<PAGE>
==============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to
Commission Registrant, State of Incorporation, I.R.S. Employer
File Number Address and Telephone Number Identification No.
1-3526 The Southern Company 58-0690070
(A Delaware Corporation)
270 Peachtree Street, N.W.
Atlanta, Georgia 30303
(404) 506-5000
1-3164 Alabama Power Company 63-0004250
(An Alabama Corporation)
600 North 18th Street
Birmingham, Alabama 35291
(205) 257-1000
1-6468 Georgia Power Company 58-0257110
(A Georgia Corporation)
241 Ralph McGill Boulevard, N.E.
Atlanta, Georgia 30308-3374
(404) 506-6526
0-2429 Gulf Power Company 59-0276810
(A Maine Corporation)
One Energy Place
Pensacola, Florida 32520-0102
(850) 444-6111
0-6849 Mississippi Power Company 64-0205820
(A Mississippi Corporation)
2992 West Beach
Gulfport, Mississippi 39501
(228) 864-1211
1-5072 Savannah Electric and Power Company 58-0418070
(A Georgia Corporation)
600 East Bay Street
Savannah, Georgia 31401
(912) 644-7171
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<PAGE>
Securities registered pursuant to Section 12(b) of the Act: 1
Each of the following classes or series of securities registered pursuant to
Section 12(b) of the Act is registered on the New York Stock Exchange.
Title of each class Registrant
Common Stock, $5 par value The Southern Company
Company obligated mandatorily redeemable
preferred securities, $25 liquidation amount
7.75% Cumulative Quarterly Income Preferred Securities 2
7 1/8% Trust Originated Preferred Securities 3
6.875% Cumulative Quarterly Income Preferred Securities 4
---------------------------------------------------
Class A preferred, cumulative, $25 stated capital Alabama Power Company
5.20% Series Adjustable Rate (1993 Series)
5.83% Series
Senior Notes
7 1/8% Series A 7% Series C
7% Series B
Company obligated mandatorily redeemable
preferred securities, $25 liquidation amount
7.375% Trust Preferred Securities 5
7.60% Trust Originated Preferred Securities 6
---------------------------------------------------
Senior Notes Georgia Power Company
6 7/8% Series A
6.60% Series B
Company obligated mandatorily redeemable
preferred securities, $25 liquidation amount
9% Monthly Income Preferred Securities, Series A 7
7.75% Trust Preferred Securities 8
7.60% Trust Preferred Securities 9
7.75% Quarterly Income Preferred Securities 10
First mortgage bonds
6 1/8% Series due 1999 6 7/8% Series due 2002
------------------------------------------------------
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1 As of December 31, 1998.
2 Issued by Southern Company Capital Trust III and guaranteed by The Southern
Company.
3 Issued by Southern Company Capital Trust IV and guaranteed by The Southern
Company.
4 Issued by Southern Company Capital Trust V and guaranteed by The Southern
Company.
5 Issued by Alabama Power Capital Trust I and guaranteed by Alabama Power
Company.
6 Issued by Alabama Power Capital Trust II and guaranteed by Alabama Power
Company.
7 Issued by Georgia Power Capital, L.P. and guaranteed by Georgia Power
Company.
8 Issued by Georgia Power Capital Trust I and guaranteed by Georgia Power
Company.
9 Issued by Georgia Power Capital Trust II and guaranteed by Georgia Power
Company.
10 Issued by Georgia Power Capital Trust III and guaranteed by Georgia Power
Company.
<PAGE>
Company obligated mandatorily redeemable Gulf Power Company
preferred securities, $25 liquidation amount
7.625% Quarterly Income Preferred Securities 11
7.00% Quarterly Income Preferred Securities 12
------------------------------------------------------
Depositary preferred shares, each Mississippi Power Company
representing one-fourth
of a share of preferred stock,
cumulative, $100 par value
6.32% Series 6.65% Series
Company obligated mandatorily redeemable
preferred securities, $25 liquidation amount
7.75% Trust Originated Preferred Securities 13
---------------------------------------------------
Company obligated mandatorily Savannah Electric and Power Company
redeemable preferred
securities, $25 liquidation amount
6.85% Trust Preferred Securities 14
Securities registered pursuant to Section 12(g) of the Act: 15
Title of each class Registrant
Preferred stock, cumulative, $100 par value Alabama Power Company
4.20% Series 4.60% Series 4.72% Series
4.52% Series 4.64% Series 4.92% Series
Class A preferred, cumulative, $100,000 stated capital
Auction (1993 Series)
Class A preferred, cumulative, $100 stated capital
Auction (1988 Series)
----------------------------------------------------------
Preferred stock, cumulative, $100 stated value Georgia Power Company
$4.60 Series $4.72 Series $5.64 Series
$4.60 Series (1962) $4.92 Series $6.48 Series
$4.60 Series (1963) $4.96 Series $6.60 Series
$4.60 Series (1964) $5.00 Series
----------------------------------------------------------
===============================================================================
11 Issued by Gulf Power Capital Trust I and guaranteed by Gulf Power Company.
12 Issued by Gulf Power Capital Trust II and guaranteed by Gulf Power Company.
13 Issued by Mississippi Power Capital Trust I and guaranteed by Misissippi
Power Company.
14 Issued by Savannal Electric Capital Trust I and guaranteed by Savannah
Electric and Power Company.
15 As of December 31, 1998.
<PAGE>
Preferred stock, cumulative, $100 par value Gulf Power Company
4.64% Series 5.44% Series
5.16% Series
----------------------------------------------------------
Preferred stock, cumulative, $100 par value Mississippi Power Company
4.40% Series 4.60% Series
4.72% Series 7.00% Series
----------------------------------------------------------
Indicate by check mark whether the registrants (1) have filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No___
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrants' knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. ( )
Aggregate market value of voting stock held by non-affiliates of
The Southern Company at February 28, 1999: $17.5 billion. Each of such other
registrants is a wholly-owned subsidiary of The Southern Company and has no
voting stock other than its common stock. A description of registrants' common
stock follows:
<TABLE>
<CAPTION>
Description of Shares Outstanding
Registrant Common Stock at February 28, 1999
<S> <C>
The Southern Company Par Value $5 Per Share 698,630,431
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
</TABLE>
Documents incorporated by reference: specified portions of The Southern
Company's Proxy Statement relating to the 1999 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.
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<PAGE>
<TABLE>
<CAPTION>
Table of Contents
Page
PART I
<S> <C>
Item 1 Business
The SOUTHERN System.........................................................I-1
Traditional Business........................................................I-1
Non-Traditional Business....................................................I-2
Certain Factors Affecting the Industry......................................I-4
Construction Programs.......................................................I-4
Year 2000...................................................................I-5
Financing Programs..........................................................I-6
Fuel Supply.................................................................I-7
Territory Served By Operating Affiliates....................................I-9
Competition.................................................................I-12
Regulation..................................................................I-13
Rate Matters................................................................I-15
Employee Relations..........................................................I-17
Item 2 Properties....................................................................I-18
Item 3 Legal Proceedings.............................................................I-23
Item 4 Submission of Matters to a Vote of Security Holders...........................I-23
Executive Officers of SOUTHERN................................................I-24
PART II
Item 5 Market for Registrants' Common Equity and Related Stockholder Matters.........II-1
Item 6 Selected Financial Data.......................................................II-2
Item 7 Management's Discussion and Analysis of Results of Operations
and Financial Condition.....................................................II-2
Item 7A Quantitative and Qualitative Disclosures about Market Risk....................II-2
Item 8 Financial Statements and Supplementary Data...................................II-3
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.........................................II-4
PART III
Item 10 Directors and Executive Officers of the Registrants..........................III-1
Item 11 Executive Compensation.......................................................III-13
Item 12 Security Ownership of Certain Beneficial Owners and
Management.................................................................III-31
Item 13 Certain Relationships and Related Transactions...............................III-37
PART IV
Item 14 Exhibits, Financial Statement Schedules, and Reports
on Form 8-K................................................................IV-1
i
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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
<S> <C>
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
APEA.......................................... Applicant Prepared Environmental Assessment
CEMIG......................................... Companhia Energetica de Minas Gerais
CEPA.......................................... Consolidated Electric Power Asia
Clean Air Act................................. Clean Air Act Amendments of 1990
Dalton........................................ City of Dalton, Georgia
DOE........................................... United States Department of Energy
Edelnor....................................... Empresa Electrica del Norte Grande, S.A. (Chile)
EMF........................................... Electromagnetic field
Energy Act.................................... Energy Policy Act of 1992
Energy Solutions.............................. Southern Company Energy Solutions,
Inc. (formerly The Southern
Development and Investment Group,
Inc.)
Entergy Gulf States........................... Entergy Gulf States Utilities Company
EPA........................................... United States Environmental Protection Agency
EWG........................................... Exempt wholesale generator
FERC.......................................... Federal Energy Regulatory Commission
FPC........................................... Florida Power Corporation
FP&L.......................................... Florida Power & Light Company
Freeport...................................... Freeport Power Company (Bahamas)
FUCO.......................................... Foreign utility company
GEORGIA....................................... Georgia Power Company
GULF.......................................... Gulf Power Company
Holding Company Act........................... Public Utility Holding Company Act of 1935, as amended
IBEW.......................................... International Brotherhood of Electrical Workers
IRS........................................... Internal Revenue Service
JEA........................................... Jacksonville Electric Authority
MEAG.......................................... Municipal Electric Authority of Georgia
MISSISSIPPI................................... Mississippi Power Company
Mobile Energy................................. Mobile Energy Services Company, LLC
NRC........................................... Nuclear Regulatory Commission
OPC........................................... Oglethorpe Power Corporation
operating affiliates.......................... ALABAMA, GEORGIA, GULF, MISSISSIPPI
and SAVANNAH
PSC........................................... Public Service Commission
RUS........................................... Rural Utility Service (formerly Rural Electrification Administration)
SAVANNAH...................................... Savannah Electric and Power Company
SCS........................................... Southern Company Services, Inc.
SEC........................................... Securities and Exchange Commission
SEGCO......................................... Southern Electric Generating Company
SEPA.......................................... Southeastern Power Administration
SERC.......................................... Southeastern Electric Reliability Council
SMEPA......................................... South Mississippi Electric Power Association
SOUTHERN...................................... The Southern Company
Southern LINC................................. Southern Communications Services, Inc.
Southern Energy............................... Southern Energy, Inc. (formerly Southern Electric International, Inc.)
Southern Nuclear.............................. Southern Nuclear Operating Company, Inc.
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
DEFINITIONS
(continued)
<S> <C>
SOUTHERN system............................... SOUTHERN, the operating affiliates, SEGCO, Southern Energy,
Southern Nuclear, SCS, Southern LINC, Energy Solutions and
other subsidiaries
SWEB.......................................... South Western Electricity plc (United Kingdom)
TVA........................................... Tennessee Valley Authority
</TABLE>
iii
<PAGE>
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING INFORMATION
This Annual Report on Form 10-K includes forward-looking and historical
information. The registrants caution that there are various important factors
that could cause actual results to differ materially from those indicated in the
forward-looking information; accordingly, there can be no assurance that such
indicated results will be realized. These factors include legislative and
regulatory initiatives regarding deregulation and restructuring of the electric
utility industry; the extent and timing of the entry of additional competition
in the markets of SOUTHERN's subsidiaries; potential business strategies,
including acquisitions or dispositions of assets or internal restructuring, that
may be pursued by the registrants; state and federal rate regulation in the
United States; Year 2000 issues; changes in or application of environmental and
other laws and regulations to which SOUTHERN and its subsidiaries are subject;
political, legal and economic conditions and developments in the United States
and in foreign countries in which the subsidiaries operate; financial market
conditions and the results of financing efforts; changes in commodity prices and
interest rates; weather and other natural phenomena; the performance of projects
undertaken by the non-traditional business and the success of efforts to invest
in and develop new opportunities; and other factors discussed elsewhere herein
and in other reports filed from time to time by the registrants with the SEC.
iv
<PAGE>
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 Southern Energy,
Southern LINC, Southern Nuclear, SCS (the system service company), Energy
Solutions and other direct and indirect subsidiaries. Southern Energy is focused
on several key international and domestic business lines, including energy
distribution, integrated utilities, stand-alone generation, and other
energy-related products and services. A further description of Southern Energy's
business and organization follows later in this section under "Non-Traditional
Business." Southern LINC provides digital wireless communications services to
SOUTHERN's operating affiliates and also markets these services to the public
within the Southeast. Southern Nuclear provides services to the Southern
electric system's nuclear plants. Energy Solutions 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
Traditional Business
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 By Operating Affiliates" herein.)
I-1
<PAGE>
Operating contracts covering arrangements in effect with principal
neighboring utility systems provide for capacity exchanges, capacity purchases
and sales, transfers of economy energy and other similar transactions.
Additionally, the 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 Energy
Corporation, South Carolina Electric & Gas Company and Virginia Electric and
Power Company, each of which provides for the establishment and periodic review
of principles and procedures for planning and operation of generation and
transmission facilities, maintenance schedules, load retention programs,
emergency operations, and other matters affecting the reliability of bulk power
supply. The 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, Southern Energy,
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. Southern
Energy, Energy Solutions and Southern LINC have also secured from the operating
affiliates certain services which are furnished at cost.
Southern Nuclear has contracts with ALABAMA to operate the Farley Nuclear
Plant, and with GEORGIA to operate Plants Hatch and Vogtle. See Item 1 -
BUSINESS - "Regulation - Atomic Energy Act of 1954" herein.
Non-Traditional Business
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
Southern Energy and other subsidiaries. SOUTHERN has filed with the SEC an
application for authority to invest up to nearly $8 billion in the
non-traditional domestic and international business. A consumer group has filed
a motion to intervene in this proceeding. The current SEC authority is $3.9
billion, of which $3.6 billion has been invested as of December 31, 1998.
Worldwide, Southern Energy develops and manages electricity and other energy
related projects, including domestic energy trading and marketing. As the energy
marketplace evolves, Southern Energy continues to position SOUTHERN to become a
major competitor. During 1998, Southern Energy further refined its business
strategy to focus on a few geographic regions of the world. In Asia, Southern
Energy will focus primarily on China, the Philippines and India. In South
America, Southern Energy will pursue opportunities in Brazil. In Europe,
Southern Energy will concentrate efforts on the European Union countries. And in
North America, Southern Energy will target efforts in Northeast, the Midwest,
Texas and California. See Item 7 for SOUTHERN's Management's Discussion and
Analysis under the heading "Future Earnings Potential" for additional
information regarding this strategy.
Reference is also made to Note 14 to the financial statements of SOUTHERN in
Item 8 herein for additional information regarding SOUTHERN's segment and
related information.
In 1995, SOUTHERN, through its subsidiary Southern Energy, acquired SWEB,
one of the United Kingdom's 12 regional electric distribution companies, for
approximately $1.8 billion. In July 1996, a 25 percent interest in SWEB was sold
to PP&L Resources.
I-2
<PAGE>
In June 1998, SOUTHERN through its subsidiary Southern Energy
sold an additional 26% interest in SWEB to PP&L Resources for $170 million. SWEB
is, to a limited extent, involved in power generation and certain non-regulated
activities which include gas marketing and telecommunications. In mid-1997, the
acquisition of CEPA was completed for a total net investment of $2.1 billion.
CEPA is engaged in the business of developing, constructing, owning and
operating electric power generation facilities. Its current operations include
installed operating capacity of approximately 3,306 megawatts, with projects
either completed or under development in the Philippines, the People's Republic
of China, and India. (For additional information related to the acquisition of
CEPA, reference is made to Note 13 to SOUTHERN's financial statements in Item 8
herein.) In 1997, Southern Energy also acquired a 26% interest in a German
utility for approximately $820 million.
In January 1998, Southern Energy entered into a joint venture with Vastar
Resources, Inc. The two companies combined their energy trading and marketing
operations to form a new full-service energy provider, Southern Company Energy
Marketing. The joint venture agreement gives Southern Company Energy Marketing
rights to market virtually all of Vastar's natural gas production over the next
10 years.
In December 1998, Southern Energy completed its $537 million purchase of
1,267 megawatts of generating capacity from Commonwealth Electric. In addition,
Southern Energy plans to add 685 megawatts of capacity at the plants. In late
1998, Southern Energy announced the $801 million planned acquisition of 3,065
megawatts of generating capacity from Pacific Gas & Electric in northern
California. Additionally, Southern Energy announced plans to acquire from Orange
and Rockland Utilities Inc. and Consolidated Edison Inc. in New York 1,776
megawatts of capacity for $480 million. These transactions are expected to close
during 1999. Further, Southern Energy has announced plans to build or purchase
an additional 980 megawatts of capacity in Texas and Wisconsin. Through Southern
Company Energy Marketing, Southern Energy has also gained access to additional
capacity through marketing agreements. Southern Energy additionally has access
to almost 2,000 megawatts of capacity through marketing agreements with Sithe
Energies in New York and Brazos Electric Cooperative in Texas.
After refining its international focus and reviewing the financial
performance of existing assets, Southern Energy announced plans to sell its
holdings in Edelnor in Chile and Alicura in Argentina. As a result, Southern
Energy recorded a write down of $200 million, after taxes, in December 1998
related to these holdings. Because of regulatory and market conditions, these
assets did not meet expectations.
In January 1999, Mobile Energy, an indirect subsidiary of SOUTHERN, and its
direct parent filed petitions for Chapter 11 bankruptcy relief in the U.S.
Bankruptcy Court for the Southern District of Alabama. For additional
information regarding this matter, reference is made to Item 3 - LEGAL
PROCEEDINGS herein.
See Item 2 - PROPERTIES - "Other Electric Generation Facilities" herein for
additional information regarding Southern Energy projects.
Southern Energy and Energy Solutions 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. More specifically, Energy Solutions is focusing on new and existing
programs to enhance customer satisfaction and efficiency and stockholder value,
such as: Good Cents, an energy efficiency program for electric utility
customers; Energy Services, providing total energy solutions to industrial and
commercial customers; Heat Pump financing for residential customers; and
telecommunications operations and security monitoring for both commercial and
residential customers.
In 1995, Southern LINC began serving SOUTHERN's operating affiliates and
marketing its services to non-affiliates within the Southeast. Its system covers
122,000 square miles and combines the functions of two-way radio dispatch,
cellular phone, short text and numeric messaging and wireless data transfer. In
the spring of 1999, Southern LINC will add more than 7,000 square miles to its
present coverage area.
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 1999-2001 in
these and other new businesses.
I-3
<PAGE>
Certain Factors Affecting the Industry
Various factors are currently affecting the electric utility industry in
general, including increasing competition and the regulatory changes related
thereto, costs required to comply with environmental regulations, and the
potential for new business opportunities (with their associated risks) outside
of traditional rate-regulated operations. The effects of these and other factors
on the SOUTHERN system are described herein. Particular reference is made to
Item 1 - BUSINESS - "Non-Traditional Business," "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 1999 through
2001 by the operating affiliates, SEGCO, SCS, Southern LINC and Southern Energy
are estimated as follows: (in millions)
------------------------------ -------- --------- ----------
1999 2000 2001
-------- --------- ----------
ALABAMA $ 875 $653 $ 668
GEORGIA 755 734 829
GULF 72 100 262
MISSISSIPPI 67 52 45
SAVANNAH 29 32 31
SEGCO 13 4 5
SCS 66 16 15
Southern LINC 46 19 14
Southern Energy* 630 481 230
Other 15 10 16
=========================== =========== ========= ==========
SOUTHERN system $2,568 $2,101 $2,115
=========================== =========== ========= ==========
*These construction estimates do not include amounts which may be expended
by Southern Energy on future power production projects or by any subsidiaries
created to effect such future projects. (See Item 1 - BUSINESS -
"Non-Traditional Business" herein.)
I-4
<PAGE>
<TABLE>
<CAPTION>
Estimated construction costs in 1999 are expected to be apportioned approximately as follows: (in millions)
--------------------------------- --------------- --------------- ---------------- ----------- ---------------- ---------
SOUTHERN
system* ALABAMA GEORGIA GULF MISSISSIPPI SAVANNAH
--------------- --------------- ---------------- ----------- ---------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Combustion turbines $ 345 $194 $144 $ - $ 7 $ -
Other generating
facilities including
associated plant substations 799 196 93 17 10 5
New business 349 142 160 23 14 10
Transmission 329 136 130 9 12 3
Joint line and substation 42 - 34 8 - -
Distribution 307 84 63 9 18 9
Nuclear fuel 120 63 57 - - -
General plant 277 60 74 6 6 2
--------------- ---------- ---------------- ----------- ------------ -----------------
$2,568 $875 $755 $72 $67 $29
=============== ========== ================ =========== ============ =================
</TABLE>
*Southern LINC, SCS and Southern Nuclear plan capital additions to general
plant in 1999 of $46 million, $66 million and $270 thousand, respectively, while
SEGCO plans capital additions of $13 million to generating facilities. Southern
Energy plans capital additions of $465 million to generating facilities, $124
million to distribution facilities, $39 million to transmission facilities, and
$2 million to general plant. These estimates do not reflect the possibility of
Southern Energy's securing a contract(s) to buy or build additional generating
facilities. Other non-traditional capital additions planned for 1999 are
approximately $15 million. (See Item 1 - BUSINESS - "Non-Traditional Business"
herein.)
The construction programs are subject to periodic review and revision, and
actual construction costs may vary from the above estimates because of numerous
factors. These factors include changes in business conditions; 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.
The operating affiliates have approximately 2,700 megawatts of combined
cycle generation scheduled to be placed in service by 2001. In addition,
significant construction will continue related to transmission and distribution
facilities and the upgrading of generating plants. (See Item 2 - PROPERTIES -
"Other Electric Generation Facilities" herein for additional information
relating to facilities under development.)
In 1991, the Georgia legislature passed legislation which requires GEORGIA
and SAVANNAH each to file an Integrated Resource Plan for approval by the
Georgia PSC. Under the plan rules, the Georgia PSC must pre-certify the
construction of new power plants and new purchase power contracts. (See Item 1 -
BUSINESS - "Rate Matters - Integrated Resource Planning" herein.)
See Item 1 - BUSINESS - "Regulation - Environmental Regulation" herein for
information with respect to certain existing and proposed environmental
requirements and Item 2 - PROPERTIES - "Jointly-Owned Facilities" herein for
additional information concerning ALABAMA's and GEORGIA's joint ownership of
certain generating units and related facilities with certain non-affiliated
utilities.
Year 2000
Reference is made to each registrant's "Management's Discussion and Analysis -
Year 2000" in Item 7 herein for information relating to Year 2000 issues.
I-5
<PAGE>
Financing Programs
In 1998, SOUTHERN raised net proceeds of $109 million from the issuance of
common stock under SOUTHERN's various stock plans. Also in 1998, SOUTHERN issued
a total of $350 million in trust preferred securities for the direct benefit of
SOUTHERN. SOUTHERN plans to issue additional equity capital in 1999. The amount
and timing of additional equity capital to be raised in 1999, 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. Any portion of the common stock required
during 1999 for SOUTHERN'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 affiliates plan to obtain the funds required for construction
and other purposes from sources similar to those used in the past, which were
primarily from internal sources. However, the type and timing of any financings
- - - - - - - -- if needed -- will depend on market conditions and regulatory approval.
Historically the operating affiliates have relied on issuances of first mortgage
bonds and preferred stock, in addition to pollution control revenue bonds issued
for their benefit by public authorities, to meet their long-term external
financing requirements. Recently, financings have consisted of unsecured debt
and trust preferred securities. In this regard, the operating affiliates sought
and obtained stockholder approval in 1997 and 1998 to amend their respective
corporate charters eliminating restrictions on the amount of unsecured
indebtedness they may incur.
Short-term debt is often utilized as appropriate at SOUTHERN and the
operating affiliates.
The maximum amounts of short-term or term-loan indebtedness authorized by
the appropriate regulatory authorities are shown on the following table:
Outstanding at
Amount December 31, 1998
------------ ---------------------
(in millions)
ALABAMA $ 750 (1) $0
GEORGIA 1,700 (2) 340.9
GULF 300(1) 58.5
MISSISSIPPI 350(1) 93.0
SAVANNAH 90(2) 30.0
SOUTHERN 2,000(1) 738.3
------------------ -------------- -- -------------------
Notes:
(1) ALABAMA's authority is based on authorization received from the Alabama
PSC, which expires December 31, 2000. No SEC authorization is required for
ALABAMA. GULF, MISSISSIPPI and SOUTHERN have received SEC authorization to issue
from time to time short-term and/or term-loan notes to banks and commercial
paper to dealers in the amounts shown through December 31, 2003, December 31,
2002 and March 31, 2001, respectively.
(2) GEORGIA and SAVANNAH have received SEC authorization to issue from time
to time short-term and term-loan notes to banks and commercial paper to dealers
in the amounts shown through December 31, 2002. Authorization for term-loan
indebtedness is also required by the Georgia PSC. At December 31, 1998, GEORGIA
had remaining authority of $920 million expiring December 31, 1999. SAVANNAH has
applied for authority from the Georgia PSC for $70 million expiring December 31,
2000.
Reference is made to Note 5 to the financial statements for SOUTHERN,
ALABAMA, GULF, MISSISSIPPI and SAVANNAH and Note 9 to the financial statements
for GEORGIA in Item 8 herein for information regarding the registrants' credit
arrangements.
New projects undertaken by subsidiaries of Southern Energy are generally
financed through a combination of equity funds provided by SOUTHERN and
non-recourse debt incurred on a project-specific basis.
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<PAGE>
Fuel Supply
The operating affiliates' and SEGCO's supply of electricity is derived
predominantly from coal. The sources of generation for the years 1996 through
1998 and the estimates for 1999 are shown below:
Oil and
ALABAMA Coal Nuclear Hydro Gas
--------- ---------- --------- ---------
1996 72 20 8 *
1997 72 20 8 *
1998 72 18 8 2
1999 72 19 7 2
GEORGIA
1996 74 22 3 1
1997 75 22 2 1
1998 73 22 3 2
1999 74 22 3 1
GULF
1996 99 ** ** 1
1997 100 ** ** *
1998 98 ** ** 2
1999 99 ** ** 1
MISSISSIPPI
1996 85 ** ** 15
1997 85 ** ** 15
1998 80 ** ** 20
1999 83 ** ** 17
SAVANNAH
1996 90 ** ** 10
1997 87 ** ** 13
1998 76 ** ** 24
1999 87 ** ** 13
SEGCO
1996 100 ** ** *
1997 100 ** ** *
1998 100 ** ** *
1999 100 ** ** *
SOUTHERN system***
1996 77 17 4 2
1997 77 17 4 2
1998 76 16 4 4
1999 77 17 4 2
---------- ------- --------- ---------- --------- ---------
*Less than 0.5%.
**Not applicable.
***Amounts shown for the SOUTHERN system are weighted
averages of the operating affiliates and SEGCO.
The average costs of fuel in cents per net kilowatt-hour generated for 1996
through 1998 are shown below:
1996 1997 1998
-------------- --------------- ---------------
ALABAMA 1.46 1.49 1.54
GEORGIA 1.35 1.32 1.36
GULF 2.02 1.99 1.69
MISSISSIPPI 1.57 1.54 1.62
SAVANNAH 2.42 2.27 2.33
SEGCO 1.72 1.51 1.53
SOUTHERN
System* 1.48 1.46 1.48
- - - - - - - ------------------- -------------- --------------- ---------------
* Amounts shown for the SOUTHERN system are weighted averages of the
operating affiliates and SEGCO.
See SELECTED FINANCIAL DATA in Item 6 herein for each registrant's source
of energy supply.
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<PAGE>
As of February 12, 1999, the operating affiliates and SEGCO had stockpiles
of coal on hand at their respective coal-fired plants which represented an
estimated 19 days of recoverable supply for bituminous coal and 24 days for
sub-bituminous coal. It is estimated that approximately 68.0 million tons of
coal will be consumed in 1999 by the operating affiliates and SEGCO (including
those units GEORGIA owns jointly with OPC, MEAG and Dalton and operates for FP&L
and JEA and the units ALABAMA owns jointly with AEC). The operating affiliates
and SEGCO currently have 45 coal contracts. These contracts cover remaining
terms of up to 13 years. Approximately 22% of 1999 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 30% of the SOUTHERN system's coal supply. Additionally, it has been
determined that approximately 30 days of recoverable supply is the appropriate
level for coal stockpiles. During 1998, the operating affiliates' and SEGCO's
average price of coal delivered was approximately $36.39 per ton.
In 1998, the weighted average sulfur content of all coal purchased by the
operating affiliates and SEGCO for use in the coal-fired facilities was 0.89%
sulfur. This sulfur level allowed the operating affiliates and SEGCO to remain
well below the limits as set forth by Phase I of the Clean Air Act Amendments of
1990. With the approach of Phase II of the Clean Air Act in 2000, the operating
affiliates and SEGCO have secured sufficient quantities of lower sulfur coal to
help meet the more stringent Phase II sulfur requirements. As more and more
strict environmental regulations are proposed that impact the utilization of
coal, the fuel mix will be monitored to insure that sufficient quantities of the
proper type of coal or natural gas are in place to remain in compliance with
applicable laws and regulations. See Item 1 - BUSINESS - "Regulation -
Environmental Regulation" herein.
Changes in fuel prices are generally reflected in fuel adjustment clauses
contained in rate schedules. See Item 1 - BUSINESS - "Rate Matters - Rate
Structure" herein.
ALABAMA 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 agreements with
non-affiliated mining firms to mine coal from ALABAMA's reserves, as well as
their 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 GULF 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 and most are
short to medium term (less than 10 years). Management believes that sufficient
capacity for nuclear fuel supplies and processing exists to preclude the
impairment of normal operations of the SOUTHERN system's nuclear generating
units.
ALABAMA and GEORGIA have contracts with the DOE that provide for the
permanent disposal of spent nuclear fuel. Although disposal was scheduled to
begin in 1998, the actual year this service will begin is uncertain. The DOE
failed to begin disposing of spent fuel in January 1998, as required by the
contracts, and the companies are pursuing legal remedies against the government
for breach of contract. Sufficient on-site storage capacity currently is
available to permit operation into 2003 at Plant Hatch, into 2017 at Plant
Vogtle, and into 2009 and 2013 at Plant Farley units 1 and 2, respectively.
Plant Vogtle's spent fuel storage capacity includes the installation in 1998 of
additional rack capacity. Activities for adding dry cask storage capacity at
Plant Hatch by as early as 1999 are in progress.
The Energy Act imposed upon utilities with nuclear plants, including ALABAMA
and GEORGIA, obligations for the decontamination and decommissioning of federal
nuclear fuel enrichment facilities. See Note 1 to SOUTHERN's, ALABAMA's and
GEORGIA's financial statements in Item 8 herein.
I-8
<PAGE>
Territory Served By Operating Affiliates
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
its steam-electric generating plant at Gorgas and uses the output of coal from
these reserves in some of 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, as well as in rural areas, and at wholesale currently
to OPC, MEAG, the City of Dalton and the City of Hampton.
GULF is engaged, within the northwestern portion of Florida, in the
generation and purchase of electricity and the distribution and sale of such
electricity at retail in 71 communities (including Pensacola, Panama City and
Fort Walton Beach), as well as in rural areas, and at wholesale to a
non-affiliated utility and a municipality. 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, six rural electric distribution cooperative
associations and one generating and transmitting cooperative.
SAVANNAH is engaged, within a five-county area in eastern Georgia, in the
generation and purchase of electricity and the distribution and sale of such
electricity at retail and, as a member of the SOUTHERN system power pool, the
transmission and sale of wholesale energy.
For information relating to kilowatt-hour sales by classification for each
registrant, reference is made to "Management's Discussion and Analysis-Revenues"
in Item 7 herein. Also, for information relating to the sources of revenues for
the Southern system and each of the operating affiliates, reference is made to
Item 6 herein.
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 RUS has authority to make loans to cooperative associations or
corporations to enable them to provide electric service to customers in rural
sections of the country. There are 71 electric cooperative organizations
operating in the territory in which the 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 RUS loans secured by long-term contracts requiring
distributing cooperatives to take their requirements from AEC to the extent such
energy is available. Two of the 14 distributing cooperatives operating in
ALABAMA's service territory obtain a portion of their power requirements
directly from ALABAMA.
I-9
<PAGE>
Four electric cooperative associations, financed by the RUS, operate within
GULF's service area. These cooperatives purchase their full requirements from
AEC and SEPA. A 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. The delivery of capacity and
energy from AEC to certain distributing cooperatives in the service areas of
ALABAMA and GULF is governed by SOUTHERN's AEC Network Transmission Service
Agreement. The rates for this service to AEC are based on the negotiated
agreement on file with the FERC. See Item 2 - PROPERTIES - "Jointly-Owned
Facilities" herein for details of ALABAMA's joint-ownership with AEC of a
portion of Plant Miller.
MISSISSIPPI has an interchange agreement with SMEPA, a generating and
transmitting cooperative, pursuant to which various services are provided,
including the furnishing of protective capacity by MISSISSIPPI to SMEPA. SMEPA
has a generating capacity of 739,000 kilowatts and a transmission system
estimated to be 1,357 miles in length.
There are 43 electric cooperative organizations operating in, or in areas
adjoining, territory in the State of Georgia in which GEORGIA provides electric
service at retail or wholesale. Three of these organizations obtain their power
from TVA and one from other sources. Since July 1, 1975, OPC has supplied the
requirements of the remaining 39 of these cooperative organizations from
self-owned generation acquired from GEORGIA and, until September 1991, through
partial requirements purchases from GEORGIA. GEORGIA entered into a power
coordination agreement with OPC pursuant to which, effective in September 1991,
OPC ceased to be 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. OPC decreased its purchases of capacity by
250 megawatts each in September 1996, 1997 and 1998 and has notified GEORGIA of
its intent to decrease purchases of capacity by an additional 250 megawatts in
September 1999 and 125 megawatts in September 2000. In December 1997, a revised
power coordination agreement was implemented between GEORGIA and OPC. Under the
amended 1995 Integrated Resource Plan approved by the Georgia PSC in March 1997,
the resources associated with the decreased purchases by OPC in 1996, 1997 and
1998 will be used to meet the needs of GEORGIA's retail customers through 2004.
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 commencing October 1, 1991. In both
contracts the power will be 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 in Item 8 herein for
further information on these contracts.
Forty-eight municipally-owned electric distribution systems and one
county-owned system receive their requirements through MEAG, which was
established by a state statute in 1975. MEAG serves these requirements from
self-owned generation facilities acquired from GEORGIA and purchases from
others. In August 1997, a power coordination agreement was implemented between
GEORGIA and MEAG that replaced the partial requirements tariff pursuant to which
GEORGIA previously sold wholesale energy to MEAG. Since 1977, Dalton has filled
its requirements from generation facilities acquired from GEORGIA and through
partial requirements purchases. One municipally-owned electric distribution
system's full requirements are served under a market-based contract by GEORGIA.
(See Item 2 - PROPERTIES - "Jointly-Owned Facilities" herein.)
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<PAGE>
GULF and MISSISSIPPI provide wholesale requirements for one municipal system
each.
GEORGIA has entered into substantially similar agreements with Georgia
Transmission Corporation (formerly OPC's transmission division), MEAG and Dalton
providing for the establishment of an integrated transmission system to carry
the power and energy of each. The agreements require an investment by each party
in the integrated transmission system in proportion to its respective share of
the aggregate system load. (See Item 2 - PROPERTIES - "Jointly-Owned Facilities"
herein.)
SCS, acting on behalf of ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH,
also has a contract with SEPA (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
systems). Areas outside of such municipal limits were either to be assigned or
to be declared open for customer choice of supplier by action of the Georgia PSC
pursuant to standards set forth in the Act. Consistent with such standards, the
Georgia PSC has assigned substantially all of the land area in the state to a
supplier. Notwithstanding such assignments, the Act provides that any new
customer locating outside of 1973 municipal limits and having a connected load
of at least 900 kilowatts may receive electric service from the supplier of its
choice. (See also Item 1 - BUSINESS - "Competition" herein.)
Under and subject to the provisions of its franchises and concessions and
the 1973 State Territorial Electric Service Act, SAVANNAH has the full but
nonexclusive right to serve the City of Savannah, the Towns of Bloomingdale,
Pooler, Garden City, Guyton, Newington, Oliver, Port Wentworth, Rincon, Tybee
Island, Springfield, Thunderbolt, Vernonburg, and in conjunction with a
secondary supplier, the Town of Richmond Hill. In addition, SAVANNAH has been
assigned certain unincorporated areas in Chatham, Effingham, Bryan, Bulloch and
Screven Counties by the Georgia PSC. (See also Item 1 - BUSINESS - "Competition"
herein.)
Pursuant to the 1956 Utility Act, the Mississippi PSC issued "Grandfather
Certificates" of public convenience and necessity to MISSISSIPPI and to six
distribution rural cooperatives operating in southeastern Mississippi, then
served in whole or in part by MISSISSIPPI, authorizing them to distribute
electricity in certain specified geographically described areas of the state.
The six cooperatives serve approximately 300,000 retail customers in a
certificated area of approximately 10,300 square miles. In areas included in a
"Grandfather Certificate," the utility holding such certificate may, without
further certification, extend its lines up to five miles; other extensions
within that area by such utility, or by other utilities, may not be made except
upon a showing of, and a grant of a certificate of, public convenience and
necessity. Areas included in such a certificate which are subsequently annexed
to municipalities may continue to be served by the holder of the certificate,
irrespective of whether it has a franchise in the annexing municipality. On the
other hand, the holder of the municipal franchise may not extend service into
such newly annexed area without authorization by the Mississippi PSC.
Long-Term Power Sales Agreements
Reference is made to Note 7 to the financial statements for SOUTHERN, ALABAMA,
GEORGIA, GULF and MISSISSIPPI in Item 8 herein for information regarding
contracts for the sales of capacity and energy to non-territorial customers.
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<PAGE>
Competition
The electric utility industry in the United States is currently undergoing a
period of dramatic change as a result of regulatory and competitive factors.
Among the primary agents of change has been the Energy Policy Act of 1992
(Energy Act). The Energy Act allows independent power producers (IPPs) to access
a utility's transmission network in order to sell electricity to other
utilities. This enhances the incentive for IPPs to build cogeneration plants for
a utility's large industrial and commercial customers, and sell energy
generation to other utilities. Also, electricity sales for resale rates are
being driven down by wholesale transmission access and numerous potential new
energy suppliers, including power marketers and brokers. SOUTHERN is
aggressively working to maintain and expand its share of wholesale sales in the
Southeastern power markets.
Although the Energy Act does not permit retail customer access, it was a
major catalyst for the current restructuring and consolidation taking place
within the utility industry. Numerous federal and state initiatives are in
varying stages to promote wholesale and retail competition. Among other things,
these initiatives allow customers to choose their electricity provider. As these
initiatives materialize, the structure of the utility industry could radically
change. Some states have approved initiatives that result in a separation of the
ownership and/or operation of generating facilities from the ownership and/or
operation of transmission and distribution facilities. While various
restructuring and competition initiatives have been or are being discussed in
Alabama, Florida, Georgia, and Mississippi, none have been enacted to date.
Enactment would require numerous issues to be resolved, including significant
ones relating to transmission pricing and recovery of any stranded investments.
The inability of an operating company to recover its investments, including the
regulatory assets described in Note 1 to each registrant's respective financial
statements, could have a material adverse effect on the financial condition of
that operating company. The operating companies are attempting to minimize or
reduce their cost exposure. Reference is made to Note 3 to the financial
statements for SOUTHERN for information regarding these efforts.
Continuing to be a low-cost producer could provide opportunities to increase
market share and profitability in markets that evolve with changing regulation.
Conversely, unless SOUTHERN 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. Reference is made to each registrant's
"Management's Discussion and Analysis - Future Earnings Potential" in Item 7
herein for further discussion of competition.
To adapt to a less regulated, more competitive environment, SOUTHERN
continues to evaluate and consider a wide array of potential business
strategies. These strategies may include business combinations, acquisitions
involving other utility or non-utility businesses or properties, internal
restructuring, disposition of certain assets, or some combination thereof.
Furthermore, SOUTHERN may engage in other new business ventures that arise from
competitive and regulatory changes in the utility industry. Pursuit of any of
the above strategies, or any combination thereof, may significantly affect the
business operations and financial condition of SOUTHERN. (See Item 1 - BUSINESS
- - - - - - - - "Non-Traditional Business" herein.)
As a result of the foregoing factors, SOUTHERN has experienced increasing
competition for available off-system sales of capacity and energy from
neighboring utilities and alternative sources of energy. Additionally, the
future effect of cogeneration and small-power production facilities on the
SOUTHERN system cannot currently be determined but may be adverse.
ALABAMA currently has cogeneration contracts in effect with eleven
industrial customers. Under the terms of these contracts, ALABAMA purchases
excess generation of such companies. During 1998, ALABAMA purchased
approximately 60 million kilowatt-hours from such companies at a cost of $1.2
million.
GEORGIA currently has contracts in effect with six small power producers
whereby GEORGIA purchases their excess generation. During 1998, GEORGIA
purchased 5.0 million kilowatt-hours from such companies at a cost of $277,510.
GEORGIA has entered into a 30-year purchase power agreement, which began in June
1998, for electricity from a 300-megawatt cogeneration facility. Payments are
subject to reductions for failure to meet minimum capacity output. During 1998,
GEORGIA purchased 732.8 million kilowatt-hours at a cost of $33 million from
this facility. Reference is made to Note 4 to the financial statements for
GEORGIA in Item 8 herein for information regarding purchase power commitments.
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<PAGE>
GULF currently has agreements in effect with four industrial customers
pursuant to which GULF purchases "as available" energy from customer-owned
generation. During 1998, GULF purchased 151 million kilowatt-hours from such
companies for $4.2 million.
In 1996, MISSISSIPPI entered into agreements to purchase options for summer
peaking power for the years 1997 through 2000. Also, MISSISSIPPI has purchased
options from power marketers. Reference is made to Note 5 to the financial
statements for MISSISSIPPI in Item 8 herein for information regarding fuel and
purchased power commitments.
SAVANNAH currently has cogeneration contracts in effect with six large
customers. Under the terms of these contracts, SAVANNAH purchases excess
generation of such companies. During 1998, SAVANNAH purchased 23 million
kilowatt-hours from such companies at a cost of $1.3 million.
The competition for retail energy sales among competing suppliers of energy
is influenced by various factors, including price, availability, technological
advancements and reliability. These factors are, in turn, affected by, among
other influences, regulatory, political and environmental considerations,
taxation and supply.
The 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 By Operating Affiliates" herein for information concerning
suppliers of electricity operating within or near the areas served at retail by
the operating affiliates.)
Regulation
State Commissions
The operating affiliates are subject to the jurisdiction of their respective
state regulatory commissions, which have broad powers of supervision and
regulation over public utilities operating in the respective states, including
their rates, service regulations, sales of securities (except for the
Mississippi PSC) and, in the cases of the Georgia PSC and Mississippi PSC, in
part, retail service territories. (See Item 1 - BUSINESS - "Rate Matters" and
"Territory Served By Operating Affiliates" herein.)
In early 1999, the Florida PSC staff initiated informal discussions with
GULF related to its authorized return on equity and the outstanding balances of
certain regulatory assets. On March 2, 1999, GULF filed a petition with the
Florida PSC proposing a reduction in its authorized return; the sharing of
revenues above a certain earnings level, which included credits on customers'
bills; and the write-off of certain regulatory assets. A recommendation by the
Florida PSC staff was also filed with the Commission relating to the same
issues. At the March 16, 1999, agenda conference, the Commission directed GULF
and the Florida PSC staff to reconvene their discussions, working within a
framework established by the Commission, and pursue a compromise to be presented
at the April 20, 1999, agenda conference or shortly thereafter.
Holding Company Act
SOUTHERN is registered as a holding company under the Holding Company Act, and
it and its subsidiary companies are subject to the regulatory provisions of said
Act, including provisions relating to the issuance of securities, sales and
acquisitions of securities and utility assets, services performed by SCS and
Southern Nuclear, and the activities of certain of SOUTHERN's special purpose
subsidiaries.
While various proposals have been introduced in Congress regarding the
Holding Company Act, the prospects for legislative reform or repeal are
uncertain at this time.
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<PAGE>
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.
Reference is made to Note 3 to each registrant's financial statements
(except SAVANNAH) in Item 8 herein for further information regarding FERC
Reviews of Equity Returns.
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 18 existing GEORGIA
generating stations having an aggregate installed capacity of 1,074,696
kilowatts.
GEORGIA filed, in September, 1996, with the FERC, a notice of its intent to
seek a new license for the Flint River Project. GEORGIA is required to file a
new license by September 1999. GEORGIA filed an application for a new license
for the Flint River Project (FERC Project Number 1218) in November 1998 with the
FERC. The application contained an APEA. The FERC noticed the application in the
Federal Register on January 15, 1999. Comments on the APEA are due by March
1999. Since all outstanding issues were resolved prior to the submittal of the
APEA, GEORGIA anticipates that a license will be issued by the FERC by the
summer or fall of 1999.
GEORGIA has also started the relicensing process for the Middle
Chattahoochee Project (FERC Project Number 2177). This project consists of the
Goat Rock, Oliver, and North Highlands facilities. GEORGIA again plans to use
the APEA process. Initial scoping and stakeholder involvement has occurred.
GEORGIA is developing its final scoping document that outlines the proposed
environmental studies. Initial field work is anticipated to start in the second
quarter of 1999.
GEORGIA and OPC also have a license, expiring in 2027, for the Rocky
Mountain Plant, a pure pumped storage facility of 847,800 kilowatt capacity
which began commercial operation in 1995. (See Item 2 - PROPERTIES -
"Jointly-Owned Facilities" herein and Note 3 to SOUTHERN's and GEORGIA's
financial statements in Item 8 herein for additional information.)
Licenses for all projects, excluding those discussed above, expire in the
period 2007-2033 in the case of ALABAMA's projects and in the period 2005-2036
in the case of GEORGIA's projects.
Upon or after the expiration of each license, the United States Government,
by act of Congress, may take over the project, or the FERC may relicense the
project either to the original licensee or to a new licensee. In the event of
takeover or relicensing to another, the original licensee is to be compensated
in accordance with the provisions of the Federal Power Act, such compensation to
reflect the net investment of the licensee in the project, not in excess of the
fair value of the property taken, plus reasonable damages to other property of
the licensee resulting from the severance therefrom of the property taken.
Atomic Energy Act of 1954
ALABAMA, GEORGIA and Southern Nuclear are subject to the provisions of the
Atomic Energy Act of 1954, as amended, which vests jurisdiction in the NRC over
the construction and operation of nuclear reactors, particularly with regard to
certain public health and safety and antitrust matters. The National
Environmental Policy Act has been construed to expand the jurisdiction of the
NRC to consider the environmental impact of a facility licensed under the Atomic
Energy Act of 1954, as amended.
NRC operating licenses currently expire in June 2017 and March 2021 for
Plant Farley units 1 and 2, respectively, in August 2014 and June 2018 for Plant
Hatch units 1 and 2, respectively, and in January 2027 and February 2029 for
Plant Vogtle units 1 and 2, respectively.
Reference is made to Notes 1 and 12 to SOUTHERN's, Notes 1 and 12 to
ALABAMA's and Notes 1 and 5 to GEORGIA's financial statements in Item 8 herein
for information on nuclear decommissioning costs and nuclear insurance.
Additionally, Note 3 to GEORGIA's financial statements contains information
I-14
<PAGE>
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.
The operating affiliates' and SEGCO's estimated capital expenditures for
environmental quality control facilities for the years 1999, 2000 and 2001
are as follows: (in millions)
--------------------- --- ---------- ---------- -----------
1999 2000 2001
---------- ---------- -----------
ALABAMA $61.9 $57.6 $ 75.7
GEORGIA 32.2 53.3 102.8
GULF 4.5 4.3 1.2
MISSISSIPPI 9.0 - -
SAVANNAH 0.1 0.2 -
SEGCO 10.0 - -
---------- ---------- -----------
Total $117.7 $115.4 $179.7
===================== === ========== ========== ===========
*The foregoing estimates are included in the current construction programs.
(See Item 1 - BUSINESS - "Construction Programs" herein.)
Additionally, each operating affiliate and SEGCO has incurred costs for
environmental remediation of various sites. Reference is made to each
registrant's "Management's Discussion and Analysis" in Item 7 herein for
information regarding the registrants' environmental remediation efforts. Also,
see Note 3 to SOUTHERN's and GEORGIA's financial statements in Item 8 herein for
information regarding the identification of sites that may require environmental
remediation by GEORGIA and Note 3 to MISSISSIPPI's financial statements in Item
8 herein for information regarding a site that will require environmental
remediation by MISSISSIPPI.
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.
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
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. Such terms and
I-15
<PAGE>
compensation of service, however, are subject to final PSC approval. ALABAMA,
GEORGIA and SAVANNAH are allowed by state law to recover fuel and net purchased
energy costs through fuel cost recovery provisions which are adjusted to reflect
increases or decreases in such costs. GULF recovers from retail customers costs
of fuel, net purchased power, energy conservation and environmental compliance
through provisions which are adjusted to reflect increases or decreases in such
costs. GULF's recovery of these costs is based upon an annual projection - any
over/under recovery during such period is reflected in a subsequent annual
period with interest. With respect to MISSISSIPPI's retail rates, fuel and
purchased power costs above base levels included in the various rate schedules
are billed to such customers under the fuel and energy adjustment clause. The
adjustment factors for MISSISSIPPI's retail and wholesale rates are generally
levelized based on the estimated energy cost for the year, adjusted for any
actual over/under collection from the previous year. However, in January 1998,
MISSISSIPPI received approval from the Mississippi PSC to levelize and fix its
Fuel Adjustment Factors for January 1998 through December 2000. Revenues are
adjusted for differences between recoverable fuel costs and amounts actually
recovered in current rates.
Rate Proceedings
Reference is made to Note 3 to each registrant's financial statements in Item 8
herein for a discussion of rate matters. For each registrant (except SAVANNAH),
such Note 3 includes a discussion of proceedings relating to the reasonableness
of certain of the Southern electric system's wholesale rate schedules and
contracts.
Integrated Resource Planning
In 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 intends to
meet the future electrical needs of their customers through a combination of
demand-side and supply-side resources. The Georgia PSC must pre-certify these
new resources. Once certified, all prudently incurred construction costs and
purchased power costs will be recoverable through rates.
In March 1997, the Georgia PSC approved amendments to GEORGIA's 1995
Integrated Resource Plan. Pursuant to the amended plan, the Georgia PSC
certified a five-year purchase power agreement scheduled to begin in June 2000
for approximately 215 megawatts. Capacity and fixed operation and maintenance
payments are estimated to be between $7 million and $8 million each year. Also
under the amended plan, resources associated with decreased purchases of 250
megawatts each in 1996, 1997 and 1998 by OPC under a power supply agreement will
be used to meet the needs of GEORGIA's retail customers through 2004.
In July 1998, the Georgia PSC approved GEORGIA's and SAVANNAH's 1998
Integrated Resource Plans as filed, with minor modifications. The approved plans
identify resource needs of approximately 800 megawatts to 1,200 megawatts
starting in the summer of 2002. As a result, GEORGIA and SAVANNAH issued a joint
request for proposals for their collective needs of 800 megawatts to 1,200
megawatts for 2002 and 2003. The bids will be evaluated against self-build
options, and a Certification Filing for the selected resources is expected to be
filed with the Georgia PSC in August 1999.
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 financial statements in Item 8 herein.
I-16
<PAGE>
Employee Relations
The companies of the SOUTHERN system had a total of 31,848 employees on their
payrolls at December 31, 1998.
-------------------------------- --- -------------------------
Employees
at
December 31, 1998
-------------------------
ALABAMA 6,631
GEORGIA 8,371
GULF 1,328
MISSISSIPPI 1,230
SAVANNAH 542
SCS 3,445
Southern Energy* 6,642
Southern Nuclear 3,054
Other 605
-------------------------------- --- -------------------------
Total 31,848
================================ === =========================
*Includes 5,670 employees on international payrolls.
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 14, 2001. Upon notice given at least 60 days prior to that date,
negotiations may be initiated with respect to agreement terms to be effective
after such date.
GEORGIA has an agreement with the IBEW covering wages and working
conditions, which is in effect through June 30, 1999.
GULF has an agreement with the IBEW on a three-year contract extending to
August 15, 2001.
MISSISSIPPI has an agreement with the IBEW on a four-year contract extending
to August 16, 2002.
SAVANNAH has three-year labor agreements with the IBEW and the Office and
Professional Employees International Union that expire April 16, 1999 and
December 1, 1999, respectively. Currently, SAVANNAH is in negotiations with the
IBEW.
Southern Energy has a 5-year labor agreement with the IBEW extending to
October 31, 2002, and the United Paperworkers International Union extending to
June 1, 2002, covering employees of Mobile Energy. At its State Line facility in
Hammond, Indiana, Southern Energy has a labor contract with the United Steel
Workers that extends to January 1, 2004.
Southern Energy Canal located in Sandwich, Massachusetts, and Southern
Energy Kendall located in Cambridge, Massachusetts, both subsidiaries of
Southern Energy, have contracts with the Utilities Workers' Union of America
which expire on June 1, 2001 and March 1, 2001, respectively.
Southern Nuclear has agreements with the IBEW on separate three-year
contracts extending to August 15, 2001 for Plant Farley and to July 1, 1999 for
Plants Hatch and Vogtle. Upon notice given at least 60 days prior to these
dates, negotiations may be initiated with respect to agreement terms to be
effective after such dates.
Southern Nuclear also has an agreement with the United Plant Guard Workers
of America for security officers at Plant Hatch extending to September 30, 2001.
Upon notice given at least 60 days prior to that date, negotiations may be
initiated with respect to agreement terms to be effective after such date.
The agreements also subject the terms of the pension plans for the companies
discussed above to collective bargaining with the unions at five-year intervals.
I-17
<PAGE>
Item 2. PROPERTIES
Electric Properties
The operating affiliates and SEGCO, at December 31, 1998, operated 33
hydroelectric generating stations, 33 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 (1)
------------------------- ------------------- -----------------
(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 (2)
Gaston Unit 5 Wilsonville, AL 880,000
Miller Birmingham, AL 2,532,288 (3)
---------
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 750,924 (4)
Wansley Carrollton, GA 925,550 (5)
Yates Newnan, GA 1,250,000
---------
GEORGIA Total 9,541,174
---------
Crist Pensacola, FL 1,045,000
Lansing Smith Panama City, FL 305,000
Scholz Chattahoochee, FL 80,000
Daniel Pascagoula, MS 500,000 (6)
Scherer Unit 3 Macon, GA 204,500 (4)
-----------
GULF Total 2,134,500
---------
Eaton Hattiesburg, MS 67,500
Sweatt Meridian, MS 80,000
Watson Gulfport, MS 1,012,000
Daniel Pascagoula, MS 500,000 (6)
Greene County Demopolis, AL 200,000 (2)
-----------
MISSISSIPPI Total 1,859,500
-----------
---------------------------------------------- ----------------
------------------------- -----------------------------------------
Nameplate
Generating Station Location Capacity
---------------------- ------------------------- ------------------
(Kilowatts)
McIntosh Effingham County, GA 163,117
Kraft Port Wentworth, GA 281,136
Riverside Savannah, GA 102,278
-----------
SAVANNAH Total 546,531
-----------
Gaston Units 1-4 Wilsonville, AL
SEGCO Total 1,000,000 (7)
-----------
Total Fossil Steam 21,700,243
-----------
Nuclear Steam
Farley Dothan, AL
ALABAMA Total 1,720,000
-----------
Hatch Baxley, GA 862,669 (8)
Vogtle Augusta, GA 1,060,240 (9)
-----------
GEORGIA Total 1,922,909
----------
Total Nuclear Steam 3,642,909
-----------
Combustion Turbines
Greene County Demopolis, AL
ALABAMA Total 720,000
Arkwright Macon, GA 30,580
Atkinson Atlanta, GA 78,720
Bowen Cartersville, GA 39,400
Intercession City Intercession City, FL 47,333 (10)
McDonough Atlanta, GA 78,800
McIntosh
Units 1,2,3,4,7,8 Effingham County, GA 480,000
McManus Brunswick, GA 481,700
Mitchell Albany, GA 118,200
Robins Warner Robins, GA 160,000
Wilson Augusta, GA 354,100
Wansley Carrollton, GA 26,322 (5)
-----------
GEORGIA Total 1,895,155
---------
Lansing Smith
Unit A Panama City, FL 39,400
Pea Ridge
Units 1-3 Pea Ridge, FL 14,250
GULF Total 53,650
Chevron Cogenerating
Station Pascagoula, MS 147,292 (11)
Sweatt Meridian, MS 39,400
Watson Gulfport, MS 39,360
---------
MISSISSIPPI Total 226,052
---------
------------------------------------------------- -----------------
I-18
<PAGE>
--------------------------- -------------------- -----------------
Nameplate
Generating Station Location Capacity
--------------------------- -------------------- -----------------
(Kilowatts)
Boulevard Savannah, GA 59,100
Kraft Port Wentworth, GA 22,000
McIntosh
Units 5&6 Effingham County, 160,000
-------
GA
SAVANNAH Total 241,100
241,100
Gaston (SEGCO) Wilsonville, AL 19,680 (7)
Total Combustion Turbines 3,155,637
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
Rocky Mountain Rome, GA 215,256 (12)
Sinclair Dam Milledgeville, GA 45,000
Tallulah Falls Clayton, GA 72,000
Terrora Clayton, GA 16,000
Tugalo Clayton, GA 45,000
Wallace Dam Eatonton, GA 321,300
Yonah Toccoa, GA 22,500
6 Other Plants 18,080
-----------
GEORGIA Total 1,077,736
----------
Total Hydroelectric Facilities 2,660,461
-----------
Total Generating Capacity 31,159,250
------------------------------------------------ -----------------
Notes:
(1) For additional information regarding facilities jointly-owned with
non-affiliated parties, see Item 2 - PROPERTIES -
"Jointly-Owned Facilities" herein.
(2) Owned by ALABAMA and MISSISSIPPI as
tenants in common in the proportions of 60% and 40%, respectively.
(3) Excludes the capacity owned by AEC.
(4) Capacity shown for GEORGIA is 8.4% of Units 1 and 2 and 75% of Unit 3.
Capacity shown for GULF is 25% of Unit 3.
(5) Capacity shown is GEORGIA's portion (53.5%) of total plant capacity.
(6) Represents 50% of the plant which is owned as tenants in common by
GULF and MISSISSIPPI.
(7) SEGCO is jointly-owned by ALABAMA and GEORGIA. (See Item 1 - BUSINESS
herein.)
(8) Capacity shown is GEORGIA's portion (50.1%) of total plant capacity.
(9) Capacity shown is GEORGIA's portion (45.7%) of total plant capacity.
(10) Capacity shown represents 33-1/3% of total plant capacity. GEORGIA
owns a 1/3 interest in the unit with 100% use of the
unit from June through September. FPC operates the unit.
(11) Generation is dedicated to a single industrial customer.
(12) Capacity shown is GEORGIA's portion (25.4%) of total plant capacity.
OPC operates the plant.
Except as discussed below under "Titles to Property," the principal plants
and other important units of the operating affiliates and SEGCO are owned in fee
by the respective companies. It is the opinion of management of each such
company that its operating properties are adequately maintained and are
substantially in good operating condition.
MISSISSIPPI owns a 79-mile length of 500-kilovolt transmission line which is
leased to Entergy Gulf States. The line, completed in 1984, extends from Plant
Daniel to the Louisiana state line. Entergy Gulf States is paying a use fee over
a forty-year period covering all expenses and the amortization of the original
$57 million cost of the line. At December 31, 1998, the unamortized portion of
this cost was $37 million.
The all-time maximum demand on the operating affiliates and SEGCO was
28,933,700 kilowatts and occurred in June 1998. This amount excludes demand
served by capacity retained by MEAG and Dalton and excludes demand associated
I-19
<PAGE>
with power purchased from OPC and SEPA by its preference customers. The reserve
margin for the operating affiliates and SEGCO at that time was 12.8%. For
additional information on peak demands, reference is made to Item 6 - SELECTED
FINANCIAL DATA herein.
ALABAMA and GEORGIA will incur significant costs in decommissioning their
nuclear units at the end of their useful lives. (See Item 1 - BUSINESS -
"Regulation - Atomic Energy Act of 1954" and Note 1 to SOUTHERN's, ALABAMA's and
GEORGIA's financial statements in Item 8 herein.)
Other Electric Generation Facilities
Through special purpose subsidiaries, SOUTHERN owns interests in or operates
independent power production facilities and foreign utility companies. The
generating capacity of these utilities (or facilities) at December 31, 1998, was
as follows:
<TABLE>
<CAPTION>
Facilities in Operation
------------------------------------------------------------------------------------------------------------------
Megawatts of Capacity Percent
Facility Location Units Owned Operated Ownership Type
---------------- --------------------------- --------- ------------ ------------- ----------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alicura Argentina 4 551 (1) 1,000 55.14 (1) Hydro
BEWAG Germany 18 443 - 26.00 Coal
BEWAG Germany 17 375 - 26.00 Oil & Gas
Birchwood Virginia 1 111 222 50.00 Coal (2)
CEPA China 3 634 - (3) 32.00 Coal
CEPA Philippines 2 641 735 87.22 Coal
CEPA Philippines 3 189 210 90.00 Oil
CEPA Philippines 13 381 381 100.00 Oil
CEMIG Brazil 33 193 - 3.60 Hydro
CEMIG Brazil 2 5 - 3.60 Thermal
CEMIG Brazil 1 - - 3.60 Wind
Edelnor Chile 2 281 341 82.34 Coal
Edelnor Chile 37 95 115 82.34 Oil
Edelnor Chile 2 8 10 82.34 Hydro
Freeport Grand Bahamas 8 79 126 62.50 Oil & Gas
Mobile Energy Alabama 3 111 111 100.00 Waste/Biomass (2)
Penal Trinidad and Tobago 5 92 236 39.00 Gas
Port of Spain Trinidad and Tobago 6 120 308 39.00 Gas
Pt. Lisas Trinidad and Tobago 10 247 634 39.00 Gas
State Line Indiana 2 490 490 100.00 Coal
SWEB United Kingdom 8 71 - (3) 3.77 Gas
SWEB United Kingdom 12 8 16 49.00 Oil & Gas
SWEB United Kingdom 3 3 - (3) 18.62 Wind
SWEB United Kingdom 3 - - 12.25 Landfill Gas
SE New
England Maine 8 1,267 1,267 100.00 Oil & Gas
======================================================================================================================
Total Capacity 6,395 6,202 (3)
=======================================================================================================================
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<PAGE>
Notes: (1) Represents megawatts of capacity under a concession agreement expiring in the year 2023.
(2) Cogeneration facility.
(3) Does not include Shajiao C (1,980 MW) or UK power plants (150 MW) that are partially owned but not operated by
CEPA and SWEB, respectively.
</TABLE>
<TABLE>
<CAPTION>
Facilities Under Development
-------------------------------------------------------------------------------------------------------------------------------
Megawatts of Capacity Percent
Facility Location Units Own Operate Ownership Type
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CEMIG Brazil 1 1 - 3.60 Hydro
CEPA Philippines 2 1,121 1,218 92.00 Coal
Edelnor Chile 1 206 250 82.34 Gas
-------------------------------------------------------------------------------------------------------------------------------
Total Capacity 1,328 1,468
===============================================================================================================================
</TABLE>
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:
<TABLE>
<CAPTION>
Total Percentage Ownership
----------- -------- ------------ -------- --------- --------- --------
Capacity ALABAMA AEC GEORGIA OPC MEAG DALTON FPC
------------- ----------- -------- ------------ -------- --------- --------- --------
(Megawatts)
Plant Miller
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Units 1 and 2 1,320 91.8% 8.2% -% -% -% -% -%
Plant Hatch 1,722 - - 50.1 30.0 17.7 2.2 -
Plant Vogtle 2,320 - - 45.7 30.0 22.7 1.6 -
Plant Scherer
Units 1 and 2 1,636 - - 8.4 60.0 30.2 1.4 -
Plant Wansley 1,779 - - 53.5 30.0 15.1 1.4 -
Rocky Mountain 848 - - 25.4 74.6 - - -
Intercession City, FL 142 - - 33.3 - - - 66.7
----------------------------- ------------- ----------- -------- ------------ -------- --------- --------- --------
</TABLE>
ALABAMA and GEORGIA have contracted to operate and maintain the respective
units in which each has an interest (other than Rocky Mountain and Intercession
City, as described below) as agent for the joint owners.
In connection with the joint ownership arrangements for Plant Vogtle,
GEORGIA made commitments to purchase portions of OPC's and MEAG's capacity and
energy from this plant. Declining commitments were in effect during periods of
up to seven years following commercial operation and ended in 1996. In addition,
the Company has commitments regarding a portion of a 5 percent interest in Plant
Vogtle owned by MEAG that are in effect until the later of retirement of the
plant or the latest stated maturity date of MEAG's bonds issued to finance such
ownership interest. The payments for capacity are required whether any capacity
is available. The energy cost is a function of each unit's variable operating
costs. Except for the portion of the capacity payments related to the 1987 and
1990 write-offs of Plant Vogtle costs, the cost of such capacity and energy is
included in purchased power from non-affiliates in GEORGIA's Statements of
Income in Item 8 herein.
In December 1988, GEORGIA and OPC entered into a joint ownership agreement
for the Rocky Mountain plant under which GEORGIA agreed to retain its present
investment in the project and OPC agreed to finance, complete and operate the
facility. In 1995, the plant went into commercial operation. GEORGIA's ownership
I-21
<PAGE>
is 25.4 percent. On January 14, 1998, the GPSC ordered that the Company be
allowed approximately $108 million of its $142 million investment in the plant
in rate base as of December 31, 1998. GEORGIA appealed the GPSC's order. Under
the rate order approved by the GPSC on December 18, 1998, GEORGIA voluntarily
dismissed the appeal. As a result, in December 1998, GEORGIA recorded a charge
to earnings of $21 million, after taxes, associated with the write-down of the
plant. Reference is made to Note 3 to SOUTHERN's and GEORGIA's financial
statements in Item 8 herein for additional information regarding the Rocky
Mountain plant.
In 1994, GEORGIA and FPC entered into a joint ownership agreement regarding
the Intercession City combustion turbine unit. The unit began commercial
operation in January 1997, and is operated by FPC. GEORGIA owns a one-third
interest in the unit, with use of 100% of the capacity from June through
September. FPC has the capacity the remainder of the year.
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 five combustion turbine
generators of MISSISSIPPI are located, which is held by easement) and other
important units of the respective companies are owned in fee by such companies,
subject only to the liens of applicable mortgage indentures (except for SEGCO)
and to excepted encumbrances as defined therein. The 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, 1994 to December 31, 1998, the operating
affiliates, SEGCO, SCS, Southern Nuclear, Southern LINC and Southern Energy
recorded gross property additions and retirements as follows:
------------------------- ------------------- --- ----------
Gross Property
Additions Retirements
--------------- -------------
(in millions)
ALABAMA $2,576 $ 426
GEORGIA (1) 2,522 1,263
GULF 327 131
MISSISSIPPI 357 98
SAVANNAH 122 13
SEGCO 27 8
SCS 108 171
Southern Nuclear 4 6
Southern
LINC 300 48
Southern Energy 1,677 54
Other 10 -
============================ =========== == ================
SOUTHERN system $8,030 $2,218
============================ =========== == ================
Notes:
(1) Includes approximately $229 million attributable to sales of Plant
Scherer Unit 4 to FP&L and JEA.
I-22
<PAGE>
Item 3. LEGAL PROCEEDINGS
(1) Frost v. ALABAMA
(Circuit Court of Jefferson County, Alabama)
Reference is made to Note 3 to SOUTHERN's and ALABAMA's financial
statements in Item 8 herein under the captions "Alabama Power Appliance
Warranty Litigation" and "Appliance Warranty Litigation", respectively.
(2) Sullivan v. ALABAMA et al.
(Circuit Court of Jefferson County, Alabama)
Reference is made to Note 3 to SOUTHERN's and ALABAMA's financial
statements in Item 8 herein under the captions "Alabama Power
Environmental Litigation" and "Environmental Litigation", respectively.
(3) GEORGIA has been designated as a potentially responsible party under the
Comprehensive Environmental Response, Compensation and Liability Act with
respect to a site in Brunswick, Georgia.
Reference is made to Note 3 to SOUTHERN's and GEORGIA's financial
statements in Item 8 herein under the captions "Georgia Power Potentially
Responsible Party Status" and "Certain Environmental Contingencies,"
respectively.
(4) In re: Mobile Energy Services Company, LLC; In re: Mobile Energy
Services Holdings, Inc.
(U.S. Bankruptcy Court for the Southern District of Alabama).
In January 1999, Mobile Energy, an indirect subsidiary of SOUTHERN, and
its direct parent filed petitions for Chapter 11 bankruptcy relief in the
U.S. Bankruptcy Court for the Southern District of Alabama. For
additional information regarding this matter, reference is made to Note 3
to SOUTHERN's financial statements in Item 8 herein. In March 1999,
SOUTHERN paid a total of approximately $36 million in respect of guaranty
and reimbursement agreements previously entered into by it for the
benefit of Mobile Energy creditors.
See Item 1 - BUSINESS - "Construction Programs," "Fuel Supply," "Regulation
- - - - - - - - Federal Power Act" and "Rate Matters" as well as Note 3 to each registrant's
financial statements in Item 8 herein for a description of certain other
administrative and legal proceedings discussed therein.
Additionally, each of the operating affiliates, Southern Energy, SCS,
Southern Nuclear, Energy Solutions and Southern LINC are, in the normal course
of business, engaged in litigation or administrative proceedings that include,
but are not limited to, acquisition of property, injuries and damages claims,
and complaints by present and former employees.
Item 4. SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS
None.
I-23
<PAGE>
EXECUTIVE OFFICERS OF SOUTHERN
(Identification of executive officers of SOUTHERN is inserted in Part I in
accordance with Regulation S-K, Item 401(b), Instruction 3.) The ages of the
officers set forth below are as of December 31, 1998.
A. W. Dahlberg
Chairman, President and Chief Executive Officer
Age 58
Elected Director in 1985, President effective January 1994, and Chairman and
Chief Executive Officer effective March 1995.
Paul J. DeNicola
Executive Vice President and Director
Age 50
Elected Director in 1989 and Executive Vice President of SOUTHERN in 1991. He
also has served as President and Chief Executive Officer of SCS since January
1994.
H. Allen Franklin
Executive Vice President and Director
Age 54
Elected Director in 1988 and Executive Vice President in 1991. He also has
served as President and Chief Executive Officer of GEORGIA since January 1994.
Elmer B. Harris
Executive Vice President and Director
Age 59
Elected Director in 1989, and Executive Vice President in 1991. He also has
served as President and Chief Executive Officer of ALABAMA since 1989.
Thomas G. Boren
Senior Vice President
Age 49
Elected in 1995. He also has served as President and Chief Executive Officer of
Southern Energy since 1992.
Stephen A. Wakefield
Senior Vice President and General Counsel
Age 58
Elected in 1997. Previously, he was a partner at the law firm of Akin, Gump,
Strauss, Hauer & Feld, LLP from July 1991 through August 1997.
W. L. Westbrook
Financial Vice President, Chief Financial Officer and Treasurer
Age 59
Elected in 1986; responsible primarily for all aspects of financing for
SOUTHERN. He also has served as Executive Vice President of SCS since 1986.
C. Alan Martin
Vice President
Age 50
Elected in 1998; serves as Chief Marketing Officer for the SOUTHERN system.
Previously Vice President of Human Resources of SOUTHERN from 1995 to February
1998, and Vice President of ALABAMA from 1987 to 1995.
Charles D. McCrary
Vice President
Age 47
Elected in 1998; serves as Chief Production Officer for the SOUTHERN system. He
also has served as Executive Vice President of GEORGIA since May 1998 and
Executive Vice President of ALABAMA since 1994. Previously served as Senior Vice
President of ALABAMA from 1991 to 1994.
W. G. Hairston, III
Age 53
President and Chief Executive Officer of Southern Nuclear since 1993.
The officers of SOUTHERN were elected for a term running from the last
annual meeting of the directors (May 27, 1998) for one year until the next
annual meeting or until their successors are elected and have qualified.
I-24
<PAGE>
PART II
Item 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) The common stock of SOUTHERN is listed and traded on the New York
Stock Exchange. The stock is also traded on regional exchanges across
the United States. High and low stock prices, per the New York Stock
Exchange Composite Tape during each quarter for the past two years
were as follows:
------------------------ ----------- --- --------------
High Low
----------- --------------
1998
First Quarter $28-11/16 $23-15/16
Second Quarter 29 25-1/16
Third Quarter 29-13/16 25-1/4
Fourth Quarter 31-9/16 27-3/16
1997
First Quarter $23-3/8 $20-3/4
Second Quarter 22-1/4 19-7/8
Third Quarter 23 20-13/16
Fourth Quarter 26-1/4 22
-------------------- --------------- --- --------------
There is no market for the other registrants' common stock, all of
which is owned by SOUTHERN. On February 28, 1999, the closing price
of SOUTHERN's common stock was $25.0625.
(b) Number of SOUTHERN's common stockholders
at December 31, 1998:
187,053
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 1998 1997
------------------- --------- ------------- ----------
SOUTHERN First $232,449 $220,194
Second 233,623 221,544
Third 233,763 222,980
Fourth 233,506 224,287
ALABAMA First 90,400 80,100
Second 90,500 85,600
Third 90,800 86,100
Fourth 95,400 87,800
GEORGIA First 132,100 122,700
Second 132,300 131,000
Third 132,700 131,800
Fourth 139,500 134,500
GULF First 14,100 12,900
Second 14,100 13,800
Third 14,100 13,800
Fourth 14,900 24,100
MISSISSIPPI First 12,700 11,300
Second 12,800 12,100
Third 12,800 12,200
Fourth 13,400 13,800
SAVANNAH First 5,800 5,100
Second 5,800 5,400
Third 5,800 5,500
Fourth 6,100 4,500
------------------- --------- ------------- ----------
The dividend paid per share by SOUTHERN was 32.5(cent) for each quarter of
1997 and 33.5(cent) for each quarter of 1998. The dividend paid on SOUTHERN's
common stock for the first quarter of 1999 was 33.5(cent) per share.
II-1
<PAGE>
The amount of dividends on their common stock that may be paid by the
subsidiary registrants is restricted in accordance with their first mortgage
bond indenture. The amounts of earnings retained in the business and the amounts
restricted against the payment of cash dividends on common stock at December 31,
1998, were as follows:
-------------------- ------------------ --- --------------
Retained Restricted
Earnings Amount
------------------ --------------
(in millions)
ALABAMA $1,225 $ 796
GEORGIA 1,780 897
GULF 171 127
MISSISSIPPI 174 118
SAVANNAH 113 68
Consolidated 3,878 2,003
-------------------- ------------------ --- --------------
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-45
through II-48.
ALABAMA. Reference is made to information under the heading
"Selected Financial and Operating Data," contained herein at pages II-80 through
II-83.
GEORGIA. Reference is made to information under the heading "Selected
Financial and Operating Data," contained herein at pages II-118 through II-121.
GULF. Reference is made to information under the heading "Selected
Financial and Operating Data," contained herein at pages II-151 through II-154.
MISSISSIPPI. Reference is made to information under the heading
"Selected Financial and Operating Data," contained herein at pages II-183
through II-186.
SAVANNAH. Reference is made to information under the heading
"Selected Financial and Operating Data," contained herein at pages II-211
through II-214.
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-19.
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-52 through II-60.
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-87 through II-96.
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-125 through II-133.
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-158 through II-166.
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-190 through II-197.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Reference is made to information in SOUTHERN's "Management's Discussion
and Analysis - Derivative Financial Instruments" and to Note 1 to SOUTHERN's
financial statements under the headings "Financial Instruments for Non-Trading
Activities" and "Financial Instruments for Trading Activities" contained herein
on pages II-15 through II-16; and pages II-30 through II-32, respectively.
II-2
<PAGE>
<TABLE>
<CAPTION>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO 1998 FINANCIAL STATEMENTS
Page
The Southern Company and Subsidiary Companies:
<S> <C>
Report of Independent Public Accountants................................................................................ II-7
Consolidated Statements of Income for the Years Ended December 31, 1998, 1997 and 1996.................................. II-20
Consolidated Statements of Retained Earnings for the Years Ended
December 31, 1998, 1997 and 1996................................................................................ II-26
Consolidated Statements of Comprehensive Income for the Years Ended
December 31, 1998, 1997 and 1996................................................................................ II-26
Consolidated Statements of Accumulated Other Comprehensive Income for the Years Ended
December 31, 1998, 1997 and 1996................................................................................ II-26
Consolidated Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996.............................. II-21
Consolidated Balance Sheets at December 31, 1998 and 1997............................................................... II-22
Consolidated Statements of Capitalization at December 31, 1998 and 1997................................................. II-24
Consolidated Statements of Paid-In Capital for the Years Ended December 31, 1998, 1997 and 1996......................... II-26
Notes to Financial Statements........................................................................................... II-27
ALABAMA:
Report of Independent Public Accountants .............................................................................. II-51
Statements of Income for the Years Ended December 31, 1998, 1997 and 1996............................................... II-61
Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996........................................... II-62
Balance Sheets at December 31, 1998 and 1997 ........................................................................... II-63
Statements of Capitalization at December 31, 1998 and 1997 ............................................................. II-65
Statements of Retained Earnings for the Years Ended December 31, 1998, 1997 and 1996.................................... II-67
Statements of Paid-In Capital for the Years Ended December 31, 1998, 1997 and 1996...................................... II-67
Notes to Financial Statements........................................................................................... II-68
GEORGIA:
Report of Independent Public Accountants................................................................................ II-86
Statements of Income for the Years Ended December 31, 1998, 1997 and 1996............................................... II-97
Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996........................................... II-98
Balance Sheets at December 31, 1998 and 1997 ........................................................................... II-99
Statements of Capitalization at December 31, 1998 and 1997 ............................................................. II-100
Statements of Retained Earnings for the Years Ended December 31, 1998, 1997 and 1996.................................... II-103
Statements of Paid-In Capital for the Years Ended December 31, 1998, 1997 and 1996...................................... II-103
Notes to Financial Statements........................................................................................... II-104
GULF:
Report of Independent Public Accountants................................................................................ II-124
Statements of Income for the Years Ended December 31, 1998, 1997 and 1996............................................... II-134
Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996........................................... II-135
Balance Sheets at December 31, 1998 and 1997 ........................................................................... II-136
Statements of Capitalization at December 31, 1998 and 1997 ............................................................. II-138
Statements of Retained Earnings for the Years Ended December 31, 1998, 1997 and 1996.................................... II-140
Statements of Paid-In Capital for the Years Ended December 31, 1998, 1997 and 1996...................................... II-140
Notes to Financial Statements........................................................................................... II-141
</TABLE>
III-3
<PAGE>
<TABLE>
<CAPTION>
Page
MISSISSIPPI:
<S> <C>
Report of Independent Public Accountants................................................................................ II-157
Statements of Income for the Years Ended December 31, 1998, 1997 and 1996............................................... II-167
Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996........................................... II-168
Balance Sheets at December 31, 1998 and 1997 ........................................................................... II-169
Statements of Capitalization at December 31, 1998 and 1997 ............................................................. II-171
Statements of Retained Earnings for the Years Ended December 31, 1998, 1997 and 1996.................................... II-172
Statements of Paid-In Capital for the Years Ended December 31, 1998, 1997 and 1996...................................... II-172
Notes to Financial Statements........................................................................................... II-173
SAVANNAH:
Report of Independent Public Accountants................................................................................ II-189
Statements of Income for the Years Ended December 31, 1998, 1997 and 1996............................................... II-198
Statements of Retained Earnings for the Years Ended December 31, 1998, 1997 and 1996.................................... II-198
Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996........................................... II-199
Balance Sheets at December 31, 1998 and 1997 ........................................................................... II-200
Statements of Capitalization at December 31, 1998 and 1997 ............................................................. II-202
Notes to Financial Statements........................................................................................... II-203
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
</TABLE>
III-4
THE SOUTHERN COMPANY
AND SUBSIDIARY COMPANIES
FINANCIAL SECTION
II-5
<PAGE>
MANAGEMENT'S REPORT
Southern Company and Subsidiary Companies 1998 Annual Report
The management of Southern Company has prepared -- and is responsible for -- the
consolidated financial statements and related information included in this
report. These statements were prepared in accordance with 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 consolidated financial statements present
fairly, in all material respects, the financial position, results of operations,
and cash flows of Southern Company and its subsidiary companies in conformity
with generally accepted accounting principles.
/s/ A. W. Dahlberg
A. W. Dahlberg
Chairman, President, and Chief Executive Officer
/s/ W. L. Westbrook
W. L. Westbrook
Financial Vice President, Chief Financial Officer,
and Treasurer
February 10, 1999
II-6
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Southern Company:
We have audited the accompanying consolidated balance sheets and consolidated
statements of capitalization of Southern Company (a Delaware corporation) and
subsidiary companies as of December 31, 1998 and 1997, and the related
consolidated statements of income, comprehensive income, retained earnings,
paid-in capital, accumulated other comprehensive income, and cash flows for each
of the three years in the period ended December 31, 1998. 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 consolidated financial statements (pages II-20 through
II-44) referred to above present fairly, in all material respects, the financial
position of Southern Company and subsidiary companies as of December 31, 1998
and 1997, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Atlanta, Georgia
February 10, 1999
II-7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Southern Company and Subsidiary Companies 1998 Annual Report
RESULTS OF OPERATIONS
Earnings and Dividends
Southern Company's 1998 earnings of $1.2 billion -- excluding non-recurring
items -- established a new record high. Earnings were driven by higher energy
sales and from growth in the non-traditional business. However, reported
earnings in both 1998 and 1997 reflected significant charges. Reported earnings
for 1998 were $977 million or $1.40 per share compared with $972 million or
$1.42 per share in 1997. The traditional core business of selling electricity
in the southeastern United States remained strong, while the non-traditional
business results were adversely affected by a $200 million, after tax, write
down of assets in South America in 1998 and by a $111 million windfall profits
tax assessed in the United Kingdom in 1997. Southern Company's subsidiary that
owns and manages its international and domestic non-traditional electric power
production and delivery facilities is Southern Energy, Inc. (Southern Energy).
After excluding these non-recurring charges, Southern Energy accounted for
approximately 20 percent and 10 percent of Southern Company's reported net
income in 1998 and 1997, respectively.
A reconciliation of reported earnings to earnings excluding non-recurring
items and explanations are as follows:
Consolidated Earnings
Net Income Per Share
--------------- ----------------
1998 1997 1998 1997
---------------- ----------------
(in millions)
Earnings as reported $ 977 $ 972 $1.40 $1.42
- - - - - - - ---------------------------------------------------------------
Write down of assets:
South American
investments 200 - .29 -
Rocky Mountain
plant 21 - .03 -
Windfall profits tax - 111 - .16
Work force reduction
programs 20 31 .03 .05
Other 7 16 .01 .02
- - - - - - - ---------------------------------------------------------------
Total non-recurring 248 158 .36 .23
- - - - - - - ---------------------------------------------------------------
Earnings excluding
non-recurring items $1,225 $1,130 $1.76 $1.65
===============================================================
Amount and
percent change $95 8.4% $0.11 6.7%
- - - - - - - ---------------------------------------------------------------
Southern Energy's 1998 write down is related to its investments in Argentina
and Chile not meeting financial expectations, which resulted in an announced
plan to sell these assets. In 1997, Southern Energy -- as well as other
utilities in the United Kingdom -- was assessed a one-time tax on profits. In
1998, Georgia Power resolved a long-term issue related to its investment in the
Rocky Mountain pumped storage hydroelectric plant. The write down resulted from
a settlement of Georgia Power's 1998 retail rate proceeding. Also, work force
reduction programs in the traditional core business were implemented in 1998 and
1997. These costs are expected to be recovered through future savings within
approximately two years following each program's implementation.
Dividends paid on common stock during 1998 were $1.34 per share or 33 1/2
cents per quarter. During 1997 and 1996, dividends paid per share were $1.30 and
$1.26, respectively. In January 1999, Southern Company maintained the quarterly
dividend at 33 1/2 cents per quarter or $1.34 annually. Southern Company has
modified its dividend policy from a targeted 75 percent payout ratio to a lower
ratio over time. This policy supports Southern Company's strategic goal to
become the best investment in the electric utility industry.
Revenues
Operating revenues changed in 1998 and 1997 as a result of the following
factors:
Increase (Decrease)
From Prior Year
- - - - - - - ---------------------------------------------------------------
1998 1997 1996
- - - - - - - ---------------------------------------------------------------
(in millions)
Retail --
Growth and price
change $ 258 $ 105 $ 124
Weather 178 (110) (64)
Fuel cost recovery and
other 189 (13) 2
- - - - - - - ---------------------------------------------------------------
Total retail 625 (18) 62
- - - - - - - ---------------------------------------------------------------
Sales for resale --
Within service area (2) (33) 10
Outside service area 12 81 14
- - - - - - - ---------------------------------------------------------------
Total sales for resale 10 48 24
Southern Energy (1,934) 2,154 1,040
Other operating revenues 91 69 52
- - - - - - - ---------------------------------------------------------------
Total operating revenues $(1,208) $2,253 $1,178
===============================================================
Percent change (9.6)% 21.8% 12.8%
- - - - - - - ---------------------------------------------------------------
Retail revenues of $8.3 billion increased sharply, up 8.2 percent compared
with last year. Continued growth in the traditional service area and the
II-8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 1998 Annual Report
positive impact of weather on energy sales were the predominant factors causing
the rise in revenues. In 1997, retail revenues decreased by 0.2 percent compared
with the year 1996. Under fuel cost recovery provisions, fuel revenues generally
equal fuel expenses -- including the fuel component of purchased energy -- and
do not affect net income.
Sales for resale revenues within the service area were $374 million in 1998,
down 0.7 percent from the prior year. Revenues from sales for resale within the
service area were $376 million in 1997, down 8.1 percent from the prior year.
This sharp decline resulted primarily from supplying less electricity under
contractual agreements with certain wholesale customers in 1997.
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:
1998 1997 1996
- - - - - - - ----------------------------------------------------------------
(in millions)
Capacity $196 $203 $217
Energy 152 183 176
- - - - - - - ----------------------------------------------------------------
Total $348 $386 $393
================================================================
Capacity revenues in 1998 slightly declined as a result of adjustments and
true-ups related to contractual pricing. In 1997, capacity revenues decreased
because the amount of capacity under contract declined during 1996. Additional
declines in capacity are not scheduled until after 1999.
In 1998, Southern Energy's revenues declined because its energy trading and
marketing operations were deconsolidated on January 1, 1998, when Southern
Energy's joint venture with Vastar Resources, Inc. (Vastar) became effective.
Because of Vastar's significant participation rights in the joint venture, the
equity method of accounting is required. This results in Southern Energy's share
of the joint venture's earnings being reported in other income in 1998. In 1997,
Southern Energy reported energy trading and marketing revenues of $2.0 billion.
Southern Energy's revenues in 1998 of $1.9 billion increased $48 million
compared with comparable revenues in 1997 that exclude energy trading and
marketing. This increase results primarily from operations of assets obtained in
domestic acquisitions. In 1997, Southern Energy's revenues rose to $3.8 billion.
This increase was primarily attributable to the development and growth of energy
trading and marketing activities. In 1997, energy trading and marketing revenues
increased $1.9 billion compared with amounts recorded in 1996. However, these
revenues were substantially offset by purchased power expenses incurred in
completing these trading and marketing transactions. Energy trading and
marketing -- similar to other low-margin sales activities -- is dependent on
huge volumes for profitability.
Energy Sales
Changes in traditional core business revenues are influenced heavily by the
amount of energy sold each year. Kilowatt-hour sales for 1998 and the percent
change by year were as follows:
Amount Percent Change
(billions of --------- ------------------------------
kilowatt-hours) 1998 1998 1997 1996
- - - - - - - ------------------------------- -------------------------------
Residential 43.5 10.9% (2.2)% 2.5%
Commercial 41.7 7.2 2.5 5.7
Industrial 55.3 2.1 2.6 2.2
Other 1.0 3.1 (1.1) 5.7
-----
Total retail 141.5 6.2 1.1 3.3
Sales for resale --
Within service area 9.8 (0.4) (9.6) 15.4
Outside service area 13.0 (5.6) 27.7 17.9
-----
Total 164.3 4.7 2.2 5.0
=================================================================
The rate of growth in 1998 retail energy sales was the highest one-year
increase since 1986. Residential energy sales registered the highest annual
increase in over two decades as a result of hotter-than-normal weather and the
addition of 57,000 new customers. Commercial sales were also affected by the
warm weather. Commercial and industrial sales, both in 1998 and 1997, continued
to show slight gains in excess of the national averages. This reflects the
strength of business and economic conditions in Southern Company's traditional
service area. Energy sales to retail customers are projected to increase at an
average annual rate of 2.1 percent during the period 1999 through 2009.
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 declined by 5.6 percent in
1998 and increased by 27.7 percent in 1997 when compared with the respective
II-9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 1998 Annual Report
prior year. The wide variances in sales were influenced by fluctuations in
prices for oil and natural gas, the primary fuel sources for utilities with
which the company has long-term contracts. When oil and gas prices fall below a
certain level, these customers can generate electricity to meet their
requirements more economically. However, these fluctuations in energy sales
under long-term contracts have minimal effects on earnings because Southern
Company is paid for dedicating specific amounts of its generating capacity to
these utilities outside the service area.
Expenses
Total operating expenses of $9.4 billion -- before write downs -- for 1998
decreased $1.2 billion compared with the prior year. Traditional core business
expenses increased $679 million. Southern Energy's expenses decreased $2.0
billion. The decline for Southern Energy corresponds to the decrease in revenues
resulting primarily from the deconsolidation of the energy trading and marketing
operations as discussed earlier. Approximately $2.0 billion of these expenses
were recorded in 1997 purchased power expenses. The costs to produce and deliver
electricity for the traditional core business in 1998 increased by $359 million
to meet higher energy demands. Non-production operation and maintenance expenses
increased $192 million in 1998. Traditional core business depreciation expenses
and taxes other than income taxes increased by $142 million as a result of
additional utility plant being placed into service and increased accelerated
depreciation of certain assets.
In 1997, operating expenses of $10.7 billion increased $2.2 billion compared
with 1996. Traditional core business expenses increased $69 million. Southern
Energy's expenses increased $2.1 billion. The large increase for Southern Energy
resulted primarily from two factors. First, the acquisition of CEPA was first
reflected in 1997 expenses. Second, $2.0 billion of energy trading and marketing
expenses were included in purchased power expenses. The costs to produce and
deliver electricity for the traditional core business in 1997 increased by $37
million to meet higher energy demands. Also, costs related to work force
reduction programs decreased in 1997 by $35 million. Traditional core business
depreciation expenses and taxes other than income taxes increased by $136
million as a result of additional utility plant being placed into service and
increased accelerated depreciation of certain assets.
Fuel costs constitute the single largest expense for Southern Company's
traditional core business. The mix of fuel sources for generation of electricity
is determined primarily by system load, the unit cost of fuel consumed, and the
availability of hydro and nuclear generating units. The amount and sources of
generation and the average cost of fuel per net kilowatt-hour generated --
within the core business service area -- were as follows:
1998 1997 1996
- - - - - - - -----------------------------------------------------------------
Total generation
(billions of kilowatt-hours) 164 160 156
Sources of generation
(percent) --
Coal 77 77 77
Nuclear 16 17 17
Hydro 4 4 4
Oil and gas 3 2 2
Average cost of fuel per net
kilowatt-hour generated
(cents) -- 1.48 1.46 1.48
- - - - - - - -----------------------------------------------------------------
Total fuel and purchased power costs of $3.6 billion in 1998 decreased $1.7
billion compared with 1997. The traditional core business increased $299 million
and Southern Energy decreased $2.0 billion. Southern Energy's reduction in fuel
and purchased power costs resulted from $2.0 billion associated with energy
trading and marketing expenses recorded in 1997 and from no energy trading costs
recorded in purchased power in 1998 as a result of the joint venture with Vastar
discussed earlier. The traditional core business's total energy sales rose by
7.4 billion kilowatt-hours more than in 1997. Fuel and purchased power expenses
of $5.3 billion in 1997 increased $2.0 billion compared with the prior year.
These expenses for traditional core business increased $32 million, and Southern
Energy's portion increased $1.9 billion. Southern Energy's increase in expenses
escalated as a result of energy trading and marketing activities discussed
earlier. The traditional core business's total energy sales went up by 3.4
billion kilowatt-hours more than in 1996. The additional cost to meet the demand
was offset slightly by a lower average cost of fuel per net kilowatt-hour
generated.
Total interest charges and other financing costs increased $91 million from
amounts reported in the previous year. These costs for the traditional core
business increased $48 million compared with the reported amounts in 1997.
Southern Energy's costs increased $47 million related primarily to financing of
acquisitions. In 1997, these same costs for traditional core business were flat,
but Southern Energy's interest charges increased $205 million as a result of
acquisitions.
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MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 1998 Annual Report
Effects of Inflation
Southern Company's traditional core business is subject to rate regulation and
income tax laws that are based on the recovery of historical costs. Therefore,
inflation creates an economic loss because the company is recovering its costs
of investments in dollars that have less purchasing power. While the inflation
rate has been relatively low in recent years, it continues to have an adverse
effect on Southern Company because of the large investment in utility plant with
long economic life. Conventional accounting for historical cost does not
recognize this economic loss nor the partially offsetting gain that arises
through financing facilities with fixed-money obligations such as long-term debt
and preferred securities. Any recognition of inflation by regulatory authorities
is reflected in the rate of return allowed.
Future Earnings Potential
The results of operations for the past three years are not necessarily
indicative of future earnings potential. The level of Southern Company's future
earnings depends on numerous factors. Two major factors are: achieving energy
sales growth in a less regulated, more competitive environment; and operating
non-traditional business activities successfully.
Southern Company continues to position its business to meet the challenges of
a new competitive environment. Work force reduction programs have reduced
earnings by $20 million, $31 million, and $53 million for the years 1998, 1997,
and 1996, respectively. These actions -- in conjunction with other cost
containment programs -- will assist efforts to continue being a low-cost
provider of electricity.
The operating companies currently operate as vertically integrated companies
providing electricity to customers within the traditional service area of the
southeastern United States. Prices for electricity provided by the operating
companies to retail customers are set by state public service commissions under
cost-based regulatory principles.
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. In December 1998, Georgia Power received a new three-year
retail rate order. As a result of the rate order, Georgia Power recorded in 1998
a write down of $34 million -- $21 million after taxes -- related to its
investment in the Rocky Mountain pumped storage hydroelectric plant. This
long-standing issue is now resolved. See Note 3 to the financial statements for
additional information about these matters and other retail and wholesale
regulatory matters.
Future earnings for the operating companies in the near term will depend upon
growth in energy sales, which is subject to a number of factors. These factors
include weather, competition, changes in contracts with neighboring utilities,
energy conservation practiced by customers, the elasticity of demand, and the
rate of economic growth in the company's service area.
The electric utility industry in the United States is currently undergoing a
period of dramatic change as a result of regulatory and competitive factors.
Among the primary agents of change has been the Energy Policy Act of 1992
(Energy Act). The Energy Act allows independent power producers (IPPs) to access
a utility's transmission network in order to sell electricity to other
utilities. This enhances the incentive for IPPs to build cogeneration plants for
a utility's large industrial and commercial customers and sell energy generation
to other utilities. Also, electricity sales for resale rates are being driven
down by wholesale transmission access and numerous potential new energy
suppliers, including power marketers and brokers. Southern Company is
aggressively working to maintain and expand its share of wholesale sales in the
Southeastern power markets.
Although the Energy Act does not permit retail customer access, it was a
major catalyst for the current restructuring and consolidation taking place
within the utility industry. Numerous federal and state initiatives are in
varying stages to promote wholesale and retail competition. Among other things,
these initiatives allow customers to choose their electricity provider. As these
initiatives materialize, the structure of the utility industry could radically
change. Some states have approved initiatives that result in a separation of the
ownership and/or operation of generating facilities from the ownership and/or
operation of transmission and distribution facilities. While various
restructuring and competition initiatives have been or are being discussed in
Alabama, Florida, Georgia, and Mississippi, none have been enacted to date.
Enactment would require numerous issues to be resolved, including significant
ones relating to transmission pricing and recovery of any stranded investments.
The inability of an operating company to recover its investments, including the
regulatory assets described in Note 1 to the financial statements, could have a
material adverse effect on the financial condition of that operating company.
The operating companies are attempting to minimize or reduce their cost
exposure. See Note 3 to the financial statements for information regarding these
efforts.
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MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 1998 Annual Report
Continuing to be a low-cost producer could provide opportunities to increase
market share and profitability in markets that evolve with changing regulation.
Conversely, unless 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.
To adapt to a less regulated, more competitive environment, Southern Company
continues to evaluate and consider a wide array of potential business
strategies. These strategies may include business combinations, acquisitions
involving other utility or non-utility businesses or properties, internal
restructuring, disposition of certain assets, or some combination thereof.
Furthermore, Southern Company may engage in other new business ventures that
arise from competitive and regulatory changes in the utility industry. Pursuit
of any of the above strategies, or any combination thereof, may significantly
affect the business operations and financial condition of Southern Company.
The Energy Act amended the Public Utility Holding Company Act of 1935 (PUHCA)
to allow 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 existing and evolving opportunities,
Southern Energy -- founded in 1981 -- is focused on several key international
and domestic business lines, including energy distribution, integrated
utilities, stand-alone generation, and other energy-related products and
services. As the energy marketplace evolves, Southern Energy continues to
position the company to become a major competitor. At December 31, 1998,
Southern Energy's total assets amounted to $12 billion.
During 1998, Southern Energy further refined its business strategy to focus
on a few geographic regions of the world. In Asia, Southern Energy will focus
primarily on China, the Philippines, and India. In South America, the company
will pursue opportunities in Brazil. In Europe, Southern Energy will concentrate
efforts on the European Union countries. And in North America, the company will
target efforts in the Northeast, the Midwest, Texas, and California. Southern
Energy announced in 1998 plans to acquire, build, or gain access to some 20,000
megawatts of generating capacity in North America over the next several years in
order to be competitive in the country's evolving competitive energy supply
business. These assets will be closely linked with Southern Energy's energy
trading and marketing business. In January 1998, Southern Energy entered into a
joint venture with Vastar. The two companies combined their energy trading and
marketing operations to form a new full-service energy provider, Southern
Company Energy Marketing. The joint venture agreement gives Southern Company
Energy Marketing rights to market virtually all of Vastar's natural gas
production over the next 10 years.
In December 1998, Southern Energy completed its $537 million purchase of
1,267 megawatts of generating capacity from Commonwealth Electric. In addition,
Southern Energy plans to add 685 megawatts of capacity at the plants. In late
1998, Southern Energy announced the $801 million planned acquisition of 3,065
megawatts of generating capacity from Pacific Gas & Electric in northern
California. Additionally, the company announced plans to acquire from Orange and
Rockland Utilities Inc. and Consolidated Edison Inc. in New York 1,776 megawatts
of capacity for $480 million. These transactions are expected to close during
1999. Additionally, Southern Energy has announced plans to build or purchase an
additional 680 megawatts of capacity in Texas and Wisconsin. Through Southern
Company Energy Marketing, the company has also gained access to additional
capacity through marketing agreements. The company has access to almost
2,000 megawatts of capacity through marketing agreements with Sithe Energies in
New York and Brazos Electric Cooperative in Texas.
After refining its international focus and reviewing the financial
performance of existing assets, Southern Energy announced plans to sell its
holdings in EDELNOR in Chile and Alicura in Argentina. As a result, Southern
Energy recorded a write down of $200 million, after tax, in December 1998
related to these holdings. Because of regulatory and market conditions, these
assets did not meet earnings expectations.
Southern Company has filed with the Securities and Exchange Commission (SEC)
a request to invest up to nearly $8 billion in the non-traditional domestic and
international business. The current SEC authority is $3.9 billion, of which
$3.6 billion has been invested as of December 31, 1998.
Southern Company is involved in various matters being litigated. See Note 3
to the financial statements for information regarding material issues that could
possibly affect future earnings.
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MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 1998 Annual Report
Compliance costs related to current and future environmental laws and
regulations could affect earnings if such costs are not fully recovered. The
Clean Air Act and other important environmental items are discussed later under
"Environmental Matters."
The staff of the SEC has questioned certain of the current accounting
practices of the electric utility industry --including Southern Company's --
regarding the recognition, measurement, and classification in the financial
statements of decommissioning costs for nuclear generating facilities. In
response to these questions, the Financial Accounting Standards Board (FASB) has
decided to review the accounting for liabilities related to the retirement of
long-lived assets, including nuclear decommissioning. If the FASB issues new
accounting rules, the estimated costs of retiring Southern Company's nuclear and
other facilities may be required to be recorded as liabilities in the
Consolidated Balance Sheets. Also, the annual provisions for such costs could
change. Because of the company's current ability to recover asset retirement
costs through rates, these changes would not have a significant adverse effect
on results of operations. See Note 1 to the financial statements under
"Depreciation and Nuclear Decommissioning" for additional information.
The operating companies are subject to the provisions of FASB Statement No.
71, Accounting for the Effects of Certain Types of Regulation. In the event that
a portion of a company's operations is no longer subject to these provisions,
the company would be required to write off related regulatory assets and
liabilities that are not specifically recoverable, and determine if any other
assets have been impaired. See Note 1 to the financial statements under
"Regulatory Assets and Liabilities" for additional information.
New Accounting Standards
The FASB has issued Statement No. 133, Accounting for Derivative Instruments and
Hedging Activities, which must be adopted by the year 2000. This statement
establishes accounting and reporting standards for derivative instruments --
including certain derivative instruments embedded in other contracts -- and for
hedging activities. Southern Company has not yet quantified the impact of
adopting this statement on its financial statements; however, the adoption could
increase volatility in earnings and other comprehensive income.
In March 1998, the American Institute of Certified Public Accountants (AICPA)
issued a new Statement of Position, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use. This statement requires
capitalization of certain costs of internal-use software. Southern Company
adopted this statement in January 1999, and it is not expected to have a
material impact on the consolidated financial statements.
In April 1998, the AICPA issued a new Statement of Position, Reporting on the
Cost of Start-up Activities. This statement requires that the costs of start-up
activities and organizational costs be expensed as incurred. Any of these costs
previously capitalized by a company must be written off in the year of adoption.
Southern Company adopted this statement in January 1999, and it is not expected
to have a material impact on the consolidated financial statements.
In December 1998, the Emerging Issues Task Force (EITF) of the FASB issued
EITF No. 98-10, Accounting for Contracts Involved in Energy Trading and Risk
Management Activities. The EITF requires that energy trading contracts must be
marked to market through the income statement, with gains and losses reflected
rather than revenues and purchased power. Energy trading contracts are defined
as energy contracts entered into with the objective of generating profits on or
from exposure to shifts or changes in market prices. Southern Company adopted
the required accounting in January 1999, and it is not expected to have a
material impact on the consolidated financial statements.
Year 2000
Year 2000 Challenge
In order to save storage space, computer programmers in the 1960s and 1970s
shortened the year portion of date entries to just two digits. Computers
assumed, in effect, that all years began with "19." This practice was widely
adopted and hard-coded into computer chips and processors found in some
equipment. This approach, intended to save processing time and storage space,
was used until the mid-1990s. Unless corrected before the Year 2000, affected
software systems and devices containing a chip or microprocessor with date and
time functions could incorrectly process dates or the systems may cease to
function.
Southern Company depends on complex computer systems for many aspects of its
operations, which include generation, transmission, and distribution of
electricity, as well as other business support activities. Southern Company's
goal is to have critical devices or software that are required to maintain
operations to be Year 2000 ready by June 1999. Year 2000 ready means that a
system or application is determined suitable for continued use through the Year
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MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 1998 Annual Report
2000 and beyond. Critical systems include, but are not limited to, reactor
control systems, safe shutdown systems, turbine generator systems, control
center computer systems, customer service systems, energy management systems,
and telephone switches and equipment.
Year 2000 Program and Status
Southern Company's executive management recognizes the seriousness of the Year
2000 challenge and has dedicated what it believes to be adequate resources to
address the issue. The Millennium Project is a team of employees, IBM
consultants, and other contractors whose progress is reviewed on a monthly basis
by a steering committee of Southern Company executives.
Southern Company's traditional business refers to the integrated utility
services within Alabama, Florida, Georgia, and Mississippi. For this traditional
business, the work was divided into two phases. Phase I began in 1996 and
consisted of identifying and assessing corporate assets related to software
systems and devices that contain a computer chip or clock. The first phase was
completed in June 1997. Phase 2 consists of testing and remediating high
priority systems and devices. Also, contingency planning is included in this
phase. Completion of Phase 2 is targeted for June 1999. The Millennium Project
will continue to monitor the affected computer systems, devices, and
applications into the Year 2000.
For the traditional business, Southern Company has completed more than 70
percent of the activities contained in its work plan. The percentage of
completion and projected completion by function are as follows:
Work Plan
- - - - - - - ----------------------------------------------------------------------
Remediation Project
Inventory Assessment Testing Completion
- - - - - - - ----------------------------------------------------------------------
Generation 100% 100% 70% 6/99
Energy
Management 100 100 90 6/99
Transmission and
Distribution 100 100 100 1/99
Telecommunications 100 100 50 6/99
Corporate
Applications 100 100 90 3/99
- - - - - - - ----------------------------------------------------------------------
For the non-traditional business located in the United States and several
countries throughout the world, Year 2000 readiness is generally scheduled to
follow the traditional business. In a number of the business units outside the
United States, Southern Company is neither the majority owner nor the managing
concern. In these circumstances, Southern Company is providing technical
assistance but does not control the schedule or progress.
Year 2000 Costs
For the traditional business, current projected total costs for Year 2000
readiness are approximately $91 million, which includes $6 million of cost
billed to non-affiliated companies. These costs include labor necessary to
identify, test, and renovate affected devices and systems. From its inception
through December 31, 1998, the Year 2000 program costs, recognized primarily as
expense, amounted to $56 million based on Southern Company's ownership interest.
In addition to the traditional business costs, current projections for Year 2000
program costs are approximately $24 million for the non-traditional business --
based on Southern Company's ownership interest -- of which $9 million has been
spent through December 31, 1998
Year 2000 Risks
Southern Company is implementing a detailed process to minimize the possibility
of service interruptions related to the Year 2000. The company believes, based
on current tests, that the system can provide customers with electricity. These
tests increase confidence, but do not guarantee error-free operations. The
company is taking what it believes to be prudent steps to prepare for the Year
2000, and it expects any interruptions in service that may occur within the
traditional business service territory to be isolated and short in duration.
Southern Company expects the risks associated with Year 2000 to be no more
severe than the scenarios that its electric system is routinely prepared to
handle. The most likely worst case scenario consists of the service loss of one
of the largest generating units and/or the service loss of any single bulk
transmission element in its traditional business service territory. The company
has followed a proven methodology for identifying and assessing software and
devices containing potential Year 2000 challenges. Remediation and testing of
those devices are in progress. Following risk assessment, Southern Company is
preparing contingency plans as appropriate and is participating in North
American Electric Reliability Council-coordinated national drills during 1999.
Southern Company is currently reviewing the Year 2000 readiness of material
third parties that provide goods and services crucial to Southern Company's
operations. Among such critical third parties are fuel, transportation,
telecommunications, water, chemical, and other suppliers. Contingency plans
based on the assessment of each third party's ability to continue supplying
critical goods and services to Southern Company are being developed.
II-14
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MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 1998 Annual Report
There is a potential for some earnings erosion caused by reduced electrical
demand by customers because of their own Year 2000 issues. The risk associated
with the progress of some operations outside the United States is a function of
the local regulatory environment and the priorities of the entities with
management control. Year 2000 issues are included in the list of due diligence
activities associated with acquisitions; there is some risk associated with the
subsequent validation of any given seller's representations.
Year 2000 Contingency Plans
Because of experience with hurricanes and other storms, the traditional business
is skilled at developing and using contingency plans in unusual circumstances.
As part of Year 2000 business continuity and contingency planning, Southern
Company is drawing on that experience to make risk assessments and is developing
additional plans to deal specifically with situations that could arise relative
to Year 2000 challenges. Southern Company is identifying critical operational
locations, and key employees will be on duty at those locations during the Year
2000 transition. In September 1999, drills are scheduled to be conducted to test
contingency plans. Because of the level of detail of the contingency planning
process, management feels that the contingency plans will keep any service
interruptions that may occur within the traditional business service territory
isolated and short in duration.
Contingency planning efforts for the non-traditional business are generally
in the initial phase.
FINANCIAL CONDITION
Overview
Southern Company's financial condition continues to remain strong. The company's
common stock closed 1998 with the highest year-end closing price in history.
Consolidated net income of $1.2 billion -- excluding non-recurring charges -- in
1998 increased $95 million compared with the prior year. In January 1999,
Southern Company modified its dividend policy to lower, over time, the
previously targeted payout ratio of approximately 75 percent. The quarterly
dividend declared was maintained at 33 1/2 cents per share or $1.34 annually.
This action allows more internally generated funds to be reinvested in the
company, which is expected to increase long-term shareholder value.
Gross property additions to utility plant were $2.0 billion in 1998. The
majority of funds needed for gross property additions since 1995 has been
provided from operating activities. Southern Energy acquired $670 million of
generating assets in 1998 and sold an additional 26 percent interest in its
United Kingdom subsidiary for $170 million. The Consolidated Statements of Cash
Flows provide additional details.
Derivative Financial Instruments
Southern Company is exposed to market risks, including changes in interest
rates, currency exchange rates, and certain commodity prices. To manage the
volatility attributable to these exposures, the company nets the exposures to
take advantage of natural offsets and enters into various derivative
transactions for the remaining exposures pursuant to the company's policies in
areas such as counterparty exposure and hedging practices. Generally, company
policy is that derivatives are to be used only for hedging purposes. Derivative
positions are monitored using techniques that include market value and
sensitivity analysis.
The company's market risk exposures relative to interest rate changes and
currency exchange fluctuations, as discussed later, have not changed materially
versus the previous reporting period. In addition, the company is not aware of
any facts or circumstances that would significantly impact such exposures in the
near-term.
Interest rate swaps are used to hedge underlying debt obligations. These
swaps hedge specific debt issuances and qualify for hedge accounting. The
interest rate differential is reflected as an adjustment to interest expense
over the life of the instruments. Additionally, the company has interest rate
swaps in foreign currencies. These swaps are designated as hedges of the
company's related debt issuance in the same currency.
If the company sustained a 100 basis point change in interest rates for all
variable rate debt in all currencies, the change would affect annualized
interest expense by approximately $35 million at December 31, 1998. Based on the
company's overall interest rate exposure at December 31, 1998, including
derivative and other interest rate sensitive instruments, a near-term 100 basis
point change in interest rates would not materially affect the consolidated
financial statements.
The company has investments in the United Kingdom and Germany. For these
investments, the company uses long-term cross-currency agreements to reduce a
substantial portion of its exposure to fluctuations in the British pound
sterling and German Deutschemark. These instruments are used to hedge the net
investments in these countries. As a result of these swaps, a 10 percent
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MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 1998 Annual Report
sustained decline of the British pound sterling and German Deutschemark versus
the U.S. dollar would not materially affect the consolidated financial
statements.
The company also has investments in various emerging market countries where
the net investments are not hedged, including Argentina, Brazil, Chile,
Trinidad, Bahamas, Philippines, and China. The company relies on either currency
pegs or contractual or regulatory links to the U.S. dollar to mitigate currency
risk attributable to these investments. The company does not believe it has a
material exposure to changes in exchange rates between the U.S. dollar and the
currencies of these countries.
Based on availability and economics, the company also uses currency swaps and
forward agreements to hedge dollar-denominated debt issued by subsidiaries
with a functional currency other than the U.S. dollar. These swaps offset the
dollar cash flows, thereby effectively converting debt to the respective
company's reporting currency. Gains and losses related to qualified hedges of
foreign currency firm commitments are deferred and included in the basis of the
underlying transactions. To the extent that a qualifying hedge is terminated or
ceases to be effective as a hedge, any deferred gains and losses to that point
continue to be deferred and are included in the basis of the underlying
transaction.
In addition to the non-trading activities, the company is exposed to market
risks through its electricity and natural gas commodity trading business, which
is primarily conducted through the company's joint venture relationship with
Vastar. While this joint venture relationship is accounted for under the equity
method of accounting, Southern Company -- through guarantees it has made jointly
with Vastar -- is exposed to market risk. Southern Company and Vastar have
agreed to indemnify each other against losses under such guarantees in
proportion to their respective ownership shares of the joint venture. At
December 31, 1998, outstanding guarantees related to the estimated fair value
of net contractual commitments were approximately $152 million. Based upon the
joint venture's statistical analysis of its credit risk, Southern Company's
potential exposure under these contractual commitments would not materially
differ from the estimated fair value. The joint venture's gross revenues and
cost of sales for 1998 were $9.2 billion and $9.1 billion, respectively.
To estimate and manage the market risk of its trading and marketing
portfolio, the joint venture employs a daily Value at Risk (VAR) methodology.
VAR is used to describe a probabilistic approach to measuring the exposure to
market risk. VAR models are relatively sophisticated. However, the quantitative
risk information is limited by the parameters established in creating the model.
The instruments being evaluated may have features that may trigger a potential
loss in excess of calculated amounts if the changes in commodity prices exceed
the confidence level of the model used. The calculation utilizes the standard
deviation of seasonally adjusted historical changes in the value of the market
risk sensitive commodity-based financial instruments to estimate the amount of
change (i.e., volatility) in the current value of these instruments that could
occur at a specified confidence level over a specified holding interval. The
parameters used in the calculation include holding intervals ranging from five
to 20 days, depending upon the type of instrument, the term of the instrument,
the liquidity of the underlying market, and other factors. The models employ a
95 percent confidence level based on historical price movement. Based on the
joint venture's VAR analysis of its overall commodity price risk exposure at
December 31, 1998, management does not anticipate a materially adverse effect on
the company's consolidated financial statements as a result of market
fluctuations.
In the United Kingdom, the company utilizes contracts to mitigate its
exposure to volatility in the prices of electricity purchased through the
wholesale electricity market. These contracts allow the company to effectively
convert the majority of its anticipated wholesale electricity purchases from
market prices to fixed prices. The gains and losses on these contracts are
deferred and recognized as electricity is purchased. Recently, a market has
developed for trading these contracts in the United Kingdom. However, due to the
immaturity of this market and the complexity of the company's existing
contracts, it is not practicable to estimate the fair value of these contracts.
Due to cost-based rate regulations, the operating companies have limited
exposure to market volatility in interest rates, commodity fuel prices, and
prices of electricity. To mitigate residual risks relative to movements in
electricity prices, the operating companies enter into fixed price contracts for
the purchase and sale of electricity through the wholesale electricity market.
Realized gains and losses are recognized in the income statement as incurred. At
December 31, 1998, exposure from these activities was not material to the
consolidated financial statements.
For additional information, see Note 1 to the financial statements under
"Financial Instruments for Non-Trading and Trading Activities."
II-16
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MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 1998 Annual Report
Capital Structure
Southern Company achieved a ratio of common equity to total capitalization --
including short-term debt -- of 37.4 percent in 1998, compared with 38.6 percent
in 1997, and 45.1 percent in 1996.
During 1998, the subsidiary companies sold, through public authorities, $210
million of pollution control revenue bonds. In addition, preferred stock of
$200 million and capital and preferred securities of $435 million were issued in
1998. The companies continued to reduce financing costs by retiring higher-cost
bonds and preferred stock. Retirements, including maturities, of bonds totaled
$1.7 billion during 1998, $507 million during 1997, and $600 million during
1996. As a result, the composite interest rate on long-term debt decreased from
7.1 percent at December 31, 1995 to 6.42 percent at December 31, 1998.
Retirements of preferred stock totaled $239 million during 1998, $660 million
during 1997, and $179 million during 1996.
In 1998, Southern Company raised net proceeds of $109 million from the
issuance of common stock under the company's various stock plans. At the close
of 1998, the company's common stock had a market value of 29 1/16 per share,
compared with a book value of $14.04 per share. The market-to-book value ratio
was 207 percent at the end of 1998, compared with 186 percent at year-end 1997,
and 166 percent at year-end 1996.
Capital Requirements for Construction
The construction program of Southern Company is budgeted at $2.6 billion for
1999, $2.1 billion for 2000, and $2.1 billion for 2001. Actual construction
costs may vary from this estimate because of changes in such factors as:
business conditions; environmental regulations; nuclear plant regulations; load
projections; the cost and efficiency of construction labor, equipment, and
materials; and the cost of capital. In addition, there can be no assurance that
costs related to capital expenditures will be fully recovered.
The operating companies have approximately 2,700 megawatts of combined cycle
generation scheduled to be placed in service by 2001. Southern Energy has under
construction some 1,300 megawatts of owned capacity. Significant construction of
transmission and distribution facilities and upgrading of generating plants will
be continuing for the core business in the Southeast.
Other Capital Requirements
In addition to the funds needed for the construction program, approximately $2.6
billion will be required by the end of 2001 for present improvement fund
requirements and maturities of long-term debt. Also, the subsidiaries will
continue to retire higher-cost debt and preferred stock and replace these
obligations with lower-cost capital if market conditions permit.
In late 1998, Southern Energy announced plans to acquire $801 million and
$480 million of generating assets in California and New York, respectively.
These transactions are expected to close in 1999.
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 -- significantly
affected Southern Company. Specific reductions in sulfur dioxide and nitrogen
oxide emissions from fossil-fired generating plants are required in two phases.
Phase I compliance began in 1995 and initially affected 28 generating units of
Southern Company. As a result of the company's compliance strategy, an
additional 22 generating units were brought into compliance with Phase I
requirements. Phase II compliance is required in 2000, and all fossil-fired
generating plants will be affected.
Southern Company achieved Phase I sulfur dioxide compliance at the affected
plants by switching to low-sulfur coal, which required some equipment upgrades.
Construction expenditures for Phase I compliance totaled approximately $300
million.
For Phase II sulfur dioxide compliance, Southern Company could use emission
allowances, increase fuel switching, and/or install flue gas desulfurization
equipment at selected plants. Also, equipment to control nitrogen oxide
emissions will be installed on additional system fossil-fired units as necessary
to meet Phase II limits and ozone non-attainment requirements for metropolitan
Atlanta through 2000. Current compliance strategy for Phase II and ozone
non-attainment could require total estimated construction expenditures of
approximately $70 million, of which $16 million remains to be spent.
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.
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MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 1998 Annual Report
In July 1997, the Environmental Protection Agency (EPA) revised the national
ambient air quality standards for ozone and particulate matter. This revision
makes the standards significantly more stringent. In September 1998, the EPA
issued the final regional nitrogen oxide rules to the states for implementation.
The states have one year to adopt and implement the new rules. The final rules
affect 22 states including Alabama and Georgia. The EPA rules are being
challenged in the courts by several states and industry groups. Implementation
of the final state rules could require substantial further reductions in
nitrogen oxide emissions from fossil-fired generating facilities and other
industry in these states. Implementation of the standards could result in
significant additional compliance costs and capital expenditures that cannot be
determined until the results of legal challenges are known and the states have
adopted their final rules.
The EPA and state environmental regulatory agencies are reviewing and
evaluating various other matters including: nitrogen oxide emission control
strategies for ozone non-attainment areas; additional controls for hazardous air
pollutant emissions; control strategies to reduce regional haze; and hazardous
waste disposal requirements. The impact of new standards will depend on the
development and implementation of applicable regulations.
Southern Company must comply with other environmental laws and regulations
that cover the handling and disposal of hazardous waste. Under these various
laws and regulations, the subsidiaries could incur substantial costs to clean up
properties. The subsidiaries conduct studies to determine the extent of any
required cleanup costs and have recognized in their respective financial
statements costs to clean up known sites. These costs for Southern Company
amounted to $6 million in 1998 and $4 million in 1997. In 1996, the company was
reimbursed $6 million for amounts previously expensed. Additional sites may
require environmental remediation for which the subsidiaries may be liable for a
portion or all required cleanup costs. See Note 3 to the financial statements
for information regarding Georgia Power's potentially responsible party status
at a site in Brunswick, Georgia.
Several major pieces of environmental legislation are being considered for
reauthorization or amendment by Congress. These include: the Clean Air Act; the
Clean Water Act; the Comprehensive Environmental Response, Compensation, and
Liability Act; the Resource Conservation and Recovery Act; the Toxic Substances
Control Act; and the Endangered Species Act. Changes to these laws could affect
many areas of Southern Company's operations. The full impact of any such changes
cannot be determined at this time.
Compliance with possible additional legislation related to global climate
change, electromagnetic fields, and other environmental and health concerns
could significantly affect Southern Company. The impact of new legislation -- if
any -- will depend on the subsequent development and implementation of
applicable regulations. In addition, the potential exists for liability as the
result of lawsuits alleging damages caused by electromagnetic fields.
Sources of Capital
The amount and timing of additional equity capital to be raised in 1999 -- as
well as in subsequent years -- will be contingent on Southern Company's
investment opportunities. Equity capital can be provided from any combination of
public offerings, private placements, or the company's stock plans. Any portion
of the common stock required during 1999 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 companies plan to obtain the funds required for construction
and other purposes from sources similar to those used in the past, which were
primarily from internal sources. However, the type and timing of any financings
- - - - - - - -- if needed -- will depend on market conditions and regulatory approval.
The operating companies historically have relied on issuances of first
mortgage bonds and preferred stock, in addition to pollution control revenue
bonds issued for their benefit by public authorities, to meet their long-term
external financing requirements. Recently, the operating companies' financings
have consisted of unsecured debt and trust preferred securities. In this regard,
the operating companies sought and obtained stockholder approval in 1997 or 1998
to amend their respective corporate charters eliminating restrictions on the
amounts of unsecured indebtedness they may incur.
To meet short-term cash needs and contingencies, Southern Company had
approximately $872 million of cash and cash equivalents and $4.6 billion of
unused credit arrangements with banks at the beginning of 1999.
Cautionary Statement Regarding Forward-Looking
Information
Southern Company's 1998 Annual Report contains forward-looking and historical
information. The company cautions that there are various important factors that
could cause actual results to differ materially from those indicated in the
forward-looking information; accordingly, there can be no assurance that such
II-18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 1998 Annual Report
indicated results will be realized. These factors include legislative and
regulatory initiatives regarding deregulation and restructuring of the electric
utility industry; the extent and timing of the entry of additional competition
in the markets of the subsidiary companies; potential business strategies
- - - - - - - --including acquisitions or dispositions of assets or internal restructuring --
that may be pursued by the company; state and federal rate regulation in the
United States; Year 2000 issues; changes in or application of environmental and
other laws and regulations to which the company and its subsidiaries are
subject; political, legal and economic conditions and developments in the United
States and in foreign countries in which the subsidiaries operate; financial
market conditions and the results of financing efforts; changes in commodity
prices and interest rates; weather and other natural phenomena; the performance
of projects undertaken by the non-traditional business and the success of
efforts to invest in and develop new opportunities; and other factors discussed
in the reports -- including Form 10-K -- filed from time to time by the company
with the SEC.
II-19
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 1998, 1997, and 1996
Southern Company and Subsidiary Companies 1998 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 1997 1996
============================================================================================================================
(in millions)
Operating Revenues $11,403 $12,611 $10,358
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 2,371 2,281 2,245
Purchased power 1,243 3,033 1,103
Other 2,112 1,930 1,860
Maintenance 887 763 782
Depreciation and amortization 1,539 1,367 1,133
Taxes other than income taxes 599 572 634
Income taxes 678 725 747
Write down of South American assets (Note 5) 308 - -
Write down of Rocky Mountain plant (Note 3) 34 - -
Income tax benefit for write down of assets (121) - -
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Total operating expenses 9,650 10,671 8,504
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Operating Income 1,753 1,940 1,854
Other Income:
Interest income 243 152 54
Equity in earnings of unconsolidated subsidiaries 123 35 6
Other, net 57 24 40
Income tax benefits (expenses) applicable to other income 8 34 (10)
Windfall profits tax assessed in United Kingdom (Note 8) - (148) -
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 2,184 2,037 1,944
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Interest Charges and Other:
Interest on long-term debt 712 678 530
Interest on notes payable 108 112 107
Amortization of debt discount, premium, and expense, net 65 34 33
Other interest charges 68 49 27
Minority interests in subsidiaries 80 29 13
Distributions on capital and preferred securities of subsidiary companies 149 120 22
Preferred dividends of subsidiary companies 25 43 85
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Interest charges and other, net 1,207 1,065 817
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Consolidated Net Income $ 977 $ 972 $ 1,127
=============================================================================================================================
Common Stock Data: (Note 9)
Average number of shares of common stock outstanding (in millions) 697 685 673
Basic and diluted earnings per share of common stock $1.40 $1.42 $1.68
Cash dividends paid per share of common stock $1.34 $1.30 $1.26
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</TABLE>
II-20
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1998, 1997, and 1996
Southern Company and Subsidiary Companies 1998 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 1997 1996
=============================================================================================================================
(in millions)
Operating Activities:
Consolidated net income $ 977 $ 972 $ 1,127
Adjustments to reconcile consolidated net income
to net cash provided from operating activities --
Depreciation and amortization 1,773 1,592 1,338
Deferred income taxes and investment tax credits (22) (5) 57
Gain on asset sales (61) (25) (59)
Write down of South American assets 308 - -
Write down of Rocky Mountain plant 34 - -
Other, net (199) (64) 50
Changes in certain current assets and liabilities
excluding effects from acquisitions --
Receivables, net 151 (229) (25)
Fossil fuel stock (35) 53 57
Materials and supplies (10) 21 47
Accounts payable (17) 138 19
Other (151) 172 (210)
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 2,748 2,625 2,401
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (2,005) (1,859) (1,229)
Southern Energy business acquisitions, net of cash acquired (998) (2,925) -
Sales of property 281 32 211
Other 86 (13) (275)
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (2,636) (4,765) (1,293)
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Proceeds --
Common stock 234 360 171
Preferred stock 200 - -
Capital and preferred securities 435 1,321 322
First mortgage bonds - - 85
Other long-term debt 2,973 2,499 1,570
Redemptions --
Common stock repurchased (125) - -
Preferred stock (239) (660) (179)
First mortgage bonds (1,487) (168) (426)
Other long-term debt (599) (802) (1,754)
Increase (decrease) in notes payable, net (353) 509 (268)
Payment of common stock dividends (933) (889) (846)
Miscellaneous 53 126 (110)
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities 159 2,296 (1,435)
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 271 156 (327)
Cash and Cash Equivalents at Beginning of Year 601 445 772
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 872 $ 601 $ 445
=============================================================================================================================
Supplemental Cash Flow Information:
Cash paid during the year for --
Interest (net of amount capitalized) $998 $876 $677
Income taxes $839 $823 $706
Southern Energy business acquisitions --
Fair value of assets acquired $1,072 $4,768 $-
Less cash paid for common stock 998 2,925 -
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Liabilities assumed $ 74 $1,843 $-
=============================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
11-21
<PAGE>
CONSOLIDATED BALANCE SHEETS
At December 31, 1998 and 1997
Southern Company and Subsidiary Companies 1998 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C>
==============================================================================================================================
Assets 1998 1997
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------
(in millions)
Utility Plant:
Plant in service (Note 1) $35,364 $34,044
Less accumulated provision for depreciation 13,239 11,934
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
22,125 22,110
Nuclear fuel, at amortized cost 217 230
Construction work in progress (Note 4) 1,782 1,312
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Total 24,124 23,652
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Goodwill, net of accumulated amortization of
$106 million in 1998 and $55 million in 1997 (Note 13) 2,067 1,888
Property rights, net of accumulated amortization of
$169 million in 1998 and $108 million in 1997 1,185 1,389
Equity investments in unconsolidated subsidiaries 1,560 1,168
Nuclear decommissioning trusts 516 387
Miscellaneous 644 742
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Total 5,972 5,574
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 872 601
Special deposits 87 103
Receivables, less accumulated provisions for uncollectible accounts
of $113 million in 1998 and $77 million in 1997 1,797 2,007
Fossil fuel stock, at average cost 252 218
Materials and supplies, at average cost 515 493
Prepayments 102 98
Vacation pay deferred 81 79
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Total 3,706 3,599
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Deferred Charges and Other Assets:
Deferred charges related to income taxes (Note 8) 1,036 1,142
Prepaid pension costs 491 383
Debt expense, being amortized 129 101
Premium on reacquired debt, being amortized 294 285
Miscellaneous 440 519
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Total 2,390 2,430
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Total Assets $36,192 $35,255
=============================================================================================================================
The accompanying notes are an integral part of these balance sheets.
</TABLE>
11-22
<PAGE>
CONSOLIDATED BALANCE SHEETS (continued)
At December 31, 1998 and 1997
Southern Company and Subsidiary Companies 1998 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C>
=============================================================================================================================
Capitalization and Liabilities 1998 1997
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
(in millions)
Capitalization (See accompanying statements):
Common stock equity $ 9,797 $ 9,647
Preferred stock of subsidiaries 369 493
Company or subsidiary obligated mandatorily redeemable
capital and preferred securities 2,179 1,744
Long-term debt 10,472 10,274
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Total 22,817 22,158
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Amount of securities due within one year 1,526 784
Notes payable 1,828 2,064
Accounts payable 1,027 1,049
Customer deposits 125 133
Taxes accrued --
Federal and state income 50 120
Other 299 259
Interest accrued 233 262
Vacation pay accrued 112 108
Miscellaneous 542 608
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Total 5,742 5,387
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes (Note 8) 4,481 4,650
Deferred credits related to income taxes (Note 8) 715 746
Accumulated deferred investment tax credits 723 754
Employee benefits provisions 474 431
Minority interests in subsidiaries 535 435
Prepaid capacity revenues 96 110
Department of Energy assessments 64 72
Disallowed Plant Vogtle capacity buyback costs 54 56
Storm damage reserves 24 38
Miscellaneous 467 418
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Total 7,633 7,710
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Commitments and Contingent Matters (Notes 1, 2, 3, 4, 5, 7, 12, and 13)
Total Capitalization and Liabilities $36,192 $35,255
=============================================================================================================================
The accompanying notes are an integral part of these balance sheets.
</TABLE>
11-23
<PAGE>
CONSOLIDATED STATEMENTS OF CAPITALIZATION
At December 31, 1998 and 1997
Southern Company and Subsidiary Companies 1998 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C>
=================================================================================================================================
1998 1997 1998 1997
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------------
(in millions) (percent of total)
Common Stock Equity:
Common stock, par value $5 per share --
Authorized -- 1 billion shares
Issued -- 1998: 700 million shares
-- 1997: 693 million shares
Par value $ 3,499 $ 3,467
Paid-in capital 2,463 2,331
Treasury, at cost (Note 9) (58) -
Retained earnings (Note 9) 3,878 3,842
Accumulated other comprehensive income 15 7
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------------
Total common stock equity 9,797 9,647 42.9% 43.5%
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------------
Cumulative Preferred Stock of Subsidiaries:
$100 par or stated value --
4.20% to 7.00% 135 136
$25 par or stated value --
5.20% to 6.80% 200 131
Adjustable and auction rates -- at 1/1/99:
4.00% to 4.30% 120 226
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------------
Total (annual dividend requirement -- $23 million) 455 493
Less amount due within one year 86 -
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------------
Total excluding amount due within one year 369 493 1.6 2.2
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------------
Company or Subsidiary Obligated Mandatorily
Redeemable Capital and Preferred Securities (Note 10):
$25 liquidation value --
6.85% to 7.00% 235 -
7.13% to 7.38% 297 97
7.60% to 7.63% 415 415
7.75% 649 649
8.14% to 9.00% 583 583
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------------
Total (annual distribution requirement -- $168 million) 2,179 1,744 9.6 7.9
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------------
Long-Term Debt of Subsidiaries:
First mortgage bonds --
Maturity Interest Rates
-------- --------------
1998 5.00% to 8.67% - 238
1999 6.13% to 8.67% 373 373
2000 6.00% to 8.67% 209 349
2001 8.67% 9 9
2002 6.85% to 8.67% 10 260
2003 6.13% to 8.67% 635 635
2004 through 2008 6.07% to 8.67% 197 372
2009 through 2013 8.67% 75 75
2014 through 2018 8.67% 56 56
2019 through 2023 7.30% to 8.75% 614 1,298
2024 through 2028 6.88% to 9.00% 287 287
</TABLE>
11-24
<PAGE>
CONSOLIDATED STATEMENTS OF CAPITALIZATION (continued)
At December 31, 1998 and 1997
Southern Company and Subsidiary Companies 1998 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
===========================================================================================================================
1998 1997 1998 1997
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
(in millions) (percent of total)
Other long-term debt --
Pollution control revenue bonds --
Collateralized:
4.38% to 6.75% due 2000-2026 954 1,154
Variable rates (3.10% to 5.25% at 1/1/99)
due 2011-2025 639 639
Non-collateralized:
6.75% to 7.25% due 2003-2020 110 110
5.80% due 2022 - 10
Variable rates (3.15% to 5.33% at 1/1/99)
due 2021-2037 880 670
Long-term notes payable --
5.21% to 11.00% due 1998-2002 - 481
6.13% to 11.00% due 1999-2002 437 -
5.35% to 10.00% due 2003-2004 361 47
5.49% to 10.50% due 2005 551 73
6.80% to 8.14% due 2006 582 578
7.16% to 10.25% due 2007 447 475
3.66% to 10.56% due 2008-2015 959 362
6.38% to 8.12% due 2018-2038 803 20
6.88% to 7.13% due 2047-2048 729 194
Adjustable rates (5.23% to 7.10% at 1/1/99)
due 1998-2001 397 710
Adjustable rates (6.58% at 1/1/99)
due 2002 793 847
Adjustable rates (3.96% at 1/1/99)
due 2004 516 478
Adjustable rates (6.93% to 7.57% at 1/1/99)
due 2005-2007 252 201
Capitalized lease obligations 135 142
Unamortized debt premium (discount), net (98) (85)
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total long-term debt (annual interest
requirement -- $771 million) 11,912 11,058
Less amount due within one year (Note 11) 1,440 784
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Long-term debt excluding amount due within one year 10,472 10,274 45.9 46.4
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total Capitalization $22,817 $22,158 100.0% 100.0%
===========================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
11-25
<PAGE>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Years Ended December 31, 1998, 1997, and 1996
Southern Company and Subsidiary Companies 1998 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C>
=================================================================================================================================
1998 1997 1996
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------------
(in millions)
Consolidated Net Income $977 $972 $1,127
Other comprehensive income:
Foreign currency translation adjustments 12 (10) 31
Gain on investments realized in net income - - (42)
Less applicable income taxes (benefits) 4 (3) (4)
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------------
Consolidated Comprehensive Income $985 $965 $1,120
==================================================================================================================================
CONSOLIDATED STATEMENTS OF PAID-IN CAPITAL
For the Years Ended December 31, 1998, 1997, and 1996
=================================================================================================================================
1998 1997 1996
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------------
(in millions)
Balance at Beginning of Year $2,331 $2,053 $1,920
Proceeds from sales of common stock over the par value -- 6.3 million,
16.4 million, and 7.5 million shares in 1998, 1997, and 1996, respectively 132 278 133
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------------
Balance at End of Year $2,463 $2,331 $2,053
==================================================================================================================================
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31, 1998, 1997, and 1996
==================================================================================================================================
1998 1997 1996
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------------
(in millions)
Balance at Beginning of Year $3,842 $3,764 $3,483
Consolidated net income 977 972 1,127
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------------
4,819 4,736 4,610
Cash dividends on common stock 933 889 846
Capital and preferred stock transactions, net 8 5 -
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------------
Balance at End of Year (Note 9) $3,878 $3,842 $3,764
==================================================================================================================================
CONSOLIDATED STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE INCOME
For the Years Ended December 31, 1998, 1997, and 1996
===================================================================================================================================
1998 1997 1996
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------------
(in millions)
Balance at Beginning of Year $ 7 $14 $21
Change during the year 8 (7) (7)
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------------
Balance at End of Year $15 $ 7 $14
====================================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
11-26
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Southern Company and Subsidiary Companies 1998 Annual Report
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
General
Southern Company is the parent company of five operating companies, a system
service company, Southern Communications Services (Southern LINC), Southern
Company Energy Solutions, Southern Energy, Inc. (Southern Energy), Southern
Nuclear Operating Company (Southern Nuclear), and other direct and indirect
subsidiaries. The operating companies -- Alabama Power, Georgia Power, Gulf
Power, Mississippi Power, and Savannah Electric -- provide electric service in
four southeastern states. Contracts among the operating 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) and/or the Securities and Exchange Commission
(SEC). The system service company provides, at cost, specialized services to
Southern Company and subsidiary companies. Southern LINC provides digital
wireless communications services to the operating companies and also markets
these services to the public within the Southeast. Southern Company Energy
Solutions develops new business opportunities related to energy products and
services. Worldwide, Southern Energy develops and manages electricity and other
energy related projects, including domestic energy trading and marketing.
Southern Nuclear provides services to Southern Company's nuclear power plants.
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 public service
commissions. The companies follow generally accepted accounting principles and
comply with the accounting policies and practices prescribed by their respective
commissions. The preparation of financial statements in conformity with
generally accepted accounting principles requires the use of estimates, and the
actual results may differ from those estimates. All material intercompany items
have been eliminated in consolidation.
The consolidated financial statements reflect investments in controlled
subsidiaries on a consolidated basis and other investments on an equity basis.
Certain prior years' data presented in the consolidated financial statements
have been reclassified to conform with the current year presentation.
Regulatory Assets and Liabilities
The operating companies are subject to the provisions of Financial Accounting
Standards Board (FASB) Statement No. 71, Accounting for the Effects of Certain
Types of Regulation. Regulatory assets represent probable future revenues to the
operating companies associated with certain costs that are expected to be
recovered from customers through the ratemaking process. Regulatory liabilities
represent probable future reductions in revenues associated with amounts that
are expected to be credited to customers through the ratemaking process.
Regulatory assets and (liabilities) reflected in the Consolidated Balance Sheets
at December 31 relate to the following:
1998 1997
- - - - - - - ---------------------------------------------------------------
(in millions)
Deferred income taxes $1,036 $1,142
Deferred Plant Vogtle costs - 50
Premium on reacquired debt 294 285
Demand-side programs - 11
Department of Energy assessments 57 63
Vacation pay 81 79
Deferred fuel charges - 4
Postretirement benefits 36 38
Work force reduction costs 17 37
Deferred income tax credits (715) (746)
Storm damage reserves (24) (36)
Other, net 145 152
- - - - - - - ---------------------------------------------------------------
Total $ 927 $1,079
===============================================================
In the event that a portion of an operating company's operations is no longer
subject to the provisions of FASB Statement No. 71, the company would be
required to write off related net regulatory assets and liabilities that are not
specifically recoverable through regulated rates. In addition, the company would
be required to determine if any impairment to other assets exists, including
plant, and write down the assets, if impaired, to their fair value.
Revenues and Fuel Costs
The 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 costs, the energy component of purchased power costs, and
11-27
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1998 Annual Report
certain other costs. Revenues are adjusted for differences between recoverable
fuel costs and amounts actually recovered in current rates.
Southern Company has a diversified base of customers. No single customer or
industry comprises 10 percent or more of revenues. For all periods presented,
uncollectible accounts continued to average less than 1 percent of revenues.
Fuel expense includes the amortization of the cost of nuclear fuel and a
charge, based on nuclear generation, for the permanent disposal of spent nuclear
fuel. Total charges for nuclear fuel included in fuel expense amounted to $133
million in 1998, $144 million in 1997, and $142 million in 1996. 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. Although disposal was
scheduled to begin in 1998, the actual year this service will begin is
uncertain. The DOE failed to begin disposing of spent fuel in January 1998, as
required by the contracts, and the companies are pursuing legal remedies against
the government for breach of contract. Sufficient storage capacity currently is
available to permit operation into 2003 at Plant Hatch, into 2017 at Plant
Vogtle, and into 2009 and 2013 at Plant Farley units 1 and 2, respectively.
Plant Vogtle's spent fuel storage capacity includes the installation in 1998 of
additional rack capacity. Activities for adding dry cask storage capacity at
Plant Hatch by as early as 1999 are in progress.
Also, the Energy Policy Act of 1992 required the establishment in 1993 of a
Uranium Enrichment Decontamination and Decommissioning Fund, which is funded in
part by a special assessment on utilities with nuclear plants. This assessment
is being paid over a 15-year period, which began in 1993. This fund will be used
by the DOE for the decontamination and decommissioning of its nuclear fuel
enrichment facilities. The law provides that utilities will recover these
payments in the same manner as any other fuel expense. Alabama Power and Georgia
Power -- based on its ownership interests -- estimate their respective remaining
liability at December 31, 1998, under this law to be approximately $31 million
and $24 million. 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
3.4 percent in 1998, 3.4 percent in 1997, and 3.3 percent in 1996. 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 and removal of other facilities.
Georgia Power recorded additional depreciation of electric plant amounting to
$316 million in 1998, $159 million in 1997, and $24 million in 1996. The
accumulated depreciation related to these charges is $505 million at December
31, 1998. See Note 3 under "Georgia Power 1998 Retail Rate Order" for additional
information.
The Nuclear Regulatory Commission (NRC) requires all licensees operating
commercial power reactors to establish a plan for providing, with reasonable
assurance, funds for decommissioning. Alabama Power and Georgia Power have
external trust funds to comply with the NRC's regulations. Amounts previously
recorded in internal reserves are being transferred into the external trust
funds over periods approved by the respective state public service commissions.
The NRC's minimum external funding requirements are based on a generic estimate
of the cost to decommission the radioactive portions of a nuclear unit based on
the size and type of reactor. Alabama Power and Georgia Power have filed plans
with the NRC to ensure that -- over time -- the deposits and earnings of the
external trust funds will provide the minimum funding amounts prescribed by the
NRC.
Site study cost is the estimate to decommission a specific facility as of the
site study year, and ultimate cost is the estimate to decommission a specific
facility as of its retirement date. The estimated costs of decommissioning --
both site study costs and ultimate costs -- based on the most current study as
11-28
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1998 Annual Report
of December 31, 1998, for Alabama Power's Plant Farley and Georgia Power's
ownership interests in plants Hatch and Vogtle were as follows:
Plant Plant Plant
Farley Hatch Vogtle
- - - - - - - ---------------------------------------------------------------
Site study basis (year) 1998 1997 1997
Decommissioning periods:
Beginning year 2017 2014 2027
Completion year 2031 2027 2038
- - - - - - - ---------------------------------------------------------------
(in millions)
Site study costs:
Radiated structures $629 $372 $317
Non-radiated structures 60 33 44
- - - - - - - ---------------------------------------------------------------
Total $689 $405 $361
===============================================================
(in millions)
Ultimate costs:
Radiated structures $1,868 $722 $ 922
Non-radiated structures 178 65 129
- - - - - - - ----------------------------------------------------------------
Total $2,046 $787 $1,051
================================================================
Significant assumptions:
Inflation rate 4.5% 3.6% 3.6%
Trust earning rate 7.0 6.5 6.5
- - - - - - - ----------------------------------------------------------------
The decommissioning cost estimates are based on prompt dismantlement and
removal of the plant from service. The actual decommissioning costs may vary
from the above estimates because of changes in the assumed date of
decommissioning, changes in NRC requirements, or changes in the assumptions used
in making these estimates.
Annual provisions for nuclear decommissioning are based on an annuity method
as approved by the respective state public service commissions. The amount
expensed in 1998 and fund balances were as follows:
Plant Plant Plant
Farley Hatch Vogtle
- - - - - - - ---------------------------------------------------------------
(in millions)
Amount expensed in 1998 $ 18 $ 11 $ 9
Accumulated provisions:
Balance in external trust
funds $232 $172 $112
Balance in internal reserves 42 19 12
- - - - - - - ---------------------------------------------------------------
Total $274 $191 $124
===============================================================
Alabama Power's decommissioning costs for ratemaking are based on the site
study. For Georgia Power effective January 1, 1999, the GPSC increased the
annual provision for decommissioning expenses to $26 million. This amount is
based on the NRC generic estimate to decommission the radioactive portion of the
facilities as of 1997. The estimates are $526 million and $438 million for
plants Hatch and Vogtle, respectively. The ultimate costs associated with the
1997 NRC minimum funding requirements are $1.1 billion and $1.3 billion for
plants Hatch and Vogtle, respectively. Significant assumptions include an
estimated inflation rate of 3.6 percent and an estimated trust earnings rate of
6.5 percent. Alabama Power and Georgia Power expect their respective state
public service commissions to periodically review and adjust, if necessary, the
amounts collected in rates for the anticipated cost of decommissioning.
Income Taxes
Southern Company uses the liability method of accounting for deferred income
taxes and provides deferred income taxes for all significant income tax
temporary differences. Investment tax credits utilized are deferred and
amortized to income over the average lives of the related property.
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.
Property Rights
Included in property rights are leasehold interests in Southern Energy's power
generation facilities that are developed under build, operate, and transfer
agreements with foreign governments. Southern Energy's construction costs are
initially recorded as construction work in progress, and -- after completion --
these costs are recorded as leasehold interests. These costs are amortized over
the length of time the facility is operated before transferring ownership to the
local government. Also included in property rights is a concession agreement
assigned in 1993 by the Argentine government to Southern Energy for the
operation of a hydroelectric plant.
Cash and Cash Equivalents
For purposes of the consolidated financial statements, temporary cash
investments are considered cash equivalents. Temporary cash investments are
securities with original maturities of 90 days or less.
11-29
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1998 Annual Report
Materials and Supplies
Generally, materials and supplies include the costs of transmission,
distribution, and generating plant materials. Materials are charged to inventory
when purchased and then expensed or capitalized to plant, as appropriate, when
installed.
Foreign Currency Translation
Assets and liabilities of Southern Company's international operations, where the
local currency is the functional currency, have been translated at year-end
exchange rates, and revenues and expenses have been translated using average
exchange rates prevailing during the year. Adjustments resulting from
translation have been recorded in other comprehensive income. The financial
statements of international operations, where the U.S. dollar is the functional
currency, reflect certain transactions denominated in the local currency that
have been remeasured in U.S. dollars. The remeasurement of local currencies into
U.S. dollars creates gains and losses from foreign currency transactions that
are included in consolidated net income. Foreign exchange gains and losses are
not material for all periods presented.
Comprehensive Income
In 1998, Southern Company adopted FASB Statement No. 130, Reporting
Comprehensive Income. This statement establishes rules for the reporting and
display of comprehensive income and its components. Comprehensive income
consists of net income and foreign currency translation adjustments and is
presented in the consolidated financial statements. The objective of the
statement is to report a measure of all changes in common stock equity of an
enterprise that result from transactions and other economic events of the
period other than transactions with owners.
Financial Instruments for Non-Trading Activities
Non-trading derivative financial instruments are used to hedge exposures to
fluctuations in interest rates, foreign currency exchange rates, and certain
commodity prices. Gains and losses on qualifying hedges are deferred and
recognized either in income or as an adjustment to the carrying amount when the
hedged transaction occurs.
The company utilizes interest rate swaps and cross currency interest rate
swaps to minimize borrowing costs by changing the interest rate and currency of
the original borrowing. For qualifying hedges, the interest rate differential is
reflected as an adjustment to interest expense over the life of the swaps.
Southern Company's international operations are exposed to the effects of
foreign currency exchange rate fluctuations. To protect against this exposure,
the company utilizes currency swaps to hedge its net investment in certain
foreign subsidiaries, which has the effect of converting foreign currency cash
inflows into U.S. dollars at fixed exchange rates. Gains or losses on these
currency swaps, designated as hedges of net investments, are offset against the
translation effects reflected in other comprehensive income, net of tax.
Non-trading financial derivative instruments held at December 31, 1998, were
as follows:
Year of Unrecognized
Maturity or Notional Gain
Type Termination Amount (Loss)
- - - - - - - ------------------------------- ----------------------------
(in millions)
Interest rate
swaps: 2002-2016 $928 $(69)
2001-2012 (pound)600 $(130)
2002-2007 DM691 $(30)
Cross currency
swaps 2001-2007 (pound)429 $11
Cross currency
swaption 2003 DM555 $(18)
- - - - - - - ----------------------------------------------------------------
(pound) - Denotes British pound sterling.
DM - Denotes Deutschemark.
The company is exposed to losses related to financial instruments in the
event of counterparties' nonperformance. The company has established controls to
determine and monitor the creditworthiness of counterparties in order to
mitigate the company's exposure to counterparty credit risk. The company is
unaware of any counterparties that will fail to meet their obligations.
In the United Kingdom, the company utilizes contracts to mitigate its
exposure to volatility in the prices of electricity purchased through the
wholesale electricity market. These contracts allow the company to effectively
convert the majority of its anticipated wholesale electricity purchases from
market prices to fixed prices. The gains and losses on these contracts are
deferred and recognized as electricity is purchased. Recently, a market has
developed for trading these contracts in the United Kingdom. However, due to the
immaturity of this market and the complexity of the company's existing
contracts, it is not practicable to estimate the fair value of these contracts.
11-30
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1998 Annual Report
Other Southern Company financial instruments for which the carrying amount
did not equal fair value at December 31 were as follows:
Carrying Fair
Amount Value
- - - - - - - ----------------------------------------------------------------
(in millions)
Long-term debt:
At December 31, 1998 $11,777 $11,626
At December 31, 1997 10,916 11,160
Capital and preferred securities:
At December 31, 1998 2,179 2,288
At December 31, 1997 1,744 1,826
- - - - - - - ----------------------------------------------------------------
The fair values for long-term debt and capital and preferred securities were
based on either closing market price or closing price of comparable instruments.
Financial Instruments for Trading Activities
Effective in January 1998, Southern Energy and Vastar Resources, Inc. (Vastar)
combined their energy trading and marketing activities to form a joint venture.
Southern Energy's investment in the joint venture is accounted for under the
equity method of accounting. See Note 5 under "Energy Trading and Marketing
Commitments" for additional information. Financial statement disclosure related
to Southern Energy's energy trading and marketing activities for 1997 -- prior
to the formation of the joint venture was presented as follows:
Derivative financial instruments used for trading purposes primarily relate
to commodities associated with the energy sector, such as electricity, natural
gas, and crude oil. These instruments were recorded at fair value for balance
sheet purposes. The determination of fair value considers various factors, such
as closing exchange prices, broker price quotations, and model pricing. Model
pricing considers time value and volatility factors underlying any options and
contractual commitments. These transactions were accounted for using the
mark-to-market method of accounting in which the unrealized gains or losses
resulting from the impact of price movements are recognized as net gains or
losses in the consolidated statements of income. If the company has a master
netting agreement with counterparties, net positions were recognized for
consolidated balance sheet and income statement purposes.
In 1997, the company provided price risk management services by entering into
a variety of contractual commitments such as price cap and floor agreements,
futures contracts, forward purchase and sale agreements, and option contracts.
These contracts generally require future settlement, and are either executed on
an exchange or traded as over-the-counter (OTC) instruments. Contractual
commitments had widely varying terms and durations that ranged from a few hours
to a number of years depending on the instrument. The majority of the company's
transactions at December 31, 1997, were short-term in duration, with a weighted
average maturity of approximately 1.3 years.
All contractual commitments used for trading purposes were recorded at fair
value. Contracts in a net receivable position, as well as options held, were
reported as assets. Similarly, contractual commitments in a net payable
position, as well as options written, were reported as liabilities. The net
unrealized gain from risk management services amounted to $8 million at December
31, 1997. Contractual commitments reflected in the Consolidated Balance Sheets
at December 31, 1997 were as follows:
Net
Notional Fair Value
Amounts --------------------
1997 (Kilowatt-Hours) Assets Liabilities
- - - - - - - ----- -------------------------------------------
(in millions)
Exchange-issued
products:
Futures
contracts 904 $14 $15
Other 958 1 1
- - - - - - - ---------------------------------------------------------------
Total 1,862 15 16
- - - - - - - ---------------------------------------------------------------
OTC products:
Forward
contracts 2,643 69 62
Swaps (473) 1 -
Other 639 9 8
- - - - - - - ---------------------------------------------------------------
Total 2,809 79 70
- - - - - - - ---------------------------------------------------------------
Total 4,671 $94 $86
===============================================================
Notional amounts -- stated in equivalent millions of kilowatt-hours -- are
indicative only of the volume of activity and are not a measure of market risk.
Notional amounts of natural gas and crude oil positions are reflected in
equivalent kilowatt-hours based on standard conversion rates.
11-31
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1998 Annual Report
The annual average gross balances of the company's options and contractual
commitments used for trading purposes, based on month-end balances were as
follows:
Average Fair Value
-----------------------------
1997 Assets Liabilities
- - - - - - - ---- -----------------------------
(in millions)
Commodity instruments:
Electricity $97 $94
Gas 6 6
Other 7 6
- - - - - - - -----------------------------------------------------------------
2. RETIREMENT BENEFITS
Southern Company has defined benefit, trusteed, pension plans that cover
substantially all employees. In the United States, Southern Company provides
certain medical care and life insurance benefits for retired employees.
Substantially all these employees may become eligible for such benefits when
they retire. The operating companies fund trusts to the extent deductible under
federal income tax regulations or to the extent required by their respective
regulatory commissions. In 1998, Southern Company adopted FASB Statement No.
132 Employers' Disclosure about Pensions and Other Postretirement Benefits. The
measurement date is September 30 for each year.
Pension Plans
Changes during the year in the projected benefit obligations and in the fair
value of plan assets were as follows:
Projected
Benefit Obligations
---------------------
1998 1997
- - - - - - - ----------------------------------------------------------------
(in millions)
Balance at beginning of year $3,701 $3,624
Service cost 99 94
Interest cost 273 271
Benefits paid (201) (163)
Actuarial (gain) loss 298 (125)
- - - - - - - ----------------------------------------------------------------
Balance at end of year $4,170 $3,701
================================================================
Plan Assets
--------------------
1998 1997
- - - - - - - ---------------------------------------------------------------
(in millions)
Balance at beginning of year $5,931 $5,212
Actual return on plan assets 223 911
Employer contributions 4 9
Benefits paid (180) (201)
- - - - - - - ---------------------------------------------------------------
Balance at end of year $5,978 $5,931
===============================================================
The accrued pension costs recognized in the Consolidated Balance Sheet were
as follows:
1998 1997
- - - - - - - ----------------------------------------------------------------
(in millions)
Funded status $ 1,808 $ 2,230
Unrecognized transition obligation (89) (101)
Unrecognized prior service cost 119 126
Unrecognized net gain (1,347) (1,874)
Fourth quarter contributions - 2
- - - - - - - ----------------------------------------------------------------
Prepaid asset recognized in the
Consolidated Balance Sheets $ 491 $ 383
================================================================
Components of the plans' net periodic cost were as follows:
1998 1997 1996
- - - - - - - ----------------------------------------------------------------
(in millions)
Service cost $ 99 $ 94 $ 99
Interest cost 273 271 267
Expected return on
plan assets (425) (394) (378)
Recognized net gain (47) (42) (29)
Net amortization (9) (9) (12)
- - - - - - - ----------------------------------------------------------------
Net pension cost (income) $(109) $ (80) $ (53)
================================================================
The weighted average rates assumed in the actuarial calculations for both
the pension plans and postretirement benefits were:
1998 1997
- - - - - - - -----------------------------------------------------------------
Discount 6.75% 7.50%
Annual salary increase 4.25 5.00
Long-term return on plan assets 8.50 8.50
- - - - - - - -----------------------------------------------------------------
Postretirement Benefits
Changes during the year in the projected benefit obligations and in the fair
value of plan assets were as follows:
Projected
Benefit Obligations
------------------
1998 1997
- - - - - - - ----------------------------------------------------------------
(in millions)
Balance at beginning of year $ 935 $870
Service cost 18 18
Interest cost 69 67
Benefits paid (35) (27)
Actuarial (gain) loss 50 7
- - - - - - - ----------------------------------------------------------------
Balance at end of year $1,037 $935
================================================================
11-32
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1998 Annual Report
Plan Assets
---------------------
1998 1997
- - - - - - - ----------------------------------------------------------------
(in millions)
Balance at beginning of year $294 $260
Actual return on plan assets 8 32
Employer contributions 69 29
Benefits paid (35) (27)
- - - - - - - ----------------------------------------------------------------
Balance at end of year $336 $294
=================================================================
The accrued postretirement costs recognized in the Consolidated
Balance Sheet were as follows:
1998 1997
- - - - - - - -----------------------------------------------------------------
(in millions)
Funded status $(701) $(641)
Unrecognized transition obligation 219 233
Unrecognized prior service cost - (4)
Unrecognized net loss (gain) 117 68
Fourth quarter contributions 30 41
- - - - - - - -----------------------------------------------------------------
Accrued liability recognized in the
Consolidated Balance Sheets $(335) $(303)
=================================================================
Components of the plans' net periodic cost were as follows:
1998 1997 1996
- - - - - - - -----------------------------------------------------------------
(in millions)
Service cost $ 18 $ 18 $ 20
Interest cost 69 66 60
Expected return on
plan assets (21) (18) (14)
Recognized net gain 2 3 3
Net amortization 14 17 15
- - - - - - - --------------------------------------------------------------
Net postretirement cost $ 82 $ 86 $ 84
==============================================================
An additional assumption used in measuring the accumulated postretirement
benefit obligation was a weighted average medical care cost trend rate of
8.30 percent for 1998, decreasing gradually to 4.75 percent through the year
2005, and remaining at that level thereafter. An annual increase or decrease
in the assumed medical care cost trend rate of 1 percent would affect the
accumulated benefit obligation and the service and interest cost components at
December 31, 1998 as follows:
1 Percent 1 Percent
Increase Decrease
- - - - - - - ----------------------------------------------------------------
(in millions)
Benefit obligation $75 $(63)
Service and interest costs 7 (6)
- - - - - - - ----------------------------------------------------------------
Work Force Reduction Programs
Southern Company has incurred additional costs for work force reduction
programs. The costs related to these programs were $32 million, $50 million, and
$85 million, for the years 1998, 1997, and 1996, respectively. In addition,
certain costs of these programs were deferred and are being amortized in
accordance with regulatory treatment. The unamortized balance of these costs was
$17 million at December 31, 1998.
3. LITIGATION AND REGULATORY MATTERS
Alabama Power Appliance Warranty Litigation
In 1996, a class action against Alabama Power was filed charging Alabama Power
with fraud and non-compliance with regulatory statutes relating to the offer,
sale, and financing of "extended service contracts" in connection with the sale
of electric appliances. The plaintiffs seek damages in an unspecified amount.
Alabama Power has offered extended service agreements to its customers since
January 1984, and approximately 175,000 extended service agreements could be
involved in these proceedings. The trial court has granted partial summary
judgment in favor of the plaintiffs. Alabama Power has appealed this decision to
the Supreme Court of Alabama. The final outcome of this case cannot now be
determined.
Alabama Power Environmental Litigation
On November 30, 1998, total judgments of nearly $53 million were entered in
favor of five plaintiffs against Alabama Power and two large textile
manufacturers. The plaintiffs alleged that the manufacturers had discharged
certain polluting substances into a stream that empties into Lake Martin, a
hydroelectric reservoir owned by Alabama Power, and that such discharges had
reduced the value of the plaintiffs' residential lots on Lake Martin. Of the
total amount of the judgments, $155 thousand was compensatory damages and the
remainder was punitive damages. The damages were assessed against all three
defendants jointly. Post-trial motions have been filed, and, if relief is not
granted at the trial court level, Alabama Power will appeal these judgments to
the Supreme Court of Alabama. While Alabama Power believes that these judgments
should be reversed or set aside, the final outcome of this matter cannot now be
determined.
11-33
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1998 Annual Report
Georgia Power Potentially Responsible Party Status
In January 1995, Georgia Power and four other unrelated entities were notified
by the Environmental Protection Agency (EPA) that they have been designated as
potentially responsible parties under the Comprehensive Environmental Response,
Compensation, and Liability Act with respect to a site in Brunswick, Georgia. As
of December 31, 1998, Georgia Power had recorded approximately $5 million in
cumulative expenses associated with the site. This represents Georgia Power's
agreed-upon share of the removal and remedial investigation and feasibility
study costs.
The final outcome of this matter cannot now be determined. However, based on
the nature and extent of Georgia Power's activities relating to the site,
management believes that the company's portion of any remaining remediation
costs should not be material to the financial statements.
FERC Review of Equity Returns
On September 21, 1998, the FERC entered separate orders affirming the outcome
of the administrative law judge's opinions in two proceedings in which the
return on common equity component of formula rates contained in substantially
all of the operating companies' wholesale power contracts was being challenged
as unreasonably high. These orders resulted in no change in the wholesale power
contracts that were the subject of such proceedings. The FERC also dismissed a
complaint filed by three customers under long-term power sales agreements
seeking to lower the equity return component in such agreements. These customers
have filed applications for rehearing regarding each FERC order. In response to
a requirement of the September 1998 FERC orders, Southern Company filed a new
equity return component on the long-term power sales contracts, to be effective
January 5, 1999. The proposed equity return was lowered from 13.75 percent to
12.50 percent. If the filed equity return is approved, the estimated impact on
Southern Company's revenues will be approximately $7 million annually. The FERC
placed the new rates into effect subject to refund. Also, this filing was
consolidated with the new proceeding discussed below.
On December 28, 1998, the FERC staff filed a motion asking the FERC to
initiate a new proceeding regarding the equity return and other issues involving
the operating companies' formula rate contracts. The motion was submitted
pursuant to review procedures applicable to these contracts, and would be
applicable to billings under such contracts on and after January 1, 1999.
Southern Company Tax Litigation
In August 1997, Southern Company and the Internal Revenue Service (IRS) entered
into a settlement agreement related to tax issues for the years 1984 through
1987. The agreement received final approval by the Joint Congressional Committee
on Taxation in June 1998 and as a result, Alabama Power and Georgia Power
recognized interest income in 1998 of $14 million and $69 million, respectively.
The refund by the IRS has been received and this matter is now concluded.
Mobile Energy Services Petition for Bankruptcy
On January 14, 1999, Mobile Energy Services Company, LLC (MESC) -- an indirect
subsidiary of Southern Company -- filed a petition for Chapter 11 bankruptcy
relief in the U.S. Bankruptcy Court for the Southern District of Alabama. MESC
is the owner and operator of a facility that generates electricity, produces
steam, and processes black liquor as part of a pulp and paper complex in Mobile,
Alabama. This action is in response to Kimberly-Clark Tissue Company's
announcement in May 1998 of plans to close its pulp mill, effective September 1,
1999. As a part of the filing, MESC also is seeking payment for damages from
Kimberly-Clark Tissue Company. MESC will continue to operate the facility as
debtors-in possession, subject to the supervision and orders of the bankruptcy
court. A reorganization plan has not yet been filed by MESC.
Southern Company's equity investment in MESC was $20 million and MESC's total
assets were $392 million at December 31, 1998. MESC contributed $4 million and
$6 million to consolidated net income in 1998 and 1997, respectively. At
December 31, 1998, MESC had senior debt outstanding of $234 million of first
mortgage bonds and $85 million related to tax-exempt bonds. MESC paid in
January 1999 its regular semi-annual payment of $17 million to its bondholders.
The final outcome of this matter cannot now be determined.
Alabama Power Rate Adjustment Procedures
In November 1982, the Alabama Public Service Commission (APSC) adopted rates
that provide for periodic adjustments based upon Alabama Power's earned return
on end-of-period retail common equity. The rates also provide for adjustments to
recognize the placing of new generating facilities in retail service. Both
increases and decreases have been placed into effect since the adoption of these
rates. The rate adjustment procedures allow a return on common equity range of
13 percent to 14.5 percent and limit increases or decreases in rates to 4
percent in any calendar year.
11-34
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1998 Annual Report
In June 1995, the APSC issued a rate order granting Alabama Power's request
for gradual adjustments to move toward parity among customer classes. This order
also calls for a moratorium on any periodic retail rate increases (but not
decreases) until July 2001.
In December 1995, the APSC issued an order authorizing Alabama Power to
reduce balance sheet items -- such as plant and deferred charges -- at any time
the company's actual base rate revenues exceed the budgeted revenues. In April
1997, the APSC issued an additional order authorizing Alabama Power to reduce
balance sheet asset items. This order authorizes the reduction of such items up
to an amount equal to five times the total estimated annual revenue reduction
resulting from future rate reductions initiated by Alabama Power. In 1998,
Alabama Power -- in accordance with the 1995 rate order -- recorded $33 million
of additional amortization of premium on reacquired debt.
The ratemaking procedures will remain in effect until the APSC votes to
modify or discontinue them.
Georgia Power Investment in Rocky Mountain
In its 1985 financing order, the GPSC concluded that completion of the Rocky
Mountain pumped storage hydroelectric plant 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 plant. 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 plant. The plant went into commercial operation in 1995.
In June 1996, the GPSC initiated a review of this plant. On January 14, 1998,
the GPSC ordered that Georgia Power be allowed to include approximately $108
million of its $142 million investment in rate base as of December 31, 1998. In
December 1998, Georgia Power recorded a write down of $34 million -- $21 million
after taxes -- on its investment in Rocky Mountain as a result of the GPSC's
1998 retail rate order discussed later. This matter is now concluded.
Georgia Power 1998 Retail Rate Order
As required by the GPSC, Georgia Power filed a general rate case in 1998. On
December 18, 1998, the GPSC approved a new three-year rate order for Georgia
Power. Under the terms of the order, Georgia Power's earnings will continue to
be evaluated against a retail return on common equity range of 10 percent to
12.5 percent. Georgia Power's annual retail rates will be decreased by
$262 million effective January 1, 1999, and by an additional $24 million
effective January 1, 2000. The order further provides for $85 million each year,
and up to an additional $50 million annually in 2000 and 2001 of any earnings in
excess of the 12.5 percent return, to be applied to accelerated amortization or
depreciation of assets. Two-thirds of any additional earnings in excess of the
12.5 percent return in any year will be applied to rate reductions and the
remaining one-third retained by Georgia Power. During the term of the order,
Georgia Power will not file for a general base rate increase unless its
projected retail return on common equity falls below 10 percent. Georgia Power
is required to file a general rate case on July 1, 2001. At that time, the GPSC
would be expected to determine whether the rate order should be continued,
modified, or discontinued.
4. CONSTRUCTION PROGRAM
Southern Company is engaged in continuous construction programs, currently
estimated to total some $2.6 billion in 1999, $2.1 billion in 2000, and
$2.1 billion in 2001. The construction programs are subject to periodic review
and revision, and actual construction costs may vary from the above estimates
because of numerous factors. These factors include: changes in business
conditions; acquisition of additional generating assets; revised load growth
estimates; changes in environmental regulations; changes in existing nuclear
plants to meet new regulatory requirements; increasing costs of labor,
equipment, and materials; and cost of capital. At December 31, 1998, significant
purchase commitments were outstanding in connection with the construction
program. The operating companies have approximately 2,700 megawatts of combined
cycle generation scheduled to be placed in service by 2001. Southern Energy has
under construction some 1,300 megawatts of owned capacity. In addition,
significant construction will continue related to transmission and distribution
facilities and the upgrading 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. INVESTMENTS, FINANCING, AND
COMMITMENTS
Investments
In December 1998, Southern Energy designed and implemented a plan to dispose of
its Argentinean and Chilean investments by December 31, 1999. As a result,
11-35
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1998 Annual Report
Southern Energy recorded an after-tax write down of approximately $200 million
in 1998 to reflect the difference between the carrying value of these assets
and the estimated fair value of the businesses. Southern Energy estimated the
fair value of the businesses held for sale based upon bids received from
prospective buyers, if available, or the discounted expected future cash flows
to be generated by the assets. The adjusted carrying value of these assets held
for disposal at December 31, 1998 was $90 million. These assets impacted the
Consolidated Statements of Income as follows:
Operating Operating Consolidated
Year Revenues Income Net Income
- - - - - - - ---- ---------------------------------------------
1998 $180 $39 $ 5
1997 180 38 5
1996 157 20 (5)
Depreciation expense was suspended beginning January 1999, and the after-tax
amount of depreciation recorded in 1998 was $16 million. Southern Energy is
actively pursuing and/or negotiating with potential buyers. However at this
time, a definitive agreement has not been entered into.
Southern Energy acquired $670 million of generating assets in 1998 and sold
an additional 26 percent interest in its United Kingdom subsidiary for $170
million. In late 1998, Southern Energy announced plans to acquire $801 million
and $480 million of generating assets in California and New York, respectively.
These transactions are expected to close in 1999. At December 31, 1998, Southern
Energy's total assets amounted to $12 billion.
Financing
The amount and timing of additional equity capital to be raised in 1999 -- as
well as in subsequent years -- will be contingent on Southern Company's
investment opportunities. Equity capital can be provided from any combination of
public offerings, private placements, or the company's stock plans.
The operating companies' construction programs are expected to be financed
primarily from internal sources. Short-term debt is often utilized and the
amounts available are discussed below. The companies may issue additional
long-term debt and preferred securities primarily for debt maturities and for
redeeming higher-cost securities if market conditions permit.
Bank Credit Arrangements
At the beginning of 1999, unused credit arrangements with banks totaled $4.6
billion, of which $2.7 billion expires during 1999, $304 million during 2000 to
2001, $1.0 billion during 2002, and $593 million during 2003 and 2004. The
following table outlines the credit arrangements by company:
Amount of Credit
-----------------------------------------
Expires
--------------------
2000 &
Company Total Unused 1999 beyond
- - - - - - - -------- -----------------------------------------
(in millions)
Alabama Power $ 758 $ 758 $ 678 $ 80
Georgia Power 1,252 1,252 722 530
Gulf Power 103 97 97 -
Mississippi Power 96 76 56 20
Savannah Electric 61 61 41 20
Southern Company 2,000 2,000 1,000 1,000
Southern Energy 907 340 71 269
Other 70 54 54 -
- - - - - - - -----------------------------------------------------------------
Total $5,247 $4,638 $2,719 $1,919
=================================================================
Approximately $2.0 billion of the credit facilities allows for term loans
ranging from one to three years. Most of the agreements include stated borrowing
rates but also allow for competitive bid loans.
All of the credit arrangements require payment of commitment fees based on
the unused portion of the commitments or the maintenance of compensating
balances with the banks. These balances are not legally restricted from
withdrawal. Of the total $4.6 billion in unused credit, $1.7 billion and $1.0
billion are syndicated credit arrangements of Southern Company and Georgia
Power, respectively. These facilities also require the payment of agent fees.
A portion of the $4.6 billion unused credit with banks is allocated to
provide liquidity support to the companies' variable rate pollution control
bonds. At December 31, 1998, the amount of the credit lines allocated for this
purpose was $1.4 billion.
In addition, the companies from time to time borrow under uncommitted lines
of credit with banks. Also, Southern Company, Alabama Power, Georgia Power, and
Southern Energy borrow through commercial paper programs that have the liquidity
support of committed bank credit arrangements.
11-36
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1998 Annual Report
Fuel and Purchased Power Commitments
To supply a portion of the fuel requirements of the generating plants, Southern
Company has entered into various long-term commitments for the procurement of
fossil and nuclear fuel. In most cases, these contracts contain provisions for
price escalations, minimum purchase levels, and other financial commitments.
Also, Southern Company has entered into various long-term commitments for the
purchase of electricity. Total estimated long-term obligations at December 31,
1998, were as follows:
Purchased
Year Fuel Power
- - - - - - - ----- ----------------------------
(in millions)
1999 $1,674 $ 161
2000 1,248 168
2001 1,048 170
2002 860 173
2003 824 177
2004 and thereafter 3,464 1,522
- - - - - - - ----------------------------------------------------------------
Total commitments $9,118 $2,371
================================================================
Operating Leases
Southern Company has operating lease agreements with various terms and
expiration dates. These expenses totaled $50 million, $33 million, and $25
million for 1998, 1997, and 1996, respectively. At December 31, 1998, estimated
minimum rental commitments for noncancelable operating leases were as follows:
Year Amounts
- - - - - - - ----- ---------
(in millions)
1999 $ 46
2000 39
2001 31
2002 30
2003 29
2004 and thereafter 304
- - - - - - - ---------------------------------------------------------------
Total minimum payments $479
===============================================================
Energy Trading and Marketing Commitments
In January 1998, Southern Energy and Vastar combined their energy trading and
marketing activities to form a joint venture, Southern Company Energy Marketing
(SCEM). Southern Company and Vastar have separately made guarantees to certain
counterparties regarding performance of contractual commitments by the joint
venture. Southern Company and Vastar have agreed to indemnify each other against
losses under such guarantees in proportion to their respective ownership shares
of SCEM. Southern Company's ownership interest is 60 percent. At December 31,
1998, outstanding guarantees related to the estimated fair value of net
contractual commitments were approximately $152 million. Based upon the SCEM's
statistical analysis of its credit risk, Southern Company's potential exposure
under these contractual commitments would not materially differ from the
estimated fair value. SCEM's gross revenues and cost of sales for 1998 were $9.2
billion and $9.1 billion, respectively.
Southern Energy has guaranteed certain minimum annual cash distributions,
subject to exclusions, payable by SCEM to Vastar. These distributions before
adjustments total $105 million for the period 1999-2002.
Vastar has the right -- exercisable in the period from December 1, 2002
through the first business day of 2003 -- to sell its remaining interest in SCEM
to Southern Energy. The price will range from $130 million to $210 million
depending on the interest owned by Vastar at that time, plus certain other
contractual considerations.
Assets Subject to Lien
Each of Southern Company's subsidiaries is organized as a legal entity,
separate, and apart from Southern Company and its other subsidiaries. The
subsidiary companies' mortgages, which secure the first mortgage bonds issued by
the companies, constitute a direct first lien on substantially all of the
companies' respective fixed property and franchises. There are no agreements or
other arrangements among the subsidiary companies under which the assets of one
company have been pledged or otherwise made available to satisfy obligations of
Southern Company or any of its other subsidiaries.
6. FACILITY SALES AND JOINT OWNERSHIP
AGREEMENTS
Alabama Power owns an undivided interest in units 1 and 2 of Plant Miller and
related facilities jointly with Alabama Electric Cooperative, Inc.
Georgia Power owns undivided interests in plants Vogtle, Hatch, Scherer, and
Wansley in varying amounts, together with transmission facilities, jointly with
OPC, the Municipal Electric Authority of Georgia, and the city of Dalton,
Georgia. In addition, Georgia Power has joint ownership agreements with OPC for
11-37
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1998 Annual Report
the Rocky Mountain project and with Florida Power Corporation (FPC) for a
combustion turbine unit at Intercession City, Florida.
At December 31, 1998, Alabama Power's and Georgia Power's ownership and
investment (exclusive of nuclear fuel) in jointly owned facilities with the
above entities were as follows:
Jointly Owned Facilities
------------------------------------------
Percent Amount of Accumulated
Ownership Investment Depreciation
--------- ------------ ----------------
(in millions)
Plant Vogtle
(nuclear) 45.7% $3,296 $1,514
Plant Hatch
(nuclear) 50.1 840 538
Plant Miller
(coal)
Units 1 and 2 91.8 717 330
Plant Scherer
(coal)
Units 1 and 2 8.4 112 48
Plant Wansley
(coal) 53.5 298 141
Rocky Mountain
(pumped storage) 25.4 169 61
Intercession City
(combustion turbine) 33.3 12 *
- - - - - - - -----------------------------------------------------------------
*Less than $1 million.
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.
7. LONG-TERM POWER SALES AGREEMENTS
The operating companies have long-term contractual agreements for the sale of
capacity and energy to certain non-affiliated utilities located outside the
system's service area. These agreements -- expiring at various dates discussed
below -- are firm and pertain to capacity related to specific generating units.
Because the energy is generally sold at cost under these agreements,
profitability is primarily affected by revenues from capacity sales. The
capacity revenues amounted to $196 million in 1998, $203 million in 1997, and
$217 million in 1996.
Unit power from specific generating plants is currently being sold to Florida
Power & Light Company (FP&L), FPC, Jacksonville Electric Authority (JEA), and
the city of Tallahassee, Florida. Under these agreements, approximately 1,600
megawatts of capacity is scheduled to be sold in 1999. Thereafter, these sales
will decline to some 1,500 megawatts and remain at that approximate level --
unless reduced by FP&L, FPC, and JEA for the periods after 1999 with a minimum
of three years notice -- until the expiration of the contracts in 2010.
8. INCOME TAXES
At December 31, 1998, the tax-related regulatory assets and liabilities were
$1.0 billion and $715 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 income tax provisions are as follows:
1998 1997 1996
- - - - - - - ---------------------------------------------------------------
(in millions)
Total provision for income taxes:
Federal --
Currently payable $ 451 $ 547 $569
Deferred -- current year 195 188 116
-- reversal of
prior years (208) (160) (74)
- - - - - - - ---------------------------------------------------------------
438 575 611
- - - - - - - ---------------------------------------------------------------
State --
Currently payable 106 104 82
Deferred -- current year 28 15 23
-- reversal of
prior years (31) (19) (9)
- - - - - - - ---------------------------------------------------------------
103 100 96
- - - - - - - ---------------------------------------------------------------
International --
Windfall profits tax
assessed in United Kingdom - 148 -
Other 8 16 50
- - - - - - - ---------------------------------------------------------------
Total 549 839 757
Less income taxes charged
(credited) to other income (8) 114 10
- - - - - - - ---------------------------------------------------------------
Total income taxes charged
to operations $ 557 $ 725 $747
===============================================================
The first half of the windfall profits tax assessed in the United Kingdom was
paid in December 1997, and the remainder in December 1998.
11-38
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1998 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:
1998 1997
- - - - - - - ---------------------------------------------------------------
(in millions)
Deferred tax liabilities:
Accelerated depreciation $3,315 $3,345
Property basis differences 1,667 1,756
Other 403 269
- - - - - - - ---------------------------------------------------------------
Total 5,385 5,370
- - - - - - - ---------------------------------------------------------------
Deferred tax assets:
Federal effect of state deferred taxes 104 108
Other property basis differences 239 245
Deferred costs 132 116
Pension and other benefits 79 72
Other 293 197
- - - - - - - ---------------------------------------------------------------
Total 847 738
- - - - - - - ---------------------------------------------------------------
Net deferred tax liabilities 4,538 4,632
Portion included in current assets, net (57) 18
- - - - - - - ---------------------------------------------------------------
Accumulated deferred income taxes
in the Consolidated Balance Sheets $4,481 $4,650
===============================================================
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 $38 million in 1998, $30 million in 1997, and $33 million in
1996. At December 31, 1998, 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:
1998 1997 1996
- - - - - - - ----------------------------------------------------------------
Federal statutory rate 35.0% 35.0% 35.0%
State income tax,
net of federal deduction 4.1 3.4 3.2
Non-deductible book
depreciation 4.1 2.3 1.8
International tax credits (6.4) - -
Windfall profits tax - 8.0 -
Difference in prior years'
deferred and current tax rate (1.3) (1.5) (1.0)
Other (1.8) (1.9) (0.5)
- - - - - - - ----------------------------------------------------------------
Effective income tax rate 33.7% 45.3% 38.5%
================================================================
Southern Company files a consolidated federal income tax return. Under a
joint consolidated income tax agreement, each subsidiary's current and deferred
tax expense is computed on a stand-alone basis. Tax benefits from losses of the
parent company are allocated to each subsidiary based on the ratio of taxable
income to total consolidated taxable income.
The undistributed earnings of certain foreign subsidiaries aggregated $251
million as of December 31, 1998, which, under existing tax law, will not be
subject to U.S. income tax until distributed. Because the earnings have been or
are intended to be indefinitely reinvested, no provision has been made for any
taxes that may be applicable. It is not practicable to estimate the amount of
unrecognized deferred U.S. income taxes on undistributed earnings.
9. COMMON STOCK
Treasury Stock
In July 1998, Southern Company's Board of Directors authorized the company to
make open market purchases of its common stock in an aggregate amount not to
exceed $300 million through March 31, 1999. The purpose of the program is to
provide shares of common stock for the purchase requirements of Southern
Company's various stockholder, employee, and outside director stock purchase
plans. Under the program, 4.4 million shares have been repurchased and 2.4
million shares were reissued through December 31, 1998.
Shares Reserved
At December 31, 1998, a total of 45 million shares was reserved for issuance
pursuant to the Southern Investment Plan, the Employee Savings Plan, the Outside
Directors Stock Plan, and the Performance Stock Plan.
Performance Stock Plan
As of December 31, 1998, 302 current and former employees participated in the
Performance Stock Plan. The maximum number of shares of common stock that may be
issued under the new plan may not exceed 40 million. The prices of options
granted to date have been at the fair market value of the shares on the dates of
grant. Options granted to date become exercisable pro rata over a maximum period
of four years from the date of grant. Options outstanding will expire no later
than 10 years after the date of grant, unless terminated earlier by the Southern
11-39
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1998 Annual Report
Company Board of Directors in accordance with the plan. Stock option activity in
1997 and 1998 for the plan is summarized below:
Shares Average
Subject Option Price
To Option Per Share
- - - - - - - --------------------------------------------------------------
Balance at December 31, 1996 3,825,164 $21.11
Options granted 1,776,094 21.25
Options canceled (64,326) 22.10
Options exercised (137,426) 19.72
- - - - - - - --------------------------------------------------------------
Balance at December 31, 1997 5,399,506 21.15
Options granted 1,659,519 27.03
Options canceled (23,495) 23.18
Options exercised (603,195) 20.92
- - - - - - - --------------------------------------------------------------
Balance at December 31, 1998 6,432,335 $23.92
==============================================================
Shares reserved for future grants:
At December 31, 1996 668,062
At December 31, 1997 38,241,376
At December 31, 1998 36,598,001
- - - - - - - --------------------------------------------------------------
Options exercisable:
At December 31, 1997 2,006,511
At December 31, 1998 2,653,591
- - - - - - - --------------------------------------------------------------
Southern Company accounts for its stock-based compensation plans in
accordance with Accounting Principles Board Opinion No. 25. Accordingly, no
compensation expense has been recognized.
The pro forma impact on earnings of fair-value accounting for options granted
- - - - - - - -- as required by FASB Statement No. 123, Accounting for Stock-Based
Compensation -- is less than 1 cent per share and is not significant to the
consolidated financial statements.
Earnings Per Share
FASB Statement No. 128, Earnings per Share simplifies the methodology for
computing both basic and diluted earnings per share. The only difference in the
two methods for computing Southern Company's per share amounts is attributable
to outstanding options under the Performance Stock Plan. The effect of the stock
options was determined using the treasury stock method. Consolidated net income
as reported was not affected. Shares used to compute diluted earnings per share
are as follows:
Average Common Stock Shares
--------------------------------
1998 1997 1996
- - - - - - - ---------------------------------------------------------------
(in thousands)
As reported shares 696,944 685,033 672,590
Effect of options 739 201 200
- - - - - - - ---------------------------------------------------------------
Diluted shares 697,683 685,234 672,790
===============================================================
Common Stock Dividend Restrictions
The income of Southern Company is derived primarily from equity in earnings of
its subsidiaries. At December 31, 1998, consolidated retained earnings included
$3.4 billion of undistributed retained earnings of the subsidiaries. Of this
amount, $2.0 billion was restricted against the payment by the subsidiary
companies of cash dividends on common stock under terms of bond indentures.
10. CAPITAL AND PREFERRED SECURITIES
Company or subsidiary obligated mandatorily redeemable capital and preferred
securities have been issued by special purpose financing entities of Southern
Company and its subsidiaries. Substantially all the assets of these special
financing entities are junior subordinated notes issued by the related company
seeking financing. Each of these companies considers that the mechanisms and
obligations relating to the capital or preferred securities issued for its
benefit, taken together, constitute a full and unconditional guarantee by it of
the respective special financing entities' payment obligations with respect to
the capital or preferred securities. At December 31, 1998, capital securities of
$950 million and preferred securities of $1.2 billion were outstanding. Southern
Company guarantees the notes related to $950 million of capital securities
issued on its behalf.
11. 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:
1998 1997
- - - - - - - ---------------------------------------------------------------
(in millions)
Bond improvement fund requirements $ 23 $ 38
Less:
Portion to be satisfied by certifying
property additions 14 3
- - - - - - - ---------------------------------------------------------------
Cash requirements 9 35
First mortgage bond maturities
and redemptions 868 349
Other long-term debt maturities 563 400
- - - - - - - ---------------------------------------------------------------
Total $1,440 $784
===============================================================
The first mortgage bond improvement fund requirements amount to 1 percent of
each outstanding series of bonds authenticated under the indentures prior to
11-40
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1998 Annual Report
January 1 of each year, other than those issued to collateralize pollution
control revenue bonds and other obligations. The requirements may be satisfied
by depositing cash or reacquiring bonds, or by pledging additional property
equal to 166 2/3 percent of such requirements.
With respect to the collateralized pollution control revenue bonds, the
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.
Improvement fund requirements and/or serial maturities through 2003
applicable to other long-term debt are as follows: $563 million in 1999; $385
million in 2000; $433 million in 2001; $1,035 million in 2002; and $387 million
in 2003.
12. NUCLEAR INSURANCE
Under the Price-Anderson Amendments Act of 1988, Alabama Power and Georgia Power
maintain agreements of indemnity with the NRC that, together with private
insurance, cover third-party liability arising from any nuclear incident
occurring at the companies' nuclear power plants. The act provides funds up to
$9.7 billion for public liability claims that could arise from a single nuclear
incident. Each nuclear plant is insured against this liability to a maximum of
$200 million by private insurance, with the remaining coverage provided by a
mandatory program of deferred premiums that could be assessed, after a nuclear
incident, against all owners of nuclear reactors. A company could be assessed up
to $88 million per incident for each licensed reactor it operates, but not more
than an aggregate of $10 million per incident to be paid in a calendar year for
each reactor. Such maximum assessment, excluding any applicable state premium
taxes, for Alabama Power and Georgia Power -- based on its ownership and buyback
interests -- is $176 million and $178 million, respectively, per incident, but
not more than an aggregate of $20 million per company to be paid for each
incident in any one year.
Alabama Power and Georgia Power are members of Nuclear Electric Insurance
Limited (NEIL), a mutual insurer established to provide property damage
insurance in an amount up to $500 million for members' nuclear generating
facilities.
Additionally, both companies have policies that currently provide
decontamination, excess property insurance, and premature decommissioning
coverage up to $2.25 billion for losses in excess of the $500 million primary
coverage. This excess insurance is also provided by NEIL.
NEIL also covers the additional costs that would be incurred in obtaining
replacement power during a prolonged accidental outage at a member's nuclear
plant. Members can be insured against increased costs of replacement power in an
amount up to $3.5 million per week -- starting 17 weeks after the outage -- for
one year and up to $2.8 million per week for the second and third years.
Under each of the NEIL policies, members are subject to assessments if losses
each year exceed the accumulated funds available to the insurer under that
policy. The current maximum annual assessments for Alabama Power and Georgia
Power under the three NEIL policies would be $21 million and $25 million,
respectively.
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.
All retrospective assessments -- whether generated for liability, property,
or replacement power -- may be subject to applicable state premium taxes.
13. PURCHASE METHOD ACQUISITION
Southern Energy completed in 1997 the acquisition of a 100 percent interest in
Consolidated Electric Power Asia (CEPA) for a total net investment of some $2.1
billion. CEPA is the largest independent power producer in Asia. The CEPA
11-41
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1998 Annual Report
acquisition has been accounted for under the purchase method of accounting. The
acquisition cost exceeded the fair market value of net assets by approximately
$1.6 billion. This amount is considered goodwill and is being amortized on a
straight-line basis over 40 years.
CEPA has been included in the consolidated financial statements since January
29, 1997. The following unaudited pro forma results of operations have been
prepared assuming the acquisition of CEPA, effective January 1, 1996. The pro
forma results assume acquisition financing of $716 million of short-term
borrowings, $792 million of long-term notes, and $600 million of capital
securities. Southern Company's assumed effective composite interest rate on
these obligations for each period was 6.82 percent.
These unaudited pro forma results are not necessarily indicative of the
actual results that would have been realized had the acquisition occurred on the
assumed dates, nor are they necessarily indicative of future results. Pro forma
operating results are for information purposes only and are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1997 1996
----------------------------------------------------------
As Pro As Pro
Reported Forma Reported Forma
- - - - - - - -----------------------------------------------------------------------------------------------------
Operating revenues (in millions) $12,611 $12,632 $10,358 $10,506
Consolidated net income (in millions) $972 $977 $1,127 $1,109
Earnings per share $1.42 $1.43 $1.68 $1.65
</TABLE>
14. SEGMENT AND RELATED INFORMATION
Effective December 31, 1997, Southern Company adopted FASB Statement No. 131,
Disclosure About Segments of an Enterprise and Related Information. Southern
Company's principal business segment -- or its traditional core business -- is
the five regulated electric utility operating companies that provide electric
service in four southeastern states. The other reportable business segment is
non-traditional energy services to retail and wholesale customers provided by
Southern Energy, which develops and manages electricity and other energy-related
projects both in the United States and abroad including domestic energy trading
and marketing for 1997 and 1996. Intersegment revenues are not material.
Financial data for business segments, products and services, and geographic
areas are as follows:
Business Segments
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Regulated Southern Energy
Domestic Non-Traditional Services All
Electric ------------------------------------------ Other Reconciling
Year Utilities International Domestic Total (Note) Eliminations Consolidated
- - - - - - - ---- ------------- -----------------------------------------------------------------------------------
(in millions)
1998
- - - - - - - -----
Operating revenues $ 9,363 $1,766 $ 137 $ 1,903 $ 166 $ (29) $11,403
Depreciation and amortization 1,289 216 18 234 16 - 1,539
Interest income 150 86 61 147 57 (111) 243
Net interest charges 654 318 91 409 97 (58) 1,102
Income taxes from operations 721 (123) (4) (127) (18) (19) 557
Writedown of generating assets 34 308 - 308 - - 342
Net income from equity
method subsidiaries 2 126 (5) 121 - - 123
Segment net income (loss) 1,083 23 16 39 (110) (35) 977
Total assets 24,476 9,578 2,869 12,447 1,428 (2,159) 36,192
Investments in equity
method subsidiaries 10 1,363 176 1,539 - 11 1,560
Gross property additions 1,298 586 63 649 58 - 2,005
Increase in goodwill - 30 200 230 - - 230
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
11-42
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1998 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Regulated Southern Energy
Domestic Non-Traditional Services All
Electric ---------------------------------------- Other Reconciling
Year Utilities International Domestic Total (Note) Eliminations Consolidated
- - - - - - - ----- ---------------------------------------------------------------------------------------------------
(in millions)
1997
- - - - - - - ----
Operating revenues $ 8,688 $1,748 $2,089 $ 3,837 $ 98 $ (12) $12,611
Depreciation and amortization 1,156 179 15 194 17 - 1,367
Interest income 51 96 42 138 21 (58) 152
Net interest charges 588 289 73 362 84 (41) 993
Income taxes from operations 735 24 (11) 13 (17) (6) 725
Windfall profits tax - 148 - 148 - - 148
Net income from equity
method subsidiaries 1 41 7 48 - (14) 35
Segment net income (loss) 1,105 (4) 5 1 (123) (11) 972
Total assets 24,555 9,225 1,832 11,057 1,224 (1,581) 35,255
Investments in equity
method subsidiaries 10 1,023 135 1,158 - - 1,168
Gross property additions 1,080 720 1 721 58 - 1,859
Increase in goodwill - 1,649 - 1,649 - - 1,649
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------------
Regulated Southern Energy
Domestic Non-Traditional Services All
Electric ---------------------------------------- Other Reconciling
Year Utilities International Domestic Total (Note) Eliminations Consolidated
- - - - - - - ----- ---------------------------------------------------------------------------------------------------
(in millions)
1996
- - - - - - - ----
Operating revenues $ 8,639 $1,506 $177 $1,683 $ 50 $(14) $10,358
Depreciation and amortization 1,019 95 13 108 6 - 1,133
Interest income 36 15 2 17 20 (19) 54
Net interest charges 546 126 31 157 18 (2) 719
Income taxes from operations 755 16 (4) 12 (14) (6) 747
Net income from equity
method subsidiaries 1 11 - 11 - (6) 6
Segment net income (loss) 1,086 88 4 92 (40) (11) 1,127
Total assets 24,899 4,320 604 4,924 450 (87) 30,186
Investments in equity
method subsidiaries 8 227 - 227 - (8) 227
Gross property additions 1,033 157 8 165 31 - 1,229
Increase in goodwill - - - - - - -
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------------
(Note) The all other category includes parent Southern Company, which does not allocate operating expenses to business segments.
Also, this category includes segments below the quantitative threshold for separate disclosure. These segments include a wireless
communication company and a developmental company for energy products and services. Non-traditional services exclude interest
expense to parent Southern Company.
</TABLE>
11-43
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1998 Annual Report
Products and Services
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Revenues
-------------------------------------------------------------------------------------------------------------
Regulated Domestic Southern Energy
Electric Utilities Non-Traditional Energy Services
----------------------------------- ----------------------------------------------------------------------
Energy
Trading
Year Retail Wholesale Other Total Generation Distribution Marketing Other Total
- - - - - - - ---- -------------------------------------------------------------------------------------------------------------------------
(in millions)
1998 $8,272 $896 $195 $9,363 $578 $1,273 $ - $52 $1,903
1997 7,647 886 155 8,688 513 1,282 1,982 60 3,837
1996 7,665 838 136 8,639 242 1,309 77 55 1,683
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Geographic Areas
Revenues
-----------------------------------------------------------------------------------------------------
International
-------------------------------------------------------------
United Southeast All
Year Domestic Kingdom Asia Other Total Consolidated
- - - - - - - ---- -----------------------------------------------------------------------------------------------------
(in millions)
1998 $9,637 $1,273 $273 $220 $1,766 $11,403
1997 10,863 1,282 247 219 1,748 12,611
1996 8,852 1,309 - 197 1,506 10,358
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Long-Lived Assets
------------------------------------------------------------------------------------
International
-------------------------------------------------------------
United Southeast All
Year Domestic Kingdom Asia Other Total Consolidated
- - - - - - - ---- -----------------------------------------------------------------------------------------------------
(in millions)
1998 $22,005 $2,463 $3,772 $1,856 $8,091 $30,096
1997 21,282 2,428 3,628 1,888 7,944 29,226
1996 21,190 2,473 108 999 3,580 24,770
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------------
15. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Summarized quarterly financial data for 1998 and 1997 are as follows:
Per Common Share
---------------------------------------------------
Price Range
Operating Operating Consolidated --------------------
Quarter Ended Revenues Income Net Income Earnings Dividends High Low
- - - - - - - -------------- ------------------------------------ -----------------------------------------------------
(in millions)
March 1998 $2,495 $437 $242 $0.35 $0.335 28 11/16 23 15/16
June 1998 2,913 490 270 0.39 0.335 29 25 1/16
September 1998 3,457 752 517 0.74 0.335 29 13/16 25 1/4
December 1998 2,538 74 (52) (0.08) 0.335 31 9/16 27 3/16
March 1997 $2,585 $397 $187 $0.28 $0.325 23 3/8 20 3/4
June 1997 2,717 429 215 0.31 0.325 22 1/4 19 7/8
September 1997 4,071 720 375 0.55 0.325 23 20 13/16
December 1997 3,238 394 195 0.28 0.325 26 1/4 22
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Southern Company's business is influenced by seasonal weather conditions.
Earnings for the fourth quarter 1998 declined by $221 million, or 32 cents per share, as a result of write downs in certain
generating assets as discussed in Notes 3 and 5.
Earnings for the third quarter 1997 declined by $111 million, or 16 cents per share, as a result of a windfall profits tax being
assessed in the United Kingdom.
</TABLE>
11-44
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA 1988-1998
Southern Company and Subsidiary 1998 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 1997 1996
- - - - - - - -----------------------------------------------------------------------------------------------------------------
Operating Revenues (in millions) $11,403 $12,611 $10,358
Consolidated Net Income (in millions) $977 $972 $1,127
Basic and Diluted Earnings Per Share of Common Stock $1.40 $1.42 $1.68
Cash Dividends Paid Per Share of Common Stock $1.34 $1.30 $1.26
Return on Average Common Equity (percent) 10.04 10.30 12.53
Total Assets (in millions) $36,192 $35,255 $30,230
Gross Property Additions (in millions) $2,005 $1,859 $1,229
- - - - - - - -----------------------------------------------------------------------------------------------------------------
Capitalization (in millions):
Common stock equity $ 9,797 $ 9,647 $ 9,216
Preferred stock and securities 2,548 2,237 1,402
Long-term debt 10,472 10,274 7,938
- - - - - - - -----------------------------------------------------------------------------------------------------------------
Total excluding amounts due within one year $22,817 $22,158 $18,556
=================================================================================================================
Capitalization Ratios (percent):
Common stock equity 42.9 43.5 49.7
Preferred stock and securities 11.2 10.1 7.6
Long-term debt 45.9 46.4 42.7
- - - - - - - -----------------------------------------------------------------------------------------------------------------
Total excluding amounts due within one year 100.0 100.0 100.0
=================================================================================================================
Other Common Stock Data:
Book value per share (year-end) $14.04 $13.91 $13.61
Market price per share:
High 31 9/16 26 1/4 25 7/8
Low 23 15/16 19 7/8 21 1/8
Close 29 1/16 25 7/8 22 5/8
Market-to-book ratio (year-end) (percent) 207.0 186.0 166.2
Price-earnings ratio (year-end) (times) 20.8 18.2 13.5
Dividends paid (in millions) $933 $889 $846
Dividend yield (year-end) (percent) 4.6 5.0 5.6
Dividend payout ratio (percent) 95.6 91.5 75.1
Cash coverage of dividends (year-end) (times) 3.2 2.8 2.9
Proceeds from sales of stock (in millions) $234 $360 $171
Shares outstanding (in thousands):
Average 696,944 685,033 672,590
Year-end 697,805 693,423 677,036
Stockholders of record (year-end) 187,053 200,508 215,246
- - - - - - - -----------------------------------------------------------------------------------------------------------------
First Mortgage Bonds (in millions):
Issued $ - $- $85
Retired 1,487 168 426
Preferred Stock and Capital and Preferred Securities (in millions):
Issued $635 $1,321 $322
Retired 239 660 179
- - - - - - - -----------------------------------------------------------------------------------------------------------------
Traditional Core Business Customers (year-end) (in thousands):
Residential 3,277 3,220 3,157
Commercial 497 479 464
Industrial 15 16 17
Other 5 5 5
- - - - - - - -----------------------------------------------------------------------------------------------------------------
Total 3,794 3,720 3,643
=================================================================================================================
Employees (year-end):
Traditional core business 25,206 24,682 25,034
Southern Energy 6,642 5,620 3,743
- - - - - - - -----------------------------------------------------------------------------------------------------------------
Total 31,848 30,302 28,777
=================================================================================================================
</TABLE>
11-45
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA 1988-1998 (continued)
Southern Company and Subsidiary Companies 1998 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1995 1994 1993 1992
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in millions) $9,180 $8,297 $8,489 $8,073
Consolidated Net Income (in millions) $1,103 $989 $1,002 $953
Basic and Diluted Earnings Per Share of Common Stock $1.66 $1.52 $1.57 $1.51
Cash Dividends Paid Per Share of Common Stock $1.22 $1.18 $1.14 $1.10
Return on Average Common Equity (percent) 13.01 12.47 13.43 13.42
Total Assets (in millions) $30,522 $27,042 $25,911 $20,038
Gross Property Additions (in millions) $1,401 $1,536 $1,441 $1,105
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------
Capitalization (in millions):
Common stock equity $ 8,772 $ 8,186 $ 7,684 $ 7,234
Preferred stock and securities 1,432 1,432 1,333 1,359
Long-term debt 8,274 7,593 7,412 7,241
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------
Total excluding amounts due within one year $18,478 $17,211 $16,429 $15,834
==============================================================================================================================
Capitalization Ratios (percent):
Common stock equity 47.5 47.6 46.8 45.7
Preferred stock and securities 7.7 8.3 8.1 8.6
Long-term debt 44.8 44.1 45.1 45.7
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------
Total excluding amounts due within one year 100.0 100.0 100.0 100.0
==============================================================================================================================
Other Common Stock Data:
Book value per share (year-end) $13.10 $12.47 $11.96 $11.43
Market price per share:
High 25 22 23 5/8 19 1/2
Low 19 3/8 17 18 3/8 15 1/8
Close 24 5/8 20 22 19 1/4
Market-to-book ratio (year-end) (percent) 188.0 160.4 183.9 168.4
Price-earnings ratio (year-end) (times) 14.8 13.2 14.0 12.7
Dividends paid (in millions) $811 $766 $726 $695
Dividend yield (year-end) (percent) 5.0 5.9 5.2 5.7
Dividend payout ratio (percent) 73.5 77.5 72.4 72.9
Cash coverage of dividends (year-end) (times) 2.9 2.7 2.9 2.8
Proceeds from sales of stock (in millions) $277 $279 $204 $30
Shares outstanding (in thousands):
Average 665,064 649,927 637,319 631,844
Year-end 669,543 656,528 642,662 632,917
Stockholders of record (year-end) 225,739 234,927 237,105 247,378
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
First Mortgage Bonds (in millions):
Issued $375 $185 $2,185 $1,815
Retired 538 241 2,178 2,575
Preferred Stock and Capital and Preferred Securities (in millions):
Issued $- $100 $426 $410
Retired 1 1 516 326
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Traditional Core Business Customers (year-end) (in thousands):
Residential 3,100 3,046 2,996 2,950
Commercial 450 439 427 414
Industrial 17 17 18 18
Other 5 5 4 4
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Total 3,572 3,507 3,445 3,386
===============================================================================================================================
Employees (year-end):
Traditional core business 26,452 27,480 28,516 28,872
Southern Energy 5,430 1,400 745 213
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------
31,882 28,880 29,261 29,085
==============================================================================================================================
</TABLE>
11-46A
<PAGE>
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA 1988-1998
Southern Company and Subsidiary Companies 1998 Annual Report
<S> <C> <C> <C> <C>
1991 1990 1989 1988
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in millions) $8,050 $8,053 $7,620 $7,287
Consolidated Net Income (in millions) $876 $604 $846 $846
Basic and Diluted Earnings Per Share of Common Stock $1.39 $0.96 $1.34 $1.36
Cash Dividends Paid Per Share of Common Stock $1.07 $1.07 $1.07 $1.07
Return on Average Common Equity (percent) 12.74 8.85 12.49 13.03
Total Assets (in millions) $19,863 $19,955 $20,092 $19,731
Gross Property Additions (in millions) $1,123 $1,185 $1,346 $1,754
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------------
Capitalization (in millions):
Common stock equity $ 6,976 $ 6,783 $ 6,861 $ 6,686
Preferred stock and securities 1,333 1,358 1,400 1,465
Long-term debt 7,992 8,458 8,575 8,433
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------------
Total excluding amounts due within one year $16,301 $16,599 $16,836 $16,584
==================================================================================================================================
Capitalization Ratios (percent):
Common stock equity 42.8 40.9 40.8 40.3
Preferred stock and securities 8.2 8.2 8.3 8.8
Long-term debt 49.0 50.9 50.9 50.9
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Total excluding amounts due within one year 100.0 100.0 100.0 100.0
==================================================================================================================================
Other Common Stock Data:
Book value per share (year-end) $11.05 $10.74 $10.87 $10.60
Market price per share:
High 17 3/8 14 5/8 14 7/8 12 1/8
Low 12 7/8 11 1/2 11 10 1/8
Close 17 1/8 13 7/8 14 1/2 11 1/8
Market-to-book ratio (year-end) (percent) 155.5 129.7 134.0 105.5
Price-earnings ratio (year-end) (times) 12.4 14.6 10.9 8.2
Dividends paid (in millions) $676 $676 $675 $661
Dividend yield (year-end) (percent) 6.2 7.7 7.3 9.6
Dividend payout ratio (percent) 77.1 111.8 79.8 78.1
Cash coverage of dividends (year-end) (times) 2.5 2.8 2.6 2.3
Proceeds from sales of stock (in millions) $- $- $4 $194
Shares outstanding (in thousands):
Average 631,307 631,307 631,303 622,292
Year-end 631,307 631,307 631,307 630,898
Stockholders of record (year-end) 254,568 263,046 273,751 290,725
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------------
First Mortgage Bonds (in millions):
Issued $380 $300 $280 $335
Retired 881 146 201 273
Preferred Stock and Capital and Preferred Securities (in millions):
Issued $100 $- $- $120
Retired 125 96 21 10
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------------
Traditional Core Business Customers (year-end) (in thousands):
Residential 2,903 2,865 2,824 2,781
Commercial 403 396 392 384
Industrial 18 18 18 18
Other 4 4 4 4
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------------
Total 3,328 3,283 3,238 3,187
==================================================================================================================================
Employees (year-end):
Traditional core business 30,144 30,087 30,368 32,366
Southern Energy 258 176 162 157
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------------
Total 30,402 30,263 30,530 32,523
==================================================================================================================================
</TABLE>
11-46B
<PAGE>
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA 1988-1998
Southern Company and Subsidiary Companies 1998 Annual Report
<S> <C> <C> <C>
1998 1997 1996
- - - - - - - --------------------------------------------------------------------------------------------------------
Operating Revenues (in millions):
Residential $ 3,163 $ 2,837 $ 2,894
Commercial 2,763 2,595 2,559
Industrial 2,267 2,139 2,136
Other 79 76 76
- - - - - - - --------------------------------------------------------------------------------------------------------
Total retail 8,272 7,647 7,665
Sales for resale within service area 374 376 409
Sales for resale outside service area 522 510 429
- - - - - - - --------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 9,168 8,533 8,503
Southern Energy 1,903 3,837 1,683
Other revenues 332 241 172
- - - - - - - --------------------------------------------------------------------------------------------------------
Total $11,403 $12,611 $10,358
========================================================================================================
Kilowatt-Hour Sales (in millions):
Residential 43,503 39,217 40,117
Commercial 41,737 38,926 37,993
Industrial 55,331 54,196 52,798
Other 929 903 911
- - - - - - - --------------------------------------------------------------------------------------------------------
Total retail 141,500 133,242 131,819
Sales for resale within service area 9,847 9,884 10,935
Sales for resale outside service area 12,988 13,761 10,777
- - - - - - - --------------------------------------------------------------------------------------------------------
Total 164,335 156,887 153,531
========================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 7.27 7.23 7.21
Commercial 6.62 6.67 6.74
Industrial 4.10 3.95 4.04
Total retail 5.85 5.74 5.81
Sales for resale 3.92 3.75 3.86
Total sales 5.58 5.44 5.54
Average Annual Kilowatt-Hour Use Per Residential Customer 13,379 12,296 12,824
Average Annual Revenue Per Residential Customer $972.89 $889.50 $925.12
Plant Nameplate Capacity Owned (year-end) (megawatts) 31,161 31,146 31,076
Maximum Peak-Hour Demand (megawatts):
Winter 21,108 22,969 22,631
Summer 28,934 27,334 27,190
System Reserve Margin (at peak) (percent) 12.8 15.0 14.0
Annual Load Factor (percent) 60.0 59.4 62.3
Plant Availability (percent):
Fossil-steam 85.2 88.2 86.4
Nuclear 87.8 88.8 89.7
- - - - - - - --------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 72.8 74.7 73.3
Nuclear 15.4 16.5 16.7
Hydro 3.9 4.3 4.1
Oil and gas 3.3 1.7 1.5
Purchased power 4.6 2.8 4.4
- - - - - - - --------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
========================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 9,690 10,035 10,257
Cost of fuel per million BTU(cents) 152.89 145.81 144.02
Average cost of fuel per net kilowatt-hour generated (cents) 1.48 1.46 1.48
- - - - - - - --------------------------------------------------------------------------------------------------------
</TABLE>
II-47
<PAGE>
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA 1988-1998
Southern Company and Subsidiary Companies 1998 Annual Report
<S> <C> <C> <C> <C>
1995 1994 1993 1992
- - - - - - - ---------------------------------------------------------------------------------------------------------------------
Operating Revenues (in millions):
Residential $2,840 $2,560 $2,696 $2,402
Commercial 2,485 2,357 2,313 2,181
Industrial 2,206 2,162 2,200 2,126
Other 72 70 68 64
- - - - - - - ---------------------------------------------------------------------------------------------------------------------
Total retail 7,603 7,149 7,277 6,773
Sales for resale within service area 399 360 447 409
Sales for resale outside service area 415 505 613 797
- - - - - - - ---------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 8,417 8,014 8,337 7,979
Southern Energy 643 185 54 -
Other revenues 120 98 98 94
- - - - - - - ---------------------------------------------------------------------------------------------------------------------
Total $9,180 $8,297 $8,489 $8,073
=====================================================================================================================
Kilowatt-Hour Sales (in millions):
Residential 39,147 35,836 36,807 33,627
Commercial 35,938 34,080 32,847 31,025
Industrial 51,644 50,311 48,738 47,816
Other 863 844 814 777
- - - - - - - ---------------------------------------------------------------------------------------------------------------------
Total retail 127,592 121,071 119,206 113,245
Sales for resale within service area 9,472 8,151 13,258 12,107
Sales for resale outside service area 9,143 10,769 12,445 16,632
- - - - - - - ---------------------------------------------------------------------------------------------------------------------
Total 146,207 139,991 144,909 141,984
=====================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 7.25 7.14 7.32 7.14
Commercial 6.91 6.92 7.04 7.03
Industrial 4.27 4.30 4.51 4.45
Total retail 5.96 5.90 6.10 5.98
Sales for resale 4.38 4.57 4.12 4.20
Total sales 5.76 5.72 5.75 5.62
Average Annual Kilowatt-Hour Use Per Residential Customer 12,722 11,851 12,378 11,490
Average Annual Revenue Per Residential Customer $922.83 $846.48 $906.60 $820.67
Plant Nameplate Capacity Owned (year-end) (megawatts) 30,733 29,932 29,513 29,830
Maximum Peak-Hour Demand (megawatts):
Winter 21,422 22,254 19,432 19,121
Summer 27,420 24,546 25,937 24,146
System Reserve Margin (at peak) (percent) 9.4 19.3 13.2 14.3
Annual Load Factor (percent) 59.5 63.5 59.4 60.3
Plant Availability (percent):
Fossil-steam 86.7 85.2 87.9 88.6
Nuclear 88.3 89.8 85.9 85.2
- - - - - - - ---------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 72.5 70.8 73.0 71.7
Nuclear 16.4 17.9 16.3 16.2
Hydro 4.1 4.7 3.9 4.6
Oil and gas 1.7 0.9 0.9 0.5
Purchased power 5.3 5.7 5.9 7.0
- - - - - - - ---------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0 100.0
=====================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,099 10,010 9,994 9,976
Cost of fuel per million BTU(cents) 151.70 155.81 166.85 162.58
Average cost of fuel per net kilowatt-hour generated (cents) 1.53 1.56 1.67 1.62
- - - - - - - ---------------------------------------------------------------------------------------------------------------------
</TABLE>
11-48A
<PAGE>
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA 1988-1998
Southern Company and Subsidiary Companies 1998 Annual Report
<S> <C> <C> <C> <C>
1991 1990 1989 1988
- - - - - - - ------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in millions):
Residential $2,391 $2,342 $2,194 $2,103
Commercial 2,122 2,062 1,965 1,835
Industrial 2,088 2,085 2,011 1,945
Other 65 64 60 56
- - - - - - - ------------------------------------------------------------------------------------------------------------------------
Total retail 6,666 6,553 6,230 5,939
Sales for resale within service area 417 412 401 480
Sales for resale outside service area 884 977 928 777
- - - - - - - -------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 7,967 7,942 7,559 7,196
Southern Energy - - - -
Other revenues 83 111 61 91
- - - - - - - -------------------------------------------------------------------------------------------------------------------------
Total $8,050 $8,053 $7,620 $7,287
=========================================================================================================================
Kilowatt-Hour Sales (in millions):
Residential 33,622 33,118 31,627 31,041
Commercial 30,379 29,658 28,454 27,005
Industrial 46,050 45,974 45,022 43,675
Other 817 806 787 763
- - - - - - - ------------------------------------------------------------------------------------------------------------------------
Total retail 110,868 109,556 105,890 102,484
Sales for resale within service area 12,320 11,134 11,419 14,806
Sales for resale outside service area 19,839 24,402 24,228 15,860
- - - - - - - -------------------------------------------------------------------------------------------------------------------------
Total 143,027 145,092 141,537 133,150
=========================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 7.11 7.07 6.94 6.77
Commercial 6.99 6.96 6.91 6.79
Industrial 4.53 4.53 4.47 4.45
Total retail 6.01 5.98 5.88 5.80
Sales for resale 4.05 3.91 3.73 4.10
Total sales 5.57 5.47 5.34 5.40
Average Annual Kilowatt-Hour Use Per Residential Customer 11,659 11,637 11,287 11,255
Average Annual Revenue Per Residential Customer $829.18 $822.93 $782.90 $762.42
Plant Nameplate Capacity Owned (year-end) (megawatts) 29,915 29,532 29,532 27,552
Maximum Peak-Hour Demand (megawatts):
Winter 19,166 17,629 20,772 18,685
Summer 25,261 25,981 24,399 23,641
System Reserve Margin (at peak) (percent) 16.5 14.0 21.0 15.0
Annual Load Factor (percent) 58.3 56.6 58.6 59.8
Plant Availability (percent):
Fossil-steam 91.3 91.9 92.2 91.3
Nuclear 83.4 83.0 87.0 78.4
- - - - - - - ------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 72.6 72.1 71.5 77.7
Nuclear 16.2 15.6 15.7 14.5
Hydro 4.4 4.4 5.2 2.3
Oil and gas 0.6 1.3 1.1 0.7
Purchased power 6.2 6.6 6.5 4.8
- - - - - - - -------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0 100.0
========================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,022 10,065 10,086 10,094
Cost of fuel per million BTU(cents) 168.28 172.81 171.00 170.36
Average cost of fuel per net kilowatt-hour generated (cents) 1.69 1.74 1.72 1.72
- - - - - - - ------------------------------------------------------------------------------------------------------------------------
</TABLE>
11-48B
ALABAMA POWER COMPANY
FINANCIAL SECTION
II-49
<PAGE>
MANAGEMENT'S REPORT
Alabama Power Company 1998 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,
Chief Financial Officer, and Treasurer
February 10, 1999
II-50
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Alabama Power Company:
We have audited the accompanying balance sheets and statements of capitalization
of Alabama Power Company (an Alabama corporation and a wholly owned subsidiary
of Southern Company) as of December 31, 1998 and 1997, 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, 1998. 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 ade 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-61 through II-79)
referred to above present fairly, in all material respects, the financial
position of Alabama Power Company as of December 31, 1998 and 1997, and the
results of its operations and its cash flows for each of the three years in
the period ended December 31, 1998, in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Birmingham, Alabama
February 10, 1999
II-51
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Alabama Power Company 1998 Annual Report
RESULTS OF OPERATIONS
Earnings
Alabama Power Company's 1998 net income after dividends on preferred stock was
$377 million, representing a $1.3 million (0.3 percent) increase from the prior
year. This improvement can be attributed primarily to increased retail energy
sales as a result of hot weather in the second quarter of 1998, compared to very
mild weather for the same period in 1997 and a strong economy in the Company's
service territory. However, earnings were offset by an increase in non-fuel
operation and maintenance expenses and an increase in the amortization of debt
discount, premium, and expense, net pursuant to an Alabama Public Service
Commission (APSC) order. See Note 3 to the financial statements under "Retail
Rate Adjustment Procedures" for additional details.
In 1997, earnings were $376 million, representing a 1.2 percent increase
from the prior year. This increase was due to lower non-fuel related
operating expenses. Despite the mild weather experienced during 1997, retail
kilowatt-hour (KWH) sales increased approximately 2 percent. However,
the expected net income effect was offset by the effect of reductions in
certain industrial and commercial prices.
The return on average common equity for 1998 was 13.63 percent compared to
13.76 percent in 1997, and 13.75 percent in 1996.
Revenues
Operating revenues for 1998 were $3.4 billion, reflecting a 7.5 percent increase
from 1997. The following table summarizes the principal factors that affected
operating revenues for the past three years:
Increase (Decrease)
From Prior Year
-----------------------------------------
1998 1997 1996
-----------------------------------------
(in thousands)
Retail --
Growth and price
change $ 75,642 $ 33,813 $ 42,385
Weather 55,282 (22,973) (29,660)
Fuel cost recovery
and other 138,944 31,353 (30,846)
- - - - - - - -------------------------------------------------------------------
Total retail 269,868 42,193 (18,121)
------------------------------------------------------------------
Sales for resale --
Non-affiliates 17,950 39,354 21,529
Affiliates (58,233) (54,825) 88,890
------------------------------------------------------------------
Total sales for resale (40,283) (15,471) 110,419
Other operating
revenues 7,677 1,614 3,703
- - - - - - - -------------------------------------------------------------------
Total operating
revenues $237,262 $ 28,336 $ 96,001
----------------------------------------------------------------
Percent change 7.5% 0.9% 3.2%
===================================================================
Retail revenues of $2.8 billion in 1998 increased $270 million (10.7
percent) from the prior year, compared with an increase of $42 million
(1.7 percent) in 1997. The predominant factors causing the rise in revenues
in 1998 were the positive impact of weather on energy sales, continued
growth throughout the state, and increased fuel revenues. Fuel revenues were
higher in the current year due to higher fuel costs and an increase in purchased
power.
Retail revenues in 1997 increased $42 million (1.7 percent) over 1996. The
primary reason for this increase was an increase in fuel revenues due to
slightly higher generation and higher fuel costs in 1997 as compared to 1996.
Fuel revenues generally represent the direct recovery of fuel expense, including
the fuel component of purchased energy, and therefore have no effect on net
income.
II-52
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1998 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 were:
1998 1997 1996
-------------------------------------------
(in thousands)
Capacity $141,814 $136,248 $150,797
Energy 118,252 134,498 107,996
------------------------------------------------------------
Total $260,066 $270,746 $258,793
=============================================================
Capacity revenues from non-affiliates increased 4.1 percent in 1998 compared
to the prior year. Capacity revenues from non-affiliates in 1997 decreased 9.6
percent compared to 1996 primarily due to a one-time unit power sales adjustment
in 1997.
