. Any Investment Election shall be delivered to the Employing Company prior to the first day of the next succeeding Computation Period and shall be effective on the first day of such succeeding Computation Period. The Investment Election made in accordance with this Article V shall be irrevocable and shall continue from Computation Period to Computation Period unless the Participant changes the Investment Election regarding future deferred Awards by submitting a written request to the Employing Company on a form prescribed by the Employing Company. Any such change shall become effective as of the first day of the Computation Period next following the Computation Period in which such request is given. 5.5 At the end of each year, a report shall be issued to each Participant who has a Deferred Account and said report will set forth the amount and the Market Value of any shares of Common Stock reflected in such Account. 5.6 The terms and provisions of Articles V and VI in effect prior to the effective date of this amendment and restatement shall remain in force and continue to apply to Individual Performance Annual Awards and Annual Corporate Financial Performance Awards deferred by Participants prior to January 1, 1994. - 11 - ARTICLE VI Distribution of Deferred Amounts 6.1 When a Participant terminates his employment with the Employing Company, said Participant shall be entitled to receive the entire amount and the Market Value of any shares of Common Stock (and Fractions thereof) reflected in his Deferred Account maintained by the Employing Company in accordance with his Deferral Election made pursuant to Article IV of the Plan. No portion of a Participant's Deferred Account shall be distributed in Common Stock. 6.2 In the event a Participant elected to receive annual installments, the first payment shall be made on the first day of the month selected by the Participant in accordance with the terms of the Plan, or as soon as reasonably possible thereafter, and shall be an amount equal to the balance in the Participant's Deferred Account divided by the number of annual installment payments. Each subsequent annual payment shall be an amount equal to the balance in the Participant's Deferred Account on the payment date, divided by the number of the remaining annual payments and shall be due on the anniversary of the preceding payment date. The Market Value of any shares of Common Stock credited to a Participant's Deferred 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. 6.3 Upon the death or total disability of a Participant, or a former Participant prior to the payment of all amounts and the Market Value of any shares of Common Stock (and fractions thereof) credited to said Participant's Deferred Account, the unpaid balance shall be paid in the sole discretion of the Employing Company (a) in a lump sum to the designated beneficiary of a Participant or former Participant within thirty (30) days of the date of death (or as soon as reasonably possible thereafter) or (b) in accordance with the Deferral Election made by such Participant or former 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 estate of the Participant or former Participant. The Market Value of any shares of Common Stock credited to a Participant's Deferred productivity Improvement Plan 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. 6.4 The beneficiary designation may be changed by the Participant or former Participant at any time, and without the consent of the prior beneficiary. 6.5 The senior officer in charge of employee relations of an Employing Company, in his sole discretion upon application - 12 - made to him, may determine to accelerate payments or, in the event of death or total disability (as determined by the Social Security Administration), to extend or otherwise make payments in a manner different from the manner in which they would be made in the absence of such determination; provided, however, that if a payment is accelerated in accordance with this Section 6.5, such payment shall be discounted to reasonably reflect the time value of money. - 13 - ARTICLE VII Miscellaneous Provisions 7.1 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. 7.2 The Employing Company shall not reserve or otherwise set aside funds for the payments of Awards deferred in accordance with Article IV. 7.3 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 Plan prior to such amendment, modification, or termination. 7.4 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. 7.5 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 the Employing Company to such governmental authority for the account of the person entitled to such distribution. 7.6 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. 7.7 This Plan, and all its rights under it, shall be governed by and construed in accordance with the laws of the State of Georgia. - 14 - IN WITNESS WHEREOF, Southern Company Services, Inc., through its officers duly authorized, hereby amends and restates The Southern Company Productivity Improvement Plan this ____ day of ____________________, 1994, to be effective January 1, 1994. SOUTHERN COMPANY SERVICES, INC. By: _______________________________ Its: Attest: By: ________________________ Its: [CORPORATE SEAL] [adamscl] h:\wpdocs\krr\southern\exec.pip - 15 - EXPLANATORY NOTES 1. Under the Corporate Financial Component, the average ROCE for a Computation Period will be determined by a) calculating the average ROCE for each year in the Computation Period, b) adding the average ROCE calculations for all years in the Computation Period; and c) dividing the total by the number of years in the Computation Period. 2. The Peer Group Companies are as follows: TECO Energy, Inc. Carolina Power & Light Company SCANA Central Louisiana Electric Company, Inc. Duke Power Company Potomac Electric Power Company American Electric Power Company, Inc. Dominion Resources, Inc. Allegheny Power Systems, Inc. Florida Progress Delmarva Power & Light Company Baltimore Gas and Electric Company Entergy, Inc. FPL Group Kentucky Utilities Energy Corporation Central and South West Corporation The Southern Company THE SOUTHERN COMPANY EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN EXHIBIT A Annual Corporate CEO/Grade Level Financial Performance Opportunity President/CEO 50% President/CEO 35% 30 35% 29-28 30% 27-26 25% 25-24 20% 23-22 15% 21-20 10% 19 5% THE SOUTHERN COMPANY EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN EXHIBIT B AWARD PERCENTAGE SCHEDULE Position Ranking 12-14 15-17 18-20 Award Percentage Companies Companies Companies Above Above Above 125% Position 1 Position 1 Position 1 120 1 1 1 115 2 2 2 110 2.5 3 3 105 3 4 4 100 4 4.5 5 95 4.5 5 6 90 5 6 7 85 6 7 8 80 6.5 8 9 75 7 8.5 10 70 8 9 11 65 8.5 10 12 60 9 11 13 55 10 12 14 50 10.5 12.5 14.5 0 Below 10.5 Below 12.5 Below 14.5 EX-10.(A)69 9 EXHIBIT 10(A)69 Exhibit 10(a)69 PENSION PLAN FOR EMPLOYEES OF ALABAMA POWER COMPANY AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 1, 1989 TABLE OF CONTENTS Page ARTICLE I Definitions . . . . . . . . . . . 2 ARTICLE II Eligibility . . . . . . . . . . . 14 2.1 Employees . . . . . . . . . . . . . . . . . . . . . 14 2.2 Employees represented by a collective bargaining agent . . . . . . . . . . . . . . . . . . . . . . . 14 2.3 Persons in military service and Employees on authorized leave of absence . . . . . . . . . . . . 14 2.4 Employees reemployed . . . . . . . . . . . . . . . 15 2.5 Participation upon return to eligible class . . . . 15 2.6 Exclusion of certain categories of employees . . . 16 2.7 Waiver of participation . . . . . . . . . . . . . . 16 ARTICLE III Retirement . . . . . . . . . . . 17 3.1 Retirement at Normal Retirement Date . . . . . . . 17 3.2 Retirement at Early Retirement Date . . . . . . . . 17 3.3 Retirement at Deferred Retirement Date . . . . . . 17 ARTICLE IV Determination of Accredited Service . . . . . 18 4.1 Accredited Service pursuant to Prior Plan . . . . . 18 4.2 Accredited Service . . . . . . . . . . . . . . . . 18 4.3 Accredited Service and Years of Service in respect of service of certain Employees previously employed by the Employer or by Affiliated Employers . . . . . . . . . . . . . . . . . . . . . 20 4.4 Accrual of Retirement Income during period of total disability . . . . . . . . . . . . . . . . . 21 4.5 Employees leaving Employer's service . . . . . . . 22 4.6 Transfers to or from Affiliated Employers . . . . . 23 4.7 Transfers from Savannah Electric and Power Company . . . . . . . . . . . . . . . . . . . . . . 24 4.8 Retirement income for certain former employees of Southern Electric Generating Company . . . . . . . 25 ARTICLE V Retirement Income . . . . . . . . . . 26 i 5.1 Normal Retirement Income . . . . . . . . . . . . . 26 5.2 Minimum Retirement Income payable upon retirement at Normal Retirement Date or Deferred Retirement Date . . . . . . . . . . . . . . . . . . . . . . . 26 5.3 Minimum Retirement Income upon retirement at Early Retirement Date or upon termination of service by reason of death or otherwise prior to retirement . 27 5.4 Calculation of Social Security Offset . . . . . . . 28 5.5 Early Retirement Income . . . . . . . . . . . . . . 29 5.6 Deferred Retirement Income . . . . . . . . . . . . 29 5.7 Payment of Retirement Income . . . . . . . . . . . 30 5.8 Termination of Retirement Income . . . . . . . . . 31 5.9 Required distributions . . . . . . . . . . . . . . 31 5.10 Suspension of Retirement Income for reemployment . . . . . . . . . . . . . . . . . . . 33 5.11 Increase in Retirement Income of retired Employees for service prior to January 1, 1991 . . 33 5.12 Special provisions relating to the treatment of absence of an Employee from the service of the Employer to serve in the Armed Forces of the United States . . . . . . . . . . . . . . . . . . . 34 ARTICLE VI Limitations on Benefits . . . . . . . . 38 6.1 Maximum Retirement Income . . . . . . . . . . . . . 38 6.2 Adjustment to Defined Benefit Dollar Limitation for Early or Deferred Retirement . . . . . . . . . 39 6.3 Adjustment of limitation for Years of Service or participation . . . . . . . . . . . . . . . . . . . 40 6.4 Preservation of Accrued Retirement Income . . . . . 40 6.5 Limitation on benefits from multiple plans . . . . 41 6.6 Special rules for plans subject to overall limitations under Code Section 415(e) . . . . . . . 42 6.7 Combination of Plans . . . . . . . . . . . . . . . 43 6.8 Incorporation of Code Section 415 . . . . . . . . . 43 ARTICLE VII Provisional Payee . . . . . . . . . . 44 7.1 Adjustment of Retirement Income to provide for payment to Provisional Payee . . . . . . . . . . . 44 7.2 Form and time of election and notice requirements . 44 7.3 Circumstances in which election and designation are inoperative . . . . . . . . . . . . . . . . . . 45 7.4 Pre-retirement death benefit . . . . . . . . . . . 46 7.5 Post-retirement death benefit - qualified joint and survivor annuity . . . . . . . . . . . . . . . 48 7.6 Election and designation by former Employee entitled to Retirement Income in accordance with Article VIII . . . . . . . . . . . . . . . . . . . 48 ii 7.7 Death benefit for Provisional Payee of former Employee . . . . . . . . . . . . . . . . . . . . . 50 7.8 Limitations on Employee's and Provisional Payee's benefits . . . . . . . . . . . . . . . . . . . . . 50 7.9 Effect of election under Article VII . . . . . . . 51 ARTICLE VIII Termination of Service . . . . . . . . 52 8.1 Vested interest . . . . . . . . . . . . . . . . . . 52 8.2 Early distribution of vested benefit . . . . . . . 52 8.3 Years of Service of reemployed Employees . . . . . 53 8.4 Cash-out and buy-back . . . . . . . . . . . . . . . 54 8.5 Calculation of present value for cash-out of benefits and for determining amount of benefits . . 55 8.6 Retirement Income under Prior Plan . . . . . . . . 57 8.7 Requirement for Direct Rollovers . . . . . . . . . 57 ARTICLE IX Contributions . . . . . . . . . . . 59 9.1 Contributions generally . . . . . . . . . . . . . . 59 9.2 Return of Employer contributions . . . . . . . . . 59 9.3 Expenses . . . . . . . . . . . . . . . . . . . . . 60 ARTICLE X Administration of Plan . . . . . . . . 61 10.1 Retirement Board . . . . . . . . . . . . . . . . . 61 10.2 Organization and transaction of business of Retirement Board . . . . . . . . . . . . . . . . . 61 10.3 Administrative responsibilities of Retirement Board . . . . . . . . . . . . . . . . . . . . . . . 61 10.4 Retirement Board, the "Administrator" . . . . . . . 62 10.5 Fiduciary responsibilities . . . . . . . . . . . . 63 10.6 Employment of actuaries and others . . . . . . . . 63 10.7 Accounts and tables . . . . . . . . . . . . . . . . 63 10.8 Indemnity of members of Retirement Board . . . . . 64 10.9 Areas in which the Retirement Board does not have responsibility . . . . . . . . . . . . . . . . . . 64 10.10 Claims Procedures . . . . . . . . . . . . . . . . 65 ARTICLE XI Management of Trust . . . . . . . . . 66 11.1 Trust . . . . . . . . . . . . . . . . . . . . . . . 66 11.2 Disbursement of the Trust Fund . . . . . . . . . . 66 11.3 Rights in the Trust . . . . . . . . . . . . . . . . 66 11.4 Merger of the Plan . . . . . . . . . . . . . . . . 67 ARTICLE XII iii Termination of the Plan . . . . . . . . 68 12.1 Termination of the Plan . . . . . . . . . . . . . . 68 12.2 Limitation on benefits for certain highly paid employees . . . . . . . . . . . . . . . . . . . . . 68 12.3 Allocation of Trust upon termination . . . . . . . 69 ARTICLE XIII Amendment of the Plan . . . . . . . . . 70 13.1 Amendment of the Plan . . . . . . . . . . . . . . . 70 ARTICLE XIV Special Provisions . . . . . . . . . 71 14.1 Adoption of Plan by other corporations . . . . . . 71 14.2 Exclusive benefit . . . . . . . . . . . . . . . . . 72 14.3 Assignment or alienation . . . . . . . . . . . . . 72 14.4 Voluntary undertaking . . . . . . . . . . . . . . . 73 14.5 Top-Heavy Plan requirements . . . . . . . . . . . . 73 14.6 Determination of Top-Heavy status . . . . . . 73 14.7 Minimum Retirement Income for Top-Heavy Plan Years . . . . . . . . . . . . . . . . . . . . . . . 77 14.8 Vesting requirements for Top-Heavy Plan Years . . . 78 14.9 Adjustments to maximum benefits for Top-Heavy Plans . . . . . . . . . . . . . . . . . . . . . . . 79 ARTICLE XV Post-retirement Medical Benefits . . . . . . 80 15.1 Definitions . . . . . . . . . . . . . . . . . . . . 80 15.2 Eligibility of Pensioned Employees and their Spouses . . . . . . . . . . . . . . . . . . . . . . 81 15.3 Medical benefits . . . . . . . . . . . . . . . . . 81 15.4 Termination of coverage . . . . . . . . . . . . . . 81 15.5 Continuation of coverage to certain individuals . . 82 15.6 Contributions to fund medical benefits . . . . . . 83 15.7 Pensioned Employee Contributions . . . . . . . . . 84 15.8 Amendment of Article XV . . . . . . . . . . . . . . 84 15.9 Termination of Article XV . . . . . . . . . . . . . 85 15.10 Reversion of assets upon termination . . . . . . . 85 ARTICLE XVI Post-retirement Medical Benefits Prior to Attainment of Normal Retirement Date . . . . 86 16.1 Definitions . . . . . . . . . . . . . . . . . . . 86 16.2 Application for and commencement of Coverage . . . 87 16.3 Medical benefits . . . . . . . . . . . . . . . . . 87 16.4 Termination of coverage . . . . . . . . . . . . . 87 16.5 Continuation of coverage to certain individuals . 88 16.6 Contributions to fund medical benefits . . . . . . 89 16.7 Pensioned Employee Contributions . . . . . . . . . 90 iv 16.8 Amendment of Article XVI . . . . . . . . . . . . . 91 16.9 Termination of Article XVI . . . . . . . . . . . . 91 16.10 Reversion of Assets upon Termination . . . . . . 92 v Introductory Statement The Pension Plan for Employees of Alabama Power Company, as amended and restated effective as of January 1, 1989 and hereinafter set forth (the "Plan"), is a modification and continuation of the Pension Plan for Employees of Alabama Power Company which originally became effective July 1, 1944, and has been amended from time to time. Since the enactment of the Employee Retirement Income Security Act of 1974 ("ERISA"), the Plan has been amended numerous times to comply with changes in the law and to achieve other administrative goals. Initially, the Plan was amended and restated in 1976 to comply with ERISA. Thereafter, the Plan was again amended and restated in 1986 to comply with the Tax Equity and Fiscal Responsibility Act of 1982, the Retirement Equity Act of 1984, and the Deficit Reduction Act of 1984. In more recent years, the Plan has been amended and restated three times to comply with the Tax Reform Act of 1986 -- first in 1989, second in 1991 and again as amended and restated herein. The amendment and restatement set forth herein consolidates those amendments made in 1989 and 1991 and provides for such other appropriate changes as are required by the law. Accordingly, this amendment and restatement is effective as of January 1, 1989. Where appropriate, amendments to the Plan which have a different effective date are noted. Retirement Income of former Employees (or Provisional Payees of former Employees) who retired in accordance with the provisions of the Prior Plan, as defined herein, is payable in accordance with the provisions of the Prior Plan. All contributions made by the Employer to this Plan are expressly conditioned upon the continued qualification of the Plan under Section 401(a) of the Code, including any amendments to the Plan, and upon the deductibility of such contributions by the Employer pursuant to Section 404 of the Code. 1 ARTICLE I Definitions The following words and phraseology as used herein have the following meanings unless a different meaning is plainly required by the context: 1 1.1 "Accrued Retirement Income" means with respect to any Employee at any particular date, the Retirement Income, determined pursuant to Section 5.1, commencing on his Normal Retirement Date which would be payable to such Employee in the form of a single life annuity on the basis of his Accredited Service to the date as of which the computation of Retirement Income is made. 1.2 "Accredited Service" means with respect to any Employee included in the Plan, the period of service as provided in Article IV. For purposes of calculating Accredited Service in Article IV, such Service shall include, in the case of a former employee of Birmingham Electric Company ("BECO") who became an Employee by reason of the merger of BECO into the Employer, any years of Accredited Service accrued to him to December 1, 1953 under the BECO Plan. 1.3 "Actuarial Equivalent" means a benefit of equivalent value when computed on the basis of five percent (5%) interest per annum, compounded annually and the 1951 Group Annuity Mortality Table for males. The ages for all Employees under the above table shall be set back six (6) years and the ages for such Employees' spouses shall be set back one year. All actuarial adjustments and actuarial determinations required and made under the terms of the Plan shall be calculated in accordance with such assumptions. 1.4 "Affiliated Employer" means any corporation which is a member of a controlled group of corporations (as defined in Section 414(b) of the Code) which includes the Employer; any trade or business (whether or not incorporated) which is under common control (as defined in Section 414(c) of the Code) with the Employer; any organization (whether or not incorporated) which is a member of an affiliated service group (as defined in Section 414(m) of the Code) which includes the Employer; and any other entity required to be aggregated with the Employer pursuant to regulations under Section 414(o) of the Code. 2 1.5 "Average Monthly Earnings" means the greater of: (a) an Employee's Monthly Earnings averaged over the three (3) highest Plan Years of participation which shall produce the highest monthly average within the last ten (10) Plan Years; or (b) an Employee's Monthly Earnings averaged over the three (3) highest Plan Years of participation which shall produce the highest monthly average within the last ten (10) Plan Years during which the Employee actively performed services for the Employer. If an Employee has completed less than three (3) Plan Years of participation upon his termination of employment, his Average Monthly Earnings will be based on his Earnings during his participation to his date of termination. 1.6 "Board of Directors" means the Board of Directors of Alabama Power Company. 1.7 "Code" means the Internal Revenue Code of 1986, as amended from time to time. 1.8 "Current Accrued Retirement Income" means an Employee's Accrued Retirement Income under the Plan, determined as if the Employee had separated from service as of the close of the last Limitation Year beginning before January 1, 1987, when expressed as an annual benefit within the meaning of Section 415(b)(2) of the Code. In determining the amount of an Employee's Current Accrued Retirement Income, the following shall be disregarded: (a) any change in the terms and conditions of the Plan after May 5, 1986; and (b) any cost of living adjustment occurring after May 5, 1986. 1.9 "Deferred Retirement Date" means the first day of the month after a retirement subsequent to the Normal Retirement Date. Employment subsequent to Normal Retirement Date shall be deemed to be a retirement if an Employee has less than forty (40) Hours of Service during a calendar month. 1.10 "Defined Benefit Dollar Limitation" means the limitation set forth in Section 415(b)(1)(A) or (d) of the Code. 1.11 "Defined Contribution Dollar Limitation" means the limitation set forth in Section 415(c)(1)(A) of the Code. 1.12 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. 1.13 "Early Retirement Date" means the first day of the month following the retirement of an Employee on or after his 3 fifty-fifth (55th) birthday and before his sixty-fifth (65th) birthday. 1.14 (a) "Earnings" with respect to any Employee including any Employee whose service is terminated by reason of disability (as defined in Section 4.4) means (1) the highest annual rate of salary or wages of an Employee of the Employer or employee of any Affiliated Employer within any Plan Year before deductions for taxes, Social Security, etc., (2) all amounts contributed by the Employer or any Affiliated Employer to The Southern Company Employee Savings Plan as Elective Employer Contributions, as said term is described under Section 4.1 of such plan, pursuant to the Employee's exercise of his deferral option made thereunder in accordance with the requirements of Section 401(k) of the Code, and (3) all amounts contributed by the Employer or any Affiliated Employer to The Southern Electric System Flexible Benefits Plan or The Southern Company Flexible Benefits Plan on behalf of an Employee pursuant to his salary reduction election, and applied to provide one or more of the optional benefits available under such plan, but (4) shall exclude all amounts deferred under any non-qualified deferred compensation plan maintained by the Employer or any Affiliated Employer. (b) Notwithstanding the above, "Earnings" with respect to any commissioned salesperson means the salary or wages of an Employee of the Employer or employee of any Affiliated Employer within any Plan Year, without including overtime, and before deductions for taxes, Social Security, etc. but applying those adjustments identified in paragraphs (a)(2), (3) and (4) above. (c) With respect to an Employee whose service terminates because of a disability under Section 4.4, Earnings shall be deemed to continue in effect throughout the period of the Employee's Disability Leave, as also defined in Section 4.4. (d) With respect to calculating the Prior Plan Retirement Income of an Employee who is a "participant in the Plan" as provided in Section 5.12, Earnings shall be determined for the recognized period of his absence to serve in the Armed Forces of the United States at the rate which is paid to him on the day he returns to the service of the Employer as provided in paragraph (a) of Section 5.12 or at the rate which was payable to him at the time he left the employment of the Employer to enter the Armed Forces of the United States, if such amount was greater. (e) For Plan Years beginning after December 31, 1988 and prior to January 1, 1994, the annual compensation of each Employee taken into account for purposes of this Plan shall not exceed $200,000 (as adjusted by the Secretary of Treasury). The imposition of this limitation shall not reduce an Employee's Retirement Income below the amount as determined on December 31, 4 1988. In addition to other applicable limitations set forth in the Plan, and notwithstanding any other provision of the Plan to the contrary, for Plan Years beginning on or after January 1, 1994, the annual compensation of each Employee taken into account under the Plan shall not exceed $150,000, as adjusted for increases in the cost of living in accordance with Code Section 401(a)(17). The cost of living adjustment in effect for a calendar year applies to any period, not exceeding twelve (12) months, over which compensation is determined (the "determination period") beginning in such calendar year. If the determination period is less than twelve (12) months, the limit shall be prorated. If compensation for any prior determination period is taken into account in determining an Employee's benefits accruing in the current Plan Year beginning on or after January 1, 1989 or January 1, 1994, as applicable, the compensation for that prior determination period is subject to the $200,000 or the $150,000 compensation limit in effect for that prior determination period. Notwithstanding any other provision in the Plan, each Employee's Accrued Retirement Income under this Plan will be the greater of: (a) the Employee's Accrued Retirement Income as of the last day of the last Plan Year beginning before January 1, 1994, frozen in accordance with Treasury Regulation Section 1.401(a)(4)-13, or (b) the Employee's Accrued Retirement Income determined with respect to the benefit formula applicable for the Plan Year beginning on or after January 1, 1994, as applied to the employee's total Years of Service taken into account under the Plan for purposes of benefit accruals. For purposes of this Section 1.14, the rules of Section 414(q)(6) of the Code shall apply in determining the adjusted $200,000 or $150,000 limitation, as applicable, except in applying such rules, the term "family" shall include only the spouse of the Employee and any lineal descendants of the Employee who have not attained age nineteen (19) before the close of the Plan Year. If, as a result of the application of such rules, the adjusted $200,000 or $150,000 limitation is exceeded, then the limitation shall be prorated among the affected individuals in proportion to each individual's Earnings determined under this Section 1.14 prior to the application of this limitation. 1.15 "Effective Date" means the original effective date of the Plan, July 1, 1944. The effective date of this amendment and restatement means January 1, 1989. 5 1.16 "Eligibility Year of Service" is a Year of Service commencing on the Employee's date of employment or reemployment or anniversary date thereof. 1.17 "Employee" means any person who is currently employed by the Employer as (a) a regular full-time employee, (b) a regular part-time employee, (c) a cooperative education employee, or (d) a temporary employee (whether full-time or part-time) paid directly or indirectly by the Employer. The term also includes "leased employees" within the meaning of Section 414(n)(2) of the Code, unless the total number of leased employees constitutes less than twenty percent (20%) of the Employer's non-highly compensated workforce within the meaning of Section 414(n)(5)(C)(ii) and such leased employees are covered by a plan described in Section 414(n)(5)(B) of the Code. 1.18 "Employer" means Alabama Power Company, any successor or successors thereof and any wholly owned subsidiary thereof which the Board of Directors may from time to time, and upon such terms and conditions as may be fixed by the Board of Directors, determine to bring under the Plan, and any other corporation which shall adopt this Plan and Trust Agreement pursuant to Section 14.1 by appropriate resolution authorized by the board of directors of said adopting corporation. 1.19 "Full Current Costs" means the normal cost, as defined in Treasury Regulation Section 1.404(a)-6, for all years since the Effective Date of the Plan, plus interest on any unfunded liability during such period. 1.20 "Hour of Service" means an Employee shall be credited with one Hour of Service for each hour for which (a) he is paid, or entitled to payment, for the performance of duties for the Employer or an Affiliated Employer, and such hours shall be credited to the Employee for the computation period or periods in which the duties are performed; (b) he is paid, or entitled to payment, by the Employer or an Affiliated Employer on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty, or leave of absence in which case the Employee shall be credited with Hours of Service for the computation period or periods in which the period during which no duties were performed occurs; (c) back pay, irrespective of mitigation of damages, has been either awarded or agreed to by the Employer or an Affiliated Employer, in which case the Employee shall be credited with Hours of Service for the computation period or periods to which the award or agreement pertains, rather than the computation period in which the award, agreement, or payment is made; and (d) solely for the purpose of calculating Vesting Years of Service, he was on any form of authorized leave of absence. The same Hours of 6 Service shall not be credited under clauses (a), (b), (c), and (d). An Employee who is entitled to be credited with Hours of Service in accordance with clause (b) or (d) of this Section shall be credited with such number of Hours of Service for the period of time during which no duties were performed as though he were in the active employment of the Employer during such period of time. However, an Employee shall not be credited with Hours of Service in accordance with clause (b) of this Section for unused vacation for which payment is received at termination of employment, or if the payment which is made to him or to which he is entitled in accordance with clause (b) is made or due under a plan maintained solely for the purpose of complying with applicable Worker's Compensation, or unemployment compensation or disability insurance laws, or if such payment is one which solely reimburses an Employee for medical or medically related expenses incurred by the Employee. Provided there is no duplication of Hours of Service credited in accordance with the foregoing provisions, if an Employee is "a participant in the Plan" within the meaning of that term as defined in paragraph (a) of Section 5.12, he shall be credited with such number of Hours of Service with respect to all or such portion of the period of his absence to serve in the Armed Forces of the United States as may be recognized under paragraph (b) of Section 5.12 as though he were in the active employment of the Employer during the recognized period of his absence to serve in the Armed Forces. For the period from January 1, 1989 to December 31, 1991, provided there is no duplication of Hours of Service credited in accordance with the foregoing provisions, an Employee shall be credited with Hours of Service during an authorized leave of absence to carry on union business as provided in Section 2.3, 4.1, and 4.2, if such Employee elects to receive credit for Hours of Service and Accredited Service in accordance with Sections 2.3, 4.1, and 4.2 The rules set forth in paragraphs (b) and (c) of Department of Labor Regulations 2530.200b-2 are incorporated in the Plan by this reference and made a part hereof. 1.21 "Limitation Year" means the Plan Year. 1.22 "Monthly Earnings" means one-twelfth (1/12) of the Earnings of an Employee of the Employer during a Plan Year. 1.23 "Normal Retirement Date" means the first day of the month following an Employee's sixty-fifth (65th) birthday, except that the Normal Retirement Date of any Employee hired on or after 7 his sixtieth (60th) birthday shall be the fifth (5th) anniversary of his initial participation in the Plan. 1.24 "One-Year Break in Service" means a twelve (12) consecutive month period commencing on or after January 1, 1976 which would constitute a Year of Service but for the fact that the Employee has not completed more than 500 Hours of Service during such period. Solely for the purpose of determining whether a One-Year Break in Service has occurred for eligibility or vesting purposes, an Employee who is absent from work for maternity or paternity reasons shall receive credit for the Hours of Service which would otherwise have been credited to such Employee but for such absence, or in any case in which such hours cannot be determined, eight (8) Hours of Service per day of such absence. In no event shall Hours of Service credited under this paragraph be in excess of the amount necessary to prevent a One-Year Break in Service from occurring. For purposes of this paragraph, an absence from work for maternity or paternity reasons means an absence (a) by reason of the pregnancy of the Employee, (b) by reason of a birth of a child of the Employee, (c) by reason of the placement of a child with the Employee in connection with the adoption of such child by such Employee, or (d) for purposes of caring for such child for a period beginning immediately following such birth or placement. The Hours of Service shall be credited under this paragraph: (a) in the vesting or eligibility period in which the absence begins if the Hours of Service credited are necessary to prevent a One-Year Break in Service in such period, and (b) in all other cases, in the vesting or eligibility period following the period in which the absence begins. 1.25 "Past Service" means with respect to any Employee included in the Plan, the period of his Accredited Service prior to January 1, 1989 as determined under the Prior Plan. 1.26 "Plan" means the Pension Plan for Employees of Alabama Power Company, as set forth herein and as hereinafter amended, effective January 1, 1989. 1.27 "Plan Year" means the twelve (12) month period commencing on the first day of January and ending on the last day of December next following. 1.28 "Plan Year of Service" is a Year of Service determined as if the date of employment or reemployment is the first day of the Plan Year. 1.29 "Prior Plan" means the Plan in effect prior to January 1, 1989. 8 1.30 "Provisional Payee" means a spouse designated or deemed to have been designated by an Employee or former Employee pursuant to Article VII to receive Retirement Income on the death of the Employee or former Employee. 1.31 "Qualified Election" means an election by an Employee or former Employee that concerns the form of distribution of Retirement Income that must be in writing and must be consented to by the Employee's Spouse. The Spouse's consent to such an election must acknowledge the effect of such election, must be in writing, and must be witnessed by a notary public. Notwithstanding this consent requirement, if the Employee establishes to the satisfaction of the Retirement Board that such written consent may not be obtained because the Spouse cannot be located or because of such other circumstances as the Secretary of the Treasury may by regulations prescribe, an election by the Employee will be deemed a Qualified Election. Any consent necessary under this provision shall be valid and effective only with respect to the Spouse who signs the consent, or in the event of a deemed Qualified Election, with respect to such Spouse. A revocation of a prior Qualified Election to waive the payment of Retirement Income to the Employee's Spouse may be made by the Employee without consent at any time commencing within 90 days before such Employee's 55th birthday but not later than before the commencement of Retirement Income. A Qualified Election or the revocation of a Qualified Election shall be on a form furnished by the Retirement Board and filed within the time prescribed for making such election. 1.32 "Retirement Board" means the managing board of the Plan provided for in Article X. 1.33 "Retirement Date" means the Employee's Normal, Early, or Deferred Retirement Date, whichever is applicable to him. 1.34 "Retirement Income" means the monthly Retirement Income provided for by the Plan. 1.35 "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, and $250 per month, on and after January 1, 1991, 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 the aggregate Accredited Service the Employee could have accumulated if he had continued his employment until his Normal Retirement Date. For purposes of determining the estimated Federal primary 9 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(b) and shall be determined pursuant to the following, as applicable: (a) With regard to an Employee described in Section 5.2, the Social Security benefit shall be computed at retirement. In estimating the amount of the Federal primary Social Security benefit to which the Employee would be entitled, it shall be assumed that he will receive no wages for Social Security purposes after his retirement on his Normal Retirement Date or Deferred Retirement Date, and it will be further assumed in calculating his estimated Federal primary Social Security benefit that the amount thereof will be the amount determined under the recomputation provision, if applicable, of the Social Security Act in effect at the time of his retirement. (b) With regard to an Employee described in Section 5.3(a), the Social Security benefit to which it is estimated that he will be entitled at sixty-five (65), shall be computed at the time of his retirement. In estimating the amount of the Federal primary Social Security benefit to which the Employee would be entitled at age sixty-five (65), it shall be assumed that he will receive no wages for Social Security purposes after his Early Retirement Date, and it will be further assumed in calculating his estimated Federal primary Social Security benefit that the amount thereof will be the amount determined under the recomputation provision, if applicable, of the Social Security Act in effect at his Early Retirement Date. (c) With regard to an Employee described in Section 5.3(b), the Social Security benefit to which it is estimated that he would have been entitled to receive at age sixty-five (65) or his date of death, if later, had he not died, shall be computed at the time of his death. In estimating the amount of Federal primary Social Security benefit to which the Employee would have been entitled at age sixty-five (65) or his date of death, if later, it shall be assumed that he would not have received any wages for Social Security purposes after the date of his death, and it will be further assumed in calculating his Federal primary Social Security benefit that the amount thereof will be the amount determined under the recomputation provision, if applicable, of the Social Security Act in effect at the time of his death. (d) With regard to an Employee described in Section 5.3(c), the Social Security benefit to which it is estimated that he will 10 become entitled at age sixty-five (65) or his date of termination, if later, shall be computed at the date of termination. In estimating the amount of the Federal primary Social Security benefit to which the Employee would be entitled at age sixty-five (65) or his date of termination, if later, it shall be assumed that he will receive no wages for Social Security purposes after his date of termination, and it will be further assumed in calculating his estimated Federal primary Social Security benefit that the amount thereof will be the amount determined under the recomputation provision, if applicable, of the Social Security Act in effect at his date of termination. (e) With regard to an Employee described in Section 5.3(d), the Social Security benefit to which it is estimated that he would have been entitled to receive at age sixty-five (65) or his initial date of disability, if later, had he not become disabled, shall be computed at the time of his retirement. In estimating the amount of Federal primary Social Security benefit to which the Employee would have been entitled at age sixty-five (65) or his date of disability, if later, it shall be assumed that he would have received wages for Social Security purposes as specified in Section 5.4, and it will be further assumed in calculating his estimated Federal primary Social Security benefit that the amount thereof will be the amount determined under the recomputation provision, if applicable, of the Social Security Act in effect at the time of his retirement. 1.36 "Social Security Retirement Age" means age sixty-five (65) if the Employee attains age sixty-two (62) before January 1, 2000 (i.e., born before January 1, 1938), age sixty-six (66) if the Employee attains age sixty-two (62) after December 31, 1999, but before January 1, 2017 (i.e., born after December 31, 1937, but before January 1, 1955), and age sixty-seven (67) if the Employee attains age sixty-two (62) after December 31, 2016 (i.e., born after December 31, 1954). 1.37 "Trust" or "Trust Fund" means all such money or other property which shall be held by the Trustee pursuant to the terms of the Trust Agreement or pursuant to contracts with life insurance companies. 1.38 "Trust Agreement" means the trust agreement or agreements between the Employer and the Trustee established for the purpose of funding the Retirement Income to be paid. 1.39 "Trustee" means the trustee or trustees acting as such under the Trust Agreement, including any successor or successors. 1.40 "Vesting Year of Service" means an Employee's Years of Service including: (a) Years of Service with an Affiliated Employer; (b) in the case of an employee of Birmingham Electric 11 Company who, prior to his Normal Retirement Date, became and remained an Employee of the Employer until December 1, 1952, and was an active Employee of the Employer on January 1, 1961, his service with Birmingham Electric Company; (c) subject to the eligibility requirements of Section 2.3, active service with the Armed Forces of the United States if the Employee entered or enters active service or training in such Armed Forces directly from the employ of the Employer and after discharge or release therefrom returns within ninety (90) days to the employ of the Employer or is deemed to return under Section 2.3 because of the death of such Employee while in active service with such Armed Forces; and (d) any period during which the Employee was on any other form of authorized leave of absence. For purposes of this Section 1.40 in determining Vesting Years of Service with respect to a period of absence referred to in clause (c) or (d) of this Section 1.40, an Employee shall be credited with Hours of Service as though the period of absence were a period of active employment with the Employer. 1.41 "Year of Service" means with respect to an Employee in the service of the Employer on or after January 1, 1976: (a) if the Employee was hired prior to January 1, 1976, each twelve (12) consecutive month period, computed from the Employee's most recent date of hire by the Employer, during his last period of continuous service as a full-time regular Employee (except that service prior to July 1, 1944 need not have been continuous) with the Employer immediately prior to January 1, 1976 (including service with Commonwealth and predecessor companies and service with Affiliated Employers and service with companies or properties heretofore affiliated or associated prior to the date of severance of such affiliation or association) and any subsequent twelve (12) consecutive month period commencing on an anniversary date of such date of hire (or date of reemployment as provided in Section 2.4), provided that in each such twelve (12) consecutive month period commencing on or after January 1, 1975 he has completed at least 1000 Hours of Service; or (b) if the Employee is hired on or after January 1, 1976, a twelve (12) consecutive month period after December 31, 1975, commencing on the Employee's most recent date of hire by the Employer (or date of reemployment as provided in Section 2.4), and any subsequent twelve (12) consecutive month period commencing on an anniversary date of such date of hire, provided he has completed at least 1000 Hours of Service during each such twelve (12) consecutive month period; and (c) to the extent not resulting in duplication, each Year of Service restored to the Employee upon reemployment as provided in Section 8.3. 12 An Employee's vested interest in his Accrued Retirement Income shall be based on his Vesting Years of Service and an Employee's eligibility to participate in the Plan pursuant to Article II shall be based on his Eligibility Year of Service. Breaks in service will be measured on the same computation period as the Year of Service. Effective on and after January 1, 1995, an Employee's accrual of Retirement Income shall be based solely on an Employee's Plan Year of Service, without regard to an Employee's completion of a Vesting Year of Service ending within such Plan Year. In the Plan and Trust Agreement, 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. 13 ARTICLE II Eligibility 2 2.1 Employees. Each Employee participating in the Plan as of January 1, 1989 shall continue to be included in the Plan. Each other Employee, except as provided in this Article, shall be included in the Plan on the first day of the month next following the date on which he first completes an Eligibility Year of Service. 2.2 Employees represented by a collective bargaining agent. An Employee who is represented by a collective bargaining agent may participate in the Plan, subject to its terms, if the representative(s) of his bargaining unit and the Employer mutually agree to participation in the Plan by members of his bargaining unit. 2.3 Persons in military service and Employees on authorized leave of absence. Any person not already included in the Plan who leaves or has left the employ of the Employer to enter the Armed Forces of the United States or is on authorized leave of absence without regular pay and who returns to the employ of the Employer within ninety (90) days after discharge from such military service or on or before termination of his leave of absence, shall, upon such return, be included in the Plan effective as of the first day of the month next following the date on which he first met or meets the eligibility requirement of Section 2.1. In determining whether an Employee entering the service of the Employer has completed an Eligibility Year of Service, his Hours of Service prior to such authorized leave of absence without regular pay or entry into the Armed Forces shall be taken into account, and for purposes of Section 2.4, he shall be deemed not to have incurred a One-Year Break in Service by reason of such absence. If an Employee dies while in active service with the Armed Forces of the United States, such Employee shall be deemed to have returned to the employ of the Employer on his date of death. An Employee not already included in the Plan who is on authorized leave of absence and receiving his regular pay shall be considered credited with Hours of Service as though the period of absence was a period of active employment with the Employer, and he shall be included in the Plan if and when he meets the requirements of this Article II regardless of whether he is, on the date of such inclusion, on such leave of absence. 14 An Employee not already included in the Plan who is granted a leave of absence on or after January 1, 1981 to serve as Business Manager or Assistant Business Manager of System Council U-19 and who makes timely written election to participate in the Plan during such leave of absence, shall be credited with Hours of Service as though the period of absence was a period of active employment with the Employer for the period (or portion of the period). Such Employee shall be included in the plan when he meets the requirements of this Article II if he is, on the date of such inclusion, on such leave of absence or has returned to the active employment of the Employer. The crediting of Hours of Service with respect to such Employee shall continue only so long as such employee remains on leave in such capacity as stated above. 2.4 Employees reemployed. An Employee whose service terminates at any time and who is reemployed as an Employee, unless excluded under Section 2.6, will be included in the Plan as provided in Section 2.1 unless: (a) prior to termination of his service he had completed at least one Year of Service; and (b) upon his reemployment, to the extent provided in Section 8.3 without regard to Section 8.4, he is entitled to restoration of his Years of Service, in which case he will be included in the Plan as of the date of his reemployment. For purposes of determining Years of Service of an Employee who is reemployed by the Employer subsequent to a One-Year Break in Service, a Year of Service subsequent to his reemployment shall be computed on the basis of the twelve (12) consecutive month period commencing on his date of reemployment or an anniversary thereof. 2.5 Participation upon return to eligible class. I f a n Employee is a participant in the Plan before July 1, 1991, the exclusion from participation provided in Section 2.6, as it regards temporary employees, shall not apply with respect to such Employee, and such Employee shall be eligible to participate in the Plan after July 1, 1991 whether or not he is classified as a temporary employee. If an Employee first becomes a participant on or after July 1, 1991, in the event such Employee ceases to be a member of an eligible class of Employees and becomes ineligible to participate, but has not incurred a One-Year Break in Service, such Employee will participate immediately upon returning to an eligible class of Employees. If such Employee incurred a One- Year Break in Service, eligibility will be determined under Section 2.4 of the Plan. 15 In all other instances, if an Employee is not a member of an eligible class of Employees but then becomes a member of an eligible class, such Employee will commence participation in the Plan as of the first day of the month next following the later of (a) the date such Employee completes an Eligibility Year of Service or (b) the date he becomes a member of an eligible class of Employees. 2.6 Exclusion of certain categories of employees. Notwithstanding any other provision of this Article II, leased employees shall not be eligible to participate in the Plan. In addition, temporary employees, except Employees, as defined in Section 1.17, participating in the Plan prior to July 1, 1991 shall not be eligible to participate in the Plan. Thirdly, any person who is employed by Electric City Merchandise Company, Inc. on or after May 1, 1988, or who is employed by Savannah Electric and Power Company on or after March 3, 1988, shall not be entitled to accrue Retirement Income under the Plan while employed at such companies. Lastly, any person who is a member of the United Mine Workers at the date of his employment, or on October 1, 1948, or thereafter becomes a member of said union or any other mine workers union having a retirement or similar fund, shall on the date of his employment or on October 1, 1948 or the date of his becoming a member, whichever is later, be deemed for purposes of the Plan to have terminated his employment with the Employer on such date and shall not be eligible to participate in the Plan; provided that any such person shall again become an employee eligible to participate in the Plan upon termination of his membership in such union subject to inclusion in the Plan as a new employee. 2.7 Waiver of participation. Effective January 1, 1991, notwithstanding the above, an Employee may, subject to the approval of the Employer, elect voluntarily not to participate in the Plan. The election not to participate must be communicated in writing to the Retirement Board effective on an Employee's date of hire or an anniversary thereof. Effective January 1, 1995, the election not to participate must be communicated in writing to and acknowledged by the Retirement Board and shall be effective as of the date set forth in such written waiver. 16 ARTICLE III Retirement 3 3.1 Retirement at Normal Retirement Date. Each Employee eligible to participate in the Plan shall have a nonforfeitable right to his Accrued Retirement Income by no later than his sixty-fifth (65th) birthday, or in the case of any Employee hired on or after his sixtieth (60th) birthday, the fifth (5th) anniversary of his initial participation in the Plan. Notwithstanding the above, an Employee's Normal Retirement Date shall be as provided in Section 1.23. 3.2 Retirement at Early Retirement Date. An Employee having at least ten (10) Years of Accredited Service (including any Accredited Service to which he is entitled under the pension plan of any Affiliated Employer from which such Employee was transferred pursuant to Section 4.6 or 4.7, or which was credited to him in accordance with Section 4.3, and including for purposes of this Section 3.2, Accredited Service under the Retirement Income Plan for Employees of Birmingham Electric Company, as amended ("BECO Plan") may elect to retire on an Early Retirement Date on or after his fifty-fifth (55th) birthday and before his sixty-fifth (65th) birthday and to have his Retirement Income commence on that date, or effective January 1, 1995, the first day of any month up to and including the Employee's Normal Retirement Date. 3.3 Retirement at Deferred Retirement Date. An Employee included in the Plan may remain in active service after his Normal Retirement Date. The involuntary retirement of an Employee on or after his Normal Retirement Date shall not be permitted solely on the basis of the Employee's age, except in accordance with the provisions of the Age Discrimination in Employment Act, as amended from time to time. Termination of service of such an Employee for any reason after Normal Retirement Date shall be deemed retirement as provided in the Plan. 17 ARTICLE IV Determination of Accredited Service 4 4.1 Accredited Service pursuant to Prior Plan. (a) Each Employee who participated in the Prior Plan shall be credited with such Accredited Service, if any, earned under such Prior Plan as of December 31, 1988. (b) Each Employee who is on an approved leave of absence from the Employer to serve as Business Manager or Assistant Business Manager for System Council U-19, and who has made a timely written election to participate in the Plan during such leave in accordance with the Pension Agreement dated May 29, 1981, shall be credited with service for the Plan Year covered by such elections. 4.2 Accredited Service. (a) Each Employee meeting the requirements of Article II shall, in addition to any Accredited Service to which he may be entitled in accordance with Section 4.1, be credited with Accredited Service as set forth in (b) below. Any such Employee who is on authorized leave of absence with regular pay shall be credited with Accredited Service during the period of such absence. Any such Employee who is a "participant in the Plan" within the meaning of that term as defined in paragraph (a) of Section 5.12 shall be credited with Accredited Service during all or such portion of the period of his absence to serve in the Armed Forces of the United States as may be recognized under paragraph (b) of Section 5.12. Employees on authorized leave of absence without regular pay, other than Employees deemed to accrue Hours of Service under Section 4.4, and persons in the Armed Forces who are not "participants in the Plan" within the meaning of that term as defined in paragraph (a) of Section 5.12 shall not be credited with Accredited Service for the period of such absence. An Employee who is on an approved leave of absence from the Employer to serve as Business Manager or Assistant Business Manager for System Council U-19, and who makes timely written election to participate in the Plan during such leave of absence, shall be credited with Accredited Service for the period (or portion of the period) after January 1, 1991 covered by such timely written election. For the purpose of determining the Earnings of such Employee during the period (or portion of the period) after January 1, 1991, of such leave of absence, he shall be deemed to have received Earnings at the rate of Earnings he would have been eligible to receive had he remained in the employ of the Employer. 18 (b) For each Plan Year commencing after December 31, 1988, an Employee included in the Plan who is credited with a Vesting Year of Service for the twelve (12) consecutive month period ending on the anniversary date of his hire which occurs during such Plan Year shall be credited with Accredited Service as follows: (1) if an Employee completes at least 1,680 Hours of Service in a Plan Year, he shall be credited with one year of Accredited Service; (2) if an Employee completes less than 1,680 Hours of Service in a Plan Year, but not less than 1,000 Hours of Service, he shall be credited with one-twelfth (1/12) of a year of Accredited Service for each 140 Hours of Service; or (3) if an Employee's initial eligibility in the Plan shall occur after the beginning of the Plan Year, and the Employee shall therefore have completed less than 1,000 Hours of Service in such Plan Year, he shall be credited with one-twelfth (1/12) of a year of Accredited Service for each 140 Hours of Service during such Plan Year after his inclusion in the Plan. Notwithstanding the above, effective January 1, 1995, an Employee's Accredited Service shall be calculated based on an Employee's accrual of a Plan Year of Service only and without regard to the requirement of a Vesting Year of Service. (c) If an Employee (1) who has previously satisfied the eligibility requirements under Article II shall again be included in the Plan at such time which is after the beginning of the Plan Year, or (2) shall terminate his employment for any reason before the close of such Plan Year and shall therefore have completed less than 1,000 Hours of Service in such Plan Year, he shall be credited with one-twelfth (1/12) of a year of Accredited Service for each 140 Hours of Service during such Plan Year after his inclusion in the Plan or before his termination of employment in such Plan Year, as the case may be. (d) In addition to any Accredited Service credited under Section 4.1, an Employee shall be entitled to Accredited Service determined under the Prior Plan, without regard to the age requirement for eligibility to participate in the Prior Plan, in excess of the Accredited Service determined under the Prior Plan (including the age requirement for eligibility to participate in the Prior Plan). Such Accredited Service shall be considered Accredited Service after December 31, 1985 for purposes of calculating an Employee's Retirement Income under Article V. 19 (e) In addition to the foregoing, Accredited Service may include Accredited Service accrued subsequent to a One-year Break in Service including such Accredited Service which may be restored in accordance with the provisions of Section 8.3. (f) Notwithstanding the above, the maximum number of years of Accredited Service with respect to any Employee participating in the Plan shall not exceed forty (40). Effective January 1, 1991, the maximum number of years of Accredited Service is increased to forty-three (43). 4.3 Accredited Service and Years of Service in respect of service of certain Employees previously employed by the Employer or by Affiliated Employers. An Employee in the service of the Employer on January 1, 1976 or employed by it thereafter who meets the requirements of paragraph (a) of this Section 4.3, in addition to any other Years of Service or Accredited Service to which he may be entitled under the Plan, upon completion of an Eligibility Year of Service where required under Section 8.3(c) (which shall also be considered to be Accredited Service) shall be credited with such number of Years of Service (and fractions thereof to the nearest whole month for service prior to January 1, 1976) and such Accredited Service and Retirement Income as shall be determined in accordance with the provisions of paragraphs (b) and (c) of this Section 4.3. (a) (1) Such Employee shall have been employed prior to January 1, 1976 by the Employer or by one or more Affiliated Employers; (2) he shall have terminated his service with Employer or such Affiliated Employer other than by retirement and he shall not be entitled to receive at any time any retirement income under the pension plan of any such prior employer in respect of any period of time for which he shall receive credit for Years of Service or Accredited Service under this Section 4.3; and (3) for Employees reemployed on or after January 1, 1985, the number of consecutive One-Year Breaks in Service incurred by the Employee prior to the date of his employment by the Employer does not equal or exceed the greater of (A) five (5), or (B) the aggregate number of his Years of Service (and fractions thereof to the nearest whole month for service prior to January 1, 1976) with the Employer and such Affiliated Employer. The years of Accredited Service credited to an Employee reemployed prior to January 1, 1985, with regard to years of Accredited Service immediately prior to the termination of his service, shall be determined under the terms of the Plan in effect prior to January 1, 1985. 20 (b) The number of Years of Service (and fractions thereof to the nearest whole month for service prior to January 1, 1976) and the Accredited Service, respectively, which shall be credited to such Employee shall be equal to the respective number of his Years of Service (and fractions thereof to the nearest whole month for service prior to January 1, 1976) and Accredited Service which were forfeited by the Employee and not restored under the pension plans of the Employer or an Affiliated Employer. (c) There shall be credited to the Employee Retirement Income equal to retirement income which was accrued by him under the pension plan of the Employer or an Affiliated Employer during the period of his Accredited Service which was forfeited and which is credited under the Plan in accordance with Section 4.3. The amount of Retirement Income credited in accordance with this paragraph (c) shall be treated as Prior Plan Retirement Income for purposes of determining the amount of Retirement Income to which the Employee is entitled, and shall be determined in accordance with the provisions of the pension plan of the Affiliated Employer in effect at the time the Employee's service with such Affiliated Employer terminated without regard to any minimum provisions of such pension plan; for this purpose and if relevant in respect of the Employee it shall be assumed that the pension plan of the Affiliated Employer in effect at the time the Employee's service with such Affiliated Employer terminated contained the provisions of Section 5.12 of the Plan and related amendments concerning absence from the service of the Employer to serve in the Armed Forces of the United States which became effective November 1, 1977. For Plan Years beginning after December 31, 1987, an Employee who meets the requirements of paragraph (a) of this Section 4.3 shall be deemed to have transferred to or from an Affiliated Employer for purposes of the transfer of assets or liabilities to or from the Plan in accordance with Section 4.6. 4.4 Accrual of Retirement Income during period of total disability. (a) If an Employee included in the Plan shall become totally disabled, as determined by the Retirement Board on the basis of medical evidence, after he has completed at least five (5) Vesting Years of Service and, by reason of such disability, he shall apply for and be granted either Social Security disability benefits or long-term disability benefits under a long-term disability benefit plan of the Employer, he shall be considered to be on a leave of absence, herein referred to as a "Disability Leave." An Employee's Disability Leave shall be deemed to begin on the initial date of the disability, as determined by the Retirement Board, and shall continue until the earlier of: (1) the end of the month in which he shall cease to be entitled to receive Social Security Disability benefits and 21 long-term disability benefits under a long-term disability benefit plan of the Employer; (2) his death; and (3) his Retirement Date if he elects to have his Retirement Income commence on such date. During the period of the Employee's Disability Leave, he shall, for purposes of the Plan, be deemed to have received Earnings at the regular rate in effect for him. (b) A disabled Employee who applies for and would be granted long-term disability benefits under a long-term disability benefit plan of the Employer, if it were not for the fact that the deductions therefrom attributable to other disability benefits equal or exceed the amount of his unreduced benefit under a long-term disability benefit plan of the Employer, will be considered as being currently granted benefits under such long-term disability benefit plan. (c) An Employee's Disability Leave shall be deemed to be a period for which Hours of Service shall be credited to the Employee as though the period of his Disability Leave were a period of active employment. (d) If an Employee's Disability Leave shall terminate prior to his Normal Retirement Date and he shall fail to return to the employment of the Employer 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 his rights shall be determined in accordance with Article VIII, unless at such time he shall be entitled to retire on an Early Retirement Date, in which event his termination of service shall be deemed to constitute his retirement under Section 3.2. (e) Notwithstanding the above, the years of Accredited Service for any Employee whose initial date of disability occurred under the Prior Plan shall be determined under the terms of the Prior Plan. 4.5 Employees leaving Employer's service. If the service of an Employee is terminated prior to retirement as provided by Article III, such Employee will forfeit any Vesting Years of Service and Accredited Service which he may have subject to possible restoration of some or all of his Vesting Years of Service and Accredited Service in accordance with Article VIII. The provisions of this Section 4.5 shall not affect the rights, if any, of an Employee under Article VIII nor shall the rights of an Employee be affected during or by reason of a layoff, due to lack of work, which continues for a period of one year or less, except that such period of layoff shall not be deemed to be service with the Employer. If the service of an Employee is terminated, or if he is not reemployed before the expiration of one year after being laid off for lack of work, and he is subsequently reemployed, he will be treated as provided in Section 2.4. 22 Forfeitures arising by reason of an Employee's termination of service for any reason shall not be applied to increase the benefits any Employee would otherwise receive under the Plan but shall be used to reduce contributions of the Employer to the Plan. 4.6 Transfers to or from Affiliated Employers. This Section 4.6 shall not apply to the transfer by an Employee to the Employer from Savannah Electric and Power Company on or after March 3, 1988. In the case of the transfer of an Employee (including an Employee included in the Prior Plan who was transferred in accordance with the Prior Plan) to an Affiliated Employer which has at the time of transfer a pension plan with substantially the same terms as this Plan, such Employee, if and when he commences to receive on or after his Normal Retirement Date retirement income under such pension plan of the Affiliated Employer to which transferred, shall receive retirement income under such pension plan attributable to years of Accredited Service with the Employer prior to the time of his transfer. If and when such an Employee commences to receive on an Early Retirement Date retirement income under such pension plan of the Affiliated Employer to which transferred, the amount of any retirement income payable under such pension plan and attributable to Accredited Service with the Employer prior to such transfer shall be reduced in accordance with the provisions of the pension plan relating to retirement income payable at Early Retirement Date, or if such retirement income shall be payable in a manner similar to the provisions of Section 8.2 or Section 8.6, reduced in accordance with the applicable provision. In the case of the transfer to this Employer (not including transfers by reason of the split-up as of November 1, 1949) of an Employee of any Affiliated Employer which has at the time of transfer a pension plan with substantially the same terms as this Plan, the Employer will, subject to the provisions of Article IX, make periodic contributions into this Plan to the extent necessary to provide the portion of the Retirement Income not provided for him in the pension plan of the company from which he was transferred. Upon the transfer of an Employee to or from the Employer, the Plan and Trust shall be authorized to receive or transfer the greater of (a) the actuarial equivalent of the Employee's Accrued Retirement Income or (b) such assets as may be required to fund the projected Retirement Income of the Employee at his retirement date attributable to the Plan or the pension plan maintained by the Affiliated Employer from which the Employee transfers, determined as of the last day of the Plan Year in which the transfer occurs using the current funding assumptions for the Plan Year in which the transfer occurs. The Retirement Board of the Employer shall be authorized to coordinate the transfer of assets and liabilities attributable to the benefits of active 23 Employees, terminated vested Employees, retired Employees, and Provisional Payees with any Affiliated Employer which has at such time a pension plan with substantially the same terms as this Plan. Notwithstanding the above, the transferred Employee shall be entitled to receive a benefit immediately following the transfer of assets or liabilities to or from the Plan and Trust which is equal to or greater than the benefit he would have been entitled to receive immediately before the transfer if the Plan or the pension plan maintained by the Affiliated Employer from which the Employee transfers had been terminated. In no event shall assets be transferred to or from the Plan and Trust without the concurrent transfer of liabilities attributable to such assets. In no case, however, shall any such Employee, who retires pursuant to Section 3.1, 3.2, or 3.3 or the Provisional Payee of a deceased Employee entitled to payment in accordance with Article VII, receive Retirement Income attributable to Accredited Service from both companies aggregating less than the Minimum Retirement Income specified in Article V (after giving effect to adjustments, if any, for Provisional Payee designation or deemed designation), as shall be applicable in his circumstances. 4.7 Transfers from Savannah Electric and Power Company. In the case of the transfer to the Employer of an employee of Savannah Electric and Power Company ("SEPCO"), such Employee, if and when he attains his Normal Retirement Date or Deferred Retirement Date, shall be entitled to receive Retirement Income calculated pursuant to Section 5.1 or 5.2, as appropriate, based upon his Accredited Service with the Employer and Accredited Service attributable to actual service during his employment with SEPCO. Such amount calculated in accordance with the preceding sentence shall be reduced by the amount of retirement income calculated under the defined benefit pension plan of SEPCO attributable to Accredited Service during his actual service during his employment with SEPCO. Any Retirement Income based upon an Employee's Accredited Service with the Employer and Accredited Service attributable to actual service during his employment with SEPCO shall be subject to the provisions of the Plan relating to Retirement Income payable at an Early Retirement Date, or if such Retirement Income shall be payable in accordance with the provisions of Section 8.2 or 8.6, subject to the provisions of such Section. This Section 4.7 shall also apply in calculating the Retirement Income payable under this Plan to a former employee of SEPCO who is hired by the Employer and is entitled to credit for years of Accredited Service under the Plan attributable to his actual service with SEPCO. 24 4.8 Retirement income for certain former employees of Southern Electric Generating Company. This Section 4.8 shall apply to those former employees of Southern Electric Generating Company ("SEGCO") who either (a) retired from SEGCO on their Early, Normal or Deferred Retirement Date under the Pension Plan for Employees of Southern Electric Generating Company (the "SEGCO Plan"), or (b) transferred from SEGCO to Alabama By-Products Corporation ("ABC") in connection with the acquisition by ABC of SEGCO's Mine No. 1 operation on or about August 1, 1974, and for whom this Plan has assumed the liability for the payment of their Retirement Income following the transfer of assets and liabilities from the SEGCO Plan to this Plan. Each such employee shall be entitled to receive retirement income under the Plan attributable to years of Accredited Service with SEGCO prior to the time of his retirement or transfer, as appropriate, calculated and payable in accordance with the terms and provisions of the SEGCO Plan in effect on the date of such retirement or transfer, subject to any adjustments provided under Section 8.6 of the Plan and any increases in Retirement Income for retired employees under Section 5.11 of this Plan. Notwithstanding the above, each Employee to whom this Section 4.8 shall apply shall be entitled to receive a benefit immediately following the transfer of assets or liabilities from the SEGCO Plan and Trust which is equal to or greater than the benefit he would have been entitled to receive immediately before the transfer of assets or liabilities if the SEGCO Plan had been terminated. 25 ARTICLE V Retirement Income 5 5.1 Normal Retirement Income. The monthly Retirement Income payable as a single life annuity to an Employee included in the Plan who retires from the service of the Employer at his Normal Retirement Date after January 1, 1989, subject to the limitations of Article VI, shall be the greater of (a) and (b): (a) the amount determined under (1) or (2) below, whichever is greater: (1) the Accrued Retirement Income determined in accordance with Section 5.1 of the Prior Plan without regard to the Minimum Retirement Income requirement, plus the designated fixed dollar amount times the Employee's years of Accredited Service earned after December 31, 1988. For the period on and after January 1, 1989 but ending December 31, 1990, the fixed dollar amount equals $20.00. For the period on and after January 1, 1991, the fixed dollar amount equals $25.00; and (2) $25.00 times an Employee's years of Accredited Service; and (b) the Minimum Retirement Income as determined in accordance with Section 5.2. 5.2 Minimum Retirement Income payable upon retirement at Normal Retirement Date or Deferred Retirement Date. The monthly Minimum Retirement Income payable to an Employee who retires from the service of the Employer after January 1, 1989 at his Normal Retirement Date or Deferred Retirement Date (before adjustment for Provisional Payee designation, if any) shall be an amount equal to 1.70% of his Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service to his Normal Retirement Date or Deferred Retirement Date including a Social Security Offset. Any provisions of this Article V to the contrary notwithstanding, Retirement Income determined in accordance with this Article V with respect to an Employee who retires on his Normal Retirement Date or Deferred Retirement Date shall not be less than the Retirement Income which would have been payable with respect to such Employee commencing on an Early Retirement Date had (a) the Employee retired on the Early Retirement Date which would have resulted in the greatest Retirement Income, (b) his Retirement Income commencing on such Early Retirement Date been computed by utilizing the estimated Federal primary Social Security benefit to which the Employee shall be entitled 26 determined in accordance with the Social Security Act in effect at his retirement, giving effect to the recomputation provision of such Social Security Act, if applicable, and (c) such Retirement Income commencing on such Early Retirement Date been payable in the same form as his Retirement Income commencing on his Normal Retirement Date or Deferred Retirement Date. 5.3 Minimum Retirement Income upon retirement at Early Retirement Date or upon termination of service by reason of death or otherwise prior to retirement. The monthly Minimum Retirement Income payable to an Employee (or his Provisional Payee), if he shall retire on his Early Retirement Date, or if his service shall terminate by reason of death or otherwise prior to retirement, shall be determined in accordance with the following provisions: (a) Upon retirement at Early Retirement Date his Minimum Retirement Income (before adjustment for Provisional Payee designation, if any) shall be an amount equal to 1.70% of his Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service to his Early Retirement Date including a Social Security Offset. (b) Upon termination of service by reason of the death of the Employee prior to retirement and after the effective date of his Provisional Payee designation or deemed designation, the Minimum Retirement Income for the purpose of determining the Employee's Accrued Retirement Income upon which payment to his Provisional Payee in accordance with Section 7.4 shall be based shall be an amount equal to 1.70% of the Employee's Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service to the date of his death including a Social Security Offset. (c) For an Employee who terminates his service with the Employer with entitlement to receive Retirement Income in accordance with Section 8.1, upon retirement at Early Retirement Date or Normal Retirement Date his Minimum Retirement Income (before adjustment for Provisional Payee designation, if any) shall be an amount equal to 1.70% of his Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service to his date of termination including a Social Security Offset. (d) Upon termination of service by reason of disability (as defined in Section 4.4) of the Employee prior to retirement, provided such Employee does not return to the service of the Employer prior to his Retirement Date, the Minimum Retirement Income shall be an amount equal to 1.70% of the Employee's Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service to his Retirement Date including a Social Security Offset. 27 5.4 Calculation of Social Security Offset. (a) Notwithstanding the Social Security Offset as calculated in Sections 5.2 and 5.3, in no event shall such Social Security Offset exceed the limits set forth in Section 401(l) of the Code and the regulations applicable thereunder which are incorporated by reference herein. (b) For purposes of determining the Social Security Offset in calculating an Employee's Retirement Income under the Plan, the Social Security Offset shall be determined by using the actual salary history of the Employee during his employment with the Employer or any Affiliated Employer, provided that in the event that the Retirement Board is unable to secure such actual salary history within 180 days (or such longer period as may be prescribed by the Retirement Board) following the later of the date of the Employee's separation from service (by retirement or otherwise) and the time when the Employee is notified of the Retirement Income to which he is entitled, the salary history shall be determined in the following manner: (1) The salary history shall be estimated by applying a salary scale, projected backwards, to the Employee's compensation from the Employer for W-2 purposes for the first Plan Year following the most recent Plan Year for which the salary history is estimated. The salary scale shall be a level percentage per year equal to six percent (6%) per annum. (2) The Plan shall give clear written notice to each Employee of the Employee's right to supply the actual salary history and of the financial consequences of failing to supply such history. Such notice shall state that the actual salary history is available from the Social Security Administration. For purposes of determining the Social Security Offset in calculating the Retirement Income of an Employee entitled to receive a public pension based on his employment with a Federal, state, or local government agency, no reduction in such Employee's Social Security benefit resulting from the receipt of a public pension shall be recognized. (c) If the distribution of an Employee's Accrued Retirement Income begins before the Employee's attainment of the Social Security Retirement Age (including a benefit commencing at Normal Retirement Date), the projected Employer derived primary insurance amount attributable to service by the Employee for the Employer will be reduced by one-fifteenth (1/15) for each of the first five (5) years and one-thirtieth (1/30) for each of the next five (5) years by which the starting date of such benefit 28 precedes the Social Security Retirement Age of the Employee, and reduced actuarially for each additional year thereafter. 5.5 Early Retirement Income. The monthly amount of Retirement Income payable to an Employee who retires from the service of the Employer at his Early Retirement Date subject to the limitations of Section 6.2, will be equal to his Retirement Income determined in accordance with Sections 5.1 and 5.3 based on his Accredited Service to his Early Retirement Date, reduced by three-tenths of one percent (0.3%) for each calendar month by which the commencement date of his Retirement Income precedes his Normal Retirement Date. At the option of the Employee exercised at or prior to commencement of his Retirement Income on or after his Early Retirement Date (provided he shall not have in effect at such Early Retirement Date a Provisional Payee designation pursuant to Article VII) he may have his Retirement Income adjusted upwards in an amount which will make his Retirement Income payable up to age sixty-five (65) equal, as nearly as may be, to the amount of his Federal primary Social Security benefit (primary old age insurance benefit) estimated to become payable after age sixty-five (65), as computed at the time of his retirement in accordance with Section 5.3(a), plus a reduced amount, if any, of Retirement Income actually determined to be payable after age sixty-five (65). The Federal primary Social Security benefit used in calculating an Employee's Retirement Income payable under the Plan shall be determined by using the salary history of the Employee during his employment with the Employer or any Affiliated Employer, as calculated in accordance with Section 5.4(b). 5.6 Deferred Retirement Income. The monthly amount of Retirement Income payable to an Employee who completes at least one Hour of Service after December 31, 1987 and who retires from the service of the Employer at his Deferred Retirement Date, subject to the limitations of Section 6.2, will be equal to his Retirement Income determined in accordance with Sections 5.1 and 5.2 based on his Accredited Service to his Deferred Retirement Date. For Employees whose Normal Retirement Date would have occurred on or before January 1, 1986, but whose Deferred Retirement Date occurs after January 1, 1988 and on or before July 1, 1991, the monthly amount of Retirement Income payable to an Employee who completes at least one Hour of Service after December 31, 1987, subject to the limitations of Section 6.2, will be equal to the greater of (a) his Retirement Income calculated on his Deferred Retirement Date, or (b) his Retirement Income calculated as of his Normal Retirement Date applying the applicable percentage increase in his Retirement Income pursuant to the terms of Section 5.13 of the Prior Plan. 29 5.7 Payment of Retirement Income. The first payment of an Employee's Retirement Income will be made on his Early Retirement Date, Normal Retirement Date, Deferred Retirement Date, or date of commencement of payment of Retirement Income in accordance with Section 8.2 or 8.6, as the case may be; provided that commencement of the distribution of an Employee's Retirement Income shall not be made prior to his Normal Retirement Date without the consent of such Employee, except as provided in Section 8.4 of the Plan. Notwithstanding anything to the contrary above, if in accordance with this Section 5.7, an Employee is entitled to receive Retirement Income commencing at his Early Retirement Date, he may, in lieu of commencing payment of his Retirement Income upon his Early Retirement Date, elect to receive such Retirement Income commencing as of the first day of any month after his Early Retirement Date and preceding his Normal Retirement Date in an amount equal to his Accrued Retirement Income determined as of the commencement of his Retirement Income on or after his Early Retirement Date determined in accordance with Section 5.5. An election pursuant to this Section 5.7 to have Retirement Income commence prior to Normal Retirement Date shall be made on a form prescribed by the Retirement Board and shall be filed with the Retirement Board at least thirty (30) days before Retirement Income is to commence. In the event of the death of an Employee who has designated a Provisional Payee or is deemed to have done so in accordance with Article VII, if the designation has become effective, the first payment to be made to the Provisional Payee pursuant to Article VII shall be made to the Provisional Payee on the first day of the month after the later of (a) the Employee's death and (b) the date on which the Employee would have attained his fifty- fifth (55th) birthday if he had survived to such date, if the Provisional Payee shall then be alive and proof of the Employee's death satisfactory to the Retirement Board shall have been received by it. Subsequent payments will be made monthly thereafter until the death of such Provisional Payee. In any event, payment of Retirement Income to the Employee shall begin not later than the sixtieth (60th) day after the later of the close of the Plan Year in which falls (a) the Employee's Normal Retirement Date or (b) the date the Employee terminates his service with the Employer or any Affiliated Employer. Notwithstanding the provisions of the Plan for the monthly payment of Retirement Income, such income may be adjusted and payable annually in arrears if the amount of the Retirement Income is less than $10.00 per month. 30 5.8 Termination of Retirement Income. The monthly payment of Retirement Income will cease with the last payment preceding the retired Employee's death; subject, however, to the continuation of payments to a surviving Provisional Payee, if one has been designated or deemed to have been designated, which likewise will cease with the last payment preceding the death of the Provisional Payee. There shall be no benefits payable under the Plan on behalf of any Employee whose death occurs prior to his retirement, except as otherwise provided in Article VII with respect to a Provisional Payee of an Employee. Following the death of an Employee and of his Provisional Payee, if any, no further payments will be made under the Plan on account of such Employee or to his estate. 5.9 Required distributions. (a) Once a written claim for benefits is filed with the Retirement Board and unless the Employee elects to have payment begin at a later date, payment of benefits to the Employee shall begin not later than sixty (60) days after the last day of the Plan Year in which the latest of the following events occurs: (1) the Employee's Normal Retirement Date; (2) the tenth (10th) anniversary of the date the Employee commenced participation in the Plan; or (3) the Employee's separation from service from the Employer or any Affiliated Employer. (b) Required minimum distributions on and after January 1, 1989 (1) Subject to the transitional rules described in Paragraph (c) below, effective for calendar years beginning after December 31, 1988, the payment of Retirement Income to any Employee shall begin no later than April 1 of the calendar year following the calendar year in which the Employee attains age 70-1/2, without regard to the actual date of separation from service. The amount of his Retirement Income shall be recomputed as of such April 1 and as of the close of each Plan Year after his Retirement Income commences and preceding his actual retirement date as if each such date were the Employee's Deferred Retirement Date. Any additional Retirement Income he accrues at the close of any such Plan Year shall be offset (but not below zero) by the value of the benefit payments received in such Plan Year. (2) The receipt by an Employee of any payments or distributions as a result of his attaining age 70-1/2 prior to his actual retirement or death shall in no way affect the 31 entitlement of an otherwise eligible Employee to additional accrued benefits. (c) Age 70-1/2 transitional rule Any Employee who is not a five-percent owner and who has attained age 70-1/2 by January 1, 1988, may defer the commencement of benefit payments under paragraph (b) above until he actually separates from service with the Employer. This transitional rule shall only apply if the Employee is not a five- percent owner at any time during the Plan Year ending with or within the calendar year in which such owner attains age 66-1/2 and in any subsequent Plan Year. (d) Distribution upon death of Employee (1) Death after commencement of benefits If the Employee dies before his entire nonforfeitable interest has been distributed to him, the remaining portion of such interest shall be distributed at least as rapidly as under the method of distribution selected by the Employee as of the date of his death. (2) Death prior to commencement of benefits If the Employee dies before the distribution of his nonforfeitable interest has begun, the entire interest shall be distributed monthly to his Provisional Payee, if any, over such Provisional Payee's remaining lifetime. (e) Determining required minimum distributions Notwithstanding anything in this Plan to the contrary, all distributions, including the minimum amounts which must be distributed each calendar year, under this Plan shall be made in accordance with Code Section 401(a)(9) and the regulations thereunder. (f) Minimum distribution transitional rules Any distribution made pursuant to Section 242(b)(2) of the Tax Equity and Fiscal Responsibility Act of 1982 shall meet the requirements of Code Section 401(a)(9) as in effect on December 31, 1983, and shall also satisfy Code Sections 401(a)(11) and 417. 32 5.10 Suspension of Retirement Income for reemployment. (a) If a former Employee who is receiving Retirement Income shall be reemployed by the Employer or 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 cease during each calendar month after his reemployment in which he completes forty (40) or more Hours of 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. (b) No payment shall be withheld 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. (c) 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. 5.11 Increase in Retirement Income of retired Employees for service prior to January 1, 1991. Retirement Income payable on and after January 1, 1991 to an Employee (or to the Provisional Payee of an Employee) who retired at an Early Retirement Date or at his Normal Retirement Date on or before January 1, 1991 pursuant to the Plan as in effect prior to January 1, 1991, will be recalculated to increase the amount thereof by an amount ranging from a minimum of two percent (2%) to a maximum of forty percent (40%) in accordance with the following schedule: Year in which Percentage retirement occurred increase 1990 2% 1989 4% 1988 6% 1987 8% 1976 - 1986 10% 1971 - 1975 20% 1966 - 1970 30% 1965 and prior years 40% 33 A similar adjustment, based on the date of the commencement of Retirement Income payments to the Employee's Provisional Payee, rather than the Employee's Retirement Date, will be made in respect of Retirement Income which is payable on or after January 1, 1991 where a Provisional Payee election was in effect, or was deemed to be in effect, when an Employee died while in service prior to January 1, 1991 and prior to his retirement. A similar adjustment will be made in respect of Retirement Income which is payable on or after January 1, 1991 for an Employee (or the Provisional Payee of an Employee) entitled to Retirement Income for which payments have commenced on or before January 1, 1991 in accordance with Article VIII of the Prior Plan, except for Employees whose Retirement Income has been cashed-out pursuant to Section 8.4 of this Plan or Section 8.5 of the Prior Plan. For purposes of determining the applicable percentage increase under this Section 5.11, the year of retirement includes retirement where the last day of employment was December 31 of such year. An Employee whose Deferred Retirement Date is on or before January 1, 1988 and who did not retire at his Normal Retirement Date shall be deemed to have retired at his Normal Retirement Date for purposes of determining the increase in his Retirement Income payable at his Deferred Retirement Date. This Section 5.11 shall not apply with respect to an Employee who has not retired, but for whom the distribution of Retirement Income has commenced pursuant to Section 5.9 of the Plan. 5.12 Special provisions relating to the treatment of absence of an Employee from the service of the Employer to serve in the Armed Forces of the United States. (a) Effective as of November 1, 1977, any provisions of the Plan to the contrary notwithstanding, the provisions of this Section 5.12 shall be applicable to determine the period of absence from the service of the Employer to serve in the Armed Forces of the United States of a "participant in the Plan" (as such term is defined in this paragraph (a)): The term "participant in the Plan" means a person who on or after November 1, 1977 is either: (1) an Employee who is then or thereafter in the service of the Employer (including an Employee on authorized leave of absence), (2) a retired Employee who is receiving Retirement Income, (3) a deceased Employee who received Retirement Income under this Plan or the Prior Plan at any time after its Effective Date, (4) a deceased former Employee who prior to the time of his death was receiving Retirement Income in accordance with this Plan or the Prior Plan, (5) a former Employee whose service terminated prior to January 1, 1976 and 34 who is receiving Retirement Income in accordance with the Prior Plan, (6) a former Employee whose service terminated prior to November 1, 1977 and who will be entitled to receive Retirement Income commencing after that date in accordance with this Plan or the Prior Plan, or (7) a former Employee who was transferred from the Employer pursuant to Section 4.6 or pursuant to the Prior Plan and who will be entitled to receive in accordance with either, Retirement Income commencing after November 1, 1977. The Employee or former Employee or retired Employee referred to in this paragraph (a) is one who: (1) left the employment of the Employer or of BECO to enter the Armed Forces of the United States (including reserve components thereof, the Public Health Service, and the National Guard) for the purposes and under circumstances which are specified in the reemployment provisions of the Military Selective Service Act and in any amendments or supplements thereto hereinafter in this Section 5.12 referred to as the "Selective Service Act," (2) made application for reemployment by the Employer or by BECO within such time after discharge or release from such service in the Armed Forces of the United States as is specified in the reemployment provisions of the Selective Service Act as is applicable in his circumstances and was reemployed by the Employer or by BECO and if by BECO thereafter became an Employee of the Employer on December 1, 1952, (3) served a period of active duty in the Armed Forces of the United States which did not exceed the maximum period of such active duty specified in the reemployment provisions of the Selective Service Act as is applicable in his circumstances, and (4) performed such service in the Armed Forces after May 1, 1940. (b) For the purposes of the Plan, the period of absence of a participant in the Plan to serve in the Armed Forces of the United States shall be the period determined by the Retirement Board. (c) In accordance with the provisions of the Plan as amended effective as of November 1, 1977 by the addition of this Section 5.12 and the concurrent amendments associated therewith, there shall be recalculated effective as of November 1, 1977 the Retirement Income (1) of each participant in the Plan or that of his Provisional Payee, if any, who is then receiving Retirement Income; and (2) of each deceased participant in the Plan and his deceased Provisional Payee, if any, who received payment of Retirement Income, who is not then receiving Retirement Income. (1) If in accordance with such recalculation, a larger amount of Retirement Income would have been payable to a participant in the Plan who is currently receiving payment of Retirement Income and/or to his Provisional Payee, if any, than was paid to them respectively prior to November 1, 1977, payment in a single sum of the excess of the recalculated amount over the amounts which were paid prior 35 to November 1, 1977 with interest thereon as hereinafter provided, shall be made as soon as practicable after November 1, 1977 and, commencing as soon as practicable after November 1, 1977, the Retirement Income payable to participants in the Plan and/or to their Provisional Payees, if any, who are currently receiving Retirement Income shall be increased to an amount which is equal to the larger recalculated amount to which they shall be entitled in respect of payments to be made on or after November 1, 1977. (2) If in accordance with the recalculation a larger amount of Retirement Income would have been payable to the date of death prior to November 1, 1977 of a deceased retired Employee or his Provisional Payee than was paid prior to his death, payment in a single sum of the excess of the recalculated amount over the amount which was paid prior to the date of death, with interest thereon as hereinafter provided, shall be made to his estate as soon as practicable after November 1, 1977. (3) For the purposes of the recalculation to be made in accordance with this paragraph (c), if a participant in the Plan left the employment of an Affiliated Employer to enter the Armed Forces of the United States and was not reemployed by such Affiliated Employer upon his discharge or release from service in the Armed Forces but he entered the employment of the Employer, without intermediate employment, and within the time prescribed in paragraph (a) of this Section 5.12, and his period of absence in the Armed Forces of the United States, as determined by the Retirement Board, is not taken into account under the pension plan of the Affiliated Employer whose service he left to enter the Armed Forces or under Section 4.3, it shall be treated under the Plan and the Prior Plan as if such period of absence had been a period of absence from the Employer. (d) Retirement Income of participants in the Plan who are not referred to in subparagraphs (1) or (2) of paragraph (c) and who are not on November 1, 1977 receiving Retirement Income shall be determined in accordance with the provisions of the Plan as amended by the addition of this Section 5.12 and the concurrent amendments associated therewith. (e) Interest to be paid on any single sum payment to be made in accordance with subparagraphs (1) or (2) of paragraph (c) of this Section 5.12 shall be computed at the annual rate of five percent (5%). (f) Payment to be made to any payee in accordance with this Section 5.12 may be conditioned by the Retirement Board upon its receipt of (1) such information pertaining to absence of an Employee or former Employee to serve in the Armed Forces of the 36 United States as it may request and (2) such form of receipt and release as it may determine to be appropriate in the circumstances. 37 ARTICLE VI Limitations on Benefits 6 6.1 Maximum Retirement Income. Notwithstanding any other provision of the Plan, the amount of Retirement Income shall be subject to the provisions of Article VI. (a) The maximum annual amount of Retirement Income payable with respect to an Employee in the form of a straight life annuity without any ancillary benefits after any adjustment for a Provisional Payee designation shall be the lesser of the dollar limitation determined under Code Section 415(b)(1)(A) as adjusted under Code Section 415(d), or Code Section 415(b)(1)(B) as adjusted under Treasury Regulation Section 1.415-5, subject to the following provisions of Article VI. With respect to any former Employee who has Accrued Retirement Income under the Plan or his Provisional Payee, the maximum annual amount shall also be subject to the adjustment under Code Section 415(d). (b) For purposes of Section 6.1, the term "average compensation for his high three (3) years" shall mean the period of consecutive calendar years (not more than three) during which the Employee was both an active participant in the Plan and had the greatest aggregate compensation from the Employer or, if he is also entitled to receive a pension from a defined benefit plan of an Affiliated Employer or if assets and liabilities attributable to the pension of the Employee from a defined benefit plan of an Affiliated Employer have been transferred to this Plan, the greatest aggregate compensation from the Employer and the Affiliated Employer during such high three (3) years. The limitation described in Section 6.1(a) shall also apply in the case of the payment of an Employee's Retirement Income with a Provisional Payee designation. (c) For purposes of Article VI, the term "compensation" means an Employee's earned income, wages, salaries, and fees for professional services, and other amounts received for personal services actually rendered in the course of employment with the Employer maintaining the Plan (including, but not limited to, commissions paid salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips and bonuses), and excluding the following: (1) Employer contributions to a plan of deferred compensation which are not included in the Employee's gross income for the taxable year in which contributed or Employer contributions under a simplified employee pension plan to the extent such contributions are deductible by the Employee, or any distributions from a plan of deferred compensation; 38 (2) Amounts realized from the exercise of a nonqualified stock option, or when restricted stock (or property) held by the Employee either becomes freely transferable or is no longer subject to a substantial risk of forfeiture; (3) Amounts realized from the sale, exchange, or other disposition of stock acquired under a qualified stock option; and (4) Other amounts which received special tax benefits, or contributions made by the Employer (whether or not under a salary reduction agreement) towards the purchase of an annuity described in Section 403(b) of the Code (whether or not the amounts are actually excludable from the gross income of the Employee). Compensation for any Limitation Year is the compensation actually paid or includible in gross income during such year. (d) The foregoing limitations regarding the maximum Retirement Income shall not apply with respect to an Employee if the Retirement Income payable under the Plan and under any other defined benefit plans of the Employer or any Affiliated Employer does not exceed $10,000 for the calendar year or for any prior calendar year, and the Employer and any Affiliated Employer has not at any time maintained a defined contribution plan in which the Employee has participated. The terms "defined benefit plan" and "defined contribution plan" shall have the meanings set forth in Section 415(k) of the Code. 6.2 Adjustment to Defined Benefit Dollar Limitation for Early or Deferred Retirement. (a) If the retirement benefit of an Employee commences before the Employee's Social Security Retirement Age, the Defined Benefit Dollar Limitation shall be reduced in accordance with Code Section 415(b)(2)(C) as prescribed by the Secretary of the Treasury. The reduction shall be made in such manner as the Secretary of the Treasury may prescribe which is consistent with the reduction for old-age insurance benefits commencing before the Social Security Retirement Age under the Social Security Act. (b) If the retirement benefit of an Employee commences after the Employee's Social Security Retirement Age, the Defined Benefit Dollar Limitation shall be adjusted in accordance with Code Section 415(b)(2)(D) as prescribed by the Secretary of the Treasury, based on the lesser of the interest rate assumption under the Plan or on an assumption of five percent (5%) per year. 39 6.3 Adjustment of limitation for Years of Service or participation. (a) If an Employee has completed less than ten (10) years of participation, the Employee's accrued benefit shall not exceed the Defined Benefit Dollar Limitation as adjusted by multiplying such amount by a fraction, the numerator of which is the Employee's number of years (or part thereof) of participation in the Plan, and the denominator of which is ten (10). (b) If an Employee has completed less than ten (10) Years of Service with the Employer and any Affiliated Employer, the limitations described in Sections 415(b)(1)(B), 415(b)(4), and 415(e) of the Code shall be adjusted by multiplying such amounts by a fraction, the numerator of which is the Employee's number of years of service (or part thereof), and the denominator of which is ten (10). (c) In no event shall Sections 6.3(a) and (b) reduce the limitations provided under Sections 415(b)(1), 415(b)(4), and 415(e) of the Code to an amount less than one-tenth (1/10) of the applicable limitation (as determined without regard to this Section 6.3). (d) This Section 6.3 shall be applied separately with respect to each change in the benefit structure of the Plan, except as is or may be limited by Revenue Procedure 92-42. 6.4 Preservation of Accrued Retirement Income. (a) Retirement Income payable to an Employee or former Employee who was an active participant in the Plan before October 3, 1973 will not be deemed to exceed the amount of maximum Retirement Income limitations imposed by the provisions of this Article VI if: (1) The annual amount of Retirement Income payable to such Employee on retirement does not exceed 100% of his annual rate of compensation on the earlier of (A) October 2, 1973, or (B) the date on which he separated from the service of the Employer; (2) Such annual Retirement Income is not greater than the annual amount of Retirement Income which would have been payable to such Employee on retirement if (A) all terms and conditions of the Plan in existence on his retirement date had remained in existence until his retirement and (B) his compensation taken into account for any period after October 2, 1973 had not exceeded his annual rate of compensation on October 2, 1973; and 40 (3) In the case of an Employee whose service with the Employer terminated prior to October 2, 1973, such annual Retirement Income is no greater than his vested Accrued Retirement Income as of the date of such termination of service. (b) In the case of an Employee who is a participant in the Plan prior to January 1, 1983, if the Section 415 requirements have been met for all Plan Years prior to 1983, then the Defined Benefit Dollar Limitation described in Section 1.10 applicable to the payment of such Employee's Retirement Income shall be equal to his Accrued Retirement Income as of December 31, 1982, (when expressed as an annual benefit within the meaning of Section 415(b)(2) of the Code, as in effect prior to the Tax Equity and Fiscal Responsibility Act of 1982), if his Accrued Retirement Income exceeds such Defined Benefit Dollar Limitation. (c) This Section 6.4(c) shall apply to defined benefit plans that were in existence on May 6, 1986, and that met the applicable requirements of Section 415 of the Code as in effect for all Limitation Years. If the Current Accrued Retirement Income of an Employee as of the first day of the Limitation Year beginning on or after January 1, 1987, exceeds the benefit limitations under Section 415(b) of the Code (as modified by Sections 6.2 and 6.3 of the Plan), then, for purposes of Code Section 415(b) and (e), the Defined Benefit Dollar Limitation with respect to such Employee shall be equal to such Current Accrued Retirement Income. 6.5 Limitation on benefits from multiple plans. (a) In the case of an Employee who is also a participant in any other defined benefit plan of the Employer or any Affiliated Employer or in any defined contribution plan of the Employer or any Affiliated Employer, the Retirement Income provided by the Plan shall be limited to the extent necessary to prevent the sum of Fractions A and B below, computed as of the end of the Plan Year, from exceeding 1.0. Fraction A (numerator) Projected annual benefit of the Employee under the Plan and any other defined benefit plan of the Employer or any Affiliated Employer (determined as of the close of the Plan Year). (denominator) The lesser of (1) the product of 1.25 multiplied by the Defined Benefit Dollar Limitation (or such higher accrued benefit as of December 31, 1982), or (2) 1.4 multiplied by the amount determined under Code Section 415(b)(1)(B) as adjusted under Treasury Regulation Section 1.415-5. 41 Fraction B (numerator) The sum of all Annual Additions to the account of the Employee under any defined contribution plan of the Employer or any Affiliated Employer as of the close of the Plan Year. (denominator) The sum of the lesser of the following amounts, determined for such Plan Year and for each prior Plan Year in which the Employee has a Year of Service, (1) 1.25 multiplied by the Defined Contribution Dollar Limitation determined under Code Section 415(c)(1)(A), or (2) 1.4 multiplied by twenty-five percent (25%) of the Employee's compensation for the year. 6.6 Special rules for plans subject to overall limitations under Code Section 415(e). (a) For purposes of computing the defined contribution plan fraction of Section 415(e)(1) of the Code, "Annual Addition" shall mean the amount allocated to an Employee's account during the Limitation Year as a result of: (1) employer contributions, (2) employee contributions, (3) forfeitures, and (4) amounts described in Sections 415(1)(1) and 419(A)(d)(2) of the Code. (b) The Annual Addition for any Limitation Year beginning before January 1, 1987 shall not be recomputed to treat all Employee contributions as an Annual Addition. (c) If the sum of Fractions A and B exceeds 1.0 as of December 31, 1982, the numerator of Fraction B shall be reduced by an amount which does not exceed the numerator, so that the sum of Fraction A and Fraction B does not exceed 1.0. (d) If the Plan satisfied the applicable requirements of Section 415 of the Code as in effect for all Limitation Years beginning before January 1, 1987, an amount shall be subtracted from the numerator of the defined contribution plan fraction (not exceeding such numerator) as prescribed by the Secretary of the Treasury so that the sum of the defined benefit plan fraction and defined contribution plan fraction computed under Section 415(e)(1) of the Code (as revised by this Article VI) does not exceed 1.0 for such Limitation Year. 42 (e) The defined contribution plans and the other defined benefit plans of the Employer and Affiliated Employers include, respectively, (1) The Southern Company Employee Savings Plan, The Southern Company Employee Stock Ownership Plan, and any other defined contribution plan (as defined in Section 415(k) of the Code) and (2) any other qualified pension plan in which the Employee participates in accruing benefits maintained by the Employer or any Affiliated Employer. 6.7 Combination of Plans. Notwithstanding any provisions contained herein to the contrary, in the event that an Employee participates in a defined contribution plan or 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(e), corrective adjustments shall first be made under this Plan. However, if an Employee's Retirement Income under this Plan has already commenced, corrections shall first be made under The Southern Company Employee Stock Ownership Plan, if possible, and if not possible, then correction shall be made to the Employee's Accrued Retirement Income under this Plan. 6.8 Incorporation of Code Section 415. Notwithstanding anything contained in this Article to the contrary, the limitations, adjustments and other requirements prescribed in this Article shall at all times comply with the provisions of Code Section 415 and the regulations thereunder, the terms of which are specifically incorporated herein by reference. 43 ARTICLE VII Provisional Payee 7 7.1 Adjustment of Retirement Income to provide for payment to Provisional Payee. An Employee who desires to have his Accrued Retirement Income adjusted in accordance with the provisions of this Article VII to provide a reduced amount of Retirement Income payable to him for his lifetime commencing on his Early Retirement Date, his Normal Retirement Date, or his Deferred Retirement Date, as the case may be, may elect, in accordance with the provisions of this Article VII, at his option, either: (a) that an amount of Retirement Income be payable to him for his lifetime which is equal to eighty percent (80%) of the Retirement Income which would otherwise be payable to him, but for such election (taking into account any reduction required in accordance with Sections 7.3 and 7.4(a)), with the provision that the same amount will be continued after his death to his Provisional Payee until the death of such Provisional Payee, or (b) that an amount of Retirement Income be payable to him for his lifetime which is equal to ninety percent (90%) of the Retirement Income which would otherwise be payable to him, but for such election (taking into account any reduction required in accordance with Sections 7.3 and 7.4(a)), with the provision that one-half (1/2) of the amount payable to the Employee will be continued after his death to his Provisional Payee until the death of such Provisional Payee. 7.2 Form and time of election and notice requirements. (a) An election of payment and designation of a Provisional Payee in accordance with Section 7.1 shall be made in writing at the same time on a form prescribed by the Retirement Board and delivered to it. The election and designation shall specify its effective date which shall not be sooner than the date received by the Retirement Board or the Employee's fifty-fifth (55th) birthday, whichever is later, nor later than the date of commencement of payments in accordance with this Article VII. (b) An election of payment to be made in accordance with paragraph (a) or paragraph (b) of Section 7.1 may be changed from paragraph (a) to paragraph (b) or vice versa by an Employee, provided the written election of the change specifies an effective date which shall not be sooner than the date received by the Retirement Board or the Employee's fifty-fifth (55th) birthday, whichever is later, nor later than the date of commencement of payments in accordance with this Article VII. To the extent that the new method of payment shall afford the 44 Employee changed protection in the event of his death after the effective date of the new election and prior to retirement, his Accrued Retirement Income shall be adjusted pursuant to Section 7.4(a) to reflect such changed protection. (c) With respect to Sections 7.5 and 7.6, within the period not less than 30 days and not more than 90 days prior to the commencement of benefits, the Employee shall be furnished, by mail or personal delivery, a written explanation of: (1) the terms and conditions of the reduced Retirement Income payable as provided in paragraph (b) of Section 7.1; (2) the Employee's right to make, and the effect of, an election to waive the payment of reduced Retirement Income pursuant to a Provisional Payee designation; (3) the rights of the Employee's Provisional Payee; and (4) the right to make, and the effect of, a revocation of a previous election to waive the payment of reduced Retirement Income pursuant to a Provisional Payee designation. Within thirty (30) days following an Employee's written request received by the Retirement Board during the election period, but within sixty (60) days from the date the Employee is furnished all of the information prescribed in the immediately preceding sentence, the Employee shall be furnished an additional written explanation, in terms of dollar amounts, of the financial effect of an election by him not to receive such reduced Retirement Income. If an Employee makes such request, the election period herein prescribed shall end not earlier than sixty (60) calendar days following the day of the mailing or personal delivery of the additional explanation to the Employee. Except that if an election made as provided in Section 7.5 or 7.6 is revoked, another election under that Section may be made during the specified election period. 7.3 Circumstances in which election and designation are inoperative. An election and designation made pursuant to this Article shall be inoperative and the regular provisions of the Plan shall again become applicable as if a Provisional Payee had not been designated if, prior to the commencement of any payment in accordance with this Article VII: (a) an Employee's Provisional Payee shall die, (b) the Employee and the Provisional Payee shall be divorced under a final decree of divorce, or (c) the Retirement Board shall have received the written Qualified Election of the Employee to rescind his election of payment and designation of a Provisional Payee. If such a Qualified Election to rescind is made by the Employee, his Accrued Retirement Income shall be reduced to reflect the protection afforded the Employee by any Provisional Payee designation during the period from its effective date to the date of the Retirement Board's receipt of the Employee's Qualified Election to rescind if the option as to payments of reduced Retirement Income was in accordance with either Section 7.1(a), 7.6(a), or 7.6(b). If an Employee remarries subsequent to the 45 death or divorce of his Provisional Payee and prior to the commencement of payments in accordance with this Article VII, and if such Employee is married prior to the time of the commencement of payments, then he shall be entitled to designate a new Provisional Payee in the manner set forth in Section 7.2. 7.4 Pre-retirement death benefit. If prior to his Normal Retirement Date (or his Deferred Retirement Date, if applicable), an Employee shall die while in the service of the Employer and is survived by his spouse to whom he shall be married at the time of his death, there shall be payable to his surviving spouse (whom he shall be deemed to have designated as his Provisional Payee) Retirement Income determined in accordance with paragraph (a) or paragraph (c) of this Section 7.4, as applicable. Such Retirement Income shall commence on the first day of the month following the death of the Employee or the first day of the month following the date on which he would have attained his fifty-fifth (55th) birthday if he were still alive, whichever is later, and shall cease with the last payment preceding the death of his Provisional Payee. (a) The amount of Retirement Income payable to the Provisional Payee of a deceased Employee who prior to his death had attained his fifty-fifth (55th) birthday shall be equal to the amount payable to the Provisional Payee as calculated in Section 7.1(b) determined on the basis of his Accredited Service to the date of his death, or if the Employee shall have attained his fifty-fifth (55th) birthday and so elected prior to his death, such Retirement Income shall be equal to the amount set forth in Section 7.1(a) determined on the basis of his Accredited Service to the date of his death reduced as provided in the next sentence. If such election shall be made by the Employee, the Retirement Income which shall be payable to the Employee if he lives to his Early Retirement Date or the first day of the month following his attainment of age sixty-five (65), if later, shall be reduced by three-fourths of one percent (0.75%) for each year (prorated for a fraction of a year from the first day of the month following the effective date of the election) which has elapsed from the effective date of his election to the earlier of (1) the commencement of Retirement Income on or after his Early Retirement Date or the first day of the month following his attainment of age sixty-five (65), if later, or (2) the revocation of such election. If he shall die before the commencement of Retirement Income on or after his Early Retirement Date or the first day of the month following his attainment of age sixty-five (65), if later, his Accrued Retirement Income to the date of his death shall be reduced by three-quarters of one percent (0.75%) for each year (prorated for a fraction of a year from the first day of the month following the effective date of the election) between the effective date of his election and the first day of the month following his attainment of age sixty-five (65). No reduction in the 46 Employee's Retirement Income shall be made for the period during which the election is in effect after the first day of the month following his attainment of age sixty-five (65). (b) Retirement Income shall not be payable under paragraph (a) of this Section 7.4 to the Provisional Payee of a deceased Employee if at the time of his death there was in effect a Qualified Election made after August 22, 1984 under this paragraph (b) that no Retirement Income shall be paid to his Provisional Payee in the event of his death while in the service of the Employer (or while in the service of an Affiliated Employer to which his employment had been transferred in accordance with Section 4.6) as provided in paragraph (a), provided the Employee had received at least 180 days prior to his fifty-fifth (55th) birthday a written explanation of: (1) the terms and conditions of the Retirement Income payable to his Provisional Payee as provided in paragraph (a); (2) the Employee's right to make, and the effect of, an election to waive the payment of Retirement Income to his Provisional Payee; (3) the rights of the Employee's Provisional Payee; and (4) the right to make, and the effect of, a revocation of a previous election to waive the payment of Retirement Income to the Employee's Provisional Payee. A revocation of a prior Qualified Election to waive the payment of Retirement Income to the Employee's Provisional Payee may be made by the Employee without the consent of the Employee's Provisional Payee at any time before the commencement of benefits. An election under this paragraph (b) may be made and such election may be revoked by an Employee during the period commencing ninety (90) days prior to the Employee's fifty-fifth (55th) birthday and ending on the date of the Employee's death. (c) The amount of such Retirement Income payable to the Provisional Payee of a deceased Employee who prior to his death, had completed at least five (5) Vesting Years of Service and had not attained his fifty-fifth (55th) birthday shall be equal to one-half of the reduced amount, as actuarially adjusted to provide for the payment of such Retirement Income beginning at the date on which such deceased Employee would have attained his fifty-fifth (55th) birthday and to provide for the determination of such Retirement Income on a joint and fifty percent (50%) survivor basis of the Employee's Accrued Retirement Income, determined on the basis of his Accredited Service to the date of his death. This Section 7.4(c) shall also apply to adjust the future payment of Retirement Income after December 31, 1990 to a Provisional Payee with respect to an Employee who died (while in the service of the Employer prior to his fifty-fifth (55th) birthday after completing the requisite number of Years of Service) in order to have a nonforfeitable right to Retirement 47 Income under the Plan as in effect on the Employee's date of death, provided Retirement Income is payable to such Provisional Payee on or after January 1, 1991. The adjustment under this Section 7.4(c) shall be determined by adjusting the Retirement Income that had commenced to the Provisional Payee on or before January 1, 1986, and then adding the applicable percentage increase under Section 5.13 of the Prior Plan. For an Employee, on or after January 1, 1991, who dies while in the service of the Employer prior to his fifty-fifth (55th) birthday after completing five (5) Vesting Years of Service, the amount of such Retirement Income payable to the Provisional Payee shall be calculated as provided in Section 7.1(b) determined on the basis of his Accredited Service to the date of his death. The payment of such Retirement Income to the Provisional Payee shall begin on the first day of the month following the date on which such deceased Employee would have attained his fifty-fifth (55th) birthday. 7.5 Post-retirement death benefit - qualified joint and survivor annuity. If at his Early Retirement Date, Normal Retirement Date, or Deferred Retirement Date, as the case may be, an Employee is married and he has not: (a) designated a Provisional Payee in accordance with Section 7.1 in respect of payments to be made commencing on his Early, Normal, or Deferred Retirement Date or (b) made a Qualified Election that payment be made to him in the mode of a single life annuity, he shall nevertheless be deemed to have made an effective designation of a Provisional Payee under this Section 7.5 and to have specified the payment of a benefit as provided in Section 7.1(b). 7.6 Election and designation by former Employee entitled to Retirement Income in accordance with Article VIII. If an Employee is entitled to receive in accordance with Section 8.1 Retirement Income commencing at Normal Retirement Date, or sooner in accordance with Section 8.2, he may, on or after his fifty-fifth (55th) birthday, designate his spouse as his Provisional Payee and elect to have his Accrued Retirement Income at the date of termination of his service actuarially adjusted to provide, at his option, in the event of the commencement of payment prior to his Normal Retirement Date either: (a) a reduced amount payable to him for his lifetime with the provision that such reduced amount will be continued after his death to his spouse as Provisional Payee until the death of such Provisional Payee; or (b) a reduced amount (greater than the amount in (a) above) payable to him for his lifetime with the provision that one-half (1/2) of such reduced amount will be continued after his death to his spouse as Provisional Payee until the death of such Provisional Payee. 48 The Employee's election and designation of his Provisional Payee made in accordance with this Section 7.6 shall be in writing on a form prescribed by the Retirement Board and delivered to it and shall become effective not sooner than the date received by the Retirement Board or the Employee's fifty-fifth (55th) birthday, whichever is later, nor later than the date of commencement of payment in accordance with this Section 7.6. If the Employee dies prior to his Normal Retirement Date but after the effective date of his Provisional Payee designation, there will be payable to his Provisional Payee for life commencing on the first day of the calendar month after the Employee's death Retirement Income in a reduced amount in accordance with the Employee's election of payments to be made to his Provisional Payee after the death of the Employee under paragraph (a) or (b), as the case may be, of this Section 7.6. However, if prior to the Employee's death, the Retirement Board has not received such election, payment of a reduced amount of Retirement Income will be made in accordance with paragraph (b) of this Section 7.6 to his surviving spouse to whom he is married at the time of his death, unless (1) at the time of his death there is in effect a Qualified Election by the Employee that reduced Retirement Income shall not be paid to his surviving spouse in accordance with this Section 7.6 should he die between his fifty-fifth (55th) birthday and his Normal Retirement Date without having elected that payment be made to a Provisional Payee and (2) at least 180 days prior to his fifty-fifth (55th) birthday a written explanation is provided to the Employee of: (A) the terms and conditions of the Retirement Income payable to his Provisional Payee as provided in this Section 7.6; (B) the Employee's right to make, and the effect of, an election to waive the payment of Retirement Income to his Provisional Payee; (C) the rights of an Employee's spouse; and (D) the right to make, and the effect of, a revocation of a previous election to waive the payment of Retirement Income to his Provisional Payee. If the Employee is entitled to receive payment of Retirement Income in accordance with Section 8.2 after his fifty-fifth (55th) birthday and prior to his Normal Retirement Date and elects to do so, a reduced amount of Retirement Income determined in accordance with this Section 7.6 based upon his Accrued Retirement Income at the date of termination of his service (actuarially reduced in accordance with Section 8.2) will be payable to him commencing on the date on which payments commence prior to Normal Retirement Date in accordance with Section 8.2 with payments in the same or reduced amount to be continued to his Provisional Payee for life after the Employee's death in accordance with his election under paragraph (a) or (b), as the case may be, of this Section 7.6. However, if the Employee is married and he has not designated a Provisional Payee in respect of payments to commence to him prior to his Normal Retirement 49 Date or elected that payment be made to him in the mode of a single life annuity pursuant to a Qualified Election, he shall be deemed to have designated a Provisional Payee pursuant to this Section 7.6 and thereby specified that a reduced Retirement Income shall be paid to him during his lifetime as provided in paragraph (b) of this Section 7.6 and continued after his death to his Provisional Payee as provided in paragraph (b) of this Section 7.6. If the Employee is alive on his Normal Retirement Date and is married and payment of Retirement Income has not sooner commenced, the provisions of Section 7.5 shall be applicable to the payment of his Retirement Income, unless he shall elect at his Normal Retirement Date to receive payment of his Retirement Income pursuant to Section 7.1(a) or 7.1(b). However, if an election and designation in accordance with this Section 7.6 was in effect prior to his Normal Retirement Date, the Employee's Accrued Retirement Income at his Normal Retirement Date shall be actuarially adjusted for the period the election and designation was in effect. 7.7 Death benefit for Provisional Payee of former Employee. If an Employee, whose service with the Employer terminates on or after January 1, 1989, shall die after such termination of employment, and prior to his death (a) shall have not attained his fifty-fifth (55th) birthday, (b) shall have completed at least five (5) Vesting Years of Service, and (c) shall be survived by his spouse to whom he shall be married at his death, then there shall be payable to his surviving spouse (whom he shall be deemed to have designated as his Provisional Payee) Retirement Income determined in accordance with this Section 7.7. Such Retirement Income shall be equal to one-half of the reduced amount, as actuarially adjusted to provide for the payment of such Retirement Income beginning at the date on which such deceased Employee would have attained his fifty-fifth (55th) birthday and to provide for the determination of such Retirement Income on a joint and fifty percent (50%) survivor basis of the Employee's Accrued Retirement Income, determined on the basis of his Accredited Service to the date of his death. Such Retirement Income shall commence on the first day of the month following the date on which the former Employee would have attained his fifty-fifth (55th) birthday if he were still alive, and shall cease with the last payment preceding the death of his Provisional Payee. 7.8 Limitations on Employee's and Provisional Payee's benefits. (a) With respect to an Employee who does not elect a single life annuity, the limitation on benefits imposed under Article VI shall be applied as if such Employee had elected a benefit in the form of a single life annuity. 50 (b) With respect to a Provisional Payee, the limitations on benefits imposed under Article VI shall be applied consistent with paragraph (a) above prorated to provide a limitation equal to or one-half of the Employee's limitation as appropriate in accordance with annuity form of benefit elected by the Employee. 7.9 Effect of election under Article VII. An election of payment or a deemed election of payment in accordance with this Article VII shall be in lieu of any other form or method of payment of Retirement Income. 51 ARTICLE VIII Termination of Service 8 8.1 Vested interest. If an Employee included in the Plan terminates for any reason other than death or transfer to an Affiliated Employer as provided by Section 4.6 or retirement as provided by Article III, and if such Employee has had at least five (5) Vesting Years of Service with the Employer, whether or not Accredited Service, he will be entitled to receive, commencing at Normal Retirement Date (except as provided in Section 8.2 and subject to the provisions of Section 7.6) Retirement Income equal to his Accrued Retirement Income at the date of the termination of such service, provided that he makes application to the Employer for the payment of such Retirement Income. If proper application for payment of Retirement Income shall not be received by the Employer by the April 1 of the calendar year following the calendar year in which the Employee attains age 70 1/2 and the whereabouts of the Employee cannot be determined by the Employer, Retirement Income shall be paid to the Employee's Provisional Payee, if any, and if surviving and the whereabouts known to the Employer, or applied in such other manner as the Retirement Board shall deem appropriate. The payment of Retirement Income pursuant to this provision shall completely discharge all liability of the Retirement Board, the Employer, and the Trustee or other payor to the extent of the payments so made. If such Employee terminates with less than five (5) Vesting Years of Service with the Employer, he shall immediately forfeit any Accrued Retirement Income under the Plan based upon his service prior to such termination. 8.2 Early distribution of vested benefit. If an Employee terminates from service before his fifty-fifth (55th) birthday and is entitled to receive in accordance with Section 8.1 Retirement Income commencing at his Normal Retirement Date and at the time his service terminated he had at least ten (10) Years of Accredited Service, he may, in lieu of receiving payment of such Retirement Income commencing at Normal Retirement Date, elect to receive such Retirement Income commencing as of the first day of any month within the ten-year period preceding his Normal Retirement Date in an amount equal to his Accrued Retirement Income at the date of termination of his service actuarially reduced in accordance with reasonable actuarial assumptions adopted by the Retirement Board. An election pursuant to this Section 8.2 to have Retirement Income commence prior to Normal Retirement Date shall be made on a form prescribed by the Retirement Board and shall be filed with the Retirement Board at least thirty (30) days before Retirement Income is to commence. 52 8.3 Years of Service of reemployed Employees. If an Employee whose service terminates is again employed by the Employer as an Employee or he is employed (other than by reason of transfer in accordance with Section 4.6) by an Affiliated Employer which has at the time of his employment by such company a pension plan with substantially the same terms as this Plan, his Years of Service with the Employer and his Accredited Service immediately prior to the termination of his service shall be treated as provided in this Section 8.3, subject to the provisions of Section 8.4. For this purpose the terms "again employed" and "reemployment" shall include employment with an Affiliated Employer. (a) If at the time of his reemployment he has not incurred a One-Year Break in Service, his Years of Service with the Employer and his Accredited Service will be restored whether or not he is entitled to receive Retirement Income in accordance with Section 8.1. (b) If at the time of termination of his service he is entitled to receive Retirement Income in accordance with the provisions of Section 8.1, upon his reemployment his Years of Service with the Employer immediately prior to the termination of his service shall be restored whether or not he has incurred a One-Year Break in Service. (c) If at the time of reemployment on or after January 1, 1985, he is not entitled to receive Retirement Income in accordance with Section 8.1 and he (1) has incurred less than five (5) consecutive One-Year Breaks in Service or (2) has incurred five (5) or more consecutive One-Year Breaks in Service, but his Years of Service prior to such One-Year Breaks in Service exceeded the consecutive One-Year Breaks in Service, then upon the completion of one Eligibility Year of Service following his reemployment, provided that if his reemployment date is on or after January 1, 1995, no such Eligibility Year of Service shall be required, his Years of Service with the Employer and his Accredited Service prior to the first One-Year Break in Service shall be restored, disregarding any Years of Service with the Employer which are not required to be taken into account by reason of any previous One-Year Breaks in Service. The Years of Service and years of Accredited Service credited to an Employee reemployed prior to January 1, 1985, with regard to his Years of Service with the Employer and years of Accredited Service immediately prior to the termination of his service shall be determined under the terms of the Plan in effect prior to January 1, 1985. 53 (d) Years of Service and Accredited Service restored to an Employee in accordance with this Section 8.3 shall be aggregated with Years of Service and Accredited Service to which the Employee may be entitled after his reemployment. If, however, the Minimum Retirement Income so determined for the Employee upon his subsequent retirement or termination of service shall be less than the aggregate of: (1) his Minimum Retirement Income, if any, determined in respect of the period ending with his prior termination of service, and (2) his Minimum Retirement Income determined in respect of the period after his reemployment, the aggregate of such Minimum Retirement Incomes shall be deemed to be his Minimum Retirement Income upon such subsequent retirement or termination of service. In any event, his Retirement Income, however computed, shall be reduced by the Actuarial Equivalent of any Retirement Income he received with respect to his prior period of employment. (e) If a former Employee to whose credit shall be restored years of Accredited Service in accordance with this Section 8.3 shall become entitled (or his Provisional Payee shall become entitled) to receive retirement income under the plan of an Affiliated Employer by which he should become employed, he shall be deemed to have transferred to the Affiliated Employer for purposes of Section 4.6 as of his initial date of participation in the plan of such Affiliated Employer. 8.4 Cash-out and buy-back. (a) Notwithstanding any other provision of this Plan, if the present value of Accrued Retirement Income of an Employee whose service terminates for any reason other than transfer to an Affiliated Employer under Section 4.6, or retirement under Article III, is not more than $3,500 (or such greater amount as permitted by the regulations prescribed by the Secretary of the Treasury) the Employer shall direct that such present value of the Employee's Accrued Retirement Income be paid in a lump sum, in cash, to such terminated Employee. The present value of the Accrued Retirement Income shall be calculated as of the last day of the date of distribution of the lump sum applying the Applicable Interest Rate as defined in Section 8.5(e) in effect on the first day of the Plan Year of distribution. For purposes of this Section 8.4, if the present value of the Employee's vested Accrued Retirement Income is zero, the Employee shall be deemed to have received a distribution of such vested Retirement Income. (b) If such terminated Employee is subsequently reemployed and becomes covered under this Plan, the calculation of his Accrued Retirement Income shall be without regard to his years of Accredited Service prior to any One-Year Breaks in Service, unless the amount of such payment is repaid to the Trust, plus interest at the rate determined under Section 411(c)(2)(C) of the Code. If such amount (plus interest) is repaid, the Employee's Retirement Income shall be calculated based on his years of 54 Accredited Service before and after any One-Year Breaks in Service. Any repayment of a cash-out made pursuant to this Section 8.4 shall be made before the earlier of (a) five (5) years after the date on which the Employee is reemployed by the Employer or an Affiliated Employer, or (b) the close of the first period of five (5) consecutive One-Year Breaks in Service commencing after the distribution. If an Employee has been deemed to receive a distribution in accordance with paragraph (a) and is then reemployed, upon such reemployment, the amount of the deemed distribution shall be restored to the Employee. 8.5 Calculation of present value for cash-out of benefits and for determining amount of benefits. (a) This Section 8.5 shall apply to all distributions from the Plan and from annuity contracts purchased to provide Accrued Retirement Income other than distributions described in Section 1.417-1T(e)(3) of the income tax regulations issued under the Retirement Equity Act of 1984. (b) (1) For purposes of determining whether the present value of (A) an Employee's vested accrued benefit; (B) a qualified joint and survivor annuity, within the meaning of Section 417(b) of the Code; or (C) a qualified preretirement survivor annuity within the meaning of Section 417(c)(1) of the Code exceeds $3,500, the present value of such benefits or annuities shall be calculated by using an interest rate no greater than the Applicable Interest Rate. (2) In no event shall the present value of any such benefit or annuity determined under this Section 8.5(b) be less than the present value of such benefits or annuities determined using the Applicable Interest Rate. (c) (1) For purposes of determining the amount of an Employee's vested Accrued Retirement Income, the interest rate used shall not exceed: (A) the Applicable Interest Rate if the present value of the benefit (using such rate or rates) is not in excess of $25,000; or (B) 120 percent of the Applicable Interest Rate if the present value of the benefit exceeds $25,000 (as determined under (A)). In no event shall the present value determined under this (B) be less than $25,000. 55 (2) In no event shall the amount of the benefit or annuity determined under this Section 8.5(c) be less than the greater of: (A) the amount of such benefit determined under the Plan's provisions for determining the amount of benefits other than Sections 8.5; or (B) the amount of such benefit determined using the Applicable Interest Rate if the value determined in Section 8.5(c)(1) is less than $25,000 or 120 percent of the Applicable Interest Rate if the value determined in Section 8.5(c)(1) is not less than $25,000. (d) In no event shall the amount of any benefit or annuity determined under this Section 8.5 exceed the maximum benefit permitted under Section 415 of the Code. (e) (1) For purposes of this Section 8.5, "Applicable Interest Rate" shall mean the interest rate or rates which would be used as of the date distribution commences by the Pension Benefit Guaranty Corporation for purposes of valuing lump sum payments under the Plan if the Plan had terminated on the date distribution commences with insufficient assets to provide benefits guaranteed by the Pension Benefit Guaranty Corporation on that date. (2) Notwithstanding the foregoing, if the provisions of the Plan other than Section 8.5(e) so provide, the Applicable Interest Rate shall be determined as of the first day of the Plan Year in which a distribution occurs rather than as of the date distribution commences. (f) (1) This Section 8.5 shall apply to distributions in Plan Years beginning after December 31, 1984, other than distributions under annuity contracts distributed to or owned by an Employee prior to September 17, 1985 unless additional contributions are made under the Plan by the Employer with respect to such contracts. (2) Notwithstanding the foregoing, this Section 8.5 shall not apply to any distributions in Plan Years beginning after December 31, 1984, and before January 1, 1987, if such distributions were made in accordance with the requirements of the income tax regulations issued under the Retirement Equity Act of 1984. 56 8.6 Retirement Income under Prior Plan. Any person entitled to receive Retirement Income under Article VIII of the Prior Plan shall only be entitled to receive Retirement Income in accordance with the provisions of such Prior Plan in effect at the time his service was terminated, except that any such person whose service terminated prior to January 1, 1976: (a) with at least twenty (20) years of Accredited Service may elect to receive Retirement Income commencing prior to his Normal Retirement Date in accordance with Section 8.2; (b) who shall have returned to the employment of the Employer, whether before or after January 1, 1976, and shall be an Employee who is entitled to receive Retirement Income in respect of his Accredited Service after January 1, 1976, his years of Accredited Service under the Prior Plan with respect to his service before January 1, 1976, shall, for the purpose of calculating his Minimum Retirement Income, be aggregated with his years of Accredited Service after his reemployment. His Accrued Retirement Income to the date of termination of his service payable in accordance with Article VIII of the Prior Plan shall be treated as Prior Plan Retirement Income and his Years of Service prior to the date of termination of his service shall be restored to his credit. It shall be a condition of the treatment provided for in this paragraph (b) that: (1) the Employee rescind any election of payment and designation of a Provisional Payee which he shall have made under the Prior Plan and which shall be in effect at the time of his return to the employment of the Employer and (2) if he is receiving Retirement Income, his Retirement Income shall cease during his period of employment and any Retirement Income payable upon his subsequent retirement shall be reduced by the Actuarial Equivalent of any Retirement Income he received prior to his reemployment. 8.7 Requirement for Direct Rollovers. This Section 8.7 applies to distributions made from the Plan on or after January 1, 1993. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a Distributee's election under this Article VIII, a Distributee may elect, at the time and in the manner prescribed by the Retirement Board, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover. (a) Definitions (1) Eligible Rollover Distribution An Eligible Rollover Distribution is any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include: 57 (A) any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee's spouse, or for a specified period of 10 years or more; (B) any distribution to the extent such distribution is required under Code Section 401(a)(9); and (C) the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). (2) Eligible Retirement Plan An Eligible Retirement Plan is an individual retirement account described in Code Section 408(a), an individual retirement annuity described in Code Section 408(b), an annuity plan described in Code Section 403(a), or a qualified trust described in Code Section 401(a) that accepts the Distributee's Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution for a Provisional Payee, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity. (3) Distributee A Distributee includes an Employee or former Employee. In addition, a Distributee includes the Employee's or former Employee's spouse who is an alternate payee under a qualified domestic relations order, as defined in Code Section 414(p). (4) Direct Rollover A Direct Rollover is a payment by the Plan to the Eligible Retirement Plan specified by the Distributee. 58 ARTICLE IX Contributions 9 9.1 Contributions generally. All contributions which the Employer deems necessary to provide the Retirement Incomes under the Plan in excess of the fund derived from the split-up of the Commonwealth pension plan will be made from time to time by or on behalf of the Employer and no contributions will be required of the Employees. All contributions shall be made to the Trustee under the Trust Agreement provided for in Article XI, and if a group annuity contract shall be entered into with a life insurance company ("contract with an insurance company"), contributions may also be made to the insurance company. The minimum amount of contributions to be made by or on behalf of the Employer for any Plan Year of the Plan shall be such amount as is required to meet the minimum funding standards of ERISA and any regulations in respect thereto. However, the Employer is under no obligation to make any contributions under the Plan after the Plan is terminated, whether or not Retirement Income accrued or vested prior to the date of termination has been fully funded. All contributions are expressly conditioned upon the deductibility of such contributions by the Employer pursuant to Section 404 of the Code. 9.2 Return of Employer contributions. All contributions made pursuant to the Plan shall be held by the Trustee in accordance with the terms of the Trust Agreement for the exclusive benefit of those Employees who are Participants under the Plan, including former Employees and their Beneficiaries, and shall be applied to provide benefits under the Plan and to pay expenses of administration of the Plan and Trust, to the extent that such expenses are not otherwise paid. At no time prior to the satisfaction of all liabilities with respect to such Employees and their Beneficiaries shall any part of the Trust Fund be used for, or diverted to, purposes other than for the exclusive benefit of such Employees and their Beneficiaries. However, notwithstanding the provisions of this Section 9.2: (a) If a contribution is conditioned upon the deductibility of the contributions under Section 404 of the Code, then, to the extent the deduction is disallowed, the Trustee shall upon written request of the Employer, return the contribution (to the extent disallowed) to the Employer within one year after the date the deduction is disallowed. (b) If a contribution or any portion thereof is made by the Employer by a mistake of fact, the Trustee shall, upon written request of the Employer, return the contribution or such portion to the Employer within one year after the date of payment to the Trustee. 59 The amount which may be returned to the Employer under this Section 9.2, is the excess of (a) the amount contributed over (b) the amount that would have been contributed had there not occurred a mistake of fact or a mistake in determining the deduction. Earnings attributable to the excess contribution shall not be returned to the Employer, but losses attributable thereto shall reduce the amount to be so returned. (c) If permitted under Federal common law, the Company may recover any other contributions to the Plan or payments to any other entity to the extent such contributions or payments unjustly enrich or otherwise gratuitously benefit such entity. 9.3 Expenses. Prior to termination of the Plan, all investment expenses (including brokerage costs, transfer taxes, shipping expenses, and charges of correspondent banks of the Trustee) and any taxes which may be levied against the Trust shall be charged to the Trust. All other expenses prior to the termination of the Plan shall be paid by the Employer or charged to the Trust, as determined in the discretion of The Southern Company Pension Fund Investment Review Committee. After the termination of the Plan, all expenses shall be levied against the Trust and shall be charged to the Trust. 60 ARTICLE X Administration of Plan 10 10.1 Retirement Board. The general administration of the Plan shall be placed in a Retirement Board of five (5) members who shall be appointed from time to time by the Board of Directors to serve at the pleasure of the Board of Directors. 10.2 Organization and transaction of business of Retirement Board. Any person appointed a member of the Retirement Board shall signify his acceptance by filing written acceptance with the Board of Directors. Any member of the Retirement Board may resign by delivering his written resignation to the Board of Directors, and such resignation shall become effective at delivery or at any later date specified therein. The members of the Retirement Board shall elect a Chairman from their number, and a Secretary who may be but need not be one of the members of the Retirement Board, and shall designate an actuary to act in actuarial matters relating to the Plan. They may appoint from their number such committees with such powers as they shall determine, may authorize one or more of their number or any agent to make any payment in their behalf, or to execute or deliver any instrument except that a requisition for funds from the Trustee shall be signed by two (2) members of the Retirement Board. The Retirement Board shall hold meetings upon such notice, at such place or places, and at such time or times as they may from time to time determine. A majority of the members of the Retirement Board at the time in office shall constitute a quorum for the transaction of business. All resolutions or other actions taken by the Retirement Board at any meeting shall be by the vote of a majority of the Retirement Board at the time in office. Any determination or action of the Retirement Board may be made or taken without a meeting by a resolution or written memorandum concurred upon by a majority of the members then in office. No member of the Retirement Board who is also an Employee of the Employer shall receive any compensation from the Plan for his service as such. No bond or other security need be required of any member in any jurisdiction except as may be required by ERISA. 10.3 Administrative responsibilities of Retirement Board. The Retirement Board, in addition to the functions and duties provided for elsewhere in the Plan, shall have exclusive discretionary authority for the following: 61 (a) construing and interpreting the Plan; (b) determining all questions affecting the eligibility of any Employee, retired Employee, Provisional Payee, or alternate payee; (c) determining all questions affecting the amount of the benefit payable hereunder; (d) ascertaining the persons to whom benefits shall be payable under the provisions hereof; (e) to the extent provided in the Plan, authorizing and directing disbursements of benefits from the Plan; (f) making final and binding determinations in connection with any questions of fact which may arise regarding the operation of the Plan; (g) making such rules and regulations with reference to the operation of the Plan as it may deem necessary or advisable, provided that such rules and regulations shall not be inconsistent with the express terms of the Plan or ERISA; (h) prescribing such procedures and adopting such forms as it determines necessary under the terms of the Plan; and (i) reviewing such denials of claims for benefits as may arise. Any decision, determination, construction, interpretation, ascertainment, authorization, direction, rule, regulation, prescription, or review that the Retirement Board may make or give in carrying out its duties or functions under this Section 10.3 shall be binding and conclusive. 10.4 Retirement Board, the "Administrator". For the purposes of compliance with the provisions of ERISA, the Retirement Board shall be deemed the "administrator" of the Plan as the term "administrator" is defined in ERISA, and the Retirement Board shall be, with respect to the Plan, a "named fiduciary" as that term is defined in ERISA. For the purpose of carrying out its duties, the Retirement Board may, in its discretion, allocate responsibilities under the Plan among its members and may, in its discretion, designate in writing, as set forth in the minutes of the Retirement Board, persons other than members of the Retirement Board to carry out such responsibilities of the Retirement Board under the Plan as it may see fit. 62 10.5 Fiduciary responsibilities. It is intended, that to the maximum extent permitted by ERISA, each person who is a "fiduciary" with respect to the Plan as that term is defined in ERISA shall be responsible for the proper exercise of his own powers, duties, responsibilities, and obligations under the Plan and the trust or other funding medium as shall each person designated by any fiduciary to carry out any fiduciary responsibility with respect to the Plan, the trust or other funding medium and no fiduciary or other person to whom fiduciary responsibilities are allocated shall be liable for any act or omission of any other fiduciary or of any other person delegated to carry out any fiduciary or other responsibility under the Plan or the trust or other funding medium. Any person or group of persons may serve in more than one fiduciary capacity with respect to the Plan and any fiduciary with respect to the Plan may serve as a fiduciary with respect to the Plan in addition to being an officer, employee, agent, or other representative of a "party in interest" as that term is defined in ERISA. 10.6 Employment of actuaries and others. The Retirement Board may employ such "enrolled actuaries" and independent "qualified public accountants" as such terms are defined in ERISA, legal counsel who may be of counsel to the Employer, other specialists, and other persons as the Retirement Board deems necessary or desirable in connection with the administration of the Plan. The Retirement Board and any person to whom it may delegate any duty or power in connection with the administration of the Plan, the Employer, and the officers and directors thereof shall be entitled to rely conclusively upon and shall be fully protected in any action omitted, taken, or suffered by them in good faith in reliance upon any enrolled actuary, independent qualified public accountant, counsel, or other specialist or other person selected by the Retirement Board or in reliance upon any tables, evaluations, certificates, opinions, or reports which shall be furnished by any of them or by the Trustee or any insurance company. Any action so taken, omitted, or suffered in accordance with the provisions of this Section 10.6 shall be conclusive upon each Employee, former Employee, and Provisional Payee covered under the Plan. 10.7 Accounts and tables. The Retirement Board shall maintain accounts showing the fiscal transactions of the Plan, and shall keep in convenient form such data as may be necessary for actuarial valuations with respect to the operation and administration of the Plan. The Retirement Board shall prepare annually a report showing in reasonable summary the financial condition of the Trust and giving a brief account of the operation of the Plan for the past year, and any further information which the Board of Directors may require. Such 63 report shall be submitted to the Board of Directors and shall be filed in the office of the Secretary of the Retirement Board. The Retirement Board may, with the advice of an enrolled actuary, adopt from time to time mortality and other tables as it may deem necessary or appropriate for use in calculating benefits under the Plan. 10.8 Indemnity of members of Retirement Board. To the extent not compensated for by any applicable insurance, the Employer shall indemnify and hold harmless each member of the Retirement Board and each Employee of the Employer designated by the Retirement Board to carry out any fiduciary responsibility with respect to the Plan from any and all claims, loss, damages, expense (including counsel fees approved by the Board of Directors) and liability (including any amount paid in settlement with the approval of the Board of Directors) arising from any act or omission of such member or Employee designated by the Retirement Board in connection with the Plan or the Trust, except where the same is determined by the Board of Directors or is judicially determined to be due to a failure to act in good faith or is due to the gross negligence or willful misconduct of such member or Employee. No assets of the Plan may be used for any such indemnification. 10.9 Areas in which the Retirement Board does not have responsibility. The Retirement Board shall not have responsibility with respect to control or management of the assets of the Plan. The Trustee or an insurance company, if funds of the Plan shall be held by an insurance company, shall have the sole responsibility for the administration of the assets of the Plan as provided in the Trust Agreement or contract with an insurance company, except to the extent that an "Investment Manager," as that term is defined in ERISA, appointed by the Board of Directors shall have responsibility for the management of the assets of the Plan, or some part thereof, including the power to acquire and dispose of the assets of the Plan, or some part thereof. The responsibility for providing a procedure for establishing and carrying out a funding policy and method for the Plan consistent with the objectives of the Plan and the requirements of Title I of ERISA shall be that of the Board of Directors or such committee, whether or not comprised of members of the Board of Directors, as the Board of Directors may from time to time designate and shall not be the responsibility of the Retirement Board. Effective July 23, 1993, the Pension Fund Investment Review Committee of The Southern Company System shall recommend for approval by the Board of Directors any Investment Manager that shall have responsibility with respect to management of any Plan 64 assets. In addition, the Pension Fund Investment Review Committee shall assume all responsibility for providing a procedure for establishing and carrying out a funding policy and method for the Plan consistent with the objectives of the Plan and the requirements of Title I of ERISA. 10.10 Claims Procedures. Consistent with the requirements of ERISA and the regulations thereunder of the Secretary of Labor from time to time in effect, the Retirement Board or its delegatee shall: (a) provide adequate notice in writing to any Employee, former Employee, retired Employee, or Provisional Payee (each being hereinafter in the paragraph referred to as "participant") whose claim for benefit under the Plan has been denied, setting forth specific reasons for such denial, written in a manner calculated to be understood by such participant; and (b) afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review of the decision denying the claim. 65 ARTICLE XI Management of Trust 11 11.1 Trust. All assets of the Plan shall be held as a special trust for use in accordance with the Plan. The funds of the Plan shall be held by a Trustee, or by a successor trustee appointed from time to time by the Board of Directors in trust or held by a life insurance company in accordance with the provisions of a contract with such insurance company entered into by the Trustee or the Employer. The Trust Agreement and contract with an insurance company may from time to time be amended in the manner therein provided. 11.2 Disbursement of the Trust Fund. Subject to the provisions of the Trust Agreement or contract with an insurance company the Retirement Board shall determine the manner in which the funds of the Plan shall be disbursed pursuant to the Plan, including the form of voucher or warrant to be used in making disbursements and the due qualification of persons authorized to approve and sign the same. The responsibility for the retention and investment of funds held by the Trustee shall lie with the Trustee and not with the Retirement Board, and the responsibility for the retention and investment of funds held by an insurance company shall lie with the insurance company and not with the Retirement Board. However, if in accordance with a Trust Agreement forming a part of the Plan (including any pooled trust agreement in which a trust forming a part of the Plan participates) a contract with an insurance company shall be held by the Trustee as an investment of the trust, directions may be given from time to time to the Trustee by such board of directors or committee or person or persons as may be specified in the Trust Agreement to transfer funds of the trust to the life insurance company which issued such contract or to transfer funds from the life insurance company to the Trustee, as the case may be. 11.3 Rights in the Trust. Under no circumstances shall amounts of money or other things of value contributed by the Employer to the Plan, or any part of the corpus or income of the Trust held by the Trustee under the Plan, be recoverable by the Employer from the Trustee or from any Employee, retired Employee, or Provisional Payee, or be used for, or diverted to, purposes other than for the exclusive benefit of the Employees, retired Employees, and Provisional Payees covered hereunder; provided, however, that, if after satisfaction of all liabilities of the Trust with respect to Employees, retired Employees, and Provisional Payees under the Plan, there is any balance remaining, the Trustee shall return such balance to the Employer. Notwithstanding the above, upon the approval of the Internal Revenue Service or the enactment or promulgation of any laws or 66 regulations by any governmental authority, the Employer shall be authorized to rededicate all or a portion of the assets allocated to fund Retirement Income under the Plan to the separate account to fund medical benefits under Article XV of the Plan. 11.4 Merger of the Plan. The Plan shall not be merged or consolidated with, or any of its assets or liabilities transferred to, any other plan, unless each Employee included in the Plan would (if the Plan then terminated) receive a benefit immediately after the merger, consolidation, or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation, or transfer (if the Plan then terminated). 67 ARTICLE XII Termination of the Plan 12 12.1 Termination of the Plan. The Plan may be terminated at any time by action of the Board of Directors of the Employer in accordance with the amendment procedures provided in Section 13.1. Upon such termination or partial termination all Accrued Retirement Income of Employees to the date of such termination, to the extent then funded, shall become nonforfeitable and the assets of the Plan which have not previously been allocated to provide Retirement Income shall then be paid out to Employees, former Employees, and Provisional Payees in accordance with the applicable requirements of ERISA and regulations thereunder governing termination of "employee pension benefit plans" as defined in ERISA. If after satisfaction of all liabilities, as provided above, there is any balance remaining in the Trust, the Trustee shall return such balance to the Employer. In the first instance, subject to the foregoing limitations, such remaining assets shall be allocated among all persons in the following categories for whom such Retirement Income or other benefits have not previously been provided, namely, (a) Employees who have been retired under the Plan, (b) Employees who at the date of termination of the Plan are included in the Plan, (c) former Employees who at the date of the termination of their employment were entitled to payment of Retirement Income in accordance with Article VIII, and (d) former Employees who have transferred to an Affiliated Employer in accordance with Section 4.6 and are still in the employ or receiving a retirement income from such company (including their Provisional Payees, if any). Retirement Income already purchased under any contract with an insurance company will be payable in accordance with the provisions of that contract. 12.2 Limitation on benefits for certain highly paid employees. (a) The annual payments to an Employee described in paragraph (b) below shall not exceed an amount equal to the payments that would be made to or on behalf of such Employee under a single life annuity that is the Actuarial Equivalent of the sum of the Employee's Accrued Retirement Income and the Employee's other benefits under this Plan (other than a Social Security supplement) and any Social Security supplement that the restricted Employee is entitled to receive. The restrictions in this paragraph (a) do not apply, however, if -- (1) after payment to an Employee described in paragraph (b) of all benefits payable to such Employee under this Plan, the value of this Plan's assets equals or exceeds 68 110% of the value of current liabilities, as defined in Code Section 412(c)(7), or (2) the value of the benefits payable to such Employee under this Plan for an Employee described in paragraph (b) below is less than 1% of the value of current liabilities before distribution. (b) The Employees whose benefits are restricted on distribution include all highly compensated employees and highly compensated former employees (as such terms are defined in Treasury Regulation Section 1.401(a)(4)-12); provided, however, that Employees whose benefits are subject to restriction under this Section 12.2 shall be limited to only those Employees who in the current or in any previous Plan Year were one of the 25 non- excludable Employees of the Employer with the greatest compensation from the Employer. 12.3 Allocation of Trust upon termination. Subject to the provisions of Section 12.2, if the Plan is terminated and the amount of the Trust to be used and applied in accordance with the provisions of Section 12.1 for the benefit of each retired Employee, Employee, or former Employee who was a member of the BECO Plan on January 1, 1974 shall not be less than (x) multiplied by (y) where (x) equals the amount which would have been used and applied for the benefit of each such retired Employee, Employee, or former Employee (including their Provisional Payees, if any) had the BECO Plan been terminated on January 1, 1974 and allocation of the trust fund under the BECO Plan then been effected for the benefit of the retired Employees, Employees, and former Employees included therein pursuant to the applicable provisions of the BECO Plan and (y) equals the lesser of 100%, or a percentage determined by dividing the dollar value as of the date of such termination of the Plan of the amount of the Trust allocated to provide Retirement Income for the benefit of such persons had the BECO Plan been terminated on January 1, 1974. If any Employee, retired Employee, former Employee, or Provisional Payee shall have received any payment from the Trust with respect to retirement benefits accrued under the BECO Plan prior to January 1, 1974, any amount otherwise allocable to such person in accordance with this Section 12.3 shall be reduced by the amount of any payments to him. 69 ARTICLE XIII Amendment of the Plan 13 13.1 Amendment of the Plan. (a) The Plan may be amended or modified at any time by the Board of Directors pursuant to its written resolutions, provided that no amendment or modification which will substantially increase the cost of the Plan will be made by the Board of Directors without approval, at a meeting of the stockholders duly called for that purpose, by the vote of a majority of the stock present and entitled to vote at such meeting. (b) Such amendments and modifications (without limiting the generality of the foregoing) may, among other things, make any changes in the Plan which may become appropriate if, for any reason, the Employer should in the future find it necessary or desirable not to complete payment of the past service costs of the Plan in the manner and within the period now contemplated or should find it necessary or desirable to reduce the amounts of Future Service contributions to be paid by the Employer after such amendment or modification. Such amendments and modifications may also (without limiting the generality of the foregoing), make any changes necessary or desirable to make the costs of the Plan eligible for tax deductions or to make the income of the Trust exempt from taxation or to bring the Plan into conformity or compliance with ERISA or with governmental regulations. Notwithstanding the foregoing, no amendment shall be made which has the effect of decreasing the Accrued Retirement Income of any Employee, former Employee or Provisional Payee, or any former employees of BECO rehired under the BECO Plan and for whom annuities have not been purchased under the BECO Plan as provided under the limitations of Section 411(d)(6) of the Code. 70 ARTICLE XIV Special Provisions 14 14.1 Adoption of Plan by other corporations. (a) Any corporation, whether or not related to the Employer by function or operation and any affiliate, if such corporation or affiliate is authorized to do so by a resolution adopted by the Board of Directors of the Employer, may adopt this Plan as a separate Plan for all eligible Employees or any separate, distinct, and identifiable class or group of Employees and the related Trust Agreement, by action of the board of directors of such corporation or affiliate. Any such adoption shall be evidenced by certified copies of the resolutions of the foregoing board of directors indicating such adoption and by the execution of the Adoption Agreement by the adopting corporation or affiliate. Such resolution shall state and define the effective date of the Plan for the purpose of such adopting corporation and, for the purpose of Section 415 of the Code, the "limitation year" as to such corporation. Notwithstanding the foregoing, however, if the Plan as adopted by an affiliate or other corporation under the foregoing provision shall fail to receive the initial approval of the Internal Revenue Service as a qualified plan, any contributions by such affiliate or other corporation after payment of all expenses will be returned to such adopting corporation free of any trust, and the Plan and the Trust Agreement as to such adopting affiliate or other corporation shall terminate. (b) Each adopting affiliate or other corporation shall be required to use the same Trustee as provided in this Plan. (c) The Trustee may, but is not required to, commingle, hold, and invest as one fund all contributions (or any portion thereof) made by each adopting affiliate or other corporation. (d) Any contributions made by an affiliate or other corporation, as provided for in this Plan, shall be paid to and held by the Trustee for the exclusive benefit of the Employees of such an affiliate or other corporation and the beneficiaries of such Employees, subject to all the terms and conditions of this Plan. On the basis of information furnished by the administrator, the Trustee shall keep separate books and records concerning the affairs of each adopting affiliate or other corporation hereunder. 71 14.2 Exclusive benefit. The Employer intends that the Plan (including the Trust forming a part thereof) shall be a pension plan of an employer for the exclusive benefit of its Employees and their beneficiaries subject to Section 11.3, as provided for in Section 401 of the Code, and as may be provided for in any similar provisions of subsequent revenue laws, and that the Trust shall qualify as an employees' trust which shall be exempt under Section 501(a) of the Code, and any similar provisions of subsequent revenue laws, as a trust forming part of such a plan. 14.3 Assignment or alienation. No benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment (either at law or in equity), pledge, encumbrance, charge, garnishment, levy, execution, or other legal or equitable process and any attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge, garnish, levy, execute, or enforce other legal or equitable process against the same shall be void, nor shall any such benefit be in any manner liable for or subject to the debts, contracts, liabilities, engagements, or torts of the person entitled to such benefit. If any Employee or retired Employee or any Provisional Payee under the Plan is adjudicated bankrupt or attempts to anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge any benefit under the Plan or if any action shall be taken which is in violation of the provisions of the immediately preceding paragraph, then such benefit shall cease and terminate and in that event the Retirement Board shall hold or apply the same or any part thereof to or for the benefit of such Employee or retired Employee or Provisional Payee in such manner as the Retirement Board may think proper. Notwithstanding the above, the Retirement Board and Trustee shall comply with any "domestic relations order" (as defined in Section 414(p)(1)(B) of the Code) which is a "qualified domestic relations order" satisfying the requirements of Section 414(p) of the Code. The Retirement Board shall establish procedures for (a) notifying Employees and alternate payees who have or may have an interest in benefits which are the subject of domestic relations orders, (b) determining whether such domestic relations orders are qualified domestic relations orders under Section 414(p) of the Code, and (c) distributing benefits which are subject to qualified domestic relations orders. 72 14.4 Voluntary undertaking. This Plan is strictly a voluntary undertaking on the part of the Employer and shall not be deemed to constitute a contract between the Employer or any other company and any Employee or to be a consideration for, or an inducement or condition of, the employment of any Employee. Nothing contained in this Plan shall be deemed to give any Employee the right to be retained in the service of the Employer or to interfere with the right of the Employer to discharge or retire any Employee at any time. Inclusion under the Plan will not give any Employee or Provisional Payee any right or claim to a Retirement Income except to the extent such right is specifically fixed under the terms of the Plan and there are funds available therefor in the hands of the Trustee or of any insurance company which may hold funds of the Plan. 14.5 Top-Heavy Plan requirements. For any Plan Year the Plan shall be determined to be a Top-Heavy Plan, the Plan shall provide the following: (a) the minimum benefit requirement of Section 14.7; and (b) the vesting requirement of Section 14.8. 