Revenues from sales to affiliated companies within the Southern electric
system, as well as purchases of energy, will vary from year to year depending on
demand and the availability and cost of generating resources at each company.
These transactions do not have a significant impact on earnings.
KWH sales for 1998 and the percent change by year were as follows:
KWH Percent Change
-------------------------------------------
1998 1998 1997 1996
-------------------------------------------
(millions)
Residential 15,795 10.2% (1.8)% 1.5%
Commercial* 11,905 5.1 3.9 8.6
Industrial* 21,585 4.2 3.6 0.7
Other 196 8.3 (6.3) 3.1
-----------
Total retail 49,481 6.2 1.9 2.7
Sales for resale -
Non-affiliates 11,841 (3.2) 29.9 18.0
Affiliates 5,976 (33.5) (12.6) 53.5
-----------
Total 67,298 (0.9)% 3.7% 10.5%
==================================================================
*The KWH sales for 1996 reflect a reclassification of approximately 200
customers from industrial to commercial, which resulted in a shift of 473
million KWH. Absent the reclassification, the percentage change in KWH sales for
commercial and industrial would have been 3.9% and 3.1%, respectively.
The increases in 1998 and 1997 retail energy sales were primarily due to the
strength of business and economic conditions in the Company's service area. In
1998, residential energy sales experienced a 10.2 percent increase over the
prior year primarily as a result of hot weather in the second quarter, compared
to very mild weather in the second quarter of 1997. Assuming normal weather,
sales to retail customers are projected to grow approximately 2.3 percent
annually on average during 1999 through 2003.
Expenses
Total operating expenses of $2.7 billion for 1998 were up $207 million or 8.2
percent compared with 1997. This increase was mainly due to a $107 million
increase in purchased power expenses, accompanied by a $58 million increase in
maintenance expense.
Total operating expenses of $2.5 billion for 1997 were up $18 million or 0.7
percent compared with 1996. This increase was primarily due to a $19 million
increase in fuel costs and a $10 million increase in epreciation and
amortization expense. These increases were somewhat offset by a $16 million
decrease in maintenance expenses.
Fuel costs constitute the single largest expense for the Company. The mix of
fuel sources for generation of electricity is determined primarily by system
load, the unit cost of fuel consumed, and the availability of hydro and nuclear
generating units. The amount and sources of generation and the average cost of
fuel per net KWH generated were as follows:
--------------------------
1998 1997 1996
--------------------------
Total generation
(billions of KWHs) 63 65 65
Sources of generation
(percent) --
Coal 72 72 72
Nuclear 18 20 20
Hydro 8 8 8
Oil & Gas 2 * *
Average cost of fuel per net
KWH generated
(cents) -- 1.54 1.49 1.46
==============================================================
* Not meaningful because of minimal generation from fuel source.
II-53
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1998 Annual Report
Total fuel and purchased power costs of $1.1 billion in 1998 increased $111
million (11 percent) over 1997 primarily due to lower levels of nuclear and
hydro generation, which were replaced by the use of peaking units and purchased
power.
Fuel and purchased power costs in 1997 increased $27 million (3 percent)
over 1996 due primarily to slightly higher generation and fuel costs in 1997.
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. Total KWH purchases increased 24.5 percent from the prior year.
The 23.8 percent increase in maintenance expense in 1998 as compared to 1997
is attributable to (i) an increase in the maintenance of overhead lines, (ii)
the write-off of obsolete steam and nuclear generating plant inventory, and
(iii) additional accruals to partially replenish the natural disaster reserve.
The 6.1 percent decrease in maintenance expenses in 1997 is attributable
primarily to a decrease in distribution expenses.
Depreciation and amortization expense increased 2.6 percent in 1998 and 3.2
percent in 1997. These increases reflect additions to utility plant.
Total net interest and other charges increased $55.7 million (22 percent) in
1998. This increase results primarily from an increase in the amortization of
debt discount, premium, and expense, net pursuant to an APSC order. See Note 3
to the financial statements under "Retail Rate Adjustment Procedures" for
additional details. Total net interest and other charges increased $25.4 million
(11.2 percent) in 1997 primarily due to an increase in company obligated
mandatorily redeemable preferred securities outstanding. This increase was
offset by a $12 million (45.2 percent) decrease in dividends on preferred stock.
Effects of Inflation
The Company is subject to rate regulation and income tax laws that are based on
the recovery of historical costs. Therefore, inflation creates an economic loss
because the Company is recovering its costs of investments in dollars that have
less purchasing power. While the inflation rate has been relatively low in
recent years, it continues to have an adverse effect on the Company because of
the large investment in utility plants with long economic life. Conventional
accounting for historical cost does not recognize this economic loss nor the
partially offsetting gain that arises through financing facilities with
fixed-money obligations, such as long-term debt and preferred securities. Any
recognition of inflation by regulatory authorities is reflected in the rate of
return allowed.
Future Earnings Potential
The results of operations for the past three years are not necessarily
indicative of future earnings potential. The level of future earnings depends on
numerous factors ranging from energy sales growth to a less regulated more
competitive environment.
The Company currently operates as a vertically integrated utility providing
electricity to customers within its traditional service area located in the
state of Alabama. Prices for electricity provided by the Company to retail
customers are set by the APSC under cost-based regulatory principles.
Future earnings in the near term will depend upon growth in electric sales,
which are subject to a number of factors. Traditionally, these factors have
included weather, competition, changes in contracts with neighboring utilities,
energy conservation practiced by customers, the elasticity of demand, and the
rate of economic growth in the Company's service area.
The electric utility industry in the United States is currently undergoing a
period of dramatic change as a result of regulatory and competitive factors.
Among the primary agents of change has been the Energy Policy Act of 1992
(Energy Act). The Energy Act allows independent power producers (IPPs) to access
a utility's transmission network in order to sell electricity to other
utilities. This enhances the incentive for IPPs to build cogeneration plants for
a utility's large industrial and commercial customers and sell excess energy
generation to other utilities. Also, electricity sales for resale rates are
being driven down by wholesale transmission access and numerous potential new
energy suppliers, including power marketers and brokers. The Company is
aggressively working to maintain and expand its share of wholesale business in
the Southeastern power markets.
II-54
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1998 Annual Report
Although the Energy Act does not permit retail customer access, it was a
major catalyst for the current restructuring and consolidation taking place
within the utility industry. Numerous federal and state initiatives are in
varying stages to promote wholesale and retail competition. Among other things,
these initiatives allow customers to choose their electricity provider. As these
initiatives materialize, the structure of the utility industry could radically
change. Some states have approved initiatives that result in a separation of the
ownership and/or operation of generating facilities from the ownership and/or
operation of transmission and distribution facilities. While various
restructuring and competition initiatives have been or are being discussed in
Alabama, Florida, Georgia, and Mississippi, none have been enacted to date.
Enactment would require numerous issues to be resolved, including significant
ones relating to transmission pricing and recovery of any stranded investments.
The inability of the Company to recover its investments, including the
regulatory assets described in Note 1 to the financial statements, could have a
material adverse effect on the financial condition of the Company. The Company
is attempting to minimize or reduce stranded cost exposure.
Continuing to be a low-cost producer could provide opportunities to increase
market share and profitability in markets that evolve with changing regulation.
Conversely, 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.
Rates to retail customers served by the Company are regulated by the APSC.
Rates for the Company can be adjusted periodically within certain limitations
based on earned retail rate of return compared with an allowed return. In June
1995, the APSC issued an order granting the Company's request for gradual
adjustments to move toward parity among customer classes. This order also calls
for a moratorium on any periodic retail rate increases (but not decreases) until
2001.
In December 1995, the APSC issued an order authorizing the Company to reduce
balance sheet items -- such as plant and deferred charges -- at any time the
Company's actual base rate revenues exceed the budgeted revenues. In April
1997, the APSC issued an additional order authorizing the Company to reduce
balance sheet asset items. This order authorizes the reduction of such items
up to an amount equal to five times the total estimated annual revenue
reduction resulting from future rate reductions initiated by the Company. See
Note 3 to the financial statements for information about this and other matters.
The Company is involved in various matters being litigated. See Note 3 to
the financial statements for information regarding material issues that could
possibly affect future earnings.
Compliance costs related to current and future environmental laws and
regulations could affect earnings if such costs are not fully recovered. The
Clean Air Act and other important environmental items are discussed later under
"Environmental Matters."
The staff of the Securities and Exchange Commission has questioned certain
of the current accounting practices of the electric utility industry --
including the Company -- regarding the recognition, measurement, and
classification in the financial statements of decommissioning costs for nuclear
generating facilities. In response to these questions, the Financial Accounting
Standards Board (FASB) has decided to review the accounting for liabilities
related to the retirement of long-lived assets, including nuclear
decommissioning. If the FASB issues new accounting rules, the estimated costs of
retiring the Company's nuclear and other facilities may be required to be
recorded as liabilities in the Balance Sheets. Also, the annual provisions for
such costs could change. Because of the Company's current ability to recover
asset retirement costs through rates, these changes would not have a significant
adverse effect on results of operations. See Note 1 to the financial statements
under "Depreciation and Nuclear Decommissioning" for additional information.
The Company is subject to the provisions of FASB Statement No. 71,
Accounting for the Effects of Certain Types of Regulation. In the event that a
portion of the Company's operations is no longer subject to these provisions,
the Company would be required to write off related regulatory assets and
liabilities that are not specifically recoverable, and determine if any other
assets have been impaired. See Note 1 to the financial statements under
"Regulatory Assets and Liabilities" for additional information.
II-55
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1998 Annual Report
Year 2000
Year 2000 Challenge
In order to save storage space, computer programmers in the 1960s and 1970s
shortened the year portion of date entries to just two digits. Computers
assumed, in effect, that all years began with "19." This practice was widely
adopted and hard-coded into computer chips and processors found in some
equipment. This approach, intended to save processing time and storage space,
was used until the mid-1990s. Unless corrected before the Year 2000, affected
software systems and devices containing a chip or microprocessor with date and
time functions could incorrectly process dates or the systems may cease to
function.
The Company depends on complex computer systems for many aspects of its
operations, which include generation, transmission, and distribution of
electricity, as well as other business support activities. The Company's goal is
to have critical devices or software that are required to maintain operations to
be Year 2000 ready by June 1999. Year 2000 ready means that a system or
application is determined suitable for continued use through the Year 2000 and
beyond. Critical systems include, but are not limited to, reactor control
systems, safe shutdown systems, turbine generator systems, control center
computer systems, customer service systems, energy management systems, and
telephone switches and equipment.
Year 2000 Program and Status
The Company's executive management recognizes the seriousness of the Year 2000
challenge and has dedicated what it believes to be adequate resources to address
the issue. The Millennium Project is a team of employees, IBM consultants, and
other contractors whose progress is reviewed on a monthly basis by a steering
committee of Southern Company executives.
The Company's Year 2000 program was divided into two phases. Phase I began
in 1996 and consisted of identifying and assessing corporate assets related to
software systems and devices that contain a computer chip or clock. The first
phase was completed in June 1997. Phase 2 consists of testing and remediating
high priority systems and devices. Also, contingency planning is included in
this phase. Completion of Phase 2 is targeted for June 1999. The Millennium
Project will continue to monitor the affected computer systems, devices, and
applications into the Year 2000.
The Southern Company has completed more than 70 percent of the activities
contained in its work plan. The percentage of completion and projected
completion by function are as follows:
- - - - - - - ------------------------------------------------------------------------------
Work Plan
------------------------------------------------------
Remediation Project
Inventory Assessment Testing Completion
- - - - - - - ------------------------------------------------------------------------------
Generation 100% 100% 70% 6/99
- - - - - - - ------------------------------------------------------------------------------
Energy Management 100 100 90 6/99
- - - - - - - ------------------------------------------------------------------------------
Transmission and
Distribution 100 100 100 1/99
- - - - - - - ------------------------------------------------------------------------------
Telecommunications 100 100 50 6/99
- - - - - - - ------------------------------------------------------------------------------
Corporate Applications 100 100 90 3/99
- - - - - - - ------------------------------------------------------------------------------
Year 2000 Costs
Current projected total costs for Year 2000 readiness, including the Company's
share of costs of Southern Nuclear Operating Company, are approximately $36
million. These costs include labor necessary to identify, test, and renovate
affected devices and systems. From its inception through December 31, 1998, the
Year 2000 program costs, recognized primarily as expense, amounted to $21
million.
Year 2000 Risks
The Company is implementing a detailed process to minimize the possibility of
service interruptions related to the Year 2000. The Company believes, based on
current tests, that the system can provide customers with electricity. These
tests increase confidence, but do not guarantee error-free operation. The
Company is taking what it believes to be prudent steps to prepare for the Year
2000, and it expects any interruptions in service that may occur within the
service territory to be isolated and short in duration.
The Company expects the risks associated with Year 2000 to be no more severe
than the scenarios that its electric system is routinely prepared to handle. The
most likely worst case scenario consists of the service loss of one of the
largest generating units and/or the service loss of any single bulk transmission
II-56
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1998 Annual Report
element in its service territory. The Company has followed a proven methodology
for identifying and assessing software and devices containing potential
Year 2000 challenges. Remediation and testing of those devices are in
progress. Following risk assessment, the Company is preparing contingency
plans as appropriate and is participating in North American Electric
Reliability Council-coordinated national drills during 1999.
The Company is currently reviewing the Year 2000 readiness of material third
parties that provide goods and services crucial to the Company's operations.
Among such critical third parties are fuel, transportation, telecommunications,
water, chemical, and other suppliers. Contingency plans based on the assessment
of each third party's ability to continue supplying critical goods and services
to the Company are being developed.
There is a potential for some earnings erosion caused by reduced electrical
demand by customers because of their Year 2000 issues.
Year 2000 Contingency Plans
Because of experience with hurricanes and other storms, the Company is skilled
at developing and using contingency plans in unusual circumstances. As part of
Year 2000 business continuity and contingency planning, the Company is drawing
on that experience to make risk assessments and is developing additional plans
to deal specifically with situations that could arise relative to Year 2000
challenges. The Company is identifying critical operational locations, and key
employees will be on duty at those locations during the Year 2000 transition. In
September 1999, drills are scheduled to be conducted to test contingency plans.
Because of the level of detail of the contingency planning process, management
feels that the contingency plans will keep any service interruptions that may
occur within the service territory isolated and short in duration.
Exposure to Market Risk
Due to cost-based rate regulation, the Company has limited exposure to market
volatility in interest rates and prices of electricity. To mitigate residual
risks relative to movements in electricity prices, the Company enters into fixed
price contracts for the purchase and sale of electricity through the wholesale
electricity market. Realized gains and losses are recognized in the income
statement as incurred. At December 31, 1998, exposure from these activities was
not material to the Company's financial position, results of operations, or cash
flows. Also, based on the Company's overall interest rate exposure at December
31, 1998, a near-term 100 basis point change in interest rates would not
materially affect the financial statements.
New Accounting Standards
The FASB has issued Statement No. 133, Accounting for Derivative Instruments and
Hedging Activities, which must be adopted by the year 2000. This statement
establishes accounting and reporting standards for derivative instruments -
including certain derivative instruments embedded in other contracts - and for
hedging activities. The Company has not yet quantified the impact of adopting
this statement on its financial statements; however, the adoption could increase
volatility in earnings.
In March 1998, the American Institute of Certified Public Accountants (AICPA)
issued a new Statement of Position, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use. This statement requires
capitalization of certain costs of internal-use software. The Company adopted
this statement in January 1999, and it is not expected to have a material impact
on the financial statements.
In April 1998, the AICPA issued a new Statement of Position, Reporting on the
Costs of Start-up Activities. This statement requires that the costs of start-up
activities and organizational costs be expensed as incurred. Any of these costs
previously capitalized by a company must be written off in the year of adoption.
The Company adopted this statement in January 1999, and it is not expected to
have a material impact on the financial statements.
In December 1998, the Emerging Issues Task Force (EITF) of the FASB issued
EITF No. 98-10, Accounting for Contracts Involved in Energy Trading and Risk
Management Activities. The EITF requires that energy trading contracts must be
marked to market through the income statement, with gains and losses reflected
rather than revenues and purchased power. Energy trading contracts are defined
as energy contracts entered into with the objective of generating profits on or
from exposure to
II-57
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1998 Annual Report
shifts or changes in market prices. The Company adopted the required accounting
in January 1999, and it is not expected to have a material impact on the
financial statements.
FINANCIAL CONDITION
Overview
The Company's financial condition remained stable in 1998. This stability is the
continuation over recent years of growth in retail energy sales and cost control
measures combined with a significant lowering of the cost of capital, achieved
through the refinancing and/or redemption of higher-cost long-term debt and
preferred stock.
The Company had gross property additions of $610 million in 1998. The
majority of funds needed for gross property additions for the last several years
has been provided from operating activities, principally from earnings and
non-cash charges to income such as depreciation and deferred income taxes. The
Statements of Cash Flows provide additional details.
Capital Structure
The Company's ratio of common equity to total capitalization -- including
short-term debt -- was 42.4 percent in 1998, compared with 44.7 percent in 1997,
and 45.3 percent in 1996.
During 1998, the Company issued $1.4 billion of senior notes, the proceeds
of which were used primarily to redeem first mortgage bonds and repay short-term
indebtedness. Additionally in 1998, the Company redeemed $8 million of
preferred stock and issued an additional $200 million.
Capital Requirements
Capital expenditures are estimated to be $875 million for 1999, $653 million for
2000, and $668 million for 2001. The total is $2.2 billion for the three years.
Included in these estimates are the following: the Company will replace all six
steam generators at Plant Farley at a total cost of approximately $234 million.
Additionally, the Company plans to construct and install 1,075 megawatts of new
generating capacity and associated substation facilities at Plant Barry. The
projected capital expenditures for this project amount to approximately $384
million.
Actual capital costs may vary from estimates because of factors such as
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. 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 capital budget, approximately $270
million will be required by the end of 2000 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 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 - significantly
impacted the operating companies of Southern Company, including Alabama Power.
Specific reductions in sulfur dioxide and nitrogen oxide emissions from
fossil-fired generating plants are required in two phases. Phase I compliance
began in 1995 and initially affected 28 generating units of Southern Company. As
a result of Southern Company's compliance strategy, an additional 22 generating
units were brought into compliance with Phase I requirements. Phase II
compliance is required in 2000, and all fossil-fired generating plants will be
affected.
Southern Company achieved Phase I sulfur dioxide compliance at the affected
plants by switching to low-sulfur coal, which required some equipment upgrades.
Construction expenditures for Phase I compliance totaled approximately $25
million for the Company.
For Phase II sulfur dioxide compliance, the Company could use emission
allowances, increase fuel switching, and/or install flue gas
desulfurization equipment at selected plants. Also equipment to
control nitrogen oxide emissions will be installed on additional system
fossil-fired units as necessary to meet Phase II limits. Current
II-58
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1998 Annual Report
compliance strategy for Phase II could require total estimated construction
expenditures of approximately $38 million, of which $19 million remains to be
spent.
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.
In July 1997, the Environmental Protection Agency (EPA) revised the national
ambient air quality standards for ozone and particulate matter. This revision
makes the standards significantly more stringent. In September 1998, the EPA
issued the final regional nitrogen oxide rules to the states for implementation.
The states have one year to adopt and implement the new rules. The final rules
affect 22 states including Alabama. The EPA rules are being challenged in the
courts by several states and industry groups. Implementation of the final state
rules could require substantial further reductions in nitrogen oxide emissions
from fossil-fired generating facilities and other industry in these states.
Implementation of the standards could result in significant additional
compliance costs and capital expenditures that cannot be determined until the
results of legal challenges are known and the states have adopted their final
rules.
The EPA and state environmental regulatory agencies are reviewing and
evaluating various other matters including: nitrogen oxide emission control
strategies for ozone nonattainment areas; additional controls for hazardous air
pollutant emissions; control strategies to reduce regional haze; and hazardous
waste disposal requirements. The impact of new standards will depend on the
development and implementation of applicable regulations.
The Company must comply with other environmental laws and regulations that
cover the handling and disposal of hazardous waste. Under these various laws and
regulations, the Company could incur costs to clean up properties. 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 Air Act;
the Clean Water Act; the Comprehensive Environmental Response, Compensation,
and Liability Act; the Resource Conservation and Recovery Act; the Toxic
Substances Control Act; and the Endangered Species Act. Changes to these laws
could affect many areas of the Company's operations. The full impact of any
such changes cannot be determined at this time.
Compliance with possible additional legislation related to global climate
change, electromagnetic fields, and other environmental and health concerns
could significantly affect 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
The Company historically has relied on issuances of first mortgage bonds and
preferred stock, in addition to pollution control revenue bonds issued for its
benefit by public authorities, to meet its long-term external financing
requirements. Recently, the Company's financings have consisted of unsecured
debt and trust preferred securities. In this regard, the Company sought and
obtained stockholder approval in 1997 to amend its corporate charter eliminating
restrictions on the amounts of unsecured indebtedness it may incur. To issue
additional debt and equity securities, the Company must comply with certain
earnings coverage requirements designated in its mortgage indenture and
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
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1998 Annual Report
Cautionary Statement Regarding Forward-Looking Information
The Company's 1998 Annual Report contains forward-looking and historical
information. The Company cautions that there are various important factors that
could cause actual results to differ materially from those indicated in the
forward-looking information; accordingly, there can be no assurance that such
indicated results will be realized. These factors include legislative and
regulatory initiatives regarding deregulation and restructuring of the electric
utility industry; the extent and timing of the entry of additional competition
in the Company's markets; potential business strategies -- including
acquisitions or dispositions of assets or internal restructuring -- that may be
pursued by Southern Company; state and federal rate regulation; Year 2000
issues; changes in or application of environmental and other laws and
regulations to which the Company is subject; political, legal and economic
conditions and developments; financial market conditions and the results of
financing efforts; changes in commodity prices and interest rates; weather and
other natural phenomena; and other factors discussed in the reports--including
Form 10-K--filed from time to time by the Company with the Securities and
Exchange Commission.
II-60
<PAGE>
STATEMENTS OF INCOME
For the Years Ended December 31, 1998, 1997, and 1996
Alabama Power Company 1998 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C>
================================================================================================================================
1998 1997 1996
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Operating Revenues:
Revenues (Notes 1, 3, and 7) $ 3,282,811 $ 2,987,316 $ 2,904,155
Revenues from affiliates 103,562 161,795 216,620
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 3,386,373 3,149,111 3,120,775
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 900,309 896,014 877,076
Purchased power from non-affiliates 92,998 41,795 36,813
Purchased power from affiliates 150,897 95,538 91,500
Other 527,954 510,203 505,884
Maintenance 300,383 242,691 258,482
Depreciation and amortization 338,822 330,377 320,102
Taxes other than income taxes 193,049 185,062 186,172
Federal and state income taxes (Note 8) 224,922 220,228 228,108
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 2,729,334 2,521,908 2,504,137
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Operating Income 657,039 627,203 616,638
Other Income (Expense):
Allowance for equity funds used during construction (Note 1) 3,811 - -
Equity in earnings of subsidiaries (Note 6) 5,271 5,250 4,676
Charitable foundation - - (6,800)
Interest income 68,553 37,844 28,318
Other, net (40,861) (39,506) (39,878)
Income taxes applicable to other income 6,347 12,351 22,400
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges and Other 700,160 643,142 625,354
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Interest Charges and Other:
Interest on long-term debt 192,426 167,172 169,390
Allowance for debt funds used during construction (Note 1) (4,664) (4,787) (6,480)
Interest on interim obligations 11,012 22,787 20,617
Amortization of debt discount, premium, and expense, net (Note 3) 42,494 9,645 9,508
Other interest charges 44,672 36,037 27,510
Distributions on preferred securities of
Alabama Power Capital Trust I & II (Note 9) 22,354 21,763 6,717
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Interest charges and other, net 308,294 252,617 227,262
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Net Income 391,866 390,525 398,092
Dividends on Preferred Stock 14,643 14,586 26,602
-------------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 377,223 $ 375,939 $ 371,490
================================================================================================================================
The accompanying notes are an integral part of these statements.
II-61
</TABLE>
<PAGE>
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1998, 1997, and 1996
Alabama Power Company 1998 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C>
===============================================================================================================================
1998 1997 1996
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Operating Activities:
Net income $ 391,866 $ 390,525 $ 398,092
Adjustments to reconcile net income to net
cash provided from operating activities--
Depreciation and amortization 425,167 394,572 383,438
Deferred income taxes and investment tax credits, net 79,430 (12,429) 16,585
Allowance for equity funds used during construction (3,811) - -
Other, net (62,928) (11,353) 6,247
Changes in certain current assets and liabilities --
Receivables, net 49,747 (30,268) 3,958
Inventories 2,880 13,709 36,234
Payables 26,583 (9,745) 1,006
Taxes accrued 4,570 6,191 (5,756)
Energy cost recovery, retail (95,427) 7,108 25,771
Other (14,373) 7,127 8,205
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 803,704 755,437 873,780
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (610,132) (451,167) (425,024)
Other (52,940) (51,791) (61,119)
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (663,072) (502,958) (486,143)
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Proceeds:
Company obligated mandatorily redeemable preferred securities - 200,000 97,000
Capital contributions 30,000 - -
Preferred stock 200,000 - -
Other long-term debt 1,462,990 258,800 21,000
Retirements:
Preferred stock (88,000) (184,888) -
First mortgage bonds (771,108) (74,951) (83,797)
Other long-term debt (107,776) (951) (21,907)
Interim obligations, net (306,882) (57,971) (25,163)
Payment of preferred stock dividends (15,596) (22,524) (26,665)
Payment of common stock dividends (367,100) (339,600) (347,500)
Miscellaneous (66,869) (16,024) (3,634)
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (30,341) (238,109) (390,666)
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Net Change in Cash and Cash Equivalents 110,291 14,370 (3,029)
Cash and Cash Equivalents at Beginning of Year 23,957 9,587 12,616
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 134,248 $ 23,957 $ 9,587
===============================================================================================================================
Supplemental Cash Flow Information:
Cash paid during the year for --
Interest (net of amount capitalized) $ 234,360 $ 209,919 $ 193,871
Income taxes (net of refunds) 188,942 207,653 195,214
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
( ) Denotes use of cash.
The accompanying notes are an integral part of these statements.
</TABLE>
II-62
<PAGE>
BALANCE SHEETS
At December 31, 1998 and 1997
Alabama Power Company 1998 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C>
================================================================================================================================
ASSETS 1998 1997
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Utility Plant:
Plant in service, at original cost (Note 1) $11,352,838 $11,070,323
Less accumulated provision for depreciation 4,666,513 4,384,180
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
6,686,325 6,686,143
Nuclear fuel, at amortized cost 95,575 103,272
Construction work in progress 525,359 311,223
-------------------------------------------------------------------------------------------------------------------------------
Total 7,307,259 7,100,638
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Equity investments in subsidiaries (Note 6) 34,298 34,373
Nuclear decommissioning trusts, at market (Note 1) 232,183 193,008
Miscellaneous 12,915 12,832
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Total 279,396 240,213
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 134,248 23,957
Receivables-
Customer accounts receivable 343,630 368,255
Other accounts and notes receivable 32,394 28,921
Affiliated companies 39,981 50,353
Accumulated provision for uncollectible accounts (1,855) (2,272)
Refundable income taxes 52,117 -
Fossil fuel stock, at average cost 83,238 74,186
Materials and supplies, at average cost 149,669 161,601
Prepayments 17,160 20,453
Vacation pay deferred 28,390 28,783
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Total 878,972 754,237
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Deferred Charges and Other Assets:
Deferred charges related to income taxes (Note 8) 362,953 384,549
Debt expense, being amortized 8,602 7,276
Premium on reacquired debt, being amortized 83,440 81,417
Prepaid pension costs 169,393 130,733
Department of Energy assessments (Note 1) 31,088 34,416
Miscellaneous 104,595 79,388
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Total 760,071 717,779
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Total Assets $9,225,698 $8,812,867
================================================================================================================================
The accompanying notes are an integral part of these balance sheets.
</TABLE>
II-63
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
At December 31, 1998 and 1997
Alabama Power Company 1998 Annual Report
<S> <C> <C>
================================================================================================================================
CAPITALIZATION AND LIABILITIES 1998 1997
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Capitalization (See accompanying statements):
Common stock equity $2,784,067 $2,750,569
Preferred stock 317,512 255,512
Company obligated mandatorily redeemable preferred securities of
subsidiary trusts holding Company Junior Subordinated Notes (Note 9) 297,000 297,000
Long-term debt 2,646,566 2,473,202
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Total 6,045,145 5,776,283
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Preferred stock due within one year (Note 11) 50,000 -
Long-term debt due within one year (Note 11) 471,209 75,336
Commercial paper - 306,882
Accounts payable-
Affiliated companies 79,844 79,822
Other 188,074 159,146
Customer deposits 29,235 34,968
Taxes accrued-
Federal and state income 82,219 21,177
Other 17,559 15,309
Interest accrued 38,166 50,722
Vacation pay accrued 28,390 28,783
Miscellaneous 79,095 103,602
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Total 1,063,791 875,747
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes (Note 8) 1,202,971 1,192,265
Accumulated deferred investment tax credits 271,611 282,873
Prepaid capacity revenues, net (Note 7) 96,080 109,982
Department of Energy assessments (Note 1) 27,202 30,592
Deferred credits related to income taxes (Note 8) 315,735 327,328
Natural disaster reserve (Note 1) 19,385 22,416
Miscellaneous 183,778 195,381
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Total 2,116,762 2,160,837
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Commitments and Contingent Matters (Notes 1 through 7, and 12)
Total Capitalization and Liabilities $9,225,698 $8,812,867
=================================================================================================================================
The accompanying notes are an integral part of these balance sheets.
</TABLE>
II-64
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CAPITALIZATION
At December 31, 1998 and 1997
Alabama Power Company 1998 Annual Report
<S> <C> <C> <C> <C>
====================================================================================================================================
1998 1997 1998 1997
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------------
(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 1998 and 1997 $ 224,358 $ 224,358
Paid-in capital 1,334,645 1,304,645
Premium on preferred stock 99 99
Retained earnings (Note 13) 1,224,965 1,221,467
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------------
Total common stock equity 2,784,067 2,750,569 46.1 % 47.6 %
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------------
Cumulative Preferred Stock:
$1 par value --
Authorized -- 27,500,000 shares
Outstanding -- 1998: 10,500,200 shares
-- 1997: 6,020,200 shares
$25 stated capital --
5.20% 162,000 -
5.83% 38,000 -
6.40% - 50,000
6.80% - 38,000
Adjustable rate
4.00% - at January 1, 1999 50,000 50,000
$100 stated capital --
Auction rate - 4.30% at January 1, 1999 50,000 50,000
$100,000 stated capital --
Auction rate - 4.08% at January 1, 1999 20,000 20,000
$100 par value --
Authorized -- 3,850,000 shares
Outstanding -- 475,115 shares in 1998 and 1997
4.20% to 4.52% 18,512 18,512
4.60% to 4.92% 29,000 29,000
- - - - - - - -------------------------------------------------------------------------------------------------------------
Total cumulative preferred stock (annual dividend
requirement -- $17,767,000) 367,512 255,512
Less amount due within one year (Note 11) 50,000 -
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------------
Cumulative preferred stock excluding amount due within one year 317,512 255,512 5.2 4.4
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------------
Company Obligated Mandatorily
Redeemable Preferred Securities (Note 9):
$25 liquidation value -- 7.375% 97,000 97,000
$25 liquidation value -- 7.60% 200,000 200,000
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------------
Total (annual distribution requirement -- $22,354,000) 297,000 297,000 4.9 5.2
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------------
Long-Term Debt:
First mortgage bonds --
Maturity Interest Rates
February 1, 1998 5 1/2% - 50,000
August 1, 1999 6 3/8% 170,000 170,000
March 1, 2000 6% 100,000 100,000
August 1, 2002 6.85% - 100,000
January 1, 2003 7% 125,000 125,000
February 1, 2003 6 3/4% 175,000 175,000
August 1, 2007 7 1/4% - 175,000
2023 through 2024 7.30% to 9% 500,000 946,108
- - - - - - - -------------------------------------------------------------------------------------------------------------
Total first mortgage bonds 1,070,000 1,841,108
- - - - - - - -------------------------------------------------------------------------------------------------------------
Other long-term debt (Note 10) --
Pollution control obligations --
Collateralized -
5.5% to 6.5% due
2023-2024 126,050 223,040
Variable rates (3.80%
to 5.00% at 1/1/99)
due 2015-2017 89,800 89,800
</TABLE>
II-65
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CAPITALIZATION (continued)
At December 31, 1998 and 1997
Alabama Power Company 1998 Annual Report
<S> <C> <C> <C> <C>
====================================================================================================================================
1998 1997 1998 1997
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------------
(in thousands) (percent of total)
Pollution control obligations -- (continued)
Non-collateralized -
7.25% due 2003 1,000 1,000
5.8% due 2022 - 9,800
Variable rates (4.80%
to 5.33% at 1/1/99)
due 2021-2028 324,290 217,500
- - - - - - - -------------------------------------------------------------------------------------------------------------
Total pollution control obligations 541,140 541,140
- - - - - - - -------------------------------------------------------------------------------------------------------------
Senior notes --
Maturity Interest Rates
-------- --------------
November 15, 2003 5.35% 156,200 -
November 1, 2005 5.49% 225,000 -
October 1, 2008 5 3/8% 160,000 -
September 30, 2010 6.25% 100,000 -
September 30, 2018 6.375% 100,000 -
September 30, 2018 6.5% 225,000 -
December 1, 2047 7 1/8% 193,800 193,800
December 31, 2047 7% 200,000 -
March 31, 2048 7% 190,000 -
- - - - - - - -------------------------------------------------------------------------------------------------------------
Total senior notes 1,550,000 193,800
- - - - - - - -------------------------------------------------------------------------------------------------------------
Capitalized lease obligations 6,119 7,105
Unamortized debt premium (discount), net (49,484) (34,615)
- - - - - - - -------------------------------------------------------------------------------------------------------------
Total long-term debt (annual interest
requirement -- $204,003,000) 3,117,775 2,548,538
Less amount due within one year (Note 11) 471,209 75,336
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------------
Long-term debt excluding amount due within one year 2,646,566 2,473,202 43.8 42.8
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------------
Total Capitalization $ 6,045,145 $ 5,776,283 100.0 % 100.0 %
==================================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-66
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31, 1998, 1997, and 1996
Alabama Power Company 1998 Annual Report
<S> <C> <C> <C>
================================================================================================================================
1998 1997 1996
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Balance at Beginning of Year $ 1,221,467 $ 1,185,128 $ 1,161,225
Net income after dividends on preferred stock 377,223 375,939 371,490
Cash dividends on common stock (367,100) (339,600) (347,500)
Preferred stock transactions, net (6,137) (45) (7)
Other adjustments to retained earnings (488) 45 (80)
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Balance at End of Year (Note 13) $ 1,224,965 $ 1,221,467 $ 1,185,128
================================================================================================================================
STATEMENTS OF PAID-IN CAPITAL
For the Years Ended December 31, 1998, 1997, and 1996
Alabama Power Company 1998 Annual Report
===============================================================================================================================-
1998 1997 1996
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Balance at Beginning of Period $ 1,304,645 $ 1,304,645 $ 1,304,645
Capital contributions from parent company 30,000 - -
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Balance at End of Period $ 1,334,645 $ 1,304,645 $ 1,304,645
================================================================================================================================
The accompanying notes are an integral part of these statements.
II-67
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Alabama Power Company 1998 Annual Report
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
General
Alabama Power Company (the Company) is a wholly owned subsidiary of Southern
Company, which is the parent company of five operating companies, Southern
Company Services (SCS), a system service company, Southern Communications
Services (Southern LINC), Southern Energy, Inc. (Southern Energy), Southern
Nuclear Operating Company (Southern Nuclear), Southern Company Energy Solutions,
and other direct and indirect subsidiaries. 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 Southern Company and
subsidiary companies. Southern LINC provides digital wireless communications
services to the operating companies and also markets these services to the
public within the Southeast. Southern Energy designs, builds, owns and operates
power production and delivery facilities and provides a broad range of energy
related services in the United States and international markets. Southern
Nuclear provides services to Southern Company's nuclear power plants. Southern
Company Energy Solutions develops new business opportunities related to energy
products and services.
Southern Company is registered as a holding company under the Public Utility
Holding Company Act of 1935 (PUHCA). Both Southern Company and its subsidiaries
are subject to the regulatory provisions of the PUHCA. The Company is also
subject to regulation by the FERC and the Alabama Public Service Commission
(APSC). The Company follows generally accepted accounting principles (GAAP) and
complies with the accounting policies and practices prescribed by the respective
regulatory commissions. The preparation of financial statements in conformity
with GAAP requires the use of estimates, and the actual results may differ from
those estimates.
Certain prior years' data presented in the financial statements have
been reclassified to conform with current year presentation.
Regulatory Assets and Liabilities
The Company is subject to the provisions of Financial Accounting Standards Board
(FASB) Statement No. 71, Accounting for the Effects of Certain Types of
Regulation. Regulatory assets represent probable future revenues to the Company
associated with certain costs that are expected to be recovered from customers
through the ratemaking process. Regulatory liabilities represent probable future
reductions in revenues associated with amounts that are expected to be credited
to customers through the ratemaking process. Regulatory assets and (liabilities)
reflected in the Balance Sheets at December 31 relate to the following:
1998 1997
-----------------------
(in thousands)
Deferred income taxes $ 362,953 $ 384,549
Deferred income tax credits (315,735) (327,328)
Premium on reacquired debt 83,440 81,417
Department of Energy assessments 31,088 34,416
Vacation pay 28,390 28,783
Natural disaster reserve (19,385) (22,416)
Work force reduction costs 4,082 19,316
Other, net 46,672 59,726
- - - - - - - ----------------------------------------------------------------
Total $ 221,505 $ 258,463
================================================================
In the event that a portion of the Company's operations is no longer subject
to the provisions of Statemen No. 71, the Company would be required to write
off related net regulatory assets and liabilities that are not specifically
recoverable through regulated rates. In addition, the Company would be required
to determine if any impairment to other assets exists, including plant, and
write down the assets, if impaired, to their fair value.
II-68
<PAGE>
NOTES (continued)
Alabama Power Company 1998 Annual Report
Revenues and Fuel Costs
The Company currently operates as a vertically integrated utility providing
electricity to retail customers within its traditional service area located
within the state of Alabama, and to wholesale customers in the southeast.
Revenues by type of service were as follows:
1998 1997 1996
--------------------------------
(in millions)
Retail $2,781 $2,511 $2,469
Non-affiliated wholesale 449 431 391
Other 53 45 44
- - - - - - - ---------------------------------------------------------------
Total $3,283 $2,987 $2,904
- - - - - - - ---------------------------------------------------------------
The Company accrues revenues for services 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.
The Company has a diversified base of customers. No single customer or
industry comprises 10 percent or more of revenues. For all periods presented,
uncollectible accounts continued to average less than 1 percent of revenues.
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 $59
million in 1998, $68 million in 1997, and $64 million in 1996. The Company has a
contract with the U.S. Department of Energy (DOE) that provides for the
permanent disposal of spent nuclear fuel. The DOE failed to begin disposing of
spent fuel in January 1998 as required by contracts, and the Company is pursuing
legal remedies against the government for breach of contract. Sufficient storage
capacity currently is available to permit operation into 2009 and 2013 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, 1998, under this law
to be approximately $31 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 1998 and 3.3 percent in both 1997 and 1996. 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 and removal of other facilities.
Nuclear Regulatory Commission (NRC) regulations require all licensees
operating commercial nuclear power reactors to establish a plan for providing,
with reasonable assurance, funds for decommissioning. The Company has
established external trust funds to comply with the NRC's regulations. Amounts
previously recorded in internal reserves are being transferred into the external
trust funds over periods approved by the APSC. The NRC's minimum external
funding requirements are based on a generic estimate of the cost to decommission
the radioactive portions of a nuclear unit based on the size and type of
reactor. The Company has filed plans with the NRC to ensure that -- over time --
the deposits and earnings of the external trust funds will provide the minimum
funding amounts prescribed by the NRC.
II-69
<PAGE>
NOTES (continued)
Alabama Power Company 1998 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, 1998, for Plant Farley were as
follows:
Site study basis (year) 1998
Decommissioning periods:
Beginning year 2017
Completion year 2031
-------------------------------------------------------------
(in millions)
Site study costs:
Radiated structures $ 629
Non-radiated structures 60
--------------------------------------------------------------
Total $ 689
=============================================================
(in millions)
Ultimate costs:
Radiated structures $1,868
Non-radiated structures 178
-------------------------------------------------------------
Total $2,046
=============================================================
The decommissioning cost estimates are based on prompt dismantlement and
removal of the plant from service. The actual decommissioning costs may vary
from the above estimates because of changes in the assumed date of
decommissioning, changes in NRC requirements, or changes in the assumptions used
in making estimates.
Annual provisions for nuclear decommissioning are based on an annuity method
as approved by the APSC. The amounts expensed in 1998 and fund balance as of
December 31, 1998 were:
(in millions)
Amount expensed in 1998 $ 18
-------------------------------------------------------------
Accumulated provisions:
Balance in external trust funds $ 232
Balance in internal reserves 42
-------------------------------------------------------------
Total $ 274
=============================================================
All of the Company's decommissioning costs are approved for ratemaking.
Significant assumptions include an estimated inflation rate of 4.5 percent and
an estimated trust earnings rate of 7.0 percent.
Income Taxes
The Company uses the liability method of accounting for deferred income taxes
and provides deferred income taxes for all significant income tax temporary
differences. Investment tax credits utilized are deferred and amortized to
income over the average lives of the related property.
Allowance For Funds Used During Construction (AFUDC)
AFUDC represents the estimated debt and equity costs of capital funds that are
necessary to finance the construction of new facilities. While cash is not
realized currently from such allowance, it increases the revenue requirement
over the service life of the plant through a higher rate base and higher
depreciation expense. The composite rate used to determine the amount of
allowance was 9.0 percent in 1998 and 5.8 percent in both 1997 and 1996. AFUDC,
net of income tax, as a percent of net income after dividends on preferred stock
was 1.8 percent in 1998, 0.8 percent in 1997 and 1.1 percent in 1996.
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
The Company's only financial instruments for which the carrying amount did not
approximate fair value at December 31 are as follows:
Carrying Fair
Amount Value
-------------------------
(in millions)
Long-term debt:
At December 31, 1998 $3,112 $3,195
At December 31, 1997 2,541 2,638
Preferred Securities:
At December 31, 1998 297 307
At December 31, 1997 297 300
--------------------------------------------------------------
II-70
<PAGE>
NOTES (continued)
Alabama Power Company 1998 Annual Report
The fair value for long-term debt and preferred securities was based on
either closing market prices or closing prices of comparable instruments.
Cash and Cash Equivalents
For purposes of the financial statements, temporary cash investments are
considered cash equivalents. Temporary cash investments are securities with
original maturities of 90 days or less.
Materials and Supplies
Generally, materials and supplies include the cost of transmission,
distribution, and generating plant materials. Materials are charged to inventory
when purchased and then expensed or capitalized to plant, as appropriate, when
installed.
Natural Disaster Reserve
In September 1994, in response to a request by the Company, the APSC issued an
order allowing the Company to establish a Natural Disaster Reserve. Regulatory
treatment allows the Company to accrue $250 thousand per month, until the
maximum accumulated provision of $32 million is attained. However, in December
1995, the APSC approved higher accruals to restore the reserve to its authorized
level whenever the balance in the reserve declines below $22.4 million.
2. RETIREMENT BENEFITS
The Company has defined benefit, trusteed, pension plans that cover
substantially all employees. The Company provides certain medical care and life
insurance benefits for retired employees. Substantially all these employees may
become eligiblefor such benefits when they retire. The Company funds trusts to
the extent deductible under federal income tax regulations or to the extent
required by the APSC and FERC. In 1998, the Company adopted FASB Statement No.
132, Employers' Disclosure about Pensions and Other Postretirement Benefits. The
measurement date is September 30 of each year.
The weighted average rates assumed in the actuarial calculations for both
the pension and postretirement benefit plans were:
1998 1997
- - - - - - - ---------------------------------------------------------------
Discount 6.75% 7.50%
Annual salary increase 4.25 5.00
Long-term return on plan assets 8.50 8.50
- - - - - - - ---------------------------------------------------------------
Pension Plan
Changes during the year in the projected benefit obligations and in the fair
value of plan assets were as follows:
Projected
Benefit Obligations
---------------------------
1998 1997
- - - - - - - ---------------------------------------------------------------
(in millions)
Balance at beginning of year $813 $814
Service cost 22 20
Interest cost 59 58
Benefits paid (51) (38)
Actuarial (gain) loss and
employee transfers 25 (41)
- - - - - - - ---------------------------------------------------------------
Balance at end of year $868 $813
===============================================================
Plan Assets
---------------------------
1998 1997
- - - - - - - ---------------------------------------------------------------
(in millions)
Balance at beginning of year $1,521 $1,334
Actual return on plan assets 9 250
Benefits paid (51) (38)
Employee transfers (18) (25)
- - - - - - - ---------------------------------------------------------------
Balance at end of year $1,461 $1,521
===============================================================
The accrued pension costs recognized in the Balance Sheets were
as follows:
1998 1997
- - - - - - - ---------------------------------------------------------------
(in millions)
Funded status $ 593 $ 708
Unrecognized transition obligation (30) (35)
Unrecognized prior service cost 39 43
Unrecognized net actuarial gain (433) (585)
- - - - - - - ---------------------------------------------------------------
Prepaid asset recognized in the
Balance Sheets $ 169 $ 131
===============================================================
II-71
<PAGE>
NOTES (continued)
Alabama Power Company 1998 Annual Report
Components of the plans' net periodic cost were as follows:
1998 1997 1996
- - - - - - - ---------------------------------------------------------------
(in millions)
Service cost $ 22 $ 20 $ 21
Interest cost 59 58 60
Expected return on plan assets (102) (95) (93)
Recognized net actuarial gain (16) (13) (9)
Net amortization (2) (2) (3)
- - - - - - - ---------------------------------------------------------------
Net pension cost (income) $ (39) $ (32) $ (24)
===============================================================
Postretirement Benefits
Changes during the year in the projected benefit obligations and in the fair
value of plan assets were as follows:
Projected
Benefit Obligations
---------------------------
1998 1997
- - - - - - - ---------------------------------------------------------------
(in millions)
Balance at beginning of year $252 $242
Service cost 5 4
Interest cost 19 18
Benefits paid (12) (8)
Actuarial (gain) loss and
employee transfers 14 (4)
- - - - - - - ---------------------------------------------------------------
Balance at end of year $278 $252
===============================================================
Plan Assets
---------------------------
1998 1997
- - - - - - - ---------------------------------------------------------------
(in millions)
Balance at beginning of year $125 $108
Actual return on plan assets 4 16
Employer contributions 20 9
Benefits Paid (12) (8)
- - - - - - - ---------------------------------------------------------------
Balance at end of year $137 $125
===============================================================
The accrued postretirement costs recognized in the Balance Sheets
were as follows:
1998 1997
- - - - - - - ---------------------------------------------------------------
(in millions)
Funded status $(141) $(127)
Unrecognized transition obligation 57 61
Unrecognized net actuarial loss 22 3
Fourth quarter contributions 8 10
- - - - - - - ---------------------------------------------------------------
Accrued liability recognized in the
Balance Sheets $ (54) $ (53)
===============================================================
Components of the plans' net periodic cost were as follows:
1998 1997 1996
- - - - - - - ---------------------------------------------------------------
(in millions)
Service cost $ 5 $ 4 $ 5
Interest cost 18 18 17
Expected return on plan assets (9) (7) (6)
Recognized net gain - - 1
Net amortization 4 4 4
- - - - - - - ------------------------------------------------------ --------
Net postretirement cost $ 18 $ 19 $ 21
===============================================================
An additional assumption used in measuring the accumulated postretirement
benefit obligations was a weighted average medical care cost trend rate of 8.30
percent for 1998, decreasing gradually to 4.75 percent through the year 2005,
and remaining at that level thereafter. An annual increase or decrease in the
assumed medical care cost trend rate of 1 percent would affect the accumulated
benefit obligation and the service and interest cost components at December 31,
1998 as follows:
1 Percent 1 Percent
Increase Decrease
- - - - - - - ---------------------------------------------------------------
(in millions)
Benefit obligation $ 18 $ (15)
Service and interest costs 2 (1)
===============================================================
Work Force Reduction Programs
The Company has incurred additional costs for work force reduction programs. The
costs related to these programs were $19.4 million, $33.0 million and $26.7
million for the years 1998, 1997 and 1996, respectively. In addition, certain
costs of these programs were deferred and are being amortized in accordance with
regulatory treatment. The unamortized balance of these costs was $4.1 million at
December 31, 1998.
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 rate adjustment
II-72
<PAGE>
NOTES (continued)
Alabama Power Company 1998 Annual Report
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 June 1995, the APSC issued a rate order granting the Company's request
for gradual adjustments to move toward parity among customer classes. This order
also calls for a moratorium on any periodic retail rate increases (but not
decreases) until July 2001.
In December 1995, the APSC issued an order authorizing the Company to reduce
balance sheet items -- such as plant and deferred charges -- at any time the
Company's actual base rate revenues exceed the budgeted revenues. In April 1997,
the APSC issued an additional order authorizing the Company to reduce balance
sheet asset items. This order authorizes the reduction of such items up to an
amount equal to five times the total estimated annual revenue reduction
resulting from future rate reductions initiated by the Company. In 1998, the
Company - in accordance with the 1995 rate order - recorded $33 million of
additional amortization of premium on reacquired debt.
The ratemaking procedures will remain in effect until the APSC votes to
modify or discontinue them.
Appliance Warranty Litigation
In 1996, a class action against the Company was filed charging the Company with
fraud and non-compliance with regulatory statutes relating to the offer, sale,
and financing of "extended service contracts" in connection with the sale of
electric appliances. The plaintiffs seek damages in an unspecified amount. The
Company has offered extended service agreements to its customers since January
1984, and approximately 175,000 extended service agreements could be involved in
these proceedings. The trial court has granted partial summary judgment in favor
of the plaintiffs. The Company has appealed this decision to the Supreme Court
of Alabama. The final outcome of this case cannot now be determined.
Environmental Litigation
On November 30, 1998, total judgments of nearly $53 million were entered in
favor of five plaintiffs against the Company and two large textile
manufacturers. The plaintiffs alleged that the manufacturers had discharged
certain polluting substances into a stream that empties into Lake Martin, a
hydroelectric reservoir owned by the Company, and that such discharges had
reduced the value of the plaintiffs' residential lots on Lake Martin. Of the
total amount of the judgments, $155 thousand was compensatory damages and the
remainder was punitive damages. The damages were assessed against all three
defendants jointly. Post-trial motions have been filed, and, if relief is not
granted at the trial court level, the Company will appeal these judgements to
the Supreme Court of Alabama. While the Company believes that these judgments
should be reversed or set aside, the final outcome of this matter cannot now be
determined.
FERC Reviews Equity Returns
On September 21, 1998, the FERC entered separate orders affirming the outcome of
the administrative law judge's opinions in two proceedings in which the return
on common equity component of formula rates contained in substantially all of
the operating companies' wholesale power contracts was being challenged as
unreasonably high. These orders resulted in no change in the wholesale power
contracts that were the subject of such proceedings. The FERC also dismissed a
complaint filed by three customers under long-term power sales agreements
seeking to lower the equity return component in such agreements. These customers
have filed applications for rehearing regarding each FERC order. In response to
a requirement of the September 1998 FERC order, Southern Company filed a new
equity return component on the long-term power sales contracts, to be effective
January 5, 1999. The proposed equity return was lowered from 13.75 percent to
12.50 percent. If the filed equity return is approved, the estimated impact on
the Company's revenues will be approximately $5 million annually. The FERC
placed the new rates into effect, subject to refund. Also, this filing was
consolidated with the new proceeding discussed below.
On December 28, 1998, the FERC staff filed a motion asking the FERC to
initiate a new proceeding regarding the equity return and other issues involving
the Company's formula rate contracts. The motion was submitted pursuant to
review procedures applicable to these contracts, and would be applicable to
billings under such contracts on and after January 1, 1999.
Tax Litigation
In August 1997, Southern Company and the Internal Revenue Service (IRS) entered
into a settlement agreement related to tax issues for the years 1984 through
1987. The agreement received final approval by the Joint Congressional
II-73
<PAGE>
NOTES (continued)
Alabama Power Company 1998 Annual Report
Committee on Taxation in June 1998 and as a result, the Company recognized
interest income in 1998 of $14 million. The refund by the IRS has been made
and this matter is now concluded.
4. CAPITAL BUDGET
The Company's capital expenditures are currently estimated to total $875 million
in 1999, $653 million in 2000, and $668 million in 2001. Included in these
estimates are the following: the Company will replace all six steam generators
at Plant Farley at a total cost of approximately $234 million. Additionally, the
Company plans to construct and install 1,075 megawatts of new generating
capacity and associated substation facilities at Plant Barry. The projected
capital expenditures for this project amount to approximately $384 million.
The capital budget is subject to periodic review and revision, and actual
capital costs 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.
In addition, significant construction will continue related to transmission
and distribution facilities and the upgrading 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 is often utilized and
the amounts available are discussed below. The Company may issue additional
long-term debt and preferred securities for debt maturities, redeeming
higher-cost securities, and meeting additional capital requirements.
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 historically has relied on issuances of first mortgage bonds
and preferred stock, in addition to pollution control revenue bonds issued for
its benefit by public authorities, to meet its long-term external financing
requirements. Recently, the Company's financings have consisted of unsecured
debt and trust preferred securities. In this regard, the Company sought and
obtained stockholder approval in 1997 to amend its corporate charter eliminating
restrictions on the amounts of unsecured indebtedness it may incur. In order to
issue additional debt and equity securities, the Company must comply with
certain earnings coverage requirements designated 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 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 maintains committed lines of credit in the amount of $757.7 million
(including $315 million of such lines under which are dedicated to funding
purchase obligations relating to variable rate pollution control bonds). Of
these lines, $677.7 million expire at various times during 1999 and $80 million
expires in 2003. In certain cases, such lines require payment of a commitment
fee based on the unused portion of the commitment or the maintenance of
compensating balances with the banks. Because the arrangements are based on an
average balance, the Company does not consider any of its cash balances to be
restricted as of any specific date. Moreover, the Company borrows from time to
time pursuant to arrangements with banks for uncommitted lines of credit.
At December 31, 1998, the Company had regulatory approval to have
outstanding up to $750 million of short-term borrowings.
Assets Subject to Lien
The Company's mortgage, as amended and supplemented, securing the first mortgage
bonds issued by the Company, constitutes a direct lien on substantially all of
the Company's fixed property and franchises.
II-74
<PAGE>
NOTES (continued)
Alabama Power Company 1998 Annual Report
Fuel Commitments
To supply a portion of the fuel requirements of its generating plants, the
Company has entered into various long-term commitments for the procurement of
fossil and nuclear fuel. In most cases, these contracts contain provisions for
price escalations, minimum purchase levels and other financial commitments.
Total estimated long-term obligations at December 31, 1998, were as follows:
Year Amounts
----------------
(in millions)
1999 $ 825
2000 547
2001 497
2002 376
2003 381
2004 - 2014 2,417
- - - - - - - ---------------------------------------------------------------
Total commitments $ 5,043
===============================================================
Operating Leases
The Company has entered into coal rail car rental agreements with various terms
and expiration dates. These expenses totaled $5.8 million in 1998, and $3.0
million each for 1997 and 1996. At December 31, 1998, estimated minimum rental
commitments for noncancellable operating leases were as follows:
Year Amounts
----------------
(in millions)
1999 $ 11.4
2000 9.7
2001 7.3
2002 5.9
2003 5.7
2004 - 2018 51.4
- - - - - - - ---------------------------------------------------------------
Total minimum payments $ 91.4
===============================================================
6. JOINT OWNERSHIP AGREEMENTS
The Company and Georgia Power Company own equally all of the outstanding capital
stock of Southern Electric Generating Company (SEGCO), which owns electric
generating units with a total rated capacity of 1,020 megawatts, together with
associated transmission facilities. The capacity of these units is sold equally
to the Company and Georgia Power Company under a contract which, in substance,
requires payments sufficient to provide for the operating expenses, taxes,
interest expense and a return on equity, whether or not SEGCO has any capacity
and energy available. The term of the contract extends automatically for
two-year periods, subject to either party's right to cancel upon two year's
notice. The Company's share of expenses totaled $74 million in 1998, $73
million in 1997 and $75 million in 1996, and is included in "Purchased power
from affiliates" in the Statements of Income.
In addition, the Company has guaranteed unconditionally the obligation of
SEGCO under an installment sale agreement for the purchase of certain pollution
control facilities at SEGCO's generating units, pursuant to which $24.5 million
principal amount of pollution control revenue bonds are outstanding. Georgia
Power Company has agreed to reimburse the Company for the pro rata portion of
such obligation corresponding to its then proportionate ownership of stock of
SEGCO if the Company is called upon to make such payment under its guaranty.
At December 31, 1998, the capitalization of SEGCO consisted of $49 million
of equity and $70 million of long-term debt on which the annual interest
requirement is $4.1 million. SEGCO paid dividends totaling $8.7 million in 1998,
$10.6 million in 1997, and $10.1 million in 1996, of which one-half of each was
paid to the Company. SEGCO's net income was $7.5 million, $8.5 million, and $7.7
million for 1998, 1997 and 1996, respectively.
The Company's percentage ownership and investment in jointly-owned
generating plants at December 31, 1998, 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 $ 94 $ 42
Plant Miller
Units 1 and 2 717 330
----------------------------------------------------------
II-75
<PAGE>
NOTES (continued)
Alabama Power Company 1998 Annual Report
7. LONG-TERM POWER SALES AGREEMENTS
General
The Company and the operating affiliates of Southern Company have entered into
long-term contractual agreements for the sale of capacity and energy to certain
non-affiliated utilities located outside the system's service area. These
agreements -- expiring at various dates discussed below -- are firm and pertain
to capacity related to specific generating units. Because the energy is
generally sold at cost under these agreements, profitability is primarily
affected by revenues from capacity sales. The Company's capacity revenues
amounted to $142 million in 1998, $136 million in 1997, and $151 million in
1996.
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 are scheduled to be sold through 1999.
Thereafter, these sales will remain at that approximate level -- unless reduced
by FP&L, FPC, and JEA for the periods after 1999 with a minimum of three years
notice -- 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 sales contract with AMEA
entitling AMEA to scheduled amounts of capacity (to a maximum 100 megawatts) for
a period of 15 years commencing September 1, 1986 (1986 Contract). In October
1991, the Company entered into a second firm power sales contract with AMEA
entitling AMEA to scheduled amounts of additional capacity (to a maximum 80
megawatts) for a period of 15 years commencing October 1, 1991 (1991 Contract).
In both contracts the power will be sold to AMEA for its member municipalities
that previously were served directly by the Company as wholesale customers.
Under the terms of the contracts, the Company received payments from AMEA
representing the net present value of the revenues associated with the
respective capacity entitlements, discounted at effective annual rates of 9.96
percent and 11.19 percent for the 1986 and 1991 contracts, respectively. These
payments are being recognized as operating revenues and the discounts are being
amortized to other interest expense as scheduled capacity is made available over
the terms of the contracts.
In order to secure AMEA's advance payments and the Company's performance
obligation under the contracts, the Company issued and delivered to an escrow
agent first mortgage bonds representing the maximum amount of liquidated damages
payable by the Company in the event of a default under the contracts. No
principal or interest is payable on such bonds unless and until a default by the
Company occurs. As the liquidated damages decline under the contracts, a portion
of the bonds equal to the decreases are returned to the Company. At December 31,
1998, $99.4 million of such bonds was held by the escrow agent under the
contracts.
8. INCOME TAXES
At December 31, 1998, the tax-related regulatory assets and liabilities were
$363 million and $316 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:
1998 1997 1996
--------------------------------
(in thousands)
Total provision for income taxes:
Federal --
Currently payable $123,384 $197,159 $172,911
Deferred --
current year 59,162 32,884 (6,309)
reversal of prior years 12,984 (44,300) 18,948
- - - - - - - -----------------------------------------------------------------
195,530 185,743 185,550
- - - - - - - -----------------------------------------------------------------
State --
Currently payable 15,761 23,147 16,212
Deferred --
current year 4,811 1,409 697
reversal of prior years 2,473 (2,422) 3,249
- - - - - - - -----------------------------------------------------------------
23,045 22,134 20,158
- - - - - - - -----------------------------------------------------------------
Total 218,575 207,877 205,708
Less income taxes credited
to other income (6,347) (12,351) (22,400)
- - - - - - - -----------------------------------------------------------------
Total income taxes
charged to operations $224,922 $220,228 $228,108
=================================================================
II-76
<PAGE>
NOTES (continued)
Alabama Power Company 1998 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:
1998 1997
------------------
(in millions)
Deferred tax liabilities:
Accelerated depreciat $ 861 $ 847
Property basis differences 435 463
Premium on reacquired debt 29 30
Pensions 50 20
Other 46 11
----------------------------------------------------------------
Total
1,421 1,371
- - - - - - - ------------------------------------------------------------------
Deferred tax assets:
Capacity prepayments 28 31
Other deferred costs 25 33
Postretirement benefits 20 18
Unbilled revenue 16 16
Other 56 66
Total 145 164
----------------------------------------------------------------
Net deferred tax liabilities 1,276 1,207
Portion included in current assets
(liabilities), net (73) (15)
- - - - - - - ----------------------------------------------------------------
Accumulated deferred income taxes
in the Balance Sheets $ 1,203 $ 1,192
================================================================
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 $11 million in 1998, 1997, and 1996. At December 31, 1998, 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:
1998 1997 1996
--------------------------
Federal statutory rate 35.0% 35.0% 35.0%
State income tax,
net of federal deduction 2.5 2.4 2.2
Non-deductible book
depreciation 1.5 1.5 1.5
Differences in prior years'
deferred and current tax rates (1.6) (2.3) (1.6)
Other (1.6) (1.9) (3.0)
- - - - - - - ---------------------------------------------------------------
Effective income tax rate 35.8% 34.7% 34.1%
===============================================================
Southern Company files a consolidated federal income tax return. Under a
joint consolidated income tax agreement, each subsidiary's current and deferred
tax expense is computed on a stand-alone basis. Tax benefits from losses of the
parent company are allocated to each subsidiary based on the ratio of taxable
income to total consolidated taxable income.
9. COMPANY OBLIGATED MANDATORILY
REDEEMABLE PREFERRED SECURITIES
Statutory business trusts formed by the Company, of which the Company owns all
the common securities, have issued mandatorily redeemable preferred securities
as follows:
Date of Maturity
Issue Amount Rate Notes Date
--------------------------------------------------------
(millions) (millions)
Trust I 1/1996 $ 97 7.375% $100 3/2026
Trust II 1/1997 200 7.60 206 12/2036
Substantially all of the assets of each trust are junior subordinated notes
issued by the Company in the respective approximate principal amounts set forth
above. In February 1999, the Company issued $50 million of variable rate
mandatorily redeemable preferred securities (Trust III), the initial
distribution rate of which was 4.85 percent. The associated junior subordinated
notes, in the amount of $51.6 million, will be due February 28, 2029.
The Company considers that the mechanisms and obligations relating to the
preferred securities, taken together, constitute a full and unconditional
guarantee by the Company of the Trusts' payment obligations with respect to the
preferred securities.
The Trusts are subsidiaries of the Company, and accordingly are consolidated
in the Company's financial statements.
10. OTHER LONG-TERM DEBT
Pollution control obligations represent installment purchases of pollution
control facilities financed by funds derived from sales by public authorities of
revenue bonds. The Company is required to make payments sufficient for the
authorities to meet principal and interest requirements of such bonds. With
respect to $215.9 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.
II-77
<PAGE>
NOTES (continued)
Alabama Power Company 1998 Annual Report
No principal or interest on these first mortgage bonds is payable unless and
until a default occurs on the installment purchase agreements.
In 1997 and 1998, the Company issued unsecured senior notes. The senior notes
are, in effect, subordinated to all secured debt of the Company, including its
first mortgage bonds.
The estimated aggregate annual maturities of capitalized lease obligations
through 2003 are as follows: $1.0 million in 1999, $0.9 million in 2000, $0.8
million in 2001, $0.9 million in 2002 and $0.9 million in 2003.
11. SECURITIES DUE WITHIN ONE YEAR
A summary of the improvement fund requirements and scheduled maturities and
redemptions of long-term debt and preferred stock due within one year at
December 31 is as follows:
1998 1997
------------------------
(in thousands)
Bond improvement fund
requirements $ - $18,450
First mortgage bond maturities
and redemptions 470,000 55,895
Other long-term debt maturities
(Note 10) 1,209 991
-------------------------------------------------------------
Total long-term debt due within
one year 471,209 75,336
-------------------------------------------------------------
Preferred stock to be redeemed 50,000 -
-------------------------------------------------------------
Total $521,209 $75,336
=============================================================
The annual first mortgage bond improvement fund requirement is 1 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. Scheduled maturities amount to $0.2 million
in connection with pollution control bonds as a result of the redemption, over a
five-year period, of the 7.25 percent series due 2003.
12. 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 $9.7 billion for public liability claims
that could arise from a single nuclear incident. Plant Farley is insured against
this liability to a maximum of $200 million by private insurance, with the
remaining coverage provided by a mandatory program of deferred premiums which
could be assessed, after a nuclear incident, against all owners of nuclear
reactors. The Company could be assessed up to $88 million per incident for each
licensed reactor it operates but not more than an aggregate of $10 million per
incident to be paid in a calendar year for each reactor. Such maximum
assessment, excluding any applicable state premium taxes, for the Company is
$176 million per incident but not more than an aggregate of $20 million to be
paid for each incident in any one year.
The Company is a member of Nuclear Electric Insurance Limited (NEIL), a
mutual insurer established to provide property damage insurance in an amount up
to $500 million for members' nuclear generating facilities.
Additionally, the Company has policies that currently provide
decontamination, excess property insurance, and premature decommissioning
coverage up to $2.25 billion for losses in excess of the $500 million primary
coverage. This excess insurance is also provided by NEIL.
NEIL also covers the additional cost that would be incurred in obtaining
replacement power during a prolonged accidental outage at a member's nuclear
plant. Members can be insured against increased cost of replacement power in an
amount up to $3.5 million per week (starting 17 weeks after the outage) for one
year and up to $2.8 million per week for the second and third years.
Under each of the NEIL policies, members are subject to assessments if
losses each year exceed the accumulated funds available to the insurer under
that policy. The current maximum annual assessments for the Company under the
three NEIL policies would be $21 million.
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
II-78
<PAGE>
NOTES (continued)
Alabama Power Company 1998 Annual Report
proceeds are to be paid either to the Company or to its bond trustees
as may be appropriate under the policies and applicable trust indentures.
All retrospective assessments, whether generated for liability, property
or replacement power may be subject to applicable state premium taxes.
13. 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, 1998, retained earnings of $796 million were
restricted against the payment of cash dividends on common stock under terms of
the mortgage indenture.
14. QUARTERLY FINANCIAL INFORMATION
(Unaudited)
Summarized quarterly financial data for 1998 and 1997 are as follows:
Net Income
After
Dividends
Quarter Operating Operating on Preferred
Ended Revenues Income Stock
- - - - - - - -------------------- -----------------------------------------
(in thousands)
March 1998 $716,505 $130,735 $ 66,041
June 1998 863,715 178,722 94,750
September 1998 1,057,988 242,063 173,958
December 1998 748,165 105,519 42,474
March 1997 $704,768 $123,455 $ 57,807
June 1997 728,089 125,750 63,137
September 1997 962,446 249,487 191,800
December 1997 753,808 128,511 63,195
=================================================================
The Company's business is influenced by seasonal weather conditions.
II-79
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA
Alabama Power Company 1998 Annual Report
<S> <C> <C> <C>
===========================================================================================================================
1998 1997 1996
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $3,386,373 $3,149,111 $3,120,775
Net Income after Dividends
on Preferred Stock (in thousands) $377,223 $375,939 $371,490
Cash Dividends on Common Stock (in thousands) $367,100 $339,600 $347,500
Return on Average Common Equity (percent) 13.63 13.76 13.75
Total Assets (in thousands) $9,225,698 $8,812,867 $8,733,846
Gross Property Additions (in thousands) $610,132 $451,167 $425,024
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $2,784,067 $2,750,569 $2,714,277
Preferred stock 317,512 255,512 340,400
Preferred stock subject to mandatory redemption - - -
Subsidiary obligated mandatorily redeemable preferred securities 297,000 297,000 97,000
Long-term debt 2,646,566 2,473,202 2,354,006
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $6,045,145 $5,776,283 $5,505,683
===========================================================================================================================
Capitalization Ratios (percent):
Common stock equity 46.1 47.6 49.3
Preferred stock 5.2 4.4 6.2
Company obligated mandatorily redeemable preferred securities 4.9 5.2 1.7
Long-term debt 43.8 42.8 42.8
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
===========================================================================================================================
First Mortgage Bonds (in thousands):
Issued - - -
Retired 771,108 74,951 83,797
Company Obligated Mandatorily Redeemable Preferred
Securities (in thousands):
Issued - 200,000 97,000
Senior Notes (in thousands):
Issued 1,356,200 193,800 -
Preferred Stock (in thousands):
Issued 200,000 - -
Retired 88,000 184,888 -
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1 A1
Standard and Poor's A+ A+ A+
Duff & Phelps AA- AA- AA-
Preferred Stock -
Moody's a2 a2 a2
Standard and Poor's A A A
Duff & Phelps A A+ A+
Unsecured Long-Term Debt -
Moody's A2 A2 -
Standard and Poor's A A -
Duff & Phelps A+ A+ -
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 1,106,217 1,092,161 1,073,559
Commercial 182,738 177,362 171,827
Industrial 5,020 5,076 5,100
Other 733 728 732
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total 1,294,708 1,275,327 1,251,218
===========================================================================================================================
Employees (year-end) 6,631 6,531 6,865
II-80
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA
Alabama Power Company 1998 Annual Report
<S> <C> <C> <C> <C>
==============================================================================================================================
1995 1994 1993 1992
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $3,024,774 $2,935,142 $3,007,609 $2,846,840
Net Income after Dividends
on Preferred Stock (in thousands) $360,894 $356,338 $346,494 $338,555
Cash Dividends on Common Stock (in thousands) $285,000 $268,000 $252,900 $273,300
Return on Average Common Equity (percent) 13.61 13.86 13.94 14.02
Total Assets (in thousands) $8,744,360 $8,459,217 $8,248,683 $6,593,618
Gross Property Additions (in thousands) $551,781 $536,785 $435,843 $367,463
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $2,690,374 $2,614,405 $2,526,348 $2,443,493
Preferred stock 440,400 440,400 440,400 489,400
Preferred stock subject to mandatory redemption - - - -
Subsidiary obligated mandatorily redeemable preferred securities - - - -
Long-term debt 2,374,948 2,455,013 2,362,852 2,202,473
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $5,505,722 $5,509,818 $5,329,600 $5,135,366
==============================================================================================================================
Capitalization Ratios (percent):
Common stock equity 48.9 47.4 47.4 47.6
Preferred stock 8.0 8.0 8.3 9.5
Company obligated mandatorily redeemable preferred securities - - - -
Long-term debt 43.1 44.6 44.3 42.9
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0 100.0
==============================================================================================================================
First Mortgage Bonds (in thousands):
Issued - 150,000 860,000 745,000
Retired - 20,387 699,788 931,797
Company Obligated Mandatorily Redeemable Preferred
Securities (in thousands):
Issued - - - -
Senior Notes (in thousands):
Issued - - - -
Preferred Stock (in thousands):
Issued - - 158,000 150,000
Retired - - 207,000 145,000
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1 A1 A1
Standard and Poor's A+ A A A
Duff & Phelps A+ A+ A+ A
Preferred Stock -
Moody's a2 a2 a2 a2
Standard and Poor's A A- A- A-
Duff & Phelps A A- A- A-
Unsecured Long-Term Debt -
Moody's - - - -
Standard and Poor's - - - -
Duff & Phelps - - - -
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 1,058,197 1,042,974 1,027,130 1,012,294
Commercial 166,480 162,239 157,337 152,530
Industrial 5,338 5,341 5,391 5,434
Other 725 716 713 704
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------
Total 1,230,740 1,211,270 1,190,571 1,170,962
==============================================================================================================================
Employees (year-end) 7,261 7,996 8,009 8,116
</TABLE>
II-81A
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA
Alabama Power Company 1998 Annual Report
<S> <C> <C> <C> <C>
===============================================================================================================================
1991 1990 1989 1988
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $2,846,794 $2,722,424 $2,629,354 $2,476,626
Net Income after Dividends
on Preferred Stock (in thousands) $339,666 $312,803 $311,146 $283,475
Cash Dividends on Common Stock (in thousands) $232,900 $220,800 $217,300 $212,700
Return on Average Common Equity (percent) 14.55 14.00 14.53 14.03
Total Assets (in thousands) $6,549,462 $6,362,293 $6,279,431 $6,180,945
Gross Property Additions (in thousands) $397,011 $444,680 $459,199 $643,892
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock 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
Subsidiary obligated mandatorily redeemable preferred securities - - - -
Long-term debt 2,382,635 2,397,931 2,435,129 2,496,492
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $5,254,233 $5,175,421 $5,125,840 $5,098,207
===============================================================================================================================
Capitalization Ratios (percent):
Common stock equity 45.4 44.1 42.7 41.1
Preferred stock 9.2 9.6 9.8 9.9
Company obligated mandatorily redeemable preferred securities - - - -
Long-term debt 45.4 46.3 47.5 49.0
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0 100.0
===============================================================================================================================
First Mortgage Bonds (in thousands):
Issued 250,000 - - 150,000
Retired 227,695 33,122 75,650 42,445
Company Obligated Mandatorily Redeemable Preferred
Securities (in thousands):
Issued - - - -
Senior Notes (in thousands):
Issued - - - -
Preferred Stock (in thousands):
Issued - - - 100,000
Retired 17,500 5,000 5,000 2,500
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1 A1 A1
Standard and Poor's A A A A
Duff & Phelps A A A 6
Preferred Stock -
Moody's a2 a2 a2 a2
Standard and Poor's A- A- A- A-
Duff & Phelps A- A- A- 7
Unsecured Long-Term Debt -
Moody's - - - -
Standard and Poor's - - - -
Duff & Phelps - - - -
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 997,585 985,566 974,622 964,581
Commercial 148,228 144,340 141,265 137,955
Industrial 5,496 5,322 5,200 5,120
Other 697 690 684 678
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Total 1,152,006 1,135,918 1,121,771 1,108,334
===============================================================================================================================
Employees (year-end) 8,513 9,473 9,698 10,302
</TABLE>
II-81B
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Alabama Power Company 1998 Annual Report
<S> <C> <C> <C>
===========================================================================================================================
1998 1997 1996
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $1,133,435 $997,507 $998,806
Commercial 779,169 724,148 696,453
Industrial 853,550 775,591 759,628
Other 14,523 13,563 13,729
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total retail 2,780,677 2,510,809 2,468,616
Sales for resale - non-affiliates 448,973 431,023 391,669
Sales for resale - affiliates 103,562 161,795 216,620
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 3,333,212 3,103,627 3,076,905
Other revenues 53,161 45,484 43,870
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total $3,386,373 $3,149,111 $3,120,775
===========================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 15,794,543 14,336,408 14,593,761
Commercial 11,904,509 11,330,312 10,904,476
Industrial 21,585,117 20,727,912 19,999,258
Other 196,647 180,389 192,573
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total retail 49,480,816 46,575,021 45,690,068
Sales for resale - non-affiliates 11,840,909 12,329,480 9,491,237
Sales for resale - affiliates 5,976,099 8,993,326 10,292,066
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total 67,297,824 67,897,827 65,473,371
===========================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 7.18 6.96 6.84
Commercial 6.55 6.39 6.39
Industrial 3.95 3.74 3.80
Total retail 5.62 5.39 5.40
Sales for resale 3.10 2.78 3.07
Total sales 4.95 4.57 4.70
Residential Average Annual Kilowatt-Hour
Use Per Customer 14,370 13,254 13,705
Residential Average Annual Revenue
Per Customer $1,031.21 $922.21 $937.95
Plant Nameplate Capacity Ratings (Note 1)
(year-end) (megawatts) 11,151 11,151 11,151
Territorial Peak-Hour Demand (megawatts) (Note 2):
Winter 7,757 8,478 8,413
Summer 10,329 9,778 9,912
Annual Load Factor (percent) (Note 2) 62.9 62.7 61.3
Plant Availability (percent):
Fossil-steam 85.6 86.3 86.6
Nuclear 80.2 88.8 90.5
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 65.3 65.7 67.0
Nuclear 16.3 17.9 18.5
Hydro 6.9 7.5 7.1
Oil and gas 1.5 0.7 0.4
Purchased power -
From non-affiliates 3.3 2.4 2.4
From affiliates 6.7 5.8 4.6
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
===========================================================================================================================
Total Fuel Economy Data (Note 1):
BTU per net kilowatt-hour generated 8,938 9,984 10,035
Cost of fuel per million BTU (cents) 171.85 148.61 147.09
Average cost of fuel per net kilowatt-hour generated (cents) 1.54 1.48 1.48
===========================================================================================================================
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.
</TABLE>
II-82
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Alabama Power Company 1998 Annual Report
<S> <C> <C> <C> <C>
==============================================================================================================================
1995 1994 1993 1992
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $997,069 $913,146 $947,277 $845,660
Commercial 670,453 647,202 634,895 589,816
Industrial 805,596 803,587 832,938 800,311
Other 13,619 13,515 13,344 12,734
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------
Total retail 2,486,737 2,377,450 2,428,454 2,248,521
Sales for resale - non-affiliates 370,140 354,760 364,105 407,791
Sales for resale - affiliates 127,730 164,762 181,975 158,088
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 2,984,607 2,896,972 2,974,534 2,814,400
Other revenues 40,167 38,170 33,075 32,440
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------
Total $3,024,774 $2,935,142 $3,007,609 $2,846,840
==============================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 14,383,231 13,183,147 13,185,062 12,069,268
Commercial 10,043,220 9,645,798 9,185,462 8,629,869
Industrial 19,862,577 19,479,364 18,595,237 18,260,274
Other 186,848 185,876 181,673 176,798
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------
Total retail 44,475,876 42,494,185 41,147,434 39,136,209
Sales for resale - non-affiliates 8,046,189 6,775,176 7,143,672 8,382,571
Sales for resale - affiliates 6,705,174 8,432,533 8,081,324 7,210,697
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------
Total 59,227,239 57,701,894 56,372,430 54,729,477
==============================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.93 6.93 7.18 7.01
Commercial 6.68 6.71 6.91 6.83
Industrial 4.06 4.13 4.48 4.38
Total retail 5.59 5.59 5.90 5.75
Sales for resale 3.38 3.42 3.59 3.63
Total sales 5.04 5.02 5.28 5.14
Residential Average Annual Kilowatt-Hour
Use Per Customer 13,686 12,746 12,936 12,017
Residential Average Annual Revenue
Per Customer $948.71 $882.88 $929.36 $842.00
Plant Nameplate Capacity Ratings (Note 1)
(year-end) (megawatts) 10,831 10,431 10,431 10,431
Territorial Peak-Hour Demand (megawatts) (Note 2):
Winter 7,958 8,217 7,152 7,077
Summer 10,090 9,028 9,457 8,801
Annual Load Factor (percent) (Note 2) 59.2 62.2 58.6 59.6
Plant Availability (percent):
Fossil-steam 88.3 86.9 89.7 88.9
Nuclear 81.1 92.5 86.6 80.2
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 67.1 62.9 63.9 64.3
Nuclear 17.1 21.7 20.1 19.0
Hydro 7.0 8.4 6.9 8.5
Oil and gas 0.4 * * *
Purchased power -
From non-affiliates 2.7 1.3 1.1 1.2
From affiliates 5.7 5.7 8.0 7.0
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0 100.0
==============================================================================================================================
Total Fuel Economy Data (Note 1):
BTU per net kilowatt-hour generated 10,025 9,961 10,003 10,000
Cost of fuel per million BTU (cents) 148.68 157.62 173.66 164.57
Average cost of fuel per net kilowatt-hour generated (cents) 1.49 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.
</TABLE>
II-83A
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Alabama Power Company 1998 Annual Report
<S> <C> <C> <C> <C>
=================================================================================================================================
1991 1990 1989 1988
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $864,347 $825,645 $781,982 $761,805
Commercial 582,730 551,634 533,487 510,910
Industrial 790,224 777,580 762,274 738,755
Other 12,662 12,103 11,743 11,255
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------------
Total retail 2,249,963 2,166,962 2,089,486 2,022,725
Sales for resale - non-affiliates 407,912 434,996 409,202 355,362
Sales for resale - affiliates 159,375 93,473 104,488 76,691
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 2,817,250 2,695,431 2,603,176 2,454,778
Other revenues 29,544 26,993 26,178 21,848
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------------
Total $2,846,794 $2,722,424 $2,629,354 $2,476,626
=================================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 12,324,898 11,996,794 11,346,736 11,332,285
Commercial 8,526,131 8,201,534 7,915,685 7,711,092
Industrial 17,511,579 17,713,153 17,360,791 16,881,342
Other 174,760 170,420 166,485 165,122
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------------
Total retail 38,537,368 38,081,901 36,789,697 36,089,841
Sales for resale - non-affiliates 8,810,442 10,277,060 10,292,329 7,905,750
Sales for resale - affiliates 7,784,285 4,519,275 5,048,743 3,551,142
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------------
Total 55,132,095 52,878,236 52,130,769 47,546,733
=================================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 7.01 6.88 6.89 6.72
Commercial 6.83 6.73 6.74 6.63
Industrial 4.51 4.39 4.39 4.38
Total retail 5.84 5.69 5.68 5.60
Sales for resale 3.42 3.57 3.35 3.77
Total sales 5.11 5.10 4.99 5.16
Residential Average Annual Kilowatt-Hour
Use Per Customer 12,435 12,256 11,717 11,839
Residential Average Annual Revenue
Per Customer $872.04 $843.50 $807.50 $795.84
Plant Nameplate Capacity Ratings (Note 1)
(year-end) (megawatts) 10,539 9,879 9,879 9,279
Territorial Peak-Hour Demand (megawatts) (Note 2):
Winter 6,586 6,293 7,264 6,377
Summer 8,627 8,878 8,256 7,991
Annual Load Factor (percent) (Note 2) 59.9 57.4 59.5 59.6
Plant Availability (percent):
Fossil-steam 93.1 92.2 90.7 91.3
Nuclear 87.0 86.5 83.1 91.9
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 61.5 57.0 54.1 53.9
Nuclear 20.8 21.6 21.0 26.1
Hydro 8.2 8.7 11.0 4.8
Oil and gas * 0.1 0.1 0.1
Purchased power -
From non-affiliates 1.6 0.9 1.8 0.5
From affiliates 7.9 11.7 12.0 14.6
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0 100.0
=================================================================================================================================
Total Fuel Economy Data (Note 1):
BTU per net kilowatt-hour generated 9,985 10,072 10,061 10,137
Cost of fuel per million BTU (cents) 170.49 171.55 172.20 168.21
Average cost of fuel per net kilowatt-hour generated (cents) 1.70 1.73 1.73 1.71
=================================================================================================================================
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.
</TABLE>
11-83B
GEORGIA POWER COMPANY
FINANCIAL SECTION
II-84
<PAGE>
MANAGEMENT'S REPORT
Georgia Power Company 1998 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 three
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.
/s/ H. Allen Franklin
H. Allen Franklin
President and Chief
Executive Officer
/s/ David M. Ratcliffe
David M. Ratcliffe
Executive Vice President,
Treasurer and Chief
Financial Officer
February 10, 1999
II-85
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Georgia Power Company:
We have audited the accompanying balance sheets and statements of capitalization
of Georgia Power Company (a Georgia corporation and a wholly owned subsidiary of
Southern Company) as of December 31, 1998 and 1997, 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, 1998. 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-97 through II-117)
referred to above present fairly, in all material respects, the financial
position of Georgia Power Company as of December 31, 1998 and 1997, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Atlanta, Georgia
February 10, 1999
II-86
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Georgia Power Company 1998 Annual Report
RESULTS OF OPERATIONS
Earnings
Georgia Power Company's 1998 earnings totaled $570 million, representing a $24
million (4.0 percent) decrease from 1997. This earnings decrease resulted
primarily from higher operating expenses, additional depreciation charges
pursuant to a Georgia Public Service Commission (GPSC) retail accounting order
discussed below, lower wholesale capacity revenues, and the write-off of a
portion of the Rocky Mountain plant investment. These decreases to earnings were
partially offset by higher retail revenues, lower financing costs and increased
non-operating income. Earnings for 1997 totaled $594 million, representing a $14
million (2.4 percent) increase over 1996. This earnings increase resulted
primarily from lower operating expenses, lower financing costs, and increased
non-operating income, partially offset by lower retail revenues and additional
depreciation charges pursuant to the GPSC retail accounting order.
Revenues
The following table summarizes the factors impacting operating revenues for the
1996-1998 period:
Increase (Decrease)
From Prior Year
------------------------------------
1998 1997 1996
------------------------------------
Retail - (in millions)
Sales growth $ 174 $ 62 $ 58
Weather 101 (74) (25)
Fuel cost recovery 70 (30) 28
Demand-side programs (25) (3) (10)
- - - - - - - --------------------------------------------------------------------
Total retail 320 (45) 51
- - - - - - - --------------------------------------------------------------------
Sales for resale -
Non-affiliates (23) 1 (9)
Affiliates 43 3 (41)
- - - - - - - --------------------------------------------------------------------
Total sales for resale 20 4 (50)
- - - - - - - --------------------------------------------------------------------
Other operating revenues 13 10 10
- - - - - - - --------------------------------------------------------------------
Total operating revenues $ 353 $ (31) $ 11
====================================================================
Percent change 8.0% (0.7)% 0.3%
- - - - - - - --------------------------------------------------------------------
Retail revenues of $4.3 billion in 1998 increased $320 million (8.0 percent)
from 1997 primarily due to higher energy sales to residential and commercial
customers. Retail revenues of $4.0 billion in 1997 decreased $45 million (1.1
percent) from 1996 primarily due to milder-than-normal weather, as well as
commercial and industrial customers taking advantage of load management rates.
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.
Wholesale revenues from sales to non-affiliated utilities decreased slightly
in 1998 and were as follows:
1998 1997 1996
-------------------------------
(in millions)
Outside service area -
Long-term contracts $ 51 $ 71 $ 84
Other sales 94 80 37
Inside service area 115 132 161
- - - - - - - ---------------------------------------------------------------
Total $260 $283 $282
===============================================================
Revenues from long-term contracts outside the service area decreased in 1998
primarily due to lower capacity charges and decreased energy sales and in 1997
primarily due to scheduled reductions in the amount of megawatt-hour capacity
under these contracts. See Note 7 to the financial statements for further
information regarding these sales. Revenues from other sales outside the service
area increased in 1998 and 1997 primarily due to power marketing activities.
These increases were primarily offset by increases in purchased power from
non-affiliates and, as a result, had no significant effect on net income.
Wholesale revenues from customers within the service area decreased in 1998 and
1997 primarily due to a decrease in revenues under a power supply agreement with
Oglethorpe Power Corporation (OPC). OPC decreased its purchases of capacity by
250 megawatts each in September 1996, 1997, and 1998 and has notified the
Company of its intent to decrease purchases of capacity by an additional 250
megawatts in September 1999 and 125 megawatts in September 2000.
Revenues from sales to affiliated companies within the Southern electric
system, as well as purchases of energy, will vary from year to year depending on
demand and the availability and cost of generating resources at each company.
These transactions do not have a significant impact on earnings.
II-87
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Georgia Power Company 1998 Annual Report
Kilowatt-hour (KWH) sales for 1998 and the percent change by year were as
follows:
Percent Change
----------------------------
1998
KWH 1998 1997 1996
-----------------------------------------
(in billions)
Residential 19.5 12.6% (3.0)% 3.0%
Commercial 22.9 8.2 1.5 4.9
Industrial 27.3 2.2 1.9 3.6
Other 0.5 1.0 0.4 8.6
--------
Total retail 70.2 6.9 0.4 3.9
--------
Sales for resale -
Non-affiliates 6.4 (5.2) (13.6) 19.4
Affiliates 2.0 19.4 44.6 (56.9)
--------
Total sales for resale 8.4 (0.3) (6.0) (3.0)
--------
Total sales 78.6 6.0 (0.3) 3.0
========
- - - - - - - ------------------------------------------------------------------
Residential and commercial sales increased in 1998 12.6 percent and 8.2
percent, respectively, and industrial sales increased slightly by 2.2 percent.
The increases are attributed primarily to sales growth and hotter temperatures
in the summer months. Residential sales in 1997 declined 3.0 percent while sales
to commercial and industrial customers increased slightly by 1.5 percent and 1.9
percent, respectively. Milder-than-normal temperatures experienced in 1997
contributed to the moderate sales.
Expenses
Fuel costs constitute the single largest expense for the Company. The mix of
fuel sources for generation of electricity is determined primarily by system
load, the unit cost of fuel consumed, and the availability of hydro and nuclear
generating units. The amount and sources of generation and the average cost of
fuel per net KWH generated were as follows:
1998 1997 1996
-------------------------
Total generation
(billions of KWH) 69.1 66.5 63.7
Sources of generation
(percent) --
Coal 73.3 74.8 74.3
Nuclear 21.6 21.8 22.4
Hydro 2.6 2.7 2.7
Oil and gas 2.5 0.7 0.6
Average cost of fuel per net
KWH generated
(cents) -- 1.36 1.32 1.35
- - - - - - - ---------------------------------------------------------------
Fuel expense increased 7.0 percent in 1998 primarily due to an increase in
generation to meet higher energy demands and a higher average cost of fuel. Fuel
expense increased 2.6 percent in 1997 primarily due to an increase in
generation, partially offset by a lower average cost of fuel.
Purchased power expense increased $70 million (21.9 percent) to meet higher
energy demands and power marketing activities. The majority of the energy
purchased for power marketing activities was resold to non-affiliated third
parties and had no significant effect on net income. In June 1998, the Company
began purchasing capacity and energy from a 300 megawatt cogeneration facility
pursuant to a 30-year purchase power agreement. Purchased power expense
decreased $66 million (17.1 percent) in 1997 primarily due to decreased
purchases from affiliated companies and declines in contractual capacity buyback
purchases from the co-owners of Plant Vogtle. Under the terms of the 1991 retail
rate order, the costs of declining Plant Vogtle contractual capacity buyback
purchases were levelized over a six-year period ending September 1997. The
levelization is reflected in the amortization of deferred Plant Vogtle costs in
the Statements of Income. See Note 1 to the financial statements under "Plant
Vogtle Phase-In Plans" for additional information.
II-88
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Georgia Power Company 1998 Annual Report
Other operation and maintenance (O&M) expenses, excluding the provision for
separation benefits, increased 15.9 percent primarily due to continuing expenses
related to a new customer service system implemented in January 1998,
modification of certain information systems for year 2000 compliance discussed
below, an increase in outage costs at steam power generating facilities, and
increased line maintenance. Other O&M expenses, excluding the provision for
separation benefits, decreased 4.1 percent in 1997 primarily due to initiatives
in 1996 to reduce fossil generation materials inventory levels and an adjustment
in 1996 to deferred postretirement benefits to reflect changes in the retiree
benefits plan.
Depreciation and amortization increased $191 million in 1998 and $140
million in 1997 primarily due to accelerated depreciation of generating plant
pursuant to the retail accounting order and an increase in plant-in-service. See
Note 3 to the financial statements under "Retail Rate Order" for additional
information.
The Company has deferred certain expenses and recorded a deferred return
related to Plant Vogtle under phase-in plans. The amortization of deferred Plant
Vogtle costs reflects the completion in September 1997 of the amortization of
the levelized buybacks and the Plant Vogtle Unit 1 cost deferrals under a 1987
GPSC order. In December 1998, the remaining Vogtle Unit 2 cost deferrals were
fully amortized to expense under a 1998 retail rate order. See Note 1 to the
financial statements under "Plant Vogtle Phase-In Plans" for information
regarding the deferral and subsequent amortization of costs related to Plant
Vogtle.
Additionally, as a result of the 1998 retail rate order, the Company
recorded a $34 million pre-tax write-off associated with a portion of its
investment in the Rocky Mountain plant. See Note 3 to the financial statements
under "Rocky Mountain Plant Status" for additional information.
Other income (expense) increased in 1998 primarily due to the recognition of
$73 million in interest income resulting from the resolution of tax issues with
the Internal Revenue Service (IRS) and the State of Georgia. Other income
(expense) increased in 1997 primarily due to increased tax benefits from losses
of the parent company allocated to the Company under the joint consolidated
income tax agreement between Southern Company and its subsidiaries. See Note 8
to the financial statements for additional information.
Total financing costs decreased in 1998 and 1997. These changes were
primarily due to the refinancing or retirement of securities. The Company
refinanced or retired $754 million and $701 million of securities in 1998 and
1997, respectively. Dividends on preferred stock decreased $13 million and $26
million in 1998 and 1997, respectively. These decreases were partially offset by
increases in interest and other charges of $6 million and $17 million in 1998
and 1997, respectively, primarily due to the issuance of additional mandatorily
redeemable preferred securities in 1996 and 1997.
Effects of Inflation
The Company is subject to rate regulation and income tax laws that are based on
the recovery of historical costs. Therefore, inflation creates an economic loss
because the Company is recovering its costs of investments in dollars that have
less purchasing power. While the inflation rate has been relatively low in
recent years, it continues to have an adverse effect on the Company because of
the large investment in utility plants with long economic life. Conventional
accounting for historical cost does not recognize this economic loss nor the
partially offsetting gain that arises through financing facilities with
fixed-money obligations such as long-term debt and preferred securities. Any
recognition of inflation by regulatory authorities is reflected in the rate of
return allowed.
Future Earnings Potential
The results of operations for the past three years are not necessarily
indicative of future earnings. The level of future earnings depends on numerous
factors including regulatory matters and energy sales.
The Company currently operates as a vertically integrated utility providing
electricity to customers within its traditional service area located in the
state of Georgia. Prices for electricity provided by the Company to retail
customers are set by the GPSC under cost-based regulatory principles.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Georgia Power Company 1998 Annual Report
On January 1, 1999, the Company began operating under a new three-year
retail rate order approved by the GPSC on December 18, 1998. The Company's
earnings will continue to be evaluated against a retail return on common equity
range of 10 percent to 12.5 percent, with rate reductions of $262 million in
1999 and an additional reduction of $24 million in 2000. The order provides for
$85 million in each year, plus up to $50 million of any earnings in excess of
the 12.5 percent return during the second and third years, to be applied to
accelerated amortization or depreciation of assets. Two-thirds of any additional
earnings in excess of the 12.5 percent return will be applied to rate
reductions, with the remaining one-third retained by the Company. The Company
will not file for a general base rate increase unless its projected retail
return on common equity falls below 10 percent, and will be required to file a
general rate case on July 1, 2001 in response to which the GPSC would be
expected to determine whether the rate order should be continued, modified, or
discontinued. See Note 3 to the financial statements under "Retail Rate Order"
for additional information.
Under a previous three-year accounting order ending December 1998, the
Company's earnings were evaluated against a retail return on common equity range
of 10 percent to 12.5 percent. Earnings in excess of 12.5 percent were used to
accelerate the amortization of regulatory assets or depreciation of electric
plant.
As a result of the Company recognizing the write-off of a portion of its
cost in the Rocky Mountain plant and completing the amortization of deferred
Plant Vogtle costs in 1998 in accordance with the new retail rate order, future
depreciation and amortization will decrease. Future depreciation and
amortization will also decrease as a result of the cap on the amount of
accelerated amortization or depreciation of assets under the new retail rate
order. See Note 3 to the financial statements under "Retail Rate Order" for
additional information.
Growth in energy sales is subject to a number of factors which traditionally
have included changes in contracts with neighboring utilities, energy
conservation practiced by customers, the elasticity of demand, weather,
competition, initiatives to increase sales to existing customers, and the rate
of economic growth in the Company's service area. Assuming normal weather,
retail sales growth is projected to be approximately 2 percent annually on
average during 1999 through 2001.
In September 1998, OPC decreased its purchases of capacity under a power
supply agreement by 250 megawatts and has notified the Company of its intent to
decrease purchases of capacity by an additional 250 megawatts in September 1999
and 125 megawatts in September 2000. As a result, the Company's capacity
revenues from OPC will decline by approximately $23 million in 1999, an
additional $19 million in 2000, and an additional $4 million in 2001. Under the
amended 1995 Integrated Resource Plan approved by the GPSC in March 1997, the
resources associated with the decreased purchases in 1998 will be used to meet
the needs of the Company's retail customers through 2004. See Note 3 to the
financial statements under "FERC Review of Equity Returns" for additional
information about other wholesale regulatory matters.
The Company has entered into a five-year purchase power agreement scheduled
to begin in June 2000 for approximately 215 megawatts. Capacity and fixed O&M
payments are estimated to be between $7 million and $8 million each year.
The Company plans to construct an eight unit, 600-megawatt combustion
turbine peaking power plant that will begin operation in 2000 and will serve the
wholesale market. The plant will supply power to fulfill a contract for 400
megawatts of peaking power already established with the Company. The addition of
this facility will increase related O&M and depreciation expenses for the
Company. Because the plant will be dedicated to the wholesale market, retail
rates will not be affected. The Company may expand the facility to a total of
1,200 to 1,900 megawatts of capacity over the next two to three years in order
to meet additional anticipated wholesale power demand.
Compliance costs related to current and future environmental laws and
regulations could affect earnings if such costs are not fully recovered. The
Clean Air Act and other important environmental items are discussed further
under "Environmental Issues."
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Georgia Power Company 1998 Annual Report
The electric utility industry in the United States is currently undergoing a
period of dramatic change as a result of regulatory and competitive factors.
Among the primary agents of change has been the Energy Policy Act of 1992
(Energy Act). The Energy Act allows independent power producers (IPPs) to access
a utility's transmission network in order to sell electricity to other
utilities. This enhances the incentive for IPPs to build cogeneration plants for
a utility's large industrial and commercial customers and sell electric energy
to other utilities. Also, electricity sales for resale rates are being driven
down by wholesale transmission access and numerous potential new energy
suppliers, including power marketers and brokers. The Company is aggressively
working to maintain and expand its share of wholesale sales in the Southeastern
power markets. Although the Energy Act does not permit retail customer access,
it was a major catalyst for the current restructuring and consolidation taking
place within the utility industry.
The Company continues to compete with other electric suppliers within the
state. In Georgia, most new retail customers with at least 900 kilowatts of
connected load may choose their electricity supplier. Numerous federal and state
initiatives are in varying stages to promote wholesale and retail competition
across the nation. Among other things, these initiatives allow customers to
choose their electricity provider. As these initiatives materialize, the
structure of the utility industry could radically change. Some states have
approved initiatives that result in a separation of the ownership and/or
operation of generating facilities from the ownership and/or operation of
transmission and distribution facilities. While the GPSC has held workshops to
discuss retail competition and industry restructuring, there has been no
proposed or enacted legislation to date in Georgia. Enactment would require
numerous issues to be resolved, including significant ones relating to
transmission pricing and recovery of costs. The GPSC plans to release a schedule
and procedure order for a stranded costs docket in the first half of 1999. The
ability of the Company to recover all its costs, including the regulatory assets
described in Note 1 to the financial statements, could have a material effect on
the financial condition of the Company. The Company is attempting to reduce
regulatory assets and other costs through the three-year retail rate order. See
Note 3 to the financial statements under "Retail Rate Order" for additional
information.
Unless the Company remains a low-cost producer and provides quality service,
the Company's retail energy sales growth could be limited as competition
increases. Conversely, continuing to be a low-cost producer could provide
opportunities to increase market share and profitability in markets that evolve
with changing regulation.
The Company is subject to the provisions of Financial Accounting Standards
Board (FASB) Statement No. 71, Accounting for the Effects of Certain Types of
Regulation. In the event that a portion of the Company's operations is no longer
subject to these provisions, the Company would be required to write off related
regulatory assets and liabilities that are not specifically recoverable, and
determine if any other assets have been impaired. See Note 1 to the financial
statements under "Regulatory Assets and Liabilities" for additional information.
The staff of the Securities and Exchange Commission has questioned certain
of the current accounting practices of the electric utility industry - including
the Company's - 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 liabilities related to the retirement of long-lived assets,
including nuclear decommissioning. If the FASB issues new accounting rules, the
estimated costs of retiring the Company's nuclear and other facilities may be
required to be recorded as liabilities in the Balance Sheets. Also, the annual
provisions for such costs could change. Because of the Company's current ability
to recover asset retirement costs through rates, these changes would not have a
significant adverse effect on results of operations. See Note 1 to the financial
statements under "Depreciation and Nuclear Decommissioning" for additional
information.
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MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Georgia Power Company 1998 Annual Report
Year 2000
Year 2000 Challenge
In order to save storage space, computer programmers in the 1960s and 1970s
shortened the year portion of date entries to just two digits. Computers
assumed, in effect, that all years began with "19." This practice was widely
adopted and hard-coded into computer chips and processors found in some
equipment. This approach, intended to save processing time and storage space,
was used until the mid-1990s. Unless corrected before the year 2000, affected
software systems and devices containing a chip or microprocessor with date and
time functions could incorrectly process dates or the systems may cease to
function.
The Company depends on complex computer systems for many aspects of its
operations, which include generation, transmission, and distribution of
electricity, as well as other business support activities. The Company's goal is
to have critical devices or software that are required to maintain operations to
be Year 2000 ready by June 1999. Year 2000 ready means that a system or
application is determined suitable for continued use through the Year 2000 and
beyond. Critical systems include, but are not limited to, reactor control
systems, safe shutdown systems, turbine generator systems, control center
computer systems, customer service systems, energy management systems, and
telephone switches and equipment.
Year 2000 Program and Status
The Company's executive management recognizes the seriousness of the Year 2000
challenge and has dedicated what it believes to be adequate resources to address
the issue. The Millennium Project is a team of employees, IBM consultants, and
other contractors whose progress is reviewed on a monthly basis by a steering
committee of Southern Company executives.
The Company's Year 2000 program was divided into two phases. Phase I began
in 1996 and consisted of identifying and assessing corporate assets related to
software systems and devices that contain a computer chip or clock. The first
phase was completed in June 1997. Phase 2 consists of testing and remediating
high priority systems and devices. Also, contingency planning is included in
this phase. Completion of Phase 2 is targeted for June 1999. The Millennium
Project will continue to monitor the affected computer systems, devices, and
applications into the year 2000.
The Southern Company has completed more than 70 percent of the activities
contained in its work plan. The percentage of completion and projected
completion by function are as follows:
- - - - - - - ------------------------------------------------------------------------------
Work Plan
----------------------------------------------------
Remediation Project
Inventory Assessment Testing Completion
- - - - - - - -----------------------------------------------------------------------------
Generation 100% 100% 70% 6/99
- - - - - - - -----------------------------------------------------------------------------
Energy Management 100 100 90 6/99
- - - - - - - -----------------------------------------------------------------------------
Transmission and
Distribution 100 100 100 1/99
- - - - - - - -----------------------------------------------------------------------------
Telecommunications 100 100 50 6/99
- - - - - - - -----------------------------------------------------------------------------
Corporate Applications 100 100 90 3/99
- - - - - - - -----------------------------------------------------------------------------
Year 2000 Costs
Current projected total costs for Year 2000 readiness, including the Company's
share of costs of Southern Nuclear Operating Company, are approximately $38
million. These costs include labor necessary to identify, test, and renovate
affected devices and systems. From its inception through December 31, 1998, the
Year 2000 program costs, recognized as expense, amounted to $27 million.
Year 2000 Risks
The Company is implementing a detailed process to minimize the possibility of
service interruptions related to the Year 2000. The Company believes, based on
current tests, that the system can provide customers with electricity. These
tests increase confidence, but do not guarantee error-free operation. The
Company is taking what it believes to be prudent steps to prepare for the Year
2000, and it expects any interruptions in service that may occur within the
service territory to be isolated and short in duration.
The Company expects the risks associated with Year 2000 to be no more severe
than the scenarios that its electric system is routinely prepared to handle. The
most likely worst case scenario consists of the service loss of one of the
largest generating units and/or the service loss of any single bulk transmission
element in its service territory. The Company has followed a proven methodology
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MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Georgia Power Company 1998 Annual Report
for identifying and assessing software and devices containing potential Year
2000 challenges. Remediation and testing of those devices are in progress.
Following risk assessment, the Company is preparing contingency plans as
appropriate and is participating in North American Electric Reliability Council
- - - - - - - - coordinated national drills during 1999.
The Company is currently reviewing the Year 2000 readiness of material third
parties that provide goods and services crucial to the Company's operations.
Among such critical third parties are fuel, transportation, telecommunications,
water, chemical, and other suppliers. Contingency plans based on the assessment
of each third party's ability to continue supplying critical goods and services
to the Company are being developed.
There is a potential for some earnings erosion caused by reduced electrical
demand by customers because of their Year 2000 issues.
Year 2000 Contingency Plans
Because of experience with hurricanes and other storms, the Company is skilled
at developing and using contingency plans in unusual circumstances. As part of
Year 2000 business continuity and contingency planning, the Company is drawing
on that experience to make risk assessments and is developing additional plans
to deal specifically with situations that could arise relative to Year 2000
challenges. The Company is identifying critical operational locations, and key
employees will be on duty at those locations during the Year 2000 transition. In
September 1999, drills are scheduled to be conducted to test contingency plans.
Because of the level of detail of the contingency planning process, management
feels that the contingency plans will keep any service interruptions that may
occur within the service territory isolated and short in duration.
Exposure to Market Risks
Due to cost-based rate regulation, the Company has limited exposure to market
volatility in interest rates and prices of electricity. To mitigate residual
risks relative to movements in electricity prices, the Company enters into fixed
price contracts for the purchase and sale of electricity through the wholesale
electricity market. Realized gains and losses are recognized in the income
statement as incurred. At December 31, 1998, exposure from these activities was
not material to the Company's financial position, results of operations, or cash
flows. Also, based on the Company's overall interest rate exposure at December
31, 1998, a near-term 100 basis point change in interest rates would not
materially affect the financial statements.
New Accounting Standards
The FASB has issued Statement No. 133, Accounting for Derivative Instruments and
Hedging Activities, which must be adopted by the year 2000. This statement
establishes accounting and reporting standards for derivative instruments -
including certain derivative instruments embedded in other contracts - and for
hedging activities. The Company has not yet quantified the impact of adopting
this statement on its financial statements; however, the adoption could increase
volatility in earnings.
In March 1998, the American Institute of Certified Public Accountants (AICPA)
issued a new Statement of Position, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use. This statement requires
capitalization of certain costs of internal-use software. The Company adopted
this statement in January 1999, and it is not expected to have a material impact
on the financial statements.
In April 1998, the AICPA issued a new Statement of Position, Reporting on the
Costs of Start-up Activities. This statement requires that the costs of start-up
activities and organizational costs be expensed as incurred. Any of these costs
previously capitalized by a company must be written off in the year of adoption.
The Company adopted this statement in January 1999, and it is not expected to
have a material impact on the financial statements.
In December 1998, the Emerging Issues Task Force (EITF) of the FASB issued
EITF No. 98-10, Accounting for Contracts Involved in Energy Trading and Risk
Management Activities. The EITF requires that energy trading contracts must be
marked to market through the income statement, with gains and losses reflected
rather than revenues and purchased power. Energy trading contracts are defined
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MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Georgia Power Company 1998 Annual Report
as energy contracts entered into with the objective of generating profits on or
from exposure to shifts or changes in market prices. The Company adopted the
required accounting in January 1999, and it is not expected to have a material
impact on the financial statements.
FINANCIAL CONDITION
Plant Additions
In 1998 gross utility plant additions were $499 million. These additions were
primarily related to transmission and distribution facilities and to the
purchase of nuclear fuel. The funds needed for gross property additions are
currently provided from operations. The Statements of Cash Flows provide
additional details.
Financing Activities
In 1998 the Company continued to lower its financing costs by refinancing
higher-cost issues. New issues during 1996 through 1998 totaled $1.6 billion and
retirement or repayment of securities totaled $2.0 billion. Composite financing
rates for long-term debt and preferred stock for the years 1996 through 1998, as
of year-end, were as follows:
1998 1997 1996
----------------------------------
Composite interest rate
on long-term debt 5.64% 6.11% 6.39%
Composite preferred
stock dividend rate 5.52 5.18 6.34
- - - - - - - ------------------------------------------------------------------
Subsidiaries of the Company have issued mandatorily redeemable preferred
securities. See Note 9 to the financial statements under "Preferred Securities"
for additional information.
Liquidity and Capital Requirements
Cash provided from operations increased by $30 million in 1998, primarily due to
higher retail revenues.
The Company estimates that construction expenditures for the years 1999
through 2001 will total $755 million, $734 million and $829 million,
respectively. Investments in additional combustion turbine and combined cycle
generating units, transmission and distribution facilities, enhancements to
existing generating plants, and equipment to comply with environmental
requirements are planned.
Cash requirements for improvement fund requirements, redemptions announced,
and maturities of long-term debt and preferred stock are expected to total $601
million during 1999 through 2001.
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. The amount to be funded is $24 million in 1999 and
increases to $30 million in 2000 and 2001. For additional information concerning
nuclear decommissioning costs, see Note 1 to the financial statements under
"Depreciation and Nuclear Decommissioning."
Sources of Capital
The Company expects to meet future capital requirements primarily using funds
generated from operations and, if needed, by the issuance of new debt and equity
securities, term loans, and short-term borrowings. To meet short-term cash needs
and contingencies, the Company had approximately $1.3 billion of unused credit
arrangements with banks at the beginning of 1999. See Note 9 to the financial
statements under "Bank Credit Arrangements" for additional information.
The Company historically has relied on issuances of first mortgage bonds and
preferred stock, in addition to pollution control revenue bonds issued for its
benefit by public authorities, to meet its long-term external financing
requirements. Recently, the Company's financings have consisted of unsecured
debt and trust preferred securities. In this regard, the Company sought and
obtained stockholder approval in 1997 to amend its corporate charter eliminating
restrictions on the amounts of unsecured indebtedness it may incur.
If the Company chooses to issue first mortgage bonds or preferred stock, it
is required to meet certain coverage requirements specified in its mortgage
indenture and corporate charter. The Company's ability to satisfy all coverage
requirements is such that it could issue new first mortgage bonds and preferred
stock to provide sufficient funds for all anticipated requirements.
II-94
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Georgia Power Company 1998 Annual Report
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 -- significantly
impacted the operating companies of Southern Company, including Georgia Power.
Specific reductions in sulfur dioxide and nitrogen oxide emissions from
fossil-fired generating plants are required in two phases. Phase I compliance
began in 1995 and initially affected 28 generating units in the Southern
electric system. As a result of Southern Company's compliance strategy, an
additional 22 generating units were brought into compliance with Phase I
requirements. Phase II compliance is required in 2000, and all fossil-fired
generating plants in the Southern electric system will be affected.
Southern Company achieved Phase I sulfur dioxide compliance at the affected
units by switching to low-sulfur coal, which required some equipment upgrades.
Construction expenditures for Georgia Power's Phase I compliance totaled
approximately $167 million.
For Phase II sulfur dioxide compliance, Southern Company could use emission
allowances, increase fuel switching, and/or install flue gas desulfurization
equipment at selected plants. Also, equipment to control nitrogen oxide
emissions will be installed on additional system fossil-fired units as necessary
to meet Phase II limits and ozone non-attainment requirements for metropolitan
Atlanta through 2000. Georgia Power's current compliance strategy for Phase II
and ozone non-attainment could require total estimated construction expenditures
of approximately $39 million, of which $14 million remains to be spent as of
December 31, 1998.
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.
In July 1997, the Environmental Protection Agency (EPA) revised the national
ambient air quality standards for ozone and particulate matter. This revision
makes the standards significantly more stringent. In September 1998, the EPA
issued the final regional nitrogen oxide rules to the states for implementation.
The states have one year to adopt and implement the new rules. The final rules
affect 22 states including Georgia. The EPA rules are being challenged in the
courts by several states and industry groups. Implementation of the final state
rules could require substantial further reductions in nitrogen oxide emissions
from fossil-fired generating facilities and other industry in these states.
Implementation of the standards could result in significant additional
compliance costs and capital expenditures that cannot be determined until the
results of legal challenges are known and the states have adopted their final
rules.
The EPA and state environmental regulatory agencies are reviewing and
evaluating various matters including: nitrogen oxide emission control strategies
for ozone non-attainment areas; additional controls for hazardous air pollutant
emissions; control strategies to reduce regional haze; and hazardous waste
disposal requirements. The impact of new standards will depend on the
development and implementation of applicable regulations.
The Company must comply with other environmental laws and regulations that
cover the handling and disposal of hazardous waste. Under these various laws and
regulations, the Company could incur costs to clean up properties currently or
previously owned. 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 $6 million, $4
million and $2 million, in 1998, 1997 and 1996, respectively. Additional sites
may require environmental remediation for which the Company may be liable for a
portion of or all required clean-up costs. See Note 3 to the financial
statements under "Certain Environmental Contingencies" for information regarding
the Company's potentially responsible party status at a site in Brunswick,
Georgia, and the status of sites listed on the State of Georgia's hazardous site
inventory.
Several major pieces of environmental legislation are being considered for
reauthorization or amendment by Congress. These include: the Clean Air Act; the
Clean Water Act; the Comprehensive Environmental Response, Compensation, and
Liability Act; the Resource Conservation and Recovery Act; the Toxic Substances
Control Act; and the Endangered Species Act. Changes to these laws could affect
many areas of the Company's operations. The full impact of any such changes
cannot be determined at this time.
II-95
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Georgia Power Company 1998 Annual Report
Compliance with possible additional legislation related to global climate
change, electromagnetic fields and other environmental and health concerns could
significantly affect the Company. The impact of new legislation -- if any --
will depend on the subsequent development and implementation of applicable
regulations. In addition, the potential exists for liability as the result of
lawsuits alleging damages caused by electromagnetic fields.
Cautionary Statement Regarding Forward-Looking
Information
The Company's 1998 Annual Report contains forward-looking and historical
information. The Company cautions that there are various important factors that
could cause actual results to differ materially from those indicated in the
forward-looking information; accordingly, there can be no assurance that such
indicated results will be realized. These factors include legislative and
regulatory initiatives regarding deregulation and restructuring of the electric
utility industry; the extent and timing of the entry of additional competition
in the Company's markets; potential business strategies -- including
acquisitions or dispositions of assets or internal restructuring -- that may be
pursued by Southern Company; state and federal rate regulation; Year 2000
issues; changes in or application of environmental and other laws and
regulations to which the Company is subject; political, legal and economic
conditions and developments; financial market conditions and the results of
financing efforts; changes in commodity prices and interest rates; weather and
other natural phenomena; and other factors discussed in the reports--including
Form 10-K--filed from time to time by the Company with the Securities and
Exchange Commission.
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<PAGE>
STATEMENTS OF INCOME
For the Years Ended December 31, 1998, 1997, and 1996
Georgia Power Company 1998 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C>
===============================================================================================================================
1998 1997 1996
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Operating Revenues:
Revenues $ 4,656,647 $ 4,347,009 $ 4,380,893
Revenues from affiliates 81,606 38,708 35,886
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 4,738,253 4,385,717 4,416,779
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation--
Fuel 917,119 857,269 835,194
Purchased power from non-affiliates 229,960 143,409 157,308
Purchased power from affiliates 161,003 177,240 229,324
Provision for separation benefits 2,369 5,459 39,099
Other 817,220 696,700 741,383
Maintenance 358,218 317,199 315,934
Depreciation and amortization 763,390 572,640 432,940
Amortization of deferred Plant Vogtle costs (Note 1) 50,412 120,577 136,650
Write-down of Rocky Mountain plant (Note 3) 33,536 - -
Taxes other than income taxes 204,623 207,192 207,098
Federal and state income taxes 406,983 426,918 435,904
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 3,944,833 3,524,603 3,530,834
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Operating Income 793,420 861,114 885,945
Other Income (Expense):
Allowance for equity funds used during construction 3,235 6,012 3,144
Equity in earnings of unconsolidated subsidiary (Note 4) 3,735 4,266 3,851
Interest income (Note 3) 79,578 10,581 5,333
Other, net (41,512) (35,834) (43,502)
Income taxes applicable to other income 8,351 31,763 18,581
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Income Before Interest and Other Charges 846,807 877,902 873,352
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Interest and Other Charges:
Interest on long-term debt 180,746 194,344 207,851
Allowance for debt funds used during construction (7,117) (8,962) (11,416)
Interest on interim obligations 12,213 7,795 15,478
Amortization of debt discount, premium and expense, net 13,366 14,179 14,790
Other interest charges 17,105 10,254 6,338
Distributions on preferred securities of subsidiary companies 54,327 47,369 14,958
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Interest and other charges, net 270,640 264,979 247,999
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Net Income 576,167 612,923 625,353
Dividends on Preferred Stock 5,939 18,927 45,026
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 570,228 $ 593,996 $ 580,327
===============================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1998, 1997, and 1996
Georgia Power Company 1998 Annual Report
<S> <C> <C> <C>
==========================================================================================================================
1998 1997 1996
- - - - - - - --------------------------------------------------------------------------------------------------------------------------
(in thousands)
Operating Activities:
Net income $ 576,167 $ 612,923 $ 625,353
Adjustments to reconcile net income to net
cash provided from operating activities --
Depreciation and amortization 867,637 674,286 521,086
Deferred income taxes and investment tax credits, net (93,005) (21,425) 35,700
Allowance for equity funds used during construction (3,235) (6,012) (3,144)
Amortization of deferred Plant Vogtle costs 50,412 120,577 136,650
Other, net (6,546) 2,076 45,255
Changes in certain current assets and liabilities --
Receivables, net (25,453) 13,387 9,421
Inventories (11,156) 39,748 55,753
Payables 47,862 (10,007) (35,651)
Taxes accrued 22,139 (3,596) 11,766
Energy cost recovery, retail (7,649) (20,103) 679
Other (15,142) (30,026) (15,880)
- - - - - - - --------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 1,402,031 1,371,828 1,386,988
- - - - - - - --------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (499,053) (475,921) (428,220)
Other 67,031 16,223 (13,149)
- - - - - - - --------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (432,022) (459,698) (441,369)
- - - - - - - --------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Proceeds --
Preferred securities - 364,250 225,000
First mortgage bonds - - 10,000
Pollution control bonds 89,990 284,700 112,825
Senior notes 495,000 - -
Retirements --
Preferred stock (106,064) (356,392) (179,148)
First mortgage bonds (558,250) (60,258) (210,860)
Pollution control bonds (89,990) (284,700) (119,665)
Interim obligations, net (25,378) (64,266) 30,166
Special deposits -- redemption funds - 44,454 (44,454)
Capital distribution to parent company (270,000) (205,000) (250,000)
Payment of preferred stock dividends (9,137) (26,917) (46,911)
Payment of common stock dividends (536,600) (520,000) (475,500)
Miscellaneous (26,641) (20,024) (10,646)
- - - - - - - --------------------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (1,037,070) (844,153) (959,193)
- - - - - - - --------------------------------------------------------------------------------------------------------------------------
Net Change in Cash and Cash Equivalents (67,061) 67,977 (13,574)
Cash and Cash Equivalents at Beginning of Year 83,333 15,356 28,930
- - - - - - - --------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 16,272 $ 83,333 $ 15,356
==========================================================================================================================
Supplemental Cash Flow Information:
Cash paid during the year for --
Interest (net of amount capitalized) $ 269,524 $ 258,298 $ 249,434
Income taxes (net of refunds) 480,318 427,596 373,886
- - - - - - - --------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</TABLE>
II-98
<PAGE>
BALANCE SHEETS
At December 31, 1998 and 1997
Georgia Power Company 1998 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C>
================================================================================================================================
ASSETS 1998 1997
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Utility Plant:
Plant in service $ 15,441,146 $ 15,082,570
Less accumulated provision for depreciation 6,109,331 5,319,680
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
9,331,815 9,762,890
Nuclear fuel, at amortized cost 121,169 126,882
Construction work in progress (Note 4) 189,849 214,128
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Total 9,642,833 10,103,900
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Southern Electric Generating Company, at equity (Note 4) 24,360 24,973
Nuclear decommissioning trusts, at market 284,536 194,417
Miscellaneous 34,781 87,907
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Total 343,677 307,297
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 16,272 83,333
Receivables--
Customer accounts receivable 439,420 385,844
Other accounts and notes receivable 99,574 110,278
Affiliated companies 16,817 20,333
Accumulated provision for uncollectible accounts (5,500) (3,000)
Fossil fuel stock, at average cost 104,133 96,067
Materials and supplies, at average cost 243,477 240,387
Prepayments 29,670 27,503
Vacation pay deferred 43,610 40,996
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Total 987,473 1,001,741
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Deferred Charges and Other Assets:
Deferred charges related to income taxes (Note 8) 604,488 688,472
Deferred Plant Vogtle costs (Note 1) - 50,412
Premium on reacquired debt, being amortized 173,858 166,609
Prepaid pension costs 103,606 67,777
Debt expense, being amortized 51,261 40,927
Miscellaneous 126,422 146,593
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Total 1,059,635 1,160,790
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Total Assets $ 12,033,618 $ 12,573,728
================================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-99
<PAGE>
BALANCE SHEETS (continued)
At December 31, 1998 and 1997
Georgia Power Company 1998 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C>
=================================================================================================================================
CAPITALIZATION AND LIABILITIES 1998 1997
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Capitalization (See accompanying statements):
Common stock equity $ 3,784,172 $ 4,019,728
Preferred stock 15,527 157,247
Company obligated mandatorily redeemable preferred securities
of subsidiaries substantially all of whose assets are junior
subordinated debentures or notes (Note 9) 689,250 689,250
Long-term debt 2,744,362 2,982,835
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Total 7,233,311 7,849,060
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Preferred stock due within one year (Note 9) 35,656 -
Long-term debt due within one year (Note 9) 399,429 220,855
Notes payable to banks (Note 9) 117,634 142,300
Commercial paper (Note 9) 223,218 223,930
Accounts payable--
Affiliated companies 75,774 71,373
Other 326,317 261,293
Customer deposits 69,584 68,618
Taxes accrued--
Federal and state income 15,801 4,480
Other 122,359 111,541
Interest accrued 60,187 72,437
Miscellaneous 100,793 105,683
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Total 1,546,752 1,282,510
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes (Note 8) 2,249,613 2,417,547
Accumulated deferred investment tax credits 381,914 397,202
Deferred credits related to income taxes (Note 8) 284,017 297,560
Employee benefits provisions 177,148 169,887
Miscellaneous 160,863 159,962
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Total 3,253,555 3,442,158
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Commitments and Contingent Matters (Notes 1 through 7)
Total Capitalization and Liabilities $ 12,033,618 $ 12,573,728
================================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-100
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CAPITALIZATION
At December 31, 1998 and 1997
Georgia Power Company 1998 Annual Report
<S> <C> <C> <C> <C> <C>
==================================================================================================================================
1998 1997 1998 1997
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------------
(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 1,660,206 1,929,971
Premium on preferred stock 158 160
Retained earnings (See accompanying statement) (Note 9) 1,779,558 1,745,347
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Total common stock equity 3,784,172 4,019,728 52.3 % 51.2 %
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Cumulative Preferred Stock, without par value:
Authorized -- 55,000,000 shares
Outstanding -- 511,834 shares at December 31, 1998
Outstanding -- 4,719,226
shares at December 31, 1997
$100 stated value --
4.60% to 6.60% 51,183 52,355
Adjustable rate -- at January 1, 1998:
4.85% - 64,213
5.27% - 40,679
- - - - - - - --------------------------------------------------------------------------------------------------------------
Total cumulative preferred stock (annual dividend
requirement -- $2,827,000) 51,183 157,247
Less amount due within one year (Note 9) 35,656 -
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Cumulative preferred stock excluding amount due within one year 15,527 157,247 0.2 2.0
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Company Obligated Mandatorily
Redeemable Preferred Securities (Note 9):
$25 liquidation value -- 9% 100,000 100,000
$25 liquidation value -- 7.75% 225,000 225,000
$25 liquidation value -- 7.60% 175,000 175,000
$25 liquidation value -- 7.75% 189,250 189,250
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Total (annual distribution requirement -- $54,404,000) 689,250 689,250 9.5 8.8
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Long-Term Debt:
First mortgage bonds --
Maturity Interest Rates
April 1, 1998 5 1/2% - 100,000
September 1, 1999 6 1/8% 195,000 195,000
March 1, 2000 6% 100,000 100,000
October 1, 2000 7% - 100,000
September 1, 2002 6 7/8% - 150,000
April 1, 2003 6 5/8% 200,000 200,000
August 1, 2003 6.35% 75,000 75,000
2004 through 2006 6.07% 10,000 10,000
2008 6 7/8% 50,000 50,000
2023 through 2025 7.55% to 7.95% 266,000 474,250
- - - - - - - ---------------------------------------------------------------------------------------------------------------
Total first mortgage bonds 896,000 1,454,250
- - - - - - - ---------------------------------------------------------------------------------------------------------------
Pollution control bonds -- (Note 9)
Maturity Interest Rates
-------- --------------
2000 4.375% 50,000 50,000
2004-2005 5% to 5.375% 57,000 103,790
2011 Variable (4.0% at 1/1/99) 10,450 10,450
2018 6% 4,600 26,700
2019-2023 5.75% to 6.35% 140,560 144,660
2022-2023 Variable (4.0% to 5.05% at 1/1/99) 64,500 64,500
2024-2025 5.4% to 6.75% 440,325 457,325
2024-2028 Variable (3.10% to 5.20% at 1/1/99) 619,055 529,065
2029-2033 Variable (3.25% to 5.15% at 1/1/99) 234,700 234,700
2034 Variable (3.25% at 1/1/99) 50,000 50,000
- - - - - - - ---------------------------------------------------------------------------------------------------------------
Total pollution control bonds 1,671,190 1,671,190
- - - - - - - ---------------------------------------------------------------------------------------------------------------
</TABLE>
II-101
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CAPITALIZATION (continued)
At December 31, 1998 and 1997
Georgia Power Company 1998 Annual Report
<S> <C> <C> <C> <C>
===================================================================================================================================
1998 1997 1998 1997
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------------
(in thousands) (percent of total)
Senior notes -- (Note 9)
Maturity Interest Rates
-------- --------------
December 1, 2005 5.50% 150,000 -
December 31, 2038 6.60% 200,000 -
December 31, 2047 6.875% 145,000 -
- - - - - - - ---------------------------------------------------------------------------------------------------------------
Total senior notes 495,000 -
- - - - - - - ---------------------------------------------------------------------------------------------------------------
Other long-term debt (Note 9) 86,280 86,675
Unamortized debt discount, net (4,679) (8,425)
- - - - - - - ---------------------------------------------------------------------------------------------------------------
Total long-term debt (annual interest
requirement -- $177,628,000) 3,143,791 3,203,690
Less amount due within one year (Note 9) 399,429 220,855
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Long-term debt excluding amount due within one year 2,744,362 2,982,835 38.0 38.0
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Total Capitalization $ 7,233,311 $ 7,849,060 100.0 % 100.0 %
===================================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-102
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31, 1998, 1997, and 1996
Georgia Power Company 1998 Annual Report
<S> <C> <C> <C>
==================================================================================================================================
1998 1997 1996
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Balance at Beginning of Period $ 1,745,347 $ 1,674,774 $ 1,569,905
Net income after dividends on preferred stock 570,228 593,996 580,327
Cash dividends on common stock (536,600) (520,000) (475,500)
Preferred stock transactions, net 583 (3,423) 42
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------------
Balance at End of Period (Note 9) $ 1,779,558 $ 1,745,347 $ 1,674,774
==================================================================================================================================
STATEMENTS OF PAID-IN CAPITAL
For the Years Ended December 31, 1998, 1997, and 1996
Georgia Power Company 1998 Annual Report
==================================================================================================================================
1998 1997 1996
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Balance at Beginning of Period $ 1,929,971 $ 2,134,886 $ 2,384,444
Capital distribution to parent company (270,000) (205,000) (250,000)
Contributions to capital by parent company 235 85 442
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------------
Balance at End of Period $ 1,660,206 $ 1,929,971 $ 2,134,886
==================================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-103
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Georgia Power Company 1998 Annual Report
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
General
The Company is a wholly owned subsidiary of Southern Company, which is the
parent company of five operating companies, Southern Company Services (SCS), a
system service company, Southern Communications Services (Southern LINC),
Southern Energy, Inc. (Southern Energy), Southern Nuclear Operating Company
(Southern Nuclear), Southern Company Energy Solutions, and other direct and
indirect subsidiaries. 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 operating 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). SCS provides, at cost,
specialized services to Southern Company and subsidiary companies. Southern LINC
provides digital wireless communications services to the operating companies and
also markets these services to the public within the Southeast. Southern Energy
designs, builds, owns, and operates power production and delivery facilities and
provides a broad range of energy related services in the United States and
international markets. Southern Nuclear provides services to Southern Company's
nuclear power plants. Southern Company Energy Solutions develops new business
opportunities related to energy products and services.
Southern Company is registered as a holding company under the Public Utility
Holding Company Act of 1935 (PUHCA). Both Southern Company and its subsidiaries
are subject to the regulatory provisions of 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 (GAAP) and
complies with the accounting policies and practices prescribed by the respective
regulatory commissions. The preparation of financial statements in conformity
with GAAP requires the use of estimates, and the actual results may differ from
these estimates.
Regulatory Assets and Liabilities
The Company is subject to the provisions of Financial Accounting Standards Board
(FASB) Statement No. 71, Accounting for the Effects of Certain Types of
Regulation. Regulatory assets represent probable future revenues to the Company
associated with certain costs that are expected to be recovered from customers
through the ratemaking process. Regulatory liabilities represent probable future
reductions in revenues associated with amounts that are expected to be credited
to customers through the ratemaking process. Regulatory assets and (liabilities)
reflected in the Company's Balance Sheets at December 31 relate to the
following:
1998 1997
----------------------
(in millions)
Deferred income taxes $ 604 $ 688
Deferred income tax credits (284) (298)
Premium on reacquired debt 174 167
Corporate building lease 53 52
Deferred Plant Vogtle costs - 50
Vacation pay 44 41
Postretirement benefits 36 38
Department of Energy assessments 26 29
Deferred nuclear outage costs 24 28
Demand-side program costs - 11
Other, net 12 10
- - - - - - - ---------------------------------------------------------------
Total $ 689 $ 816
===============================================================
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 net regulatory assets and liabilities that are not specifically
recoverable through regulated rates. In addition, the Company would be required
to determine if any impairment to other assets exists, including plant, and
write down the assets, if impaired, to their fair value.
11-104
<PAGE>
NOTES (continued)
Georgia Power Company 1998 Annual Report
Revenues and Fuel Costs
The Company currently operates as a vertically integrated utility providing
electricity to retail customers within its traditional service area located
within the state of Georgia, and to wholesale customers in the Southeast.
Revenues by type of service were as follows:
1998 1997 1996
--------------------------------
(in millions)
Retail $4,298 $3,978 $4,023
Non-affiliated wholesale 260 283 282
Other 99 86 76
- - - - - - - ---------------------------------------------------------------
Total $4,657 $4,347 $4,381
===============================================================
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
costs, energy component of purchased power costs, and certain other costs.
Revenues are adjusted for differences between recoverable fuel costs and amounts
actually recovered in current rates.
The Company has a diversified base of customers. No single customer or
industry comprises 10 percent or more of revenues. For all periods presented,
uncollectible accounts averaged less than 1 percent of revenues.
Fuel expense includes the amortization of the cost of nuclear fuel and a
charge, based on nuclear generation, for the permanent disposal of spent nuclear
fuel. Total charges for nuclear fuel included in fuel expense amounted to $74
million in 1998, $76 million in 1997, and $78 million in 1996. The Company has a
contract with the U.S. Department of Energy (DOE) that provides for the
permanent disposal of spent nuclear fuel. The DOE failed to begin disposing of
spent fuel in January 1998 as required by the contracts, and the Company is
pursuing legal remedies against the government for breach of contract.
Sufficient storage capacity currently is available to permit operation into 2003
at Plant Hatch and into 2017 at Plant Vogtle. Plant Vogtle's spent fuel storage
capacity includes the installation in 1998 of additional rack capacity.
Activities for adding dry cask storage capacity at Plant Hatch by as early as
1999 are in progress.
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 at
December 31, 1998, to be approximately $24 million. This obligation is recorded
in the accompanying Balance Sheets.
Depreciation and Nuclear Decommissioning
Depreciation of the original cost of depreciable utility plant in service is
provided primarily by using composite straight-line rates, which approximated
3.2 percent in 1998 and 3.1 percent in 1997 and 1996. In addition, the Company
recorded accelerated depreciation of electric plant of $316 million in 1998,
$159 million in 1997, and $24 million in 1996. The amount of such charges in the
accumulated provision for depreciation is $505 million at December 31, 1998. See
Note 3 under "Retail Rate Order" for additional information. 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 and removal of other facilities.
Nuclear Regulatory Commission (NRC) regulations require 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 ordered by the GPSC. Earnings on the
trust funds are considered in determining decommissioning expense. The NRC's
minimum external funding requirements are based on a generic estimate of the
cost to decommission the radioactive portions of a nuclear unit based on the
size and type of reactor. The Company has filed plans with the NRC to ensure
that -- over time -- the deposits and earnings of the external trust funds will
provide the minimum funding amounts prescribed by the NRC.
11-105
<PAGE>
NOTES (continued)
Georgia Power Company 1998 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
its retirement date. The estimated site study costs based on the most current
study and ultimate costs assuming an inflation rate of 3.6% for the Company's
ownership interests are as follows:
Plant Plant
Hatch Vogtle
--------------------
Site study basis (year) 1997 1997
Decommissioning periods:
Beginning year 2014 2027
Completion year 2027 2038
- - - - - - - -------------------------------------------------------------
(in millions)
Site study costs:
Radiated structures $372 $317
Non-radiated structures 33 44
- - - - - - - -------------------------------------------------------------
Total $405 $361
=============================================================
(in millions)
Ultimate costs:
Radiated structures $722 $ 922
Non-radiated structures 65 129
- - - - - - - -------------------------------------------------------------
Total $787 $1,051
=============================================================
The decommissioning cost estimates are based on prompt dismantlement and
removal of the plant from service. The actual decommissioning costs may vary
from the above estimates because of changes in the assumed date of
decommissioning, changes in NRC requirements, changes in the assumptions used in
making estimates, changes in regulatory requirements, changes in technology, and
changes in costs of labor, materials, and equipment.
Annual provisions for nuclear decommissioning expense are based on an
annuity method as approved by the GPSC. The amounts expensed in 1998 and fund
balance as of December 31, 1998 were:
Plant Plant
Hatch Vogtle
- - - - - - - -------------------------------------------------------------
(in millions)
Amount expensed in 1998 $ 11 $ 9
- - - - - - - -------------------------------------------------------------
Accumulated provisions:
Balance in external trust funds $172 $112
Balance in internal reserves 19 12
- - - - - - - -------------------------------------------------------------
Total $191 $124
=============================================================
Effective January 1, 1999, the GPSC increased the annual provision for
decommissioning expenses to $26 million. This amount is based on the NRC generic
estimate to decommission the radioactive portion of the facilities as of 1997 of
$526 million and $438 million for plants Hatch and Vogtle, respectively. The
ultimate costs associated with the 1997 NRC minimum funding requirements are
$1.1 billion and $1.3 billion for plants Hatch and Vogtle, respectively.
Significant assumptions include an estimated inflation rate of 3.6% and an
estimated trust earnings rate of 6.5%. The Company expects the GPSC to
periodically review and adjust, if necessary, the amounts collected in rates for
the anticipated cost of decommissioning.
Income Taxes
The Company uses the liability method of accounting for deferred income taxes
and provides deferred income taxes for all significant income tax temporary
differences. Investment tax credits utilized are deferred and amortized to
income over the average lives of the related property.
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. Pursuant to the orders, the Company recorded a deferred return under
phase-in plans until October 1991 when the allowed investment was fully
reflected in rates. In 1991, the GPSC levelized the remaining Plant Vogtle
declining capacity buyback expenses over a six-year period. In addition, the
Company deferred certain Plant Vogtle operating expenses and financing costs
under accounting orders issued by the GPSC. These GPSC orders provided for the
recovery of deferred costs within 10 years. Costs deferred under the 1987 order
and the levelized buybacks were fully recovered as of September 1997. Under a
December 18, 1998 retail rate order from the GPSC, the remaining deferred costs
were fully amortized to expense in December 1998. See Note 3 under "Retail Rate
Order" for additional information.
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
11-106
<PAGE>
NOTES (continued)
Georgia Power Company 1998 Annual Report
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 1998, 1997 and 1996, the average AFUDC rates
were 6.71 percent, 7.60 percent and 6.59 percent, respectively. AFUDC, net of
taxes, as a percentage of net income after dividends on preferred stock, was
less than 2.0 percent for 1998, 1997, and 1996.
Utility Plant
Utility plant is stated at original cost, less regulatory disallowances.
Original cost includes: materials; labor; payroll-related costs such as taxes,
pensions, and other benefits; and the cost of funds used during construction.
The cost of maintenance, repairs, and replacement of minor items of property is
charged to maintenance expense. The cost of replacements of property (exclusive
of minor items of property) is charged to utility plant.
Cash and Cash Equivalents
For purposes of the financial statements, temporary cash investments are
considered cash equivalents. Temporary cash investments are securities with
original maturities of 90 days or less.
Financial Instruments
The Company's financial instruments for which the carrying amounts did not
approximate fair value at December 31 were as follows:
Carrying Fair
Amount Value
------------------------
Long-term debt: (in millions)
At December 31, 1998 $3,058 $3,105
At December 31, 1997 3,125 3,170
Preferred securities:
At December 31, 1998 689 716
At December 31, 1997 689 720
- - - - - - - --------------------------------------------------------------
The fair values for securities were based on either closing market prices or
closing prices of comparable instruments.
Materials and Supplies
Generally, materials and supplies include the cost of transmission, distribution
and generating plant materials. Materials are charged to inventory when
purchased and then expensed or capitalized to plant, as appropriate, when
installed.
2. RETIREMENT BENEFITS
The Company has defined benefit, trusteed pension plans that cover substantially
all employees. The Company provides certain medical care and life insurance
benefits for retired employees. Substantially all these employees may become
eligible for such benefits when they retire. The Company funds trusts to the
extent deductible under federal income tax regulations or to the extent required
by the GPSC and FERC. In 1998, the Company adopted FASB Statement No. 132,
Employers' Disclosure about Pensions and Other Postretirement Benefits. The
measurement date is September 30 of each year.
The weighted average rates assumed in the actuarial calculations for both
the pension and postretirement benefit plans were:
1998 1997
- - - - - - - -----------------------------------------------------------------
Discount 6.75% 7.50%
Annual salary increase 4.25 5.00
Expected long-term return on plan
assets 8.50 8.50
- - - - - - - -----------------------------------------------------------------
Pension Plan
Changes during the year in the projected benefit obligations and in the fair
value of plan assets were as follows:
Projected
Benefit Obligations
---------------------------
1998 1997
- - - - - - - ----------------------------------------------------------------
(in millions)
Balance at beginning of year $1,119 $1,172
Service cost 30 30
Interest cost 82 82
Benefits paid (55) (42)
Actuarial (gain) loss and
employee transfers 41 (123)
- - - - - - - ----------------------------------------------------------------
Balance at end of year $1,217 $1,119
================================================================
Plan Assets
---------------------------
1998 1997
- - - - - - - ----------------------------------------------------------------
(in millions)
Balance at beginning of year $1,931 $1,797
Actual return on plan assets 11 338
Benefits paid (55) (42)
Employee transfers (28) (162)
- - - - - - - ----------------------------------------------------------------
Balance at end of year $1,859 $1,931
================================================================
11-107
<PAGE>
NOTES (continued)
Georgia Power Company 1998 Annual Report
The accrued pension costs recognized in the Balance Sheets were as
follows:
1998 1997
- - - - - - - ---------------------------------------------------------------
(in millions)
Funded status $ 642 $ 812
Unrecognized transition obligation (35) (39)
Unrecognized prior service cost 45 48
Unrecognized net actuarial gain (548) (753)
- - - - - - - ---------------------------------------------------------------
Prepaid asset recognized in the
Balance Sheets $ 104 $ 68
===============================================================
Components of the plans' net periodic cost were as follows:
1998 1997 1996
- - - - - - - ---------------------------------------------------------------
(in millions)
Service cost $ 30 $ 30 $ 35
Interest cost 82 82 86
Expected return on plan assets (127) (121) (124)
Recognized net actuarial gain (20) (18) (14)
Net amortization (1) (1) (2)
- - - - - - - ---------------------------------------------------------------
Net pension income $ (36) $ (28) $ (19)
===============================================================
Postretirement Benefits
Changes during the year in the projected benefit obligations and
in the fair value of plan assets were as follows:
Projected
Benefit Obligations
---------------------------
1998 1997
- - - - - - - ----------------------------------------------------------------
(in millions)
Balance at beginning of year $ 435 $ 430
Service cost 7 7
Interest cost 32 32
Benefits paid (16) (13)
Actuarial loss and employee
transfers 6 (21)
- - - - - - - ----------------------------------------------------------------
Balance at end of year $ 464 $ 435
================================================================
Plan Assets
---------------------------
1998 1997
- - - - - - - ----------------------------------------------------------------
(in millions)
Balance at beginning of year $122 $112
Actual return on plan assets 4 9
Employer contributions 40 14
Benefits paid (16) (13)
- - - - - - - ----------------------------------------------------------------
Balance at end of year $150 $122
================================================================
The accrued postretirement costs recognized in the Balance
Sheets were as follows:
1998 1997
- - - - - - - ---------------------------------------------------------------
(in millions)
Funded status $ (314) $ (313)
Unrecognized transition obligation 131 139
Unrecognized net actuarial loss 57 47
Fourth quarter contributions 19 29
- - - - - - - ---------------------------------------------------------------
Accrued liability recognized in the
Balance Sheets $ (107) $ (98)
===============================================================
Components of the plans' net periodic cost were as follows:
1998 1997 1996
- - - - - - - ---------------------------------------------------------------
(in millions)
Service cost $ 7 $ 7 $ 9
Interest cost 32 32 30
Expected return on plan assets (9) (7) (5)
Recognized net actuarial loss 1 1 2
Net amortization 9 9 9
- - - - - - - ---------------------------------------------------------------
Net postretirement cost $ 40 $ 42 $ 45
===============================================================
An additional assumption used in measuring the accumulated postretirement
benefit obligations was a weighted average medical care cost trend rate of 8.30
percent for 1998, decreasing gradually to 4.75 percent through the year 2005,
and remaining at that level thereafter. An annual increase or decrease in the
assumed medical care cost trend rate of 1 percent would affect the accumulated
benefit obligation and the service and interest cost components at December 31,
1998 as follows:
1 Percent 1 Percent
Increase Decrease
- - - - - - - ---------------------------------------------------------------
(in millions)
Benefit obligation $ 38 $ (32)
Service and interest costs 3 (3)
===============================================================
3. REGULATORY AND LITIGATION MATTERS
Retail Rate Order
As required by the GPSC, the Company filed a general rate case in 1998. On
December 18, 1998, the GPSC approved a new three-year rate order for the
Company. Under terms of the order, earnings will continue to be evaluated
against a retail return on common equity range of 10 percent to 12.5 percent.
Retail rates will be decreased by $262 million on an annual basis effective
January 1, 1999, and by an additional $24 million effective January 1, 2000. The
II-108
<PAGE>
NOTES (continued)
Georgia Power Company 1998 Annual Report
order further provides for $85 million in each year, plus up to $50 million of
any earnings in excess of the 12.5 percent return during the second and third
years, to be applied to accelerated amortization or depreciation of assets.
Two-thirds of any additional earnings in excess of the 12.5 percent return will
be applied to rate reductions, with the remaining one-third retained by the
Company. The Company will not file for a general base rate increase unless its
projected retail return on common equity falls below 10 percent, and will be
required to file a general rate case on July 1, 2001, in response to which the
GPSC would be expected to determine whether the rate order should be continued,
modified, or discontinued.
Under a previous three-year accounting order ending December 1998, the
Company's earnings were evaluated against a retail return on common equity range
of 10 percent to 12.5 percent. Earnings in excess of 12.5 percent were used to
accelerate the amortization of regulatory assets or depreciation of electric
plant. The Company was required to absorb cost increases of approximately $29
million annually during the order's three-year operation, including $14 million
annually of accelerated depreciation of electric plant.
The Company's 1996 retail return on common equity was within the 10 percent
to 12.5 percent range. During 1998 and 1997, for earnings in excess of the 12.5
percent retail return, the Company recorded charges of $292 million and $135
million, respectively, that are presented in the financial statements as
depreciation expense of electric plant and as an addition to the accumulated
provision for depreciation.
FERC Review of Equity Returns
On September 21, 1998, the FERC entered separate orders affirming the outcome of
the administrative law judge's opinions in two proceedings in which the return
on common equity component of formula rates contained in substantially all of
the operating companies' wholesale power contracts was being challenged as
unreasonably high. These orders resulted in no change in the wholesale power
contracts that were the subject of such proceedings. The FERC also dismissed a
complaint filed by three customers under long-term power sales agreements
seeking to lower the equity return component in such agreements. These customers
have filed applications for rehearing regarding each FERC order. In response to
a requirement of the September 1998 FERC order, Southern Company filed a new
equity return component on the long-term power sales contracts, to be effective
January 5, 1999. The proposed equity return was lowered from 13.75 percent to
12.50 percent. If the filed return is approved, annual revenues will decrease by
approximately $1 million. The FERC placed the new rates into effect, subject to
refund. Also, this filing was consolidated with the new proceeding discussed
below.
On December 28, 1998, the FERC staff filed a motion asking the FERC to
initiate a new proceeding regarding the equity return and other issues involving
the Company's formula rate contracts. The motion was submitted pursuant to
review procedures applicable to theses contracts, and would be applicable to
billings under such contracts on and after January 1, 1999.
Rocky Mountain Plant Status
In its 1985 financing order, the GPSC concluded that completion of the Rocky
Mountain pumped storage hydroelectric plant 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 plant. In
1988, the Company and Oglethorpe Power Corporation (OPC) entered into a joint
ownership agreement for OPC to assume responsibility for the construction and
operation of the plant, as discussed in Note 6. In 1995, the plant went into
commercial operation.
In June 1996, the GPSC initiated a review of the plant. On January 14, 1998,
the GPSC ordered that the Company be allowed approximately $108 million of its
$142 million investment in the plant in rate base as of December 31, 1998. The
Company appealed the GPSC's order to the Superior Court of Fulton County,
Georgia. Under the rate order approved by the GPSC on December 18, 1998, the
Company voluntarily dismissed the appeal. As a result, in December 1998, the
Company recorded a charge to earnings of $21 million, after taxes, associated
with the write-down of the plant.
Tax Litigation
In August 1997, Southern Company and the Internal Revenue Service (IRS) entered
into a settlement agreement related to tax issues for the years 1984 through
1987. The agreement received final approval by the Joint Congressional Committee
on Taxation in June 1998 and as a result, the Company recognized interest income
in 1998 of $69 million. The refund by the IRS has been made and this matter is
now concluded.
11-109
<PAGE>
NOTES (continued)
Georgia Power Company 1998 Annual Report
Additionally, the Company received a refund from the State of Georgia
pertaining to the same issues and recognized an additional $4 million in
interest income in 1998.
Demand-Side Conservation Programs
In August 1995, the GPSC ordered the Company to discontinue its current
demand-side conservation programs by the end of 1995. Rate riders previously
approved by the GPSC for recovery of the Company's costs incurred in connection
with these programs remained in effect until January 1998 when costs deferred
were fully collected.
Under a GPSC accounting order approved February 16, 1996, the Company
recognized approximately $29 million of deferred program costs over a three-year
period ending December 1998, which were not recovered through the riders.
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. As of December 31, 1998, the Company
has recognized approximately $5 million in cumulative expenses associated with
this site. This represents the Company's agreed upon share of removal and
remedial investigation and feasibility study costs. The final outcome of this
matter cannot now be determined. However, based on the nature and extent of the
Company's activities relating to the site, management believes that the
Company's portion of any remaining remediation costs should not be material.
In compliance with the Georgia Hazardous Site Response Act of 1993, the
State of Georgia was required to compile an inventory of all known or suspected
sites where hazardous wastes, constituents or substances have been disposed of
or released in quantities deemed reportable by the State. In developing this
list, the State identified several hundred properties throughout the State,
including 26 sites which may require environmental remediation that were either
previously or are currently owned by the Company. The majority of these sites
are electrical power substations and power generation facilities. The Company
has remediated nine electrical substations on the list at a cumulative cost of
approximately $3 million. The State has removed from the list one power
generation facility following the assessment which indicated no remediation was
necessary. In addition, the Company has recognized approximately $23 million in
cumulative expenses through December 31, 1998 for the assessment of the
remaining sites on the list and the anticipated clean-up cost for 11 sites that
the Company plans to remediate. 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
listed sites were required to be remediated, the Company could incur expenses of
up to approximately $10 million in additional clean-up costs and construction
expenditures of up to approximately $56 million to develop new waste management
facilities or install additional pollution control devices.
The accrued costs for environmental remediation obligations are not
discounted to their present value.
Nuclear Performance Standards
The GPSC has adopted a nuclear performance standard for the Company's nuclear
generating units under which the performance of plants Hatch and Vogtle will be
evaluated every three years. The performance standard is based on each unit's
capacity factor as compared to the average of all comparable U.S. nuclear units
operating at a capacity factor of 50 percent or higher during the three-year
period of evaluation. Depending on the performance of the units, the Company
could receive a monetary award or penalty under the performance standards
criteria.
The first evaluation was conducted in 1993 for performance during the
1990-92 period. The GPSC approved a performance award of approximately $8.5
million for the Company. This award was collected through the retail fuel cost
recovery provision and recognized in income over a 36-month period which ended
in October 1996. In January 1997, the GPSC approved a performance award of
approximately $11.7 million for performance during the 1993-95 period. This
award is being collected through the retail fuel cost recovery provision and
recognized in income over a 36-month period that began in January 1997.
11-110
<PAGE>
NOTES (continued)
Georgia Power Company 1998 Annual Report
4. COMMITMENTS
Construction Program
While the Company has no traditional baseload generating plants under
construction, the construction of eight combustion turbine peaking units is
planned to be completed by 2000. In addition, significant construction of
transmission and distribution facilities, and projects to upgrade and extend the
useful life of generating plants and to remain in compliance with environmental
requirements will continue. The Company currently estimates property additions
to be approximately $755 million in 1999, $734 million in 2000, and $829 million
in 2001.
The construction program is subject to periodic review and revision, and
actual construction costs may vary from estimates because of numerous factors,
including, but not limited to, changes in business conditions, load growth
estimates, environmental regulations, and regulatory requirements.
Fuel Commitments
To supply a portion of the fuel requirements of its generating plants, the
Company has entered into various long-term commitments for the procurement of
fossil and nuclear fuel. In most cases, these contracts contain provisions for
price escalations, minimum purchase levels and other financial commitments.
Total estimated long-term fossil and nuclear fuel commitments at December 31,
1998 were as follows:
Minimum
Year Obligations
----------------------
(in millions)
1999 $ 642
2000 545
2001 483
2002 414
2003 366
2004 and beyond 719
- - - - - - - ----------------------------------------------------------------
Total minimum obligations $3,169
================================================================
Additional commitments for coal and for nuclear fuel will be required in the
future to supply the Company's fuel needs.
Purchased Power Commitments
In connection with the joint ownership arrangement for Plant Vogtle, discussed
in Note 6, the Company has made commitments to purchase portions of OPC's and
the Municipal Electric Authority of Georgia's (MEAG's) capacity and energy from
this plant. Declining commitments were in effect during periods of up to seven
years following commercial operation and ended in 1996. In addition, the Company
has commitments regarding a portion of a 5 percent interest in Plant Vogtle
owned by MEAG that are in effect until the latter of the retirement of the plant
or the latest stated maturity date of MEAG's bonds issued to finance such
ownership interest. The payments for capacity are required whether or not any
capacity is available. The energy cost is a function of each unit's variable
operating costs. Except as noted below, the cost of such capacity and energy is
included in purchased power from non-affiliates in the Company's Statements of
Income. Capacity payments totaled $56 million, $54 million, and $68 million in
1998, 1997, and 1996, respectively. The current projected Plant Vogtle capacity
payments are:
Year Amounts
----------------------
(in millions)
1999 $ 59
2000 62
2001 61
2002 60
2003 60
2004 and beyond 711
- - - - - - - ----------------------------------------------------------------
Total $ 1,013
================================================================
Portions of the payments noted above relate to costs in excess of Plant
Vogtle's allowed investment for ratemaking purposes. The present value of these
portions was written off in 1987 and 1990.
The Company and an affiliate, Alabama Power Company, own equally all of the
outstanding capital stock of Southern Electric Generating Company (SEGCO), which
owns electric generating units with a total rated capacity of 1,020 megawatts,
as well as associated transmission facilities. The capacity of the units has
been sold equally to the Company and Alabama Power Company under a contract
which, in substance, requires payments sufficient to provide for the operating
expenses, taxes, debt service and return on investment, whether or not SEGCO has
any capacity and energy available. The term of the contract extends
II-111
<PAGE>
NOTES (continued)
Georgia Power Company 1998 Annual Report
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:
1998 1997 1996
---------------------------------
(in millions)
Energy $45 $45 $47
Capacity 30 30 30
- - - - - - - --------------------------------------------------------------
Total $75 $75 $77
==============================================================
Kilowatt-hours 3,146 3,038 2,780
- - - - - - - --------------------------------------------------------------
At December 31, 1998, the capitalization of SEGCO consisted of $49 million
of equity and $70 million of long-term debt on which the annual interest
requirement is $4 million.
The Company has entered into other various long-term commitments for the
purchase of electricity. Total long-term obligations at December 31, 1998 were
as follows:
Year Amounts
----------------------
(in millions)
1999 $ 18
2000 21
2001 22
2002 23
2003 23
2004 and beyond 363
- - - - - - - ----------------------------------------------------------------
Total $ 470
================================================================
Operating Leases
The Company has entered into coal rail car rental agreements with various terms
and expiration dates. These expenses totaled $13 million for 1998, and $11
million each for 1997 and 1996. At December 31, 1998, estimated minimum rental
commitments for these noncancelable operating leases were as follows:
Year Amounts
----------------------
(in millions)
1999 $ 11
2000 11
2001 11
2002 12
2003 12
2004 and beyond 120
- - - - - - - ----------------------------------------------------------------
Total $177
================================================================
5. NUCLEAR INSURANCE
Under the Price-Anderson Amendments Act of 1988, the Company maintains
agreements of indemnity with the NRC that, together with private insurance,
cover third-party liability arising from any nuclear incident occurring at the
Company's nuclear power plants. The act provides funds up to $9.7 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. The Company could be assessed up to $88 million
per incident for each licensed reactor it operates but not more than an
aggregate of $10 million per incident to be paid in a calendar year for each
reactor. Such maximum assessment for the Company, excluding any applicable state
premium taxes, -- based on its ownership and buyback interests -- is $178
million per incident but not more than an aggregate of $20 million to be paid
for each incident in any one year.
The Company is a member of Nuclear Electric Insurance Limited (NEIL), a
mutual insurer established to provide property damage insurance in an amount up
to $500 million for members' nuclear generating facilities.
Additionally, the Company has policies that currently provide
decontamination, excess property insurance, and premature decommissioning
coverage up to $2.25 billion for losses in excess of the $500 million primary
coverage. This excess insurance is also provided by NEIL.
NEIL also covers the additional costs that would be incurred in obtaining
replacement power during a prolonged accidental outage at a member's nuclear
plant. Members can be insured against increased costs of replacement power in an
amount up to $3.5 million per week -- starting 17 weeks after the outage -- for
one year and up to $2.8 million per week for the second and third years.
Under each of the NEIL policies, members are subject to assessments if
losses each year exceed the accumulated funds available to the insurer under
that policy. The current maximum annual assessments for the Company under the
three NEIL policies would be $25 million.
For all on-site property damage insurance policies for commercial nuclear
II-112
<PAGE>
NOTES (continued)
Georgia Power Company 1998 Annual Report
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.
All retrospective assessments, whether generated for liability, property or
replacement power, may be subject to applicable state premium taxes.
6. FACILITY SALES AND JOINT OWNERSHIP
AGREEMENTS
The Company has sold undivided interests in plants Hatch, Wansley, Vogtle, and
Scherer Units 1 and 2 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 Company, an affiliate. Additionally, the
Company has sold 76.4 percent of Plant Scherer Unit 4 to Florida Power & Light
Company (FP&L) and the remaining 23.6 percent to Jacksonville Electric Authority
(JEA). The Company has also sold transmission facilities to Georgia Transmission
Corporation (formerly OPC's transmission division), MEAG, and the City of
Dalton.
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.
The Company owns 25.4 percent of the Rocky Mountain pumped storage
hydroelectric plant. OPC owns the remainder, and is the operator of the plant.
The Company owns six of eight 80 megawatt combustion turbine generating units
and 75 percent of the related common facilities at Plant McIntosh. Savannah
Electric and Power Company, an affiliate, owns the remainder and operates the
plant. The Company and Florida Power Corporation (FPC) jointly own a combustion
turbine unit at Intercession City, Florida, near Orlando. The unit began
commercial operation in January 1997, and is operated by FPC. The Company owns a
one-third interest in the unit, with use of 100 percent of the unit's capacity
from June through September. FPC has the capacity the remainder of the year.
At December 31, 1998, the Company's percentage ownership and investment
(exclusive of nuclear fuel) in jointly owned facilities in commercial operation,
were as follows:
Company Accumulated
Facility (Type) Ownership Investment Depreciation
- - - - - - - --------------------------------------------------------------------
(in millions)
Plant Vogtle (nuclear) 45.7% $3,296* $1,514
Plant Hatch (nuclear) 50.1 840 538
Plant Wansley (coal) 53.5 298 141
Plant Scherer (coal)
Units 1 and 2 8.4 112 48
Unit 3 75.0 545 179
Plant McIntosh
Common Facilities 75.0 19 1
(combustion-turbine)
Rocky Mountain 25.4 169* 61
(pumped storage)
Intercession City 33.3 12 **
(combustion-turbine)
- - - - - - - --------------------------------------------------------------------
* Investment net of write-offs.
** Less than $1 million.
7. LONG-TERM POWER SALES AGREEMENTS
The Company and the operating subsidiaries of Southern Company have long-term
contractual agreements for the sale of capacity and energy to non-affiliated
utilities located outside the system's service area. These agreements consist of
firm unit power sales pertaining to capacity from specific generating units.
Because energy is generally sold at cost under these agreements, it is primarily
the capacity revenues that affect the Company's profitability.
The Company's capacity revenues were as follows:
Year Revenues Capacity
-------------------------------------
(in millions) (megawatts)
1998 $ 32 162
1997 42 159
1996 41 173
-------------------------------------
Unit power from specific generating plants is being sold to FP&L, FPC, JEA,
and the City of Tallahassee, Florida. Under these agreements, the Company sold
approximately 162 megawatts of capacity in 1998 and is scheduled to sell
approximately 162 megawatts of capacity in 1999. In 2000, 129 megawatts will be
sold. After 2000, capacity sales will decline to approximately 105 megawatts --
unless reduced by FP&L, FPC, and JEA -- until the expiration of the contracts in
2010.
II-113
<PAGE>
NOTES (continued)
Georgia Power Company 1998 Annual Report
8. INCOME TAXES
At December 31, 1998, tax-related regulatory assets were $604 million and
tax-related regulatory liabilities were $284 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:
1998 1997 1996
-------------------------------
Total provision for income taxes: (in millions)
Federal:
Currently payable $ 415 $352 $325
Deferred -
Current year 131 49 70
Reversal of prior years (218) (68) (41)
Deferred investment tax
credits 7 - -
- - - - - - - -----------------------------------------------------------------
335 333 354
- - - - - - - -----------------------------------------------------------------
State:
Currently payable 77 65 56
Deferred -
Current year 18 8 12
Reversal of prior years (31) (11) (5)
- - - - - - - -----------------------------------------------------------------
64 62 63
- - - - - - - -----------------------------------------------------------------
Total 399 395 417
- - - - - - - -----------------------------------------------------------------
Less:
Income taxes credited
to other income (8) (32) (19)
- - - - - - - -----------------------------------------------------------------
Total income taxes
charged to operations $ 407 $427 $436
=================================================================
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:
1998 1997
-------------------
(in millions)
Deferred tax liabilities:
Accelerated depreciation $1,670 $1,732
Property basis differences 854 968
Other 158 142
- - - - - - - ----------------------------------------------------------------
Total 2,682 2,842
- - - - - - - ----------------------------------------------------------------
Deferred tax assets:
Other property basis differences 211 216
Federal effect of state deferred taxes 95 99
Other deferred costs 96 83
Disallowed Plant Vogtle buybacks 23 23
Other 21 14
- - - - - - - ----------------------------------------------------------------
Total 446 435
- - - - - - - ----------------------------------------------------------------
Net deferred tax liabilities 2,236 2,407
Portion included in current assets 13 11
- - - - - - - ----------------------------------------------------------------
Accumulated deferred income taxes
in the Balance Sheets $2,249 $2,418
================================================================
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 $22 million in 1998, $15 million in 1997, and $17 million in 1996.
At December 31, 1998, all investment tax credits available to reduce federal
income taxes payable had been utilized.
A reconciliation of the federal statutory tax rate to the effective income
tax rate is as follows:
1998 1997 1996
--------------------------
Federal statutory rate 35% 35% 35%
State income tax, net of
federal deduction 4 4 4
Non-deductible book
depreciation 6 4 3
Other (4) (4) (2)
- - - - - - - ---------------------------------------------------------------
Effective income tax rate 41% 39% 40%
===============================================================
Southern Company and its subsidiaries file a consolidated federal income tax
return. Under a joint consolidated income tax agreement, each subsidiary's
current and deferred tax expense is computed on a stand-alone basis. Tax
benefits from losses of the parent company are allocated to each subsidiary
based on the ratio of taxable income to total consolidated taxable income.
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NOTES (continued)
Georgia Power Company 1998 Annual Report
9. CAPITALIZATION
First Mortgage Bond Indenture & Charter Restrictions
The Company historically has relied on issuances of first mortgage bonds and
preferred stock, in addition to pollution control revenue bonds issued for its
benefit by public authorities, to meet its long-term external financing
requirements. Recently, the Company's financings have consisted of unsecured
debt and trust preferred securities. In this regard, the Company sought and
obtained stockholder approval in 1997 to amend its corporate charter eliminating
restrictions on the amounts of unsecured indebtedness it may incur.
The Company's first mortgage bond indenture contains various restrictions
that remain in effect as long as the bonds are outstanding. At December 31,
1998, $883 million of retained earnings and paid-in capital was unrestricted for
the payment of cash dividends or any other distributions under terms of the
mortgage indenture. If additional first mortgage bonds are issued, supplemental
indentures in connection with those issues may contain more stringent
restrictions than those currently in effect.
Preferred Securities
In December 1994, Georgia Power Capital, L.P., of which the Company is the sole
general partner, issued $100 million of 9 percent mandatorily redeemable
preferred securities. Substantially all of the assets of Georgia Power Capital,
L.P., are $103 million aggregate principal amount of Georgia Power's 9 percent
Junior Subordinated Deferrable Interest Debentures due December 19, 2024.
Statutory business trusts formed by the Company, of which the Company owns
all the common securities, have issued mandatorily redeemable preferred
securities as follows:
Date of Maturity
Issue Amount Rate Notes Date
---------------------------------------------------
(millions) (millions)
Trust I 8/1996 $225.00 7.75% $232 6/2036
Trust II 1/1997 175.00 7.60% 180 12/2036
Trust III 6/1997 189.25 7.75% 195 3/2037
Substantially all of the assets of each trust are junior subordinated notes
issued by the Company in the respective approximate principal amounts set forth
above. In February 1999, the Company issued an additional $200 million of
mandatorily redeemable preferred securities (Trust IV), bearing interest at 6.85
percent. The associated junior subordinated notes will be due March 31, 2029.
The Company considers that the mechanisms and obligations relating to the
preferred securities, taken together, constitute a full and unconditional
guarantee by the Company of Georgia Power Capital, L.P.'s and the Trusts'
payment obligations with respect to the preferred securities.
Georgia Power Capital, L.P., and the Trusts are subsidiaries of the Company,
and accordingly are consolidated in the Company's financial statements.
Pollution Control Bonds
The Company has incurred obligations in connection with the sale by public
authorities of tax-exempt pollution control revenue bonds. The Company has
authenticated and delivered to trustees an aggregate of $1.2 billion of its
first mortgage bonds, which are pledged as security for its obligations under
pollution control revenue contracts. No interest on these first mortgage bonds
is payable unless and until a default occurs on the installment purchase or loan
agreements.
Senior Notes
In January, November, and December 1998, the Company issued unsecured senior
notes. The senior notes are, in effect, subordinated to all secured debt of the
Company, including its first mortgage bonds.
Bank Credit Arrangements
At the beginning of 1999, the Company had unused credit arrangements with banks
totaling $1.3 billion, of which $722 million expires at various times during
1999, $30 million expires at May 1, 2000, and $500 million expires at April 24,
2003.
Of the total $1.3 billion in unused credit, $1 billion is a syndicated
credit arrangement with $500 million expiring April 23, 1999 and $500 million
expiring April 24, 2003. Both agreements provide the option of converting
borrowings into two-year term loans upon expiration date. The agreements contain
stated borrowing rates but also allow for competitive bid loans. In addition,
the agreements require payment of commitment fees based on the unused portions
of the commitments. Annual fees are also paid to the agent bank.
II-115
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NOTES (continued)
Georgia Power Company 1998 Annual Report
Approximately $162 million of the $722 million arrangements expiring during
1999 allow for two-year term loans executable upon expiration date of the credit
facilities. The $30 million credit arrangement expiring at May 1, 2000 allows
for term loans of up to three years. All of the arrangements include stated
borrowing rates but also allow for negotiated rates. These agreements also
require payment of commitment fees based on the unused portion of the
commitments or the maintenance of compensating balances with the banks. These
balances are not legally restricted from withdrawal.
The $1.3 billion in unused credit arrangements provide liquidity support to
the Company's variable rate pollution control bonds. The amount of variable rate
pollution control bonds outstanding as of December 31, 1998 was $979 million.
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 1998.
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, 1998 and 1997, the Company had a capitalized
lease obligation for its corporate headquarters building of $87 million with an
interest rate of 8.1 percent. The lease agreement provides for payments that are
minimal in early years and escalate through the first 21 years of the lease. For
ratemaking purposes, the GPSC has treated the lease as an operating lease and
has allowed only the lease payments in cost of service. The difference between
the accrued expense and the lease payments allowed for ratemaking purposes is
being deferred as a cost to be recovered in the future as ordered by the GPSC.
At December 31, 1998 and 1997, the interest and lease amortization deferred on
the Balance Sheets are $53 million and $52 million, respectively.
Assets Subject to Lien
The Company's mortgage dated as of March 1, 1941, as amended and supplemented,
securing the first mortgage bonds issued by the Company, constitutes a direct
lien on substantially all of the Company's fixed property and franchises.
Securities Due Within One Year
A summary of the improvement fund requirements and scheduled maturities and
redemptions of securities due within one year at December 31 is as follows:
1998 1997
-------------------
(in millions)
Bond improvement fund requirements $ 9 $ 15
Less:
Portion to be satisfied by certifying
property additions - -
- - - - - - - ----------------------------------------------------------------
Cash requirements 9 15
First mortgage bond maturities
and redemptions 390 205
- - - - - - - ----------------------------------------------------------------
Total long-term debt 399 220
Preferred stock 36 -
- - - - - - - ----------------------------------------------------------------
Total $435 $220
================================================================
The Company's first mortgage bond indenture includes an improvement fund
requirement that amounts to 1 percent of each outstanding series of bonds
authenticated under the indenture prior to January 1 of each year, other than
those issued to collateralize pollution control obligations. The requirement may
be satisfied by June 1 of each year by depositing cash, reacquiring bonds, or by
pledging additional property equal to 1 2/3 times the requirement. The 1999
requirement was met in the first quarter of the year by depositing cash with the
trustee. These funds were used to redeem first mortgage bonds.
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 requirements, to meet replacement provisions of the mortgage,
or through use of proceeds from the sale of property pledged under the mortgage.
II-116
<PAGE>
NOTES (continued)
Georgia Power Company 1998 Annual Report
In general, for the first five years a series of first mortgage bonds is
outstanding, the Company is prohibited from redeeming for improvement fund
purposes more than 1 percent annually of the original issue amount.
10. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial information for 1998 and 1997 is as follows:
Net Income
After
Dividends on
Operating Operating Preferred Stock
Quarter Ended Revenues Income
- - - - - - - ---------------------------------------------------------------------
(in millions)
--------------------------------------------
March 1998 $ 984 $177 $ 106
June 1998 1,226 188 137
September 1998 1,530 325 255
December 1998 998 104 72
March 1997 $ 959 $180 $ 106
June 1997 1,015 205 131
September 1997 1,407 317 257
December 1997 1,005 159 100
- - - - - - - ---------------------------------------------------------------------
Earnings in the fourth quarter of 1998, compared to the fourth quarter of
1997, decreased primarily as a result of the December 1998 Rocky Mountain
write-off.
The Company's business is influenced by seasonal weather conditions.
II-117
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA
Georgia Power Company 1998 Annual Report
<S> <C> <C> <C>
===============================================================================================================================
1998 1997 1996
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $4,738,253 $4,385,717 $4,416,779
Net Income after Dividends
on Preferred Stock (in thousands) $570,228 $593,996 $580,327
Cash Dividends on Common Stock (in thousands) $536,600 $520,000 $475,500
Return on Average Common Equity (percent) 14.61 14.53 13.73
Total Assets (in thousands) $12,033,618 $12,573,728 $13,006,635
Gross Property Additions (in thousands) $499,053 $475,921 $428,220
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $3,784,172 $4,019,728 $4,154,281
Preferred stock 15,527 157,247 464,611
Preferred stock subject to mandatory redemption - - -
Company obligated mandatorily redeemable preferred securities 689,250 689,250 325,000
Long-term debt 2,744,362 2,982,835 3,200,419
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $7,233,311 $7,849,060 $8,144,311
===============================================================================================================================
Capitalization Ratios (percent):
Common stock equity 52.3 51.2 51.0
Preferred stock 0.2 2.0 5.7
Company obligated mandatorily redeemable preferred securities 9.5 8.8 4.0
Long-term debt 38.0 38.0 39.3
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
===============================================================================================================================
First Mortgage Bonds (in thousands):
Issued - - 10,000
Retired 558,250 60,258 210,860
Preferred Stock (in thousands):
Issued - - -
Retired 106,064 356,392 179,148
Senior Notes (in thousands):
Issued 495,000 - -
Company Obligated Mandatorily Redeemable
Preferred Securities (in thousands):
Issued - 364,250 225,000
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1 A1
Standard and Poor's A+ A+ A+
Duff & Phelps AA- AA- AA-
Preferred Stock -
Moody's a2 a2 a2
Standard and Poor's A A A
Duff & Phelps A+ A+ A+
Unsecured Long-Term Debt -
Moody's A2 A2 A2
Standard and Poor's A A A
Duff & Phelps A+ A+ A+
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 1,596,488 1,561,675 1,531,453
Commercial 221,180 211,672 205,087
Industrial 9,485 9,988 10,424
Other 3,034 2,748 2,645
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Total 1,830,187 1,786,083 1,749,609
===============================================================================================================================
Employees (year-end) 8,371 8,354 * 10,346
*In 1997 Georgia Power Company transferred 1,855 employees to Southern Nuclearompany.
</TABLE>
II-118
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Georgia Power Company 1998 Annual Report
<S> <C> <C> <C> <C>
=======================================================================================================================------------
1995 1994 1993 1992
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $4,405,338 $4,162,403 $4,451,181 $4,297,436
Net Income after Dividends
on Preferred Stock (in thousands) $608,862 $525,544 $569,853 $520,538
Cash Dividends on Common Stock (in thousands) $451,500 $429,300 $402,400 $384,000
Return on Average Common Equity (percent) 14.43 12.84 14.37 13.60
Total Assets (in thousands) $13,470,275 $13,712,658 $13,736,110 $10,964,442
Gross Property Additions (in thousands) $480,449 $638,426 $674,432 $508,444
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $4,299,012 $4,141,554 $4,045,458 $3,888,237
Preferred stock 692,787 692,787 692,787 692,792
Preferred stock subject to mandatory redemption - - - 6,250
Company obligated mandatorily redeemable preferred securities 100,000 100,000 - -
Long-term debt 3,315,460 3,757,823 4,031,387 4,131,016
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $8,407,259 $8,692,164 $8,769,632 $8,718,295
===================================================================================================================================
Capitalization Ratios (percent):
Common stock equity 51.1 47.6 46.1 44.6
Preferred stock 8.2 8.0 7.9 8.0
Company obligated mandatorily redeemable preferred securities 1.2 1.2 - -
Long-term debt 39.5 43.2 46.0 47.4
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0 100.0
===================================================================================================================================
First Mortgage Bonds (in thousands):
Issued 75,000 - 1,135,000 975,000
Retired 505,789 133,559 1,337,822 1,381,300
Preferred Stock (in thousands):
Issued - - 175,000 195,000
Retired - - 245,005 165,004
Senior Notes (in thousands):
Issued - - - -
Company Obligated Mandatorily Redeemable
Preferred Securities (in thousands):
Issued - 100,000 - -
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A2 A3 A3
Standard and Poor's A+ A A- A-
Duff & Phelps AA- A+ A+ A-
Preferred Stock -
Moody's a2 a3 baa1 baa1
Standard and Poor's A A- BBB+ BBB+
Duff & Phelps A A- A- BBB
Unsecured Long-Term Debt -
Moody's A2 A3 Baa1 Baa1
Standard and Poor's A A- BBB+ BBB+
Duff & Phelps A+ A A BBB+
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 1,500,024 1,466,382 1,441,972 1,421,175
Commercial 198,624 193,648 188,820 183,784
Industrial 10,796 10,976 11,217 11,479
Other 2,568 2,426 2,322 2,269
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Total 1,712,012 1,673,432 1,644,331 1,618,707
===================================================================================================================================
Employees (year-end) 11,061 11,765 12,528 12,600
</TABLE>
II-119A
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Georgia Power Company 1998 Annual Report
<S> <C> <C> <C> <C>
=================================================================================================================================
1991 1990 1989 1988
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $4,301,428 $4,445,809 $4,145,240 $3,897,479
Net Income after Dividends
on Preferred Stock (in thousands) $474,855 $208,066 $449,099 $479,532
Cash Dividends on Common Stock (in thousands) $375,200 $389,600 $394,500 $386,600
Return on Average Common Equity (percent) 12.76 5.52 11.72 13.06
Total Assets (in thousands) $10,842,538 $11,176,619 $11,372,346 $11,130,539
Gross Property Additions (in thousands) $548,051 $558,727 $727,631 $929,019
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock 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
Company obligated mandatorily redeemable preferred securities - - - -
Long-term debt 4,553,189 5,000,225 5,054,001 4,861,378
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $9,046,286 $9,406,934 $9,677,502 $9,487,792
=================================================================================================================================
Capitalization Ratios (percent):
Common stock equity 41.7 39.1 39.9 40.1
Preferred stock 8.0 7.8 7.9 8.6
Company obligated mandatorily redeemable preferred securities - - - -
Long-term debt 50.3 53.1 52.2 51.3
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0 100.0
=================================================================================================================================
First Mortgage Bonds (in thousands):
Issued - 300,000 250,000 150,000
Retired 598,384 91,117 91,516 206,677
Preferred Stock (in thousands):
Issued 100,000 - - -
Retired 100,000 83,750 7,500 3,750
Senior Notes (in thousands):
Issued - - - -
Company Obligated Mandatorily Redeemable
Preferred Securities (in thousands):
Issued - - - -
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's Baa1 Baa1 Baa2 Baa2
Standard and Poor's BBB+ BBB+ BBB+ BBB
Duff & Phelps BBB+ BBB BBB 9
Preferred Stock -
Moody's baa1 baa1 baa2 baa2
Standard and Poor's BBB BBB BBB BBB-
Duff & Phelps BBB- BBB- BBB- 10
Unsecured Long-Term Debt -
Moody's Baa2 Baa2 - Baa3
Standard and Poor's BBB+ BBB - BBB-
Duff & Phelps BBB+ - - 10
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 1,397,682 1,378,888 1,355,211 1,329,173
Commercial 179,933 178,391 177,814 174,147
Industrial 11,946 12,115 12,311 12,353
Other 2,190 2,114 2,050 1,993
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------------
Total 1,591,751 1,571,508 1,547,386 1,517,666
=================================================================================================================================
Employees (year-end) 13,700 13,746 13,900 15,110
</TABLE>
II-119B
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Georgia Power Company 1998 Annual Report
<S> <C> <C> <C>
===============================================================================================================================
1998 1997 1996
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $1,486,699 $1,326,787 $1,371,033
Commercial 1,591,363 1,493,353 1,486,586
Industrial 1,170,881 1,110,311 1,118,633
Other 49,274 47,848 47,060
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Total retail 4,298,217 3,978,299 4,023,312
Sales for resale - non-affiliates 259,234 282,365 281,580
Sales for resale - affiliates 81,606 38,708 35,886
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 4,639,057 4,299,372 4,340,778
Other revenues 99,196 86,345 76,001
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Total $4,738,253 $4,385,717 $4,416,779
===============================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 19,481,486 17,295,022 17,826,451
Commercial 22,861,391 21,134,346 20,823,073
Industrial 27,283,147 26,701,685 26,191,831
Other 543,462 538,163 536,057
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Total retail 70,169,486 65,669,216 65,377,412
Sales for resale - non-affiliates 6,438,891 6,795,300 7,868,342
Sales for resale - affiliates 2,038,400 1,706,699 1,180,207
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Total 78,646,777 74,171,215 74,425,961
===============================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 7.63 7.67 7.69
Commercial 6.96 7.07 7.14
Industrial 4.29 4.16 4.27
Total retail 6.13 6.06 6.15
Sales for resale 4.02 3.78 3.51
Total sales 5.90 5.80 5.83
Residential Average Annual Kilowatt-Hour Use Per Customer 12,314 11,171 11,763
Residential Average Annual Revenue Per Customer $939.72 $857.01 $904.70
Plant Nameplate Capacity Ratings (year-end) (megawatts) 14,437 14,437 14,367
Maximum Peak-Hour Demand (megawatts):
Winter 11,959 10,407 10,410
Summer 13,923 13,153 12,914
Annual Load Factor (percent) 58.7 57.4 62.2
Plant Availability (percent):
Fossil-steam 86.0 85.8 85.2
Nuclear 91.6 88.8 89.3
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 62.3 64.3 60.4
Nuclear 18.3 18.8 18.2
Hydro 2.2 2.2 2.2
Oil and gas 2.2 0.6 0.5
Purchased power -
From non-affiliates 6.5 2.7 5.6
From affiliates 8.5 11.4 13.1
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
===============================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,118 9,990 10,468
Cost of fuel per million BTU (cents) 134.62 132.61 128.72
Average cost of fuel per net kilowatt-hour generated (cents) 1.36 1.32 1.35
===============================================================================================================================
* Less than one-tenth of one percent.
</TABLE>
II-120
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Georgia Power Company 1998 Annual Report
<S> <C> <C> <C> <C>
==========================================================================================================================
1995 1994 1993 1992
- - - - - - - --------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $1,337,060 $1,180,358 $1,291,035 $1,128,396
Commercial 1,449,108 1,367,315 1,354,130 1,285,681
Industrial 1,141,766 1,100,995 1,113,067 1,083,856
Other 44,255 42,983 41,399 39,504
- - - - - - - --------------------------------------------------------------------------------------------------------------------------
Total retail 3,972,189 3,691,651 3,799,631 3,537,437
Sales for resale - non-affiliates 290,302 351,591 534,370 640,308
Sales for resale - affiliates 76,906 60,899 61,668 67,835
- - - - - - - --------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 4,339,397 4,104,141 4,395,669 4,245,580
Other revenues 65,941 58,262 55,512 51,856
- - - - - - - --------------------------------------------------------------------------------------------------------------------------
Total $4,405,338 $4,162,403 $4,451,181 $4,297,436
==========================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 17,307,399 15,680,709 16,649,859 14,939,172
Commercial 19,844,999 18,738,461 18,278,508 17,260,614
Industrial 25,286,340 24,337,632 23,635,363 22,978,312
Other 493,720 484,009 460,801 436,144
- - - - - - - --------------------------------------------------------------------------------------------------------------------------
Total retail 62,932,458 59,240,811 59,024,531 55,614,242
Sales for resale - non-affiliates 6,591,841 7,968,475 14,307,030 15,870,222
Sales for resale - affiliates 2,738,947 3,056,050 3,027,733 3,320,060
- - - - - - - --------------------------------------------------------------------------------------------------------------------------
Total 72,263,246 70,265,336 76,359,294 74,804,524
==========================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 7.73 7.53 7.75 7.55
Commercial 7.30 7.30 7.41 7.45
Industrial 4.52 4.52 4.71 4.72
Total retail 6.31 6.23 6.44 6.36
Sales for resale 3.94 3.74 3.44 3.69
Total sales 6.00 5.84 5.76 5.68
Residential Average Annual Kilowatt-Hour Use Per Customer 11,654 10,766 11,630 10,603
Residential Average Annual Revenue Per Customer $900.28 $810.39 $901.79 $800.88
Plant Nameplate Capacity Ratings (year-end) (megawatts) 14,344 13,943 13,759 14,076
Maximum Peak-Hour Demand (megawatts):
Winter 9,819 10,509 9,067 8,938
Summer 12,828 11,758 12,573 11,448
Annual Load Factor (percent) 59.6 63.0 58.5 60.5
Plant Availability (percent):
Fossil-steam 85.8 83.1 85.9 86.6
Nuclear 91.8 88.4 85.5 87.7
- - - - - - - --------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 63.0 61.3 62.1 61.4
Nuclear 19.3 18.0 16.2 17.0
Hydro 2.5 2.6 2.3 2.5
Oil and gas 0.6 0.1 0.2 *
Purchased power -
From non-affiliates 7.7 9.7 10.2 12.2
From affiliates 6.9 8.3 9.0 6.9
- - - - - - - --------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0 100.0
==========================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,039 9,915 9,912 9,900
Cost of fuel per million BTU (cents) 143.85 145.33 153.62 153.08
Average cost of fuel per net kilowatt-hour generated (cents) 1.44 1.44 1.52 1.52
==========================================================================================================================
* Less than one-tenth of one percent.
</TABLE>
II-121A
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Georgia Power Company 1998 Annual Report
<S> <C> <C> <C> <C>
===============================================================================================================================
1991 1990 1989 1988
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $1,111,358 $1,109,165 $1,022,781 $979,047
Commercial 1,243,067 1,218,441 1,143,727 1,054,995
Industrial 1,057,702 1,061,830 1,006,416 983,822
Other 37,861 36,773 34,775 31,743
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Total retail 3,449,988 3,426,209 3,207,699 3,049,607
Sales for resale - non-affiliates 736,643 784,086 760,809 707,076
Sales for resale - affiliates 65,586 168,251 150,394 86,751
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 4,252,217 4,378,546 4,118,902 3,843,434
Other revenues 49,211 67,263 26,338 54,045
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Total $4,301,428 $4,445,809 $4,145,240 $3,897,479
===============================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 14,815,089 14,771,648 14,134,195 13,800,038
Commercial 16,885,833 16,627,128 15,843,181 14,790,561
Industrial 22,298,062 22,126,604 21,801,404 21,412,845
Other 429,016 428,459 414,107 397,669
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Total retail 54,428,000 53,953,839 52,192,887 50,401,113
Sales for resale - non-affiliates 18,719,924 20,158,681 20,479,412 18,544,705
Sales for resale - affiliates 3,885,892 8,272,528 7,489,948 3,327,814
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Total 77,033,816 82,385,048 80,162,247 72,273,632
===============================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 7.50 7.51 7.24 7.09
Commercial 7.36 7.33 7.22 7.13
Industrial 4.74 4.80 4.62 4.59
Total retail 6.34 6.35 6.15 6.05
Sales for resale 3.55 3.35 3.26 3.63
Total sales 5.52 5.31 5.14 5.32
Residential Average Annual Kilowatt-Hour Use Per Customer 10,675 10,795 10,530 10,484
Residential Average Annual Revenue Per Customer $800.78 $810.56 $761.96 $743.82
Plant Nameplate Capacity Ratings (year-end) (megawatts) 14,076 14,366 14,366 13,018
Maximum Peak-Hour Demand (megawatts):
Winter 10,001 8,977 10,101 9,866
Summer 13,090 13,196 12,735 12,295
Annual Load Factor (percent) 55.2 55.5 56.3 59.1
Plant Availability (percent):
Fossil-steam 93.3 92.5 93.0 94.5
Nuclear 81.6 81.3 89.2 69.4
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 63.6 65.1 64.0 72.0
Nuclear 15.3 13.7 14.1 9.6
Hydro 2.3 2.2 2.1 1.2
Oil and gas * 0.1 0.1 0.1
Purchased power -
From non-affiliates 10.3 11.0 10.2 8.2
From affiliates 8.5 7.9 9.5 8.9
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0 100.0
===============================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 9,960 9,939 10,020 9,969
Cost of fuel per million BTU (cents) 157.97 166.22 164.27 166.28
Average cost of fuel per net kilowatt-hour generated (cents) 1.57 1.65 1.65 1.66
===============================================================================================================================
* Less than one-tenth of one percent.
</TABLE>
11-121B
GULF POWER COMPANY
FINANCIAL SECTION
II-122
<PAGE>
MANAGEMENT'S REPORT
Gulf Power Company 1998 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 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 /s/ Arlan E. Scarbrough
Travis J. Bowden Arlan E. Scarbrough
President Chief Financial Officer
and Chief Executive Officer
February 10, 1999
II-123
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Gulf Power Company:
We have audited the accompanying balance sheets and statements of capitalization
of Gulf Power Company (a Maine corporation and a wholly owned subsidiary of
Southern Company) as of December 31, 1998 and 1997, 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, 1998. 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-134 through II-150)
referred to above present fairly, in all material respects, the financial
position of Gulf Power Company as of December 31, 1998 and 1997, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
Atlanta, Georgia
February 10, 1999
II-124
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Gulf Power Company 1998 Annual Report
RESULTS OF OPERATIONS
Earnings
Gulf Power Company's 1998 net income after dividends on preferred stock was
$56.5 million, a decrease of $1.1 million from the previous year. The decrease
in earnings was primarily a result of higher operating expenses in 1998 when
compared to 1997.
In 1997, earnings were $57.6 million, down $0.2 million when compared to
1996. The change was attributed to lower residential revenues due to
milder-than-normal weather.
Revenues
Operating revenues increased in 1998 when compared to 1997 and decreased in 1997
when compared to 1996. The following table summarizes the factors impacting
operating revenues for the past three years:
Increase (Decrease)
From Prior Year
---------------------------------------
1998 1997 1996
---------------------------------------
(in thousands)
Retail --
Sales growth $15,021 $ 4,005 $ 7,123
Weather 6,656 (5,277) (1,057)
Regulatory cost
recovery and other (34,179) (7,837) 5,649
- - - - - - - --------------------------------------------------------------------
Total retail (12,502) (9,109) 11,715
- - - - - - - --------------------------------------------------------------------
Sales for resale--
Non-affiliates (1,804) 496 2,788
Affiliates 25,882 (1,002) (857)
- - - - - - - --------------------------------------------------------------------
Total sales for resale 24,078 (506) 1,931
Other operating
revenues 13,086 1,106 1,642
- - - - - - - --------------------------------------------------------------------
Total operating
revenues $24,662 $(8,509) $15,288
====================================================================
Percent change 3.9% (1.3)% 2.5%
- - - - - - - --------------------------------------------------------------------
Retail revenues of $509.1 million in 1998 decreased $12.5 million or 2.4
percent from the prior year due primarily to the recovery of lower fuel costs.
The price per ton of coal, which is the Company's primary fuel source, was lower
in 1998 as the costs related to prior year coal contract renegotiations were
fully amortized and a major coal contract price was reduced. See Note 5 to the
financial statements under "Fuel Commitments" for further information. Retail
revenues for 1997 decreased $9.1 million or 1.7 percent when compared to 1996
due primarily to a decrease in residential revenues as a result of mild weather
and recovery of lower purchased power capacity costs.
The decrease in regulatory cost recovery and other retail revenues is
primarily attributable to the recovery of decreased fuel costs as mentioned
previously. Regulatory cost recovery and other includes recovery provisions for
fuel expense and the energy component of purchased power costs; energy
conservation costs; purchased power capacity costs; and environmental compliance
costs. The recovery provisions generally equal the related expenses and have no
material effect on net income. See Notes 1 and 3 to the financial statements
under "Revenues and Regulatory Cost Recovery Clauses" and "Environmental Cost
Recovery," respectively, for further information.
Sales for resale were $104.5 million in 1998, an increase of $24.1 million or
29.9 percent over 1997 due to additional energy sales to affiliated companies,
which is discussed below. Revenues from sales to utilities outside the service
area under long-term contracts consist of capacity and energy components.
Capacity revenues reflect the recovery of fixed costs and a return on investment
under the contracts. Energy is generally sold at variable cost. The capacity and
energy components under these long-term contracts were as follows:
1998 1997 1996
----------------------------------------
(in thousands)
Capacity $22,503 $24,899 $25,400
Energy 14,556 18,160 19,804
- - - - - - - -------------------------------------------------------------
Total $37,059 $43,059 $45,204
=============================================================
Declining capacity revenues reflect the decline in net plant investment
related to these sales.
Sales to affiliated companies vary from year to year depending on demand and
the availability and cost of generating resources at each company. These sales
have little impact on earnings.
Other operating revenues increased in 1998 due primarily to adjustments to
reflect differences between recoverable costs and the amounts actually reflected
in current rates. See Notes 1 and 3 to the financial statements under "Revenues
and Regulatory Cost Recovery Clauses" and "Environmental Cost Recovery,"
respectively, for further discussion.
II-125
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1998 Annual Report
Kilowatt-hour sales for 1998 and the percent changes by year were as follows:
KWH Percent Change
------------- ------------------------------
1998 1998 1997 1996
------------- ------------------------------
(millions)
Residential 4,437 7.7% (1.0)% 3.6%
Commercial 3,112 7.4 3.2 3.7
Industrial 1,834 (3.7) 5.3 0.7
Other 19 4.7 1.6 2.7
-------------
Total retail 9,402 5.2 1.6 3.0
Sales for resale
Non-affiliates 1,342 (12.4) (0.2) 9.9
Affiliates 1,758 107.3 19.5 (6.5)
-------------
Total 12,502 10.5 2.5 3.3
=================================================================
In 1998, total retail energy sales increased due to higher temperatures when
compared to the milder-than-normal temperatures in 1997 and due to increases in
the number of residential and commercial customers. The decrease in industrial
energy sales in 1998 when compared to 1997 primarily reflects the shut down of a
major industrial customer's plant site and temporary production delays of other
industrial customers. In 1997, residential energy sales declined as a result of
the milder weather when compared with more normal weather in 1996. The increase
in industrial energy sales was primarily the result of the Real-Time-Pricing
program. The price structure of this program has encouraged participating
industrial customers to lower their peak demand requirements and increase their
purchases of energy during off-peak periods. See "Future Earnings Potential" for
information on the Company's initiatives to remain competitive and to meet
conservation goals set by the Florida Public Service Commission (FPSC).
Decreases in energy sales for resale to non-affiliates of 12.4 percent in
1998 when compared to 1997 and 0.2 percent in 1997 when compared to 1996 are
primarily related to unit power sales under long-term contracts to other Florida
utilities and bulk power sales under short-term contracts to other
non-affiliated utilities. Energy sales to affiliated companies vary from year to
year as mentioned previously.
Expenses
Total operating expenses in 1998 increased $25.6 million or 4.8 percent from the
amount recorded in 1997 due primarily to higher fuel, purchased power, and
maintenance expenses, offset by lower other operation expenses. In 1997, total
operating expenses decreased $3.9 million or 0.7 percent from 1996. The decrease
was due to lower fuel, purchased power, and maintenance expenses, offset by
higher other operation expenses and depreciation and amortization expenses.
Fuel expenses in 1998 when compared to 1997 increased $16.6 million or 9.2
percent due to increased generation resulting from a higher demand for energy,
while average fuel costs decreased as noted below. In 1997, fuel expenses
decreased when compared to 1996 due to slightly lower fuel costs.
Purchased power expenses increased in 1998 by $6.9 million or 18.8 percent
above 1997 amounts due to an increased demand for energy. In 1997, purchased
power expenses decreased $6.5 million or 14.9 percent from the amount recorded
in 1996. This change was due primarily to a reduction in the cost of purchased
power from affiliated companies.
The amount and sources of generation and the average cost of fuel per net
kilowatt-hour generated were as follows:
1998 1997 1996
-------------------------------
Total generation
(millions of kilowatt-hours) 11,986 10,435 10,214
Sources of generation
(percent)
Coal 98.0 99.6 99.5
Oil and gas 2.0 0.4 0.5
Average cost of fuel per net
kilowatt-hour generated
(cents)-- 1.69 1.99 2.02
- - - - - - - ---------------------------------------------------------------------
Other operation expenses decreased $7.3 million or 5.7 percent in 1998 due to
a decrease in the amortization costs of prior year payments related to
renegotiations of coal supply contracts. This decrease was partially offset by
higher implementation costs of a new customer accounting system, increased costs
related to the Year 2000 program, and an increase in the accrual to the
accumulated provision for property damage. In 1997, other operation expenses
increased $11.1 million or 9.6 percent from the 1996 level. This change was
attributable to higher amortization costs of prior year payments related to
renegotiations of coal supply contracts, implementation costs related to a new
customer accounting system, and increased production and distribution costs
II-126
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1998 Annual Report
related to 1997 work force reduction programs. See Note 2 to the financial
statements under "Workforce Reduction Programs" for further discussion.
Maintenance expenses in 1998 rose by $9.3 million or 19.4 percent, as
compared to 1997, due primarily to scheduled maintenance performed at Plant
Crist and Plant Smith and increased transmission and distribution maintenance.
In 1997, maintenance expenses decreased $3.1 million or 6.0 percent when
compared to the prior year due to a decrease in scheduled maintenance of
production facilities.
Interest on long-term debt in 1998 decreased $2.0 million or 9.1 percent from
1997 due primarily to a decrease in interest expense on pollution control bonds
refinanced in 1997 and two long-term bank notes that matured in 1998. This
decrease was partially offset by an increase in interest due to two first
mortgage bonds maturing in 1998 being replaced with senior notes at a slightly
higher interest rate. In 1997, interest on long-term debt decreased $3.0 million
or 12.1 percent from the prior year as a result of retirements and refinancings.
Distributions on preferred securities increased $3.2 million in 1998. This
increase was attributable to the issuance of $45 million of trust preferred
securities in January 1998 to replace preferred stock. In 1997, distributions on
preferred securities increased $2.8 million due to the issuance of $40 million
of trust preferred securities in January 1997.
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 utility plant with a long economic life. Conventional
accounting for historical cost does not recognize this economic loss nor the
partially offsetting gain that arises through financing facilities with
fixed-money obligations, such as long-term debt and preferred securities. Any
recognition of inflation by regulatory authorities is reflected in the rate of
return allowed.
Future Earnings Potential
The results of operations for the past three years are not necessarily
indicative of future earnings potential. The level of future earnings depends on
numerous factors ranging from energy sales growth to a potentially less
regulated and more competitive environment.
Gulf Power currently operates as a vertically integrated utility providing
electricity to customers within its traditional service area located in
northwest Florida. Prices for electricity provided by the Company to retail
customers are set by the FPSC.
Future earnings in the near term will depend upon growth in energy sales,
which is subject to a number of factors. Traditionally, these factors have
included weather, competition, changes in contracts with neighboring utilities,
energy conservation practiced by customers, the elasticity of demand, and the
rate of economic growth in the Company's service area. In the fourth quarter of
1998, the FPSC opened a docketed proceeding to consider whether the rate of
return authorized for another investor-owned electric utility subject to the
FPSC's jurisdiction continues to be reasonable under current market conditions.
Although no official action has been taken by the FPSC at this time with regard
to the authorized returns for Gulf Power or any of the other investor-owned
electric utilities subject to the FPSC's jurisdiction, a similar investigation
could be initiated by action of the FPSC or its staff at any time.
The electric utility industry in the United States is currently undergoing a
period of dramatic change as a result of regulatory and competitive factors.
Among the primary agents of change has been the Energy Policy Act of 1992
(Energy Act). The 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 the Company's
transmission network in order to sell electricity to other utilities. This
enhances the incentive for IPPs to build cogeneration plants for industrial and
II-127
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1998 Annual Report
commercial customers and sell energy generation to other utilities. The Company
has and will continue to evaluate opportunities to partner and participate in
profitable cogeneration projects. In 1998, partnering with one of the Company's
largest industrial customers, construction was completed on 15 megawatts of
Company-owned cogeneration on the customer's plant site. Also, electricity sales
for resale rates are being driven down by wholesale transmission access and
numerous potential new energy suppliers, including power marketers and brokers.
The Company is aggressively working to maintain and expand its share of
wholesale sales in the southeastern power markets.
Although the Energy Act does not permit retail customer access, it was a
major catalyst for the current restructuring and consolidation taking place
within the utility industry. Numerous federal and state initiatives are in
varying stages to promote wholesale and retail competition. Among other things,
these initiatives allow customers to choose their electricity provider. As the
initiatives materialize, the structure of the utility industry could radically
change. Some states have approved initiatives that result in a separation of the
ownership and/or operation of generating facilities from the ownership and/or
operation of transmission and distribution facilities. While various
restructuring and competition initiatives have been or are being discussed in
Florida, none have been enacted to date. Enactment would require numerous issues
to be resolved, including significant ones relating to transmission pricing and
recovery of any stranded investments. The inability of the Company to recover
its investments, including the regulatory assets described in Note 1 to the
financial statements, could have a material adverse effect on the financial
condition of the Company. The Company is attempting to minimize or reduce its
cost exposure.
Continuing to be a low-cost producer could provide opportunities to increase
market share and profitability in markets that evolve with changing regulation.
Conversely, 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.
In 1996, the FPSC approved a new optional Commercial/Industrial Service Rider
(CISR), which is applicable to the rate schedules for the Company's largest
existing and potential customers who are able to show they have viable
alternatives to purchasing the Company's energy services. The CISR, approved as
a pilot program, provides the flexibility needed to enable the Company to offer
its services in a more competitive manner to these customers. The publicity of
the CISR ruling, increased competitive pressures, and general awareness of
customer choice pilots and proposals across the country have stimulated interest
on the part of customers in custom tailored offerings. The Company has
participated in one-on-one discussions with many of these customers, and has
negotiated and executed two Contract Service Agreements within the CISR pilot
program.
The FPSC will set new conservation goals and approve programs to accomplish
the goals by year-end 1999. Conservation goals are set every five years for a
ten-year period. The last conservation goals proceeding was in 1994 and
established demand-side management programs and conservation goals for 1995 to
2004. In the previous and current goals proceedings, the emphasis remains on
using price flexibility and competitive offerings of energy efficient products
and services. The new goals will be for the 2000 to 2009 period.
Compliance costs related to current and future environmental laws and
regulations could affect earnings if such costs are not fully recovered. The
Clean Air Act and other important environmental items are discussed later under
"Environmental Matters." Also, Florida legislation adopted in 1993 that provides
for recovery of prudent environmental compliance costs is discussed in Note 3 to
the financial statements under "Environmental Cost Recovery."
The Company is subject to the provisions of Financial Accounting Standards
Board (FASB) Statement No. 71, Accounting for the Effects of Certain Types of
Regulation. In the event that a portion of the Company's operations is no longer
subject to these provisions, the Company would be required to write off related
regulatory assets and liabilities that are not specifically recoverable, and
determine if any other assets have been impaired. See Note 1 to the financial
statements under "Regulatory Assets and Liabilities" for additional information.
II-128
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1998 Annual Report
Exposure to Market Risks
Due to cost-based rate regulation, the Company has limited exposure to market
volatility in interest rates and prices of electricity. To mitigate residual
risks relative to movements in electricity prices, the Company enters into fixed
price contracts for the purchase and sale of electricity through the wholesale
electricity market. Realized gains and losses are recognized in the income
statements as incurred. At December 31, 1998, exposure from these activities was
not material to the Company's financial position, results of operations, or cash
flows. Also, based on the Company's overall interest rate exposure at December
31, 1998, a near-term 100 basis point change in interest rates would not
materially affect the Company's financial statements.
New Accounting Standards
The FASB has issued Statement No. 133, Accounting for Derivative Instruments and
Hedging Activities, which must be adopted by the year 2000. This statement
establishes accounting and reporting standards for derivative instruments -
including certain derivative instruments embedded in other contracts - and for
hedging activities. Adoption of this statement is not expected to have a
material impact on the Company's financial statements.
In March 1998, the American Institute of Certified Public Accountants (AICPA)
issued a new Statement of Position, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use. This statement requires
capitalization of certain costs of internal-use software. The Company adopted
this statement in January 1999, and it is not expected to have a material impact
on the financial statements.
In April 1998, the AICPA issued a new Statement of Position, Reporting on the
Costs of Start-up Activities. This statement requires that the costs of start-up
activities and organizational costs be expensed as incurred. Any of these costs
previously capitalized by a company must be written off in the year of adoption.
The Company adopted this statement in January 1999, and it is not expected to
have a material impact on the financial statements.
In December 1998, the Emerging Issues Task Force (EITF) of the FASB issued
EITF No. 98-10, Accounting for Contracts Involved in Energy Trading and Risk
Management Activities. The EITF requires that energy trading contracts must be
marked to market through the income statement, with gains and losses reflected
rather than revenues and purchased power. Energy trading contracts are defined
as energy contracts entered into with the objective of generating profits on or
from exposure to shifts or changes in market prices. The Company adopted the
required accounting in January 1999, and it is not expected to have a material
impact on the financial statements.
Year 2000
Year 2000 Challenge
In order to save storage space, computer programmers in the 1960s and 1970s
shortened the year portion of date entries to just two digits. Computers
assumed, in effect, that all years began with "19." This practice was widely
adopted and hard-coded into computer chips and processors found in some
equipment. This approach, intended to save processing time and storage space,
was used until the mid-1990s. Unless corrected before the year 2000, affected
software systems and devices containing a chip or microprocessor with date and
time functions could incorrectly process dates or the systems may cease to
function.
The Company depends on complex computer systems for many aspects of its
operations, which include generation, transmission, and distribution of
electricity, as well as other business support activities. The Company's goal is
to have critical devices or software that are required to maintain operations to
be Year 2000 ready by June 1999. Year 2000 ready means that a system or
application is determined suitable for continued use through the Year 2000 and
beyond. Critical systems include, but are not limited to, turbine generator
systems, control center computer systems, customer service systems, energy
management systems, and telephone switches and equipment.
Year 2000 Program and Status
The Company's executive management recognizes the seriousness of the Year 2000
challenge and has dedicated what it believes to be adequate resources to address
the issue. The Millennium Project is a team of employees, IBM consultants, and
other contractors whose progress is reviewed on a monthly basis by a steering
committee of Southern Company executives.
II-129
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1998 Annual Report
The work was divided into two phases. Phase I began in 1996 and consisted of
identifying and assessing corporate assets related to software systems and
devices that contain a computer chip or clock. The first phase was completed in
June 1997. Phase 2 consists of testing and remediating high priority systems and
devices. Also, contingency planning is included in this phase. Completion of
Phase 2 is targeted for June 1999. The Millennium Project will continue to
monitor the affected computer systems, devices, and applications into the Year
2000.
Southern Company has completed more than 70 percent of the activities
contained in its work plan. The percentage of completion and projected
completion dates by function are as follows:
- - - - - - - ------------------------------------------------------------------
Work Plan
-----------------------------------------
Remediation Project
Inventory Assessment Testing Completion
- - - - - - - ------------------------------------------------------------------
Generation 100% 100% 70% 6/99
- - - - - - - ------------------------------------------------------------------
Energy Management 100 100 90 6/99
- - - - - - - ------------------------------------------------------------------
Transmission and
Distribution 100 100 100 1/99
- - - - - - - ------------------------------------------------------------------
Telecommunications 100 100 50 6/99
- - - - - - - ------------------------------------------------------------------
Corporate Applications 100 100 90 3/99
- - - - - - - ------------------------------------------------------------------
Year 2000 Costs
The Company's current projected total costs for Year 2000 readiness are
approximately $4.8 million. These costs include labor necessary to identify,
test, and renovate affected devices and systems. From its inception through
December 31, 1998, the Year 2000 program costs, recognized as expense, amounted
to $3.0 million, of which $2.5 million was recorded in 1998.
Year 2000 Risks
The Company is implementing a detailed process to minimize the possibility of
service interruptions related to the Year 2000. The Company believes, based on
current tests, that the system can provide customers with electricity. These
tests increase confidence, but do not guarantee error-free operation. The
Company is taking what it believes to be prudent steps to prepare for the Year
2000, and it expects any interruptions in service that may occur within the
Company's service territory to be isolated and short in duration.
The Company expects the risks associated with Year 2000 to be no more severe
than the scenarios that its electric system is routinely prepared to handle. The
most likely worst case scenario consists of the service loss of one of the
largest generating units and/or the service loss of any single bulk transmission
element in its service territory. The Company has followed a proven methodology
for identifying and assessing software and devices containing potential Year
2000 challenges. Remediation and testing of those devices are in progress.
Following risk assessment, the Company is preparing contingency plans as
appropriate and is participating in North American Electric Reliability Council
- - - - - - - - coordinated national drills during 1999.
The Company is currently reviewing the Year 2000 readiness of material third
parties that provide goods and services crucial to the Company's operations.
Among such critical third parties are fuel, transportation, telecommunications,
water, chemical, and other suppliers. Contingency plans based on the assessment
of each third party's ability to continue supplying critical goods and services
to the Company are being developed.
There is a potential for some earnings erosion caused by reduced electrical
demand by customers because of their own Year 2000 issues.
Year 2000 Contingency Plans
Because of experience with hurricanes and other storms, the Company is skilled
at developing and using contingency plans in unusual circumstances. As part of
Year 2000 business continuity and contingency planning, the Company is drawing
on that experience to make risk assessments and is developing additional plans
to deal specifically with situations that could arise relative to Year 2000
challenges. The Company is identifying critical operational locations, and key
employees will be on duty at those locations during the Year 2000 transition. In
September 1999, drills are scheduled to be conducted to test contingency plans.
Because of the level of detail of the contingency planning process, management
feels that the contingency plans will keep any service interruptions that may
occur within the Company's service territory isolated and short in duration.
II-130
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1998 Annual Report
FINANCIAL CONDITION
Overview
The Company's financial condition continues to be very solid. During 1998, gross
property additions were $69.7 million. Funds for the property additions were
provided by internal sources. See the Statements of Cash Flows for further
details.
Financing Activities
In 1998, the Company sold $45 million of trust preferred securities and $50
million of senior insured quarterly notes. Retirements, including maturities
during 1998, totaled $45 million of first mortgage bonds, $9.5 million of
preferred stock, and $8.3 million of long-term bank notes. The proceeds from the
issuance of $45 million of trust preferred securities were used to repay
short-term indebtedness that was used to redeem preferred stock tendered at the
end of 1997 and to redeem additional preferred stock during 1998. This
refinancing will result in savings of approximately $0.6 million annually. See
the Statements of Cash Flows for further details.
Composite financing rates for the years 1996 through 1998 as of year end were
as follows:
1998 1997 1996
-----------------------------
Composite interest rate on
long-term debt 6.1% 5.9% 6.1%
Composite rate on
trust preferred securities 7.3% 7.6% -
Composite preferred stock
dividend rate 5.1% 6.1% 6.4%
- - - - - - - -----------------------------------------------------------------
The composite interest rate on long-term debt increased in 1998 primarily as
a result of the maturity of two low-cost first mortgage bond issues, which were
replaced with long-term notes with a slightly higher interest rate. The decrease
in the composite preferred stock dividend rate in 1998 was primarily due to the
retirement of higher-cost preferred stock.
Capital Requirements for Construction
The Company's gross property additions, including those amounts related to
environmental compliance, are budgeted at $434 million for the three years
beginning in 1999 ($72 million in 1999, $100 million in 2000, and $262 million
in 2001). Actual construction costs may vary from this estimate because of
changes in such factors as: business conditions; environmental regulations; load
projections; the cost and efficiency of construction labor, equipment, and
materials; and the cost of capital. In addition, there can be no assurance that
costs related to capital expenditures will be fully recovered. The Company has
budgeted $263.6 million for the years 1999 through 2002 for the estimated cost
of a 532 megawatt combined cycle gas unit to be located in the eastern portion
of its service area. The unit is expected to have an in-service date of June
2002, subject to regulatory approval. The Company will continue its program to
maintain and upgrade transmission and distribution facilities and generating
plants.
Other Capital Requirements
In addition to the funds needed for the construction program, approximately $27
million will be required by the end of 2001 in connection with maturities of
long-term debt. Also, the Company will continue to retire higher-cost debt and
preferred securities and replace these securities with lower-cost capital as
market conditions and terms of the instruments permit.
Environmental Matters
In November 1990, the Clean Air Act was signed into law. Title IV of the Clean
Air Act -- the acid rain compliance provision of the law -- significantly
affected the Company. Specific reductions in sulfur dioxide and nitrogen oxide
emissions from fossil-fired generating plants are required in two phases. Phase
I compliance began in 1995 and initially affected 28 generating units of
Southern Company. As a result of Southern Company's compliance strategy, an
additional 22 generating units were brought into compliance with Phase I
requirements. Phase II compliance is required in 2000, and all fossil-fired
generating plants will be affected.
Southern Company achieved Phase I sulfur dioxide compliance at the affected
plants by switching to low-sulfur coal, which required some equipment upgrades.
Construction expenditures for Phase I compliance totaled approximately $300
million for Southern Company, including approximately $42 million for Gulf
Power.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1998 Annual Report
For Phase II sulfur dioxide compliance, Southern Company could use emission
allowances, increase fuel switching, and/or install flue gas desulfurization
equipment at selected plants. Also, equipment to control nitrogen oxide
emissions will be installed on additional system fossil-fired units as required
to meet Phase II limits. Current compliance strategy for Phase II and ozone
non-attainment could require total estimated construction expenditures for
Southern Company of approximately $70 million, of which $16 million remains to
be spent. Phase II compliance is not expected to have a material impact on Gulf
Power.
Following adoption of legislation in April of 1992 allowing electric
utilities in Florida to seek FPSC approval of their Clean Air Act Compliance
Plans, Gulf Power 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.
In 1993, the Florida Legislature adopted legislation that allows a utility to
petition the FPSC for recovery of prudent environmental compliance costs that
are not being recovered through base rates or any other recovery mechanism. The
legislation is discussed in Note 3 to the financial statements under
"Environmental Cost Recovery." Substantially all of the costs for the Clean Air
Act and other new environmental legislation discussed below are expected to be
recovered through the Environmental Cost Recovery Clause.
In July 1997, the Environmental Protection Agency (EPA) revised the national
ambient air quality standards for ozone and particulate matter. This revision
makes the standards significantly more stringent. In September 1998, the EPA
issued the final regional nitrogen oxide rules to the states for implementation.
The states have one year to adopt and implement the new rules. The final rules
affect 22 states including Alabama and Georgia. See Note 6 to the financial
statements under "Joint Ownership Agreements" related to the Company's ownership
interest in Georgia Power's Plant Scherer Unit No. 3. The EPA rules are being
challenged in the courts by several states and industry groups. Implementation
of the final state rules could require substantial further reductions in
nitrogen oxide emissions from fossil-fired generating facilities and other
industry in these states. Implementation of the standards could result in
significant additional compliance costs and capital expenditures that cannot be
determined until the results of legal challenges are known and the states have
adopted their final rules.
The EPA and state environmental regulatory agencies are reviewing and
evaluating various other matters including: nitrogen oxide emission control
strategies for ozone non-attainment areas; additional controls for hazardous air
pollutant emissions; and hazardous waste disposal requirements. The impact of
new standards will depend on the development and implementation of applicable
regulations.
Gulf Power must comply with other environmental laws and regulations that
cover the handling and disposal of hazardous waste. Under these various laws and
regulations, the Company could incur substantial costs to clean up properties.
The Company conducts studies to determine the extent of any required cleanup
costs and has recognized in the financial statements costs to clean up known
sites. For additional information, see Note 3 to the financial statements under
"Environmental Cost Recovery."
Several major pieces of environmental legislation are being considered for
reauthorization or amendment by Congress. These include: the Clean Air Act; the
Clean Water Act; the Comprehensive Environmental Response, Compensation and
Liability Act; the Resource Conservation and Recovery Act; the Toxic Substances
Control Act; and the Endangered Species Act. Changes to these laws could affect
many areas of the Company's operations. The full impact of any such changes
cannot be determined at this time.
Compliance with possible additional legislation related to global climate
change, electric and magnetic fields, and other environmental health concerns
could significantly affect the Company. The impact of new legislation -- if any
- - - - - - - -- will depend on the subsequent development and implementation of applicable
regulations. In addition, the potential exists for liability as the result of
lawsuits alleging damages caused by electric and magnetic fields.
Sources of Capital
At December 31, 1998, the Company had approximately $1.0 million of cash and
cash equivalents and $35.5 million of unused committed lines of credit with
banks to meet its short-term cash needs. Refer to Statements of Cash Flows for
II-132
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1998 Annual Report
details related to the Company's financing activities. See Note 5 to the
financial statements under "Bank Credit Arrangements" for additional
information.
The Company historically has relied on issuances of first mortgage bonds and
preferred stock, in addition to pollution control revenue bonds issued for its
benefit by public authorities, to meet its long-term external financing
requirements. Recently, the Company's financings have consisted of unsecured
debt and trust preferred securities. In this regard, the Company sought and
obtained stockholder approval in 1997 to amend its corporate charter eliminating
restrictions on the amounts of unsecured indebtedness it may incur.
If the Company chooses to issue first mortgage bonds or preferred stock, it
is required to meet certain coverage requirements specified in its mortgage
indenture and corporate charter. The Company's ability to satisfy all coverage
requirements is such that it could issue new first mortgage bonds and preferred
stock to provide sufficient funds for all anticipated requirements.
Cautionary Statement Regarding Forward-Looking Information
Gulf Power Company's 1998 Annual Report contains forward-looking and historical
information. The Company cautions that there are various important factors that
could cause actual results to differ materially from those indicated in the
forward-looking information; accordingly, there can be no assurance that such
indicated results will be realized. These factors include legislative and
regulatory initiatives regarding deregulation and restructuring of the electric
utility industry; the extent and timing of the entry of additional competition
in the Company's markets; potential business strategies--including acquisitions
or dispositions of assets or internal restructuring--that may be pursued by the
company; state and federal rate regulation; Year 2000 issues; changes in or
application of environmental and other laws and regulations to which the Company
is subject; political, legal and economic conditions and developments; financial
market conditions and the results of financing efforts; changes in commodity
prices and interest rates; weather and other natural phenomena; and other
factors discussed in the reports--including Form 10-K--filed from time to time
by the Company with the Securities and Exchange Commission.
II-133
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF INCOME
For the Years Ended December 31, 1998, 1997, and 1996
Gulf Power Company 1998 Annual Report
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
1998 1997 1996
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
(in thousands)
Operating Revenues:
<S> <C> <C> <C>
Revenues $ 607,876 $ 609,096 $ 616,603
Revenues from affiliates 42,642 16,760 17,762
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total operating revenues 650,518 625,856 634,365
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation-
Fuel 197,462 180,843 184,500
Purchased power from non-affiliates 29,369 11,938 8,300
Purchased power from affiliates 14,445 24,955 35,076
Other 119,011 126,266 115,154
Maintenance 57,286 47,988 51,050
Depreciation and amortization 59,129 57,874 56,645
Taxes other than income taxes 51,462 51,775 52,027
Federal and state income taxes (Note 8) 34,089 35,034 37,821
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total operating expenses 562,253 536,673 540,573
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Operating Income 88,265 89,183 93,792
Other Income (Expense):
Interest income 931 1,203 1,921
Other, net (2,339) (992) (1,678)
Income taxes applicable to other income 1,890 1,584 248
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges and Other 88,747 90,978 94,283
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Interest Charges and Other:
Interest on long-term debt 19,718 21,699 24,691
Other interest charges 2,548 2,076 1,824
Interest on notes payable 1,190 891 2,071
Amortization of debt discount, premium, and expense, net 2,100 2,281 2,087
Distributions on preferred securities of subsidiary trust 6,034 2,804 -
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Interest charges and other, net 31,590 29,751 30,673
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Net Income 57,157 61,227 63,610
Dividends on Preferred Stock 636 3,617 5,765
===========================================================================================================================
Net Income After Dividends on Preferred Stock $ 56,521 $ 57,610 $ 57,845
===========================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-134
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1998, 1997, and 1996
Gulf Power Company 1998 Annual Report
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Operating Activities:
<S> <C> <C> <C>
Net income $ 57,157 $ 61,227 $ 63,610
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 69,633 72,860 71,825
Deferred income taxes (4,684) (7,047) 2,157
Accumulated provision for property damage 2,308 2,572 4,227
Deferred costs of 1995 coal contract renegotiation - 1,246 10,931
Other, net 1,155 1,012 1,468
Changes in certain current assets and liabilities --
Receivables, net 11,308 (692) 391
Inventories (4,308) 10,674 12,957
Payables 823 1,398 (7,078)
Taxes accrued (7,960) 6,123 (441)
Current costs of 1995 coal contract renegotiation 812 14,146 (5,099)
Other (11,323) 2,028 5,937
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 114,921 165,547 160,885
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (69,731) (54,289) (61,386)
Other 5,990 509 (2,786)
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (63,741) (53,780) (64,172)
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------------
Financing Activities and Capital Contributions:
Proceeds:
Preferred securities 45,000 40,000 -
First mortgage bonds - - 55,000
Pollution control bonds - 40,930 33,275
Capital contributions from parent 522 - -
Other long-term debt 50,000 20,000 49,148
Retirements:
Preferred stock (9,455) (75,911) -
First mortgage bonds (45,000) (25,000) (50,930)
Pollution control bonds - (40,930) (33,275)
Other long-term debt (8,326) (15,972) (34,923)
Notes payable, net (15,500) 22,000 (55,500)
Payment of preferred stock dividends (792) (5,370) (5,749)
Payment of common stock dividends (67,200) (64,600) (48,300)
Miscellaneous (4,167) (3,014) (5,332)
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (54,918) (107,867) (96,586)
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents (3,738) 3,900 127
Cash and Cash Equivalents at Beginning of Year 4,707 807 680
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 969 $ 4,707 $ 807
====================================================================================================================================
Supplemental Cash Flow Information:
Cash paid during the year for --
Interest (net of amount capitalized) $28,044 $26,558 $26,050
Income taxes $38,782 $36,010 $25,858
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------------
( ) Denotes use of cash.
The accompanying notes are an integral part of these statements.
</TABLE>
II-135
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
At December 31, 1998 and 1997
Gulf Power Company 1998 Annual Report
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
ASSETS 1998 1997
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Utility Plant:
<S> <C> <C> <C> <C>
Plant in service (Notes 1 and 6) $ 1,809,901 $ 1,762,244
Less accumulated provision for depreciation 784,111 737,767
--------------------------------------------------------------------------------------------------------------------------------
1,025,790 1,024,477
Construction work in progress 34,863 31,030
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Total 1,060,653 1,055,507
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Other Property and Investments 588 622
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 969 4,707
Receivables-
Customer accounts receivable 49,067 57,057
Other accounts and notes receivable 3,514 2,744
Affiliated companies 3,442 7,329
Accumulated provision for uncollectible accounts (996) (796)
Fossil fuel stock, at average cost 24,213 19,296
Materials and supplies, at average cost (Note 1) 28,025 28,634
Deferred coal contract costs (Note 5) - 4,456
Regulatory clauses under recovery (Note 1) 9,737 1,675
Prepayments 5,690 2,171
Vacation pay deferred 4,035 4,057
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Total 127,696 131,330
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Deferred Charges and Other Assets:
Deferred charges related to income taxes (Note 8) 25,308 26,586
Debt expense and loss, being amortized 21,448 22,941
Prepaid pension costs (Note 2) 13,770 10,385
Deferred storm charges (Note 1) - 703
Miscellaneous 18,438 17,538
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Total 78,964 78,153
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Total Assets $ 1,267,901 $ 1,265,612
================================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-136
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
At December 31, 1998 and 1997
Gulf Power Company 1998 Annual Report
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
CAPITALIZATION AND LIABILITIES 1998 1997
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Capitalization (See accompanying statements):
<S> <C> <C>
Common stock equity (Note 11) $ 427,652 $ 428,718
Preferred stock 4,236 13,691
Company obligated mandatorily redeemable preferred securities of
subsidiary trusts holding Company Junior Subordinated Notes (Note 9) 85,000 40,000
Long-term debt 317,341 296,993
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Total 834,229 779,402
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Long-term debt due within one year (Note 10) 27,000 53,327
Notes payable 31,500 47,000
Accounts payable-
Affiliated companies 19,756 14,334
Other 23,697 20,205
Customer deposits 12,560 13,778
Taxes accrued 7,432 8,258
Interest accrued 5,184 7,227
Regulatory clauses over recovery (Note 1) 6,037 5,062
Vacation pay accrued 4,035 4,057
Dividends declared 54 10,210
Miscellaneous 3,960 8,739
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Total 141,215 192,197
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes (Note 8) 166,118 166,302
Deferred credits related to income taxes (Note 8) 52,465 56,935
Accumulated deferred investment tax credits 29,632 31,552
Accumulated provision for postretirement benefits (Note 2) 23,534 20,491
Accumulated provision for property damage (Note 1) 1,605 -
Miscellaneous 19,103 18,733
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Total 292,457 294,013
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Commitments and Contingent Matters (Notes 1, 2, 3, 4, 5, and 7)
Total Capitalization and Liabilities $ 1,267,901 $ 1,265,612
================================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-137
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CAPITALIZATION
At December 31, 1998 and 1997
Gulf Power Company 1998 Annual Report
-----------------------------------------------------------------------------------------------------------------------------
1998 1997 1998 1997
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
(in thousands) (percent of total)
Common Stock Equity:
Common stock, without par value --
Authorized and outstanding --
<S> <C> <C> <C> <C>
992,717 shares in 1998 and 1997 $ 38,060 $ 38,060
Paid-in capital 218,960 218,438
Premium on preferred stock 12 12
Retained earnings (Note 11) 170,620 172,208
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Total common stock equity 427,652 428,718 51.3 % 55.0 %
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Cumulative Preferred Stock:
$10 par value --
Authorized -- 10,000,000 shares
Outstanding -- 0 shares in 1998 and 377,989 shares in 1997
$25 stated capital --
6.72% - 8,661
Adjustable Rate - 789
$100 par value --
Authorized -- 801,626 shares
Outstanding -- 42,361 shares in 1998 and 42,411 shares in 1997
4.64% 1,250 1,255
5.16% 1,357 1,357
5.44% 1,629 1,629
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Total (annual dividend requirement -- $217,000) 4,236 13,691 0.5 1.8
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Company Obligated Mandatorily
Redeemable Preferred Securities (Note 9):
$25 Liquidation Value --
7.00% 45,000 -
7.625% 40,000 40,000
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Total (annual distribution requirement--$6,200,000) 85,000 40,000 10.2 5.1
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
II-138
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CAPITALIZATION (continued)
At December 31, 1998 and 1997
Gulf Power Company 1998 Annual Report
-----------------------------------------------------------------------------------------------------------------------------
1998 1997 1998 1997
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
(in thousands) (percent of total)
Long-term Debt:
First mortgage bonds --
<S> <C> <C> <C> <C>
Maturity Interest Rates
April 1, 1998 5.55% - 15,000
July 1, 1998 5.00% - 30,000
July 1, 2003 6.125% 30,000 30,000
November 1, 2006 6.50% 25,000 25,000
January 1, 2026 6.875% 30,000 30,000
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Total first mortgage bonds 85,000 130,000
Pollution control revenue bonds--
Collateralized:
Maturity Interest Rates
April 1, 2006 5.25% 12,075 12,075
July 1, 2022 Variable - 5.10% at 1/1/99 40,930 40,930
April 1, 2023 6.20% 13,000 13,000
June 1, 2023 5.80% 32,550 32,550
November 1, 2023 5.70% 7,875 7,875
September 1, 2024 6.30% 22,000 22,000
September 1, 2024 Variable - 5.15% at 1/1/99 20,000 20,000
February 1, 2026 5.50% 21,200 21,200
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Total pollution control revenue bonds 169,630 169,630
Other long-term debt--
Maturity Interest Rates
Bank notes--
February 1, 1998 5.2125% - 5,754
April 1, 1998 6.44% - 2,573
November 20, 1999 Variable - 5.7163% at 1/1/99 13,500 13,500
November 20, 1999 Variable - 5.7163% at 1/1/99 13,500 13,500
Junior subordinated notes--
June 30, 2037 7.50% 20,000 20,000
Senior insured quarterly notes--
June 30, 2038 6.70% 50,000 -
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Total other long-term debt 97,000 55,327
Unamortized debt discount (7,289) (4,637)
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Total long-term debt (annual interest
requirement -- $21,365,000) 344,341 350,320
Less amount due within one year (Note 10) 27,000 53,327
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Long-term debt excluding amount due within one year 317,341 296,993 38.0 38.1
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Total Capitalization $ 834,229 $ 779,402 100.0 % 100.0 %
=============================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-139
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31, 1998, 1997, and 1996
Gulf Power Company 1998 Annual Report
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
1998 1997 1996
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Balance at Beginning of Year $ 172,208 $ 179,179 $ 179,663
Net income after dividends on preferred stock 56,521 57,610 57,845
Dividends on common stock (57,200) (64,600) (58,300)
Preferred stock transactions, net (909) 19 (29)
============================================================================================================================
Balance at End of Year (Note 11) $ 170,620 $ 172,208 $ 179,179
===========================================================================================================================
STATEMENTS OF PAID-IN CAPITAL
For the Years Ended December 31, 1998, 1997, and 1996
Gulf Power Company 1998 Annual Report
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
1998 1997 1996
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
(in thousands)
Balance at Beginning of Year $ 218,438 $ 218,438 $ 218,438
Capital contributions from parent 522 - -
===========================================================================================================================
Balance at End of Year $ 218,960 $ 218,438 $ 218,438
===========================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-140
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Gulf Power Company 1998 Annual Report
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
General
Gulf Power Company is a wholly owned subsidiary of Southern Company, which is
the parent company of five operating companies, a system service company,
Southern Communications Services (Southern LINC), Southern Company Energy
Solutions, Southern Energy, Inc. (Southern Energy), Southern Nuclear Operating
Company (Southern Nuclear), and other direct and indirect subsidiaries. The
operating companies (Alabama Power, Georgia Power, Gulf Power, Mississippi
Power, and Savannah Electric) provide electric service in four southeastern
states. Gulf Power Company provides electric service to the northwest panhandle
of Florida. Contracts among the operating 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) and/or the Securities and Exchange Commission. The system
service company provides, at cost, specialized services to Southern Company and
subsidiary companies. Southern LINC provides digital wireless communications
services to the operating companies and also markets these services to the
public within the Southeast. Southern Company Energy Solutions develops new
business opportunities related to energy products and services. Worldwide,
Southern Energy develops and manages electricity and other energy related
projects, including domestic energy trading and marketing. Southern Nuclear
provides services to Southern Company's nuclear power plants.
Southern Company is registered as a holding company under the Public Utility
Holding Company Act of 1935 (PUHCA). Both Southern Company and its subsidiaries
are subject to the regulatory provisions of the PUHCA. The Company is also
subject to regulation by the FERC and the Florida Public Service Commission
(FPSC). The Company follows generally accepted accounting principles and
complies with the accounting policies and practices prescribed by the FPSC. The
preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates, and the actual results may
differ from those estimates.
Certain prior years' data presented in the financial statements have been
reclassified to conform with current year presentation.
Regulatory Assets and Liabilities
The Company is subject to the provisions of Financial Accounting Standards Board
(FASB) Statement No. 71, Accounting for the Effects of Certain Types of
Regulation. Regulatory assets represent probable future revenues to the Company
associated with certain costs that are expected to be recovered from customers
through the ratemaking process. Regulatory liabilities represent probable future
reductions in revenues associated with amounts that are expected to be credited
to customers through the ratemaking process. Regulatory assets and (liabilities)
reflected in the Balance Sheets at December 31 relate to the following:
1998 1997
--------------------------
(in thousands)
Deferred income tax debits $ 25,308 $ 26,586
Deferred loss on reacquired debt 18,883 20,494
Environmental remediation 7,076 7,338
Current & deferred
coal contract costs - 4,456
Vacation pay 4,035 4,057
Accumulated provision for
property damage (1,605) -
Deferred storm charges - 703
Regulatory clauses under (over)
recovery, net 3,700 (3,387)
Deferred income tax credits (52,465) (56,935)
Other, net (480) (629)
- - - - - - - ------------------------------------------------------------------
Total $ 4,452 $ 2,683
==================================================================
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 net regulatory assets and liabilities that are not specifically
recoverable through regulated rates. In addition, the Company would be required
to determine any impairment to other assets, including plant, and write down the
assets, if impaired, to their fair value.
II-141
<PAGE>
NOTES (continued)
Gulf Power Company 1998 Annual Report
Revenues and Regulatory Cost Recovery Clauses
The Company currently operates as a vertically integrated utility providing
electricity to retail customers within its service area located in northwest
Florida and to wholesale customers in the Southeast. Revenues, less affiliated
transactions, by type of service were as follows:
1998 1997 1996
-------------------------------------
(in thousands)
Retail $509,118 $521,620 $530,729
Wholesale 61,893 63,697 63,201
Other operating 36,865 23,779 22,673
- - - - - - - ---------------------------------------------------------------
Total $607,876 $609,096 $616,603
===============================================================
The Company accrues revenues for service rendered but unbilled at the end of
each fiscal period. The Company has a diversified base of customers and no
single customer or industry comprises 10 percent or more of revenues. For all
periods presented, uncollectible accounts averaged significantly less than 1
percent of revenues.
Fuel costs are expensed as the fuel is used. The Company's electric rates
include provisions to periodically adjust billings for fluctuations in fuel
costs, the energy component of purchased power costs, and certain other costs.
The Company also has similar cost recovery clauses for energy conservation
costs, purchased power capacity costs, and environmental compliance costs.
Revenues are adjusted monthly for differences between recoverable costs and
amounts actually reflected in current rates.
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 1998 and 3.6 percent in 1997 and 1996. The increase in 1998 is
attributable to new depreciation rates, which were approved by the FPSC in 1998.
When property subject to depreciation is retired or otherwise disposed of in the
normal course of business, its cost -- together with the cost of removal, less
salvage -- is charged to the accumulated provision for depreciation. Minor items
of property included in the original cost of the plant are retired when the
related property unit is retired. Also, the provision for depreciation expense
includes an amount for the expected cost of removal of facilities.
Income Taxes
The Company uses the liability method of accounting for income taxes and
provides deferred income taxes for all significant income tax temporary
differences. Investment tax credits utilized are deferred and amortized to
income over the average lives of the related property. The Company is included
in the consolidated federal income tax return of Southern Company.
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
Temporary cash investments are considered cash equivalents. Temporary cash
investments are securities with original maturities of 90 days or less.
Financial Instruments
The Company's financial instruments for which the carrying amount did not equal
fair value at December 31 were as follows:
Carrying Fair
Amount Value
---------------------------
(in thousands)
Long-term debt:
At December 31, 1998 $344,341 $357,100
At December 31, 1997 $350,320 $356,766
Capital trust preferred
securities:
At December 31, 1998 $85,000 $89,400
At December 31, 1997 $40,000 $40,800
- - - - - - - --------------------------------------------------------------
The fair values for long-term debt and preferred securities were based on
either closing market prices or closing prices of comparable instruments.
II-142
<PAGE>
NOTES (continued)
Gulf Power Company 1998 Annual Report
Materials and Supplies
Generally, materials and supplies include the cost of transmission,
distribution, and generating plant materials. Materials are charged to inventory
when purchased and then expensed or capitalized to plant, as appropriate, when
installed.
Provision for Injuries and Damages
The Company is subject to claims and suits arising in the ordinary course of
business. As permitted by regulatory authorities, the Company provides for the
uninsured costs of injuries and damages by charges to income amounting to $1.2
million annually. The expense of settling claims is charged to the provision to
the extent available. The accumulated provision of $1.3 million and $1.4 million
at December 31, 1998 and 1997, respectively, is included in miscellaneous
current liabilities in the accompanying Balance Sheets.
Provision for Property Damage
The Company provides for the cost of repairing damages from major storms and
other uninsured property damages. This includes the full cost of storm and other
damages to its transmission and distribution lines and the cost of uninsured
damages to its generation and other property. The expense of such damages is
charged to the provision account. At December 31, 1998, the accumulated
provision for property damage was $1.6 million. In 1995, the FPSC approved the
Company's request to increase the amount of its annual accrual to the
accumulated provision for property damage account from $1.2 million to $3.5
million and approved a target level for the accumulated provision account
between $25.1 and $36.0 million. The FPSC has also given the Company the
flexibility to increase its annual accrual amount above $3.5 million, when the
Company believes it is in a position to do so, until the account balance reaches
$12 million. The Company accrued $6.5 million in 1998 and $3.9 million in 1997
to the accumulated provision for property damage. Charges to the provision
account during 1998 totaled $4.2 million, which included $3.4 million related to
Hurricane Georges.
2. RETIREMENT BENEFITS
The Company has a defined benefit, trusteed, non-contributory pension plan that
covers substantially all regular employees. The Company provides certain medical
care and life insurance benefits for retired employees. Substantially all
employees may become eligible for these benefits when they retire. Trusts are
funded to the extent deductible under federal income tax regulations or to the
extent required by the Company's regulatory commissions. In 1998, the Company
adopted FASB Statement No. 132, Employers' Disclosure about Pensions and Other
Postretirement Benefits. The measurement date is September 30 for each year.
Pension Plan
Changes during the year in the projected benefit obligations and in the fair
value of plan assets were as follows:
Projected
Benefit Obligations
---------------------------
1998 1997
- - - - - - - ---------------------------------------------------------------
(in thousands)
Balance at beginning of year $130,794 $123,467
Service cost 4,107 3,897
Interest cost 9,572 9,301
Benefits paid (6,663) (4,852)
Actuarial loss (gain) and
employee transfers 5,202 (1,019)
- - - - - - - ---------------------------------------------------------------
Balance at end of year $143,012 $130,794
===============================================================
Plan Assets
---------------------------
1998 1997
- - - - - - - ---------------------------------------------------------------
(in thousands)
Balance at beginning of year $222,196 $191,152
Actual return on plan assets 1,310 35,886
Benefits paid (6,663) (4,852)
Employee transfers (3,909) 10
- - - - - - - ---------------------------------------------------------------
Balance at end of year $212,934 $222,196
===============================================================
II-143
<PAGE>
NOTES (continued)
Gulf Power Company 1998 Annual Report
The accrued pension costs recognized in the Balance Sheet were as follows:
1998 1997
- - - - - - - ---------------------------------------------------------------
(in thousands)
Funded status $ 69,922 $ 91,402
Unrecognized transition
obligation (5,043) (5,764)
Unrecognized prior
service cost 4,869 5,244
Unrecognized net gain (55,978) (80,497)
- - - - - - - ---------------------------------------------------------------
Prepaid asset recognized
in the Balance Sheets $ 13,770 $ 10,385
===============================================================
Components of the plan's net periodic cost were as follows:
1998 1997 1996
- - - - - - - -----------------------------------------------------------------
Service cost $ 4,107 $ 3,897 $ 3,880
Interest cost 9,572 9,301 9,129
Expected return on
plan assets (14,827) (13,675) (13,410)
Recognized net gain (1,891) (1,656) (1,248)
Net amortization (347) (347) (443)
- - - - - - - -----------------------------------------------------------------
Net pension income $ (3,386) $ (2,480) $ (2,092)
=================================================================
The weighted average rates assumed in the actuarial calculations for both the
pension plan and postretirement benefits were:
1998 1997
- - - - - - - ----------------------------------------------------------
Discount 6.75% 7.50%
Annual salary increase 4.25% 5.00%
Long-term return on plan
assets 8.50% 8.50%
- - - - - - - ----------------------------------------------------------
Postretirement Benefits
Changes during the year in the projected benefit obligations and in the fair
value of plan assets were as follows:
Projected
Benefit Obligations
---------------------------
1998 1997
- - - - - - - ---------------------------------------------------------------
(in thousands)
Balance at beginning of year $39,669 $33,656
Service cost 946 896
Interest cost 3,123 2,845
Benefits paid (1,068) (1,077)
Actuarial loss and employee
transfers 3,614 3,349
Amendments 3,019 -
- - - - - - - ---------------------------------------------------------------
Balance at end of year $49,303 $39,669
===============================================================
Plan Assets
---------------------------
1998 1997
- - - - - - - ---------------------------------------------------------------
(in thousands)
Balance at beginning of year $9,455 $7,996
Actual return on plan assets 54 1,407
Employer contributions 1,162 1,129
Benefits paid (1,068) (1,077)
- - - - - - - ---------------------------------------------------------------
Balance at end of year $9,603 $9,455
===============================================================
The accrued postretirement costs recognized in the Balance Sheet were as
follows:
1998 1997
- - - - - - - ---------------------------------------------------------------
(in thousands)
Funded status $(39,700) $(30,214)
Unrecognized transition
obligation 5,079 5,435
Unrecognized prior
service cost 2,900 -
Unrecognized net loss 8,187 4,288
- - - - - - - ---------------------------------------------------------------
Accrued liability recognized
in the Balance Sheets $(23,534) $(20,491)
===============================================================
II-144
<PAGE>
NOTES (continued)
Gulf Power Company 1998 Annual Report
Components of the plan's net periodic cost were as follows:
1998 1997 1996
- - - - - - - ---------------------------------------------------------------
Service cost $ 946 $ 896 $ 939
Interest cost 3,123 2,845 2,330
Expected return on
plan assets (717) (641) (565)
Transition obligation 356 356 356
Prior service cost 119 - -
Recognized net loss 128 184 86
- - - - - - - ---------------------------------------------------------------
Net postretirement cost $3,955 $3,640 $3,146
===============================================================
An additional assumption used in measuring the accumulated postretirement
benefit obligations was a weighted average medical care cost trend rate of 8.30
percent for 1998, decreasing gradually to 4.75 percent through the year 2005,
and remaining at that level thereafter. An annual increase or decrease in the
assumed medical care cost trend rate of 1 percent would affect the accumulated
benefit obligation and the service and interest cost components at December 31,
1998 as follows (in thousands):
1 Percent 1 Percent
Increase Decrease
- - - - - - - ------------------------------------------------- -------------
Benefit obligation $3,808 $(3,218)
Service and interest costs $319 $(261)
===============================================================
Work Force Reduction Programs
The Company recorded costs related to work force reduction programs of $2.8
million in 1998, $1.4 million in 1997, and $1.2 million in 1996. The Company has
also incurred its pro rata share for the costs of affiliated companies'
programs. The costs related to these programs were $0.2 million for 1998, $1.3
million for 1997, and $2.1 million for 1996. The Company has expensed all costs
related to these work force reduction programs.
3. LITIGATION AND REGULATORY MATTERS
FERC Review of Equity Returns
On September 21, 1998, the FERC entered separate orders affirming the outcome of
the administrative law judge's opinions in two proceedings in which the return
on common equity component of formula rates contained in substantially all of
the Company's wholesale power contracts was being challenged as unreasonably
high. These orders resulted in no change in the wholesale power contracts that
were the subject of such proceedings. The FERC also dismissed a complaint filed
by three customers under long-term power sales agreements seeking to lower the
equity return component in such agreements. These customers have filed
applications for rehearing regarding each FERC order. In response to a
requirement of the September 1998 FERC order, Southern Company filed a new
equity return component on the long-term power sales contracts, to be effective
January 5, 1999. The proposed equity return was lowered from 13.75 percent to
12.50 percent. The estimated impact on the Company's revenues at a 12.50% equity
return would be approximately $0.8 million annually. The FERC placed the new
rates into effect subject to refund. Also, this filing was consolidated with the
new proceeding discussed below.
On December 28, 1998, the FERC staff filed a motion asking the FERC to
initiate a new proceeding regarding the equity return and other issues involving
the Company's formula rate contracts. The motion was submitted pursuant to
review procedures applicable to these contracts, and would be applicable to
billings under such contracts on and after January 1, 1999.
Environmental Cost Recovery
In April 1993, the Florida Legislature adopted legislation for an Environmental
Cost Recovery Clause (ECRC), which allows a utility to petition the FPSC for
recovery of all prudent environmental compliance costs that are not being
recovered through base rates or any other recovery mechanism. Such environmental
costs include operation and maintenance expense, emission allowance expense,
depreciation, and a return on invested capital.
In January 1994, the FPSC approved the Company's initial petition under the
ECRC for recovery of environmental costs. Initially, recovery under the ECRC was
determined semi-annually. The FPSC approved annual recovery periods beginning
with the October 1996 through September 1997 period. As of January 1999, the
annual recovery period will be on a calendar-year basis as approved by the FPSC
in May 1998. Recovery includes a true-up of the prior period and a projection of
the ensuing period. During 1998 and 1997, the Company recorded ECRC revenues of
$15.1 million and $10.2 million, respectively.
II-145
<PAGE>
NOTES (continued)
Gulf Power Company 1998 Annual Report
At December 31, 1998, the Company's liability for the estimated costs of
environmental remediation projects for known sites was $7.1 million. These
estimated costs are expected to be expended from 1999 through 2005. These
projects have been approved by the FPSC for recovery through the ECRC discussed
above. Therefore, the Company recorded $1.7 million in current assets and
current liabilities and $5.4 million in deferred assets and liabilities
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 $72 million in 1999, $100 million in 2000, and
$262 million in 2001. 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, 1998, significant purchase commitments were outstanding in
connection with the construction program. The Company has budgeted $263.6
million for the years 1999 through 2002 for the estimated cost of a 532 megawatt
combined cycle gas unit to be located in the eastern portion of its service
area. The unit is expected to have an in-service date of June 2002, subject to
regulatory approval. The Company will continue its construction program 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
from operations; the sale of additional first mortgage bonds, long-term
unsecured debt, pollution control bonds, and preferred securities; bank notes;
and capital contributions from Southern Company. In addition, the Company may
issue additional long-term debt and preferred securities primarily for debt
maturities and redemptions of higher-cost securities.
Bank Credit Arrangements
At December 31, 1998, the Company had $41.5 million of lines of credit with
banks subject to renewal June 1 of each year, of which $35.5 million remained
unused. In addition, the Company has two unused committed lines of credit
totaling $61.9 million that were established for liquidity support of its
variable rate pollution control bonds. In connection with these credit lines,
the Company has agreed to pay commitment fees and/or to maintain compensating
balances with the banks. The compensating balances, which represent
substantially all of the cash of the Company except for daily working funds and
like items, are not legally restricted from withdrawal. In addition, the Company
has bid-loan facilities with thirteen major money center banks that total $205
million, of which $25.5 million was committed at December 31, 1998.
Assets Subject to Lien
The Company's mortgage, which secures the first mortgage bonds issued by the
Company, constitutes a direct first lien on substantially all of the Company's
fixed property and franchises.
II-146
<PAGE>
NOTES (continued)
Gulf Power Company 1998 Annual Report
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 at December 31, 1998, including the Company's portion relating to
jointly owned facilities, were as follows:
Year Fuel
--------- ----------------
(in millions)
1999 $132
2000 88
2001 79
2002 78
2003 83
2004 - 2008 359
----------------------------------------------------------
Total commitments $819
==========================================================
In 1988, the Company made an advance payment of $60 million to a coal
supplier under an arrangement to lower the cost of future coal purchased under
an existing contract. This payment was fully amortized to expense on a per ton
basis as of March 1998.
In December 1995, the Company made another payment of $22 million to the same
coal supplier under an arrangement to lower the cost of future coal and/or to
suspend the purchase of coal under an existing contract for 25 months. This
payment was fully amortized to expense on a per ton basis as of March 1998.
The amortization expense of these contract renegotiations was recovered
through the fuel cost recovery clause discussed under "Revenues and Regulatory
Cost Recovery Clauses" in Note 1.
Lease Agreements
In 1989, the Company and Mississippi Power jointly entered into a twenty-two
year operating lease agreement for the use of 495 aluminum railcars. In 1994, a
second lease agreement for the use of 250 additional aluminum railcars was
entered into for twenty-two years. Both of these leases are for the
transportation of coal to Plant Daniel. At the end of each lease term, the
Company has the option to renew the lease. In 1997, three additional lease
agreements for 120 cars each were entered into for three years, with a monthly
renewal option for up to an additional nine months.
The Company, as a joint owner of Plant Daniel, is responsible for one half of
the lease costs. The lease costs are charged to fuel inventory and are allocated
to fuel expense as the fuel is used. The Company's share of the lease costs
charged to fuel inventories was $2.8 million in 1998, and $2.3 million in 1997.
The annual amounts for 1999 through 2003 are expected to be $2.8 million, $2.1
million, $1.7 million, $1.7 million, and $1.7 million respectively, and after
2003 are expected to total $16.1 million.
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. Plant
Scherer is 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.
II-147
<PAGE>
NOTES (continued)
Gulf Power Company 1998 Annual Report
At December 31, 1998, the Company's percentage ownership and its investment
in these jointly owned facilities were as follows:
Plant Scherer Plant
Unit No. 3 Daniel
(coal-fired) (coal-fired)
-----------------------------
(in thousands)
Plant In Service $185,497(1) $224,907
Accumulated Depreciation $62,255 $113,327
Construction Work in Progress $615 $8,686
Nameplate Capacity (2)
(megawatts) 205 500
Ownership 25% 50%
- - - - - - - ------------------------------------------------------------------
(1) Includes net plant acquisition adjustment.
(2) Total megawatt nameplate capacity:
Plant Scherer Unit No. 3: 818
Plant Daniel: 1,000
7. LONG-TERM POWER SALES AGREEMENTS
The Company and the other operating affiliates have long-term contractual
agreements for the sale of capacity and energy to certain non-affiliated
utilities located outside the system's service area. The unit power sales
agreements are firm and pertain to capacity related to specific generating
units. Because the energy is generally sold at cost under these agreements,
profitability is primarily affected by revenues from capacity sales. The
capacity revenues from these sales were $22.5 million in 1998, $24.9 million in
1997, and $25.4 million in 1996. See Note 3 to the financial statements under
"FERC Review of Equity Returns."
Unit power from specific generating plants of Southern Company is currently
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, 214 megawatts of net dependable capacity were
sold by the Company during 1998, and sales will remain at that level until the
expiration of the contracts in 2010, unless reduced by FPC, FP&L, and JEA after
2002.
Capacity and energy sales to FP&L, the Company's largest single customer,
provided revenues of $22.3 million in 1998, $25.4 million in 1997, and $27.2
million in 1996, or 3.4 percent, 4.1 percent, and 4.3 percent of operating
revenues, respectively.
8. INCOME TAXES
At December 31, 1998, the tax-related regulatory assets to be recovered from
customers were $25.3 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, 1998, the tax-related regulatory liabilities
to be credited to customers were $52.5 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:
1998 1997 1996
------------------------------------
(in thousands)
Total provision for income taxes:
Federal--
Currently payable $31,746 $34,522 $31,022
Deferred--current year 18,485 19,297 26,072
--reversal of
prior years (22,952) (25,778) (24,780)
- - - - - - - --------------------------------------------------------------------
27,279 28,041 32,314
- - - - - - - --------------------------------------------------------------------
State--
Currently payable 5,137 5,975 4,394
Deferred--current year 2,745 2,868 3,904
--reversal of
prior years (2,962) (3,434) (3,039)
- - - - - - - --------------------------------------------------------------------
4,920 5,409 5,259
- - - - - - - --------------------------------------------------------------------
Total 32,199 33,450 37,573
Less income taxes
credited to other income (1,890) (1,584) (248)
- - - - - - - --------------------------------------------------------------------
Total income taxes charged
to operations $34,089 $35,034 $37,821
====================================================================
II-148
<PAGE>
NOTES (continued)
Gulf Power Company 1998 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:
1998 1997
--------------------------
(in thousands)
Deferred tax liabilities:
Accelerated depreciation $155,833 $156,328
Property basis differences 20,330 19,220
Other 17,645 14,242
- - - - - - - ---------------------------------------------------------------------
Total 193,808 189,790
- - - - - - - ---------------------------------------------------------------------
Deferred tax assets:
Federal effect of state deferred taxes 9,509 9,268
Postretirement benefits 7,644 6,976
Other 10,702 10,861
- - - - - - - ---------------------------------------------------------------------
Total 27,855 27,105
- - - - - - - ---------------------------------------------------------------------
Net deferred tax liabilities 165,953 162,685
Less current portion, net (165) (3,617)
=====================================================================
Accumulated deferred income
taxes in the Balance Sheets $166,118 $166,302
=====================================================================
Deferred investment tax credits are amortized over the life of the related
property with such amortization normally applied as a credit to reduce
depreciation and amortization in the Statements of Income. Credits amortized in
this manner amounted to $1.9 million in 1998, $2.2 million in 1997, and $2.3
million in 1996. At December 31, 1998, 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:
1998 1997 1996
----------------------------
Federal statutory rate 35% 35% 35%
State income tax,
net of federal deduction 4 4 4
Non-deductible book
depreciation 1 1 1
Difference in prior years'
deferred and current tax rate (2) (1) (1)
Other, net (2) (4) (2)
- - - - - - - ----------------------------------------------------------------
Effective income tax rate 36% 35% 37%
================================================================
The Company and the other subsidiaries of Southern Company file a
consolidated federal tax return. Under a joint consolidated income tax
agreement, each subsidiary's current and deferred tax expense is computed on a
stand-alone basis. Tax benefits from losses of the parent company are allocated
to each subsidiary based on the ratio of taxable income to total consolidated
taxable income.
9. COMPANY OBLIGATED MANDATORILY
REDEEMABLE PREFERRED SECURITIES
In January 1997, Gulf Power Capital Trust I (Trust I), of which the Company owns
all of the common securities, issued $40 million of 7.625 percent mandatorily
redeemable preferred securities. Substantially all of the assets of Trust I are
$41 million aggregate principal amount of the Company's 7.625 percent junior
subordinated notes due December 31, 2036.
In January 1998, Gulf Power Capital Trust II (Trust II), of which the Company
owns all of the common securities, issued $45 million of 7.0 percent mandatorily
redeemable preferred securities. Substantially all of the assets of Trust II are
$46 million aggregate principal amount of the Company's 7.0 percent junior
subordinated notes due December 31, 2037.
The Company considers that the mechanisms and obligations relating to the
preferred securities, taken together, constitute a full and unconditional
guarantee by the Company of payment obligations with respect to the preferred
securities of Trust I and Trust II. Trust I and Trust II are subsidiaries of the
Company, and accordingly are consolidated in the Company's financial statements.
10. SECURITIES DUE WITHIN ONE YEAR
A summary of the improvement fund requirement and scheduled maturities and
redemptions of long-term debt due within one year at December 31 is as follows:
1998 1997
----------------------
(in thousands)
Bond improvement fund requirement $ 850 $1,300
Less portion to be satisfied by
certifying property additions 850 1,300
- - - - - - - -----------------------------------------------------------------
Cash requirement - -
Maturities of first mortgage bonds - 45,000
Current portion of other long-term
debt 27,000 8,327
- - - - - - - -----------------------------------------------------------------
Total $27,000 $53,327
=================================================================
The first mortgage bond improvement fund requirement amounts to 1 percent of
each outstanding series of bonds authenticated under the indenture prior to
II-149
<PAGE>
NOTES (continued)
Gulf Power Company 1998 Annual Report
January 1 of each year, other than those issued to collateralize pollution
control revenue bond obligations. The requirement may be satisfied by depositing
cash, reacquiring bonds, or by pledging additional property equal to 1 and 2/3
times the requirement.
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, 1998, retained earnings of $127 million were
restricted against the payment of cash dividends on common stock under the terms
of the mortgage indenture.
12. QUARTERLY FINANCIAL DATA (Unaudited)
Summarized quarterly financial data for 1998 and 1997 are as follows:
Net Income
After Dividends
Operating Operating on Preferred
Quarter Ended Revenues Income Stock
- - - - - - - --------------------------------------------------------------------
(in thousands)
March 1998 $140,950 $15,237 $ 6,853
June 1998 177,130 23,742 13,364
September 1998 199,377 34,070 26,989
December 1998 133,061 15,216 9,315
March 1997 $141,374 $20,212 $10,740
June 1997 145,292 19,153 10,386
September 1997 193,710 34,750 27,484
December 1997 145,480 15,068 9,000
- - - - - - - --------------------------------------------------------------------
The Company's business is influenced by seasonal weather conditions and the
timing of rate changes, among other factors.
II-150
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA
Gulf Power Company 1998 Annual Report
- - - - - - - --------------------------------------------------------------------------------------------------------------
1998 1997 1996
- - - - - - - --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues (in thousands) $650,518 $625,856 $634,365
Net Income after Dividends
on Preferred Stock (in thousands) $56,521 $57,610 $57,845
Dividends on Common Stock (in thousands) $57,200 $64,600 $58,300
Return on Average Common Equity (percent) 13.20 13.33 13.27
Total Assets (in thousands) $1,267,901 $1,265,612 $1,308,366
Gross Property Additions (in thousands) $69,731 $54,289 $61,386
- - - - - - - --------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $427,652 $428,718 $435,758
Preferred stock 4,236 13,691 65,102
Preferred stock subject to mandatory redemption - - -
Trust preferred securities 85,000 40,000 -
Long-term debt 317,341 296,993 331,880
- - - - - - - --------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $834,229 $779,402 $832,740
- - - - - - - --------------------------------------------------------------------------------------------------------------
Capitalization Ratios (percent):
Common stock equity 51.3 55.0 52.3
Preferred stock 0.5 1.8 7.8
Trust preferred securities 10.2 5.1 -
Long-term debt 38.0 38.1 39.9
- - - - - - - --------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
==============================================================================================================
First Mortgage Bonds (in thousands):
Issued - - 55,000
Retired 45,000 25,000 50,930
Preferred Stock (in thousands):
Issued - - -
Retired 9,455 75,911 -
- - - - - - - --------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1 A1
Standard and Poor's AA- AA- A+
Duff & Phelps AA- AA- AA-
Preferred Stock -
Moody's a2 a2 a2
Standard and Poor's A A A
Duff & Phelps A+ A+ A+
- - - - - - - --------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 307,077 300,257 291,196
Commercial 46,370 44,589 43,196
Industrial 257 267 278
Other 268 264 162
- - - - - - - --------------------------------------------------------------------------------------------------------------
Total 353,972 345,377 334,832
==============================================================================================================
Employees (year-end) 1,328 1,328 1,384
</TABLE>
II-151
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA
Gulf Power Company 1998 Annual Report
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Revenues (in thousands) $619,077 $578,813 $583,142 $570,902
Net Income after Dividends
on Preferred Stock (in thousands) $57,154 $55,229 $54,311 $54,090
Dividends on Common Stock (in thousands) $46,400 $44,000 $41,800 $39,900
Return on Average Common Equity (percent) 13.27 13.15 13.29 13.62
Total Assets (in thousands) $1,341,859 $1,315,542 $1,307,809 $1,062,699
Gross Property Additions (in thousands) $63,113 $78,869 $78,562 $64,671
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $436,242 $425,472 $414,196 $403,190
Preferred stock 89,602 89,602 89,602 74,662
Preferred stock subject to mandatory redemption - - 1,000 2,000
Trust preferred securities - - - -
Long-term debt 323,376 356,393 369,259 382,047
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $849,220 $871,467 $874,057 $861,899
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------
Capitalization Ratios (percent):
Common stock equity 51.4 48.8 47.4 46.8
Preferred stock 10.5 10.3 10.4 8.9
Trust preferred securities - - - -
Long-term debt 38.1 40.9 42.2 44.3
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0 100.0
============================================================================================================================
First Mortgage Bonds (in thousands):
Issued - - 75,000 25,000
Retired 1,750 48,856 88,809 117,693
Preferred Stock (in thousands):
Issued - - 35,000 29,500
Retired 1,000 1,000 21,060 15,500
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A2 A2 A2
Standard and Poor's A+ A A A
Duff & Phelps A+ A+ A+ A
Preferred Stock -
Moody's a2 a2 a2 a2
Standard and Poor's A A- A- A-
Duff & Phelps A A A A-
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 283,421 280,859 274,194 267,591
Commercial 41,281 40,398 39,253 37,105
Industrial 278 283 274 270
Other 134 106 86 74
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------
Total 325,114 321,646 313,807 305,040
============================================================================================================================
Employees (year-end) 1,501 1,540 1,565 1,613
</TABLE>
II-152A
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA
Gulf Power Company 1998 Annual Report
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
1991 1990 1989 1988
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Revenues (in thousands) $565,207 $567,825 $527,821 $550,827
Net Income after Dividends
on Preferred Stock (in thousands) $57,796 $38,714 $37,361 $45,698
Dividends on Common Stock (in thousands) $38,000 $37,000 $37,200 $35,400
Return on Average Common Equity (percent) 15.17 10.51 10.32 13.41
Total Assets (in thousands) $1,095,736 $1,084,579 $1,093,430 $1,097,225
Gross Property Additions (in thousands) $64,323 $62,462 $70,726 $67,042
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock 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
Trust preferred securities - - - -
Long-term debt 434,648 475,284 484,608 497,069
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $888,291 $910,881 $916,241 $923,291
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Capitalization Ratios (percent):
Common stock equity 44.0 40.8 39.9 38.8
Preferred stock 7.1 7.1 7.2 7.4
Trust preferred securities - - - -
Long-term debt 48.9 52.1 52.9 53.8
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0 100.0
===========================================================================================================================
First Mortgage Bonds (in thousands):
Issued 50,000 - - 35,000
Retired 32,807 6,455 9,344 9,369
Preferred Stock (in thousands):
Issued - - - -
Retired 2,500 1,750 1,250 1,750
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A2 A2 A1 A1
Standard and Poor's A A A A
Duff & Phelps A A AA- 4
Preferred Stock -
Moody's a2 a2 a1 a1
Standard and Poor's A- A- A- A-
Duff & Phelps A- A- A+ 5
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 261,210 256,111 251,341 246,450
Commercial 34,685 34,019 33,678 33,030
Industrial 264 252 240 206
Other 72 67 67 61
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total 296,231 290,449 285,326 279,747
===========================================================================================================================
Employees (year-end) 1,598 1,615 1,614 1,601
</TABLE>
II-152B
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Gulf Power Company 1998 Annual Report
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
<S> <C> <C> <C>
Residential $276,208 $277,609 $285,498
Commercial 160,960 164,435 164,181
Industrial 69,850 77,492 78,994
Other 2,100 2,084 2,056
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------------
Total retail 509,118 521,620 530,729
Sales for resale - non-affiliates 61,893 63,697 63,201
Sales for resale - affiliates 42,642 16,760 17,762
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 613,653 602,077 611,692
Other revenues 36,865 23,779 22,673
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------------
Total $650,518 $625,856 $634,365
==================================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 4,437,558 4,119,492 4,159,924
Commercial 3,111,933 2,897,887 2,808,634
Industrial 1,833,575 1,903,050 1,808,086
Other 18,952 18,101 17,815
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------------
Total retail 9,402,018 8,938,530 8,794,459
Sales for resale - non-affiliates 1,341,990 1,531,179 1,534,097
Sales for resale - affiliates 1,758,150 848,135 709,647
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------------
Total 12,502,158 11,317,844 11,038,203
==================================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.22 6.74 6.86
Commercial 5.17 5.67 5.85
Industrial 3.81 4.07 4.37
Total retail 5.41 5.84 6.03
Sales for resale 3.37 3.38 3.61
Total sales 4.91 5.32 5.54
Average Annual Kilowatt-Hour Use Per Residential Customer 14,577 13,894 14,457
Average Annual Revenue Per Residential Customer $907.35 $936.30 $992.17
Plant Nameplate Capacity Ratings (year-end) (megawatts) 2,188 2,174 2,174
Maximum Peak-Hour Demand - Net of SEPA (megawatts):
Winter 2,040 1,844 2,136
Summer 2,146 2,032 1,961
Annual Load Factor (percent) 55.3 55.5 51.4
Plant Availability - Fossil-Steam (percent) 87.6 91.0 91.8
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 89.2 87.1 87.8
Oil and gas 2.0 0.4 0.5
Purchased power -
From non-affiliates 5.5 3.5 2.7
From affiliates 3.3 9.0 9.0
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
==================================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,523 10,436 10,484
Cost of fuel per million BTU (cents) 160.22 190.75 192.22
Average cost of fuel per net kilowatt-hour generated (cents) 1.69 1.99 2.02
==================================================================================================================================
</TABLE>
II-153
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Gulf Power Company 1998 Annual Report
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
<S> <C> <C> <C> <C>
Residential $276,155 $252,598 $244,967 $235,296
Commercial 159,260 146,394 137,308 133,071
Industrial 81,606 82,169 87,526 91,320
Other 1,993 1,955 1,882 1,784
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------
Total retail 519,014 483,116 471,683 461,471
Sales for resale - non-affiliates 60,413 66,111 72,209 70,078
Sales for resale - affiliates 18,619 17,353 23,166 24,075
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 598,046 566,580 567,058 555,624
Other revenues 21,031 12,233 16,084 15,278
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------
Total $619,077 $578,813 $583,142 $570,902
==============================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 4,014,142 3,751,932 3,712,980 3,596,515
Commercial 2,708,243 2,548,846 2,433,382 2,369,236
Industrial 1,794,754 1,847,114 2,029,936 2,179,435
Other 17,345 17,354 16,944 16,649
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------
Total retail 8,534,484 8,165,246 8,193,242 8,161,835
Sales for resale - non-affiliates 1,396,474 1,418,977 1,460,105 1,430,908
Sales for resale - affiliates 759,341 874,050 1,029,787 1,208,771
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------
Total 10,690,299 10,458,273 10,683,134 10,801,514
==============================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.88 6.73 6.60 6.54
Commercial 5.88 5.74 5.64 5.62
Industrial 4.55 4.45 4.31 4.19
Total retail 6.08 5.92 5.76 5.65
Sales for resale 3.67 3.64 3.83 3.57
Total sales 5.59 5.42 5.31 5.14
Average Annual Kilowatt-Hour Use Per Residential Customer 14,148 13,486 13,671 13,553
Average Annual Revenue Per Residential Customer $973.35 $907.92 $901.96 $886.66
Plant Nameplate Capacity Ratings (year-end) (megawatts) 2,174 2,174 2,174 2,174
Maximum Peak-Hour Demand - Net of SEPA (megawatts):
Winter 1,732 1,801 1,571 1,533
Summer 2,040 1,795 1,898 1,828
Annual Load Factor (percent) 53.0 56.7 54.5 55.0
Plant Availability - Fossil-Steam (percent) 84.0 92.2 88.9 91.2
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 86.8 87.2 84.5 87.7
Oil and gas 0.4 0.2 0.5 0.1
Purchased power -
From non-affiliates 4.0 2.8 1.5 0.8
From affiliates 8.8 9.8 13.5 11.4
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0 100.0
==============================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,609 10,614 10,390 10,347
Cost of fuel per million BTU (cents) 196.62 189.55 197.37 200.30
Average cost of fuel per net kilowatt-hour generated (cents) 2.09 2.01 2.05 2.07
==============================================================================================================================
</TABLE>
II-154A
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Gulf Power Company 1998 Annual Report
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
1991 1990 1989 1988
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
<S> <C> <C> <C> <C>
Residential $231,220 $217,843 $203,781 $184,036
Commercial 130,691 124,066 118,897 107,615
Industrial 92,300 91,041 84,671 72,634
Other 1,860 1,805 1,586 1,402
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total retail 456,071 434,755 408,935 365,687
Sales for resale - non-affiliates 69,636 73,855 67,554 117,466
Sales for resale - affiliates 29,343 38,563 39,244 48,277
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 555,050 547,173 515,733 531,430
Other revenues 10,157 20,652 12,088 19,397
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total $565,207 $567,825 $527,821 $550,827
===========================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 3,455,100 3,360,838 3,293,750 3,154,541
Commercial 2,272,690 2,217,568 2,169,497 2,088,598
Industrial 2,117,408 2,177,872 2,094,670 1,968,091
Other 17,118 18,866 17,209 16,257
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total retail 7,862,316 7,775,144 7,575,126 7,227,487
Sales for resale - non-affiliates 1,550,018 1,775,703 1,640,355 1,911,759
Sales for resale - affiliates 1,236,223 1,435,558 1,461,036 2,326,238
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total 10,648,557 10,986,405 10,676,517 11,465,484
===========================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.69 6.48 6.19 5.83
Commercial 5.75 5.59 5.48 5.15
Industrial 4.36 4.18 4.04 3.69
Total retail 5.80 5.59 5.40 5.06
Sales for resale 3.55 3.50 3.44 3.91
Total sales 5.21 4.98 4.83 4.64
Average Annual Kilowatt-Hour Use Per Residential Customer 13,320 13,173 13,173 12,883
Average Annual Revenue Per Residential Customer $891.38 $853.86 $815.00 $751.60
Plant Nameplate Capacity Ratings (year-end) (megawatts) 2,174 2,174 2,174 2,174
Maximum Peak-Hour Demand - Net of SEPA (megawatts):
Winter 1,418 1,310 1,814 1,395
Summer 1,740 1,778 1,691 1,613
Annual Load Factor (percent) 57.0 55.2 52.6 56.5
Plant Availability - Fossil-Steam (percent) 92.2 89.2 89.1 88.2
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 82.0 69.8 78.3 93.2
Oil and gas 0.1 0.5 0.2 0.4
Purchased power -
From non-affiliates 0.5 0.6 0.4 0.4
From affiliates 17.4 29.1 21.1 6.0
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0 100.0
===========================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,636 10,765 10,621 10,461
Cost of fuel per million BTU (cents) 203.60 206.06 193.70 178.00
Average cost of fuel per net kilowatt-hour generated (cents) 2.17 2.22 2.06 1.86
===========================================================================================================================
</TABLE>
II-154B
MISSISSIPPI POWER COMPANY
FINANCIAL SECTION
II-155
<PAGE>
MANAGEMENT'S REPORT
Mississippi Power Company 1998 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/ Dwight H. Evans
Dwight H. Evans
President and Chief Executive Officer
/s/ Michael W. Southern
Michael W. Southern
Vice President, Secretary, Treasurer and
Chief Financial Officer
February 10, 1999
II-156
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Mississippi Power Company:
We have audited the accompanying balance sheets and statements of capitalization
of Mississippi Power Company (a Mississippi corporation and a wholly owned
subsidiary of Southern Company) as of December 31, 1998 and 1997, 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, 1998. 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-167 through II-182)
referred to above present fairly, in all material respects, the financial
position of Mississippi Power Company as of December 31, 1998 and 1997, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Atlanta, Georgia
February 10, 1999
11-157
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Mississippi Power Company 1998 Annual Report
RESULTS OF OPERATIONS
Earnings
Mississippi Power Company's 1998 net income after dividends on preferred stock
was $55.1 million, reflecting a 2.0 percent or $1.1 million increase over the
prior year. This change is primarily attributable to higher retail and wholesale
revenues. In 1997, earnings were $54.0 million, up $1.3 million from the prior
year. This earnings increase resulted primarily from lower operating expenses.
Revenues
The following table summarizes the factors impacting operating revenues for the
past three years:
Increase (Decrease)
From Prior Year
-------------------------------------
1998 1997 1996
-------------------------------------
(in thousands)
Retail --
Change in base
rates (PEP and
ECO Plan) $ 335 $ 3,177 $ (402)
Sales growth 4,787 109 11,187
Weather 7,091 (1,118) (5,585)
Fuel cost
recovery
and other 13,112 948 (1,255)
-----------------------------------------------------------------
Total retail 25,325 3,116 3,945
---------------------------------------------------- ------------
Sales for resale --
Non-affiliates 16,084 5,464 7,776
Affiliates 8,142 (11,606) 14,139
-----------------------------------------------------------------
Total sales for
resale 24,226 (6,142) 21,915
Other operating
revenues 1,992 2,585 1,616
-----------------------------------------------------------------
Total operating
revenues $51,543 $ (441) $27,476
=================================================================
Percent change 9.5% (0.1)% 5.3%
-----------------------------------------------------------------
Retail revenues of $443 million in 1998 increased 6.1 percent from 1997.
Continued growth in the service area and the positive impact of weather on
energy sales were the predominant factors contributing to the rise in revenues.
Retail revenues for 1997 reflected a 0.8 percent increase over the prior year
due to the 1996 Performance Evaluation Plan (PEP) retail rate increase and the
January 1997 Environmental Compliance Overview Plan (ECO Plan) retail rate
increase. Changes in base rates reflect any rate changes made under the PEP and
ECO Plan.
Fuel revenues generally represent the direct recovery of fuel expense
including purchased power. Therefore, changes in recoverable fuel expenses are
offset with corresponding changes in fuel revenues and have no effect on net
income.
Energy sales to non-affiliates include economy sales and amounts sold under
short-term contracts. Sales for resale to non-affiliates are influenced by those
utilities' own customer demand, plant availability, and the cost of their
predominant fuels.
Included in sales for resale to non-affiliates are revenues from rural
electric cooperative associations and municipalities located in southeastern
Mississippi. Energy sales to these customers increased 9.8 percent in 1998 and
3.6 percent in 1997, with the related revenues rising 11.3 percent and 1.6
percent, respectively. The customer demand experienced by these utilities is
determined by factors very similar to Mississippi Power's. Revenues from other
sales outside the service area increased in 1998 and 1997 primarily due to power
marketing activities. These increases were primarily offset by increases in
purchased power from non-affiliates and, as a result, had no significant effect
on net income.
Sales to affiliated companies within the Southern 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.
11-158
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Mississippi Power Company 1998 Annual Report
Below is a breakdown of kilowatt-hour sales for 1998 and the percent change
for the last three years:
1998 Percent Change
----------- ------------------------------
KWH 1998 1997 1996
(in millions)
Residential 2,249 10.3% (2.0)% 1.9%
Commercial 2,623 9.0 4.0 3.3
Industrial 3,729 (6.4) 0.6 3.8
Other 40 - 2.6 1.9
----------
Total retail 8,641 2.0 0.9 3.2
Sales for
Resale --
Non-affiliates 3,158 9.1 6.2 9.4
Affiliates 552 15.2 (31.0) 184.7
----------
Total 12,351 4.3 0.2 8.7
==================================================================
Residential and commercial sales increased in 1998 10.3 percent and 9.0
percent respectively, and industrial sales decreased 6.4 percent. The increases
can be attributed primarily to sales growth and hotter temperatures in the
summer months. The decrease in industrial sales was due primarily to a large
industrial customer being out of service because of damages incurred from
Hurricane Georges. Residential sales in 1997 declined 2.0 percent while sales to
commercial and industrial customers increased by 4.0 percent and 0.6 percent,
respectively. Milder-than-normal temperatures experienced in 1997 contributed to
the moderate sales.
The Company anticipates continued growth in energy sales as the economy
improves within its service area. The casino industry and ancillary services,
such as lodging, food, transportation, etc., are some of the factors that may
influence the economy of the Company's service area. Also, energy demand is
expected to grow as a result of a larger and more fully employed population.
Expenses
Total operating expenses were $515 million in 1998 reflecting an increase of
$49.1 million or 10.6 percent over the prior year. The increase was due
primarily to higher fuel expenses, higher maintenance and higher other operation
costs. In 1997, total operating expenses decreased by 0.3 percent from the prior
year due primarily to lower administrative and general expenses.
Fuel costs are the single largest expense for the Company. Fuel
expenses in 1998 increased 10.2 percent due to a 3.1 percent increase in
generation and a higher average cost of fuel. In 1998, expenses related to
purchased power from non-affiliates increased 133.0 percent and expenses related
to purchased power from affiliates decreased 4.6 percent. The increased
generation was due to higher demand for energy across the Southern electric
system. Further, the higher demand for energy resulted in higher purchased power
costs from non-affiliates.
In 1997, fuel costs increased because of a 1.1 percent increase in
generation caused by the higher demand for energy in the retail sector. Expenses
related to purchased power from non-affiliates decreased and expenses related to
purchased power from affiliates increased due to the availability of energy
within the Southern electric system.
Purchased power expense increased $18 million (128.4 percent) to meet higher
territorial energy demands and power marketing activities. Energy purchased for
power marketing activities was resold to non-affiliated third parties and had no
significant effect on net income. 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 amount and sources of generation and the average cost of fuel per
net kilowatt-hour generated were as follows:
1998 1997 1996
----------------------------
Total generation
(millions of kilowatt hours) 10,610 10,289 10,180
Sources of generation
(percent) --
Coal 80 85 85
Gas 20 15 15
Average cost of fuel per net
kilowatt-hour generated
(cents) -- 1.62 1.54 1.57
==============================================================
Other operation expenses increased 7.5 percent in 1998 primarily due to
continuing expenses related to a new customer service system, modification of
certain information systems for year 2000 readiness discussed below, and costs
related to work force reduction programs. In 1997, other operation expense
decreased 3.5 percent due to lower administrative and general expenses.
II-159
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Mississippi Power Company 1998 Annual Report
Maintenance expenses increased 6.6 percent in 1998 due to scheduled
maintenance performed at Plants Daniel and Watson, as well as other projects.
In 1998, depreciation and amortization expenses increased 4.1 percent
primarily due to additional plant investment and increased amortization of
regulatory assets.
Comparisons of taxes other than income taxes for 1998 and 1997 show
increases of 4.4 percent and 1.1 percent, respectively, due to higher municipal
franchise taxes resulting from higher retail revenues.
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 energy sales growth to a
less regulated more competitive environment. Expenses are subject to constant
review and cost control programs. See Note 2 to the financial statements under
"Workforce Reduction Programs" for information regarding the Company's workforce
reduction plan of 1997.
The Company currently operates as a vertically integrated company providing
electricity to customers within its traditional service area located in
southeastern Mississippi. Prices for electricity provided by the Company to
retail customers are set by the MPSC under cost-based regulatory principles.
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
aggressively controlling the construction budget.
Operating revenues will be affected by any changes in rates under the PEP,
the Company's performance based ratemaking plan, and the ECO Plan. PEP has
proven to be a stabilizing force on electric rates, with only moderate changes
in rates taking place. The ECO Plan provides for recovery of costs (including
costs of capital) associated with environmental projects approved by the
Mississippi Public Service Commission (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 the Company's
wholesale rate schedules, power sales contracts and transmission facilities. The
FERC is currently reviewing the rate of return on common equity included in
certain contracts and may require such returns to be lowered, possibly
retroactively.
Further discussion of PEP, the ECO Plan, and proceedings before the FERC is
found in Note 3 to the financial statements herein.
Future earnings in the near term will depend upon growth in energy sales,
which is subject to a number of factors. These factors include weather,
competition, changes in contracts with neighboring utilities, energy
conservation practiced by customers, the elasticity of demand, and the rate of
economic growth in Mississippi Power's service area.
The electric utility industry in the United States is currently undergoing a
period of dramatic change as a result of regulatory and competitive factors.
Among the primary agents of change has been the Energy Policy Act of 1992
(Energy Act). The Energy Act allows Independent Power Producers (IPPs) to access
a utility's transmission network in order to sell electricity to other
utilities. This enhances the incentive for IPPs to build cogeneration plants for
II-160
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Mississippi Power Company 1998 Annual Report
a utility's large industrial and commercial customers and sell energy generation
to other utilities. Also, electricity sales for resale rates are being driven
down by wholesale transmission access and numerous potential new energy
suppliers, including power marketers and brokers. The Company is aggressively
working to maintain and expand its share of wholesale sales in the Southeastern
power markets.
Although the Energy Act does not permit retail transmission access, it was a
major catalyst for the current restructuring and consolidation taking place
within the utility industry. Numerous federal and state initiatives are in
various stages to promote wholesale and retail competition. Among other things,
these initiatives allow customers to choose their electricity provider. As these
initiatives materialize, the structure of the utility industry could radically
change. Restructuring initiatives are being discussed in Mississippi; none have
been enacted to date. Enactment would require numerous issues to be resolved,
including significant ones relating to transmission pricing and recovery of any
stranded investments. In the event that a portion of the Company's operations is
no longer subject to these provisions, the Company would be required to write
off related regulatory assets and liabilities that are not specifically
recoverable, and determine if any other assets have been impaired. See Note 1 to
the financial statements under "Regulatory Assets and Liabilities" for
additional information. The inability of Mississippi Power to recover its
investment, including regulatory assets, could have a material adverse effect on
the financial condition of the Company.
The Company is attempting to minimize or reduce its cost exposure.
Continuing to be a low-cost producer could provide significant opportunities to
increase market share and profitability in markets that evolve with changing
regulation. Conversely, unless 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. The Company is subject
to the provisions of FASB Statement 71, Accounting for the Effects of Certain
Types of Regulation. In the event that a portion of the Company's operation is
no longer subject to these provisions, the Company would be required to write
off related regulatory assets and liabilities that are not specifically
recoverable, and determine if any other assets have been impaired. See Note 1
to the financial statements under "Regulatory Assets and Liabilities" for
additional information.
Exposure to Market Risks
Due to cost-based rate regulation, the Company has limited exposure to market
volatility in interest rates and prices of electricity. To mitigate residual
risks relative to movements in electricity prices, the Company enters into fixed
price contracts for the purchase and sale of electricity through the wholesale
electricity market. Realized gains and losses are recognized in the income
statements as incurred. At December 31, 1998, exposure from these activities was
not material to the Company's financial position, results of operation, or cash
flow. Also, based on the Company's overall interest rate exposure at December
31, 1998, a near-term 100 basis point change in interest rates would not
materially affect the financial statements.
New Accounting Standards
The FASB has issued Statement No.133, Accounting for Derivative Instruments and
Hedging Activities, which must be adopted by the year 2000. This statement
establishes accounting and reporting standards for derivative instruments -
including certain derivative instruments embedded in other contracts - and for
hedging activities. The Company has not yet quantified the impact of adopting
this statement on its financial statements; however, the adoption could increase
volatility in earnings and other comprehensive income.
In March 1998, the American Institute of Certified Public Accountants
(AICPA) issued a new Statement of Position, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use. This statement requires
capitalization of certain costs of internal-use software. The Company adopted
this statement in January 1999, and it is not expected to have a material impact
on the financial statements.
In April 1998, the AICPA issued a new Statement of Position, Reporting on
the Cost of Start-up Activities. This statement requires that the costs of
start-up activities and organizational costs be expensed as incurred. Any of
these costs previously capitalized by a company must be written off in the year
of adoption. The Company adopted this statement in January 1999, and it is not
expected to have a material impact on the financial statements.
II-161
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Mississippi Power Company 1998 Annual Report
In December 1998, the Emerging Issues Task Force (EITF) of the FASB issued
EITF No. 98-10, Accounting for Contracts Involved in Energy Trading and Risk
Management Activities. The EITF requires that energy trading contracts must be
marked to market through the income statement, reflecting gains and losses
rather than revenues and purchased power expense. Energy trading contracts are
defined as energy contracts entered into with the objective of generating
profits on or from exposure to shifts or changes in market prices. The Company
adopted the required accounting in January 1999, and it is not expected to have
a material impact on the financial statements.
Year 2000
Year 2000 Challenge
In order to save storage space, computer programmers in the 1960s and 1970s
shortened the year portion of date entries to just two digits. Computers
assumed, in effect, that all years began with "19." This practice was widely
adopted and hard wired into computer chips and processors found in some
equipment. This approach, intended to save processing time and storage space was
used until the mid-1990s. Unless corrected before the year 2000, affected
software systems and devices containing a chip or microprocessor with date and
time function could incorrectly process dates or the systems may cease to
function.
The Company depends on complex computer systems for many aspects of its
operations, which include generation, transmission, and distribution of
electricity, as well as other business support activities. The Company's goal is
to have critical devices or software that are required to maintain operations to
be Year 2000 ready by June 1999. Year 2000 ready means that a system or
application is determined suitable for continued use through the Year 2000 and
beyond. Critical systems include, but are not limited to, safe shutdown systems,
turbine generator systems, control center computer systems, customer service
systems, energy management systems, and telephone switches and equipment.
Year 2000 Program and Status
The Company's executive management recognizes the seriousness of the Year 2000
challenge and has dedicated adequate resources to address the issue. The
Millennium Project is a team of employees, IBM consultants, and other
contractors whose progress is reviewed on a monthly basis by a steering
committee of Southern Company executives.
The Company's Year 2000 Program was divided into two phases. Phase I
began in 1996 and consisted of identifying and assessing corporate assets
related to software systems and devices that contain a computer chip or clock.
The first phase was completed in June 1997. Phase 2 consists of testing and
remediating high priority systems and devices. Also, contingency planning is
included in the phase. Completion of Phase 2 is targeted for June 1999. The
Millennium Project will continue to monitor the affected computer systems,
devices and applications into the year 2000.
The Southern Company has completed more than 70 percent of the activities in
its work plan. The percentage of completion and projected completion by function
is as follows:
Work Plan
- - - - - - - --------------------------------------------------------------------------
Remediation Project
Inventory Assessment Testing Completion
- - - - - - - --------------------------------------------------------------------------
Generation 100% 100% 70% 6/99
Energy
Management 100 100 90 6/99
Transmission and
Distribution 100 100 100 1/99
Telecommunications 100 100 50 6/99
Corporate
Applications 100 100 90 3/99
- - - - - - - --------------------------------------------------------------------------
Year 2000 Costs
Current projected costs for Year 2000 readiness are approximately $4.9 million.
These costs include labor necessary to identify, test, and renovate affected
devices and systems. From its inception through December 31, 1998, the year 2000
program costs, recognized as expense, amounted to $3.2 million.
II-162
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MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Mississippi Power Company 1998 Annual Report
Year 2000 Risks
The Company is implementing a detailed process to minimize the possibility of
service interruptions related to Year 2000. The Company believes, based on
current tests, that the system can provide customers with electricity. These
tests increase confidence, but do not guarantee error-free operations. The
Company is taking what it believes to be prudent steps to prepare for the Year
2000, and it expects any interruption in service that may occur within the
service territory to be isolated and short in duration.
The Company expects the risks associated with Year 2000 to be no more severe
than the scenarios that its electric system is routinely prepared to handle. The
most likely worst case scenario consists of the service loss of one of the
largest generating units and/or the loss of any single bulk transmission element
in its service territory. The Company has followed a proven methodology for
identifying and assessing software and devices containing potential Year 2000
challenges. Remediation and testing of those devices are in progress. Following
risk assessment, the Company is preparing contingency plans as appropriate and
is participating in North American Electric Reliability Council-coordinated
national drills during 1999.
The Company is currently reviewing the Year 2000 readiness of material third
parties that provide goods and services crucial to the Company's operations.
Among such critical third parties are fuel, transportation, telecommunication,
water, chemical, and other suppliers. Contingency plans based on the assessment
of each third party's ability to continue supplying critical goods and services
to the Company is being developed.
There is a potential for some earnings erosion caused by reduced electrical
demand by customers because of their Year 2000 issues.
Year 2000 Contingency Plans
Because of experience with hurricanes and other storms, the Company is skilled
at developing and using contingency plans in unusual circumstances.
As part of Year 2000 business continuity and contingency planning, the Company
is drawing on that experience to make risk assessments and developing additional
plans to deal specifically with situations that could arise relative to Year
2000 challenges. The Company is identifying critical operational location, and
key employees will be on duty at those locations during the Year 2000
transition. In September 1999, drills are scheduled to be conducted to test
contingency plans. Because of the level of detail of the contingency planning
process, management feels that the contingency plans will keep any service
interruptions that may occur within the service territory isolated and short in
duration.
FINANCIAL CONDITION
Overview
The principal change in Mississippi Power's financial condition during 1998 was
gross property additions to utility plant of $68 million. Funding for gross
property additions and other capital requirements has been provided from
operating activities, principally earnings and the non-cash charges to income of
depreciation and amortization. The Statements of Cash Flows provide additional
details.
Financing Activity
The Company continued to improve its financial position by issuing pollution
control bonds and retiring higher-cost issues in 1998. The Company sold $13.5
million of pollution control bonds and increased unsecured debt by $90 million.
Retirements, including maturities during 1998, totaled $75 million of first
mortgage bonds and $13 million of pollution control bonds. See the Statements of
Cash Flows for further details.
Composite financing rates for the years 1996 through 1998 as of year-end
were as follows:
1998 1997 1996
----------------------------
Composite interest rate on
long-term debt 6.14% 6.16% 6.03%
Composite preferred stock
dividend rate 6.33% 6.33% 6.58%
Composite interest rate on
preferred securities 7.75% 7.75% -
============================================================
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Mississippi Power Company 1998 Annual Report
The decrease in the composite dividend rate on preferred stock in 1997 was
primarily the result of retirements.
Capital Structure
At year-end 1998, the Company's ratio of common equity to total capitalization,
excluding long-term debt due within one year, remained at the same level as in
1997 at 52.1 percent.
Capital Requirements for Construction
The Company's projected construction expenditures for the next three years total
$164 million ($67 million in 1999, $52 million in 2000, and $45 million in
2001). The major emphasis within the construction program will be on the upgrade
of existing facilities.
In February 1999, the Company signed an interim construction agency
agreement with Escatawpa Funding ("Escatawpa"), a limited partnership, that
calls for the Company to design and construct, as agent for Escatawpa, a 1064
megawatt natural gas combined cycle facility. On or before April 30, 1999,
Escatawpa and the Company anticipate entering into an Agreement for Lease (which
will supersede the interim construction agency agreement), and a Lease
Agreement. It is anticipated that the total project will cost approximately $406
million, and upon project completion, the Company will lease the facility from
Escatawpa. If the anticipated lease arrangement is not reached, the Company will
either exercise its purchase option or Escatawpa will sell the facility to a
third party.
Revisions to projected construction expenditures may be necessary because of
factors such as changes in business conditions, revised load projections, the
availability and cost of capital, and changes in environmental regulations, and
alternatives such as leasing.
Other Capital Requirements
In addition to the funds required for the Company's construction program,
approximately $80.1 million will be required by the end of 2001 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 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 -- significantly
affected Mississippi Power and the other operating companies of Southern
Company. Specific reductions in sulfur dioxide and nitrogen oxide emissions from
fossil-fired generating plants are required in two phases. Phase I compliance
began in 1995 and initially affected 28 generating plants in the Southern
electric system. As a result of Southern Company's compliance strategy, an
additional 22 generating units were brought into compliance with Phase I
requirements. Phase II compliance is required in 2000, and all fossil-fired
generating plants will be affected.
Southern Company achieved Phase I sulfur dioxide compliance at the affected
plants by switching to low-sulfur coal, which required some equipment upgrades.
Construction expenditures for Phase I compliance totaled approximately $65
million for Mississippi Power.
For Phase II sulfur dioxide compliance, Southern Company could use emission
allowances, increase fuel switching, and/or install flue gas desulfurization
equipment at selected plants. Current compliance strategy for Phase II could
require total estimated construction expenditures of approximately $70 million,
of which $16 million remains to be spent. Phase II compliance is not expected to
have a material impact on Mississippi Power.
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
the annual revenue requirement is limited to 2 percent of retail revenues.
Mississippi Power's management believes that the ECO Plan provides for recovery
of the Clean Air Act costs. See Note 3 to the financial statements under
"Environmental Compliance Overview Plan" for additional information.
A significant portion of costs related to the acid rain provision of the
Clean Air Act is expected to be recovered through existing ratemaking
II-164
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MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Mississippi Power Company 1998 Annual Report
provisions. However, there can be no assurance that all Clean Air Act costs will
be recovered.
In July 1997, the Environmental Protection Agency (EPA) revised the national
ambient air quality standards for ozone and particulate matter. This revision
makes the standards significantly more stringent. In September 1998, the EPA
issued the final regional nitrogen oxide rules to the states for implementation.
The states have one year to adopt and implement the new rules. The final rules
affect 22 states that at present does not include Mississippi. The EPA is
presently evaluating whether or not to bring an additional 15 states under this
regional haze rule. Misssissippi is one of those new 15 states. The EPA rules
are being challenged in the courts by several states and industry groups.
Implementation of the final state rules could require substantial further
reductions in nitrogen oxide emissions from fossil-fired generating facilities
and other industry in these states. Implementation of the standards could result
in significant additional compliance costs and capital expenditures that cannot
be determined until the results of legal challenges are known and the states
have adopted their final rules.
The EPA and state environmental regulatory agencies are reviewing and
evaluating various matters including: emission control strategies for ozone
non-attainment areas; additional controls for hazardous air pollutant emissions;
and hazardous waste disposal requirements. The impact of new standards will
depend on the development and implementation of applicable regulations.
The Company must comply with other environmental laws and regulations that
cover the handling and disposal of hazardous waste. Under these various laws and
regulations, the Company could incur costs to clean up properties currently or
previously owned. Upon identifying potential sites, the Company conducts
studies, when possible, to determine the extent of any required cleanup costs.
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 has been investigated for potential
remediation. Remediation is scheduled for 1999. See Note 3 to the financial
statements under "Environmental Compliance Overview Plan" for additional
information.
Several major pieces of environmental legislation are being considered for
reauthorization or amendment by Congress. These include: the Clean Air Act; the
Clean Water Act; the Comprehensive Environmental Response, Compensation, and
Liability Act; the Resource Conservation and Recovery Act; and the Endangered
Species Act. Changes to these laws could affect many areas of the Company's
operations. The full impact of any such changes cannot be determined at this
time.
Compliance with possible additional legislation related to global climate
change, electromagnetic fields, and other environmental and health concerns
could significantly affect the Company. The impact of new legislation -- if any
- - - - - - - -- will depend on the subsequent development and implementation of applicable
regulations. In addition, the potential exists for lawsuits alleging damages
caused by electromagnetic fields. The likelihood or outcome of such potential
lawsuits cannot be determined at this time.
Sources of Capital
At December 31, 1998, the Company had $76.3 million of unused committed credit
agreements. The Company had $13 million of short term notes payable
outstanding at year end 1998.
It is anticipated that the funds required for construction and other
purposes, including compliance with environmental regulations, will be derived
from sources similar to those used in the past. These sources were primarily the
issuances of first mortgage bonds and preferred securities, in addition to
pollution control revenue bonds issued for the Company's benefit by public
authorities. The Company issued unsecured debt in 1998. In this regard,
Mississippi Power sought and obtained stockholder approval in 1997 to amend its
corporate charter eliminating restrictions on the amounts of unsecured
indebtedness the Company may incur.
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
II-165
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Mississippi Power Company 1998 Annual Report
permitted to issue in the future will depend upon market conditions and other
factors prevailing at that time.
Cautionary Statement Regarding Forward-Looking
Information
This annual report, including the foregoing Management's Discussion and
Analysis, contains forward-looking and historical information. The Company
cautions that there are various important factors that could cause actual
results to differ materially from those indicated in the forward-looking
information; accordingly, there can be no assurance that such indicated results
will be realized. These factors include legislative and regulatory initiatives
regarding deregulation and restructuring of the electric utility industry; the
extent and timing of the entry of additional competition in the Company's
markets; potential business strategies -- including acquisitions or dispositions
of assets or internal restructuring -- that may be pursued by the Company; state
and federal rate regulation; changes in or application of environmental and
other laws and regulations to which the Company is subject; political, legal and
economic conditions and developments; financial market conditions and the
results of financing efforts; changes in commodity prices and interest rates;
weather and other natural phenomena; and other factors discussed in the reports
(including Form 10-K) filed from time to time by the Company with the SEC.
II-166
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF INCOME
For the Years Ended December 31, 1998, 1997, and 1996
Mississippi Power Company 1998 Annual Report
<S> <C> <C> <C>
===========================================================================================================================
1998 1997 1996
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
(in thousands)
Operating Revenues (Notes 1, 3, and 7):
Revenues $ 576,846 $ 533,445 $ 522,199
Revenues from affiliates 18,285 10,143 21,830
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total operating revenues 595,131 543,588 544,029
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation--
Fuel 156,539 142,059 141,532
Purchased power from non-affiliates 33,872 14,536 17,960
Purchased power from affiliates 36,037 37,794 33,245
Other 109,993 102,365 106,061
Maintenance 50,404 47,302 47,091
Depreciation and amortization 47,450 45,574 44,906
Taxes other than income taxes 45,965 44,034 43,545
Federal and state income taxes (Note 8) 34,499 31,968 32,618
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total operating expenses 514,759 465,632 466,958
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Operating Income 80,372 77,956 77,071
Other Income (Expense):
Interest income 947 857 239
Other, net 2,498 2,368 4,145
Income taxes applicable to other income (165) 588 (932)
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Income Before Interest and Other Charges 83,652 81,769 80,523
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Interest and Other Charges:
Interest on long-term debt 20,567 19,856 19,898
Interest on notes payable 943 96 1,416
Amortization of debt discount, premium, and expense, net 1,446 1,577 1,547
Other interest charges 790 574 40
Distributions on preferred securities of subsidiary trust 2,796 2,369 -
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Interest and other charges, net 26,542 24,472 22,901
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Net Income 57,110 57,297 57,622
Dividends on Preferred Stock 2,005 3,287 4,899
- - - - - - - --------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 55,105 $ 54,010 $ 52,723
===========================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1998, 1997, and 1996
Mississippi Power Company 1998 Annual Report
<S> <C> <C> <C>
================================================================================================================================
1998 1997 1996
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Operating Activities:
Net income $ 57,110 $ 57,297 $ 57,622
Adjustments to reconcile net income to net
cash provided by operating activities--
Depreciation and amortization 51,517 49,661 50,551
Deferred income taxes 11,620 (1,809) 74
Other, net (12,175) 3,206 9,443
Changes in certain current assets and liabilities--
Receivables, net (5,486) (8,583) 5,118
Inventories (5,050) 3,148 4,973
Payables (389) 8,357 2,077
Taxes accrued (2,457) 2,515 532
Other (1,604) 1,465 (240)
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 93,086 115,257 130,150
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (68,231) (55,375) (61,314)
Other (324) (489) (2,258)
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (68,555) (55,864) (63,572)
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Proceeds--
Capital contribution 85 - 27
Pollution control bonds 13,520 - -
Preferred securities - 35,000 -
Other long-term debt 90,000 - 80,000
Retirements--
Preferred stock (87) (42,518) -
First mortgage bonds (75,000) - (45,447)
Pollution control bonds (13,020) (10) (10)
Other long-term debt - - (55,000)
Increase (decrease) in notes payable, net 13,000 - -
Payment of preferred stock dividends (2,005) (3,287) (4,899)
Payment of common stock dividends (51,700) (49,400) (43,900)
Miscellaneous (2,429) (1,804) (2,932)
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (27,636) (62,019) (72,161)
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Net Change in Cash and Cash Equivalents (3,105) (2,626) (5,583)
Cash and Cash Equivalents at Beginning of Year 4,432 7,058 12,641
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 1,327 $ 4,432 $ 7,058
================================================================================================================================
Supplemental Cash Flow Information:
Cash paid during the period for--
Interest (net of amount capitalized) $ 26,133 $ 22,297 $ 21,467
Income taxes 26,847 33,450 34,072
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
( ) Denotes use of cash.
The accompanying notes are an integral part of these statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
At December 31, 1998 and 1997
Mississippi Power Company 1998 Annual Report
<S> <C> <C>
=============================================================================================================================
ASSETS 1998 1997
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
(in thousands)
Utility Plant:
Plant in service, at original cost (Notes 1 and 6) $ 1,553,112 $ 1,518,402
Less accumulated provision for depreciation 583,957 559,098
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
969,155 959,304
Construction work in progress 51,517 41,083
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Total 1,020,672 1,000,387
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Other Property and Investments 979 650
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 1,327 4,432
Receivables--
Customer accounts receivable 29,829 32,220
Regulatory clauses under recovery 8,042 7,619
Other accounts and notes receivable 12,495 8,666
Affiliated companies 10,946 7,398
Accumulated provision for uncollectible accounts (621) (698)
Fossil fuel stock, at average cost 16,418 10,651
Materials and supplies, at average cost 18,735 19,452
Current portion of accumulated deferred income taxes 4,248 8,379
Prepayments 1,651 1,791
Vacation pay deferred 4,717 5,030
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Total 107,787 104,940
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Deferred Charges:
Debt expense and loss, being amortized 13,713 12,234
Deferred charges related to income taxes (Note 8) 22,697 21,906
Long-term notes receivable 2,072 2,837
Workforce Reduction Plan 12,748 18,236
Miscellaneous 8,937 5,639
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Total 60,167 60,852
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Total Assets $ 1,189,605 $ 1,166,829
=============================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-169
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS (continued)
At December 31, 1998 and 1997
Mississippi Power Company 1998 Annual Report
<S> <C> <C>
=============================================================================================================================
CAPITALIZATION AND LIABILITIES 1998 1997
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
(in thousands)
Capitalization (See accompanying statements):
Common stock equity $ 391,231 $ 387,824
Preferred stock 31,809 31,896
Company obligated mandatorily redeemable preferred securities of
subsidiary trust holding Company Junior Subordinated Notes (Note 9) 35,000 35,000
Long-term debt 292,744 291,665
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Total 750,784 746,385
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Long-term debt due within one year (Note 10) 50,020 35,020
Notes payable 13,000 -
Accounts payable--
Affiliated companies 8,788 8,548
Regulatory clauses over recovery 4,412 15,476
Other 47,113 34,065
Customer deposits 3,272 3,225
Taxes accrued--
Federal and state income 1,124 1,101
Other 31,379 33,859
Interest accrued 2,955 4,098
Miscellaneous 11,753 12,797
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Total 173,816 148,189
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes (Note 8) 143,852 134,645
Accumulated deferred investment tax credits 25,913 27,121
Deferred credits related to income taxes (Note 8) 37,277 38,203
Postretirement benefits other than pension 25,869 25,145
Accumulated provision for property damage (Note 1) 910 13,991
Workforce Reduction Plan 13,051 15,700
Miscellaneous 18,133 17,450
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Total 265,005 272,255
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Commitments and Contingent Matters (Notes 2, 3, 4, and 5)
Total Capitalization and Liabilities $ 1,189,605 $ 1,166,829
=============================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CAPITALIZATION
At December 31, 1998 and 1997
Mississippi Power Company 1998 Annual Report
<S> <C> <C> <C> <C>
===========================================================================================================================
1998 1997 1998 1997
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
(in thousands) (percent of total)
Common Stock Equity:
Common stock, without par value --
Authorized -- 1,130,000 shares
Outstanding -- 1,121,000 shares in
1998 and 1997 $ 37,691 $ 37,691
Paid-in capital 179,474 179,389
Premium on preferred stock 326 327
Retained earnings (Note 11) 173,740 170,417
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total common stock equity 391,231 387,824 52.1 % 52.0 %
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Cumulative Preferred Stock:
$100 par value --
Authorized -- 1,244,139 shares
Outstanding -- 318,090 shares in 1998 and
318,955 shares in 1997
4.40% to 4.72% 3,421 3,492
6.32% to 7.00% 28,388 28,404
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total (annual dividend requirement -- $2,013,000) 31,809 31,896 4.2 4.3
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Company Obligated Mandatorily
Redeemable Preferred Securities (Note 9):
$25 liquidation value -- 7.75% 35,000 35,000
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total (annual dividend requirement -- $2,713,000) 35,000 35,000 4.7 4.7
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Long-Term Debt:
First mortgage bonds --
Maturity Interest Rates
1998 5.38% - 35,000
2000 6.63% - 40,000
2004 6.60% 35,000 35,000
2023 7.45% 35,000 35,000
2025 6.88% 30,000 30,000
Pollution control obligations --
Collateralized:
5.65% to 5.80% due 2007-2023 26,805 39,825
4.00% to 5.25% due 2020-2025 33,900 33,900
Non-collateralized:
Variable rate (5.25% at 1/1/99) due 2028 13,520 -
Other long-term notes payable--
6.05% due 2003 35,000 -
6.75% due 2038 55,000 -
Adjustable rates (5.71% to 5.79%) due 1999-2000 80,000 80,000
Unamortized debt premium (discount), net (1,461) (2,040)
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total long-term debt (annual interest
requirement--$21,131,000) 342,764 326,685
Less amount due within one year (Note 10) 50,020 35,020
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Long-term debt excluding amount due within one year 292,744 291,665 39.0 39.0
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total Capitalization $ 750,784 $ 746,385 100.0 % 100.0 %
===========================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31, 1998, 1997, and 1996
Mississippi Power Company 1998 Annual Report
<S> <C> <C> <C>
======================================================================================================================
1998 1997 1996
- - - - - - - ----------------------------------------------------------------------------------------------------------------------
(in thousands)
Balance at Beginning of Period $ 170,417 $ 166,282 $ 157,459
Net income after dividends on preferred stock 55,105 54,010 52,723
Cash dividends on common stock (51,700) (49,400) (43,900)
Preferred stock transactions and other, net (82) (475) -
- - - - - - - ----------------------------------------------------------------------------------------------------------------------
Balance at End of Period (Note 11) $ 173,740 $ 170,417 $ 166,282
======================================================================================================================
STATEMENTS OF PAID-IN CAPITAL
For the Years Ended December 31, 1998, 1997, and 1996
======================================================================================================================
1998 1997 1996
- - - - - - - ----------------------------------------------------------------------------------------------------------------------
(in thousands)
Balance at Beginning of Period $ 179,389 $ 179,389 $ 179,362
Contributions to capital by parent company 85 - 27
- - - - - - - ----------------------------------------------------------------------------------------------------------------------
Balance at End of Period $ 179,474 $ 179,389 $ 179,389
======================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-172
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Mississippi Power Company 1998 Annual Report
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
General
Mississippi Power Company is a wholly owned subsidiary of Southern Company,
which is the parent company of five operating companies, Southern Company
Services (SCS), Southern Communications Services (Southern LINC), Southern
Energy, Inc. (Southern Energy), Southern Nuclear Operating Company (Southern
Nuclear), and Southern Energy Solutions, and other direct and indirect
subsidiaries. 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) and/or the
Securities and Exchange Commission. SCS provides, at cost, specialized services
to Southern Company and to the subsidiary companies. Southern LINC provides
digital wireless communications services to the operating companies and also
markets these services to the public within the Southeast. Worldwide, Southern
Energy develops and manages electricity and other energy related projects,
including domestic energy trading and marketing. Southern Nuclear provides
services to Southern Company's nuclear power plants. Southern Energy Solutions
develops new business opportunities related to energy products and services.
Southern Company is registered as a holding company under the Public Utility
Holding Company Act of 1935 (PUHCA). Both Southern Company and its subsidiaries
are subject to the regulatory provisions of the PUHCA. 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. The preparation of financial statements in conformity with
generally accepted accounting principles requires the use of estimates and the
actual results may differ from those estimates.
Certain prior years' data presented in the financial statements have been
reclassified to conform with current year presentation.
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 expected to be credited
to customers through the ratemaking process. Regulatory assets and (liabilities)
reflected in the Balance Sheets as of December 31 relate to:
1998 1997
-------------------------
(in thousands)
Deferred income taxes $ 22,697 $ 21,906
Vacation pay 4,717 5,030
Workforce reduction plan of
1997 12,748 18,236
Premium on reacquired debt 9,304 9,508
Deferred environmental costs 1,500 1,583
Property damage reserve (910) (13,991)
Deferred income tax credits (37,277) (38,203)
Other, net (2,538) (2,982)
- - - - - - - ----------------------------------------------------------------
Total $ 10,241 $ 1,087
================================================================
In the event that a portion of the Company's operations is no longer subject
to the provisions of FASB Statement No. 71, the Company would be required to
write off the net regulatory assets and liabilities related to that portion of
operations that are not specifically recoverable through regulated rates. In
addition, the Company would be required to determine any impairment to other
assets, including plant, and write down the assets, if impaired, to their fair
value.
Revenues
The Company currently operates as a vertically integrated utility providing
electricity to retail customers within its traditional service area located
within the state of Mississippi, and to wholesale customers in the southeast.
II-173
<PAGE>
NOTES (continued)
Mississippi Power Company 1998 Annual Report
Revenues, less affiliated transactions, by type of service were as follows:
1998 1997 1996
--------------------------------------
(in thousands)
Retail $442,567 $417,242 $414,126
Wholesale 121,225 105,141 99,596
Other 13,054 11,062 8,477
- - - - - - - -----------------------------------------------------------------
Total $576,846 $533,445 $522,199
- - - - - - - -----------------------------------------------------------------
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 costs, the energy
component of purchased power costs and certain other costs. Retail rates also
include provisions to adjust billings for fluctuations in costs for ad valorem
taxes and certain qualifying environmental costs. Revenues are adjusted for
differences between actual allowable amounts and the amounts included in rates.
The Company has a diversified base of customers. No single customer or
industry comprises 10 percent or more of revenues. For all periods presented,
uncollectible accounts continued to average less than 1 percent of revenues.
Depreciation
Depreciation of the original cost of depreciable utility plant in service is
provided by using composite straight-line rates which approximated 3.3 percent
in 1998, 1997, and 1996. When property subject to depreciation is retired or
otherwise disposed of in the normal course of business, its cost -- together
with the cost of removal, less salvage -- is charged to the accumulated
provision for depreciation. Minor items of property included in the original
cost of the plant are retired when the related property unit is retired.
Depreciation expense includes an amount for the expected cost of removal of
facilities.
Income Taxes
Mississippi Power uses the liability method of accounting for deferred income
taxes and provides deferred income taxes for all significant income tax
temporary differences. Investment tax credits utilized are deferred and
amortized to income over the average lives of the related property.
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. If applicable, the cost of
maintenance, repairs, and replacement of minor items of property is charged to
maintenance expense except for the maintenance of coal cars and a portion of the
railway track maintenance, which are charged to fuel stock. The cost of
replacements of property (exclusive of minor items of property) is 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
The Company's financial instruments for which the carrying amount did not equal
fair value at December 31 were as follows:
Carrying Fair
Amount Value
---------------------------
(in millions)
Long-term debt
At December 31, 1998 $343 $348
At December 31, 1997 $327 $330
Capital trust preferred
securities:
At December 31, 1998 $35 $36
At December 31, 1997 35 36
- - - - - - - --------------------------------------------------------------
The fair value for long-term debt and preferred securities 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-174
<PAGE>
NOTES (continued)
Mississippi Power Company 1998 Annual Report
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 $1.5 million in each of the
years 1998, 1997 and 1996. 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. Effective January 1995, regulatory
treatment by the MPSC allowed a maximum accumulated provision of $18 million.
Hurricane Georges struck Mississippi's service area on September 28, 1998,
causing power outages and widespread flooding in certain counties. Current
estimates place the cost of repairing Mississippi's damaged facilities at
approximately $16.4 million, of which $1.5 million is expected to be recovered
from insurance. Substantially all of the cost ($13.9 million) was charged to the
property damage reserve; income will not be significantly affected by these
restoration costs. As of December 31, 1998, the accumulated provision amounted
to $0.9 million.
2. RETIREMENT BENEFITS
Mississippi Power has a defined benefit, trusteed, pension plan that covers
substantially all regular employees. The Company provides certain medical care
and life insurance benefits for retired employees. Substantially all these
employees may become eligible for such benefits when they retire. The Company
funds trusts to the extent deductible under federal income tax regulations or to
the extent required by the MPSC. In 1998, the Company adopted FASB Statement No.
132 Employers' Disclosure about Pensions and Other Postretirement Benefits The
measurement date is September 30 for each year.
Pension Plan
Changes during the year in the projected benefit obligations and in the fair
value of plan assets were as follows:
Projected
Benefit Obligations
----------------------------
1998 1997
- - - - - - - -----------------------------------------------------------------
(in thousands)
Balance at beginning of year $132,131 $127,834
Service cost 3,848 4,015
Interest cost 9,613 9,407
Benefits paid (7,845) (5,384)
Actuarial (gain) loss and
employee transfers 5,060 (3,571)
Effect of workforce reduction - (170)
- - - - - - - -----------------------------------------------------------------
Balance at end of year $142,807 $132,131
=================================================================
Plan Assets
----------------------------
1998 1997
- - - - - - - -----------------------------------------------------------------
(in thousands)
Balance at beginning of year $207,457 $179,658
Actual return on plan assets 1,252 33,718
Benefits paid (7,845) (5,385)
Employee transfers (2,764) (534)
- - - - - - - -----------------------------------------------------------------
Balance at end of year $198,100 $207,457
=================================================================
The accrued pension costs recognized in the Balance Sheets
were as follows:
1998 1997
- - - - - - - --------------------------------------------------------------------
(in thousands)
Funded status $ 55,293 $ 75,326
Unrecognized transition obligation (4,359) (4,903)
Unrecognized prior service cost 5,405 5,818
Unrecognized net gain (56,590) (78,936)
- - - - - - - --------------------------------------------------------------------
Accrued liability recognized in the
Balance Sheets $ (251) $ 2,695
====================================================================
II-175
<PAGE>
NOTES (continued)
Mississippi Power Company 1998 Annual Report
Components of the plans' net periodic cost were as follows:
1998 1997 1996
- - - - - - - ------------------------------------------------------------------
(in thousands)
Service cost $ 3,848 $ 4,015 $ 3,842
Interest cost 9,613 9,407 9,310
Expected return on
Plan assets (13,817) (12,805) (12,562)
Recognized net gain (1,956) (1,729) (1,202)
Net amortization (131) (119) (232)
- - - - - - - -------------------------------------------------------------------
Net pension income $ (2,443) $ (1,231) $ (844)
===================================================================
The weighted average rates assumed in the actuarial calculations for both
the pension plans and postretirement benefits were:
1998 1997
---------------------------------------------------------------
Discount 6.75% 7.50%
Annual salary increase 4.25 5.00
Long-term return on plan assets 8.50 8.50
---------------------------------------------------------------
Postretirement Benefits
Changes during the year in the projected benefit obligations and in the fair
value of plan assets were as follows:
Projected
Benefit Obligations
----------------------------
1998 1997
- - - - - - - -----------------------------------------------------------------
(in thousands)
Balance at beginning of year $43,417 $41,108
Service cost 806 867
Interest cost 3,162 2,922
Benefits paid (2,302) (1,495)
Actuarial loss and
employee transfers 2,177 2,824
Effect of work force reduction - (2,809)
- - - - - - - -----------------------------------------------------------------
Balance at end of year $47,260 $43,417
=================================================================
Plan Assets
----------------------------
1998 1997
- - - - - - - -----------------------------------------------------------------
(in thousands)
Balance at beginning of year $12,189 $10,210
Actual return on plan assets 176 1,661
Employer contributions 2,716 1,813
Benefits paid (2,302) (1,495)
- - - - - - - -----------------------------------------------------------------
Balance at end of year $12,779 $12,189
=================================================================
The accrued postretirement costs recognized in the Balance Sheets were as
follows:
1998 1997
- - - - - - - --------------------------------------------------------------------
(in thousands)
Funded status $(34,481) $(31,228)
Unrecognized transition obligation 4,967 5,313
Unrecognized net loss (gain) 1,010 (1,980)
Fourth quarter contributions 577 728
- - - - - - - --------------------------------------------------------------------
Accrued liability recognized in the
Balance Sheets $(27,927) $(27,167)
======================================================================
Components of the plans' net periodic cost were as follows:
1998 1997 1996
- - - - - - - ------------------------------------------------------------------
(in thousands)
Service cost $ 806 $ 867 $ 958
Interest cost 3,162 2,922 2,830
Expected return on
plan assets (989) (815) (696)
Recognized net (gain) loss - (7) 18
Net amortization 346 362 362
- - - - - - - ------------------------------------------------------------------
Net postretirement cost $3,325 $3,329 $3,472
==================================================================
II-176
<PAGE>
NOTES (continued)
Mississippi Power Company 1998 Annual Report
An additional assumption used in measuring the accumulated postretirement
benefit obligation was a weighted average medical care cost trend rate of 8.30
percent for 1998, decreasing gradually to 4.75 percent through the year 2005 and
remaining at that level thereafter. An annual increase or decrease in the
assumed medical care cost trend rate of 1 percent would increase the accumulated
benefit obligation and the service and interest cost components at December 31,
1998 as follows:
1 Percent 1 Percent
Increase Decrease
- - - - - - - -------------------------------------------------- --------------
(in thousands)
Benefit obligation $3,128 $(2,652)
Service and interest costs 281 (236)
- - - - - - - -----------------------------------------------------------------
Workforce Reduction Programs
In 1997, approximately one hundred employees of Mississippi Power accepted
the terms of a workforce reduction plan. The total cost to be incurred in
connection with this voluntary plan is expected to be $18.2 million, including a
$2.5 million pension and postretirement benefits curtailment loss. The MPSC
approved the deferral and amortization of these program costs over a period not
to exceed 60 months beginning no later than July 1998. The unamortized balance
of this program was $12.7 million at December 31, 1998.
3. LITIGATION AND REGULATORY MATTERS
Retail Rate Adjustment Plans
Mississippi Power's retail base rates are set under a Performance Evaluation
Plan (PEP) approved by the MPSC in 1994. PEP was designed with the objective
that the plan would reduce the impact of rate changes on the customer and
provide incentives for Mississippi Power to keep customer prices low. PEP
includes a mechanism for sharing rate adjustments based on the Company's ability
to maintain low rates for customers and on the Company's performance as measured
by three indicators that emphasize price and service to the customer. PEP
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 will remain in effect until the MPSC modifies or
terminates the plan. In September 1996, the MPSC under PEP approved a retail
revenue increase of $4.5 million (1.06 percent of annual retail revenue) which
became effective in October 1996. There were no PEP retail revenue changes for
1998 or 1997.
FERC Reviews Equity Returns
On September 21, 1998, the FERC entered separate orders affirming the
outcome of its administrative law judge's opinions in two proceedings in which
the return on common equity component contained in substantially all of the
operating companies' wholesale formula rate contracts was being challenged as
unnecessarily high. These orders resulted in no change in the wholesale
contracts. The FERC also dismissed a complaint filed by the three customers
under long-term power sales agreements seeking to lower the equity return
component in such agreements. These customers have filed applications for
rehearing regarding each FERC order. In response to a requirement of the
September 1998 FERC orders, Southern Company filed a new equity return component
on the long-term power sales contracts, to be effective January 5, 1999. The
proposed equity return was lowered from 13.75 percent to 12.5 percent. The FERC
placed the new rates into effect subject to refund. Also this filing was
consolidated with the new proceeding discussed below.
On December 28, 1998, the FERC staff filed a motion asking the FERC to
initiate a new proceeding regarding the equity return and other issues involving
the operating companies' formula rate contracts. The motion was submitted
pursuant to review procedures applicable to these contracts, and would be
applicable to billings under such contracts on and after January 1, 1999.
Environmental Compliance Overview Plan
The MPSC approved Mississippi Power's Environmental Compliance Overview Plan
(ECO) in 1992. The plan establishes procedures to facilitate the MPSC's overview
of the Company's environmental strategy and provides for recovery of costs
(including costs of capital) associated with environmental projects approved by
the MPSC. Under the ECO Plan any increase in the annual revenue requirement is
limited to 2 percent of retail revenues. However, the plan also provides for
carryover of any amount over the 2 percent limit into the next year's revenue
requirement. In 1997, the Company's filing with the MPSC under the ECO Plan
resulted in an annual retail rate increase of $0.9 million. The 1998 ECO filing
resulted in a small decrease in customer prices.
11-177
<PAGE>
NOTES (continued)
Mississippi Power Company 1998 Annual Report
Mississippi Power conducts studies, when possible, to determine the extent
of any required environmental remediation. Should such remediation be determined
to be probable, reasonable estimates of costs to clean up such sites are
developed and recognized in the financial statements. A currently owned site
where manufactured gas plant operations were located prior to the Company's
ownership is being investigated for potential remediation. In recognition of
probable remediation, the Company in 1995 recorded a liability and a deferred
debit (regulatory asset) of $1.8 million, including feasibility study costs. The
Company recognizes such costs as they are incurred and recovers them under the
ECO Plan as provided in the Company's 1995 ECO order. As of December 31, 1998,
the balance in the liability and regulatory asset accounts was $1.5 million. The
remedial investigation has been approved by the Mississippi Department of
Environmental Quality. The site is scheduled to be remediated in 1999. The
Company currently estimates the remediation costs to be approximately $1.5
million before recovery from potentially responsible parties.
Approval for New Capacity
In January of 1998, the Company was granted a Certificate of Public
Convenience and Necessity by the MPSC to build approximately 1,000 megawatts of
combined cycle generation at the Company's Plant Daniel site, to be placed in
service by June 2001. In December 1998, the Company requested approval to
transfer the ownership rights under the certificate to Escatawpa Funding,
Limited Partnership, which will lease the facility to the Company (see Note 4,
Construction Program). The Company also requested approval from the MPSC to
exclude the costs of the new facility from retail rate base and to assign the
Company's existing generating capacity to its retail business, beginning in
2001. In January 1999, the Company and Mississippi Public Utility Staff entered
a stipulation covering the details of cost allocation and ratemaking to effect
this change. In February 1999, the Commission held hearings on this matter and
subsequently granted the Company's request, as modified by the stipulation.
4. CONSTRUCTION PROGRAM
Mississippi Power is engaged in continuous construction programs, the costs of
which are currently estimated to total $67 million in 1999, $52 million in 2000,
and $45 million in 2001.
The construction program is subject to periodic review and revision, and
actual construction costs may vary from the above estimates because of numerous
factors. These factors include changes in business conditions; revised load
growth estimates; changes in environmental regulations; increasing costs of
labor, equipment and materials; and cost of capital. Significant construction
will continue related to transmission and distribution facilities, the upgrading
of generating plants, and the addition of combined cycle generation.
In February 1999, the Company signed an interim construction agency
agreement with Escatawpa Funding ("Escatawpa"), a limited partnership, that
calls for the Company to design and construct, as agent for Escatawpa, a 1064
megawatt natural gas combined cycle facility. On or before April 30, 1999,
Escatawpa and the Company anticipate entering into an Agreement for Lease (which
will supersede the interim construction agency agreement), and a Lease
Agreement. It is anticipated that the total project will cost approximately $406
million. Upon project completion, the Company will lease the facility from
Escatawpa. If the anticipated lease arrangement is not reached, the Company will
either exercise its purchase option or Escatawpa will sell the facility to a
third party.
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 securities and the receipt of capital contributions from Southern
Company.
The amounts of first mortgage bonds and preferred stock that can be issued
in the future will be contingent upon market conditions, adequate earnings
levels, regulatory authorizations and other factors.
At December 31, 1998, Mississippi Power had total committed credit
agreements with banks for $96.3 million. At year-end 1998, the unused portion of
these committed credit agreements was $76.3 million. These credit agreements
expire at various dates in 1999 and in 2000. Some of these agreements allow
short-term borrowings to be converted into term loans, payable in 12 equal
quarterly installments, with the first installment due at the end of the first
11-178
<PAGE>
NOTES (continued)
Mississippi Power Company 1998 Annual Report
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. At December 31, 1998, the
Company had $13 million of short-term borrowings outstanding.
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 of the Company's fixed
property and franchises.
Lease Agreements
In 1984, Mississippi Power and Gulf States Utilities (now Entergy) entered into
a forty-year transmission facilities agreement whereby Entergy began paying a
use fee to the Company covering all expenses relative to ownership and operation
and maintenance of a 500 kV line, including amortization of its original $57
million cost. For the three years ended 1998 use fees collected under this
agreement, net of related expenses, amounted to $3.4 million each year, and are
included within Other Income in the Statements of Income.
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. The Company has the option to purchase the 745
railcars at the greater of lease termination value or fair market value, or to
renew the leases at the end of the lease term. In 1997, a third lease agreement
for the use of 360 railcars was also entered into for three years, with a
monthly renewal option for up to an additional nine months. All of these leases,
totaling 1,105 railcars, were for the transport of coal 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, charged to fuel
inventory, was $2.8 million in 1998, $2.0 million in 1997, and $1.7 million in
1996. The Company's annual lease payments for 1999 through 2003 will average
approximately $2.2 million and after 2003, lease payments total in aggregate
approximately $16 million.
Fuel and Purchased Power 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 at December 31, 1998, were as follows:
Year Fuel
-------- --------------
(in millions)
1999 $111
2000 80
- - - - - - - ----------------------------------------------------------
Total commitments $191
- - - - - - - ----------------------------------------------------------
Additional commitments for fuel will be required in the future to supply the
Company's fuel needs.
In 1996, Mississippi Power entered into agreements to purchase options for
summer peaking power for the years 1997 through 2000. The Company has purchased
options from power marketers for up to 250 megawatts of peaking power in 1997;
300 megawatts in 1998; 250 megawatts in 1999; and 400 megawatts in 2000. In
1997and 1998, Mississippi Power exercised its option to purchase 250 megawatts
and 300 megawatts of peaking capacity respectively. In June 1997, the MPSC
approved Mississippi Power's request that it be allowed to earn a return on the
capacity portion of this agreement. Mississippi Power expects to exercise its
option to purchase 250 megawatts of summer peaking capacity in 1999.
11-179
<PAGE>
NOTES (continued)
Mississippi Power Company 1998 Annual Report
6. JOINT OWNERSHIP AGREEMENTS
Mississippi Power and Alabama Power own as tenants in common Units 1 and 2 at
Greene County Electric Generating Plant located in Alabama; and Mississippi
Power and Gulf Power own as tenants in common Daniel Electric Generating Plant
located in Mississippi.
At December 31, 1998, 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
Units 1 and 2 500 40% $ 60,868 $27,767
Daniel 1,000 50% 219,082 99,006
--------------------------------------------------------------------------
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
Mississippi Power and the other operating affiliates of Southern Company have
long-term contractual agreements for the sale of capacity and energy to certain
non-affiliated utilities located outside the system's service area. Because the
energy is generally sold at cost under these agreements, profitability is
primarily affected by revenues from capacity sales. The capacity revenues have
been $10,389 in 1998; $8,000 in 1997; and none in 1996.
8. INCOME TAXES
At December 31, 1998, the tax-related regulatory assets and liabilities were $23
million and $37 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 shown below:
1998 1997 1996
----------------------------------
(in thousands)
Total provision for
income taxes
Federal --
Currently payable $20,500 $27,651 $29,888
Deferred --current year 7,007 8,171 13,816
--reversal of
prior years 2,435 (9,236) (14,913)
-----------------------------------------------------------------
29,942 26,586 28,791
-----------------------------------------------------------------
State --
Currently payable 2,544 5,537 3,588
Deferred --current year 1,568 1,756 4,727
--reversal of
prior years 610 (2,499) (3,556)
-----------------------------------------------------------------
4,722 4,794 4,759
-----------------------------------------------------------------
Total 34,664 31,380 33,550
Less income taxes charged
to other income 165 (588) 932
-----------------------------------------------------------------
Federal and state
income taxes charged
to operations $34,499 $31,968 $32,618
=================================================================
11-180
<PAGE>
NOTES (continued)
Mississippi Power Company 1998 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:
1998 1997
----------------------------
(in thousands)
Deferred tax liabilities:
Accelerated depreciation $153,768 $149,941
Basis differences 9,642 10,037
Other 26,038 25,097
---------------------------------------------------------------
Total 189,448 185,075
---------------------------------------------------------------
Deferred tax assets:
Other property
basis differences 22,391 23,139
Pension and
other benefits 9,441 9,803
Property insurance 1,526 5,351
Unbilled fuel 2,080 802
Other 14,406 19,714
---------------------------------------------------------------
Total 49,844 58,809
---------------------------------------------------------------
Net deferred tax
liabilities 139,604 126,266
Portion included in
current assets, net 4,248 8,379
---------------------------------------------------------------
Accumulated deferred
income taxes in the
Balance Sheets $143,852 $134,645
===============================================================
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 $1.2 million in 1998, $1.2 million in 1997, and $1.4 million in
1996. At December 31, 1998, 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:
1998 1997 1996
----------------------------------
Federal statutory rate 35.00% 35.00% 35.00%
State income tax, net of
federal deduction 3.34 3.51 3.39
Non-deductible book
depreciation .47 .47 .46
Other (1.04) (3.60) (2.05)
------------------------------------------------------------------
Effective income tax rate 37.77% 35.38% 36.80%
==================================================================
Southern Company files a consolidated federal income tax return. Under a
joint consolidated income tax agreement, each subsidiary's current and deferred
tax expense is computed on a stand-alone basis. Tax benefits from losses of the
parent company are allocated to each subsidiary based on the ratio of taxable
income to total consolidated taxable income.
9. COMPANY OBLIGATED MANDATORILY
REDEEMABLE PREFERRED SECURITIES
In February 1997, Mississippi Power Capital Trust I (Trust I), of which the
Company owns all the common securities, issued $35 million of 7.75 percent
mandatorily redeemable preferred securities. Substantially all of the assets of
Trust I are $36 million aggregate principal amount of the Company's 7.75 percent
junior subordinated notes due February 15, 2037.
The Company considers that the mechanisms and obligations relating to the
preferred securities, taken together, constitute a full and unconditional
guarantee by Mississippi Power Capital Trust for the obligation with respect to
the preferred securities.
The Trust is a subsidiary of the Company, and accordingly is consolidated in
the Company's financial statements.
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:
1998 1997
-------------------
(in thousands)
Bond improvement fund requirement $ 1,000 $1,750
Less: Portion to be satisfied by
certifying property additions 1,000 1,750
---------------------------------------------------------------
Cash sinking fund requirement - -
Redemptions of first mortgage bonds - 35,000
Current portion of other long-term debt 50,000
Pollution control bond cash
sinking fund requirements 20 20
---------------------------------------------------------------
Total $50,020 $35,020
===============================================================
II-181
<PAGE>
NOTES (continued()
Mississippi Power Company 1998 Annual Report
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, 1998,
approximately $118 million of retained earnings was restricted against the
payment of cash dividends on common stock under the most restrictive terms of
the mortgage indenture or corporate charter.
12. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for 1998 and 1997 are as follows:
Net Income
After Dividends
Operating Operating On Preferred
Quarter Ended Revenues Income Stock
- - - - - - - --------------------------------------------------------------------
(in thousands)
March 1998 $122,156 $15,367 $8,388
June 1998 156,612 20,123 13,713
September 1998 191,699 34,167 28,309
December 1998 124,664 10,715 4,696
March 1997 $116,903 $17,132 $10,645
June 1997 128,915 19,340 12,618
September 1997 171,874 30,441 25,163
December 1997 125,896 11,043 5,584
- - - - - - - --------------------------------------------------------------------
Mississippi Power's business is influenced by seasonal weather conditions
and the timing of rate changes.
II-182
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA
Mississippi Power Company 1998 Annual Report
<S> <C> <C> <C>
===========================================================================================================================
1998 1997 1996
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $595,131 $543,588 $544,029
Net Income after Dividends
on Preferred Stock (in thousands) $55,105 $54,010 $52,723
Cash Dividends on Common Stock (in thousands) $51,700 $49,400 $43,900
Return on Average Common Equity (percent) 14.2 14.0 13.9
Total Assets (in thousands) $1,189,605 $1,166,829 $1,142,327
Gross Property Additions (in thousands) $68,231 $55,375 $61,314
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $391,231 $387,824 $383,734
Preferred stock 31,809 31,896 74,414
Preferred stock subject to mandatory redemption - - -
Company obligated mandatorily redeemable preferred securities 35,000 35,000 -
Long-term debt 292,744 291,665 326,379
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $750,784 $746,385 $784,527
===========================================================================================================================
Capitalization Ratios (percent):
Common stock equity 52.1 52.0 48.9
Preferred stock 4.2 4.3 9.5
Company obligated mandatorily redeemable preferred securities 4.7 4.7 -
Long-term debt 39.0 39.0 41.6
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
===========================================================================================================================
First Mortgage Bonds (in thousands):
Issued - - -
Retired 75,000 - 45,447
Preferred Stock (in thousands):
Issued - - -
Retired 87 42,518 -
Company Obligated Mandatorily Redeemable
Preferred Securities (in thousands):
Issued - 35,000 -
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's Aa3 Aa3 Aa3
Standard and Poor's AA- AA- A+
Duff & Phelps AA- AA- AA-
Preferred Stock -
Moody's a1 a1 a1
Standard and Poor's A A A
Duff & Phelps A+ A+ A+
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 156,530 156,650 154,630
Commercial 31,319 31,667 30,366
Industrial 587 642 639
Other 200 200 200
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------
Total 188,636 189,159 185,835
===========================================================================================================================
Employees (year-end) 1,230 1,245 1,363
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
II-183
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA
Mississippi Power Company 1998 Annual Report
<S> <C> <C> <C> <C>
==============================================================================================================================
1995 1994 1993 1992
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $516,553 $499,162 $474,883 $434,447
Net Income after Dividends
on Preferred Stock (in thousands) $52,531 $49,157 $42,436 $36,790
Cash Dividends on Common Stock (in thousands) $39,400 $34,100 $29,000 $28,000
Return on Average Common Equity (percent) 14.26 14.38 14.09 13.27
Total Assets (in thousands) $1,148,953 $1,123,711 $1,050,334 $791,283
Gross Property Additions (in thousands) $67,570 $104,014 $139,976 $68,189
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $374,884 $361,753 $321,768 $280,640
Preferred stock 74,414 74,414 74,414 74,414
Preferred stock subject to mandatory redemption - - - -
Company obligated mandatorily redeemable preferred securities - - - -
Long-term debt 288,820 306,522 250,391 238,650
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $738,118 $742,689 $646,573 $593,704
==============================================================================================================================
Capitalization Ratios (percent):
Common stock equity 50.8 48.7 49.8 47.3
Preferred stock 10.1 10.0 11.5 12.5
Company obligated mandatorily redeemable preferred securities - - - -
Long-term debt 39.1 41.3 38.7 40.2
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0 100.0
==============================================================================================================================
First Mortgage Bonds (in thousands):
Issued 30,000 35,000 70,000 40,000
Retired 1,625 32,628 51,300 104,703
Preferred Stock (in thousands):
Issued - - 23,404 35,000
Retired - - 23,404 -
Company Obligated Mandatorily Redeemable
Preferred Securities (in thousands):
Issued - - - -
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's Aa3 Aa3 A1 A1
Standard and Poor's A+ A+ A+ A+
Duff & Phelps AA- A+ A+ A+
Preferred Stock -
Moody's a1 a1 a1 a1
Standard and Poor's A A A A
Duff & Phelps A+ A A A
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 154,014 152,891 151,692 150,248
Commercial 29,903 29,276 28,648 28,056
Industrial 642 650 570 573
Other 194 189 190 189
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------
Total 184,753 183,006 181,100 179,066
==============================================================================================================================
Employees (year-end) 1,421 1,535 1,586 1,619
- - - - - - - ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
11-184A
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA
Mississippi Power Company 1998 Annual Report
<S> <C> <C> <C> <C>
============================================================================================================================-
1991 1990 1989 1988
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $432,386 $446,871 $442,650 $437,939
Net Income after Dividends
on Preferred Stock (in thousands) $22,627 $34,176 $38,576 $36,081
Cash Dividends on Common Stock (in thousands) $28,500 $27,500 $27,000 $27,600
Return on Average Common Equity (percent) 8.17 12.36 14.43 14.03
Total Assets (in thousands) $790,641 $800,026 $786,570 $779,319
Gross Property Additions (in thousands) $53,675 $49,009 $43,916 $54,550
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock 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
Company obligated mandatorily redeemable preferred securities - - - -
Long-term debt 304,150 270,724 277,693 287,525
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $617,419 $593,721 $594,764 $593,662
=============================================================================================================================
Capitalization Ratios (percent):
Common stock equity 44.4 47.1 45.9 44.1
Preferred stock 6.4 7.3 7.4 7.5
Company obligated mandatorily redeemable preferred securities - - - -
Long-term debt 49.2 45.6 46.7 48.4
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0 100.0
=============================================================================================================================
First Mortgage Bonds (in thousands):
Issued 50,000 - - -
Retired - 4,000 3,823 -
Preferred Stock (in thousands):
Issued - - - -
Retired 4,118 750 750 1,500
Company Obligated Mandatorily Redeemable
Preferred Securities (in thousands):
Issued - - - -
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1 A1 A1
Standard and Poor's A+ A+ A+ A+
Duff & Phelps A+ A+ A+ 5
Preferred Stock -
Moody's a1 a1 a1 a1
Standard and Poor's A A A A
Duff & Phelps A A A 6
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 148,978 147,738 147,308 146,750
Commercial 27,441 27,134 26,867 26,751
Industrial 562 574 525 478
Other 400 411 404 399
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Total 177,381 175,857 175,104 174,378
=============================================================================================================================
Employees (year-end) 1,630 1,842 1,750 1,831
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
11-184B
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Mississippi Power Company 1998 Annual Report
<S> <C> <C> <C>
- - - - - - - -------------------------------------------------------------------------------------------------------------------------
1998 1997 1996
- - - - - - - -------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $157,642 $138,608 $137,055
Commercial 145,677 134,208 131,734
Industrial 135,039 140,233 141,324
Other 4,209 4,193 4,013
- - - - - - - -------------------------------------------------------------------------------------------------------------------------
Total retail 442,567 417,242 414,126
Sales for resale - non-affiliates 121,225 105,141 99,596
Sales for resale - affiliates 18,285 10,143 21,830
- - - - - - - -------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 582,077 532,526 535,552
Other revenues 13,054 11,062 8,477
- - - - - - - --------------------------------------------------------------------------------------------------------- --------------
Total $595,131 $543,588 $544,029
=========================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 2,248,915 2,039,042 2,079,611
Commercial 2,623,276 2,407,520 2,315,860
Industrial 3,729,166 3,981,875 3,960,243
Other 39,772 40,508 39,297
- - - - - - - -------------------------------------------------------------------------------------------------------------------------
Total retail 8,641,129 8,468,945 8,395,011
Sales for resale - non-affiliates 3,157,837 2,895,182 2,726,993
Sales for resale - affiliates 552,142 478,884 693,510
- - - - - - - -------------------------------------------------------------------------------------------------------------------------
Total 12,351,108 11,843,011 11,815,514
=========================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 7.01 6.80 6.59
Commercial 5.55 5.57 5.69
Industrial 3.62 3.52 3.57
Total retail 5.12 4.93 4.93
Total sales 4.71 4.50 4.53
Residential Average Annual Kilowatt-Hour Use Per Customer 14,375 13,132 13,469
Residential Average Annual Revenue Per Customer $1,007.68 $892.68 $887.66
Plant Nameplate Capacity Ratings (year-end) (megawatts) 2,086 2,086 2,086
Maximum Peak-Hour Demand (megawatts):
Winter 1,740 1,922 2,030
Summer 2,339 2,209 2,117
Annual Load Factor (percent) 58.0 59.1 60.7
Plant Availability - Fossil-Steam (percent) 90.0 92.4 91.8
- - - - - - - -------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 66.0 70.0 70.4
Oil and gas 15.0 13.0 12.0
Purchased power -
From non-affiliates 8.0 3.0 6.5
From affiliates 11.0 14.0 11.1
- - - - - - - -------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
=========================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,261 10,078 10,038
Cost of fuel per million BTU (cents) 157.93 153.32 156.08
Average cost of fuel per net kilowatt-hour generated (cents) 1.62 1.54 1.57
- - - - - - - -------------------------------------------------------------------------------------------------------------------------
</TABLE>
11-185
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Mississippi Power Company 1998 Annual Report
<S> <C> <C> <C> <C>
===========================================================================================================================
1995 1994 1993 1992
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $134,286 $124,257 $118,793 $109,781
Commercial 131,034 124,716 115,152 107,131
Industrial 140,947 142,268 130,198 117,010
Other 3,914 3,882 3,760 3,533
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total retail 410,181 395,123 367,903 337,455
Sales for resale - non-affiliates 91,820 88,122 83,511 80,213
Sales for resale - affiliates 7,691 9,538 15,519 10,055
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 509,692 492,783 466,933 427,723
Other revenues 6,861 6,379 7,950 6,724
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total $516,553 $499,162 $474,883 $434,447
===========================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 2,040,608 1,922,217 1,929,835 1,804,858
Commercial 2,242,163 2,100,625 1,933,685 1,811,042
Industrial 3,813,456 3,847,011 3,623,543 3,536,634
Other 38,559 38,147 38,357 38,261
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total retail 8,134,786 7,908,000 7,525,420 7,190,795
Sales for resale - non-affiliates 2,493,519 2,555,914 2,544,982 2,687,917
Sales for resale - affiliates 243,554 174,342 426,919 280,443
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total 0,871,859 10,638,256 10,497,321 10,159,155
===========================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.58 6.46 6.16 6.08
Commercial 5.84 5.94 5.96 5.92
Industrial 3.70 3.70 3.59 3.31
Total retail 5.04 5.00 4.89 4.69
Total sales 4.69 4.63 4.45 4.21
Residential Average Annual Kilowatt-Hour Use Per Customer 13,307 12,611 12,780 12,066
Residential Average Annual Revenue Per Customer $875.69 $815.21 $786.71 $733.90
Plant Nameplate Capacity Ratings (year-end) (megawatts) 2,086 2,086 2,011 2,011
Maximum Peak-Hour Demand (megawatts):
Winter 1,637 1,636 1,401 1,386
Summer 2,095 1,874 1,872 1,755
Annual Load Factor (percent) 60.0 63.4 60.0 60.8
Plant Availability - Fossil-Steam (percent) 92.1 85.4 88.0 92.0
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 58.0 56.0 63.5 60.4
Oil and gas 15.2 10.2 7.6 5.8
Purchased power -
From non-affiliates 2.4 1.2 1.3 1.2
From affiliates 24.4 32.6 27.6 32.6
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0 100.0
===========================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,249 10,295 10,075 9,888
Cost of fuel per million BTU (cents) 160.48 165.96 170.13 162.27
Average cost of fuel per net kilowatt-hour generated (cents) 1.64 1.71 1.71 1.60
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
II-186A
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Mississippi Power Company 1998 Annual Report
<S> <C> <C> <C> <C>
===========================================================================================================================
1991 1990 1989 1988
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $103,820 $102,243 $100,068 $96,711
Commercial 103,666 103,352 103,403 98,772
Industrial 116,972 123,754 128,983 123,038
Other 5,869 6,078 5,992 5,874
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total retail 330,327 335,427 338,446 324,395
Sales for resale - non-affiliates 78,826 86,194 82,111 75,525
Sales for resale - affiliates 18,044 20,157 16,938 33,747
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 427,197 441,778 437,495 433,667
Other revenues 5,189 5,093 5,155 4,272
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total $432,386 $446,871 $442,650 $437,939
===========================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 1,832,266 1,804,838 1,741,855 1,686,722
Commercial 1,768,441 1,718,074 1,686,302 1,607,988
Industrial 3,297,247 3,311,460 3,204,208 2,879,457
Other 89,375 85,938 87,611 86,049
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total retail 6,987,329 6,920,310 6,719,976 6,260,216
Sales for resale - non-affiliates 2,706,320 2,883,581 2,798,086 2,280,341
Sales for resale - affiliates 617,696 714,365 527,970 1,100,808
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total 0,311,345 10,518,256 10,046,032 9,641,365
===========================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 5.67 5.66 5.74 5.73
Commercial 5.86 6.02 6.13 6.14
Industrial 3.55 3.74 4.03 4.27
Total retail 4.73 4.85 5.04 5.18
Total sales 4.14 4.20 4.35 4.50
Residential Average Annual Kilowatt-Hour Use Per Customer 12,338 12,228 11,842 11,499
Residential Average Annual Revenue Per Customer $699.11 $692.70 $680.32 $659.30
Plant Nameplate Capacity Ratings (year-end) (megawatts) 2,011 1,998 1,998 1,966
Maximum Peak-Hour Demand (megawatts):
Winter 1,267 1,201 1,556 1,284
Summer 1,682 1,724 1,682 1,621
Annual Load Factor (percent) 61.5 59.0 58.8 57.6
Plant Availability - Fossil-Steam (percent) 89.8 93.3 94.0 93.0
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 64.1 62.6 63.4 86.3
Oil and gas 8.1 14.0 13.5 4.8
Purchased power -
From non-affiliates 0.7 0.8 0.5 0.4
From affiliates 27.1 22.6 22.6 8.5
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0 100.0
===========================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,142 10,319 10,159 10,220
Cost of fuel per million BTU (cents) 177.52 183.27 178.38 185.13
Average cost of fuel per net kilowatt-hour generated (cents) 1.80 1.89 1.81 1.89
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
II-186B
<
SAVANNAH ELECTRIC AND POWER COMPANY
FINANCIAL SECTION
II-187
<PAGE>
MANAGEMENT'S REPORT
Savannah Electric and Power Company 1998 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/ G. Edison Holland, Jr.
G. Edison Holland, Jr.
President
and Chief Executive Officer
/s/ K. R. Willis
K. R. Willis
Vice-President
Treasurer, Chief Financial Officer
and Assistant Secretary
February 10, 1999
II-188
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Savannah Electric and Power Company:
We have audited the accompanying balance sheets and statements of capitalization
of Savannah Electric and Power Company (a Georgia corporation and a wholly owned
subsidiary of Southern Company) as of December 31, 1998 and 1997, and the
related statements of income, retained earnings, and cash flows for each of the
three years in the period ended December 31, 1998. 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 11-198 through II-210)
referred to above present fairly, in all material respects, the financial
position of Savannah Electric and Power Company as of December 31, 1998 and
1997, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Atlanta, Georgia
February 10, 1999
II-189
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Savannah Electric and Power Company 1998 Annual Report
RESULTS OF OPERATIONS
Earnings
Savannah Electric and Power Company's net income after dividends on preferred
stock for 1998 totaled $23.6 million, representing a $0.2 million decrease from
the prior year. This 0.9 percent decline in earnings from 1997 is principally
the result of a decrease in other income, net.
In 1997, earnings were $23.8 million, representing a $0.1 million, or 0.4
percent decrease from the prior year. This was principally the result of an
increase in other operation expense, partially offset by an increase in other
income, net.
Revenues
Total revenues for 1998 were $254.5 million, reflecting a 12.5 percent increase
compared to 1997. The following table summarizes the factors affecting operating
revenues for the 1996-1998 period:
Increase (Decrease)
From Prior Year
--------------------------------------
1998 1997 1996
--------------------------------------
Retail -- (in thousands)
Sales growth $ (479) $ 7,664 $ 3,679
Weather 8,336 (6,186) (2,813)
Fuel cost recovery
and other 15,012 (10,002) 12,365
--------------------------------------------------------------------
Total retail 22,869 (8,524) 13,231
--------------------------------------------------------------------
Sales for resale--
Non-affiliates 1,081 1,469 147
Affiliates 964 (1,078) (4,070)
--------------------------------------------------------------------
Total sales for resale 2,045 391 (3,923)
--------------------------------------------------------------------
Other operating revenues 3,264 336 (963)
--------------------------------------------------------------------
Total operating revenues $28,178 $ (7,797) $ 8,345
====================================================================
Percent change 12.5% (3.3)% 3.7%
--------------------------------------------------------------------
Retail revenues increased 10.4 percent in 1998, compared to a decline of
3.7 percent in 1997. The increase in 1998 retail revenues is primarily
attributable to the unusually hot summer weather, which led to the increases in
the residential and commercial classes. The base rate decrease to the small
business customer class, ordered by the Georgia Public Service Commission (GPSC)
effective July 1998, more than offset the sales growth in all classes. See Note
3 to the financial statements for additional information. The number of
customers was also up in both the residential and commercial categories.
The decline in 1997 retail revenues was attributable to the mild summer
weather and a decrease in fuel cost recovery revenues, somewhat offset by
customer growth and increased industrial energy sales. Industrial energy sales
were higher primarily due to an increase in the demand of a major customer.
Under the Company's fuel cost recovery provisions, fuel revenues--including
the fuel component of purchased energy--generally equal fuel expense and have no
effect on earnings.
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 revenues remained unchanged
in 1998. The capacity and energy components were as follows:
1998 1997 1996
--------------------------------------
(in thousands)
Capacity $ 2 $ 2 $ 2
Energy 401 746 1,329
- - - - - - - -----------------------------------------------------------
Total $403 $748 $1,331
===========================================================
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 do not have a significant impact on
earnings.
Energy Sales
Changes in revenues are influenced heavily by the amount of energy sold each
year. Kilowatt-hour (KWH) sales for 1998 and the percent change by year were as
follows:
KWH Percent Change
------------ -----------------------------
1998 1998 1997 1996
------------ -----------------------------
(in millions)
Residential 1,540 7.8% (1.9)% 3.9%
Commercial 1,236 6.9 1.3 3.8
Industrial 900 2.1 5.1 (5.5)
Other 131 5.3 (1.4) 0.1
------------
Total retail 3,807 6.0 0.8 1.4
Sales for resale--
Non-affiliates 53 (43.5) 2.9 4.4
Affiliates 59 7.2 30.4 (34.4)
------------
Total 3,919 4.8% 1.2% 0.8%
=====================================================================
II-190
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Savannah Electric and Power Company 1998 Annual Report
Total retail energy sales were up 6.0% in 1998, the strongest showing since
1995. Both residential and commercial energy sales reflected the impact of the
hotter-than-normal weather. Industrial energy sales reflected high demand from
one industrial customer.
Expenses
Total operating expenses for 1998 were $216.6 million, reflecting a $27.6
million increase from 1997. Major components of this increase include a $17.5
million increase in fuel, a $7.1 million increase in purchased power from
non-affiliates, and a $5.5 million increase in maintenance expense. These
increases were partially offset by a decrease of $6.4 million in purchased power
from affiliates. The increase in fuel expense was primarily attributable to
higher demand for energy. The increase in purchased power from non-affiliates
primarily resulted from increased power marketing activities. Maintenance
expenses were higher primarily due to scheduled turbine dismantle inspection
costs. The decline in purchased power from affiliates was due primarily to an
increase in internal generation reflecting system load growth.
In 1997, total operating expenses were $189.1 million, reflecting a $6.1
million decrease from 1996. This decrease includes a $16.5 million reduction in
purchased power from affiliates, partially offset by increases of $6.4 million
in fuel and $3.7 million in other operation expenses. The decrease in purchased
power from affiliates was due to an increase in internal generation and to an
adjustment in affiliated billings. The increase in fuel expense was primarily
attributable to higher generation and to fuel mix. The increase in other
operation expense primarily resulted from a one-time charge for work force
reductions of $1.9 million, and expenses associated with the implementation of a
new computer software system.
Fuel and purchased power costs constitute the single largest expense for
the Company. The mix of energy supply is determined primarily by system load,
the unit cost of fuel consumed, and the availability of units.
The amount and sources of energy supply and the total average cost of
energy supply were as follows:
1998 1997 1996
--------------------------
Total energy supply
(millions of KWHs) 4,182 3,964 3,917
Sources of energy supply
(percent) --
Coal 42 34 28
Oil 1 - -
Gas 12 5 3
Purchased Power 45 61 69
Total average cost of
energy supply (cents) 2.35 2.02 2.30
- - - - - - - -----------------------------------------------------------------
Effects of Inflation
The Company is subject to rate regulation and income tax laws that are based on
the recovery of historical costs. Therefore, inflation creates an economic loss
because the Company is recovering its costs of investments in dollars that have
less purchasing power. While the inflation rate has been relatively low in
recent years, it continues to have an adverse effect on the Company because of
the large investment in utility plant with long economic life. Conventional
accounting for historical cost does not recognize this economic loss nor the
partially offsetting gain that arises through financing facilities with
fixed-money obligations such as long-term debt and preferred securities. Any
recognition of inflation by regulatory authorities is reflected in the rate of
return allowed.
11-191
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Savannah Electric and Power Company 1998 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 energy sales growth to a less regulated, more
competitive environment.
Savannah Electric currently operates as a vertically integrated utility
providing electricity to customers within the traditional service area of
southeastern Georgia. Prices for electricity provided by the Company to retail
customers are set by the GPSC. Prices for electricity relating to jointly owned
generating facilities, interconnecting transmission lines, and the exchange of
electric power are set by the Federal Energy Regulatory Commission (FERC).
Future earnings in the near term will depend upon growth in energy sales,
which is subject to a number of factors. These factors include weather,
competition, changes in contracts with neighboring utilities, energy
conservation practiced by customers, the elasticity of demand, and the rate of
economic growth in the Company's service area.
The electric utility industry in the United States is currently undergoing
a period of dramatic change as a result of regulatory and competitive factors.
Among the primary agents of change has been the Energy Policy Act of 1992
(Energy Act). The 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 the Company's
transmission network in order to sell electricity to other utilities. This
enhances the incentive for IPPs to build cogeneration plants for industrial and
commercial customers and sell energy generation to other utilities. Also,
electricity sales for resale rates are being driven down by wholesale
transmission access and numerous potential new energy suppliers, including power
marketers and brokers.
Although the Energy Act does not permit retail customer access, it was a
major catalyst for the current restructuring and consolidation taking place
within the utility industry. Numerous federal and state initiatives are in
varying stages to promote wholesale and retail competition. Among other things,
these initiatives allow customers to choose their electricity provider. As these
initiatives materialize, the structure of the utility industry could radically
change. Some states have approved initiatives that result in a separation of the
ownership and/or operation of generating facilities from the ownership and/or
operation of transmission and distribution facilities. While various
restructuring and competition initiatives have been or are being discussed in
Georgia, none have been enacted to date. Enactment would require numerous issues
to be resolved, including significant ones relating to transmission pricing and
recovery of any stranded investments. The inability of the Company to recover
its investments, including the regulatory assets described in Note 1 to the
financial statements, could have a material adverse effect on the financial
condition of the Company. The Company is attempting to minimize or reduce its
cost exposure.
Continuing to be a low-cost producer could provide significant
opportunities to increase market share and profitability in markets that evolve
with changing regulation. Conversely, unless the Company remains a low-cost
producer and provides quality service, the Company's retail energy sales growth
could be limited, and this could significantly erode earnings.
Compliance costs related to current and future environmental laws and
regulations could affect earnings if such costs are not fully recovered. The
Clean Air Act and other important environmental items are discussed later under
"Environmental Matters."
Rates to retail customers served by the Company are regulated by the GPSC.
As part of the Company's rate settlement in 1992, it was informally agreed that
the Company's earned rate of return on common equity should be 12.95 percent. In
June 1998, the GPSC issued a four-year accounting order which settled its review
of the Company's earnings. See Note 3 to the financial statements 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 that are not specifically recoverable, and
determine if any other assets have been impaired. See Note 1 to the financial
statements under "Regulatory Assets and Liabilities" for additional information.
11-192
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Savannah Electric and Power Company 1998 Annual Report
Exposure to Market Risks
Due to cost-based rate regulation, the Company has limited exposure to market
volatility in interest rates and prices of electricity. To mitigate residual
risks relative to movements in electricity prices, the Company enters into fixed
price contracts for the purchase and sale of electricity through the wholesale
electricity market. Realized gains and losses are recognized in the income
statement as incurred. At December 31, 1998, exposure from these activities was
not material to the Company's financial statements. Also, based on the Company's
overall interest rate exposure at December 31, 1998, a near-term 100 basis point
change in interest rates would not materially affect the financial statements.
New Accounting Standards
The FASB has issued Statement No. 133, Accounting for Derivative Instruments and
Hedging Activities, which must be adopted by the year 2000. This statement
establishes accounting and reporting standards for derivative instruments --
including certain derivative instruments embedded in other contracts -- and for
hedging activities. The Company has not yet quantified the impact of adopting
this statement on its financial statements; however, the adoption could increase
volatility in earnings.
In March 1998, the American Institute of Certified Public Accountants
(AICPA) issued a new Statement of Position, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use. This statement requires
capitalization of certain costs of internal-use software. The Company adopted
this statement in January 1999, and it is not expected to have a material impact
on the financial statements.
In April 1998, the AICPA issued a new Statement of Position, Reporting on
the Cost of Start-up Activities. This statement requires that the costs of
start-up activities and organizational costs be expensed as incurred. Any of
these costs previously capitalized by a company must be written off in the year
of adoption. The Company adopted this statement in January 1999, and it is not
expected to have a material impact on the financial statements.
In December 1998, the Emerging Issues Task Force (EITF) of the FASB issued
EITF No. 98-10, Accounting for Contracts Involved in Energy Trading and Risk
Management Activities. The EITF requires that energy trading contracts must be
marked to market through the income statement, with gains and losses reflected
rather than revenues and purchased power. Energy trading contracts are defined
as energy contracts entered into with the objective of generating profits on or
from exposure to shifts or changes in market prices. The Company adopted the
required accounting in January 1999, and it is not expected to have a material
impact on the financial statements.
Year 2000
Year 2000 Challenge
In order to save storage space, computer programmers in the 1960s and 1970s
shortened the year portion of date entries to just two digits. Computers
assumed, in effect, that all years began with "19." This practice was widely
adopted and hard-coded into computer chips and processors found in some
equipment. This approach, intended to save processing time and storage space,
was used until the mid-1990s. Unless corrected before the Year 2000, affected
software systems and devices containing a chip or microprocessor with date and
time functions could incorrectly process dates or the systems may cease to
function.
The Company depends on complex computer systems for many aspects of its
operations, which include generation, transmission, and distribution of
electricity, as well as other business support activities. The Company's goal is
to have critical devices or software that are required to maintain operations to
be Year 2000 ready by June 1999. Year 2000 ready means that a system or
application is determined suitable for continued use through the Year 2000 and
beyond. Critical systems include, but are not limited to, safe shutdown systems,
turbine generator systems, control center computer systems, customer service
systems, energy management systems, and telephone switches and equipment.
Year 2000 Program and Status
The Company's executive management recognizes the seriousness of the Year 2000
challenge and has dedicated what it believes to be adequate resources to address
the issue. The Millennium Project is a team of employees, IBM consultants, and
other contractors whose progress is reviewed on a monthly basis by a steering
committee of Southern Company executives.
11-193
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Savannah Electric and Power Company 1998 Annual Report
The Company's Year 2000 program was divided into two phases. Phase I began
in 1996 and consisted of identifying and assessing corporate assets related to
software systems and devices that contain a computer chip or clock. The first
phase was completed in June 1997. Phase 2 consists of testing and remediating
high priority systems and devices. Also, contingency planning is included in
this phase. Completion of Phase 2 is targeted for June 1999. The Millennium
Project will continue to monitor the affected computer systems, devices, and
applications into the Year 2000.
Southern Company has completed more than 70 percent of the activities
contained in its work plan. The percentage of completion and projected
completion by function are as follows:
- - - - - - - -------------------------------------------------------------------------
Work Plan
------------------------------------------------
Remediation Project
Inventory Assessment Testing Completion
- - - - - - - -------------------------------------------------------------------------
Generation 100% 100% 70% 6/99
- - - - - - - -------------------------------------------------------------------------
Energy Management 100 100 90 6/99
- - - - - - - -------------------------------------------------------------------------
Transmission and
Distribution 100 100 100 1/99
- - - - - - - -------------------------------------------------------------------------
Telecommunications 100 100 50 6/99
- - - - - - - -------------------------------------------------------------------------
Corporate Applications 100 100 90 3/99
- - - - - - - ------------------------------------------------------------------------
Year 2000 Costs
Current projected total costs for Southern Company for Year 2000 readiness are
approximately $91 million, which includes $6 million of cost billed to
non-affiliated companies. These costs include labor necessary to identify, test,
and remediate affected devices and systems. From its inception through December
31, 1998, the Year 2000 program costs for Southern Company, recognized as
expense, amounted to $56 million. The Company's total estimated costs related to
the project are approximately $1.2 million. Year 2000 costs of $0.5 million and
$0.2 million were expensed in 1998 and 1997, respectively. The Company's
estimated cost of completion is $0.5 million.
Year 2000 Risks
The Company is implementing a detailed process to minimize the possibility of
service interruptions related to the Year 2000. The Company believes, based on
current tests, that the system can provide customers with electricity. These
tests increase confidence, but do not guarantee error-free operations. The
Company is taking what it believes to be prudent steps to prepare for the Year
2000, and it expects any interruptions in service that may occur within the
service territory to be isolated and short in duration.
The Company expects the risks associated with Year 2000 to be no more
severe than the scenarios that its electric system is routinely prepared to
handle. The most likely worst case scenario consists of the service loss of one
of the largest generating units and/or the service loss of any single bulk
transmission element in its service territory. The Company has followed a proven
methodology for identifying and assessing software and devices containing
potential Year 2000 challenges. Remediation and testing of those devices are in
progress. Following risk assessment, the Company is preparing contingency plans
as appropriate and is participating in North American Electric Reliability
Council-coordinated national drills during 1999.
The Company is currently reviewing the Year 2000 readiness of material
third parties that provide goods and services crucial to the Company's
operations. Among such critical third parties are fuel, transportation,
telecommunications, water, chemical, and other suppliers. Contingency plans
based on the assessment of each third party's ability to continue supplying
critical goods and services to the Company are being developed.
There is a potential for some earnings erosion caused by reduced electrical
demand by customers because of their own Year 2000 issues.
Year 2000 Contingency Plans
Because of experience with hurricanes and other storms, the Company is skilled
at developing and using contingency plans in unusual circumstances. As part of
Year 2000 business continuity and contingency planning, the Company is drawing
on that experience to make risk assessments and developing additional plans to
deal specifically with situations that could arise relative to Year 2000
challenges. The Company is identifying critical operational locations, and key
employees will be on duty at those locations during the Year 2000 transition. In
September 1999, drills are scheduled to be conducted to test contingency plans.
Because of the level of detail of the contingency planning process, management
feels that the contingency plans will keep any service interruptions that may
occur within the service territory isolated and short in duration.
11-194
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Savannah Electric and Power Company 1998 Annual Report
FINANCIAL CONDITION
Overview
The principal change in the Company's financial condition in 1998 was the
addition of $18.1 million to utility plant. The funds needed for gross property
additions are currently provided from operating activities, principally from
earnings and non-cash charges to income such as depreciation and deferred income
taxes and from financing activities. See Statements of Cash Flows for additional
information.
Capital Structure
As of December 31, 1998, the Company's capital structure consisted of 46.4
percent common stock equity, 10.5 percent trust preferred securities, and 43.1
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 48 percent, preferred securities at 10 percent and
debt at 42 percent.
In March 1998, the Company issued $30 million of Series A 6 5/8% senior
retail intermediate bonds maturing in 2015. The Company used these proceeds to
redeem the remaining amount of its 8.30% first mortgage bonds due in 2022.
Maturities and retirements of long-term debt were $30 million in 1998, $14
million in 1997, and $29 million in 1996.
In November 1998, the Company redeemed all of its 1,400,000 shares of 6.64%
Series Preferred Stock at a redemption price of $25 per share, plus accrued
dividends through the date of redemption.
In December 1998, Savannah Electric Capital Trust I, of which the Company
owns all of the common securities, issued $40 million of 6.85% mandatorily
redeemable preferred securities.
The composite interest rates and dividend rates for the years 1996 through
1998 as of year-end were as follows:
1998 1997 1996
-------------------------------
Composite interest rates
on long-term debt 6.5% 6.9% 7.0%
Preferred stock dividend rate -% 6.6% 6.6%
Trust preferred securities
dividend rate 6.9% -% -%
==================================================================
Capital Requirements for Construction
The Company's projected construction expenditures for the next three years total
$92 million ($29 million in 1999, $32 million in 2000, and $31 million in 2001).
Actual construction costs may vary from this estimate because of factors such as
changes in: business conditions; environmental regulations; load projections;
the cost and efficiency of construction labor, equipment and materials; and the
cost of capital. In addition, there can be no assurance that costs related to
capital expenditures will be fully recovered. In early 1999, the Company will
issue a Request for Proposal for bids to provide its capacity requirements for
2002. These bids will be compared to self-build options to identify the least
cost supply option. The supply decision should be made by late summer.
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
$31.9 million will be needed by the end of 2001 for maturities of long-term debt
and present sinking fund requirements.
11-195
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Savannah Electric and Power Company 1998 Annual Report
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--significantly affected
the Company and other subsidiaries of Southern Company. Specific reductions in
sulfur dioxide and nitrogen oxide emissions from fossil-fired generating plants
are required in two phases. Phase I compliance began in 1995 and initially
affected 28 generating units of Southern Company. As a result of Southern
Company's compliance strategy, an additional 22 generating units, which included
four of the Company's units, were brought into compliance with Phase I
requirements. Phase II compliance is required in 2000, and all fossil-fired
generating plants will be affected.
Southern Company achieved Phase I sulfur dioxide compliance at the affected
plants by switching to low-sulfur coal, which required some equipment upgrades.
This compliance strategy resulted in unused emission allowances being banked for
later use. Construction expenditures for Phase I compliance totaled
approximately $2 million for Savannah Electric.
For Phase II sulfur dioxide compliance, Southern Company could use emission
allowances, increase fuel switching, and/or install flue gas desulfurization
equipment at selected plants. Also, equipment to control nitrogen oxide
emissions will be installed on additional system fossil-fired plants as
necessary to meet Phase II limits. Current compliance strategy for Phase II and
ozone non-attainment could require total estimated construction expenditures for
Southern Company of approximately $70 million, of which $16 million remains to
be spent. Phase II compliance is not expected to have a material impact on
Savannah Electric.
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.
In July 1997, the Environmental Protection Agency (EPA) revised the
national ambient air quality standards for ozone and particulate matter. This
revision makes the standards significantly more stringent. In September 1998,
the EPA issued the final regional nitrogen oxide rules to the states for
implementation. The states have one year to adopt and implement the rules. The
final rules affect 22 states including Georgia. The EPA rules are being
challenged in the courts by several states and industry groups. Implementation
of the final state rules could require substantial further reductions in
nitrogen oxide emissions from fossil-fired generating facilities and other
industry in these states. Implementation of the standards could result in
significant additional compliance costs and capital expenditures that cannot be
determined until the results of legal challenges are known, and the states have
adopted their final rules.
The EPA and state environmental regulatory agencies are reviewing and
evaluating various other matters including: nitrogen oxide emission control
strategies for ozone non-attainment areas; additional controls for hazardous air
pollutant emissions; control strategies to reduce regional haze; and hazardous
waste disposal requirements. The impact of new standards will depend on the
development and implementation of applicable regulations.
The Company must comply with other environmental laws and regulations that
cover the handling and disposal of hazardous waste. Under these various laws and
regulations, the Company could incur substantial costs to clean up properties
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 Air Act; the
Clean Water Act; the Comprehensive Environmental Response, Compensation, and
Liability Act; the Resource Conservation and Recovery Act; the Toxic Substances
Control Act; and the Endangered Species Act. Changes to these laws could affect
many areas of Southern Company's operations. The full impact of any such changes
cannot be determined at this time.
Compliance with possible additional legislation related to global climate
change, electromagnetic fields, and other environmental and health concerns
could significantly affect Southern Company. The impact of new legislation--if
any--will depend on the subsequent development and implementation of applicable
regulations. In addition, the potential exists for liability as the result of
lawsuits alleging damages caused by electromagnetic fields.
11-196
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Savannah Electric and Power Company 1998 Annual Report
Sources of Capital
At December 31, 1998, the Company had $6.0 million of cash and $40.5 million of
unused short-term credit arrangements with banks to meet its short-term cash
needs. Revolving credit arrangements of $20 million, which expire December 31,
2001, are also used to meet short-term cash needs and to provide additional
interim funding for the Company's construction program. Of the revolving credit
arrangements, $20 million remained unused at December 31, 1998.
It is anticipated that the funds required for construction and other
purposes, including compliance with environmental regulation, will be derived
from sources similar to those used in the past. These sources were primarily
from the issuances of first mortgage bonds, other long-term debt, and preferred
stock, in addition to pollution control revenue bonds issued for the Company's
benefit by public authorities, to meet long-term external financing
requirements. Recently, the Company's financings have consisted of unsecured
debt and trust preferred securities. The Company is required to meet certain
earnings coverage requirements specified in its mortgage indenture and corporate
charter to issue new first mortgage bonds and preferred stock. The Company's
coverage ratios are sufficiently high to permit, at present interest rate
levels, any foreseeable security sales. In December 1998, the Company obtained
stockholder approval to amend the corporate charter including the elimination of
the restrictions on the amount of unsecured indebtedness allowed. The amount of
securities which the Company will be permitted to issue in the future will
depend upon market conditions and other factors prevailing at that time.
Cautionary Statement Regarding Forward-Looking Information
Savannah Electric and Power Company's 1998 Annual Report contains
forward-looking and historical information. The Company cautions that there are
various important factors that could cause actual results to differ materially
from those indicated in the forward-looking information; accordingly, there can
be no assurance that such indicated results will be realized. These factors
include legislative and regulatory initiatives regarding deregulation and
restructuring of the electric utility industry; the extent and timing of the
entry of additional competition in the Company's markets; potential business
strategies--including acquisitions or dispositions of assets or internal
restructuring--that may be pursued by the Company; state and federal rate
regulation; Year 2000 issues; changes in or application of environmental and
other laws and regulations to which the Company is subject; political, legal and
economic conditions and developments; financial market conditions and the
results of financing efforts; changes in commodity prices and interest rates;
weather and other natural phenomena; and other factors discussed in the
reports--including Form 10-K--filed from time to time by the Company with the
Securities and Exchange Commission.
11-197
<PAGE>
STATEMENTS OF INCOME
For the Years Ended December 31, 1998, 1997, and 1996
Savannah Electric and Power Company 1998 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C>
================================================================================================================================
1998 1997 1996
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Operating Revenues (Note 1):
Revenues $ 251,439 $ 224,225 $ 230,944
Revenues from affiliates 3,016 2,052 3,130
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 254,455 226,277 234,074
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 53,021 35,563 29,139
Purchased power from non-affiliates 9,460 2,347 2,350
Purchased power from affiliates 35,687 42,107 58,591
Other 49,055 47,735 44,007
Maintenance 18,711 13,236 14,140
Depreciation and amortization (Notes 1 and 3) 22,032 20,152 19,113
Taxes other than income taxes 12,342 11,494 11,675
Federal and state income taxes (Notes 1 and 6) 16,335 16,419 16,175
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 216,643 189,053 195,190
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Operating Income 37,812 37,224 38,884
Other Income (Expense):
Allowance for equity funds used during construction 83 239 317
Interest income 384 279 201
Other, net (1,781) (781) (1,756)
Income taxes applicable to other income (Notes 1 and 6) 1,234 1,233 1,034
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges 37,732 38,194 38,680
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Interest and Other Charges:
Interest on long-term debt 10,383 10,907 11,563
Allowance for debt funds used during construction (133) (164) (333)
Interest on notes payable 278 172 229
Amortization of debt discount, premium, and expense, net 853 739 579
Distributions on preferred securities of subsidiary trust 167 - -
Other interest charges 474 369 378
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Interest and other charges, net 12,022 12,023 12,416
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Net Income 25,710 26,171 26,264
Dividends on Preferred Stock 2,066 2,324 2,324
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 23,644 $ 23,847 $ 23,940
================================================================================================================================
STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31, 1998, 1997, and 1996
================================================================================================================================
1998 1997 1996
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Balance at Beginning of Year $ 112,720 $ 109,373 $ 105,033
Net income after dividends on preferred stock 23,644 23,847 23,940
Cash dividends on common stock (23,500) (20,500) (19,600)
Preferred stock transactions, net and other adjustments 90 - -
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Balance at End of Year (Note 9) $ 112,954 $ 112,720 $ 109,373
================================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
11-198
<PAGE>
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1998, 1997, and 1996
Savannah Electric and Power Company 1998 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C>
================================================================================================================================
1998 1997 1996
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Operating Activities:
Net income $ 25,710 $ 26,171 $ 26,264
Adjustments to reconcile net income to net
cash provided from operating activities --
Depreciation and amortization 23,531 21,083 20,246
Deferred income taxes and investment tax credits, net 7,011 3,841 7,482
Allowance for equity funds used during construction (83) (239) (317)
Other, net (6) (2,577) (641)
Changes in certain current assets and liabilities --
Receivables, net (9,969) (3,239) (641)
Inventories 705 1,720 410
Payables 470 (1,608) 4,242
Taxes accrued (434) 2,310 (569)
Other (4,331) 2,357 (4,038)
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 42,604 49,819 52,438
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (18,071) (18,846) (28,950)
Other 1,617 (1,418) (3,173)
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (16,454) (20,264) (32,123)
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Financing Activities and Capital Contributions:
Proceeds:
Preferred securities 40,000 - -
First mortgage bonds - - 20,000
Pollution control notes - 13,870 -
Other long-term debt 30,000 - 17,000
Retirements:
Preferred stock (35,000) - -
First mortgage bonds (30,000) - (29,400)
Pollution control bonds - (13,870) -
Other long-term debt (478) (433) (397)
Notes payable, net - (5,000) 1,000
Payment of preferred stock dividends (2,556) (2,324) (2,324)
Payment of common stock dividends (23,500) (20,500) (19,600)
Miscellaneous (4,798) (368) (2,257)
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (26,332) (28,625) (15,978)
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Net Change in Cash and Cash Equivalents (182) 930 4,337
Cash and Cash Equivalents at Beginning of Year 6,144 5,214 877
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 5,962 $ 6,144 $ 5,214
================================================================================================================================
Supplemental Cash Flow Information:
Cash paid during the year for-
Interest (net of amount capitalized) $12,198 $11,619 $12,960
Income taxes 9,666 11,150 10,926
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
( ) Denotes use of cash.
The accompanying notes are an integral part of these statements.
</TABLE>
11-199
<PAGE>
BALANCE SHEETS
At December 31, 1998 and 1997
Savannah Electric and Power Company 1998 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C>
============================================================================================================================
Assets 1998 1997
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------
(in thousands)
Utility Plant:
Plant in service, at original cost (Notes 1, 4, 5, and 8) $ 781,964 $ 760,694
Less accumulated provision for depreciation 341,930 321,509
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------
440,034 439,185
Construction work in progress 2,908 7,709
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------
Total 442,942 446,894
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------
Other Property and Investments 1,420 1,783
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 5,962 6,144
Special deposits - 94
Receivables-
Customer accounts receivable 18,030 21,148
Other accounts and notes receivable 3,543 720
Affiliated companies 1,388 1,128
Accumulated provision for uncollectible accounts (284) (354)
Fuel cost under recovery 17,628 7,694
Fossil fuel stock, at average cost 4,984 5,205
Materials and supplies, at average cost (Note 1) 6,496 6,980
Prepayments 4,772 5,922
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------
Total 62,519 54,681
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------
Deferred Charges and Other Assets:
Deferred charges related to income taxes (Note 6) 17,130 17,267
Debt issue expense, being amortized 3,554 2,255
Premium on reacquired debt, being amortized 8,570 7,121
Prepaid pension costs (Note 2) 3,281 3,424
Cash surrender value of life insurance for deferred compensation plans 14,179 12,130
Miscellaneous 2,204 1,797
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------
Total 48,918 43,994
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------
Total Assets $ 555,799 $ 547,352
============================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-200
<PAGE>
BALANCE SHEETS
At December 31, 1998 and 1997
Savannah Electric and Power Company 1998 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C>
============================================================================================================================
Capitalization and Liabilities 1998 1997
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------
(in thousands)
Capitalization (See accompanying statements):
Common stock equity $ 175,865 $ 175,631
Preferred stock - 35,000
Company obligated mandatorily redeemable preferred securities of
subsidiary trust holding company junior subordinated notes (Note 7) 40,000 -
Long-term debt 163,443 142,846
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------
Total 379,308 353,477
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Amount of securities due within one year (Note 8) 689 21,764
Accounts payable-
Affiliated companies 5,014 6,025
Other 10,833 7,862
Customer deposits 5,224 5,541
Taxes accrued-
Federal and state income 2,467 534
Other 2,891 2,791
Interest accrued 3,815 4,963
Vacation pay accrued 1,978 1,893
Miscellaneous 6,700 9,031
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------
Total 39,611 60,404
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes (Note 6) 82,778 80,697
Accumulated deferred investment tax credits (Note 6) 11,943 12,607
Deferred credits related to income taxes (Note 6) 21,349 21,469
Deferred compensation plans 9,788 9,272
Postretirement benefits (Note 2) 6,434 6,011
Miscellaneous 4,588 3,415
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------
Total 136,880 133,471
- - - - - - - ----------------------------------------------------------------------------------------------------------------------------
Commitments and Contingent Matters (Notes 1, 2, 3, 4, 5, and 8)
Total Capitalization and Liabilities $ 555,799 $ 547,352
============================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-201
<PAGE>
STATEMENTS OF CAPITALIZATION
At December 31, 1998 and 1997
Savannah Electric and Power Company 1998 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
================================================================================================================================
1998 1997 1998 1997
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
(in thousands) (percent of total)
Common Stock Equity (Note 9):
Common stock, par value $5 per share --
Authorized -- 16,000,000 shares
Outstanding -- 10,844,635 shares in
1998 and 1997 $ 54,223 $ 54,223
Paid-in capital 8,688 8,688
Retained earnings 112,954 112,720
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Total common stock equity 175,865 175,631 46.4 % 49.7 %
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Cumulative Preferred Stock (Note 7):
$25 par value --
Authorized -- 2,200,000 shares
6.64% Series -- Outstanding -- 1,400,000 shares
in 1997 - 35,000
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Total (annual dividend requirement -- $2,324,000) - 35,000 - 9.9
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Company Obligated Mandatorily Redeemable
Preferred Securities (Note 7):
$25 Liquidation Value -- 6.85% 40,000 -
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Total (annual distribution requirement -- $2,740,000) 40,000 - 10.5 -
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Long-Term Debt (Note 8):
First mortgage bonds --
Maturity Interest Rates
-------- --------------
July 1, 2003 6 3/8% 20,000 20,000
May 1, 2006 6.90% 20,000 20,000
July 1, 2022 8.30% - 30,000
July 1, 2023 7.40% 25,000 25,000
May 1, 2025 7 7/8% 15,000 15,000
Other long-term debt --
Pollution control revenue bonds --
Collateralized:
Variable rate (4.00% at 1/1/99) due 2016 4,085 4,085
Variable rate bank note (5.10% at 1/1/99) due 2037 13,870 13,870
Long-term notes payable --
6.88% due 2001 10,000 10,000
Variable rate (5.38% at 1/1/99) due 2001 10,000 15,000
Variable rate (5.77% at 1/1/99) due 2001 10,000 5,000
6 5/8% Retail Intermediate Bond due 2015 30,000 -
Capitalized lease obligations --
Coal unloading facility variable rate (5.80% at 1/1/99) 5,467 5,867
Transportation fleet 710 788
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Total long-term debt (annual interest
requirement -- $10,717,000) 164,132 164,610
Less amount due within one year (Note 8) 689 21,764
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Long-term debt excluding amount due within one year 163,443 142,846 43.1 40.4
- - - - - - - --------------------------------------------------------------------------------------------------------------------------------
Total Capitalization $ 379,308 $ 353,477 100.0 % 100.0 %
================================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-202
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Savannah Electric and Power Company 1998 Annual Report
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
General
Savannah Electric and Power Company (the Company), is a wholly owned subsidiary
of Southern Company, which is the parent company of five operating companies, a
system service company, Southern Communications Services (Southern LINC),
Southern Energy, Inc. (Southern Energy), Southern Nuclear Operating Company
(Southern Nuclear), Southern Company Energy Solutions, and other direct and
indirect subsidiaries. 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)
and/or the Securities and Exchange Commission. The system service company
provides, at cost, specialized services to Southern Company and subsidiary
companies. Southern LINC provides digital wireless communications services to
the operating companies and also markets these services to the public within the
Southeast. Worldwide, Southern Energy develops and manages electricity and other
energy related projects, including domestic energy trading and marketing.
Southern Nuclear provides services to Southern Company's nuclear power plants.
Southern Company Energy Solutions develops new business opportunities related to
energy products and services.
Southern Company is registered as a holding company under the Public
Utility Holding Company Act of 1935 (PUHCA). Both Southern Company and its
subsidiaries are subject to the regulatory provisions of the PUHCA. The Company
also is subject to regulation by the FERC and the Georgia Public Service
Commission (GPSC). The Company follows generally accepted accounting principles
and complies with the accounting policies and practices prescribed by the GPSC.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates, and the actual results may
differ from those estimates.
Certain prior years' data presented in the financial statements has been
reclassified to conform with the current year presentation.
Regulatory Assets and Liabilities
The Company is subject to the provisions of Financial Accounting Standards Board
(FASB) Statement No. 71, Accounting for the Effects of Certain Types of
Regulation. Regulatory assets represent probable future revenues to the Company
associated with certain costs that are expected to be recovered from customers
through the ratemaking process. Regulatory liabilities represent probable future
reductions in revenues associated with amounts that are expected to be credited
to customers through the ratemaking process. Regulatory assets and (liabilities)
reflected in the Balance Sheets at December 31 relate to:
1998 1997
---------------------------
(in thousands)
Deferred income taxes $ 17,130 $ 17,267
Premium on reacquired debt 8,570 7,121
Deferred income tax credits (21,349) (21,469)
Storm damage reserves (1,580) (1,500)
Accelerated depreciation (1,000) -
- - - - - - - ---------------------------------------------------------------
Total $ 1,771 $ 1,419
===============================================================
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 net regulatory assets and liabilities that are not
specifically recoverable through regulated rates. In addition, the Company would
be required to determine if any impairment to other assets exists, including
plant, and write down the assets, if impaired, to their fair value.
Revenues and Fuel Costs
The Company currently operates as a vertically integrated utility providing
electricity to retail customers within its traditional service area of
southeastern Georgia, and to non-affiliated customers in the Southeast.
Revenues, less affiliated transactions, by type of service were as follows:
1998 1997 1996
--------------------------------------
(in thousands)
Retail $242,327 $219,458 $227,982
Sales for resale--
Non-affiliates 4,548 3,467 1,998
Other 4,564 1,300 964
- - - - - - - ------------------------------------------------------------
Total $251,439 $224,225 $230,944
============================================================
Other revenues include rents and revenues from non-utility services.
II-203
<PAGE>
NOTES (continued)
Savannah Electric and Power Company 1998 Annual Report
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
costs, the energy component of purchased power costs, and certain other costs.
Revenues are adjusted for differences between recoverable fuel costs and amounts
actually recovered in current rates.
The Company has a diversified base of customers. No single customer or
industry comprises 10 percent or more of revenues. In 1998, uncollectible
accounts continued to average less than 1 percent of revenues.
In January 1999, the GPSC approved an increase of slightly over one-tenth of
a cent per kilowatt-hour in the Company's fuel allowance, effective in February
1999.
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 1998 and 1997 and 2.8 percent in 1996. When property subject to
depreciation is retired or otherwise disposed of in the normal course of
business, its cost--together with the cost of removal, less salvage--is charged
to the accumulated provision for depreciation. Minor items of property included
in the original cost of the plant are retired when the related property unit is
retired. Depreciation expense includes an amount for the expected cost of
removal of certain facilities. See Note 3 to the financial statements for more
information.
Income Taxes
The Company, which is included in the consolidated federal income tax return
filed by Southern Company, uses the liability method of accounting for deferred
income taxes and provides deferred income taxes for all significant income tax
temporary differences. Investment tax credits utilized are deferred and
amortized to income over the average lives of the related property.
Allowance for Funds Used During Construction
(AFUDC)
AFUDC represents the estimated debt and equity costs of capital funds that are
necessary to finance the construction of new facilities. While cash is not
realized currently from such allowance, it increases the revenue requirement
over the service life of the plant through a higher rate base and higher
depreciation expense. The composite rates used by the Company to calculate AFUDC
were 8.00 percent in 1998, 9.24 percent in 1997 and 8.69 percent in 1996.
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 AFUDC.
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 financial statements, temporary cash investments are
considered cash equivalents. Temporary cash investments are securities with
original maturities of 90 days or less.
Financial Instruments
The Company's financial instruments for which the carrying amounts did not equal
fair value at December 31 were as follows:
Carrying Fair
Amount Value
--------------------------
(in millions)
Long-term debt:
At December 31, 1998 $158 $162
At December 31, 1997 158 161
Trust preferred securities:
At December 31, 1998 $40 $40
At December 31, 1997 - -
The fair values for long-term debt and preferred securities were based on
either closing market prices or closing prices of comparable instruments.
II-204
<PAGE>
NOTES (continued)
Savannah Electric and Power Company 1998 Annual Report
Materials and Supplies
Generally, materials and supplies include the costs of transmission,
distribution, and generating plant materials. Materials are charged to inventory
when purchased and then expensed or capitalized to plant, as appropriate, when
installed.
2. RETIREMENT BENEFITS
The Company has defined benefit, trusteed, non-contributory pension plans that
cover substantially all employees. The Company provides certain medical care and
life insurance benefits for retired employees. Substantially all these employees
may become eligible for such benefits when they retire. The Company funds trusts
to the extent deductible under federal income tax regulations or to the extent
required by the GPSC. In 1998, the Company adopted FASB Statement No. 132,
Employers' Disclosure about Pensions and Other Postretirement Benefits. The
measurement date is September 30 of each year.
The weighted average rates assumed in the actuarial calculations for both
the pension plans and postretirement benefit plans were:
1998 1997
- - - - - - - ---------------------------------------------------------------
Discount 6.75% 7.50%
Annual salary increase 4.25 5.00
Long-term return on plan assets 8.50 8.50
- - - - - - - ---------------------------------------------------------------
Pension Plan
Changes during the year in the projected benefit obligations and in the fair
value of plan assets were as follows:
Projected
Benefit Obligations
---------------------------
1998 1997
- - - - - - - ---------------------------------------------------------------
(in thousands)
Balance at beginning of year $51,720 $49,914
Service cost 1,495 1,393
Interest cost 3,806 3,556
Benefits paid (3,392) (2,403)
Actuarial (gain) loss and
employee transfers 4,343 (740)
Amendments 1,235 -
- - - - - - - ---------------------------------------------------------------
Balance at end of year $59,207 $51,720
===============================================================
Plan Assets
---------------------------
1998 1997
- - - - - - - ---------------------------------------------------------------
(in thousands)
Balance at beginning of year $50,630 $42,430
Actual return on plan assets 171 7,603
Employer contributions 2,464 3,000
Benefits paid (3,392) (2,403)
Employee transfers (243) -
- - - - - - - ---------------------------------------------------------------
Balance at end of year $49,630 $50,630
===============================================================
The accrued pension costs recognized in the Balance Sheets were as
follows:
1998 1997
- - - - - - - -----------------------------------------------------------------
(in thousands)
Funded status $(9,577) $(1,090)
Unrecognized transition
obligation 266 355
Unrecognized prior service cost 2,874 1,884
Unrecognized net loss 9,718 1,275
Fourth quarter contributions - 1,000
- - - - - - - -----------------------------------------------------------------
Prepaid asset recognized in
the Balance Sheets $ 3,281 $ 3,424
=================================================================
Components of the plans' net periodic cost were as follows:
1998 1997 1996
- - - - - - - -----------------------------------------------------------------
(in thousands)
Service cost $1,495 $1,393 $1,352
Interest cost 3,806 3,556 3,389
Expected return on plan
assets (3,992) (3,782) (3,263)
Recognized net loss 2 475 626
Net amortization 334 280 224
- - - - - - - -----------------------------------------------------------------
Net pension cost $1,645 $1,922 $2,328
=================================================================
II-205
<PAGE>
NOTES (continued)
Savannah Electric and Power Company 1998 Annual Report
Postretirement Benefits
Changes during the year in the projected benefit obligations and in the fair
value of plan assets were as follows:
Projected
Benefit Obligations
---------------------------
1998 1997
- - - - - - - ---------------------------------------------------------------
(in thousands)
Balance at beginning of year $20,899 $20,520
Service cost 348 319
Interest cost 1,527 1,499
Benefits paid (839) (526)
Actuarial (gain) loss and
employee transfers 1,621 (913)
- - - - - - - ---------------------------------------------------------------
Balance at end of year $23,556 $20,899
===============================================================
Plan Assets
---------------------------
1998 1997
- - - - - - - ---------------------------------------------------------------
(in thousands)
Balance at beginning of year $3,110 $2,473
Actual return on plan assets 85 365
Employer contributions 1,447 798
Benefits paid (839) (526)
- - - - - - - ---------------------------------------------------------------
Balance at end of year $3,803 $3,110
===============================================================
The accrued postretirement costs recognized in the Balance Sheets were
as follows:
1998 1997
- - - - - - - -----------------------------------------------------------------
(in thousands)
Funded status $(19,753) $(17,789)
Unrecognized transition
obligation 6,913 7,407
Unrecognized net loss 5,444 3,737
Fourth quarter contributions 1,152 749
- - - - - - - -----------------------------------------------------------------
Accrued liability recognized in
the Balance Sheets $ (6,244) $(5,896)
=================================================================
Components of the plans' net periodic cost were as follows:
1998 1997 1996
- - - - - - - ----------------------------------------------------------------
(in thousands)
Service cost $ 348 $ 319 $ 360
Interest cost 1,528 1,499 1,422
Expected return on plan assets (276) (211) (129)
Recognized net loss 104 125 171
Net amortization 494 494 494
- - - - - - - -----------------------------------------------------------------
Net postretirement cost $2,198 $2,226 $2,318
================================================================
An additional assumption used in measuring the accumulated postretirement
benefit obligations was a weighted average medical care cost trend rate of 8.30
percent for 1998, decreasing gradually to 4.75 percent through the year 2005,
and remaining at that level thereafter. An annual increase or decrease in the
assumed medical care cost trend rate of 1 percent would affect the accumulated
benefit obligation and the service and interest cost components at December 31,
1998 as follows:
1 Percent 1 Percent
Increase Decrease
- - - - - - - ---------------------------------------------------------------
(in thousands)
Benefit obligation $1,301 $(1,227)
Service and interest costs 107 (101)
===============================================================
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 were $0.4 million for 1998, 1997 and 1996.
Work Force Reduction Program
In 1997, the Company incurred a $1.9 million, one-time charge to other operation
expense for costs related to the implementation of a work force reduction
program.
II-206
<PAGE>
NOTES (continued)
Savannah Electric and Power Company 1998 Annual Report
3. REGULATORY MATTERS
Rates to retail customers served by the Company are regulated by the GPSC. As
part of the Company's rate settlement in 1992, it was informally agreed that the
Company's earned rate of return on common equity should be 12.95 percent.
In June 1998, the GPSC approved a four-year accounting order for the
Company. Under this order, the Company will reduce the electric rates of its
small business customers by approximately $11 million over the next four years.
The Company will also expense an additional $1.95 million in storm damage
accruals and accrue an additional $8 million in depreciation on generating
assets over the term of the order. The additional depreciation will be
accumulated in a regulatory liability account to be available to mitigate any
potential stranded costs. In addition, the Company has discretionary authority
to provide up to an additional $0.3 million per year in storm damage accruals
and up to an additional $4.0 million in depreciation expense over the four
years. The Company is also precluded from asking for a rate increase except upon
significant changes in economic conditions, new laws, or regulations. There will
be a quarterly monitoring of the Company's earnings performance.
4. CONSTRUCTION PROGRAM
The Company is engaged in a continuous construction program, currently estimated
to total $29 million in 1999, $32 million in 2000, and $31 million in 2001. The
construction program is subject to periodic review and revision, and actual
construction costs may vary from the above estimates because of numerous
factors. These factors include: changes in business conditions; revised load
growth estimates; changes in environmental regulations; increasing costs of
labor, equipment, and materials; and changes in cost of capital. The Company
does not have any traditional baseload generating plants under construction.
However, construction related to transmission and distribution facilities and
the upgrading of generating plants will continue.
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, preferred securities, and capital contributions from Southern Company.
The amounts of long-term debt and preferred securities that can be issued
in the future will be contingent on market conditions, the maintenance of
adequate earnings levels, regulatory authorizations, and other factors.
Bank Credit Arrangements
At the end of 1998, unused credit arrangements with six banks totaled $40.5
million and expire at various times during 1999 and 2000.
The Company's revolving credit arrangements of $20 million, all of which
remained unused as of December 31, 1998, expire December 31, 2001. These
agreements allow short-term borrowings to be converted into term loans, payable
in 12 equal quarterly installments, with the first installment due at the end of
the first calendar quarter after the applicable termination date or at an
earlier date at the Company's option.
In connection with these credit arrangements, the Company agrees to pay
commitment fees based on the unused portions of the commitments.
Assets Subject to Lien
As amended and supplemented, the Company's Indenture of Mortgage, which secures
the first mortgage bonds issued by the Company, constitutes a direct first lien
on substantially all of the Company's fixed property and franchises. A second
lien for $10 million of bank debt is secured by a portion of the Plant Kraft
property and a second lien for $34 million in bank notes is secured by a portion
of the Plant McIntosh property.
II-207
<PAGE>
NOTES (continued)
Savannah Electric and Power Company 1998 Annual Report
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. The Company has fuel
commitments of $12.0 million and $9.0 million for 1999 and 2000, respectively.
Operating Leases
The Company has rental agreements with various terms and expiration dates.
Rental expenses totaled $1.1 million for 1998, $1.2 million for 1997, and $1.6
million for 1996. The Company entered into a 22.5 year lease agreement effective
December 1, 1995 for 100 new aluminum rail cars at an annual cost of
approximately $0.5 million. The rail cars are used to transport coal to one of
the Company's generating plants.
At December 31, 1998, estimated future minimum lease payments for
noncancelable operating leases were as follows:
Rental Commitments
--------------------
(in thousands)
1999 $ 483
2000 483
2001 483
2002 483
2003 483
2004 and thereafter 6,969
- - - - - - - -------------------------------------------------------------
6. INCOME TAXES
At December 31, 1998, tax-related regulatory assets and liabilities were $17
million and $21 million, respectively. 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 income tax provisions are as follows:
1998 1997 1996
--------------------------------
(in thousands)
Total provision for income taxes
Federal --
Currently payable $ 6,763 $ 9,743 $ 7,084
Deferred -- current year 8,377 4,522 8,216
-- reversal of
prior years (2,565) (1,381) (1,989)
- - - - - - - ------------------------------------------------------------------
12,575 12,884 13,311
- - - - - - - ------------------------------------------------------------------
State --
Currently payable 1,327 1,603 575
Deferred -- current year 1,174 569 1,216
-- reversal of
prior years 25 130 39
- - - - - - - ------------------------------------------------------------------
2,526 2,302 1,830
- - - - - - - ------------------------------------------------------------------
Total 15,101 15,186 15,141
Less income taxes credited
to other income (1,234) (1,233) (1,034)
- - - - - - - ------------------------------------------------------------------
Total income taxes
charged to operations $16,335 $16,419 $16,175
==================================================================
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:
1998 1997
--------------------
Deferred tax liabilities: (in thousands)
Accelerated depreciation $75,187 $72,663
Property basis differences 7,591 8,034
Other 10,187 5,850
- - - - - - - ----------------------------------------------------------------
Total 92,965 86,547
- - - - - - - ----------------------------------------------------------------
Deferred tax assets:
Pension and other benefits 4,892 5,338
Other 2,828 2,957
- - - - - - - ----------------------------------------------------------------
Total 7,720 8,295
- - - - - - - ----------------------------------------------------------------
Net deferred tax liabilities 85,245 78,252
Portions included in current assets, net (2,467) 2,445
- - - - - - - ----------------------------------------------------------------
Accumulated deferred income taxes
in the Balance Sheets $82,778 $80,697
================================================================
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 1998, 1997, and 1996. At December 31, 1998, all
investment tax credits available to reduce federal income taxes payable had been
utilized.
II-208
<PAGE>
NOTES (continued)
Savannah Electric and Power Company 1998 Annual Report
A reconciliation of the federal statutory income tax rate to the effective
income tax rate is as follows:
1998 1997 1996
---------------------------
Federal statutory tax rate 35% 35% 35%
State income tax, net of
federal income tax benefit 4 4 3
Other (2) (2) (1)
--------------------------------------------------------------
Effective income tax rate 37% 37% 37%
==============================================================
Southern Company files a consolidated federal income tax return. Under a
joint consolidated income tax agreement, each subsidiary's current and deferred
tax expense is computed on a stand-alone basis. Tax benefits from losses of the
parent company are allocated to each subsidiary based on the ratio of taxable
income to total consolidated taxable income.
7. CUMULATIVE PREFERRED STOCK AND
TRUST PREFERRED SECURITIES
In November 1998, the Company redeemed all of its 1,400,000 shares of 6.64%
Series Preferred Stock at a redemption price of $25 per share, plus accrued
dividends through the date of redemption.
In December 1998, Savannah Electric Capital Trust I, of which the Company
owns all of the common securities, issued $40 million of 6.85% mandatorily
redeemable preferred securities. Substantially all of the assets of Trust I are
$40 million aggregate principal amount of the Company's 6.85% junior
subordinated notes due December 31, 2028.
The Company considers that the mechanisms and obligations relating to the
preferred securities, taken together, constitute a full and unconditional
guarantee by the Company of payment obligations with respect to the preferred
securities of Savannah Electric Capital Trust I.
Savannah Electric Capital Trust I is a subsidiary of the Company, and
accordingly is consolidated in the Company's financial statements.
8. LONG-TERM DEBT AND LONG-TERM DEBT
DUE WITHIN ONE YEAR
The Company's Indenture related to its First Mortgage Bonds is unlimited as to
the authorized amount of bonds which may be issued, provided that required
property additions, earnings and other provisions of such Indenture are met.
In March 1998, the Company issued $30 million of Series A 6 5/8% senior
retail intermediate bonds maturing in 2015. The Company used these proceeds to
redeem the remaining amount of its 8.30% first mortgage bonds due in 2022.
Maturities and retirements of long-term debt were $30 million in 1998, $14
million in 1997 and $29 million in 1996.
In April 1997, the Company issued $14 million in variable rate pollution
control obligations (bank note) maturing in 2037. The Company redeemed all of
its remaining outstanding 6 3/4% Pollution Control Bonds due 2022.
Assets acquired under capital leases are recorded as utility plant in
service, and the related obligation is classified as other long-term debt.
Leases are capitalized at the net present value of the future lease payments.
However, for ratemaking purposes, these obligations are treated as operating
leases, and as such, lease payments are charged to expense as incurred.
A summary of the sinking fund requirements and scheduled maturities and
redemptions of long-term debt due within one year at December 31 is as follows:
1998 1997
---------------------
(in thousands)
Bond sinking fund requirement $800 $ 1,100
Less:
Portion to be satisfied by
certifying property additions 800 -
- - - - - - - -------------------------------------------------------------------
Cash sinking fund requirement - 1,100
Other long-term debt maturities 689 20,664
- - - - - - - -------------------------------------------------------------------
Total $689 $21,764
===================================================================
II-209
<PAGE>
NOTES (continued)
Savannah Electric and Power Company 1998 Annual Report
The first mortgage bond improvement (sinking) fund requirements amount to 1
percent of each outstanding series of bonds authenticated under the Indenture
prior to January 1 of each year, other than those issued to collateralize
pollution control and other obligations. The requirements may be satisfied by
depositing cash or reacquiring bonds, or by pledging additional property equal
to 1 2/3 times the requirements.
The sinking fund requirements of first mortgage bonds were satisfied by
cash redemption in 1998 and by certifying property additions in 1997. It is
anticipated that the 1999 requirement will be satisfied by certifying property
additions. Sinking fund requirements and/or maturities through 2003 applicable
to long-term debt are as follows: $0.7 million in 1999; $0.6 million in 2000;
$30.5 million in 2001; $0.5 million in 2002; and $20.4 million in 2003.
9. COMMON STOCK DIVIDEND RESTRICTIONS
The Company's Indenture contains certain limitations on the payment of cash
dividends on common stock. At December 31, 1998, approximately $68 million of
retained earnings was restricted against the payment of cash dividends on common
stock under the terms of the Indenture.
10. QUARTERLY FINANCIAL INFORMATION
(Unaudited)
Summarized quarterly financial data for 1998 and 1997 are as follows (in
thousands):
Net Income After
Operating Operating Dividends on
Quarter Ended Revenues Income Preferred Stock
- - - - - - - ------------------------------------------------------------------
March 1998 $48,381 $ 6,214 $ 2,426
June 1998 69,616 11,606 7,807
September 1998 84,224 16,056 12,518
December 1998 52,234 3,936 893
March 1997 $42,945 $ 6,117 $ 2,545
June 1997 52,516 8,626 5,136
September 1997 79,900 17,531 14,276
December 1997 50,916 4,950 1,890
- - - - - - - ------------------------------------------------------------------
The Company's business is influenced by seasonal weather conditions and a
seasonal rate structure, among other factors.
II-210
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
Savannah Electric and Power Company 1998 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
=========================================================================================================================
1998 1997 1996 1995
- - - - - - - -------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $254,455 $226,277 $234,074 $225,729
Net Income after Dividends
on Preferred and Preference Stocks (in thousands) $23,644 $23,847 $23,940 $23,395
Cash Dividends on Common Stock (in thousands) $23,500 $20,500 $19,600 $17,600
Return on Average Common Equity (percent) 13.45 13.71 14.08 14.20
Total Assets (in thousands) $555,799 $547,352 $544,900 $524,662
Gross Property Additions (in thousands) $18,071 $18,846 $28,950 $26,503
- - - - - - - -------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $175,865 $175,631 $172,284 $167,812
Preferred stock - 35,000 35,000 35,000
Preferred and preference stock subject
to mandatory redemption - - - -
Trust preferred securities 40,000 - - -
Long-term debt 163,443 142,846 164,406 153,679
- - - - - - - -------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $379,308 $353,477 $371,690 $356,491
=========================================================================================================================
Capitalization Ratios (percent):
Common stock equity 46.4 49.7 46.4 47.1
Preferred and preference stock - 9.9 9.4 9.8
Trust preferred securities 10.5 - - -
Long-term debt 43.1 40.4 44.2 43.1
- - - - - - - -------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0 100.0
=========================================================================================================================
First Mortgage Bonds (in thousands):
Issued - - 20,000 15,000
Retired 30,000 - 29,400 29,250
Preferred Stock and Preferred Securities (in thousands):
Issued 40,000 - - -
Retired 35,000 - - -
- - - - - - - -------------------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1 A1 A1
Standard and Poor's AA- AA- A+ A+
Preferred Stock -
Moody's "a2" "a2" "a2" "a2"
Standard and Poor's A A A A
- - - - - - - -------------------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 110,437 109,092 106,657 104,624
Commercial 15,328 14,233 13,877 13,339
Industrial 63 64 65 65
Other 377 1,129 1,097 1,048
- - - - - - - -------------------------------------------------------------------------------------------------------------------------
Total 126,205 124,518 121,696 119,076
=========================================================================================================================
Employees (year-end) 542 535 571 584
</TABLE>
II-211
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Savannah Electric and Power Company 1998 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
=============================================================================================================================
1994 1993 1992 1991
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $211,785 $218,442 $197,761 $189,646
Net Income after Dividends
on Preferred and Preference Stocks (in thousands) $22,110 $21,459 $20,512 $24,030
Cash Dividends on Common Stock (in thousands) $16,300 $21,000 $22,000 $22,000
Return on Average Common Equity (percent) 14.00 13.73 12.89 15.13
Total Assets (in thousands) $518,305 $527,187 $352,175 $352,505
Gross Property Additions (in thousands) $30,078 $72,858 $30,132 $19,478
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $161,581 $154,269 $158,376 $159,841
Preferred stock 35,000 35,000 20,000 20,000
Preferred and preference stock subject
to mandatory redemption - - - -
Trust preferred securities - - - -
Long-term debt 155,922 151,338 110,767 119,280
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $352,503 $340,607 $289,143 $299,121
=============================================================================================================================
Capitalization Ratios (percent):
Common stock equity 45.8 45.3 54.8 53.4
Preferred and preference stock 9.9 10.3 6.9 6.7
Trust preferred securities - - - -
Long-term debt 44.3 44.4 38.3 39.9
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0 100.0
=============================================================================================================================
First Mortgage Bonds (in thousands):
Issued - 45,000 30,000 30,000
Retired 5,065 - 38,750 22,500
Preferred Stock and Preferred Securities (in thousands):
Issued - 35,000 - -
Retired - 20,000 - -
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1 A1 A1
Standard and Poor's A A A A
Preferred Stock -
Moody's "a2" "a2" "a2" "a2"
Standard and Poor's A- A- A- A-
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 103,199 101,032 99,164 97,446
Commercial 13,015 12,702 12,416 12,153
Industrial 65 69 73 73
Other 1,007 957 940 897
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------
Total 117,286 114,760 112,593 110,569
=============================================================================================================================
Employees (year-end) 616 665 688 672
</TABLE>
II-212A
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Savannah Electric and Power Company 1998 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C>
===============================================================================================================================
1990 1989 1988
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $205,635 $201,799 $182,440
Net Income after Dividends
on Preferred and Preference Stocks (in thousands) $26,254 $25,535 $24,272
Cash Dividends on Common Stock (in thousands) $22,000 $20,000 $11,700
Return on Average Common Equity (percent) 16.85 16.88 17.03
Total Assets (in thousands) $340,050 $349,887 $347,051
Gross Property Additions (in thousands) $20,086 $18,831 $23,254
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $157,811 $153,737 $148,883
Preferred stock 20,000 22,300 22,300
Preferred and preference stock subject
to mandatory redemption - 2,884 3,075
Trust preferred securities - - -
Long-term debt 112,377 117,522 98,285
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $290,188 $296,443 $272,543
===============================================================================================================================
Capitalization Ratios (percent):
Common stock equity 54.4 51.9 54.6
Preferred and preference stock 6.9 8.5 9.3
Trust preferred securities - - -
Long-term debt 38.7 39.6 36.1
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
===============================================================================================================================
First Mortgage Bonds (in thousands):
Issued - 30,000 -
Retired 9,135 18,275 12,231
Preferred Stock and Preferred Securities (in thousands):
Issued - - 20,000
Retired 5,374 6,591 553
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
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- BBB+
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 96,452 94,766 93,486
Commercial 12,045 12,298 12,135
Industrial 76 69 69
Other 867 856 828
- - - - - - - -------------------------------------------------------------------------------------------------------------------------------
Total 109,440 107,989 106,518
===============================================================================================================================
Employees (year-end) 648 643 655
</TABLE>
II-212B
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Savannah Electric and Power Company 1998 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
=================================================================================================================================
1998 1997 1996 1995
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $109,393 $96,587 $101,607 $95,208
Commercial 86,231 78,949 80,494 75,117
Industrial 37,865 35,301 37,077 36,040
Other 8,838 8,621 8,804 8,386
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------------
Total retail 242,327 219,458 227,982 214,751
Sales for resale - non-affiliates 4,548 3,467 1,998 1,851
Sales for resale - affiliates 3,016 2,052 3,130 7,200
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 249,891 224,977 233,110 223,802
Other revenues 4,564 1,300 964 1,927
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------------
Total $254,455 $226,277 $234,074 $225,729
=================================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 1,539,792 1,428,337 1,456,651 1,402,148
Commercial 1,236,337 1,156,078 1,141,218 1,099,570
Industrial 900,012 881,261 838,753 887,141
Other 131,142 124,490 126,215 126,057
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------------
Total retail 3,807,283 3,590,166 3,562,837 3,514,916
Sales for resale - non-affiliates 53,294 94,280 91,610 87,747
Sales for resale - affiliates 58,415 54,509 41,808 63,731
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------------
Total 3,918,992 3,738,955 3,696,255 3,666,394
=================================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 7.10 6.76 6.98 6.79
Commercial 6.97 6.83 7.05 6.83
Industrial 4.21 4.01 4.42 4.06
Total retail 6.36 6.11 6.40 6.11
Sale for resale 6.77 3.71 3.84 5.98
Total sales 6.38 6.02 6.31 6.10
Residential Average Annual Kilowatt-Hour Use Per Customer 14,061 13,231 13,771 13,478
Residential Average Annual Revenue Per Customer $998.95 $894.73 $960.58 $915.15
Plant Nameplate Capacity Ratings (year-end) (megawatts) 788 788 788 788
Maximum Peak-Hour Demand (megawatts):
Winter 582 625 666 630
Summer 846 802 811 811
Annual Load Factor (percent) 54.9 54.3 53.1 52.9
Plant Availability - Fossil-Steam (percent) 72.9 93.7 77.6 83.3
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 41.6 34.4 27.7 23.9
Oil and gas 12.9 5.2 3.1 5.9
Purchased power -
From non-affiliates 3.4 1.4 2.1 2.3
From affiliates 42.1 59.0 67.1 67.9
- - - - - - - ---------------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0 100.0
=================================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 11,730 11,495 11,888 12,146
Cost of fuel per million BTU (cents) 198.75 197.19 203.36 179.25
Average cost of fuel per net kilowatt-hour generated (cents) 2.33 2.27 2.42 2.18
=================================================================================================================================
</TABLE>
II-213
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Savannah Electric and Power Company 1998 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
===================================================================================================================================
1994 1993 1992 1991
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $89,195 $93,883 $82,670 $80,541
Commercial 71,227 71,320 64,756 61,827
Industrial 32,906 36,180 33,171 30,492
Other 7,946 7,810 7,095 6,561
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Total retail 201,274 209,193 187,692 179,421
Sales for resale - non-affiliates 4,786 6,021 7,821 7,813
Sales for resale - affiliates 6,446 2,433 1,505 1,430
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 212,506 217,647 197,018 188,664
Other revenues (721) 795 743 982
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Total $211,785 $218,442 $197,761 $189,646
===================================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 1,298,122 1,329,362 1,216,993 1,195,005
Commercial 1,045,831 1,015,935 953,840 925,757
Industrial 799,543 854,324 861,121 825,862
Other 119,593 115,969 110,270 106,683
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Total retail 3,263,089 3,315,590 3,142,224 3,053,307
Sales for resale - non-affiliates 201,716 247,203 367,066 372,085
Sales for resale - affiliates 93,001 75,384 37,632 32,581
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Total 3,557,806 3,638,177 3,546,922 3,457,973
===================================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.87 7.06 6.79 6.74
Commercial 6.81 7.02 6.79 6.68
Industrial 4.12 4.23 3.85 3.69
Total retail 6.17 6.31 5.97 5.88
Sale for resale 3.81 2.62 2.30 2.28
Total sales 5.97 5.98 5.55 5.46
Residential Average Annual Kilowatt-Hour Use Per Customer 12,686 13,269 12,369 12,323
Residential Average Annual Revenue Per Customer $871.68 $937.07 $840.23 $830.54
Plant Nameplate Capacity Ratings (year-end) (megawatts) 788 628 628 605
Maximum Peak-Hour Demand (megawatts):
Winter 617 524 533 526
Summer 729 747 695 691
Annual Load Factor (percent) 54.3 54.1 55.0 54.1
Plant Availability - Fossil-Steam (percent) 81.0 90.2 89.1 76.9
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 18.6 21.5 12.0 16.3
Oil and gas 1.8 4.5 2.9 1.7
Purchased power -
From non-affiliates 1.5 0.9 1.0 0.4
From affiliates 78.1 73.1 84.1 81.6
- - - - - - - -----------------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0 100.0
===================================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 11,786 11,515 12,547 10,917
Cost of fuel per million BTU (cents) 205.03 215.97 201.50 199.42
Average cost of fuel per net kilowatt-hour generated (cents) 2.42 2.49 2.53 2.18
===================================================================================================================================
</TABLE>
II-214A
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Savannah Electric and Power Company 1998 Annual Report
<TABLE>
<CAPTION>
<S> <C> <C> <C>
==================================================================================================================
1990 1989 1988
- - - - - - - -------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $87,063 $85,113 $81,098
Commercial 65,462 65,474 62,640
Industrial 30,237 28,304 26,865
Other 6,782 6,892 6,557
- - - - - - - -------------------------------------------------------------------------------------------------------------------
Total retail 189,544 185,783 177,160
Sales for resale - non-affiliates 9,482 8,814 808
Sales for resale - affiliates 5,566 6,025 3,567
- - - - - - - -------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 204,592 200,622 181,535
Other revenues 1,043 1,177 905
- - - - - - - -------------------------------------------------------------------------------------------------------------------
Total $205,635 $201,799 $182,440
===================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 1,183,486 1,109,976 1,067,411
Commercial 892,931 839,756 806,687
Industrial 644,704 561,063 533,604
Other 103,539 101,164 97,072
- - - - - - - -------------------------------------------------------------------------------------------------------------------
Total retail 2,824,660 2,611,959 2,504,774
Sales for resale - non-affiliates 441,090 437,943 24,168
Sales for resale - affiliates 294,042 303,142 156,106
- - - - - - - -------------------------------------------------------------------------------------------------------------------
Total 3,559,792 3,353,044 2,685,048
===================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 7.36 7.67 7.60
Commercial 7.33 7.80 7.77
Industrial 4.69 5.04 5.03
Total retail 6.71 7.11 7.07
Sale for resale 2.05 2.00 2.43
Total sales 5.75 5.98 6.76
Residential Average Annual Kilowatt-Hour Use Per Customer 12,339 11,781 11,489
Residential Average Annual Revenue Per Customer $907.68 $903.37 $872.87
Plant Nameplate Capacity Ratings (year-end) (megawatts) 605 605 605
Maximum Peak-Hour Demand (megawatts):
Winter 428 548 471
Summer 648 613 574
Annual Load Factor (percent) 53.2 52.4 53.4
Plant Availability - Fossil-Steam (percent) 89.6 94.7 77.1
- - - - - - - -------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 52.8 63.5 79.8
Oil and gas 3.4 1.4 5.4
Purchased power -
From non-affiliates 0.8 1.5 5.9
From affiliates 43.0 33.6 8.9
- - - - - - - -------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
===================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,741 10,611 10,683
Cost of fuel per million BTU (cents) 188.18 180.48 178.31
Average cost of fuel per net kilowatt-hour generated (cents) 2.02 1.92 1.90
===================================================================================================================
</TABLE>
II-214B
<PAGE>
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 1999
annual meeting of stockholders. The ages of directors and executive officers in
Item 10 set forth below are as of December 31, 1998.
Item 10. DIRECTORS AND EXECUTIVE
OFFICERS OF THE REGISTRANTS
ALABAMA
Identification of directors of ALABAMA.
Elmer B. Harris (1)
President and Chief Executive Officer
Age 59
Served as Director since 3-1-89
Whit Armstrong (2)
Age 51
Served as Director since 9-24-82
David J. Cooper, Sr. (2)
Age 53
Served as Director since 4-24-98
A. W. Dahlberg (2)
Age 58
Served as Director since 4-22-94
Peter V. Gregerson, Sr. (2)
Age 70
Served as Director since 10-22-93
Carl E. Jones, Jr. (2)
Age 58
Served as Director since 4-22-88
Patricia M. King (2)
Age 53
Served as Director since 7-25-97
James K. Lowder (2)
Age 49
Served as Director since 7-25-97
Wallace D. Malone, Jr. (2)
Age 62
Served as Director since 6-22-90
Thomas C. Meredith (2)
Age 57
Served as Director since 10-23-98
William V. Muse (2)
Age 59
Served as Director since 2-26-93
John T. Porter (2)
Age 67
Served as Director since 10-22-93
Robert D. Powers (2)
Age 48
Served as Director since 1-24-92
Andreas Renschler (2)
Age 40
Served as Director since 1-23-98
C. Dowd Ritter (2)
Age 51
Served as Director since 7-25-97
William J. Rushton, III (2)
Age 69
Served as Director since 9-18-70
James H. Sanford (2)
Age 54
Served as Director since 8-1-83
John C. Webb, IV (2)
Age 56
Served as Director since 4-22-77
(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 24, 1998) for one
year until the next annual meeting or until a successor is elected and
qualified, except for Dr. Meredith, who was elected on the date indicated.
III-1
<PAGE>
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.
Identification of executive officers of ALABAMA.
Elmer B. Harris (1)
President, Chief Executive Officer and Director
Age 59
Served as Executive Officer since 3-1-89
Banks H. Farris
Executive Vice President
Age 63
Served as Executive Officer since 12-3-91
Michael D. Garrett
Executive Vice President - External Affairs
Age 49
Served as Executive Officer since 3-1-98
William B. Hutchins, III
Executive Vice President, Chief Financial Officer
and Treasurer
Age 55
Served as Executive Officer since 12-3-91
Earl B. Parsons, Jr.
Senior Vice President
Age 60
Served as Executive Officer since 6-1-98
(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 24, 1998) for
one year until the next annual meeting or until his successor is elected and
qualified, except for Mr. Parsons, who was elected 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
ALABAMA acting solely in their capacities as such.
Identification of certain significant employees.
None.
Family relationships.
None.
Business experience.
Elmer B. Harris - President and Chief Executive Officer since 1989. Director
of SOUTHERN and AmSouth Bancorporation.
Whit Armstrong - President, Chairman of the Board and Director of The Citizens
Bank, Enterprise, Alabama. Also, President, Chairman of the Board and Director
of Enterprise Capital Corporation, Inc. Director of The Enstar Group, Inc.
David J. Cooper, Sr. - President of Cooper/T. Smith Corporation, a maritime
company with a core business of stevedoring and tugboats.
Director of Cooper/T. Smith Corporation and subsidiaries. Chairman of the
Board, American Equity Underwriters, Inc., Mobile, Alabama.
A. W. Dahlberg - Chairman, President and Chief Executive Officer of SOUTHERN
since 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, Equifax, Inc., Protective Life Corporation and
SunTrust Banks, Inc.
Peter V. Gregerson, Sr. - Chairman Emeritus of Gregerson's Foods, Inc. (retail
groceries), Gadsden, Alabama.
Carl E. Jones, Jr. - President and Chief Executive Officer of Regions Financial
Corporation, Birmingham, Alabama.
Patricia M. King - President and Chief Executive Officer of King Motor Co.,
Inc., King's Highway, Inc. and King Imports, Inc.,
Anniston, Alabama. Director of Regions Bank, Anniston, Alabama.
James K. Lowder - President and Chief Executive Officer of The Colonial Company
(real estate development and sales), Montgomery, Alabama.
III-2
<PAGE>
Wallace D. Malone, Jr. - Chairman and Chief Executive Officer of SouthTrust
Corporation, bank holding company, Birmingham, Alabama. Director of American
Cast Iron Pipe Company, Birmingham, Alabama.
Thomas C. Meredith - Chancellor of The University of Alabama System,
Tuscaloosa, Alabama. Director of ATMOS Energy Corporation, Dallas, Texas.
William V. Muse - President of Auburn University, Auburn, Alabama. Director of
SouthTrust Bank and American Cast Iron Pipe Company, Birmingham, Alabama.
John T. Porter - Pastor of Sixth Avenue Baptist Church, Birmingham, Alabama.
Director of Citizens Federal Savings Bank, Birmingham, Alabama.
Robert D. Powers - President and Director, The Eufaula Agency, Inc. (real
estate and insurance), Eufaula, Alabama.
Andreas Renschler - President and Chief Executive Officer of Mercedes-Benz U.S.
International, Inc., Tuscaloosa County, Alabama.
C. Dowd Ritter - Chairman, President, Chief Executive Officer and Director,
AmSouth Bancorporation and AmSouth Bank, Birmingham, Alabama.
William J. Rushton, III - Chairman Emeritus of Protective Life Corporation
(insurance holding company), Birmingham, Alabama. Director of SOUTHERN.
James H. Sanford - Chairman, HOME Place Farms Inc. (diversified farmers and
ginners), Prattville, Alabama. President, Autauga Quality Cotton Association.
Chairman of the Board, Sylvest Farms of Georgia, Inc., College Park, Georgia.
Chairman of the Board, Sylvest Poultry Inc., Montgomery, Alabama.
John C. Webb, IV - President, Webb Lumber Company, Inc. (wholesale lumber and
wood products sales), Demopolis, Alabama. Director of J. F. Suttle, Co.
Banks H. Farris - Executive Vice President - Customer Service since 1994.
Responsible for providing the overall management of human resources, information
resources, power delivery and marketing departments, customer service centers
and the six geographic divisions. He previously served as Senior Vice President
from 1991 to 1994.
Michael D. Garrett - Executive Vice President - External Affairs since 1998.
Responsible for governmental relations, environmental, public relations,
economic development, corporate real estate and corporate services. He
previously served as Senior Vice President - External Affairs from February 1994
to March 1998. Director of AmSouth Bank, Birmingham, Alabama.
William B. Hutchins, III - Executive Vice President, and Chief Financial Officer
since 1991. Treasurer was added to his responsibilities in 1998. Responsible for
financial and accounting operations, corporate planning and treasury operations.
He previously served as Senior Vice President and Chief Financial Officer from
1991 to 1994.
Earl B. Parsons, Jr. - Senior Vice president - Fossil and Hydro Generation
since 1995. Responsible for providing the overall management of the Fossil
Generation, Hydro Generation, Power Generation Support and Fuels Department.
He previously served as Vice President of Power Generation and Transmission at
GULF.
Involvement in certain legal proceedings.
None.
III-3
<PAGE>
GEORGIA
Identification of directors of GEORGIA.
H. Allen Franklin
President and Chief Executive Officer
Age 54
Served as Director since 1-1-94
Warren Y. Jobe
Executive Vice President
Age 58
Served as Director since 8-1-82
Daniel P. Amos (1)
Age 47
Served as Director since 5-21-97
Juanita P. Baranco (1)
Age 49
Served as Director since 5-21-97
A. W. Dahlberg (1)
Age 58
Served as Director since 6-1-88
William A. Fickling, Jr. (1)
Age 66
Served as Director since 4-18-73
L. G. Hardman III (1)
Age 59
Served as Director since 6-25-79
James R. Lientz, Jr. (1)
Age 55
Served as Director since 7-21-93
Zell Miller (1)
Age 67
Served as Director since 2-17-99
G. Joseph Prendergast (1)
Age 53
Served as Director since 1-20-93
Herman J. Russell (1)
Age 68
Served as Director since 5-18-88
Gloria M. Shatto (1)
Age 67
Served as Director since 2-20-80
William Jerry Vereen (1)
Age 58
Served as Director since 5-18-88
Carl Ware (1) (2)
Age 55
Served as Director since 2-15-95
(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 20, 1998) for one
year until the next annual meeting or until a successor is elected and
qualified, except for Mr. Miller, who was elected 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.
Identification of executive officers of GEORGIA.
H. Allen Franklin
President, Chief Executive Officer and Director
Age 54
Served as Executive Officer since 1-1-94
Warren Y. Jobe
Executive Vice President and Director
Age 58
Served as Executive Officer since 5-19-82
William C. Archer, III
Executive Vice President - External Affairs
Age 50
Served as Executive Officer since 4-6-95
III-4
<PAGE>
Gene R. Hodges
Executive Vice President - Customer Operations
Age 60
Served as Executive Officer since 11-19-86
David M. Ratcliffe
Executive Vice President, Treasurer and
Chief Financial Officer
Age 50
Served as Executive Officer since 3-1-98
Wayne T. Dahlke
Senior Vice President - Power Delivery
Age 57
Served as Executive Officer since 4-19-89
James K. Davis
Senior Vice President - Corporate Relations
Age 58
Served as Executive Officer since 10-1-93
Robert H. Haubein
Senior Vice President - Fossil/Hydro Power
Age 58
Served as Executive Officer since 2-19-92
Leonard J. Haynes
Senior Vice President - Marketing
Age 48
Served as Executive Office since 10-13-98
Fred R. Williams
Senior Vice President - Resource Policy & Planning
Age 54
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 20, 1998) for
one year until the next annual meeting or until his successor is elected and
qualified, except for Mr. Haynes, who was elected 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
GEORGIA acting solely in their capacities as such.
Identification of certain significant employees.
None.
Family relationships.
None.
Business experience.
H. Allen Franklin - President and Chief Executive Officer since 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 since 1982. He previously served as
Chief Financial Officer and Treasurer from 1982 to 1998. Effective February
1998, elected Senior Vice President of SOUTHERN with responsibilities for
corporate development, including customer relations and civic and community
affairs.
Daniel P. Amos - President and Chief Executive Officer, American Family Life
Assurance Company, Incorporated (AFLAC), Columbus, Georgia. Director, AFLAC
Incorporated (and subsidiaries), CIT Group and Greystone Capital Partners,
I.L.P.
Juanita P. Baranco - Business owner of Baranco Automotive Group. Director of
Federal Reserve Bank of Atlanta and John H. Harland Company, Decatur, Georgia.
A. W. Dahlberg - Chairman, President and Chief Executive Officer of SOUTHERN
since 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, Equifax, Inc., Protective Life Corporation and
SunTrust Banks, Inc.
William A. Fickling, Jr. - Chairman of the Board, Chief Executive Officer of
Beech Street Corporation (provider of managed care services) and President from
1995 to 1996. He previously served as Chairman of the Board and Chief Executive
Officer of Charter Medical Corporation (provider of psychiatric care).
L. G. Hardman III - Chairman of the Board and Chief Executive Officer of First
Commerce Bancorp, Inc. Chairman of the Board of The First National Bank of
Commerce, Georgia and Chairman of the Board, President and Treasurer of Harmony
Grove Mills, Inc. (real estate investments). Director of SOUTHERN.
III-5
<PAGE>
James R. Lientz, Jr. - President, NationsBank, Mid-South Banking Group since
1993. He previously served as President and Chief Executive Officer of former
C&S of South Carolina (now NationsBank) from 1990 to 1993. Director of Cerulean
Companies, Inc. and Blue Cross/Blue Shield of Georgia.
Zell Miller - Former Governor of Georgia. He served two terms as Governor of the
State of Georgia, leaving office in January 1999. He previously served as
Lieutenant Governor of Georgia. Director of Albany-based Gray Communications,
Atlanta-based Post Properties, Atlanta-based Law Companies Group and United
Community Banks, Inc., Blairsville, GA.
G. Joseph Prendergast - Senior Executive Vice President, Wachovia Corporation.
Heads the banking division comprising the companies' consumer and corporate
banking activities and Wachovia Bank, N.A.
Herman J. Russell - Chairman and Chief Executive Officer of H. J. Russell &
Company (construction), Atlanta, Georgia. Chairman of
the Board, Citizens Trust Bank, Atlanta, Georgia. Director of Wachovia
Corporation and First Union Real Estate and Mortgage
Investments.
Gloria M. Shatto - President Emerita, Berry College, Mount Berry, Georgia.
Director of SOUTHERN, Becton Dickinson & Company and Texas Instruments
Incorporated.
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
Corporation, Cerulean Companies, Inc. and Blue Cross/Blue Shield of Georgia.
Carl Ware - President, Africa Group, The Coca-Cola Company since 1991.
William C. Archer, III - Executive Vice President - External Affairs since
September 1995. Senior Vice President - External Affairs from April 1995 to
September 1995. Vice President - Human Resources for SCS from 1992 to 1995.
Responsible for governmental and regulatory affairs, corporate relations, land
department, environmental affairs, corporate communications, risk management,
corporate security, regulatory and litigation support and corporate concerns.
Gene R. Hodges - Executive Vice President - Customer Operations, Power Delivery
and Safety since 2-19-92. Elected Vice President in charge of customer service
and power delivery in 1992. Safety department was added to the Executive Vice
President's responsibilities in 1995. Responsible for the northern and southern
regions and power delivery, customer service, region safety and labor relations
areas.
David M. Ratcliffe - Executive Vice President and Treasurer since 3-1-98 and
Executive Vice President, Treasurer and Chief Financial Officer since 5-20-98.
He previously served as Senior Vice President - External Affairs of SOUTHERN
from 1995 to 1998. President and Chief Executive Officer of MISSISSIPPI from
1991 to 1995. Responsible for accounting, corporate secretary, finance and
procurement.
Wayne T. Dahlke - Senior Vice President - Power Delivery since 1992. Senior Vice
President - Marketing from 1989 to 1992. Responsible for transmission and
construction, planning and projects, distribution, forestry and right of way
services and system operations.
James K. Davis - Senior Vice President - Corporate Relations since 1993. Vice
President of Corporate Relations from 1988 to 1993. Responsible for corporate
relations and consumer affairs.
Robert H. Haubein - Senior Vice President - Fossil/ Hydro Power since 1994.
Senior Vice President - Administrative Services from 1992 to 1994. Responsible
for fossil/hydro power generation, labor relations, safety and health.
Leonard J. Haynes - Senior Vice President - Marketing since 1998. Vice President
of Marketing from October 1995 to November 1998. Responsible for GEORGIA's and
SAVANNAH's Power Marketing organizations as well as SOUTHERN's national accounts
organization.
Fred R. Williams - Senior Vice President - Resource Policy and Planning since
1997. Senior Vice President - Wholesale Power Marketing from 1995 to 1997.
Senior Vice President - Bulk Power Markets from 1992 to August 1995. Responsible
for managing the supply needs for retail and wholesale customers and developing
policy and recommendations for future industry structure.
Involvement in certain legal proceedings.
None.
III-6
<PAGE>
GULF
Identification of directors of GULF.
Travis J. Bowden
President and Chief Executive Officer
Age 60
Served as Director since 2-1-94
Paul J. DeNicola (1)
Age 50
Served as Director since 4-19-91
Fred C. Donovan, Sr. (1)
Age 58
Served as Director since 1-18-91
W. Deck Hull, Jr. (1)
Age 66
Served as Director since 10-14-83
Joseph K. Tannehill (1)
Age 65
Served as Director since 7-19-85
Barbara H. Thames (1)
Age 58
Served as Director since 2-28-97
(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 30, 1998) 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.
Identification of executive officers of GULF.
Travis J. Bowden
President, Chief Executive Officer and Director
Age 60
Served as Executive Officer since 2-1-94
Francis M. Fisher, Jr.
Vice President - Power Delivery and Customer Operations
Age 50
Served as Executive Officer since 5-19-89
John E. Hodges, Jr.
Vice President - Marketing and Employee/External Affairs
Age 55
Served as Executive Officer since 5-19-89
Robert G. Moore
Vice President - Power Generation and Transmission
Age 49
Served as Executive Officer since 7-25-97
Arlan E. Scarbrough
Vice President - Finance
Age 62
Served as Executive Officer since 9-21-77
Each of the above is currently an executive officer of GULF, serving a term
running from the last annual meeting of the directors (July 24, 1998) 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
GULF acting solely in their capacities as such.
Identification of certain significant employees.
None.
Family relationships.
None.
Business experience.
Travis J. Bowden - President and Chief Executive Officer since 1994. He
previously served as Executive Vice President of ALABAMA from 1985 to 1994.
III-7
<PAGE>
Paul J. DeNicola - President and Chief Executive Officer of SCS since 1994.
Executive Vice President and Group Executive of SOUTHERN since 1991. He
previously served as Executive Vice President of SCS from 1991 through 1993.
Director of SOUTHERN, MISSISSIPPI and SAVANNAH.
Fred C. Donovan, Sr. - President of Baskerville - Donovan, Inc., an
architectural and engineering firm, Pensacola, Florida.
W. Deck Hull, Jr. - President and Director of Hull Company - Panama City,
Florida. He previously served as Vice Chairman of the
SunTrust Bank, West Florida, Panama City, Florida.
Joseph K. Tannehill - President, Chairman and Chief Executive Officer of
Tannehill International Industries, Inc., Lynn Haven,
Florida. Director of Regions Bank of North Florida, Panama City, Florida.
Barbara H. Thames - Vice President of West Florida Regional Medical Center,
Pensacola, Florida. She previously served as Chief
Executive Officer of Santa Rosa Medical Center, Milton, Florida.
Francis M. Fisher, Jr. - Vice President - Power Delivery and Customer
Operations since 1996. He previously served as Vice
President-Employee and External Relations from 1989 to 1996. Responsible for
power delivery, customer operations, corporate real
estate, and total quality management and serves as compliance officer.
John E. Hodges, Jr. - Vice President - Marketing and Employee/External Affairs
since 1996. He previously served as Vice President - Customer Operations from
1989 to 1996. Responsible for corporate communications, marketing, govermental
affairs, economic development, safety and health, employee relations and human
resources-coastal region.
Robert G. Moore - Vice President - Power Generation and Transmission of GULF and
Vice President of Fossil Generation of SCS since 1997. He previously served as
Plant Manager - Bowen at GEORGIA. Responsible for the generation and
transmission of electricity and bulk power maketing efforts.
Arlan E. Scarbrough - Vice President - Finance since 1980. Responsible for all
accounting, financial and regulatory matters.
Involvement in certain legal proceedings.
None.
III-8
<PAGE>
MISSISSIPPI
Identification of directors of MISSISSIPPI.
Dwight H. Evans
President and Chief Executive Officer
Age 50
Served as Director since 3-27-95
Paul J. DeNicola (1)
Age 50
Served as Director since 5-1-89
Edwin E. Downer (1)
Age 67
Served as Director since 4-24-84
Robert S. Gaddis (1)
Age 67
Served as Director since 1-21-86
Aubrey K. Lucas (1)
Age 64
Served as Director since 4-24-84
George A. Schloegel (1)
Age 58
Served as Director since 7-26-95
Philip J. Terrell (1)
Age 45
Served as Director since 2-22-95
N. Eugene Warr (1)
Age 63
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 7,
1998) 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 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. Identification of executive officers of MISSISSIPPI.
Dwight H. Evans
President, Chief Executive Officer and Director
Age 50
Served as Executive Officer since 3-27-95
H. E. Blakeslee
Vice President - Customer Services and Marketing
Age 58
Served as Executive Officer since 1-25-84
Andrew J. Dearman, III
Vice President - Power Generation and Delivery
Age 45
Served as Executive Officer since 4-23-97
Don E. Mason
Vice President - External Affairs and Corporate Services
Age 57
Served as Executive Officer since 7-27-83
Michael W. Southern
Vice President, Secretary, Treasurer and
Chief Financial Officer
Age 46
Served as Executive Officer since 1-1-95
Each of the above is currently an executive officer of MISSISSIPPI, serving
a term running from the last annual meeting of the directors (May 7, 1998) 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
MISSISSIPPI acting solely in their capacities as such.
Identification of certain significant employees.
None.
Family relationships.
None.
III-9
<PAGE>
Business experience.
Dwight H. Evans - President and Chief Executive Officer since 1995. He
previously served as Executive Vice President - External Affairs of GEORGIA from
1989 to 1995.
Paul J. DeNicola - President and Chief Executive Officer of SCS effective 1994.
Executive Vice President and Group Executive of SOUTHERN since 1991. Executive
Vice President of SCS from 1991 through 1993. Director of SOUTHERN, SAVANNAH and
GULF.
Edwin E. Downer - Business consultant specializing in economic analysis,
management controls and procedural studies, Meridian, Mississippi.
Robert S. Gaddis - Chairman of the Advisory Board of Trustmark National Bank,
Laurel, Mississippi.
Aubrey K. Lucas - President Emeritus and Distinguished Professor of Higher
Education at the University of Southern Mississippi, Hattiesburg, Mississippi.
George A. Schloegel - President of Hancock Bank. President, Chief Executive
Officer and Director of Hancock Bank Securities
Corporation. Vice Chairman of Hancock Holding Company. Director of Hancock
Bank - Mississippi and Hancock Bank - Louisiana.
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). Director of
Coast Community Bank, formerly SouthTrust Bank of Mississippi, Biloxi,
Mississippi.
H. E. Blakeslee - Vice President - Customer Services and Marketing since 1984.
Responsible for rate design, revenue forecasting, marketing, district
operations, corporate compliance, distribution engineering, customer accounting,
vehicle maintenance centers and customer call center.
Andrew J. Dearman, III - Vice President - Power Generation and Delivery since
1997. Responsible for generating plants, environmental quality, fuel services,
power generation technical services, transmission, system planning, bulk power
contracts, system operations and control, system protection and real estate. He
served as Vice President - Southern Division of ALABAMA from 1995 to May 1997,
and Division Manager - Customer Service of ALABAMA from 1989 to 1995.
Don E. Mason - Vice President- External Affairs and Corporate Services since
1983. Responsible for external affairs, corporate communications, security, risk
management, economic development and general services, as well as the human
resources function.
Michael W. Southern - Vice President, Secretary, Treasurer and Chief Financial
Officer since 1995. Responsible for accounting, secretary/treasury, corporate
planning, procurement and information resources. 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.
Involvement in certain legal proceedings.
None.
III-10
<PAGE>
SAVANNAH
Identification of directors of SAVANNAH.
G. Edison Holland, Jr.
President and Chief Executive Officer
Age 46
Served as Director since 7-15-97
Archie H. Davis (1)
Age 57
Served as Director since 2-18-97
Paul J. DeNicola (1)
Age 50
Served as Director since 3-14-91
Walter D. Gnann (1)
Age 63
Served as Director since 5-17-83
Robert B. Miller, III (1)
Age 53
Served as Director since 5-17-83
Arnold M. Tenenbaum (1)
Age 62
Served as Director since 5-17-77
(1) No position other than Director.
Each of the above is currently a director of SAVANNAH, serving a term
running from the last annual meeting of SAVANNAH's stockholder (May 19, 1998)
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.
Identification of executive officers of SAVANNAH.
G. Edison Holland, Jr.
President, Chief Executive Officer and Director
Age 46
Served as Executive Officer since 7-15-97
W. Miles Greer
Vice President - Customer Operations, Marketing and External Affairs
Age 55
Served as Executive Officer since 11-20-85
Kirby R. Willis
Vice President, Treasurer, Chief Financial Officer
and Assistant Corporate Secretary
Age 47
Served as Executive Officer since 1-1-94
Each of the above is currently an executive officer of SAVANNAH, serving a
term running from the meeting of the directors held on July 21, 1998 for the
ensuing year.
There are no arrangements or understandings between any of the individuals
listed above and any other person pursuant to which he was or is to be selected
as an officer, other than any arrangements or understandings with officers of
SAVANNAH acting solely in their capacities as such.
Identification of certain significant employees.
None.
Family relationships.
None.
Business experience.
G. Edison Holland, Jr. - Elected President and Chief Executive Officer in 1997.
Vice President - Power Generation/Transmission and Corporate Counsel of GULF
from 1995 to 1997. Served as a partner in the law firm of Beggs & Lane from 1979
to 1997. Director of SunTrust Bank of Savannah.
Archie H. Davis - President and Chief Executive Officer of The Savannah Bancorp
and The Savannah Bank, N.A., Savannah, Georgia. Member of the Board of
Directors of Thomaston Mills, Thomaston, Georgia. Director of Bryan Bank &
Trust.
III-11
<PAGE>
Paul J. DeNicola - President and Chief Executive Officer of SCS since 1994.
Executive Vice President and Group Executive of SOUTHERN since 1991. Executive
Vice President of SCS from 1991 through 1993. Director of SOUTHERN, GULF and
MISSISSIPPI.
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 Building Systems, Inc., Savannah,
Georgia.
Arnold M. Tenenbaum - President and Director of Chatham Steel Corporation.
Director of First Union Bank of Georgia, First Union
Bank of Savannah, Cerulean Corporation and Blue Cross/Blue Shield of Georgia.
W. Miles Greer - Vice President - Customer Operations, Marketing and External
Affairs since 1998. Responsible for marketing, customer services, transmission
and distribution, engineering, system operation and external affairs. He
previously served as Vice President of Marketing and Customer Service from 1994
to 1998.
Kirby R. Willis - Vice President, Treasurer and Chief Financial Officer since
1994 and Assistant Corporate Secretary effective 1998. Responsible primarily for
all accounting, financial, information resources, labor relations, corporate
services, environmental and safety activities. He previously served as
Treasurer, Controller and Assistant Secretary from 1991 to 1993.
Involvement in certain legal proceedings.
None
Section 16(a) Beneficial Ownership Reporting Compliance.
GEORGIA's Mr. Franklin filed one late report with the SEC representing one
transaction in SOUTHERN common stock.