14.6 Determination of Top-Heavy status. (a) For any Plan Year commencing after December 31, 1983, the Plan shall be determined to be a "Top-Heavy Plan," if, as of the Determination Date, (1) the Present Value of Accrued Retirement Income of Key Employees or (2) the sum of the Aggregate Accounts of Key Employees under this Plan and any plan of an Aggregation Group, exceeds sixty percent (60%) of the Present Value of Accrued Retirement Income or the Aggregate Accounts of all Employees entitled to participate in this Plan and any Plan of an Aggregation Group. (b) For Plan Years beginning after December 31, 1986, the Accrued Retirement Income of a Non-Key Employee shall be determined under the accrual method under the Plan. (c) For any Plan Year commencing after December 31, 1983, the Plan shall be determined to be a "Super Top-Heavy Plan," if, as of the Determination Date, (1) the Present Value of Accrued Retirement Income of Key Employees or (2) the sum of the Aggregate Accounts of Key Employees under this Plan and any plan in an Aggregation Group, exceeds ninety percent (90%) of the Present Value of Accrued Retirement Income or the Aggregate Accounts of all Employees entitled to participate in this Plan and any plan of an Aggregation Group. 73 For purposes of Sections 14.6(a) and 14.6(b), if any Employee is a Non-Key Employee for any Plan Year, but such Employee was a Key Employee for any prior Plan Year, such Employee's Present Value of Accrued Retirement Income and/ or Aggregate Account balance shall not be taken into account for purposes of determining whether this Plan is a Top-Heavy or Super Top-Heavy Plan (or whether any Aggregation Group which includes this Plan is a Top-Heavy Group). In addition, for Plan Years beginning after December 31, 1984, if an Employee or former Employee has not performed any services for the Employer or any Affiliated Employer maintaining the Plan at any time during the five (5) year period ending on the Determination Date, the Aggregate Account and/or Present Value of Accrued Retirement Income for such Employee or former Employee shall not be taken into account for purposes of determining whether this Plan is a Top-Heavy or Super Top-Heavy Plan. (d) An Employee's "Aggregate Account" as of the Determination Date shall be determined under applicable provisions of the defined contribution plan used in determining Top-Heavy status. (e) An "Aggregation Group" shall mean either a Required Aggregation Group or a Permissive Aggregation Group as hereinafter determined. (1) Required Aggregation Group: In determining a Required Aggregation Group hereunder, each plan of the Employer in which a Key Employee is a participant, and each other plan of the Employer which enables any plan in which a Key Employee participates to meet the requirements of Code Sections 401(a)(4) or 410, will be required to be aggregated. Such group shall be known as a Required Aggregation Group. In the case of a Required Aggregation Group, each plan in the group will be considered a Top-Heavy Plan if the Required Aggregation Group is a Top-Heavy Group. No plan in the Required Aggregation Group will be considered a Top-Heavy Plan if the Aggregation Group is not a Top-Heavy Group. (2) Permissive Aggregation Group: The Employer may also include any other plan not required to be included in the Required Aggregation Group, provided the resulting group, taken as a whole, would continue to satisfy the provisions of Code Sections 401(a)(4) or 410. Such group shall be known as a Permissive Aggregation Group. In the case of a Permissive Aggregation Group, only a plan that is part of the Required Aggregation Group will be considered a Top-Heavy Plan if the Permissive Aggregation Group is a 74 Top-Heavy Group. A plan that is not part of the Required Aggregation Group but that has nonetheless been aggregated as part of the Permissive Aggregation Group will not be considered a Top-Heavy Plan even if the Permissive Group is a Top-Heavy Group. (3) Only those plans of the Employer in which the Determination Dates fall within the same calendar year shall be aggregated in order to determine whether such plans are Top-Heavy Plans. (f) The "Determination Date" shall mean with respect to any Plan Year, the last day of the preceding Plan Year, or in the case of the first Plan Year, the last day of such Plan Year. (g) A "Key Employee" shall mean any Employee or former Employee (and his beneficiaries) who, at any time during the Plan Year or any of the four (4) preceding Plan Years, is: (1) an officer of the Employer having an annual compensation from the Employer greater than fifty percent (50%) of the amount in effect under Code Section 415(b)(1)(A) for any such Plan Year. For purposes of this Section 14.6(g)(1), only those employers which are incorporated shall be considered as having officers, and no more than fifty (50) Employees (or, if lesser, the greater of three (3) or ten percent (10%) of the Employees) shall be treated as officers. Annual compensation means compensation as defined in Section 415(c)(3) of the Code, but including amounts contributed by the Employer pursuant to a salary reduction agreement which are excludable from the Employee's gross income under Section 125, Section 402(a)(8), Section 402(h), or Section 403(b) of the Code. (2) one of the ten (10) Employees (A) having annual compensation from the Employer greater than the limitation in effect under Code Section 415(c)(1)(A) and (B) owning (or considered as owning within the meaning of Code Section 318) the largest interests in the Employer. For purposes of this Section 14.6(g)(2), if two (2) Employees have the same interest in the Employer, the Employee having the greater annual compensation from the Employer shall be treated as having a larger interest. (3) a "five-percent owner" of the Employer. The term "five-percent owner" shall mean any person who owns (or is considered as owning within the meaning of Code Section 318) more than five percent (5%) of the outstanding stock of the Employer or stock possessing more than five percent (5%) of the total combined voting power of all stock of the Employer. In determining percentage ownership hereunder, employers that would otherwise be aggregated under Code 75 Sections 414(b), (c), and (m) shall be treated as separate employers. (4) a "one-percent owner" of the Employer having an annual compensation from the Employer of more than $150,000. The term "one-percent owner" shall mean any person who owns (or is considered as owning within the meaning of Code Section 318) more than one percent (1%) of the outstanding stock of the Employer or stock possessing more than one percent (1%) of the total combined voting power of all stock of the Employer. In determining percentage ownership hereunder, employers that would otherwise be aggregated under Code Sections 414(b), (c), and (m) shall be treated as separate employers. However, in determining whether an individual has compensation of more than $150,000, compensation from each employer required to be aggregated under Code Sections 414(b), (c), and (m) shall be taken into account. (h) A "Non-Key Employee" shall mean any Employee who is not a Key Employee as defined in Section 14.6(g). (i) An Employee's "Present Value of Accrued Retirement Income" shall mean as of the Determination Date, the sum of the following: (1) the Present Value of his Accrued Retirement Income as of the most recent valuation occurring within a twelve (12) month period ending on the Determination Date. (2) any Plan distributions made within the Plan Year that includes the Determination Date or within the four (4) preceding Plan Years. However, in the case of distributions made after the valuation date and prior to the Determination Date, such distributions are not included as distributions for Top-Heavy purposes to the extent that such distributions are already included in the Employee's Present Value of Accrued Retirement Income as of the valuation date. Notwithstanding anything herein to the contrary, all distributions, including distributions made prior to January 1, 1984, and distributions under a terminated plan which if it had not been terminated would have been required to be included in an Aggregation Group, will be counted. (3) any Employee contributions, whether voluntary or mandatory. However, amounts attributable to qualified deductible employee contributions shall not be considered to be a part of the Employee's Present Value of Accrued Retirement Income. 76 (4) with respect to unrelated rollovers and plan-to-plan transfers (ones which are both initiated by the Employee and made from a plan maintained by one employer to a plan maintained by another employer), if this Plan provides for rollovers or plan-to-plan transfers, it shall always consider such rollover or plan-to-plan transfer as a distribution for the purposes of this Section. If this Plan is the plan accepting such rollovers or plan-to-plan transfers, it shall not consider such rollovers or plan-to-plan transfers accepted after December 31, 1983 as part of the Employee's Present Value of Accrued Retirement Income. However, rollovers or plan-to-plan transfers accepted prior to January 1, 1984 shall be considered as part of the Employee's Present Value of Accrued Retirement Income. (5) with respect to related rollovers and plan-to-plan transfers (ones either not initiated by the Employee or made to a plan maintained by the same employer), if this Plan provides for rollovers or plan-to-plan transfers, it shall not be counted as a distribution for purposes of this Section. If this Plan is the plan accepting such rollover or plan-to-plan transfer, it shall consider such rollover or plan-to-plan transfer as part of the Employee's Present Value of Accrued Retirement Income, irrespective of the date on which such rollover or plan-to-plan transfer is accepted. (j) A "Top-Heavy Group" shall mean an Aggregation Group in which, as of the Determination Date, the sum of: (1) the Present Value of Accrued Retirement Income of Key Employees under all defined benefit plans included in that group, and (2) the Aggregate Accounts of Key Employees under all defined contribution plans included in the group, exceeds sixty percent (60%) of a similar sum determined for all Employees. 14.7 Minimum Retirement Income for Top-Heavy Plan Years. Notwithstanding anything herein to the contrary, for any Top-Heavy Plan Year, the minimum Accrued Retirement Income derived from Employer contributions for each Non-Key Employee, including benefits accrued in years in which the Plan is not a Top-Heavy Plan, shall equal a percentage of such Non-Key Employee's highest average compensation not less than the lesser of: (a) two percent (2%) multiplied by the Employee's number of Years of Service with the Employer, or (b) twenty percent (20%). For purposes of the minimum benefit, an Employee's Years of Service shall exclude (a) Plan Years in which the Plan is not a Top-Heavy Plan, and (b) Years of Service completed prior to 77 January 1, 1984. The minimum benefit required by this Section 14.7 shall be calculated using the Employee's total compensation and expressed in the form of a single life annuity (with no ancillary benefits) beginning at such Employee's Normal Retirement Date. An Employee's average compensation shall be based on the five (5) consecutive years for which the Employee had the highest compensation. Notwithstanding the foregoing, in any Plan Year in which a Non-Key Employee is an Employee in both this Plan and a defined contribution plan, and both such plans are Top-Heavy Plans, the Employer shall not be required to provide a Non-Key Employee with both the full separate minimum defined benefit and the full separate minimum defined contribution plan allocation. Therefore, if a Non-Key Employee is participating in a defined contribution plan maintained by the Employer and the minimum allocation under Code Section 416(c)(2) is allocated to the Non-Key Employee under such defined contribution plan, the minimum Accrued Retirement Income provided for above shall not be applicable, and no minimum benefit shall accrue on behalf of the Non-Key Employee. Alternatively, the Employer may satisfy the minimum benefit requirement of Code Section 416(c)(1) for the Non-Key Employee by providing any combination of benefits and/or contributions that satisfy the safe harbor rules of Treasury Regulation Section 1.416-1(m-12). 14.8 Vesting requirements for Top-Heavy Plan Years. Notwithstanding the provisions of Section 8.1, for any Top-Heavy Plan Year, the vested portion of an Employee's Accrued Retirement Income shall be determined on the basis of the Employee's Vesting Years of Service according to the following schedule: Years of Service Vested Percentage less than 2 0 2 20 3 40 4 60 5 80 6 or more 100 The minimum Retirement Income for any Top-Heavy Plan Year shall not be forfeited during any period for which the payment of the Employee's Retirement Income is required to be suspended under Section 5.10 of the Plan. If in any subsequent Plan Year, the Plan ceases to be a Top-Heavy Plan, the Retirement Board may, in its sole discretion, elect to (a) continue to apply this vesting schedule in determining the vested percentage of an Employee's Accrued Retirement Income or (b) revert to the vesting schedule in effect before the Plan became a Top-Heavy Plan. Any such reversion 78 shall be treated as a Plan amendment pursuant to the terms of the Plan. No decrease in an Employee's nonforfeitable percentage may occur in the event the Plan's status as a Top-Heavy Plan changes for any Plan Year. 14.9 Adjustments to maximum benefits for Top-Heavy Plans. (a) In the case of an Employee who is a participant in a defined benefit plan and a defined contribution plan maintained by the Employer, and such plans as a group are determined to be Top-Heavy for any limitation year beginning after December 31, 1983, "1.0" shall be substituted for "1.25" in each place it appears in the denominators of Fractions A and B, as set forth in Section 6.5 of the Plan, unless the extra minimum benefit is provided pursuant to Section 14.9(b). Super Top-Heavy Plans shall be required at all times to substitute "1.0" for "1.25" in the denominator of each plan fraction. (b) If a Key Employee is a participant in both a defined benefit plan and a defined contribution plan that are both part of a Top-Heavy Group (but neither of such plans is a Super Top-Heavy Plan), the defined benefit and defined contribution fractions set forth in Section 6.5 shall remain unchanged, provided that in Section 14.7 above, "three percent (3%)" shall be substituted for "two percent (2%)" and "twenty percent (20%)" shall be increased by one (1) percentage point (but not more than ten (10) percentage points) for each Year of Service included in the computations under Section 14.7. (c) For purposes of this Section 14.9, if the sum of the defined benefit plan fraction and the defined contribution fraction shall exceed 1.0 in any Plan Year for any Employee in this Plan, the Employer shall eliminate any amounts in excess of the limits set forth in Section 6.5, pursuant to Section 6.7 of the Plan. 79 ARTICLE XV Post-retirement Medical Benefits 15 15.1 Definitions. The following words and phraseology as used herein shall have the following meanings unless a different meaning is plainly required by the context: (a) "Pensioned Employee" means a former Employee of the Employer (1) who is eligible to receive Retirement Income after the attainment of his Normal or Deferred Retirement Date, as applicable, pursuant to the terms of the Plan, (2) who was insured under the Employer's program of medical insurance benefits on the last day worked prior to retirement, (3) who is not insured under any group insurance plan providing hospitalization and medical coverage to which the Employer contributes, (4) who resides in the United States,and (5) who has become eligible for Medicare and, if the Pensioned Employee's retirement occurred before attainment of Medicare eligibility, the premiums for hospitalization and medical coverage were being deducted from his Retirement Income continuously until his eligibility for Medicare. A "Pensioned Employee" shall not include a Key Employee, as defined in Section 14.6(g), or effective January 1, 1991, any Pensioned Employee of an Employer that has adopted the Plan pursuant to Section 14.1 hereof but does not provide medical benefits to its Pensioned Employees. (b) "Spouse " means the Pensioned Employee's spouse (1) who is not legally separated from the Pensioned Employee, (2) who was insured under the Employer's program of medical insurance benefits on the last day prior to the Pensioned Employee's retirement, (3) who resides in the United States, (4) who is not insured under any group insurance plan providing hospitalization and medical coverage to which the Employer contributes, (5) who meets the eligibility requirements of the Medicare program, (6) who has become eligible for Medicare and, if the Pensioned Employee's retirement occurred before his Spouse became eligible for Medicare, premiums for hospitalization and medical coverage for both the Pensioned Employee and his Spouse were being deducted from his Retirement Income continuously until his Spouse became eligible for Medicare, and (7) in the case of a surviving spouse of a deceased Pensioned Employee, who was insured as a Spouse at the time of the Pensioned Employee's death. (c) "Covered Individual" means a Pensioned Employee or Spouse of a Pensioned Employee who is eligible to receive medical benefits under Article XV. 80 15.2 Eligibility of Pensioned Employees and their Spouses. (a) A person who is a Pensioned Employee on January 1, 1989 shall be eligible for coverage as a Pensioned Employee on January 1, 1989, provided he was covered as an Employee under a group medical plan maintained by the Employer immediately prior to the time he became a Pensioned Employee. (b) An Employee who becomes a Pensioned Employee on or after January 1, 1989 shall be eligible for coverage on the date he becomes a Pensioned Employee, provided he was covered as an Employee under a group medical plan maintained by the Employer immediately prior to the time he became a Pensioned Employee. (c) A Spouse of a Pensioned Employee shall be eligible for coverage under this Plan on the later of (1) the date the Pensioned Employee becomes eligible for coverage hereunder and (2) the date such person becomes a Spouse. 15.3 Medical benefits. The medical benefits provided under this Article XV by the Employer and each adopting Employer are set forth in the copy of each such Employer's medical benefits plan which is attached hereto as Exhibit A and specifically incorporated herein by reference in its entirety, as may be amended from time to time. Such medical benefits shall be subject without limitation to all deductibles, maximums, exclusions, coordination with Medicare and other medical plans, and procedures for submitting claims and initiating legal proceedings provided therein. 15.4 Termination of coverage. (a) Coverage of any Pensioned Employee shall cease as follows: (1) when Article XV is amended, terminated, or discontinued in accordance with its terms; or (2) when the Pensioned Employee fails to make when due any required contribution; or (3) as otherwise provided in Exhibit A. (b) Coverage of a Spouse shall cease as follows: (1) when Article XV is amended, terminated, or discontinued in accordance with its terms; or (2) when the Pensioned Employee fails to make when due any required contribution; or (3) as otherwise provided in Exhibit A. 81 15.5 Continuation of coverage to certain individuals. (a) Anything in Article XV to the contrary notwithstanding, a Pensioned Employee or Spouse shall be entitled to elect continued medical coverage as provided under the terms of Article XV upon the occurrence of a Qualifying Event, provided such Pensioned Employee or Spouse was entitled to benefits under Article XV on the day prior to the Qualifying Event. (1) "Qualifying Event" means with respect to any Pensioned Employee or Spouse, as appropriate, (A) the death of the Pensioned Employee, (B) the divorce or legal separation of the Pensioned Employee from his Spouse, or (C) a proceeding in a case under Title 11, United States Code, with respect to the Employer. (b) The Pensioned Employee or Spouse electing continued coverage under this Section 15.5 shall be required to pay such monthly contributions as determined by the Employer to be equal to a reasonable estimate of 102% of the cost of providing coverage for such period for similarly situated beneficiaries which (1) is determined on an actuarial basis and (2) takes into account such factors as the Secretary of the Treasury may prescribe. (c) The continuation coverage elected by a Pensioned Employee or Spouse shall begin on the date of the Qualifying Event and end not earlier than the first to occur of the following: (1) The third anniversary of the Qualifying Event; (2) The termination of Article XV of the Plan; (3) The failure of the Pensioned Employee or Spouse to pay any required contribution when due; (4) The date on which the Pensioned Employee or Spouse first becomes, after the date of his election, (A) a covered employee under any other group health plan which does not contain any exclusion or limitation with respect to any preexisting condition of such individual, or (B) entitled to benefits under Title XVIII of the Social Security Act; or (5) The date the Spouse becomes covered under another group health plan which does not contain any exclusion or limitation with respect to any preexisting condition of such Spouse. 82 (d) Any election to continue coverage under this Section 15.5 shall be made during the election period (1) beginning not later than the termination date of coverage by reason of the Qualifying Event and (2) ending sixty (60) days following the later of the date described in (1) above or the date any Pensioned Employee or Spouse receives notice of a Qualifying Event from the Employer. (e) The Employer shall provide each Pensioned Employee and Spouse, if any, written notice of the rights provided in this Section 15.5. The Pensioned Employee or Spouse is required to notify the Employer within thirty (30) days of any Qualifying Event described in Section 15.5(a)(1)(B), and the Employer shall provide the Spouse written notice of the rights provided in this Section 15.5 within fourteen (14) days thereafter. 15.6 Contributions to fund medical benefits. Any contributions which the Employer deems necessary to provide the medical benefits under Article XV will be made from time to time by or on behalf of the Employer, and contributions shall be required of the Pensioned Employees to the Employer's medical benefit plan in amounts determined in the sole discretion of the Employer from time to time. All Employer contributions shall be made to the Trustee under the Trust Agreement provided for in Article XI and shall be allocated to a separate account maintained solely to fund the medical benefits provided under Article XV. The Employer shall designate that portion of any contribution to the Plan allocable to the funding of medical benefits under this Article XV. In no event at any time prior to the satisfaction of all liabilities under this Article XV shall any part of the corpus or income of such separate account be used for, or diverted to, purposes other than for the exclusive purpose of providing benefits under this Article XV. Effective January 1, 1991, subject to the requirements of Code Section 420, the Employer shall have the right, in its sole discretion, to transfer any excess corpus or income of the Plan allocated to fund Retirement Income to the separate account to fund medical benefits under this Article XV. The amount of contributions to be made by or on behalf of the Employer for any Plan Year shall be determined in accordance with any generally accepted actuarial method which is reasonable in view of the provisions and coverage of Article XV, the funding medium, and any other applicable considerations. However, the Employer is under no obligation to make any contributions under Article XV after Article XV is terminated, except to fund claims for medical expenses incurred prior to the date of termination. The medical benefits provided under this Article XV, when added to any life insurance protection provided under the Plan, shall be subordinate to the retirement benefits provided under the Plan. 83 Subject to any transitional rule applicable to contributions made under this Article XV prior to January 1, 1990, effective October 3, 1989, the aggregate of costs of the medical benefits (measured from January 1, 1987) plus the costs of any life insurance protection shall not exceed twenty-five percent (25%) of the sum of the aggregate of costs of retirement benefits under the Plan (other than past service credits), the aggregate of costs of the medical benefits and the costs of any life insurance protection (both measured from January 1, 1987). The aggregate of costs of retirement benefits, other than for past service credits, and the aggregate of costs of medical benefits provided under the Plan shall be determined using the projected unit credit funding method and the actuarial assumptions set forth in Exhibit B, a copy of which is attached hereto and specifically incorporated herein by reference in its entirety, and as may be amended from time to time by the committee responsible for providing a procedure for establishing and carrying out a funding policy and method for the Plan pursuant to Section 10.9 of the Plan. Contributions allocated to any separate account established for a Pensioned Employee from which medical benefits will be payable solely to such Pensioned Employee or his Spouse shall be treated as an Annual Addition as defined in Section 6.6(a) to any defined contribution plan maintained by the Employer. 15.7 Pensioned Employee Contributions. It shall be the sole responsibility of the Pensioned Employee to notify the Employer promptly in writing when a change in the amount of the Pensioned Employee's contribution is in order because his Spouse has become ineligible for coverage under this Article XV. No person shall become covered under this Article XV for whom the Pensioned Employee has not made the required contribution. Any contribution paid by a Pensioned Employee for any person after such person shall have become ineligible for coverage under this Article XV shall be returned upon written request but only provided such written request by or on behalf of the Pensioned Employee is received by the Employer within ninety (90) days from the date coverage terminates with respect to such ineligible person. 15.8 Amendment of Article XV. The Employer reserves the right, through action of its Board of Directors, to amend Article XV (including Exhibit A) pursuant to Section 13.1 or the Trust without the consent of any Pensioned Employee or his Spouse, provided, however, that no amendment of this Article or the Trust shall cancel the payment or reimbursement of expenses for claims already incurred by a Pensioned Employee or his Spouse prior to the date of any amendment, nor shall any such amendment increase the duties and obligations of the Trustee except with its consent. This Article XV, as set forth in the Plan document, is not a contract and non-contributory benefits hereunder are provided gratuitously, without consideration from any Pensioned 84 Employee or his Spouse. The Employer makes no promise to continue these benefits in the future and rights to future benefits will never vest. In particular, retirement or the fulfillment of the prerequisites for a retirement benefit pursuant to the terms of the Plan or under the terms of any other employee benefit plan maintained by the Employer shall not confer upon any Pensioned Employee or his Spouse any right to continued benefits under this Article XV. 15.9 Termination of Article XV. Although it is the intention of the Employer that this Article shall be continued and the contribution shall be made regularly thereto each year, the Employer, by action of its Board of Directors pursuant to Section 13.1, may terminate this Article XV or permanently discontinue contributions at any time in its sole discretion. This Article XV, as set forth in the Plan document, is not a contract and non-contributory benefits hereunder are provided gratuitously, without consideration from any Pensioned Employee or his Spouse. The Employer makes no promise to continue these benefits in the future and rights to future benefits will never vest. In particular, retirement or the fulfillment of the prerequisites for a retirement benefit pursuant to the terms of the Plan or under the terms of any other employee benefit plan maintained by the Employer shall not confer upon any Pensioned Employee or his Spouse any right to continued benefits under this Article XV. Effective January 1, 1991, in the event the Employer or any adopting Employer shall terminate its provision of the medical benefits described in Exhibit A to Section 15.3 of the Plan to its Pensioned Employees, this Article XV of the Plan shall automatically terminate with respect to the Pensioned Employees and their Spouses of such Employer without the requirement of any action by such Employer. 15.10 Reversion of assets upon termination. Upon the termination of this Article XV and the satisfaction of all liabilities under this Article XV, all remaining assets in the separate account described in Section 15.6 shall be returned to the Employer. 85 ARTICLE XVI Post-retirement Medical Benefits Prior to Attainment of Normal Retirement Date 16.1 Definitions. The following words and phraseology as used herein shall have the following meanings unless a different meaning is plainly required by the context: (a) "Pensioned Employee" means a former Employee of the Employer who is receiving Retirement Income after his retirement at his Early Retirement Date and prior to attainment of his Normal Retirement Date, pursuant to the terms of the Plan, and who was insured under the Employer's program of medical insurance benefits on the last day prior to his retirement. The term "Pensioned Employee" shall not include (1) any former Employee who terminated his service with the Employer prior to his Early Retirement Date and who is entitled to Retirement Income under the Plan or, effective January 1, 1991, (2) a Key Employee, as defined in Section 14.6(g), or (3) any Pensioned Employee of an Employer that has adopted the Plan pursuant to Section 14.1 hereof but does not provide medical benefits to its Pensioned Employees. (b) "Dependents" means a person who was insured by the Pensioned Employee under the Employer's program of medical insurance on the last day prior to retirement and who is: (1) the spouse of the Pensioned Employee, or (2) an unmarried child of either or both under nineteen (19) years of age, or (3) an unmarried child of either or both under twenty- three (23) years of age who is a full-time student in a course of study or training (approved by the Employer), not employed on a regular full-time basis and chiefly dependent upon the Pensioned Employee for support, or (4) an unmarried child of either or both who is mentally or physically incapacitated and unable to support himself and chiefly dependent upon the Pensioned Employee for support, if the incapacity begins and is certified to the Employer by a Doctor of Medicine or Osteopathy before the child reaches the age of nineteen (19) years. Whenever a claim for benefits under Article XVI is submitted, another certification of incapacity must be with the claim. The Employer is entitled to have its physician examine such child prior to acceptance of such child's coverage and periodically thereafter to ensure the continuation of incapacity. 86 The term "child" as used in this definition is limited to the following: (1) Any natural child of the Pensioned Employee; (2) Any child of the Pensioned Employee's spouse who regularly and permanently resides with the Pensioned Employee and such spouse in a parent-child relationship during the marriage; and (3) A child placed for adoption with a Pensioned Employee (as such term is defined in Exhibit C). 16.2 Application for and commencement of Coverage. (a) Every Pensioned Employee, as defined in Section 16.1, shall be entitled to apply for coverage for himself and his eligible Dependents. (b) If the required contributions for coverage of a covered individual have been paid in advance in accordance with Article XVI, the Employer's coverage of a Pensioned Employee and his Dependents who were continuously covered under a prior medical plan maintained by the Employer on December 31, 1989 or the day before the retirement of a Pensioned Employee, shall continue under Article XVI commencing with such effective date, subject to any waiting periods. Application for such prior medical plan shall be deemed to be application for coverage under Article XVI. 16.3 Medical benefits. The medical benefits provided under this Article XVI by the Employer and each adopting Employer are set forth in the copy of each such Employer's medical benefits plan which is attached hereto as Exhibit C and specifically incorporated herein by reference in its entirety, and as may be amended from time to time. Such medical benefits shall be subject without limitation to all deductibles, maximums, exclusions, coordination with Medicare and other medical plans, and procedures for submitting claims and initiating legal proceedings provided therein. 16.4 Termination of coverage. (a) Coverage of any Pensioned Employee shall cease as follows: (1) when Article XVI is amended, terminated, or discontinued in accordance with its terms; or (2) when the Pensioned Employee fails to make when due any required contribution; or (3) as otherwise provided in Exhibit C. 87 (b) Coverage of any Dependent shall cease as follows: (1) when Article XVI is amended, terminated, or discontinued in accordance with its terms; or (2) when the Pensioned Employee fails to make when due any required contribution; or (3) as otherwise provided in Exhibit C. 16.5 Continuation of coverage to certain individuals. (a) Anything in Article XVI to the contrary notwithstanding, a Pensioned Employee, Dependent spouse, or Dependent child shall be entitled to elect continued medical coverage as provided under the terms of Article XVI upon the occurrence of a Qualifying Event, provided such Pensioned Employee, Dependent spouse, or Dependent child was entitled to benefits under Article XVI on the day prior to the Qualifying Event. (1) "Qualifying Event" means with respect to any Pensioned Employee, Dependent spouse, or Dependent child, as appropriate, (A) the death of the Pensioned Employee, (B) the divorce or legal separation of the Pensioned Employee from the Dependent spouse, (C) a Dependent child ceasing to be a Dependent as defined under the requirements of Article XVI, or (D) a proceeding in a case under Title 11, United States Code, with respect to the Employer. (b) The Pensioned Employee or Dependent electing continued coverage under this Section 16.5 shall be required to pay such monthly contributions as determined by the Employer to be equal to a reasonable estimate of 102% of the cost of providing coverage for such period for similarly situated beneficiaries which (1) is determined on an actuarial basis and (2) takes into account such factors as the Secretary of the Treasury may prescribe. (c) The continuation coverage elected by a Pensioned Employee, Dependent spouse, or Dependent child shall begin on the date of the Qualifying Event and end not earlier than the first to occur of the following: (1) The third anniversary of the Qualifying Event; (2) The termination of Article XVI of the Plan; (3) The failure of the Pensioned Employee or Dependent to pay any required contribution when due; 88 (4) The date on which the Pensioned Employee or Dependent first becomes, after the date of his election, (A) a covered employee under any other group health plan which does not contain any exclusion or limitation with respect to any preexisting condition of such individual, or (B) entitled to benefits under Title XVIII of the Social Security Act; or (5) The date the Dependent spouse becomes covered under another group health plan which does not contain any exclusion or limitation with respect to any preexisting condition of such Dependent spouse. (d) Any election to continue coverage under this Section 16.5 shall be made during the election period (1) beginning not later than the termination date of coverage by reason of the Qualifying Event and (2) ending sixty (60) days following the later of the date described in (1) above or the date any Pensioned Employee, Dependent spouse, or Dependent child receives notice of a Qualifying Event from the Employer. (e) The Employer shall provide each Pensioned Employee and Dependent spouse, if any, written notice of the rights provided in this Section 16.5. The Pensioned Employee or Dependent spouse is required to notify the Employer within thirty (30) days of any Qualifying Event described in Section 16.5(a)(1)(B) or (C), and the Employer shall provide the Dependent spouse or Dependent child written notice of the rights provided in this Section 16.5 within fourteen (14) days thereafter. Notice to the Dependent spouse shall be deemed notice to each Dependent child residing with such spouse at the time such notification is made. 16.6 Contributions to fund medical benefits. Any contributions which the Employer deems necessary to provide the medical benefits under Article XVI will be made from time to time by or on behalf of the Employer, and contributions shall be required of the Pensioned Employees in amounts determined in the sole discretion of the Employer from time to time. All contributions shall be made to the Trustee under the Trust Agreement provided for in Article XI and shall be allocated to a separate account maintained solely to fund the medical benefits provided under Article XVI. The Employer shall designate that portion of any contribution to the Plan allocable to the funding of medical benefits under this Article XVI. In no event at any time prior to the satisfaction of all liabilities under this Article XVI shall any part of the corpus or income of such separate account be used for, or diverted to, purposes other than for the exclusive purpose of providing benefits under this Article XVI. Effective January 1, 1991, subject to the requirements of Code Section 420, the Employer shall have the right, in its sole discretion, to transfer any excess corpus or 89 income of the Plan allocated to fund Retirement Income to the separate account to fund medical benefits under this Article XVI. The minimum amount of contributions to be made by or on behalf of the Employer for any Plan Year shall be determined in accordance with any generally accepted actuarial method which is reasonable in view of the provisions and coverage of Article XVI, the funding medium, and any other applicable considerations. However, the Employer is under no obligation to make any contributions under Article XVI after Article XVI is terminated, except to fund claims for medical expenses incurred prior to the date of termination. The medical benefits provided under this Article XVI, when added to any life insurance protection provided under the Plan, shall be subordinate to the retirement benefits provided under the Plan. Subject to any transitional rule applicable to contributions made under this Article XVI prior to January 1, 1990, effective October 3, 1989, the aggregate of costs of the medical benefits (measured from January 1, 1987) plus the costs of any life insurance protection shall not exceed twenty-five percent (25%) of the sum of the aggregate of costs of retirement benefits under the Plan (other than past service credits), the aggregate of costs of the medical benefits and the costs of any life insurance protection (both measured from January 1, 1987). The aggregate of costs of retirement benefits, other than for past service credits, and the aggregate of costs of medical benefits provided under the Plan shall be determined using the projected unit credit funding method and the actuarial assumptions set forth in Exhibit B, a copy of which is attached hereto and specifically incorporated herein by reference in its entirety, and as may be amended from time to time by the committee responsible for providing a procedure for establishing and carrying out a funding policy and method for the Plan pursuant to Section 10.9 of the Plan. Contributions allocated to any separate account established for a Pensioned Employee from which medical benefits will be payable solely to such Pensioned Employee or his Dependents shall be treated as an Annual Addition as defined in Section 6.6(a) to any defined contribution plan maintained by the Employer. 16.7 Pensioned Employee Contributions. It shall be the sole responsibility of the Pensioned Employee to notify the Employer promptly in writing when a change in the amount of the Pensioned Employee's contribution is in order because a Dependent has become ineligible for coverage under this Article XVI. No person shall become covered under this Article XVI for whom the Pensioned Employee has not made the required contribution. Any contribution paid by a Pensioned Employee for any person after such person shall have become ineligible for coverage under this Article XVI shall be returned upon written request but only provided such written request by or on behalf of the Pensioned 90 Employee is received by the Employer within ninety (90) days from the date coverage terminates with respect to such ineligible person. 16.8 Amendment of Article XVI. The Employer reserves the right, through action of its Board of Directors pursuant to Section 13.1, to amend Article XVI (including Exhibit C) or the Trust without the consent of any Pensioned Employee, or any Dependent of a Pensioned Employee, provided, however, that no amendment of this Article or the Trust shall cancel the payment or reimbursement of expenses for claims already incurred by a Pensioned Employee or his Dependent prior to the date of any amendment, nor shall any such amendment increase the duties and obligations of the Trustee except with its consent. This Article XVI, as set forth in the Plan document, is not a contract and non-contributory benefits hereunder are provided gratuitously, without consideration from any Pensioned Employee or the Dependent of any Pensioned Employee. The Employer makes no promise to continue these benefits in the future and rights to future benefits will never vest. In particular, retirement or the fulfillment of the prerequisites for a retirement benefit pursuant to the terms of the Plan or under the terms of any other employee benefit plan maintained by the Employer shall not confer upon any Pensioned Employee or the Dependent of any Pensioned Employee any right to continued benefits under this Article XVI. 16.9 Termination of Article XVI. Although it is the intention of the Employer that this Article shall be continued and the contribution shall be made regularly thereto each year, the Employer, by action of its Board of Directors pursuant to Section 13.1, may terminate this Article XVI or permanently discontinue contributions at any time in its sole discretion. This Article XVI, as set forth in the Plan document, is not a contract and non-contributory benefits hereunder are provided gratuitously, without consideration from any Pensioned Employee or the Dependent of any Pensioned Employee. The Employer makes no promise to continue these benefits in the future and rights to future benefits will never vest. In particular, retirement or the fulfillment of the prerequisites for a retirement benefit pursuant to the terms of the Plan or under the terms of any other employee benefit plan maintained by the Employer shall not confer upon any Pensioned Employee or the Dependent of any Pensioned Employee any right to continued benefits under this Article XVI. Effective January 1, 1991, in the event the Employer or any adopting Employer shall terminate its provision of the medical benefits described in Exhibit C to Section 16.3 of the Plan to its Pensioned Employees, this Article XVI of the Plan shall automatically terminate with respect to the Pensioned Employees of such Employer without the requirement of any action by such Employer. 91 16.10 Reversion of Assets upon Termination. Upon the termination of this Article XVI and the satisfaction of all liabilities under this Article XVI, any remaining assets in the separate account described in Section 16.6 shall be returned to the Employer. 92 IN WITNESS WHEREOF, the Board of Directors of Alabama Power Company through its authorized officers has adopted this amendment and restatement of the Pension Plan for Employees of Alabama Power Company this day of , , to be effective January 1, 1989. ALABAMA POWER COMPANY By: Its: ATTEST: By: Its: [CORPORATE SEAL] [adamscl] h:\wpdocs\mtd\alapower\apc-pens.94 93 EX-10.(A)70 10 EXHIBIT 10(A)70 Exhibit 10(a)70 PENSION PLAN FOR EMPLOYEES OF GEORGIA POWER COMPANY AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 1, 1989 TABLE OF CONTENTS Page ARTICLE I Definitions . . . . . . . . . . . 2 ARTICLE II Eligibility . . . . . . . . . . . 14 2.1 Employees . . . . . . . . . . . . . . . . . . . . . 14 2.2 Employees represented by a collective bargaining agent . . . . . . . . . . . . . . . . . . . . . . . 14 2.3 Persons in military service and Employees on authorized leave of absence . . . . . . . . . . . . 14 2.4 Employees reemployed . . . . . . . . . . . . . . . 15 2.5 Participation upon return to eligible class . . . . 15 2.6 Exclusion of certain categories of employees . . . 15 2.7 Waiver of participation . . . . . . . . . . . . . . 16 ARTICLE III Retirement . . . . . . . . . . . 17 3.1 Retirement at Normal Retirement Date . . . . . . . 17 3.2 Retirement at Early Retirement Date . . . . . . . . 17 3.3 Retirement at Deferred Retirement Date . . . . . . 17 ARTICLE IV Determination of Accredited Service . . . . . 18 4.1 Accredited Service pursuant to Prior Plan . . . . . 18 4.2 Accredited Service . . . . . . . . . . . . . . . . 18 4.3 Accredited Service and Years of Service in respect of service of certain Employees previously employed by the Employer or by Affiliated Employers . . . . . . . . . . . . . . . . . . . . . 20 4.4 Accrual of Retirement Income during period of total disability . . . . . . . . . . . . . . . . . 21 4.5 Employees leaving Employer's service . . . . . . . 22 4.6 Transfers to or from Affiliated Employers . . . . . 23 4.7 Transfers from Savannah Electric and Power Company . . . . . . . . . . . . . . . . . . . . . . 24 4.8 Retirement income for certain former employees of Southern Electric Generating Company . . . . . . . 25 ARTICLE V Retirement Income . . . . . . . . . . 26 i 5.1 Normal Retirement Income . . . . . . . . . . . . . 26 5.2 Minimum Retirement Income payable upon retirement at Normal Retirement Date or Deferred Retirement Date . . . . . . . . . . . . . . . . . . . . . . . 26 5.3 Minimum Retirement Income upon retirement at Early Retirement Date or upon termination of service by reason of death or otherwise prior to retirement . 27 5.4 Calculation of Social Security Offset . . . . . . . 28 5.5 Early Retirement Income . . . . . . . . . . . . . . 29 5.6 Deferred Retirement Income . . . . . . . . . . . . 29 5.7 Payment of Retirement Income . . . . . . . . . . . 30 5.8 Termination of Retirement Income . . . . . . . . . 31 5.9 Required distributions . . . . . . . . . . . . . . 31 5.10 Suspension of Retirement Income for reemployment . . . . . . . . . . . . . . . . . . . 33 5.11 Increase in Retirement Income of retired Employees for service prior to January 1, 1991 . . 33 5.12 Special provisions relating to the treatment of absence of an Employee from the service of the Employer to serve in the Armed Forces of the United States . . . . . . . . . . . . . . . . . . . 34 ARTICLE VI Limitations on Benefits . . . . . . . . 38 6.1 Maximum Retirement Income . . . . . . . . . . . . . 38 6.2 Adjustment to Defined Benefit Dollar Limitation for Early or Deferred Retirement . . . . . . . . . 39 6.3 Adjustment of limitation for Years of Service or participation . . . . . . . . . . . . . . . . . . . 40 6.4 Preservation of Accrued Retirement Income . . . . . 40 6.5 Limitation on benefits from multiple plans . . . . 41 6.6 Special rules for plans subject to overall limitations under Code Section 415(e) . . . . . . . 42 6.7 Combination of Plans . . . . . . . . . . . . . . . 43 6.8 Incorporation of Code Section 415 . . . . . . . . . 43 ARTICLE VII Provisional Payee . . . . . . . . . . 44 7.1 Adjustment of Retirement Income to provide for payment to Provisional Payee . . . . . . . . . . . 44 7.2 Form and time of election and notice requirements . 44 7.3 Circumstances in which election and designation are inoperative . . . . . . . . . . . . . . . . . . 45 7.4 Pre-retirement death benefit . . . . . . . . . . . 46 7.5 Post-retirement death benefit - qualified joint and survivor annuity . . . . . . . . . . . . . . . 48 7.6 Election and designation by former Employee entitled to Retirement Income in accordance with Article VIII . . . . . . . . . . . . . . . . . . . 48 ii 7.7 Death benefit for Provisional Payee of former Employee . . . . . . . . . . . . . . . . . . . . . 50 7.8 Limitations on Employee's and Provisional Payee's benefits . . . . . . . . . . . . . . . . . . . . . 50 7.9 Effect of election under Article VII . . . . . . . 51 ARTICLE VIII Termination of Service . . . . . . . . 52 8.1 Vested interest . . . . . . . . . . . . . . . . . . 52 8.2 Early distribution of vested benefit . . . . . . . 52 8.3 Years of Service of reemployed Employees . . . . . 53 8.4 Cash-out and buy-back . . . . . . . . . . . . . . . 54 8.5 Calculation of present value for cash-out of benefits and for determining amount of benefits . . 55 8.6 Retirement Income under Prior Plan . . . . . . . . 57 8.7 Requirement for Direct Rollovers . . . . . . . . . 57 ARTICLE IX Contributions . . . . . . . . . . . 59 9.1 Contributions generally . . . . . . . . . . . . . . 59 9.2 Return of Employer contributions . . . . . . . . . 59 9.3 Expenses . . . . . . . . . . . . . . . . . . . . . 60 ARTICLE X Administration of Plan . . . . . . . . 61 10.1 Retirement Board . . . . . . . . . . . . . . . . . 61 10.2 Organization and transaction of business of Retirement Board . . . . . . . . . . . . . . . . . 61 10.3 Administrative responsibilities of Retirement Board . . . . . . . . . . . . . . . . . . . . . . . 61 10.4 Retirement Board, the "Administrator" . . . . . . . 62 10.5 Fiduciary responsibilities . . . . . . . . . . . . 63 10.6 Employment of actuaries and others . . . . . . . . 63 10.7 Accounts and tables . . . . . . . . . . . . . . . . 63 10.8 Indemnity of members of Retirement Board . . . . . 64 10.9 Areas in which the Retirement Board does not have responsibility . . . . . . . . . . . . . . . . . . 64 10.10 Claims Procedures . . . . . . . . . . . . . . . . 65 ARTICLE XI Management of Trust . . . . . . . . . 66 11.1 Trust . . . . . . . . . . . . . . . . . . . . . . . 66 11.2 Disbursement of the Trust Fund . . . . . . . . . . 66 11.3 Rights in the Trust . . . . . . . . . . . . . . . . 66 11.4 Merger of the Plan . . . . . . . . . . . . . . . . 67 ARTICLE XII iii Termination of the Plan . . . . . . . . 68 12.1 Termination of the Plan . . . . . . . . . . . . . . 68 12.2 Limitation on benefits for certain highly paid employees . . . . . . . . . . . . . . . . . . . . . 68 12.3 Allocation of Trust upon termination . . . . . . . 69 ARTICLE XIII Amendment of the Plan . . . . . . . . . 71 13.1 Amendment of the Plan . . . . . . . . . . . . . . . 71 ARTICLE XIV Special Provisions . . . . . . . . . 73 14.1 Adoption of Plan by other corporations . . . . . . 73 14.2 Exclusive benefit . . . . . . . . . . . . . . . . . 74 14.3 Assignment or alienation . . . . . . . . . . . . . 74 14.4 Voluntary undertaking . . . . . . . . . . . . . . . 75 14.5 Top-Heavy Plan requirements . . . . . . . . . . . . 75 14.6 Determination of Top-Heavy status . . . . . . 75 14.7 Minimum Retirement Income for Top-Heavy Plan Years . . . . . . . . . . . . . . . . . . . . . . . 79 14.8 Vesting requirements for Top-Heavy Plan Years . . . 80 14.9 Adjustments to maximum benefits for Top-Heavy Plans . . . . . . . . . . . . . . . . . . . . . . . 81 ARTICLE XV Post-retirement Medical Benefits . . . . . . 82 15.1 Definitions . . . . . . . . . . . . . . . . . . . . 82 15.2 Eligibility of Pensioned Employees and their Dependents . . . . . . . . . . . . . . . . . . . . 83 15.3 Medical benefits . . . . . . . . . . . . . . . . . 83 15.4 Termination of coverage . . . . . . . . . . . . . . 84 15.5 Continuation of coverage to certain individuals . . 84 15.6 Contributions to fund medical benefits . . . . . . 85 15.7 Pensioned Employee contributions . . . . . . . . . 87 15.8 Amendment of Article XV . . . . . . . . . . . . . . 87 15.9 Termination of Article XV . . . . . . . . . . . . . 87 15.10 Reversion of assets upon termination . . . . . . . 88 ARTICLE XVI Early Retirement Incentive Program . . . . . 89 16.1 Eligibility . . . . . . . . . . . . . . . . . . . . 89 16.2 Retirement Dates of Eligible Employees . . . . . . 89 16.3 Early retirement incentive program benefits . . . . 90 16.4 Restoration to service . . . . . . . . . . . . . . 90 iv Introductory Statement The Pension Plan for Employees of Georgia Power Company, as amended and restated effective as of January 1, 1989 and hereinafter set forth (the "Plan"), is a modification and continuation of the Pension Plan for Employees of Georgia Power Company which originally became effective July 1, 1944, and has been amended from time to time. Since the enactment of the Employee Retirement Income Security Act of 1974 ("ERISA"), the Plan has been amended numerous times to comply with changes in the law and to achieve other administrative goals. Initially, the Plan was amended and restated in 1976 to comply with ERISA. Thereafter, the Plan was again amended and restated in 1986 to comply with the Tax Equity and Fiscal Responsibility Act of 1982, the Retirement Equity Act of 1984, and the Deficit Reduction Act of 1984. In more recent years, the Plan has been amended and restated three times to comply with the Tax Reform Act of 1986 -- first in 1989, second in 1991 and again as amended and restated herein. The amendment and restatement set forth herein consolidates those amendments made in 1989 and 1991 and provides for such other appropriate changes as are required by the law. Accordingly, this amendment and restatement is effective as of January 1, 1989. Where appropriate, amendments to the Plan which have a different effective date are noted. Retirement Income of former Employees (or Provisional Payees of former Employees) who retired in accordance with the provisions of the Prior Plan, as defined herein, is payable in accordance with the provisions of the Prior Plan. All contributions made by the Employer to this Plan are expressly conditioned upon the continued qualification of the Plan under Section 401(a) of the Code, including any amendments to the Plan, and upon the deductibility of such contributions by the Employer pursuant to Section 404 of the Code. 1 ARTICLE I Definitions The following words and phraseology as used herein have the following meanings unless a different meaning is plainly required by the context: 1 1.1 "Accrued Retirement Income" means with respect to any Employee at any particular date, the Retirement Income, determined pursuant to Section 5.1, commencing on his Normal Retirement Date which would be payable to such Employee in the form of a single life annuity on the basis of his Accredited Service to the date as of which the computation of Retirement Income is made. 1.2 "Accredited Service" means with respect to any Employee included in the Plan, the period of service as provided in Article IV. For purposes of calculating Accredited Service in Article IV such Service shall include, in the case of a former employee of the former Georgia Power and Light Company ("Power and Light Company") who became an Employee of the Employer effective upon acquisition of the assets and properties of Power and Light Company, the number of years of his Creditable Service, if any, accrued to July 1, 1957 to which he may be entitled under the Power and Light Plan, but not to exceed the number of years of Accredited Service to which he would have been entitled up to July 1, 1957 determined in accordance with the provisions of the Prior Plan had his service with Power and Light Company prior to July 1, 1957 been service with the Employer. 1.3 "Actuarial Equivalent" means a benefit of equivalent value when computed on the basis of five percent (5%) interest per annum, compounded annually and the 1951 Group Annuity Mortality Table for males. The ages for all Employees under the above table shall be set back six (6) years and the ages for such Employees' spouses shall be set back one year. All actuarial adjustments and actuarial determinations required and made under the terms of the Plan shall be calculated in accordance with such assumptions. 1.4 "Affiliated Employer" means any corporation which is a member of a controlled group of corporations (as defined in Section 414(b) of the Code) which includes the Employer; any trade or business (whether or not incorporated) which is under common control (as defined in Section 414(c) of the Code) with the Employer; any organization (whether or not incorporated) which is a member of an affiliated service group (as defined in Section 414(m) of the Code) which includes the Employer; and any other entity required to be aggregated with the Employer pursuant to regulations under Section 414(o) of the Code. 2 1.5 "Average Monthly Earnings" means the greater of: (a) an Employee's Monthly Earnings averaged over the three (3) highest Plan Years of participation which shall produce the highest monthly average within the last ten (10) Plan Years; or (b) an Employee's Monthly Earnings averaged over the three (3) highest Plan Years of participation which shall produce the highest monthly average within the last ten (10) Plan Years during which the Employee actively performed services for the Employer. If an Employee has completed less than three (3) Plan Years of participation upon his termination of employment, his Average Monthly Earnings will be based on his Earnings during his participation to his date of termination. 1.6 "Board of Directors" means the Board of Directors of Georgia Power Company. 1.7 "Code" means the Internal Revenue Code of 1986, as amended from time to time. 1.8 "Current Accrued Retirement Income" means an Employee's Accrued Retirement Income under the Plan, determined as if the Employee had separated from service as of the close of the last Limitation Year beginning before January 1, 1987, when expressed as an annual benefit within the meaning of Section 415(b)(2) of the Code. In determining the amount of an Employee's Current Accrued Retirement Income, the following shall be disregarded: (a) any change in the terms and conditions of the Plan after May 5, 1986; and (b) any cost of living adjustment occurring after May 5, 1986. 1.9 "Deferred Retirement Date" means the first day of the month after a retirement subsequent to the Normal Retirement Date. Employment subsequent to Normal Retirement Date shall be deemed to be a retirement if an Employee has less than forty (40) Hours of Service during a calendar month. 1.10 "Defined Benefit Dollar Limitation" means the limitation set forth in Section 415(b)(1)(A) or (d) of the Code. 1.11 "Defined Contribution Dollar Limitation" means the limitation set forth in Section 415(c)(1)(A) of the Code. 1.12 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. 1.13 "Early Retirement Date" means the first day of the month following the retirement of an Employee on or after his 3 fifty-fifth (55th) birthday and before his sixty-fifth (65th) birthday. 1.14 (a) "Earnings" with respect to any Employee including any Employee whose service is terminated by reason of disability (as defined in Section 4.4) means (1) the highest annual rate of salary or wages of an Employee of the Employer or employee of any Affiliated Employer within any Plan Year before deductions for taxes, Social Security, etc., (2) all amounts contributed by the Employer or any Affiliated Employer to The Southern Company Employee Savings Plan as Elective Employer Contributions, as said term is described under Section 4.1 of such plan, pursuant to the Employee's exercise of his deferral option made thereunder in accordance with the requirements of Section 401(k) of the Code, and (3) all amounts contributed by the Employer or any Affiliated Employer to The Southern Electric System Flexible Benefits Plan or The Southern Company Flexible Benefits Plan on behalf of an Employee pursuant to his salary reduction election, and applied to provide one or more of the optional benefits available under such plan, but (4) shall exclude all amounts deferred under any non-qualified deferred compensation plan maintained by the Employer or any Affiliated Employer. (b) Notwithstanding the above, "Earnings" with respect to any commissioned salesperson means the salary or wages of an Employee of the Employer or employee of any Affiliated Employer within any Plan Year, without including overtime, and before deductions for taxes, Social Security, etc. but applying those adjustments identified in paragraphs (a)(2), (3) and (4) above. (c) With respect to an Employee whose service terminates because of a disability under Section 4.4, Earnings shall be deemed to continue in effect throughout the period of the Employee's Disability Leave, as also defined in Section 4.4. (d) Notwithstanding the above, "Earnings" with respect to an Employee who is a member of Local Union 84 of I.B.E.W., who is eligible to be included in the Plan, and who is granted a leave of absence by the Employer to carry on union business, shall be determined pursuant to Section 4.2 of the Plan. (e) With respect to calculating the Prior Plan Retirement Income of an Employee who is a "participant in the Plan" as provided in Section 5.12, Earnings shall be determined for the recognized period of his absence to serve in the Armed Forces of the United States at the rate which is paid to him on the day he returns to the service of the Employer as provided in paragraph (a) of Section 5.12 or at the rate which was payable to him at the time he left the employment of the Employer to enter the Armed Forces of the United States, if such amount was greater. 4 (f) For Plan Years beginning after December 31, 1988 and prior to January 1, 1994, the annual compensation of each Employee taken into account for purposes of this Plan shall not exceed $200,000 (as adjusted by the Secretary of Treasury). The imposition of this limitation shall not reduce an Employee's Retirement Income below the amount as determined on December 31, 1988. In addition to other applicable limitations set forth in the Plan, and notwithstanding any other provision of the Plan to the contrary, for Plan Years beginning on or after January 1, 1994, the annual compensation of each Employee taken into account under the Plan shall not exceed $150,000, as adjusted for increases in the cost of living in accordance with Code Section 401(a)(17). The cost of living adjustment in effect for a calendar year applies to any period, not exceeding twelve (12) months, over which compensation is determined (the "determination period") beginning in such calendar year. If the determination period is less than twelve (12) months, the limit shall be prorated. If compensation for any prior determination period is taken into account in determining an Employee's benefits accruing in the current Plan Year beginning on or after January 1, 1989 or January 1, 1994, as applicable, the compensation for that prior determination period is subject to the $200,000 or the $150,000 compensation limit in effect for that prior determination period. Notwithstanding any other provision in the Plan, each Employee's Accrued Retirement Income under this Plan will be the greater of: (a) the Employee's Accrued Retirement Income as of the last day of the last Plan Year beginning before January 1, 1994, frozen in accordance with Treasury Regulation Section 1.401(a)(4)-13, or (b) the Employee's Accrued Retirement Income determined with respect to the benefit formula applicable for the Plan Year beginning on or after January 1, 1994, as applied to the employee's total Years of Service taken into account under the Plan for purposes of benefit accruals. For purposes of this Section 1.14, the rules of Section 414(q)(6) of the Code shall apply in determining the adjusted $200,000 or $150,000 limitation, as applicable, except in applying such rules, the term "family" shall include only the spouse of the Employee and any lineal descendants of the Employee who have not attained age nineteen (19) before the close of the Plan Year. If, as a result of the application of such rules, the adjusted $200,000 or $150,000 limitation is exceeded, then the limitation shall be prorated among the affected individuals in 5 proportion to each individual's Earnings determined under this Section 1.14 prior to the application of this limitation. 1.15 "Effective Date" means the original effective date of the Plan, July 1, 1944. The effective date of this amendment and restatement means January 1, 1989. 1.16 "Eligibility Year of Service" is a Year of Service commencing on the Employee's date of employment or reemployment or anniversary date thereof. 1.17 "Employee" means any person who is currently employed by the Employer as (a) a regular full-time employee, (b) a regular part-time employee, (c) a cooperative education employee, or (d) a Temporary Full-Time or Temporary Part-Time employee, as such terms are defined in the Corporate Guidelines of the Employer. The term also includes "leased employees" within the meaning of Section 414(n)(2) of the Code, unless the total number of leased employees constitutes less than twenty percent (20%) of the Employer's non-highly compensated workforce within the meaning of Section 414(n)(5)(C)(ii) and such leased employees are covered by a plan described in Section 414(n)(5)(B) of the Code. 1.18 "Employer" means Georgia Power Company, any successor or successors thereof and any wholly owned subsidiary thereof which the Board of Directors may from time to time, and upon such terms and conditions as may be fixed by the Board of Directors, determine to bring under the Plan, and any other corporation which shall adopt this Plan and Trust Agreement pursuant to Section 14.1 by appropriate resolution authorized by the board of directors of said adopting corporation. 1.19 "Full Current Costs" means the normal cost, as defined in Treasury Regulation Section 1.404(a)-6, for all years since the Effective Date of the Plan, plus interest on any unfunded liability during such period. 1.20 "Hour of Service" means an Employee shall be credited with one Hour of Service for each hour for which (a) he is paid, or entitled to payment, for the performance of duties for the Employer or an Affiliated Employer, and such hours shall be credited to the Employee for the computation period or periods in which the duties are performed; (b) he is paid, or entitled to payment, by the Employer or an Affiliated Employer on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty, or leave of absence in which case the Employee shall be credited with Hours of Service for the computation period or periods in which the period during which no duties were performed occurs; (c) back pay, irrespective of mitigation of damages, has been 6 either awarded or agreed to by the Employer or an Affiliated Employer, in which case the Employee shall be credited with Hours of Service for the computation period or periods to which the award or agreement pertains, rather than the computation period in which the award, agreement, or payment is made; and (d) solely for the purpose of calculating Vesting Years of Service, he was on any form of authorized leave of absence. The same Hours of Service shall not be credited under clauses (a), (b), (c), and (d). An Employee who is entitled to be credited with Hours of Service in accordance with clause (b) or (d) of this Section shall be credited with such number of Hours of Service for the period of time during which no duties were performed as though he were in the active employment of the Employer during such period of time. However, an Employee shall not be credited with Hours of Service in accordance with clause (b) of this Section for unused vacation for which payment is received at termination of employment, or if the payment which is made to him or to which he is entitled in accordance with clause (b) is made or due under a plan maintained solely for the purpose of complying with applicable Worker's Compensation, or unemployment compensation or disability insurance laws, or if such payment is one which solely reimburses an Employee for medical or medically related expenses incurred by the Employee. Provided there is no duplication of Hours of Service credited in accordance with the foregoing provisions, if an Employee is "a participant in the Plan" within the meaning of that term as defined in paragraph (a) of Section 5.12, he shall be credited with such number of Hours of Service with respect to all or such portion of the period of his absence to serve in the Armed Forces of the United States as may be recognized under paragraph (b) of Section 5.12 as though he were in the active employment of the Employer during the recognized period of his absence to serve in the Armed Forces. Provided there is no duplication of Hours of Service credited in accordance with the foregoing provisions, an Employee shall be credited with Hours of Service as though he were in the active employment of the Employer during an authorized leave of absence to carry on union business as provided in Section 4.2, if such Employee elects to receive credit for Accredited Service in accordance with Section 4.2. The rules set forth in paragraphs (b) and (c) of Department of Labor Regulations 2530.200b-2 are incorporated in the Plan by this reference and made a part hereof. 1.21 "Limitation Year" means the Plan Year. 7 1.22 "Monthly Earnings" means one-twelfth (1/12) of the Earnings of an Employee of the Employer during a Plan Year. 1.23 "Normal Retirement Date" means the first day of the month following an Employee's sixty-fifth (65th) birthday, except that the Normal Retirement Date of any Employee hired on or after his sixtieth (60th) birthday shall be the fifth (5th) anniversary of his initial participation in the Plan. 1.24 "One-Year Break in Service" means a twelve (12) consecutive month period commencing on or after January 1, 1976 which would constitute a Year of Service but for the fact that the Employee has not completed more than 500 Hours of Service during such period. Solely for the purpose of determining whether a One-Year Break in Service has occurred for eligibility or vesting purposes, an Employee who is absent from work for maternity or paternity reasons shall receive credit for the Hours of Service which would otherwise have been credited to such Employee but for such absence, or in any case in which such hours cannot be determined, eight (8) Hours of Service per day of such absence. In no event shall Hours of Service credited under this paragraph be in excess of the amount necessary to prevent a One-Year Break in Service from occurring. For purposes of this paragraph, an absence from work for maternity or paternity reasons means an absence (a) by reason of the pregnancy of the Employee, (b) by reason of a birth of a child of the Employee, (c) by reason of the placement of a child with the Employee in connection with the adoption of such child by such Employee, or (d) for purposes of caring for such child for a period beginning immediately following such birth or placement. The Hours of Service shall be credited under this paragraph: (a) in the vesting or eligibility period in which the absence begins if the Hours of Service credited are necessary to prevent a One-Year Break in Service in such period, and (b) in all other cases, in the vesting or eligibility period following the period in which the absence begins. 1.25 "Past Service" means with respect to any Employee included in the Plan, the period of his Accredited Service prior to January 1, 1989 as determined under the Prior Plan. 1.26 "Plan" means the Pension Plan for Employees of Georgia Power Company, as set forth herein and as hereinafter amended, effective January 1, 1989. 1.27 "Plan Year" means the twelve (12) month period commencing on the first day of January and ending on the last day of December next following. 8 1.28 "Plan Year of Service" is a Year of Service determined as if the date of employment or reemployment is the first day of the Plan Year. 1.29 "Prior Plan" means the Plan in effect prior to January 1, 1989. 1.30 "Provisional Payee" means a spouse designated or deemed to have been designated by an Employee or former Employee pursuant to Article VII to receive Retirement Income on the death of the Employee or former Employee. 1.31 "Qualified Election" means an election by an Employee or former Employee that concerns the form of distribution of Retirement Income that must be in writing and must be consented to by the Employee's Spouse. The Spouse's consent to such an election must acknowledge the effect of such election, must be in writing, and must be witnessed by a notary public. Notwithstanding this consent requirement, if the Employee establishes to the satisfaction of the Retirement Board that such written consent may not be obtained because the Spouse cannot be located or because of such other circumstances as the Secretary of the Treasury may by regulations prescribe, an election by the Employee will be deemed a Qualified Election. Any consent necessary under this provision shall be valid and effective only with respect to the Spouse who signs the consent, or in the event of a deemed Qualified Election, with respect to such Spouse. A revocation of a prior Qualified Election to waive the payment of Retirement Income to the Employee's Spouse may be made by the Employee without consent at any time commencing within 90 days before such Employee's 55th birthday but not later than before the commencement of Retirement Income. A Qualified Election or the revocation of a Qualified Election shall be on a form furnished by the Retirement Board and filed within the time prescribed for making such election. 1.32 "Retirement Board" means the managing board of the Plan provided for in Article X. 1.33 "Retirement Date" means the Employee's Normal, Early, or Deferred Retirement Date, whichever is applicable to him. 1.34 "Retirement Income" means the monthly Retirement Income provided for by the Plan. 1.35 "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 9 month on and after January 1, 1989, and $250 per month, on and after January 1, 1991, 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 the aggregate Accredited Service the Employee could have accumulated if he had continued his employment 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(b) and shall be determined pursuant to the following, as applicable: (a) With regard to an Employee described in Section 5.2, the Social Security benefit shall be computed at retirement. In estimating the amount of the Federal primary Social Security benefit to which the Employee would be entitled, it shall be assumed that he will receive no wages for Social Security purposes after his retirement on his Normal Retirement Date or Deferred Retirement Date, and it will be further assumed in calculating his estimated Federal primary Social Security benefit that the amount thereof will be the amount determined under the recomputation provision, if applicable, of the Social Security Act in effect at the time of his retirement. (b) With regard to an Employee described in Section 5.3(a), the Social Security benefit to which it is estimated that he will be entitled at sixty-five (65), shall be computed at the time of his retirement. In estimating the amount of the Federal primary Social Security benefit to which the Employee would be entitled at age sixty-five (65), it shall be assumed that he will receive no wages for Social Security purposes after his Early Retirement Date, and it will be further assumed in calculating his estimated Federal primary Social Security benefit that the amount thereof will be the amount determined under the recomputation provision, if applicable, of the Social Security Act in effect at his Early Retirement Date. (c) With regard to an Employee described in Section 5.3(b), the Social Security benefit to which it is estimated that he would have been entitled to receive at age sixty-five (65) or his date of death, if later, had he not died, shall be computed at the time of his death. In estimating the amount of Federal primary Social Security benefit to which the Employee would have been entitled at age sixty-five (65) or his date of death, if later, it shall be assumed that he would not have received any wages for Social Security purposes after the date of his death, and it will be further assumed in calculating his Federal primary 10 Social Security benefit that the amount thereof will be the amount determined under the recomputation provision, if applicable, of the Social Security Act in effect at the time of his death. (d) With regard to an Employee described in Section 5.3(c), the Social Security benefit to which it is estimated that he will become entitled at age sixty-five (65) or his date of termination, if later, shall be computed at the date of termination. In estimating the amount of the Federal primary Social Security benefit to which the Employee would be entitled at age sixty-five (65) or his date of termination, if later, it shall be assumed that he will receive no wages for Social Security purposes after his date of termination, and it will be further assumed in calculating his estimated Federal primary Social Security benefit that the amount thereof will be the amount determined under the recomputation provision, if applicable, of the Social Security Act in effect at his date of termination. (e) With regard to an Employee described in Section 5.3(d), the Social Security benefit to which it is estimated that he would have been entitled to receive at age sixty-five (65) or his initial date of disability, if later, had he not become disabled, shall be computed at the time of his retirement. In estimating the amount of Federal primary Social Security benefit to which the Employee would have been entitled at age sixty-five (65) or his date of disability, if later, it shall be assumed that he would have received wages for Social Security purposes as specified in Section 5.4, and it will be further assumed in calculating his estimated Federal primary Social Security benefit that the amount thereof will be the amount determined under the recomputation provision, if applicable, of the Social Security Act in effect at the time of his retirement. 1.36 "Social Security Retirement Age" means age sixty-five (65) if the Employee attains age sixty-two (62) before January 1, 2000 (i.e., born before January 1, 1938), age sixty-six (66) if the Employee attains age sixty-two (62) after December 31, 1999, but before January 1, 2017 (i.e., born after December 31, 1937, but before January 1, 1955), and age sixty-seven (67) if the Employee attains age sixty-two (62) after December 31, 2016 (i.e., born after December 31, 1954). 1.37 "Trust" or "Trust Fund" means all such money or other property which shall be held by the Trustee pursuant to the terms of the Trust Agreement or pursuant to contracts with life insurance companies. 1.38 "Trust Agreement" means the trust agreement or agreements between the Employer and the Trustee established for the purpose of funding the Retirement Income to be paid. 11 1.39 "Trustee" means the trustee or trustees acting as such under the Trust Agreement, including any successor or successors. 1.40 "Vesting Year of Service" means an Employee's Years of Service including: (a) Years of Service with an Affiliated Employer and Years of Service with companies or properties heretofore affiliated or associated with the Employer prior to the date of severance of such affiliation or association and service with Georgia Power and Light Company; (b) subject to the eligibility requirements of Section 2.3, active service with the Armed Forces of the United States if the Employee entered or enters active service or training in such Armed Forces directly from the employ of the Employer and after discharge or release therefrom returns within ninety (90) days to the employ of the Employer or is deemed to return under Section 2.3 because of the death of such Employee while in active service with such Armed Forces; and (c) any period during which the Employee was on any other form of authorized leave of absence. For purposes of this Section 1.40 in determining Vesting Years of Service with respect to a period of absence referred to in clause (b) or (c) of this Section 1.40, an Employee shall be credited with Hours of Service as though the period of absence were a period of active employment with the Employer. 1.41 "Year of Service" means with respect to an Employee in the service of the Employer on or after January 1, 1976: (a) if the Employee was hired prior to January 1, 1976, each twelve (12) consecutive month period, computed from the Employee's most recent date of hire by the Employer, during his last period of continuous service as a full-time regular Employee (except that service prior to July 1, 1944 need not have been continuous) with the Employer immediately prior to January 1, 1976 (including service with Commonwealth and predecessor companies and service with Affiliated Employers and service with companies or properties heretofore affiliated or associated prior to the date of severance of such affiliation or association) and any subsequent twelve (12) consecutive month period commencing on an anniversary date of such date of hire (or date of reemployment as provided in Section 2.4), provided that in each such twelve (12) consecutive month period commencing on or after January 1, 1975 he has completed at least 1000 Hours of Service; or (b) if the Employee is hired on or after January 1, 1976, a twelve (12) consecutive month period after December 31, 1975, commencing on the Employee's most recent date of hire by the Employer (or date of reemployment as provided in Section 2.4), and any subsequent twelve (12) consecutive month period commencing on an anniversary date of such date of hire, provided he has completed at least 1000 Hours of Service during each such twelve (12) consecutive month period; and 12 (c) to the extent not resulting in duplication, each Year of Service restored to the Employee upon reemployment as provided in Section 8.3. An Employee's vested interest in his Accrued Retirement Income shall be based on his Vesting Years of Service and an Employee's eligibility to participate in the Plan pursuant to Article II shall be based on his Eligibility Year of Service. Breaks in service will be measured on the same computation period as the Year of Service. Effective on and after January 1, 1995, an Employee's accrual of Retirement Income shall be based solely on an Employee's Plan Year of Service, without regard to an Employee's completion of a Vesting Year of Service ending within such Plan Year. In the Plan and Trust Agreement, 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. 13 ARTICLE II Eligibility 2 2.1 Employees. Each Employee participating in the Plan as of January 1, 1989 shall continue to be included in the Plan. Each other Employee, except as provided in this Article, shall be included in the Plan on the first day of the month next following the date on which he first completes an Eligibility Year of Service. 2.2 Employees represented by a collective bargaining agent. The Employer recognizes Local 84, I.B.E.W., as the exclusive representative of all employees covered by the Memorandum of Agreement between Local Union No. 84 of the International Brotherhood of Electrical Workers and the Employer, and it is further agreed that these employees are eligible to participate in accordance with the provisions of the Plan. Any other Employee who is represented by a collective bargaining agent may participate in the Plan, subject to its terms, if the representative(s) of his bargaining unit and the Employer mutually agree to participation in the Plan by the members of his bargaining unit. 2.3 Persons in military service and Employees on authorized leave of absence. Any person not already included in the Plan who leaves or has left the employ of the Employer to enter the Armed Forces of the United States or is on authorized leave of absence without regular pay and who returns to the employ of the Employer within ninety (90) days after discharge from such military service or on or before termination of his leave of absence, shall, upon such return, be included in the Plan effective as of the first day of the month next following the date on which he first met or meets the eligibility requirement of Section 2.1. In determining whether an Employee entering the service of the Employer has completed an Eligibility Year of Service, his Hours of Service prior to such authorized leave of absence without regular pay or entry into the Armed Forces shall be taken into account, and for purposes of Section 2.4, he shall be deemed not to have incurred a One-Year Break in Service by reason of such absence. If an Employee dies while in active service with the Armed Forces of the United States, such Employee shall be deemed to have returned to the employ of the Employer on his date of death. An Employee not already included in the Plan who is on authorized leave of absence and receiving his regular pay shall be considered credited with Hours of Service as though the period of absence was a period of active employment with the Employer, and he shall be included in the Plan if and when he meets the 14 requirements of this Article II regardless of whether he is, on the date of such inclusion, on such leave of absence. 2.4 Employees reemployed. An Employee whose service terminates at any time and who is reemployed as an Employee, unless excluded under Section 2.6, will be included in the Plan as provided in Section 2.1 unless: (a) prior to termination of his service he had completed at least one Year of Service; and (b) upon his reemployment, to the extent provided in Section 8.3 without regard to Section 8.4, he is entitled to restoration of his Years of Service, in which case he will be included in the Plan as of the date of his reemployment. For purposes of determining Years of Service of an Employee who is reemployed by the Employer subsequent to a One-Year Break in Service, a Year of Service subsequent to his reemployment shall be computed on the basis of the twelve (12) consecutive month period commencing on his date of reemployment or an anniversary thereof. 2.5 Participation upon return to eligible class. If an Employee is a participant in the Plan before July 1, 1991, the exclusion from participation provided in Section 2.6, as it regards temporary employees, shall not apply with respect to such Employee, and such Employee shall be eligible to participate in the Plan after July 1, 1991 whether or not he is classified as a temporary employee. If an Employee first becomes a participant on or after July 1, 1991, in the event such Employee ceases to be a member of an eligible class of Employees and becomes ineligible to participate, but has not incurred a One-Year Break in Service, such Employee will participate immediately upon returning to an eligible class of Employees. If such Employee incurred a One- Year Break in Service, eligibility will be determined under Section 2.4 of the Plan. In all other instances, if an Employee is not a member of an eligible class of Employees but then becomes a member of an eligible class, such Employee will commence participation in the Plan as of the first day of the month next following the later of (a) the date such Employee completes an Eligibility Year of Service or (b) the date he becomes a member of an eligible class of Employees. 2.6 Exclusion of certain categories of employees. Notwithstanding any other provision of this Article II, leased employees shall not be eligible to participate in the Plan. In addition, a Temporary Full-Time or Temporary Part-Time employee, 15 as such terms are defined in the Corporate Guidelines of the Employer, who was not participating in the Plan as an Employee prior to July 1, 1990, shall not be considered to be an Employee for purposes of this Plan and shall not be entitled to any benefits hereunder. Lastly, any person who is employed by Electric City Merchandise Company, Inc. on or after May 1, 1988, or who is employed by Savannah Electric and Power Company on or after March 3, 1988, shall not be entitled to accrue Retirement Income under the Plan while employed at such companies. 2.7 Waiver of participation. Effective January 1, 1991, notwithstanding the above, an Employee may, subject to the approval of the Employer, elect voluntarily not to participate in the Plan. The election not to participate must be communicated in writing to the Retirement Board effective on an Employee's date of hire or an anniversary thereof. Effective January 1, 1995, the election not to participate must be communicated in writing to and acknowledged by the Retirement Board and shall be effective as of the date set forth in such written waiver. 16 ARTICLE III Retirement 3 3.1 Retirement at Normal Retirement Date. Each Employee eligible to participate in the Plan shall have a nonforfeitable right to his Accrued Retirement Income by no later than his sixty-fifth (65th) birthday, or in the case of any Employee hired on or after his sixtieth (60th) birthday, the fifth (5th) anniversary of his initial participation in the Plan. Notwithstanding the above, an Employee's Normal Retirement Date shall be as provided in Section 1.23. 3.2 Retirement at Early Retirement Date. An Employee having at least ten (10) Years of Accredited Service (including any Accredited Service to which he is entitled under the pension plan of any Affiliated Employer from which such Employee was transferred pursuant to Section 4.6 or 4.7, or which was credited to him in accordance with Section 4.3) may elect to retire on an Early Retirement Date on or after his fifty-fifth (55th) birthday and before his sixty-fifth (65th) birthday and to have his Retirement Income commence on that date, or effective January 1, 1995, the first day of any month up to and including the Employee's Normal Retirement Date. For the purposes of this Section 3.2, Accredited Service shall include Creditable Service under the Employees' Retirement Plan of Georgia Power and Light Company [Georgia Power Company, as successor] ("Power and Light Plan") not to exceed a period equal to the Accredited Service to which the Employee would have been entitled up to July 1, 1957 had his service with Georgia Power and Light Company prior to July 1, 1957 been service with the Employer. 3.3 Retirement at Deferred Retirement Date. An Employee included in the Plan may remain in active service after his Normal Retirement Date. The involuntary retirement of an Employee on or after his Normal Retirement Date shall not be permitted solely on the basis of the Employee's age, except in accordance with the provisions of the Age Discrimination in Employment Act, as amended from time to time. Termination of service of such an Employee for any reason after Normal Retirement Date shall be deemed retirement as provided in the Plan. 17 ARTICLE IV Determination of Accredited Service 4 4.1 Accredited Service pursuant to Prior Plan. Each Employee who participated in the Prior Plan shall be credited with such Accredited Service, if any, earned under such Prior Plan as of December 31, 1988. 4.2 Accredited Service. (a) Each Employee meeting the requirements of Article II shall, in addition to any Accredited Service to which he may be entitled in accordance with Section 4.1, be credited with Accredited Service as set forth in (b) below. Any such Employee who is on authorized leave of absence with regular pay shall be credited with Accredited Service during the period of such absence. Any such Employee who is a "participant in the Plan" within the meaning of that term as defined in paragraph (a) of Section 5.12 shall be credited with Accredited Service during all or such portion of the period of his absence to serve in the Armed Forces of the United States as may be recognized under paragraph (b) of Section 5.12. Employees on authorized leave of absence without regular pay, other than Employees deemed to accrue Hours of Service under Section 4.4, and persons in the Armed Forces who are not "participants in the Plan" within the meaning of that term as defined in paragraph (a) of Section 5.12 shall not be credited with Accredited Service for the period of such absence. An Employee who is a member of Local Union 84 of I.B.E.W. who is eligible to be included in the Plan will be credited with Accredited Service for the period (or portion of the period) after January 1, 1984, of a leave of absence granted by the Employer to permit him to carry on union business at the international office of I.B.E.W., but only if such Employee elects in writing on or before the beginning of a Plan Year to receive such credit for Accredited Service for such Plan Year. For the purposes of determining the Earnings of such Employee during the period (or portion of the period) after January 1, 1978 of such leave of absence, he shall be deemed to have received Earnings at the rate of Earnings being paid to him at the time of his leave of absence for union business commenced, adjusted from time to time during the period of such leave of absence for any general wage increase or decrease during such period applicable to Employees in the category of employment in which the Employee was employed at the time his leave of absence commenced. (b) For each Plan Year commencing after December 31, 1988, an Employee included in the Plan who is credited with a Vesting Year of Service for the twelve (12) consecutive month period 18 ending on the anniversary date of his hire which occurs during such Plan Year shall be credited with Accredited Service as follows: (1) if an Employee completes at least 1,680 Hours of Service in a Plan Year, he shall be credited with one year of Accredited Service; (2) if an Employee completes less than 1,680 Hours of Service in a Plan Year, but not less than 1,000 Hours of Service, he shall be credited with one-twelfth (1/12) of a year of Accredited Service for each 140 Hours of Service; or (3) if an Employee's initial eligibility in the Plan shall occur after the beginning of the Plan Year, and the Employee shall therefore have completed less than 1,000 Hours of Service in such Plan Year, he shall be credited with one-twelfth (1/12) of a year of Accredited Service for each 140 Hours of Service during such Plan Year after his inclusion in the Plan. Notwithstanding the above, effective January 1, 1995, an Employee's Accredited Service shall be calculated based on an Employee's accrual of a Plan Year of Service only and without regard to the requirement of a Vesting Year of Service. (c) If an Employee (1) who has previously satisfied the eligibility requirements under Article II shall again be included in the Plan at such time which is after the beginning of the Plan Year, or (2) shall terminate his employment for any reason before the close of such Plan Year and shall therefore have completed less than 1,000 Hours of Service in such Plan Year, he shall be credited with one-twelfth (1/12) of a year of Accredited Service for each 140 Hours of Service during such Plan Year after his inclusion in the Plan or before his termination of employment in such Plan Year, as the case may be. (d) In addition to any Accredited Service credited under Section 4.1, an Employee shall be entitled to Accredited Service determined under the Prior Plan, without regard to the age requirement for eligibility to participate in the Prior Plan, in excess of the Accredited Service determined under the Prior Plan (including the age requirement for eligibility to participate in the Prior Plan). Such Accredited Service shall be considered Accredited Service after December 31, 1985 for purposes of calculating an Employee's Retirement Income under Article V. (e) In addition to the foregoing, Accredited Service may include Accredited Service accrued subsequent to a One-year Break in Service including such Accredited Service which may be restored in accordance with the provisions of Section 8.3. 19 (f) Notwithstanding the above, the maximum number of years of Accredited Service with respect to any Employee participating in the Plan shall not exceed forty (40). Effective January 1, 1991, the maximum number of years of Accredited Service is increased to forty-three (43). 4.3 Accredited Service and Years of Service in respect of service of certain Employees previously employed by the Employer or by Affiliated Employers. An Employee in the service of the Employer on January 1, 1976 or employed by it thereafter who meets the requirements of paragraph (a) of this Section 4.3, in addition to any other Years of Service or Accredited Service to which he may be entitled under the Plan, upon completion of an Eligibility Year of Service where required under Section 8.3(c) (which shall also be considered to be Accredited Service) shall be credited with such number of Years of Service (and fractions thereof to the nearest whole month for service prior to January 1, 1976) and such Accredited Service and Retirement Income as shall be determined in accordance with the provisions of paragraphs (b) and (c) of this Section 4.3. (a) (1) Such Employee shall have been employed prior to January 1, 1976 by the Employer or by one or more Affiliated Employers; (2) he shall have terminated his service with Employer or such Affiliated Employer other than by retirement and he shall not be entitled to receive at any time any retirement income under the pension plan of any such prior employer in respect of any period of time for which he shall receive credit for Years of Service or Accredited Service under this Section 4.3; and (3) for Employees reemployed on or after January 1, 1985, the number of consecutive One-Year Breaks in Service incurred by the Employee prior to the date of his employment by the Employer does not equal or exceed the greater of (A) five (5), or (B) the aggregate number of his Years of Service (and fractions thereof to the nearest whole month for service prior to January 1, 1976) with the Employer and such Affiliated Employer. The years of Accredited Service credited to an Employee reemployed prior to January 1, 1985, with regard to years of Accredited Service immediately prior to the termination of his service, shall be determined under the terms of the Plan in effect prior to January 1, 1985. (b) The number of Years of Service (and fractions thereof to the nearest whole month for service prior to January 1, 1976) and the Accredited Service, respectively, which shall be credited to such Employee shall be equal to the respective number of his Years of Service (and fractions thereof to the nearest whole month for service prior to January 1, 1976) and Accredited Service which were forfeited by the Employee and not restored under the pension plans of the Employer or an Affiliated Employer. 20 (c) There shall be credited to the Employee Retirement Income equal to retirement income which was accrued by him under the pension plan of the Employer or an Affiliated Employer during the period of his Accredited Service which was forfeited and which is credited under the Plan in accordance with Section 4.3. The amount of Retirement Income credited in accordance with this paragraph (c) shall be treated as Prior Plan Retirement Income for purposes of determining the amount of Retirement Income to which the Employee is entitled, and shall be determined in accordance with the provisions of the pension plan of the Affiliated Employer in effect at the time the Employee's service with such Affiliated Employer terminated without regard to any minimum provisions of such pension plan; for this purpose and if relevant in respect of the Employee it shall be assumed that the pension plan of the Affiliated Employer in effect at the time the Employee's service with such Affiliated Employer terminated contained the provisions of Section 5.12 of the Plan and related amendments concerning absence from the service of the Employer to serve in the Armed Forces of the United States which became effective November 1, 1977. For Plan Years beginning after December 31, 1987, an Employee who meets the requirements of paragraph (a) of this Section 4.3 shall be deemed to have transferred to or from an Affiliated Employer for purposes of the transfer of assets or liabilities to or from the Plan in accordance with Section 4.6. 4.4 Accrual of Retirement Income during period of total disability. (a) If an Employee included in the Plan shall become totally disabled, as determined by the Retirement Board on the basis of medical evidence, after he has completed at least five (5) Vesting Years of Service and, by reason of such disability, he shall apply for and be granted either Social Security disability benefits or long-term disability benefits under a long-term disability benefit plan of the Employer, he shall be considered to be on a leave of absence, herein referred to as a "Disability Leave." An Employee's Disability Leave shall be deemed to begin on the initial date of the disability, as determined by the Retirement Board, and shall continue until the earlier of: (1) the end of the month in which he shall cease to be entitled to receive Social Security Disability benefits and long-term disability benefits under a long-term disability benefit plan of the Employer; (2) his death; and (3) his Retirement Date if he elects to have his Retirement Income commence on such date. During the period of the Employee's Disability Leave, he shall, for purposes of the Plan, be deemed to have received Earnings at the regular rate in effect for him. 21 (b) A disabled Employee who applies for and would be granted long-term disability benefits under a long-term disability benefit plan of the Employer, if it were not for the fact that the deductions therefrom attributable to other disability benefits equal or exceed the amount of his unreduced benefit under a long-term disability benefit plan of the Employer, will be considered as being currently granted benefits under such long-term disability benefit plan. (c) An Employee's Disability Leave shall be deemed to be a period for which Hours of Service shall be credited to the Employee as though the period of his Disability Leave were a period of active employment. (d) If an Employee's Disability Leave shall terminate prior to his Normal Retirement Date and he shall fail to return to the employment of the Employer 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 his rights shall be determined in accordance with Article VIII, unless at such time he shall be entitled to retire on an Early Retirement Date, in which event his termination of service shall be deemed to constitute his retirement under Section 3.2. (e) Notwithstanding the above, the years of Accredited Service for any Employee whose initial date of disability occurred under the Prior Plan shall be determined under the terms of the Prior Plan. 4.5 Employees leaving Employer's service. If the service of an Employee is terminated prior to retirement as provided by Article III, such Employee will forfeit any Vesting Years of Service and Accredited Service which he may have been subject to possible restoration of some or all of his Vesting Years of Service and Accredited Service in accordance with Article VIII. The provisions of this Section 4.5 shall not affect the rights, if any, of an Employee under Article VIII nor shall the rights of an Employee be affected during or by reason of a layoff, due to lack of work, which continues for a period of one year or less, except that such period of layoff shall not be deemed to be service with the Employer. If the service of an Employee is terminated, or if he is not reemployed before the expiration of one year after being laid off for lack of work, and he is subsequently reemployed, he will be treated as provided in Section 2.4. Forfeitures arising by reason of an Employee's termination of service for any reason shall not be applied to increase the benefits any Employee would otherwise receive under the Plan but shall be used to reduce contributions of the Employer to the Plan. 22 4.6 Transfers to or from Affiliated Employers. This Section 4.6 shall not apply to the transfer by an Employee to the Employer from Savannah Electric and Power Company on or after March 3, 1988. In the case of the transfer of an Employee (including an Employee included in the Prior Plan who was transferred in accordance with the Prior Plan) to an Affiliated Employer which has at the time of transfer a pension plan with substantially the same terms as this Plan, such Employee, if and when he commences to receive on or after his Normal Retirement Date retirement income under such pension plan of the Affiliated Employer to which transferred, shall receive retirement income under such pension plan attributable to years of Accredited Service with the Employer prior to the time of his transfer. If and when such an Employee commences to receive on an Early Retirement Date retirement income under such pension plan of the Affiliated Employer to which transferred, the amount of any retirement income payable under such pension plan and attributable to Accredited Service with the Employer prior to such transfer shall be reduced in accordance with the provisions of the pension plan relating to retirement income payable at Early Retirement Date, or if such retirement income shall be payable in a manner similar to the provisions of Section 8.2 or Section 8.6, reduced in accordance with the applicable provision. In the case of the transfer to this Employer (not including transfers by reason of the split-up as of November 1, 1949) of an Employee of any Affiliated Employer which has at the time of transfer a pension plan with substantially the same terms as this Plan, the Employer will, subject to the provisions of Article IX, make periodic contributions into this Plan to the extent necessary to provide the portion of the Retirement Income not provided for him in the pension plan of the company from which he was transferred. Upon the transfer of an Employee to or from the Employer, the Plan and Trust shall be authorized to receive or transfer the greater of (a) the actuarial equivalent of the Employee's Accrued Retirement Income or (b) such assets as may be required to fund the projected Retirement Income of the Employee at his retirement date attributable to the Plan or the pension plan maintained by the Affiliated Employer from which the Employee transfers, determined as of the last day of the Plan Year in which the transfer occurs using the current funding assumptions for the Plan Year in which the transfer occurs. The Retirement Board of the Employer shall be authorized to coordinate the transfer of assets and liabilities attributable to the benefits of active Employees, terminated vested Employees, retired Employees, and Provisional Payees with any Affiliated Employer which has at such time a pension plan with substantially the same terms as this Plan. 23 Notwithstanding the above, the transferred Employee shall be entitled to receive a benefit immediately following the transfer of assets or liabilities to or from the Plan and Trust which is equal to or greater than the benefit he would have been entitled to receive immediately before the transfer if the Plan or the pension plan maintained by the Affiliated Employer from which the Employee transfers had been terminated. In no event shall assets be transferred to or from the Plan and Trust without the concurrent transfer of liabilities attributable to such assets. In no case, however, shall any such Employee, who retires pursuant to Section 3.1, 3.2, or 3.3 or the Provisional Payee of a deceased Employee entitled to payment in accordance with Article VII, receive Retirement Income attributable to Accredited Service from both companies aggregating less than the Minimum Retirement Income specified in Article V (after giving effect to adjustments, if any, for Provisional Payee designation or deemed designation), as shall be applicable in his circumstances. 4.7 Transfers from Savannah Electric and Power Company. In the case of the transfer to the Employer of an employee of Savannah Electric and Power Company ("SEPCO"), such Employee, if and when he attains his Normal Retirement Date or Deferred Retirement Date, shall be entitled to receive Retirement Income calculated pursuant to Section 5.1 or 5.2, as appropriate, based upon his Accredited Service with the Employer and Accredited Service attributable to actual service during his employment with SEPCO. Such amount calculated in accordance with the preceding sentence shall be reduced by the amount of retirement income calculated under the defined benefit pension plan of SEPCO attributable to Accredited Service during his actual service during his employment with SEPCO. Any Retirement Income based upon an Employee's Accredited Service with the Employer and Accredited Service attributable to actual service during his employment with SEPCO shall be subject to the provisions of the Plan relating to Retirement Income payable at an Early Retirement Date, or if such Retirement Income shall be payable in accordance with the provisions of Section 8.2 or 8.6, subject to the provisions of such Section. This Section 4.7 shall also apply in calculating the Retirement Income payable under this Plan to a former employee of SEPCO who is hired by the Employer and is entitled to credit for years of Accredited Service under the Plan attributable to his actual service with SEPCO. 24 4.8 Retirement income for certain former employees of Southern Electric Generating Company. This Section 4.8 shall apply to those former employees of Southern Electric Generating Company ("SEGCO") who either (a) retired from SEGCO on their Early, Normal or Deferred Retirement Date under the Pension Plan for Employees of Southern Electric Generating Company (the "SEGCO Plan"), or (b) transferred from SEGCO to Alabama By-Products Corporation ("ABC") in connection with the acquisition by ABC of SEGCO's Mine No. 1 operation on or about August 1, 1974, and for whom this Plan has assumed the liability for the payment of their retirement income following the transfer of assets and liabilities from the SEGCO Plan to this Plan. Each such employee shall be entitled to receive Retirement Income under the Plan attributable to years of Accredited Service with SEGCO prior to the time of his retirement or transfer, as appropriate, calculated and payable in accordance with the terms and provisions of the SEGCO Plan in effect on the date of such retirement or transfer, subject to any adjustments provided under Section 8.6 of this Plan and any increases in Retirement Income for retired employees under Section 5.11 of this Plan. Notwithstanding the above, each employee to whom this Section 4.8 shall apply shall be entitled to receive a benefit immediately following the transfer of assets or liabilities from the SEGCO Plan and Trust which is equal to or greater than the benefit he would have been entitled to receive immediately before the transfer of assets or liabilities if the SEGCO Plan had been terminated. 25 ARTICLE V Retirement Income 5 5.1 Normal Retirement Income. The monthly Retirement Income payable as a single life annuity to an Employee included in the Plan who retires from the service of the Employer at his Normal Retirement Date after January 1, 1989, subject to the limitations of Article VI, shall be the greater of (a) and (b): (a) the amount determined under (1) or (2) below, whichever is greater: (1) the Accrued Retirement Income determined in accordance with Section 5.1 of the Prior Plan without regard to the Minimum Retirement Income requirement, plus the designated fixed dollar amount times the Employee's years of Accredited Service earned after December 31, 1988. For the period on and after January 1, 1989 but ending December 31, 1990, the fixed dollar amount equals $20.00. For the period on and after January 1, 1991, the fixed dollar amount equals $25.00; and (2) $25.00 times an Employee's years of Accredited Service; and (b) the Minimum Retirement Income as determined in accordance with Section 5.2. 5.2 Minimum Retirement Income payable upon retirement at Normal Retirement Date or Deferred Retirement Date. The monthly Minimum Retirement Income payable to an Employee who retires from the service of the Employer after January 1, 1989 at his Normal Retirement Date or Deferred Retirement Date (before adjustment for Provisional Payee designation, if any) shall be an amount equal to 1.70% of his Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service to his Normal Retirement Date or Deferred Retirement Date including a Social Security Offset. Any provisions of this Article V to the contrary notwithstanding, Retirement Income determined in accordance with this Article V with respect to an Employee who retires on his Normal Retirement Date or Deferred Retirement Date shall not be less than the Retirement Income which would have been payable with respect to such Employee commencing on an Early Retirement Date had (a) the Employee retired on the Early Retirement Date which would have resulted in the greatest Retirement Income, (b) his Retirement Income commencing on such Early Retirement Date been computed by utilizing the estimated Federal primary Social Security benefit to which the Employee shall be entitled 26 determined in accordance with the Social Security Act in effect at his retirement, giving effect to the recomputation provision of such Social Security Act, if applicable, and (c) such Retirement Income commencing on such Early Retirement Date been payable in the same form as his Retirement Income commencing on his Normal Retirement Date or Deferred Retirement Date. 5.3 Minimum Retirement Income upon retirement at Early Retirement Date or upon termination of service by reason of death or otherwise prior to retirement. The monthly Minimum Retirement Income payable to an Employee (or his Provisional Payee), if he shall retire on his Early Retirement Date, or if his service shall terminate by reason of death or otherwise prior to retirement, shall be determined in accordance with the following provisions: (a) Upon retirement at Early Retirement Date his Minimum Retirement Income (before adjustment for Provisional Payee designation, if any) shall be an amount equal to 1.70% of his Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service to his Early Retirement Date including a Social Security Offset. (b) Upon termination of service by reason of the death of the Employee prior to retirement and after the effective date of his Provisional Payee designation or deemed designation, the Minimum Retirement Income for the purpose of determining the Employee's Accrued Retirement Income upon which payment to his Provisional Payee in accordance with Section 7.4 shall be based shall be an amount equal to 1.70% of the Employee's Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service to the date of his death including a Social Security Offset. (c) For an Employee who terminates his service with the Employer with entitlement to receive Retirement Income in accordance with Section 8.1, upon retirement at Early Retirement Date or Normal Retirement Date his Minimum Retirement Income (before adjustment for Provisional Payee designation, if any) shall be an amount equal to 1.70% of his Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service to his date of termination including a Social Security Offset. (d) Upon termination of service by reason of disability (as defined in Section 4.4) of the Employee prior to retirement, provided such Employee does not return to the service of the Employer prior to his Retirement Date, the Minimum Retirement Income shall be an amount equal to 1.70% of the Employee's Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service to his Retirement Date including a Social Security Offset. 27 5.4 Calculation of Social Security Offset. (a) Notwithstanding the Social Security Offset as calculated in Sections 5.2 and 5.3, in no event shall such Social Security Offset exceed the limits set forth in Section 401(l) of the Code and the regulations applicable thereunder which are incorporated by reference herein. (b) For purposes of determining the Social Security Offset in calculating an Employee's Retirement Income under the Plan, the Social Security Offset shall be determined by using the actual salary history of the Employee during his employment with the Employer or any Affiliated Employer, provided that in the event that the Retirement Board is unable to secure such actual salary history within 180 days (or such longer period as may be prescribed by the Retirement Board) following the later of the date of the Employee's separation from service (by retirement or otherwise) and the time when the Employee is notified of the Retirement Income to which he is entitled, the salary history shall be determined in the following manner: (1) The salary history shall be estimated by applying a salary scale, projected backwards, to the Employee's compensation from the Employer for W-2 purposes for the first Plan Year following the most recent Plan Year for which the salary history is estimated. The salary scale shall be a level percentage per year equal to six percent (6%) per annum. (2) The Plan shall give clear written notice to each Employee of the Employee's right to supply the actual salary history and of the financial consequences of failing to supply such history. Such notice shall state that the actual salary history is available from the Social Security Administration. For purposes of determining the Social Security Offset in calculating the Retirement Income of an Employee entitled to receive a public pension based on his employment with a Federal, state, or local government agency, no reduction in such Employee's Social Security benefit resulting from the receipt of a public pension shall be recognized. (c) If the distribution of an Employee's Accrued Retirement Income begins before the Employee's attainment of the Social Security Retirement Age (including a benefit commencing at Normal Retirement Date), the projected Employer derived primary insurance amount attributable to service by the Employee for the Employer will be reduced by one-fifteenth (1/15) for each of the first five (5) years and one-thirtieth (1/30) for each of the next five (5) years by which the starting date of such benefit 28 precedes the Social Security Retirement Age of the Employee, and reduced actuarially for each additional year thereafter. 5.5 Early Retirement Income. The monthly amount of Retirement Income payable to an Employee who retires from the service of the Employer at his Early Retirement Date subject to the limitations of Section 6.2, will be equal to his Retirement Income determined in accordance with Sections 5.1 and 5.3 based on his Accredited Service to his Early Retirement Date, reduced by three-tenths of one percent (0.3%) for each calendar month by which the commencement date of his Retirement Income precedes his Normal Retirement Date. At the option of the Employee exercised at or prior to commencement of his Retirement Income on or after his Early Retirement Date (provided he shall not have in effect at such Early Retirement Date a Provisional Payee designation pursuant to Article VII) he may have his Retirement Income adjusted upwards in an amount which will make his Retirement Income payable up to age sixty-five (65) equal, as nearly as may be, to the amount of his Federal primary Social Security benefit (primary old age insurance benefit) estimated to become payable after age sixty-five (65), as computed at the time of his retirement in accordance with Section 5.3(a), plus a reduced amount, if any, of Retirement Income actually determined to be payable after age sixty-five (65). The Federal primary Social Security benefit used in calculating an Employee's Retirement Income payable under the Plan shall be determined by using the salary history of the Employee during his employment with the Employer or any Affiliated Employer, as calculated in accordance with Section 5.4(b). 5.6 Deferred Retirement Income. The monthly amount of Retirement Income payable to an Employee who completes at least one Hour of Service after December 31, 1987 and who retires from the service of the Employer at his Deferred Retirement Date, subject to the limitations of Section 6.2, will be equal to his Retirement Income determined in accordance with Sections 5.1 and 5.2 based on his Accredited Service to his Deferred Retirement Date. For Employees whose Normal Retirement Date would have occurred on or before January 1, 1986, but whose Deferred Retirement Date occurs after January 1, 1988 and on or before July 1, 1991, the monthly amount of Retirement Income payable to an Employee who completes at least one Hour of Service after December 31, 1987, subject to the limitations of Section 6.2, will be equal to the greater of (a) his Retirement Income calculated on his Deferred Retirement Date, or (b) his Retirement Income calculated as of his Normal Retirement Date applying the applicable percentage increase in his Retirement Income pursuant to the terms of Section 5.13 of the Prior Plan. 29 5.7 Payment of Retirement Income. The first payment of an Employee's Retirement Income will be made on his Early Retirement Date, Normal Retirement Date, Deferred Retirement Date, or date of commencement of payment of Retirement Income in accordance with Section 8.2 or 8.6, as the case may be; provided that commencement of the distribution of an Employee's Retirement Income shall not be made prior to his Normal Retirement Date without the consent of such Employee, except as provided in Section 8.4 of the Plan. Notwithstanding anything to the contrary above, if in accordance with this Section 5.7, an Employee is entitled to receive Retirement Income commencing at his Early Retirement Date, he may, in lieu of commencing payment of his Retirement Income upon his Early Retirement Date, elect to receive such Retirement Income commencing as of the first day of any month after his Early Retirement Date and preceding his Normal Retirement Date in an amount equal to his Accrued Retirement Income determined as of the commencement of his Retirement Income on or after his Early Retirement Date determined in accordance with Section 5.5. An election pursuant to this Section 5.7 to have Retirement Income commence prior to Normal Retirement Date shall be made on a form prescribed by the Retirement Board and shall be filed with the Retirement Board at least thirty (30) days before Retirement Income is to commence. In the event of the death of an Employee who has designated a Provisional Payee or is deemed to have done so in accordance with Article VII, if the designation has become effective, the first payment to be made to the Provisional Payee pursuant to Article VII shall be made to the Provisional Payee on the first day of the month after the later of (a) the Employee's death and (b) the date on which the Employee would have attained his fifty- fifth (55th) birthday if he had survived to such date, if the Provisional Payee shall then be alive and proof of the Employee's death satisfactory to the Retirement Board shall have been received by it. Subsequent payments will be made monthly thereafter until the death of such Provisional Payee. In any event, payment of Retirement Income to the Employee shall begin not later than the sixtieth (60th) day after the later of the close of the Plan Year in which falls (a) the Employee's Normal Retirement Date or (b) the date the Employee terminates his service with the Employer or any Affiliated Employer. Notwithstanding the provisions of the Plan for the monthly payment of Retirement Income, such income may be adjusted and payable annually in arrears if the amount of the Retirement Income is less than $10.00 per month. 30 5.8 Termination of Retirement Income. The monthly payment of Retirement Income will cease with the last payment preceding the retired Employee's death; subject, however, to the continuation of payments to a surviving Provisional Payee, if one has been designated or deemed to have been designated, which likewise will cease with the last payment preceding the death of the Provisional Payee. There shall be no benefits payable under the Plan on behalf of any Employee whose death occurs prior to his retirement, except as otherwise provided in Article VII with respect to a Provisional Payee of an Employee. Following the death of an Employee and of his Provisional Payee, if any, no further payments will be made under the Plan on account of such Employee or to his estate. 5.9 Required distributions. (a) Once a written claim for benefits is filed with the Retirement Board and unless the Employee elects to have payment begin at a later date, payment of benefits to the Employee shall begin not later than sixty (60) days after the last day of the Plan Year in which the latest of the following events occurs: (1) the Employee's Normal Retirement Date; (2) the tenth (10th) anniversary of the date the Employee commenced participation in the Plan; or (3) the Employee's separation from service from the Employer or any Affiliated Employer. (b) Required minimum distributions on and after January 1, 1989 (1) Subject to the transitional rules described in Paragraph (c) below, effective for calendar years beginning after December 31, 1988, the payment of Retirement Income to any Employee shall begin no later than April 1 of the calendar year following the calendar year in which the Employee attains age 70-1/2, without regard to the actual date of separation from service. The amount of his Retirement Income shall be recomputed as of such April 1 and as of the close of each Plan Year after his Retirement Income commences and preceding his actual retirement date as if each such date were the Employee's Deferred Retirement Date. Any additional Retirement Income he accrues at the close of any such Plan Year shall be offset (but not below zero) by the value of the benefit payments received in such Plan Year. (2) The receipt by an Employee of any payments or distributions as a result of his attaining age 70-1/2 prior to his actual retirement or death shall in no way affect the 31 entitlement of an otherwise eligible Employee to additional accrued benefits. (c) Age 70-1/2 transitional rule Any Employee who is not a five-percent owner and who has attained age 70-1/2 by January 1, 1988, may defer the commencement of benefit payments under paragraph (b) above until he actually separates from service with the Employer. This transitional rule shall only apply if the Employee is not a five- percent owner at any time during the Plan Year ending with or within the calendar year in which such owner attains age 66-1/2 and in any subsequent Plan Year. (d) Distribution upon death of Employee (1) Death after commencement of benefits If the Employee dies before his entire nonforfeitable interest has been distributed to him, the remaining portion of such interest shall be distributed at least as rapidly as under the method of distribution selected by the Employee as of the date of his death. (2) Death prior to commencement of benefits If the Employee dies before the distribution of his nonforfeitable interest has begun, the entire interest shall be distributed monthly to his Provisional Payee, if any, over such Provisional Payee's remaining lifetime. (e) Determining required minimum distributions Notwithstanding anything in this Plan to the contrary, all distributions, including the minimum amounts which must be distributed each calendar year, under this Plan shall be made in accordance with Code Section 401(a)(9) and the regulations thereunder. (f) Minimum distribution transitional rules Any distribution made pursuant to Section 242(b)(2) of the Tax Equity and Fiscal Responsibility Act of 1982 shall meet the requirements of Code Section 401(a)(9) as in effect on December 31, 1983, and shall also satisfy Code Sections 401(a)(11) and 417. 32 5.10 Suspension of Retirement Income for reemployment. (a) If a former Employee who is receiving Retirement Income shall be reemployed by the Employer or 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 cease during each calendar month after his reemployment in which he completes forty (40) or more Hours of 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. (b) No payment shall be withheld 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. (c) 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. 5.11 Increase in Retirement Income of retired Employees for service prior to January 1, 1991. Retirement Income payable on and after January 1, 1991 to an Employee (or to the Provisional Payee of an Employee) who retired at an Early Retirement Date or at his Normal Retirement Date on or before January 1, 1991 pursuant to the Plan as in effect prior to January 1, 1991, will be recalculated to increase the amount thereof by an amount ranging from a minimum of two percent (2%) to a maximum of forty percent (40%) in accordance with the following schedule: Year in which Percentage retirement occurred increase 1990 2% 1989 4% 1988 6% 1987 8% 1976 - 1986 10% 1971 - 1975 20% 1966 - 1970 30% 1965 and prior years 40% 33 A similar adjustment, based on the date of the commencement of Retirement Income payments to the Employee's Provisional Payee, rather than the Employee's Retirement Date, will be made in respect of Retirement Income which is payable on or after January 1, 1991 where a Provisional Payee election was in effect, or was deemed to be in effect, when an Employee died while in service prior to January 1, 1991 and prior to his retirement. A similar adjustment will be made in respect of Retirement Income which is payable on or after January 1, 1991 for an Employee (or the Provisional Payee of an Employee) entitled to Retirement Income for which payments have commenced on or before January 1, 1991 in accordance with Article VIII of the Prior Plan, except for Employees whose Retirement Income has been cashed-out pursuant to Section 8.4 of this Plan or Section 8.5 of the Prior Plan. For purposes of determining the applicable percentage increase under this Section 5.11, the year of retirement includes retirement where the last day of employment was December 31 of such year. An Employee whose Deferred Retirement Date is on or before January 1, 1988 and who did not retire at his Normal Retirement Date shall be deemed to have retired at his Normal Retirement Date for purposes of determining the increase in his Retirement Income payable at his Deferred Retirement Date. This Section 5.11 shall not apply with respect to an Employee who has not retired, but for whom the distribution of Retirement Income has commenced pursuant to Section 5.9 of the Plan. 5.12 Special provisions relating to the treatment of absence of an Employee from the service of the Employer to serve in the Armed Forces of the United States. (a) Effective as of November 1, 1977, any provisions of the Plan to the contrary notwithstanding, the provisions of this Section 5.12 shall be applicable to determine the period of absence from the service of the Employer to serve in the Armed Forces of the United States of a "participant in the Plan" (as such term is defined in this paragraph (a)): The term "participant in the Plan" means a person who on or after November 1, 1977 is either: (1) an Employee who is then or thereafter in the service of the Employer (including an Employee on authorized leave of absence), (2) a retired Employee who is receiving Retirement Income, (3) a deceased Employee who received Retirement Income under this Plan or the Prior Plan at any time after its Effective Date, (4) a deceased former Employee who prior to the time of his death was receiving Retirement Income in accordance with this Plan or the Prior Plan, (5) a former Employee whose service terminated prior to January 1, 1976 and 34 who is receiving Retirement Income in accordance with the Prior Plan, (6) a former Employee whose service terminated prior to November 1, 1977 and who will be entitled to receive Retirement Income commencing after that date in accordance with this Plan or the Prior Plan, or (7) a former Employee who was transferred from the Employer pursuant to Section 4.6 or pursuant to the Prior Plan and who will be entitled to receive in accordance with either, Retirement Income commencing after November 1, 1977. The Employee or former Employee or retired Employee referred to in this paragraph (a) is one who: (1) left the employment of the Employer or of Georgia Power and Light Company to enter the Armed Forces of the United States (including reserve components thereof, the Public Health Service, and the National Guard) for the purposes and under circumstances which are specified in the reemployment provisions of the Military Selective Service Act and in any amendments or supplements thereto hereinafter in this Section 5.12 referred to as the "Selective Service Act," (2) made application for reemployment by the Employer or by Georgia Power and Light Company within such time after discharge or release from such service in the Armed Forces of the United States as is specified in the reemployment provisions of the Selective Service Act as is applicable in his circumstances and was reemployed by the Employer or by Georgia Power and Light Company thereafter became an Employee of the Employer on March 1, 1957, (3) served a period of active duty in the Armed Forces of the United States which did not exceed the maximum period of such active duty specified in the reemployment provisions of the Selective Service Act as is applicable in his circumstances, and (4) performed such service in the Armed Forces after May 1, 1940. (b) For the purposes of the Plan, the period of absence of a participant in the Plan to serve in the Armed Forces of the United States shall be the period determined by the Retirement Board. (c) In accordance with the provisions of the Plan as amended effective as of November 1, 1977 by the addition of this Section 5.12 and the concurrent amendments associated therewith, there shall be recalculated effective as of November 1, 1977 the Retirement Income (1) of each participant in the Plan or that of his Provisional Payee, if any, who is then receiving Retirement Income; and (2) of each deceased participant in the Plan and his deceased Provisional Payee, if any, who received payment of Retirement Income, who is not then receiving Retirement Income. (1) If in accordance with such recalculation, a larger amount of Retirement Income would have been payable to a participant in the Plan who is currently receiving payment of Retirement Income and/or to his Provisional Payee, if any, than was paid to them respectively prior to November 1, 1977, payment in a single sum of the excess of the 35 recalculated amount over the amounts which were paid prior to November 1, 1977 with interest thereon as hereinafter provided, shall be made as soon as practicable after November 1, 1977 and, commencing as soon as practicable after November 1, 1977, the Retirement Income payable to participants in the Plan and/or to their Provisional Payees, if any, who are currently receiving Retirement Income shall be increased to an amount which is equal to the larger recalculated amount to which they shall be entitled in respect of payments to be made on or after November 1, 1977. (2) If in accordance with the recalculation a larger amount of Retirement Income would have been payable to the date of death prior to November 1, 1977 of a deceased retired Employee or his Provisional Payee than was paid prior to his death, payment in a single sum of the excess of the recalculated amount over the amount which was paid prior to the date of death, with interest thereon as hereinafter provided, shall be made to his estate as soon as practicable after November 1, 1977. (3) For the purposes of the recalculation to be made in accordance with this paragraph (c), if a participant in the Plan left the employment of an Affiliated Employer to enter the Armed Forces of the United States and was not reemployed by such Affiliated Employer upon his discharge or release from service in the Armed Forces but he entered the employment of the Employer, without intermediate employment, and within the time prescribed in paragraph (a) of this Section 5.12, and his period of absence in the Armed Forces of the United States, as determined by the Retirement Board, is not taken into account under the pension plan of the Affiliated Employer whose service he left to enter the Armed Forces or under Section 4.3, it shall be treated under the Plan and the Prior Plan as if such period of absence had been a period of absence from the Employer. (d) Retirement Income of participants in the Plan who are not referred to in subparagraphs (1) or (2) of paragraph (c) and who are not on November 1, 1977 receiving Retirement Income shall be determined in accordance with the provisions of the Plan as amended by the addition of this Section 5.12 and the concurrent amendments associated therewith. (e) Interest to be paid on any single sum payment to be made in accordance with subparagraphs (1) or (2) of paragraph (c) of this Section 5.12 shall be computed at the annual rate of five percent (5%). (f) Payment to be made to any payee in accordance with this Section 5.12 may be conditioned by the Retirement Board upon its receipt of (1) such information pertaining to absence of an 36 Employee or former Employee to serve in the Armed Forces of the United States as it may request and (2) such form of receipt and release as it may determine to be appropriate in the circumstances. 37 ARTICLE VI Limitations on Benefits 6 6.1 Maximum Retirement Income. Notwithstanding any other provision of the Plan, the amount of Retirement Income shall be subject to the provisions of Article VI. (a) The maximum annual amount of Retirement Income payable with respect to an Employee in the form of a straight life annuity without any ancillary benefits after any adjustment for a Provisional Payee designation shall be the lesser of the dollar limitation determined under Code Section 415(b)(1)(A) as adjusted under Code Section 415(d), or Code Section 415(b)(1)(B) as adjusted under Treasury Regulation Section 1.415-5, subject to the following provisions of Article VI. With respect to any former Employee who has Accrued Retirement Income under the Plan or his Provisional Payee, the maximum annual amount shall also be subject to the adjustment under Code Section 415(d). (b) For purposes of Section 6.1, the term "average compensation for his high three (3) years" shall mean the period of consecutive calendar years (not more than three) during which the Employee was both an active participant in the Plan and had the greatest aggregate compensation from the Employer or, if he is also entitled to receive a pension from a defined benefit plan of an Affiliated Employer or if assets and liabilities attributable to the pension of the Employee from a defined benefit plan of an Affiliated Employer have been transferred to this Plan, the greatest aggregate compensation from the Employer and the Affiliated Employer during such high three (3) years. The limitation described in Section 6.1(a) shall also apply in the case of the payment of an Employee's Retirement Income with a Provisional Payee designation. (c) For purposes of Article VI, the term "compensation" means an Employee's earned income, wages, salaries, and fees for professional services, and other amounts received for personal services actually rendered in the course of employment with the Employer maintaining the Plan (including, but not limited to, commissions paid salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips and bonuses), and excluding the following: (1) Employer contributions to a plan of deferred compensation which are not included in the Employee's gross income for the taxable year in which contributed or Employer contributions under a simplified employee pension plan to the extent such contributions are deductible by the Employee, or any distributions from a plan of deferred compensation; 38 (2) Amounts realized from the exercise of a nonqualified stock option, or when restricted stock (or property) held by the Employee either becomes freely transferable or is no longer subject to a substantial risk of forfeiture; (3) Amounts realized from the sale, exchange, or other disposition of stock acquired under a qualified stock option; and (4) Other amounts which received special tax benefits, or contributions made by the Employer (whether or not under a salary reduction agreement) towards the purchase of an annuity described in Section 403(b) of the Code (whether or not the amounts are actually excludable from the gross income of the Employee). Compensation for any Limitation Year is the compensation actually paid or includible in gross income during such year. (d) The foregoing limitations regarding the maximum Retirement Income shall not apply with respect to an Employee if the Retirement Income payable under the Plan and under any other defined benefit plans of the Employer or any Affiliated Employer does not exceed $10,000 for the calendar year or for any prior calendar year, and the Employer and any Affiliated Employer has not at any time maintained a defined contribution plan in which the Employee has participated. The terms "defined benefit plan" and "defined contribution plan" shall have the meanings set forth in Section 415(k) of the Code. 6.2 Adjustment to Defined Benefit Dollar Limitation for Early or Deferred Retirement. (a) If the retirement benefit of an Employee commences before the Employee's Social Security Retirement Age, the Defined Benefit Dollar Limitation shall be reduced in accordance with Code Section 415(b)(2)(C) as prescribed by the Secretary of the Treasury. The reduction shall be made in such manner as the Secretary of the Treasury may prescribe which is consistent with the reduction for old-age insurance benefits commencing before the Social Security Retirement Age under the Social Security Act. (b) If the retirement benefit of an Employee commences after the Employee's Social Security Retirement Age, the Defined Benefit Dollar Limitation shall be adjusted in accordance with Code Section 415(b)(2)(D) as prescribed by the Secretary of the Treasury, based on the lesser of the interest rate assumption under the Plan or on an assumption of five percent (5%) per year. 39 6.3 Adjustment of limitation for Years of Service or participation. (a) If an Employee has completed less than ten (10) years of participation, the Employee's accrued benefit shall not exceed the Defined Benefit Dollar Limitation as adjusted by multiplying such amount by a fraction, the numerator of which is the Employee's number of years (or part thereof) of participation in the Plan, and the denominator of which is ten (10). (b) If an Employee has completed less than ten (10) Years of Service with the Employer and any Affiliated Employer, the limitations described in Sections 415(b)(1)(B), 415(b)(4), and 415(e) of the Code shall be adjusted by multiplying such amounts by a fraction, the numerator of which is the Employee's number of years of service (or part thereof), and the denominator of which is ten (10). (c) In no event shall Sections 6.3(a) and (b) reduce the limitations provided under Sections 415(b)(1), 415(b)(4), and 415(e) of the Code to an amount less than one-tenth (1/10) of the applicable limitation (as determined without regard to this Section 6.3). (d) This Section 6.3 shall be applied separately with respect to each change in the benefit structure of the Plan, except as is or may be limited by Revenue Procedure 92-42. 6.4 Preservation of Accrued Retirement Income. (a) Retirement Income payable to an Employee or former Employee who was an active participant in the Plan before October 3, 1973 will not be deemed to exceed the amount of maximum Retirement Income limitations imposed by the provisions of this Article VI if: (1) The annual amount of Retirement Income payable to such Employee on retirement does not exceed 100% of his annual rate of compensation on the earlier of (A) October 2, 1973, or (B) the date on which he separated from the service of the Employer; (2) Such annual Retirement Income is not greater than the annual amount of Retirement Income which would have been payable to such Employee on retirement if (A) all terms and conditions of the Plan in existence on his retirement date had remained in existence until his retirement and (B) his compensation taken into account for any period after October 2, 1973 had not exceeded his annual rate of compensation on October 2, 1973; and 40 (3) In the case of an Employee whose service with the Employer terminated prior to October 2, 1973, such annual Retirement Income is no greater than his vested Accrued Retirement Income as of the date of such termination of service. (b) In the case of an Employee who is a participant in the Plan prior to January 1, 1983, if the Section 415 requirements have been met for all Plan Years prior to 1983, then the Defined Benefit Dollar Limitation described in Section 1.10 applicable to the payment of such Employee's Retirement Income shall be equal to his Accrued Retirement Income as of December 31, 1982, (when expressed as an annual benefit within the meaning of Section 415(b)(2) of the Code, as in effect prior to the Tax Equity and Fiscal Responsibility Act of 1982), if his Accrued Retirement Income exceeds such Defined Benefit Dollar Limitation. (c) This Section 6.4(c) shall apply to defined benefit plans that were in existence on May 6, 1986, and that met the applicable requirements of Section 415 of the Code as in effect for all Limitation Years. If the Current Accrued Retirement Income of an Employee as of the first day of the Limitation Year beginning on or after January 1, 1987, exceeds the benefit limitations under Section 415(b) of the Code (as modified by Sections 6.2 and 6.3 of the Plan), then, for purposes of Code Section 415(b) and (e), the Defined Benefit Dollar Limitation with respect to such Employee shall be equal to such Current Accrued Retirement Income. 6.5 Limitation on benefits from multiple plans. (a) In the case of an Employee who is also a participant in any other defined benefit plan of the Employer or any Affiliated Employer or in any defined contribution plan of the Employer or any Affiliated Employer, the Retirement Income provided by the Plan shall be limited to the extent necessary to prevent the sum of Fractions A and B below, computed as of the end of the Plan Year, from exceeding 1.0. Fraction A (numerator) Projected annual benefit of the Employee under the Plan and any other defined benefit plan of the Employer or any Affiliated Employer (determined as of the close of the Plan Year). (denominator) The lesser of (1) the product of 1.25 multiplied by the Defined Benefit Dollar Limitation (or such higher accrued benefit as of December 31, 1982), or (2) 1.4 multiplied by the amount determined under Code Section 415(b)(1)(B) as adjusted under Treasury Regulation Section 1.415-5. 41 Fraction B (numerator) The sum of all Annual Additions to the account of the Employee under any defined contribution plan of the Employer or any Affiliated Employer as of the close of the Plan Year. (denominator) The sum of the lesser of the following amounts, determined for such Plan Year and for each prior Plan Year in which the Employee has a Year of Service, (1) 1.25 multiplied by the Defined Contribution Dollar Limitation determined under Code Section 415(c)(1)(A), or (2) 1.4 multiplied by twenty-five percent (25%) of the Employee's compensation for the year. 6.6 Special rules for plans subject to overall limitations under Code Section 415(e). (a) For purposes of computing the defined contribution plan fraction of Section 415(e)(1) of the Code, "Annual Addition" shall mean the amount allocated to an Employee's account during the Limitation Year as a result of: (1) employer contributions, (2) employee contributions, (3) forfeitures, and (4) amounts described in Sections 415(1)(1) and 419(A)(d)(2) of the Code. (b) The Annual Addition for any Limitation Year beginning before January 1, 1987 shall not be recomputed to treat all Employee contributions as an Annual Addition. (c) If the sum of Fractions A and B exceeds 1.0 as of December 31, 1982, the numerator of Fraction B shall be reduced by an amount which does not exceed the numerator, so that the sum of Fraction A and Fraction B does not exceed 1.0. (d) If the Plan satisfied the applicable requirements of Section 415 of the Code as in effect for all Limitation Years beginning before January 1, 1987, an amount shall be subtracted from the numerator of the defined contribution plan fraction (not exceeding such numerator) as prescribed by the Secretary of the Treasury so that the sum of the defined benefit plan fraction and defined contribution plan fraction computed under Section 415(e)(1) of the Code (as revised by this Article VI) does not exceed 1.0 for such Limitation Year. 42 (e) The defined contribution plans and the other defined benefit plans of the Employer and Affiliated Employers include, respectively, (1) The Southern Company Employee Savings Plan, The Southern Company Employee Stock Ownership Plan, and any other defined contribution plan (as defined in Section 415(k) of the Code) and (2) any other qualified pension plan in which the Employee participates in accruing benefits maintained by the Employer or any Affiliated Employer. 6.7 Combination of Plans. Notwithstanding any provisions contained herein to the contrary, in the event that an Employee participates in a defined contribution plan or 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(e), corrective adjustments shall first be made under this Plan. However, if an Employee's Retirement Income under this Plan has already commenced, corrections shall first be made under The Southern Company Employee Stock Ownership Plan, if possible, and if not possible, then correction shall be made to the Employee's Accrued Retirement Income under this Plan. 6.8 Incorporation of Code Section 415. Notwithstanding anything contained in this Article to the contrary, the limitations, adjustments and other requirements prescribed in this Article shall at all times comply with the provisions of Code Section 415 and the regulations thereunder, the terms of which are specifically incorporated herein by reference. 43 ARTICLE VII Provisional Payee 7 7.1 Adjustment of Retirement Income to provide for payment to Provisional Payee. An Employee who desires to have his Accrued Retirement Income adjusted in accordance with the provisions of this Article VII to provide a reduced amount of Retirement Income payable to him for his lifetime commencing on his Early Retirement Date, his Normal Retirement Date, or his Deferred Retirement Date, as the case may be, may elect, in accordance with the provisions of this Article VII, at his option, either: (a) that an amount of Retirement Income be payable to him for his lifetime which is equal to eighty percent (80%) of the Retirement Income which would otherwise be payable to him, but for such election (taking into account any reduction required in accordance with Sections 7.3 and 7.4(a)), with the provision that the same amount will be continued after his death to his Provisional Payee until the death of such Provisional Payee, or (b) that an amount of Retirement Income be payable to him for his lifetime which is equal to ninety percent (90%) of the Retirement Income which would otherwise be payable to him, but for such election (taking into account any reduction required in accordance with Sections 7.3 and 7.4(a)), with the provision that one-half (1/2) of the amount payable to the Employee will be continued after his death to his Provisional Payee until the death of such Provisional Payee. 7.2 Form and time of election and notice requirements. (a) An election of payment and designation of a Provisional Payee in accordance with Section 7.1 shall be made in writing at the same time on a form prescribed by the Retirement Board and delivered to it. The election and designation shall specify its effective date which shall not be sooner than the date received by the Retirement Board or the Employee's fifty-fifth (55th) birthday, whichever is later, nor later than the date of commencement of payments in accordance with this Article VII. (b) An election of payment to be made in accordance with paragraph (a) or paragraph (b) of Section 7.1 may be changed from paragraph (a) to paragraph (b) or vice versa by an Employee, provided the written election of the change specifies an effective date which shall not be sooner than the date received by the Retirement Board or the Employee's fifty-fifth (55th) birthday, whichever is later, nor later than the date of commencement of payments in accordance with this Article VII. To the extent that the new method of payment shall afford the 44 Employee changed protection in the event of his death after the effective date of the new election and prior to retirement, his Accrued Retirement Income shall be adjusted pursuant to Section 7.4(a) to reflect such changed protection. (c) With respect to Sections 7.5 and 7.6, within the period not less than 30 days and not more than 90 days prior to the commencement of benefits, the Employee shall be furnished, by mail or personal delivery, a written explanation of: (1) the terms and conditions of the reduced Retirement Income payable as provided in paragraph (b) of Section 7.1; (2) the Employee's right to make, and the effect of, an election to waive the payment of reduced Retirement Income pursuant to a Provisional Payee designation; (3) the rights of the Employee's Provisional Payee; and (4) the right to make, and the effect of, a revocation of a previous election to waive the payment of reduced Retirement Income pursuant to a Provisional Payee designation. Within thirty (30) days following an Employee's written request received by the Retirement Board during the election period, but within sixty (60) days from the date the Employee is furnished all of the information prescribed in the immediately preceding sentence, the Employee shall be furnished an additional written explanation, in terms of dollar amounts, of the financial effect of an election by him not to receive such reduced Retirement Income. If an Employee makes such request, the election period herein prescribed shall end not earlier than sixty (60) calendar days following the day of the mailing or personal delivery of the additional explanation to the Employee. Except that if an election made as provided in Section 7.5 or 7.6 is revoked, another election under that Section may be made during the specified election period. 7.3 Circumstances in which election and designation are inoperative. An election and designation made pursuant to this Article shall be inoperative and the regular provisions of the Plan shall again become applicable as if a Provisional Payee had not been designated if, prior to the commencement of any payment in accordance with this Article VII: (a) an Employee's Provisional Payee shall die, (b) the Employee and the Provisional Payee shall be divorced under a final decree of divorce, or (c) the Retirement Board shall have received the written Qualified Election of the Employee to rescind his election of payment and designation of a Provisional Payee. If such a Qualified Election to rescind is made by the Employee, his Accrued Retirement Income shall be reduced to reflect the protection afforded the Employee by any Provisional Payee designation during the period from its effective date to the date of the Retirement Board's receipt of the Employee's Qualified Election to rescind if the option as to payments of reduced Retirement Income was in accordance with either Section 7.1(a), 7.6(a), or 7.6(b). If an Employee remarries subsequent to the 45 death or divorce of his Provisional Payee and prior to the commencement of payments in accordance with this Article VII, and if such Employee is married prior to the time of the commencement of payments, then he shall be entitled to designate a new Provisional Payee in the manner set forth in Section 7.2. 7.4 Pre-retirement death benefit. If prior to his Normal Retirement Date (or his Deferred Retirement Date, if applicable), an Employee shall die while in the service of the Employer and is survived by his spouse to whom he shall be married at the time of his death, there shall be payable to his surviving spouse (whom he shall be deemed to have designated as his Provisional Payee) Retirement Income determined in accordance with paragraph (a) or paragraph (c) of this Section 7.4, as applicable. Such Retirement Income shall commence on the first day of the month following the death of the Employee or the first day of the month following the date on which he would have attained his fifty-fifth (55th) birthday if he were still alive, whichever is later, and shall cease with the last payment preceding the death of his Provisional Payee. (a) The amount of Retirement Income payable to the Provisional Payee of a deceased Employee who prior to his death had attained his fifty-fifth (55th) birthday shall be equal to the amount payable to the Provisional Payee as calculated in Section 7.1(b) determined on the basis of his Accredited Service to the date of his death, or if the Employee shall have attained his fifty-fifth (55th) birthday and so elected prior to his death, such Retirement Income shall be equal to the amount set forth in Section 7.1(a) determined on the basis of his Accredited Service to the date of his death reduced as provided in the next sentence. If such election shall be made by the Employee, the Retirement Income which shall be payable to the Employee if he lives to his Early Retirement Date or the first day of the month following his attainment of age sixty-five (65), if later, shall be reduced by three-fourths of one percent (0.75%) for each year (prorated for a fraction of a year from the first day of the month following the effective date of the election) which has elapsed from the effective date of his election to the earlier of (1) the commencement of Retirement Income on or after his Early Retirement Date or the first day of the month following his attainment of age sixty-five (65), if later, or (2) the revocation of such election. If he shall die before the commencement of Retirement Income on or after his Early Retirement Date or the first day of the month following his attainment of age sixty-five (65), if later, his Accrued Retirement Income to the date of his death shall be reduced by three-quarters of one percent (0.75%) for each year (prorated for a fraction of a year from the first day of the month following the effective date of the election) between the effective date of his election and the first day of the month following his attainment of age sixty-five (65). No reduction in the 46 Employee's Retirement Income shall be made for the period during which the election is in effect after the first day of the month following his attainment of age sixty-five (65). (b) Retirement Income shall not be payable under paragraph (a) of this Section 7.4 to the Provisional Payee of a deceased Employee if at the time of his death there was in effect a Qualified Election made after August 22, 1984 under this paragraph (b) that no Retirement Income shall be paid to his Provisional Payee in the event of his death while in the service of the Employer (or while in the service of an Affiliated Employer to which his employment had been transferred in accordance with Section 4.6) as provided in paragraph (a), provided the Employee had received at least 180 days prior to his fifty-fifth (55th) birthday a written explanation of: (1) the terms and conditions of the Retirement Income payable to his Provisional Payee as provided in paragraph (a); (2) the Employee's right to make, and the effect of, an election to waive the payment of Retirement Income to his Provisional Payee; (3) the rights of the Employee's Provisional Payee; and (4) the right to make, and the effect of, a revocation of a previous election to waive the payment of Retirement Income to the Employee's Provisional Payee. A revocation of a prior Qualified Election to waive the payment of Retirement Income to the Employee's Provisional Payee may be made by the Employee without the consent of the Employee's Provisional Payee at any time before the commencement of benefits. An election under this paragraph (b) may be made and such election may be revoked by an Employee during the period commencing ninety (90) days prior to the Employee's fifty-fifth (55th) birthday and ending on the date of the Employee's death. (c) The amount of such Retirement Income payable to the Provisional Payee of a deceased Employee who prior to his death, had completed at least five (5) Vesting Years of Service and had not attained his fifty-fifth (55th) birthday shall be equal to one-half of the reduced amount, as actuarially adjusted to provide for the payment of such Retirement Income beginning at the date on which such deceased Employee would have attained his fifty-fifth (55th) birthday and to provide for the determination of such Retirement Income on a joint and fifty percent (50%) survivor basis of the Employee's Accrued Retirement Income, determined on the basis of his Accredited Service to the date of his death. This Section 7.4(c) shall also apply to adjust the future payment of Retirement Income after December 31, 1990 to a Provisional Payee with respect to an Employee who died (while in the service of the Employer prior to his fifty-fifth (55th) birthday after completing the requisite number of Years of Service) in order to have a nonforfeitable right to Retirement 47 Income under the Plan as in effect on the Employee's date of death, provided Retirement Income is payable to such Provisional Payee on or after January 1, 1991. The adjustment under this Section 7.4(c) shall be determined by adjusting the Retirement Income that had commenced to the Provisional Payee on or before January 1, 1986, and then adding the applicable percentage increase under Section 5.13 of the Prior Plan. For an Employee, on or after January 1, 1991, who dies while in the service of the Employer prior to his fifty-fifth (55th) birthday after completing five (5) Vesting Years of Service, the amount of such Retirement Income payable to the Provisional Payee shall be calculated as provided in Section 7.1(b) determined on the basis of his Accredited Service to the date of his death. The payment of such Retirement Income to the Provisional Payee shall begin on the first day of the month following the date on which such deceased Employee would have attained his fifty-fifth (55th) birthday. 7.5 Post-retirement death benefit - qualified joint and survivor annuity. If at his Early Retirement Date, Normal Retirement Date, or Deferred Retirement Date, as the case may be, an Employee is married and he has not: (a) designated a Provisional Payee in accordance with Section 7.1 in respect of payments to be made commencing on his Early, Normal, or Deferred Retirement Date or (b) made a Qualified Election that payment be made to him in the mode of a single life annuity, he shall nevertheless be deemed to have made an effective designation of a Provisional Payee under this Section 7.5 and to have specified the payment of a benefit as provided in Section 7.1(b). 7.6 Election and designation by former Employee entitled to Retirement Income in accordance with Article VIII. If an Employee is entitled to receive in accordance with Section 8.1 Retirement Income commencing at Normal Retirement Date, or sooner in accordance with Section 8.2, he may, on or after his fifty-fifth (55th) birthday, designate his spouse as his Provisional Payee and elect to have his Accrued Retirement Income at the date of termination of his service actuarially adjusted to provide, at his option, in the event of the commencement of payment prior to his Normal Retirement Date either: (a) a reduced amount payable to him for his lifetime with the provision that such reduced amount will be continued after his death to his spouse as Provisional Payee until the death of such Provisional Payee; or (b) a reduced amount (greater than the amount in (a) above) payable to him for his lifetime with the provision that one-half (1/2) of such reduced amount will be continued after his death to his spouse as Provisional Payee until the death of such Provisional Payee. 48 The Employee's election and designation of his Provisional Payee made in accordance with this Section 7.6 shall be in writing on a form prescribed by the Retirement Board and delivered to it and shall become effective not sooner than the date received by the Retirement Board or the Employee's fifty-fifth (55th) birthday, whichever is later, nor later than the date of commencement of payment in accordance with this Section 7.6. If the Employee dies prior to his Normal Retirement Date but after the effective date of his Provisional Payee designation, there will be payable to his Provisional Payee for life commencing on the first day of the calendar month after the Employee's death Retirement Income in a reduced amount in accordance with the Employee's election of payments to be made to his Provisional Payee after the death of the Employee under paragraph (a) or (b), as the case may be, of this Section 7.6. However, if prior to the Employee's death, the Retirement Board has not received such election, payment of a reduced amount of Retirement Income will be made in accordance with paragraph (b) of this Section 7.6 to his surviving spouse to whom he is married at the time of his death, unless (1) at the time of his death there is in effect a Qualified Election by the Employee that reduced Retirement Income shall not be paid to his surviving spouse in accordance with this Section 7.6 should he die between his fifty-fifth (55th) birthday and his Normal Retirement Date without having elected that payment be made to a Provisional Payee and (2) at least 180 days prior to his fifty-fifth (55th) birthday a written explanation is provided to the Employee of: (A) the terms and conditions of the Retirement Income payable to his Provisional Payee as provided in this Section 7.6; (B) the Employee's right to make, and the effect of, an election to waive the payment of Retirement Income to his Provisional Payee; (C) the rights of an Employee's spouse; and (D) the right to make, and the effect of, a revocation of a previous election to waive the payment of Retirement Income to his Provisional Payee. If the Employee is entitled to receive payment of Retirement Income in accordance with Section 8.2 after his fifty-fifth (55th) birthday and prior to his Normal Retirement Date and elects to do so, a reduced amount of Retirement Income determined in accordance with this Section 7.6 based upon his Accrued Retirement Income at the date of termination of his service (actuarially reduced in accordance with Section 8.2) will be payable to him commencing on the date on which payments commence prior to Normal Retirement Date in accordance with Section 8.2 with payments in the same or reduced amount to be continued to his Provisional Payee for life after the Employee's death in accordance with his election under paragraph (a) or (b), as the case may be, of this Section 7.6. However, if the Employee is married and he has not designated a Provisional Payee in respect of payments to commence to him prior to his Normal Retirement 49 Date or elected that payment be made to him in the mode of a single life annuity pursuant to a Qualified Election, he shall be deemed to have designated a Provisional Payee pursuant to this Section 7.6 and thereby specified that a reduced Retirement Income shall be paid to him during his lifetime as provided in paragraph (b) of this Section 7.6 and continued after his death to his Provisional Payee as provided in paragraph (b) of this Section 7.6. If the Employee is alive on his Normal Retirement Date and is married and payment of Retirement Income has not sooner commenced, the provisions of Section 7.5 shall be applicable to the payment of his Retirement Income, unless he shall elect at his Normal Retirement Date to receive payment of his Retirement Income pursuant to Section 7.1(a) or 7.1(b). However, if an election and designation in accordance with this Section 7.6 was in effect prior to his Normal Retirement Date, the Employee's Accrued Retirement Income at his Normal Retirement Date shall be actuarially adjusted for the period the election and designation was in effect. 7.7 Death benefit for Provisional Payee of former Employee. If an Employee, whose service with the Employer terminates on or after January 1, 1989, shall die after such termination of employment, and prior to his death (a) shall have not attained his fifty-fifth (55th) birthday, (b) shall have completed at least five (5) Vesting Years of Service, and (c) shall be survived by his spouse to whom he shall be married at his death, then there shall be payable to his surviving spouse (whom he shall be deemed to have designated as his Provisional Payee) Retirement Income determined in accordance with this Section 7.7. Such Retirement Income shall be equal to one-half of the reduced amount, as actuarially adjusted to provide for the payment of such Retirement Income beginning at the date on which such deceased Employee would have attained his fifty-fifth (55th) birthday and to provide for the determination of such Retirement Income on a joint and fifty percent (50%) survivor basis of the Employee's Accrued Retirement Income, determined on the basis of his Accredited Service to the date of his death. Such Retirement Income shall commence on the first day of the month following the date on which the former Employee would have attained his fifty-fifth (55th) birthday if he were still alive, and shall cease with the last payment preceding the death of his Provisional Payee. 7.8 Limitations on Employee's and Provisional Payee's benefits. (a) With respect to an Employee who does not elect a single life annuity, the limitation on benefits imposed under Article VI shall be applied as if such Employee had elected a benefit in the form of a single life annuity. 50 (b) With respect to a Provisional Payee, the limitations on benefits imposed under Article VI shall be applied consistent with paragraph (a) above prorated to provide a limitation equal to or one-half of the Employee's limitation as appropriate in accordance with annuity form of benefit elected by the Employee. 7.9 Effect of election under Article VII. An election of payment or a deemed election of payment in accordance with this Article VII shall be in lieu of any other form or method of payment of Retirement Income. 51 ARTICLE VIII Termination of Service 8 8.1 Vested interest. If an Employee included in the Plan terminates for any reason other than death or transfer to an Affiliated Employer as provided by Section 4.6 or retirement as provided by Article III, and if such Employee has had at least five (5) Vesting Years of Service with the Employer, whether or not Accredited Service, he will be entitled to receive, commencing at Normal Retirement Date (except as provided in Section 8.2 and subject to the provisions of Section 7.6) Retirement Income equal to his Accrued Retirement Income at the date of the termination of such service, provided that he makes application to the Employer for the payment of such Retirement Income. If proper application for payment of Retirement Income shall not be received by the Employer by the April 1 of the calendar year following the calendar year in which the Employee attains age 70 1/2 and the whereabouts of the Employee cannot be determined by the Employer, Retirement Income shall be paid to the Employee's Provisional Payee, if any, and if surviving and the whereabouts known to the Employer, or applied in such other manner as the Retirement Board shall deem appropriate. The payment of Retirement Income pursuant to this provision shall completely discharge all liability of the Retirement Board, the Employer, and the Trustee or other payor to the extent of the payments so made. If such Employee terminates with less than five (5) Vesting Years of Service with the Employer, he shall immediately forfeit any Accrued Retirement Income under the Plan based upon his service prior to such termination. 8.2 Early distribution of vested benefit. If an Employee terminates from service before his fifty-fifth (55th) birthday and is entitled to receive in accordance with Section 8.1 Retirement Income commencing at his Normal Retirement Date and at the time his service terminated he had at least ten (10) Years of Accredited Service, he may, in lieu of receiving payment of such Retirement Income commencing at Normal Retirement Date, elect to receive such Retirement Income commencing as of the first day of any month within the ten-year period preceding his Normal Retirement Date in an amount equal to his Accrued Retirement Income at the date of termination of his service actuarially reduced in accordance with reasonable actuarial assumptions adopted by the Retirement Board. An election pursuant to this Section 8.2 to have Retirement Income commence prior to Normal Retirement Date shall be made on a form prescribed by the Retirement Board and shall be filed with the Retirement Board at least thirty (30) days before Retirement Income is to commence. 52 8.3 Years of Service of reemployed Employees. If an Employee whose service terminates is again employed by the Employer as an Employee or he is employed (other than by reason of transfer in accordance with Section 4.6) by an Affiliated Employer which has at the time of his employment by such company a pension plan with substantially the same terms as this Plan, his Years of Service with the Employer and his Accredited Service immediately prior to the termination of his service shall be treated as provided in this Section 8.3, subject to the provisions of Section 8.4. For this purpose the terms "again employed" and "reemployment" shall include employment with an Affiliated Employer. (a) If at the time of his reemployment he has not incurred a One-Year Break in Service, his Years of Service with the Employer and his Accredited Service will be restored whether or not he is entitled to receive Retirement Income in accordance with Section 8.1. (b) If at the time of termination of his service he is entitled to receive Retirement Income in accordance with the provisions of Section 8.1, upon his reemployment his Years of Service with the Employer immediately prior to the termination of his service shall be restored whether or not he has incurred a One-Year Break in Service. (c) If at the time of reemployment on or after January 1, 1985, he is not entitled to receive Retirement Income in accordance with Section 8.1 and he (1) has incurred less than five (5) consecutive One-Year Breaks in Service or (2) has incurred five (5) or more consecutive One-Year Breaks in Service, but his Years of Service prior to such One-Year Breaks in Service exceeded the consecutive One-Year Breaks in Service, then upon the completion of one Eligibility Year of Service following his reemployment, provided that if his reemployment date is on or after January 1, 1995, no such Eligibility Year of Service shall be required, his Years of Service with the Employer and his Accredited Service prior to the first One-Year Break in Service shall be restored, disregarding any Years of Service with the Employer which are not required to be taken into account by reason of any previous One-Year Breaks in Service. The Years of Service and years of Accredited Service credited to an Employee reemployed prior to January 1, 1985, with regard to his Years of Service with the Employer and years of Accredited Service immediately prior to the termination of his service shall be determined under the terms of the Plan in effect prior to January 1, 1985. 53 (d) Years of Service and Accredited Service restored to an Employee in accordance with this Section 8.3 shall be aggregated with Years of Service and Accredited Service to which the Employee may be entitled after his reemployment. If, however, the Minimum Retirement Income so determined for the Employee upon his subsequent retirement or termination of service shall be less than the aggregate of: (1) his Minimum Retirement Income, if any, determined in respect of the period ending with his prior termination of service, and (2) his Minimum Retirement Income determined in respect of the period after his reemployment, the aggregate of such Minimum Retirement Incomes shall be deemed to be his Minimum Retirement Income upon such subsequent retirement or termination of service. In any event, his Retirement Income, however computed, shall be reduced by the Actuarial Equivalent of any Retirement Income he received with respect to his prior period of employment. (e) If a former Employee to whose credit shall be restored years of Accredited Service in accordance with this Section 8.3 shall become entitled (or his Provisional Payee shall become entitled) to receive retirement income under the plan of an Affiliated Employer by which he should become employed, he shall be deemed to have transferred to the Affiliated Employer for purposes of Section 4.6 as of his initial date of participation in the plan of such Affiliated Employer. 8.4 Cash-out and buy-back. (a) Notwithstanding any other provision of this Plan, if the present value of Accrued Retirement Income of an Employee whose service terminates for any reason other than transfer to an Affiliated Employer under Section 4.6, or retirement under Article III, is not more than $3,500 (or such greater amount as permitted by the regulations prescribed by the Secretary of the Treasury) the Employer shall direct that such present value of the Employee's Accrued Retirement Income be paid in a lump sum, in cash, to such terminated Employee. The present value of the Accrued Retirement Income shall be calculated as of the last day of the date of distribution of the lump sum applying the Applicable Interest Rate as defined in Section 8.5(e) in effect on the first day of the Plan Year of distribution. For purposes of this Section 8.4, if the present value of the Employee's vested Accrued Retirement Income is zero, the Employee shall be deemed to have received a distribution of such vested Retirement Income. (b) If such terminated Employee is subsequently reemployed and again becomes covered under this Plan, the calculation of his Accrued Retirement Income shall be without regard to his years of Accredited Service prior to any One-Year Breaks in Service, unless the amount of such payment is repaid to the Trust, plus interest at the rate determined under Section 411(c)(2)(C) of the Code. If such amount (plus interest) is repaid, the Employee's Retirement Income shall be calculated based on his years of 54 Accredited Service before and after any One-Year Breaks in Service. Any repayment of a cash-out made pursuant to this Section 8.4 shall be made before the earlier of (a) five (5) years after the date on which the Employee is reemployed by the Employer or an Affiliated Employer, or (b) the close of the first period of five (5) consecutive One-Year Breaks in Service commencing after the distribution. If an Employee has been deemed to receive a distribution in accordance with paragraph (a) and is then reemployed, upon such reemployment, the amount of the deemed distribution shall be restored to the Employee. 8.5 Calculation of present value for cash-out of benefits and for determining amount of benefits. (a) This Section 8.5 shall apply to all distributions from the Plan and from annuity contracts purchased to provide Accrued Retirement Income other than distributions described in Section 1.417-1T(e)(3) of the income tax regulations issued under the Retirement Equity Act of 1984. (b) (1) For purposes of determining whether the present value of (A) an Employee's vested accrued benefit; (B) a qualified joint and survivor annuity, within the meaning of Section 417(b) of the Code; or (C) a qualified preretirement survivor annuity within the meaning of Section 417(c)(1) of the Code exceeds $3,500, the present value of such benefits or annuities shall be calculated by using an interest rate no greater than the Applicable Interest Rate. (2) In no event shall the present value of any such benefit or annuity determined under this Section 8.5(b) be less than the present value of such benefits or annuities determined using the Applicable Interest Rate. (c) (1) For purposes of determining the amount of an Employee's vested Accrued Retirement Income, the interest rate used shall not exceed: (A) the Applicable Interest Rate if the present value of the benefit (using such rate or rates) is not in excess of $25,000; or (B) 120 percent of the Applicable Interest Rate if the present value of the benefit exceeds $25,000 (as determined under (A)). In no event shall the present value determined under this (B) be less than $25,000. 55 (2) In no event shall the amount of the benefit or annuity determined under this Section 8.5(c) be less than the greater of: (A) the amount of such benefit determined under the Plan's provisions for determining the amount of benefits other than Sections 8.5; or (B) the amount of such benefit determined using the Applicable Interest Rate if the value determined in Section 8.5(c)(1) is less than $25,000 or 120 percent of the Applicable Interest Rate if the value determined in Section 8.5(c)(1) is not less than $25,000. (d) In no event shall the amount of any benefit or annuity determined under this Section 8.5 exceed the maximum benefit permitted under Section 415 of the Code. (e) (1) For purposes of this Section 8.5, "Applicable Interest Rate" shall mean the interest rate or rates which would be used as of the date distribution commences by the Pension Benefit Guaranty Corporation for purposes of valuing lump sum payments under the Plan if the Plan had terminated on the date distribution commences with insufficient assets to provide benefits guaranteed by the Pension Benefit Guaranty Corporation on that date. (2) Notwithstanding the foregoing, if the provisions of the Plan other than Section 8.5(e) so provide, the Applicable Interest Rate shall be determined as of the first day of the Plan Year in which a distribution occurs rather than as of the date distribution commences. (f) (1) This Section 8.5 shall apply to distributions in Plan Years beginning after December 31, 1984, other than distributions under annuity contracts distributed to or owned by an Employee prior to September 17, 1985 unless additional contributions are made under the Plan by the Employer with respect to such contracts. (2) Notwithstanding the foregoing, this Section 8.5 shall not apply to any distributions in Plan Years beginning after December 31, 1984, and before January 1, 1987, if such distributions were made in accordance with the requirements of the income tax regulations issued under the Retirement Equity Act of 1984. 56 8.6 Retirement Income under Prior Plan. Any person entitled to receive Retirement Income under Article VIII of the Prior Plan shall only be entitled to receive Retirement Income in accordance with the provisions of such Prior Plan in effect at the time his service was terminated, except that any such person whose service terminated prior to January 1, 1976: (a) with at least twenty (20) years of Accredited Service may elect to receive Retirement Income commencing prior to his Normal Retirement Date in accordance with Section 8.2; (b) who shall have returned to the employment of the Employer, whether before or after January 1, 1976, and shall be an Employee who is entitled to receive Retirement Income in respect of his Accredited Service after January 1, 1976, his years of Accredited Service under the Prior Plan with respect to his service before January 1, 1976, shall, for the purpose of calculating his Minimum Retirement Income, be aggregated with his years of Accredited Service after his reemployment. His Accrued Retirement Income to the date of termination of his service payable in accordance with Article VIII of the Prior Plan shall be treated as Prior Plan Retirement Income and his Years of Service prior to the date of termination of his service shall be restored to his credit. It shall be a condition of the treatment provided for in this paragraph (b) that: (1) the Employee rescind any election of payment and designation of a Provisional Payee which he shall have made under the Prior Plan and which shall be in effect at the time of his return to the employment of the Employer and (2) if he is receiving Retirement Income, his Retirement Income shall cease during his period of employment and any Retirement Income payable upon his subsequent retirement shall be reduced by the Actuarial Equivalent of any Retirement Income he received prior to his reemployment. 8.7 Requirement for Direct Rollovers. This Section 8.7 applies to distributions made from the Plan on or after January 1, 1993. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a Distributee's election under this Article VIII, a Distributee may elect, at the time and in the manner prescribed by the Retirement Board, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover. (a) Definitions (1) Eligible Rollover Distribution An Eligible Rollover Distribution is any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include: 57 (A) any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee's spouse, or for a specified period of 10 years or more; (B) any distribution to the extent such distribution is required under Code Section 401(a)(9); and (C) the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). (2) Eligible Retirement Plan An Eligible Retirement Plan is an individual retirement account described in Code Section 408(a), an individual retirement annuity described in Code Section 408(b), an annuity plan described in Code Section 403(a), or a qualified trust described in Code Section 401(a) that accepts the Distributee's Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution for a Provisional Payee, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity. (3) Distributee A Distributee includes an Employee or former Employee. In addition, a Distributee includes the Employee's or former Employee's spouse who is an alternate payee under a qualified domestic relations order, as defined in Code Section 414(p). (4) Direct Rollover A Direct Rollover is a payment by the Plan to the Eligible Retirement Plan specified by the Distributee. 58 ARTICLE IX Contributions 9 9.1 Contributions generally. All contributions which the Employer deems necessary to provide the Retirement Incomes under the Plan in excess of the fund derived from the split-up of the Commonwealth pension plan will be made from time to time by or on behalf of the Employer and no contributions will be required of the Employees. All contributions shall be made to the Trustee under the Trust Agreement provided for in Article XI, and if a group annuity contract shall be entered into with a life insurance company ("contract with an insurance company"), contributions may also be made to the insurance company. The minimum amount of contributions to be made by or on behalf of the Employer for any Plan Year of the Plan shall be such amount as is required to meet the minimum funding standards of ERISA and any regulations in respect thereto. However, the Employer is under no obligation to make any contributions under the Plan after the Plan is terminated, whether or not Retirement Income accrued or vested prior to the date of termination has been fully funded. All contributions are expressly conditioned upon the deductibility of such contributions by the Employer pursuant to Section 404 of the Code. 9.2 Return of Employer contributions. All contributions made pursuant to the Plan shall be held by the Trustee in accordance with the terms of the Trust Agreement for the exclusive benefit of those Employees who are Participants under the Plan, including former Employees and their Beneficiaries, and shall be applied to provide benefits under the Plan and to pay expenses of administration of the Plan and Trust, to the extent that such expenses are not otherwise paid. At no time prior to the satisfaction of all liabilities with respect to such Employees and their Beneficiaries shall any part of the Trust Fund be used for, or diverted to, purposes other than for the exclusive benefit of such Employees and their Beneficiaries. However, notwithstanding the provisions of this Section 9.2: (a) If a contribution is conditioned upon the deductibility of the contributions under Section 404 of the Code, then, to the extent the deduction is disallowed, the Trustee shall upon written request of the Employer, return the contribution (to the extent disallowed) to the Employer within one year after the date the deduction is disallowed. (b) If a contribution or any portion thereof is made by the Employer by a mistake of fact, the Trustee shall, upon written request of the Employer, return the contribution or such portion to the Employer within one year after the date of payment to the Trustee. 59 The amount which may be returned to the Employer under this Section 9.2, is the excess of (a) the amount contributed over (b) the amount that would have been contributed had there not occurred a mistake of fact or a mistake in determining the deduction. Earnings attributable to the excess contribution shall not be returned to the Employer, but losses attributable thereto shall reduce the amount to be so returned. (c) If permitted under Federal common law, the Company may recover any other contributions to the Plan or payments to any other entity to the extent such contributions or payments unjustly enrich or otherwise gratuitously benefit such entity. 9.3 Expenses. Prior to termination of the Plan, all investment expenses (including brokerage costs, transfer taxes, shipping expenses, and charges of correspondent banks of the Trustee) and any taxes which may be levied against the Trust shall be charged to the Trust. All other expenses prior to the termination of the Plan shall be paid by the Employer or charged to the Trust, as determined in the discretion of The Southern Company Pension Fund Investment Review Committee. After the termination of the Plan, all expenses shall be levied against the Trust and shall be charged to the Trust. 60 ARTICLE X Administration of Plan 10 10.1 Retirement Board. The general administration of the Plan shall be placed in a Retirement Board of five (5) members who shall be appointed from time to time by the Board of Directors to serve at the pleasure of the Board of Directors. 10.2 Organization and transaction of business of Retirement Board. Any person appointed a member of the Retirement Board shall signify his acceptance by filing written acceptance with the Board of Directors. Any member of the Retirement Board may resign by delivering his written resignation to the Board of Directors, and such resignation shall become effective at delivery or at any later date specified therein. The members of the Retirement Board shall elect a Chairman from their number, and a Secretary who may be but need not be one of the members of the Retirement Board, and shall designate an actuary to act in actuarial matters relating to the Plan. They may appoint from their number such committees with such powers as they shall determine, may authorize one or more of their number or any agent to make any payment in their behalf, or to execute or deliver any instrument except that a requisition for funds from the Trustee shall be signed by two (2) members of the Retirement Board. The Retirement Board shall hold meetings upon such notice, at such place or places, and at such time or times as they may from time to time determine. A majority of the members of the Retirement Board at the time in office shall constitute a quorum for the transaction of business. All resolutions or other actions taken by the Retirement Board at any meeting shall be by the vote of a majority of the Retirement Board at the time in office. Any determination or action of the Retirement Board may be made or taken without a meeting by a resolution or written memorandum concurred upon by a majority of the members then in office. No member of the Retirement Board who is also an Employee of the Employer shall receive any compensation from the Plan for his service as such. No bond or other security need be required of any member in any jurisdiction except as may be required by ERISA. 10.3 Administrative responsibilities of Retirement Board. The Retirement Board, in addition to the functions and duties provided for elsewhere in the Plan, shall have exclusive discretionary authority for the following: 61 (a) construing and interpreting the Plan; (b) determining all questions affecting the eligibility of any Employee, retired Employee, Provisional Payee, or alternate payee; (c) determining all questions affecting the amount of the benefit payable hereunder; (d) ascertaining the persons to whom benefits shall be payable under the provisions hereof; (e) to the extent provided in the Plan, authorizing and directing disbursements of benefits from the Plan; (f) making final and binding determinations in connection with any questions of fact which may arise regarding the operation of the Plan; (g) making such rules and regulations with reference to the operation of the Plan as it may deem necessary or advisable, provided that such rules and regulations shall not be inconsistent with the express terms of the Plan or ERISA; (h) prescribing such procedures and adopting such forms as it determines necessary under the terms of the Plan; and (i) reviewing such denials of claims for benefits as may arise. Any decision, determination, construction, interpretation, ascertainment, authorization, direction, rule, regulation, prescription, or review that the Retirement Board may make or give in carrying out its duties or functions under this Section 10.3 shall be binding and conclusive. 10.4 Retirement Board, the "Administrator". For the purposes of compliance with the provisions of ERISA, the Retirement Board shall be deemed the "administrator" of the Plan as the term "administrator" is defined in ERISA, and the Retirement Board shall be, with respect to the Plan, a "named fiduciary" as that term is defined in ERISA. For the purpose of carrying out its duties, the Retirement Board may, in its discretion, allocate responsibilities under the Plan among its members and may, in its discretion, designate in writing, as set forth in the minutes of the Retirement Board, persons other than members of the Retirement Board to carry out such responsibilities of the Retirement Board under the Plan as it may see fit. 62 10.5 Fiduciary responsibilities. It is intended, that to the maximum extent permitted by ERISA, each person who is a "fiduciary" with respect to the Plan as that term is defined in ERISA shall be responsible for the proper exercise of his own powers, duties, responsibilities, and obligations under the Plan and the trust or other funding medium as shall each person designated by any fiduciary to carry out any fiduciary responsibility with respect to the Plan, the trust or other funding medium and no fiduciary or other person to whom fiduciary responsibilities are allocated shall be liable for any act or omission of any other fiduciary or of any other person delegated to carry out any fiduciary or other responsibility under the Plan or the trust or other funding medium. Any person or group of persons may serve in more than one fiduciary capacity with respect to the Plan and any fiduciary with respect to the Plan may serve as a fiduciary with respect to the Plan in addition to being an officer, employee, agent, or other representative of a "party in interest" as that term is defined in ERISA. 10.6 Employment of actuaries and others. The Retirement Board may employ such "enrolled actuaries" and independent "qualified public accountants" as such terms are defined in ERISA, legal counsel who may be of counsel to the Employer, other specialists, and other persons as the Retirement Board deems necessary or desirable in connection with the administration of the Plan. The Retirement Board and any person to whom it may delegate any duty or power in connection with the administration of the Plan, the Employer, and the officers and directors thereof shall be entitled to rely conclusively upon and shall be fully protected in any action omitted, taken, or suffered by them in good faith in reliance upon any enrolled actuary, independent qualified public accountant, counsel, or other specialist or other person selected by the Retirement Board or in reliance upon any tables, evaluations, certificates, opinions, or reports which shall be furnished by any of them or by the Trustee or any insurance company. Any action so taken, omitted, or suffered in accordance with the provisions of this Section 10.6 shall be conclusive upon each Employee, former Employee, and Provisional Payee covered under the Plan. 10.7 Accounts and tables. The Retirement Board shall maintain accounts showing the fiscal transactions of the Plan, and shall keep in convenient form such data as may be necessary for actuarial valuations with respect to the operation and administration of the Plan. The Retirement Board shall prepare annually a report showing in reasonable summary the financial condition of the Trust and giving a brief account of the operation of the Plan for the past year, and any further information which the Board of Directors may require. Such 63 report shall be submitted to the Board of Directors and shall be filed in the office of the Secretary of the Retirement Board. The Retirement Board may, with the advice of an enrolled actuary, adopt from time to time mortality and other tables as it may deem necessary or appropriate for use in calculating benefits under the Plan. 10.8 Indemnity of members of Retirement Board. To the extent not compensated for by any applicable insurance, the Employer shall indemnify and hold harmless each member of the Retirement Board and each Employee of the Employer designated by the Retirement Board to carry out any fiduciary responsibility with respect to the Plan from any and all claims, loss, damages, expense (including counsel fees approved by the Board of Directors) and liability (including any amount paid in settlement with the approval of the Board of Directors) arising from any act or omission of such member or Employee designated by the Retirement Board in connection with the Plan or the Trust, except where the same is determined by the Board of Directors or is judicially determined to be due to a failure to act in good faith or is due to the gross negligence or willful misconduct of such member or Employee. No assets of the Plan may be used for any such indemnification. 10.9 Areas in which the Retirement Board does not have responsibility. The Retirement Board shall not have responsibility with respect to control or management of the assets of the Plan. The Trustee or an insurance company, if funds of the Plan shall be held by an insurance company, shall have the sole responsibility for the administration of the assets of the Plan as provided in the Trust Agreement or contract with an insurance company, except to the extent that an "Investment Manager," as that term is defined in ERISA, appointed by the Board of Directors shall have responsibility for the management of the assets of the Plan, or some part thereof, including the power to acquire and dispose of the assets of the Plan, or some part thereof. The responsibility for providing a procedure for establishing and carrying out a funding policy and method for the Plan consistent with the objectives of the Plan and the requirements of Title I of ERISA shall be that of the Board of Directors or such committee, whether or not comprised of members of the Board of Directors, as the Board of Directors may from time to time designate and shall not be the responsibility of the Retirement Board. Effective July 21, 1993, the Pension Fund Investment Review Committee of The Southern Company System shall recommend for approval by the Board of Directors any Investment Manager that shall have responsibility with respect to management of any Plan 64 assets. In addition, the Pension Fund Investment Review Committee shall assume all responsibility for providing a procedure for establishing and carrying out a funding policy and method for the Plan consistent with the objectives of the Plan and the requirements of Title I of ERISA. 10.10 Claims Procedures. Consistent with the requirements of ERISA and the regulations thereunder of the Secretary of Labor from time to time in effect, the Retirement Board or its delegatee shall: (a) provide adequate notice in writing to any Employee, former Employee, retired Employee, or Provisional Payee (each being hereinafter in the paragraph referred to as "participant") whose claim for benefit under the Plan has been denied, setting forth specific reasons for such denial, written in a manner calculated to be understood by such participant; and (b) afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review of the decision denying the claim. 65 ARTICLE XI Management of Trust 11 11.1 Trust. All assets of the Plan shall be held as a special trust for use in accordance with the Plan. The funds of the Plan shall be held by a Trustee, or by a successor trustee appointed from time to time by the Board of Directors in trust or held by a life insurance company in accordance with the provisions of a contract with such insurance company entered into by the Trustee or the Employer. The Trust Agreement and contract with an insurance company may from time to time be amended in the manner therein provided. 11.2 Disbursement of the Trust Fund. Subject to the provisions of the Trust Agreement or contract with an insurance company the Retirement Board shall determine the manner in which the funds of the Plan shall be disbursed pursuant to the Plan, including the form of voucher or warrant to be used in making disbursements and the due qualification of persons authorized to approve and sign the same. The responsibility for the retention and investment of funds held by the Trustee shall lie with the Trustee and not with the Retirement Board, and the responsibility for the retention and investment of funds held by an insurance company shall lie with the insurance company and not with the Retirement Board. However, if in accordance with a Trust Agreement forming a part of the Plan (including any pooled trust agreement in which a trust forming a part of the Plan participates) a contract with an insurance company shall be held by the Trustee as an investment of the trust, directions may be given from time to time to the Trustee by such board of directors or committee or person or persons as may be specified in the Trust Agreement to transfer funds of the trust to the life insurance company which issued such contract or to transfer funds from the life insurance company to the Trustee, as the case may be. 11.3 Rights in the Trust. Under no circumstances shall amounts of money or other things of value contributed by the Employer to the Plan, or any part of the corpus or income of the Trust held by the Trustee under the Plan, be recoverable by the Employer from the Trustee or from any Employee, retired Employee, or Provisional Payee, or be used for, or diverted to, purposes other than for the exclusive benefit of the Employees, retired Employees, and Provisional Payees covered hereunder; provided, however, that, if after satisfaction of all liabilities of the Trust with respect to Employees, retired Employees, and Provisional Payees under the Plan, there is any balance remaining, the Trustee shall return such balance to the Employer. Notwithstanding the above, upon the approval of the Internal Revenue Service or the enactment or promulgation of any laws or 66 regulations by any governmental authority, the Employer shall be authorized to rededicate all or a portion of the assets allocated to fund Retirement Income under the Plan to the separate account to fund medical benefits under Article XV of the Plan. 11.4 Merger of the Plan. The Plan shall not be merged or consolidated with, or any of its assets or liabilities transferred to, any other plan, unless each Employee included in the Plan would (if the Plan then terminated) receive a benefit immediately after the merger, consolidation, or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation, or transfer (if the Plan then terminated). 67 ARTICLE XII Termination of the Plan 12 12.1 Termination of the Plan. The Plan may be terminated at any time by action of the Board of Directors of the Employer in accordance with the amendment procedures provided in Section 13.1. Upon such termination or partial termination all Accrued Retirement Income of Employees to the date of such termination, to the extent then funded, shall become nonforfeitable and the assets of the Plan which have not previously been allocated to provide Retirement Income shall then be paid out to Employees, former Employees, and Provisional Payees in accordance with the applicable requirements of ERISA and regulations thereunder governing termination of "employee pension benefit plans" as defined in ERISA. If after satisfaction of all liabilities, as provided above, there is any balance remaining in the Trust, the Trustee shall return such balance to the Employer. In the first instance, subject to the foregoing limitations, such remaining assets shall be allocated among all persons in the following categories for whom such Retirement Income or other benefits have not previously been provided, namely, (a) Employees who have been retired under the Plan, (b) Employees who at the date of termination of the Plan are included in the Plan, (c) former Employees who at the date of the termination of their employment were entitled to payment of Retirement Income in accordance with Article VIII, and (d) former Employees who have transferred to an Affiliated Employer in accordance with Section 4.6 and are still in the employ or receiving a retirement income from such company (including their Provisional Payees, if any). Retirement Income already purchased under any contract with an insurance company will be payable in accordance with the provisions of that contract. 12.2 Limitation on benefits for certain highly paid employees. (a) The annual payments to an Employee described in paragraph (b) below shall not exceed an amount equal to the payments that would be made to or on behalf of such Employee under a single life annuity that is the Actuarial Equivalent of the sum of the Employee's Accrued Retirement Income and the Employee's other benefits under this Plan (other than a Social Security supplement) and any Social Security supplement that the restricted Employee is entitled to receive. The restrictions in this paragraph (a) do not apply, however, if -- (1) after payment to an Employee described in paragraph (b) of all benefits payable to such Employee under this Plan, the value of this Plan's assets equals or exceeds 68 110% of the value of current liabilities, as defined in Code Section 412(c)(7), or (2) the value of the benefits payable to such Employee under this Plan for an Employee described in paragraph (b) below is less than 1% of the value of current liabilities before distribution. (b) The Employees whose benefits are restricted on distribution include all highly compensated employees and highly compensated former employees (as such terms are defined in Treasury Regulation Section 1.401(a)(4)-12); provided, however, that Employees whose benefits are subject to restriction under this Section 12.2 shall be limited to only those Employees who in the current or in any previous Plan Year were one of the 25 non- excludable Employees of the Employer with the greatest compensation from the Employer. 12.3 Allocation of Trust upon termination. Subject to the provisions of Section 12.2 above, if, subsequent to the effective date of merger and consolidation of the Employees' Retirement Plan of Georgia Power and Light Company [Georgia Power, as successor] (hereinafter in this subsection referred to as the "Retirement Plan") with the Plan, the Plan is terminated and the amount of the Trust to be used and applied in accordance with the provisions of Section 12.1 for the benefit of the persons therein referred to shall not be equal to the sum of: (a) an amount equal to the actuarially determined present values at the date of termination of the Plan of the respective Retirement Incomes or Accrued Retirement Incomes, as the case may be, of each retired Employee, Employee, or former Employee (including their Provisional Payees, if any) referred to in Section 12.1, plus (b) an amount equal to the actuarially determined present values at the date of termination of the Plan of the retirement allowance under the Retirement Plan of each Member or retired Member (including their Optional Payees, if any) with respect to his service with Georgia Power and Light Company and the Company prior to July 1, 1957, the amount of the Trust to be used and applied for the benefit of each of such persons shall in no event be less that (x) multiplied by (y) where (x) equals the amount which would have been used and applied for the benefit of each such retired Employee, Employee, or former Employee (including their Provisional Payees, if any) and Members and retired Members (including their Optional Payees, if any) had the Plan and the Retirement Plan each been terminated on the day preceding the effective date of the merger and consolidation of the Retirement Plan and the Plan and allocation of the trust funds under the respective Plans then been effected for the benefit of the retired Employees, Employees, and former Employees included therein pursuant to the provisions of Section 12.1 of the Plan and for the benefit of Members and retired Members and their beneficiaries pursuant to Section 11.6 of the Retirement Plan and 69 (y) equals the lesser of 100%, or a percentage determined by dividing the dollar value as of the date of termination of the Plan of $1 contributed to the Trust on the effective date of the merger of the Retirement Plan and the Plan, adjusted to reflect earnings and realized and unrealized gains and losses thereon, by $1. The determination of such dollar value shall be made by the Trustee and its determination shall be conclusive. To the extent that: (a) any retired Employee or former Employee (including their Provisional Payees, if any) referred to in Section 12.1 and (b) any Member or retired Member (or his Optional Payee) of the Retirement Plan shall, subsequent to the effective date of the merger and consolidation of the Retirement Plan and the Plan, have received from the Trust Retirement Income or retirement allowance, which in either case includes Accrued Retirement Income or retirement allowance accrued to the effective date of the merger and consolidation of the Retirement Plan and the Plan or shall have received the return of contributions to the Retirement Plan with interest, any amount to be used or applied for his benefit which is determined in accordance with this Section 12.3 shall be reduced to take account of the amount of such payments to him. 70 ARTICLE XIII Amendment of the Plan 13 13.1 Amendment of the Plan. (a) The Plan may be amended or modified at any time by the Board of Directors pursuant to its written resolutions, provided that no amendment or modification which will substantially increase the cost of the Plan will be made by the Board of Directors without approval, at a meeting of the stockholders duly called for that purpose, by the vote of a majority of the stock present and entitled to vote at such meeting. (b) Such amendments and modifications (without limiting the generality of the foregoing) may, among other things, make any changes in the Plan which may become appropriate if, for any reason, the Employer should in the future find it necessary or desirable not to complete payment of the past service costs of the Plan in the manner and within the period now contemplated or should find it necessary or desirable to reduce the amounts of Future Service contributions to be paid by the Employer after such amendment or modification. Such amendments and modifications may also (without limiting the generality of the foregoing), make any changes necessary or desirable to make the costs of the Plan eligible for tax deductions or to make the income of the Trust exempt from taxation or to bring the Plan into conformity or compliance with ERISA or with governmental regulations. Notwithstanding the foregoing, no amendment shall be made which has the effect of decreasing the Accrued Retirement Income of any Employee, former Employee, or Provisional Payee as provided under the limitations of Section 411(d)(6) of the Code. (c) Notwithstanding the foregoing, the Plan may also be amended by the Management Council of the Company if such amendment does not involve an increase or decrease in the cost of the Plan to the Company in excess of a dollar amount to be determined from time to time by the Board of Directors, is necessary, proper or desirable in order to comply with laws or regulations promulgated by any federal or state governmental authority, or is necessary to maintain the qualification of the Plan under the Code and ERISA. The Board of Directors of the Company shall from time to time determine the dollar amount referenced in the foregoing sentence and may from time to time by written instruction to the Management Council limit or suspend Management Council's authority to amend the Plan pursuant to the foregoing sentence. 71 (d) The Plan may also be amended from time to time for any reason by the Compensation Committee of the Board of the Company subject to the limitations on amendments to the Plan set forth in subsection (a) above. The Board of Directors may from time to time by written instruction to the Compensation Committee limit or suspend the Committee's authority to amend the Plan as permitted by the foregoing sentence. 72 ARTICLE XIV Special Provisions 14 14.1 Adoption of Plan by other corporations. (a) Any corporation, whether or not related to the Employer by function or operation and any affiliate, if such corporation or affiliate is authorized to do so by a resolution adopted by the Board of Directors of the Employer, may adopt this Plan as a separate Plan for all eligible Employees or any separate, distinct, and identifiable class or group of Employees and the related Trust Agreement, by action of the board of directors of such corporation or affiliate. Any such adoption shall be evidenced by certified copies of the resolutions of the foregoing board of directors indicating such adoption and by the execution of the Adoption Agreement by the adopting corporation or affiliate. Such resolution shall state and define the effective date of the Plan for the purpose of such adopting corporation and, for the purpose of Section 415 of the Code, the "limitation year" as to such corporation. Notwithstanding the foregoing, however, if the Plan as adopted by an affiliate or other corporation under the foregoing provision shall fail to receive the initial approval of the Internal Revenue Service as a qualified plan, any contributions by such affiliate or other corporation after payment of all expenses will be returned to such adopting corporation free of any trust, and the Plan and the Trust Agreement as to such adopting affiliate or other corporation shall terminate. (b) Each adopting affiliate or other corporation shall be required to use the same Trustee as provided in this Plan. (c) The Trustee may, but is not required to, commingle, hold, and invest as one fund all contributions (or any portion thereof) made by each adopting affiliate or other corporation. (d) Any contributions made by an affiliate or other corporation, as provided for in this Plan, shall be paid to and held by the Trustee for the exclusive benefit of the Employees of such an affiliate or other corporation and the beneficiaries of such Employees, subject to all the terms and conditions of this Plan. On the basis of information furnished by the administrator, the Trustee shall keep separate books and records concerning the affairs of each adopting affiliate or other corporation hereunder. 73 14.2 Exclusive benefit. The Employer intends that the Plan (including the Trust forming a part thereof) shall be a pension plan of an employer for the exclusive benefit of its Employees and their beneficiaries subject to Section 11.3, as provided for in Section 401 of the Code, and as may be provided for in any similar provisions of subsequent revenue laws, and that the Trust shall qualify as an employees' trust which shall be exempt under Section 501(a) of the Code, and any similar provisions of subsequent revenue laws, as a trust forming part of such a plan. 14.3 Assignment or alienation. No benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment (either at law or in equity), pledge, encumbrance, charge, garnishment, levy, execution, or other legal or equitable process and any attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge, garnish, levy, execute, or enforce other legal or equitable process against the same shall be void, nor shall any such benefit be in any manner liable for or subject to the debts, contracts, liabilities, engagements, or torts of the person entitled to such benefit. If any Employee or retired Employee or any Provisional Payee under the Plan is adjudicated bankrupt or attempts to anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge any benefit under the Plan or if any action shall be taken which is in violation of the provisions of the immediately preceding paragraph, then such benefit shall cease and terminate and in that event the Retirement Board shall hold or apply the same or any part thereof to or for the benefit of such Employee or retired Employee or Provisional Payee in such manner as the Retirement Board may think proper. Notwithstanding the above, the Retirement Board and Trustee shall comply with any "domestic relations order" (as defined in Section 414(p)(1)(B) of the Code) which is a "qualified domestic relations order" satisfying the requirements of Section 414(p) of the Code. The Retirement Board shall establish procedures for (a) notifying Employees and alternate payees who have or may have an interest in benefits which are the subject of domestic relations orders, (b) determining whether such domestic relations orders are qualified domestic relations orders under Section 414(p) of the Code, and (c) distributing benefits which are subject to qualified domestic relations orders. 74 14.4 Voluntary undertaking. This Plan is strictly a voluntary undertaking on the part of the Employer and shall not be deemed to constitute a contract between the Employer or any other company and any Employee or to be a consideration for, or an inducement or condition of, the employment of any Employee. Nothing contained in this Plan shall be deemed to give any Employee the right to be retained in the service of the Employer or to interfere with the right of the Employer to discharge or retire any Employee at any time. Inclusion under the Plan will not give any Employee or Provisional Payee any right or claim to a Retirement Income except to the extent such right is specifically fixed under the terms of the Plan and there are funds available therefor in the hands of the Trustee or of any insurance company which may hold funds of the Plan. 14.5 Top-Heavy Plan requirements. For any Plan Year the Plan shall be determined to be a Top-Heavy Plan, the Plan shall provide the following: (a) the minimum benefit requirement of Section 14.7; and (b) the vesting requirement of Section 14.8. 14.6 Determination of Top-Heavy status. (a) For any Plan Year commencing after December 31, 1983, the Plan shall be determined to be a "Top-Heavy Plan," if, as of the Determination Date, (1) the Present Value of Accrued Retirement Income of Key Employees or (2) the sum of the Aggregate Accounts of Key Employees under this Plan and any plan of an Aggregation Group, exceeds sixty percent (60%) of the Present Value of Accrued Retirement Income or the Aggregate Accounts of all Employees entitled to participate in this Plan and any Plan of an Aggregation Group. (b) For Plan Years beginning after December 31, 1986, the Accrued Retirement Income of a Non-Key Employee shall be determined under the accrual method under the Plan. (c) For any Plan Year commencing after December 31, 1983, the Plan shall be determined to be a "Super Top-Heavy Plan," if, as of the Determination Date, (1) the Present Value of Accrued Retirement Income of Key Employees or (2) the sum of the Aggregate Accounts of Key Employees under this Plan and any plan in an Aggregation Group, exceeds ninety percent (90%) of the Present Value of Accrued Retirement Income or the Aggregate Accounts of all Employees entitled to participate in this Plan and any plan of an Aggregation Group. 75 For purposes of Sections 14.6(a) and 14.6(b), if any Employee is a Non-Key Employee for any Plan Year, but such Employee was a Key Employee for any prior Plan Year, such Employee's Present Value of Accrued Retirement Income and/ or Aggregate Account balance shall not be taken into account for purposes of determining whether this Plan is a Top-Heavy or Super Top-Heavy Plan (or whether any Aggregation Group which includes this Plan is a Top-Heavy Group). In addition, for Plan Years beginning after December 31, 1984, if an Employee or former Employee has not performed any services for the Employer or any Affiliated Employer maintaining the Plan at any time during the five (5) year period ending on the Determination Date, the Aggregate Account and/or Present Value of Accrued Retirement Income for such Employee or former Employee shall not be taken into account for purposes of determining whether this Plan is a Top-Heavy or Super Top-Heavy Plan. (d) An Employee's "Aggregate Account" as of the Determination Date shall be determined under applicable provisions of the defined contribution plan used in determining Top-Heavy status. (e) An "Aggregation Group" shall mean either a Required Aggregation Group or a Permissive Aggregation Group as hereinafter determined. (1) Required Aggregation Group: In determining a Required Aggregation Group hereunder, each plan of the Employer in which a Key Employee is a participant, and each other plan of the Employer which enables any plan in which a Key Employee participates to meet the requirements of Code Sections 401(a)(4) or 410, will be required to be aggregated. Such group shall be known as a Required Aggregation Group. In the case of a Required Aggregation Group, each plan in the group will be considered a Top-Heavy Plan if the Required Aggregation Group is a Top-Heavy Group. No plan in the Required Aggregation Group will be considered a Top-Heavy Plan if the Aggregation Group is not a Top-Heavy Group. (2) Permissive Aggregation Group: The Employer may also include any other plan not required to be included in the Required Aggregation Group, provided the resulting group, taken as a whole, would continue to satisfy the provisions of Code Sections 401(a)(4) or 410. Such group shall be known as a Permissive Aggregation Group. In the case of a Permissive Aggregation Group, only a plan that is part of the Required Aggregation Group will be considered a Top-Heavy Plan if the Permissive Aggregation Group is a 76 Top-Heavy Group. A plan that is not part of the Required Aggregation Group but that has nonetheless been aggregated as part of the Permissive Aggregation Group will not be considered a Top-Heavy Plan even if the Permissive Group is a Top-Heavy Group. (3) Only those plans of the Employer in which the Determination Dates fall within the same calendar year shall be aggregated in order to determine whether such plans are Top-Heavy Plans. (f) The "Determination Date" shall mean with respect to any Plan Year, the last day of the preceding Plan Year, or in the case of the first Plan Year, the last day of such Plan Year. (g) A "Key Employee" shall mean any Employee or former Employee (and his beneficiaries) who, at any time during the Plan Year or any of the four (4) preceding Plan Years, is: (1) an officer of the Employer having an annual compensation from the Employer greater than fifty percent (50%) of the amount in effect under Code Section 415(b)(1)(A) for any such Plan Year. For purposes of this Section 14.6(g)(1), only those employers which are incorporated shall be considered as having officers, and no more than fifty (50) Employees (or, if lesser, the greater of three (3) or ten percent (10%) of the Employees) shall be treated as officers. Annual compensation means compensation as defined in Section 415(c)(3) of the Code, but including amounts contributed by the Employer pursuant to a salary reduction agreement which are excludable from the Employee's gross income under Section 125, Section 402(a)(8), Section 402(h), or Section 403(b) of the Code. (2) one of the ten (10) Employees (A) having annual compensation from the Employer greater than the limitation in effect under Code Section 415(c)(1)(A) and (B) owning (or considered as owning within the meaning of Code Section 318) the largest interests in the Employer. For purposes of this Section 14.6(g)(2), if two (2) Employees have the same interest in the Employer, the Employee having the greater annual compensation from the Employer shall be treated as having a larger interest. (3) a "five-percent owner" of the Employer. The term "five-percent owner" shall mean any person who owns (or is considered as owning within the meaning of Code Section 318) more than five percent (5%) of the outstanding stock of the Employer or stock possessing more than five percent (5%) of the total combined voting power of all stock of the Employer. In determining percentage ownership hereunder, employers that would otherwise be aggregated under Code 77 Sections 414(b), (c), and (m) shall be treated as separate employers. (4) a "one-percent owner" of the Employer having an annual compensation from the Employer of more than $150,000. The term "one-percent owner" shall mean any person who owns (or is considered as owning within the meaning of Code Section 318) more than one percent (1%) of the outstanding stock of the Employer or stock possessing more than one percent (1%) of the total combined voting power of all stock of the Employer. In determining percentage ownership hereunder, employers that would otherwise be aggregated under Code Sections 414(b), (c), and (m) shall be treated as separate employers. However, in determining whether an individual has compensation of more than $150,000, compensation from each employer required to be aggregated under Code Sections 414(b), (c), and (m) shall be taken into account. (h) A "Non-Key Employee" shall mean any Employee who is not a Key Employee as defined in Section 14.6(g). (i) An Employee's "Present Value of Accrued Retirement Income" shall mean as of the Determination Date, the sum of the following: (1) the Present Value of his Accrued Retirement Income as of the most recent valuation occurring within a twelve (12) month period ending on the Determination Date. (2) any Plan distributions made within the Plan Year that includes the Determination Date or within the four (4) preceding Plan Years. However, in the case of distributions made after the valuation date and prior to the Determination Date, such distributions are not included as distributions for Top-Heavy purposes to the extent that such distributions are already included in the Employee's Present Value of Accrued Retirement Income as of the valuation date. Notwithstanding anything herein to the contrary, all distributions, including distributions made prior to January 1, 1984, and distributions under a terminated plan which if it had not been terminated would have been required to be included in an Aggregation Group, will be counted. (3) any Employee contributions, whether voluntary or mandatory. However, amounts attributable to qualified deductible employee contributions shall not be considered to be a part of the Employee's Present Value of Accrued Retirement Income. 78 (4) with respect to unrelated rollovers and plan-to-plan transfers (ones which are both initiated by the Employee and made from a plan maintained by one employer to a plan maintained by another employer), if this Plan provides for rollovers or plan-to-plan transfers, it shall always consider such rollover or plan-to-plan transfer as a distribution for the purposes of this Section. If this Plan is the plan accepting such rollovers or plan-to-plan transfers, it shall not consider such rollovers or plan-to-plan transfers accepted after December 31, 1983 as part of the Employee's Present Value of Accrued Retirement Income. However, rollovers or plan-to-plan transfers accepted prior to January 1, 1984 shall be considered as part of the Employee's Present Value of Accrued Retirement Income. (5) with respect to related rollovers and plan-to-plan transfers (ones either not initiated by the Employee or made to a plan maintained by the same employer), if this Plan provides for rollovers or plan-to-plan transfers, it shall not be counted as a distribution for purposes of this Section. If this Plan is the plan accepting such rollover or plan-to-plan transfer, it shall consider such rollover or plan-to-plan transfer as part of the Employee's Present Value of Accrued Retirement Income, irrespective of the date on which such rollover or plan-to-plan transfer is accepted. (j) A "Top-Heavy Group" shall mean an Aggregation Group in which, as of the Determination Date, the sum of: (1) the Present Value of Accrued Retirement Income of Key Employees under all defined benefit plans included in that group, and (2) the Aggregate Accounts of Key Employees under all defined contribution plans included in the group, exceeds sixty percent (60%) of a similar sum determined for all Employees. 14.7 Minimum Retirement Income for Top-Heavy Plan Years. Notwithstanding anything herein to the contrary, for any Top-Heavy Plan Year, the minimum Accrued Retirement Income derived from Employer contributions for each Non-Key Employee, including benefits accrued in years in which the Plan is not a Top-Heavy Plan, shall equal a percentage of such Non-Key Employee's highest average compensation not less than the lesser of: (a) two percent (2%) multiplied by the Employee's number of Years of Service with the Employer, or (b) twenty percent (20%). For purposes of the minimum benefit, an Employee's Years of Service shall exclude (a) Plan Years in which the Plan is not a Top-Heavy Plan, and (b) Years of Service completed prior to 79 January 1, 1984. The minimum benefit required by this Section 14.7 shall be calculated using the Employee's total compensation and expressed in the form of a single life annuity (with no ancillary benefits) beginning at such Employee's Normal Retirement Date. An Employee's average compensation shall be based on the five (5) consecutive years for which the Employee had the highest compensation. Notwithstanding the foregoing, in any Plan Year in which a Non-Key Employee is an Employee in both this Plan and a defined contribution plan, and both such plans are Top-Heavy Plans, the Employer shall not be required to provide a Non-Key Employee with both the full separate minimum defined benefit and the full separate minimum defined contribution plan allocation. Therefore, if a Non-Key Employee is participating in a defined contribution plan maintained by the Employer and the minimum allocation under Code Section 416(c)(2) is allocated to the Non-Key Employee under such defined contribution plan, the minimum Accrued Retirement Income provided for above shall not be applicable, and no minimum benefit shall accrue on behalf of the Non-Key Employee. Alternatively, the Employer may satisfy the minimum benefit requirement of Code Section 416(c)(1) for the Non-Key Employee by providing any combination of benefits and/or contributions that satisfy the safe harbor rules of Treasury Regulation Section 1.416-1(m-12). 14.8 Vesting requirements for Top-Heavy Plan Years. Notwithstanding the provisions of Section 8.1, for any Top-Heavy Plan Year, the vested portion of an Employee's Accrued Retirement Income shall be determined on the basis of the Employee's Vesting Years of Service according to the following schedule: Years of Service Vested Percentage less than 2 0 2 20 3 40 4 60 5 80 6 or more 100 The minimum Retirement Income for any Top-Heavy Plan Year shall not be forfeited during any period for which the payment of the Employee's Retirement Income is required to be suspended under Section 5.10 of the Plan. If in any subsequent Plan Year, the Plan ceases to be a Top-Heavy Plan, the Retirement Board may, in its sole discretion, elect to (a) continue to apply this vesting schedule in determining the vested percentage of an Employee's Accrued Retirement Income or (b) revert to the vesting schedule in effect before the Plan became a Top-Heavy Plan. Any such reversion 80 shall be treated as a Plan amendment pursuant to the terms of the Plan. No decrease in an Employee's nonforfeitable percentage may occur in the event the Plan's status as a Top-Heavy Plan changes for any Plan Year. 14.9 Adjustments to maximum benefits for Top-Heavy Plans. (a) In the case of an Employee who is a participant in a defined benefit plan and a defined contribution plan maintained by the Employer, and such plans as a group are determined to be Top-Heavy for any limitation year beginning after December 31, 1983, "1.0" shall be substituted for "1.25" in each place it appears in the denominators of Fractions A and B, as set forth in Section 6.5 of the Plan, unless the extra minimum benefit is provided pursuant to Section 14.9(b). Super Top-Heavy Plans shall be required at all times to substitute "1.0" for "1.25" in the denominator of each plan fraction. (b) If a Key Employee is a participant in both a defined benefit plan and a defined contribution plan that are both part of a Top-Heavy Group (but neither of such plans is a Super Top-Heavy Plan), the defined benefit and defined contribution fractions set forth in Section 6.5 shall remain unchanged, provided that in Section 14.7 above, "three percent (3%)" shall be substituted for "two percent (2%)" and "twenty percent (20%)" shall be increased by one (1) percentage point (but not more than ten (10) percentage points) for each Year of Service included in the computations under Section 14.7. (c) For purposes of this Section 14.9, if the sum of the defined benefit plan fraction and the defined contribution fraction shall exceed 1.0 in any Plan Year for any Employee in this Plan, the Employer shall eliminate any amounts in excess of the limits set forth in Section 6.5, pursuant to Section 6.7 of the Plan. 81 ARTICLE XV Post-retirement Medical Benefits 15 15.1 Definitions. The following words and phraseology as used herein shall have the following meanings unless a different meaning is plainly required by the context: (a) "Pensioned Employee" means a former Employee of the Employer who is eligible to receive Retirement Income after his retirement at his Early, Normal, or Deferred Retirement Date, as applicable, pursuant to the terms of the Plan, but shall not include any former Employee who terminated his service with the Employer prior to his Early, Normal, or Deferred Retirement Date and who is entitled to Retirement Income under the Plan. A "Pensioned Employee" shall not include a Key Employee, as defined in Section 14.6(g), or effective January 1, 1991 any Pensioned Employee of an Employer that has adopted the Plan pursuant to Section 14.1 hereof but does not provide medical benefits to its Pensioned Employees. (b) "Dependents" means the Pensioned Employee's spouse who is not legally separated or, effective January 1, 1991, divorced from the Pensioned Employee and the Pensioned Employee's unmarried children (both natural and legally adopted) within the prescribed age limit set forth below. The term "children" includes stepchildren and foster children who reside with the Pensioned Employee in a regular parent-child relationship and are dependent upon the Pensioned Employee for principal support and maintenance. The term Dependent shall not include any person who is covered, or eligible for coverage, under the Plan as a Pensioned Employee or who is entitled to any benefits under any provisions of this Plan because of having been covered as a Pensioned Employee. Children shall be considered to be within the prescribed age limit if they are less than nineteen (19) years of age, except that unmarried children shall continue to be eligible until the December 31 coinciding with or next following attainment of age nineteen (19). Unmarried children age nineteen (19), but less than age twenty-five (25), shall continue to be within the prescribed age limit if they are regularly attending school on a full-time basis. Effective January 1, 1991, for purposes of this Article XV, an unmarried child shall be considered to be regularly attending school on a full-time basis if such child is enrolled in and regularly attending a secondary school or an accredited vocational school, College or University (as defined under Exhibit A) and meets the minimum requirements of such school, College or University to maintain full-time status. This shall also include an unmarried child who is enrolled as a part- time student at one of the above institutions while such individual is taking a course load that is equivalent to the 82 minimum course load required for full-time student status at such institution. If both a husband and his wife are covered under this Plan as Pensioned Employees of the Employer, either, but not both, may elect to cover their eligible children as Dependents. Any person covered or eligible for coverage under Article XV as a Pensioned Employee, or under any group medical plan maintained by the Employer as an Employee, shall not be considered as a Dependent. 15.2 Eligibility of Pensioned Employees and their Dependents. (a) A person who is a Pensioned Employee on January 1, 1989 shall be eligible for coverage as a Pensioned Employee on January 1, 1989, provided he was covered as an Employee under a group medical plan maintained by the Employer immediately prior to the time he became a Pensioned Employee. (b) An Employee who becomes a Pensioned Employee on or after January 1, 1989 shall be eligible for coverage on the date he becomes a Pensioned Employee, provided he was covered as an Employee under a group medical plan maintained by the Employer immediately prior to the time he became a Pensioned Employee. (c) Effective January 1, 1989, a Dependent of a Pensioned Employee shall be eligible for coverage under this Plan on the later of (1) the date the Pensioned Employee becomes eligible for coverage hereunder and (2) the date such person becomes a Dependent and (3) the date of the payment of any contribution required of the Pensioned Employee with respect to the Dependent. (d) Notwithstanding paragraph (c) above, effective January 1, 1991, a Dependent of a Pensioned Employee shall be eligible for coverage under this Plan on the later of (1) the date the Pensioned Employee becomes eligible for coverage hereunder and (2) the date such person becomes a Dependent. 15.3 Medical benefits. The medical benefits provided under this Article XV by the Employer and each adopting Employer are set forth in the copy of each such Employer's medical benefits plan which is attached hereto as Exhibit A and specifically incorporated herein by reference in its entirety, as may be amended from time to time. Such medical benefits shall be subject without limitation to all deductibles, maximums, exclusions, coordination with Medicare Parts A and B and other medical plans, and procedures for submitting claims and initiating legal proceedings provided therein. 83 15.4 Termination of coverage. (a) Coverage of any Pensioned Employee shall cease as follows: (1) when Article XV is amended, terminated, or discontinued in accordance with its terms; or (2) when the Pensioned Employee fails to make when due any required contribution; or (3) as otherwise provided in Exhibit A. (b) Coverage of any Dependent shall cease as follows: (1) when Article XV is amended, terminated, or discontinued in accordance with its terms; or (2) when the Pensioned Employee fails to make when due any required contribution; or (3) as otherwise provided in Exhibit A. 15.5 Continuation of coverage to certain individuals. (a) Anything in Article XV to the contrary notwithstanding, a Pensioned Employee, Dependent spouse, or Dependent child shall be entitled to elect continued medical coverage as provided under the terms of Article XV upon the occurrence of a Qualifying Event, provided such Pensioned Employee, Dependent spouse, or Dependent child was entitled to benefits under Article XV on the day prior to the Qualifying Event. (1) "Qualifying Event" means with respect to any Pensioned Employee, Dependent spouse, or Dependent child, as appropriate, (A) the death of the Pensioned Employee, (B) the divorce or legal separation of the Pensioned Employee from the Dependent spouse, (C) a Dependent child ceasing to be a Dependent as defined under the requirements of Article XV, or (D) a proceeding in a case under Title 11, United States Code, with respect to the Employer. (b) The Pensioned Employee or Dependent electing continued coverage under this Section 15.5 shall be required to pay such monthly contributions as determined by the Employer to be equal to a reasonable estimate of 102% of the cost of providing coverage for such period for similarly situated beneficiaries which (1) is determined on an actuarial basis and (2) takes into account such factors as the Secretary of the Treasury may prescribe. 84 (c) The continuation coverage elected by a Pensioned Employee, Dependent spouse, or Dependent child shall begin on the date of the Qualifying Event and end not earlier than the first to occur of the following: (1) The third anniversary of the Qualifying Event; (2) The termination of Article XV of the Plan; (3) The failure of the Pensioned Employee or Dependent to pay any required contribution when due; (4) The date on which the Pensioned Employee or Dependent first becomes, after the date of his election, (A) a covered employee under any other group health plan which does not contain any exclusion or limitation with respect to any preexisting condition of such individual, or (B) entitled to benefits under Title XVIII of the Social Security Act; or (5) The date the Dependent spouse becomes covered under another group health plan which does not contain any exclusion or limitation with respect to any preexisting condition of such Dependent spouse. (d) Any election to continue coverage under this Section 15.5 shall be made during the election period (1) beginning not later than the termination date of coverage by reason of the Qualifying Event and (2) ending sixty (60) days following the later of the date described in (1) above or the date any Pensioned Employee, Dependent spouse, or Dependent child receives notice of a Qualifying Event from the Employer. (e) The Employer shall provide each Pensioned Employee and Dependent spouse, if any, written notice of the rights provided in this Section 15.5. The Pensioned Employee or Dependent spouse is required to notify the Employer within thirty (30) days of any Qualifying Event described in Section 15.5(a)(1)(B) or (C), and the Employer shall provide the Dependent spouse or Dependent child written notice of the rights provided in this Section 15.5 within fourteen (14) days thereafter. Notice to the Dependent spouse shall be deemed notice to each Dependent child residing with such spouse at the time such notification is made. 15.6 Contributions to fund medical benefits. Any contributions which the Employer deems necessary to provide the medical benefits under Article XV will be made from time to time by or on behalf of the Employer, and contributions shall be required of the Pensioned Employees to the Employer's medical benefit plan in amounts determined in the sole discretion of the Employer from time to time. All Employer contributions shall be made to the Trustee under the Trust Agreement provided for in 85 Article XI and shall be allocated to a separate account maintained solely to fund the medical benefits provided under Article XV. The Employer shall designate that portion of any contribution to the Plan allocable to the funding of medical benefits under this Article XV. In no event at any time prior to the satisfaction of all liabilities under this Article XV shall any part of the corpus or income of such separate account be used for, or diverted to, purposes other than for the exclusive purpose of providing benefits under this Article XV. Effective January 1, 1991, subject to the requirements of Code Section 420, the Employer shall have the right, in its sole discretion, to transfer any excess corpus or income of the Plan allocated to fund Retirement Income to the separate account to fund medical benefits under this Article XV. The amount of contributions to be made by or on behalf of the Employer for any Plan Year shall be determined in accordance with any generally accepted actuarial method which is reasonable in view of the provisions and coverage of Article XV, the funding medium, and any other applicable considerations. However, the Employer is under no obligation to make any contributions under Article XV after Article XV is terminated, except to fund claims for medical expenses incurred prior to the date of termination. The medical benefits provided under this Article XV, when added to any life insurance protection provided under the Plan, shall be subordinate to the retirement benefits provided under the Plan. Subject to any transitional rule applicable to contributions made under this Article XV prior to January 1, 1990, effective October 3, 1989, the aggregate of costs of the medical benefits (measured from January 1, 1987) plus the costs of any life insurance protection shall not exceed twenty-five percent (25%) of the sum of the aggregate of costs of retirement benefits under the Plan (other than past service credits), the aggregate of costs of the medical benefits and the costs of any life insurance protection (both measured from January 1, 1987). The aggregate of costs of retirement benefits, other than for past service credits, and the aggregate of costs of medical benefits provided under the Plan shall be determined using the projected unit credit funding method and the actuarial assumptions set forth in Exhibit B, a copy of which is attached hereto and specifically incorporated herein by reference in its entirety, and as may be amended from time to time by the committee responsible for providing a procedure for establishing and carrying out a funding policy and method for the Plan pursuant to Section 10.9 of the Plan. Contributions allocated to any separate account established for a Pensioned Employee from which medical benefits will be payable solely to such Pensioned Employee or his Dependents shall be treated as an Annual Addition as defined in 86 Section 6.6(a) to any defined contribution plan maintained by the Employer. 15.7 Pensioned Employee contributions. It shall be the sole responsibility of the Pensioned Employee to notify the Employer promptly in writing when a change in the amount of the Pensioned Employee's contribution is in order because a Dependent has become ineligible for coverage under this Article XV. No person shall become covered under this Article XV for whom the Pensioned Employee has not made the required contribution. Any contribution paid by a Pensioned Employee for any person after such person shall have become ineligible for coverage under this Article XV shall be returned upon written request but only provided such written request by or on behalf of the Pensioned Employee is received by the Employer within ninety (90) days from the date coverage terminates with respect to such ineligible person. 15.8 Amendment of Article XV. The Employer reserves the right, through action of its Board of Directors, to amend Article XV (including Exhibit A) pursuant to Section 13.1 or the Trust without the consent of any Pensioned Employee, or his Dependents, provided, however, that no amendment of this Article or the Trust shall cancel the payment or reimbursement of expenses for claims already incurred by a Pensioned Employee or his Dependent prior to the date of any amendment, nor shall any such amendment increase the duties and obligations of the Trustee except with its consent. This Article XV, as set forth in the Plan document, is not a contract and non-contributory benefits hereunder are provided gratuitously, without consideration from any Pensioned Employee or his Dependents. The Employer makes no promise to continue these benefits in the future and rights to future benefits will never vest. In particular, retirement or the fulfillment of the prerequisites for a retirement benefit pursuant to the terms of the Plan or under the terms of any other employee benefit plan maintained by the Employer shall not confer upon any Pensioned Employee or Dependents any right to continued benefits under this Article XV. 15.9 Termination of Article XV. Although it is the intention of the Employer that this Article shall be continued and the contribution shall be made regularly thereto each year, the Employer, by action of its Board of Directors pursuant to Section 13.1, may terminate this Article XV or permanently discontinue contributions at any time in its sole discretion. This Article XV, as set forth in the Plan document, is not a contract and non-contributory benefits hereunder are provided gratuitously, without consideration from any Pensioned Employee or his Dependents. The Employer makes no promise to continue these benefits in the future and rights to future benefits will never vest. In particular, retirement or the fulfillment of the prerequisites for a retirement benefit pursuant to the terms of 87 the Plan or under the terms of any other employee benefit plan maintained by the Employer shall not confer upon any Pensioned Employee or his Dependents any right to continued benefits under this Article XV. Effective January 1, 1991, in the event the Employer or any adopting Employer shall terminate its provision of the medical benefits described in Exhibit A to Section 15.3 of the Plan to its Pensioned Employees, this Article XV of the Plan shall automatically terminate with respect to the Pensioned Employees and their Dependents of such Employer without the requirement of any action by such Employer. 15.10 Reversion of assets upon termination. Upon the termination of this Article XV and the satisfaction of all liabilities under this Article XV, all remaining assets in the separate account described in Section 15.6 shall be returned to the Employer. 88 ARTICLE XVI Early Retirement Incentive Program 16 16.1 Eligibility. This Article XVI is effective as of March 1, 1994. All Employees of the Employer other than Nuclear Generation Employees, who: (a) are classified on the Employer's payroll as actively employed on the last day preceding their Retirement Date; (b) who have or will complete ten (10) or more years of Accredited Service on or before December 31, 1994; and (c) have or will attain age fifty-five (55) on or before December 31, 1994 ("Eligible Employee") shall be eligible to receive the benefits described in Section 16.3 below if, during the period from April 1, 1994 through 5:00 p.m. EDT on April 30, 1994, such Employee elects to retire by filing an election form and waiver agreement with the Retirement Board no later than 5:00 p.m. EDT on April 30, 1994 and allows such election form and waiver agreement to become effective. In the event an Eligible Employee does not submit an election form and waiver agreement by 5:00 p.m. EDT on April 30, 1994 and allow such Agreement to become effective, the Retirement Board shall interpret such failure as an election not to receive the benefits provided under this Article XVI. 16.2 Retirement Dates of Eligible Employees. (a) Employees who satisfy eligibility criteria by May 31, 1994. The Early Retirement Date of an Eligible Employee who elects to retire in accordance with the provisions of this Article XVI and who is age fifty-five (55) or older with ten (10) or more years of Accredited Service by May 31, 1994 shall be June 1, 1994. (b) Employees who satisfy eligibility criteria subsequent to May 31, 1994. The Early Retirement Date of an Eligible Employee who elects to retire in accordance with the provisions of this Article XVI and who attains age fifty-five (55) or older with ten (10) or more years of Accredited Service subsequent to May 31, 1994, but prior to December 31, 1994, shall be the first day of the first month following the date such Eligible Employee satisfies the age and service criteria described in this Section 16.2(b). (c) Exception for critical projects. Notwithstanding the foregoing, in the sole discretion of the Employer, the Early Retirement Date of an Eligible Employee may be postponed beyond the Eligible Employee's Early Retirement Date determined in accordance with the provisions of paragraph (a) or (b) above, whichever is applicable, provided, however, that no Eligible Employee's Early Retirement Date shall be postponed beyond May 31, 1995. 89 16.3 Early retirement incentive program benefits. (a) Early retirement replacement benefit. In addition to any Retirement Income to which an Eligible Employee may be entitled in accordance with the provisions of Article V of the Plan, if an Eligible Employee retires from the service of the Employer in accordance with the provisions of this Article XVI prior to his Normal Retirement Date and elects to commence his Retirement Income prior to his Normal Retirement Date pursuant to the provisions of Section 5.7 of the Plan, the amount of Retirement Income to be received by such Eligible Employee under Section 5.5 shall not be reduced due to early commencement of such Retirement Income. (b) Social Security Bridge Benefit. An Eligible Employee who retires in accordance with the provisions of this Article XVI prior to the attainment of age sixty-two (62) shall be paid an amount equal to the estimated monthly Social Security benefits such Eligible Employee would become entitled to beginning at age sixty-five (65) based upon the Social Security Act in effect at the time of such Employee's retirement and such Eligible Employee's estimated Social Security earnings while employed with the Employer or an Affiliated Employer through his Early Retirement Date. This "Social Security Bridge Benefit" shall be paid monthly commencing on the Employee's Early Retirement Date (determined in accordance with Section 16.2 above) and shall continue to be paid on the first day of each month thereafter up to and including the first day of the month in which such Eligible Employee attains age sixty-two (62). (c) Provisional Payees. The benefits described in this Section 16.3 shall be subject to and administered in accordance with the provisions of Article VII of the Plan; provided, however, that in the event of the Eligible Employee's death prior to his sixty-second (62nd) birthday, one hundred percent (100%) of the monthly Social Security Bridge Benefit to which the Eligible Employee is entitled shall continue to be paid to his Provisional Payee through the first day of the month in which such Eligible Employee would have attained age sixty-two (62) had the Eligible Employee not died. 16.4 Restoration to service. Notwithstanding any provisions of Section 5.10 to the contrary, in the event an Eligible Employee who retires in accordance with the provisions of this Article XVI subsequently returns to the service of the Employer or any Affiliated Employer, all benefits payable to such Eligible Employee under this Article XVI shall cease and upon such Eligible Employee's subsequent retirement, the Eligible Employee shall receive the Actuarial Equivalent of the greater of: 90 (a) the Retirement Income the Eligible Employee would receive under the Plan based upon his Accredited Service and age at the date of his subsequent retirement, reduced by the Actuarial Equivalent of any Retirement Income, including any amount payable under Section 16.3(b), which the Employee received prior to his reemployment; or (b) the Retirement Income the Eligible Employee was actually receiving prior to his reemployment plus any amounts payable under Section 16.3(b). IN WITNESS WHEREOF, the Board of Directors of Georgia Power Company through its authorized officers has adopted this amendment and restatement of the Pension Plan for Employees of Georgia Power Company this day of , , to be effective January 1, 1989. GEORGIA POWER COMPANY By: Its: ATTEST: By: Its: [CORPORATE SEAL] adamscl] h:\wpdocs\mtd\gpc\gpc-pens.94 91 EX-10.(A)71 11 EXHIBIT 10(A)71 Exhibit 10(a)71 PENSION PLAN FOR EMPLOYEES OF SOUTHERN COMPANY SERVICES, INC. AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 1, 1989 TABLE OF CONTENTS Page ARTICLE I Definitions . . . . . . . . . . . . . . . . . . 2 ARTICLE II Eligibility . . . . . . . . . . . . . . . . . 13 2.1 Employees . . . . . . . . . . . . . . . . . . 13 2.2 Employees represented by a collective bargaining agent . . . . . . . . . . . . 13 2.3 Persons in military service and Employees on authorized leave of absence . . . . . 13 2.4 Employees reemployed . . . . . . . . . . . . . 13 2.5 Participation upon return to eligible class . 14 2.6 Exclusion of certain categories of employees . 14 2.7 Waiver of participation . . . . . . . . . . . 14 ARTICLE III Retirement . . . . . . . . . . . . . . . . . . 16 3.1 Retirement at Normal Retirement Date . . . . . 16 3.2 Retirement at Early Retirement Date . . . . . 16 3.3 Retirement at Deferred Retirement Date . . . . 16 ARTICLE IV Determination of Accredited Service . . . . . 17 4.1 Accredited Service pursuant to Prior Plan . . 17 4.2 Accredited Service . . . . . . . . . . . . . . 17 4.3 Accredited Service and Years of Service in respect of service of certain Employees previously employed by the Employer or by Affiliated Employers . . . 18 4.4 Accrual of Retirement Income during period of total disability . . . . . . . 20 4.5 Employees leaving Employer's service . . . . . 21 4.6 Transfers to or from Affiliated Employers . . 21 4.7 Transfers from Savannah Electric and Power Company . . . . . . . . . . . . . . 23 ARTICLE V Retirement Income . . . . . . . . . . . . . . 24 5.1 Normal Retirement Income . . . . . . . . . . . 24 5.2 Minimum Retirement Income payable upon retirement at Normal Retirement Date or Deferred Retirement Date . . . . . . . 24 5.3 Minimum Retirement Income upon retirement at Early Retirement Date or upon termination of service by reason of death or otherwise prior to retirement . 25 i 5.4 Calculation of Social Security Offset . . . . 26 5.5 Early Retirement Income . . . . . . . . . . . 27 5.6 Deferred Retirement Income . . . . . . . . . . 27 5.7 Payment of Retirement Income . . . . . . . . . 28 5.8 Termination of Retirement Income . . . . . . . 29 5.9 Required distributions . . . . . . . . . . . . 29 5.10 Suspension of Retirement Income for reemployment . . . . . . . . . . . . . . 31 5.11 Increase in Retirement Income of retired Employees for service prior to January 1, 1991 . . . . . . . . . . . . . 31 5.12 Special provisions relating to the treatment of absence of an Employee from the service of the Employer to serve in the Armed Forces of the United States . . . . . . . . . . . . . . 32 ARTICLE VI Limitations on Benefits . . . . . . . . . . . 36 6.1 Maximum Retirement Income . . . . . . . . . . 36 6.2 Adjustment to Defined Benefit Dollar Limitation for Early or Deferred Retirement . . . . . . . . . . . . . . . 37 6.3 Adjustment of limitation for Years of Service or participation . . . . . . . . 38 6.4 Preservation of Accrued Retirement Income . . 38 6.5 Limitation on benefits from multiple plans . . 39 6.6 Special rules for plans subject to overall limitations under Code Section 415(e) . . . . . . . . . . . . . 40 6.7 Combination of Plans . . . . . . . . . . . . . 41 6.8 Incorporation of Code Section 415 . . . . . . 41 ARTICLE VII Provisional Payee . . . . . . . . . . . . . . 42 7.1 Adjustment of Retirement Income to provide for payment to Provisional Payee . . . . . . . . . . . . . . . . . . 42 7.2 Form and time of election and notice requirements . . . . . . . . . . . . . . 42 7.3 Circumstances in which election and designation are inoperative . . . . . . . 43 7.4 Pre-retirement death benefit . . . . . . . . . 44 7.5 Post-retirement death benefit - qualified joint and survivor annuity . . 46 7.6 Election and designation by former Employee entitled to Retirement Income in accordance with Article VIII . 46 7.7 Death benefit for Provisional Payee of former Employee . . . . . . . . . . . . . 48 7.8 Limitations on Employee's and Provisional ii Payee's benefits . . . . . . . . . . . . 48 7.9 Effect of election under Article VII . . . . . 49 ARTICLE VIII Termination of Service . . . . . . . . . . . . 50 8.1 Vested interest . . . . . . . . . . . . . . . 50 8.2 Early distribution of vested benefit . . . . . 50 8.3 Years of Service of reemployed Employees . . . 51 8.4 Cash-out and buy-back . . . . . . . . . . . . 52 8.5 Calculation of present value for cash-out of benefits and for determining amount of benefits . . . . . . . . . . . . . . . 53 8.6 Retirement Income under Prior Plan . . . . . . 55 8.7 Requirement for Direct Rollovers . . . . . . . 55 ARTICLE IX Contributions . . . . . . . . . . . . . . . . 57 9.1 Contributions generally . . . . . . . . . . . 57 9.2 Return of Employer contributions . . . . . . . 57 9.3 Expenses . . . . . . . . . . . . . . . . . . . 58 ARTICLE X Administration of Plan . . . . . . . . . . . . 59 10.1 Retirement Board . . . . . . . . . . . . . . . 59 10.2 Organization and transaction of business of Retirement Board . . . . . . . . . . . 59 10.3 Administrative responsibilities of Retirement Board . . . . . . . . . . . . 59 10.4 Retirement Board, the "Administrator" . . . . 60 10.5 Fiduciary responsibilities . . . . . . . . . . 61 10.6 Employment of actuaries and others . . . . . . 61 10.7 Accounts and tables . . . . . . . . . . . . . 61 10.8 Indemnity of members of Retirement Board . . . 62 10.9 Areas in which the Retirement Board does not have responsibility . . . . . . . . . 62 10.10 Claims Procedures . . . . . . . . . . . . . . 63 ARTICLE XI Management of Trust . . . . . . . . . . . . . 64 11.1 Trust . . . . . . . . . . . . . . . . . . . . 64 11.2 Disbursement of the Trust Fund . . . . . . . . 64 11.3 Rights in the Trust . . . . . . . . . . . . . 64 11.4 Merger of the Plan . . . . . . . . . . . . . . 65 ARTICLE XII Termination of the Plan . . . . . . . . . . . 66 12.1 Termination of the Plan . . . . . . . . . . . 66 12.2 Limitation on benefits for certain highly paid employees . . . . . . . . . . . . . 66 iii ARTICLE XIII Amendment of the Plan . . . . . . . . . . . . 68 13.1 Amendment of the Plan . . . . . . . . . . . . 68 ARTICLE XIV Special Provisions . . . . . . . . . . . . . . 69 14.1 Adoption of Plan by other corporations . . . . 69 14.2 Exclusive benefit . . . . . . . . . . . . . . 70 14.3 Assignment or alienation . . . . . . . . . . . 70 14.4 Voluntary undertaking . . . . . . . . . . . . 71 14.5 Top-Heavy Plan requirements . . . . . . . . . 71 14.6 Determination of Top-Heavy status . . . . . . 71 14.7 Minimum Retirement Income for Top-Heavy Plan Years . . . . . . . . . . . . . . . 75 14.8 Vesting requirements for Top-Heavy Plan Years . . . . . . . . . . . . . . . . . . 76 14.9 Adjustments to maximum benefits for Top-Heavy Plans . . . . . . . . . . . . . 77 ARTICLE XV Post-retirement Medical Benefits . . . . . . . 78 15.1 Definitions . . . . . . . . . . . . . . . . . 78 15.2 Eligibility of Pensioned Employees and their Dependents . . . . . . . . . . . . 79 15.3 Medical benefits . . . . . . . . . . . . . . . 79 15.4 Termination of coverage . . . . . . . . . . . 79 15.5 Continuation of coverage to certain individuals . . . . . . . . . . . . . . . 80 15.6 Contributions to fund medical benefits . . . . 81 15.7 Pensioned Employee contributions . . . . . . . 82 15.8 Amendment of Article XV . . . . . . . . . . . 83 15.9 Termination of Article XV . . . . . . . . . . 83 15.10 Reversion of assets upon termination . . . . . 83 ARTICLE XVI Early Retirement Incentive Program . . . . . 84 16.1 Eligibility . . . . . . . . . . . . . . . . . 84 16.2 Retirement Dates of Eligible Employees . . . . 84 16.3 Early retirement incentive program benefits . 85 16.4 Restoration to service . . . . . . . . . . . . 85 iv Introductory Statement The Pension Plan for Employees of Southern Company Services, Inc., as amended and restated effective as of January 1, 1989 and hereinafter set forth (the "Plan"), is a modification and continuation of the Pension Plan for Employees of Southern Company Services, Inc. which originally became effective November 1, 1949, and has been amended from time to time. Since the enactment of the Employee Retirement Income Security Act of 1974 ("ERISA"), the Plan has been amended numerous times to comply with changes in the law and to achieve other administrative goals. Initially, the Plan was amended and restated in 1976 to comply with ERISA. Thereafter, the Plan was again amended and restated in 1986 to comply with the Tax Equity and Fiscal Responsibility Act of 1982, the Retirement Equity Act of 1984, and the Deficit Reduction Act of 1984. In more recent years, the Plan has been amended and restated three times to comply with the Tax Reform Act of 1986 -- first in 1989, second in 1991 and again as amended and restated herein. The amendment and restatement set forth herein consolidates those amendments made in 1989 and 1991 and provides for such other appropriate changes as are required by the law. Accordingly, this amendment and restatement is effective as of January 1, 1989. Where appropriate, amendments to the Plan which have a different effective date are noted. Retirement Income of former Employees (or Provisional Payees of former Employees) who retired in accordance with the provisions of the Prior Plan, as defined herein, is payable in accordance with the provisions of the Prior Plan. All contributions made by the Employer to this Plan are expressly conditioned upon the continued qualification of the Plan under Section 401(a) of the Code, including any amendments to the Plan, and upon the deductibility of such contributions by the Employer pursuant to Section 404 of the Code. 1 ARTICLE I Definitions The following words and phraseology as used herein have the following meanings unless a different meaning is plainly required by the context: 1 1.1 "Accrued Retirement Income" means with respect to any Employee at any particular date, the Retirement Income, determined pursuant to Section 5.1, commencing on his Normal Retirement Date which would be payable to such Employee in the form of a single life annuity on the basis of his Accredited Service to the date as of which the computation of Retirement Income is made. 1.2 "Accredited Service" means with respect to any Employee included in the Plan, the period of service as provided in Article IV. 1.3 "Actuarial Equivalent" means a benefit of equivalent value when computed on the basis of five percent (5%) interest per annum, compounded annually and the 1951 Group Annuity Mortality Table for males. The ages for all Employees under the above table shall be set back six (6) years and the ages for such Employees' spouses shall be set back one year. All actuarial adjustments and actuarial determinations required and made under the terms of the Plan shall be calculated in accordance with such assumptions. 1.4 "Affiliated Employer" means any corporation which is a member of a controlled group of corporations (as defined in Section 414(b) of the Code) which includes the Employer; any trade or business (whether or not incorporated) which is under common control (as defined in Section 414(c) of the Code) with the Employer; any organization (whether or not incorporated) which is a member of an affiliated service group (as defined in Section 414(m) of the Code) which includes the Employer; and any other entity required to be aggregated with the Employer pursuant to regulations under Section 414(o) of the Code. 1.5 "Average Monthly Earnings" means the greater of: (a) an Employee's Monthly Earnings averaged over the three (3) highest Plan Years of participation which shall produce the highest monthly average within the last ten (10) Plan Years; or (b) an Employee's Monthly Earnings averaged over the three (3) highest Plan Years of participation which shall produce the highest monthly average within the last ten (10) Plan Years during which the Employee actively performed services for the Employer. If an Employee has completed less than three (3) Plan Years of participation upon his termination of employment, his 2 Average Monthly Earnings will be based on his Earnings during his participation to his date of termination. 1.6 "Board of Directors" means the Board of Directors of Southern Company Services, Inc. 1.7 "Code" means the Internal Revenue Code of 1986, as amended from time to time. 1.8 "Current Accrued Retirement Income" means an Employee's Accrued Retirement Income under the Plan, determined as if the Employee had separated from service as of the close of the last Limitation Year beginning before January 1, 1987, when expressed as an annual benefit within the meaning of Section 415(b)(2) of the Code. In determining the amount of an Employee's Current Accrued Retirement Income, the following shall be disregarded: (a) any change in the terms and conditions of the Plan after May 5, 1986; and (b) any cost of living adjustment occurring after May 5, 1986. 1.9 "Deferred Retirement Date" means the first day of the month after a retirement subsequent to the Normal Retirement Date. Employment subsequent to Normal Retirement Date shall be deemed to be a retirement if an Employee has less than forty (40) Hours of Service during a calendar month. 1.10 "Defined Benefit Dollar Limitation" means the limitation set forth in Section 415(b)(1)(A) or (d) of the Code. 1.11 "Defined Contribution Dollar Limitation" means the limitation set forth in Section 415(c)(1)(A) of the Code. 1.12 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. 1.13 "Early Retirement Date" means the first day of the month following the retirement of an Employee on or after his fifty-fifth (55th) birthday and before his sixty-fifth (65th) birthday. 1.14 (a) "Earnings" with respect to any Employee including any Employee whose service is terminated by reason of disability (as defined in Section 4.4) means (1) the highest annual rate of salary or wages of an Employee of the Employer or employee of any Affiliated Employer within any Plan Year before deductions for taxes, Social Security, etc., (2) all amounts contributed by the Employer or any Affiliated Employer to The Southern Company 3 Employee Savings Plan as Elective Employer Contributions, as said term is described under Section 4.1 of such plan, pursuant to the Employee's exercise of his deferral option made thereunder in accordance with the requirements of Section 401(k) of the Code, and (3) all amounts contributed by the Employer or any Affiliated Employer to The Southern Electric System Flexible Benefits Plan or The Southern Company Flexible Benefits Plan on behalf of an Employee pursuant to his salary reduction election, and applied to provide one or more of the optional benefits available under such plan, but (4) shall exclude all amounts deferred under any non-qualified deferred compensation plan maintained by the Employer or any Affiliated Employer. (b) Notwithstanding the above, "Earnings" with respect to any commissioned salesperson means the salary or wages of an Employee of the Employer or employee of any Affiliated Employer within any Plan Year, without including overtime, and before deductions for taxes, Social Security, etc. but applying those adjustments identified in paragraphs (a)(2), (3) and (4) above. (c) With respect to an Employee whose service terminates because of a disability under Section 4.4, Earnings shall be deemed to continue in effect throughout the period of the Employee's Disability Leave, as also defined in Section 4.4. (d) With respect to calculating the Prior Plan Retirement Income of an Employee who is a "participant in the Plan" as provided in Section 5.12, Earnings shall be determined for the recognized period of his absence to serve in the Armed Forces of the United States at the rate which is paid to him on the day he returns to the service of the Employer as provided in paragraph (a) of Section 5.12 or at the rate which was payable to him at the time he left the employment of the Employer to enter the Armed Forces of the United States, if such amount was greater. (e) For Plan Years beginning after December 31, 1988 and prior to January 1, 1994, the annual compensation of each Employee taken into account for purposes of this Plan shall not exceed $200,000 (as adjusted by the Secretary of Treasury). The imposition of this limitation shall not reduce an Employee's Retirement Income below the amount as determined on December 31, 1988. In addition to other applicable limitations set forth in the Plan, and notwithstanding any other provision of the Plan to the contrary, for Plan Years beginning on or after January 1, 1994, the annual compensation of each Employee taken into account under the Plan shall not exceed $150,000, as adjusted for increases in the cost of living in accordance with Code Section 401(a)(17). The cost of living adjustment in effect for a calendar year applies to any period, not exceeding twelve (12) months, over which compensation is determined (the "determination period") beginning in such calendar year. If the determination 4 period is less than twelve (12) months, the limit shall be prorated. If compensation for any prior determination period is taken into account in determining an Employee's benefits accruing in the current Plan Year beginning on or after January 1, 1989 or January 1, 1994, as applicable, the compensation for that prior determination period is subject to the $200,000 or the $150,000 compensation limit in effect for that prior determination period. Notwithstanding any other provision in the Plan, each Employee's Accrued Retirement Income under this Plan will be the greater of: (a) the Employee's Accrued Retirement Income as of the last day of the last Plan Year beginning before January 1, 1994, frozen in accordance with Treasury Regulation Section 1.401(a)(4)-13, or (b) the Employee's Accrued Retirement Income determined with respect to the benefit formula applicable for the Plan Year beginning on or after January 1, 1994, as applied to the employee's total Years of Service taken into account under the Plan for purposes of benefit accruals. For purposes of this Section 1.14, the rules of Section 414(q)(6) of the Code shall apply in determining the adjusted $200,000 or $150,000 limitation, as applicable, except in applying such rules, the term "family" shall include only the spouse of the Employee and any lineal descendants of the Employee who have not attained age nineteen (19) before the close of the Plan Year. If, as a result of the application of such rules, the adjusted $200,000 or $150,000 limitation is exceeded, then the limitation shall be prorated among the affected individuals in proportion to each individual's Earnings determined under this Section 1.14 prior to the application of this limitation. 1.15 "Effective Date" means the original effective date of the Plan, November 1, 1949. The effective date of this amendment and restatement means January 1, 1989. 1.16 "Eligibility Year of Service" is a Year of Service commencing on the Employee's date of employment or reemployment or anniversary date thereof. 1.17 "Employee" means any person who is currently employed by the Employer as (a) a regular full-time employee, (b) a regular part-time employee, (c) a cooperative education employee, or (d) a temporary employee (whether full-time or part-time) paid directly or indirectly by the Employer. The term also includes "leased employees" within the meaning of Section 414(n)(2) of the 5 Code, unless the total number of leased employees constitutes less than twenty percent (20%) of the Employer's non-highly compensated workforce within the meaning of Section 414(n)(5)(C)(ii) and such leased employees are covered by a plan described in Section 414(n)(5)(B) of the Code. 1.18 "Employer" means Southern Company Services, Inc., any successor or successors thereof and any wholly owned subsidiary thereof which the Board of Directors may from time to time, and upon such terms and conditions as may be fixed by the Board of Directors, determine to bring under the Plan, and any other corporation which shall adopt this Plan and Trust Agreement pursuant to Section 14.1 by appropriate resolution authorized by the board of directors of said adopting corporation. 1.19 "Full Current Costs" means the normal cost, as defined in Treasury Regulation Section 1.404(a)-6, for all years since the Effective Date of the Plan, plus interest on any unfunded liability during such period. 1.20 "Hour of Service" means an Employee shall be credited with one Hour of Service for each hour for which (a) he is paid, or entitled to payment, for the performance of duties for the Employer or an Affiliated Employer, and such hours shall be credited to the Employee for the computation period or periods in which the duties are performed; (b) he is paid, or entitled to payment, by the Employer or an Affiliated Employer on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty, or leave of absence in which case the Employee shall be credited with Hours of Service for the computation period or periods in which the period during which no duties were performed occurs; (c) back pay, irrespective of mitigation of damages, has been either awarded or agreed to by the Employer or an Affiliated Employer, in which case the Employee shall be credited with Hours of Service for the computation period or periods to which the award or agreement pertains, rather than the computation period in which the award, agreement, or payment is made; and (d) solely for the purpose of calculating Vesting Years of Service, he was on any form of authorized leave of absence. The same Hours of Service shall not be credited under clauses (a), (b), (c), and (d). An Employee who is entitled to be credited with Hours of Service in accordance with clause (b) or (d) of this Section shall be credited with such number of Hours of Service for the period of time during which no duties were performed as though he were in the active employment of the Employer during such period of time. However, an Employee shall not be credited with Hours of Service in accordance with clause (b) of this Section for 6 unused vacation for which payment is received at termination of employment, or if the payment which is made to him or to which he is entitled in accordance with clause (b) is made or due under a plan maintained solely for the purpose of complying with applicable Worker's Compensation, or unemployment compensation or disability insurance laws, or if such payment is one which solely reimburses an Employee for medical or medically related expenses incurred by the Employee. Provided there is no duplication of Hours of Service credited in accordance with the foregoing provisions, if an Employee is "a participant in the Plan" within the meaning of that term as defined in paragraph (a) of Section 5.12, he shall be credited with such number of Hours of Service with respect to all or such portion of the period of his absence to serve in the Armed Forces of the United States as may be recognized under paragraph (b) of Section 5.12 as though he were in the active employment of the Employer during the recognized period of his absence to serve in the Armed Forces. The rules set forth in paragraphs (b) and (c) of Department of Labor Regulations 2530.200b-2 are incorporated in the Plan by this reference and made a part hereof. 1.21 "Limitation Year" means the Plan Year. 1.22 "Monthly Earnings" means one-twelfth (1/12) of the Earnings of an Employee of the Employer during a Plan Year. 1.23 "Normal Retirement Date" means the first day of the month following an Employee's sixty-fifth (65th) birthday, except that the Normal Retirement Date of any Employee hired on or after his sixtieth (60th) birthday shall be the fifth (5th) anniversary of his initial participation in the Plan. 1.24 "One-Year Break in Service" means a twelve (12) consecutive month period commencing on or after January 1, 1976 which would constitute a Year of Service but for the fact that the Employee has not completed more than 500 Hours of Service during such period. Solely for the purpose of determining whether a One-Year Break in Service has occurred for eligibility or vesting purposes, an Employee who is absent from work for maternity or paternity reasons shall receive credit for the Hours of Service which would otherwise have been credited to such Employee but for such absence, or in any case in which such hours cannot be determined, eight (8) Hours of Service per day of such absence. In no event shall Hours of Service credited under this paragraph be in excess of the amount necessary to prevent a One-Year Break in Service from occurring. For purposes of this paragraph, an absence from work for maternity or paternity reasons means an 7 absence (a) by reason of the pregnancy of the Employee, (b) by reason of a birth of a child of the Employee, (c) by reason of the placement of a child with the Employee in connection with the adoption of such child by such Employee, or (d) for purposes of caring for such child for a period beginning immediately following such birth or placement. The Hours of Service shall be credited under this paragraph: (a) in the vesting or eligibility period in which the absence begins if the Hours of Service credited are necessary to prevent a One-Year Break in Service in such period, and (b) in all other cases, in the vesting or eligibility periodfollowing the periodin which theabsence begins. 1.25 "Past Service" means with respect to any Employee included in the Plan, the period of his Accredited Service prior to January 1, 1989 as determined under the Prior Plan. 1.26 "Plan" means the Pension Plan for Employees of Southern Company Services, Inc., as set forth herein and as hereinafter amended, effective January 1, 1989. 1.27 "Plan Year" means the twelve (12) month period commencing on the first day of January and ending on the last day of December next following. 1.28 "Plan Year of Service" is a Year of Service determined as if the date of employment or reemployment is the first day of the Plan Year. 1.29 "Prior Plan" means the Plan in effect prior to January 1, 1989. 1.30 "Provisional Payee" means a spouse designated or deemed to have been designated by an Employee or former Employee pursuant to Article VII to receive Retirement Income on the death of the Employee or former Employee. 1.31 "Qualified Election" means an election by an Employee or former Employee that concerns the form of distribution of Retirement Income that must be in writing and must be consented to by the Employee's Spouse. The Spouse's consent to such an election must acknowledge the effect of such election, must be in writing, and must be witnessed by a notary public. Notwithstanding this consent requirement, if the Employee establishes to the satisfaction of the Retirement Board that such written consent may not be obtained because the Spouse cannot be located or because of such other circumstances as the Secretary of the Treasury may by regulations prescribe, an election by the Employee will be deemed a Qualified Election. Any consent necessary under this provision shall be valid and effective only with respect to the Spouse who signs the consent, or in the event of a deemed Qualified Election, with respect to such Spouse. 8 A revocation of a prior Qualified Election to waive the payment of Retirement Income to the Employee's Spouse may be made by the Employee without consent at any time commencing within 90 days before such Employee's 55th birthday but not later than before the commencement of Retirement Income. A Qualified Election or the revocation of a Qualified Election shall be on a form furnished by the Retirement Board and filed within the time prescribed for making such election. 1.32 "Retirement Board" means the managing board of the Plan provided for in Article X. 1.33 "Retirement Date" means the Employee's Normal, Early, or Deferred Retirement Date, whichever is applicable to him. 1.34 "Retirement Income" means the monthly Retirement Income provided for by the Plan. 1.35 "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, and $250 per month, on and after January 1, 1991, 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 the aggregate Accredited Service the Employee could have accumulated if he had continued his employment 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(b) and shall be determined pursuant to the following, as applicable: (a) With regard to an Employee described in Section 5.2, the Social Security benefit shall be computed at retirement. In estimating the amount of the Federal primary Social Security benefit to which the Employee would be entitled, it shall be assumed that he will receive no wages for Social Security purposes after his retirement on his Normal Retirement Date or Deferred Retirement Date, and it will be further assumed in calculating his estimated Federal primary Social Security benefit that the amount thereof will be the amount determined under the recomputation provision, if applicable, of the Social Security Act in effect at the time of his retirement. 9 (b) With regard to an Employee described in Section 5.3(a), the Social Security benefit to which it is estimated that he will be entitled at sixty-five (65), shall be computed at the time of his retirement. In estimating the amount of the Federal primary Social Security benefit to which the Employee would be entitled at age sixty-five (65), it shall be assumed that he will receive no wages for Social Security purposes after his Early Retirement Date, and it will be further assumed in calculating his estimated Federal primary Social Security benefit that the amount thereof will be the amount determined under the recomputation provision, if applicable, of the Social Security Act in effect at his Early Retirement Date. (c) With regard to an Employee described in Section 5.3(b), the Social Security benefit to which it is estimated that he would have been entitled to receive at age sixty-five (65) or his date of death, if later, had he not died, shall be computed at the time of his death. In estimating the amount of Federal primary Social Security benefit to which the Employee would have been entitled at age sixty-five (65) or his date of death, if later, it shall be assumed that he would not have received any wages for Social Security purposes after the date of his death, and it will be further assumed in calculating his Federal primary Social Security benefit that the amount thereof will be the amount determined under the recomputation provision, if applicable, of the Social Security Act in effect at the time of his death. (d) With regard to an Employee described in Section 5.3(c), the Social Security benefit to which it is estimated that he will become entitled at age sixty-five (65) or his date of termination, if later, shall be computed at the date of termination. In estimating the amount of the Federal primary Social Security benefit to which the Employee would be entitled at age sixty-five (65) or his date of termination, if later, it shall be assumed that he will receive no wages for Social Security purposes after his date of termination, and it will be further assumed in calculating his estimated Federal primary Social Security benefit that the amount thereof will be the amount determined under the recomputation provision, if applicable, of the Social Security Act in effect at his date of termination. (e) With regard to an Employee described in Section 5.3(d), the Social Security benefit to which it is estimated that he would have been entitled to receive at age sixty-five (65) or his initial date of disability, if later, had he not become disabled, shall be computed at the time of his retirement. In estimating the amount of Federal primary Social Security benefit to which the Employee would have been entitled at age sixty-five (65) or his date of disability, if later, it shall be assumed that he would have received wages for Social Security purposes as 10 specified in Section 5.4, and it will be further assumed in calculating his estimated Federal primary Social Security benefit that the amount thereof will be the amount determined under the recomputation provision, if applicable, of the Social Security Act in effect at the time of his retirement. 1.36 "Social Security Retirement Age" means age sixty-five (65) if the Employee attains age sixty-two (62) before January 1, 2000 (i.e., born before January 1, 1938), age sixty-six (66) if the Employee attains age sixty-two (62) after December 31, 1999, but before January 1, 2017 (i.e., born after December 31, 1937, but before January 1, 1955), and age sixty-seven (67) if the Employee attains age sixty-two (62) after December 31, 2016 (i.e., born after December 31, 1954). 1.37 "Trust" or "Trust Fund" means all such money or other property which shall be held by the Trustee pursuant to the terms of the Trust Agreement or pursuant to contracts with life insurance companies. 1.38 "Trust Agreement" means the trust agreement or agreements between the Employer and the Trustee established for the purpose of funding the Retirement Income to be paid. 1.39 "Trustee" means the trustee or trustees acting as such under the Trust Agreement, including any successor or successors. 1.40 "Vesting Year of Service" means an Employee's Years of Service including: (a) Years of Service with an Affiliated Employer; (b) in the case of an employee of Birmingham Electric Company who, prior to his Normal Retirement Date, became and remained an Employee of the Employer until December 1, 1952, and was an active Employee of the Employer on January 1, 1961, his service with Birmingham Electric Company; (c) subject to the eligibility requirements of Section 2.3, active service with the Armed Forces of the United States if the Employee entered or enters active service or training in such Armed Forces directly from the employ of the Employer and after discharge or release therefrom returns within ninety (90) days to the employ of the Employer or is deemed to return under Section 2.3 because of the death of such Employee while in active service with such Armed Forces; and (d) any period during which the Employee was on any other form of authorized leave of absence. For purposes of this Section 1.40 in determining Vesting Years of Service with respect to a period of absence referred to in clause (c) or (d) of this Section 1.40, an Employee shall be credited with Hours of Service as though the period of absence were a period of active employment with the Employer. 1.41 "Year of Service" means with respect to an Employee in the service of the Employer on or after January 1, 1976: 11 (a) if the Employee was hired prior to January 1, 1976, each twelve (12) consecutive month period, computed from the Employee's most recent date of hire by the Employer, during his last period of continuous service as a full-time regular Employee (except that service prior to July 1, 1944 need not have been continuous) with the Employer immediately prior to January 1, 1976 (including service with Commonwealth and predecessor companies and service with Affiliated Employers and service with companies or properties heretofore affiliated or associated prior to the date of severance of such affiliation or association) and any subsequent twelve (12) consecutive month period commencing on an anniversary date of such date of hire (or date of reemployment as provided in Section 2.4), provided that in each such twelve (12) consecutive month period commencing on or after January 1, 1975 he has completed at least 1000 Hours of Service; or (b) if the Employee is hired on or after January 1, 1976, a twelve (12) consecutive month period after December 31, 1975, commencing on the Employee's most recent date of hire by the Employer (or date of reemployment as provided in Section 2.4), and any subsequent twelve (12) consecutive month period commencing on an anniversary date of such date of hire, provided he has completed at least 1000 Hours of Service during each such twelve (12) consecutive month period; and (c) to the extent not resulting in duplication, each Year of Service restored to the Employee upon reemployment as provided in Section 8.3. An Employee's vested interest in his Accrued Retirement Income shall be based on his Vesting Years of Service and an Employee's eligibility to participate in the Plan pursuant to Article II shall be based on his Eligibility Year of Service. Breaks in service will be measured on the same computation period as the Year of Service. Effective on and after January 1, 1995, an Employee's accrual of Retirement Income shall be based solely on an Employee's Plan Year of Service, without regard to an Employee's completion of a Vesting Year of Service ending within such Plan Year. In the Plan and Trust Agreement, 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. 12 ARTICLE II Eligibility 2 2.1 Employees. Each Employee participating in the Plan as of January 1, 1989 shall continue to be included in the Plan. Each other Employee, except as provided in this Article, shall be included in the Plan on the first day of the month next following the date on which he first completes an Eligibility Year of Service. 2.2 Employees represented by a collective bargaining agent. An Employee who is represented by a collective bargaining agent may participate in the Plan, subject to its terms, if the representative(s) of his bargaining unit and the Employer mutually agree to participation in the Plan by members of his bargaining unit. 2.3 Persons in military service and Employees on authorized leave of absence. Any person not already included in the Plan who leaves or has left the employ of the Employer to enter the Armed Forces of the United States or is on authorized leave of absence without regular pay and who returns to the employ of the Employer within ninety (90) days after discharge from such military service or on or before termination of his leave of absence, shall, upon such return, be included in the Plan effective as of the first day of the month next following the date on which he first met or meets the eligibility requirement of Section 2.1. In determining whether an Employee entering the service of the Employer has completed an Eligibility Year of Service, his Hours of Service prior to such authorized leave of absence without regular pay or entry into the Armed Forces shall be taken into account, and for purposes of Section 2.4, he shall be deemed not to have incurred a One-Year Break in Service by reason of such absence. If an Employee dies while in active service with the Armed Forces of the United States, such Employee shall be deemed to have returned to the employ of the Employer on his date of death. An Employee not already included in the Plan who is on authorized leave of absence and receiving his regular pay shall be considered credited with Hours of Service as though the period of absence was a period of active employment with the Employer, and he shall be included in the Plan if and when he meets the requirements of this Article II regardless of whether he is, on the date of such inclusion, on such leave of absence. 2.4 Employees reemployed. An Employee whose service terminates at any time and who is reemployed as an Employee, unless excluded under Section 2.6, will be included in the Plan as provided in Section 2.1 unless: 13 (a) prior to termination of his service he had completed at least one Year of Service; and (b) upon his reemployment, to the extent provided in Section 8.3 without regard to Section 8.4, he is entitled to restoration of his Years of Service, in which case he will be included in the Plan as of the date of his reemployment. For purposes of determining Years of Service of an Employee who is reemployed by the Employer subsequent to a One-Year Break in Service, a Year of Service subsequent to his reemployment shall be computed on the basis of the twelve (12) consecutive month period commencing on his date of reemployment or an anniversary thereof. 2.5 Participation upon return to eligible class. I f a n Employee is a participant in the Plan before July 1, 1991, the exclusion from participation provided in Section 2.6, as it regards temporary employees, shall not apply with respect to such Employee, and such Employee shall be eligible to participate in the Plan after July 1, 1991 whether or not he is classified as a temporary employee. If an Employee first becomes a participant on or after July 1, 1991, in the event such Employee ceases to be a member of an eligible class of Employees and becomes ineligible to participate, but has not incurred a One-Year Break in Service, such Employee will participate immediately upon returning to an eligible class of Employees. If such Employee incurred a One- Year Break in Service, eligibility will be determined under Section 2.4 of the Plan. In all other instances, if an Employee is not a member of an eligible class of Employees but then becomes a member of an eligible class, such Employee will commence participation in the Plan as of the first day of the month next following the later of (a) the date such Employee completes an Eligibility Year of Service or (b) the date he becomes a member of an eligible class of Employees. 2.6 Exclusion of certain categories of employees. Notwithstanding any other provision of this Article II, leased employees shall not be eligible to participate in the Plan. In addition, temporary employees, except Employees, as defined in Section 1.17, participating in the Plan prior to July 1, 1991 shall not be eligible to participate in the Plan. Any person who is employed by Electric City Merchandise Company, Inc. on or after May 1, 1988, or who is employed by Savannah Electric and Power Company on or after March 3, 1988, shall not be entitled to accrue Retirement Income under the Plan while employed at such companies. 14 2.7 Waiver of participation. Effective January 1, 1991, notwithstanding the above, an Employee may, subject to the approval of the Employer, elect voluntarily not to participate in the Plan. The election not to participate must be communicated in writing to the Retirement Board effective on an Employee's date of hire or an anniversary thereof. Effective January 1, 1995, the election not to participate must be communicated in writing to and acknowledged by the Retirement Board and shall be effective as of the date set forth in such written waiver. 15 ARTICLE III Retirement 3 3.1 Retirement at Normal Retirement Date. Each Employee eligible to participate in the Plan shall have a nonforfeitable right to his Accrued Retirement Income by no later than his sixty-fifth (65th) birthday, or in the case of any Employee hired on or after his sixtieth (60th) birthday, the fifth (5th) anniversary of his initial participation in the Plan. Notwithstanding the above, an Employee's Normal Retirement Date shall be as provided in Section 1.23. 3.2 Retirement at Early Retirement Date. An Employee having at least ten (10) Years of Accredited Service (including any Accredited Service to which he is entitled under the pension plan of any Affiliated Employer from which such Employee was transferred pursuant to Section 4.6 or 4.7, or which was credited to him in accordance with Section 4.3) may elect to retire on an Early Retirement Date on or after his fifty-fifth (55th) birthday and before his sixty-fifth (65th) birthday and to have his Retirement Income commence on that date, or effective January 1, 1995, the first day of any month up to and including the Employee's Normal Retirement Date. 3.3 Retirement at Deferred Retirement Date. An Employee included in the Plan may remain in active service after his Normal Retirement Date. The involuntary retirement of an Employee on or after his Normal Retirement Date shall not be permitted solely on the basis of the Employee's age, except in accordance with the provisions of the Age Discrimination in Employment Act, as amended from time to time. Termination of service of such an Employee for any reason after Normal Retirement Date shall be deemed retirement as provided in the Plan. 16 ARTICLE IV Determination of Accredited Service 4 4.1 Accredited Service pursuant to Prior Plan. Each Employee who participated in the Prior Plan shall be credited with such Accredited Service, if any, earned under such Prior Plan as of December 31, 1988. 4.2 Accredited Service. (a) Each Employee meeting the requirements of Article II shall, in addition to any Accredited Service to which he may be entitled in accordance with Section 4.1, be credited with Accredited Service as set forth in (b) below. Any such Employee who is on authorized leave of absence with regular pay shall be credited with Accredited Service during the period of such absence. Any such Employee who is a "participant in the Plan" within the meaning of that term as defined in paragraph (a) of Section 5.12 shall be credited with Accredited Service during all or such portion of the period of his absence to serve in the Armed Forces of the United States as may be recognized under paragraph (b) of Section 5.12. Employees on authorized leave of absence without regular pay, other than Employees deemed to accrue Hours of Service under Section 4.4, and persons in the Armed Forces who are not "participants in the Plan" within the meaning of that term as defined in paragraph (a) of Section 5.12 shall not be credited with Accredited Service for the period of such absence. (b) For each Plan Year commencing after December 31, 1988, an Employee included in the Plan who is credited with a Vesting Year of Service for the twelve (12) consecutive month period ending on the anniversary date of his hire which occurs during such Plan Year shall be credited with Accredited Service as follows: (1) if an Employee completes at least 1,680 Hours of Service in a Plan Year, he shall be credited with one year of Accredited Service; (2) if an Employee completes less than 1,680 Hours of Service in a Plan Year, but not less than 1,000 Hours of Service, he shall be credited with one-twelfth (1/12) of a year of Accredited Service for each 140 Hours of Service; or (3) if an Employee's initial eligibility in the Plan shall occur after the beginning of the Plan Year, and the Employee shall therefore have completed less than 1,000 Hours of Service in such Plan Year, he shall be credited with one-twelfth (1/12) of a year of Accredited Service for 17 each 140 Hours of Service during such Plan Year after his inclusion in the Plan. Notwithstanding the above, effective January 1, 1995, an Employee's Accredited Service shall be calculated based on an Employee's accrual of a Plan Year of Service only and without regard to the requirement of a Vesting Year of Service. (c) If an Employee (1) who has previously satisfied the eligibility requirements under Article II shall again be included in the Plan at such time which is after the beginning of the Plan Year, or (2) shall terminate his employment for any reason before the close of such Plan Year and shall therefore have completed less than 1,000 Hours of Service in such Plan Year, he shall be credited with one-twelfth (1/12) of a year of Accredited Service for each 140 Hours of Service during such Plan Year after his inclusion in the Plan or before his termination of employment in such Plan Year, as the case may be. (d) In addition to any Accredited Service credited under Section 4.1, an Employee shall be entitled to Accredited Service determined under the Prior Plan, without regard to the age requirement for eligibility to participate in the Prior Plan, in excess of the Accredited Service determined under the Prior Plan (including the age requirement for eligibility to participate in the Prior Plan). Such Accredited Service shall be considered Accredited Service after December 31, 1985 for purposes of calculating an Employee's Retirement Income under Article V. (e) In addition to the foregoing, Accredited Service may include Accredited Service accrued subsequent to a One-year Break in Service including such Accredited Service which may be restored in accordance with the provisions of Section 8.3. (f) Notwithstanding the above, the maximum number of years of Accredited Service with respect to any Employee participating in the Plan shall not exceed forty (40). Effective January 1, 1991, the maximum number of years of Accredited Service is increased to forty-three (43). 4.3 Accredited Service and Years of Service in respect of service of certain Employees previously employed by the Employer or by Affiliated Employers. An Employee in the service of the Employer on January 1, 1976 or employed by it thereafter who meets the requirements of paragraph (a) of this Section 4.3, in addition to any other Years of Service or Accredited Service to which he may be entitled under the Plan, upon completion of an Eligibility Year of Service where required under Section 8.3(c) (which shall also be considered to be Accredited Service) shall be credited with such number of Years of Service (and fractions thereof to the nearest whole month for service prior to January 1, 1976) and such Accredited Service and Retirement Income as 18 shall be determined in accordance with the provisions of paragraphs (b) and (c) of this Section 4.3. (a) (1) Such Employee shall have been employed prior to January 1, 1976 by the Employer or by one or more Affiliated Employers; (2) he shall have terminated his service with Employer or such Affiliated Employer other than by retirement and he shall not be entitled to receive at any time any retirement income under the pension plan of any such prior employer in respect of any period of time for which he shall receive credit for Years of Service or Accredited Service under this Section 4.3; and (3) for Employees reemployed on or after January 1, 1985, the number of consecutive One-Year Breaks in Service incurred by the Employee prior to the date of his employment by the Employer does not equal or exceed the greater of (A) five (5), or (B) the aggregate number of his Years of Service (and fractions thereof to the nearest whole month for service prior to January 1, 1976) with the Employer and such Affiliated Employer. The years of Accredited Service credited to an Employee reemployed prior to January 1, 1985, with regard to years of Accredited Service immediately prior to the termination of his service, shall be determined under the terms of the Plan in effect prior to January 1, 1985. (b) The number of Years of Service (and fractions thereof to the nearest whole month for service prior to January 1, 1976) and the Accredited Service, respectively, which shall be credited to such Employee shall be equal to the respective number of his Years of Service (and fractions thereof to the nearest whole month for service prior to January 1, 1976) and Accredited Service which were forfeited by the Employee and not restored under the pension plans of the Employer or an Affiliated Employer. (c) There shall be credited to the Employee Retirement Income equal to retirement income which was accrued by him under the pension plan of the Employer or an Affiliated Employer during the period of his Accredited Service which was forfeited and which is credited under the Plan in accordance with Section 4.3. The amount of Retirement Income credited in accordance with this paragraph (c) shall be treated as Prior Plan Retirement Income for purposes of determining the amount of Retirement Income to which the Employee is entitled, and shall be determined in accordance with the provisions of the pension plan of the Affiliated Employer in effect at the time the Employee's service with such Affiliated Employer terminated without regard to any minimum provisions of such pension plan; for this purpose and if relevant in respect of the Employee it shall be assumed that the pension plan of the Affiliated Employer in effect at the time the Employee's service with such Affiliated Employer terminated contained the provisions of Section 5.12 of the Plan and related amendments concerning absence from the service of the Employer to 19 serve in the Armed Forces of the United States which became effective November 1, 1977. For Plan Years beginning after December 31, 1987, an Employee who meets the requirements of paragraph (a) of this Section 4.3 shall be deemed to have transferred to or from an Affiliated Employer for purposes of the transfer of assets or liabilities to or from the Plan in accordance with Section 4.6. 4.4 Accrual of Retirement Income during period of total disability. (a) If an Employee included in the Plan shall become totally disabled, as determined by the Retirement Board on the basis of medical evidence, after he has completed at least five (5) Vesting Years of Service and, by reason of such disability, he shall apply for and be granted either Social Security disability benefits or long-term disability benefits under a long-term disability benefit plan of the Employer, he shall be considered to be on a leave of absence, herein referred to as a "Disability Leave." An Employee's Disability Leave shall be deemed to begin on the initial date of the disability, as determined by the Retirement Board, and shall continue until the earlier of: (1) the end of the month in which he shall cease to be entitled to receive Social Security Disability benefits and long-term disability benefits under a long-term disability benefit plan of the Employer; (2) his death; and (3) his Retirement Date if he elects to have his Retirement Income commence on such date. During the period of the Employee's Disability Leave, he shall, for purposes of the Plan, be deemed to have received Earnings at the regular rate in effect for him. (b) A disabled Employee who applies for and would be granted long-term disability benefits under a long-term disability benefit plan of the Employer, if it were not for the fact that the deductions therefrom attributable to other disability benefits equal or exceed the amount of his unreduced benefit under a long-term disability benefit plan of the Employer, will be considered as being currently granted benefits under such long-term disability benefit plan. (c) An Employee's Disability Leave shall be deemed to be a period for which Hours of Service shall be credited to the Employee as though the period of his Disability Leave were a period of active employment. (d) If an Employee's Disability Leave shall terminate prior to his Normal Retirement Date and he shall fail to return to the employment of the Employer 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 his rights shall be determined in accordance with Article VIII, unless at such time he shall be entitled to retire on an Early 20 Retirement Date, in which event his termination of service shall be deemed to constitute his retirement under Section 3.2. (e) Notwithstanding the above, the years of Accredited Service for any Employee whose initial date of disability occurred under the Prior Plan shall be determined under the terms of the Prior Plan. 4.5 Employees leaving Employer's service. If the service of an Employee is terminated prior to retirement as provided by Article III, such Employee will forfeit any Vesting Years of Service and Accredited Service which he may have subject to possible restoration of some or all of his Vesting Years of Service and Accredited Service in accordance with Article VIII. The provisions of this Section 4.5 shall not affect the rights, if any, of an Employee under Article VIII nor shall the rights of an Employee be affected during or by reason of a layoff, due to lack of work, which continues for a period of one year or less, except that such period of layoff shall not be deemed to be service with the Employer. If the service of an Employee is terminated, or if he is not reemployed before the expiration of one year after being laid off for lack of work, and he is subsequently reemployed, he will be treated as provided in Section 2.4. Forfeitures arising by reason of an Employee's termination of service for any reason shall not be applied to increase the benefits any Employee would otherwise receive under the Plan but shall be used to reduce contributions of the Employer to the Plan. 4.6 Transfers to or from Affiliated Employers. This Section 4.6 shall not apply to the transfer by an Employee to the Employer from Savannah Electric and Power Company on or after March 3, 1988. In the case of the transfer of an Employee (including an Employee included in the Prior Plan who was transferred in accordance with the Prior Plan) to an Affiliated Employer which has at the time of transfer a pension plan with substantially the same terms as this Plan, such Employee, if and when he commences to receive on or after his Normal Retirement Date retirement income under such pension plan of the Affiliated Employer to which transferred, shall receive retirement income under such pension plan attributable to years of Accredited Service with the Employer prior to the time of his transfer. If and when such an Employee commences to receive on an Early Retirement Date retirement income under such pension plan of the Affiliated Employer to which transferred, the amount of any retirement income payable under such pension plan and attributable to Accredited Service with the Employer prior to such transfer shall be reduced in accordance with the provisions of the pension plan relating to retirement income payable at Early Retirement Date, or if such retirement income shall be 21 payable in a manner similar to the provisions of Section 8.2 or Section 8.6, reduced in accordance with the applicable provision. In the case of the transfer to this Employer (not including transfers by reason of the split-up as of November 1, 1949) of an Employee of any Affiliated Employer which has at the time of transfer a pension plan with substantially the same terms as this Plan, the Employer will, subject to the provisions of Article IX, make periodic contributions into this Plan to the extent necessary to provide the portion of the Retirement Income not provided for him in the pension plan of the company from which he was transferred. Upon the transfer of an Employee to or from the Employer, the Plan and Trust shall be authorized to receive or transfer the greater of (a) the actuarial equivalent of the Employee's Accrued Retirement Income or (b) such assets as may be required to fund the projected Retirement Income of the Employee at his retirement date attributable to the Plan or the pension plan maintained by the Affiliated Employer from which the Employee transfers, determined as of the last day of the Plan Year in which the transfer occurs using the current funding assumptions for the Plan Year in which the transfer occurs. The Retirement Board of the Employer shall be authorized to coordinate the transfer of assets and liabilities attributable to the benefits of active Employees, terminated vested Employees, retired Employees, and Provisional Payees with any Affiliated Employer which has at such time a pension plan with substantially the same terms as this Plan. Notwithstanding the above, the transferred Employee shall be entitled to receive a benefit immediately following the transfer of assets or liabilities to or from the Plan and Trust which is equal to or greater than the benefit he would have been entitled to receive immediately before the transfer if the Plan or the pension plan maintained by the Affiliated Employer from which the Employee transfers had been terminated. In no event shall assets be transferred to or from the Plan and Trust without the concurrent transfer of liabilities attributable to such assets. In no case, however, shall any such Employee, who retires pursuant to Section 3.1, 3.2, or 3.3 or the Provisional Payee of a deceased Employee entitled to payment in accordance with Article VII, receive Retirement Income attributable to Accredited Service from both companies aggregating less than the Minimum Retirement Income specified in Article V (after giving effect to adjustments, if any, for Provisional Payee designation or deemed designation), as shall be applicable in his circumstances. 22 4.7 Transfers from Savannah Electric and Power Company. In the case of the transfer to the Employer of an employee of Savannah Electric and Power Company ("SEPCO"), such Employee, if and when he attains his Normal Retirement Date or Deferred Retirement Date, shall be entitled to receive Retirement Income calculated pursuant to Section 5.1 or 5.2, as appropriate, based upon his Accredited Service with the Employer and Accredited Service attributable to actual service during his employment with SEPCO. Such amount calculated in accordance with the preceding sentence shall be reduced by the amount of retirement income calculated under the defined benefit pension plan of SEPCO attributable to Accredited Service during his actual service during his employment with SEPCO. Any Retirement Income based upon an Employee's Accredited Service with the Employer and Accredited Service attributable to actual service during his employment with SEPCO shall be subject to the provisions of the Plan relating to Retirement Income payable at an Early Retirement Date, or if such Retirement Income shall be payable in accordance with the provisions of Section 8.2 or 8.6, subject to the provisions of such Section. This Section 4.7 shall also apply in calculating the Retirement Income payable under this Plan to a former employee of SEPCO who is hired by the Employer and is entitled to credit for years of Accredited Service under the Plan attributable to his actual service with SEPCO. 23 ARTICLE V Retirement Income 5 5.1 Normal Retirement Income. The monthly Retirement Income payable as a single life annuity to an Employee included in the Plan who retires from the service of the Employer at his Normal Retirement Date after January 1, 1989, subject to the limitations of Article VI, shall be the greater of (a) and (b): (a) the amount determined under (1) or (2) below, whichever is greater: (1) the Accrued Retirement Income determined in accordance with Section 5.1 of the Prior Plan without regard to the Minimum Retirement Income requirement, plus the designated fixed dollar amount times the Employee's years of Accredited Service earned after December 31, 1988. For the period on and after January 1, 1989 but ending December 31, 1990, the fixed dollar amount equals $20.00. For the period on and after January 1, 1991, the fixed dollar amount equals $25.00; and (2) $25.00 times an Employee's years of Accredited Service; and (b) the Minimum Retirement Income as determined in accordance with Section 5.2. 5.2 Minimum Retirement Income payable upon retirement at Normal Retirement Date or Deferred Retirement Date. The monthly Minimum Retirement Income payable to an Employee who retires from the service of the Employer after January 1, 1989 at his Normal Retirement Date or Deferred Retirement Date (before adjustment for Provisional Payee designation, if any) shall be an amount equal to 1.70% of his Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service to his Normal Retirement Date or Deferred Retirement Date including a Social Security Offset. Any provisions of this Article V to the contrary notwithstanding, Retirement Income determined in accordance with this Article V with respect to an Employee who retires on his Normal Retirement Date or Deferred Retirement Date shall not be less than the Retirement Income which would have been payable with respect to such Employee commencing on an Early Retirement Date had (a) the Employee retired on the Early Retirement Date which would have resulted in the greatest Retirement Income, (b) his Retirement Income commencing on such Early Retirement Date been computed by utilizing the estimated Federal primary Social Security benefit to which the Employee shall be entitled 24 determined in accordance with the Social Security Act in effect at his retirement, giving effect to the recomputation provision of such Social Security Act, if applicable, and (c) such Retirement Income commencing on such Early Retirement Date been payable in the same form as his Retirement Income commencing on his Normal Retirement Date or Deferred Retirement Date. 5.3 Minimum Retirement Income upon retirement at Early Retirement Date or upon termination of service by reason of death or otherwise prior to retirement. The monthly Minimum Retirement Income payable to an Employee (or his Provisional Payee), if he shall retire on his Early Retirement Date, or if his service shall terminate by reason of death or otherwise prior to retirement, shall be determined in accordance with the following provisions: (a) Upon retirement at Early Retirement Date his Minimum Retirement Income (before adjustment for Provisional Payee designation, if any) shall be an amount equal to 1.70% of his Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service to his Early Retirement Date including a Social Security Offset. (b) Upon termination of service by reason of the death of the Employee prior to retirement and after the effective date of his Provisional Payee designation or deemed designation, the Minimum Retirement Income for the purpose of determining the Employee's Accrued Retirement Income upon which payment to his Provisional Payee in accordance with Section 7.4 shall be based shall be an amount equal to 1.70% of the Employee's Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service to the date of his death including a Social Security Offset. (c) For an Employee who terminates his service with the Employer with entitlement to receive Retirement Income in accordance with Section 8.1, upon retirement at Early Retirement Date or Normal Retirement Date his Minimum Retirement Income (before adjustment for Provisional Payee designation, if any) shall be an amount equal to 1.70% of his Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service to his date of termination including a Social Security Offset. (d) Upon termination of service by reason of disability (as defined in Section 4.4) of the Employee prior to retirement, provided such Employee does not return to the service of the Employer prior to his Retirement Date, the Minimum Retirement Income shall be an amount equal to 1.70% of the Employee's Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service to his Retirement Date including a Social Security Offset. 25 5.4 Calculation of Social Security Offset. (a) Notwithstanding the Social Security Offset as calculated in Sections 5.2 and 5.3, in no event shall such Social Security Offset exceed the limits set forth in Section 401(l) of the Code and the regulations applicable thereunder which are incorporated by reference herein. (b) For purposes of determining the Social Security Offset in calculating an Employee's Retirement Income under the Plan, the Social Security Offset shall be determined by using the actual salary history of the Employee during his employment with the Employer or any Affiliated Employer, provided that in the event that the Retirement Board is unable to secure such actual salary history within 180 days (or such longer period as may be prescribed by the Retirement Board) following the later of the date of the Employee's separation from service (by retirement or otherwise) and the time when the Employee is notified of the Retirement Income to which he is entitled, the salary history shall be determined in the following manner: (1) The salary history shall be estimated by applying a salary scale, projected backwards, to the Employee's compensation from the Employer for W-2 purposes for the first Plan Year following the most recent Plan Year for which the salary history is estimated. The salary scale shall be a level percentage per year equal to six percent (6%) per annum. (2) The Plan shall give clear written notice to each Employee of the Employee's right to supply the actual salary history and of the financial consequences of failing to supply such history. Such notice shall state that the actual salary history is available from the Social Security Administration. For purposes of determining the Social Security Offset in calculating the Retirement Income of an Employee entitled to receive a public pension based on his employment with a Federal, state, or local government agency, no reduction in such Employee's Social Security benefit resulting from the receipt of a public pension shall be recognized. (c) If the distribution of an Employee's Accrued Retirement Income begins before the Employee's attainment of the Social Security Retirement Age (including a benefit commencing at Normal Retirement Date), the projected Employer derived primary insurance amount attributable to service by the Employee for the Employer will be reduced by one-fifteenth (1/15) for each of the first five (5) years and one-thirtieth (1/30) for each of the next five (5) years by which the starting date of such benefit 26 precedes the Social Security Retirement Age of the Employee, and reduced actuarially for each additional year thereafter. 5.5 Early Retirement Income. The monthly amount of Retirement Income payable to an Employee who retires from the service of the Employer at his Early Retirement Date subject to the limitations of Section 6.2, will be equal to his Retirement Income determined in accordance with Sections 5.1 and 5.3 based on his Accredited Service to his Early Retirement Date, reduced by three-tenths of one percent (0.3%) for each calendar month by which the commencement date of his Retirement Income precedes his Normal Retirement Date. At the option of the Employee exercised at or prior to commencement of his Retirement Income on or after his Early Retirement Date (provided he shall not have in effect at such Early Retirement Date a Provisional Payee designation pursuant to Article VII) he may have his Retirement Income adjusted upwards in an amount which will make his Retirement Income payable up to age sixty-five (65) equal, as nearly as may be, to the amount of his Federal primary Social Security benefit (primary old age insurance benefit) estimated to become payable after age sixty-five (65), as computed at the time of his retirement in accordance with Section 5.3(a), plus a reduced amount, if any, of Retirement Income actually determined to be payable after age sixty-five (65). The Federal primary Social Security benefit used in calculating an Employee's Retirement Income payable under the Plan shall be determined by using the salary history of the Employee during his employment with the Employer or any Affiliated Employer, as calculated in accordance with Section 5.4(b). 5.6 Deferred Retirement Income. The monthly amount of Retirement Income payable to an Employee who completes at least one Hour of Service after December 31, 1987 and who retires from the service of the Employer at his Deferred Retirement Date, subject to the limitations of Section 6.2, will be equal to his Retirement Income determined in accordance with Sections 5.1 and 5.2 based on his Accredited Service to his Deferred Retirement Date. For Employees whose Normal Retirement Date would have occurred on or before January 1, 1986, but whose Deferred Retirement Date occurs after January 1, 1988 and on or before July 1, 1991, the monthly amount of Retirement Income payable to an Employee who completes at least one Hour of Service after December 31, 1987, subject to the limitations of Section 6.2, will be equal to the greater of (a) his Retirement Income calculated on his Deferred Retirement Date, or (b) his Retirement Income calculated as of his Normal Retirement Date applying the applicable percentage increase in his Retirement Income pursuant to the terms of Section 5.13 of the Prior Plan. 27 5.7 Payment of Retirement Income. The first payment of an Employee's Retirement Income will be made on his Early Retirement Date, Normal Retirement Date, Deferred Retirement Date, or date of commencement of payment of Retirement Income in accordance with Section 8.2 or 8.6, as the case may be; provided that commencement of the distribution of an Employee's Retirement Income shall not be made prior to his Normal Retirement Date without the consent of such Employee, except as provided in Section 8.4 of the Plan. Notwithstanding anything to the contrary above, if in accordance with this Section 5.7, an Employee is entitled to receive Retirement Income commencing at his Early Retirement Date, he may, in lieu of commencing payment of his Retirement Income upon his Early Retirement Date, elect to receive such Retirement Income commencing as of the first day of any month after his Early Retirement Date and preceding his Normal Retirement Date in an amount equal to his Accrued Retirement Income determined as of the commencement of his Retirement Income on or after his Early Retirement Date determined in accordance with Section 5.5. An election pursuant to this Section 5.7 to have Retirement Income commence prior to Normal Retirement Date shall be made on a form prescribed by the Retirement Board and shall be filed with the Retirement Board at least thirty (30) days before Retirement Income is to commence. In the event of the death of an Employee who has designated a Provisional Payee or is deemed to have done so in accordance with Article VII, if the designation has become effective, the first payment to be made to the Provisional Payee pursuant to Article VII shall be made to the Provisional Payee on the first day of the month after the later of (a) the Employee's death and (b) the date on which the Employee would have attained his fifty- fifth (55th) birthday if he had survived to such date, if the Provisional Payee shall then be alive and proof of the Employee's death satisfactory to the Retirement Board shall have been received by it. Subsequent payments will be made monthly thereafter until the death of such Provisional Payee. In any event, payment of Retirement Income to the Employee shall begin not later than the sixtieth (60th) day after the later of the close of the Plan Year in which falls (a) the Employee's Normal Retirement Date or (b) the date the Employee terminates his service with the Employer or any Affiliated Employer. Notwithstanding the provisions of the Plan for the monthly payment of Retirement Income, such income may be adjusted and payable annually in arrears if the amount of the Retirement Income is less than $10.00 per month. 28 5.8 Termination of Retirement Income. The monthly payment of Retirement Income will cease with the last payment preceding the retired Employee's death; subject, however, to the continuation of payments to a surviving Provisional Payee, if one has been designated or deemed to have been designated, which likewise will cease with the last payment preceding the death of the Provisional Payee. There shall be no benefits payable under the Plan on behalf of any Employee whose death occurs prior to his retirement, except as otherwise provided in Article VII with respect to a Provisional Payee of an Employee. Following the death of an Employee and of his Provisional Payee, if any, no further payments will be made under the Plan on account of such Employee or to his estate. 5.9 Required distributions. (a) Once a written claim for benefits is filed with the Retirement Board and unless the Employee elects to have payment begin at a later date, payment of benefits to the Employee shall begin not later than sixty (60) days after the last day of the Plan Year in which the latest of the following events occurs: (1) the Employee's Normal Retirement Date; (2) the tenth (10th) anniversary of the date the Employee commenced participation in the Plan; or (3) the Employee's separation from service from the Employer or any Affiliated Employer. (b) Required minimum distributions on and after January 1, 1989 (1) Subject to the transitional rules described in Paragraph (c) below, effective for calendar years beginning after December 31, 1988, the payment of Retirement Income to any Employee shall begin no later than April 1 of the calendar year following the calendar year in which the Employee attains age 70-1/2, without regard to the actual date of separation from service. The amount of his Retirement Income shall be recomputed as of such April 1 and as of the close of each Plan Year after his Retirement Income commences and preceding his actual retirement date as if each such date were the Employee's Deferred Retirement Date. Any additional Retirement Income he accrues at the close of any such Plan Year shall be offset (but not below zero) by the value of the benefit payments received in such Plan Year. (2) The receipt by an Employee of any payments or distributions as a result of his attaining age 70-1/2 prior to his actual retirement or death shall in no way affect the 29 entitlement of an otherwise eligible Employee to additional accrued benefits. (c) Age 70-1/2 transitional rule Any Employee who is not a five-percent owner and who has attained age 70-1/2 by January 1, 1988, may defer the commencement of benefit payments under paragraph (b) above until he actually separates from service with the Employer. This transitional rule shall only apply if the Employee is not a five- percent owner at any time during the Plan Year ending with or within the calendar year in which such owner attains age 66-1/2 and in any subsequent Plan Year. (d) Distribution upon death of Employee (1) Death after commencement of benefits If the Employee dies before his entire nonforfeitable interest has been distributed to him, the remaining portion of such interest shall be distributed at least as rapidly as under the method of distribution selected by the Employee as of the date of his death. (2) Death prior to commencement of benefits If the Employee dies before the distribution of his nonforfeitable interest has begun, the entire interest shall be distributed monthly to his Provisional Payee, if any, over such Provisional Payee's remaining lifetime. (e) Determining required minimum distributions Notwithstanding anything in this Plan to the contrary, all distributions, including the minimum amounts which must be distributed each calendar year, under this Plan shall be made in accordance with Code Section 401(a)(9) and the regulations thereunder. (f) Minimum distribution transitional rules Any distribution made pursuant to Section 242(b)(2) of the Tax Equity and Fiscal Responsibility Act of 1982 shall meet the requirements of Code Section 401(a)(9) as in effect on December 31, 1983, and shall also satisfy Code Sections 401(a)(11) and 417. 30 5.10 Suspension of Retirement Income for reemployment. (a) If a former Employee who is receiving Retirement Income shall be reemployed by the Employer or 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 cease during each calendar month after his reemployment in which he completes forty (40) or more Hours of 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. (b) No payment shall be withheld 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. (c) 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. 5.11 Increase in Retirement Income of retired Employees for service prior to January 1, 1991. Retirement Income payable on and after January 1, 1991 to an Employee (or to the Provisional Payee of an Employee) who retired at an Early Retirement Date or at his Normal Retirement Date on or before January 1, 1991 pursuant to the Plan as in effect prior to January 1, 1991, or to the plan of Southern, will be recalculated to increase the amount thereof by an amount ranging from a minimum of two percent (2%) to a maximum of forty percent (40%) in accordance with the following schedule: Year in which Percentage retirement occurred increase 1990 2% 1989 4% 1988 6% 1987 8% 1976 - 1986 10% 1971 - 1975 20% 1966 - 1970 30% 1965 and prior years 40% 31 A similar adjustment, based on the date of the commencement of Retirement Income payments to the Employee's Provisional Payee, rather than the Employee's Retirement Date, will be made in respect of Retirement Income which is payable on or after January 1, 1991 where a Provisional Payee election was in effect, or was deemed to be in effect, when an Employee died while in service prior to January 1, 1991 and prior to his retirement. A similar adjustment will be made in respect of Retirement Income which is payable on or after January 1, 1991 for an Employee (or the Provisional Payee of an Employee) entitled to Retirement Income for which payments have commenced on or before January 1, 1991 in accordance with Article VIII of the Prior Plan, except for Employees whose Retirement Income has been cashed-out pursuant to Section 8.4 of this Plan or Section 8.5 of the Prior Plan. For purposes of determining the applicable percentage increase under this Section 5.11, the year of retirement includes retirement where the last day of employment was December 31 of such year. An Employee whose Deferred Retirement Date is on or before January 1, 1988 and who did not retire at his Normal Retirement Date shall be deemed to have retired at his Normal Retirement Date for purposes of determining the increase in his Retirement Income payable at his Deferred Retirement Date. This Section 5.11 shall not apply with respect to an Employee who has not retired, but for whom the distribution of Retirement Income has commenced pursuant to Section 5.9 of the Plan. 5.12 Special provisions relating to the treatment of absence of an Employee from the service of the Employer to serve in the Armed Forces of the United States. (a) Effective as of November 1, 1977, any provisions of the Plan to the contrary notwithstanding, the provisions of this Section 5.12 shall be applicable to determine the period of absence from the service of the Employer to serve in the Armed Forces of the United States of a "participant in the Plan" (as such term is defined in this paragraph (a)): The term "participant in the Plan" means a person who on or after November 1, 1977 is either: (1) an Employee who is then or thereafter in the service of the Employer (including an Employee on authorized leave of absence), (2) a retired Employee who is receiving Retirement Income, (3) a deceased Employee who received Retirement Income under this Plan or the Prior Plan at any time after its Effective Date, (4) a deceased former Employee who prior to the time of his death was receiving Retirement Income in accordance with this Plan or the Prior Plan, (5) a former Employee whose service terminated prior to January 1, 1976 and 32 who is receiving Retirement Income in accordance with the Prior Plan, (6) a former Employee whose service terminated prior to November 1, 1977 and who will be entitled to receive Retirement Income commencing after that date in accordance with this Plan or the Prior Plan, or (7) a former Employee who was transferred from the Employer pursuant to Section 4.6 or pursuant to the Prior Plan and who will be entitled to receive in accordance with either, Retirement Income commencing after November 1, 1977. The Employee or former Employee or retired Employee referred to in this paragraph (a) is one who: (1) left the employment of the Employer or of Commonwealth Services, Inc. (formerly known as The Commonwealth & Southern Corporation (New York) ("Commonwealth")) or of The Southern Company ("Southern") to enter the Armed Forces of the United States (including reserve components thereof, the Public Health Service, and the National Guard) for the purposes and under circumstances which are specified in the reemployment provisions of the Military Selective Service Act and in any amendments or supplements thereto hereinafter in this Section 5.12 referred to as the "Selective Service Act," (2) made application for reemployment by the Employer or by Commonwealth or Southern within such time after discharge or release from such service in the Armed Forces of the United States as is specified in the reemployment provisions of the Selective Service Act as is applicable in his circumstances and was reemployed by the Employer or by Southern or by Commonwealth and if by Commonwealth thereafter became an Employee of Southern or of the Employer, (3) served a period of active duty in the Armed Forces of the United States which did not exceed the maximum period of such active duty specified in the reemployment provisions of the Selective Service Act as is applicable in his circumstances, and (4) performed such service in the Armed Forces after May 1, 1940. (b) For the purposes of the Plan, the period of absence of a participant in the Plan to serve in the Armed Forces of the United States shall be the period determined by the Retirement Board. (c) In accordance with the provisions of the Plan as amended effective as of November 1, 1977 by the addition of this Section 5.12 and the concurrent amendments associated therewith, there shall be recalculated effective as of November 1, 1977 the Retirement Income (1) of each participant in the Plan or that of his Provisional Payee, if any, who is then receiving Retirement Income; and (2) of each deceased participant in the Plan and his deceased Provisional Payee, if any, who received payment of Retirement Income, who is not then receiving Retirement Income. (1) If in accordance with such recalculation, a larger amount of Retirement Income would have been payable to a participant in the Plan who is currently receiving payment 33 of Retirement Income and/or to his Provisional Payee, if any, than was paid to them respectively prior to November 1, 1977, payment in a single sum of the excess of the recalculated amount over the amounts which were paid prior to November 1, 1977 with interest thereon as hereinafter provided, shall be made as soon as practicable after November 1, 1977 and, commencing as soon as practicable after November 1, 1977, the Retirement Income payable to participants in the Plan and/or to their Provisional Payees, if any, who are currently receiving Retirement Income shall be increased to an amount which is equal to the larger recalculated amount to which they shall be entitled in respect of payments to be made on or after November 1, 1977. (2) If in accordance with the recalculation a larger amount of Retirement Income would have been payable to the date of death prior to November 1, 1977 of a deceased retired Employee or his Provisional Payee than was paid prior to his death, payment in a single sum of the excess of the recalculated amount over the amount which was paid prior to the date of death, with interest thereon as hereinafter provided, shall be made to his estate as soon as practicable after November 1, 1977. (3) For the purposes of the recalculation to be made in accordance with this paragraph (c), if a participant in the Plan left the employment of an Affiliated Employer to enter the Armed Forces of the United States and was not reemployed by such Affiliated Employer upon his discharge or release from service in the Armed Forces but he entered the employment of the Employer, without intermediate employment, and within the time prescribed in paragraph (a) of this Section 5.12, and his period of absence in the Armed Forces of the United States, as determined by the Retirement Board, is not taken into account under the pension plan of the Affiliated Employer whose service he left to enter the Armed Forces or under Section 4.3, it shall be treated under the Plan and the Prior Plan as if such period of absence had been a period of absence from the Employer. (d) Retirement Income of participants in the Plan who are not referred to in subparagraphs (1) or (2) of paragraph (c) and who are not on November 1, 1977 receiving Retirement Income shall be determined in accordance with the provisions of the Plan as amended by the addition of this Section 5.12 and the concurrent amendments associated therewith. (e) Interest to be paid on any single sum payment to be made in accordance with subparagraphs (1) or (2) of paragraph (c) of this Section 5.12 shall be computed at the annual rate of five percent (5%). 34 (f) Payment to be made to any payee in accordance with this Section 5.12 may be conditioned by the Retirement Board upon its receipt of (1) such information pertaining to absence of an Employee or former Employee to serve in the Armed Forces of the United States as it may request and (2) such form of receipt and release as it may determine to be appropriate in the circumstances. 35 ARTICLE VI Limitations on Benefits 6 6.1 Maximum Retirement Income. Notwithstanding any other provision of the Plan, the amount of Retirement Income shall be subject to the provisions of Article VI. (a) The maximum annual amount of Retirement Income payable with respect to an Employee in the form of a straight life annuity without any ancillary benefits after any adjustment for a Provisional Payee designation shall be the lesser of the dollar limitation determined under Code Section 415(b)(1)(A) as adjusted under Code Section 415(d), or Code Section 415(b)(1)(B) as adjusted under Treasury Regulation Section 1.415-5, subject to the following provisions of Article VI. With respect to any former Employee who has Accrued Retirement Income under the Plan or his Provisional Payee, the maximum annual amount shall also be subject to the adjustment under Code Section 415(d). (b) For purposes of Section 6.1, the term "average compensation for his high three (3) years" shall mean the period of consecutive calendar years (not more than three) during which the Employee was both an active participant in the Plan and had the greatest aggregate compensation from the Employer or, if he is also entitled to receive a pension from a defined benefit plan of an Affiliated Employer or if assets and liabilities attributable to the pension of the Employee from a defined benefit plan of an Affiliated Employer have been transferred to this Plan, the greatest aggregate compensation from the Employer and the Affiliated Employer during such high three (3) years. The limitation described in Section 6.1(a) shall also apply in the case of the payment of an Employee's Retirement Income with a Provisional Payee designation. (c) For purposes of Article VI, the term "compensation" means an Employee's earned income, wages, salaries, and fees for professional services, and other amounts received for personal services actually rendered in the course of employment with the Employer maintaining the Plan (including, but not limited to, commissions paid salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips and bonuses), and excluding the following: (1) Employer contributions to a plan of deferred compensation which are not included in the Employee's gross income for the taxable year in which contributed or Employer contributions under a simplified employee pension plan to the extent such contributions are deductible by the Employee, or any distributions from a plan of deferred compensation; 36 (2) Amounts realized from the exercise of a nonqualified stock option, or when restricted stock (or property) held by the Employee either becomes freely transferable or is no longer subject to a substantial risk of forfeiture; (3) Amounts realized from the sale, exchange, or other disposition of stock acquired under a qualified stock option; and (4) Other amounts which received special tax benefits, or contributions made by the Employer (whether or not under a salary reduction agreement) towards the purchase of an annuity described in Section 403(b) of the Code (whether or not the amounts are actually excludable from the gross income of the Employee). Compensation for any Limitation Year is the compensation actually paid or includible in gross income during such year. (d) The foregoing limitations regarding the maximum Retirement Income shall not apply with respect to an Employee if the Retirement Income payable under the Plan and under any other defined benefit plans of the Employer or any Affiliated Employer does not exceed $10,000 for the calendar year or for any prior calendar year, and the Employer and any Affiliated Employer has not at any time maintained a defined contribution plan in which the Employee has participated. The terms "defined benefit plan" and "defined contribution plan" shall have the meanings set forth in Section 415(k) of the Code. 6.2 Adjustment to Defined Benefit Dollar Limitation for Early or Deferred Retirement. (a) If the retirement benefit of an Employee commences before the Employee's Social Security Retirement Age, the Defined Benefit Dollar Limitation shall be reduced in accordance with Code Section 415(b)(2)(C) as prescribed by the Secretary of the Treasury. The reduction shall be made in such manner as the Secretary of the Treasury may prescribe which is consistent with the reduction for old-age insurance benefits commencing before the Social Security Retirement Age under the Social Security Act. (b) If the retirement benefit of an Employee commences after the Employee's Social Security Retirement Age, the Defined Benefit Dollar Limitation shall be adjusted in accordance with Code Section 415(b)(2)(D) as prescribed by the Secretary of the Treasury, based on the lesser of the interest rate assumption under the Plan or on an assumption of five percent (5%) per year. 37 6.3 Adjustment of limitation for Years of Service or participation. (a) If an Employee has completed less than ten (10) years of participation, the Employee's accrued benefit shall not exceed the Defined Benefit Dollar Limitation as adjusted by multiplying such amount by a fraction, the numerator of which is the Employee's number of years (or part thereof) of participation in the Plan, and the denominator of which is ten (10). (b) If an Employee has completed less than ten (10) Years of Service with the Employer and any Affiliated Employer, the limitations described in Sections 415(b)(1)(B), 415(b)(4), and 415(e) of the Code shall be adjusted by multiplying such amounts by a fraction, the numerator of which is the Employee's number of years of service (or part thereof), and the denominator of which is ten (10). (c) In no event shall Sections 6.3(a) and (b) reduce the limitations provided under Sections 415(b)(1), 415(b)(4), and 415(e) of the Code to an amount less than one-tenth (1/10) of the applicable limitation (as determined without regard to this Section 6.3). (d) This Section 6.3 shall be applied separately with respect to each change in the benefit structure of the Plan, except as is or may be limited by Revenue Procedure 92-42. 6.4 Preservation of Accrued Retirement Income. (a) Retirement Income payable to an Employee or former Employee who was an active participant in the Plan before October 3, 1973 will not be deemed to exceed the amount of maximum Retirement Income limitations imposed by the provisions of this Article VI if: (1) The annual amount of Retirement Income payable to such Employee on retirement does not exceed 100% of his annual rate of compensation on the earlier of (A) October 2, 1973, or (B) the date on which he separated from the service of the Employer; (2) Such annual Retirement Income is not greater than the annual amount of Retirement Income which would have been payable to such Employee on retirement if (A) all terms and conditions of the Plan in existence on his retirement date had remained in existence until his retirement and (B) his compensation taken into account for any period after October 2, 1973 had not exceeded his annual rate of compensation on October 2, 1973; and 38 (3) In the case of an Employee whose service with the Employer terminated prior to October 2, 1973, such annual Retirement Income is no greater than his vested Accrued Retirement Income as of the date of such termination of service. (b) In the case of an Employee who is a participant in the Plan prior to January 1, 1983, if the Section 415 requirements have been met for all Plan Years prior to 1983, then the Defined Benefit Dollar Limitation described in Section 1.10 applicable to the payment of such Employee's Retirement Income shall be equal to his Accrued Retirement Income as of December 31, 1982, (when expressed as an annual benefit within the meaning of Section 415(b)(2) of the Code, as in effect prior to the Tax Equity and Fiscal Responsibility Act of 1982), if his Accrued Retirement Income exceeds such Defined Benefit Dollar Limitation. (c) This Section 6.4(c) shall apply to defined benefit plans that were in existence on May 6, 1986, and that met the applicable requirements of Section 415 of the Code as in effect for all Limitation Years. If the Current Accrued Retirement Income of an Employee as of the first day of the Limitation Year beginning on or after January 1, 1987, exceeds the benefit limitations under Section 415(b) of the Code (as modified by Sections 6.2 and 6.3 of the Plan), then, for purposes of Code Section 415(b) and (e), the Defined Benefit Dollar Limitation with respect to such Employee shall be equal to such Current Accrued Retirement Income. 6.5 Limitation on benefits from multiple plans. (a) In the case of an Employee who is also a participant in any other defined benefit plan of the Employer or any Affiliated Employer or in any defined contribution plan of the Employer or any Affiliated Employer, the Retirement Income provided by the Plan shall be limited to the extent necessary to prevent the sum of Fractions A and B below, computed as of the end of the Plan Year, from exceeding 1.0. Fraction A (numerator) Projected annual benefit of the Employee under the Plan and any other defined benefit plan of the Employer or any Affiliated Employer (determined as of the close of the Plan Year). (denominator) The lesser of (1) the product of 1.25 multiplied by the Defined Benefit Dollar Limitation (or such higher accrued benefit as of December 31, 1982), or (2) 1.4 multiplied by the amount determined under Code Section 415(b)(1)(B) as adjusted under Treasury Regulation Section 1.415-5. 39 Fraction B (numerator) The sum of all Annual Additions to the account of the Employee under any defined contribution plan of the Employer or any Affiliated Employer as of the close of the Plan Year. (denominator) The sum of the lesser of the following amounts, determined for such Plan Year and for each prior Plan Year in which the Employee has a Year of Service, (1) 1.25 multiplied by the Defined Contribution Dollar Limitation determined under Code Section 415(c)(1)(A), or (2) 1.4 multiplied by twenty-five percent (25%) of the Employee's compensation for the year. 6.6 Special rules for plans subject to overall limitations under Code Section 415(e). (a) For purposes of computing the defined contribution plan fraction of Section 415(e)(1) of the Code, "Annual Addition" shall mean the amount allocated to an Employee's account during the Limitation Year as a result of: (1) employer contributions, (2) employee contributions, (3) forfeitures, and (4) amounts described in Sections 415(1)(1) and 419(A)(d)(2) of the Code. (b) The Annual Addition for any Limitation Year beginning before January 1, 1987 shall not be recomputed to treat all Employee contributions as an Annual Addition. (c) If the sum of Fractions A and B exceeds 1.0 as of December 31, 1982, the numerator of Fraction B shall be reduced by an amount which does not exceed the numerator, so that the sum of Fraction A and Fraction B does not exceed 1.0. (d) If the Plan satisfied the applicable requirements of Section 415 of the Code as in effect for all Limitation Years beginning before January 1, 1987, an amount shall be subtracted from the numerator of the defined contribution plan fraction (not exceeding such numerator) as prescribed by the Secretary of the Treasury so that the sum of the defined benefit plan fraction and defined contribution plan fraction computed under Section 415(e)(1) of the Code (as revised by this Article VI) does not exceed 1.0 for such Limitation Year. 40 (e) The defined contribution plans and the other defined benefit plans of the Employer and Affiliated Employers include, respectively, (1) The Southern Company Employee Savings Plan, The Southern Company Employee Stock Ownership Plan, and any other defined contribution plan (as defined in Section 415(k) of the Code) and (2) any other qualified pension plan in which the Employee participates in accruing benefits maintained by the Employer or any Affiliated Employer. 6.7 Combination of Plans. Notwithstanding any provisions contained herein to the contrary, in the event that an Employee participates in a defined contribution plan or 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(e), corrective adjustments shall first be made under this Plan. However, if an Employee's Retirement Income under this Plan has already commenced, corrections shall first be made under The Southern Company Employee Stock Ownership Plan, if possible, and if not possible, then correction shall be made to the Employee's Accrued Retirement Income under this Plan. 6.8 Incorporation of Code Section 415. Notwithstanding anything contained in this Article to the contrary, the limitations, adjustments and other requirements prescribed in this Article shall at all times comply with the provisions of Code Section 415 and the regulations thereunder, the terms of which are specifically incorporated herein by reference. 