III-12
<PAGE>
Item 11. EXECUTIVE COMPENSATION
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 $100,000 during
1998 for each of the operating affiliates (ALABAMA, GEORGIA, GULF, MISSISSIPPI
and SAVANNAH).
Key terms used in this Item will have the following meanings:-
AME.........................Above-market earnings on deferred compensation
ESP.........................Employee Savings Plan
ESOP........................Employee Stock Ownership Plan
SBP.........................Supplemental Benefit Plan
ERISA.......................Employee Retirement Income Security Act
<TABLE>
<CAPTION>
ALABAMA
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
Number of
Securities Long-
Name Underlying Term
and Other Annual Stock Incentive All Other
Principal Compensation Options Payouts Compensation
Position Year Salary($) Bonus($) ($)1 (Shares) ($)2 ($)3
- - - - - - - ------------------------------------------------------------------------------------------------------------------------
Elmer B. Harris
President,
<S> <C> <C> <C> <C> <C> <C> <C>
Chief Executive 1998 545,102 192,751 19,060 29,411 249,971 30,180
Officer, 1997 500,700 101,002 20,453 35,648 247,224 30,172
Director 1996 480,310 72,697 7,112 31,608 439,508 25,068
Banks H. Farris 1998 275,822 32,631 8,530 11,473 178,829 14,764
Executive Vice 1997 247,170 37,500 7,218 13,513 155,313 14,379
President 1996 235,255 32,390 7,829 9,730 155,313 12,161
William B.
Hutchins, III
Executive Vice
President, 1998 237,532 34,646 3,010 8,118 132,472 12,678
Chief Financial 1997 217,756 31,400 1,383 9,834 115,170 12,441
Officer 1996 209,213 28,806 3,029 8,654 115,169 10,853
See next page for footnotes.
</TABLE>
III-13
<PAGE>
<TABLE>
<CAPTION>
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
- - - - - - - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael D. Garrett4 1998 221,731 25,966 12,389 7,800 105,866 11,558
Executive Vice 1997 - - - - - -
President 1996 - - - - - -
Earl B. Parsons, Jr.4 1998 213,075 26,758 7,285 7,282 114,911 11,249
Senior Vice President 1997 - - - - - -
1996 - - - - - -
1 Tax reimbursement by ALABAMA and certain personal benefits.
2 Payouts made in 1997, 1998 and 1999 for the four-year performance periods ending December 31, 1996, 1997 and 1998,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 $5,792 $1,046 $23,342
Banks H. Farris 7,200 1,046 6,518
William B. Hutchins, III 7,200 1,046 4,432
Michael D. Garrett 6,093 1,046 4,419
Earl B. Parsons, Jr. 7,200 1,046 3,003
4 Messrs. Garrett and Parsons, Jr. were named executive officers effective April 24, 1998.
</TABLE>
III-14
<PAGE>
<TABLE>
<CAPTION>
GEORGIA
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
Number of
Securities Long-
Name Underlying Term
and Other Annual Stock Incentive All Other
Principal Compensation Options Payouts Compensation
Position Year Salary($) Bonus($) ($)1 (Shares) ($)2 ($)3
- - - - - - - -------------------------------------------------------------------------------------------------------------------------
H. Allen Franklin
<S> <C> <C> <C> <C> <C> <C> <C>
President, 1998 564,329 237,502 7,078 30,521 283,629 31,590
Chief Executive 1997 511,505 129,426 14,219 36,544 280,513 31,350
Officer, Director 1996 482,658 73,260 10,992 31,853 498,688 27,334
David M. Ratcliffe
Executive
Vice President,
Treasurer, 1998 339,672 62,700 3,934 14,039 218,175 12,255
Chief Financial 1997 313,152 50,515 10,828 17,086 207,322 18,342
Officer 1996 347,985 39,465 8,446 15,179 207,322 16,889
Gene R. Hodges 1998 244,284 42,595 4,543 8,317 132,472 13,087
Executive 1997 228,336 39,058 5,544 10,271 126,075 13,111
Vice President 1996 221,708 26,209 1,783 9,214 126,075 12,193
Warren Y. Jobe
Executive 1998 249,314 37,434 7,804 10,275 132,472 12,660
Vice President, 1997 238,948 39,862 98,870 10,483 126,075 13,408
Director 1996 227,496 26,749 4,308 9,404 126,075 12,476
Robert H.
Haubein, Jr. 1998 239,448 35,683 1,922 8,175 132,472 13,007
Senior Vice 1997 220,358 35,683 657 9,952 115,170 11,981
President 1996 211,010 29,681 2,081 8,757 115,169 11,740
1 Tax reimbursement by GEORGIA on certain personal benefits including membership fees of $94,429 in 1997 for Mr. Jobe.
2 Payouts made in 1997, 1998 and 1999 for the four-year performance periods ending December 31, 1996,
1997 and 1998, 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 $7,200 $1,046 $23,344
David M. Ratcliffe 7,200 1,046 4,009
Gene R. Hodges 7,200 1,046 4,841
Warren Y. Jobe 6,450 1,046 5,164
Robert H. Haubein, Jr. 6,450 1,046 5,511
</TABLE>
III-15
<PAGE>
<TABLE>
<CAPTION>
GULF
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
Number of
Securities Long-
Name Underlying Term
and Other Annual Stock Incentive All Other
Principal Compensation Options Payouts Compensation
Position Year Salary($) Bonus($) ($)1 (Shares) ($)2 ($)3
- - - - - - - -------------------------------------------------------------------------------------------------------------------------
Travis J. Bowden
<S> <C> <C> <C> <C> <C> <C> <C>
President, 1998 329,280 35,121 3,839 13,583 218,175 18,068
Chief Executive 1997 306,584 33,933 2,842 16,694 207,322 17,888
Officer, Director 1996 297,685 29,950 1,560 14,975 207,322 14,950
Arlan E. Scarbrough 1998 196,661 18,071 3,253 6,721 96,594 10,218
Vice President 1997 180,642 18,212 1,440 8,142 84,048 10,235
1996 173,719 17,512 1,514 7,234 84,047 9,420
John E. Hodges, Jr. 1998 192,765 17,680 915 6,575 96,594 10,014
Vice President 1997 178,428 17,989 2,418 8,042 91,977 10,185
1996 171,688 17,297 1,415 7,145 91,977 9,405
Francis M. 1998 175,719 16,147 240 6,005 96,594 9,329
Fisher, Jr. 1997 160,783 16,274 479 7,275 84,048 9,182
Vice President 1996 151,236 15,352 459 5,674 84,047 8,177
Robert G. Moore4 1998 159,332 18,626 525 4,881 72,767 8,325
Vice President 1997 149,926 23,474 - 4,741 46,551 7,550
1996 - - - - - -
1 Tax reimbursement by GULF on certain personal benefits.
2 Payouts made in 1997, 1998 and 1999 for the four-year performance periods
ending December 31, 1996, 1997 and 1998, 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 $6,450 $1,046 $10,572
Arlan E. Scarbrough 6,448 1,046 2,724
John E. Hodges, Jr. 6,698 1,046 2,270
Francis M. Fisher, Jr. 7,200 1,046 1,083
Robert G. Moore 6,927 1,046 352
4 Mr. Moore was named an executive officer effective July 25, 1997.
</TABLE>
III-16
<PAGE>
<TABLE>
<CAPTION>
MISSISSIPPI
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
Number of
Securities Long-
Name Underlying Term
and Other Annual Stock Incentive All Other
Principal Compensation Options Payouts Compensation
Position Year Salary($) Bonus($) ($)1 (Shares) ($)2 ($)3
- - - - - - - -------------------------------------------------------------------------------------------------------------------------
Dwight H. Evans
<S> <C> <C> <C> <C> <C> <C> <C>
President, Chief 1998 283,195 42,603 5,051 11,693 218,175 15,291
Executive 1997 262,678 39,643 3,830 14,303 126,075 15,025
Officer, Director 1996 253,006 35,923 3,519 12,830 126,075 13,824
H. E. Blakeslee 1998 207,416 36,202 47 7,068 96,594 10,979
Vice President 1997 192,029 38,863 697 8,687 91,977 10,991
1996 190,429 25,664 224 7,572 91,977 9,885
Don E. Mason 1998 203,234 29,560 4,497 6,926 96,594 10,757
Vice President 1997 188,126 41,889 839 8,512 84,048 10,675
1996 186,670 25,148 125 7,420 84,047 9,587
Michael W. Southern
Vice President
Chief Financial 1998 174,334 34,130 - 5,997 83,087 8,978
Officer, Secretary, 1997 155,151 31,406 1,590 6,281 65,768 8,757
Treasurer 1996 155,027 20,740 2,841 5,475 65,768 7,865
Andrew J.
Dearman, III4 1998 159,713 41,031 600 4,893 83,087 8,343
Vice President 1997 141,393 21,008 2,083 5,871 42,903 21,354
1996 - - - - - -
1 Tax reimbursement by MISSISSIPPI on certain personal benefits.
2 Payouts made in 1997, 1998 and 1999 for the four-year performance periods ending
December 31, 1996, 1997 and 1998, 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
Dwight H. Evans $6,450 $1,046 $7,795
H. E. Blakeslee 6,093 1,046 3,840
Don E. Mason 5,992 1,046 3,719
Michael W. Southern 6,879 1,046 1,053
Andrew J. Dearman, III 6,936 1,046 361
In 1997, Mr. Dearman received a one-time lump-sum payment of
$13,591, given in connection with his appointment to his current position.
4 Mr. Dearman was named an executive officer effective April 23, 1997.
</TABLE>
III-17
<PAGE>
<TABLE>
<CAPTION>
SAVANNAH
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
Number of
Securities Long-
Name Underlying Term
and Other Annual Stock Incentive All Other
Principal Compensation Options Payouts Compensation
Position Year Salary($) Bonus($) ($)1 (Shares) ($)2 ($)3
- - - - - - - -------------------------------------------------------------------------------------------------------------------------
G. Edison
Holland, Jr.4
<S> <C> <C> <C> <C> <C> <C> <C>
President, 1998 233,330 26,019 17,309 7,951 128,608 8,246
Chief Executive 1997 202,413 26,231 3,046 8,640 91,977 49,892
Officer, Director 1996 184,359 18,584 2,969 7,677 91,977 9,940
W. Miles Greer 1998 160,207 16,054 13 4,901 69,000 13,179
Vice President 1997 138,643 16,294 805 4,924 60,636 10,740
1996 131,203 16,225 322 4,261 60,636 9,631
Kirby R. Willis
Vice President, 1998 155,236 15,554 13 4,748 69,000 10,581
Chief Financial 1997 134,794 15,915 182 4,809 60,636 9,322
Officer, Treasurer 1996 122,110 15,505 674 3,924 60,636 8,765
1 Tax reimbursement by SAVANNAH on certain personal benefits, including membership
fees of $11,669 for Mr. Holland, Jr. in 1998.
2 Payouts made in 1997, 1998 and 1999 for the four-year performance periods ending December 31, 1996, 1997 and
1998, 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
G. Edison Holland, Jr. $7,200 $1,046 $ -
W. Miles Greer 5,902 1,046 6,231
Kirby R. Willis 6,483 1,046 3,052
In 1997, Mr. Holland received a one-time lump-sum payment of $38,654, given in connection with his appointment to his current
position.
4 Mr. Holland became president on July 1, 1997. He was previously an executive officer at GULF.
</TABLE>
III-18
<PAGE>
<TABLE>
<CAPTION>
STOCK OPTION GRANTS IN 1998
Stock Option Grants. The following table sets forth all stock option grants to
the named executive officers of each operating subsidiary during the year ending
December 31, 1998.
Individual Grants Grant Date Value
# of % of Total
Securities Options Exercise
Underlying Granted to or
Options Employees in Base Price Expiration Grant Date
Name Granted1 Fiscal Year2 ($/Sh)1 Date1 Present Value($)3
-----------------------------------------------------------------------------------------------------------
ALABAMA
<S> <C> <C> <C> <C> <C>
Elmer B. Harris 29,411 1.8 27.03125 05/01/2007 167,349
Banks H. Farris 11,473 0.7 27.03125 06/01/2003 65,281
William B. Hutchins, III 8,118 0.5 27.03125 07/20/2008 46,191
Michael D. Garrett 7,800 0.5 27.03125 07/20/2008 44,382
Earl B. Parsons, Jr. 7,282 0.4 27.03125 06/01/2006 41,435
GEORGIA
H. Allen Franklin 30,521 1.8 27.03125 07/20/2008 173,664
David M. Ratcliffe 14,039 0.9 27.03125 07/20/2008 79,882
Gene R. Hodges 8,317 0.5 27.03125 04/01/2006 47,324
Warren Y. Jobe 10,275 0.6 27.03125 07/20/2008 58,465
Robert H. Haubein, Jr. 8,175 0.5 27.03125 02/01/2008 46,516
GULF
Travis J. Bowden 13,583 0.8 27.03125 09/01/2006 77,287
Arlan E. Scarbrough 6,721 0.4 27.03125 11/01/2004 38,242
John E. Hodges, Jr. 6,575 0.4 27.03125 07/20/2008 37,412
Francis M. Fisher, Jr. 6,005 0.4 27.03125 07/20/2008 34,168
Robert G. Moore 4,881 0.3 27.03125 07/20/2008 27,773
See next page for footnotes.
</TABLE>
III-19
<PAGE>
<TABLE>
<CAPTION>
STOCK OPTION GRANTS IN 1998
Individual Grants Grant Date Value
# of % of Total
Securities Options Exercise
Underlying Granted to or
Options Employees in Base Price Expiration Grant Date
Name Granted1 Fiscal Year2 ($/Sh)1 Date1 Present Value($)3
------------------------------------------------------------------------------------------------------------
MISSISSIPPI
<S> <C> <C> <C> <C> <C>
Dwight H. Evans 11,693 0.7 27.03125 07/20/2008 66,533
H. E. Blakeslee 7,068 0.4 27.03125 07/01/2008 40,217
Don E. Mason 6,926 0.4 27.03125 07/20/2008 39,409
Michael W. Southern 5,997 0.4 27.03125 07/20/2008 34,123
Andrew J. Dearman, III 4,893 0.3 27.03125 07/20/2008 27,841
SAVANNAH
G. Edison Holland, Jr. 7,951 0.5 27.03125 07/20/2008 45,241
W. Miles Greer 4,901 0.3 27.03125 07/20/2008 27,887
Kirby R. Willis 4,748 0.3 27.03125 07/20/2008 27,016
1 Performance Stock Plan grants were made on July 20, 1998, and vest 25% per
year on the anniversary date of the grant. Grants fully vest upon
termination incident to death, disability, or retirement. The exercise
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 Performance Stock
Plan, Mr. Blakeslee's unexercised options expire on July 1, 2008, three years
after his normal retirement date; Mr. Bowden's unexercised options expire on
September 1, 2006, three years after his normal retirement date; Mr. Farris'
unexercised options expire on June 1, 2003, three years after his normal
retirement date; Mr. Harris' unexercised options expire on May 1, 2007, three
years after his normal retirement date; Mr. Haubein, Jr.'s unexercised options
expire on February 1, 2008, three years after his normal retirement date; Mr.
Gene R. Hodges' unexercised options expire on April 1, 2006, three years after
his normal retirement date; Mr. Parsons Jr.'s unexercised options expire on June
1, 2006, three years after his normal retirement date; and Mr. Scarbrough's
unexercised options expire on November 1, 2004, three years after his normal
retirement date.
2 A total of 1,659,519 stock options were granted in 1998 to
key executives participating in SOUTHERN's Performance 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. There is no assurance that the value realized will be at or near the
value estimated by the Black-Scholes model. Significant assumptions used to
calculate this value: price volatility - 19.16%; risk-free rate of return -
5.46%; dividend opportunity - 50%; time to exercise - 10 years; reductions for
probability of forfeiture before vesting - 9.61%; and reductions for probability
of forfeiture before expiration - 15.51%. These assumptions reflect the effects
of cash dividend equivalents paid to participants under the Performance Dividend
Plan assuming targets are met.
</TABLE>
III-20
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED STOCK OPTION EXERCISES IN 1998 AND YEAR-END OPTION VALUES
Aggregated Stock Option Exercises. The following table sets forth information
concerning options exercised during the year ending December 31, 1998, by the
named executive officers and the value of unexercised options held by them as of
December 31, 1998.
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($)2 Unexercisable Unexercisable
- - - - - - - --------------------------------------------------------------------------------------------------------------
ALABAMA
<S> <C> <C> <C> <C>
Elmer B. Harris - - 183,510/79,994 1,929,365/424,248
Banks H. Farris 13,154 99,117 24,020/28,937 181,514/150,304
William B. Hutchins, III - - 32,521/22,034 279,966/116,806
Michael D. Garrett 13,165 77,775 2,019/19,246 15,773/98,358
Earl B. Parsons, Jr. 6,005 31,460 6,188/19,842 44,155/105,299
GEORGIA
H. Allen Franklin 3,560 56,404 149,760/81,846 1,480,720/432,104
David M. Ratcliffe - - 69,668/38,325 708,769/203,513
Gene R. Hodges 8,329 79,692 26,842/23,007 215,427/122,705
Warren Y. Jobe - - 39,645/25,268 358,857/128,865
Robert H. Haubein, Jr. 6,684 79,581 26,696/22,236 215,611/117,962
GULF
Travis J. Bowden 81,334 969,563 0/37,458 0/199,560
Arlan E. Scarbrough 11,200 82,590 0/18,295 0/97,050
John E. Hodges, Jr. 10,519 117,035 15,640/18,007 114,024/95,730
Francis M. Fisher, Jr. 8,857 78,155 0/15,700 0/82,450
Robert G. Moore - - 6,368/11,522 45,011/57,844
See next page for footnotes.
</TABLE>
III-21
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED STOCK OPTION EXERCISES IN 1998 AND YEAR-END OPTION VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Fiscal Fiscal
Year-End (#) Year-End($)1
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized($)2 Unexercisable Unexercisable
- - - - - - - --------------------------------------------------------------------------------------------------------------
MISSISSIPPI
<S> <C> <C> <C> <C>
Dwight H. Evans 2,455 37,055 40,274/31,458 341,070/165,956
H. E. Blakeslee 5,284 60,270 21,932/19,270 175,814/102,347
Don E. Mason - - 11,421/18,882 80,640/100,284
Michael W. Southern - - 7,942/14,658 55,894/74,599
Andrew J. Dearman, III - - 6,737/12,448 47,781/64,906
SAVANNAH
G. Edison Holland, Jr. - - 30,209/20,233 261,280/104,649
W. Miles Greer - - 6,655/11,824 47,029/59,900
Kirby R. Willis - - 6,192/11,327 43,806/57,231
1 This represents the excess of the fair market
value of SOUTHERN's common stock of $29.0625 per share, as of December 31, 1998,
above the exercise price of the options. One column reports the "value" of
options that are vested and therefore could be exercised; the other the "value"
of options that are not vested and therefore could not be exercised as of
December 31, 1998.
2 The "Value Realized" is ordinary income, before taxes, and
represents the amount equal to the excess of the fair market value of the shares
at the time of exercise over the exercise price.
</TABLE>
III-22
<PAGE>
<TABLE>
<CAPTION>
LONG-TERM INCENTIVE PLANS - AWARDS IN 1998
Long-Term Incentive Plans. The following table sets forth the long-term
incentive plan awards made to the named executive officers for the performance
period January 1, 1998 through December 31, 2001.
Estimated Future Payouts under
Non-Stock Price-Based Plans
Performance or
Other Period
Number of Until Maturation Threshold Target Maximum
Name Units (#)1 or Payout ($)2 ($)2 ($)2
- - - - - - - ----------------------------------------------------------------------------------------------------------------
ALABAMA
<S> <C> <C> <C> <C> <C>
Elmer B. Harris 291,502 4 years 145,751 291,502 583,004
Banks H. Farris 120,832 4 years 60,416 120,832 241,664
William B. Hutchins, III 89,508 4 years 44,754 89,508 179,017
Michael D. Garrett 89,508 4 years 44,754 89,508 179,017
Earl B. Parsons, Jr. 89,508 4 years 44,754 89,508 179,017
GEORGIA
H. Allen Franklin 330,751 4 years 165,376 330,751 661,502
David M. Ratcliffe 147,416 4 years 73,708 147,416 294,832
Gene R. Hodges 89,508 4 years 44,754 89,508 179,017
Warren Y. Jobe 89,508 4 years 44,754 89,508 179,017
Robert H. Haubein, Jr. 89,508 4 years 44,754 89,508 179,017
GULF
Travis J. Bowden 147,416 4 years 73,708 147,416 294,832
Arlan E. Scarbrough 65,265 4 years 32,632 65,265 130,530
John E. Hodges, Jr. 65,265 4 years 32,632 65,265 130,530
Francis M. Fisher, Jr. 65,265 4 years 32,632 65,265 130,530
Robert G. Moore 65,265 4 years 32,632 65,265 130,530
See next page for footnotes.
</TABLE>
III-23
<PAGE>
<TABLE>
<CAPTION>
LONG-TERM INCENTIVE PLANS - AWARDS IN 1998
Estimated Future Payouts under
Non-Stock Price-Based Plans
Performance or
Other Period
Number of Until Maturation Threshold Target Maximum
Name Units (#)1 or Payout ($)2 ($)2 ($)2
- - - - - - - ------------------------------------------------------------------------------------------------------------------
MISSISSIPPI
<S> <C> <C> <C> <C> <C>
Dwight H. Evans 147,416 4 years 73,708 147,416 294,832
H. E. Blakeslee 65,265 4 years 32,632 65,265 130,530
Don E. Mason 65,265 4 years 32,632 65,265 130,530
Michael W. Southern 65,265 4 years 32,632 65,265 130,530
Andrew J. Dearman, III 65,265 4 years 32,632 65,265 130,530
SAVANNAH
G. Edison Holland, Jr. 107,637 4 years 53,819 107,637 215,274
W. Miles Greer 46,620 4 years 23,310 46,620 93,240
Kirby R. Willis 46,620 4 years 23,310 46,620 93,240
1 A performance unit is a method of assigning a dollar value to a performance
award opportunity. Under the Executive Productivity Improvement Plan,
Messrs. Harris and Franklin's number of units are based on the beginning of the
period base salary mid-points. All other executive officers listed in this
table are participants in the Productivity Improvement Plan of SOUTHERN,
the number of units granted to these named executive officers is based on the
weighted average of the base salary mid-points as of December 31 for each
calendar year in the four-year computation period. No awards are paid unless
the participant remains employed by the company through the end 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 and
total shareholder return relative to selected groups of electric and gas
utilities. If certain minimum performance relative to the selected groups 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. The Plan provides that in the discretion of the committee,
extraordinary income may be excluded for purposes of calculating the amount
available for the payment of awards. All awards are payable in cash at the end
of the performance period.
</TABLE>
III-24
<PAGE>
DEFINED BENEFIT OR ACTUARIAL PLAN DISCLOSURE
Pension Plan Table. The following table sets forth the estimated combined annual
pension benefits under the Pension, Supplemental Defined Benefit, and
Supplemental Executive Retirement Plans in effect during 1998 for the named
executives at ALABAMA, GEORGIA, GULF and MISSISSIPPI and Mr. Holland at
SAVANNAH. Employee compensation covered by the Pension, Supplemental Benefit,
and Supplemental Executive Retirement Plans for pension purposes is limited to
the average of the highest three of the final 10 years' compensation -- base
salary plus the excess of annual and long-term incentive compensation over 25
percent of base salary (reported under column titled "Salary", "Bonus", and
"Long-Term Incentive Payouts" in the Summary Compensation 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 $3,900 per year times the number of years of accredited
service, divided by the total possible years of accredited service to normal
retirement age.
<TABLE>
<CAPTION>
Years of Accredited Service
Remuneration 15 20 25 30 35 40
<S> <C> <C> <C> <C> <C> <C>
$ 100,000 $ 25,500 $ 34,000 $ 42,500 $ 51,000 $ 59,500 $ 68,000
300,000 76,500 102,000 127,500 153,000 178,500 204,000
500,000 127,500 170,000 212,500 255,000 297,500 340,000
700,000 178,500 238,000 297,500 357,000 416,500 476,000
900,000 229,500 306,000 382,500 459,000 535,500 612,000
1,100,000 280,500 374,000 467,500 561,000 654,500 748,000
1,300,000 331,500 442,000 552,500 663,000 773,500 884,000
</TABLE>
As of December 31, 1998, the applicable compensation levels and years
of accredited service are presented in the following tables:
ALABAMA
Compensation Accredited
Name Level Years of Service
Elmer B. Harris $844,132 39
Banks H. Farris 391,968 39
William B. Hutchins, III 319,544 32
Michael D. Garrett 268,316 30
Earl B. Parsons, Jr. 269,744 37
III-25
<PAGE>
GEORGIA
Compensation Accredited
Name Level Years of Service
H. Allen Franklin $920,468 27
David M. Ratcliffe 506,316 27
Gene R. Hodges 342,084 34
Warren Y. Jobe1 343,808 34
Robert H. Haubein, Jr. 326,044 31
GULF
Compensation Accredited
Name Level Years of Service
Travis J. Bowden2 $481,924 32
Arlan E. Scarbrough 244,832 35
John E. Hodges, Jr. 248,136 32
Francis M. Fisher, Jr. 227,144 27
Robert G. Moore 183,044 25
MISSISSIPPI
Compensation Accredited
Name Level Years of Service
Dwight H. Evans $398,224 27
H. E. Blakeslee 274,248 33
Don E. Mason 264,564 32
Michael W. Southern 221,140 23
Andrew J. Dearman, III 185,060 23
SAVANNAH
Compensation Accredited
Name Level Years of Service
G. Edison Holland, Jr.3 $280,560 15
W. Miles Greer 143,858 14
Kirby R. Willis 137,972 24
- - - - - - - ---------------------------
1 The number of accredited years of service includes 7 years and 8 months
credited to Mr. Jobe pursuant to a supplemental pension agreement.
2 The number of accredited years of service includes 10 years credited to
Mr. Bowden pursuant to a supplemental pension agreement.
3 The number of accredited years of service includes 9 years and 3 months
credited to Mr. Holland pursuant to a supplemental pension agreement.
III-26
<PAGE>
Effective January 1, 1998, SAVANNAH merged its pension plan into
SOUTHERN's Pension Plan. SAVANNAH also has in effect a supplemental executive
retirement plan for certain of its executive employees. The plan is designed to
provide participants with a supplemental retirement benefit, which, in
conjunction with social security and benefits under SOUTHERN's qualified
pension plan, will equal 70 percent of the highest three of the final 10 years'
average annual earnings (excluding incentive compensation).
The following table sets forth the estimated combined annual pension
benefits under SOUTHERN's pension and SAVANNAH's supplemental executive
retirement plans in effect during 1998 which are payable to SAVANNAH's named
executives, except Mr.Holland who participates in the plans described on
page III-25, upon retirement at the normal retirement age after designated
periods of accredited service and at a specified compensation level.
Years of Accredited Service
Remuneration 15 25 35
$ 90,000 $ 63,000 $ 63,000 $ 63,000
120,000 84,000 84,000 84,000
150,000 105,000 105,000 105,000
180,000 126,000 126,000 126,000
210,000 147,000 147,000 147,000
260,000 182,000 182,000 182,000
280,000 196,000 196,000 196,000
300,000 210,000 210,000 210,000
III-27
<PAGE>
Compensation of Directors.
Standard Arrangements. The following table presents compensation paid
to the directors, during 1998 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 payable in cash may be deferred under
the Deferred Compensation Plan until membership on the board is terminated or
may be payable in SOUTHERN common stock at the election of the director.
<TABLE>
<CAPTION>
ALABAMA GEORGIA GULF MISSISSIPPI SAVANNAH
<S> <C> <C> <C> <C> <C>
Cash Retainer Fee $17,000 $20,000 $10,000 $10,000 $10,000
Stock Retainer Fee $3,000 $3,000 $2,000 $2,000 $2,000
Meeting Fee 900 900 750 750 750
Committees:
Audit 900 900 750 750 750
Compensation 900 900 750 750 750
Executive 900 900 - - 750
Finance - 900 - 750 -
Nominating 900 - - - -
Nuclear Safety 900 - - - -
Nuclear Operations
Overview - 1,800 - - -
</TABLE>
Effective January 1, 1997, the Outside Directors Pension Plan (the
"Plan") was terminated and benefits payable under the Plan were frozen.
Non-employee directors serving as of January 1, 1997, were given a one-time
election to receive a Plan benefit buy-out equal to the actuarial present value
of future Plan benefits or receive benefits under the terms of the Plan at the
annual retainer rate in effect on December 31, 1996. Directors who elected to
receive the benefit buy-out were required to defer receipt of that amount under
the Deferred Compensation Plan until termination from board membership.
Directors who elected to continue to participate under the terms of the Plan are
entitled to benefits upon retirement from the board on the retirement date
designated in the respective companies' by-laws. The annual benefit payable is
based upon length of service and varies from 75 percent of the annual retainer
in effect on December 31, 1996, if the participant has at least 60 months of
service on the board of one or more system companies, to 100 percent if the
participant has at least 120 months of such service. Payments will continue for
the greater of the lifetime of the participant or 10 years.
Other Arrangements. No director received other compensation for
services as a director during the year ending December 31, 1998 in addition to
or in lieu of that specified by the standard arrangements specified above.
III-28
<PAGE>
Employment Contracts and Termination of Employment and Change in Control
Arrangements.
Each registrant has adopted SOUTHERN's Change in Control Plan which is
applicable to certain of its officers, and has entered into individual change in
control agreements with its most highly compensated executive officers. If an
executive is involuntarily terminated, other than for cause, within two years
following a change in control of SOUTHERN the agreements provide for:
o lump sum payment of two or three times annual compensation,
o up to five years' coverage under group health and life insurance plans,
o immediate vesting of all stock options and stock appreciation rights
previously granted,
o payment of any accrued long-term and short-term bonuses and dividend
equivalents, and
o payment of any excise tax liability incurred as a result of payments made
under the agreement.
A change in control is defined under the agreements as:
o acquisition of at least 20 percent of the SOUTHERN's stock,
o a change in the majority of the members of the SOUTHERN's board of
directors,
o a merger or other business combination that results in SOUTHERN's
shareholders immediately before the merger owning less than 65 percent of
the voting power after the merger, or
o a sale of substantially all the assets of SOUTHERN.
If a change in control affects only a subsidiary of SOUTHERN, these
payments would only be made to executives of the affected subsidiary who are
involuntarily terminated as a result of that change in control.
SOUTHERN also has amended its short- and long-term incentive plans to
provide for pro-rata payments at not less than target-level performance if a
change in control occurs and the plans are not continued or replaced with
comparable plans.
On February 28, 1998, SOUTHERN and GEORGIA entered into a Deferred
Compensation Agreement with Mr. Franklin. On the fifth anniversary of the
Agreement, if Mr. Franklin is still employed by SOUTHERN or one of its
subsidiaries, he will receive the cash value of the number of shares of common
stock that could have been purchased for $500,000 on February 28, 1998, and on
which dividends were reinvested throughout the five-year period. If certain
performance goals are met, Mr. Franklin also will receive the estimated income
tax expense on the compensation. Mr. Franklin may elect to defer receipt of the
award until termination of employment.
SOUTHERN and GEORGIA entered into a Deferred Compensation
Agreement with Mr. Jobe. Mr. Jobe becomes eligible for benefits under the terms
of this Agreement if one of the following Eligibility Events occurs: (1) Mr.
Jobe terminates employment with SOUTHERN or one of its subsidiaries on or after
attaining age sixty-two and enters into a release as provided by the Agreement;
or (2) Mr. Jobe, after entering into this Agreement but while employed by
SOUTHERN or one of its subsidiaries, becomes totally and permanently disabled as
determined by a medical doctor selected by SOUTHERN and enters into a release as
provided by the Agreement. Upon the occurrence of an eligibility event as
detailed in item (1) above, SOUTHERN agrees to pay Mr. Jobe a lump sum amount
equal to two times base pay in effect at the time of the eligibility event; a
lump sum amount equal to the present value of the monthly Early Retirement
Reduction Percentage of Employee's Accrued Retirement Income under the pension
plan, plus an amount equal to the reduction of Mr. Jobe's monthly Supplemental
Employee Retirement Plan benefit; and consulting fees for services provided by
Mr. Jobe as an independent contractor. Upon the occurrence of an eligibility
event as detailed in item (2) above, SOUTHERN agrees to pay Mr. Jobe a lump sum
amount
III-29
<PAGE>
Employment Contracts and Termination of Employment and Change in Control
Arrangements. (continued)
equal to two times base pay in effect at the time of the eligibility event; and
a lump sum amount equal to the present value of the monthly Early Retirement
Reduction Percentage of Employee's Accrued Retirement Income under the pension
plan, plus an amount equal to the reduction of Mr. Jobe's monthly Supplemental
Employee Retirement Plan benefit.
Report on Repricing of Options.
None.
Compensation Committee Interlocks and Insider Participation.
None.
III-30
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners. SOUTHERN is the beneficial
owner of 100% of the outstanding common stock of registrants: ALABAMA, GEORGIA,
GULF, MISSISSIPPI and SAVANNAH.
<TABLE>
<CAPTION>
Amount and
Name and Address Nature of Percent
of Beneficial Beneficial of
Title of Class Owner Ownership Class
<S> <C>
Common Stock The Southern Company 100%
270 Peachtree Street, N.W.
Atlanta, Georgia 30303
Registrants:
ALABAMA 5,608,955
GEORGIA 7,761,500
GULF 992,717
MISSISSIPPI 1,121,000
SAVANNAH 10,844,635
</TABLE>
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, 1998. 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, 1998.
Name of Directors,
Nominees and Number of Shares
Executive Officers Title of Class Beneficially Owned (1) (2)
ALABAMA
Whit Armstrong SOUTHERN Common 16,949
David J. Cooper, Sr. SOUTHERN Common 379
A. William Dahlberg SOUTHERN Common 355,291
Peter V. Gregerson, Sr. SOUTHERN Common 575
Elmer B. Harris SOUTHERN Common 222,887
Carl E. Jones, Jr. SOUTHERN Common 11,403
Patricia M. King SOUTHERN Common 177
James K. Lowder SOUTHERN Common 5,47
III-31
<PAGE>
Name of Directors,
Nominees and Number of Shares
Executive Officers Title of Class Beneficially Owned (1)(2)
Thomas C. Meredith SOUTHERN Common 18
William V. Muse SOUTHERN Common 575
John T. Porter SOUTHERN Common 1,008
Robert D. Powers SOUTHERN Common 575
Andreas Renschler SOUTHERN Common 410
C. Dowd Ritter SOUTHERN Common 177
William J. Rushton, III SOUTHERN Common 8,148
James H. Sanford SOUTHERN Common 511
John C. Webb, IV SOUTHERN Common 19,572
Banks H. Farris SOUTHERN Common 28,112
Michael D. Garrett SOUTHERN Common 8,087
William B. Hutchins, III SOUTHERN Common 48,307
Earl B. Parsons Jr. SOUTHERN Common 10,895
The directors, nominees,
and executive officers
as a group SOUTHERN Common 728,635
GEORGIA
Daniel P. Amos SOUTHERN Common 168
Juanita P. Baranco SOUTHERN Common 168
A. William Dahlberg SOUTHERN Common 355,291
W. A. Fickling, Jr. SOUTHERN Common 1,069
III-32
<PAGE>
Name of Directors,
Nominees and Number of Shares
Executive Officers Title of Class Beneficially Owned(1)(2)
H. Allen Franklin SOUTHERN Common 177,239
L. G. Hardman III SOUTHERN Common 16,062
Warren Y. Jobe SOUTHERN Common 70,034
GEORGIA Preferred 200
James R. Lientz, Jr. SOUTHERN Common 946
G. Joseph Prendergast SOUTHERN Common 961
Herman J. Russell SOUTHERN Common 10,710
Gloria M. Shatto SOUTHERN Common 18,830
GEORGIA Preferred 1,200
W. J. Vereen SOUTHERN Common 496
Carl Ware SOUTHERN Common 646
William C. Archer, III SOUTHERN Common 17,500
Robert H. Haubein, Jr. SOUTHERN Common 29,002
Gene R. Hodges SOUTHERN Common 43,245
David M. Ratcliffe SOUTHERN Common 79,206
The directors, nominees
and executive officers
as a group SOUTHERN Common 917,255
GEORGIA Preferred 1,650
III-33
<PAGE>
Name of Directors,
Nominees and Number of Shares
Executive Officers Title of Class Beneficially Owned (1) (2)
GULF
Travis J. Bowden SOUTHERN Common 34,889
Paul J. DeNicola SOUTHERN Common 139,642
Fred C. Donovan, Sr. SOUTHERN Common 637
W. Deck Hull, Jr. SOUTHERN Common 2,549
Joseph K. Tannehill SOUTHERN Common 4,439
Barbara H. Thames SOUTHERN Common 160
Francis M. Fisher, Jr. SOUTHERN Common 6,604
John E. Hodges, Jr. SOUTHERN Common 37,925
Robert G. Moore SOUTHERN Common 20,729
Arlan E. Scarbrough SOUTHERN Common 20,039
The directors, nominees
and executive officers
as a group SOUTHERN Common 267,502
MISSISSIPPI
Paul J. DeNicola SOUTHERN Common 139,642
Edwin E. Downer SOUTHERN Common 5,365
Dwight H. Evans SOUTHERN Common 62,158
GEORGIA Preferred 400
MISSISSIPPI Preferred 200
SOUTHERN Preferred 200
Robert S. Gaddis SOUTHERN Common 3,183
III-34
<PAGE>
Name of Directors,
Nominees and Number of Shares
Executive Officers Title of Class Beneficially Owned (1) (2)
Aubrey K. Lucas SOUTHERN Common 1,940
George A. Schloegel SOUTHERN Common 485
Philip J. Terrell SOUTHERN Common 1,103
N. Eugene Warr SOUTHERN Common 688
H. E. Blakeslee SOUTHERN Common 26,201
Andrew J. Dearman, III SOUTHERN Common 11,674
Don E. Mason SOUTHERN Common 34,258
Michael W. Southern SOUTHERN Common 7,430
The directors, nominees
and executive officers
as a group SOUTHERN Common 294,125
GEORGIA Preferred 400
MISSISSIPPI Preferred 233
SOUTHERN Preferred 200
SAVANNAH
Archie H. Davis SOUTHERN Common 190
Paul J. DeNicola SOUTHERN Common 139,642
Walter D. Gnann SOUTHERN Common 1,833
G. Edison Holland SOUTHERN Common 32,589
Robert B. Miller, III SOUTHERN Common 2,203
Arnold M. Tenenbaum SOUTHERN Common 793
III-35
<PAGE>
Name of Directors,
Nominees and Number of Shares
Executive Officers Title of Class Beneficially Owned (1) (2)
W. Miles Greer SOUTHERN Common 9,599
Kirby R. Willis SOUTHERN Common 10,996
The directors, nominees
and executive officers
as a group SOUTHERN Common 185,772
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. Blakeslee, 21,932 shares; Mr. Dahlberg, 289,787 shares; Mr. DeNicola,
103,158 shares; Mr. Evans, 40,274 shares; Mr. Farris, 24,020 shares; Mr.
Franklin, 149,760 shares; Mr. Greer, 6,655 shares; Mr. Harris, 183,510
shares; Mr. Haubein, 26,696 shares; Mr. G. R. Hodges, 26,842 shares; Mr. J.
E. Hodges, 15,640 shares; Mr. Holland, 30,209 shares; Mr. Hutchins, 32,521
shares; Mr. Jobe, 39,645 shares; Mr. Mason, 11,421 shares; Mr. Southern,
7,942 shares, and Mr. Willis, 6,192 shares. Also included are shares of
SOUTHERN common stock held by the spouses of the following directors: Mr.
Bowden, 500 shares; Mr. DeNicola, 12,072 shares; Mr. Gaddis; 1,200 shares;
Mr. Hardman, 100 shares; Mr. Harris, 310 shares, and Dr. Shatto, 14,113
shares. Also included are shares of common stock held in the Southern
Company Deferred Stock Trust of which certain directors have the power to
direct the voting, as follows: Mr. Hardman, 6,714 shares and Dr. Shatto,
799 shares. Also included are 1,200 shares of GEORGIA preferred stock held
by Dr. Shatto's spouse.
III-36
<PAGE>
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ALABAMA
Transactions with management and others.
Mr. Whit Armstrong is President, Chairman and Chief Executive Officer of The
Citizens Bank, Enterprise, Alabama; Mr. Carl E. Jones, Jr. is President and
Chief Executive Officer of Regions Financial Corporation, Birmingham, Alabama;
Mr. Wallace D. Malone is Chairman and Chief Executive Officer of SouthTrust
Corporation, Birmingham, Alabama. Mr. C. Dowd Ritter is Chairman, President,
Chief Executive Officer and Director of AmSouth Bancorporation and AmSouth Bank,
Birmingham, Alabama. During 1998, these banks furnished a number of regular
banking services in the ordinary course of business to ALABAMA. ALABAMA intends
to maintain normal banking relations with all the aforesaid banks in the future.
Certain business relationships.
None.
Indebtedness of management.
None.
Transactions with promoters.
None.
GEORGIA
Transactions with management and others.
Mr. L. G. Hardman III is Chairman of the Board of The First National Bank
of Commerce, Georgia; Mr. James R. Lientz, Jr. is President of NationsBank
Mid-South Banking Group, Atlanta, Georgia; Mr. G. Joseph Prendergast is Senior
Executive Vice President, Wachovia Corporation, Atlanta, Georgia; and Mr. Herman
J. Russell is Chairman of the Board of Citizens Trust Bank, Atlanta, Georgia.
During 1998, 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 1998, GEORGIA leased a building from Riverside Manufacturing Co. for
approximately $84,075. Also,Riverside Manufacturing sold to GEORGIA fire
retardant uniforms for $88,646. Mr. William J. Vereen is Chief Executive
Officer, President, Treasurer and Director of Riverside Manufacturing Co.
Certain business relationships.
None.
Indebtedness of management.
None.
Transactions with promoters.
None.
GULF
Transactions with management and others.
None
Certain business relationships.
None.
Indebtedness of management.
None.
Transactions with promoters.
None.
MISSISSIPPI
Transactions with management and others.
Mr. Robert S. Gaddis is Chairman of the Advisory Board of Trustmark
National Bank, Laurel, Mississippi; Mr. George A. Schloegel is President of
Hancock Bank, Gulfport, Mississippi. During 1998, these banks furnished a number
of regular banking services in the ordinary course of business to MISSISSIPPI.
MISSISSIPPI intends to maintain normal banking relations with the aforesaid
banks in the future.
Certain business relationships.
None.
Indebtedness of management.
None.
Transactions with promoters.
None.
III-37
<PAGE>
SAVANNAH
Transactions with management and others.
None
Certain business relationships.
None.
Indebtedness of management.
None.
Transactions with promoters.
None.
III-38
<PAGE>
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 1998 were as follows:
SOUTHERN filed Current Reports on Form 8-K:
Date of event: December 18, 1998
Items reported: Items 5 and 7
Date of event: December 21, 1998
Items reported: Item 5
ALABAMA filed Current Reports on Form 8-K:
Date of event: October 7, 1998
Items reported: Items 5 and 7
Date of event: October 28, 1998
Items reported: Items 5 and 7
Date of event: November 12, 1998
Items reported: Items 5 and 7
GEORGIA filed Current Reports on Form 8-K:
Date of event: November 19, 1998
Items reported: Items 5 and 7
Date of event: November 19, 1998
Items reported: Items 5 and 7
SAVANNAH filed a Current Report on Form 8-K:
Date of event: December 3, 1998
Items reported: Items 5 and 7
IV-1
<PAGE>
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: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 24, 1999
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, Chief Financial Officer and
Treasurer
(Principal Financial and Accounting Officer)
Directors:
John C. Adams Elmer B. Harris
A. D. Correll Zack T. Pate
Paul J. DeNicola William J. Rushton, III
Jack Edwards Gloria M. Shatto
H. Allen Franklin Gerald J. St. Pe'
Bruce S. Gordon Herbert Stockham
L. G. Hardman III
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 24, 1999
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized. The signature of the
undersigned company shall be deemed to relate only to matters having reference
to such company and any subsidiaries thereof.
ALABAMA POWER COMPANY
By: Elmer B. Harris, President and
Chief Executive Officer
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 24, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated. The signature of each of the
undersigned shall be deemed to relate only to matters having reference to the
above-named company and any subsidiaries thereof.
Elmer B. Harris
President, Chief Executive Officer and Director
(Principal Executive Officer)
William B. Hutchins, III
Executive Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)
Art P. Beattie
Vice President, Secretary and Comptroller
(Principal Accounting Officer)
Directors:
Whit Armstrong Thomas C. Meredith
David J. Cooper John T. Porter
A. W. Dahlberg Robert D. Powers
Peter V. Gregerson, Sr. Andreas Renschler
Carl E. Jones, Jr. C. Dowd Ritter
Patricia M. King James H. Sanford
James K. Lowder John Cox Webb, IV
Wallace D. Malone, Jr.
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 24, 1999
IV-2
<PAGE>
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: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 24, 1999
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)
David M. Ratcliffe
Executive Vice President, Chief Financial Officer
and Treasurer
(Principal Financial Officer)
Cliff S. Thrasher
Vice President, Comptroller and Chief Accounting Officer
(Principal Accounting Officer)
Directors:
Juanita P. Baranco Zell Miller
A. W. Dahlberg G. Joseph Prendergast
William A. Fickling, Jr. Herman J. Russell
L. G. Hardman III William Jerry Vereen
Warren Y. Jobe Carl Ware
James R. Lientz, Jr.
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 24, 1999
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized. The signature of the
undersigned company shall be deemed to relate only to matters having reference
to such company and any subsidiaries thereof.
GULF POWER COMPANY
By: Travis J. Bowden, President and
Chief Executive Officer
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 24, 1999
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)
Arlan E. Scarbrough
Vice President - Finance
(Principal Financial and Accounting Officer)
Directors:
Paul J. DeNicola Joseph K. Tannehill
Fred C. Donovan, Sr. Barbara H. Thames
W. Deck Hull, Jr.
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 24, 1999
IV-3
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized. The signature of the
undersigned company shall be deemed to relate only to matters having reference
to such company and any subsidiaries thereof.
MISSISSIPPI POWER COMPANY
By: Dwight H. Evans, President and
Chief Executive Officer
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 24, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated. The signature of each of the
undersigned shall be deemed to relate only to matters having reference to the
above-named company and any subsidiaries thereof.
Dwight H. Evans
President, Chief Executive Officer and Director
(Principal Executive Officer)
Michael W. Southern
Vice President, Secretary, Treasurer and
Chief Financial Officer
(Principal Financial and Accounting Officer)
Directors:
Paul J. DeNicola George A. Schloegel
Edwin E. Downer Philip J. Terrell
Robert S. Gaddis Gene Warr
Linda T. Howard
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 24, 1999
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized. The signature of the
undersigned company shall be deemed to relate only to matters having reference
to such company and any subsidiaries thereof.
SAVANNAH ELECTRIC AND POWER COMPANY
By: G. Edison Holland, Jr., President and
Chief Executive Officer
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 24, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated. The signature of each of the
undersigned shall be deemed to relate only to matters having reference to the
above-named company and any subsidiaries thereof.
G. Edison Holland, Jr.
President, Chief Executive Officer and Director
(Principal Executive Officer)
Kirby R. Willis
Vice President, Treasurer and
Chief Financial Officer
(Principal Financial and Accounting Officer)
Directors:
Archie H. Davis Robert B. Miller, III
Paul J. DeNicola Arnold M. Tenenbaum
Walter D. Gnann
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 24, 1999
IV-4
<PAGE>
Exhibit 21. Subsidiaries of the Registrants.*
Jurisdiction of
Name of Company Organization
- - - - - - - ------------------------------------------------ -- ---------------------
The Southern Company Delaware
Southern Company Capital Trust I Delaware
Southern Company Capital Trust II Delaware
Southern Company Capital Trust III Delaware
Southern Company Capital Trust IV Delaware
Southern Company Capital Trust V Delaware
Southern Company Capital Trust VI Delaware
Southern Company Capital Trust VII Delaware
Alabama Power Company Alabama
Alabama Power Capital Trust I Delaware
Alabama Power Capital Trust II Delaware
Alabama Power Capital Trust III Delaware
Alabama Power Capital Trust IV Delaware
Alabama Power Capital Trust V Delaware
Alabama Property Company Alabama
Southern Electric Generating Company Alabama
Georgia Power Company Georgia
Georgia Power Capital Trust I Delaware
Georgia Power Capital Trust II Delaware
Georgia Power Capital Trust III Delaware
Georgia Power Capital Trust IV Delaware
Georgia Power Capital Trust V Delaware
Georgia Power Capital Trust VI Delaware
Georgia Power L.P. Holdings Corp. Georgia
Georgia Power Capital, L.P. Delaware
Piedmont-Forrest Corporation Georgia
Southern Electric Generating Company Alabama
Gulf Power Company Maine
Gulf Power Capital Trust I Delaware
Gulf Power Capital Trust II Delaware
Gulf Power Capital Trust III Delaware
Mississippi Power Company Mississippi
Mississippi Power Capital Trust I Delaware
Mississippi Power Capital Trust II Delaware
Mississippi Power Capital Trust III Delaware
Savannah Electric and Power Company Georgia
Savannah Electric Capital Trust I Delaware
Southern Energy, Inc. Delaware
- - - - - - - ------------------------------------------------ -- ---------------------
*This information is as of December 31, 1998. In addition, the list omits
certain subsidiaries pursuant to paragraph (b)(21)(ii) of Regulation S-K Item
601.
IV-5
<PAGE>
Exhibit 23(a)
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports dated February 10, 1999 on the financial statements of The
Southern Company and its subsidiaries and the related financial statement
schedule, included in this Form 10-K, into The Southern Company's previously
filed Registration Statement File Nos. 2-78617, 33-3546, 33-30171, 33-51433,
33-54415, 33-57951, 33-58371, 33-60427, 333-09077, 333-44127, 333-44261 and
333-64871.
/s/ Arthur Andersen LLP
Atlanta, Georgia
March 22, 1999
IV-6
<PAGE>
ARTHUR ANDERSEN LLP
Exhibit 23(b)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports dated February 10, 1999 on the financial statements of Alabama
Power Company and the related financial statement schedule, included in this
Form 10-K, into Alabama Power Company's previously filed Registration Statement
File Nos. 33-61845 and 333-67453.
/s/ Arthur Andersen LLP
Birmingham, Alabama
March 22, 1999
IV-7
<PAGE>
ARTHUR ANDERSEN LLP
Exhibit 23(c)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports dated February 10, 1999 on the financial statements of Georgia
Power Company and the related financial statement schedule, included in this
Form 10-K, into Georgia Power Company's previously filed Registration Statement
File No. 333-43895.
/s/ Arthur Andersen LLP
Atlanta, Georgia
March 22, 1999
IV-8
<PAGE>
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 10, 1999 on the financial statements of Gulf Power
Company and the related financial statement schedule, included in this Form
10-K, into Gulf Power Company's previously filed Registration Statement File
Nos. 33-50165 and 333-42033.
/s/ Arthur Andersen LLP
Atlanta, Georgia
March 22, 1999
IV-9
<PAGE>
ARTHUR ANDERSEN LLP
Exhibit 23 (e)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports dated February 10, 1999 on the financial statements of
Mississippi Power Company and the related financial statement schedule, included
in this Form 10-K, into Mississippi Power Company's previously filed
Registration Statement File No. 333-45069.
/s/ Arthur Andersen LLP
Atlanta, Georgia
March 22, 1999
IV-10
<PAGE>
ARTHUR ANDERSEN LLP
Exhibit 23(f)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports dated February 10, 1999 on the financial statements of Savannah
Electric and Power Company and the related financial statement schedule,
included in this Form 10-K, into Savannah Electric and Power Company's
previously filed Registration Statement File No. 333-46171.
/s/ Arthur Andersen LLP
Atlanta, Georgia
March 22, 1999
IV-11
<PAGE>
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULE
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 10, 1999. Our audits were made for the purpose of forming an
opinion on those statements taken as a whole. The schedule listed under Item
14(a)(2) herein as it relates to The Southern Company and its subsidiaries (page
S-2) is the responsibility of The Southern Company's management and is presented
for purposes of complying with the Securities and Exchange Commission's rules
and is not part of the basic consolidated financial statements. This schedule
has been subjected to the auditing procedures applied in the audits of the basic
consolidated financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
/s/ Arthur Andersen LLP
Atlanta, Georgia
February 10, 1999
IV-12
<PAGE>
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULE
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 10, 1999. Our audits were made
for the purpose of forming an opinion on those statements taken as a whole. The
schedule listed under Item 14(a)(2) herein as it relates to Alabama Power
Company (page S-3) is the responsibility of Alabama Power Company's management
and is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
Birmingham, Alabama
February 10, 1999
IV-13
<PAGE>
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULE
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 10, 1999. Our audits were made
for the purpose of forming an opinion on those statements taken as a whole. The
schedule listed under Item 14(a)(2) herein as it relates to Georgia Power
Company (page S-4) is the responsibility of Georgia Power Company's management
and is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
Atlanta, Georgia
February 10, 1999
IV-14
<PAGE>
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULE
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 10, 1999. Our audits were made for
the purpose of forming an opinion on those statements taken as a whole. The
schedule listed under Item 14(a)(2) herein as it relates to Gulf Power Company
(page S-5) is the responsibility of Gulf Power Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
Atlanta, Georgia
February 10, 1999
IV-15
<PAGE>
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULE
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 10, 1999. Our audits
were made for the purpose of forming an opinion on those statements taken as a
whole. The schedule listed under Item 14(a)(2) herein as it relates to
Mississippi Power Company (page S-6) is the responsibility of Mississippi Power
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
/s/ Arthur Andersen LLP
Atlanta, Georgia
February 10, 1999
IV-16
<PAGE>
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULE
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 10, 1999. Our
audits were made for the purpose of forming an opinion on those statements taken
as a whole. The schedule listed under Item 14(a)(2) herein as it relates to
Savannah Electric and Power Company (page S-7) is the responsibility of Savannah
Electric and Power Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
/s/ Arthur Andersen LLP
Atlanta, Georgia
February 10, 1999
IV-17
<PAGE>
INDEX TO FINANCIAL STATEMENT SCHEDULES
Schedule
Page
II Valuation and Qualifying Accounts and Reserves
1998, 1997 and 1996
The Southern Company and Subsidiary Companies.....................S-2
Alabama Power Company.............................................S-3
Georgia Power Company.............................................S-4
Gulf Power Company................................................S-5
Mississippi Power Company.........................................S-6
Savannah Electric and Power Company...............................S-7
Schedules I through V not listed above are omitted as not applicable or not
required. Columns omitted from schedules filed have been omitted because the
information is not applicable or not required.
S-1
<PAGE>
<TABLE>
<CAPTION>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(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
<S> <C> <C> <C> <C> <C>
1998.......................... $77,056 $64,789 $6,325 $35,659 (1) $112,511
1997.......................... 31,587 35,930 36,290 (2) 26,751 (1) 77,056
1996.......................... 37,119 24,768 48 30,348 (1) 31,587
- - - - - - - -------------------
Notes:
(1) Represents write-off of accounts considered to be uncollectible, less
recoveries of amounts previously written off.
(2) Includes the addition of a Purchased Reserve in the amount of $37,000 related to the acquisition of
CEPA.
</TABLE>
S-2
<PAGE>
<TABLE>
<CAPTION>
ALABAMA POWER COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(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
<S> <C> <C> <C> <C> <C>
1998.......................... $2,272 $7,702 $- $8,119 (Note) $1,855
1997.......................... 1,171 8,580 - 7,479 (Note) 2,272
1996.......................... 1,212 8,214 - 8,255 (Note) 1,171
- - - - - - - -------------------
Note: Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously
written off.
</TABLE>
S-3
<PAGE>
<TABLE>
<CAPTION>
GEORGIA POWER COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(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
<S> <C> <C> <C> <C> <C>
1998.......................... $3,000 $17,856 $- $15,356 (Note) $5,500
1997.......................... 4,000 7,888 - 8,888 (Note) 3,000
1996.......................... 5,000 11,815 - 12,815 (Note) 4,000
- - - - - - - -------------------
Note: Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously
written off.
</TABLE>
S-4
<PAGE>
<TABLE>
<CAPTION>
GULF POWER COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31,1998, 1997 AND 1996
(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
<S> <C> <C> <C> <C> <C>
1998.......................... $796 $2,288 $- $2,088 (Note) $996
1997.......................... 789 1,350 - 1,343 (Note) 796
1996.......................... 768 1,850 7 1,836 (Note) 789
- - - - - - - -------------------
Note: Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously
written off.
</TABLE>
S-5
<PAGE>
<TABLE>
<CAPTION>
MISSISSIPPI POWER COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(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
<S> <C> <C> <C> <C> <C>
1998.......................... $698 $1,510 $31 $1,618 (Note) $621
1997.......................... 839 1,128 56 1,325 (Note) 698
1996.......................... 802 1,726 41 1,730 (Note) 839
- - - - - - - -------------------
Note: Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously
written off.
</TABLE>
S-6
<PAGE>
<TABLE>
<CAPTION>
SAVANNAH ELECTRIC AND POWER COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(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
<S> <C> <C> <C> <C> <C>
1998.......................... $354 $417 $- $487 (Note) $284
1997.......................... 632 192 - 470 (Note) 354
1996.......................... 983 126 - 477 (Note) 632
- - - - - - - -------------------
Note: Represents write-off of accounts receivable considered to be uncollectible, less recoveries of amounts
previously written off.
</TABLE>
S-7
<PAGE>
EXHIBIT INDEX
The following exhibits indicated by an asterisk preceding the exhibit number
are filed herewith. The balance of the exhibits have heretofore been filed with
the SEC, respectively, as the exhibits and in the file numbers indicated and are
incorporated herein by reference. The exhibits marked with a pound sign are
management contracts or compensatory plans or arrangements required to be filed
herewith and required to be identified as such by Item 14 of Form 10-K.
Reference is made to a duplicate list of exhibits being filed as a part of this
Form 10-K, which list, prepared in accordance with Item 601 of Regulation S-K of
the SEC, immediately precedes the exhibits being physically filed with this Form
10-K.
(1) Underwriting Agreements
GEORGIA
(c) - Distribution Agreement dated November 29, 1995 between
GEORGIA and Lehman Brothers Inc.; Donaldson, Lufkin &
Jenrette Securities Corporation; J. P. Morgan Securities
Inc.; Salomon Brothers Inc and Smith Barney Inc. relating to
$300,000,000 First Mortgage Bonds Secured Medium-Term Notes.
(Designated in GEORGIA's Form 10-K for the year ended
December 31, 1995, as Exhibit 1(c).)
(3) Articles of Incorporation and By-Laws
SOUTHERN
(a) 1 - Composite Certificate of Incorporation of SOUTHERN,
reflecting all amendments thereto through January 5, 1994.
(Designated in Registration No. 33-3546 as Exhibit 4(a), in
Certificate of Notification, File No. 70-7341, as Exhibit A
and in Certificate of Notification, File No. 70-8181, as
Exhibit A.)
(a) 2 - By-laws of SOUTHERN as amended effective October 21,
1991, and as presently in effect. (Designated in Form U-1,
File No. 70-8181, as Exhibit A-2.)
ALABAMA
(b) 1 - Charter of ALABAMA and amendments thereto through August
10, 1998. (Designated in Registration Nos. 2-59634 as
Exhibit 2(b), 2-60209 as Exhibit 2(c), 2-60484 as Exhibit
2(b), 2-70838 as Exhibit 4(a)-2, 2-85987 as Exhibit 4(a)-2,
33-25539 as Exhibit 4(a)-2, 33-43917 as Exhibit 4(a)-2, in
Form 8-K dated February 5, 1992, File No. 1-3164, as Exhibit
4(b)-3, in Form 8-K dated July 8, 1992, File No. 1-3164, as
Exhibit 4(b)-3, in Form 8-K dated October 27, 1993, File No.
1-3164, as Exhibits 4(a) and 4(b), in Form 8-K dated
November 16, 1993, File No. 1-3164, as Exhibit 4(a), in
Certificate of Notification, File No. 70-8191, as Exhibit A,
in ALABAMA's Form 10-K for the year ended December 31, 1997,
File No. 1-3164, as Exhibit 3(b)2 and Form 8-K dated August
10, 1998, File No. 1-3164, as Exhibit 4.4.)
E-1
<PAGE>
(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
January 26, 1998. (Designated in Registration Nos. 2-63392
as Exhibit 2(a)-2, 2-78913 as Exhibits 4(a)-(2) and
4(a)-(3), 2-93039 as Exhibit 4(a)-(2), 2-96810 as Exhibit
4(a)-2, 33-141 as Exhibit 4(a)-(2), 33-1359 as Exhibit
4(a)(2), 33-5405 as Exhibit 4(b)(2), 33-14367 as Exhibits
4(b)-(2) and 4(b)-(3), 33-22504 as Exhibits 4(b)-(2),
4(b)-(3) and 4(b)-(4), in GEORGIA's Form 10-K for the year
ended December 31, 1991, File No. 1-6468, as Exhibits
4(a)(2) and 4(a)(3), in Registration No. 33-48895 as
Exhibits 4(b)-(2) and 4(b)-(3), in Form 8-K dated December
10, 1992, File No. 1-6468 as Exhibit 4(b), in Form 8-K dated
June 17, 1993, File No. 1-6468, as Exhibit 4(b), in Form 8-K
dated October 20, 1993, File No. 1-6468, as Exhibit 4(b) and
in GEORGIA's Form 10-K for the year ended December 31, 1997,
File No. 1-6468, as Exhibit 3(c)2.)
(c) 2 - 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 January 28, 1998. (Designated in
Registration No. 33-43739 as Exhibit 4(b)-1, in Form 8-K
dated January 15, 1992, File No. 0-2429, as Exhibit 1(b), in
Form 8-K dated August 18, 1992, File No. 0-2429, as Exhibit
4(b)-2, in Form 8-K dated September 22, 1993, File No.
0-2429, as Exhibit 4, in Form 8-K dated November 3, 1993,
File No. 0-2429, as Exhibit 4 and in GULF's Form 10-K for
the year ended December 31, 1997, File No. 0-2429, as
Exhibit 3(d)2.)
(d) 2 - By-laws of GULF as amended effective July 26, 1996, and
as presently in effect. (Designated in Form U-1, File No.
70-8949, as Exhibit A-2(c).)
MISSISSIPPI
(e) 1 - Articles of Incorporation of MISSISSIPPI, articles of
merger of Mississippi Power Company (a Maine corporation)
into MISSISSIPPI and articles of amendment to the articles
of incorporation of MISSISSIPPI through December 31, 1997.
(Designated in Registration No. 2-71540 as Exhibit 4(a)-1,
in Form U5S for 1987, File No. 30-222-2, as Exhibit B-10, in
Registration No. 33-49320 as Exhibit 4(b)-(1), in Form 8-K
dated August 5, 1992, File No. 0-6849, as Exhibits 4(b)-2
and 4(b)-3, in Form 8-K dated August 4, 1993, File No.
0-6849, as Exhibit 4(b)-3, in Form 8-K dated August 18,
1993, File No. 0-6849, as Exhibit 4(b)-3 and in
MISSISSIPPI's Form 10-K for the year ended December 31,
1997, File No. 0-6849, as Exhibit 3(e)2.)
E-2
<PAGE>
(e) 2 - By-laws of MISSISSIPPI as amended effective April 2,
1996, and as presently in effect. (Designated in Form U5S
for 1995, File No. 30-222-2, as Exhibit B-10.)
SAVANNAH
(f) 1 - Charter of SAVANNAH and amendments thereto through
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 - Amendment to charter of SAVANNAH dated December 2, 1998.
(f) 3 - 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.)
(4) Instruments Describing Rights of Security Holders, Including Indentures
SOUTHERN
(a) 1 - Subordinated Note Indenture dated as of February 1,
1997, among SOUTHERN, Southern Company Capital Funding, Inc.
and Bankers Trust Company, as Trustee, and indentures
supplemental thereto dated as of February 4, 1997.
(Designated in Registration Nos. 333-28349 as Exhibits 4.1
and 4.2 and 333-28355 as Exhibit 4.2.)
(a) 2 - Subordinated Note Indenture dated as of June 1, 1997,
among SOUTHERN, Southern Company Capital Funding, Inc. and
Bankers Trust Company, as Trustee, and indentures
supplemental thereto through that dated as of December 23,
1998. (Designated in SOUTHERN's Form 10-K for the year ended
December 31, 1997, File No. 1-3526, as Exhibit (4)(a)2, in
Form 8-K dated June 18, 1998, File No. 1-3526, as Exhibit
4.2 and in Form 8-K dated December 18, 1998, File No.
1-3526, as Exhibit 4.4.)
(a) 3 - Amended and Restated Trust Agreement of Southern Company
Capital Trust I dated as of February 1, 1997. (Designated in
Registration No. 333-28349 as Exhibit 4.6)
(a) 4 - Amended and Restated Trust Agreement of Southern Company
Capital Trust II dated as of February 1, 1997. (Designated
in Registration No. 333-28355 as Exhibit 4.6)
(a) 5 - Amended and Restated Trust Agreement of Southern Company
Capital Trust III dated as of June 1, 1997. (Designated in
SOUTHERN's Form 10-K for the year ended December 31, 1997,
File No. 1-3526, as Exhibit (4)(a)5.)
(a) 6 - Amended and Restated Trust Agreement of Southern Company
Capital Trust IV dated as of June 1, 1998. (Designated in
Form 8-K dated June 18, 1998, File No. 1-3526, as Exhibit
4.5.)
E-3
<PAGE>
(a) 7 - Amended and Restated Trust Agreement of Southern Company
Capital Trust V dated as of December 1, 1998. (Designated in
Form 8-K dated December 18, 1998, File No. 1-3526, as
Exhibit 4.7A.)
(a) 8 - Capital Securities Guarantee Agreement relating to
Southern Company Capital Trust I dated as of February 1,
1997. (Designated in Registration No. 333-28349 as Exhibit
4.10)
(a) 9 - Capital Securities Guarantee Agreement relating to
Southern Company Capital Trust II dated as of February 1,
1997. (Designated in Registration No. 333-28355 as Exhibit
4.10)
(a) 10 - Preferred Securities Guarantee Agreement relating to
Southern Company Capital Trust III dated as of June 1, 1997.
(Designated in SOUTHERN's Form 10-K for the year ended
December 31, 1997, File No. 1-3526, as Exhibit (4)(a)8.)
(a) 11 - Preferred Securities Guarantee Agreement relating to
Southern Company Capital Trust IV dated as of June 1, 1998.
(Designated in Form 8-K dated June 18, 1998, File No.
1-3626, as Exhibit 4.8.)
(a) 12 - Preferred Securities Guarantee Agreement relating to
Southern Company Capital Trust V dated as of December 1,
1998. (Designated in Form 8-K dated December 18, 1998, File
No. 1-3526, as Exhibit 4.11A.)
ALABAMA
(b) 1 - Indenture dated as of January 1, 1942, between ALABAMA
and The Chase Manhattan Bank (formerly Chemical Bank), as
Trustee, and indentures supplemental thereto through that
dated as of December 1, 1994. (Designated in Registration
Nos. 2-59843 as Exhibit 2(a)-2, 2-60484 as Exhibits 2(a)-3
and 2(a)-4, 2-60716 as Exhibit 2(c), 2-67574 as Exhibit
2(c), 2-68687 as Exhibit 2(c), 2-69599 as Exhibit 4(a)-2,
2-71364 as Exhibit 4(a)-2, 2-73727 as Exhibit 4(a)-2,
33-5079 as Exhibit 4(a)-2, 33-17083 as Exhibit 4(a)-2,
33-22090 as Exhibit 4(a)-2, in ALABAMA's Form 10-K for the
year ended December 31, 1990, File No. 1-3164, as Exhibit
4(c), in Registration Nos. 33-43917 as Exhibit 4(a)-2,
33-45492 as Exhibit 4(a)-2, 33-48885 as Exhibit 4(a)-2,
33-48917 as Exhibit 4(a)-2, in Form 8-K dated January 20,
1993, File No. 1-3164, as Exhibit 4(a)-3, in Form 8-K dated
February 17, 1993, File No. 1-3164, as Exhibit 4(a)-3, in
Form 8-K dated March 10, 1993, File No. 1-3164, as Exhibit
4(a)-3, in Certificate of Notification, File No. 70-8069, as
Exhibits A and B, in Form 8-K dated June 24, 1993, File No.
1-3164, as Exhibit 4, in Certificate of Notification, File
No. 70-8069, as Exhibit A, in Form 8-K dated November 16,
1993, File No. 1-3164, as Exhibit 4(b), in Certificate of
Notification, File No. 70-8069, as Exhibits A and B, in
Certificate of Notification, File No. 70-8069, as Exhibit A,
in Certificate of Notification, File No. 70-8069, as Exhibit
A and in Form 8-K dated November 30, 1994, File No. 1-3164,
as Exhibit 4.)
E-4
<PAGE>
(b) 2 - Subordinated Note Indenture dated as of January 1, 1996,
between ALABAMA and The Chase Manhattan Bank (formerly
Chemical Bank), as Trustee, and indenture supplemental
thereto dated as of January 1, 1996. (Designated in
Certificate of Notification, File No. 70-8461, as Exhibits E
and F.)
(b) 3 - Subordinated Note Indenture dated as of January 1, 1997,
between ALABAMA and The Chase Manhattan Bank, as Trustee,
and indentures supplemental thereto through that dated as of
February 25, 1999. (Designated in Form 8-K dated January 9,
1997, File No. 1-3164, as Exhibits 4.1 and 4.2 and in Form
8-K dated February 18, 1999, File No. 3164, as Exhibit 4.2.)
(b) 4 - Senior Note Indenture dated as of December 1, 1997,
between ALABAMA and The Chase Manhattan Bank, as Trustee,
and indentures supplemental thereto through that dated
November 17, 1998. (Designated in Form 8-K dated December 4,
1997, File No. 1-3164, as Exhibits 4.1 and 4.2, in Form 8-K
dated February 20, 1998, File No. 1-3164, as Exhibit 4.2, in
Form 8-K dated April 17, 1998, File No. 1-3164, as Exhibit
4.2, in Form 8-K dated August 11, 1998, File No. 1-3164, as
Exhibit 4.2, in Form 8-K dated September 8, 1998, File No.
1-3164, as Exhibit 4.2, in Form 8-K dated September 16,
1998, File No. 1-3164, as Exhibit 4.2, in Form 8-K dated
October 7, 1998, File No. 1-3164, as Exhibit 4.2, in Form
8-K dated October 28, 1998, File No. 1-3164, as Exhibit 4.2
and in Form 8-K dated November 12, 1998, File No. 1-3164, as
Exhibit 4.2 .)
(b) 5 - Amended and Restated Trust Agreement of Alabama Power
Capital Trust I dated as of January 1, 1996. (Designated in
Certificate of Notification, File No. 70-8461, as Exhibit
D.)
(b) 6 - Amended and Restated Trust Agreement of Alabama Power
Capital Trust II dated as of January 1, 1997. (Designated in
Form 8-K dated January 9, 1997, File No. 1-3164, as Exhibit
4.5.)
(b) 7 - Amended and Restated Trust Agreement of Alabama Power
Capital Trust III dated as of February 1, 1999. (Designated
in Form 8-K dated February 18, 1999, File No. 1-3164, as
Exhibit 4.5.)
(b) 8 - Guarantee Agreement relating to Alabama Power Capital
Trust I dated as of January 1, 1996. (Designated in
Certificate of Notification, File No. 70-8461, as Exhibit
G.)
(b) 9 - Guarantee Agreement relating to Alabama Power Capital
Trust II dated as of January 1, 1997. (Designated in Form
8-K dated January 9, 1997, File No. 1-3164, as Exhibit 4.8.)
(b) 10 - Guarantee Agreement relating to Alabama Power Capital
Trust III dated as of February 1, 1999. (Designated in Form
8-K dated February 18, 1999, File No. 1-3164, as Exhibit
4.8.)
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GEORGIA
(c) 1 - Indenture dated as of March 1, 1941, between GEORGIA and
The Chase Manhattan Bank (formerly Chemical Bank), as
Trustee, and indentures supplemental thereto dated as of
March 1, 1941, March 3, 1941 (3 indentures), March 6, 1941
(139 indentures), March 1, 1946 (88 indentures) and December
1, 1947, through October 15, 1995. (Designated in
Registration Nos. 2-4663 as Exhibits B-3 and B-3(a), 2-7299
as Exhibit 7(a)-2, 2-61116 as Exhibit 2(a)-3 and 2(a)-4,
2-62488 as Exhibit 2(a)-3, 2-63393 as Exhibit 2(a)-4,
2-63705 as Exhibit 2(a)-3, 2-68973 as Exhibit 2(a)-3,
2-70679 as Exhibit 4(a)-(2), 2-72324 as Exhibit 4(a)-2,
2-73987 as Exhibit 4(a)-(2), 2-77941 as Exhibits 4(a)-(2)
and 4(a)-(3), 2-79336 as Exhibit 4(a)-(2), 2-81303 as
Exhibit 4(a)-(2), 2-90105 as Exhibit 4(a)-(2), 33-5405 as
Exhibit 4(a)-(2), 33-14367 as Exhibits 4(a)-(2) and
4(a)-(3), 33-22504 as Exhibits 4(a)-(2), 4(a)-(3) and
4(a)-(4), 33-32420 as Exhibit 4(a)-(2), 33-35683 as Exhibit
4(a)-(2), in GEORGIA's Form 10-K for the year ended December
31, 1990, File No. 1-6468, as Exhibit 4(a)(3), in Form 10-K
for the year ended December 31, 1991, File No. 1-6468, as
Exhibit 4(a)(5), in Registration No. 33-48895 as Exhibit
4(a)-(2), in Form 8-K dated August 26, 1992, File No.
1-6468, as Exhibit 4(a)-(3), in Form 8-K dated September 9,
1992, File No. 1-6468, as Exhibits 4(a)-(3) and 4(a)-(4), in
Form 8-K dated September 23, 1992, File No. 1-6468, as
Exhibit 4(a)-(3), in Form 8-A dated October 12, 1992, as
Exhibit 2(b), in Form 8-K dated January 27, 1993, File No.
1-6468, as Exhibit 4(a)-(3), in Registration No. 33-49661 as
Exhibit 4(a)-(2), in Form 8-K dated July 26, 1993, File No.
1-6468, as Exhibit 4, in Certificate of Notification, File
No. 70-7832, as Exhibit M, in Certificate of Notification,
File No. 70-7832, as Exhibit C, in Certificate of
Notification, File No. 70-7832, as Exhibits K and L, in
Certificate of Notification, File No. 70-8443, as Exhibit C,
in Certificate of Notification, File No. 70-8443, as Exhibit
C, in Certificate of Notification, File No. 70-8443, as
Exhibit E, in Certificate of Notification, File No. 70-8443,
as Exhibit E, in Certificate of Notification, File No.
70-8443, as Exhibit E, in GEORGIA's Form 10-K for the year
ended December 31, 1994, File No. 1-6468, as Exhibits 4(c)2
and 4(c)3, in Certificate of Notification, File No. 70-8443,
as Exhibit C, in Certificate of Notification, File No.
70-8443, as Exhibit C, in Form 8-K dated May 17, 1995, File
No. 1-6468, as Exhibit 4 and in GEORGIA's Form 10-K for the
year ended December 31, 1995, File No. 1-6468, as Exhibits
4(c)2, 4(c)3, 4(c)4, 4(c)5 and 4(c)6.)
(c) 2 - Indenture dated as of December 1, 1994, between GEORGIA
and Trust Company Bank, as Trustee and indentures
supplemental thereto through that dated as of December 15,
1994. (Designated in Certificate of Notification, File No.
70-8461, as Exhibits E and F.)
(c) 3 - Subordinated Note Indenture dated as of August 1, 1996,
between GEORGIA and The Chase Manhattan Bank, as Trustee,
and indentures supplemental thereto through January 1, 1997.
(Designated in Form 8-K dated August 21, 1996, File No.
1-6468, as Exhibits 4.1 and 4.2 and in Form 8-K dated
January 9, 1997, File No. 1-6468, as Exhibit 4.2.)
(c) 4 - Subordinated Note Indenture dated as of June 1, 1997,
between GEORGIA and The Chase Manhattan Bank, as Trustee,
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and indentures supplemental thereto through that dated as of
February 25, 1999. (Designated in Certificate of
Notification, File No. 70-8461, as Exhibits D and E and Form
8-K dated February 17, 1999, File No. 1-6468, as Exhibit
4.4.)
(c) 5 - Senior Note Indenture dated as of January 1, 1998,
between GEORGIA and The Chase Manhattan Bank, as Trustee,
and indentures supplemental thereto through that dated as of
March 9, 1999. (Designated in Form 8-K dated January 21,
1998, File No. 1-6468, as Exhibits 4.1 and 4.2, in Forms 8-K
each dated November 19, 1998, File No. 1-6468, as Exhibit
4.2 and in Form 8-K dated March 3, 1999, File No. 1-6469 as
Exhibit 4.2.)
(c) 6 - Amended and Restated Trust Agreement of Georgia Power
Capital Trust I dated as of August 1, 1996. (Designated in
Form 8-K dated August 21, 1996, File No. 1-6468, as Exhibit
4.5.)
(c) 7 - Amended and Restated Trust Agreement of Georgia Power
Capital Trust II dated as of January 1, 1997. (Designated in
Form 8-K dated January 9, 1997, File No. 1-6468, as Exhibit
4.5.)
(c) 8 - Amended and Restated Trust Agreement of Georgia Power
Capital Trust III dated as of June 1, 1997. (Designated in
Certificate of Notification, File No. 70-8461, as Exhibit
C.)
(c) 9 - Amended and Restated Trust Agreement of Georgia Power
Capital Trust IV dated as of February 1, 1999. (Designated
in Form 8-K dated February 17, 1999, as Exhibit 4.7-A)
(c) 10 - Guarantee Agreement relating to Georgia Power Capital
Trust I dated as of August 1, 1996. (Designated in Form 8-K
dated August 21, 1996, File No. 1-6468, as Exhibit 4.8.)
(c) 11 - Guarantee Agreement relating to Georgia Power Capital
Trust II dated as of January 1, 1997. (Designated in Form
8-K dated January 9, 1997, File No. 1-6468, as Exhibit 4.8.)
(c) 12 - Guarantee Agreement relating to Georgia Power Capital
Trust III dated as of June 1, 1997. (Designated in
Certificate of Notification, File No. 70-8461, as Exhibit
F.)
(c) 13 - Guarantee Agreement relating to Georgia Power Capital
Trust IV dated as of February 1, 1999. (Designated in Form
8-K dated February 17, 1999, as Exhibit 4.11-A.)
GULF
(d) 1 - Indenture dated as of September 1, 1941, between GULF
and The Chase Manhattan Bank (formerly The Chase Manhattan
Bank (National Association)), as Trustee, and indentures
supplemental thereto through November 1, 1996. (Designated
in Registration Nos. 2-4833 as Exhibit B-3, 2-62319 as
Exhibit 2(a)-3, 2-63765 as Exhibit 2(a)-3, 2-66260 as
Exhibit 2(a)-3, 33-2809 as Exhibit 4(a)-2, 33-43739 as
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Exhibit 4(a)-2, in GULF's Form 10-K for the year ended
December 31, 1991, File No. 0-2429, as Exhibit 4(b), in Form
8-K dated August 18, 1992, File No. 0-2429, as Exhibit
4(a)-3, in Registration No. 33-50165 as Exhibit 4(a)-2, in
Form 8-K dated July 12, 1993, File No. 0-2429, as Exhibit 4,
in Certificate of Notification, File No. 70-8229, as Exhibit
A, in Certificate of Notification, File No. 70-8229, as
Exhibits E and F, in Form 8-K dated January 17, 1996, File
No. 0-2429, as Exhibit 4, in Certificate of Notification,
File No. 70-8229, as Exhibit A, in Certificate of
Notification, File No. 70-8229, as Exhibit A and in Form 8-K
dated November 6, 1996, File No. 0-2429, as Exhibit 4.)
(d) 2 - Subordinated Note Indenture dated as of January 1, 1997,
between GULF and The Chase Manhattan Bank, as Trustee, and
indentures supplemental thereto through that dated as of
January 1, 1998. (Designated in Form 8-K dated January 27,
1997, File No. 0-2429, as Exhibits 4.1 and 4.2, in Form 8-K
dated July 28, 1997, File No. 0-2429, as Exhibit 4.2 and in
Form 8-K dated January 13, 1998, File No. 0-2429, as Exhibit
4.2.)
(d) 3 - Senior Note Indenture dated as of January 1, 1998,
between GULF and The Chase Manhattan Bank, as Trustee, and
indenture supplemental thereto dated as of June 24, 1998.
(Designated in Form 8-K dated June 17, 1998, File No.
0-2429, as Exhibits 4.1 and 4.2.)
(d) 4 - Amended and Restated Trust Agreement of Gulf Power
Capital Trust I dated as of January 1, 1997. (Designated in
Form 8-K dated January 27, 1997, File No. 0-2429, as Exhibit
4.5.)
(d) 5 - Amended and Restated Trust Agreement of Gulf Power
Capital Trust II dated as of January 1, 1998. (Designated in
Form 8-K dated January 13, 1998, File No. 0-2429, as Exhibit
4.5.)
(d) 6 - Guarantee Agreement relating to Gulf Power Capital Trust
I dated as of January 1, 1997. (Designated in Form 8-K dated
January 27, 1997, File No. 0-2429, as Exhibit 4.8.)
(d) 7 - Guarantee Agreement relating to Gulf Power Capital Trust
II dated as of January 1, 1998. (Designated in Form 8-K
dated January 13, 1998, File No. 0-2429, as Exhibit 4.8.)
MISSISSIPPI
(e) 1 - Indenture dated as of September 1, 1941, between
MISSISSIPPI and Bankers Trust Company, as Successor Trustee,
and indentures supplemental thereto through December 1,
1995. (Designated in Registration Nos. 2-4834 as Exhibit
B-3, 2-62965 as Exhibit 2(b)-2, 2-66845 as Exhibit 2(b)-2,
2-71537 as Exhibit 4(a)-(2), 33-5414 as Exhibit 4(a)-(2),
33-39833 as Exhibit 4(a)-2, in MISSISSIPPI's Form 10-K for
the year ended December 31, 1991, File No. 0-6849, as
Exhibit 4(b), in Form 8-K dated August 5, 1992, File No.
0-6849, as Exhibit 4(a)-2, in Second Certificate of
Notification, File No. 70-7941, as Exhibit I, in
MISSISSIPPI's Form 8-K dated February 26, 1993, File No.
0-6849, as Exhibit 4(a)-2, in Certificate of Notification,
File No. 70-8127, as Exhibit A, in Form 8-K dated June 22,
1993, File No. 0-6849, as Exhibit 1, in Certificate of
Notification, File No. 70-8127, as Exhibit A, in Form 8-K
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<PAGE>
dated March 8, 1994, File No. 0-6849, as Exhibit 4, in
Certificate of Notification, File No. 70-8127, as Exhibit C
and in Form 8-K dated December 5, 1995, File No. 0-6849, as
Exhibit 4.)
(e) 2 - Senior Note Indenture dated as of May 1, 1998 between
MISSISSIPPI and Bankers Trust Company, as Trustee and
indentures supplemental thereto through May 20, 1998.
(Designated in Form 8-K dated May 14, 1998, File No. 0-6849,
as Exhibits 4.1, 4.2(a) and 4.2(b).)
(e) 3 - Subordinated Note Indenture dated as of February 1,
1997, between MISSISSIPPI and Bankers Trust Company, as
Trustee, and indenture supplemental thereto dated as of
February 1, 1997. (Designated in Form 8-K dated February 20,
1997, File No. 0-6849, as Exhibits 4.1 and 4.2.)
(e) 4 - Amended and Restated Trust Agreement of Mississippi
Power Capital Trust I dated as of February 1, 1997.
(Designated in Form 8-K dated February 20, 1997, File No.
0-6849, as Exhibit 4.5.)
(e) 5 - Guarantee Agreement relating to Mississippi Power
Capital Trust I dated as of February 1, 1997. (Designated in
Form 8-K dated February 20, 1997, File No. 0-6849, as
Exhibit 4.8.)
SAVANNAH
(f) 1 - Indenture dated as of March 1, 1945, between SAVANNAH
and The Bank of New York, New York, as Trustee, and
indentures supplemental thereto through May 1, 1996.
(Designated in Registration Nos. 33-25183 as Exhibit
4(a)-(1), 33-41496 as Exhibit 4(a)-(2), 33-45757 as Exhibit
4(a)-(2), in SAVANNAH's Form 10-K for the year ended
December 31, 1991, File No. 1-5072, as Exhibit 4(b), in Form
8-K dated July 8, 1992, File No. 1-5072, as Exhibit 4(a)-3,
in Registration No. 33-50587 as Exhibit 4(a)-(2), in Form
8-K dated July 22, 1993, File No. 1-5072, as Exhibit 4, in
Form 8-K dated May 18, 1995, File No. 1-5072, as Exhibit 4
and in Form 8-K dated May 23, 1996, File No. 1-5072, as
Exhibit 4.)
(f) 2 - Senior Note Indenture dated as of March 1, 1998 between
SAVANNAH and The Bank of New York, as Trustee and indenture
supplemental thereto dated as of March 1, 1998. (Designated
in Form 8-K dated March 9, 1998, File No. 1-5072, as
Exhibits 4.1 and 4.2.)
(f) 3 - Subordinated Note Indenture dated as of December 1,
1998, between SAVANNAH and The Bank of New York, as Trustee,
and indenture supplemental thereto dated as of December 9,
1998. (Designated in Form 8-K dated December 3, 1998, File
No. 1-5072, as Exhibit 4.3 and 4.4.)
(f) 4 - Amended and Restated Trust Agreement of Savannah
Electric Capital Trust I dated as of December 1, 1998.
(Designated in Form 8-K dated December 3, 1998, File No.
1-5072, as Exhibit 4.7.)
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<PAGE>
(f) 5 - Guarantee Agreement relating to Savannah Electric
Capital Trust I dated as of December 1, 1998. (Designated in
Form 8-K dated December 3, 1998, File No. 1-5072, as Exhibit
4.11.)
(10) Material Contracts
SOUTHERN
(a) 1 - Service contracts dated as of January 1, 1984, between
SCS and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SEGCO and
SOUTHERN and Amendment No. 1 dated as of September 6, 1985
between SCS and SOUTHERN. (Designated in SOUTHERN's Form
10-K for the year ended December 31, 1984, File No. 1-3526,
as Exhibit 10(a) and in SOUTHERN's Form 10-K for the year
ended December 31, 1985, File No. 1-3526, as Exhibit
10(a)(3).)
(a) 2 - Service contract dated as of July 17, 1981, between SCS
and 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 - Service contract dated as of December 12, 1994, between
SCS and Mobile Energy Services Company, Inc. (Designated in
SOUTHERN's Form 10-K for the year ended December 31, 1994,
File No. 1-3526, as Exhibit 10(a)58.)
(a) 6 - Interchange contract dated 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) 7 - Agreement dated as of January 27, 1959, Amendment No. 1
dated as of October 27, 1982 and Amendment No. 2 dated
November 4, 1993 and effective June 1, 1994, among SEGCO,
ALABAMA and GEORGIA. (Designated in Registration No. 2-59634
as Exhibit 5(c), in GEORGIA's Form 10-K for the year ended
December 31, 1982, File No. 1-6468, as Exhibit 10(d)(2) and
in ALABAMA's Form 10-K for the year ended December 31, 1994,
File No. 1-3164, as Exhibit 10(b)18.)
(a) 8 - Joint Committee Agreement dated as of August 27, 1976,
among GEORGIA, OPC, MEAG and Dalton. (Designated in
Registration No. 2-61116 as Exhibit 5(d).)
(a) 9 - Edwin I. Hatch Nuclear Plant Purchase and Ownership
Participation Agreement dated as of January 6, 1975, between
GEORGIA and OPC. (Designated in Form 8-K for January, 1975,
File No. 1-6468, as Exhibit (b)(1).)
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<PAGE>
(a) 10 - Edwin I. Hatch Nuclear Plant Operating Agreement dated
as of January 6, 1975, between GEORGIA and OPC. (Designated
in Form 8-K for January, 1975, File No. 1-6468, as Exhibit
(b)(3).)
(a) 11 - Revised and Restated Integrated Transmission System
Agreement dated as of November 12, 1990, between GEORGIA and
OPC. (Designated in GEORGIA's Form 10-K for the year ended
December 31, 1990, File No. 1-6468, as Exhibit 10(g).)
(a) 12 - Plant Hal Wansley Purchase and Ownership Participation
Agreement dated as of March 26, 1976, between GEORGIA and
OPC. (Designated in Certificate of Notification, File No.
70-5592, as Exhibit A.)
(a) 13 - Plant Hal Wansley Operating Agreement dated as of March
26, 1976, between GEORGIA and OPC. (Designated in
Certificate of Notification, File No. 70-5592, as Exhibit
B.)
(a) 14 - Edwin I. Hatch Nuclear Plant Purchase and Ownership
Participation Agreement dated as of August 27, 1976, between
GEORGIA, MEAG and Dalton. (Designated in Form 8-K dated as
of June 13, 1977, File No. 1-6468, as Exhibit (b)(1).)
(a) 15 - Edwin I. Hatch Nuclear Plant Operating Agreement dated
as of August 27, 1976, between GEORGIA, MEAG and Dalton.
(Designated in Form 8-K for February 1977, File No. 1-6468,
as Exhibit (b)(2).)
(a) 16 - Alvin W. Vogtle Nuclear Units Number One and Two
Purchase and Ownership Participation Agreement dated as of
August 27, 1976 and Amendment No. 1 dated as of January 18,
1977, among GEORGIA, OPC, MEAG and Dalton. (Designated in
Form U-1, File No. 70-5792, as Exhibit B-1 and in Form 8-K
for January 1977, File No. 1-6468, as Exhibit (B)(3).)
(a) 17 - Alvin W. Vogtle Nuclear Units Number One and Two
Operating Agreement dated as of August 27, 1976, among
GEORGIA, OPC, MEAG and Dalton. (Designated in Form U-1, File
No. 70-5792, as Exhibit B-2.)
(a) 18 - Alvin W. Vogtle Nuclear Units Number One and Two
Purchase, Amendment, Assignment and Assumption Agreement
dated as of November 16, 1983, between GEORGIA and MEAG.
(Designated in GEORGIA's Form 10-K for the year ended
December 31, 1983, File No. 1-6468, as Exhibit 10(k)(4).)
(a) 19 - Plant Hal Wansley Purchase and Ownership Participation
Agreement dated as of August 27, 1976, between GEORGIA and
MEAG. (Designated in Form 8-K dated as of July 5, 1977, File
No. 1-6468, as Exhibit (b)(2).)
(a) 20 - Plant Hal Wansley Operating Agreement dated as of
August 27, 1976, between GEORGIA and MEAG. (Designated in
Form 8-K dated as of July 5, 1977, File No. 1-6468, as
Exhibit (b)(4).)
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<PAGE>
(a) 21 - Nuclear Operating Agreement between Southern Nuclear
and GEORGIA dated as of July 1, 1993. (Designated in
SOUTHERN's Form 10-K for the year ended December 31, 1997,
File No. 1-3526, as Exhibit 10(a)21.)
(a) 22 - Pseudo Scheduling and Services Agreement between
GEORGIA and MEAG dated as of April 8, 1997. (Designated in
SOUTHERN's Form 10-K for the year ended December 31, 1997,
File No. 1-3526, as Exhibit 10(a)22.)
(a) 23 - Plant Hal Wansley Purchase and Ownership Participation
Agreement dated as of April 19, 1977, between GEORGIA and
Dalton. (Designated in Form 8-K dated as of June 13, 1977,
File No. 1-6468, as Exhibit (b)(3).)
(a) 24 - Plant Hal Wansley Operating Agreement dated as of April
19, 1977, between GEORGIA and Dalton. (Designated in Form
8-K dated as of June 13, 1977, File No. 1-6468, as Exhibit
(b)(7).)
(a) 25 - Plant Robert W. Scherer Units Number One and Two
Purchase and Ownership Participation Agreement dated as of
May 15, 1980, Amendment No. 1 dated as of December 30, 1985,
Amendment No. 2 dated as of July 1, 1986, Amendment No. 3
dated as of August 1, 1988 and Amendment No. 4 dated as of
December 31, 1990, among GEORGIA, OPC, MEAG and Dalton.
(Designated in Form U-1, File No. 70-6481, as Exhibit B-3,
in SOUTHERN's Form 10-K for the year ended December 31,
1987, File No. 1-3526, as Exhibit 10(o)(2), in SOUTHERN's
Form 10-K for the year ended December 31, 1989, File No.
1-3526, as Exhibit 10(n)(2) and in SOUTHERN's Form 10-K for
the year ended December 31, 1993, File No. 1-3526, as
Exhibit 10(a)54.)
(a) 26 - Plant Robert W. Scherer Units Number One and Two
Operating Agreement dated as of May 15, 1980, Amendment No.
1 dated as of December 3, 1985 and Amendment No. 2 dated as
of December 31, 1990, among GEORGIA, OPC, MEAG and Dalton.
(Designated in Form U-1, File No. 70-6481, as Exhibit B-4,
in SOUTHERN's Form 10-K for the year ended December 31,
1987, File No. 1-3526, as Exhibit 10(o)(4) and in SOUTHERN's
Form 10-K for the year ended December 31, 1993, File No.
1-3526, as Exhibit 10(a)55.)
(a) 27 - Plant Robert W. Scherer Purchase, Sale and Option
Agreement dated as of May 15, 1980, between GEORGIA and
MEAG. (Designated in Form U-1, File No. 70-6481, as Exhibit
B-1.)
(a) 28 - Plant Robert W. Scherer Purchase and Sale Agreement
dated as of May 16, 1980, between GEORGIA and Dalton.
(Designated in Form U-1, File No. 70-6481, as Exhibit B-2.)
(a) 29 - Plant Robert W. Scherer Unit Number Three Purchase and
Ownership Participation Agreement dated as of March 1, 1984,
Amendment No. 1 dated as of July 1, 1986 and Amendment No. 2
dated as of August 1, 1988, between GEORGIA and GULF.
(Designated in Form U-1, File No. 70-6573, as Exhibit B-4,
in SOUTHERN's Form 10-K for the year ended December 31,
1987, as Exhibit 10(o)(2) and in SOUTHERN's Form 10-K for
the year ended December 31, 1989, as Exhibit 10(n)(2).)
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(a) 30 - Plant Robert W. Scherer Unit Number Three Operating
Agreement dated as of March 1, 1984, between GEORGIA and
GULF. (Designated in Form U-1, File No. 70-6573, as Exhibit
B-5.)
(a) 31 - Plant Robert W. Scherer Unit No. Four Amended and
Restated Purchase and Ownership Participation Agreement by
and among GEORGIA, FP&L and JEA, dated as of December 31,
1990 and Amendment No. 1 dated as of June 15, 1994.
(Designated in Form U-1, File No. 70-7843, as Exhibit B-1
and in SOUTHERN's Form 10-K for the year ended December 31,
1994, File No. 1-3526, as Exhibit 10(a)60.)
(a) 32 - Plant Robert W. Scherer Unit No. Four Operating
Agreement by and among GEORGIA, FP&L and JEA, dated as of
December 31, 1990 and Amendment No. 1 dated as of June 15,
1994. (Designated in Form U-1, File No. 70-7843, as Exhibit
B-2 and in SOUTHERN's Form 10-K for the year ended December
31, 1994, File No. 1-3526, as Exhibit 10(a)61.)
(a) 33 - 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) 34 - 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) 35 - Unit Power Sales Agreement dated July 19, 1988, between
FPC and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and
SCS. (Designated in SAVANNAH's Form 10-K for the year ended
December 31, 1988, File No. 1-5072, as Exhibit 10(d).)
(a) 36 - 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) 37 - 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).)
E-13
<PAGE>
(a) 38 - 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) 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.)
(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).)
E-14
<PAGE>
(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 - Revised and Restated Coordination Services Agreement
between and among GEORGIA, OPC and Georgia Systems
Operations Corporation dated as of September 10, 1997.
(Designated in SOUTHERN's Form 10-K for the year ended
December 31, 1997, File No. 1-3526, as Exhibit 10(a)48.)
(a) 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.)
(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.)
E-15
<PAGE>
(a) 58 - 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) 59 - The Southern Company Productivity Improvement
Plan, Amended and Restated effective January 1, 1998.
# * (a) 60 - The Southern Company Executive Productivity
Improvement Plan, Amended and Restated effective January 1,
1998.
* (a) 61 - The Southern Company Employee Savings Plan, Amended
and Restated effective January 1, 1997 and all amendments
thereto through Amendment Number Three.
* (a) 62 - The Southern Company Employee Stock Ownership Plan,
Amended and Restated effective January 1, 1997 and all
amendments thereto through Amendment Number Two.
* (a) 63 - The Southern Company Performance Pay Plan, Amended
and Restated effective January 1, 1998.
# (a) 64 - The Deferred Compensation Plan for the Directors of
The Southern Company and First Amendment and Second
Amendment thereto. (Designated in SOUTHERN's Form 10-K for
the year ended December 31, 1994, File No. 1-3526, as
Exhibit 10(a)76 and in SOUTHERN's Form 10-K for the year
ended December 31, 1995, File No. 1-3526, as Exhibit
10(a)75.)
# (a) 65 - The Southern Company Outside Directors Pension
Plan. (Designated in SOUTHERN's Form 10-K for the year ended
December 31, 1994, File No. 1-3526, as Exhibit 10(a)77.)
# * (a) 66 - The Southern Company Deferred Compensation Plan,
Amended and Restated effective January 1, 1998.
# (a) 67 - The Southern Company Outside Directors Stock Plan
and First Amendment thereto. (Designated in Registration No.
33-54415 as Exhibit 4(c) and in SOUTHERN's Form 10-K for the
year ended December 31, 1995, File No. 1-3526, as Exhibit
10(a)79.)
# (a) 68 - Outside Directors Stock Plan for Subsidiaries of
The Southern Company and First Amendment thereto.
(Designated in SOUTHERN's Form 10-K for the year ended
December 31, 1995, File No. 1-3526, as Exhibit 10(a)80.)
# * (a) 69 - The Southern Company Performance Dividend Plan,
Amended and Restated effective January 1, 1998.
E-16
<PAGE>
(a) 70 - The Southern Company Pension Plan, effective as of
January 1, 1997 and Amendment Number One thereto.
(Designated in SOUTHERN's Form 10-K for the year ended
December 31, 1996, File No. 1-3526, as Exhibit 10(a)83 and
in SOUTHERN's Form 10-K for the year ended December 31,
1997, File No. 1-3526, as Exhibit 10(a)79.)
* (a) 71 - Amendment Number Two and Amendment Number Three to
The Southern Company Pension Plan.
# * (a) 72 - The Southern Company Performance Stock Plan,
Amended and Restated effective January 1, 1998.
# (a) 73 - The Southern Company Supplemental Executive
Retirement Plan. (Designated in SOUTHERN's Form 10-K for the
year ended December 31, 1997, File No. 1-3526, as Exhibit
10(a)81.)
# * (a) 74 - Amendment Number One and Amendment Number Two to
The Southern Company Supplemental Executive Retirement Plan.
# (a) 75 - The Southern Company Performance Sharing Plan
effective January 1, 1997. (Designated in SOUTHERN's Form
10-K for the year ended December 31, 1997, File No. 1-3526,
as Exhibit 10(a)82.)
# * (a) 76 - Amendments One through Six to The Southern
Company Performance Sharing Plan.
# * (a) 77 - The Southern Company Supplemental Benefit Plan,
Amended and Restated effective January 1, 1998.
* (a) 78 - Southern Company Change in Control Severance Plan,
effective December 7, 1998.
# * (a) 79 - Southern Company Executive Change in Control
Severance Plan, effective December 7, 1998.
# * (a) 80 - Deferred Compensation Agreement between SOUTHERN,
GEORGIA and Henry Allen Franklin.
# * (a) 81 - Deferred Compensation Agreement between SOUTHERN,
Southern Nuclear and William G. Hairston III.
# * (a) 82 - Deferred Compensation Agreement between SOUTHERN,
GEORGIA and Warren Y. Jobe.
# * (a) 83 - Change in Control Agreement between SOUTHERN,
Southern Energy Resources, Inc. and Thomas G. Boren.
# * (a) 84 - Change in Control Agreement between SOUTHERN,
GULF and Travis J. Bowden.
# * (a) 85 - Change in Control Agreement between SOUTHERN, SCS
and A. W. Dahlberg.
# * (a) 86 - Change in Control Agreement between SOUTHERN, SCS
and Paul J. DeNicola.
E-17
<PAGE>
# * (a) 87 - Change in Control Agreement between SOUTHERN,
MISSISSIPPI and Dwight H. Evans.
# * (a) 88 - Change in Control Agreement between SOUTHERN,
ALABAMA and Banks Harry Farris.
# * (a) 89 - Change in Control Agreement between SOUTHERN,
GEORGIA and Henry Allen Franklin.
# * (a) 90 - Change in Control Agreement between SOUTHERN,
Southern Nuclear and William G. Hairston, III.
# * (a) 91 - Change in Control Agreement between SOUTHERN,
ALABAMA and Elmer B. Harris.
# * (a) 92 - Change in Control Agreement between SOUTHERN,
SAVANNAH and G. Edison Holland, Jr.
# * (a) 93 - Change in Control Agreement between SOUTHERN, SCS
and C. Alan Martin.
# * (a) 94 - Change in Control Agreement between SOUTHERN, SCS
and Charles Douglas McCrary.
# * (a) 95 - Change in Control Agreement between SOUTHERN,
GEORGIA and David M. Ratcliffe.
# * (a) 96 - Change in Control Agreement between SOUTHERN, SCS
and Stephen A. Wakefield.
# * (a) 97 - Change in Control Agreement between SOUTHERN, SCS
and W. Lawrence Westbrook.
ALABAMA
(b) 1 - Service contracts dated as of January 1, 1984, between
SCS and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SEGCO and
SOUTHERN and Amendment No. 1 dated as of September 6, 1985
between SCS and SOUTHERN. See Exhibit 10(a)1 herein.
(b) 2 - Interchange contract dated October 28, 1988, effective
January 1, 1989, between ALABAMA, GEORGIA, GULF,
MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)6 herein.
(b) 3 - Agreement dated as of January 27, 1959, Amendment No. 1
dated as of October 27, 1982 and Amendment No. 2 dated
November 4, 1993 and effective June 1, 1994, among SEGCO,
ALABAMA and GEORGIA. See Exhibit 10(a)7 herein.
E-18
<PAGE>
(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)33 herein.
(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)34 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)35 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)36 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)37 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)38 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-19
<PAGE>
(b) 17 - Long Term Transmission Service Agreement between
Entergy Power, Inc. and ALABAMA, MISSISSIPPI and SCS. See
Exhibit 10(a)53 herein.
(b) 18 - Operating Agreement for the Joseph M. Farley Nuclear
Plant between ALABAMA and Southern Nuclear dated as of
December 23, 1991. See Exhibit 10(a)58 herein.
# * (b) 19 - The Southern Company Productivity Improvement
Plan, Amended and Restated effective January 1, 1998. See
Exhibit 10(a)59 herein.
# * (b) 20 - The Southern Company Executive Productivity
Improvement Plan, Amended and Restated effective January 1,
1998. See Exhibit 10(a)60 herein.
* (b) 21 - The Southern Company Employee Savings Plan, Amended
and Restated effective January 1, 1997 and all amendments
thereto through Amendment Number Three. See Exhibit 10(a)61
herein.
* (b) 22 - The Southern Company Employee Stock Ownership Plan,
Amended and Restated effective January 1, 1997 and all
amendments thereto through Amendment Number Two. See Exhibit
10(a)62 herein.
* (b) 23 - The Southern Company Performance Pay Plan, Amended
and Restated effective January 1, 1998. See Exhibit 10(a)63
herein.
# * (b) 24 - The Southern Company Deferred Compensation Plan,
Amended and Restated effective January 1, 1998. See Exhibit
10(a)66 herein.
# (b) 25 - The Southern Company Outside Directors Pension
Plan. See Exhibit 10(a)65 herein.
# (b) 26 - Outside Directors Stock Plan for Subsidiaries of
The Southern Company and First Amendment thereto. See
Exhibit 10(a)68 herein.
(b) 27 - The Southern Company Pension Plan, effective as of
January 1, 1997 and Amendment Number One thereto. See
Exhibit 10(a)70 herein.
* (b) 28 - Amendment Number Two and Amendment Number Three to
The Southern Company Pension Plan. See Exhibit 10(a)71
herein.
# * (b) 29 - The Southern Company Performance Stock Plan,
Amended and Restated effective January 1, 1998. See Exhibit
10(a)72 herein.
# (b) 30 - The Southern Company Supplemental Executive
Retirement Plan. See Exhibit 10(a)73 herein.
# * (b) 31 - Amendment Number One and Amendment Number Two to
The Southern Company Supplemental Executive Retirement Plan.
See Exhibit 10(a)74 herein.
# * (b) 32 - The Southern Company Performance Dividend Plan,
Amended and Restated effective January 1, 1998. See Exhibit
10(a)69 herein.
E-20
<PAGE>
# (b) 33 - The Southern Company Performance Sharing Plan
effective January 1, 1997. See Exhibit 10(a)75 herein.
# * (b) 34 - Amendments One through Six to The Southern
Company Performance Sharing Plan. See Exhibit 10(a)76
herein.
# * (b) 35 - The Southern Company Supplemental Benefit Plan,
Amended and Restated effective January 1, 1998. See Exhibit
10(a)77 herein.
* (b) 36 - Southern Company Change in Control Severance Plan,
effective December 7, 1998. See Exhibit 10(a)78 herein.
# * (b) 37 - Southern Company Executive Change in Control
Severance Plan, effective December 7, 1998. See Exhibit
10(a)79 herein.
# * (b) 38 - Change in Control Agreement between SOUTHERN,
ALABAMA and Banks Harry Farris. See Exhibit 10(a)88 herein.
# * (b) 39 - Change in Control Agreement between SOUTHERN,
ALABAMA and Elmer B. Harris. See Exhibit 10(a)91 herein.
# * (b) 40 - Supplemental Pension Agreement between ALABAMA,
GULF and Travis J. Bowden.
GEORGIA
(c) 1 - Service contracts dated as of January 1, 1984, between
SCS and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SEGCO and
SOUTHERN and Amendment No. 1 dated as of September 6, 1985,
between SCS and SOUTHERN. See Exhibit 10(a)1 herein.
(c) 2 - Interchange contract dated October 28, 1988, effective
January 1, 1989, between ALABAMA, GEORGIA, GULF,
MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)6 herein.
(c) 3 - Agreement dated as of January 27, 1959, Amendment No. 1
dated as of October 27, 1982 and Amendment No. 2 dated
November 4, 1993 and effective June 1, 1994, among SEGCO,
ALABAMA and GEORGIA. See Exhibit 10(a)7 herein.
(c) 4 - Joint Committee Agreement dated as of August 27, 1976,
among GEORGIA, OPC, MEAG and Dalton. See Exhibit 10(a)8
herein.
(c) 5 - Edwin I. Hatch Nuclear Plant Purchase and Ownership
Participation Agreement dated as of January 6, 1975, between
GEORGIA and OPC. See Exhibit 10(a)9 herein.
(c) 6 - Edwin I. Hatch Nuclear Plant Operating Agreement dated
as of January 6, 1975, between GEORGIA and OPC. See Exhibit
10(a)10 herein.
E-21
<PAGE>
(c) 7 - Revised and Restated Integrated Transmission System
Agreement dated as of November 12, 1990, between GEORGIA and
OPC. See Exhibit 10(a)11 herein.
(c) 8 - Plant Hal Wansley Purchase and Ownership Participation
Agreement dated as of March 26, 1976, between GEORGIA and
OPC. See Exhibit 10(a)12 herein.
(c) 9 - Plant Hal Wansley Operating Agreement dated as of March
26, 1976, between GEORGIA and OPC. See Exhibit 10(a)13
herein.
(c) 10 - Edwin I. Hatch Nuclear Plant Purchase and Ownership
Participation Agreement dated as of August 27, 1976, between
GEORGIA, MEAG and Dalton. See Exhibit 10(a)14 herein.
(c) 11 - Edwin I. Hatch Nuclear Plant Operating Agreement dated
as of August 27, 1976, between GEORGIA, MEAG and Dalton. See
Exhibit 10(a)15 herein.
(c) 12 - Alvin W. Vogtle Nuclear Units Number One and Two
Purchase and Ownership Participation Agreement dated as of
August 27, 1976 and Amendment No. 1 dated as of January 18,
1977, among GEORGIA, OPC, MEAG and Dalton. See Exhibit
10(a)16 herein.
(c) 13 - Alvin W. Vogtle Nuclear Units Number One and Two
Operating Agreement dated as of August 27, 1976, among
GEORGIA, OPC, MEAG and Dalton. See Exhibit 10(a)17 herein.
(c) 14 - Alvin W. Vogtle Nuclear Units Number One and Two
Purchase, Amendment, Assignment and Assumption Agreement
dated as of November 16, 1983, between GEORGIA and MEAG. See
Exhibit 10(a)18 herein.
(c) 15 - Plant Hal Wansley Purchase and Ownership Participation
Agreement dated as of August 27, 1976, between GEORGIA and
MEAG. See Exhibit 10(a)19 herein.
(c) 16 - Plant Hal Wansley Operating Agreement dated as of
August 27, 1976, between GEORGIA and MEAG. See Exhibit
10(a)20 herein.
(c) 17 - Nuclear Operating Agreement between Southern Nuclear
and GEORGIA dated as of July 1, 1993. See Exhibit 10(a)21
herein.
(c) 18 - Pseudo Scheduling and Services Agreement between
GEORGIA and MEAG dated as of April 8, 1997. See Exhibit
10(a)22 herein.
(c) 19 - Plant Hal Wansley Purchase and Ownership Participation
Agreement dated as of April 19, 1977, between GEORGIA and
Dalton. See Exhibit 10(a)23 herein.
(c) 20 - Plant Hal Wansley Operating Agreement dated as of April
19, 1977, between GEORGIA and Dalton. See Exhibit 10(a)24
herein.
E-22
<PAGE>
(c) 21 - Plant Robert W. Scherer Units Number One and Two
Purchase and Ownership Participation Agreement dated as of
May 15, 1980, Amendment No. 1 dated as of December 30, 1985,
Amendment No. 2 dated as of July 1, 1986, Amendment No. 3
dated as of August 1, 1988 and Amendment No. 4 dated as of
December 31, 1990, among GEORGIA, OPC, MEAG and Dalton. See
Exhibit 10(a)25 herein.
(c) 22 - Plant Robert W. Scherer Units Number One and Two
Operating Agreement dated as of May 15, 1980, Amendment No.
1 dated as of December 3, 1985 and Amendment No. 2 dated as
of December 31, 1990, among GEORGIA, OPC, MEAG and Dalton.
See Exhibit 10(a)26 herein.
(c) 23 - Plant Robert W. Scherer Purchase, Sale and Option
Agreement dated as of May 15, 1980, between GEORGIA and
MEAG. See Exhibit 10(a)27 herein.
(c) 24 - Plant Robert W. Scherer Purchase and Sale Agreement
dated as of May 16, 1980, between GEORGIA and Dalton. See
Exhibit 10(a)28 herein.
(c) 25 - Plant Robert W. Scherer Unit Number Three Purchase and
Ownership Participation Agreement dated as of March 1, 1984,
Amendment No. 1 dated as of July 1, 1986 and Amendment No. 2
dated as of August 1, 1988, between GEORGIA and GULF. See
Exhibit 10(a)29 herein.
(c) 26 - Plant Robert W. Scherer Unit Number Three Operating
Agreement dated as of March 1, 1984, between GEORGIA and
GULF. See Exhibit 10(a)30 herein.
(c) 27 - Plant Robert W. Scherer Unit No. Four Amended and
Restated Purchase and Ownership Participation Agreement by
and among GEORGIA, FP&L and JEA dated as of December 31,
1990 and Amendment No. 1 dated as of June 15, 1994. See
Exhibit 10(a)31 herein.
(c) 28 - Plant Robert W. Scherer Unit No. Four Operating
Agreement by and among GEORGIA, FP&L and JEA dated as of
December 31, 1990 and Amendment No. 1 dated as of June 15,
1994. See Exhibit 10(a)32 herein.
(c) 29 - 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)33 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)34 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)35 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)36 herein.
E-23
<PAGE>
(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)37 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)38 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.
(c) 41 - Block Power Sale Agreement between GEORGIA and OPC
dated as of November 12, 1990. See Exhibit 10(a)47 herein.
(c) 42 - Revised and Restated Coordination Services Agreement
between and among GEORGIA, OPC and Georgia Systems
Operations Corporation dated as of September 10, 1997. See
Exhibit 10(a)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.
E-24
<PAGE>
(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.)
# * (c) 54 - The Southern Company Productivity Improvement
Plan, Amended and Restated effective January 1, 1998. See
Exhibit 10(a)59 herein.
# * (c) 55 - The Southern Company Executive Productivity
Improvement Plan, Amended and Restated effective January 1,
1998. See Exhibit 10(a)60 herein.
* (c) 56 - The Southern Company Employee Savings Plan, Amended
and Restated effective January 1, 1997 and all amendments
thereto through Amendment Number Three. See Exhibit 10(a)61
herein.
* (c) 57 - The Southern Company Employee Stock Ownership Plan,
Amended and Restated effective January 1, 1997 and all
amendments thereto through Amendment Number Two. See Exhibit
10(a)62 herein.
* (c) 58 - The Southern Company Performance Pay Plan, Amended
and Restated effective January 1, 1998. See Exhibit 10(a)63
herein.
# * (c) 59 - The Southern Company Deferred Compensation Plan,
Amended and Restated effective January 1, 1998. See Exhibit
10(a)66 herein.
E-25
<PAGE>
# (c) 60 - The Southern Company Outside Directors Pension
Plan. See Exhibit 10(a)65 herein.
# (c) 61 - Outside Directors Stock Plan for Subsidiaries of
The Southern Company and First Amendment thereto. See
Exhibit 10(a)68 herein.
(c) 62 - The Southern Company Pension Plan, effective as of
January 1, 1997 and Amendment Number One thereto. See
Exhibit 10(a)70 herein.
* (c) 63 - Amendment Number Two and Amendment Number Three to
The Southern Company Pension Plan. See Exhibit 10(a)71
herein.
# * (c) 64 - The Southern Company Performance Stock Plan,
Amended and Restated effective January 1, 1998. See Exhibit
10(a)72 herein.
# (c) 65 - The Southern Company Supplemental Executive
Retirement Plan. See Exhibit 10(a)73 herein.
# * (c) 66 - Amendment Number One and Amendment Number Two to
The Southern Company Supplemental Executive Retirement Plan.
See Exhibit 10(a)74 herein.
# * (c) 67 - The Southern Company Performance Dividend Plan,
Amended and Restated effective January 1, 1998. See Exhibit
10(a)69 herein.
# (c) 68 - The Southern Company Performance Sharing Plan
effective January 1, 1997. See Exhibit 10(a)75 herein.
# * (c) 69 - Amendments One through Six to The Southern
Company Performance Sharing Plan. See Exhibit 10(a)76
herein.
# * (c) 70 - The Southern Company Supplemental Benefit Plan,
Amended and Restated effective January 1, 1998. See Exhibit
10(a)77 herein.
* (c) 71 - Southern Company Change in Control Severance Plan,
effective December 7, 1998. See Exhibit 10(a)78 herein.
# * (c) 72 - Southern Company Executive Change in Control
Severance Plan, effective December 7, 1998. See Exhibit
10(a)79 herein.
# * (c) 73 - Deferred Compensation Agreement between SOUTHERN,
GEORGIA and Henry Allen Franklin. See Exhibit 10(a)80
herein.
# * (c) 74 - Deferred Compensation Agreement between SOUTHERN,
GEORGIA and Warren Y. Jobe. See Exhibit 10(a)82 herein.
# * (c) 75 - Change in Control Agreement between SOUTHERN,
GEORGIA and Henry Allen Franklin. See Exhibit 10(a)89
herein.
# * (c) 76 - Change in Control Agreement between SOUTHERN,
GEORGIA and David M. Ratcliffe. See Exhibit 10(a)95 herein.
E-26
<PAGE>
# * (c) 77 - Supplemental Pension Agreement between GEORGIA
and Warren Y. Jobe.
GULF
(d) 1 - Service contracts dated as of January 1, 1984, between
SCS and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SEGCO and
SOUTHERN and Amendment No. 1 dated as of September 6, 1985,
between SCS and SOUTHERN. See Exhibit 10(a)1 herein.
(d) 2 - Interchange contract dated October 28, 1988, effective
January 1, 1989, between ALABAMA, GEORGIA, GULF,
MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)6 herein.
(d) 3 - Plant Robert W. Scherer Unit Number Three Purchase and
Ownership Participation Agreement dated as of March 1, 1984,
Amendment No. 1 dated as of July 1, 1986 and Amendment No. 2
dated as of August 1, 1988, between GEORGIA and GULF. See
Exhibit 10(a)29 herein.
(d) 4 - Plant Robert W. Scherer Unit Number Three Operating
Agreement dated as of March 1, 1984, between GEORGIA and
GULF. See Exhibit 10(a)30 herein.
(d) 5 - Plant Scherer Managing Board Agreement dated as of
December 31, 1990 among GEORGIA, OPC, MEAG, Dalton, GULF,
FP&L and JEA. See Exhibit 10(a)54 herein.
(d) 6 - 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)33 herein.
(d) 7 - 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)34 herein.
(d) 8 - Unit Power Sales Agreement dated July 19, 1988, between
FPC and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and
SCS. See Exhibit 10(a)35 herein.
(d) 9 - Amended Unit Power Sales Agreement dated July 20, 1988,
between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI,
SAVANNAH and SCS. See Exhibit 10(a)36 herein.
(d) 10 - Amended Unit Power Sales Agreement dated August 17,
1988, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI,
SAVANNAH and SCS. See Exhibit 10(a)37 herein.
E-27
<PAGE>
(d) 11 - 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) 12 - Unit Power Sales Agreement dated December 8, 1990,
between Tallahassee and ALABAMA, GEORGIA, GULF, MISSISSIPPI,
SAVANNAH and SCS. See Exhibit 10(a)38 herein.
(d) 13 - Transition Energy Agreement dated December 31, 1990,
between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI,
SAVANNAH and SCS. See Exhibit 10(a)39 herein.
(d) 14 - Transition Energy Agreement dated December 31, 1990,
between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI,
SAVANNAH and SCS. See Exhibit 10(a)40 herein.
# * (d) 15 - The Southern Company Productivity Improvement
Plan, Amended and Restated effective January 1, 1998. See
Exhibit 10(a)59 herein.
# * (d) 16 - The Southern Company Executive Productivity
Improvement Plan, Amended and Restated effective January 1,
1998. See Exhibit 10(a)60 herein.
* (d) 17 - The Southern Company Employee Savings Plan, Amended
and Restated effective January 1, 1997 and all amendments
thereto through Amendment Number Three. See Exhibit 10(a)61
herein.
* (d) 18 - The Southern Company Employee Stock Ownership Plan,
Amended and Restated effective January 1, 1997 and all
amendments thereto through Amendment Number Two. See Exhibit
10(a)62 herein.
* (d) 19 - The Southern Company Performance Pay Plan, Amended
and Restated effective January 1, 1998. See Exhibit 10(a)63
herein.
# * (d) 20 - The Southern Company Deferred Compensation Plan,
Amended and Restated effective January 1, 1998. See Exhibit
10(a)66 herein.
# (d) 21 - The Southern Company Outside Directors Pension
Plan. See Exhibit 10(a)65 herein.
# (d) 22 - Outside Directors Stock Plan for Subsidiaries of
The Southern Company and First Amendment thereto. See
Exhibit 10(a)68 herein.
(d) 23 - The Southern Company Pension Plan, effective as of
January 1, 1997 and Amendment Number One thereto. See
Exhibit 10(a)70 herein.
* (d) 24 - Amendment Number Two and Amendment Number Three to
The Southern Company Pension Plan. See Exhibit 10(a)71
herein.
# * (d) 25 - The Southern Company Supplemental Benefit Plan,
Amended and Restated effective January 1, 1998. See Exhibit
10(a)77 herein.
E-28
<PAGE>
* (d) 26 - Southern Company Change in Control Severance Plan,
effective December 7, 1998. See Exhibit 10(a)78 herein.
# * (d) 27 - Southern Company Executive Change in Control
Severance Plan, effective December 7, 1998. See Exhibit
10(a)79 herein.
# * (d) 28 - Change in Control Agreement between SOUTHERN,
GULF and Travis J. Bowden. See Exhibit 10(a)84 herein.
# * (d) 29 - The Southern Company Performance Stock Plan,
Amended and Restated effective January 1, 1998. See Exhibit
10(a)72 herein.
# (d) 30 - The Southern Company Supplemental Executive
Retirement Plan. See Exhibit 10(a)73 herein.
# * (d) 31 - Amendment Number One and Amendment Number Two to
The Southern Company Supplemental Executive Retirement Plan.
See Exhibit 10(a)74 herein.
# * (d) 32 - The Southern Company Performance Dividend Plan,
Amended and Restated effective January 1, 1998. See Exhibit
10(a)69 herein.
# (d) 33 - The Southern Company Performance Sharing Plan
effective January 1, 1997. See Exhibit 10(a)75 herein.
# * (d) 34 - Amendments One through Six to The Southern
Company Performance Sharing Plan. See Exhibit 10(a)76
herein.
# * (d) 35 - Supplemental Pension Agreement between SAVANNAH,
GULF and G. Edison Holland, Jr.
# * (d) 36 - Supplemental Pension Agreement between ALABAMA,
GULF and Travis J. Bowden. See Exhibit 10(b)40 herein.
MISSISSIPPI
(e) 1 - Service contracts dated as of January 1, 1984, between
SCS and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SEGCO and
SOUTHERN and Amendment No. 1 dated as of September 6, 1985,
between SCS and SOUTHERN. See Exhibit 10(a)1 herein.
(e) 2 - Interchange contract dated October 28, 1988, effective
January 1, 1989, between ALABAMA, GEORGIA, GULF,
MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)6 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)33 herein.
E-29
<PAGE>
(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)34 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)35 herein.
(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)36 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)37 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)38 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, 1998. See
Exhibit 10(a)59 herein.
# * (e) 15 - The Southern Company Executive Productivity
Improvement Plan, Amended and Restated effective January 1,
1998. See Exhibit 10(a)60 herein.
* (e) 16 - The Southern Company Employee Savings Plan, Amended
and Restated effective January 1, 1997 and all amendments
thereto through Amendment Number Three. See Exhibit 10(a)61
herein.
E-30
<PAGE>
* (e) 17 - The Southern Company Employee Stock Ownership Plan,
Amended and Restated effective January 1, 1997 and all
amendments thereto through Amendment Number Two. See Exhibit
10(a)62 herein.
* (e) 18 - The Southern Company Performance Pay Plan, Amended
and Restated effective January 1, 1998. See Exhibit 10(a)63
herein.
# * (e) 19 - The Southern Company Deferred Compensation Plan,
Amended and Restated effective January 1, 1998. See Exhibit
10(a)66 herein.
# (e) 20 - The Southern Company Outside Directors Pension
Plan. See Exhibit 10(a)65 herein.
# (e) 21 - Outside Directors Stock Plan for Subsidiaries of
The Southern Company and First Amendment thereto. See
Exhibit 10(a)68 herein.
(e) 22 - The Southern Company Pension Plan, effective as of
January 1, 1997 and Amendment Number One thereto. See
Exhibit 10(a)70 herein.
* (e) 23 - Amendment Number Two and Amendment Number Three to
The Southern Company Pension Plan. See Exhibit 10(a)71
herein.
# * (e) 24 - The Southern Company Supplemental Benefit Plan,
Amended and Restated effective January 1, 1998. See Exhibit
10(a)77 herein.
* (e) 25 - Southern Company Change in Control Severance Plan,
effective December 7, 1998. See Exhibit 10(a)78 herein.
# * (e) 26 - Southern Company Executive Change in Control
Severance Plan, effective December 7, 1998. See Exhibit
10(a)79 herein.
# * (e) 27 - Change in Control Agreement between SOUTHERN,
MISSISSIPPI and Dwight H. Evans. See Exhibit 10(a)87 herein.
# * (e) 28 - The Southern Company Performance Stock Plan,
Amended and Restated effective January 1, 1998. See Exhibit
10(a)72 herein.
# (e) 29 - The Southern Company Supplemental Executive
Retirement Plan. See Exhibit 10(a)73 herein.
# * (e) 30 - Amendment Number One and Amendment Number Two to
The Southern Company Supplemental Executive Retirement Plan.
See Exhibit 10(a)74 herein.
# * (e) 31 - The Southern Company Performance Dividend Plan,
Amended and Restated effective January 1, 1998. See Exhibit
10(a)69 herein.
# (e) 32 - The Southern Company Performance Sharing Plan
effective January 1, 1997. See Exhibit 10(a)75 herein.
E-31
<PAGE>
# * (e) 33 - Amendments One through Six to The Southern
Company Performance Sharing Plan. See Exhibit 10(a)76
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)6 herein.
(f) 3 - Unit Power Sales Agreement dated July 19, 1988, between
FPC and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SAVANNAH and
SCS. See Exhibit 10(a)35 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)36 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)37 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)38 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.
# * (f) 11 - The Southern Company Productivity Improvement
Plan, Amended and Restated effective January 1, 1998. See
Exhibit 10(a)59 herein.
# * (f) 12 - The Southern Company Executive Productivity
Improvement Plan, Amended and Restated effective January 1,
1998. See Exhibit 10(a)60 herein.
E-32
<PAGE>
* (f) 13 - The Southern Company Employee Savings Plan, Amended
and Restated effective January 1, 1997 and all amendments
thereto through Amendment Number Three. See Exhibit 10(a)61
herein.
* (f) 14 - The Southern Company Employee Stock Ownership Plan,
Amended and Restated effective January 1, 1997 and all
amendments thereto through Amendment Number Two. See Exhibit
10(a)62 herein.
# (f) 15 - Supplemental Executive Retirement Plan of SAVANNAH,
Amended and Restated effective January 1, 1996 and all
amendments thereto through Amendment Number Two. (Designated
in SAVANNAH's Form 10-K for the year ended December 31,
1995, File No. 1-5072, as Exhibit 10(f)17, in SAVANNAH's
Form 10-K for the year ended December 31, 1996, File No.
1-5072, as Exhibit 10(f)20 and in SAVANNAH's Form 10-K for
the year ended December 31, 1997, File No. 1-5072, as
Exhibit 10(f)18.)
# (f) 16 - Deferred Compensation Plan for Key Employees of
SAVANNAH and all amendments thereto through Amendment Number
Two. (Designated in SAVANNAH's Form 10-K for the year ended
December 31, 1994, File No. 1-5072, as Exhibit 10(f)17, in
SAVANNAH's Form 10-K for the year ended December 31, 1995,
File No. 1-5072, as Exhibit 10(f)19 and in SAVANNAH's Form
10-K for the year ended December 31, 1996, File No. 1-5072,
as Exhibit 10(f)22.)
# * (f) 17 - Amendment Number Three to the Deferred
Compensation Plan for Key Employees of SAVANNAH.
* (f) 18 - The Southern Company Performance Pay Plan, Amended
and Restated effective January 1, 1998. See Exhibit 10(a)63
herein.
# (f) 19 - The Southern Company Outside Directors Pension
Plan. See Exhibit 10(a)65 herein.
# (f) 20 - Deferred Compensation Plan for Directors of
SAVANNAH. (Designated in SAVANNAH's Form 10-K for the year
ended December 31, 1997, File No. 1-5072, as Exhibit
10(f)23.)
# (f) 21 - Outside Directors Stock Plan for Subsidiaries of
The Southern Company and First Amendment thereto. See
Exhibit 10(a)68 herein.
(f) 22 - The Southern Company Pension Plan, effective as of
January 1, 1997 and Amendment Number One thereto. See
Exhibit 10(a)70 herein.
* (f) 23 - Amendment Number Two and Amendment Number Three to
The Southern Company Pension Plan. See Exhibit 10(a)71
herein.
# * (f) 24 - The Southern Company Supplemental Benefit Plan,
Amended and Restated effective January 1, 1998. See Exhibit
10(a)77 herein.
* (f) 25 - Southern Company Change in Control Severance Plan,
effective December 7, 1998. See Exhibit 10(a)78 herein.
E-33
<PAGE>
# * (f) 26 - Southern Company Executive Change in Control
Severance Plan, effective December 7, 1998. See Exhibit
10(a)79 herein.
# * (f) 27 - Change in Control Agreement between SOUTHERN,
SAVANNAH and G. Edison Holland, Jr. See Exhibit 10(a)92
herein.
# * (f) 28 - The Southern Company Deferred Compensation Plan,
Amended and Restated effective January 1, 1998. See Exhibit
10(a)66 herein.
# * (f) 29 - The Southern Company Performance Stock Plan,
Amended and Restated effective January 1, 1998. See Exhibit
10(a)72 herein.
# (f) 30 - The Southern Company Supplemental Executive
Retirement Plan. See Exhibit 10(a)73 herein.
# * (f) 31 - Amendment Number One and Amendment Number Two to
The Southern Company Supplemental Executive Retirement Plan.
See Exhibit 10(a)74 herein.
# * (f) 32 - The Southern Company Performance Dividend Plan,
Amended and Restated effective January 1, 1998. See Exhibit
10(a)69 herein.
# (f) 33 - The Southern Company Performance Sharing Plan
effective January 1, 1997. See Exhibit 10(a)75 herein.
# * (f) 34 - Amendments One through Six to The Southern
Company Performance Sharing Plan. See Exhibit 10(a)76
herein.
# * (f) 35 - Supplemental Pension Agreement between SAVANNAH,
GULF and G. Edison Holland, Jr. See Exhibit 10(d)35 herein.
(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.
E-34
<PAGE>
GULF
* (d) - The consent of Arthur Andersen LLP is contained herein
at page IV-9.
MISSISSIPPI
* (e) - The consent of Arthur Andersen LLP is contained herein
at page IV-10.
SAVANNAH
* (f) - The consent of Arthur Andersen LLP is contained herein
at page IV-11.
(24) Powers of Attorney and Resolutions
SOUTHERN
* (a) - Power of Attorney and resolution.
ALABAMA
* (b) - Power of Attorney and resolution.
GEORGIA
* (c) - Power of Attorney and resolution.
GULF
* (d) - Power of Attorney and resolution.
MISSISSIPPI
* (e) - Power of Attorney and resolution.
SAVANNAH
* (f) - Power of Attorney and resolution.
(27) Financial Data Schedule
SOUTHERN
(a) - Financial Data Schedule. (Designated in Form 8-K dated
February 10, 1999, File No. 1-3526, as Exhibit 27.)
ALABAMA
(b) - Financial Data Schedule. (Designated in Form 8-K dated
February 10, 1999, File No. 1-3164, as Exhibit 27.)
E-35
<PAGE>
GEORGIA
(c) - Financial Data Schedule. (Designated in Form 8-K dated
February 10, 1999, File No. 1-6468, as Exhibit 27.)
GULF
(d) - Financial Data Schedule. (Designated in Form 8-K dated
February 10, 1999, File No. 0-2429, as Exhibit 27.)
MISSISSIPPI
(e) - Financial Data Schedule. (Designated in Form 8-K dated
February 10, 1999, File No. 0-6849, as Exhibit 27.)
SAVANNAH
(f) - Financial Data Schedule. (Designated in Form 8-K dated
February 10, 1999, File No. 1-5072, as Exhibit 27.)
E-36
EXHIBIT 3(f)2
TO ALL TO WHOM THESE PRESENTS MAY COME - GREETING:
WHEREAS, SAVANNAH ELECTRIC AND POWER COMPANY, a corporation created and
existing under the laws of Georgia, has filed in this office in terms of law a
petition asking that its charter be amended to eliminate therefrom in their
entirety (i) Section 4.04(B)(i), a provision restricting the amount of
securities representing unsecured indebtedness issuable by the Company, (ii)
Section 4.04(B)(ii), a provision which requires the vote of the holders of at
least a majority of the total voting power of the Company's outstanding
preferred stock to approve the sale of all or substantially all of the Company's
property and mergers or consolidations that have not been approved under the
Public Utility Holding Company Act of 1935, as amended, and (iii) Section 4.06
(except the first sentence therein), a provision restricting the ability of the
Company to pay dividends on its common stock in the event that its common equity
capitalization falls below certain levels; and
WHEREAS, Savannah Electric and Power Company has complied with all the
requirements of the law in such cases made and provided.
THEREFORE, the State of Georgia hereby amends the charter of said
Savannah Electric and Power Company so as to eliminate Sections 4.04(B)(i),
4.04(B)(ii) and 4.06 (except the first sentence therein) of its charter.
<PAGE>
IN WITNESS WHEREOF, these presents have been signed by the Secretary of
State and the great seal has been attached hereto at the State Capitol in
Atlanta, Georgia, on this 2nd day of December, 1998.
Secretary of State
<PAGE>
PETITION FOR TWENTY-FIFTH AMENDMENT TO CHARTER
TO THE SECRETARY OF STATE OF THE STATE OF GEORGIA:
The petition of Savannah Electric and Power Company, a corporation of
Chatham County, in said State, respectfully shows:
I. It is a street and suburban railway company, with authority to do an
electric light, heat and power business. Its Charter was granted by the
Secretary of State of the State of Georgia on August 21, 1921, for the term of
One Hundred and One Years (101 years), with the right of renewal and continuance
thereafter as may be provided by law, upon a petition duly filed and pursuant to
an Act of the General Assembly of the State of Georgia approved December 17,
1892, and acts amendatory thereof, and was amended by certificates issued by the
Secretary of State on the following dates: (1) September 29, 1924, (2) November
15, 1926, (3) July 11, 1930, (4) June 19, 1942, (5) July 13, 1945, (6) December
31, 1945, (7) November 18, 1948, (8) April 20, 1953, (9) November 25, 1953, (10)
May 23, 1954, (11) October 13, 1954, (12) April 7, 1955, (13) March 5, 1957,
(14) April 17, 1957, (15) April 9, 1964, (16) March 3, 1970, (17) October 23,
1972, (18) October 15, 1975, (19) January 12, 1982, (20) August 7, 1984, (21)
August 6, 1986, (22) March 1, 1988, (23) December 9, 1988 and (24) November 10,
1993.
II. The authorized and outstanding shares of capital stock of the
Company outstanding at November 23, 1998, the date of the Written Consent of the
Sole Shareholder hereinafter referred to, are as follows:
<TABLE>
<CAPTION>
Authorized Outstanding
Kind of Stock Number of Shares Number of Shares
- - - - - - - ------------- ---------------- ----------------
<S> <C> <C>
Undesignated Preferred Stock, Par Value $100 Per Share 125,000 0
Undesignated Preference Stock, Par Value $5 Per Share 2,000,000 0
Undesignated Class A Convertible, Par Value $5 Per Share 500,000 0
Common Stock, Par Value $5 Per Share 16,000,000 10,844,635
</TABLE>
III. The Company desires an amendment to its charter to eliminate
therefrom in their entirety (i) Section 4.04(B)(i), a provision restricting the
amount of securities representing unsecured indebtedness issuable by the
Company, (ii) Section 4.04(B)(ii), a provision which requires the vote of the
holders of at least a majority of the total voting power of the Company's
outstanding preferred stock to approve the sale of all or substantially all of
the Company's property and mergers or consolidations that have not been approved
under the Public Utility Holding Company Act of 1935, as amended, and (iii)
Section 4.06 (except the first sentence therein), a provision restricting the
ability of the Company to pay dividends on its common stock in the event that
its common equity capitalization falls below certain levels.
IV. This petition for the proposed amendment has been duly authorized
by the action of more than two-thirds in amount of the entire capital stock of
the Company outstanding and entitled by the terms of its charter or state law to
vote thereon by Written Consent of the Sole Shareholder of the Company. The
affirmative vote of (i) the holders of record of at least 66-2/3% of the shares
of common stock of the Company outstanding and entitled to vote and (ii) the
holders of at least 66-2/3% of the total number of shares of preferred stock
outstanding was required to adopt the foregoing amendment. There were 10,844,635
shares of common stock of the Company outstanding and entitled to vote thereon
of which all were voted in favor of the foregoing amendment. There were no other
outstanding shares of capital stock of the Company.
V. Petitioner respectfully presents this, its petition for an amendment
to its charter, as heretofore amended, and asks that the same be granted as
herein prayed for and that all other rights, powers and privileges contained in
its original charter, as heretofore amended, and such as are incident to like
corporations under the laws of Georgia, do continue and remain of force and be
approved and confirmed.
SAVANNAH ELECTRIC AND POWER COMPANY
By: _____________________
Title:
Attest:
- - - - - - - -------------------------
Title:
Date: November 23, 1998
<PAGE>
CERTIFIED ABSTRACT FROM THE MINUTES OF THE
BOARD OF DIRECTORS OF SAVANNAH ELECTRIC AND POWER COMPANY
WITH RESPECT TO PETITION FOR
TWENTY-FIFTH AMENDMENT TO ITS CHARTER
On motion, duly made and seconded, the following resolution was
unanimously adopted by the Board of Directors of the Company:
RESOLVED: That it is desirable and in the best interests of
the Company to seek the approval of the Company's shareholders to amend
the Company's charter, as heretofore amended (the "Charter"), in order
to eliminate in their entirety (i) Section 4.04(B)(i), a provision
restricting the amount of securities representing unsecured
indebtedness issuable by the Company, (ii) Section 4.04(B)(ii), a
provision which requires the vote of the holders of at least a majority
of the total voting power of the Company's outstanding preferred stock
to approve the sale of all or substantially all of the Company's
property and mergers or consolidations that have not been approved
under the Public Utility Holding Company Act of 1935, as amended, and
(iii) Section 4.06 (except the first sentence therein), a provision
restricting the ability of the Company to pay dividends on its common
stock in the event that its common equity capitalization falls below
certain levels, and this Board of Directors does hereby authorize and
approve such amendment;
RESOLVED FURTHER: That, if the holder of record of the
Company's outstanding common stock votes affirmatively for the proposal
to amend the Charter, the President or any Vice President and the
Secretary, any Assistant Secretary, the Treasurer or any Assistant
Treasurer of the Company be and hereby are authorized and directed to
make application to the Secretary of State of the State of Georgia that
the Charter of Savannah Electric and Power Company, dated August 5,
1921, as heretofore amended by certificates of the Honorable Secretary
of Sate dated (1) September 29, 1924, (2) November 15, 1926, (3) July
11, 1930, (4) June 19, 1942, (5) July 13, 1945, (6) December 31, 1945,
(7) November 18, 1948, (8) April 20, 1953, (9) November 25, 1953, (10)
May 23, 1954, (11) October 13, 1954, (12) April 7, 1955, (13) March 5,
1957, (14) April 17, 1957, (15) April 9, 1964, (16) March 3, 1970, (17)
October 23, 1972, (18) October 15, 1975, (19) January 12, 1982, (20)
August 7, 1984, (21) August 6, 1986, (22) March 1, 1988, (23) December
9, 1988 and (24) November 10, 1993, be further amended to eliminate
Sections 4.04(B)(i), 4.04(B)(ii) and 4.06 (except the first sentence
therein) (all other terms and provisions of the Charter to remain
unchanged); and that the officers of the Company be and they are hereby
authorized and empowered to take all such other action as any one of
them may deem necessary or desirable to effect said amendment;
RESOLVED FURTHER: That the Secretary of the Company shall
certify under the seal of the Company a copy of this resolution and
attach it to the petition for twenty-fifth amendment to the Charter to
be filed with the Secretary of State of the State of Georgia; and
RESOLVED FURTHER: That the officers of the Company be, and
they hereby are, authorized and directed to do and perform all such
acts, matters and things as may be necessary or appropriate to carry
out the proposals described in the foregoing resolutions in the manner
provided by law and otherwise to consummate the transactions
contemplated thereby.
I, Nancy Frankenhauser, Secretary of Savannah Electric and Power
Company, do 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 October 20, 1998, at which a
quorum was in attendance and voting throughout, and that said resolution has not
since been rescinded but is still in full force and effect.
Given under my official signature and the seal of said Company this
23rd day of November, 1998.
Secretary
(SEAL)
<PAGE>
CERTIFIED ABSTRACT FROM THE WRITTEN CONSENT OF THE
SOLE SHAREHOLDER OF SAVANNAH ELECTRIC AND POWER COMPANY
WITH RESPECT TO PETITION FOR
TWENTY-FIFTH AMENDMENT TO ITS CHARTER
The following resolution was adopted by written consent of the sole
shareholder of the outstanding shares of the Company's common stock:
RESOLVED: That there be and hereby is approved and adopted an
amendment to the Charter of Savannah Electric and Power (the "Company")
to remove therefrom (i) Section 4.04(B)(i), a provision restricting the
amount of securities representing unsecured indebtedness issuable by
the Company, (ii) Section 4.04(B)(ii), a provision which requires the
vote of the holders of at least a majority of the total voting power of
the Company's outstanding preferred stock to approve the sale of all or
substantially all of the Company's property and mergers or
consolidations that have not been approved under the Public Utility
Holding Company Act of 1935, as amended, and (iii) Section 4.06 (except
the first sentence therein), a provision restricting the ability of the
Company to pay dividends on its common stock in the event that its
common equity capitalization falls below certain levels.
I, Nancy Frankenhauser, Secretary of Savannah Electric and Power
Company, do hereby certify that the foregoing is a true and correct copy of the
resolution duly and regularly adopted by written consent of the sole shareholder
of Savannah Electric and Power Company, effective November 23, 1998, and that
said resolution has not since been rescinded but is still in full force and
effect.
Given under my official signature and the seal of said Company this
23rd day of November, 1998.
Secretary
(SEAL)
EXHIBIT 10(a)59
SOUTHERN COMPANY
PRODUCTIVITY IMPROVEMENT PLAN
AMENDED AND RESTATED
TROUTMAN SANDERS LLP
NationsBank Plaza
600 Peachtree Street, N.E., Suite 5200
Atlanta, Georgia 30308
(404) 885-3000
Effective January 1, 1998
<PAGE>
SOUTHERN COMPANY
PRODUCTIVITY IMPROVEMENT PLAN
Amended and Restated
Purposes
The purposes of the Amended and Restated Southern Company Productivity
Improvement 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 amendment and restatement shall be effective as of January 1, 1998.
ARTICLE I
Definitions
For purposes of the Plan, the following terms shall have the following
meanings unless a different meaning is plainly required by the context:
1.1 "Annual Salary" shall mean base salary or wages paid to a
Participant before deductions for taxes, social security, etc., including all
amounts contributed by an Employing Company to The Southern Electric System
Flexible Benefits Plan or The Southern Company Flexible Benefits Plan on behalf
of a Participant, amounts contributed by any Employing Company to The Southern
Company Employee Savings Plan as Elective Employer Contributions, as said term
is defined in Section 4.1 therein, pursuant to the Participant's exercise of his
deferral option made in accordance with Section 401(k) of the Internal Revenue
Code, and amounts contributed to the Southern Company Deferred Compensation
Plan, but excluding all awards under The Southern Company Performance Pay Plan
and the Southern Company Productivity Improvement Plan, overtime pay, shift
differential and substitution pay.
1.2 "Average Common Equity" shall mean the total average common equity
of Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi
Power Company, Savannah Electric and Power Company, Southern Nuclear Operating
Company and Southern Company Services, Inc.
1.3 "Average Return on Common Equity" for a Computation Period shall
mean the result obtained by (a) dividing Core Net Income by Average Common
Equity for each year in the Computation Period, (b) adding the result, and (c)
dividing the sum by the number of years in the Computation Period.
1.4 "Award" shall mean the award opportunity multiplied by the
performance unit value determined under Section 3.2 of the Plan.
1.5 "Award Opportunity" shall mean the target award opportunity
determined under Section 3.1 of the Plan.
1.6 "Award Percentage" shall mean the award percentage set forth on
Exhibit B hereto. Such Exhibit may be modified from time to time by the
Committee to reflect changes in Exhibit C hereto.
1.7 "Beneficial Ownership" shall mean beneficial ownership within the
meaning of Rule 13d-3 promulgated under the Exchange Act.
1.8 "Board of Directors" shall mean the Board of Directors of Southern
Company Services, Inc.
1.9 "Business Combination" shall mean a reorganization, merger or
consolidation or sale of Southern Company or a sale of all or substantially all
of Southern Company's assets.
1.10 "Chief Executive Officer" shall mean the individual designated as
such by the Board of Directors of an Employing Company and of Southern Company.
1.11 "Committee" shall mean the individuals then serving in the
positions of Director, Compensation and Benefits of Southern Company; Senior
Vice President, Human Resources of Southern Company; and Vice President &
Comptroller of Southern Company or any other position or positions that succeed
to the duties of the foregoing positions.
1.12 "Common Stock" shall mean the common stock of Southern Company.
1.13 "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 on the first day of January each year.
1.14 "Consummation" shall mean the completion of the final act
necessary to complete a transaction as a matter of law, including, but not
limited to, any required approvals by the corporation's shareholders and board
of directors, the transfer of legal and beneficial title to securities or assets
and the final approval of the transaction by any applicable domestic or foreign
governments or agencies.
1.15 "Control" shall mean, in the case of a corporation, Beneficial
Ownership of more than 50% of the combined voting power of the corporation's
Voting Securities, or in the case of any other entity, Beneficial Ownership of
more than 50% of such entity's voting equity interests.
1.16 "Core Business" shall mean the operations of Alabama Power
Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company,
Savannah Electric and Power Company, Southern Nuclear Operating Company and the
operations of Southern Company Services, Inc. with respect to such companies.
1.17 "Core Net Income" shall mean the combined net income (or net loss)
of Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi
Power Company, Savannah Electric and Power Company and The Southern Company
"corporate", provided, that the net income (or net loss) of The Southern Company
"corporate" shall be adjusted by eliminating interest expense not attributable
to Core Business and one-half of The Southern Company's "corporate"
administration and general expenses.
1.18 "Employee" shall mean any person who is currently employed by an
Employing Company but shall not include (a) any individual who is eligible to
participate in the Southern Company Executive Productivity Improvement Plan or
(b) any person who is eligible to participate in any incentive compensation
program maintained by an Employing Company that specifically provides that an
eligible employee under such program shall not also be entitled to receive
Awards under this Plan.
1.19 "Employing Company" shall mean Southern Company Services, Inc., or
any affiliate or subsidiary (direct or indirect) of Southern Company, which the
Board of Directors may from time to time determine to bring under the Plan and
which shall adopt the Plan, and any successor of any of them.
1.20 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
1.21 "Grade Level" shall mean the evaluation assigned under the job
evaluation system as of December 31 of each calendar year.
1.22 "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.
1.23 "Group" shall have the meaning set forth in Section 14(d) of the
Exchange Act.
1.24 "Incumbent Board" shall mean those individuals who constitute the
Southern Board as of the Effective Date plus any individual who shall become a
director subsequent to such date whose election or nomination for election by
Southern Company's shareholders was approved by a vote of at least 75% of the
directors then comprising the Incumbent Board. Notwithstanding the foregoing, no
individual who shall become a director of the Southern Board subsequent to the
Effective Date whose initial assumption of office occurs as a result of an
actual or threatened election contest (within the meaning of Rule 14a-11 of the
Regulations promulgated under the Exchange Act) with respect to the election or
removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Southern Board shall be a
member of the Incumbent Board.
1.25 "Non-Adopting Company" shall mean any subsidiary or affiliate of
Southern Company which is not an Employing Company.
1.26 "Participant" shall mean all Employees described in Section 2.1
hereof.
1.27 "Payment Date" shall mean the date that the check evidencing the
Award is endorsed by an authorized person of an Employing Company.
1.28 "Peer Group Companies" shall mean the companies set forth on
Exhibit C attached hereto and as may be revised from time to time by the
Committee to reflect mergers, acquisitions, reorganizations, etc. of such
companies.
1.29 "Plan" shall mean the Southern Company Productivity Improvement
Plan, as described herein or as may be amended from time to time.
1.30 "Plan Termination" shall mean the termination of the Plan by
Southern Company or an Employing Company following a Southern Change in Control
unless an equitable arrangement (embodied in an ongoing substitute or
replacement plan) has been made with respect to the Plan in connection with the
Southern Change in Control. For purposes of this Plan, an ongoing substitute or
alternative plan shall be considered an "equitable arrangement" if a nationally
recognized compensation consulting firm chosen by the Committee opines in
writing that, on aggregate, the post-Southern Change in Control plan is an
equitable substitute or replacement of the pre-Southern Change in Control Plan,
and that such substitute or alternative plan provides substantially similar
target opportunities and a substantially similar level of performance
difficulty.
1.31 "Prior Plan" shall mean the Plan as amended and restated effective
January 1, 1995.
1.32 "Southern Board" shall mean the Board of Directors of The Southern
Company.
1.33 "Southern Change in Control" shall mean any of the following:
(a) The Consummation of an acquisition by any Person of
Beneficial Ownership of 20% or more of Southern Company's Voting
Securities; provided, however, that for purposes of this subsection
(a), the following acquisitions of Southern Company's Voting Securities
shall not constitute a Change in Control:
(i) any acquisition directly from Southern Company,
(ii) any acquisition by Southern Company,
(iii) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by Southern Company
or any corporation Controlled by Southern Company,
(iv) any acquisition by a qualified pension plan or
publicly held mutual fund,
(v) any acquisition by an Employee or Group composed
exclusively of Employees, or
(vi) any Business Combination which would not
otherwise constitute a Change in Control because of the
application of clauses (i), (ii) and (iii) of Section 1.33(c);
(b) A change in the composition of the Southern Board whereby
individuals who constitute the Incumbent Board cease for any reason to
constitute at least a majority of the Southern Board; or
(c) Consummation of a Business Combination, unless, following
such Business Combination, all of the following three conditions are
met:
(i) all or substantially all of the individuals and
entities who held Beneficial Ownership, respectively, of
Southern Company's Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly,
65% or more of the combined voting power of the Voting
Securities of the corporation surviving or resulting from such
Business Combination, (including, without limitation, a
corporation which as a result of such transaction holds
Beneficial Ownership of all or substantially all of Southern
Company's Voting Securities or all or substantially all of
Southern Company's assets) (such surviving or resulting
corporation to be referred to as "Surviving Company"), in
substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the
Southern Company's Voting Securities,
(ii) no Person (excluding any corporation resulting
from such Business Combination, any qualified pension plan,
publicly held mutual fund, Group composed exclusively of
Employees or employee benefit plan (or related trust) of
Southern Company, its subsidiaries or Surviving Company) holds
Beneficially Ownership, directly or indirectly, of 20% or more
of the combined voting power of the then outstanding Voting
Securities of Surviving Company except to the extent that such
ownership existed prior to the Business Combination, and
(iii) at least a majority of the members of the board
of directors of the Surviving Company were members of the
Incumbent Board at the earlier of the date of execution of the
initial agreement, or of the action of the Southern Board,
providing for such Business Combination.
1.34 "Southern Company" shall mean The Southern Company.
1.35 "Southern Termination" shall mean the following:
(a) The Consummation of a reorganization, merger or
consolidation of Southern Company under circumstances where either (i)
Southern Company is not the surviving corporation or (ii) Southern
Company's Voting Securities are no longer publicly traded;
(b) The Consummation of a sale or other disposition of all or
substantially all of Southern Company's assets; or
(c) The Consummation of an acquisition by any Person of
Beneficial Ownership of all of Southern Company's Voting Securities
such that Southern Company's Voting Securities are no longer publicly
traded;
in each case under circumstances where the Surviving Company or the
company acquiring Southern Company's assets or Voting Securities does
not adopt an "equitable arrangement" (as defined in Section 1.30
hereof) in the form of a replacement plan.
1.36 "Subsidiary Change in Control" shall mean the following:
(a) The Consummation of an acquisition by any Person of
Beneficial Ownership of 50% or more of the combined voting power of the
then outstanding Voting Securities of an Employing Company; provided,
however, that for purposes of this Subsection 1.36, any acquisition by
an Employee, or Group composed entirely of Employees, any qualified
pension plan, any publicly held mutual fund or any employee benefit
plan (or related trust) sponsored or maintained by Southern Company or
any corporation Controlled by Southern Company shall not constitute a
Change in Control.
(b) Consummation of a reorganization, merger or consolidation
of an Employing Company (an "Employing Company Business Combination"),
in each case, unless, following such Employing Company Business
Combination, Southern Company Controls the corporation surviving or
resulting from such Employing Company Business Combination, or
<PAGE>
(c) Consummation of the sale or other disposition of all or
substantially all of the assets of an Employing Company to an entity
which Southern Company does not Control.
1.37 "Subsidiary Employee" shall mean an Employee of an Employing
Company which has undergone a Subsidiary Change in Control.
1.38 "Termination for Cause" or "Cause" shall mean the termination of a
Participant's employment by an Employing Company under any of the following
circumstances:
(a) The Participant willfully neglects or refuses to discharge
his or her duties to the Employing Company as an employee or refuses to
comply with any lawful or reasonable instructions given to him or her
by the Employing Company without reasonable excuse;
(b) The Participant is guilty of gross misconduct. For
purposes of this Plan, the following acts shall constitute gross
misconduct:
(i) any act involving fraud or dishonesty or breach
of appropriate regulations of competent authorities;
(ii) the carrying out of any activity or the making
of any statement which would prejudice and/or reduce the good
name and standing of Southern Company or an Employing Company
or would bring Southern Company or an Employing Company any
into contempt, ridicule or would reasonably shock or offend
any community in which Southern Company or an Employing
Company is located;
(iii) attendance at work in a state of intoxication
or otherwise being found in possession at his or her workplace
of any prohibited drug or substance, possession of which would
amount to a criminal offense;
(iv) assault or other act of violence against any
employee or other person during the course of the
Participant's employment; and
(v) conviction of any felony or misdemeanor involving
moral turpitude.
1.39 "Voting Securities" shall mean the outstanding voting securities
of a corporation entitling the holder thereof to vote generally in the election
of such corporation's directors.
Where the context requires, words in the masculine gender shall include
the feminine and neuter genders, words in the singular shall include the plural,
and words in the plural shall include the singular.
ARTICLE II
Participants
2.1 Except as otherwise provided in Section 2.8 hereof, the
Participants in the Plan shall be limited to those Employees of the Employing
Companies who occupy Grade Level 7 or above (or who are deemed to occupy such
Grade Levels under Section 2.6 hereof) for at least thirty-six (36) months of
Computation Period which respect to which an Award shall be made and are
employed by an Employing Company on the last day of such Computation Period, as
well as any other Employee who is so employed and 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, for at least such thirty-six (36) months; 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 Southern Company shall be identified by Grade Level
Value and/or title in an exhibit to the Plan each January 1. For purposes of
calculating the thirty-six month period referred to in this Section 2.1, an
Employee shall be deemed to have occupied a Grade Level of 7 of higher for each
month in which such Employee has occupied such Grade Level for fifteen (15) or
more days.
2.2 Notwithstanding the provisions of Section 2.1 hereof, any
Participant who, for job performance reasons (as determined in the sole
discretion of the Committee), vacates an eligible Grade Level in the last
calendar year prior to the close of a Computation Period shall forfeit any Award
for the Computation Period ending in the year in which such Grade Level is
vacated.
2.3 If a Participant's employment with an Employing Company is
terminated by reason of death, disability or retirement, such Participant or his
or her estate shall be eligible to receive an Award for the Computation Period
ending in the year of such death, disability or retirement. For purposes of this
Plan, the date of disability or retirement shall be the last day of active
service by the Participant and shall not mean any date subsequent to such last
date of active service which is deemed to be a retirement or disability date
under the terms of any pension, severance, retirement or disability plan or
arrangement. Except as provided in Section 2.4 hereof, any Participant who
terminates employment with an Employing Company for any other reason shall
receive only any unpaid Award for a completed Computation Period and shall not
be eligible to receive an Award for the Computation Period ending in the year of
such termination of employment, provided, however, that any Participant whose
employment is Terminated for Cause shall forfeit any and all unpaid Awards as of
the date of termination.
2.4 In the case of a Participant whose employment is transferred from
an Employing Company to a Non-Adopting Employer, any Award for any Computation
Period not yet closed as of the date of a Participant's transfer shall be paid
to the Participant by the Employing Company from which the Participant is
transferred on the following basis:
(i) 100% of the Award for the Computation Period ending in the
year of transfer;
(ii) 75% of the Award for the Computation Period ending in the
first year following the year of transfer;
(iii) 50% of the Award for the Computation Period ending in
the second year following the year of transfer; and
(iv) 25% of the Award for the Computation Period ending in the
third year following the year of transfer.
Such transferring Participant shall receive no award for any Computation Period
which has not begun on the date of the Participant's transfer or if the
Participant shall no longer occupy an eligible Grade Level after such transfer
(as determined by the Committee).
Any Awards payable under this Section 2.4 shall be based on the
weighted average Grade Level at the time of transfer as determined under Section
3.1 hereof.
2.5 In the case of an individual transferring from a Non-Adopting
Employer to an Employing Company whose Grade Level and length of service at the
Non-Adopting Employer would have caused the Employee to have been a Participant
in the Plan if the Non-Adopting Employer were an Employing Company and whose
Grade Level after the transfer would enable the Employee to participate in the
Plan, such individual shall be deemed to have been employed by an Employing
Company while employed with the Non-Adopting Employer and shall, for any
Computation Period ending after such transfer, be deemed a Participant in the
Plan as if the Non-Adopting Employer were an Employing Company.
Any Awards payable under this Section 2.5 shall be based on the
weighted average Grade Levels at the Employing Company.
2.6 In the case of an individual who, immediately prior to becoming a
Participant was a participant in the Southern Company Executive Productivity
Improvement Plan (the "Executive PIP") such individual shall be deemed to have
been a Participant in the Plan for each year of any Computation Period in which
such Participant was a participant in the Executive PIP.
2.7 The administration of Awards for Participants who move from one
Grade Level included in the Plan to another Grade Level included in the Plan
shall be based on the Participant's Grade Level Value on the last day of each
calendar year of the Computation Period for which an Award is being granted,
multiplied by twenty-five percent (25%) for each year (or deemed year) of
participation in the Computation Period. The Grade Level Value for additional
years of service granted to a Participant under Section 2.8 hereof, shall be the
Grade Level Value on such Participant's first day of employment by an Employing
Company.
2.8 In the case of an individual who becomes a Participant as a result
of becoming a new Employee of an Employing Company subsequent to January 1,
1995, such Participant shall be eligible to participate in the Plan for each
Computation Period which ends not less than two (2) years and not greater than
four (4) years after becoming a Participant provided such Participant is an
Employee as of the last day of the Computation Period and shall have occupied
Grade Level 7 or above for at least seventy five percent (75%) of the total
number of months such Participant has been an Employee. For purposes of
calculating the six month period referred to in this Section 2.8, an Employee
shall be deemed to occupy Grade Level 7 or above for each month in which such
Employee has occupied such Grade Level for fifteen (15) days or more.
ARTICLE III
Corporate Financial Performance Award
3.1 The Award Opportunity for each Participant shall be based upon his
weighted average Grade Level(s) as of December 31 of each calendar year of the
Computation Period with respect to which an Award shall be made and shall range
from fifteen percent (15%) to sixty-five percent (65%) of the Grade Level Value
held by the Participant at the beginning of each calendar year of a Computation
Period. 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. Such
Exhibit A shall be modified from time to time by the Committee to reflect any
changes in Exhibit C hereto.
3.2 Each Award Opportunity shall be multiplied by the Award Percentage
set forth in Exhibit B herein, which is based on 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 to determine
a Participant's Award. The return on common equity of Southern Company Peer
Group Companies shall be determined annually by an independent certified public
accountant based on generally accepted accounting principles and shall be
properly adjusted and annualized by such accountant so that each Peer Group
Company's return on common equity may be accurately compared to that of Southern
Company. The average return on common equity for each Peer Group Company for a
Computation Period under this Section 3.2 shall be determined by (a) calculating
the average return on common equity for each company for each year in the
Computation Period, (b) adding the average return on common equity calculations
for each company all years in the Computation Period; and (c) dividing the total
for each company by the number of years in the Computation Period.
3.3 Notwithstanding anything in this Article III to the contrary,
Awards for Computation Periods beginning on and before January 1, 1998 shall be
the greater of the Award determined under Section 3.1 hereof or the Award
determined based upon the Participant's Grade Level Value as of the first day of
each such Computation Period.
3.4 Notwithstanding the above provisions, an Award shall not be granted
for any Computation Period ending with the calendar year in which the current
earnings of Southern Company are less than the amount necessary to fund the
dividends on its Common Stock at the rate such dividends were paid for the
immediately preceding calendar year.
3.5 In the discretion of the Chief Executive Officer of Southern
Company, for purposes of determining the Award for one or more Computation
Periods may be calculated without regard to any extraordinary item of income or
expense incurred by 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. An Award payment may not be
deferred under this Plan. In the event an Award was deferred under the Prior
Plan, such deferral shall be governed by the terms of the Prior Plan.
ARTICLE IV
Change in Control
4.1 Southern Change in Control. Notwithstanding any other provision of
this Plan to the contrary, in the event of a Plan Termination within the two (2)
year period following a Southern Change in Control, each Participant who is an
Employee on the date of the Plan Termination shall be entitled to receive within
thirty (30) days of the Plan Termination, cash in an amount equal to his Award
Opportunity under the Plan for the Computation Period in which the Plan
Termination shall have occurred, at the target Award Percentage resulting in a
Value of Performance Unit of $1.00, prorated for each Computation Period by the
number of months which have passed since the beginning of the Computation Period
until the date of the Plan Termination.
4.2 Subsidiary Change in Control. Notwithstanding any other provision
of this Plan to the contrary, in the event of a Subsidiary Change in Control,
each Subsidiary Employee on the date of such Change in Control whose employment
is not transferred upon such Subsidiary Change in Control to another Employing
Company shall be entitled to receive within thirty (30) days of the Subsidiary
Change in Control, cash in an amount equal his Award Opportunity under the Plan
for the Computation Period in which the Subsidiary Change in Control shall have
occurred, at the target Award Percentage resulting in a Value of Performance
Unit of $1.00, prorated for each Computation Period by the number of months
which have passed since the beginning of the Computation Period until the date
of the Subsidiary Change in Control.
4.3 Minimum Target Payout. In the event of a Southern Change in Control
or a Southern Termination, if the Plan or an equitable replacement thereto (as
described in Section 1.30 hereof) remains effective on December 31st of the Plan
Year in which the Southern Change in Control or Southern Termination shall have
occurred, the Plan or replacement plan shall operate with respect to the
Computation Period then ended in accordance with its terms, but in no event
shall the Award from the Plan or replacement plan for such Computation Period be
at less than a target Award Percentage resulting in a Value of Performance Unit
of $1.00.
ARTICLE V
Miscellaneous Provisions
5.1 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.
5.2 The Employing Company shall not reserve or otherwise set aside
funds for the payments of Awards deferred in accordance with the Prior Plan.
5.3 Except for the provisions of Article IV which cannot be amended,
modified or terminated following a Southern Change in Control, Subsidiary Change
in Control or Southern Termination, the Plan may be amended, modified, or
terminated by the Board of Directors in its sole discretion at any time and from
time to time; provided, however, that no such amendment, modification, or
termination shall impair any rights to payments which have been deferred under
the Prior Plan prior to such amendment, modification, or termination.
5.4 It is expressly understood and agreed that the Awards made in
accordance with the Plan are in addition to any other benefits or compensation
to which a Participant may be entitled or for which he may be eligible, whether
funded or unfunded, by reason of his employment with the Employing Company.
5.5 There shall be deducted from the payment of each Award under the
Plan the amount of any tax required by any governmental authority to be withheld
and paid over by the Employing Company to such governmental authority for the
account of the person entitled to such distribution.
5.6 Any Awards paid to a Participant while employed by an Employing
Company shall not be considered in the calculation of the Participant's benefits
under any other employee welfare or pension benefit plan maintained by an
Employing Company, unless otherwise specifically provided therein.
5.7 The Committee shall have the authority to interpret the provisions
of this Plan and to develop such rules and regulations as are necessary to carry
out the terms of the Plan. Any such interpretations, rules or regulations shall
be binding upon all Participants.
5.8 The Committee shall have the authority to delegate any of its
duties and obligations hereunder and shall have the authority to engage such
agents as it deems necessary to carry out its duties and obligations hereunder.
5.9 Governing Law. This Plan, and all rights under it, shall be
governed by and construed in accordance with the laws of the State of Georgia.
5.10 Pooling Accounting. Notwithstanding anything to the contrary
herein, if, but for any provision of this Plan, a Change in Control transaction
would otherwise be accounted for as a pooling-of-interests under APB No.16
("Pooling Accounting") (after giving effect to any and all other facts and
circumstances affecting whether such Change in Control transaction would use
Pooling Accounting), such provision or provisions of this Plan which would
otherwise cause the Change in Control transaction to be ineligible for Pooling
Accounting shall automatically be void and ineffective in such a manner and to
the extent that by eliminating such provision or provisions of this Plan,
Pooling Accounting would be required for such Change in Control transaction and
Pooling Accounting is in fact used for such Change in Control transaction.
IN WITNESS WHEREOF, Southern Company Services, Inc., through its duly
authorized officers, hereby amends and restates Southern Company Productivity
Improvement Plan this ____ day of ____________________, 1999, to be effective
January 1, 1998.
SOUTHERN COMPANY SERVICES, INC.
By:
Christopher C. Womack
Senior Vice President, Human Resources
Attest:
By:
Tommy Chisholm
Secretary
[CORPORATE SEAL]
<PAGE>
SOUTHERN COMPANY
PRODUCTIVITY IMPROVEMENT PLAN
EXHIBIT A
Grade Level Value Target Award Opportunity
Percentage of Grade Level Value
President/CEO 50/65%
15 50%
14 45%
13 40%
12 35%
11 30%
10 25%
9 25%
8 20%
7 15%
<PAGE>
SOUTHERN COMPANY
PRODUCTIVITY IMPROVEMENT PLAN
EXHIBIT B
AWARD PERCENTAGE SCHEDULE
Position Ranking
Value of
Performance Unit 12 - 14 15 - 17 18 - 20
$ Companies Companies Companies
- --------- --------- ---------
$2.00 Top Top Top
1.80 1.0 1.0 1.0
1.60 2.0 2.0 2.0
1.40 2.5 3.0 3.0
1.20 3.0 4.0 4.0
1.00 4.0 4.5 5.0
.90 4.5 5.0 6.0
.80 5.0 6.0 7.0
.70 6.0 7.0 8.0
.60 6.5 8.0 9.0
.50 7.0 8.5 10.0
0 Below 7.0 Below 8.5 Below 10
<PAGE>
SOUTHERN COMPANY
PRODUCTIVITY IMPROVEMENT PLAN
EXHIBIT C
The Peer Group Companies are as follows:
Allegheny Power System
American Electric Power (combine core subs...Note 1)
Baltimore Gas & Electric Company
Carolina Power & Light
Central & South West (combine core subs...Note 2)
Central Louisiana Electric
Duke Energy
Entergy (combine core subs...Note 3)
Florida Power & Light (previously used FPL Group, Inc.)
Florida Power Corp. (previously used Florida Progress)
Kentucky Utilities Company (previously used KU Energy)
Potomac Electric Power Company
South Carolina Electric & Gas (previously used SCANA)
Tampa Electric (previously used TECO Energy)
Virginia Electric & Power (previously used Dominion Resources)
Note 1: Combine AEP Generating Company, Appalachian Power Company, Columbus
Southern Power Company, Indiana Michigan Power Company, Kentucky Power Company,
and Ohio Power Company.
Note 2: Combine Central Power & Light Co., Public Service Co. of Oklahoma,
Southwestern Electric Power Co. and West Texas Utilities Co.
Note 3: Combine Entergy Arkansas, Inc., Entergy Gulf States, Inc., Entergy
Louisiana, Inc., Entergy Mississippi, Inc., and System Energy Resources, Inc.
EXHIBIT 10(a)60
SOUTHERN COMPANY
EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN
AMENDED AND RESTATED
TROUTMAN SANDERS LLP
NationsBank Plaza
600 Peachtree Street, N.E., Suite 5200
Atlanta, Georgia 30308
(404) 885-3000
Effective January 1, 1999
SOUTHERN COMPANY
EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN
Purposes
The purposes of the Southern Company Executive Productivity Improvement
Plan (the "Plan") are to provide a financial incentive which will focus the
efforts of certain executives on areas that will have a direct and significant
influence on corporate performance and to provide the potential for levels of
compensation that will enhance the Employing Companies' abilities to attract,
retain and motivate such executives. In order to achieve these objectives, the
Plan will be based upon corporate performance.
This Amendment and Restatement shall be effective as of January 1,
1999.
ARTICLE I
Definitions
For purposes of the Plan, the following terms shall have the following
meanings unless a different meaning is plainly required by the context:
1.1 "Annual Salary" shall mean base salary or wages paid to a
Participant before deductions for taxes, social security, etc., including all
amounts contributed by an Employing Company to The Southern Electric System
Flexible Benefits Plan or The Southern Company Flexible Benefits Plan on behalf
of a Participant, amounts contributed by any Employing Company to The Southern
Company Employee Savings Plan as Elective Employer Contributions, as said term
is defined in Section 4.1 therein, pursuant to the Participant's exercise of his
deferral option made in accordance with Section 401(k) of the Internal Revenue
Code, and amounts contributed to the Southern Company Deferred Compensation
Plan, but excluding all awards under the Southern Company Performance Pay Plan
and the Southern Company Executive Productivity Improvement Plan, overtime pay,
shift differential and substitution pay. For Computation Periods beginning on or
before January 1, 1998, Annual Salary shall be the Participant's Annual Salary
as of the first day of the Computation Period. For Computation Periods beginning
January 1, 1999 and thereafter, Annual Salary shall be the weighted average
Annual Salary determined as of the last day of each of the four years within the
Computation Period.
1.2 "Average ROE" shall mean the mathematical result obtained by (a)
calculating the return on equity for each year in the Computation Period, (b)
adding the return on equity calculations for all years in the Computation
Period; and (c) dividing the total by the number of years in the Computation
Period.
1.3 "Award" shall mean the Award Opportunity or Award Units multiplied
by the Performance Unit Value determined under Sections 3.2 and 3.4 of the Plan.
1.4 "Award Opportunity" shall mean the award opportunity determined
under Section 3.1 of the Plan.
1.5 "Award Unit" shall mean the unit opportunity determined under
Section 3.3 of the Plan.
1.6 "Beneficial Ownership" shall mean beneficial ownership within the
meaning of Rule 13d-3 promulgated under the Exchange Act.
1.7 "Board of Directors" shall mean the Board of Directors of Southern
Company Services, Inc.
1.8 "Business Combination" shall mean a reorganization, merger or
consolidation or sale of Southern Company or a sale of all or substantially all
of Southern Company's assets.
1.9 "Chief Executive Officer" shall mean the individual designated as
such by the Board of Directors of an Employing Company and of Southern Company.
1.10 "Committee" or "Compensation Committee" shall mean the
Compensation Committee of the Board of Directors of Southern Company or the
Employing Company.
1.11 "Common Stock" shall mean the common stock of Southern Company.
1.12 "Computation Period" shall mean a four-year period commencing on
the first day of the initial year of participation and thereafter it shall mean
a four-year period commencing the first day of January each year made up of the
ROE Computation Period and the TSR Computation Period, if any, respectively.
1.13 "Consummation" shall mean the completion of the final act
necessary to complete a transaction as a matter of law, including, but not
limited to, any required approvals by the corporation's shareholders and board
of directors, the transfer of legal and beneficial title to securities or assets
and the final approval of the transaction by any applicable domestic or foreign
governments or agencies.
1.14 "Control" shall mean, in the case of a corporation, Beneficial
Ownership of more than 50% of the combined voting power of the corporation's
Voting Securities, or in the case of any other entity, Beneficial Ownership of
more than 50% of such entity's voting equity interests.
1.15 "Employing Company" shall mean Southern Company Services, Inc., or
any other affiliate or subsidiary (direct or indirect) of Southern Company,
which the Board of Directors may from time to time determine to bring under the
Plan and which shall adopt the Plan, and any successor of any of them.
1.16 "Executive Employee" shall mean any person who is currently
employed by an Employing Company who is a "covered employee" as that term is
defined in Section 162(m) of the Internal Revenue Code (the "Code") who is
designated as an Executive Employee by the Compensation Committee and such other
persons employed by an Employing Company as the Compensation Committee in its
discretion shall designate.
1.17 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
1.18 "Grade Level" shall mean the evaluation assigned under the job
evaluation system. For Computation Periods beginning on or before January 1,
1998, Grade Level shall be the Participant's Grade Level as of the first day of
the Computation Period. For Computation Periods beginning January 1, 1999 and
thereafter, Grade Level shall be the weighted average Grade Level determined as
of the last day of each of the four years within the Computation Period.
1.19 "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 "Group" shall have the meaning set forth in Section 14(d) of the
Exchange Act.
1.21 "Incumbent Board" shall mean those individuals who constitute the
Southern Board as of the Effective Date plus any individual who shall become a
director subsequent to such date whose election or nomination for election by
Southern Company's shareholders was approved by a vote of at least 75% of the
directors then comprising the Incumbent Board. Notwithstanding the foregoing, no
individual who shall become a director of the Southern Board subsequent to the
Effective Date whose initial assumption of office occurs as a result of an
actual or threatened election contest (within the meaning of Rule 14a-11 of the
Regulations promulgated under the Exchange Act) with respect to the election or
removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Southern Board shall be a
member of the Incumbent Board.
1.22 "Non-Adopting Employer" shall mean any subsidiary or affiliate of
Southern Company which is not an Employing Company.
1.23 "Participant" shall mean an Executive Employee who satisfies the
criteria referred to in Article II at the beginning of a Computation Period.
1.24 "Payment Date" shall mean the date the check evidencing the Award
is endorsed by an authorized person of an Employing Company.
1.25 "Percentage of Total Award" shall have the meaning ascribed in
Exhibits B and E hereof.
1.26 "Plan" shall mean the Southern Company Executive Productivity
Improvement Plan, as described herein or as may be amended from time to time.
1.27 "Plan Termination" shall mean the termination of the Plan by
Southern Company or an Employing Company following a Southern Change in Control
unless an equitable arrangement (embodied in an ongoing substitute or
replacement plan) has been made with respect to the Plan in connection with the
Southern Change in Control. For purposes of this Plan, an ongoing substitute or
alternative plan shall be considered an "equitable arrangement" if a nationally
recognized compensation consulting firm chosen by the Committee opines in
writing that, on aggregate, the post-Southern Change in Control plan is an
equitable substitute or replacement of the pre-Southern Change in Control Plan,
and that such substitute or alternative plan provides substantially similar
target opportunities and a substantially similar level of performance
difficulty.
1.28 "Prior Plan" shall mean the Plan as amended and restated effective
January 1, 1995.
1.29 "Southern Board" shall mean the board of directors of Southern
Company.
1.30 "Southern Change in Control" shall mean any of the following:
(a) The acquisition by any Person of Beneficial Ownership of
20% or more of Southern Company's Voting Securities; provided, however,
that for purposes of this subsection (a), the following acquisitions of
Southern Company's Voting Securities shall not constitute a Change in
Control:
(i) any acquisition directly from Southern Company;
(ii) any acquisition by Southern Company;
(iii) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by Southern Company
or any corporation Controlled by Southern Company;
(iv) any acquisition by a qualified pension plan or
publicly held mutual fund;
(v) any acquisition by an Employee or Group composed
exclusively of Employees; or
(vi) any Business Combination which would not
otherwise constitute a Change in Control because of the
application of clauses (i), (ii) and (iii) of Section 1.30(c);
(b) A change in the composition of the Southern Board whereby
individuals who constitute the Incumbent Board cease for any reason to
constitute at least a majority of the Southern Board; or
(c) Consummation of a Business Combination, unless, following
such Business Combination, all of the following three conditions are
met:
(i) all or substantially all of the individuals and
entities who held Beneficial Ownership, respectively, of
Southern Company's Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly,
65% or more of the combined voting power of the Voting
Securities of the corporation surviving or resulting from such
Business Combination, (including, without limitation, a
corporation which as a result of such transaction holds
Beneficial Ownership of all or substantially all of Southern
Company's Voting Securities or all or substantially all of
Southern Company's assets) (such surviving or resulting
corporation to be referred to as "Surviving Company"), in
substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the
Southern Company's Voting Securities;
(ii) no Person (excluding any corporation resulting
from such Business Combination, any qualified pension plan,
publicly held mutual fund, Group composed exclusively of
Employees or employee benefit plan (or related trust) of
Southern Company, its subsidiaries or Surviving Company) holds
Beneficial Ownership, directly or indirectly, of 20% or more
of the combined voting power of the then outstanding Voting
Securities of Surviving Company except to the extent that such
ownership existed prior to the Business Combination; and
(iii) at least a majority of the members of the board
of directors of Surviving Company were members of the
Incumbent Board at the earlier of the date of execution of the
initial agreement, or of the action of the Southern Board,
providing for such Business Combination.
1.31 "Southern Company" shall mean The Southern Company.
1.32 "Southern Termination" shall mean the following:
(a) The consummation of a reorganization, merger or
consolidation of Southern Company under circumstances where either (i)
Southern Company is not the surviving corporation or (ii) Southern
Company's Voting Securities are no longer publicly traded;
(b) The sale or other disposition of all or substantially all
of Southern Company's assets; or
(c) The acquisition by any Person of Beneficial Ownership of
all of Southern Company's Voting Securities such that Southern
Company's Voting Securities are no longer publicly traded;
in each case under circumstances where the Surviving Company of the
company acquiring Southern Company's assets or Voting Securities dies
not adopt an "equitable arrangement" (as defined in Section 1.27
hereof) in the form of a replacement plan.
1.33 "Subsidiary Change in Control" shall mean the following:
(a) The Consummation of an acquisition by any Person of
Beneficial Ownership of 50% or more of the combined voting power of the
then outstanding Voting Securities of an Employing Company; provided,
however, that for purposes of this Section 1.33, any acquisition by an
Employee, or Group composed entirely of Employees, any qualified
pension plan, any publicly held mutual fund or any employee benefit
plan (or related trust) sponsored or maintained by Southern Company or
any corporation Controlled by Southern Company shall not constitute a
Change in Control;
(b) Consummation of a reorganization, merger or consolidation
of an Employing Company (an "Employing Company Business Combination"),
in each case, unless, following such Employing Company Business
Combination, Southern Company Controls the corporation surviving or
resulting from such Employing Company Business Combination; or
(c) Consummation of the sale or other disposition of all or
substantially all of the assets of an Employing Company to an entity
which Southern Company does not Control.
1.34 "Subsidiary Employee" shall mean an Executive Employee of an
Employing Company which has undergone a Subsidiary Change in Control.
1.35 "ROE Computation Period" shall have the meaning ascribed in
Section 3.1 hereof.
1.36 "ROE Peer Group Companies" shall mean the companies set forth on
Exhibit C attached hereto and as may be revised from time to time by the
Committee to reflect mergers, acquisitions, reorganizations, etc. of such
companies.
1.37 "Termination for Cause" or "Cause" shall mean the termination of a
Participant's employment by an Employing Company under any of the following
circumstances:
(a) The Participant willfully neglects or refuses to discharge
his or her duties to the Employing Company as an employee or refuses to
comply with any lawful and reasonable instructions given to him or her
by the Employing Company without reasonable excuse;
(b) The Participant is guilty of gross misconduct. For
purposes of this Plan, the following acts shall constitute gross
misconduct:
(i) any act involving fraud or dishonesty or breach
of appropriate regulations of competent authorities;
(ii) the carrying out of any activity or the making
of any statement which would prejudice or impair the good name
and standing of the Company or any Employing Company or would
bring the Company or any Employing Company into contempt,
ridicule or would reasonably shock or offend any community in
which the Company or any Employing Company is located;
(iii) attendance at work in a state of intoxication
or otherwise being found in possession at his or her workplace
of any prohibited drug or substance, possession of which would
amount to a criminal offense;
(iv) assault or other act of violence against any
employee or other person during the course of the
Participant's employment; and
(v) conviction of any felony or misdemeanor involving
moral turpitude.
1.38 "Total Shareholder Return" or "TSR" shall mean the total amount an
investor would receive by investing $100 per quarter in Common Stock or in TSR
Peer Group Common Stock, as the case may be, as determined by measuring the
total dividends which would have been paid on such Common Stock or TSR Peer
Group Common Stock by reinvesting such dividends on a quarterly basis in
additional shares of Common Stock or TSR Peer Group Common Stock, as the case
may be, and the total gain or loss on such Common Stock or Peer Group Common
Stock as if such stock had been sold at the closing price on the last day of the
respective Computation Period.
1.39 "TSR Computation Period" shall have the meaning ascribed in
Section 3.3 hereof.
1.40 "TSR Peer Group Common Stock" shall mean the common stock of the
Peer Group Companies.
1.41 "TSR Peer Group Companies" shall mean those Companies designated
by Goldman Sachs in its "Selected Electric Utility Industry Report" as the
approximately 80 Utility Peer Group Companies as published quarterly and as
composed from time to time. In the event that Goldman Sachs no longer publishes
the 80 Utility Peer Group Companies, the Committee shall choose such other and
similar list of national peer group companies as published by a similarly
nationally recognized firm.
1.42 "Value of Performance Unit" shall have the meaning ascribed in
Exhibits B and E attached hereto.
1.43 "Voting Securities" shall mean the outstanding voting securities
of a corporation entitling the holder thereof to vote generally in the election
of such corporation's directors.
Where the context requires, words in the masculine gender shall include
the feminine and neuter genders, words in the singular shall include the plural,
and words in the plural shall include the singular.
ARTICLE II
Participants
2.1 Participation. Participation in the Plan shall be limited to
Executive Employees of the Employing Companies.
2.2 Reduction in Grade Level. Any Participant who ceases to be an
Executive Employee prior to the close of a Computation Period shall receive an
Award for the Computation Period ending on December 31st of the year in which
such Participant ceased to be an Executive Employee and shall forfeit any Award
for any other Computation Periods that have not closed as of the date the
Participant ceases to be an Executive Employee.
2.3 Termination of Employment. If a Participant's employment is
terminated by reason of death, disability or retirement, such Participant or his
or her estate shall be eligible to receive an Award for the Computation Period
ending in the year of such death, disability or retirement unless such death,
disability or retirement shall have occurred on January 1 in which case the
Participant or his or her estate shall only be entitled to an Award for the
Computation Period ending December 31 of the previous year. Any Participant who
terminates employment for any other reason shall receive only any unpaid Award
for a completed Computation Period and shall not be eligible to receive an Award
for the Computation Period ending in the year of such termination of employment.
2.4 Transfer to Non-Adopting Employer. Notwithstanding the provisions
of Section 2.3 above, in the case of an individual transferring from an
Employing Company to a Non-Adopting Employer any Award paid for any Computation
Period not yet closed as of the date of a Participant's transfer shall be paid
to the Participant by the Employing Company from which the Participant is
transferring on the following basis:
(i) 100% of the Award for the Computation Period ending in the
year of transfer;
(ii) 75% of the Award for the Computation Period ending in the
first year following the year of transfer;
(iii) 50% of the Award for the Computation Period ending in
the second year following the year of transfer; and
(iv) 25% of the Award for the Computation Period ending in the
third year following the year of transfer.
Such transferring Participant shall receive no award for any Computation Period
which has not begun on the date of the Participant's transfer or if such
Participant shall no longer be in an eligible Grade Level after such transfer.
Any Awards payable under this Section 2.4 shall be based on the Grade
Level at the time of transfer.
2.5 Transfer from Non-Adopting Employer. In the case of an individual
transferring from a Non-Adopting Employer to an Employing Company whose Grade
Level and length of service at the Non-Adopting Employer would have caused the
Employee to have been a Participant in the Plan if the Non-Adopting Employer
were an Employing Company and whose Grade Level after the transfer would enable
the Employee to participate in the Plan, such individual shall be deemed to have
been employed by an Employing Company while employed with the Non-Adopting
Employer and shall, for any Computation Period ending after such transfer, be
deemed a Participant in the Plan as if the Non-Adopting Employer was an
Employing Company.
Any Awards payable under this Section 2.5 shall be based on the Grade
Levels at the Employing Company.
2.6 Termination for Cause. Notwithstanding any other provision of this
Plan, a Participant whose employment is Terminated for Cause shall forfeit any
and all unpaid Awards under this Plan.
2.7 Promotion. The administration of Awards for Participants who are
promoted or transferred from one Grade Level included in the Plan to another
Grade Level included in the Plan shall be based on the Participant's Grade Level
Value on the last day of the Computation Period for which an Award is being
granted. For the Computation Periods ending December 31, 1995, December 31,
1996, December 31, 1997 and December 31, 1998 a Participant's Grade Level Value
for determining Awards shall be the Participant's Grade Level Value on January
1, 1995.
2.8 Maximum Award. Notwithstanding any other provision of this Plan,
the maximum Award for any Computation Period payable to any Participant shall be
two million dollars ($2,000,000).
2.9 1995 Participants. Any individual who initially becomes a
Participant in the Plan as of January 1, 1995 shall be considered to have been
participating in the Plan as of January 1, 1993 for purposes of determining
benefits payable for any Computation Period that began or begins on or after
January 1, 1993 and such Participant will therefore be eligible for an Award
equal to seventy-five percent (75%) of the Award Opportunity for the Computation
Period ending December 31, 1995.
2.10 Post-1995 Participants. In the case of an individual who becomes a
Participant subsequent to January 1, 1995, said Participant will participate in
each Computation Period which ends not less than two (2) years after becoming a
Participant.
ARTICLE III
Corporate Financial Performance Award
3.1 ROE Computation Period. For Computation Period years beginning
before January 1, 1997 (the "ROE Computation Period"), the Award Opportunity for
each Participant shall be based upon either his Grade Level Value (as determined
based on his Grade Level at the beginning of such period) or, in the Committee's
discretion, upon his Annual Salary at the beginning of such period and in either
case shall range from fifteen percent (15%) to sixty-five percent (65%) of such
Grade Level Value or Annual Salary, as applicable. The Award Opportunity for
each Grade Level or Annual Salary shall be determined in accordance with the
chart set forth in Exhibit A hereof.
3.2 ROE Ranking. Each Award Opportunity granted in the ROE Computation
Period shall be multiplied by the Value of Performance Unit factor and the
Percentage of Total Award factor set forth in Exhibit B hereof, which is based
on Southern Company's Average ROE ranking during the ROE Computation Period as
compared to the Average ROE ranking of the ROE Peer Group Companies to determine
a Participant's Award. The return on common equity of the ROE Peer Group
Companies shall be determined annually by an independent certified public
accountant based on generally accepted accounting principles and shall be
properly adjusted and annualized by such accountant so that each ROE Peer Group
Company return on common equity may be accurately compared to that of Southern
Company.
3.3 TSR Computation Period. For Computation Period years beginning on
or after January 1, 1997 (the "TSR Computation Period"), the Award Units for
each Participant shall be based upon either his Grade Level Value or, in the
Committee's discretion, upon his Annual Salary and, in either case shall range
from fifteen percent (15%) to sixty-five percent (65%) of such Grade Level Value
or Annual Salary, as applicable. The Award Units for each Grade Level or Annual
Salary shall be determined in accordance with the charts set forth in Exhibit D
hereof.
3.4 TSR Ranking. Each Award Unit granted in the TSR Computation Period
shall be multiplied by the Value of Performance Unit factor and the Percentage
of Total Award factor set forth in Exhibit E hereof which is based on Total
Shareholder Return of Southern Company as compared to the Total Shareholder
Return for the TSR Peer Group Companies. The Total Shareholder Return of
Southern Company and the TSR Peer Group Companies shall be determined annually
by an independent certified public accountant and shall be properly adjusted and
amortized by such accountant so that each TSR Peer Group Company's total
shareholder return may be accurately compared to that of Southern Company.
3.5 Insufficient Earnings. Notwithstanding the above provisions, an
Award will not be granted for any Computation Period ending with the calendar
year in which the current earnings of Southern Company are less than the amount
necessary to fund the dividends on its Common Stock at the rate such dividends
were paid for the immediately preceding calendar year.
3.6 Extraordinary Income. In the exercise of negative discretion, the
Compensation Committee may calculate the Award for one or more Computation
Period(s) without regard to any extraordinary income item (but not loss)
otherwise recorded by Southern Company or any Employing Company, provided such
determination that an item of income is extraordinary is made by the Committee
prior to the close of the Computation Period.
3.7 Payment. The Awards to the Participants will be paid in cash as
soon as is practicable after all evaluations are completed. An Award payment may
not be deferred under this Plan. In the event an Award was deferred under the
Prior Plan, such deferral shall be governed by the terms of the Prior Plan.
ARTICLE IV
Change in Control
4.1 Southern Change in Control. Notwithstanding any other provision of
this Plan to the contrary, in the event of a Plan Termination within the two (2)
year period following a Southern Change in Control, each Participant who is an
Executive Employee on the date of the Plan Termination shall be entitled to
receive within thirty (30) days of the Plan Termination, cash in an amount equal
to his Award Opportunity or Award Units, as the case may be, for the Computation
Period in which the Plan Termination shall have occurred, at a target Value of
Performance Unit of $1.00, prorated for each Computation Period by the number of
months which have passed since the beginning of the Computation Period until the
date of the Plan Termination.
4.2 Subsidiary Change in Control. Notwithstanding any other provision
of this Plan to the contrary, in the event of a Subsidiary Change in Control,
each Subsidiary Employee on the date of such Change in Control whose employment
is not transferred upon such Subsidiary Change in Control to another Employing
Company shall be entitled to receive within thirty (30) days of the Subsidiary
Change in Control, cash in an amount equal to his Award Opportunity, or Award
Units, as the case may be, for the Computation Period in which the Subsidiary
Change in Control shall have occurred, at a target Value of Performance Unit of
$1.00, prorated for each Computation Period by the number of months which have
passed since the beginning of the Computation Period until the date of the
Subsidiary Change in Control.
4.3 Southern Termination. Notwithstanding any other provision of this
Plan to the contrary, in the event of a Southern Termination, if the Plan or an
equitable replacement thereto (as described in Section 1.27 hereof) remains
effective on December 31st of the Plan Year in which the Southern Change in
Control shall have occurred, the Plan or Replacement Plan shall operate with
respect to the Performance Period then ended in accordance with its terms, but
in no event shall the Value of Performance Unit under the Plan or similar factor
under a replacement plan for such Performance Period be less than $1.00 or
target performance, respectively.
ARTICLE V
Miscellaneous Provisions
5.1 No Assignment. Neither the Participant, his beneficiary, nor his
personal representative shall have any rights to commute, sell, assign, transfer
or otherwise convey the right to receive any payments hereunder, which payments
and the rights thereto are expressly declared to be nonassignable and
nontransferable. Any attempt to assign or transfer the right to payments of this
Plan shall be void and have no effect.
5.2 No Reserve. The Employing Company shall not reserve or otherwise
set aside funds for the payments of Awards deferred in accordance with the Prior
Plan.
5.3 Plan Amendment. Except for the provisions of Article IV hereof, which may
not be amended, modified or terminated following a Southern Change in Control,
Subsidiary Change in Control or a Southern Termination, the Plan may be amended,
modified, or terminated by the Board of Directors in its sole discretion at any
time and from time to time; provided, however, that no such amendment,
modification, or termination shall impair any rights to payments which have been
deferred under the Prior Plan prior to such amendment, modification, or
termination.
5.4 Additional Benefits. It is expressly understood and agreed that the
Awards made in accordance with the Plan are in addition to any other benefits or
compensation to which a Participant may be entitled or for which he may be
eligible, whether funded or unfunded, by reason of his employment with the
Employing Company.
<PAGE>
5.5 Withholding. There shall be deducted from the payment of each Award
under the Plan the amount of any tax required by any governmental authority to
be withheld and paid over by the Employing Company to such governmental
authority for the account of the person entitled to such distribution.
5.6 Effect On Other Benefits. Any Awards paid to a Participant while
employed by an Employing Company shall not be considered in the calculation of
the Participant's benefits under any other employee welfare or pension benefit
plan maintained by an Employing Company, unless otherwise specifically provided
therein.
5.7 Governing Law. This Plan, and all its rights under it, shall be
governed by and construed in accordance with the laws of the State of Georgia.
5.8 Pooling Accounting. Notwithstanding anything to the contrary
herein, if, but for any provision of this Plan, a Change in Control transaction
would otherwise be accounted for as a pooling-of-interests under APB No.16
("Pooling Accounting") (after giving effect to any and all other facts and
circumstances affecting whether such Change in Control transaction would use
Pooling Accounting,), such provision or provisions of this Plan which would
otherwise cause the Change in Control transaction to be ineligible for Pooling
Accounting shall be void and ineffective in such a manner and to the extent that
by eliminating such provision or provisions of this Plan, Pooling Accounting
would be required for such Change in Control transaction.
IN WITNESS WHEREOF, Southern Company Services, Inc., through its duly
authorized officers, hereby amends and restates the Southern Company Executive
Productivity Improvement Plan this ____ day of , 1999 to be effective January 1,
1999.
SOUTHERN COMPANY SERVICES, INC.
By: ______________________________
Christopher C. Womack
Senior Vice President, Human Resources
Attest:
By: ________________________
Tommy Chisholm
Secretary
[CORPORATE SEAL]
<PAGE>
SOUTHERN COMPANY
EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN
EXHIBIT A
Award Opportunity
Grade Level Value Award Opportunity
Percentage of Grade Level Value
or Annual Salary
President/CEO 50/65%
15 50%
14 45%
13 40%
12 35%
11 30%
10 25%
9 25%
8 20%
7 15%
<PAGE>
SOUTHERN COMPANY
EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN
EXHIBIT B
AWARD PERCENTAGE SCHEDULE
Position Ranking
Value of
Performance Unit 12 - 14 15 - 17 18 - 20
$ Companies Companies Companies
- --------- --------- ---------
$2.00 Top Top Top
1.80 1.0 1.0 1.0
1.60 2.0 2.0 2.0
1.40 2.5 3.0 3.0
1.20 3.0 4.0 4.0
1.00 4.0 4.5 5.0
.90 4.5 5.0 6.0
.80 5.0 6.0 7.0
.70 6.0 7.0 8.0
.60 6.5 8.0 9.0
.50 7.0 8.5 10.0
0 Below 7.0 Below 8.5 Below 10
Percentage Of Total Award Factor
Computation Period Ending Factor
December 31, 1997 75%
December 31, 1998 50%
December 31, 1999 25%
Thereafter 0%
<PAGE>
SOUTHERN COMPANY
EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN
EXHIBIT C
ROE Peer Group Companies
Allegheny Energy, Inc. Kansas City Power & Light Company
Alliant Energy Corporation Keyspan Energy Corporation
Ameren Corporation LG&E Energy Corporation
American Electric Power Company MDU Resources
Baltimore Gas & Electric Company MidAmerican Energy Holdings Co.
BEC Energy Minnesota Power Company
Carolina Power & Light Company Montana Power Company
Central & South West Corporation Nevada Power Co.
CILCORP. Inc. New Century Energies, Inc.
Cinergy Corporation New England Electric System
Cleco Corporation Niagara Mohawk Power Corp.
Conectiv CIV NIPSCO Industries, Inc.
CMS Energy Corporation Northeast Utilities Co.
Commonwealth Energy System Northern States Power Co.
Consolidated Edison, Inc. OGE Energy Corp.
Dominion Resources, Inc. Orange & Rockland Utilities, Inc.
DPL, Inc. PG&E Corp.
DQE, Inc. PacifiCorp
DTE Energy Company PECO Energy Co.
Duke Energy Corporation Pinnacle West Capital Corp.
Eastern Utilities Associates Potomac Electric Power Co.
Edison International PP&L Resources, Inc.
Energy East Corporation Public Service Co. of New Mexico
Entergy Corporation Public Service Enterprise Group, Inc.
FirstEnergy Corporation Puget Sound Energy, Inc.
Florida Progress Corporation Rochester Gas & Electric Corp.
FPL Group, Inc. SCANA Corp.
GPU, Inc. Sierra Pacific Resources
Hawaiian Electric Industries, Inc. SIGCORP, Inc.
Houston Industries, Inc. TECO Energy, Inc.
IDACORP, Inc. Texas Utilities Company
Illinova Corporation Unicom Corp.
Interstate Energy Corporation Unisource Energy Corp.
IPALCO Enterprises, Inc. United Illuminating Company
Washington Water Power Co. UtiliCorp. United, Inc.
Western Resources, Inc. Wisconsin Energy Corp.
WPS Resources Corp.
SOUTHERN COMPANY
EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN
EXHIBIT D
Award Units
Grade Level Value Award Units
Percentage of Grade Level Value
or Annual Salary
President/CEO 50/65%
15 50%
14 45%
13 40%
12 35%
11 30%
10 25%
9 25%
8 20%
7 15%
<PAGE>
SOUTHERN COMPANY
EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN
EXHIBIT E
Performance Unit Factor*
Value of Unit Percentile of Southern TSR
vs.
Investor Utility
$ 2.00 90th and above
$ 1.50 70th
$1.00 50th
$ .50 30th
$ .00 Below 30th
*The Value of Unit for performance levels falling between the percentiles listed
above shall be interpolated on a straight line basis for any given calendar
year.
Percentage Of Total Award Factor
Computation Period Ending Factor
December 31, 1997 25%
December 31, 1998 50%
December 31, 1999 75%
Thereafter 100%
EXHIBIT 10(a)61
THE SOUTHERN COMPANY
EMPLOYEE SAVINGS PLAN
As Amended and Restated
Effective January 1, 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE I - PURPOSE.................................................1
ARTICLE II - DEFINITIONS............................................2
2.1 "Account"..................................................2
2.2 "Actual Contribution Percentage Test"......................2
2.3 "Actual Deferral Percentage"...............................2
2.4 "Actual Deferral Percentage Test"..........................2
2.5 "Affiliated Employer"......................................2
2.6 "Aggregate Account"........................................2
2.7 "Aggregation Group"........................................3
2.8 "Annual Addition"..........................................3
2.9 "Average Actual Deferral Percentage".......................3
2.10 "Average Contribution Percentage"..........................4
2.11 "Beneficiary"..............................................4
2.12 "Board of Directors".......................................4
2.13 "Break-in-Service Date"....................................4
2.14 "Code".....................................................4
2.15 "Committee"................................................4
2.16 "Common Stock".............................................4
2.17 "Company"..................................................4
2.18 "Compensation".............................................4
2.19 "Contribution Percentage"..................................5
2.20 "Defined Benefit Plan Fraction"............................5
2.21 "Defined Contribution Plan Fraction".......................5
2.22 "Determination Date".......................................6
2.23 "Determination Year".......................................6
2.24 "Direct Rollover"..........................................6
2.25 "Distributee"..............................................6
2.26 "Elective Employer Contribution"...........................6
2.27 "Eligible Employee"........................................6
2.28 "Eligible Participant".....................................7
2.29 "Eligible Retirement Plan".................................7
2.30 "Eligible Rollover Distribution"...........................7
2.31 "Employee".................................................7
2.32 "Employer Matching Contribution"...........................7
2.33 "Employing Company"........................................7
2.34 "Enrollment Date"..........................................7
2.35 "ERISA"....................................................7
2.36 "Excess Aggregate Contributions"...........................7
2.37 "Excess Deferral Amount"...................................8
2.38 "Excess Deferral Contributions"............................8
2.39 "Highly Compensated Employee"..............................8
2.40 "Hour of Service"..........................................8
2.41 "Investment Fund"..........................................8
2.42 "Key Employee".............................................8
2.43 "Limitation Year"..........................................8
2.44 "Look-Back Year"...........................................8
2.45 "Non-Highly Compensated Employee"..........................8
2.46 "Normal Retirement Date"...................................8
2.47 "One-Year Break in Service"................................9
2.48 "Participant"..............................................9
2.49 "Permissive Aggregation Group".............................9
2.50 "Plan".....................................................9
2.51 "Plan Year"................................................9
2.52 "Present Value of Accrued Retirement Income"...............9
2.53 "Required Aggregation Group"...............................9
2.54 "Rollover Contribution"....................................9
2.55 "SEPCO"....................................................9
2.56 "SEPCO Plan"...............................................9
2.57 "SEPCO Transferred Account"...............................10
2.58 "Super-Top-Heavy Group"...................................10
2.59 "Surviving Spouse"........................................10
2.60 "Top-Heavy Group".........................................10
2.61 "Trust"or "Trust Fund"....................................10
2.62 "Trust Agreement".........................................10
2.63 "Trustee".................................................10
2.64 "Valuation Date"..........................................10
2.65 "Voluntary Participant Contribution"......................10
2.66 "Year of Service".........................................10
ARTICLE III - PARTICIPATION........................................12
3.1 Eligibility Requirements..................................12
3.2 Participation upon Reemployment...........................12
3.3 No Restoration of Previously Distributed Benefits.........12
3.4 Loss of Eligible Employee Status..........................12
3.5 Special Rule for Scott Paper Company Energy Complex
Employees.................................................13
3.6 Former Commonwealth Edison of Indiana Employees...........13
3.7 Military Leave............................................13
ARTICLE IV - ELECTIVE EMPLOYER CONTRIBUTIONS AND VOLUNTARY
PARTICIPANT CONTRIBUTIONS..........................................14
4.1 Elective Employer Contributions...........................14
4.2 Maximum Amount of Elective Employer Contributions.........14
4.3 Distribution of Excess Deferral Amounts...................14
4.4 Additional Rules Regarding Elective Employer Contributions15
4.5 Section 401(k) Nondiscrimination Tests....................16
4.6 Voluntary Participant Contributions.......................19
4.7 Manner and Time of Payment of Elective Employer
Contributions and Voluntary Participant Contributions.....19
4.8 Change in Contribution Rate...............................19
4.9 Change in Contribution Amount.............................20
4.10 Rollover Contributions and Direct Transfers from
the SEPCO and ECMC Plans..................................20
4.11 Rollovers from Other Plans................................20
ARTICLE V - EMPLOYER MATCHING CONTRIBUTIONS........................22
5.1 Amount of Employer Matching Contributions.................22
5.2 Payment of Employer Matching Contributions................22
5.3 Limitations on Employer Matching Contributions and
Voluntary Participant Contributions.......................22
5.4 Multiple Use Limitation...................................25
5.5 Reversion of Employing Company Contributions..............25
5.6 Correction of Prior Incorrect Allocations and
Distributions.............................................26
ARTICLE VI - LIMITATIONS ON CONTRIBUTIONS..........................27
6.1 Section 415 Limitations...................................27
6.2 Correction of Contributions in Excess of Section
415 Limits................................................28
6.3 Combination of Plans......................................28
ARTICLE VII - SUSPENSION OF CONTRIBUTIONS..........................30
7.1 Suspension of Contributions...............................30
7.2 Resumption of Contributions...............................30
ARTICLE VIII - INVESTMENT OF CONTRIBUTIONS.........................31
8.1 Investment Funds..........................................31
8.2 Investment of Participant Contributions...................31
8.3 Investment of Employer Matching Contributions.............31
8.4 Investment of Earnings....................................31
8.5 Transfer of Assets between Funds..........................31
8.6 Change in Investment Direction............................32
8.7 Section 404(c) Plan.......................................32
ARTICLE IX - MAINTENANCE AND VALUATION OF PARTICIPANTS'ACCOUNTS....33
9.1 Establishment of Accounts.................................33
9.2 Valuation of Investment Funds.............................33
9.3 Rights in Investment Funds................................33
ARTICLE X - VESTING................................................34
10.1 Vesting...................................................34
ARTICLE XI - WITHDRAWALS AND LOANS.................................35
11.1 Withdrawals by Participants...............................35
11.2 Notice of Withdrawal......................................36
11.3 Form of Withdrawal........................................36
11.4 Minimum Withdrawal........................................36
11.5 Source of Withdrawal......................................36
11.6 Requirement of Hardship...................................36
11.7 Loans to Participants.....................................38
11.8 Special Waiver for Participants Employed in the
United Kingdom............................................39
ARTICLE XII - DISTRIBUTION TO PARTICIPANTS.........................41
12.1 Distribution upon Retirement..............................41
12.2 Distribution upon Disability..............................42
12.3 Distribution upon Death...................................42
12.4 Designation of Beneficiary in the Event of Death..........42
12.5 Distribution upon Termination of Employment...............43
12.6 Commencement of Benefits..................................43
12.7 Transfer between Employing Companies......................44
12.8 Distributions to Alternate Payees.........................44
12.9 Requirement for Direct Rollovers..........................45
12.10 Consent and Notice Requirements...........................45
12.11 Form of Payment...........................................45
12.12 Partial Distribution upon Termination of Employment.......45
ARTICLE XIII - ADMINISTRATION OF THE PLAN..........................47
13.1 Membership of Committee...................................47
13.2 Acceptance and Resignation................................47
13.3 Transaction of Business...................................47
13.4 Responsibilities in General...............................47
13.5 Committee as Named Fiduciary..............................47
13.6 Rules for Plan Administration.............................48
13.7 Employment of Agents......................................48
13.8 Co-Fiduciaries............................................48
13.9 General Records...........................................48
13.10 Liability of the Committee................................48
13.11 Reimbursement of Expenses and Compensation of Committee...49
13.12 Expenses of Plan and Trust Fund...........................49
13.13 Responsibility for Funding Policy.........................49
13.14 Management of Assets......................................49
13.15 Notice and Claims Procedures..............................50
13.16 Bonding...................................................50
13.17 Multiple Fiduciary Capacities.............................50
13.18 Change in Administrative Procedures.......................50
ARTICLE XIV - TRUSTEE OF THE PLAN..................................51
14.1 Trustee...................................................51
14.2 Purchase of Common Stock..................................51
14.3 Voting of Common Stock....................................51
14.4 Voting of Other Investment Fund Shares....................52
14.5 Uninvested Amounts........................................52
14.6 Independent Accounting....................................52
ARTICLE XV - AMENDMENT AND TERMINATION OF THE PLAN.................53
15.1 Amendment of the Plan.....................................53
15.2 Termination of the Plan...................................53
15.3 Merger or Consolidation of the Plan.......................53
ARTICLE XVI - TOP-HEAVY REQUIREMENTS...............................55
16.1 Top-Heavy Plan Requirements...............................55
16.2 Determination of Top-Heavy Status.........................55
16.3 Minimum Allocation for Top-Heavy Plan Years...............56
16.4 Adjustments to Maximum Benefit Limits for Top-Heavy Plans.56
ARTICLE XVII - GENERAL PROVISIONS..................................58
17.1 Plan Not an Employment Contract...........................58
17.2 No Right of Assignment or Alienation......................58
17.3 Payment to Minors and Others..............................58
17.4 Source of Benefits........................................59
17.5 Unclaimed Benefits........................................59
17.6 Governing Law.............................................59
ARTICLE XVIII - SPECIAL REQUIREMENTS FOR ACCOUNT BALANCES
ATTRIBUTABLE TO ACCRUED BENEFITS TRANSFERRED FROM THE SEPCO PLAN...60
18.1 SEPCO Transferred Accounts................................60
18.2 In-Service Withdrawals from SEPCO Transferred Accounts....60
18.3 Loans from SEPCO Transferred Accounts.....................60
18.4 Distribution of SEPCO Transferred Accounts................60
18.5 Code Section 411(d)(6) Protected Benefits.................62
<PAGE>
THE SOUTHERN COMPANY
EMPLOYEE SAVINGS PLAN
As Amended and Restated
Effective January 1, 1997
ARTICLE I
PURPOSE
The purpose of the Plan is to encourage employee thrift, to create
added employee interest in the affairs of The Southern Company, to provide a
means for becoming a shareholder in The Southern Company, to supplement
retirement and death benefits, and to create a competitive compensation program
for employees through the establishment of a formal plan under which
contributions by and on behalf of Participants are supplemented by contributions
of Employing Companies. This Plan is intended to be a stock bonus plan, and all
contributions made by an Employing Company to this Plan are expressly
conditioned upon the deductibility of such contributions under Code Section 404.
The Plan was originally effective March 1, 1976 and is being amended and
restated effective as of January 1, 1997, in order to incorporate a variety of
plan design and other changes.
<PAGE>
ARTICLE II
DEFINITIONS
All references to articles, sections, subsections, and paragraphs shall
be to articles, sections, subsections, and paragraphs of this Plan unless
another reference is expressly set forth in this Plan. Any words used in the
masculine shall be read and be construed in the feminine where they would so
apply. Words in the singular shall be read and construed in the plural, and all
words in the plural shall be read and construed in the singular in all cases
where they would so apply.
For purposes of this Plan, unless otherwise required by the context,
the following terms shall have the meanings set forth opposite such terms:
2.1 "Account" shall mean the total amount credited to the account of a
Participant, as described in Section 9.1.
2.2 "Actual Contribution Percentage Test" shall mean the test described
in Section 5.3(a).
2.3 "Actual Deferral Percentage" shall mean the ratio (expressed as a
percentage) of Elective Employer Contributions on behalf of an Eligible
Participant for the Plan Year to the Eligible Participant's compensation for the
Plan Year. For the purpose of determining an Eligible Participant's Actual
Deferral Percentage for a Plan Year, the Committee may elect to consider an
Eligible Participant's compensation for (a) the entire Plan Year or (b) that
portion of the Plan Year in which the Eligible Participant was eligible to have
Elective Employer Contributions made on his behalf, provided that such election
is applied uniformly to all Eligible Participants for the Plan Year. The Actual
Deferral Percentage of an Eligible Participant who does not have Elective
Employer Contributions made on his behalf shall be zero.
2.4 "Actual Deferral Percentage Test" shall mean the test described in
Section 4.5(a).
2.5 "Affiliated Employer" shall mean an Employing Company and (a) any
corporation which is a member of a controlled group of corporations (as defined
in Section 414(b) of the Code) which includes such Employing Company, (b) any
trade or business (whether or not incorporated) which is under common control
(as defined in Section 414(c) of the Code) with such Employing Company, (c) 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 such
Employing Company, and (d) any other entity required to be aggregated with such
Employing Company pursuant to regulations under Section 414(o) of the Code.
Notwithstanding the foregoing, for purposes of applying the limitations of
Article VI, the term Affiliated Employer shall be adjusted as required by Code
Section 415(h).
2.6 "Aggregate Account" shall mean with respect to a Participant as of
the Determination Date, the sum of the following:
(a) the Account balance of such Participant as of the
most recent valuation occurring within a twelve-month period
ending on the Determination Date;
(b) an adjustment for any contributions due as of the
Determination Date;
(c) any Plan distributions, including 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), but
not related rollovers or plan-to-plan transfers (ones either
not initiated by the Employee or made to a plan maintained by
the same employer), made within the Plan Year that includes
the Determination Date or within the four preceding Plan
Years, including distributions made prior to January 1, 1984,
and distributions made under a terminated plan which if it had
not been terminated would have been required to be included in
an Aggregation Group;
(d) any Employee contributions, whether voluntary or
mandatory;
(e) unrelated rollovers and plan-to-plan transfers to
this Plan accepted prior to January 1, 1984; and
(f) related rollovers and plan-to-plan transfers to
this Plan.
2.7 "Aggregation Group" shall mean either a Required Aggregation Group
or a Permissive Aggregation Group.
2.8 "Annual Addition" shall mean the amount allocated to a
Participant's Account and accounts under all defined contribution plans
maintained by the Affiliated Employers during a Limitation Year that constitutes
(a) Affiliated Employer contributions,
(b) Voluntary Participant Contributions,
(c) forfeitures, if any, allocated to a Participant's
Account or accounts under all defined contribution plans
maintained by the Affiliated Employers, and
(d) amounts described in Sections 415(l)(1) and
419A(d)(2) of the Code.
2.9 "Average Actual Deferral Percentage" shall mean the average
(expressed as a percentage) of the Actual Deferral Percentages of the Eligible
Participants in a group.
2.10 "Average Contribution Percentage" shall mean the average
(expressed as a percentage) of the Contribution Percentages of the Eligible
Participants in a group.
2.11 "Beneficiary" shall mean any person(s) who, or estate(s),
trust(s), or organization(s) which, in accordance with the provisions of Section
12.4, become entitled to receive benefits upon the death of a Participant.
2.12 "Board of Directors" shall mean the Board of Directors of Southern
Company Services, Inc.
2.13 "Break-in-Service Date" means the earlier of:
(a) the date on which an Employee terminates employment, is discharged,
retires, or dies; or
(b) the last day of an approved leave of absence including any
extension.
In the case of an individual who is absent from work for maternity or
paternity reasons, such individual shall not incur a Break-in-Service Date
earlier than the expiration of the second anniversary of the first date of such
absence; provided, however, that the twelve-consecutive-month period beginning
on the first anniversary of the first date of such absence shall not constitute
a Year of Service. 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.
2.14 "Code" shall mean the Internal Revenue Code of 1986, as amended,
or any successor statute, and the rulings and regulations promulgated
thereunder. In the event an amendment to the Code renumbers a section of the
Code referred to in this Plan, any such reference automatically shall become a
reference to such section as renumbered.
2.15 "Committee" shall mean the committee appointed pursuant to Section
13.1 to serve as plan administrator.
2.16 "Common Stock" shall mean the common stock of The Southern
Company.
2.17 "Company" shall mean Southern Company Services, Inc., and its
successors.
2.18 "Compensation" shall mean the base salary or wages of a
Participant, including all amounts contributed by an Employing Company to The
Southern Company Flexible Benefits Plan on behalf of a Participant pursuant to a
salary reduction arrangement under such plan, plus monthly shift and monthly
seven-day schedule differentials, geographic premiums, monthly customer service
premiums, monthly nuclear plant premiums, and, effective July 1, 1998, sales
commissions paid under a sales commission payment program sponsored by an
Employing Company for sales commissioned based employees, and before deduction
of taxes, social security, etc., but excluding all awards under any incentive
pay plans sponsored by the Employing Company, including but not limited to, The
Southern Company Performance Pay Plan, The Southern Company Productivity
Improvement Plan, and The Southern Company Executive Productivity Improvement
Plan, overtime pay, any hourly shift differentials, substitution pay, such
amounts which are reimbursements to a Participant paid by any Employing Company,
including but not limited to, reimbursement for such items as moving expenses
and travel and entertainment expenses, and imputed income for automobile
expenses, tax preparation expenses and health and life insurance premiums paid
by the Employing Company.
The Compensation of each Participant taken into account for purposes of
this Plan shall not exceed $160,000 (as adjusted pursuant to Code Section
401(a)(17)).
2.19 "Contribution Percentage" shall mean the ratio (expressed as a
percentage), of the sum of the Voluntary Participant Contributions and Employer
Matching Contributions under the Plan on behalf of the Eligible Participant for
the Plan Year to the Eligible Participant's compensation for the Plan Year. For
the purpose of determining an Eligible Participant's Contribution Percentage for
a Plan Year, the Committee may elect to consider an Eligible Participant's
compensation for (a) the entire Plan Year or (b) that portion of the Plan Year
in which the individual is an Eligible Participant, provided that such election
is applied uniformly to all Eligible Participants for the Plan Year. The
Contribution Percentage of an Eligible Participant who does not make Voluntary
Participant Contributions or have Employer Matching Contributions made on his
behalf shall be zero.
2.20 "Defined Benefit Plan Fraction" shall mean the following fraction:
(numerator) Sum of the projected annual benefits of the Participant
under all Affiliated Employer defined benefit plans (whether or not
terminated) determined as of the close of the Plan Year.
(denominator) The lesser of (a) the product of 1.25 multiplied by the
dollar limitation in effect for the Plan Year under Code Sections
415(b)(1)(A) or 415(d), or (b) 1.4 multiplied by 100% of the
Participant's average compensation for his highest three (3)
consecutive Plan Years of participation as adjusted under Treasury
Regulation Section 1.415-5.
2.21 "Defined Contribution Plan Fraction" shall mean the following
fraction:
(numerator) The sum of all Annual Additions to the account of the
Participant as of the close of the Plan Year under all defined
contribution plans maintained by the Affiliated Employers for the
current and prior Limitation Years (whether or not terminated),
including this Plan.
(denominator) The sum of the lesser of the following amounts determined
for such Plan Year and for each prior Plan Year in which the
Participant has a Year of Service: (a) 1.25 multiplied by the dollar
limitation in effect under Code Section 415(c)(1)(A) for the Plan Year
(determined without regard to Code Section 415(c)(6)), or (b) 1.4
multiplied by the amount that may be taken into account under Code
Section 415(c)(1)(B) with respect to a Participant for the Plan Year.
2.22 "Determination Date" shall mean with respect to a Plan Year, the
last day of the preceding Plan Year.
2.23 "Determination Year" shall mean the Plan Year being tested.
2.24 "Direct Rollover" shall mean a payment by the Plan to the Eligible
Retirement Plan specified by the Distributee.
2.25 "Distributee" shall include an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse and the
Employee's or former Employee's spouse or former spouse who is an alternate
payee under a qualified domestic relations order, as defined in Section 414(p)
of the Code, are Distributees with regard to the interest of the spouse or
former spouse.
2.26 "Elective Employer Contribution" shall mean contributions made
pursuant to Section 4.1 during the Plan Year by an Employing Company, at the
election of the Participant, in lieu of cash compensation and shall include
contributions made pursuant to a salary reduction agreement.
2.27 "Eligible Employee" shall mean an Employee who is employed by an
Employing Company and (a) who was eligible to be included in the Plan on January
1, 1991, or (b) who is a regular full-time, regular part-time, or cooperative
education employee other than:
(1) an Employee who is treated as such solely by reason of the
"leased employee" rules of Code Section 414(n);
(2) any Employee who is represented by a collective bargaining
agent unless the representatives of his bargaining unit and
the Employing Company mutually agree to participation in the
Plan subject to its terms by members of his bargaining unit;
(3) an individual who is a cooperative education employee and who
first performs an Hour of Service on or after January 1, 1995;
and
(4) an individual who is classified by the Employing Company as a
temporary employee (who was not eligible to be included in the
Plan on January 1, 1991) or an independent contractor,
regardless of whether such classification is in error.