41 ARTICLE VII Provisional Payee 7 7.1 Adjustment of Retirement Income to provide for payment to Provisional Payee. An Employee who desires to have his Accrued Retirement Income adjusted in accordance with the provisions of this Article VII to provide a reduced amount of Retirement Income payable to him for his lifetime commencing on his Early Retirement Date, his Normal Retirement Date, or his Deferred Retirement Date, as the case may be, may elect, in accordance with the provisions of this Article VII, at his option, either: (a) that an amount of Retirement Income be payable to him for his lifetime which is equal to eighty percent (80%) of the Retirement Income which would otherwise be payable to him, but for such election (taking into account any reduction required in accordance with Sections 7.3 and 7.4(a)), with the provision that the same amount will be continued after his death to his Provisional Payee until the death of such Provisional Payee, or (b) that an amount of Retirement Income be payable to him for his lifetime which is equal to ninety percent (90%) of the Retirement Income which would otherwise be payable to him, but for such election (taking into account any reduction required in accordance with Sections 7.3 and 7.4(a)), with the provision that one-half (1/2) of the amount payable to the Employee will be continued after his death to his Provisional Payee until the death of such Provisional Payee. 7.2 Form and time of election and notice requirements. (a) An election of payment and designation of a Provisional Payee in accordance with Section 7.1 shall be made in writing at the same time on a form prescribed by the Retirement Board and delivered to it. The election and designation shall specify its effective date which shall not be sooner than the date received by the Retirement Board or the Employee's fifty-fifth (55th) birthday, whichever is later, nor later than the date of commencement of payments in accordance with this Article VII. (b) An election of payment to be made in accordance with paragraph (a) or paragraph (b) of Section 7.1 may be changed from paragraph (a) to paragraph (b) or vice versa by an Employee, provided the written election of the change specifies an effective date which shall not be sooner than the date received by the Retirement Board or the Employee's fifty-fifth (55th) birthday, whichever is later, nor later than the date of commencement of payments in accordance with this Article VII. To the extent that the new method of payment shall afford the 42 Employee changed protection in the event of his death after the effective date of the new election and prior to retirement, his Accrued Retirement Income shall be adjusted pursuant to Section 7.4(a) to reflect such changed protection. (c) With respect to Sections 7.5 and 7.6, within the period not less than 30 days and not more than 90 days prior to the commencement of benefits, the Employee shall be furnished, by mail or personal delivery, a written explanation of: (1) the terms and conditions of the reduced Retirement Income payable as provided in paragraph (b) of Section 7.1; (2) the Employee's right to make, and the effect of, an election to waive the payment of reduced Retirement Income pursuant to a Provisional Payee designation; (3) the rights of the Employee's Provisional Payee; and (4) the right to make, and the effect of, a revocation of a previous election to waive the payment of reduced Retirement Income pursuant to a Provisional Payee designation. Within thirty (30) days following an Employee's written request received by the Retirement Board during the election period, but within sixty (60) days from the date the Employee is furnished all of the information prescribed in the immediately preceding sentence, the Employee shall be furnished an additional written explanation, in terms of dollar amounts, of the financial effect of an election by him not to receive such reduced Retirement Income. If an Employee makes such request, the election period herein prescribed shall end not earlier than sixty (60) calendar days following the day of the mailing or personal delivery of the additional explanation to the Employee. Except that if an election made as provided in Section 7.5 or 7.6 is revoked, another election under that Section may be made during the specified election period. 7.3 Circumstances in which election and designation are inoperative. An election and designation made pursuant to this Article shall be inoperative and the regular provisions of the Plan shall again become applicable as if a Provisional Payee had not been designated if, prior to the commencement of any payment in accordance with this Article VII: (a) an Employee's Provisional Payee shall die, (b) the Employee and the Provisional Payee shall be divorced under a final decree of divorce, or (c) the Retirement Board shall have received the written Qualified Election of the Employee to rescind his election of payment and designation of a Provisional Payee. If such a Qualified Election to rescind is made by the Employee, his Accrued Retirement Income shall be reduced to reflect the protection afforded the Employee by any Provisional Payee designation during the period from its effective date to the date of the Retirement Board's receipt of the Employee's Qualified Election to rescind if the option as to payments of reduced Retirement Income was in accordance with either Section 7.1(a), 7.6(a), or 7.6(b). If an Employee remarries subsequent to the 43 death or divorce of his Provisional Payee and prior to the commencement of payments in accordance with this Article VII, and if such Employee is married prior to the time of the commencement of payments, then he shall be entitled to designate a new Provisional Payee in the manner set forth in Section 7.2. 7.4 Pre-retirement death benefit. If prior to his Normal Retirement Date (or his Deferred Retirement Date, if applicable), an Employee shall die while in the service of the Employer and is survived by his spouse to whom he shall be married at the time of his death, there shall be payable to his surviving spouse (whom he shall be deemed to have designated as his Provisional Payee) Retirement Income determined in accordance with paragraph (a) or paragraph (c) of this Section 7.4, as applicable. Such Retirement Income shall commence on the first day of the month following the death of the Employee or the first day of the month following the date on which he would have attained his fifty-fifth (55th) birthday if he were still alive, whichever is later, and shall cease with the last payment preceding the death of his Provisional Payee. (a) The amount of Retirement Income payable to the Provisional Payee of a deceased Employee who prior to his death had attained his fifty-fifth (55th) birthday shall be equal to the amount payable to the Provisional Payee as calculated in Section 7.1(b) determined on the basis of his Accredited Service to the date of his death, or if the Employee shall have attained his fifty-fifth (55th) birthday and so elected prior to his death, such Retirement Income shall be equal to the amount set forth in Section 7.1(a) determined on the basis of his Accredited Service to the date of his death reduced as provided in the next sentence. If such election shall be made by the Employee, the Retirement Income which shall be payable to the Employee if he lives to his Early Retirement Date or the first day of the month following his attainment of age sixty-five (65), if later, shall be reduced by three-fourths of one percent (0.75%) for each year (prorated for a fraction of a year from the first day of the month following the effective date of the election) which has elapsed from the effective date of his election to the earlier of (1) the commencement of Retirement Income on or after his Early Retirement Date or the first day of the month following his attainment of age sixty-five (65), if later, or (2) the revocation of such election. If he shall die before the commencement of Retirement Income on or after his Early Retirement Date or the first day of the month following his attainment of age sixty-five (65), if later, his Accrued Retirement Income to the date of his death shall be reduced by three-quarters of one percent (0.75%) for each year (prorated for a fraction of a year from the first day of the month following the effective date of the election) between the effective date of his election and the first day of the month following his attainment of age sixty-five (65). No reduction in the 44 Employee's Retirement Income shall be made for the period during which the election is in effect after the first day of the month following his attainment of age sixty-five (65). (b) Retirement Income shall not be payable under paragraph (a) of this Section 7.4 to the Provisional Payee of a deceased Employee if at the time of his death there was in effect a Qualified Election made after August 22, 1984 under this paragraph (b) that no Retirement Income shall be paid to his Provisional Payee in the event of his death while in the service of the Employer (or while in the service of an Affiliated Employer to which his employment had been transferred in accordance with Section 4.6) as provided in paragraph (a), provided the Employee had received at least 180 days prior to his fifty-fifth (55th) birthday a written explanation of: (1) the terms and conditions of the Retirement Income payable to his Provisional Payee as provided in paragraph (a); (2) the Employee's right to make, and the effect of, an election to waive the payment of Retirement Income to his Provisional Payee; (3) the rights of the Employee's Provisional Payee; and (4) the right to make, and the effect of, a revocation of a previous election to waive the payment of Retirement Income to the Employee's Provisional Payee. A revocation of a prior Qualified Election to waive the payment of Retirement Income to the Employee's Provisional Payee may be made by the Employee without the consent of the Employee's Provisional Payee at any time before the commencement of benefits. An election under this paragraph (b) may be made and such election may be revoked by an Employee during the period commencing ninety (90) days prior to the Employee's fifty-fifth (55th) birthday and ending on the date of the Employee's death. (c) The amount of such Retirement Income payable to the Provisional Payee of a deceased Employee who prior to his death, had completed at least five (5) Vesting Years of Service and had not attained his fifty-fifth (55th) birthday shall be equal to one-half of the reduced amount, as actuarially adjusted to provide for the payment of such Retirement Income beginning at the date on which such deceased Employee would have attained his fifty-fifth (55th) birthday and to provide for the determination of such Retirement Income on a joint and fifty percent (50%) survivor basis of the Employee's Accrued Retirement Income, determined on the basis of his Accredited Service to the date of his death. This Section 7.4(c) shall also apply to adjust the future payment of Retirement Income after December 31, 1990 to a Provisional Payee with respect to an Employee who died (while in the service of the Employer prior to his fifty-fifth (55th) birthday after completing the requisite number of Years of Service) in order to have a nonforfeitable right to Retirement 45 Income under the Plan as in effect on the Employee's date of death, provided Retirement Income is payable to such Provisional Payee on or after January 1, 1991. The adjustment under this Section 7.4(c) shall be determined by adjusting the Retirement Income that had commenced to the Provisional Payee on or before January 1, 1986, and then adding the applicable percentage increase under Section 5.13 of the Prior Plan. For an Employee on or after January 1, 1991, who dies while in the service of the Employer prior to his fifty-fifth birthday after completing five (5) Vesting Years of Service, the amount of such Retirement Income payable to the Provisional Payee shall be calculated as provided in Section 7.1(b) determined on the basis of his Accredited Service to the date of his death. The payment of such Retirement Income to the Provisional Payee shall begin on the first day of the month following the date on which such deceased Employee would have attained his fifty-fifth (55th) birthday. 7.5 Post-retirement death benefit - qualified joint and survivor annuity. If at his Early Retirement Date, Normal Retirement Date, or Deferred Retirement Date, as the case may be, an Employee is married and he has not: (a) designated a Provisional Payee in accordance with Section 7.1 in respect of payments to be made commencing on his Early, Normal, or Deferred Retirement Date or (b) made a Qualified Election that payment be made to him in the mode of a single life annuity, he shall nevertheless be deemed to have made an effective designation of a Provisional Payee under this Section 7.5 and to have specified the payment of a benefit as provided in Section 7.1(b). 7.6 Election and designation by former Employee entitled to Retirement Income in accordance with Article VIII. If an Employee is entitled to receive in accordance with Section 8.1 Retirement Income commencing at Normal Retirement Date, or sooner in accordance with Section 8.2, he may, on or after his fifty-fifth (55th) birthday, designate his spouse as his Provisional Payee and elect to have his Accrued Retirement Income at the date of termination of his service actuarially adjusted to provide, at his option, in the event of the commencement of payment prior to his Normal Retirement Date either: (a) a reduced amount payable to him for his lifetime with the provision that such reduced amount will be continued after his death to his spouse as Provisional Payee until the death of such Provisional Payee; or (b) a reduced amount (greater than the amount in (a) above) payable to him for his lifetime with the provision that one-half (1/2) of such reduced amount will be continued after his death to his spouse as Provisional Payee until the death of such Provisional Payee. 46 The Employee's election and designation of his Provisional Payee made in accordance with this Section 7.6 shall be in writing on a form prescribed by the Retirement Board and delivered to it and shall become effective not sooner than the date received by the Retirement Board or the Employee's fifty-fifth (55th) birthday, whichever is later, nor later than the date of commencement of payment in accordance with this Section 7.6. If the Employee dies prior to his Normal Retirement Date but after the effective date of his Provisional Payee designation, there will be payable to his Provisional Payee for life commencing on the first day of the calendar month after the Employee's death Retirement Income in a reduced amount in accordance with the Employee's election of payments to be made to his Provisional Payee after the death of the Employee under paragraph (a) or (b), as the case may be, of this Section 7.6. However, if prior to the Employee's death, the Retirement Board has not received such election, payment of a reduced amount of Retirement Income will be made in accordance with paragraph (b) of this Section 7.6 to his surviving spouse to whom he is married at the time of his death, unless (1) at the time of his death there is in effect a Qualified Election by the Employee that reduced Retirement Income shall not be paid to his surviving spouse in accordance with this Section 7.6 should he die between his fifty-fifth (55th) birthday and his Normal Retirement Date without having elected that payment be made to a Provisional Payee and (2) at least 180 days prior to his fifty-fifth (55th) birthday a written explanation is provided to the Employee of: (A) the terms and conditions of the Retirement Income payable to his Provisional Payee as provided in this Section 7.6; (B) the Employee's right to make, and the effect of, an election to waive the payment of Retirement Income to his Provisional Payee; (C) the rights of an Employee's spouse; and (D) the right to make, and the effect of, a revocation of a previous election to waive the payment of Retirement Income to his Provisional Payee. If the Employee is entitled to receive payment of Retirement Income in accordance with Section 8.2 after his fifty-fifth (55th) birthday and prior to his Normal Retirement Date and elects to do so, a reduced amount of Retirement Income determined in accordance with this Section 7.6 based upon his Accrued Retirement Income at the date of termination of his service (actuarially reduced in accordance with Section 8.2) will be payable to him commencing on the date on which payments commence prior to Normal Retirement Date in accordance with Section 8.2 with payments in the same or reduced amount to be continued to his Provisional Payee for life after the Employee's death in accordance with his election under paragraph (a) or (b), as the case may be, of this Section 7.6. However, if the Employee is married and he has not designated a Provisional Payee in respect of payments to commence to him prior to his Normal Retirement 47 Date or elected that payment be made to him in the mode of a single life annuity pursuant to a Qualified Election, he shall be deemed to have designated a Provisional Payee pursuant to this Section 7.6 and thereby specified that a reduced Retirement Income shall be paid to him during his lifetime as provided in paragraph (b) of this Section 7.6 and continued after his death to his Provisional Payee as provided in paragraph (b) of this Section 7.6. If the Employee is alive on his Normal Retirement Date and is married and payment of Retirement Income has not sooner commenced, the provisions of Section 7.5 shall be applicable to the payment of his Retirement Income, unless he shall elect at his Normal Retirement Date to receive payment of his Retirement Income pursuant to Section 7.1(a) or 7.1(b). However, if an election and designation in accordance with this Section 7.6 was in effect prior to his Normal Retirement Date, the Employee's Accrued Retirement Income at his Normal Retirement Date shall be actuarially adjusted for the period the election and designation was in effect. 7.7 Death benefit for Provisional Payee of former Employee. If an Employee, whose service with the Employer terminates on or after January 1, 1989, shall die after such termination of employment, and prior to his death (a) shall have not attained his fifty-fifth (55th) birthday, (b) shall have completed at least five (5) Vesting Years of Service, and (c) shall be survived by his spouse to whom he shall be married at his death, then there shall be payable to his surviving spouse (whom he shall be deemed to have designated as his Provisional Payee) Retirement Income determined in accordance with this Section 7.7. Such Retirement Income shall be equal to one-half of the reduced amount, as actuarially adjusted to provide for the payment of such Retirement Income beginning at the date on which such deceased Employee would have attained his fifty-fifth (55th) birthday and to provide for the determination of such Retirement Income on a joint and fifty percent (50%) survivor basis of the Employee's Accrued Retirement Income, determined on the basis of his Accredited Service to the date of his death. Such Retirement Income shall commence on the first day of the month following the date on which the former Employee would have attained his fifty-fifth (55th) birthday if he were still alive, and shall cease with the last payment preceding the death of his Provisional Payee. 7.8 Limitations on Employee's and Provisional Payee's benefits. (a) With respect to an Employee who does not elect a single life annuity, the limitation on benefits imposed under Article VI shall be applied as if such Employee had elected a benefit in the form of a single life annuity. 48 (b) With respect to a Provisional Payee, the limitations on benefits imposed under Article VI shall be applied consistent with paragraph (a) above prorated to provide a limitation equal to or one-half of the Employee's limitation as appropriate in accordance with annuity form of benefit elected by the Employee. 7.9 Effect of election under Article VII. An election of payment or a deemed election of payment in accordance with this Article VII shall be in lieu of any other form or method of payment of Retirement Income. 49 ARTICLE VIII Termination of Service 8 8.1 Vested interest. If an Employee included in the Plan terminates for any reason other than death or transfer to an Affiliated Employer as provided by Section 4.6 or retirement as provided by Article III, and if such Employee has had at least five (5) Vesting Years of Service with the Employer, whether or not Accredited Service, he will be entitled to receive, commencing at Normal Retirement Date (except as provided in Section 8.2 and subject to the provisions of Section 7.6) Retirement Income equal to his Accrued Retirement Income at the date of the termination of such service, provided that he makes application to the Employer for the payment of such Retirement Income. If proper application for payment of Retirement Income shall not be received by the Employer by the April 1 of the calendar year following the calendar year in which the Employee attains age 70 1/2 and the whereabouts of the Employee cannot be determined by the Employer, Retirement Income shall be paid to the Employee's Provisional Payee, if any, and if surviving and the whereabouts known to the Employer, or applied in such other manner as the Retirement Board shall deem appropriate. The payment of Retirement Income pursuant to this provision shall completely discharge all liability of the Retirement Board, the Employer, and the Trustee or other payor to the extent of the payments so made. If such Employee terminates with less than five (5) Vesting Years of Service with the Employer, he shall immediately forfeit any Accrued Retirement Income under the Plan based upon his service prior to such termination. 8.2 Early distribution of vested benefit. If an Employee terminates from service before his fifty-fifth (55th) birthday and is entitled to receive in accordance with Section 8.1 Retirement Income commencing at his Normal Retirement Date and at the time his service terminated he had at least ten (10) Years of Accredited Service, he may, in lieu of receiving payment of such Retirement Income commencing at Normal Retirement Date, elect to receive such Retirement Income commencing as of the first day of any month within the ten-year period preceding his Normal Retirement Date in an amount equal to his Accrued Retirement Income at the date of termination of his service actuarially reduced in accordance with reasonable actuarial assumptions adopted by the Retirement Board. An election pursuant to this Section 8.2 to have Retirement Income commence prior to Normal Retirement Date shall be made on a form prescribed by the Retirement Board and shall be filed with the Retirement Board at least thirty (30) days before Retirement Income is to commence. 50 8.3 Years of Service of reemployed Employees. If an Employee whose service terminates is again employed by the Employer as an Employee or he is employed (other than by reason of transfer in accordance with Section 4.6) by an Affiliated Employer which has at the time of his employment by such company a pension plan with substantially the same terms as this Plan, his Years of Service with the Employer and his Accredited Service immediately prior to the termination of his service shall be treated as provided in this Section 8.3, subject to the provisions of Section 8.4. For this purpose the terms "again employed" and "reemployment" shall include employment with an Affiliated Employer. (a) If at the time of his reemployment he has not incurred a One-Year Break in Service, his Years of Service with the Employer and his Accredited Service will be restored whether or not he is entitled to receive Retirement Income in accordance with Section 8.1. (b) If at the time of termination of his service he is entitled to receive Retirement Income in accordance with the provisions of Section 8.1, upon his reemployment his Years of Service with the Employer immediately prior to the termination of his service shall be restored whether or not he has incurred a One-Year Break in Service. (c) If at the time of reemployment on or after January 1, 1985, he is not entitled to receive Retirement Income in accordance with Section 8.1 and he (1) has incurred less than five (5) consecutive One-Year Breaks in Service or (2) has incurred five (5) or more consecutive One-Year Breaks in Service, but his Years of Service prior to such One-Year Breaks in Service exceeded the consecutive One-Year Breaks in Service, then upon the completion of one Eligibility Year of Service following his reemployment, provided that if his reemployment date is on or after January 1, 1995, no such Eligibility Year of Service shall be required, his Years of Service with the Employer and his Accredited Service prior to the first One-Year Break in Service shall be restored, disregarding any Years of Service with the Employer which are not required to be taken into account by reason of any previous One-Year Breaks in Service. The Years of Service and years of Accredited Service credited to an Employee reemployed prior to January 1, 1985, with regard to his Years of Service with the Employer and years of Accredited Service immediately prior to the termination of his service shall be determined under the terms of the Plan in effect prior to January 1, 1985. 51 (d) Years of Service and Accredited Service restored to an Employee in accordance with this Section 8.3 shall be aggregated with Years of Service and Accredited Service to which the Employee may be entitled after his reemployment. If, however, the Minimum Retirement Income so determined for the Employee upon his subsequent retirement or termination of service shall be less than the aggregate of: (1) his Minimum Retirement Income, if any, determined in respect of the period ending with his prior termination of service, and (2) his Minimum Retirement Income determined in respect of the period after his reemployment, the aggregate of such Minimum Retirement Incomes shall be deemed to be his Minimum Retirement Income upon such subsequent retirement or termination of service. In any event, his Retirement Income, however computed, shall be reduced by the Actuarial Equivalent of any Retirement Income he received with respect to his prior period of employment. (e) If a former Employee to whose credit shall be restored years of Accredited Service in accordance with this Section 8.3 shall become entitled (or his Provisional Payee shall become entitled) to receive retirement income under the plan of an Affiliated Employer by which he should become employed, he shall be deemed to have transferred to the Affiliated Employer for purposes of Section 4.6 as of his initial date of participation in the plan of such Affiliated Employer. 8.4 Cash-out and buy-back. (a) Notwithstanding any other provision of this Plan, if the present value of Accrued Retirement Income of an Employee whose service terminates for any reason other than transfer to an Affiliated Employer under Section 4.6, or retirement under Article III, is not more than $3,500 (or such greater amount as permitted by the regulations prescribed by the Secretary of the Treasury) the Employer shall direct that such present value of the Employee's Accrued Retirement Income be paid in a lump sum, in cash, to such terminated Employee. The present value of the Accrued Retirement Income shall be calculated as of the last day of the date of distribution of the lump sum applying the Applicable Interest Rate as defined in Section 8.5(e) in effect on the first day of the Plan Year of distribution. For purposes of this Section 8.4, if the present value of the Employee's vested Accrued Retirement Income is zero, the Employee shall be deemed to have received a distribution of such vested Retirement Income. (b) If such terminated Employee is subsequently reemployed and becomes covered under this Plan, the calculation of his Accrued Retirement Income shall be without regard to his years of Accredited Service prior to any One-Year Breaks in Service, unless the amount of such payment is repaid to the Trust, plus interest at the rate determined under Section 411(c)(2)(C) of the Code. If such amount (plus interest) is repaid, the Employee's Retirement Income shall be calculated based on his years of 52 Accredited Service before and after any One-Year Breaks in Service. Any repayment of a cash-out made pursuant to this Section 8.4 shall be made before the earlier of (a) five (5) years after the date on which the Employee is reemployed by the Employer or an Affiliated Employer, or (b) the close of the first period of five (5) consecutive One-Year Breaks in Service commencing after the distribution. If an Employee has been deemed to receive a distribution in accordance with paragraph (a) and is then reemployed, upon such reemployment, the amount of the deemed distribution shall be restored to the Employee. 8.5 Calculation of present value for cash-out of benefits and for determining amount of benefits. (a) This Section 8.5 shall apply to all distributions from the Plan and from annuity contracts purchased to provide Accrued Retirement Income other than distributions described in Section 1.417-1T(e)(3) of the income tax regulations issued under the Retirement Equity Act of 1984. (b) (1) For purposes of determining whether the present value of (A) an Employee's vested accrued benefit; (B) a qualified joint and survivor annuity, within the meaning of Section 417(b) of the Code; or (C) a qualified preretirement survivor annuity within the meaning of Section 417(c)(1) of the Code exceeds $3,500, the present value of such benefits or annuities shall be calculated by using an interest rate no greater than the Applicable Interest Rate. (2) In no event shall the present value of any such benefit or annuity determined under this Section 8.5(b) be less than the present value of such benefits or annuities determined using the Applicable Interest Rate. (c) (1) For purposes of determining the amount of an Employee's vested Accrued Retirement Income, the interest rate used shall not exceed: (A) the Applicable Interest Rate if the present value of the benefit (using such rate or rates) is not in excess of $25,000; or (B) 120 percent of the Applicable Interest Rate if the present value of the benefit exceeds $25,000 (as determined under (A)). In no event shall the present value determined under this (B) be less than $25,000. 53 (2) In no event shall the amount of the benefit or annuity determined under this Section 8.5(c) be less than the greater of: (A) the amount of such benefit determined under the Plan's provisions for determining the amount of benefits other than Sections 8.5; or (B) the amount of such benefit determined using the Applicable Interest Rate if the value determined in Section 8.5(c)(1) is less than $25,000 or 120 percent of the Applicable Interest Rate if the value determined in Section 8.5(c)(1) is not less than $25,000. (d) In no event shall the amount of any benefit or annuity determined under this Section 8.5 exceed the maximum benefit permitted under Section 415 of the Code. (e) (1) For purposes of this Section 8.5, "Applicable Interest Rate" shall mean the interest rate or rates which would be used as of the date distribution commences by the Pension Benefit Guaranty Corporation for purposes of valuing lump sum payments under the Plan if the Plan had terminated on the date distribution commences with insufficient assets to provide benefits guaranteed by the Pension Benefit Guaranty Corporation on that date. (2) Notwithstanding the foregoing, if the provisions of the Plan other than Section 8.5(e) so provide, the Applicable Interest Rate shall be determined as of the first day of the Plan Year in which a distribution occurs rather than as of the date distribution commences. (f) (1) This Section 8.5 shall apply to distributions in Plan Years beginning after December 31, 1984, other than distributions under annuity contracts distributed to or owned by an Employee prior to September 17, 1985 unless additional contributions are made under the Plan by the Employer with respect to such contracts. (2) Notwithstanding the foregoing, this Section 8.5 shall not apply to any distributions in Plan Years beginning after December 31, 1984, and before January 1, 1987, if such distributions were made in accordance with the requirements of the income tax regulations issued under the Retirement Equity Act of 1984. 54 8.6 Retirement Income under Prior Plan. Any person entitled to receive Retirement Income under Article VIII of the Prior Plan shall only be entitled to receive Retirement Income in accordance with the provisions of such Prior Plan in effect at the time his service was terminated, except that any such person whose service terminated prior to January 1, 1976: (a) with at least twenty (20) years of Accredited Service may elect to receive Retirement Income commencing prior to his Normal Retirement Date in accordance with Section 8.2; (b) who shall have returned to the employment of the Employer, whether before or after January 1, 1976, and shall be an Employee who is entitled to receive Retirement Income in respect of his Accredited Service after January 1, 1976, his years of Accredited Service under the Prior Plan with respect to his service before January 1, 1976, shall, for the purpose of calculating his Minimum Retirement Income, be aggregated with his years of Accredited Service after his reemployment. His Accrued Retirement Income to the date of termination of his service payable in accordance with Article VIII of the Prior Plan shall be treated as Prior Plan Retirement Income and his Years of Service prior to the date of termination of his service shall be restored to his credit. It shall be a condition of the treatment provided for in this paragraph (b) that: (1) the Employee rescind any election of payment and designation of a Provisional Payee which he shall have made under the Prior Plan and which shall be in effect at the time of his return to the employment of the Employer and (2) if he is receiving Retirement Income, his Retirement Income shall cease during his period of employment and any Retirement Income payable upon his subsequent retirement shall be reduced by the Actuarial Equivalent of any Retirement Income he received prior to his reemployment. 8.7 Requirement for Direct Rollovers. This Section 8.7 applies to distributions made from the Plan on or after January 1, 1993. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a Distributee's election under this Article VIII, a Distributee may elect, at the time and in the manner prescribed by the Retirement Board, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover. (a) Definitions (1) Eligible Rollover Distribution An Eligible Rollover Distribution is any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include: 55 (A) any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee's spouse, or for a specified period of 10 years or more; (B) any distribution to the extent such distribution is required under Code Section 401(a)(9); and (C) the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). (2) Eligible Retirement Plan An Eligible Retirement Plan is an individual retirement account described in Code Section 408(a), an individual retirement annuity described in Code Section 408(b), an annuity plan described in Code Section 403(a), or a qualified trust described in Code Section 401(a) that accepts the Distributee's Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution for a Provisional Payee, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity. (3) Distributee A Distributee includes an Employee or former Employee. In addition, a Distributee includes the Employee's or former Employee's spouse who is an alternate payee under a qualified domestic relations order, as defined in Code Section 414(p). (4) Direct Rollover A Direct Rollover is a payment by the Plan to the Eligible Retirement Plan specified by the Distributee. 56 ARTICLE IX Contributions 9 9.1 Contributions generally. All contributions which the Employer deems necessary to provide the Retirement Incomes under the Plan in excess of the fund derived from the split-up of the Commonwealth pension plan will be made from time to time by or on behalf of the Employer and no contributions will be required of the Employees. All contributions shall be made to the Trustee under the Trust Agreement provided for in Article XI, and if a group annuity contract shall be entered into with a life insurance company ("contract with an insurance company"), contributions may also be made to the insurance company. The minimum amount of contributions to be made by or on behalf of the Employer for any Plan Year of the Plan shall be such amount as is required to meet the minimum funding standards of ERISA and any regulations in respect thereto. However, the Employer is under no obligation to make any contributions under the Plan after the Plan is terminated, whether or not Retirement Income accrued or vested prior to the date of termination has been fully funded. All contributions are expressly conditioned upon the deductibility of such contributions by the Employer pursuant to Section 404 of the Code. 9.2 Return of Employer contributions. All contributions made pursuant to the Plan shall be held by the Trustee in accordance with the terms of the Trust Agreement for the exclusive benefit of those Employees who are Participants under the Plan, including former Employees and their Beneficiaries, and shall be applied to provide benefits under the Plan and to pay expenses of administration of the Plan and Trust, to the extent that such expenses are not otherwise paid. At no time prior to the satisfaction of all liabilities with respect to such Employees and their Beneficiaries shall any part of the Trust Fund be used for, or diverted to, purposes other than for the exclusive benefit of such Employees and their Beneficiaries. However, notwithstanding the provisions of this Section 9.2: (a) If a contribution is conditioned upon the deductibility of the contributions under Section 404 of the Code, then, to the extent the deduction is disallowed, the Trustee shall upon written request of the Employer, return the contribution (to the extent disallowed) to the Employer within one year after the date the deduction is disallowed. (b) If a contribution or any portion thereof is made by the Employer by a mistake of fact, the Trustee shall, upon written request of the Employer, return the contribution or such portion to the Employer within one year after the date of payment to the Trustee. 57 The amount which may be returned to the Employer under this Section 9.2, is the excess of (a) the amount contributed over (b) the amount that would have been contributed had there not occurred a mistake of fact or a mistake in determining the deduction. Earnings attributable to the excess contribution shall not be returned to the Employer, but losses attributable thereto shall reduce the amount to be so returned. (c) If permitted under Federal common law, the Company may recover any other contributions to the Plan or payments to any other entity to the extent such contributions or payments unjustly enrich or otherwise gratuitously benefit such entity. 9.3 Expenses. Prior to termination of the Plan, all investment expenses (including brokerage costs, transfer taxes, shipping expenses, and charges of correspondent banks of the Trustee) and any taxes which may be levied against the Trust shall be charged to the Trust. All other expenses prior to the termination of the Plan shall be paid by the Employer or charged to the Trust, as determined in the discretion of The Southern Company Pension Fund Investment Review Committee. After the termination of the Plan, all expenses shall be levied against the Trust and shall be charged to the Trust. 58 ARTICLE X Administration of Plan 10 10.1 Retirement Board. The general administration of the Plan shall be placed in a Retirement Board of five (5) members who shall be appointed from time to time by the Board of Directors to serve at the pleasure of the Board of Directors. 10.2 Organization and transaction of business of Retirement Board. Any person appointed a member of the Retirement Board shall signify his acceptance by filing written acceptance with the Board of Directors. Any member of the Retirement Board may resign by delivering his written resignation to the Board of Directors, and such resignation shall become effective at delivery or at any later date specified therein. The members of the Retirement Board shall elect a Chairman from their number, and a Secretary who may be but need not be one of the members of the Retirement Board, and shall designate an actuary to act in actuarial matters relating to the Plan. They may appoint from their number such committees with such powers as they shall determine, may authorize one or more of their number or any agent to make any payment in their behalf, or to execute or deliver any instrument except that a requisition for funds from the Trustee shall be signed by two (2) members of the Retirement Board. The Retirement Board shall hold meetings upon such notice, at such place or places, and at such time or times as they may from time to time determine. A majority of the members of the Retirement Board at the time in office shall constitute a quorum for the transaction of business. All resolutions or other actions taken by the Retirement Board at any meeting shall be by the vote of a majority of the Retirement Board at the time in office. Any determination or action of the Retirement Board may be made or taken without a meeting by a resolution or written memorandum concurred upon by a majority of the members then in office. No member of the Retirement Board who is also an Employee of the Employer shall receive any compensation from the Plan for his service as such. No bond or other security need be required of any member in any jurisdiction except as may be required by ERISA. 10.3 Administrative responsibilities of Retirement Board. The Retirement Board, in addition to the functions and duties provided for elsewhere in the Plan, shall have exclusive discretionary authority for the following: 59 (a) construing and interpreting the Plan; (b) determining all questions affecting the eligibility of any Employee, retired Employee, Provisional Payee, or alternate payee; (c) determining all questions affecting the amount of the benefit payable hereunder; (d) ascertaining the persons to whom benefits shall be payable under the provisions hereof; (e) to the extent provided in the Plan, authorizing and directing disbursements of benefits from the Plan; (f) making final and binding determinations in connection with any questions of fact which may arise regarding the operation of the Plan; (g) making such rules and regulations with reference to the operation of the Plan as it may deem necessary or advisable, provided that such rules and regulations shall not be inconsistent with the express terms of the Plan or ERISA; (h) prescribing such procedures and adopting such forms as it determines necessary under the terms of the Plan; and (i) reviewing such denials of claims for benefits as may arise. Any decision, determination, construction, interpretation, ascertainment, authorization, direction, rule, regulation, prescription, or review that the Retirement Board may make or give in carrying out its duties or functions under this Section 10.3 shall be binding and conclusive. 10.4 Retirement Board, the "Administrator". For the purposes of compliance with the provisions of ERISA, the Retirement Board shall be deemed the "administrator" of the Plan as the term "administrator" is defined in ERISA, and the Retirement Board shall be, with respect to the Plan, a "named fiduciary" as that term is defined in ERISA. For the purpose of carrying out its duties, the Retirement Board may, in its discretion, allocate responsibilities under the Plan among its members and may, in its discretion, designate in writing, as set forth in the minutes of the Retirement Board, persons other than members of the Retirement Board to carry out such responsibilities of the Retirement Board under the Plan as it may see fit. 60 10.5 Fiduciary responsibilities. It is intended, that to the maximum extent permitted by ERISA, each person who is a "fiduciary" with respect to the Plan as that term is defined in ERISA shall be responsible for the proper exercise of his own powers, duties, responsibilities, and obligations under the Plan and the trust or other funding medium as shall each person designated by any fiduciary to carry out any fiduciary responsibility with respect to the Plan, the trust or other funding medium and no fiduciary or other person to whom fiduciary responsibilities are allocated shall be liable for any act or omission of any other fiduciary or of any other person delegated to carry out any fiduciary or other responsibility under the Plan or the trust or other funding medium. Any person or group of persons may serve in more than one fiduciary capacity with respect to the Plan and any fiduciary with respect to the Plan may serve as a fiduciary with respect to the Plan in addition to being an officer, employee, agent, or other representative of a "party in interest" as that term is defined in ERISA. 10.6 Employment of actuaries and others. The Retirement Board may employ such "enrolled actuaries" and independent "qualified public accountants" as such terms are defined in ERISA, legal counsel who may be of counsel to the Employer, other specialists, and other persons as the Retirement Board deems necessary or desirable in connection with the administration of the Plan. The Retirement Board and any person to whom it may delegate any duty or power in connection with the administration of the Plan, the Employer, and the officers and directors thereof shall be entitled to rely conclusively upon and shall be fully protected in any action omitted, taken, or suffered by them in good faith in reliance upon any enrolled actuary, independent qualified public accountant, counsel, or other specialist or other person selected by the Retirement Board or in reliance upon any tables, evaluations, certificates, opinions, or reports which shall be furnished by any of them or by the Trustee or any insurance company. Any action so taken, omitted, or suffered in accordance with the provisions of this Section 10.6 shall be conclusive upon each Employee, former Employee, and Provisional Payee covered under the Plan. 10.7 Accounts and tables. The Retirement Board shall maintain accounts showing the fiscal transactions of the Plan, and shall keep in convenient form such data as may be necessary for actuarial valuations with respect to the operation and administration of the Plan. The Retirement Board shall prepare annually a report showing in reasonable summary the financial condition of the Trust and giving a brief account of the operation of the Plan for the past year, and any further information which the Board of Directors may require. Such 61 report shall be submitted to the Board of Directors and shall be filed in the office of the Secretary of the Retirement Board. The Retirement Board may, with the advice of an enrolled actuary, adopt from time to time mortality and other tables as it may deem necessary or appropriate for use in calculating benefits under the Plan. 10.8 Indemnity of members of Retirement Board. To the extent not compensated for by any applicable insurance, the Employer shall indemnify and hold harmless each member of the Retirement Board and each Employee of the Employer designated by the Retirement Board to carry out any fiduciary responsibility with respect to the Plan from any and all claims, loss, damages, expense (including counsel fees approved by the Board of Directors) and liability (including any amount paid in settlement with the approval of the Board of Directors) arising from any act or omission of such member or Employee designated by the Retirement Board in connection with the Plan or the Trust, except where the same is determined by the Board of Directors or is judicially determined to be due to a failure to act in good faith or is due to the gross negligence or willful misconduct of such member or Employee. No assets of the Plan may be used for any such indemnification. 10.9 Areas in which the Retirement Board does not have responsibility. The Retirement Board shall not have responsibility with respect to control or management of the assets of the Plan. The Trustee or an insurance company, if funds of the Plan shall be held by an insurance company, shall have the sole responsibility for the administration of the assets of the Plan as provided in the Trust Agreement or contract with an insurance company, except to the extent that an "Investment Manager," as that term is defined in ERISA, appointed by the Board of Directors shall have responsibility for the management of the assets of the Plan, or some part thereof, including the power to acquire and dispose of the assets of the Plan, or some part thereof. The responsibility for providing a procedure for establishing and carrying out a funding policy and method for the Plan consistent with the objectives of the Plan and the requirements of Title I of ERISA shall be that of the Board of Directors or such committee, whether or not comprised of members of the Board of Directors, as the Board of Directors may from time to time designate and shall not be the responsibility of the Retirement Board. Effective August 5, 1993, the Pension Fund Investment Review Committee of The Southern Company System shall recommend for approval by the Board of Directors any Investment Manager that shall have responsibility with respect to management of any Plan 62 assets. In addition, the Pension Fund Investment Review Committee shall assume all responsibility for providing a procedure for establishing and carrying out a funding policy and method for the Plan consistent with the objectives of the Plan and the requirements of Title I of ERISA. 10.10 Claims Procedures. Consistent with the requirements of ERISA and the regulations thereunder of the Secretary of Labor from time to time in effect, the Retirement Board or its delegatee shall: (a) provide adequate notice in writing to any Employee, former Employee, retired Employee, or Provisional Payee (each being hereinafter in the paragraph referred to as "participant") whose claim for benefit under the Plan has been denied, setting forth specific reasons for such denial, written in a manner calculated to be understood by such participant; and (b) afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review of the decision denying the claim. 63 ARTICLE XI Management of Trust 11 11.1 Trust. All assets of the Plan shall be held as a special trust for use in accordance with the Plan. The funds of the Plan shall be held by a Trustee, or by a successor trustee appointed from time to time by the Board of Directors in trust or held by a life insurance company in accordance with the provisions of a contract with such insurance company entered into by the Trustee or the Employer. The Trust Agreement and contract with an insurance company may from time to time be amended in the manner therein provided. 11.2 Disbursement of the Trust Fund. Subject to the provisions of the Trust Agreement or contract with an insurance company the Retirement Board shall determine the manner in which the funds of the Plan shall be disbursed pursuant to the Plan, including the form of voucher or warrant to be used in making disbursements and the due qualification of persons authorized to approve and sign the same. The responsibility for the retention and investment of funds held by the Trustee shall lie with the Trustee and not with the Retirement Board, and the responsibility for the retention and investment of funds held by an insurance company shall lie with the insurance company and not with the Retirement Board. However, if in accordance with a Trust Agreement forming a part of the Plan (including any pooled trust agreement in which a trust forming a part of the Plan participates) a contract with an insurance company shall be held by the Trustee as an investment of the trust, directions may be given from time to time to the Trustee by such board of directors or committee or person or persons as may be specified in the Trust Agreement to transfer funds of the trust to the life insurance company which issued such contract or to transfer funds from the life insurance company to the Trustee, as the case may be. 11.3 Rights in the Trust. Under no circumstances shall amounts of money or other things of value contributed by the Employer to the Plan, or any part of the corpus or income of the Trust held by the Trustee under the Plan, be recoverable by the Employer from the Trustee or from any Employee, retired Employee, or Provisional Payee, or be used for, or diverted to, purposes other than for the exclusive benefit of the Employees, retired Employees, and Provisional Payees covered hereunder; provided, however, that, if after satisfaction of all liabilities of the Trust with respect to Employees, retired Employees, and Provisional Payees under the Plan, there is any balance remaining, the Trustee shall return such balance to the Employer. Notwithstanding the above, upon the approval of the Internal Revenue Service or the enactment or promulgation of any laws or 64 regulations by any governmental authority, the Employer shall be authorized to rededicate all or a portion of the assets allocated to fund Retirement Income under the Plan to the separate account to fund medical benefits under Article XV of the Plan. 11.4 Merger of the Plan. The Plan shall not be merged or consolidated with, or any of its assets or liabilities transferred to, any other plan, unless each Employee included in the Plan would (if the Plan then terminated) receive a benefit immediately after the merger, consolidation, or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation, or transfer (if the Plan then terminated). 65 ARTICLE XII Termination of the Plan 12 12.1 Termination of the Plan. The Plan may be terminated at any time by action of the Board of Directors of the Employer in accordance with the amendment procedures provided in Section 13.1. Upon such termination or partial termination all Accrued Retirement Income of Employees to the date of such termination, to the extent then funded, shall become nonforfeitable and the assets of the Plan which have not previously been allocated to provide Retirement Income shall then be paid out to Employees, former Employees, and Provisional Payees in accordance with the applicable requirements of ERISA and regulations thereunder governing termination of "employee pension benefit plans" as defined in ERISA. If after satisfaction of all liabilities, as provided above, there is any balance remaining in the Trust, the Trustee shall return such balance to the Employer. In the first instance, subject to the foregoing limitations, such remaining assets shall be allocated among all persons in the following categories for whom such Retirement Income or other benefits have not previously been provided, namely, (a) Employees who have been retired under the Plan, (b) Employees who at the date of termination of the Plan are included in the Plan, (c) former Employees who at the date of the termination of their employment were entitled to payment of Retirement Income in accordance with Article VIII, and (d) former Employees who have transferred to an Affiliated Employer in accordance with Section 4.6 and are still in the employ or receiving a retirement income from such company (including their Provisional Payees, if any). Retirement Income already purchased under any contract with an insurance company will be payable in accordance with the provisions of that contract. 12.2 Limitation on benefits for certain highly paid employees. (a) The annual payments to an Employee described in paragraph (b) below shall not exceed an amount equal to the payments that would be made to or on behalf of such Employee under a single life annuity that is the Actuarial Equivalent of the sum of the Employee's Accrued Retirement Income and the Employee's other benefits under this Plan (other than a Social Security supplement) and any Social Security supplement that the restricted Employee is entitled to receive. The restrictions in this paragraph (a) do not apply, however, if -- (1) after payment to an Employee described in paragraph (b) of all benefits payable to such Employee under this Plan, the value of this Plan's assets equals or exceeds 66 110% of the value of current liabilities, as defined in Code Section 412(c)(7), or (2) the value of the benefits payable to such Employee under this Plan for an Employee described in paragraph (b) below is less than 1% of the value of current liabilities before distribution. (b) The Employees whose benefits are restricted on distribution include all highly compensated employees and highly compensated former employees (as such terms are defined in Treasury Regulation Section 1.401(a)(4)-12); provided, however, that Employees whose benefits are subject to restriction under this Section 12.2 shall be limited to only those Employees who in the current or in any previous Plan Year were one of the 25 non- excludable Employees of the Employer with the greatest compensation from the Employer. 67 ARTICLE XIII Amendment of the Plan 13 13.1 Amendment of the Plan. (a) The Plan may be amended or modified at any time by the Board of Directors pursuant to its written resolutions, provided that no amendment or modification which will substantially increase the cost of the Plan will be made by the Board of Directors without approval, at a meeting of the stockholders duly called for that purpose, by the vote of a majority of the stock present and entitled to vote at such meeting. (b) Such amendments and modifications (without limiting the generality of the foregoing) may, among other things, make any changes in the Plan which may become appropriate if, for any reason, the Employer should in the future find it necessary or desirable not to complete payment of the past service costs of the Plan in the manner and within the period now contemplated or should find it necessary or desirable to reduce the amounts of Future Service contributions to be paid by the Employer after such amendment or modification. Such amendments and modifications may also (without limiting the generality of the foregoing), make any changes necessary or desirable to make the costs of the Plan eligible for tax deductions or to make the income of the Trust exempt from taxation or to bring the Plan into conformity or compliance with ERISA or with governmental regulations. Notwithstanding the foregoing, no amendment shall be made which has the effect of decreasing the Accrued Retirement Income of any Employee, former Employee, or Provisional Payee as provided under the limitations of Section 411(d)(6) of the Code. 68 ARTICLE XIV Special Provisions 14 14.1 Adoption of Plan by other corporations. (a) Any corporation, whether or not related to the Employer by function or operation and any affiliate, if such corporation or affiliate is authorized to do so by a resolution adopted by the Board of Directors of the Employer, may adopt this Plan as a separate Plan for all eligible Employees or any separate, distinct, and identifiable class or group of Employees and the related Trust Agreement, by action of the board of directors of such corporation or affiliate. Any such adoption shall be evidenced by certified copies of the resolutions of the foregoing board of directors indicating such adoption and by the execution of the Adoption Agreement by the adopting corporation or affiliate. Such resolution shall state and define the effective date of the Plan for the purpose of such adopting corporation and, for the purpose of Section 415 of the Code, the "limitation year" as to such corporation. Notwithstanding the foregoing, however, if the Plan as adopted by an affiliate or other corporation under the foregoing provision shall fail to receive the initial approval of the Internal Revenue Service as a qualified plan, any contributions by such affiliate or other corporation after payment of all expenses will be returned to such adopting corporation free of any trust, and the Plan and the Trust Agreement as to such adopting affiliate or other corporation shall terminate. (b) Each adopting affiliate or other corporation shall be required to use the same Trustee as provided in this Plan. (c) The Trustee may, but is not required to, commingle, hold, and invest as one fund all contributions (or any portion thereof) made by each adopting affiliate or other corporation. (d) Any contributions made by an affiliate or other corporation, as provided for in this Plan, shall be paid to and held by the Trustee for the exclusive benefit of the Employees of such an affiliate or other corporation and the beneficiaries of such Employees, subject to all the terms and conditions of this Plan. On the basis of information furnished by the administrator, the Trustee shall keep separate books and records concerning the affairs of each adopting affiliate or other corporation hereunder. 69 14.2 Exclusive benefit. The Employer intends that the Plan (including the Trust forming a part thereof) shall be a pension plan of an employer for the exclusive benefit of its Employees and their beneficiaries subject to Section 11.3, as provided for in Section 401 of the Code, and as may be provided for in any similar provisions of subsequent revenue laws, and that the Trust shall qualify as an employees' trust which shall be exempt under Section 501(a) of the Code, and any similar provisions of subsequent revenue laws, as a trust forming part of such a plan. 14.3 Assignment or alienation. No benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment (either at law or in equity), pledge, encumbrance, charge, garnishment, levy, execution, or other legal or equitable process and any attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge, garnish, levy, execute, or enforce other legal or equitable process against the same shall be void, nor shall any such benefit be in any manner liable for or subject to the debts, contracts, liabilities, engagements, or torts of the person entitled to such benefit. If any Employee or retired Employee or any Provisional Payee under the Plan is adjudicated bankrupt or attempts to anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge any benefit under the Plan or if any action shall be taken which is in violation of the provisions of the immediately preceding paragraph, then such benefit shall cease and terminate and in that event the Retirement Board shall hold or apply the same or any part thereof to or for the benefit of such Employee or retired Employee or Provisional Payee in such manner as the Retirement Board may think proper. Notwithstanding the above, the Retirement Board and Trustee shall comply with any "domestic relations order" (as defined in Section 414(p)(1)(B) of the Code) which is a "qualified domestic relations order" satisfying the requirements of Section 414(p) of the Code. The Retirement Board shall establish procedures for (a) notifying Employees and alternate payees who have or may have an interest in benefits which are the subject of domestic relations orders, (b) determining whether such domestic relations orders are qualified domestic relations orders under Section 414(p) of the Code, and (c) distributing benefits which are subject to qualified domestic relations orders. 70 14.4 Voluntary undertaking. This Plan is strictly a voluntary undertaking on the part of the Employer and shall not be deemed to constitute a contract between the Employer or any other company and any Employee or to be a consideration for, or an inducement or condition of, the employment of any Employee. Nothing contained in this Plan shall be deemed to give any Employee the right to be retained in the service of the Employer or to interfere with the right of the Employer to discharge or retire any Employee at any time. Inclusion under the Plan will not give any Employee or Provisional Payee any right or claim to a Retirement Income except to the extent such right is specifically fixed under the terms of the Plan and there are funds available therefor in the hands of the Trustee or of any insurance company which may hold funds of the Plan. 14.5 Top-Heavy Plan requirements. For any Plan Year the Plan shall be determined to be a Top-Heavy Plan, the Plan shall provide the following: (a) the minimum benefit requirement of Section 14.7; and (b) the vesting requirement of Section 14.8. 14.6 Determination of Top-Heavy status. (a) For any Plan Year commencing after December 31, 1983, the Plan shall be determined to be a "Top-Heavy Plan," if, as of the Determination Date, (1) the Present Value of Accrued Retirement Income of Key Employees or (2) the sum of the Aggregate Accounts of Key Employees under this Plan and any plan of an Aggregation Group, exceeds sixty percent (60%) of the Present Value of Accrued Retirement Income or the Aggregate Accounts of all Employees entitled to participate in this Plan and any Plan of an Aggregation Group. (b) For Plan Years beginning after December 31, 1986, the Accrued Retirement Income of a Non-Key Employee shall be determined under the accrual method under the Plan. (c) For any Plan Year commencing after December 31, 1983, the Plan shall be determined to be a "Super Top-Heavy Plan," if, as of the Determination Date, (1) the Present Value of Accrued Retirement Income of Key Employees or (2) the sum of the Aggregate Accounts of Key Employees under this Plan and any plan in an Aggregation Group, exceeds ninety percent (90%) of the Present Value of Accrued Retirement Income or the Aggregate Accounts of all Employees entitled to participate in this Plan and any plan of an Aggregation Group. 71 For purposes of Sections 14.6(a) and 14.6(b), if any Employee is a Non-Key Employee for any Plan Year, but such Employee was a Key Employee for any prior Plan Year, such Employee's Present Value of Accrued Retirement Income and/ or Aggregate Account balance shall not be taken into account for purposes of determining whether this Plan is a Top-Heavy or Super Top-Heavy Plan (or whether any Aggregation Group which includes this Plan is a Top-Heavy Group). In addition, for Plan Years beginning after December 31, 1984, if an Employee or former Employee has not performed any services for the Employer or any Affiliated Employer maintaining the Plan at any time during the five (5) year period ending on the Determination Date, the Aggregate Account and/or Present Value of Accrued Retirement Income for such Employee or former Employee shall not be taken into account for purposes of determining whether this Plan is a Top-Heavy or Super Top-Heavy Plan. (d) An Employee's "Aggregate Account" as of the Determination Date shall be determined under applicable provisions of the defined contribution plan used in determining Top-Heavy status. (e) An "Aggregation Group" shall mean either a Required Aggregation Group or a Permissive Aggregation Group as hereinafter determined. (1) Required Aggregation Group: In determining a Required Aggregation Group hereunder, each plan of the Employer in which a Key Employee is a participant, and each other plan of the Employer which enables any plan in which a Key Employee participates to meet the requirements of Code Sections 401(a)(4) or 410, will be required to be aggregated. Such group shall be known as a Required Aggregation Group. In the case of a Required Aggregation Group, each plan in the group will be considered a Top-Heavy Plan if the Required Aggregation Group is a Top-Heavy Group. No plan in the Required Aggregation Group will be considered a Top-Heavy Plan if the Aggregation Group is not a Top-Heavy Group. (2) Permissive Aggregation Group: The Employer may also include any other plan not required to be included in the Required Aggregation Group, provided the resulting group, taken as a whole, would continue to satisfy the provisions of Code Sections 401(a)(4) or 410. Such group shall be known as a Permissive Aggregation Group. In the case of a Permissive Aggregation Group, only a plan that is part of the Required Aggregation Group will be considered a Top-Heavy Plan if the Permissive Aggregation Group is a 72 Top-Heavy Group. A plan that is not part of the Required Aggregation Group but that has nonetheless been aggregated as part of the Permissive Aggregation Group will not be considered a Top-Heavy Plan even if the Permissive Group is a Top-Heavy Group. (3) Only those plans of the Employer in which the Determination Dates fall within the same calendar year shall be aggregated in order to determine whether such plans are Top-Heavy Plans. (f) The "Determination Date" shall mean with respect to any Plan Year, the last day of the preceding Plan Year, or in the case of the first Plan Year, the last day of such Plan Year. (g) A "Key Employee" shall mean any Employee or former Employee (and his beneficiaries) who, at any time during the Plan Year or any of the four (4) preceding Plan Years, is: (1) an officer of the Employer having an annual compensation from the Employer greater than fifty percent (50%) of the amount in effect under Code Section 415(b)(1)(A) for any such Plan Year. For purposes of this Section 14.6(g)(1), only those employers which are incorporated shall be considered as having officers, and no more than fifty (50) Employees (or, if lesser, the greater of three (3) or ten percent (10%) of the Employees) shall be treated as officers. Annual compensation means compensation as defined in Section 415(c)(3) of the Code, but including amounts contributed by the Employer pursuant to a salary reduction agreement which are excludable from the Employee's gross income under Section 125, Section 402(a)(8), Section 402(h), or Section 403(b) of the Code. (2) one of the ten (10) Employees (A) having annual compensation from the Employer greater than the limitation in effect under Code Section 415(c)(1)(A) and (B) owning (or considered as owning within the meaning of Code Section 318) the largest interests in the Employer. For purposes of this Section 14.6(g)(2), if two (2) Employees have the same interest in the Employer, the Employee having the greater annual compensation from the Employer shall be treated as having a larger interest. (3) a "five-percent owner" of the Employer. The term "five-percent owner" shall mean any person who owns (or is considered as owning within the meaning of Code Section 318) more than five percent (5%) of the outstanding stock of the Employer or stock possessing more than five percent (5%) of the total combined voting power of all stock of the Employer. In determining percentage ownership hereunder, employers that would otherwise be aggregated under Code 73 Sections 414(b), (c), and (m) shall be treated as separate employers. (4) a "one-percent owner" of the Employer having an annual compensation from the Employer of more than $150,000. The term "one-percent owner" shall mean any person who owns (or is considered as owning within the meaning of Code Section 318) more than one percent (1%) of the outstanding stock of the Employer or stock possessing more than one percent (1%) of the total combined voting power of all stock of the Employer. In determining percentage ownership hereunder, employers that would otherwise be aggregated under Code Sections 414(b), (c), and (m) shall be treated as separate employers. However, in determining whether an individual has compensation of more than $150,000, compensation from each employer required to be aggregated under Code Sections 414(b), (c), and (m) shall be taken into account. (h) A "Non-Key Employee" shall mean any Employee who is not a Key Employee as defined in Section 14.6(g). (i) An Employee's "Present Value of Accrued Retirement Income" shall mean as of the Determination Date, the sum of the following: (1) the Present Value of his Accrued Retirement Income as of the most recent valuation occurring within a twelve (12) month period ending on the Determination Date. (2) any Plan distributions made within the Plan Year that includes the Determination Date or within the four (4) preceding Plan Years. However, in the case of distributions made after the valuation date and prior to the Determination Date, such distributions are not included as distributions for Top-Heavy purposes to the extent that such distributions are already included in the Employee's Present Value of Accrued Retirement Income as of the valuation date. Notwithstanding anything herein to the contrary, all distributions, including distributions made prior to January 1, 1984, and distributions under a terminated plan which if it had not been terminated would have been required to be included in an Aggregation Group, will be counted. (3) any Employee contributions, whether voluntary or mandatory. However, amounts attributable to qualified deductible employee contributions shall not be considered to be a part of the Employee's Present Value of Accrued Retirement Income. 74 (4) with respect to unrelated rollovers and plan-to-plan transfers (ones which are both initiated by the Employee and made from a plan maintained by one employer to a plan maintained by another employer), if this Plan provides for rollovers or plan-to-plan transfers, it shall always consider such rollover or plan-to-plan transfer as a distribution for the purposes of this Section. If this Plan is the plan accepting such rollovers or plan-to-plan transfers, it shall not consider such rollovers or plan-to-plan transfers accepted after December 31, 1983 as part of the Employee's Present Value of Accrued Retirement Income. However, rollovers or plan-to-plan transfers accepted prior to January 1, 1984 shall be considered as part of the Employee's Present Value of Accrued Retirement Income. (5) with respect to related rollovers and plan-to-plan transfers (ones either not initiated by the Employee or made to a plan maintained by the same employer), if this Plan provides for rollovers or plan-to-plan transfers, it shall not be counted as a distribution for purposes of this Section. If this Plan is the plan accepting such rollover or plan-to-plan transfer, it shall consider such rollover or plan-to-plan transfer as part of the Employee's Present Value of Accrued Retirement Income, irrespective of the date on which such rollover or plan-to-plan transfer is accepted. (j) A "Top-Heavy Group" shall mean an Aggregation Group in which, as of the Determination Date, the sum of: (1) the Present Value of Accrued Retirement Income of Key Employees under all defined benefit plans included in that group, and (2) the Aggregate Accounts of Key Employees under all defined contribution plans included in the group, exceeds sixty percent (60%) of a similar sum determined for all Employees. 14.7 Minimum Retirement Income for Top-Heavy Plan Years. Notwithstanding anything herein to the contrary, for any Top-Heavy Plan Year, the minimum Accrued Retirement Income derived from Employer contributions for each Non-Key Employee, including benefits accrued in years in which the Plan is not a Top-Heavy Plan, shall equal a percentage of such Non-Key Employee's highest average compensation not less than the lesser of: (a) two percent (2%) multiplied by the Employee's number of Years of Service with the Employer, or (b) twenty percent (20%). For purposes of the minimum benefit, an Employee's Years of Service shall exclude (a) Plan Years in which the Plan is not a Top-Heavy Plan, and (b) Years of Service completed prior to 75 January 1, 1984. The minimum benefit required by this Section 14.7 shall be calculated using the Employee's total compensation and expressed in the form of a single life annuity (with no ancillary benefits) beginning at such Employee's Normal Retirement Date. An Employee's average compensation shall be based on the five (5) consecutive years for which the Employee had the highest compensation. Notwithstanding the foregoing, in any Plan Year in which a Non-Key Employee is an Employee in both this Plan and a defined contribution plan, and both such plans are Top-Heavy Plans, the Employer shall not be required to provide a Non-Key Employee with both the full separate minimum defined benefit and the full separate minimum defined contribution plan allocation. Therefore, if a Non-Key Employee is participating in a defined contribution plan maintained by the Employer and the minimum allocation under Code Section 416(c)(2) is allocated to the Non-Key Employee under such defined contribution plan, the minimum Accrued Retirement Income provided for above shall not be applicable, and no minimum benefit shall accrue on behalf of the Non-Key Employee. Alternatively, the Employer may satisfy the minimum benefit requirement of Code Section 416(c)(1) for the Non-Key Employee by providing any combination of benefits and/or contributions that satisfy the safe harbor rules of Treasury Regulation Section 1.416-1(m-12). 14.8 Vesting requirements for Top-Heavy Plan Years. Notwithstanding the provisions of Section 8.1, for any Top-Heavy Plan Year, the vested portion of an Employee's Accrued Retirement Income shall be determined on the basis of the Employee's Vesting Years of Service according to the following schedule: Years of Service Vested Percentage less than 2 0 2 20 3 40 4 60 5 80 6 or more 100 The minimum Retirement Income for any Top-Heavy Plan Year shall not be forfeited during any period for which the payment of the Employee's Retirement Income is required to be suspended under Section 5.10 of the Plan. If in any subsequent Plan Year, the Plan ceases to be a Top-Heavy Plan, the Retirement Board may, in its sole discretion, elect to (a) continue to apply this vesting schedule in determining the vested percentage of an Employee's Accrued Retirement Income or (b) revert to the vesting schedule in effect before the Plan became a Top-Heavy Plan. Any such reversion 76 shall be treated as a Plan amendment pursuant to the terms of the Plan. No decrease in an Employee's nonforfeitable percentage may occur in the event the Plan's status as a Top-Heavy Plan changes for any Plan Year. 14.9 Adjustments to maximum benefits for Top-Heavy Plans. (a) In the case of an Employee who is a participant in a defined benefit plan and a defined contribution plan maintained by the Employer, and such plans as a group are determined to be Top-Heavy for any limitation year beginning after December 31, 1983, "1.0" shall be substituted for "1.25" in each place it appears in the denominators of Fractions A and B, as set forth in Section 6.5 of the Plan, unless the extra minimum benefit is provided pursuant to Section 14.9(b). Super Top-Heavy Plans shall be required at all times to substitute "1.0" for "1.25" in the denominator of each plan fraction. (b) If a Key Employee is a participant in both a defined benefit plan and a defined contribution plan that are both part of a Top-Heavy Group (but neither of such plans is a Super Top-Heavy Plan), the defined benefit and defined contribution fractions set forth in Section 6.5 shall remain unchanged, provided that in Section 14.7 above, "three percent (3%)" shall be substituted for "two percent (2%)" and "twenty percent (20%)" shall be increased by one (1) percentage point (but not more than ten (10) percentage points) for each Year of Service included in the computations under Section 14.7. (c) For purposes of this Section 14.9, if the sum of the defined benefit plan fraction and the defined contribution fraction shall exceed 1.0 in any Plan Year for any Employee in this Plan, the Employer shall eliminate any amounts in excess of the limits set forth in Section 6.5, pursuant to Section 6.7 of the Plan. 77 ARTICLE XV Post-retirement Medical Benefits 15 15.1 Definitions. The following words and phraseology as used herein shall have the following meanings unless a different meaning is plainly required by the context: (a) "Pensioned Employee" means a former Employee of the Employer who is eligible to receive Retirement Income after his retirement at his Early, Normal, or Deferred Retirement Date, as applicable, pursuant to the terms of the Plan, but shall not include any former Employee who terminated his service with the Employer prior to his Early, Normal, or Deferred Retirement Date and who is entitled to Retirement Income under the Plan. A "Pensioned Employee" shall not include a Key Employee, as defined in Section 14.6(g), or effective January 1, 1991 any Pensioned Employee of an employer that has adopted the Plan pursuant to Section 14.1 hereof but does not provide medical benefits to its Pensioned Employees. (b) "Dependents" means the Pensioned Employee's spouse who is not legally separated from the Pensioned Employee and the Pensioned Employee's unmarried children (both natural and legally adopted) within the prescribed age limit set forth below. The term "children" includes stepchildren and foster children who reside with the Pensioned Employee in a regular parent-child relationship and are dependent upon the Pensioned Employee for principal support and maintenance. The term Dependent shall not include any person who is covered, or eligible for coverage, under the Plan as a Pensioned Employee or who is entitled to any benefits under any provisions of this Plan because of having been covered as a Pensioned Employee. Children shall be considered to be within the prescribed age limit if they are less than nineteen (19) years of age. Unmarried children age nineteen (19) but less than age twenty-four (24) continue to be within the prescribed age limit if they are (1) attending school on a full-time basis as defined by the school and are dependent upon the Pensioned Employee for more than half of their support, or (2) attending school on a part-time basis, receiving medical treatment prescribed by an attending physician, and are dependent upon the Pensioned Employee for more than half of their support. The attending physician must also certify that the Dependent is mentally or physically unable to attend school on a full-time basis. If both a husband and his wife are covered under this Plan as Pensioned Employees of the Employer, either, but not both, may elect to cover their eligible children as Dependents. 78 Any person covered or eligible for coverage under Article XV as a Pensioned Employee, or under any group medical plan maintained by the Employer as an Employee, shall not be considered as a Dependent. (c) "Covered Individual" means a Pensioned Employee or Dependent of a Pensioned Employee who is eligible to receive medical benefits under Article XV. 15.2 Eligibility of Pensioned Employees and their Dependents. (a) A person who is a Pensioned Employee on January 1, 1989 shall be eligible for coverage as a Pensioned Employee on January 1, 1989, provided he was covered as an Employee under a group medical plan maintained by the Employer immediately prior to the time he became a Pensioned Employee. (b) An Employee who becomes a Pensioned Employee on or after January 1, 1989 shall be eligible for coverage on the date he becomes a Pensioned Employee, provided he was covered as an Employee under a group medical plan maintained by the Employer immediately prior to the time he became a Pensioned Employee. (c) A Dependent of a Pensioned Employee shall be eligible for coverage under this Plan on the later of (1) the date the Pensioned Employee becomes eligible for coverage hereunder and (2) the date such person becomes a Dependent. 15.3 Medical benefits. The medical benefits provided under this Article XV by the Employer and each adopting Employer are set forth in the copy of each such Employer's medical benefits plan which is attached hereto as Exhibit A and specifically incorporated herein by reference in its entirety, as may be amended from time to time. Such medical benefits shall be subject without limitation to all deductibles, maximums, exclusions, coordination with Medicare and other medical plans, and procedures for submitting claims and initiating legal proceedings provided therein. 15.4 Termination of coverage. (a) Coverage of any Pensioned Employee shall cease as follows: (1) when Article XV is amended, terminated, or discontinued in accordance with its terms; or (2) when the Pensioned Employee fails to make when due any required contribution; or (3) as otherwise provided in Exhibit A. 79 (b) Coverage of any Dependent shall cease as follows: (1) when Article XV is amended, terminated, or discontinued in accordance with its terms; or (2) when the Pensioned Employee fails to make when due any required contribution; or (3) as otherwise provided in Exhibit A. 15.5 Continuation of coverage to certain individuals. (a) Anything in Article XV to the contrary notwithstanding, a Pensioned Employee, Dependent spouse, or Dependent child shall be entitled to elect continued medical coverage as provided under the terms of Article XV upon the occurrence of a Qualifying Event, provided such Pensioned Employee, Dependent spouse, or Dependent child was entitled to benefits under Article XV on the day prior to the Qualifying Event. (1) "Qualifying Event" means with respect to any Pensioned Employee, Dependent spouse, or Dependent child, as appropriate, (A) the death of the Pensioned Employee, (B) the divorce or legal separation of the Pensioned Employee from the Dependent spouse, (C) a Dependent child ceasing to be a Dependent as defined under the requirements of Article XV, or (D) a proceeding in a case under Title 11, United States Code, with respect to the Employer. (b) The Pensioned Employee or Dependent electing continued coverage under this Section 15.5 shall be required to pay such monthly contributions as determined by the Employer to be equal to a reasonable estimate of 102% of the cost of providing coverage for such period for similarly situated beneficiaries which (1) is determined on an actuarial basis and (2) takes into account such factors as the Secretary of the Treasury may prescribe. (c) The continuation coverage elected by a Pensioned Employee, Dependent spouse, or Dependent child shall begin on the date of the Qualifying Event and end not earlier than the first to occur of the following: (1) The third anniversary of the Qualifying Event; (2) The termination of Article XV of the Plan; (3) The failure of the Pensioned Employee or Dependent to pay any required contribution when due; 80 (4) The date on which the Pensioned Employee or Dependent first becomes, after the date of his election, (A) a covered employee under any other group health plan which does not contain any exclusion or limitation with respect to any preexisting condition of such individual, or (B) entitled to benefits under Title XVIII of the Social Security Act; or (5) The date the Dependent spouse becomes covered under another group health plan which does not contain any exclusion or limitation with respect to any preexisting condition of such Dependent spouse. (d) Any election to continue coverage under this Section 15.5 shall be made during the election period (1) beginning not later than the termination date of coverage by reason of the Qualifying Event and (2) ending sixty (60) days following the later of the date described in (1) above or the date any Pensioned Employee, Dependent spouse, or Dependent child receives notice of a Qualifying Event from the Employer. (e) The Employer shall provide each Pensioned Employee and Dependent spouse, if any, written notice of the rights provided in this Section 15.5. The Pensioned Employee or Dependent spouse is required to notify the Employer within thirty (30) days of any Qualifying Event described in Section 15.5(a)(1)(B) or (C), and the Employer shall provide the Dependent spouse or Dependent child written notice of the rights provided in this Section 15.5 within fourteen (14) days thereafter. Notice to the Dependent spouse shall be deemed notice to each Dependent child residing with such spouse at the time such notification is made. 15.6 Contributions to fund medical benefits. Any contributions which the Employer deems necessary to provide the medical benefits under Article XV will be made from time to time by or on behalf of the Employer, and contributions shall be required of the Pensioned Employees to the Employer's medical benefit plan in amounts determined in the sole discretion of the Employer from time to time. All Employer contributions shall be made to the Trustee under the Trust Agreement provided for in Article XI and shall be allocated to a separate account maintained solely to fund the medical benefits provided under Article XV. The Employer shall designate that portion of any contribution to the Plan allocable to the funding of medical benefits under this Article XV. In no event at any time prior to the satisfaction of all liabilities under this Article XV shall any part of the corpus or income of such separate account be used for, or diverted to, purposes other than for the exclusive purpose of providing benefits under this Article XV. Effective January 1, 1991, subject to the requirements of Code Section 420, the Employer shall have the right, in its sole discretion, to transfer any excess corpus or income of the Plan allocated to 81 fund Retirement Income to the separate account to fund medical benefits under this Article XV. The amount of contributions to be made by or on behalf of the Employer for any Plan Year shall be determined in accordance with any generally accepted actuarial method which is reasonable in view of the provisions and coverage of Article XV, the funding medium, and any other applicable considerations. However, the Employer is under no obligation to make any contributions under Article XV after Article XV is terminated, except to fund claims for medical expenses incurred prior to the date of termination. The medical benefits provided under this Article XV, when added to any life insurance protection provided under the Plan, shall be subordinate to the retirement benefits provided under the Plan. Subject to any transitional rule applicable to contributions made under this Article XV prior to January 1, 1990, effective October 3, 1989, the aggregate of costs of the medical benefits (measured from January 1, 1987) plus the costs of any life insurance protection shall not exceed twenty-five percent (25%) of the sum of the aggregate of costs of retirement benefits under the Plan (other than past service credits), the aggregate of costs of the medical benefits and the costs of any life insurance protection (both measured from January 1, 1987). The aggregate of costs of retirement benefits, other than for past service credits, and the aggregate of costs of medical benefits provided under the Plan shall be determined using the projected unit credit funding method and the actuarial assumptions set forth in Exhibit B, a copy of which is attached hereto and specifically incorporated herein by reference in its entirety, and as may be amended from time to time by the committee responsible for providing a procedure for establishing and carrying out a funding policy and method for the Plan pursuant to Section 10.9 of the Plan. Contributions allocated to any separate account established for a Pensioned Employee from which medical benefits will be payable solely to such Pensioned Employee or his Dependents shall be treated as an Annual Addition as defined in Section 6.6(a) to any defined contribution plan maintained by the Employer. 15.7 Pensioned Employee contributions. It shall be the sole responsibility of the Pensioned Employee to notify the Employer promptly in writing when a change in the amount of the Pensioned Employee's contribution is in order because a Dependent has become ineligible for coverage under this Article XV. No person shall become covered under this Article XV for whom the Pensioned Employee has not made the required contribution. Any contribution paid by a Pensioned Employee for any person after such person shall have become ineligible for coverage under this Article XV shall be returned upon written request but only 82 provided such written request by or on behalf of the Pensioned Employee is received by the Employer within ninety (90) days from the date coverage terminates with respect to such ineligible person. 15.8 Amendment of Article XV. The Employer reserves the right, through action of its Board of Directors, to amend Article XV (including Exhibit A) pursuant to Section 13.1 or the Trust without the consent of any Pensioned Employee, or his Dependents, provided, however, that no amendment of this Article or the Trust shall cancel the payment or reimbursement of expenses for claims already incurred by a Pensioned Employee or his Dependent prior to the date of any amendment, nor shall any such amendment increase the duties and obligations of the Trustee except with its consent. This Article XV, as set forth in the Plan document, is not a contract and non-contributory benefits hereunder are provided gratuitously, without consideration from any Pensioned Employee or his Dependents. The Employer makes no promise to continue these benefits in the future and rights to future benefits will never vest. In particular, retirement or the fulfillment of the prerequisites for a retirement benefit pursuant to the terms of the Plan or under the terms of any other employee benefit plan maintained by the Employer shall not confer upon any Pensioned Employee or Dependents any right to continued benefits under this Article XV. 15.9 Termination of Article XV. Although it is the intention of the Employer that this Article shall be continued and the contribution shall be made regularly thereto each year, the Employer, by action of its Board of Directors pursuant to Section 13.1, may terminate this Article XV or permanently discontinue contributions at any time in its sole discretion. This Article XV, as set forth in the Plan document, is not a contract and non-contributory benefits hereunder are provided gratuitously, without consideration from any Pensioned Employee or his Dependents. The Employer makes no promise to continue these benefits in the future and rights to future benefits will never vest. In particular, retirement or the fulfillment of the prerequisites for a retirement benefit pursuant to the terms of the Plan or under the terms of any other employee benefit plan maintained by the Employer shall not confer upon any Pensioned Employee or his Dependents any right to continued benefits under this Article XV. Effective January 1, 1991, in the event the Employer or any adopting Employer shall terminate its provision of the medical benefits described in Exhibit A to Section 15.3 of the Plan to its Pensioned Employees, this Article XV of the Plan shall automatically terminate with respect to the Pensioned Employees and their Dependents of such Employer without the requirement of any action by such Employer. 15.10 Reversion of assets upon termination. Upon the termination of this Article XV and the satisfaction of all 83 liabilities under this Article XV, all remaining assets in the separate account described in Section 15.6 shall be returned to the Employer. 84 ARTICLE XVI Early Retirement Incentive Program 16 16.1 Eligibility. All Employees of the Employer who: (a) are classified on the Employer's payroll as actively employed on the last day preceding their Retirement Date; (b) who have or will complete ten (10) or more years of Accredited Service on or before December 31, 1994; and (c) have or will attain age fifty- five (55) on or before December 31, 1994 ("Eligible Employee") shall be eligible to receive the benefits described in Section 16.3 below if, during the period from May 1, 1994 through 5:00 p.m. on May 31, 1994, such Employee elects to retire by filing an election form and waiver agreement with the Retirement Board no later than 5:00 p.m. on May 31, 1994 and allows such election form and waiver agreement to become effective. In the event an Eligible Employee does not submit an election form and waiver agreement by 5:00 p.m. on May 31, 1994 and allow such Agreement to become effective, the Retirement Board shall interpret such failure as an election not to receive the benefits provided under this Article XVI. 16.2 Retirement Dates of Eligible Employees. (a) Employees who satisfy eligibility criteria by June 30, 1994. The Early Retirement Date of an Eligible Employee who elects to retire in accordance with the provisions of this Article XVI and who is age fifty-five (55) or older with ten (10) or more years of Accredited Service by June 30, 1994 shall be July 1, 1994. (b) Employees who satisfy eligibility criteria subsequent to June 30, 1994. The Early Retirement Date of an Eligible Employee who elects to retire in accordance with the provisions of this Article XVI and who attains age fifty-five (55) or older with ten (10) or more years of Accredited Service subsequent to June 30, 1994, but prior to December 31, 1994, shall be the first day of the first month following the date such Eligible Employee satisfies the age and service criteria described in this Section 16.2(b). (c) Exception for critical projects. Notwithstanding the foregoing, in the sole discretion of the Employer, the Early Retirement Date of an Eligible Employee may be postponed beyond the Eligible Employee's Early Retirement Date determined in accordance with the provisions of paragraph (a) or (b) above, whichever is applicable, provided, however, that no Eligible Employee's Early Retirement Date shall be postponed beyond June 30, 1995. 85 16.3 Early retirement incentive program benefits. (a) Early retirement replacement benefit. In addition to any Retirement Income to which an Eligible Employee may be entitled in accordance with the provisions of Article V of the Plan, if an Eligible Employee retires from the service of the Employer in accordance with the provisions of this Article XVI prior to his Normal Retirement Date and elects to commence his Retirement Income prior to his Normal Retirement Date pursuant to the provisions of Section 5.7 of the Plan, the amount of Retirement Income to be received by such Eligible Employee under Section 5.5 shall not be reduced due to early commencement of such Retirement Income. (b) Social Security Bridge Benefit. An Eligible Employee who retires in accordance with the provisions of this Article XVI prior to the attainment of age sixty-two (62) shall be paid an amount equal to the estimated monthly Social Security benefits such Eligible Employee would become entitled to beginning at age sixty-five (65) based upon the Social Security Act in effect at the time of such Employee's retirement and such Eligible Employee's estimated Social Security earnings while employed with the Employer or an Affiliated Employer through his Early Retirement Date. This "Social Security Bridge Benefit" shall be paid monthly commencing on the Employee's Early Retirement Date (determined in accordance with Section 16.2 above) and shall continue to be paid on the first day of each month thereafter up to and including the first day of the month in which such Eligible Employee attains age sixty-two (62). (c) Provisional Payees. The benefits described in this Section 16.3 shall be subject to and administered in accordance with the provisions of Article VII of the Plan; provided, however, that in the event of the Eligible Employee's death prior to his sixty-second (62nd) birthday, one hundred percent (100%) of the monthly Social Security Bridge Benefit to which the Eligible Employee is entitled shall continue to be paid to his Provisional Payee through the first day of the month in which such Eligible Employee would have attained age sixty-two (62) had the Eligible Employee not died. 16.4 Restoration to service. Notwithstanding any provisions of Section 5.10 to the contrary, in the event an Eligible Employee who retires in accordance with the provisions of this Article XVI subsequently returns to the service of the Employer or any Affiliated Employer, all benefits payable to such Eligible Employee under this Article XVI shall cease and upon such Eligible Employee's subsequent retirement, the Eligible Employee shall receive the Actuarial Equivalent of the greater of: 86 (a) the Retirement Income the Eligible Employee would receive under the Plan based upon his Accredited Service and age at the date of his subsequent retirement, reduced by the Actuarial Equivalent of any Retirement Income, including any amount payable under Section 16.3(b), which the Employee received prior to his reemployment; or (b) the Retirement Income the Eligible Employee was actually receiving prior to his reemployment plus any amounts payable under Section 16.3(b). IN WITNESS WHEREOF, the Board of Directors of Southern Company Services, Inc. through its authorized officers has adopted this amendment and restatement of the Pension Plan for Employees of Southern Company Services, Inc. this day of , , to be effective January 1, 1989. SOUTHERN COMPANY SERVICES, INC. By: William C. Archer III Vice President ATTEST: By: Tommy Chisholm Secretary [CORPORATE SEAL] [adamscl] h:\wpdocs\mtd\southern\scs-pens.94 87 [D R A F T] FIRST AMENDMENT TO THE PENSION PLAN FOR EMPLOYEES OF SOUTHERN COMPANY SERVICES, INC. WHEREAS, the Board of Directors of Southern Company Services, Inc. (the "Company") heretofore adopted the amendment and restatement of the Pension Plan for Employees of Southern Company Services, Inc. (the "Plan"), effective January 1, 1989, in order to comply with the Internal Revenue Code of 1986, as amended (hereinafter referred to as the "Code"); and WHEREAS, the Pension Plan has also been adopted by, and covers the eligible employees of, Southern Electric International, Inc. ("SEI"); and WHEREAS, effective as of December 16, 1994, SEI acquired a power generation facility from Scott Paper Company ("Scott") located in Mobile, Alabama; and WHEREAS, SEI employed certain of Scott's salaried employees after the acquisition; and WHEREAS, the Board of Directors wishes to amend the Pension Plan to allow former employees of Scott who are now salaried employees of SEI to immediately participate in the Pension Plan, to recognize for benefit accrual and vesting purposes under the Pension Plan service accrued under any Scott pension plan maintained for such salaried employees, and to offset in the Pension Plan any benefits these salaried employees may have accrued under such Scott pension plans; and WHEREAS, the Board of Directors of the Company is authorized pursuant to Section 13.1 of the Plan to amend the Plan at any time. NOW, THEREFORE, effective , the Board of Directors of the Company hereby amends the Plan by adding the following Article: 17 ARTICLE XVII Special Provisions Concerning Certain Employees of Southern Electric International, Inc. 17.1 Eligibility and Recognition of Service for Former Employees of Scott Paper Company. (a) 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. effective December 17, 1994, (1) Such employee shall be eligible to participate in the Plan effective January 1, 1995. (2) Such 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 calculated pursuant to Section 5.1, 5.2, 5.3, 8.1, or 8.2, as appropriate, based on his Accredited Service with the Employer and Accredited Service equal to service accrued under any salaried, non- collectively bargained pension benefit plan ("Salaried Plan(s)") maintained by Scott Paper Company. The Retirement Income calculated according to the preceding sentence shall be reduced by the amount of retirement income such Employee would receive under such Salaried Plan(s), assuming he retired at his normal retirement age, as that term is defined therein on December 17, 1994, from Scott Paper Company. (3) For purposes of calculating such Employee's Social Security Offset under Section 5.4, the Social Security Offset shall be determined by using the actual salary history of the Employee during his employment with the Employer, or an Affiliated Employer, and Scott Paper Company. If the actual salary history is not available from Scott Paper Company, such history shall be estimated in accordance with Section 5.4(b)(1) and (2) of the Plan. (4) For vesting purposes, such Employee shall be entitled to receive Vesting Years of Service as provided in Section 1.40 and, in addition, shall be entitled to vesting service equal to the sum of the years of service accrued under each defined benefit pension plan maintained by Scott Paper Company in which such Employee participated. 2 18 Except as amended herein by this First Amendment, the Plan shall remain in full force and effect as amended and restated by the Company prior to the adoption of this First Amendment. IN WITNESS WHEREOF, Southern Company Services, Inc., through its duly authorized officers, has adopted this First Amendment to the Pension Plan for Employees of Southern Company Services, Inc. this ____ day of _________________, 1995, to be effective as stated herein. SOUTHERN COMPANY SERVICES, INC. By: Its: ATTEST: By: Its: [CORPORATE SEAL] [adamscl] h:\wpdocs\mtd\southern\pens-94.1am 3 EX-10.(A)72 12 EXHIBIT 10(A)72 Exhibit 10(a)72 THE SOUTHERN COMPANY PERFORMANCE PAY PLAN As Amended and Restated Effective January 1, 1993 ARTICLE DESCRIPTION PAGE I Definitions . . . . . . . . . . . . . . . 2 II Participation . . . . . . . . . . . . . . 5 III Funding of Incentive Pay Awards . . . . . 7 IV Incentive Pay Award Opportunities . . . . 10 V Administration of Plan . . . . . . . . . 12 VI Miscellaneous Provisions . . . . . . . . 14 THE SOUTHERN COMPANY PERFORMANCE PAY PLAN Purposes The purposes of the Performance Pay Plan are to focus the attention and efforts of employees 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 individual, organizational and corporate goals; and to provide the potential for levels of compensation that will enhance the ability of the Operating Companies 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, organizational and corporate performance. Such compensation shall be paid out of the general assets of The Southern Company. No benefits under the Performance Pay Plan shall be deferred 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. The Performance Pay Plan was established effective January 1, 1989 and was first amended and restated effective January 1, 1991. The Board of Directors of Southern Company Services, Inc. now desires to amend and restate the Performance Pay Plan to incorporate numerous changes including provisions modifying the allocation of funds under the Performance Pay Plan. The effective date of this amendment and restatement (the "Restatement Effective Date") of the Performance Pay Plan shall be January 1, 1993 - 1 - 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 with respect to Non-Covered Employees the base salary or wages paid to a Participant before deductions for taxes, social security, etc., including all amounts contributed by an Operating Company to The Southern Electric System Flexible Benefits Plan or The Southern Company Flexible Benefits Plan on behalf of a Participant, amounts contributed by any Operating 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 Deferred Compensation Plan for The Southern Electric System, but excluding all awards under The Southern Company Performance Pay Plan and The Southern Company Productivity Improvement Plan, overtime pay, shift differential and substitution pay. With respect to Covered Employees, "Annual Salary" shall be defined in the Covered Employee Plan established by an Operating Company for the benefit of Covered Employees. 1.2 "Board of Directors" shall mean the Board of Directors of Southern Company Services, Inc. 1.3 "Company Goal Funding Rate" shall mean the rate at which funding of the Incentive Pay Award Pool is achieved for each of the Company Goals, which rates shall be established and committed to writing by no later than the end of each Performance Period by The Southern Company Management Council. 1.4 "Company Goals" shall mean the Organizational Goal, Customer Satisfaction Goal, Competitive Cost Goal and Earnings Goal, as is applicable. 1.5 "Covered Employee" shall mean an employee of an Operating Company covered by a collective bargaining agreement between the Operating Company and a union or other employee representative who participates in a Covered Employee Plan. 1.6 "Covered Employee Plan" shall mean a performance based plan established for the benefit of Covered Employees by an Operating Company pursuant to a collective bargaining agreement which plan is maintained in conjunction with this Performance Pay Plan. - 2 - 1.7 "Earnings Thresholds" shall mean The Southern Company Earnings Threshold and the Operating Company Earnings Threshold set forth at Section 3.1 of the Plan. 1.8 "Effective Date" shall mean January 1, 1989. The "Restatement Effective Date" shall mean January 1, 1993. 1.9 "Funding Unit" shall mean each organizational unit established by an Operating Company for which Company Goals are established and assessed for the purpose of paying Incentive Pay Awards. 1.10 "Funding Unit Head" shall mean the individual responsible for managing a Funding Unit. 1.11 "Grade" shall mean the evaluation assigned under the job evaluation system. 1.12 "Grade Value" shall mean with respect to Non-Covered Employees the assigned dollar value within the Annual Salary range for a Grade Level in a Performance Period and upon which Incentive Pay Awards are based. Grade Values of Non-Covered Employees who commence service during a Performance Period and Grade Values of Non-Covered Employees who terminate their employment for one of the reasons set forth in Section 2.1(b)(1)- (4) shall be prorated based upon their date of commencement or termination of service with their Operating Company in accordance with Schedule I or Schedule II, as appropriate. With respect to Covered Employees, "Grade Value" shall be defined in the Covered Employee Plan established by the Operating Company in which such Covered Employee participates. 1.13 "Incentive Pay Award" shall mean the amount awarded to a Participant in accordance with Article IV. 1.14 "Incentive Pay Award Pool" shall mean the pool of funds established in accordance with Article III either for the benefit of Non-Covered Employees or for the benefit of Covered Employees, respectively, and which funds are allocated to each Operating Company. 1.15 "Non-Covered Employee" shall mean each active full-time and regular part-time employee of an Operating Company, regardless of their classification as an exempt or non-exempt employee, who is not covered by a collective bargaining agreement between their Operating Company and a union or other employee representative. The term "Non-Covered Employee" shall not include any person who is a temporary employee, cooperative employee or a contractor of an Operating Company. In addition, the term "Employee" shall not include any employee who is eligible to participate in any incentive compensation program - 3 - maintained by his Operating Company that specifically provides that an eligible employee under such program shall not be entitled to also receive Incentive Pay Awards under this Plan. 1.16 "Operating Companies" shall mean Southern Company Services, Inc., or any affiliate or subsidiary (direct or indirect) of The 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 Operating 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. and Southern Nuclear Operating Company, Inc. 1.17 "Participant" shall mean all Non-Covered 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 Compensation Department of each Operating Company. 1.21 "ROE" shall mean return on equity. 1.22 "The Southern Company Earnings Test" shall mean the test set forth at Section 3.2(b) of the Plan. 1.23 "The Southern Company Earnings Threshold" shall mean the percentage ROE determined under Section 3.1(a). 1.24 "Threshold for Funding" shall mean the minimum level of performance established for each of the Company Goals before the commencement of each Performance Period by The Southern Company Management Council. 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. - 4 - ARTICLE II Participation 2.1 Non-Covered Employees. All Non-Covered Employees of an Operating Company shall be eligible to participate in the Plan and receive Incentive Pay Awards. (a) Non-Covered Employees who commence service with an Operating Company 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. For purposes of calculating the number of months of employment with an Operating Company under this Section 2.1: (1) Non-Covered 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 (2) Non-Covered 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. Non-Covered 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. (b) Non-Covered Employees whose employment with an Operating Company 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: (1) retirement, (2) total disability (as determined by the Social Security Administration), (3) death, or (4) termination of employment, but only in the event the Participant shall transfer to or be reemployed by Southern Electric International, Inc. during such Performance Period. - 5 - The pro-rata amount of an Incentive Pay Award shall be determined for the Performance Period in which such termination described above occurs by a fraction which is the number of months of employment with an Operating Company during the Performance Period, divided by the total number of months in the Performance Period. For purposes of calculating the number of months of employment with an Operating Company under this Section 2.(1)(b) for a Non-Covered Employee whose service is terminated for one of the reasons described above: (1) The month in which the Non-Covered Employee's service terminates shall not be considered if such terminating event occurs on or before the fourteenth (14th) day of the month; and (2) The month in which the Non-Covered Employee's service terminates shall be considered if such terminating event occurs on or after the fifteenth (15th) day of the month. A Non-Covered Employee whose employment with an Operating Company is terminated during a Performance Period for any reason other the reasons described above shall not be eligible to receive an Incentive Pay Award for such Performance Period. 2.2 Covered Employees. All Covered Employees of an Operating Company who are covered under a Covered Employee Plan shall not be eligible to participate in the Plan, but shall be eligible to participate in the Covered Employee Plan and to receive Incentive Pay Awards in accordance with the terms of such Covered Employee Plan. - 6 - ARTICLE III Funding of Incentive Pay Awards 3.1 Earnings Thresholds. Incentive Pay Award Pools shall be eligible for funding for the Performance Period in an amount determined in accordance with this Article III of the Plan for each Operating Company, provided both of the following Earnings Thresholds are achieved: (a) Southern Company Earnings Threshold - The Southern Company achieves earnings during the Performance Period equal to or greater than a percentage return on equity, which percentage is designated by The Southern Company Management Council by no later than the end of each Performance Period and which percentage and its dollar equivalent shall be set forth on Schedule III; and (b) Operating Company Earnings Threshold - Each Operating Company achieves earnings during the Performance Period equal to or greater than a percentage return on equity, which percentage is designated by The Southern Company Management Council by no later than the end of each Performance Period and which percentage and its dollar equivalent shall be set forth on Schedule IV. If, during the Performance Period, The Southern Company Earnings Threshold is not satisfied, no Incentive Pay Award Pool for any Operating Company shall be eligible for funding. If, during the Performance Period, The Southern Company Earnings Threshold is satisfied, but an Operating Company fails to satisfy its Operating Company Earnings Threshold, such Operating Company's Incentive Pay Award Pool shall not be eligible for funding. If, during the Performance Period, The Southern Company Earnings Threshold is satisfied and the Operating Company satisfies its Operating Company Earnings Threshold, such Operating Company's Incentive Pay Award Pools shall be eligible for funding in accordance with this Article III. 3.2 Funding for Non-Covered Employee Participants. Subject to Paragraph (c) of this Section 3.2, Plan funding for the Incentive Pay Award Pool benefiting Non-Covered Employees for each Operating Company shall equal for any given Performance Period the funding achieved under the Company Goals set forth in Paragraph (a) below, unless such amount is reduced by application of The Southern Company Earnings Test set forth in Paragraph (b) below. - 7 - (a) Company Goals. Each of the Company Goals provides for a Threshold for Funding, which must be achieved in order to obtain funding under any particular Goal. The Threshold for Funding and the Company Goal Funding Rate shall be designated by no later than the end of each Performance Period by The Southern Company Management Council on Schedule V. Funding under each Company Goal shall be calculated at the end of each Performance Period in accordance with Appendix A. (b) The Southern Company Earnings Test. The Southern Company Earnings Test shall be applied, as set forth in Appendix B, at the end of each Performance Period to total amount calculated for each Operating Company under the Company Goals. (c) If a Non-Covered Employee Participant transfers from one Funding Unit to another Funding Unit during a Performance Period, the transferee Funding Unit will fund such Participant's Incentive Pay Award for the entire Performance Period, and shall include such Participant's Grade Value in the calculation of the Incentive Pay Award Pool for the transferee Funding Unit without prorating the Grade Value of such Participant for the Performance Period. 3.3 Funding for Covered Employee Participants. With respect to a Covered Employee Plan sponsored by an Operating Company, such Plan shall be funded in accordance with this Section 3.3. (a) A Covered Employee Plan shall be eligible for funding provided the Earnings Thresholds set forth in Section 3.1 are satisfied. (b) Provided the Incentive Pay Award Pool for a Covered Employee Plan is eligible for funding under Paragraph (a) above, the Incentive Pay Award Pool for a Covered Employee Plan shall be funded in accordance with its terms, except that the maximum dollar amount of the Incentive Pay Award Pool for the Covered Employee Plan shall be subject to and may be limited by The Southern Company Earnings Test. - 8 - 3.4 Extraordinary Item Exception. If requested by an Operating Company, at the discretion of the Chief Executive Officer of The Southern Company, the Incentive Pay Award Pool for a Performance Period may be calculated without regard to any extraordinary item of income or expense ("Extraordinary Item") incurred by The Southern Company or any Operating Company, provided such determination is made prior to the close of the Performance Period. If the Chief Executive Officer of The Southern Company approves an Extraordinary Item, it shall be identified in Schedule VI, and, in addition, an explanation as to how such Extraordinary Item shall impact upon the funding of the Plan and the Incentive Pay Award Pool of the Operating Company requesting approval of the Extraordinary Item shall be set forth therein. 3.5 Appliance Sales Performance Plan. The portion of the Incentive Pay Award Pool otherwise distributable under the terms of the Plan on behalf of Non-Covered Employees of Gulf Power Company shall be reduced by the amount necessary (the "Necessary Amount") to fund the Gulf Power Company Appliance Sales Performance Pay Plan (hereinafter referred to as the "Gulf Plan") as determined by the executive committee (as that term is defined under the Gulf Plan) of the Gulf Plan. Such Necessary Amount shall be distributed directly to the Gulf Plan from the Incentive Pay Award Pool and shall be further distributed in accordance with the terms of the Gulf Plan. The portion of the Incentive Pay Award Pool otherwise payable on behalf of Employees of Gulf Power Company but not payable to the Gulf Plan in accordance with this Section 3.5 shall be subject to and distributed in accordance with the provisions of this Plan. Except as provided in Section 3.5(a) below, in no event shall a Gulf Power Company Appliance Sales Department employee be entitled to receive a distribution from both this Plan and the Gulf Plan. (a) If an employee of the Gulf Power Company Appliance Sales Department transfers between the Appliance Sales Department and another department of Gulf Power Company or another Operating Company, such employee shall be entitled to receive a pro-rata award under the Plan for that portion of the Performance Period in which such employee participates in the Plan. The accrual rate of the pro-rata award to be awarded to such employee under this Section 3.5(a) shall be determined in accordance with Schedule I of the Plan. (b) Grade Values for employees transferring to or from the Appliance Sales Department as described in Section 3.5(a) above shall be prorated based upon the employee's time of participation in this Plan. 3.6 Determination of Funding Amount. Funding in accordance with this Article III shall be fixed in all events by the end of each Performance Period. - 9 - ARTICLE IV Incentive Pay Award Opportunities 4.1 Non-Covered Employee Participants. (a) The Incentive Pay Award Pool benefiting Non-Covered Employee Participants of an Operating Company shall be allocated to each Funding Unit by the Plan Administrator of the Operating Company in accordance with performance goals established by the Operating Company and each of its Funding Unit Heads. The amount allocated to each Funding Unit shall then be allocated among Participants employed in such Funding Unit in accordance with individual, team, departmental or other criteria established by the respective Funding Unit Head. All Funding Unit Heads for a Performance Period shall be identified before the first day of the next succeeding Performance Period. The Funding Unit Heads shall be responsible for publishing the criteria established for the purpose of allocating its portion of the Incentive Pay Award Pool attributable to their respective Funding Units within a reasonable period of time after commencement of each Performance Period, and shall also communicate such criteria to the Plan Administrator prior to the close of each Performance Period. (b) The Plan Administrator shall be solely responsible for calculating each Participant's Incentive Pay Award and distributing such Incentive Pay Award in accordance with the criteria established by the Funding Unit Heads. (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 federal income tax deduction for Incentive Pay Awards paid with respect to such Performance Period. The Incentive Pay Award payment shall be made in cash or its functional equivalent and the receipt of such payment may not be deferred 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. - 10 - 4.2 Covered Employee Participants. (a) The Incentive Pay Award Pool benefiting Covered Employees of an Operating Company shall be allocated among Covered Employee Participants in the Covered Employee Plan in accordance with the terms of such Covered Employee Plan. (2) 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. - 11 - 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 upon 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 Operating 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 and/or desirable in order to discharge its duties hereunder. - 12 - 5.4 Indemnification. The Operating Companies 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 is finally adjudicated to be due to gross negligence or willful misconduct. The Operating 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 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. - 13 - 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. The Operating Company shall not reserve or otherwise set aside funds for the payments of Incentive Pay Awards under the Plan. 6.3 Amendment and Termination of Plan. 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. Notwithstanding the foregoing, in the event that the Plan is terminated before funding is fixed at the end of a Performance Period, no Incentive Pay Award shall be funded, and accordingly, no Incentive Pay Awards shall be paid for such Performance Period. 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 Operating Company. (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 Operating Company to such governmental authority. 6.5 Coordination with Benefit Plans. Any Incentive Pay Awards paid to a Participant while employed by an Operating Company shall not be considered in the calculation of the Participant's benefits under any employee welfare or pension benefit plan maintained by an Operating Company, unless otherwise specifically provided therein. 6.6 Plan Not a Contract. The Plan shall not be deemed to constitute a contract between an Operating Company and any Non- Covered or Covered Employee, nor shall anything herein contained be deemed to give any Non-Covered or Covered Employee any right to be retained in the employ of an Operating Company or interfere with the right of the Operating Company to discharge any Non- Covered 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. - 14 - 6.7 Choice of Law. This Plan 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 officers duly authorized, hereby amends and restates The Southern Company Performance Pay Plan this _____ day of _________________, _____, to be effective January 1, 1993. SOUTHERN COMPANY SERVICES, INC. By: ____________________________ W. C. Archer III Vice President Attest: By: ___________________________ Tommy Chisholm Secretary [CORPORATE SEAL] - 15 - THE SOUTHERN COMPANY PERFORMANCE PAY PLAN Amended and Restated Effective January 1, 1993 SCHEDULE I Employment Date Accrual Factor --------------- ------- ------ January 1 - January 14 12/12 = 1.00 January 15 - February 14 11/12 = .92 February 15 - March 14 10/12 = .83 March 15 - April 14 9/12 = .75 April 15 - May 14 8/12 = .67 May 15 - June 14 7/12 = .58 June 15 - July 14 6/12 = .50 July 15 - August 14 5/12 = .42 August 15 - September 14 4/12 = .33 September 15 - October 14 3/12 = .25 October 15 - November 14 2/12 = .17 November 15 - December 14 1/12 = .08 December 15 - December 31 0/12 = .00 - 16 - THE SOUTHERN COMPANY PERFORMANCE PAY PLAN Amended and Restated Effective January 1, 1993 SCHEDULE II Termination Date Accrual Factor ---------------- ------- ------ December 15 - December 31 12/12 = 1.00 November 15 - December 14 11/12 = .92 October 15 - November 14 10/12 = .83 September 15 - October 14 9/12 = .75 August 15 - September 14 8/12 = .67 July 15 - August 14 7/12 = .58 June 15 - July 14 6/12 = .50 May 15 - June 14 5/12 = .42 April 15 - May 14 4/12 = .33 March 15 - April 14 3/12 = .25 February 15 - March 14 2/12 = .17 January 15 - February 14 1/12 = .08 January 1 - January 14 0/12 = .00 - 17 - THE SOUTHERN COMPANY PERFORMANCE PAY PLAN Amended and Restated Effective January 1, 1993 SCHEDULE III THE SOUTHERN COMPANY EARNINGS THRESHOLD Year Percentage ROE/ Dollar Equivalent ----------------- 1993 11.50% / $1,335,397,000 1994 - 18 - THE SOUTHERN COMPANY PERFORMANCE PAY PLAN Amended and Restated Effective January 1, 1993 SCHEDULE IV OPERATING COMPANY EARNINGS THRESHOLD Percentage ROE / Dollar Equivalent ($000) Southern Year Alabama Georgia Gulf Mississippi Savannah Nuclear SCS SOCO ---- ------- ------- ---- ----------- -------- -------- --- ---- 1993 12% 12% 12% 12% 12% n/a n/a n/a $ 461,900 $ 757,500 $ 77,700 $ 57,400 $ 30,900 1994
- 19 - THE SOUTHERN COMPANY PERFORMANCE PAY PLAN Amended and Restated Effective January 1, 1993 SCHEDULE V COMPANY GOALS FUNDING THRESHOLDS/RATES Effective 1993 ($000) Southern Alabama Georgia Gulf Mississippi Savannah Nuclear SCS ------- ------- ---- ----------- -------- -------- --- ROE/ $ 492,757 $ 808,100 $ 82,900 $ 61,200 $ 32,845 n/a n/a Earnings Goal $0.10 $0.20 $0.10 $0.28 $0.09 Threshold/ Rate Cost Goal $ 969,343 $1,424,000 $ 228,000 n/a $ 138,500 $ 611,000 n/a Threshold/ Rate $0.10 $0.20 $0.10 $0.10 $0.10 Customer 60.1% 58.0% 56.6% 67.0% 60.8% n/a n/a Satisfaction Goal .6% .5% .5% 1.0% .5% Threshold/ Rate *Organizational _____ n/a _____ _____ _____ _____ n/a Goal Threshold/ Rate * Level 5 - 4% 4 - 3 3 - 2 2 - 1 1 - 0%
-20- THE SOUTHERN COMPANY PERFORMANCE PAY PLAN Amended and Restated Effective January 1, 1993 SCHEDULE VI EXTRAORDINARY ITEMS - 21 - EX-10.(A)73 13 EXHIBIT 10(A)73 Exhibit 10(a)73 SUPPLEMENTAL BENEFIT PLAN FOR ALABAMA POWER COMPANY SUPPLEMENTAL BENEFIT PLAN FOR ALABAMA POWER COMPANY Page ARTICLE I - PURPOSE AND ADOPTION OF PLAN . . . . . . . 1 1.1 Adoption . . . . . . . . . . . . . . . . 1 1.2 Purpose. . . . . . . . . . . . . . . . . 1 ARTICLE II - DEFINITIONS . . . . . . . . . . . . . . . 2 2.1 Account. . . . . . . . . . . . . . . . . 2 2.2 Administrative Committee . . . . . . . . 2 2.3 Affiliated Employer. . . . . . . . . . . 2 2.4 Beneficiary. . . . . . . . . . . . . . . 2 2.5 Board of Directors . . . . . . . . . . . 2 2.6 Code . . . . . . . . . . . . . . . . . . 2 2.7 Common Stock . . . . . . . . . . . . . . 2 2.8 Company. . . . . . . . . . . . . . . . . 2 2.9 Deferred Compensation Plan . . . . . . . 3 2.10 Effective Date . . . . . . . . . . . . . 3 2.11 Employee . . . . . . . . . . . . . . . . 3 2.12 ESOP . . . . . . . . . . . . . . . . . . 3 2.13 Non Pension Benefit. . . . . . . . . . . 3 2.14 Participant. . . . . . . . . . . . . . . 3 -i- 2.15 Pension Benefit. . . . . . . . . . . . . 3 2.16 Pension Plan . . . . . . . . . . . . . . 3 2.17 Plan . . . . . . . . . . . . . . . . . . 3 2.18 Plan Year. . . . . . . . . . . . . . . . 4 2.19 Savings Plan. . . . . . . . . . . . . . 4 ARTICLE III - ADMINISTRATION OF PLAN . . . . . . . . . 4 3.1 Administrator. . . . . . . . . . . . . . 4 3.2 Powers . . . . . . . . . . . . . . . . . 4 3.3 Duties of the Administrative Committee. . . . . . . . . . . . . . . 5 3.4 Indemnification. . . . . . . . . . . . . 6 ARTICLE IV - ELIGIBILITY . . . . . . . . . . . . . . . 7 4.1 Eligibility Requirements . . . . . . . . 7 4.2 Determination of Eligibility . . . . . . 7 ARTICLE V - BENEFITS . . . . . . . . . . . . . . . . . 8 5.1 Pension Benefit. . . . . . . . . . . . . 8 5.2 Non Pension Benefit. . . . . . . . . . . 10 5.3 Distribution of Benefits . . . . . . . . 13 5.4 Funding of Benefits. . . . . . . . . . . 16 5.5 Withholding. . . . . . . . . . . . . . . 16 -ii- ARTICLE VI - MISCELLANEOUS . . . . . . . . . . . . . . 17 6.1 Assignment . . . . . . . . . . . . . . . 17 6.2 Amendment and Termination. . . . . . . . 17 6.3 No Guarantee of Employment . . . . . . . 17 6.4 Construction . . . . . . . . . . . . . . 18 -iii- SUPPLEMENTAL BENEFIT PLAN FOR ALABAMA POWER COMPANY ARTICLE I - PURPOSE AND ADOPTION OF PLAN 1.1 Adoption: Alabama Power Company hereby adopt and establish the Supplemental Benefit Plan for Alabama Power Company. 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 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 Company under the Pension Plan for Employees of Alabama Power Company, the Employee Savings Plan for The Southern Company System, and the Employee Stock Ownership Plan of The Southern Company System, as a result of the limitations set forth under Sections 401(a)(17), 402(g), and 415 of the Internal Revenue Code of 1986, as amended from time to time. -1- ARTICLE II DEFINITIONS 2.1 "Account" shall mean the account or accounts established and maintained by a Company 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 Retirement Board of the Pension Plan. 2.3 "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. 2.4 "Beneficiary" shall mean any person, estate, trust, or organization entitled to receive any payment under the Plan upon the death of a Participant. 2.5 "Board of Directors" shall mean the Board of Directors of the Company. 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 The Southern Company. 2.8 "Company" shall mean Alabama Power Company. 2.9 "Deferred Compensation Plan" shall mean the Deferred Compensation Plan for The Southern Electric System, as amended -2- from time to time, following its adoption by the Board of Directors. 2.10 "Effective Date" shall mean January 1, 1983. The Effective Date of this amendment and restatement shall mean January 1, 1988. 2.11 "Employee" shall mean any person who is currently employed by the Company. 2.12 "ESOP" shall mean the Employee Stock Ownership Plan of The Southern Company System, as amended from time to time. 2.13 "Non Pension Benefit" shall mean the benefit described in Section 5.2. 2.14 "Participant" shall mean an Employee or former Employee of a Company who is eligible to receive benefits provided by the Plan. 2.15 "Pension Benefit" shall mean the benefit described in Section 5.1. 2.16 "Pension Plan" shall mean the defined benefit pension plan maintained by the Company or an Affiliated Employer, as amended from time to time. 2.17 "Plan" shall mean the Supplemental Benefit Plan for Alabama Power Company, as amended from time to time. 2.18 "Plan Year" shall mean the calendar year. -3- 2.19 "Savings Plan" shall mean the Employee Savings Plan for The Southern Company System, as amended from time to time. Where the context requires, the definitions of all terms set forth in the Pension Plan, the ESOP, 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. 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 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 -4- 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. -5- (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 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 their own expense sufficient liability insurance for the Administrative Committee to cover any and all claims, -6- 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 Company shall receive any compensation from the Plan for his service as such. ARTICLE IV ELIGIBILITY 4.1 Eligibility Requirements. All Employees (a) whose benefits under the Pension Plan of the Company are limited by the limitations set forth in Sections 401(a)(17) and 415 of the Code, (b) for whom contributions by the Company to the Savings Plan are limited by the limitations set forth in Sections 401(a)(17), 401(k), 401(m), 402(g) and 415 of the Code, or (c) for whom contributions by the Company to the ESOP are limited by the limitations set forth in Sections 401(a)(17) and 415 of the Code, 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 -7- necessary 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 under the Employee Retirement Income Security Act of 1974, as amended. ARTICLE V BENEFITS 5.1 Pension Benefit. (a) If a Participant has Accredited Service with respect to the Pension Plan of the Company, but not with respect to the Pension Plan of any Affiliated Employer, he shall be entitled to a Pension Benefit equal to that portion of his Retirement Income under the Pension Plan of the Company which is not payable under such Pension Plan as a result of the limitations imposed by Sections 401(a)(17), 415(b), and 415(e) of the Code. (b) If a Participant has Accredited Service with respect to the Pension Plan of the Company and with respect to the Pension Plan of one or more Affiliated Employers, his Pension Benefit payable by the Company, and any Affiliated Employer(s) shall be equal to that portion of his combined Retirement Income under each Pension Plan which is not payable under any of such Pension Plans as a result of the limitations described by -8- Sections 401(a)(17), 415(b), and 415(e) of the Code, multiplied by a fraction, the sum of the individual fractions not to exceed one (1), the numerator of which is his years of Accredited Service under the Pension Plan of the Company or any Affiliated Employer(s) and the denominator which is his total years of Accredited Service under the Pension Plans of the Company and any Affiliated Employer(s). (c) 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 of the Company in calculating his Retirement Income, without regard to the limitation of Section 401(a)(17) of Code, but excluding any portion of his Compensation he may have elected to defer under the Deferred Compensation Plan. (d) To the extent that a Participant's Retirement Income under a Pension Plan is recalculated as a result of an amendment to such 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. -9- 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 by the Company, 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 the 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), 415(c), and 415(e) of the Code and (2) to the ESOP on behalf of the Participant as a result of the limitations imposed by Sections 401(a)(17), 415(c), and 415(e) 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 and ESOP, without regard to the limitations of Section 401(a)(17) or Section 402(g) of the Code, but excluding any portion of his Compensation he may have elected to defer under the Deferred Compensation Plan. -10- (c) All amounts so credited to the Account of the Participant shall be deemed to be invested in the Common Stock at the same time that such amounts would have been so invested if they had been contributed by the Company to the Savings Plan or the ESOP, as the case may be. In addition, such Account shall be credited with respect to shares of Common Stock allocated to the Participant's Account as follows: (1) In the case of cash dividends, such additional shares as could be purchased 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 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. -11- (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 Company 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 each Account established for the benefit of the Participant by the Company. Notwithstanding, 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. 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. -12- 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 and in the same manner as the Participant's Retirement Income under the Pension Plan. The Beneficiary of a Participant's Pension Benefit shall be the same as the beneficiary of the Participant's Retirement Income under the Pension Plan. (b) When a Participant terminates his employment with the Company, said Participant shall be entitled to receive the market value of any shares of Common Stock (and fractions thereof) reflected in any Account maintained by the Company for his benefit under the Plan 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 close of the calendar quarter in which his termination of employment occurs, or as soon as reasonably practicable thereafter. The transfer by a Participant between companies in the Southern electric system shall not be deemed to be a termination of employment with the Company. No portion of a Participant's Account shall be distributed in Common Stock. -13- (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 close of the calendar quarter in which his termination of employment occurs, or as soon as reasonably practicable thereafter, and shall be an amount equal to the balance in the Participant's Account 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 divided by the number of the remaining annual payments and shall be due on the anniversary of the preceding payment date. No portion of a Participant's Account shall be distributed in Common Stock. (d) Upon the death of a Participant, or a former Participant prior to the payment of all amounts credited to said Participant's Account, 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 close of the calendar quarter in 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 -14- 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 estate of the Participant or former Participant. No portion of a Participant's Account shall be distributed in Common Stock. (e) Upon the total disability of a Participant or former Participant, as determined by the Social Security Administration, 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 notification of the Administrative Committee of the determination of 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. No portion of a Participant's Account shall be distributed in Common Stock. (f) The Administrative Committee in its sole discretion upon application made by the Participant, a designated Beneficiary, or their legal representative, may determine to -15- 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 Funding of Benefits. The Company maintaining an Account for the benefit of a Participant shall not reserve or otherwise set aside funds for the payment of its obligations under the Plan, and such obligations shall be paid solely from the general assets of the Company. 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 at all times remain subject to the claims of the creditors of the Company. 5.5 Withholding. There shall be deducted from the payment of any Pension Benefit or Non Pension 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. -16- ARTICLE VI MISCELLANEOUS 6.1 Assignment. Neither the Participant, his Beneficiary, or 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. 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 the Company and a Participant, nor shall it limit the right of the Company to suspend, terminate, alter, modify, whether or not for cause, the employment relationship between the Company and a Participant. -17- 6.4 Construction. This Plan shall be construed in accordance with and governed by the laws of the State of Alabama, to the extent such laws are not otherwise superseded by the laws of the United States. IN WITNESS WHEREOF, the Plan has been executed by duly authorized officers of Alabama Power Company, pursuant to resolutions of the Board of Directors of the Alabama Power Company, this day of , . ALABAMA POWER COMPANY (CORPORATE SEAL) By: Attest: [adamscl] h:\wpdocs\mtd\alapower\sup-ben.pln -18- EX-10.(A)74 14 EXHIBIT 10(A)74 Exhibit 10(a)74 SUPPLEMENTAL BENEFIT PLAN FOR GEORGIA POWER COMPANY SUPPLEMENTAL BENEFIT PLAN FOR GEORGIA POWER COMPANY Page ARTICLE I - PURPOSE AND ADOPTION OF PLAN . . . . . . . 1 1.1 Adoption . . . . . . . . . . . . . . . . 1 1.2 Purpose. . . . . . . . . . . . . . . . . 1 ARTICLE II - DEFINITIONS . . . . . . . . . . . . . . . 2 2.1 Account. . . . . . . . . . . . . . . . . 2 2.2 Affiliated Employer. . . . . . . . . . . 2 2.3 Beneficiary. . . . . . . . . . . . . . . 2 2.4 Board of Directors . . . . . . . . . . . 2 2.5 Code . . . . . . . . . . . . . . . . . . 2 2.6 Common Stock . . . . . . . . . . . . . . 2 2.7 Company. . . . . . . . . . . . . . . . . 2 2.8 Deferred Compensation Plan . . . . . . . 2 2.9 Effective Date . . . . . . . . . . . . . 3 2.10 Employee . . . . . . . . . . . . . . . . 3 2.11 ESOP . . . . . . . . . . . . . . . . . . 3 2.12 Non Pension Benefit. . . . . . . . . . . 3 2.13 Participant. . . . . . . . . . . . . . . 3 2.14 Pension Benefit. . . . . . . . . . . . . 3 -i- 2.15 Pension Plan . . . . . . . . . . . . . . 3 2.16 Plan . . . . . . . . . . . . . . . . . . 3 2.17 Plan Year. . . . . . . . . . . . . . . . 3 2.18 Savings Plan. . . . . . . . . . . . . . 3 ARTICLE III - ADMINISTRATION OF PLAN . . . . . . . . . 4 3.1 Administrator. . . . . . . . . . . . . . 4 3.2 Powers . . . . . . . . . . . . . . . . . 4 3.3 Duties of the Board of Directors. . . . . . . . . . . . . . . 5 3.4 Indemnification. . . . . . . . . . . . . 6 ARTICLE IV - ELIGIBILITY . . . . . . . . . . . . . . . 7 4.1 Eligibility Requirements . . . . . . . . 7 4.2 Determination of Eligibility . . . . . . 7 ARTICLE V - BENEFITS . . . . . . . . . . . . . . . . . 8 5.1 Pension Benefit. . . . . . . . . . . . . 8 5.2 Non Pension Benefit. . . . . . . . . . . 10 5.3 Distribution of Benefits . . . . . . . . 13 5.4 Funding of Benefits. . . . . . . . . . . 16 5.5 Withholding. . . . . . . . . . . . . . . 16 -ii- ARTICLE VI - MISCELLANEOUS . . . . . . . . . . . . . . 17 6.1 Assignment . . . . . . . . . . . . . . . 17 6.2 Amendment and Termination. . . . . . . . 17 6.3 No Guarantee of Employment . . . . . . . 17 6.4 Construction . . . . . . . . . . . . . . 18 -iii- SUPPLEMENTAL BENEFIT PLAN FOR GEORGIA POWER COMPANY ARTICLE I - PURPOSE AND ADOPTION OF PLAN 1.1 Adoption: Georgia Power Company hereby adopt and establish the Supplemental Benefit Plan for Georgia Power Company. 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 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 Company under the Pension Plan for Employees of Georgia Power Company, the Employee Savings Plan for The Southern Company System, and the Employee Stock Ownership Plan of The Southern Company System, as a result of the limitations set forth under Sections 401(a)(17), 402(g), and 415 of the Internal Revenue Code of 1986, as amended from time to time. -1- ARTICLE II DEFINITIONS 2.1 "Account" shall mean the account or accounts established and maintained by a Company 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 "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. 2.3 "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 "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. 2.6 "Common Stock" shall mean common stock of The Southern Company. 2.7 "Company" shall mean Georgia Power Company. 2.8 "Deferred Compensation Plan" shall mean the Deferred Compensation Plan for The Southern Electric System, as amended -2- from time to time, following its adoption by the Board of Directors. 2.9 "Effective Date" shall mean January 1, 1983. The Effective Date of this amendment and restatement shall mean January 1, 1988. 2.10 "Employee" shall mean any person who is currently employed by the Company. 2.11 "ESOP" shall mean the Employee Stock Ownership Plan of The Southern Company System, as amended from time to time. 2.12 "Non Pension Benefit" shall mean the benefit described in Section 5.2. 2.13 "Participant" shall mean an Employee or former Employee of a Company who is eligible to receive benefits provided by the Plan. 2.14 "Pension Benefit" shall mean the benefit described in Section 5.1. 2.15 "Pension Plan" shall mean the defined benefit pension plan maintained by the Company or an Affiliated Employer, as amended from time to time. 2.16 "Plan" shall mean the Supplemental Benefit Plan for Georgia Power Company, as amended from time to time. 2.17 "Plan Year" shall mean the calendar year. -3- 2.18 "Savings Plan" shall mean the Employee Savings Plan for The Southern Company System, as amended from time to time. Where the context requires, the definitions of all terms set forth in the Pension Plan, the ESOP, 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 Board of Directors. 3.2 Powers. The Board of Directors 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 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 -4- 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 Board of Directors. (a) The Board of Directors is responsible for the daily administration of the Plan. It may appoint other persons or entities to perform any of its fiduciary functions. The Board of Directors 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 Board of Directors 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 Board of Directors 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. -5- (c) The Board of Directors 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 Board of Directors 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 Board of Directors 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 their own expense sufficient liability insurance for the Board of Directors to cover any and all claims, losses, -6- damages and expenses arising from any action or failure to act in connection with the execution of the duties as Board of Directors. ARTICLE IV ELIGIBILITY 4.1 Eligibility Requirements. All Employees (a) whose benefits under the Pension Plan of the Company are limited by the limitations set forth in Sections 401(a)(17) and 415 of the Code, (b) for whom contributions by the Company to the Savings Plan are limited by the limitations set forth in Sections 401(a)(17), 401(k), 401(m), 402(g) and 415 of the Code, or (c) for whom contributions by the Company to the ESOP are limited by the limitations set forth in Sections 401(a)(17) and 415 of the Code, shall be eligible to receive benefits under the Plan. 4.2 Determination of Eligibility. The Board of Directors 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 Board of Directors shall be authorized to rescind the eligibility of any Participant if necessary to insure that the Plan is maintained primarily for the purpose of providing deferred compensation to a select group of management or highly -7- compensated employees under the Employee Retirement Income Security Act of 1974, as amended. ARTICLE V BENEFITS 5.1 Pension Benefit. (a) If a Participant has Accredited Service with respect to the Pension Plan of the Company, but not with respect to the Pension Plan of any Affiliated Employer, he shall be entitled to a Pension Benefit equal to that portion of his Retirement Income under the Pension Plan of the Company which is not payable under such Pension Plan as a result of the limitations imposed by Sections 401(a)(17), 415(b), and 415(e) of the Code. (b) If a Participant has Accredited Service with respect to the Pension Plan of the Company and with respect to the Pension Plan of one or more Affiliated Employers, his Pension Benefit payable by the Company, and any Affiliated Employer(s) shall be equal to that portion of his combined Retirement Income under each Pension Plan which is not payable under any of such Pension Plans as a result of the limitations described by Sections 401(a)(17), 415(b), and 415(e) of the Code, multiplied by a fraction, the sum of the individual fractions not to exceed -8- one (1), the numerator of which is his years of Accredited Service under the Pension Plan of the Company or any Affiliated Employer(s) and the denominator which is his total years of Accredited Service under the Pension Plans of the Company and any Affiliated Employer(s). (c) 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 of the Company in calculating his Retirement Income, without regard to the limitation of Section 401(a)(17) of Code, but excluding any portion of his Compensation he may have elected to defer under the Deferred Compensation Plan. (d) To the extent that a Participant's Retirement Income under a Pension Plan is recalculated as a result of an amendment to such 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. -9- 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 by the Company, 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 the 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), 415(c), and 415(e) of the Code and (2) to the ESOP on behalf of the Participant as a result of the limitations imposed by Sections 401(a)(17), 415(c), and 415(e) 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 and ESOP, without regard to the limitations of Section 401(a)(17) or Section 402(g) of the Code, but excluding any portion of his Compensation he may have elected to defer under the Deferred Compensation Plan. -10- (c) All amounts so credited to the Account of the Participant shall be deemed to be invested in the Common Stock at the same time that such amounts would have been so invested if they had been contributed by the Company to the Savings Plan or the ESOP, as the case may be. In addition, such Account shall be credited with respect to shares of Common Stock allocated to the Participant's Account as follows: (1) In the case of cash dividends, such additional shares as could be purchased 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 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. -11- (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 Company 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 each Account established for the benefit of the Participant by the Company. Notwithstanding, in the sole discretion of the Board of Directors 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. 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. -12- 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 and in the same manner as the Participant's Retirement Income under the Pension Plan. The Beneficiary of a Participant's Pension Benefit shall be the same as the beneficiary of the Participant's Retirement Income under the Pension Plan. (b) When a Participant terminates his employment with the Company, said Participant shall be entitled to receive the market value of any shares of Common Stock (and fractions thereof) reflected in any Account maintained by the Company for his benefit under the Plan 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 close of the calendar quarter in which his termination of employment occurs, or as soon as reasonably practicable thereafter. The transfer by a Participant between companies in the Southern electric system shall not be deemed to be a termination of employment with the Company. No portion of a Participant's Account shall be distributed in Common Stock. -13- (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 close of the calendar quarter in which his termination of employment occurs, or as soon as reasonably practicable thereafter, and shall be an amount equal to the balance in the Participant's Account 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 divided by the number of the remaining annual payments and shall be due on the anniversary of the preceding payment date. No portion of a Participant's Account shall be distributed in Common Stock. (d) Upon the death of a Participant, or a former Participant prior to the payment of all amounts credited to said Participant's Account, the unpaid balance shall be paid in the sole discretion of the Board of Directors (1) in a lump sum to the designated Beneficiary of a Participant or former Participant within sixty (60) days following the close of the calendar quarter in which the Board of Directors 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 -14- 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 estate of the Participant or former Participant. No portion of a Participant's Account shall be distributed in Common Stock. (e) Upon the total disability of a Participant or former Participant, as determined by the Social Security Administration, the unpaid balance of his Account shall be paid in the sole discretion of the Board of Directors (1) in a lump sum to the Participant or former Participant, or his legal representative within sixty (60) days following the notification of the Board of Directors of the determination of 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. No portion of a Participant's Account shall be distributed in Common Stock. (f) The Board of Directors in its sole discretion upon application made by the Participant, a designated Beneficiary, or their legal representative, may determine to -15- 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 Funding of Benefits. The Company maintaining an Account for the benefit of a Participant shall not reserve or otherwise set aside funds for the payment of its obligations under the Plan, and such obligations shall be paid solely from the general assets of the Company. 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 at all times remain subject to the claims of the creditors of the Company. 5.5 Withholding. There shall be deducted from the payment of any Pension Benefit or Non Pension 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. -16- ARTICLE VI MISCELLANEOUS 6.1 Assignment. Neither the Participant, his Beneficiary, or 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. 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 the Company and a Participant, nor shall it limit the right of the Company to suspend, terminate, alter, modify, whether or not for cause, the employment relationship between the Company and a Participant. -17- 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 has been executed by duly authorized officers of Georgia Power Company, pursuant to resolutions of the Board of Directors of the Georgia Power Company, this day of , . GEORGIA POWER COMPANY (CORPORATE SEAL) By: Attest: [adamscl] h:\wpdocs\mtd\gpc\sup-ben.pln -18- EX-10.(A)75 15 EXHIBIT 10(A)75 Exhibit 10(a)75 SUPPLEMENTAL BENEFIT PLAN FOR SOUTHERN COMPANY SERVICES, INC. AND SOUTHERN ELECTRIC INTERNATIONAL, INC. SUPPLEMENTAL BENEFIT PLAN FOR SOUTHERN COMPANY SERVICES, INC. AND SOUTHERN ELECTRIC INTERNATIONAL, INC. Page ARTICLE I - PURPOSE AND ADOPTION OF PLAN . . . . . . . 1 1.1 Adoption . . . . . . . . . . . . . . . . 1 1.2 Purpose. . . . . . . . . . . . . . . . . 1 ARTICLE II - DEFINITIONS . . . . . . . . . . . . . . . 2 2.1 Account. . . . . . . . . . . . . . . . . 2 2.2 Affiliated Employer. . . . . . . . . . . 2 2.3 Beneficiary. . . . . . . . . . . . . . . 2 2.4 Board of Directors . . . . . . . . . . . 2 2.5 Code . . . . . . . . . . . . . . . . . . 2 2.6 Common Stock . . . . . . . . . . . . . . 2 2.7 Company. . . . . . . . . . . . . . . . . 2 2.8 Deferred Compensation Plan . . . . . . . 2 2.9 Effective Date . . . . . . . . . . . . . 3 2.10 Employee . . . . . . . . . . . . . . . . 3 2.11 Employing Company. . . . . . . . . . . . 3 2.12 ESOP . . . . . . . . . . . . . . . . . . 3 2.13 Non Pension Benefit. . . . . . . . . . . 3 -i- 2.14 Participant. . . . . . . . . . . . . . . 3 2.15 Pension Benefit. . . . . . . . . . . . . 3 2.16 Pension Plan . . . . . . . . . . . . . . 4 2.17 Plan . . . . . . . . . . . . . . . . . . 4 2.18 Plan Year. . . . . . . . . . . . . . . . 4 2.19 Savings Plan. . . . . . . . . . . . . . 4 ARTICLE III - ADMINISTRATION OF PLAN . . . . . . . . . 4 3.1 Administrator. . . . . . . . . . . . . . 4 3.2 Powers . . . . . . . . . . . . . . . . . 5 3.3 Duties of the Board of Directors. . . . . . . . . . . . . . . 5 3.4 Indemnification. . . . . . . . . . . . . 7 ARTICLE IV - ELIGIBILITY . . . . . . . . . . . . . . . 7 4.1 Eligibility Requirements . . . . . . . . 7 4.2 Determination of Eligibility . . . . . . 8 ARTICLE V - BENEFITS . . . . . . . . . . . . . . . . . 8 5.1 Pension Benefit. . . . . . . . . . . . . 8 5.2 Non Pension Benefit. . . . . . . . . . . 10 5.3 Distribution of Benefits . . . . . . . . 13 5.4 Funding of Benefits. . . . . . . . . . . 16 5.5 Withholding. . . . . . . . . . . . . . . 16 -ii- ARTICLE VI - MISCELLANEOUS . . . . . . . . . . . . . . 17 6.1 Assignment . . . . . . . . . . . . . . . 17 6.2 Amendment and Termination. . . . . . . . 17 6.3 No Guarantee of Employment . . . . . . . 18 6.4 Construction . . . . . . . . . . . . . . 18 -iii- SUPPLEMENTAL BENEFIT PLAN FOR SOUTHERN ELECTRIC SERVICES, INC. AND SOUTHERN ELECTRIC INTERNATIONAL, INC. ARTICLE I - PURPOSE AND ADOPTION OF PLAN 1.1 Adoption: Southern Company Services, Inc. and Southern Electric International, Inc. hereby adopt and establish the Supplemental Benefit Plan for Southern Company Services, Inc. and Southern Electric International, Inc. The Plan shall be an unfunded deferred compensation arrangement whose benefits shall be paid solely from the general assets of the Employing Companies. 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 under the Pension Plan for Employees of Southern Company Services, Inc., the Employee Savings Plan for The Southern Company System, and the Employee Stock Ownership Plan of The Southern Company System, as a result of the limitations set forth under Sections 401(a)(17), 402(g), and 415 -1- of the Internal Revenue Code of 1986, as amended from time to time. ARTICLE II DEFINITIONS 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 Non Pension Benefit calculated in accordance with Section 5.2. 2.2 "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. 2.3 "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 "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. 2.6 "Common Stock" shall mean common stock of The Southern Company. 2.7 "Company" shall mean Southern Company Services, Inc. -2- 2.8 "Deferred Compensation Plan" shall mean the Deferred Compensation Plan for The Southern Electric System, as amended from time to time, following its adoption by the Boards of Directors of Employing Companies. 2.9 "Effective Date" shall mean January 1, 1983. The Effective Date of this amendment and restatement shall mean January 1, 1988. 2.10 "Employee" shall mean any person who is currently employed by an Employing Company. 2.11 "Employing Company" shall mean the Company, Southern Electric International, Inc., and any affiliate or subsidiary 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. The Employing Companies as of January 1, 1988 are Southern Company Services, Inc. and Southern Electric International, Inc. 2.12 "ESOP" shall mean the Employee Stock Ownership Plan of The Southern Company System, as amended from time to time. 2.13 "Non Pension Benefit" shall mean the benefit described in Section 5.2. -3- 2.14 "Participant" shall mean an Employee or former Employee of an Employing Company who is eligible to receive benefits provided by the Plan. 2.15 "Pension Benefit" shall mean the benefit described in Section 5.1. 2.16 "Pension Plan" shall mean the defined benefit pension plan maintained by an Employing Company or Affiliated Employer, as amended from time to time. 2.17 "Plan" shall mean the Supplemental Benefit Plan for Southern Company Services, Inc. and Southern Electric International, Inc., as amended from time to time. 2.18 "Plan Year" shall mean the calendar year. 2.19 "Savings Plan" shall mean the Employee Savings Plan for The Southern Company System, as amended from time to time. Where the context requires, the definitions of all terms set forth in the Pension Plan, the ESOP, 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. -4- ARTICLE III ADMINISTRATION OF PLAN 3.1 Administrator. The general administration of the Plan shall be placed in the Board of Directors. 3.2 Powers. The Board of Directors 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 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 Board of Directors. (a) The Board of Directors is responsible for the daily administration of the Plan. It may appoint other persons or entities to perform any of its fiduciary functions. The Board of Directors 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 Board of Directors shall -5- 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 Board of Directors 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. (c) The Board of Directors 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 Board of Directors shall keep a record of all of its proceedings and -6- 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 Board of Directors 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 Board of Directors 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 Board of Directors. ARTICLE IV ELIGIBILITY 4.1 Eligibility Requirements. All Employees (a) whose benefits under the Pension Plan of their Employing Company are limited by the limitations set forth in Sections 401(a)(17) and 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) and 415 of the Code, or (c) for whom contributions by their Employing Company to the ESOP are limited by the limitations set forth in -7- Sections 401(a)(17) and 415 of the Code, shall be eligible to receive benefits under the Plan. 4.2 Determination of Eligibility. The Board of Directors 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 Board of Directors shall be authorized to rescind the eligibility of any Participant if necessary 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 under the Employee Retirement Income Security Act of 1974, as amended. ARTICLE V BENEFITS 5.1 Pension Benefit. (a) If a Participant has Accredited Service with respect to the Pension Plan of his Employing Company, but not with respect to the Pension Plan of any other Employing Company or Affiliated Employer, he shall be entitled to a Pension Benefit equal to that portion of his Retirement Income under the Pension Plan of his Employing Company which is not payable under such -8- Pension Plan as a result of the limitations imposed by Sections 401(a)(17), 415(b), and 415(e) of the Code. (b) If a Participant has Accredited Service with respect to the Pension Plan of his Employing Company and with respect to the Pension Plan of any other Employing Company or one or more Affiliated Employers, his Pension Benefit payable by his Employing Company, his former Employing Company, and/or Affiliated Employer(s) shall be equal to that portion of his combined Retirement Income under each Pension Plan which is not payable under any of such Pension Plans as a result of the limitations described by Sections 401(a)(17), 415(b), and 415(e) of the Code, multiplied by a fraction, the sum of the individual fractions not to exceed one (1), the numerator of which is his years of Accredited Service under the Pension Plan of each Employing Company or Affiliated Employer and the denominator which is his total years of Accredited Service under the Pension Plans of all of his Employing Companies and Affiliated Employers. (c) 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 of his Employing Company in calculating his Retirement Income, without regard to the limitation of Section 401(a)(17) of Code, -9- but excluding any portion of his Compensation he may have elected to defer under the Deferred Compensation Plan. (d) To the extent that a Participant's Retirement Income under a Pension Plan is recalculated as a result of an amendment to such 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 by his Employing Company, as of his initial Plan Year of participation in the Plan, and by each other Employing Company by which the Participant is subsequently employed. 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), 415(c), and 415(e) of the Code and (2) to the ESOP on -10- behalf of the Participant as a result of the limitations imposed by Sections 401(a)(17), 415(c), and 415(e) 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 and ESOP, without regard to the limitations of Section 401(a)(17) or Section 402(g) of the Code, but excluding any portion of his Compensation he may have elected to defer under the Deferred Compensation Plan. (c) All amounts so credited to the Account of the Participant shall be deemed to be invested in the Common Stock at the same time that such amounts would have been so invested if they had been contributed by his Employing Company to the Savings Plan or the ESOP, as the case may be. In addition, such Account shall be credited with respect to shares of Common Stock allocated to the Participant's Account as follows: (1) In the case of cash dividends, such additional shares as could be purchased with the dividends which would have been payable if the credited shares had been outstanding; -11- (2) In the case of dividends payable in property other than cash or Common Stock, such additional shares as could be purchased 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 Company 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 each Account established for the benefit of the Participant by his Employing Companies. Notwithstanding, in the sole discretion of the Board of Directors 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 -12- the form of distribution of his Account in accordance with the terms of the Plan. 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 and in the same manner as the Participant's Retirement Income under the Pension Plan. The Beneficiary of a Participant's Pension Benefit shall be the same as the beneficiary 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 Common Stock (and fractions thereof) reflected in any Account maintained by an Employing Company for his benefit under the Plan 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 close of the calendar quarter in which his termination of employment occurs, or as soon as reasonably -13- practicable thereafter. The transfer by a Participant between companies in the Southern electric system shall not be deemed to be a termination of employment with an Employing Company. 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 close of the calendar quarter in which his termination of employment occurs, or as soon as reasonably practicable thereafter, and shall be an amount equal to the balance in the Participant's Account 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 divided by the number of the remaining annual payments and shall be due on the anniversary of the preceding payment date. No portion of a Participant's Account shall be distributed in Common Stock. (d) Upon the death of a Participant, or a former Participant prior to the payment of all amounts credited to said Participant's Account, the unpaid balance shall be paid in the sole discretion of the Board of Directors (1) in a lump sum to the designated Beneficiary of a Participant or former Participant -14- within sixty (60) days following the close of the calendar quarter in which the Board of Directors 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 estate of the Participant or former Participant. No portion of a Participant's Account shall be distributed in Common Stock. (e) Upon the total disability of a Participant or former Participant, as determined by the Social Security Administration, the unpaid balance of his Account shall be paid in the sole discretion of the Board of Directors (1) in a lump sum to the Participant or former Participant, or his legal representative within sixty (60) days following the notification of the Board of Directors of the determination of 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 -15- Participant. No portion of a Participant's Account shall be distributed in Common Stock. (f) The Board of Directors 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 Funding of Benefits. Any Employing Company maintaining an Account for the benefit of a Participant shall not reserve or otherwise set aside funds for the payment of its obligations under the Plan, and such obligations shall be paid solely from the general assets of the 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 at all times remain subject to the claims of the creditors of the Participant's Employing Companies. 5.5 Withholding. There shall be deducted from the payment of any Pension Benefit or Non Pension Benefit due under the Plan the amount of any tax required by any governmental authority to -16- be withheld and paid over by an Employing Company to such governmental authority for the account of the Participant or Beneficiary entitled to such payment. ARTICLE VI MISCELLANEOUS 6.1 Assignment. Neither the Participant, his Beneficiary, or 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. 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. -17- 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, 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 Plan has been executed by duly authorized officers of Southern Company Services, Inc., pursuant to resolutions of the Board of Directors of the Employing Companies, this day of , . SOUTHERN COMPANY SERVICES, INC. (CORPORATE SEAL) By: Thomas A. Nunnelly Executive Vice President Attest: Tommy Chisholm Secretary [adamscl] h:\wpdocs\mtd\southern\scssupbe.ft -18- EX-10.(A)76 16 EXHIBIT 10(A)76 Exhibit 10(a)76 DEFERRED COMPENSATION PLAN FOR DIRECTORS OF THE SOUTHERN COMPANY Amended and Restated Effective October 20, 1986 Article I Definitions 1.1 "Account" shall mean the Deferred Compensation Account established for each Director electing to participate in the Plan pursuant to Article VI. 1.2 "Board of Directors" or "Board" shall mean the Board of Directors of The Southern Company. 1.3 "Common Stock" shall mean the common stock of The Southern Company. 1.4 "Company" shall mean The Southern Company. 1.5 "Compensation" shall mean the compensation payable to the Directors of the Company, including retainer fees and meeting fees, as determined from time to time by the Board of Directors. 1.6 "Deferral Election" shall mean the written election by a Director to defer payment of all or a portion of his Compensation under the Plan pursuant to Article VI. 1.7 "Director" shall mean a member of the Board of Directors and shall include an Advisory Director. 1.8 "Investment Election" shall mean the written election by a Director to have his deferred Compensation invested pursuant to Section 7.2 or Section 7.3. 1.9 "Market Value" shall mean 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). 1.10 "Plan" shall mean the Deferred Compensation Plan for Directors of The Southern Company. 1.11 "Plan Period" shall mean the period designated in Article V. Article II Purpose 2.1 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 of Directors. Article III Eligibility 3.1 An individual who serves as a Director and is not otherwise actively employed by the Company or any of its subsidiaries or affiliates shall be eligible to participate in the Plan. Article IV Administration 4.1 The Plan shall be administered by the Compensation Committee of the Board of Directors, as appointed from time to time. The Compensation Committee shall have the power to interpret the Plan and, subject to its provisions, to make all determinations necessary or desirable for the Plan's administration. Article V Plan Periods 5.1 The first Plan Period shall commence February 1, 1981. Said first Plan Period shall be an eleven-month period and all subsequent Plan Periods shall be on a calendar year basis, except that the initial Plan Period applicable to any person elected to fill a vacancy on the Board of Directors who was not a Director on the preceding December 31 shall begin on the first day of such Director's membership on the Board of Directors. Article VI Participation 6.1 Prior to the beginning of any Plan Period, a Director may elect to participate in the Plan by directing that payment of all or any part of the Compensation which would otherwise be paid to the Director in the next succeeding Plan Period be deferred until the Director terminates his membership on the Board of Directors and elects to commence distribution of his Deferred Compensation Account pursuant to the terms of the Plan. -2- 6.2 The Deferral Election shall be in writing on a form prescribed by the Compensation Committee and shall state (a) that the Director wishes to make an election to defer payment of his Compensation, (b) the percentage/dollar amount of Compensation to be deferred, (c) the method of payment, which shall be the payment of a lump sum or a series of annual payments not to exceed ten (10), and (d) the time for commencement of distribution of his Account balance, which shall be not later than the first day of the month coinciding with or next following the second anniversary of the termination of his membership on the Board of Directors. Each Director making a Deferral Election in accordance with the terms of the Plan, and his successors, heirs and assigns shall be bound as to any action taken pursuant to the terms thereof and to the terms of the Plan. 6.3 The Deferral Election shall be made by written notice delivered to the Secretary of the Company prior to the first day of the next succeeding Plan Period and shall be effective on the first day of such succeeding Plan Period. The Deferral Election made in accordance with this Article shall be irrevocable. Such Deferral Election shall continue from Plan Period to Plan Period unless the Director terminates participation or changes the Deferral Election regarding future payments by submitting a written request to the Secretary of the Company on a form prescribed by the Compensation Committee. Any such termination or change shall become effective as of the first day of the Plan Period next following the Plan Period in which such request is given. A termination of participation in the Plan or change in Deferral Election regarding future payments shall not affect amounts previously deferred. The initial Deferral Election made after the effective date of this Amendment and Restatement with respect to (a) the method of payment, whether it be lump sum or installments, including the number of installments selected, and (b) the time for commencement of distribution of a Participant's Account may not be revoked and shall govern the distribution of a Participant's Account, except as provided in Section 6.5. 6.4 A Director who has filed a termination of Deferral Election may thereafter file a new Deferral Election to participate for Plan Periods subsequent to the Plan Period of the filing of such Deferral Election. The new Deferral Election shall not affect amounts previously deferred. 6.5 A Director may amend a prior Deferral Election on a form prescribed by the Compensation Committee not prior to the sixtieth (60th) day not later than the thirtieth (30th) day prior to his termination on the Board of Directors in order to change (a) the form, and/or (b) the time for commencement -3- of his Deferred Compensation Account in accordance with the terms of the Plan. Article VII Deferred Compensation Accounts 7.1 An Account shall be established on the Company books for each Director electing to defer all or a portion of his Compensation, which shall be credited with (a) any Compensation deferred in accordance with Article VI and (b) pursuant to each Director's Investment Election, the amounts computed in accordance with Section 7.2 and/or the number of shares computed in accordance with Section 7.3. 7.2 The Deferred Compensation Account of each Director electing to invest his deferred Compensation for a Plan Period pursuant to this Section 7.2 shall be credited with an amount computed by the Company by treating the amount deferred as a sum certain to which the Company will add in lieu of interest an amount equal to the prime rate of interest set by the First National Bank of Atlanta. Interest shall be computed as if credited from the date such Compensation would otherwise have been paid and shall be compounded quarterly at the end of each calendar quarter. The prime rate in effect on the first day of each calendar quarter shall be deemed the prime rate in effect for each calendar quarter. Interest will be treated as if accrued and will be compounded on any balance until such amount is fully distributed. 7.3 The Deferred Compensation Account of each Director electing to invest his deferred Compensation for a Plan Period pursuant to this Section 7.3 shall be credited with the number of shares (including fractional shares) of Common Stock which could have been purchased on the date such deferred Compensation otherwise would have been paid based upon the Common Stock's Market Value. As of each date of payment of dividends on the Common Stock, there shall be credited with respect to shares of Common Stock in the Director's Deferred Compensation Account such additional shares (including fractional shares) of Common Stock as follows: (a) In the case of cash dividends, such additional shares as could be purchased at the Market Value as of the dividend payment date with the dividends which would have been payable if the credited shares had been outstanding; (b) In the case of dividends payable in property other than cash or Common Stock, such additional shares -4- as could be purchased at the Market Value as of the payment date with the fair market value of the property which would have been payable if the credited shares had been outstanding; or (c) 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. 7.4 The Investment Election by a Director with respect to his Deferred Compensation Account shall be made in writing on a form prescribed by the Compensation Committee and delivered to the Secretary of the Company prior to the first day of the next succeeding Plan Period and shall be effective on the first day of such succeeding Plan Period. The Investment Election made in accordance with this Article VII shall be irrevocable. Such Investment Election shall continue from Plan Period to Plan Period unless the Director changes the Investment Election regarding future deferred Compensation by submitting a written request to the Secretary of the Company on a form prescribed by the Compensation Committee. Any such change shall become effective as of the first day of the Plan Period next following the Plan Period in which such request is given. 