Effective September 1, 1998, any individual classified by the
Employing Company as a temporary employee shall be excluded
from the Plan, regardless of any prior inclusion in the Plan
and regardless of whether the "temporary employee"
classification is determined to be in error.
2.28 "Eligible Participant" shall mean an Eligible Employee who is
authorized to have Elective Employer Contributions or Voluntary Participant
Contributions allocated to his Account for the Plan Year.
2.29 "Eligible Retirement Plan" shall mean an individual retirement
account described in Section 408(a) of the Code, an individual retirement
annuity described in Section 408(b) of the Code, an annuity plan described in
Section 403(a) of the Code, or a qualified trust described in Section 401(a) of
the Code 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.
2.30 "Eligible Rollover Distribution" shall mean 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, the
joint lives (or joint life expectancies) of the Distributee and the
Distributee's Beneficiary, or for a specified period of 10 years or more; (b)
any distribution to the extent such distribution is required under Section
401(a)(9) of the Code; and (c) the portion of any distribution that is not
includable in gross income (determined without regard to the exclusion for net
unrealized appreciation with respect to employer securities).
2.31 "Employee" shall mean each individual who is employed by an
Affiliated Employer under common law and each individual who is required to be
treated as an employee pursuant to the "leased employee" rules of Code Section
414(n) other than a leased employee described in Code Section 414(n)(5).
2.32 "Employer Matching Contribution" shall mean a contribution made by
an Employing Company pursuant to Section 5.1 with respect to Elective Employer
Contributions and Voluntary Participant Contributions made on behalf of each
Participant each payroll period.
2.33 "Employing Company" shall mean the Company 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 them. The Employing Companies are set forth on Appendix A to the
Plan as updated from time to time. No such entity shall be treated as an
Employing Company prior to the date it adopts the Plan.
2.34 "Enrollment Date" shall mean the first day of each payroll period.
2.35 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, or any successor statute, and the rulings and regulations
promulgated thereunder. In the event an amendment to ERISA renumbers a section
of ERISA referred to in this Plan, any such reference automatically shall become
a reference to such section as renumbered.
2.36 "Excess Aggregate Contributions" shall mean the amount referred to
in Code Section 401(m)(6)(B) with respect to a Participant. In no event may the
Excess Aggregate Contributions for any Highly Compensated Employee exceed the
amount of the Employer Matching Contributions or Voluntary Participant
Contributions made on behalf of the Highly Compensated Employee for the Plan
Year.
2.37 "Excess Deferral Amount" shall mean the amount of Elective
Employer Contributions for a calendar year that exceed the Code Section 402(g)
limits as allocated to this Plan pursuant to Section 4.3(b).
2.38 "Excess Deferral Contributions" shall mean the amount of Elective
Employer Contributions on behalf of a Highly Compensated Employee referred to in
Code Section 401(k)(8)(B).
2.39 "Highly Compensated Employee" shall mean (in accordance with and
subject to Code Section 414(q) and any regulations, rulings, notices or
procedures thereunder), with respect to any Plan Year: (1) any Employee who was
a five percent (5%) owner of The Southern Company or an Affiliated Employer (as
determined pursuant to Code Section 416) during the Plan Year or the immediately
preceding Plan Year, or (2) any Employee who earned more than $80,000 in the
preceding Plan Year. The $80,000 amount shall be adjusted for inflation and for
short Plan Years, pursuant to Code Section 414(q). The Employer may, at its
election, limit Employees earning more than $80,000 to only those Employees who
fall within the "top-paid group," as defined in Code Section 414(q) excluding
those employees described in Code Section 414(q)(8) for such purpose. In
determining whether an Employee is a Highly Compensated Employee, the Committee
may make any elections authorized under applicable regulations, rulings,
notices, or revenue procedures.
2.40 "Hour of Service" shall mean each hour for which an Employee is
paid, or entitled to payment, for the performance of duties for an Affiliated
Employer.
2.41 "Investment Fund" shall mean any one of the funds described in
Article VIII which constitutes part of the Trust Fund.
2.42 "Key Employee" shall mean any Employee or former Employee (and his
Beneficiary) who is a key employee within the meaning of Code Section 416(i)(1).
2.43 "Limitation Year" shall mean the Plan Year.
2.44 "Look-Back Year" shall mean the Plan Year preceding the
Determination Year.
2.45 "Non-Highly Compensated Employee" shall mean an Employee who is
not a Highly Compensated Employee.
2.46 "Normal Retirement Date" shall mean the first day of the month
following a Participant's sixty-fifth (65th) birthday.
2.47 "One-Year Break in Service" shall mean each
twelve-consecutive-month period within the period commencing with an Employee's
Break-in-Service Date and ending on the date the Employee is again credited with
an Hour of Service.
2.48 "Participant" shall mean (a) an Eligible Employee who has elected
to participate in the Plan as provided in Article III and whose participation in
the Plan at the time of reference has not been terminated as provided in the
Plan, (b) an Employee or former Employee who has ceased to be a Participant
under (a) above, but for whom an Account is maintained under the Plan, and,
effective April 1, 1997, (c) an Eligible Employee who has made a Rollover
Contribution to this Plan to the extent that the Provisions of the Plan apply to
such Rollover Contribution of the Eligible Employee.
2.49 "Permissive Aggregation Group" shall mean a group of plans
consisting of the Required Aggregation Group and, at the election of the
Affiliated Employers, such other plan or plans 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 Section 401(a)(4) or 410.
2.50 "Plan" shall mean The Southern Company Employee Savings Plan
(known as the Employee Savings Plan for The Southern Company System prior to
January 1, 1991), as described herein or as from time to time amended.
2.51 "Plan Year" shall mean the twelve-month period commencing January
1st and ending on the last day of December next following.
2.52 "Present Value of Accrued Retirement Income" shall mean an amount
determined solely for the purpose of determining if the Plan, or any other plan
included in a Required Aggregation Group of which the Plan is a part, is top
heavy in accordance with Code Section 416.
2.53 "Required Aggregation Group" shall mean those plans that are
required to be aggregated as determined under this Section 2.53. In determining
a Required Aggregation Group hereunder, each plan of the Affiliated Employers in
which a Key Employee is a participant and each other plan of the Affiliated
Employers which enables any plan in which a Key Employee participates to meet
the requirements of Code Section 410 or 401(a)(4) will be required to be
aggregated.
2.54 "Rollover Contribution" shall mean that portion of an eligible
rollover distribution (as defined in Code Section 402(c)(4)) that an Eligible
Employee elects to contribute to this Plan in accordance with the requirements
of Section 4.11.
2.55 "SEPCO" shall mean Savannah Electric and Power Company.
2.56 "SEPCO Plan" shall mean the Employee Savings Plan of Savannah
Electric and Power Company as in effect December 31, 1992.
2.57 "SEPCO Transferred Account" shall mean the total amount credited
to the account of a Participant as described in Section 9.1(b).
2.58 "Super-Top-Heavy Group" shall mean an Aggregation Group that would
be a Top-Heavy Group if 90% were substituted for 60% in Section 2.60.
2.59 "Surviving Spouse" shall mean the person to whom the Participant
is married on the date of his death, if such spouse is then living, provided
that the Participant and such spouse shall have been married throughout the one
(1) year period ending on the date of the Participant's death.
2.60 "Top-Heavy Group" shall mean an Aggregation Group in which, as of
the Determination Date, the sum of:
(a) the Present Value of Accrued Retirement Income of Key
Employees under all defined benefit plans included in that group, and
(b) the Aggregate Accounts of Key Employees under all defined
contribution plans included in the group,
exceeds 60% of a similar sum determined for all employees.
2.61 "Trust" or "Trust Fund" shall mean the trust established pursuant
to the Trust Agreement.
2.62 "Trust Agreement" shall mean the trust agreement between the
Company and the Trustee, as described in Article XIV.
2.63 "Trustee" shall mean the person or corporation designated as
trustee under the Trust Agreement, including any successor or successors.
2.64 "Valuation Date" shall mean each business day of the New York
Stock Exchange.
2.65 "Voluntary Participant Contribution" shall mean a contribution
made pursuant to Section 4.6 during the Plan Year.
2.66 "Year of Service" shall mean a twelve-month period of employment
as an Employee, including any fractions thereof. Calculation of the twelve-month
periods shall commence with the Employee's first day of employment, which is the
date on which an Employee first performs an Hour of Service, and shall terminate
on his Break-in-Service Date. Thereafter, if he has more than one period of
employment as an Employee, his Years of Service for any subsequent period shall
commence with the Employee's reemployment date, which is the first date
following a Break-in-Service Date on which the Employee performs an Hour of
Service, and shall terminate on his next Break-in-Service Date. An Employee who
has a Break-in-Service Date and resumes employment with the Affiliated Employers
within twelve months of his Break-in-Service Date shall receive a fractional
Year of Service for the period of such cessation of employment.
For purposes of determining an Employee's eligibility to participate,
the following years of service shall also be treated as Years of Service:
(a) In respect of an Employee of an Employing Company who
transfers to an Employing Company from Southern Energy Resources, Inc.
following its adoption of a plan containing a cash or deferred
arrangement under Section 401(k) of the Code, his credited years of
service under such plan as of his date of transfer.
(b) In respect of an Employee of an Employing Company who
transfers to an Employing Company from SEPCO on or before December 31,
1992, his credited years of service under the SEPCO Plan for actual
service while employed at SEPCO as of the date of his transfer.
Notwithstanding anything in this Section 2.66 to the contrary, an
Employee shall not receive credit for more than one Year of Service with respect
to any twelve-consecutive-month period.
<PAGE>
ARTICLE III
PARTICIPATION
3.1 Eligibility Requirements. Each Eligible Employee who was an active
Participant on December 31, 1996 shall continue to be an active Participant in
this Plan on January 1, 1997, provided he remains an Eligible Employee. Each
other Eligible Employee may elect to participate in the Plan as of any
Enrollment Date after he has completed a Year of Service. An Eligible Employee
shall make an election to participate by authorizing deductions from or
reduction of his Compensation as contributions to the Plan in accordance with
Article IV, and directing the investment of such contributions in accordance
with Article VIII. Such Compensation deduction and/or reduction authorization
and investment direction shall be made in accordance with the procedures
established by the Committee.
3.2 Participation upon Reemployment. If an Employee terminates his
employment with an Affiliated Employer and is subsequently reemployed as an
Eligible Employee, the following rules shall apply in determining his
eligibility to participate:
(a) If the reemployed Eligible Employee had not completed
the Year of Service requirement of Section 3.1 prior to his termination
of employment and is reemployed following a One-Year Break in Service,
he shall not receive credit for fractional periods of service completed
prior to the One-Year Break in Service until he has completed a Year of
Service after his return. A reemployed Employee who had not completed
the Year of Service requirement and who is reemployed within 12 months
of his Break-in-Service Date shall receive service credit for the
period in which he performed no services in accordance with Section
2.66.
(b) If the reemployed Eligible Employee fulfilled the
eligibility requirements of Section 3.1 prior to his termination of
employment and is reemployed as an Eligible Employee, whether before or
after he incurs a One-Year Break in Service, he may elect to become a
Participant in the Plan as of the date of his reemployment.
3.3 No Restoration of Previously Distributed Benefits. A Participant
who has terminated his employment with the Affiliated Employers and who has
received a distribution of the amount credited to his Account pursuant to
Section 12.5 shall not be entitled to restore the amount of such distribution to
his Account if he is reemployed and again becomes a Participant in the Plan.
3.4 Loss of Eligible Employee Status. If a Participant loses his status
as an Eligible Employee, but remains an Employee, such Participant shall be
ineligible to participate and shall be deemed to have elected to suspend making
Voluntary Participant Contributions or to have Elective Employer Contributions
made on his behalf.
3.5 Special Rule for Scott Paper Company Energy Complex Employees. An
Eligible Employee who was an employee of Scott Paper Company Energy Complex on
December 16, 1994, and who became an Employee of an Employing Company effective
December 17, 1994, shall be credited with a Year of Service as of December 31,
1994, and may elect to become a Participant as of any Enrollment Date commencing
on or after January 1, 1995.
3.6 Former Commonwealth Edison of Indiana Employees. Effective January
1, 1998, notwithstanding any other provision of the Plan to the contrary, with
respect to a former employee of Commonwealth Edison of Indiana ("ComEd") who was
employed by Southern Energy Resources, Inc. on or before December 31, 1997 and
is set forth on a schedule of employees acknowledged by the Committee shall be
credited with a Year of Service as of December 31, 1997, and may elect to become
a Participant as of any Enrollment Date commencing on or after January 1, 1998.
In addition, any former employee of ComEd who becomes employed by Southern
Energy Resources, Inc. on or after January 1, 1998 but prior to April 1, 1998
(hereafter "Date of Employment") and is set forth on the schedule of employees
acknowledged by the Committee shall be credited with a Year of Service as of the
day immediately preceding such employee's Date of Employment and may elect to
become a Participant as of any Enrollment Date commencing on or after such
employee's Date of Employment.
3.7 Military Leave. Notwithstanding any provision of the Plan to the
contrary, contributions, benefits, and service credit with respect to qualified
military service will be provided in accordance with Section 414(u) of the Code.
<PAGE>
ARTICLE IV
ELECTIVE EMPLOYER CONTRIBUTIONS AND
VOLUNTARY PARTICIPANT CONTRIBUTIONS
4.1 Elective Employer Contributions. An Eligible Employee who meets the
participation requirements of Article III may elect on a form provided by the
Employing Company to have his Compensation reduced by a whole percentage of his
Compensation, which percentage shall not be less than one percent (1%) nor more
than sixteen percent (16%) of his Compensation, such Elective Employer
Contribution to be contributed to his Account under the Plan.
4.2 Maximum Amount of Elective Employer Contributions. The maximum
amount of Elective Employer Contributions that may be made on behalf of a
Participant during any Plan Year to this Plan or any other qualified plan
maintained by an Employing Company shall not exceed the dollar limitation set
forth in Section 402(g) of the Code in effect at the beginning of such Plan
Year.
4.3 Distribution of Excess Deferral Amounts.
(a) In General. Notwithstanding any other provision of the
Plan, Excess Deferral Amounts and income allocable thereto shall be
distributed (and any corresponding Employer Matching Contributions
shall be forfeited) no later than April 15, 1997, and each April 15
thereafter, to Participants who allocate (or are deemed to allocate)
such amounts to this Plan pursuant to (b) below for the preceding
calendar year. Excess Deferral Amounts that are distributed shall not
be treated as an Annual Addition. Any Employer Matching Contributions
forfeited pursuant to this subsection (a) shall be applied, subject to
Section 6.1, toward funding Employing Company contributions (for the
Plan Year immediately following the Plan Year to which such forfeited
Employer Matching Contributions relate) or distributed, as directed by
the Committee, to the extent permitted by applicable law.
(b) Assignment. The Participant's allocation of amounts in
excess of the Code Section 402(g) limits to this Plan shall be in
writing; shall be submitted to the Committee no later than March 1;
shall specify the Participant's Excess Deferral Amount for the
preceding calendar year; and shall be accompanied by the Participant's
written statement that if such amounts are not distributed, such Excess
Deferral Amount, when added to amounts deferred under other plans or
arrangements described in Section 401(k), 408(k), 408(p), 402(h)(1)(B),
457, 501(c)(18), or 403(b) of the Code, exceeds the limit imposed on
the Participant by Section 402(g) of the Code for the year in which the
deferral occurred. A Participant is deemed to notify the Committee of
any Excess Deferral Amounts that arise by taking into account only
those deferrals under this Plan and any other plans of an Affiliated
Employer.
(c) Determination of Income or Loss. The Excess Deferral
Amount distributed to a Participant with respect to a calendar year
shall be adjusted for income or loss through the last day of the Plan
Year or the date of distribution, as determined by the Committee. The
income or loss allocable to Excess Deferral Amounts is the sum of:
(1) income or loss allocated to the Participant's
Account for the taxable year multiplied by a fraction, the
numerator of which is such Participant's Excess Deferral
Amount for the year and the denominator is the Participant's
Account balance attributable to Elective Employer
Contributions, minus any income or plus any loss occurring
during the Plan Year; and
(2) if the Committee shall determine in its sole
discretion, ten percent (10%) of the amount determined under
(1) above multiplied by the number of whole calendar months
between the end of the Plan Year and the date of the
distribution, counting the month of distribution if
distribution occurs after the 15th of the month.
Notwithstanding the above, the Committee may designate any
reasonable method for computing the income or loss allocable to Excess
Deferral Amounts, provided that the method does not violate Section
401(a)(4) of the Code, is used consistently for all Participants and
for all corrective distributions under the Plan for the Plan Year, and
is used by the Plan for allocating income or loss to Participants'
Accounts.
(3) Maximum Distribution Amount. The Excess
Deferral Amount, which would otherwise be distributed to the
Participant, shall, if there is a loss allocable to such
Excess Deferral Amount, in no event be less than the lesser
of the Participant's Account under the Plan attributable to
Elective Employer Contributions or the Participant's
Elective Employer Contributions for the Plan Year.
4.4 Additional Rules Regarding Elective Employer Contributions.
Salary reduction agreements shall be governed by the following:
(a) A salary reduction agreement shall apply to payroll
periods during which such salary reduction agreement is in effect. The
Committee, in its discretion, may establish administrative procedures
whereby the actual reduction in Compensation may be made to coincide
with each payroll period of the Employing Company, or at such other
times as the Committee may determine.
(b) The Employing Company may amend or revoke its salary
reduction agreement with any Participant at any time, if the Employing
Company determines that such revocation or amendment is necessary to
ensure that a Participant's additions for any Plan Year will not exceed
the limitations of Sections 4.2 and 6.1 of the Plan or to ensure that
the Actual Deferral Percentage Test is satisfied.
(c) Except as required under (b) above, and under Section
4.5(d) below, no amounts attributable to Elective Employer
Contributions may be distributed to a Participant or his Beneficiary
from his Account prior to the earlier of:
(1) the separation from service, death or
disability of the Participant;
(2) the attainment of age 59 1/2 by the
Participant;
(3) the termination of the Plan without
establishment of a successor plan;
(4) a financial hardship of the Participant
pursuant to Section 11.6 of the Plan;
(5) the date of a sale by an Employing Company
to an entity that is not an Affiliated
Employer of substantially all of the assets
(within the meaning of Code Section
409(d)(2)) with respect to a Participant who
continues employment with the corporation
acquiring such assets; or
(6) the date of the sale by an Employing Company
or an Affiliated Employer of its interest in
a subsidiary (within the meaning of Code
Section 409(d)(3)) to an entity which is not
an Affiliated Employer with respect to the
Participant who continues employment with
such subsidiary.
4.5 Section 401(k) Nondiscrimination Tests.
(a) Actual Deferral Percentage Test. The Plan shall satisfy
the nondiscrimination test of Section 401(k)(3) of the Code, under
which no Elective Employer Contributions shall be made that would cause
the Actual Deferral Percentage for Eligible Participants who are Highly
Compensated Employees to exceed (1) or (2) as follows:
(1) For Plan Years commencing prior to January 1,
1998:
(A) The Average Actual Deferral Percentage
for the Eligible Participants who are Highly Compensated
Employees in the current Plan Year shall not exceed the
Average Actual Deferral Percentage for Eligible Participants
who are Non-Highly Compensated Employees for the current Plan
Year multiplied by 1.25; or
(B) The Average Actual Deferral Percentage
for Eligible Participants who are Highly Compensated Employees
in the current Plan Year shall not exceed the Average Actual
Deferral Percentage for Eligible Participants who are
Non-Highly Compensated Employees in the current Plan Year
multiplied by two (2), provided that the Average Actual
Deferral Percentage for Eligible Participants who are Highly
Compensated Employees in the current Plan Year does not exceed
the Average Actual Deferral Percentage for Eligible
Participants who are Non-Highly Compensated Employees in the
current Plan Year by more than two (2) percentage points.
(2) For Plan Years commencing on and after January 1,
1998:
(A) The Average Actual Deferral Percentage
for the Eligible Participants who are Highly Compensated
Employees in the current Plan Year shall not exceed the
Average Actual Deferral Percentage for the prior Plan Year for
Eligible Participants who were Non-Highly Compensated
Employees for the prior Plan Year multiplied by 1.25; or
(B) The Average Actual Deferral Percentage
for Eligible Participants who are Highly Compensated Employees
in the current Plan Year shall not exceed the Average Actual
Deferral Percentage for Eligible Participants who were
Non-Highly Compensated Employees in the prior Plan Year
multiplied by two (2), provided that the Average Actual
Deferral Percentage for Eligible Participants who are Highly
Compensated Employees in the current Plan Year does not exceed
the Average Actual Deferral Percentage for the prior Plan Year
for Eligible Participants who were Non-Highly Compensated
Employees in the prior Plan Year by more than two (2)
percentage points.
(b) Distribution of Excess Deferral Contributions.
(1) In General. The Excess Deferral Contributions for
a Highly Compensated Employee for a Plan Year which are to be
distributed shall be distributed such that the Highly
Compensated Employee with the highest amount of Elective
Employer Contributions for the Plan Year shall be reduced to
the extent required to:
(A) distribute the total amount of Excess
Deferral Contributions, or
(B) cause the amount of such Highly
Compensated Employee's Elective Employer
Contributions to equal the amount of Elective
Employer Contributions of the Highly Compensated
Employee with the next highest amount of Elective
Employer Contributions for the Plan Year.
This process must be repeated until all Excess Deferral
Contributions are distributed.
Excess Deferral Contributions plus any income and
minus any loss allocable thereto shall be distributed (and any
corresponding Employer Matching Contribution shall be
forfeited) to Participants on whose behalf such Excess
Deferral Contributions were made within two and one-half
(2-1/2) months after the last day of the Plan Year in which
such excess amounts arose, and in any event not later than the
last day of the Plan Year following the close of the Plan Year
for which such contributions were made. Distribution of Excess
Deferral Contributions shall be made to Highly Compensated
Employees in accordance with this Section 4.5(b). Any Employer
Matching Contributions forfeited pursuant to this Subsection
(b)(1) shall be applied, subject to Section 6.1, toward
funding Employing Company contributions (for the Plan Year
immediately following the Plan Year to which such forfeited
Employer Matching Contributions relate) or distributed, as
directed by the Committee, to the extent permitted by
applicable law.
(2) Determination of Income or Loss. Excess Deferral
Contributions to be distributed shall be adjusted for any
income or loss through the last day of the Plan Year or the
date of distribution, as determined by the Committee. The
income or loss allocable to such Excess Deferral Contributions
is the sum of:
(A) income or loss allocated to the
Participant's Account for the taxable year multiplied
by a fraction, the numerator of which is the
Participant's Excess Deferral Contributions to be
distributed for the year and the denominator is the
Participant's Account balance attributable to
Elective Employer Contributions, minus any income or
plus any loss occurring during the Plan Year; and
(B) if the Committee shall determine in its
sole discretion, ten percent (10%) of the amount
determined under (A) above multiplied by the number
of whole calendar months between the end of the Plan
Year and the date of the distribution, counting the
month of distribution if distribution occurs after
the 15th of the month.
Notwithstanding the above, the Committee may
designate any reasonable method for computing the income or
loss allocable to Excess Deferral Contributions, provided that
the method does not violate Section 401(a)(4) of the Code, is
used consistently for all Participants and for all corrective
distributions under the Plan for the Plan Year, and is used by
the Plan for allocating income or loss to Participants'
Accounts.
(3) Maximum Distribution Amount. The Excess Deferral
Contributions which would otherwise be distributed to the
Participant shall be adjusted for income; shall be reduced, in
accordance with regulations, by the Excess Deferral Amount
distributed to the Participant; and shall, if there is a loss
allocable to the Excess Deferral Contributions, in no event be
less than the lesser of the Participant's Account under the
Plan attributable to Elective Employer Contributions or the
Participant's Elective Employer Contributions for the Plan
Year.
(c) Special Rules.
(1) For purposes of this Section 4.5, the Actual
Deferral Percentage for any Eligible Participant who is a
Highly Compensated Employee for the Plan Year and who is
eligible to have deferral contributions allocated to his
account under two (2) or more plans or arrangements described
in Section 401(k) of the Code that are maintained by an
Affiliated Employer shall be determined as if all such
deferral contributions were made under a single arrangement.
If a Highly Compensated Employee participates in two (2) or
more cash or deferred arrangements that have different plan
years, all cash or deferred arrangements ending with or within
the same calendar year shall be treated as a single
arrangement. Notwithstanding the foregoing, certain plans
shall be treated as separate if mandatorily disaggregated
under Code Section 401(k).
(2) In the event that this Plan satisfies the
requirements of Code Section 401(k), 401(a)(4), or 410(b) only
if aggregated with one or more other plans, or if one or more
other plans satisfy the requirements of Code Section 401(k),
401(a)(4), or 410(b) only if aggregated with this Plan, then
the actual deferral percentages shall be determined as if all
such plans were a single plan.
4.6 Voluntary Participant Contributions. An Eligible Employee who meets
the participation requirements of Article III may elect in accordance with the
procedures established by the Committee to contribute to his Account a Voluntary
Participant Contribution consisting of any whole percentage of his Compensation,
which percentage is not less than one percent (1%) nor more than sixteen percent
(16%) of his Compensation. The maximum Voluntary Participant Contribution shall
be reduced by the percent, if any, which is contributed as an Elective Employer
Contribution on behalf of such Participant under Section 4.1.
4.7 Manner and Time of Payment of Elective Employer Contributions and
Voluntary Participant Contributions. Contributions made in accordance with
Sections 4.1 and 4.6 will be rounded to the next higher multiple of one dollar
on a monthly basis. They will be made only through payroll deductions and will
be effective as of the payroll period commencing as soon as practicable after
the date on which the Participant elects to commence participation in the Plan.
Contributions shall be remitted to the Trustee as of the earliest date on which
such contributions can reasonably be segregated from each Employing Company's
general assets, but in any event not later than the fifteenth (15th) business
day of the month following the month during which such amounts would otherwise
have been payable to the Participant in cash or such earlier time as may be
prescribed by applicable law.
4.8 Change in Contribution Rate. A Participant may prospectively change
the percentage of his Compensation that he has authorized as the Elective
Employer Contribution to be made on his behalf or his Voluntary Participant
Contribution to another permissible percentage in accordance with the procedures
established by the Committee. Such election shall be effective as soon as
practicable after it is made.
4.9 Change in Contribution Amount. In the event of a change in the
Compensation of a Participant, the percentage of the Elective Employer
Contribution made on his behalf or his Voluntary Participant Contribution
currently in effect shall be applied as soon as practicable with respect to such
changed Compensation without action by the Participant.
4.10 Rollover Contributions and Direct Transfers from the SEPCO and
ECMC Plans.
(a) Effective December 1, 1991, a Participant shall be
entitled to transfer (or cause to be transferred directly from the
trustee) to the Trust to be held as part of his Account all or a
portion of the fair market value of the cash or other property a
Participant receives in the distribution of his accrued benefits under
the Profit Sharing Plan for Electric City Merchandise Company, Inc.
("ECMC Plan"), reduced by any voluntary participant contributions under
such plan. Such rollover contribution may only be made within sixty
(60) days following the date the Participant receives the distribution
(or within such additional period as may be provided under Section 408
of the Code if the Participant shall have made a timely deposit of the
distribution in an individual retirement account). No such rollover
contribution or trustee to Trustee transfer shall be made by a
Participant (or on his behalf) if not otherwise permissible under the
Code or if such rollover contribution or transfer would subject this
Plan to the requirements of Section 401(a)(11)(A) of the Code.
Notwithstanding the foregoing, the Trustee is specifically
authorized to accept any rollover accounts under the terms of the SEPCO
Plan as are necessary to reflect a Participant's interest in the Plan
resulting from the merger of the SEPCO Plan into this Plan effective as
of January 1, 1993. Any such rollover account shall be held as part of
the Participant's Account and shall be subject to the requirements of
Article XVIII.
(b) Any amounts so transferred to the Trust shall be
entitled to share in earnings or losses of the Trust in the same manner
as other Employing Company contributions to the Trust.
(c) The portion of a Participant's Account attributable to
any rollover contribution or trustee to Trustee transfer shall be
distributed with the balance of the Participant's Account pursuant to
Article XII of the Plan.
4.11 Rollovers from Other Plans. An Eligible Employee who is hired or
rehired on or after April 1, 1997 and has received a distribution of his
interest in a retirement plan of a former employer under circumstances meeting
the requirements of Section 402(c)(4) of the Code relating to eligible rollover
distributions from qualified trusts may elect to deposit all or any portion (as
designated by such Employee) of the amount of such distribution as a Rollover
Contribution to this Plan. A Rollover Contribution may be made only within 60
days following the date the Employee receives the distribution from the plan of
his former employer (or within such additional period as may be provided under
Section 408 of the Code if the Eligible Employee shall have made a timely
deposit of the distribution in an individual retirement account) and within 12
months of the date of his employment or reemployment with an Employing Company.
In addition to the foregoing, an Eligible Employee described in Section 3.5 may
elect to make a Rollover Contribution to this Plan without regard to his date of
employment, provided that such Rollover Contribution is deposited with this Plan
within the period beginning April 1, 1997 and ending June 30, 1997 and which
otherwise satisfies the requirements of this Section 4.11.
The Committee shall establish rules and procedures to implement this
Section 4.11, including without limitation, such procedures as may be
appropriate to permit the Committee to verify the tax qualified status of the
plan of the former employer and compliance with any applicable provisions of the
Code relating to such contributions. The amount contributed to the Trustee
pursuant to this Section 4.11 shall be placed in the Eligible Employee's
Rollover Contribution subaccount for the benefit of the Eligible Employee
pursuant to Section 9.1. The Eligible Employee shall have a fully vested
interest in the balance of his Rollover Contribution subaccount at all times and
such Rollover Contribution subaccount shall share in the earnings, gains, and
losses of the Trust Fund as set forth in Article IX of the Plan. An Employee
shall be entitled to a distribution of his Rollover Contribution subaccount
pursuant to the applicable provisions of Articles XI and XII hereof.
<PAGE>
ARTICLE V
EMPLOYER MATCHING CONTRIBUTIONS
5.1 Amount of Employer Matching Contributions. The Board of Directors,
in its sole and absolute discretion, shall determine the amount of Employer
Matching Contributions that shall be made by each Employing Company on behalf of
each Participant in its employ. The amount of Employer Matching Contributions
shall be fixed by resolutions of the Board of Directors and communicated to each
Employing Company prior to the first day of each Plan Year.
5.2 Payment of Employer Matching Contributions. Except as provided
herein, Employer Matching Contributions shall be remitted to the Trustee as soon
as practicable after the payroll period to which they relate.
5.3 Limitations on Employer Matching Contributions and Voluntary
Participant Contributions.
(a) Actual Contribution Percentage Test. The Plan shall
satisfy the nondiscrimination test of Section 401(m) of the Code, under
which the Average Contribution Percentage for Eligible Participants
shall not exceed (1) or (2) as follows:
(1) For Plan Years commencing prior to January 1,
1998:
(A) The Average Contribution Percentage for
Eligible Participants who are Highly Compensated Employees in
the current Plan Year shall not exceed the Average
Contribution Percentage for Eligible Participants who are
Non-Highly Compensated Employees in the current Plan Year
multiplied by 1.25; or
(B) The Average Contribution Percentage for
Eligible Participants who are Highly Compensated Employees in
the current Plan Year shall not exceed the Average
Contribution Percentage for Eligible Participants who are
Non-Highly Compensated Employees in the current Plan Year
multiplied by two (2), provided that the Average Contribution
Percentage for Eligible Participants who are Highly
Compensated Employees in the current Plan Year does not exceed
the Average Contribution Percentage for Eligible Participants
who are Non-Highly Compensated Employees in the current Plan
Year by more than two (2) percentage points.
(2) For Plan Years commencing on and after January 1,
1998:
(A) The Average Contribution Percentage for
Eligible Participants who are Highly Compensated
Employees in the current Plan Year shall not exceed
the Average Contribution Percentage for the prior
Plan Year for Eligible Participants who were
Non-Highly Compensated Employees in the prior Plan
Year multiplied by 1.25; or
(B) The Average Contribution Percentage for
Eligible Participants who are Highly Compensated
Employees in the current Plan Year shall not exceed
the Average Contribution Percentage for Eligible
Participants who were Non-Highly Compensated
Employees in the prior Plan Year multiplied by two
(2), provided that the Average Contribution
Percentage for Eligible Participants who are Highly
Compensated Employees in the current Plan Year does
not exceed the Average Contribution Percentage for
the prior Plan Year for Eligible Participants who
were Non-Highly Compensated Employees in the prior
Plan Year by more than two (2) percentage points.
(b) Distribution of Excess Aggregate Contributions.
(1) In General. The Excess Aggregate Contributions
for a Highly Compensated Employee for a Plan Year which are to
be distributed shall be distributed such that the Highly
Compensated Employee with the highest amount of Matching
Employer Contributions and Voluntary Participant Contributions
shall be reduced to the extent required to:
(A) distribute the total amount of Excess
Aggregate Contributions, or
(B) cause the amount of such Highly
Compensated Employee's Employer Matching
Contributions and Voluntary Participant Contributions
to equal the amount of Employer Matching
Contributions and Voluntary Participant Contributions
of the Highly Compensated Employee with the next
highest amount of Employer Matching Contributions and
Voluntary Participant Contributions for the Plan
Year.
This process must be repeated until all Excess
Aggregate Contributions are distributed.
Excess Aggregate Contributions, plus any income and
minus any loss allocable thereto, shall be distributed (or, if
forfeitable, forfeited) within 2-1/2 months after the last day
of the Plan Year in which such excess amounts arose, and in
any event not later than the last day of the following Plan
Year, to Participants to whose Accounts such Excess Aggregate
Contributions were allocated for the Plan Year. Excess
Aggregate Contributions shall be treated as Annual Additions.
(2) Determination of Income or Loss. Excess Aggregate
Contributions to be distributed shall be adjusted for any
income or loss through the last day of the Plan Year or the
date of distribution, as determined by the Committee. The
income or loss allocable to such Excess Aggregate
Contributions is the sum of:
(A) income or loss allocated to the
Participant's Account attributable to Voluntary
Participant Contributions and Employer Matching
Contributions to be distributed for the Plan Year
multiplied by a fraction, the numerator of which is
the Participant's Excess Aggregate Contributions for
the year and the denominator is the Participant's
Account balance attributable to Voluntary Participant
Contributions and Employer Matching Contributions,
minus any income or plus any loss occurring during
the Plan Year; and
(B) if the Committee shall determine in its
sole discretion, ten percent (10%) of the amount
determined under (1) above multiplied by the number
of whole calendar months between the end of the Plan
Year and the date of the distribution, counting the
month of distribution if distribution occurs after
the 15th of the month.
Notwithstanding the above, the Committee may
designate any reasonable method for computing the income or
loss allocable to Excess Aggregate Contributions, provided
that the method does not violate Section 401(a)(4) of the
Code, is used consistently for all Participants and for all
corrective distributions under the Plan for the Plan Year, and
is used by the Plan for allocating income or loss to
Participants' Accounts.
(3) Accounting for Excess Aggregate Contributions.
Excess Aggregate Contributions shall be distributed first from
Voluntary Participant Contributions allocated to the
Participant's Account and any corresponding Employer Matching
Contribution shall also be forfeited and then, if necessary,
distributed from the remaining Employer Matching Contribution
allocated to the Participant's Account.
(c) Special Rules.
(1) The Contribution Percentage for any Eligible
Participant who is a Highly Compensated Employee for the Plan
Year and who is eligible to make voluntary participant
contributions, to receive employer matching contributions, or
to make deferral contributions under two or more plans
described in Section 401(a) of the Code or arrangements
described in Section 401(k) of the Code that are maintained by
an Affiliated Employer shall be determined as if all such
contributions were made under a single plan.
(2) In the event that this Plan satisfies the
requirements of Code Section 401(m), 401(a)(4), or 410(b) only
if aggregated with one or more other plans, or if one or more
other plans satisfy the requirements of Code Section 401(m),
401(a)(4), or 410(b) only if aggregated with this Plan, then
the contribution percentages shall be determined as if all
such plans were a single plan.
(3) The determination and treatment of the
Contribution Percentage of any Eligible Participant shall
satisfy such other requirements as may be prescribed by the
Secretary of the Treasury.
5.4 Multiple Use Limitation. If both the Average Actual Deferral
Percentage and the Average Contribution Percentage of the Highly Compensated
Employees exceed 1.25 of the Average Actual Deferral Percentage and the Average
Contribution Percentage of the Non-Highly Compensated Employees and if one or
more Highly Compensated Employees makes Elective Employer Contributions and
receives Employer Matching Contributions, and the sum of the Actual Deferral
Percentage and Actual Contribution Percentage of those Highly Compensated
Employees subject to either or both tests exceed the aggregate limit as defined
in Treasury Regulation Section 1.401(m)-2, then the Employer Matching
Contribution of those Highly Compensated Employees who participate in the cash
or deferred arrangement will be reduced (beginning with such Highly Compensated
Employee whose Employer Matching Contribution is the highest) so that the
aggregate limit is not exceeded. For purposes of determining if the aggregate
limit has been exceeded, the Actual Deferral Percentage and the Contribution
Percentage of the Highly Compensated Employees shall be determined after any
corrections required to meet the Actual Deferral Percentage Test and the Actual
Contribution Percentage Test.
5.5 Reversion of Employing Company Contributions. Employing Company
contributions computed in accordance with the provisions of this Plan shall
revert to the Employing Company under the following circumstances:
(a) In the case of an Employing Company contribution which is
made by reason of a mistake of fact, such contribution upon written
direction of the Employing Company shall be returned to the Employing
Company within one year after the payment of the contribution.
(b) If any Employing Company contribution is determined to be
nondeductible under Section 404 of the Code, then such Employing
Company contribution, to the extent that it is determined to be
nondeductible, upon written direction of the Employing Company shall be
returned to the Employing Company within one year after the
disallowance of the deduction.
The amount which may be returned to the Employing Company under this
Section 5.7 is the excess of (1) the amount contributed over (2) the amount that
would have been contributed had there not occurred a mistake of fact or
disallowance of the deduction. Earnings attributable to the excess contribution
shall not be returned to the Employing Company, but losses attributable thereto
shall reduce the amount to be so returned. If the withdrawal of the amount
attributable to the mistaken contribution would cause the balance of the Account
of any Participant to be reduced to less than the balance which would have been
in the Account had the mistaken amount not been contributed, then the amount to
be returned to the Employing Company shall be limited so as to avoid such
reduction.
5.6 Correction of Prior Incorrect Allocations and Distributions.
Notwithstanding any provisions contained herein to the contrary, in the event
that, as of any Valuation Date, adjustments are required in any Participants'
Accounts to correct any incorrect allocation of contributions or investment
earnings or losses, or such other discrepancies in Account balances that may
have occurred previously, the Employing Companies may make additional
contributions to the Plan to be applied to correct such incorrect allocations or
discrepancies. The additional contributions shall be allocated by the Committee
to adjust such Participants' Accounts to the value which would have existed on
said Valuation Date had there been no prior incorrect allocation or
discrepancies. The Committee shall also be authorized to take such other actions
as it deems necessary to correct prior incorrect allocations or discrepancies in
the Accounts of Participants under the Plan.
<PAGE>
ARTICLE VI
LIMITATIONS ON CONTRIBUTIONS
6.1 Section 415 Limitations.
(a) Notwithstanding any provision of the Plan to the
contrary, the total Annual Additions allocated to the Account (and the
accounts under all defined contribution plans maintained by an
Affiliated Employer) of any Participant for any Limitation Year in
accordance with Code Section 415 and the regulations thereunder, which
are incorporated herein by this reference, shall not exceed the lesser
of the following amounts:
(1) twenty-five percent (25%) of the
Participant's compensation in the Limitation
Year; or
(2) $30,000 (as adjusted pursuant to Code
Section 415(d)(1)(C)).
(b) If a Participant is also a participant in any Affiliated
Employer's defined benefit plan, then in addition to the limitations in
(a) above, the sum of the Defined Benefit Plan Fraction and Defined
Contribution Plan Fraction shall not exceed 1.0 for any Limitation
Year.
(c) For purposes of this Section 6.1, wherever the term
"compensation" is used, such term shall mean compensation as defined in
Code Section 415(c)(3) and any rulings and regulations thereunder.
(d) The Annual Addition for any Plan Year beginning before
January 1, 1987 shall not be recomputed to treat all Voluntary
Participant Contributions as an Annual Addition.
(e) If the Plan satisfied the applicable requirements of
Section 415 of the Code as in effect for all Plan Years beginning
before January 1, 1987, an amount shall be subtracted from the
numerator of the Defined Contribution Plan Fraction (not exceeding the
numerator), as prescribed by the Secretary of the Treasury, so that the
sum of the Defined Benefit Plan Fraction and the Defined Contribution
Plan Fraction computed under Section 415(e)(1) of the Code (as revised
by this Section 6.1) does not exceed 1.0 for the Plan Year. In
addition, the Defined Contribution Plan Fraction for a Participant may
be determined by taking into account the special transition rule of
Code Section 415(e)(6).
(f) If the Participant was a participant in one or more
defined benefit plans maintained by the Affiliated Employers which were
in existence on July 1, 1982, the denominator of the Defined Benefit
Plan Fraction shall not be less than 1.25% of the sum of the annual
benefits under such plans which the Participant had accrued as of the
later of September 30, 1983 or the end of the last Limitation Year
beginning before January 1, 1983. The preceding sentence applies only
if the defined benefit plans individually, and in the aggregate satisfy
the requirements of Code Section 415 as in effect at the end of the
1982 Limitation Year.
6.2 Correction of Contributions in Excess of Section 415 Limits. If the
Annual Additions for a Participant exceed the limits of Section 6.1 as
a result of the allocation of forfeitures, if any, a reasonable error
in estimating a Participant's annual compensation for purposes of the
Plan, a reasonable error in determining the amount of elective
deferrals (within the meaning of Section 402(g)(3) of the Code) that
may be made with respect to any individual, or under other limited
facts and circumstances that the Commissioner of the Treasury finds
justify the availability of the rules set forth in this Section 6.2,
the excess amounts shall not be deemed Annual Additions if they are
treated in accordance with any one or more or any combination of the
following:
(a) distribute to the Participant that portion, or all,
of his Elective Employer Contributions (as adjusted
for income and loss) as is necessary to ensure
compliance with Section 6.1;
(b) return to the Participant that portion, or all, of
his Voluntary Participant Contributions (as
adjusted for income and loss) as is necessary to
ensure compliance with Section 6.1; and
(c) forfeiture of that portion, or all, of the Employer
Matching Contributions (as adjusted for income and
loss) and any forfeitures of Employer contributions
that were allocated to the Participant's Account
(as adjusted for income and loss), as is necessary
to ensure compliance with Section 6.1.
Any amounts distributed or returned to the Participant under (a) or (b)
above shall be disregarded for purposes of the Actual Deferral Percentage Test
and for purposes of the Actual Contribution Percentage Test.
Any amounts forfeited under this Section 6.2 shall be held in a
suspense account and shall be applied, subject to Section 6.1, toward funding
the Employer Matching Contributions for the next succeeding Plan Year. Such
application shall be made prior to any Employing Company contributions and prior
to any Employer Matching Contributions that would constitute Annual Additions.
No income or investment gains and losses shall be allocated to the suspense
account provided for under this Section 6.2. If any amount remains in a suspense
account provided for under this Section 6.2 upon termination of this Plan, such
amount will revert to the Employing Companies notwithstanding any other
provision of this Plan.
6.3 Combination of Plans. Notwithstanding any provisions contained
herein to the contrary, in the event that a Participant participates in a
defined contribution plan or defined benefit plan required to be aggregated with
this Plan under Code Section 415(g) and the sum of the Defined Contribution Plan
Fraction and Defined Benefit Plan Fraction with respect to a Participant exceeds
the limitations contained in Section 6.1(b), corrective adjustments (a) for an
Employee shall not be made under this Plan until made under such other defined
benefit plan but (b) for a Participant whose distribution of benefit payments
has commenced under such defined benefit plan, shall be made under The Southern
Company Employee Stock Ownership Plan ("ESOP") and then, to the extent
necessary, under The Southern Company Performance Sharing Plan ("PSP") and then,
to the extent necessary, under such other defined benefit plan and then, to the
extent necessary, under this Plan. If an Employee participates in more than one
defined contribution plan maintained by an Affiliated Employer and his Annual
Additions exceed the limitations of Section 6.1(a), corrective adjustments shall
be made first under this Plan and then, to the extent necessary, under the PSP
and then, to the extent necessary, under the ESOP.
<PAGE>
ARTICLE VII
SUSPENSION OF CONTRIBUTIONS
7.1 Suspension of Contributions. A Participant may (on a prospective
basis) voluntarily suspend the Elective Employer Contributions made on his
behalf and his Voluntary Participant Contributions in accordance with the
procedures established by the Committee. Such suspension shall be effective as
soon as practicable after it is made. Whenever Elective Employer Contributions
made on a Participant's behalf and Voluntary Participant Contributions are
suspended, Employer Matching Contributions shall also be suspended.
7.2 Resumption of Contributions. A Participant may terminate
prospectively any such suspension in accordance with the procedures established
by the Committee. Such resumption of contributions shall be effective as soon as
practicable after the election to terminate prospectively the suspension is
made. There shall be no make up of any contributions by a Participant or by an
Employing Company with respect to a period of suspension.
<PAGE>
ARTICLE VIII
INVESTMENT OF CONTRIBUTIONS
8.1 Investment Funds. The Investment Funds shall be selected from time
to time by the Pension Fund Investment Review Committee of the Southern Company
System. In addition to such other Investment Funds selected by the Pension Fund
Investment Review Committee, the Investment Funds shall include the "Company
Stock Fund". The Company Stock Fund shall be invested and reinvested in Common
Stock, provided that funds applicable to the purchase of Common Stock pending
investment of such funds may be temporarily invested in short-term United States
Government obligations, other obligations guaranteed by the United States
Government, commercial paper, or certificates of deposit, and, if the Trustee so
determines, may be transferred to money market funds utilized by the Trustee for
qualified employee benefit trusts.
8.2 Investment of Participant Contributions. Each Participant shall
direct, at the time he elects to participate in the Plan and at such other times
as may be directed by the Committee or pursuant to Section 8.6, that his
Elective Employer Contributions and Voluntary Participant Contributions be
invested in one or more of the Investment Funds, provided such investments are
made in one-percent (1%) increments.
8.3 Investment of Employer Matching Contributions. Employer Matching
Contributions shall be invested entirely in the Company Stock Fund and shall
remain invested in the Company Stock Fund except as follows:
(a) Any Participant whose employment with the
Affiliated Employers is terminated as a result of his
retirement pursuant to the defined benefit pension plan of an
Affiliated Employer may elect to invest the amount credited to
his Employer Matching Contribution subaccount in any of the
Investment Funds under this Plan as provided in Section 8.5;
and
(b) Any Participant may elect at any time on or after
the fifth anniversary of the Enrollment Date on which he first
became a Participant in this Plan to invest a portion of the
amount credited to his Employer Matching Contribution
subaccount in any of the Investment Funds under this Plan as
provided in Section 8.5, except that the amount subject to
such election may not exceed fifty percent (50%) of the amount
of Common Stock credited to his Employer Matching Contribution
subaccount at the time the election is made.
8.4 Investment of Earnings. Interest, dividends, if any, and other
distributions received by the Trustee with respect to an Investment Fund shall
be invested in such Investment Fund.
8.5 Transfer of Assets between Funds. A Participant may direct in
accordance with the provisions of this Section 8.5 and such procedures
established by the Committee that all of his interest in an Investment Fund or
Funds attributable to amounts in his Account (including Employer Matching
Contributions other than those required to be invested in the Company Stock Fund
pursuant to Section 8.3) or any portion of such amount (expressed in number of
shares, whole dollar amounts, or one-percent (1%) increments) to the credit of
his Account be transferred and invested by the Trustee as of such date in any
other Investment Fund as designated by the Participant. Such direction shall be
effective as soon as practicable after it is made.
8.6 Change in Investment Direction. Any investment direction given by a
Participant shall continue in effect until changed by the Participant. A
Participant may change his investment direction as to the future contributions
and allocations to his Account (other than Employer Matching Contributions) in
accordance with the procedures established by the Committee, and such direction
shall be effective as soon as practicable after it is made.
8.7 Section 404(c) Plan. This Plan is intended to be a plan described
in ERISA Section 404(c) and shall be interpreted in accordance with Department
of Labor Regulations Section 1.404c-1, which is incorporated herein by this
reference. The Committee shall take such actions as it deems necessary or
appropriate in its discretion to cause the Plan to comply with such
requirements, including, but not limited to, providing Participants with the
right to request and receive written confirmation of their investment
instructions. Further, the Committee shall take such actions as it deems
necessary or appropriate in its discretion (a) to ensure that confidentiality
procedures with respect to a Participant's ownership of Common Stock and the
exercise of ownership rights with respect to such Common Stock are adequate and
utilized, and (b) to appoint an independent fiduciary to carry out such actions
as the Committee determines involve the potential for undue influence on
Participants with regard to the direct or indirect exercise of shareholder
rights with respect to Common Stock.
<PAGE>
ARTICLE IX
MAINTENANCE AND VALUATION OF PARTICIPANTS' ACCOUNTS
9.1 Establishment of Accounts.
(a) An Account shall be established for each Participant. In
addition, subaccounts shall be established for each Participant to
reflect all Elective Employer Contributions, Voluntary Participant
Contributions, Employer Matching Contributions, Rollover Contributions
(effective as of April 1, 1997), and rollover contributions from the
SEPCO Plan (and the earnings and/or losses on each subaccount). Each
Participant will be furnished a statement of his Account at least
annually and upon any distribution.
(b) Effective as of January 1, 1993, the Committee shall
also establish a subaccount known as a Participant's SEPCO Transferred
Account to reflect the Participant's interest in the Plan resulting
from the merger of the SEPCO Plan into this Plan effective as of
January 1, 1993. To the extent that a Participant's Salary Deferral
Account, Employer Contribution Account, and Rollover Account (as those
terms were defined under the SEPCO Plan), were transferred to this Plan
from the SEPCO Plan, such accounts shall retain their character as
participant deferral, employer, or rollover contributions,
respectively, and the Committee shall establish and maintain such
bookkeeping accounts as it deems necessary to account for such
contributions, and any subsequent earnings or losses attributable
thereto, under this Plan.
9.2 Valuation of Investment Funds. A Participant's Account in respect
of his interest in each Investment Fund shall be credited or charged, as the
case may be, as of each Valuation Date with the dividends, income, gains,
appreciation, losses, depreciation, forfeitures, expenses, and other
transactions with respect to such Investment Fund for the Valuation Date as of
which such credit or charge accrued. Such credits or charges to a Participant's
Account shall be made in such proportions and by such method or formula as shall
be deemed by the Committee to be necessary or appropriate to account for each
Participant's proportionate beneficial interest in the Trust Fund in respect of
his interest in each Investment Fund. Investments of each Investment Fund shall
be valued at their fair market values as of each Valuation Date as determined by
the Trustee, and such valuation shall conclusively establish such value.
9.3 Rights in Investment Funds. Nothing contained in this Article IX
shall be deemed to give any Participant any interest in any specific property in
any Investment Fund or any interest, other than the right to receive payments or
distributions in accordance with the Plan or the right to instruct the Trustee
how to vote Common Stock as provided in Section 14.3.
<PAGE>
ARTICLE X
VESTING
10.1 Vesting. The amount to the credit of a Participant's Account shall
at all times be fully vested and nonforfeitable.
<PAGE>
ARTICLE XI
WITHDRAWALS AND LOANS
11.1 Withdrawals by Participants.
(a) Subject to the provisions of Article XII, this Section
11.1, and Sections 11.2 through 11.6, a Participant may make
withdrawals from his Account effective as of any Valuation Date in the
order of priority listed below:
(1) All or a portion of the value of his Account
attributable to Voluntary Participant Contributions (not
including any earnings or appreciation thereon) made prior
to January 1, 1987;
(2) All amounts described above, plus all or a
portion of the value of his Account attributable to
Voluntary Participant Contributions, plus a ratable portion
of the earnings and/or appreciation on Voluntary Participant
Contributions;
(3) All amounts described above, plus effective
April 1, 1997, all or a portion of the value of his Account
attributable to Rollover Contributions (including earnings
and appreciation thereon);
(4) All amounts described above, plus up to fifty
percent (50%) of the value of his Account attributable to
Employer Matching Contributions (including earnings and
appreciation thereon) allocated to his Account; provided,
however, that said Participant shall have participated in
the Plan for not less than sixty (60) months at the time of
the withdrawal;
(5)(A) For Participants who have not attained age
59 1/2 or separated from service with the Affiliated
Employers (within the meaning of Code Section
401(k)(2)(B)(i)(I)), all amounts described above, plus all
or a portion of the value of his Account attributable to
Elective Employer Contributions (not including any earnings
or appreciation thereon for Plan Years beginning after
December 31, 1988); and
(B) For Participants who have attained age 59 1/2
or separated from service with the Affiliated Employers
(within the meaning of Code Section 401(k)(2)(B)(i)(I)), all
amounts described above, plus all or a portion of the value
of his Account attributable to any earnings or appreciation
on Elective Employer Contributions.
(b) Notwithstanding the foregoing, withdrawals from a
Participant's SEPCO Transferred Account shall be made in accordance
with Article XVIII.
11.2 Notice of Withdrawal. Notice of withdrawal must be given by a
Participant in accordance with the procedures established by the Committee, and
if such withdrawal would constitute an eligible rollover distribution (within
the meaning of Code Section 402(c)(4)), the consent and notice requirements of
Section 12.10 must be satisfied. Payment of a withdrawal shall be made as soon
as practicable and in accordance with Section 12.10, if applicable.
11.3 Form of Withdrawal. All distributions under this Article XI shall
be made in the form of cash, provided that with respect to any distribution
which is attributable to Common Stock the Participant shall have the right to
demand that such portion of the distribution be made in the form of Common Stock
to the extent of the whole number of shares of Common Stock in his Account.
Such demand must be made in accordance with the procedures established by the
Committee.
11.4 Minimum Withdrawal. No distribution under this Article XI shall be
permitted in an amount which has a value of less than $300, unless the value of
the amount available under the selected option is less than $300, in which case
such available amount will be distributed.
11.5 Source of Withdrawal. Withdrawals shall be made in accordance with
the instructions of the Participant from each of the Investment Funds in which
the amount to be distributed is invested. The value of the amount to be
distributed under any option listed in Section 11.1 shall be determined as soon
as practicable in accordance with the procedures established by the Committee.
11.6 Requirement of Hardship.
(a) Except as provided in (e) below, a withdrawal pursuant
to Section 11.1(a)(5)(A), in addition to the other requirements of
Article XI, shall be permitted only if the Committee determines that
the withdrawal is to be made on account of an immediate and heavy
financial need of the Participant, the amount of the withdrawal does
not exceed such financial need, and the amount of the withdrawal is not
reasonably available from other resources of the Participant.
(b) For purposes of this Section 11.6, the following shall
be deemed to be immediate and heavy financial needs:
(1) Medical expenses described in Section 213(d) of
the Code, including but not limited to, expenses for
(i) The diagnosis, cure, mitigation,
treatment, or prevention of disease, or for the
purpose of affecting any structure or function of
the body; (ii) transportation primarily for and
essential to such expenses referred to in (i)
above; or (iii) insurance (including amounts paid
as premiums under part B of Title XVIII of the
Social Security Act) relating to medical expenses
referred to in (i) or (ii) above, provided such
expenses are incurred by the Participant, the
Participant's spouse or any person whom the
Participant may properly claim as a dependent on
his federal income tax return or are necessary for
such persons to obtain the medical care described
above; or
(2) Purchase (excluding mortgage payments) of a
principal residence for the Participant; or
(3) Payment of tuition, related educational fees, and
room and board expenses, for the next twelve (12) months of
post-secondary education for the Participant, the
Participant's spouse or child or children, or any person the
Participant may properly claim as a dependent on his federal
income tax return; or
(4) The need to prevent eviction of the Participant
from his principal residence or foreclosure on the mortgage
of the Participant's principal residence; or
(5) Any other need which the Commissioner of the
Internal Revenue Service, through the publication of revenue
rulings, notices, or other documents of general
applicability, deems to be immediate and heavy.
(c) For purposes of this Section 11.6, a withdrawal shall be
deemed necessary to satisfy an immediate and heavy financial need if:
(1) The distribution is not in excess of the amount
of the immediate and heavy financial need of the
Participant, including any amounts necessary to pay any
federal, state, or local income taxes or penalties
reasonably anticipated to result from the distribution;
(2) The Participant has obtained all distributions
and all nontaxable loans currently available to him under
all plans maintained by an Affiliated Employer;
(3) The Participant agrees to suspend all elective
employer contributions and voluntary participant
contributions to all plans of an Affiliated Employer for at
least twelve (12) months after receipt of the distribution
under this Section 11.6; and
(4) The Participant agrees not to make elective
contributions to this Plan or any other qualified or
non-qualified deferred compensation plan sponsored by an
Affiliated Employer (including stock purchase, stock option
or similar plans) during the Participant's taxable year
immediately following the taxable year of the hardship
distribution in excess of the Participant's applicable
elective deferral limits under Section 402(g) of the Code
for such taxable year less the amount for the taxable year
of the hardship distribution.
(d) When all suspensions pursuant to this Section 11.6 are
ended, Elective Employer Contributions and/or Voluntary Participant
Contributions may be resumed by the Participant (if the Participant is
then eligible and elects to resume such contributions) beginning with
the Participant's first payroll period commencing after all suspensions
are ended, and Employer Matching Contributions by his Employing Company
also shall be resumed. There shall be no make up of any contributions
by a Participant or by an Employing Company with respect to a period of
suspension.
(e) Notwithstanding (a) above, if a Participant has attained
age 59 1/2 or separated from service with the Affiliated Employers
(within the meaning of Code Section 401(k)(2)(B)(i)(I)), he shall be
permitted to make a withdrawal pursuant to Section 11.1(a)(5)(A), even
if such withdrawal is not on account of hardship.
11.7 Loans to Participants.
(a) The Committee may, in its sole discretion, direct the
Trustee to make a loan or loans from the Trust Fund to any Participant
(other than a Participant with an existing Plan loan in arrears) (1)
who is an Employee on the active payroll of an Employing Company or is
a cooperative education employee, (2) who is receiving long-term
disability payments under a plan maintained by his Employing Company,
(3) who is on a leave of absence authorized by his Employing Company,
or (4) who is a party in interest as defined in Section 3(14) of ERISA.
All loan applications shall be made in accordance with the procedures
established by the Committee, which shall form a part of this Plan.
Such procedures shall establish the terms and conditions of loans under
the Plan, including the events constituting default, and shall be
consistent with the provisions of this Section 11.7.
(b) The total amount of all loans outstanding to any one
Participant under all qualified plans maintained by an Affiliated
Employer shall not exceed the lesser of (1) $50,000, reduced by the
excess of the highest outstanding balance of loans from all qualified
plans maintained by an Affiliated Employer during the twelve-month
period ending on the day before a loan is made, over the outstanding
balance of any loans to the Participant from all qualified plans
maintained by an Affiliated Employer on the date the loan is made, or
(2) fifty percent (50%) of such Participant's Account as of the
Valuation Date coinciding with or next following the date the loan
application is made. The minimum amount of any loan shall not equal
less than $1,000.
(c) The Participant requesting a loan pursuant to this
Section 11.7 shall designate the order of priority of Investment
Fund(s) from which the principal amount of the loan shall be obtained.
(d) The Committee shall adopt and follow uniform and
nondiscriminatory procedures in making loans under this Plan to make
certain that such loans (1) are available to all Participants on a
reasonably equivalent basis, (2) are not made available to Highly
Compensated Employees, officers, or shareholders in an amount greater
than the amount made available to other Participants, (3) bear a
reasonable rate of interest, and (4) are adequately secured. The
repayment of such loans by any Participant who is an Employee on the
active payroll of an Employing Company shall be made through payroll
deduction. The minimum amount of any loan repayment shall not equal
less than $20.00, and such repayment shall extend for a period certain
of at least twelve (12) months (unless repaid in full), but not to
exceed fifty-eight (58) months, expressed in any number of whole months
(including the month the loan is made). The term of any loan may be for
a period certain of more than fifty-eight (58) months, but not to
exceed fifteen (15) years, only if the proceeds of such loan are used
to acquire any dwelling used or, within a reasonable period of time, to
be used as the principal residence of the Participant.
(e) The Committee shall direct the Trustee to obtain from
the Participant such note and adequate security as it may require. All
loans made pursuant to this Section 11.7 shall be secured by the
Participant's Account, and no other types of collateral may be used to
secure a loan from the Plan. Notwithstanding the provisions of Section
17.2, if a Participant defaults on a loan under the Plan or if the
Participant's employment terminates prior to full repayment thereof, in
addition to any other remedy provided in the loan instruments or by
law, the Committee may direct the Trustee to charge against that
portion of the Participant's Account which secures the loan the amount
required to fully repay the loan. Under no circumstances, however,
shall any unpaid loan be charged against a Participant's Account until
permitted by applicable law. This Section authorizes only the making of
bona fide loans and not distributions, and before resort is made
against a Participant's Account for his failure to repay any loan, such
other reasonable efforts to collect the same shall be made by the
Committee as it deems reasonable and practical under the circumstances.
(f) No distribution shall be made to any Participant unless
and until all unpaid loans to such Participant have either been paid in
full or deducted from the Participant's Account.
(g) All loans made under this Section 11.7 shall be
considered earmarked investments of the Participant's Account, and any
repayment of principal and interest shall be reinvested in accordance
with the Participant's investment direction in effect on the date of
such repayment pursuant to Article VIII of the Plan.
11.8 Special Waiver for Participants Employed in the United Kingdom. A
Participant shall be entitled to sign a waiver of his right to make withdrawals
or loans from his Account under the provisions of this Article XI with respect
to the Elective Employer Contributions and Employer Matching Contributions
credited to his Account to the extent necessary to ensure that such
contributions are not taxable in the United Kingdom. The purpose of such waiver
is to meet the requirements of the Department of Inland Treasury of the United
Kingdom for excluding such Elective Employer and Employer Matching Contributions
from taxable income in the United Kingdom. Such waiver shall be made on a form
prescribed by the Committee from time to time in accordance with the
requirements of the Department of Inland Treasury of the United Kingdom.
<PAGE>
ARTICLE XII
DISTRIBUTION TO PARTICIPANTS
12.1 Distribution upon Retirement.
(a) Subject to the provisions of Article XVIII, if a
Participant's employment with the Affiliated Employers is terminated as
a result of his retirement pursuant to the defined benefit pension plan
of an Affiliated Employer, in addition to the withdrawal options under
Section 11.1, the entire balance credited to his Account shall be
payable to him in the manner set forth in this Section 12.1 at such
time requested by the Participant pursuant to Section 12.6 and in
accordance with the procedures established by the Committee. The
distribution shall commence as soon as practicable after the Valuation
Date selected by the Participant in one of the following ways:
(1) In a single lump sum distribution; or
(2) In annual installments not to exceed twenty
(20), as selected by the Participant, or the Participant's
life expectancy. The amount of cash and/or the number of
shares of Common Stock in each installment shall be equal to
the proportionate value as of each Valuation Date
immediately preceding payment of the balance then to the
credit of the Participant in his Account determined by
dividing the amount credited to his Account as of such
Valuation Date by the number of payments remaining to be
made.
If a Participant who is receiving installment payments shall
establish to the satisfaction of the Committee, in accordance with
principles and procedures established by the Committee which are
applicable to all persons similarly situated, that a financial
emergency exists in his affairs, such as illness or accident to the
Participant or a member of his immediate family or other similar
contingency, the Committee may, for the purpose of alleviating such
emergency, accelerate the time of payment of some or all of the
remaining installments. If a Participant dies before receiving all of
the amount to the credit of his Account in accordance with this
paragraph (2), the amount remaining to the credit of his Account at his
death shall be distributed to his Beneficiary as soon as practicable in
accordance with Section 12.4.
(b) Notwithstanding a Participant's election to defer the
receipt of the benefits under (a) above, the Committee shall direct
payment in a single lump sum to such Participant if the balance of his
Account does not exceed $3,500 ($5,000 effective January 1, 1998) in
accordance with the requirements of Code Section 411(a)(11). The
Committee shall not cash-out any Participant whose Account balance
exceeds $3,500 ($5,000 effective January 1, 1998) without the written
consent of the Participant.
12.2 Distribution upon Disability. If a Participant's employment with
the Affiliated Employers is terminated prior to his Normal Retirement Date by
reason of his total and permanent disability, as determined by the Social
Security Administration and evidenced in a writing provided to the Committee,
such disabled Participant, in addition to the withdrawal options under Section
11.1, shall be entitled to receive the entire value credited to his Account at
such time as requested by the Participant or such legal representative pursuant
to Section 12.6 and in accordance with the procedures established by the
Committee. Any distribution pursuant to this Section 12.2 shall be made in a
single lump sum as soon as practicable after the selected Valuation Date.
Notwithstanding the foregoing, the Committee shall direct payment in a
single lump sum to such Participant or his legal representative if the balance
of such Participant's Account does not exceed $3,500 ($5,000 effective January
1, 1998) in accordance with the requirements of Code Section 411(a)(11).
12.3 Distribution upon Death. If a Participant's employment with the
Affiliated Employers is terminated by reason of death, the entire balance
credited to the Participant's Account shall be distributed as soon as
practicable to the Participant's surviving Beneficiary or Beneficiaries in a
lump sum.
12.4 Designation of Beneficiary in the Event of Death. A Participant
may designate a Beneficiary or Beneficiaries (who may be designated
contingently) to receive all or part of the amount credited to his Account in
case of his death before his receipt of all of his benefits under the Plan,
provided that the Beneficiary of a married Participant shall be the
Participant's Surviving Spouse, unless such Surviving Spouse shall consent in a
writing witnessed by a notary public, which writing acknowledges the effect of
the Participant's designation of a Beneficiary other than such Surviving Spouse.
However, if such Participant establishes to the satisfaction of the Committee
that such written consent may not be obtained because the Surviving Spouse
cannot be located or because of such other circumstances as the Secretary of the
Treasury may by regulations prescribe, a designation by such Participant without
the consent of the Surviving Spouse shall be valid.
Any consent necessary under this Section 12.4 shall be valid and
effective only with respect to the Surviving Spouse who signs the consent or, in
the event of a deemed consent, only with respect to a designated Surviving
Spouse.
A designation of Beneficiary may be revoked by the Participant without
the consent of any Beneficiary (or the Participant's Surviving Spouse) at any
time before the commencement of the distribution of benefits. A Beneficiary
designation or change or revocation of a Beneficiary designation shall be made
in accordance with the procedures established by the Committee.
If no designated Beneficiary shall be living at the death of the
Participant and/or such Participant's Beneficiary designation is not valid and
enforceable under applicable law or the procedures of the Committee, such
Participant's Beneficiary or Beneficiaries shall be the person or persons in the
first of the following classes of successive preference, if then living:
(a) the Participant's spouse on the date of his death,
(b) the Participant's children, equally,
(c) the Participant's parents, equally,
(d) the Participant's brothers and sisters, equally, or
(e) the Participant's executors or administrators.
Payment to such one or more persons shall completely discharge the Plan and the
Trustee with respect to the amount so paid.
12.5 Distribution upon Termination of Employment.
(a) If a Participant's employment with the Affiliated
Employers is terminated for any reason other than in accordance with
Sections 12.1, 12.2, and 12.3, the balance to the credit of the
Participant's Account shall be payable in a single lump sum. Such lump
sum distribution shall be made as soon as practicable after the
Participant's termination of employment, provided that one of the
following conditions is met:
(1) the Participant's Account Balance does not exceed
$3,500 ($5,000 effective January 1, 1998) in accordance with
Code Section 411(a)(11), or
(2) in accordance with Section 12.10, the Participant
elects to receive a distribution of his Account.
(b) A Participant who does not receive a distribution under
Section 12.5(a)(1) may elect to defer the commencement of the
distribution of his Account following the termination of his employment
until a later Valuation Date, provided that such distribution shall
commence not later than the date required under Section 12.6 of the
Plan. In addition to the withdrawal options under Section 11.1, any
deferred distribution shall commence as soon as practicable after the
Valuation Date selected by the Participant.
12.6 Commencement of Benefits.
(a) Notwithstanding any other provision of the Plan, and
except as further provided in Section 12.6(b) below, if the Participant
does not elect to defer commencement of his benefit payments, the
payment of his benefits shall begin at the Participant's election no
later than the sixtieth (60th) day after the close of the Plan Year in
which the latest of the following events occurs:
(1) the Participant attains the earlier of age
sixty-five (65) or his Normal Retirement
Date,
(2) the Participant's tenth (10th) anniversary
of participation under the Plan, or
(3) the Participant's separation from service
with the Affiliated Employers.
(b) In no event shall the distribution of amounts in a
Participant's Account commence later than the April 1 of the calendar
year following the later of the calendar year in which the Participant
attains age 70 1/2 or terminates employment with the Affiliated
Employers, in accordance with regulations prescribed by the Secretary
of the Treasury. The foregoing requirements in this Section 12.6(b)
shall not be applied to restrict the implementation of any written
designation given to the Committee by a Participant prior to January 1,
1984, with regard to the method of distribution of his Account, if such
method was permissible under the Plan and Code prior to January 1,
1984. Notwithstanding the foregoing, the payment of benefits to a
Participant who is a five percent (5%) owner of The Southern Company or
an Affiliated Employer (as determined pursuant to Code Section 416)
with respect to the Plan Year ending in the calendar year in which the
Participant attains age 70 1/2 shall begin not later than April 1, of
the calendar year following the calendar year in which the Participant
attains age 70 1/2 regardless of the Participant's termination from
employment.
Any distribution made under this Plan shall be made in
accordance with the minimum distribution requirements of Code Section
401(a)(9), including the incidental death benefits requirements under
Code Section 401(a)(9)(G) and the Treasury Regulations thereunder.
12.7 Transfer between Employing Companies. A transfer by a Participant
from one Employing Company to another Employing Company shall not affect his
participation in the Plan. A transfer by a Participant from an Employing Company
to an Affiliated Employer that is not an Employing Company shall not be deemed
to be a termination of employment with an Employing Company.
12.8 Distributions to Alternate Payees. If the Participant's Account
under the Plan shall become subject to any domestic relations order which (a) is
a qualified domestic relations order satisfying the requirements of Section
414(p) of the Code and (b) requires the immediate distribution in a single lump
sum of the entire portion of the Participant's Account required to be segregated
for the benefit of an alternate payee, then the entire interest of such
alternate payee shall be distributed in a single lump sum within ninety (90)
days following the Employing Company's notification to the Participant and the
alternate payee that the domestic relations order is qualified under Section
414(p) of the Code, or as soon as practicable thereafter. Such distribution to
an alternate payee shall be made even if the Participant has not separated from
the service of the Affiliated Employers. Any other distribution pursuant to a
qualified domestic relations order shall not be made earlier than the
Participant's termination of service, or his attainment of age fifty (50), if
earlier, and shall not commence later than the date the Participant's (or his
Beneficiary's) benefit payments otherwise commence. Such distribution to an
alternate payee shall be made only in a manner permitted under Articles XI or
XII of the Plan and only to the extent the Participant would be eligible for
such distribution option.
12.9 Requirement for Direct Rollovers. Notwithstanding any provision of
the Plan to the contrary that would otherwise limit a Distributee's election
under this Article XII, a Distributee may elect, at the time and in the manner
prescribed by the 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.
12.10 Consent and Notice Requirements. If the value of the vested
portion of a Participant's Account derived from Employing Company and Employee
contributions exceeds $3,500 ($5,000 effective January 1, 1998) determined in
accordance with the requirements of Code Section 411(a)(11), the Participant
must consent to any distribution of such vested account balance prior to his
Normal Retirement Date. The consent of the Participant shall be obtained within
the ninety-day period ending on the first day of the first period for which an
amount is payable as an annuity or in any other form under this Plan.
The Committee shall notify the Participant of the right to defer any
distribution until the Participant's Account balance is no longer immediately
distributable. Such notification shall include a general description of the
material features and an explanation of the relative values of the operational
forms of benefit available under the Plan in a manner that would satisfy the
notice requirements of Section 417(a)(3) of the Code; such notification shall be
provided no less than 30 days and no more than 90 days prior to the annuity
starting date.
Distributions may commence less than 30 days after the notice required
under Section 1.411(a)-11(c) of the Treasury Regulations is given, provided
that:
(a) the Committee informs the Participant that the
Participant has a right to a period of at least 30
days after receiving the notice to consider the
decision of whether or not to elect a distribution
and a particular distribution option, and
(b) the Participant, after receiving the notice,
affirmatively elects a distribution.
12.11 Form of Payment. All distributions under this Article XII shall
be made in the form of cash, provided that the person entitled to such
distribution may demand that the portion of any distribution which is
attributable to Common Stock be distributed in the form of Common Stock to the
extent of the whole number of shares in the Participant's Account, with a cash
adjustment for any fractional shares.
12.12 Partial Distribution upon Termination of Employment. If a
Participant's employment with the Affiliated Employers is terminated and such
Participant is deemed not to have separated from service within the meaning of
Code Section 401(k)(2)(B)(i)(I), such Participant, in addition to the withdrawal
options available under Article XI, shall be entitled to elect a lump sum
distribution of the entire balance to the credit of his Account less the amount
credited to his Elective Employer Contribution subaccount. The amounts credited
to his Elective Employer Contribution subaccount may be distributed in a lump
sum distribution at such time permitted pursuant to Code Section 401(k)(2)(B)(i)
and Section 4.4(c) hereof. Such lump sum distributions shall otherwise be
subject to this Article XII.
<PAGE>
ARTICLE XIII
ADMINISTRATION OF THE PLAN
13.1 Membership of Committee. The Plan shall be administered by the
Committee, which shall consist of the individuals then serving in the positions
of Director, System Compensation and Benefits of The Southern Company;
Vice-President, Human Resources of The Southern Company; and Comptroller of The
Southern Company or any other position or positions that succeed to the duties
of the foregoing positions. The Committee shall be chaired by the
Vice-President, Human Resources of The Southern Company and may select a
Secretary (who may, but need not, be a member of the Committee) to keep its
records or to assist it in the discharge of its duties.
13.2 Acceptance and Resignation. Any person appointed to be a member of
the Committee shall signify his acceptance in writing to the Chairman of the
Committee. Any member of the Committee may resign by delivering his written
resignation to the Committee and such resignation shall become effective upon
delivery or upon any later date specified therein.
13.3 Transaction of Business. A majority of the members of the
Committee at the time in office shall constitute a quorum for the transaction of
business at any meeting. Any determination or action of the Committee may be
made or taken by a majority of the members present at any meeting thereof or
without a meeting by a resolution or written memorandum concurred in by a
majority of the members then in office.
13.4 Responsibilities in General. The Committee shall administer the
Plan and shall have the discretionary authority, power, and the duty to take all
actions and to make all decisions necessary or proper to carry out the Plan and
to control and manage the operation and administration of the Plan. The
Committee shall have the discretion to interpret the Plan, including any
ambiguities herein, and to determine the eligibility for benefits under the Plan
in its sole discretion. The determination of the Committee as to any question
involving the general administration and interpretation of the Plan shall be
final, conclusive, and binding on all persons, except as otherwise provided
herein or by law, and may be relied upon by the Company, all Employing
Companies, the Trustee, the Participants, and their Beneficiaries. Any
discretionary actions to be taken under the Plan by the Committee with respect
to Employees and Participants or with respect to benefits shall be uniform in
their nature and applicable to all persons similarly situated.
13.5 Committee as Named Fiduciary. For the purpose of compliance with
the provisions of ERISA, the Committee shall be deemed the administrator of the
Plan as the term "administrator" is defined in ERISA, and the Committee 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 Committee may, in its
discretion, allocate its responsibilities under the Plan among its members and
may, in its discretion, designate persons (in writing or otherwise) other than
members of the Committee to carry out such responsibilities of the Committee
under the Plan as it may see fit.
13.6 Rules for Plan Administration. The Committee may make and enforce
rules and regulations for the administration of the Plan consistent with the
provisions thereof and may prescribe the use of such forms or procedures as it
shall deem appropriate for the administration of the Plan.
13.7 Employment of Agents. The Committee may employ independent
qualified public accountants, as such term is defined in ERISA, who may be
accountants to The Southern Company and any Affiliated Employer, legal counsel
who may be counsel to The Southern Company and any Affiliated Employer, other
specialists, and other persons as the Committee deems necessary or desirable in
connection with the administration of the Plan. The Committee and any person to
whom it may delegate any duty or power in connection with the administration of
the Plan, the Company 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 independent
qualified public accountant, counsel, or other specialist, or other person
selected by the Committee, or in reliance upon any tables, evaluations,
certificates, opinions, or reports which shall be furnished by any of them or by
the Trustee.
13.8 Co-Fiduciaries. It is intended that to the maximum extent
permitted by ERISA, each person who is a fiduciary (as that term is defined in
ERISA) with respect to the Plan shall be responsible for the proper exercise of
his own powers, duties, responsibilities, and obligations under the Plan and the
Trust, as shall each person designated by any fiduciary to carry out any
fiduciary responsibilities with respect to the Plan or the Trust. 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.
13.9 General Records. The Committee shall maintain or cause to be
maintained an Account (and any separate subaccount) which accurately reflects
the interest of each Participant, as provided for in Section 9.1, and shall
maintain or cause to be maintained all necessary books of account and records
with respect to the administration of the Plan. The Committee shall mail or
cause to be mailed to Participants reports to be furnished to Participants in
accordance with the Plan or as may be required by ERISA. Any notices, reports,
or statements to be given, furnished, made, or delivered to a Participant shall
be deemed duly given, furnished, made, or delivered when addressed to the
Participant and delivered to the Participant in person or mailed by ordinary
mail to his address last communicated to the Committee (or its delegate) or of
his Employing Company.
13.10 Liability of the Committee. In administering the Plan, except as
may be prohibited by ERISA, neither the Committee nor any person to whom it may
delegate any duty or power in connection with administering the Plan shall be
liable for any action or failure to act except for its or his own gross
negligence or willful misconduct; nor for the payment of any amount under the
Plan; nor for any mistake of judgment made by him or on his behalf as a member
of the Committee; nor for any action, failure to act, or loss unless resulting
from his own gross negligence or willful misconduct; nor for the neglect,
omission, or wrongdoing of any other member of the Committee. No member of the
Committee shall be personally liable under any contract, agreement, bond, or
other instrument made or executed by him or on his behalf as a member of the
Committee.
13.11 Reimbursement of Expenses and Compensation of Committee. Members
of the Committee shall be reimbursed by the Company for expenses they may
individually or collectively incur in the performance of their duties. Each
member of the Committee who is a full-time employee of the Company or of any
Employing Company shall serve without compensation for his services as such
member; each other member of the Committee shall receive such compensation, if
any, for his services as the Board of Directors may fix from time to time.
13.12 Expenses of Plan and Trust Fund. The expenses of establishment
and administration of the Plan and the Trust Fund, including all fees of the
Trustee, auditors, and counsel, shall be paid by the Company or the Employing
Companies. Notwithstanding the foregoing, to the extent provided in the Trust
Agreement, certain administrative expenses may be paid from the Trust Fund
either directly or through reimbursement of the Company or the Employing
Companies. Any expenses directly related to the investments of the Trust Fund,
such as stock transfer taxes, brokerage commissions, or other charges incurred
in the acquisition or disposition of such investments, shall be paid from the
Trust Fund (or from the particular Investment Fund to which such fees or
expenses relate) and shall be deemed to be part of the cost of such securities
or deducted in computing the proceeds therefrom, as the case may be. Investment
management fees for the Investment Funds shall be paid from the particular
Investment Fund to which they relate either directly or through reimbursement of
the Company or the Employing Companies unless the Company or the Employing
Companies do not elect to receive reimbursement for payment of such expenses.
Taxes, if any, on any assets held or income received by the Trustee and transfer
taxes on the transfer of Common Stock from the Trustee to a Participant or his
Beneficiary shall be charged appropriately against the Accounts of Participants
as the Committee shall determine. Any expenses paid by the Company pursuant to
Section 13.11 and this section shall be subject to reimbursement by other
Employing Companies of their proportionate shares of such expenses as determined
by the Committee.
13.13 Responsibility for Funding Policy. The Pension Fund Investment
Review Committee of The Southern Company System shall have 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.
13.14 Management of Assets. The Committee shall not have responsibility
with respect to the control or management of the assets of the Plan. The Trustee
shall have the sole responsibility for the administration of the assets of the
Plan as provided in the Trust Agreement, except to the extent that an investment
advisor (who qualifies as an Investment Manager as that term is defined in
ERISA) who may be appointed by the Board of Directors (upon recommendation by
the Pension Fund Investment Review Committee on and after August 5, 1993) shall
have responsibility for the management of the assets of the Plan, or some part
thereof (including the powers to acquire and dispose of the assets of the Plan,
or some part thereof).
13.15 Notice and Claims Procedures. Consistent with the requirements of
ERISA and the regulations thereunder of the Secretary of Labor from time to time
in effect, the Committee shall:
(a) provide adequate notice in writing to any Participant or
Beneficiary 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 Participant or Beneficiary, and
(b) afford a reasonable opportunity to any Participant or
Beneficiary whose claim for benefits has been denied for a full and
fair review of the decision denying the claim.
13.16 Bonding. Unless otherwise determined by the Board of Directors or
required by law, no member of the Committee shall be required to give any bond
or other security in any jurisdiction.
13.17 Multiple Fiduciary Capacities. 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.
13.18 Change in Administrative Procedures. Notwithstanding any
provision in the Plan to the contrary, the Committee shall be authorized to take
whatever actions it deems necessary or appropriate in its discretion to
implement administrative procedures, including, but not limited to, suspending
plan participation (to the extent permitted by applicable law,) and suspending
changes in investment directions and fund transfers, even though otherwise
permitted or required under the Plan.
<PAGE>
ARTICLE XIV
TRUSTEE OF THE PLAN
14.1 Trustee. The Company has entered into a Trust Agreement with the
Trustee to hold the funds necessary to provide the benefits set forth in the
Plan. If the Board of Directors so determines, the Company may enter into a
Trust Agreement or Trust Agreements with additional trustees. Any Trust
Agreement may be amended by the Company from time to time in accordance with its
terms. Any Trust Agreement shall provide, among other things, that all funds
received by the Trustee thereunder will be held, administered, invested, and
distributed by the Trustee, and that no part of the corpus or income of the
Trust held by the Trustee shall be used for or diverted to purposes other than
for the exclusive benefit of Participants or their Beneficiaries, except as
otherwise provided in the Plan. Any Trust Agreement may also provide that the
investment and reinvestment of the Trust Fund, or any part thereof may be
carried out in accordance with directions given to the Trustee by any Investment
Manager or Investment Managers (as that term is defined in ERISA) who may be
appointed by the Board of Directors (upon recommendation by the Pension Fund
Investment Review Committee). The Board of Directors may remove any Trustee or
any successor Trustee, and any Trustee or any successor Trustee may resign. Upon
removal or resignation of a Trustee, the Board of Directors shall appoint a
successor Trustee.
14.2 Purchase of Common Stock. As soon as practicable after receipt of
funds applicable to the purchase of Common Stock, the Trustee shall purchase
Common Stock or cause Common Stock to be purchased. Such Common Stock may be
purchased on the open market or by private purchase (including private purchases
directly from The Southern Company); provided that (a) no private purchase may
be made at any price greater than the last sale price or highest current
independent bid price, whichever is higher, for Common Stock on the New York
Stock Exchange, plus an amount equal to the commission payable in a stock
exchange transaction; (b) if such private purchase shall be a purchase of Common
Stock directly from The Southern Company, no commission shall be paid with
respect thereto; and (c) the Trustee may purchase Common Stock directly from The
Southern Company under The Southern Investment Plan, as from time to time
amended, or under any other similar plan made available to holders of record of
shares of Common Stock which may be in effect from time to time, at the purchase
price provided for in such plan. The Trustee may hold in cash, and may
temporarily invest funds applicable to the purchase of Common Stock in
short-term United States obligations, other obligations guaranteed by the United
States Government, commercial paper, or certificates of deposit, and if the
Trustee so determines, may transfer such funds to money market funds utilized by
the Trustee for qualified employee benefit trusts.
14.3 Voting of Common Stock. Before each annual or special meeting of
shareholders of The Southern Company, there shall be sent to each Participant a
copy of the proxy soliciting material for the meeting, together with a form
requesting instructions to the Trustee on how to vote the shares of Common Stock
credited to such Participant's Account as of the record date of the Common
Stock. If a Participant does not provide the Trustee or its designated agent
with timely voting instructions for the Trustee, the Pension Fund Investment
Review Committee of The Southern Company System or its delegate may direct the
Trustee how to vote such Participant's shares. If the Pension Fund Investment
Review Committee of The Southern Company System or its delegate does not provide
the Trustee or its designated agent with timely voting instructions, the
Trustee, if required to do so by applicable law, may vote such Participant's
shares. The Pension Fund Investment Review Committee of The Southern Company
System or its delegate may direct the Trustee with respect to voting unallocated
shares of Common Stock, if any. If the Pension Fund Investment Review Committee
of The Southern Company System or its delegate does not provide the Trustee or
its designated agent with timely voting instructions, the Trustee, if required
to do so by applicable law, may vote such unallocated shares.
14.4 Voting of Other Investment Fund Shares. The Pension Fund
Investment Review Committee or its delegate may direct the Trustee with respect
to voting the shares in any Investment Fund other than the Company Stock Fund.
To the extent an Investment Manager has been designated with respect to an
Investment Fund, such Investment Manager (and not the Pension Fund Investment
Review Committee) shall direct the Trustee with respect to voting the shares in
such Investment Fund. If the Investment Manager does not direct the Trustee with
respect to voting such shares, the Pension Fund Investment Review Committee may
direct the Trustee with respect to voting such shares. If the Pension Fund
Investment Review Committee does not provide the Trustee or its designated agent
with timely voting instructions, the Trustee, if required to do so by applicable
law, may vote such shares.
14.5 Uninvested Amounts. The Trustee may keep uninvested an amount of
cash sufficient in its opinion to enable it to carry out the purposes of the
Plan.
14.6 Independent Accounting. The Board of Directors shall select a firm
of independent public accountants to examine and report annually on the
financial position and the results of operation of the Trust forming a part of
the Plan.
<PAGE>
ARTICLE XV
AMENDMENT AND TERMINATION OF THE PLAN
15.1 Amendment of the Plan. The Plan may be amended or modified by the
Board of Directors pursuant to its written resolutions at any time and from time
to time; provided, however, that no such amendment or modification shall make it
possible for any part of the corpus or income of the Trust Fund to be used for
or diverted to purposes other than for the exclusive benefit of Participants or
their Beneficiaries under the Plan, including such part as is required to pay
taxes and administration expenses of the Plan. The Plan may also be amended or
modified by the Committee (a) if such amendment or modification does not involve
a substantial increase in cost to any Employing Company, or (b) as may be
necessary, proper, or desirable in order to comply with laws or regulations
enacted or promulgated by any federal or state governmental authority and to
maintain the qualification of the Plan under Sections 401(a) and 501(a) of the
Code and the applicable provisions of ERISA.
No amendment to the Plan shall have the effect of decreasing a
Participant's vested interest in his Account, determined without regard to such
amendment, as of the later of the date such amendment is adopted or the date it
becomes effective. In addition, if the vesting schedule of the Plan is amended,
any Participant who has completed at least three (3) Years of Service and whose
vested interest is at any time adversely affected by such amendment may elect to
have his vested interest determined without regard to such amendment during the
election period defined under Section 411(a)(10) of the Code. Finally, no
amendment shall eliminate an optional form of benefit in violation of Code
Section 411(d)(6).
15.2 Termination of the Plan. It is the intention of the Employing
Companies to continue the Plan indefinitely. However, the Board of Directors
pursuant to its written resolutions may at any time and for any reason suspend
or terminate the Plan or suspend or discontinue the making of contributions of
all Participants and of contributions by all Employing Companies. Any Employing
Company may, by action of its board of directors and approval of the Board of
Directors, suspend or terminate the making of contributions of Participants in
the employ of such Employing Company and of contributions by such Employing
Company.
In the event of termination of the Plan or partial termination or upon
complete discontinuance of contributions under the Plan by all Employing
Companies or by any one Employing Company, the amount to the credit of the
Account of each Participant whose Employing Company shall be affected by such
termination or discontinuance shall be determined as of the next Valuation Date
and shall be distributed to him or his Beneficiary thereafter at such time or
times and in such nondiscriminatory manner as is determined by the Committee in
compliance with the restrictions on distributions set forth in Code Section
401(k).
15.3 Merger or Consolidation of the Plan. The Plan shall not be merged
or consolidated with nor shall any assets or liabilities thereof be transferred
to any other plan unless each Participant of 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 prior to the merger, consolidation, or transfer
(if the Plan had then terminated).
<PAGE>
ARTICLE XVI
TOP-HEAVY REQUIREMENTS
16.1 Top-Heavy Plan Requirements. For any Plan Year the Plan shall be
determined to be a top-heavy plan, the Plan shall provide the minimum allocation
requirement of Section 16.3.
16.2 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, the sum of the Aggregate Accounts of Key Employees
under this Plan exceeds 60% of the Aggregate Accounts of all Employees
entitled to participate in this Plan.
(b) 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, the sum of the Aggregate Accounts of Key
Employees under this Plan exceeds 90% of the Aggregate Accounts of all
Employees entitled to participate in this Plan.
(c) 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.
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 Aggregation Group is a Top-Heavy Group.
(d) For purposes of this Article XVI, 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 any Employing Company
maintaining the Plan at any time during the five-year period ending on
the Determination Date, the Aggregate Account and/or Present Value of
Accrued Retirement Income shall be excluded in determining whether this
Plan is a top-heavy or super-top-heavy plan.
(e) Only those plans of the Affiliated Employers 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.
16.3 Minimum Allocation for Top-Heavy Plan Years.
(a) Notwithstanding anything herein to the contrary, for any
top-heavy Plan Year, the Employing Company contribution allocated to
the Account of each non-Key Employee shall be an amount not less than
the lesser of: (1) 3% of such Participant's compensation for that Plan
Year, or (2) a percentage of that Participant's compensation not to
exceed the percentage at which contributions are made under the Plan
for the Key Employee for whom such percentage is highest for that Plan
Year.
(b) For purposes of the minimum allocation of Section
16.3(a), the percentage allocated to the Account of any Key Employee
shall be equal to the ratio of the Employing Company contributions
allocated on behalf of such Key Employee divided by the compensation of
such Key Employee for that Plan Year.
(c) For any top-heavy Plan Year, the minimum allocations of
Section 16.3(a) shall be allocated to the Accounts of all non-Key
Employees who are Participants and who are employed by the Affiliated
Employers on the last day of the Plan Year.
(d) Notwithstanding the foregoing, in any Plan Year in which
a non-Key Employee is a Participant in both this Plan and a defined
benefit plan, and both such plans are top-heavy plans, the Affiliated
Employers shall not be required to provide a non-Key Employee with both
the full separate minimum defined benefit and the full separate defined
contribution plan allocations. Therefore, if a non-Key Employee is
participating in a defined benefit plan maintained by the Affiliated
Employers and the minimum benefit under Code Section 416(c)(1) is
provided the non-Key Employee under such defined benefit plan, the
minimum allocation provided for above shall not be applicable, and no
minimum allocation shall be made on behalf of the non-Key Employee.
Alternatively, the Employing Company may satisfy the minimum allocation
requirement of Code Section 416(c)(2) 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).
16.4 Adjustments to Maximum Benefit Limits 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
Affiliated Employers, 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 the Defined Benefit Plan Fraction and Defined
Contribution Plan Fraction, unless the extra minimum benefit is
provided pursuant to Section 16.4(b) below. Super-top-heavy plans and
plans in a Super-Top-Heavy Group 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 Plan Fraction and the Defined Contribution Plan
Fraction shall remain unchanged, provided the Account of each non-Key
Employee who is a Participant receives an extra allocation (in addition
to the minimum allocation in Section 16.3(a)) equal to not less than 1%
of such non-Key Employee's compensation.
(c) For purposes of this Section 16.4, if the sum of the
Defined Benefit Plan Fraction and the Defined Contribution Plan
Fraction shall exceed 1.0 in any Plan Year for any Participant in this
Plan, the Affiliated Employers shall eliminate any amounts in excess of
the limits set forth in Section 6.1(b), pursuant to Section 6.3 of the
Plan.
<PAGE>
ARTICLE XVII
GENERAL PROVISIONS
17.1 Plan Not an Employment Contract. The Plan shall not be deemed to
constitute a contract between an Affiliated Employer and any Employee, nor shall
anything herein contained be deemed to give any Employee any right to be
retained in the employ of an Employing Company or to interfere with the right of
an Employing Company to discharge any Employee at any time and to treat him
without regard to the effect which such treatment might have upon him as a
Participant.
17.2 No Right of Assignment or Alienation. Except as may be otherwise
permitted or required by law, no right or interest in the Plan of any
Participant or Beneficiary and no distribution or payment under the Plan to any
Participant or Beneficiary shall be subject in any manner to anticipation,
alienation, sale, transfer (except by death), assignment (either at law or in
equity), pledge, encumbrance, charge, attachment, garnishment, levy, execution,
or other legal or equitable process, whether voluntary or involuntary, and any
attempt to so anticipate, alienate, sell, transfer, assign, pledge, encumber,
charge, attach, garnish, levy, or execute or enforce any other legal or
equitable process against the same shall be void, nor shall any such right,
interest, distribution, or payment be in any way liable for or subject to the
debts, contracts, liabilities, engagements, or torts of any person entitled to
such right, interest, distribution, or payment. If any Participant or
Beneficiary is adjudicated bankrupt or purports to anticipate, alienate, sell,
transfer, assign, pledge, encumber, or charge any such right, interest,
distribution, or payment, voluntarily or involuntarily, or if any action shall
be taken which is in violation of the provisions of the immediately preceding
sentence, the Committee may hold or apply or cause to be held or applied such
right, interest, distribution, or payment or any part thereof to or for the
benefit of such Participant or Beneficiary in such manner as is in accordance
with applicable law. In addition, a Participant's benefits may be offset
pursuant to a judgment, order, or decree issued (or settlement agreement entered
into) on or after August 5, 1997, if and to the extent that such offset is
permissible or required under Code Section 401(a)(13).
Notwithstanding the above, the Committee and the 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 Committee shall establish procedures for (a)
notifying Participants 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.
17.3 Payment to Minors and Others. If the Committee determines that any
person entitled to a distribution or payment from the Trust Fund is an infant or
incompetent or is unable to care for his affairs by reason of physical or mental
disability, it may cause all distributions or payments thereafter becoming due
to such person to be made to any other person for his benefit, without
responsibility to follow the application of payments so made. Payments made
pursuant to this provision shall completely discharge the Company, the Trustee,
and the Committee with respect to the amounts so paid. No person shall have any
rights under the Plan with respect to the Trust Fund, or against the Trustee or
any Employing Company, except as specifically provided herein.
17.4 Source of Benefits. The Trust Fund established under the Plan
shall be the sole source of the payments or distributions to be made in
accordance with the Plan. No person shall have any rights under the Plan with
respect to the Trust Fund, or against the Trustee or any Employing Company,
except as specifically provided herein.
17.5 Unclaimed Benefits. If the Committee is unable, within five (5)
years after any distribution becomes payable to a Participant or Beneficiary, to
make or direct payment to the person entitled thereto because the identity or
whereabouts of such person cannot be ascertained, notwithstanding the mailing of
due notice to such person at his last known address as indicated by the records
of either the Committee or his Employing Company, then such benefit or
distribution will be disposed of as follows:
(a) If the whereabouts of the Participant is unknown to the
Committee, distribution will be made to the Participant's Beneficiary
or Beneficiaries.
Payment to such one or more persons shall completely
discharge the Company, the Trustee, and the Committee with respect to
the amounts so paid.
(b) If none of the persons described in (a) above, can be
located, then the benefit payable under the Plan shall be forfeited and
shall be applied to reduce future Employer Matching Contributions.
Notwithstanding the foregoing sentence, such benefit shall be
reinstated if a claim is made by the Participant or Beneficiary for the
forfeited benefit.
17.6 Governing Law. The provisions of the Plan and the Trust shall be
construed, administered, and enforced in accordance with the laws of the State
of Georgia, except to the extent such laws are preempted by the laws of the
United States.
<PAGE>
ARTICLE XVIII
SPECIAL REQUIREMENTS FOR ACCOUNT BALANCES
ATTRIBUTABLE TO ACCRUED BENEFITS
TRANSFERRED FROM THE SEPCO PLAN
18.1 SEPCO Transferred Accounts. Notwithstanding any other provisions
of this Plan to the contrary, a Participant's SEPCO Transferred Account shall be
subject to the requirements of this Article XVIII.
18.2 In-Service Withdrawals from SEPCO Transferred Accounts. Except as
provided in this Section 18.2, a Participant shall be entitled to a distribution
of his SEPCO Transferred Account at the same time he is entitled to a
distribution of his Account under the applicable provisions of Article XII.
(a) Age 59 1/2. A Participant who has attained age 59 1/2
shall have the right to withdraw all or a portion of his SEPCO
Transferred Account in accordance with Section 11.6(e) provided that he
shall have first withdrawn all other amounts available to him in
accordance with the terms and order of priority set forth in Section
11.1.
(b) Hardship. A Participant who meets the requirements for
hardship set forth in Section 11.6 hereof shall be entitled to withdraw
amounts determined necessary to relieve such hardship from his SEPCO
Transferred Account, provided that he shall have first withdrawn all
other amounts available to him in accordance with the terms and order
of priority set forth in Section 11.1.
18.3 Loans from SEPCO Transferred Accounts. Subject to the provisions
of Section 11.7, a Participant may request that a loan be made to him from his
SEPCO Transferred Account, provided, however, that the Participant has first
borrowed all other amounts available to him under the terms of the Plan.
A Participant must obtain the consent of his or her spouse, if any, to
use any portion of his SEPCO Transferred Account as security for a loan. Within
the ninety-day period ending on the date on which a loan is made to a
Participant who is married, the Participant shall obtain and deliver to the
Committee the written consent of the Participant's spouse (1) to the loan, and
(2) to the reduction of the Participant's Account if the Participant's Account
is reduced because of nonpayment or other default with respect to the loan. No
further spousal consent shall be required in the event the Participant's Account
is subsequently reduced with respect to such loan, even if the Participant is
then married to a different spouse. A new spousal consent shall be required for
any subsequent loan to a Participant, if the Participant is then married.
18.4 Distribution of SEPCO Transferred Accounts. Notwithstanding any
provisions of this Plan to the contrary, a Participant with a SEPCO Transferred
Account shall be paid the vested benefits of the SEPCO Transferred Account upon
retirement, death, total and permanent disability, or termination of employment
as provided herein.
(a) All benefits from a Participant's SEPCO Transferred
Account shall be distributed in accordance with the distribution
options available under Article XII, with applicable spousal consent as
provided under the SEPCO Plan, unless a Participant elects payment of
benefits in the form of a life annuity pursuant to a written election
filed with the Committee prior to commencement of distribution of
benefits. The provisions of this Section 18.4 shall take precedence
over any conflicting provisions of the Plan and shall apply to any
Participant who has a SEPCO Transferred Account and who elects to
receive payment of his benefits from his SEPCO Transferred Account in
the form of a life annuity. A married Participant electing to receive
benefits in the form of a life annuity shall receive the value of his
benefit in the form of a qualified joint and survivor annuity, which
shall provide an annuity for the life of the Participant with a
survivor annuity for the life of the Participant's spouse which is
either 50% or 100%, as elected by the Participant, of the amount of the
annuity which is payable during the joint lives of the Participant and
the Participant's spouse, and which is the actuarial equivalent of a
single life annuity for the life of the Participant. An unmarried
Participant who elects a life annuity shall receive the value of his
benefits from his SEPCO Transferred Account in the form of an annuity
for his lifetime.
(b) If the Participant's interest is to be distributed in
other than a single sum, the amount required to be distributed for each
calendar year, beginning with distributions for the first Distribution
Calendar Year, must at least equal the quotient obtained by dividing
the Participant's Benefit by the Applicable Life Expectancy.
(c) The minimum distribution required for the Participant's
first Distribution Calendar Year must be made on or before the
Participant's Required Beginning Date. The minimum distribution for
other calendar years, including the minimum distribution for the
Distribution Calendar Year in which the Participant's Required
Beginning Date occurs, must be made on or before December 31 of that
Distribution Calendar Year.
(d) If the Participant's benefit is distributed in the form
of an annuity purchased from an insurance company, distributions
thereunder shall be made in accordance with the requirements of Section
401(a)(9) of the Code and the proposed regulations thereunder.
(e) Definitions.
(1) "Applicable Life Expectancy" means the life
expectancy calculated using the attained age of the
Participant as of the Participant's birthday in the
applicable calendar year reduced by one for each calendar
year which has elapsed since the date life expectancy was
first calculated. If life expectancy is being recalculated,
the applicable life expectancy shall be the life expectancy
as so recalculated. The applicable calendar year shall be
the first Distribution Calendar Year, and if life expectancy
is being recalculated such succeeding calendar year.
(2) "Distribution Calendar Year" means a calendar
year for which a minimum distribution is required. For
distributions beginning before the Participant's death, the
first Distribution Calendar Year is the calendar year
immediately preceding the calendar year which contains the
Participant's Required Beginning Date.
(3) "Participant's Benefit" means the account
balance as of the last valuation date in the calendar year
immediately preceding the Distribution Calendar Year
(valuation calendar year) increased by the amount of any
contributions or forfeitures allocated to the account
balance as of dates in the valuation calendar year after the
valuation date and decreased by distributions made in the
valuation calendar year after the valuation date. If any
portion of the minimum distribution for the first
Distribution Calendar Year is made in the second
Distribution Calendar Year on or before the Required
Beginning Date, the amount of the minimum distribution made
in the second Distribution Calendar Year shall be treated as
if it had been made in the immediately preceding
Distribution Calendar Year.
(4) "Required Beginning Date" means April 1st of
the calendar year following the calendar year in which the
Participant attains age 70-1/2, in accordance with
regulations prescribed by the Secretary of the Treasury.
(f) Notwithstanding anything contained herein to the
contrary, the requirements of this Section shall apply to any
distribution of a Participant's interest and will take precedence over
any inconsistent provisions of this Plan. All distributions required
under this Section shall be determined and made in accordance with the
proposed regulations under Section 401(a)(9), including the minimum
distribution incidental benefit requirement of Section 1.401(a)(9)-2 of
the proposed regulations.
18.5 Code Section 411(d)(6) Protected Benefits.
Notwithstanding any of the foregoing, the provisions of this Article XVIII to
effectuate the merger of the SEPCO Plan into this Plan shall not decrease a
Participant's accrued benefit, except to the extent permitted under Section
412(c)(8) of the Code, and shall not reduce or eliminate Code Section 411(d)(6)
protected benefits determined immediately prior to the date of such merger. The
Committee shall disregard any part of this Article XVIII or the Plan to the
extent that application of such would fail to satisfy this paragraph. If the
Committee disregards any portion of this Article XVIII or the Plan because it
would eliminate a protected benefit, the Committee shall maintain a schedule of
any such impacted early retirement option or other optional forms of benefit and
the Plan shall continue such for the affected Participants.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this amendment and
restatement of The Southern Company Employee Savings Plan effective as of
January 1, 1997, to be executed this _______ day of __________________, 1998.
SOUTHERN COMPANY SERVICES, INC.
By:
Its:
Attest:
By: _________________
Its: _________________
<PAGE>
APPENDIX A - EMPLOYING COMPANIES
The Employing Companies as of July 1, 1998 are:
Alabama Power Company
Georgia Power Company
Gulf Power Company
Mississippi Power Company
Savannah Electric and Power Company
Southern Communications Services, Inc.
Southern Company Energy Solutions, Inc.
Southern Company Services, Inc.
Southern Energy Resources, Inc.
Southern Nuclear Operating Company, Inc.
<PAGE>
FIRST AMENDMENT TO THE
SOUTHERN COMPANY EMPLOYEE SAVINGS PLAN
WHEREAS, the Employee Savings Plan Committee ("Committee") heretofore
adopted the amendment and restatement of The Southern Company Employee Savings
Plan ("Plan"), effective as of January 1, 1997; and
WHEREAS, the Board of Directors of Southern Company Services, Inc. has
determined that the Plan should be an employee stock ownership plan, as defined
in Section 4975(e)(7) of the Internal Revenue Code of 1986, as amended, and
Section 407(d)(6) of the Employee Retirement Income Security Act of 1974, as
amended; and
WHEREAS, the Committee desires to amend the Plan consistent with such
determination to cause the Plan to be an employee stock ownership plan and to
allow Participants to receive a distribution of dividends payable on Common
Stock under the Plan; and
WHEREAS, the Committee also desires to amend the Plan to provide for
the participation in the Plan by certain former employees of the Commonwealth
Energy System who become employed by Southern Energy Resources, Inc.; and
WHEREAS, the Committee is authorized pursuant to Section 15.1 of the
Plan to amend the Plan at any time, provided that the amendment does not involve
a substantial increase in cost to any Employing Company or is necessary or
desirable to comply with the laws and regulations applicable to the Plan.
NOW, THEREFORE, the Committee hereby amends the Plan as follows, to be
effective as provided herein: I.
Effective as of January 1, 1999, Article I shall be amended by adding
the following new sentence after the second sentence thereof:
This Plan is also intended to be an employee stock ownership plan, as
defined in Code Section 4975(e)(7) and ERISA Section 407(d)(6), and is
designed to invest primarily in qualifying employer securities, as
defined in Code Section 409(l).
II.
Effective as of the date hereof, Article III shall be amended by adding
a new Section 3.7 thereto as follows and by redesignating existing Section 3.7
as Section 3.8:
3.7 Former Commonwealth Energy System Employees.
Notwithstanding any other provision of the Plan to the contrary, with
respect to a former employee of the Commonwealth Energy System
("ComElectric") who is employed by Southern Energy Resources, Inc. and
is set forth on a schedule of employees acknowledged by the Committee,
such employee shall become a Participant as of the Enrollment Date
coincident with or next following such employee's date of employment.
III.
Effective as of January 1, 1999, Section 8.1 of the Plan shall be
amended by deleting the third sentence thereof and inserting a new sentence as
follows:
The Company Stock Fund shall be invested and, subject to Section 12.13
of the Plan, reinvested in Common Stock, provided that funds applicable
to the purchase of Common Stock pending investment of such funds may be
temporarily invested in short-term United States Government
obligations, other obligations guaranteed by the United States
Government, commercial paper, or certificates of deposit, and, if the
Trustee so determines, may be transferred to money market funds
utilized by the Trustee for qualified employee benefit trusts.
IV.
Effective as of January 1, 1999, Section 8.4 shall be amended by
deleting such Section in its entirety and substituting a new Section 8.4 as
follows:
8.4 Investment of Earnings. Except as provided in Section 12.13 of the
Plan, interest, dividends, if any, and other distributions received by
the Trustee with respect to an Investment Fund shall be invested in
such Investment Fund.
V.
Effective as of January 1, 1999, Section 9.2 shall be amended by
deleting the first sentence thereof and substituting a new sentence as follows:
Except as provided in Section 12.13 of the Plan, a Participant's
Account in respect of his interest in each Investment Fund shall be
credited or charged, as the case may be, as of each Valuation Date with
the dividends, income, gains, appreciation, losses, depreciation,
forfeitures, expenses, and other transactions with respect to such
Investment Fund for the Valuation Date as of which such credit or
charge accrued.
VI.
Effective as of January 1, 1999, Article XII shall be amended by adding
a new Section 12.13 to the end thereof as follows:
12.13 Distribution of Dividends Payable on Common Stock. Each
Participant may elect to receive a cash distribution of all or a
portion of the dividends payable on the shares of Common Stock credited
to the Participant's Account as of the record date of the Common Stock.
The Committee shall establish administrative procedures to enable
Participants to make elections under this Section 12.13. The dividends
payable on the shares of Common Stock credited to the Account of a
Participant who does not elect to receive a cash distribution shall be
invested in accordance with Section 8.4 of the Plan. Payment of cash
distributions under this Section 12.13 shall be made as soon as
administratively practicable after the payable date of the shares of
Common Stock, but in no event later than 90 days after the end of the
Plan Year which includes such payable date. A Participant's election to
receive cash distributions of dividends payable on Common Stock shall
be revoked automatically upon the Participant's death.
VII.
Effective as of January 1, 1999, Section 14.2 shall be amended by
deleting the first two sentences thereof and substituting two new sentences as
follows:
As soon as practicable after receipt of funds applicable to the
purchase of Common Stock, the Trustee shall purchase Common Stock or
cause Common Stock to be purchased. Such Common Stock may be purchased
on the open market or by private purchase (including private purchases
directly from The Southern Company); provided that (a) no private
purchase may be made at any price greater than the last sale price or
highest current independent bid price, whichever is higher, for Common
Stock on the New York Stock Exchange, plus an amount equal to the
commission payable in a stock exchange transaction; (b) if such private
purchase shall be a purchase of Common Stock directly from The Southern
Company, no commission shall be paid with respect thereto unless such
commission satisfies the requirements of Prohibited Transaction Class
Exemption 75-1; and (c) the Trustee may purchase Common Stock directly
from The Southern Company under The Southern Investment Plan, as from
time to time amended, or under any other similar plan made available to
holders of record of shares of Common Stock which may be in effect from
time to time, at the purchase price provided for in such plan.
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 the duly
authorized members of the Employee Savings Plan Committee, has adopted this
First Amendment to The Southern Company Employee Savings Plan this ____ day of
_________________________, 1998 to be effective as stated herein.
EMPLOYEE SAVINGS PLAN COMMITTEE:
Christopher C. Womack
Robert A. Bell
W. Dean Hudson
<PAGE>
SECOND AMENDMENT TO THE
SOUTHERN COMPANY EMPLOYEE SAVINGS PLAN
WHEREAS, the Employee Savings Plan Committee ("Committee") heretofore
adopted the amendment and restatement of The Southern Company Employee Savings
Plan ("Plan"), effective as of January 1, 1997; and
WHEREAS, the Committee desires to amend the Plan to modify the
definition of Compensation for appliance salespersons to include certain
nonproductive pay earnings types as may be determined from time to time by the
Committee; and
WHEREAS, the Committee is authorized pursuant to Section 15.1 of the
Plan to amend the Plan at any time, provided that the amendment does not involve
a substantial increase in cost to any Employing Company or is necessary or
desirable to comply with the laws and regulations applicable to the Plan.
NOW, THEREFORE, the Committee hereby amends the Plan as follows, to be
effective as provided herein:
I.
Effective for pay periods ending on and after January 8, 1999, Section
2.18 of the Plan shall be amended by adding the following to the end of the
first paragraph thereof:
Effective for pay periods ending on and after January 8, 1999, the term
"Compensation" shall also include, for appliance salespersons, certain
nonproductive pay earnings types as determined from time to time by the
Committee and set forth on Appendix B to the Plan, which Appendix may
be updated from time to time.
II.
Except as amended herein by this Second Amendment, the Plan shall
remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, Southern Company Services, Inc., through the duly
authorized members of the Employee Savings Plan Committee, has adopted this
Second Amendment to The Southern Company Employee Savings Plan this ____ day of
_________________________, 1999 to be effective as stated herein.
EMPLOYEE SAVINGS PLAN COMMITTEE:
Christopher C. Womack
Robert A. Bell
W. Dean Hudson
<PAGE>
APPENDIX B
Nonproductive Pay Earnings Types
Earnings Code Earnings Description
003 Salesperson - Hourly
092 Holiday Taken
093 Meetings
095 Meetings - Safety
096 Disability 100%
100 Disability Extended Approval
106 Leave - Death
108 Occupational Injury
111 Jury Duty
112 Training
113 Safety Training
115 Vacation
116 Vacation Special Circumstances
117 Vacation FMLA Employee
118 Vacation FMLA Family Care
119 Time Off With Pay
125 Holiday Banked - Taken
127 Vacation In Lieu Of Disability
442 DISABILITY FMLA EMPLOYEE
<PAGE>
THIRD AMENDMENT TO THE
SOUTHERN COMPANY EMPLOYEE SAVINGS PLAN
WHEREAS, the Employee Savings Plan Committee ("Committee") heretofore
adopted the amendment and restatement of The Southern Company Employee Savings
Plan ("Plan"), effective as of January 1, 1997; and
WHEREAS, the Committee desires to amend the Plan to make certain design
changes; and
WHEREAS, the Committee is authorized pursuant to Section 15.1 of the
Plan to amend the Plan at any time, provided that the amendment does not involve
a substantial increase in cost to any Employing Company or is necessary or
desirable to comply with the laws and regulations applicable to the Plan.
NOW, THEREFORE, the Committee hereby amends the Plan as follows, to be
effective as provided herein:
I.
Effective as of January 1, 1996, Subsection (1) of Section 2.27 of the
Plan shall be amended as follows:
(1) an Employee who is treated as such solely by reason of the
"leased employee" rules of Code Section 414(n) such that, pursuant to
an agreement between an Employing Company and any other person, such
individual has performed services for the Employing Company (or the
Employing Company and related persons as described in Code Section
414(n)(6)) on a substantially full-time basis for a period of at least
one year and such services were performed under the primary direction
or control of the Employing Company;
II.
Effective as of January 1, 1999, Section 3.8 of the Plan shall be
amended by adding the following sentence to the end of such Section:
Loan repayments will be suspended under the Plan as permitted under
Section 414(u)(4) of the Code.
<PAGE>
III.
Effective as of January 1, 1996, Section 12.6(b) shall be amended by
adding the following sentence to the end of the first paragraph in such Section:
In addition, any Participant who attains age 70 1/2 on or after January
1, 1996, but prior to January 1, 1999, may elect to have payment of his
benefits begin no later than April 1 of the calendar year following the
calendar year during which the Participant attains age 70 1/2,
regardless of the Participant's termination of employment.
IV.
Except as amended herein by this Third Amendment, the Plan shall remain
in full force and effect.
IN WITNESS WHEREOF, Southern Company Services, Inc., through the duly
authorized members of the Employee Savings Plan Committee, has adopted this
Third Amendment to The Southern Company Employee Savings Plan this ____ day of
___________________, 1999.
EMPLOYEE SAVINGS PLAN COMMITTEE:
Christopher C. Womack
Robert A. Bell
W. Dean Hudson
EXHIBIT 10(a)62
THE SOUTHERN COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
As Amended and Restated
Effective January 1, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I - PURPOSE OF THE PLAN..................................1
ARTICLE II - DEFINITIONS.........................................2
2.1 "Account"...............................................2
2.2 "Affiliated Employer"...................................2
2.3 "Aggregate Account".....................................2
2.4 "Aggregation Group".....................................3
2.5 "Annual Addition".......................................3
2.6 "Beneficiary"...........................................3
2.7 "Board of Directors"....................................3
2.8 "Break-in-Service Date".................................3
2.9 "Code"..................................................3
2.10 "Committee".............................................4
2.11 "Common Stock"..........................................4
2.12 "Company"...............................................4
2.13 "Compensation"..........................................4
2.14 "Defined Benefit Plan Fraction".........................4
2.15 "Defined Contribution Plan Fraction"....................4
2.16 "Determination Date"....................................5
2.17 "Determination Year"....................................5
2.18 "Distributee"...........................................5
2.19 "Direct Rollover".......................................5
2.20 "Eligible Employee".....................................5
2.21 "Eligible Retirement Plan"..............................6
2.22 "Eligible Rollover Distribution"........................6
2.23 "Employee"..............................................6
2.24 "Employing Company".....................................7
2.25 "Enrollment Date".......................................7
2.26 "ERISA".................................................7
2.27 "Highly Compensated Employee"...........................7
2.28 "Hour of Service".......................................7
2.29 "Key Employee"..........................................7
2.30 "Limitation Year".......................................7
2.31 "Look-Back Year"........................................7
2.32 "Non-Highly Compensated Employee".......................7
2.33 "Normal Retirement Date"................................7
2.34 "One-Year Break in Service".............................8
2.35 "Participant"...........................................8
2.36 "Permissive Aggregation Group"..........................8
2.37 "Plan"..................................................8
2.38 "Plan Year".............................................8
2.39 "Present Value of Accrued Retirement Income"............8
2.40 "Qualified Election Period".............................8
2.41 "Qualified Participant..................................8
2.42 "Required Aggregation Group"............................8
2.43 "SEPCO".................................................8
2.44 "SEPCO ESOP"............................................8
2.45 "Super-Top-Heavy Group".................................9
2.46 "Surviving Spouse"......................................9
2.47 "Top-Heavy Group".......................................9
2.48 "Trust or Trust Fund"...................................9
2.49 "Trust Agreement".......................................9
2.50 "Trustee"...............................................9
2.51 "Valuation Date"........................................9
2.52 "Year of Service".......................................9
ARTICLE III - PARTICIPATION.....................................12
3.1 Eligibility Requirements...............................12
3.2 Duration of Participation..............................12
3.3 Participation upon Reemployment........................12
3.4 No Restoration of Previously Distributed Benefits......12
3.5 Special Rule for Scott Paper Company Energy Complex
Employees..............................................12
3.6 Former Commonwealth Edison of Indiana Employees........13
3.7 Military Leave.........................................13
ARTICLE IV - EMPLOYING COMPANY CONTRIBUTION.....................14
4.1 Amount of Contribution.................................14
4.2 Time of Payment........................................14
4.3 Purchases of Common Stock..............................14
4.4 Restrictions on Common Stock...........................14
4.5 Exclusive Benefit of Employees.........................14
ARTICLE V - PARTICIPANT CONTRIBUTION............................16
5.1 Participant Contributions Not Allowed..................16
ARTICLE VI - ACCOUNTS OF PARTICIPANTS...........................17
6.1 Separate Accounts......................................17
6.2 Allocation of Common Stock.............................17
6.3 Section 415 Limitations................................17
6.4 Correction of Contributions in Excess of Section
415 Limits.............................................18
6.5 Combination of Plans...................................19
6.6 Allocation of Dividends and other Distributions........19
6.7 Valuations.............................................20
6.8 Voting Company Stock...................................20
6.9 Correction of Prior Incorrect Allocations and
Distributions..........................................20
ARTICLE VII - AUTHORIZED WITHDRAWALS............................22
7.1 In General.............................................22
7.2 Distributions in Lieu of Diversification of
Investments Pursuant to Code Section 401(a)(28)(B).....22
7.3 In-Service Withdrawals.................................22
ARTICLE VIII - DISTRIBUTIONS TO PARTICIPANTS....................24
8.1 Vesting................................................24
8.2 Distribution upon Retirement...........................24
8.3 Distribution upon Death................................24
8.4 Designation of Beneficiary in the Event of Death.......24
8.5 Distribution upon Disability...........................25
8.6 Distribution upon Termination of Employment............25
8.7 Property Distributed/Method of Payment.................26
8.8 Commencement of Benefits...............................27
8.9 Distribution upon Death................................27
8.10 Adjustments for Deferred Accounts or Installment
Payments...............................................28
8.11 Transfers between Employing Companies..................28
8.12 Distribution to Alternate Payees.......................28
8.13 Requirement for Direct Rollovers.......................28
8.14 Consent and Notice Requirements........................28
ARTICLE IX - ADMINSTRATION......................................30
9.1 Membership of Committee................................30
9.2 Acceptance and Resignation.............................30
9.3 Transaction of Business................................30
9.4 Responsibilities in General............................30
9.5 Committee as Named Fiduciary...........................30
9.6 Rules for Plan Administration..........................30
9.7 Employment of Agents...................................31
9.8 Co-Fiduciaries.........................................31
9.9 General Records........................................31
9.10 Liability of the Committee.............................31
9.11 Reimbursement of Expenses and Compensation of Committee31
9.12 Expenses of Plan and Trust Fund........................31
9.13 Responsibility for Funding Policy......................32
9.14 Code Section 411(d)(6) Protected Benefits..............32
9.15 Management of Assets...................................32
9.16 Notice and Claims Procedure............................32
9.17 Bonding................................................32
9.18 Multiple Fiduciary Capacities..........................33
ARTICLE X - THE TRUST FUND AND TRUSTEE..........................34
10.1 Trustee................................................34
10.2 Duties of the Trustee..................................34
10.3 Diversion..............................................34
ARTICLE XI - AMENDMENT AND TERMINATION..........................35
11.1 Amendment of the Plan..................................35
11.2 Termination of the Plan................................35
11.3 Merger or Consolidation of the Plan....................36
ARTICLE XII - TOP-HEAVY PROVISIONS..............................37
12.1 Top-Heavy Plan Requirements............................37
12.2 Determination of Top-Heavy Status......................37
12.3 Minimum Allocation for Top-Heavy Plan Years............38
12.4 Adjustments to Maximum Benefit Limits for Top-Heavy
Plans..................................................38
ARTICLE XIII - GENERAL PROVISIONS...............................40
13.1 Plan Not an Employment Contract........................40
13.2 Non-Alienation or Assignment...........................40
13.3 Payments to Minors and Others..........................40
13.4 Source of Benefits.....................................40
13.5 Unclaimed Benefits.....................................41
13.6 Governing Law..........................................41
<PAGE>
ARTICLE I
PURPOSE OF THE PLAN
The purpose of this Plan is to enable Participants to share in the
future of The Southern Company, to provide Participants with an opportunity to
accumulate capital for their future economic security, and to enable
Participants to acquire stock ownership interests in The Southern Company.
Consequently, Employing Company contributions to the Plan will be invested
primarily in Common Stock of The Southern Company.
The Plan is also designed to provide Participants with beneficial
ownership of Common Stock of The Southern Company substantially in proportion to
their relative Compensation without requiring any cash outlay, any reduction in
pay or other benefits, or the surrender of any other rights on the part of
Participants.
The Plan was originally effective January 1, 1976, and was last amended
and restated effective as of April 1, 1995. The Plan is hereby amended and
restated effective January 1, 1997 in order to incorporate a variety of plan
design and other changes. It is intended that this Plan, as amended and restated
effective as of January 1, 1997, shall constitute an employee stock ownership
plan under Section 4975(e)(7) of the Internal Revenue Code of 1986, as amended
("Code") and Section 407(d)(6) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"). The Plan is a stock bonus plan intended to be
qualified under Section 401(a) of the Code.
<PAGE>
ARTICLE II
DEFINITIONS
All references to articles, sections, subsections, and paragraphs shall
be to articles, sections, subsections, and paragraphs of this Plan unless
another reference is expressly set forth in this Plan. Any words used in the
masculine shall be read and be construed in the feminine where they would so
apply. Words in the singular shall be read and construed in the plural, and all
words in the plural shall be read and construed in the singular in all cases
where they would so apply.
For purposes of this Plan, unless otherwise required by the context,
the following terms shall have the meanings set forth opposite such terms:
2.1......"Account" shall mean the separate account maintained for each
Participant in accordance with Section 6.1.
2.2......"Affiliated Employer" shall mean each Employing Company and
(a) any corporation which is a member of a controlled group of corporations (as
defined in Section 414(b) of the Code) which includes any Employing Company; (b)
any trade or business (whether or not incorporated) which is under common
control (as defined in Section 414(c) of the Code) with any Employing Company;
(c) 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 any Employing Company; and (d) any other entity required to be
aggregated with an Employing Company pursuant to regulations under Section
414(o) of the Code. Notwithstanding the foregoing, for purposes of applying the
limitations of Section 6.3, the term Affiliated Employer shall be adjusted as
required by Code Section 415(h).
2.3......"Aggregate Account" shall mean with respect to a Participant
as of the Determination Date, the sum of the following:
(a) the Account balance of such Participant as of the most
recent valuation occurring within a twelve-month period ending on the
Determination Date;
(b) an adjustment for any contributions due as of the
Determination Date;
(c) any Plan distributions, including 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), but not related rollovers or plan-to-plan transfers
(ones either not initiated by the Employee or made to a plan maintained
by the same employer), made within the Plan Year that includes the
Determination Date or within the four preceding Plan Years, including
distributions made prior to January 1, 1984, and distributions made
under a terminated plan which if it had not been terminated would have
been required to be included in an Aggregation Group;
(d) any Employee contributions, whether voluntary or
mandatory;
(e) unrelated rollovers and plan-to-plan transfers to this
Plan accepted prior to January 1, 1984; and
(f) related rollovers and plan-to-plan transfers to this Plan.
2.4......"Aggregation Group" shall mean either a Required Aggregation
Group or a Permissive Aggregation Group.
2.5......"Annual Addition" shall mean the amount allocated to a
Participant's Account and accounts under all defined contribution plans
maintained by the Affiliated Employers during a Limitation Year that constitutes
(a) Affiliated Employer contributions,
.........(b) voluntary participant contributions,
(c) forfeitures, if any, allocated to a Participant's Account
and accounts under all defined contribution plans maintained by the
Affiliated Employers, and
(d) amounts described in Sections 415(l)(1) and 419A(d)(2) of
the Code.
2.6......"Beneficiary" shall mean any person(s) who, or estate(s),
trust(s), or organization(s) which, in accordance with the provisions of Section
8.4, become entitled to receive benefits upon the death of a Participant.
2.7......"Board of Directors" shall mean the Board of Directors of
Southern Company Services, Inc.
2.8......"Break-in-Service Date" means the earlier of the following
dates:
(a) the date on which an Employee terminates employment, is
discharged, retires, or dies; or
(b) the last day of an approved leave of absence including any
extension.
In the case of an individual who is absent from work for maternity or
paternity reasons, such individual shall not incur a Break-in-Service Date
earlier than the expiration of the second anniversary of the first date of such
absence; provided, however, that the twelve-consecutive-month period beginning
on the first anniversary of the first date of such absence shall not constitute
a Year of Service. 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.
2.9......"Code" shall mean the Internal Revenue Code of 1986, as
amended, or any successor statute, and the rulings and regulations promulgated
thereunder. In the event an amendment to the Code renumbers a section of the
Code referred to in this Plan, any such reference automatically shall become a
reference to such section as renumbered.
2.10....."Committee" shall mean the Committee appointed pursuant to
Section 9.1 to serve as plan administrator.
2.11....."Common Stock" shall mean the common stock of The Southern
Company, which stock is a qualifying employer security within the meaning of
Code Section 409(l)(1) and which stock is a registration-type class of
securities as defined in Code Section 409(e)(4).
2.12....."Company" shall mean Southern Company Services, Inc., and its
successors.
2.13....."Compensation" shall mean the total amount of a Participant's
salary or wages, amounts received as sick pay and for leaves of absence with
pay, overtime pay, any shift, nuclear, or other pay differentials, substitution
pay, and other amounts received for personal services actually rendered, amounts
paid by any Employing Company to The Southern Company Employee Savings Plan as
Elective Employer Contributions (as defined therein) pursuant to the
Participant's exercise of his deferral option made in accordance with Section
401(k) of the Code, all awards under any incentive pay plans sponsored by the
Employing Company including, but not limited to, The Southern Company
Performance Pay Plan, The Southern Company Productivity Improvement Plan, and
The Southern Company Executive Productivity Improvement Plan, includable as
gross income, and amounts contributed by an Employing Company to the Southern
Electric System Flexible Benefits Plan or The Southern Company Flexible Benefits
Plan on behalf of the Participant pursuant to his salary reduction election
under either such plan, and before deduction of taxes, social security, etc. The
term "Compensation" shall not include amounts which are reimbursement to a
Participant paid by any Employing Company, including but not limited to,
reimbursement for such items as moving expenses and travel and entertainment
expenses, and imputed income for automobile expenses, tax preparation expenses,
and health and life insurance premiums paid by an Employing Company.
The Compensation of each Participant taken into account for purposes of
this Plan shall not exceed $160,000 (as adjusted pursuant to Code Section
401(a)(17)).
2.14....."Defined Benefit Plan Fraction" shall mean the following
fraction:
(numerator) Sum of the projected annual benefits of the Participant
under all Affiliated Employer defined benefit plans (whether or not
terminated) determined as of the close of the Plan Year.
(denominator) The lesser of (a) the product of 1.25 multiplied by the
dollar limitation in effect for the Plan Year under Code Sections
415(b)(1)(A) or 415(d), or (b) 1.4 multiplied by 100% of the
Participant's average compensation for his highest three (3)
consecutive Plan Years of participation as adjusted under Treasury
Regulation Section 1.415-5.
2.15 "Defined Contribution Plan Fraction" shall mean the following
fraction:
(numerator) The sum of all Annual Additions to the account of the
Participant as of the close of the Plan Year under all defined
contribution plans maintained by the Affiliated Employers for the
current and prior Limitation Years (whether or not terminated),
including this Plan.
(denominator) The sum of the lesser of the following amounts determined
for such Plan Year and for each prior Plan Year in which the
Participant has a Year of Service: (a) 1.25 multiplied by the dollar
limitation in effect under Code Section 415(c)(1)(A) for the Plan Year
(determined without regard to Code Section 415(c)(6)), or (b) 1.4
multiplied by the amount that may be taken into account under Code
Section 415(c)(1)(B) with respect to a Participant for the Plan Year.
2.16 "Determination Date" shall mean with respect to a Plan Year, the
last day of the preceding Plan Year.
2.17 "Determination Year" shall mean the Plan Year being tested.
2.18 "Distributee" shall include an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse and the
Employee's or former Employee's spouse or former spouse who is an alternate
payee under a qualified domestic relations order, as defined in Section 414(p)
of the Code, are Distributees with regard to the interest of the spouse or
former spouse.
2.19 "Direct Rollover" shall mean a payment by the Plan to the Eligible
Retirement Plan specified by the Distributee.
2.20 "Eligible Employee" shall mean an Employee who is employed by an
Employing Company and (a) who was eligible to be included in the Plan on January
1, 1991, or (b) who is a regular full-time, regular part-time, or cooperative
education employee other than:
<PAGE>
(1) an Employee who is treated as such solely by reason of the
"leased employee" rules of Code Section 414(n);
(2) any Employee who is represented by a collective bargaining
agent unless the representatives of his bargaining unit and the
Employing Company mutually agree to participation in the Plan subject
to its terms by members of his bargaining unit;
(3) an individual who is a cooperative education employee and
who first performs an Hour of Service on or after January 1, 1995; and
(4) an individual who is classified by the Employing Company
as a temporary employee (who was not eligible to be included in the
Plan on January 1, 1991) or an independent contractor, regardless of
whether such classification is in error. Effective September 1, 1998,
any individual classified by the Employing Company as a temporary
employee shall be excluded from the Plan, regardless of any prior
inclusion in the Plan and regardless of whether the "temporary
employee" classification is determined to be in error.
2.21 "Eligible Retirement Plan" shall mean an individual retirement
account described in Section 408(a) of the Code, an individual retirement
annuity described in Section 408(b) of the Code, an annuity plan described in
Section 403(a) of the Code, or a qualified trust described in Section 401(a) of
the Code 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.
2.22 "Eligible Rollover Distribution" shall mean 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, the
joint lives (or joint life expectancies) of the Distributee and the
Distributee's Beneficiary, or for a specified period of 10 years or more; (b)
any distribution to the extent such distribution is required under Section
401(a)(9) of the Code; and (c) the portion of any distribution that is not
includable in gross income (determined without regard to the exclusion for net
unrealized appreciation with respect to employer securities).
2.23 "Employee" shall mean each individual who is employed by an
Affiliated Employer under common law and each individual who is required to be
treated as an employee pursuant to the "leased employee" rules of Code Section
414(n) other than a leased employee described in Code Section 414(n)(5).
<PAGE>
2.24 "Employing Company" shall mean the Company 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 them. The Employing Companies are set forth on Appendix A to the
Plan, as updated from time to time. No such entity shall be treated as an
Employing Company prior to the date it adopts the Plan.
2.25 "Enrollment Date" shall mean the day on which the Eligible
Employee meets the requirements for participation in this Plan under Article
III.
2.26 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, or any successor statute, and the rulings and regulations
promulgated thereunder. In the event an amendment to ERISA renumbers a section
of ERISA referred to in this Plan, any such reference automatically shall become
a reference to such section as renumbered.
2.27 "Highly Compensated Employee" shall mean (in accordance with and
subject to Code Section 414(q) and any regulations, rulings, notices or
procedures thereunder), with respect to any Plan Year: (1) any Employee who was
a five percent (5%) owner of The Southern Company or an Affiliated Employer (as
determined pursuant to Code Section 416)) during the Plan Year or the
immediately preceding Plan Year, or (2) any Employee who earned more than
$80,000 in the preceding Plan Year. The $80,000 amount shall be adjusted for
inflation and for short Plan Years, pursuant to Code Section 414(q). The
Employer may, at its election, limit Employees earning more than $80,000 to only
those Employees who fall within the "top-paid group," as defined in Code Section
414(q) excluding those employees described in Code Section 414(q)(8) for such
purpose. In determining whether an Employee is a Highly Compensated Employee,
the Committee may make any elections authorized under applicable regulations,
rulings, notices, or revenue procedures.
2.28 "Hour of Service" shall mean each hour for which an Employee is
paid or entitled to payment for the performance of duties for an Affiliated
Employer.
2.29 "Key Employee" shall mean any Employee or former Employee (and his
Beneficiary) who is a key employee within the meaning of Code Section 416(i)(1).
2.30 "Limitation Year" shall mean the Plan Year.
2.31 "Look-Back Year" shall mean the Plan Year preceding the
Determination Year.
2.32 "Non-Highly Compensated Employee" shall mean an Employee who is
not a Highly Compensated Employee.
2.33 "Normal Retirement Date" shall mean the first day of the month
following a Participant's sixty-fifth (65th) birthday.
<PAGE>
2.34 "One-Year Break in Service" shall mean each
twelve-consecutive-month period within the period commencing with an Employee's
Break-in-Service Date and ending on the date the Employee is again credited with
an Hour of Service.
2.35 "Participant" shall mean (a) an Eligible Employee who satisfied
the eligibility requirements set forth in Section 3.1 of the Plan and whose
participation in the Plan at the time of reference has not been terminated as
provided in the Plan and (b) an Employee or former Employee who has ceased to be
a Participant under (a) above, but for whom an Account is maintained under the
Plan.
2.36 "Permissive Aggregation Group" shall mean a group of plans
consisting of the Required Aggregation Group and, at the election of the
Affiliated Employers, such other plan or plans 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 Section 401(a)(4) or 410.
2.37 "Plan" shall mean The Southern Company Employee Stock Ownership
Plan, as described herein and as it may be amended from time to time. Prior to
January 1, 1991, the Plan was named The Employee Stock Ownership Plan of The
Southern Company System.
2.38 "Plan Year" shall mean the twelve-month period commencing January
1st and ending on the last day of December next following.
2.39 "Present Value of Accrued Retirement Income" shall mean an amount
determined solely for the purpose of determining if the Plan or any other plan
included in a Required Aggregation Group of which the Plan is a part is top
heavy in accordance with Code Section 416.
2.40 "Qualified Election Period" shall mean the six-Plan-Year period
beginning with the Plan Year in which the Participant first becomes a Qualified
Participant.
2.41 "Qualified Participant" shall mean a Participant who has attained
age 55 and who has completed at least 10 years of participation in the Plan,
whether or not he remains an Employee.
2.42 "Required Aggregation Group" shall mean those plans that are
required to be aggregated as determined under this Section 2.42. In determining
a Required Aggregation Group hereunder, each plan of the Affiliated Employers in
which a Key Employee is a participant and each other plan of the Affiliated
Employers which enables any plan in which a Key Employee participates to meet
requirements of Code Section 401(a)(4) or 410 will be required to be aggregated.
2.43 "SEPCO" shall mean Savannah Electric and Power Company.
2.44 "SEPCO ESOP" shall mean the Employee Stock Ownership Plan of
Savannah Electric and Power Company.
<PAGE>
2.45 "Super-Top-Heavy Group" shall mean an Aggregation Group that would
be a Top-Heavy Group if 90% were substituted for 60% in Section 2.47.
2.46 "Surviving Spouse" shall mean the person to whom the Participant
is married on the date of his death, if such spouse is then living, provided
that the Participant and such spouse shall have been married throughout the one
(1) year period ending on the date of the Participant's death.
2.47 "Top-Heavy Group" shall mean an Aggregation Group in which, as of
the Determination Date, the sum of:
(a) the Present Value of Accrued Retirement Income of Key
Employees under all defined benefit plans included in that group, and
(b) the Aggregate Accounts of Key Employees under all defined
contribution plans included in the group, exceeds 60% of a similar sum
determined for all employees.
2.48 "Trust or Trust Fund" shall mean the trust established pursuant to
the Trust Agreement.
2.49 "Trust Agreement" shall mean the trust agreement between the
Company and the Trustee, as described in Article X.
2.50 "Trustee" shall mean the person or corporation designated as
trustee under the Trust Agreement, including any successor or successors.
2.51 "Valuation Date" shall mean each business day of the New York
Stock Exchange.
2.52 "Year of Service" shall mean a twelve-month period of
employment as an Employee, including any fractions thereof. Calculation of the
twelve-month periods shall commence with the Employee's first day of employment,
which is the date on which an Employee first performs an Hour of Service, and
shall terminate on his Break-in-Service Date. Thereafter, if he has more than
one period of employment as an Employee, his Years of Service for any subsequent
period shall commence with the Employee's reemployment date, which is the first
date following a Break-in-Service Date on which the Employee performs an Hour of
Service, and shall terminate on his next Break-in-Service Date. An Employee who
has a Break-in-Service Date and resumes employment with the Affiliated Employers
within twelve months of his Break-in-Service Date shall receive a fractional
Year of Service for the period of such cessation of employment.
For purposes of determining an Employee's eligibility to participate,
the following years of service shall also be treated as Years of Service:
(a) In respect of an Employee of an Employing Company who
transfers to an Employing Company from Southern Energy Resources, Inc.
following its adoption of a defined contribution plan under Section
401(a) of the Code, his credited years of service under such plan as of
his date of transfer.
<PAGE>
(b) In respect of an Employee of an Employing Company who
transfers to an Employing Company from SEPCO on or before December 31,
1992, his credited years of service under the SEPCO ESOP for actual
service while employed at SEPCO as of his date of transfer.
Notwithstanding anything in this Section 2.52 to the contrary, an
Employee shall not receive credit for more than one Year of Service with respect
to any twelve-consecutive-month period.
<PAGE>
ARTICLE III
PARTICIPATION
3.1 Eligibility Requirements. Each Eligible Employee shall become a
Participant on the later of January 1, 1997 or the Enrollment Date next
following the date on which the Eligible Employee completes a Year of Service.
3.2 Duration of Participation. Once an Eligible Employee becomes a
Participant in the Plan, he shall remain an active Participant during each Plan
Year in which he is an Eligible Employee as of the last day of such Plan Year;
provided, however, that an Eligible Employee whose employment terminates during
a Plan Year by reason of death, retirement pursuant to his Affiliated Employer's
pension plan, or total and permanent disability, as determined by the Social
Security Administration, shall not cease to be an active Participant until the
first day of the Plan Year next following the date such termination of
employment occurs. In addition, a Participant in the Plan shall remain an active
Participant during periods of authorized leaves of absence granted by an
Employing Company under rules uniformly applicable to all persons similarly
situated, during periods of sickness, disability leave, jury or military duty,
or vacation or holiday leave. If the Employee does not return to work within the
period of his authorized leave of absence (not including sickness or disability
leave) or within the period provided by law in respect of absence for military
duty, he shall cease to be an active Participant in the Plan as of the first day
next following the date his authorized leave of absence or military duty is
terminated.
3.3 Participation upon Reemployment. If an Employee terminates his
employment with an Affiliated Employer and is subsequently reemployed as an
Eligible Employee, the following rules shall apply in determining his
eligibility to participate:
(a) If the reemployed Eligible Employee had not completed the
Year of Service requirement of Section 3.1 prior to his termination of
employment and is reemployed following a One-Year Break in Service, he
shall not receive credit for fractional periods of service completed
prior to the One-Year Break in Service until he has completed a Year of
Service after his return. A reemployed Employee who had not completed
the Year of Service requirement and who is reemployed within 12 months
of his Break-in-Service Date shall receive service credit for the
period in which he performed no services in accordance with Section
2.52.
(b) If the reemployed Eligible Employee had fulfilled the
eligibility requirements of Section 3.1 prior to his termination of
employment and is reemployed as an Eligible Employee, whether before or
after he incurs a One-Year Break in Service, he shall again become a
Participant in the Plan as of the date of his reemployment.
3.4 No Restoration of Previously Distributed Benefits. A Participant
who had terminated his employment with the Affiliated Employers and who has
received a distribution of the amount credited to his Account pursuant to
Section 8.6 shall not be entitled to restore the amount of such distribution to
his Account if he is reemployed and again becomes a Participant in the Plan.
3.5 Special Rule for Scott Paper Company Energy Complex Employees. An
Eligible Employee who was an employee of Scott Paper Company Energy Complex on
December 16, 1994, and who became an Employee of an Employing Company effective
December 17, 1994, shall be credited with a Year of Service as of December 31,
1994, and shall become a Participant on January 1, 1995.
3.6 Former Commonwealth Edison of Indiana Employees. Effective January
1, 1998, notwithstanding any other provision of the Plan to the contrary, with
respect to a former employee of Commonwealth Edison of Indiana ("ComEd") who was
employed by Southern Energy Resources, Inc. on or before December 31, 1997 and
is set forth on a schedule of employees acknowledged by the Committee shall be
credited with a Year of Service as of December 31, 1997, and shall become a
Participant on January 1, 1998. In addition, any former employee of ComEd who
becomes employed by Southern Energy Resources, Inc. on or after January 1, 1998
but prior to April 1, 1998 (hereafter "Date of Employment") and is set forth on
the schedule of employees acknowledged by the Committee shall be credited with a
Year of Service as of the day immediately preceding such employee's Date of
Employment and shall become a Participant on the Enrollment Date coincident with
or next following such employee's Date of Employment.
3.7 Military Leave. Notwithstanding any provision of the Plan to the
contrary, contributions, benefits and service credit with respect to qualified
military service will be provided in accordance with Section 414(u) of the Code.
<PAGE>
ARTICLE IV
EMPLOYING COMPANY CONTRIBUTION
4.1 Amount of Contribution. An Employing Company may contribute to the
Plan, in respect of each Plan Year, cash or Common Stock in an amount (or under
such formula) as the Company, in its sole and absolute discretion, shall
determine. If Common Stock is contributed to the Plan, the number of shares
contributed shall be determined by the market value of such Common Stock, as
determined by the Company.
4.2 Time of Payment. The Employing Company shall transfer the amount of
cash or Common Stock described in Section 4.1 to the Plan on any date or dates
consistent with the law, which the Employing Company may select, provided that
the contributions for a Plan Year shall be transferred not later than the time
(including extensions) for filing the consolidated federal income tax return for
such Plan Year.
4.3 Purchases of Common Stock. If a contribution to the Plan under
Section 4.1 is made in cash, the Trustee shall use such contribution to purchase
Common Stock; provided, however, that the Plan may retain a cash reserve in an
amount which does not exceed the value of fractional shares and declared cash
dividends allocable to those Participants entitled to receive an immediate
distribution of their Accounts at the time of the contribution of the cash. If
Common Stock is purchased from The Southern Company, the price paid therefor by
the Trustee shall be the market value of such Common Stock, as determined by the
Company.
4.4 Restrictions on Common Stock. No Common Stock held by the Plan may
be used to satisfy a loan made to the Plan, nor may any Common Stock held by the
Plan be used as collateral for a loan made to the Plan.
4.5 Exclusive Benefit of Employees. 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, including former
Employees, who are Participants under the Plan, and their Beneficiaries, and
shall be applied to provide benefits under the Plan and to pay expenses of
administration of the Plan and the 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 4.5:
(a) If any contribution under the Plan is conditioned on
initial qualification of the Plan under Section 401(a) of the Code and
if the Plan does not so qualify, the Trustee shall, upon written
request of the Employing Company, return to the Employing Company the
amount of such contribution (increased by earnings attributable thereto
and reduced by losses attributable thereto) within one calendar year
after the date that qualification of the Plan is denied; provided that
the application for the determination is made by the time prescribed by
law for filing the Employing Company's return for the taxable year in
which the Plan is adopted or such later date as the Secretary of the
Treasury may prescribe.
(b) If a contribution is conditioned upon the deductibility of
the contribution under Section 404 of the Code, then to the extent the
deduction is disallowed the Trustee shall, upon written request of the
Employing Company, return the contribution (to the extent disallowed)
to the Employing Company within one year after the date the deduction
is disallowed.
(c) If a contribution or any portion thereof is made by the
Employing Company by a mistake of fact, the Trustee shall, upon written
request of the Employing Company, return the contribution or such
portion to the Employing Company within one year after the date of
payment to the Trustee.
The amount which may be returned to the Employing Company under this
Section 4.5, 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
disallowance of the deduction. Earnings attributable to the excess contribution
shall not be returned to the Employing Company, but losses attributable thereto
shall reduce the amount to be so returned. If the withdrawal of the amount
attributable to the mistaken contribution would cause the balance of the Account
of any Participant to be reduced to less than the balance which would have been
in the Account had the mistaken amount not been contributed, then the amount to
be returned to the Employing Company shall be limited so as to avoid such
reduction.
<PAGE>
ARTICLE V
PARTICIPANT CONTRIBUTION
5.1 Participant Contributions Not Allowed. Participant contributions
are neither required nor permitted under the Plan. Notwithstanding the
foregoing, to the extent that Participant contributions were permitted under the
terms of the Plan in effect prior to January 1, 1983, such contributions and/or
pledges of contributions attributable to Plan Years beginning before January 1,
1983, may be made in accordance with the applicable provisions of the terms of
the Plan as in effect prior to January 1, 1983.
<PAGE>
ARTICLE VI
ACCOUNTS OF PARTICIPANTS
6.1 Separate Accounts. The Committee shall establish and maintain a
separate Account for each Participant, with separate subaccounts as the
Committee shall direct in its sole discretion. The subaccounts maintained in
accordance with this Section 6.1 shall be for bookkeeping purposes only.
Subaccounts, to the extent they were created under the Plan prior to January 1,
1983, shall be maintained, if necessary.
The Committee shall also establish separate subaccounts for each
Participant, as the Committee shall direct, as is necessary to reflect a
Participant's interest in the Plan resulting from the transfer of his accounts
from the SEPCO ESOP due to the merger of such plan into this Plan effective as
of January 1, 1993. Any such subaccounts so established shall be subject to the
terms and conditions of this Plan.
6.2 Allocation of Common Stock. All shares of Common Stock contributed
or purchased with cash contributions for such Plan Year and all fractional
rights to such shares shall be allocated as of the close of such Plan Year by
the Committee to the Account of each Participant who was a Participant or deemed
to be a Participant pursuant to Section 3.2 on the last day of such Plan Year.
Such allocation shall be made in accordance with the ratio to which each
eligible Participant's Compensation for such Plan Year bears to the total
Compensation of all Participants eligible to share in the contribution for such
Plan Year.
6.3 Section 415 Limitations
(a) Notwithstanding any provision of the Plan to the contrary,
the total Annual Additions allocated to the Account (and the accounts
under all defined contribution plans maintained by an Affiliated
Employer) of any Participant for any Limitation Year in accordance with
Code Section 415 and the regulations thereunder, which are incorporated
herein by this reference, shall not exceed the lesser of the following
amounts:
(1) twenty-five percent (25%) of the
Participant's compensation in the Limitation
Year; or
(2) $30,000 (as adjusted pursuant to Code
Section 415(d)(1)(C)).
(b) If a Participant is also a participant in any Affiliated
Employer's defined benefit plan, then in addition to the limitations in
(a) above, the sum of the Defined Benefit Plan Fraction and Defined
Contribution Plan Fraction shall not exceed 1.0 for any Limitation
Year.
<PAGE>
(c) For purposes of this Section 6.3, wherever the term
"compensation" is used, such term shall mean compensation as defined in
Code Section 414(c)(3) and any rulings or regulations thereunder.
(d) The Annual Addition for any Plan Year beginning before
January 1, 1987 shall not be recomputed to treat all employee
contributions as an Annual Addition.
(e) If the Plan satisfied the applicable requirements of
Section 415 of the Code as in effect for all Plan Years beginning
before January 1, 1987, an amount shall be subtracted from the
numerator of the Defined Contribution Plan Fraction (not exceeding the
numerator), as prescribed by the Secretary of the Treasury, so that the
sum of the Defined Benefit Plan Fraction and the Defined Contribution
Plan Fraction computed under Section 415(e)(1) of the Code (as revised
by this Section 6.3) does not exceed 1.0 for the Plan Year. In
addition, the Defined Contribution Plan Fraction for a Participant may
be determined by taking into account the special transition rule of
Code Section 415(e)(6).
(f) If the Participant was a participant in one or more
defined benefit plans maintained by the Affiliated Employers which were
in existence on July 1, 1982, the denominator of the Defined Benefit
Plan Fraction shall not be less than 1.25% of the sum of the annual
benefits under such plans which the Participant had accrued as of the
later of September 30, 1983 or the end of the last Limitation Year
beginning before January 1, 1983. The preceding sentence applies only
if the defined benefit plans individually, and in the aggregate satisfy
the requirements of Code Section 415 as in effect at the end of the
1982 Limitation Year.
6.4 Correction of Contributions in Excess of Section 415 Limits. If the
Annual Additions for a Participant exceed the limits of Section 6.3 as a result
of the allocation of forfeitures, if any, a reasonable error in estimating a
Participant's annual compensation for purposes of the Plan, a reasonable error
in determining the amount of elective deferrals (within the meaning of Section
402(g)(3) of the Code) that may be made with respect to any individual, or under
other limited facts and circumstances that the Commissioner of the Treasury
finds justify the availability of the rules set forth in this Section 6.4, the
excess amounts shall not be deemed Annual Additions if they are corrected by
forfeiture of that portion, or all, of the Employing Company contributions that
were allocated to the Participant's Account, as is necessary to ensure
compliance with Section 6.3.
Any amounts forfeited under this Section 6.4 shall be held in a
suspense account and shall be applied, subject to Section 6.3, toward funding
the Employing Company contributions for the next succeeding Plan Year. Such
application shall be made prior to any Employing Company contributions that
would constitute Annual Additions. No income or investment gains and losses
<PAGE>
shall be allocated to the suspense account provided for under this Section 6.4.
If any amount remains in a suspense account provided for under this Section 6.4
upon termination of this Plan, such amount will revert to the Employing
Companies notwithstanding any other provision of this Plan.
6.5 Combination of Plans. Notwithstanding any provisions contained
herein to the contrary, in the event that a Participant participates in a
defined contribution plan or defined benefit plan required to be aggregated with
this Plan under Code Section 415(g) and the sum of the Defined Contribution Plan
Fraction and Defined Benefit Plan Fraction with respect to a Participant exceeds
the limitations contained in Section 6.3(b), corrective adjustments (a) for an
Employee shall not be made under this Plan until the corrective adjustments have
been made under such other defined benefit plan and defined contribution plan
but (b) for a Participant whose distribution of benefit payments has commenced
under such defined benefit plan, shall be made under this Plan and then, to the
extent necessary, under The Southern Company Performance Sharing Plan ("PSP")
and then, to the extent necessary, under such other defined benefit plan and
then, to the extent necessary, under The Southern Company Employee Savings Plan
("ESP"). If an Employee participates in more than one defined contribution plan
maintained by an Affiliated Employer and his Annual Additions exceed the
limitations of Section 6.3(a), corrective adjustments shall first be made under
the ESP and then, to the extent necessary, under the PSP and then, to the extent
necessary, under this Plan.
6.6 Allocation of Dividends and other Distributions.
(a) Any dividends or other distributions of cash on the Common
Stock shall be allocated to a Participant's Account on the basis of
Account balances. The amount of any cash dividends on Common Stock so
allocated may be retained in the Participants' Accounts or paid to such
Participants pursuant to (b) below. Any cash dividends retained in the
Accounts of Participants and any other distributions of cash on the
Common Stock so allocated shall be reinvested by the Trustee in Common
Stock which shall be credited to each such Participant's Account. In
reinvesting such dividends or other distributions of cash on the Common
Stock, the Trustee may purchase Common Stock under The Southern
Company's Dividend Reinvestment and Stock Purchase Plan, from The
Southern Company, or on the open market.
If a dividend or other distribution on the Common Stock
allocated to a Participant's Account is of additional shares of Common
Stock, the Trustee shall credit such shares to the Participant's
Account. If a dividend or other distribution on the Common Stock
allocated to a Participant's Account is of property other than cash or
additional shares of Common Stock, the Trustee shall sell such property
for an amount not less than its fair market value as determined by the
Trustee and reinvest the proceeds of such sale in shares of Common
Stock pursuant to this Section 6.6. All allocations under this
subsection shall be made on the basis of the subaccounts created in
accordance with Section 6.1.
<PAGE>
(b) Any cash dividends received by the Trustee on Common Stock
allocated to the Accounts of Participants (or Beneficiaries) may be
retained in the Participants' Accounts as provided in (a) above or may
be paid to such Participants at the sole discretion of the Committee;
provided that any current payment in cash must be made within two years
of the date such dividends are received by the Trustee, or, if the
Employing Company desires a tax deduction for the amount of such
dividends pursuant to Code Section 404(k), such cash dividends shall be
distributed in cash not later than 90 days after the close of the Plan
Year in which such dividends were paid.
(c) Notwithstanding (b) above, if during any Plan Year the
Committee shall determine not to pay cash dividends received by the
Trustee on Common Stock allocated to Accounts of Participants to such
Participants, a Participant may elect to have such cash dividends (or
other distributions) paid to him currently by the Trustee. Such an
election shall be made in such time and manner as may be prescribed by
the Committee and shall be effective only with respect to dividends
which are payable by The Southern Company to the Trustee in the Plan
Years which begin after the Plan Year in which the election is made. An
election shall remain in full force until revoked by a Participant. Any
revocation shall be made in accordance with procedures established by
the Committee and shall become effective only with respect to dividends
payable by The Southern Company to the Trustee in Plan Years which
begin after the Plan Year in which the revocation is made.
6.7 Valuations. Each Participant shall be furnished a statement of his
Account no less frequently than annually and upon any distribution, which
statement shall reflect the balances of the subaccounts referred to in Section
6.1. Each Participant's Account shall be adjusted as of each Valuation Date to
reflect any increase or decrease in the number of shares of Common Stock
credited to his Account and to reflect the effect of income collected, realized
and unrealized gains and losses, and expenses attributable thereto.
6.8 Voting Company Stock. Before each annual or special meeting of
shareholders of The Southern Company, there shall be sent to each Participant a
copy of the proxy soliciting material for the meeting, together with a form
requesting instructions to the Trustee on how to vote the shares of Common Stock
credited to such Participant's Account as of the record date of the Common
Stock. Fractional shares shall be combined and voted by the Trustee to the
extent possible to reflect the instructions of Participants credited with such
shares. If a Participant does not provide the Trustee or its designated agent
with timely voting instructions for the Trustee, the Pension Fund Investment
Review Committee of The Southern Company System may direct the Trustee how to
vote such Participant's shares. If the Pension Fund Investment Review Committee
of The Southern Company System does not provide the Trustee or its designated
agent with timely voting instructions, the Trustee, if required to do so by
applicable law, may vote such Participant's shares. The Pension Fund Investment
Review Committee of The Southern Company System may direct the Trustee with
respect to voting unallocated shares of Common Stock, if any. If the Pension
Fund Investment Review Committee of The Southern Company System does not provide
the Trustee or its designated agent with timely voting instructions, the
Trustee, if required to do so by applicable law, may vote such unallocated
shares.
6.9 Correction of Prior Incorrect Allocations and Distributions.
Notwithstanding any provisions contained herein to the contrary, in the event
that, as of any Valuation Date, adjustments are required in any Participants'
Accounts to correct any incorrect allocation of contributions or investment
earnings or losses, or such other discrepancies in Account balances that may
have occurred previously, the Employing Companies may make additional
contributions to the Plan to be applied to correct such incorrect allocations or
discrepancies. The additional contributions shall be allocated by the Committee
to adjust such Participants' Accounts to the value which would have existed on
said Valuation Date had there been no prior incorrect allocation or
discrepancies. The Committee shall also be authorized to take such other actions
as it deems necessary to correct prior incorrect allocations under the Plan or
discrepancies in the Accounts of the Participants.
<PAGE>
ARTICLE VII
AUTHORIZED WITHDRAWALS
7.1 In General. Except as provided in this Article VII, shares of
Common Stock allocated to the Account of a Participant may be distributed to him
only in the event he ceases to be an Employee, whether by reason of retirement,
total and permanent disability, as determined by the Social Security
Administration, death, or other termination of employment. Distributions upon
termination of employment for any of the above reasons, shall be made in
accordance with Article VIII.
7.2 Distributions in Lieu of Diversification of Investments Pursuant to
Code Section 401(a)(28)(B).
(a) Each Qualified Participant shall be permitted to elect
within 90 days after the last day of each Plan Year during the
Participant's Qualified Election Period to receive a cash distribution
from the Plan not to exceed 25% of the value of the Participant's
Account balance attributable to Common Stock which was acquired by the
Plan after December 31, 1986. Within 90 days after the close of the
last Plan Year in the Participant's Qualified Election Period, a
Qualified Participant may elect to receive a cash distribution from the
Plan not to exceed 50% of the value of such Account balance.
(b) The Participant's election shall be made in accordance
with the procedures established by the Committee and shall be effective
no later than 180 days after the close of the Plan Year to which the
election applies. The Plan shall distribute (notwithstanding Section
409(d) of the Code) the portion of the Participant's Account that is
covered by the election within 90 days after the last day of the period
during which the election can be made. This Section 7.2 shall apply
notwithstanding any other provision of the Plan other than such
provisions as may require the consent of the Participant to a
distribution with a present value in excess of $3,500 ($5,000 effective
January 1, 1998). If the Participant does not consent to a distribution
with a present value in excess of $3,500 ($5,000 effective January 1,
1998) under this Section 7.2, such amount shall be retained in the Plan
and the Plan shall be deemed to have satisfied the diversification
requirements of Section 401(a)(28)(B) of the Code.
7.3 In-Service Withdrawals. Subject to the requirements of Section
8.14, a Participant who is employed by an Affiliated Employer may at any time
elect to have distributed to him the cash value of a specific number of whole
shares of Common Stock, provided such Common Stock shall have been credited to
the Participant's Account for a period of at least 84 months. Such shares of
Common Stock shall be distributed not prior to the first day of the 85th month
following the
<PAGE>
month in which any full shares of Common Stock shall have been credited to his
Account. The election shall be made in accordance with the procedures
established by the Committee.
Any such withdrawal shall be subject to the following requirements:
(a) a withdrawal must be for a specific number of whole shares
or the value of a specific number of whole shares of Common Stock;
(b) the specific number of shares requested must equal at
least the lesser of 20 shares or the total number of whole shares
available for withdrawal from the Participant's Account; and
(c) a withdrawal shall be made in the form of cash, provided
that with respect to any distribution which is attributable to full
shares of Common Stock, the Participant shall have the right to demand
that such portion of the distribution be made in the form of Common
Stock.
<PAGE>
ARTICLE VIII
DISTRIBUTIONS TO PARTICIPANTS
8.1 Vesting. All amounts credited to the Account of a Participant under
the Plan shall at all times be fully vested and nonforfeitable.
8.2 Distribution upon Retirement.
(a) If a Participant retires pursuant to his Affiliated
Employer's pension plan, the entire balance credited to his Account
shall be payable to him in the manner and time for commencement of
benefits requested by the Participant pursuant to Sections 8.7 and 8.8.
(b) Notwithstanding a Participant's election to defer receipt
of benefits under (a) above, the Committee shall direct payment in a
lump sum to such Participant if the balance of his Account
(attributable to Employing Company and Employee contributions) does not
exceed $3,500 ($5,000 effective January 1, 1998) in accordance with the
requirements of Code Section 411(a)(11). The Committee shall not
cash-out any Participant whose benefits exceed $3,500 ($5,000 effective
January 1, 1998) without the written consent of the Participant.
8.3 Distribution upon Death. If a Participant's employment with the
Affiliated Employers is terminated by reason of death, the entire balance
credited to the Participant's Account shall be distributed as soon as
practicable to the Participant's Beneficiary or Beneficiaries in a lump sum
pursuant to Section 8.9(b).
8.4 Designation of Beneficiary in the Event of Death. A Participant may
designate a Beneficiary or Beneficiaries (who may be designated contingently) to
receive all or part of the amount credited to his Account in case of his death
before his receipt of all of his benefits under the Plan, provided that the
Beneficiary of a married Participant shall be the Participant's Surviving
Spouse, unless such Surviving Spouse shall consent in a writing witnessed by a
notary public, which writing acknowledges the effect of the Participant's
designation of a Beneficiary other than such Surviving Spouse. However, if such
Participant establishes to the satisfaction of the Committee that such written
consent may not be obtained because the Surviving Spouse cannot be located or
because of such other circumstances as the Secretary of the Treasury may by
regulations prescribe, a designation by such Participant without the consent of
the Surviving Spouse shall be valid.
Any consent necessary under this Section 8.4 shall be valid and
effective only with respect to the Surviving Spouse who signs the consent or, in
the event of a deemed consent, only with respect to a designated Surviving
Spouse.
<PAGE>
A designation of Beneficiary may be revoked by the Participant without
the consent of any Beneficiary (or the Participant's Surviving Spouse) at any
time before the commencement of the distribution of benefits. A Beneficiary
designation or change or revocation of a Beneficiary designation shall be made
in accordance with the procedures established by the Committee.
If no designated Beneficiary shall be living at the death of the
Participant and/or such Participant's Beneficiary designation is not valid and
enforceable under applicable law or the procedures of the Committee, such
Participant's Beneficiary of Beneficiaries shall be the person or persons in the
first of the following classes of successive preference, if then living:
(a) the Participant's spouse on the date of his death,
(b) the Participant's children, equally,
(c) the Participant's parents, equally,
(d) the Participant's brothers and sisters, equally, or
(e) the Participant's executors or administrators.
Payment to such one or more persons shall completely discharge the Plan and the
Trustee with respect to the amount so paid.
8.5 Distribution upon Disability. If a Participant's employment with
the Affiliated Employers is terminated by reason of his total and permanent
disability, as determined by the Social Security Administration, such disabled
Participant shall be entitled to receive the full value of his Account
immediately following the date the Social Security Administration determines the
Participant is totally and permanently disabled, in a single lump sum payment.
The Participant or his legal representative shall request the time for
commencement of benefits pursuant to Section 8.8. Notwithstanding the foregoing,
effective July 1, 1995, the Committee shall direct payment in a single lump sum
to such Participant or his legal representative if the balance of the
Participant's Account does not exceed $3,500 ($5,000 effective January 1, 1998)
in accordance with the requirements of Code Section 411(a)(11).
8.6 Distribution upon Termination of Employment.
(a) If a Participant's employment with the Affiliated
Employers is terminated for any reason other than in accordance with
Sections 8.2, 8.3, or 8.5, he shall become entitled to payment of the
full value of his Account as hereinafter provided.
(b) Upon termination of employment with the Affiliated
Employers, the Participant may request a distribution in a single lump
sum of the full value of his Account.
<PAGE>
Alternatively, such Participant may elect to defer receipt of the full value of
his Account until a time not later than the time specified in Section
8.8 below. Any deferred distribution shall commence as soon as
practicable after the Valuation Date selected by the Participant.
(c) Notwithstanding a Participant's election to defer receipt
of benefits under (b) above, the Committee shall direct payment in a
lump sum to such Participant if the balance of his Account
(attributable to Employing Company and Employee contributions) as of
the last Valuation Date in the month in which such Participant
terminates employment with the Affiliated Employers does not exceed
$3,500 ($5,000 effective January 1, 1998) in accordance with Code
Section 411(a)(11). The Committee shall not cash-out any Participant
whose benefits exceed $3,500 ($5,000 effective January 1, 1998) without
the written consent of the Participant.
8.7 Property Distributed/Method of Payment.
(a) A Participant separating from service in accordance with
Section 8.2 shall elect the manner in which the Common Stock credited
to his Account is distributed and a time for commencement of the
distribution as provided hereinafter. The election by the Participant
shall be made in accordance with the procedures established by the
Committee. The Participant shall select one of the following
alternative forms of distribution of his Account:
(1) A lump sum distribution; or
(2) Annual installments for a period not to exceed
five years or, in the case of a Participant whose Account
exceeds $500,000, five years plus one additional year (but not
more than five additional years) for each $100,000 or fraction
thereof by which such Account exceeds $500,000. The dollar
amounts contained in this paragraph (2) shall be adjusted by
the Secretary of the Treasury pursuant to Section 409(o)(2) of
the Code.
(b) All lump sum distributions under the Plan shall be made in
cash, provided that a Participant shall have the right to request that
such distribution be made in full shares of Common Stock, except that
fractional shares shall be converted to and paid in cash, and declared
but unpaid cash dividends shall be paid in cash. If any additional
shares of Common Stock are subsequently allocated to the Participant's
Account, such shares shall be distributed to the Participant or his
Beneficiary within 60 days following the date on which such additional
allocation is made.
(c) All installment distributions under this Section 8.7 shall
be made in cash, unless the Participant shall request that such
distribution be made in full shares of Common Stock and cash for any
fractional shares and declared but unpaid cash dividends. If a
<PAGE>
Participant elects installment payments, any additional shares of Common Stock
allocated to his Account shall be added to the undistributed balance of
such Account and be distributed thereafter in the manner the
Participant has elected.
8.8 Commencement of Benefits.
(a) Unless the Participant elects to have payment begin at a
later date, payment of benefits to the Participant shall begin at the
Participant's election, in accordance with the procedures established
by the Committee, not later than 60 days after the last day of the Plan
Year in which the latest of the following occurs:
(1) the Participant attains the earlier of age
65 or his Normal Retirement Date;
(2) the Participant's 10th anniversary of
participation under the Plan; or
(3) the Participant's separation from service.
(b) In no event shall the distribution of amounts in a
Participant's Account commence later than the April 1 of the calendar
year following the later of the calendar year in which the Participant
attains age 70 1/2 or terminates employment with the Affiliated
Employers, in accordance with regulations prescribed by the Secretary
of the Treasury. The foregoing requirements in this Section 8.8(b)
shall not be applied to restrict the implementation of any written
designation given to the Committee by a Participant prior to January 1,
1984, with regard to the method of distribution of his Account, if such
method was permissible under the Plan and Code prior to January 1,
1984. Notwithstanding the foregoing, the payment of benefits to a
Participant who is a five percent (5%) owner of The Southern Company or
an Affiliated Employer (as determined pursuant to Code Section 416)
with respect to the Plan Year ending in the calendar year in which the
Participant attains age 70 1/2 shall begin not later than April 1, of
the calendar year following the calendar year in which the Participant
attains age 70 1/2 regardless of the Participant's termination from
employment.
Any distribution made under this Plan shall be made in
accordance with the minimum distribution requirements of Code Section
401(a)(9), including the incidental death benefits requirements under
Code Section 401(a)(9)(G) and the Treasury Regulations thereunder.
8.9 Distribution upon Death.
(a) If the Participant dies before his entire nonforfeitable
interest has been distributed to him, the remaining portion of such
interest shall be distributed in a single lump sum to his Beneficiary.
(b) If the Participant dies before the distribution of his
nonforfeitable interest has begun, the entire interest shall be
distributed in a single lump sum to his Beneficiary within 60 days
following the Company's receipt of notification of the death of such
Participant.
8.10 Adjustments for Deferred Accounts or Installment Payments. If the
distribution of benefits to a Participant will either be paid in installments or
the Participant elects to postpone distribution of his benefits payable in a
lump sum, the Participant's Account shall remain in the Trust Fund and shall
continue to participate in the valuations as provided in Sections 6.6 and 6.7
until fully distributed.
8.11 Transfers between Employing Companies. A transfer by a Participant
from one Employing Company to another Employing Company shall not affect his
participation in the Plan. A transfer by a Participant from an Employing Company
to an Affiliated Employer that is not an Employing Company shall not be deemed
to be a termination of employment with an Employing Company.
8.12 Distribution to Alternate Payees. If the Participant's Account
under the Plan shall become subject to any domestic relations order which (a) is
a qualified domestic relations order satisfying the requirements of Section
414(p) of the Code and (b) requires the immediate distribution in a single lump
sum of the entire portion of the Participant's Account required to be segregated
for the benefit of an alternate payee, then the entire interest of such
alternate payee shall be distributed in a single lump sum within 90 days
following the Employing Company's notification to the Participant and the
alternate payee that the domestic relations order is qualified under Section
414(p) of the Code, or as soon as practicable thereafter. Such distribution to
an alternate payee shall be made even if the Participant has not separated from
the service of the Affiliated Employers. Any other distribution pursuant to a
qualified domestic relations order shall not be made earlier than the
Participant's termination of service or his attainment of age 50, if earlier,
and shall not commence later than the date the Participant's (or his
Beneficiary's) benefit payments otherwise commence. Such distribution to an
alternate payee shall be made only in a manner permitted under Section 8.7 of
the Plan and only to the extent the Participant would be eligible for such
distribution option.
8.13 Requirement for Direct Rollovers. 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 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.
8.14.....Consent and Notice Requirements. If the value of the vested
portion of a Participant's Account derived from Employing Company and Employee
contributions exceeds $3,500 ($5,000 effective January 1, 1998) determined in
accordance with the requirements of Code Section 411(a)(11), the Participant
must consent to any distribution of such vested account balance prior to his
Normal Retirement Date. The consent of the Participant shall be obtained within
the ninety-day period ending on the first day of the first period for which an
amount is payable as an annuity or in any other form under this Plan.
The Committee shall notify the Participant of the right to defer any
distribution until the Participant's Account balance is no longer immediately
distributable. Such notification shall include a general description of the
material features and an explanation of the relative values of the operational
forms of benefit available under the Plan in a manner that would satisfy the
notice requirements of Section 417(a)(3) of the Code; such notification shall be
provided no less than 30 days and no more than 90 days prior to the annuity
starting date.
Distributions may commence less than 30 days after the notice required
under Section 1.411(a)-11(c) of the Treasury Regulations is given, provided
that:
(a) the Committee informs the Participant that the Participant
has a right to a period of at least 30 days after receiving the notice
to consider the decision of whether or not to elect a distribution and
a particular distribution option, and
(b) the Participant, after receiving the notice, affirmatively
elects a distribution.
<PAGE>
ARTICLE IX
ADMINISTRATION
9.1......Membership of Committee. The Plan shall be administered by the
Committee, which shall consist of the individuals then serving in the positions
of Director, System Compensation and Benefits of The Southern Company;
Vice-President, Human Resources of The Southern Company; and Comptroller of The
Southern Company or any other position or positions that succeed to the duties
of the foregoing positions. The Committee shall be chaired by the
Vice-President, Human Resources of The Southern Company and may select a
Secretary (who may, but need not, be a member of the Committee) to keep its
records or to assist it in the discharge of its duties.
9.2......Acceptance and Resignation. Any person appointed to be a
member of the Committee shall signify his acceptance in writing to the Chairman
of the Committee. Any member of the Committee may resign by delivering his
written resignation to the Committee and such resignation shall become effective
upon delivery or upon any later date specified therein.
9.3......Transaction of Business. A majority of the members of the
Committee at the time in office shall constitute a quorum for the transaction of
business at any meeting. Any determination or action of the Committee may be
made or taken by a majority of the members present at any meeting thereof or
without a meeting by a resolution or written memorandum concurred in by a
majority of the members then in office.
9.4......Responsibilities in General. The Committee shall administer
the Plan and shall have the discretionary authority, power, and the duty to take
all actions and to make all decisions necessary or proper to carry out the Plan
and to control and manage the operation and administration of the Plan. The
Committee shall have the discretion to interpret the Plan, including any
ambiguities herein, and to determine the eligibility for benefits under the
Plan. The determination of the Committee as to any question involving the
general administration and interpretation of the Plan shall be final,
conclusive, and binding on all persons, except as otherwise provided herein or
by law, and may be relied upon by the Company, all Employing Companies, the
Trustee, Participants, and their Beneficiaries. Any discretionary actions to be
taken under the Plan by the Committee with respect to Employees and Participants
and with respect to benefits shall be uniform in their nature and applicable to
all persons similarly situated.
9.5......Committee as Named Fiduciary. For the purpose of compliance
with the provisions of ERISA, the Committee shall be deemed the administrator of
the Plan, as the term "administrator" is defined in ERISA, and the Committee
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 Committee may, in its
discretion, allocate its responsibilities under the Plan among its members and
may, in its discretion, designate (in writing or otherwise) persons other than
members of the Committee to carry out such responsibilities of the Committee
under the Plan as it may see fit.
9.6......Rules for Plan Administration. The Committee may make and
enforce rules and regulations for the administration of the Plan consistent with
the provisions thereof and may prescribe the use of such forms or procedures as
it shall deem appropriate for the administration of the Plan.
9.7......Employment of Agents. The Committee may employ independent
qualified public accountants, as such term is defined in ERISA, who may be
accountants to The Southern Company and any Affiliated Employer, legal counsel
who may be counsel to The Southern Company and any Affiliated Employer, other
specialists, and other persons as the Committee deems necessary or desirable in
connection with the administration of the Plan. The Committee and any person to
whom it may delegate any duty or power in connection with the administration of
the Plan, the Company 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 independent
qualified public accountant, counsel, or other specialist or other person
selected by the Committee, or in reliance upon any tables, evaluations,
certificates, opinions, or reports which shall be furnished by any of them or by
the Trustee.
9.8......Co-Fiduciaries. It is intended that, to the maximum extent
permitted by ERISA, each person who is a fiduciary (as that term is defined in
ERISA) with respect to the Plan shall be responsible for the proper exercise of
his own powers, duties, responsibilities, and obligations under the Plan and the
Trust, as shall each person designated by any fiduciary to carry out any
fiduciary responsibility with respect to the Plan or the Trust. 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.
9.9......General Records. The Committee shall maintain or cause to be
maintained separate Accounts (and any separate subaccounts) which accurately
reflect the interests of the Participants as provided for in Section 6.1, and
shall maintain or cause to be maintained all necessary books of account and
records with respect to the administration of the Plan. The Committee shall mail
or cause to be mailed to Participants reports to be furnished to Participants in
accordance with the Plan or as may be required by ERISA. Any notices, reports,
or statements to be given, furnished, made, or delivered to a Participant shall
be deemed duly given, furnished, made, or delivered when addressed to the
Participant and delivered to the Participant in person or mailed by ordinary
mail to his address last communicated to the Committee (or its delegate) or of
his Employing Company.
9.10.....Liability of the Committee. In administering the Plan, except
as may be prohibited by ERISA, neither the Committee nor any person to whom it
may delegate any duty or power in connection with administering the Plan shall
be liable for any action or failure to act except for its or his own gross
negligence or willful misconduct, nor for the payment of any amount under the
Plan, nor for any mistake of judgment made by him or on his behalf as a member
of the Committee; nor for any action, failure to act, or loss unless resulting
from his own gross negligence or willful misconduct, nor for the neglect,
omission, or wrongdoing of any other member of the Committee. No member of the
Committee shall be personally liable under any contract, agreement, bond, or
other instrument made or executed by him or on his behalf as a member of the
Committee.
9.11.....Reimbursement of Expenses and Compensation of Committee.
Members of the Committee shall be reimbursed by the Company for expenses they
may individually or collectively incur in the performance of their duties. Each
member of the Committee who is a full-time employee of the Company or of any
Employing Company shall serve without compensation for his services as such
member; each other member of the Committee shall receive such compensation, if
any, for his services as the Board of Directors may fix from time to time.
9.12.....Expenses of Plan and Trust Fund. The expenses of establishment
and administration of the Plan and the Trust Fund, including all fees of the
Trustee, auditors and counsel, shall be paid by the Company or the Employing
Companies. Notwithstanding the foregoing, to the extent provided in the Trust
Agreement, certain administrative expenses may be paid from the Trust Fund
either directly or through reimbursement of the Company or the Employing
Companies. Any expenses directly related to the investments of the Trust Fund,
such as stock transfer taxes, brokerage commissions, or other charges incurred
in the acquisition or disposition of such investments, shall be paid from the
Trust Fund and shall be deemed to be part of the cost of such securities or
deducted in computing the proceeds therefrom, as the case may be. Taxes, if any,
on any assets held or income received by the Trustee and transfer taxes on the
transfer of Common Stock from the Trustee to a Participant or his Beneficiary
shall be charged appropriately against the Accounts of Participants as the
Committee shall determine. Any expenses paid by the Company pursuant to Section
9.11 and this section shall be subject to reimbursement by other Employing
Companies of their proportionate shares of such expenses as determined by the
Committee.
9.13.....Responsibility for Funding Policy. The Pension Fund Investment
Review Committee of The Southern Company System shall have 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.
9.14.....Code Section 411(d)(6) Protected Benefits. Notwithstanding
anything to the contrary in this Plan, any provisions added to this Plan to
effectuate the merger of the SEPCO ESOP into this Plan shall not be interpreted
so as to decrease a Participant's accrued benefit except to the extent permitted
under Section 412(c)(8) of the Code, and such provisions shall not reduce or
eliminate Code Section 411(d)(6) protected benefits determined immediately prior
to January 1, 1993. The Committee shall disregard such provision in the Plan to
the extent that application of such would fail to satisfy this paragraph. If the
Committee disregards any portion of the Plan because it would eliminate a
protected benefit, the Committee shall maintain a schedule of any such impacted
early retirement option or other optional forms of benefit and the Plan must
continue such for the affected Participants.
9.15.....Management of Assets. The Committee shall not have
responsibility with respect to the control or management of the assets of the
Plan. The Trustee shall have the sole responsibility for the administration of
the assets of the Plan as provided in the Trust Agreement.
9.16.....Notice and Claims Procedure. Consistent with the requirements
of ERISA and the regulations thereunder of the Secretary of Labor from time to
time in effect, the Committee shall:
(a) provide adequate notice in writing to any Participant or
Beneficiary 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 Participant or Beneficiary, and
(b) afford a reasonable opportunity to any Participant or
Beneficiary whose claim for benefits has been denied for a full and
fair review of the decision denying the claim.
9.17.....Bonding. Unless Otherwise determined by the Board of Directors
or required by law, no member of the Committee shall be required to give any
bond or other security in any jurisdiction.
9.18.....Multiple Fiduciary Capacities. 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.
<PAGE>
ARTICLE X
THE TRUST FUND AND TRUSTEE
10.1.....Trustee. The Company has entered into a Trust Agreement with
the Trustee to hold the funds necessary to provide the benefits set forth in the
Plan. The Company may remove the Trustee or appoint a successor trustee at any
time upon 60 days notice in writing to the Trustee and the Committee. Any Trust
Agreement may be amended by the Company from time to time in accordance with its
terms. Any Trust Agreement shall provide, among other things, for a Trust Fund.
The Trust Fund shall be administered by the Trustee to receive contributions, to
hold, invest, and reinvest all property and funds of the Trust Fund, and to
distribute benefits to eligible Participants and Beneficiaries.
10.2.....Duties of the Trustee. The Trustee shall have sole
responsibility for the investment and safekeeping of the assets of the Trust
Fund and shall have no responsibility for the operation or administration of the
Plan, except as expressly provided herein.
10.3.....Diversion. At no time shall any part of the corpus or income
of the Trust Fund be used for or diverted to purposes other than for the
exclusive benefit of Participants or their Beneficiaries; provided, however,
that contributions may be returned to the Employing Company in accordance with
the provisions of Section 4.5.
<PAGE>
ARTICLE XI
AMENDMENT AND TERMINATION
11.1.....Amendment of the Plan. The Plan may be amended or modified by
the Board of Directors pursuant to its written resolutions at any time and from
time to time; provided, however, that no such amendment or modification shall
make it possible for any part of the corpus or income of the Trust Fund to be
used for or diverted to purposes other than for the exclusive benefit of
Participants or their Beneficiaries under the Plan, including such part as is
required to pay taxes and administration expenses of the Plan. The Plan may also
be amended or modified by the Committee (a) if such amendment or modification
does not involve a substantial increase in cost to any Employing Company, or (b)
as may be necessary, proper, or desirable in order to comply with laws or
regulations enacted or promulgated by any federal or state governmental
authority and to maintain the qualification of the Plan under Sections 401(a)
and 501(a) of the Code and the applicable provisions of ERISA.
Notwithstanding the foregoing, the formula in Section 6.2 of this Plan
under which shares of Common Stock are allocated to the Accounts of Plan
Participants shall not be amended more frequently than once every six months.
No amendment to the Plan shall have the effect of decreasing a
Participant's vested interest in his Account, determined without regard to such
amendment, as of the later of the date such amendment is adopted or the date it
becomes effective. In addition, if the vesting schedule of the Plan is amended,
any Participant who has completed at least three (3) Years of Service and whose
vested interest is at any time adversely affected by such amendment may elect to
have his vested interest determined without regard to such amendment during the
election period defined under Section 411(a)(10) of the Code. Finally, no
amendment shall eliminate an optional form of benefit in violation of Code
Section 411(d)(6).
11.2.....Termination of the Plan. It is the intention of the Employing
Companies to continue the Plan indefinitely. However, the Board of Directors
pursuant to its written resolutions may at any time and for any reason suspend
or terminate the Plan or suspend or discontinue the making of contributions to
the Plan by all Employing Companies. Any Employing Company may, by action of its
board of directors and approval by the Board of Directors suspend or terminate
the making of contributions to the Plan by such Employing Company.
In the event of termination of the Plan or partial termination or upon
complete discontinuance of contributions under the Plan by all Employing
Companies or by any one Employing Company, the amount to the credit of the
Account of each Participant whose Employing Company shall be affected by such
termination or discontinuance shall be determined as of the next Valuation Date
and shall be distributed to him or his Beneficiary thereafter at such time or
times and in such nondiscriminatory manner as is determined by the Committee.
Notwithstanding the above, so long as a Participant continues to be an Employee,
no distribution may be made of shares of Common Stock which have been allocated
to the Participant's Account for a period of less than 84 months commencing
after the month in which such allocation occurred, unless such distribution is
pursuant to Section 7.2 of the Plan or on account of termination of the Plan
after December 31, 1984.
11.3.....Merger or Consolidation of the Plan. The Plan shall not be
merged or consolidated with nor shall any assets or liabilities thereof be
transferred to any other plan unless each Participant of 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 prior to the merger,
consolidation, or transfer (if the Plan had then terminated).
<PAGE>
ARTICLE XII
TOP-HEAVY PROVISIONS
12.1.....Top-Heavy Plan Requirements. For any Plan Year the Plan shall
be determined to be a top-heavy plan, the Plan shall provide the minimum
allocation requirement of Section 12.3.
12.2.....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, the sum of the Aggregate Accounts of Key Employees
under this Plan exceeds 60% of the Aggregate Accounts of all Employees
entitled to participate in this Plan.
(b) 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, the sum of the Aggregate Accounts of Key Employees
under this Plan exceeds 90% of the Aggregate Accounts of all Employees
entitled to participate in this Plan.
(c) 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.
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 Aggregation Group is a Top-Heavy Group.
(d) For purposes of this Article XII, 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 any Employing Company
maintaining the Plan at any time during the five-year period ending on
the Determination Date, the Aggregate Account and/or Present Value of
Accrued Retirement Income shall be excluded in determining whether this
Plan is a top-heavy or super-top-heavy plan.
<PAGE>
(e) Only those plans of the Affiliated Employers 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.
12.3.....Minimum Allocation for Top-Heavy Plan Years.
(a) Notwithstanding anything herein to the contrary, for any
top-heavy Plan Year, the Employing Company contribution allocated to
the Account of each non-Key Employee shall be an amount not less than
the lesser of: (1) 3% of such Participant's compensation for that Plan
Year, or (2) a percentage of that Participant's compensation not to
exceed the percentage at which contributions are made under the Plan
for the Key Employee for whom such percentage is highest for that Plan
Year.
(b) For purposes of the minimum allocation of Section 12.3(a),
the percentage allocated to the Account of any Key Employee shall be
equal to the ratio of the Employing Company contributions allocated on
behalf of such Key Employee divided by the compensation of such Key
Employee for that Plan Year.
(c) For any top-heavy Plan Year, the minimum allocations of
Section 12.3(a) shall be allocated to the Accounts of all non-Key
Employees who are Participants and who are employed by the Affiliated
Employers on the last day of the Plan Year.
(d) Notwithstanding the foregoing, in any Plan Year in which a
non-Key Employee is a Participant in both this Plan and a defined
benefit plan, and both such plans are top-heavy plans, the Affiliated
Employers shall not be required to provide a non-Key Employee with both
the full separate minimum defined benefit and the full separate defined
contribution plan allocations. Therefore, if a non-Key Employee is
participating in a defined benefit plan maintained by the Affiliated
Employers and the minimum benefit under Code Section 416(c)(1) is
provided the non-Key Employee under such defined benefit plan, the
minimum allocation provided for above shall not be applicable, and no
minimum allocation shall be made on behalf of the non-Key Employee.
Alternatively, the Employing Company may satisfy the minimum allocation
requirement of Code Section 416(c)(2) 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).
12.4.....Adjustments to Maximum Benefit Limits 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
Affiliated Employers, 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 the Defined Benefit Plan Fraction and Defined
Contribution Plan Fraction, unless the extra minimum benefit is
provided pursuant to Section 12.4(b) below. Super-top-heavy plans and
plans in a Super-Top-Heavy Group 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 Plan Fraction and the Defined Contribution Plan
Fraction shall remain unchanged, provided the Account of each non-Key
Employee who is a Participant receives an extra allocation (in addition
to the minimum allocation in Section 12.3(a)) equal to not less than 1%
of such non-Key Employee's compensation.
(c) For purposes of this Section 12.4, if the sum of the
Defined Benefit Plan Fraction and the Defined Contribution Plan
Fraction shall exceed 1.0 in any Plan Year for any Participant in this
Plan, the Affiliated Employers shall eliminate any amounts in excess of
the limits set forth in Section 6.3(b), pursuant to Section 6.5 of the
Plan.
<PAGE>
ARTICLE XIII
GENERAL PROVISIONS
13.1.....Plan Not an Employment Contract. The Plan shall not be deemed
to constitute a contract between an Affiliated Employer and any Employee, nor
shall anything herein contained be deemed to give any Employee any right to be
retained in the employ of an Employing Company, or to interfere with the right
of an Employing Company to discharge any Employee at any time and to treat him
without regard to the effect which such treatment might have upon him as a
Participant.
13.2.....Non-Alienation or Assignment. Except as may be otherwise
permitted or required by law, no right or interest in the Plan of any
Participant or Beneficiary and no distribution or payment under the Plan to any
Participant or Beneficiary of a deceased Participant shall be subject in any
manner to anticipation, alienation, sale, transfer (except by death), assignment
(either at law or in equity), pledge, encumbrance, charge, attachment,
garnishment, levy, execution, or other legal or equitable process, whether
voluntary or involuntary, and any attempt to so anticipate, alienate, sell,
transfer, assign, pledge, encumber, charge, attach, garnish, levy, execute, or
enforce any other legal or equitable process against the same shall be void, nor
shall any such right, interest, distribution, or payment be in any way liable
for or subject to the debts, contracts, liabilities, engagements, or torts of
any person entitled to such right, interest, distribution, or payment. If any
Participant or Beneficiary is adjudicated bankrupt or purports to anticipate,
alienate, sell, transfer, assign, pledge, encumber, or charge any such right,
interest, distribution, or payment, voluntarily or involuntarily, or if any
action shall be taken which is in violation of the provisions of the immediately
preceding sentence, the Committee may hold or apply or cause to be held or
applied such right, interest, distribution, or payment or any part thereof to or
for the benefit of such Participant or Beneficiary in such manner as is in
accordance with applicable law. In addition, a Participant's benefits may be
offset pursuant to a judgment, order, or decree issued (or settlement agreement
entered into) on or after August 5, 1997, if and to the extent that such offset
is permissible or required under Code Section 401(a)(13).
Notwithstanding the above, the Committee and the 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 Committee shall establish procedures for (a)
notifying Participants 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.
13.3.....Payments to Minors and Others. If the Committee determines
that any person entitled to a distribution or payment from the Trust Fund under
the Plan is an infant or incompetent or is unable to care for his affairs by
reason of physical or mental disability, it may cause all distributions or
payments thereafter becoming due to such person to be made to any other person
for his benefit, without responsibility to follow the application of payments so
made. Payments made pursuant to this provision shall completely discharge the
Company, the Trustee, and the Committee with respect to the amounts so paid.
13.4.....Source of Benefits. The Trust Fund established under the Plan
shall be the sole source of the payments or distributions to be made in
accordance with the Plan. No persons shall have any rights under the Plan with
respect to the Trust Fund, or against the Trustee or any Employing Company,
except as specifically provided herein.
13.5.....Unclaimed Benefits. If the Committee is unable, within five
(5) years after any distribution becomes payable to a Participant or
Beneficiary, to make or direct payment to the person entitled thereto because
the identity or whereabouts of such person cannot be ascertained,
notwithstanding the mailing of due notice to such person at his last known
address as indicated by the records of either the Committee or his Employing
Company, then such benefit or distribution will be disposed of as follows:
(a) If the whereabouts of the Participant is unknown to the
Committee, distribution will be made to the Participant's Beneficiary
or Beneficiaries.
Payment to such one or more persons shall completely discharge
the Company, the Trustee, and the Committee with respect to the amounts
so paid.
(b) If none of the persons described in (a) above, can be
located, then the benefit payable under the Plan shall be forfeited and
shall be applied to reduce future Employing Company contributions.
Notwithstanding the foregoing sentence, such benefit shall be
reinstated if a claim is made by the Participant or Beneficiary for the
forfeited benefit.
13.6.....Governing Law. The provisions of the Plan and the Trust shall
be construed, administered, and enforced in accordance with the laws of the
State of Georgia, except to the extent such laws are preempted by the laws of
the United States.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this amendment and
restatement of the Plan to be executed this _____ day of _______________, 1998
to be effective as provided herein.
SOUTHERN COMPANY SERVICES, INC.:
By:
-------------------------------------------------
Its:
------------------------------------------------
ATTEST:
By:
Its:
<PAGE>
THE SOUTHERN COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
APPENDIX A
The Employing Companies as of July 1, 1998 are:
Alabama Power Company
Georgia Power Company
Gulf Power Company
Mississippi Power Company
Savannah Electric and Power Company
Southern Communications Services, Inc.
Southern Company Energy Solutions, Inc.
Southern Company Services, Inc.
Southern Energy Resources, Inc.
Southern Nuclear Operating Company, Inc.
<PAGE>
FIRST AMENDMENT TO THE
SOUTHERN COMPANY EMPLOYEE STOCK OWNERSHIP PLAN
WHEREAS, Southern Company Services, Inc. ("Company") heretofore adopted
The Southern Company Employee Stock Ownership Plan ("Plan"), originally
effective as of January 1, 1976 and has most recently amended and restated the
Plan effective as of January 1, 1997; and
WHEREAS, the Employee Stock Ownership Plan Committee ("Committee")
desires to amend the Plan in order to make certain design and other changes; and
WHEREAS, the Committee is authorized pursuant to Section 11.1 of the
Plan to amend the Plan at any time, provided that the amendment does not involve
a substantial increase in cost to any Employing Company or is necessary or
desirable to comply with the laws and regulations applicable to the Plan.
NOW, THEREFORE, the Committee hereby amends the Plan as follows to be
effective as provided herein:
I.
Effective as of the date hereof, Article III of the Plan shall be
amended by adding a new Section 3.7 thereto as follows and by redesignating
existing Section 3.7 as Section 3.8:
3.7 Former Commonwealth Energy System Employees.
Notwithstanding any other provision of the Plan to the
contrary, with respect to a former employee of Commonwealth
Energy System ("ComElectric") who is employed by Southern
Energy Resources, Inc. and is set forth on a schedule of
employees acknowledged by the Committee, such employee shall
become a Participant as of the Enrollment Date coincident with
or next following such employee's date of employment.
II.
Except as amended herein by this First Amendment, the Plan shall remain
in full force and effect.
<PAGE>
IN WITNESS WHEREOF, Southern Company Services, Inc. through the duly
authorized members of the Employee Stock Ownership Plan Committee has adopted
this First Amendment to The Southern Company Employee Stock Ownership Plan this
_____ day of ________________, 1998, to be effective as stated herein.
EMPLOYEE STOCK OWNERSHIP
PLAN COMMITTEE:
------------------------
Christopher C. Womack
------------------------
Robert A. Bell
------------------------
W. Dean Hudson
<PAGE>
SECOND AMENDMENT TO THE
SOUTHERN COMPANY EMPLOYEE STOCK OWNERSHIP PLAN
WHEREAS, Southern Company Services, Inc. ("Company") heretofore adopted
The Southern Company Employee Stock Ownership Plan ("Plan"), originally
effective as of January 1, 1976 and as most recently amended and restated the
Plan effective as of January 1, 1997; and
WHEREAS, the Employee Stock Ownership Plan Committee ("Committee")
desires to amend the Plan in order to make certain design and technical changes;
and
WHEREAS, the Committee is authorized pursuant to Section 11.1 of the
Plan to amend the Plan at any time, provided that the amendment does not involve
a substantial increase in cost to any Employing Company or is necessary or
desirable to comply with the laws and regulations applicable to the Plan.
NOW, THEREFORE, the Committee hereby amends the Plan as follows to be
effective as provided herein:
I.
Effective as of January 1, 1996, Subsection (1) of Section 2.20 of the
Plan shall be amended as follows:
(1) an Employee who is treated as such solely by reason of the
"leased employee" rules of Code Section 414(n) such that, pursuant to
an agreement between an Employing Company and any other person, such
individual has performed services for the Employing Company (or the
Employing Company and related persons as described in Code Section
414(n)(6)) on a substantially full-time basis for a period of at least
one year and such services were performed under the primary direction
or control of the Employing Company;
II.
Effective as of January 1, 1997, Section 8.8(b) of the Plan shall be
amended by adding the following sentence to the end of such Section:
In addition, any Participant who attains age 70 1/2 on or after January
1, 1996, but prior to January 1, 1999, may elect to have payment of his
benefits begin no later than April 1 of the calendar year following the
calendar year during which the Participant attains age 70 1/2,
regardless of the Participant's termination of employment.
III.
Except as amended herein by this Second Amendment, the Plan shall
remain in full force and effect.
IN WITNESS WHEREOF, Southern Company Services, Inc. through the duly
authorized members of the Employee Stock Ownership Plan Committee has adopted
this Second Amendment to The Southern Company Employee Stock Ownership Plan this
_____ day of ________________, 1999, to be effective as stated herein.
EMPLOYEE STOCK OWNERSHIP
PLAN COMMITTEE:
-------------------------
Christopher C. Womack
-------------------------
Robert A. Bell
-------------------------
W. Dean Hudson
EXHIBIT 10(a)63
SOUTHERN COMPANY
PERFORMANCE PAY PLAN
AMENDED AND RESTATED
Troutman Sanders LLP
NationsBank Plaza, Suite 5200
600 Peachtree Street, N.E.
Atlanta, Georgia 30308
Effective January 1, 1998
<PAGE>
SOUTHERN COMPANY
PERFORMANCE PAY PLAN
Amended and Restated
Purposes
The purposes of the Amended and Restated Performance Pay Plan are to
focus the attention and efforts of employees on goals which have a direct and
significant influence on individual, 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
Southern Company. No benefits under the Performance Pay Plan shall be deferred
under this Plan or held in trust for the benefit of eligible employees. The
Performance Pay Plan is not intended to be an employee benefit plan or any other
plan subject to regulation by the Employee Retirement Income Security Act of
1974.
The Performance Pay Plan was established effective January 1, 1989. It
has subsequently been amended and restated effective January 1, 1991, January 1,
1993 and January 1, 1996. The Board of Directors of Southern Company Services,
Inc. now desires to amend and restate the Performance Pay Plan to expand
eligibility and modify the basis for funding and allocating Incentive Pay Awards
and to provide for certain plan distributions in the event of a change in
control of Southern Company or of an Operating Company. The effective date of
this amendment and restatement (the "Restatement Effective Date") of the
Performance Pay Plan shall be January 1, 1998.
ARTICLE I
Definitions
For purposes of the Performance Pay Plan, the following terms shall
have the following meanings, unless a different meaning is plainly required by
the context:
1.1 "Annual Salary" shall mean base salary or wages paid to an Employee
before deductions for taxes, social security, etc., including all amounts
contributed on an Employee's behalf by an Operating Company to the Southern
Electric System Flexible Benefits Plan or the Southern Company Flexible Benefits
Plan, any amounts contributed on an Employee's behalf 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 an
Employee's exercise of any deferral option made in accordance with Section
401(k) of the Internal Revenue Code, and amounts contributed on an Employee's
behalf to the Southern Company Deferred Compensation Plan, but excluding all
awards under the Southern Company Performance Pay Plan, the Southern Company
Executive Productivity Improvement Plan and the Southern Company Productivity
Improvement Plan, overtime pay, shift differential and substitution pay. Annual
Salaries of Employees who commence service during a Performance Period and
Annual Salaries of Employees who terminate their employment for one of the
reasons set forth in Section 2.1(b)(1)-(5) 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 hereof, as appropriate. 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 "Base Funding Opportunity" shall mean the funding percentage
determined with reference to ROE earned by Southern Company and each Operating
Company as provided in Schedule VII hereof.
1.3 "Beneficial Ownership" shall mean beneficial ownership within the
meaning of Rule 13d-3 promulgated under the Exchange Act.
1.4 "Board of Directors" shall mean the Board of Directors of Southern
Company Services, Inc.
1.5 "Business Combination" shall mean a reorganization, merger or
consolidation or sale of Southern Company or a sale of all or substantially all
of Southern Company's assets.
1.6 "Company Goals" shall mean the goals established annually by the
Southern Company Leadership Council and set forth in Schedule III hereof.
1.7 "Consummation" shall mean the completion of the final act necessary
to complete a transaction as a matter of law, including, but not limited to, any
required approvals by the corporation's shareholders and board of directors, the
transfer of legal and beneficial title to securities or assets and the final
approval of the transaction by any applicable domestic or foreign governments or
agencies.
1.8 "Control" shall mean, in the case of a corporation, Beneficial
Ownership of more than 50% of the combined voting power of the corporation's
Voting Securities, or in the case of any other entity, Beneficial Ownership of
more than 50% of such entity's voting equity interests.
1.9 "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.
1.10 "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.
1.11 "Earnings Thresholds" shall mean the Southern Company Earnings
Threshold and the Operating Company Earnings Threshold set forth at Section 3.1
of the Plan.
1.12 "Effective Date" shall mean January 1, 1989. The "Restatement
Effective Date" shall mean January 1, 1998.
1.13 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
1.14 "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. The term "Employee" shall not include any person
who is a temporary employee, cooperative employee, a contractor of an Operating
Company or an employee covered by a collective bargaining agreement unless such
employee is eligible to participate in the Plan as an Employee pursuant to an
agreement between his Operating Company and his collective bargaining
representative. In addition, the term "Employee" shall not include any employee
who is eligible to participate in any incentive compensation program maintained
by his 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.
1.15 "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.
1.16 "Group" shall have the meaning set forth in Section 14(d) of the
Exchange Act.
1.17 "Incentive Pay Award" shall mean the amount awarded to a
Participant in accordance with Article IV hereof.
1.18 "Incentive Pay Award Pool" shall mean the pool of funds
established in accordance with Article III hereof either for the benefit of
Employees or for the benefit of Covered Employees, respectively, and which funds
are allocated to each Operating Company.
1.19 "Incumbent Board" shall mean those individuals who constitute the
Southern Board as of the Restatement Effective Date plus any individual who
shall become a director subsequent to such date whose election or nomination for
election by Southern's shareholders was approved by a vote of at least 75% of
the directors then comprising the Incumbent Board. Notwithstanding the
foregoing, no individual who shall become a director of the Southern Board
subsequent to the Restatement Effective Date whose initial assumption of office
occurs as a result of an actual or threatened election contest (within the
meaning of Rule 14a-11 of the Regulations promulgated under the Exchange Act)
with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Southern Board shall be a member of the Incumbent Board.
1.20 "Non-Adopting Company" shall mean any subsidiary or affiliate of
Southern Company which is not an Operating Company.
1.21 "Operating Companies" shall mean Southern Company Services, Inc.,
or any affiliate or subsidiary (direct or indirect) of Southern Company, which
the Board of Directors may from time to time determine to be eligible to
participate under the Plan and which shall adopt the Plan, and any successor of
any such affiliate or subsidiary. The 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.
1.22 "Participant" shall mean all Employees and Covered Employees who
satisfy the criteria set forth in Article II.
1.23 "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.
1.24 "Person" shall mean any individual, entity or group within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act.
1.25 "Plan" shall mean the Southern Company Performance Pay Plan, as
described herein or as from time to time amended.
1.26 "Plan Administrator" shall mean Southern Company Compensation and
Benefits Department.
1.27 "Plan Termination" shall mean the termination of the Plan by an
Employing Company or Southern Company following a Southern Change in Control
unless an equitable arrangement (embodied in an ongoing substitute or
replacement plan) has been made with respect to the Plan in connection with the
Southern Change in Control. For purposes of this Plan, an ongoing substitute or
alternative plan shall be considered an "equitable arrangement" if a nationally
recognized compensation consulting firm chosen by the Committee opines in
writing that the post-Southern Change in Control plan is an equitable substitute
or replacement of the Plan, and that such substitute or alternative plan
provides substantially similar target opportunities and a substantially similar
level of performance difficulty.
1.28 "ROE" shall mean return on equity.
1.29 "Southern Board" shall mean the Board of Directors of Southern
Company.
1.30 "Southern Change in Control" shall mean any of the following:
(a) The Consummation of an acquisition by any Person of
Beneficial Ownership of 20% or more of Southern Company's Voting
Securities; provided, however, that for purposes of this subsection
(a), the following acquisitions of Southern's Voting Securities shall
not constitute a Change in Control:
(i) any acquisition directly from Southern Company,
(ii) any acquisition by Southern Company,
(iii) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by Southern Company
or any corporation controlled by Southern Company,
(iv) any acquisition by a qualified pension plan or
publicly held mutual fund,
(v) any acquisition by an Employee or Group composed
exclusively of Employees, or
(vi) any Business Combination which would not
otherwise constitute a Change in Control because of the
application of clauses (i), (ii) and (iii) of Section 1.30(c);
(b) A change in the composition of the Southern Board whereby
individuals who constitute the Incumbent Board cease for any reason to
constitute at least a majority of the Southern Board; or
(c) Consummation of a Business Combination, unless, following
such Business Combination, all of the following three conditions are
met:
(i) all or substantially all of the individuals and
entities who held Beneficial Ownership, respectively, of
Southern Company's Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly,
65% or more of the combined voting power of the Voting
Securities of the corporation surviving or resulting from such
Business Combination, (including, without limitation, a
corporation which as a result of such transaction holds
Beneficial Ownership of all or substantially all of Southern
Company's Voting Securities or all or substantially all of
Southern Company's assets) (such surviving or resulting
corporation to be referred to as "Surviving Company"), in
substantially the same proportions as their ownership,
immediately prior to such Business Combination, of Southern
Company's Voting Securities,
(ii) no Person (excluding any corporation resulting
from such Business Combination, any qualified pension plan,
publicly held mutual fund, Group composed exclusively of
Employees or employee benefit plan (or related trust) of
Southern Company, its subsidiaries or Surviving Company) holds
Beneficial Ownership, directly or indirectly, of 20% or more
of the combined voting power of the then outstanding Voting
Securities of Surviving Company except to the extent that such
ownership existed prior to the Business Combination, and
(iii) at least a majority of the members of the board
of directors of Surviving Company were members of the
Incumbent Board at the earlier of the date of execution of the
initial agreement, or of the action of the Southern Board,
providing for such Business Combination.
1.31 "Southern Company" shall mean The Southern Company.
1.32 "Southern Termination" shall mean the following:
(a) The Consummation of a reorganization, merger or
consolidation of Southern Company under circumstances where either (i)
Southern Company is not the surviving corporation or (ii) Southern
Company's Voting Securities are no longer publicly traded;
(b) The Consummation of a sale or other disposition of all or
substantially all of Southern Company's assets; or
(c) The Consummation of an acquisition by any Person of
Beneficial Ownership of all of Southern Company's Voting Securities
such that Southern Company's Voting Securities are no longer publicly
traded.
1.33 "Subsidiary Change in Control" shall mean the following:
(a) The Consummation of an acquisition by any Person of
Beneficial Ownership of 50% or more of the combined voting power of the
then outstanding Voting Securities of an Operating Company; provided,
however, that for purposes of this Section 1.33, any acquisition by an
Employee, or Group composed entirely of Employees, any qualified
pension plan, any publicly held mutual fund or any employee benefit
plan (or related trust) sponsored or maintained by Southern Company or
any corporation Controlled by Southern Company shall not constitute a
Change in Control.
(b) Consummation of a reorganization, merger or consolidation
of an Operating Company (an "Operating Company Business Combination"),
in each case, unless, following such Operating Company Business
Combination, Southern Company Controls the corporation surviving or
resulting from such Operating Company Business Combination, or
(c) Consummation of the sale or other disposition of all or
substantially all of the assets of an Operating Company to an entity
which Southern Company does not Control.
1.34 "Southern Company Earnings Test" shall mean the test set forth at
Section 3.2(b) of the Plan.
1.35 "Southern Company Earnings Threshold" shall mean the percentage
ROE determined under Section 3.1(a).
1.36 "Subsidiary Employee" shall mean an Employee of an Operating
Company which has undergone a Subsidiary Change in Control.
Where the context requires, words in the masculine gender include the
feminine and neuter genders and words in the singular include the plural and
words in the plural include the singular.
ARTICLE II
Participation
2.1 Employees. All Employees of an Operating Company shall be eligible
to participate in the Plan and receive Incentive Pay Awards.
(a) 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. The
following shall apply for purposes of calculating the number of months
of employment with an Operating Company under this Section 2.1:
(1) 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) Employees whose effective date of employment is
on or after the fifteenth (15th) day of a month shall not be
considered Employees until the first day of the next
succeeding month.
(b) Employees whose effective date of employment is on or
after December 15 of a Performance Period shall not be eligible to
participate until the next succeeding Performance Period.
(c) Employees whose employment with 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,
(4) termination of employment, but only in the event
the Participant shall transfer to or be reemployed by a
Non-Adopting Company, or any successor thereto, during such
Performance Period, or
(5) termination from participation in the Plan
because the requirements of Section 1.21 of the Plan are not
met.
(d) The pro-rata amount of an Incentive Pay Award shall be
determined for the Performance Period in which a termination described
in Section 2.1(c) occurs by a fraction which is the number of months of
employment with an Operating Company during the Performance Period,
divided by the total number of months in the Performance Period. The
following shall apply for purposes of calculating the number of months
of employment with an Operating Company under this Section 2.(1)(d) for
an Employee whose service is terminated for one of the reasons
described in Section 2.1(c):
(1) The month in which the Employee's service
terminates shall not be considered if such terminating event
occurs on or before the fourteenth (14th) day of the month;
and
(2) The month in which the Employee's service
terminates shall be considered if such terminating event
occurs on or after the fifteenth (15th) day of the month.
(e) An Employee whose employment with an Operating Company is
terminated during a Performance Period for any reason other the reasons
described in Section 2.1(c) shall not be eligible to receive an
Incentive Pay Award for such Performance Period.
2.2 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.
2.3 Notwithstanding any other provision of the Plan, all Participants
covered by a collective bargaining agreement shall become ineligible for
Incentive Pay Awards for and after any Performance Period in which such
collective bargaining agreement expires or is terminated for any reason.
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 for each Operating Company, provided both of the Earnings
Thresholds set forth in Sections 3.1(a) and (b) are achieved, provided however,
notwithstanding anything to the contrary in this Section 3.1, no Earnings
Threshold shall apply in the Plan Year of a Southern Change in Control.
(a) Southern Company Earnings Threshold. The Southern Company
Earnings Threshold shall be met if 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 Leadership Council by no later than the end of each Performance
Period and which percentage shall be set forth on Schedule IV hereof.
(b) Operating Company Earnings Threshold. The Operating
Company Earnings Threshold shall be met with respect to an Operating
Company which achieves earnings during the Performance Period equal to
or greater than a percentage return on equity, which percentage is
designated for such Operating Company by the Southern Company
Leadership Council no later than the end of each Performance Period and
which percentage and its dollar equivalent shall be set forth on
Schedule V hereof.
(c) Funding Eligibility. 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 Employee Participants. Subject to the provisions of
Section 3.2(c) hereof, Plan funding for the Incentive Pay Award Pool benefiting
Employees for each Operating Company shall equal for any given Performance
Period the percentage provided under the Southern Company Earnings Test set
forth in Section 3.2(a) hereof reduced or increased by the achievement of the
Company Goals set forth in Section 3.2(b) hereof.
<PAGE>
(a) Southern Company (Core Business only) Earnings Test. The
Southern Company (Core Business only) Earnings Test set forth in
Schedule VII hereof shall be applied at the end of each Performance
Period to determine the Base Funding Opportunity.
(b) Operating Company (Core Business only) Earnings Test. The
Operating Company (Core Business only) Earnings Test set forth in
Schedule VIII hereof shall be applied at the end of each Performance
Period to determine the Base Funding Opportunity.
(c) Company Goals. The Chief Executive Officer of Southern
Company shall determine in his sole discretion whether to increase or
decrease the Base Funding Opportunity established in Section 3.2(a)
hereof based on achievement of the Company Goals set forth in Schedule
III hereof. Such increase or decrease shall not cause a deviation of
more than 10% in the Base Funding Opportunity.
(d) Employee Transfers. If an 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 Annual Salary in the calculation of the
Incentive Pay Award Pool for the transferee Funding Unit without
prorating the Annual Salary 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) Funding Eligibility. A Covered Employee Plan shall be
acceptable for funding provided the Earnings Thresholds set forth in
Section 3.1 are satisfied.
(b) Maximum Dollar Amount. Provided the Incentive Pay Award
Pool for a Covered Employee Plan is acceptable for funding under
Section 3.3(a) hereof, 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.
3.4 Extraordinary Item Exception. If requested by an Operating Company,
at the sole discretion of the Chief Executive Officer of 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 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 Southern Company approves an Extraordinary Item, it shall
be identified in Schedule VI hereof, and, in addition, an explanation as to how
such Extraordinary Item shall impact 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 Determination of Funding Amount. Funding in accordance with this
Article III shall be fixed in all events by the end of each Performance Period.
ARTICLE IV
Incentive Pay Award Opportunities
4.1 Employee Participants.
(a) The Incentive Pay Award Pool benefiting Employee
Participants of an Operating Company shall be allocated to each
Operating Company in accordance with Article III hereof. The amount
allocated to each Operating Company shall then be distributed by the
Plan Administrator among Participants in proportion to each such
Participant's Annual Salary.
(b) The Plan Administrator shall be solely responsible for
calculating each Participant's Incentive Pay Award and distributing
such Incentive Pay Award.
(c) The Plan Administrator shall endeavor to pay the Incentive
Pay Awards for a Performance Period to the Participants not later than
two and one-half (2 1/2) months following the close of the preceding
Performance Period, or such shorter or longer period of time following
the close of the preceding Performance Period as may be required under
the Internal Revenue Code to preserve the timely accrual of the federal
income tax deduction for Incentive Pay Awards paid with respect to such
Performance Period.
(d) The Incentive Pay Award payment shall be made in cash or
its functional equivalent and the receipt of such payment may not be
deferred under this Plan at the option of the 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.
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.
(b) The Plan Administrator shall be solely responsible for calculating and
distributing each Participant's Incentive Pay Award in accordance with
the terms of the Covered Employee Plan in which the Covered Employee
Participant participates.
ARTICLE V
Change in Control
5.1 Southern Change in Control. In the event of a Southern Change in
Control, if there is no Plan Termination, payout of Incentive Pay Awards to
Participants for the Performance Period in which the Southern Change in Control
shall have occurred shall be the greater of actual or target performance under
the Plan.
5.2 Plan Termination. Notwithstanding any other provision of this Plan
to the contrary, in the event of a Plan Termination within two (2) years
following a Southern Change in Control, each Participant who is an Employee on
the date of such Plan Termination shall be entitled to receive within thirty
(30) days of the Plan Termination, cash in an amount equal to a pro-rated payout
of his Incentive Pay Award under the Plan for the Performance Period in which
the Plan Termination shall have occurred, at the greater of target or actual
performance under the Plan and prorated by the number of months which have
passed since the beginning of the Performance Period until the date of the Plan
Termination.
5.3 Subsidiary Change in Control. Notwithstanding any other provision
of this Plan to the contrary, in the event of a Subsidiary Change in Control,
each Subsidiary Employee on the date of such Change in Control whose employment
is not transferred upon such Subsidiary Change in Control to another Operating
Company shall be entitled to receive within thirty (30) days of the Subsidiary
Change in Control, cash in an amount equal to a prorated payout of his Incentive
Pay Award under the Plan for the Performance Period in which the Subsidiary
Change in Control shall have occurred, at the greater of actual or target
performance under the Plan and prorated by the number of months which have
passed since the beginning of the Performance Period until the date of the
Subsidiary Change in Control.
5.4 Southern Termination. Notwithstanding any other provision of this Plan to
the contrary, in the event of a Southern Termination, each Participant on the
date of such Southern Termination shall be entitled to receive within thirty
(30) days of the Southern Termination, cash in an amount equal to a prorated
payout of his Incentive Pay Award under the Plan for the
Performance Period in which the Southern Termination shall have occurred, at the
greater of actual or target performance under the Plan and prorated by the
number of months which have passed since the beginning of the Performance Period
until the date of the Southern Termination. This Plan shall terminate
immediately following the payments provided for in this Section
5.5 Pro rata Calculation. For purposes of calculating any pro rata Incentive Pay
Awards under this Article V, a month shall not be considered if the determining
event occurs on or before the 14th day of the month, and a month shall be
considered if the determining event occurs on or after the 15th day of the
month.
ARTICLE VI
Administration of Plan
6.1 Employment of Agents. The Plan Administrator shall be responsible
for the daily administration of the Plan and may appoint other persons or
entities to perform or assist in the performance of any of its fiduciary duties,
subject to its review and approval. The Plan Administrator shall have the right
to remove any such appointee from his position without cause or notice. Any
person, group of persons, or entity may serve in more than one fiduciary
capacity.
6.2 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.
6.3 Responsibilities in General. The Plan Administrator shall
administer the Plan in accordance with its terms and shall have all powers
necessary to carry out the provisions of the Plan as more particularly set forth
herein. The Plan Administrator shall interpret the Plan and shall determine all
questions concerning eligibility, administration, interpretation, and
application of the Plan, and all such determinations shall be conclusive and
binding on all Participants and interested persons. The Plan Administrator shall
adopt such procedures and guidelines as it deems necessary or desirable in order
to discharge its duties hereunder.
<PAGE>
6.4 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 are
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.
6.5 Service of Process. The Plan Administrator shall be the appointed
agent for the service of process.
ARTICLE VII
Miscellaneous Provisions
7.1 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.
7.2 No Trust Requirement. Unless the Board of Directors shall in its
discretion determine otherwise, the Operating Companies shall neither reserve
nor otherwise set aside funds for the payments of Incentive Pay Awards under the
Plan.
7.3 Amendment and Termination of Plan. Except for the provisions of
Article V hereof, which may not be amended following a Southern Change in
Control, Subsidiary Change in Control or a Southern Termination, the Board of
Directors may terminate the Plan at any time or may from time to time amend the
Plan; provided, however, that no amendment shall impair any rights to payments
which have been earned under the Plan prior to the termination or amendment. Any
amendment or termination of the Plan shall apply, in the Board of Directors'
sole discretion, with respect to all Employees participating in the Plan,
irrespective of whether any such amendment or termination has been collectively
bargained. 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.
<PAGE>
7.4 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.
7.5 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.
7.6 Plan Not a Contract. The Plan shall not be deemed to constitute a
contract between an Operating Company and any Employee or Covered Employee, nor
shall anything herein contained be deemed to give any Employee or Covered
Employee any right to be retained in the employ of an Operating Company or
interfere with the right of the Operating Company to discharge any Employee or
Covered Employee at any time and to treat him without regard to the effect which
such treatment might have upon him as a Participant.
7.7 Choice of Law. This Plan shall be governed by and construed in
accordance with the laws of the State of Georgia except for the application of
any law which would require the use of the laws of another state.
7.8 Pooling Accounting. Notwithstanding anything to the contrary
herein, if, but for any provision of this Plan, a Change in Control transaction
would otherwise be accounted for as a pooling of interests under APB No. 16
("Pooling Accounting") (after giving effect to any and all other facts and
circumstances affecting whether such Change in Control transaction would use
Pooling Accounting), such provision or provisions of this Plan which would
otherwise cause the Change in Control transaction to be ineligible for Pooling
Accounting shall automatically be void and ineffective in such a manner and to
the extent that be eliminating such provision or provisions of this Plan,
Pooling Accounting would be required for such Change in Control transaction and
Pooling Accounting is in fact used for such Change in Control transaction.
IN WITNESS WHEREOF, Southern Company Services, Inc., through its
officers duly authorized, hereby amends and restates Southern Company
Performance Pay Plan this _____ day of , 1999, to be effective January 1, 1998.
SOUTHERN COMPANY SERVICES, INC.
By: _____________________________________________________
Christopher C. Womack
Senior Vice President, Human Resources
Attest:
By: ____________________________________________
Tommy Chisholm
Secretary
[Corporate Seal]
<PAGE>
SOUTHERN COMPANY
PERFORMANCE PAY PLAN
Amended and Restated
Effective January 1, 1998
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
<PAGE>
SOUTHERN COMPANY
PERFORMANCE PAY PLAN
Amended and Restated
Effective January 1, 1998
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
<PAGE>
SOUTHERN COMPANY
PERFORMANCE PAY PLAN
Amended and Restated
Effective January 1, 1998
SCHEDULE III
1998 COMPANY GOALS
<TABLE>
<CAPTION>
- - - - - - - ----------- ---------------------------------------- -------------- --------------- ------------- ------------ ------------ --------
BIG 1998 Goals APC GPC GULF MPC SAV SNC
- - - - - - - --- ----------- --- --- ---- --- --- ---
- - - - - - - ----------- ---------------------------------------- -------------- --------------- ------------- ------------ ------------ --------
- - - - - - - ----------- ---------------------------------------- -------------- --------------- ------------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
I o Cost Goal(1)(2) $1,144 $1,350 $231 $229 $86.4 $592
$1,107 $1,296 $224 $222 $83.2 $575
- - - - - - - ----------- ---------------------------------------- -------------- --------------- ------------- ------------ ------------ --------
- - - - - - - ----------- ---------------------------------------- -------------- --------------- ------------- ------------ ------------ --------
II o Overhead Cost Goal(1)(2)(3) $123.0 $219.0 $31.0 $26.0 $15.0 $9.0
$119.0 $210.0 $30.0 $25.0 $14.6 $9.3
- - - - - - - ----------- ---------------------------------------- -------------- --------------- ------------- ------------ ------------ --------
- - - - - - - ----------- ---------------------------------------- -------------- --------------- ------------- ------------ ------------ --------
IV o Cashflow - above capital $355.0 $645.0 $55.1 $47.0 $22.6 $44.0(4)
reinvestment and dividend $369.0 $665.0 $57.7 $49.7 $23.5 $43.0(4)
requirements(1)(2)
- - - - - - - ----------- ---------------------------------------- -------------- --------------- ------------- ------------ ------------ --------
- - - - - - - ----------- ---------------------------------------- -------------- --------------- ------------- ------------ ------------ --------
IX o Each operating company will
measure customer satisfaction
relative to a peer group of 16
competitive utilities. Customer
satisfaction scores will be
equally weighted across
residential and business
customers (commercial, industrial
and large energy users), and will
be scored on a ranking scale
where entry into the top quartile
represents 100% achievement of
this goal.
- - - - - - - ----------- ---------------------------------------- -------------- --------------- ------------- ------------ ------------ --------
</TABLE>
(1)Dollars expressed in millions
(2)Goal assumes 100% performance level. Second figure in column assumes 110%
performance level.
(3)Figures shown indicate levels of overhead cost, except for Southern Nuclear
data which represents reductions in overheads.
*Cash flow goal for Southern Nuclear represents level of capital spending.
<PAGE>
SOUTHERN COMPANY
PERFORMANCE PAY PLAN
Amended and Restated
Effective January 1, 1998
SCHEDULE IV
THE SOUTHERN COMPANY EARNINGS THRESHOLD
Year Percentage ROE
1998 10.75%
<PAGE>
SOUTHERN COMPANY
PERFORMANCE PAY PLAN
Amended and Restated
Effective January 1, 1998
SCHEDULE V
OPERATING COMPANY EARNINGS THRESHOLD
Percentage ROE
Southern
Year Alabama Georgia Gulf Mississippi Savannah Nuclear SCS SOCO
- - - - - - - ---- ------- ------- ---- ----------- -------- ------- --- ----
1998 12% 12% 12% 12% 12% 12% 12% 12%
<PAGE>
SOUTHERN COMPANY
PERFORMANCE PAY PLAN
Amended and Restated
Effective January 1, 1998
SCHEDULE VI
EXTRAORDINARY ITEMS
<PAGE>
SOUTHERN COMPANY
PERFORMANCE PAY PLAN
Amended and Restated
Effective January 1, 1998
SCHEDULE VII
SOUTHERN COMPANY (CORE BUSINESS ONLY) EARNINGS TEST
Southern
Year Alabama Georgia Gulf Mississippi Savannah Nuclear SCS SOCO
- - - - - - - ---- ------- ------- ---- ----------- -------- ------- --- ----
1998 13.5% 13.5% 13.5% 13.5% 13.5% 13.5% 13.5% 13.5%
<PAGE>
SOUTHERN COMPANY
PERFORMANCE PAY PLAN
Amended and Restated
Effective January 1, 1998
SCHEDULE VIII
OPERATING COMPANY (CORE BUSINESS ONLY) EARNINGS TEST
Southern
Year Alabama Georgia Gulf Mississippi Savannah Nuclear SCS SOCO
- - - - - - - ---- ------- ------- ---- ----------- -------- ------- --- ----
1998 13.5% 13.5% 13.5% 13.5% 13.5% 13.5% 13.5% 13.5%
EXHIBIT 10(a)66
SOUTHERN COMPANY
DEFERRED COMPENSATION PLAN
Troutman Sanders LLP
600 Peachtree Street, N.E.
5200 NationsBank Plaza
Atlanta, Georgia 30308
(404) 885-3000
Amended and Restated as of January 1, 1998
<PAGE>
SOUTHERN COMPANY
DEFERRED COMPENSATION PLAN
TABLE OF CONTENTS
ARTICLE I Purpose and Adoption of Plan................................1
ARTICLE II Definitions................................................1
ARTICLE III Administration of Plan....................................4
ARTICLE IV Eligibility................................................6
ARTICLE V Deferral Election...........................................7
ARTICLE VI Participants'Accounts......................................8
ARTICLE VII Account Distribution.....................................10
ARTICLE VIII Miscellaneous Provisions................................12
<PAGE>
SOUTHERN COMPANY
DEFERRED COMPENSATION PLAN
ARTICLE I
Purpose and Adoption of Plan
1.1 Adoption: Southern Company Services, Inc. and the other Employing
Companies established the Deferred Compensation Plan for The Southern Electric
System effective October 1, 1988. The Plan was amended effective October 1,
1988, March 1, 1993 and January 1, 1996, and except as otherwise provided
herein, the terms of the Plan as in effect prior to January 1, 1998 shall
continue to be applicable to deferrals made pursuant to the Plan prior to
January 1, 1998.
.........1.2 Purpose: This Southern Company Deferred Compensation Plan is
designed to permit a select group of management or highly compensated employees
to elect to defer a portion of their regular compensation during each payroll
period and to defer all or a portion of certain short-term and long-term
incentive payments until their death, disability, retirement, or other
termination of employment with an Employing Company. The Plan shall be an
unfunded deferred compensation arrangement whose benefits shall be paid solely
from the general assets of the Employing Companies.
ARTICLE II
Definitions
.........For purposes of the Plan the following terms shall have the following
meanings unless a different meaning is plainly required by the context:
.........2.1 "Account" shall mean the account or accounts established and
maintained by an Employing Company to reflect the interest of a Participant in
the Plan resulting from a Participant's deferral of Compensation or Incentive
Pay and adjustments thereto to reflect income, gains, losses, and other credits
or charges. Charges to Participant's Accounts for distributions shall be posted
as of the date the Committee (or its designee) notifies its paying agent to make
such distribution.
.........2.2 "Board of Directors" shall mean the Board of Directors of the
Company.
.........2.3 "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.
.........2.4 "Committee" shall mean the committee referred to in Section 3.1
hereof.
.........2.5 "Common Stock" shall mean the common stock of The Southern Company.
.........2.6 "Company" shall mean Southern Company Services, Inc.
.........2.7 "Compensation" shall mean the monthly rate of an Employee's base
wages or salary paid by any Employing Company to an Employee, including amounts
contributed by an Employing Company to the Employee Savings Plan as Elective
Employer Contributions, as said term is defined in Section 4.1 therein, pursuant
to the Employee's exercise of his or her deferral option made in accordance with
Section 401(k) of the Internal Revenue Code and amounts contributed by an
Employing Company to The Southern Company Flexible Benefits Plan on behalf of
the Employee pursuant to his or her salary reduction election under such plan;
but disregarding overtime and any reimbursements to an Employee paid by any
Employing Company including, but not limited to, reimbursements for such items
as moving expenses, automobile expenses, tax preparation expenses, travel and
entertainment expenses, and health and life insurance premiums.
.........2.8 "Deferral Election" shall mean the Participant's written election
to defer a portion of his or her Compensation or Incentive Pay pursuant to
Article V hereof.
.........2.9 "Distribution Election" shall mean the election under Article VII
hereof, pursuant to which a Participant elects to receive the balance of his or
her Account in either a lump sum or in annual installments following the
Participant's death, disability, retirement or other termination of Employment
with an Employing Company.
.........2.10 "Effective Date" shall mean January 1, 1998.
.........2.11 "Employee" shall mean any person who is currently employed by an
Employing Company.
.........2.12 "Employee Savings Plan" shall mean The Southern Company Employee
Savings Plan, as amended from time to time.
.........2.13 "Employee Stock Ownership Plan" shall mean The Southern Company
Employee Stock Ownership Plan, as amended from time to time.
.........2.14 "Employing Company" shall mean the Company, or any affiliate or
subsidiary (direct or indirect) of The Southern Company, which the Board of
Directors may from time to time determine to bring under the Plan and which
shall adopt the Plan, and any successor of any of them.
.........2.15 "Enrollment Date" shall mean the Effective Date, January 1 of each
Plan Year, and such other dates as may be determined from time to time by the
Committee.
.........2.16 "Incentive Pay" shall mean such long-term or short-term incentive
pay as the Committee shall permit to be deferred under this Plan for any Plan
Year.
.........2.17 "Investment Election" shall mean the Participant's written
election to have his or her deferred Compensation or Incentive Pay invested
pursuant to Section 6.2 or Section 6.3 hereof.
.........2.18 "Non-adopting Company" shall mean any subsidiary or affiliate of
The Southern Company which is not an Employing Company.
.........2.19 "Participant" shall mean an Employee or former employee of an
Employing Company who is eligible to receive benefits under the Plan or who was
so eligible and had an unpaid Account balance upon his or her death, disability,
retirement or other termination of employment with an Employing Company.
.........2.20 "Pension Plan" shall The Southern Company Pension Plan, as amended
from time to time.
.........2.21 "Performance Sharing Plan" shall mean The Southern Company
Performance Sharing Plan, as amended from time to time.
.........2.22 "Plan" shall mean the Southern Company Deferred Compensation Plan,
amended and restated as of January 1, 1998, as further amended from time to
time. Prior to the January 1, 1996 amendment and restatement, the Plan was
entitled the Deferred Compensation Plan for The Southern Electric System.
.........2.23 "Plan Year" shall mean the calendar year.
.........2.24 "Retirement Income" shall have the same meaning as set forth in
the Pension Plan.
.........2.25 "Supplemental Benefit Plan" shall mean The Southern Company
Supplemental Benefit Plan and the Supplemental Executive Retirement Plan of
Savannah Electric and Power Company, each as amended from time to time.
.........2.26 "Valuation Date" shall mean each trading day of the New York Stock
Exchange, or any successor national exchange on which the Common Stock is traded
and with respect to which a Closing Price may be determined.
.........Where the context requires, the definitions of all terms set forth in
the Pension Plan, the Employee Savings Plan, the Employee Stock Ownership Plan,
the Performance Sharing Plan and the Supplemental Benefit Plan shall apply with
equal force and effect for purposes of interpretation and administration of the
Plan, unless said terms are otherwise specifically defined in the Plan. Words in
the masculine gender shall include the feminine and neuter genders, words in the
singular shall include the plural and words in the plural shall include the
singular.
ARTICLE III
Administration of Plan
.........3.1 The general administration of the Plan shall be placed in the
Committee. The Committee shall consist of the Vice President, Human Resources of
The Southern Company, the Director, System Compensation and Benefits of The
Southern Company and the Comptroller of The Southern Company. Any member may
resign or may be removed by the Board of Directors and new members may be
appointed by the Board of Directors at such time or times as the Board of
Directors in its discretion shall determine. The Committee shall be chaired by
the Vice President, Human Resources of The Southern Company and may select a
Secretary (who may, but need not, be a member of the Committee) to keep its
records or to assist it in the discharge of its duties. A majority of the
members of the Committee shall constitute a quorum for the transaction of
business at any meeting. Any determination or action of the Committee may be
made or taken by a majority of the members present at any meeting thereof, or
without a meeting by resolution or written memorandum concurred in by a majority
of the members.
.........3.2 No member of the Committee shall receive any compensation from the
Plan for his or her service.
.........3.3 The Committee shall administer the Plan in accordance with its
terms and shall have all powers necessary to carry out the provisions of the
Plan as may be more particularly set forth herein. The Committee shall interpret
the Plan and shall determine all questions arising in the administration,
interpretation and application of the Plan. Any such determination by the
Committee shall be conclusive and binding on all persons. The Committee may
adopt such regulations as it deems desirable for the conduct of its affairs and
may appoint such accountants, counsel, actuaries, specialists and other persons
as it deems necessary or desirable in connection with the administration of this
Plan. The Committee shall be the Plan's agent for service of process.
.........3.4 The Committee shall be reimbursed by the Employing Companies for
all reasonable expenses incurred by it in the fulfillment of its duties,
including, but not limited to, fees of accountants, counsel, actuaries, and
other specialists, and other costs of administering the Plan.
3.5 (a) The Committee is responsible for the daily administration of
the Plan and may appoint other persons or entities to perform any of its
fiduciary functions. The Committee and any such appointee may employ advisors
and other persons necessary or convenient to help the Committee carry out its
duties, including its fiduciary duties. The Committee shall review the work and
performance of each such appointee, and shall have the right to remove any such
appointee from his or her position. Any person, group of persons or entity may
serve in more than one fiduciary capacity.
(b) The Committee shall maintain accurate and detailed records and
accounts of Participants and of their rights under the Plan and of all receipts,
disbursements, transfers and other transactions concerning the Plan. Such
accounts, books and records relating thereto shall be open at all reasonable
times to inspection and audit by the Board of Directors and by any persons
designated thereby.
(c) The Committee shall take all steps necessary to ensure that the
Plan complies with the law at all times. These steps shall include such items as
the preparation and filing of all documents and forms required by any
governmental agency; maintaining of adequate Participants' records; recording
and transmission of all notices required to be given to Participants and their
beneficiaries; the receipt and dissemination, if required, of all reports and
information received from an Employing Company; securing of such fidelity bonds
as may be required by law; and doing such other acts necessary for the proper
administration of the Plan. The Committee shall keep a record of all of its
proceedings and acts, and shall keep all such books of account, records and
other data as may be necessary for proper administration of the Plan. The
Committee shall notify the Employing Companies upon their request of any action
taken by the Committee, and when required, shall notify any other interested
person or persons.
ARTICLE IV
Eligibility
.........4.1 Any Employee whose compensation equals or exceeds such minimum
amount as may be established by the Committee from time to time may elect to
participate in the Plan beginning on any Enrollment Date by electing to have his
or her Compensation or Incentive Pay reduced and such amounts contributed to the
Plan in accordance with Article V hereof, and directing the investment of such
contributions in accordance with Article VI hereof. The Committee shall be
authorized to establish the minimum compensation required for eligibility to
participate in the Plan, to be effective as of the first day of the next
succeeding Plan Year. Notwithstanding the foregoing, any Employee eligible to
participate in any similar deferred compensation plan maintained by an Employing
Company or maintained by a Non-adopting Company shall be ineligible to defer
Compensation or Incentive Pay under this Plan, unless the Committee in its sole
discretion shall determine otherwise.
.........4.2 Notwithstanding the above, the Committee shall be authorized to
modify the minimum compensation amount and to rescind the eligibility of any
Participant if necessary or advisable to insure that the Plan is maintained
primarily for the purpose of providing deferred compensation to a select group
of management or highly compensated employees, as such terms are defined by the
Employee Retirement Income Security Act of 1974, as amended.
.........4.3 The Committee shall have the authority to permit, if it deems
appropriate, separate Deferral Elections under Article V hereof, Investment
Elections under Article VI hereof, and Distribution Elections under Article VII
hereof for Compensation and Incentive Pay, respectively.
ARTICLE V
Deferral Election
.........5.1 A Participant may elect to defer payment of a portion of his or her
Compensation otherwise payable to him by his or her Employing Company during
each payroll period of the next succeeding Plan Year by any whole percentage not
to exceed fifty percent (50%) of his or her Compensation, or such greater or
lesser amount as shall be determined by the Committee from time to time. A
Participant may also elect to defer payment of up to one hundred percent (100%),
by whole percentages, of any Incentive Pay otherwise payable to him or her by
his or her Employing Company.
.........5.2 The Deferral Election shall be made in writing on a form prescribed
by the Committee and shall state as follows:
(a) That the Participant wishes to make an election to defer the
receipt of a portion of his or her Compensation or all or a portion of his or
her Incentive Pay;
(b) The whole percentage of his or her Compensation or Incentive Pay
which the Participant elects to defer; and
(c) The Distribution Election under Article VII hereof.
.........5.3 The initial Deferral Election of a new Participant shall be made by
written notice signed by the Participant and delivered to the Participant's
Employing Company by the date established by the Committee and shall be
effective on the next occurring Enrollment Date. Any modification or revocation
of the most recent Deferral Election shall be made by written notice signed by
the Participant and delivered to the Participant's Employing Company by the date
established by the Committee and shall be effective on the first day of the Plan
Year immediately following the date of the Deferral Election. A Deferral
Election with respect to the deferral of future Compensation or Incentive Pay
shall be an annual election for each Plan Year unless otherwise modified or
revoked as provided herein. The termination of a Participant's participation in
the Plan shall not affect the Participant's Compensation or Incentive Pay
previously deferred under the Plan, which shall be invested and distributed in
accordance with the Participant's elections and the terms and conditions of the
Plan.
.........5.4 Notwithstanding the provisions of Section 5.4 of the Plan, the
Committee, in its sole discretion upon written application by a Participant, may
authorize the suspension of a Participant's Deferral Election in the event of an
unforeseen emergency or hardship of the Participant. A Deferral Election
suspension will be on account of hardship if it is necessary in light of
immediate and heavy financial needs of the Participant which cannot reasonably
be met from the Participant's other financial resources. For this purpose, any
amounts held in the Participant's accounts in the Employee Savings Plan and the
Employee Stock Ownership Plan shall not be deemed to be reasonably available.
Any Deferral Election suspension authorized by the Committee shall become
effective as of the first payroll period beginning thirty (30) days after
receipt by the Participant's Employing Company of the Participant's suspension
application, or as soon as practicable after the receipt of such application.
Such Deferral Election suspension shall be effective for the remainder of the
Plan Year of application and shall be deemed an annual election by the
Participant for each succeeding Plan Year unless otherwise modified by the
Participant under the provisions of Section 5.3 hereof.
ARTICLE VI
Participants' Accounts
.........6.1 Upon the Committee's receipt of a Participant's valid Deferral
Election under Article V hereof, beginning as of the Enrollment Date, the
designated portion of Compensation and Incentive Pay shall be credited to the
Participant's Account as of the date of each such deferral in accordance with
the provisions of this Article VI.
.........6.2 On the last business day of each month the Account of each
Participant electing to invest his or her deferred Compensation or Incentive Pay
for a Plan Year in accordance with this Section 6.2 shall be credited by the
Employing Company with an amount, in lieu of interest, equal to the monthly
equivalent of the per annum prime rate of interest as published by the Wall
Street Journal as the base rate on corporate loans posted as of the last
business day of each month by at least seventy five (75%) percent of the United
States' largest banks, compounded monthly on any Account balance until such
balance is fully distributed.
.........6.3 The Account of each Participant electing to invest his or her
deferred Compensation or Incentive Pay for a Plan Year in accordance with this
Section 6.3 shall be credited on the date of deferral with the deemed number of
shares (including fractional shares) of Common Stock which could have been
purchased on such date with the dollar amount of such deferral, based upon the
Common Stock's Closing Price on the Valuation Date immediately preceding the
date of deferral. As of the date on which occurs the payment of dividends on the
Common Stock, there shall be credited with respect to the deemed number of
shares of Common Stock in the Participant's Account on such date such additional
deemed shares (including fractional shares) of Common Stock as follows:
(a) In the case of cash dividends, such additional deemed
shares as could be purchased at the Closing Price on the Valuation Date
immediately preceding the dividend payment date with the dividends
which would have been payable on the deemed number of shares previously
credited to the Participant's Account;
(b) In the case of dividends payable in property other than
cash or Common Stock, such additional deemed shares as could be
purchased at the Closing Price on the Valuation Date immediately
preceding the dividend payment date with the fair market value of the
property which would have been payable on the deemed number of shares
previously credited to the Participant's Account; or
(c) In the case of dividends payable in Common Stock, such
additional deemed shares as would have been payable on the deemed
number of shares previously credited to the Participant's Account.
.........6.4 The Investment Election by a Participant with respect to his or her
Account shall be made in writing on a form prescribed by the Committee.
Investment Elections shall be delivered to the Participant's Employing Company
prior to the first (1st) day of the month immediately prior to his or her
Enrollment Date or the next succeeding Plan Year, as appropriate, and shall be
effective on such Enrollment Date or the first day of such succeeding Plan Year.
Investment Elections shall be irrevocable and shall continue from Plan Year to
Plan Year unless the Participant changes the Investment Election regarding
future deferred Compensation or Incentive Pay by submitting a written request to
his or her Employing Company on a form prescribed by the Committee. Any such
change shall become effective as of the first day of the Plan Year next
following the Plan Year in which such request is submitted to the Employing
Company. No transfer of amounts between investment options shall be permitted
under the Plan.
.........6.5 As of the last day of each Plan Year, the Committee shall issue a
report to each Participant holding an Account, setting forth the dollar amount
of deferrals invested under Section 6.2 hereof as of the last day of the Plan
Year and, with respect to deferrals invested under Section 6.3 hereof, the
aggregate Closing Price of the number of shares of Common Stock credited to each
Participant's Account as of the Valuation Date on or immediately preceding the
last day of the Plan Year.
ARTICLE VII
Account Distribution
.........7.1 When a Participant retires or terminates his or her employment with
an Employing Company, he or she shall be entitled to receive in cash an amount
equal to the dollar amount of any deferrals and any amounts in lieu of interest
thereon credited to his or her Account under the Investment Election of Section
6.2 hereof, and the dollar value of the aggregate Closing Price of the number of
deemed shares of Common Stock (and fractions thereof) credited to his or her
Account in accordance with the Investment Election of Section 6.3 hereof,
determined as of the date following such termination or retirement that the
Company notifies its paying agent to make the distribution or the immediately
preceding Valuation Date, and any replacement benefits provided under Sections
6.2, 6.3 and 6.4 hereof prior to January 1, 1996, such amounts to be paid in
accordance with the Participant's most recent Distribution Election. The
transfer by a Participant between subsidiaries or affiliates of The Southern
Company shall not be deemed to be a termination of employment with an Employing
Company for purposes of the Plan. No portion of a Participant's Account shall be
distributed in Common Stock.
.........7.2 In the event that a Participant's most recent Distribution Election
is to receive a lump sum distribution of his or her Account, the dollar amount
determined under Section 7.1 hereof shall be paid to the Participant not later
than sixty (60) days following the date on which the Participant's termination
of employment occurs, or as soon as reasonably practicable thereafter.
.........7.3 In the event that a Participant's most recent Distribution Election
is to receive the distribution of his or her Account in annual installments, the
first payment shall be made not later than sixty (60) days following the date on
which the Participant's termination of employment occurs, or as soon as
reasonably practicable thereafter, and shall be in an amount equal to the dollar
balance in the Participant's Account determined under Section 7.1 hereof,
divided by the number of annual installments elected. Subsequent annual
installments shall be in an amount equal to the dollar value of the
Participant's Account determined under Section 7.1 hereof divided by the number
of the remaining annual payments, and shall be paid as soon as practicable
following each anniversary of the initial payment date until the balance of the
Participant's Account is paid in full.
.........7.4 The Participants' initial Distribution Elections may not be revoked
and shall govern the distribution of the Participants' Accounts. Notwithstanding
the foregoing, and except as otherwise provided herein, the Committee may, in
its sole discretion, upon application by a Participant, accept an amended
Distribution Election from a Participant provided the election is made not prior
to the 395th day nor later than the 365th day prior to a distribution of such
Participant's Account in accordance with the terms of the Plan; provided
further, however, that any Participant who is required to file reports pursuant
to Section 16(a) of the Securities and Exchange Act of 1934, as amended, with
respect to equity securities of The Southern Company shall not be permitted to
amend his or her Distribution Election during any time period for which such
Participant is required to file any such reports with respect to the portion of
his or her Account invested in accordance with the provisions of Section 6.3 of
the Plan, unless the Committee in its sole discretion shall determine otherwise.
.........7.5 Upon the death of a Participant prior to the complete distribution
his or her Account, the unpaid Account balance shall be paid in the sole
discretion of the Committee (a) in a lump sum to the Participant's designated
beneficiary within sixty (60) days following the date on which the Committee is
provided evidence of the Participant's death (or as soon as reasonably
practicable thereafter) or (b) in accordance with the Distribution Election made
by such Participant. In the event a beneficiary designation is not on file or
the designated beneficiary is deceased or cannot be located, payment will be
made to the Participant's estate.
.........7.6 Beneficiary designations may be changed by the Participants at any
time without the consent of any prior beneficiary.
.........7.7 Upon the total disability of a Participant, as determined by the
Social Security Administration, prior to the complete distribution of his or her
Account, the unpaid balance of his or her Account shall be paid in the sole
discretion of the Committee (a) in a lump sum to the Participant or his or her
legal representative within sixty (60) days following the date on which the
Committee receives notification of the determination of disability by the Social
Security Administration (or as soon as reasonable practicable thereafter) or (b)
in accordance with the Participant's Deferral Election.
.........7.8 Upon application made by a Participant, his or her designated
beneficiary, or an authorized legal representative, the Committee may in its
sole discretion determine to accelerate payments or, in the event of death or
total disability (as determined by Social Security Administration), may extend
or otherwise make payments in a manner different from the manner in which such
payment would otherwise be made under the Participant's Deferral Election in the
absence of such determination.
ARTICLE VIII
Miscellaneous Provisions
.........8.1 Neither the Participant, his or her beneficiary, nor his or her
legal representative shall have any rights to commute, sell, assign, transfer or
otherwise convey the right to receive any payments hereunder, which payments and
the rights thereto are expressly declared to be non-assignable and
nontransferable. Any attempt to assign or transfer the right to payments of this
Plan shall be void and have no effect.
.........8.2 An Employing Company maintaining an Account for the benefit of a
Participant shall neither reserve nor specifically set aside funds for the
payment of its obligations under the Plan, 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 or her Account
under the Plan, the assets from which such amount may be paid shall at all times
be subject to the claims of the creditors of the Participants' Employing
Companies.
.........8.3 The Plan may be amended, modified, or terminated by the Board of
Directors in its sole discretion at any time and from time to time; provided,
however, that no such amendment, modification, or termination shall impair any
rights to any amounts which have been earned or deferred under the Plan prior to
such amendment, modification, or termination. Payment in full in cash of the
amount credited to a Participant's Account as of the date of any amendment,
modification of termination of the Plan shall not be deemed to be an impairment
of the Participant's rights under the Plan. The Plan may also be amended or
modified by the Committee if such amendment or modification does not involve a
substantial increase in cost to any Employing Company.
.........8.4 It is expressly understood and agreed that the payments made in
accordance with the Plan are in addition to any other benefits or compensation
to which a Participant may be entitled or for which he or she may be eligible,
whether funded or unfunded, by reason of his or her employment with any
Employing Company.
.........8.5 There shall be deducted from each payment under the Plan the amount
of any tax required by any governmental authority to be withheld and paid over
by an Employing Company to such governmental authority for the account of the
person entitled to such distribution.
.........8.6 Any Compensation or Incentive Pay deferred by a Participant while
employed by an Employing Company shall not be considered "compensation," as the
term is defined in the Employee Savings Plan, the Employee Stock Ownership Plan,
or the Pension Plan. Distributions from a Participant's Account shall not be
considered wages, salaries or compensation under any other employee benefit
plan.
.........8.7 No provision of this Plan shall be construed to affect in any
manner the existing rights of an Employing Company to suspend, terminate, alter,
modify, whether or not for cause, the employment relationship of the Participant
and his or her Employing Company.
.........8.8 This Plan, and all rights under it, shall be governed by and
construed in accordance with the laws of the State of Georgia.
.........IN WITNESS WHEREOF, this Amended and Restated Deferred Compensation
Plan has been executed pursuant to resolutions of the Board of Directors of
Southern Company Services, Inc., this ___ day of March, 1998, to be effective as
provided herein.
......... SOUTHERN COMPANY SERVICES, INC.
......... By:______________________________
......... C. Alan Martin
..... Vice President, Human Resources
Attest:
By: ______________________________
Tommy Chisholm
Secretary
EXHIBIT 10(a)69
SOUTHERN COMPANY
PERFORMANCE DIVIDEND PLAN
AMENDED AND RESTATED
TROUTMAN SANDERS LLP
NationsBank Plaza
600 Peachtree Street, N.E., Suite 5200
Atlanta, Georgia 30308
(404) 885-3000
Effective January 1, 1998
<PAGE>
SOUTHERN COMPANY
PERFORMANCE DIVIDEND PLAN
Purposes
The purposes of the Southern Company Performance Dividend Plan are to
provide a financial incentive which will focus the efforts of certain key
employees on areas which will have a direct and significant influence on
corporate performance and to provide the potential for levels of compensation
which will enhance the Employing Companies' abilities to attract, retain and
motivate such key employees. In order to achieve these objectives, the Plan will
be based upon corporate performance as measured by total shareholder return or
such other performance measure which the Committee may determine under the terms
of the Plan.
ARTICLE I
Definitions
For purposes of the Plan, the following terms shall have the following
meanings unless a different meaning is plainly required by the context:
1.1 "Annual Dividend" shall mean the aggregate, annual dividend
declared by Southern Company on Common Stock for the Plan Year in which an Award
is made.
1.2 "Award" shall mean the awards granted pursuant to Article IV
hereof.
1.3 "Beneficial Ownership" shall mean beneficial ownership within the
meaning of Rule 13d-3 promulgated under the Exchange Act.
1.4 "Board of Directors" shall mean the Board of Directors of Southern
Company Services, Inc.
1.5 "Business Combination" shall mean a reorganization, merger or
consolidation of Southern Company or sale or other disposition of all or
substantially all of the assets of Southern Company.
1.6 "Committee" shall mean the Compensation Committee of the Board of
Directors of Southern Company.
1.7 "Common Stock" shall mean the common stock of Southern Company.
1.8 "Computation Period" shall mean a four-year period commencing the
first day of January of each year, provided, however, that the Computation
Period for the first three years beginning in the year of the effective date of
the Plan shall be one year, two years and three years, respectively, beginning
January 1, 1997.
1.9 "Consummation" shall mean the completion of the final act necessary
to complete a transaction as a matter of law, including, but not limited to, any
required approvals by the corporation's shareholders and board of directors, the
transfer of legal and beneficial title to securities or assets and the final
approval of the transaction by any applicable domestic or foreign governments or
agencies.
1.10 "Control" shall mean, in the case of a corporation, Beneficial
Ownership of more than 50% of the combined voting power of the corporation's
Voting Securities, or in the case of any other entity, Beneficial Ownership of
more than 50% of such entity's voting equity interests.
1.11 "Employing Company" shall mean Southern Company Services, Inc., or
any other affiliate or subsidiary (direct or indirect) of Southern Company,
which the Board of Directors may from time to time determine to bring under the
Plan and which shall adopt the Plan, and any successor of any of them.
1.12 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
1.13 "Group" shall mean group within the meaning of Section 14(d) of
the Exchange Act.
1.14 "Incumbent Board" shall mean those individuals who constitute the
Southern Board as of the Effective Date plus any individual who shall become a
director subsequent to such date whose election or nomination for election by
Southern Company's shareholders was approved by a vote of at least 75% of the
directors then comprising the Incumbent Board. Notwithstanding the foregoing, no
individual who shall become a director of the Southern Board subsequent to the
Effective Date whose initial assumption of office occurs as a result of an
actual or threatened election contest (within the meaning of Rule 14a-11 of the
Regulations promulgated under the Exchange Act) with respect to the election or
removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Southern Board shall be a
member of the Incumbent Board.
1.15 "Key Employee" shall mean any person who is or was employed by an
Employing Company who has been granted Stock Options.
1.16 "Participant" shall mean a Key Employee who satisfies the criteria
set forth in Article III.
1.17 "Payment Date" shall mean the date the check evidencing an Award
is endorsed by an authorized person of an Employing Company.
1.18 "Peer Group Common Stock" shall mean the common stock of the Peer
Group Companies.
1.19 "Peer Group Companies" shall mean those Companies designated by
Goldman Sachs as the 80 Utility Peer Group Companies as published quarterly and
as composed from time to time. In the event that Goldman Sachs no longer
publishes the 80 Utility Peer Group Companies, the Committee shall choose such
other and similar list of national peer group companies as published by a
similarly nationally recognized firm.
1.20 "Performance Based" shall mean compensation which qualifies as
"performance based" within the meaning of Code Section 162(m)(4)(c) and the
regulations thereunder.
1.21 "Permanent Disability" shall mean such permanent disability as
defined in The Southern Company Pension Plan.
1.22 "Person" shall mean any individual, entity or group within the
meaning of Section 13(d)(3) or 14(d)(2) of Exchange Act.
1.23 "Phantom Stock" shall mean phantom shares of Common Stock as
defined by The Southern Company Deferred Compensation Plan.
1.24 "Plan" shall mean the Southern Company Performance Dividend Plan.
1.25 "Plan Termination" shall mean the termination of the Plan by
Southern Company or an Employing Company following a Southern Change in Control
unless an equitable arrangement (embodied in an ongoing substitute or
replacement plan) has been made with respect to the Plan in connection with the
Southern Change in Control. For purposes of this Plan, an ongoing substitute or
alternative plan shall be considered an "equitable arrangement" if a nationally
recognized compensation consulting firm chosen by the Committee opines in
writing that the post-Southern Change in Control plan is an equitable substitute
or replacement of the Plan, and that such substitute or alternative plan
provides substantially similar target opportunities and a substantially similar
level of performance difficulty.
1.26 "Plan Year" shall mean the calendar year.
1.27 "Retirement" shall mean the termination of employment with an
Employing Company under the terms of The Southern Company Pension Plan or such
other retirement or early retirement plan or arrangement which the Committee
shall adopt and make available to a Participant.
1.28 "Southern Board" shall mean the Board of Directors of The Southern
Company.
1.29 "Southern Change in Control" shall mean any of the following:
(i) The Consummation of an acquisition by any Person of
Beneficial Ownership of 20% or more of Southern Company's Voting
Securities; provided, however, that for purposes of this subsection
(i), the following acquisitions of Southern's Voting Securities shall
not constitute a Change in Control:
(A) any acquisition directly from Southern Company;
(B) any acquisition by Southern Company;
(C) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by Southern or any
corporation controlled by Southern Company;
(D) any acquisition by a qualified pension plan or
publicly held mutual fund; (E) any acquisition by an Employee
or Group composed exclusively of Employees; or
(F) any Business Combination which would not
otherwise constitute a change in control because of the
application of clauses (A), (B) and (C) of Section 1.29(iii).
(ii) A change in the composition of the Southern Board whereby
individuals who constitute the Incumbent Board cease for any reason to
constitute at least a majority of the Southern Board; or
(iii) Consummation of a Business Combination, unless,
following such Business Combination, all of the following three
conditions are met:
(A) all or substantially all of the individuals and
entities who held Beneficial Ownership, respectively, of
Southern Company's Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly,
65% or more of the combined voting power of the Voting
Securities of the corporation surviving or resulting from such
Business Combination, (including, without limitation, a
corporation which as a result of such transaction holds
Beneficial Ownership of all or substantially all of Southern
Company's Voting Securities or all or substantially all of
Southern Company's assets) (such surviving or resulting
corporation to be referred to as "Surviving Company"), in
substantially the same proportions as their ownership,
immediately prior to such Business Combination, of Southern
Company's Voting Securities;
(B) no Person (excluding any corporation resulting
from such Business Combination, qualified pension plan,
publicly held mutual fund, Group composed exclusively of
Employees or employee benefit plan (or related trust) of
Southern Company, its subsidiaries or Surviving Company) holds
Beneficial Ownership, directly or indirectly, of 20% or more
of the combined voting power of the then outstanding Voting
Securities of Surviving Company except to the extent that such
ownership existed prior to the Business Combination; and
(C) at least a majority of the members of the board
of directors of Surviving Company were members of the
Incumbent Board at the earlier of the date of execution of the
initial agreement, or of the action of the Southern Board,
providing for such Business Combination.
1.30 "Southern Company" shall mean The Southern Company.
1.31 "Subsidiary Change in Control" shall mean the following:
(i) The Consummation of an acquisition by any Person of
Beneficial Ownership of 50% or more of the combined voting power of the
then outstanding Voting Securities of an Employing Company; provided,
however, that for purposes of this Subsection 1.31, any acquisition by
an Employee, or Group composed entirely of Employees, any qualified
pension plan, publicly held mutual fund or any employee benefit plan
(or related trust) sponsored or maintained by Southern Company or any
corporation Controlled by Southern Company shall not constitute a
Change in Control;
(ii) Consummation of a reorganization, merger or consolidation
of an Employing Company (an "Employing Company Business Combination"),
in each case, unless, following such Employing Company Business
Combination, Southern Company Controls the corporation surviving or
resulting from such Employing Company Business Combination; or
(iii) Consummation of the sale or other disposition of all or
substantially all of the assets of an Employing Company to an entity
which Southern Company does not Control.
1.32 "Southern Termination" shall mean the following:
(a) The Consummation of a reorganization, merger or
consolidation of Southern Company under circumstances where either (i)
Southern Company is not the surviving corporation or (ii) Southern
Company's Voting Securities are no longer publicly traded;
(b) The Consummation of a sale or other disposition of all or
substantially all of Southern Company's assets; or
(c) The Consummation of an acquisition by any Person of
Beneficial Ownership of all of Southern Company's Voting Securities
such that Southern Company's Voting Securities are no longer publicly
traded.
1.33 "Subsidiary Employee" shall mean an Employee of an Employing
Company which has undergone a Subsidiary Change in Control.
1.34 "Stock Option" shall mean those options to acquire Common Stock
awarded to Participants pursuant to the Southern Company Performance Stock Plan.
1.35 "Termination for Cause" or "Cause" shall mean the termination of a
Participant's employment by an Employing Company under any of the following
circumstances:
(a) The Participant willfully neglects or refuses to discharge
his or her duties to the Employing Company as an employee or refuses to
comply with any lawful or reasonable instructions given to him or her
by the Employing Company without reasonable excuse;
(b) The Participant is guilty of gross misconduct. For
purposes of this Plan, the following acts shall constitute gross
misconduct:
(i) any act involving fraud or dishonesty or breach
of appropriate regulations of competent authorities;
(ii) the carrying out of any activity or the making
of any statement which would prejudice and/or reduce the good
name and standing of Southern Company or an Employing Company
or would bring Southern Company or an Employing Company any
into contempt, ridicule or would reasonably shock or offend
any community in which Southern Company or an Employing
Company is located;
(iii) attendance at work in a state of intoxication
or otherwise being found in possession at his or her workplace
of any prohibited drug or substance, possession of which would
amount to a criminal offense;
(iv) assault or other act of violence against any
employee or other person during the course of the
Participant's employment; and
(v) conviction of any felony or misdemeanor involving
moral turpitude.
1.36 "Total Shareholder Return" or "TSR" shall mean the total amount an
investor would receive by investing $100 per quarter in Common Stock or in Peer
Group Common Stock, as the case may be, as determined by measuring the total
dividends which would have been paid on such Common Stock or Peer Group Common
Stock by reinvesting such dividends on a quarterly basis in additional shares of
Common Stock or Peer Group Common Stock as the case may be and the total gain or
loss on such Common Stock or Peer Group Common Stock as if such stock had been
sold at the closing price on the last day of the respective Computation Period.
1.37 "Voting Securities" shall mean the outstanding voting securities
of a corporation entitling the holder thereof to vote generally in the election
of such corporation's directors.
Where the context requires, words in the masculine gender shall include
the feminine and neuter genders, words in the singular shall include the plural,
and words in the plural shall include the singular.
<PAGE>
ARTICLE II
Plan Administration.
2.1 The Plan shall be administered by the Committee. The Committee is
authorized to establish such rules and to appoint such agents as it deems
appropriate for the proper administration of the Plan, and to make such
determinations and to take such steps in connection with the Plan or the
benefits provided hereunder as it deems necessary or advisable.
2.2 Plan Interpretation. The Committee shall have the exclusive
authority to interpret the Plan. The decision of the Committee with respect to
any question arising as to the grant of an Award to a Participant in the Plan,
the amount, term, form, and time of payment of Awards under the Plan, or any
other matter concerning the Plan shall be final, conclusive, and binding on both
Southern Company and the Participants.
ARTICLE III
Participants
3.1 Participation in the Plan shall be limited to Key Employees of the
Employing Companies, or in the case of death, their estates or beneficiaries,
holding Stock Options as of the last day of any Computation Period.
3.2 Any Participant who terminates his or her employment with an
Employing Company and who is not immediately re-employed with an affiliate of an
Employing Company prior to the Payment Date of any Award due under this Plan for
reasons other than death, Permanent Disability, or Retirement shall forfeit any
Award due under this Plan. If a Participant terminates his or her employment by
reason of death, Permanent Disability or Retirement, such Participant or his or
her estate or representative shall continue to be eligible to receive Awards
with respect to any Stock Options which remain outstanding in accordance with
their terms.
3.3 Notwithstanding any other provision of this Plan, no Participant
whose employment is terminated by an Employing Company for Cause shall be
eligible to receive an Award under this Plan.
3.4 Notwithstanding any other provision of this Plan, the maximum Award
for any Plan Year payable to any Participant with respect to Stock Options
awarded during such Plan Year shall be six million dollars ($6,000,000).
3.5 In the case of an individual who becomes a Participant subsequent
to January 1, 1997, such Participant shall participate in each Computation
Period which ends not less than two (2) years after becoming a Participant. A
new four-year measuring period shall begin each year in order to recognize the
need to link objectives over longer periods of time, to recognize changes in the
operating environment, and to encourage Participants to make long-term
decisions.
ARTICLE IV
Performance Dividend Award
4.1 Each Participant shall receive an Award on the last day of each
Computation Period which shall be based upon the number of vested and unvested,
outstanding Stock Options held by the Participant on the last day of such
Computation Period multiplied by the Annual Dividend multiplied by the Payout
Percentage determined in accordance with the following schedule:
Percentile of Southern TSR Payout Percentage
Versus Peer Group TSR
90th and above 100%
70th 75%
50th 50%
30th 25%
Below 30th 0%
The Payout Percentage for performance levels falling between the percentiles
listed above shall be interpolated on a straight line basis for any given Plan
Year. The Committee may increase the Payout Percentage by up to a factor of two
(2) with respect to such Participants and under such circumstances as the
Committee in its discretion shall deem appropriate.
4.2 The Payout Percentage set forth herein shall be based on Southern
Company's Total Shareholder Return during a Computation Period as compared to
the Total Shareholder Return ranking of the Peer Group Companies for such
Computation Period. The Total Shareholder Return of the Peer Group Companies
shall be determined annually by an independent certified public accountant and
shall be properly adjusted and annualized by such accountant so that the Peer
Group Companies' Total Shareholder Return may be accurately compared to that of
Southern Company.
4.3 Notwithstanding the above provisions, an Award shall not be granted
for any Computation Period ending with the Plan Year in which the current
earnings of Southern Company are less than the amount necessary to fund
dividends on its Common Stock at the rate such dividends were paid for the
immediately preceding Plan Year.
4.4 Awards shall be paid in cash on or before the 15th day of the third
month following the last day of the Computation Period or, with respect to those
Participants who are otherwise eligible to participate in the Southern Company
Deferred Compensation Plan, may be deferred by exercising an option to do so no
later than 12 months before any amount would otherwise be distributed pursuant
to this Section 4.4. If an election is made to defer the receipt of the amount
of any Award, such amount shall be deemed to be invested in Phantom Stock.
Dividend equivalents earned on such Phantom Stock shall be automatically
invested in additional shares of Phantom Stock.
ARTICLE V
Change in Control and Southern Termination
5.1 Southern Change in Control. Notwithstanding any other provision of
this Plan to the contrary, in the event of a Plan Termination within two (2)
years following a Southern Change in Control, each Participant who is an
employee of his Employing Company on the date of such Plan Termination shall be
entitled to receive within thirty (30) days of the Plan Termination, cash for
each Award held as of such date, based on actual performance under Section 4.1
hereof determined as of the date of the Plan Termination, and the Annual
Dividend declared prior to the date of the Plan Termination.
5.2 Subsidiary Change in Control. Notwithstanding any other provision
of this Plan to the contrary, in the event of a Subsidiary Change in Control,
each Subsidiary Employee on the date of such Change in Control whose employment
is not transferred upon such Subsidiary Change in Control to another Employing
Company shall be entitled to receive within thirty (30) days of the Subsidiary
Change in Control, cash for each Award held as of such date, based on actual
performance under Section 4.1 hereof determined as of the date on which the
Subsidiary Change in Control shall have occurred, and the Annual Dividend
declared prior to the date of the Subsidiary Change in Control.
5.3 Southern Termination. Notwithstanding any other provision of this
Plan to the contrary, in the event of a Southern Termination, each Participant
who is an employee of his Employing Company on the date of such Southern
Termination shall be entitled to receive within thirty (30) days of the Southern
Termination, cash for each Award held as of such date, based on actual
performance under Section 4.1 hereof determined as of the date on which the
Southern Termination shall have occurred, and the Annual Dividend declared prior
to the date of the Southern Termination.
ARTICLE VI
Miscellaneous Provisions
6.1 Neither the Participant, his or her beneficiary, nor his or her
personal representative shall have any rights to commute, sell, assign, transfer
or otherwise convey the right to receive any payments hereunder, which payments
and the rights thereto are expressly declared to be nonassignable and
nontransferable. Any attempt to assign or transfer the right to payments under
this Plan shall be void and have no effect.
6.2 An Employing Company shall neither reserve nor otherwise set aside
funds for the payments of any Awards under this Plan.
6.3 Except for the provisions of Article V, which may not be amended,
modified or terminated following a Southern Change in Control, a Subsidiary
Change in Control or a Southern Termination, the Plan may be amended, modified,
or terminated by the Board of Directors in its sole discretion at any time and
from time to time; provided, however, that no such amendment, modification, or
termination shall impair any rights to payments which have accrued under the
Plan prior to such amendment, modification, or termination.
6.4 It is expressly understood and agreed that Awards made in
accordance with the Plan are in addition to any other benefits or compensation
to which a Participant may be entitled or for which he or she may be eligible,
whether funded or unfunded, by reason of his or her employment with an Employing
Company.
6.5 There shall be deducted from the payment of each Award under the
Plan the amount of any tax required by any governmental authority to be withheld
and paid over by an Employing Company to such governmental authority for the
account of the person entitled to such distribution.
6.6 Any Awards paid to a Participant while employed by an Employing
Company shall not be considered in the calculation of the Participant's benefits
under any other employee welfare or pension benefit plan maintained by an
Employing Company, unless otherwise specifically provided therein.
6.7 This Plan, and all rights under it, shall be governed by and
construed in accordance with the laws of the State of Georgia.
6.8 Pooling Accounting. Notwithstanding anything to the contrary
herein, if, but for any provision of this Plan, a Change in Control transaction
would otherwise be accounted for as a pooling-of-interests under APB No.16
("Pooling Accounting") (after giving effect to any and all other facts and
circumstances affecting whether such Change in Control transaction would use
Pooling Accounting), such provision or provisions of this Plan which would
otherwise cause the Change in Control transaction to be ineligible for Pooling
Accounting shall automatically be void and ineffective in such a manner and to
the extent that by eliminating such provision or provisions of this Plan,
Pooling Accounting would be required for such Change in Control transaction and
Pooling Accounting is in fact used for such Change in Control transaction.
<PAGE>
IN WITNESS WHEREOF, Southern Company Services, Inc., through its duly
authorized officers, hereby adopts the Southern Company Performance Dividend
Plan this ____ day of _____________, 1999, to be effective ______________, 1998.
SOUTHERN COMPANY SERVICES, INC.
By:
Christopher C. Womack
Senior Vice President, Human Resources
Attest:
By:
Tommy Chisholm
Secretary
[CORPORATE SEAL]
EXHIBIT 10(a)71
SECOND AMENDMENT TO
THE SOUTHERN COMPANY
PENSION PLAN
WHEREAS, the Board of Directors of Southern Company Services, Inc. (the
"Company") heretofore adopted The Southern Company Pension Plan, as amended and
restated (the "Plan"), effective January 1, 1997; and
WHEREAS, the Company desires to amend the Plan to clarify the grant of
prior service credit to certain employees formerly employed by Commonwealth
Edison of Indiana; and
WHEREAS, the Company also desires to amend the Plan to discontinue
eligibility under the Plan for employees classified as temporary employees and
to cease the accrual of benefits of any temporary employees who may be
participating in the Plan effective as of August 31, 1998; and
WHEREAS, the Company also desires to amend the Plan to reflect the
corporate name change of certain Employing Companies; and
WHEREAS, the Company also desires to amend the Plan to make certain
other technical and miscellaneous corrections; and
WHEREAS, the Company is authorized pursuant to Section 13.1 of the Plan
to amend the Plan at any time.
NOW, THEREFORE, the Company hereby amends the Plan as follows to be
effective as provided herein:
1.
Effective January 1, 1998, Section 1.16 of the Plan, as amended by the
First Amendment to the Plan, is further amended by deleting the last sentence of
such Section and substituting the following in lieu thereof:
Notwithstanding the preceding, "Employee" shall not mean any person who
is classified by an Employing Company as an independent contractor
regardless of whether such classification is determined to be in error.
2.
Effective September 1, 1998, Section 2.5 of the Plan is amended by
adding the following sentence to the end of the first paragraph thereof:
Notwithstanding the foregoing, the exclusion set forth in Section 2.6
shall apply with respect to any temporary employee effective as of
September 1, 1998.
3.
Effective September 1, 1998, Section 2.6 of the Plan is amended by
deleting such subsection in its entirety and substituting the following in lieu
thereof:
2.6 Exclusion of certain categories of employees. Notwithstanding any
other provision of this Article II, leased employees and, effective September 1,
1998, any individuals classified by an Employing Company as temporary employees,
regardless of whether either such classification is determined to be in error,
shall not be eligible to participate in the Plan. Notwithstanding the preceding
sentence, temporary employees, defined as Employees in Section 1.16 and
participating in the Plan prior to July 1, 1991, are eligible to participate in
the Plan up through and including August 31, 1998.
4.
Effective January 1, 1998, Section 16.1(b) of the Plan as amended by
the First Amendment to the Plan is further amended by deleting such subsection
(b) in its entirety and substituting the following in lieu thereof:
(b) Former Commonwealth Edison of Indiana Employees. Effective January
1, 1998, notwithstanding any other provision of the Plan to the contrary, any
former employee of Commonwealth Edison of Indiana ("ComEd") who was employed by
Southern Energy Resources, Inc. on or before December 31, 1997 and is set forth
on a schedule of employees acknowledged by the Retirement Board (hereafter
"January 1 ComEd Employees") shall be eligible to participate in the Plan
effective January 1, 1998. In addition, any former employee of ComEd who becomes
employed by Southern Energy Resources, Inc. on or after January 1, 1998 but
prior to April 1, 1998 (hereafter "Date of Employment") and is set forth on the
schedule of employees acknowledged by the Retirement Board (hereafter "Pre-April
1 ComEd Employees") shall become a Participant as of the first day of the month
coincident with or next following such employee's Date of Employment. The
following provisions of this subparagraph (b) shall also apply with respect to
all January 1 ComEd Employees and Pre-April 1 ComEd Employees (hereafter jointly
referred to as "ComEd Scheduled Employees"):
(1) Such ComEd Scheduled Employee, if and when he attains his
Early Retirement Date, Normal Retirement Date, or Deferred Retirement
Date, or terminates service for any reason subject to the requirements
of Section 8.1 or 8.2, shall be entitled to receive Retirement Income
based on both his Accredited Service with an Employing Company and the
service accrued under the Commonwealth Edison Company of Indiana
Service Annuity System Plan (the "ComEd Plan") which shall be treated
as if Accredited Service under this Plan. To calculate such ComEd
Scheduled Employee's Retirement Income, the ComEd Scheduled Employee's
Accrued Retirement Income, as determined in accordance with Section
5.1, shall first be reduced by the Employee's accrued benefit in the
ComEd Plan, determined as if he retired from ComEd at his normal
retirement age, as that term is defined in the ComEd Plan on December
31, 1997. Thereafter, such Employee's Retirement Income shall be
subject to applicable reductions, if any, in accordance with Article V,
Section 8.1 and Section 8.2, as appropriate.
(2) For purposes of calculating such ComEd Scheduled
Employee's Social Security Offset under Section 5.4, the Social
Security Offset shall be determined by using the actual salary history
of the ComEd Scheduled Employee during his employment with any
Affiliated Employer, and ComEd. If the actual salary history is not
available from ComEd, such history shall be estimated in accordance
with Section 5.4.
(3) For vesting purposes, such ComEd Scheduled Employee shall
be entitled to receive Vesting Years of Service as provided in Section
1.41 and, in addition, shall be entitled to vesting service equal to
the sum of the years of service accrued under the ComEd Plan.
5.
Effective September 1, 1998, Section 17.1 (d) is amended by adding the
following sentence to the end thereof:
Notwithstanding the preceding, in the event a SEPCO Employee is
classified as a temporary employee and is eligible to participate in
the Plan as such in accordance with this Article XVII, such SEPCO
Employee shall be ineligible to participate in the Plan on and after
September 1, 1998.
6.
Effective January 1, 1998, Section 1.14 of the SEPCO Schedule which is
incorporated in the Plan by the First Amendment thereto, is amended by deleting
the last sentence of such section and substituting the following in lieu
thereof:
Notwithstanding the preceding, "Employee" shall not mean any person who
is classified by the Company as an independent contractor regardless of
whether such classification is determined to be an error.
7.
Effective September 1, 1998, Section 3.07 of the SEPCO Schedule which
is incorporated into the Plan by the First Amendment thereto, is amended by
deleting such section in its entirety and substituting the following in lieu
thereof:
Section 3.07 Notwithstanding any other provision of this Article 3 of
the SEPCO Schedule, Leased Employees and, effective September 1, 1998, any
individuals classified by the Company as temporary employees, regardless of
whether either such classification is determined to be an error, shall not be
eligible to participate in the Plan. Notwithstanding the preceding sentence,
temporary employees as defined in Section 1.14 of the SEPCO Schedule who were
participating in the SEPCO Plan as temporary employees prior to October 13,
1994, shall be eligible to participate in the Plan up to and including August
31, 1998.
8.
Effective July 1, 1998, Appendix A of the Plan is amended by deleting
such Appendix in its entirety and substituting the following in lieu thereof:
APPENDIX A
THE SOUTHERN COMPANY PENSION PLAN
EMPLOYING COMPANIES AS OF JULY 1, 1998
Alabama Power Company
Georgia Power Company
Gulf Power Company
Mississippi Power Company
Savannah Electric and Power Company
Southern Communications Services, Inc.
Southern Company Energy Solutions, Inc.
Southern Company Services, Inc.
Southern Energy Resources, Inc.
Southern Nuclear Operating Company, Inc.
9.
Except as amended herein by this Second Amendment, the Plan shall
remain in full force and effect.
IN WITNESS WHEREOF, Southern Company Services, Inc., through its duly
authorized officer, has adopted this Second Amendment to The Southern Company
Pension Plan pursuant to resolutions of the Board of Directors of Southern
Company Services, Inc. this ____ day of __________, 1998, to be effective as
stated herein.
SOUTHERN COMPANY SERVICES, INC.
By:
Title:
ATTEST
By: ________________________
Its: ________________________
<PAGE>
THIRD AMENDMENT TO
THE SOUTHERN COMPANY
PENSION PLAN
WHEREAS, the Board of Directors of Southern Company Services, Inc. (the
"Company") heretofore adopted The Southern Company Pension Plan, as amended and
restated (the "Plan"), effective January 1, 1997; and
WHEREAS, the Company desires to amend the Plan to modify the definition
of Earnings for appliance salespersons to include certain nonproductive pay
earnings types; and
WHEREAS, the Company desires to amend the Plan to grant prior service
credit to certain employees formerly employed by Commonwealth Energy Systems
("CES") and to provide for an offset of the CES retirement benefit; and
WHEREAS, the Company desires to amend the Plan to grandfather certain
employees of Southern Company Energy Marketing L.P. who are rehired by an
Employing Company; and
WHEREAS, the Company desires to clarify Plan language concerning the
Retirement Board's responsibility for controlling and managing Plan assets and
to clarify the calculation of the level income form of payment with respect to
Alternate Payees; and
WHEREAS, the Company is authorized pursuant to Section 13.1 of the Plan
to amend the Plan at any time.
NOW, THEREFORE, the Company hereby amends the Plan as follows to be
effective as provided herein:
1.
Effective July 1, 1998, Subsection 1.13(b) of the Plan shall be amended
by adding the following new language to the end thereof:
Effective as of July 1, 1998, "Earnings" shall also include, for
appliance salespersons, certain nonproductive pay earnings types as
determined from time to time by the Board of Directors and set forth on
Appendix B to the Plan, which Appendix may be updated from time to
time.
2.
Effective January 1, 1998, Section 5.5 of the Plan shall be amended by
deleting the last sentence thereof and by adding the following new language:
The Federal primary Social Security benefit used in calculating an
Employee's Retirement Income and adjustment described in the preceding
sentence shall be determined by using the salary history of the
Employee during his employment with any Affiliated Employer, as
calculated in accordance with Section 5.4. Notwithstanding the
preceding sentence with respect to an Alternate Payee, the adjustment
described in this paragraph shall be determined by using the Alternate
Payee's actual Social Security salary history and estimated age 65
Social Security benefit provided that the Alternate Payee secures this
information for the Retirement Board.
3.
Effective January 1, 1999, Article XVI of the Plan shall be amended by
adding the following to the end thereof:
(c) Former Commonwealth Energy System Employees.
(1) Effective January 1, 1999, notwithstanding any other
provision of the Plan to the contrary, any former employees of
Commonwealth Energy System ("CES") who were employed by Southern Energy
Resources, Inc. and are set forth on a schedule of employees
acknowledged by the Retirement Board (hereinafter "CES Employees")
shall be eligible to become a Participant as of the first day of the
month coincident with or next following the later of the CES Employee's
employment date or the date on which he first completes an Eligibility
Year of Service as provided in Paragraph (5) below.
(2) CES Employees who (A) were actively employed by CES on
January 1, 1997 and (B) attain their fortieth (40th) birthday on or
before January 1, 2002 shall not be subject to provisions of Article XV
of the Plan.
(3) If and when a CES Employee attains his Early Retirement
Date, Normal Retirement Date, or Deferred Retirement Date, or
terminates service for any reason subject to the requirements of
Section 8.1 or 8.2, he shall be entitled to receive Retirement Income
based on both his Accredited Service with an Employing Company and the
Credited Service as defined under The Pension Plan for Employees of
Commonwealth Energy System and Subsidiary Companies (the "CES Plan")
which shall be treated as if Accredited Service under this Plan.
However, prior to adjustment for forms of payment, a CES Employee's
Retirement Income will be reduced by the Actuarial Equivalent as
defined in Appendix D of the applicable amounts set forth in Appendix
C. Thereafter, such Employee's benefit shall be subject to applicable
reductions, if any, in accordance with Article V, Section 8.1 and
Section 8.2, as appropriate.
(4) For purposes of calculating Retirement Income, such CES
Employee's actual salary history with CES shall be included. With
respect to determining the Social Security Offset, if the actual salary
history is not available from CES, such history shall be estimated in
accordance with Section 5.4.
(5) For vesting and participation purposes, such CES Employee
shall be entitled to receive Vesting and Eligibility Years of Service
as provided under the Plan and, in addition, shall be entitled to
vesting and eligibility service equal to the sum of the Years of
Service as defined and accrued under the CES Plan.
(6) Notwithstanding any provision in this Plan to the
contrary, prior to the offset described in Paragraph 3 above, a CES
Employee will be entitled to his Retirement Income or his Retirement
Allowance or vested benefit determined under Appendix D as of the
earlier of his retirement, termination of employment, or December 31,
2001 whichever has the greater Actuarial Equivalent value as defined in
Appendix D. Such determination will be made prior to any adjustment for
forms of payments.
4.
Effective February 11, 1999, Section 10.9 of the Plan shall be amended
by deleting such section in its entirety and replacing it with the following:
Section 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 insofar as
such control or management is assigned under the Trust Agreement to a
Person, including but not limited to an Asset Manager, as those terms
are defined under the Trust Agreement.
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 Southern Company Pension Fund Investment Review
Committee.
5.
Effective January 1, 1999, Section 15.1 of the Plan shall be amended by
adding the following new language to the end thereof:
(e) Notwithstanding paragraph (c) of this Section 15.1, employees that
have been previously employed by an Employing Company, transferred to
Southern Company Energy Marketing, L.P., subsequently transfer back to
an Employing Company, and are not described in paragraph (a) of this
Section 15.1, shall not be subject to this Article XV but shall be
subject to eligibility to participate in the Plan in accordance with
the provisions of Article II.
6.
Except as amended herein by this Third Amendment, the Plan shall remain
in full force and effect.
IN WITNESS WHEREOF, Southern Company Services, Inc., through its duly
authorized officer, has adopted this Third Amendment to The Southern Company
Pension Plan pursuant to resolutions of the Board of Directors of Southern
Company Services, Inc. this ____ day of __________, 1999, to be effective as
stated herein.
SOUTHERN COMPANY SERVICES, INC.
By:
Title:
ATTEST
By: ________________________
Its: ________________________
<PAGE>
APPENDIX B
Nonproductive Pay Earnings Types
Earnings Code Earnings Description
003 Salesperson - Hourly
092 Holiday Taken
093 Meetings
095 Meetings - Safety
096 Disability 100%
100 Disability Extended Approval
106 Leave - Death
108 Occupational Injury
111 Jury Duty
112 Training
113 Safety Training
115 Vacation
116 Vacation Special Circumstances
117 Vacation FMLA Employee
118 Vacation FMLA Family Care
119 Time Off With Pay
125 Holiday Banked - Taken
127 Vacation In Lieu Of Disability
442 DISABILITY FMLA EMPLOYEE
EXHIBIT 10(a)72
SOUTHERN COMPANY
PERFORMANCE STOCK PLAN
AMENDED AND RESTATED
TROUTMAN SANDERS LLP
NationsBank Plaza
600 Peachtree Street, N.E., Suite 5200
Atlanta, Georgia 30308
(404) 885-3000
Effective January 1, 1998
<PAGE>
SOUTHERN COMPANY PERFORMANCE STOCK PLAN
AMENDED AND RESTATED
Purposes
This Southern Company Performance Stock Plan, as amended and restated,
is intended to maximize the long-term success of Southern Company, ensure a
balanced emphasis on both current and long-term performance, enhance
Participants' identification with shareholders' interests, and facilitate the
attraction and retention of key individuals with outstanding ability.
ARTICLE I
Definitions. Whenever used in the Plan, the following terms shall have
the meaning set forth below:
1.1 "Award" shall mean, individually and collectively, any Option,
Stock Appreciation Right or Restricted Stock granted under the Plan.
1.2 "Award Document" shall mean the written document evidencing the
grant of an Award and setting forth the terms and conditions thereof.
1.3 "Base Value" shall mean the Fair Market Value of a Stock
Appreciation Right on the date of its grant.
1.4 "Beneficial Ownership" shall mean beneficial ownership within the
meaning of Rule 13d-3 promulgated under the Exchange Act.
1.5 "Board" or "Board of Directors" shall mean the Board of Directors
of Southern Company.
1.6 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.7 "Committee" shall mean the Compensation Committee of the Board of
Directors composed solely of not less than three (3) Nonemployee Directors and,
to the extent necessary for any Award intended to qualify as Performance Based
to so qualify, each member of the Committee shall be an Outside Director.
1.8 "Common Stock" shall mean the common stock of Southern Company.
1.9 "Consummation" shall mean the completion of the final act necessary
to complete a transaction as a matter of law, including, but not limited to, any
required approvals by the corporation's shareholders and board of directors, the
transfer of legal and beneficial title to securities or assets and the final
approval of the transaction by any applicable domestic or foreign governments or
agencies.
1.10 "Control" shall mean, in the case of a corporation, Beneficial
Ownership of more than 50% of the combined voting power of the corporation's
Voting Securities, or in the case of any other entity, Beneficial Ownership of
more than 50% of such entity's voting equity interests.
1.11 "Covered Employee" shall mean a Participant who is, as of the last
day of Southern Company's fiscal year in which the Participant shall be required
to recognize taxable income with respect to an Award, a "covered employee"
within the meaning of Code section 162(m)(3) and the regulations thereunder.
1.12 "Director" shall mean any person who is currently a member of the
Board of Directors or of the board of directors of an Employing Company.
1.13 "Disability" shall mean total and permanent disability as
determined by the Social Security Administration.
1.14 "Effective Date" shall mean January 1, 1998.
1.15 "Employee" shall mean any person who is currently employed by an
Employing Company.
1.16 "Employing Company" shall mean any affiliate or subsidiary (direct
or indirect) of Southern Company, which the Board of Directors may from time to
time determine to bring under the Plan and which may adopt the Plan, and any
successor of any of them.
The Employing Companies as of January 1, 1998 are:
Alabama Power Company
Georgia Power Company
Gulf Power Company
Mississippi Power Company
Savannah Electric and Power Company
Southern Communications Services, Inc.
Southern Company Services, Inc.
Southern Energy Resources, Inc.
Southern Nuclear Operating Company, Inc.
Southern Company Energy Solutions, Inc.
1.17 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
1.18 "Fair Market Value" shall mean the average of the high and low
prices at which a share of Common Stock shall have been traded on the respective
measurement date, such as the date of grant or the exercise of an Award, or on
the next preceding trading day if such date was not a trading date, as reported
on the New York Stock Exchange-Composite Transactions Listing, or as otherwise
determined by the Committee. In no event shall the Fair Market Value equal less
than the par value of the Common Stock.
1.19 "Group" shall mean group within the meaning of Section 14(d) of
the Exchange Act.
1.20 "Incentive Stock Option" shall mean a stock option satisfying the
requirements of Section 422 of the Code granted pursuant to Section 4.1(b) and
designated by the Committee as an Incentive Stock Option.
1.21 "Nonemployee Director" shall mean a Director of Southern Company
who is a "nonemployee director" within the meaning of Rule 16b-3 promulgated
under the Exchange Act.
1.22 "Nonqualified Stock Option" shall mean an Option, other than an
Incentive Stock Option, granted pursuant to Section 4.1(c).
1.23 "Option" shall mean, individually and collectively, an Incentive
Stock Option or a Nonqualified Stock Option to purchase Common Stock.
1.24 "Optionee" shall mean a person to whom an Option has been granted
under the Plan.
1.25 "Option Price" shall mean the price per share of Common Stock set
by the grant of an Option, but in no event less than the Fair Market Value of
the Common Stock on the date of grant.
1.26 "Outside Director" shall mean a Director of Southern Company who
is an "outside director" within the meaning of Section 162(m) of the Code and
the regulations promulgated thereunder.
1.27 "Participant" shall mean any Director or Employee who satisfies
the criteria set forth in Article III.
1.28 "Performance-Based" shall mean compensation which qualifies as
"performance-based" within the meaning of Code section 162(m)(4)(c) and the
regulations thereunder.
1.29 "Person" shall mean any individual, entity or group within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act.
1.30 "Plan" shall mean this Southern Company Performance Stock Plan, as
amended and restated and as may be further amended from time to time.
1.31 "Restricted Stock" shall mean an Award granted pursuant to Section
4.1(e).
1.32 "Retirement" shall mean the termination of service or employment
by a Participant on or after age 65 or as otherwise determined by the Committee
in its sole discretion.
1.33 "Separation Date" shall mean, as determined by the Committee, the
date on which a Participant's service or employment with Southern Company or an
Employing Company terminates for reasons other than his transfer of service or
employment to Southern Company or another Employing Company. Whether any leave
of absence shall constitute a termination of service or employment for the
purposes of the Plan shall be determined in each case by the Committee in its
sole discretion.
1.34 "Stock Appreciation Right" or "SAR" shall mean a right to any
appreciation in value of shares of Common Stock granted pursuant to Section
4.1(d).
1.35 "Southern Company" shall mean The Southern Company.
1.36 "Southern Termination" shall mean the following:
(a) The Consummation of a reorganization, merger or
consolidation of Southern Company under circumstances where either (i)
Southern Company is not the surviving corporation or (ii) Southern
Company's Voting Securities are no longer publicly traded;
(b) The sale or other disposition of all or substantially all
of Southern Company's assets; or
(c) The Consummation of an acquisition by any Person of
Beneficial Ownership of all of Southern Company's Voting Securities
such that Southern Company's Voting Securities are no longer publicly
traded.
1.37 "Subsidiary Change in Control" shall mean the following:
(a) The Consummation of an acquisition by any Person of
Beneficial Ownership of 50% or more of the combined voting power of the
then outstanding Voting Securities of an Employing Company; provided,
however, that for purposes of this Subsection 1.37, any acquisition by
an Employee, or Group composed entirely of Employees, any qualified
pension plan, publicly held mutual fund or any employee benefit plan
(or related trust) sponsored or maintained by Southern Company or any
corporation Controlled by Southern Company shall not constitute a
Change in Control;
(b) The Consummation of a reorganization, merger or
consolidation of an Employing Company (an "Employing Company Business
Combination"), in each case, unless, following such Employing Company
Business Combination, Southern Company Controls the corporation
surviving or resulting from such Employing Company Business
Combination; or
(c) The Consummation of the sale or other disposition of all
or substantially all of the assets of an Employing Company to an entity
which Southern Company does not Control.
1.38 "Subsidiary Employee" shall mean an Employee of an Employing
Company which has undergone a Subsidiary Change in Control whose employment is
not immediately transferred to another Employing Company upon such Subsidiary
Change in Control.
1.39 "Voting Securities" shall mean the outstanding voting securities
of a corporation entitling the holder thereof to vote generally in the election
of such corporation's directors.
Where the context requires, words in the masculine gender shall include
the feminine and neuter genders, words in the singular shall include the plural,
and words in the plural shall include the singular.
ARTICLE II
2.1 Plan Administration. The Plan shall be administered by the
Committee. The Committee is authorized to establish such rules, to appoint such
agents and to delegate such authority as it deems appropriate for the proper
administration of the Plan, including, but not limited to, the delegation of
authority to such person or persons to exercise the discretion provided in
Section 5.1 hereof to determine whether a Participant may exercise an Award
subsequent to termination of employment, and to make such determinations and to
take such steps in connection with the Plan or the benefits provided hereunder
as it deems necessary or advisable.
2.2 Plan Interpretation. The Committee shall have the exclusive
authority to interpret the Plan. The decision of the Committee with respect to
any question arising as to the grant of an Award to a Participant in the Plan,
the amount, term, form, and time of payment of Awards under the Plan, or any
other matter concerning the Plan shall be final, conclusive, and binding on both
Southern Company and the Participants.
ARTICLE III
3.1 Eligibility. The Participants in the Plan shall be limited to
Directors and to those Employees, as determined by the Committee, who have a
significant impact on the long-term performance and success of Southern Company.
Subject to the terms of the Plan, the Committee shall identify individuals
eligible to become Participants in the Plan, select from time to time the
Participants to whom Awards shall be granted and shall determine the number of
Awards to be granted.
ARTICLE IV
4.1 Awards.
(a) General. Beginning January 1, 1998 and thereafter not more
frequently than once each calendar year, the Committee shall determine
the forms and amounts of Awards for Participants. All Awards shall be
subject to the terms and conditions of the Plan and to such other terms
and conditions consistent with the Plan as the Committee deems
appropriate. Awards under the Plan need not be uniform and Awards under
two (2) or more paragraphs may be combined in one Award Document. Any
combination of Awards may be granted at one time and on more than one
occasion to the same Participant. Such Awards may take the following
forms, in the Committee's sole discretion:
(b) Incentive Stock Options. These shall be stock options
within the meaning of Section 422 of the Code to purchase Common Stock.
In addition to other restrictions contained in the Plan, an Incentive
Stock Option (1) shall not be exercised more than ten (10) years after
the date it is granted, (2) shall not have an Option Price less than
the Fair Market Value of Common Stock on the date the Incentive Stock
Option is granted, (3) shall otherwise comply with Section 422 of the
Code, (4) shall be granted only to Employees and (5) shall be
designated as an "Incentive Stock Option" by the Committee. The
aggregate Fair Market Value of Common Stock, determined at the time of
each grant, for which any Optionee may vest in Incentive Stock Options
under this Plan for any calendar year shall not exceed $100,000.
(c) Nonqualified Stock Options. These shall be stock options
to purchase Common Stock which are not designated by the Committee as
"Incentive Stock Options." At the time of the grant, the Committee
shall determine the Option exercise period, the Option Price, and such
other conditions or restrictions on the exercise of the Nonqualified
Stock Option as the Committee deems appropriate. In addition to other
restrictions contained in the Plan, a Nonqualified Stock Option (1)
shall not be exercised more than ten (10) years after the date it is
granted, and (2) shall not have an Option Price less than 100% of the
Fair Market Value of Common Stock on the date the Nonqualified Stock
Option is granted.
(d) Stock Appreciation Rights. These shall be rights that on
exercise entitle the holder to receive the excess of (1) the Fair
Market Value of Common Stock on the date of exercise over (2) its Base
Value multiplied by (3) the number of SARs exercised. Such rights shall
be satisfied in cash, stock, or a combination thereof, as determined by
the Committee. Stock Appreciation Rights granted under the Plan may be
granted in the sole discretion of the Committee in conjunction with an
Incentive Stock Option or Nonqualified Stock Option under the Plan. The
Committee may impose such conditions or restrictions on the exercise of
SARs as it deems appropriate and may terminate, amend, or suspend such
SARs at any time. SARs granted under this Plan shall not be exercised
more than ten (10) years after the date of grant.
(e) Restricted Stock. Restricted Stock shall be shares of
Common Stock held by Southern Company for the benefit of a Participant
without payment of consideration, except as otherwise may be determined
by the Committee in its discretion, with restrictions or conditions
upon the Participant's right to retain, transfer or sell such shares.
The following provisions shall be applicable to Restricted Stock
Awards:
(1) Stock Power. Each certificate for Restricted
Stock shall be registered in the name of the Participant and
shall be deposited by him with Southern Company, together with
a stock power endorsed in blank.
(2) Restriction Period. At the time of making a
Restricted Stock Award, the Committee shall establish the
"Restriction Period" applicable thereto. Such Restriction
Period may be up to ten (10) years as determined by the
Committee. The Committee may provide for the annual lapse of
restrictions with respect to a specified percentage of the
Restricted Stock, provided the Participant satisfies all
eligibility requirements at such time.
(3) Dividends. The Participant shall be entitled to
receive dividends during the Restriction Period and shall have
the right to vote such Common Stock and all other
shareholder's rights except the following:
(i) the Participant shall not be entitled to
delivery of the stock certificate during the
Restriction Period,
(ii) Southern Company shall retain custody
of the Common Stock during the Restriction Period,
and
(iii) a breach of a restriction or a breach
of the terms and conditions established by the
Committee with respect to the Restricted Stock shall
cause a forfeiture of the Restricted Stock.
4.2 Award Document. After the Committee determines the form and amount
of a Participant's Award, it shall cause Southern Company to prepare an Award
Document to be delivered to the Participant setting forth the form and amount of
the Award and any conditions and restrictions on the Award imposed by the Plan
and the Committee.
4.3 Exercise and Payment. The exercise of an Option shall be made only
by a written notice delivered in person or by mail to the Secretary of Southern
Company at Southern Company's principal executive office, specifying the number
of shares of Common Stock to be purchased and accompanied by payment therefore
and otherwise in accordance with the Award Document pursuant to which the Option
was granted. The purchase price for any shares of Common Stock purchased
pursuant to the exercise of an Option shall be paid, as determined by the
Committee in its discretion and set forth in the Award Document at the time of
grant, in either of the following forms (or any combination thereof): (i) cash
or (ii) the transfer of shares of Common Stock with a Fair Market Value equal to
the aggregate exercise price of the Option to Southern Company upon such terms
and conditions as determined by the Committee. In addition, Options may be
exercised through a registered broker-dealer pursuant to such cashless exercise
procedures (other than the withholding of shares of Common Stock that would
otherwise be acquired upon the exercise of such Option) which are, from time to
time, deemed acceptable by the Committee, and the Committee may authorize that
the purchase price payable upon exercise of an Option may be paid by having
shares of Common Stock withheld that otherwise would be acquired upon such
exercise. Any shares of Common Stock transferred to Southern Company (or
withheld upon exercise) as payment of the purchase price under an Option shall
be valued at their Fair Market Value on the day preceding the date of exercise
of such Option. The Optionee shall deliver the Award Document evidencing the
Option to the Secretary of Southern Company who shall endorse thereon a notation
of such exercise and return such Award Document to the Optionee. No fractional
shares of Common Stock (or cash in lieu thereof) shall be issued upon exercise
of an Option and the number of shares of Common Stock that may be purchased upon
exercise shall be rounded to the nearest number of whole shares of Common Stock.
ARTICLE V
5.1 Termination of Service or Employment. A Participant whose service
as a Director or whose employment terminates for reasons other than Retirement,
Disability, or death shall, in the discretion of the Committee, have no right to
receive any benefit or payment for existing Awards under the Plan. Any
outstanding Award shall terminate on the Participant's Separation Date;
provided, however, that the Committee or its designee, in its or his sole
discretion, may permit the exercise of any outstanding Award after the
Participant's Separation Date, at such time and in such manner as the Committee
or such designee may determine, but in no event in the case of Incentive Stock
Options shall such exercise be beyond the earlier of (a) three (3) months from
the Participant's Separation Date or (b) the expiration date of the Award, to
the extent exercisable on such Participant's Separation Date.
5.2 Death of a Participant. Unless otherwise provided in the Award
Document, in the event of the death of a Participant prior to the exercise of
all Incentive Stock Options, Nonqualified Stock Options, and Stock Appreciation
Rights granted to such Participant, the administrator of the deceased
Participant's estate, the executor under his will, or the person or persons to
whom the Options or SARs shall have been validly transferred by such executor or
administrator pursuant to the will or laws of intestate succession shall have
the right, within thirty-six (36) months from the date of such Participant's
death, but not beyond the expiration date of the Options or SARs, to exercise
such Options or SARs to the extent exercisable on such Participant's Separation
Date.
5.3 Retirement.
(a) Incentive Stock Options. In the event of the termination
of a Participant's employment as result of his Retirement prior to the
exercise of all Incentive Stock Options granted to the Participant,
such Participant shall have the right, within three (3) months of his
Separation Date, but not beyond the expiration date of such Options, to
exercise such Incentive Stock Options to the extent exercisable on his
Separation Date.
(b) Nonqualified Stock Options and SARs. Unless otherwise
provided in the Award Document, in the event of the termination of a
Participant's employment as a result of his Retirement prior to the
exercise of all Nonqualified Stock Options or Stock Appreciation Rights
granted to the Participant, such Participant shall have the right,
within thirty-six (36) months of his Separation Date, but not beyond
the expiration date of such Nonqualified Stock Options or SARs, to
exercise such Nonqualified Stock Options or SARs to the extent
exercisable on his Separation Date.
5.4 Disability.
(a) Incentive Stock Options. In the event of the termination
of a Participant's employment due to Disability prior to the exercise
of all Incentive Stock Options granted to the Participant, such
Participant or his legal representative shall have the right, within
twelve (12) months of his Separation Date, but not beyond the
expiration date of such Incentive Stock Options, to exercise such
Incentive Stock Options to the extent exercisable on his Separation
Date.
(b) Nonqualified Stock Options and SARs. Unless otherwise
provided in the Award Document, in the event of the termination of a
Participant's employment due to Disability prior to the exercise of all
Nonqualified Stock Options or Stock Appreciation Rights granted to the
Participant, such Participant or his legal representative shall have
the right, within thirty-six (36) months of his Separation Date, but
not beyond the expiration date of such Nonqualified Stock Options or
SARs, to exercise such Nonqualified Stock Options or SARs to the extent
exercisable on his Separation Date.
5.5 Change in Control.
(a) Subsidiary Change in Control. Notwithstanding any other
provision of the Plan to the contrary, in the event of a Subsidiary
Change in Control:
(i) Any Options and Stock Appreciation Rights held by
a Subsidiary Employee which are outstanding as of the date
such Subsidiary Change in Control is determined to have
occurred, and which are not then exercisable and vested, shall
become fully exercisable and vested to the full extent of the
original grant; provided, that in the case of a Subsidiary
Employee holding a Stock Appreciation Right who is actually
subject to Section 16(b) of the Exchange Act, such Stock
Appreciation Right shall not become fully vested and
exercisable unless it shall have been outstanding for at least
six months as of the date such Subsidiary Change in Control is
determined to have occurred.
(ii) The restrictions and deferral limitations
applicable to any Restricted Stock held by a Subsidiary
Employee shall lapse, and such Restricted Stock shall become
free of all restrictions and limitations and become fully
vested and transferable to the full extent of the original
grant.
(iii) The restrictions and deferral limitations and
other conditions applicable to any other Awards held by
Subsidiary Employees shall lapse, and such other Awards shall
become free of all restrictions, limitations or conditions and
become fully vested and transferable to the full extent of the
original grant.
(b) Southern Termination. Notwithstanding any other provision
of the Plan to the contrary, in the event of a Southern Termination:
(i) Any Options and Stock Appreciation Rights which
are outstanding as of the date such Southern Termination is
determined to have occurred, and which are not then
exercisable and vested, shall become fully exercisable and
vested to the full extent of the original grant; provided,
that in the case of a Participant holding a Stock Appreciation
Right who is subject to Section 16(b) of the Exchange Act,
such Stock Appreciation Right shall not become fully vested
and exercisable at such time if such actions would result in
liability to the Participant under Section 16(b), provided
further, that any such actions not taken as a result of the
rules under Section 16(b) shall be effected as of the first
date that such activity would no longer result in liability
under such section.
(ii) The restrictions and deferral limitations
applicable to any Restricted Stock shall lapse, and such
Restricted Stock shall become free of all restrictions and
limitations and become fully vested and transferable to the
full extent of the original grant.
(iii) The restrictions and deferral limitations and
other conditions applicable to any other Awards under the Plan
shall lapse, and such other Awards shall become free of all
restrictions, limitations or conditions and become fully
vested and transferable to the full extent of the original
grant.
(iv) Any Options, Stock Appreciation Rights or
Restricted Stock which are outstanding as of the date such
Southern Termination is determined to have occurred, shall be
converted into or replaced by options, stock appreciation
rights or restricted stock, as the case may be, in the
Surviving Company, or the corporation which has acquired all
of Southern Company's Common Stock or assets. In the event of
such conversion or replacement, the terms of the replacement
options or stock appreciation rights shall preserve with
respect to each Option and each SAR the spread between the
Fair Market Value of the shares subject to the Options or SARs
and the Option Price or Base Value, as the case may be, as
determined immediately prior to the Southern Termination.
Similarly, the terms of replacement restricted stock shall
preserve the Fair Market Value of each share of Restricted
Stock as determined immediately prior to the Southern
Termination. No replacement option, stock appreciation right
or share of restricted stock received shall be subject to any
terms which are less favorable than those which existed with
respect to the original Option, SAR or share of Restricted
Stock immediately prior to the Southern Termination.
(v) In the event that it is not possible to effect
the conversion set forth in Section 5.5(b)(iv) hereof, any and
all outstanding Options, Stock Appreciation Rights and
Restricted Stock as of the date of the Southern Termination
which are not so converted shall be terminated and the
affected Participants shall receive within thirty (30) days of
the Southern Termination cash equal to the difference between
the Option Price and Fair Market Value, in the case of
Options, the Base Value and Fair Market Value, in the case of
SARs and equal to the Fair Market Value, in the case of
Restricted Stock. For purposes of this Section 5.5(b)(v), Fair
Market Value shall be determined as of the day prior to the
date of the Southern Termination.
<PAGE>
ARTICLE VI
6.1 Limitation of Shares of Common Stock Available under the Plan.
(a) Share Limit. The total number of shares of Common Stock
available to be granted by the Committee as Awards to the Participants
under the Plan shall not exceed 40,000,000 shares. Upon a change in
capitalization, the maximum number of shares of Common Stock referred
to in the preceding sentence shall be adjusted in number and kind
pursuant to Section 7.1 hereof.
(b) Share Reduction. The total number of shares available
under Section 6.1(a) shall be reduced from time to time in the manner
specified:
(1) Incentive Stock Options and Nonqualified Stock
Options. The grant of an Incentive Stock Option and
Nonqualified Stock Option shall reduce the available shares by
the number of shares subject to such Option.
(2) Stock Appreciation Rights. The grant of Stock
Appreciation Rights shall reduce the available shares by the
number of SARs granted; provided, however, if SARs are granted
in conjunction with an Option and the exercise of such Option
would cancel the SARs and vice versa, then the grant of the
SARs will only reduce the amount available by the excess, if
any, of the number of SARs granted over the number of shares
subject to the related Option.
(3) Restricted Stock. The grant of Restricted Stock
shall reduce the available shares by the number of shares of
Restricted Stock granted.
(c) Share Increase. The total number of shares available under
Section 6.1(a) shall be increased from time to time in the manner
specified:
(1) Incentive Stock Options and Nonqualified Stock
Options. The lapse or cancellation of an Incentive Stock
Option or Nonqualified Stock Option shall increase the
available shares by the number of shares released from such
Option; provided, however, in the event the cancellation of an
Option is due to the exercise of SARs related to such Option,
the cancellation of such Option shall only increase the amount
available by the excess, if any, of the number of shares
released from such Option over the number of SARs exercised.
(2) Stock Appreciation Rights. The lapse or
cancellation of Stock Appreciation Rights shall increase the
available shares by the number of SARs which lapse or are
canceled; provided, however, in the event the cancellation of
such SARs is due to the exercise of an Option related to such
SARs, the cancellation of such SARs shall only increase the
available shares by the excess, if any, of the number of SARs
canceled over the number of shares delivered on the exercise
of such Option.
(3) Restricted Shares. The reversion of Restricted
Stock to Southern Company due to the breach or occurrence of a
restriction or failure to satisfy a condition on such shares
shall increase the available shares by the number of shares of
Restricted Stock reverted.
6.2 Maximum Shares to Participant. The maximum number of shares of
Common Stock which may be the subject of Awards to a Participant during any
calendar year during the term of the Plan shall be 1,000,000.
ARTICLE VII
7.1 Adjustment Upon Changes in Capitalization. The total number of
shares of Common Stock available for Awards under the Plan or allocable to any
individual Participant, the number of shares of Common Stock subject to
outstanding Options, the exercise price for such Options, the number of
outstanding SARs, the Base Value of such SARs and the Award limit set forth in
subsection 6.2 shall be appropriately adjusted by the Committee in the event of
any increase or decrease in the number of outstanding shares of Common Stock
resulting from any change in Southern Company's capital structure, including but
not limited to any stock dividend, subdivision or combination of shares, or
reclassification.
7.2 Merger, Consolidation or Tender Offer. In the event of a merger or
consolidation of Southern Company or a tender offer for shares of Common Stock,
or in anticipation of such merger, consolidation, or tender offer, the Committee
may make such adjustments with respect to Awards under the Plan and take such
other action as it deems necessary or appropriate to reflect such merger,
consolidation, or tender offer, including without limitation the substitution of
new Awards, the termination or adjustment of outstanding Awards, the
acceleration of Awards, or the removal of limitations or restrictions on
outstanding Awards.
ARTICLE VIII
8.1 Withholding Taxes. Southern Company or the Employing Company, as
the case may be, of the Participant shall deduct from all payments and
distributions in cash under the Plan any taxes required to be withheld for
federal, state, or local governments. In the event distributions are made in
shares of Common Stock, Southern Company shall retain the value of sufficient
shares to equal the amount of the tax required to be withheld in respect of such
distributions.
8.2 Service or Employment. The establishment of the Plan and Awards
hereunder shall not be construed as conferring on any Participant any right to
continued service or employment, and the service or employment of any
Participant may be terminated without regard to the effect which such action
might have upon him or her as a Participant.
8.3 Non-Alienation of Benefits. Except as otherwise provided in Section
8.5 hereof, or as may otherwise be provided in the Participant's Award Document
with respect to Awards other than Incentive Stock Options, and other than as
specifically provided with regard to the death of a Participant, no benefit
under the Plan shall be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, or charge, excluding the use of
Options under this Plan as collateral in exercising such Options. Any attempt to
do so shall be null and void. No such benefits shall, prior to receipt thereof
by the Participant, be in any manner liable for or subject to the debts,
contracts, liabilities, engagement, or torts of the Participant.
8.4 Non-Alienation of Election or Exercise Rights. Except as otherwise
provided in Section 8.5 hereof, or as may otherwise be provided in the
Participant's Award Document with respect to Awards other than Incentive Stock
Options, no election as to benefits or exercise of Options, Stock Appreciation
Rights, or other rights may be made during a Participant's lifetime by anyone
other than the Participant.
8.5 Transfer of Awards (Other Than ISOs) to Revocable Trust. Awards
other than Incentive Stock Options may be transferred by a Participant to a
revocable trust under circumstances where the grantor Participant is the trustee
or co-trustee of such revocable trust and the trust beneficiaries are limited to
the grantor Participant and, in the event of the Participant's death, the
grantor's spouse, lineal descendants and lineal ancestors. Powers of the
non-Participant co-trustee must be limited to the exercise of the Awards held by
the trust in the event of the Participant's death or incapacity. Written notice
of the Participant's intent to transfer Awards under this Section 8.5 must be
delivered to the Vice President of Human Resources of Southern Company Services,
Inc. prior to such transfer.
8.6 Amendment, Modification, and Termination of the Plan. Except for
the provisions of Section 5.5 hereof, which cannot be amended, modified or
terminated following a Subsidiary Change in Control or a Southern Termination,
the Board of Directors, at any time, may terminate and in any respect amend or
modify the Plan; provided, however, that no such action by the Board of
Directors, without approval of Southern Company's shareholders, may increase the
total number of shares of Common Stock available under the Plan; and further
provided that, except as provided in Section 7.2, no amendment, modification, or
termination of the Plan shall in any manner adversely affect the rights of any
Participant under the Plan without the consent of such Participant.
8.7 Indemnification. Each person who is or shall have been a member of
the Committee or of the Board of Directors shall be indemnified and held
harmless by Southern Company against and from any loss, cost, liability, or
expense that may be imposed upon or reasonably incurred by him in connection
with or resulting from any claim, action, suit, or proceeding to which he may be
a party or in which he may be involved by reason of any action or failure to act
under the Plan and against and from any and all amounts paid by him in
satisfaction of judgment in any such action, suit, or proceeding against him.
Such person shall give Southern Company an opportunity, at its own expense, to
handle and defend the same before he undertakes to handle and defend it on his
own behalf. The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such persons may be entitled under
Southern Company's Articles of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that Southern Company may have to indemnify them or hold
them harmless.
8.8 Reliance on Reports. Each member of the Committee and each member
of the Board of Directors shall be fully justified in relying or acting in good
faith upon any report made by the independent public accountants of Southern
Company and any Employing Company and upon any other information furnished in
connection with the Plan by any person or persons other than himself. In no
event shall any person who is or shall have been a member of the Committee or
the Board of Directors be liable for any determination made or other action
taken or any omission to act in reliance upon any such report or information or
for any action taken, including the furnishing of information, or failure to
act, if in good faith.
8.9 Governing Law. To the extent that federal law shall not be held to
have preempted local law, this Plan shall be governed by the laws of the State
of Delaware. If any provision of the Plan shall be held invalid or
unenforceable, the remaining provisions hereof shall continue in full force and
effect.
8.10 Term. The Plan shall remain in effect for ten (10) years from the
Effective Date or until terminated by the Board of Directors, whichever occurs
first.
8.11 Pooling Accounting. Notwithstanding anything to the contrary
herein, if, but for any provision of this Plan, a Southern Termination
transaction would otherwise be accounted for as a pooling-of-interests under APB
No.16 ("Pooling Accounting") (after giving effect to any and all other facts and
circumstances affecting whether such Southern Termination transaction would use
Pooling Accounting), such provision or provisions of this Plan which would
otherwise cause the Southern Termination transaction to be ineligible for
Pooling Accounting shall automatically be void and ineffective in such a manner
and to the extent that by eliminating such provision or provisions of this Plan,
Pooling Accounting would be required for such Southern Termination transaction
and Pooling Accounting is in fact used for such Southern Termination
transaction.
IN WITNESS WHEREOF, Southern Company has caused the Southern Company
Performance Stock Plan, as amended and restated, to be executed by its duly
authorized officers pursuant to resolutions of the Board of Directors as of the
______day of ___________1999, to be effective January 1, 1998.
SOUTHERN COMPANY
By:___________________________________
A. W. Dahlberg
President
Attest:
By:____________________________
Tommy Chisholm
Secretary
[CORPORATE SEAL]
EXHIBIT 10(a)74
FIRST AMENDMENT TO
THE SOUTHERN COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
WHEREAS, effective as of January 1, 1997, Southern Company Services,
Inc. ("Company") established The Southern Company Supplemental Executive
Retirement Plan ("Plan") to provide deferred compensation benefits primarily for
a select group of management or highly compensated employees which are not
otherwise payable under The Southern Company Pension Plan as a result of the
exclusion of incentive pay from the definition of earnings set forth under such
Plan; and
WHEREAS, the Company, through its Board of Directors, has reserved unto
itself the authority to amend the Plan at any time; and
WHEREAS, the Company wishes to provide for the withholding of the
Hospital Insurance portion of the tax due under the Federal Insurance
Contributions Act from payments made under the Plan; and
WHEREAS, the Company desires to make certain other clarifying technical
and miscellaneous changes.
Accordingly, The Southern Company Supplemental Executive Retirement
Plan is hereby amended in the following particulars, to be effective as of even
date herewith:
1.
Amend Section 2.15 of the Plan by deleting said Section in its entirety
and substituting the following in lieu thereof:
2.15 "Supplemental Pension Benefit" shall mean the pension
benefit, if any, that is payable to a Participant under a group and/or
individual supplemental benefit plan of an Affiliated Employer (as such
term is defined therein).
2.
Amend Section 5.1(a)(1) of the Plan by deleting said Section in its
entirety and substituting the following in lieu thereof:
(1) 1.70% (1.0% if subject to Article XV of the
Pension Plan) of the Participant's Average
Monthly Earnings multiplied by his years
(and fraction of a year) of Accredited
Service to his Retirement Date, death or
other termination of service, including a
Social Security Offset, as adjusted, if
necessary, under the terms of the Pension
Plan for commencement prior to the
Participant's Normal Retirement Date; less
3.
Amend Section 5.2 of the Plan by deleting said Section in its entirety
and substituting the following in lieu thereof:
5.2 Distribution of Benefits.
(a) The SERP Benefit, as determined in accordance with Section
5.1, shall be payable in monthly increments on the first day of the
month concurrently with the Participant's Retirement Income under the
Pension Plan. The form in which the SERP Benefit is paid will be the
same as elected by the Participant under the Pension Plan except that
the amount of the monthly benefit will be modified at the appropriate
time based on the commencement of payments as follows. Payments shall
be adjusted to include three components:
(1) The amount necessary to pay the Hospital
Insurance portion of the tax due under the
Federal Insurance Contributions Act with
respect to the accrued SERP Benefit
determined upon retirement (or such other
appropriate "resolution date" as defined
under Treasury Regulation Section
31.3121(v)-2) calculated in accordance with
Section 5.1;
(2) The amount estimated to pay the federal and
state income tax withholding liability due
on the amount paid under paragraph (1)
above; and
(3) An adjusted monthly benefit determined on an
actuarially equivalent basis in accordance
with the terms of the Pension Plan which
takes into account the amounts paid under
paragraph (1) and (2) above and taking into
account the form of benefit elected by the
Participant under the Pension Plan.
Upon adjustment, the remaining monthly payments shall equal the amount
described in paragraph (3) above. The Beneficiary of a Participant's
Pension Benefit shall be the same as the Provisional Payee, if any, of
the Participant's Retirement Income under the Pension Plan.
4.
Effective July 1, 1998, the Plan shall include an Appendix A setting
forth the Affiliated Employers as such term is defined therein as follows:
APPENDIX A
THE SOUTHERN COMPANY SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN AFFILIATED COMPANIES AS OF JULY 1, 1998
Alabama Power Company
Georgia Power Company
Gulf Power Company
Mississippi Power Company
Savannah Electric and Power Company
Southern Communications Services, Inc.
Southern Company Energy Solutions, Inc.
Southern Company Services, Inc.
Southern Nuclear Operating Company, Inc.
5.
All parts of the Plan not inconsistent herewith are hereby ratified and
affirmed.
IN WITNESS WHEREOF, this Amendment has been executed by a duly
authorized officer of Southern Company Services, Inc. pursuant to resolutions of
the Board of Directors of the Company this ____ day of _______________________,
1998.
SOUTHERN COMPANY SERVICES, INC.
By:
Christopher C. Womack
Senior Vice President, Human Resources
ATTEST:
By:
Its:
<PAGE>
SECOND AMENDMENT TO
THE SOUTHERN COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
WHEREAS, effective as of January 1, 1997, Southern Company Services,
Inc. ("Company") established The Southern Company Supplemental Executive
Retirement Plan ("Plan") to provide deferred compensation benefits primarily for
a select group of management or highly compensated employees which are not
otherwise payable under The Southern Company Pension Plan as a result of the
exclusion of incentive pay from the definition of earnings set forth under such
Plan; and
WHEREAS, the Company, through its Board of Directors, has reserved unto
itself the authority to amend the Plan at any time and approve participation in
the Plan by subsidiaries of The Southern Company; and
WHEREAS, the Company desires to permit Southern Energy Resources, Inc.
to become an Affiliated Employer under the terms of the Plan.
Accordingly, the Plan is hereby amended in the following particulars,
to be effective as set forth below:
1.
Effective June 25, 1998, amend Appendix A of the Plan adding thereto
Southern Energy Resources, Inc. as an Affiliated Employer.
2.
All parts of the Plan not inconsistent herewith are hereby ratified and
affirmed.
IN WITNESS WHEREOF, this Amendment has been executed by a duly
authorized officer of Southern Company Services, Inc. pursuant to resolutions of
the Board of Directors of the Company this ____ day of _______________________,
1998.
SOUTHERN COMPANY SERVICES, INC.
By:
Christopher C. Womack
Senior Vice President, Human Resources
ATTEST:
By:
Its:
EXHIBIT 10(a)76
FIRST AMENDMENT TO THE
SOUTHERN COMPANY PERFORMANCE SHARING PLAN
WHEREAS, Southern Company Services, Inc. ("Company") heretofore adopted
The Southern Company Performance Sharing Plan ("Plan"), effective as of January
1, 1997, and
WHEREAS, the Performance Sharing Plan Committee ("Committee") desires
to amend the Plan in order to make certain design and other changes; and
WHEREAS, the Committee is authorized pursuant to Section 12.1 of the
Plan to amend the Plan at any time, provided that the amendment does not involve
a substantial increase in cost to any Employing Company or is necessary or
desirable to comply with the laws and regulations applicable to the Plan;
NOW, THEREFORE, the Committee hereby amends the Plan as follows:
I.
Effective as of January 1, 1997, Section 2.12 shall be amended by
deleting the first paragraph of such Section in its entirety and substituting a
new paragraph as follows:
2.12 "Compensation" shall mean the base salary or wages paid
to a Participant by an Affiliated Employer for the Plan Year during
which he is eligible to participate, including all amounts contributed
by an Affiliated Employer to The Southern Company Employee Savings Plan
and/or The Southern Company Flexible Benefits Plan on behalf of a
Participant pursuant to a salary reduction arrangement under such
plans. Compensation shall also include all awards under any incentive
pay plans sponsored by an Affiliated Employer as shall be determined by
the Committee from time to time and set forth in Appendix B attached
hereto, monthly shift and monthly seven-day schedule differentials,
scheduled shift pay, geographic premiums, monthly nuclear plant
premiums, and monthly customer service premiums. Compensation shall
exclude regular overtime pay, any hourly shift differentials,
substitution pay, such amounts which are reimbursements to a
Participant paid by any Affiliated Employer including, but not limited
to, reimbursement for such items as moving expenses and travel and
entertainment expenses, and imputed income for automobile expenses, tax
preparation expenses and health and life insurance premiums paid by the
Affiliated Employer.
II.
Effective as of January 1, 1997, Section 2.28 shall be amended by
deleting such section its entirety and substituting a new Section 2.28 as
follows:
2.28 "Highly Compensated Employee" shall mean (in accordance
with and subject to Code Section 414(q) and any regulations, rulings,
notices or procedures thereunder), with respect to any Plan Year: (1)
any Employee who was a five percent (5%) or greater owner during the
Plan Year or the immediately preceding Plan Year, or (2) any Employee
who earned more than $80,000 in the preceding Plan Year. The $80,000
amount shall be adjusted for inflation and for short Plan Years,
pursuant to Code Section 414(q). The Employer may, at its election,
limit Employees earning $80,000 or more to only those Employees who
fall within the "top-paid group," as defined in Code Section 414(q)
excluding those employees described in Code Section 414(q)(8) for such
purpose. In determining whether an Employee is a Highly Compensated
Employee, the Committee may make any elections authorized under
applicable regulations, rulings, notices, or procedures.
III.
Effective as of the date hereof, Article III shall be amended to add a
new Section 3.6 as follows:
3.6 Former Commonwealth Edison of Indiana Employees. Effective
January 1, 1998, notwithstanding any other provision of the Plan to the
contrary, with respect to a former employee of Commonwealth Edison of
Indiana ("ComEd") who was employed by Southern Energy, Inc. as set
forth on a schedule of employees acknowledged by the Committee:
(a) shall become a Participant as of January 1, 1998;
and
(b) shall be entitled for vesting purposes hereunder
to years of vesting service accrued under the
Commonwealth Edison Company of Indiana Service
Annuity System Plan after January 1, 1997, in
addition to any Years of Service accrued under this
Plan.
IV.
Effective as of January 1, 1997, Section 5.1(c) shall be amended by
deleting such section in its entirety and substituting a new Section 5.1(c) as
follows:
For purposes of this Section 5.1, whenever the term
"compensation" is used, such term shall mean "compensation" within the
meaning of Code Section 415(c)(3) and any rulings or regulations
thereunder.
V.
Effective as of January 1, 1998, Sections 9.1, 9.2, 9.5, and 9.11 shall
be amended by replacing each reference therein to "$3,500" with a reference to
"$5,000".
VI.
Effective as of January 1, 1997, Section 14.2 is amended to add the
following sentence to the end of the first paragraph:
In addition, a Participant's benefits may be offset pursuant
to a judgment, order, or decree issued (or settlement agreement entered
into) on or after August 5, 1997, if and to the extent that such offset
is permissible or required under Code Section 401(a)(13).
VII.
Except as amended herein by this First Amendment, the Plan shall remain
in full force and effect.
IN WITNESS WHEREOF, Southern Company Services, Inc. through the duly
authorized members of the Performance Sharing Plan Committee has adopted this
First Amendment to The Southern Company Performance Sharing Plan this ____ day
of _________________________, 1998 to be effective as stated herein.
PERFORMANCE SHARING PLAN COMMITTEE
<PAGE>
APPENDIX B - INCENTIVE PAY PLANS
Effective as of January 1, 1997, all awards under the following
incentive pay plans shall be counted as compensation for purposes of Section
2.12 of the Plan:
The Southern Company Performance Pay Plan The Southern Company
Productivity Improvement Plan The Southern Company Executive
Productivity Improvement Plan Incentive Compensation Plan for Southern
Energy, Inc.
Georgia Power Company 1998 Customer Partnership Teams Incentive Plan
Georgia Power Company 1998 Residential Customer Partnership Team
Incentive Plan Georgia Power Company 1998 Northwest Region Residential
Sales Team Incentive Plan Georgia Power Company Customer Choice Group
1998 Compensation Plan Georgia Power Company Olympic Project Management
Group 1998 Short Term
Incentive Plan
Southern Company National Accounts 1998 Incentive Plan
Southern Communications Performance Improvement Plan (PIP)
Southern Communications Performance Pay Plan (PPP)
Southern Company Energy Solutions, Inc. 1998 Officer and Staff
Incentive Compensation Plan
<PAGE>
SECOND AMENDMENT TO THE
SOUTHERN COMPANY PERFORMANCE SHARING PLAN
WHEREAS, Southern Company Services, Inc. ("Company") heretofore adopted
The Southern Company Performance Sharing Plan ("Plan"), effective as of January
1, 1997, and
WHEREAS, the Performance Sharing Plan Committee ("Committee")
previously amended the Plan and desires again to amend the Plan in order to make
certain clarifying and design changes; and
WHEREAS, the Committee is authorized pursuant to Section 12.1 of the
Plan to amend the Plan at any time, provided that the amendment does not involve
a substantial increase in cost to any Employing Company or is necessary or
desirable to comply with the laws and regulations applicable to the Plan;
NOW, THEREFORE, the Committee hereby amends the Plan as follows:
I.
Effective as of January 1, 1997, Section 2.12 shall be amended by
deleting the first paragraph of such Section in its entirety and substituting a
new paragraph as follows:
2.12 "Compensation" shall mean the base salary or wages paid
to a Participant by an Affiliated Employer for the Plan Year during
which he is eligible to participate, including all amounts contributed
by an Affiliated Employer to The Southern Company Employee Savings Plan
and/or The Southern Company Flexible Benefits Plan on behalf of a
Participant pursuant to a salary reduction arrangement under such
plans. Compensation shall also include all awards under any incentive
pay plans sponsored by an Affiliated Employer as shall be determined by
the Committee from time to time and set forth in Appendix B attached
hereto, monthly shift and monthly seven-day schedule differentials,
scheduled shift pay, geographic premiums, monthly nuclear plant
premiums, monthly customer service premiums, and all awards under the
incentive pay plans sponsored by Southern Energy, Inc. (or Southern
Energy Resources, Inc.) provided that such awards do not exceed the
maximum annual award of such Participant for the Plan Year under the
Southern Energy, Inc. Short Term Incentive Plan. Compensation shall
exclude regular overtime pay, any hourly shift differentials,
substitution pay, such amounts which are reimbursements to a
Participant paid by any Affiliated Employer including, but not limited
to, reimbursement for such items as moving expenses and travel and
entertainment expenses, and imputed income for automobile expenses, tax
preparation expenses and health and life insurance premiums paid by the
Affiliated Employer.
II.
Effective as of January 1, 1997, Section 2.19 shall be amended by
deleting subsection (y) of such Section in its entirety and substituting a new
subsection (y) as follows:
(y) any individual or Employee who is classified by the
Employing Company as a temporary employee (who was not a participant in
the pension plan of an Employing Company before July 1, 1991 (or July
1, 1990 for employees of Georgia Power Company)) or an independent
contractor, regardless of whether such classification is in error, or
III.
Effective as provided therein, Appendix A and Appendix B shall be
modified in the forms attached hereto.
IV.
Except as amended herein by this Second Amendment, the Plan shall
remain in full force and effect.
IN WITNESS WHEREOF, Southern Company Services, Inc. through the duly
authorized members of the Performance Sharing Plan Committee has adopted this
Second Amendment to The Southern Company Performance Sharing Plan this ____ day
of _________________________, 1998 to be effective as stated herein.
PERFORMANCE SHARING PLAN
COMMITTEE
<PAGE>
APPENDIX A - EMPLOYING COMPANIES
The Employing Companies as of January 1, 1998 are:
Alabama Power Company
Georgia Power Company
Gulf Power Company
Mississippi Power Company
Savannah Electric and Power Company
Southern Communications Services, Inc.
Southern Company Services, Inc.
Southern Energy Resources, Inc.
Southern Energy Solutions, Inc.
Southern Nuclear Operating Company, Inc.
<PAGE>
APPENDIX B - INCENTIVE PAY PLANS
Effective as of January 1, 1997, all awards under the following
incentive pay plans shall be counted as compensation for purposes of Section
2.12 of the Plan:
The Southern Company Performance Pay Plan
The Southern Company Productivity Improvement Plan
The Southern Company Executive Productivity Improvement Plan
Georgia Power Company 1998 Customer Partnership Teams Incentive Plan
Georgia Power Company 1998 Residential Customer Partnership Team
Incentive Plan Georgia Power Company 1998 Northwest Region Residential
Sales Team Incentive Plan Georgia Power Company Customer Choice Group
1998 Compensation Plan Georgia Power Company Olympic Project Management
Group 1998 Short Term Incentive Plan
Southern Company National Accounts 1998 Incentive Plan
Southern Communications Performance Improvement Plan (PIP)
Southern Communications Performance Pay Plan (PPP)
Southern Company Energy Solutions, Inc. 1998 Officer and Staff
Incentive Compensation Plan
<PAGE>
THIRD AMENDMENT TO
THE SOUTHERN COMPANY PERFORMANCE SHARING PLAN
WHEREAS, Southern Company Services, Inc. ("Company") heretofore adopted
The Southern Company Performance Sharing Plan ("Plan"), effective as of January
1, 1997; and
WHEREAS, the Performance Sharing Plan Committee ("Committee")
previously amended the Plan on two separate occasions and desires to amend the
Plan again in order to (i) clarify the definition of "Compensation" under the
Plan; (ii) clarify the grant of prior service credit under the Plan to certain
employees formerly employed by Commonwealth Edison of Indiana; (iii)
discontinue, effective September 1, 1998, eligibility under the Plan for
employees classified as temporary employees; (iv) reflect the corporate name
change of certain Employing Companies; and (v) clarify distribution requirements
with respect to alternate payees; and
WHEREAS, the Committee is authorized pursuant to Section 12.1 of the
Plan to amend the Plan at any time, provided that the amendment does not involve
a substantial increase in cost to any Employing Company or is necessary or
desirable to comply with the laws and regulations applicable to the Plan.
NOW, THEREFORE, the Committee hereby amends the Plan as follows:
I.
Effective as of January 1, 1998, Section 2.12 shall be amended by
deleting the first paragraph of such Section in its entirety and substituting a
new paragraph as follows:
2.12 "Compensation" shall mean the base salary or wages paid
to a Participant by an Affiliated Employer for the Plan Year during
which he is eligible to participate, including all amounts contributed
by an Affiliated Employer to The Southern Company Employee Savings Plan
and/or The Southern Company Flexible Benefits Plan on behalf of a
Participant pursuant to a salary reduction arrangement under such
plans. Compensation shall also include all awards under any incentive
pay plans sponsored by an Affiliated Employer as shall be determined by
the Committee from time to time and set forth in Appendix B attached
hereto, monthly shift and monthly seven-day schedule differentials,
scheduled shift pay, geographic premiums, monthly nuclear plant
premiums, monthly customer service premiums, all awards under the
incentive pay plans sponsored by Southern Energy, Inc. (or Southern
Energy Resources, Inc.) provided that such awards do not exceed the
maximum annual award of such Participant for the Plan Year under the
Southern Energy, Inc. Short Term Incentive Plan and, effective January
1, 1998, sales commissions paid under a sales commission payment
program sponsored by an Affiliated Employer for sales commissioned
based employees. Compensation shall exclude regular overtime pay, any
hourly shift differentials, substitution pay, such amounts which are
reimbursements to a Participant paid by any Affiliated Employer
including, but not limited to, reimbursement for such items as moving
expenses and travel and entertainment expenses, and imputed income for
automobile expenses, tax preparation expenses and health and life
insurance premiums paid by the Affiliated Employer.
II.
Effective September 1, 1998, Section 2.19 of the Plan, as amended by
the Second Amendment to the Plan, is further amended by deleting the first
paragraph of such Section and substituting the following in lieu thereof:
2.19 "Eligible Employee" shall mean an Employee who is
employed by an Employing Company and who is classified by the Employing
Company as a regular full-time, regular part-time or cooperative
education employee who:
III.
Effective September 1, 1998, Section 2.19 is further amended by
deleting subsection (y) of such Section in its entirety and substituting a new
subsection (y) as follows:
(y) any individual or Employee who is classified by the Employing
Company as a temporary employee or as an independent
contractor, regardless of prior inclusion under the Plan or
whether such classification is determined to be in error; or
IV.
Effective January 1, 1998, Section 3.6 of the Plan, as added by the
First Amendment to the Plan, is amended by deleting such Section in its entirety
and substituting the following in lieu thereof:
3.6 Former Commonwealth Edison of Indiana Employees. Effective
January 1, 1998, notwithstanding any other provision of the Plan to the
contrary, any former employee of Commonwealth Edison of Indiana
("ComEd") who was employed by Southern Energy Resources, Inc. on or
before December 31, 1997 and is set forth on a schedule of employees
acknowledged by the Committee, shall become a Participant as of January
1, 1998 and shall be entitled for vesting purposes hereunder to years
of vesting service accrued under the Commonwealth Edison Company of
Indiana Service Annuity System Plan ("ComEd Plan") on or after January
1, 1997, in addition to any Years of Service accrued under this Plan.
In addition, any former employee of ComEd who becomes employed
by Southern Energy Resources, Inc. on or after January 1, 1998 but
prior to April 1, 1998 (hereafter "Date of Employment") and is set
forth on the schedule of employees acknowledged by the Committee, shall
become a Participant as of the Enrollment Date coincident with or next
following such employee's Date of Employment, and shall be entitled for
vesting purposes hereunder to years of vesting service accrued under
the ComEd Plan on or after January 1, 1997, in addition to any Years of
Service accrued under this Plan.
V.
Section 9.9 of the Plan is hereby amended by deleting such Section in
its entirety and substituting the following in lieu thereof:
9.9 Distributions to Alternate Payees. If the Participant's
Account under the Plan shall become subject to a domestic relations
order which (a) is a qualified domestic relations order satisfying the
requirements of Section 414(p) of the Code and (b) requires the
distribution in a single lump sum of the entire portion of the
Participant's Account required to be segregated for the benefit of an
alternate payee, then the entire interest of such alternate payee shall
be distributed in a single lump sum within ninety (90) days following
the later of: (a) the Employing Company's determination that such
domestic relations order is qualified in accordance with Section 414(p)
of the Code; and (b) such Participant's Account becoming fully vested
in accordance with Article VIII, or as soon as practicable thereafter.
Such distribution to an alternate payee shall be made even if the
Participant has not separated from the service of the Affiliated
Employers. Any other distribution pursuant to a qualified domestic
relations order shall not be made earlier than the later of: (a) the
Participant's termination of service, or his attainment of age fifty
(50), if earlier, and (b) such Participant's Account becoming fully
vested in accordance with Article VIII. In no event shall a
distribution to an alternate payee commence later than the date the
Participant's (or his Beneficiary's) benefit payments otherwise
commence. Such distribution to an alternate payee shall be made only in
a manner permitted under this Article IX.
VI.
Appendix A of the Plan is amended by deleting such Appendix in its
entirety and substituting the following in lieu thereof:
APPENDIX A - EMPLOYING COMPANIES
The Employing Companies as of January 1, 1998 are:
Alabama Power Company
Georgia Power Company
Gulf Power Company
Mississippi Power Company
Savannah Electric and Power Company
Southern Communications Services, Inc.
Southern Company Energy Solutions, Inc.
Southern Company Services, Inc.
Southern Energy Resources, Inc.
Southern Nuclear Operating Company, Inc.
<PAGE>
VII.
Except as amended herein by this Third Amendment, the Plan shall remain
in full force and effect.
IN WITNESS WHEREOF, Southern Company Services, Inc., through the duly
authorized members of the Performance Sharing Plan Committee, has adopted this
Third Amendment to The Southern Company Performance Sharing Plan this ____ day
of _______, 1998 to be effective as stated herein.
PERFORMANCE SHARING PLAN COMMITTEE
Christopher C. Womack
Robert A. Bell
W. Dean Hudson
<PAGE>
FOURTH AMENDMENT TO THE
SOUTHERN COMPANY PERFORMANCE SHARING PLAN
WHEREAS, Southern Company Services, Inc. ("Company") heretofore adopted
The Southern Company Performance Sharing Plan ("Plan"), effective as of January
1, 1997; and
WHEREAS, the Performance Sharing Plan Committee ("Committee") desires
to amend the Plan in order to make certain design and other changes; and
WHEREAS, the Committee is authorized pursuant to Section 12.1 of the
Plan to amend the Plan at any time, provided that the amendment does not involve
a substantial increase in cost to any Employing Company or is necessary or
desirable to comply with the laws and regulations applicable to the Plan.
NOW, THEREFORE, the Committee hereby amends the Plan as follows, to be
effective as provided herein:
I.
Effective as of the date hereof, Article III of the Plan shall be
amended by adding a new Section 3.7 thereto as follows:
3.7 Former Commonwealth Energy System Employees.
Notwithstanding any other provision of the Plan to the
contrary, with respect to a former employee of the
Commonwealth Energy System ("ComElectric") who is employed by
Southern Energy Resources, Inc. and is set forth on a schedule
of employees acknowledged by the Committee, such employee
shall become a Participant as of the Enrollment Date
coincident with or next following such employee's date of
employment, and shall be entitled, for vesting purposes
hereunder, to years of vesting service accrued under the
Pension Plan for Employees of Commonwealth Energy System and
Subsidiary Companies ("ComElectric Plan") on or after January
1, 1997, in addition to any Years of Service accrued under
this Plan.
II.
Except as amended herein by this Fourth Amendment, the Plan shall
remain in full force and effect.
IN WITNESS WHEREOF, Southern Company Services, Inc., through the duly
authorized members of the Performance Sharing Committee, has adopted this Fourth
Amendment to The Southern Company Performance Sharing Plan this _____ day of
________________, 1998, to be effective as stated herein.
PERFORMANCE SHARING PLAN COMMITTEE:
-----------------------------
Christopher C. Womack
--------------------------------------------------------------
Robert A. Bell
--------------------------------------------------------------
W. Dean Hudson
<PAGE>
FIFTH AMENDMENT TO THE
SOUTHERN COMPANY PERFORMANCE SHARING PLAN
WHEREAS, Southern Company Services, Inc. ("Company") heretofore adopted
The Southern Company Performance Sharing Plan ("Plan"), effective as of January
1, 1997; and
WHEREAS, the Performance Sharing Plan Committee ("Committee") desires
to amend the Plan to modify the definition of Compensation for appliance
salespersons to include certain nonproductive pay earnings types as may be
determined from time to time by the Committee; and
WHEREAS, the Committee is authorized pursuant to Section 12.1 of the
Plan to amend the Plan at any time, provided that the amendment does not involve
a substantial increase in cost to any Employing Company or is necessary or
desirable to comply with the laws and regulations applicable to the Plan.
NOW, THEREFORE, the Committee hereby amends the Plan as follows, to be
effective as provided herein:
I.
Effective as of January 1, 1998, Section 2.12 of the Plan (as
previously amended by the Third Amendment) shall be amended by replacing the
period at the end of the second sentence with a comma, and by adding the
following to the end of said second sentence:
, and, for appliance salespersons, certain nonproductive pay earnings
types as determined from time to time by the Committee and set forth on
Appendix C to the Plan, which Appendix may be updated from time to
time.
II.
Except as amended herein by this Fifth Amendment, the Plan shall remain
in full force and effect.
IN WITNESS WHEREOF, Southern Company Services, Inc., through the duly
authorized members of the Performance Sharing Committee, has adopted this Fifth
Amendment to The Southern Company Performance Sharing Plan this _____ day of
________________, 1999, to be effective as stated herein.
PERFORMANCE SHARING PLAN COMMITTEE:
--------------------------------------------------------------
Christopher C. Womack
--------------------------------------------------------------
Robert A. Bell
--------------------------------------------------------------
W. Dean Hudson
<PAGE>
APPENDIX C
Nonproductive Pay Earnings Types
Earnings Code Earnings Description
003 Salesperson - Hourly
092 Holiday Taken
093 Meetings
095 Meetings - Safety
096 Disability 100%
100 Disability Extended Approval
106 Leave - Death
108 Occupational Injury
111 Jury Duty
112 Training
113 Safety Training
115 Vacation
116 Vacation Special Circumstances
117 Vacation FMLA Employee
118 Vacation FMLA Family Care
119 Time Off With Pay
125 Holiday Banked - Taken
127 Vacation In Lieu Of Disability
442 DISABILITY FMLA EMPLOYEE
<PAGE>
SIXTH AMENDMENT TO THE
SOUTHERN COMPANY PERFORMANCE SHARING PLAN
WHEREAS, Southern Company Services, Inc. ("Company") heretofore adopted
The Southern Company Performance Sharing Plan ("Plan"), effective as of January
1, 1997; and
WHEREAS, the Performance Sharing Plan Committee ("Committee") desires
to amend the Plan in order to make a technical change; and
WHEREAS, the Committee is authorized pursuant to Section 12.1 of the
Plan to amend the Plan at any time, provided that the amendment does not involve
a substantial increase in cost to any Employing Company or is necessary or
desirable to comply with the laws and regulations applicable to the Plan.
NOW, THEREFORE, the Committee hereby amends the Plan as follows, to be
effective as provided herein:
I.
Effective as of January 1, 1997, Subsection (w) of Section 2.19 of the
Plan shall be amended as follows:
(w) an Employee who is treated as such solely by reason of the
"leased employee" rules of Code Section 414(n) such that,
pursuant to an agreement between an Employing Company and any
other person, such individual has performed services for the
Employing Company (or the Employing Company and related
persons as described in Code Section 414(n)(6)) on a
substantially full-time basis for a period of at least one
year and such services were performed under the primary
direction or control of the Employing Company;
II.
Except as amended herein by this Sixth Amendment, the Plan shall remain
in full force and effect.
IN WITNESS WHEREOF, Southern Company Services, Inc., through the duly
authorized members of the Performance Sharing Plan Committee, has adopted this
Sixth Amendment to The Southern Company Performance Sharing Plan this _____ day
of ________________, 1999, to be effective as stated herein.
PERFORMANCE SHARING PLAN COMMITTEE:
--------------------------------------------------------------
Christopher C. Womack
--------------------------------------------------------------
Robert A. Bell
--------------------------------------------------------------
W. Dean Hudson
EXHIBIT 10(a)77
THE SOUTHERN COMPANY
SUPPLEMENTAL BENEFIT PLAN
(Amended and Restated Effective as of January 1, 1998)
<PAGE>
THE SOUTHERN COMPANY
SUPPLEMENTAL BENEFIT PLAN
Page
ARTICLE I -PURPOSE AND ADOPTION OF PLAN..........................1
1.1 Adoption.....................................................1
1.2 Purpose......................................................2
ARTICLE II - DEFINITIONS.........................................3
2.1 Account......................................................3
2.2 Beneficiary..................................................3
2.3 Board of Directors...........................................3
2.4 Code 3
2.5 Common Stock.................................................3
2.6 Company......................................................3
2.7 Deferred Compensation Plan...................................3
2.8 Effective Date...............................................3
2.9 Employee.....................................................3
2.10 Employing Company...........................................4
2.11 ESOP........................................................4
2.12 Non-Pension Benefit.........................................4
2.13 Participant.................................................4
2.14 Pension Benefit.............................................4
2.15 Pension Plan................................................4
2.16 Performance Sharing Plan....................................4
2.17 Phantom Common Stock........................................4
2.18 Plan........................................................5
2.19 Plan Year...................................................5
2.20 Purchase Price..............................................5
2.21 Retirement Board............................................5
2.22 Sales Price.................................................5
2.23 Savings Plan................................................5
2.24 Valuation Date..............................................5
ARTICLE III - ADMINISTRATION OF PLAN.............................7
3.1 Administrator................................................7
3.2 Powers.......................................................7
3.3 Duties of the Retirement Board...............................7
3.4 Indemnification..............................................8
ARTICLE IV - ELIGIBILITY........................................10
4.1 Eligibility Requirements....................................10
4.2 Determination of Eligibility................................10
4.3 Eligibility of Employees of Savannah Electric and
Power Company...............................................11
ARTICLE V - BENEFITS............................................12
5.1 Pension Benefit.............................................12
5.2 Non-Pension Benefit.........................................12
5.3 Distribution of Benefits....................................15
5.4 Allocation of Pension Benefit Liability.....................18
5.5 Funding of Benefits.........................................19
5.6 Withholding.................................................19
ARTICLE VI - MISCELLANEOUS......................................20
6.1 Assignment..................................................20
6.2 Amendment and Termination...................................20
6.3 No Guarantee of Employment..................................20
6.4 Construction................................................21
<PAGE>
THE SOUTHERN COMPANY
SUPPLEMENTAL BENEFIT PLAN
ARTICLE I - PURPOSE AND ADOPTION OF PLAN
1.1......Adoption: The Southern Company Supplemental Benefit Plan,
effective as of January 1, 1998 and hereinafter set forth (the "Plan"), is a
modification and continuation of the Supplemental Benefit Plan for Southern
Company Services, Inc. and Southern Electric International, Inc., which
originally became effective January 1, 1983, and which has been amended from
time to time.
.........Effective January 1, 1998, the following other plans are
merged into the Plan:
o Supplemental Benefit Plan for Alabama Power Company
o Supplemental Benefit Plan for Georgia Power Company
o Supplemental Benefit Plan for Gulf Power Company
o Supplemental Benefit Plan for Mississippi Power Company
o Supplemental Benefit Plan for Southern Company Services, Inc. and
Southern Electric International, Inc., as adopted by Southern
Communications Services, Inc.
o Supplemental Benefit Plan for Southern Company Services, Inc. and
Southern Electric International, Inc., as adopted by Southern
Development and Investment Group, Inc.
o Supplemental Benefit Plan for Southern Nuclear Operating Company, Inc.
.........Employees participating in the merged plans and employed by an
Employing Company on January 1, 1998 shall become immediately covered under the
Plan; provided, however, that the terms of the prior plans govern an Employee's
circumstances with regard to actions taken or occurring before January 1, 1998.
The benefits of former Employees are payable in accordance with the provisions
of the prior plans.
1.2......Purpose: The Plan is designed to provide certain retirement
and other deferred compensation benefits primarily for a select group of
management or highly compensated employees which are not otherwise payable or
cannot otherwise be provided by the Employing Companies (1) under The Southern
Company Pension Plan, The Southern Company Employee Savings Plan, The Southern
Company Employee Stock Ownership Plan and The Southern Company Performance
Sharing Plan, as a result of the limitations set forth under Sections
401(a)(17), 401(k), 401(m), 402(g), or 415 of the Internal Revenue Code of 1986,
as amended from time to time; and (2) to compensate for lost benefits resulting
from participation in The Southern Company Deferred Compensation Plan, as
amended from time to time. The Plan shall be an unfunded deferred compensation
arrangement whose benefits shall be paid solely from the general assets of the
Employing Companies.
<PAGE>
ARTICLE II - DEFINITIONS
2.1......"Account" shall mean the total amount credited to the account
of a Participant to reflect the interest of a Participant in the Plan resulting
from a Participant's Non-Pension Benefit calculated in accordance with Section
5.2.
2.2......"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 the
Company.
2.4......"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
2.5......"Common Stock" shall mean common stock of The Southern
Company.
2.6......"Company" shall mean Southern Company Services, Inc.
2.7......"Deferred Compensation Plan" shall mean The Southern Company
Deferred Compensation Plan, as amended from time to time.
2.8......"Effective Date" of this amendment and restatement and the
consolidation of plans shall mean January 1, 1998.
2.9......"Employee" shall mean any person who is currently employed by
an Employing Company.
2.10....."Employing Company" shall mean the Company 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 any successor to them. The
Employing Companies are set forth in Appendix A to the Plan, as amended from
time to time.
2.11....."ESOP" shall mean The Southern Company Employee Stock
Ownership Plan, 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 an
Employing Company who is eligible to participate in the Plan pursuant to
Sections 4.1 and 4.2.
2.14....."Pension Benefit" shall mean the benefit described in Section
5.1.
2.15....."Pension Plan" shall mean The Southern Company Pension Plan,
as amended from time to time.
2.16....."Performance Sharing Plan" shall mean The Southern Company
Performance Sharing Plan, as amended from time to time.
2.17....."Phantom Common Stock" shall mean the Common Stock in which a
Participant is deemed to invest his Non-Pension Benefit as if such Common Stock
had been purchased upon contribution to the Savings Plan, the ESOP and/or the
Performance Sharing Plan, as the case may be.
2.18....."Plan" shall mean The Southern Company Supplemental Benefit
Plan, as amended from time to time.
2.19....."Plan Year" shall mean the calendar year.
2.20....."Purchase Price" shall mean for purposes of deemed purchases
of Phantom Common Stock the following: (a) with respect to the Savings Plan and
the Performance Sharing Plan, the weighted average purchase price of a share of
the Common Stock under the Savings Plan as of the applicable Valuation Date; (b)
with respect to any investment of dividends attributable to Phantom Common
Stock, the dividend reinvestment price of a share of the Common Stock under the
Savings Plan as of the applicable Valuation Date; and (c) with respect to the
ESOP, the price at which a share of Common Stock is purchased with regard to a
contribution made for each applicable Plan Year.
2.21....."Retirement Board" shall mean the Retirement Board of the
Pension Plan.
2.22....."Sales Price" shall mean the weighted average sales price of a
share of Common Stock under the Savings Plan as of each applicable Valuation
Date.
2.23....."Savings Plan" shall mean The Southern Company Employee
Savings Plan, as amended from time to time. 2.24....."Valuation Date" shall mean
each business day of the New York Stock Exchange. Where the context requires,
the definitions of all terms set forth in the Pension Plan, the ESOP, the
Performance Sharing Plan, the Savings Plan and the Deferred Compensation Plan
shall apply with equal force and effect for purposes of interpretation and
administration of the Plan, unless said terms are otherwise specifically defined
in the Plan. The masculine pronoun shall be construed to include the feminine
pronoun and the singular shall include the plural, where the context so
requires.
<PAGE>
ARTICLE III - ADMINISTRATION OF PLAN
3.1......Administrator. The general administration of the Plan shall be
placed in the Retirement Board.
3.2......Powers. The Retirement Board shall administer the Plan in
accordance with its terms and shall have all powers necessary to carry out the
provisions of the Plan more particularly set forth herein. It shall have the
discretion to interpret the Plan and shall determine all questions arising in
the administration, interpretation and application of the Plan. Any such
determination by it shall be conclusive and binding on all persons. It may adopt
such regulations as it deems desirable for the conduct of its affairs. It may
appoint such accountants, counsel, actuaries, specialists and other persons as
it deems necessary or desirable in connection with the administration of this
Plan, and shall be the agent for the service of process.
3.3......Duties of the Retirement Board.
.........(a) The Retirement Board is responsible for the daily
administration of the Plan. It may appoint other persons or entities to perform
any of its fiduciary functions. The Retirement Board 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 Retirement Board 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 Retirement Board 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 Retirement
Board.
.........(c) The Retirement Board 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 Retirement Board
shall keep a record of all of its proceedings and acts, and shall keep all such
books of account, records and other data as may be necessary for proper
administration of the Plan.
3.4......Indemnification. The Employing Companies shall indemnify the
Retirement Board 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 Retirement Board 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 Retirement Board. No member of
the Retirement Board who is also an Employee of the Employing Companies shall
receive any compensation from the Plan for his services in administering the
Plan.
<PAGE>
ARTICLE IV - ELIGIBILITY
4.1......Eligibility Requirements. Subject to Section 4.3, all
Employees who are determined eligible to participate in accordance with Section
4.2: (a) whose benefits under the Pension Plan are limited by the limitations
set forth in Sections 401(a)(17) or 415 of the Code, (b) for whom contributions
by their Employing Company to the Savings Plan are limited by the limitations
set forth in Sections 401(a)(17), 401(k), 401(m), 402(g) or 415 of the Code, (c)
for whom contributions by their Employing Company to the ESOP are limited by the
limitations set forth in Sections 401(a)(17) or 415 of the Code, (d) for whom
contributions by their Employing Company to the Performance Sharing Plan are
limited by the limitations set forth in Sections 401(a)(17) or 415 of the Code,
or (e) who make deferrals under the Deferred Compensation Plan, shall be
eligible to receive benefits under the Plan.
4.2......Determination of Eligibility. The Retirement Board 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 Retirement Board 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.
4.3......Eligibility of Employees of Savannah Electric and Power
Company.
.........(a) Employees of Savannah Electric and Power Company meeting
the requirements of Sections 4.1 and 4.2 on or after January 1, 1997 shall be
eligible to participate in the Plan provided that such employees are not
participating in the Supplemental Executive Retirement Plan of Savannah Electric
and Power Company. Such Employees' benefits shall include any accruals for the
Plan Year ending December 31, 1997 as determined in accordance with Sections 5.1
and 5.2.
.........(b) Notwithstanding paragraph (a) above, Employees of Savannah
Electric and Power Company who have participated in The Southern Company
Deferred Compensation Plan on and after January 1, 1996, shall be eligible to
participate in the Plan but only to the extent that the Plan compensates
employees for lost benefits resulting from participation in The Southern Company
Deferred Compensation Plan. Such Employees' benefits shall include any accruals
permitted under the preceding sentence for Plan Years ending December 31, 1996
and December 31, 1997 determined in accordance with Sections 5.1 and 5.2.
<PAGE>
ARTICLE V - BENEFITS
5.1......Pension Benefit.
.........(a) Each Participant shall be entitled to a Pension Benefit
equal to that portion of his Retirement Income under the Pension Plan which is
not payable under the Pension Plan as a result of the limitations imposed by
Sections 401(a)(17), 415(b), or 415(e) of the Code.
.........(b) For purposes of this Section 5.1, the Pension Benefit of a
Participant shall be calculated based on the Participant's Earnings that are
considered under the Pension Plan in calculating his Retirement Income, without
regard to the limitation of Section 401(a)(17) of the Code, including any
portion of his compensation he may have elected to defer under the Deferred
Compensation Plan, but excluding incentive pay he deferred under such Deferred
Compensation Plan.
.........(c) To the extent that a Participant's Retirement Income under
the Pension Plan is recalculated as a result of an amendment to the Pension Plan
in order to increase the amount of his Retirement Income, the Participant's
Pension Benefit shall also be recalculated in order to properly reflect such
increase in determining payments of the Participant's Pension Benefit made on or
after the effective date of such increase.
5.2......Non-Pension Benefit.
.........(a) A Participant shall be entitled to a Non-Pension Benefit
which is determined under this Section 5.2. An Account shall be established for
the Participant as of his initial Plan Year of participation in the Plan. Each
Plan Year, such Account shall be credited with an amount equal to the amount
that his Employing Company is prohibited from contributing (1) to the Savings
Plan on behalf of the Participant as a result of the limitations imposed by
Sections 401(a)(17), 401(k), 401(m), 402(g), 415(c) or 415(e) of the Code, (2)
to the ESOP on behalf of the Participant as a result of the limitations imposed
by Sections 401(a)(17), 415(c) or 415(e) of the Code and (3) to the Performance
Sharing Plan (including for the 1997 Plan Year) on behalf of the Participant as
a result of the limitations imposed by Sections 401(a)(17), 415(c) or 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, ESOP and Performance Sharing Plan, without regard to the
limitations of Section 401(a)(17) or Section 402(g) of the Code, including any
portion of his compensation he may have elected to defer under the Deferred
Compensation Plan, but with respect to the Savings Plan only excluding incentive
pay he deferred under the Deferred Compensation Plan.
.........(c) The Non-Pension Benefit of the Participant shall be deemed
to be invested in Phantom Common Stock. On each such date of investment, a
Participant's Account shall be credited with the number of shares (including
fractional shares) of Phantom Common Stock which could have been purchased on
such date, based upon the Common Stock's Purchase Price. As of the date upon
which occurs the payment of dividends on the Common Stock, there shall be
credited with respect to shares of Phantom Common Stock in the Participant's
Account on such date, such additional shares (including fractional shares) of
Phantom Common Stock as follows:
(1) In the case of cash dividends, such additional
shares as could be purchased at the Purchase Price with the dividends
which would have been payable if the credited shares had been
outstanding;
(2) In the case of dividends payable in property
other than cash or Common Stock, such additional shares as could be
purchased at the Purchase Price with the fair market value of the
property which would have been payable if the credited shares had been
outstanding; or
(3) In the case of dividends payable in Common Stock,
such additional shares as would have been payable on the credited
shares if they had been outstanding.
(d) As soon as practicable following the first day of his
eligibility to have benefits credited to his Account, a Participant shall
designate in writing on a form to be prescribed by the Retirement Board the
method of payment of his Account, which shall be the payment of a single lump
sum or a series of annual installments not to exceed twenty (20). The method of
distribution initially designated by a Participant shall not be revoked and
shall govern the distribution of a Participant's Account. Notwithstanding the
foregoing, in the sole discretion of the Retirement Board, upon application by
the Participant, the method of distribution designated by such Participant may
be modified not prior to 395 days nor later than 365 days prior to a
Participant's date of separation from service in order to change the form of
distribution of his Account in accordance with the terms of the Plan; provided,
however, that any Participant who is required to file reports pursuant to
Section 16(a) of the Securities and Exchange Act of 1934, as amended, with
respect to equity securities of The Southern Company shall not be permitted to
amend his distribution election during any time period for which such
Participant is required to file any such reports with respect to his Non-Pension
Benefit unless such amendment is specifically approved by the Retirement Board
in its sole discretion. Each Participant, his Beneficiary, and legal
representative shall be bound as to any action taken pursuant to the method of
distribution elected by a Participant and the terms of the Plan.
5.3 Distribution of Benefits.
(a) The Pension Benefit, as determined in accordance with
Section 5.1, shall be payable in monthly increments on the first day of the
month concurrently with the Participant's Retirement Income under the Pension
Plan. The form in which the Pension Benefit is paid will be the same as elected
by the Participant under the Pension Plan except that the amount of the monthly
benefit will be modified at the appropriate time based on the commencement of
payments as follows. Payments shall be adjusted to include three components:
(1) The amount necessary to pay the Hospital Insurance
portion of the tax due under the Federal Insurance
Contributions Act with respect to the accrued Pension
Benefit determined upon retirement (or such other
appropriate "resolution date" as defined under
Treasury Regulation Section 31.3121(v)-2) calculated
in accordance with Section 5.1;
(2) The amount estimated to pay the federal and state
income tax withholding liability due on the amount
paid under paragraph (1) above; and
(3) An adjusted monthly benefit determined on an
actuarially equivalent basis in accordance with the
terms of the Pension Plan which takes into account
the amounts paid under paragraph (1) and (2) above
and taking into account the form of benefit elected
by the Participant under the Pension Plan. Upon
adjustment, the remaining monthly payments shall
equal the amount described in paragraph (3) above.
The Beneficiary of a Participant's Pension Benefit
shall be the same as the Provisional Payee, if any,
of the Participant's Retirement Income under the
Pension Plan.
(b) When a Participant terminates his employment with an
Employing Company, said Participant shall be entitled to receive the market
value of any shares of Phantom Common Stock (and fractions thereof) reflected in
his Account in a single lump sum distribution or annual installments not to
exceed twenty (20). Such distribution shall be made not later than sixty (60)
days following the date on which his termination of employment occurs, or as
soon as reasonably practicable thereafter. The transfer by a Participant between
companies within The Southern Company shall not be deemed to be a termination of
employment with an Employing Company. With regard to any distribution made under
this Article, the market value of any shares of Phantom Common Stock credited to
a Participant's Account shall be based on the Sales Price. No portion of a
Participant's Account shall be distributed in Common Stock.
(c) In the event a Participant elects to receive the
distribution of his Account in annual installments, the first payment shall be
made not later than sixty (60) days following the date on which his termination
of employment occurs, or as soon as reasonably practicable thereafter.
Installments shall equal the balance in the Participant's Account taking into
account the tax due under the Federal Insurance Contributions Act divided by the
number of annual installment payments. Each subsequent annual payment shall be
an amount equal to the balance in the Participant's Account as of the Valuation
Date, divided by the number of the remaining annual payments and shall be due on
the anniversary of the preceding payment date.
(d) Upon the death of a Participant, or a former Participant
prior to the payment of the market value of any shares of Phantom Common Stock
(and fractions thereof) credited to said Participant's Account based on the
Sales Price, the unpaid balance shall be paid in the sole discretion of the
Retirement Board (1) in a lump sum to the designated Beneficiary of a
Participant or former Participant within sixty (60) days following the date on
which the Retirement Board is provided evidence of the Participant's death (or
as soon as reasonably practicable thereafter) or (2) in accordance with the
distribution method chosen by such Participant or former Participant. The
Beneficiary designation may be changed by the Participant or former Participant
at any time without the consent of the prior Beneficiary. In the event a
Beneficiary designation is not on file or the designated Beneficiary is deceased
or cannot be located, payment will be made to the person or persons in the first
of the following classes of successive preference, if then living:
(1) the Participant's spouse on the date of his death; (2) the
Participant's children, equally; (3) the Participant's parents,
equally; (4) the Participant's brothers and sisters, equally; or (5)
the Participant's executors or administrators. Payment to such one or
more persons shall completely discharge the Plan with respect to the
amount so paid. (e) Upon the total disability of a Participant or
former Participant, as determined by the Social Security Administration
prior to the payment of the market value of any shares of Phantom
Common Stock (and practices thereof) credited to such Participant's
Account based on the Sales Price, the unpaid balance of his Account
shall be paid in the sole discretion of the Retirement Board (1) in a
lump sum to the Participant or former Participant, or his legal
representative within sixty (60) days following the date on which the
Retirement Board receives notification of the determination of a
disability by the Social Security Administration (or as soon as
reasonably practicable thereafter) or (2) in accordance with the
distribution method elected by such Participant or former Participant.
(f) The Retirement Board, in its sole discretion upon
application made by the Participant, a designated Beneficiary, or their legal
representative, may determine to accelerate payments or, in the event of death
or total disability (as determined by Social Security Administration), to extend
or otherwise make payments in a manner different from the manner in which such
payment would be made under the method of distribution elected by the
Participant in the absence of such determination.
5.4 Allocation of Pension Benefit Liability. In the event that a
Participant eligible to receive a Pension Benefit has been employed at more than
one Employing Company, the Pension Benefit liability shall be apportioned so
that each such Employing Company is obligated in accordance with Section 5.5 to
cover the percentage of the total Pension Benefit as determined below. Each
Employing Company's share of the Pension Benefit liability shall be calculated
by multiplying the Pension Benefit by a fraction where the numerator of such
fraction is the pay, as defined by the Retirement Board, received by the
Participant at the respective Employing Company multiplied by the Accredited
Service earned by the Participant at the respective Employing Company and where
the denominator of such fraction is the sum of all numerators calculated for
each respective Employing Company for which the Participant has been employed.
5.5 Funding of Benefits. Neither the Company nor any Employing Company
hereunder shall 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 shall at all times remain subject to
the claims of the creditors of the Participant's Employing Company.
5.6 Withholding. There shall be deducted from payments and, if
necessary, from the Non-Pension Account under the Plan the amount of any tax
required by any governmental authority to be withheld and paid over by an
Employing Company to such governmental authority for the account of the
Participant or Beneficiary.
<PAGE>
ARTICLE VI - MISCELLANEOUS
6.1 Assignment. Neither the Participant, his Beneficiary, nor his legal
representative shall have any rights to sell, assign, transfer or otherwise
convey the right to receive the payment of any Pension Benefit or Non-Pension
Benefit due hereunder, which payment and the right thereto are expressly
declared to be nonassignable and nontransferable. Any attempt to assign or
transfer the right to payment under the Plan shall be null and void and of no
effect.
6.2 Amendment and Termination. The Plan may be amended or terminated at
any time by the Board of Directors, provided that no amendment or termination
shall cause a forfeiture or reduction in any benefits accrued as of the date of
such amendment or termination. The Plan may also be amended by the Retirement
Board (a) if such amendment does not involve a substantial increase in cost to
any Employing Company, or (b) as may be necessary, proper, or desirable in order
to comply with laws or regulations enacted or promulgated by any federal or
state governmental authority.
6.3 No Guarantee of Employment. Participation hereunder shall not be
construed as creating any contract of employment between any Employing Company
and a Participant, nor shall it limit the right of an Employing Company to
suspend, terminate, alter, or modify, whether or not for cause, the employment
relationship between such Employing Company and a Participant.
6.4 Construction. This Plan shall be construed in accordance with and
governed by the laws of the State of Georgia, to the extent such laws are not
otherwise superseded by the laws of the United States.
<PAGE>
IN WITNESS WHEREOF, the Plan has been executed by a duly authorize
officer of Southern Company Services, Inc., pursuant to resolutions of the Board
of Directors of the Company, this day of , 1998.
SOUTHERN COMPANY SERVICES, INC.
By: _____________________________________________________
Christopher C. Womack
Vice President, Human Resources
ATTEST:
By: _________________________________________________________
Title:________________________________________________________
<PAGE>
APPENDIX A
THE SOUTHERN COMPANY SUPPLEMENTAL BENEFIT PLAN
EMPLOYING COMPANIES AS OF JULY 1, 1998
Alabama Power Company
Georgia Power Company
Gulf Power Company
Mississippi Power Company
Savannah Electric and Power Company
Southern Communications Services, Inc.
Southern Company Energy Solutions, Inc.
Southern Company Services, Inc.
Southern Energy Resources, Inc.
Southern Nuclear Operating Company, Inc.
EXHIBIT 10(a)78
SOUTHERN COMPANY
CHANGE IN CONTROL
SEVERANCE PLAN
Troutman Sanders LLP
NationsBank Plaza, Suite 5200
600 Peachtree Street, N.E.
Atlanta, Georgia 30308
Effective December 7, 1998
<PAGE>
SOUTHERN COMPANY
CHANGE IN CONTROL
SEVERANCE PLAN
ARTICLE 1 - PURPOSE AND ADOPTION OF PLAN
1.1 Adoption of Plan. Southern Company Services, Inc. hereby adopts
this Southern Company Change in Control Severance Plan, effective December 7,
1998. The Plan shall be an unfunded severance pay plan that is a welfare plan as
such term is defined by the Employee Retirement Income Security Act of 1974, the
benefits of which shall be paid solely from the general assets of the respective
Employing Companies.
1.2 Purpose. The Plan is primarily designed to provide benefits to
certain employees of the Employing Companies, whose employment is terminated
subsequent to a change in control of Southern or their respective Employing
Company.
ARTICLE 2 - DEFINITIONS
2.1 "Administrative Committee" shall mean the Board of Directors, plus,
in the event of any act necessary to be taken in connection with the Plan
relative to a particular Participant, the Chief Executive Officer of the
Participant's Employing Company, if such Chief Executive Officer is not already
a member of the Board of Directors.
2.2 "Beneficial Ownership" shall mean beneficial ownership within the
meaning of Rule 13d-3 promulgated under the Exchange Act.
2.3 "Board of Directors" shall mean the board of directors of the
Company.
<PAGE>
2.4 "Business Combination" shall mean a reorganization, merger or
consolidation of Southern or sale or other disposition of all or substantially
all of the assets of Southern.
2.5 "Change in Control" shall mean,
(a) with respect to Southern, the occurrence of any of the following:
(i) The Consummation of an acquisition by any Person of
Beneficial Ownership of 20% or more of Southern's Voting Securities;
provided, however, that for purposes of this Section 2.5(i), the
following acquisitions of Southern's Voting Securities shall not
constitute a Change in Control:
(A) any acquisition directly from Southern;
(B) any acquisition by Southern;
(C) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by Southern or any
Southern Subsidiary;
(D) any acquisition by a qualified pension plan or
publicly held mutual fund; (E) any acquisition by an Employee
or Group composed exclusively of Employees; or (F) any
Business Combination which would not otherwise constitute a
Change in Control because of the application of clauses (A),
(B) and (C) of Section 2.5(a)(iii); (ii) A change in the
composition of the Southern Board whereby individuals who
constitute the Incumbent Board cease for any reason to
constitute at least a majority of the Southern Board; or (iii)
Consummation of a Business Combination, unless, following such
Business Combination, all of the following three conditions
are met:
(A) all or substantially all of the individuals and
entities who held Beneficial Ownership, respectively, of
Southern's Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly,
65% or more of the combined voting power of the Voting
Securities of the corporation surviving or resulting from such
Business Combination, (including, without limitation, a
corporation which as a result of such transaction holds
Beneficial Ownership of all or substantially all of Southern's
Voting Securities or all or substantially all of Southern's
assets) (such surviving or resulting corporation to be
referred to as "Surviving Company"), in substantially the same
proportions as their ownership, immediately prior to such
Business Combination, of Southern's Voting Securities;
(B) no Person (excluding any corporation resulting
from such Business Combination, any qualified pension plan,
publicly held mutual fund, Group composed exclusively of
Employees or employee benefit plan (or related trust) of
Southern, any Southern Subsidiary or Surviving Company) holds
Beneficial Ownership, directly or indirectly, of 20% or more
of the combined voting power of the then outstanding Voting
Securities of Surviving Company except to the extent that such
ownership existed prior to the Business Combination; and
(C) at least a majority of the members of the board
of directors of Surviving Company were members of the
Incumbent Board at the earlier of the date of execution of the
initial agreement, or of the action of the Southern Board,
providing for such Business Combination.
(b) with respect to an Employing Company, the occurrence of any of the
following:
(i) Consummation of an acquisition by any Person of Beneficial
Ownership of 50% or more of the combined voting power of the then
outstanding Voting Securities of an Employing Company; provided,
however, that for purposes of this Section 2.5(b)(i), any acquisition
by an Employee, or Group composed entirely of Employees, any qualified
pension plan, any publicly held mutual fund or any employee benefit
plan (or related trust) sponsored or maintained by Southern or any
Southern Subsidiary shall not constitute a Change in Control;
(ii) Consummation of a reorganization, merger or consolidation
of an Employing Company (an "Employing Company Business Combination"),
in each case, unless, following such Employing Company Business
Combination, Southern Controls the corporation surviving or resulting
from such Employing Company Business Combination; or
(iii) Consummation of the sale or other disposition of all or
substantially all of the assets of an Employing Company to an entity
which Southern does not Control. 2.5 "COBRA Coverage" shall mean any
continuation coverage to which a Participant or his dependents may be
entitled pursuant to Code Section 4980B.
2.6 "Code" shall mean the Internal Revenue Code of 1986, as amended.
2.7 "Company" shall mean Southern Company Services, Inc., its
successors and assigns.
2.8 "Consummation" shall mean the completion of the final act necessary
to complete a transaction as a matter of law, including, but not limited to, any
required approvals by the corporation's shareholders and board of directors, the
transfer of legal and beneficial title to securities or assets and the final
approval of the transaction by any applicable domestic or foreign governments or
governmental agencies.
2.9 "Control" shall mean, in the case of a corporation, Beneficial
Ownership of more than 50% of the combined voting power of the corporation's
Voting Securities, or in the case of any other entity, Beneficial Ownership of
more than 50% of such entity's voting equity interests.
2.10 "Effective Date" shall mean the date of execution hereof.
2.11 "Employee" shall mean each active exempt and nonexempt employee of
an Employing Company of Grade 9 or below (or, if the Grade system is not used,
below $130,000 of annual base salary rate for the twelve month period
immediately preceding the Change in Control) not covered by a collective
bargaining agreement between the Employing Company and a union or other employee
representative.
2.12 "Employee Outplacement Program" shall mean the program established
by the Employing Company from time to time for the purpose of assisting
Participants covered by the Plan in finding employment outside of the Employing
Company which provides for the following services:
(a) self assessment, career decision and goal setting; (b) job
market research and job sources; (c) networking and
interviewing skills; (d) planning and implementation strategy;
(e) resume writing, job hunting methods and salary
negotiation; and (f) office support and job search resources.
2.13 "Employing Company" shall mean the Company, or any other Southern
Subsidiary, which the Board of Directors may from time to time determine to
bring under the Plan and which shall adopt the Plan, and any successor of any of
them.
2.14 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
2.15 "Good Reason" shall mean, without an Employee's express written
consent, after written notice to his Employing Company, and after a thirty (30)
day opportunity for the Employee's Employing Company to cure, the continuing
occurrence of any of the following events:
(a) Reduced Salary. A reduction of five percent (5%) or more
by the Employing Company in either of the following: (i) the Employee's
annual base salary rate for the twelve month period immediately
preceding the Change in Control ("Base Salary") (except for a less than
ten percent (10%), across-the-board Base Salary reduction similarly
affecting at least ninety-five percent (95%) of all Employees of the
Employing Company) or (ii) the sum of the Employee's Base Salary plus
target bonus under his Employing Company's short term bonus plan (e.g.,
either the PPP Plan or the Southern Energy, Inc. Short Term Plan, as
the case may be), as in effect immediately prior to the Change in
Control (except for a less than ten percent (10%), across-the-board
reduction of Base Salary plus target bonus under such short term plans
similarly affecting at least ninety-five (95%) of all Employees of the
Employing Company);
(b) Relocation. A change in an Employee's work location to a
location more than fifty (50) miles from the facility where the
Employee was located at the time of the Change in Control, unless such
new work location is within fifty (50) miles from the Employee's
principal place of residence at the time of the Change in Control. The
acceptance, if any, by an Employee of employment by an Employing
Company at a work location which is outside the fifty mile radius set
forth in this Section 2.15(b) shall not be a waiver of the Employee's
right to refuse subsequent transfer by an Employing Company to a
location which is more than fifty (50) miles from the Employee's
principal place of residence at the time of the Change in Control, and
such subsequent unconsented transfer shall be "Good Reason" under this
Agreement;
(c) Compensation Plans. The failure by an Employing Company to
continue in effect any "compensation plan or agreement" in which an
Employee participates or the elimination of the Employee's
participation in any such plan (except for across-the-board plan
changes or terminations similarly affecting at least ninety-five
percent (95%) of all Employees of the Employing Company);
For purposes of this Section 2.15(c), the term "compensation
plan or agreement" shall mean any written arrangement executed by an
authorized officer of the Employing Company which provides for
periodic, non-discretionary compensatory payments to Employees in the
nature of bonuses.
(d) Benefits and Perquisites. The taking of any action by the
Employing Company that would directly or indirectly materially reduce
the benefits enjoyed by an Employee under the Employing Company's
retirement, life insurance, medical, health and accident, disability,
deferred compensation or savings plans in which the Employee was
participating immediately prior to the Change in Control, or the
failure by the Employing Company to provide an Employee with the number
of paid vacation days to which the Employee is entitled on the basis of
years of service with the Employing Company in accordance with the
Employing Company's normal vacation policy in effect immediately prior
to the Change in Control (except for across-the-board plan or vacation
policy changes or plan terminations similarly affecting at least
ninety-five percent (95%) of all Employees of the Employing Company).
2.16 "Group" shall have the meaning set forth in Section 14(d) of the
Exchange Act. 2.17 "Group Health Plan" shall mean the group health plan
covering the Participant, as such plan may be amended from time
to time.
2.18 "Group Life Insurance Plan" shall mean the group life insurance
program covering the Participant, as such plan may be amended from time to time.
2.19 "Incumbent Board" shall mean those individuals who constitute the
Southern Board as of the Effective Date plus any individual who shall become a
director subsequent to such date whose election or nomination for election by
Southern's shareholders was approved by a vote of at least 75% of the directors
then comprising the Incumbent Board. Notwithstanding the foregoing, no
individual who shall become a director of the Southern Board subsequent to the
Effective Date whose initial assumption of office occurs as a result of an
actual or threatened election contest (within the meaning of Rule 14a-11 of the
Regulations promulgated under the Exchange Act) with respect to the election or
removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Southern Board shall be a
member of the Incumbent Board.
2.20 "Month of Service" shall mean any calendar month during which a
Participant has worked at least one (1) hour or was on approved leave of absence
while in the employ of an Employing Company or any other Southern Subsidiary.
2.21 "Participant" shall mean an Employee who meets the eligibility
requirements of Section 3.1 of this Plan. 2.22 "Pension Plan" shall
mean The Southern Company Pension Plan or any successor thereto, as
such plans may be amended
from time to time.
2.23 "Performance Dividend Plan" or "PDP Plan" shall mean the Southern
Company Performance Dividend Plan or any successor thereto which is considered
an "equitable arrangement" under Section 1.25 thereof, as such plans may be
amended from time to time.
2.24 "Performance Pay Plan" or "PPP Plan" shall mean the Southern
Company Performance Pay Plan or any successor thereto which is considered an
"equitable arrangement" under Section 1.31 thereof, as such plans may be amended
from time to time.
2.25 "Performance Stock Plan" shall mean the Southern Company
Performance Stock Plan or any successor thereto which is considered an
"equitable arrangement" under Section 1.33 thereof, as such plans may be amended
from time to time.
2.26 "Person" shall mean any individual, entity or group within the
meaning of Section 13(d)(3) or 14(d)(2) of Exchange Act.
2.27 "Plan" shall mean the Southern Company Change in Control Severance
Plan.
2.28 "PIP Plan" shall mean the "Southern Company Productivity
Improvement Plan or any successor thereto which is considered an "equitable
arrangement" under Section 1.30 thereof, as such plans may be amended from time
to time.
2.29 "Short Term Plan" shall mean the Southern Energy Resources, Inc.
Short Term Plan, as amended from time to time. 2.30 "Southern" shall
mean The Southern Company, its successors and assigns.
2.31 "Southern Board" shall mean the board of directors of Southern.
2.32 "Southern Subsidiary" shall mean any corporation or other entity
which Southern Controls.
2.33 "Straight Time Pay" shall mean a Participant's highest base salary
during the calendar year in which his Termination Date occurs. Base salary shall
include "add ons" such as monthly shift differential, monthly premium pay, etc.,
but shall not include overtime pay. For Participants who were part-time
Employees "Straight Time Pay" shall mean the actual average salary paid during
the calendar year in which the Participant's Termination Date occurs.
2.34 "Termination for Cause" or "Cause" shall mean an Employee's
termination of employment with his Employing Company upon the occurrence of any
of the following:
(a) The willful and continued failure by the Employee to
substantially perform his duties with his Employing Company (other than
any such failure resulting from the Employee's Total Disability or from
the Employee's retirement or any such actual or anticipated failure
resulting from termination by the Employee for Good Reason) after a
written demand for substantial performance is delivered to him by the
Employee's responsible corporate officer, which demand specifically
identifies the manner in which such corporate officer believes the
Employee has not substantially performed his duties; or
(b) The willful engaging by the Employee in conduct that is
demonstrably and materially injurious to his Employing Company,
monetarily or otherwise, including but not limited to any of the
following:
(i) any willful act involving fraud or dishonesty in
the course of an Employee's employment by his Employing
Company;
(ii) the willful carrying out of any activity or the
making of any statement by an Employee which would materially
prejudice or impair the good name and standing of his
Employing Company, Southern or any other Southern Subsidiary
or would bring his Employing Company, Southern or any other
Southern Subsidiary into contempt, ridicule or would
reasonably shock or offend any community in which his
Employing Company, Southern or such other Southern Subsidiary
is located;
(iii) attendance by an Employee at work in a state of
intoxication or otherwise being found in possession at his
workplace of any prohibited drug or substance, possession of
which would amount to a criminal offense;
(iv) violation of his Employing Company's policies on
drug and alcohol usage, fitness for duty requirements or
similar policies as may exist from time to time as adopted by
the Employing Company's safety officer;
(v) assault or other act of violence by an Employee
against any person during the course of employment; or
(vi) an Employee's indictment for any felony or any
misdemeanor involving moral turpitude. No act or failure to
act by an Employee shall be deemed "willful" unless done, or
omitted to be done, by the Employee not in good faith and
without reasonable belief that his action or omission was in
the best interest of his Employing Company. Notwithstanding
the foregoing, an Employee shall not be deemed to have been
terminated for Cause unless and until there shall have been
delivered to him a copy of a resolution duly adopted by the
affirmative vote of the majority of the Administrative
Committee at a meeting called and held for such purpose (after
reasonable notice to the Employee and an opportunity for him,
together with counsel, to be heard before the Administrative
Committee), finding that, in the good faith opinion of the
Administrative Committee, the Employee was guilty of conduct
set forth in Section 2.34(a) or (b) hereof and specifying the
particulars thereof in detail.
2.35 "Termination Date" shall mean the date on which a Participant is
separated from his Employing Company's regular payroll; provided, however, that
solely for purposes of Section 3.2(c) hereof, the Termination Date of
Participants who are deemed to be retired pursuant to the provisions of Section
3.3 hereof, shall be the effective date of their retirement pursuant to the
terms of the Pension Plan.
2.36 "Total Disability" shall mean total disability under the terms of
the Pension Plan.
2.37 "Value Creation Plan" shall mean the Southern Energy Resources,
Inc. Value Creation Plan or any replacement thereto which is considered an
"equitable arrangement" under Section 1.30 thereof, as such plans may be amended
from time to time.
2.36 "Voting Securities" shall mean the outstanding voting securities
of a corporation entitling the holder thereof to vote generally in the election
of such corporation's directors.
2.37 "Waiver and Release" shall mean the Waiver and Release attached
hereto as Exhibit A.
2.38 "Year of Service" shall mean an Employee's Months of Service
divided by twelve (12) rounded to the nearest whole year, rounding up if the
remaining number of months is seven (7) or greater and rounding down if the
remaining number of months is less than seven (7). If an Employee has a break in
his service with his Employing Company, he will receive credit under this Plan
for the service prior to the break in service only if the break in service was
less than five years and his service prior to the break exceeds the length of
the break in service.
ARTICLE 3 - SEVERANCE BENEFITS
3.1 Eligibility. Except as otherwise provided herein, any Employee
whose employment is involuntarily terminated by his Employing Company at any
time during the two year period following a Change in Control of Southern or his
Employing Company for reasons other than Cause or who shall voluntarily
terminate his employment with his Employing Company for Good Reason at any time
during the two year period following a Change in Control of Southern or his
Employing Company shall be entitled to participate in this Plan and receive the
benefits described in Section 3.2 hereof, subject to the terms and conditions
described in this Article 3. Notwithstanding anything to the contrary herein, an
Employee shall not be eligible to receive benefits under this Plan if the
Employee:
(a) is not actively at work on his Termination Date, unless
such Employee is capable of returning to work within twelve (12) weeks
of the beginning of any leave of absence from work;
(b) voluntarily terminates his employment with his Employing
Company for other than Good Reason;
(c) is terminated by his Employing Company for Cause;
(d) accepts the transfer of his employment to Southern, any
Southern Subsidiary or any employer that acquires all or substantially
all of the assets of Southern, a Southern Subsidiary or his Employing
Company;
(e) refuses an offer of continued employment with his
Employing Company, Southern or a Southern Subsidiary, or any employer
that acquires all or substantially all of the assets of Southern, a
Southern Subsidiary or his Employing Company, under circumstances where
such refusal would not amount to Good Reason for voluntary termination
of employment and such employer agrees to adopt this Plan as it applies
to such Participant; or
(f) elects to receive the benefits of any other voluntary or
involuntary severance, separation or outplacement program maintained by
his Employing Company; provided however, that the receipt of benefits
under any retention plan or agreement shall not be deemed to be the
receipt of benefits under any severance, separation or outplacement
program for purposes of this Plan. 3.2 Benefits. Upon the Employing
Company's receipt of an effective Waiver and Release, Participants
shall be entitled to receive the following benefits:
(a) Employee Outplacement Services. Each Participant shall be
eligible to participate in the Employee Outplacement Program, which
program shall not be less than six (6) months duration measured from
the Participant's Termination Date.
(b) Severance Benefit. Each Participant shall be paid a cash
amount equal to the sum of the following amounts: (i) eight (8) weeks'
Straight Time Pay, (ii) one (1) week's Straight Time Pay for each of
the Participant's first five (5) Years of Service; (iii) two (2) weeks'
Straight Time Pay for each of the Participant's sixth (6th) through
tenth (10th) Years of Service; (iv) three (3) weeks' Straight Time Pay
for each of the Participant's eleventh (11th) through fifteenth (15th)
Years of Service; (v) five (5) weeks' Straight Time Pay for each of the
Participant's sixteenth (16th) through twentieth (20th) Years of
Service; and (vi) six (6) weeks' Straight Time Pay for each of the
Participant's Years of Service in excess of twenty (20) Years of
Service.
(c) Welfare Benefit.
(i) Except as provided in Section 3.3 hereof, each
Participant shall be eligible to participate in the Employing
Company's Group Health Plan for a period of six (6) months for
each of the Participant's Years of Service, not to exceed a
period of five (5) years, beginning on the first day of the
first month following the Participant's Termination Date
unless otherwise specifically provided under such plan, upon
the Participant's payment of both the Employing Company's and
the Participant's premium under such plan. A Participant who
receives this extended medical coverage shall also be entitled
to elect coverage under the Group Health Plan for his
dependents who are participating in the Group Health Plan on
the Participant's Termination Date (and for such other
dependents as may be entitled to coverage under the provisions
of the Health Insurance Portability and Accountability Act of
1996) for the duration of the Participant's extended medical
coverage under this Section 3.2(c) to the extent such
dependents remain eligible for dependent coverage under the
terms of the Group Health Plan.
(ii) The extended medical coverage afforded to a
Participant pursuant to this Section 3.2(c) as well as the
premiums to be paid by the Participant in connection with such
coverage shall be determined in accordance with the terms of
the Group Health Plan and shall be subject to any changes in
the terms and conditions of the Group Health Plan as well as
any future increases in premiums under the Group Health Plan.
The premiums to be paid by the Participant in connection with
this extended coverage shall be due on the first day of each
month; provided, however, that if a Participant fails to pay
his premium within thirty (30) days of its due date, such
Participant's extended coverage shall be terminated.
(iii) Any Group Health Plan coverage provided under
this Section 3.2(c) shall be a part of and not in addition to
any COBRA Coverage which a Participant or his dependent may
elect. In the event that a Participant or his dependent
becomes eligible to be covered, by virtue of re-employment or
otherwise, by any employer-sponsored group health plan or is
eligible for coverage under any government-sponsored health
plan during the above period, coverage under the Employing
Company's Group Health Plan available to the Participant or
his dependent by virtue of the provisions of this Article 3
shall terminate, except as may otherwise be required by law,
and shall not be renewed. It shall be the duty of a
Participant to inform the Employing Company of his eligibility
to participate in any such health plan.
(iv) Except as otherwise provided in Section 3.3
hereof, regardless of whether a Participant elects the
extended coverage described in Section 3.2(c) hereof, the
Employing Company shall pay to each Participant a cash amount
equal to the Employing Company's and the Participant's cost of
premiums for coverage under the Group Health Plan and Group
Life Insurance Plan, if the Participant was participating in
such plans on his Termination Date, for a period equal to the
total number of weeks of pay the Participant receives as a
severance benefit under Section 3.2(b) hereof. (d) Stock
Option Vesting. The provisions of this Section 3.2(d) shall
apply to any Participant who, as of the date of the Change in
Control, was a participant in the Performance Stock Plan, the
defined terms of which are incorporated in this Section 3.2(d)
by reference.
(i) Any of the Participant's Options and Stock
Appreciation Rights outstanding as of the Termination Date
which are not then exercisable and vested, shall become fully
exercisable and vested to the full extent of the original
grant; provided, that in the case of a Participant holding a
Stock Appreciation Right who is subject to Section 16(b) of
the Exchange Act, such Stock Appreciation Right shall not
become fully vested and exercisable at such time if such
actions would result in liability to the Participant under
Section 16(b) of the Exchange Act, provided further, that any
such actions not taken as a result of the rules under Section
16(b) of the Exchange Act shall be effected as of the first
date that such activity would no longer result in liability
under Section 16(b) of the Exchange Act.
(ii) The restrictions and deferral limitations
applicable to any of the Participant's Restricted Stock as of
the Termination Date shall lapse, and such Restricted Stock
shall become free of all restrictions and limitations and
become fully vested and transferable to the full extent of the
original grant.
(iii) The restrictions and deferral limitations and
other conditions applicable to any other Awards held by the
Participant under the Performance Stock Plan as of the
Termination Date shall lapse, and such other Awards shall
become free of all restrictions, limitations or conditions and
become fully vested and transferable to the full extent of the
original grant. (e) Performance Pay Plan. The provisions of
this Section 3.2(e) shall apply to any Participant who, as of
the date of the Change in Control, was a participant in the
Performance Pay Plan, the defined terms of which are
incorporated in this Section 3.2(e) by reference. Provided the
Participant is not entitled to benefits under Article V of the
PPP Plan, if the PPP Plan is in place through the
Participant's Termination Date and to the extent the
Participant is entitled to participate therein, the
Participant shall be entitled to receive cash in an amount
equal to a prorated payout of his Incentive Pay Award under
the PPP Plan for the Performance Period in which the
Termination Date shall have occurred, at target performance
under the PPP Plan and prorated by the number of months which
have passed since the beginning of the Performance Period
until the Termination Date.
(f) PIP Plan. The provisions of this Section 3.2(f) shall
apply to any Participant who, as of the date of the Change in Control,
was a participant in the PIP Plan, the defined terms of which are
incorporated in this Section 3.2(f) by reference. Provided the
Participant is not entitled to benefits under Article IV of the PIP
Plan, if the PIP Plan is in place through the Participant's Termination
Date and to the extent the Participant is entitled to participate
therein, the Participant shall be entitled to receive cash in an amount
equal to his Award Opportunity under the PIP Plan for the Computation
Periods in which the Termination Date shall have occurred, at a target
Value of Performance Unit of $1.00, prorated for each Computation
Period by the number of months which have passed since the beginning of
each of the Computation Periods until the Termination Date.
(g) Performance Dividend Plan. The provisions of this Section
3.2(g) shall apply to any Participant who, as of the date of the Change
in Control, was a participant in the Performance Dividend Plan, the
defined terms of which are incorporated in this Section 3.2(g) by
reference. Provided the Participant is not entitled to benefits under
Article V of the Performance Dividend Plan, if the Performance Dividend
Plan is in place through the Participant's Termination Date and to the
extent the Participant is entitled to participate therein, the
Participant shall be entitled to receive cash for each Award held as of
such date based on a Payout Percentage of 50% under Section 4.1 of the
Performance Dividend Plan for the Performance Period in which the
Termination Date shall have occurred, and the Annual Dividend declared
prior to the Termination Date.
(h) Value Creation Plan. The provisions of this Section 3.2(h)
shall apply to any Participant who, as of the date of the Change in
Control, was a participant in the Value Creation Plan, the defined
terms of which are incorporated in this Section 3.2(h) by reference.
Any of the Participant's Appreciation Rights or Indexed Rights
outstanding as of the Termination Date which are not then exercisable
and vested, shall become fully exercisable and vested to the full
extent of the original grant. Notwithstanding anything in the Value
Creation Plan to the contrary, Share Value with respect to any
Appreciation Rights or Indexed Rights held by the Participant following
his Termination Date shall be no less than the Share Value as of the
date of the Change in Control of Southern or his Employing Company, as
the case may be.
(i) Short Term Plan. The provisions of this Section 3.2(i)
shall apply to any Participant who, as of the date of the Change in
Control was a Participant in the Short Term Plan, the defined terms of
which are incorporated in this Section 3.2(i) by reference. Provided
the Participant is not entitled to benefits under Article V of the
Short Term Plan, if the Short Term Plan is in place through the
Participant's Termination Date and to the extent the Participant is
entitled to participate therein, the Participant shall be entitled to
receive cash in an amount equal to his Award under the Short Term Plan
for the Performance Period in which the Termination Date shall have
occurred, at Total Target for the Participant's Job Category and
prorated by the number of months which have passed since the beginning
of the Performance Period until the Termination Date.
(j) Other Short Term Incentive Plans. The provisions of this
Section 3.2(j) shall apply to any Participant who, as of the date of
the Change in Control is a participant in any other "short term
incentive compensation plan" not otherwise previously referred to in
this Section 3.2. Provided the Participant is not otherwise entitled to
a plan payout under any change in control provisions of such plans, if
the "short term incentive compensation plan" is in place through the
Participant's Termination Date and to the extent the Participant is
entitled to participate therein, the Participant shall be entitled to
receive cash in an amount equal to his award under his respective
Employing Company's "short term incentive compensation plan" for the
annual performance period in which the Termination Date shall have
occurred, at the Participant's target performance level and prorated by
the number of months which have passed since the beginning of the
annual performance period until the Termination Date. For purposes of
this Section 3.2(j), the term "short term incentive compensation plan"
shall mean any incentive compensation plan or arrangement adopted in
writing by an Employing Company which provides for annual, recurring
compensatory bonuses to participants based upon articulated performance
criteria, and which have been identified by the Board of Directors and
listed on Exhibit B hereto which may be amended from time to time to
reflect plan additions, terminations and amendments. 3.3 Coordination
with Retiree Medical and Life Insurance Coverage. Notwithstanding
anything to the contrary above, any Participant who is otherwise
eligible to retire pursuant to the terms of the Pension Plan, shall be
deemed to have retired for purposes of all employee benefit plans
sponsored by the Employing Company of which the Participant is a
participant. A Participant who is deemed to have retired in accordance
with the preceding sentence shall not be eligible to receive the
benefits described in Section 3.2(c) hereof if, upon his Termination
Date, such Participant becomes eligible to receive the retiree medical
and life insurance coverage provided to certain retirees pursuant to
the terms of the Pension Plan, the Group Health Plan and the Group Life
Insurance Plan.
3.4 Maximum Benefit. Notwithstanding anything to the contrary above,
with respect to each Participant, the maximum benefit payable under this Article
3 shall be an amount equal to two (2) times such Participant's "annual
compensation" as defined in Department of Labor Regulation Section 2510.3-2(b),
which, for purposes of this Plan shall be no less than Straight Time Pay plus
thirty percent (30%). When necessary, the Administrative Committee shall reduce
the severance benefits described in Section 3.2(b) and 3.2(c)(iv) hereof to
comply with this Section 3.4.
3.5 Payment of Benefits. The total amount payable under this Article 3
shall be paid to a Participant in one (1) lump sum payment within two (2)
payroll periods of the later of the following to occur: (a) the Participant's
Termination Date, or (b) the tender to the Employing Company by the Participant
of an effective Waiver and Release (in the form of Exhibit A attached hereto)
and the expiration of any applicable revocation period for such waiver. In the
event of a dispute with respect to liability or amount of any benefit due
hereunder, an effective Waiver and Release shall be tendered at the time of
final resolution of any such dispute when payment is tendered by the Employing
Company.
3.6 Benefits in the Event of Death. In the event of the Participant's
death prior to the payment of all benefits due under this Article 3, the
Participant's estate shall be entitled to receive as due any amounts not yet
paid under this Article 3 upon the tender by the executor or administrator of
the estate of an effective Waiver and Release.
3.7 Legal Fees. In the event of a dispute between a Participant and his
Employing Company with regard to any amounts due hereunder, if any material
issue in such dispute is finally resolved in the Participant's favor, his
Employing Company shall reimburse the Participant's legal fees incurred with
respect to all issues in such dispute in an amount not to exceed fifteen
thousand dollars ($15,000).
3.8 No Mitigation. A Participant who receives benefits under Section
3.2 of this Plan shall have no duty or obligation to seek other employment
following his Termination Date and, except as otherwise provided in Subsection
3.1(d) hereof, the amounts due a Participant hereunder shall not be reduced or
suspended if such Participant accepts such subsequent employment.
3.9 Non-qualified Retirement and Deferred Compensation Plans.
Subsequent to a Change in Control, any claims by a Participant for benefits
under any of the Company's non-qualified retirement or deferred compensation
plans shall be resolved through binding arbitration in accordance with the
procedures and provisions set forth in Article 5 hereof and if any material
issue in such dispute is finally resolved in the Participant's favor, the
Company shall reimburse the Participant's legal fees in the manner provided in
Section 3.7 hereof.
ARTICLE 4 - ADMINISTRATION
4.1 Administrative Committee. The Administrative Committee shall be
responsible for the general administration of the Plan and shall be a "named
fiduciary" under Section 402 of the Employee Retirement Income Security Act of
1974, as amended.
4.2 Duties of the Administrative Committee.
(a) The Administrative Committee shall be responsible for the
daily administration of the Plan and may appoint other persons or
entities to perform or assist in the performance of any of its
fiduciary duties, subject to its review and approval. The
Administrative Committee shall have the right to remove any such
appointee from his position without cause upon notice. Any person,
group of persons, or entity may serve in more than one fiduciary
capacity.
(b) The Administrative Committee shall maintain permanent
records and accounts of Participants and of their rights under the Plan
and of all receipts, disbursements, transfers, and other transactions
concerning the Plan. Such accounts, books, and records relating thereto
shall be open at all reasonable times to inspection and audit by the
Company and any persons designated thereby.
(c) The Administrative Committee shall take all steps
necessary to ensure that the Plan complies with the law at all times,
including the preparation and filing of all documents and forms
required by any governmental agency; maintenance of adequate
Participant records; recording and transmission of all notices required
to be given to Participants and their beneficiaries; receipt and
dissemination, if required, of all reports and information received
from the Employing Companies; securing of such fidelity bonds as may be
required by law; and doing such other acts necessary for the proper
administration of the Plan. The Administrative Committee shall keep a
record of all of its proceedings and acts, and shall keep all such
books of accounts, records, and other data as may be necessary for
proper administration of the Plan. The Administrative Committee shall
notify the Employing Companies upon their request of any action taken
by it, and when required, shall notify any other interested person or
persons. 4.3 Powers. The Administrative Committee shall administer the
Plan in accordance with its terms and shall have all powers necessary
to carry out the provisions of the Plan as more particularly set forth
herein. The Administrative Committee shall have the discretionary
authority to interpret the Plan (including any ambiguities herein) and
to determine all questions arising in the administration,
interpretation, and application of the Plan. The Administrative
Committee shall adopt such procedures and regulations necessary or
desirable for the discharge of its duties hereunder and may appoint
such accountants, counsel, actuaries, specialists, and other agents as
it deems necessary or desirable in connection with the administration
of this Plan. The Administrative Committee shall be the legal appointed
agent for the service of process.
4.4 Compensation of the Administrative Committee. The Administrative
Committee shall not receive any compensation from the Plan for its services.
4.5 Payment of Expenses. The Administrative Committee shall be
reimbursed by the Employing Companies for its reasonable expenses incurred in
the discharge of its duties. Such expenses shall include any expenses incident
to its duties, including, but not limited to, fees of accountants, counsel,
actuaries, and other specialists, and other costs of administering the Plan.
4.6 Indemnification. Each Employing Company shall indemnify the
Administrative Committee against any and all claims, losses, damages, expenses,
and liability arising from its actions or omissions, except when the same is
finally adjudicated to be the result of gross negligence or willful misconduct.
The Employing Companies may purchase at their own expense sufficient liability
insurance for the Administrative Committee to cover any and all claims, losses,
damages, and expenses arising from any action or omission in connection with the
execution of the duties as the Administrative Committee.
ARTICLE 5 - ARBITRATION
5.1 General. Any dispute, controversy or claim arising out of or
relating to the Company's obligations to pay severance benefits under this Plan,
or the breach thereof, shall be settled and resolved solely by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association ("AAA") except as otherwise provided herein. The arbitration shall
be the sole and exclusive forum for resolution of any such claim for severance
benefits and the arbitrators' award shall be final and binding. The provisions
of this Article 5 are not intended to apply to any other disputes, claims or
controversies arising out of or relating to a Participant's employment by an
Employing Company or the termination thereof.
5.2 Demand for Arbitration. Arbitration shall be initiated by serving a
written notice of demand for arbitration to the Participant, in the case of an
Employing Company, or to the Administrative Committee, in the case of a
Participant.
5.3 Law and Venue. The arbitrators shall apply the laws of the State of
Georgia, except to the extent pre-empted by federal law, excluding any law which
would require the use of the law of another state. The arbitration shall be held
in Atlanta, Georgia.
5.4 Appointment of Arbitrators. Arbitrators shall be appointed within
fifteen (15) business days following service of the demand for arbitration. The
number of arbitrators shall be three. One arbitrator shall be appointed by the
Participant, one arbitrator shall be appointed by the Employing Company, and the
two arbitrators shall appoint a third. If the arbitrators cannot agree on a
third arbitrator within thirty (30) business days after the service of demand
for arbitration, the third arbitrator shall be selected by the AAA.
5.5 Costs. The arbitration filing fee shall be paid by the Participant.
All other costs of arbitration shall be borne equally by the Participant and his
Employing Company, provided, however, that such Employing Company shall
reimburse such fees and costs in the event any material issue in such dispute is
finally resolved in the Participant's favor and the Participant is reimbursed
legal fees under Section 3.7 hereof.
5.6 Interim and Injunctive Relief. Nothing in this Article 5 is
intended to preclude, upon application of either party, any court having
jurisdiction from issuing and enforcing in any lawful manner such temporary
restraining orders, preliminary injunctions, and other interim measures of
relief as may be necessary to prevent harm to either party's interests or as
otherwise may be appropriate pending the conclusion of arbitration proceedings
pursuant to this Article 5 and nothing herein is intended to prevent any court
from entering and enforcing in any lawful manner such judgments for permanent
equitable relief as may be necessary to prevent harm to a party's interests or
as otherwise may be appropriate following the issuance of arbitral awards
pursuant to this Article 5.
ARTICLE 6 - MISCELLANEOUS
6.1 Funding of Benefits. Unless the Board of Directors in its
discretion determines otherwise, the benefits payable to a Participant under the
Plan shall not be funded in any manner and shall be paid by the Employing
Companies out of their general assets, which assets are subject to the claims of
the Employing Companies' creditors.
6.2 Withholding. There shall be deducted from the payment of any
benefit due under the Plan the amount of any tax required by any governmental
authority to be withheld and paid over by the Employing Companies to such
governmental authority for the account of the Participant entitled to such
payment.
6.3 Assignment. No Participant or beneficiary shall have any rights to
sell, assign, transfer, encumber, or otherwise convey the right to receive the
payment of any benefit due hereunder, which payment and the rights thereto are
expressly declared to be nonassignable and nontransferable. Any attempt to do so
shall be null and void and of no effect.
6.4 Amendment and Termination. The Plan may be amended or terminated at
any time by the Board of Directors, provided, however, the Plan may not be
amended in any material of respect or terminated within the two (2) year period
following a Change in Control nor shall any amendment or termination impair the
rights of any Participant which have accrued hereunder prior to any such
amendment or termination.
6.5 Pooling Accounting. Notwithstanding anything to the contrary
herein, if, but for any provision of this Plan, a Change in Control transaction
would otherwise be accounted for as a pooling-of-interests under APB No.16
("Pooling Accounting") (after giving effect to any and all other facts and
circumstances affecting whether such Change in Control transaction would use
Pooling Accounting), such provision or provisions of this Plan which would
otherwise cause the Change in Control transaction to be ineligible for Pooling
Accounting shall be void and ineffective in such a manner and to the extent that
by eliminating such provision or provisions of this Plan, Pooling Accounting
would be required for such Change in Control transaction.
IN WITNESS WHEREOF, this Southern Company Change in Control Severance
Plan has been executed by the Company through its duly authorized officer, this
____ day of ___________, 1999, to be effective as provided herein.
SOUTHERN COMPANY SERVICES, INC.
By:
Christopher C. Womack
Senior Vice President
<PAGE>
Exhibit A
SOUTHERN COMPANY
CHANGE IN CONTROL
SEVERANCE PLAN
Waiver and Release
I understand that I am entitled to receive the severance benefits
described in Article 3 of the Southern Company Change in Control Severance Plan
(the "Plan") if I execute this Waiver and Release ("Waiver"). I understand that
the benefits I have elected to receive under the Plan are in excess of those I
would have received from ____________________ (the "Company") if I had not
elected to participate in the Plan and sign this Waiver.
I recognize that I may have a claim against the Company under the Civil
Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the
Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended,
the Americans with Disabilities Act or other federal, state and local laws.
In exchange for the benefits I elect to receive, I hereby irrevocably
waive and release all claims, of any kind whatsoever, whether known or unknown
in connection with any claim which I ever had, may have, or now have against The
Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power
Company, Mississippi Power Company, Savannah Electric and Power Company,
Southern Communication Services, Inc., Southern Company Services, Inc., Southern
Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern
Nuclear Operating Company, Inc. and other direct or indirect subsidiaries of The
Southern Company and their past, present and future officers, directors,
employees, agents and attorneys. Nothing in this Waiver shall be construed to
release claims or causes of action under the Age Discrimination in Employment
Act or the Energy Reorganization Act of 1974, as amended, which arise out of
events occurring after the execution date of this Waiver.
In further exchange for the benefits I elect to receive, I understand
and agree that I will respect the proprietary and confidential nature of any
information I have obtained in the course of my service with the Company or any
subsidiary or affiliate of The Southern Company. I understand and agree that I
am obligated to keep confidential and not disclose the terms of this Waiver,
including, but not limited to, the benefits under this Plan, except to my
attorneys, financial advisors, or except where such disclosure is required by
law. However, nothing in this Waiver shall prohibit me from engaging in
protected activities under applicable law or from communicating, either
voluntary or otherwise, with any governmental agency concerning any potential
violation of the law.
In signing this Waiver, I am not releasing claims to any vested or
accrued benefits that I have under any workers' compensation laws or any
retirement plan or welfare benefit plan within the meaning of the Employee
Retirement Income Security Act of 1974, as amended, which is sponsored by or
adopted by the Company and/or any of its direct or indirect subsidiaries;
however, I understand and acknowledge that nothing herein is intended to or
shall be construed to require the Company to institute or continue in effect any
particular plan or benefit sponsored by the Company and the Company hereby
reserves the right to amend or terminate any of its benefit programs at any time
in accordance with the procedures set forth in such plans.
In signing this Waiver, I realize that I am waiving and releasing,
among other things, any claims to benefits under any and all bonus, severance,
workforce reduction, early retirement, outplacement, or any other similar type
plan sponsored by the Company except for programs specifically designed for
participants in the Plan.
I have been encouraged and advised in writing to seek advice from
anyone of my choosing regarding this Waiver, including my attorney, and my
accountant or tax advisor. Prior to signing this Waiver, I have been given the
opportunity and sufficient time to seek such advice, and I fully understand the
meaning and contents of this Waiver.
I understand that I may take up to forty-five (45) calendar days to
consider whether or not I desire to enter this Waiver. I was not coerced,
threatened or otherwise forced to sign this Waiver. I have made my choice to
sign this Waiver voluntarily and of my own free will.
I understand that I may revoke this Waiver at any time during the seven
(7) calendar day period after I sign and deliver this Waiver to the Company. If
I revoke this Waiver, I must do so in writing delivered to the Company. I
understand that this Waiver is not effective until the expiration of this seven
(7) calendar day revocation period. I understand that upon the expiration of
such seven (7) calendar day revocation period this entire Waiver will be binding
upon me and will be irrevocable.
I understand that by signing this Waiver I am giving up rights I may
have.
IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this
_____ day of ________________, in the year ___.
Employee's signature
Employee's printed name
Acknowledged and Accepted by the Administrative Committee of the Southern
Company Change in Control Severance Plan.
By:
Date:
<PAGE>
Attachment to Exhibit A
TO: All Eligible Employees under the Southern Company Change in Control
Severance Plan
FROM: _____________________
RE: ADEA Information Notice
DATE: _____________________
A severance plan known as the Southern Company Change in Control
Severance Plan ("Plan") has been approved and established by The Southern
Company, its affiliates and its direct and indirect subsidiaries (collectively
the "Company"). You are eligible to participate in the Plan subject to the terms
of the Plan. In accordance with the Age Discrimination in Employment Act
("ADEA"), the Company is providing you the following information pertaining to
eligibility and participation in the Plan.
o The purpose of the Plan is to provide benefits to certain
employees of The Southern Company and certain subsidiaries of The
Southern Company ("Employing Companies") whose employment is
terminated subsequent to a change in control of The Southern
Company or their respective Employing Company. A full description
of the benefits under the Plan as well as any restrictions or
limitations that may be applicable can be found in the Summary
Plan Description you have been given.
o Each active exempt and non-exempt employee of an Employing Company
of Grade 9 or below (or, if the Grade System is not used, below
$130,000 of annual base salary rate for the 12 month period
immediately preceding the change in control) not covered by a
collective bargaining agreement is generally eligible to
participate in the Plan if during the two year period following a
change in control: (i) his employment is involuntarily terminated
for reasons other than cause, or (ii) he voluntarily terminates
his employment for good reason.
o All eligible employees may elect to receive severance benefits
under the Plan by signing an Election Form and Waiver Agreement no
later than 45 calendar days from the date it is received. The
Agreement will remain revocable by you for a seven day period
after you sign it.
o Attached is a list sorted by job title and age of each employee
eligible to participate in the Plan as well as a list of the ages
of all employees in the same job classification who are not
eligible to participate in the Plan.
In furtherance of you making an informed decision, the Company urges
you to seek a financial advisor, legal counsel and a qualified tax advisor to
assist you in fully understanding your rights and benefits under the plan and
the Election Form and Waiver Agreement that you will be required to sign to
receive severance benefits under the Plan.
If you have any questions or need additional information, please call me at
_______________.
Sincerely,
- - - - - - - ----------------------
[Name]
- - - - - - - ----------------------
[Title]
<PAGE>
ADEA INFORMATION NOTICE
<TABLE>
<S> <C>
- - - - - - - ------------------------------------------------------------ ---------------------------------------------------------
Job Title, Classification Age of
or Category of Eligible Employees Eligible Employees
- - - - - - - ------------------------------------------------------------ ---------------------------------------------------------
- - - - - - - ------------------------------------------------------------ ---------------------------------------------------------
- - - - - - - ------------------------------------------------------------ ---------------------------------------------------------
- - - - - - - ------------------------------------------------------------ ---------------------------------------------------------
[List job classification, title or category of all [List corresponding age of each eligible employee]
eligible employees]
- - - - - - - ------------------------------------------------------------ ---------------------------------------------------------
- - - - - - - ------------------------------------------------------------ ---------------------------------------------------------
Job Title, Classification Age of
or Category of Ineligible Employees Ineligible Employees
- - - - - - - ------------------------------------------------------------ ---------------------------------------------------------
- - - - - - - ------------------------------------------------------------ ---------------------------------------------------------
- - - - - - - ------------------------------------------------------------ ---------------------------------------------------------
- - - - - - - ------------------------------------------------------------ ---------------------------------------------------------
[List job classification, title or category of all [List corresponding age of each ineligible employee]
ineligible employees]
- - - - - - - ------------------------------------------------------------ ---------------------------------------------------------
</TABLE>
<PAGE>
Exhibit B
SOUTHERN COMPANY
CHANGE IN CONTROL
SEVERANCE PLAN
Short Term Incentive Compensation Plans
EXHIBIT 10(a)79
SOUTHERN COMPANY
EXECUTIVE CHANGE IN CONTROL
SEVERANCE PLAN
Troutman Sanders LLP
NationsBank Plaza, Suite 5200
600 Peachtree Street, N.E.
Atlanta, Georgia 30308
Effective December 7, 1998
<PAGE>
SOUTHERN COMPANY
EXECUTIVE CHANGE IN CONTROL
SEVERANCE PLAN
ARTICLE 1 - PURPOSE AND ADOPTION OF PLAN
1.1 Adoption of Plan. Southern Company Services, Inc. hereby adopts
this Southern Company Executive Change in Control Severance Plan, effective
December 7, 1998. The Plan shall be an unfunded "top hat" plan designed to
provide certain severance benefits to a select group of management or highly
compensated employees, to be paid solely from the general assets of the
respective Employing Companies.
1.2 Purpose. The Plan is primarily designed to provide benefits to
certain key employees of the Employing Companies, whose employment is terminated
subsequent to a change in control of Southern or their respective Employing
Company.
ARTICLE 2 - DEFINITIONS
2.1 "Administrative Committee" shall mean the Board of Directors, plus,
in the event of any act necessary to be taken in connection with the Plan
relative to a particular Participant, the Chief Executive Officer of the
Participant's Employing Company, if such Chief Executive Officer is not already
a member of the Board of Directors.
2.2 "Annual Compensation" shall mean a Participant's highest annual
base salary rate for the twelve month period immediately preceding the date of
the Change in Control plus market level target annual bonus as specified by
Exhibit A attached hereto.
2.3 "Beneficial Ownership" shall mean beneficial ownership within the
meaning of Rule 13d-3 promulgated under the Exchange Act.
2.4 "Board of Directors" shall mean the board of directors of the
Company.
2.5 "Business Combination" shall mean a reorganization, merger or
consolidation of Southern or sale or other disposition of all or substantially
all of the assets of Southern.
2.6 "Change in Control" shall mean,
(a) with respect to Southern, the occurrence of any of the following:
(i) The Consummation of an acquisition by any Person of
Beneficial Ownership of 20% or more of Southern's Voting Securities;
provided, however, that for purposes of this Section 2.6 (i), the
following acquisitions of Southern's Voting Securities shall not
constitute a Change in Control:
(A) any acquisition directly from Southern;
(B) any acquisition by Southern;
(C) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by Southern or any
Southern Subsidiary;
(D) any acquisition by a qualified pension plan or
publicly held mutual fund;
(E) any acquisition by an Employee or Group composed
exclusively of Employees; or
(F) any Business Combination which would not
otherwise constitute a Change in Control because of the
application of clauses (A), (B) and (C) of Section
2.6(a)(iii).
(ii) A change in the composition of the Southern Board whereby
individuals who constitute the Incumbent Board cease for any reason to
constitute at least a majority of the Southern Board; or
(iii) Consummation of a Business Combination, unless,
following such Business Combination, all of the following three
conditions are met:
(A) all or substantially all of the individuals and
entities who held Beneficial Ownership, respectively, of
Southern's Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly,
65% or more of the combined voting power of the Voting
Securities of the corporation surviving or resulting from such
Business Combination, (including, without limitation, a
corporation which as a result of such transaction holds
Beneficial Ownership of all or substantially all of Southern's
Voting Securities or all or substantially all of Southern's
assets) (such surviving or resulting corporation to be
referred to as "Surviving Company"), in substantially the same
proportions as their ownership, immediately prior to such
Business Combination, of Southern's Voting Securities;
(B) no Person (excluding any corporation resulting
from such Business Combination, any qualified pension plan,
publicly held mutual fund, Group composed exclusively of
Employees or employee benefit plan (or related trust) of
Southern, any Southern Subsidiary or Surviving Company) holds
Beneficial Ownership, directly or indirectly, of 20% or more
of the combined voting power of the then outstanding Voting
Securities of Surviving Company except to the extent that such
ownership existed prior to the Business Combination; and
(C) at least a majority of the members of the board
of directors of Surviving Company were members of the
Incumbent Board at the earlier of the date of execution of the
initial agreement, or of the action of the Southern Board,
providing for such Business Combination.
(b) with respect to an Employing Company, the occurrence of any of the
following:
(i) The Consummation of an acquisition by any Person of
Beneficial Ownership of 50% or more of the combined voting power of the
then outstanding Voting Securities of an Employing Company; provided,
however, that for purposes of this Section 2.6(b)(i), any acquisition
by an Employee, or Group composed entirely of Employees, any qualified
pension plan, any publicly held mutual fund or any employee benefit
plan (or related trust) sponsored or maintained by Southern or any
Southern Subsidiary shall not constitute a Change in Control;
(ii) The Consummation of a reorganization, merger or
consolidation of an Employing Company (an "Employing Company Business
Combination"), in each case, unless, following such Employing Company
Business Combination, Southern Controls the corporation surviving or
resulting from such Employing Company Business Combination; or
(iii) The Consummation of the sale or other disposition of all
or substantially all of the assets of an Employing Company to an entity
which Southern does not Control. 2.7 "COBRA Coverage" shall mean any
continuation coverage to which a Participant or his dependents may be
entitled pursuant to Code Section 4980B.
2.8 "Code" shall mean the Internal Revenue Code of 1986, as amended.
2.9 "Company" shall mean Southern Company Services, Inc., its
successors and assigns.
2.10 "Consummation" shall mean the completion of the final act
necessary to complete a transaction as a matter of law, including, but not
limited to, any required approvals by the corporation's shareholders and board
of directors, the transfer of legal and beneficial title to securities or assets
and the final approval of the transaction by any applicable domestic or foreign
governments or governmental agencies.
2.11 "Control" shall mean, in the case of a corporation, Beneficial
Ownership of more than 50% of the combined voting power of the corporation's
Voting Securities, or in the case of any other entity, Beneficial Ownership of
more than 50% of such entity's voting equity interests.
2.12 "Effective Date" shall mean the date of execution hereof.
2.13 "Employee" shall mean each full-time or regular part-time employee
of an Employing Company of Grades 10 to 13 (or, if the Grade system is not used,
$130,000 or more of annual base salary rate for the twelve month period
immediately preceding the Change in Control who has not otherwise entered into a
Change in Control agreement with his Employing Company and elects to receive
benefits under such agreement) and is not covered by a collective bargaining
agreement between the Employing Company and a union or other employee
representative.
2.14 "Employee Outplacement Program" shall mean the program established
by the Employing Company from time to time for the purpose of assisting
Participants covered by the Plan in finding employment outside of the Employing
Company which provides for the following services:
(a) self assessment, career decision and goal setting; (b) job
market research and job sources; (c) networking and
interviewing skills; (d) planning and implementation strategy;
(e) resume writing, job hunting methods and salary
negotiation; and (f) office support and job search resources.
2.15 "Employing Company" shall mean the Company, or any other Southern
Subsidiary, which the Board of Directors may from time to time determine to
bring under the Plan and which shall adopt the Plan, and any successor of any of
them.
2.16 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
2.17 "Good Reason" shall mean, without an Employee's express written
consent, after written notice to his Employing Company, and after a thirty (30)
day opportunity for the Employee's Employing Company to cure, the continuing
occurrence of any of the following events:
(a) Inconsistent Duties. A meaningful and detrimental
alteration in the Employee's position or in the nature or status of his
responsibilities from those in effect immediately prior to the Change
in Control;
(b) Reduced Salary. A reduction of five percent (5%) or more
by the Employing Company in either of the following: (i) the Employee's
annual base salary rate for the twelve month period immediately
preceding the date of the Change in Control ("Base Salary") (except for
a less than ten percent (10%), across-the-board Base Salary reduction
similarly affecting at least ninety-five percent (95%) of all Employees
of the Employing Company); or (ii) the sum of the Employee's Base
Salary plus target bonus under his Employing Company's short term bonus
plan (e.g., either the PPP Plan or the Southern Energy, Inc. Short Term
Plan, as the case may be), as in effect immediately prior to the Change
in Control (except for a less than ten percent (10%), across-the-board
reduction of Base Salary plus target bonus under such short term plan
similarly affecting at least ninety-five percent (95%) of all Employees
of the Employing Company);
(c) Compensation Plans. The failure by the Employing Company
to continue in effect any "compensation plan or agreement" in which an
Employee participates as of the date of the Change in Control or the
elimination of the Employee's participation in any such plan, (except
for across-the-board plan changes or terminations similarly affecting
at least ninety-five percent (95%) of all Employees of the Employing
Company);
For purposes of this Section 2.17(c), the "compensation plan
or agreement" shall mean any written arrangement executed by an
authorized officer of the Employing Company which provides for
periodic, non-discretionary compensatory payments to employees in the
nature of bonuses.
(d) Relocation. A change in an Employee's work location to a
location more than fifty (50) miles from the facility where the
Employee was located at the time of the Change in Control, unless such
new work location is within fifty (50) miles from the Employee's
principal place of residence at the time of the Change in Control. The
acceptance, if any, by an Employee of employment by an Employing
Company at a work location which is outside the fifty mile radius set
forth in this Section 2.17(d) shall not be a waiver of the Employee's
right to refuse subsequent transfer by an Employing Company to a
location which is more than fifty (50) miles from the Employee's
principal place of residence at the time of the Change in Control, and
such subsequent, unconsented transfer shall be "Good Reason" under this
Agreement; or
(e) Benefits and Perquisites. The taking of any action by the
Employing Company that would directly or indirectly materially reduce
the benefits enjoyed by an Employee under the Employing Company's
retirement, life insurance, medical, health and accident, disability,
deferred compensation or savings plans in which the Employee was
participating immediately prior to the Change in Control, or the
failure by the Employing Company to provide an Employee with the number
of paid vacation days to which the Employee is entitled on the basis of
years of service with the Employing Company in accordance with the
Employing Company's normal vacation policy in effect immediately prior
to the Change in Control (except for across-the-board plan or vacation
policy changes or plan terminations similarly affecting at least
ninety-five percent (95%) of all Employees of the Employing Company).
2.18 "Group" shall have the meaning set forth in Section 14(d) of the
Exchange Act. 2.19 "Group Health Plan" shall mean the group health plan
covering the Participant, as such plan may be amended from time to
time.
2.20 "Group Life Insurance Plan" shall mean the group life insurance
program covering the Participant, as such plan may be amended from time to time.
2.21 "Incumbent Board" shall mean those individuals who constitute the
Southern Board as of the Effective Date plus any individual who shall become a
director subsequent to such date whose election or nomination for election by
Southern's shareholders was approved by a vote of at least 75% of the directors
then comprising the Incumbent Board. Notwithstanding the foregoing, no
individual who shall become a director of the Southern Board subsequent to the
Effective Date whose initial assumption of office occurs as a result of an
actual or threatened election contest (within the meaning of Rule 14a-11 of the
Regulations promulgated under the Exchange Act) with respect to the election or
removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Southern Board shall be a
member of the Incumbent Board.
2.22 "Month of Service" shall mean any calendar month during which a
Participant has worked at least one (1) hour or was on approved leave of absence
while in the employ of an Employing Company or any other Southern Subsidiary.
2.23 "Participant" shall mean an Employee who meets the eligibility
requirements of Section 3.1 of this Plan. 2.24 "Pension Plan" shall
mean The Southern Company Pension Plan or any successor thereto, as
such plans may be amended
from time to time.
2.25 "Performance Dividend Plan" or "PDP Plan" shall mean the Southern
Company Performance Dividend Plan or any successor thereto which is considered
an "equitable arrangement" under Section 1.25 thereof, as such plans may be
amended from time to time.
2.26 "Performance Pay Plan" or "PPP Plan" shall mean the Southern
Company Performance Pay Plan or any successor thereto which is considered an
"equitable arrangement" under Section 1.31 thereof, as such plans may be amended
from time to time.
2.27 "Performance Stock Plan" shall mean the Southern Company
Performance Stock Plan or any successor thereto which is considered an
"equitable arrangement" under Section 1.33 thereof, as such plans may be amended
from time to time.
2.28 "Person" shall mean any individual, entity or group within the
meaning of Section 13(d)(3) or 14(d)(2) of Exchange Act.
2.29 "PIP Plan" shall mean the Southern Company Productivity
Improvement Plan or any successor thereto which is considered an "equitable
arrangement" under Section 1.30 thereof, as such plans may be amended from time
to time.
2.30 "Plan" shall mean the Southern Company Executive Change in Control
Severance Plan.
2.31 "Short Term Plan" shall mean the Southern Energy Resources, Inc.
Short Term Plan, as amended from time to time. 2.32 "Southern" shall
mean The Southern Company, its successors and assigns.
2.33 "Southern Board" shall mean the board of directors of Southern.
2.34 "Southern Subsidiary" shall mean any corporation or other entity
Controlled by Southern.
2.35 "Termination for Cause" or "Cause" shall mean an Employee's
termination of employment with his Employing Company upon the occurrence of any
of the following:
(a) The willful and continued failure by the Employee to
substantially perform his duties with his Employing Company (other than
any such failure resulting from the Employee's Total Disability or from
the Employee's retirement or any such actual or anticipated failure
resulting from termination by the Employee for Good Reason) after a
written demand for substantial performance is delivered to him by the
Administrative Committee, which demand specifically identifies the
manner in which the Administrative Committee believes that he has not
substantially performed his duties; or
(b) The willful engaging by the Employee in conduct that is
demonstrably and materially injurious to his Employing Company,
monetarily or otherwise, including but not limited to any of the
following:
(i) any willful act involving fraud or dishonesty in
the course of an Employee's employment by his Employing
Company;
(ii) the willful carrying out of any activity or the
making of any statement by an Employee which would materially
prejudice or impair the good name and standing of his
Employing Company, Southern or any other Southern Subsidiary
or would bring his Employing Company, Southern or any other
Southern Subsidiary into contempt, ridicule or would
reasonably shock or offend any community in which his
Employing Company, Southern or such other Southern Subsidiary
is located;
(iii) attendance by an Employee at work in a state of
intoxication or otherwise being found in possession at his
workplace of any prohibited drug or substance, possession of
which would amount to a criminal offense;
(iv) violation of his Employing Company's policies on
drug and alcohol usage, fitness for duty requirements or
similar policies as may exist from time to time as adopted by
the Employing Company's safety officer;
(v) assault or other act of violence by an Employee
against any person during the course of employment; or
(vi) an Employee's indictment for any felony or any
misdemeanor involving moral turpitude. No act or failure to
act by an Employee shall be deemed "willful" unless done, or
omitted to be done, by the Employee not in good faith and
without reasonable belief that his action or omission was in
the best interest of his Employing Company. Notwithstanding
the foregoing, an Employee shall not be deemed to have been
terminated for Cause unless and until there shall have been
delivered to him a copy of a resolution duly adopted by the
affirmative vote of the majority of the Administrative
Committee at a meeting called and held for such purpose (after
reasonable notice to the Employee and an opportunity for him,
together with counsel, to be heard before the Administrative
Committee), finding that, in the good faith opinion of the
Administrative Committee, the Employee was guilty of conduct
set forth in Section 2.35(a) or (b) hereof and specifying the
particulars thereof in detail.
2.36 "Termination Date" shall mean the date on which a Participant is
separated from his Employing Company's regular payroll; provided, however, that
solely for purposes of Section 3.2(c) hereof, the Termination Date of
Participants who are deemed to be retired pursuant to the provisions of Section
3.3 hereof, shall be the effective date of their retirement pursuant to the
terms of the Pension Plan.
2.37 "Total Disability" shall mean total disability within the meaning
of the Pension Plan.
2.38 "Value Creation Plan" shall mean the Southern Energy Resources,
Inc. Value Creation Plan or any replacement thereto which is considered an
"equitable arrangement" under Section 1.30 thereof, as such plans may be amended
from time to time.
2.39 "Voting Securities" shall mean the outstanding voting securities
of a corporation entitling the holder thereof to vote generally in the election
of such corporation's directors.
2.40 "Waiver and Release" shall mean the Waiver and Release attached
hereto as Exhibit B.
2.41 "Year of Service" shall mean an Employee's Months of Service
divided by twelve (12) rounded to the nearest whole year, rounding up if the
remaining number of months is seven (7) or greater and rounding down if the
remaining number of months is less than seven (7). If an Employee has a break in
his service with his Employing Company, he will receive credit under this Plan
for the service prior to the break in service only if the break in service was
less than five years and his service prior to the break exceeds the length of
the break in service.
ARTICLE 3 - SEVERANCE BENEFITS
3.1 Eligibility. Except as otherwise provided herein, any Employee
whose employment is involuntarily terminated by his Employing Company at any
time during the two year period following a Change in Control of Southern or his
Employing Company for reasons other than Cause or who shall voluntarily
terminate his employment with his Employing Company for Good Reason at any time
during the two year period following a Change in Control of Southern or his
Employing Company shall be entitled to participate in this Plan and receive the
benefits described in Section 3.2 hereof, subject to the terms and conditions
described in this Article 3. Notwithstanding anything to the contrary herein, an
Employee shall not be eligible to receive benefits under this Plan if the
Employee:
(a) is not actively at work on his Termination Date, unless
such Employee is capable of returning to work within twelve (12) weeks
of the beginning of any leave of absence from work;
(b) voluntarily terminates his employment with his Employing
Company for other than Good Reason;
(c) is terminated by his Employing Company for Cause;
(d) accepts the transfer of his employment to Southern, any
Southern Subsidiary or any employer that acquires all or substantially
all of the assets of Southern, a Southern Subsidiary or his Employing
Company;
(e) refuses an offer of continued employment with his
Employing Company, Southern or a Southern Subsidiary, or any employer
that acquires all or substantially all of the assets of Southern, a
Southern Subsidiary or his Employing Company, under circumstances where
such refusal would not amount to Good Reason for voluntary termination
of employment and such employer agrees to adopt this Plan as it applies
to such Participant; or
(f) elects to receive the benefits of any other voluntary or
involuntary severance, separation or outplacement program maintained by
his Employing Company; provided however, that the receipt of benefits
under any retention plan or agreement shall not be deemed to be the
receipt of benefits under any severance, separation or outplacement
program for purposes of this Plan. 3.2 Benefits. Upon the Employing
Company's receipt of an effective Waiver and Release, Participants
shall be entitled to receive the following benefits:
(a) Employee Outplacement Services. Each Participant shall be
eligible to participate in the Employee Outplacement Program, which
program shall not be less than six (6) months duration measured from
the Participant's Termination Date.
(b) Severance Benefit. Participants shall be paid in cash an
amount equal to two times the Participant's Annual Compensation, but
not in excess of the Capped Amount. For purposes of this Section
3.2(b), the Capped Amount shall be the amount otherwise payable under
this Section 3.2(b), reduced in such amount and to such extent that no
amount of the payment under this Section 3.2(b), plus all other
"parachute payments" under Code Section 280G, would constitute an
"excess parachute payment" under Code Section 280G, but only to the
extent that if the payment under this Section 3.2(b) were increased by
one additional dollar ($1.00), a portion of the payment under this
Section 3.2(b) would be an "excess parachute payment" under Code
Section 280G. The calculation of the Capped Amount and any other
determinations relating to the applicability of Code Section 280G (and
the rules and regulations promulgated thereunder) to the payments
contemplated by this Plan shall be made by the tax department of the
independent public accounting firm then responsible for preparing
Southern's consolidated federal income tax return, and such
determinations shall be binding upon the Participants, Southern and the
Employing Company.
(c) Welfare Benefit.
(i) Except as provided in Section 3.3 hereof, each
Participant shall be eligible to participate in the Employing
Company's Group Health Plan for a period of six (6) months for
each of the Participant's Years of Service, not to exceed a
period of five (5) years, beginning on the first day of the
first month following the Participant's Termination Date
unless otherwise specifically provided under such plan, upon
the Participant's payment of both the Employing Company's and
the Participant's premium under such plan. A Participant who
receives this extended medical coverage shall also be entitled
to elect coverage under the Group Health Plan for his
dependents who are participating in the Group Health Plan on
the Participant's Termination Date (and for such other
dependents as may be entitled to coverage under the provisions
of the Health Insurance Portability and Accountability Act of
1996) for the duration of the Participant's extended medical
coverage under this Section 3.2(c) to the extent such
dependents remain eligible for dependent coverage under the
terms of the Group Health Plan.
(ii) The extended medical coverage afforded to a
Participant pursuant to this Section 3.2(c) as well as the
premiums to be paid by the Participant in connection with such
coverage shall be determined in accordance with the terms of
the Group Health Plan and shall be subject to any changes in
the terms and conditions of the Group Health Plan as well as
any future increases in premiums under the Group Health Plan.
The premiums to be paid by the Participant in connection with
this extended coverage shall be due on the first day of each
month; provided, however, that if a Participant fails to pay
his premium within thirty (30) days of its due date, such
Participant's extended coverage shall be terminated.
(iii) Any Group Health Plan coverage provided under
this Section 3.2(c) shall be a part of and not in addition to
any COBRA Coverage which a Participant or his dependent may
elect. In the event that a Participant or his dependent
becomes eligible to be covered, by virtue of re-employment or
otherwise, by any employer-sponsored group health plan or is
eligible for coverage under any government-sponsored health
plan during the above period, coverage under the Employing
Company's Group Health Plan available to the Participant or
his dependent by virtue of the provisions of this Article 3
shall terminate, except as may otherwise be required by law,
and shall not be renewed. It shall be the duty of a
Participant to inform the Employing Company of his eligibility
to participate in any such health plan.
(iv) Except as otherwise provided in Section 3.3
hereof, regardless of whether a Participant elects the
extended coverage described in Section 3.2(a) hereof, the
Employing Company shall pay to each Participant a cash amount
equal to the Employing Company's and the Participant's cost of
premiums for two (2) years of coverage under the Group Health
Plan and Group Life Insurance Plan, as such Plans were in
effect as of the date of the Change in Control. (d) Stock
Option Vesting. The provisions of this Section 3.2(d) shall
apply to any Participant who, as of the date of the Change in
Control, was a participant in the Performance Stock Plan, the
defined terms of which are incorporated in this Section 3.2(d)
by reference.
(i) Any of the Participant's Options and Stock
Appreciation Rights outstanding as of the Termination Date
which are not then exercisable and vested, shall become fully
exercisable and vested to the full extent of the original
grant; provided, that in the case of a Participant holding a
Stock Appreciation Right who is subject to Section 16(b) of
the Exchange Act, such Stock Appreciation Right shall not
become fully vested and exercisable at such time if such
actions would result in liability to the Participant under
Section 16(b) of the Exchange Act, provided further that any
such actions not taken as a result of the rules under Section
16(b) of the Exchange Act shall be effected as of the first
date that such activity would no longer result in liability
under Section 16(b) of the Exchange Act.
(ii) The restrictions and deferral limitations
applicable to any of the Participant's Restricted Stock as of
the Termination Date shall lapse, and such Restricted Stock
shall become free of all restrictions and limitations and
become fully vested and transferable to the full extent of the
original grant.
(iii) The restrictions and deferral limitations and
other conditions applicable to any other Awards held by the
Participant under the Performance Stock Plan as of the
Termination Date shall lapse, and such other Awards shall
become free of all restrictions, limitations or conditions and
become fully vested and transferable to the full extent of the
original grant. (e) Performance Pay Plan. The provisions of
this Section 3.2(e) shall apply to any Participant who, as of
the date of the Change in Control, was a participant in the
Performance Pay Plan, the defined terms of which are
incorporated in this Section 3.2(e) by reference. Provided the
Participant is not entitled to benefits under Article V of the
PPP Plan, if the PPP Plan is in place as of the Participant's
Termination Date and to the extent the Participant is entitled
to participate therein, the Participant shall be entitled to
receive cash in an amount equal to a prorated payout of his
Incentive Pay Award under the PPP Plan for the Performance
Period in which the Termination Date shall have occurred, at
target performance under the PPP Plan and prorated by the
number of months which have passed since the beginning of the
Performance Period until the Termination Date.
(f) PIP Plan. The provisions of this Section 3.2(f) shall
apply to any Participant who, as of the date of the Change in Control,
was a participant in the PIP Plan, the defined terms of which are
incorporated in this Section 3.2(f) by reference. Provided the
Participant is not entitled to benefits under Article IV of the PIP
Plan, if the PIP Plan is in place through the Participant's Termination
Date and to the extent the Participant is entitled to participate
therein, the Participant shall be entitled to receive cash in an amount
equal to his Award Opportunity under the PIP Plan for the Computation
Periods in which the Termination Date shall have occurred, at a target
Value of Performance Unit of $1.00, prorated for each Performance
Period by the number of months which have passed since the beginning of
each of the Computation Periods until the Termination Date.
(g) Performance Dividend Plan. The provisions of this Section
3.2(g) shall apply to any Participant who, as of the date of the Change
in Control, was a participant in the Performance Dividend Plan, the
defined terms of which are incorporated in this Section 3.2(g) by
reference. Provided the Participant is not entitled to benefits under
Article V of the Performance Dividend Plan, if the Performance Dividend
Plan is in place through the Participant's Termination Date and to the
extent the Participant is entitled to participate therein, the
Participant shall be entitled to receive cash for each Award held as of
such date based on a Payout Percentage of 50% under Section 4.1 of the
Performance Dividend Plan for the Performance Period in which the
Termination Date shall have occurred, and the Annual Dividend declared
prior to the Termination Date.
(h) Value Creation Plan. The provisions of this Section 3.2(h)
shall apply to any Participant who, as of the date of the Change in
Control, was a participant in the Value Creation Plan, the defined
terms of which are incorporated in this Section 3.2(h) by reference.
Any of the Participant's Appreciation Rights or Indexed Rights
outstanding as of the Termination Date which are not then exercisable
and vested, shall become fully exercisable and vested to the full
extent of the original grant. Notwithstanding anything in the Value
Creation Plan to the contrary, Share Value with respect to any
Appreciation Rights or Indexed Rights held by the Participant following
his Termination Date shall be no less than the Share Value as of the
date of the Change in Control of Southern or his Employing Company, as
the case may be.
(i) Short Term Plan. The provisions of this Section 3.2(i)
shall apply to any Participant who, as of the date of the Change in
Control was a Participant in the Short Term Plan, the defined terms of
which are incorporated in this Section 3.2(i) by reference. Provided
the Participant is not entitled to benefits under Article V of the
Short Term Plan, if the Short Term Plan is in place through the
Participant's Termination Date and to the extent the Participant is
entitled to participate therein, the Participant shall be entitled to
receive cash in an amount equal to his Award under the Short Term Plan
for the Performance Period in which the Termination Date shall have
occurred, at Total Target for the Participant's Job Category and
prorated by the number of months which have passed since the beginning
of the Performance Period until the Termination Date.
(j) Other Short Term Incentive Plans. The provisions of this
Section 3.2(j) shall apply to any Participant who, as of the date of
the Change in Control is a participant in any other "short term
incentive compensation plan" not otherwise previously referred to in
this Section 3.2. Provided the Participant is not otherwise entitled to
a plan payout under any change in control provisions of such plans, if
the "short term incentive compensation plan" is in place through the
Participant's Termination Date and to the extent the Participant is
entitled to participate therein, the Participant shall be entitled to
receive cash in an amount equal to his award under his respective
Employing Company's "short term incentive compensation plan" for the
annual performance period in which the Termination Date shall have
occurred, at the Participant's target performance level and prorated by
the number of months which have passed since the beginning of the
annual performance period until the Termination Date. For purposes of
this Section 3.2(j), the term "short term incentive compensation plan"
shall mean any incentive compensation plan or arrangement adopted in
writing by an Employing Company which provides for annual, recurring
compensatory bonuses to participants based upon articulated performance
criteria, and which have been identified by the Board of Directors and
listed on Exhibit C hereto, which may be amended from time to time to
reflect plan additions, terminations and amendments. 3.3 Coordination
with Retiree Medical and Life Insurance Coverage. Notwithstanding
anything to the contrary above, any Participant who is otherwise
eligible to retire pursuant to the terms of the Pension Plan shall be
deemed to have retired for purposes of all employee benefit plans
sponsored by the Employing Company of which the Participant is a
participant. A Participant who is deemed to have retired in accordance
with the preceding sentence shall not be eligible to receive the
benefits described in Section 3.2(c) hereof if, upon his Termination
Date, such Participant becomes eligible to receive the retiree medical
and life insurance coverage provided to certain retirees pursuant to
the terms of the Pension Plan, the Group Health Plan and the Group Life
Insurance Plan.