7.5 At the end of each Plan Period, a report shall be issued to each Director who has a deferred Compensation Account which sets forth the amount and Market Value of any shares of Common Stock (and fractions thereof) reflected in such Account. Article VIII Distribution of Accounts 8.1 When a Director terminates his membership on the Board of Directors, said Director shall be entitled to receive the entire amount and the Market Value of any shares of Common Stock (and fractions thereof) reflected in his Deferred Compensation Account payable in cash in accordance with his Deferral Election. No portion of a Director's Deferred Compensation Account shall be distributed in Common Stock. In the event a Director shall have elected to receive the balance of his Deferred Compensation Account in a lump sum, distribution shall be made on the first day of the month selected by the Director in accordance with the terms of the Plan, or as soon as reasonably possible thereafter. In the event the Director shall have elected to receive annual installments, the first payment shall be on the first day of the month selected by a Director, or as soon as reasonably possible thereafter, and shall be paid an amount equal to -5- the balance in the Director's Account 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 Account on the payment date divided by the number of remaining annual payments and shall be paid on the anniversary of the preceding payment date. The Market Value of any shares of Common Stock credited to a Director's Deferred Compensation 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. 8.2 Upon the death of a Director, or a former Director prior to the payment of all amounts and the Market Value of any shares of Common Stock (and fractions thereof) credited to said Director's Account, the unpaid balance shall be paid in the sole discretion of the Compensation Committee (a) 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 (b) in accordance with the Deferral 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 Deferred Compensation 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. 8.3 The beneficiary designation referred to above may be changed by a Director or former Director at any time, and without the consent of the prior beneficiary, on a form to be provided by the Secretary of the Company. Article IX Miscellaneous 9.1 No Director or beneficiary shall have any right to sell, assign, transfer, encumber or otherwise convey the right to receive payment of any benefit 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. 9.2 The Company shall not reserve or otherwise set aside funds for the payment of its obligations hereunder, which obligations will be paid from the general assets of the Company. Notwithstanding that a Director shall be entitled to receive the entire amount in his Deferred Compensation Account as provided in Section 8.1, any amounts credited to -6- a Director's Account to be paid to such Director shall at all times be subject to the claims of the Company's creditors. 9.3 The Board of Directors may terminate the Plan at any time or may, from time to time, amend the Plan; provided, however, that no such amendment or termination shall impair any rights to payments which had been deferred under the Plan prior to the termination or amendment. 9.4 This Plan shall be construed in accordance with and governed by the laws of the State of Georgia. -7- IN WITNESS WHEREOF, the Plan, as amended and restated effective October 20, 1986, has been executed pursuant to resolutions of the Board of Directors of The Southern Company, this ____ day of _________________, ____. THE SOUTHERN COMPANY By: Robert H. Radcliff, Jr. Chairman Compensation Committee Attest: By: Tommy Chisholm Secretary and Assistant Treasurer The Southern Company [Corporate Seal] (adamscl) h:\wpdocs\mtd\southern\def-comp.pln -8- FIRST AMENDMENT TO THE DEFERRED COMPENSATION PLAN FOR THE DIRECTORS OF THE SOUTHERN COMPANY WHEREAS, the Deferred Compensation Plan for Directors of The Southern Company (the "Plan") was amended and restated effective October 20, 1986, which amendment and restatement included changes to permit eligible Directors of The Southern Company (the "Company") (1) to elect to treat compensation deferred under the Plan as though invested in fixed income or common stock of The Southern Company, (2) to receive distribution of deferred amounts in a lump sum or up to ten (10) annual installments beginning not later than the second anniversary of the termination of their membership on the Board of Directors, and (3) to change the method of payment of their account balance under the Plan from lump sum to installments, or vice versa, shortly before their termination of membership on the Board of Directors; and WHEREAS, The Board of Directors of the Company desires to amend the Plan (1) to change the period of time during which a Director may elect to change the method of payment of his account balance under the Plan, (2) to require that any such change in the method of payment be contingent upon the Director's completion of his term of membership on the Board of Directors, except in the event of disability or death, and (3) to authorize the Compensation Committee to accelerate installment distributions in its sole discretion for cause upon request by a Director or his legal representative; and WHEREAS, the Board of Directors of the Company has the authority to amend the Plan from time to time in accordance with Section 9.3 of the Plan; NOW, THEREFORE, effective January 19, 1987, the Board of Directors of The Southern Company hereby amends the Deferred Compensation Plan for Directors of The Southern Company as follows: I. The Plan shall be amended by deleting Section 6.5 of the Plan in its entirety and substituting therefor the following language as Section 6.5 therein: 6.5 With the approval of the compensation Committee, a Director may amend a prior Deferral Election on a form prescribed by the Compensation Committee not prior to the 390th day nor later than the 360th day prior to his terminating of membership on the Board of Directors in order to change (a) the form and/or (b) the time for commencement of the distribution of his Deferred Compensation Account in accordance with the terms of the Plan. Any such amendment to a prior Deferral Election, as described in this Section 6.5, shall be contingent upon the Director's completion of his term of membership on the Board of Directors, except in the event of the disability or death of such Director. II. Section 8.1 of the Plan shall be amended by deleting said Section in its entirety and substituting therefor the following language as Section 8.1 therein: 8.1 When a Director terminates his membership on the Board of Directors, said Director shall be entitled to receive the entire amount and the Market Value of any shares of Common Stock (and fractions thereof) reflected in his Deferred Compensation Account payable in cash in accordance with his Deferral Election. No portion of a Director's Deferred Compensation Account shall be distributed in Common Stock. In the event a Director shall have elected to receive the balance of his Deferred Compensation Account in a lump sum, distribution shall be made on the first day of the month selected by the Director in accordance with the terms of the Plan, or as soon as reasonably possible thereafter. In the event the Director shall have elected to receive annual installments, the first payment shall be on the first day of the month selected by the Director, or as soon as reasonably possible thereafter, and shall be an amount equal to the balance in the Director's Deferred Compensation Account on such date divided by the number of annual installment payments. Each subsequent annual payment shall be an amount equal to the balance of the Director's Account on the payment date divided by the number of remaining annual payments and shall be paid on the anniversary of the preceding payment date. Notwithstanding a Director's election to receive his Deferred Compensation Account balance in annual installments, the Compensation Committee, in its sole discretion upon request of the Director or his legal representative, may accelerate the payment of any such installments for cause. The Market Value of any shares of Common Stock credited to a Director's Deferred Compensation 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. III. Except as amended by this First Amendment, the Plan shall remain in full force and effect as amended and restated by the Company effective October 20, 1986. -2- IN WITNESS WHEREOF, this First Amendment has been executed pursuant to resolutions of the Board of Directors of The Southern Company, this ____ day of ____________, 19__. THE SOUTHERN COMPANY By: Robert H. Radcliff, Jr. Chairman Compensation Committee Attest: By: Tommy Chisholm Secretary The Southern Company [CORPORATE SEAL] [adamscl] h:\wpdocs\mtd\southern\def-comp.1st -3- SECOND AMENDMENT TO THE DEFERRED COMPENSATION PLAN FOR THE DIRECTORS OF THE SOUTHERN COMPANY WHEREAS, the Board of Directors of The Southern Company (the "Company") heretofore adopted the amendment and restatement of the Deferred Compensation Plan for the Directors of The Southern Company (the "Plan") effective as of October 20, 1986; and WHEREAS, the Board of Directors of the Company desires to amend the Plan to comply with changes in the Securities and Exchange Act of 1934; and WHEREAS, under Section 9.3 of the Plan, the Board of Directors has the authority to amend the Plan at any time; NOW THEREFORE, effective as of the date of execution, the Board of Directors hereby amends the Plan as follows: 1. Section 6.5 of the Plan shall be amended by deleting said Section in its entirety and substituting therefore the following language: 6.5 Except as provided below, with the approval of the Compensation Committee, a Director may amend a prior Deferral Election on a form prescribed by the Compensation Committee not prior to the 390th day nor later than the 360th day prior to his termination of membership on the Board of Directors in order to change (a) the form, and/or (b) the time for commencement of the distribution of his Deferred Compensation Account in accordance with the terms of the Plan; provided, however, that any Director 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 Company shall not be permitted to amend his Deferral Election during any time period for which such Director is required to file any such reports with respect to the portion of his Deferred Compensation Account invested in accordance with the provisions of Section 7.3 of the Plan. Any such amendment to a prior Deferral Election, as described in this Section 6.5, shall be contingent upon the Director's completion of his term of membership on the Board of Directors, except in the event of the disability or death of such Director. 2. Except as amended herein by this Second Amendment, the Plan shall remain in full force and effect as adopted and amended by the Company prior to the adoption of this Second Amendment. IN WITNESS WHEREOF, this Second Amendment has been executed pursuant to resolutions of the Board of Directors of The Southern Company this day of , 19 , to be effective as of the date of execution. THE SOUTHERN COMPANY By: Its: Attest: By: Its: (CORPORATE SEAL] (wb) h:\wpdocs\scs\dc-dir.2D -2- EX-10.(A)77 17 EXHIBIT 10(A)77 Exhibit 10(a)77 THE SOUTHERN COMPANY OUTSIDE DIRECTORS PENSION PLAN TABLE OF CONTENTS PAGE ARTICLE I - PURPOSE AND ADOPTION OF PLAN . . . . . . . . . . 1 1.1 Adoption . . . . . . . . . . . . . . . . . . . 1 1.2 Purpose . . . . . . . . . . . . . . . . . . . 1 ARTICLE II - DEFINITIONS . . . . . . . . . . . . . . . . . . 2 2.1 "Affiliated Employer" . . . . . . . . . . . . 2 2.2 "Beneficiary" . . . . . . . . . . . . . . . . 2 2.3 "Board of Directors" . . . . . . . . . . . . . 2 2.4 "Code" . . . . . . . . . . . . . . . . . . . . 2 2.5 "Director" . . . . . . . . . . . . . . . . . . 2 2.6 "Early Retirement Date" . . . . . . . . . . . 2 2.7 "Effective Date" . . . . . . . . . . . . . . . 2 2.8 "Eligibility Date" . . . . . . . . . . . . . . 2 2.9 "Month of Service" . . . . . . . . . . . . . . 2 2.10 "Normal Retirement Date" . . . . . . . . . . . 3 2.11 "Participant" . . . . . . . . . . . . . . . . 3 2.12 "Plan" . . . . . . . . . . . . . . . . . . . . 3 2.13 "Plan Administrator" . . . . . . . . . . . . . 3 2.14 "Plan Year" . . . . . . . . . . . . . . . . . 3 2.15 "Retainer Fee" . . . . . . . . . . . . . . . . 3 2.16 "System Company" . . . . . . . . . . . . . . . 3 ARTICLE III - ADMINISTRATION OF PLAN . . . . . . . . . . . . 4 3.1 Administrator . . . . . . . . . . . . . . . . 4 3.2 Powers . . . . . . . . . . . . . . . . . . . . 4 3.3 Duties of the Plan Administrator . . . . . . . 4 3.4 Indemnification . . . . . . . . . . . . . . . 5 ARTICLE IV - ELIGIBILITY . . . . . . . . . . . . . . . . . . 6 4.1 Eligibility Requirements . . . . . . . . . . . 6 4.2 Determination of Eligibility . . . . . . . . . 6 4.3 Termination or Death Prior to Eligibility . . 6 ARTICLE V - BENEFITS . . . . . . . . . . . . . . . . . . . . 7 5.1 Normal Retirement Income . . . . . . . . . . . 7 5.2 Early Retirement Income . . . . . . . . . . . 7 5.3 Distribution of Retirement Income . . . . . . 8 5.4 Death After Commencement of Benefits at Early or Normal Retirement Date . . . . . . . . . . 8 5.5 Death After Normal Retirement Date and Before Commencement of Benefits . . . . . . . . . . . 8 5.6 Death Prior to Early or Normal Retirement Date . . . . . . . . . . . . . . . . . . . . . 9 5.7 Beneficiary Designation . . . . . . . . . . . 9 5.8 Funding of Benefits . . . . . . . . . . . . . 10 5.9 Withholding . . . . . . . . . . . . . . . . . 10 ARTICLE VI - MISCELLANEOUS . . . . . . . . . . . . . . . . . 11 6.1 Assignment . . . . . . . . . . . . . . . . . . 11 6.2 Amendment and Termination . . . . . . . . . . 11 6.3 No Guarantee of Continued or Future Service on a Board of Directors . . . . . . . . . . . 11 6.4 Construction . . . . . . . . . . . . . . . . . 11 THE SOUTHERN COMPANY OUTSIDE DIRECTORS PENSION PLAN ARTICLE I - PURPOSE AND ADOPTION OF PLAN 1.1 Adoption. The Southern Company hereby amends and restates The Southern Company Outside Directors Pension Plan effective January 1, 1992. The terms of the Plan prior to this amendment and restatement shall generally remain in force to the extent that they do not conflict with this amendment and restatement and for purposes of the treatment of transactions occurring prior to January 1, 1992. This amendment and restatement shall not be applicable to former Participants or Beneficiaries of former Participants whose service on the Board of Directors of one of more System Companies terminated prior to January 1, 1992, unless otherwise provided herein. The Plan shall be an unfunded deferred compensation arrangement whose benefits shall be paid solely from the general assets of the System Companies. 1.2 Purpose. The Plan is designed to provide retirement benefits for certain individuals who have retired from service on a Board of Directors of a System Company. The Plan is intended to constitute a plan which is unfunded and maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees under the Employee Retirement Income Security Act of 1974, as amended. 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 "Beneficiary" shall mean any person, estate, trust, or organization entitled to receive any payment under the Plan upon the death of a Participant. 2.3 "Board of Directors" shall mean the Board of Directors of each System Company. 2.4 "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. 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, 1992, (b) who is not an employee of The Southern Company or an Affiliated Employer, and (c) who is not eligible to receive retirement income under the defined benefit pension plan maintained by an Affiliated Employer as a result of his having retired after reaching his early retirement date, normal retirement date or deferred retirement date under such plan. 2.6 "Early Retirement Date" shall mean the date on which a Participant is first eligible to retire from a Board of Directors of a System Company on which he serves, which date shall not precede (a) such Participant's Eligibility Date, nor (b) such Participant's Normal Retirement Date by more than five (5) years. 2.7 "Effective Date" shall mean the original effective date of the Plan, January 1, 1991. The Effective Date of this amendment and restatement shall be January 1, 1992. 2.8 "Eligibility Date" shall mean the date a Director first meets the eligibility requirements of Section 4.1 of the Plan. 2.9 "Month of Service" shall mean each calendar month during which a Director serves at least one day on the Board of Directors of a System Company. Months of Service served concurrently on more than one Board of Directors shall be counted separately for purposes of determining a Director's eligibility to participate and benefits hereunder. Months of Service completed prior to the Effective Date of the Plan or after a Participant's Normal Retirement Date shall be recognized. 2 2.10 "Normal Retirement Date" shall mean the date a Director is required to retire from the Board of Directors of a System Company on which he serves, as set forth in such System Company's by-laws, notwithstanding any agreement to serve beyond such date. 2.11 "Participant" shall mean each Director on the Board of Directors of a System Company who meets the requirements of Section 4.1 of the Plan. 2.12 "Plan" shall mean The Southern Company Outside Directors Pension Plan, as amended from time to time. 2.13 "Plan Administrator" shall mean the Committee so named, as provided in Article III. 2.14 "Plan Year" shall mean the calendar year. 2.15 "Retainer Fee" shall mean the monthly rate of the fees paid 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. 2.16 "System Company" shall mean The Southern Company, and any affiliate or subsidiary of The Southern Company which the Board of Directors of The Southern 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 masculine pronoun shall be construed to include the feminine pronoun and the singular shall include the plural, where the context so requires. 3 ARTICLE III - ADMINISTRATION OF PLAN 3.1 Administrator. The general administration of the Plan shall be the responsibility of The Southern Company Human Resources Committee. 3.2 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 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 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 and their Beneficiaries; 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 4 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 System Companies shall indemnify the Plan Administrator 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 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. 5 ARTICLE IV - ELIGIBILITY 4.1 Eligibility Requirements. Each Director shall be eligible to participate under the Plan on the first date such Director: (a) Serves on the Board of Directors of a System Company on or after January 1, 1992, and (b) Is credited with at least sixty (60) Months of Service on the Board(s) of Directors of one or more System Companies. 4.2 Determination of Eligibility. The Plan Administrator shall determine which Directors are eligible to participate. Upon becoming a Participant, a Director shall be deemed to have assented to the Plan and to any amendments hereafter adopted. The Plan Administrator shall be authorized to rescind the eligibility of any Participant if necessary to insure that the Plan is maintained primarily to provide 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 Termination or Death Prior to Eligibility. No benefits shall be payable under the Plan to a Director or any designated Beneficiary if a Director (a) shall terminate his service on the Board(s) of Directors of all System Companies on which he serves prior to his Eligibility Date, or (b) shall die prior to his Eligibility Date. 6 ARTICLE V - BENEFITS 5.1 Normal Retirement Income. (a) The monthly benefit payable as a single life annuity, guaranteed for a term certain of ten (10) years from the date distribution of the monthly benefit commences, to a Participant who retires on or after his Normal Retirement Date, shall equal the following percentage of his Retainer Fee based upon his credited Months of Service: Months of Service Percentage 120 or more 100% 108 95% 96 90% 84 85% 72 80% 60 75% (b) If a Director is credited with Months of Service on the Boards of Directors of two (2) or more System Companies, the greatest Retainer Fee being paid on the date of the Participant's retirement by a System Company on whose Board of Directors the Participant served prior to his retirement shall be used for purposes of calculating the Participant's benefits under Section 5.1 of the Plan, notwithstanding that the Participant may not have reached his Early Retirement Date or Normal Retirement Date with respect to the Board of Directors whose Retainer Fee is used for the benefit calculation. Each System Company on whose Board of Directors the Participant is credited with Months of Service shall pay a portion of the monthly benefit payment based on the following fraction: (numerator) the product of the Retainer Fee being paid by such System Company on the date of the Participant's retirement and the Months of Service credited to the Participant on the Board of Directors of such System Company, over (denominator) the sum of the above numerators for the System Companies sharing in the benefit payment. 5.2 Early Retirement Income. The monthly benefit payable to a Participant who retires on his Early Retirement Date shall be calculated in the same manner as provided in Section 5.1 above. The payment of the monthly benefit to a Participant shall not extend beyond the lesser of (a) the life of the Participant, (b) the number of the Participant's credited Months of Service under the Plan, or (c) fifteen (15) years. Notwithstanding the above, payment of the monthly benefit provided under this Section 5.2 shall be guaranteed for a term not to exceed the lesser of 7 (a) the Participant's credited Months of Service, or (b) ten (10) years. Such benefits shall be paid by the System Companies based on the fraction set forth in Section 5.1(b) above. 5.3 Distribution of Retirement Income. The first monthly payment of a Participant's benefit shall be made on the first day of the month following his actual retirement from the last Board of Directors on which the Participant serves on or after his Eligibility Date, or as soon as practicable thereafter, and subsequent monthly payments shall be made on the first day of each month thereafter. The monthly payment of benefits shall cease with the last payment preceding the death of the Participant, subject to the payment of any death benefits under Section 5.4 below. 5.4 Death After Commencement of Benefits at Early or Normal Retirement Date. If a Participant dies after the payment of his benefit commences following his retirement on his Early or Normal Retirement Date, but before the payment of all benefits guaranteed under the Plan, any remaining guaranteed monthly payments shall be continued after his death to the Participant's Beneficiary, in the same time and manner such payments would have been made to the Participant if he had survived, until all such guaranteed payments have been made. 5.5 Death After Normal Retirement Date and Before Commencement of Benefits. (a) If a Participant dies after his Normal Retirement Date with respect to the Board of Directors of a System Company on which he has served, but prior to his actual retirement from the last Board of Directors of a System Company on which he serves, the monthly benefit (calculated in the same manner as provided in Section 5.1 above) payable to his Beneficiary shall be based on (1) the Participant's credited Months of Service as of his date of death, and (2) the greatest Retainer Fee then being paid by a System Company on whose Board of Directors the Participant served prior to his date of death. Such benefits shall be paid by the System Companies on whose Board(s) of Directors the Participant served prior to his death based on the fraction set forth in Section 5.1(b) above, notwithstanding that the Participant may not have attained his Early or Normal Retirement Date with respect to all of the Board(s) of Directors of such System Companies. (b) The first monthly payment to a designated Beneficiary shall be made on the first day of the month following the death of the Participant, or as soon as practicable thereafter, and subsequent monthly payments shall be made on the first day of each month thereafter until a total of one hundred-twenty (120) monthly payments has been made. 8 5.6 Death Prior to Early or Normal Retirement Date. (a) This Section 5.6 shall apply if a Participant (1) dies after his Early Retirement Date with respect to the Board of Directors of a System Company on which he has served, but prior to his Normal Retirement Date and his actual retirement from the Board of Directors of a System Company, or (2) dies after his Eligibility Date while serving on the Board of Directors of a System Company, but prior to his Early Retirement Date. (b) The monthly benefit (calculated in the same manner as provided in Section 5.1 above) payable to a Participant's Beneficiary under this Section 5.6 shall be based on (1) the Participant's credited Months of Service as of his date of death, and (2) the greatest Retainer Fee then being paid by a System Company on whose Board of Directors the Participant served prior to his date of death. Such benefits shall be paid by the System Companies on whose Board(s) of Directors the Participant served prior to his death based on the fraction set forth in Section 5.1(b) above, notwithstanding that the Participant may not have attained his Early Retirement Date with respect to all of the Board(s) of Directors of such System Companies. (c) The first monthly payment to a Beneficiary shall be made on the first day of the month following the death of the Participant, or as soon as practicable thereafter, and subsequent monthly payments shall be made on the first day of each month thereafter. The payment of the monthly benefit to the designated Beneficiary shall not extend beyond the lesser of (a) the number of the Participant's credited Months of Service under the Plan, or (b) ten (10) years. 5.7 Beneficiary Designation. A Beneficiary designation may be changed by the 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, cannot be located, or dies prior to the payment of all guaranteed payments without the Participant having named a contingent Beneficiary, payment shall be made to the following classes of successive preference, if then living: (1) The Participant's spouse. (2) The Participant's children, equally. (3) The Participant's brothers and sisters, equally. (4) The Participant's executors or administrators. The payment of benefits to one or more such persons shall completely discharge the System Companies with respect to the amount so paid. 9 5.8 Funding of Benefits. Each System Company responsible for the payment of benefits to a Participant or his Beneficiary shall not reserve or otherwise set aside funds for the payment of its obligations under the Plan, and such obligations shall be paid solely from the general assets of the System Companies. Notwithstanding that a Participant shall be entitled to receive benefits under the Plan for his lifetime guaranteed for a term certain, the assets from which such amounts shall be paid at all times remain subject to the claims of the creditors of the System Companies on whose Board(s) of Directors the Participant served. 5.9 Withholding. There shall be deducted from the payment of any benefits due under the Plan the amount of any tax required by any governmental authority to be withheld and paid over by a System Company to such governmental authority for the account of the Participant or Beneficiary entitled to such payment. 10 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 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 amended or terminated at any time by the Board of Directors of The Southern Company, provided that no amendment or termination shall cause a forfeiture or reduction in any benefits in pay status as of the 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. 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 Board of Directors of The Southern Company, through its duly authorized officers, has adopted this amendment and restatement of The Southern Company Outside Directors Pension Plan this day of , , to be effective January 1, 1992. THE SOUTHERN COMPANY (CORPORATE SEAL) By:______________________________ Edward L. Addison President Attest: By: ________________________ Tommy Chisholm Secretary [adamscl] h:\wpdocs\mtd\southern\1992odir.pen 11 THE SOUTHERN COMPANY OUTSIDE DIRECTORS PENSION PLAN As Amended and Restated Effective January 1, 1992 FIRST AMENDMENT TO THE SOUTHERN COMPANY OUTSIDE DIRECTORS PENSION PLAN WHEREAS, the Boards of Directors of The Southern Company and its subsidiaries (hereinafter collectively referred to as the "System Companies") heretofore established The Southern Company Outside Directors Pension Plan (hereinafter referred to as the "Plan") in order to provide retirement income to eligible Directors who are not employed by a System Company; and WHEREAS, the Board of Directors of The Southern Company subsequently amended and restated the Plan effective January 1, 1992; and WHEREAS, the Board of Directors of The Southern Company desires to amend the Plan in order to clarify the Normal Retirement Date applicable to each Board of Directors of a System Company on which Participants under the Plan may serve; and WHEREAS, the Board of Directors of The Southern Company is authorized pursuant to Section 6.2 of the Plan to amend the Plan at any time. NOW, THEREFORE, effective January 1, 1992, the Board of Directors of The Southern Company hereby amends the Plan as follows: I. Section 2.10 of the Plan shall be amended by deleting said Section in its entirety and substituting therefor the following language: 2.10 "Normal Retirement Date" shall mean, with respect to each Board of Directors on which a Participant serves, the first day of the month next following the normal retirement event set forth on Exhibit A, a copy of which is attached hereto and incorporated herein by reference, notwithstanding any agreement by a Participant to serve beyond such date. II. Except as amended herein by this First Amendment, the Plan shall remain in full force and effect as amended and restated by The Southern Company prior to the adoption of this First Amendment. 13 IN WITNESS WHEREOF, the Board of Directors of The Southern Company, through its duly authorized officers, has adopted this First Amendment to The Southern Company Outside Directors Pension Plan this 30th day of April, 1992 to be effective January 1, 1992. THE SOUTHERN COMPANY [CORPORATE SEAL] By: Edward L. Addison President Attest: By: Tommy Chisholm Secretary - 14 -14 EXHIBIT A THE SOUTHERN COMPANY OUTSIDE DIRECTORS PENSION PLAN NORMAL RETIREMENT EVENTS FOR THE SYSTEM COMPANIES BOARD OF DIRECTORS NORMAL RETIREMENT DATE THE SOUTHERN COMPANY The annual meeting next following a Participant's 70th birthday. ALABAMA POWER COMPANY A Participant's 70th birthday. GEORGIA POWER COMPANY A Participant's 70th birthday. GULF POWER COMPANY The annual meeting next following a Participant's 70th birthday. MISSISSIPPI POWER COMPANY A Participant's 70th birthday. SAVANNAH ELECTRIC & POWER The annual meeting next COMPANY following a Participant's 70th birthday. - 15 -15 EXHIBIT A THE SOUTHERN COMPANY OUTSIDE DIRECTORS PENSION PLAN NORMAL RETIREMENT EVENTS FOR THE SYSTEM COMPANIES BOARD OF DIRECTORS NORMAL RETIREMENT DATE THE SOUTHERN COMPANY The annual meeting next following a Participant's 70th birthday. ALABAMA POWER COMPANY The annual meeting next following a Participant's 70th birthday. GEORGIA POWER COMPANY A Participant's 70th birthday. GULF POWER COMPANY The annual meeting next following a Participant's 70th birthday. MISSISSIPPI POWER COMPANY A Participant's 70th birthday. SAVANNAH ELECTRIC & POWER The annual meeting next COMPANY following a Participant's 70th birthday. - 3 -3 EX-10.(A)78 18 EXHIBIT 10(A)78 Exhibit 10(a)78 DEFERRED COMPENSATION PLAN FOR THE SOUTHERN ELECTRIC SYSTEM DEFERRED COMPENSATION PLAN FOR THE SOUTHERN ELECTRIC SYSTEM ARTICLE DESCRIPTION PAGE I Purpose and Adoption of Plan 1 II Definitions 1 III Administration of Plan 5 IV Eligibility 8 V Election for Deferral of Payment 9 VI Deferred Compensation Accounts 12 VII Distribution of Deferred Compensation Accounts 17 VIII Miscellaneous Provisions 20 i DEFERRED COMPENSATION PLAN FOR THE SOUTHERN ELECTRIC SYSTEM ARTICLE I Purpose and Adoption of Plan 1.1 Adoption: Southern Company Services, Inc. and the other Employing Companies hereby adopt and establish the Deferred Compensation Plan for The Southern Electric System. The Plan shall be an unfunded deferred compensation arrangement whose benefits shall be paid solely from the general assets of the Employing Companies. 1.2 Purpose: The Plan is designed to permit a select group of management or highly compensated employees to elect to defer a portion of their Compensation during each payroll period until their death, disability, retirement, or termination of employment with their Employing Company. ARTICLE II Definitions For purposes of the Deferred Compensation 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 the Company or the Employing Company to reflect the interest of a Participant in the Plan resulting from a Participant's deferred Compensation and adjustments thereto to reflect income, gains, losses, and other credits or charges. 2.2 "Administrative Committee" shall mean the committee referred to in Section 3.1. 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 "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. 2.6 "Common Stock" shall mean the common stock of The Southern Company. 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 deferral option made in accordance with Section 401(k) of the Internal Revenue Code and amounts contributed by an Employing Company to the Southern Electric System Flexible Benefits Plan on behalf of the Employee pursuant to his salary reduction election under such plan; but disregarding overtime, such amounts which are reimbursements to 2 an Employee paid by any Employing Company including, but not limited to, reimbursement 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 Compensation pursuant to Article III. 2.10 "Earnings" shall have the same meaning as set forth in the Pension Plan. 2.11 "Effective Date" shall mean the first day of the first payroll period the Administrative Committee shall permit a Participant to defer Compensation under the Plan. 2.12 "Employee" shall mean any person who is currently employed by an Employing Company. 2.13 "Employee Savings Plan" shall mean the Employee Savings Plan for The Southern Company System and the Employee Savings Plan of Savannah Electric and Power Company, as amended from time to time. 2.14 "Employee Stock Ownership Plan' shall mean the Employee Stock Ownership Plan of The Southern Company System and the Employee Stock Ownership Plan of Savannah Electric and Power Company, as amended from time to time. 2.15 "Employer Matching Contribution" shall have the same meaning as set forth in the Employee Savings Plan. 3 2.16 "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. The term "Employing Company" shall not include Electric City Merchandise Company. The Employing Companies as of the Effective Date are: Alabama Power Company Georgia Power Company Gulf Power Company Mississippi Power Company Savannah Electric and Power Company Southern Company Services, Inc. Southern Electric International, Inc. 2.17 "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 Administrative Committee. 2.18 "Investment Election" shall mean the Participant's written election to have his deferred Compensation invested pursuant to Section 6.5 or Section 6.6. 2.19 "Participant" shall mean an Employee or former Employee of an Employing Company who is eligible to receive benefits under the Plan. 2.20 "Pension Plan" shall mean the defined benefit pension plan maintained by the Employing Company of the Participant, as amended from time to time. 4 2.21 "Plan" shall mean the Deferred Compensation Plan for The Southern Electric System, as amended from time to time. 2.22 "Plan Year" shall mean the twelve (12) month period commencing January 1st and ending on the last day of December next following, except for the first Plan Year which shall begin on the Effective Date and end on the last day of the calendar year in which the Effective Date occurs. 2.23 "Retirement Income" shall have the same meaning as set forth in the Pension Plan. 2.24 "Supplemental Benefit Plan" shall mean the Supplemental Benefit Plan of the Employing Company and the Supplemental Executive Retirement Plan of Savannah Electric and Power Company, as amended from time to time. Where the context requires, the definitions of all terms set forth in the Pension Plan, Savings Plan, the ESOP, 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. The words in the masculine gender shall include the feminine and neuter genders and words in the singular shall include the plural and words in the plural shall include the singular. 5 ARTICLE III Administration of Plan 3.1 The general administration of the Plan shall be placed in the Administrative Committee. The Administrative Committee shall consist of at least one employee of each Employing Company, except Southern Electric International, Inc., and such additional number of persons, if any, as shall be determined from time to time by the Board of Directors. Members shall be appointed by the boards of directors of the Employing Companies. Any member may resign or be removed by his board of directors and new members may be appointed by such board of directors. The Administrative Committee shall be chaired by the representative of the 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 No member of the Administrative Committee shall receive any compensation from the Plan for his service. 6 3.3 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 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. 3.4 The Administrative Committee shall be reimbursed by the Employing Companies for all reasonable expenses incurred by it in the fulfillment of its duties. Such expenses shall include any expenses incident to its functioning, including, but not limited to, fees of accountants, counsel, actuaries, and other specialists, and other costs of administering the Plan. 3.5 (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 review the work and performance of each such appointee, and shall have the right to remove any such 7 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 the Board of Directors and by persons designated thereby. (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 Admini- strative 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 Administrative Committee shall notify the Company upon its request of any action taken by it, and when required, shall notify any other interested person or persons. 8 ARTICLE IV Eligibility 4.1 Any Employee whose Compensation equals or exceeds such minimum amount as may be established by the Administrative Committee from time to time, may elect to participate in the Plan beginning on any Enrollment Date by electing to have his Compensation reduced and such amounts contributed to the Plan in accordance with Article V, and directing the investment of such contributions in accordance with Article VI. The Administrative 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. 4.2 Notwithstanding the above, the Administrative Committee shall be authorized to modify the minimum Compensation amount and rescind the eligibility of any Participant if necessary 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 under the Employee Retirement Income Security Act of 1974, as amended. 9 ARTICLE V Election for Deferral of Payment 5.1 A Participant may elect to defer payment of a portion of his Compensation otherwise payable to him during each payroll period of the next succeeding Plan Year by any whole percentage not to exceed twenty-five percent (25%) of his Compensation, or such greater or lesser amount as shall be determined by the Administrative Committee from time to time, such amount to be credited to his Account under the Plan. 5.2 An Account shall be established for each Participant by the Company or the Employing Company as of the effective date of such Participant's initial Deferral Election. 5.3 The Deferral Election shall be made in writing on a form prescribed by the Company and said Deferral Election shall state: (a) That the Participant wishes to make an election to defer the receipt of a portion of his Compensation; (b) The whole percentage of the Compensation to be deferred; and (c) The method of payment, which shall be the payment of a lump-sum or a series of annual payments not to exceed ten (10) years. 5.4 The initial Deferral Election of a new Participant shall be made by written notice signed by the Participant and delivered to the Participant's Employing Company not later than 10 the first (1st) day of the month immediately preceding the Participant's Enrollment Date and shall be effective on such Enrollment Date. Any modification or revocation of the most recent Deferral Election shall be made by written notice signed by the Participant and delivered to the Participant's Employing Company not later than the first (1st) day of the month prior to the next succeeding Plan Year and shall be effective on the first day of such succeeding Plan Year. A Deferral Election with respect to the deferral of future Compensation shall be an annual election for each Plan Year unless otherwise modified or revoked as provided herein. The termination of participation in the Plan shall not affect Compensation previously deferred by a Participant under the Plan. 5.5 Notwithstanding the provisions of Section 5.4 of the Plan, the Administrative 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 suspension will be on account of hardship if it is necessary in light of immediate and heavy financial needs of the Participant and such needs cannot reasonably be met from other resources of the Participant. For this purpose, amounts held in the Participant's accounts in the Employee Savings Plan and the Employee Stock Ownership shall not be deemed to be reasonably available. Any suspension authorized by the Administrative Committee shall become effective as of the first payroll period 11 beginning thirty (30) days after receipt by the Participant's Employing Company of the suspension application, or as soon as practicable after the receipt of such application. Such suspension shall be effective for the remainder of the Plan Year and shall be deemed an annual election for each succeeding Plan Year unless modified under Section 5.4 of the Plan. 5.6 The initial Deferral Election specifying the method of distribution, whether it be lump sum or annual installments not to exceed ten (10), may not be revoked and shall govern the distribution of a Participant's Account. Notwithstanding, in the sole discretion of the Administrative Committee upon application by the Participant, the Deferral Election may be amended not prior to 395 days nor later than 365 days prior to a Participant's date of termination in order to change the form of distribution of his Account in accordance with the terms of the Plan. Each Participant making a Deferral Election in accordance with this Article III and his successors, shall be bound as to any action taken pursuant to the terms of the Participant's Deferral Election and the Plan. ARTICLE VI Deferred Compensation Accounts 6.1 The Compensation deferred in accordance with Article III, the amounts credited pursuant to Sections 6.2 and 6.3, and, pursuant to each Participant's Investment Election, the amounts computed in accordance with Section 6.5 and/or the number of 12 shares computed in accordance with Section 6.6 shall be credited to the Participant's Account. 6.2 The Account of each Participant electing to defer a portion of his Compensation shall be credited as of the last day of each calendar quarter with an amount equal to the difference between the Employer Matching Contribution allocated to the Participant's account under the Employee Savings Plan and the Employer Matching Contribution that would have been allocated to the Participant's account under the Employee Savings Plan if the Compensation deferred under this Plan during such calendar quarter were considered as compensation under the Employee Savings Plan. The amount to be credited to a Participant's Account under this Section 6.2 shall be calculated based on the Participant's Compensation that would have been considered in calculating allocations to his account under the Employee Savings Plan, without regard to the limitations of Section 401(a)(17), Section 401(k), Section 401(m), Section 402(g), or Section 415 of the Code, if the Compensation deferred under this Plan during a calendar quarter were considered as compensation under the Employee Savings Plan. 6.3 The Account of each Participant electing to defer a portion of his Compensation shall be credited as of the last day of such calendar quarter with an amount equal to the difference between the Employing Company contribution allocated to his account under the Employee Stock Ownership Plan and the Employing Company contribution that would have been allocated to the 13 Participant's account under the Employee Stock Ownership Plan if the Compensation deferred under this Plan during such calendar quarter were considered as compensation under the Employee Stock Ownership Plan. The amount to be credited to a Participant's Account under this Section 6.3 shall be calculated based on the Participant's Compensation that would have been considered in calculating allocations to his account under the Employee Stock Ownership Plan, without regard to the limitations of Section 401(a)(17) or Section 415 of the Code, if the Compensation deferred under this Plan during a calendar quarter were considered as compensation under the Employee Stock Ownership Plan. 6.4 Each Participant electing to defer a portion of his Compensation shall also be entitled to receive a monthly amount from his Employing Company equal to the difference between his Retirement Income under the Pension Plan of his Employing Company and the Retirement Income he would be entitled to receive if his Compensation deferred were considered as Earnings (as of the calendar quarter such Compensation is deferred) for purposes of calculating his Retirement Income under such Pension Plan. The additional monthly Retirement Income under this Section 6.4 shall be calculated without regard to the limitations of Section 401(a)(17) or Section 415 of the Code. In no event shall any amounts payable under this Section 6.4 duplicate any Pension Benefit payable under the Supplemental Benefit Plan. Such monthly amount shall be recalculated from time to time to reflect 14 any future increases in Retirement Income of retirees under the Pension Plan following the Participant's retirement at his Early Retirement Date, Normal Retirement Date, or Deferred Retirement Date under the Pension Plan, as appropriate. 6.5 The Account of each Participant electing to invest his deferred Compensation and amounts credited pursuant to Sections 6.2 and 6.3 of the Plan for a Plan Year in accordance with this Section 6.5 shall be credited as of the last day of each calendar quarter with an amount computed by the Company by treating the Account balance as of the first day of such calendar quarter as a sum certain to which the Employing Company will add in lieu of interest an amount equal to the prime rate of interest set by The First National Bank of Atlanta. Interest will be compounded quarterly at the end of each succeeding calendar quarter on any balance until such amount is fully distributed. The prime rate in effect at the close of business on the first business day of each calendar quarter shall be deemed the prime rate in effect for such calendar quarter. 6.6 The Account of each Participant electing to invest his deferred Compensation and amounts credited pursuant to Sections 6.2 and 6.3 of the Plan for a Plan Year in accordance with this Section 6.6 shall be credited as of the last day of the calendar quarter with the number of shares (including fractional shares) of Common Stock which could have been purchased on the last day of such calendar quarter, based upon the Common Stock's Closing Price on the last trading day of such calendar quarter. 15 As of the last day of each calendar quarter in which occurs the payment of dividends on the Common Stock there shall be credited with respect to shares of Common Stock in the Participant's Account as of the first day of such calendar quarter such additional shares (including fractional shares) of Common Stock as follows: (a) In the case of cash dividends, such additional shares as could be purchased at the Closing Price on the last trading day during the calendar quarter in which the payment date occurs with the dividends which would have been payable if the credited shares had been outstanding; (b) In the case of dividends payable in property other than cash or Common Stock, such additional shares as could be purchased at the Closing Price on the last trading day during the calendar quarter in which the payment date occurs with the fair market value of the property which would have been payable if the credited shares had been outstanding; or (c) 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. 6.7 The Investment Election by a Participant with respect to his Account shall be made in writing on a form prescribed by 16 the Company. Any Investment Election shall be delivered to the Participant's Employing Company prior to the first (1st) day of the month immediately prior to his 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. The Investment Election made in accordance with this Article IV shall be irrevocable and shall continue from Plan Year to Plan Year unless the Participant changes the Investment Election regarding future deferred Compensation by submitting a written request to his Employing Company on a form prescribed by the Company not later than the first day of the month prior to the next succeeding Plan Year. 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 an Employing Company. No transfer of amounts between investment options shall be permitted under the Plan. 6.8 At the end of each Plan Year, a report shall be issued to each Participant who has an Account and said report will set forth the amount and the market value of any shares of Common Stock reflected in such Account. ARTICLE VII Distribution of Deferred Compensation Accounts 7.1 When a Participant retires or terminates his employment with an Employing Company, said Participant shall be entitled to receive the market value of any shares of Common Stock (and 17 fractions thereof ) reflected in his Account maintained by the Company that has established an Account for his benefit in accordance with his Deferral Election made pursuant to Article III of the Plan. Such distribution shall be made not later than sixty (60) days following the close of the calendar quarter in which his termination of employment occurs, or as soon as reasonably practicable thereafter. The transfer by a Participant between companies in the Southern electric system shall not be deemed to be a termination of employment with an Employing Company. The market value of any shares of Common Stock credited to a Participant's Account shall be based on the Closing Price of such Common Stock on the last trading day of the calendar quarter immediately preceding a lump sum distribution. No portion of a Participant's Account shall be distributed in Common Stock. 7.2 In the event a Participant elected to receive the distribution of his Account in annual installments, the first payment shall be made not later than sixty (60) days following the close of the calendar quarter in which his termination of employment occurs, or as soon as reasonably practicable thereafter, and shall be an amount equal to the balance in the Participant's Account 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 close of the calendar quarter preceding the payment date, divided by the number of the remaining annual payments and shall be due on the anniversary of the preceding payment date. The market value 18 of any shares of Common Stock credited to a Participant's Account shall be based on the Closing Price of such Common Stock on the last trading day of the calendar quarter immediately preceding an installment distribution. No portion of a Participant's Account shall be distributed in Common Stock. 7.3 Upon the death of a Participant, or a former Participant prior to the payment of all amounts and the market value of any shares of Common Stock (and fractions thereof) credited to said Participant's Account, the unpaid balance shall be paid in the sole discretion of the Administrative Committee (a) in a lump sum to the designated beneficiary of a Participant or former Participant within sixty (60) days following the close of the calendar quarter in which the Administrative Committee is provided evidence of the Participant's death (or as soon as reasonably practicable thereafter) or (b) in accordance with the Deferral Election made by such Participant or former 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 estate of the Participant or former Participant. The market value of any shares of Common Stock credited to a Participant's Account shall be based on the Closing Price of such Common Stock on the last day of the calendar quarter immediately preceding the date of any lump sum or installment distribution. No portion of a Participant's Account shall be distributed in Common Stock. 7.4 The beneficiary designation may be changed by the 19 Participant or former Participant at any time without the consent of the prior beneficiary. 7.5 Upon the total disability of a Participant or former Participant, as determined by the Social Security Administration, the unpaid balance of his Account shall be paid in the sole discretion of the Administrative Committee (a) in a lump sum to the Participant, or former Participant, or his legal representative within sixty (60) days following the close of the calendar quarter in which the Administrative 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 Deferral Election made by such Participant or former Participant. The market value of any shares of Common Stock credited to a Participant's Account shall be based on the Closing Price of such Common Stock on the last trading day of the calendar quarter immediately preceding the date of any lump sum or installment distribution. No portion of a Participant's Account shall be distributed in Common Stock. 7.6 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 Participant's Deferral Election in the absence of such determination. 20 7.7 The amount calculated in accordance with Section 6.4 with respect to the Pension Plan shall be paid in monthly amounts on the first day of each month concurrently with and in the same manner as the Participant's Retirement Income under the Pension Plan. ARTICLE VIII Miscellaneous Provisions 8.1 Neither the Participant, his beneficiary, nor his 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 nonassignable and nontransferable. Any attempt to assign or transfer the right to payments of this Plan shall be void and have no effect. 8.2 An Employing Company maintaining an Account for the benefit of a Participant shall not reserve or specifically set aside funds for the payment of its obligations under the Plan, and such obligations shall be paid solely from the general assets of the 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 at all times be subject to the claims of the creditors of the Participants Employing Companies. 21 8.3 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 Compensation which has been deferred under the Plan prior to such amendment, modification, or termination. The Plan may also be amended or modified by the Administrative 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 may be eligible, whether funded or unfunded, by reason of his 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 deferred by a Participant while employed by an Employing Company 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. 22 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 Employing Company. 8.8 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, the Plan has been executed pursuant to resolutions of the Board of Directors of Southern Company Services, Inc., this ____ day of _____________, 19__ to be effective as provided herein. SOUTHERN COMPANY SERVICES, INC. By: [CORPORATE SEAL] Thomas A. Nunnelly Executive Vice President Attest: By: Tommy Chisholm Secretary 23 (adamscl) h:\wpdocs\mtd\southern\dcom-ses.pln 24 FIRST AMENDMENT TO THE DEFERRED COMPENSATION PLAN FOR THE SOUTHERN ELECTRIC SYSTEM WHEREAS, the Boards of Directors of Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, Southern Company Services, Inc., and Southern Electric International, Inc. (hereinafter collectively referred to as the "Employing Companies") heretofore established the Deferred Compensation Plan for The Southern Electric System (hereinafter referred to as the "Plan") in order to provide certain employees of the Employing Companies with the opportunity to elect to defer a portion of their compensation until their death, disability, or termination of employment with their Employing Company; and WHEREAS, certain employees of Alabama Power Company, Georgia Power Company, and Southern Company Services, Inc. will be transferred to and employed by Southern Nuclear Operating Company upon the approval by the Securities and Exchange Commission of an application to form Southern Nuclear Operating Company as a service company and the creation and organization of Southern Nuclear Operating Company as a subsidiary of The Southern Company; and WHEREAS, the Board of Directors of Southern Company Services, Inc. (hereinafter referred to as the "Company") desires to amend the Plan to permit the employees of Southern Nuclear Operating Company to participate in the Plan, upon the later of October 1, 1988 or the approval by the Securities and Exchange Commission of an application to form Southern Nuclear Operating Company as a service company and the creation and organization of Southern Nuclear Operating Company as a subsidiary of The Southern Company; and WHEREAS, the Board of Directors of the Company is authorized pursuant to Section 8.3 of the Plan to amend the Plan at any time. NOW, THEREFORE, effective as stated herein, the Board of Directors of the Company hereby amends the Plan as follows: I. Section 2.16 of the Plan shall be amended by deleting said Section in its entirety and substituting therefor the following language effective upon the later of October 1, 1988 or the approval by the Securities and Exchange Commission of an application to form Southern Nuclear Operating Company as a service company and the creation and organization of Southern Nuclear Operating Company as a subsidiary of The Southern Company: 2.16 "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 them. The term "Employing Company" shall not include Electric City Merchandise Company. The Employing Companies as of the effective date of this amendment are: Alabama Power Company Georgia Power Company Gulf Power Company Mississippi Power Company Savannah Electric and Power Company Southern Company Services, Inc. Southern Electric International, Inc. Southern Nuclear Operating Company II. Except as amended herein by this First Amendment, the Plan shall remain in full force and effect as adopted by the Employing Companies prior to the adoption of this First Amendment. IN WITNESS WHEREOF, Southern Company Services, Inc., through its authorized officers, has adopted this First Amendment to the Deferred Compensation Plan for The Southern Electric System this ____ day of __________________, ____, to be effective as stated herein. SOUTHERN COMPANY SERVICES, INC. By: Thomas A Nunnelly Executive Vice President Attest: By: Tommy Chisholm Secretary [CORPORATE SEAL] (adamscl) h:\wpdocs\mtd\southern\dcom-ses.1am -2- SECOND AMENDMENT TO THE DEFERRED COMPENSATION PLAN FOR THE SOUTHERN ELECTRIC SYSTEM WHEREAS, the Boards of Directors of Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, Southern Company Services, Inc., Southern Electric International, Inc. and Southern Nuclear Operating Company heretofore adopted the Deferred Compensation Plan for the Southern Electric System (the "Plan"); and WHEREAS, the Board of Directors of Southern Company Services, Inc. (the "Company") desires to amend the Plan to comply with changes in the Securities and Exchange Act of 1934; and WHEREAS, under Section 8.3 of the Plan, the Board of Directors of the Company has the authority to amend the Plan at any time; NOW, THEREFORE, effective as of the date of execution, the Board of Directors hereby amends the Plan as follows: 1. Section 5.6 of the Plan shall be amended by deleting said Section in its entirety and substituting therefore the following language: 5.6 The initial Deferral Election specifying the method of distribution, whether it be lump sum or annual installments not to exceed ten (10) may not be revoked and shall govern the distribution of a Participant's Account. Notwithstanding the foregoing, and except as provided below, in the sole discretion of the Administrative Committee upon application by a Participant, a Participant's Deferral Election may be amended not prior to the 395th day nor later than the 365th day prior to a Participant's date of termination 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 Deferral Election during any time period for which such Participant is required to file any such reports with respect to the portion of his deferred Compensation invested in accordance with the provisions of Section 6.6 of the Plan. Each Participant making a Deferral Election in accordance with this Article V and his successors, shall be bound as to any action taken pursuant to the terms of the Participant's Deferral Election and the Plan. 2. Except as amended herein by this Second Amendment, the Plan shall remain in full force and effect as adopted and amended by the Company prior to the adoption of this Second Amendment. IN WITNESS WHEREOF, Southern Company Services, Inc., through its duly authorized officers, has adopted this Second Amendment to the Deferred Compensation Plan for The Southern Electric System this ____ day of _______________, 19__, to be effective as of the date of execution. SOUTHERN COMPANY SERVICES, INC. By: Its: Attest: By: Its: [CORPORATE SEAL] (adamscl) h:\wpdocs\mtd\southern\dcom-ses.2am -2- EX-10.(B)18 19 EXHIBIT 10(B)18 Exhibit 10(b)18 Amendment No. 2 to The Power Contract between Southern Electric Generating Company, Alabama Power Company and Georgia Power Company This Amendment No. 2 to the Power Contract dated January 27, 1959, is made and entered into this 4th day of November, 1993, by and between Southern Electric Generating Company (SEGCO), a corporation organized and existing under the laws of the State of Alabama with its principal office in Birmingham, Alabama; Alabama Power Company (ALABAMA), a corporation organized and existing under the laws of the State of Alabama with its principal office in Birmingham, Alabama; and Georgia Power Company (GEORGIA), a corporation organized and existing under the laws of the State of Georgia with its principal office in Atlanta, Georgia. W I T N E S S E T H WHEREAS, SEGCO is a subsidiary of ALABAMA and GEORGIA, each of which owns 50% of the outstanding common stock of SEGCO; WHEREAS, both ALABAMA and GEORGIA are wholly-owned subsidiaries of The Southern Company, a registered holding company under the Public Utility Holding Company Act of 1935; WHEREAS, SEGCO was formed to make available to ALABAMA and GEORGIA the benefit of economies resulting from low-cost fuel and large generating units; WHEREAS, in furtherance of this purpose SEGCO constructed and now owns a share of the Ernest C. Gaston Steam Plant located near Wilsonville, Alabama, which share consists of four coal-fired steam generating units and one combustion turbine unit with an aggregate nameplate rating of 1,019,680 kilowatts; WHEREAS, ALABAMA acts as SEGCO's agent in the operating of its share of the Ernest C. Gaston Steam Plant and performs certain other functions, including accounting, under an agreement between SEGCO and ALABAMA; - 2 - WHEREAS, SEGCO sells the entire capacity and output of its generating units to ALABAMA and GEORGIA pursuant to the provisions of a Power Contract dated January 27, 1959 ("the Power Contract"), which has been amended from time to time; WHEREAS, the Power Contract is set to expire by its terms on June 1, 1994; WHEREAS, extension of the Power Contract is necessary and appropriate to avoid expiration; and WHEREAS, the parties wish to avoid expiration of the Power Contract by extending the term of the Power Contract. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter stated, SEGCO, ALABAMA and GEORGIA agree and contract as follows: 1. This Amendment No. 2 to the Power Contract shall become effective on June 1, 1994. 2. Article IX, Section 9.08 of the Power Contract is amended by deleting such provision in its entirety and substituting therefore the following revised Article IX, Section 9.08: Section 9.08 Term of Agreement: This Agreement shall continue in effect until the 31st day of May, 1996, and thereafter shall be automatically extended for succeeding periods of two (2) years, unless terminated by any party to this Contract upon two (2) years written notice to the other parties to this Contract; provided, however, that the provisions of Article VI and of Section 9.11 shall continue in full force and effect in accordance with the terms of Article VI. IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to the Power Contract to be executed by their duly authorized officers. - 3 - ATTEST: SOUTHERN ELECTRIC GENERATING COMPANY _____________________ By _____________________________________ Secretary Mr. E. B. Harris President ATTEST: ALABAMA POWER COMPANY --------------------- Secretary By _____________________________________ Mr. W. B. Hutchins, III Senior Vice President and Chief Financial Officer ATTEST: GEORGIA POWER COMPANY _____________________ By _____________________________________ Secretary Mr. A. W. Dahlberg President and Chief Executive Officer EX-10.(D)18 20 EXHIBIT 10(D)18 Exhibit 10(d)18 PENSION PLAN FOR EMPLOYEES OF GULF POWER COMPANY AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 1, 1989 TABLE OF CONTENTS Page ARTICLE I Definitions . . . . . . . . . . . 2 ARTICLE II Eligibility . . . . . . . . . . . 13 2.1 Employees . . . . . . . . . . . . . . . . . . . . . 13 2.2 Employees represented by a collective bargaining agent . . . . . . . . . . . . . . . . . . . . . . . 13 2.3 Persons in military service and Employees on authorized leave of absence . . . . . . . . . . . . 13 2.4 Employees reemployed . . . . . . . . . . . . . . . 14 2.5 Participation upon return to eligible class . . . . 14 2.6 Exclusion of certain categories of employees . . . 14 2.7 Waiver of participation . . . . . . . . . . . . . . 15 ARTICLE III Retirement . . . . . . . . . . . 16 3.1 Retirement at Normal Retirement Date . . . . . . . 16 3.2 Retirement at Early Retirement Date . . . . . . . . 16 3.3 Retirement at Deferred Retirement Date . . . . . . 16 ARTICLE IV Determination of Accredited Service . . . . . 17 4.1 Accredited Service pursuant to Prior Plan . . . . . 17 4.2 Accredited Service . . . . . . . . . . . . . . . . 17 4.3 Accredited Service and Years of Service in respect of service of certain Employees previously employed by the Employer or by Affiliated Employers . . . . . . . . . . . . . . . . . . . . . 18 4.4 Accrual of Retirement Income during period of total disability . . . . . . . . . . . . . . . . . 20 4.5 Employees leaving Employer's service . . . . . . . 21 4.6 Transfers to or from Affiliated Employers . . . . . 21 4.7 Transfers from Savannah Electric and Power Company . . . . . . . . . . . . . . . . . . . . . . 23 ARTICLE V Retirement Income . . . . . . . . . . 24 5.1 Normal Retirement Income . . . . . . . . . . . . . 24 i 5.2 Minimum Retirement Income payable upon retirement at Normal Retirement Date or Deferred Retirement Date . . . . . . . . . . . . . . . . . . . . . . . 24 5.3 Minimum Retirement Income upon retirement at Early Retirement Date or upon termination of service by reason of death or otherwise prior to retirement . 25 5.4 Calculation of Social Security Offset . . . . . . . 26 5.5 Early Retirement Income . . . . . . . . . . . . . . 27 5.6 Deferred Retirement Income . . . . . . . . . . . . 27 5.7 Payment of Retirement Income . . . . . . . . . . . 28 5.8 Termination of Retirement Income . . . . . . . . . 29 5.9 Required distributions . . . . . . . . . . . . . . 29 5.10 Suspension of Retirement Income for reemployment . . . . . . . . . . . . . . . . . . . 31 5.11 Increase in Retirement Income of retired Employees for service prior to January 1, 1991 . . 31 5.12 Special provisions relating to the treatment of absence of an Employee from the service of the Employer to serve in the Armed Forces of the United States . . . . . . . . . . . . . . . . . . . 32 ARTICLE VI Limitations on Benefits . . . . . . . . 36 6.1 Maximum Retirement Income . . . . . . . . . . . . . 36 6.2 Adjustment to Defined Benefit Dollar Limitation for Early or Deferred Retirement . . . . . . . . . 37 6.3 Adjustment of limitation for Years of Service or participation . . . . . . . . . . . . . . . . . . . 38 6.4 Preservation of Accrued Retirement Income . . . . . 38 6.5 Limitation on benefits from multiple plans . . . . 39 6.6 Special rules for plans subject to overall limitations under Code Section 415(e) . . . . . . . 40 6.7 Combination of Plans . . . . . . . . . . . . . . . 41 6.8 Incorporation of Code Section 415 . . . . . . . . . 41 ARTICLE VII Provisional Payee . . . . . . . . . . 42 7.1 Adjustment of Retirement Income to provide for payment to Provisional Payee . . . . . . . . . . . 42 7.2 Form and time of election and notice requirements . 42 7.3 Circumstances in which election and designation are inoperative . . . . . . . . . . . . . . . . . . 43 7.4 Pre-retirement death benefit . . . . . . . . . . . 44 7.5 Post-retirement death benefit - qualified joint and survivor annuity . . . . . . . . . . . . . . . 46 7.6 Election and designation by former Employee entitled to Retirement Income in accordance with Article VIII . . . . . . . . . . . . . . . . . . . 46 7.7 Death benefit for Provisional Payee of former Employee . . . . . . . . . . . . . . . . . . . . . 48 ii 7.8 Limitations on Employee's and Provisional Payee's benefits . . . . . . . . . . . . . . . . . . . . . 48 7.9 Effect of election under Article VII . . . . . . . 49 ARTICLE VIII Termination of Service . . . . . . . . 50 8.1 Vested interest . . . . . . . . . . . . . . . . . . 50 8.2 Early distribution of vested benefit . . . . . . . 50 8.3 Years of Service of reemployed Employees . . . . . 51 8.4 Cash-out and buy-back . . . . . . . . . . . . . . . 52 8.5 Calculation of present value for cash-out of benefits and for determining amount of benefits . . 53 8.6 Retirement Income under Prior Plan . . . . . . . . 55 8.7 Requirement for Direct Rollovers . . . . . . . . . 55 ARTICLE IX Contributions . . . . . . . . . . . 57 9.1 Contributions generally . . . . . . . . . . . . . . 57 9.2 Return of Employer contributions . . . . . . . . . 57 9.3 Expenses . . . . . . . . . . . . . . . . . . . . . 58 ARTICLE X Administration of Plan . . . . . . . . 59 10.1 Retirement Board . . . . . . . . . . . . . . . . . 59 10.2 Organization and transaction of business of Retirement Board . . . . . . . . . . . . . . . . . 59 10.3 Administrative responsibilities of Retirement Board . . . . . . . . . . . . . . . . . . . . . . . 59 10.4 Retirement Board, the "Administrator" . . . . . . . 60 10.5 Fiduciary responsibilities . . . . . . . . . . . . 61 10.6 Employment of actuaries and others . . . . . . . . 61 10.7 Accounts and tables . . . . . . . . . . . . . . . . 61 10.8 Indemnity of members of Retirement Board . . . . . 62 10.9 Areas in which the Retirement Board does not have responsibility . . . . . . . . . . . . . . . . . . 62 10.10 Claims Procedures . . . . . . . . . . . . . . . . 63 ARTICLE XI Management of Trust . . . . . . . . . 64 11.1 Trust . . . . . . . . . . . . . . . . . . . . . . . 64 11.2 Disbursement of the Trust Fund . . . . . . . . . . 64 11.3 Rights in the Trust . . . . . . . . . . . . . . . . 64 11.4 Merger of the Plan . . . . . . . . . . . . . . . . 65 ARTICLE XII Termination of the Plan . . . . . . . . 66 12.1 Termination of the Plan . . . . . . . . . . . . . . 66 iii 12.2 Limitation on benefits for certain highly paid employees . . . . . . . . . . . . . . . . . . . . . 66 ARTICLE XIII Amendment of the Plan . . . . . . . . . 68 13.1 Amendment of the Plan . . . . . . . . . . . . . . . 68 ARTICLE XIV Special Provisions . . . . . . . . . 69 14.1 Adoption of Plan by other corporations . . . . . . 69 14.2 Exclusive benefit . . . . . . . . . . . . . . . . . 70 14.3 Assignment or alienation . . . . . . . . . . . . . 70 14.4 Voluntary undertaking . . . . . . . . . . . . . . . 71 14.5 Top-Heavy Plan requirements . . . . . . . . . . . . 71 14.6 Determination of Top-Heavy status . . . . . . 71 14.7 Minimum Retirement Income for Top-Heavy Plan Years . . . . . . . . . . . . . . . . . . . . . . . 75 14.8 Vesting requirements for Top-Heavy Plan Years . . . 76 14.9 Adjustments to maximum benefits for Top-Heavy Plans . . . . . . . . . . . . . . . . . . . . . . . 77 ARTICLE XV Post-retirement Medical Benefits . . . . . . 78 15.1 Definitions . . . . . . . . . . . . . . . . . . . . 78 15.2 Eligibility of Pensioned Employees and their Dependents . . . . . . . . . . . . . . . . . . . . 80 15.3 Medical benefits . . . . . . . . . . . . . . . . . 82 15.4 Termination of coverage . . . . . . . . . . . . . . 82 15.5 Continuation of coverage to certain individuals . . 82 15.6 Contributions to fund medical benefits . . . . . . 83 15.7 Pensioned Employee contributions . . . . . . . . . 84 15.8 Amendment of Article XV . . . . . . . . . . . . . . 84 15.9 Termination of Article XV . . . . . . . . . . . . . 85 15.10 Reversion of assets upon termination . . . . . . . 85 iv Introductory Statement The Pension Plan for Employees of Gulf Power Company, as amended and restated effective as of January 1, 1989 and hereinafter set forth (the "Plan"), is a modification and continuation of the Pension Plan for Employees of Gulf Power Company which originally became effective July 1, 1944, and has been amended from time to time. Since the enactment of the Employee Retirement Income Security Act of 1974 ("ERISA"), the Plan has been amended numerous times to comply with changes in the law and to achieve other administrative goals. Initially, the Plan was amended and restated in 1976 to comply with ERISA. Thereafter, the Plan was again amended and restated in 1986 to comply with the Tax Equity and Fiscal Responsibility Act of 1982, the Retirement Equity Act of 1984, and the Deficit Reduction Act of 1984. In more recent years, the Plan has been amended and restated three times to comply with the Tax Reform Act of 1986 -- first in 1989, second in 1991 and again as amended and restated herein. The amendment and restatement set forth herein consolidates those amendments made in 1989 and 1991 and provides for such other appropriate changes as are required by the law. Accordingly, this amendment and restatement is effective as of January 1, 1989. Where appropriate, amendments to the Plan which have a different effective date are noted. Retirement Income of former Employees (or Provisional Payees of former Employees) who retired in accordance with the provisions of the Prior Plan, as defined herein, is payable in accordance with the provisions of the Prior Plan. All contributions made by the Employer to this Plan are expressly conditioned upon the continued qualification of the Plan under Section 401(a) of the Code, including any amendments to the Plan, and upon the deductibility of such contributions by the Employer pursuant to Section 404 of the Code. 1 ARTICLE I Definitions The following words and phraseology as used herein have the following meanings unless a different meaning is plainly required by the context: 1 1.1 "Accrued Retirement Income" means with respect to any Employee at any particular date, the Retirement Income, determined pursuant to Section 5.1, commencing on his Normal Retirement Date which would be payable to such Employee in the form of a single life annuity on the basis of his Accredited Service to the date as of which the computation of Retirement Income is made. 1.2 "Accredited Service" means with respect to any Employee included in the Plan, the period of service as provided in Article IV. 1.3 "Actuarial Equivalent" means a benefit of equivalent value when computed on the basis of five percent (5%) interest per annum, compounded annually and the 1951 Group Annuity Mortality Table for males. The ages for all Employees under the above table shall be set back six (6) years and the ages for such Employees' spouses shall be set back one year. All actuarial adjustments and actuarial determinations required and made under the terms of the Plan shall be calculated in accordance with such assumptions. 1.4 "Affiliated Employer" means any corporation which is a member of a controlled group of corporations (as defined in Section 414(b) of the Code) which includes the Employer; any trade or business (whether or not incorporated) which is under common control (as defined in Section 414(c) of the Code) with the Employer; any organization (whether or not incorporated) which is a member of an affiliated service group (as defined in Section 414(m) of the Code) which includes the Employer; and any other entity required to be aggregated with the Employer pursuant to regulations under Section 414(o) of the Code. 1.5 "Average Monthly Earnings" means the greater of: (a) an Employee's Monthly Earnings averaged over the three (3) highest Plan Years of participation which shall produce the highest monthly average within the last ten (10) Plan Years; or (b) an Employee's Monthly Earnings averaged over the three (3) highest Plan Years of participation which shall produce the highest monthly average within the last ten (10) Plan Years during which the Employee actively performed services for the Employer. If an Employee has completed less than three (3) Plan Years of participation upon his termination of employment, his 2 Average Monthly Earnings will be based on his Earnings during his participation to his date of termination. 1.6 "Board of Directors" means the Board of Directors of Gulf Power Company. 1.7 "Code" means the Internal Revenue Code of 1986, as amended from time to time. 1.8 "Current Accrued Retirement Income" means an Employee's Accrued Retirement Income under the Plan, determined as if the Employee had separated from service as of the close of the last Limitation Year beginning before January 1, 1987, when expressed as an annual benefit within the meaning of Section 415(b)(2) of the Code. In determining the amount of an Employee's Current Accrued Retirement Income, the following shall be disregarded: (a) any change in the terms and conditions of the Plan after May 5, 1986; and (b) any cost of living adjustment occurring after May 5, 1986. 1.9 "Deferred Retirement Date" means the first day of the month after a retirement subsequent to the Normal Retirement Date. Employment subsequent to Normal Retirement Date shall be deemed to be a retirement if an Employee has less than forty (40) Hours of Service during a calendar month. 1.10 "Defined Benefit Dollar Limitation" means the limitation set forth in Section 415(b)(1)(A) or (d) of the Code. 1.11 "Defined Contribution Dollar Limitation" means the limitation set forth in Section 415(c)(1)(A) of the Code. 1.12 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. 1.13 "Early Retirement Date" means the first day of the month following the retirement of an Employee on or after his fifty-fifth (55th) birthday and before his sixty-fifth (65th) birthday. 1.14 (a) "Earnings" with respect to any Employee including any Employee whose service is terminated by reason of disability (as defined in Section 4.4) means (1) the highest annual rate of salary or wages of an Employee of the Employer or employee of any Affiliated Employer within any Plan Year before deductions for taxes, Social Security, etc., (2) all amounts contributed by the Employer or any Affiliated Employer to The Southern Company 3 Employee Savings Plan as Elective Employer Contributions, as said term is described under Section 4.1 of such plan, pursuant to the Employee's exercise of his deferral option made thereunder in accordance with the requirements of Section 401(k) of the Code, and (3) all amounts contributed by the Employer or any Affiliated Employer to The Southern Electric System Flexible Benefits Plan or The Southern Company Flexible Benefits Plan on behalf of an Employee pursuant to his salary reduction election, and applied to provide one or more of the optional benefits available under such plan, but (4) shall exclude all amounts deferred under any non-qualified deferred compensation plan maintained by the Employer or any Affiliated Employer. (b) Notwithstanding the above, "Earnings" with respect to any commissioned salesperson means the salary or wages of an Employee of the Employer or employee of any Affiliated Employer within any Plan Year, without including overtime, and before deductions for taxes, Social Security, etc. but applying those adjustments identified in paragraphs (a)(2), (3) and (4) above. (c) With respect to an Employee whose service terminates because of a disability under Section 4.4, Earnings shall be deemed to continue in effect throughout the period of the Employee's Disability Leave, as also defined in Section 4.4. (d) With respect to calculating the Prior Plan Retirement Income of an Employee who is a "participant in the Plan" as provided in Section 5.12, Earnings shall be determined for the recognized period of his absence to serve in the Armed Forces of the United States at the rate which is paid to him on the day he returns to the service of the Employer as provided in paragraph (a) of Section 5.12 or at the rate which was payable to him at the time he left the employment of the Employer to enter the Armed Forces of the United States, if such amount was greater. (e) For Plan Years beginning after December 31, 1988 and prior to January 1, 1994, the annual compensation of each Employee taken into account for purposes of this Plan shall not exceed $200,000 (as adjusted by the Secretary of Treasury). The imposition of this limitation shall not reduce an Employee's Retirement Income below the amount as determined on December 31, 1988. In addition to other applicable limitations set forth in the Plan, and notwithstanding any other provision of the Plan to the contrary, for Plan Years beginning on or after January 1, 1994, the annual compensation of each Employee taken into account under the Plan shall not exceed $150,000, as adjusted for increases in the cost of living in accordance with Code Section 401(a)(17). The cost of living adjustment in effect for a calendar year applies to any period, not exceeding twelve (12) months, over which compensation is determined (the "determination period") beginning in such calendar year. If the determination 4 period is less than twelve (12) months, the limit shall be prorated. If compensation for any prior determination period is taken into account in determining an Employee's benefits accruing in the current Plan Year beginning on or after January 1, 1989 or January 1, 1994, as applicable, the compensation for that prior determination period is subject to the $200,000 or the $150,000 compensation limit in effect for that prior determination period. Notwithstanding any other provision in the Plan, each Employee's Accrued Retirement Income under this Plan will be the greater of: (a) the Employee's Accrued Retirement Income as of the last day of the last Plan Year beginning before January 1, 1994, frozen in accordance with Treasury Regulation Section 1.401(a)(4)-13, or (b) the Employee's Accrued Retirement Income determined with respect to the benefit formula applicable for the Plan Year beginning on or after January 1, 1994, as applied to the employee's total Years of Service taken into account under the Plan for purposes of benefit accruals. For purposes of this Section 1.14, the rules of Section 414(q)(6) of the Code shall apply in determining the adjusted $200,000 or $150,000 limitation, as applicable, except in applying such rules, the term "family" shall include only the spouse of the Employee and any lineal descendants of the Employee who have not attained age nineteen (19) before the close of the Plan Year. If, as a result of the application of such rules, the adjusted $200,000 or $150,000 limitation is exceeded, then the limitation shall be prorated among the affected individuals in proportion to each individual's Earnings determined under this Section 1.14 prior to the application of this limitation. 1.15 "Effective Date" means the original effective date of the Plan, July 1, 1944. The effective date of this amendment and restatement means January 1, 1989. 1.16 "Eligibility Year of Service" is a Year of Service commencing on the Employee's date of employment or reemployment or anniversary date thereof. 1.17 "Employee" means any person who is currently employed by the Employer as (a) a regular full-time employee, (b) a regular part-time employee, (c) a cooperative education employee, or (d) a temporary employee (whether full-time or part-time) paid directly or indirectly by the Employer. The term also includes "leased employees" within the meaning of Section 414(n)(2) of the 5 Code, unless the total number of leased employees constitutes less than twenty percent (20%) of the Employer's non-highly compensated workforce within the meaning of Section 414(n)(5)(C)(ii) and such leased employees are covered by a plan described in Section 414(n)(5)(B) of the Code. 1.18 "Employer" means Gulf Power Company, any successor or successors thereof and any wholly owned subsidiary thereof which the Board of Directors may from time to time, and upon such terms and conditions as may be fixed by the Board of Directors, determine to bring under the Plan, and any other corporation which shall adopt this Plan and Trust Agreement pursuant to Section 14.1 by appropriate resolution authorized by the board of directors of said adopting corporation. 1.19 "Full Current Costs" means the normal cost, as defined in Treasury Regulation Section 1.404(a)-6, for all years since the Effective Date of the Plan, plus interest on any unfunded liability during such period. 1.20 "Hour of Service" means an Employee shall be credited with one Hour of Service for each hour for which (a) he is paid, or entitled to payment, for the performance of duties for the Employer or an Affiliated Employer, and such hours shall be credited to the Employee for the computation period or periods in which the duties are performed; (b) he is paid, or entitled to payment, by the Employer or an Affiliated Employer on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty, or leave of absence in which case the Employee shall be credited with Hours of Service for the computation period or periods in which the period during which no duties were performed occurs; (c) back pay, irrespective of mitigation of damages, has been either awarded or agreed to by the Employer or an Affiliated Employer, in which case the Employee shall be credited with Hours of Service for the computation period or periods to which the award or agreement pertains, rather than the computation period in which the award, agreement, or payment is made; and (d) solely for the purpose of calculating Vesting Years of Service, he was on any form of authorized leave of absence. The same Hours of Service shall not be credited under clauses (a), (b), (c), and (d). An Employee who is entitled to be credited with Hours of Service in accordance with clause (b) or (d) of this Section shall be credited with such number of Hours of Service for the period of time during which no duties were performed as though he were in the active employment of the Employer during such period of time. However, an Employee shall not be credited with Hours of Service in accordance with clause (b) of this Section for 6 unused vacation for which payment is received at termination of employment, or if the payment which is made to him or to which he is entitled in accordance with clause (b) is made or due under a plan maintained solely for the purpose of complying with applicable Worker's Compensation, or unemployment compensation or disability insurance laws, or if such payment is one which solely reimburses an Employee for medical or medically related expenses incurred by the Employee. Provided there is no duplication of Hours of Service credited in accordance with the foregoing provisions, if an Employee is "a participant in the Plan" within the meaning of that term as defined in paragraph (a) of Section 5.12, he shall be credited with such number of Hours of Service with respect to all or such portion of the period of his absence to serve in the Armed Forces of the United States as may be recognized under paragraph (b) of Section 5.12 as though he were in the active employment of the Employer during the recognized period of his absence to serve in the Armed Forces. The rules set forth in paragraphs (b) and (c) of Department of Labor Regulations 2530.200b-2 are incorporated in the Plan by this reference and made a part hereof. 1.21 "Limitation Year" means the Plan Year. 1.22 "Monthly Earnings" means one-twelfth (1/12) of the Earnings of an Employee of the Employer during a Plan Year. 1.23 "Normal Retirement Date" means the first day of the month following an Employee's sixty-fifth (65th) birthday, except that the Normal Retirement Date of any Employee hired on or after his sixtieth (60th) birthday shall be the fifth (5th) anniversary of his initial participation in the Plan. 1.24 "One-Year Break in Service" means a twelve (12) consecutive month period commencing on or after January 1, 1976 which would constitute a Year of Service but for the fact that the Employee has not completed more than 500 Hours of Service during such period. Solely for the purpose of determining whether a One-Year Break in Service has occurred for eligibility or vesting purposes, an Employee who is absent from work for maternity or paternity reasons shall receive credit for the Hours of Service which would otherwise have been credited to such Employee but for such absence, or in any case in which such hours cannot be determined, eight (8) Hours of Service per day of such absence. In no event shall Hours of Service credited under this paragraph be in excess of the amount necessary to prevent a One-Year Break in Service from occurring. For purposes of this paragraph, an absence from work for maternity or paternity reasons means an 7 absence (a) by reason of the pregnancy of the Employee, (b) by reason of a birth of a child of the Employee, (c) by reason of the placement of a child with the Employee in connection with the adoption of such child by such Employee, or (d) for purposes of caring for such child for a period beginning immediately following such birth or placement. The Hours of Service shall be credited under this paragraph: (a) in the vesting or eligibility period in which the absence begins if the Hours of Service credited are necessary to prevent a One-Year Break in Service in such period, and (b) in all other cases, in the vesting or eligibility period following the period in which the absence begins. 1.25 "Past Service" means with respect to any Employee included in the Plan, the period of his Accredited Service prior to January 1, 1989 as determined under the Prior Plan. 1.26 "Plan" means the Pension Plan for Employees of Gulf Power Company, as set forth herein and as hereinafter amended, effective January 1, 1989. 1.27 "Plan Year" means the twelve (12) month period commencing on the first day of January and ending on the last day of December next following. 1.28 "Plan Year of Service" is a Year of Service determined as if the date of employment or reemployment is the first day of the Plan Year. 1.29 "Prior Plan" means the Plan in effect prior to January 1, 1989. 1.30 "Provisional Payee" means a spouse designated or deemed to have been designated by an Employee or former Employee pursuant to Article VII to receive Retirement Income on the death of the Employee or former Employee. 1.31 "Qualified Election" means an election by an Employee or former Employee that concerns the form of distribution of Retirement Income that must be in writing and must be consented to by the Employee's Spouse. The Spouse's consent to such an election must acknowledge the effect of such election, must be in writing, and must be witnessed by a notary public. Notwithstanding this consent requirement, if the Employee establishes to the satisfaction of the Retirement Board that such written consent may not be obtained because the Spouse cannot be located or because of such other circumstances as the Secretary of the Treasury may by regulations prescribe, an election by the Employee will be deemed a Qualified Election. Any consent necessary under this provision shall be valid and effective only with respect to the Spouse who signs the consent, or in the event of a deemed Qualified Election, with respect to such Spouse. 8 A revocation of a prior Qualified Election to waive the payment of Retirement Income to the Employee's Spouse may be made by the Employee without consent at any time commencing within 90 days before such Employee's 55th birthday but not later than before the commencement of Retirement Income. A Qualified Election or the revocation of a Qualified Election shall be on a form furnished by the Retirement Board and filed within the time prescribed for making such election. 1.32 "Retirement Board" means the managing board of the Plan provided for in Article X. 1.33 "Retirement Date" means the Employee's Normal, Early, or Deferred Retirement Date, whichever is applicable to him. 1.34 "Retirement Income" means the monthly Retirement Income provided for by the Plan. 1.35 "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, and $250 per month, on and after January 1, 1991, 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 the aggregate Accredited Service the Employee could have accumulated if he had continued his employment 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(b) and shall be determined pursuant to the following, as applicable: (a) With regard to an Employee described in Section 5.2, the Social Security benefit shall be computed at retirement. In estimating the amount of the Federal primary Social Security benefit to which the Employee would be entitled, it shall be assumed that he will receive no wages for Social Security purposes after his retirement on his Normal Retirement Date or Deferred Retirement Date, and it will be further assumed in calculating his estimated Federal primary Social Security benefit that the amount thereof will be the amount determined under the recomputation provision, if applicable, of the Social Security Act in effect at the time of his retirement. 9 (b) With regard to an Employee described in Section 5.3(a), the Social Security benefit to which it is estimated that he will be entitled at sixty-five (65), shall be computed at the time of his retirement. In estimating the amount of the Federal primary Social Security benefit to which the Employee would be entitled at age sixty-five (65), it shall be assumed that he will receive no wages for Social Security purposes after his Early Retirement Date, and it will be further assumed in calculating his estimated Federal primary Social Security benefit that the amount thereof will be the amount determined under the recomputation provision, if applicable, of the Social Security Act in effect at his Early Retirement Date. (c) With regard to an Employee described in Section 5.3(b), the Social Security benefit to which it is estimated that he would have been entitled to receive at age sixty-five (65) or his date of death, if later, had he not died, shall be computed at the time of his death. In estimating the amount of Federal primary Social Security benefit to which the Employee would have been entitled at age sixty-five (65) or his date of death, if later, it shall be assumed that he would not have received any wages for Social Security purposes after the date of his death, and it will be further assumed in calculating his Federal primary Social Security benefit that the amount thereof will be the amount determined under the recomputation provision, if applicable, of the Social Security Act in effect at the time of his death. (d) With regard to an Employee described in Section 5.3(c), the Social Security benefit to which it is estimated that he will become entitled at age sixty-five (65) or his date of termination, if later, shall be computed at the date of termination. In estimating the amount of the Federal primary Social Security benefit to which the Employee would be entitled at age sixty-five (65) or his date of termination, if later, it shall be assumed that he will receive no wages for Social Security purposes after his date of termination, and it will be further assumed in calculating his estimated Federal primary Social Security benefit that the amount thereof will be the amount determined under the recomputation provision, if applicable, of the Social Security Act in effect at his date of termination. (e) With regard to an Employee described in Section 5.3(d), the Social Security benefit to which it is estimated that he would have been entitled to receive at age sixty-five (65) or his initial date of disability, if later, had he not become disabled, shall be computed at the time of his retirement. In estimating the amount of Federal primary Social Security benefit to which the Employee would have been entitled at age sixty-five (65) or his date of disability, if later, it shall be assumed that he would have received wages for Social Security purposes as 10 specified in Section 5.4, and it will be further assumed in calculating his estimated Federal primary Social Security benefit that the amount thereof will be the amount determined under the recomputation provision, if applicable, of the Social Security Act in effect at the time of his retirement. 1.36 "Social Security Retirement Age" means age sixty-five (65) if the Employee attains age sixty-two (62) before January 1, 2000 (i.e., born before January 1, 1938), age sixty-six (66) if the Employee attains age sixty-two (62) after December 31, 1999, but before January 1, 2017 (i.e., born after December 31, 1937, but before January 1, 1955), and age sixty-seven (67) if the Employee attains age sixty-two (62) after December 31, 2016 (i.e., born after December 31, 1954). 1.37 "Trust" or "Trust Fund" means all such money or other property which shall be held by the Trustee pursuant to the terms of the Trust Agreement or pursuant to contracts with life insurance companies. 1.38 "Trust Agreement" means the trust agreement or agreements between the Employer and the Trustee established for the purpose of funding the Retirement Income to be paid. 1.39 "Trustee" means the trustee or trustees acting as such under the Trust Agreement, including any successor or successors. 1.40 "Vesting Year of Service" means an Employee's Years of Service including: (a) Years of Service with an Affiliated Employer; (b) in the case of an employee of Birmingham Electric Company who, prior to his Normal Retirement Date, became and remained an Employee of the Employer until December 1, 1952, and was an active Employee of the Employer on January 1, 1961, his service with Birmingham Electric Company; (c) subject to the eligibility requirements of Section 2.3, active service with the Armed Forces of the United States if the Employee entered or enters active service or training in such Armed Forces directly from the employ of the Employer and after discharge or release therefrom returns within ninety (90) days to the employ of the Employer or is deemed to return under Section 2.3 because of the death of such Employee while in active service with such Armed Forces; and (d) any period during which the Employee was on any other form of authorized leave of absence. For purposes of this Section 1.40 in determining Vesting Years of Service with respect to a period of absence referred to in clause (c) or (d) of this Section 1.40, an Employee shall be credited with Hours of Service as though the period of absence were a period of active employment with the Employer. 11 1.41 "Year of Service" means with respect to an Employee in the service of the Employer on or after January 1, 1976: (a) if the Employee was hired prior to January 1, 1976, each twelve (12) consecutive month period, computed from the Employee's most recent date of hire by the Employer, during his last period of continuous service as a full-time regular Employee (except that service prior to July 1, 1944 need not have been continuous) with the Employer immediately prior to January 1, 1976 (including service with Commonwealth and predecessor companies and service with Affiliated Employers and service with companies or properties heretofore affiliated or associated prior to the date of severance of such affiliation or association) and any subsequent twelve (12) consecutive month period commencing on an anniversary date of such date of hire (or date of reemployment as provided in Section 2.4), provided that in each such twelve (12) consecutive month period commencing on or after January 1, 1975 he has completed at least 1000 Hours of Service; or (b) if the Employee is hired on or after January 1, 1976, a twelve (12) consecutive month period after December 31, 1975, commencing on the Employee's most recent date of hire by the Employer (or date of reemployment as provided in Section 2.4), and any subsequent twelve (12) consecutive month period commencing on an anniversary date of such date of hire, provided he has completed at least 1000 Hours of Service during each such twelve (12) consecutive month period; and (c) to the extent not resulting in duplication, each Year of Service restored to the Employee upon reemployment as provided in Section 8.3. An Employee's vested interest in his Accrued Retirement Income shall be based on his Vesting Years of Service and an Employee's eligibility to participate in the Plan pursuant to Article II shall be based on his Eligibility Year of Service. Breaks in service will be measured on the same computation period as the Year of Service. Effective on and after January 1, 1995, an Employee's accrual of Retirement Income shall be based solely on an Employee's Plan Year of Service, without regard to an Employee's completion of a Vesting Year of Service ending within such Plan Year. In the Plan and Trust Agreement, 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. 12 ARTICLE II Eligibility 2 2.1 Employees. Each Employee participating in the Plan as of January 1, 1989 shall continue to be included in the Plan. Each other Employee, except as provided in this Article, shall be included in the Plan on the first day of the month next following the date on which he first completes an Eligibility Year of Service. 2.2 Employees represented by a collective bargaining agent. An Employee who is represented by a collective bargaining agent may participate in the Plan, subject to its terms, if the representative(s) of his bargaining unit and the Employer mutually agree to participation in the Plan by members of his bargaining unit. 2.3 Persons in military service and Employees on authorized leave of absence. Any person not already included in the Plan who leaves or has left the employ of the Employer to enter the Armed Forces of the United States or is on authorized leave of absence without regular pay and who returns to the employ of the Employer within ninety (90) days after discharge from such military service or on or before termination of his leave of absence, shall, upon such return, be included in the Plan effective as of the first day of the month next following the date on which he first met or meets the eligibility requirement of Section 2.1. In determining whether an Employee entering the service of the Employer has completed an Eligibility Year of Service, his Hours of Service prior to such authorized leave of absence without regular pay or entry into the Armed Forces shall be taken into account, and for purposes of Section 2.4, he shall be deemed not to have incurred a One-Year Break in Service by reason of such absence. If an Employee dies while in active service with the Armed Forces of the United States, such Employee shall be deemed to have returned to the employ of the Employer on his date of death. An Employee not already included in the Plan who is on authorized leave of absence and receiving his regular pay shall be considered credited with Hours of Service as though the period of absence was a period of active employment with the Employer, and he shall be included in the Plan if and when he meets the requirements of this Article II regardless of whether he is, on the date of such inclusion, on such leave of absence. 13 2.4 Employees reemployed. An Employee whose service terminates at any time and who is reemployed as an Employee, unless excluded under Section 2.6, will be included in the Plan as provided in Section 2.1 unless: (a) prior to termination of his service he had completed at least one Year of Service; and (b) upon his reemployment, to the extent provided in Section 8.3 without regard to Section 8.4, he is entitled to restoration of his Years of Service, in which case he will be included in the Plan as of the date of his reemployment. For purposes of determining Years of Service of an Employee who is reemployed by the Employer subsequent to a One-Year Break in Service, a Year of Service subsequent to his reemployment shall be computed on the basis of the twelve (12) consecutive month period commencing on his date of reemployment or an anniversary thereof. 2.5 Participation upon return to eligible class. I f a n Employee is a participant in the Plan before July 1, 1991, the exclusion from participation provided in Section 2.6, as it regards temporary employees, shall not apply with respect to such Employee, and such Employee shall be eligible to participate in the Plan after July 1, 1991 whether or not he is classified as a temporary employee. If an Employee first becomes a participant on or after July 1, 1991, in the event such Employee ceases to be a member of an eligible class of Employees and becomes ineligible to participate, but has not incurred a One-Year Break in Service, such Employee will participate immediately upon returning to an eligible class of Employees. If such Employee incurred a One- Year Break in Service, eligibility will be determined under Section 2.4 of the Plan. In all other instances, if an Employee is not a member of an eligible class of Employees but then becomes a member of an eligible class, such Employee will commence participation in the Plan as of the first day of the month next following the later of (a) the date such Employee completes an Eligibility Year of Service or (b) the date he becomes a member of an eligible class of Employees. 2.6 Exclusion of certain categories of employees. Notwithstanding any other provision of this Article II, leased employees shall not be eligible to participate in the Plan. In addition, temporary employees, except Employees, as defined in Section 1.17, participating in the Plan prior to July 1, 1991 shall not be eligible to participate in the Plan. Any person who is employed by Electric City Merchandise Company, Inc. on or 14 after May 1, 1988, or who is employed by Savannah Electric and Power Company on or after March 3, 1988, shall not be entitled to accrue Retirement Income under the Plan while employed at such companies. 2.7 Waiver of participation. Effective January 1, 1991, notwithstanding the above, an Employee may, subject to the approval of the Employer, elect voluntarily not to participate in the Plan. The election not to participate must be communicated in writing to the Retirement Board effective on an Employee's date of hire or an anniversary thereof. Effective January 1, 1995, the election not to participate must be communicated in writing to and acknowledged by the Retirement Board and shall be effective as of the date set forth in such written waiver. 15 ARTICLE III Retirement 3 3.1 Retirement at Normal Retirement Date. Each Employee eligible to participate in the Plan shall have a nonforfeitable right to his Accrued Retirement Income by no later than his sixty-fifth (65th) birthday, or in the case of any Employee hired on or after his sixtieth (60th) birthday, the fifth (5th) anniversary of his initial participation in the Plan. Notwithstanding the above, an Employee's Normal Retirement Date shall be as provided in Section 1.23. 3.2 Retirement at Early Retirement Date. An Employee having at least ten (10) Years of Accredited Service (including any Accredited Service to which he is entitled under the pension plan of any Affiliated Employer from which such Employee was transferred pursuant to Section 4.6 or 4.7, or which was credited to him in accordance with Section 4.3) may elect to retire on an Early Retirement Date on or after his fifty-fifth (55th) birthday and before his sixty-fifth (65th) birthday and to have his Retirement Income commence on that date, or effective January 1, 1995, the first day of any month up to and including the Employee's Normal Retirement Date. 3.3 Retirement at Deferred Retirement Date. An Employee included in the Plan may remain in active service after his Normal Retirement Date. The involuntary retirement of an Employee on or after his Normal Retirement Date shall not be permitted solely on the basis of the Employee's age, except in accordance with the provisions of the Age Discrimination in Employment Act and Section 760.10 of the Florida Statutes Annotated, as amended from time to time. Termination of service of such an Employee for any reason after Normal Retirement Date shall be deemed retirement as provided in the Plan. 16 ARTICLE IV Determination of Accredited Service 4 4.1 Accredited Service pursuant to Prior Plan. Each Employee who participated in the Prior Plan shall be credited with such Accredited Service, if any, earned under such Prior Plan as of December 31, 1988. 4.2 Accredited Service. (a) Each Employee meeting the requirements of Article II shall, in addition to any Accredited Service to which he may be entitled in accordance with Section 4.1, be credited with Accredited Service as set forth in (b) below. Any such Employee who is on authorized leave of absence with regular pay shall be credited with Accredited Service during the period of such absence. Any such Employee who is a "participant in the Plan" within the meaning of that term as defined in paragraph (a) of Section 5.12 shall be credited with Accredited Service during all or such portion of the period of his absence to serve in the Armed Forces of the United States as may be recognized under paragraph (b) of Section 5.12. Employees on authorized leave of absence without regular pay, other than Employees deemed to accrue Hours of Service under Section 4.4, and persons in the Armed Forces who are not "participants in the Plan" within the meaning of that term as defined in paragraph (a) of Section 5.12 shall not be credited with Accredited Service for the period of such absence. (b) For each Plan Year commencing after December 31, 1988, an Employee included in the Plan who is credited with a Vesting Year of Service for the twelve (12) consecutive month period ending on the anniversary date of his hire which occurs during such Plan Year shall be credited with Accredited Service as follows: (1) if an Employee completes at least 1,680 Hours of Service in a Plan Year, he shall be credited with one year of Accredited Service; (2) if an Employee completes less than 1,680 Hours of Service in a Plan Year, but not less than 1,000 Hours of Service, he shall be credited with one-twelfth (1/12) of a year of Accredited Service for each 140 Hours of Service; or (3) if an Employee's initial eligibility in the Plan shall occur after the beginning of the Plan Year, and the Employee shall therefore have completed less than 1,000 Hours of Service in such Plan Year, he shall be credited with one-twelfth (1/12) of a year of Accredited Service for 17 each 140 Hours of Service during such Plan Year after his inclusion in the Plan. Notwithstanding the above, effective January 1, 1995, an Employee's Accredited Service shall be calculated based on an Employee's accrual of a Plan Year of Service only and without regard to the requirement of a Vesting Year of Service. (c) If an Employee (1) who has previously satisfied the eligibility requirements under Article II shall again be included in the Plan at such time which is after the beginning of the Plan Year, or (2) shall terminate his employment for any reason before the close of such Plan Year and shall therefore have completed less than 1,000 Hours of Service in such Plan Year, he shall be credited with one-twelfth (1/12) of a year of Accredited Service for each 140 Hours of Service during such Plan Year after his inclusion in the Plan or before his termination of employment in such Plan Year, as the case may be. (d) In addition to any Accredited Service credited under Section 4.1, an Employee shall be entitled to Accredited Service determined under the Prior Plan, without regard to the age requirement for eligibility to participate in the Prior Plan, in excess of the Accredited Service determined under the Prior Plan (including the age requirement for eligibility to participate in the Prior Plan). Such Accredited Service shall be considered Accredited Service after December 31, 1985 for purposes of calculating an Employee's Retirement Income under Article V. (e) In addition to the foregoing, Accredited Service may include Accredited Service accrued subsequent to a One-year Break in Service including such Accredited Service which may be restored in accordance with the provisions of Section 8.3. (f) Notwithstanding the above, the maximum number of years of Accredited Service with respect to any Employee participating in the Plan shall not exceed forty (40). Effective January 1, 1991, the maximum number of years of Accredited Service is increased to forty-three (43). 4.3 Accredited Service and Years of Service in respect of service of certain Employees previously employed by the Employer or by Affiliated Employers. An Employee in the service of the Employer on January 1, 1976 or employed by it thereafter who meets the requirements of paragraph (a) of this Section 4.3, in addition to any other Years of Service or Accredited Service to which he may be entitled under the Plan, upon completion of an Eligibility Year of Service where required under Section 8.3(c) (which shall also be considered to be Accredited Service) shall be credited with such number of Years of Service (and fractions thereof to the nearest whole month for service prior to January 1, 1976) and such Accredited Service and Retirement Income as 18 shall be determined in accordance with the provisions of paragraphs (b) and (c) of this Section 4.3. (a) (1) Such Employee shall have been employed prior to January 1, 1976 by the Employer or by one or more Affiliated Employers; (2) he shall have terminated his service with Employer or such Affiliated Employer other than by retirement and he shall not be entitled to receive at any time any retirement income under the pension plan of any such prior employer in respect of any period of time for which he shall receive credit for Years of Service or Accredited Service under this Section 4.3; and (3) for Employees reemployed on or after January 1, 1985, the number of consecutive One-Year Breaks in Service incurred by the Employee prior to the date of his employment by the Employer does not equal or exceed the greater of (A) five (5), or (B) the aggregate number of his Years of Service (and fractions thereof to the nearest whole month for service prior to January 1, 1976) with the Employer and such Affiliated Employer. The years of Accredited Service credited to an Employee reemployed prior to January 1, 1985, with regard to years of Accredited Service immediately prior to the termination of his service, shall be determined under the terms of the Plan in effect prior to January 1, 1985. (b) The number of Years of Service (and fractions thereof to the nearest whole month for service prior to January 1, 1976) and the Accredited Service, respectively, which shall be credited to such Employee shall be equal to the respective number of his Years of Service (and fractions thereof to the nearest whole month for service prior to January 1, 1976) and Accredited Service which were forfeited by the Employee and not restored under the pension plans of the Employer or an Affiliated Employer. (c) There shall be credited to the Employee Retirement Income equal to retirement income which was accrued by him under the pension plan of the Employer or an Affiliated Employer during the period of his Accredited Service which was forfeited and which is credited under the Plan in accordance with Section 4.3. The amount of Retirement Income credited in accordance with this paragraph (c) shall be treated as Prior Plan Retirement Income for purposes of determining the amount of Retirement Income to which the Employee is entitled, and shall be determined in accordance with the provisions of the pension plan of the Affiliated Employer in effect at the time the Employee's service with such Affiliated Employer terminated without regard to any minimum provisions of such pension plan; for this purpose and if relevant in respect of the Employee it shall be assumed that the pension plan of the Affiliated Employer in effect at the time the Employee's service with such Affiliated Employer terminated contained the provisions of Section 5.12 of the Plan and related amendments concerning absence from the service of the Employer to 19 serve in the Armed Forces of the United States which became effective November 1, 1977. For Plan Years beginning after December 31, 1987, an Employee who meets the requirements of paragraph (a) of this Section 4.3 shall be deemed to have transferred to or from an Affiliated Employer for purposes of the transfer of assets or liabilities to or from the Plan in accordance with Section 4.6. 4.4 Accrual of Retirement Income during period of total disability. (a) If an Employee included in the Plan shall become totally disabled, as determined by the Retirement Board on the basis of medical evidence, after he has completed at least five (5) Vesting Years of Service and, by reason of such disability, he shall apply for and be granted either Social Security disability benefits or long-term disability benefits under a long-term disability benefit plan of the Employer, he shall be considered to be on a leave of absence, herein referred to as a "Disability Leave." An Employee's Disability Leave shall be deemed to begin on the initial date of the disability, as determined by the Retirement Board, and shall continue until the earlier of: (1) the end of the month in which he shall cease to be entitled to receive Social Security Disability benefits and long-term disability benefits under a long-term disability benefit plan of the Employer; (2) his death; and (3) his Retirement Date if he elects to have his Retirement Income commence on such date. During the period of the Employee's Disability Leave, he shall, for purposes of the Plan, be deemed to have received Earnings at the regular rate in effect for him. (b) A disabled Employee who applies for and would be granted long-term disability benefits under a long-term disability benefit plan of the Employer, if it were not for the fact that the deductions therefrom attributable to other disability benefits equal or exceed the amount of his unreduced benefit under a long-term disability benefit plan of the Employer, will be considered as being currently granted benefits under such long-term disability benefit plan. (c) An Employee's Disability Leave shall be deemed to be a period for which Hours of Service shall be credited to the Employee as though the period of his Disability Leave were a period of active employment. (d) If an Employee's Disability Leave shall terminate prior to his Normal Retirement Date and he shall fail to return to the employment of the Employer 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 his rights shall be determined in accordance with Article VIII, unless at such time he shall be entitled to retire on an Early 20 Retirement Date, in which event his termination of service shall be deemed to constitute his retirement under Section 3.2. (e) Notwithstanding the above, the years of Accredited Service for any Employee whose initial date of disability occurred under the Prior Plan shall be determined under the terms of the Prior Plan. 4.5 Employees leaving Employer's service. If the service of an Employee is terminated prior to retirement as provided by Article III, such Employee will forfeit any Vesting Years of Service and Accredited Service which he may have subject to possible restoration of some or all of his Vesting Years of Service and Accredited Service in accordance with Article VIII. The provisions of this Section 4.5 shall not affect the rights, if any, of an Employee under Article VIII nor shall the rights of an Employee be affected during or by reason of a layoff, due to lack of work, which continues for a period of one year or less, except that such period of layoff shall not be deemed to be service with the Employer. If the service of an Employee is terminated, or if he is not reemployed before the expiration of one year after being laid off for lack of work, and he is subsequently reemployed, he will be treated as provided in Section 2.4. Forfeitures arising by reason of an Employee's termination of service for any reason shall not be applied to increase the benefits any Employee would otherwise receive under the Plan but shall be used to reduce contributions of the Employer to the Plan. 4.6 Transfers to or from Affiliated Employers. This Section 4.6 shall not apply to the transfer by an Employee to the Employer from Savannah Electric and Power Company on or after March 3, 1988. In the case of the transfer of an Employee (including an Employee included in the Prior Plan who was transferred in accordance with the Prior Plan) to an Affiliated Employer which has at the time of transfer a pension plan with substantially the same terms as this Plan, such Employee, if and when he commences to receive on or after his Normal Retirement Date retirement income under such pension plan of the Affiliated Employer to which transferred, shall receive retirement income under such pension plan attributable to years of Accredited Service with the Employer prior to the time of his transfer. If and when such an Employee commences to receive on an Early Retirement Date retirement income under such pension plan of the Affiliated Employer to which transferred, the amount of any retirement income payable under such pension plan and attributable to Accredited Service with the Employer prior to such transfer shall be reduced in accordance with the provisions of the pension plan relating to retirement income payable at Early Retirement Date, or if such retirement income shall be 21 payable in a manner similar to the provisions of Section 8.2 or Section 8.6, reduced in accordance with the applicable provision. In the case of the transfer to this Employer (not including transfers by reason of the split-up as of November 1, 1949) of an Employee of any Affiliated Employer which has at the time of transfer a pension plan with substantially the same terms as this Plan, the Employer will, subject to the provisions of Article IX, make periodic contributions into this Plan to the extent necessary to provide the portion of the Retirement Income not provided for him in the pension plan of the company from which he was transferred. Upon the transfer of an Employee to or from the Employer, the Plan and Trust shall be authorized to receive or transfer the greater of (a) the actuarial equivalent of the Employee's Accrued Retirement Income or (b) such assets as may be required to fund the projected Retirement Income of the Employee at his retirement date attributable to the Plan or the pension plan maintained by the Affiliated Employer from which the Employee transfers, determined as of the last day of the Plan Year in which the transfer occurs using the current funding assumptions for the Plan Year in which the transfer occurs. The Retirement Board of the Employer shall be authorized to coordinate the transfer of assets and liabilities attributable to the benefits of active Employees, terminated vested Employees, retired Employees, and Provisional Payees with any Affiliated Employer which has at such time a pension plan with substantially the same terms as this Plan. Notwithstanding the above, the transferred Employee shall be entitled to receive a benefit immediately following the transfer of assets or liabilities to or from the Plan and Trust which is equal to or greater than the benefit he would have been entitled to receive immediately before the transfer if the Plan or the pension plan maintained by the Affiliated Employer from which the Employee transfers had been terminated. In no event shall assets be transferred to or from the Plan and Trust without the concurrent transfer of liabilities attributable to such assets. In no case, however, shall any such Employee, who retires pursuant to Section 3.1, 3.2, or 3.3 or the Provisional Payee of a deceased Employee entitled to payment in accordance with Article VII, receive Retirement Income attributable to Accredited Service from both companies aggregating less than the Minimum Retirement Income specified in Article V (after giving effect to adjustments, if any, for Provisional Payee designation or deemed designation), as shall be applicable in his circumstances. 22 4.7 Transfers from Savannah Electric and Power Company. In the case of the transfer to the Employer of an employee of Savannah Electric and Power Company ("SEPCO"), such Employee, if and when he attains his Normal Retirement Date or Deferred Retirement Date, shall be entitled to receive Retirement Income calculated pursuant to Section 5.1 or 5.2, as appropriate, based upon his Accredited Service with the Employer and Accredited Service attributable to actual service during his employment with SEPCO. Such amount calculated in accordance with the preceding sentence shall be reduced by the amount of retirement income calculated under the defined benefit pension plan of SEPCO attributable to Accredited Service during his actual service during his employment with SEPCO. Any Retirement Income based upon an Employee's Accredited Service with the Employer and Accredited Service attributable to actual service during his employment with SEPCO shall be subject to the provisions of the Plan relating to Retirement Income payable at an Early Retirement Date, or if such Retirement Income shall be payable in accordance with the provisions of Section 8.2 or 8.6, subject to the provisions of such Section. This Section 4.7 shall also apply in calculating the Retirement Income payable under this Plan to a former employee of SEPCO who is hired by the Employer and is entitled to credit for years of Accredited Service under the Plan attributable to his actual service with SEPCO. 23 ARTICLE V Retirement Income 5 5.1 Normal Retirement Income. The monthly Retirement Income payable as a single life annuity to an Employee included in the Plan who retires from the service of the Employer at his Normal Retirement Date after January 1, 1989, subject to the limitations of Article VI, shall be the greater of (a) and (b): (a) the amount determined under (1) or (2) below, whichever is greater: (1) the Accrued Retirement Income determined in accordance with Section 5.1 of the Prior Plan without regard to the Minimum Retirement Income requirement, plus the designated fixed dollar amount times the Employee's years of Accredited Service earned after December 31, 1988. For the period on and after January 1, 1989 but ending December 31, 1990, the fixed dollar amount equals $20.00. For the period on and after January 1, 1991, the fixed dollar amount equals $25.00; and (2) $25.00 times an Employee's years of Accredited Service; and (b) the Minimum Retirement Income as determined in accordance with Section 5.2. 5.2 Minimum Retirement Income payable upon retirement at Normal Retirement Date or Deferred Retirement Date. The monthly Minimum Retirement Income payable to an Employee who retires from the service of the Employer after January 1, 1989 at his Normal Retirement Date or Deferred Retirement Date (before adjustment for Provisional Payee designation, if any) shall be an amount equal to 1.70% of his Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service to his Normal Retirement Date or Deferred Retirement Date including a Social Security Offset. Any provisions of this Article V to the contrary notwithstanding, Retirement Income determined in accordance with this Article V with respect to an Employee who retires on his Normal Retirement Date or Deferred Retirement Date shall not be less than the Retirement Income which would have been payable with respect to such Employee commencing on an Early Retirement Date had (a) the Employee retired on the Early Retirement Date which would have resulted in the greatest Retirement Income, (b) his Retirement Income commencing on such Early Retirement Date been computed by utilizing the estimated Federal primary Social Security benefit to which the Employee shall be entitled 24 determined in accordance with the Social Security Act in effect at his retirement, giving effect to the recomputation provision of such Social Security Act, if applicable, and (c) such Retirement Income commencing on such Early Retirement Date been payable in the same form as his Retirement Income commencing on his Normal Retirement Date or Deferred Retirement Date. 5.3 Minimum Retirement Income upon retirement at Early Retirement Date or upon termination of service by reason of death or otherwise prior to retirement. The monthly Minimum Retirement Income payable to an Employee (or his Provisional Payee), if he shall retire on his Early Retirement Date, or if his service shall terminate by reason of death or otherwise prior to retirement, shall be determined in accordance with the following provisions: (a) Upon retirement at Early Retirement Date his Minimum Retirement Income (before adjustment for Provisional Payee designation, if any) shall be an amount equal to 1.70% of his Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service to his Early Retirement Date including a Social Security Offset. (b) Upon termination of service by reason of the death of the Employee prior to retirement and after the effective date of his Provisional Payee designation or deemed designation, the Minimum Retirement Income for the purpose of determining the Employee's Accrued Retirement Income upon which payment to his Provisional Payee in accordance with Section 7.4 shall be based shall be an amount equal to 1.70% of the Employee's Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service to the date of his death including a Social Security Offset. (c) For an Employee who terminates his service with the Employer with entitlement to receive Retirement Income in accordance with Section 8.1, upon retirement at Early Retirement Date or Normal Retirement Date his Minimum Retirement Income (before adjustment for Provisional Payee designation, if any) shall be an amount equal to 1.70% of his Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service to his date of termination including a Social Security Offset. (d) Upon termination of service by reason of disability (as defined in Section 4.4) of the Employee prior to retirement, provided such Employee does not return to the service of the Employer prior to his Retirement Date, the Minimum Retirement Income shall be an amount equal to 1.70% of the Employee's Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service to his Retirement Date including a Social Security Offset. 25 5.4 Calculation of Social Security Offset. (a) Notwithstanding the Social Security Offset as calculated in Sections 5.2 and 5.3, in no event shall such Social Security Offset exceed the limits set forth in Section 401(l) of the Code and the regulations applicable thereunder which are incorporated by reference herein. (b) For purposes of determining the Social Security Offset in calculating an Employee's Retirement Income under the Plan, the Social Security Offset shall be determined by using the actual salary history of the Employee during his employment with the Employer or any Affiliated Employer, provided that in the event that the Retirement Board is unable to secure such actual salary history within 180 days (or such longer period as may be prescribed by the Retirement Board) following the later of the date of the Employee's separation from service (by retirement or otherwise) and the time when the Employee is notified of the Retirement Income to which he is entitled, the salary history shall be determined in the following manner: (1) The salary history shall be estimated by applying a salary scale, projected backwards, to the Employee's compensation from the Employer for W-2 purposes for the first Plan Year following the most recent Plan Year for which the salary history is estimated. The salary scale shall be a level percentage per year equal to six percent (6%) per annum. (2) The Plan shall give clear written notice to each Employee of the Employee's right to supply the actual salary history and of the financial consequences of failing to supply such history. Such notice shall state that the actual salary history is available from the Social Security Administration. For purposes of determining the Social Security Offset in calculating the Retirement Income of an Employee entitled to receive a public pension based on his employment with a Federal, state, or local government agency, no reduction in such Employee's Social Security benefit resulting from the receipt of a public pension shall be recognized. (c) If the distribution of an Employee's Accrued Retirement Income begins before the Employee's attainment of the Social Security Retirement Age (including a benefit commencing at Normal Retirement Date), the projected Employer derived primary insurance amount attributable to service by the Employee for the Employer will be reduced by one-fifteenth (1/15) for each of the first five (5) years and one-thirtieth (1/30) for each of the next five (5) years by which the starting date of such benefit 26 precedes the Social Security Retirement Age of the Employee, and reduced actuarially for each additional year thereafter. 5.5 Early Retirement Income. The monthly amount of Retirement Income payable to an Employee who retires from the service of the Employer at his Early Retirement Date subject to the limitations of Section 6.2, will be equal to his Retirement Income determined in accordance with Sections 5.1 and 5.3 based on his Accredited Service to his Early Retirement Date, reduced by three-tenths of one percent (0.3%) for each calendar month by which the commencement date of his Retirement Income precedes his Normal Retirement Date. At the option of the Employee exercised at or prior to commencement of his Retirement Income on or after his Early Retirement Date (provided he shall not have in effect at such Early Retirement Date a Provisional Payee designation pursuant to Article VII) he may have his Retirement Income adjusted upwards in an amount which will make his Retirement Income payable up to age sixty-five (65) equal, as nearly as may be, to the amount of his Federal primary Social Security benefit (primary old age insurance benefit) estimated to become payable after age sixty-five (65), as computed at the time of his retirement in accordance with Section 5.3(a), plus a reduced amount, if any, of Retirement Income actually determined to be payable after age sixty-five (65). The Federal primary Social Security benefit used in calculating an Employee's Retirement Income payable under the Plan shall be determined by using the salary history of the Employee during his employment with the Employer or any Affiliated Employer, as calculated in accordance with Section 5.4(b). 5.6 Deferred Retirement Income. The monthly amount of Retirement Income payable to an Employee who completes at least one Hour of Service after December 31, 1987 and who retires from the service of the Employer at his Deferred Retirement Date, subject to the limitations of Section 6.2, will be equal to his Retirement Income determined in accordance with Sections 5.1 and 5.2 based on his Accredited Service to his Deferred Retirement Date. For Employees whose Normal Retirement Date would have occurred on or before January 1, 1986, but whose Deferred Retirement Date occurs after January 1, 1988 and on or before July 1, 1991, the monthly amount of Retirement Income payable to an Employee who completes at least one Hour of Service after December 31, 1987, subject to the limitations of Section 6.2, will be equal to the greater of (a) his Retirement Income calculated on his Deferred Retirement Date, or (b) his Retirement Income calculated as of his Normal Retirement Date applying the applicable percentage increase in his Retirement Income pursuant to the terms of Section 5.13 of the Prior Plan. 27 5.7 Payment of Retirement Income. The first payment of an Employee's Retirement Income will be made on his Early Retirement Date, Normal Retirement Date, Deferred Retirement Date, or date of commencement of payment of Retirement Income in accordance with Section 8.2 or 8.6, as the case may be; provided that commencement of the distribution of an Employee's Retirement Income shall not be made prior to his Normal Retirement Date without the consent of such Employee, except as provided in Section 8.4 of the Plan. Notwithstanding anything to the contrary above, if in accordance with this Section 5.7, an Employee is entitled to receive Retirement Income commencing at his Early Retirement Date, he may, in lieu of commencing payment of his Retirement Income upon his Early Retirement Date, elect to receive such Retirement Income commencing as of the first day of any month after his Early Retirement Date and preceding his Normal Retirement Date in an amount equal to his Accrued Retirement Income determined as of the commencement of his Retirement Income on or after his Early Retirement Date determined in accordance with Section 5.5. An election pursuant to this Section 5.7 to have Retirement Income commence prior to Normal Retirement Date shall be made on a form prescribed by the Retirement Board and shall be filed with the Retirement Board at least thirty (30) days before Retirement Income is to commence. In the event of the death of an Employee who has designated a Provisional Payee or is deemed to have done so in accordance with Article VII, if the designation has become effective, the first payment to be made to the Provisional Payee pursuant to Article VII shall be made to the Provisional Payee on the first day of the month after the later of (a) the Employee's death and (b) the date on which the Employee would have attained his fifty- fifth (55th) birthday if he had survived to such date, if the Provisional Payee shall then be alive and proof of the Employee's death satisfactory to the Retirement Board shall have been received by it. Subsequent payments will be made monthly thereafter until the death of such Provisional Payee. In any event, payment of Retirement Income to the Employee shall begin not later than the sixtieth (60th) day after the later of the close of the Plan Year in which falls (a) the Employee's Normal Retirement Date or (b) the date the Employee terminates his service with the Employer or any Affiliated Employer. Notwithstanding the provisions of the Plan for the monthly payment of Retirement Income, such income may be adjusted and payable annually in arrears if the amount of the Retirement Income is less than $10.00 per month. 28 5.8 Termination of Retirement Income. The monthly payment of Retirement Income will cease with the last payment preceding the retired Employee's death; subject, however, to the continuation of payments to a surviving Provisional Payee, if one has been designated or deemed to have been designated, which likewise will cease with the last payment preceding the death of the Provisional Payee. There shall be no benefits payable under the Plan on behalf of any Employee whose death occurs prior to his retirement, except as otherwise provided in Article VII with respect to a Provisional Payee of an Employee. Following the death of an Employee and of his Provisional Payee, if any, no further payments will be made under the Plan on account of such Employee or to his estate. 5.9 Required distributions. (a) Once a written claim for benefits is filed with the Retirement Board and unless the Employee elects to have payment begin at a later date, payment of benefits to the Employee shall begin not later than sixty (60) days after the last day of the Plan Year in which the latest of the following events occurs: (1) the Employee's Normal Retirement Date; (2) the tenth (10th) anniversary of the date the Employee commenced participation in the Plan; or (3) the Employee's separation from service from the Employer or any Affiliated Employer. (b) Required minimum distributions on and after January 1, 1989 (1) Subject to the transitional rules described in Paragraph (c) below, effective for calendar years beginning after December 31, 1988, the payment of Retirement Income to any Employee shall begin no later than April 1 of the calendar year following the calendar year in which the Employee attains age 70-1/2, without regard to the actual date of separation from service. The amount of his Retirement Income shall be recomputed as of such April 1 and as of the close of each Plan Year after his Retirement Income commences and preceding his actual retirement date as if each such date were the Employee's Deferred Retirement Date. Any additional Retirement Income he accrues at the close of any such Plan Year shall be offset (but not below zero) by the value of the benefit payments received in such Plan Year. (2) The receipt by an Employee of any payments or distributions as a result of his attaining age 70-1/2 prior to his actual retirement or death shall in no way affect the 29 entitlement of an otherwise eligible Employee to additional accrued benefits. (c) Age 70-1/2 transitional rule Any Employee who is not a five-percent owner and who has attained age 70-1/2 by January 1, 1988, may defer the commencement of benefit payments under paragraph (b) above until he actually separates from service with the Employer. This transitional rule shall only apply if the Employee is not a five- percent owner at any time during the Plan Year ending with or within the calendar year in which such owner attains age 66-1/2 and in any subsequent Plan Year. (d) Distribution upon death of Employee (1) Death after commencement of benefits If the Employee dies before his entire nonforfeitable interest has been distributed to him, the remaining portion of such interest shall be distributed at least as rapidly as under the method of distribution selected by the Employee as of the date of his death. (2) Death prior to commencement of benefits If the Employee dies before the distribution of his nonforfeitable interest has begun, the entire interest shall be distributed monthly to his Provisional Payee, if any, over such Provisional Payee's remaining lifetime. (e) Determining required minimum distributions Notwithstanding anything in this Plan to the contrary, all distributions, including the minimum amounts which must be distributed each calendar year, under this Plan shall be made in accordance with Code Section 401(a)(9) and the regulations thereunder. (f) Minimum distribution transitional rules Any distribution made pursuant to Section 242(b)(2) of the Tax Equity and Fiscal Responsibility Act of 1982 shall meet the requirements of Code Section 401(a)(9) as in effect on December 31, 1983, and shall also satisfy Code Sections 401(a)(11) and 417. 30 5.10 Suspension of Retirement Income for reemployment. (a) If a former Employee who is receiving Retirement Income shall be reemployed by the Employer or 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 cease during each calendar month after his reemployment in which he completes forty (40) or more Hours of 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. (b) No payment shall be withheld 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. (c) 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. 5.11 Increase in Retirement Income of retired Employees for service prior to January 1, 1991. Retirement Income payable on and after January 1, 1991 to an Employee (or to the Provisional Payee of an Employee) who retired at an Early Retirement Date or at his Normal Retirement Date on or before January 1, 1991 pursuant to the Plan as in effect prior to January 1, 1991, or to the plan of Southern, will be recalculated to increase the amount thereof by an amount ranging from a minimum of two percent (2%) to a maximum of forty percent (40%) in accordance with the following schedule: Year in which Percentage retirement occurred increase 1990 2% 1989 4% 1988 6% 1987 8% 1976 - 1986 10% 1971 - 1975 20% 1966 - 1970 30% 1965 and prior years 40% 31 A similar adjustment, based on the date of the commencement of Retirement Income payments to the Employee's Provisional Payee, rather than the Employee's Retirement Date, will be made in respect of Retirement Income which is payable on or after January 1, 1991 where a Provisional Payee election was in effect, or was deemed to be in effect, when an Employee died while in service prior to January 1, 1991 and prior to his retirement. A similar adjustment will be made in respect of Retirement Income which is payable on or after January 1, 1991 for an Employee (or the Provisional Payee of an Employee) entitled to Retirement Income for which payments have commenced on or before January 1, 1991 in accordance with Article VIII of the Prior Plan, except for Employees whose Retirement Income has been cashed-out pursuant to Section 8.4 of this Plan or Section 8.5 of the Prior Plan. For purposes of determining the applicable percentage increase under this Section 5.11, the year of retirement includes retirement where the last day of employment was December 31 of such year. An Employee whose Deferred Retirement Date is on or before January 1, 1988 and who did not retire at his Normal Retirement Date shall be deemed to have retired at his Normal Retirement Date for purposes of determining the increase in his Retirement Income payable at his Deferred Retirement Date. This Section 5.11 shall not apply with respect to an Employee who has not retired, but for whom the distribution of Retirement Income has commenced pursuant to Section 5.9 of the Plan. 5.12 Special provisions relating to the treatment of absence of an Employee from the service of the Employer to serve in the Armed Forces of the United States. (a) Effective as of November 1, 1977, any provisions of the Plan to the contrary notwithstanding, the provisions of this Section 5.12 shall be applicable to determine the period of absence from the service of the Employer to serve in the Armed Forces of the United States of a "participant in the Plan" (as such term is defined in this paragraph (a)): The term "participant in the Plan" means a person who on or after November 1, 1977 is either: (1) an Employee who is then or thereafter in the service of the Employer (including an Employee on authorized leave of absence), (2) a retired Employee who is receiving Retirement Income, (3) a deceased Employee who received Retirement Income under this Plan or the Prior Plan at any time after its Effective Date, (4) a deceased former Employee who prior to the time of his death was receiving Retirement Income in accordance with this Plan or the Prior Plan, (5) a former Employee whose service terminated prior to January 1, 1976 and 32 who is receiving Retirement Income in accordance with the Prior Plan, (6) a former Employee whose service terminated prior to November 1, 1977 and who will be entitled to receive Retirement Income commencing after that date in accordance with this Plan or the Prior Plan, or (7) a former Employee who was transferred from the Employer pursuant to Section 4.6 or pursuant to the Prior Plan and who will be entitled to receive in accordance with either, Retirement Income commencing after November 1, 1977. The Employee or former Employee or retired Employee referred to in this paragraph (a) is one who: (1) left the employment of the Employer or of Commonwealth Services, Inc. (formerly known as The Commonwealth & Southern Corporation (New York) ("Commonwealth")) or of The Southern Company ("Southern") to enter the Armed Forces of the United States (including reserve components thereof, the Public Health Service, and the National Guard) for the purposes and under circumstances which are specified in the reemployment provisions of the Military Selective Service Act and in any amendments or supplements thereto hereinafter in this Section 5.12 referred to as the "Selective Service Act," (2) made application for reemployment by the Employer or by Commonwealth or Southern within such time after discharge or release from such service in the Armed Forces of the United States as is specified in the reemployment provisions of the Selective Service Act as is applicable in his circumstances and was reemployed by the Employer or by Southern or by Commonwealth and if by Commonwealth thereafter became an Employee of Southern or of the Employer, (3) served a period of active duty in the Armed Forces of the United States which did not exceed the maximum period of such active duty specified in the reemployment provisions of the Selective Service Act as is applicable in his circumstances, and (4) performed such service in the Armed Forces after May 1, 1940. (b) For the purposes of the Plan, the period of absence of a participant in the Plan to serve in the Armed Forces of the United States shall be the period determined by the Retirement Board. (c) In accordance with the provisions of the Plan as amended effective as of November 1, 1977 by the addition of this Section 5.12 and the concurrent amendments associated therewith, there shall be recalculated effective as of November 1, 1977 the Retirement Income (1) of each participant in the Plan or that of his Provisional Payee, if any, who is then receiving Retirement Income; and (2) of each deceased participant in the Plan and his deceased Provisional Payee, if any, who received payment of Retirement Income, who is not then receiving Retirement Income. (1) If in accordance with such recalculation, a larger amount of Retirement Income would have been payable to a participant in the Plan who is currently receiving payment 33 of Retirement Income and/or to his Provisional Payee, if any, than was paid to them respectively prior to November 1, 1977, payment in a single sum of the excess of the recalculated amount over the amounts which were paid prior to November 1, 1977 with interest thereon as hereinafter provided, shall be made as soon as practicable after November 1, 1977 and, commencing as soon as practicable after November 1, 1977, the Retirement Income payable to participants in the Plan and/or to their Provisional Payees, if any, who are currently receiving Retirement Income shall be increased to an amount which is equal to the larger recalculated amount to which they shall be entitled in respect of payments to be made on or after November 1, 1977. (2) If in accordance with the recalculation a larger amount of Retirement Income would have been payable to the date of death prior to November 1, 1977 of a deceased retired Employee or his Provisional Payee than was paid prior to his death, payment in a single sum of the excess of the recalculated amount over the amount which was paid prior to the date of death, with interest thereon as hereinafter provided, shall be made to his estate as soon as practicable after November 1, 1977. (3) For the purposes of the recalculation to be made in accordance with this paragraph (c), if a participant in the Plan left the employment of an Affiliated Employer to enter the Armed Forces of the United States and was not reemployed by such Affiliated Employer upon his discharge or release from service in the Armed Forces but he entered the employment of the Employer, without intermediate employment, and within the time prescribed in paragraph (a) of this Section 5.12, and his period of absence in the Armed Forces of the United States, as determined by the Retirement Board, is not taken into account under the pension plan of the Affiliated Employer whose service he left to enter the Armed Forces or under Section 4.3, it shall be treated under the Plan and the Prior Plan as if such period of absence had been a period of absence from the Employer. (d) Retirement Income of participants in the Plan who are not referred to in subparagraphs (1) or (2) of paragraph (c) and who are not on November 1, 1977 receiving Retirement Income shall be determined in accordance with the provisions of the Plan as amended by the addition of this Section 5.12 and the concurrent amendments associated therewith. (e) Interest to be paid on any single sum payment to be made in accordance with subparagraphs (1) or (2) of paragraph (c) of this Section 5.12 shall be computed at the annual rate of five percent (5%). 34 (f) Payment to be made to any payee in accordance with this Section 5.12 may be conditioned by the Retirement Board upon its receipt of (1) such information pertaining to absence of an Employee or former Employee to serve in the Armed Forces of the United States as it may request and (2) such form of receipt and release as it may determine to be appropriate in the circumstances. 35 ARTICLE VI Limitations on Benefits 6 6.1 Maximum Retirement Income. Notwithstanding any other provision of the Plan, the amount of Retirement Income shall be subject to the provisions of Article VI. (a) The maximum annual amount of Retirement Income payable with respect to an Employee in the form of a straight life annuity without any ancillary benefits after any adjustment for a Provisional Payee designation shall be the lesser of the dollar limitation determined under Code Section 415(b)(1)(A) as adjusted under Code Section 415(d), or Code Section 415(b)(1)(B) as adjusted under Treasury Regulation Section 1.415-5, subject to the following provisions of Article VI. With respect to any former Employee who has Accrued Retirement Income under the Plan or his Provisional Payee, the maximum annual amount shall also be subject to the adjustment under Code Section 415(d). (b) For purposes of Section 6.1, the term "average compensation for his high three (3) years" shall mean the period of consecutive calendar years (not more than three) during which the Employee was both an active participant in the Plan and had the greatest aggregate compensation from the Employer or, if he is also entitled to receive a pension from a defined benefit plan of an Affiliated Employer or if assets and liabilities attributable to the pension of the Employee from a defined benefit plan of an Affiliated Employer have been transferred to this Plan, the greatest aggregate compensation from the Employer and the Affiliated Employer during such high three (3) years. The limitation described in Section 6.1(a) shall also apply in the case of the payment of an Employee's Retirement Income with a Provisional Payee designation. (c) For purposes of Article VI, the term "compensation" means an Employee's earned income, wages, salaries, and fees for professional services, and other amounts received for personal services actually rendered in the course of employment with the Employer maintaining the Plan (including, but not limited to, commissions paid salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips and bonuses), and excluding the following: (1) Employer contributions to a plan of deferred compensation which are not included in the Employee's gross income for the taxable year in which contributed or Employer contributions under a simplified employee pension plan to the extent such contributions are deductible by the Employee, or any distributions from a plan of deferred compensation; 36 (2) Amounts realized from the exercise of a nonqualified stock option, or when restricted stock (or property) held by the Employee either becomes freely transferable or is no longer subject to a substantial risk of forfeiture; (3) Amounts realized from the sale, exchange, or other disposition of stock acquired under a qualified stock option; and (4) Other amounts which received special tax benefits, or contributions made by the Employer (whether or not under a salary reduction agreement) towards the purchase of an annuity described in Section 403(b) of the Code (whether or not the amounts are actually excludable from the gross income of the Employee). Compensation for any Limitation Year is the compensation actually paid or includible in gross income during such year. (d) The foregoing limitations regarding the maximum Retirement Income shall not apply with respect to an Employee if the Retirement Income payable under the Plan and under any other defined benefit plans of the Employer or any Affiliated Employer does not exceed $10,000 for the calendar year or for any prior calendar year, and the Employer and any Affiliated Employer has not at any time maintained a defined contribution plan in which the Employee has participated. The terms "defined benefit plan" and "defined contribution plan" shall have the meanings set forth in Section 415(k) of the Code. 6.2 Adjustment to Defined Benefit Dollar Limitation for Early or Deferred Retirement. (a) If the retirement benefit of an Employee commences before the Employee's Social Security Retirement Age, the Defined Benefit Dollar Limitation shall be reduced in accordance with Code Section 415(b)(2)(C) as prescribed by the Secretary of the Treasury. The reduction shall be made in such manner as the Secretary of the Treasury may prescribe which is consistent with the reduction for old-age insurance benefits commencing before the Social Security Retirement Age under the Social Security Act. (b) If the retirement benefit of an Employee commences after the Employee's Social Security Retirement Age, the Defined Benefit Dollar Limitation shall be adjusted in accordance with Code Section 415(b)(2)(D) as prescribed by the Secretary of the Treasury, based on the lesser of the interest rate assumption under the Plan or on an assumption of five percent (5%) per year. 37 6.3 Adjustment of limitation for Years of Service or participation. (a) If an Employee has completed less than ten (10) years of participation, the Employee's accrued benefit shall not exceed the Defined Benefit Dollar Limitation as adjusted by multiplying such amount by a fraction, the numerator of which is the Employee's number of years (or part thereof) of participation in the Plan, and the denominator of which is ten (10). (b) If an Employee has completed less than ten (10) Years of Service with the Employer and any Affiliated Employer, the limitations described in Sections 415(b)(1)(B), 415(b)(4), and 415(e) of the Code shall be adjusted by multiplying such amounts by a fraction, the numerator of which is the Employee's number of years of service (or part thereof), and the denominator of which is ten (10). (c) In no event shall Sections 6.3(a) and (b) reduce the limitations provided under Sections 415(b)(1), 415(b)(4), and 415(e) of the Code to an amount less than one-tenth (1/10) of the applicable limitation (as determined without regard to this Section 6.3). (d) This Section 6.3 shall be applied separately with respect to each change in the benefit structure of the Plan, except as is or may be limited by Revenue Procedure 92-42. 6.4 Preservation of Accrued Retirement Income. (a) Retirement Income payable to an Employee or former Employee who was an active participant in the Plan before October 3, 1973 will not be deemed to exceed the amount of maximum Retirement Income limitations imposed by the provisions of this Article VI if: (1) The annual amount of Retirement Income payable to such Employee on retirement does not exceed 100% of his annual rate of compensation on the earlier of (A) October 2, 1973, or (B) the date on which he separated from the service of the Employer; (2) Such annual Retirement Income is not greater than the annual amount of Retirement Income which would have been payable to such Employee on retirement if (A) all terms and conditions of the Plan in existence on his retirement date had remained in existence until his retirement and (B) his compensation taken into account for any period after October 2, 1973 had not exceeded his annual rate of compensation on October 2, 1973; and 38 (3) In the case of an Employee whose service with the Employer terminated prior to October 2, 1973, such annual Retirement Income is no greater than his vested Accrued Retirement Income as of the date of such termination of service. (b) In the case of an Employee who is a participant in the Plan prior to January 1, 1983, if the Section 415 requirements have been met for all Plan Years prior to 1983, then the Defined Benefit Dollar Limitation described in Section 1.10 applicable to the payment of such Employee's Retirement Income shall be equal to his Accrued Retirement Income as of December 31, 1982, (when expressed as an annual benefit within the meaning of Section 415(b)(2) of the Code, as in effect prior to the Tax Equity and Fiscal Responsibility Act of 1982), if his Accrued Retirement Income exceeds such Defined Benefit Dollar Limitation. (c) This Section 6.4(c) shall apply to defined benefit plans that were in existence on May 6, 1986, and that met the applicable requirements of Section 415 of the Code as in effect for all Limitation Years. If the Current Accrued Retirement Income of an Employee as of the first day of the Limitation Year beginning on or after January 1, 1987, exceeds the benefit limitations under Section 415(b) of the Code (as modified by Sections 6.2 and 6.3 of the Plan), then, for purposes of Code Section 415(b) and (e), the Defined Benefit Dollar Limitation with respect to such Employee shall be equal to such Current Accrued Retirement Income. 6.5 Limitation on benefits from multiple plans. (a) In the case of an Employee who is also a participant in any other defined benefit plan of the Employer or any Affiliated Employer or in any defined contribution plan of the Employer or any Affiliated Employer, the Retirement Income provided by the Plan shall be limited to the extent necessary to prevent the sum of Fractions A and B below, computed as of the end of the Plan Year, from exceeding 1.0. Fraction A (numerator) Projected annual benefit of the Employee under the Plan and any other defined benefit plan of the Employer or any Affiliated Employer (determined as of the close of the Plan Year). (denominator) The lesser of (1) the product of 1.25 multiplied by the Defined Benefit Dollar Limitation (or such higher accrued benefit as of December 31, 1982), or (2) 1.4 multiplied by the amount determined under Code Section 415(b)(1)(B) as adjusted under Treasury Regulation Section 1.415-5. 39 Fraction B (numerator) The sum of all Annual Additions to the account of the Employee under any defined contribution plan of the Employer or any Affiliated Employer as of the close of the Plan Year. (denominator) The sum of the lesser of the following amounts, determined for such Plan Year and for each prior Plan Year in which the Employee has a Year of Service, (1) 1.25 multiplied by the Defined Contribution Dollar Limitation determined under Code Section 415(c)(1)(A), or (2) 1.4 multiplied by twenty-five percent (25%) of the Employee's compensation for the year. 6.6 Special rules for plans subject to overall limitations under Code Section 415(e). (a) For purposes of computing the defined contribution plan fraction of Section 415(e)(1) of the Code, "Annual Addition" shall mean the amount allocated to an Employee's account during the Limitation Year as a result of: (1) employer contributions, (2) employee contributions, (3) forfeitures, and (4) amounts described in Sections 415(1)(1) and 419(A)(d)(2) of the Code. (b) The Annual Addition for any Limitation Year beginning before January 1, 1987 shall not be recomputed to treat all Employee contributions as an Annual Addition. (c) If the sum of Fractions A and B exceeds 1.0 as of December 31, 1982, the numerator of Fraction B shall be reduced by an amount which does not exceed the numerator, so that the sum of Fraction A and Fraction B does not exceed 1.0. (d) If the Plan satisfied the applicable requirements of Section 415 of the Code as in effect for all Limitation Years beginning before January 1, 1987, an amount shall be subtracted from the numerator of the defined contribution plan fraction (not exceeding such numerator) as prescribed by the Secretary of the Treasury so that the sum of the defined benefit plan fraction and defined contribution plan fraction computed under Section 415(e)(1) of the Code (as revised by this Article VI) does not exceed 1.0 for such Limitation Year. 40 (e) The defined contribution plans and the other defined benefit plans of the Employer and Affiliated Employers include, respectively, (1) The Southern Company Employee Savings Plan, The Southern Company Employee Stock Ownership Plan, and any other defined contribution plan (as defined in Section 415(k) of the Code) and (2) any other qualified pension plan in which the Employee participates in accruing benefits maintained by the Employer or any Affiliated Employer. 6.7 Combination of Plans. Notwithstanding any provisions contained herein to the contrary, in the event that an Employee participates in a defined contribution plan or 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(e), corrective adjustments shall first be made under this Plan. However, if an Employee's Retirement Income under this Plan has already commenced, corrections shall first be made under The Southern Company Employee Stock Ownership Plan, if possible, and if not possible, then correction shall be made to the Employee's Accrued Retirement Income under this Plan. 6.8 Incorporation of Code Section 415. Notwithstanding anything contained in this Article to the contrary, the limitations, adjustments and other requirements prescribed in this Article shall at all times comply with the provisions of Code Section 415 and the regulations thereunder, the terms of which are specifically incorporated herein by reference. 41 ARTICLE VII Provisional Payee 7 7.1 Adjustment of Retirement Income to provide for payment to Provisional Payee. An Employee who desires to have his Accrued Retirement Income adjusted in accordance with the provisions of this Article VII to provide a reduced amount of Retirement Income payable to him for his lifetime commencing on his Early Retirement Date, his Normal Retirement Date, or his Deferred Retirement Date, as the case may be, may elect, in accordance with the provisions of this Article VII, at his option, either: (a) that an amount of Retirement Income be payable to him for his lifetime which is equal to eighty percent (80%) of the Retirement Income which would otherwise be payable to him, but for such election (taking into account any reduction required in accordance with Sections 7.3 and 7.4(a)), with the provision that the same amount will be continued after his death to his Provisional Payee until the death of such Provisional Payee, or (b) that an amount of Retirement Income be payable to him for his lifetime which is equal to ninety percent (90%) of the Retirement Income which would otherwise be payable to him, but for such election (taking into account any reduction required in accordance with Sections 7.3 and 7.4(a)), with the provision that one-half (1/2) of the amount payable to the Employee will be continued after his death to his Provisional Payee until the death of such Provisional Payee. 7.2 Form and time of election and notice requirements. (a) An election of payment and designation of a Provisional Payee in accordance with Section 7.1 shall be made in writing at the same time on a form prescribed by the Retirement Board and delivered to it. The election and designation shall specify its effective date which shall not be sooner than the date received by the Retirement Board or the Employee's fifty-fifth (55th) birthday, whichever is later, nor later than the date of commencement of payments in accordance with this Article VII. (b) An election of payment to be made in accordance with paragraph (a) or paragraph (b) of Section 7.1 may be changed from paragraph (a) to paragraph (b) or vice versa by an Employee, provided the written election of the change specifies an effective date which shall not be sooner than the date received by the Retirement Board or the Employee's fifty-fifth (55th) birthday, whichever is later, nor later than the date of commencement of payments in accordance with this Article VII. To the extent that the new method of payment shall afford the 42 Employee changed protection in the event of his death after the effective date of the new election and prior to retirement, his Accrued Retirement Income shall be adjusted pursuant to Section 7.4(a) to reflect such changed protection. (c) With respect to Sections 7.5 and 7.6, within the period not less than 30 days and not more than 90 days prior to the commencement of benefits, the Employee shall be furnished, by mail or personal delivery, a written explanation of: (1) the terms and conditions of the reduced Retirement Income payable as provided in paragraph (b) of Section 7.1; (2) the Employee's right to make, and the effect of, an election to waive the payment of reduced Retirement Income pursuant to a Provisional Payee designation; (3) the rights of the Employee's Provisional Payee; and (4) the right to make, and the effect of, a revocation of a previous election to waive the payment of reduced Retirement Income pursuant to a Provisional Payee designation. Within thirty (30) days following an Employee's written request received by the Retirement Board during the election period, but within sixty (60) days from the date the Employee is furnished all of the information prescribed in the immediately preceding sentence, the Employee shall be furnished an additional written explanation, in terms of dollar amounts, of the financial effect of an election by him not to receive such reduced Retirement Income. If an Employee makes such request, the election period herein prescribed shall end not earlier than sixty (60) calendar days following the day of the mailing or personal delivery of the additional explanation to the Employee. Except that if an election made as provided in Section 7.5 or 7.6 is revoked, another election under that Section may be made during the specified election period. 7.3 Circumstances in which election and designation are inoperative. An election and designation made pursuant to this Article shall be inoperative and the regular provisions of the Plan shall again become applicable as if a Provisional Payee had not been designated if, prior to the commencement of any payment in accordance with this Article VII: (a) an Employee's Provisional Payee shall die, (b) the Employee and the Provisional Payee shall be divorced under a final decree of divorce, or (c) the Retirement Board shall have received the written Qualified Election of the Employee to rescind his election of payment and designation of a Provisional Payee. If such a Qualified Election to rescind is made by the Employee, his Accrued Retirement Income shall be reduced to reflect the protection afforded the Employee by any Provisional Payee designation during the period from its effective date to the date of the Retirement Board's receipt of the Employee's Qualified Election to rescind if the option as to payments of reduced Retirement Income was in accordance with either Section 7.1(a), 7.6(a), or 7.6(b). If an Employee remarries subsequent to the 43 death or divorce of his Provisional Payee and prior to the commencement of payments in accordance with this Article VII, and if such Employee is married prior to the time of the commencement of payments, then he shall be entitled to designate a new Provisional Payee in the manner set forth in Section 7.2. 7.4 Pre-retirement death benefit. If prior to his Normal Retirement Date (or his Deferred Retirement Date, if applicable), an Employee shall die while in the service of the Employer and is survived by his spouse to whom he shall be married at the time of his death, there shall be payable to his surviving spouse (whom he shall be deemed to have designated as his Provisional Payee) Retirement Income determined in accordance with paragraph (a) or paragraph (c) of this Section 7.4, as applicable. Such Retirement Income shall commence on the first day of the month following the death of the Employee or the first day of the month following the date on which he would have attained his fifty-fifth (55th) birthday if he were still alive, whichever is later, and shall cease with the last payment preceding the death of his Provisional Payee. (a) The amount of Retirement Income payable to the Provisional Payee of a deceased Employee who prior to his death had attained his fifty-fifth (55th) birthday shall be equal to the amount payable to the Provisional Payee as calculated in Section 7.1(b) determined on the basis of his Accredited Service to the date of his death, or if the Employee shall have attained his fifty-fifth (55th) birthday and so elected prior to his death, such Retirement Income shall be equal to the amount set forth in Section 7.1(a) determined on the basis of his Accredited Service to the date of his death reduced as provided in the next sentence. If such election shall be made by the Employee, the Retirement Income which shall be payable to the Employee if he lives to his Early Retirement Date or the first day of the month following his attainment of age sixty-five (65), if later, shall be reduced by three-fourths of one percent (0.75%) for each year (prorated for a fraction of a year from the first day of the month following the effective date of the election) which has elapsed from the effective date of his election to the earlier of (1) the commencement of Retirement Income on or after his Early Retirement Date or the first day of the month following his attainment of age sixty-five (65), if later, or (2) the revocation of such election. If he shall die before the commencement of Retirement Income on or after his Early Retirement Date or the first day of the month following his attainment of age sixty-five (65), if later, his Accrued Retirement Income to the date of his death shall be reduced by three-quarters of one percent (0.75%) for each year (prorated for a fraction of a year from the first day of the month following the effective date of the election) between the effective date of his election and the first day of the month following his attainment of age sixty-five (65). No reduction in the 44 Employee's Retirement Income shall be made for the period during which the election is in effect after the first day of the month following his attainment of age sixty-five (65). (b) Retirement Income shall not be payable under paragraph (a) of this Section 7.4 to the Provisional Payee of a deceased Employee if at the time of his death there was in effect a Qualified Election made after August 22, 1984 under this paragraph (b) that no Retirement Income shall be paid to his Provisional Payee in the event of his death while in the service of the Employer (or while in the service of an Affiliated Employer to which his employment had been transferred in accordance with Section 4.6) as provided in paragraph (a), provided the Employee had received at least 180 days prior to his fifty-fifth (55th) birthday a written explanation of: (1) the terms and conditions of the Retirement Income payable to his Provisional Payee as provided in paragraph (a); (2) the Employee's right to make, and the effect of, an election to waive the payment of Retirement Income to his Provisional Payee; (3) the rights of the Employee's Provisional Payee; and (4) the right to make, and the effect of, a revocation of a previous election to waive the payment of Retirement Income to the Employee's Provisional Payee. A revocation of a prior Qualified Election to waive the payment of Retirement Income to the Employee's Provisional Payee may be made by the Employee without the consent of the Employee's Provisional Payee at any time before the commencement of benefits. An election under this paragraph (b) may be made and such election may be revoked by an Employee during the period commencing ninety (90) days prior to the Employee's fifty-fifth (55th) birthday and ending on the date of the Employee's death. (c) The amount of such Retirement Income payable to the Provisional Payee of a deceased Employee who prior to his death, had completed at least five (5) Vesting Years of Service and had not attained his fifty-fifth (55th) birthday shall be equal to one-half of the reduced amount, as actuarially adjusted to provide for the payment of such Retirement Income beginning at the date on which such deceased Employee would have attained his fifty-fifth (55th) birthday and to provide for the determination of such Retirement Income on a joint and fifty percent (50%) survivor basis of the Employee's Accrued Retirement Income, determined on the basis of his Accredited Service to the date of his death. This Section 7.4(c) shall also apply to adjust the future payment of Retirement Income after December 31, 1990 to a Provisional Payee with respect to an Employee who died (while in the service of the Employer prior to his fifty-fifth (55th) birthday after completing the requisite number of Years of Service) in order to have a nonforfeitable right to Retirement 45 Income under the Plan as in effect on the Employee's date of death, provided Retirement Income is payable to such Provisional Payee on or after January 1, 1991. The adjustment under this Section 7.4(c) shall be determined by adjusting the Retirement Income that had commenced to the Provisional Payee on or before January 1, 1986, and then adding the applicable percentage increase under Section 5.13 of the Prior Plan. For an Employee, on or after January 1, 1991, who dies while in the service of the Employer prior to his fifty-fifth (55th) birthday after completing five (5) Vesting Years of Service, the amount of such Retirement Income payable to the Provisional Payee shall be calculated as provided in Section 7.1(b) determined on the basis of his Accredited Service to the date of his death. The payment of such Retirement Income to the Provisional Payee shall begin on the first day of the month following the date on which such deceased Employee would have attained his fifty-fifth (55th) birthday. 