3.4 Payment of Benefits. The amounts due a Participant under Sections
3.2(b) and (c) hereof shall be payable in one (1) lump sum payment as soon as
administratively practicable within thirty (30) days of the later of the
following to occur: (a) the Participant's Termination Date, or (b) the tender to
the Employing Company by the Participant of an effective Waiver and Release in
the form of Exhibit B attached hereto and the expiration of any applicable
revocation period for such waiver. In the event of a dispute with respect to
liability or amount of any benefit due hereunder, an effective Waiver and
Release shall be tendered at the time of final resolution of any such dispute
when payment is tendered by the Employing Company.
3.5 Benefits in the Event of Death. In the event of the Participant's
death prior to the payment of all benefits due under this Article 3, the
Participant's estate shall be entitled to receive as due any amounts not yet
paid under this Article 3 upon the tender by the executor or administrator of
the estate of an effective Waiver and Release.
3.6 Legal Fees. In the event of a dispute between a Participant and his
Employing Company with regard to any amounts due hereunder, if any material
issue in such dispute is finally resolved in the Participant's favor, his
Employing Company shall reimburse the Participant's legal fees incurred with
respect to all issues in such dispute in an amount not to exceed thirty thousand
dollars ($30,000).
3.7 No Mitigation. A Participant who receives benefits under Section
3.2 of this Plan shall have no duty or obligation to seek other employment
following his Termination Date and, except as otherwise provided in Subsection
3.1(d) hereof, the amounts due a Participant hereunder shall not be reduced or
suspended if such Participant accepts such subsequent employment.
3.8 Non-qualified Retirement and Deferred Compensation Plans.
Subsequent to a Change in Control, any claims by a Participant for benefits
under any of the Company's non-qualified retirement or deferred compensation
plans shall be resolved through binding arbitration in accordance with the
procedures and provisions set forth in Article 5 hereof and if any material
issue in such dispute is finally resolved in the Participant's favor, the
Company shall reimburse the Participant's legal fees in the manner provided in
Section 3.6 hereof.
<PAGE>
ARTICLE 4 - ADMINISTRATION
4.1 Administrative Committee. The Administrative Committee shall be
responsible for the general administration of the Plan and may appoint other
persons or entities to perform or assist in the performance of any of its
duties, subject to its review and approval. The Administrative Committee shall
have the right to remove any such appointee from his position without cause upon
notice.
ARTICLE 5 - ARBITRATION
5.1 General. Any dispute, controversy or claim arising out of or
relating to the Company's obligations to pay severance benefits under this Plan,
or the breach thereof, shall be settled and resolved solely by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association ("AAA") except as otherwise provided herein. The arbitration shall
be the sole and exclusive forum for resolution of any such claim for severance
benefits and the arbitrators' award shall be final and binding. The provisions
of this Article 5 are not intended to apply to any other disputes, claims or
controversies arising out of or relating to a Participant's employment by an
Employing Company or the termination thereof.
5.2 Demand for Arbitration. Arbitration shall be initiated by serving a
written notice of demand for arbitration to the Participant, in the case of an
Employing Company, or to the Administrative Committee, in the case of a
Participant.
5.3 Law and Venue. The arbitrators shall apply the laws of the State of
Georgia, except to the extent pre-empted by federal law, excluding any law which
would require the use of the law of another state. The arbitration shall be held
in Atlanta, Georgia.
5.4 Appointment of Arbitrators. Arbitrators shall be appointed within
fifteen (15) business days following service of the demand for arbitration. The
number of arbitrators shall be three. One arbitrator shall be appointed by the
Participant, one arbitrator shall be appointed by the Employing Company, and the
two arbitrators shall appoint a third. If the arbitrators cannot agree on a
third arbitrator within thirty (30) business days after the service of demand
for arbitration, the third arbitrator shall be selected by the AAA.
5.5 Costs. The arbitration filing fee shall be paid by the Participant.
All other costs of arbitration shall be borne equally by the Participant and his
Employing Company, provided, however, that such Employing Company shall
reimburse such fees and costs in the event any material issue in such dispute is
finally resolved in the Participant's favor and the Participant is reimbursed
legal fees under Section 3.6 hereof.
5.6 Interim and Injunctive Relief. Nothing in this Article 5 is
intended to preclude, upon application of either party, any court having
jurisdiction from issuing and enforcing in any lawful manner such temporary
restraining orders, preliminary injunctions, and other interim measures of
relief as may be necessary to prevent harm to either party's interests or as
otherwise may be appropriate pending the conclusion of arbitration proceedings
pursuant to this Article 5 and nothing herein is intended to prevent any court
from entering and enforcing in any lawful manner such judgments for permanent
equitable relief as may be necessary to prevent harm to a party's interests or
as otherwise may be appropriate following the issuance of arbitral awards
pursuant to this Article 5.
ARTICLE 6 - MISCELLANEOUS
6.1 Funding of Benefits. Unless the Board of Directors shall in its
discretion determine otherwise, the benefits payable to a Participant under the
Plan shall not be funded in any manner and shall be paid by the Employing
Companies out of their general assets, which assets are subject to the claims of
the Employing Companies' creditors.
6.2 Withholding. There shall be deducted from the payment of any
benefit due under the Plan the amount of any tax required by any governmental
authority to be withheld and paid over by the Employing Companies to such
governmental authority for the account of the Participant entitled to such
payment.
6.3 Assignment. No Participant or beneficiary shall have any rights to
sell, assign, transfer, encumber, or otherwise convey the right to receive the
payment of any benefit due hereunder, which payment and the rights thereto are
expressly declared to be nonassignable and nontransferable. Any attempt to do so
shall be null and void and of no effect.
6.4 Amendment and Termination. The Plan may be amended or terminated at
any time by the Board of Directors, provided, however, the Plan may not be
amended in any material respect or terminated within the two (2) year period
following a Change in Control nor shall any amendment or termination impair the
rights of any Participant which have accrued hereunder prior to any such
amendment or termination.
6.5 Pooling Accounting. Notwithstanding anything to the contrary
herein, if, but for any provision of this Plan, a Change in Control transaction
would otherwise be accounted for as a pooling-of-interests under APB No.16
("Pooling Accounting") (after giving effect to any and all other facts and
circumstances affecting whether such Change in Control transaction would use
Pooling Accounting), such provision or provisions of this Plan which would
otherwise cause the Change in Control transaction to be ineligible for Pooling
Accounting shall be void and ineffective in such a manner and to the extent that
by eliminating such provision or provisions of this Plan, Pooling Accounting
would be required for such Change in Control transaction.
<PAGE>
IN WITNESS WHEREOF, this Southern Company Executive Change in Control
Severance Plan has been executed by the Company through its duly authorized
officer, this ____ day of ___________, 1999, to be effective as provided herein.
SOUTHERN COMPANY SERVICES, INC.
By: ____________________________________
Christopher C. Womack
Senior Vice President
<PAGE>
Exhibit A
SOUTHERN COMPANY
EXECUTIVE CHANGE IN CONTROL
SEVERANCE PLAN
Market Level Target Annual Bonus
For the following companies: Alabama Power Company Georgia Power Company Gulf
Power Company Mississippi Power Company Savannah Electric & Power Company
Southern Company Services, Inc.
Southern Nuclear Operating Company, Inc.
Southern Communications Services, Inc.
Southern Company Energy Solutions, Inc.
Target based on grade level.
Grade Target (as a percent of base salary rate)
10 25%
11 30%
12 35%
13 40%
For the following companies:
Southern Energy Resources, Inc.
Vice President or large business unit head.
Target (as a percent of base salary rate)
40%
<PAGE>
Exhibit B
SOUTHERN COMPANY
EXECUTIVE CHANGE IN CONTROL
SEVERANCE PLAN
Waiver and Release
I understand that I am entitled to receive the Severance Benefits
described in Article 3 of the Southern Company Executive Change in Control
Severance Plan (the "Plan") if I execute this Waiver and Release ("Waiver"). I
understand that the benefits I have elected to receive under the Plan are in
excess of those I would have received from ________________________ (the
"Company") if I had not elected to participate in the Plan and sign this Waiver.
I recognize that I may have a claim against the Company under the Civil
Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the
Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended,
the Americans with Disabilities Act or other federal, state and local laws.
In exchange for the benefits I elect to receive, I hereby irrevocably
waive and release all claims, of any kind whatsoever, whether known or unknown
in connection with any claim which I ever had, may have, or now have against The
Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power
Company, Mississippi Power Company, Savannah Electric and Power Company,
Southern Communication Services, Inc., Southern Company Services, Inc., Southern
Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern
Nuclear Operating Company, Inc. and other direct or indirect subsidiaries of The
Southern Company and their past, present and future officers, directors,
employees, agents and attorneys. Nothing in this Waiver shall be construed to
release claims or causes of action under the Age Discrimination in Employment
Act or the Energy Reorganization Act of 1974, as amended, which arise out of
events occurring after the execution date of this Waiver.
In further exchange for the benefits I elect to receive, I understand
and agree that I will respect the proprietary and confidential nature of any
information I have obtained in the course of my service with the Company or any
subsidiary or affiliate of The Southern Company. I understand and agree that I
am obligated to keep confidential and not disclose the terms of this Waiver,
including, but not limited to, the benefits under this Plan, except to my
attorneys, financial advisors, or except where such disclosure is required by
law. However, nothing in this Waiver shall prohibit me from engaging in
protected activities under applicable law or from communicating, either
voluntary or otherwise, with any governmental agency concerning any potential
violation of the law.
In signing this Waiver, I am not releasing claims to any vested or
accrued benefits that I have under any workers' compensation laws or any
retirement plan or welfare benefit plan within the meaning of the Employee
Retirement Income Security Act of 1974, as amended, which is sponsored by or
adopted by the Company and/or any of its direct or indirect subsidiaries;
however, I understand and acknowledge that nothing herein is intended to or
shall be construed to require the Company to institute or continue in effect any
particular plan or benefit sponsored by the Company and the Company hereby
reserves the right to amend or terminate any of its benefit programs at any time
in accordance with the procedures set forth in such plans.
In signing this Waiver, I realize that I am waiving and releasing,
among other things, any claims to benefits under any and all bonus, severance,
workforce reduction, early retirement, outplacement, or any other similar type
plan sponsored by the Company except for programs specifically designed for
participants in the Plan.
I have been encouraged and advised in writing to seek advice from
anyone of my choosing regarding this Waiver, including my attorney, and my
accountant or tax advisor. Prior to signing this Waiver, I have been given the
opportunity and sufficient time to seek such advice, and I fully understand the
meaning and contents of this Waiver.
I understand that I may take up to forty-five (45) calendar days to
consider whether or not I desire to enter this Waiver. I was not coerced,
threatened or otherwise forced to sign this Waiver. I have made my choice to
sign this Waiver voluntarily and of my own free will.
I understand that I may revoke this Waiver at any time during the seven
(7) calendar day period after I sign and deliver this Waiver to the Company. If
I revoke this Waiver, I must do so in writing delivered to the Company. I
understand that this Waiver is not effective until the expiration of this seven
(7) calendar day revocation period. I understand that upon the expiration of
such seven (7) calendar day revocation period this entire Waiver will be binding
upon me and will be irrevocable.
I understand that by signing this Waiver I am giving up rights I may
have.
IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this
day of , in the year.
Employee's signature
Employee's printed name
Acknowledged and Accepted by the Administrative Committee of the
Southern Company Executive Change in Control Severance Plan.
By:
Date:
<PAGE>
Attachment to Exhibit B
TO: All Eligible Employees under the Southern Company Executive Change in
Control Severance Plan
FROM: _____________________
RE: ADEA Information Notice
DATE: _____________________
A severance plan known as the Southern Company Executive Change in
Control Severance Plan ("Plan") has been approved and established by The
Southern Company, its affiliates and its direct and indirect subsidiaries
(collectively the "Company"). You are eligible to participate in the Plan
subject to the terms of the Plan. In accordance with the Age Discrimination in
Employment Act ("ADEA"), the Company is providing you the following information
pertaining to eligibility and participation in the Plan.
o The purpose of the Plan is to provide benefits to certain key
employees of The Southern Company and certain subsidiaries of The
Southern Company ("Employing Companies") whose employment is
terminated subsequent to a change in control of The Southern
Company or their respective Employing Company.
o Each active exempt and non-exempt employee of an Employing Company
of Grade 10 to 13 (or, if the Grade System is not used, $130,000
or more of annual base salary rate for the 12 month period
immediately preceding the change in control) not covered by a
collective bargaining agreement is generally eligible to
participate in the Plan if, during the two year period following a
change in control: (i) his employment is involuntarily terminated
for reasons other than cause, or (ii) he voluntarily terminates
employment for good reason.
o All eligible employees may receive severance benefits under the
Plan by signing a Waiver and Release no later than 45 calendar
days from the date it is received. The Waiver and Release will
remain revocable by you for a seven day period after you sign it.
o Attached is a list sorted by job title and age of each employee
eligible to participate in the Plan as well as a list of the ages
of all employees in the same job classification who are not
eligible to participate in the Plan.
In furtherance of you making an informed decision, the Company urges
you to seek a financial advisor, legal counsel and a qualified tax advisor to
assist you in fully understanding your rights and benefits under the plan and
the Waiver and Release that you will be required to sign to receive severance
benefits under the Plan.
If you have any questions or need additional information, please call me at
_______________.
Sincerely,
- - - - - - - ----------------------
[Name]
- - - - - - - ----------------------
[Title]
<PAGE>
ADEA INFORMATION NOTICE
<TABLE>
<S> <C>
- - - - - - - ------------------------------------------------------------ ---------------------------------------------------------
Job Title, Classification Age of
or Category of Eligible Employees Eligible Employees
- - - - - - - ------------------------------------------------------------ ---------------------------------------------------------
- - - - - - - ------------------------------------------------------------ ---------------------------------------------------------
- - - - - - - ------------------------------------------------------------ ---------------------------------------------------------
- - - - - - - ------------------------------------------------------------ ---------------------------------------------------------
[List job classification, title or category of all [List corresponding age of each eligible employee]
eligible employees]
- - - - - - - ------------------------------------------------------------ ---------------------------------------------------------
- - - - - - - ------------------------------------------------------------ ---------------------------------------------------------
Job Title, Classification Age of
or Category of Ineligible Employees Ineligible Employees
- - - - - - - ------------------------------------------------------------ ---------------------------------------------------------
- - - - - - - ------------------------------------------------------------ ---------------------------------------------------------
- - - - - - - ------------------------------------------------------------ ---------------------------------------------------------
- - - - - - - ------------------------------------------------------------ ---------------------------------------------------------
[List job classification, title or category of all [List corresponding age of each ineligible employee]
ineligible employees]
- - - - - - - ------------------------------------------------------------ ---------------------------------------------------------
</TABLE>
<PAGE>
Exhibit C
SOUTHERN COMPANY
EXECUTIVE CHANGE IN CONTROL
SEVERANCE PLAN
Short Term Incentive Compensation Plans
EXHIBIT 10(a)80
DEFERRED COMPENSATION AGREEMENT
THIS DEFERRED COMPENSATION AGREEMENT ("Agreement") made and entered
into by and between The Southern Company ("Southern"), Georgia Power Company
(the "Company") and Henry Allen Franklin ("Mr. Franklin").
W I T N E S S E T H:
WHEREAS, Mr. Franklin is the Chief Executive Officer of the Company;
WHEREAS, the Company and Southern wish to encourage Mr. Franklin to
increase the profitability of the Company and to provide Mr. Franklin an
interest in the Company's overall profitability;
NOW, THEREFORE, in consideration of the premises, and the agreements of
the parties set forth in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. General Nature of Award. Subject to the terms and conditions of this
Agreement, the Company shall establish and maintain on behalf of Mr. Franklin an
account on the Company's books and records (the "Account") which, if Mr.
Franklin continues to be an employee of the Company, or any affiliate or
subsidiary of Southern (as set forth in Paragraph 15 hereof), shall entitle Mr.
Franklin to receive on the fifth anniversary date of the effective date of this
Agreement (such five year period to be referred to as the "Performance Period")
an amount equal to the then Market Value (as defined below) of the equivalent of
Five Hundred Thousand Dollars ($500,000) of Market Value of Southern's common
stock deemed to have been purchased as of the effective date of this Agreement,
including reinvested dividends thereon, increased, if certain profitability
goals are met, by estimated income tax expenses.
2. Investment.
(a) As of the date hereof, the Company shall credit to Mr. Franklin's
Account that number of deemed shares (including fractional shares) of Southern's
common stock ("Common Stock") as shall equal $500,000 in Market Value (as
defined herein) determined as of the effective date of this Agreement (such
hypothetical shares to be referred to herein as the "Phantom Stock"). For
purposes of this Agreement, "Market Value" shall mean the average closing price
of the Common Stock as reported by the New York Stock Exchange for the ten
trading days immediately preceding the respective valuation date.
(b) As of the day of each calendar quarter in which occurs the payment
of dividends on Common Stock, there shall be credited to Mr. Franklin's Account
such additional shares of Phantom Stock (including fractional shares) as could
have been purchased at the Market Value on such day as follows:
(i) In the case of cash dividends, such additional shares of
Phantom Stock as could have been purchased with the dividends payable
on the number of shares of Phantom Stock credited to the Account
immediately prior to the dividend;
(ii) In the case of dividends payable in property other than
cash or Common Stock, such additional shares of Phantom Stock as could
have been purchased with the fair market value of the property which
would have been payable as dividends on the number of shares of Phantom
Stock credited to the Account immediately prior to the dividend; or
(iii) In the case of dividends payable in Common Stock, such
additional shares of Phantom Stock as would have been payable on the
number of shares of Phantom Stock credited to the Account immediately
prior to the dividend. (c) In the event that the number of outstanding
shares of Common Stock is changed through merger, consolidation,
reorganization, recapitalization, reincorporation, stock split, stock dividend
(in excess of 2%) or other change in the capital structure of Southern without
consideration, or upon the occurrence of any other extraordinary corporate event
involving the Common Stock causing a reduction in the value of the Common Stock,
such as a corporate spin off or split up, the number of shares of Common Stock
credited to the Account shall be proportionately adjusted by the Company so as
to preserve the value of the Account immediately prior to such event.
3. Vesting of Account. The Market Value of Mr. Franklin's Account shall
vest on the fifth anniversary of the effective date of this Agreement (the
"Vesting Date"), provided Mr. Franklin is then an employee of the Company,
Southern, or an affiliate or subsidiary of Southern.
4. Valuation of Account. The value of Mr. Franklin's Account on any
date shall be based on the Market Value on such date multiplied by the number of
shares of Phantom Stock then credited to the Account, provided, however, that if
the annual profitability goals established for the Company and for Mr. Franklin
by the Chief Executive Officer of Southern have been equaled or exceeded for
each fiscal year of the Company during the Performance Period as set forth on
Exhibit A, and as annually documented on Exhibit B of this Agreement, (the
"Profitability Goals"), the value of the Account shall be increased upon payout
to cover Mr. Franklin's federal and state income tax expense as reasonably
estimated by the Company for the year of payout (the "Tax Gross-up"). Failure to
meet the Profitability Goals for any year of the Performance Period shall result
in the forfeiture of the Tax Gross-up, provided, however, that Southern's Chief
Executive Officer may, in his sole discretion, determine after the close of the
Performance Period, that as a result of overall Company profitability and
individual performance during the entire Performance Period, that all or a
portion of the value of the Tax Gross-up shall nevertheless be paid. For
purposes of this Paragraph 4, in the event that Mr. Franklin shall become
Southern's Chief Executive Officer, the goals and determinations hereunder shall
be made by the Compensation Committee of Southern's Board of Directors.
5. Payment of Account Balance. Provided that Mr. Franklin is then an
employee of the Company, Southern, or an affiliate or subsidiary of Southern,
and, with respect to the Tax Gross-up amount, has also achieved the
Profitability Goals, the Company shall pay to Mr. Franklin the value of his
Account, and, if applicable, the Tax Gross-up amount, in cash within ten (10)
days of the Vesting Date.
6. Election to Defer. By written election filed with Southern's Vice
President, Human Resources no less than thirteen (13) months prior to the
Vesting Date, Mr. Franklin may defer all or a portion of the amount to be
received under this Agreement by having such amount contributed on his account
to The Southern Company Deferred Compensation Plan, in accordance with the terms
and conditions of such Plan.
7. Death, Permanent Disability, Termination Without Cause or
Termination for Good Reason. In the event of Mr. Franklin's termination of
employment with the Company prior to the payout of the value of the Account for
reasons of death, permanent disability, termination by the Company without
Cause, or termination by Mr. Franklin for Good Reason following a Change in
Control, the Company shall pay to Mr. Franklin, or his estate in the event of
death, the value of the Account determined as of the date of such termination,
plus, if the Profitability Goals have been met as of such date, the Tax Gross-up
amount. For purposes of this Section 7, the terms Cause, Change in Control, and
Good Reason shall have the meaning set forth in that certain Change in Control
Agreement, dated _________________, 1999, as amended from time to time, between
Southern, the Company and Mr. Franklin (the "Change in Control Agreement"), the
defined terms of which are incorporated in this Section 7 by reference thereto.
8. Assignability. Neither Mr. Franklin, his estate, his beneficiaries,
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
Agreement shall be void and have no effect.
9. Unsecured General Creditor. The Company shall neither reserve nor
specifically set aside funds for the payment of its obligations under this
Agreement, and such obligations shall be paid solely from the general assets of
the Company. Notwithstanding that Mr. Franklin may be entitled to receive the
value of his Account under the terms and conditions of this Agreement, the
assets from which such amount may be paid shall at all times be subject to the
claims of the Company's creditors.
10. Amendment; Modification; Termination. Except as otherwise provided
herein, this Agreement may be amended, modified, or terminated only by a writing
executed by the parties hereto.
11. No Effect On Other Arrangements. It is expressly understood and
agreed that the payments made in accordance with this Agreement are in addition
to any other benefits or compensation to which Mr. Franklin may be entitled or
for which he may be eligible, whether funded or unfunded, by reason of his
employment with the Company.
12. Tax Withholding. There shall be deducted from each payment under
this Agreement the amount of any tax required by any governmental authority to
be withheld and paid over by the Company to such governmental authority for the
account of Mr. Franklin.
13. Compensation. Any compensation contributed on behalf of Mr.
Franklin under this Agreement shall not be considered "compensation," as the
term is defined in The Southern Company Employee Savings Plan, The Southern
Company Employee Stock Ownership Plan, or The Southern Company Pension Plan.
Distributions from Mr. Franklin's Account shall not be considered wages,
salaries or compensation under any other employee benefit plan.
14. No Guarantee of Employment. No provision of this Agreement shall be
construed to affect in any manner the existing rights of the Company to suspend,
terminate, alter, modify, whether or not for Cause, the employment relationship
of Mr. Franklin and the Company.
15. Transfer of Employment to Southern or a Southern Subsidiary of
Affiliate. In the event that Mr. Franklin's employment by the Company is
terminated during the Performance Period and Mr. Franklin shall become
immediately re-employed by Southern or a subsidiary or an affiliate of Southern,
the Company shall assign this Agreement to Southern or such subsidiary or
affiliate, Southern shall accept such assignment or cause such affiliate or
subsidiary to accept such assignment, such assignee shall become the "Company"
for all purposes hereunder and the profitability goals set forth on Exhibit A
hereof shall be amended to appropriately reflect the performance of such
assignee. In the event of such assignment, the expense of this Agreement shall
be shared pro rata by the Company and any such assignee based upon the number of
months during the Performance Period Mr. Franklin was employed by each.
16. Southern Company Change in Control Agreement. The benefits provided
for herein are intended to be in addition to any benefits to which Mr. Franklin
may otherwise be entitled under the terms of the Change in Control Agreement.
17. Governing Law. This Agreement, 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, this Agreement has been executed by the parties
first listed above, effective this 27th day of February, 1998.
THE SOUTHERN COMPANY
By: ______________________________
GEORGIA POWER COMPANY
By:
Mr. FRANKLIN
Henry Allen Franklin
Attest:
By:
<PAGE>
Exhibit A
Deferred Compensation Agreement
Schedule of Profitability Goals
For Performance Period
The Company shall achieve a rate of return which is equal to or above
the median of the Goldman Sachs comparator group of 77 utility companies for
each of the Company's fiscal years included in the Performance Period, excluding
extraordinary events occurring during any such fiscal years subject to the
approval of the Chief Executive Officer of The Southern Company. Achievement of
the goals shall be assessed annually by the Chief Executive Officer of The
Southern Company and documented in Exhibit B of this Agreement.
<PAGE>
Exhibit B
Deferred Compensation Agreement
Annual Documentation of Profitability Goals
For Performance Period
EXHIBIT 10(a)81
DEFERRED COMPENSATION AGREEMENT
THIS DEFERRED COMPENSATION AGREEMENT ("Agreement") made and entered
into by and between The Southern Company ("Southern"), Southern Nuclear
Operating Company, Inc. (the "Company") and William G. Hairston III ("Mr.
Hairston").
W I T N E S S E T H:
WHEREAS, Mr. Hairston is the Chief Executive Officer of the Company;
WHEREAS, the Company and Southern wish to encourage Mr. Hairston to
increase the performance of the Company and to provide Mr. Hairston an interest
in Southern's overall profitability;
NOW, THEREFORE, in consideration of the premises, and the agreements of
the parties set forth in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. General Nature of Award. Subject to the terms and conditions of this
Agreement, the Company shall establish and maintain on behalf of Mr. Hairston an
account on the Company's books and records (the "Account") which, if Mr.
Hairston continues to be an employee of the Company, or any affiliate or
subsidiary of Southern (as set forth in Paragraph 15 hereof), shall entitle Mr.
Hairston to receive on the fifth anniversary date of the effective date of this
Agreement (such five year period to be referred to as the "Performance Period")
an amount equal to the then Market Value (as defined below) of the equivalent of
Two Hundred Fifty Thousand Dollars ($250,000) of Market Value of Southern's
common stock deemed to have been purchased as of the effective date of this
Agreement, including reinvested dividends thereon, increased, if certain
performance goals are met, by estimated income tax expenses.
2. Investment.
(a) As of the date hereof, the Company shall credit to Mr. Hairston's
Account that number of deemed shares (including fractional shares) of Southern's
common stock ("Common Stock") as shall equal $250,000 in Market Value (as
defined herein) determined as of the effective date of this Agreement (such
hypothetical shares to be referred to herein as the "Phantom Stock"). For
purposes of this Agreement, "Market Value" shall mean the average closing price
of the Common Stock as reported by the New York Stock Exchange for the ten
trading days immediately preceding the respective valuation date.
(b) As of the day of each calendar quarter in which occurs the payment
of dividends on Common Stock, there shall be credited to Mr. Hairston's Account
such additional shares of Phantom Stock (including fractional shares) as could
have been purchased at the Market Value on such day as follows:
(i) In the case of cash dividends, such additional shares of
Phantom Stock as could have been purchased with the dividends payable
on the number of shares of Phantom Stock credited to the Account
immediately prior to the dividend;
(ii) In the case of dividends payable in property other than
cash or Common Stock, such additional shares of Phantom Stock as could
have been purchased with the fair market value of the property which
would have been payable as dividends on the number of shares of Phantom
Stock credited to the Account immediately prior to the dividend; or
(iii) In the case of dividends payable in Common Stock, such
additional shares of Phantom Stock as would have been payable on the
number of shares of Phantom Stock credited to the Account immediately
prior to the dividend. (c) In the event that the number of outstanding
shares of Common Stock is changed through merger, consolidation,
reorganization, recapitalization, reincorporation, stock split, stock dividend
(in excess of 2%) or other change in the capital structure of Southern without
consideration, or upon the occurrence of any other extraordinary corporate event
involving the Common Stock causing a reduction in the value of the Common Stock,
such as a corporate spin off or split up, the number of shares of Common Stock
credited to the Account shall be proportionately adjusted by the Company so as
to preserve the value of the Account immediately prior to such event.
3. Vesting of Account. The Market Value of Mr. Hairston's Account shall
vest on the fifth anniversary of the effective date of this Agreement (the
"Vesting Date"), provided Mr. Hairston is then an employee of the Company,
Southern, or an affiliate or subsidiary of Southern.
5. Payment of Account Balance. Provided that Mr. Hairston is then an
employee of the Company, Southern, or an affiliate or subsidiary of Southern,
and, with respect to the Tax Gross-up amount, has also achieved the Performance
Goals, the Company shall pay to Mr. Hairston the value of his Account, and, if
applicable, the Tax Gross-up amount, in cash within ten (10) days of the Vesting
Date.
4. Valuation of Account. The value of Mr. Hairston's Account on any
date shall be based on the Market Value on such date multiplied by the number of
shares of Phantom Stock then credited to the Account, provided, however, that if
the annual performance goals established for the Company and for Mr. Hairston by
the Chief Executive Officer of Southern have been equaled or exceeded for each
fiscal year of the Company during the Performance Period as set forth on Exhibit
A, and as annually documented on Exhibit B of this Agreement, (the "Performance
Goals"), the value of the Account shall be increased upon payout to cover Mr.
Hairston's federal and state income tax expense as reasonably estimated by the
Company for the year of payout (the "Tax Gross-up"). Failure to meet the
Performance Goals for any year of the Performance Period shall result in the
forfeiture of the Tax Gross-up, provided, however, that Southern's Chief
Executive Officer may, in his sole discretion, determine after the close of the
Performance Period, that as a result of overall Company performance and
individual performance during the entire Performance Period, that all or a
portion of the value of the Tax Gross-up shall nevertheless be paid.
6. Election to Defer. By written election filed with Southern's Vice
President, Human Resources no less than thirteen (13) months prior to the
Vesting Date, Mr. Hairston may defer all or a portion of the amount to be
received under this Agreement by having such amount contributed on his account
to The Southern Company Deferred Compensation Plan, in accordance with the terms
and conditions of such Plan.
7. Death, Permanent Disability and Termination Without Cause. In the
event of Mr. Hairston's termination of employment with the Company prior to the
payout of the value of the Account for reasons of death, permanent disability or
termination by the Company without Cause (as defined below), the Company shall
pay to Mr. Hairston, or his estate in the event of death, the value of the
Account determined as of the date of such termination, plus, if the Performance
Goals have been met as of such date, the Tax Gross-up amount. As used in this
Agreement, the term "cause" shall mean gross negligence or willful misconduct in
the performance of the duties and services required in the course of employment
by the Company, the final conviction of a felony or misdemeanor involving moral
turpitude, the carrying out of any activity or the making of any statement which
would prejudice the good name and standing of the Company or would bring the
Company into contempt, ridicule or would reasonably shock or offend any
community in which the Company is located, or a material breach of the fiduciary
obligations owed by an officer and an employee to the Company.
8. Assignability. Neither Mr. Hairston, his estate, his beneficiaries,
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
Agreement shall be void and have no effect.
9. Unsecured General Creditor. The Company shall neither reserve nor
specifically set aside funds for the payment of its obligations under this
Agreement, and such obligations shall be paid solely from the general assets of
the Company. Notwithstanding that Mr. Hairston may be entitled to receive the
value of his Account under the terms and conditions of this Agreement, the
assets from which such amount may be paid shall at all times be subject to the
claims of the Company's creditors.
10. Amendment; Modification; Termination. Except as otherwise provided
herein, this Agreement may be amended, modified, or terminated only by a writing
executed by the parties hereto.
11. No Effect On Other Arrangements. It is expressly understood and
agreed that the payments made in accordance with this Agreement are in addition
to any other benefits or compensation to which Mr. Hairston may be entitled or
for which he may be eligible, whether funded or unfunded, by reason of his
employment with the Company.
12. Tax Withholding. There shall be deducted from each payment under
this Agreement the amount of any tax required by any governmental authority to
be withheld and paid over by the Company to such governmental authority for the
account of Mr. Hairston.
13. Compensation. Any compensation contributed on behalf of Mr.
Hairston under this Agreement shall not be considered "compensation," as the
term is defined in The Southern Company Employee Savings Plan, The Southern
Company Employee Stock Ownership Plan, or The Southern Company Pension Plan.
Distributions from Mr. Hairston's Account shall not be considered wages,
salaries or compensation under any other employee benefit plan.
14. No Guarantee of Employment. No provision of this Agreement shall be
construed to affect in any manner the existing rights of the Company to suspend,
terminate, alter, modify, whether or not for Cause, the employment relationship
of Mr. Hairston and the Company.
15. Transfer of Employment to Southern or a Southern Subsidiary of
Affiliate. In the event that Mr. Hairston's employment by the Company is
terminated during the Performance Period and Mr. Hairston shall become
immediately re-employed by Southern or a subsidiary or an affiliate of Southern,
the Company shall assign this Agreement to Southern or such subsidiary or
affiliate, Southern shall accept such assignment or cause such affiliate or
subsidiary to accept such assignment, such assignee shall become the "Company"
for all purposes hereunder and the performance goals set forth on Exhibit A
hereof shall be amended to appropriately reflect the performance of such
assignee. In the event of such assignment, the expense of this Agreement shall
be shared pro rata by the Company and any such assignee based upon the number of
months during the Performance Period Mr. Hairston was employed by each.
16. Governing Law. This Agreement, and all its rights under it, shall
be governed by and construed in accordance with the laws of the State of
Georgia.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the parties
first listed above, effective this ___ day of February, 1998.
THE SOUTHERN COMPANY
By: ______________________________
SOUTHERN NUCLEAR OPERATING COMPANY, INC.
By:
MR. HAIRSTON
------------------------------
William G. Hairston III
Attest:
By:
<PAGE>
Exhibit A
Deferred Compensation Agreement
Schedule of Performance Goals
For Performance Period
The Company shall achieve an assessment ranking of Level 2 or better in
INPO Evaluations.
The Company shall experience no catastrophic event in the operations of
its nuclear facilities.
The Company shall meet a cost goal of 2.0 cents/kwh for all cost except
FNP steam generator replacement cost and embedded capital.
The FNP steam generators shall be replaced at a cost of less than $250
million which includes AFUDC.
The annual individual performance goals established for Mr. Hairston
shall be met or exceeded, barring an extraordinary event occurring during any of
the fiscal years, subject to the approval of the Chief Executive Officer of
Southern. Achievement of the goals shall be assessed annually by the Chief
Executive Officer of Southern and documented in Exhibit B of this Agreement.
<PAGE>
Cost Goal Basis:
1998 1999 2000 2001 2002
---- ---- ---- ---- ----
Nuclear O&M 454.3 443.0 436.8 445.8 444.6
Other Non-capital 113.8 105.4 102.7 106.3 111.0
Capital Additions 107.5 95.0 104.5 63.4 64.0
Less Farley SGR (63.3) (60.6) (49.5) (22.3) 0.0
- - - - - - - --------------- ---- ---- ---- ---- ---
Non-fuel Costs 612.3 582.8 594.5 593.2 619.6
Millions of MWH 42.90 44.39 44.10 43.88 44.15
Non-fuel Cost/Kwh 1.43 1.31 1.35 1.35 1.40
Fuel Cost/Kwh 0.51 0.51 0.51 0.52 0.54
4% Contingency 0.08 0.07 0.07 0.07 0.08
- - - - - - - -------------- ---- ---- ---- ---- ----
Goal Cost/Kwh 2.02 1.89 1.93 1.94 2.02
<PAGE>
Exhibit B
Deferred Compensation Agreement
Annual Documentation of Performance Goals
For Performance Period
EXHIBIT 10(a)82
DEFERRED COMPENSATION AGREEMENT
THIS DEFERRED COMPENSATION AGREEMENT ("Agreement") made and entered
into by and between THE SOUTHERN COMPANY ("Southern"), GEORGIA POWER COMPANY
(the "Company") and WARREN Y. JOBE ("Employee").
W I T N E S S E T H
WHEREAS, Employee has been employed by the Company for approximately
___________(____) years; WHEREAS, Employee is a highly compensated
employee of the Company and is a member of its management; WHEREAS, the
parties acknowledge that certain events ("Eligibility Events") may
occur upon the termination of the Employee's
employment with the Company;
WHEREAS, the parties desire to delineate their respective rights,
duties, and obligations attendant to the occurrence of an Eligibility Event and
desire to reach an accord and satisfaction of all claims arising from Employee's
employment and the occurrence of an Eligibility Event, with appropriate
releases; and
WHEREAS, the parties desire to provide Employee with deferred
compensation upon the occurrence of an Eligibility Event for service he has
provided or will provide for the Company;
WHEREAS, the parties desire to enter into a consulting arrangement upon
the occurrence of an Eligibility Event; NOW, THEREFORE, in
consideration of the premises, and the agreements of the parties set
forth in this Agreement, and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby covenant
and agree as follows:
1. Event Rendering Employee Eligible For Deferred Compensation. The
Employee shall become eligible for benefits under the terms of this Agreement if
one of the following Eligibility Events occurs:
a. The Employee terminates employment with the Company on or
after attaining age sixty-two (62) and enters into a release in the
form attached hereto as Exhibit 1; or
b. The Employee, after entering into this Agreement but while
employed by the Company, becomes totally and permanently disabled as
determined by a medical doctor selected by the Company and enters into
a release in the form attached hereto as Exhibit 1.
c. Upon the occurrence of the Eligibility Event in Paragraph
(a) above, and subject to Paragraph 5, the Company agrees to pay to
Employee the amounts described in Paragraphs 2, 3 and 4 hereof. Upon
the occurrence of the Eligibility Event in Paragraph (b) above, and
subject to Paragraph 5, the Company agrees to pay to Employee the
amounts described in Paragraph 2 and 3 hereof. Employee covenants and
agrees that the consideration set forth in Paragraphs 2, 3 and 4 shall
be in full satisfaction of all sums owed to Employee, if any, by the
Company upon the occurrence of an Eligibility Event, and shall
constitute good and complete consideration for the Release attached
hereto as Exhibit 1, those nondisclosure and ownership obligations
under Paragraph 7 hereof and all other obligations and covenants of
Employee contained herein.
d. Notwithstanding Paragraph (a) above, in the event Employee
dies after entering into this Agreement but before incurring this
Eligibility Event, the amounts described in Paragraphs 2 and 3 shall be
paid to Employee's spouse, if living, or if not only the amounts
payable under Paragraph 2 hereof shall be paid to the Employee's
estate.
2. Severance Benefit. Subject to the terms and conditions of this
Agreement including paragraph 5 hereof, on the first day of the first month
following the Employee's Eligibility Event, the Company shall pay to Employee a
lump sum amount equal to two (2) times base pay in effect at the time of the
Employee's Eligibility Event. Employee shall be responsible for all state and
federal income taxes and his share of FICA taxes owed on the foregoing amounts.
3. Replacement Benefit. On the first day of the first month following
the Employee's Eligibility Event, the Company shall pay to Employee a lump sum
amount equal to the present value of the following benefits determined as of the
Employee's Eligibility Event: the monthly Early Retirement Reduction Percentage
of Employee's Accrued Retirement Income under the Pension Plan (determined
without regard to the limitations described under Sections 401(a)(17), 415(b) or
415(e) of the Internal Revenue Code of 1986 ("Code"), plus an amount equal to
the reduction of the Employee's monthly SERP Benefit under Section 5.1 (a)(1) of
The Southern Company Supplemental Retirement Plan, effective January 1, 1997,
for commencement of benefits prior to Employee's Normal Retirement Date under
the Pension Plan. In calculating the benefit with respect to the preceding
sentence, any service granted the Employee under an agreement with the Company
shall be taken into account. Employee shall be responsible for all state and
federal income taxes and his share of FICA taxes owed on the foregoing amounts.
4. Payments for Consulting. Upon terminating from the Company in
accordance with Paragraph 1(a), Employee agrees to provide consulting services
to Company as an independent contractor in accordance with the agreement set
forth in Exhibit 2:
5. Termination for Cause. In the event the Employee is terminated for
cause, no benefits shall be payable under this Agreement. As used in the
preceding sentence, the term "cause" shall mean gross negligence or willful
misconduct in the performance of the duties and services required in the course
of employment by the Company, the final conviction of a felony or misdemeanor
involving moral turpitude, the carrying out of any activity or the making of any
statement which would prejudice the good name and standing of the Company or
would bring the Company into contempt, ridicule or would reasonably shock or
offend any community in which the Company is located, or a material breach of
the fiduciary obligations owed by an officer and an employee to the Company.
6. Publicity; No Disparaging Statement. Except as otherwise provided in
Paragraph 9 hereof, Employee, Southern and the Company covenant and agree that
they shall not engage in any communications which shall disparage one another or
interfere with their existing or prospective business relationships.
7. Non-Disclosure and Non-Solicitation.
a. Definitions. For purposes of this Paragraph 7, the
following terms shall have the following meanings:
i) "Entity" shall mean any business, individual,
partnership, joint venture, agency, governmental subdivision,
association, firm, corporation or other entity.
ii) "Affiliate" shall mean the following Entities:
(A) any Entity which owns an Interest (as defined below) in
the Company either directly or indirectly through any other
Entity, (B) any Entity an Interest in which is owned directly
or indirectly by any Entity which owns directly or indirectly
an Interest in the Company or (C) any Entity in which the
Company owns an Interest either directly or indirectly through
any other Entity. For purposes of this Agreement, the term
"Interest" shall include any equity interest in an Entity in
an amount equal to or greater than 30% of the Entity's total
outstanding equity interests.
iii) "Confidential Information" shall mean
proprietary and confidential data or information other than
Trade Secrets (as defined below), which is valuable to, and
related to the business of, the Company, its Affiliates or
non-affiliated Entities with whom the Company or its
Affiliates has or have business relationships (collectively,
"Third Parties"), and the details of which are generally
unknown to the public or to the Company's competitors,
including, without limitation, information regarding the
Company's employees, business strategies, models and systems,
customers, suppliers, partners and affiliates, gained by
Employee as a result of his or her affiliation with the
Company or its Affiliates, and other items that the Company or
its Affiliates may from time to time mark or otherwise
identify as confidential.
iv) "Trade Secrets" shall mean information of or
related to the Company, its Affiliates or Third Parties which
(A) derives economic value, actual or potential, from not
being generally known to, and not being readily ascertainable
by proper means by, other persons who can obtain economic
value from its disclosure or use; and (B) is the subject of
efforts that are reasonable under the circumstances to
maintain its secrecy; it being agreed that such information
includes, without limitation, technical and non-technical
data, a formula, a pattern, a compilation, a program, a
device, a method, a technique, a drawing, a process, financial
data, financial plans, product plans or a list of actual or
potential customers or suppliers.
v) "Intellectual Property" shall mean all work
product, property, data, documentation, "know-how", concepts
or plans, inventions, discovery, compositions, innovations,
computer programs, improvements, techniques, processes,
designs, article of manufacture or information of any kind, or
any new or useful improvements of any of the foregoing and any
Trade Secrets, patents, copyrights, Confidential Information,
mask work, trademark or service mark, relating in any way to
the Company or its Affiliates and its or their business
prepared, conceived, revised, discovered, developed, or
created by Employee for the Company or its Affiliates or by
using the Company's or its Affiliates' time, personnel,
facilities, or material.
b. Nondisclosure: Ownership of Proprietary Property.
i) Nondisclosure. In recognition of the Company's
need to protect its legitimate business interests, Employee
hereby acknowledges that he has been given access to valuable
Trade Secrets and Confidential Information; and Employee
hereby covenants and agrees that he will use the Trade Secrets
and Confidential Information for the Company's business
purposes only, and that he will not for any reason, in any
fashion, form or manner, other than as instructed by a duly
authorized representative of the Company, copy, disclose,
disseminate, communicate, transfer or otherwise convey to any
Entity any item: (A) which is a Trade Secret, for so long as
such item remains a trade secret under applicable law; or (B)
which is Confidential Information, other than Trade Secrets,
for a period of two (2) years from the Employee's Eligibility
Event.
ii) Notification of Unauthorized Disclosure. Employee
shall exercise his best efforts to ensure the continued
confidentiality of all Trade Secrets and Confidential
Information known by, disclosed or made available to Employee.
Employee shall immediately notify the Company of any
unauthorized disclosure or use of any Trade Secrets or
Confidential Information of which Employee becomes aware.
Employee shall assist the Company, to the extent necessary, in
the procurement or protection of the Company's or its
Affiliates' rights to or in any Intellectual Property, Trade
Secrets or Confidential Information and, upon the Company's
request, shall assist, to the extent necessary, in the
procurement or protection of any Third Party's rights to or in
any Intellectual Property, Trade Secrets or Confidential
Information.
iii) Ownership. To the greatest extent possible, any
and all Intellectual Property shall be deemed to be "work made
for hire" (as defined in the Copyright Act, 17 U.S.C.A. ss.ss.
101 et seq.), and Employee hereby unconditionally and
irrevocably transfers and assigns to the Company or its
Affiliates all rights, title and interest Employee currently
has or in the future may have by operation of law or otherwise
in or to any Intellectual Property, including, without
limitation, all patents, copyrights, trademarks, service marks
and other Intellectual Property rights and agrees that the
Company or its Affiliates shall have the exclusive world-wide
ownership of such Intellectual Property, and that no
Intellectual Property shall be treated as or deemed to be a
"joint work" (as defined by the Copyright Act) of Employee and
the Company, its Affiliates or otherwise. Employee agrees to
execute and deliver to the Company or its Affiliates any
transfers, assignments, documents or other instruments which
the Company or its Affiliates may deem necessary or
appropriate to vest complete title and ownership of any
Intellectual Property, and all rights therein, exclusively in
the Company or its Affiliates, as the case may be.
iv) Return of Materials. Upon the Employee's
Eligibility Event, or at any point after that time upon the
specific request of the Company, Employee shall return to the
Company all written or descriptive materials of any kind
belonging or relating to the Company or its Affiliates,
including, without limitation, any Intellectual Property,
Confidential Information and Trade Secrets, in Employee's
possession.
8. Transfer of Employment to Southern or a Southern Subsidiary or
Affiliate. In the event that Employee's employment by the Company is terminated
prior to Employee's Eligibility Event and Employee shall become immediately
re-employed by Southern or a subsidiary or an affiliate of Southern, the Company
shall assign this Agreement to Southern or such subsidiary or affiliate,
Southern shall accept such assignment or cause such affiliate or subsidiary to
accept such assignment, such assignee shall become the "Company" for all
purposes hereunder, including but not limited to the Release and Consulting
Agreement attached hereto and incorporated herein as Exhibit 1 and 2
respectively. In the event of such assignment, the expense of this Agreement
shall be shared pro rata by the Company and any such assignee based upon the
number of months after the effective date of this Agreement that the Employee is
employed by the Company, and/or Southern and/or such affiliate or subsidiary of
Southern, as the case may be.
9. Confidentiality and Legal Process. Employee represents and agrees
that he will keep the terms, amount and fact of this Agreement confidential and
that he will not hereafter disclose any information concerning this Agreement to
any one other than his personal agents, including, but not limited to, any past,
present, or prospective employee or applicant for employment with Company.
Notwithstanding the foregoing, nothing in this Agreement is intended to prohibit
Employee from performing any duty or obligation that shall arise as a matter of
law. Specifically, Employee shall continue to be under a duty to truthfully
respond to any legal and valid subpoena or other legal process. This Agreement
is not intended in any way to proscribe Employee's right and ability to provide
information to any federal, state or local government in the lawful exercise of
such governments' governmental functions.
10. Successors And Assigns; Applicable Law. This Agreement shall be
binding upon and inure to the benefit of Employee and his heirs, administrators,
representatives, executors, successors and assigns, and shall be binding upon
and inure to the benefit of Southern, the Company and their officers, directors,
employees, agents, shareholders, parent corporation and affiliates, and their
respective predecessors, successors, assigns, heirs, executors and
administrators and each of them, and to their heirs, administrators,
representatives, executors, successors and assigns. This Agreement shall be
construed and interpreted in accordance with the laws of the State of Georgia,
United States of America (without giving effect to principles of conflicts of
laws).
11. Complete Agreement. This Agreement shall constitute the full and
complete Agreement between the parties concerning its subject matter and fully
supersedes any and all other prior Agreements or understandings between the
parties concerning the subject matter hereof. This Agreement shall not be
modified or amended except by a written instrument signed by both Employee and
an authorized representative of Southern and the Company.
12. Severability. The unenforceability or invalidity of any particular
provision of this Agreement shall not affect its other provisions, and to the
extent necessary to give such other provisions effect, they shall be deemed
severable.
13. Waiver Of Breach; Specific Performance. The waiver of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any other breach. Each of the parties to this Agreement will be entitled to
enforce its or his rights under this Agreement, specifically, to recover damages
by reason of any breach of any provision of this Agreement and to exercise all
other rights existing in its or his favor. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its or his sole
discretion apply to any court of law or equity of competent jurisdiction for
specific performance or injunctive relief in order to enforce or prevent any
violations of the provisions of this Agreement.
14. Unsecured General Creditor. The Company shall neither reserve nor
specifically set aside funds for the payment of its obligations under this
Agreement, and such obligations shall be paid solely from the general assets of
the Company. Notwithstanding that Employee may be entitled to receive the value
of his Account under the terms and conditions of this Agreement, the assets from
which such amount may be paid shall at all times be subject to the claims of the
Company's creditors.
15. No Effect On Other Arrangements. It is expressly understood and
agreed that the payments made in accordance with this Agreement are in addition
to any other benefits or compensation to which Employee may be entitled or for
which he may be eligible, whether funded or unfunded, by reason of his
employment with the Company.
16. Tax Withholding. There shall be deducted from each payment under
this Agreement the amount of any tax required by any governmental authority to
be withheld and paid over by the Company to such governmental authority for the
account of Employee.
17. Compensation. Any compensation contributed on behalf of Employee
under this Agreement shall not be considered "compensation," as the term is
defined in The Southern Company Employee Savings Plan, The Southern Company
Employee Stock Ownership Plan, or The Southern Company Pension Plan. Payments
under this Agreement shall not be considered wages, salaries or compensation
under any other employee benefit plan.
18. No Guarantee of Employment. No provision of this Agreement shall be
construed to affect in any manner the existing rights of the Company to suspend,
terminate, alter, modify, whether or not for Cause, the employment relationship
of Employee and the Company.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
this ___ day of ________________, 1998.
"SOUTHERN"
THE SOUTHERN COMPANY
By:______________________
Its:_____________________
"COMPANY"
GEORGIA POWER COMPANY
By:______________________
Its:_____________________
"EMPLOYEE"
WARREN Y. JOBE
-------------------------
WITNESSED BY:
-------------------------
Exhibit 1 to Deferred Compensation
Agreement with Warren Y. Jobe
RELEASE AGREEMENT
THIS RELEASE ("Release') is made and entered into by and between WARREN
Y. JOBE ("Employee"), THE SOUTHERN COMPANY ("Southern") and GEORGIA POWER
COMPANY and its successor or assigns ("Company").
WHEREAS, Employee, Southern and Company have agreed that Employee's
employment with _________________ shall terminate on
- - - - - - - -------------, -------;
WHEREAS, Employee, Southern and Georgia Power Company have previously
entered into that certain Deferred Compensation Agreement, dated _______, 1998
("Agreement"), that this Release is incorporated into by reference;
WHEREAS, Employee, Southern and Company desire to delineate their
respective rights, duties and obligations attendant to such termination and
desire to reach an accord and satisfaction of all claims arising from Employee's
employment, and his termination of employment, with appropriate releases, in
accordance with the Agreement;
WHEREAS, the Company desires to provide Employee with deferred
compensation in accordance with the Agreement for service he has or will provide
for the Company;
NOW, THEREFORE, in consideration of the premises and the agreements of
the parties set forth in this Release, and other good and valuable consideration
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, hereby covenant and agree as follows:
1._______Release. Employee does hereby remise, release and forever
discharge Southern and the Company and their officers, directors, employees,
agents, shareholders, parent corporation and affiliates, and their respective
predecessors, successors, assigns, heirs, executors and administrators
(collectively, "Releasees"), of and from all manner of actions and causes of
action, suits, debts, claims and demands whatsoever at law or in equity, known
or unknown, actual or contingent, including, but not limited to, any claims
which have been asserted, or could be asserted now or in the future, against any
Releasees arising under any and all federal, state or local laws and any common
law claims, and including, but not limited to, any claims Employee may have
pursuant to the Age Discrimination in Employment Act and any claims to benefits
under any and all offer letters, employment or separation agreements, or bonus,
severance, workforce reduction, early retirement, out-placement, or other
similar plans sponsored by the Company, now or hereafter recognized
(collectively, "Claims"), which he ever had or now has or may in the future
have, by reason of any matter, cause or thing arising out of his employment
relationship and privileges, his serving as an employee of the Company or the
separation from his employment relationship or affiliation as an employee of the
Company as of the date of this Release against each of the Releasees.
Notwithstanding the foregoing, Employee does not release any Claims under the
Age Discrimination in Employment Act that may arise after his execution of this
Release.
2._______No Assignment of Claim. Employee represents that he has not
assigned or transferred, or purported to assign or transfer, any Claims or any
portion thereof or interest therein to any party prior to the date of this
Release.
3._______Deferred Compensation. In accordance with Paragraph 1 of the
Deferred Compensation Agreement, the Company agrees to pay the Employee, his
spouse or estate, as the case may be, the amounts outlined in Paragraphs 2 and 3
of the Agreement.
4._______Consulting Services. If the Employee terminates from the
Company in accordance with Paragraph 4 of the Deferred Compensation Agreement,
the Employee agrees to provide consulting services as set forth under the
Consulting Agreement referred to therein.
5._______No Admission Of Liability. This Release shall not in any way
be construed as an admission by Southern, the Company or Employee of any
improper actions or liability whatsoever as to one another, and each
specifically disclaims any liability to or improper actions against the other or
any other person, on the part of itself or himself, its or his employees or
agents.
6._______Voluntary Execution. Employee warrants, represents and agrees
that he has been encouraged in writing to seek advice from anyone of his
choosing regarding this Release, including his attorney and accountant or tax
advisor prior to his signing it; that this Release represents written notice to
do so; that he has been given the opportunity and sufficient time to seek such
advice; and that he fully understands the meaning and contents of this Release.
He further represents and warrants that he was not coerced, threatened or
otherwise forced to sign this Release, and that his signature appearing
hereinafter is voluntary and genuine. EMPLOYEE UNDERSTANDS THAT HE MAY TAKE UP
TO TWENTY-ONE (21) DAYS TO CONSIDER WHETHER OR NOT HE DESIRES TO ENTER INTO THIS
RELEASE.
7. Ability to Revoke Agreement. EMPLOYEE UNDERSTANDS THAT HE MAY REVOKE
THIS RELEASE BY NOTIFYING THE COMPANY IN WRITING OF SUCH REVOCATION WITHIN SEVEN
(7) DAYS OF HIS EXECUTION OF THIS RELEASE AND THAT THIS RELEASE IS NOT EFFECTIVE
UNTIL THE EXPIRATION OF SUCH SEVEN (7) DAY PERIOD. HE UNDERSTANDS THAT UPON THE
EXPIRATION OF SUCH SEVEN (7) DAY PERIOD THIS RELEASE WILL BE BINDING UPON HIM
AND HIS HEIRS, ADMINISTRATORS, REPRESENTATIVES, EXECUTORS, SUCCESSORS AND
ASSIGNS AND WILL BE IRREVOCABLE.
<PAGE>
Acknowledged and Agreed To:
"SOUTHERN"
THE SOUTHERN COMPANY
By:
Its:
"COMPANY"
GEORGIA POWER COMPANY
By:
Its:
I UNDERSTAND THAT BY SIGNING THIS RELEASE, I AM GIVING UP RIGHTS I MAY HAVE. I
UNDERSTAND THAT I DO NOT HAVE TO SIGN THIS RELEASE.
"EMPLOYEE"
WARREN Y. JOBE
Date
WITNESSED BY:
- - - - - - - ------------------------------------
- - - - - - - ------------------------------------
Date
<PAGE>
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement") is entered into by and between
THE SOUTHERN COMPANY ("Southern"), GEORGIA POWER COMPANY (the "Company") and
WARREN Y. JOBE ("Consultant").
W I T N E S S E T H
WHEREAS, Southern and the Company conduct business in the electric
utility industry;
WHEREAS, Consultant has expertise with respect to this industry and
about Southern and the Company;
WHEREAS, Southern and the Company desire to retain certain consulting
services of Consultant and Consultant desires to provide such consulting
services to Company in accordance with the terms and conditions of this
Agreement.
NOW THEREFORE, for and in consideration of the premises, the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt, sufficiency and adequacy of which are hereby
acknowledged, the parties hereby agree as follows:
1. Engagement as an Independent Contractor. Company hereby agrees to
engage Consultant as an independent contractor and Consultant hereby accepts
such engagement as an independent contractor, upon the terms and conditions set
forth in this Agreement.
2. Term. The term of this Agreement shall be for four (4) years and
shall commence upon the occurrence of the Eligibility Event set forth under
Paragraph 1(a) of the Deferred Compensation Agreement. Notwithstanding the
preceding sentence, the term shall be shortened so that Consultant shall not be
required to render consulting services beyond his sixty-sixth (66th) birthday.
However, either party may terminate the Agreement at any time by providing a one
hundred and eighty (180) day written notice of intent to terminate pursuant to
Section 7 below.
3. Duties. Unless otherwise detailed in a specific letter or
memorandum, Consultant shall manage, perform, and provide professional
consulting services and advice as Company may request in writing from time to
time. Consultant must obtain prior written approval from the Company before
Consultant contracts with or in any other way employs any agents or
subcontractors to perform work in any way related to this Agreement. Consultant
shall cause its agents, employees and subcontractors to perform such duties in a
professional and competent manner which shall be consistent with Company's Code
of Ethics. Additionally, during the term of this Agreement, Consultant agrees to
promote the best interests of Company and to take no actions that in any way
damage the public image or reputation of Company or its affiliates or to
knowingly assist, in any way, a competitor of Company.
4. Consultant as an Independent Contractor.
a. The parties acknowledge and intend that the relationship of
Consultant, and its agents, employees and subcontractors, to Company
under this Agreement shall be that of independent contractors. In
performing its duties under this Agreement, Consultant shall cause the
services required to be completed according to its own means and
methods of work which shall be in the exclusive charge and control of
Consultant and which shall not be subject to the control or supervision
of Company, except as to the results of its work. Consultant shall
determine its own working hours and schedule for its agents, employees
and subcontractors and shall not be subject to Company's personnel
policies and procedures except for Company's Code of Ethics.
Consultant shall be entirely and solely responsible for its
actions or in-actions and the actions or in-actions of its agents,
employees or subcontractors, if any, while performing services
hereunder. Consultant agrees that neither it nor any of its agents,
employees or subcontractors shall, in any form or fashion, maintain,
hold out, represent, state or imply to any other individual or entity
that an employer/employee relationship exists between Company and
Consultant, its agents and employees, or between Company and any
subcontractor or its agents and employees, and neither Consultant nor
its agents, employees or subcontractors are granted nor shall they
represent that they are granted any right or authority to make any
representation or warranty or assume or create any obligation or
responsibility, express or implied, for, on behalf of or in the name of
Company, to incur debts for Company or to bind Company in any manner
whatsoever.
Additionally, Consultant hereby waives and relinquishes any
right of subrogation it might have against Company under the provisions
of the Workers' Compensation Act of Georgia on account of any injury to
its employees or employees of its subcontractors, if any, caused in
whole or in part by any negligence of Company. Consultant further
agrees that it will require its Workers' Compensation insurer, if any,
to likewise waive and relinquish such subrogation rights and furnish
evidence of such waiver to Company.
b. Consultant agrees that neither its agents, employees or
subcontractors nor the agents or employees of its subcontractors shall
be eligible to participate in any employee benefit plan sponsored by
Company or its affiliates, including, but not limited to, any
retirement plan, insurance program, disability plan, medical benefits
plan or any other fringe benefit program sponsored and maintained by
Company for its employees. 5. Compensation and Payments.
a. As payment for the services provided under this Agreement,
Consultant shall receive compensation in accordance with the following
schedule:
Minimum Days Required
to be Available Retainer for Rate for Days in Excess of
Year to Company Minimum Days Minimum Required Days
1 30 $60,000 $2,000
2 30 $60,000 $2,000
3 20 $40,000 $2,000
4 20 $40,000 $2,000
The provided amounts will be payable upon execution by the
Company of this Agreement and each succeeding anniversary thereof for
the term of the Agreement. Consultant shall be reimbursed by Company
for reasonable expenses incurred while conducting work as Consultant
under this Agreement which are approved by the Company in advance upon
remittance of the same to Company.
b. Consultant hereby recognizes, covenants and agrees that,
except as specifically set forth to the contrary in this Agreement,
Consultant shall be solely and exclusively responsible and liable for
all expenses, costs, liabilities, assessments, taxes, maintenance,
insurance, undertakings and other obligations incurred by Consultant,
its agents, employees and all subcontractors at any time and for any
reason as a result of this Agreement or the performance of services by
Consultant including, but not limited to, withholding taxes, social
security taxes, unemployment taxes, sales/use taxes and workers'
compensation insurance premiums.
6. Transfer of Employment to Southern or a Southern Subsidiary or
Affiliate. In the event that Employee's employment by the Company is terminated
prior to Employee's Eligibility Event under the Deferred Compensation Agreement
and Employee shall become immediately re-employed by Southern or a subsidiary or
an affiliate of Southern, the Company shall assign this Agreement to Southern or
such subsidiary or affiliate, Southern shall accept such assignment or cause
such affiliate or subsidiary to accept such assignment, such assignee shall
become the "Company" for all purposes hereunder.
7. Notices. All notices required, necessary or desired to be given
pursuant to this Agreement shall be in writing and shall be effective when
delivered or on the third day following the date upon which such notice is
deposited, postage prepaid, in the United States mail, certified return receipt
requested, and addressed to the party at the address set forth below:
====================== =======================
---------------------- -----------------------
8. Indemnification. Consultant shall and does hereby expressly agree to
indemnify and hold harmless Southern and Company, its officers, directors,
shareholders, employees, parent and affiliates against any and all suits,
actions, judgments, costs (including, without limitation, all court costs and
attorneys' fees), losses, damages, or claims of whatever nature arising out of
or related to any acts or omissions of Consultant, its agents, employees or
subcontractors, including, but not limited to, any injuries to or deaths of
persons or any damage to property or equipment. Consultant further agrees to
defend any and all such actions in any court or in arbitration.
9. Non-Disclosure, Non-Competition And Non-Solicitation Provisions.
a. Definitions. For purposes of this Section 9, the following
terms shall have the following meanings:
i) "Confidential Information" shall mean proprietary
and confidential data or information other than Trade Secrets
(as defined below), which is valuable to, and related to the
business of the Company, its Affiliates or non-affiliated
Entities with whom the Company or its Affiliates has or have
business relationships (collectively, "Third Parties") and the
details of which are generally unknown to the public or to the
Company's Competitors including, without limitation,
information regarding the Company's employees, business
strategies, models and systems, customers, suppliers, partners
and affiliates, gained by Consultant as a result of his or her
affiliation with the Company or its Affiliates, and other
items that the Company or its Affiliates may from time to time
mark or otherwise identify as confidential.
ii) "Trade Secrets" shall mean information of or
related to the Company, its Affiliates or Third Parties which
(A) derives economic value, actual or potential, from not
being generally known to, and not being readily ascertainable
by proper means by, other persons who can obtain economic
value from its disclosure or use; and (B) is the subject of
efforts that are reasonable under the circumstances to
maintain its secrecy; it being agreed that such information
includes, without limitation and without regard to form,
technical and non-technical data, a formula, a pattern, a
compilation, a program, a device, a method, a technique, a
drawing, a process, financial data, financial plans, product
plans or a list of actual or potential customers or suppliers.
iii) "Intellectual Property" shall mean all work
product, property, data, documentation, "know-how", concepts
or plans, inventions, discovery, compositions, innovations,
computer programs, improvements, techniques, processes,
designs, article of manufacture or information of any kind, or
any new or useful improvements of any of the foregoing and any
Trade Secrets, patents, copyrights, Confidential Information,
mask work, trademark or service mark, relating in any way to
the Company or its Affiliates and its or their business
prepared, conceived, revised, discovered, developed, or
created by Consultant for the Company or its Affiliates or any
of Company's or its Affiliates' clients or Customers or by
using the Company's or its Affiliates' time, personnel,
facilities, or material.
iv) "Competitive Position" shall mean: any employment
or independent contractor arrangement with any Customer
whereby Consultant will serve such Customer in the same or
substantially similar capacity as that which it performs for
Company or its Affiliates pursuant to the terms of this
Agreement.
v) "Customer" shall have the meaning ascribed by
Section 9.c. hereof.
vi) "Entity" shall mean any business, individual,
partnership, joint venture, agency, governmental subdivision,
association, firm, corporation or other entity.
vii) "Affiliate" shall mean the following Entities:
(A) any Entity which owns an Interest (as defined below) in
the Company either directly or indirectly through any other
Entity, (B) any Entity an Interest in which is owned directly
or indirectly by any Entity which owns directly or indirectly
an Interest in the Company or (C) any Entity in which the
Company owns an Interest either directly or indirectly through
any other Entity. For purposes of this Agreement, the term
"Interest" shall include any equity interest in an Equity in
an amount equal to or greater than 30% of the Entity's total
outstanding equity interests.
b. Nondisclosure: Ownership of Proprietary Property.
i) Nondisclosure. In recognition of the need of
Company and its Affiliates to protect its legitimate business
interests, Consultant hereby covenants and agrees that: (A)
with regard to each item constituting all or any portion of a
Trade Secret (before or after the termination of this
Agreement); and (B) with regard to any Confidential
Information, at all times during this Agreement and for a
period of three (3) years following the expiration or
termination of this Agreement for any reason, Consultant, its
agents, employees and subcontractors shall regard and treat
all Trade Secrets and all Confidential Information as strictly
confidential and wholly-owned by Company and its Affiliates
and will not, for any reason, in any fashion, either directly
or indirectly, use, sell, lend, lease, distribute, license,
give, transfer, assign, show, disclose, disseminate,
reproduce, copy, misappropriate or otherwise communicate any
such item or information to any Third Party for any purpose
other than in accordance with this Agreement or as required by
applicable law.
ii) Allowed Disclosures. Notwithstanding Section
9.b.i) hereof, Consultant may disclose Confidential
Information and Trade Secrets to those of its agents,
employees and subcontractors who need to know such particular
Trade Secrets or Confidential Information in order for
Consultant to perform its obligations under this Agreement.
Consultant shall require each and every person to whom it
discloses any Trade Secrets or Confidential Information to
execute confidentiality agreements in a form reasonably
acceptable to Company and shall use its best efforts to cause
such persons to comply with the restrictions contained in such
confidentiality agreements. Consultant shall remain
responsible for every person to whom it provides Trade Secrets
or Confidential Information.
iii) Notification of Unauthorized Disclosure.
Consultant shall exercise its best efforts and shall cause its
agents, employees and subcontractors to exercise their best
efforts to ensure the continued confidentiality of all Trade
Secrets and Confidential Information of Company or its
Affiliates known by, disclosed or made available to
Consultant, whether in connection with this Agreement or any
other past or present relationship with Company or its
Affiliates. Consultant shall immediately notify Company of any
unauthorized disclosure or use of any Trade Secrets or
Confidential Information of which Consultant becomes aware.
Consultant shall assist Company and its Affiliates, to the
extent necessary, in the procurement or protection of
Company's and its Affiliates' rights to or in any Intellectual
Property, Trade Secrets or Confidential Information.
iv) Ownership. To the greatest extent possible, any
and all Intellectual Property shall be deemed to be "work made
for hire" (as defined in the Copyright Act, 17 U.S.C.A. ss.ss.
101 et seq.), and Consultant hereby unconditionally and
irrevocably transfers and assigns and shall cause its agents,
employees and subcontractors to unconditionally and
irrevocably transfer and assign to Company or its Affiliates
all rights, title and interest Consultant or such persons
currently have or in the future may have by operation of law
or otherwise in or to any Intellectual Property, including,
without limitation, all patents, copyrights, trademarks,
service marks and other Intellectual Property rights and
agrees that Company and its Affiliates shall have the
exclusive world-wide ownership of such Intellectual Property,
and that no Intellectual Property shall be treated as or
deemed to be a "joint work" (as defined by the Copyright Act)
of Consultant, Company and its Affiliates or otherwise.
Consultant agrees to execute and deliver and to cause its
agents, employees and subcontractors to execute and deliver to
Company any transfers, assignments, documents or other
instruments which Company may deem necessary or appropriate to
vest complete title and ownership of any Intellectual
Property, and all rights therein, exclusively in Company or
its Affiliates.
v) Return of Materials. Immediately upon termination
of the Agreement, or at any point prior to or after that time
upon the specific request of Company or its Affiliates,
Consultant shall return and shall cause its agents, employees
and subcontractors to return to Company and its Affiliates all
written or descriptive materials of any kind including,
without limitation, any Intellectual Property, Confidential
Information and Trade Secrets, in Consultant's or such
persons' possession. The confidentiality obligations described
in this Agreement shall continue until their expiration under
the terms of this Agreement.
vi) Public Statements and Press Releases. Company
shall issue all public statements concerning the work
hereunder. Neither Consultant nor its agents, employees or
subcontractors shall issue any press releases, publications or
other public communications describing or concerning any
acknowledged project of Company or its Affiliates without the
prior written consent of the Company.
c. Non-solicitation of Customers, Non-referral and
Non-compete. Consultant covenants and agrees that during the term of
this Agreement, and for a period of three (3) years thereafter, it
shall not, nor shall its agents, employees or subcontractors either
directly or indirectly, for itself or themselves or in conjunction with
or on behalf of any Entity: (a) solicit, divert or appropriate or
attempt to solicit, divert or appropriate any customer or actively
sought prospective customer of Company or its Affiliates whom
Consultant, its agents, employees or subcontractors, has solicited,
provided service to or otherwise had significant contact with while
providing services to Company and its Affiliates pursuant to this
Agreement (hereinafter "Customer"); (b) refer, recommend or otherwise
suggest to any Customer the services of any Entity other than Company
or its Affiliates with respect to those types of services which Company
and its Affiliates are regularly in the business of providing; (c)
refer, recommend or otherwise suggest to any Entity to provide or seek
to provide services to any Customer with respect to those types of
services which Company and its Affiliates are in the business of
providing; (d) seek or accept a Competitive Position with a Customer;
or (e) solicit, divert or appropriate or attempt to solicit, divert or
appropriate any employee or other contractor of Company or its
Affiliates. Consultant agrees to require each of its agents, employees
or subcontractors who will perform services pursuant to this agreement
for a Customer to execute a non-solicitation, non-referral and
non-compete agreement in a form reasonably acceptable to Company and
its Affiliates and shall use its best efforts to cause such persons to
comply with such agreement.
d. Remedies. The parties represent and agree that any
disclosure or use of any Trade Secrets or Confidential Information by
Consultant, its agents, employees or subcontractors except as otherwise
authorized by the Company in writing, or any other violation of this
Section 9 would be wrongful and cause immediate, significant,
continuing and irreparable injury and damage to Company and its
Affiliates that is not fully compensable by monetary damages. Should
Consultant breach or threaten to breach any provision of this Section
9, Company and its Affiliates shall be entitled to obtain immediate
relief and remedies in a court of competent jurisdiction (including but
not limited to damages, preliminary or permanent injunctive relief and
an accounting for all profits and benefits arising out of Consultant's
breach), cumulative of and in addition to any other rights or remedies
to which Company and its Affiliates may be entitled by this Agreement,
at law or in equity. 10. Laws, Regulations and Public Ordinances.
Consultant shall comply with all federal, state, and local statutes,
regulations, and public ordinances governing its work hereunder and shall
indemnify, defend and hold Company and Southern harmless from any and all
liability, damage, cost, fine, penalty, fee and expense arising from
Consultant's failure to do so.
11. Political Activities. Of particular importance to Company and
Southern are those laws and regulations that regulate or proscribe conduct
relating to lobbying, political campaign contributions or other dealings with
public officials or candidates for public office. The parties expressly
acknowledge that all amounts paid by Company to Consultant consist solely of
payment for professional services rendered or reimbursement of all normal "out
of pocket" expenses related thereto; and no portion of such payment shall be
forwarded to any political campaign, any candidate for political office or any
candidate's campaign committee or to any other entity if Company or Southern
itself could not lawfully make such a payment. While Consultant expressly agrees
not to make any campaign contributions for or on behalf of Company or Southern
in any form, Consultant retains the right to make such contributions in its
corporate capacity as otherwise permitted by law.
12. Foreign Corrupt Practices. Consultant acknowledges that Company and
Southern are subject to the provisions of United States Public Law 95-213, the
Foreign Corrupt Practices Act of 1977 and any amendments thereto ("FCPA") and
that it is familiar with Company's policy to comply strictly with the FCPA.
Consultant hereby agrees to meet and comply with the FCPA and Company's policy
in all respects and to require its employees, agents, advisors, affiliates,
associates, vendors and subcontractors to do the same. Consultant specifically
understands and agrees that it shall not make any offer, gift, promise to give,
or authorization of the giving of anything of value, to any official, any
political party or official thereof or any candidate for political office, or
any other person, that is contrary to the prohibitions set forth in the FCPA,
including, without limitation, articles 78dd-1(a) or 78dd-2(a) thereof
("Improper Payments"). Consultant hereby further represents and warrants within
the meaning of the FCPA that:
(i) no person or entity affiliated with Consultant is a
foreign official of a foreign political party, or a candidate for
foreign political office, or a person who will offer all or a portion
of the consideration received by Consultant or such person or entity to
any foreign official, foreign political party or official thereof, or
to any candidate for political office; and
(ii) the consideration, or any portion thereof, paid by
Company to Consultant, pursuant to this Agreement or otherwise,
constitutes (or will constitute) consideration only for the services
rendered hereunder and is not given, directly or indirectly, in order
to influence any act or decision of a foreign official in its official
capacity or to induce such foreign official to use its influence with a
foreign government or instrumentality to affect or influence any act or
decision of such government or instrumentality in order to assist
Company or Southern in obtaining or retaining business. In the event
that Consultant or any of its agents, employees or subcontractors makes
any Improper Payment or otherwise violates the provisions of this
Section 12, then in addition to other rights and remedies available to
Company and Southern hereunder and under applicable law, Company and
Southern shall have the right to immediately terminate this Agreement
and recover from Consultant or withhold from compensation due
Consultant under this Agreement or any agreement entered into pursuant
hereto: (i) the amount or value of the Improper Payment; and (ii) any
fines, expenses or attorneys' fees incurred in connection with the
Improper Payment or violation hereof.
12. Waiver of Breach. The waiver by any party to this Agreement of a
breach of any provision, section or paragraph of this Agreement shall not
operate or be construed as a waiver of any subsequent breach of the same, or of
a different provision, section or paragraph, by any party hereto.
13. Assignment by Consultant. Consultant may not assign, transfer or
subcontract any of its rights or obligations under this Agreement to any party
without the prior written consent of the Company. Consultant's obligations under
this Agreement shall be binding on Consultant's successors and permitted
assigns. Any assignment, transfer or subcontracting in violation of this
provision shall be null and void.
14. Survival. Notwithstanding any expiration or termination of this
Agreement, the provisions of Sections 6, 7, 8, 9, 10, 11, 14, 15, 16, 17 and 18
hereof shall survive and remain in full force and effect, as shall any other
provision hereof that, by its terms or reasonable interpretation thereof, sets
forth obligations that extend beyond the termination of this Agreement.
15. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Georgia.
16. Severability. The unenforceability or invalidity of any term,
provision or Section of this Agreement shall not affect the validity or
enforceability of the remaining terms, provisions, or sections hereof, but such
remaining terms, provisions or sections shall be construed and interpreted in
such a manner as to carry out fully the intent of the parties hereto; provided
however, that should any judicial body interpreting this Agreement deem any
provision hereof to be unreasonably broad in time, territory, scope or
otherwise, it is the intent and desire of the parties hereto that such judicial
body, to the greatest extent possible, reduce the breadth of such provision to
the maximum legally allowable parameters rather than deeming such provision
totally unenforceable or invalid.
17. Interpretation. Should a provision of this Agreement require
judicial interpretation, it is agreed that the judicial body interpreting or
construing the Agreement shall not apply the assumption that the terms hereof
shall be more strictly construed against one party by reason of the rule of
construction that an instrument is to be construed more strictly against the
party which itself or through its agents prepared the agreement, it being agreed
that all parties and/or their agents have participated in the preparation
hereof.
18. Entire Agreement. This Agreement embodies the entire agreement of
the parties and supersedes all prior agreements between the parties hereto
relating to the subject matter hereof. It may not be changed orally, but only by
an agreement in writing signed by the party against whom enforcement of any
waiver, change, modification, extension or discharge is sought.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
this ____ day of ________________, _____.
"COMPANY" "CONSULTANT"
GEORGIA POWER COMPANY WARREN Y. JOBE
By:_________________________________ ____________________________
Its:________________________________ Witnessed By:_______________
"SOUTHERN"
THE SOUTHERN COMPANY
By:_________________________________
Its:________________________________
Exhibit 10(a)83
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT ("Agreement") made and entered into by
and between The Southern Company ("Southern"), Southern Energy Resources, Inc.
(the "Company") and Mr. Thomas G. Boren ("Mr. Boren").
W I T N E S S E T H:
WHEREAS, Mr. Boren is the President and Chief Executive Officer of the
Company;
WHEREAS, the Company wish to provide to Mr. Boren certain severance
benefits under certain circumstances following a change in control (as defined
herein) of Southern or the Company;
NOW, THEREFORE, in consideration of the premises, and the agreements of
the parties set forth in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) "Annual Compensation" shall mean Mr. Boren's highest
annual base salary rate for the twelve (12) month period immediately
preceding the date of the Change in Control plus market level target
annual bonus as set forth on Exhibit A hereof.
(b) "Beneficial Ownership" shall mean beneficial ownership
within the meaning of Rule 13d-3 promulgated under the Exchange Act.
(c) "Board" shall mean the board of directors of the Company.
(d) "Business Combination" shall mean a reorganization, merger
or consolidation of Southern or sale or other disposition of all or
substantially all of the assets of Southern.
(e) "Change in Control" shall mean any of the following:
(i) The Consummation of an acquisition by any Person
of Beneficial Ownership of 20% or more of Southern's Voting
Securities; provided, however, that for purposes of this
Paragraph 1.(e)(i), the following acquisitions of Southern's
Voting Securities shall not constitute a Change in Control:
(A) any acquisition directly from Southern;
(B) any acquisition by Southern;
(C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by
Southern or any Southern Subsidiary;
(D) any acquisition by a qualified pension
plan or publicly held mutual fund;
(E) any acquisition by a Group composed
exclusively of employees of Southern, or any Southern
Subsidiary;
(F) any acquisition by Mr. Boren or any
Group of which Mr. Boren is a party; or
(G) any Business Combination which would not
otherwise constitute a change in control because of
the application of clauses (A), (B) and (C) of
Paragraph 1.(e)(iii);
(ii) A change in the composition of the Southern
Board whereby individuals who constitute the Incumbent Board
cease for any reason to constitute at least a majority of the
Southern Board;
(iii) Consummation of a Business Combination,
provided, however, that such a Business Combination shall not
constitute a Change in Control if all three (3) of the
following conditions are met:
(A) all or substantially all of the
individuals and entities who held Beneficial
Ownership, respectively, of Southern's Voting
Securities immediately prior to such Business
Combination beneficially own, directly or indirectly,
65% or more of the combined voting power of the
Voting Securities of the corporation surviving or
resulting from such Business Combination, (including,
without limitation, a corporation which as a result
of such transaction holds Beneficial Ownership of all
or substantially all of Southern's Voting Securities
or all or substantially all of Southern's assets)
(such surviving or resulting corporation to be
referred to as "Surviving Company"), in substantially
the same proportions as their ownership, immediately
prior to such Business Combination, of Southern's
Voting Securities;
(B) no Person (excluding any corporation
resulting from such Business Combination, any
employee benefit plan (or related trust) of Southern,
any Southern Subsidiary or Surviving Company, Mr.
Boren, any Group of which Mr. Boren is a party, any
Group composed exclusively of Company employees, any
qualified pension plan (or related trust) or any
publicly held mutual fund) holds Beneficial
Ownership, directly or indirectly, of 20% or more of
the combined voting power of the then outstanding
Voting Securities of Surviving Company except to the
extent that such ownership existed prior to the
Business Combination; and
(C) at least a majority of the members of
the board of directors of Surviving Company were
members of the Incumbent Board at the earlier of the
date of execution of the initial agreement, or of the
action of the Southern Board, providing for such
Business Combination. (iv) The Consummation of an
acquisition by any Person of Beneficial Ownership of
50% or more of the combined voting power of the then
outstanding Voting Securities of the Company;
provided, however, that for purposes of this
Paragraph 1.(e)(iv), any acquisition by Mr. Boren,
any Group composed exclusively of employees of the
Company, any Group of which Mr. Boren is a party, any
qualified pension plan (or related trust), any
publicly held mutual fund, any employee benefit plan
(or related trust) sponsored or maintained by
Southern or any Southern Subsidiary shall not
constitute a Change in Control;
(v) Consummation of a reorganization, merger or
consolidation of the Company (an "Employing Company Business
Combination"), in each case, unless, following such Employing
Company Business Combination, Southern Controls the
corporation or other entity surviving or resulting from such
Employing Company Business Combination; or
(vi) Consummation of the sale or other disposition of
all or substantially all of the assets of the Company to a
corporation or other entity which Southern does not Control.
(f) "COBRA Coverage" shall mean any continuation coverage to
which Mr. Boren or his dependents may be entitled pursuant to
Code Section 4980B.
(g) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(h) "Company" shall mean Southern Energy Resources, Inc., its
successors and assigns.
(i) "Consummation" shall mean the completion of the final act
necessary to complete a transaction as a matter of law, including, but
not limited to, any required approvals by the corporation's
shareholders and board of directors, the transfer of legal and
beneficial title to securities or assets and the final approval of the
transaction by any applicable domestic or foreign governments or
governmental agencies.
(j) "Control" shall mean, in the case of a corporation,
Beneficial Ownership of more than 50% of the combined voting power of
the corporation's Voting Securities, or in the case of any other
entity, Beneficial Ownership of more than 50% of such entity's voting
equity interests.
(k) "Effective Date" shall mean the date of execution of this
Agreement.
(l) "Employee Outplacement Program" shall mean the program
established by the Company from time to time for the purpose of
assisting participants covered by the plan in finding employment
outside of the Employing Company which provides for the following
services:
(i) self-assessment, career decision and goal
setting; (ii) job market research and job sources;
(iii) networking and interviewing skills; (iv)
planning and implementation strategy; (v) resume
writing, job hunting methods and salary negotiation;
and (vi) office support and job search resources.
(m) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(n) "Good Reason" shall mean, without Mr. Boren's express
written consent, after written notice to the Board, and after a thirty
(30) day opportunity for the Board to cure, the continuing occurrence
of any of the following events:
(i) Inconsistent Duties. A meaningful and detrimental
alteration in Mr. Boren's position or in the nature or status
of his responsibilities from those in effect immediately prior
to the Change in Control;
(ii) Reduced Salary. A reduction of five percent (5%)
or more by the Company in either of the following: (i) Mr.
Boren's annual base salary rate as in effect immediately prior
to the Change in Control (except for a less than ten percent
(10%), across-the-board annual base salary rate reduction
similarly affecting at least ninety-five percent (95%) of the
Executive Employees of the Company); or (ii) the sum of Mr.
Boren's annual base salary rate plus target bonus under the
Company's Short Term Plan (except for a less than ten percent
(10%), across-the-board reduction of annual base salary rate
plus target bonus under the Short Term Plan similarly
affecting at least ninety-five percent (95%) of the Executive
Employees of the Company);
(iii) Pension and Compensation Plans. The failure by
the Company to continue in effect any pension or compensation
plan or agreement in which Mr. Boren participates or is a
party as of the date of the Change in Control or the
elimination of Mr. Boren's participation therein, (except for
across-the-board plan changes or terminations similarly
affecting at least ninety-five percent (95%) of the Executive
Employees of the Company); For purposes of this Paragraph
1.(n), a "pension plan or agreement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for payments upon retirement; and a
"compensation plan or arrangement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for periodic, non-discretionary compensatory
payments in the nature of bonuses.
(iv) Relocation. A change in Mr. Boren's work
location to a location more than fifty (50) miles from the
office where Mr. Boren is located at the time of the Change in
Control, unless such new work location is within fifty (50)
miles from Mr. Boren's principal place of residence at the
time of the Change in Control. The acceptance, if any, by Mr.
Boren of employment by the Company at a work location which is
outside the fifty mile radius set forth in this Paragraph
1.(n)(iv) shall not be a waiver of Mr. Boren's right to refuse
subsequent transfer by the Company to a location which is more
than fifty (50) miles from Mr. Boren's principal place of
residence at the time of the Change in Control, and such
subsequent unconsented transfer shall be "Good Reason" under
this Agreement; or
(v) Benefits and Perquisites. The taking of any
action by the Company which would directly or indirectly
materially reduce the benefits enjoyed by Mr. Boren under the
Company's retirement, life insurance, medical, health and
accident, disability, deferred compensation or savings plans
in which Mr. Boren was participating immediately prior to the
Change in Control; or the failure by the Company to provide
Mr. Boren with the number of paid vacation days to which Mr.
Boren is entitled on the basis of years of service with the
Company in accordance with the Company's normal vacation
policy in effect immediately prior to the Change in Control
(except for across-the-board plan or vacation policy changes
or plan terminations similarly affecting at least ninety-five
percent (95%) of the Executive Employees of the Company).
(vi) For purposes of this Paragraph 1.(n), the term
"Executive Employee" shall mean employees of the Company whose
annual base salary is $130,000 or more. (o) "Group" shall have
the meaning set forth in Section 14(d) of the Exchange Act.
(p) "Group Health Plan" shall mean the group health plan
covering Mr. Boren, as such plan may be amended from time to
time.
(q) "Group Life Insurance Plan" shall mean the group life
insurance program covering Mr. Boren, as such plan may be amended from
time to time.
(r) "Incumbent Board" shall mean those individuals who
constitute the Southern Board as of the Effective Date plus any
individual who shall become a director subsequent to such date whose
election or nomination for election by Southern's shareholders was
approved by a vote of at least 75% of the directors then comprising the
Incumbent Board. Notwithstanding the foregoing, no individual who shall
become a director of the Southern Board subsequent to the Effective
Date whose initial assumption of office occurs as a result of an actual
or threatened election contest (within the meaning of Rule 14a-11 of
the Regulations promulgated under the Exchange Act) with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Southern Board shall be a member of the Incumbent Board.
(s) "Month of Service" shall mean any calendar month during
which Mr. Boren has worked at least one (1) hour or was on approved
leave of absence while in the employ of the Company or any affiliate or
subsidiary of Southern.
(t) "Pension Plan" shall mean The Southern Company Pension
Plan, as such plan may be amended from time to time.
(u) "Performance Dividend Plan" shall mean the Southern
Company Performance Dividend Plan or any replacement thereto, as such
plans may be amended from time to time.
(v) "Performance Stock Plan" shall mean the Southern Company
Performance Stock Plan or any replacement thereto, as such plans may be
amended from time to time.
(w) "Person" shall mean any individual, entity or group within
the meaning of Section 13(d)(3) or 14(d)(2) of Act.
(x) "Southern" shall mean The Southern Company, its successors
and assigns.
(y) "Southern Board" shall mean the board of directors of
Southern.
(z) "Southern Subsidiary" shall mean any corporation or other
entity Controlled by Southern.
(a) "Termination for Cause" or "Cause" shall mean the
termination of Mr. Boren's employment by the Company upon the
occurrence of any of the following:
(i) The willful and continued failure by Mr. Boren
substantially to perform his duties with the Company (other
than any such failure resulting from Mr. Boren's Total
Disability or from Mr. Boren's retirement or any such actual
or anticipated failure resulting from termination by Mr. Boren
for Good Reason) after a written demand for substantial
performance is delivered to him by the Southern Board, which
demand specifically identifies the manner in which the
Southern Board believes that he has not substantially
performed his duties; or
(ii) The willful engaging by Mr. Boren in conduct
that is demonstrably and materially injurious to the Company,
monetarily or otherwise, including, but not limited to any of
the following:
(A) any willful act involving fraud or
dishonesty in the course of Mr. Boren's employment by
the Company;
(B) the willful carrying out of any activity
or the making of any statement which would materially
prejudice or impair the good name and standing of the
Company, Southern or any Southern Subsidiary or would
bring the Company, Southern or any other Southern
Subsidiary into contempt, ridicule or would
reasonably shock or offend any community in which the
Company, Southern or such Southern Subsidiary is
located;
(C) attendance at work in a state of
intoxication or otherwise being found in possession
at his workplace of any prohibited drug or substance,
possession of which would amount to a criminal
offense;
(D) violation of the Company's policies on
drug and alcohol usage, fitness for duty requirements
or similar policies as may exist from time to time as
adopted by the Company's safety officer;
(E) assault or other act of violence against
any person during the course of employment; or (F)
indictment of any felony or any misdemeanor involving
moral turpitude.
No act or failure to act by Mr. Boren shall be deemed
"willful" unless done, or omitted to be done, by Mr. Boren not in good
faith and without reasonable belief that his action or omission was in
the best interest of the Company.
Notwithstanding the foregoing, Mr. Boren shall not be deemed
to have been terminated for Cause unless and until there shall have
been delivered to him a copy of a resolution duly adopted by the
affirmative vote of not less than three quarters of the entire
membership of the Southern Board at a meeting of the Southern Board
called and held for such purpose (after reasonable notice to Mr. Boren
and an opportunity for him, together with counsel, to be heard before
the Southern Board), finding that, in the good faith opinion of the
Southern Board, Mr. Boren was guilty of conduct set forth above in
clause (i) or (ii) of this Paragraph 1.(aa) and specifying the
particulars thereof in detail.
(bb) "Termination Date" shall mean the date on which Mr.
Boren's employment with the Company is terminated; provided, however,
that solely for purposes of Paragraph 2.(c) hereof, the Termination
Date shall be the effective date of his retirement pursuant to the
terms of the Pension Plan.
(cc) "Total Disability" shall mean Mr. Boren's total
disability within the meaning of the Pension Plan.
(dd) "Value Creation Plan" shall mean the Southern Energy
Resources, Inc. Value Creation Plan or any replacement thereto, as such
plans may be amended from time to time.
(ee) "Voting Securities" shall mean the outstanding voting
securities of a corporation entitling the holder thereof to vote
generally in the election of such corporation's directors.
(ff) "Waiver and Release" shall mean the Waiver and Release
attached hereto as Exhibit B.
(gg) "Year of Service" shall mean Mr. Boren's Months of
Service divided by twelve (12) rounded to the nearest whole year,
rounding up if the remaining number of months is seven (7) or greater
and rounding down if the remaining number of months is less than seven
(7). If Mr. Boren has a break in his service with the Company, he will
receive credit under this Agreement for service prior to the break in
service only if the break in service is less than five years.
2. Severance Benefits.
(a) Eligibility. Except as otherwise provided in this
Paragraph 2.(a), if Mr. Boren's employment is involuntarily terminated
by the Company at any time during the two year period following a
Change in Control for reasons other than Cause, or if Mr. Boren
voluntarily terminates his employment with the Company for Good Reason
at any time during the two year period following a Change in Control,
Mr. Boren shall be entitled to receive the benefits described in this
Agreement upon the Company's receipt of an effective Waiver and
Release. Notwithstanding anything to the contrary herein, Mr. Boren
shall not be eligible to receive benefits under this Agreement if Mr.
Boren:
(i) voluntarily terminates his employment with the
Company for other than Good Reason;
(ii) has his employment terminated by the Company for
Cause;
(iii) accepts the transfer of his employment to
Southern, any Southern Subsidiary or any employer that
succeeds to all or substantially all of the assets of the
Company, Southern or any Southern Subsidiary;
(iv) refuses an offer of continued employment with
the Company, any Southern Subsidiary, or any employer that
succeeds to all or substantially all of the assets of the
Company, Southern, or any Southern Subsidiary under
circumstances where such refusal would not amount to Good
Reason for voluntary termination of employment; or
(v) elects to receive the benefits of any other
voluntary or involuntary severance or separation program
maintained by the Company; provided however, that the receipt
of benefits under the terms of any retention plan or agreement
shall not be deemed to be the receipt of severance or
separation benefits for purposes of this Agreement. (b)
Severance Benefits. If Mr. Boren meets the eligibility
requirements of Paragraph 2.(a) hereof, he shall be entitled
to a cash severance benefit in an amount equal to three times
his Annual Compensation (the "Severance Amount"). If any
portion of the Severance Amount constitutes an "excess
parachute payment" (as such term is defined under Code Section
280G ("Excess Parachute Payment")), the Company shall pay to
Mr. Boren an additional amount calculated by determining the
amount of tax under Code Section 4999 that he otherwise would
have paid on any Excess Parachute Payment with respect to the
Change in Control and dividing such amount by a decimal
determined by adding the tax rate under Code Section 4999
("Excise Tax"), the hospital insurance tax under Code Section
3101(b) ("HI Tax") and federal and state income tax measured
at the highest marginal rates ("Income Tax") and subtracting
such result from the number one (1) (the "280G Gross-up");
provided, however, that no 280G Gross-up shall be paid unless
the Severance Amount plus all other "parachute payments" to
Mr. Boren under Code Section 280G exceeds three (3) times Mr.
Boren's "base amount" (as such term is defined under Code
Section 280G ("Base Amount")) by ten percent (10%) or more;
provided further, that if no 280G Gross-up is paid, the
Severance Amount shall be capped at three (3) times Mr.
Boren's Base Amount, less all other "parachute payments" (as
such term is defined under Code Section 280G) received by Mr.
Boren, less one dollar (the "Capped Amount"), if the Capped
Amount, reduced by HI Tax and Income Tax, exceeds what
otherwise would have been the Severance Amount, reduced by HI
Tax, Income Tax and Excise Tax.
For purposes of this Paragraph 2.(b), whether any amount would
constitute an Excess Parachute Payment and any other calculations of
tax, e.g., Excise Tax, HI Tax, Income Tax, etc., or other amounts,
e.g., Base Amount, Capped Amount, etc., shall be determined by the tax
department of the independent public accounting firm then responsible
for preparing Southern's consolidated federal income tax return, and
such calculations or determinations shall be binding upon the parties
hereto.
(c) Welfare Benefits. If Mr. Boren meets the eligibility
requirements of Paragraph 2.(a) hereof and is not otherwise eligible to
receive retiree medical and life insurance benefits provided to certain
retirees pursuant to the terms of the Pension Plan, the Group Health
Plan and the Group Life Insurance Plan, shall be entitled to the
benefits set forth in this Paragraph 2.(c).
(i) Mr. Boren shall be eligible to participate in the
Company's Group Health Plan, upon payment of both the
Company's and his monthly premium under such plan, for a
period of six (6) months for each of Mr. Boren's Years of
Service, not to exceed five (5) years. If Mr. Boren elects to
receive this extended medical coverage, he shall also be
entitled to elect coverage under the Group Health Plan for his
dependents who were participating in the Group Health Plan on
Mr. Boren's Termination Date (and for such other dependents as
may be entitled to coverage under the provisions of the Health
Insurance Portability and Accountability Act of 1996) for the
duration of Mr. Boren's extended medical coverage under this
Paragraph 2.(c)(i) to the extent such dependents remain
eligible for dependent coverage under the terms of the Group
Health Plan.
(A) The extended medical coverage afforded
to Mr. Boren pursuant to Paragraph 2.(c)(i), as well
as the premiums to be paid by Mr. Boren in connection
with such coverage shall be determined in accordance
with the terms of the Group Health Plan and shall be
subject to any changes in the terms and conditions of
the Group Health Plan as well as any future increases
in premiums under the Group Health Plan. The premiums
to be paid by Mr. Boren in connection with this
extended coverage shall be due on the first day of
each month; provided, however, that if he fails to
pay his premium within thirty (30) days of its due
date, such extended coverage shall be terminated.
(B) Any Group Health Plan coverage provided
under Paragraph 2.(c)(i) shall be a part of and not
in addition to any COBRA Coverage which Mr. Boren or
his dependent may elect. In the event that Mr. Boren
or his dependent becomes eligible to be covered, by
virtue of re-employment or otherwise, by any
employer-sponsored group health plan or is eligible
for coverage under any government-sponsored health
plan during the above period, coverage under the
Company's Group Health Plan available to Mr. Boren or
his dependent by virtue of the provisions of
Paragraph 2.(c)(i) shall terminate, except as may
otherwise be required by law, and shall not be
renewed. (ii) Mr. Boren shall be entitled to receive
cash in an amount equal to the Company's and Mr.
Boren's cost of premiums for three (3) years of
coverage under the Group Health Plan and Group Life
Insurance Plan in accordance with the terms of such
plans as of the date of the Change in Control.
(d) Incentive Plans. If Mr. Boren meets the
eligibility requirements of Paragraph 2.(a) hereof he shall be
entitled to the following benefits under the Company's
incentive plans:
(i) Stock Option Plan.
(A) Any of Mr. Boren's Options and Stock
Appreciation Rights under the Performance Stock Plan
(the defined terms of which are incorporated in this
Paragraph 2.(d)(i) by reference) which are
outstanding as of the Termination Date and which are
not then exercisable and vested, shall become fully
exercisable and vested to the full extent of the
original grant; provided, that in the case of a Stock
Appreciation Right, if Mr. Boren is subject to
Section 16(b) of the Exchange Act, such Stock
Appreciation Right shall not become fully vested and
exercisable at such time if such action would result
in liability to Mr. Boren under Section 16(b) of the
Exchange Act, provided further, that any such action
not taken as a result of the rules of Section 16(b)
of the Exchange Act shall be effective as of the
first date that such activity would no longer result
in liability under Section 16(b) of the Exchange Act.
(B) The restrictions and deferral
limitations applicable to any of Mr. Boren's
Restricted Stock as of the Termination Date shall
lapse, and such Restricted Stock shall become free of
all restrictions and limitations and become fully
vested and transferable to the full extent of the
original grant.
(C) The restrictions and deferral
limitations and other conditions applicable to any
other Awards held by Mr. Boren under the Stock
Performance Plan as of the Termination Date shall
lapse, and such other Awards shall become free of all
restrictions, limitations or conditions and become
fully vested and transferable to the full extent of
the original grant. (ii) Performance Dividend Plan.
Provided Mr. Boren is not entitled to benefits under
the Performance Dividend Plan (the defined terms of
which are incorporated in this Paragraph 2.(d)(ii) by
reference), if the Performance Dividend Plan is in
place through Mr. Boren's Termination Date and to the
extent Mr. Boren is entitled to participate therein,
Mr. Boren shall be entitled to receive cash for each
Award held by Mr. Boren on his Termination Date,
based on actual performance under Section 4.1 of the
Performance Dividend Plan determined as of the most
recently completed calendar quarter of the
Performance Period in which the Termination Date
shall have occurred, and the Annual Dividend declared
prior to the Termination Date.
(iii) Value Creation Plan. Any of Mr. Boren's
Appreciation Rights or Indexed Rights under the Value Creation
Plan (the defined terms of which are incorporated in this
Paragraph 2.(d)(iii) by reference) which are outstanding as of
the Termination Date and which are not then exercisable and
vested, shall become fully exercisable and fully vested to the
full extent of the original grant. Notwithstanding anything in
the Value Creation Plan to the contrary, Share Value with
respect to any Appreciation Rights or Indexed Rights held by
Mr. Boren following his Termination Date shall be no less than
the Share Value as of the date of the Change in Control of
Southern or the Company, as the case may be.
(iv) Other Short Term Incentive Plans. The provisions
of this Paragraph 2.(d)(iv) shall apply if and to the extent
that Mr. Boren is a participant in any other "short term
compensation plan" not otherwise previously referred to in
this Paragraph 2.(d). Provided Mr. Boren is not otherwise
entitled to a plan payout under any change of control
provisions of such plans, if the "short term compensation
plan" is in place as of the Termination Date and to the extent
Mr. Boren is entitled to participate therein, Mr. Boren shall
receive cash in an amount equal to his award under the
Company's "short term incentive plan" for the annual
performance period in which the Termination Date shall have
occurred, at Mr. Boren's target performance level and prorated
by the number of months which have passed since the beginning
of the annual performance period until his Termination Date.
For purposes of this Paragraph 2.(d)(iv) the term "short term
incentive compensation plan" shall mean any incentive
compensation plan or arrangement adopted in writing by the
Company which provides for annual, recurring compensatory
bonuses based upon articulated performance criteria. (e)
Payment of Benefits. Any amounts due under this Agreement
shall be paid in one (1) lump sum payment as soon as
administratively practicable following the later of: (i) Mr.
Boren's Termination Date, or (ii) upon Mr. Boren's tender of
an effective Waiver and Release to the Company in the form of
Exhibit B attached hereto and the expiration of any applicable
revocation period for such waiver. In the event of a dispute
with respect to liability or amount of any benefit due
hereunder, an effective Waiver and Release shall be tendered
at the time of final resolution of any such dispute when
payment is tendered by the Company.
(f) Benefits in the Event of Death. In the event of Mr.
Boren's death prior to the payment of all amounts due under this
Agreement, Mr. Boren's estate shall be entitled to receive as due any
amounts not yet paid under this Agreement upon the tender by the
executor or administrator of the estate of an effective Waiver and
Release.
(g) Legal Fees. In the event of a dispute between Mr. Boren
and the Company with regard to any amounts due hereunder, if any
material issue in such dispute is finally resolved in Mr. Boren's
favor, the Company shall reimburse Mr. Boren's legal fees incurred with
respect to all issues in such dispute in an amount not to exceed fifty
thousand dollars ($50,000).
(h) Employee Outplacement Services. Mr. Boren shall be
eligible to participate in the Employee Outplacement Program, which
program shall not be less than six (6) months duration measured from
Mr. Boren's Termination Date.
(i) Non-qualified Retirement and Deferred Compensation Plans.
The Parties agree that subsequent to a Change in Control, any claims by
Mr. Boren for benefits under any of the Company's non-qualified
retirement or deferred compensation plans shall be resolved through
binding arbitration in accordance with the provisions and procedures
set forth in Paragraph 5 hereof and if any material issue in such
dispute is finally resolved in Mr. Boren's favor, the Company shall
reimburse Mr. Boren's legal fees in the manner provided in Paragraph
2.(g) hereof.
3. Transfer of Employment. In the event that Mr. Boren's employment by
the Company is terminated during the two year period following a Change in
Control and Mr. Boren accepts employment by Southern, a Southern Subsidiary, or
any employer that succeeds to all or substantially all of the assets of the
Company, Southern or any Southern Subsidiary, the Company shall assign this
Agreement to Southern, such Southern Subsidiary, or successor employer, Southern
shall accept such assignment or cause such Southern Subsidiary or successor
employer to accept such assignment, and such assignee shall become the "Company"
for all purposes hereunder.
4. No Mitigation. If Mr. Boren is otherwise eligible to receive
benefits under Paragraph 2 of this Agreement, he shall have no duty or
obligation to seek other employment following his Termination Date and, except
as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr. Boren
hereunder shall not be reduced or suspended if Mr. Boren accepts such subsequent
employment.
5. Arbitration.
(a) Any dispute, controversy or claim arising out of or
relating to the Company's obligations to pay severance benefits under
this Agreement, or the breach thereof, shall be settled and resolved
solely by arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association ("AAA") except as
otherwise provided herein. The arbitration shall be the sole and
exclusive forum for resolution of any such claim for severance benefits
and the arbitrators' award shall be final and binding. The provisions
of this Paragraph 5 are not intended to apply to any other disputes,
claims or controversies arising out of or relating to Mr. Boren's
employment by the Company or the termination thereof.
(b) Arbitration shall be initiated by serving a written notice
of demand for arbitration to Mr. Boren, in the case of the Company, or
to the Southern Board, in the case of Mr. Boren.
(c) The arbitration shall be held in Atlanta, Georgia. The
arbitrators shall apply the law of the State of Georgia, to the extent
not preempted by federal law, excluding any law which would require the
application of the law of another state.
(d) The parties shall appoint arbitrators within fifteen (15)
business days following service of the demand for arbitration. The
number of arbitrators shall be three. One arbitrator shall be appointed
by Mr. Boren, one arbitrator shall be appointed by the Company, and the
two arbitrators shall appoint a third. If the arbitrators cannot agree
on a third arbitrator within thirty (30) business days after the
service of demand for arbitration, the third arbitrator shall be
selected by the AAA.
(e) The arbitration filing fee shall be paid by Mr. Boren. All
other costs of arbitration shall be borne equally by Mr. Boren and the
Company, provided, however, that the Company shall reimburse such fees
and costs in the event any material issue in such dispute is finally
resolved in Mr. Boren's favor and Mr. Boren is reimbursed legal fees
under Paragraph 2.(g) hereof.
(f) The parties agree that they will faithfully observe the
rules that govern any arbitration between them, they will abide by and
perform any award rendered by the arbitrators in any such arbitration,
including any award of injunctive relief, and a judgment of a court
having jurisdiction may be entered upon an award.
(g) The parties agree that nothing in this Paragraph 5 is
intended to preclude any court having jurisdiction from issuing and
enforcing in any lawful manner such temporary restraining orders,
preliminary injunctions, and other interim measures of relief as may be
necessary to prevent harm to a party's interests or as otherwise may be
appropriate pending the conclusion of arbitration proceedings pursuant
to this Agreement regardless of whether an arbitration proceeding under
this Paragraph 5 has begun. The parties further agree that nothing
herein shall prevent any court from entering and enforcing in any
lawful manner such judgments for permanent equitable relief as may be
necessary to prevent harm to a party's interests or as otherwise may be
appropriate following the issuance of arbitral awards pursuant to this
Agreement.
6. Miscellaneous.
(a) Funding of Benefits. Unless the Board in its discretion
shall determine otherwise, the benefits payable to Mr. Boren under this
Agreement shall not be funded in any manner and shall be paid by the
Company out of its general assets, which assets are subject to the
claims of the Company's creditors.
(b) Withholding. There shall be deducted from the payment of
any benefit due under this Agreement the amount of any tax required by
any governmental authority to be withheld and paid over by the Company
to such governmental authority for the account of Mr. Boren.
(c) Assignment. Mr. Boren shall have no rights to sell,
assign, transfer, encumber, or otherwise convey the right to receive
the payment of any benefit due hereunder, which payment and the rights
thereto are expressly declared to be nonassignable and nontransferable.
Any attempt to do so shall be null and void and of no effect.
(d) Amendment and Termination. The Agreement may be amended or
terminated only by a writing executed by the parties.
(e) Construction. This Agreement shall be construed in
accordance with and governed by the laws of the State of Georgia, to
the extent not preempted by federal law, disregarding any provision of
law which would require the application of the law of another state.
(f) Pooling Accounting. Notwithstanding anything to the
contrary herein, if, but for any provision of this Agreement, a Change
in Control transaction would otherwise be accounted for as a
pooling-of-interests under APB No.16 ("Pooling Accounting") (after
giving effect to any and all other facts and circumstances affecting
whether such Change in Control transaction would use Pooling
Accounting,), such provision or provisions of this Agreement which
would otherwise cause the Change in Control transaction to be
ineligible for Pooling Accounting shall be void and ineffective in such
a manner and to the extent that by eliminating such provision or
provisions of this Agreement, Pooling Accounting would be required for
such Change in Control transaction.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
this ____ day of __________________, 199__.
THE SOUTHERN COMPANY
By: ____________________________________
SOUTHERN ENERGY RESOURCES,
INC.
By: ____________________________________
MR. BOREN
-----------------------------
Thomas G. Boren
<PAGE>
Exhibit A
CHANGE IN CONTROL AGREEMENT
Target Annual Bonus for
Mr. Thomas G. Boren
65%
<PAGE>
Exhibit B
CHANGE IN CONTROL AGREEMENT
Waiver and Release
The attached Waiver and Release is to be given to Mr. Thomas G. Boren
upon the occurrence of an event that triggers eligibility for severance benefits
under the Change in Control Agreement, as described in Paragraph 2(a) of such
agreement.
<PAGE>
CHANGE IN CONTROL AGREEMENT
Waiver and Release
I, Thomas G. Boren, understand that I am entitled to receive the
severance benefits described in Section 2 of the Change in Control Agreement
(the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand
that the benefits I will receive under the Agreement are in excess of those I
would have received from The Southern Company and Southern Energy Resources,
Inc.
(collectively, the "Company") if I had not elected to sign this Waiver.
I recognize that I may have a claim against the Company under the Civil
Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the
Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended,
the Americans with Disabilities Act or other federal, state and local laws.
In exchange for the benefits I elect to receive, I hereby irrevocably
waive and release all claims, of any kind whatsoever, whether known or unknown
in connection with any claim which I ever had, may have, or now have against The
Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power
Company, Mississippi Power Company, Savannah Electric and Power Company,
Southern Communication Services, Inc., Southern Company Services, Inc., Southern
Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern
Nuclear Operating Company, Inc. and other direct or indirect subsidiaries of The
Southern Company and their past, present and future officers, directors,
employees, agents and attorneys. Nothing in this Waiver shall be construed to
release claims or causes of action under the Age Discrimination in Employment
Act or the Energy Reorganization Act of 1974, as amended, which arise out of
events occurring after the execution date of this Waiver.
In further exchange for the benefits I elect to receive, I understand
and agree that I will respect the proprietary and confidential nature of any
information I have obtained in the course of my service with the Company or any
subsidiary or affiliate of The Southern Company. However, nothing in this Waiver
shall prohibit me from engaging in protected activities under applicable law or
from communicating, either voluntary or otherwise, with any governmental agency
concerning any potential violation of the law.
In signing this Waiver, I am not releasing claims to benefits that I am
already entitled to under any workers' compensation laws or under any retirement
plan or welfare benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, as amended, which is sponsored by or adopted by the
Company and/or any of its direct or indirect subsidiaries; however, I understand
and acknowledge that nothing herein is intended to or shall be construed to
require the Company to institute or continue in effect any particular plan or
benefit sponsored by the Company and the Company hereby reserves the right to
amend or terminate any of its benefit programs at any time in accordance with
the procedures set forth in such plans.
In signing this Waiver, I realize that I am waiving and releasing,
among other things, any claims to benefits under any and all bonus, severance,
workforce reduction, early retirement, outplacement, or any other similar type
plan sponsored by the Company.
I have been encouraged and advised in writing to seek advice from
anyone of my choosing regarding this Waiver, including my attorney, and my
accountant or tax advisor. Prior to signing this Waiver, I have been given the
opportunity and sufficient time to seek such advice, and I fully understand the
meaning and contents of this Waiver.
I understand that I may take up to twenty-one (21) calendar days to
consider whether or not I desire to enter this Waiver. I was not coerced,
threatened or otherwise forced to sign this Waiver. I have made my choice to
sign this Waiver voluntarily and of my own free will.
I understand that I may revoke this Waiver at any time during the seven
(7) calendar day period after I sign and deliver this Waiver to the Company. If
I revoke this Waiver, I must do so in writing delivered to the Company. I
understand that this Waiver is not effective until the expiration of this seven
(7) calendar day revocation period. I understand that upon the expiration of
such seven (7) calendar day revocation period this entire Waiver will be binding
upon me and will be irrevocable.
I understand that by signing this Waiver I am giving up rights I may
have.
IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this
____ day of ____________________, in the year _____.
Thomas G. Boren
Sworn to and subscribed to me this ____ day of ____________, _____.
Notary Public
My Commission Expires:
(Notary Seal)
Acknowledged and Accepted by the Company, as defined in the Waiver.
By:
Date:
EXHIBIT 10(a)84
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT ("Agreement") made and entered into by
and between The Southern Company ("Southern"), Gulf Power Company (the
"Company") and Mr. Travis J. Bowden ("Mr. Bowden").
W I T N E S S E T H:
WHEREAS, Mr. Bowden is the President and Chief Executive Officer of the
Company;
WHEREAS, the Company wish to provide to Mr. Bowden certain severance
benefits under certain circumstances following a change in control (as defined
herein) of Southern or the Company;
NOW, THEREFORE, in consideration of the premises, and the agreements of
the parties set forth in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) "Annual Compensation" shall mean Mr. Bowden's highest
annual base salary rate for the twelve (12) month period immediately
preceding the date of the Change in Control plus market level target
annual bonus as set forth on Exhibit A hereof.
(b) "Beneficial Ownership" shall mean beneficial ownership
within the meaning of Rule 13d-3 promulgated under the Exchange Act.
(c) "Board" shall mean the board of directors of the Company.
(d) "Business Combination" shall mean a reorganization, merger
or consolidation of Southern or sale or other disposition of all or
substantially all of the assets of Southern.
(e) "Change in Control" shall mean any of the following:
(i) The Consummation of an acquisition by any Person
of Beneficial Ownership of 20% or more of Southern's Voting
Securities; provided, however, that for purposes of this
Paragraph 1.(e)(i), the following acquisitions of Southern's
Voting Securities shall not constitute a Change in Control:
(A) any acquisition directly from Southern;
(B) any acquisition by Southern;
(C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by
Southern or any Southern Subsidiary;
(D) any acquisition by a qualified pension
plan or publicly held mutual fund;
(E) any acquisition by a Group composed
exclusively of employees of Southern, or any Southern
Subsidiary;
(F) any acquisition by Mr. Bowden or any
Group of which Mr. Bowden is a party; or (G) any
Business Combination which would not otherwise
constitute a change in control because of the
application of clauses (A), (B) and (C) of Paragraph
1.(e)(iii);
(ii) A change in the composition of the Southern
Board whereby individuals who constitute the Incumbent Board
cease for any reason to constitute at least a majority of the
Southern Board;
(iii) Consummation of a Business Combination,
provided, however, that such a Business Combination shall not
constitute a Change in Control if all three (3) of the
following conditions are met:
(A) all or substantially all of the
individuals and entities who held Beneficial
Ownership, respectively, of Southern's Voting
Securities immediately prior to such Business
Combination beneficially own, directly or indirectly,
65% or more of the combined voting power of the
Voting Securities of the corporation surviving or
resulting from such Business Combination, (including,
without limitation, a corporation which as a result
of such transaction holds Beneficial Ownership of all
or substantially all of Southern's Voting Securities
or all or substantially all of Southern's assets)
(such surviving or resulting corporation to be
referred to as "Surviving Company"), in substantially
the same proportions as their ownership, immediately
prior to such Business Combination, of Southern's
Voting Securities;
(B) no Person (excluding any corporation
resulting from such Business Combination, any
employee benefit plan (or related trust) of Southern,
any Southern Subsidiary or Surviving Company, Mr.
Bowden, any Group of which Mr. Bowden is a party, any
Group composed exclusively of Company employees, any
qualified pension plan (or related trust) or any
publicly held mutual fund) holds Beneficial
Ownership, directly or indirectly, of 20% or more of
the combined voting power of the then outstanding
Voting Securities of Surviving Company except to the
extent that such ownership existed prior to the
Business Combination; and
(C) at least a majority of the members of
the board of directors of Surviving Company were
members of the Incumbent Board at the earlier of the
date of execution of the initial agreement, or of the
action of the Southern Board, providing for such
Business Combination. (iv) The Consummation of an
acquisition by any Person of Beneficial Ownership of
50% or more of the combined voting power of the then
outstanding Voting Securities of the Company;
provided, however, that for purposes of this
Paragraph 1.(e)(iv), any acquisition by Mr. Bowden,
any Group composed exclusively of employees of the
Company, any Group of which Mr. Bowden is a party,
any qualified pension plan (or related trust), any
publicly held mutual fund, any employee benefit plan
(or related trust) sponsored or maintained by
Southern or any Southern Subsidiary shall not
constitute a Change in Control;
(v) Consummation of a reorganization, merger or
consolidation of the Company (an "Employing Company Business
Combination"), in each case, unless, following such Employing
Company Business Combination, Southern Controls the
corporation or other entity surviving or resulting from such
Employing Company Business Combination; or
(vi) Consummation of the sale or other disposition of
all or substantially all of the assets of the Company to a
corporation or other entity which Southern does not Control.
(f) "COBRA Coverage" shall mean any continuation coverage to
which Mr. Bowden or his dependents may be entitled pursuant to
Code Section 4980B.
(g) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(h) "Company" shall mean Gulf Power Company, its successors
and assigns.
(i) "Consummation" shall mean the completion of the final act
necessary to complete a transaction as a matter of law, including, but
not limited to, any required approvals by the corporation's
shareholders and board of directors, the transfer of legal and
beneficial title to securities or assets and the final approval of the
transaction by any applicable domestic or foreign governments or
governmental agencies.
(j) "Control" shall mean, in the case of a corporation,
Beneficial Ownership of more than 50% of the combined voting power of
the corporation's Voting Securities, or in the case of any other
entity, Beneficial Ownership of more than 50% of such entity's voting
equity interests.
(k) "Effective Date" shall mean the date of execution of this
Agreement.
(l) "Employee Outplacement Program" shall mean the program
established by the Company from time to time for the purpose of
assisting participants covered by the plan in finding employment
outside of the Company which provides for the following services:
(i) self-assessment, career decision and goal
setting; (ii) job market research and job sources;
(iii) networking and interviewing skills; (iv)
planning and implementation strategy; (v) resume
writing, job hunting methods and salary negotiation;
and (vi) office support and job search resources.
(m) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(n) "Good Reason" shall mean, without Mr. Bowden's express
written consent, after written notice to the Board, and after a thirty
(30) day opportunity for the Board to cure, the continuing occurrence
of any of the following events:
(i) Inconsistent Duties. A meaningful and detrimental
alteration in Mr. Bowden's position or in the nature or status
of his responsibilities from those in effect immediately prior
to the Change in Control;
(ii) Reduced Salary. A reduction of five percent (5%)
or more by the Company in either of the following: (i) Mr.
Bowden's annual base salary rate as in effect immediately
prior to the Change in Control (except for a less than ten
percent (10%), across-the-board annual base salary rate
reduction similarly affecting at least ninety-five percent
(95%) of the Executive Employees of the Company); or (ii) the
sum of Mr. Bowden's annual base salary rate plus target bonus
under the PPP Plan (except for a less than ten percent (10%),
across-the-board reduction of annual base salary plus target
bonus under the PPP Plan similarly affecting at least
ninety-five percent (95%) of the Executive Employees of the
Company);
(iii) Pension and Compensation Plans. The failure by
the Company to continue in effect any pension or compensation
plan or agreement in which Mr. Bowden participates or is a
party as of the date of the Change in Control or the
elimination of Mr. Bowden's participation therein, (except for
across-the-board plan changes or terminations similarly
affecting at least ninety-five percent (95%) of the Executive
Employees of the Company); For purposes of this Paragraph
1.(n), a "pension plan or agreement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for payments upon retirement; and a
"compensation plan or arrangement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for periodic, non-discretionary compensatory
payments in the nature of bonuses.
(iv) Relocation. A change in Mr. Bowden's work
location to a location more than fifty (50) miles from the
office where Mr. Bowden is located at the time of the Change
in Control, unless such new work location is within fifty (50)
miles from Mr. Bowden's principal place of residence at the
time of the Change in Control. The acceptance, if any, by Mr.
Bowden of employment by the Company at a work location which
is outside the fifty mile radius set forth in this Paragraph
1.(n)(iv) shall not be a waiver of Mr. Bowden's right to
refuse subsequent transfer by the Company to a location which
is more than fifty (50) miles from Mr. Bowden's principal
place of residence at the time of the Change in Control, and
such subsequent unconsented transfer shall be "Good Reason"
under this Agreement; or
(v) Benefits and Perquisites. The taking of any
action by the Company which would directly or indirectly
materially reduce the benefits enjoyed by Mr. Bowden under the
Company's retirement, life insurance, medical, health and
accident, disability, deferred compensation or savings plans
in which Mr. Bowden was participating immediately prior to the
Change in Control; or the failure by the Company to provide
Mr. Bowden with the number of paid vacation days to which Mr.
Bowden is entitled on the basis of years of service with the
Company in accordance with the Company's normal vacation
policy in effect immediately prior to the Change in Control
(except for across-the-board plan or vacation policy changes
or plan terminations similarly affecting at least ninety-five
percent (95%) of the Executive Employees of the Company).
(vi) For purposes of this Paragraph 1.(n), the term
"Executive Employee" shall mean those employees of the Company
of Grade Level 10 or above. (o) "Group" shall have the meaning
set forth in Section 14(d) of the Exchange Act. (p) "Group
Health Plan" shall mean the group health plan covering Mr.
Bowden, as such plan may be amended from time to time.
(q) "Group Life Insurance Plan" shall mean the group life
insurance program covering Mr. Bowden, as such plan may be amended from
time to time.
(r) "Incumbent Board" shall mean those individuals who
constitute the Southern Board as of the Effective Date plus any
individual who shall become a director subsequent to such date whose
election or nomination for election by Southern's shareholders was
approved by a vote of at least 75% of the directors then comprising the
Incumbent Board. Notwithstanding the foregoing, no individual who shall
become a director of the Southern Board subsequent to the Effective
Date whose initial assumption of office occurs as a result of an actual
or threatened election contest (within the meaning of Rule 14a-11 of
the Regulations promulgated under the Exchange Act) with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Southern Board shall be a member of the Incumbent Board.
(s) "Month of Service" shall mean any calendar month during
which Mr. Bowden has worked at least one (1) hour or was on approved
leave of absence while in the employ of the Company or any affiliate or
subsidiary of Southern.
(t) "Pension Plan" shall mean The Southern Company Pension
Plan, as such plan may be amended from time to time.
(u) "Performance Dividend Plan" shall mean the Southern
Company Performance Dividend Plan or any replacement thereto, as such
plans may be amended from time to time.
(v) "Performance Stock Plan" shall mean the Southern Company
Performance Stock Plan or any replacement thereto, as such plans may be
amended from time to time.
(w) "Person" shall mean any individual, entity or group within
the meaning of Section 13(d)(3) or 14(d)(2) of Act.
(x) "Performance Pay Plan" or "PPP Plan" shall mean the
Southern Company Performance Pay Plan or any replacement thereto, as
such plans may be amended from time to time.
(y) "Productivity Improvement Plan" or "PIP Plan" shall mean
the Southern Company Productivity Improvement Plan or replacement
thereto, as such plans may be amended from time to time.
(z) "Southern" shall mean The Southern Company, its successors
and assigns.
(aa) "Southern Board" shall mean the board of directors of
Southern.
(bb) "Southern Subsidiary" shall mean any corporation or other
entity Controlled by Southern.
(cc) "Termination for Cause" or "Cause" shall mean the
termination of Mr. Bowden's employment by the Company upon the
occurrence of any of the following:
(i) The willful and continued failure by Mr. Bowden
substantially to perform his duties with the Company (other
than any such failure resulting from Mr. Bowden's Total
Disability or from Mr. Bowden's retirement or any such actual
or anticipated failure resulting from termination by Mr.
Bowden for Good Reason) after a written demand for substantial
performance is delivered to him by the Southern Board, which
demand specifically identifies the manner in which the
Southern Board believes that he has not substantially
performed his duties; or
(ii) The willful engaging by Mr. Bowden in conduct
that is demonstrably and materially injurious to the Company,
monetarily or otherwise, including, but not limited to any of
the following:
(A) any willful act involving fraud or
dishonesty in the course of Mr. Bowden's employment
by the Company;
(B) the willful carrying out of any activity
or the making of any statement which would materially
prejudice or impair the good name and standing of the
Company, Southern or any Southern Subsidiary or would
bring the Company, Southern or any Southern
Subsidiary into contempt, ridicule or would
reasonably shock or offend any community in which the
Company, Southern or such Southern Subsidiary is
located;
(C) attendance at work in a state of
intoxication or otherwise being found in possession
at his workplace of any prohibited drug or substance,
possession of which would amount to a criminal
offense;
(D) violation of the Company's policies on
drug and alcohol usage, fitness for duty requirements
or similar policies as may exist from time to time as
adopted by the Company's safety officer;
(E) assault or other act of violence against
any person during the course of employment; or
(F) indictment of any felony or any
misdemeanor involving moral turpitude.
No act or failure to act by Mr. Bowden shall be deemed
"willful" unless done, or omitted to be done, by Mr. Bowden not in good
faith and without reasonable belief that his action or omission was in
the best interest of the Company.
Notwithstanding the foregoing, Mr. Bowden shall not be deemed
to have been terminated for Cause unless and until there shall have
been delivered to him a copy of a resolution duly adopted by the
affirmative vote of not less than three quarters of the entire
membership of the Southern Board at a meeting of the Southern Board
called and held for such purpose (after reasonable notice to Mr. Bowden
and an opportunity for him, together with counsel, to be heard before
the Southern Board), finding that, in the good faith opinion of the
Southern Board, Mr. Bowden was guilty of conduct set forth above in
clause (i) or (ii) of this Paragraph 1.(cc) and specifying the
particulars thereof in detail.
(dd) "Termination Date" shall mean the date on which Mr.
Bowden's employment with the Company is terminated; provided, however,
that solely for purposes of Paragraph 2.(c) hereof, the Termination
Date shall be the effective date of his retirement pursuant to the
terms of the Pension Plan.
(ee) "Total Disability" shall mean Mr. Bowden's total
disability within the meaning of the Pension Plan.
(ff) "Voting Securities" shall mean the outstanding voting
securities of a corporation entitling the holder thereof to vote
generally in the election of such corporation's directors.
(gg) "Waiver and Release" shall mean the Waiver and Release
attached hereto as Exhibit B.
(hh) "Year of Service" shall mean Mr. Bowden's Months of
Service divided by twelve (12) rounded to the nearest whole year,
rounding up if the remaining number of months is seven (7) or greater
and rounding down if the remaining number of months is less than seven
(7). If Mr. Bowden has a break in his service with the Company, he will
receive credit under this Agreement for service prior to the break in
service only if the break in service is less than five years.
2. Severance Benefits.
(a) Eligibility. Except as otherwise provided in this
Paragraph 2.(a), if Mr. Bowden's employment is involuntarily terminated
by the Company at any time during the two year period following a
Change in Control for reasons other than Cause, or if Mr. Bowden
voluntarily terminates his employment with the Company for Good Reason
at any time during the two year period following a Change in Control,
Mr. Bowden shall be entitled to receive the benefits described in this
Agreement upon the Company's receipt of an effective Waiver and
Release. Notwithstanding anything to the contrary herein, Mr. Bowden
shall not be eligible to receive benefits under this Agreement if Mr.
Bowden:
(i) voluntarily terminates his employment with the Company for
other than Good Reason; (ii) has his employment terminated by
the Company for Cause; (iii) accepts the transfer of his
employment to Southern, any Southern Subsidiary or any
employer that succeeds to all or substantially all of the
assets of the Company, Southern or any Southern Subsidiary;
(iv) refuses an offer of continued employment with the
Company, any Southern Subsidiary, or any employer that
succeeds to all or substantially all of the assets of the
Company, Southern, or any Southern Subsidiary under
circumstances where such refusal would not amount to Good
Reason for voluntary termination of employment; or (v) elects
to receive the benefits of any other voluntary or involuntary
severance or separation program maintained by the Company;
provided however, that the receipt of benefits under the terms
of any retention plan or agreement shall not be deemed to be
the receipt of severance or separation benefits for purposes
of this Agreement.
(b) Severance Benefits. If Mr. Bowden meets the eligibility
requirements of Paragraph 2.(a) hereof, he shall be entitled to a cash
severance benefit in an amount equal to three times his Annual
Compensation (the "Severance Amount"). If any portion of the Severance
Amount constitutes an "excess parachute payment" (as such term is
defined under Code Section 280G ("Excess Parachute Payment")), the
Company shall pay to Mr. Bowden an additional amount calculated by
determining the amount of tax under Code Section 4999 that he otherwise
would have paid on any Excess Parachute Payment with respect to the
Change in Control and dividing such amount by a decimal determined by
adding the tax rate under Code Section 4999 ("Excise Tax"), the
hospital insurance tax under Code Section 3101(b) ("HI Tax") and
federal and state income tax measured at the highest marginal rates
("Income Tax") and subtracting such result from the number one (1) (the
"280G Gross-up"); provided, however, that no 280G Gross-up shall be
paid unless the Severance Amount plus all other "parachute payments" to
Mr. Bowden under Code Section 280G exceeds three (3) times Mr. Bowden's
"base amount" (as such term is defined under Code Section 280G ("Base
Amount")) by ten percent (10%) or more; provided further, that if no
280G Gross-up is paid, the Severance Amount shall be capped at three
(3) times Mr. Bowden's Base Amount, less all other "parachute payments"
(as such term is defined under Code Section 280G) received by Mr.
Bowden, less one dollar (the "Capped Amount"), if the Capped Amount,
reduced by HI Tax and Income Tax, exceeds what otherwise would have
been the Severance Amount, reduced by HI Tax, Income Tax and Excise
Tax.
For purposes of this Paragraph 2.(b), whether any amount would
constitute an Excess Parachute Payment and any other calculations of
tax, e.g., Excise Tax, HI Tax, Income Tax, etc., or other amounts,
e.g., Base Amount, Capped Amount, etc., shall be determined by the tax
department of the independent public accounting firm then responsible
for preparing Southern's consolidated federal income tax return, and
such calculations or determinations shall be binding upon the parties
hereto.
(c) Welfare Benefits. If Mr. Bowden meets the eligibility
requirements of Paragraph 2.(a) hereof and is not otherwise eligible to
receive retiree medical and life insurance benefits provided to certain
retirees pursuant to the terms of the Pension Plan, the Group Health
Plan and the Group Life Insurance Plan, he shall be entitled to the
benefits set forth in this Paragraph 2.(c).
(i) Mr. Bowden shall be eligible to participate in
the Company's Group Health Plan, upon payment of both the
Company's and his monthly premium under such plan, for a
period of six (6) months for each of Mr. Bowden's Years of
Service, not to exceed five (5) years. If Mr. Bowden elects to
receive this extended medical coverage, he shall also be
entitled to elect coverage under the Group Health Plan for his
dependents who were participating in the Group Health Plan on
Mr. Bowden's Termination Date (and for such other dependents
as may be entitled to coverage under the provisions of the
Health Insurance Portability and Accountability Act of 1996)
for the duration of Mr. Bowden's extended medical coverage
under this Paragraph 2.(c)(i) to the extent such dependents
remain eligible for dependent coverage under the terms of the
Group Health Plan.
(A) The extended medical coverage afforded
to Mr. Bowden pursuant to Paragraph 2.(c)(i), as well
as the premiums to be paid by Mr. Bowden in
connection with such coverage shall be determined in
accordance with the terms of the Group Health Plan
and shall be subject to any changes in the terms and
conditions of the Group Health Plan as well as any
future increases in premiums under the Group Health
Plan. The premiums to be paid by Mr. Bowden in
connection with this extended coverage shall be due
on the first day of each month; provided, however,
that if he fails to pay his premium within thirty
(30) days of its due date, such extended coverage
shall be terminated.
(B) Any Group Health Plan coverage provided under
Paragraph 2.(c)(i) shall be a part of and not in addition to
any COBRA Coverage which Mr. Bowden or his dependents may
elect. In the event that Mr. Bowden or his dependents become
eligible to be covered, by virtue of re-employment or
otherwise, by any employer-sponsored group health plan or is
eligible for coverage under any government-sponsored health
plan during the above period, coverage under the Company's
Group Health Plan available to Mr. Bowden or his dependents by
virtue of the provisions of Paragraph 2.(c)(i) shall
terminate, except as may otherwise be required by law, and
shall not be renewed. (ii) Mr. Bowden shall be entitled to
receive cash in an amount equal to the Company's and Mr.
Bowden's cost of premiums for three (3) years of coverage
under the Group Health Plan and Group Life Insurance Plan in
accordance with the terms of such plans as of the date of the
Change in Control.
(d) Incentive Plans. If Mr. Bowden meets the eligibility
requirements of Paragraph 2.(a) hereof he shall be entitled to the
following benefits under the Company's incentive plans:
(i) Stock Option Plan.
(A) Any of Mr. Bowden's Options and Stock
Appreciation Rights under the Performance Stock Plan
(the defined terms of which are incorporated in this
Paragraph 2.(d)(i) by reference) which are
outstanding as of the Termination Date and which are
not then exercisable and vested, shall become fully
exercisable and vested to the full extent of the
original grant; provided, that in the case of a Stock
Appreciation Right, if Mr. Bowden is subject to
Section 16(b) of the Exchange Act, such Stock
Appreciation Right shall not become fully vested and
exercisable at such time if such actions would result
in liability to Mr. Bowden under Section 16(b) of the
Exchange Act, provided further, that any such actions
not taken as a result of the rules under Section
16(b) of the Exchange Act shall be effected as of the
first date that such activity would no longer result
in liability under Section 16(b) of the Exchange Act.
(B) The restrictions and deferral
limitations applicable to any of Mr. Bowden's
Restricted Stock as of the Termination Date shall
lapse, and such Restricted Stock shall become free of
all restrictions and limitations and become fully
vested and transferable to the full extent of the
original grant.
(C) The restrictions and deferral
limitations and other conditions applicable to any
other Awards held by Mr. Bowden under the Stock
Performance Plan as of the Termination Date shall
lapse, and such other Awards shall become free of all
restrictions, limitations or conditions and become
fully vested and transferable to the full extent of
the original grant. (ii) Performance Pay Plan.
Provided Mr. Bowden is not entitled to benefits under
Article V of the PPP Plan, (the defined terms of
which are incorporated in this Paragraph 2.(d)(ii) by
reference), if the PPP Plan is in place through Mr.
Bowden's Termination Date and to the extent Mr.
Bowden is entitled to participate therein, Mr. Bowden
shall be entitled to receive cash in an amount equal
to a prorated payout of his Incentive Pay Awards
under the PPP Plan for the Performance Period in
which the Termination Date shall have occurred, at
target performance under the PPP Plan and prorated by
the number of months which have passed since the
beginning of the Performance Period until the
Termination Date.
(iii) PIP Plan. Provided Mr. Bowden is not entitled
to benefits under Article IV of the PIP Plan (the defined
terms of which are incorporated in this Paragraph 2.(d)(iii)
by reference), if the PIP Plan is in place through Mr.
Bowden's Termination Date and to the extent Mr. Bowden is
entitled to participate therein, Mr. Bowden shall be entitled
to receive cash in an amount equal to his Award Opportunity
for the Computation Periods in which the Termination Date
shall have occurred at a target Value of Performance Unit of
$1.00, prorated for each Computation Period by the number of
months which have passed since the beginning of the
Computation Periods until the Termination Date.
(iv) Performance Dividend Plan. Provided Mr. Bowden
is not entitled to benefits under the Performance Dividend
Plan (the defined terms of which are incorporated in this
Paragraph 2.(d)(iv) by reference), if the Performance Dividend
Plan is in place through Mr. Bowden's Termination Date and to
the extent Mr. Bowden is entitled to participate therein, Mr.
Bowden shall be entitled to receive cash for each Award held
by Mr. Bowden on his Termination Date, based on actual
performance under Section 4.1 of the Performance Dividend Plan
determined as of the most recently completed calendar quarter
of the Performance Period in which the Termination Date shall
have occurred, and the Annual Dividend declared prior to the
Termination Date.
(v) Other Short Term Incentive Plans. The provisions
of this Paragraph 2.(d)(v) shall apply if and to the extent
that Mr. Bowden is a participant in any other "short term
compensation plan" not otherwise previously referred to in
this Paragraph 2.(d). Provided Mr. Bowden is not otherwise
entitled to a plan payout under any change of control
provisions of such plans, if the "short term compensation
plan" is in place as of the Termination Date and to the extent
Mr. Bowden is entitled to participate therein, Mr. Bowden
shall receive cash in an amount equal to his award under the
Company's "short term incentive plan" for the annual
performance period in which the Termination Date shall have
occurred, at Mr. Bowden's target performance level and
prorated by the number of months which have passed since the
beginning of the annual performance period until his
Termination Date. For purposes of this Paragraph 2.(d)(v), the
term "short term incentive compensation plan" shall mean any
incentive compensation plan or arrangement adopted in writing
by the Company which provides for annual, recurring
compensatory bonuses based upon articulated performance
criteria. (e) Payment of Benefits. Any amounts due under this
Agreement shall be paid in one (1) lump sum payment as soon as
administratively practicable following the later of: (i) Mr.
Bowden's Termination Date, or (ii) upon Mr. Bowden's tender of
an effective Waiver and Release to the Company in the form of
Exhibit B attached hereto and the expiration of any applicable
revocation period for such waiver. In the event of a dispute
with respect to liability or amount of any benefit due
hereunder, an effective Waiver and Release shall be tendered
at the time of final resolution of any such dispute when
payment is tendered by the Company.
(f) Benefits in the Event of Death. In the event of Mr.
Bowden's death prior to the payment of all amounts due under this
Agreement, Mr. Bowden's estate shall be entitled to receive as due any
amounts not yet paid under this Agreement upon the tender by the
executor or administrator of the estate of an effective Waiver and
Release.
(g) Legal Fees. In the event of a dispute between Mr. Bowden
and the Company with regard to any amounts due hereunder, if any
material issue in such dispute is finally resolved in Mr. Bowden's
favor, the Company shall reimburse Mr. Bowden's legal fees incurred
with respect to all issues in such dispute in an amount not to exceed
fifty thousand dollars ($50,000).
(h) Employee Outplacement Services. Mr. Bowden shall be
eligible to participate in the Employee Outplacement Program, which
program shall not be less than six (6) months duration measured from
Mr. Bowden's Termination Date.
(i) Non-qualified Retirement and Deferred Compensation Plans.
The Parties agree that subsequent to a Change in Control, any claims by
Mr. Bowden for benefits under any of the Company's non-qualified
retirement or deferred compensation plans shall be resolved through
binding arbitration in accordance with the provisions and procedures
set forth in Paragraph 5 hereof and if any material issue in such
dispute is finally resolved in Mr. Bowden's favor, the Company shall
reimburse Mr. Bowden's legal fees in the manner provided in Paragraph
2.(g) hereof. 3. Transfer of Employment. In the event that Mr. Bowden's
employment by the Company is terminated during the two year period
following a Change in Control and Mr. Bowden accepts employment by
Southern, Southern Subsidiary, or any employer that succeeds to all or
substantially all of the assets of the Company, Southern or any
Southern Subsidiary, the Company shall assign this Agreement to
Southern, such Southern Subsidiary, or successor employer, Southern
shall accept such assignment or cause such Southern Subsidiary or
successor employer to accept such assignment, and such assignee shall
become the "Company" for all purposes hereunder.
4. No Mitigation. If Mr. Bowden is otherwise eligible to receive
benefits under Paragraph 2 of this Agreement, he shall have no duty or
obligation to seek other employment following his Termination Date and, except
as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr. Bowden
hereunder shall not be reduced or suspended if Mr. Bowden accepts such
subsequent employment.
5. Arbitration.
(a) Any dispute, controversy or claim arising out of or
relating to the Company's obligations to pay severance benefits under
this Agreement, or the breach thereof, shall be settled and resolved
solely by arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association ("AAA") except as
otherwise provided herein. The arbitration shall be the sole and
exclusive forum for resolution of any such claim for severance benefits
and the arbitrators' award shall be final and binding. The provisions
of this Paragraph 5 are not intended to apply to any other disputes,
claims or controversies arising out of or relating to Mr. Bowden's
employment by the Company or the termination thereof.
(b) Arbitration shall be initiated by serving a written notice
of demand for arbitration to Mr. Bowden, in the case of the Company, or
to the Southern Board, in the case of Mr. Bowden.
(c) The arbitration shall be held in Atlanta, Georgia. The
arbitrators shall apply the law of the State of Georgia, to the extent
not preempted by federal law, excluding any law which would require the
application of the law of another state.
(d) The parties shall appoint arbitrators within fifteen (15)
business days following service of the demand for arbitration. The
number of arbitrators shall be three. One arbitrator shall be appointed
by Mr. Bowden, one arbitrator shall be appointed by the Company, and
the two arbitrators shall appoint a third. If the arbitrators cannot
agree on a third arbitrator within thirty (30) business days after the
service of demand for arbitration, the third arbitrator shall be
selected by the AAA.
(e) The arbitration filing fee shall be paid by Mr. Bowden.
All other costs of arbitration shall be borne equally by Mr. Bowden and
the Company, provided, however, that the Company shall reimburse such
fees and costs in the event any material issue in such dispute is
finally resolved in Mr. Bowden's favor and Mr. Bowden is reimbursed
legal fees under Paragraph 2.(g) hereof.
(f) The parties agree that they will faithfully observe the
rules that govern any arbitration between them, they will abide by and
perform any award rendered by the arbitrators in any such arbitration,
including any award of injunctive relief, and a judgment of a court
having jurisdiction may be entered upon an award.
(g) The parties agree that nothing in this Paragraph 5 is
intended to preclude upon application of either party any court having
jurisdiction from issuing and enforcing in any lawful manner such
temporary restraining orders, preliminary injunctions, and other
interim measures of relief as may be necessary to prevent harm to a
party's interests or as otherwise may be appropriate pending the
conclusion of arbitration proceedings pursuant to this Agreement;
regardless of whether an arbitration proceeding under this Paragraph 5
has begun. The parties further agree that nothing herein shall prevent
any court from entering and enforcing in any lawful manner such
judgments for permanent equitable relief as may be necessary to prevent
harm to a party's interests or as otherwise may be appropriate
following the issuance of arbitral awards pursuant to this Paragraph 5.
6. Miscellaneous.
(a) Funding of Benefits. Unless the Board in its discretion
shall determine otherwise, the benefits payable to Mr. Bowden under
this Agreement shall not be funded in any manner and shall be paid by
the Company out of its general assets, which assets are subject to the
claims of the Company's creditors.
(b) Withholding. There shall be deducted from the payment of
any benefit due under this Agreement the amount of any tax required by
any governmental authority to be withheld and paid over by the Company
to such governmental authority for the account of Mr. Bowden.
(c) Assignment. Mr. Bowden shall have no rights to sell,
assign, transfer, encumber, or otherwise convey the right to receive
the payment of any benefit due hereunder, which payment and the rights
thereto are expressly declared to be nonassignable and nontransferable.
Any attempt to do so shall be null and void and of no effect.
(d) Amendment and Termination. The Agreement may be amended or
terminated only by a writing executed by the parties.
(e) Construction. This Agreement shall be construed in
accordance with and governed by the laws of the State of Georgia, to
the extent not preempted by federal law, disregarding any provision of
law which would require the application of the law of another state.
(f) Pooling Accounting. Notwithstanding anything to the
contrary herein, if, but for any provision of this Agreement, a Change
in Control transaction would otherwise be accounted for as a
pooling-of-interests under APB No.16 ("Pooling Accounting") (after
giving effect to any and all other facts and circumstances affecting
whether such Change in Control transaction would use Pooling
Accounting), such provision or provisions of this Agreement which would
otherwise cause the Change in Control transaction to be ineligible for
Pooling Accounting shall be void and ineffective in such a manner and
to the extent that by eliminating such provision or provisions of this
Agreement, Pooling Accounting would be required for such Change in
Control transaction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
this ____ day of __________________, 199__.
THE SOUTHERN COMPANY
By: ____________________________________
GULF POWER COMPANY
By: ____________________________________
MR. BOWDEN
-----------------------------
Travis J. Bowden
<PAGE>
Exhibit A
CHANGE IN CONTROL AGREEMENT
Target Annual Bonus for
Mr. Travis J. Bowden
50%
<PAGE>
Exhibit B
CHANGE IN CONTROL AGREEMENT
Waiver and Release
The attached Waiver and Release is to be given to Mr. Travis J. Bowden
upon the occurrence of an event that triggers eligibility for severance benefits
under the Change in Control Agreement, as described in Paragraph 2(a) of such
agreement.
<PAGE>
CHANGE IN CONTROL AGREEMENT
Waiver and Release
I, Travis J. Bowden, understand that I am entitled to receive the
severance benefits described in Section 2 of the Change in Control Agreement
(the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand
that the benefits I will receive under the Agreement are in excess of those I
would have received from The Southern Company and Gulf Power Company
(collectively, the "Company") if I had not elected to sign this Waiver.
I recognize that I may have a claim against the Company under the Civil
Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the
Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended,
the Americans with Disabilities Act or other federal, state and local laws.
In exchange for the benefits I elect to receive, I hereby irrevocably
waive and release all claims, of any kind whatsoever, whether known or unknown
in connection with any claim which I ever had, may have, or now have against The
Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power
Company, Mississippi Power Company, Savannah Electric and Power Company,
Southern Communication Services, Inc., Southern Company Services, Inc., Southern
Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern
Nuclear Operating Company, Inc. and other direct or indirect subsidiaries of The
Southern Company and their past, present and future officers, directors,
employees, agents and attorneys. Nothing in this Waiver shall be construed to
release claims or causes of action under the Age Discrimination in Employment
Act or the Energy Reorganization Act of 1974, as amended, which arise out of
events occurring after the execution date of this Waiver.
In further exchange for the benefits I elect to receive, I understand
and agree that I will respect the proprietary and confidential nature of any
information I have obtained in the course of my service with the Company or any
subsidiary or affiliate of The Southern Company. However, nothing in this Waiver
shall prohibit me from engaging in protected activities under applicable law or
from communicating, either voluntary or otherwise, with any governmental agency
concerning any potential violation of the law.
In signing this Waiver, I am not releasing claims to benefits that I am
already entitled to under any workers' compensation laws or under any retirement
plan or welfare benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, as amended, which is sponsored by or adopted by the
Company and/or any of its direct or indirect subsidiaries; however, I understand
and acknowledge that nothing herein is intended to or shall be construed to
require the Company to institute or continue in effect any particular plan or
benefit sponsored by the Company and the Company hereby reserves the right to
amend or terminate any of its benefit programs at any time in accordance with
the procedures set forth in such plans.
In signing this Waiver, I realize that I am waiving and releasing,
among other things, any claims to benefits under any and all bonus, severance,
workforce reduction, early retirement, outplacement, or any other similar type
plan sponsored by the Company.
I have been encouraged and advised in writing to seek advice from
anyone of my choosing regarding this Waiver, including my attorney, and my
accountant or tax advisor. Prior to signing this Waiver, I have been given the
opportunity and sufficient time to seek such advice, and I fully understand the
meaning and contents of this Waiver.
I understand that I may take up to twenty-one (21) calendar days to
consider whether or not I desire to enter this Waiver. I was not coerced,
threatened or otherwise forced to sign this Waiver. I have made my choice to
sign this Waiver voluntarily and of my own free will.
I understand that I may revoke this Waiver at any time during the seven
(7) calendar day period after I sign and deliver this Waiver to the Company. If
I revoke this Waiver, I must do so in writing delivered to the Company. I
understand that this Waiver is not effective until the expiration of this seven
(7) calendar day revocation period. I understand that upon the expiration of
such seven (7) calendar day revocation period this entire Waiver will be binding
upon me and will be irrevocable.
I understand that by signing this Waiver I am giving up rights I may
have.
IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this
____ day of ____________________, in the year _____.
Travis J. Bowden
Sworn to and subscribed to me this ____ day of ____________, _____.
Notary Public
My Commission Expires:
(Notary Seal)
Acknowledged and Accepted by the Company, as defined in the Waiver.
By:
Date:
EXHIBIT 10(a)85
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT ("Agreement") made and entered into by
and between The Southern Company ("Southern"), Southern Company Services, Inc.
(the "Company") and Mr. A. W. Dahlberg ("Mr. Dahlberg").
W I T N E S S E T H:
WHEREAS, Mr. Dahlberg is the Chairman of the Board and Chief Executive
Officer of Southern;
WHEREAS, Mr. Dahlberg is the Chairman of the Executive Committee of the
Company;
WHEREAS, Southern and the Company wish to provide to Mr. Dahlberg
certain severance benefits under certain circumstances following a change in
control (as defined herein) of Southern or the Company;
NOW, THEREFORE, in consideration of the premises, and the agreements of
the parties set forth in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) "Annual Compensation" shall mean Mr. Dahlberg's highest
annual base salary rate for the twelve (12) month period immediately
preceding the date of the Change in Control plus market level target
annual bonus as set forth on Exhibit A hereof.
(b) "Beneficial Ownership" shall mean beneficial ownership
within the meaning of Rule 13d-3 promulgated under the Exchange Act.
(c) "Business Combination" shall mean a reorganization, merger
or consolidation of Southern or sale or other disposition of all or
substantially all of the assets of Southern.
(d) "Change in Control" shall mean any of the following:
(i) The Consummation of an acquisition by any Person
of Beneficial Ownership of 20% or more of Southern's Voting
Securities; provided, however, that for purposes of this
Paragraph 1.(d)(i), the following acquisitions of Southern's
Voting Securities shall not constitute a Change in Control:
(A) any acquisition directly from Southern;
(B) any acquisition by Southern;
(C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by
Southern or any Southern Subsidiary;
(D) any acquisition by a qualified pension
plan or publicly held mutual fund;
(E) any acquisition by a Group composed
exclusively of employees of Southern, or any Southern
Subsidiary;
(F) any acquisition by Mr. Dahlberg or any
Group of which Mr. Dahlberg is a party; or
(G) any Business Combination which would not
otherwise constitute a change in control because of
the application of clauses (A), (B) and (C) of
Paragraph 1.(d)(iii);
(ii) A change in the composition of the Southern
Board whereby individuals who constitute the Incumbent Board
cease for any reason to constitute at least a majority of the
Southern Board;
(iii) Consummation of a Business Combination,
provided, however, that such a Business Combination shall not
constitute a Change in Control if all three (3) of the
following conditions are met:
(A) all or substantially all of the
individuals and entities who held Beneficial
Ownership, respectively, of Southern's Voting
Securities immediately prior to such Business
Combination beneficially own, directly or indirectly,
65% or more of the combined voting power of the
Voting Securities of the corporation surviving or
resulting from such Business Combination, (including,
without limitation, a corporation which as a result
of such transaction holds Beneficial Ownership of all
or substantially all of Southern's Voting Securities
or all or substantially all of Southern's assets)
(such surviving or resulting corporation to be
referred to as "Surviving Company"), in substantially
the same proportions as their ownership, immediately
prior to such Business Combination, of Southern's
Voting Securities;
(B) no Person (excluding any corporation
resulting from such Business Combination, any
employee benefit plan (or related trust) of Southern,
any Southern Subsidiary or Surviving Company, Mr.
Dahlberg, any Group of which Mr. Dahlberg is a party,
any Group composed exclusively of Company employees,
any qualified pension plan (or related trust) or any
publicly held mutual fund) holds Beneficial
Ownership, directly or indirectly, of 20% or more of
the combined voting power of the then outstanding
Voting Securities of Surviving Company except to the
extent that such ownership existed prior to the
Business Combination; and
(C) at least a majority of the members of
the board of directors of Surviving Company were
members of the Incumbent Board at the earlier of the
date of execution of the initial agreement, or of the
action of the Southern Board, providing for such
Business Combination. (iv) The Consummation of an
acquisition by any Person of Beneficial Ownership of
50% or more of the combined voting power of the then
outstanding Voting Securities of the Company;
provided, however, that for purposes of this
Paragraph 1.(e)(iv), any acquisition by Mr. Dahlberg,
any Group composed exclusively of employees of the
Company, any Group of which Mr. Dahlberg is a party,
any qualified pension plan (or related trust), any
publicly held mutual fund, any employee benefit plan
(or related trust) sponsored or maintained by
Southern or any Southern Subsidiary shall not
constitute a Change in Control;
(v) Consummation of a reorganization, merger or
consolidation of the Company (an "Employing Company Business
Combination"), in each case, unless, following such Employing
Company Business Combination, Southern Controls the
corporation or other entity surviving or resulting from such
Employing Company Business Combination; or
(vi) Consummation of the sale or other disposition of
all or substantially all of the assets of the Company to a
corporation or other entity which Southern does not Control.
(e) "COBRA Coverage" shall mean any continuation coverage to
which Mr. Dahlberg or his dependents may be entitled pursuant
to Code Section 4980B.
(f) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(g) "Company" shall mean Southern Company Services, Inc., its
successors and assigns.
(h) "Consummation" shall mean the completion of the final act
necessary to complete a transaction as a matter of law, including, but
not limited to, any required approvals by the corporation's
shareholders and board of directors, the transfer of legal and
beneficial title to securities or assets and the final approval of the
transaction by any applicable domestic or foreign governments or
governmental agencies.
(i) "Control" shall mean, in the case of a corporation,
Beneficial Ownership of more than 50% of the combined voting power of
the corporation's Voting Securities, or in the case of any other
entity, Beneficial Ownership of more than 50% of such entity's voting
equity interests.
(j) "Effective Date" shall mean the date of execution of this
Agreement.
(k) "Employee Outplacement Program" shall mean the program
established by the Company from time to time for the purpose of
assisting participants covered by the plan in finding employment
outside of the Company which provides for the following services:
(i) self assessment, career decision and goal
setting; (ii) job market research and job sources;
(iii) networking and interviewing skills; (iv)
planning and implementation strategy; (v) resume
writing, job hunting methods and salary negotiation;
and (vi) office support and job search resources.
(l) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(m) "Good Reason" shall mean, without Mr. Dahlberg's express
written consent, after written notice to the Board, and after a thirty
(30) day opportunity for the Board to cure, the continuing occurrence
of any of the following events:
(i) Inconsistent Duties. A meaningful and detrimental
alteration in Mr. Dahlberg's position or in the nature or
status of his responsibilities from those in effect
immediately prior to the Change in Control;
(ii) Reduced Salary. A reduction of five percent (5%)
or more by the Company in either of the following: (i) Mr.
Dahlberg's annual base salary rate as in effect immediately
prior to the Change in Control (except for a less than ten
percent (10%), across-the-board annual base salary rate
reduction similarly affecting at least ninety-five percent
(95%) of the Executive Employees of the Company); or (ii) the
sum of Mr. Dahlberg's annual base salary rate plus target
bonus under the PPP Plan (except for a less than ten percent
(10%), across-the-board reduction of annual base salary rate
plus target bonus under the PPP Plan similarly affecting at
least ninety-five percent (95%) of the Executive Employees of
the Company);
(iii) Pension and Compensation Plans. The failure by
the Company to continue in effect any pension or compensation
plan or agreement in which Mr. Dahlberg participates or is a
party as of the date of the Change in Control or the
elimination of Mr. Dahlberg's participation therein, (except
for across-the-board plan changes or terminations similarly
affecting at least ninety-five percent (95%) of the Executive
Employees of the Company); For purposes of this Paragraph
1.(n), a "pension plan or agreement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for payments upon retirement; and a
"compensation plan or arrangement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for periodic, non-discretionary compensatory
payments in the nature of bonuses.
(iv) Relocation. A change in Mr. Dahlberg's work
location to a location more than fifty (50) miles from the
office where Mr. Dahlberg is located at the time of the Change
in Control, unless such new work location is within fifty (50)
miles from Mr. Dahlberg's principal place of residence at the
time of the Change in Control. The acceptance, if any, by Mr.
Dahlberg of employment by the Company at a work location which
is outside the fifty mile radius set forth in this Paragraph
1.(m)(iv) shall not be a waiver of Mr. Dahlberg's right to
refuse subsequent transfer by the Company to a location which
is more than fifty (50) miles from Mr. Dahlberg's principal
place of residence at the time of the Change in Control, and
such subsequent unconsented transfer shall be "Good Reason"
under this Agreement; or
(v) Benefits and Perquisites. The taking of any
action by the Company which would directly or indirectly
materially reduce the benefits enjoyed by Mr. Dahlberg under
the Company's retirement, life insurance, medical, health and
accident, disability, deferred compensation or savings plans
in which Mr. Dahlberg was participating immediately prior to
the Change in Control; or the failure by the Company to
provide Mr. Dahlberg with the number of paid vacation days to
which Mr. Dahlberg is entitled on the basis of years of
service with the Company in accordance with the Company's
normal vacation policy in effect immediately prior to the
Change in Control (except for across-the-board plan or
vacation policy changes or plan terminations similarly
affecting at least ninety-five percent (95%) of the Executive
Employees of the Company).
(vi) For purposes of this Paragraph 1.(n), the term
"Executive Employee" shall mean those employees of the Company
of Grade Level 10 or above. (n) "Group" shall have the meaning
set forth in Section 14(d) of the Exchange Act. (o) "Group
Health Plan" shall mean the group health plan covering Mr.
Dahlberg as such plan may be amended from time to time.
(p) "Group Life Insurance Plan" shall mean the group life
insurance program covering Mr. Dahlberg as such plan may be amended
from time to time.
(q) "Incumbent Board" shall mean those individuals who
constitute the Southern Board as of the Effective Date plus any
individual who shall become a director subsequent to such date whose
election or nomination for election by Southern's shareholders was
approved by a vote of at least 75% of the directors then comprising the
Incumbent Board. Notwithstanding the foregoing, no individual who shall
become a director of the Southern Board subsequent to the Effective
Date whose initial assumption of office occurs as a result of an actual
or threatened election contest (within the meaning of Rule 14a-11 of
the Regulations promulgated under the Exchange Act) with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Southern Board shall be a member of the Incumbent Board.
(r) "Month of Service" shall mean any calendar month during
which Mr. Dahlberg has worked at least one (1) hour or was on approved
leave of absence while in the employ of the Company or any affiliate or
subsidiary of Southern.
(s) "Pension Plan" shall mean The Southern Company Pension
Plan, as such plan may be amended from time to time.
(t) "Performance Dividend Plan" shall mean the Southern
Company Performance Dividend Plan or any replacement
thereto, as such plans may be amended from time to time.
(u) "Performance Stock Plan" shall mean the Southern Company
Performance Stock Plan or any replacement thereto, as such plans may be
amended from time to time.
(v) "Person" shall mean any individual, entity or group within
the meaning of Section 13(d)(3) or 14(d)(2) of Act.
(w) "Performance Pay Plan" or "PPP Plan" shall mean the
Southern Company Performance Pay Plan or any replacement thereto, as
such plans may be amended from time to time.
(x) "Productivity Improvement Plan" or "PIP Plan" shall mean
the Southern Company Productivity Improvement Plan or replacement
thereto, as such plans may be amended from time to time.
(y) "Southern" shall mean The Southern Company, its successors
and assigns.
(z) "Southern Board" shall mean the board of directors of
Southern.
(aa) "Southern Subsidiary" shall mean any corporation or other
entity Controlled by Southern.
(bb) "Termination for Cause" or "Cause" shall mean the
termination of Mr. Dahlberg's employment by the Company upon the
occurrence of any of the following:
(i) The willful and continued failure by Mr. Dahlberg
substantially to perform his duties with the Company (other
than any such failure resulting from Mr. Dahlberg's Total
Disability or from Mr. Dahlberg's retirement or any such
actual or anticipated failure resulting from termination by
Mr. Dahlberg for Good Reason) after a written demand for
substantial performance is delivered to him by the Southern
Board, which demand specifically identifies the manner in
which the Southern Board believes that he has not
substantially performed his duties; or
(ii) The willful engaging by Mr. Dahlberg in conduct
that is demonstrably and materially injurious to the Company,
monetarily or otherwise, including, but not limited to any of
the following:
(A) any willful act involving fraud or
dishonesty in the course of Mr. Dahlberg's employment
by the Company;
(B) the willful carrying out of any activity
or the making of any statement which would materially
prejudice or impair the good name and standing of the
Company, Southern or any Southern Subsidiary or would
bring the Company, Southern or any Southern
Subsidiary into contempt, ridicule or would
reasonably shock or offend any community in which the
Company, Southern or such Southern Subsidiary is
located;
(C) attendance at work in a state of
intoxication or otherwise being found in possession
at his workplace of any prohibited drug or substance,
possession of which would amount to a criminal
offense;
(D) violation of the Company's policies on
drug and alcohol usage, fitness for duty requirements
or similar policies as may exist from time to time as
adopted by the Company's safety officer;
(E) assault or other act of violence against
any person during the course of employment; or
(F) indictment of any felony or any
misdemeanor involving moral turpitude.
No act or failure to act by Mr. Dahlberg shall be deemed
"willful" unless done, or omitted to be done, by Mr. Dahlberg not in
good faith and without reasonable belief that his action or omission
was in the best interest of the Company.
Notwithstanding the foregoing, Mr. Dahlberg shall not be
deemed to have been terminated for Cause unless and until there shall
have been delivered to him a copy of a resolution duly adopted by the
affirmative vote of not less than three quarters of the entire
membership of the Southern Board at a meeting of the Southern Board
called and held for such purpose (after reasonable notice to Mr.
Dahlberg and an opportunity for him, together with counsel, to be heard
before the Southern Board), finding that, in the good faith opinion of
the Southern Board, Mr. Dahlberg was guilty of conduct set forth above
in clause (i) or (ii) of this Paragraph 1.(bb) and specifying the
particulars thereof in detail.
(cc) "Termination Date" shall mean the date on which Mr.
Dahlberg's employment with the Company is terminated; provided,
however, that solely for purposes of Paragraph 2.(b) hereof, the
Termination Date shall be the effective date of his retirement pursuant
to the terms of the Pension Plan.
(dd) "Total Disability" shall mean Mr. Dahlberg's total
disability within the meaning of the Pension Plan.
(ee) "Voting Securities" shall mean the outstanding voting
securities of a corporation entitling the holder thereof to vote
generally in the election of such corporation's directors.
(ff) "Waiver and Release" shall mean the Waiver and Release
attached hereto as Exhibit B.
(gg) "Year of Service" shall mean Mr. Dahlberg's Months of
Service divided by twelve (12) rounded to the nearest whole year,
rounding up if the remaining number of months is seven (7) or greater
and rounding down if the remaining number of months is less than seven
(7). If Mr. Dahlberg has a break in his service with the Company, he
will receive credit under this Agreement for service prior to the break
in service only if the break in service is less than five years.
2. Severance Benefits.
(a) Eligibility. Except as otherwise provided in this
Paragraph 2.(a), if Mr. Dahlberg's employment is involuntarily
terminated by the Company at any time during the two year period
following a Change in Control for reasons other than Cause, or if Mr.
Dahlberg voluntarily terminates his employment with the Company for
Good Reason at any time during the two year period following a Change
in Control, Mr. Dahlberg shall be entitled to receive the benefits
described in this Agreement upon the Company's receipt of an effective
Waiver and Release. Notwithstanding anything to the contrary herein,
Mr. Dahlberg shall not be eligible to receive benefits under this
Agreement if Mr. Dahlberg:
(i) voluntarily terminates his employment with the
Company for other than Good Reason;
(ii) has his employment terminated by the Company for
Cause;
(iii) accepts the transfer of his employment to any
Southern Subsidiary or any employer that succeeds to all or
substantially all of the assets of Southern or any Southern
Subsidiary;
(iv) refuses an offer of continued employment with
the Company, any Southern Subsidiary, or any employer that
succeeds to all or substantially all of the assets of the
Company, or any Southern Subsidiary under circumstances where
such refusal would not amount to Good Reason for voluntary
termination of employment; or
(v) elects to receive the benefits of any other
voluntary or involuntary severance or separation program
maintained by the Company; provided however, that the receipt
of benefits under the terms of any retention plan or agreement
shall not be deemed to be the receipt of severance or
separation benefits for purposes of this Agreement. (b)
Severance Benefits. If Mr. Dahlberg meets the eligibility
requirements of Paragraph 2.(a) hereof, he shall be entitled
to a cash severance benefit in an amount equal to three times
his Annual Compensation (the "Severance Amount"). If any
portion of the Severance Amount constitutes an "excess
parachute payment" (as such term is defined under Code Section
280G ("Excess Parachute Payment")), the Company shall pay to
Mr. Dahlberg an additional amount calculated by determining
the amount of tax under Code Section 4999 that he otherwise
would have paid on any Excess Parachute Payment with respect
to the Change in Control and dividing such amount by a decimal
determined by adding the tax rate under Code Section 4999
("Excise Tax"), the hospital insurance tax under Code Section
3101(b) ("HI Tax") and federal and state income tax measured
at the highest marginal rates ("Income Tax") and subtracting
such result from the number one (1) (the "280G Gross-up");
provided, however, that no 280G Gross-up shall be paid unless
the Severance Amount plus all other "parachute payments" to
Mr. Dahlberg under Code Section 280G exceeds three (3) times
Mr. Dahlberg's "base amount" (as such term is defined under
Code Section 280G ("Base Amount")) by ten percent (10%) or
more; provided further, that if no 280G Gross-up is paid, the
Severance Amount shall be capped at three (3) times Mr.
Dahlberg's Base Amount, less all other "parachute payments"
(as such term is defined under Code Section 280G) received by
Mr. Dahlberg, less one dollar (the "Capped Amount"), if the
Capped Amount, reduced by HI Tax and Income Tax, exceeds what
otherwise would have been the Severance Amount, reduced by HI
Tax, Income Tax and Excise Tax.
For purposes of this Paragraph 2.(b), whether any amount would
constitute an Excess Parachute Payment and any other calculations of
tax, e.g., Excise Tax, HI Tax, Income Tax, etc., or other amounts,
e.g., Base Amount, Capped Amount, etc., shall be determined by the tax
department of the independent public accounting firm then responsible
for preparing Southern's consolidated federal income tax return, and
such calculations or determinations shall be binding upon the parties
hereto.
(c) Welfare Benefits. If Mr. Dahlberg meets the eligibility
requirements of Paragraph 2.(a) hereof and is not otherwise eligible to
receive retiree medical and life insurance benefits provided to certain
retirees pursuant to the terms of the Pension Plan, the Group Health
Plan and the Group Life Insurance Plan, he shall be entitled to the
benefits set forth in this Paragraph 2.(c).
(i) Mr. Dahlberg shall be eligible to participate in
the Company's Group Health Plan, upon payment of both the
Company's and his monthly premium under such plan, for a
period of six (6) months for each of Mr. Dahlberg's Years of
Service, not to exceed five (5) years. If Mr. Dahlberg elects
to receive this extended medical coverage, he shall also be
entitled to elect coverage under the Group Health Plan for his
dependents who were participating in the Group Health Plan on
Mr. Dahlberg's Termination Date (and for such other dependents
as may be entitled to coverage under the provisions of the
Health Insurance Portability and Accountability Act of 1996)
for the duration of Mr. Dahlberg's extended medical coverage
under this Paragraph 2.(c)(i) to the extent such dependents
remain eligible for dependent coverage under the terms of the
Group Health Plan.
(A) The extended medical coverage afforded
to Mr. Dahlberg pursuant to Paragraph 2.(c)(i), as
well as the premiums to be paid by Mr. Dahlberg in
connection with such coverage shall be determined in
accordance with the terms of the Group Health Plan
and shall be subject to any changes in the terms and
conditions of the Group Health Plan as well as any
future increases in premiums under the Group Health
Plan. The premiums to be paid by Mr. Dahlberg in
connection with this extended coverage shall be due
on the first day of each month; provided, however,
that if he fails to pay his premium within thirty
(30) days of its due date, such extended coverage
shall be terminated.
(B) Any Group Health Plan coverage provided
under Paragraph 2.(c)(i) shall be a part of and not
in addition to any COBRA Coverage which Mr. Dahlberg
or his dependents may elect. In the event that Mr.
Dahlberg or his dependents become eligible to be
covered, by virtue of re-employment or otherwise, by
any employer-sponsored group health plan or is
eligible for coverage under any government-sponsored
health plan during the above period, coverage under
the Company's Group Health Plan available to Mr.
Dahlberg or his dependents by virtue of the
provisions of Paragraph 2.(c)(i) shall terminate,
except as may otherwise be required by law, and shall
not be renewed. (ii) Mr. Dahlberg shall be entitled
to receive cash in an amount equal to the Company's
and Mr. Dahlberg's cost of premiums for three (3)
years of coverage under the Group Health Plan and
Group Life Insurance Plan in accordance with the
terms of such plans as of the date of the Change in
Control.
(d) Incentive Plans. If Mr. Dahlberg meets the
eligibility requirements of Paragraph 2.(a) hereof he shall be
entitled to the following benefits under the Company's
incentive plans:
(i) Stock Option Plan.
(A) Any of Mr. Dahlberg's Options and Stock
Appreciation Rights under the Performance Stock Plan
(the defined terms of which are incorporated in this
Paragraph 2.(d)(i) by reference) which are
outstanding as of the Termination Date and which are
not then exercisable and vested, shall become fully
exercisable and vested to the full extent of the
original grant; provided, that in the case of a Stock
Appreciation Right, if Mr. Dahlberg is subject to
Section 16(b) of the Exchange Act, such Stock
Appreciation Right shall not become fully vested and
exercisable at such time if such actions would result
in liability to Mr. Dahlberg under Section 16(b) of
the Exchange Act, provided further, that any such
actions not taken as a result of the rules under
Section 16(b) of the Exchange Act shall be effected
as of the first date that such activity would no
longer result in liability under Section 16(b) of the
Exchange Act.
(B) The restrictions and deferral
limitations applicable to any of Mr. Dahlberg's
Restricted Stock as of the Termination Date shall
lapse, and such Restricted Stock shall become free of
all restrictions and limitations and become fully
vested and transferable to the full extent of the
original grant.
(C) The restrictions and deferral
limitations and other conditions applicable to any
other Awards held by Mr. Dahlberg under the Stock
Performance Plan as of the Termination Date shall
lapse, and such other Awards shall become free of all
restrictions, limitations or conditions and become
fully vested and transferable to the full extent of
the original grant.
(ii) Performance Pay Plan. Provided Mr. Dahlberg is
not entitled to benefits under Article V of the PPP Plan (the
defined terms of which are incorporated in this Paragraph
2.(d)(ii) by reference), if the PPP Plan is in place through
Mr. Dahlberg's Termination Date and to the extent Mr. Dahlberg
is entitled to participate therein, Mr. Dahlberg shall be
entitled to receive cash in an amount equal to a prorated
payout of his Incentive Pay Awards under the PPP Plan for the
Performance Period in which the Termination Date shall have
occurred, at target performance under the PPP Plan and
prorated by the number of months which have passed since the
beginning of the Performance Period until the Termination
Date.
(iii) PIP Plan. Provided Mr. Dahlberg is not entitled
to benefits under Article IV of the PIP Plan (the defined
terms of which are incorporated in this Paragraph 2.(d)(iii)
by reference), if the PIP Plan is in place through Mr.
Dahlberg's Termination Date and to the extent Mr. Dahlberg is
entitled to participate therein, Mr. Dahlberg shall be
entitled to receive cash in an amount equal to his Award
Opportunity for the Computation Periods in which the
Termination Date shall have occurred at a target Value of
Performance Unit of $1.00, prorated for each Performance
Period by the number of months which have passed since the
beginning of each of the Computation Periods until the
Termination Date.
(iv) Performance Dividend Plan. Provided Mr. Dahlberg
is not entitled to benefits under the Performance Dividend
Plan (the defined terms of which are incorporated in this
Paragraph 2.(d)(iv) by reference), if the Performance Dividend
Plan is in place through Mr. Dahlberg's Termination Date and
to the extent Mr. Dahlberg is entitled to participate therein,
Mr. Dahlberg shall be entitled to receive cash for each Award
held by Mr. Dahlberg on his Termination Date, based on actual
performance under Section 4.1 of the Performance Dividend Plan
determined as of the most recently completed calendar quarter
of the Performance Period in which the Termination Date shall
have occurred, and the Annual Dividend declared prior to the
Termination Date.
(v) Other Short Term Incentive Plans. The provisions
of this Paragraph 2.(d)(v) shall apply if and to the extent
that Mr. Dahlberg is a participant in any other "short term
compensation plan" not otherwise previously referred to in
this Paragraph 2.(d). Provided Mr. Dahlberg is not otherwise
entitled to a plan payout under any change of control
provisions of such plans, if the "short term compensation
plan" is in place as of the Termination Date and to the extent
Mr. Dahlberg is entitled to participate therein, Mr. Dahlberg
shall receive cash in an amount equal to his award under the
Company's "short term incentive plan" for the annual
performance period in which the Termination Date shall have
occurred, at Mr. Dahlberg's target performance level and
prorated by the number of months which have passed since the
beginning of the annual performance period until his
Termination Date. For purposes of this Paragraph 2.(d)(v) the
term "short term incentive compensation plan" shall mean any
incentive compensation plan or arrangement adopted in writing
by the Company which provides for annual, recurring
compensatory bonuses based upon articulated performance
criteria. (e) Payment of Benefits. Any amounts due under this
Agreement shall be paid in one (1) lump sum payment as soon as
administratively practicable following the later of: (i) Mr.
Dahlberg's Termination Date, or (ii) upon Mr. Dahlberg's
tender of an effective Waiver and Release to the Company in
the form of Exhibit B attached hereto and the expiration of
any applicable revocation period for such waiver. In the event
of a dispute with respect to liability or amount of any
benefit due hereunder, an effective Waiver and Release shall
be tendered at the time of final resolution of any such
dispute when payment is tendered by the Company.
(f) Benefits in the Event of Death. In the event of Mr.
Dahlberg's death prior to the payment of all amounts due under this
Agreement, Mr. Dahlberg's estate shall be entitled to receive as due
any amounts not yet paid under this Agreement upon the tender by the
executor or administrator of the estate of an effective Waiver and
Release.
(g) Legal Fees. In the event of a dispute between Mr. Dahlberg
and the Company with regard to any amounts due hereunder, if any
material issue in such dispute is finally resolved in Mr. Dahlberg's
favor, the Company shall reimburse Mr. Dahlberg's legal fees incurred
with respect to all issues in such dispute in an amount not to exceed
fifty thousand dollars ($50,000).
(h) Employee Outplacement Services. Mr. Dahlberg shall be
eligible to participate in the Employee Outplacement Program, which
program shall not be less than six (6) months duration measured from
Mr. Dahlberg's Termination Date.
(i) Non-qualified Retirement and Deferred Compensation Plans.
The Parties agree that subsequent to a Change in Control, any claims by
Mr. Dahlberg for benefits under any of the Company's non-qualified
retirement or deferred compensation plans shall be resolved through
binding arbitration in accordance with the provisions and procedures
set forth in Paragraph 5 hereof and if any material issue in such
dispute is finally resolved in Mr. Dalhberg's favor, the Company shall
reimburse Mr. Dahlberg's legal fees in the manner provided in Paragraph
2.(g) hereof. 3. Transfer of Employment. In the event that Mr.
Dahlberg's employment by the Company is terminated during the two year
period following a Change in Control and Mr. Dahlberg accepts
employment by Southern, a Southern Subsidiary, or any employer that
succeeds to all or substantially all of the assets of the Company,
Southern or any Southern Subsidiary, the Company shall assign this
Agreement to Southern, such Southern Subsidiary, or successor employer,
Southern shall accept such assignment or cause such Southern Subsidiary
or successor employer to accept such assignment, and such assignee
shall become the "Company" for all purposes hereunder.
4. No Mitigation. If Mr. Dahlberg is otherwise eligible to receive
benefits under Paragraph 2 of this Agreement, he shall have no duty or
obligation to seek other employment following his Termination Date and, except
as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr.
Dahlberg hereunder shall not be reduced or suspended if Mr. Dahlberg accepts
such subsequent employment.
5. Arbitration.
(a) Any dispute, controversy or claim arising out of or
relating to the Company's obligations to pay severance benefits under
this Agreement, or the breach thereof, shall be settled and resolved
solely by arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association ("AAA") except as
otherwise provided herein. The arbitration shall be the sole and
exclusive forum for resolution of any such claim for severance benefits
and the arbitrators' award shall be final and binding. The provisions
of this Paragraph 5 are not intended to apply to any other disputes,
claims or controversies arising out of or relating to Mr. Dahlberg's
employment by the Company or the termination thereof.
(b) Arbitration shall be initiated by serving a written notice
of demand for arbitration to Mr. Dahlberg, in the case of the Company,
or to the Southern Board, in the case of Mr. Dahlberg.
(c) The arbitration shall be held in Atlanta, Georgia. The
arbitrators shall apply the law of the State of Georgia, to the extent
not preempted by federal law, excluding any law which would require the
application of the law of another state.
(d) The parties shall appoint arbitrators within fifteen (15)
business days following service of the demand for arbitration. The
number of arbitrators shall be three. One arbitrator shall be appointed
by Mr. Dahlberg, one arbitrator shall be appointed by the Company, and
the two arbitrators shall appoint a third. If the arbitrators cannot
agree on a third arbitrator within thirty (30) business days after the
service of demand for arbitration, the third arbitrator shall be
selected by the AAA.
(e) The arbitration filing fee shall be paid by Mr. Dahlberg.
All other costs of arbitration shall be borne equally by Mr. Dahlberg
and the Company, provided, however, that the Company shall reimburse
such fees and costs in the event any material issue in such dispute is
finally resolved in Mr. Dahlberg's favor and Mr. Dahlberg is reimbursed
legal fees under Paragraph 2.(g) hereof.
(f) The parties agree that they will faithfully observe the
rules that govern any arbitration between them, they will abide by and
perform any award rendered by the arbitrators in any such arbitration,
including any award of injunctive relief, and a judgment of a court
having jurisdiction may be entered upon an award.
(g) The parties agree that nothing in this Paragraph 5 is
intended to preclude upon application of either party any court having
jurisdiction from issuing and enforcing in any lawful manner such
temporary restraining orders, preliminary injunctions, and other
interim measures of relief as may be necessary to prevent harm to a
party's interests or as otherwise may be appropriate pending the
conclusion of arbitration proceedings pursuant to this Agreement;
regardless of whether an arbitration proceeding under this Paragraph 5
has begun. The parties further agree that nothing herein shall prevent
any court from entering and enforcing in any lawful manner such
judgments for permanent equitable relief as may be necessary to prevent
harm to a party's interests or as otherwise may be appropriate
following the issuance of arbitral awards pursuant to this Paragraph 5.
6. Miscellaneous.
(a) Funding of Benefits. Unless the Board in its discretion
shall determine otherwise, the benefits payable to Mr. Dahlberg under
this Agreement shall not be funded in any manner and shall be paid by
the Company out of its general assets, which assets are subject to the
claims of the Company's creditors.
(b) Withholding. There shall be deducted from the payment of
any benefit due under this Agreement the amount of any tax required by
any governmental authority to be withheld and paid over by the Company
to such governmental authority for the account of Mr. Dahlberg.
(c) Assignment. Mr. Dahlberg shall have no rights to sell,
assign, transfer, encumber, or otherwise convey the right to receive
the payment of any benefit due hereunder, which payment and the rights
thereto are expressly declared to be nonassignable and nontransferable.
Any attempt to do so shall be null and void and of no effect.
(d) Amendment and Termination. The Agreement may be amended or
terminated only by a writing executed by the parties.
(e) Construction. This Agreement shall be construed in
accordance with and governed by the laws of the State of Georgia, to
the extent not preempted by federal law, disregarding any provision of
law which would require the application of the law of another state.
(f) Pooling Accounting. Notwithstanding anything to the
contrary herein, if, but for any provision of this Agreement, a Change
in Control transaction would otherwise be accounted for as a
pooling-of-interests under APB No.16 ("Pooling Accounting") (after
giving effect to any and all other facts and circumstances affecting
whether such Change in Control transaction would use Pooling
Accounting), such provision or provisions of this Agreement which would
otherwise cause the Change in Control transaction to be ineligible for
Pooling Accounting shall be void and ineffective in such a manner and
to the extent that by eliminating such provision or provisions of this
Agreement, Pooling Accounting would be required for such Change in
Control transaction.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
this ____ day of __________________, 199__.
THE SOUTHERN COMPANY
By: ____________________________________
SOUTHERN COMPANY SERVICES, INC.
By: ____________________________________
MR. DAHLBERG
-----------------------------
A.W. Dahlberg
<PAGE>
Exhibit A
CHANGE IN CONTROL AGREEMENT
Target Annual Bonus for
Mr. A. W. Dahlberg
65%
<PAGE>
Exhibit B
CHANGE IN CONTROL AGREEMENT
Waiver and Release
The attached Waiver and Release is to be given to Mr. A.W. Dahlberg
upon the occurrence of an event that triggers eligibility for severance benefits
under the Change in Control Agreement, as described in Paragraph 2(a) of such
agreement.
<PAGE>
CHANGE IN CONTROL AGREEMENT
Waiver and Release
I, A.W. Dahlberg, understand that I am entitled to receive the
severance benefits described in Section 2 of the Change in Control Agreement
(the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand
that the benefits I will receive under the Agreement are in excess of those I
would have received from The Southern Company and Southern Company Services,
Inc.(collectively, the "Company") if I had not elected to sign this Waiver.
I recognize that I may have a claim against the Company under the Civil
Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the
Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended,
the Americans with Disabilities Act or other federal, state and local laws.
In exchange for the benefits I elect to receive, I hereby irrevocably
waive and release all claims, of any kind whatsoever, whether known or unknown
in connection with any claim which I ever had, may have, or now have against The
Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power
Company, Mississippi Power Company, Savannah Electric and Power Company,
Southern Communication Services, Inc., Southern Company Services, Inc., Southern
Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern
Nuclear Operating Company, Inc. and other direct or indirect subsidiaries of The
Southern Company and their past, present and future officers, directors,
employees, agents and attorneys. Nothing in this Waiver shall be construed to
release claims or causes of action under the Age Discrimination in Employment
Act or the Energy Reorganization Act of 1974, as amended, which arise out of
events occurring after the execution date of this Waiver.
In further exchange for the benefits I elect to receive, I understand
and agree that I will respect the proprietary and confidential nature of any
information I have obtained in the course of my service with the Company or any
subsidiary or affiliate of The Southern Company. However, nothing in this Waiver
shall prohibit me from engaging in protected activities under applicable law or
from communicating, either voluntary or otherwise, with any governmental agency
concerning any potential violation of the law.
In signing this Waiver, I am not releasing claims to benefits that I am
already entitled to under any workers' compensation laws or under any retirement
plan or welfare benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, as amended, which is sponsored by or adopted by the
Company and/or any of its direct or indirect subsidiaries; however, I understand
and acknowledge that nothing herein is intended to or shall be construed to
require the Company to institute or continue in effect any particular plan or
benefit sponsored by the Company and the Company hereby reserves the right to
amend or terminate any of its benefit programs at any time in accordance with
the procedures set forth in such plans.
In signing this Waiver, I realize that I am waiving and releasing,
among other things, any claims to benefits under any and all bonus, severance,
workforce reduction, early retirement, outplacement, or any other similar type
plan sponsored by the Company.
I have been encouraged and advised in writing to seek advice from
anyone of my choosing regarding this Waiver, including my attorney, and my
accountant or tax advisor. Prior to signing this Waiver, I have been given the
opportunity and sufficient time to seek such advice, and I fully understand the
meaning and contents of this Waiver.
I understand that I may take up to twenty-one (21) calendar days to
consider whether or not I desire to enter this Waiver. I was not coerced,
threatened or otherwise forced to sign this Waiver. I have made my choice to
sign this Waiver voluntarily and of my own free will.
I understand that I may revoke this Waiver at any time during the seven
(7) calendar day period after I sign and deliver this Waiver to the Company. If
I revoke this Waiver, I must do so in writing delivered to the Company. I
understand that this Waiver is not effective until the expiration of this seven
(7) calendar day revocation period. I understand that upon the expiration of
such seven (7) calendar day revocation period this entire Waiver will be binding
upon me and will be irrevocable.
I understand that by signing this Waiver I am giving up rights I may
have.
IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this
____ day of ____________________, in the year _____.
A.W. Dahlberg
Sworn to and subscribed to me this ____ day of ____________, _____.
Notary Public
My Commission Expires:
(Notary Seal)
Acknowledged and Accepted by the Company, as defined in the Waiver.
By:
Date:
EXHIBIT 10(a)86
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT ("Agreement") made and entered into by
and between The Southern Company ("Southern"), Southern Company Services, Inc.
(the "Company") and Mr. Paul J. DeNicola ("Mr. DeNicola").
W I T N E S S E T H:
WHEREAS, Mr. DeNicola is the President and Chief Executive Officer of
the Company;
WHEREAS, the Company wishes to provide to Mr. DeNicola certain
severance benefits under certain circumstances following a change in control (as
defined herein) of Southern or the Company;
NOW, THEREFORE, in consideration of the premises, and the agreements of
the parties set forth in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) "Annual Compensation" shall mean Mr. DeNicola's highest
annual base salary rate for the twelve (12) month period immediately
preceding the date of the Change in Control plus market level target
annual bonus as set forth on Exhibit A hereof.
(b) "Beneficial Ownership" shall mean beneficial ownership
within the meaning of Rule 13d-3 promulgated under the Exchange Act.
(c) "Board" shall mean the board of directors of the Company.
(d) "Business Combination" shall mean a reorganization, merger
or consolidation of Southern or sale or other disposition of all or
substantially all of the assets of Southern.
(e) "Change in Control" shall mean any of the following:
(i) The Consummation of an acquisition by any Person
of Beneficial Ownership of 20% or more of Southern's Voting
Securities; provided, however, that for purposes of this
Paragraph 1.(e)(i), the following acquisitions of Southern's
Voting Securities shall not constitute a Change in Control:
(A) any acquisition directly from Southern;
(B) any acquisition by Southern;
(C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by
Southern or any Southern Subsidiary;
(D) any acquisition by a qualified pension
plan or publicly held mutual fund; (E) any
acquisition by a Group composed exclusively of
employees of Southern, or any Southern
Subsidiary;
(F) any acquisition by Mr. DeNicola or any
Group of which Mr. DeNicola is a party; or
(G) any Business Combination which would not
otherwise constitute a change in control because of
the application of clauses (A), (B) and (C) of
Paragraph 1.(e)(iii);
(ii) A change in the composition of the Southern
Board whereby individuals who constitute the Incumbent Board
cease for any reason to constitute at least a majority of the
Southern Board;
(iii) Consummation of a Business Combination,
provided, however, that such a Business Combination shall not
constitute a Change in Control if all three (3) of the
following conditions are met:
(A) all or substantially all of the
individuals and entities who held Beneficial
Ownership, respectively, of Southern's Voting
Securities immediately prior to such Business
Combination beneficially own, directly or indirectly,
65% or more of the combined voting power of the
Voting Securities of the corporation surviving or
resulting from such Business Combination, (including,
without limitation, a corporation which as a result
of such transaction holds Beneficial Ownership of all
or substantially all of Southern's Voting Securities
or all or substantially all of Southern's assets)
(such surviving or resulting corporation to be
referred to as "Surviving Company"), in substantially
the same proportions as their ownership, immediately
prior to such Business Combination, of Southern's
Voting Securities;
(B) no Person (excluding any corporation
resulting from such Business Combination, any
employee benefit plan (or related trust) of Southern,
any Southern Subsidiary or Surviving Company, Mr.
DeNicola, any Group of which Mr. DeNicola is a party,
any Group composed exclusively of Company employees,
any qualified pension plan (or related trust) or any
publicly held mutual fund) holds Beneficial
Ownership, directly or indirectly, of 20% or more of
the combined voting power of the then outstanding
Voting Securities of Surviving Company except to the
extent that such ownership existed prior to the
Business Combination; and
(C) at least a majority of the members of
the board of directors of Surviving Company were
members of the Incumbent Board at the earlier of the
date of execution of the initial agreement, or of the
action of the Southern Board, providing for such
Business Combination. (iv) The Consummation of an
acquisition by any Person of Beneficial Ownership of
50% or more of the combined voting power of the then
outstanding Voting Securities of the Company;
provided, however, that for purposes of this
Paragraph 1.(e)(iv), any acquisition by Mr. DeNicola,
any Group composed exclusively of employees of the
Company, any Group of which Mr. DeNicola is a party,
any qualified pension plan (or related trust), any
publicly held mutual fund, any employee benefit plan
(or related trust) sponsored or maintained by
Southern or any Southern Subsidiary shall not
constitute a Change in Control;
(v) Consummation of a reorganization, merger or
consolidation of the Company (an "Employing Company Business
Combination"), in each case, unless, following such Employing
Company Business Combination, Southern Controls the
corporation or other entity surviving or resulting from such
Employing Company Business Combination; or
(vi) Consummation of the sale or other disposition of
all or substantially all of the assets of the Company to a
corporation or other entity which Southern does not Control.
(f) "COBRA Coverage" shall mean any continuation coverage to
which Mr. DeNicola or his dependents may be entitled pursuant
to Code Section 4980B.
(g) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(h) "Company" shall mean Southern Company Services, Inc., its
successors and assigns.
(i) "Consummation" shall mean the completion of the final act
necessary to complete a transaction as a matter of law, including, but
not limited to, any required approvals by the corporation's
shareholders and board of directors, the transfer of legal and
beneficial title to securities or assets and the final approval of the
transaction by any applicable domestic or foreign governments or
governmental agencies.
(j) "Control" shall mean, in the case of a corporation,
Beneficial Ownership of more than 50% of the combined voting power of
the corporation's Voting Securities, or in the case of any other
entity, Beneficial Ownership of more than 50% of such entity's voting
equity interests.
(k) "Effective Date" shall mean the date of execution of this
Agreement.
(l) "Employee Outplacement Program" shall mean the program
established by the Company from time to time for the purpose of
assisting participants covered by the plan in finding employment
outside of the Company which provides for the following services:
(i) self-assessment, career decision and goal
setting; (ii) job market research and job sources;
(iii) networking and interviewing skills; (iv)
planning and implementation strategy; (v) resume
writing, job hunting methods and salary negotiation;
and (vi) office support and job search resources.
(m) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(n) "Good Reason" shall mean, without Mr. DeNicola's express
written consent, after written notice to the Board, and after a thirty
(30) day opportunity for the Board to cure, the continuing occurrence
of any of the following events:
(i) Inconsistent Duties. A meaningful and detrimental
alteration in Mr. DeNicola's position or in the nature or
status of his responsibilities from those in effect
immediately prior to the Change in Control;
(ii) Reduced Salary. A reduction of five percent (5%)
or more by the Company in either of the following: (i) Mr.
DeNicola's annual base salary rate as in effect immediately
prior to the Change in Control (except for a less than ten
percent (10%), across-the-board annual base salary rate
reduction similarly affecting at least ninety-five percent
(95%) of the Executive Employees of the Company); or (ii) the
sum of Mr. DeNicola's annual base salary rate plus target
bonus under the PPP Plan (except for a less than ten percent
(10%), across-the-board reduction of annual base salary rate
plus target bonus under the PPP Plan similarly affecting at
least ninety-five percent (95%) of the Executive Employees of
the Company);
(iii) Pension and Compensation Plans. The failure by
the Company to continue in effect any pension or compensation
plan or agreement in which Mr. DeNicola participates or is a
party as of the date of the Change in Control or the
elimination of Mr. DeNicola's participation therein, (except
for across-the-board plan changes or terminations similarly
affecting at least ninety-five percent (95%) of the Executive
Employees of the Company); For purposes of this Paragraph
1.(n), a "pension plan or agreement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for payments upon retirement; and a
"compensation plan or arrangement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for periodic, non-discretionary compensatory
payments in the nature of bonuses.
(iv) Relocation. A change in Mr. DeNicola's work
location to a location more than fifty (50) miles from the
office where Mr. DeNicola is located at the time of the Change
in Control, unless such new work location is within fifty (50)
miles from Mr. DeNicola's principal place of residence at the
time of the Change in Control. The acceptance, if any, by Mr.
DeNicola of employment by the Company at a work location which
is outside the fifty mile radius set forth in this Paragraph
1.(n)(iv) shall not be a waiver of Mr. DeNicola's right to
refuse subsequent transfer by the Company to a location which
is more than fifty (50) miles from Mr. DeNicola's principal
place of residence at the time of the Change in Control, and
such subsequent unconsented transfer shall be "Good Reason"
under this Agreement; or
(v) Benefits and Perquisites. The taking of any
action by the Company which would directly or indirectly
materially reduce the benefits enjoyed by Mr. DeNicola under
the Company's retirement, life insurance, medical, health and
accident, disability, deferred compensation or savings plans
in which Mr. DeNicola was participating immediately prior to
the Change in Control; or the failure by the Company to
provide Mr. DeNicola with the number of paid vacation days to
which Mr. DeNicola is entitled on the basis of years of
service with the Company in accordance with the Company's
normal vacation policy in effect immediately prior to the
Change in Control (except for across-the-board plan or
vacation policy changes or plan terminations similarly
affecting at least ninety-five percent (95%) of the Executive
Employees of the Company).
(vi) For purposes of this Paragraph 1.(n), the term
"Executive Employee" shall mean those employees of the Company
of Grade Level 10 or above. (o) "Group" shall have the meaning
set forth in Section 14(d) of the Exchange Act. (p) "Group
Health Plan" shall mean the group health plan covering Mr.
DeNicola, as such plan may be amended from time to time.
(q) "Group Life Insurance Plan" shall mean the group life
insurance program covering Mr. DeNicola, as such plan may be amended
from time to time.
(r) "Incumbent Board" shall mean those individuals who
constitute the Southern Board as of the Effective Date plus any
individual who shall become a director subsequent to such date whose
election or nomination for election by Southern's shareholders was
approved by a vote of at least 75% of the directors then comprising the
Incumbent Board. Notwithstanding the foregoing, no individual who shall
become a director of the Southern Board subsequent to the Effective
Date whose initial assumption of office occurs as a result of an actual
or threatened election contest (within the meaning of Rule 14a-11 of
the Regulations promulgated under the Exchange Act) with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Southern Board shall be a member of the Incumbent Board.
(s) "Month of Service" shall mean any calendar month during
which Mr. DeNicola has worked at least one (1) hour or was on approved
leave of absence while in the employ of the Company or any affiliate or
subsidiary of Southern.
(t) "Pension Plan" shall mean The Southern Company Pension
Plan, as such plan may be amended from time to time. (u) "Performance
Dividend Plan" shall mean the Southern Company Performance Dividend
Plan or any replacement thereto, as such plans may be amended from time
to time.
(v) "Performance Stock Plan" shall mean the Southern Company
Performance Stock Plan or any replacement thereto, as such plans may be
amended from time to time.
(w) "Person" shall mean any individual, entity or group within
the meaning of Section 13(d)(3) or 14(d)(2) of Act.
(x) "Performance Pay Plan" or "PPP Plan" shall mean the
Southern Company Performance Pay Plan or any replacement thereto, as
such plans may be amended from time to time.
(y) "Productivity Improvement Plan" or "PIP Plan" shall mean
the Southern Company Productivity Improvement Plan or replacement
thereto, as such plans may be amended from time to time.
(z) "Southern" shall mean The Southern Company, its successors
and assigns.
(aa) "Southern Board" shall mean the board of directors of
Southern.
(bb) "Southern Subsidiary" shall mean any corporation or other
entity Controlled by Southern.
(cc) "Termination for Cause" or "Cause" shall mean the
termination of Mr. DeNicola's employment by the Company upon the
occurrence of any of the following:
(i) The willful and continued failure by Mr. DeNicola
substantially to perform his duties with the Company (other
than any such failure resulting from Mr. DeNicola's Total
Disability or from Mr. DeNicola's retirement or any such
actual or anticipated failure resulting from termination by
Mr. DeNicola for Good Reason) after a written demand for
substantial performance is delivered to him by the Southern
Board, which demand specifically identifies the manner in
which the Southern Board believes that he has not
substantially performed his duties; or
(ii) The willful engaging by Mr. DeNicola in conduct
that is demonstrably and materially injurious to the Company,
monetarily or otherwise, including, but not limited to any of
the following:
(A) any willful act involving fraud or
dishonesty in the course of Mr. DeNicola's employment
by the Company;
(B) the willful carrying out of any activity
or the making of any statement which would materially
prejudice or impair the good name and standing of the
Company, Southern or any Southern Subsidiary or would
bring the Company, Southern or any Southern
Subsidiary into contempt, ridicule or would
reasonably shock or offend any community in which the
Company, Southern or such Southern Subsidiary is
located;
(C) attendance at work in a state of
intoxication or otherwise being found in possession
at his workplace of any prohibited drug or substance,
possession of which would amount to a criminal
offense;
(D) violation of the Company's policies on
drug and alcohol usage, fitness for duty requirements
or similar policies as may exist from time to time as
adopted by the Company's safety officer;
(E) assault or other act of violence against
any person during the course of employment; or (F)
indictment of any felony or any misdemeanor involving
moral turpitude.
No act or failure to act by Mr. DeNicola shall be deemed
"willful" unless done, or omitted to be done, by Mr. DeNicola not in
good faith and without reasonable belief that his action or omission
was in the best interest of the Company.
Notwithstanding the foregoing, Mr. DeNicola shall not be
deemed to have been terminated for Cause unless and until there shall
have been delivered to him a copy of a resolution duly adopted by the
affirmative vote of not less than three quarters of the entire
membership of the Southern Board at a meeting of the Southern Board
called and held for such purpose (after reasonable notice to Mr.
DeNicola and an opportunity for him, together with counsel, to be heard
before the Southern Board), finding that, in the good faith opinion of
the Southern Board, Mr. DeNicola was guilty of conduct set forth above
in clause (i) or (ii) of this Paragraph 1.(cc) and specifying the
particulars thereof in detail.
(dd) "Termination Date" shall mean the date on which Mr.
DeNicola's employment with the Company is terminated; provided,
however, that solely for purposes of Paragraph 2.(c) hereof, the
Termination Date shall be the effective date of his retirement pursuant
to the terms of the Pension Plan.
(ee) "Total Disability" shall mean Mr. DeNicola's total
disability within the meaning of the Pension Plan.
(ff) "Voting Securities" shall mean the outstanding voting
securities of a corporation entitling the holder thereof to vote
generally in the election of such corporation's directors.
(gg) "Waiver and Release" shall mean the Waiver and Release
attached hereto as Exhibit B.
(hh) "Year of Service" shall mean Mr. DeNicola's Months of
Service divided by twelve (12) rounded to the nearest whole year,
rounding up if the remaining number of months is seven (7) or greater
and rounding down if the remaining number of months is less than seven
(7). If Mr. DeNicola has a break in his service with the Company, he
will receive credit under this Agreement for service prior to the break
in service only if the break in service is less than five years.
2. Severance Benefits.
(a) Eligibility. Except as otherwise provided in this
Paragraph 2.(a), if Mr. DeNicola's employment is involuntarily
terminated by the Company at any time during the two year period
following a Change in Control for reasons other than Cause, or if Mr.
DeNicola voluntarily terminates his employment with the Company for
Good Reason at any time during the two year period following a Change
in Control, Mr. DeNicola shall be entitled to receive the benefits
described in this Agreement upon the Company's receipt of an effective
Waiver and Release. Notwithstanding anything to the contrary herein,
Mr. DeNicola shall not be eligible to receive benefits under this
Agreement if Mr. DeNicola:
(i) voluntarily terminates his employment with the
Company for other than Good Reason; (ii) has his
employment terminated by the Company for Cause; (iii)
accepts the transfer of his employment to Southern,
any Southern Subsidiary or any employer that succeeds
to all or substantially all of the assets of the
Company, Southern or any Southern Subsidiary; (iv)
refuses an offer of continued employment with the
Company, any Southern Subsidiary, or any employer
that succeeds to all or substantially all of the
assets of the Company, Southern, or any Southern
Subsidiary under circumstances where such refusal
would not amount to Good Reason for voluntary
termination of employment; or (v) elects to receive
the benefits of any other voluntary or involuntary
severance or separation program maintained by the
Company; provided however, that the receipt of
benefits under the terms of any retention plan or
agreement shall not be deemed to be the receipt of
severance or separation benefits for purposes of this
Agreement.
(b) Severance Benefits. If Mr. DeNicola meets the eligibility
requirements of Paragraph 2.(a) hereof, he shall be entitled to a cash severance
benefit in an amount equal to three times his Annual Compensation (the
"Severance Amount"). If any portion of the Severance Amount constitutes an
"excess parachute payment" (as such term is defined under Code Section 280G
("Excess Parachute Payment")), the Company shall pay to Mr. DeNicola an
additional amount calculated by determining the amount of tax under Code Section
4999 that he otherwise would have paid on any Excess Parachute Payment with
respect to the Change in Control and dividing such amount by a decimal
determined by adding the tax rate under Code Section 4999 ("Excise Tax"), the
hospital insurance tax under Code Section 3101(b) ("HI Tax") and federal and
state income tax measured at the highest marginal rates ("Income Tax") and
subtracting such result from the number one (1) (the "280G Gross-up"); provided,
however, that no 280G Gross-up shall be paid unless the Severance Amount plus
all other "parachute payments" to Mr. DeNicola under Code Section 280G exceeds
three (3) times Mr. DeNicola's "base amount" (as such term is defined under Code
Section 280G ("Base Amount")) by ten percent (10%) or more; provided further,
that if no 280G Gross-up is paid, the Severance Amount shall be capped at three
(3) times Mr. DeNicola's Base Amount, less all other "parachute payments" (as
such term is defined under Code Section 280G) received by Mr. DeNicola, less one
dollar (the "Capped Amount"), if the Capped Amount, reduced by HI Tax and Income
Tax, exceeds what otherwise would have been the Severance Amount, reduced by HI
Tax, Income Tax and Excise Tax.
For purposes of this Paragraph 2.(b), whether any amount would
constitute an Excess Parachute Payment and any other calculations of tax, e.g.,
Excise Tax, HI Tax, Income Tax, etc., or other amounts, e.g., Base Amount,
Capped Amount, etc., shall be determined by the tax department of the
independent public accounting firm then responsible for preparing Southern's
consolidated federal income tax return, and such calculations or determinations
shall be binding upon the parties hereto.
(c) Welfare Benefits. If Mr. DeNicola meets the eligibility
requirements of Paragraph 2.(a) hereof and is not otherwise eligible to
receive retiree medical and life insurance benefits provided to certain
retirees pursuant to the terms of the Pension Plan, the Group Health
Plan and the Group Life Insurance Plan, he shall be entitled to the
benefits set forth in this Paragraph 2.(c).
(i) Mr. DeNicola shall be eligible to participate in
the Company's Group Health Plan, upon payment of both the
Company's and his monthly premium under such plan, for a
period of six (6) months for each of Mr. DeNicola's Years of
Service, not to exceed five (5) years. If Mr. DeNicola elects
to receive this extended medical coverage, he shall also be
entitled to elect coverage under the Group Health Plan for his
dependents who were participating in the Group Health Plan on
Mr. DeNicola's Termination Date (and for such other dependents
as may be entitled to coverage under the provisions of the
Health Insurance Portability and Accountability Act of 1996)
for the duration of Mr. DeNicola's extended medical coverage
under this Paragraph 2.(c)(i) to the extent such dependents
remain eligible for dependent coverage under the terms of the
Group Health Plan.
(A) The extended medical coverage afforded
to Mr. DeNicola pursuant to Paragraph 2.(c)(i), as
well as the premiums to be paid by Mr. DeNicola in
connection with such coverage shall be determined in
accordance with the terms of the Group Health Plan
and shall be subject to any changes in the terms and
conditions of the Group Health Plan as well as any
future increases in premiums under the Group Health
Plan. The premiums to be paid by Mr. DeNicola in
connection with this extended coverage shall be due
on the first day of each month; provided, however,
that if he fails to pay his premium within thirty
(30) days of its due date, such extended coverage
shall be terminated.
(B) Any Group Health Plan coverage provided
under Paragraph 2.(c)(i) shall be a part of and not
in addition to any COBRA Coverage which Mr. DeNicola
or his dependents may elect. In the event that Mr.
DeNicola or his dependents become eligible to be
covered, by virtue of re-employment or otherwise, by
any employer-sponsored group health plan or is
eligible for coverage under any government-sponsored
health plan during the above period, coverage under
the Company's Group Health Plan available to Mr.
DeNicola or his dependents by virtue of the
provisions of Paragraph 2.(c)(i) shall terminate,
except as may otherwise be required by law, and shall
not be renewed. (ii) Mr. DeNicola shall be entitled
to receive cash in an amount equal to the Company's
and Mr. DeNicola's cost of premiums for three (3)
years of coverage under the Group Health Plan and
Group Life Insurance Plan in accordance with the
terms of such plans as of the date of the Change in
Control.
(d) Incentive Plans. If Mr. DeNicola meets the
eligibility requirements of Paragraph 2.(a) hereof he shall be
entitled to the following benefits under the Company's
incentive plans:
(i) Stock Option Plan.
(A) Any of Mr. DeNicola's Options and Stock
Appreciation Rights under the Performance Stock Plan
(the defined terms of which are incorporated in this
Paragraph 2.(d)(i) by reference) which are
outstanding as of the Termination Date and which are
not then exercisable and vested, shall become fully
exercisable and vested to the full extent of the
original grant; provided, that in the case of a Stock
Appreciation Right, if Mr. DeNicola is subject to
Section 16(b) of the Exchange Act, such Stock
Appreciation Right shall not become fully vested and
exercisable at such time if such actions would result
in liability to Mr. DeNicola under Section 16(b) of
the Exchange Act, provided further, that any such
actions not taken as a result of the rules under
Section 16(b) of the Exchange Act shall be effected
as of the first date that such activity would no
longer result in liability under Section 16(b) of the
Exchange Act.
(B) The restrictions and deferral
limitations applicable to any of Mr. DeNicola's
Restricted Stock as of the Termination Date shall
lapse, and such Restricted Stock shall become free of
all restrictions and limitations and become fully
vested and transferable to the full extent of the
original grant.
(C) The restrictions and deferral
limitations and other conditions applicable to any
other Awards held by Mr. DeNicola under the Stock
Performance Plan as of the Termination Date shall
lapse, and such other Awards shall become free of all
restrictions, limitations or conditions and become
fully vested and transferable to the full extent of
the original grant.
(ii) Performance Pay Plan. Provided Mr. DeNicola is
not entitled to benefits under Article V of the PPP Plan, (the
defined terms of which are incorporated in this Paragraph
2.(d)(ii) by reference), if the PPP Plan is in place through
Mr. DeNicola's Termination Date and to the extent Mr. DeNicola
is entitled to participate therein, Mr. DeNicola shall be
entitled to receive cash in an amount equal to a prorated
payout of his Incentive Pay Awards under the PPP Plan for the
Performance Period in which the Termination Date shall have
occurred, at target performance under the PPP Plan and
prorated by the number of months which have passed since the
beginning of the Performance Period until the Termination
Date.
(iii) PIP Plan. Provided Mr. DeNicola is not entitled
to benefits under Article IV of the PIP Plan (the defined
terms of which are incorporated in this Paragraph 2.(d)(iii)
by reference), if the PIP Plan is in place through Mr.
DeNicola's Termination Date and to the extent Mr. DeNicola is
entitled to participate therein, Mr. DeNicola shall be
entitled to receive cash in an amount equal to his Award
Opportunity for the Computation Periods in which the
Termination Date shall have occurred at a target Value of
Performance Unit of $1.00, prorated for each Computation
Period by the number of months which have passed since the
beginning of the Computation Periods until the Termination
Date.
(iv) Performance Dividend Plan. Provided Mr. DeNicola
is not entitled to benefits under the Performance Dividend
Plan (the defined terms of which are incorporated in this
Paragraph 2.(d)(iv) by reference), if the Performance Dividend
Plan is in place through Mr. DeNicola's Termination Date and
to the extent Mr. DeNicola is entitled to participate therein,
Mr. DeNicola shall be entitled to receive cash for each Award
held by Mr. DeNicola on his Termination Date, based on actual
performance under Section 4.1 of the Performance Dividend Plan
determined as of the most recently completed calendar quarter
of the Performance Period in which the Termination Date shall
have occurred, and the Annual Dividend declared prior to the
Termination Date.
(v) Other Short Term Incentive Plans. The provisions
of this Paragraph 2.(d)(v) shall apply if and to the extent
that Mr. DeNicola is a participant in any other "short term
compensation plan" not otherwise previously referred to in
this Paragraph 2.(d). Provided Mr. DeNicola is not otherwise
entitled to a plan payout under any change of control
provisions of such plans, if the "short term compensation
plan" is in place as of the Termination Date and to the extent
Mr. DeNicola is entitled to participate therein, Mr. DeNicola
shall receive cash in an amount equal to his award under the
Company's "short term incentive plan" for the annual
performance period in which the Termination Date shall have
occurred, at Mr. DeNicola's target performance level and
prorated by the number of months which have passed since the
beginning of the annual performance period until his
Termination Date. For purposes of this Paragraph 2.(d)(v) the
term "short term incentive compensation plan" shall mean any
incentive compensation plan or arrangement adopted in writing
by the Company which provides for annual, recurring
compensatory bonuses based upon articulated performance
criteria. (e) Payment of Benefits. Any amounts due under this
Agreement shall be paid in one (1) lump sum payment as soon as
administratively practicable following the later of: (i) Mr.
DeNicola's Termination Date, or (ii) upon Mr. DeNicola's
tender of an effective Waiver and Release to the Company in
the form of Exhibit B attached hereto and the expiration of
any applicable revocation period for such waiver. In the event
of a dispute with respect to liability or amount of any
benefit due hereunder, an effective Waiver and Release shall
be tendered at the time of final resolution of any such
dispute when payment is tendered by the Company.
(f) Benefits in the Event of Death. In the event of Mr.
DeNicola's death prior to the payment of all amounts due under this
Agreement, Mr. DeNicola's estate shall be entitled to receive as due
any amounts not yet paid under this Agreement upon the tender by the
executor or administrator of the estate of an effective Waiver and
Release.
(g) Legal Fees. In the event of a dispute between Mr. DeNicola
and the Company with regard to any amounts due hereunder, if any
material issue in such dispute is finally resolved in Mr. DeNicola's
favor, the Company shall reimburse Mr. DeNicola's legal fees incurred
with respect to all issues in such dispute in an amount not to exceed
fifty thousand dollars ($50,000).
(h) Employee Outplacement Services. Mr. DeNicola shall be
eligible to participate in the Employee Outplacement Program, which
program shall not be less than six (6) months duration measured from
Mr. DeNicola's Termination Date.
(i) Non-qualified Retirement and Deferred Compensation Plans.
The Parties agree that subsequent to a Change in Control, any claims by
Mr. DeNicola for benefits under any of the Company's non-qualified
retirement or deferred compensation plans shall be resolved through
binding arbitration in accordance with the provisions and procedures
set forth in Paragraph 5 hereof and if any material issue in such
dispute is finally resolved in Mr. DeNicola's favor, the Company shall
reimburse Mr. DeNicola's legal fees in the manner provided in Paragraph
2.(g) hereof. 3. Transfer of Employment. In the event that Mr.
DeNicola's employment by the Company is terminated during the two year
period following a Change in Control and Mr. DeNicola accepts
employment by Southern, a Southern Subsidiary, or any employer that
succeeds to all or substantially all of the assets of the Company,
Southern or any Southern Subsidiary, the Company shall assign this
Agreement to Southern, such Southern Subsidiary, or successor employer,
Southern shall accept such assignment or cause such Southern Subsidiary
or successor employer to accept such assignment, and such assignee
shall become the "Company" for all purposes hereunder.
4. No Mitigation. If Mr. DeNicola is otherwise eligible to receive
benefits under Paragraph 2 of this Agreement, he shall have no duty or
obligation to seek other employment following his Termination Date and, except
as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr.
DeNicola hereunder shall not be reduced or suspended if Mr. DeNicola accepts
such subsequent employment.
5. Arbitration.
(a) Any dispute, controversy or claim arising out of or
relating to the Company's obligations to pay severance benefits under
this Agreement, or the breach thereof, shall be settled and resolved
solely by arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association ("AAA") except as
otherwise provided herein. The arbitration shall be the sole and
exclusive forum for resolution of any such claim for severance benefits
and the arbitrators' award shall be final and binding. The provisions
of this Paragraph 5 are not intended to apply to any other disputes,
claims or controversies arising out of or relating to Mr. DeNicola's
employment by the Company or the termination thereof.
(b) Arbitration shall be initiated by serving a written notice
of demand for arbitration to Mr. DeNicola, in the case of the Company,
or to the Southern Board, in the case of Mr. DeNicola.
(c) The arbitration shall be held in Atlanta, Georgia. The
arbitrators shall apply the law of the State of Georgia, to the extent
not preempted by federal law, excluding any law which would require the
application of the law of another state.
(d) The parties shall appoint arbitrators within fifteen (15)
business days following service of the demand for arbitration. The
number of arbitrators shall be three. One arbitrator shall be appointed
by Mr. DeNicola, one arbitrator shall be appointed by the Company, and
the two arbitrators shall appoint a third. If the arbitrators cannot
agree on a third arbitrator within thirty (30) business days after the
service of demand for arbitration, the third arbitrator shall be
selected by the AAA.
(e) The arbitration filing fee shall be paid by Mr. DeNicola.
All other costs of arbitration shall be borne equally by Mr. DeNicola
and the Company, provided, however, that the Company shall reimburse
such fees and costs in the event any material issue in such dispute is
finally resolved in Mr. DeNicola's favor and Mr. DeNicola is reimbursed
legal fees under Paragraph 2.(g) hereof.
(f) The parties agree that they will faithfully observe the
rules that govern any arbitration between them, they will abide by and
perform any award rendered by the arbitrators in any such arbitration,
including any award of injunctive relief, and a judgment of a court
having jurisdiction may be entered upon an award.
(g) The parties agree that nothing in this Paragraph 5 is
intended to preclude upon application of either party any court having
jurisdiction from issuing and enforcing in any lawful manner such
temporary restraining orders, preliminary injunctions, and other
interim measures of relief as may be necessary to prevent harm to a
party's interests or as otherwise may be appropriate pending the
conclusion of arbitration proceedings pursuant to this Agreement;
regardless of whether an arbitration proceeding under this Paragraph 5
has begun. The parties further agree that nothing herein shall prevent
any court from entering and enforcing in any lawful manner such
judgments for permanent equitable relief as may be necessary to prevent
harm to a party's interests or as otherwise may be appropriate
following the issuance of arbitral awards pursuant to this Paragraph 5.
6. Miscellaneous.
(a) Funding of Benefits. Unless the Board in its discretion
shall determine otherwise, the benefits payable to Mr. DeNicola under
this Agreement shall not be funded in any manner and shall be paid by
the Company out of its general assets, which assets are subject to the
claims of the Company's creditors.
(b) Withholding. There shall be deducted from the payment of
any benefit due under this Agreement the amount of any tax required by
any governmental authority to be withheld and paid over by the Company
to such governmental authority for the account of Mr. DeNicola.
(c) Assignment. Mr. DeNicola shall have no rights to sell,
assign, transfer, encumber, or otherwise convey the right to receive
the payment of any benefit due hereunder, which payment and the rights
thereto are expressly declared to be nonassignable and nontransferable.
Any attempt to do so shall be null and void and of no effect.
(d) Amendment and Termination. The Agreement may be amended or
terminated only by a writing executed by the parties.
(e) Construction. This Agreement shall be construed in
accordance with and governed by the laws of the State of Georgia, to
the extent not preempted by federal law, disregarding any provision of
law which would require the application of the law of another state.
(f) Pooling Accounting. Notwithstanding anything to the
contrary herein, if, but for any provision of this Agreement, a Change
in Control transaction would otherwise be accounted for as a
pooling-of-interests under APB No.16 ("Pooling Accounting") (after
giving effect to any and all other facts and circumstances affecting
whether such Change in Control transaction would use Pooling
Accounting), such provision or provisions of this Agreement which would
otherwise cause the Change in Control transaction to be ineligible for
Pooling Accounting shall be void and ineffective in such a manner and
to the extent that by eliminating such provision or provisions of this
Agreement, Pooling Accounting would be required for such Change in
Control transaction.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
this ____ day of __________________, 199__.
THE SOUTHERN COMPANY
By: ____________________________________
SOUTHERN COMPANY SERVICES, INC.
By: ____________________________________
MR. DENICOLA
-----------------------------
Paul J. DeNicola
<PAGE>
Exhibit A
CHANGE IN CONTROL AGREEMENT
Target Annual Bonus for
Mr. Paul J. DeNicola
65%
<PAGE>
Exhibit B
CHANGE IN CONTROL AGREEMENT
Waiver and Release
The attached Waiver and Release is to be given to Mr. Paul J. DeNicola
upon the occurrence of an event that triggers eligibility for severance benefits
under the Change in Control Agreement, as described in Paragraph 2(a) of such
agreement.
<PAGE>
CHANGE IN CONTROL AGREEMENT
Waiver and Release
I, Paul J. DeNicola, understand that I am entitled to receive the
severance benefits described in Section 2 of the Change in Control Agreement
(the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand
that the benefits I will receive under the Agreement are in excess of those I
would have received from The Southern Company and Southern Company Services,
Inc.(collectively, the "Company") if I had not elected to sign this Waiver.
I recognize that I may have a claim against the Company under the Civil
Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the
Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended,
the Americans with Disabilities Act or other federal, state and local laws.
In exchange for the benefits I elect to receive, I hereby irrevocably
waive and release all claims, of any kind whatsoever, whether known or unknown
in connection with any claim which I ever had, may have, or now have against The
Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power
Company, Mississippi Power Company, Savannah Electric and Power Company,
Southern Communication Services, Inc., Southern Company Services, Inc., Southern
Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern
Nuclear Operating Company, Inc. and other direct or indirect subsidiaries of The
Southern Company and their past, present and future officers, directors,
employees, agents and attorneys. Nothing in this Waiver shall be construed to
release claims or causes of action under the Age Discrimination in Employment
Act or the Energy Reorganization Act of 1974, as amended, which arise out of
events occurring after the execution date of this Waiver.
In further exchange for the benefits I elect to receive, I understand
and agree that I will respect the proprietary and confidential nature of any
information I have obtained in the course of my service with the Company or any
subsidiary or affiliate of The Southern Company. However, nothing in this Waiver
shall prohibit me from engaging in protected activities under applicable law or
from communicating, either voluntary or otherwise, with any governmental agency
concerning any potential violation of the law.
In signing this Waiver, I am not releasing claims to benefits that I am
already entitled to under any workers' compensation laws or under any retirement
plan or welfare benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, as amended, which is sponsored by or adopted by the
Company and/or any of its direct or indirect subsidiaries; however, I understand
and acknowledge that nothing herein is intended to or shall be construed to
require the Company to institute or continue in effect any particular plan or
benefit sponsored by the Company and the Company hereby reserves the right to
amend or terminate any of its benefit programs at any time in accordance with
the procedures set forth in such plans.