7.5 Post-retirement death benefit - qualified joint and survivor annuity. If at his Early Retirement Date, Normal Retirement Date, or Deferred Retirement Date, as the case may be, an Employee is married and he has not: (a) designated a Provisional Payee in accordance with Section 7.1 in respect of payments to be made commencing on his Early, Normal, or Deferred Retirement Date or (b) made a Qualified Election that payment be made to him in the mode of a single life annuity, he shall nevertheless be deemed to have made an effective designation of a Provisional Payee under this Section 7.5 and to have specified the payment of a benefit as provided in Section 7.1(b). 7.6 Election and designation by former Employee entitled to Retirement Income in accordance with Article VIII. If an Employee is entitled to receive in accordance with Section 8.1 Retirement Income commencing at Normal Retirement Date, or sooner in accordance with Section 8.2, he may, on or after his fifty-fifth (55th) birthday, designate his spouse as his Provisional Payee and elect to have his Accrued Retirement Income at the date of termination of his service actuarially adjusted to provide, at his option, in the event of the commencement of payment prior to his Normal Retirement Date either: (a) a reduced amount payable to him for his lifetime with the provision that such reduced amount will be continued after his death to his spouse as Provisional Payee until the death of such Provisional Payee; or (b) a reduced amount (greater than the amount in (a) above) payable to him for his lifetime with the provision that one-half (1/2) of such reduced amount will be continued after his death to his spouse as Provisional Payee until the death of such Provisional Payee. 46 The Employee's election and designation of his Provisional Payee made in accordance with this Section 7.6 shall be in writing on a form prescribed by the Retirement Board and delivered to it and shall become effective not sooner than the date received by the Retirement Board or the Employee's fifty-fifth (55th) birthday, whichever is later, nor later than the date of commencement of payment in accordance with this Section 7.6. If the Employee dies prior to his Normal Retirement Date but after the effective date of his Provisional Payee designation, there will be payable to his Provisional Payee for life commencing on the first day of the calendar month after the Employee's death Retirement Income in a reduced amount in accordance with the Employee's election of payments to be made to his Provisional Payee after the death of the Employee under paragraph (a) or (b), as the case may be, of this Section 7.6. However, if prior to the Employee's death, the Retirement Board has not received such election, payment of a reduced amount of Retirement Income will be made in accordance with paragraph (b) of this Section 7.6 to his surviving spouse to whom he is married at the time of his death, unless (1) at the time of his death there is in effect a Qualified Election by the Employee that reduced Retirement Income shall not be paid to his surviving spouse in accordance with this Section 7.6 should he die between his fifty-fifth (55th) birthday and his Normal Retirement Date without having elected that payment be made to a Provisional Payee and (2) at least 180 days prior to his fifty-fifth (55th) birthday a written explanation is provided to the Employee of: (A) the terms and conditions of the Retirement Income payable to his Provisional Payee as provided in this Section 7.6; (B) the Employee's right to make, and the effect of, an election to waive the payment of Retirement Income to his Provisional Payee; (C) the rights of an Employee's spouse; and (D) the right to make, and the effect of, a revocation of a previous election to waive the payment of Retirement Income to his Provisional Payee. If the Employee is entitled to receive payment of Retirement Income in accordance with Section 8.2 after his fifty-fifth (55th) birthday and prior to his Normal Retirement Date and elects to do so, a reduced amount of Retirement Income determined in accordance with this Section 7.6 based upon his Accrued Retirement Income at the date of termination of his service (actuarially reduced in accordance with Section 8.2) will be payable to him commencing on the date on which payments commence prior to Normal Retirement Date in accordance with Section 8.2 with payments in the same or reduced amount to be continued to his Provisional Payee for life after the Employee's death in accordance with his election under paragraph (a) or (b), as the case may be, of this Section 7.6. However, if the Employee is married and he has not designated a Provisional Payee in respect of payments to commence to him prior to his Normal Retirement 47 Date or elected that payment be made to him in the mode of a single life annuity pursuant to a Qualified Election, he shall be deemed to have designated a Provisional Payee pursuant to this Section 7.6 and thereby specified that a reduced Retirement Income shall be paid to him during his lifetime as provided in paragraph (b) of this Section 7.6 and continued after his death to his Provisional Payee as provided in paragraph (b) of this Section 7.6. If the Employee is alive on his Normal Retirement Date and is married and payment of Retirement Income has not sooner commenced, the provisions of Section 7.5 shall be applicable to the payment of his Retirement Income, unless he shall elect at his Normal Retirement Date to receive payment of his Retirement Income pursuant to Section 7.1(a) or 7.1(b). However, if an election and designation in accordance with this Section 7.6 was in effect prior to his Normal Retirement Date, the Employee's Accrued Retirement Income at his Normal Retirement Date shall be actuarially adjusted for the period the election and designation was in effect. 7.7 Death benefit for Provisional Payee of former Employee. If an Employee, whose service with the Employer terminates on or after January 1, 1989, shall die after such termination of employment, and prior to his death (a) shall have not attained his fifty-fifth (55th) birthday, (b) shall have completed at least five (5) Vesting Years of Service, and (c) shall be survived by his spouse to whom he shall be married at his death, then there shall be payable to his surviving spouse (whom he shall be deemed to have designated as his Provisional Payee) Retirement Income determined in accordance with this Section 7.7. Such Retirement Income shall be equal to one-half of the reduced amount, as actuarially adjusted to provide for the payment of such Retirement Income beginning at the date on which such deceased Employee would have attained his fifty-fifth (55th) birthday and to provide for the determination of such Retirement Income on a joint and fifty percent (50%) survivor basis of the Employee's Accrued Retirement Income, determined on the basis of his Accredited Service to the date of his death. Such Retirement Income shall commence on the first day of the month following the date on which the former Employee would have attained his fifty-fifth (55th) birthday if he were still alive, and shall cease with the last payment preceding the death of his Provisional Payee. 7.8 Limitations on Employee's and Provisional Payee's benefits. (a) With respect to an Employee who does not elect a single life annuity, the limitation on benefits imposed under Article VI shall be applied as if such Employee had elected a benefit in the form of a single life annuity. 48 (b) With respect to a Provisional Payee, the limitations on benefits imposed under Article VI shall be applied consistent with paragraph (a) above prorated to provide a limitation equal to or one-half of the Employee's limitation as appropriate in accordance with annuity form of benefit elected by the Employee. 7.9 Effect of election under Article VII. An election of payment or a deemed election of payment in accordance with this Article VII shall be in lieu of any other form or method of payment of Retirement Income. 49 ARTICLE VIII Termination of Service 8 8.1 Vested interest. If an Employee included in the Plan terminates for any reason other than death or transfer to an Affiliated Employer as provided by Section 4.6 or retirement as provided by Article III, and if such Employee has had at least five (5) Vesting Years of Service with the Employer, whether or not Accredited Service, he will be entitled to receive, commencing at Normal Retirement Date (except as provided in Section 8.2 and subject to the provisions of Section 7.6) Retirement Income equal to his Accrued Retirement Income at the date of the termination of such service, provided that he makes application to the Employer for the payment of such Retirement Income. If proper application for payment of Retirement Income shall not be received by the Employer by the April 1 of the calendar year following the calendar year in which the Employee attains age 70 1/2 and the whereabouts of the Employee cannot be determined by the Employer, Retirement Income shall be paid to the Employee's Provisional Payee, if any, and if surviving and the whereabouts known to the Employer, or applied in such other manner as the Retirement Board shall deem appropriate. The payment of Retirement Income pursuant to this provision shall completely discharge all liability of the Retirement Board, the Employer, and the Trustee or other payor to the extent of the payments so made. If such Employee terminates with less than five (5) Vesting Years of Service with the Employer, he shall immediately forfeit any Accrued Retirement Income under the Plan based upon his service prior to such termination. 8.2 Early distribution of vested benefit. If an Employee terminates from service before his fifty-fifth (55th) birthday and is entitled to receive in accordance with Section 8.1 Retirement Income commencing at his Normal Retirement Date and at the time his service terminated he had at least ten (10) Years of Accredited Service, he may, in lieu of receiving payment of such Retirement Income commencing at Normal Retirement Date, elect to receive such Retirement Income commencing as of the first day of any month within the ten-year period preceding his Normal Retirement Date in an amount equal to his Accrued Retirement Income at the date of termination of his service actuarially reduced in accordance with reasonable actuarial assumptions adopted by the Retirement Board. An election pursuant to this Section 8.2 to have Retirement Income commence prior to Normal Retirement Date shall be made on a form prescribed by the Retirement Board and shall be filed with the Retirement Board at least thirty (30) days before Retirement Income is to commence. 50 8.3 Years of Service of reemployed Employees. If an Employee whose service terminates is again employed by the Employer as an Employee or he is employed (other than by reason of transfer in accordance with Section 4.6) by an Affiliated Employer which has at the time of his employment by such company a pension plan with substantially the same terms as this Plan, his Years of Service with the Employer and his Accredited Service immediately prior to the termination of his service shall be treated as provided in this Section 8.3, subject to the provisions of Section 8.4. For this purpose the terms "again employed" and "reemployment" shall include employment with an Affiliated Employer. (a) If at the time of his reemployment he has not incurred a One-Year Break in Service, his Years of Service with the Employer and his Accredited Service will be restored whether or not he is entitled to receive Retirement Income in accordance with Section 8.1. (b) If at the time of termination of his service he is entitled to receive Retirement Income in accordance with the provisions of Section 8.1, upon his reemployment his Years of Service with the Employer immediately prior to the termination of his service shall be restored whether or not he has incurred a One-Year Break in Service. (c) If at the time of reemployment on or after January 1, 1985, he is not entitled to receive Retirement Income in accordance with Section 8.1 and he (1) has incurred less than five (5) consecutive One-Year Breaks in Service or (2) has incurred five (5) or more consecutive One-Year Breaks in Service, but his Years of Service prior to such One-Year Breaks in Service exceeded the consecutive One-Year Breaks in Service, then upon the completion of one Eligibility Year of Service following his reemployment, provided that if his reemployment date is on or after January 1, 1995, no such Eligibility Year of Service shall be required, his Years of Service with the Employer and his Accredited Service prior to the first One-Year Break in Service shall be restored, disregarding any Years of Service with the Employer which are not required to be taken into account by reason of any previous One-Year Breaks in Service. The Years of Service and years of Accredited Service credited to an Employee reemployed prior to January 1, 1985, with regard to his Years of Service with the Employer and years of Accredited Service immediately prior to the termination of his service shall be determined under the terms of the Plan in effect prior to January 1, 1985. 51 (d) Years of Service and Accredited Service restored to an Employee in accordance with this Section 8.3 shall be aggregated with Years of Service and Accredited Service to which the Employee may be entitled after his reemployment. If, however, the Minimum Retirement Income so determined for the Employee upon his subsequent retirement or termination of service shall be less than the aggregate of: (1) his Minimum Retirement Income, if any, determined in respect of the period ending with his prior termination of service, and (2) his Minimum Retirement Income determined in respect of the period after his reemployment, the aggregate of such Minimum Retirement Incomes shall be deemed to be his Minimum Retirement Income upon such subsequent retirement or termination of service. In any event, his Retirement Income, however computed, shall be reduced by the Actuarial Equivalent of any Retirement Income he received with respect to his prior period of employment. (e) If a former Employee to whose credit shall be restored years of Accredited Service in accordance with this Section 8.3 shall become entitled (or his Provisional Payee shall become entitled) to receive retirement income under the plan of an Affiliated Employer by which he should become employed, he shall be deemed to have transferred to the Affiliated Employer for purposes of Section 4.6 as of his initial date of participation in the plan of such Affiliated Employer. 8.4 Cash-out and buy-back. (a) Notwithstanding any other provision of this Plan, if the present value of Accrued Retirement Income of an Employee whose service terminates for any reason other than transfer to an Affiliated Employer under Section 4.6, or retirement under Article III, is not more than $3,500 (or such greater amount as permitted by the regulations prescribed by the Secretary of the Treasury) the Employer shall direct that such present value of the Employee's Accrued Retirement Income be paid in a lump sum, in cash, to such terminated Employee. The present value of the Accrued Retirement Income shall be calculated as of the last day of the date of distribution of the lump sum applying the Applicable Interest Rate as defined in Section 8.5(e) in effect on the first day of the Plan Year of distribution. For purposes of this Section 8.4, if the present value of the Employee's vested Accrued Retirement Income is zero, the Employee shall be deemed to have received a distribution of such vested Retirement Income. (b) If such terminated Employee is subsequently reemployed and becomes covered under this Plan, the calculation of his Accrued Retirement Income shall be without regard to his years of Accredited Service prior to any One-Year Breaks in Service, unless the amount of such payment is repaid to the Trust, plus interest at the rate determined under Section 411(c)(2)(C) of the Code. If such amount (plus interest) is repaid, the Employee's Retirement Income shall be calculated based on his years of 52 Accredited Service before and after any One-Year Breaks in Service. Any repayment of a cash-out made pursuant to this Section 8.4 shall be made before the earlier of (a) five (5) years after the date on which the Employee is reemployed by the Employer or an Affiliated Employer, or (b) the close of the first period of five (5) consecutive One-Year Breaks in Service commencing after the distribution. If an Employee has been deemed to receive a distribution in accordance with paragraph (a) and is then reemployed, upon such reemployment, the amount of the deemed distribution shall be restored to the Employee. 8.5 Calculation of present value for cash-out of benefits and for determining amount of benefits. (a) This Section 8.5 shall apply to all distributions from the Plan and from annuity contracts purchased to provide Accrued Retirement Income other than distributions described in Section 1.417-1T(e)(3) of the income tax regulations issued under the Retirement Equity Act of 1984. (b) (1) For purposes of determining whether the present value of (A) an Employee's vested accrued benefit; (B) a qualified joint and survivor annuity, within the meaning of Section 417(b) of the Code; or (C) a qualified preretirement survivor annuity within the meaning of Section 417(c)(1) of the Code exceeds $3,500, the present value of such benefits or annuities shall be calculated by using an interest rate no greater than the Applicable Interest Rate. (2) In no event shall the present value of any such benefit or annuity determined under this Section 8.5(b) be less than the present value of such benefits or annuities determined using the Applicable Interest Rate. (c) (1) For purposes of determining the amount of an Employee's vested Accrued Retirement Income, the interest rate used shall not exceed: (A) the Applicable Interest Rate if the present value of the benefit (using such rate or rates) is not in excess of $25,000; or (B) 120 percent of the Applicable Interest Rate if the present value of the benefit exceeds $25,000 (as determined under (A)). In no event shall the present value determined under this (B) be less than $25,000. 53 (2) In no event shall the amount of the benefit or annuity determined under this Section 8.5(c) be less than the greater of: (A) the amount of such benefit determined under the Plan's provisions for determining the amount of benefits other than Sections 8.5; or (B) the amount of such benefit determined using the Applicable Interest Rate if the value determined in Section 8.5(c)(1) is less than $25,000 or 120 percent of the Applicable Interest Rate if the value determined in Section 8.5(c)(1) is not less than $25,000. (d) In no event shall the amount of any benefit or annuity determined under this Section 8.5 exceed the maximum benefit permitted under Section 415 of the Code. (e) (1) For purposes of this Section 8.5, "Applicable Interest Rate" shall mean the interest rate or rates which would be used as of the date distribution commences by the Pension Benefit Guaranty Corporation for purposes of valuing lump sum payments under the Plan if the Plan had terminated on the date distribution commences with insufficient assets to provide benefits guaranteed by the Pension Benefit Guaranty Corporation on that date. (2) Notwithstanding the foregoing, if the provisions of the Plan other than Section 8.5(e) so provide, the Applicable Interest Rate shall be determined as of the first day of the Plan Year in which a distribution occurs rather than as of the date distribution commences. (f) (1) This Section 8.5 shall apply to distributions in Plan Years beginning after December 31, 1984, other than distributions under annuity contracts distributed to or owned by an Employee prior to September 17, 1985 unless additional contributions are made under the Plan by the Employer with respect to such contracts. (2) Notwithstanding the foregoing, this Section 8.5 shall not apply to any distributions in Plan Years beginning after December 31, 1984, and before January 1, 1987, if such distributions were made in accordance with the requirements of the income tax regulations issued under the Retirement Equity Act of 1984. 54 8.6 Retirement Income under Prior Plan. Any person entitled to receive Retirement Income under Article VIII of the Prior Plan shall only be entitled to receive Retirement Income in accordance with the provisions of such Prior Plan in effect at the time his service was terminated, except that any such person whose service terminated prior to January 1, 1976: (a) with at least twenty (20) years of Accredited Service may elect to receive Retirement Income commencing prior to his Normal Retirement Date in accordance with Section 8.2; (b) who shall have returned to the employment of the Employer, whether before or after January 1, 1976, and shall be an Employee who is entitled to receive Retirement Income in respect of his Accredited Service after January 1, 1976, his years of Accredited Service under the Prior Plan with respect to his service before January 1, 1976, shall, for the purpose of calculating his Minimum Retirement Income, be aggregated with his years of Accredited Service after his reemployment. His Accrued Retirement Income to the date of termination of his service payable in accordance with Article VIII of the Prior Plan shall be treated as Prior Plan Retirement Income and his Years of Service prior to the date of termination of his service shall be restored to his credit. It shall be a condition of the treatment provided for in this paragraph (b) that: (1) the Employee rescind any election of payment and designation of a Provisional Payee which he shall have made under the Prior Plan and which shall be in effect at the time of his return to the employment of the Employer and (2) if he is receiving Retirement Income, his Retirement Income shall cease during his period of employment and any Retirement Income payable upon his subsequent retirement shall be reduced by the Actuarial Equivalent of any Retirement Income he received prior to his reemployment. 8.7 Requirement for Direct Rollovers. This Section 8.7 applies to distributions made from the Plan on or after January 1, 1993. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a Distributee's election under this Article VIII, a Distributee may elect, at the time and in the manner prescribed by the Retirement Board, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover. (a) Definitions (1) Eligible Rollover Distribution An Eligible Rollover Distribution is any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include: 55 (A) any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee's spouse, or for a specified period of 10 years or more; (B) any distribution to the extent such distribution is required under Code Section 401(a)(9); and (C) the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). (2) Eligible Retirement Plan An Eligible Retirement Plan is an individual retirement account described in Code Section 408(a), an individual retirement annuity described in Code Section 408(b), an annuity plan described in Code Section 403(a), or a qualified trust described in Code Section 401(a) that accepts the Distributee's Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution for a Provisional Payee, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity. (3) Distributee A Distributee includes an Employee or former Employee. In addition, a Distributee includes the Employee's or former Employee's spouse who is an alternate payee under a qualified domestic relations order, as defined in Code Section 414(p). (4) Direct Rollover A Direct Rollover is a payment by the Plan to the Eligible Retirement Plan specified by the Distributee. 56 ARTICLE IX Contributions 9 9.1 Contributions generally. All contributions which the Employer deems necessary to provide the Retirement Incomes under the Plan in excess of the fund derived from the split-up of the Commonwealth pension plan will be made from time to time by or on behalf of the Employer and no contributions will be required of the Employees. All contributions shall be made to the Trustee under the Trust Agreement provided for in Article XI, and if a group annuity contract shall be entered into with a life insurance company ("contract with an insurance company"), contributions may also be made to the insurance company. The minimum amount of contributions to be made by or on behalf of the Employer for any Plan Year of the Plan shall be such amount as is required to meet the minimum funding standards of ERISA and any regulations in respect thereto. However, the Employer is under no obligation to make any contributions under the Plan after the Plan is terminated, whether or not Retirement Income accrued or vested prior to the date of termination has been fully funded. All contributions are expressly conditioned upon the deductibility of such contributions by the Employer pursuant to Section 404 of the Code. 9.2 Return of Employer contributions. All contributions made pursuant to the Plan shall be held by the Trustee in accordance with the terms of the Trust Agreement for the exclusive benefit of those Employees who are Participants under the Plan, including former Employees and their Beneficiaries, and shall be applied to provide benefits under the Plan and to pay expenses of administration of the Plan and Trust, to the extent that such expenses are not otherwise paid. At no time prior to the satisfaction of all liabilities with respect to such Employees and their Beneficiaries shall any part of the Trust Fund be used for, or diverted to, purposes other than for the exclusive benefit of such Employees and their Beneficiaries. However, notwithstanding the provisions of this Section 9.2: (a) If a contribution is conditioned upon the deductibility of the contributions under Section 404 of the Code, then, to the extent the deduction is disallowed, the Trustee shall upon written request of the Employer, return the contribution (to the extent disallowed) to the Employer within one year after the date the deduction is disallowed. (b) If a contribution or any portion thereof is made by the Employer by a mistake of fact, the Trustee shall, upon written request of the Employer, return the contribution or such portion to the Employer within one year after the date of payment to the Trustee. 57 The amount which may be returned to the Employer under this Section 9.2, is the excess of (a) the amount contributed over (b) the amount that would have been contributed had there not occurred a mistake of fact or a mistake in determining the deduction. Earnings attributable to the excess contribution shall not be returned to the Employer, but losses attributable thereto shall reduce the amount to be so returned. (c) If permitted under Federal common law, the Company may recover any other contributions to the Plan or payments to any other entity to the extent such contributions or payments unjustly enrich or otherwise gratuitously benefit such entity. 9.3 Expenses. Prior to termination of the Plan, all investment expenses (including brokerage costs, transfer taxes, shipping expenses, and charges of correspondent banks of the Trustee) and any taxes which may be levied against the Trust shall be charged to the Trust. All other expenses prior to the termination of the Plan shall be paid by the Employer or charged to the Trust, as determined in the discretion of The Southern Company Pension Fund Investment Review Committee. After the termination of the Plan, all expenses shall be levied against the Trust and shall be charged to the Trust. 58 ARTICLE X Administration of Plan 10 10.1 Retirement Board. The general administration of the Plan shall be placed in a Retirement Board of five (5) members who shall be appointed from time to time by the Board of Directors to serve at the pleasure of the Board of Directors. 10.2 Organization and transaction of business of Retirement Board. Any person appointed a member of the Retirement Board shall signify his acceptance by filing written acceptance with the Board of Directors. Any member of the Retirement Board may resign by delivering his written resignation to the Board of Directors, and such resignation shall become effective at delivery or at any later date specified therein. The members of the Retirement Board shall elect a Chairman from their number, and a Secretary who may be but need not be one of the members of the Retirement Board, and shall designate an actuary to act in actuarial matters relating to the Plan. They may appoint from their number such committees with such powers as they shall determine, may authorize one or more of their number or any agent to make any payment in their behalf, or to execute or deliver any instrument except that a requisition for funds from the Trustee shall be signed by two (2) members of the Retirement Board. The Retirement Board shall hold meetings upon such notice, at such place or places, and at such time or times as they may from time to time determine. A majority of the members of the Retirement Board at the time in office shall constitute a quorum for the transaction of business. All resolutions or other actions taken by the Retirement Board at any meeting shall be by the vote of a majority of the Retirement Board at the time in office. Any determination or action of the Retirement Board may be made or taken without a meeting by a resolution or written memorandum concurred upon by a majority of the members then in office. No member of the Retirement Board who is also an Employee of the Employer shall receive any compensation from the Plan for his service as such. No bond or other security need be required of any member in any jurisdiction except as may be required by ERISA. 10.3 Administrative responsibilities of Retirement Board. The Retirement Board, in addition to the functions and duties provided for elsewhere in the Plan, shall have exclusive discretionary authority for the following: 59 (a) construing and interpreting the Plan; (b) determining all questions affecting the eligibility of any Employee, retired Employee, Provisional Payee, or alternate payee; (c) determining all questions affecting the amount of the benefit payable hereunder; (d) ascertaining the persons to whom benefits shall be payable under the provisions hereof; (e) to the extent provided in the Plan, authorizing and directing disbursements of benefits from the Plan; (f) making final and binding determinations in connection with any questions of fact which may arise regarding the operation of the Plan; (g) making such rules and regulations with reference to the operation of the Plan as it may deem necessary or advisable, provided that such rules and regulations shall not be inconsistent with the express terms of the Plan or ERISA; (h) prescribing such procedures and adopting such forms as it determines necessary under the terms of the Plan; and (i) reviewing such denials of claims for benefits as may arise. Any decision, determination, construction, interpretation, ascertainment, authorization, direction, rule, regulation, prescription, or review that the Retirement Board may make or give in carrying out its duties or functions under this Section 10.3 shall be binding and conclusive. 10.4 Retirement Board, the "Administrator". For the purposes of compliance with the provisions of ERISA, the Retirement Board shall be deemed the "administrator" of the Plan as the term "administrator" is defined in ERISA, and the Retirement Board shall be, with respect to the Plan, a "named fiduciary" as that term is defined in ERISA. For the purpose of carrying out its duties, the Retirement Board may, in its discretion, allocate responsibilities under the Plan among its members and may, in its discretion, designate in writing, as set forth in the minutes of the Retirement Board, persons other than members of the Retirement Board to carry out such responsibilities of the Retirement Board under the Plan as it may see fit. 60 10.5 Fiduciary responsibilities. It is intended, that to the maximum extent permitted by ERISA, each person who is a "fiduciary" with respect to the Plan as that term is defined in ERISA shall be responsible for the proper exercise of his own powers, duties, responsibilities, and obligations under the Plan and the trust or other funding medium as shall each person designated by any fiduciary to carry out any fiduciary responsibility with respect to the Plan, the trust or other funding medium and no fiduciary or other person to whom fiduciary responsibilities are allocated shall be liable for any act or omission of any other fiduciary or of any other person delegated to carry out any fiduciary or other responsibility under the Plan or the trust or other funding medium. Any person or group of persons may serve in more than one fiduciary capacity with respect to the Plan and any fiduciary with respect to the Plan may serve as a fiduciary with respect to the Plan in addition to being an officer, employee, agent, or other representative of a "party in interest" as that term is defined in ERISA. 10.6 Employment of actuaries and others. The Retirement Board may employ such "enrolled actuaries" and independent "qualified public accountants" as such terms are defined in ERISA, legal counsel who may be of counsel to the Employer, other specialists, and other persons as the Retirement Board deems necessary or desirable in connection with the administration of the Plan. The Retirement Board and any person to whom it may delegate any duty or power in connection with the administration of the Plan, the Employer, and the officers and directors thereof shall be entitled to rely conclusively upon and shall be fully protected in any action omitted, taken, or suffered by them in good faith in reliance upon any enrolled actuary, independent qualified public accountant, counsel, or other specialist or other person selected by the Retirement Board or in reliance upon any tables, evaluations, certificates, opinions, or reports which shall be furnished by any of them or by the Trustee or any insurance company. Any action so taken, omitted, or suffered in accordance with the provisions of this Section 10.6 shall be conclusive upon each Employee, former Employee, and Provisional Payee covered under the Plan. 10.7 Accounts and tables. The Retirement Board shall maintain accounts showing the fiscal transactions of the Plan, and shall keep in convenient form such data as may be necessary for actuarial valuations with respect to the operation and administration of the Plan. The Retirement Board shall prepare annually a report showing in reasonable summary the financial condition of the Trust and giving a brief account of the operation of the Plan for the past year, and any further information which the Board of Directors may require. Such 61 report shall be submitted to the Board of Directors and shall be filed in the office of the Secretary of the Retirement Board. The Retirement Board may, with the advice of an enrolled actuary, adopt from time to time mortality and other tables as it may deem necessary or appropriate for use in calculating benefits under the Plan. 10.8 Indemnity of members of Retirement Board. To the extent not compensated for by any applicable insurance, the Employer shall indemnify and hold harmless each member of the Retirement Board and each Employee of the Employer designated by the Retirement Board to carry out any fiduciary responsibility with respect to the Plan from any and all claims, loss, damages, expense (including counsel fees approved by the Board of Directors) and liability (including any amount paid in settlement with the approval of the Board of Directors) arising from any act or omission of such member or Employee designated by the Retirement Board in connection with the Plan or the Trust, except where the same is determined by the Board of Directors or is judicially determined to be due to a failure to act in good faith or is due to the gross negligence or willful misconduct of such member or Employee. No assets of the Plan may be used for any such indemnification. 10.9 Areas in which the Retirement Board does not have responsibility. The Retirement Board shall not have responsibility with respect to control or management of the assets of the Plan. The Trustee or an insurance company, if funds of the Plan shall be held by an insurance company, shall have the sole responsibility for the administration of the assets of the Plan as provided in the Trust Agreement or contract with an insurance company, except to the extent that an "Investment Manager," as that term is defined in ERISA, appointed by the Board of Directors shall have responsibility for the management of the assets of the Plan, or some part thereof, including the power to acquire and dispose of the assets of the Plan, or some part thereof. The responsibility for providing a procedure for establishing and carrying out a funding policy and method for the Plan consistent with the objectives of the Plan and the requirements of Title I of ERISA shall be that of the Board of Directors or such committee, whether or not comprised of members of the Board of Directors, as the Board of Directors may from time to time designate and shall not be the responsibility of the Retirement Board. Effective October 23, 1993, the Pension Fund Investment Review Committee of The Southern Company System shall recommend for approval by the Board of Directors any Investment Manager that shall have responsibility with respect to management of any 62 Plan assets. In addition, the Pension Fund Investment Review Committee shall assume all responsibility for providing a procedure for establishing and carrying out a funding policy and method for the Plan consistent with the objectives of the Plan and the requirements of Title I of ERISA. 10.10 Claims Procedures. Consistent with the requirements of ERISA and the regulations thereunder of the Secretary of Labor from time to time in effect, the Retirement Board or its delegatee shall: (a) provide adequate notice in writing to any Employee, former Employee, retired Employee, or Provisional Payee (each being hereinafter in the paragraph referred to as "participant") whose claim for benefit under the Plan has been denied, setting forth specific reasons for such denial, written in a manner calculated to be understood by such participant; and (b) afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review of the decision denying the claim. 63 ARTICLE XI Management of Trust 11 11.1 Trust. All assets of the Plan shall be held as a special trust for use in accordance with the Plan. The funds of the Plan shall be held by a Trustee, or by a successor trustee appointed from time to time by the Board of Directors in trust or held by a life insurance company in accordance with the provisions of a contract with such insurance company entered into by the Trustee or the Employer. The Trust Agreement and contract with an insurance company may from time to time be amended in the manner therein provided. 11.2 Disbursement of the Trust Fund. Subject to the provisions of the Trust Agreement or contract with an insurance company the Retirement Board shall determine the manner in which the funds of the Plan shall be disbursed pursuant to the Plan, including the form of voucher or warrant to be used in making disbursements and the due qualification of persons authorized to approve and sign the same. The responsibility for the retention and investment of funds held by the Trustee shall lie with the Trustee and not with the Retirement Board, and the responsibility for the retention and investment of funds held by an insurance company shall lie with the insurance company and not with the Retirement Board. However, if in accordance with a Trust Agreement forming a part of the Plan (including any pooled trust agreement in which a trust forming a part of the Plan participates) a contract with an insurance company shall be held by the Trustee as an investment of the trust, directions may be given from time to time to the Trustee by such board of directors or committee or person or persons as may be specified in the Trust Agreement to transfer funds of the trust to the life insurance company which issued such contract or to transfer funds from the life insurance company to the Trustee, as the case may be. 11.3 Rights in the Trust. Under no circumstances shall amounts of money or other things of value contributed by the Employer to the Plan, or any part of the corpus or income of the Trust held by the Trustee under the Plan, be recoverable by the Employer from the Trustee or from any Employee, retired Employee, or Provisional Payee, or be used for, or diverted to, purposes other than for the exclusive benefit of the Employees, retired Employees, and Provisional Payees covered hereunder; provided, however, that, if after satisfaction of all liabilities of the Trust with respect to Employees, retired Employees, and Provisional Payees under the Plan, there is any balance remaining, the Trustee shall return such balance to the Employer. Notwithstanding the above, upon the approval of the Internal Revenue Service or the enactment or promulgation of any laws or 64 regulations by any governmental authority, the Employer shall be authorized to rededicate all or a portion of the assets allocated to fund Retirement Income under the Plan to the separate account to fund medical benefits under Article XV of the Plan. 11.4 Merger of the Plan. The Plan shall not be merged or consolidated with, or any of its assets or liabilities transferred to, any other plan, unless each Employee included in the Plan would (if the Plan then terminated) receive a benefit immediately after the merger, consolidation, or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation, or transfer (if the Plan then terminated). 65 ARTICLE XII Termination of the Plan 12 12.1 Termination of the Plan. The Plan may be terminated at any time by action of the Board of Directors of the Employer in accordance with the amendment procedures provided in Section 13.1. Upon such termination or partial termination all Accrued Retirement Income of Employees to the date of such termination, to the extent then funded, shall become nonforfeitable and the assets of the Plan which have not previously been allocated to provide Retirement Income shall then be paid out to Employees, former Employees, and Provisional Payees in accordance with the applicable requirements of ERISA and regulations thereunder governing termination of "employee pension benefit plans" as defined in ERISA. If after satisfaction of all liabilities, as provided above, there is any balance remaining in the Trust, the Trustee shall return such balance to the Employer. In the first instance, subject to the foregoing limitations, such remaining assets shall be allocated among all persons in the following categories for whom such Retirement Income or other benefits have not previously been provided, namely, (a) Employees who have been retired under the Plan, (b) Employees who at the date of termination of the Plan are included in the Plan, (c) former Employees who at the date of the termination of their employment were entitled to payment of Retirement Income in accordance with Article VIII, and (d) former Employees who have transferred to an Affiliated Employer in accordance with Section 4.6 and are still in the employ or receiving a retirement income from such company (including their Provisional Payees, if any). Retirement Income already purchased under any contract with an insurance company will be payable in accordance with the provisions of that contract. 12.2 Limitation on benefits for certain highly paid employees. (a) The annual payments to an Employee described in paragraph (b) below shall not exceed an amount equal to the payments that would be made to or on behalf of such Employee under a single life annuity that is the Actuarial Equivalent of the sum of the Employee's Accrued Retirement Income and the Employee's other benefits under this Plan (other than a Social Security supplement) and any Social Security supplement that the restricted Employee is entitled to receive. The restrictions in this paragraph (a) do not apply, however, if -- (1) after payment to an Employee described in paragraph (b) of all benefits payable to such Employee under this Plan, the value of this Plan's assets equals or exceeds 66 110% of the value of current liabilities, as defined in Code Section 412(c)(7), or (2) the value of the benefits payable to such Employee under this Plan for an Employee described in paragraph (b) below is less than 1% of the value of current liabilities before distribution. (b) The Employees whose benefits are restricted on distribution include all highly compensated employees and highly compensated former employees (as such terms are defined in Treasury Regulation Section 1.401(a)(4)-12); provided, however, that Employees whose benefits are subject to restriction under this Section 12.2 shall be limited to only those Employees who in the current or in any previous Plan Year were one of the 25 non- excludable Employees of the Employer with the greatest compensation from the Employer. 67 ARTICLE XIII Amendment of the Plan 13 13.1 Amendment of the Plan. (a) The Plan may be amended or modified at any time by the Board of Directors pursuant to its written resolutions, provided that no amendment or modification which will substantially increase the cost of the Plan will be made by the Board of Directors without approval, at a meeting of the stockholders duly called for that purpose, by the vote of a majority of the stock present and entitled to vote at such meeting. (b) Such amendments and modifications (without limiting the generality of the foregoing) may, among other things, make any changes in the Plan which may become appropriate if, for any reason, the Employer should in the future find it necessary or desirable not to complete payment of the past service costs of the Plan in the manner and within the period now contemplated or should find it necessary or desirable to reduce the amounts of Future Service contributions to be paid by the Employer after such amendment or modification. Such amendments and modifications may also (without limiting the generality of the foregoing), make any changes necessary or desirable to make the costs of the Plan eligible for tax deductions or to make the income of the Trust exempt from taxation or to bring the Plan into conformity or compliance with ERISA or with governmental regulations. Notwithstanding the foregoing, no amendment shall be made which has the effect of decreasing the Accrued Retirement Income of any Employee, former Employee, or Provisional Payee as provided under the limitations of Section 411(d)(6) of the Code. 68 ARTICLE XIV Special Provisions 14 14.1 Adoption of Plan by other corporations. (a) Any corporation, whether or not related to the Employer by function or operation and any affiliate, if such corporation or affiliate is authorized to do so by a resolution adopted by the Board of Directors of the Employer, may adopt this Plan as a separate Plan for all eligible Employees or any separate, distinct, and identifiable class or group of Employees and the related Trust Agreement, by action of the board of directors of such corporation or affiliate. Any such adoption shall be evidenced by certified copies of the resolutions of the foregoing board of directors indicating such adoption and by the execution of the Adoption Agreement by the adopting corporation or affiliate. Such resolution shall state and define the effective date of the Plan for the purpose of such adopting corporation and, for the purpose of Section 415 of the Code, the "limitation year" as to such corporation. Notwithstanding the foregoing, however, if the Plan as adopted by an affiliate or other corporation under the foregoing provision shall fail to receive the initial approval of the Internal Revenue Service as a qualified plan, any contributions by such affiliate or other corporation after payment of all expenses will be returned to such adopting corporation free of any trust, and the Plan and the Trust Agreement as to such adopting affiliate or other corporation shall terminate. (b) Each adopting affiliate or other corporation shall be required to use the same Trustee as provided in this Plan. (c) The Trustee may, but is not required to, commingle, hold, and invest as one fund all contributions (or any portion thereof) made by each adopting affiliate or other corporation. (d) Any contributions made by an affiliate or other corporation, as provided for in this Plan, shall be paid to and held by the Trustee for the exclusive benefit of the Employees of such an affiliate or other corporation and the beneficiaries of such Employees, subject to all the terms and conditions of this Plan. On the basis of information furnished by the administrator, the Trustee shall keep separate books and records concerning the affairs of each adopting affiliate or other corporation hereunder. 69 14.2 Exclusive benefit. The Employer intends that the Plan (including the Trust forming a part thereof) shall be a pension plan of an employer for the exclusive benefit of its Employees and their beneficiaries subject to Section 11.3, as provided for in Section 401 of the Code, and as may be provided for in any similar provisions of subsequent revenue laws, and that the Trust shall qualify as an employees' trust which shall be exempt under Section 501(a) of the Code, and any similar provisions of subsequent revenue laws, as a trust forming part of such a plan. 14.3 Assignment or alienation. No benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment (either at law or in equity), pledge, encumbrance, charge, garnishment, levy, execution, or other legal or equitable process and any attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge, garnish, levy, execute, or enforce other legal or equitable process against the same shall be void, nor shall any such benefit be in any manner liable for or subject to the debts, contracts, liabilities, engagements, or torts of the person entitled to such benefit. If any Employee or retired Employee or any Provisional Payee under the Plan is adjudicated bankrupt or attempts to anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge any benefit under the Plan or if any action shall be taken which is in violation of the provisions of the immediately preceding paragraph, then such benefit shall cease and terminate and in that event the Retirement Board shall hold or apply the same or any part thereof to or for the benefit of such Employee or retired Employee or Provisional Payee in such manner as the Retirement Board may think proper. Notwithstanding the above, the Retirement Board and Trustee shall comply with any "domestic relations order" (as defined in Section 414(p)(1)(B) of the Code) which is a "qualified domestic relations order" satisfying the requirements of Section 414(p) of the Code. The Retirement Board shall establish procedures for (a) notifying Employees and alternate payees who have or may have an interest in benefits which are the subject of domestic relations orders, (b) determining whether such domestic relations orders are qualified domestic relations orders under Section 414(p) of the Code, and (c) distributing benefits which are subject to qualified domestic relations orders. 70 14.4 Voluntary undertaking. This Plan is strictly a voluntary undertaking on the part of the Employer and shall not be deemed to constitute a contract between the Employer or any other company and any Employee or to be a consideration for, or an inducement or condition of, the employment of any Employee. Nothing contained in this Plan shall be deemed to give any Employee the right to be retained in the service of the Employer or to interfere with the right of the Employer to discharge or retire any Employee at any time. Inclusion under the Plan will not give any Employee or Provisional Payee any right or claim to a Retirement Income except to the extent such right is specifically fixed under the terms of the Plan and there are funds available therefor in the hands of the Trustee or of any insurance company which may hold funds of the Plan. 14.5 Top-Heavy Plan requirements. For any Plan Year the Plan shall be determined to be a Top-Heavy Plan, the Plan shall provide the following: (a) the minimum benefit requirement of Section 14.7; and (b) the vesting requirement of Section 14.8. 14.6 Determination of Top-Heavy status. (a) For any Plan Year commencing after December 31, 1983, the Plan shall be determined to be a "Top-Heavy Plan," if, as of the Determination Date, (1) the Present Value of Accrued Retirement Income of Key Employees or (2) the sum of the Aggregate Accounts of Key Employees under this Plan and any plan of an Aggregation Group, exceeds sixty percent (60%) of the Present Value of Accrued Retirement Income or the Aggregate Accounts of all Employees entitled to participate in this Plan and any Plan of an Aggregation Group. (b) For Plan Years beginning after December 31, 1986, the Accrued Retirement Income of a Non-Key Employee shall be determined under the accrual method under the Plan. (c) For any Plan Year commencing after December 31, 1983, the Plan shall be determined to be a "Super Top-Heavy Plan," if, as of the Determination Date, (1) the Present Value of Accrued Retirement Income of Key Employees or (2) the sum of the Aggregate Accounts of Key Employees under this Plan and any plan in an Aggregation Group, exceeds ninety percent (90%) of the Present Value of Accrued Retirement Income or the Aggregate Accounts of all Employees entitled to participate in this Plan and any plan of an Aggregation Group. 71 For purposes of Sections 14.6(a) and 14.6(b), if any Employee is a Non-Key Employee for any Plan Year, but such Employee was a Key Employee for any prior Plan Year, such Employee's Present Value of Accrued Retirement Income and/ or Aggregate Account balance shall not be taken into account for purposes of determining whether this Plan is a Top-Heavy or Super Top-Heavy Plan (or whether any Aggregation Group which includes this Plan is a Top-Heavy Group). In addition, for Plan Years beginning after December 31, 1984, if an Employee or former Employee has not performed any services for the Employer or any Affiliated Employer maintaining the Plan at any time during the five (5) year period ending on the Determination Date, the Aggregate Account and/or Present Value of Accrued Retirement Income for such Employee or former Employee shall not be taken into account for purposes of determining whether this Plan is a Top-Heavy or Super Top-Heavy Plan. (d) An Employee's "Aggregate Account" as of the Determination Date shall be determined under applicable provisions of the defined contribution plan used in determining Top-Heavy status. (e) An "Aggregation Group" shall mean either a Required Aggregation Group or a Permissive Aggregation Group as hereinafter determined. (1) Required Aggregation Group: In determining a Required Aggregation Group hereunder, each plan of the Employer in which a Key Employee is a participant, and each other plan of the Employer which enables any plan in which a Key Employee participates to meet the requirements of Code Sections 401(a)(4) or 410, will be required to be aggregated. Such group shall be known as a Required Aggregation Group. In the case of a Required Aggregation Group, each plan in the group will be considered a Top-Heavy Plan if the Required Aggregation Group is a Top-Heavy Group. No plan in the Required Aggregation Group will be considered a Top-Heavy Plan if the Aggregation Group is not a Top-Heavy Group. (2) Permissive Aggregation Group: The Employer may also include any other plan not required to be included in the Required Aggregation Group, provided the resulting group, taken as a whole, would continue to satisfy the provisions of Code Sections 401(a)(4) or 410. Such group shall be known as a Permissive Aggregation Group. In the case of a Permissive Aggregation Group, only a plan that is part of the Required Aggregation Group will be considered a Top-Heavy Plan if the Permissive Aggregation Group is a 72 Top-Heavy Group. A plan that is not part of the Required Aggregation Group but that has nonetheless been aggregated as part of the Permissive Aggregation Group will not be considered a Top-Heavy Plan even if the Permissive Group is a Top-Heavy Group. (3) Only those plans of the Employer in which the Determination Dates fall within the same calendar year shall be aggregated in order to determine whether such plans are Top-Heavy Plans. (f) The "Determination Date" shall mean with respect to any Plan Year, the last day of the preceding Plan Year, or in the case of the first Plan Year, the last day of such Plan Year. (g) A "Key Employee" shall mean any Employee or former Employee (and his beneficiaries) who, at any time during the Plan Year or any of the four (4) preceding Plan Years, is: (1) an officer of the Employer having an annual compensation from the Employer greater than fifty percent (50%) of the amount in effect under Code Section 415(b)(1)(A) for any such Plan Year. For purposes of this Section 14.6(g)(1), only those employers which are incorporated shall be considered as having officers, and no more than fifty (50) Employees (or, if lesser, the greater of three (3) or ten percent (10%) of the Employees) shall be treated as officers. Annual compensation means compensation as defined in Section 415(c)(3) of the Code, but including amounts contributed by the Employer pursuant to a salary reduction agreement which are excludable from the Employee's gross income under Section 125, Section 402(a)(8), Section 402(h), or Section 403(b) of the Code. (2) one of the ten (10) Employees (A) having annual compensation from the Employer greater than the limitation in effect under Code Section 415(c)(1)(A) and (B) owning (or considered as owning within the meaning of Code Section 318) the largest interests in the Employer. For purposes of this Section 14.6(g)(2), if two (2) Employees have the same interest in the Employer, the Employee having the greater annual compensation from the Employer shall be treated as having a larger interest. (3) a "five-percent owner" of the Employer. The term "five-percent owner" shall mean any person who owns (or is considered as owning within the meaning of Code Section 318) more than five percent (5%) of the outstanding stock of the Employer or stock possessing more than five percent (5%) of the total combined voting power of all stock of the Employer. In determining percentage ownership hereunder, employers that would otherwise be aggregated under Code 73 Sections 414(b), (c), and (m) shall be treated as separate employers. (4) a "one-percent owner" of the Employer having an annual compensation from the Employer of more than $150,000. The term "one-percent owner" shall mean any person who owns (or is considered as owning within the meaning of Code Section 318) more than one percent (1%) of the outstanding stock of the Employer or stock possessing more than one percent (1%) of the total combined voting power of all stock of the Employer. In determining percentage ownership hereunder, employers that would otherwise be aggregated under Code Sections 414(b), (c), and (m) shall be treated as separate employers. However, in determining whether an individual has compensation of more than $150,000, compensation from each employer required to be aggregated under Code Sections 414(b), (c), and (m) shall be taken into account. (h) A "Non-Key Employee" shall mean any Employee who is not a Key Employee as defined in Section 14.6(g). (i) An Employee's "Present Value of Accrued Retirement Income" shall mean as of the Determination Date, the sum of the following: (1) the Present Value of his Accrued Retirement Income as of the most recent valuation occurring within a twelve (12) month period ending on the Determination Date. (2) any Plan distributions made within the Plan Year that includes the Determination Date or within the four (4) preceding Plan Years. However, in the case of distributions made after the valuation date and prior to the Determination Date, such distributions are not included as distributions for Top-Heavy purposes to the extent that such distributions are already included in the Employee's Present Value of Accrued Retirement Income as of the valuation date. Notwithstanding anything herein to the contrary, all distributions, including distributions made prior to January 1, 1984, and distributions under a terminated plan which if it had not been terminated would have been required to be included in an Aggregation Group, will be counted. (3) any Employee contributions, whether voluntary or mandatory. However, amounts attributable to qualified deductible employee contributions shall not be considered to be a part of the Employee's Present Value of Accrued Retirement Income. 74 (4) with respect to unrelated rollovers and plan-to-plan transfers (ones which are both initiated by the Employee and made from a plan maintained by one employer to a plan maintained by another employer), if this Plan provides for rollovers or plan-to-plan transfers, it shall always consider such rollover or plan-to-plan transfer as a distribution for the purposes of this Section. If this Plan is the plan accepting such rollovers or plan-to-plan transfers, it shall not consider such rollovers or plan-to-plan transfers accepted after December 31, 1983 as part of the Employee's Present Value of Accrued Retirement Income. However, rollovers or plan-to-plan transfers accepted prior to January 1, 1984 shall be considered as part of the Employee's Present Value of Accrued Retirement Income. (5) with respect to related rollovers and plan-to-plan transfers (ones either not initiated by the Employee or made to a plan maintained by the same employer), if this Plan provides for rollovers or plan-to-plan transfers, it shall not be counted as a distribution for purposes of this Section. If this Plan is the plan accepting such rollover or plan-to-plan transfer, it shall consider such rollover or plan-to-plan transfer as part of the Employee's Present Value of Accrued Retirement Income, irrespective of the date on which such rollover or plan-to-plan transfer is accepted. (j) A "Top-Heavy Group" shall mean an Aggregation Group in which, as of the Determination Date, the sum of: (1) the Present Value of Accrued Retirement Income of Key Employees under all defined benefit plans included in that group, and (2) the Aggregate Accounts of Key Employees under all defined contribution plans included in the group, exceeds sixty percent (60%) of a similar sum determined for all Employees. 14.7 Minimum Retirement Income for Top-Heavy Plan Years. Notwithstanding anything herein to the contrary, for any Top-Heavy Plan Year, the minimum Accrued Retirement Income derived from Employer contributions for each Non-Key Employee, including benefits accrued in years in which the Plan is not a Top-Heavy Plan, shall equal a percentage of such Non-Key Employee's highest average compensation not less than the lesser of: (a) two percent (2%) multiplied by the Employee's number of Years of Service with the Employer, or (b) twenty percent (20%). For purposes of the minimum benefit, an Employee's Years of Service shall exclude (a) Plan Years in which the Plan is not a Top-Heavy Plan, and (b) Years of Service completed prior to 75 January 1, 1984. The minimum benefit required by this Section 14.7 shall be calculated using the Employee's total compensation and expressed in the form of a single life annuity (with no ancillary benefits) beginning at such Employee's Normal Retirement Date. An Employee's average compensation shall be based on the five (5) consecutive years for which the Employee had the highest compensation. Notwithstanding the foregoing, in any Plan Year in which a Non-Key Employee is an Employee in both this Plan and a defined contribution plan, and both such plans are Top-Heavy Plans, the Employer shall not be required to provide a Non-Key Employee with both the full separate minimum defined benefit and the full separate minimum defined contribution plan allocation. Therefore, if a Non-Key Employee is participating in a defined contribution plan maintained by the Employer and the minimum allocation under Code Section 416(c)(2) is allocated to the Non-Key Employee under such defined contribution plan, the minimum Accrued Retirement Income provided for above shall not be applicable, and no minimum benefit shall accrue on behalf of the Non-Key Employee. Alternatively, the Employer may satisfy the minimum benefit requirement of Code Section 416(c)(1) for the Non-Key Employee by providing any combination of benefits and/or contributions that satisfy the safe harbor rules of Treasury Regulation Section 1.416-1(m-12). 14.8 Vesting requirements for Top-Heavy Plan Years. Notwithstanding the provisions of Section 8.1, for any Top-Heavy Plan Year, the vested portion of an Employee's Accrued Retirement Income shall be determined on the basis of the Employee's Vesting Years of Service according to the following schedule: Years of Service Vested Percentage less than 2 0 2 20 3 40 4 60 5 80 6 or more 100 The minimum Retirement Income for any Top-Heavy Plan Year shall not be forfeited during any period for which the payment of the Employee's Retirement Income is required to be suspended under Section 5.10 of the Plan. 76 If in any subsequent Plan Year, the Plan ceases to be a Top-Heavy Plan, the Retirement Board may, in its sole discretion, elect to (a) continue to apply this vesting schedule in determining the vested percentage of an Employee's Accrued Retirement Income or (b) revert to the vesting schedule in effect before the Plan became a Top-Heavy Plan. Any such reversion shall be treated as a Plan amendment pursuant to the terms of the Plan. No decrease in an Employee's nonforfeitable percentage may occur in the event the Plan's status as a Top-Heavy Plan changes for any Plan Year. 14.9 Adjustments to maximum benefits for Top-Heavy Plans. (a) In the case of an Employee who is a participant in a defined benefit plan and a defined contribution plan maintained by the Employer, and such plans as a group are determined to be Top-Heavy for any limitation year beginning after December 31, 1983, "1.0" shall be substituted for "1.25" in each place it appears in the denominators of Fractions A and B, as set forth in Section 6.5 of the Plan, unless the extra minimum benefit is provided pursuant to Section 14.9(b). Super Top-Heavy Plans shall be required at all times to substitute "1.0" for "1.25" in the denominator of each plan fraction. (b) If a Key Employee is a participant in both a defined benefit plan and a defined contribution plan that are both part of a Top-Heavy Group (but neither of such plans is a Super Top-Heavy Plan), the defined benefit and defined contribution fractions set forth in Section 6.5 shall remain unchanged, provided that in Section 14.7 above, "three percent (3%)" shall be substituted for "two percent (2%)" and "twenty percent (20%)" shall be increased by one (1) percentage point (but not more than ten (10) percentage points) for each Year of Service included in the computations under Section 14.7. (c) For purposes of this Section 14.9, if the sum of the defined benefit plan fraction and the defined contribution fraction shall exceed 1.0 in any Plan Year for any Employee in this Plan, the Employer shall eliminate any amounts in excess of the limits set forth in Section 6.5, pursuant to Section 6.7 of the Plan. 77 ARTICLE XV Post-retirement Medical Benefits 15 15.1 Definitions. The following words and phraseology as used herein shall have the following meanings unless a different meaning is plainly required by the context: (a) "Pensioned Employee" means a former Employee of the Employer who is eligible to receive Retirement Income after his retirement at his Early, Normal, or Deferred Retirement Date, as applicable, pursuant to the terms of the Plan, but shall not include any former Employee who terminated his service with the Employer prior to his Early, Normal, or Deferred Retirement Date and who is entitled to Retirement Income under the Plan. A "Pensioned Employee" shall not include a Key Employee, as defined in Section 14.6(g), or effective January 1, 1991, any Pensioned Employee of an Employer that has adopted the Plan pursuant to Section 14.1 hereof, but does not provide medical benefits to its Pensioned Employees. (b) "Dependents" means (1) a Pensioned Employee's spouse, or (2) a Pensioned Employee's unmarried child from birth until his or her nineteenth (19th) birthday. A "Dependent" shall not include anyone who (1) lives outside the United States or Canada, (2) is in the armed forces of any country, or (3) has coverage under another medical plan maintained by the Employer as an employee or as a dependent of another person. The term "child" includes (1) an adopted child, or (2) a step-child or foster- child under a Pensioned Employee's legal guardianship, but only if such step-child or foster-child is dependent on the Pensioned Employee for support and maintenance and if the step-child or foster-child lives with the Pensioned Employee in a parent-child relationship. An unmarried child who is nineteen (19) years old will be considered a Dependent until his or her twenty-third (23rd) birthday, if the child (1) is enrolled as a full-time student at an accredited school or college, and (2) is not employed on a full-time basis, and (3) has the same permanent home address as the Pensioned Employee. The age limit that applies to Dependent children will not apply to any covered child who becomes incapable of working and remains a Dependent of a Pensioned Employee for support and maintenance (1) before reaching the age limit, (2) due to physical handicap or mental retardation, and (3) while covered. If a claim is denied with respect to a handicapped child because he or she has reached the age limit, written proof of his or her incapacity and dependency must be furnished to the Employer. Upon receipt of this proof, further consideration will be given to the denied claim. 78 The Dependent coverage being kept in force under the terms of this Article XV will automatically terminate (1) on the date the child is no longer incapacitated and dependent on the Pensioned Employee, or (2) on the date the child's coverage would terminate in the absence of this provision. This provision applies only to Dependent coverage under Article XV that provides benefits based on expenses incurred for (1) medical services, (2) surgical services, or (3) dental services. It will not apply to any other type of coverage that provides benefits based on death, dismemberment, or loss of sight. If a Pensioned Employee's Dependents are covered by Dependent coverage when he dies, that coverage will be continued without payment of premiums for a maximum period of one year after the date of the Pensioned Employee's death. This continued coverage may be terminated before the end of the maximum period. The coverage for any Dependent will terminate on the date Article XV terminates or the earliest of: (1) the date he or she reaches the age limit; (2) the date he or she marries or remarries; (3) the date he or she becomes covered as an employee under a medical plan maintained by the Employer; or (4) the date he or she is no longer a Dependent. If a Pensioned Employee's wife is pregnant when he dies, the Dependent coverage continued under these provisions will automatically extend to the newborn child or children born from that pregnancy. This coverage will take effect on the date of birth. No other Dependents acquired by a Pensioned Employee's spouse after his death will be covered by this continued coverage. If both a husband and his wife are covered under this Plan as Pensioned Employees of the Employer, or if the husband or wife of a Pensioned Employee is covered as an Employee under any medical plan maintained by the Employer, either, but not both, may elect to cover their eligible children as Dependents. Any person covered or eligible for coverage under Article XV as a Pensioned Employee, or under any group medical plan maintained by the Employer as an Employee, shall not be considered as a Dependent. 79 15.2 Eligibility of Pensioned Employees and their Dependents. (a) A person who is a Pensioned Employee on January 1, 1989 shall be eligible for coverage as a Pensioned Employee on January 1, 1989, provided he was covered as an Employee under a group medical plan maintained by the Employer immediately prior to the time he became a Pensioned Employee. (b) An Employee who becomes a Pensioned Employee on or after January 1, 1989 shall be eligible for coverage on the date he becomes a Pensioned Employee, provided he was covered as an Employee under a group medical plan maintained by the Employer immediately prior to the time he became a Pensioned Employee. (c) A Dependent of a Pensioned Employee shall be eligible for coverage under Article XV on the later of (1) the date the Pensioned Employee becomes eligible for coverage hereunder, (2) the date such person becomes a Dependent, and (3) the first of the month following the date that the Pensioned Employee properly elects to have Dependents covered and pays any contribution required of the Pensioned Employee with respect to the Dependent. (d) Notwithstanding the foregoing provisions of this Section 15.2, each person subject to the conditions described below will become eligible on the date indicated: (1) The following applies if a person was at one time covered under Article XV and is again applying for coverage: (A) Any person who was in an eligible class when his or her coverage was terminated due to nonpayment of premiums must prove to the Employer that he or she is in good health. (B) If a person obtained an individual conversion policy after his or her coverage terminated, that person must prove to the Employer that he or she is in good health. For a person to prove that he or she is in good health, a physician's statement of health and/or physical exam may be required. Any cost for this must be paid by the person. If a person becomes ineligible for coverage before approval is given, but becomes eligible again at a later date and reapplies for coverage, this person will have to prove he or she is in good health at that time. 80 (e) For a newborn child, Dependent coverage will take effect as follows: (1) If a Pensioned Employee has Dependents covered on the child's date of birth, coverage for the newborn will take effect on that date. If an increase in premium is required, the Pensioned Employee must: (A) apply in writing for the coverage; and (B) pay the required premium that applies. (2) If the Pensioned Employee does not have any Dependents covered, coverage for the newborn will not take effect until he applies for Dependent coverage. The coverage will then take effect as set forth in 15.2(c) above. Newborn coverage will be for injury or sickness, including care or treatment of (1) congenital defects, (2) birth abnormalities, or (3) premature birth. It will not include any benefits for normal newborn child care. Newborn coverage also includes coverage for the transportation of a newborn child to and from the nearest available facility. This facility must be staffed and equipped to treat his or her condition. A physician must certify that the transportation is necessary to protect the health and safety of the child. The Employer shall not pay more than $1000 at such facility. (f) There are cases in which coverage will not begin on the usual effective date. These cases are as follows: (1) Coverage of a Pensioned Employee confined in a hospital or other facility due to sickness or injury on the date coverage would normally take effect shall not take effect until the Pensioned Employee has been discharged. (2) Coverage of a Dependent, other than a newborn child, confined in a hospital or other facility due to sickness or injury on the date his or her coverage would normally take effect will not take effect until he or she has been discharged. Coverage for a Dependent will not take effect before coverage for a Pensioned Employee takes effect. 81 15.3 Medical benefits. The medical benefits provided under this Article XV by the Employer and each adopting Employer are set forth in the copy of each such Employer's medical benefits plan which is attached hereto as Exhibit A and specifically incorporated herein by reference in its entirety, as may be amended from time to time. Such medical benefits shall be subject without limitation to all deductibles, maximums, exclusions, coordination with Medicare and other medical plans, and procedures for submitting claims and initiating legal proceedings provided therein. 15.4 Termination of coverage. (a) Coverage of any Pensioned Employee shall cease as follows: (1) when Article XV is amended, terminated, or discontinued in accordance with its terms; or (2) when the Pensioned Employee fails to make when due any required contribution; or (3) as otherwise provided in Exhibit A. (b) Coverage of any Dependent shall cease as follows: (1) when Article XV is amended, terminated, or discontinued in accordance with its terms; or (2) when the Pensioned Employee fails to make when due any required contribution; or (3) as otherwise provided in Exhibit A. 15.5 Continuation of coverage to certain individuals. (a) Continuation Coverage. Each Pensioned Employee, Dependent spouse or Dependent child who is a "qualified beneficiary" and who would lose coverage under Article XV as a result of a "qualifying event" shall be entitled to elect, within the "election period", "continuation coverage" under the Plan. For purposes of this Section 15.5, the terms "qualified beneficiary", "qualifying event", "election period" and "continuation coverage" shall have the same meanings as those provided under Section 4980B of the Code and Title I, Subtitle B, Part 6 of ERISA. (b) Premium Requirements. The qualified beneficiary shall be required to make payment of a premium during the period of continuation coverage up to the maximum premium amount permitted under Section 4980B(f) of the Code and Title I, Subtitle B, Part 6 of ERISA for such continuation coverage. Such premium shall be 82 periodically determined by the Plan Administrator and communicated to the qualified beneficiary. (c) Conversion Option. Each qualified beneficiary who elects to receive continuation coverage under Article XV shall have the right during the 180-day period ending on the date such continuation coverage expires to enroll under a conversion health plan if such a plan is then offered by the Employer. (d) Notice Requirements. The Plan, the Plan Administrator and the Employer shall each provide such notice regarding continuation coverage as they may be required to provide under Section 4980B of the Code and Title I, Subtitle B, Part 6 of ERISA. (e) Election. Except as otherwise specified in an election, an election to receive continuation coverage that is made by a Pensioned Employee or his spouse shall be deemed to include an election for continuation coverage on behalf of any other qualified beneficiary who would lose coverage under Article XV by reason of the qualifying event giving rise to the election. 15.6 Contributions to fund medical benefits. Any contributions which the Employer deems necessary to provide the medical benefits under Article XV will be made from time to time by or on behalf of the Employer, and contributions shall be required of the Pensioned Employees to the Employer's medical benefit plan in amounts determined in the sole discretion of the Employer from time to time. All Employer contributions shall be made to the Trustee under the Trust Agreement provided for in Article XI and shall be allocated to a separate account maintained solely to fund the medical benefits provided under Article XV. The Employer shall designate that portion of any contribution to the Plan allocable to the funding of medical benefits under this Article XV. In no event at any time prior to the satisfaction of all liabilities under this Article XV shall any part of the corpus or income of such separate account be used for, or diverted to, purposes other than for the exclusive purpose of providing benefits under this Article XV. Effective January 1, 1991, subject to the requirements of Code Section 420, the Employer shall have the right, in its sole discretion, to transfer any excess corpus or income of the Plan allocated to fund Retirement Income to the separate account to fund medical benefits under this Article XV. The amount of contributions to be made by or on behalf of the Employer for any Plan Year shall be determined in accordance with any generally accepted actuarial method which is reasonable in view of the provisions and coverage of Article XV, the funding medium, and any other applicable considerations. However, the Employer is under no obligation to make any contributions under 83 Article XV after Article XV is terminated, except to fund claims for medical expenses incurred prior to the date of termination. The medical benefits provided under this Article XV, when added to any life insurance protection provided under the Plan, shall be subordinate to the retirement benefits provided under the Plan. Subject to any transitional rule applicable to contributions made under this Article XV prior to January 1, 1990, effective October 3, 1989, the aggregate of costs of the medical benefits (measured from January 1, 1987) plus the costs of any life insurance protection shall not exceed twenty-five percent (25%) of the sum of the aggregate of costs of retirement benefits under the Plan (other than past service credits), the aggregate of costs of the medical benefits and the costs of any life insurance protection (both measured from January 1, 1987). The aggregate of costs of retirement benefits, other than for past service credits, and the aggregate of costs of medical benefits provided under the Plan shall be determined using the projected unit credit funding method and the actuarial assumptions set forth in Exhibit B, a copy of which is attached hereto and specifically incorporated herein by reference in its entirety, and as may be amended from time to time by the committee responsible for providing a procedure for establishing and carrying out a funding policy and method for the Plan pursuant to Section 10.9 of the Plan. Contributions allocated to any separate account established for a Pensioned Employee from which medical benefits will be payable solely to such Pensioned Employee or his Dependents shall be treated as an Annual Addition as defined in Section 6.6(a) to any defined contribution plan maintained by the Employer. 15.7 Pensioned Employee contributions. It shall be the sole responsibility of the Pensioned Employee to notify the Employer promptly in writing when a change in the amount of the Pensioned Employee's contribution is in order because a Dependent has become ineligible for coverage under this Article XV. No person shall become covered under this Article XV for whom the Pensioned Employee has not made the required contribution. Any contribution paid by a Pensioned Employee for any person after such person shall have become ineligible for coverage under this Article XV shall be returned upon written request but only provided such written request by or on behalf of the Pensioned Employee is received by the Employer within ninety (90) days from the date coverage terminates with respect to such ineligible person. 15.8 Amendment of Article XV. The Employer reserves the right, through action of its Board of Directors, to amend Article XV (including Exhibit A) pursuant to Section 13.1 or the Trust without the consent of any Pensioned Employee, or his Dependents, 84 provided, however, that no amendment of this Article or the Trust shall cancel the payment or reimbursement of expenses for claims already incurred by a Pensioned Employee or his Dependent prior to the date of any amendment, nor shall any such amendment increase the duties and obligations of the Trustee except with its consent. This Article XV, as set forth in the Plan document, is not a contract and non-contributory benefits hereunder are provided gratuitously, without consideration from any Pensioned Employee or his Dependents. The Employer makes no promise to continue these benefits in the future and rights to future benefits will never vest. In particular, retirement or the fulfillment of the prerequisites for a retirement benefit pursuant to the terms of the Plan or under the terms of any other employee benefit plan maintained by the Employer shall not confer upon any Pensioned Employee or Dependents any right to continued benefits under this Article XV. 15.9 Termination of Article XV. Although it is the intention of the Employer that this Article shall be continued and the contribution shall be made regularly thereto each year, the Employer, by action of its Board of Directors pursuant to Section 13.1, may terminate this Article XV or permanently discontinue contributions at any time in its sole discretion. This Article XV, as set forth in the Plan document, is not a contract and non-contributory benefits hereunder are provided gratuitously, without consideration from any Pensioned Employee or his Dependents. The Employer makes no promise to continue these benefits in the future and rights to future benefits will never vest. In particular, retirement or the fulfillment of the prerequisites for a retirement benefit pursuant to the terms of the Plan or under the terms of any other employee benefit plan maintained by the Employer shall not confer upon any Pensioned Employee or his Dependents any right to continued benefits under this Article XV. Effective January 1, 1991, in the event the Employer or any adopting Employer shall terminate its provision of the medical benefits described in Exhibit A to Section 15.3 of the Plan to its Pensioned Employees, this Article XV of the Plan shall automatically terminate with respect to the Pensioned Employees and their Dependents of such Employer without the requirement of any action by such Employer. 15.10 Reversion of assets upon termination. Upon the termination of this Article XV and the satisfaction of all liabilities under this Article XV, all remaining assets in the separate account described in Section 15.6 shall be returned to the Employer. 85 IN WITNESS WHEREOF, the Board of Directors of Gulf Power Company, through its authorized officers has adopted this amendment and restatement of the Pension Plan for Employees of Gulf Power Company, this day of , , to be effective January 1, 1989. GULF POWER COMPANY By: Its: ATTEST: By: Its: [CORPORATE SEAL] [adamscl] h:\wpdocs\mtd\gulf\gulf-pens.94 86 EX-10.(D)20 21 EXHIBIT 10(D)20 Exhibit 10(d)20 SUPPLEMENTAL BENEFIT PLAN FOR GULF POWER COMPANY SUPPLEMENTAL BENEFIT PLAN FOR GULF POWER COMPANY Page ARTICLE I - PURPOSE AND ADOPTION OF PLAN . . . . . . . 1 1.1 Adoption . . . . . . . . . . . . . . . . 1 1.2 Purpose. . . . . . . . . . . . . . . . . 1 ARTICLE II - DEFINITIONS . . . . . . . . . . . . . . . 2 2.1 Account. . . . . . . . . . . . . . . . . 2 2.2 Affiliated Employer. . . . . . . . . . . 2 2.3 Beneficiary. . . . . . . . . . . . . . . 2 2.4 Board of Directors . . . . . . . . . . . 2 2.5 Code . . . . . . . . . . . . . . . . . . 2 2.6 Common Stock . . . . . . . . . . . . . . 2 2.7 Company. . . . . . . . . . . . . . . . . 2 2.8 Deferred Compensation Plan . . . . . . . 2 2.9 Effective Date . . . . . . . . . . . . . 3 2.10 Employee . . . . . . . . . . . . . . . . 3 2.11 ESOP . . . . . . . . . . . . . . . . . . 3 2.12 Non Pension Benefit. . . . . . . . . . . 3 2.13 Participant. . . . . . . . . . . . . . . 3 2.14 Pension Benefit. . . . . . . . . . . . . 3 -i- 2.15 Pension Plan . . . . . . . . . . . . . . 3 2.16 Plan . . . . . . . . . . . . . . . . . . 3 2.17 Plan Year. . . . . . . . . . . . . . . . 3 2.18 Savings Plan. . . . . . . . . . . . . . 3 ARTICLE III - ADMINISTRATION OF PLAN . . . . . . . . . 4 3.1 Administrator. . . . . . . . . . . . . . 4 3.2 Powers . . . . . . . . . . . . . . . . . 4 3.3 Duties of the Board of Directors. . . . . . . . . . . . . . . 5 3.4 Indemnification. . . . . . . . . . . . . 6 ARTICLE IV - ELIGIBILITY . . . . . . . . . . . . . . . 7 4.1 Eligibility Requirements . . . . . . . . 7 4.2 Determination of Eligibility . . . . . . 7 ARTICLE V - BENEFITS . . . . . . . . . . . . . . . . . 8 5.1 Pension Benefit. . . . . . . . . . . . . 8 5.2 Non Pension Benefit. . . . . . . . . . . 10 5.3 Distribution of Benefits . . . . . . . . 13 5.4 Funding of Benefits. . . . . . . . . . . 16 5.5 Withholding. . . . . . . . . . . . . . . 16 -ii- ARTICLE VI - MISCELLANEOUS . . . . . . . . . . . . . . 17 6.1 Assignment . . . . . . . . . . . . . . . 17 6.2 Amendment and Termination. . . . . . . . 17 6.3 No Guarantee of Employment . . . . . . . 17 6.4 Construction . . . . . . . . . . . . . . 18 -iii- SUPPLEMENTAL BENEFIT PLAN FOR GULF POWER COMPANY ARTICLE I - PURPOSE AND ADOPTION OF PLAN 1.1 Adoption: Gulf Power Company hereby adopt and establish the Supplemental Benefit Plan for Gulf Power Company. 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 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 Company under the Pension Plan for Employees of Gulf Power Company, the Employee Savings Plan for The Southern Company System, and the Employee Stock Ownership Plan of The Southern Company System, as a result of the limitations set forth under Sections 401(a)(17), 402(g), and 415 of the Internal Revenue Code of 1986, as amended from time to time. -1- ARTICLE II DEFINITIONS 2.1 "Account" shall mean the account or accounts established and maintained by a Company 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 "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. 2.3 "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 "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. 2.6 "Common Stock" shall mean common stock of The Southern Company. 2.7 "Company" shall mean Gulf Power Company. 2.8 "Deferred Compensation Plan" shall mean the Deferred Compensation Plan for The Southern Electric System, as amended -2- from time to time, following its adoption by the Board of Directors. 2.9 "Effective Date" shall mean January 1, 1983. The Effective Date of this amendment and restatement shall mean January 1, 1988. 2.10 "Employee" shall mean any person who is currently employed by the Company. 2.11 "ESOP" shall mean the Employee Stock Ownership Plan of The Southern Company System, as amended from time to time. 2.12 "Non Pension Benefit" shall mean the benefit described in Section 5.2. 2.13 "Participant" shall mean an Employee or former Employee of a Company who is eligible to receive benefits provided by the Plan. 2.14 "Pension Benefit" shall mean the benefit described in Section 5.1. 2.15 "Pension Plan" shall mean the defined benefit pension plan maintained by the Company or an Affiliated Employer, as amended from time to time. 2.16 "Plan" shall mean the Supplemental Benefit Plan for Gulf Power Company, as amended from time to time. 2.17 "Plan Year" shall mean the calendar year. -3- 2.18 "Savings Plan" shall mean the Employee Savings Plan for The Southern Company System, as amended from time to time. Where the context requires, the definitions of all terms set forth in the Pension Plan, the ESOP, 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 Board of Directors. 3.2 Powers. The Board of Directors 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 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 -4- 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 Board of Directors. (a) The Board of Directors is responsible for the daily administration of the Plan. It may appoint other persons or entities to perform any of its fiduciary functions. The Board of Directors 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 Board of Directors 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 Board of Directors 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. -5- (c) The Board of Directors 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 Board of Directors 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 Board of Directors 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 their own expense sufficient liability insurance for the Board of Directors to cover any and all claims, losses, -6- damages and expenses arising from any action or failure to act in connection with the execution of the duties as Board of Directors. ARTICLE IV ELIGIBILITY 4.1 Eligibility Requirements. All Employees (a) whose benefits under the Pension Plan of the Company are limited by the limitations set forth in Sections 401(a)(17) and 415 of the Code, (b) for whom contributions by the Company to the Savings Plan are limited by the limitations set forth in Sections 401(a)(17), 401(k), 401(m), 402(g) and 415 of the Code, or (c) for whom contributions by the Company to the ESOP are limited by the limitations set forth in Sections 401(a)(17) and 415 of the Code, shall be eligible to receive benefits under the Plan. 4.2 Determination of Eligibility. The Board of Directors 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 Board of Directors shall be authorized to rescind the eligibility of any Participant if necessary to insure that the Plan is maintained primarily for the purpose of providing deferred compensation to a select group of management or highly -7- compensated employees under the Employee Retirement Income Security Act of 1974, as amended. ARTICLE V BENEFITS 5.1 Pension Benefit. (a) If a Participant has Accredited Service with respect to the Pension Plan of the Company, but not with respect to the Pension Plan of any Affiliated Employer, he shall be entitled to a Pension Benefit equal to that portion of his Retirement Income under the Pension Plan of the Company which is not payable under such Pension Plan as a result of the limitations imposed by Sections 401(a)(17), 415(b), and 415(e) of the Code. (b) If a Participant has Accredited Service with respect to the Pension Plan of the Company and with respect to the Pension Plan of one or more Affiliated Employers, his Pension Benefit payable by the Company, and any Affiliated Employer(s) shall be equal to that portion of his combined Retirement Income under each Pension Plan which is not payable under any of such Pension Plans as a result of the limitations described by Sections 401(a)(17), 415(b), and 415(e) of the Code, multiplied by a fraction, the sum of the individual fractions not to exceed -8- one (1), the numerator of which is his years of Accredited Service under the Pension Plan of the Company or any Affiliated Employer(s) and the denominator which is his total years of Accredited Service under the Pension Plans of the Company and any Affiliated Employer(s). (c) 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 of the Company in calculating his Retirement Income, without regard to the limitation of Section 401(a)(17) of Code, but excluding any portion of his Compensation he may have elected to defer under the Deferred Compensation Plan. (d) To the extent that a Participant's Retirement Income under a Pension Plan is recalculated as a result of an amendment to such 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. -9- 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 by the Company, 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 the 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), 415(c), and 415(e) of the Code and (2) to the ESOP on behalf of the Participant as a result of the limitations imposed by Sections 401(a)(17), 415(c), and 415(e) 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 and ESOP, without regard to the limitations of Section 401(a)(17) or Section 402(g) of the Code, but excluding any portion of his Compensation he may have elected to defer under the Deferred Compensation Plan. -10- (c) All amounts so credited to the Account of the Participant shall be deemed to be invested in the Common Stock at the same time that such amounts would have been so invested if they had been contributed by the Company to the Savings Plan or the ESOP, as the case may be. In addition, such Account shall be credited with respect to shares of Common Stock allocated to the Participant's Account as follows: (1) In the case of cash dividends, such additional shares as could be purchased 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 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. -11- (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 Company 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 each Account established for the benefit of the Participant by the Company. Notwithstanding, in the sole discretion of the Board of Directors 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. 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. -12- 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 and in the same manner as the Participant's Retirement Income under the Pension Plan. The Beneficiary of a Participant's Pension Benefit shall be the same as the beneficiary of the Participant's Retirement Income under the Pension Plan. (b) When a Participant terminates his employment with the Company, said Participant shall be entitled to receive the market value of any shares of Common Stock (and fractions thereof) reflected in any Account maintained by the Company for his benefit under the Plan 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 close of the calendar quarter in which his termination of employment occurs, or as soon as reasonably practicable thereafter. The transfer by a Participant between companies in the Southern electric system shall not be deemed to be a termination of employment with the Company. No portion of a Participant's Account shall be distributed in Common Stock. -13- (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 close of the calendar quarter in which his termination of employment occurs, or as soon as reasonably practicable thereafter, and shall be an amount equal to the balance in the Participant's Account 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 divided by the number of the remaining annual payments and shall be due on the anniversary of the preceding payment date. No portion of a Participant's Account shall be distributed in Common Stock. (d) Upon the death of a Participant, or a former Participant prior to the payment of all amounts credited to said Participant's Account, the unpaid balance shall be paid in the sole discretion of the Board of Directors (1) in a lump sum to the designated Beneficiary of a Participant or former Participant within sixty (60) days following the close of the calendar quarter in which the Board of Directors 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 -14- 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 estate of the Participant or former Participant. No portion of a Participant's Account shall be distributed in Common Stock. (e) Upon the total disability of a Participant or former Participant, as determined by the Social Security Administration, the unpaid balance of his Account shall be paid in the sole discretion of the Board of Directors (1) in a lump sum to the Participant or former Participant, or his legal representative within sixty (60) days following the notification of the Board of Directors of the determination of 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. No portion of a Participant's Account shall be distributed in Common Stock. (f) The Board of Directors in its sole discretion upon application made by the Participant, a designated Beneficiary, or their legal representative, may determine to -15- 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 Funding of Benefits. The Company maintaining an Account for the benefit of a Participant shall not reserve or otherwise set aside funds for the payment of its obligations under the Plan, and such obligations shall be paid solely from the general assets of the Company. 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 at all times remain subject to the claims of the creditors of the Company. 5.5 Withholding. There shall be deducted from the payment of any Pension Benefit or Non Pension 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. -16- ARTICLE VI MISCELLANEOUS 6.1 Assignment. Neither the Participant, his Beneficiary, or 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. 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 the Company and a Participant, nor shall it limit the right of the Company to suspend, terminate, alter, modify, whether or not for cause, the employment relationship between the Company and a Participant. -17- 6.4 Construction. This Plan shall be construed in accordance with and governed by the laws of the State of Florida, to the extent such laws are not otherwise superseded by the laws of the United States. IN WITNESS WHEREOF, the Plan has been executed by duly authorized officers of Gulf Power Company, pursuant to resolutions of the Board of Directors of the Gulf Power Company, this day of , . GULF POWER COMPANY (CORPORATE SEAL) By: Attest: [adamscl] h:\wpdocs\mtd\gulf\sup-ben.pln -18- EX-10.(E)18 22 EXHIBIT 10(E)18 Exhibit 10(e)18 PENSION PLAN FOR EMPLOYEES OF MISSISSIPPI POWER COMPANY AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 1, 1989 TABLE OF CONTENTS Page ARTICLE I Definitions . . . . . . . . . . . 2 ARTICLE II Eligibility . . . . . . . . . . . 13 2.1 Employees . . . . . . . . . . . . . . . . . . . . . 13 2.2 Employees represented by a collective bargaining agent . . . . . . . . . . . . . . . . . . . . . . . 13 2.3 Persons in military service and Employees on authorized leave of absence . . . . . . . . . . . . 13 2.4 Employees reemployed . . . . . . . . . . . . . . . 14 2.5 Participation upon return to eligible class . . . . 14 2.6 Exclusion of certain categories of employees . . . 15 2.7 Waiver of participation . . . . . . . . . . . . . . 15 ARTICLE III Retirement . . . . . . . . . . . 16 3.1 Retirement at Normal Retirement Date . . . . . . . 16 3.2 Retirement at Early Retirement Date . . . . . . . . 16 3.3 Retirement at Deferred Retirement Date . . . . . . 16 ARTICLE IV Determination of Accredited Service . . . . . 17 4.1 Accredited Service pursuant to Prior Plan . . . . . 17 4.2 Accredited Service . . . . . . . . . . . . . . . . 17 4.3 Accredited Service and Years of Service in respect of service of certain Employees previously employed by the Employer or by Affiliated Employers . . . . . . . . . . . . . . . . . . . . . 18 4.4 Accrual of Retirement Income during period of total disability . . . . . . . . . . . . . . . . . 20 4.5 Employees leaving Employer's service . . . . . . . 21 4.6 Transfers to or from Affiliated Employers . . . . . 21 4.7 Transfers from Savannah Electric and Power Company . . . . . . . . . . . . . . . . . . . . . . 23 ARTICLE V Retirement Income . . . . . . . . . . 24 5.1 Normal Retirement Income . . . . . . . . . . . . . 24 i 5.2 Minimum Retirement Income payable upon retirement at Normal Retirement Date or Deferred Retirement Date . . . . . . . . . . . . . . . . . . . . . . . 24 5.3 Minimum Retirement Income upon retirement at Early Retirement Date or upon termination of service by reason of death or otherwise prior to retirement . 25 5.4 Calculation of Social Security Offset . . . . . . . 26 5.5 Early Retirement Income . . . . . . . . . . . . . . 27 5.6 Deferred Retirement Income . . . . . . . . . . . . 27 5.7 Payment of Retirement Income . . . . . . . . . . . 28 5.8 Termination of Retirement Income . . . . . . . . . 29 5.9 Required distributions . . . . . . . . . . . . . . 29 5.10 Suspension of Retirement Income for reemployment . . . . . . . . . . . . . . . . . . . 31 5.11 Increase in Retirement Income of retired Employees for service prior to January 1, 1991 . . 31 5.12 Special provisions relating to the treatment of absence of an Employee from the service of the Employer to serve in the Armed Forces of the United States . . . . . . . . . . . . . . . . . . . 32 ARTICLE VI Limitations on Benefits . . . . . . . . 36 6.1 Maximum Retirement Income . . . . . . . . . . . . . 36 6.2 Adjustment to Defined Benefit Dollar Limitation for Early or Deferred Retirement . . . . . . . . . 37 6.3 Adjustment of limitation for Years of Service or participation . . . . . . . . . . . . . . . . . . . 38 6.4 Preservation of Accrued Retirement Income . . . . . 38 6.5 Limitation on benefits from multiple plans . . . . 39 6.6 Special rules for plans subject to overall limitations under Code Section 415(e) . . . . . . . 40 6.7 Combination of Plans . . . . . . . . . . . . . . . 41 6.8 Incorporation of Code Section 415 . . . . . . . . . 41 ARTICLE VII Provisional Payee . . . . . . . . . . 42 7.1 Adjustment of Retirement Income to provide for payment to Provisional Payee . . . . . . . . . . . 42 7.2 Form and time of election and notice requirements . 42 7.3 Circumstances in which election and designation are inoperative . . . . . . . . . . . . . . . . . . 43 7.4 Pre-retirement death benefit . . . . . . . . . . . 44 7.5 Post-retirement death benefit - qualified joint and survivor annuity . . . . . . . . . . . . . . . 46 7.6 Election and designation by former Employee entitled to Retirement Income in accordance with Article VIII . . . . . . . . . . . . . . . . . . . 46 7.7 Death benefit for Provisional Payee of former Employee . . . . . . . . . . . . . . . . . . . . . 48 ii 7.8 Limitations on Employee's and Provisional Payee's benefits . . . . . . . . . . . . . . . . . . . . . 48 7.9 Effect of election under Article VII . . . . . . . 49 ARTICLE VIII Termination of Service . . . . . . . . 50 8.1 Vested interest . . . . . . . . . . . . . . . . . . 50 8.2 Early distribution of vested benefit . . . . . . . 50 8.3 Years of Service of reemployed Employees . . . . . 51 8.4 Cash-out and buy-back . . . . . . . . . . . . . . . 52 8.5 Calculation of present value for cash-out of benefits and for determining amount of benefits . . 53 8.6 Retirement Income under Prior Plan . . . . . . . . 55 8.7 Requirement for Direct Rollovers . . . . . . . . . 55 ARTICLE IX Contributions . . . . . . . . . . . 57 9.1 Contributions generally . . . . . . . . . . . . . . 57 9.2 Return of Employer contributions . . . . . . . . . 57 9.3 Expenses . . . . . . . . . . . . . . . . . . . . . 58 ARTICLE X Administration of Plan . . . . . . . . 59 10.1 Retirement Board . . . . . . . . . . . . . . . . . 59 10.2 Organization and transaction of business of Retirement Board . . . . . . . . . . . . . . . . . 59 10.3 Administrative responsibilities of Retirement Board . . . . . . . . . . . . . . . . . . . . . . . 59 10.4 Retirement Board, the "Administrator" . . . . . . . 60 10.5 Fiduciary responsibilities . . . . . . . . . . . . 61 10.6 Employment of actuaries and others . . . . . . . . 61 10.7 Accounts and tables . . . . . . . . . . . . . . . . 61 10.8 Indemnity of members of Retirement Board . . . . . 62 10.9 Areas in which the Retirement Board does not have responsibility . . . . . . . . . . . . . . . . . . 62 10.10 Claims Procedures . . . . . . . . . . . . . . . . 63 ARTICLE XI Management of Trust . . . . . . . . . 64 11.1 Trust . . . . . . . . . . . . . . . . . . . . . . . 64 11.2 Disbursement of the Trust Fund . . . . . . . . . . 64 11.3 Rights in the Trust . . . . . . . . . . . . . . . . 64 11.4 Merger of the Plan . . . . . . . . . . . . . . . . 65 ARTICLE XII Termination of the Plan . . . . . . . . 66 12.1 Termination of the Plan . . . . . . . . . . . . . . 66 iii 12.2 Limitation on benefits for certain highly paid employees . . . . . . . . . . . . . . . . . . . . . 66 ARTICLE XIII Amendment of the Plan . . . . . . . . . 68 13.1 Amendment of the Plan . . . . . . . . . . . . . . . 68 ARTICLE XIV Special Provisions . . . . . . . . . 69 14.1 Adoption of Plan by other corporations . . . . . . 69 14.2 Exclusive benefit . . . . . . . . . . . . . . . . . 70 14.3 Assignment or alienation . . . . . . . . . . . . . 70 14.4 Voluntary undertaking . . . . . . . . . . . . . . . 71 14.5 Top-Heavy Plan requirements . . . . . . . . . . . . 71 14.6 Determination of Top-Heavy status . . . . . . 71 14.7 Minimum Retirement Income for Top-Heavy Plan Years . . . . . . . . . . . . . . . . . . . . . . . 75 14.8 Vesting requirements for Top-Heavy Plan Years . . . 76 14.9 Adjustments to maximum benefits for Top-Heavy Plans . . . . . . . . . . . . . . . . . . . . . . . 77 ARTICLE XV Post-retirement Medical Benefits . . . . . . 78 15.1 Definitions . . . . . . . . . . . . . . . . . . . . 78 15.2 Eligibility of Pensioned Employees and their Dependents . . . . . . . . . . . . . . . . . . . . 79 15.3 Medical benefits . . . . . . . . . . . . . . . . . 79 15.4 Termination of coverage . . . . . . . . . . . . . . 80 15.5 Continuation of coverage to certain individuals . . 80 15.6 Contributions to fund medical benefits . . . . . . 81 15.7 Pensioned Employee contributions . . . . . . . . . 83 15.8 Amendment of Article XV . . . . . . . . . . . . . . 83 15.9 Termination of Article XV . . . . . . . . . . . . . 83 15.10 Reversion of assets upon termination . . . . . . . 84 ARTICLE XVI Early Retirement Incentive Program . . . . . 85 16.1 Eligibility . . . . . . . . . . . . . . . . . . . . 85 16.2 Retirement Dates of Eligible Employees . . . . . . 85 16.3 Early retirement incentive program benefits . . . . 86 16.4 Restoration to service . . . . . . . . . . . . . . 86 iv Introductory Statement The Pension Plan for Employees of Mississippi Power Company, as amended and restated effective as of January 1, 1989 and hereinafter set forth (the "Plan"), is a modification and continuation of the Pension Plan for Employees of Mississippi Power Company which originally became effective July 1, 1944, and has been amended from time to time. Since the enactment of the Employee Retirement Income Security Act of 1974 ("ERISA"), the Plan has been amended numerous times to comply with changes in the law and to achieve other administrative goals. Initially, the Plan was amended and restated in 1976 to comply with ERISA. Thereafter, the Plan was again amended and restated in 1986 to comply with the Tax Equity and Fiscal Responsibility Act of 1982, the Retirement Equity Act of 1984, and the Deficit Reduction Act of 1984. In more recent years, the Plan has been amended and restated three times to comply with the Tax Reform Act of 1986 -- first in 1989, second in 1991 and again as amended and restated herein. The amendment and restatement set forth herein consolidates those amendments made in 1989 and 1991 and provides for such other appropriate changes as are required by the law. Accordingly, this amendment and restatement is effective as of January 1, 1989. Where appropriate, amendments to the Plan which have a different effective date are noted. Retirement Income of former Employees (or Provisional Payees of former Employees) who retired in accordance with the provisions of the Prior Plan, as defined herein, is payable in accordance with the provisions of the Prior Plan. All contributions made by the Employer to this Plan are expressly conditioned upon the continued qualification of the Plan under Section 401(a) of the Code, including any amendments to the Plan, and upon the deductibility of such contributions by the Employer pursuant to Section 404 of the Code. 1 ARTICLE I Definitions The following words and phraseology as used herein have the following meanings unless a different meaning is plainly required by the context: 1 1.1 "Accrued Retirement Income" means with respect to any Employee at any particular date, the Retirement Income, determined pursuant to Section 5.1, commencing on his Normal Retirement Date which would be payable to such Employee in the form of a single life annuity on the basis of his Accredited Service to the date as of which the computation of Retirement Income is made. 1.2 "Accredited Service" means with respect to any Employee included in the Plan, the period of service as provided in Article IV. 1.3 "Actuarial Equivalent" means a benefit of equivalent value when computed on the basis of five percent (5%) interest per annum, compounded annually and the 1951 Group Annuity Mortality Table for males. The ages for all Employees under the above table shall be set back six (6) years and the ages for such Employees' spouses shall be set back one year. All actuarial adjustments and actuarial determinations required and made under the terms of the Plan shall be calculated in accordance with such assumptions. 1.4 "Affiliated Employer" means any corporation which is a member of a controlled group of corporations (as defined in Section 414(b) of the Code) which includes the Employer; any trade or business (whether or not incorporated) which is under common control (as defined in Section 414(c) of the Code) with the Employer; any organization (whether or not incorporated) which is a member of an affiliated service group (as defined in Section 414(m) of the Code) which includes the Employer; and any other entity required to be aggregated with the Employer pursuant to regulations under Section 414(o) of the Code. 1.5 "Average Monthly Earnings" means the greater of: (a) an Employee's Monthly Earnings averaged over the three (3) highest Plan Years of participation which shall produce the highest monthly average within the last ten (10) Plan Years; or (b) an Employee's Monthly Earnings averaged over the three (3) highest Plan Years of participation which shall produce the highest monthly average within the last ten (10) Plan Years during which the Employee actively performed services for the Employer. If an Employee has completed less than three (3) Plan Years of participation upon his termination of employment, his 2 Average Monthly Earnings will be based on his Earnings during his participation to his date of termination. 1.6 "Board of Directors" means the Board of Directors of Mississippi Power Company. 1.7 "Code" means the Internal Revenue Code of 1986, as amended from time to time. 1.8 "Current Accrued Retirement Income" means an Employee's Accrued Retirement Income under the Plan, determined as if the Employee had separated from service as of the close of the last Limitation Year beginning before January 1, 1987, when expressed as an annual benefit within the meaning of Section 415(b)(2) of the Code. In determining the amount of an Employee's Current Accrued Retirement Income, the following shall be disregarded: (a) any change in the terms and conditions of the Plan after May 5, 1986; and (b) any cost of living adjustment occurring after May 5, 1986. 1.9 "Deferred Retirement Date" means the first day of the month after a retirement subsequent to the Normal Retirement Date. Employment subsequent to Normal Retirement Date shall be deemed to be a retirement if an Employee has less than forty (40) Hours of Service during a calendar month. 1.10 "Defined Benefit Dollar Limitation" means the limitation set forth in Section 415(b)(1)(A) or (d) of the Code. 1.11 "Defined Contribution Dollar Limitation" means the limitation set forth in Section 415(c)(1)(A) of the Code. 1.12 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. 1.13 "Early Retirement Date" means the first day of the month following the retirement of an Employee on or after his fifty-fifth (55th) birthday and before his sixty-fifth (65th) birthday. 1.14 (a) "Earnings" with respect to any Employee including any Employee whose service is terminated by reason of disability (as defined in Section 4.4) means (1) the highest annual rate of salary or wages of an Employee of the Employer or employee of any Affiliated Employer within any Plan Year before deductions for taxes, Social Security, etc., (2) all amounts contributed by the Employer or any Affiliated Employer to The Southern Company 3 Employee Savings Plan as Elective Employer Contributions, as said term is described under Section 4.1 of such plan, pursuant to the Employee's exercise of his deferral option made thereunder in accordance with the requirements of Section 401(k) of the Code, and (3) all amounts contributed by the Employer or any Affiliated Employer to The Southern Electric System Flexible Benefits Plan or The Southern Company Flexible Benefits Plan on behalf of an Employee pursuant to his salary reduction election, and applied to provide one or more of the optional benefits available under such plan, but (4) shall exclude all amounts deferred under any non-qualified deferred compensation plan maintained by the Employer or any Affiliated Employer. (b) Notwithstanding the above, "Earnings" with respect to any commissioned salesperson means the salary or wages of an Employee of the Employer or employee of any Affiliated Employer within any Plan Year, without including overtime, and before deductions for taxes, Social Security, etc. but applying those adjustments identified in paragraphs (a)(2), (3) and (4) above. (c) With respect to an Employee whose service terminates because of a disability under Section 4.4, Earnings shall be deemed to continue in effect throughout the period of the Employee's Disability Leave, as also defined in Section 4.4. (d) With respect to calculating the Prior Plan Retirement Income of an Employee who is a "participant in the Plan" as provided in Section 5.12, Earnings shall be determined for the recognized period of his absence to serve in the Armed Forces of the United States at the rate which is paid to him on the day he returns to the service of the Employer as provided in paragraph (a) of Section 5.12 or at the rate which was payable to him at the time he left the employment of the Employer to enter the Armed Forces of the United States, if such amount was greater. (e) For Plan Years beginning after December 31, 1988 and prior to January 1, 1994, the annual compensation of each Employee taken into account for purposes of this Plan shall not exceed $200,000 (as adjusted by the Secretary of Treasury). The imposition of this limitation shall not reduce an Employee's Retirement Income below the amount as determined on December 31, 1988. In addition to other applicable limitations set forth in the Plan, and notwithstanding any other provision of the Plan to the contrary, for Plan Years beginning on or after January 1, 1994, the annual compensation of each Employee taken into account under the Plan shall not exceed $150,000, as adjusted for increases in the cost of living in accordance with Code Section 401(a)(17). The cost of living adjustment in effect for a calendar year applies to any period, not exceeding twelve (12) months, over which compensation is determined (the "determination period") beginning in such calendar year. If the determination 4 period is less than twelve (12) months, the limit shall be prorated. If compensation for any prior determination period is taken into account in determining an Employee's benefits accruing in the current Plan Year beginning on or after January 1, 1989 or January 1, 1994, as applicable, the compensation for that prior determination period is subject to the $200,000 or the $150,000 compensation limit in effect for that prior determination period. Notwithstanding any other provision in the Plan, each Employee's Accrued Retirement Income under this Plan will be the greater of: (a) the Employee's Accrued Retirement Income as of the last day of the last Plan Year beginning before January 1, 1994, frozen in accordance with Treasury Regulation Section 1.401(a)(4)-13, or (b) the Employee's Accrued Retirement Income determined with respect to the benefit formula applicable for the Plan Year beginning on or after January 1, 1994, as applied to the employee's total Years of Service taken into account under the Plan for purposes of benefit accruals. For purposes of this Section 1.14, the rules of Section 414(q)(6) of the Code shall apply in determining the adjusted $200,000 or $150,000 limitation, as applicable, except in applying such rules, the term "family" shall include only the spouse of the Employee and any lineal descendants of the Employee who have not attained age nineteen (19) before the close of the Plan Year. If, as a result of the application of such rules, the adjusted $200,000 or $150,000 limitation is exceeded, then the limitation shall be prorated among the affected individuals in proportion to each individual's Earnings determined under this Section 1.14 prior to the application of this limitation. 1.15 "Effective Date" means the original effective date of the Plan, July 1, 1944. The effective date of this amendment and restatement means January 1, 1989. 1.16 "Eligibility Year of Service" is a Year of Service commencing on the Employee's date of employment or reemployment or anniversary date thereof. 1.17 "Employee" means any person who is currently employed by the Employer as (a) a regular full-time employee, (b) a regular part-time employee, (c) a cooperative education employee, or (d) a temporary employee (whether full-time or part-time) paid directly or indirectly by the Employer. The term also includes "leased employees" within the meaning of Section 414(n)(2) of the 5 Code, unless the total number of leased employees constitutes less than twenty percent (20%) of the Employer's non-highly compensated workforce within the meaning of Section 414(n)(5)(C)(ii) and such leased employees are covered by a plan described in Section 414(n)(5)(B) of the Code. 1.18 "Employer" means Mississippi Power Company, any successor or successors thereof and any wholly owned subsidiary thereof which the Board of Directors may from time to time, and upon such terms and conditions as may be fixed by the Board of Directors, determine to bring under the Plan, and any other corporation which shall adopt this Plan and Trust Agreement pursuant to Section 14.1 by appropriate resolution authorized by the board of directors of said adopting corporation. The term "Employer" shall not include Electric City Merchandise Company, Inc. 1.19 "Full Current Costs" means the normal cost, as defined in Treasury Regulation Section 1.404(a)-6, for all years since the Effective Date of the Plan, plus interest on any unfunded liability during such period. 1.20 "Hour of Service" means an Employee shall be credited with one Hour of Service for each hour for which (a) he is paid, or entitled to payment, for the performance of duties for the Employer or an Affiliated Employer, and such hours shall be credited to the Employee for the computation period or periods in which the duties are performed; (b) he is paid, or entitled to payment, by the Employer or an Affiliated Employer on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty, or leave of absence in which case the Employee shall be credited with Hours of Service for the computation period or periods in which the period during which no duties were performed occurs; (c) back pay, irrespective of mitigation of damages, has been either awarded or agreed to by the Employer or an Affiliated Employer, in which case the Employee shall be credited with Hours of Service for the computation period or periods to which the award or agreement pertains, rather than the computation period in which the award, agreement, or payment is made; and (d) solely for the purpose of calculating Vesting Years of Service, he was on any form of authorized leave of absence. The same Hours of Service shall not be credited under clauses (a), (b), (c), and (d). An Employee who is entitled to be credited with Hours of Service in accordance with clause (b) or (d) of this Section shall be credited with such number of Hours of Service for the period of time during which no duties were performed as though he were in the active employment of the Employer during such period 6 of time. However, an Employee shall not be credited with Hours of Service in accordance with clause (b) of this Section for unused vacation for which payment is received at termination of employment, or if the payment which is made to him or to which he is entitled in accordance with clause (b) is made or due under a plan maintained solely for the purpose of complying with applicable Worker's Compensation, or unemployment compensation or disability insurance laws, or if such payment is one which solely reimburses an Employee for medical or medically related expenses incurred by the Employee. Provided there is no duplication of Hours of Service credited in accordance with the foregoing provisions, if an Employee is "a participant in the Plan" within the meaning of that term as defined in paragraph (a) of Section 5.12, he shall be credited with such number of Hours of Service with respect to all or such portion of the period of his absence to serve in the Armed Forces of the United States as may be recognized under paragraph (b) of Section 5.12 as though he were in the active employment of the Employer during the recognized period of his absence to serve in the Armed Forces. The rules set forth in paragraphs (b) and (c) of Department of Labor Regulations 2530.200b-2 are incorporated in the Plan by this reference and made a part hereof. 1.21 "Limitation Year" means the Plan Year. 1.22 "Monthly Earnings" means one-twelfth (1/12) of the Earnings of an Employee of the Employer during a Plan Year. 1.23 "Normal Retirement Date" means the first day of the month following an Employee's sixty-fifth (65th) birthday, except that the Normal Retirement Date of any Employee hired on or after his sixtieth (60th) birthday shall be the fifth (5th) anniversary of his initial participation in the Plan. 1.24 "One-Year Break in Service" means a twelve (12) consecutive month period commencing on or after January 1, 1976 which would constitute a Year of Service but for the fact that the Employee has not completed more than 500 Hours of Service during such period. Solely for the purpose of determining whether a One-Year Break in Service has occurred for eligibility or vesting purposes, an Employee who is absent from work for maternity or paternity reasons shall receive credit for the Hours of Service which would otherwise have been credited to such Employee but for such absence, or in any case in which such hours cannot be determined, eight (8) Hours of Service per day of such absence. In no event shall Hours of Service credited under this paragraph be in excess of the amount necessary to prevent a One-Year Break 7 in Service from occurring. For purposes of this paragraph, an absence from work for maternity or paternity reasons means an absence (a) by reason of the pregnancy of the Employee, (b) by reason of a birth of a child of the Employee, (c) by reason of the placement of a child with the Employee in connection with the adoption of such child by such Employee, or (d) for purposes of caring for such child for a period beginning immediately following such birth or placement. The Hours of Service shall be credited under this paragraph: (a) in the vesting or eligibility period in which the absence begins if the Hours of Service credited are necessary to prevent a One-Year Break in Service in such period, and (b) in all other cases, in the vesting or eligibility period following the period in which the absence begins. 1.25 "Past Service" means with respect to any Employee included in the Plan, the period of his Accredited Service prior to January 1, 1989 as determined under the Prior Plan. 1.26 "Plan" means the Pension Plan for Employees of Mississippi Power Company, as set forth herein and as hereinafter amended, effective January 1, 1989. 1.27 "Plan Year" means the twelve (12) month period commencing on the first day of January and ending on the last day of December next following. 1.28 "Plan Year of Service" is a Year of Service determined as if the date of employment or reemployment is the first day of the Plan Year. 1.29 "Prior Plan" means the Plan in effect prior to January 1, 1989. 1.30 "Provisional Payee" means a spouse designated or deemed to have been designated by an Employee or former Employee pursuant to Article VII to receive Retirement Income on the death of the Employee or former Employee. 1.31 "Qualified Election" means an election by an Employee or former Employee that concerns the form of distribution of Retirement Income that must be in writing and must be consented to by the Employee's Spouse. The Spouse's consent to such an election must acknowledge the effect of such election, must be in writing, and must be witnessed by a notary public. Notwithstanding this consent requirement, if the Employee establishes to the satisfaction of the Retirement Board that such written consent may not be obtained because the Spouse cannot be located or because of such other circumstances as the Secretary of the Treasury may by regulations prescribe, an election by the Employee will be deemed a Qualified Election. Any consent necessary under this provision shall be valid and effective only 8 with respect to the Spouse who signs the consent, or in the event of a deemed Qualified Election, with respect to such Spouse. A revocation of a prior Qualified Election to waive the payment of Retirement Income to the Employee's Spouse may be made by the Employee without consent at any time commencing within 90 days before such Employee's 55th birthday but not later than before the commencement of Retirement Income. A Qualified Election or the revocation of a Qualified Election shall be on a form furnished by the Retirement Board and filed within the time prescribed for making such election. 1.32 "Retirement Board" means the managing board of the Plan provided for in Article X. 1.33 "Retirement Date" means the Employee's Normal, Early, or Deferred Retirement Date, whichever is applicable to him. 1.34 "Retirement Income" means the monthly Retirement Income provided for by the Plan. 1.35 "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, and $250 per month, on and after January 1, 1991, 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 the aggregate Accredited Service the Employee could have accumulated if he had continued his employment 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(b) and shall be determined pursuant to the following, as applicable: (a) With regard to an Employee described in Section 5.2, the Social Security benefit shall be computed at retirement. In estimating the amount of the Federal primary Social Security benefit to which the Employee would be entitled, it shall be assumed that he will receive no wages for Social Security purposes after his retirement on his Normal Retirement Date or Deferred Retirement Date, and it will be further assumed in calculating his estimated Federal primary Social Security benefit 9 that the amount thereof will be the amount determined under the recomputation provision, if applicable, of the Social Security Act in effect at the time of his retirement. (b) With regard to an Employee described in Section 5.3(a), the Social Security benefit to which it is estimated that he will be entitled at sixty-five (65), shall be computed at the time of his retirement. In estimating the amount of the Federal primary Social Security benefit to which the Employee would be entitled at age sixty-five (65), it shall be assumed that he will receive no wages for Social Security purposes after his Early Retirement Date, and it will be further assumed in calculating his estimated Federal primary Social Security benefit that the amount thereof will be the amount determined under the recomputation provision, if applicable, of the Social Security Act in effect at his Early Retirement Date. (c) With regard to an Employee described in Section 5.3(b), the Social Security benefit to which it is estimated that he would have been entitled to receive at age sixty-five (65) or his date of death, if later, had he not died, shall be computed at the time of his death. In estimating the amount of Federal primary Social Security benefit to which the Employee would have been entitled at age sixty-five (65) or his date of death, if later, it shall be assumed that he would not have received any wages for Social Security purposes after the date of his death, and it will be further assumed in calculating his Federal primary Social Security benefit that the amount thereof will be the amount determined under the recomputation provision, if applicable, of the Social Security Act in effect at the time of his death. (d) With regard to an Employee described in Section 5.3(c), the Social Security benefit to which it is estimated that he will become entitled at age sixty-five (65) or his date of termination, if later, shall be computed at the date of termination. In estimating the amount of the Federal primary Social Security benefit to which the Employee would be entitled at age sixty-five (65) or his date of termination, if later, it shall be assumed that he will receive no wages for Social Security purposes after his date of termination, and it will be further assumed in calculating his estimated Federal primary Social Security benefit that the amount thereof will be the amount determined under the recomputation provision, if applicable, of the Social Security Act in effect at his date of termination. (e) With regard to an Employee described in Section 5.3(d), the Social Security benefit to which it is estimated that he would have been entitled to receive at age sixty-five (65) or his initial date of disability, if later, had he not become disabled, shall be computed at the time of his retirement. In estimating 10 the amount of Federal primary Social Security benefit to which the Employee would have been entitled at age sixty-five (65) or his date of disability, if later, it shall be assumed that he would have received wages for Social Security purposes as specified in Section 5.4, and it will be further assumed in calculating his estimated Federal primary Social Security benefit that the amount thereof will be the amount determined under the recomputation provision, if applicable, of the Social Security Act in effect at the time of his retirement. 1.36 "Social Security Retirement Age" means age sixty-five (65) if the Employee attains age sixty-two (62) before January 1, 2000 (i.e., born before January 1, 1938), age sixty-six (66) if the Employee attains age sixty-two (62) after December 31, 1999, but before January 1, 2017 (i.e., born after December 31, 1937, but before January 1, 1955), and age sixty-seven (67) if the Employee attains age sixty-two (62) after December 31, 2016 (i.e., born after December 31, 1954). 1.37 "Trust" or "Trust Fund" means all such money or other property which shall be held by the Trustee pursuant to the terms of the Trust Agreement or pursuant to contracts with life insurance companies. 1.38 "Trust Agreement" means the trust agreement or agreements between the Employer and the Trustee established for the purpose of funding the Retirement Income to be paid. 1.39 "Trustee" means the trustee or trustees acting as such under the Trust Agreement, including any successor or successors. 1.40 "Vesting Year of Service" means an Employee's Years of Service including: (a) Years of Service with an Affiliated Employer; (b) in the case of an employee of Birmingham Electric Company who, prior to his Normal Retirement Date, became and remained an Employee of the Employer until December 1, 1952, and was an active Employee of the Employer on January 1, 1961, his service with Birmingham Electric Company; (c) subject to the eligibility requirements of Section 2.3, active service with the Armed Forces of the United States if the Employee entered or enters active service or training in such Armed Forces directly from the employ of the Employer and after discharge or release therefrom returns within ninety (90) days to the employ of the Employer or is deemed to return under Section 2.3 because of the death of such Employee while in active service with such Armed Forces; and (d) any period during which the Employee was on any other form of authorized leave of absence. For purposes of this Section 1.40 in determining Vesting Years of Service with respect to a period of absence referred to in clause (c) or (d) of this Section 1.40, an Employee shall be credited with Hours of Service as though the period of absence were a period of active employment with the Employer. 11 1.41 "Year of Service" means with respect to an Employee in the service of the Employer on or after January 1, 1976: (a) if the Employee was hired prior to January 1, 1976, each twelve (12) consecutive month period, computed from the Employee's most recent date of hire by the Employer, during his last period of continuous service as a full-time regular Employee (except that service prior to July 1, 1944 need not have been continuous) with the Employer immediately prior to January 1, 1976 (including service with Commonwealth and predecessor companies and service with Affiliated Employers and service with companies or properties heretofore affiliated or associated prior to the date of severance of such affiliation or association) and any subsequent twelve (12) consecutive month period commencing on an anniversary date of such date of hire (or date of reemployment as provided in Section 2.4), provided that in each such twelve (12) consecutive month period commencing on or after January 1, 1975 he has completed at least 1000 Hours of Service; or (b) if the Employee is hired on or after January 1, 1976, a twelve (12) consecutive month period after December 31, 1975, commencing on the Employee's most recent date of hire by the Employer (or date of reemployment as provided in Section 2.4), and any subsequent twelve (12) consecutive month period commencing on an anniversary date of such date of hire, provided he has completed at least 1000 Hours of Service during each such twelve (12) consecutive month period; and (c) to the extent not resulting in duplication, each Year of Service restored to the Employee upon reemployment as provided in Section 8.3. An Employee's vested interest in his Accrued Retirement Income shall be based on his Vesting Years of Service and an Employee's eligibility to participate in the Plan pursuant to Article II shall be based on his Eligibility Year of Service. Breaks in service will be measured on the same computation period as the Year of Service. Effective on and after January 1, 1995, an Employee's accrual of Retirement Income shall be based solely on an Employee's Plan Year of Service, without regard to an Employee's completion of a Vesting Year of Service ending within such Plan Year. In the Plan and Trust Agreement, 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. 12 ARTICLE II Eligibility 2 2.1 Employees. Each Employee participating in the Plan as of January 1, 1989 shall continue to be included in the Plan. Each other Employee, except as provided in this Article, shall be included in the Plan on the first day of the month next following the date on which he first completes an Eligibility Year of Service. 2.2 Employees represented by a collective bargaining agent. An Employee who is represented by a collective bargaining agent may participate in the Plan, subject to its terms, if the representative(s) of his bargaining unit and the Employer mutually agree to participation in the Plan by members of his bargaining unit. 2.3 Persons in military service and Employees on authorized leave of absence. Any person not already included in the Plan who leaves or has left the employ of the Employer to enter the Armed Forces of the United States or is on authorized leave of absence without regular pay and who returns to the employ of the Employer within ninety (90) days after discharge from such military service or on or before termination of his leave of absence, shall, upon such return, be included in the Plan effective as of the first day of the month next following the date on which he first met or meets the eligibility requirement of Section 2.1. In determining whether an Employee entering the service of the Employer has completed an Eligibility Year of Service, his Hours of Service prior to such authorized leave of absence without regular pay or entry into the Armed Forces shall be taken into account, and for purposes of Section 2.4, he shall be deemed not to have incurred a One-Year Break in Service by reason of such absence. If an Employee dies while in active service with the Armed Forces of the United States, such Employee shall be deemed to have returned to the employ of the Employer on his date of death. An Employee not already included in the Plan who is on authorized leave of absence and receiving his regular pay shall be considered credited with Hours of Service as though the period of absence was a period of active employment with the Employer, and he shall be included in the Plan if and when he meets the requirements of this Article II regardless of whether he is, on the date of such inclusion, on such leave of absence. 13 2.4 Employees reemployed. An Employee whose service terminates at any time and who is reemployed as an Employee, unless excluded under Section 2.6, will be included in the Plan as provided in Section 2.1 unless: (a) prior to termination of his service he had completed at least one Year of Service; and (b) upon his reemployment, to the extent provided in Section 8.3 without regard to Section 8.4, he is entitled to restoration of his Years of Service, in which case he will be included in the Plan as of the date of his reemployment. For purposes of determining Years of Service of an Employee who is reemployed by the Employer subsequent to a One-Year Break in Service, a Year of Service subsequent to his reemployment shall be computed on the basis of the twelve (12) consecutive month period commencing on his date of reemployment or an anniversary thereof. 2.5 Participation upon return to eligible class. If an Employee is a participant in the Plan before July 1, 1991, the exclusion from participation provided in Section 2.6, as it regards temporary employees, shall not apply with respect to such Employee, and such Employee shall be eligible to participate in the Plan after July 1, 1991 whether or not he is classified as a temporary employee. If an Employee first becomes a participant on or after July 1, 1991, in the event such Employee ceases to be a member of an eligible class of Employees and becomes ineligible to participate, but has not incurred a One-Year Break in Service, such Employee will participate immediately upon returning to an eligible class of Employees. If such Employee incurred a One- Year Break in Service, eligibility will be determined under Section 2.4 of the Plan. In all other instances, if an Employee is not a member of an eligible class of Employees but then becomes a member of an eligible class, such Employee will commence participation in the Plan as of the first day of the month next following the later of (a) the date such Employee completes an Eligibility Year of Service or (b) the date he becomes a member of an eligible class of Employees. 14 2.6 Exclusion of certain categories of employees. Notwithstanding any other provision of this Article II, leased employees shall not be eligible to participate in the Plan. In addition, temporary employees, except Employees, as defined in Section 1.17, participating in the Plan prior to July 1, 1991 shall not be eligible to participate in the Plan. Any person who is employed by Electric City Merchandise Company, Inc. on or after May 1, 1988, or who is employed by Savannah Electric and Power Company on or after March 3, 1988, shall not be entitled to accrue Retirement Income under the Plan while employed at such companies. 2.7 Waiver of participation. Effective January 1, 1991, notwithstanding the above, an Employee may, subject to the approval of the Employer, elect voluntarily not to participate in the Plan. The election not to participate must be communicated in writing to the Retirement Board effective on an Employee's date of hire or an anniversary thereof. Effective January 1, 1995, the election not to participate must be communicated in writing to and acknowledged by the Retirement Board and shall be effective as of the date set forth in such written waiver. 15 ARTICLE III Retirement 3 3.1 Retirement at Normal Retirement Date. Each Employee eligible to participate in the Plan shall have a nonforfeitable right to his Accrued Retirement Income by no later than his sixty-fifth (65th) birthday, or in the case of any Employee hired on or after his sixtieth (60th) birthday, the fifth (5th) anniversary of his initial participation in the Plan. Notwithstanding the above, an Employee's Normal Retirement Date shall be as provided in Section 1.23. 3.2 Retirement at Early Retirement Date. An Employee having at least ten (10) Years of Accredited Service (including any Accredited Service to which he is entitled under the pension plan of any Affiliated Employer from which such Employee was transferred pursuant to Section 4.6 or 4.7, or which was credited to him in accordance with Section 4.3) may elect to retire on an Early Retirement Date on or after his fifty-fifth (55th) birthday and before his sixty-fifth (65th) birthday and to have his Retirement Income commence on that date, or effective January 1, 1995, the first day of any month up to and including the Employee's Normal Retirement Date. 3.3 Retirement at Deferred Retirement Date. An Employee included in the Plan may remain in active service after his Normal Retirement Date. The involuntary retirement of an Employee on or after his Normal Retirement Date shall not be permitted solely on the basis of the Employee's age, except in accordance with the provisions of the Age Discrimination in Employment Act, as amended from time to time. Termination of service of such an Employee for any reason after Normal Retirement Date shall be deemed retirement as provided in the Plan. 16 ARTICLE IV Determination of Accredited Service 4 4.1 Accredited Service pursuant to Prior Plan. Each Employee who participated in the Prior Plan shall be credited with such Accredited Service, if any, earned under such Prior Plan as of December 31, 1988. 4.2 Accredited Service. (a) Each Employee meeting the requirements of Article II shall, in addition to any Accredited Service to which he may be entitled in accordance with Section 4.1, be credited with Accredited Service as set forth in (b) below. Any such Employee who is on authorized leave of absence with regular pay shall be credited with Accredited Service during the period of such absence. Any such Employee who is a "participant in the Plan" within the meaning of that term as defined in paragraph (a) of Section 5.12 shall be credited with Accredited Service during all or such portion of the period of his absence to serve in the Armed Forces of the United States as may be recognized under paragraph (b) of Section 5.12. Employees on authorized leave of absence without regular pay, other than Employees deemed to accrue Hours of Service under Section 4.4, and persons in the Armed Forces who are not "participants in the Plan" within the meaning of that term as defined in paragraph (a) of Section 5.12 shall not be credited with Accredited Service for the period of such absence. (b) For each Plan Year commencing after December 31, 1988, an Employee included in the Plan who is credited with a Vesting Year of Service for the twelve (12) consecutive month period ending on the anniversary date of his hire which occurs during such Plan Year shall be credited with Accredited Service as follows: (1) if an Employee completes at least 1,680 Hours of Service in a Plan Year, he shall be credited with one year of Accredited Service; (2) if an Employee completes less than 1,680 Hours of Service in a Plan Year, but not less than 1,000 Hours of Service, he shall be credited with one-twelfth (1/12) of a year of Accredited Service for each 140 Hours of Service; or (3) if an Employee's initial eligibility in the Plan shall occur after the beginning of the Plan Year, and the Employee shall therefore have completed less than 1,000 Hours of Service in such Plan Year, he shall be credited with one-twelfth (1/12) of a year of Accredited Service for 17 each 140 Hours of Service during such Plan Year after his inclusion in the Plan. Notwithstanding the above, effective January 1, 1995, an Employee's Accredited Service shall be calculated based on an Employee's accrual of a Plan Year of Service only and without regard to the requirement of a Vesting Year of Service. (c) If an Employee (1) who has previously satisfied the eligibility requirements under Article II shall again be included in the Plan at such time which is after the beginning of the Plan Year, or (2) shall terminate his employment for any reason before the close of such Plan Year and shall therefore have completed less than 1,000 Hours of Service in such Plan Year, he shall be credited with one-twelfth (1/12) of a year of Accredited Service for each 140 Hours of Service during such Plan Year after his inclusion in the Plan or before his termination of employment in such Plan Year, as the case may be. (d) In addition to any Accredited Service credited under Section 4.1, an Employee shall be entitled to Accredited Service determined under the Prior Plan, without regard to the age requirement for eligibility to participate in the Prior Plan, in excess of the Accredited Service determined under the Prior Plan (including the age requirement for eligibility to participate in the Prior Plan). Such Accredited Service shall be considered Accredited Service after December 31, 1985 for purposes of calculating an Employee's Retirement Income under Article V. (e) In addition to the foregoing, Accredited Service may include Accredited Service accrued subsequent to a One-year Break in Service including such Accredited Service which may be restored in accordance with the provisions of Section 8.3. (f) Notwithstanding the above, the maximum number of years of Accredited Service with respect to any Employee participating in the Plan shall not exceed forty (40). Effective January 1, 1991, the maximum number of years of Accredited Service is increased to forty-three (43). 4.3 Accredited Service and Years of Service in respect of service of certain Employees previously employed by the Employer or by Affiliated Employers. An Employee in the service of the Employer on January 1, 1976 or employed by it thereafter who meets the requirements of paragraph (a) of this Section 4.3, in addition to any other Years of Service or Accredited Service to which he may be entitled under the Plan, upon completion of an Eligibility Year of Service where required under Section 8.3(c) (which shall also be considered to be Accredited Service) shall be credited with such number of Years of Service (and fractions thereof to the nearest whole month for service prior to January 1, 1976) and such Accredited Service and Retirement Income as 18 shall be determined in accordance with the provisions of paragraphs (b) and (c) of this Section 4.3. (a) (1) Such Employee shall have been employed prior to January 1, 1976 by the Employer or by one or more Affiliated Employers; (2) he shall have terminated his service with Employer or such Affiliated Employer other than by retirement and he shall not be entitled to receive at any time any retirement income under the pension plan of any such prior employer in respect of any period of time for which he shall receive credit for Years of Service or Accredited Service under this Section 4.3; and (3) for Employees reemployed on or after January 1, 1985, the number of consecutive One-Year Breaks in Service incurred by the Employee prior to the date of his employment by the Employer does not equal or exceed the greater of (A) five (5), or (B) the aggregate number of his Years of Service (and fractions thereof to the nearest whole month for service prior to January 1, 1976) with the Employer and such Affiliated Employer. The years of Accredited Service credited to an Employee reemployed prior to January 1, 1985, with regard to years of Accredited Service immediately prior to the termination of his service, shall be determined under the terms of the Plan in effect prior to January 1, 1985. (b) The number of Years of Service (and fractions thereof to the nearest whole month for service prior to January 1, 1976) and the Accredited Service, respectively, which shall be credited to such Employee shall be equal to the respective number of his Years of Service (and fractions thereof to the nearest whole month for service prior to January 1, 1976) and Accredited Service which were forfeited by the Employee and not restored under the pension plans of the Employer or an Affiliated Employer. (c) There shall be credited to the Employee Retirement Income equal to retirement income which was accrued by him under the pension plan of the Employer or an Affiliated Employer during the period of his Accredited Service which was forfeited and which is credited under the Plan in accordance with Section 4.3. The amount of Retirement Income credited in accordance with this paragraph (c) shall be treated as Prior Plan Retirement Income for purposes of determining the amount of Retirement Income to which the Employee is entitled, and shall be determined in accordance with the provisions of the pension plan of the Affiliated Employer in effect at the time the Employee's service with such Affiliated Employer terminated without regard to any minimum provisions of such pension plan; for this purpose and if relevant in respect of the Employee it shall be assumed that the pension plan of the Affiliated Employer in effect at the time the Employee's service with such Affiliated Employer terminated contained the provisions of Section 5.12 of the Plan and related amendments concerning absence from the service of the Employer to 19 serve in the Armed Forces of the United States which became effective November 1, 1977. For Plan Years beginning after December 31, 1987, an Employee who meets the requirements of paragraph (a) of this Section 4.3 shall be deemed to have transferred to or from an Affiliated Employer for purposes of the transfer of assets or liabilities to or from the Plan in accordance with Section 4.6. 4.4 Accrual of Retirement Income during period of total disability. (a) If an Employee included in the Plan shall become totally disabled, as determined by the Retirement Board on the basis of medical evidence, after he has completed at least five (5) Vesting Years of Service and, by reason of such disability, he shall apply for and be granted either Social Security disability benefits or long-term disability benefits under a long-term disability benefit plan of the Employer, he shall be considered to be on a leave of absence, herein referred to as a "Disability Leave." An Employee's Disability Leave shall be deemed to begin on the initial date of the disability, as determined by the Retirement Board, and shall continue until the earlier of: (1) the end of the month in which he shall cease to be entitled to receive Social Security Disability benefits and long-term disability benefits under a long-term disability benefit plan of the Employer; (2) his death; and (3) his Retirement Date if he elects to have his Retirement Income commence on such date. During the period of the Employee's Disability Leave, he shall, for purposes of the Plan, be deemed to have received Earnings at the regular rate in effect for him. (b) A disabled Employee who applies for and would be granted long-term disability benefits under a long-term disability benefit plan of the Employer, if it were not for the fact that the deductions therefrom attributable to other disability benefits equal or exceed the amount of his unreduced benefit under a long-term disability benefit plan of the Employer, will be considered as being currently granted benefits under such long-term disability benefit plan. (c) An Employee's Disability Leave shall be deemed to be a period for which Hours of Service shall be credited to the Employee as though the period of his Disability Leave were a period of active employment. (d) If an Employee's Disability Leave shall terminate prior to his Normal Retirement Date and he shall fail to return to the employment of the Employer 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 his rights shall be determined in accordance with Article VIII, unless at such time he shall be entitled to retire on an Early 20 Retirement Date, in which event his termination of service shall be deemed to constitute his retirement under Section 3.2. (e) Notwithstanding the above, the years of Accredited Service for any Employee whose initial date of disability occurred under the Prior Plan shall be determined under the terms of the Prior Plan. 4.5 Employees leaving Employer's service. If the service of an Employee is terminated prior to retirement as provided by Article III, such Employee will forfeit any Vesting Years of Service and Accredited Service which he may have subject to possible restoration of some or all of his Vesting Years of Service and Accredited Service in accordance with Article VIII. The provisions of this Section 4.5 shall not affect the rights, if any, of an Employee under Article VIII nor shall the rights of an Employee be affected during or by reason of a layoff, due to lack of work, which continues for a period of one year or less, except that such period of layoff shall not be deemed to be service with the Employer. If the service of an Employee is terminated, or if he is not reemployed before the expiration of one year after being laid off for lack of work, and he is subsequently reemployed, he will be treated as provided in Section 2.4. Forfeitures arising by reason of an Employee's termination of service for any reason shall not be applied to increase the benefits any Employee would otherwise receive under the Plan but shall be used to reduce contributions of the Employer to the Plan. 4.6 Transfers to or from Affiliated Employers. This Section 4.6 shall not apply to the transfer by an Employee to the Employer from Savannah Electric and Power Company on or after March 3, 1988. In the case of the transfer of an Employee (including an Employee included in the Prior Plan who was transferred in accordance with the Prior Plan) to an Affiliated Employer which has at the time of transfer a pension plan with substantially the same terms as this Plan, such Employee, if and when he commences to receive on or after his Normal Retirement Date retirement income under such pension plan of the Affiliated Employer to which transferred, shall receive retirement income under such pension plan attributable to years of Accredited Service with the Employer prior to the time of his transfer. If and when such an Employee commences to receive on an Early Retirement Date retirement income under such pension plan of the Affiliated Employer to which transferred, the amount of any retirement income payable under such pension plan and attributable to Accredited Service with the Employer prior to such transfer shall be reduced in accordance with the provisions of the pension plan relating to retirement income payable at Early Retirement Date, or if such retirement income shall be 21 payable in a manner similar to the provisions of Section 8.2 or Section 8.6, reduced in accordance with the applicable provision. In the case of the transfer to this Employer (not including transfers by reason of the split-up as of November 1, 1949) of an Employee of any Affiliated Employer which has at the time of transfer a pension plan with substantially the same terms as this Plan, the Employer will, subject to the provisions of Article IX, make periodic contributions into this Plan to the extent necessary to provide the portion of the Retirement Income not provided for him in the pension plan of the company from which he was transferred. Upon the transfer of an Employee to or from the Employer, the Plan and Trust shall be authorized to receive or transfer the greater of (a) the actuarial equivalent of the Employee's Accrued Retirement Income or (b) such assets as may be required to fund the projected Retirement Income of the Employee at his retirement date attributable to the Plan or the pension plan maintained by the Affiliated Employer from which the Employee transfers, determined as of the last day of the Plan Year in which the transfer occurs using the current funding assumptions for the Plan Year in which the transfer occurs. The Retirement Board of the Employer shall be authorized to coordinate the transfer of assets and liabilities attributable to the benefits of active Employees, terminated vested Employees, retired Employees, and Provisional Payees with any Affiliated Employer which has at such time a pension plan with substantially the same terms as this Plan. Notwithstanding the above, the transferred Employee shall be entitled to receive a benefit immediately following the transfer of assets or liabilities to or from the Plan and Trust which is equal to or greater than the benefit he would have been entitled to receive immediately before the transfer if the Plan or the pension plan maintained by the Affiliated Employer from which the Employee transfers had been terminated. In no event shall assets be transferred to or from the Plan and Trust without the concurrent transfer of liabilities attributable to such assets. In no case, however, shall any such Employee, who retires pursuant to Section 3.1, 3.2, or 3.3 or the Provisional Payee of a deceased Employee entitled to payment in accordance with Article VII, receive Retirement Income attributable to Accredited Service from both companies aggregating less than the Minimum Retirement Income specified in Article V (after giving effect to adjustments, if any, for Provisional Payee designation or deemed designation), as shall be applicable in his circumstances. 22 4.7 Transfers from Savannah Electric and Power Company. In the case of the transfer to the Employer of an employee of Savannah Electric and Power Company ("SEPCO"), such Employee, if and when he attains his Normal Retirement Date or Deferred Retirement Date, shall be entitled to receive Retirement Income calculated pursuant to Section 5.1 or 5.2, as appropriate, based upon his Accredited Service with the Employer and Accredited Service attributable to actual service during his employment with SEPCO. Such amount calculated in accordance with the preceding sentence shall be reduced by the amount of retirement income calculated under the defined benefit pension plan of SEPCO attributable to Accredited Service during his actual service during his employment with SEPCO. Any Retirement Income based upon an Employee's Accredited Service with the Employer and Accredited Service attributable to actual service during his employment with SEPCO shall be subject to the provisions of the Plan relating to Retirement Income payable at an Early Retirement Date, or if such Retirement Income shall be payable in accordance with the provisions of Section 8.2 or 8.6, subject to the provisions of such Section. This Section 4.7 shall also apply in calculating the Retirement Income payable under this Plan to a former employee of SEPCO who is hired by the Employer and is entitled to credit for years of Accredited Service under the Plan attributable to his actual service with SEPCO. 23 ARTICLE V Retirement Income 5 5.1 Normal Retirement Income. The monthly Retirement Income payable as a single life annuity to an Employee included in the Plan who retires from the service of the Employer at his Normal Retirement Date after January 1, 1989, subject to the limitations of Article VI, shall be the greater of (a) and (b): (a) the amount determined under (1) or (2) below, whichever is greater: (1) the Accrued Retirement Income determined in accordance with Section 5.1 of the Prior Plan without regard to the Minimum Retirement Income requirement, plus the designated fixed dollar amount times the Employee's years of Accredited Service earned after December 31, 1988. For the period on and after January 1, 1989 but ending December 31, 1990, the fixed dollar amount equals $20.00. For the period on and after January 1, 1991, the fixed dollar amount equals $25.00; and (2) $25.00 times an Employee's years of Accredited Service; and (b) the Minimum Retirement Income as determined in accordance with Section 5.2. 5.2 Minimum Retirement Income payable upon retirement at Normal Retirement Date or Deferred Retirement Date. The monthly Minimum Retirement Income payable to an Employee who retires from the service of the Employer after January 1, 1989 at his Normal Retirement Date or Deferred Retirement Date (before adjustment for Provisional Payee designation, if any) shall be an amount equal to 1.70% of his Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service to his Normal Retirement Date or Deferred Retirement Date including a Social Security Offset. Any provisions of this Article V to the contrary notwithstanding, Retirement Income determined in accordance with this Article V with respect to an Employee who retires on his Normal Retirement Date or Deferred Retirement Date shall not be less than the Retirement Income which would have been payable with respect to such Employee commencing on an Early Retirement Date had (a) the Employee retired on the Early Retirement Date which would have resulted in the greatest Retirement Income, (b) his Retirement Income commencing on such Early Retirement Date been computed by utilizing the estimated Federal primary Social Security benefit to which the Employee shall be entitled 24 determined in accordance with the Social Security Act in effect at his retirement, giving effect to the recomputation provision of such Social Security Act, if applicable, and (c) such Retirement Income commencing on such Early Retirement Date been payable in the same form as his Retirement Income commencing on his Normal Retirement Date or Deferred Retirement Date. 5.3 Minimum Retirement Income upon retirement at Early Retirement Date or upon termination of service by reason of death or otherwise prior to retirement. The monthly Minimum Retirement Income payable to an Employee (or his Provisional Payee), if he shall retire on his Early Retirement Date, or if his service shall terminate by reason of death or otherwise prior to retirement, shall be determined in accordance with the following provisions: (a) Upon retirement at Early Retirement Date his Minimum Retirement Income (before adjustment for Provisional Payee designation, if any) shall be an amount equal to 1.70% of his Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service to his Early Retirement Date including a Social Security Offset. (b) Upon termination of service by reason of the death of the Employee prior to retirement and after the effective date of his Provisional Payee designation or deemed designation, the Minimum Retirement Income for the purpose of determining the Employee's Accrued Retirement Income upon which payment to his Provisional Payee in accordance with Section 7.4 shall be based shall be an amount equal to 1.70% of the Employee's Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service to the date of his death including a Social Security Offset. (c) For an Employee who terminates his service with the Employer with entitlement to receive Retirement Income in accordance with Section 8.1, upon retirement at Early Retirement Date or Normal Retirement Date his Minimum Retirement Income (before adjustment for Provisional Payee designation, if any) shall be an amount equal to 1.70% of his Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service to his date of termination including a Social Security Offset. (d) Upon termination of service by reason of disability (as defined in Section 4.4) of the Employee prior to retirement, provided such Employee does not return to the service of the Employer prior to his Retirement Date, the Minimum Retirement Income shall be an amount equal to 1.70% of the Employee's Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service to his Retirement Date including a Social Security Offset. 25 5.4 Calculation of Social Security Offset. (a) Notwithstanding the Social Security Offset as calculated in Sections 5.2 and 5.3, in no event shall such Social Security Offset exceed the limits set forth in Section 401(l) of the Code and the regulations applicable thereunder which are incorporated by reference herein. (b) For purposes of determining the Social Security Offset in calculating an Employee's Retirement Income under the Plan, the Social Security Offset shall be determined by using the actual salary history of the Employee during his employment with the Employer or any Affiliated Employer, provided that in the event that the Retirement Board is unable to secure such actual salary history within 180 days (or such longer period as may be prescribed by the Retirement Board) following the later of the date of the Employee's separation from service (by retirement or otherwise) and the time when the Employee is notified of the Retirement Income to which he is entitled, the salary history shall be determined in the following manner: (1) The salary history shall be estimated by applying a salary scale, projected backwards, to the Employee's compensation from the Employer for W-2 purposes for the first Plan Year following the most recent Plan Year for which the salary history is estimated. The salary scale shall be a level percentage per year equal to six percent (6%) per annum. (2) The Plan shall give clear written notice to each Employee of the Employee's right to supply the actual salary history and of the financial consequences of failing to supply such history. Such notice shall state that the actual salary history is available from the Social Security Administration. For purposes of determining the Social Security Offset in calculating the Retirement Income of an Employee entitled to receive a public pension based on his employment with a Federal, state, or local government agency, no reduction in such Employee's Social Security benefit resulting from the receipt of a public pension shall be recognized. (c) If the distribution of an Employee's Accrued Retirement Income begins before the Employee's attainment of the Social Security Retirement Age (including a benefit commencing at Normal Retirement Date), the projected Employer derived primary insurance amount attributable to service by the Employee for the Employer will be reduced by one-fifteenth (1/15) for each of the first five (5) years and one-thirtieth (1/30) for each of the next five (5) years by which the starting date of such benefit 26 precedes the Social Security Retirement Age of the Employee, and reduced actuarially for each additional year thereafter. 5.5 Early Retirement Income. The monthly amount of Retirement Income payable to an Employee who retires from the service of the Employer at his Early Retirement Date subject to the limitations of Section 6.2, will be equal to his Retirement Income determined in accordance with Sections 5.1 and 5.3 based on his Accredited Service to his Early Retirement Date, reduced by three-tenths of one percent (0.3%) for each calendar month by which the commencement date of his Retirement Income precedes his Normal Retirement Date. At the option of the Employee exercised at or prior to commencement of his Retirement Income on or after his Early Retirement Date (provided he shall not have in effect at such Early Retirement Date a Provisional Payee designation pursuant to Article VII) he may have his Retirement Income adjusted upwards in an amount which will make his Retirement Income payable up to age sixty-five (65) equal, as nearly as may be, to the amount of his Federal primary Social Security benefit (primary old age insurance benefit) estimated to become payable after age sixty-five (65), as computed at the time of his retirement in accordance with Section 5.3(a), plus a reduced amount, if any, of Retirement Income actually determined to be payable after age sixty-five (65). The Federal primary Social Security benefit used in calculating an Employee's Retirement Income payable under the Plan shall be determined by using the salary history of the Employee during his employment with the Employer or any Affiliated Employer, as calculated in accordance with Section 5.4(b). 5.6 Deferred Retirement Income. The monthly amount of Retirement Income payable to an Employee who completes at least one Hour of Service after December 31, 1987 and who retires from the service of the Employer at his Deferred Retirement Date, subject to the limitations of Section 6.2, will be equal to his Retirement Income determined in accordance with Sections 5.1 and 5.2 based on his Accredited Service to his Deferred Retirement Date. For Employees whose Normal Retirement Date would have occurred on or before January 1, 1986, but whose Deferred Retirement Date occurs after January 1, 1988 and on or before July 1, 1991, the monthly amount of Retirement Income payable to an Employee who completes at least one Hour of Service after December 31, 1987, subject to the limitations of Section 6.2, will be equal to the greater of (a) his Retirement Income calculated on his Deferred Retirement Date, or (b) his Retirement Income calculated as of his Normal Retirement Date applying the applicable percentage increase in his Retirement Income pursuant to the terms of Section 5.13 of the Prior Plan. 27 5.7 Payment of Retirement Income. The first payment of an Employee's Retirement Income will be made on his Early Retirement Date, Normal Retirement Date, Deferred Retirement Date, or date of commencement of payment of Retirement Income in accordance with Section 8.2 or 8.6, as the case may be; provided that commencement of the distribution of an Employee's Retirement Income shall not be made prior to his Normal Retirement Date without the consent of such Employee, except as provided in Section 8.4 of the Plan. Notwithstanding anything to the contrary above, if in accordance with this Section 5.7, an Employee is entitled to receive Retirement Income commencing at his Early Retirement Date, he may, in lieu of commencing payment of his Retirement Income upon his Early Retirement Date, elect to receive such Retirement Income commencing as of the first day of any month after his Early Retirement Date and preceding his Normal Retirement Date in an amount equal to his Accrued Retirement Income determined as of the commencement of his Retirement Income on or after his Early Retirement Date determined in accordance with Section 5.5. An election pursuant to this Section 5.7 to have Retirement Income commence prior to Normal Retirement Date shall be made on a form prescribed by the Retirement Board and shall be filed with the Retirement Board at least thirty (30) days before Retirement Income is to commence. In the event of the death of an Employee who has designated a Provisional Payee or is deemed to have done so in accordance with Article VII, if the designation has become effective, the first payment to be made to the Provisional Payee pursuant to Article VII shall be made to the Provisional Payee on the first day of the month after the later of (a) the Employee's death and (b) the date on which the Employee would have attained his fifty- fifth (55th) birthday if he had survived to such date, if the Provisional Payee shall then be alive and proof of the Employee's death satisfactory to the Retirement Board shall have been received by it. Subsequent payments will be made monthly thereafter until the death of such Provisional Payee. In any event, payment of Retirement Income to the Employee shall begin not later than the sixtieth (60th) day after the later of the close of the Plan Year in which falls (a) the Employee's Normal Retirement Date or (b) the date the Employee terminates his service with the Employer or any Affiliated Employer. Notwithstanding the provisions of the Plan for the monthly payment of Retirement Income, such income may be adjusted and payable annually in arrears if the amount of the Retirement Income is less than $10.00 per month. 28 5.8 Termination of Retirement Income. The monthly payment of Retirement Income will cease with the last payment preceding the retired Employee's death; subject, however, to the continuation of payments to a surviving Provisional Payee, if one has been designated or deemed to have been designated, which likewise will cease with the last payment preceding the death of the Provisional Payee. There shall be no benefits payable under the Plan on behalf of any Employee whose death occurs prior to his retirement, except as otherwise provided in Article VII with respect to a Provisional Payee of an Employee. Following the death of an Employee and of his Provisional Payee, if any, no further payments will be made under the Plan on account of such Employee or to his estate. 5.9 Required distributions. (a) Once a written claim for benefits is filed with the Retirement Board and unless the Employee elects to have payment begin at a later date, payment of benefits to the Employee shall begin not later than sixty (60) days after the last day of the Plan Year in which the latest of the following events occurs: (1) the Employee's Normal Retirement Date; (2) the tenth (10th) anniversary of the date the Employee commenced participation in the Plan; or (3) the Employee's separation from service from the Employer or any Affiliated Employer. (b) Required minimum distributions on and after January 1, 1989 (1) Subject to the transitional rules described in Paragraph (c) below, effective for calendar years beginning after December 31, 1988, the payment of Retirement Income to any Employee shall begin no later than April 1 of the calendar year following the calendar year in which the Employee attains age 70-1/2, without regard to the actual date of separation from service. The amount of his Retirement Income shall be recomputed as of such April 1 and as of the close of each Plan Year after his Retirement Income commences and preceding his actual retirement date as if each such date were the Employee's Deferred Retirement Date. Any additional Retirement Income he accrues at the close of any such Plan Year shall be offset (but not below zero) by the value of the benefit payments received in such Plan Year. (2) The receipt by an Employee of any payments or distributions as a result of his attaining age 70-1/2 prior to his actual retirement or death shall in no way affect the 29 entitlement of an otherwise eligible Employee to additional accrued benefits. (c) Age 70-1/2 transitional rule Any Employee who is not a five-percent owner and who has attained age 70-1/2 by January 1, 1988, may defer the commencement of benefit payments under paragraph (b) above until he actually separates from service with the Employer. This transitional rule shall only apply if the Employee is not a five- percent owner at any time during the Plan Year ending with or within the calendar year in which such owner attains age 66-1/2 and in any subsequent Plan Year. (d) Distribution upon death of Employee (1) Death after commencement of benefits If the Employee dies before his entire nonforfeitable interest has been distributed to him, the remaining portion of such interest shall be distributed at least as rapidly as under the method of distribution selected by the Employee as of the date of his death. (2) Death prior to commencement of benefits If the Employee dies before the distribution of his nonforfeitable interest has begun, the entire interest shall be distributed monthly to his Provisional Payee, if any, over such Provisional Payee's remaining lifetime. (e) Determining required minimum distributions Notwithstanding anything in this Plan to the contrary, all distributions, including the minimum amounts which must be distributed each calendar year, under this Plan shall be made in accordance with Code Section 401(a)(9) and the regulations thereunder. (f) Minimum distribution transitional rules Any distribution made pursuant to Section 242(b)(2) of the Tax Equity and Fiscal Responsibility Act of 1982 shall meet the requirements of Code Section 401(a)(9) as in effect on December 31, 1983, and shall also satisfy Code Sections 401(a)(11) and 417. 30 5.10 Suspension of Retirement Income for reemployment. (a) If a former Employee who is receiving Retirement Income shall be reemployed by the Employer or 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 cease during each calendar month after his reemployment in which he completes forty (40) or more Hours of 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. (b) No payment shall be withheld 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. (c) 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. 5.11 Increase in Retirement Income of retired Employees for service prior to January 1, 1991. Retirement Income payable on and after January 1, 1991 to an Employee (or to the Provisional Payee of an Employee) who retired at an Early Retirement Date or at his Normal Retirement Date on or before January 1, 1991 pursuant to the Plan as in effect prior to January 1, 1991, or to the plan of Southern, will be recalculated to increase the amount thereof by an amount ranging from a minimum of two percent (2%) to a maximum of forty percent (40%) in accordance with the following schedule: Year in which Percentage retirement occurred increase 1990 2% 1989 4% 1988 6% 1987 8% 1976 - 1986 10% 1971 - 1975 20% 1966 - 1970 30% 1965 and prior years 40% 31 A similar adjustment, based on the date of the commencement of Retirement Income payments to the Employee's Provisional Payee, rather than the Employee's Retirement Date, will be made in respect of Retirement Income which is payable on or after January 1, 1991 where a Provisional Payee election was in effect, or was deemed to be in effect, when an Employee died while in service prior to January 1, 1991 and prior to his retirement. A similar adjustment will be made in respect of Retirement Income which is payable on or after January 1, 1991 for an Employee (or the Provisional Payee of an Employee) entitled to Retirement Income for which payments have commenced on or before January 1, 1991 in accordance with Article VIII of the Prior Plan, except for Employees whose Retirement Income has been cashed-out pursuant to Section 8.4 of this Plan or Section 8.5 of the Prior Plan. For purposes of determining the applicable percentage increase under this Section 5.11, the year of retirement includes retirement where the last day of employment was December 31 of such year. An Employee whose Deferred Retirement Date is on or before January 1, 1988 and who did not retire at his Normal Retirement Date shall be deemed to have retired at his Normal Retirement Date for purposes of determining the increase in his Retirement Income payable at his Deferred Retirement Date. This Section 5.11 shall not apply with respect to an Employee who has not retired, but for whom the distribution of Retirement Income has commenced pursuant to Section 5.9 of the Plan. 5.12 Special provisions relating to the treatment of absence of an Employee from the service of the Employer to serve in the Armed Forces of the United States. (a) Effective as of November 1, 1977, any provisions of the Plan to the contrary notwithstanding, the provisions of this Section 5.12 shall be applicable to determine the period of absence from the service of the Employer to serve in the Armed Forces of the United States of a "participant in the Plan" (as such term is defined in this paragraph (a)): The term "participant in the Plan" means a person who on or after November 1, 1977 is either: (1) an Employee who is then or thereafter in the service of the Employer (including an Employee on authorized leave of absence), (2) a retired Employee who is receiving Retirement Income, (3) a deceased Employee who received Retirement Income under this Plan or the Prior Plan at any time after its Effective Date, (4) a deceased former Employee who prior to the time of his death was receiving Retirement Income in accordance with this Plan or the Prior Plan, (5) a former Employee whose service terminated prior to January 1, 1976 and 32 who is receiving Retirement Income in accordance with the Prior Plan, (6) a former Employee whose service terminated prior to November 1, 1977 and who will be entitled to receive Retirement Income commencing after that date in accordance with this Plan or the Prior Plan, or (7) a former Employee who was transferred from the Employer pursuant to Section 4.6 or pursuant to the Prior Plan and who will be entitled to receive in accordance with either, Retirement Income commencing after November 1, 1977. The Employee or former Employee or retired Employee referred to in this paragraph (a) is one who: (1) left the employment of the Employer or of Commonwealth Services, Inc. (formerly known as The Commonwealth & Southern Corporation (New York) ("Commonwealth")) or of The Southern Company ("Southern") to enter the Armed Forces of the United States (including reserve components thereof, the Public Health Service, and the National Guard) for the purposes and under circumstances which are specified in the reemployment provisions of the Military Selective Service Act and in any amendments or supplements thereto hereinafter in this Section 5.12 referred to as the "Selective Service Act," (2) made application for reemployment by the Employer or by Commonwealth or Southern within such time after discharge or release from such service in the Armed Forces of the United States as is specified in the reemployment provisions of the Selective Service Act as is applicable in his circumstances and was reemployed by the Employer or by Southern or by Commonwealth and if by Commonwealth thereafter became an Employee of Southern or of the Employer, (3) served a period of active duty in the Armed Forces of the United States which did not exceed the maximum period of such active duty specified in the reemployment provisions of the Selective Service Act as is applicable in his circumstances, and (4) performed such service in the Armed Forces after May 1, 1940. (b) For the purposes of the Plan, the period of absence of a participant in the Plan to serve in the Armed Forces of the United States shall be the period determined by the Retirement Board. (c) In accordance with the provisions of the Plan as amended effective as of November 1, 1977 by the addition of this Section 5.12 and the concurrent amendments associated therewith, there shall be recalculated effective as of November 1, 1977 the Retirement Income (1) of each participant in the Plan or that of his Provisional Payee, if any, who is then receiving Retirement Income; and (2) of each deceased participant in the Plan and his deceased Provisional Payee, if any, who received payment of Retirement Income, who is not then receiving Retirement Income. (1) If in accordance with such recalculation, a larger amount of Retirement Income would have been payable to a participant in the Plan who is currently receiving payment 33 of Retirement Income and/or to his Provisional Payee, if any, than was paid to them respectively prior to November 1, 1977, payment in a single sum of the excess of the recalculated amount over the amounts which were paid prior to November 1, 1977 with interest thereon as hereinafter provided, shall be made as soon as practicable after November 1, 1977 and, commencing as soon as practicable after November 1, 1977, the Retirement Income payable to participants in the Plan and/or to their Provisional Payees, if any, who are currently receiving Retirement Income shall be increased to an amount which is equal to the larger recalculated amount to which they shall be entitled in respect of payments to be made on or after November 1, 1977. (2) If in accordance with the recalculation a larger amount of Retirement Income would have been payable to the date of death prior to November 1, 1977 of a deceased retired Employee or his Provisional Payee than was paid prior to his death, payment in a single sum of the excess of the recalculated amount over the amount which was paid prior to the date of death, with interest thereon as hereinafter provided, shall be made to his estate as soon as practicable after November 1, 1977. (3) For the purposes of the recalculation to be made in accordance with this paragraph (c), if a participant in the Plan left the employment of an Affiliated Employer to enter the Armed Forces of the United States and was not reemployed by such Affiliated Employer upon his discharge or release from service in the Armed Forces but he entered the employment of the Employer, without intermediate employment, and within the time prescribed in paragraph (a) of this Section 5.12, and his period of absence in the Armed Forces of the United States, as determined by the Retirement Board, is not taken into account under the pension plan of the Affiliated Employer whose service he left to enter the Armed Forces or under Section 4.3, it shall be treated under the Plan and the Prior Plan as if such period of absence had been a period of absence from the Employer. (d) Retirement Income of participants in the Plan who are not referred to in subparagraphs (1) or (2) of paragraph (c) and who are not on November 1, 1977 receiving Retirement Income shall be determined in accordance with the provisions of the Plan as amended by the addition of this Section 5.12 and the concurrent amendments associated therewith. (e) Interest to be paid on any single sum payment to be made in accordance with subparagraphs (1) or (2) of paragraph (c) of this Section 5.12 shall be computed at the annual rate of five percent (5%). 34 (f) Payment to be made to any payee in accordance with this Section 5.12 may be conditioned by the Retirement Board upon its receipt of (1) such information pertaining to absence of an Employee or former Employee to serve in the Armed Forces of the United States as it may request and (2) such form of receipt and release as it may determine to be appropriate in the circumstances. 35 ARTICLE VI Limitations on Benefits 6 6.1 Maximum Retirement Income. Notwithstanding any other provision of the Plan, the amount of Retirement Income shall be subject to the provisions of Article VI. (a) The maximum annual amount of Retirement Income payable with respect to an Employee in the form of a straight life annuity without any ancillary benefits after any adjustment for a Provisional Payee designation shall be the lesser of the dollar limitation determined under Code Section 415(b)(1)(A) as adjusted under Code Section 415(d), or Code Section 415(b)(1)(B) as adjusted under Treasury Regulation Section 1.415-5, subject to the following provisions of Article VI. With respect to any former Employee who has Accrued Retirement Income under the Plan or his Provisional Payee, the maximum annual amount shall also be subject to the adjustment under Code Section 415(d). (b) For purposes of Section 6.1, the term "average compensation for his high three (3) years" shall mean the period of consecutive calendar years (not more than three) during which the Employee was both an active participant in the Plan and had the greatest aggregate compensation from the Employer or, if he is also entitled to receive a pension from a defined benefit plan of an Affiliated Employer or if assets and liabilities attributable to the pension of the Employee from a defined benefit plan of an Affiliated Employer have been transferred to this Plan, the greatest aggregate compensation from the Employer and the Affiliated Employer during such high three (3) years. The limitation described in Section 6.1(a) shall also apply in the case of the payment of an Employee's Retirement Income with a Provisional Payee designation. (c) For purposes of Article VI, the term "compensation" means an Employee's earned income, wages, salaries, and fees for professional services, and other amounts received for personal services actually rendered in the course of employment with the Employer maintaining the Plan (including, but not limited to, commissions paid salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips and bonuses), and excluding the following: (1) Employer contributions to a plan of deferred compensation which are not included in the Employee's gross income for the taxable year in which contributed or Employer contributions under a simplified employee pension plan to the extent such contributions are deductible by the Employee, or any distributions from a plan of deferred compensation; 36 (2) Amounts realized from the exercise of a nonqualified stock option, or when restricted stock (or property) held by the Employee either becomes freely transferable or is no longer subject to a substantial risk of forfeiture; (3) Amounts realized from the sale, exchange, or other disposition of stock acquired under a qualified stock option; and (4) Other amounts which received special tax benefits, or contributions made by the Employer (whether or not under a salary reduction agreement) towards the purchase of an annuity described in Section 403(b) of the Code (whether or not the amounts are actually excludable from the gross income of the Employee). Compensation for any Limitation Year is the compensation actually paid or includible in gross income during such year. (d) The foregoing limitations regarding the maximum Retirement Income shall not apply with respect to an Employee if the Retirement Income payable under the Plan and under any other defined benefit plans of the Employer or any Affiliated Employer does not exceed $10,000 for the calendar year or for any prior calendar year, and the Employer and any Affiliated Employer has not at any time maintained a defined contribution plan in which the Employee has participated. The terms "defined benefit plan" and "defined contribution plan" shall have the meanings set forth in Section 415(k) of the Code. 6.2 Adjustment to Defined Benefit Dollar Limitation for Early or Deferred Retirement. (a) If the retirement benefit of an Employee commences before the Employee's Social Security Retirement Age, the Defined Benefit Dollar Limitation shall be reduced in accordance with Code Section 415(b)(2)(C) as prescribed by the Secretary of the Treasury. The reduction shall be made in such manner as the Secretary of the Treasury may prescribe which is consistent with the reduction for old-age insurance benefits commencing before the Social Security Retirement Age under the Social Security Act. (b) If the retirement benefit of an Employee commences after the Employee's Social Security Retirement Age, the Defined Benefit Dollar Limitation shall be adjusted in accordance with Code Section 415(b)(2)(D) as prescribed by the Secretary of the Treasury, based on the lesser of the interest rate assumption under the Plan or on an assumption of five percent (5%) per year. 37 6.3 Adjustment of limitation for Years of Service or participation. (a) If an Employee has completed less than ten (10) years of participation, the Employee's accrued benefit shall not exceed the Defined Benefit Dollar Limitation as adjusted by multiplying such amount by a fraction, the numerator of which is the Employee's number of years (or part thereof) of participation in the Plan, and the denominator of which is ten (10). (b) If an Employee has completed less than ten (10) Years of Service with the Employer and any Affiliated Employer, the limitations described in Sections 415(b)(1)(B), 415(b)(4), and 415(e) of the Code shall be adjusted by multiplying such amounts by a fraction, the numerator of which is the Employee's number of years of service (or part thereof), and the denominator of which is ten (10). (c) In no event shall Sections 6.3(a) and (b) reduce the limitations provided under Sections 415(b)(1), 415(b)(4), and 415(e) of the Code to an amount less than one-tenth (1/10) of the applicable limitation (as determined without regard to this Section 6.3). (d) This Section 6.3 shall be applied separately with respect to each change in the benefit structure of the Plan, except as is or may be limited by Revenue Procedure 92-42. 6.4 Preservation of Accrued Retirement Income. (a) Retirement Income payable to an Employee or former Employee who was an active participant in the Plan before October 3, 1973 will not be deemed to exceed the amount of maximum Retirement Income limitations imposed by the provisions of this Article VI if: (1) The annual amount of Retirement Income payable to such Employee on retirement does not exceed 100% of his annual rate of compensation on the earlier of (A) October 2, 1973, or (B) the date on which he separated from the service of the Employer; (2) Such annual Retirement Income is not greater than the annual amount of Retirement Income which would have been payable to such Employee on retirement if (A) all terms and conditions of the Plan in existence on his retirement date had remained in existence until his retirement and (B) his compensation taken into account for any period after October 2, 1973 had not exceeded his annual rate of compensation on October 2, 1973; and 38 (3) In the case of an Employee whose service with the Employer terminated prior to October 2, 1973, such annual Retirement Income is no greater than his vested Accrued Retirement Income as of the date of such termination of service. (b) In the case of an Employee who is a participant in the Plan prior to January 1, 1983, if the Section 415 requirements have been met for all Plan Years prior to 1983, then the Defined Benefit Dollar Limitation described in Section 1.10 applicable to the payment of such Employee's Retirement Income shall be equal to his Accrued Retirement Income as of December 31, 1982, (when expressed as an annual benefit within the meaning of Section 415(b)(2) of the Code, as in effect prior to the Tax Equity and Fiscal Responsibility Act of 1982), if his Accrued Retirement Income exceeds such Defined Benefit Dollar Limitation. (c) This Section 6.4(c) shall apply to defined benefit plans that were in existence on May 6, 1986, and that met the applicable requirements of Section 415 of the Code as in effect for all Limitation Years. If the Current Accrued Retirement Income of an Employee as of the first day of the Limitation Year beginning on or after January 1, 1987, exceeds the benefit limitations under Section 415(b) of the Code (as modified by Sections 6.2 and 6.3 of the Plan), then, for purposes of Code Section 415(b) and (e), the Defined Benefit Dollar Limitation with respect to such Employee shall be equal to such Current Accrued Retirement Income. 6.5 Limitation on benefits from multiple plans. (a) In the case of an Employee who is also a participant in any other defined benefit plan of the Employer or any Affiliated Employer or in any defined contribution plan of the Employer or any Affiliated Employer, the Retirement Income provided by the Plan shall be limited to the extent necessary to prevent the sum of Fractions A and B below, computed as of the end of the Plan Year, from exceeding 1.0. Fraction A (numerator) Projected annual benefit of the Employee under the Plan and any other defined benefit plan of the Employer or any Affiliated Employer (determined as of the close of the Plan Year). (denominator) The lesser of (1) the product of 1.25 multiplied by the Defined Benefit Dollar Limitation (or such higher accrued benefit as of December 31, 1982), or (2) 1.4 multiplied by the amount determined under Code Section 415(b)(1)(B) as adjusted under Treasury Regulation Section 1.415-5. 39 Fraction B (numerator) The sum of all Annual Additions to the account of the Employee under any defined contribution plan of the Employer or any Affiliated Employer as of the close of the Plan Year. (denominator) The sum of the lesser of the following amounts, determined for such Plan Year and for each prior Plan Year in which the Employee has a Year of Service, (1) 1.25 multiplied by the Defined Contribution Dollar Limitation determined under Code Section 415(c)(1)(A), or (2) 1.4 multiplied by twenty-five percent (25%) of the Employee's compensation for the year. 6.6 Special rules for plans subject to overall limitations under Code Section 415(e). (a) For purposes of computing the defined contribution plan fraction of Section 415(e)(1) of the Code, "Annual Addition" shall mean the amount allocated to an Employee's account during the Limitation Year as a result of: (1) employer contributions, (2) employee contributions, (3) forfeitures, and (4) amounts described in Sections 415(1)(1) and 419(A)(d)(2) of the Code. (b) The Annual Addition for any Limitation Year beginning before January 1, 1987 shall not be recomputed to treat all Employee contributions as an Annual Addition. (c) If the sum of Fractions A and B exceeds 1.0 as of December 31, 1982, the numerator of Fraction B shall be reduced by an amount which does not exceed the numerator, so that the sum of Fraction A and Fraction B does not exceed 1.0. (d) If the Plan satisfied the applicable requirements of Section 415 of the Code as in effect for all Limitation Years beginning before January 1, 1987, an amount shall be subtracted from the numerator of the defined contribution plan fraction (not exceeding such numerator) as prescribed by the Secretary of the Treasury so that the sum of the defined benefit plan fraction and defined contribution plan fraction computed under Section 415(e)(1) of the Code (as revised by this Article VI) does not exceed 1.0 for such Limitation Year. 40 (e) The defined contribution plans and the other defined benefit plans of the Employer and Affiliated Employers include, respectively, (1) The Southern Company Employee Savings Plan, The Southern Company Employee Stock Ownership Plan, and any other defined contribution plan (as defined in Section 415(k) of the Code) and (2) any other qualified pension plan in which the Employee participates in accruing benefits maintained by the Employer or any Affiliated Employer. 6.7 Combination of Plans. Notwithstanding any provisions contained herein to the contrary, in the event that an Employee participates in a defined contribution plan or 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(e), corrective adjustments shall first be made under this Plan. However, if an Employee's Retirement Income under this Plan has already commenced, corrections shall first be made under The Southern Company Employee Stock Ownership Plan, if possible, and if not possible, then correction shall be made to the Employee's Accrued Retirement Income under this Plan. 6.8 Incorporation of Code Section 415. Notwithstanding anything contained in this Article to the contrary, the limitations, adjustments and other requirements prescribed in this Article shall at all times comply with the provisions of Code Section 415 and the regulations thereunder, the terms of which are specifically incorporated herein by reference. 41 ARTICLE VII Provisional Payee 7 7.1 Adjustment of Retirement Income to provide for payment to Provisional Payee. An Employee who desires to have his Accrued Retirement Income adjusted in accordance with the provisions of this Article VII to provide a reduced amount of Retirement Income payable to him for his lifetime commencing on his Early Retirement Date, his Normal Retirement Date, or his Deferred Retirement Date, as the case may be, may elect, in accordance with the provisions of this Article VII, at his option, either: (a) that an amount of Retirement Income be payable to him for his lifetime which is equal to eighty percent (80%) of the Retirement Income which would otherwise be payable to him, but for such election (taking into account any reduction required in accordance with Sections 7.3 and 7.4(a)), with the provision that the same amount will be continued after his death to his Provisional Payee until the death of such Provisional Payee, or (b) that an amount of Retirement Income be payable to him for his lifetime which is equal to ninety percent (90%) of the Retirement Income which would otherwise be payable to him, but for such election (taking into account any reduction required in accordance with Sections 7.3 and 7.4(a)), with the provision that one-half (1/2) of the amount payable to the Employee will be continued after his death to his Provisional Payee until the death of such Provisional Payee. 7.2 Form and time of election and notice requirements. (a) An election of payment and designation of a Provisional Payee in accordance with Section 7.1 shall be made in writing at the same time on a form prescribed by the Retirement Board and delivered to it. The election and designation shall specify its effective date which shall not be sooner than the date received by the Retirement Board or the Employee's fifty-fifth (55th) birthday, whichever is later, nor later than the date of commencement of payments in accordance with this Article VII. (b) An election of payment to be made in accordance with paragraph (a) or paragraph (b) of Section 7.1 may be changed from paragraph (a) to paragraph (b) or vice versa by an Employee, provided the written election of the change specifies an effective date which shall not be sooner than the date received by the Retirement Board or the Employee's fifty-fifth (55th) birthday, whichever is later, nor later than the date of commencement of payments in accordance with this Article VII. To the extent that the new method of payment shall afford the 42 Employee changed protection in the event of his death after the effective date of the new election and prior to retirement, his Accrued Retirement Income shall be adjusted pursuant to Section 7.4(a) to reflect such changed protection. (c) With respect to Sections 7.5 and 7.6, within the period not less than 30 days and not more than 90 days prior to the commencement of benefits, the Employee shall be furnished, by mail or personal delivery, a written explanation of: (1) the terms and conditions of the reduced Retirement Income payable as provided in paragraph (b) of Section 7.1; (2) the Employee's right to make, and the effect of, an election to waive the payment of reduced Retirement Income pursuant to a Provisional Payee designation; (3) the rights of the Employee's Provisional Payee; and (4) the right to make, and the effect of, a revocation of a previous election to waive the payment of reduced Retirement Income pursuant to a Provisional Payee designation. Within thirty (30) days following an Employee's written request received by the Retirement Board during the election period, but within sixty (60) days from the date the Employee is furnished all of the information prescribed in the immediately preceding sentence, the Employee shall be furnished an additional written explanation, in terms of dollar amounts, of the financial effect of an election by him not to receive such reduced Retirement Income. If an Employee makes such request, the election period herein prescribed shall end not earlier than sixty (60) calendar days following the day of the mailing or personal delivery of the additional explanation to the Employee. Except that if an election made as provided in Section 7.5 or 7.6 is revoked, another election under that Section may be made during the specified election period. 7.3 Circumstances in which election and designation are inoperative. An election and designation made pursuant to this Article shall be inoperative and the regular provisions of the Plan shall again become applicable as if a Provisional Payee had not been designated if, prior to the commencement of any payment in accordance with this Article VII: (a) an Employee's Provisional Payee shall die, (b) the Employee and the Provisional Payee shall be divorced under a final decree of divorce, or (c) the Retirement Board shall have received the written Qualified Election of the Employee to rescind his election of payment and designation of a Provisional Payee. If such a Qualified Election to rescind is made by the Employee, his Accrued Retirement Income shall be reduced to reflect the protection afforded the Employee by any Provisional Payee designation during the period from its effective date to the date of the Retirement Board's receipt of the Employee's Qualified Election to rescind if the option as to payments of reduced Retirement Income was in accordance with either Section 7.1(a), 7.6(a), or 7.6(b). If an Employee remarries subsequent to the 43 death or divorce of his Provisional Payee and prior to the commencement of payments in accordance with this Article VII, and if such Employee is married prior to the time of the commencement of payments, then he shall be entitled to designate a new Provisional Payee in the manner set forth in Section 7.2. 7.4 Pre-retirement death benefit. If prior to his Normal Retirement Date (or his Deferred Retirement Date, if applicable), an Employee shall die while in the service of the Employer and is survived by his spouse to whom he shall be married at the time of his death, there shall be payable to his surviving spouse (whom he shall be deemed to have designated as his Provisional Payee) Retirement Income determined in accordance with paragraph (a) or paragraph (c) of this Section 7.4, as applicable. Such Retirement Income shall commence on the first day of the month following the death of the Employee or the first day of the month following the date on which he would have attained his fifty-fifth (55th) birthday if he were still alive, whichever is later, and shall cease with the last payment preceding the death of his Provisional Payee. (a) The amount of Retirement Income payable to the Provisional Payee of a deceased Employee who prior to his death had attained his fifty-fifth (55th) birthday shall be equal to the amount payable to the Provisional Payee as calculated in Section 7.1(b) determined on the basis of his Accredited Service to the date of his death, or if the Employee shall have attained his fifty-fifth (55th) birthday and so elected prior to his death, such Retirement Income shall be equal to the amount set forth in Section 7.1(a) determined on the basis of his Accredited Service to the date of his death reduced as provided in the next sentence. If such election shall be made by the Employee, the Retirement Income which shall be payable to the Employee if he lives to his Early Retirement Date or the first day of the month following his attainment of age sixty-five (65), if later, shall be reduced by three-fourths of one percent (0.75%) for each year (prorated for a fraction of a year from the first day of the month following the effective date of the election) which has elapsed from the effective date of his election to the earlier of (1) the commencement of Retirement Income on or after his Early Retirement Date or the first day of the month following his attainment of age sixty-five (65), if later, or (2) the revocation of such election. If he shall die before the commencement of Retirement Income on or after his Early Retirement Date or the first day of the month following his attainment of age sixty-five (65), if later, his Accrued Retirement Income to the date of his death shall be reduced by three-quarters of one percent (0.75%) for each year (prorated for a fraction of a year from the first day of the month following the effective date of the election) between the effective date of his election and the first day of the month following his attainment of age sixty-five (65). No reduction in the 44 Employee's Retirement Income shall be made for the period during which the election is in effect after the first day of the month following his attainment of age sixty-five (65). (b) Retirement Income shall not be payable under paragraph (a) of this Section 7.4 to the Provisional Payee of a deceased Employee if at the time of his death there was in effect a Qualified Election made after August 22, 1984 under this paragraph (b) that no Retirement Income shall be paid to his Provisional Payee in the event of his death while in the service of the Employer (or while in the service of an Affiliated Employer to which his employment had been transferred in accordance with Section 4.6) as provided in paragraph (a), provided the Employee had received at least 180 days prior to his fifty-fifth (55th) birthday a written explanation of: (1) the terms and conditions of the Retirement Income payable to his Provisional Payee as provided in paragraph (a); (2) the Employee's right to make, and the effect of, an election to waive the payment of Retirement Income to his Provisional Payee; (3) the rights of the Employee's Provisional Payee; and (4) the right to make, and the effect of, a revocation of a previous election to waive the payment of Retirement Income to the Employee's Provisional Payee. A revocation of a prior Qualified Election to waive the payment of Retirement Income to the Employee's Provisional Payee may be made by the Employee without the consent of the Employee's Provisional Payee at any time before the commencement of benefits. An election under this paragraph (b) may be made and such election may be revoked by an Employee during the period commencing ninety (90) days prior to the Employee's fifty-fifth (55th) birthday and ending on the date of the Employee's death. (c) The amount of such Retirement Income payable to the Provisional Payee of a deceased Employee who prior to his death, had completed at least five (5) Vesting Years of Service and had not attained his fifty-fifth (55th) birthday shall be equal to one-half of the reduced amount, as actuarially adjusted to provide for the payment of such Retirement Income beginning at the date on which such deceased Employee would have attained his fifty-fifth (55th) birthday and to provide for the determination of such Retirement Income on a joint and fifty percent (50%) survivor basis of the Employee's Accrued Retirement Income, determined on the basis of his Accredited Service to the date of his death. This Section 7.4(c) shall also apply to adjust the future payment of Retirement Income after December 31, 1990 to a Provisional Payee with respect to an Employee who died (while in the service of the Employer prior to his fifty-fifth (55th) birthday after completing the requisite number of Years of Service) in order to have a nonforfeitable right to Retirement 45 Income under the Plan as in effect on the Employee's date of death, provided Retirement Income is payable to such Provisional Payee on or after January 1, 1991. The adjustment under this Section 7.4(c) shall be determined by adjusting the Retirement Income that had commenced to the Provisional Payee on or before January 1, 1986, and then adding the applicable percentage increase under Section 5.13 of the Prior Plan. For an Employee, on or after January 1, 1991, who dies while in the service of the Employer prior to his fifty-fifth (55th) birthday after completing five (5) Vesting Years of Service, the amount of such Retirement Income payable to the Provisional Payee shall be calculated as provided in Section 7.1(b) determined on the basis of his Accredited Service to the date of his death. The payment of such Retirement Income to the Provisional Payee shall begin on the first day of the month following the date on which such deceased Employee would have attained his fifty-fifth (55th) birthday. 7.5 Post-retirement death benefit - qualified joint and survivor annuity. If at his Early Retirement Date, Normal Retirement Date, or Deferred Retirement Date, as the case may be, an Employee is married and he has not: (a) designated a Provisional Payee in accordance with Section 7.1 in respect of payments to be made commencing on his Early, Normal, or Deferred Retirement Date or (b) made a Qualified Election that payment be made to him in the mode of a single life annuity, he shall nevertheless be deemed to have made an effective designation of a Provisional Payee under this Section 7.5 and to have specified the payment of a benefit as provided in Section 7.1(b). 7.6 Election and designation by former Employee entitled to Retirement Income in accordance with Article VIII. If an Employee is entitled to receive in accordance with Section 8.1 Retirement Income commencing at Normal Retirement Date, or sooner in accordance with Section 8.2, he may, on or after his fifty-fifth (55th) birthday, designate his spouse as his Provisional Payee and elect to have his Accrued Retirement Income at the date of termination of his service actuarially adjusted to provide, at his option, in the event of the commencement of payment prior to his Normal Retirement Date either: (a) a reduced amount payable to him for his lifetime with the provision that such reduced amount will be continued after his death to his spouse as Provisional Payee until the death of such Provisional Payee; or (b) a reduced amount (greater than the amount in (a) above) payable to him for his lifetime with the provision that one-half (1/2) of such reduced amount will be continued after his death to his spouse as Provisional Payee until the death of such Provisional Payee. 46 The Employee's election and designation of his Provisional Payee made in accordance with this Section 7.6 shall be in writing on a form prescribed by the Retirement Board and delivered to it and shall become effective not sooner than the date received by the Retirement Board or the Employee's fifty-fifth (55th) birthday, whichever is later, nor later than the date of commencement of payment in accordance with this Section 7.6. If the Employee dies prior to his Normal Retirement Date but after the effective date of his Provisional Payee designation, there will be payable to his Provisional Payee for life commencing on the first day of the calendar month after the Employee's death Retirement Income in a reduced amount in accordance with the Employee's election of payments to be made to his Provisional Payee after the death of the Employee under paragraph (a) or (b), as the case may be, of this Section 7.6. However, if prior to the Employee's death, the Retirement Board has not received such election, payment of a reduced amount of Retirement Income will be made in accordance with paragraph (b) of this Section 7.6 to his surviving spouse to whom he is married at the time of his death, unless (1) at the time of his death there is in effect a Qualified Election by the Employee that reduced Retirement Income shall not be paid to his surviving spouse in accordance with this Section 7.6 should he die between his fifty-fifth (55th) birthday and his Normal Retirement Date without having elected that payment be made to a Provisional Payee and (2) at least 180 days prior to his fifty-fifth (55th) birthday a written explanation is provided to the Employee of: (A) the terms and conditions of the Retirement Income payable to his Provisional Payee as provided in this Section 7.6; (B) the Employee's right to make, and the effect of, an election to waive the payment of Retirement Income to his Provisional Payee; (C) the rights of an Employee's spouse; and (D) the right to make, and the effect of, a revocation of a previous election to waive the payment of Retirement Income to his Provisional Payee. If the Employee is entitled to receive payment of Retirement Income in accordance with Section 8.2 after his fifty-fifth (55th) birthday and prior to his Normal Retirement Date and elects to do so, a reduced amount of Retirement Income determined in accordance with this Section 7.6 based upon his Accrued Retirement Income at the date of termination of his service (actuarially reduced in accordance with Section 8.2) will be payable to him commencing on the date on which payments commence prior to Normal Retirement Date in accordance with Section 8.2 with payments in the same or reduced amount to be continued to his Provisional Payee for life after the Employee's death in accordance with his election under paragraph (a) or (b), as the case may be, of this Section 7.6. However, if the Employee is married and he has not designated a Provisional Payee in respect of payments to commence to him prior to his Normal Retirement 47 Date or elected that payment be made to him in the mode of a single life annuity pursuant to a Qualified Election, he shall be deemed to have designated a Provisional Payee pursuant to this Section 7.6 and thereby specified that a reduced Retirement Income shall be paid to him during his lifetime as provided in paragraph (b) of this Section 7.6 and continued after his death to his Provisional Payee as provided in paragraph (b) of this Section 7.6. If the Employee is alive on his Normal Retirement Date and is married and payment of Retirement Income has not sooner commenced, the provisions of Section 7.5 shall be applicable to the payment of his Retirement Income, unless he shall elect at his Normal Retirement Date to receive payment of his Retirement Income pursuant to Section 7.1(a) or 7.1(b). However, if an election and designation in accordance with this Section 7.6 was in effect prior to his Normal Retirement Date, the Employee's Accrued Retirement Income at his Normal Retirement Date shall be actuarially adjusted for the period the election and designation was in effect. 7.7 Death benefit for Provisional Payee of former Employee. If an Employee, whose service with the Employer terminates on or after January 1, 1989, shall die after such termination of employment, and prior to his death (a) shall have not attained his fifty-fifth (55th) birthday, (b) shall have completed at least five (5) Vesting Years of Service, and (c) shall be survived by his spouse to whom he shall be married at his death, then there shall be payable to his surviving spouse (whom he shall be deemed to have designated as his Provisional Payee) Retirement Income determined in accordance with this Section 7.7. Such Retirement Income shall be equal to one-half of the reduced amount, as actuarially adjusted to provide for the payment of such Retirement Income beginning at the date on which such deceased Employee would have attained his fifty-fifth (55th) birthday and to provide for the determination of such Retirement Income on a joint and fifty percent (50%) survivor basis of the Employee's Accrued Retirement Income, determined on the basis of his Accredited Service to the date of his death. Such Retirement Income shall commence on the first day of the month following the date on which the former Employee would have attained his fifty-fifth (55th) birthday if he were still alive, and shall cease with the last payment preceding the death of his Provisional Payee. 7.8 Limitations on Employee's and Provisional Payee's benefits. (a) With respect to an Employee who does not elect a single life annuity, the limitation on benefits imposed under Article VI shall be applied as if such Employee had elected a benefit in the form of a single life annuity. 48 (b) With respect to a Provisional Payee, the limitations on benefits imposed under Article VI shall be applied consistent with paragraph (a) above prorated to provide a limitation equal to or one-half of the Employee's limitation as appropriate in accordance with annuity form of benefit elected by the Employee. 7.9 Effect of election under Article VII. An election of payment or a deemed election of payment in accordance with this Article VII shall be in lieu of any other form or method of payment of Retirement Income. 49 ARTICLE VIII Termination of Service 8 8.1 Vested interest. If an Employee included in the Plan terminates for any reason other than death or transfer to an Affiliated Employer as provided by Section 4.6 or retirement as provided by Article III, and if such Employee has had at least five (5) Vesting Years of Service with the Employer, whether or not Accredited Service, he will be entitled to receive, commencing at Normal Retirement Date (except as provided in Section 8.2 and subject to the provisions of Section 7.6) Retirement Income equal to his Accrued Retirement Income at the date of the termination of such service, provided that he makes application to the Employer for the payment of such Retirement Income. If proper application for payment of Retirement Income shall not be received by the Employer by the April 1 of the calendar year following the calendar year in which the Employee attains age 70 1/2 and the whereabouts of the Employee cannot be determined by the Employer, Retirement Income shall be paid to the Employee's Provisional Payee, if any, and if surviving and the whereabouts known to the Employer, or applied in such other manner as the Retirement Board shall deem appropriate. The payment of Retirement Income pursuant to this provision shall completely discharge all liability of the Retirement Board, the Employer, and the Trustee or other payor to the extent of the payments so made. If such Employee terminates with less than five (5) Vesting Years of Service with the Employer, he shall immediately forfeit any Accrued Retirement Income under the Plan based upon his service prior to such termination. 8.2 Early distribution of vested benefit. If an Employee terminates from service before his fifty-fifth (55th) birthday and is entitled to receive in accordance with Section 8.1 Retirement Income commencing at his Normal Retirement Date and at the time his service terminated he had at least ten (10) Years of Accredited Service, he may, in lieu of receiving payment of such Retirement Income commencing at Normal Retirement Date, elect to receive such Retirement Income commencing as of the first day of any month within the ten-year period preceding his Normal Retirement Date in an amount equal to his Accrued Retirement Income at the date of termination of his service actuarially reduced in accordance with reasonable actuarial assumptions adopted by the Retirement Board. An election pursuant to this Section 8.2 to have Retirement Income commence prior to Normal Retirement Date shall be made on a form prescribed by the Retirement Board and shall be filed with the Retirement Board at least thirty (30) days before Retirement Income is to commence. 50 8.3 Years of Service of reemployed Employees. If an Employee whose service terminates is again employed by the Employer as an Employee or he is employed (other than by reason of transfer in accordance with Section 4.6) by an Affiliated Employer which has at the time of his employment by such company a pension plan with substantially the same terms as this Plan, his Years of Service with the Employer and his Accredited Service immediately prior to the termination of his service shall be treated as provided in this Section 8.3, subject to the provisions of Section 8.4. For this purpose the terms "again employed" and "reemployment" shall include employment with an Affiliated Employer. (a) If at the time of his reemployment he has not incurred a One-Year Break in Service, his Years of Service with the Employer and his Accredited Service will be restored whether or not he is entitled to receive Retirement Income in accordance with Section 8.1. (b) If at the time of termination of his service he is entitled to receive Retirement Income in accordance with the provisions of Section 8.1, upon his reemployment his Years of Service with the Employer immediately prior to the termination of his service shall be restored whether or not he has incurred a One-Year Break in Service. (c) If at the time of reemployment on or after January 1, 1985, he is not entitled to receive Retirement Income in accordance with Section 8.1 and he (1) has incurred less than five (5) consecutive One-Year Breaks in Service or (2) has incurred five (5) or more consecutive One-Year Breaks in Service, but his Years of Service prior to such One-Year Breaks in Service exceeded the consecutive One-Year Breaks in Service, then upon the completion of one Eligibility Year of Service following his reemployment, provided that if his reemployment date is on or after January 1, 1995, no such Eligibility Year of Service shall be required, his Years of Service with the Employer and his Accredited Service prior to the first One-Year Break in Service shall be restored, disregarding any Years of Service with the Employer which are not required to be taken into account by reason of any previous One-Year Breaks in Service. The Years of Service and years of Accredited Service credited to an Employee reemployed prior to January 1, 1985, with regard to his Years of Service with the Employer and years of Accredited Service immediately prior to the termination of his service shall be determined under the terms of the Plan in effect prior to January 1, 1985. 51 (d) Years of Service and Accredited Service restored to an Employee in accordance with this Section 8.3 shall be aggregated with Years of Service and Accredited Service to which the Employee may be entitled after his reemployment. If, however, the Minimum Retirement Income so determined for the Employee upon his subsequent retirement or termination of service shall be less than the aggregate of: (1) his Minimum Retirement Income, if any, determined in respect of the period ending with his prior termination of service, and (2) his Minimum Retirement Income determined in respect of the period after his reemployment, the aggregate of such Minimum Retirement Incomes shall be deemed to be his Minimum Retirement Income upon such subsequent retirement or termination of service. In any event, his Retirement Income, however computed, shall be reduced by the Actuarial Equivalent of any Retirement Income he received with respect to his prior period of employment. (e) If a former Employee to whose credit shall be restored years of Accredited Service in accordance with this Section 8.3 shall become entitled (or his Provisional Payee shall become entitled) to receive retirement income under the plan of an Affiliated Employer by which he should become employed, he shall be deemed to have transferred to the Affiliated Employer for purposes of Section 4.6 as of his initial date of participation in the plan of such Affiliated Employer. 8.4 Cash-out and buy-back. (a) Notwithstanding any other provision of this Plan, if the present value of Accrued Retirement Income of an Employee whose service terminates for any reason other than transfer to an Affiliated Employer under Section 4.6, or retirement under Article III, is not more than $3,500 (or such greater amount as permitted by the regulations prescribed by the Secretary of the Treasury) the Employer shall direct that such present value of the Employee's Accrued Retirement Income be paid in a lump sum, in cash, to such terminated Employee. The present value of the Accrued Retirement Income shall be calculated as of the last day of the date of distribution of the lump sum applying the Applicable Interest Rate as defined in Section 8.5(e) in effect on the first day of the Plan Year of distribution. For purposes of this Section 8.4, if the present value of the Employee's vested Accrued Retirement Income is zero, the Employee shall be deemed to have received a distribution of such vested Retirement Income. (b) If such terminated Employee is subsequently reemployed and becomes covered under this Plan, the calculation of his Accrued Retirement Income shall be without regard to his years of Accredited Service prior to any One-Year Breaks in Service, unless the amount of such payment is repaid to the Trust, plus interest at the rate determined under Section 411(c)(2)(C) of the Code. If such amount (plus interest) is repaid, the Employee's Retirement Income shall be calculated based on his years of 52 Accredited Service before and after any One-Year Breaks in Service. Any repayment of a cash-out made pursuant to this Section 8.4 shall be made before the earlier of (a) five (5) years after the date on which the Employee is reemployed by the Employer or an Affiliated Employer, or (b) the close of the first period of five (5) consecutive One-Year Breaks in Service commencing after the distribution. If an Employee has been deemed to receive a distribution in accordance with paragraph (a) and is then reemployed, upon such reemployment, the amount of the deemed distribution shall be restored to the Employee. 8.5 Calculation of present value for cash-out of benefits and for determining amount of benefits. (a) This Section 8.5 shall apply to all distributions from the Plan and from annuity contracts purchased to provide Accrued Retirement Income other than distributions described in Section 1.417-1T(e)(3) of the income tax regulations issued under the Retirement Equity Act of 1984. (b) (1) For purposes of determining whether the present value of (A) an Employee's vested accrued benefit; (B) a qualified joint and survivor annuity, within the meaning of Section 417(b) of the Code; or (C) a qualified preretirement survivor annuity within the meaning of Section 417(c)(1) of the Code exceeds $3,500, the present value of such benefits or annuities shall be calculated by using an interest rate no greater than the Applicable Interest Rate. (2) In no event shall the present value of any such benefit or annuity determined under this Section 8.5(b) be less than the present value of such benefits or annuities determined using the Applicable Interest Rate. (c) (1) For purposes of determining the amount of an Employee's vested Accrued Retirement Income, the interest rate used shall not exceed: (A) the Applicable Interest Rate if the present value of the benefit (using such rate or rates) is not in excess of $25,000; or (B) 120 percent of the Applicable Interest Rate if the present value of the benefit exceeds $25,000 (as determined under (A)). In no event shall the present value determined under this (B) be less than $25,000. 53 (2) In no event shall the amount of the benefit or annuity determined under this Section 8.5(c) be less than the greater of: (A) the amount of such benefit determined under the Plan's provisions for determining the amount of benefits other than Sections 8.5; or (B) the amount of such benefit determined using the Applicable Interest Rate if the value determined in Section 8.5(c)(1) is less than $25,000 or 120 percent of the Applicable Interest Rate if the value determined in Section 8.5(c)(1) is not less than $25,000. (d) In no event shall the amount of any benefit or annuity determined under this Section 8.5 exceed the maximum benefit permitted under Section 415 of the Code. (e) (1) For purposes of this Section 8.5, "Applicable Interest Rate" shall mean the interest rate or rates which would be used as of the date distribution commences by the Pension Benefit Guaranty Corporation for purposes of valuing lump sum payments under the Plan if the Plan had terminated on the date distribution commences with insufficient assets to provide benefits guaranteed by the Pension Benefit Guaranty Corporation on that date. (2) Notwithstanding the foregoing, if the provisions of the Plan other than Section 8.5(e) so provide, the Applicable Interest Rate shall be determined as of the first day of the Plan Year in which a distribution occurs rather than as of the date distribution commences. (f) (1) This Section 8.5 shall apply to distributions in Plan Years beginning after December 31, 1984, other than distributions under annuity contracts distributed to or owned by an Employee prior to September 17, 1985 unless additional contributions are made under the Plan by the Employer with respect to such contracts. (2) Notwithstanding the foregoing, this Section 8.5 shall not apply to any distributions in Plan Years beginning after December 31, 1984, and before January 1, 1987, if such distributions were made in accordance with the requirements of the income tax regulations issued under the Retirement Equity Act of 1984. 54 8.6 Retirement Income under Prior Plan. Any person entitled to receive Retirement Income under Article VIII of the Prior Plan shall only be entitled to receive Retirement Income in accordance with the provisions of such Prior Plan in effect at the time his service was terminated, except that any such person whose service terminated prior to January 1, 1976: (a) with at least twenty (20) years of Accredited Service may elect to receive Retirement Income commencing prior to his Normal Retirement Date in accordance with Section 8.2; (b) who shall have returned to the employment of the Employer, whether before or after January 1, 1976, and shall be an Employee who is entitled to receive Retirement Income in respect of his Accredited Service after January 1, 1976, his years of Accredited Service under the Prior Plan with respect to his service before January 1, 1976, shall, for the purpose of calculating his Minimum Retirement Income, be aggregated with his years of Accredited Service after his reemployment. His Accrued Retirement Income to the date of termination of his service payable in accordance with Article VIII of the Prior Plan shall be treated as Prior Plan Retirement Income and his Years of Service prior to the date of termination of his service shall be restored to his credit. It shall be a condition of the treatment provided for in this paragraph (b) that: (1) the Employee rescind any election of payment and designation of a Provisional Payee which he shall have made under the Prior Plan and which shall be in effect at the time of his return to the employment of the Employer and (2) if he is receiving Retirement Income, his Retirement Income shall cease during his period of employment and any Retirement Income payable upon his subsequent retirement shall be reduced by the Actuarial Equivalent of any Retirement Income he received prior to his reemployment. 8.7 Requirement for Direct Rollovers. This Section 8.7 applies to distributions made from the Plan on or after January 1, 1993. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a Distributee's election under this Article VIII, a Distributee may elect, at the time and in the manner prescribed by the Retirement Board, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover. (a) Definitions (1) Eligible Rollover Distribution An Eligible Rollover Distribution is any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include: 55 (A) any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee's spouse, or for a specified period of 10 years or more; (B) any distribution to the extent such distribution is required under Code Section 401(a)(9); and (C) the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). (2) Eligible Retirement Plan An Eligible Retirement Plan is an individual retirement account described in Code Section 408(a), an individual retirement annuity described in Code Section 408(b), an annuity plan described in Code Section 403(a), or a qualified trust described in Code Section 401(a) that accepts the Distributee's Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution for a Provisional Payee, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity. (3) Distributee A Distributee includes an Employee or former Employee. In addition, a Distributee includes the Employee's or former Employee's spouse who is an alternate payee under a qualified domestic relations order, as defined in Code Section 414(p). (4) Direct Rollover A Direct Rollover is a payment by the Plan to the Eligible Retirement Plan specified by the Distributee. 56 ARTICLE IX Contributions 9 9.1 Contributions generally. All contributions which the Employer deems necessary to provide the Retirement Incomes under the Plan in excess of the fund derived from the split-up of the Commonwealth pension plan will be made from time to time by or on behalf of the Employer and no contributions will be required of the Employees. All contributions shall be made to the Trustee under the Trust Agreement provided for in Article XI, and if a group annuity contract shall be entered into with a life insurance company ("contract with an insurance company"), contributions may also be made to the insurance company. The minimum amount of contributions to be made by or on behalf of the Employer for any Plan Year of the Plan shall be such amount as is required to meet the minimum funding standards of ERISA and any regulations in respect thereto. However, the Employer is under no obligation to make any contributions under the Plan after the Plan is terminated, whether or not Retirement Income accrued or vested prior to the date of termination has been fully funded. All contributions are expressly conditioned upon the deductibility of such contributions by the Employer pursuant to Section 404 of the Code. 9.2 Return of Employer contributions. All contributions made pursuant to the Plan shall be held by the Trustee in accordance with the terms of the Trust Agreement for the exclusive benefit of those Employees who are Participants under the Plan, including former Employees and their Beneficiaries, and shall be applied to provide benefits under the Plan and to pay expenses of administration of the Plan and Trust, to the extent that such expenses are not otherwise paid. At no time prior to the satisfaction of all liabilities with respect to such Employees and their Beneficiaries shall any part of the Trust Fund be used for, or diverted to, purposes other than for the exclusive benefit of such Employees and their Beneficiaries. However, notwithstanding the provisions of this Section 9.2: (a) If a contribution is conditioned upon the deductibility of the contributions under Section 404 of the Code, then, to the extent the deduction is disallowed, the Trustee shall upon written request of the Employer, return the contribution (to the extent disallowed) to the Employer within one year after the date the deduction is disallowed. (b) If a contribution or any portion thereof is made by the Employer by a mistake of fact, the Trustee shall, upon written request of the Employer, return the contribution or such portion to the Employer within one year after the date of payment to the Trustee. 57 The amount which may be returned to the Employer under this Section 9.2, is the excess of (a) the amount contributed over (b) the amount that would have been contributed had there not occurred a mistake of fact or a mistake in determining the deduction. Earnings attributable to the excess contribution shall not be returned to the Employer, but losses attributable thereto shall reduce the amount to be so returned. (c) If permitted under Federal common law, the Company may recover any other contributions to the Plan or payments to any other entity to the extent such contributions or payments unjustly enrich or otherwise gratuitously benefit such entity. 9.3 Expenses. Prior to termination of the Plan, all investment expenses (including brokerage costs, transfer taxes, shipping expenses, and charges of correspondent banks of the Trustee) and any taxes which may be levied against the Trust shall be charged to the Trust. All other expenses prior to the termination of the Plan shall be paid by the Employer or charged to the Trust, as determined in the discretion of The Southern Company Pension Fund Investment Review Committee. After the termination of the Plan, all expenses shall be levied against the Trust and shall be charged to the Trust. 58 ARTICLE X Administration of Plan 10 10.1 Retirement Board. The general administration of the Plan shall be placed in a Retirement Board of five (5) members who shall be appointed from time to time by the Board of Directors to serve at the pleasure of the Board of Directors. 10.2 Organization and transaction of business of Retirement Board. Any person appointed a member of the Retirement Board shall signify his acceptance by filing written acceptance with the Board of Directors. Any member of the Retirement Board may resign by delivering his written resignation to the Board of Directors, and such resignation shall become effective at delivery or at any later date specified therein. The members of the Retirement Board shall elect a Chairman from their number, and a Secretary who may be but need not be one of the members of the Retirement Board, and shall designate an actuary to act in actuarial matters relating to the Plan. They may appoint from their number such committees with such powers as they shall determine, may authorize one or more of their number or any agent to make any payment in their behalf, or to execute or deliver any instrument except that a requisition for funds from the Trustee shall be signed by two (2) members of the Retirement Board. The Retirement Board shall hold meetings upon such notice, at such place or places, and at such time or times as they may from time to time determine. A majority of the members of the Retirement Board at the time in office shall constitute a quorum for the transaction of business. All resolutions or other actions taken by the Retirement Board at any meeting shall be by the vote of a majority of the Retirement Board at the time in office. Any determination or action of the Retirement Board may be made or taken without a meeting by a resolution or written memorandum concurred upon by a majority of the members then in office. No member of the Retirement Board who is also an Employee of the Employer shall receive any compensation from the Plan for his service as such. No bond or other security need be required of any member in any jurisdiction except as may be required by ERISA. 10.3 Administrative responsibilities of Retirement Board. The Retirement Board, in addition to the functions and duties provided for elsewhere in the Plan, shall have exclusive discretionary authority for the following: 59 (a) construing and interpreting the Plan; (b) determining all questions affecting the eligibility of any Employee, retired Employee, Provisional Payee, or alternate payee; (c) determining all questions affecting the amount of the benefit payable hereunder; (d) ascertaining the persons to whom benefits shall be payable under the provisions hereof; (e) to the extent provided in the Plan, authorizing and directing disbursements of benefits from the Plan; (f) making final and binding determinations in connection with any questions of fact which may arise regarding the operation of the Plan; (g) making such rules and regulations with reference to the operation of the Plan as it may deem necessary or advisable, provided that such rules and regulations shall not be inconsistent with the express terms of the Plan or ERISA; (h) prescribing such procedures and adopting such forms as it determines necessary under the terms of the Plan; and (i) reviewing such denials of claims for benefits as may arise. Any decision, determination, construction, interpretation, ascertainment, authorization, direction, rule, regulation, prescription, or review that the Retirement Board may make or give in carrying out its duties or functions under this Section 10.3 shall be binding and conclusive. 10.4 Retirement Board, the "Administrator". For the purposes of compliance with the provisions of ERISA, the Retirement Board shall be deemed the "administrator" of the Plan as the term "administrator" is defined in ERISA, and the Retirement Board shall be, with respect to the Plan, a "named fiduciary" as that term is defined in ERISA. For the purpose of carrying out its duties, the Retirement Board may, in its discretion, allocate responsibilities under the Plan among its members and may, in its discretion, designate in writing, as set forth in the minutes of the Retirement Board, persons other than members of the Retirement Board to carry out such responsibilities of the Retirement Board under the Plan as it may see fit. 60 10.5 Fiduciary responsibilities. It is intended, that to the maximum extent permitted by ERISA, each person who is a "fiduciary" with respect to the Plan as that term is defined in ERISA shall be responsible for the proper exercise of his own powers, duties, responsibilities, and obligations under the Plan and the trust or other funding medium as shall each person designated by any fiduciary to carry out any fiduciary responsibility with respect to the Plan, the trust or other funding medium and no fiduciary or other person to whom fiduciary responsibilities are allocated shall be liable for any act or omission of any other fiduciary or of any other person delegated to carry out any fiduciary or other responsibility under the Plan or the trust or other funding medium. Any person or group of persons may serve in more than one fiduciary capacity with respect to the Plan and any fiduciary with respect to the Plan may serve as a fiduciary with respect to the Plan in addition to being an officer, employee, agent, or other representative of a "party in interest" as that term is defined in ERISA. 10.6 Employment of actuaries and others. The Retirement Board may employ such "enrolled actuaries" and independent "qualified public accountants" as such terms are defined in ERISA, legal counsel who may be of counsel to the Employer, other specialists, and other persons as the Retirement Board deems necessary or desirable in connection with the administration of the Plan. The Retirement Board and any person to whom it may delegate any duty or power in connection with the administration of the Plan, the Employer, and the officers and directors thereof shall be entitled to rely conclusively upon and shall be fully protected in any action omitted, taken, or suffered by them in good faith in reliance upon any enrolled actuary, independent qualified public accountant, counsel, or other specialist or other person selected by the Retirement Board or in reliance upon any tables, evaluations, certificates, opinions, or reports which shall be furnished by any of them or by the Trustee or any insurance company. Any action so taken, omitted, or suffered in accordance with the provisions of this Section 10.6 shall be conclusive upon each Employee, former Employee, and Provisional Payee covered under the Plan. 10.7 Accounts and tables. The Retirement Board shall maintain accounts showing the fiscal transactions of the Plan, and shall keep in convenient form such data as may be necessary for actuarial valuations with respect to the operation and administration of the Plan. The Retirement Board shall prepare annually a report showing in reasonable summary the financial condition of the Trust and giving a brief account of the operation of the Plan for the past year, and any further information which the Board of Directors may require. Such 61 report shall be submitted to the Board of Directors and shall be filed in the office of the Secretary of the Retirement Board. The Retirement Board may, with the advice of an enrolled actuary, adopt from time to time mortality and other tables as it may deem necessary or appropriate for use in calculating benefits under the Plan. 10.8 Indemnity of members of Retirement Board. To the extent not compensated for by any applicable insurance, the Employer shall indemnify and hold harmless each member of the Retirement Board and each Employee of the Employer designated by the Retirement Board to carry out any fiduciary responsibility with respect to the Plan from any and all claims, loss, damages, expense (including counsel fees approved by the Board of Directors) and liability (including any amount paid in settlement with the approval of the Board of Directors) arising from any act or omission of such member or Employee designated by the Retirement Board in connection with the Plan or the Trust, except where the same is determined by the Board of Directors or is judicially determined to be due to a failure to act in good faith or is due to the gross negligence or willful misconduct of such member or Employee. No assets of the Plan may be used for any such indemnification. 10.9 Areas in which the Retirement Board does not have responsibility. The Retirement Board shall not have responsibility with respect to control or management of the assets of the Plan. The Trustee or an insurance company, if funds of the Plan shall be held by an insurance company, shall have the sole responsibility for the administration of the assets of the Plan as provided in the Trust Agreement or contract with an insurance company, except to the extent that an "Investment Manager," as that term is defined in ERISA, appointed by the Board of Directors shall have responsibility for the management of the assets of the Plan, or some part thereof, including the power to acquire and dispose of the assets of the Plan, or some part thereof. The responsibility for providing a procedure for establishing and carrying out a funding policy and method for the Plan consistent with the objectives of the Plan and the requirements of Title I of ERISA shall be that of the Board of Directors or such committee, whether or not comprised of members of the Board of Directors, as the Board of Directors may from time to time designate and shall not be the responsibility of the Retirement Board. Effective July 28, 1993, the Pension Fund Investment Review Committee of The Southern Company System shall recommend for approval by the Board of Directors any Investment Manager that shall have responsibility with respect to management of any Plan 62 assets. In addition, the Pension Fund Investment Review Committee shall assume all responsibility for providing a procedure for establishing and carrying out a funding policy and method for the Plan consistent with the objectives of the Plan and the requirements of Title I of ERISA. 10.10 Claims Procedures. Consistent with the requirements of ERISA and the regulations thereunder of the Secretary of Labor from time to time in effect, the Retirement Board or its delegatee shall: (a) provide adequate notice in writing to any Employee, former Employee, retired Employee, or Provisional Payee (each being hereinafter in the paragraph referred to as "participant") whose claim for benefit under the Plan has been denied, setting forth specific reasons for such denial, written in a manner calculated to be understood by such participant; and (b) afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review of the decision denying the claim. 63 ARTICLE XI Management of Trust 11 11.1 Trust. All assets of the Plan shall be held as a special trust for use in accordance with the Plan. The funds of the Plan shall be held by a Trustee, or by a successor trustee appointed from time to time by the Board of Directors in trust or held by a life insurance company in accordance with the provisions of a contract with such insurance company entered into by the Trustee or the Employer. The Trust Agreement and contract with an insurance company may from time to time be amended in the manner therein provided. 11.2 Disbursement of the Trust Fund. Subject to the provisions of the Trust Agreement or contract with an insurance company the Retirement Board shall determine the manner in which the funds of the Plan shall be disbursed pursuant to the Plan, including the form of voucher or warrant to be used in making disbursements and the due qualification of persons authorized to approve and sign the same. The responsibility for the retention and investment of funds held by the Trustee shall lie with the Trustee and not with the Retirement Board, and the responsibility for the retention and investment of funds held by an insurance company shall lie with the insurance company and not with the Retirement Board. However, if in accordance with a Trust Agreement forming a part of the Plan (including any pooled trust agreement in which a trust forming a part of the Plan participates) a contract with an insurance company shall be held by the Trustee as an investment of the trust, directions may be given from time to time to the Trustee by such board of directors or committee or person or persons as may be specified in the Trust Agreement to transfer funds of the trust to the life insurance company which issued such contract or to transfer funds from the life insurance company to the Trustee, as the case may be. 11.3 Rights in the Trust. Under no circumstances shall amounts of money or other things of value contributed by the Employer to the Plan, or any part of the corpus or income of the Trust held by the Trustee under the Plan, be recoverable by the Employer from the Trustee or from any Employee, retired Employee, or Provisional Payee, or be used for, or diverted to, purposes other than for the exclusive benefit of the Employees, retired Employees, and Provisional Payees covered hereunder; provided, however, that, if after satisfaction of all liabilities of the Trust with respect to Employees, retired Employees, and Provisional Payees under the Plan, there is any balance remaining, the Trustee shall return such balance to the Employer. Notwithstanding the above, upon the approval of the Internal Revenue Service or the enactment or promulgation of any laws or 64 regulations by any governmental authority, the Employer shall be authorized to rededicate all or a portion of the assets allocated to fund Retirement Income under the Plan to the separate account to fund medical benefits under Article XV of the Plan. 11.4 Merger of the Plan. The Plan shall not be merged or consolidated with, or any of its assets or liabilities transferred to, any other plan, unless each Employee included in the Plan would (if the Plan then terminated) receive a benefit immediately after the merger, consolidation, or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation, or transfer (if the Plan then terminated). 65 ARTICLE XII Termination of the Plan 12 12.1 Termination of the Plan. The Plan may be terminated at any time by action of the Board of Directors of the Employer in accordance with the amendment procedures provided in Section 13.1. Upon such termination or partial termination all Accrued Retirement Income of Employees to the date of such termination, to the extent then funded, shall become nonforfeitable and the assets of the Plan which have not previously been allocated to provide Retirement Income shall then be paid out to Employees, former Employees, and Provisional Payees in accordance with the applicable requirements of ERISA and regulations thereunder governing termination of "employee pension benefit plans" as defined in ERISA. If after satisfaction of all liabilities, as provided above, there is any balance remaining in the Trust, the Trustee shall return such balance to the Employer. In the first instance, subject to the foregoing limitations, such remaining assets shall be allocated among all persons in the following categories for whom such Retirement Income or other benefits have not previously been provided, namely, (a) Employees who have been retired under the Plan, (b) Employees who at the date of termination of the Plan are included in the Plan, (c) former Employees who at the date of the termination of their employment were entitled to payment of Retirement Income in accordance with Article VIII, and (d) former Employees who have transferred to an Affiliated Employer in accordance with Section 4.6 and are still in the employ or receiving a retirement income from such company (including their Provisional Payees, if any). Retirement Income already purchased under any contract with an insurance company will be payable in accordance with the provisions of that contract. 12.2 Limitation on benefits for certain highly paid employees. (a) The annual payments to an Employee described in paragraph (b) below shall not exceed an amount equal to the payments that would be made to or on behalf of such Employee under a single life annuity that is the Actuarial Equivalent of the sum of the Employee's Accrued Retirement Income and the Employee's other benefits under this Plan (other than a Social Security supplement) and any Social Security supplement that the restricted Employee is entitled to receive. The restrictions in this paragraph (a) do not apply, however, if -- (1) after payment to an Employee described in paragraph (b) of all benefits payable to such Employee under this Plan, the value of this Plan's assets equals or exceeds 66 110% of the value of current liabilities, as defined in Code Section 412(c)(7), or (2) the value of the benefits payable to such Employee under this Plan for an Employee described in paragraph (b) below is less than 1% of the value of current liabilities before distribution. (b) The Employees whose benefits are restricted on distribution include all highly compensated employees and highly compensated former employees (as such terms are defined in Treasury Regulation Section 1.401(a)(4)-12); provided, however, that Employees whose benefits are subject to restriction under this Section 12.2 shall be limited to only those Employees who in the current or in any previous Plan Year were one of the 25 non- excludable Employees of the Employer with the greatest compensation from the Employer. 67 ARTICLE XIII Amendment of the Plan 13 13.1 Amendment of the Plan. (a) The Plan may be amended or modified at any time by the Board of Directors pursuant to its written resolutions, provided that no amendment or modification which will substantially increase the cost of the Plan will be made by the Board of Directors without approval, at a meeting of the stockholders duly called for that purpose, by the vote of a majority of the stock present and entitled to vote at such meeting. (b) Such amendments and modifications (without limiting the generality of the foregoing) may, among other things, make any changes in the Plan which may become appropriate if, for any reason, the Employer should in the future find it necessary or desirable not to complete payment of the past service costs of the Plan in the manner and within the period now contemplated or should find it necessary or desirable to reduce the amounts of Future Service contributions to be paid by the Employer after such amendment or modification. Such amendments and modifications may also (without limiting the generality of the foregoing), make any changes necessary or desirable to make the costs of the Plan eligible for tax deductions or to make the income of the Trust exempt from taxation or to bring the Plan into conformity or compliance with ERISA or with governmental regulations. Notwithstanding the foregoing, no amendment shall be made which has the effect of decreasing the Accrued Retirement Income of any Employee, former Employee, or Provisional Payee as provided under the limitations of Section 411(d)(6) of the Code. 68 ARTICLE XIV Special Provisions 14 14.1 Adoption of Plan by other corporations. (a) Any corporation, whether or not related to the Employer by function or operation and any affiliate, if such corporation or affiliate is authorized to do so by a resolution adopted by the Board of Directors of the Employer, may adopt this Plan as a separate Plan for all eligible Employees or any separate, distinct, and identifiable class or group of Employees and the related Trust Agreement, by action of the board of directors of such corporation or affiliate. Any such adoption shall be evidenced by certified copies of the resolutions of the foregoing board of directors indicating such adoption and by the execution of the Adoption Agreement by the adopting corporation or affiliate. Such resolution shall state and define the effective date of the Plan for the purpose of such adopting corporation and, for the purpose of Section 415 of the Code, the "limitation year" as to such corporation. Notwithstanding the foregoing, however, if the Plan as adopted by an affiliate or other corporation under the foregoing provision shall fail to receive the initial approval of the Internal Revenue Service as a qualified plan, any contributions by such affiliate or other corporation after payment of all expenses will be returned to such adopting corporation free of any trust, and the Plan and the Trust Agreement as to such adopting affiliate or other corporation shall terminate. (b) Each adopting affiliate or other corporation shall be required to use the same Trustee as provided in this Plan. (c) The Trustee may, but is not required to, commingle, hold, and invest as one fund all contributions (or any portion thereof) made by each adopting affiliate or other corporation. (d) Any contributions made by an affiliate or other corporation, as provided for in this Plan, shall be paid to and held by the Trustee for the exclusive benefit of the Employees of such an affiliate or other corporation and the beneficiaries of such Employees, subject to all the terms and conditions of this Plan. On the basis of information furnished by the administrator, the Trustee shall keep separate books and records concerning the affairs of each adopting affiliate or other corporation hereunder. 69 14.2 Exclusive benefit. The Employer intends that the Plan (including the Trust forming a part thereof) shall be a pension plan of an employer for the exclusive benefit of its Employees and their beneficiaries subject to Section 11.3, as provided for in Section 401 of the Code, and as may be provided for in any similar provisions of subsequent revenue laws, and that the Trust shall qualify as an employees' trust which shall be exempt under Section 501(a) of the Code, and any similar provisions of subsequent revenue laws, as a trust forming part of such a plan. 14.3 Assignment or alienation. No benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment (either at law or in equity), pledge, encumbrance, charge, garnishment, levy, execution, or other legal or equitable process and any attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge, garnish, levy, execute, or enforce other legal or equitable process against the same shall be void, nor shall any such benefit be in any manner liable for or subject to the debts, contracts, liabilities, engagements, or torts of the person entitled to such benefit. If any Employee or retired Employee or any Provisional Payee under the Plan is adjudicated bankrupt or attempts to anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge any benefit under the Plan or if any action shall be taken which is in violation of the provisions of the immediately preceding paragraph, then such benefit shall cease and terminate and in that event the Retirement Board shall hold or apply the same or any part thereof to or for the benefit of such Employee or retired Employee or Provisional Payee in such manner as the Retirement Board may think proper. Notwithstanding the above, the Retirement Board and Trustee shall comply with any "domestic relations order" (as defined in Section 414(p)(1)(B) of the Code) which is a "qualified domestic relations order" satisfying the requirements of Section 414(p) of the Code. The Retirement Board shall establish procedures for (a) notifying Employees and alternate payees who have or may have an interest in benefits which are the subject of domestic relations orders, (b) determining whether such domestic relations orders are qualified domestic relations orders under Section 414(p) of the Code, and (c) distributing benefits which are subject to qualified domestic relations orders. 70 14.4 Voluntary undertaking. This Plan is strictly a voluntary undertaking on the part of the Employer and shall not be deemed to constitute a contract between the Employer or any other company and any Employee or to be a consideration for, or an inducement or condition of, the employment of any Employee. Nothing contained in this Plan shall be deemed to give any Employee the right to be retained in the service of the Employer or to interfere with the right of the Employer to discharge or retire any Employee at any time. Inclusion under the Plan will not give any Employee or Provisional Payee any right or claim to a Retirement Income except to the extent such right is specifically fixed under the terms of the Plan and there are funds available therefor in the hands of the Trustee or of any insurance company which may hold funds of the Plan. 14.5 Top-Heavy Plan requirements. For any Plan Year the Plan shall be determined to be a Top-Heavy Plan, the Plan shall provide the following: (a) the minimum benefit requirement of Section 14.7; and (b) the vesting requirement of Section 14.8. 14.6 Determination of Top-Heavy status. (a) For any Plan Year commencing after December 31, 1983, the Plan shall be determined to be a "Top-Heavy Plan," if, as of the Determination Date, (1) the Present Value of Accrued Retirement Income of Key Employees or (2) the sum of the Aggregate Accounts of Key Employees under this Plan and any plan of an Aggregation Group, exceeds sixty percent (60%) of the Present Value of Accrued Retirement Income or the Aggregate Accounts of all Employees entitled to participate in this Plan and any Plan of an Aggregation Group. (b) For Plan Years beginning after December 31, 1986, the Accrued Retirement Income of a Non-Key Employee shall be determined under the accrual method under the Plan. (c) For any Plan Year commencing after December 31, 1983, the Plan shall be determined to be a "Super Top-Heavy Plan," if, as of the Determination Date, (1) the Present Value of Accrued Retirement Income of Key Employees or (2) the sum of the Aggregate Accounts of Key Employees under this Plan and any plan in an Aggregation Group, exceeds ninety percent (90%) of the Present Value of Accrued Retirement Income or the Aggregate Accounts of all Employees entitled to participate in this Plan and any plan of an Aggregation Group. 71 For purposes of Sections 14.6(a) and 14.6(b), if any Employee is a Non-Key Employee for any Plan Year, but such Employee was a Key Employee for any prior Plan Year, such Employee's Present Value of Accrued Retirement Income and/ or Aggregate Account balance shall not be taken into account for purposes of determining whether this Plan is a Top-Heavy or Super Top-Heavy Plan (or whether any Aggregation Group which includes this Plan is a Top-Heavy Group). In addition, for Plan Years beginning after December 31, 1984, if an Employee or former Employee has not performed any services for the Employer or any Affiliated Employer maintaining the Plan at any time during the five (5) year period ending on the Determination Date, the Aggregate Account and/or Present Value of Accrued Retirement Income for such Employee or former Employee shall not be taken into account for purposes of determining whether this Plan is a Top-Heavy or Super Top-Heavy Plan. (d) An Employee's "Aggregate Account" as of the Determination Date shall be determined under applicable provisions of the defined contribution plan used in determining Top-Heavy status. (e) An "Aggregation Group" shall mean either a Required Aggregation Group or a Permissive Aggregation Group as hereinafter determined. (1) Required Aggregation Group: In determining a Required Aggregation Group hereunder, each plan of the Employer in which a Key Employee is a participant, and each other plan of the Employer which enables any plan in which a Key Employee participates to meet the requirements of Code Sections 401(a)(4) or 410, will be required to be aggregated. Such group shall be known as a Required Aggregation Group. In the case of a Required Aggregation Group, each plan in the group will be considered a Top-Heavy Plan if the Required Aggregation Group is a Top-Heavy Group. No plan in the Required Aggregation Group will be considered a Top-Heavy Plan if the Aggregation Group is not a Top-Heavy Group. (2) Permissive Aggregation Group: The Employer may also include any other plan not required to be included in the Required Aggregation Group, provided the resulting group, taken as a whole, would continue to satisfy the provisions of Code Sections 401(a)(4) or 410. Such group shall be known as a Permissive Aggregation Group. In the case of a Permissive Aggregation Group, only a plan that is part of the Required Aggregation Group will be considered a Top-Heavy Plan if the Permissive Aggregation Group is a 72 Top-Heavy Group. A plan that is not part of the Required Aggregation Group but that has nonetheless been aggregated as part of the Permissive Aggregation Group will not be considered a Top-Heavy Plan even if the Permissive Group is a Top-Heavy Group. (3) Only those plans of the Employer in which the Determination Dates fall within the same calendar year shall be aggregated in order to determine whether such plans are Top-Heavy Plans. (f) The "Determination Date" shall mean with respect to any Plan Year, the last day of the preceding Plan Year, or in the case of the first Plan Year, the last day of such Plan Year. (g) A "Key Employee" shall mean any Employee or former Employee (and his beneficiaries) who, at any time during the Plan Year or any of the four (4) preceding Plan Years, is: (1) an officer of the Employer having an annual compensation from the Employer greater than fifty percent (50%) of the amount in effect under Code Section 415(b)(1)(A) for any such Plan Year. For purposes of this Section 14.6(g)(1), only those employers which are incorporated shall be considered as having officers, and no more than fifty (50) Employees (or, if lesser, the greater of three (3) or ten percent (10%) of the Employees) shall be treated as officers. Annual compensation means compensation as defined in Section 415(c)(3) of the Code, but including amounts contributed by the Employer pursuant to a salary reduction agreement which are excludable from the Employee's gross income under Section 125, Section 402(a)(8), Section 402(h), or Section 403(b) of the Code. (2) one of the ten (10) Employees (A) having annual compensation from the Employer greater than the limitation in effect under Code Section 415(c)(1)(A) and (B) owning (or considered as owning within the meaning of Code Section 318) the largest interests in the Employer. For purposes of this Section 14.6(g)(2), if two (2) Employees have the same interest in the Employer, the Employee having the greater annual compensation from the Employer shall be treated as having a larger interest. (3) a "five-percent owner" of the Employer. The term "five-percent owner" shall mean any person who owns (or is considered as owning within the meaning of Code Section 318) more than five percent (5%) of the outstanding stock of the Employer or stock possessing more than five percent (5%) of the total combined voting power of all stock of the Employer. In determining percentage ownership hereunder, employers that would otherwise be aggregated under Code 73 Sections 414(b), (c), and (m) shall be treated as separate employers. (4) a "one-percent owner" of the Employer having an annual compensation from the Employer of more than $150,000. The term "one-percent owner" shall mean any person who owns (or is considered as owning within the meaning of Code Section 318) more than one percent (1%) of the outstanding stock of the Employer or stock possessing more than one percent (1%) of the total combined voting power of all stock of the Employer. In determining percentage ownership hereunder, employers that would otherwise be aggregated under Code Sections 414(b), (c), and (m) shall be treated as separate employers. However, in determining whether an individual has compensation of more than $150,000, compensation from each employer required to be aggregated under Code Sections 414(b), (c), and (m) shall be taken into account. (h) A "Non-Key Employee" shall mean any Employee who is not a Key Employee as defined in Section 14.6(g). (i) An Employee's "Present Value of Accrued Retirement Income" shall mean as of the Determination Date, the sum of the following: (1) the Present Value of his Accrued Retirement Income as of the most recent valuation occurring within a twelve (12) month period ending on the Determination Date. (2) any Plan distributions made within the Plan Year that includes the Determination Date or within the four (4) preceding Plan Years. However, in the case of distributions made after the valuation date and prior to the Determination Date, such distributions are not included as distributions for Top-Heavy purposes to the extent that such distributions are already included in the Employee's Present Value of Accrued Retirement Income as of the valuation date. Notwithstanding anything herein to the contrary, all distributions, including distributions made prior to January 1, 1984, and distributions under a terminated plan which if it had not been terminated would have been required to be included in an Aggregation Group, will be counted. (3) any Employee contributions, whether voluntary or mandatory. However, amounts attributable to qualified deductible employee contributions shall not be considered to be a part of the Employee's Present Value of Accrued Retirement Income. 74 (4) with respect to unrelated rollovers and plan-to-plan transfers (ones which are both initiated by the Employee and made from a plan maintained by one employer to a plan maintained by another employer), if this Plan provides for rollovers or plan-to-plan transfers, it shall always consider such rollover or plan-to-plan transfer as a distribution for the purposes of this Section. If this Plan is the plan accepting such rollovers or plan-to-plan transfers, it shall not consider such rollovers or plan-to-plan transfers accepted after December 31, 1983 as part of the Employee's Present Value of Accrued Retirement Income. However, rollovers or plan-to-plan transfers accepted prior to January 1, 1984 shall be considered as part of the Employee's Present Value of Accrued Retirement Income. (5) with respect to related rollovers and plan-to-plan transfers (ones either not initiated by the Employee or made to a plan maintained by the same employer), if this Plan provides for rollovers or plan-to-plan transfers, it shall not be counted as a distribution for purposes of this Section. If this Plan is the plan accepting such rollover or plan-to-plan transfer, it shall consider such rollover or plan-to-plan transfer as part of the Employee's Present Value of Accrued Retirement Income, irrespective of the date on which such rollover or plan-to-plan transfer is accepted. (j) A "Top-Heavy Group" shall mean an Aggregation Group in which, as of the Determination Date, the sum of: (1) the Present Value of Accrued Retirement Income of Key Employees under all defined benefit plans included in that group, and (2) the Aggregate Accounts of Key Employees under all defined contribution plans included in the group, exceeds sixty percent (60%) of a similar sum determined for all Employees. 14.7 Minimum Retirement Income for Top-Heavy Plan Years. Notwithstanding anything herein to the contrary, for any Top-Heavy Plan Year, the minimum Accrued Retirement Income derived from Employer contributions for each Non-Key Employee, including benefits accrued in years in which the Plan is not a Top-Heavy Plan, shall equal a percentage of such Non-Key Employee's highest average compensation not less than the lesser of: (a) two percent (2%) multiplied by the Employee's number of Years of Service with the Employer, or (b) twenty percent (20%). For purposes of the minimum benefit, an Employee's Years of Service shall exclude (a) Plan Years in which the Plan is not a Top-Heavy Plan, and (b) Years of Service completed prior to 75 January 1, 1984. The minimum benefit required by this Section 14.7 shall be calculated using the Employee's total compensation and expressed in the form of a single life annuity (with no ancillary benefits) beginning at such Employee's Normal Retirement Date. An Employee's average compensation shall be based on the five (5) consecutive years for which the Employee had the highest compensation. Notwithstanding the foregoing, in any Plan Year in which a Non-Key Employee is an Employee in both this Plan and a defined contribution plan, and both such plans are Top-Heavy Plans, the Employer shall not be required to provide a Non-Key Employee with both the full separate minimum defined benefit and the full separate minimum defined contribution plan allocation. Therefore, if a Non-Key Employee is participating in a defined contribution plan maintained by the Employer and the minimum allocation under Code Section 416(c)(2) is allocated to the Non-Key Employee under such defined contribution plan, the minimum Accrued Retirement Income provided for above shall not be applicable, and no minimum benefit shall accrue on behalf of the Non-Key Employee. Alternatively, the Employer may satisfy the minimum benefit requirement of Code Section 416(c)(1) for the Non-Key Employee by providing any combination of benefits and/or contributions that satisfy the safe harbor rules of Treasury Regulation Section 1.416-1(m-12). 14.8 Vesting requirements for Top-Heavy Plan Years. Notwithstanding the provisions of Section 8.1, for any Top-Heavy Plan Year, the vested portion of an Employee's Accrued Retirement Income shall be determined on the basis of the Employee's Vesting Years of Service according to the following schedule: Years of Service Vested Percentage less than 2 0 2 20 3 40 4 60 5 80 6 or more 100 The minimum Retirement Income for any Top-Heavy Plan Year shall not be forfeited during any period for which the payment of the Employee's Retirement Income is required to be suspended under Section 5.10 of the Plan. If in any subsequent Plan Year, the Plan ceases to be a Top-Heavy Plan, the Retirement Board may, in its sole discretion, elect to (a) continue to apply this vesting schedule in determining the vested percentage of an Employee's Accrued Retirement Income or (b) revert to the vesting schedule in effect before the Plan became a Top-Heavy Plan. Any such reversion 76 shall be treated as a Plan amendment pursuant to the terms of the Plan. No decrease in an Employee's nonforfeitable percentage may occur in the event the Plan's status as a Top-Heavy Plan changes for any Plan Year. 14.9 Adjustments to maximum benefits for Top-Heavy Plans. (a) In the case of an Employee who is a participant in a defined benefit plan and a defined contribution plan maintained by the Employer, and such plans as a group are determined to be Top-Heavy for any limitation year beginning after December 31, 1983, "1.0" shall be substituted for "1.25" in each place it appears in the denominators of Fractions A and B, as set forth in Section 6.5 of the Plan, unless the extra minimum benefit is provided pursuant to Section 14.9(b). Super Top-Heavy Plans shall be required at all times to substitute "1.0" for "1.25" in the denominator of each plan fraction. (b) If a Key Employee is a participant in both a defined benefit plan and a defined contribution plan that are both part of a Top-Heavy Group (but neither of such plans is a Super Top-Heavy Plan), the defined benefit and defined contribution fractions set forth in Section 6.5 shall remain unchanged, provided that in Section 14.7 above, "three percent (3%)" shall be substituted for "two percent (2%)" and "twenty percent (20%)" shall be increased by one (1) percentage point (but not more than ten (10) percentage points) for each Year of Service included in the computations under Section 14.7. (c) For purposes of this Section 14.9, if the sum of the defined benefit plan fraction and the defined contribution fraction shall exceed 1.0 in any Plan Year for any Employee in this Plan, the Employer shall eliminate any amounts in excess of the limits set forth in Section 6.5, pursuant to Section 6.7 of the Plan. 77 ARTICLE XV Post-retirement Medical Benefits 15 15.1 Definitions. The following words and phraseology as used herein shall have the following meanings unless a different meaning is plainly required by the context: (a) "Pensioned Employee" means a former Employee of the Employer who is eligible to receive Retirement Income after his retirement at his Early, Normal, or Deferred Retirement Date, as applicable, pursuant to the terms of the Plan, but shall not include any former Employee who terminated his service with the Employer prior to his Early, Normal, or Deferred Retirement Date and who is entitled to Retirement Income under the Plan. A "Pensioned Employee" shall not include a Key Employee, as defined in Section 14.6(g), or effective January 1, 1991, any Pensioned Employee of an Employer that has adopted the Plan pursuant to Section 14.1 hereof but does not provide medical benefits to its Pensioned Employees. (b) "Dependents" means the Pensioned Employee's spouse who is not legally separated from the Pensioned Employee and the Pensioned Employee's unmarried children (both natural and legally adopted) within the prescribed age limit set forth below. The term "children" includes stepchildren and foster children who reside with the Pensioned Employee in a regular parent-child relationship and are dependent upon the Pensioned Employee for principal support and maintenance. The term Dependent shall not include any person who is covered, or eligible for coverage, under the Plan as a Pensioned Employee or who is entitled to any benefits under any provisions of this Plan because of having been covered as a Pensioned Employee. Children shall be considered to be within the prescribed age limit if they are less than nineteen (19) years of age. Unmarried children age nineteen (19) but less than age twenty-five (25) continue to be within the prescribed age limit if they are (1) dependent upon the Pensioned Employee for their support and maintenance, or (2) qualify as a dependent on the Pensioned Employee's tax return. Effective March 1, 1993, unmarried children age nineteen (19) but less than age twenty- five (25) continue to be within the prescribed age limit only if they are (1) dependent upon the Pensioned Employee for support and maintenance, and (2) regularly attending school on a full- time basis. For purposes of this Article XV, an unmarried child shall be considered to be regularly attending school on a full- time basis if such child is enrolled in and regularly attending a secondary school or an accredited vocational school, College or University (as defined in Exhibit A) and meets the minimum requirements of such school, College or University to maintain full-time status. This shall also include an unmarried child who 78 is enrolled as a part-time student at one of the above institutions while such individual is taking a course load that is equivalent to the minimum course load required for full-time student status at such institution. If both a husband and his wife are covered under this Plan as Pensioned Employees of the Employer, either, but not both, may elect to cover their eligible children as Dependents. Any person covered or eligible for coverage under Article XV as a Pensioned Employee, or under any group medical plan maintained by the Employer as an Employee, shall not be considered as a Dependent. (c) "Covered Individual" means a Pensioned Employee or Dependent of a Pensioned Employee who is eligible to receive medical benefits under Article XV. 15.2 Eligibility of Pensioned Employees and their Dependents. (a) A person who is a Pensioned Employee on January 1, 1989 shall be eligible for coverage as a Pensioned Employee on January 1, 1989, provided he was covered as an Employee under a group medical plan maintained by the Employer immediately prior to the time he became a Pensioned Employee. (b) An Employee who becomes a Pensioned Employee on or after January 1, 1989 shall be eligible for coverage on the date he becomes a Pensioned Employee, provided he was covered as an Employee under a group medical plan maintained by the Employer immediately prior to the time he became a Pensioned Employee. (c) A Dependent of a Pensioned Employee shall be eligible for coverage under this Plan on the later of (1) the date the Pensioned Employee becomes eligible for coverage hereunder and (2) the date such person becomes a Dependent, and (3) the date of payment by the Pensioned Employee of any required contributions with respect to a Dependent. 15.3 Medical benefits. The medical benefits provided under this Article XV by the Employer and each adopting Employer are set forth in the copy of each such Employer's medical benefits plan which is attached hereto as Exhibit A and specifically incorporated herein by reference in its entirety, as may be amended from time to time. Such medical benefits shall be subject without limitation to all deductibles, maximums, exclusions, coordination with Medicare and other medical plans, and procedures for submitting claims and initiating legal proceedings provided therein. 79 15.4 Termination of coverage. (a) Coverage of any Pensioned Employee shall cease as follows: (1) when Article XV is amended, terminated, or discontinued in accordance with its terms; or (2) when the Pensioned Employee fails to make when due any required contribution; or (3) as otherwise provided in Exhibit A. (b) Coverage of any Dependent shall cease as follows: (1) when Article XV is amended, terminated, or discontinued in accordance with its terms; or (2) when the Pensioned Employee fails to make when due any required contribution; or (3) as otherwise provided in Exhibit A. 15.5 Continuation of coverage to certain individuals. (a) Anything in Article XV to the contrary notwithstanding, a Pensioned Employee, Dependent spouse, or Dependent child shall be entitled to elect continued medical coverage as provided under the terms of Article XV upon the occurrence of a Qualifying Event, provided such Pensioned Employee, Dependent spouse, or Dependent child was entitled to benefits under Article XV on the day prior to the Qualifying Event. (1) "Qualifying Event" means with respect to any Pensioned Employee, Dependent spouse, or Dependent child, as appropriate, (A) the death of the Pensioned Employee, (B) the divorce or legal separation of the Pensioned Employee from the Dependent spouse, (C) a Dependent child ceasing to be a Dependent as defined under the requirements of Article XV, or (D) a proceeding in a case under Title 11, United States Code, with respect to the Employer. (b) The Pensioned Employee or Dependent electing continued coverage under this Section 15.5 shall be required to pay such monthly contributions as determined by the Employer to be equal to a reasonable estimate of 102% of the cost of providing coverage for such period for similarly situated beneficiaries which (1) is determined on an actuarial basis and (2) takes into account such factors as the Secretary of the Treasury may prescribe. 80 (c) The continuation coverage elected by a Pensioned Employee, Dependent spouse, or Dependent child shall begin on the date of the Qualifying Event and end not earlier than the first to occur of the following: (1) The third anniversary of the Qualifying Event; (2) The termination of Article XV of the Plan; (3) The failure of the Pensioned Employee or Dependent to pay any required contribution when due; (4) The date on which the Pensioned Employee or Dependent first becomes, after the date of his election, (A) a covered employee under any other group health plan which does not contain any exclusion or limitation with respect to any preexisting condition of such individual, or (B) entitled to benefits under Title XVIII of the Social Security Act; or (5) The date the Dependent spouse becomes covered under another group health plan which does not contain any exclusion or limitation with respect to any preexisting condition of such Dependent spouse. (d) Any election to continue coverage under this Section 15.5 shall be made during the election period (1) beginning not later than the termination date of coverage by reason of the Qualifying Event and (2) ending sixty (60) days following the later of the date described in (1) above or the date any Pensioned Employee, Dependent spouse, or Dependent child receives notice of a Qualifying Event from the Employer. (e) The Employer shall provide each Pensioned Employee and Dependent spouse, if any, written notice of the rights provided in this Section 15.5. The Pensioned Employee or Dependent spouse is required to notify the Employer within thirty (30) days of any Qualifying Event described in Section 15.5(a)(1)(B) or (C), and the Employer shall provide the Dependent spouse or Dependent child written notice of the rights provided in this Section 15.5 within fourteen (14) days thereafter. Notice to the Dependent spouse shall be deemed notice to each Dependent child residing with such spouse at the time such notification is made. 15.6 Contributions to fund medical benefits. Any contributions which the Employer deems necessary to provide the medical benefits under Article XV will be made from time to time by or on behalf of the Employer, and contributions shall be required of the Pensioned Employees to the Employer's medical benefit plan in amounts determined in the sole discretion of the Employer from time to time. All Employer contributions shall be made to the Trustee under the Trust Agreement provided for in 81 Article XI and shall be allocated to a separate account maintained solely to fund the medical benefits provided under Article XV. The Employer shall designate that portion of any contribution to the Plan allocable to the funding of medical benefits under this Article XV. In no event at any time prior to the satisfaction of all liabilities under this Article XV shall any part of the corpus or income of such separate account be used for, or diverted to, purposes other than for the exclusive purpose of providing benefits under this Article XV. Effective January 1, 1991, subject to the requirements of Code Section 420, the Employer shall have the right, in its sole discretion, to transfer any excess corpus or income of the Plan allocated to fund Retirement Income to the separate account to fund medical benefits under this Article XV. The amount of contributions to be made by or on behalf of the Employer for any Plan Year shall be determined in accordance with any generally accepted actuarial method which is reasonable in view of the provisions and coverage of Article XV, the funding medium, and any other applicable considerations. However, the Employer is under no obligation to make any contributions under Article XV after Article XV is terminated, except to fund claims for medical expenses incurred prior to the date of termination. The medical benefits provided under this Article XV, when added to any life insurance protection provided under the Plan, shall be subordinate to the retirement benefits provided under the Plan. Subject to any transitional rule applicable to contributions made under this Article XV prior to January 1, 1990, effective October 3, 1989, the aggregate of costs of the medical benefits (measured from January 1, 1987) plus the costs of any life insurance protection shall not exceed twenty-five percent (25%) of the sum of the aggregate of costs of retirement benefits under the Plan (other than past service credits), the aggregate of costs of the medical benefits and the costs of any life insurance protection (both measured from January 1, 1987). The aggregate of costs of retirement benefits, other than for past service credits, and the aggregate of costs of medical benefits provided under the Plan shall be determined using the projected unit credit funding method and the actuarial assumptions set forth in Exhibit B, a copy of which is attached hereto and specifically incorporated herein by reference in its entirety, and as may be amended from time to time by the committee responsible for providing a procedure for establishing and carrying out a funding policy and method for the Plan pursuant to Section 10.9 of the Plan. Contributions allocated to any separate account established for a Pensioned Employee from which medical benefits will be payable solely to such Pensioned Employee or his Dependents shall be treated as an Annual Addition as defined in 82 Section 6.6(a) to any defined contribution plan maintained by the Employer. 15.7 Pensioned Employee contributions. It shall be the sole responsibility of the Pensioned Employee to notify the Employer promptly in writing when a change in the amount of the Pensioned Employee's contribution is in order because a Dependent has become ineligible for coverage under this Article XV. No person shall become covered under this Article XV for whom the Pensioned Employee has not made the required contribution. Any contribution paid by a Pensioned Employee for any person after such person shall have become ineligible for coverage under this Article XV shall be returned upon written request but only provided such written request by or on behalf of the Pensioned Employee is received by the Employer within ninety (90) days from the date coverage terminates with respect to such ineligible person. 15.8 Amendment of Article XV. The Employer reserves the right, through action of its Board of Directors, to amend Article XV (including Exhibit A) pursuant to Section 13.1 or the Trust without the consent of any Pensioned Employee, or his Dependents, provided, however, that no amendment of this Article or the Trust shall cancel the payment or reimbursement of expenses for claims already incurred by a Pensioned Employee or his Dependent prior to the date of any amendment, nor shall any such amendment increase the duties and obligations of the Trustee except with its consent. This Article XV, as set forth in the Plan document, is not a contract and non-contributory benefits hereunder are provided gratuitously, without consideration from any Pensioned Employee or his Dependents. The Employer makes no promise to continue these benefits in the future and rights to future benefits will never vest. In particular, retirement or the fulfillment of the prerequisites for a retirement benefit pursuant to the terms of the Plan or under the terms of any other employee benefit plan maintained by the Employer shall not confer upon any Pensioned Employee or Dependents any right to continued benefits under this Article XV. 15.9 Termination of Article XV. Although it is the intention of the Employer that this Article shall be continued and the contribution shall be made regularly thereto each year, the Employer, by action of its Board of Directors pursuant to Section 13.1, may terminate this Article XV or permanently discontinue contributions at any time in its sole discretion. This Article XV, as set forth in the Plan document, is not a contract and non-contributory benefits hereunder are provided gratuitously, without consideration from any Pensioned Employee or his Dependents. The Employer makes no promise to continue these benefits in the future and rights to future benefits will never vest. In particular, retirement or the fulfillment of the prerequisites for a retirement benefit pursuant to the terms of 83 the Plan or under the terms of any other employee benefit plan maintained by the Employer shall not confer upon any Pensioned Employee or his Dependents any right to continued benefits under this Article XV. Effective January 1, 1991, in the event the Employer or any adopting Employer shall terminate its provision of the medical benefits described in Exhibit A to Section 15.3 of the Plan to its Pensioned Employees, this Article XV of the Plan shall automatically terminate with respect to the Pensioned Employees and their Dependents of such Employer without the requirement of any action by such Employer. 15.10 Reversion of assets upon termination. Upon the termination of this Article XV and the satisfaction of all liabilities under this Article XV, all remaining assets in the separate account described in Section 15.6 shall be returned to the Employer. 84 ARTICLE XVI Early Retirement Incentive Program 16 16.1 Eligibility. This Article XVI is effective as of May 1, 1994. All Employees of the Employer including, solely for purposes of this Article, those individuals who are currently receiving long term disability benefits from a welfare benefit plan sponsored by the Employer: (a) who have or will complete ten (10) or more years of Accredited Service on or before December 31, 1994; and (b) have or will attain age fifty-five (55) on or before December 31, 1994 ("Eligible Employee") shall be eligible to receive the benefits described in Section 16.3 below if, during the period from July 16, 1994 through 5:00 p.m. CDST on August 31, 1994, such Employee elects to retire by filing an election form and waiver agreement with the Retirement Board no later than 5:00 p.m. CDST on August 31, 1994 and allows such election form and waiver agreement to become effective. In the event an Eligible Employee does not submit an election form and waiver agreement by 5:00 p.m. CDST on August 31, 1994 and allow such Agreement to become effective, the Retirement Board shall interpret such failure as an election not to receive the benefits provided under this Article XVI. 16.2 Retirement Dates of Eligible Employees. (a) Employees who satisfy eligibility criteria by October 31, 1994. The Early Retirement Date of an Eligible Employee who elects to retire in accordance with the provisions of this Article XVI and who is age fifty-five (55) or older with ten (10) or more years of Accredited Service by October 31, 1994 shall be November 1, 1994. (b) Employees who satisfy eligibility criteria subsequent to October 31, 1994. The Early Retirement Date of an Eligible Employee who elects to retire in accordance with the provisions of this Article XVI and who attains age fifty-five (55) or older with ten (10) or more years of Accredited Service subsequent to October 31, 1994, but prior to December 31, 1994, shall be the first day of the first month following the date such Eligible Employee satisfies the age and service criteria described in this Section 16.2(b). (c) Exception for critical projects. Notwithstanding the foregoing, in the sole discretion of the Employer, the Early Retirement Date of an Eligible Employee may be postponed beyond the Eligible Employee's Early Retirement Date determined in accordance with the provisions of paragraph (a) or (b) above, whichever is applicable, provided, however, that no Eligible Employee's Early Retirement Date shall be postponed beyond October 31, 1995. 85 16.3 Early retirement incentive program benefits. (a) Early retirement replacement benefit. In addition to any Retirement Income to which an Eligible Employee may be entitled in accordance with the provisions of Article V of the Plan, if an Eligible Employee retires from the service of the Employer in accordance with the provisions of this Article XVI prior to his Normal Retirement Date and elects to commence his Retirement Income prior to his Normal Retirement Date pursuant to the provisions of Section 5.7 of the Plan, the amount of Retirement Income to be received by such Eligible Employee under Section 5.5 shall not be reduced due to early commencement of such Retirement Income. (b) Social Security Bridge Benefit. An Eligible Employee who retires in accordance with the provisions of this Article XVI prior to the attainment of age sixty-two (62) shall be paid an amount equal to the estimated monthly Social Security benefits such Eligible Employee would become entitled to beginning at age sixty-five (65) based upon the Social Security Act in effect at the time of such Employee's retirement and such Eligible Employee's estimated Social Security earnings while employed with the Employer or an Affiliated Employer through his Early Retirement Date. This "Social Security Bridge Benefit" shall be paid monthly commencing on the Employee's Early Retirement Date (determined in accordance with Section 16.2 above) and shall continue to be paid on the first day of each month thereafter up to and including the first day of the month in which such Eligible Employee attains age sixty-two (62). (c) Provisional Payees. The benefits described in this Section 16.3 shall be subject to and administered in accordance with the provisions of Article VII of the Plan; provided, however, that in the event of the Eligible Employee's death prior to his sixty-second (62nd) birthday, one hundred percent (100%) of the monthly Social Security Bridge Benefit to which the Eligible Employee is entitled shall continue to be paid to his Provisional Payee through the first day of the month in which such Eligible Employee would have attained age sixty-two (62) had the Eligible Employee not died. 16.4 Restoration to service. Notwithstanding any provisions of Section 5.10 to the contrary, in the event an Eligible Employee who retires in accordance with the provisions of this Article XVI subsequently returns to the service of the Employer or any Affiliated Employer, all benefits payable to such Eligible Employee under this Article XVI shall cease and upon such Eligible Employee's subsequent retirement, the Eligible Employee shall receive the Actuarial Equivalent of the greater of: 86 (a) the Retirement Income the Eligible Employee would receive under the Plan based upon his Accredited Service and age at the date of his subsequent retirement, reduced by the Actuarial Equivalent of any Retirement Income, including any amount payable under Section 16.3(b), which the Employee received prior to his reemployment; or (b) the Retirement Income the Eligible Employee was actually receiving prior to his reemployment plus any amounts payable under Section 16.3(b). IN WITNESS WHEREOF, the Board of Directors of Mississippi Power Company through its authorized officers has adopted this amendment and restatement of the Pension Plan for Employees of Mississippi Power Company this day of , , to be effective January 1, 1989. MISSISSIPPI POWER COMPANY By: Its: ATTEST: By: Its: [CORPORATE SEAL] [adamscl] h:\wpdocs\mtd\mpc\mpc-pens.94 87 EX-10.(E)20 23 EXHIBIT 10(E)20 Exhibit 10(e)20 SUPPLEMENTAL BENEFIT PLAN FOR MISSISSIPPI POWER COMPANY SUPPLEMENTAL BENEFIT PLAN FOR MISSISSIPPI POWER COMPANY Page ARTICLE I - PURPOSE AND ADOPTION OF PLAN . . . . . . . 1 1.1 Adoption . . . . . . . . . . . . . . . . 1 1.2 Purpose. . . . . . . . . . . . . . . . . 1 ARTICLE II - DEFINITIONS . . . . . . . . . . . . . . . 2 2.1 Account. . . . . . . . . . . . . . . . . 2 2.2 Affiliated Employer. . . . . . . . . . . 2 2.3 Beneficiary. . . . . . . . . . . . . . . 2 2.4 Board of Directors . . . . . . . . . . . 2 2.5 Code . . . . . . . . . . . . . . . . . . 2 2.6 Common Stock . . . . . . . . . . . . . . 2 2.7 Company. . . . . . . . . . . . . . . . . 2 2.8 Deferred Compensation Plan . . . . . . . 2 2.9 Effective Date . . . . . . . . . . . . . 3 2.10 Employee . . . . . . . . . . . . . . . . 3 2.11 ESOP . . . . . . . . . . . . . . . . . . 3 2.12 Non Pension Benefit. . . . . . . . . . . 3 2.13 Participant. . . . . . . . . . . . . . . 3 2.14 Pension Benefit. . . . . . . . . . . . . 3 -i- 2.15 Pension Plan . . . . . . . . . . . . . . 4 2.16 Plan . . . . . . . . . . . . . . . . . . 4 2.17 Plan Year. . . . . . . . . . . . . . . . 4 2.18 Savings Plan. . . . . . . . . . . . . . 4 ARTICLE III - ADMINISTRATION OF PLAN . . . . . . . . . 4 3.1 Administrator. . . . . . . . . . . . . . 4 3.2 Powers . . . . . . . . . . . . . . . . . 5 3.3 Duties of the Board of Directors. . . . . . . . . . . . . . . 5 3.4 Indemnification. . . . . . . . . . . . . 7 ARTICLE IV - ELIGIBILITY . . . . . . . . . . . . . . . 7 4.1 Eligibility Requirements . . . . . . . . 7 4.2 Determination of Eligibility . . . . . . 8 ARTICLE V - BENEFITS . . . . . . . . . . . . . . . . . 8 5.1 Pension Benefit. . . . . . . . . . . . . 8 5.2 Non Pension Benefit. . . . . . . . . . . 10 5.3 Distribution of Benefits . . . . . . . . 13 5.4 Funding of Benefits. . . . . . . . . . . 16 5.5 Withholding. . . . . . . . . . . . . . . 16 -ii- ARTICLE VI - MISCELLANEOUS . . . . . . . . . . . . . . 17 6.1 Assignment . . . . . . . . . . . . . . . 17 6.2 Amendment and Termination. . . . . . . . 17 6.3 No Guarantee of Employment . . . . . . . 18 6.4 Construction . . . . . . . . . . . . . . 18 -iii- SUPPLEMENTAL BENEFIT PLAN FOR MISSISSIPPI POWER COMPANY ARTICLE I - PURPOSE AND ADOPTION OF PLAN 1.1 Adoption: Mississippi Power Company hereby adopt and establish the Supplemental Benefit Plan for Mississippi Power Company. 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 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 Company under the Pension Plan for Employees of Mississippi Power Company, the Employee Savings Plan for The Southern Company System, and the Employee Stock Ownership Plan of The Southern Company System, as a result of the limitations set forth under Sections 401(a)(17), 402(g), and 415 of the Internal Revenue Code of 1986, as amended from time to time. -1- ARTICLE II DEFINITIONS 2.1 "Account" shall mean the account or accounts established and maintained by a Company 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 "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. 2.3 "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 "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. 2.6 "Common Stock" shall mean common stock of The Southern Company. 2.7 "Company" shall mean Mississippi Power Company. 2.8 "Deferred Compensation Plan" shall mean the Deferred Compensation Plan for The Southern Electric System, as amended -2- from time to time, following its adoption by the Board of Directors. 2.9 "Effective Date" shall mean January 1, 1983. The Effective Date of this amendment and restatement shall mean January 1, 1988. 2.10 "Employee" shall mean any person who is currently employed by the Company. 2.11 "ESOP" shall mean the Employee Stock Ownership Plan of The Southern Company System, as amended from time to time. 2.12 "Non Pension Benefit" shall mean the benefit described in Section 5.2. 2.13 "Participant" shall mean an Employee or former Employee of a Company who is eligible to receive benefits provided by the Plan. 2.14 "Pension Benefit" shall mean the benefit described in Section 5.1. 2.15 "Pension Plan" shall mean the defined benefit pension plan maintained by the Company or an Affiliated Employer, as amended from time to time. 2.16 "Plan" shall mean the Supplemental Benefit Plan for Mississippi Power Company, as amended from time to time. 2.17 "Plan Year" shall mean the calendar year. -3- 2.18 "Savings Plan" shall mean the Employee Savings Plan for The Southern Company System, as amended from time to time. Where the context requires, the definitions of all terms set forth in the Pension Plan, the ESOP, 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 Board of Directors. 3.2 Powers. The Board of Directors 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 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 -4- 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 Board of Directors. (a) The Board of Directors is responsible for the daily administration of the Plan. It may appoint other persons or entities to perform any of its fiduciary functions. The Board of Directors 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 Board of Directors 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 Board of Directors 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. -5- (c) The Board of Directors 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 Board of Directors 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 Board of Directors 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 their own expense sufficient liability insurance for the Board of Directors to cover any and all claims, losses, damages and expenses arising from any action or failure to act in -6- connection with the execution of the duties as Board of Directors. ARTICLE IV ELIGIBILITY 4.1 Eligibility Requirements. All Employees (a) whose benefits under the Pension Plan of the Company are limited by the limitations set forth in Sections 401(a)(17) and 415 of the Code, (b) for whom contributions by the Company to the Savings Plan are limited by the limitations set forth in Sections 401(a)(17), 401(k), 401(m), 402(g) and 415 of the Code, or (c) for whom contributions by the Company to the ESOP are limited by the limitations set forth in Sections 401(a)(17) and 415 of the Code, shall be eligible to receive benefits under the Plan. 4.2 Determination of Eligibility. The Board of Directors 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 Board of Directors shall be authorized to rescind the eligibility of any Participant if necessary to insure that the Plan is maintained primarily for the purpose of providing deferred compensation to a select group of management or highly -7- compensated employees under the Employee Retirement Income Security Act of 1974, as amended. ARTICLE V BENEFITS 5.1 Pension Benefit. (a) If a Participant has Accredited Service with respect to the Pension Plan of the Company, but not with respect to the Pension Plan of any Affiliated Employer, he shall be entitled to a Pension Benefit equal to that portion of his Retirement Income under the Pension Plan of the Company which is not payable under such Pension Plan as a result of the limitations imposed by Sections 401(a)(17), 415(b), and 415(e) of the Code. (b) If a Participant has Accredited Service with respect to the Pension Plan of the Company and with respect to the Pension Plan of one or more Affiliated Employers, his Pension Benefit payable by the Company, and any Affiliated Employer(s) shall be equal to that portion of his combined Retirement Income under each Pension Plan which is not payable under any of such Pension Plans as a result of the limitations described by Sections 401(a)(17), 415(b), and 415(e) of the Code, multiplied by a fraction, the sum of the individual fractions not to exceed -8- one (1), the numerator of which is his years of Accredited Service under the Pension Plan of the Company or any Affiliated Employer(s) and the denominator which is his total years of Accredited Service under the Pension Plans of the Company and any Affiliated Employer(s). (c) 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 of the Company in calculating his Retirement Income, without regard to the limitation of Section 401(a)(17) of Code, but excluding any portion of his Compensation he may have elected to defer under the Deferred Compensation Plan. (d) To the extent that a Participant's Retirement Income under a Pension Plan is recalculated as a result of an amendment to such 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. -9- 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 by the Company, 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 the 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), 415(c), and 415(e) of the Code and (2) to the ESOP on behalf of the Participant as a result of the limitations imposed by Sections 401(a)(17), 415(c), and 415(e) 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 and ESOP, without regard to the limitations of Section 401(a)(17) or Section 402(g) of the Code, but excluding any portion of his Compensation he may have elected to defer under the Deferred Compensation Plan. -10- (c) All amounts so credited to the Account of the Participant shall be deemed to be invested in the Common Stock at the same time that such amounts would have been so invested if they had been contributed by the Company to the Savings Plan or the ESOP, as the case may be. In addition, such Account shall be credited with respect to shares of Common Stock allocated to the Participant's Account as follows: (1) In the case of cash dividends, such additional shares as could be purchased 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 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. -11- (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 Company 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 each Account established for the benefit of the Participant by the Company. Notwithstanding, in the sole discretion of the Board of Directors 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. 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. -12- 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 and in the same manner as the Participant's Retirement Income under the Pension Plan. The Beneficiary of a Participant's Pension Benefit shall be the same as the beneficiary of the Participant's Retirement Income under the Pension Plan. (b) When a Participant terminates his employment with the Company, said Participant shall be entitled to receive the market value of any shares of Common Stock (and fractions thereof) reflected in any Account maintained by the Company for his benefit under the Plan 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 close of the calendar quarter in which his termination of employment occurs, or as soon as reasonably practicable thereafter. The transfer by a Participant between companies in the Southern electric system shall not be deemed to be a termination of employment with the Company. No portion of a Participant's Account shall be distributed in Common Stock. -13- (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 close of the calendar quarter in which his termination of employment occurs, or as soon as reasonably practicable thereafter, and shall be an amount equal to the balance in the Participant's Account 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 divided by the number of the remaining annual payments and shall be due on the anniversary of the preceding payment date. No portion of a Participant's Account shall be distributed in Common Stock. (d) Upon the death of a Participant, or a former Participant prior to the payment of all amounts credited to said Participant's Account, the unpaid balance shall be paid in the sole discretion of the Board of Directors (1) in a lump sum to the designated Beneficiary of a Participant or former Participant within sixty (60) days following the close of the calendar quarter in which the Board of Directors 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 -14- 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 estate of the Participant or former Participant. No portion of a Participant's Account shall be distributed in Common Stock. (e) Upon the total disability of a Participant or former Participant, as determined by the Social Security Administration, the unpaid balance of his Account shall be paid in the sole discretion of the Board of Directors (1) in a lump sum to the Participant or former Participant, or his legal representative within sixty (60) days following the notification of the Board of Directors of the determination of 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. No portion of a Participant's Account shall be distributed in Common Stock. (f) The Board of Directors in its sole discretion upon application made by the Participant, a designated Beneficiary, or their legal representative, may determine to -15- 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 Funding of Benefits. The Company maintaining an Account for the benefit of a Participant shall not reserve or otherwise set aside funds for the payment of its obligations under the Plan, and such obligations shall be paid solely from the general assets of the Company. 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 at all times remain subject to the claims of the creditors of the Company. 5.5 Withholding. There shall be deducted from the payment of any Pension Benefit or Non Pension 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. -16- ARTICLE VI MISCELLANEOUS 6.1 Assignment. Neither the Participant, his Beneficiary, or 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. 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 the Company and a Participant, nor shall it limit the right of the Company to suspend, terminate, alter, modify, whether or not for cause, the employment relationship between the Company and a Participant. -17- 6.4 Construction. This Plan shall be construed in accordance with and governed by the laws of the State of Mississippi, to the extent such laws are not otherwise superseded by the laws of the United States. IN WITNESS WHEREOF, the Plan has been executed by duly authorized officers of Mississippi Power Company, pursuant to resolutions of the Board of Directors of the Mississippi Power Company, this day of , . MISSISSIPPI POWER COMPANY (CORPORATE SEAL) By: Attest: [adamscl] h:\wpdocs\mtd\mpc\sup-ben.pln -18- EX-10.(F)15 24 EXHIBIT 10(F)15 Exhibit 10(f)15 EMPLOYEES' RETIREMENT PLAN OF SAVANNAH ELECTRIC AND POWER COMPANY As Amended and Restated Effective January 1, 1989 EMPLOYEES' RETIREMENT PLAN OF SAVANNAH ELECTRIC AND POWER COMPANY As Amended To and Including TABLE OF CONTENTS Page No. ARTICLE 1 - DEFINITIONS . . . . . . . . . . . . . . . . . . . 1 ARTICLE 2 - RETIREMENT ANNUITIES PURCHASED UNDER GROUP ANNUITY CONTRACT AND CHANGE OF FUNDING . . . 9 ARTICLE 3 - MEMBERSHIP . . . . . . . . . . . . . . . . . . . 10 ARTICLE 4 - SERVICE . . . . . . . . . . . . . . . . . . . . . 12 4.01 Continuous Service . . . . . . . . . . . . . . 12 4.02 Credited Service . . . . . . . . . . . . . . . 12 4.03 Breaks in Service . . . . . . . . . . . . . . 14 4.04 Disabled Members . . . . . . . . . . . . . . . 15 4.05 Service with Certain Other Employers . . . . . 15 ARTICLE 5 - BENEFITS . . . . . . . . . . . . . . . . . . . . 17 5.01 Normal and Late Retirement . . . . . . . . . . 17 5.02 Early Retirement . . . . . . . . . . . . . . . 19 5.03 Termination of Employment . . . . . . . . . . 20 5.04 Adjustment of Retirement Allowance for Social Security Benefits . . . . . . . . . . . . . . 21 5.05 Restoration of Retired Member or Former Member to Service . . . . . . . . . . . . . . 21 5.06 Additional Monthly Benefit . . . . . . . . . . 24 5.07 Written Application . . . . . . . . . . . . . 25 ARTICLE 6 - LIMITATIONS ON BENEFITS . . . . . . . . . . . . . 26 6.01 Maximum Benefits . . . . . . . . . . . . . . . 26 ARTICLE 7 - DISTRIBUTION OF BENEFITS . . . . . . . . . . . . 32 7.01 Surviving Spouse Benefit . . . . . . . . . . . 32 7.02 Qualified Joint and Survivor Annuity . . . . . 32 7.03 Qualified Preretirement Survivor Annuity . . . 32 7.04 Definitions . . . . . . . . . . . . . . . . . 36 7.05 Notice Requirements . . . . . . . . . . . . . 37 i 7.06 Transitional Rules . . . . . . . . . . . . . . 38 7.07 Alternative Forms of Distribution . . . . . . 38 7.08 Cash-Out of Annuity Benefits . . . . . . . . . 39 7.09 Commencement of Benefits . . . . . . . . . . . 40 7.10 TEFRA 242(b)(2) Transitional Rules . . . . . . 42 7.11 Requirement for Direct Rollovers . . . . . . . 42 ARTICLE 8 - CONTRIBUTIONS . . . . . . . . . . . . . . . . . . 44 ARTICLE 9 - ADMINISTRATION OF THE PLAN . . . . . . . . . . . 45 ARTICLE 10 - MANAGEMENT OF FUNDS . . . . . . . . . . . . . . 48 ARTICLE 11 - CERTAIN RIGHTS AND LIMITATIONS . . . . . . . . . 49 ARTICLE 12 - NON-ALIENATION OF BENEFITS . . . . . . . . . . . 52 ARTICLE 13 - AMENDMENTS . . . . . . . . . . . . . . . . . . . 53 ARTICLE 14 - CONSTRUCTION . . . . . . . . . . . . . . . . . . 54 ARTICLE 15 - TOP-HEAVY PROVISIONS . . . . . . . . . . . . . . 55 15.01 Top-Heavy Plan Requirements . . . . . . . . . 55 15.02 Determination of Top-Heavy Status . . . . . . 55 15.03 Minimum Retirement Income for Top-Heavy Plan Years . . . . . . . . . . . . . . . . . . . . 60 15.04 Vesting Requirements for Top-Heavy Plan Years . . . . . . . . . . . . . . . . . . . . 61 15.05 Adjustments to Maximum Benefits for Top-Heavy Plans . . . . . . . . . . . . . . . . . . . . 62 ARTICLE 16 - EARLY RETIREMENT INCENTIVE PROGRAM . . . . . . . 64 16.01 Eligibility . . . . . . . . . . . . . . . . . 64 16.02 Benefits . . . . . . . . . . . . . . . . . . . 64 16.03 Restoration to Service . . . . . . . . . . . . 65 ARTICLE 17 - RETIREE MEDICAL BENEFITS . . . . . . . . . . . . 66 17.01 Provision of Medical Benefits . . . . . . . . 66 17.02 Eligibility for Medical Benefits . . . . . . . 66 17.03 Contributions to the Medical Benefits Account . . . . . . . . . . . . . . . . . . . 67 17.04 Medical Benefits Covered by the System . . . . 68 17.05 Amendment and Termination of Medical Benefits . . . . . . . . . . . . . . . . . . . 69 17.06 Definitions . . . . . . . . . . . . . . . . . 69 ii The Employees' Retirement Plan of Savannah Electric and Power Company, as amended and restated effective January 1, 1989, (the "Plan") is a continuation and modification of the Retirement Annuity Plan for Employees of Savannah Electric and Power Company effective as of April 1, 1947, which was last amended and restated effective January 1, 1986. The Plan, except as specifically provided herein and hereinafter set forth, is designed to provide a retirement Allowance to eligible employees and their Spouses following the termination of their employment with Savannah Electric and Power Company (the "Company"). It is intended that the Plan and the Employees' Retirement Plan of Savannah Electric and Power Company Trust (the "Trust"), meet all the requirements of the Internal Revenue Code of 1986 (the "Code"), and that the Plan and Trust shall be interpreted, wherever possible, to comply with the terms of the Code and the Employee Retirement Income Security Act of 1974 ("ERISA"), and all formal regulations and rulings issued under the Code and ERISA. ARTICLE 1 - DEFINITIONS i 1.01 "Accrued Benefit" shall mean the amount of retirement Allowance computed at a specific date, in accordance with Article 5, based on Compensation and Credited Service to such date. 1.02 "Affiliated Company" shall mean any company not participating in the Plan which is a Member of a controlled group of corporations (determined under Code Section 1563(a) without regard to Sections 1563(a)(4) and (e)(3)(C)) which also includes as a member the Company, except that with respect to Section 6.01 "more than 50 percent" shall be substituted for "at least 80 percent" where it appears in Code Section 1563(a)(1). The term "Affiliated Company" shall also include any trade or business under common control (as defined in Code Section 414(c)) with the Company, or a Member of an affiliated service group (as defined in Code Section 414(m)) which includes the Company or any other entity required to be aggregated with the Company pursuant to regulations under Code Section 414(o). 1.03 "Allowance" shall mean payments under the Plan payable as provided in Article 5 or Article 7. 1.04 "Annuity Starting Date" shall mean the first day of the first period for which an amount is paid as an annuity or in any other form. 1.05 "Board of Directors" shall mean the Board of Directors of Savannah Electric and Power Company or the board of directors of any successor. 1 1.06 "Break in Service" shall mean a period which constitutes a break in an Employee's Continuous Service, as provided in Section 4.03. 1.07 "Code" means the Internal Revenue Code of 1986, as amended from time to time. 1.08 "Company" shall mean Savannah Electric and Power Company or any successor by merger, purchase or otherwise, with respect to its employees; or any other company participating in the Plan as provided in Section 4.05, with respect to its employees. 1.09 "Compensation" shall mean the actual remuneration paid to an employee for services rendered to the Company, determined prior to any pre-tax contributions under a "qualified cash or deferred arrangement" (as defined under Code Section 401(k) and its applicable regulations) or under a "cafeteria plan" (as defined under Code Section 125 and its applicable regulations), including payments made under any short term disability plan maintained by the Company which shall equal the rate of Compensation of the Member at the time of disability, but excluding any bonuses, pay for overtime, compensation deferred under any deferred compensation plan or arrangement, separation pay, imputed income and relocation pay, and excluding the Company's cost for any public or private employee benefit plan, including this Plan, under rules uniformly applicable to all employees similarly situated, provided further, effective as of January 1, 1989, any workers' compensation received by an employee shall be excluded from "compensation" for purposes of determining his benefit under the Plan. For purposes of this Section 1.09, actual remuneration means regular straight time pay, straight time differential pay, substitution straight time pay, substitution flat rate pay, earned vacation pay and the difference between military pay and regular straight time pay a Member would have been paid if such Member had been working for the Company. Notwithstanding the foregoing, effective as of January 1, 1989, compensation taken into account for any purpose under the Plan shall not exceed $200,000 per year, provided that the imposition of the limit on compensation shall not reduce a Member's Accrued Benefit below the amount of Accrued Benefit determined as of December 31, 1988. As of January 1 of each calendar year on and after January 1, 1990, the applicable limitation as determined by the Commissioner 2 of the Internal Revenue Service for that calendar year shall become effective as the maximum compensation to be taken into account for Plan purposes for that calendar year in lieu of the $200,000 limitation set forth in the preceding sentence. In addition to other applicable limitations set forth in the Plan, and notwithstanding any other provision of the Plan to the contrary, for Plan Years beginning on or after January 1, 1994, the annual compensation of each Employee taken into account under the Plan shall not exceed the Omnibus Budget Reconciliation Act of 1993 ("OBRA `93") annual compensation limit. The OBRA `93 annual compensation limit is $150,000, as adjusted by the Commissioner for increases in the cost of living in accordance with Code Section 401(a)(17)(B). The cost of living adjustment in effect for a calendar year applies to any period, not exceeding 12 months, over which compensation is determined (determination period) beginning in such calendar year. If a determination period consists of fewer than 12 months, the OBRA `93 annual compensation limit will be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is 12. For Plan Years beginning on or after January 1, 1994, any reference in this Plan to the limitation under Code Section 401(a)(17) shall mean the OBRA `93 annual compensation limit set forth in this provision. If compensation for any prior determination period is taken into account in determining an Employee's benefits accruing in the current Plan Year, the compensation for that prior determination period is subject to the OBRA `93 annual compensation limit in effect for that prior determination period. For this purpose, for determination periods beginning on or after January 1, 1994, the OBRA `93 annual compensation limit is $150,000. For purposes of this Section 1.09, the rules of Code Section 414(q) shall apply in determining the adjusted $150,000 limitation above, except in applying such rules, the term "family" shall include only the Spouse of the Employee and any lineal descendants of the Employee who have not attained age nineteen (19) before the close of the Plan Year. If as a result of the application of such rules, the adjusted $150,000 limitation is exceeded, then the limitation shall be prorated among the affected individuals in proportion to each individual's compensation determined under this 3 Section 1.09 prior to the application of this limitation. 1.10 Effective January 1, 1989, "Computation Year" means the calendar year. Prior to January 1, 1989, "Computation Year" meant the 12-month period from April 1 to March 31. 1.11 "Continuous Service" shall mean service recognized for purposes of determining eligibility for membership in the Plan and eligibility for certain benefits under the Plan, determined as provided in Section 4.01. 1.12 "Credited Service" shall mean service recognized for purposes of computing the amount of any benefit under the Plan, determined as provided in Section 4.02. 1.13 "Effective Date of the Plan" as amended, shall mean April 1, 1959. The "Amendment and Restatement Effective Date" shall mean January 1, 1989. 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. 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 Section 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 Section 414(n)(5)(C)(ii), the term Employee shall not include those Leased Employees covered by a plan described in Code Section 414(n)(5). 1.15 "Equivalent Actuarial Value" shall mean equivalent value when computed at 6 per centum per annum on the basis of the 1971 Group Annuity Mortality Table (Male) for Members, and 1971 Group Annuity Mortality Table (Female) for contingent annuitants under optional forms of Allowances. 1.16 "Fund" shall mean the trust fund established under the trust agreement with the Trustee from which the amounts of retirement Allowances are to be paid. 4 1.17 "Group Annuity Contract" shall mean Group Annuity Contract No. AC 766 issued by The Equitable Life Assurance Society of the United States to Savannah Electric and Power Company. 1.18 "Hour of Service" means, with respect to any applicable computation period: (a) each hour for which the Employee is paid or entitled to payment for the performance of duties for the Company or an Affiliated Company; (b) each hour for which an Employee is paid or entitled to payment by the Company or an Affiliated Company on account of a period during which no duties are performed, whether or not the employment relationship has terminated, due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence, but not more than 501 hours for any single continuous period; (c) each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Company or an Affiliated Company, excluding any hour credited under (a) or (b), which shall be credited to the computation period or periods to which the award, agreement or payment pertains, rather than to the computation period in which the award, agreement or payment is made; and (d) solely for purposes of determining whether an Employee has incurred a Break in Service under the Plan, each hour for which an Employee would normally be credited under Paragraphs (a) or (b) above during a period of Parental Leave but not more than 501 hours for any single continuous period. However, the number of hours credited to an Employee under this Paragraph (d) during the computation period in which the Parental Leave began, when added to the hours credited to an Employee under Paragraphs (a) through (c) above during that computation period, shall not exceed 501. If the number of hours credited under this Paragraph (d) for the computation period in which the Parental Leave began is zero, the provisions of this Paragraph (d) shall apply as though the Parental Leave began in the immediately following computation period. 5 No hours shall be credited on account of any period during which the Employee performs no duties and receives payment solely for the purpose of complying with unemployment compensation, workers' compensation or disability insurance laws. The Hours of Service credited shall be determined as required by Title 29 of the Code of Federal Regulations, Sections 2530.200b- 2(b) and (c). 1.19 "Leased Employee" means any person as so defined in Code Section 414(n). In the case of a person who is a Leased Employee immediately before or after a period of service as an Employee, the entire period during which he has performed services for the Company as a Leased Employee shall be counted as Continuous Service for purposes of determining eligibility for participation and vesting, to the extent such service would be recognized with respect to other employees under the Plan; however, he shall not, by reason of that status, be eligible to become a Member of the Plan. 1.20 "Member" shall mean any person included in the membership of the Plan as provided in Article 3. 1.21 "Normal Retirement Date" shall mean the first day of the calendar month next following the 65th anniversary of an Employee's birth. 1.22 "Parental Leave" means a period commencing on or after January 1, 1985, in which the Employee is absent from work because of the pregnancy of the Employee, the birth of a child of the Employee or the placement of a child with the Employee in connection with adoption proceedings, or for purposes of caring for that child for a period beginning immediately following such birth or placement. 1.23 "Plan" shall mean Employees' Retirement Plan of Savannah Electric and Power Company as previously described in the Group Annuity Contract and as described and amended herein or as hereafter amended. 1.24 "Plan Year" shall mean the 12-month period from January 1 to December 31. 1.25 "Qualified Joint and Survivor Annuity" shall mean an annuity of Equivalent Actuarial Value to the Allowance otherwise payable, providing for a reduced Allowance payable to the Member during his life, and after his death providing that one-half of that reduced Allowance will continue to be paid during the life of, and to, 6 the spouse to whom he was married at his Annuity Starting Date. 1.26 "Qualified Preretirement Survivor Annuity" shall mean an annuity for the life of a Surviving Spouse calculated in accordance with Section 7.03. 1.27 "Retirement Annuity" shall mean the amount of the annuity purchased under the Group Annuity Contract as provided by that Contract at actual retirement date, at or after the attainment of age 65, prior to any conversion to a contingent annuity. 1.28 "Retirement Committee" shall mean the administrator of the Plan as provided in Article 9. The Administrative Benefits Committee of the Company shall comprise the Retirement Committee for purposes of administration of the Plan. 1.29 "Social Security Benefit" shall mean the annual primary old-age insurance benefit which the Member is entitled to receive under Title II of the Social Security Act as in effect on the date he retires or otherwise terminates employment, or would be entitled to receive if he did not disqualify himself by receiving the same by entering into covered employment or otherwise. In the case of early retirement, the Social Security Benefit shall be computed on the assumption that he will receive no income after early retirement and before age 65 which would be treated as wages for purposes of the Social Security Act. In the case of vested retirement, the Social Security Benefit shall be computed on the assumption that he will continue to receive compensation until age 65 which would be treated as wages for purposes of the Social Security Act at the same rate as in effect on his termination of service. In computing any Social Security Benefit, no wage index adjustment or cost-of-living adjustment shall be assumed with respect to any period after the end of the calendar year before the year in which the Member retires or terminates service. The Member's Social Security Benefit shall be determined on the basis of the Employee's actual earnings, where available from Company records, in conjunction with a salary increase assumption based on the actual yearly change in national average wages as determined by the Social Security Administration for all other years prior to retirement or other termination of employment with the Company where actual earnings are not so available. If, within three months after the later of the date of retirement or other termination of employment or the date on which a Member is notified of the Allowance to which he is entitled, the Member provides documentation 7 as to his actual earnings history with respect to those prior years, his Allowance shall be redetermined using the actual earnings history, if the recalculation would result in an increased benefit. Any adjustment to Allowance payments shall be made retroactively. 1.30 The term "Spouse or Surviving Spouse" shall mean the spouse or surviving spouse of a Member, provided that a former Spouse will be treated as the spouse or surviving spouse and a current spouse will not be treated as the spouse or surviving spouse to the extent provided under a qualified domestic relations order as described in Code Section 414(p). 1.31 "Suspendible Month" means a month in which the Member completes at least 40 hours of service with the Company. 1.32 "Trustee" shall mean the trustee or trustees by whom the funds of the Plan are held as provided in Article 10. 8 ARTICLE 2 - RETIREMENT ANNUITIES PURCHASED UNDER GROUP ANNUITY CONTRACT AND CHANGE OF FUNDING ii All Retirement Annuities payable under the Plan as in effect prior to April 1, 1959 with respect to service thereunder prior to such date, have been purchased from The Equitable Life Assurance Society of the United States pursuant to the terms of Group Annuity Contract No. AC 766. Effective as of April 1, 1959, the purchase of Retirement Annuities under the Group Annuity Contract was discontinued in accordance with the terms and provisions of such Contract. Subject to the provisions of the Plan, with respect to service under the Plan from and after April 1, 1959, and as a supplement to the Retirement Annuities purchased under the Group Annuity Contract for service prior to April 1, 1959, retirement Allowances will be provided by means of contributions to the Fund by the Company. Such retirement Allowances will be in addition to Retirement Annuities purchased as described in the preceding paragraph with respect to services prior to April 1, 1959. The rights of Members of the Retirement Annuities purchased for them under the Group Annuity Contract with respect to service prior to April 1, 1959 will not be adversely affected by the discontinuance of such purchases and such Retirement Annuities will be payable by The Equitable Life Assurance Society of the United States in accordance with the terms, conditions and provisions of the Group Annuity Contract. 9 ARTICLE 3 - MEMBERSHIP iii 3.01 Every Employee in Company service on January 1, 1985, who was a Member on December 31, 1984, shall continue to be a Member of the Plan on and after January 1, 1985, provided he remains eligible under the terms of the Plan. 3.02 Every other Employee on January 1, 1985, and every person becoming an Employee after that date shall become a Member on the first day of the calendar month, beginning with January 1, 1985, coincident with or next following (i) the date he completes one year of Continuous Service or (ii) the 21st anniversary of his birth, whichever is later. For this purpose, a year of Continuous Service shall be a 12-month period during which an Employee completes at least 1,000 hours commencing with the date of employment, or if in such period he has not completed at least 1,000 hours, commencing with the first day of the Computation Year after the date of his employment. If an Employee has incurred a one-year Break in Service prior to becoming eligible for membership, any Continuous Service prior the break shall be disregarded in determining eligibility for membership unless he shall complete at least one year of Continuous Service following the Break in Service; provided that an Employee's Continuous Service prior to the break shall not be recognized for purposes of determining his eligibility for membership if his consecutive number of one-year Breaks in Service equal or exceed the greater of (i) five or (ii) his aggregate years of Continuous Service prior to the Break in Service. 3.03 An Employee who is represented by a collective bargaining agent may participate in the Plan if the representative(s) of his bargaining unit and the Compa- ny mutually agree to participation in the Plan by the members of his bargaining unit. 3.04 An Employee's membership in the Plan shall terminate only if he dies or his employment with the Company terminates other than by reason of retirement or termination with vested benefits under the Plan. Membership shall be continued during a period while on leave of absence from service without pay approved by the Company, but no benefit credit shall be allowed with respect to such period unless credit is allowed for service in the Armed Forces of the United States as provided in Section 4.03(c). Membership shall be continued during a period of disability for which Continuous Service is granted as provided in Section 4.04. 10 3.05 In the event a Member ceases to participate because he enters an ineligible class under Article III and becomes ineligible to participate, but has not incurred a break in service under Section 4.03(a), such Employee will participate as of the first day of the month coinciding with or next following his return to an eligible class of Employees. If such Employee incurs a break in service under Section 4.03(a), eligibility will be determined under Section 3.02. In the event an Employee who is not in an eligible class to participate enters an eligible class, such Employee will participate as of the first day of the month coinciding with or next following his employment if he has satisfied Section 3.02 and would have otherwise previously been eligible to participate in the Plan. 3.06 Subject to Section 3.05, if an Employee's membership in the Plan terminates and he again becomes an Employee, he shall be considered a new Employee for all purposes of the Plan, except as provided in Section 5.05. 3.07 Notwithstanding any other provision of this Article 3, Leased Employees shall not be eligible to participate. In addition, temporary employees as defined in Section 1.14 of the Plan who were not participating in the Plan as temporary employees prior to October 13, 1994, shall not be eligible to participate in the Plan. 3.08 An Employee may, subject to the approval of the Retirement Committee, elect voluntarily not to participate in the Plan. The election not to participate must be communicated in writing to the Retirement Committee effective on an Employee's date of hire or anniversary thereof. 11 ARTICLE 4 - SERVICE iv 4.01 Continuous Service (a) Effective January 1, 1988, except as hereinafter provided, all service performed as an Employee of the Company or an Affiliated Company shall be Continuous Service for Plan purposes. If an Employee completes at least 1,000 Hours of Service in any Computation Year, he shall receive credit for a full year of Continuous Service. If an Employee completes fewer than 1,000 Hours of Service in any Computation Year, no Continuous Service shall be recognized for such Computation Year. (b) Any Employee employed by the Company on or after January 1, 1989 shall, due to the change in the definition of Computation Year, receive two years of Continuous Service for vesting purposes for the Computation Years (1) beginning April 1, 1988 and ending on March 31, 1989; and (2) beginning January 1, 1989 and ending on December 31, 1989, provided that the Employee completes 1,000 Hours of Service in each of those two Computation Years. (c) Any person employed by the Company on March 31, 1976 shall receive Continuous Service for service performed before that date equal to the Credited Service recognized through March 31, 1976 under the Plan as in effect on that date. However, if such a person became a Member after April 1, 1959, Continuous Service shall also include his service after April 1, 1959, and before his date of membership. 4.02 Credited Service (a) Effective January 1, 1989, Credited Service shall be calculated based on Periods of Service. A "Period of Service" shall mean twelve (12) month periods of employment as a Member, or fractions thereof, running from the date that a Member commences participation in the Plan and terminates on his first severance from service date. A severance from service shall occur as of the earlier of the date a Member quits, retires, is discharged or dies, or the first anniversary of absence for any other reason. Thereafter, subject to 4.03(b), if a Member becomes reemployed, his Period of Service for each subsequent period shall 12 commence with the reemployment commencement date, which is the first date following a one year period of severance on which a Member performs an Hour of Service and shall terminate on his next severance from service. In the case of an Employee who transfers from a class of employees whose service is determined on the basis of Hours of Service to a class of employees whose service is determined under this Paragraph (a), such Employee shall receive credit for a Period of Service consisting of (i) a number of years equal to the number of years of service credited to the Employee before the computation period during which the transfer occurs and (ii) the greater of (1) the Period of Service that would be credited to the Employee under this Paragraph (a) during the entire computation period in which the transfer occurs or (2) the service taken into account under the Hours of Service method as of the date of the transfer. In addition, the Employee shall receive credit for Periods of Service subsequent to the transfer commencing on the day after the last day of the computation period in which the transfer occurs. In the case of an Employee who transfers from a class of employees whose service is determined pursuant to this Paragraph (a) to a class of employees whose service is determined on the basis of Hours of Service (i) the Employee shall receive credit, as of the date of transfer, for the numbers of Years of Service equal to the number of one year Periods of Service credited to the Employee as of the date of the transfer and (ii) the Employee shall receive credit in the computation period which includes the date of the transfer, for a number of Hours of Service determined by applying the equivalency set forth in 29 C.F.R. Section 2530.200b-3(e)(1)(i) to any fractional part of a year credited to the Employee under this Section as of the date of the transfer. 13 4.03 Breaks in Service (a) Effective for any Computation Year beginning on or after April 1, 1976, there shall be a Break in Service of one year for any Computation Year after the year in which a person first becomes employed during which he does not complete more than 500 Hours of Service. If an Employee terminates his service with the Company and is reemployed after incurring a Break in Service, his service before the Break in Service shall be excluded from his Continuous Service, except as provided in Section 5.05. (b) Effective for any Computation Year beginning on or after January 1, 1989, for purposes of calculating Credited Service only, there shall be a one year Period of Severance if during the 12 consecutive month period after a severance from service date, as defined in Section 4.02(a) the Employee fails to perform an Hour of Service. If an Employee terminates his service with the Company and is reemployed after incurring a one year Period of Severance, his service before the Period of Severance shall be excluded unless he thereafter completes a one year Period of Service. In the case of a non-vested member, the Period of Service accrued prior to a one year Period of Severance shall not be taken into account if at such time the consecutive Period of Severance equals or exceeds the greater of 5 or of prior Periods of Service, whether or not consecutive. (c) If an Employee shall have been absent from the service of the Company because of service in the Armed Forces of the United States and if he shall have returned to the service of the Company within 90 days either (i) after having become entitled to release from active duty in the Armed Forces or (ii) after hospitalization continuing after discharge for a period of not more than one year, such absence shall not count as a Break in Service, but instead shall be considered as Continuous Service. 14 4.04 Disabled Members If a Member is eligible for and continuously receiving disability benefits under the long-term disability plan provided by the Company, he shall continue to be a Member of the Plan and shall continue to accrue service until he retires in the same amount and manner as though he had continued in the active employment of the Company and he shall be deemed to receive Compensation during such period based upon his rate of Compensation at the time of disability. In the event that a Member no longer qualifies for benefits under the long-term disability plan before his Normal Retirement Date and he does not resume active employment with the Company, he shall be eligible to receive a vested retirement Allowance as provided in Section 5.03 or to retire on an early retirement Allowance as provided in Section 5.02, if otherwise eligible for such Allowance as of the date of such disqualification. In either case, the Allowance shall be computed on the basis of his Compensation and Credited Service at the date of such disqualification. In the event that a Member does not qualify for disability benefits under the Social Security Act, the Allowance accrued under Section 5.01(c)(i)(A) for purposes of this Section 4.04 for Credited Service during such period of nonqualification shall be increased by 5/6 per centum of the part of each year's Compensation which is not in excess of $3,600 per annum. 4.05 Service with Certain Other Employers (a) An Employee hired prior to November 9, 1989, who becomes a Member and continues as a Member without a break in membership, shall receive Continuous Service and Credited Service for all service not otherwise recognized, in the employ of another electric utility company or a company or corpora- tion furnishing advisory or consulting service to the Company, provided that such service would be recognized if it had been rendered to the Company and provided that any benefit payable under this Plan on account of such service, so recognized, shall be reduced by the amount of benefit provided under the pension or retirement plan of such other company with respect to the same period. The Company shall calculate such service based on actual employment records where available, but if such records are not available, the Company shall request that the Employee obtain information from the Social Security Administration which documents the Employee's Social Security eligible 15 compensation or from such other entity as the Company deems appropriate. Based on such documents, the Company shall calculate the Employee's service and Compensation for purposes of this Section 4.05. In the event no such documentation can be obtained, the Company shall make its best effort to estimate such service and Compensation. (b) An Employee hired on or after November 9, 1989, who becomes a Member and continues as a Member without a break in membership, shall receive Continuous Service and Credited Service for all service not otherwise recognized, in the employ of an Affiliated Company, provided that such service would be recognized if it had been rendered to the Company and provided that any benefit payable under this Plan on account of such service, so recognized shall be reduced by the amount of benefit provided under the pension or retirement plan of such other company with respect to the same period. 16 ARTICLE 5 - BENEFITS v 5.01 Normal and Late Retirement (a) The right of a Member to his normal retirement Allowance shall be non-forfeitable upon attaining age 65. A Member may retire from service on a normal retirement Allowance upon reaching his Normal Retirement Date or he may postpone his retirement and remain in service after his Normal Retirement Date. During any such deferment the Member shall be retired from service on a normal retirement Allowance on the first day of the calendar month next following receipt by the Retirement Committee of written application therefor made by the Member. (b) Subject to the provisions of Section 5.01(e), the annual normal retirement Allowance payable upon retirement on the Normal Retirement Date shall be computed pursuant to Paragraphs (c) and (d) below. The annual retirement Allowance payable upon retirement after a Member's Normal Retirement Date shall be equal to (i) the amount determined in accordance with Paragraphs (c) and (d) below, based on the Member's Credited Service and average annual Compensation as of his late retirement date or, if greater, (ii) the amount of Allowance to which the Member would have been entitled under Paragraphs (c) and (d) below as of his Normal Retirement Date increased by an amount of Equivalent Actuarial Value to the monthly payments which would have been payable with respect to each month during the postponement period which is not a Suspendible Month, with any such monthly payment amount determined as if the Member had retired as of the first day of the Plan Year during which payment would have been made or, if later, his Normal Retirement Date. (c) The normal retirement Allowance shall be computed as an annuity payable for the life of the Member and shall consist of: (i) For service credited while a Member on or after April 1, 1969, an Allowance equal to 1-1/6 per centum of the part of each year's Compensation which is not in excess of $3,600 per annum plus 2 per centum of the part of such Compensation in excess of $3,600 per annum; and 17 (ii) For service credited between the effective date of the Plan and March 31, 1969, an Allowance equal to 1 per centum of the part of each year's Compensation which is not in excess of $3,000 per annum plus 2 per centum of the part of such Compensation in excess of $3,000 per annum; and (iii) For service credited prior to the effective date of the Plan, an Allowance which, when added to his Retirement Annuity, shall be equal to 1 per centum of the part of the Member's average annual Compensation for the three calendar years (1956, 1957 and 1958) which is not in excess of $3,000 plus 1- 1/2 per centum of the part of such Compensation in excess of $3,000, multiplied by the number of years of his Credited Service to the effective date of the Plan. (d) The benefit determined in Paragraph (c) above, when added to a Member's Retirement Annuity, if any, shall not be less than: (i) 1-2/3 per centum of his average annual Compensation, multiplied by his years of Credited Service not in excess of 36 years, reduced by (ii) 1-1/2 per centum of his primary Social Security Benefit multiplied by his years of Credited Service, the product not to exceed 50 per centum of his primary Social Security Benefit, where average annual Compensation is calculated during the 36 highest consecutive months within the 120 months preceding retirement. (e) If the Member is married on his Annuity Starting Date and if he has not elected an optional form of benefit as provided in Section 7.07, the retirement Allowance shall be payable in the form of a 50% Qualified Joint and Survivor Annuity. 18 (f) Notwithstanding any other provision of the Plan, each Member;s normal retirement allowance is the greater of (i) the sum of: (A) the normal retirement allowance determined under this Section 5.01 as of December 31, 1993, plus (B) the normal retirement allowance determined under this Section 5.01 based on Credited Service and Compensation after December 31, 1993 (with Credited Service used in this paragraph (f)(i)(B) being added to the Credited Service used in paragraph (f)(i)(A) for purposes of determining whether paragraph (d)(i) 36-year limit and (d)(ii) 50 per centum offset limit have been exceeded); or (ii) the normal retirement allowance determined under this Section 5.01 as applied to all Credited Service and Compensation. 5.02 Early Retirement (a) A Member who has not reached his Normal Retirement Date but who has reached the 55th anniversary of his birth shall be retired from service on an early retirement Allowance on the first day of the calendar month next following receipt by the Retirement Committee of written application therefor made by the Member. (b) At the time of retirement the Member may elect to receive either (i) a deferred early retirement Allowance commencing on the Member's Normal Retirement Date which shall be computed as a normal retirement Allowance, in accordance with Section 5.01(b), on the basis of his Compensation and Credited Service at the time of early retirement or (ii) an immediate early retirement Allowance beginning on the first day of any month before his Normal Retirement Date which shall be computed in accordance with Sections 5.01(c) and (d) and shall be reduced by 1/12 of 5% for each month by which the date the Member's early retirement Allowance begins precedes age 62. 19 (c) If the Member is married on the date his retirement Allowance commences, the early retirement Allowance shall be computed on the same basis as in Paragraph (b) above, in accordance with Section 5.01(e). 5.03 Termination of Employment (a) A Member shall be 100% vested in, and have a non- forfeitable right to, his Accrued Benefit upon completion of five years of Continuous Service since the first day of the Computation Period in which the 18th anniversary of his birth occurs. If the Member's employment with the Company is subsequently terminated for reasons other than retirement or death, he shall be eligible for a vested Allowance upon application therefor. If a Member's employment with the Company terminates before completion of five (5) years of Continuous Service or before becoming eligible for an early retirement or normal retirement Allowance, such Member's Accrued Benefit shall be forfeited upon termination of employment subject to restoration under Section 5.05. (b) The vested Allowance shall be a deferred Allowance commencing on the former Member's Normal Retirement Date and shall be determined by computing a normal retirement Allowance, in accordance with Section 5.01, on the basis of his Compensation and Credited Service at his date of termination and the benefit formula in effect on that date. (c) Instead of deferring his Allowance to his Normal Retirement Date, the Member can elect to receive a reduced Allowance commencing on the first day of any month next following his attainment of age 55 but prior to his Normal Retirement Date. The reduction shall be 1/12 of 5% for each month by which his Annuity Starting Date precedes his Normal Retirement Date, provided that such reduction shall be made prior to the application of the maximum limitation provided under Article 6 and such reduced Allowance shall be subject to such limitation. 20 5.04 Adjustment of Retirement Allowance for Social Security Benefits When an Allowance commences prior to the attainment of age 65, the Member may elect to convert the Allowance otherwise payable to him into an Allowance of Equivalent Actuarial Value of such amount that, with his Retirement Annuity, if any, and his old-age insurance benefit under Title II of the Social Security Act, he will receive, so far as possible, the same amount each year before and after such benefit commences. 5.05 Restoration of Retired Member or Former Member to Service (a) If a Member in receipt of an Allowance is restored to service as an Employee on or after his Normal Retirement Date, the following shall apply: (i) His Allowance shall be suspended for each month during the period of restoration which is a Suspendible Month. (ii) Upon the death of the Member during the period of restoration, any Allowance that would have been payable to his surviving Spouse had he not been restored to service shall be payable or, alternatively, any payments under an optional benefit, if one has been elected and becomes effective, shall begin. (iii) Upon later retirement, payment of the Member's Allowance shall resume no later than the third month after the latest Suspendible Month during the period of restoration, and shall be adjusted, if necessary, in compliance with Title 29 of the Code of Federal Regulations, Section 2530.203-3 in a consistent and nondiscriminatory manner. (b) If a Member in receipt of an Allowance is restored to service with the Company before his Normal Retirement Date, the following shall apply: (i) His Allowance shall cease and any election of an optional benefit in effect shall be void. 21 (ii) Any Continuous and Credited Service to which he was entitled when he retired or terminated service shall be restored to him. (iii) Upon later retirement or termination, his Allowance shall be based on the benefit formula then in effect and his Compensation and Credited Service before and after the period when he was not in the service of the Company, reduced by an amount of Equivalent Actuarial Value to the benefits, if any, he received before the date of his restoration to service. (iv) The part of the Member's Allowance upon later retirement payable with respect to Credited Service rendered before his previous retirement or termination of service shall never be less than the amount of his previous Allowance modified to reflect any option in effect on his later retirement. (c) If a Member not in receipt of an Allowance or a former Member is restored to service without having had a Break in Service, his Continuous Service shall be determined as provided in Section 4.01, and, if applicable, he shall again become a Member as of his date of restoration to service. (d) If a vested Member not in receipt of an Allowance or a former Member who received a lump sum settlement in lieu of his Allowance is restored to service with the Company after having had a Break in Service, the following shall apply: (i) Upon completion of one year of Continuous Service following the Break in Service, the Continuous Service to which he was previously entitled shall be restored to him, and, if applicable, he shall again become a Member as of his date of restoration to service. (ii) If a Member has received a distribution of his Allowance and the Member is restored to service with the Company, the Member shall have the right to restore his or her Accrued Benefit to the extent forfeited upon the repayment 22 to the Plan of the full amount of the distribution plus interest, compounded annually from the date of distribution at the rate determined for purposes of Code Section 411(c)(2)(C). Such repayment must be made before the earlier of five (5) years after the first date on which the Member is subsequently reemployed by the Company, or the date the Member incurs five (5) consecutive one year Breaks in Service following the date of distribution. If an Member has been deemed to receive a distribution under the Plan, and the Member is restored to service with the Company, upon the reemployment of such Member, the Accrued Benefit will be restored to the amount of such Accrued Benefit on the date of deemed distribution. (iii) Upon later termination or retirement of a Member whose previous Credited Service has been restored under this Paragraph (d), his Allowance shall be based on the benefit formula then in effect and his Compensation and Credited Service before and after the period when he was not in the service of the Company. (e) If any other former Member is restored to service with the Company after having had a Break in Service, the following shall apply: (i) Upon completion of one year of Continuous Service following the Break in Service, he shall again become a Member as of his date of restoration to service. (ii) Upon becoming a Member in accordance with (i) above, the Continuous Service to which he was previously entitled shall be restored to him, if the total number of consecutive one-year Breaks in Service does not equal or exceed the greater of (a) five, or (b) the total number of years of his Continuous Service before the Break in Service, determined at the time of the Break in 23 Service, excluding any Continuous Service disregarded under this Paragraph (e) by reason of any earlier Break in Service. (iii) Any Credited Service to which the Member was entitled at the time of his termination of service which is included in the Continuous Service so restored shall be restored to him. (iv) Upon later termination or retirement of a Member whose previous Credited Service has been restored under this Paragraph (e), his Allowance, if any, shall be based on the benefit formula then in effect and his Compensation and Credited Service before and after the period when he was not in the service of the Company. 5.06 Additional Monthly Benefit (a) Effective June 1, 1991, in addition to other benefits provided in this Article 5, the following monthly benefits are payable as a life annuity to eligible Members as defined in Paragraph (b) below, The "additional monthly amount" is calculated as (i) a percentage of the Member's first $300 of monthly Allowance, multiplied by (ii) the number of years the Member was retired prior to January 1, 1990, with a minimum of $25.00 per month. The percentage is as follows: Years Since Retirement Percentage as of 1/1/90 Less than 5 3-3/4 5 to 10 4 10 to 15 4-1/2 15 or more 5 (b) Members eligible for the additional monthly amount are those retired Members as of June 1, 1991, who entered retired status directly from active status. 24 (c) If an adjustment of retirement Allowance for Social Security benefits option was elected pursuant to Section 5.04, the additional monthly benefit was calculated based on the Allowance before such adjustment. (d) Upon the death of a Member eligible for an additional monthly amount, such amount shall be continued to the Member's Spouse regardless of the method of distribution elected by a Member. 5.07 Written Application Each Member, before any benefit shall be payable to him or his account under the Plan, shall file with the Retirement Committee such information as it shall require to establish his rights and benefits under the Plan. 25 ARTICLE 6 - LIMITATIONS ON BENEFITS vi 6.01 Maximum Benefits (a) The maximum annual retirement Allowance payable to a Member under the Plan, when added to any retirement Allowance attributable to contributions of the Company or an Affiliated Company provided to the Member under any other qualified defined benefit plan, shall be equal to the lesser of (1) $90,000, as adjusted under Code Section 415(d), or (2) the Member's average annual remuneration during the three consecutive calendar years in his Credited Service as a Member affording the highest such average, or during all of the years in his Credited Service as a Member, if less than three years, subject to the following adjustments: (i) If the Member has not been a Member of the Plan for at least 10 years, the maximum annual retirement Allowance in clause (1) above shall be multiplied by the ratio which the number of years of his membership in the Plan bears to 10. This adjustment shall be applied separately to the amount of the Member's retirement Allowance resulting from each change in the benefit structure of the Plan, with the number of the years of membership in the Plan being measured from the effective date of each such change. (ii) If the Member has not completed 10 years of Continuous Service, the maximum annual retirement Allowance in clause (2) above shall be multiplied by the ratio which the number of years of his Continuous Service bears to 10. (iii) If the retirement Allowance begins before the Member's social security retirement age (as defined below), but on or after his 62nd birthday, the maximum retirement Allowance in clause (1) above shall be reduced by 5/9 of 1% for each of the first 36 months plus 5/12 of 1% for each additional month by which the Member is younger than the social security retirement age at the date his retirement Allowance begins. 26 If the retirement Allowance begins before the Member's 62nd birthday, the maximum retirement Allowance in clause (1) above shall be of Equivalent Actuarial Value to the maximum benefit payable to age 62 as determined in accordance with the preceding sentence. (iv) If the retirement Allowance begins after the Member's social security retirement age (as defined below), the maximum retirement Allowance in clause (1) above shall be of Equivalent Actuarial Value, based on an interest rate of 5% per year in lieu of the interest rate otherwise used in the determination of Equivalent Actuarial Value, to that maximum benefit payable at the social security retirement age. (v) If the Member's retirement Allowance is payable as a joint and survivor Allowance with his Spouse as the contingent annuitant, the modification of the retirement Allowance for that form of payment shall be made before the application of the maximum limitation, and, as so modified, shall be subject to the limitation. (b) As of January 1 of each calendar year on or after January 1, 1988, the dollar limitation as determined by the Commissioner of Internal Revenue for that calendar year shall become effective as the maximum permissible dollar amount of retirement Allowances payable under the Plan during that calendar year, including retirement Allowances payable to Members who retired prior to that calendar year, in lieu of the dollar amount in (1) of Paragraph (a) above. (c) In the case of a Member who is also a Member of a defined contribution plan of the Company or an Affiliated Company, his maximum benefit limitation shall not exceed an adjusted limitation computed as follows: (i) Determine the defined contribution fraction. (ii) Subtract the result of (i) from 1.0. 27 (iii) Multiply the dollar amount in (1) of Paragraph (a) above by 1.25. (iv) Multiply the amount described in (2) of Paragraph (a) above by 1.4. (v) Multiply the lesser of the result of (iii) or the result of (iv) by the result of (ii) to determine the adjusted maximum benefit limitation applicable to a Member. (d) For purposes of this Section: (i) the defined contribution fraction for a Member who is a Member of one or more defined contribution plans of the Company or an Affiliated Company shall be a fraction the numerator of which is the sum of the following: (A) the Company's and Affiliated Companies' contributions credited to the Member's accounts under the defined contribution plan or plans. (B) with respect to calendar years beginning before 1987, the lesser of the part of the Member's contributions in excess of 6% of his Compensation or one-half of his total contributions to such plan or plans, and with respect to calendar years beginning after 1986, all Member's contributions to such plan or plans, and (C) any forfeitures allocated to his accounts under such plan or plans, but reduced by any amount permitted by regulations promulgated by the Commissioner of Internal Revenue; and the denominator of which is the lesser of the following amounts determined for each year of the Member's Continuous Service: (D) 1.25 multiplied by the maximum dollar amount allowed by law for that year; or 28 (E) 1.4 multiplied by 25% of the Member's remuneration for that year. At the direction of the Retirement Committee, the portion of the denominator of that fraction with respect to calendar years before 1983 shall be computed as the denominator for 1982, as determined under the law as then in effect, multiplied by a fraction of the numerator of which is the lesser of: (F) $51,875, or (G) 1.4 multiplied by 25% of the Member's remuneration for 1981; and the denominator of which is the lesser of: (H) $41,500, or (I) 25% of the Member's remuneration for 1981; (ii) a defined contribution plan means a pension plan which provides for an individual account for each Member and for benefits based solely upon the amount contributed to the Member's account, and any income, expenses, gains and losses, and any forfeitures of accounts of other Members which may be allocated to that Member's accounts, subject to (iii) below; and (iii) a defined benefit plan means any pension plan which is not a defined contribution plan; however, in the case of a defined benefit which is based partly on the balance of the separate account of a Member, that plan shall be treated as a defined contribution plan to the extent benefits are based on the separate account of a Member and as a defined benefit plan with respect to the remaining portion of the benefits under the plan. 29 (iv) the term "remuneration" with respect to any Member shall mean the wages, salaries and other amounts paid in respect of such Member by the Company or an Affiliated Company for personal services actually rendered, determined after any pre-tax contributions under "qualified cash or deferred arrangement" (as defined under Code Section 401(k) and its applicable regulations) or under a "cafeteria plan" (as defined under Code Section 125 and its applicable regulations), and shall include, but not by way of limitation, bonuses, overtime payments and commissions; and shall exclude deferred compensation, stock options and other distributions which receive special tax benefits under the Code; and (v) the term "social security retirement age" shall mean age 65 with respect to a Member who was born before January 1, 1938; age 66 with respect to a Member who was born after December 1, 1937 and before December 1, 1955; and age 67 with respect to a Member who was born after December 31, 1954. (e) Notwithstanding the preceding paragraphs of this Section, a Member's annual retirement Allowance payable under this Plan, prior to any reduction required by operation of Paragraph (c) above, shall in no event be less than: (i) the benefit that the Member had accrued under the Plan as of the end of the Plan Year beginning in 1982, with no changes in the terms and conditions of the Plan on or after July 1, 1982 taken into account in determining that benefit, or (ii) the benefit that the Member had accrued under the Plan as of the end of the Plan Year beginning in 1986, with no changes in the terms and conditions of the Plan on or after May 5, 1986 taken into account in determining that benefit. 30 (f) Notwithstanding any provisions contained herein to the contrary, in the event that a Member participates in a defined contribution plan or defined benefit plan required to be aggregated with this Plan under Code Section 415(g) and the combined benefits with respect to a Member exceed the limitations contained in Code Section 415(e), corrective adjustments shall first be made under this Plan. However, if a Member's Allowance under this Plan has already commenced, corrections shall first be made under The Southern Company Employee Stock Ownership Plan, if possible, and if not possible, then correction shall be made to the Member's Accrued Benefit under this Plan. (g) Notwithstanding anything contained in this Article to the contrary, the limitations, adjustments and other requirements prescribed in this Article shall at all times comply with the provisions of Code Section 415 and the regulations thereunder, the terms of which are specifically incorporated herein by reference. 31 ARTICLE 7 - DISTRIBUTION OF BENEFITS vii 7.01 Surviving Spouse Benefit On and after August 23, 1984, if a married Member: (a) dies in active service prior to his Annuity Starting Date after having met the requirements for an Allowance, or (b) dies after retiring on any Allowance or after terminating service on or after August 23, 1984, with entitlement to a vested Allowance, but in either case before his Annuity Starting Date, or (c) dies after he is credited with at least one Hour of Service with the Company on or after August 23, 1984 but prior to his Annuity Starting Date, there shall be payable to his Surviving Spouse a Qualified Preretirement Survivor Annuity as provided in Section 7.03. 7.02 Qualified Joint and Survivor Annuity Provided an optional form of benefit as set forth in Section 7.07 is not elected pursuant to a Qualified Election within the 90-day period ending on the Annuity Starting Date, a married Member's Accrued Benefit will be paid in the form of a Qualified Joint and Survivor Annuity and an unmarried Member's Accrued Benefit will be paid in the form of an annuity for his lifetime. 7.03 Qualified Preretirement Survivor Annuity (a) Provided that a Member and his or her Spouse have been married throughout the one-year period ending on his or her date of death and provided an optional form of benefit as set forth in Section 7.07 has not been elected by a Member eligible to waive the Qualified Preretirement Survivor Annuity within the Election Period pursuant to a Qualified Election, if a Participant dies before the Annuity Starting Date, the Member's Accrued Benefit shall be payable as an annuity for the life of the Surviving Spouse in accordance with this Section 7.03. 32 (b) The Qualified Preretirement Survivor Annuity shall commence on what would have been the Member's Normal Retirement Date or, on the first day of the month following the death of the Member, if later, and shall cease with the last monthly payment prior to the death of the Spouse. However: (i) if the Member dies in active service after having met the requirements for early retirement, after having completed twenty years of service, or after retiring early but before payments commence, the Spouse may elect to begin receiving payments as of the first day of the month following the Member's date of death; and (ii) in the case of the death of any other Member, the Spouse may elect to begin receiving payments as of the first day of any month following what would have been the Member's Earliest Retirement Age which is his 55th birthday. (c) Before reduction in accordance with Paragraph (d) below, the Qualified Preretirement Survivor Annuity shall be equal to: (i) in the case of a Member who dies while in active service after having met the requirements for early retirement, after having completed twenty years of service, or after retiring early but before payments commence, the following per centum of a normal retirement Allowance computed as provided in Section 5.01(c) and 5.01(d) on the basis of the deceased Member's Compensation and Credited Service prior to his death, provided that if the Spouse was born more than 60 months after the deceased Member, the Qualified Preretirement Survivor Annuity so determined shall be reduced by 1/6 of 1% for each month in 33 excess of 60 by which her date of birth followed the deceased Member's date of birth. Age Member Would Have Been At Commencement Per Centum 40 to 45 40% 46 41% 47 42% 48 43% 49 44% 50 45% 51 46% 52 47% 53 48% 54 49% 55 or over 50% (ii) in the case of any other Member, 50% of the amount of vested Allowance to which the Member would have been entitled at his Normal Retirement Date, reduced as follows: - reduction for a 50% joint and survivor annuity option (based on the Member's age and his Spouse's age had the Member survived to the date benefits commence), and - reduction to reflect early commencement, if applicable, of payments in accordance with Section 5.03(c). (iii) If within the 90 day period prior to his Annuity Starting Date a Member has elected Option (ii) under Section 7.07 naming his spouse as contingent annuitant, the amount payable to his spouse under this Section 7.03 as a Qualified Preretirement Survivor Annuity shall be the amount that would have been payable to his spouse under Option (ii) if such amount is greater than the amount of the Qualified Preretirement Survivor Annuity otherwise payable under 34 subparagraphs (c)(i) or (c)(ii) above, as applicable. (d) The Allowance subsequently payable to a Member whose Spouse would have been entitled to a Qualified Preretirement Survivor Annuity under this Section had the Member's death occurred, or the Qualified Preretirement Survivor Annuity payable to his Spouse after his death, whichever is applicable, shall be reduced by the applicable percentage shown in the following table for the period, or periods, that the provisions of this Section 7.03 are in effect with respect to the Member. No such reduction shall be made with respect to: (i) coverage during active employment, or (ii) any period before the commencement of the election period specified in Para- graph (e) below. Annual Reduction for Spouse's Coverage after Retirement or Other Termination of Service Age Reduction Under 35 0% 35 - 39 2/10 of 1% 40 - 49 3/10 of 1% 50 - 54 4/10 of 1% 55 - 59 5/10 of 1% 60 and over 1% (e) The Company shall furnish to each married Member within the one year period commencing on the date he terminates service a written explanation in non-technical language which describes (1) the terms and conditions of the Qualified Preretirement Survivor Annuity, (2) the Member's right to make, and the effect of, an election to waive the Qualified Preretirement Survivor Annuity, (3) the rights of the Member's Spouse and (4) the right to make, and the effect of, a revocation of such election. 35 7.04 Definitions For purposes of this Article 7, the following definitions shall apply: (a) The term "Election Period" shall mean the period which begins on the first day of the Plan Year in which a Member attains age 35 and ends on the date of the Member's death. If a Member separates from service prior to the first day of the Plan Year in which age 35 is attained, with respect to the Accrued Benefit as of the date of separation, the Election Period shall begin on the date of separation. (b) The term "Earliest Retirement Age" shall mean the earliest date on which, under the Plan, the Member could elect to receive retirement benefits. (c) The term "Qualified Election" shall mean waiver of a Qualified Joint and Survivor Annuity or a Qualified Preretirement Survivor Annuity. Any waiver of a Qualified Joint and Survivor Annuity or a Qualified Preretirement Survivor Annuity shall not be effective unless: (a) the Member's Spouse consents in writing to the election; (b) the election designates a contingent annuitant, which may not be changed without spousal consent (or the Spouse expressly permits designations by the Participant without any further spousal consent); (c) the Spouse's consent acknowledges the effect of the election; and (d) the Spouse's consent is witnessed by a Plan representative designated by the Retirement Committee or notary public. Additionally, a Member's waiver of the Qualified Joint and Survivor Annuity shall not be effective unless the election designates a form of benefit payment which may not be changed without spousal consent (or the Spouse expressly permits designations by the Member without any further spousal consent). If it is established to the satisfaction of a the Retirement Committee that there is no Spouse or that the Spouse cannot be located, a waiver without spousal consent will be deemed a Qualified Election. Any consent by a Spouse obtained under this provision (or establishment that the consent of a Spouse may not be obtained) shall be effective only with respect to such Spouse. A consent that permits designations by the Member without any requirement of further consent by such Spouse must acknowledge that the Spouse has the right to limit consent to a specific Beneficiary, and a specific 36 form of benefit where applicable, and that the Spouse voluntarily elects to relinquish both of such rights. A revocation of a prior waiver may be made by a Member without the consent of the Spouse at any time before the commencement of benefits. The number of revocations shall not be limited. No consent obtained under this provision shall be valid unless the Member has received notice as provided in Section 7.05 below. 7.05 Notice Requirements (a) In the case of a Qualified Joint and Survivor Annuity or a single life annuity, the Retirement Committee shall provide, no less than 30 days and no more than 90 days prior to the Annuity Starting Date, each Member with a written explanation of: (1) the terms and conditions of a Qualified Joint and Survivor Annuity or single life annuity; (2) the Member's right to make and the effect of an election to waive the Qualified Joint and Survivor Annuity or single life annuity form of benefit; (3) the rights of a Member's Spouse; and (4) the right to make, and the effect of, a revocation of a previous election to waive the qualified Joint and Survivor Annuity or single life annuity. (b) In the case of a Qualified Preretirement Survivor Annuity, the Retirement Committee shall provide each Member within the applicable period for such Member a written explanation of the Qualified Preretirement Survivor Annuity in such terms and in such manner as would be comparable to the explanation provided for meeting the requirements of Paragraph (a) above applicable to a Qualified Joint and Survivor Annuity or a single life annuity. The applicable period for a Member is whichever of the following periods ends last: (1) the period beginning with the first day of the Plan Year in which the Member attains age 32 and ending with the close of the Plan Year preceding the Plan Year in which the Member attains age 35; (2) a reasonable period ending after the individual becomes a Member; (3) a reasonable period ending after the Member's Qualified Preretirement Survivor Annuity ceases to be fully subsidized; (4) a reasonable period ending after this Article first applies to the Member. Notwithstanding the foregoing, notice must be provided within a reasonable period ending after separation from service in the case of a Member who separates from service before attaining age 35. 37 For purposes of applying the preceding paragraph, a reasonable period ending after the enumerated events described in (2), (3) and (4) is the end of the two-year period beginning one year prior to the date the applicable event occurs, and ending one year after that date. In the case of a Member who separates from service before the Plan Year in which age 35 is attained, notice shall be provided within the two-year period beginning one year prior to separation and ending one year after separation. If such a Member thereafter returns to employment with the employer, the applicable period for such Member shall be redetermined. 7.06 Transitional Rules Any living Member not receiving benefits on August 23, 1984, who would otherwise not receive the benefits prescribed by the previous Sections of this Article must be given the opportunity to elect to have the prior Sections of this Article apply if such Member is credited with at least one Hour of Service under this Plan or a predecessor plan in a Plan Year beginning on or after January 1, 1976, and such Member is entitled to a vested Allowance. 7.07 Alternative Forms of Distribution (a) Any Member may, subject to the election procedures applicable to Qualified Joint and Survivor Annuities and Qualified Preretirement Survivor Annuities, elect to convert his retirement Allowance into an optional benefit of Equivalent Actuarial Value determined as of the Annuity Starting Date, in accordance with one of the options named below: Option (i) a retirement Allowance payable for the Member's life, with no Allowance payable after his death; or Option (ii) a modified retirement Allowance payable during the Member's life with the provision that after his death either a 50%, 75% or a 100% joint and survivor annuity shall be paid during the life of, and to, the contingent annuitant nominated by him. 38 (b) The election of an optional form of benefit shall become effective as follows: (i) If the Member retired on his Normal Retirement Date, or if he retires on an early retirement Allowance or a vested retirement Allowance deferred to commence on his Normal Retirement Date, the election shall become effective on his Normal Retirement Date. (ii) If the Member retires on an early retirement allowance commencing prior to his Normal Retirement Date, the election shall become effective on the date due of the first monthly installment. (iii) If the Member continues in service as an Employee after his Normal Retirement Date and the notice of his election is received by the Retirement Committee prior to his Normal Retirement Date, the election shall become effective on his Normal Retirement Date, or if the notice of the election is received by the Retirement Committee after the Member's Normal Retirement Date, the election shall become effective on the date it is received by the Retirement Committee. In the event of the death of a Member in service as an Employee on or after his Normal Retirement Date and after his election has become effective, payments of the benefit under the option computed as of the time it became effective shall commence on the first day of the month next following the month of death if the contingent annuitant designated under the option is then living; or, upon the retirement of such a Member, the amount under the option computed as of the time it became effective shall be payable to the Member, but no payments shall commence or accrue to him until the date of retirement. 7.08 Cash-Out of Annuity Benefits Although Allowances shall normally be payable in monthly installments, a lump sum payment of Equivalent Actuarial Value shall be made in lieu thereof if the present value of a Member's Allowance upon termination of employment is less than $3,500. The Equivalent Actuarial Value shall be determined by using an interest rate assumption equal to the interest rate 39 used by the Pension Benefit Guaranty Corporation for valuing a lump sum distribution for single employer plans that terminate on the first day of the Computation Year in which the Annuity Starting Date occurs. In determining the amount of a lump sum payable prior to a Member's Normal Retirement Date, Equivalent Actuarial Value shall be calculated as a benefit which would otherwise have been provided commencing at the Member's Normal Retirement Date, or, if larger, the benefit payable at the earliest possible commencement date, but in no event earlier than the date as of which the lump sum is paid. The lump sum payment shall be made as soon as practicable on or after the date the Member terminates employment. Notwithstanding the foregoing, if the present value of the Member's vested Allowance is zero, the Member shall be deemed to have received a distribution of such Member's Accrued Benefit. 7.09 Commencement of Benefits (a) Required Distributions Once a written claim for benefits is filed with the Retirement Committee and unless the Member elects to have payment begin at a later date, payment of benefits to the Member shall begin not later than sixty (60) days after the last day of the Plan Year in which the latest of the following events occur: (i) the Member's Normal Retirement Date; (ii) the tenth (10th) anniversary of the date the Employee became a Member; or (iii) the Member's separation from service. (b) Required Minimum Distributions On and After January 1, 1989 (i) Subject to the transitional rules described in Paragraph (c) below, effective for taxable years beginning after December 31, 1988, the payment of benefits to any Member shall begin no later than April 1 of the calendar year following the calendar year in which the Member attains age 70-1/2, without regard to the actual date of separation from service. The amount of his Allowance shall be recomputed as of such April 1 and as of the close of each Plan Year after his Allowance commences and preceding his actual retirement date as 40 if each such date were the Member's late retirement date. Any additional Allowance he accrues at the close of any such Plan Year shall be offset (but not below zero) by the value of the benefit payments received in such Plan Year. (ii) The receipt by a Member of any payments or distributions as a result of his attaining age 70-1/2 prior to his actual retirement or death shall in no way affect the entitlement of an otherwise eligible Member to additional accrued benefits. (c) Transitional Rule Any Member who is not a five percent owner and who has attained age 70-1/2 by January 1, 1988, may defer the commencement of benefit payments under Paragraph (b) above until he actually separates from service with the Company. This transitional rule shall only apply if the Member is not a five percent owner at any time during the Plan Year ending with or within the calendar year in which such owner attains age 66-1/2 and in any subsequent Plan Year. (d) Distribution Upon Death of Member (i) Death After Commencement of Benefits If the Member dies before his entire nonforfeitable interest has been distributed to him, the remaining portion of such interest shall be distributed at least as rapidly as under the method of distribution selected by the Member as of the date of his death. (ii) Death Prior to Commencement of Benefits If the Member dies before the distribu- tion of his nonforfeitable interest has begun, the entire interest shall be distributed within five years after the death of such Member. (e) Determining Required Minimum Distributions Notwithstanding anything in this Plan to the contrary, all distributions under this Plan shall be made in accordance with Section 401(a)(9) of the Code and the regulations thereunder and the minimum amount which must be distributed each 41 calendar year shall be determined in accordance with the provisions of Code Section 401(a)(9) and applicable Treasury Regulations. 7.10 TEFRA 242(b)(2) Transitional Rules Any distribution made pursuant to a TEFRA transitional rule distribution election shall meet the requirements of Code Section 401(a)(9) as in effect on December 31, 1983, and shall also satisfy Code Sections 401(a)(11) and 417. 7.11 Requirement for Direct Rollovers This Section applies to distributions made on or after January 1, 1993. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a Distributee's election under this Article 7, a Distributee may elect, at the time and in the manner prescribed by the Retirement Committee, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover. (a) Definitions (i) Eligible Rollover Distribution An Eligible Rollover Distribution is any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include: (A) any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee's designated beneficiary, or for a specified period of 10 years or more; (B) any distribution to the extent such distribution is required under Code Section 401(a)(9); and (C) the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized 42 appreciation with respect to employer securities). (ii) Eligible Retirement Plan An Eligible Retirement Plan is an individual retirement account described in Section Code 408(a), an individual retirement annuity described in Code Section 408(b), an annuity plan described in Code Section 403(a), or a qualified trust described in Code Section 401(a) that accepts the Distributee's Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution to a surviving Spouse, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity. (iii) Distributee A Distributee includes a Member or former Member. In addition, the Member's or former Member's Surviving Spouse and the Member's or former Member's Spouse or former Spouse who is an alternate payee under a qualified domestic relations order, as defined in Code Section 414(p), are Distributees with regard to the interest of the Spouse or former Spouse. (iv) Direct Rollover A Direct Rollover is a payment by the Plan to the Eligible Retirement Plan specified by the Distributee. 43 ARTICLE 8 - CONTRIBUTIONS viii 8.01 It is the intention of the Company to continue the Plan and make such contributions to the Trustee each year in such amounts as are necessary to maintain the Plan on a sound actuarial basis and to meet minimum funding standards as prescribed by any applicable law. However, subject to the provisions of Article 9, the Company may discontinue its contributions for any reason at any time. Any forfeitures shall be used to reduce the Company contributions otherwise payable, and will not be applied to increase the benefits any Member would otherwise receive under the Plan. 44 ARTICLE 9 - ADMINISTRATION OF THE PLAN ix 9.01 The general administration of the Plan and the responsibility for carrying out the provisions of the Plan shall be placed in a Retirement Committee of not less than three persons appointed from time to time by the Board of Directors to serve at the pleasure of the Board of Directors. Any Member of the Retirement Committee may resign by delivering his written resignation to the Board of Directors and the Secretary of the Retirement Committee. 9.02 The Members of the Retirement Committee shall elect a Chairman from their number and a Secretary who may be but need not be one of the Members of the Retirement Committee; may appoint from their number such committees with such powers as they shall determine; may authorize one or more of their number or any agent to execute or deliver any instrument or make any payment on their behalf; may retain counsel, employ agents and provide for such clerical, accounting and actuarial services as they may require in carrying out the provisions of the Plan; and may allocate among themselves or delegate to other persons all or such portion of their duties hereunder, other than those granted to the Trustee under the Trust instrument adopted for use in implementing the Plan, as they, in their sole discretion shall decide. 9.03 The Retirement Committee, in addition to the functions and duties provided for elsewhere in the Plan, shall have exclusive discretionary authority for the following: (a) Construing and interpreting the Plan; (b) Determining all questions affecting the eligibility of any Member, retired Member, Spouse or beneficiary; (c) Determining all questions affecting the amount of the Allowance payable hereunder; (d) Ascertaining the persons to whom benefits shall be payable under the provisions hereof; (e) To the extent provided in the Plan, authorizing and directing disbursements of benefits from the Plan; (f) Making final and binding determinations in connection with any questions of fact which may arise regarding the operation of the Plan; 45 (g) Making such rules and regulations with reference to the operation of the Plan as it may deem necessary or advisable, provided that such rules and regulations shall not be inconsistent with the express terms of the Plan or ERISA; (h) Prescribing such procedures and adopting such forms as it determines necessary under the terms of the Plan; (i) Reviewing such denials of claims for benefits as may arise under Section 9.04 below and making decisions on such review. [claims procedure] Any decision, determination, construction, interpretation, ascertainment, authorization direction, rule, regulation, prescription or review that the Retirement Committee may make or give in carrying out its duties or functions under this Section 9.03 shall be binding and conclusive. 9.04 Consistent with the requirements of ERISA and the regulations thereunder of the Secretary of Labor as from time to time in effect, the Retirement Committee shall: (a) provide adequate notice in writing to any Member or contingent annuitant (each being hereinafter in this paragraph referred to as "Member") whose claim for benefits under the Plan has been denied setting forth specific reasons for such denial, written in a manner calculated to be understood by such Member; and (b) afford a reasonable opportunity to any Member whose claim for benefits has been denied for a full and fair review of the decision denying the claim. 9.05 The Retirement Committee shall hold meetings upon such notice, at such place or places, and at such time or times as it may from time to time determine. 9.06 Any act which the Plan authorizes or requires the Retirement Committee to do may be done by a majority of its Members. The action of such majority expressed from time to time by a vote at a meeting or in writing without a meeting shall constitute the action of the Retirement Committee and shall have the same effect for all purposes as if assented to by all Members of the Retirement Committee at the time in office. 9.07 No Member of the Retirement Committee shall receive any Compensation for his services as such. 9.08 Subject to the limitations of the Plan, the Retirement Committee from time to time shall establish rules for the administration of the Plan and the transaction of its business. The determination of the Retirement Committee asto anydisputed question shallbe conclusive. 46 9.09 As an aid to the Retirement Committee fixing the rates of Company contributions payable to the Plan, the actuary designated by the Retirement Committee shall make annual actuarial valuations and shall submit to the Retirement Committee such amounts of contribution as he recommends for use. The Retirement Committee shall maintain accounts showing the fiscal transactions of the Plan, and shall keep in convenient form such data as may be necessary for actuarial valuations of the Plan. The Retirement Committee shall submit a report each year to the Board of Directors, giving a brief account of the operation of the Plan during the past year. 9.10 The Members of the Retirement Committee shall use that degree of care, skill, prudence and diligence that a prudent man acting in a like capacity and familiar with such matters would use in his conduct of a similar situation. 47 ARTICLE 10 - MANAGEMENT OF FUNDS x All the funds of the Plan except those held by an insurance company shall be held by a Trustee or Trustees appointed from time to time by the Board of Directors, in trust under a trust instrument adopted, or as amended, by the Board of Directors for use in providing the benefits of the Plan and paying its expenses not paid directly by the Company; provided that, except as otherwise herein provided, no part of the corpus or income of the Trust shall be used for, or diverted to, purposes other than for the exclusive benefit of Members and contingent annuitants under the Plan, prior to the satisfaction of all liabilities with respect to them; and provided that no person shall have any interest in or right to any part of the earnings of the Trust, or any rights in, or to, or under the Trust or any part of the assets thereof, except as and to the extent expressly provided in the Plan and in the trust instrument, and the Company shall have no liability for the payment of benefits under the Plan nor for the administration of the funds paid over to the Trustee or Trustees. The Company's contributions to the Plan are conditioned upon their deductibility under Code Section 404. If all or part of the Company's deductions for contributions to the Plan are disallowed by the Internal Revenue Service, the portion of the contributions to which that disallowance applies shall be returned to the Company without interest, but reduced by any investment loss attributable to those contributions. The return shall be made within one year after the date of the disallowance of deduction. The Company may recover without interest the amount of its contributions to the Plan made on account of a mistake in fact, reduced by any investment loss attributable to those contributions, if recovery is made within one year after the date of those contributions. Furthermore, if permitted under federal common law, the Company may recover any other contributions to the Plan or payments to any other entity to the extent such contributions or payments unjustly enrich or otherwise gratuitously benefit such entity(s). 48 ARTICLE 11 - CERTAIN RIGHTS AND LIMITATIONS xi The following provisions shall apply in all cases whenever a Member or other person is affected thereby. 11.01 The Board of Directors may terminate the Plan for any reason at any time. In case of complete or partial termination of the Plan, the rights of affected Members to the benefits accrued under the Plan to the date of such termination, to the extent then funded, shall be non-forfeitable. The funds of the Plan shall be used for the exclusive benefit of Members, Spouses, former Members, retired Members, and contingent annuitants under the Plan as of the date of such termination except that any residual assets which are not required to satisfy all liabilities of the Plan for benefits because of erroneous actuarial computation as defined in Treasury Regulation Section 1.401-2 shall be returned to the Company. Upon termination, the Retirement Committee shall determine and pay benefits to each Member, Spouse, and contingent annuitant in accordance with the provisions of Title IV of ERISA. 11.02 The establishment of the Plan shall not be construed as conferring any legal rights upon any Employee or other person for a continuation of employment, nor shall it interfere with the rights of the Company to discharge any Employee and to treat him without regard to the effect which such treatment might have upon him as a Member of the Plan. 11.03 (a) The annual payments to a Member described in subparagraph (b) below shall not exceed an amount equal to the payments that would be made to or on behalf of such Member under a single life annuity that is the Actuarial Equivalent of the sum of the Member's Accrued Benefit and the Member's other benefits under this Plan (other than a Social Security supplement) and any Social Security supplement that the restricted employee is entitled to receive. The restrictions in this subparagraph (a) do not apply, however, if -- (i) after payment to a Member described in subparagraph (b) of all benefits payable to such Member under this Plan, the value of this Plan's assets equals or exceeds 110% of the value of current liabilities, as defined in Code Section 412(a)(7), or 49 (ii) the value of the benefits payable to such Member under this Plan for a Member described in subparagraph (b) below is less than 1% of the value of current liabilities before distribution. (b) The Members whose benefits are restricted on distribution include all highly compensated employees and highly compensated former employees (as such terms are defined in Treasury Regulation Section 1.401(a)(4)-12); provided, however, that Members whose benefits are subject to restriction under this Section 11.03 shall be limited to only those Members who in the current or in any previous Plan Year were one of the 25 non- excludible Members of the Company with the greatest compensation from the Company. 11.04 In the event that the Retirement Committee shall find that a Member or other person entitled to a benefit is unable to care for his affairs because of illness or accident or is a minor or has died, the Retirement Committee may direct that any benefit payment due him, unless a claim shall have been made therefor by a duly appointed legal representative, be paid to his Spouse, a child, a parent or other blood relative, or to a person with whom he resides, and any such payment so made shall be a complete discharge of the liabilities of the Plan therefor. 11.05 The Retirement Committee shall, upon direction of the Board of Directors uniformly applicable to all Employees similarly situated, deduct from the part of any retirement Allowance under the Plan, all or part of any amount paid or payable to or on account of any Member under the provisions of any present or future law, pension or benefit scheme of any sovereign government, or any political subdivision thereof, on account of which contributions have been made or premiums or taxes paid by the Company with respect thereto; provided that benefits payable under Title II of the Social Security Act are not to be used to reduce the benefits otherwise provided under this Plan except as specifically provided in Section 5.01(d)(ii). 11.06 If any company hereafter becomes a subsidiary or Affiliated Company of the Company, the Board of Directors may include the employees of such subsidiary or Affiliated Company in the membership of the Plan upon appropriate action by such company necessary to adopt the Plan. In such event, or if any persons become Employees of the Company as the result of merger or consolidation or as the result of acquisition by the Company of all or part of the assets or business of another company, the Board of Directors shall determine 50 to what extent, if any, credit and benefits shall be granted for previous service with such subsidiary, affiliated or other company, but subject to the continued qualification of the trust for the Plan as a tax exempt trust under the Code. Any such subsidiary or Affiliated Company may terminate its participation in the Plan upon appropriate action by it, in which event the funds of the Plan held on account of Members of such company shall be determined by the Retirement Committee on the basis of actuarial valuation, and shall be applied as provided in Section 11.01 in the manner there provided if the Plan should be terminated, or shall be segregated by the Trustee as a separate trust, pursuant to certification to the Trustee by the Retirement Committee, continuing the Plan as a separate Plan for the Employees of such company under which the board of directors of such company shall succeed to all the powers and duties of the Board of Directors including the appointment of the Members of the Retirement Committee. 11.07 The Plan may not be merged or consolidated with, nor may its assets or liabilities be transferred to, any other plan unless each Member, Spouse, former Member, retired Member, or contingent annuitant under the Plan would, if the resulting plan were then terminated, receive a benefit immediately after the merger, consolidation, or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation, or transfer if the Plan had then terminated. 51 ARTICLE 12 - NON-ALIENATION OF BENEFITS xii Except as required by any applicable law, no benefit under the Plan shall in any manner be anticipated, assigned or alienated, and any attempt to do so shall be void. However, payment shall be made in accordance with the provisions of any judgment, decree, or order which: (a) creates for, or assigns to, a Spouse, former Spouse, child or other dependent of a Member the right to receive all or a portion of the Member's benefits under the Plan for the purpose of providing child support, alimony payments or marital property rights to that Spouse, child or dependent, (b) is made pursuant to a State domestic relations law, (c) does not require the Plan to provide any type of benefit, or any option, not otherwise provided under the Plan, and (d) otherwise meets the requirements of Code Section 414(p). 52 ARTICLE 13 - AMENDMENTS xiii The Board of Directors reserves the right at any time and from time to time, and retroactively if deemed necessary or appropriate to conform with governmental regulations or other policies, to modify or amend in whole or in part any or all of the provisions of the Plan; provided that no such modification or amendment shall make it possible for any part of the funds of the Plan to be used for, or diverted to, purposes other than for the exclusive benefit of Members or contingent annuitants under the Plan, prior to the satisfaction of all liabilities with respect to them; that no modification or amendment may be made in Section 11.01 without the consent of every participating Company; and that no modification or amendment shall be made which has the effect of decreasing the accrued benefit of any Member or of reducing the non-forfeitable percentage of the accrued benefit of a Member below that non-forfeitable percentage thereof computed under the Plan as in effect on the later of the date on which the amendment is adopted or becomes effective pursuant to Code Section 411(d)(6). Any modification or amendment of the provisions of the Plan shall be voted on by a quorum of the Board of Directors necessary to transact business and such modifications or amendments shall be set forth in resolutions duly adopted by the Board of Directors. 53 ARTICLE 14 - CONSTRUCTION xiv 14.01 The Plan shall be construed, regulated and administered under the laws of the State of Georgia. 14.02 The masculine pronoun shall mean the feminine pronoun, and feminine the masculine, wherever appropriate. 54 ARTICLE 15 - TOP-HEAVY PROVISIONS xv 15.01 Top-Heavy Plan Requirements For any Plan Year the Plan shall be determined to be a Top-Heavy Plan, the Plan shall provide the following: (a) the minimum benefit requirement of Section 15.03; and (b) the vesting requirement of Section 15.04. 15.02 Determination of Top-Heavy Status (a) For any Plan Year commencing after December 31, 1983, the Plan shall be determined to be a "Top-Heavy Plan," if, as of the Determination Date, (1) the Present Value of Accrued Retirement Income of Key Employees or (2) the sum of the Aggregate Accounts of Key Employees under this Plan and any plan of an Aggregation Group, exceeds sixty percent (60%) of the Present Value of Accrued Retirement Income or the Aggregate Accounts of all Members entitled to participate in this Plan and any Plan of an Aggregation Group. For purposes of determining whether the Plan is top-heavy, proportional subsidies shall be ignored while non-proportional subsidies shall be taken into account. (b) For Plan Years beginning after December 31, 1986, the Accrued Retirement Income of a Non-Key Employee shall be determined under the accrual method under the Plan. (c) For any Plan Year commencing after December 31, 1983, the Plan shall be determined to be a "Super Top-Heavy Plan," if, as of the Determination Date, (1) the Present Value of Accrued Retirement Income of Key Employees or (2) the sum of the Aggregate Accounts of Key Employees under this Plan and any plan in an Aggregation Group, exceeds ninety percent (90%) of the Present Value of Accrued Retirement Income or the Aggregate Accounts of all Members entitled to participate in this Plan and any plan of an Aggregation Group. 55 For purposes of Sections 15.02(a) and 15.02(b), if any Member is a Non-Key Employee for any Plan Year, but such Member was a Key Employee for any prior Plan Year, such Member's Present Value of Accrued Retirement Income and/ or Aggregate Account balance shall not be taken into account for purposes of determining whether this Plan is a Top-Heavy or Super Top-Heavy Plan (or whether any Aggregation Group which includes this Plan is a Top-Heavy Group). In addition, for Plan Years beginning after December 31, 1984, if a Member or former Member has not performed any services for the Company or any Affiliated Company maintaining the Plan at any time during the five (5) year period ending on the Determination Date, the Aggregate Account and/or Present Value of Accrued Retirement Income for such Member or former Member shall not be taken into account for purposes of determining whether this Plan is a Top-Heavy or Super Top-Heavy Plan. (d) An Member's "Aggregate Account" as of the Determination Date shall be determined under applicable provisions of the defined contribution plan used in determining Top-Heavy status. (e) An "Aggregation Group" shall mean either a Required Aggregation Group or a Permissive Aggregation Group as hereinafter determined. (i) Required Aggregation Group: In determining a Required Aggregation Group hereunder, each plan of the Company in which a Key Employee is a participant, and each other plan of the Company which enables any plan in which a Key Employee participates to meet the requirements of Code Sections 401(a)(4) or 410, will be required to be aggregated. Such group shall be known as a Required Aggregation Group. In the case of a Required Aggregation Group, each plan in the group will be considered a Top-Heavy Plan if the Required Aggregation Group is a Top-Heavy Group. No plan in the Required Aggregation Group will be considered a Top-Heavy Plan if the Aggregation Group is not a Top-Heavy Group. 56 (ii) Permissive Aggregation Group: The Company may also include any other plan not required to be included in the Required Aggregation Group, provided the resulting group, taken as a whole, would continue to satisfy the provisions of Code Sections 401(a)(4) or 410. Such group shall be known as a Permissive Aggregation Group. In the case of a Permissive Aggregation Group, only a plan that is part of the Required Aggregation Group will be considered a Top-Heavy Plan if the Permissive Aggregation Group is a Top-Heavy Group. A plan that is not part of the Required Aggregation Group but that has nonetheless been aggregated as part of the Permissive Aggregation Group will not be considered a Top-Heavy Plan even if the Permissive Group is a Top-Heavy Group. (iii) Only those plans of the Employer in which the Determination Dates fall within the same calendar year shall be aggregated in order to determine whether such plans are Top-Heavy Plans. (f) The "Determination Date" shall mean with respect to any Plan Year, the last day of the preceding Plan Year, or in the case of the first Plan Year, the last day of such Plan Year. (g) A "Key Employee" shall mean any Member or former Member (and his beneficiaries) who, at any time during the Plan Year or any of the four (4) preceding Plan Years, is: (i) an officer of the Company having an annual compensation from the Company greater than fifty percent (50%) of the amount in effect under Code Section 415(b)(1)(A) for any such Plan Year. For purposes of this Section 15.02(g)(i), only those employers which are incorporated shall be considered as having officers, and no more than fifty (50) Members (or, if lesser, the greater of three (3) or ten percent (10%) of the Members) shall be treated as officers. Annual compensation means compensation 57 as defined in Code Section 415(c)(3), but including amounts contributed by the Company pursuant to a salary reduction agreement which are excludable from the Member's gross income under Code Section 125, Code Section 402(a)(8), Code Section 402(h), or Code Section 403(b). (ii) one of the ten (10) Members (A) having annual compensation from the Company greater than the limitation in effect under Code Sections 415(c)(1)(A) and (B) owning (or considered as owning within the meaning of Code Section 318) the largest interests in the Company. For purposes of this Section 15.06(g)(ii), if two (2) Members have the same interest in the Company, the Member having the greater annual compensation from the Company shall be treated as having a larger interest. (iii) a "five percent owner" of the Company. The term "five percent owner" shall mean any person who owns (or is considered as owning within the meaning of Code Section 318) more than five percent (5%) of the outstanding stock of the Company or stock possessing more than five percent (5%) of the total combined voting power of all stock of the Company. In determining percentage ownership hereunder, employers that would otherwise be aggregated under Code Sections 414(b), (c), and (m) shall be treated as separate employers. (iv) a "one percent owner" of the Company having an annual compensation from the Company of more than $150,000. The term "one percent owner" shall mean any person who owns (or is considered as owning within the meaning of Code Section 318) more than one percent (1%) of the outstanding stock of the Company or stock possessing more than one percent (1%) of the total combined voting power of all stock of the Company. In determining percentage ownership hereunder, employers that would otherwise be aggregated under Code 58 Sections 414(b), (c), and (m) shall be treated as separate employers. However, in determining whether an individual has compensation of more than $150,000, compensation from each employer required to be aggregated under Code Sections 414(b), (c), and (m) shall be taken into account. (h) A "Non-Key Employee" shall mean any Employee who is not a Key Employee as defined in Section 15.02(g). (i) An Employee's "Present Value of Accrued Retirement Income" shall mean as of the Determination Date, the sum of the following: (i) the Present Value of his Accrued Benefit as of the most recent valuation occurring within a twelve (12) month period ending on the Determination Date. (ii) any Plan distributions made within the Plan Year that includes the Determination Date or within the four (4) preceding Plan Years. However, in the case of distributions made after the valuation date and prior to the Determination Date, such distributions are not included as distributions for Top-Heavy purposes to the extent that such distributions are already included in the Member's Present Value of Accrued Retirement Income as of the valuation date. Notwithstanding anything herein to the contrary, all distributions, including distributions made prior to January 1, 1984, and distributions under a terminated plan which if it had not been terminated would have been required to be included in an Aggregation Group, will be counted. (iii) with respect to unrelated rollovers and plan-to-plan transfers (ones which are both initiated by the Member and made from a plan maintained by one employer to a plan maintained by another employer), if this Plan provides for rollovers or plan-to-plan transfers, it shall always consider such rollover or plan-to-plan transfer as a distribution 59 for the purposes of this Section. If this Plan is the plan accepting such rollovers or plan-to-plan transfers, it shall not consider such rollovers or plan-to-plan transfers accepted after December 31, 1983 as part of the Employee's Present Value of Accrued Retirement Income. However, rollovers or plan-to-plan transfers accepted prior to January 1, 1984 shall be considered as part of the Employee's Present Value of Accrued Retirement Income. (iv) with respect to related rollovers and plan-to-plan transfers (ones either not initiated by the Employee or made to a plan maintained by the same employer), if this Plan provides for rollovers or plan-to-plan transfers, it shall not be counted as a distribution for purposes of this Section. If this Plan is the plan accepting such rollover or plan-to-plan transfer, it shall consider such rollover or plan-to-plan transfer as part of the Employee's Present Value of Accrued Retirement Income, irrespective of the date on which such rollover or plan-to-plan transfer is accepted. (j) A "Top-Heavy Group" shall mean an Aggregation Group in which, as of the Determination Date, the sum of: (i) the Present Value of Accrued Retirement Income of Key Employees under all defined benefit plans included in that group, and (ii) the Aggregate Accounts of Key Employees under all defined contribution plans included in the group, exceeds sixty percent (60%) of a similar sum determined for all Employees. 15.03 Minimum Retirement Income for Top-Heavy Plan Years Notwithstanding anything herein to the contrary, for any Top-Heavy Plan Year, the minimum Accrued Retirement Income derived from Company contributions for each Non-Key Employee, including benefits accrued in years 60 in which the Plan is not a Top-Heavy Plan, shall equal a percentage of such Non-Key Employee's highest average compensation not less than the lesser of: (a) two percent (2%) multiplied by the Member's number of Credited Service with the Company, or (b) twenty percent (20%). For purposes of the minimum benefit, a Member's Credited Service shall exclude (a) Plan Years in which the Plan is not a Top-Heavy Plan, and (b) Credited Service completed prior to January 1, 1984. The minimum benefit required by this Section 15.03 shall be calculated using the Member's total compensation and expressed in the form of a single life annuity (with no ancillary benefits) beginning at such Member's Normal Retirement Date. A Member's average compensation shall be based on the five (5) consecutive years for which the Member had the highest compensation. Notwithstanding the foregoing, in any Plan Year in which a Non-Key Employee participates in both this Plan and a defined contribution plan, and both such plans are Top-Heavy Plans, the Company shall not be required to provide a Non-Key Employee with both the full separate minimum defined benefit and the full separate minimum defined contribution plan allocation. Therefore, if a Non-Key Employee is participating in a defined contribution plan maintained by the Employer and the minimum allocation under Code Section 416(c)(2) is allocated to the Non-Key Employee under such defined contribution plan, the minimum Accrued Retirement Income provided for above shall not be applicable, and no minimum benefit shall accrue on behalf of the Non-Key Employee. Alternatively, the Company may satisfy the minimum benefit requirement of Code Section 416(c)(1) for the Non-Key Employee by providing any combination of benefits and/or contributions that satisfy the safe harbor rules of Treasury Regulation Section 1.416-1(m-12). 15.04 Vesting Requirements for Top-Heavy Plan Years Notwithstanding any other provisions of the Plan, for any Top-Heavy Plan Year, the vested portion of a Member's Accrued Retirement Income shall be determined on the basis of the Member's Continuous Service according to the following schedule: Years of Service Vested Percentage less than 2 0% 2 20% 61 3 40% 4 60% 5 80% 6 or more 100% The minimum Retirement Income for any Top-Heavy Plan Year shall not be forfeited during any period for which the payment of the Member's Retirement Income is required to be suspended under the Plan. If in any subsequent Plan Year, the Plan ceases to be a Top-Heavy Plan, the Retirement Committee may, in its sole discretion, elect to (a) continue to apply this vesting schedule in determining the vested percentage of an Employee's Accrued Retirement Income or (b) revert to the vesting schedule in effect before the Plan became a Top-Heavy Plan. Any such reversion shall be treated as a Plan amendment pursuant to the terms of the Plan. No decrease in an Employee's nonforfeitable percentage may occur in the event the Plan's status as a Top-Heavy Plan changes for any Plan Year. Members with three (3) or more years of Continuous Service may elect to remain under the above Top-Heavy Plan vesting schedule in any year the Plan ceases to be top heavy. 15.05 Adjustments to Maximum Benefits for Top-Heavy Plans (a) In the case of a Member who is a participant in a defined benefit plan and a defined contribution plan maintained by the Company, and such plans as a group are determined to be Top-Heavy for any limitation year beginning after December 31, 1983,t "1.0" shall be substituted for "1.25" in each place it appears in the denominators of fractions, as set forth in Article 6 of the Plan, unless the extra minimum benefit is provided pursuant to Section 15.01(b). Super Top-Heavy Plans shall be required at all times to substitute "1.0" for "1.25" in the denominator of each plan fraction. (b) If a Key Employee is a participant in both a defined benefit plan and a defined contribution plan that are both part of a Top-Heavy Group (but neither of such plans is a Super Top-Heavy Plan), the defined benefit and defined contribution fractions set forth in Article 6 shall remain 62 unchanged, provided that in Section 15.03 above, "three percent (3%)" shall be substituted for "two percent (2%)" and "twenty percent (20%)" shall be increased by one (1) percentage point (but not more than ten (10) percentage points) for each year of Service included in the computations under Section 15.03. (c) For purposes of this Section 15.05, if the sum of the defined benefit plan fraction and the defined contribution fraction shall exceed 1.0 in any Plan Year for any Member in this Plan, the Company shall eliminate any amounts in excess of the limits set forth in Article 6, pursuant to Section 6.01(f) of the Plan. 63 ARTICLE 16 - EARLY RETIREMENT INCENTIVE PROGRAM xvi 16.01 Eligibility (a) Subject to the conditions described in Section 16.01(b) below, all Members of the Plan who (i) have completed ten or more years of Continuous Service and have attained age 55 on or prior to December 31, 1993; (ii) are active Employees of the Company or are disabled and currently accruing service under Section 4.04 of the Plan on December 31, 1993; and (iii) who elect to receive the benefits provided under this Article 16 by executing and allowing to become effective an Election Form and Waiver Agreement ("Eligible Member") shall be eligible to receive the benefits described in Section 16.02 below. Notwithstanding the foregoing, the benefits payable under Section 16.02 shall only be payable to an Eligible Member who elects during the period from October 1, 1993 to November 15, 1993 (the "Window Period") to retire on or before December 31, 1993, by filing and allowing to become effective an Election Form and Waiver Agreement with the Retirement Committee no later than November 15, 1993. In the event an Eligible Member does not submit and allow to become effective an Election Form and Waiver Agreement by November 15, 1993, the Retirement Committee shall interpret such failure as an election not to receive the benefits provided under this Article 16. (b) The retirement date of an Eligible Member who elects to retire during the Window Period shall be December 31, 1993; provided, however, that in the sole discretion of the Company, the retirement date of certain Eligible Members may be postponed beyond December 31, 1993, but in no event shall any Eligible Member's retirement date be postponed until or beyond October 1, 1994. 16.02 Benefits (a) In addition to any Early or Normal Retirement Allowance to which an Eligible Member may be entitled in accordance with the provisions of Article 5 of the Plan, if an Eligible Member retires from the Company in accordance with the provisions of this Article 16 prior to his Normal Retirement Date and elects to receive an immediate Early Retirement Allowance in accordance with Section 5.02, the immediate Early Retirement 64 Allowance to be received by such Eligible Member under Section 5.02(b) shall not be reduced due to early commencement of benefits. (b) An Eligible Member who retires in accordance with the provisions of Article 16 prior to the attainment of age 62 shall be paid an amount equal to the monthly Social Security benefits such Eligible Member would become entitled to beginning at age 65 based upon the Social Security law in effect on December 31, 1993 and such Eligible Member's Social Security earnings through his retirement date. This Social Security Bridge Benefit shall be paid monthly commencing on the first day of the month next following the Eligible Member's retirement date and shall continue to be paid on the first day of each month thereafter up to and including the first day of the month following the month in which such Eligible Member attains age 62. 16.03 Restoration to Service Notwithstanding any provisions of Section 5.05 to the contrary, in the event an Eligible Member who retires in accordance with the provisions of this Article 16 subsequently returns to the service of the Company, all benefits payable to such Eligible Member under this Article 16 shall cease and upon the Eligible Member's subsequent retirement, the Eligible Member shall receive the greater of: (a) the retirement Allowance the Member would receive under the Plan based upon his Credited Service and age at the date of his subsequent retirement, reduced by the Equivalent Actuarial Value of the retirement Allowance, excluding any amount payable under Section 16.02(b) which the Member received prior to his restoration to service and prior to his normal retirement date; or (b) the retirement Allowance the Member was actually receiving excluding any amounts payable under Section 16.02(b) or if the retirement Allowance had not commenced, the retirement Allowance such Member is eligible to receive under this Article 16. 65 ARTICLE 17 - RETIREE MEDICAL BENEFITS xvii 17.01 Provision of Medical Benefits The provisions of this Article 17 of the Retirement System provide for the payment of medical benefits to eligible retired employees of the Company and to their spouses and dependents as provided in this Article 17. The Board of Directors makes no promise to continue these benefits in the future and has the right to discontinue providing such benefits at any time, as well as the right to change any aspect of the arrangements for their provision, including without limitation the class of eligible retired employees and the classes of eligible spouses and dependents of retired former employees, the types of benefits covered, the amounts paid for payment or reimbursement of retired former employees, spouses and dependents for medical services, the identity of any insurer involved, the means by which the medical benefits are provided and the institution of a requirement for contributions by covered retired employees or covered spouses or dependents of retired employees. In the event of any such discontinuance or change, payments or reimbursement of covered expenses incurred prior to the effective date of the discontinuance or change would not be adversely affected. 17.02 Eligibility for Medical Benefits (a) Effective September 15, 1993, a member who retires and is receiving a distribution from the Plan pursuant to Sections 5.01 and 5.02 or a retired member who is entitled to receive a distribution from the Plan pursuant to Sections 5.01 or 5.02 after retirement will be eligible for reimbursement or payment of covered medical expenses, as hereinafter described, provided the member (1) was covered by the Georgia Power Company Medical Benefits Plan immediately before retirement; (2) is not eligible as a spouse or dependent or otherwise for coverage under the Georgia Power Company Medical Benefits Plan; and (3) continues to satisfy the eligibility requirements applicable to retired employees as set forth in the provisions of the Georgia Power Company Medical Benefits Plan, which is attached hereto as Exhibit A and incorporated herein by reference and may be changed in accordance with the terms of the Georgia Power Company Medical Benefits Plan. Notwithstanding the foregoing, a former employee who was a key employee pursuant to 66 Section 15.02(g) on the date of his retirement shall not be eligible to receive any benefits under this Article 17. (b) The spouses and dependents of retired members who are eligible for reimbursement or payment of covered medical expenses pursuant to paragraph (a) and who were covered under the Georgia Power Company Medical Benefits Plan immediately prior to the member's retirement are also eligible for reimbursement or payment of covered medical expenses to the extent, if any, provided in the Georgia Power Company Medical Benefits Plan, a copy of which is attached as Exhibit A. Notwithstanding the foregoing, a spouse or dependent who is eligible for coverage under the "active employee" portion of the Georgia Power Company Medical Benefits Plan shall not be eligible for reimbursement of medical expenses or payment of premiums hereunder. Coverage shall terminate (1) upon termination of the Plan or this Article 17, or (2) in accordance with the provisions of the Georgia Power Company Medical Benefit Plan relating to termination of coverage, whichever is earlier. 17.03 Contributions to the Medical Benefits Account (a) There is hereby established a separate account to provide the medical benefits payable pursuant to this Article 17, called the Medical Benefits Account. All contributions and transfers to the Medical Benefits Account shall be held in trust by a trustee for the payment of medical benefits hereunder. All such contributions and transfers shall be specifically designated to provide for the payment of medical benefits. If such contributions or transfers are held by a trustee or trustees holding funds for the payment of retirement benefits under the Plan, such contributions and transfers (although held in a separate account as provided above) need not be segregated or separately invested by the trustee. A portion of the earnings on trust assets for the payment of both retirement and medical benefits that have been jointly invested shall be allocated to the Medical Benefits Account in an equitable and reasonable manner. Prior to the satisfaction of all liabilities for medical benefits under this Article 17 of the Plan, no part of the corpus or income in the Medical Benefits Account shall be used for, or diverted to, any purpose other than the providing 67 of such benefits. Reimbursement of the Company for payments of premiums under the Georgia Power Company Medical Benefits Plan for the provision of medical benefits thereunder for Eligible Recipients and reimbursement of the Company for direct payment or reimbursement to Eligible Recipients of covered medical expenses is considered a means of providing such benefits and is specifically permitted. In no event shall the Company contribute any amount under this Article 17 for any retired employee who is or was a "key employee" (as defined in Section 15.02(g)). (b) Eligible Recipients shall not contribute to the Medical Benefits Account described in paragraph (a) but may be required to contribute under the Georgia Power Company Medical Benefits Plan through which such coverage is provided in such amounts as shall be determined from time to time by the Board of Directors. The Company shall from time to time contribute to such Medical Benefits Account such amounts as the Retirement Committee shall determine, but not in excess of the actuarially determined total cost of providing the medical benefits described in paragraph (d) below taking into account any Member contributions and any transfers of excess pension assets to the Medical Benefits Account. Anything in this Plan to the contrary notwithstanding, the aggregate amount of the actual contributions to the Medical Benefits Account described in paragraph (a) may not exceed 25% of the total actual contributions to the Plan for all benefits under the Plan (exclusive of contributions that may be made to fund past service credits) on and after September 15, 1993. In the event that an Eligible Recipient's interest in the Medical Benefits Account is forfeited prior to termination of the Plan, an amount equal to the amount of the forfeiture must be applied, as soon as possible, to reduce any Company contributions to fund the Medical Benefits Account. 17.04 Medical Benefits Covered by the System Medical benefits under the Plan shall be provided through the Georgia Power Company Medical Benefits Plan by the payment of premiums thereunder or through reimbursement to the Company of direct payment by the Company or reimbursement by the Company to Eligible 68 Recipients of medical expenses in accordance with the terms and conditions, and subject to the limitations, set forth in the provisions of the Georgia Power Company Medical Benefits Plan attached hereto as Exhibit A and which may be changed in accordance with the terms of the Georgia Power Company Medical Benefit Plan. Medical benefits shall be provided under the Plan only to the extent there are sufficient funds to provide such benefits available in the Medical Benefits Account described in Section 17.03(a). In no event shall any benefits be paid under the Plan to the extent the same benefits are payable under any other plan, program or arrangement of the Company. The Retirement Committee may establish claims procedures and administrative rules relating to the provision of medical benefits hereunder to the extent that the claims procedures and administrative rules under the applicable group medical plan do not apply. 17.05 Amendment and Termination of Medical Benefits The Board of Directors may amend, suspend, terminate, withdraw or modify this Article 17 of the Plan in whole or in part at any time subject to the provisions of the Georgia Power Company Medical Benefits Plan relating to benefits following termination or conversion rights. The Board of Directors may permanently discontinue contributions under this Article 17 at any time in its sole discretion. Upon the satisfaction of all Plan liabilities for medical benefits under the Plan, all amounts held in the Medical Benefits Account described in Section 17.03(a) of the Plan will be returned to the Company. In the event the Plan is terminated, the Company's obligation to contribute to the Medical Benefits Account after termination shall cease, except for benefits payable hereunder with respect to medical expenses either paid or incurred by an Eligible Recipient prior to the date of termination. A termination of the provisions of this Article shall not constitute a termination or partial termination of the Plan for purposes of Section 11.01. 17.06 Definitions (a) "Eligible Recipient" means a retired employee, the employee's spouse, and the employee's dependents, all of whom are eligible for retiree medical benefits under the provisions of Section 17.02. 69 IN WITNESS WHEREOF, the Board of Directors of Savannah Electric and Power Company, through its authorized officers has adopted this amendment and restatement of the Employees' Retirement Plan of Savannah Electric and Power Company this day of , 199__, to be effective January 1, 1989. SAVANNAH ELECTRIC AND POWER COMPANY By: Arthur M. Gignilliat, Jr. President and Chief Executive Officer ATTEST: By: Lavonne K. Calandra Corporate Secretary [CORPORATE SEAL] [adamscl] h:\wpdocs\mtd\savannah\pension.pln 70 FIRST AMENDMENT TO THE EMPLOYEES' RETIREMENT PLAN OF SAVANNAH ELECTRIC AND POWER COMPANY (AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1989) WHEREAS, the Board of Directors of Savannah Electric and Power Company (the "Company") heretofore adopted the amendment and restatement of the Employees' Retirement Plan of Savannah Electric and Power Company (the "Plan"), effective January 1, 1989, in order to comply with the Internal Revenue Code of 1986, as amended; and WHEREAS, the Company has authorized appropriate officers to take proper actions which accomplish its overall intent to amend and restate the Plan; and WHEREAS, the Company is authorized pursuant to Article XIII of the Plan to amend the Plan from time to time. NOW, THEREFORE, effective January 16, 1995, the Company hereby amends the Plan as follows: 17.07 Section 5.05(a) of the Plan is amended by deleting said Section in its entirety and substituting the following in lieu thereof: 5.05 Restoration of Retired Member or Former Member to Service (a) If a Member in receipt of an Allowance is restored to service as an Employee on or after his Normal Retirement Date, the following shall apply, except with respect to temporary employees on and after January 16, 1995: (i) His Allowance shall be suspended for each month during the period of restoration which is a Suspendible Month. (ii) Upon the death of the Member during the period of restoration, any Allowance that would have been payable to his surviving Spouse had he not been restored to service shall be payable or, alternatively, any payments under an optional benefit, if one has been elected and becomes effective, shall begin. (iii) Upon later retirement, payment of the Member's Allowance shall resume no later than the third month after the latest Suspendible Month during the period of restoration, and shall be adjusted, if necessary, in compliance with Title 29 of the Code of Federal Regulations, Section 2530.203-3 in a consistent and nondiscriminatory manner. 17.08 Section 5.05(b) of the Plan is amended by deleting said Section in its entirety and substituting the following in lieu thereof: (b) If a Member in receipt of an Allowance is restored to service as an Employee before his Normal Retirement Date, the following shall apply, except with respect to temporary employees on and after January 16, 1995: (i) His Allowance shall cease and any election of an optional benefit in effect shall be void. (ii) Any Continuous and Credited Service to which he was entitled when he retired or terminated service shall be restored to him. (iii) Upon later retirement or termination, his Allowance shall be based on the benefit formula then in effect and his Compensation and Credited Service before and after the period when he was not in the service of the Company, reduced by an amount of Equivalent Actuarial Value to the benefits, if any, he received before the date of his restoration to service. (iv) The part of the Member's Allowance upon later retirement payable with respect to Credited Service rendered before his previous retirement or 2 termination of service shall never be less than the amount of his previous Allowance modified to reflect any option in effect on his later retirement. 17.09 Except as amended herein by this First Amendment, the Plan shall remain in full force and effect as amended and restated by the Company prior to the adoption of this First Amendment. IN WITNESS WHEREOF, the Company, through its duly authorized officers, adopts this First Amendment to the Plan this 16th day of January, 1995, to be effective as stated herein. SAVANNAH ELECTRIC AND POWER COMPANY By: Arthur M. Gignilliat, Jr. President and Chief Executive Officer ATTEST: By: Lavonne K. Calandra Corporate Secretary [CORPORATE SEAL] [adamscl] h:\wpdocs\mtd\savannah\pension.1am 3 EX-10.(F)16 25 EXHIBIT 10(F)16 Exhibit 10(f)16 SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN OF SAVANNAH ELECTRIC AND POWER COMPANY 1As Amended and Restated, Effective July 23, 1986. Designation of Beneficiary Supplemental Executive Retirement Plan of Savannah Electric and Power Company As a Participant in the Supplemental Executive Retirement Plan of Savannah Electric and Power Company, I hereby designate the following person(s) as "Designated Beneficiary," as that term is defined and used in the Plan: _________________________________________________________________ _____________ _________________________________________________________________ _____________ _________________________________________________________________ _____________ _________________________________________________________________ _____________ _________________________________________________________________ _____________ _________________________________________________________________ _____________ _________________________________________________________________ _____________ _________________________________________________________________ _____________ _________________________________________________________________ _____________ _________________________________________________________________ _____________ I understand that the Designated Beneficiary named above may be changed or revoked by me at any time by filing a new designation in writing with the Committee. Date_____________________________ ___________________________________ Signature of Participant TABLE OF CONTENTS ARTICLE I - STATEMENT OF PURPOSE 1 ARTICLE II - DEFINITIONS 1 2.01 Terms . . . . . . . . . . . . . . . . . . . . . . . 1 2.02 Accrued SERP Retirement Benefit . . . . . . . . . . 1 2.03 Assumed Pension Plan Retirement Benefit . . . . . . 1 2.04 Committee . . . . . . . . . . . . . . . . . . . . . 2 2.05 Company . . . . . . . . . . . . . . . . . . . . . . 2 2.06 Credited Service . . . . . . . . . . . . . . . . . 2 2.07 Designated Beneficiary . . . . . . . . . . . . . . 2 2.08 Disability Benefit . . . . . . . . . . . . . . . . 2 2.09 Disability Date . . . . . . . . . . . . . . . . . . 2 2.10 Early Retirement Date . . . . . . . . . . . . . . . 2 2.11 Early Retirement Factor . . . . . . . . . . . . . . 2 2.12 Eligible Spouse . . . . . . . . . . . . . . . . . . 3 2.13 Final Average Salary . . . . . . . . . . . . . . . 3 2.14 Normal Retirement Date . . . . . . . . . . . . . . 3 2.15 Participant . . . . . . . . . . . . . . . . . . . . 3 2.16 Pension Plan . . . . . . . . . . . . . . . . . . . 3 2.17 Pension Plan Spouse's Allowance . . . . . . . . . . 3 2.18 Plan . . . . . . . . . . . . . . . . . . . . . . . 3 2.19 Postponed Retirement Date . . . . . . . . . . . . . 3 2.20 Salary . . . . . . . . . . . . . . . . . . . . . . 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 . . . . . . . . . . . . . . 4 2.26 Total Disability and Totally Disabled . . . . . . . 4 2.27 Vested Percentage . . . . . . . . . . . . . . . . . 5 ARTICLE III - ELIGIBILITY AND PARTICIPATION 5 3.01 Eligibility . . . . . . . . . . . . . . . . . . . . 5 3.02 Participation . . . . . . . . . . . . . . . . . . . 5 ARTICLE IV - RETIREMENT BENEFITS 5 4.01 Normal Retirement . . . . . . . . . . . . . . . . . 5 4.02 Early Retirement . . . . . . . . . . . . . . . . . 6 4.03 Postponed Retirement . . . . . . . . . . . . . . . 6 4.04 Commencement of Payment . . . . . . . . . . . . . . 7 4.05 Re-employment of Retired Participant . . . . . . . 7 ARTICLE V - PRERETIREMENT DEATH BENEFITS 7 5.01 Death Benefit . . . . . . . . . . . . . . . . . . . 7 5.02 Payment . . . . . . . . . . . . . . . . . . . . . . 8 ARTICLE VI - DISABILITY BENEFITS 8 6.01 Disability Prior to Retirement Date . . . . . . . . 8 6.02 Benefit at Retirement Date . . . . . . . . . . . . . 9 i ARTICLE VII - SEVERANCE BENEFITS 10 7.01 Eligibility . . . . . . . . . . . . . . . . . . . . 10 7.02 Participant Benefit . . . . . . . . . . . . . . . . 10 7.03 Spousal Benefit . . . . . . . . . . . . . . . . . . 10 7.04 Resumption of Employment After Severance . . . . . 11 ARTICLE VIII - ADMINISTRATIVE COMMITTEE 11 8.01 Authority . . . . . . . . . . . . . . . . . . . . . 11 8.02 Voting . . . . . . . . . . . . . . . . . . . . . . 11 8.03 Records . . . . . . . . . . . . . . . . . . . . . . 11 8.04 Liability . . . . . . . . . . . . . . . . . . . . . 12 ARTICLE IX - AMENDMENT AND TERMINATION 12 ARTICLE X - MISCELLANEOUS 12 10.01 Non-Alienation of Benefits . . . . . . . . . . 12 10.02 No Trust Created . . . . . . . . . . . . . . . 13 10.03 No Employment Agreement . . . . . . . . . . . 13 10.04 Binding Effect . . . . . . . . . . . . . . . . 13 10.05 Suicide . . . . . . . . . . . . . . . . . . . 13 10.06 Claims for Benefits . . . . . . . . . . . . . 13 10.07 Entire Plan . . . . . . . . . . . . . . . . . 14 10.08 Merger or Consolidation . . . . . . . . . . . 14 10.09 Age Differential of Spouse . . . . . . . . . . 14 ARTICLE XI - CONSTRUCTION 14 11.01 Governing Law . . . . . . . . . . . . . . . . 14 11.02 Gender . . . . . . . . . . . . . . . . . . . . 15 11.03 Headings, etc. . . . . . . . . . . . . . . . . 15 11.04 Children . . . . . . . . . . . . . . . . . . . 15 11.05 Action . . . . . . . . . . . . . . . . . . . . 15 ii ARTICLE I STATEMENT OF 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 Company's Employees' Retirement Plan of Savannah Electric and Power Company (the "Pension Plan") and the Savannah Electric and Power Company Long-Term Disability Plan, and are designed to supplement such Pension Plan benefits and provide the participant with additional financial security upon retirement, disability or death. ARTICLE II DEFINITIONS 2.01 Terms - Unless otherwise clearly required by the context, the terms used herein shall have the following meanings. 2.02 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 (but not beyond his Normal Retirement Date), whichever is applicable, and the denominator of which shall be the greater of (i) 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 (ii) 15 years of Credited Service.] 1 1 2.03 Assumed Pension Plan Retirement Benefit shall mean the actual annual retirement benefit a Participant would receive pursuant to the Pension Plan calculated with the following assumptions: (a) A married Participant selects to receive his retirement benefit under Option B of Section 5.06(a) of the Pension Plan on a life and 75% joint survivor basis. (b) A single Participant selects to receive his retirement benefit under Option A of Section 5.06(a) of the Pension Plan on a life and ten-year certain basis. 2.04 Committee - The Administrative Committee appointed by the Board of Directors of the Company to administer this Plan. 2.05 Company shall mean Savannah Electric and Power Company and any successor to Savannah Electric and Power Company by merger, purchase or otherwise. 2.06 Credited Service shall have the same meaning as set forth in Article 4, Section 4.02 of the Pension Plan. 2.07 Designated Beneficiary - 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 5.02. 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. 2.08 Disability Benefit shall mean a totally disabled Participant's actual annual disability benefit paid pursuant to the Savannah Electric and Power Company Long-Term Disability Income Plan. 2.09 Disability Date shall have the same meaning as "Elimination Period" as set forth in the Savannah Electric and Power Company Long-Term Disability Income Plan. 2.10 Early Retirement Date shall have the same meaning as set forth in Article 5, Section 5.02(a) of the Pension Plan. 2.11 Early Retirement Factor shall be a fraction, 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.]1 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 - Pre- Retirement Death Benefits, 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 Final Average Salary shall mean a Participant's average yearly Salary (as defined in Article 2.20) 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, or Normal Retirement Date, whichever is applicable. 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, if a Participant dies during Total Disability, Final Average Salary shall be determined for the appropriate months immediately preceding the Participant's Disability Date. 2.14 Normal Retirement Date shall mean the first day of the calendar month following the birthday on which a Participant attains the age of 65. 2.15 Participant shall mean an employee of the Company who is eligible and is participating in the Plan in accordance with Article Ill of this Plan. 3 2.16 Pension Plan shall mean the "Employees' Retirement Plan of Savannah Electric and Power Company" (amended to January 1, 1986), as it may from time to time be amended in the future. 2.17 Pension Plan Spouse's Allowance shall mean an Eligible Spouse's actual pre-retirement death benefit pursuant to Article 5, Section 5.04 of the Pension Plan. 2.18 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. 2.19 Postponed Retirement Date shall mean the first day of the calendar month on which a Participant actually retires after his Normal Retirement Date. 2.20 Salary shall mean the annual compensation paid by the Company to a Participant as reflected in Internal Revenue Service Form W-2, plus amounts of compensation deferred under any deferred compensation plan or arrangement (including, without limitation, the Deferred Compensation Plan for Key Employees of Savannah Electric and Power Company and which but for the deferral would have been reflected in Form W-2). 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: (1) the Participant's Pension Plan Pre-Retirement Death Benefit (Spouse's Benefit), if any, and (2) [fifty percent (50%)]1 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: (1) the Participant's Disability Benefit, if any, and (2) 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: 4 (1) the Participant's Assumed Pension Plan Retirement Benefit, and (2) [fifty percent (50%)]1 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 Article I Section 1.19 of the Pension Plan. 2.26 Total Disability and Totally Disabled shall have the same meaning as set forth in the Savannah Electric and Power Company Long-Term Disability Plan. 2.27 Vested Percentage - a Participant's Vested Percentage shall be determined as follows: 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% Provided, however, the Vested Percentage of a Participant who has attained age 60 shall be 100%. ARTICLE III ELIGIBILITY AND PARTICIPATION 3.01 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. 3.02 Participation. The Committee shall notify those employees selected as Participants of their participation and resulting benefits. 5 ARTICLE IV RETIREMENT BENEFITS 4.01 Normal Retirement. (a) Participant Benefit. Upon retirement at his Normal Retirement Date, a Participant becomes entitled to the "Normal Retirement Benefit" as defined in this Article 4.01(a). The Normal Retirement Benefit is 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 either receiving or entitled to receive a Normal Retirement Benefit survived by an Eligible Spouse, such Eligible Spouse becomes entitled to the benefit defined in this Article 4.01(b). The Eligible Spouse's benefit is a monthly amount equal to 75% of the deceased Participant's Normal Retirement Benefit, payable monthly to the Eligible Spouse during her lifetime. 4.02 Early Retirement. (a) Participant Benefit. Upon retirement at his Early Retirement Date, a Participant becomes entitled to the "Early Retirement Benefit" as defined in this Article 4.02(a). The Early Retirement Benefit is 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 where the Participant's Retirement Income from the Pension Plan commences prior to the Participant's attainment of age 62.]1 (b) Spousal Benefit. Upon the death of a retired Participant either receiving or entitled to receive an Early Retirement Benefit survived by an Eligible Spouse, such Eligible Spouse becomes entitled to the benefit defined in this Article 4.02(b). If the Participant was receiving his Early Retirement Benefit at the time of his death, the Eligible Spouse's benefit is a monthly amount equal to 75% of the deceased Participant's 6 actual Early Retirement Benefit, payable monthly to the Eligible Spouse during her lifetime. If the Participant's death occurs prior to commencement of payment of his Early Retirement Benefit, the Eligible Spouse's benefit is 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. 4.03 Postponed Retirement. (a) Participant Benefit. Upon retirement at a Postponed Retirement Date, a Participant becomes entitled to the "Postponed Retirement Benefit" as defined in this Article 4.03(a). The Postponed Retirement Benefit shall be equal to the Participant's Normal Retirement Benefit (as defined in Article 4.01(a)) as if he had retired on his Normal Retirement Date. No additional benefits shall accrue to any Participant after his Normal Retirement Date. (b) Spousal Benefit. Upon the death of a retired Participant receiving or entitled to receive a Postponed Retirement Benefit survived by an Eligible Spouse, such Eligible Spouse becomes entitled to the benefit defined in this Article 4.03(b). The Eligible Spouse's benefit is a monthly amount equal to 75% of the deceased Participant's Postponed Retirement Benefit, payable monthly to the Eligible Spouse during her lifetime. (c) Death Benefit. In the event a Participant, whose retirement is postponed beyond his Normal Retirement Date, dies prior to his Postponed Retirement Date, he shall be considered to have retired on his Normal Retirement Date for the purpose of determining retirement benefits payable to his surviving Eligible Spouse. 4.04 Commencement of Payment. The payment of all Participant retirement benefits under this Article IV shall commence at the same time as retirement income payments from the Pension Plan. All benefits payable to an Eligible Spouse under 7 this Article IV shall commence within 60 days of the Participant's death. 4.05 Re-employment of Retired Participant. A retired Participant receiving or eligible to receive retirement benefits under this Article IV who is re-employed by the Company shall be ineligible to again participate in the Plan. ARTICLE V PRERETIREMENT DEATH BENEFITS 5.01 Death Benefit. Upon the death of a Participant while employed, or while receiving disability retirement benefits pursuant to Article 6.01 hereof, prior to the earlier of either his Early Retirement Date or Normal Retirement Date, a "Pre-- Retirement Death Benefit" as defined in this Article 5.01 shall be payable; provided, however, such Pre-Retirement Death Benefit shall be payable only if the deceased Participant is survived by either an Eligible Spouse or children under age 21. The Pre- Retirement Death Benefit is an amount equal to 1/12th of the Participant's SERP Death Benefit. 5.02 Payment. (a) If the deceased Participant is survived by an Eligible Spouse, the Pre-Retirement Death Benefit shall be paid monthly to such Eligible Spouse during her lifetime. Provided, further, that 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 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 shall be paid monthly to the Participant's Designated Beneficiary until the last such surviving child reaches age 21. ARTICLE VI 8 DISABILITY BENEFITS 6.01 Disability Prior to Retirement Date. (a) Benefit. In the event of the Total Disability of a Participant prior to his Normal Retirement Date, the Participant becomes entitled to a disability retirement benefit as defined in this Article 6.01(a). Said disability retirement benefit shall be determined at 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 to the disabled Participant until the earliest of: (i) he resumes working; (ii) 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; (iii) 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; (iv) he dies; (v) he elects to retire at his Early Retirement Date; or (vi) 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 9 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. 6.02 Benefit at Retirement Date. (a) Benefit. Upon reaching the earlier of his Early Retirement Date or his Normal Retirement Date, a Participant receiving the disability retirement benefit defined in Article 6.01 above shall become entitled to disability retirement benefits, in lieu of the retirement benefits of Article IV, as defined in this Article 6.02(a). Said benefits shall be calculated at either the Participant's Early Retirement Date or Normal Retirement Date, as the case may be, and shall be equal to either 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 Articles 4.01 and 4.02 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, in determining said 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. Said disability retirement benefit(s) shall be payable in the same manner as the retirement benefits in Article 4.01 - Normal Retirement or Article 4.02 - Early Retirement, as the case may be, as if the Participant had actually retired. ARTICLE VII SEVERANCE BENEFITS 7.01 Eligibility. A Participant whose employment is terminated other than by 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. 10 7.02 Participant Benefit. A Participant whose employment is terminated (other than by death, Total Disability or retirement) after completing five (5) years of Credited Service shall be entitled to receive the "Severance Benefit" described in this Article 7.02. The Severance Benefit is 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 the Pension Plan where the Participant's retirement benefit commences prior to the Participant's attainment of age 62. A Participant's Severance Benefit shall be paid monthly to him for his lifetime, beginning at the same time when retirement income payments under the Pension Plan commence. 7.03 Spousal Benefit. Upon the death of a Participant who (i) has attained age 55; (ii) is either receiving or entitled to receive a Severance Benefit; and (iii) is survived by an Eligible Spouse, such Eligible Spouse becomes entitled to the benefit defined in this Article 7.03. If the Participant was receiving his Severance Benefit at the time of his death, the Eligible Spouse's benefit is an amount equal to 75% of the deceased Participant's actual Severance Benefit, payable monthly to the Eligible Spouse for her lifetime. 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 11 hereunder shall commence within 60 days of the Participant's death. 7.04 Resumption of Employment After Severance. In the event a Participant entitled to a Severance Benefit but prior to commencement of payment of such benefit 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 participate in the Plan as if his service with the Company had never terminated; provided, however, he shall not receive any Credited Service for time between his termination of employment and his re-employment. Anything in the foregoing to the contrary notwithstanding, however, if at the time of the Participant's re- employment payment of his Severance Benefit has already commenced, he shall be ineligible to again 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 ADMINISTRATIVE COMMITTEE 8.01 Authority. This Plan shall be administered by an Administrative Committee of not less than three (3) members appointed by the Board of Directors of Savannah Electric and Power 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. 8.02 Voting. The Committee shall act by a majority of the number then constituting the Committee, and such action may be 12 taken either by a vote at a meeting or in writing without a meeting. 8.03 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 regulationsfor theconduct ofits businessasit shalldeem advisable. 8.04 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 IX AMENDMENT AND TERMINATION 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, such termination shall not affect any vested accrued benefits of participants hereunder. Notwithstanding any provision of this Plan, should there be a change in the Internal Revenue Code prior to January 1, 1985, which would adversely affect the Company's operation of this Plan, the Board of Directors may, at its option, terminate this Plan and distribute the amounts deferred to the Participants plus compound interest at the rate of nine percent (9%) per annum. ARTICLE X MISCELLANEOUS 10.01 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 13 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. 10.02 No Trust Created. The obligations of the Company to make payments hereunder shall constitute a liability of the Company to a Participant. 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. 10.03 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. 14 10.04 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. 10.05 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. 10.06 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. 15 10.07 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. 10.08 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. 10.09 Age Differential of Spouse. If a Participant's Eligible Spouse at the time of commencement of a (i) Normal Retirement Benefit; (ii) Early Retirement Benefit; (iii) Postponed Retirement Benefit; (iv) Pre-Retirement Death Benefit; or (v) 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 5.06 of the Pension Plan and assuming that the Eligible Spouse is ten years older than such spouse's attained age. ARTICLE XI CONSTRUCTION 11.01 Governing Law. This Plan shall be construed and governed in accordance with the laws of the State of Georgia. 11.02 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. 11.03 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. 16 11.04 Children. All references in the Plan to a Participant's children shall include both natural and adopted children. 11.05 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. This Plan in its original form was adopted and became effective on January 1, 1984. This Plan, as amended on July 23, 1986 (Amendment No. 1), herein described is effective as of, and with respect to Supplemental Executive Retirement Plan Agreements entered into on or after, January 1, 1987. SAVANNAH ELECTRIC AND POWER COMPANY By: A.M. Gignilliat, Jr. President and Chief Executive Officer ATTEST: K. R. Willis Treasurer and Secretary /sd (Corporate Seal) 17 SAVANNAH ELECTRIC AND POWER COMPANY C E R T I F I C A T E I, Grace E. Arnold, DO HEREBY CERTIFY, that I am Secretary of Savannah Electric and Power Company (hereinafter called the "Company") , a Georgia corporation, and attached hereto is a true, correct and complete copy of certain resolutions duly adopted by the Board of Directors of Savannah Electric and Power Company at a meeting duly convened and held on May 21, 1991, at which meeting a quorum for the transaction of business was present and acting throughout and that said resolutions have not been altered, amended or rescinded and that the same is now in full force and effect. WITNESS my hand and the corporate seal of Savannah Electric and Power Company, this 28th day of May, 1991. Secretary of Savannah Electric and Power Company /sd RESOLVED: To amend Section 2.20 of the Supplemental Executive Retirement Plan (SERP) effective January 1, 1991, as follows: 2.20 Salary shall mean the annual compensation, excluding any incentive plan compensation, paid by the Company to a Participant plus amounts of compensation deferred under any deferred compensation plan or arrangement (including, without limitation, the Deferred Compensation Plan for Key Employees of Savannah Electric and Power Company.) RESOLVED: That the Manager-Human Resources be, and hereby is, named as a member of the Administrative Committee for each of the following plans: Savannah Electric and Power Company Employees' Retirement Plan, the Employee Stock Ownership Plan of Savannah Electric and Power Company, the 401(k) Employee Savings Plan, the Supplemental Executive Retirement Plan, the Deferred Compensation Plan for Key Employees and the Deferred Compensation Plan for Directors. ### IN WITNESS WHEREOF, Savannah Electric and Power Company has caused these Amendments to be duly adopted and the same to be executed by its duly authorized corporate officers and its corporate seal to be affixed hereto, this 21st day of May, 1991. SAVANNAH ELECTRIC AND POWER COMPANY By: A. M. Gignilliat, Jr., President & CEO Attest: G. E. Arnold, Secretary (Corporate Seal) RESOLVED: To amend section 2.20 of the Supplemental Executive Retirement Plan (SERP) effective January 1, 1991, as follows: 2.20 Salary shall mean the annual compensation, excluding any incentive plan compensation, paid by the Company to a Participant plus amounts of compensation deferred under any deferred compensation plan or arrangement (including, without limitation, the Deferred Compensation Plan for Key Employees of Savannah Electric and Power Company.) (adamscl) h:\wpdocs\mtd\savannah\serp.pln THIRD AMENDMENT TO THE SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN OF SAVANNAH ELECTRIC AND POWER COMPANY (AS AMENDED AND RESTATED EFFECTIVE JULY 23, 1986) WHEREAS, the Board of Directors of Savannah Electric and Power Company (the "Company") heretofore adopted the Supplemental Executive Retirement Plan of Savannah Electric and Power Company (the "Supplemental Plan") in order to provide certain key management employees of the Company with additional retirement compensation; and WHEREAS, the Plan is intended to operate in conjunction with the Employees' Retirement Plan of Savannah Electric and Power Company (the "Pension Plan"); and WHEREAS, the Pension Plan has been amended and restated to comply with the Tax Reform Act of 1986; and WHEREAS, it is the Company's desire to amend the Supplemental Plan at this time to acknowledge the changes to the Pension Plan and to address other issues concerning the operation of the Supplemental Plan; and WHEREAS, the Company has reserved the right to amend the Supplemental Plan at any time in Article IX. NOW, THEREFORE, effective October 12, 1994, the Company hereby amends the Plan as follows: 1. Article I is amended by clarifying the reference to the Savannah Electric and Power Company Long-Term Disability Plan to mean the Savannah Electric and Power Company Long Term Disability Income Plan. 2. Section 2.02 of the Plan is amended by deleting such Section in its entirety and inserting the following: 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 greater of (i) 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 (ii) 15 years of Credited Service.]1 3. Section 2.03(a) is amended by deleting such provision in its entirety and inserting the following: (a) A married Participant elects to receive his retirement benefit on a life and seventy-five percent (75%) joint survivor basis. 4. Section 2.03(b) is amended by deleting such provision in its entirety and inserting the following: (b) A single Participant elects to receive his retirement benefit on a life and ten-year certain basis. 5. Section 2.04 is amended by deleting such provision in its entirety and inserting the following: Committee shall mean the Administrative Benefits Committee appointed by the Board of Directors of the Company to administer the Plan. 6. Section 2.06 is amended by deleting such provision in its entirety and inserting the following: Credited Service shall have the same meaning as set forth in Article 4, Sections 4.02 and 4.05 of the Pension Plan. 7. Section 2.11 of the Plan is amended by deleting such provision in its entirety and inserting the following: Early Retirement Factor shall be 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 -2- would have completed at attainment of age 62 if he had remained employed until such age.]1 8. Section 2.13 of the Plan is amended by deleting the first sentence of this provision and inserting the following: Final Average Salary shall mean a Participant's average yearly Salary (as defined in Article 2.20) 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. 9. Section 2.16 is amended by deleting such provision in its entirety and inserting the following: 2.16 Pension Plan shall mean the "Employees' Retirement Plan of Savannah Electric and Power Company" (amended and restated effective January 1, 1989), as it may from time to time be amended in the future. 10. Section 2.17 is amended by deleting such provision in its entirety and inserting the following: 2.17 Pension Plan Spouse's Allowance shall mean the preretirement death benefit determined pursuant to Section 7.03 of the Pension Plan. 11. Section 2.25 is amended by deleting such provision in its entirety and inserting the following: 2.25 Social Security Amount shall have the same meaning as set forth in Section 1.29 of the Pension Plan. -3- 12. Section 2.26 is amended by deleting such provision in its entirety and inserting the following: 2.26 Total Disability and Totally Disabled shall have the same meaning as set forth in the Savannah Electric and Power Company Long Term Disability Income Plan. 13. Section 4.03(a) of the Plan is amended by deleting the second and third sentences thereof in their entirety and by inserting the following: The Postponed Retirement Benefit shall be equal to 1/12th of the Participant's SERP Retirement Benefit payable monthly during the Participant's lifetime. 14. Section 4.03(c) of the Plan is amended by deleting such provision in its entirety. IN WITNESS WHEREOF, the Board of Directors of Savannah Electric and Power Company hereby approves this Third Amendment to the Supplemental Executive Retirement Plan of Savannah Electric and Power Company, as executed by the undersigned authorized officer, and further authorizes such other actions necessary to implement this Amendment this _____ day of ________________, 1994, to be effective as of October 12, 1994. SAVANNAH ELECTRIC AND POWER COMPANY By: Arthur M. Gignilliat, Jr. President and Chief Executive Officer ATTEST: By: Lavonne K. Calandra Corporate Secretary (CORPORATE SEAL) [adamscl] h:\wpdocs\mtd\savannah\serp.3am -4- EX-10.(F)17 26 EXHIBIT 10(F)17 Exhibit 10(f)17 DEFERRED COMPENSATION PLAN FOR ______________________ KEY EMPLOYEES _____________________ OF SAVANNAH ELECTRIC AND POWER COMPANY 1As Amended July 23, 1986. Effective July 23, 1986. 2As Amended September 16, 1987. Effective January 1, 1987. TABLE OF CONTENTS ARTICLE I STATEMENT OF PURPOSE . . . . . . . . . . . . . 1 ARTICLE II DEFINITIONS . . . . . . . . . . . . . . . 1 ARTICLE III ELIGIBILITY AND PARTICIPATION . . . . . . 3 ARTICLE IV RETIREMENT BENEFITS . . . . . . . . . . . . . 5 ARTICLE V SURVIVOR BENEFITS . . . . . . . . . . . . . . 7 ARTICLE VI DISABILITY BENEFITS . . . . . . . . . . . . . 9 ARTICLE VII SEVERANCE BENEFITS . . . . . . . . . . . . . . 10 ARTICLE VIII ADDITIONAL BENEFITS . . . . . . . . . . . . . 11 ARTICLE IX ACCRUAL OF BENEFITS . . . . . . . . . . . . . 11 ARTICLE X ADMINISTRATIVE COMMITTEE . . . . . . . . . . . 11 ARTICLE XI AMENDMENT AND TERMINATION . . . . . . . . . . 13 ARTICLE XII MISCELLANEOUS . . . . . . . . . . . . . . . . 13 ARTICLE XIII CONSTRUCTION . . . . . . . . . . . . . . . . . 16 i 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. "Committee": The Administrative Committee appointed by the Board of Directors of the Company to administer this Plan. 3. "Company": Savannah Electric and Power Company, a Georgia corporation, and its corporate successors. 4. "Deferred Compensation Agreement": [The written agreement between the Company and a Participant in substantially the form attached hereto as Exhibit A and made a part hereof.]2 5. "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. 6. "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. 7. "Disability Retirement": Retirement from the employ of the Company because of Total Disability. 8. "Disability Retirement Date": The date upon which a Participant retires from the employ of the Company because of Total Disability. 9. "Early Retirement": Retirement from the employ of the Company upon or after attaining age sixty (60) but prior to age sixty-five (65). 10. "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. 11. "Employee": A person who is employed by the Company. 12. "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. 13. "Normal Retirement": Retirement from the employ of the Company upon the Normal Retirement Date. 14. "Normal Retirement Date": The date upon which such Participant attains the age of sixty-five (65). 15. "Participant": An Employee who is or hereafter becomes eligible to participate in the Plan and does participate by 2 electing, in the manner specified herein, to defer compensation pursuant to this Plan. 16. "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. 17. "Postponed Retirement": Retirement from the employ of the Company after attaining age sixty-five (65). 18. "Postponed Retirement Date": The date upon which a Participant over age sixty-five (65) retires from the employ of the Company. 19. "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. 20. "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. 21. "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 3 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 participates in the Plan by irrevocably electing, in the manner specified herein, to defer future Salary at an annual rate for one (1) or four (4) consecutive calendar years (or such fewer years remaining until the Employee's Normal Retirement Date). An eligible employee]2 may defer a minimum of $1,000 per year under the four (4) 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 (50) percent 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.]2 [4. Conditions Subsequent. The Committee shall be vested with the authority to condition the Company's obligations under a 4 Deferred Compensation Agreement upon the nonoccurrence of a legislative, judicial or regulatory development or change which adversely affects the Company's ability to informally finance such obligations, 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; (d) the current exclusion from income of "dividends" on a life insurance contract which are used to purchase additional insurance; and (e) the current provisions related to the deductibility of interest paid on policy loans. 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 of nine percent (9%) per annum compounded annually. 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.]1 ARTICLE IV RETIREMENT BENEFITS 1. Normal Retirement Benefit. 5 (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 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 6 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) 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 such accelerated Annuity Starting Date. (c) In the event a Participant elects an Accelerated Annuity Starting Date, his Early Retirement Benefit shall be reduced by [seven percent (7%)]2 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. 7 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 2. Payment. [Payment of the Survivor Benefit will]2 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 8 (180) equal monthly installments in a monthly amount equal to the present value at the Participant's date of death of the Partici- pant'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. 9 (e) Notwithstanding anything herein to the contrary, in the event the Participant's death occurs prior to April 1 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.]2 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]2 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 10 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.]2 [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]2 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,]2 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 fifteen (15) Years of Service nor attained age fifty-five (55) 11 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.]2 (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 fifteen (15) or more Years of Service or attained age fifty-five (55) 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 12 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.]2 ARTICLE X ADMINISTRATIVE COMMITTEE 13 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. 14 ARTICLE XI AMENDMENT AND TERMINATION 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, such termination shall not affect the Deferred Compensation Agreements then in effect. Notwithstanding any provision of this Plan, should there be a change in the Internal Revenue Code prior to January 1, 1985, which would adversely affect the Company's operation of this Plan, the Board of Directors may, at its option, terminate this Plan. Upon such termination all amounts previously deferred shall be refunded to the respective Participants together with interest thereon at nine percent (9%) per annum. ARTICLE XII 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 15 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. 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. 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 16 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 con- tained 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. 17 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 XIII 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. 18 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. THIS PLAN in its original form was adopted and became effective on December 1, 1983. This Plan, as amended on July 23, 1986 (Amendment No. 1), and as amended on September 16, 1987 (Amendment No. 2), herein described is effective as of, and with respect to Deferred Compensation Agreements entered into on or after, January 1, 1987. SAVANNAH ELECTRIC AND POWER COMPANY By: A.M. Gignilliat, Jr. President and Chief Executive Officer ATTEST: K. R. Willis Treasurer and Secretary /sd (Corporate Seal) 19 EXHIBIT A DEFERRED COMPENSATION AGREEMENT THIS AGREEMENT is made this _______________ day of ___________________ 19__, between SAVANNAH ELECTRIC AND POWER COMPANY, a Georgia corporation (hereinafter the "Company"), and ______________________________________, a Key Employee of the Company (hereinafter called "Participant"). WHEREAS, the Board of Directors of the Company has approved a Deferred Compensation Plan for the purpose of attracting and retaining in the employment of the Company outstanding Key Employees; and WHEREAS, such Deferred Compensation Plan provides that the Participant becomes eligible to participate upon execution of a Deferred Compensation Agreement; NOW, THEREFORE, in consideration of the mutual agreements herein contained, the Company and the Participant agree as follows: 1. Participation. This Agreement is made to evidence the Participant's participation in the Deferred Compensation Plan for Key Employees of SAVANNAH ELECTRIC AND POWER COMPANY (hereinafter the "Plan"), to set forth the amount of the Participant's compensation to be [deferred, to establish the amount of the Participant's Normal Retirement Benefit and certain Survivor Benefits under the Plan, and to set forth the Present Value Interest Rate.]2 2. Adoption of Plan. The Plan (and all its provisions), as it now exists and as it may be amended hereafter, is incorporated herein and made a part of this Agreement. 3. Definitions. When used herein, the terms which are defined in the Plan shall have the meanings given them in the Plan, unless a different meaning is clearly required by the context. 4. No Interest Created. Neither the Participant nor his Designated Beneficiary shall have any interest in any assets of A-1 the Company, including policies of insurance. The Participant and his Designated Beneficiary shall have only the right to receive the benefits under the Plan and this Agreement. 5. Deferrals. Pursuant to Article III of the Plan, the Participant hereby elects to defer the receipt of, and the Company hereby elects to defer the payment of, Salary in the a m o u n t o f _______________________________________________________________ [Dollars ($______________) per year as follows: (a) One (1) year deferral: for the calendar year _______________. (b) Four (4) year deferral: for the calendar years ________, ________, ________, and _____________.]2 6. Normal Retirement Benefit. The Participant's Normal Retirement Benefit, as defined in Article IV of the Plan, is _________________________________________________ [Dollars ($_____________)]2 per month, payable for 180 months. 7. Survivor Benefit. [If the Participant is Insurable, the Participant's Survivor Benefit, payable pursuant to Section 3(a) of Article V of the Plan,]2 is the appropriate monthly amount, payable for 180 months, as follows: Participant's Age Monthly Amount at Date of Death (payable for 180 months) 8. [Present Value Interest Rate. If the Participant is not Insurable, the interest rate for purposes of determining the Participant's Survivor Benefit, if any, pursuant to ARTICLE V, Section 3(b) (i.e., the present value of the Participant's A-2 monthly Normal Retirement Benefit), shall be ______________ percent compounded annually.]2 [9. Condition Subsequent. The Company's obligations to pay the Participant or his Designated Beneficiary the benefits provided for herein are conditioned upon the nonoccurrence of the following event(s): [Insert here description of event(s) constituting condition subsequent, asdetermined from time to time by the Committee] If any of such events occur, 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, as applicable, the deferrals the Participant has made hereunder with interest from the date of a deferral accrued at the rate of nine percent (9%) per annum compounded annually. The payment of such refund shall fully and completely discharge the Company's obligations hereunder and shall fully and completely satisfy all the participant's and his Designated Beneficiary's rights hereunder.]1,2 [10. Entire Agreement. This Agreement contains the entire agreement and understanding by and between the Company and the Participant with respect to the subject matter hereof, and no representations, promises, agreements, or understandings, written or oral, not contained herein shall be of any force or effect.]1,2 IN WITNESS WHEREOF, the parties have executed this Agreement in duplicate originals as of the day and year first above written. SAVANNAH ELECTRIC AND POWER COMPANY By: A. M. Gignilliat, Jr. President and Chief Executive Officer ATTEST: A-3 K. R. Willis Treasurer and Secretary (Corporate Seal) Employee: (L.S.) Participant A-4 Designation of Beneficiary Deferred Compensation Plan for Key Employees of Savannah Electric and Power Company As a Participant in the Deferred Compensation Plan for Key Employees of Savannah Electric and Power Company, I hereby designate the following person(s) as "Designated Beneficiary," as that term is defined and used in the Plan: _________________________________________________________________ _____________ _________________________________________________________________ _____________ _________________________________________________________________ _____________ _________________________________________________________________ _____________ _________________________________________________________________ _____________ _________________________________________________________________ _____________ _________________________________________________________________ _____________ _________________________________________________________________ _____________ _________________________________________________________________ _____________ _________________________________________________________________ _____________ I understand that the Designated Beneficiary named above may be changed or revoked by me at any time by filing a new designation in writing with the Committee. Date_____________________________ ___________________________________ Signature of Participant [adamscl] h:\wpdocs\mtd\savannah\d-comp-ee.pln FIRST AMENDMENT TO THE DEFERRED COMPENSATION PLAN FOR KEY EMPLOYEES OF SAVANNAH ELECTRIC AND POWER COMPANY WHEREAS, the Board of Directors of Savannah Electric and Power Company (the "Company") heretofore adopted the Deferred Compensation Plan for Key Employees of Savannah Electric and Power Company (the "Plan"), in order to provide key management employees of the Company with long-term compensation incentives; and WHEREAS, the Plan has been amended from time to time to change the terms of these long-term compensation incentives; and WHEREAS, it is the Company's desire to amend the Plan at this time to clarify administration of the Plan; and WHEREAS, the Company has reserved the right to amend the Plan at any time in Article XI of the Plan. NOW, THEREFORE, effective October 12, 1994, the Company hereby amends the Plan as follows: 11. Section 2.2 of the Plan is amended by deleting such provision in its entirety and inserting the following: "Committee": The Administrative Benefits Committee appointed by the Board of Directors of the Company to administer the Plan. IN WITNESS WHEREOF, the Board of Directors of Savannah Electric and Power Company hereby approves this First Amendment to the Deferred Compensation Plan for Key Employees of Savannah Electric and Power Company, as executed by the undersigned authorized officer, and further authorizes such other actions necessary to implement this Amendment this _____ day of ________________, 1994, to be effective as of October 12, 1994. SAVANNAH ELECTRIC AND POWER COMPANY By: Arthur M. Gignilliat, Jr. President and Chief Executive Officer ATTEST: Lavonne K. Calandra Corporate Secretary (CORPORATE SEAL) EX-10.(F)20 27 EXHIBIT 10(F)20 Exhibit 10(f)20 DEFERRED COMPENSATION PLAN FOR ___________________________ DIRECTORS ___________________________ OF SAVANNAH ELECTRIC AND POWER COMPANY 1As Amended July 23, 1986. Effective July 23, 1986. 2As Amended September 18, 1987. Effective January 1, 1987 3As Amended May 15, 1990. Effective January 1, 1991. TABLE OF CONTENTS ARTICLE I STATEMENT OF PURPOSE . . . . . . . . . . . . . 1 ARTICLE II DEFINITIONS . . . . . . . . . . . . . . . 1 ARTICLE III ELIGIBILITY AND PARTICIPATION . . . . . . 3 ARTICLE IV RETIREMENT BENEFITS . . . . . . . . . . . . . 5 ARTICLE V SURVIVOR BENEFITS . . . . . . . . . . . . . . 8 ARTICLE VI SEVERANCE BENEFITS . . . . . . . . . . . . . . 10 ARTICLE VII ACCRUAL OF BENEFITS . . . . . . . . . . . . . 12 ARTICLE VIII ADMINISTRATIVE COMMITTEE . . . . . . . . . . . 12 ARTICLE IX AMENDMENT AND TERMINATION . . . . . . . . . . 13 ARTICLE X MISCELLANEOUS . . . . . . . . . . . . . . . . 14 ARTICLE XI CONSTRUCTION . . . . . . . . . . . . . . . . . 17 i 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 Directors of the Company; to further the long-term growth and earnings of the Company by offering long-term incentives to Directors in addition to current fees; and to attract and retain outstanding individuals as Directors of the Company through enhancement of the value of fees paid to individuals. ARTICLE II DEFINITIONS When used herein the following terms shall have the meanings indicated unless a different meaning clearly required by the context. 1. "Annuity Starting Date": The date on which payment of a benefit payable hereunder is to commence. 2. "Committee": The Administrative Committee appointed by the Board of Directors of the Company to administer this Plan. 3. "Company": Savannah Electric and Power Company, a Georgia corporation, and its corporate successors. 4. "Deferred Compensation Agreement": Written agreement between the Company and a Participant in substantially the form attached hereto as Exhibit A and made a part hereof. 5. "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 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. 6. "Director": A person who is a duly qualified and acting member of the Board of Directors of the Company. 7. "Early Retirement": Retirement from the Directorship of the Company after attaining age sixty (60) but prior to age sixty-five (65) for those under age fifty (50) at time of election and prior to age seventy (70) for those fifty (50) years of age and over at time of election. 8. "Early Retirement Date": The date upon which Participants have attained an age of at least sixty (60) but have not yet reached ages sixty-five (65) or seventy (70), respectively, retires from the Directorship of the Company. 9. "Insurable": The life of a Participant is insurable 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. 10. "Normal Retirement": Retirement from the Directorship of the Company upon or after attaining age sixty-five (65) for those under age fifty (50) at time of election and age seventy (70) for those fifty (50) years of age and older at time of election. 2 11. "Normal Retirement Date": The date upon which Participants who have attained an age of at least sixty-five (65) or seventy (70), respectively, as the case shall be, retire from the Directorship of the Company. 12. "Participant": A Director 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. 13. "Plan": The Deferred Compensation Plan for Directors of Savannah Electric and Power Company contained herein, and as may be amended from time to time hereafter. 14. "Plan Year": The period commencing January 1 and ending the following December 31. 15. "Postponed Retirement": Retirement from the Directorship of the Company after continuing to serve as such following attainment of: (i) age sixty-five (65) for a Participant under age fifty (50) at time of deferral election and (ii) age seventy (70) for a Participant fifty (50) years of age and older at time of deferral election. 16. "Postponed Retirement Date": The date upon which a Participant who has Postponed Retirement retires from the Directorship of the Company. ARTICLE III ELIGIBILITY AND PARTICIPATION 1. Eligibility. [Any Director of the Company is eligible to participate in this Plan.]2 3 2. Participation. (a) [An eligible Director participates in the Plan by irrevocably electing, in the manner specified herein, to defer all or any part of future Director's fees at an annual rate of from one (1) to four (4) consecutive Plan Years. The Deferred Compensation Agreement shall stipulate, with respect to each such Plan Year, the [percentage of fees to be deferred or the fixed dollar amount to be deferred];3 provided, however, the annual deferral amount shall not be less than $1,000.00.]2 (b) An eligible Director becomes a Participant in the Plan upon the execution and delivery of a Deferred Compensation Agreement. Such Agreement must be executed on or before the December 31st next preceding succeeding Plan Years to defer Director's fees to be earned in such Plan Years. 3. [Benefits. Benefits payable pursuant to any election made hereunder will be calculated and based upon both the Participant's age at the time of the deferral election and the amount of deferrals. In addition, the amount of Survivor Benefits will depend upon whether the Participant is Insurable or non-Insurable.]2 [4. Conditions Subsequent. The Committee shall be vested with the authority to condition the Company's obligations under a Deferred Compensation Agreement upon the nonoccurrence of a legislative, judicial or regulatory development or change which adversely affects the Company's ability to informally finance 4 such obligations, 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; (d) the current exclusion from income of "dividends" on a life insurance contract which are used to purchase additional insurance; and (e) the current provisions related to the deductibility of interest paid on policy loans. 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 of nine percent (9%) per annum compounded annually. The payment of such refund shall fully and completely discharge the Company's obligations under the Deferred Compensation Agreement and shall 5 fully and completely satisfy all the Participant's and his Designated Beneficiary's rights thereunder.]1 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 on a number of factors, including among other things, the amount of the deferral, and the length of time between the time 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 the Postponed Retirement Benefit. The Postponed Retirement Benefit is a level fifteen (15) year annuity payable in equal monthly installments. Payment 6 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 eight percent (8%) 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 of cash, 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 sixty-fifth (65th) birthday for those under age fifty (50) at time of deferral election and age seventy (70) for those fifty (50) years of age and older at time of deferral election (such date being the "Regular Annuity Staring Date"), and shall continue on the first day of each month thereafter until one hundred eight (180) monthly payments have been made. 7 (b) 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 such accelerated Annuity Starting Date. (c) In the event a Participant elects an Accelerated Annuity Starting Date, his Early Retirement Benefit shall be reduced by the early retirement percentage as specified in Participant's Deferred Compensation Agreement compounded 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. 8 ARTICLE V SURVIVOR BENEFITS 1. [Survivor Benefit. Upon the occurrence of any of the following events, the Company shall pay to a 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 serving as a Director of 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; or (c) The death of the Participant after becoming entitled to the Severance Benefit of Article VI, Section 1, 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. 9 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 stated in the Participant's Deferred Compensation Agreement. (b) If the Participant is not Insurable and his death occurs at a time when, had he retired on the day of his death, he would have been entitled to a Retirement Benefit of Article IV, 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 Participant's Deferred Compensation Agreement, discounted, for the period between the Participant's Regular Annuity Starting Date (as defined in Article IV, Section 1(a)) and the Participant's date of death, by the early retirement percentage stated in the Participant's Deferred Compensation Agreement 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 10 Participant's Deferred Compensation Agreement, increased by eight percent (8%) 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 his death occurs at a time when, had he retired on the day of his death, he would not have been entitled to a Retirement Benefit of Article IV, 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 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 1 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 11 gross deferrals made, if any, pursuant to such Deferred Compensation Agreement plus interest thereon at nine percent (9%) per annum until date of payment.]2 ARTICLE VI SEVERANCE BENEFITS 1. In the event a Participant's relationship as a Director of the Company terminates for any reason other than death, Early Retirement or Normal Retirement, such Participant shall be entitled to 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. Notwithstanding the foregoing, such terminated Participant may request to receive, in lieu of the Severance Benefit provided by Section 1 of this Article VI, a benefit equal to his actual gross deferrals plus interest thereon at nine percent (9%) per annum compounded annually until such termination. Payment of such benefit is at the discretion of the Committee and shall commence on the first day of the month following approval of such request. Such benefit shall be payable in the option of the Committee either in a lump sum or in 12 up to sixty (60) equal consecutive monthly installments with interest at nine percent (9%) per annum. 3. In the event a Participant dies prior to full payment of his Severance Benefit under this Article VI, all remaining payments due hereunder shall be made to such Participant's Designated Beneficiary. ARTICLE VII ACCRUAL OF BENEFITS 1. If a Participant's relationship with the Company as a Director 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 VII 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;]2 or (c) Article VI, Section 2 [only.]2 ARTICLE VIII 13 ADMINISTRATIVE COMMITTEE 1. This Plan shall be administered by an Administrative Committee of not less than three (3) members appointed by the Savannah Electric and Power 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 determined 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. 14 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 IX AMENDMENT AND TERMINATION 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, such termination shall not affect the Deferred Compensation Agreements then in effect. Notwithstanding any provision of this Plan, should there be a change in the Internal Revenue Code prior to January 1, 1985, which would adversely affect the Company's operation of this Plan, the Board of Directors may, at its option, terminate this Plan. Upon such termination all amounts previously deferred shall be refunded to the respective Participants together with interest thereon at nine percent (9%) per annum. 15 ARTICLE X 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 within 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 16 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. 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. 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 a Director of the Company. No provision herein shall restrict the right of the Company to terminate a Participant as a member of the Board of Directors, or restrict the right of any Participant to terminate his role as a Director of 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 17 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 18 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 X, Section 5 hereinabove. 8. Entire Plan. This documents 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. ARTICLE XI 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 19 convenience of reference only and are not part of the substance of this Plan. (Continued on Next Page) 20 This Plan in its original form was adopted and became effective on December 1, 1983. This Plan, as amended on July 23, 1988 (Amendment No. 1), as amended on September 16, 1987 (Amendment No. 2), and as amended on May 15, 1990 (Amendment No. 3), herein described is effective as of, and with respect to Deferred Compensation Agreements entered into on or after, January 1, 1991. SAVANNAH ELECTRIC AND POWER COMPANY By: A.M. Gignilliat, Jr. President and Chief Executive Officer ATTEST: K.R. Willis Treasurer and Secretary /sd [Corporate Seal] 21 EXHIBIT A DEFERRED COMPENSATION AGREEMENT THIS AGREEMENT is made this ____ day of _____________________, 19__, between SAVANNAH ELECTRIC AND POWER COMPANY, a Georgia corporation (hereinafter the "Company"), and _______________________________________________, a Director of the Company (hereinafter called "Participant"). [WHEREAS, the Board of Directors of the Company has approved a Deferred Compensation Plan for the purpose of attracting and retaining outstanding Directors of the Company;]2 and WHEREAS, such Deferred Compensation Plan provides that the Participant becomes eligible to participate upon execution of a Deferred Compensation Agreement; NOW, THEREFORE, in consideration of the mutual agreements herein contained, the Company and the Participant agree as follows: 1. Participation. This Agreement is made to evidence the Participant's participation in the Deferred Compensation Plan for Directors of SAVANNAH ELECTRIC AND POWER COMPANY (hereinafter the "Plan"), to set forth the [percentage or the fixed dollar]3 amount of the Participant's [fees to be deferred, to establish the amount of the Participant's Normal Retirement Benefit and certain Survivor Benefits under the Plan, and to set forth the Early Retirement Percentage.]2 A-1 2. Adoption of Plan. The Plan (and all its provisions), as it now exists and as it may be amended hereafter, is incorporated herein and made a part of this Agreement. 3. Definitions. When used herein, the terms which and defined in the Plan shall have the meanings given them in the Plan, unless a different meaning is clearly required by the context. 4. [No Interest Created. Neither the Participant nor his Designated Beneficiary shall have any interest in any assets of the Company, including policies of insurance. The Participant and his Designated Beneficiary shall have only the right to receive the benefits under the Plan and this Agreement.]2 5. Early Retirement Percentage. The Participant's Early Retirement Percentage is _____________ [percent (____%)].2 6. [Deferrals. Pursuant to Article III of the Plan, the Participant hereby elects to defer the receipt of, and the Company hereby elects to defer the payment of, director's fees in the [percentage(s) or the fixed dollar amount(s) and for the calendar year(s) indicated below: Fixed Dollar Percentage (or) Amount Calendar Year (i) $ % (ii) $ % (iii) $ % (iv) $ % 2,3 A-2 7. Normal Retirement Benefit. The Participant's Normal Retirement Benefit, as defined in Article IV of the Plan, is _____________________________________________ [Dollars ($_____________________)]2 per month, payable for 180 months. 8. Survivor Benefit. [If the Participant is Insurable, the Participant's Survivor Benefit, payable pursuant to Section 3(a) of Article V of the Plan, is the appropriate monthly amount, payable for 180 months, as follows: Participant's Age at Date of Monthly Amount (payable for Death 180 months) If the Participant is not Insurable, the discount for interest for purposes of determining the Participant's Survivor Benefit, if any, pursuant to ARTICLE V, Section 3(b) (i.e., the present value of the Participant's monthly Normal Retirement Benefit), shall be the Early Retirement Percentage set forth in Paragraph 5 above, compounded annually.]2 [9. Condition Subsequent. The Company's obligations to pay the Participant or this Designated Beneficiary the benefits provided for herein are conditioned upon the nonoccurrence of the following event(s): [Insert description of event(s) constituting condition subsequent as determined from time to time by the Committee] A-3 If any such events occur, 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, as applicable, the deferrals the Participant has made hereunder with interest from the date of deferral accrued at the rate of nine percent (9%) per annum compounded annually. The payment of such refund shall fully and completely discharge the Company's obligations hereunder and shall fully and completely satisfy all the participant's and his Designated Beneficiary's rights hereunder.]1,2 10. Entire Agreement. This Agreement contains the entire agreement and understanding by and between the Company and the Participant [with respect to the subject matter hereof, and no representations, promises, agreements, or understandings, written or oral, not contained herein shall be of any force or effect.]1.2 IN WITNESS WHEREOF, the parties have executed this Agreement in duplicate originals as of the day and year first above written. SAVANNAH ELECTRIC AND POWER COMPANY By: A.M. Gignilliat, Jr. President and Chief Executive Officer ATTEST: A-4 K.R. Willis Treasurer and Secretary [Corporate Seal] Participating Director (L.S.) Participant A-5 Designation of Beneficiary Deferred Compensation Plan for Directors of Savannah Electric and Power Company As a Participant in the Deferred Compensation Plan for Directors of Savannah Electric and Power Company, I hereby Designate the following person(s) as "Designated Beneficiary," as that term is defined and used in the Plan: _________________________________________________________________ _____________ _________________________________________________________________ _____________ _________________________________________________________________ _____________ _________________________________________________________________ _____________ _________________________________________________________________ _____________ _________________________________________________________________ _____________ _________________________________________________________________ _____________ _________________________________________________________________ _____________ _________________________________________________________________ _____________ _________________________________________________________________ _____________ I understand that the Designated Beneficiary named above may be changed or revoked by me at any time by filing a new designation in writing with the Committee. Date______________________________ ________________________________________ Signature of Participant (adamscl) h:\wpdocs\mtd\savannah\def-comp.pln FIRST AMENDMENT TO THE DEFERRED COMPENSATION PLAN FOR DIRECTORS OF SAVANNAH ELECTRIC AND POWER COMPANY (AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1991) WHEREAS, the Board of Directors of Savannah Electric and Power Company, Inc. (the "Company") heretofore adopted the Deferred Compensation Plan for Directors of Savannah Electric and Power Company (the "Plan"), originally effective December 1, 1983, in order to provide Directors of the Company with long-term compensation incentives; and WHEREAS, the Plan has been amended from time to time to change the terms of these long-term compensation incentives; and WHEREAS, it is the Company's desire to amend the Plan at this time to provide a more flexible distribution provision under the Plan; and WHEREAS, the Company has reserved the right to amend the Plan at any time in Article IX of the Plan. NOW, THEREFORE, effective May 1, 1994, the Company hereby amends the Plan as follows: Section 4.1(a) is amended by deleting the third sentence of such Section in its entirety and replacing it with the following: Payment of the Normal Retirement Benefit shall commence on the first day of the month 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 and eighty (180) monthly payments have been made. Section 4.2(a) is amended by deleting the third sentence of such Section in its entirety and replacing it with the following: Payment of the Postponed Retirement Benefit shall commence on the first day of the month 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 and eighty (180) monthly payments have been made. Section 4.3(a) is amended by deleting the third sentence of such Section in its entirety and replacing it with the following: Subject to Sections 3(b) and 3(c) of this Article IV, payment of Early Retirement Benefits shall commence on the Regular Annuity Starting Date and shall continue on the first day of each month thereafter until one hundred and eighty (180) monthly payments have been made. Section 4.3(b) is amended by deleting the first sentence of such Section in its entirety and replacing it with the following: A Participant is entitled to elect to have payment of his Early Retirement Benefit commence on the first day of the month immediately following his Early Retirement Date and preceding his Regular Annuity Starting Date (such date being the "Accelerated Annuity Starting Date"). IN WITNESS WHEREOF, the Executive Committee of the Board of Directors of Savannah Electric and Power Company, which is authorized to act on behalf of the full Board, hereby approves this First Amendment to the Deferred Compensation Plan for Directors of Savannah Electric and Power Company, as executed by the undersigned authorized officer, and further authorizes such other actions necessary to implement this Amendment this _____ day of ________________, 1994, to be effective as of May 1, 1994. SAVANNAH ELECTRIC AND POWER COMPANY, INC. By: Title: ATTEST: By: Title: [adamscl] h:\wpdocs\mtd\savannah\def-comp.1am 2 SECOND AMENDMENT TO THE DEFERRED COMPENSATION PLAN FOR DIRECTORS OF SAVANNAH ELECTRIC AND POWER COMPANY (AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1991) WHEREAS, the Board of Directors of Savannah Electric and Power Company (the "Company") heretofore adopted the Deferred Compensation Plan for Directors of Savannah Electric and Power Company (the "Plan"), originally effective December 1, 1983, in order to provide Directors of the Company with long-term compensation incentives; and WHEREAS, the Plan has been amended from time to time to change the terms of these long-term compensation incentives; and WHEREAS, it is the Company's desire to amend the Plan at this time to clarify the treatment of Director's Fees occurring mid-term during a Plan Year; and WHEREAS, the Company has reserved the right to amend the Plan at any time in Article IX of the Plan. NOW, THEREFORE, effective July 29, 1994, the Company hereby amends the Plan as follows: Section 3.2(a) is amended by adding to the end thereof the following: Notwithstanding the foregoing, no deferral election shall be effective with respect to any increase in Director's Fees, whether denominated as retainer fees or meeting fees, which increase occurs mid-term during a Plan Year. However, such increase shall be subject to the deferral election procedures set forth in paragraph (b) below, beginning on the first day of the first Plan Year following such increase. IN WITNESS WHEREOF, the Executive Committee of the Board of Directors of Savannah Electric and Power Company, which is authorized to act on behalf of the full Board, hereby approves this Second Amendment to the Deferred Compensation Plan for Directors of Savannah Electric and Power Company, as executed by the undersigned authorized officer, and further authorizes such other actions necessary to implement this Amendment this _____ day of ________________, 1994, to be effective as of July 29, 1994. SAVANNAH ELECTRIC AND POWER COMPANY By: Title: ATTEST: By: Title: [adamscl] h:\wpdocs\mtd\savannah\def-comp.2am -2- THIRD AMENDMENT TO THE DEFERRED COMPENSATION PLAN FOR DIRECTORS OF SAVANNAH ELECTRIC AND POWER COMPANY (AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1991) WHEREAS, the Board of Directors of Savannah Electric and Power Company (the "Company") heretofore adopted the Deferred Compensation Plan for Directors of Savannah Electric and Power Company (the "Plan"), originally effective December 1, 1983, in order to provide Directors of the Company with long-term compensation incentives; and WHEREAS, the Plan has been amended from time to time to change the terms of these long-term compensation incentives; and WHEREAS, it is the Company's desire to amend the Plan at this time to address the increased payment of compensation in the form of stock and fees to Participants in the Plan; and WHEREAS, the Company has reserved the right to amend the Plan at any time in Article IX of the Plan. NOW, THEREFORE, effective October 12, 1994, the Company hereby amends the Plan as follows: (i) Section 2.2 of the Plan is amended by deleting such provision in its entirety and inserting the following: "Committee": The Administrative Benefits Committee appointed by the Board of Directors of the Company to administer the Plan. (ii) Section 2.7 of the Plan is amended by deleting such Section in its entirety and inserting the following: "Early Retirement": Retirement from the Directorship of the Company after attaining age sixty (60) but prior to age sixty-five (65) for those under age fifty (50) at the time of deferral election and prior to age seventy (70) for those fifty (50) years of age and over at the time of deferral election. (iii) Section 2.10 of the Plan is amended by deleting such Section in its entirety and inserting the following: "Normal Retirement": Retirement from the Directorship of the Company upon or after attaining age sixty-five (65) for those under age fifty (50) at the time of deferral election and age seventy (70) for those fifty (50) years of age and older at the time of deferral election. (iv) Article II is amended by adding a new paragraph 17 as follows: "Director's Fees" shall mean the compensation payable to the Directors of the Company, including retainer fees and meeting fees, but excluding any amount paid in the form of stock, as determined from time to time by the Board of Directors. (v) Section 3.2(b) of the Plan is amended by adding to the end of such Section the following language: If the Director's Fees paid to a Director are increased during a Plan Year, such Director shall receive a Deferred Compensation Agreement proscribed by the Committee and shall be entitled to make a new deferral election regarding such increase which shall be effective as of the first day of the next following Plan Year. (vi) The Deferred Compensation Agreement whereby Participants elect to defer Director's Fees is amended as set forth in Exhibit A. (vii) For purposes of new Section 3.2(b) above, the Supplemental Deferred Compensation Agreement is adopted as is set forth in Exhibit B. -2- IN WITNESS WHEREOF, the Board of Directors of Savannah Electric and Power Company hereby approves this Third Amendment to the Deferred Compensation Plan for Directors of Savannah Electric and Power Company, as executed by the undersigned authorized officer, and further authorizes such other actions necessary to implement this Amendment this _____ day of ________________, 1994, to be effective as of October 12, 1994. SAVANNAH ELECTRIC AND POWER COMPANY By: Arthur M. Gignilliat, Jr. President and Chief Executive Officer ATTEST: Lavonne K. Calandra Corporate Secretary (CORPORATE SEAL) [adamscl] h:\wpdocs\mtd\savannah\def-comp.3am -3- EXHIBIT A DEFERRED COMPENSATION AGREEMENT THIS AGREEMENT is made this ____ day of _______________, 19___, between SAVANNAH ELECTRIC AND POWER COMPANY, a Georgia corporation (hereinafter the "Company"), and _____________________________________, a Director of the Company (hereinafter called "Participant"). [WHEREAS, the Board of Directors of the Company has approved a Deferred Compensation Plan for the purpose of attracting and retaining outstanding Directors of the Company;]2 and WHEREAS, such Deferred Compensation Plan provides that the Participant becomes eligible to participate upon execution of a Deferred Compensation Agreement; NOW, THEREFORE, in consideration of the mutual agreements herein contained, the Company and the Participant agree as follows: (viii) Participation. This Agreement is made to evidence the Participant's participation in the Deferred Compensation Plan for Directors of SAVANNAH ELECTRIC AND POWER COMPANY (hereinafter the "Plan"), to set forth the [percentage or the fixed dollar]3 amount of the Participant's [fees to be deferred, to establish the amount of the Participant's Normal Retirement Benefit and certain Survivor Benefits under the Plan, and to set forth the Early Retirement Percentage.]2 (ix) Adoption of Plan. The Plan (and all its provisions), as it now exists and as it may be amended hereafter, is incorporated herein and made a part of this Agreement. A-1 (x) Definitions. When used herein, the terms which are defined in the Plan shall have the meanings given them in the Plan, unless a different meaning is clearly required by the context. (xi) [No Interest Created. Neither the Participant nor his Designated Beneficiary shall have any interest in any assets of the Company, including policies of insurance. The Participant and his Designated Beneficiary shall have only the right to receive the benefits under the Plan and this Agreement.]2 (xii) Early Retirement Percentage. The Participant's Early Retirement Percentage is ____________________ [percent (___%)].2 (xiii) [Deferrals. Pursuant to Article III of the Plan, the Participant hereby elects to defer the receipt of, and the Company hereby elects to defer the payment of, director's fees in the [percentage(s) or the fixed dollar amount(s) and for the calendar year(s) indicated below: Fixed Calendar Percentage (or) Dollar Year Amount (i) ___________ $__________ _________ % __ (ii) ___________ $__________ _________ % __ (iii) ___________ $__________ _________ % __ (iv) ___________ $__________ _________]2, % __ 3 (xiv) Normal Retirement Benefit. The Participant's Normal Retirement Benefit, as defined in Article IV of the Plan, A-2 is ________________________________________ [Dollars ($_______________)]2 per month, payable for 180 months. (xv) Survivor Benefit. [If the Participant is Insurable, the Participant's Survivor Benefit, payable pursuant to Section 3(a) of Article V of the Plan, is the appropriate monthly amount, payable for 180 months, as follows: Participant's Age Monthly Amount at Date of Death (payable for 180 months) If the Participant is not Insurable, the discount for interest for purposes of determining the Participant's Survivor Benefit, if any, pursuant to ARTICLE V, Section 3(b) (i.e., the present value of the Participant's monthly Normal Retirement Benefit), shall be the Early Retirement Percentage set forth in Paragraph 5 above, compounded annually.]2 [(xvi) Commencement of Benefits. Benefits provided under the Plan shall commence on the first day of the month next following the Participant's Early, Normal or Postponed Retirement Date.]4 [(xvii) Condition Subsequent. The Company's obligations to pay the Participant or his Designated Beneficiary the benefits provided for herein are conditioned upon the nonoccurrence of the following event(s): [Insert description of event(s) constituting condition subsequent as determined from time to time by the Committee] A-3 If any such events occur, 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, as applicable, the deferrals the Participant has made hereunder with interest from the date of deferral accrued at the rate of nine percent (9%) per annum compounded annually. The payment of such refund shall fully and completely discharge the Company's obligations hereunder and shall fully and completely satisfy all the Participant's and his Designated Beneficiary's rights hereunder.]1,2 (xviii) Entire Agreement. This Agreement contains the entire agreement and understanding by and between the Company and the Participant [with respect to the subject matter hereof, and no representations, promises, agreements, or understandings, written or oral, not contained herein shall be of any force or effect.]1,2 IN WITNESS WHEREOF, the parties have executed this Agreement in duplicate originals as of the day and year first above written. SAVANNAH ELECTRIC AND POWER COMPANY By: Arthur M. Gignilliat, Jr. President and Chief Executive Officer ATTEST: Lavonne Calandra A-4 Corporate Secretary (CORPORATE SEAL) Participating Director: (L.S.) Participant 1 As Amended July 23, 1986. Effective July 23, 1986. 2 As Amended September 16, 1987. Effective January 1, 1987. 3 As Amended May 15, 1990. Effective January 1, 1991. 4 As Amended May 26, 1994. Effective May 1, 1994. [adamscl] h:\wpdocs\mtd\savannah\def-comp.agt A-5 EXHIBIT B SUPPLEMENTAL DEFERRED COMPENSATION AGREEMENT THIS AGREEMENT is made this ____ day of _______________, 19___, between SAVANNAH ELECTRIC AND POWER COMPANY, a Georgia corporation (hereinafter the "Company"), and _____________________________________, a Director of the Company (hereinafter called "Participant"). WHEREAS, the Board of Directors of the Company has approved a Deferred Compensation Plan for the purpose of attracting and retaining outstanding Directors of the Company; and WHEREAS, such Deferred Compensation Plan provides that the Participant becomes eligible to participate upon execution of a Deferred Compensation Agreement; and WHEREAS, the Board of Directors of the Company has approved an increase in Director's Fees; and WHEREAS, the Participant may elect to defer all or a portion of the increased Director's Fees. NOW, THEREFORE, in consideration of the mutual agreements herein contained, the Company and the Participant agree as follows: (xix) Participation. This Agreement is made to evidence the Participant's participation in the Deferred Compensation Plan for Directors of SAVANNAH ELECTRIC AND POWER COMPANY (hereinafter the "Plan"), to set forth the percentage or the fixed dollar amount of the Participant's fees to be deferred, to establish the amount of the Participant's Normal Retirement Benefit and certain B-1 Survivor Benefits under the Plan, and to set forth the Early Retirement Percentage. (xx) Adoption of Plan. The Plan (and all its provisions), as it now exists and as it may be amended hereafter, is incorporated herein and made a part of this Agreement. (xxi) Definitions. When used herein, the terms which are defined in the Plan shall have the meanings given them in the Plan, unless a different meaning is clearly required by the context. (xxii) No Interest Created. Neither the Participant nor his Designated Beneficiary shall have any interest in any assets of the Company, including policies of insurance. The Participant and his Designated Beneficiary shall have only the right to receive the benefits under the Plan and this Agreement. (xxiii) Early Retirement Percentage. The Participant's Early Retirement Percentage with respect to this Supplemental Deferred Compensation Agreement is ____________________ percent (___%). (xxiv) Deferrals. Pursuant to Article III of the Plan, the Participant hereby elects to defer the receipt of, and the Company hereby elects to defer the payment of, increased Director's Fees in the [percentage(s) or the fixed dollar amount(s) and for the calendar year(s) indicated below, which years should equal the same number of calendar years remaining with respect to the Deferred Compensation Agreement currently in effect for the Participant: B-2 Fixed Calendar Percentage (or) Dollar Year Amount (i) ___________ $__________ _________ % __ (ii) ___________ $__________ _________ % __ (iii) ___________ $__________ _________ % __ (iv) ___________ $__________ _________ % __ (xxv) Normal Retirement Benefit. The Participant's Normal Retirement Benefit with respect to this Supplemental Deferred Compensation Agreement, as defined in Article IV of the Plan, is ________________________________________ Dollars ($_______________) per month, payable for 180 months. (xxvi) Survivor Benefit. If the Participant is Insurable, the Participant's Survivor Benefit, payable pursuant to Section 3(a) of Article V of the Plan, is the appropriate monthly amount, payable for 180 months, as follows: Participant's Age Monthly Amount at Date of Death (payable for 180 months) If the Participant is not Insurable, the discount for interest for purposes of determining the Participant's Survivor Benefit, if any, pursuant to ARTICLE V, Section 3(b) (i.e., the present value of the Participant's monthly Normal Retirement B-3 Benefit), shall be the Early Retirement Percentage set forth in Paragraph 5 above, compounded annually. (xxvii) Commencement of Benefits. Benefits provided under the Plan shall commence on the first day of the month next following the Participant's Early, Normal or Postponed Retirement Date. (xxviii) Condition Subsequent. The Company's obligations to pay the Participant or his Designated Beneficiary the benefits provided for herein are conditioned upon the nonoccurrence of the following event(s): [Insert description of event(s) constituting condition subsequent as determined from time to time by the Committee] If any such events occur, 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, as applicable, the deferrals made under this Supplemental Deferred Compensation Agreement the Participant has made hereunder with interest from the date of deferral accrued at the rate of nine percent (9%) per annum compounded annually. The payment of such refund shall fully and completely discharge the Company's obligations hereunder and shall fully and completely satisfy all the Participant's and his Designated Beneficiary's rights hereunder. (xxix) Entire Agreement. This Agreement contains the entire agreement and understanding by and between the Company and B-4 the Participant with respect to the subject matter hereof, and no representations, promises, agreements, or understandings, written or oral, not contained herein shall be of any force or effect. IN WITNESS WHEREOF, the parties have executed this Agreement in duplicate originals as of the day and year first above written. SAVANNAH ELECTRIC AND POWER COMPANY By: Arthur M. Gignilliat, Jr. President and Chief Executive Officer ATTEST: Lavonne K. Calandra Corporate Secretary (CORPORATE SEAL) Participating Director: (L.S.) Participant [adamscl] h:\wpdocs\mtd\savannah\def-comp.sup B-5 EX-24.(A) 28 THE SOUTHERN COMPANY POWER OF ATTORNEY Exhibit 24(a) January 16, 1995 A. W. Dahlberg, W. L. Westbrook, Tommy Chisholm and Wayne Boston Dear Sirs: The Southern Company proposes to file or join in the filing of statements 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, 1994, and (2) the filing of Quarterly Reports on Form 10-Q and Current Reports on Form 8-K during 1995. The Southern Company also proposes to file a registration statement or statements under the Securities Act of 1933, as amended, with the Securities and Exchange Commission with respect to the issuance by this Company of additional shares of its common stock pursuant to the Dividend Reinvestment and Stock Purchase Plan. 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 - 2 - foregoing said Annual Report on Form 10-K and any appropriate amendment or amendments thereto and any necessary exhibits, said Quarterly Reports on Form 10-Q and any necessary exhibits, any Current Reports on Form 8-K and any necessary exhibits, and said registration statement or statements and appropriate amendment or amendments (including post-effective amendments) thereto, to be accompanied by a prospectus or prospectuses and any appropriately amended or supplemented prospectus or prospectuses and any necessary exhibits. Yours very truly, THE SOUTHERN COMPANY By /s/A. W. Dahlberg President - 3 - /s/Elmer B. Harris /s/W. P. Copenhaver /s/Earl D. McLean, Jr. /s/A. D. Correll /s/William A. Parker, Jr. /s/A. W. Dahlberg /s/William J. Rushton, III /s/Paul J. DeNicola /s/Gloria M. Shatto /s/Jack Edwards /s/Herbert Stockham /s/H. Allen Franklin /s/W. L. Westbrook /s/Bruce S. Gordon /s/Tommy Chisholm /s/L. G. Hardman III /s/W. Dean Hudson 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, 1994, 1995 Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K 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 A. W. Dahlberg, W. L. Westbrook, 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 January 16, 1995, 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 23, 1995 THE SOUTHERN COMPANY By /s/Tommy Chisholm Secretary EX-24.(B) 29 ALABAMA POWER COMPANY POWER OF ATTORNEY Exhibit 24(b) February 24, 1995 W. L. Westbrook and Wayne Boston 64 Perimeter Center East Atlanta, Georgia 30346 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, 1994, and (2) its quarterly reports on Form 10-Q during 1995. 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 President and Chief Executive Officer - 2 - ______________________________ /s/Whit Armstrong John T. Porter /s/Philip E. Austin /s/Gerald H. Powell /s/Margaret A. Carpenter /s/Robert D. Powers /s/A. W. Dahlberg /s/John W. Rouse ______________________________ /s/Peter V. Gregerson, Sr. William J. Rushton, III /s/Bill M. Guthrie /s/James H. Sanford /s/Elmer B. Harris /s/John Cox Webb, IV /s/Crawford T. Johnson, III /s/John W. Woods /s/Carl E. Jones, Jr. /s/William B. Hutchins, III /s/Wallace D. Malone, Jr. /s/Art P. Beattie /s/William V. Muse /s/David L. Whitson 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, 1994, and of remedying any deficiencies with respect thereto by appropriate amendment or amendments, and also filing quarterly reports on Form 10-Q, 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 February 24, 1995, 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 23, 1995 ALABAMA POWER COMPANY By /s/Wayne Boston Assistant Secretary EX-24.(C) 30 GEORGIA POWER COMPANY POWER OF ATTORNEY Exhibit 24(c) February 15, 1995 W. L. Westbrook and Wayne Boston Dear Sirs: Georgia Power Company proposes to file or join in the filing of statements 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, 1994, and (2) the filing of its quarterly reports on Form 10-Q during 1995. 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/H. Allen Franklin President and Chief Executive Officer - 2 - /s/Bennett A. Brown /s/G. Joseph Prendergast /s/A. W. Dahlberg /s/Herman J. Russell ______________________________ ______________________________ William A. Fickling, Jr. Gloria M. Shatto /s/H. Allen Franklin /s/William Jerry Vereen /s/L. G. Hardman III /s/Carl Ware /s/Warren Y. Jobe /s/Thomas R. Williams /s/James R. Lientz, Jr. /s/C. B. Harreld ______________________________ William A. Parker, Jr. /s/Judy M. Anderson 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, 1994, and (b) quarterly filings on Form 10-Q during 1995; 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 W. L. Westbrook 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 15, 1995, 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 23, 1995 GEORGIA POWER COMPANY By /s/Wayne Boston Assistant Secretary EX-24.(D) 31 GULF POWER COMPANY POWER OF ATTORNEY Exhibit 24(d) February 24, 1995 Mr. W. L. Westbrook Mr. Wayne Boston Southern Company Services, Inc. Southern Company Services, Inc. 64 Perimeter Center East 64 Perimeter Center East Atlanta, Georgia 30346 Atlanta, Georgia 30346 Dear Sirs: Re: Forms 10-K and 10-Q Gulf Power Company proposes to file or join in the filing of statements 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, 1994, and (2) its 1995 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. Yours very truly, GULF POWER COMPANY By /s/Travis J. Bowden President and Chief Executive Officer - 2 - /s/Reed Bell /s/C. Walter Ruckel /s/Travis J. Bowden /s/Joseph K. Tannehill /s/Paul J. DeNicola /s/Arlan E. Scarbrough /s/Fred C. Donovan /s/Ronnie R. Labrato /s/W. D. Hull, Jr. /s/Warren E. Tate Extract from minutes of meeting of the board of directors of Gulf Power Company. - - - - - - - - - - RESOLVED, That for the purpose of signing the statements 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, 1994, and its 1995 quarterly reports on Form 10-Q, and of remedying any deficiencies with respect thereto by appropriate amendment or amendments (both before and after such statements become effective), 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 24, 1995, 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 23, 1995 GULF POWER COMPANY By /s/Wayne Boston Assistant Secretary EX-24.(E) 32 MISSISSIPPI POWER COMPANY POWER OF ATTORNEY Exhibit 24(e) February 22, 1995 W. L. Westbrook and Wayne Boston Dear Sirs: Mississippi Power Company proposes to file or join in the filing of statements 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, 1994, and (2) the filing of its quarterly reports on Form 10-Q during 1995. 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/David M. Ratcliffe President and Chief Executive Officer - 2 - /s/Paul J. DeNicola /s/David M. Ratcliffe /s/Edwin E. Downer /s/Gerald J. St. Pe' /s/Robert S. Gaddis /s/N. Eugene Warr /s/Walter H. Hurt, III /s/Michael W. Southern /s/Aubrey K. Lucas /s/Frances V. Turnage Extract from minutes of meeting of the board of directors of Mississippi Power Company. - - - - - - - - - - RESOLVED: That the members of this Company's Board of Directors and its officers are authorized to give their several powers of attorney to W. L. Westbrook and Wayne Boston for the purpose of signing the statements 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, 1994, and the filing of this Company's quarterly reports to the Securities and Exchange Commission on Form 10-Q for the year 1995. - - - - - - - - - - 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 22, 1995, 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 23, 1995 MISSISSIPPI POWER COMPANY By /s/Wayne Boston Assistant Secretary EX-24.(F) 33 SAVANNAH ELECTRIC AND POWER COMPANY POWER OF ATTORNEY Exhibit 24(f) February 15, 1995 W. L. Westbrook 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, 1994, and (2) its quarterly reports on Form 10-Q during 1995. 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/Arthur M. Gignilliat, Jr. President and Chief Executive Officer - 2 - /s/Helen Q. Artley /s/James M. Piette /s/Paul J. DeNicola /s/Arnold M. Tenenbaum /s/Brian R. Foster /s/Frederick F. Williams, Jr. /s/Arthur M. Gignilliat, Jr. /s/K. R. Willis /s/Walter D. Gnann /s/Lavonne K. Calandra /s/Robert B. Miller, III /s/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 statements 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, 1994, and (b) quarterly reports on Form 10-Q during calendar year 1995; 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 W. L. Westbrook 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 15, 1995, 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 23, 1995 SAVANNAH ELECTRIC AND POWER COMPANY By /s/Wayne Boston Assistant Secretary