In signing this Waiver, I realize that I am waiving and releasing,
among other things, any claims to benefits under any and all bonus, severance,
workforce reduction, early retirement, outplacement, or any other similar type
plan sponsored by the Company.
I have been encouraged and advised in writing to seek advice from
anyone of my choosing regarding this Waiver, including my attorney, and my
accountant or tax advisor. Prior to signing this Waiver, I have been given the
opportunity and sufficient time to seek such advice, and I fully understand the
meaning and contents of this Waiver.
I understand that I may take up to twenty-one (21) calendar days to
consider whether or not I desire to enter this Waiver. I was not coerced,
threatened or otherwise forced to sign this Waiver. I have made my choice to
sign this Waiver voluntarily and of my own free will.
I understand that I may revoke this Waiver at any time during the seven
(7) calendar day period after I sign and deliver this Waiver to the Company. If
I revoke this Waiver, I must do so in writing delivered to the Company. I
understand that this Waiver is not effective until the expiration of this seven
(7) calendar day revocation period. I understand that upon the expiration of
such seven (7) calendar day revocation period this entire Waiver will be binding
upon me and will be irrevocable.
I understand that by signing this Waiver I am giving up rights I may
have.
IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this
____ day of ____________________, in the year _____.
Paul J. DeNicola
Sworn to and subscribed to me this ____ day of ____________, _____.
Notary Public
My Commission Expires:
(Notary Seal)
Acknowledged and Accepted by the Company, as defined in the Waiver.
By:
Date:
EXHIBIT 10(a)87
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT ("Agreement") made and entered into by
and between The Southern Company ("Southern"), Mississippi Power Company (the
"Company") and Mr. Dwight H. Evans ("Mr. Evans").
W I T N E S S E T H:
WHEREAS, Mr. Evans is the President and Chief Executive Officer of the
Company;
WHEREAS, the Company wishes to provide to Mr. Evans certain severance
benefits under certain circumstances following a change in control (as defined
herein) of Southern or the Company;
NOW, THEREFORE, in consideration of the premises, and the agreements of
the parties set forth in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) "Annual Compensation" shall mean Mr. Evans's highest
annual base salary rate for the twelve (12) month
period immediately preceding the date of the Change in Control plus
market level target annual bonus as set forth on Exhibit A hereof.
(b) "Beneficial Ownership" shall mean beneficial ownership
within the meaning of Rule 13d-3 promulgated under the Exchange Act.
(c) "Board" shall mean the board of directors of the Company.
(d) "Business Combination" shall mean a reorganization, merger
or consolidation of Southern or sale or other disposition of all or
substantially all of the assets of Southern.
(e) "Change in Control" shall mean any of the following:
(i) The Consummation of an acquisition by any Person
of Beneficial Ownership of 20% or more of Southern's Voting
Securities; provided, however, that for purposes of this
Paragraph 1.(e)(i), the following acquisitions of Southern's
Voting Securities shall not constitute a Change in Control:
(A) any acquisition directly from Southern;
(B) any acquisition by Southern;
(C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by
Southern or any Southern Subsidiary;
(D) any acquisition by a qualified pension
plan or publicly held mutual fund;
(E) any acquisition by a Group composed
exclusively of employees of Southern, or any Southern
Subsidiary;
(F) any acquisition by Mr. Evans or any
Group of which Mr. Evans is a party; or (G) any
Business Combination which would not otherwise
constitute a change in control because of the
application of clauses (A), (B) and (C) of Paragraph
1.(e)(iii);
(ii) A change in the composition of the Southern
Board whereby individuals who constitute the Incumbent Board
cease for any reason to constitute at least a majority of the
Southern Board;
(iii) Consummation of a Business Combination,
provided, however, that such a Business Combination shall not
constitute a Change in Control if all three (3) of the
following conditions are met:
(A) all or substantially all of the
individuals and entities who held Beneficial
Ownership, respectively, of Southern's Voting
Securities immediately prior to such Business
Combination beneficially own, directly or indirectly,
65% or more of the combined voting power of the
Voting Securities of the corporation surviving or
resulting from such Business Combination, (including,
without limitation, a corporation which as a result
of such transaction holds Beneficial Ownership of all
or substantially all of Southern's Voting Securities
or all or substantially all of Southern's assets)
(such surviving or resulting corporation to be
referred to as "Surviving Company"), in substantially
the same proportions as their ownership, immediately
prior to such Business Combination, of Southern's
Voting Securities;
(B) no Person (excluding any corporation
resulting from such Business Combination, any
employee benefit plan (or related trust) of Southern,
any Southern Subsidiary or Surviving Company, Mr.
Evans, any Group of which Mr. Evans is a party, any
Group composed exclusively of Company employees, any
qualified pension plan (or related trust) or any
publicly held mutual fund) holds Beneficial
Ownership, directly or indirectly, of 20% or more of
the combined voting power of the then outstanding
Voting Securities of Surviving Company except to the
extent that such ownership existed prior to the
Business Combination; and
(C) at least a majority of the members of
the board of directors of Surviving Company were
members of the Incumbent Board at the earlier of the
date of execution of the initial agreement, or of the
action of the Southern Board, providing for such
Business Combination. (iv) The Consummation of an
acquisition by any Person of Beneficial Ownership of
50% or more of the combined voting power of the then
outstanding Voting Securities of the Company;
provided, however, that for purposes of this
Paragraph 1.(e)(iv), any acquisition by Mr. Evans,
any Group composed exclusively of employees of the
Company, any Group of which Mr. Evans is a party, any
qualified pension plan (or related trust), any
publicly held mutual fund, any employee benefit plan
(or related trust) sponsored or maintained by
Southern or any Southern Subsidiary shall not
constitute a Change in Control;
(v) Consummation of a reorganization, merger or
consolidation of the Company (an "Employing Company Business
Combination"), in each case, unless, following such Employing
Company Business Combination, Southern Controls the
corporation or other entity surviving or resulting from such
Employing Company Business Combination; or
(vi) Consummation of the sale or other disposition of
all or substantially all of the assets of the Company to a
corporation or other entity which Southern does not Control.
(f) "COBRA Coverage" shall mean any continuation coverage to
which Mr. Evans or his dependents may be entitled pursuant to
Code Section 4980B.
(g) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(h) "Company" shall mean Mississippi Power Company, its
successors and assigns.
(i) "Consummation" shall mean the completion of the final act
necessary to complete a transaction as a matter of law, including, but
not limited to, any required approvals by the corporation's
shareholders and board of directors, the transfer of legal and
beneficial title to securities or assets and the final approval of the
transaction by any applicable domestic or foreign governments or
governmental agencies.
(j) "Control" shall mean, in the case of a corporation,
Beneficial Ownership of more than 50% of the combined voting power of
the corporation's Voting Securities, or in the case of any other
entity, Beneficial Ownership of more than 50% of such entity's voting
equity interests.
(k) "Effective Date" shall mean the date of execution of this
Agreement.
(l) "Employee Outplacement Program" shall mean the program
established by the Company from time to time for the purpose of
assisting participants covered by the plan in finding employment
outside of the Company which provides for the following services:
(i) self-assessment, career decision and goal
setting; (ii) job market research and job sources;
(iii) networking and interviewing skills; (iv)
planning and implementation strategy; (v) resume
writing, job hunting methods and salary negotiation;
and (vi) office support and job search resources.
(m) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(n) "Good Reason" shall mean, without Mr. Evans's express
written consent, after written notice to the Board, and after a thirty
(30) day opportunity for the Board to cure, the continuing occurrence
of any of the following events:
(i) Inconsistent Duties. A meaningful and detrimental
alteration in Mr. Evans's position or in the nature or status
of his responsibilities from those in effect immediately prior
to the Change in Control;
(ii) Reduced Salary. A reduction of five percent (5%)
or more by the Company in either of the following: (i) Mr.
Evans's annual base salary rate as in effect immediately prior
to the Change in Control (except for a less than ten percent
(10%), across-the-board annual base salary rate reduction
similarly affecting at least ninety-five percent (95%) of the
Executive Employees of the Company); or (ii) the sum of Mr.
Evans's annual base salary rate plus target bonus under the
PPP Plan (except for a less than ten percent (10%),
across-the-board reduction of annual base salary rate plus
target bonus under the PPP Plan similarly affecting at least
ninety-five percent (95%) of the Executive Employees of the
Company);
(iii) Pension and Compensation Plans. The failure by
the Company to continue in effect any pension or compensation
plan or agreement in which Mr. Evans participates or is a
party as of the date of the Change in Control or the
elimination of Mr. Evans' participation therein, (except for
across-the-board plan changes or terminations similarly
affecting at least ninety-five percent (95%) of the Executive
Employees of the Company); For purposes of this Paragraph
1.(n), a "pension plan or agreement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for payments upon retirement; and a
"compensation plan or arrangement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for periodic, non-discretionary compensatory
payments in the nature of bonuses.
(iv) Relocation. A change in Mr. Evans's work
location to a location more than fifty (50) miles from the
office where Mr. Evans is located at the time of the Change in
Control, unless such new work location is within fifty (50)
miles from Mr. Evans's principal place of residence at the
time of the Change in Control. The acceptance, if any, by Mr.
Evans of employment by the Company at a work location which is
outside the fifty mile radius set forth in this Paragraph
1.(n)(iv) shall not be a waiver of Mr. Evans's right to refuse
subsequent transfer by the Company to a location which is more
than fifty (50) miles from Mr. Evans's principal place of
residence at the time of the Change in Control, and such
subsequent unconsented transfer shall be "Good Reason" under
this Agreement; or
(v) Benefits and Perquisites. The taking of any
action by the Company which would directly or indirectly
materially reduce the benefits enjoyed by Mr. Evans under the
Company's retirement, life insurance, medical, health and
accident, disability, deferred compensation or savings plans
in which Mr. Evans was participating immediately prior to the
Change in Control; or the failure by the Company to provide
Mr. Evans with the number of paid vacation days to which Mr.
Evans is entitled on the basis of years of service with the
Company in accordance with the Company's normal vacation
policy in effect immediately prior to the Change in Control
(except for across-the-board plan or vacation policy changes
or plan terminations similarly affecting at least ninety-five
percent (95%) of the Executive Employees of the Company).
(vi) For purposes of this Paragraph 1.(n), the term
"Executive Employee" shall mean those employees of the Company
of Grade Level 10 or above. (o) "Group" shall have the meaning
set forth in Section 14(d) of the Exchange Act. (p) "Group
Health Plan" shall mean the group health plan covering Mr.
Evans, as such plan may be amended from time to time.
(q) "Group Life Insurance Plan" shall mean the group life
insurance program covering Mr. Evans, as such plan may be amended from
time to time.
(r) "Incumbent Board" shall mean those individuals who
constitute the Southern Board as of the Effective Date plus any
individual who shall become a director subsequent to such date whose
election or nomination for election by Southern's shareholders was
approved by a vote of at least 75% of the directors then comprising the
Incumbent Board. Notwithstanding the foregoing, no individual who shall
become a director of the Southern Board subsequent to the Effective
Date whose initial assumption of office occurs as a result of an actual
or threatened election contest (within the meaning of Rule 14a-11 of
the Regulations promulgated under the Exchange Act) with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Southern Board shall be a member of the Incumbent Board.
(s) "Month of Service" shall mean any calendar month during
which Mr. Evans has worked at least one (1) hour or was on approved
leave of absence while in the employ of the Company or any affiliate or
subsidiary of Southern.
(t) "Pension Plan" shall mean The Southern Company Pension
Plan, as such plan may be amended from time to time.
(u) "Performance Dividend Plan" shall mean the Southern
Company Performance Dividend Plan or any replacement thereto, as such
plans may be amended from time to time.
(v) "Performance Stock Plan" shall mean the Southern Company
Performance Stock Plan or any replacement thereto, as such plans may be
amended from time to time.
(w) "Person" shall mean any individual, entity or group within
the meaning of Section 13(d)(3) or 14(d)(2) of Act.
(x) "Performance Pay Plan" or "PPP Plan" shall mean the
Southern Company Performance Pay Plan or any replacement thereto, as
such plans may be amended from time to time.
(y) "Productivity Improvement Plan" or "PIP Plan" shall mean
the Southern Company Productivity Improvement Plan or replacement
thereto, as such plans may be amended from time to time.
(z) "Southern" shall mean The Southern Company, its successors
and assigns.
(aa) "Southern Board" shall mean the board of directors of
Southern.
(bb) "Southern Subsidiary" shall mean any corporation or other
entity Controlled by Southern.
(cc) "Termination for Cause" or "Cause" shall mean the
termination of Mr. Evans's employment by the Company upon the
occurrence of any of the following:
(i) The willful and continued failure by Mr. Evans
substantially to perform his duties with the Company (other
than any such failure resulting from Mr. Evans's Total
Disability or from Mr. Evans's retirement or any such actual
or anticipated failure resulting from termination by Mr. Evans
for Good Reason) after a written demand for substantial
performance is delivered to him by the Southern Board, which
demand specifically identifies the manner in which the
Southern Board believes that he has not substantially
performed his duties; or
(ii) The willful engaging by Mr. Evans in conduct
that is demonstrably and materially injurious to the Company,
monetarily or otherwise, including, but not limited to any of
the following:
(A) any willful act involving fraud or
dishonesty in the course of Mr. Evans's employment by
the Company;
(B) the willful carrying out of any activity
or the making of any statement which would materially
prejudice or impair the good name and standing of the
Company, Southern or any Southern Subsidiary or would
bring the Company, Southern or any Southern
Subsidiary into contempt, ridicule or would
reasonably shock or offend any community in which the
Company, Southern or such Southern Subsidiary is
located;
(C) attendance at work in a state of
intoxication or otherwise being found in possession
at his workplace of any prohibited drug or substance,
possession of which would amount to a criminal
offense;
(D) violation of the Company's policies on
drug and alcohol usage, fitness for duty requirements
or similar policies as may exist from time to time as
adopted by the Company's safety officer;
(E) assault or other act of violence against
any person during the course of employment; or
(F) indictment of any felony or any
misdemeanor involving moral turpitude.
No act or failure to act by Mr. Evans shall be deemed
"willful" unless done, or omitted to be done, by Mr. Evans not in good
faith and without reasonable belief that his action or omission was in
the best interest of the Company.
Notwithstanding the foregoing, Mr. Evans shall not be deemed
to have been terminated for Cause unless and until there shall have
been delivered to him a copy of a resolution duly adopted by the
affirmative vote of not less than three quarters of the entire
membership of the Southern Board at a meeting of the Southern Board
called and held for such purpose (after reasonable notice to Mr. Evans
and an opportunity for him, together with counsel, to be heard before
the Southern Board), finding that, in the good faith opinion of the
Southern Board, Mr. Evans was guilty of conduct set forth above in
clause (i) or (ii) of this Paragraph 1.(cc) and specifying the
particulars thereof in detail.
(dd) "Termination Date" shall mean the date on which Mr.
Evans's employment with the Company is terminated; provided, however,
that solely for purposes of Paragraph 2.(c) hereof, the Termination
Date shall be the effective date of his retirement pursuant to the
terms of the Pension Plan.
(ee) "Total Disability" shall mean Mr. Evans's total
disability within the meaning of the Pension Plan.
(ff) "Voting Securities" shall mean the outstanding voting
securities of a corporation entitling the holder thereof to vote
generally in the election of such corporation's directors.
(gg) "Waiver and Release" shall mean the Waiver and Release
attached hereto as Exhibit B.
(hh) "Year of Service" shall mean Mr. Evans's Months of
Service divided by twelve (12) rounded to the nearest whole year,
rounding up if the remaining number of months is seven (7) or greater
and rounding down if the remaining number of months is less than seven
(7). If Mr. Evans has a break in his service with the Company, he will
receive credit under this Agreement for service prior to the break in
service only if the break in service is less than five years.
2. Severance Benefits.
(a) Eligibility. Except as otherwise provided in this
Paragraph 2.(a), if Mr. Evans's employment is involuntarily terminated
by the Company at any time during the two year period following a
Change in Control for reasons other than Cause, or if Mr. Evans
voluntarily terminates his employment with the Company for Good Reason
at any time during the two year period following a Change in Control,
Mr. Evans shall be entitled to receive the benefits described in this
Agreement upon the Company's receipt of an effective Waiver and
Release. Notwithstanding anything to the contrary herein, Mr. Evans
shall not be eligible to receive benefits under this Agreement if Mr.
Evans:
(i) voluntarily terminates his employment
with the Company for other than Good Reason; (ii) has
his employment terminated by the Company for Cause;
(iii) accepts the transfer of his employment to
Southern, any Southern Subsidiary or any employer
that succeeds to all or substantially all of the
assets of the Company, Southern or any Southern
Subsidiary; (iv) refuses an offer of continued
employment with the Company, any Southern Subsidiary,
or any employer that succeeds to all or substantially
all of the assets of the Company, Southern, or any
Southern Subsidiary under circumstances where such
refusal would not amount to Good Reason for voluntary
termination of employment; or (v) elects to receive
the benefits of any other voluntary or involuntary
severance or separation program maintained by the
Company; provided however, that the receipt of
benefits under the terms of any retention plan or
agreement shall not be deemed to be the receipt of
severance or separation benefits for purposes of this
Agreement. (b) Severance Benefits. If Mr. Evans meets
the eligibility requirements of Paragraph 2.(a)
hereof, he shall be entitled to a cash severance
benefit in an amount equal to three times his Annual
Compensation (the "Severance Amount"). If any portion
of the Severance Amount constitutes an "excess
parachute payment" (as such term is defined under
Code Section 280G ("Excess Parachute Payment")), the
Company shall pay to Mr. Evans an additional amount
calculated by determining the amount of tax under
Code Section 4999 that he otherwise would have paid
on any Excess Parachute Payment with respect to the
Change in Control and dividing such amount by a
decimal determined by adding the tax rate under Code
Section 4999 ("Excise Tax"), the hospital insurance
tax under Code Section 3101(b) ("HI Tax") and federal
and state income tax measured at the highest marginal
rates ("Income Tax") and subtracting such result from
the number one (1) (the "280G Gross-up"); provided,
however, that no 280G Gross-up shall be paid unless
the Severance Amount plus all other "parachute
payments" to Mr. Evans under Code Section 280G
exceeds three (3) times Mr. Evans's "base amount" (as
such term is defined under Code Section 280G ("Base
Amount")) by ten percent (10%) or more; provided
further, that if no 280G Gross-up is paid, the
Severance Amount shall be capped at three (3) times
Mr. Evans's Base Amount, less all other "parachute
payments" (as such term is defined under Code Section
280G) received by Mr. Evans, less one dollar (the
"Capped Amount"), if the Capped Amount, reduced by HI
Tax and Income Tax, exceeds what otherwise would have
been the Severance Amount, reduced by HI Tax, Income
Tax and Excise Tax.
For purposes of this Paragraph 2.(b), whether any amount would
constitute an Excess Parachute Payment and any other calculations of
tax, e.g., Excise Tax, HI Tax, Income Tax, etc., or other amounts e.g.,
Base Amount, Capped Amount, etc., shall be determined by the tax
department of the independent public accounting firm then responsible
for preparing Southern's consolidated federal income tax return, and
such calculations or determinations shall be binding upon the parties
hereto.
(c) Welfare Benefits. If Mr. Evans meets the eligibility
requirements of Paragraph 2.(a) hereof and is not otherwise eligible to
receive retiree medical and life insurance benefits provided to certain
retirees pursuant to the terms of the Pension Plan, the Group Health
Plan and the Group Life Insurance Plan, he shall be entitled to the
benefits set forth in this Paragraph 2.(c).
(i) Mr. Evans shall be eligible to participate in the
Company's Group Health Plan, upon payment of both the
Company's and his monthly premium under such plan, for a
period of six (6) months for each of Mr. Evans's Years of
Service, not to exceed five (5) years. If Mr. Evans elects to
receive this extended medical coverage, he shall also be
entitled to elect coverage under the Group Health Plan for his
dependents who were participating in the Group Health Plan on
Mr. Evans's Termination Date (and for such other dependents as
may be entitled to coverage under the provisions of the Health
Insurance Portability and Accountability Act of 1996) for the
duration of Mr. Evans's extended medical coverage under this
Paragraph 2.(c)(i) to the extent such dependents remain
eligible for dependent coverage under the terms of the Group
Health Plan.
(A) The extended medical coverage afforded
to Mr. Evans pursuant to Paragraph 2.(c)(i), as well
as the premiums to be paid by Mr. Evans in connection
with such coverage shall be determined in accordance
with the terms of the Group Health Plan and shall be
subject to any changes in the terms and conditions of
the Group Health Plan as well as any future increases
in premiums under the Group Health Plan. The premiums
to be paid by Mr. Evans in connection with this
extended coverage shall be due on the first day of
each month; provided, however, that if he fails to
pay his premium within thirty (30) days of its due
date, such extended coverage shall be terminated.
(B) Any Group Health Plan coverage provided
under Paragraph 2.(c)(i) shall be a part of and not
in addition to any COBRA Coverage which Mr. Evans or
his dependents may elect. In the event that Mr. Evans
or his dependents become eligible to be covered, by
virtue of re-employment or otherwise, by any
employer-sponsored group health plan or is eligible
for coverage under any government-sponsored health
plan during the above period, coverage under the
Company's Group Health Plan available to Mr. Evans or
his dependents by virtue of the provisions of
Paragraph 2.(c)(i) shall terminate, except as may
otherwise be required by law, and shall not be
renewed. (ii) Mr. Evans shall be entitled to receive
cash in an amount equal to the Company's and Mr.
Evans's cost of premiums for three (3) years of
coverage under the Group Health Plan and Group Life
Insurance Plan in accordance with the terms of such
plans as of the date of the Change in Control.
(d) Incentive Plans. If Mr. Evans meets the eligibility
requirements of Paragraph 2.(a) hereof he shall be entitled to the
following benefits under the Company's incentive plans:
(i) Stock Option Plan.
(A) Any of Mr. Evans's Options and Stock
Appreciation Rights under the Performance Stock Plan
(the defined terms of which are incorporated in this
Paragraph 2.(d)(i) by reference) which are
outstanding as of the Termination Date and which are
not then exercisable and vested, shall become fully
exercisable and vested to the full extent of the
original grant; provided, that in the case of a Stock
Appreciation Right, if Mr. Evans is subject to
Section 16(b) of the Exchange Act, such Stock
Appreciation Right shall not become fully vested and
exercisable at such time if such actions would result
in liability to Mr. Evans under Section 16(b) of the
Exchange Act, provided further, that any such actions
not taken as a result of the rules under Section
16(b) of the Exchange Act shall be effected as of the
first date that such activity would no longer result
in liability under Section 16(b) of the Exchange Act.
(B) The restrictions and deferral
limitations applicable to any of Mr. Evans'
Restricted Stock as of the Termination Date shall
lapse, and such Restricted Stock shall become free of
all restrictions and limitations and become fully
vested and transferable to the full extent of the
original grant.
(C) The restrictions and deferral
limitations and other conditions applicable to any
other Awards held by Mr. Evans under the Stock
Performance Plan as of the Termination Date shall
lapse, and such other Awards shall become free of all
restrictions, limitations or conditions and become
fully vested and transferable to the full extent of
the original grant. (ii) Performance Pay Plan.
Provided Mr. Evans is not entitled to benefits under
Article V of the PPP Plan, (the defined terms of
which are incorporated in this Paragraph 2.(d)(ii) by
reference), if the PPP Plan is in place through Mr.
Evans's Termination Date and to the extent Mr. Evans
is entitled to participate therein, Mr. Evans shall
be entitled to receive cash in an amount equal to a
prorated payout of his Incentive Pay Awards under the
PPP Plan for the Performance Period in which the
Termination Date shall have occurred, at target
performance under the PPP Plan and prorated by the
number of months which have passed since the
beginning of the Performance Period until the
Termination Date.
(iii) PIP Plan. Provided Mr. Evans is not entitled to
benefits under Article IV of the PIP Plan (the defined terms
of which are incorporated in this Paragraph 2.(d)(iii) by
reference), if the PIP Plan is in place through Mr. Evans's
Termination Date and to the extent Mr. Evans is entitled to
participate therein, Mr. Evans shall be entitled to receive
cash in an amount equal to his Award Opportunity for the
Computation Periods in which the Termination Date shall have
occurred at a target Value of Performance Unit of $1.00,
prorated for each Computation Period by the number of months
which have passed since the beginning of the Computation
Periods until the Termination Date.
(iv) Performance Dividend Plan. Provided Mr. Evans is
not entitled to benefits under the Performance Dividend Plan
(the defined terms of which are incorporated in this Paragraph
2.(d)(iv) by reference), if the Performance Dividend Plan is
in place through Mr. Evans's Termination Date and to the
extent Mr. Evans is entitled to participate therein, Mr. Evans
shall be entitled to receive cash for each Award held by Mr.
Evans on his Termination Date, based on actual performance
under Section 4.1 of the Performance Dividend Plan determined
as of the most recently completed calendar quarter of the
Performance Period in which the Termination Date shall have
occurred, and the Annual Dividend declared prior to the
Termination Date.
(v) Other Short Term Incentive Plans. The provisions
of this Paragraph 2.(d)(v) shall apply if and to the extent
that Mr. Evans is a participant in any other "short term
compensation plan" not otherwise previously referred to in
this Paragraph 2.(d). Provided Mr. Evans is not otherwise
entitled to a plan payout under any change of control
provisions of such plans, if the "short term compensation
plan" is in place as of the Termination Date and to the extent
Mr. Evans is entitled to participate therein, Mr. Evans shall
receive cash in an amount equal to his award under the
Company's "short term incentive plan" for the annual
performance period in which the Termination Date shall have
occurred, at Mr. Evans's target performance level and prorated
by the number of months which have passed since the beginning
of the annual performance period until his Termination Date.
For purposes of this Paragraph 2.(d)(v) the term "short term
incentive compensation plan" shall mean any incentive
compensation plan or arrangement adopted in writing by the
Company which provides for annual, recurring compensatory
bonuses based upon articulated performance criteria. (e)
Payment of Benefits. Any amounts due under this Agreement
shall be paid in one (1) lump sum payment as soon as
administratively practicable following the later of: (i) Mr.
Evans's Termination Date, or (ii) upon Mr. Evans's tender of
an effective Waiver and Release to the Company in the form of
Exhibit B attached hereto and the expiration of any applicable
revocation period for such waiver. In the event of a dispute
with respect to liability or amount of any benefit due
hereunder, an effective Waiver and Release shall be tendered
at the time of final resolution of any such dispute when
payment is tendered by the Company.
(f) Benefits in the Event of Death. In the event of Mr.
Evans's death prior to the payment of all amounts due under this
Agreement, Mr. Evans's estate shall be entitled to receive as due any
amounts not yet paid under this Agreement upon the tender by the
executor or administrator of the estate of an effective Waiver and
Release.
(g) Legal Fees. In the event of a dispute between Mr. Evans
and the Company with regard to any amounts due hereunder, if any
material issue in such dispute is finally resolved in Mr. Evans's
favor, the Company shall reimburse Mr. Evans's legal fees incurred with
respect to all issues in such dispute in an amount not to exceed fifty
thousand dollars ($50,000).
(h) Employee Outplacement Services. Mr. Evans shall be
eligible to participate in the Employee Outplacement Program, which
program shall not be less than six (6) months duration measured from
Mr. Evans's Termination Date.
(i) Non-qualified Retirement and Deferred Compensation Plans.
The Parties agree that subsequent to a Change in Control, any claims by
Mr. Evans for benefits under any of the Company's non-qualified
retirement or deferred compensation plans shall be resolved through
binding arbitration in accordance with the provisions and procedures
set forth in Paragraph 5 hereof and if any material issue in such
dispute is finally resolved in Mr. Evans' favor, the Company shall
reimburse Mr. Evans' legal fees in the manner provided in Paragraph
2.(g) hereof.
3. Transfer of Employment. In the event that Mr. Evans's employment by
the Company is terminated during the two year period following a Change in
Control and Mr. Evans accepts employment by Southern, a Southern Subsidiary, or
any employer that succeeds to all or substantially all of the assets of the
Company, Southern or any Southern Subsidiary, the Company shall assign this
Agreement to Southern, such Southern Subsidiary, or successor employer, Southern
shall accept such assignment or cause such Southern Subsidiary or successor
employer to accept such assignment, and such assignee shall become the "Company"
for all purposes hereunder.
4. No Mitigation. If Mr. Evans is otherwise eligible to receive
benefits under Paragraph 2 of this Agreement, he shall have no duty or
obligation to seek other employment following his Termination Date and, except
as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr. Evans
hereunder shall not be reduced or suspended if Mr. Evans accepts such subsequent
employment.
5. Arbitration.
(a) Any dispute, controversy or claim arising out of or
relating to the Company's obligations to pay severance benefits under
this Agreement, or the breach thereof, shall be settled and resolved
solely by arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association ("AAA") except as
otherwise provided herein. The arbitration shall be the sole and
exclusive forum for resolution of any such claim for severance benefits
and the arbitrators' award shall be final and binding. The provisions
of this Paragraph 5 are not intended to apply to any other disputes,
claims or controversies arising out of or relating to Mr. Evans's
employment by the Company or the termination thereof.
(b) Arbitration shall be initiated by serving a written notice
of demand for arbitration to Mr. Evans, in the case of the Company, or
to the Southern Board, in the case of Mr. Evans.
(c) The arbitration shall be held in Atlanta, Georgia. The
arbitrators shall apply the law of the State of Georgia, to the extent
not preempted by federal law, excluding any law which would require the
application of the law of another state.
(d) The parties shall appoint arbitrators within fifteen (15)
business days following service of the demand for arbitration. The
number of arbitrators shall be three. One arbitrator shall be appointed
by Mr. Evans, one arbitrator shall be appointed by the Company, and the
two arbitrators shall appoint a third. If the arbitrators cannot agree
on a third arbitrator within thirty (30) business days after the
service of demand for arbitration, the third arbitrator shall be
selected by the AAA.
(e) The arbitration filing fee shall be paid by Mr. Evans. All
other costs of arbitration shall be borne equally by Mr. Evans and the
Company, provided, however, that the Company shall reimburse such fees
and costs in the event any material issue in such dispute is finally
resolved in Mr. Evans's favor and Mr. Evans is reimbursed legal fees
under Paragraph 2.(g) hereof.
(f) The parties agree that they will faithfully observe the
rules that govern any arbitration between them, they will abide by and
perform any award rendered by the arbitrators in any such arbitration,
including any award of injunctive relief, and a judgment of a court
having jurisdiction may be entered upon an award.
(g) The parties agree that nothing in this Paragraph 5 is
intended to preclude upon application of either party any court having
jurisdiction from issuing and enforcing in any lawful manner such
temporary restraining orders, preliminary injunctions, and other
interim measures of relief as may be necessary to prevent harm to a
party's interests or as otherwise may be appropriate pending the
conclusion of arbitration proceedings pursuant to this Agreement
regardless of whether an arbitration proceeding under this Paragraph 5
has begun. The parties further agree that nothing herein shall prevent
any court from entering and enforcing in any lawful manner such
judgments for permanent equitable relief as may be necessary to prevent
harm to a party's interests or as otherwise may be appropriate
following the issuance of arbitral awards pursuant to this Paragraph 5.
6. Miscellaneous.
(a) Funding of Benefits. Unless the Board in its discretion
shall determine otherwise the benefits payable to Mr. Evans under this
Agreement shall not be funded in any manner and shall be paid by the
Company out of its general assets, which assets are subject to the
claims of the Company's creditors.
(b) Withholding. There shall be deducted from the payment of
any benefit due under this Agreement the amount of any tax required by
any governmental authority to be withheld and paid over by the Company
to such governmental authority for the account of Mr. Evans.
(c) Assignment. Mr. Evans shall have no rights to sell,
assign, transfer, encumber, or otherwise convey the right to receive
the payment of any benefit due hereunder, which payment and the rights
thereto are expressly declared to be nonassignable and nontransferable.
Any attempt to do so shall be null and void and of no effect.
(d) Amendment and Termination. The Agreement may be amended or
terminated only by a writing executed by the parties.
(e) Construction. This Agreement shall be construed in
accordance with and governed by the laws of the State of Georgia, to
the extent not preempted by federal law, disregarding any provision of
law which would require the application of the law of another state.
(f) Pooling Accounting. Notwithstanding anything to the
contrary herein, if, but for any provision of this Agreement, a Change
in Control transaction would otherwise be accounted for as a
pooling-of-interests under APB No.16 ("Pooling Accounting") (after
giving effect to any and all other facts and circumstances affecting
whether such Change in Control transaction would use Pooling
Accounting), such provision or provisions of this Agreement which would
otherwise cause the Change in Control transaction to be ineligible for
Pooling Accounting shall be void and ineffective in such a manner and
to the extent that by eliminating such provision or provisions of this
Agreement, Pooling Accounting would be required for such Change in
Control transaction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
this ____ day of __________________, 199__.
THE SOUTHERN COMPANY
By: ____________________________________
MISSISSIPPI POWER COMPANY
By: ____________________________________
MR. EVANS
-----------------------------
Dwight H. Evans
<PAGE>
Exhibit A
CHANGE IN CONTROL AGREEMENT
Target Annual Bonus for
Mr. Dwight H. Evans
50%
<PAGE>
Exhibit B
CHANGE IN CONTROL AGREEMENT
Waiver and Release
The attached Waiver and Release is to be given to Mr. Dwight H. Evans
upon the occurrence of an event that triggers eligibility for severance benefits
under the Change in Control Agreement, as described in Paragraph 2(a) of such
agreement.
<PAGE>
CHANGE IN CONTROL AGREEMENT
Waiver and Release
I, Dwight H. Evans, understand that I am entitled to receive the
severance benefits described in Section 2 of the Change in Control Agreement
(the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand
that the benefits I will receive under the Agreement are in excess of those I
would have received from The Southern Company and Mississippi Power Company
(collectively, the "Company") if I had not elected to sign this Waiver.
I recognize that I may have a claim against the Company under the Civil
Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the
Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended,
the Americans with Disabilities Act or other federal, state and local laws.
In exchange for the benefits I elect to receive, I hereby irrevocably
waive and release all claims, of any kind whatsoever, whether known or unknown
in connection with any claim which I ever had, may have, or now have against The
Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power
Company, Mississippi Power Company, Savannah Electric and Power Company,
Southern Communication Services, Inc., Southern Company Services, Inc., Southern
Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern
Nuclear Operating Company, Inc. and other direct or indirect subsidiaries of The
Southern Company and their past, present and future officers, directors,
employees, agents and attorneys. Nothing in this Waiver shall be construed to
release claims or causes of action under the Age Discrimination in Employment
Act or the Energy Reorganization Act of 1974, as amended, which arise out of
events occurring after the execution date of this Waiver.
In further exchange for the benefits I elect to receive, I understand
and agree that I will respect the proprietary and confidential nature of any
information I have obtained in the course of my service with the Company or any
subsidiary or affiliate of The Southern Company. However, nothing in this Waiver
shall prohibit me from engaging in protected activities under applicable law or
from communicating, either voluntary or otherwise, with any governmental agency
concerning any potential violation of the law.
In signing this Waiver, I am not releasing claims to benefits that I am
already entitled to under any workers' compensation laws or under any retirement
plan or welfare benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, as amended, which is sponsored by or adopted by the
Company and/or any of its direct or indirect subsidiaries; however, I understand
and acknowledge that nothing herein is intended to or shall be construed to
require the Company to institute or continue in effect any particular plan or
benefit sponsored by the Company and the Company hereby reserves the right to
amend or terminate any of its benefit programs at any time in accordance with
the procedures set forth in such plans.
In signing this Waiver, I realize that I am waiving and releasing,
among other things, any claims to benefits under any and all bonus, severance,
workforce reduction, early retirement, outplacement, or any other similar type
plan sponsored by the Company.
I have been encouraged and advised in writing to seek advice from
anyone of my choosing regarding this Waiver, including my attorney, and my
accountant or tax advisor. Prior to signing this Waiver, I have been given the
opportunity and sufficient time to seek such advice, and I fully understand the
meaning and contents of this Waiver.
I understand that I may take up to twenty-one (21) calendar days to
consider whether or not I desire to enter this Waiver. I was not coerced,
threatened or otherwise forced to sign this Waiver. I have made my choice to
sign this Waiver voluntarily and of my own free will.
I understand that I may revoke this Waiver at any time during the seven
(7) calendar day period after I sign and deliver this Waiver to the Company. If
I revoke this Waiver, I must do so in writing delivered to the Company. I
understand that this Waiver is not effective until the expiration of this seven
(7) calendar day revocation period. I understand that upon the expiration of
such seven (7) calendar day revocation period this entire Waiver will be binding
upon me and will be irrevocable.
I understand that by signing this Waiver I am giving up rights I may
have.
IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this
____ day of ____________________, in the year _____.
Dwight H. Evans
Sworn to and subscribed to me this ____ day of ____________, _____.
Notary Public
My Commission Expires:
(Notary Seal)
Acknowledged and Accepted by the Company, as defined in the Waiver.
By:
Date:
EXHIBIT 10(a)88
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT ("Agreement") made and entered into by
and between The Southern Company ("Southern"), Alabama Power Company (the
"Company") and Mr. Banks Harry Farris ("Mr. Farris").
W I T N E S S E T H:
WHEREAS, Mr. Farris is the Executive Vice President of the Company;
WHEREAS, the Company wishes to provide to Mr. Farris certain severance
benefits under certain circumstances following a change in control (as defined
herein) of Southern or the Company;
NOW, THEREFORE, in consideration of the premises, and the agreements of
the parties set forth in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) "Annual Compensation" shall mean Mr. Farris's highest
annual base salary rate for the twelve (12) month period immediately
preceding the date of the Change in Control plus market level target
annual bonus as set forth on Exhibit A hereof.
(b) "Beneficial Ownership" shall mean beneficial ownership
within the meaning of Rule 13d-3 promulgated under the Exchange Act.
(c) "Board" shall mean the board of directors of the Company.
(d) "Business Combination" shall mean a reorganization, merger
or consolidation of Southern or sale or other disposition of all or
substantially all of the assets of Southern.
<PAGE>
(e) "Change in Control" shall mean any of the following:
(i) The Consummation of an acquisition by any Person
of Beneficial Ownership of 20% or more of Southern's Voting
Securities; provided, however, that for purposes of this
Paragraph 1.(e)(i), the following acquisitions of Southern's
Voting Securities shall not constitute a Change in Control:
(A) any acquisition directly from Southern;
(B) any acquisition by Southern;
(C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by
Southern or any Southern Subsidiary;
(D) any acquisition by a qualified pension
plan or publicly held mutual fund;
(E) any acquisition by a Group composed
exclusively of employees of Southern, or any Southern
Subsidiary;
(F) any acquisition by Mr. Farris or any
Group of which Mr. Farris is a party; or
(G) any Business Combination which would not
otherwise constitute a change in control because of
the application of clauses (A), (B) and (C) of
Paragraph 1.(e)(iii);
(ii) A change in the composition of the Southern
Board whereby individuals who constitute the Incumbent Board
cease for any reason to constitute at least a majority of the
Southern Board;
(iii) Consummation of a Business Combination,
provided, however, that such a Business Combination shall not
constitute a Change in Control if all three (3) of the
following conditions are met:
(A) all or substantially all of the
individuals and entities who held Beneficial
Ownership, respectively, of Southern's Voting
Securities immediately prior to such Business
Combination beneficially own, directly or indirectly,
65% or more of the combined voting power of the
Voting Securities of the corporation surviving or
resulting from such Business Combination, (including,
without limitation, a corporation which as a result
of such transaction holds Beneficial Ownership of all
or substantially all of Southern's Voting Securities
or all or substantially all of Southern's assets)
(such surviving or resulting corporation to be
referred to as "Surviving Company"), in substantially
the same proportions as their ownership, immediately
prior to such Business Combination, of Southern's
Voting Securities;
(B) no Person (excluding any corporation
resulting from such Business Combination, any
employee benefit plan (or related trust) of Southern,
any Southern Subsidiary or Surviving Company, Mr.
Farris, any Group of which Mr. Farris is a party, any
Group composed exclusively of Company employees, any
qualified pension plan (or related trust) or any
publicly held mutual fund) holds Beneficial
Ownership, directly or indirectly, of 20% or more of
the combined voting power of the then outstanding
Voting Securities of Surviving Company except to the
extent that such ownership existed prior to the
Business Combination; and
(C) at least a majority of the members of
the board of directors of Surviving Company were
members of the Incumbent Board at the earlier of the
date of execution of the initial agreement, or of the
action of the Southern Board, providing for such
Business Combination. (iv) The Consummation of an
acquisition by any Person of Beneficial Ownership of
50% or more of the combined voting power of the then
outstanding Voting Securities of the Company;
provided, however, that for purposes of this
Paragraph 1.(e)(iv), any acquisition by Mr. Farris,
any Group composed exclusively of employees of the
Company, any Group of which Mr. Farris is a party,
any qualified pension plan (or related trust), any
publicly held mutual fund, any employee benefit plan
(or related trust) sponsored or maintained by
Southern or any Southern Subsidiary shall not
constitute a Change in Control;
(v) Consummation of a reorganization, merger or
consolidation of the Company (an "Employing Company Business
Combination"), in each case, unless, following such Employing
Company Business Combination, Southern Controls the
corporation or other entity surviving or resulting from such
Employing Company Business Combination; or
(vi) Consummation of the sale or other disposition of
all or substantially all of the assets of the Company to a
corporation or other entity which Southern does not Control.
(f) "COBRA Coverage" shall mean any continuation coverage to
which Mr. Farris or his dependents may be entitled pursuant to
Code Section 4980B.
(g) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(h) "Company" shall mean Alabama Power Company, its successors
and assigns.
(i) "Consummation" shall mean the completion of the final act
necessary to complete a transaction as a matter of law, including, but
not limited to, any required approvals by the corporation's
shareholders and board of directors, the transfer of legal and
beneficial title to securities or assets and the final approval of the
transaction by any applicable domestic or foreign governments or
governmental agencies.
(j) "Control" shall mean, in the case of a corporation,
Beneficial Ownership of more than 50% of the combined voting power of
the corporation's Voting Securities, or in the case of any other
entity, Beneficial Ownership of more than 50% of such entity's voting
equity interests.
(k) "Effective Date" shall mean the date of execution of this
Agreement.
(l) "Employee Outplacement Program" shall mean the program
established by the Company from time to time for the purpose of
assisting participants covered by the plan in finding employment
outside of the Company which provides for the following services:
(i) self-assessment, career decision and goal
setting; (ii) job market research and job sources;
(iii) networking and interviewing skills; (iv)
planning and implementation strategy; (v) resume
writing, job hunting methods and salary negotiation;
and (vi) office support and job search resources.
(m) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(n) "Good Reason" shall mean, without Mr. Farris's express
written consent, after written notice to the Board, and after a thirty
(30) day opportunity for the Board to cure, the continuing occurrence
of any of the following events:
(i) Inconsistent Duties. A meaningful and detrimental
alteration in Mr. Farris's position or in the nature or status
of his responsibilities from those in effect immediately prior
to the Change in Control;
(ii) Reduced Salary. A reduction of five percent (5%)
or more by the Company in either of the following: (i) Mr.
Farris's annual base salary rate as in effect immediately
prior to the Change in Control (except for a less than ten
percent (10%), across-the-board annual base salary rate
reduction similarly affecting at least ninety-five percent
(95%) of the Executive Employees of the Company); or (ii) the
sum of Mr. Farris's annual base salary rate plus target bonus
under the PPP Plan (except for a less than ten percent (10%),
across-the-board reduction of annual base salary rate plus
target bonus under the PPP Plan similarly affecting at least
ninety-five percent (95%) of the Executive Employees of the
Company);
(iii) Pension and Compensation Plans. The failure by
the Company to continue in effect any pension or compensation
plan or agreement in which Mr. Farris participates or is a
party as of the date of the Change in Control or the
elimination of Mr. Farris' participation therein, (except for
across-the-board plan changes or terminations similarly
affecting at least ninety-five percent (95%) of the Executive
Employees of the Company); For purposes of this Paragraph
1.(n), a "pension plan or agreement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for payments upon retirement; and a
"compensation plan or arrangement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for periodic, non-discretionary compensatory
payments in the nature of bonuses.
(iv) Relocation. A change in Mr. Farris's work
location to a location more than fifty (50) miles from the
office where Mr. Farris is located at the time of the Change
in Control, unless such new work location is within fifty (50)
miles from Mr. Farris's principal place of residence at the
time of the Change in Control. The acceptance, if any, by Mr.
Farris of employment by the Company at a work location which
is outside the fifty mile radius set forth in this Paragraph
1.(n)(iv) shall not be a waiver of Mr. Farris's right to
refuse subsequent transfer by the Company to a location which
is more than fifty (50) miles from Mr. Farris's principal
place of residence at the time of the Change in Control, and
such subsequent unconsented transfer shall be "Good Reason"
under this Agreement; or
(v) Benefits and Perquisites. The taking of any
action by the Company which would directly or indirectly
materially reduce the benefits enjoyed by Mr. Farris under the
Company's retirement, life insurance, medical, health and
accident, disability, deferred compensation or savings plans
in which Mr. Farris was participating immediately prior to the
Change in Control; or the failure by the Company to provide
Mr. Farris with the number of paid vacation days to which Mr.
Farris is entitled on the basis of years of service with the
Company in accordance with the Company's normal vacation
policy in effect immediately prior to the Change in Control
(except for across-the-board plan or vacation policy changes
or plan terminations similarly affecting at least ninety-five
percent (95%) of the Executive Employees of the Company).
(vi) For purposes of this Paragraph 1.(n), the term
"Executive Employee" shall mean those employees of the Company
of Grade Level 10 or above. (o) "Group" shall have the meaning
set forth in Section 14(d) of the Exchange Act. (p) "Group
Health Plan" shall mean the group health plan covering Mr.
Farris, as such plan may be amended from time to time.
(q) "Group Life Insurance Plan" shall mean the group life
insurance program covering Mr. Farris, as such plan may be amended from
time to time.
(r) "Incumbent Board" shall mean those individuals who
constitute the Southern Board as of the Effective Date plus any
individual who shall become a director subsequent to such date whose
election or nomination for election by Southern's shareholders was
approved by a vote of at least 75% of the directors then comprising the
Incumbent Board. Notwithstanding the foregoing, no individual who shall
become a director of the Southern Board subsequent to the Effective
Date whose initial assumption of office occurs as a result of an actual
or threatened election contest (within the meaning of Rule 14a-11 of
the Regulations promulgated under the Exchange Act) with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Southern Board shall be a member of the Incumbent Board.
(s) "Month of Service" shall mean any calendar month during
which Mr. Farris has worked at least one (1) hour or was on approved
leave of absence while in the employ of the Company or any affiliate or
subsidiary of Southern.
(t) "Pension Plan" shall mean The Southern Company Pension
Plan, as such plan may be amended from time to time.
(u) "Performance Dividend Plan" shall mean the Southern
Company Performance Dividend Plan or any replacement thereto, as such
plans may be amended from time to time.
(v) "Performance Stock Plan" shall mean the Southern Company
Performance Stock Plan or any replacement thereto, as such plans may be
amended from time to time.
(w) "Person" shall mean any individual, entity or group within
the meaning of Section 13(d)(3) or 14(d)(2) of Act. (x) "Performance
Pay Plan" or "PPP Plan" shall mean the Southern Company Performance Pay
Plan or any replacement thereto, as such plans may be amended from time
to time.
(y) "Productivity Improvement Plan" or "PIP Plan" shall mean
the Southern Company Productivity Improvement Plan or replacement
thereto, as such plans may be amended from time to time.
(z) "Southern" shall mean The Southern Company, its successors
and assigns.
(aa) "Southern Board" shall mean the board of directors of
Southern.
(bb) "Southern Subsidiary" shall mean any corporation or other
entity Controlled by Southern.
(cc) "Termination for Cause" or "Cause" shall mean the
termination of Mr. Farris's employment by the Company upon the
occurrence of any of the following:
(i) The willful and continued failure by Mr. Farris
substantially to perform his duties with the Company (other
than any such failure resulting from Mr. Farris's Total
Disability or from Mr. Farris's retirement or any such actual
or anticipated failure resulting from termination by Mr.
Farris for Good Reason) after a written demand for substantial
performance is delivered to him by the Southern Board, which
demand specifically identifies the manner in which the
Southern Board believes that he has not substantially
performed his duties; or
(ii) The willful engaging by Mr. Farris in conduct
that is demonstrably and materially injurious to the Company,
monetarily or otherwise, including, but not limited to any of
the following:
(A) any willful act involving fraud or
dishonesty in the course of Mr. Farris's employment
by the Company;
(B) the willful carrying out of any activity
or the making of any statement which would materially
prejudice or impair the good name and standing of the
Company, Southern or any Southern Subsidiary or would
bring the Company, Southern or any Southern
Subsidiary into contempt, ridicule or would
reasonably shock or offend any community in which the
Company, Southern or such Southern Subsidiary is
located;
(C) attendance at work in a state of
intoxication or otherwise being found in possession
at his workplace of any prohibited drug or substance,
possession of which would amount to a criminal
offense;
(D) violation of the Company's policies on
drug and alcohol usage, fitness for duty requirements
or similar policies as may exist from time to time as
adopted by the Company's safety officer;
(E) assault or other act of violence against
any person during the course of employment; or
(F) indictment of any felony or any
misdemeanor involving moral turpitude.
No act or failure to act by Mr. Farris shall be deemed
"willful" unless done, or omitted to be done, by Mr. Farris not in good
faith and without reasonable belief that his action or omission was in
the best interest of the Company.
Notwithstanding the foregoing, Mr. Farris shall not be deemed
to have been terminated for Cause unless and until there shall have
been delivered to him a copy of a resolution duly adopted by the
affirmative vote of not less than three quarters of the entire
membership of the Southern Board at a meeting of the Southern Board
called and held for such purpose (after reasonable notice to Mr. Farris
and an opportunity for him, together with counsel, to be heard before
the Southern Board), finding that, in the good faith opinion of the
Southern Board, Mr. Farris was guilty of conduct set forth above in
clause (i) or (ii) of this Paragraph 1.(bb) and specifying the
particulars thereof in detail.
(dd) "Termination Date" shall mean the date on which Mr.
Farris's employment with the Company is terminated; provided, however,
that solely for purposes of Paragraph 2.(c) hereof, the Termination
Date shall be the effective date of his retirement pursuant to the
terms of the Pension Plan.
(ee) "Total Disability" shall mean Mr. Farris's total
disability within the meaning of the Pension Plan.
(ff) "Voting Securities" shall mean the outstanding voting
securities of a corporation entitling the holder thereof to vote
generally in the election of such corporation's directors.
(gg) "Waiver and Release" shall mean the Waiver and Release
attached hereto as Exhibit B.
(hh) "Year of Service" shall mean Mr. Farris's Months of
Service divided by twelve (12) rounded to the nearest whole year,
rounding up if the remaining number of months is seven (7) or greater
and rounding down if the remaining number of months is less than seven
(7). If Mr. Farris has a break in his service with the Company, he will
receive credit under this Agreement for service prior to the break in
service only if the break in service is less than five years.
2. Severance Benefits.
(a) Eligibility. Except as otherwise provided in this
Paragraph 2.(a), if Mr. Farris's employment is involuntarily terminated
by the Company at any time during the two year period following a
Change in Control for reasons other than Cause, or if Mr. Farris
voluntarily terminates his employment with the Company for Good Reason
at any time during the two year period following a Change in Control,
Mr. Farris shall be entitled to receive the benefits described in this
Agreement upon the Company's receipt of an effective Waiver and
Release. Notwithstanding anything to the contrary herein, Mr. Farris
shall not be eligible to receive benefits under this Agreement if Mr.
Farris:
(i) voluntarily terminates his employment with the
Company for other than Good Reason;
(ii) has his employment terminated by the Company for
Cause;
(iii) accepts the transfer of his employment to
Southern, any Southern Subsidiary or any employer that
succeeds to all or substantially all of the assets of the
Company, Southern or any Southern Subsidiary;
(iv) refuses an offer of continued employment with
the Company, any Southern Subsidiary, or any employer that
succeeds to all or substantially all of the assets of the
Company, Southern, or any Southern Subsidiary under
circumstances where such refusal would not amount to Good
Reason for voluntary termination of employment; or
(v) elects to receive the benefits of any other
voluntary or involuntary severance or separation program
maintained by the Company; provided however, that the receipt
of benefits under the terms of any retention plan or agreement
shall not be deemed to be the receipt of severance or
separation benefits for purposes of this Agreement. (b)
Severance Benefits. If Mr. Farris meets the eligibility
requirements of Paragraph 2.(a) hereof, he shall be entitled
to a cash severance benefit in an amount equal to three times
his Annual Compensation (the "Severance Amount"). If any
portion of the Severance Amount constitutes an "excess
parachute payment" (as such term is defined under Code Section
280G ("Excess Parachute Payment")), the Company shall pay to
Mr. Farris an additional amount calculated by determining the
amount of tax under Code Section 4999 that he otherwise would
have paid on any Excess Parachute Payment with respect to the
Change in Control and dividing such amount by a decimal
determined by adding the tax rate under Code Section 4999
("Excise Tax"), the hospital insurance tax under Code Section
3101(b) ("HI Tax") and federal and state income tax measured
at the highest marginal rates ("Income Tax") and subtracting
such result from the number one (1) (the "280G Gross-up");
provided, however, that no 280G Gross-up shall be paid unless
the Severance Amount plus all other "parachute payments" to
Mr. Farris under Code Section 280G exceeds three (3) times Mr.
Farris's "base amount" (as such term is defined under Code
Section 280G ("Base Amount")) by ten percent (10%) or more;
provided further, that if no 280G Gross-up is paid, the
Severance Amount shall be capped at three (3) times Mr.
Farris's Base Amount, less all other "parachute payments" (as
such term is defined under Code Section 280G) received by Mr.
Farris, less one dollar (the "Capped Amount"), if the Capped
Amount, reduced by HI Tax and Income Tax, exceeds what
otherwise would have been the Severance Amount, reduced by HI
Tax, Income Tax and Excise Tax.
For purposes of this Paragraph 2.(b), whether any amount would
constitute an Excess Parachute Payment and any other calculations of
tax, e.g., Excise Tax, HI Tax, Income Tax, etc., or other amounts e.g.,
Base Amount, Capped Amount, etc., shall be determined by the tax
department of the independent public accounting firm then responsible
for preparing Southern's consolidated federal income tax return, and
such calculations or determinations shall be binding upon the parties
hereto.
(c) Welfare Benefits. If Mr. Farris meets the eligibility
requirements of Paragraph 2.(a) hereof and is not otherwise eligible to
receive retiree medical and life insurance benefits provided to certain
retirees pursuant to the terms of the Pension Plan, the Group Health
Plan and the Group Life Insurance Plan, he shall be entitled to the
benefits set forth in this Paragraph 2.(c).
(i) Mr. Farris shall be eligible to participate in
the Company's Group Health Plan, upon payment of both the
Company's and his monthly premium under such plan, for a
period of six (6) months for each of Mr. Farris's Years of
Service, not to exceed five (5) years. If Mr. Farris elects to
receive this extended medical coverage, he shall also be
entitled to elect coverage under the Group Health Plan for his
dependents who were participating in the Group Health Plan on
Mr. Farris's Termination Date (and for such other dependents
as may be entitled to coverage under the provisions of the
Health Insurance Portability and Accountability Act of 1996)
for the duration of Mr. Farris's extended medical coverage
under this Paragraph 2.(c)(i) to the extent such dependents
remain eligible for dependent coverage under the terms of the
Group Health Plan.
(A) The extended medical coverage afforded
to Mr. Farris pursuant to Paragraph 2.(c)(i), as well
as the premiums to be paid by Mr. Farris in
connection with such coverage shall be determined in
accordance with the terms of the Group Health Plan
and shall be subject to any changes in the terms and
conditions of the Group Health Plan as well as any
future increases in premiums under the Group Health
Plan. The premiums to be paid by Mr. Farris in
connection with this extended coverage shall be due
on the first day of each month; provided, however,
that if he fails to pay his premium within thirty
(30) days of its due date, such extended coverage
shall be terminated.
(B) Any Group Health Plan coverage provided
under Paragraph 2.(c)(i) shall be a part of and not
in addition to any COBRA Coverage which Mr. Farris or
his dependents may elect. In the event that Mr.
Farris or his dependents become eligible to be
covered, by virtue of re-employment or otherwise, by
any employer-sponsored group health plan or is
eligible for coverage under any government-sponsored
health plan during the above period, coverage under
the Company's Group Health Plan available to Mr.
Farris or his dependents by virtue of the provisions
of Paragraph 2.(c)(i) shall terminate, except as may
otherwise be required by law, and shall not be
renewed. (ii) Mr. Farris shall be entitled to receive
cash in an amount equal to the Company's and Mr.
Farris's cost of premiums for three (3) years of
coverage under the Group Health Plan and Group Life
Insurance Plan in accordance with the terms of such
plans as of the date of the Change in Control.
(d) Incentive Plans. If Mr. Farris meets the eligibility
requirements of Paragraph 2.(a) hereof he shall be entitled to the
following benefits under the Company's incentive plans:
(i) Stock Option Plan.
(A) Any of Mr. Farris's Options and Stock
Appreciation Rights under the Performance Stock Plan
(the defined terms of which are incorporated in this
Paragraph 2.(d)(i) by reference) which are
outstanding as of the Termination Date and which are
not then exercisable and vested, shall become fully
exercisable and vested to the full extent of the
original grant; provided, that in the case of a Stock
Appreciation Right, if Mr. Farris is subject to
Section 16(b) of the Exchange Act, such Stock
Appreciation Right shall not become fully vested and
exercisable at such time if such actions would result
in liability to Mr. Farris under Section 16(b) of the
Exchange Act, provided further, that any such actions
not taken as a result of the rules under Section
16(b) of the Exchange Act shall be effected as of the
first date that such activity would no longer result
in liability under Section 16(b) of the Exchange Act.
(B) The restrictions and deferral
limitations applicable to any of Farris' Restricted
Stock as of the Termination Date shall lapse, and
such Restricted Stock shall become free of all
restrictions and limitations and become fully vested
and transferable to the full extent of the original
grant.
(C) The restrictions and deferral
limitations and other conditions applicable to any
other Awards held by Mr. Farris under the Stock
Performance Plan as of the Termination Date shall
lapse, and such other Awards shall become free of all
restrictions, limitations or conditions and become
fully vested and transferable to the full extent of
the original grant. (ii) Performance Pay Plan.
Provided Mr. Farris is not entitled to benefits under
Article V of the PPP Plan, (the defined terms of
which are incorporated in this Paragraph 2.(d)(ii) by
reference), if the PPP Plan is in place through Mr.
Farris's Termination Date and to the extent Mr.
Farris is entitled to participate therein, Mr. Farris
shall be entitled to receive cash in an amount equal
to a prorated payout of his Incentive Pay Awards
under the PPP Plan for the Performance Period in
which the Termination Date shall have occurred, at
target performance under the PPP Plan and prorated by
the number of months which have passed since the
beginning of the Performance Period until the
Termination Date.
(iii) PIP Plan. Provided Mr. Farris is not entitled
to benefits under Article IV of the PIP Plan (the defined
terms of which are incorporated in this Paragraph 2.(d)(iii)
by reference), if the PIP Plan is in place through Mr.
Farris's Termination Date and to the extent Mr. Farris is
entitled to participate therein, Mr. Farris shall be entitled
to receive cash in an amount equal to his Award Opportunity
for the Computation Periods in which the Termination Date
shall have occurred at a target Value of Performance Unit of
$1.00, prorated for each Computation Period by the number of
months which have passed since the beginning of the
Computation Periods until the Termination Date.
(iv) Performance Dividend Plan. Provided Mr. Farris
is not entitled to benefits under the Performance Dividend
Plan (the defined terms of which are incorporated in this
Paragraph 2.(d)(iv) by reference), if the Performance Dividend
Plan is in place through Mr. Farris's Termination Date and to
the extent Mr. Farris is entitled to participate therein, Mr.
Farris shall be entitled to receive cash for each Award held
by Mr. Farris on his Termination Date, based on actual
performance under Section 4.1 of the Performance Dividend Plan
determined as of the most recently completed calendar quarter
of the Performance Period in which the Termination Date shall
have occurred, and the Annual Dividend declared prior to the
Termination Date.
(v) Other Short Term Incentive Plans. The provisions
of this Paragraph 2.(d)(v) shall apply if and to the extent
that Mr. Farris is a participant in any other "short term
compensation plan" not otherwise previously referred to in
this Paragraph 2.(d). Provided Mr. Farris is not otherwise
entitled to a plan payout under any change of control
provisions of such plans, if the "short term compensation
plan" is in place as of the Termination Date and to the extent
Mr. Farris is entitled to participate therein, Mr. Farris
shall receive cash in an amount equal to his award under the
Company's "short term incentive plan" for the annual
performance period in which the Termination Date shall have
occurred, at Mr. Farris's target performance level and
prorated by the number of months which have passed since the
beginning of the annual performance period until his
Termination Date. For purposes of this Paragraph 2.(d)(v) the
term "short term incentive compensation plan" shall mean any
incentive compensation plan or arrangement adopted in writing
by the Company which provides for annual, recurring
compensatory bonuses based upon articulated performance
criteria. (e) Payment of Benefits. Any amounts due under this
Agreement shall be paid in one (1) lump sum payment as soon as
administratively practicable following the later of: (i) Mr.
Farris's Termination Date, or (ii) upon Mr. Farris's tender of
an effective Waiver and Release to the Company in the form of
Exhibit B attached hereto and the expiration of any applicable
revocation period for such waiver. In the event of a dispute
with respect to liability or amount of any benefit due
hereunder, an effective Waiver and Release shall be tendered
at the time of final resolution of any such dispute when
payment is tendered by the Company.
(f) Benefits in the Event of Death. In the event of Mr.
Farris's death prior to the payment of all amounts due under this
Agreement, Mr. Farris's estate shall be entitled to receive as due any
amounts not yet paid under this Agreement upon the tender by the
executor or administrator of the estate of an effective Waiver and
Release.
(g) Legal Fees. In the event of a dispute between Mr. Farris
and the Company with regard to any amounts due hereunder, if any
material issue in such dispute is finally resolved in Mr. Farris's
favor, the Company shall reimburse Mr. Farris's legal fees incurred
with respect to all issues in such dispute in an amount not to exceed
fifty thousand dollars ($50,000).
(h) Employee Outplacement Services. Mr. Farris shall be
eligible to participate in the Employee Outplacement Program, which
program shall not be less than six (6) months duration measured from
Mr. Farris's Termination Date.
(i) Non-qualified Retirement and Deferred Compensation Plans.
The Parties agree that subsequent to a Change in Control, any claims by
Mr. Farris for benefits under any of the Company's non-qualified
retirement or deferred compensation plans shall be resolved through
binding arbitration in accordance with the provisions and procedures
set forth in Paragraph 5 hereof and if any material issue in such
dispute is finally resolved in Mr. Farris' favor, the Company shall
reimburse Mr. Farris' legal fees in the manner provided in Paragraph
2.(g) hereof.
3. Transfer of Employment. In the event that Mr. Farris's employment by
the Company is terminated during the two year period following a Change in
Control and Mr. Farris accepts employment by Southern, a Southern Subsidiary, or
any employer that succeeds to all or substantially all of the assets of the
Company, Southern or any Southern Subsidiary, the Company shall assign this
Agreement to Southern, such Southern Subsidiary, or successor employer, Southern
shall accept such assignment or cause such Southern Subsidiary or successor
employer to accept such assignment, and such assignee shall become the "Company"
for all purposes hereunder.
4. No Mitigation. If Mr. Farris is otherwise eligible to receive
benefits under Paragraph 2 of this Agreement, he shall have no duty or
obligation to seek other employment following his Termination Date and, except
as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr. Farris
hereunder shall not be reduced or suspended if Mr. Farris accepts such
subsequent employment.
5. Arbitration.
(a) Any dispute, controversy or claim arising out of or
relating to the Company's obligations to pay severance benefits under
this Agreement, or the breach thereof, shall be settled and resolved
solely by arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association ("AAA") except as
otherwise provided herein. The arbitration shall be the sole and
exclusive forum for resolution of any such claim for severance benefits
and the arbitrators' award shall be final and binding. The provisions
of this Paragraph 5 are not intended to apply to any other disputes,
claims or controversies arising out of or relating to Mr. Farris's
employment by the Company or the termination thereof.
(b) Arbitration shall be initiated by serving a written notice
of demand for arbitration to Mr. Farris, in the case of the Company, or
to the Southern Board, in the case of Mr. Farris.
(c) The arbitration shall be held in Atlanta, Georgia. The
arbitrators shall apply the law of the State of Georgia, to the extent
not preempted by federal law, excluding any law which would require the
application of the law of another state.
(d) The parties shall appoint arbitrators within fifteen (15)
business days following service of the demand for arbitration. The
number of arbitrators shall be three. One arbitrator shall be appointed
by Mr. Farris, one arbitrator shall be appointed by the Company, and
the two arbitrators shall appoint a third. If the arbitrators cannot
agree on a third arbitrator within thirty (30) business days after the
service of demand for arbitration, the third arbitrator shall be
selected by the AAA.
(e) The arbitration filing fee shall be paid by Mr. Farris.
All other costs of arbitration shall be borne equally by Mr. Farris and
the Company, provided, however, that the Company shall reimburse such
fees and costs in the event any material issue in such dispute is
finally resolved in Mr. Farris's favor and Mr. Farris is reimbursed
legal fees under Paragraph 2.(g) hereof.
(f) The parties agree that they will faithfully observe the
rules that govern any arbitration between them, they will abide by and
perform any award rendered by the arbitrators in any such arbitration,
including any award of injunctive relief, and a judgment of a court
having jurisdiction may be entered upon an award.
(g) The parties agree that nothing in this Paragraph 5 is
intended to preclude upon application of either party any court having
jurisdiction from issuing and enforcing in any lawful manner such
temporary restraining orders, preliminary injunctions, and other
interim measures of relief as may be necessary to prevent harm to a
party's interests or as otherwise may be appropriate pending the
conclusion of arbitration proceedings pursuant to this Agreement;
regardless of whether an arbitration proceeding under this Paragraph 5
has begun. The parties further agree that nothing herein shall prevent
any court from entering and enforcing in any lawful manner such
judgments for permanent equitable relief as may be necessary to prevent
harm to a party's interests or as otherwise may be appropriate
following the issuance of arbitral awards pursuant to this Paragraph 5.
<PAGE>
6. Miscellaneous.
(a) Funding of Benefits. Unless the Board in its discretion
shall determine otherwise, the benefits payable to Mr. Farris under
this Agreement shall not be funded in any manner and shall be paid by
the Company out of its general assets, which assets are subject to the
claims of the Company's creditors.
(b) Withholding. There shall be deducted from the payment of
any benefit due under this Agreement the amount of any tax required by
any governmental authority to be withheld and paid over by the Company
to such governmental authority for the account of Mr. Farris.
(c) Assignment. Mr. Farris shall have no rights to sell,
assign, transfer, encumber, or otherwise convey the right to receive
the payment of any benefit due hereunder, which payment and the rights
thereto are expressly declared to be nonassignable and nontransferable.
Any attempt to do so shall be null and void and of no effect.
(d) Amendment and Termination. The Agreement may be amended or
terminated only by a writing executed by the parties.
(e) Construction. This Agreement shall be construed in
accordance with and governed by the laws of the State of Georgia, to
the extent not preempted by federal law, disregarding any provision of
law which would require the application of the law of another state.
(f) Pooling Accounting. Notwithstanding anything to the
contrary herein, if, but for any provision of this Agreement, a Change
in Control transaction would otherwise be accounted for as a
pooling-of-interests under APB No.16 ("Pooling Accounting") (after
giving effect to any and all other facts and circumstances affecting
whether such Change in Control transaction would use Pooling
Accounting), such provision or provisions of this Agreement which would
otherwise cause the Change in Control transaction to be ineligible for
Pooling Accounting shall be void and ineffective in such a manner and
to the extent that by eliminating such provision or provisions of this
Agreement, Pooling Accounting would be required for such Change in
Control transaction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
this ____ day of __________________, 199__.
THE SOUTHERN COMPANY
By: ____________________________________
ALABAMA POWER COMPANY
By: ____________________________________
MR. FARRIS
-----------------------------
Banks Harry Farris
<PAGE>
Exhibit A
CHANGE IN CONTROL AGREEMENT
Target Annual Bonus for
Mr. Banks Harry Farris
45%
<PAGE>
Exhibit B
CHANGE IN CONTROL AGREEMENT
Waiver and Release
The attached Waiver and Release is to be given to Mr. Banks Harry
Farris upon the occurrence of an event that triggers eligibility for severance
benefits under the Change in Control Agreement, as described in Paragraph 2(a)
of such agreement.
<PAGE>
CHANGE IN CONTROL AGREEMENT
Waiver and Release
I, Banks Harry Farris, understand that I am entitled to receive the
severance benefits described in Section 2 of the Change in Control Agreement
(the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand
that the benefits I will receive under the Agreement are in excess of those I
would have received from The Southern Company and Alabama Power Company
(collectively, the "Company") if I had not elected to sign this Waiver.
I recognize that I may have a claim against the Company under the Civil
Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the
Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended,
the Americans with Disabilities Act or other federal, state and local laws.
In exchange for the benefits I elect to receive, I hereby irrevocably
waive and release all claims, of any kind whatsoever, whether known or unknown
in connection with any claim which I ever had, may have, or now have against The
Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power
Company, Mississippi Power Company, Savannah Electric and Power Company,
Southern Communication Services, Inc., Southern Company Services, Inc., Southern
Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern
Nuclear Operating Company, Inc. and other direct or indirect subsidiaries of The
Southern Company and their past, present and future officers, directors,
employees, agents and attorneys. Nothing in this Waiver shall be construed to
release claims or causes of action under the Age Discrimination in Employment
Act or the Energy Reorganization Act of 1974, as amended, which arise out of
events occurring after the execution date of this Waiver.
In further exchange for the benefits I elect to receive, I understand
and agree that I will respect the proprietary and confidential nature of any
information I have obtained in the course of my service with the Company or any
subsidiary or affiliate of The Southern Company. However, nothing in this Waiver
shall prohibit me from engaging in protected activities under applicable law or
from communicating, either voluntary or otherwise, with any governmental agency
concerning any potential violation of the law.
In signing this Waiver, I am not releasing claims to benefits that I am
already entitled to under any workers' compensation laws or under any retirement
plan or welfare benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, as amended, which is sponsored by or adopted by the
Company and/or any of its direct or indirect subsidiaries; however, I understand
and acknowledge that nothing herein is intended to or shall be construed to
require the Company to institute or continue in effect any particular plan or
benefit sponsored by the Company and the Company hereby reserves the right to
amend or terminate any of its benefit programs at any time in accordance with
the procedures set forth in such plans.
In signing this Waiver, I realize that I am waiving and releasing,
among other things, any claims to benefits under any and all bonus, severance,
workforce reduction, early retirement, outplacement, or any other similar type
plan sponsored by the Company.
I have been encouraged and advised in writing to seek advice from
anyone of my choosing regarding this Waiver, including my attorney, and my
accountant or tax advisor. Prior to signing this Waiver, I have been given the
opportunity and sufficient time to seek such advice, and I fully understand the
meaning and contents of this Waiver.
I understand that I may take up to twenty-one (21) calendar days to
consider whether or not I desire to enter this Waiver. I was not coerced,
threatened or otherwise forced to sign this Waiver. I have made my choice to
sign this Waiver voluntarily and of my own free will.
I understand that I may revoke this Waiver at any time during the seven
(7) calendar day period after I sign and deliver this Waiver to the Company. If
I revoke this Waiver, I must do so in writing delivered to the Company. I
understand that this Waiver is not effective until the expiration of this seven
(7) calendar day revocation period. I understand that upon the expiration of
such seven (7) calendar day revocation period this entire Waiver will be binding
upon me and will be irrevocable.
I understand that by signing this Waiver I am giving up rights I may
have.
IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this
____ day of ____________________, in the year _____.
Banks Harry Farris
Sworn to and subscribed to me this ____ day of ____________, _____.
Notary Public
My Commission Expires:
(Notary Seal)
Acknowledged and Accepted by the Company, as defined in the Waiver.
By:
Date:
EXHIBIT 10(a)89
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT ("Agreement") made and entered into by
and between The Southern Company ("Southern"), Georgia Power Company (the
"Company") and Mr. Henry Allen Franklin ("Mr. Franklin").
W I T N E S S E T H:
WHEREAS, Mr. Franklin is the Chief Executive Officer of the Company;
WHEREAS, the Company wishes to provide to Mr. Franklin certain
severance benefits under certain circumstances following a change in control (as
defined herein) of Southern or the Company;
NOW, THEREFORE, in consideration of the premises, and the agreements of
the parties set forth in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) "Annual Compensation" shall mean Mr. Franklin's highest
annual base salary rate for the twelve (12) month period immediately
preceding the date of the Change in Control plus market level target
annual bonus as set forth on Exhibit A hereof.
(b) "Beneficial Ownership" shall mean beneficial ownership
within the meaning of Rule 13d-3 promulgated under the Exchange Act.
(c) "Board" shall mean the board of directors of the Company.
(d) "Business Combination" shall mean a reorganization, merger
or consolidation of Southern or sale or other disposition of all or
substantially all of the assets of Southern.
(e) "Change in Control" shall mean any of the following:
(i) The Consummation of an acquisition by any Person
of Beneficial Ownership of 20% or more of Southern's Voting
Securities; provided, however, that for purposes of this
Paragraph 1.(e)(i), the following acquisitions of Southern's
Voting Securities shall not constitute a Change in Control:
(A) any acquisition directly from Southern;
(B) any acquisition by Southern;
(C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by
Southern or any Southern Subsidiary;
(D) any acquisition by a qualified pension
plan or publicly held mutual fund;
(E) any acquisition by a Group composed
exclusively of employees of Southern, or any Southern
Subsidiary;
(F) any acquisition by Mr. Franklin or any
Group of which Mr. Franklin is a party; or
(G) any Business Combination which would not
otherwise constitute a change in control because of
the application of clauses (A), (B) and (C) of
Paragraph 1.(e)(iii);
(ii) A change in the composition of the Southern
Board whereby individuals who constitute the Incumbent Board
cease for any reason to constitute at least a majority of the
Southern Board;
(iii) Consummation of a Business Combination,
provided, however, that such a Business Combination shall not
constitute a Change in Control if all three (3) of the
following conditions are met:
(A) all or substantially all of the
individuals and entities who held Beneficial
Ownership, respectively, of Southern's Voting
Securities immediately prior to such Business
Combination beneficially own, directly or indirectly,
65% or more of the combined voting power of the
Voting Securities of the corporation surviving or
resulting from such Business Combination, (including,
without limitation, a corporation which as a result
of such transaction holds Beneficial Ownership of all
or substantially all of Southern's Voting Securities
or all or substantially all of Southern's assets)
(such surviving or resulting corporation to be
referred to as "Surviving Company"), in substantially
the same proportions as their ownership, immediately
prior to such Business Combination, of Southern's
Voting Securities;
(B) no Person (excluding any corporation
resulting from such Business Combination, any
employee benefit plan (or related trust) of Southern,
any Southern Subsidiary or Surviving Company, Mr.
Franklin, any Group of which Mr. Franklin is a party,
any Group composed exclusively of Company employees,
any qualified pension plan (or related trust) or any
publicly held mutual fund) holds Beneficial
Ownership, directly or indirectly, of 20% or more of
the combined voting power of the then outstanding
Voting Securities of Surviving Company except to the
extent that such ownership existed prior to the
Business Combination; and
(C) at least a majority of the members of
the board of directors of Surviving Company were
members of the Incumbent Board at the earlier of the
date of execution of the initial agreement, or of the
action of the Southern Board, providing for such
Business Combination. (iv) The Consummation of an
acquisition by any Person of Beneficial Ownership of
50% or more of the combined voting power of the then
outstanding Voting Securities of the Company;
provided, however, that for purposes of this
Paragraph 1.(e)(iv), any acquisition by Mr. Franklin,
any Group composed exclusively of employees of the
Company, any Group of which Mr. Franklin is a party,
any qualified pension plan (or related trust), any
publicly held mutual fund, any employee benefit plan
(or related trust) sponsored or maintained by
Southern or any Southern Subsidiary shall not
constitute a Change in Control;
(v) Consummation of a reorganization, merger or
consolidation of the Company (an "Employing Company Business
Combination"), in each case, unless, following such Employing
Company Business Combination, Southern Controls the
corporation or other entity surviving or resulting from such
Employing Company Business Combination; or
(vi) Consummation of the sale or other disposition of
all or substantially all of the assets of the Company to a
corporation or other entity which Southern does not Control.
(f) "COBRA Coverage" shall mean any continuation coverage to
which Mr. Franklin or his dependents may be entitled pursuant
to Code Section 4980B.
(g) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(h) "Company" shall mean Georgia Power Company, its successors
and assigns.
(i) "Consummation" shall mean the completion of the final act
necessary to complete a transaction as a matter of law, including, but
not limited to, any required approvals by the corporation's
shareholders and board of directors, the transfer of legal and
beneficial title to securities or assets and the final approval of the
transaction by any applicable domestic or foreign governments or
governmental agencies.
(j) "Control" shall mean, in the case of a corporation,
Beneficial Ownership of more than 50% of the combined voting power of
the corporation's Voting Securities, or in the case of any other
entity, Beneficial Ownership of more than 50% of such entity's voting
equity interests.
(k) "Effective Date" shall mean the date of execution of this
Agreement.
(l) "Employee Outplacement Program" shall mean the program
established by the Company from time to time for the purpose of
assisting participants covered by the plan in finding employment
outside of the Company which provides for the following services:
(i) self-assessment, career decision and goal
setting; (ii) job market research and job sources;
(iii) networking and interviewing skills; (iv)
planning and implementation strategy; (v) resume
writing, job hunting methods and salary negotiation;
and (vi) office support and job search resources.
(m) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(n) "Good Reason" shall mean, without Mr. Franklin's express
written consent, after written notice to the Board, and after a thirty
(30) day opportunity for the Board to cure, the continuing occurrence
of any of the following events:
(i) Inconsistent Duties. A meaningful and detrimental
alteration in Mr. Franklin's position or in the nature or
status of his responsibilities from those in effect
immediately prior to the Change in Control;
(ii) Reduced Salary. A reduction of five percent (5%)
or more by the Company in either of the following: (i) Mr.
Franklin's annual base salary rate as in effect immediately
prior to the Change in Control (except for a less than ten
percent (10%), across-the-board annual base salary rate
reduction similarly affecting at least ninety-five percent
(95%) of the Executive Employees of the Company); or (ii) the
sum of Mr. Franklin's annual base salary rate plus target
bonus under the PPP Plan (except for a less than ten percent
(10%), across-the-board reduction of annual base salary rate
plus target bonus under the PPP Plan similarly affecting at
least ninety-five percent (95%) of the Executive Employees of
the Company);
(iii) Pension and Compensation Plans. The failure by
the Company to continue in effect any pension or compensation
plan or agreement in which Mr. Franklin participates or is a
party as of the date of the Change in Control or the
elimination of Mr. Franklin's participation therein, (except
for across-the-board plan changes or terminations similarly
affecting at least ninety-five percent (95%) of the Executive
Employees of the Company); For purposes of this Paragraph
1.(n), a "pension plan or agreement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for payments upon retirement; and a
"compensation plan or arrangement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for periodic, non-discretionary compensatory
payments in the nature of bonuses.
(iv) Relocation. A change in Mr. Franklin's work
location to a location more than fifty (50) miles from the
office where Mr. Franklin is located at the time of the Change
in Control, unless such new work location is within fifty (50)
miles from Mr. Franklin's principal place of residence at the
time of the Change in Control. The acceptance, if any, by Mr.
Franklin of employment by the Company at a work location which
is outside the fifty mile radius set forth in this Paragraph
1.(n)(iv) shall not be a waiver of Mr. Franklin's right to
refuse subsequent transfer by the Company to a location which
is more than fifty (50) miles from Mr. Franklin's principal
place of residence at the time of the Change in Control, and
such subsequent unconsented transfer shall be "Good Reason"
under this Agreement; or
(v) Benefits and Perquisites. The taking of any
action by the Company which would directly or indirectly
materially reduce the benefits enjoyed by Mr. Franklin under
the Company's retirement, life insurance, medical, health and
accident, disability, deferred compensation or savings plans
in which Mr. Franklin was participating immediately prior to
the Change in Control; or the failure by the Company to
provide Mr. Franklin with the number of paid vacation days to
which Mr. Franklin is entitled on the basis of years of
service with the Company in accordance with the Company's
normal vacation policy in effect immediately prior to the
Change in Control (except for across-the-board plan or
vacation policy changes or plan terminations similarly
affecting at least ninety-five percent (95%) of the Executive
Employees of the Company).
(vi) For purposes of this Paragraph 1.(n), the term
"Executive Employee" shall mean employees of the Company of
Grade Level 10 or above. (o) "Group" shall have the meaning
set forth in Section 14(d) of the Exchange Act. (p) "Group
Health Plan" shall mean the group health plan covering Mr.
Franklin, as such plan may be amended from time to time.
(q) "Group Life Insurance Plan" shall mean the group life
insurance program covering Mr. Franklin, as such plan may be amended
from time to time.
(r) "Incumbent Board" shall mean those individuals who
constitute the Southern Board as of the Effective Date plus any
individual who shall become a director subsequent to such date whose
election or nomination for election by Southern's shareholders was
approved by a vote of at least 75% of the directors then comprising the
Incumbent Board. Notwithstanding the foregoing, no individual who shall
become a director of the Southern Board subsequent to the Effective
Date whose initial assumption of office occurs as a result of an actual
or threatened election contest (within the meaning of Rule 14a-11 of
the Regulations promulgated under the Exchange Act) with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Southern Board shall be a member of the Incumbent Board.
(s) "Month of Service" shall mean any calendar month during
which Mr. Franklin has worked at least one (1) hour or was on approved
leave of absence while in the employ of the Company or any affiliate or
subsidiary of Southern.
(t) "Pension Plan" shall mean The Southern Company Pension
Plan, as such plan may be amended from time to time.
(u) "Performance Dividend Plan" shall mean the Southern
Company Performance Dividend Plan or any replacement thereto, as such
plans may be amended from time to time.
(v) "Performance Stock Plan" shall mean the Southern Company
Performance Stock Plan or any replacement thereto, as such plans may be
amended from time to time.
(w) "Person" shall mean any individual, entity or group within
the meaning of Section 13(d)(3) or 14(d)(2) of Act.
(x) "Performance Pay Plan" or "PPP Plan" shall mean the
Southern Company Performance Pay Plan or any replacement thereto, as
such plans may be amended from time to time.
(y) "Productivity Improvement Plan" or "PIP Plan" shall mean
the Southern Company Productivity Improvement Plan or replacement
thereto, as such plans may be amended from time to time.
(z) "Southern" shall mean The Southern Company, its successors
and assigns.
(aa) "Southern Board" shall mean the board of directors of
Southern.
(bb) "Southern Subsidiary" shall mean any corporation or other
entity Controlled by Southern.
(cc) "Termination for Cause" or "Cause" shall mean the
termination of Mr. Franklin's employment by the Company upon the
occurrence of any of the following:
(i) The willful and continued failure by Mr. Franklin
substantially to perform his duties with the Company (other
than any such failure resulting from Mr. Franklin's Total
Disability or from Mr. Franklin's retirement or any such
actual or anticipated failure resulting from termination by
Mr. Franklin for Good Reason) after a written demand for
substantial performance is delivered to him by the Southern
Board, which demand specifically identifies the manner in
which the Southern Board believes that he has not
substantially performed his duties; or
(ii) The willful engaging by Mr. Franklin in conduct
that is demonstrably and materially injurious to the Company,
monetarily or otherwise, including, but not limited to any of
the following:
(A) any willful act involving fraud or
dishonesty in the course of Mr. Franklin's employment
by the Company;
(B) the willful carrying out of any activity
or the making of any statement which would materially
prejudice or impair the good name and standing of the
Company, Southern or any Southern Subsidiary or would
bring the Company, Southern or any Southern
Subsidiary into contempt, ridicule or would
reasonably shock or offend any community in which the
Company, Southern or such Southern Subsidiary is
located;
(C) attendance at work in a state of
intoxication or otherwise being found in possession
at his workplace of any prohibited drug or substance,
possession of which would amount to a criminal
offense;
(D) violation of the Company's policies on
drug and alcohol usage, fitness for duty requirements
or similar policies as may exist from time to time as
adopted by the Company's safety officer;
(E) assault or other act of violence against
any person during the course of employment; or
(F) indictment of any felony or any
misdemeanor involving moral turpitude.
No act or failure to act by Mr. Franklin shall be deemed
"willful" unless done, or omitted to be done, by Mr. Franklin not in
good faith and without reasonable belief that his action or omission
was in the best interest of the Company.
Notwithstanding the foregoing, Mr. Franklin shall not be
deemed to have been terminated for Cause unless and until there shall
have been delivered to him a copy of a resolution duly adopted by the
affirmative vote of not less than three quarters of the entire
membership of the Southern Board at a meeting of the Southern Board
called and held for such purpose (after reasonable notice to Mr.
Franklin and an opportunity for him, together with counsel, to be heard
before the Southern Board), finding that, in the good faith opinion of
the Southern Board, Mr. Franklin was guilty of conduct set forth above
in clause (i) or (ii) of this Paragraph 1.(cc) and specifying the
particulars thereof in detail.
(dd) "Termination Date" shall mean the date on which Mr.
Franklin's employment with the Company is terminated; provided,
however, that solely for purposes of Paragraph 2.(c) hereof, the
Termination Date shall be the effective date of his retirement pursuant
to the terms of the Pension Plan.
(ee) "Total Disability" shall mean Mr. Franklin's total
disability within the meaning of the Pension Plan.
(ff) "Voting Securities" shall mean the outstanding voting
securities of a corporation entitling the holder thereof to vote
generally in the election of such corporation's directors.
(gg) "Waiver and Release" shall mean the Waiver and Release
attached hereto as Exhibit B.
(hh) "Year of Service" shall mean Mr. Franklin's Months of
Service divided by twelve (12) rounded to the nearest whole year,
rounding up if the remaining number of months is seven (7) or greater
and rounding down if the remaining number of months is less than seven
(7). If Mr. Franklin has a break in his service with the Company, he
will receive credit under this Agreement for service prior to the break
in service only if the break in service is less than five years.
2. Severance Benefits.
(a) Eligibility. Except as otherwise provided in this
Paragraph 2.(a), if Mr. Franklin's employment is involuntarily
terminated by the Company at any time during the two year period
following a Change in Control for reasons other than Cause, or if Mr.
Franklin voluntarily terminates his employment with the Company for
Good Reason at any time during the two year period following a Change
in Control, Mr. Franklin shall be entitled to receive the benefits
described in this Agreement upon the Company's receipt of an effective
Waiver and Release. Notwithstanding anything to the contrary herein,
Mr. Franklin shall not be eligible to receive benefits under this
Agreement if Mr. Franklin:
(i) voluntarily terminates his employment with the
Company for other than Good Reason;
(ii) has his employment terminated by the Company for
Cause;
(iii) accepts the transfer of his employment to
Southern, any Southern Subsidiary or any employer that
succeeds to all or substantially all of the assets of the
Company, Southern or any Southern Subsidiary;
(iv) refuses an offer of continued employment with
the Company, any Southern Subsidiary, or any employer that
succeeds to all or substantially all of the assets of the
Company, Southern, or any Southern Subsidiary under
circumstances where such refusal would not amount to Good
Reason for voluntary termination of employment; or
(v) elects to receive the benefits of any other
voluntary or involuntary severance or separation program
maintained by the Company; provided however, that the receipt
of benefits under the terms of any retention plan or agreement
shall not be deemed to be the receipt of severance or
separation benefits for purposes of this Agreement. (b)
Severance Benefits. If Mr. Franklin meets the eligibility
requirements of Paragraph 2.(a) hereof, he shall be entitled
to a cash severance benefit in an amount equal to three times
his Annual Compensation (the "Severance Amount"). If any
portion of the Severance Amount constitutes an "excess
parachute payment" (as such term is defined under Code Section
280G ("Excess Parachute Payment")), the Company shall pay to
Mr. Franklin an additional amount calculated by determining
the amount of tax under Code Section 4999 that he otherwise
would have paid on any Excess Parachute Payment with respect
to the Change in Control and dividing such amount by a decimal
determined by adding the tax rate under Code Section 4999
("Excise Tax"), the hospital insurance tax under Code Section
3101(b) ("HI Tax") and federal and state income tax measured
at the highest marginal rates ("Income Tax") and subtracting
such result from the number one (1) (the "280G Gross-up");
provided, however, that no 280G Gross-up shall be paid unless
the Severance Amount plus all other "parachute payments" to
Mr. Franklin under Code Section 280G exceeds three (3) times
Mr. Franklin's "base amount" (as such term is defined under
Code Section 280G ("Base Amount")) by ten percent (10%) or
more; provided further, that if no 280G Gross-up is paid, the
Severance Amount shall be capped at three (3) times Mr.
Franklin's Base Amount, less all other "parachute payments"
(as such term is defined under Code Section 280G) received by
Mr. Franklin, less one dollar (the "Capped Amount"), if the
Capped Amount, reduced by HI Tax and Income Tax, exceeds what
otherwise would have been the Severance Amount, reduced by HI
Tax, Income Tax and Excise Tax.
For purposes of this Paragraph 2.(b), whether any amount would
constitute an Excess Parachute Payment and any other calculations of
tax, e.g., Excise Tax, HI Tax, Income Tax, etc., or other amounts,
e.g., Base Amount, Capped Amount, etc., shall be determined by the tax
department of the independent public accounting firm then responsible
for preparing Southern's consolidated federal income tax return, and
such calculations or determinations shall be binding upon the parties
hereto.
(c) Welfare Benefits. If Mr. Franklin meets the eligibility
requirements of Paragraph 2.(a) hereof and is not otherwise eligible to
receive retiree medical and life insurance benefits provided to certain
retirees pursuant to the terms of the Pension Plan, the Group Health
Plan and the Group Life Insurance Plan, he shall be entitled to the
benefits set forth in this Paragraph 2.(c).
(i) Mr. Franklin shall be eligible to participate in
the Company's Group Health Plan, upon payment of both the
Company's and his monthly premium under such plan, for a
period of six (6) months for each of Mr. Franklin's Years of
Service, not to exceed five (5) years. If Mr. Franklin elects
to receive this extended medical coverage, he shall also be
entitled to elect coverage under the Group Health Plan for his
dependents who were participating in the Group Health Plan on
Mr. Franklin's Termination Date (and for such other dependents
as may be entitled to coverage under the provisions of the
Health Insurance Portability and Accountability Act of 1996)
for the duration of Mr. Franklin's extended medical coverage
under this Paragraph 2.(c)(i) to the extent such dependents
remain eligible for dependent coverage under the terms of the
Group Health Plan.
(A) The extended medical coverage afforded
to Mr. Franklin pursuant to Paragraph 2.(c)(i), as
well as the premiums to be paid by Mr. Franklin in
connection with such coverage shall be determined in
accordance with the terms of the Group Health Plan
and shall be subject to any changes in the terms and
conditions of the Group Health Plan as well as any
future increases in premiums under the Group Health
Plan. The premiums to be paid by Mr. Franklin in
connection with this extended coverage shall be due
on the first day of each month; provided, however,
that if he fails to pay his premium within thirty
(30) days of its due date, such extended coverage
shall be terminated.
(B) Any Group Health Plan coverage provided
under Paragraph 2.(c)(i) shall be a part of and not
in addition to any COBRA Coverage which Mr. Franklin
or his dependents may elect. In the event that Mr.
Franklin or his dependents become eligible to be
covered, by virtue of re-employment or otherwise, by
any employer-sponsored group health plan or is
eligible for coverage under any government-sponsored
health plan during the above period, coverage under
the Company's Group Health Plan available to Mr.
Franklin or his dependents by virtue of the
provisions of Paragraph 2.(c)(i) shall terminate,
except as may otherwise be required by law, and shall
not be renewed. (ii) Mr. Franklin shall be entitled
to receive cash in an amount equal to the Company's
and Mr. Franklin's cost of premiums for three (3)
years of coverage under the Group Health Plan and
Group Life Insurance Plan in accordance with the
terms of such plans as of the date of the Change in
Control.
(d) Incentive Plans. If Mr. Franklin meets the eligibility
requirements of Paragraph 2.(a) hereof he shall be
entitled to the following benefits under the Company's incentive plans:
(i) Stock Option Plan.
(A) Any of Mr. Franklin's Options and Stock
Appreciation Rights under the Performance Stock Plan
(the defined terms of which are incorporated in this
Paragraph 2.(d)(i) by reference) which are
outstanding as of the Termination Date and which are
not then exercisable and vested, shall become fully
exercisable and vested to the full extent of the
original grant; provided, that in the case of a Stock
Appreciation Right, if Mr. Franklin is subject to
Section 16(b) of the Exchange Act, such Stock
Appreciation Right shall not become fully vested and
exercisable at such time if such actions would result
in liability to Mr. Franklin under Section 16(b) of
the Exchange Act, provided further, that any such
actions not taken as a result of the rules under
Section 16(b) of the Exchange Act shall be effected
as of the first date that such activity would no
longer result in liability under Section 16(b) of the
Exchange Act.
(B) The restrictions and deferral
limitations applicable to any of Franklin's
Restricted Stock as of the Termination Date shall
lapse, and such Restricted Stock shall become free of
all restrictions and limitations and become fully
vested and transferable to the full extent of the
original grant.
(C) The restrictions and deferral
limitations and other conditions applicable to any
other Awards held by Mr. Franklin under the Stock
Performance Plan as of the Termination Date shall
lapse, and such other Awards shall become free of all
restrictions, limitations or conditions and become
fully vested and transferable to the full extent of
the original grant. (ii) Performance Pay Plan.
Provided Mr. Franklin is not entitled to benefits
under Article V of the PPP Plan, (the defined terms
of which are incorporated in this Paragraph 2.(d)(ii)
by reference), if the PPP Plan is in place through
Mr. Franklin's Termination Date and to the extent Mr.
Franklin is entitled to participate therein, Mr.
Franklin shall be entitled to receive cash in an
amount equal to a prorated payout of his Incentive
Pay Awards under the PPP Plan for the Performance
Period in which the Termination Date shall have
occurred, at target performance under the PPP Plan
and prorated by the number of months which have
passed since the beginning of the Performance Period
until the Termination Date.
(iii) PIP Plan. Provided Mr. Franklin is not entitled
to benefits under Article IV of the PIP Plan (the defined
terms of which are incorporated in this Paragraph 2.(d)(iii)
by reference), if the PIP Plan is in place through Mr.
Franklin's Termination Date and to the extent Mr. Franklin is
entitled to participate therein, Mr. Franklin shall be
entitled to receive cash in an amount equal to his Award
Opportunity for the Computation Periods in which the
Termination Date shall have occurred at a target Value of
Performance Unit of $1.00, prorated for each Computation
Period by the number of months which have passed since the
beginning of each of the Computation Periods until the
Termination Date.
(iv) Performance Dividend Plan. Provided Mr. Franklin
is not entitled to benefits under the Performance Dividend
Plan (the defined terms of which are incorporated in this
Paragraph 2.(d)(iv) by reference), if the Performance Dividend
Plan is in place through Mr. Franklin's Termination Date and
to the extent Mr. Franklin is entitled to participate therein,
Mr. Franklin shall be entitled to receive cash for each Award
held by Mr. Franklin on his Termination Date, based on actual
performance under Section 4.1 of the Performance Dividend Plan
determined as of the most recently completed calendar quarter
of the Performance Period in which the Termination Date shall
have occurred, and the Annual Dividend declared prior to the
Termination Date.
(v) Other Short Term Incentive Plans. The provisions
of this Paragraph 2.(d)(v) shall apply if and to the extent
that Mr. Franklin is a participant in any other "short term
compensation plan" not otherwise previously referred to in
this Paragraph 2.(d). Provided Mr. Franklin is not otherwise
entitled to a plan payout under any change of control
provisions of such plans, if the "short term compensation
plan" is in place as of the Termination Date and to the extent
Mr. Franklin is entitled to participate therein, Mr. Franklin
shall receive cash in an amount equal to his award under the
Company's "short term incentive plan" for the annual
performance period in which the Termination Date shall have
occurred, at Mr. Franklin's target performance level and
prorated by the number of months which have passed since the
beginning of the annual performance period until his
Termination Date. For purposes of this Paragraph 2.(d)(v) the
term "short term incentive compensation plan" shall mean any
incentive compensation plan or arrangement adopted in writing
by the Company which provides for annual, recurring
compensatory bonuses based upon articulated performance
criteria. (e) Payment of Benefits. Any amounts due under this
Agreement shall be paid in one (1) lump sum payment as soon as
administratively practicable following the later of: (i) Mr.
Franklin's Termination Date, or (ii) upon Mr. Franklin's
tender of an effective Waiver and Release to the Company in
the form of Exhibit B attached hereto and the expiration of
any applicable revocation period for such waiver. In the event
of a dispute with respect to liability or amount of any
benefit due hereunder, an effective Waiver and Release shall
be tendered at the time of final resolution of any such
dispute when payment is tendered by the Company.
(f) Benefits in the Event of Death. In the event of Mr.
Franklin's death prior to the payment of all amounts due under this
Agreement, Mr. Franklin's estate shall be entitled to receive as due
any amounts not yet paid under this Agreement upon the tender by the
executor or administrator of the estate of an effective Waiver and
Release.
(g) Legal Fees. In the event of a dispute between Mr. Franklin
and the Company with regard to any amounts due hereunder, if any
material issue in such dispute is finally resolved in Mr. Franklin's
favor, the Company shall reimburse Mr. Franklin's legal fees incurred
with respect to all issues in such dispute in an amount not to exceed
fifty thousand dollars ($50,000).
(h) Employee Outplacement Services. Mr. Franklin shall be
eligible to participate in the Employee Outplacement Program, which
program shall not be less than six (6) months duration measured from
Mr. Franklin's Termination Date.
(i) Non-qualified Retirement and Deferred Compensation Plans.
The Parties agree that subsequent to a Change in Control, any claims by
Mr. Franklin for benefits under any of the Company's non-qualified
retirement or deferred compensation plans shall be resolved through
binding arbitration in accordance with the provisions and procedures
set forth in Paragraph 5 hereof and if any material issue in such
dispute is finally resolved in Mr. Franklin's favor, the Company shall
reimburse Mr. Franklin's legal fees in the manner provided in Paragraph
2.(g) hereof. 3. Transfer of Employment. In the event that Mr.
Franklin's employment by the Company is terminated during the two year
period following a Change in Control and Mr. Franklin accepts
employment by Southern, a Southern Subsidiary, or any employer that
succeeds to all or substantially all of the assets of the Company,
Southern or any Southern Subsidiary, the Company shall assign this
Agreement to Southern, such Southern Subsidiary, or successor employer,
Southern shall accept such assignment or cause such Southern Subsidiary
or successor employer to accept such assignment, and such assignee
shall become the "Company" for all purposes hereunder.
4. No Mitigation. If Mr. Franklin is otherwise eligible to receive
benefits under Paragraph 2 of this Agreement, he shall have no duty or
obligation to seek other employment following his Termination Date and, except
as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr.
Franklin hereunder shall not be reduced or suspended if Mr. Franklin accepts
such subsequent employment.
5. Arbitration.
(a) Any dispute, controversy or claim arising out of or
relating to the Company's obligations to pay severance benefits under
this Agreement, or the breach thereof, shall be settled and resolved
solely by arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association ("AAA") except as
otherwise provided herein. The arbitration shall be the sole and
exclusive forum for resolution of any such claim for severance benefits
and the arbitrators' award shall be final and binding. The provisions
of this Paragraph 5 are not intended to apply to any other disputes,
claims or controversies arising out of or relating to Mr. Franklin's
employment by the Company or the termination thereof.
(b) Arbitration shall be initiated by serving a written notice
of demand for arbitration to Mr. Franklin, in the case of the Company,
or to the Southern Board, in the case of Mr. Franklin.
(c) The arbitration shall be held in Atlanta, Georgia. The
arbitrators shall apply the law of the State of Georgia, to the extent
not preempted by federal law, excluding any law which would require the
application of the law of another state.
(d) The parties shall appoint arbitrators within fifteen (15)
business days following service of the demand for arbitration. The
number of arbitrators shall be three. One arbitrator shall be appointed
by Mr. Franklin, one arbitrator shall be appointed by the Company, and
the two arbitrators shall appoint a third. If the arbitrators cannot
agree on a third arbitrator within thirty (30) business days after the
service of demand for arbitration, the third arbitrator shall be
selected by the AAA.
(e) The arbitration filing fee shall be paid by Mr. Franklin.
All other costs of arbitration shall be borne equally by Mr. Franklin
and the Company, provided, however, that the Company shall reimburse
such fees and costs in the event any material issue in such dispute is
finally resolved in Mr. Franklin's favor and Mr. Franklin is reimbursed
legal fees under Paragraph 2.(g) hereof.
(f) The parties agree that they will faithfully observe the
rules that govern any arbitration between them, they will abide by and
perform any award rendered by the arbitrators in any such arbitration,
including any award of injunctive relief, and a judgment of a court
having jurisdiction may be entered upon an award.
(g) The parties agree that nothing in this Paragraph 5 is
intended to preclude upon application of either party any court having
jurisdiction from issuing and enforcing in any lawful manner such
temporary restraining orders, preliminary injunctions, and other
interim measures of relief as may be necessary to prevent harm to a
party's interests or as otherwise may be appropriate pending the
conclusion of arbitration proceedings pursuant to this Agreement;
regardless of whether an arbitration proceeding under this Paragraph 5
has begun. The parties further agree that nothing herein shall prevent
any court from entering and enforcing in any lawful manner such
judgments for permanent equitable relief as may be necessary to prevent
harm to a party's interests or as otherwise may be appropriate
following the issuance of arbitral awards pursuant to this Paragraph 5.
6. Miscellaneous.
(a) Funding of Benefits. Unless the Board in its discretion
shall determine otherwise, the benefits payable to Mr. Franklin under
this Agreement shall not be funded in any manner and shall be paid by
the Company out of its general assets, which assets are subject to the
claims of the Company's creditors.
(b) Withholding. There shall be deducted from the payment of
any benefit due under this Agreement the amount of any tax required by
any governmental authority to be withheld and paid over by the Company
to such governmental authority for the account of Mr. Franklin.
(c) Assignment. Mr. Franklin shall have no rights to sell,
assign, transfer, encumber, or otherwise convey the right to receive
the payment of any benefit due hereunder, which payment and the rights
thereto are expressly declared to be nonassignable and nontransferable.
Any attempt to do so shall be null and void and of no effect.
(d) Amendment and Termination. The Agreement may be amended or
terminated only by a writing executed by the parties.
(e) Construction. This Agreement shall be construed in
accordance with and governed by the laws of the State of Georgia, to
the extent not preempted by federal law, disregarding any provision of
law which would require the application of the law of another state.
(f) Pooling Accounting. Notwithstanding anything to the
contrary herein, if, but for any provision of this Agreement, a Change
in Control transaction would otherwise be accounted for as a
pooling-of-interests under APB No.16 ("Pooling Accounting") (after
giving effect to any and all other facts and circumstances affecting
whether such Change in Control transaction would use Pooling
Accounting), such provision or provisions of this Agreement which would
otherwise cause the Change in Control transaction to be ineligible for
Pooling Accounting shall be void and ineffective in such a manner and
to the extent that by eliminating such provision or provisions of this
Agreement, Pooling Accounting would be required for such Change in
Control transaction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
this ____ day of __________________, 199__.
THE SOUTHERN COMPANY
By: ____________________________________
GEORGIA POWER COMPANY
By: ____________________________________
MR. FRANKLIN
-----------------------------
Henry Allen Franklin
<PAGE>
Exhibit A
CHANGE IN CONTROL AGREEMENT
Target Annual Bonus for
Mr. Henry Allen Franklin
65%
<PAGE>
Exhibit B
CHANGE IN CONTROL AGREEMENT
Waiver and Release
The attached Waiver and Release is to be given to Mr. Henry Allen
Franklin upon the occurrence of an event that triggers eligibility for severance
benefits under the Change in Control Agreement, as described in Paragraph 2(a)
of such agreement.
<PAGE>
CHANGE IN CONTROL AGREEMENT
Waiver and Release
I, Henry Allen Franklin, understand that I am entitled to receive the
severance benefits described in Section 2 of the Change in Control Agreement
(the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand
that the benefits I will receive under the Agreement are in excess of those I
would have received from The Southern Company and Georgia Power Company
(collectively, the "Company") if I had not elected to sign this Waiver.
I recognize that I may have a claim against the Company under the Civil
Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the
Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended,
the Americans with Disabilities Act or other federal, state and local laws.
In exchange for the benefits I elect to receive, I hereby irrevocably
waive and release all claims, of any kind whatsoever, whether known or unknown
in connection with any claim which I ever had, may have, or now have against The
Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power
Company, Mississippi Power Company, Savannah Electric and Power Company,
Southern Communication Services, Inc., Southern Company Services, Inc., Southern
Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern
Nuclear Operating Company, Inc. and other direct or indirect subsidiaries of The
Southern Company and their past, present and future officers, directors,
employees, agents and attorneys. Nothing in this Waiver shall be construed to
release claims or causes of action under the Age Discrimination in Employment
Act or the Energy Reorganization Act of 1974, as amended, which arise out of
events occurring after the execution date of this Waiver.
In further exchange for the benefits I elect to receive, I understand
and agree that I will respect the proprietary and confidential nature of any
information I have obtained in the course of my service with the Company or any
subsidiary or affiliate of The Southern Company. However, nothing in this Waiver
shall prohibit me from engaging in protected activities under applicable law or
from communicating, either voluntary or otherwise, with any governmental agency
concerning any potential violation of the law.
In signing this Waiver, I am not releasing claims to benefits that I am
already entitled to under any workers' compensation laws or under any retirement
plan or welfare benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, as amended, which is sponsored by or adopted by the
Company and/or any of its direct or indirect subsidiaries; however, I understand
and acknowledge that nothing herein is intended to or shall be construed to
require the Company to institute or continue in effect any particular plan or
benefit sponsored by the Company and the Company hereby reserves the right to
amend or terminate any of its benefit programs at any time in accordance with
the procedures set forth in such plans.
In signing this Waiver, I realize that I am waiving and releasing,
among other things, any claims to benefits under any and all bonus, severance,
workforce reduction, early retirement, outplacement, or any other similar type
plan sponsored by the Company.
I have been encouraged and advised in writing to seek advice from
anyone of my choosing regarding this Waiver, including my attorney, and my
accountant or tax advisor. Prior to signing this Waiver, I have been given the
opportunity and sufficient time to seek such advice, and I fully understand the
meaning and contents of this Waiver.
I understand that I may take up to twenty-one (21) calendar days to
consider whether or not I desire to enter this Waiver. I was not coerced,
threatened or otherwise forced to sign this Waiver. I have made my choice to
sign this Waiver voluntarily and of my own free will.
I understand that I may revoke this Waiver at any time during the seven
(7) calendar day period after I sign and deliver this Waiver to the Company. If
I revoke this Waiver, I must do so in writing delivered to the Company. I
understand that this Waiver is not effective until the expiration of this seven
(7) calendar day revocation period. I understand that upon the expiration of
such seven (7) calendar day revocation period this entire Waiver will be binding
upon me and will be irrevocable.
I understand that by signing this Waiver I am giving up rights I may
have.
IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this
____ day of ____________________, in the year _____.
Henry Allen Franklin
Sworn to and subscribed to me this ____ day of ____________, _____.
Notary Public
My Commission Expires:
(Notary Seal)
Acknowledged and Accepted by the Company, as defined in the Waiver.
By:
Date:
EXHIBIT 10(a)90
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT ("Agreement") made and entered into by
and between The Southern Company ("Southern"), Southern Nuclear Operating
Company, Inc. (the "Company") and Mr. William G. Hairston, III ("Mr. Hairston").
W I T N E S S E T H:
WHEREAS, Mr. Hairston is the President and Chief Executive Officer of
the Company;
WHEREAS, the Company wishes to provide to Mr. Hairston certain
severance benefits under certain circumstances following a change in control (as
defined herein) of Southern or the Company;
NOW, THEREFORE, in consideration of the premises, and the agreements of
the parties set forth in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) "Annual Compensation" shall mean Mr. Hairston's highest
annual base salary rate for the twelve (12) month period immediately
preceding the date of the Change in Control plus market level target
annual bonus as set forth on Exhibit A hereof.
(b) "Beneficial Ownership" shall mean beneficial ownership
within the meaning of Rule 13d-3 promulgated under the Exchange Act.
(c) "Board" shall mean the board of directors of the Company.
(d) "Business Combination" shall mean a reorganization, merger
or consolidation of Southern or sale or other disposition of all or
substantially all of the assets of Southern.
(e) "Change in Control" shall mean any of the following:
(i) The Consummation of an acquisition by any Person
of Beneficial Ownership of 20% or more of Southern's Voting
Securities; provided, however, that for purposes of this
Paragraph 1.(e)(i), the following acquisitions of Southern's
Voting Securities shall not constitute a Change in Control:
(A) any acquisition directly from Southern;
(B) any acquisition by Southern;
(C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by
Southern or any Southern Subsidiary;
(D) any acquisition by a qualified pension
plan or publicly held mutual fund;
(E) any acquisition by a Group composed
exclusively of employees of Southern, or any Southern
Subsidiary;
(F) any acquisition by Mr. Hairston or any
Group of which Mr. Hairston is a party; or
(G) any Business Combination which would not
otherwise constitute a change in control because of
the application of clauses (A), (B) and (C) of
Paragraph 1.(e)(iii);
(ii) A change in the composition of the Southern
Board whereby individuals who constitute the Incumbent Board
cease for any reason to constitute at least a majority of the
Southern Board;
(iii) Consummation of a Business Combination,
provided, however, that such a Business Combination shall not
constitute a Change in Control if all three (3) of the
following conditions are met:
(A) all or substantially all of the
individuals and entities who held Beneficial
Ownership, respectively, of Southern's Voting
Securities immediately prior to such Business
Combination beneficially own, directly or indirectly,
65% or more of the combined voting power of the
Voting Securities of the corporation surviving or
resulting from such Business Combination, (including,
without limitation, a corporation which as a result
of such transaction holds Beneficial Ownership of all
or substantially all of Southern's Voting Securities
or all or substantially all of Southern's assets)
(such surviving or resulting corporation to be
referred to as "Surviving Company"), in substantially
the same proportions as their ownership, immediately
prior to such Business Combination, of Southern's
Voting Securities;
(B) no Person (excluding any corporation
resulting from such Business Combination, any
employee benefit plan (or related trust) of Southern,
any Southern Subsidiary or Surviving Company, Mr.
Hairston, any Group of which Mr. Hairston is a party,
any Group composed exclusively of Company employees,
any qualified pension plan (or related trust) or any
publicly held mutual fund) holds Beneficial
Ownership, directly or indirectly, of 20% or more of
the combined voting power of the then outstanding
Voting Securities of Surviving Company except to the
extent that such ownership existed prior to the
Business Combination; and
(C) at least a majority of the members of
the board of directors of Surviving Company were
members of the Incumbent Board at the earlier of the
date of execution of the initial agreement, or of the
action of the Southern Board, providing for such
Business Combination. (iv) The Consummation of an
acquisition by any Person of Beneficial Ownership of
50% or more of the combined voting power of the then
outstanding Voting Securities of the Company;
provided, however, that for purposes of this
Paragraph 1.(e)(iv), any acquisition by Mr. Hairston,
any Group composed exclusively of employees of the
Company, any Group of which Mr. Hairston is a party,
any qualified pension plan (or related trust), any
publicly held mutual fund, any employee benefit plan
(or related trust) sponsored or maintained by
Southern or any Southern Subsidiary shall not
constitute a Change in Control;
(v) Consummation of a reorganization, merger or
consolidation of the Company (an "Employing Company Business
Combination"), in each case, unless, following such Employing
Company Business Combination, Southern Controls the
corporation or other entity surviving or resulting from such
Employing Company Business Combination; or
(vi) Consummation of the sale or other disposition of
all or substantially all of the assets of the Company to a
corporation or other entity which Southern does not Control.
(f) "COBRA Coverage" shall mean any continuation coverage to
which Mr. Hairston or his dependents may be entitled pursuant
to Code Section 4980B.
(g) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(h) "Company" shall mean Southern Nuclear Operating Company,
Inc., its successors and assigns.
(i) "Consummation" shall mean the completion of the final act
necessary to complete a transaction as a matter of law, including, but
not limited to, any required approvals by the corporation's
shareholders and board of directors, the transfer of legal and
beneficial title to securities or assets and the final approval of the
transaction by any applicable domestic or foreign governments or
governmental agencies.
(j) "Control" shall mean, in the case of a corporation,
Beneficial Ownership of more than 50% of the combined voting power of
the corporation's Voting Securities, or in the case of any other
entity, Beneficial Ownership of more than 50% of such entity's voting
equity interests.
(k) "Effective Date" shall mean the date of execution of this
Agreement.
(l) "Employee Outplacement Program" shall mean the program
established by the Company from time to time for the purpose of
assisting participants covered by the plan in finding employment
outside of the Company which provides for the following services:
(i) self-assessment, career decision and goal
setting; (ii) job market research and job sources;
(iii) networking and interviewing skills; (iv)
planning and implementation strategy; (v) resume
writing, job hunting methods and salary negotiation;
and (vi) office support and job search resources.
(m) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(n) "Good Reason" shall mean, without Mr. Hairston's express
written consent, after written notice to the Board, and after a thirty
(30) day opportunity for the Board to cure, the continuing occurrence
of any of the following events:
(i) Inconsistent Duties. A meaningful and detrimental
alteration in Mr. Hairston's position or in the nature or
status of his responsibilities from those in effect
immediately prior to the Change in Control;
(ii) Reduced Salary. A reduction of five percent (5%)
or more by the Company in either of the following: (i) Mr.
Hairston's annual base salary rate as in effect immediately
prior to the Change in Control (except for a less than ten
percent (10%), across-the-board annual base salary rate
reduction similarly affecting at least ninety-five percent
(95%) of the Executive Employees of the Company); or (ii) the
sum of Mr. Hairston's annual base salary rate plus target
bonus under the PPP Plan (except for a less than ten percent
(10%), across-the-board reduction of annual base salary rate
plus target bonus under the PPP Plan similarly affecting at
least ninety-five percent (95%) of the Executive Employees of
the Company);
(iii) Pension and Compensation Plans. The failure by
the Company to continue in effect any pension or compensation
plan or agreement in which Mr. Hairston participates or is a
party as of the date of the Change in Control or the
elimination of Mr. Hairston's participation therein, (except
for across-the-board plan changes or terminations similarly
affecting at least ninety-five percent (95%) of the Executive
Employees of the Company); For purposes of this Paragraph
1.(n), a "pension plan or agreement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for payments upon retirement; and a
"compensation plan or arrangement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for periodic, non-discretionary compensatory
payments in the nature of bonuses.
(iv) Relocation. A change in Mr. Hairston's work
location to a location more than fifty (50) miles from the
office where Mr. Hairston is located at the time of the Change
in Control, unless such new work location is within fifty (50)
miles from Mr. Hairston's principal place of residence at the
time of the Change in Control. The acceptance, if any, by Mr.
Hairston of employment by the Company at a work location which
is outside the fifty mile radius set forth in this Paragraph
1.(n)(iv) shall not be a waiver of Mr. Hairston's right to
refuse subsequent transfer by the Company to a location which
is more than fifty (50) miles from Mr. Hairston's principal
place of residence at the time of the Change in Control, and
such subsequent unconsented transfer shall be "Good Reason"
under this Agreement; or
(v) Benefits and Perquisites. The taking of any
action by the Company which would directly or indirectly
materially reduce the benefits enjoyed by Mr. Hairston under
the Company's retirement, life insurance, medical, health and
accident, disability, deferred compensation or savings plans
in which Mr. Hairston was participating immediately prior to
the Change in Control; or the failure by the Company to
provide Mr. Hairston with the number of paid vacation days to
which Mr. Hairston is entitled on the basis of years of
service with the Company in accordance with the Company's
normal vacation policy in effect immediately prior to the
Change in Control (except for across-the-board plan or
vacation policy changes or plan terminations similarly
affecting at least ninety-five percent (95%) of the Executive
Employees of the Company).
(vi) For purposes of this Paragraph 1.(n), the term
"Executive Employee" shall mean those employees of the Company
of Grade Level 10 or above. (o) "Group" shall have the meaning
set forth in Section 14(d) of the Exchange Act. (p) "Group
Health Plan" shall mean the group health plan covering Mr.
Hairston, as such plan may be amended from time to time.
(q) "Group Life Insurance Plan" shall mean the group life
insurance program covering Mr. Hairston, as such plan may be amended
from time to time.
(r) "Incumbent Board" shall mean those individuals who
constitute the Southern Board as of the Effective Date plus any
individual who shall become a director subsequent to such date whose
election or nomination for election by Southern's shareholders was
approved by a vote of at least 75% of the directors then comprising the
Incumbent Board. Notwithstanding the foregoing, no individual who shall
become a director of the Southern Board subsequent to the Effective
Date whose initial assumption of office occurs as a result of an actual
or threatened election contest (within the meaning of Rule 14a-11 of
the Regulations promulgated under the Exchange Act) with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Southern Board shall be a member of the Incumbent Board.
(s) "Month of Service" shall mean any calendar month during
which Mr. Hairston has worked at least one (1) hour or was on approved
leave of absence while in the employ of the Company or any affiliate or
subsidiary of Southern.
(t) "Pension Plan" shall mean The Southern Company Pension
Plan, as such plan may be amended from time to time.
(u) "Performance Dividend Plan" shall mean the Southern
Company Performance Dividend Plan or any replacement thereto, as such
plans may be amended from time to time.
(v) "Performance Stock Plan" shall mean the Southern Company
Performance Stock Plan or any replacement thereto, as such plans may be
amended from time to time.
(w) "Person" shall mean any individual, entity or group within
the meaning of Section 13(d)(3) or 14(d)(2) of Act.
(x) "Performance Pay Plan" or "PPP Plan" shall mean the
Southern Company Performance Pay Plan or any replacement thereto, as
such plans may be amended from time to time.
(y) "Productivity Improvement Plan" or "PIP Plan" shall mean
the Southern Company Productivity Improvement Plan or replacement
thereto, as such plans may be amended from time to time.
(z) "Southern" shall mean The Southern Company, its successors
and assigns.
(aa) "Southern Board" shall mean the board of directors of
Southern.
(bb) "Southern Subsidiary" shall mean any corporation or other
entity Controlled by Southern.
(cc) "Termination for Cause" or "Cause" shall mean the
termination of Mr. Hairston's employment by the Company upon the
occurrence of any of the following:
(i) The willful and continued failure by Mr. Hairston
substantially to perform his duties with the Company (other
than any such failure resulting from Mr. Hairston's Total
Disability or from Mr. Hairston's retirement or any such
actual or anticipated failure resulting from termination by
Mr. Hairston for Good Reason) after a written demand for
substantial performance is delivered to him by the Southern
Board, which demand specifically identifies the manner in
which the Southern Board believes that he has not
substantially performed his duties; or
(ii) The willful engaging by Mr. Hairston in conduct
that is demonstrably and materially injurious to the Company,
monetarily or otherwise, including, but not limited to any of
the following:
(A) any willful act involving fraud or
dishonesty in the course of Mr. Hairston's employment
by the Company;
(B) the willful carrying out of any activity
or the making of any statement which would materially
prejudice or impair the good name and standing of the
Company, Southern or any Southern Subsidiary or would
bring the Company, Southern or any Southern
Subsidiary into contempt, ridicule or would
reasonably shock or offend any community in which the
Company, Southern or such Southern Subsidiary is
located;
(C) attendance at work in a state of
intoxication or otherwise being found in possession
at his workplace of any prohibited drug or substance,
possession of which would amount to a criminal
offense;
(D) violation of the Company's policies on
drug and alcohol usage, fitness for duty requirements
or similar policies as may exist from time to time as
adopted by the Company's safety officer;
(E) assault or other act of violence against
any person during the course of employment; or
(F) indictment of any felony or any
misdemeanor involving moral turpitude.
No act or failure to act by Mr. Hairston shall be deemed
"willful" unless done, or omitted to be done, by Mr. Hairston not in
good faith and without reasonable belief that his action or omission
was in the best interest of the Company.
Notwithstanding the foregoing, Mr. Hairston shall not be
deemed to have been terminated for Cause unless and until there shall
have been delivered to him a copy of a resolution duly adopted by the
affirmative vote of not less than three quarters of the entire
membership of the Southern Board at a meeting of the Southern Board
called and held for such purpose (after reasonable notice to Mr.
Hairston and an opportunity for him, together with counsel, to be heard
before the Southern Board), finding that, in the good faith opinion of
the Southern Board, Mr. Hairston was guilty of conduct set forth above
in clause (i) or (ii) of this Paragraph 1.(cc) and specifying the
particulars thereof in detail.
(dd) "Termination Date" shall mean the date on which Mr.
Hairston's employment with the Company is terminated; provided,
however, that solely for purposes of Paragraph 2.(c) hereof, the
Termination Date shall be the effective date of his retirement pursuant
to the terms of the Pension Plan.
(ee) "Total Disability" shall mean Mr. Hairston's total
disability within the meaning of the Pension Plan.
(ff) "Voting Securities" shall mean the outstanding voting
securities of a corporation entitling the holder thereof to vote
generally in the election of such corporation's directors.
(gg) "Waiver and Release" shall mean the Waiver and Release
attached hereto as Exhibit B.
(hh) "Year of Service" shall mean Mr. Hairston's Months of
Service divided by twelve (12) rounded to the nearest whole year,
rounding up if the remaining number of months is seven (7) or greater
and rounding down if the remaining number of months is less than seven
(7). If Mr. Hairston has a break in his service with the Company, he
will receive credit under this Agreement for service prior to the break
in service only if the break in service is less than five years.
2. Severance Benefits.
(a) Eligibility. Except as otherwise provided in this
Paragraph 2.(a), if Mr. Hairston's employment is involuntarily
terminated by the Company at any time during the two year period
following a Change in Control for reasons other than Cause, or if Mr.
Hairston voluntarily terminates his employment with the Company for
Good Reason at any time during the two year period following a Change
in Control, Mr. Hairston shall be entitled to receive the benefits
described in this Agreement upon the Company's receipt of an effective
Waiver and Release. Notwithstanding anything to the contrary herein,
Mr. Hairston shall not be eligible to receive benefits under this
Agreement if Mr. Hairston:
(i) voluntarily terminates his employment with the
Company for other than Good Reason;
(ii) has his employment terminated by the Company for
Cause;
(iii) accepts the transfer of his employment to
Southern, any Southern Subsidiary or any employer that
succeeds to all or substantially all of the assets of the
Company, Southern or any Southern Subsidiary;
(iv) refuses an offer of continued employment with
the Company, any Southern Subsidiary, or any employer that
succeeds to all or substantially all of the assets of the
Company, Southern, or any Southern Subsidiary under
circumstances where such refusal would not amount to Good
Reason for voluntary termination of employment; or
(v) elects to receive the benefits of any other
voluntary or involuntary severance or separation program
maintained by the Company; provided however, that the receipt
of benefits under the terms of any retention plan or agreement
shall not be deemed to be the receipt of severance or
separation benefits for purposes of this Agreement. (b)
Severance Benefits. If Mr. Hairston meets the eligibility
requirements of Paragraph 2.(a) hereof, he shall be entitled
to a cash severance benefit in an amount equal to three times
his Annual Compensation (the "Severance Amount"). If any
portion of the Severance Amount constitutes an "excess
parachute payment" (as such term is defined under Code Section
280G ("Excess Parachute Payment")), the Company shall pay to
Mr. Hairston an additional amount calculated by determining
the amount of tax under Code Section 4999 that he otherwise
would have paid on any Excess Parachute Payment with respect
to the Change in Control and dividing such amount by a decimal
determined by adding the tax rate under Code Section 4999
("Excise Tax"), the hospital insurance tax under Code Section
3101(b) ("HI Tax") and federal and state income tax measured
at the highest marginal rates ("Income Tax") and subtracting
such result from the number one (1) (the "280G Gross-up");
provided, however, that no 280G Gross-up shall be paid unless
the Severance Amount plus all other "parachute payments" to
Mr. Hairston under Code Section 280G exceeds three (3) times
Mr. Hairston's "base amount" (as such term is defined under
Code Section 280G ("Base Amount")) by ten percent (10%) or
more; provided further, that if no 280G Gross-up is paid, the
Severance Amount shall be capped at three (3) times Mr.
Hairston's Base Amount, less all other "parachute payments"
(as such term is defined under Code Section 280G) received by
Mr. Hairston, less one dollar (the "Capped Amount"), if the
Capped Amount, reduced by HI Tax and Income Tax, exceeds what
otherwise would have been the Severance Amount, reduced by HI
Tax, Income Tax and Excise Tax.
For purposes of this Paragraph 2.(b), whether any amount would
constitute an Excess Parachute Payment and any other calculations of
tax, e.g., Excise Tax, HI Tax, Income Tax, etc., or other amounts e.g.,
Base Amount, Capped Amount, etc., shall be determined by the tax
department of the independent public accounting firm then responsible
for preparing Southern's consolidated federal income tax return, and
such calculations or determinations shall be binding upon the parties
hereto.
(c) Welfare Benefits. If Mr. Hairston meets the eligibility
requirements of Paragraph 2.(a) hereof and is not otherwise eligible to
receive retiree medical and life insurance benefits provided to certain
retirees pursuant to the terms of the Pension Plan, the Group Health
Plan and the Group Life Insurance Plan, he shall be entitled to the
benefits set forth in this Paragraph 2.(c).
(i) Mr. Hairston shall be eligible to participate in
the Company's Group Health Plan, upon payment of both the
Company's and his monthly premium under such plan, for a
period of six (6) months for each of Mr. Hairston's Years of
Service, not to exceed five (5) years. If Mr. Hairston elects
to receive this extended medical coverage, he shall also be
entitled to elect coverage under the Group Health Plan for his
dependents who were participating in the Group Health Plan on
Mr. Hairston's Termination Date (and for such other dependents
as may be entitled to coverage under the provisions of the
Health Insurance Portability and Accountability Act of 1996)
for the duration of Mr. Hairston's extended medical coverage
under this Paragraph 2.(c)(i) to the extent such dependents
remain eligible for dependent coverage under the terms of the
Group Health Plan.
(A) The extended medical coverage afforded
to Mr. Hairston pursuant to Paragraph 2.(c)(i), as
well as the premiums to be paid by Mr. Hairston in
connection with such coverage shall be determined in
accordance with the terms of the Group Health Plan
and shall be subject to any changes in the terms and
conditions of the Group Health Plan as well as any
future increases in premiums under the Group Health
Plan. The premiums to be paid by Mr. Hairston in
connection with this extended coverage shall be due
on the first day of each month; provided, however,
that if he fails to pay his premium within thirty
(30) days of its due date, such extended coverage
shall be terminated.
(B) Any Group Health Plan coverage provided
under Paragraph 2.(c)(i) shall be a part of and not
in addition to any COBRA Coverage which Mr. Hairston
or his dependents may elect. In the event that Mr.
Hairston or his dependents become eligible to be
covered, by virtue of re-employment or otherwise, by
any employer-sponsored group health plan or is
eligible for coverage under any government-sponsored
health plan during the above period, coverage under
the Company's Group Health Plan available to Mr.
Hairston or his dependents by virtue of the
provisions of Paragraph 2.(c)(i) shall terminate,
except as may otherwise be required by law, and shall
not be renewed. (ii) Mr. Hairston shall be entitled
to receive cash in an amount equal to the Company's
and Mr. Hairston's cost of premiums for three (3)
years of coverage under the Group Health Plan and
Group Life Insurance Plan in accordance with the
terms of such plans as of the date of the Change in
Control.
(d) Incentive Plans. If Mr. Hairston meets the
eligibility requirements of Paragraph 2.(a) hereof he shall be
entitled to the following benefits under the Company's
incentive plans:
(i) Stock Option Plan.
(A) Any of Mr. Hairston's Options and Stock
Appreciation Rights under the Performance Stock Plan
(the defined terms of which are incorporated in this
Paragraph 2.(d)(i) by reference) which are
outstanding as of the Termination Date and which are
not then exercisable and vested, shall become fully
exercisable and vested to the full extent of the
original grant; provided, that in the case of a Stock
Appreciation Right, if Mr. Hairston is subject to
Section 16(b) of the Exchange Act, such Stock
Appreciation Right shall not become fully vested and
exercisable at such time if such actions would result
in liability to Mr. Hairston under Section 16(b) of
the Exchange Act, provided further, that any such
actions not taken as a result of the rules under
Section 16(b) of the Exchange Act shall be effected
as of the first date that such activity would no
longer result in liability under Section 16(b) of the
Exchange Act.
(B) The restrictions and deferral
limitations applicable to any of Mr. Hairston's
Restricted Stock as of the Termination Date shall
lapse, and such Restricted Stock shall become free of
all restrictions and limitations and become fully
vested and transferable to the full extent of the
original grant.
(C) The restrictions and deferral
limitations and other conditions applicable to any
other Awards held by Mr. Hairston under the Stock
Performance Plan as of the Termination Date shall
lapse, and such other Awards shall become free of all
restrictions, limitations or conditions and become
fully vested and transferable to the full extent of
the original grant. (ii) Performance Pay Plan.
Provided Mr. Hairston is not entitled to benefits
under Article V of the PPP Plan, (the defined terms
of which are incorporated in this Paragraph 2.(d)(ii)
by reference), if the PPP Plan is in place through
Mr. Hairston's Termination Date and to the extent Mr.
Hairston is entitled to participate therein, Mr.
Hairston shall be entitled to receive cash in an
amount equal to a prorated payout of his Incentive
Pay Awards under the PPP Plan for the Performance
Period in which the Termination Date shall have
occurred, at target performance under the PPP Plan
and prorated by the number of months which have
passed since the beginning of the Performance Period
until the Termination Date.
(iii) PIP Plan. Provided Mr. Hairston is not entitled
to benefits under Article IV of the PIP Plan (the defined
terms of which are incorporated in this Paragraph 2.(d)(iii)
by reference), if the PIP Plan is in place through Mr.
Hairston's Termination Date and to the extent Mr. Hairston is
entitled to participate therein, Mr. Hairston shall be
entitled to receive cash in an amount equal to his Award
Opportunity for the Computation Periods in which the
Termination Date shall have occurred at a target Value of
Performance Unit of $1.00, prorated for each Computation
Period by the number of months which have passed since the
beginning of the Computation Periods until the Termination
Date.
(iv) Performance Dividend Plan. Provided Mr. Hairston
is not entitled to benefits under the Performance Dividend
Plan (the defined terms of which are incorporated in this
Paragraph 2.(d)(iv) by reference), if the Performance Dividend
Plan is in place through Mr. Hairston's Termination Date and
to the extent Mr. Hairston is entitled to participate therein,
Mr. Hairston shall be entitled to receive cash for each Award
held by Mr. Hairston on his Termination Date, based on actual
performance under Section 4.1 of the Performance Dividend Plan
determined as of the most recently completed calendar quarter
of the Performance Period in which the Termination Date shall
have occurred, and the Annual Dividend declared prior to the
Termination Date.
(v) Other Short Term Incentive Plans. The provisions
of this Paragraph 2.(d)(v) shall apply if and to the extent
that Mr. Hairston is a participant in any other "short term
compensation plan" not otherwise previously referred to in
this Paragraph 2.(d). Provided Mr. Hairston is not otherwise
entitled to a plan payout under any change of control
provisions of such plans, if the "short term compensation
plan" is in place as of the Termination Date and to the extent
Mr. Hairston is entitled to participate therein, Mr. Hairston
shall receive cash in an amount equal to his award under the
Company's "short term incentive plan" for the annual
performance period in which the Termination Date shall have
occurred, at Mr. Hairston's target performance level and
prorated by the number of months which have passed since the
beginning of the annual performance period until his
Termination Date. For purposes of this Paragraph 2.(d)(v) the
term "short term incentive compensation plan" shall mean any
incentive compensation plan or arrangement adopted in writing
by the Company which provides for annual, recurring
compensatory bonuses based upon articulated performance
criteria. (e) Payment of Benefits. Any amounts due under this
Agreement shall be paid in one (1) lump sum payment as soon as
administratively practicable following the later of: (i) Mr.
Hairston's Termination Date, or (ii) upon Mr. Hairston's
tender of an effective Waiver and Release to the Company in
the form of Exhibit B attached hereto and the expiration of
any applicable revocation period for such waiver. In the event
of a dispute with respect to liability or amount of any
benefit due hereunder, an effective Waiver and Release shall
be tendered at the time of final resolution of any such
dispute when payment is tendered by the Company.
(f) Benefits in the Event of Death. In the event of Mr.
Hairston's death prior to the payment of all amounts due under this
Agreement, Mr. Hairston's estate shall be entitled to receive as due
any amounts not yet paid under this Agreement upon the tender by the
executor or administrator of the estate of an effective Waiver and
Release.
(g) Legal Fees. In the event of a dispute between Mr. Hairston
and the Company with regard to any amounts due hereunder, if any
material issue in such dispute is finally resolved in Mr. Hairston's
favor, the Company shall reimburse Mr. Hairston's legal fees incurred
with respect to all issues in such dispute in an amount not to exceed
fifty thousand dollars ($50,000).
(h) Employee Outplacement Services. Mr. Hairston shall be
eligible to participate in the Employee Outplacement Program, which
program shall not be less than six (6) months duration measured from
Mr. Hairston's Termination Date.
(i) Non-qualified Retirement and Deferred Compensation Plans.
The Parties agree that subsequent to a Change in Control, any claims by
Mr. Hairston for benefits under any of the Company's non-qualified
retirement or deferred compensation plans shall be resolved through
binding arbitration in accordance with the provisions and procedures
set forth in Paragraph 5 hereof and if any material issue in such
dispute is finally resolved in Mr. Hairston's favor, the Company shall
reimburse Mr. Hairston's legal fees in the manner provided in Paragraph
2.(g) hereof. 3. Transfer of Employment. In the event that Mr.
Hairston's employment by the Company is terminated during the two year
period following a Change in Control and Mr. Hairston accepts
employment by Southern, a Southern Subsidiary, or any employer that
succeeds to all or substantially all of the assets of the Company,
Southern or any Southern Subsidiary, the Company shall assign this
Agreement to Southern, such Southern Subsidiary, or successor employer,
Southern shall accept such assignment or cause such Southern Subsidiary
or successor employer to accept such assignment, and such assignee
shall become the "Company" for all purposes hereunder.
4. No Mitigation. If Mr. Hairston is otherwise eligible to receive
benefits under Paragraph 2 of this Agreement, he shall have no duty or
obligation to seek other employment following his Termination Date and, except
as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr.
Hairston hereunder shall not be reduced or suspended if Mr. Hairston accepts
such subsequent employment.
5. Arbitration.
(a) Any dispute, controversy or claim arising out of or
relating to the Company's obligations to pay severance benefits under
this Agreement, or the breach thereof, shall be settled and resolved
solely by arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association ("AAA") except as
otherwise provided herein. The arbitration shall be the sole and
exclusive forum for resolution of any such claim for severance benefits
and the arbitrators' award shall be final and binding. The provisions
of this Paragraph 5 are not intended to apply to any other disputes,
claims or controversies arising out of or relating to Mr. Hairston's
employment by the Company or the termination thereof.
(b) Arbitration shall be initiated by serving a written notice
of demand for arbitration to Mr. Hairston, in the case of the Company,
or to the Southern Board, in the case of Mr. Hairston.
(c) The arbitration shall be held in Atlanta, Georgia. The
arbitrators shall apply the law of the State of Georgia, to the extent
not preempted by federal law, excluding any law which would require the
application of the law of another state.
(d) The parties shall appoint arbitrators within fifteen (15)
business days following service of the demand for arbitration. The
number of arbitrators shall be three. One arbitrator shall be appointed
by Mr. Hairston, one arbitrator shall be appointed by the Company, and
the two arbitrators shall appoint a third. If the arbitrators cannot
agree on a third arbitrator within thirty (30) business days after the
service of demand for arbitration, the third arbitrator shall be
selected by the AAA.
(e) The arbitration filing fee shall be paid by Mr. Hairston.
All other costs of arbitration shall be borne equally by Mr. Hairston
and the Company, provided, however, that the Company shall reimburse
such fees and costs in the event any material issue in such dispute is
finally resolved in Mr. Hairston's favor and Mr. Hairston is reimbursed
legal fees under Paragraph 2.(g) hereof.
(f) The parties agree that they will faithfully observe the
rules that govern any arbitration between them, they will abide by and
perform any award rendered by the arbitrators in any such arbitration,
including any award of injunctive relief, and a judgment of a court
having jurisdiction may be entered upon an award.
(g) The parties agree that nothing in this Paragraph 5 is
intended to preclude upon application of either party any court having
jurisdiction from issuing and enforcing in any lawful manner such
temporary restraining orders, preliminary injunctions, and other
interim measures of relief as may be necessary to prevent harm to a
party's interests or as otherwise may be appropriate pending the
conclusion of arbitration proceedings pursuant to this Agreement
regardless of whether an arbitration proceeding under this Paragraph 5
has begun. The parties further agree that nothing herein shall prevent
any court from entering and enforcing in any lawful manner such
judgments for permanent equitable relief as may be necessary to prevent
harm to a party's interests or as otherwise may be appropriate
following the issuance of arbitral awards pursuant to this Paragraph 5.
6. Miscellaneous.
(a) Funding of Benefits. Unless the Board in its discretion
shall determine otherwise, the benefits payable to Mr. Hairston under
this Agreement shall not be funded in any manner and shall be paid by
the Company out of its general assets, which assets are subject to the
claims of the Company's creditors.
(b) Withholding. There shall be deducted from the payment of
any benefit due under this Agreement the amount of any tax required by
any governmental authority to be withheld and paid over by the Company
to such governmental authority for the account of Mr. Hairston.
(c) Assignment. Mr. Hairston shall have no rights to sell,
assign, transfer, encumber, or otherwise convey the right to receive
the payment of any benefit due hereunder, which payment and the rights
thereto are expressly declared to be nonassignable and nontransferable.
Any attempt to do so shall be null and void and of no effect.
(d) Amendment and Termination. The Agreement may be amended or
terminated only by a writing executed by the parties.
(e) Construction. This Agreement shall be construed in
accordance with and governed by the laws of the State of Georgia, to
the extent not preempted by federal law, disregarding any provision of
law which would require the application of the law of another state.
(f) Pooling Accounting. Notwithstanding anything to the
contrary herein, if, but for any provision of this Agreement, a Change
in Control transaction would otherwise be accounted for as a
pooling-of-interests under APB No.16 ("Pooling Accounting") (after
giving effect to any and all other facts and circumstances affecting
whether such Change in Control transaction would use Pooling
Accounting), such provision or provisions of this Agreement which would
otherwise cause the Change in Control transaction to be ineligible for
Pooling Accounting shall be void and ineffective in such a manner and
to the extent that by eliminating such provision or provisions of this
Agreement, Pooling Accounting would be required for such Change in
Control transaction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
this ____ day of __________________, 199__.
THE SOUTHERN COMPANY
By: ____________________________________
SOUTHERN NUCLEAR OPERATING COMPANY, INC.
By: ____________________________________
MR. HAIRSTON
-----------------------------
William G. Hairston, III
<PAGE>
Exhibit A
CHANGE IN CONTROL AGREEMENT
Target Annual Bonus for
Mr. William G. Hairston, III
50%
<PAGE>
Exhibit B
CHANGE IN CONTROL AGREEMENT
Waiver and Release
The attached Waiver and Release is to be given to Mr. William G.
Hairston, III upon the occurrence of an event that triggers eligibility for
severance benefits under the Change in Control Agreement, as described in
Paragraph 2(a) of such agreement.
<PAGE>
CHANGE IN CONTROL AGREEMENT
Waiver and Release
I, William G. Hairston, III, understand that I am entitled to receive
the severance benefits described in Section 2 of the Change in Control Agreement
(the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand
that the benefits I will receive under the Agreement are in excess of those I
would have received from The Southern Company and Southern Nuclear Operating
Company, Inc. (collectively, the "Company") if I had not elected to sign this
Waiver.
I recognize that I may have a claim against the Company under the Civil
Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the
Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended,
the Americans with Disabilities Act or other federal, state and local laws.
In exchange for the benefits I elect to receive, I hereby irrevocably
waive and release all claims, of any kind whatsoever, whether known or unknown
in connection with any claim which I ever had, may have, or now have against The
Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power
Company, Mississippi Power Company, Savannah Electric and Power Company,
Southern Communication Services, Inc., Southern Company Services, Inc., Southern
Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern
Nuclear Operating Company, Inc. and other direct or indirect subsidiaries of The
Southern Company and their past, present and future officers, directors,
employees, agents and attorneys. Nothing in this Waiver shall be construed to
release claims or causes of action under the Age Discrimination in Employment
Act or the Energy Reorganization Act of 1974, as amended, which arise out of
events occurring after the execution date of this Waiver.
In further exchange for the benefits I elect to receive, I understand
and agree that I will respect the proprietary and confidential nature of any
information I have obtained in the course of my service with the Company or any
subsidiary or affiliate of The Southern Company. However, nothing in this Waiver
shall prohibit me from engaging in protected activities under applicable law or
from communicating, either voluntary or otherwise, with any governmental agency
concerning any potential violation of the law.
In signing this Waiver, I am not releasing claims to benefits that I am
already entitled to under any workers' compensation laws or under any retirement
plan or welfare benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, as amended, which is sponsored by or adopted by the
Company and/or any of its direct or indirect subsidiaries; however, I understand
and acknowledge that nothing herein is intended to or shall be construed to
require the Company to institute or continue in effect any particular plan or
benefit sponsored by the Company and the Company hereby reserves the right to
amend or terminate any of its benefit programs at any time in accordance with
the procedures set forth in such plans.
In signing this Waiver, I realize that I am waiving and releasing,
among other things, any claims to benefits under any and all bonus, severance,
workforce reduction, early retirement, outplacement, or any other similar type
plan sponsored by the Company.
I have been encouraged and advised in writing to seek advice from
anyone of my choosing regarding this Waiver, including my attorney, and my
accountant or tax advisor. Prior to signing this Waiver, I have been given the
opportunity and sufficient time to seek such advice, and I fully understand the
meaning and contents of this Waiver.
I understand that I may take up to twenty-one (21) calendar days to
consider whether or not I desire to enter this Waiver. I was not coerced,
threatened or otherwise forced to sign this Waiver. I have made my choice to
sign this Waiver voluntarily and of my own free will.
I understand that I may revoke this Waiver at any time during the seven
(7) calendar day period after I sign and deliver this Waiver to the Company. If
I revoke this Waiver, I must do so in writing delivered to the Company. I
understand that this Waiver is not effective until the expiration of this seven
(7) calendar day revocation period. I understand that upon the expiration of
such seven (7) calendar day revocation period this entire Waiver will be binding
upon me and will be irrevocable.
I understand that by signing this Waiver I am giving up rights I may
have.
IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this
____ day of ____________________, in the year _____.
William G. Hairston, III
Sworn to and subscribed to me this ____ day of ____________, _____.
Notary Public
My Commission Expires:
(Notary Seal)
Acknowledged and Accepted by the Company, as defined in the Waiver.
By:
Date:
EXHIBIT 10(a)91
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT ("Agreement") made and entered into by
and between The Southern Company ("Southern"), Alabama Power Company (the
"Company") and Mr. Elmer B. Harris ("Mr. Harris").
W I T N E S S E T H:
WHEREAS, Mr. Harris is the President and Chief Executive Officer of the
Company;
WHEREAS, the Company wishes to provide to Mr. Harris certain severance
benefits under certain circumstances following a change in control (as defined
herein) of Southern or the Company;
NOW, THEREFORE, in consideration of the premises, and the agreements of
the parties set forth in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) "Annual Compensation" shall mean Mr. Harris's highest
annual base salary rate for the twelve (12) month period immediately
preceding the date of the Change in Control plus market level target
annual bonus as set forth on Exhibit A hereof.
(b) "Beneficial Ownership" shall mean beneficial ownership
within the meaning of Rule 13d-3 promulgated under the Exchange Act.
(c) "Board" shall mean the board of directors of the Company.
(d) "Business Combination" shall mean a reorganization, merger
or consolidation of Southern or sale or other disposition of all or
substantially all of the assets of Southern.
(e) "Change in Control" shall mean any of the following:
(i) The Consummation of an acquisition by any Person
of Beneficial Ownership of 20% or more of Southern's Voting
Securities; provided, however, that for purposes of this
Paragraph 1.(e)(i), the following acquisitions of Southern's
Voting Securities shall not constitute a Change in Control:
(A) any acquisition directly from Southern;
(B) any acquisition by Southern;
(C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by
Southern or any Southern Subsidiary;
(D) any acquisition by a qualified pension
plan or publicly held mutual fund;
(E) any acquisition by a Group composed
exclusively of employees of Southern, or any Southern
Subsidiary;
(F) any acquisition by Mr. Harris or any
Group of which Mr. Harris is a party; or
(G) any Business Combination which would not
otherwise constitute a change in control because of
the application of clauses (A), (B) and (C) of
Paragraph 1.(e)(iii);
(ii) A change in the composition of the Southern
Board whereby individuals who constitute the Incumbent Board
cease for any reason to constitute at least a majority of the
Southern Board;
(iii) Consummation of a Business Combination,
provided, however, that such a Business Combination shall not
constitute a Change in Control if all three (3) of the
following conditions are met:
(A) all or substantially all of the
individuals and entities who held Beneficial
Ownership, respectively, of Southern's Voting
Securities immediately prior to such Business
Combination beneficially own, directly or indirectly,
65% or more of the combined voting power of the
Voting Securities of the corporation surviving or
resulting from such Business Combination, (including,
without limitation, a corporation which as a result
of such transaction holds Beneficial Ownership of all
or substantially all of Southern's Voting Securities
or all or substantially all of Southern's assets)
(such surviving or resulting corporation to be
referred to as "Surviving Company"), in substantially
the same proportions as their ownership, immediately
prior to such Business Combination, of Southern's
Voting Securities;
(B) no Person (excluding any corporation
resulting from such Business Combination, any
employee benefit plan (or related trust) of Southern,
any Southern Subsidiary or Surviving Company, Mr.
Harris, any Group of which Mr. Harris is a party, any
Group composed exclusively of Company employees, any
qualified pension plan (or related trust) or any
publicly held mutual fund) holds Beneficial
Ownership, directly or indirectly, of 20% or more of
the combined voting power of the then outstanding
Voting Securities of Surviving Company except to the
extent that such ownership existed prior to the
Business Combination; and
(C) at least a majority of the members of
the board of directors of Surviving Company were
members of the Incumbent Board at the earlier of the
date of execution of the initial agreement, or of the
action of the Southern Board, providing for such
Business Combination. (iv) The Consummation of an
acquisition by any Person of Beneficial Ownership of
50% or more of the combined voting power of the then
outstanding Voting Securities of the Company;
provided, however, that for purposes of this
Paragraph 1.(e)(iv), any acquisition by Mr. Harris,
any Group composed exclusively of employees of the
Company, any Group of which Mr. Harris is a party,
any qualified pension plan (or related trust), any
publicly held mutual fund, any employee benefit plan
(or related trust) sponsored or maintained by
Southern or Southern Subsidiary shall not constitute
a Change in Control;
(v) Consummation of a reorganization, merger or
consolidation of the Company (an "Employing Company Business
Combination"), in each case, unless, following such Employing
Company Business Combination, Southern Controls the
corporation or other entity surviving or resulting from such
Employing Company Business Combination; or
(vi) Consummation of the sale or other disposition of
all or substantially all of the assets of the Company to a
corporation or other entity which Southern does not Control.
(f) "COBRA Coverage" shall mean any continuation coverage to
which Mr. Harris or his dependents may be entitled pursuant to
Code Section 4980B.
(g) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(h) "Company" shall mean Alabama Power Company, its successors
and assigns.
(i) "Consummation" shall mean the completion of the final act
necessary to complete a transaction as a matter of law, including, but
not limited to, any required approvals by the corporation's
shareholders and board of directors, the transfer of legal and
beneficial title to securities or assets and the final approval of the
transaction by any applicable domestic or foreign governments or
governmental agencies.
(j) "Control" shall mean, in the case of a corporation,
Beneficial Ownership of more than 50% of the combined voting power of
the corporation's Voting Securities, or in the case of any other
entity, Beneficial Ownership of more than 50% of such entity's voting
equity interests.
(k) "Effective Date" shall mean the date of execution of this
Agreement.
(l) "Employee Outplacement Program" shall mean the program
established by the Company from time to time for the purpose of
assisting participants covered by the plan in finding employment
outside of the Company which provides for the following services:
(i) self-assessment, career decision and goal
setting; (ii) job market research and job sources;
(iii) networking and interviewing skills; (iv)
planning and implementation strategy; (v) resume
writing, job hunting methods and salary negotiation;
and (vi) office support and job search resources.
(m) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(n) "Good Reason" shall mean, without Mr. Harris's express
written consent, after written notice to the Board, and after a thirty
(30) day opportunity for the Board to cure, the continuing occurrence
of any of the following events:
(i) Inconsistent Duties. A meaningful and detrimental
alteration in Mr. Harris's position or in the nature or status
of his responsibilities from those in effect immediately prior
to the Change in Control;
(ii) Reduced Salary. A reduction of five percent (5%)
or more by the Company in either of the following: (i) Mr.
Harris's annual base salary rate as in effect immediately
prior to the Change in Control (except for a less than ten
percent (10%), across-the-board annual base salary rate
reduction similarly affecting at least ninety-five percent
(95%) of the Executive Employees of the Company); or (ii) the
sum of Mr. Harris's annual base salary rate plus target bonus
under the PPP Plan (except for a less than ten percent (10%),
across-the-board reduction of annual base salary rate plus
target bonus under the PPP Plan similarly affecting at least
ninety-five percent (95%) of the Executive Employees of the
Company);
(iii) Pension and Compensation Plans. The failure by
the Company to continue in effect any pension or compensation
plan or agreement in which Mr. Harris participates or is a
party as of the date of the Change in Control or the
elimination of Mr. Harris' participation therein, (except for
across-the-board plan changes or terminations similarly
affecting at least ninety-five percent (95%) of the Executive
Employees of the Company); For purposes of this Paragraph
1.(n), a "pension plan or agreement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for payments upon retirement; and a
"compensation plan or arrangement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for periodic, non-discretionary compensatory
payments in the nature of bonuses.
(iv) Relocation. A change in Mr. Harris's work
location to a location more than fifty (50) miles from the
office where Mr. Harris is located at the time of the Change
in Control, unless such new work location is within fifty (50)
miles from Mr. Harris's principal place of residence at the
time of the Change in Control. The acceptance, if any, by Mr.
Harris of employment by the Company at a work location which
is outside the fifty mile radius set forth in this Paragraph
1.(n)(iv) shall not be a waiver of Mr. Harris's right to
refuse subsequent transfer by the Company to a location which
is more than fifty (50) miles from Mr. Harris's principal
place of residence at the time of the Change in Control, and
such subsequent unconsented transfer shall be "Good Reason"
under this Agreement; or
(v) Benefits and Perquisites. The taking of any
action by the Company which would directly or indirectly
materially reduce the benefits enjoyed by Mr. Harris under the
Company's retirement, life insurance, medical, health and
accident, disability, deferred compensation or savings plans
in which Mr. Harris was participating immediately prior to the
Change in Control; or the failure by the Company to provide
Mr. Harris with the number of paid vacation days to which Mr.
Harris is entitled on the basis of years of service with the
Company in accordance with the Company's normal vacation
policy in effect immediately prior to the Change in Control
(except for across-the-board plan or vacation policy changes
or plan terminations similarly affecting at least ninety-five
percent (95%) of the Executive Employees of the Company).
(vi) For purposes of this Paragraph 1.(n), the term
"Executive Employee" shall mean those employees of the Company
of Grade Level 10 or above. (o) "Group" shall have the meaning
set forth in Section 14(d) of the Exchange Act. (p) "Group
Health Plan" shall mean the group health plan covering Mr.
Harris, as such plan may be amended from time to time.
(q) "Group Life Insurance Plan" shall mean the group life
insurance program covering Mr. Harris, as such plan may be amended from
time to time.
(r) "Incumbent Board" shall mean those individuals who
constitute the Southern Board as of the Effective Date plus any
individual who shall become a director subsequent to such date whose
election or nomination for election by Southern's shareholders was
approved by a vote of at least 75% of the directors then comprising the
Incumbent Board. Notwithstanding the foregoing, no individual who shall
become a director of the Southern Board subsequent to the Effective
Date whose initial assumption of office occurs as a result of an actual
or threatened election contest (within the meaning of Rule 14a-11 of
the Regulations promulgated under the Exchange Act) with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Southern Board shall be a member of the Incumbent Board.
(s) "Month of Service" shall mean any calendar month during
which Mr. Harris has worked at least one (1) hour or was on approved
leave of absence while in the employ of the Company or any affiliate or
subsidiary of Southern.
(t) "Pension Plan" shall mean The Southern Company Pension
Plan, as such plan may be amended from time to time.
(u) "Performance Dividend Plan" shall mean the Southern
Company Performance Dividend Plan or any replacement thereto, as such
plans may be amended from time to time.
(v) "Performance Stock Plan" shall mean the Southern Company
Performance Stock Plan or any replacement thereto, as such plans may be
amended from time to time.
(w) "Person" shall mean any individual, entity or group within
the meaning of Section 13(d)(3) or 14(d)(2) of Act.
(x) "Performance Pay Plan" or "PPP Plan" shall mean the
Southern Company Performance Pay Plan or any replacement thereto, as
such plans may be amended from time to time.
(y) "Productivity Improvement Plan" or "PIP Plan" shall mean
the Southern Company Productivity Improvement Plan or replacement
thereto, as such plans may be amended from time to time.
(z) "Southern" shall mean The Southern Company, its successors
and assigns.
(aa) "Southern Board" shall mean the board of directors of
Southern.
(bb) "Southern Subsidiary" shall mean any corporation or other
entity Controlled by Southern.
(cc) "Termination for Cause" or "Cause" shall mean the
termination of Mr. Harris's employment by the Company upon the
occurrence of any of the following:
(i) The willful and continued failure by Mr. Harris
substantially to perform his duties with the Company (other
than any such failure resulting from Mr. Harris's Total
Disability or from Mr. Harris's retirement or any such actual
or anticipated failure resulting from termination by Mr.
Harris for Good Reason) after a written demand for substantial
performance is delivered to him by the Southern Board, which
demand specifically identifies the manner in which the
Southern Board believes that he has not substantially
performed his duties; or
(ii) The willful engaging by Mr. Harris in conduct
that is demonstrably and materially injurious to the Company,
monetarily or otherwise, including, but not limited to any of
the following:
(A) any willful act involving fraud or
dishonesty in the course of Mr. Harris's employment
by the Company;
(B) the willful carrying out of any activity
or the making of any statement which would materially
prejudice or impair the good name and standing of the
Company, Southern or any Southern Subsidiary or would
bring the Company, Southern or any Southern
Subsidiary into contempt, ridicule or would
reasonably shock or offend any community in which the
Company, Southern or such Southern Subsidiary is
located;
(C) attendance at work in a state of
intoxication or otherwise being found in possession
at his workplace of any prohibited drug or substance,
possession of which would amount to a criminal
offense;
(D) violation of the Company's policies on
drug and alcohol usage, fitness for duty requirements
or similar policies as may exist from time to time as
adopted by the Company's safety officer;
(E) assault or other act of violence against
any person during the course of employment; or (F)
indictment of any felony or any misdemeanor involving
moral turpitude.
No act or failure to act by Mr. Harris shall be deemed
"willful" unless done, or omitted to be done, by Mr. Harris not in good
faith and without reasonable belief that his action or omission was in
the best interest of the Company.
Notwithstanding the foregoing, Mr. Harris shall not be deemed
to have been terminated for Cause unless and until there shall have
been delivered to him a copy of a resolution duly adopted by the
affirmative vote of not less than three quarters of the entire
membership of the Southern Board at a meeting of the Southern Board
called and held for such purpose (after reasonable notice to Mr. Harris
and an opportunity for him, together with counsel, to be heard before
the Southern Board), finding that, in the good faith opinion of the
Southern Board, Mr. Harris was guilty of conduct set forth above in
clause (i) or (ii) of this Paragraph 1.(cc) and specifying the
particulars thereof in detail.
(dd) "Termination Date" shall mean the date on which Mr.
Harris's employment with the Company is terminated; provided, however,
that solely for purposes of Paragraph 2.(c) hereof, the Termination
Date shall be the effective date of his retirement pursuant to the
terms of the Pension Plan.
(ee) "Total Disability" shall mean Mr. Harris's total
disability within the meaning of the Pension Plan.
(ff) "Voting Securities" shall mean the outstanding voting
securities of a corporation entitling the holder thereof to vote
generally in the election of such corporation's directors.
(gg) "Waiver and Release" shall mean the Waiver and Release
attached hereto as Exhibit B.
(hh) "Year of Service" shall mean Mr. Harris's Months of
Service divided by twelve (12) rounded to the nearest whole year,
rounding up if the remaining number of months is seven (7) or greater
and rounding down if the remaining number of months is less than seven
(7). If Mr. Harris has a break in his service with the Company, he will
receive credit under this Agreement for service prior to the break in
service only if the break in service is less than five years.
2. Severance Benefits.
(a) Eligibility. Except as otherwise provided in this
Paragraph 2.(a), if Mr. Harris's employment is involuntarily terminated
by the Company at any time during the two year period following a
Change in Control for reasons other than Cause, or if Mr. Harris
voluntarily terminates his employment with the Company for Good Reason
at any time during the two year period following a Change in Control,
Mr. Harris shall be entitled to receive the benefits described in this
Agreement upon the Company's receipt of an effective Waiver and
Release. Notwithstanding anything to the contrary herein, Mr. Harris
shall not be eligible to receive benefits under this Agreement if Mr.
Harris:
(i) voluntarily terminates his employment with the
Company for other than Good Reason;
(ii) has his employment terminated by the Company for
Cause;
(iii) accepts the transfer of his employment to
Southern, any Southern Subsidiary or any employer that
succeeds to all or substantially all of the assets of the
Company, Southern or any Southern Subsidiary;
(iv) refuses an offer of continued employment with
the Company, any Southern Subsidiary, or any
employer that succeeds to all or substantially all of the
assets of the Company, Southern, or any Southern Subsidiary
under circumstances where such refusal would not amount to
Good Reason for voluntary termination of employment; or
(v) elects to receive the benefits of any other
voluntary or involuntary severance or separation program
maintained by the Company; provided however, that the receipt
of benefits under the terms of any retention plan or agreement
shall not be deemed to be the receipt of severance or
separation benefits for purposes of this Agreement. (b)
Severance Benefits. If Mr. Harris meets the eligibility
requirements of Paragraph 2.(a) hereof, he shall be entitled
to a cash severance benefit in an amount equal to three times
his Annual Compensation (the "Severance Amount"). If any
portion of the Severance Amount constitutes an "excess
parachute payment" (as such term is defined under Code Section
280G ("Excess Parachute Payment")), the Company shall pay to
Mr. Harris an additional amount calculated by determining the
amount of tax under Code Section 4999 that he otherwise would
have paid on any Excess Parachute Payment with respect to the
Change in Control and dividing such amount by a decimal
determined by adding the tax rate under Code Section 4999
("Excise Tax"), the hospital insurance tax under Code Section
3101(b) ("HI Tax") and federal and state income tax measured
at the highest marginal rates ("Income Tax") and subtracting
such result from the number one (1) (the "280G Gross-up");
provided, however, that no 280G Gross-up shall be paid unless
the Severance Amount plus all other "parachute payments" to
Mr. Harris under Code Section 280G exceeds three (3) times Mr.
Harris's "base amount" (as such term is defined under Code
Section 280G ("Base Amount")) by ten percent (10%) or more;
provided further, that if no 280G Gross-up is paid, the
Severance Amount shall be capped at three (3) times Mr.
Harris's Base Amount, less all other "parachute payments" (as
such term is defined under Code Section 280G) received by Mr.
Harris, less one dollar (the "Capped Amount"), if the Capped
Amount, reduced by HI Tax and Income Tax, exceeds what
otherwise would have been the Severance Amount, reduced by HI
Tax, Income Tax and Excise Tax.
For purposes of this Paragraph 2.(b), whether any amount would
constitute an Excess Parachute Payment and any other calculations of
tax, e.g., Excise Tax, HI Tax, Income Tax, etc., or other amounts,
e.g., Base Amount, Capped Amount, etc., shall be determined by the tax
department of the independent public accounting firm then responsible
for preparing Southern's consolidated federal income tax return, and
such calculations or determinations shall be binding upon the parties
hereto.
(c) Welfare Benefits. If Mr. Harris meets the eligibility
requirements of Paragraph 2.(a) hereof and is not otherwise eligible to
receive retiree medical and life insurance benefits provided to certain
retirees pursuant to the terms of the Pension Plan, the Group Health
Plan and the Group Life Insurance Plan, he shall be entitled to the
benefits set forth in this Paragraph 2.(c).
(i) Mr. Harris shall be eligible to participate in
the Company's Group Health Plan, upon payment of both the
Company's and his monthly premium under such plan, for a
period of six (6) months for each of Mr. Harris's Years of
Service, not to exceed five (5) years. If Mr. Harris elects to
receive this extended medical coverage, he shall also be
entitled to elect coverage under the Group Health Plan for his
dependents who were participating in the Group Health Plan on
Mr. Harris's Termination Date (and for such other dependents
as may be entitled to coverage under the provisions of the
Health Insurance Portability and Accountability Act of 1996)
for the duration of Mr. Harris's extended medical coverage
under this Paragraph 2.(c)(i) to the extent such dependents
remain eligible for dependent coverage under the terms of the
Group Health Plan.
(A) The extended medical coverage afforded
to Mr. Harris pursuant to Paragraph 2.(c)(i), as well
as the premiums to be paid by Mr. Harris in
connection with such coverage shall be determined in
accordance with the terms of the Group Health Plan
and shall be subject to any changes in the terms and
conditions of the Group Health Plan as well as any
future increases in premiums under the Group Health
Plan. The premiums to be paid by Mr. Harris in
connection with this extended coverage shall be due
on the first day of each month; provided, however,
that if he fails to pay his premium within thirty
(30) days of its due date, such extended coverage
shall be terminated.
(B) Any Group Health Plan coverage provided
under Paragraph 2.(c)(i) shall be a part of and not
in addition to any COBRA Coverage which Mr. Harris or
his dependents may elect. In the event that Mr.
Harris or his dependents become eligible to be
covered, by virtue of re-employment or otherwise, by
any employer-sponsored group health plan or is
eligible for coverage under any government-sponsored
health plan during the above period, coverage under
the Company's Group Health Plan available to Mr.
Harris or his dependents by virtue of the provisions
of Paragraph 2.(c)(i) shall terminate, except as may
otherwise be required by law, and shall not be
renewed. (ii) Mr. Harris shall be entitled to receive
cash in an amount equal to the Company's and Mr.
Harris's cost of premiums for three (3) years of
coverage under the Group Health Plan and Group Life
Insurance Plan in accordance with the terms of such
plans as of the date of the Change in Control.
(d) Incentive Plans. If Mr. Harris meets the eligibility
requirements of Paragraph 2.(a) hereof he shall be entitled to the
following benefits under the Company's incentive plans:
(i) Stock Option Plan.
(A) Any of Mr. Harris's Options and Stock
Appreciation Rights under the Performance Stock Plan
(the defined terms of which are incorporated in this
Paragraph 2.(d)(i) by reference) which are
outstanding as of the Termination Date and which are
not then exercisable and vested, shall become fully
exercisable and vested to the full extent of the
original grant; provided, that in the case of a Stock
Appreciation Right, if Mr. Harris is subject to
Section 16(b) of the Exchange Act, such Stock
Appreciation Right shall not become fully vested and
exercisable at such time if such actions would result
in liability to Mr. Harris under Section 16(b) of the
Exchange Act, provided further, that any such actions
not taken as a result of the rules under Section
16(b) of the Exchange Act shall be effected as of the
first date that such activity would no longer result
in liability under Section 16(b) of the Exchange Act.
(B) The restrictions and deferral
limitations applicable to any of Mr. Harris'
Restricted Stock as of the Termination Date shall
lapse, and such Restricted Stock shall become free of
all restrictions and limitations and become fully
vested and transferable to the full extent of the
original grant.
(C) The restrictions and deferral
limitations and other conditions applicable to any
other Awards held by Mr. Harris under the Stock
Performance Plan as of the Termination Date shall
lapse, and such other Awards shall become free of all
restrictions, limitations or conditions and become
fully vested and transferable to the full extent of
the original grant. (ii) Performance Pay Plan.
Provided Mr. Harris is not entitled to benefits under
Article V of the PPP Plan, (the defined terms of
which are incorporated in this Paragraph 2.(d)(ii) by
reference), if the PPP Plan is in place through Mr.
Harris's Termination Date and to the extent Mr.
Harris is entitled to participate therein, Mr. Harris
shall be entitled to receive cash in an amount equal
to a prorated payout of his Incentive Pay Awards
under the PPP Plan for the Performance Period in
which the Termination Date shall have occurred, at
target performance under the PPP Plan and prorated by
the number of months which have passed since the
beginning of the Performance Period until the
Termination Date.
(iii) PIP Plan. Provided Mr. Harris is not entitled
to benefits under Article IV of the PIP Plan (the defined
terms of which are incorporated in this Paragraph 2.(d)(iii)
by reference), if the PIP Plan is in place through Mr.
Harris's Termination Date and to the extent Mr. Harris is
entitled to participate therein, Mr. Harris shall be entitled
to receive cash in an amount equal to his Award Opportunity
for the Computation Periods in which the Termination Date
shall have occurred at a target Value of Performance Unit of
$1.00, prorated for each Computation Period by the number of
months which have passed since the beginning of the
Computation Periods until the Termination Date.
(iv) Performance Dividend Plan. Provided Mr. Harris
is not entitled to benefits under the Performance Dividend
Plan (the defined terms of which are incorporated in this
Paragraph 2.(d)(iv) by reference), if the Performance Dividend
Plan is in place through Mr. Harris's Termination Date and to
the extent Mr. Harris is entitled to participate therein, Mr.
Harris shall be entitled to receive cash for each Award held
by Mr. Harris on his Termination Date, based on actual
performance under Section 4.1 of the Performance Dividend Plan
determined as of the most recently completed calendar quarter
of the Performance Period in which the Termination Date shall
have occurred, and the Annual Dividend declared prior to the
Termination Date.
(v) Other Short Term Incentive Plans. The provisions
of this Paragraph 2.(d)(v) shall apply if and to the extent
that Mr. Harris is a participant in any other "short term
compensation plan" not otherwise previously referred to in
this Paragraph 2.(d). Provided Mr. Harris is not otherwise
entitled to a plan payout under any change of control
provisions of such plans, if the "short term compensation
plan" is in place as of the Termination Date and to the extent
Mr. Harris is entitled to participate therein, Mr. Harris
shall receive cash in an amount equal to his award under the
Company's "short term incentive plan" for the annual
performance period in which the Termination Date shall have
occurred, at Mr. Harris's target performance level and
prorated by the number of months which have passed since the
beginning of the annual performance period until his
Termination Date. For purposes of this Paragraph 2.(d)(v) the
term "short term incentive compensation plan" shall mean any
incentive compensation plan or arrangement adopted in writing
by the Company which provides for annual, recurring
compensatory bonuses based upon articulated performance
criteria. (e) Payment of Benefits. Any amounts due under this
Agreement shall be paid in one (1) lump sum payment as soon as
administratively practicable following the later of: (i) Mr.
Harris's Termination Date, or (ii) upon Mr. Harris's tender of
an effective Waiver and Release to the Company in the form of
Exhibit B attached hereto and the expiration of any applicable
revocation period for such waiver. In the event of a dispute
with respect to liability or amount of any benefit due
hereunder, an effective Waiver and Release shall be tendered
at the time of final resolution of any such dispute when
payment is tendered by the Company.
(f) Benefits in the Event of Death. In the event of Mr.
Harris's death prior to the payment of all amounts due under this
Agreement, Mr. Harris's estate shall be entitled to receive as due any
amounts not yet paid under this Agreement upon the tender by the
executor or administrator of the estate of an effective Waiver and
Release.
(g) Legal Fees. In the event of a dispute between Mr. Harris
and the Company with regard to any amounts due hereunder, if any
material issue in such dispute is finally resolved in Mr. Harris's
favor, the Company shall reimburse Mr. Harris's legal fees incurred
with respect to all issues in such dispute in an amount not to exceed
fifty thousand dollars ($50,000).
(h) Employee Outplacement Services. Mr. Harris shall be
eligible to participate in the Employee Outplacement Program, which
program shall not be less than six (6) months duration measured from
Mr. Harris's Termination Date.
(i) Non-qualified Retirement and Deferred Compensation Plans.
The Parties agree that subsequent to a Change in Control, any claims by
Mr. Harris for benefits under any of the Company's non-qualified
retirement or deferred compensation plans shall be resolved through
binding arbitration in accordance with the provisions and procedures
set forth in Paragraph 5 hereof and if any material issue in such
dispute is finally resolved in Mr. Harris' favor, the Company shall
reimburse Mr. Harris' legal fees in the manner provided in Paragraph
2.(g) hereof.
3. Transfer of Employment. In the event that Mr. Harris's employment by
the Company is terminated during the two year period following a Change in
Control and Mr. Harris accepts employment by Southern, a Southern Subsidiary, or
any employer that succeeds to all or substantially all of the assets of the
Company, Southern or any Southern Subsidiary, the Company shall assign this
Agreement to Southern, Southern Subsidiary, or successor employer, Southern
shall accept such assignment or cause such Southern Subsidiary or successor
employer to accept such assignment, and such assignee shall become the "Company"
for all purposes hereunder.
4. No Mitigation. If Mr. Harris is otherwise eligible to receive
benefits under Paragraph 2 of this Agreement, he shall have no duty or
obligation to seek other employment following his Termination Date and, except
as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr. Harris
hereunder shall not be reduced or suspended if Mr. Harris accepts such
subsequent employment.
5. Arbitration.
(a) Any dispute, controversy or claim arising out of or
relating to the Company's obligations to pay severance benefits under
this Agreement, or the breach thereof, shall be settled and resolved
solely by arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association ("AAA") except as
otherwise provided herein. The arbitration shall be the sole and
exclusive forum for resolution of any such claim for severance benefits
and the arbitrators' award shall be final and binding. The provisions
of this Paragraph 5 are not intended to apply to any other disputes,
claims or controversies arising out of or relating to Mr. Harris's
employment by the Company or the termination thereof.
(b) Arbitration shall be initiated by serving a written notice
of demand for arbitration to Mr. Harris, in the case of the Company, or
to the Southern Board, in the case of Mr. Harris.
(c) The arbitration shall be held in Atlanta, Georgia. The
arbitrators shall apply the law of the State of Georgia, to the extent
not preempted by federal law, excluding any law which would require the
application of the law of another state.
(d) The parties shall appoint arbitrators within fifteen (15)
business days following service of the demand for arbitration. The
number of arbitrators shall be three. One arbitrator shall be appointed
by Mr. Harris, one arbitrator shall be appointed by the Company, and
the two arbitrators shall appoint a third. If the arbitrators cannot
agree on a third arbitrator within thirty (30) business days after the
service of demand for arbitration, the third arbitrator shall be
selected by the AAA.
(e) The arbitration filing fee shall be paid by Mr. Harris.
All other costs of arbitration shall be borne equally by Mr. Harris and
the Company, provided, however, that the Company shall reimburse such
fees and costs in the event any material issue in such dispute is
finally resolved in Mr. Harris's favor and Mr. Harris is reimbursed
legal fees under Paragraph 2.(g) hereof.
(f) The parties agree that they will faithfully observe the
rules that govern any arbitration between them, they will abide by and
perform any award rendered by the arbitrators in any such arbitration,
including any award of injunctive relief, and a judgment of a court
having jurisdiction may be entered upon an award.
(g) The parties agree that nothing in this Paragraph 5 is
intended to preclude upon application of either party any court having
jurisdiction from issuing and enforcing in any lawful manner such
temporary restraining orders, preliminary injunctions, and other
interim measures of relief as may be necessary to prevent harm to a
party's interests or as otherwise may be appropriate pending the
conclusion of arbitration proceedings pursuant to this Agreement;
regardless of whether an arbitration proceeding under this Paragraph 5
has begun. The parties further agree that nothing herein shall prevent
any court from entering and enforcing in any lawful manner such
judgments for permanent equitable relief as may be necessary to prevent
harm to a party's interests or as otherwise may be appropriate
following the issuance of arbitral awards pursuant to this Paragraph 5.
6. Miscellaneous.
(a) Funding of Benefits. Unless the Board in its discretion
shall determine otherwise, the benefits payable to Mr. Harris under
this Agreement shall not be funded in any manner and shall be paid by
the Company out of its general assets, which assets are subject to the
claims of the Company's creditors.
(b) Withholding. There shall be deducted from the payment of
any benefit due under this Agreement the amount of any tax required by
any governmental authority to be withheld and paid over by the Company
to such governmental authority for the account of Mr. Harris.
(c) Assignment. Mr. Harris shall have no rights to sell,
assign, transfer, encumber, or otherwise convey the right to receive
the payment of any benefit due hereunder, which payment and the rights
thereto are expressly declared to be nonassignable and nontransferable.
Any attempt to do so shall be null and void and of no effect.
(d) Amendment and Termination. The Agreement may be amended or
terminated only by a writing executed by the parties.
(e) Construction. This Agreement shall be construed in
accordance with and governed by the laws of the State of Georgia, to
the extent not preempted by federal law, disregarding any provision of
law which would require the application of the law of another state.
(f) Pooling Accounting. Notwithstanding anything to the
contrary herein, if, but for any provision of this Agreement, a Change
in Control transaction would otherwise be accounted for as a
pooling-of-interests under APB No.16 ("Pooling Accounting") (after
giving effect to any and all other facts and circumstances affecting
whether such Change in Control transaction would use Pooling
Accounting), such provision or provisions of this Agreement which would
otherwise cause the Change in Control transaction to be ineligible for
Pooling Accounting shall be void and ineffective in such a manner and
to the extent that by eliminating such provision or provisions of this
Agreement, Pooling Accounting would be required for such Change in
Control transaction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
this ____ day of __________________, 199__.
THE SOUTHERN COMPANY
By: ____________________________________
ALABAMA POWER COMPANY
By: ____________________________________
MR. HARRIS
-----------------------------
Elmer B. Harris
<PAGE>
Exhibit A
CHANGE IN CONTROL AGREEMENT
Target Annual Bonus for
Mr. Elmer B. Harris
65%
<PAGE>
Exhibit B
CHANGE IN CONTROL AGREEMENT
Waiver and Release
The attached Waiver and Release is to be given to Mr. Elmer B. Harris
upon the occurrence of an event that triggers eligibility for severance benefits
under the Change in Control Agreement, as described in Paragraph 2(a) of such
agreement.
<PAGE>
CHANGE IN CONTROL AGREEMENT
Waiver and Release
I, Elmer B. Harris, understand that I am entitled to receive the
severance benefits described in Section 2 of the Change in Control Agreement
(the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand
that the benefits I will receive under the Agreement are in excess of those I
would have received from The Southern Company and Alabama Power Company
(collectively, the "Company") if I had not elected to sign this Waiver.
I recognize that I may have a claim against the Company under the Civil
Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the
Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended,
the Americans with Disabilities Act or other federal, state and local laws.
In exchange for the benefits I elect to receive, I hereby irrevocably
waive and release all claims, of any kind whatsoever, whether known or unknown
in connection with any claim which I ever had, may have, or now have against The
Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power
Company, Mississippi Power Company, Savannah Electric and Power Company,
Southern Communication Services, Inc., Southern Company Services, Inc., Southern
Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern
Nuclear Operating Company, Inc. and other direct or indirect subsidiaries of The
Southern Company and their past, present and future officers, directors,
employees, agents and attorneys. Nothing in this Waiver shall be construed to
release claims or causes of action under the Age Discrimination in Employment
Act or the Energy Reorganization Act of 1974, as amended, which arise out of
events occurring after the execution date of this Waiver.
In further exchange for the benefits I elect to receive, I understand
and agree that I will respect the proprietary and confidential nature of any
information I have obtained in the course of my service with the Company or any
subsidiary or affiliate of The Southern Company. However, nothing in this Waiver
shall prohibit me from engaging in protected activities under applicable law or
from communicating, either voluntary or otherwise, with any governmental agency
concerning any potential violation of the law.
In signing this Waiver, I am not releasing claims to benefits that I am
already entitled to under any workers' compensation laws or under any retirement
plan or welfare benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, as amended, which is sponsored by or adopted by the
Company and/or any of its direct or indirect subsidiaries; however, I understand
and acknowledge that nothing herein is intended to or shall be construed to
require the Company to institute or continue in effect any particular plan or
benefit sponsored by the Company and the Company hereby reserves the right to
amend or terminate any of its benefit programs at any time in accordance with
the procedures set forth in such plans.
In signing this Waiver, I realize that I am waiving and releasing,
among other things, any claims to benefits under any and all bonus, severance,
workforce reduction, early retirement, outplacement, or any other similar type
plan sponsored by the Company.
I have been encouraged and advised in writing to seek advice from
anyone of my choosing regarding this Waiver, including my attorney, and my
accountant or tax advisor. Prior to signing this Waiver, I have been given the
opportunity and sufficient time to seek such advice, and I fully understand the
meaning and contents of this Waiver.
I understand that I may take up to twenty-one (21) calendar days to
consider whether or not I desire to enter this Waiver. I was not coerced,
threatened or otherwise forced to sign this Waiver. I have made my choice to
sign this Waiver voluntarily and of my own free will.
I understand that I may revoke this Waiver at any time during the seven
(7) calendar day period after I sign and deliver this Waiver to the Company. If
I revoke this Waiver, I must do so in writing delivered to the Company. I
understand that this Waiver is not effective until the expiration of this seven
(7) calendar day revocation period. I understand that upon the expiration of
such seven (7) calendar day revocation period this entire Waiver will be binding
upon me and will be irrevocable.
I understand that by signing this Waiver I am giving up rights I may
have.
IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this
____ day of ____________________, in the year _____.
Elmer B. Harris
Sworn to and subscribed to me this ____ day of ____________, _____.
Notary Public
My Commission Expires:
(Notary Seal)
Acknowledged and Accepted by the Company, as defined in the Waiver.
By:
Date:
EXHIBIT 10(a)92
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT ("Agreement") made and entered into by
and between The Southern Company ("Southern"), Savannah Electric & Power Company
(the "Company") and Mr. G. Edison Holland, Jr. ("Mr. Holland").
W I T N E S S E T H:
WHEREAS, Mr. Holland is the President and Chief Executive Officer of
the Company;
WHEREAS, the Company wishes to provide to Mr. Holland certain severance
benefits under certain circumstances following a change in control (as defined
herein) of Southern or the Company;
NOW, THEREFORE, in consideration of the premises, and the agreements of
the parties set forth in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) "Annual Compensation" shall mean Mr. Holland's highest
annual base salary rate for the twelve (12) month period immediately
preceding the date of the Change in Control plus market level target
annual bonus as set forth on Exhibit A hereof.
(b) "Beneficial Ownership" shall mean beneficial ownership
within the meaning of Rule 13d-3 promulgated under the Exchange Act.
(c) "Board" shall mean the board of directors of the Company.
(d) "Business Combination" shall mean a reorganization, merger
or consolidation of Southern or sale or other disposition of all or
substantially all of the assets of Southern.
(e) "Change in Control" shall mean any of the following:
(i) The Consummation of an acquisition by any Person
of Beneficial Ownership of 20% or more of Southern's Voting
Securities; provided, however, that for purposes of this
Paragraph 1.(e)(i), the following acquisitions of Southern's
Voting Securities shall not constitute a Change in Control:
(A) any acquisition directly from Southern;
(B) any acquisition by Southern;
(C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by
Southern or any Southern Subsidiary;
(D) any acquisition by a qualified pension
plan or publicly held mutual fund;
(E) any acquisition by a Group composed
exclusively of employees of Southern, or any Southern
Subsidiary;
(F) any acquisition by Mr. Holland or any
Group of which Mr. Holland is a party; or
(G) any Business Combination which would not
otherwise constitute a change in control because of
the application of clauses (A), (B) and (C) of
Paragraph 1.(e)(iii);
(ii) A change in the composition of the Southern
Board whereby individuals who constitute the Incumbent Board
cease for any reason to constitute at least a majority of the
Southern Board;
(iii) Consummation of a Business Combination,
provided, however, that such a Business Combination shall not
constitute a Change in Control if all three (3) of the
following conditions are met:
(A) all or substantially all of the
individuals and entities who held Beneficial
Ownership, respectively, of Southern's Voting
Securities immediately prior to such Business
Combination beneficially own, directly or indirectly,
65% or more of the combined voting power of the
Voting Securities of the corporation surviving or
resulting from such Business Combination, (including,
without limitation, a corporation which as a result
of such transaction holds Beneficial Ownership of all
or substantially all of Southern's Voting Securities
or all or substantially all of Southern's assets)
(such surviving or resulting corporation to be
referred to as "Surviving Company"), in substantially
the same proportions as their ownership, immediately
prior to such Business Combination, of Southern's
Voting Securities;
(B) no Person (excluding any corporation
resulting from such Business Combination, any
employee benefit plan (or related trust) of Southern,
any Southern Subsidiary or Surviving Company, Mr.
Holland, any Group of which Mr. Holland is a party,
any Group composed exclusively of Company employees,
any qualified pension plan (or related trust) or any
publicly held mutual fund) holds Beneficial
Ownership, directly or indirectly, of 20% or more of
the combined voting power of the then outstanding
Voting Securities of Surviving Company except to the
extent that such ownership existed prior to the
Business Combination; and
(C) at least a majority of the members of
the board of directors of Surviving Company were
members of the Incumbent Board at the earlier of the
date of execution of the initial agreement, or of the
action of the Southern Board, providing for such
Business Combination. (iv) The Consummation of an
acquisition by any Person of Beneficial Ownership of
50% or more of the combined voting power of the then
outstanding Voting Securities of the Company;
provided, however, that for purposes of this
Paragraph 1.(e)(iv), any acquisition by Mr. Holland,
any Group composed exclusively of employees of the
Company, any Group of which Mr. Holland is a party,
any qualified pension plan (or related trust), any
publicly held mutual fund, any employee benefit plan
(or related trust) sponsored or maintained by
Southern or any Southern Subsidiary shall not
constitute a Change in Control;
(v) Consummation of a reorganization, merger or
consolidation of the Company (an "Employing Company Business
Combination"), in each case, unless, following such Employing
Company Business Combination, Southern Controls the
corporation or other entity surviving or resulting from such
Employing Company Business Combination; or
(vi) Consummation of the sale or other disposition of
all or substantially all of the assets of the Company to a
corporation or other entity which Southern does not Control.
(f) "COBRA Coverage" shall mean any continuation coverage to
which Mr. Holland or his dependents may be entitled pursuant to Code
Section 4980B.
(g) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(h) "Company" shall mean Savannah Electric & Power Company,
its successors and assigns.
(i) "Consummation" shall mean the completion of the final act
necessary to complete a transaction as a matter of law, including, but
not limited to, any required approvals by the corporation's
shareholders and board of directors, the transfer of legal and
beneficial title to securities or assets and the final approval of the
transaction by any applicable domestic or foreign governments or
governmental agencies.
(j) "Control" shall mean, in the case of a corporation,
Beneficial Ownership of more than 50% of the combined voting power of
the corporation's Voting Securities, or in the case of any other
entity, Beneficial Ownership of more than 50% of such entity's voting
equity interests.
(k) "Effective Date" shall mean the date of execution of this
Agreement.
(l) "Employee Outplacement Program" shall mean the program
established by the Company from time to time for the purpose of
assisting participants covered by the plan in finding employment
outside of the Company which provides for the following services:
(i) self-assessment, career decision and goal
setting; (ii) job market research and job sources;
(iii) networking and interviewing skills; (iv)
planning and implementation strategy; (v) resume
writing, job hunting methods and salary negotiation;
and (vi) office support and job search resources.
(m) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(n) "Good Reason" shall mean, without Mr. Holland's express
written consent, after written notice to the Board, and after a thirty
(30) day opportunity for the Board to cure, the continuing occurrence
of any of the following events:
(i) Inconsistent Duties. A meaningful and detrimental
alteration in Mr. Holland's position or in the nature or
status of his responsibilities from those in effect
immediately prior to the Change in Control;
(ii) Reduced Salary. A reduction of five percent (5%)
or more by the Company in either of the following: (i) Mr.
Holland's annual base salary rate as in effect immediately
prior to the Change in Control (except for a less than ten
percent (10%), across-the-board annual base salary rate
reduction similarly affecting at least ninety-five percent
(95%) of the Executive Employees of the Company); or (ii) the
sum of Mr. Holland's annual base salary rate plus target bonus
under the PPP Plan (except for a less than ten percent (10%),
across-the-board reduction of annual base salary rate plus
target bonus under the PPP Plan similarly affecting at least
ninety-five percent (95%) of the Executive Employees of the
Company);
(iii) Pension and Compensation Plans. The failure by
the Company to continue in effect any pension or compensation
plan or agreement in which Mr. Holland participates or is a
party as of the date of the Change in Control or the
elimination of Mr. Holland's participation therein, (except
for across-the-board plan changes or terminations similarly
affecting at least ninety-five percent (95%) of the Executive
Employees of the Company); For purposes of this Paragraph
1.(n), a "pension plan or agreement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for payments upon retirement; and a
"compensation plan or arrangement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for periodic, non-discretionary compensatory
payments in the nature of bonuses.
(iv) Relocation. A change in Mr. Holland's work
location to a location more than fifty (50) miles from the
office where Mr. Holland is located at the time of the Change
in Control, unless such new work location is within fifty (50)
miles from Mr. Holland's principal place of residence at the
time of the Change in Control. The acceptance, if any, by Mr.
Holland of employment by the Company at a work location which
is outside the fifty mile radius set forth in this Paragraph
1.(n)(iv) shall not be a waiver of Mr. Holland's right to
refuse subsequent transfer by the Company to a location which
is more than fifty (50) miles from Mr. Holland's principal
place of residence at the time of the Change in Control, and
such subsequent unconsented transfer shall be "Good Reason"
under this Agreement; or
(v) Benefits and Perquisites. The taking of any
action by the Company which would directly or indirectly
materially reduce the benefits enjoyed by Mr. Holland under
the Company's retirement, life insurance, medical, health and
accident, disability, deferred compensation or savings plans
in which Mr. Holland was participating immediately prior to
the Change in Control; or the failure by the Company to
provide Mr. Holland with the number of paid vacation days to
which Mr. Holland is entitled on the basis of years of service
with the Company in accordance with the Company's normal
vacation policy in effect immediately prior to the Change in
Control (except for across-the-board plan or vacation policy
changes or plan terminations similarly affecting at least
ninety-five percent (95%) of the Executive Employees of the
Company).
(vi) For purposes of this Paragraph 1.(n), the term
"Executive Employee" shall mean those employees of the Company
of Grade Level 10 or above. (o) "Group" shall have the meaning
set forth in Section 14(d) of the Exchange Act. (p) "Group
Health Plan" shall mean the group health plan covering Mr.
Holland, as such plan may be amended from time to time.
(q) "Group Life Insurance Plan" shall mean the group life
insurance program covering Mr. Holland, as such plan may be amended
from time to time.
(r) "Incumbent Board" shall mean those individuals who
constitute the Southern Board as of the Effective Date plus any
individual who shall become a director subsequent to such date whose
election or nomination for election by Southern's shareholders was
approved by a vote of at least 75% of the directors then comprising the
Incumbent Board. Notwithstanding the foregoing, no individual who shall
become a director of the Southern Board subsequent to the Effective
Date whose initial assumption of office occurs as a result of an actual
or threatened election contest (within the meaning of Rule 14a-11 of
the Regulations promulgated under the Exchange Act) with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Southern Board shall be a member of the Incumbent Board.
(s) "Month of Service" shall mean any calendar month during
which Mr. Holland has worked at least one (1) hour or was on approved
leave of absence while in the employ of the Company or any affiliate or
subsidiary of Southern.
(t) "Pension Plan" shall mean The Southern Company Pension
Plan, as such plan may be amended from time to time.
(u) "Performance Dividend Plan" shall mean the Southern
Company Performance Dividend Plan or any replacement thereto, as such
plans may be amended from time to time.
(v) "Performance Stock Plan" shall mean the Southern Company
Performance Stock Plan or any replacement thereto, as such plans may be
amended from time to time.
(w) "Person" shall mean any individual, entity or group within
the meaning of Section 13(d)(3) or 14(d)(2) of Act.
(x) "Performance Pay Plan" or "PPP Plan" shall mean the
Southern Company Performance Pay Plan or any replacement thereto, as
such plans may be amended from time to time.
(y) "Productivity Improvement Plan" or "PIP Plan" shall mean
the Southern Company Productivity Improvement Plan or replacement
thereto, as such plans may be amended from time to time.
(z) "Southern" shall mean The Southern Company, its successors
and assigns.
(aa) "Southern Board" shall mean the board of directors of
Southern.
(bb) "Southern Subsidiary" shall mean any corporation or other
entity Controlled by Southern.
(cc) "Termination for Cause" or "Cause" shall mean the
termination of Mr. Holland's employment by the Company upon the
occurrence of any of the following:
(i) The willful and continued failure by Mr. Holland
substantially to perform his duties with the Company (other
than any such failure resulting from Mr. Holland's Total
Disability or from Mr. Holland's retirement or any such actual
or anticipated failure resulting from termination by Mr.
Holland for Good Reason) after a written demand for
substantial performance is delivered to him by the Southern
Board, which demand specifically identifies the manner in
which the Southern Board believes that he has not
substantially performed his duties; or
(ii) The willful engaging by Mr. Holland in conduct
that is demonstrably and materially injurious to the Company,
monetarily or otherwise, including, but not limited to any of
the following:
(A) any willful act involving fraud or
dishonesty in the course of Mr. Holland's employment
by the Company;
(B) the willful carrying out of any activity
or the making of any statement which would materially
prejudice or impair the good name and standing of the
Company, Southern or any Southern Subsidiary or would
bring the Company, Southern or any Southern
Subsidiary into contempt, ridicule or would
reasonably shock or offend any community in which the
Company, Southern or such Southern Subsidiary is
located;
(C) attendance at work in a state of
intoxication or otherwise being found in possession
at his workplace of any prohibited drug or substance,
possession of which would amount to a criminal
offense;
(D) violation of the Company's policies on
drug and alcohol usage, fitness for duty requirements
or similar policies as may exist from time to time as
adopted by the Company's safety officer;
(E) assault or other act of violence against
any person during the course of employment; or
(F) indictment of any felony or any
misdemeanor involving moral turpitude.
No act or failure to act by Mr. Holland shall be deemed
"willful" unless done, or omitted to be done, by Mr. Holland not in
good faith and without reasonable belief that his action or omission
was in the best interest of the Company.
Notwithstanding the foregoing, Mr. Holland shall not be deemed
to have been terminated for Cause unless and until there shall have
been delivered to him a copy of a resolution duly adopted by the
affirmative vote of not less than three quarters of the entire
membership of the Southern Board at a meeting of the Southern Board
called and held for such purpose (after reasonable notice to Mr.
Holland and an opportunity for him, together with counsel, to be heard
before the Southern Board), finding that, in the good faith opinion of
the Southern Board, Mr. Holland was guilty of conduct set forth above
in clause (i) or (ii) of this Paragraph 1.(cc) and specifying the
particulars thereof in detail.
(dd) "Termination Date" shall mean the date on which Mr.
Holland's employment with the Company is terminated; provided, however,
that solely for purposes of Paragraph 2.(c) hereof, the Termination
Date shall be the effective date of his retirement pursuant to the
terms of the Pension Plan.
(ee) "Total Disability" shall mean Mr. Holland's total
disability within the meaning of the Pension Plan.
(ff) "Voting Securities" shall mean the outstanding voting
securities of a corporation entitling the holder thereof to vote
generally in the election of such corporation's directors.
(gg) "Waiver and Release" shall mean the Waiver and Release
attached hereto as Exhibit B.
(hh) "Year of Service" shall mean Mr. Holland's Months of
Service divided by twelve (12) rounded to the nearest whole year,
rounding up if the remaining number of months is seven (7) or greater
and rounding down if the remaining number of months is less than seven
(7). If Mr. Holland has a break in his service with the Company, he
will receive credit under this Agreement for service prior to the break
in service only if the break in service is less than five years.
2. Severance Benefits.
(a) Eligibility. Except as otherwise provided in this
Paragraph 2.(a), if Mr. Holland's employment is involuntarily
terminated by the Company at any time during the two year period
following a Change in Control for reasons other than Cause, or if Mr.
Holland voluntarily terminates his employment with the Company for Good
Reason at any time during the two year period following a Change in
Control, Mr. Holland shall be entitled to receive the benefits
described in this Agreement upon the Company's receipt of an effective
Waiver and Release. Notwithstanding anything to the contrary herein,
Mr. Holland shall not be eligible to receive benefits under this
Agreement if Mr. Holland:
(i) voluntarily terminates his employment with the
Company for other than Good Reason;
(ii) has his employment terminated by the Company for
Cause;
(iii) accepts the transfer of his employment to
Southern, any Southern Subsidiary or any employer that
succeeds to all or substantially all of the assets of the
Company, Southern or any Southern Subsidiary;
(iv) refuses an offer of continued employment with
the Company, any Southern Subsidiary, or any employer that
succeeds to all or substantially all of the assets of the
Company, Southern, or any Southern Subsidiary under
circumstances where such refusal would not amount to Good
Reason for voluntary termination of employment; or
(v) elects to receive the benefits of any other
voluntary or involuntary severance or separation program
maintained by the Company; provided however, that the receipt
of benefits under the terms of any retention plan or agreement
shall not be deemed to be the receipt of severance or
separation benefits for purposes of this Agreement. (b)
Severance Benefits. If Mr. Holland meets the eligibility
requirements of Paragraph 2.(a) hereof, he shall be entitled
to a cash severance benefit in an amount equal to three times
his Annual Compensation (the "Severance Amount"). If any
portion of the Severance Amount constitutes an "excess
parachute payment" (as such term is defined under Code Section
280G ("Excess Parachute Payment")), the Company shall pay to
Mr. Holland an additional amount calculated by determining the
amount of tax under Code Section 4999 that he otherwise would
have paid on any Excess Parachute Payment with respect to the
Change in Control and dividing such amount by a decimal
determined by adding the tax rate under Code Section 4999
("Excise Tax"), the hospital insurance tax under Code Section
3101(b) ("HI Tax") and federal and state income tax measured
at the highest marginal rates ("Income Tax") and subtracting
such result from the number one (1) (the "280G Gross-up");
provided, however, that no 280G Gross-up shall be paid unless
the Severance Amount plus all other "parachute payments" to
Mr. Holland under Code Section 280G exceeds three (3) times
Mr. Holland's "base amount" (as such term is defined under
Code Section 280G ("Base Amount")) by ten percent (10%) or
more; provided further, that if no 280G Gross-up is paid, the
Severance Amount shall be capped at three (3) times Mr.
Holland's Base Amount, less all other "parachute payments" (as
such term is defined under Code Section 280G) received by Mr.
Holland, less one dollar (the "Capped Amount"), if the Capped
Amount, reduced by HI Tax and Income Tax, exceeds what
otherwise would have been the Severance Amount, reduced by HI
Tax, Income Tax and Excise Tax.
For purposes of this Paragraph 2.(b), whether any amount would
constitute an Excess Parachute Payment and any other calculations of
tax, e.g., Excise Tax, HI Tax, Income Tax, etc., or other amounts e.g.,
Base Amount, Capped Amount, etc., shall be determined by the tax
department of the independent public accounting firm then responsible
for preparing Southern's consolidated federal income tax return, and
such calculations or determinations shall be binding upon the parties
hereto.
(c) Welfare Benefits. If Mr. Holland meets the eligibility
requirements of Paragraph 2.(a) hereof and is not otherwise eligible to
receive retiree medical and life insurance benefits provided to certain
retirees pursuant to the terms of the Pension Plan, the Group Health
Plan and the Group Life Insurance Plan, he shall be entitled to the
benefits set forth in this Paragraph 2.(c).
(i) Mr. Holland shall be eligible to participate in
the Company's Group Health Plan, upon payment of both the
Company's and his monthly premium under such plan, for a
period of six (6) months for each of Mr. Holland's Years of
Service, not to exceed five (5) years. If Mr. Holland elects
to receive this extended medical coverage, he shall also be
entitled to elect coverage under the Group Health Plan for his
dependents who were participating in the Group Health Plan on
Mr. Holland's Termination Date (and for such other dependents
as may be entitled to coverage under the provisions of the
Health Insurance Portability and Accountability Act of 1996)
for the duration of Mr. Holland's extended medical coverage
under this Paragraph 2.(c)(i) to the extent such dependents
remain eligible for dependent coverage under the terms of the
Group Health Plan.
(A) The extended medical coverage afforded
to Mr. Holland pursuant to Paragraph 2.(c)(i), as
well as the premiums to be paid by Mr. Holland in
connection with such coverage shall be determined in
accordance with the terms of the Group Health Plan
and shall be subject to any changes in the terms and
conditions of the Group Health Plan as well as any
future increases in premiums under the Group Health
Plan. The premiums to be paid by Mr. Holland in
connection with this extended coverage shall be due
on the first day of each month; provided, however,
that if he fails to pay his premium within thirty
(30) days of its due date, such extended coverage
shall be terminated.
(B) Any Group Health Plan coverage provided
under Paragraph 2.(c)(i) shall be a part of and not
in addition to any COBRA Coverage which Mr. Holland
or his dependents may elect. In the event that Mr.
Holland or his dependents become eligible to be
covered, by virtue of re-employment or otherwise, by
any employer-sponsored group health plan or is
eligible for coverage under any government-sponsored
health plan during the above period, coverage under
the Company's Group Health Plan available to Mr.
Holland or his dependents by virtue of the provisions
of Paragraph 2.(c)(i) shall terminate, except as may
otherwise be required by law, and shall not be
renewed. (ii) Mr. Holland shall be entitled to
receive cash in an amount equal to the Company's and
Mr. Holland's cost of premiums for three (3) years of
coverage under the Group Health Plan and Group Life
Insurance Plan in accordance with the terms of such
plans as of the date of the Change in Control.
(d) Incentive Plans. If Mr. Holland meets the eligibility
requirements of Paragraph 2.(a) hereof he shall be entitled to the
following benefits under the Company's incentive plans:
(i) Stock Option Plan.
(A) Any of Mr. Holland's Options and Stock
Appreciation Rights under the Performance Stock Plan
(the defined terms of which are incorporated in this
Paragraph 2.(d)(i) by reference) which are
outstanding as of the Termination Date and which are
not then exercisable and vested, shall become fully
exercisable and vested to the full extent of the
original grant; provided, that in the case of a Stock
Appreciation Right, if Mr. Holland is actually
subject to Section 16(b) of the Exchange Act, such
Stock Appreciation Right shall not become fully
vested and exercisable at such time if such actions
would result in liability to Mr. Holland under
Section 16(b) of the Exchange Act, provided further,
that any such actions not taken as a result of the
rules under Section 16(b) of the Exchange Act shall
be effected as of the first date that such activity
would no longer result in liability under Section
16(b) of the Exchange Act.
(B) The restrictions and deferral
limitations applicable to any of Mr. Holland's
Restricted Stock as of the Termination Date shall
lapse, and such Restricted Stock shall become free of
all restrictions and limitations and become fully
vested and transferable to the full extent of the
original grant.
(C) The restrictions and deferral
limitations and other conditions applicable to any
other Awards held by Mr. Holland under the Stock
Performance Plan as of the Termination Date shall
lapse, and such other Awards shall become free of all
restrictions, limitations or conditions and become
fully vested and transferable to the full extent of
the original grant. (ii) Performance Pay Plan.
Provided Mr. Holland is not entitled to benefits
under Article V of the PPP Plan, (the defined terms
of which are incorporated in this Paragraph 2.(d)(ii)
by reference), if the PPP Plan is in place through
Mr. Holland's Termination Date and to the extent Mr.
Holland is entitled to participate therein, Mr.
Holland shall be entitled to receive cash in an
amount equal to a prorated payout of his Incentive
Pay Awards under the PPP Plan for the Performance
Period in which the Termination Date shall have
occurred, at target performance under the PPP Plan
and prorated by the number of months which have
passed since the beginning of the Performance Period
until the Termination Date.
(iii) PIP Plan. Provided Mr. Holland is not entitled
to benefits under Article IV of the PIP Plan (the defined
terms of which are incorporated in this Paragraph 2.(d)(iii)
by reference), if the PIP Plan is in place through Mr.
Holland's Termination Date and to the extent Mr. Holland is
entitled to participate therein, Mr. Holland shall be entitled
to receive cash in an amount equal to his Award Opportunity
for the Computation Periods in which the Termination Date
shall have occurred at a target Value of Performance Unit of
$1.00, prorated for each Computation Period by the number of
months which have passed since the beginning of the
Computation Periods until the Termination Date.
(iv) Performance Dividend Plan. Provided Mr. Holland
is not entitled to benefits under the Performance Dividend
Plan (the defined terms of which are incorporated in this
Paragraph 2.(d)(iv) by reference), if the Performance Dividend
Plan is in place through Mr. Holland's Termination Date and to
the extent Mr. Holland is entitled to participate therein, Mr.
Holland shall be entitled to receive cash for each Award held
by Mr. Holland on his Termination Date, based on actual
performance under Section 4.1 of the Performance Dividend Plan
determined as of the most recently completed calendar quarter
of the Performance Period in which the Termination Date shall
have occurred, and the Annual Dividend declared prior to the
Termination Date.
(v) Other Short Term Incentive Plans. The provisions
of this Paragraph 2.(d)(v) shall apply if and to the extent
that Mr. Holland is a participant in any other "short term
compensation plan" not otherwise previously referred to in
this Paragraph 2.(d). Provided Mr. Holland is not otherwise
entitled to a plan payout under any change of control
provisions of such plans, if the "short term compensation
plan" is in place as of the Termination Date and to the extent
Mr. Holland is entitled to participate therein, Mr. Holland
shall receive cash in an amount equal to his award under the
Company's "short term incentive plan" for the annual
performance period in which the Termination Date shall have
occurred, at Mr. Holland's target performance level and
prorated by the number of months which have passed since the
beginning of the annual performance period until his
Termination Date. For purposes of this Paragraph 2.(d)(v) the
term "short term incentive compensation plan" shall mean any
incentive compensation plan or arrangement adopted in writing
by the Company which provides for annual, recurring
compensatory bonuses based upon articulated performance
criteria. (e) Payment of Benefits. Any amounts due under this
Agreement shall be paid in one (1) lump sum payment as soon as
administratively practicable following the later of: (i) Mr.
Holland's Termination Date, or (ii) upon Mr. Holland's tender
of an effective Waiver and Release to the Company in the form
of Exhibit B attached hereto and the expiration of any
applicable revocation period for such waiver. In the event of
a dispute with respect to liability or amount of any benefit
due hereunder, an effective Waiver and Release shall be
tendered at the time of final resolution of any such dispute
when payment is tendered by the Company.
(f) Benefits in the Event of Death. In the event of Mr.
Holland's death prior to the payment of all amounts due under this
Agreement, Mr. Holland's estate shall be entitled to receive as due any
amounts not yet paid under this Agreement upon the tender by the
executor or administrator of the estate of an effective Waiver and
Release.
(g) Legal Fees. In the event of a dispute between Mr. Holland
and the Company with regard to any amounts due hereunder, if any
material issue in such dispute is finally resolved in Mr. Holland's
favor, the Company shall reimburse Mr. Holland's legal fees incurred
with respect to all issues in such dispute in an amount not to exceed
fifty thousand dollars ($50,000).
(h) Employee Outplacement Services. Mr. Holland shall be
eligible to participate in the Employee Outplacement Program, which
program shall not be less than six (6) months duration measured from
Mr. Holland's Termination Date.
(i) Non-qualified Retirement and Deferred Compensation Plans.
The Parties agree that subsequent to a Change in Control, any claims by
Mr. Holland for benefits under any of the Company's non-qualified
retirement or deferred compensation plans shall be resolved through
binding arbitration in accordance with the provisions and procedures
set forth in Paragraph 5 hereof and if any material issue in such
dispute is finally resolved in Mr. Holland's favor, the Company shall
reimburse Mr. Holland's legal fees in the manner provided in Paragraph
2.(g) hereof. 3. Transfer of Employment. In the event that Mr.
Holland's employment by the Company is terminated during the two year
period following a Change in Control and Mr. Holland accepts employment
by Southern, a Southern Subsidiary, or any employer that succeeds to
all or substantially all of the assets of the Company, Southern or any
Southern Subsidiary, the Company shall assign this Agreement to
Southern, such Southern Subsidiary, or successor employer, Southern
shall accept such assignment or cause such Southern Subsidiary or
successor employer to accept such assignment, and such assignee shall
become the "Company" for all purposes hereunder.
4. No Mitigation. If Mr. Holland is otherwise eligible to receive
benefits under Paragraph 2 of this Agreement, he shall have no duty or
obligation to seek other employment following his Termination Date and, except
as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr.
Holland hereunder shall not be reduced or suspended if Mr. Holland accepts such
subsequent employment.
5. Arbitration.
(a) Any dispute, controversy or claim arising out of or
relating to the Company's obligations to pay severance benefits under
this Agreement, or the breach thereof, shall be settled and resolved
solely by arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association ("AAA") except as
otherwise provided herein. The arbitration shall be the sole and
exclusive forum for resolution of any such claim for severance benefits
and the arbitrators' award shall be final and binding. The provisions
of this Paragraph 5 are not intended to apply to any other disputes,
claims or controversies arising out of or relating to Mr. Holland's
employment by the Company or the termination thereof.
(b) Arbitration shall be initiated by serving a written notice
of demand for arbitration to Mr. Holland, in the case of the Company,
or to the Southern Board, in the case of Mr. Holland.
(c) The arbitration shall be held in Atlanta, Georgia. The
arbitrators shall apply the law of the State of Georgia, to the extent
not preempted by federal law, excluding any law which would require the
application of the law of another state.
(d) The parties shall appoint arbitrators within fifteen (15)
business days following service of the demand for arbitration. The
number of arbitrators shall be three. One arbitrator shall be appointed
by Mr. Holland, one arbitrator shall be appointed by the Company, and
the two arbitrators shall appoint a third. If the arbitrators cannot
agree on a third arbitrator within thirty (30) business days after the
service of demand for arbitration, the third arbitrator shall be
selected by the AAA.
(e) The arbitration filing fee shall be paid by Mr. Holland.
All other costs of arbitration shall be borne equally by Mr. Holland
and the Company, provided, however, that the Company shall reimburse
such fees and costs in the event any material issue in such dispute is
finally resolved in Mr. Holland's favor and Mr. Holland is reimbursed
legal fees under Paragraph 2.(g) hereof.
(f) The parties agree that they will faithfully observe the
rules that govern any arbitration between them, they will abide by and
perform any award rendered by the arbitrators in any such arbitration,
including any award of injunctive relief, and a judgment of a court
having jurisdiction may be entered upon an award.
(g) The parties agree that nothing in this Paragraph 5 is
intended to preclude upon application of either party any court having
jurisdiction from issuing and enforcing in any lawful manner such
temporary restraining orders, preliminary injunctions, and other
interim measures of relief as may be necessary to prevent harm to a
party's interests or as otherwise may be appropriate pending the
conclusion of arbitration proceedings pursuant to this Agreement
regardless of whether an arbitration proceeding under this Paragraph 5
has begun. The parties further agree that nothing herein shall prevent
any court from entering and enforcing in any lawful manner such
judgments for permanent equitable relief as may be necessary to prevent
harm to a party's interests or as otherwise may be appropriate
following the issuance of arbitral awards pursuant to this Paragraph 5.
6. Miscellaneous.
(a) Funding of Benefits. Unless the Board in its discretion
shall determine otherwise, the benefits payable to Mr. Holland under
this Agreement shall not be funded in any manner and shall be paid by
the Company out of its general assets, which assets are subject to the
claims of the Company's creditors.
(b) Withholding. There shall be deducted from the payment of
any benefit due under this Agreement the amount of any tax required by
any governmental authority to be withheld and paid over by the Company
to such governmental authority for the account of Mr. Holland.
(c) Assignment. Mr. Holland shall have no rights to sell,
assign, transfer, encumber, or otherwise convey the right to receive
the payment of any benefit due hereunder, which payment and the rights
thereto are expressly declared to be nonassignable and nontransferable.
Any attempt to do so shall be null and void and of no effect.
(d) Amendment and Termination. The Agreement may be amended or
terminated only by a writing executed by the parties.
(e) Construction. This Agreement shall be construed in
accordance with and governed by the laws of the State of Georgia, to
the extent not preempted by federal law, disregarding any provision of
law which would require the application of the law of another state.
(f) Pooling Accounting. Notwithstanding anything to the
contrary herein, if, but for any provision of this Agreement, a Change
in Control transaction would otherwise be accounted for as a
pooling-of-interests under APB No.16 ("Pooling Accounting") (after
giving effect to any and all other facts and circumstances affecting
whether such Change in Control transaction would use Pooling
Accounting), such provision or provisions of this Agreement which would
otherwise cause the Change in Control transaction to be ineligible for
Pooling Accounting shall be void and ineffective in such a manner and
to the extent that by eliminating such provision or provisions of this
Agreement, Pooling Accounting would be required for such Change in
Control transaction.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
this ____ day of __________________, 199__.
THE SOUTHERN COMPANY
By: ____________________________________
SAVANNAH ELECTRIC & POWER
COMPANY
By: ____________________________________
MR. HOLLAND
-----------------------------
G. Edison Holland, Jr.
<PAGE>
Exhibit A
CHANGE IN CONTROL AGREEMENT
Target Annual Bonus for
Mr. G. Edison Holland, Jr.
50%
<PAGE>
Exhibit B
CHANGE IN CONTROL AGREEMENT
Waiver and Release
The attached Waiver and Release is to be given to Mr. G. Edison
Holland, Jr. upon the occurrence of an event that triggers eligibility for
severance benefits under the Change in Control Agreement, as described in
Paragraph 2(a) of such agreement.
<PAGE>
CHANGE IN CONTROL AGREEMENT
Waiver and Release
I, G. Edison Holland, Jr., understand that I am entitled to receive the
severance benefits described in Section 2 of the Change in Control Agreement
(the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand
that the benefits I will receive under the Agreement are in excess of those I
would have received from The Southern Company and Savannah Electric & Power
Company (collectively, the "Company") if I had not elected to sign this Waiver.
I recognize that I may have a claim against the Company under the Civil
Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the
Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended,
the Americans with Disabilities Act or other federal, state and local laws.
In exchange for the benefits I elect to receive, I hereby irrevocably
waive and release all claims, of any kind whatsoever, whether known or unknown
in connection with any claim which I ever had, may have, or now have against The
Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power
Company, Mississippi Power Company, Savannah Electric and Power Company,
Southern Communication Services, Inc., Southern Company Services, Inc., Southern
Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern
Nuclear Operating Company, Inc. and other direct or indirect subsidiaries of The
Southern Company and their past, present and future officers, directors,
employees, agents and attorneys. Nothing in this Waiver shall be construed to
release claims or causes of action under the Age Discrimination in Employment
Act or the Energy Reorganization Act of 1974, as amended, which arise out of
events occurring after the execution date of this Waiver.
In further exchange for the benefits I elect to receive, I understand
and agree that I will respect the proprietary and confidential nature of any
information I have obtained in the course of my service with the Company or any
subsidiary or affiliate of The Southern Company. However, nothing in this Waiver
shall prohibit me from engaging in protected activities under applicable law or
from communicating, either voluntary or otherwise, with any governmental agency
concerning any potential violation of the law.
In signing this Waiver, I am not releasing claims to benefits that I am
already entitled to under any workers' compensation laws or under any retirement
plan or welfare benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, as amended, which is sponsored by or adopted by the
Company and/or any of its direct or indirect subsidiaries; however, I understand
and acknowledge that nothing herein is intended to or shall be construed to
require the Company to institute or continue in effect any particular plan or
benefit sponsored by the Company and the Company hereby reserves the right to
amend or terminate any of its benefit programs at any time in accordance with
the procedures set forth in such plans.
In signing this Waiver, I realize that I am waiving and releasing,
among other things, any claims to benefits under any and all bonus, severance,
workforce reduction, early retirement, outplacement, or any other similar type
plan sponsored by the Company.
I have been encouraged and advised in writing to seek advice from
anyone of my choosing regarding this Waiver, including my attorney, and my
accountant or tax advisor. Prior to signing this Waiver, I have been given the
opportunity and sufficient time to seek such advice, and I fully understand the
meaning and contents of this Waiver.
I understand that I may take up to twenty-one (21) calendar days to
consider whether or not I desire to enter this Waiver. I was not coerced,
threatened or otherwise forced to sign this Waiver. I have made my choice to
sign this Waiver voluntarily and of my own free will.
I understand that I may revoke this Waiver at any time during the seven
(7) calendar day period after I sign and deliver this Waiver to the Company. If
I revoke this Waiver, I must do so in writing delivered to the Company. I
understand that this Waiver is not effective until the expiration of this seven
(7) calendar day revocation period. I understand that upon the expiration of
such seven (7) calendar day revocation period this entire Waiver will be binding
upon me and will be irrevocable.
I understand that by signing this Waiver I am giving up rights I may
have.
IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this
____ day of ____________________, in the year _____.
G. Edison Holland, Jr.
Sworn to and subscribed to me this ____ day of ____________, _____.
Notary Public
My Commission Expires:
(Notary Seal)
Acknowledged and Accepted by the Company, as defined in the Waiver.
By:
Date:
EXHIBIT 10(a)93
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT ("Agreement") made and entered into by
and between The Southern Company ("Southern"), Southern Company Services, Inc.
(the "Company") and Mr. C. Alan Martin ("Mr. Martin").
W I T N E S S E T H:
WHEREAS, Mr. Martin is the Executive Vice President and Chief Marketing
Officer of the Company;
WHEREAS, the Company wishes to provide to Mr. Martin certain severance
benefits under certain circumstances following a change in control (as defined
herein) of Southern or the Company;
NOW, THEREFORE, in consideration of the premises, and the agreements of
the parties set forth in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) "Annual Compensation" shall mean Mr. Martin's highest
annual base salary rate for the twelve (12) month period immediately
preceding the date of the Change in Control plus market level target
annual bonus as set forth on Exhibit A hereof.
(b) "Beneficial Ownership" shall mean beneficial ownership
within the meaning of Rule 13d-3 promulgated under the Exchange Act.
(c) "Board" shall mean the board of directors of the Company.
(d) "Business Combination" shall mean a reorganization, merger
or consolidation of Southern or sale or other disposition of all or
substantially all of the assets of Southern.
(e) "Change in Control" shall mean any of the following:
(i) The Consummation of an acquisition by any Person
of Beneficial Ownership of 20% or more of Southern's Voting
Securities; provided, however, that for purposes of this
Paragraph 1.(e)(i), the following acquisitions of Southern's
Voting Securities shall not constitute a Change in Control:
(A) any acquisition directly from Southern;
(B) any acquisition by Southern;
(C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by
Southern or any Southern Subsidiary;
(D) any acquisition by a qualified pension
plan or publicly held mutual fund;
(E) any acquisition by a Group composed
exclusively of employees of Southern, or any Southern
Subsidiary;
(F) any acquisition by Mr. Martin or any
Group of which Mr. Martin is a party; or
(G) any Business Combination which would not
otherwise constitute a change in control because of
the application of clauses (A), (B) and (C) of
Paragraph 1.(e)(iii);
(ii) A change in the composition of the Southern
Board whereby individuals who constitute the Incumbent Board
cease for any reason to constitute at least a majority of the
Southern Board;
(iii) Consummation of a Business Combination,
provided, however, that such a Business Combination shall not
constitute a Change in Control if all three (3) of the
following conditions are met:
(A) all or substantially all of the
individuals and entities who held Beneficial
Ownership, respectively, of Southern's Voting
Securities immediately prior to such Business
Combination beneficially own, directly or indirectly,
65% or more of the combined voting power of the
Voting Securities of the corporation surviving or
resulting from such Business Combination, (including,
without limitation, a corporation which as a result
of such transaction holds Beneficial Ownership of all
or substantially all of Southern's Voting Securities
or all or substantially all of Southern's assets)
(such surviving or resulting corporation to be
referred to as "Surviving Company"), in substantially
the same proportions as their ownership, immediately
prior to such Business Combination, of Southern's
Voting Securities;
(B) no Person (excluding any corporation
resulting from such Business Combination, any
employee benefit plan (or related trust) of Southern,
any Southern Subsidiary or Surviving Company, Mr.
Martin, any Group of which Mr. Martin is a party, any
Group composed exclusively of Company employees, any
qualified pension plan (or related trust) or any
publicly held mutual fund) holds Beneficial
Ownership, directly or indirectly, of 20% or more of
the combined voting power of the then outstanding
Voting Securities of Surviving Company except to the
extent that such ownership existed prior to the
Business Combination; and
(C) at least a majority of the members of
the board of directors of Surviving Company were
members of the Incumbent Board at the earlier of the
date of execution of the initial agreement, or of the
action of the Southern Board, providing for such
Business Combination. (iv) The Consummation of an
acquisition by any Person of Beneficial Ownership of
50% or more of the combined voting power of the then
outstanding Voting Securities of the Company;
provided, however, that for purposes of this
Paragraph 1.(e)(iv), any acquisition by Mr. Martin,
any Group composed exclusively of employees of the
Company, any Group of which Mr. Martin is a party,
any qualified pension plan (or related trust), any
publicly held mutual fund, any employee benefit plan
(or related trust) sponsored or maintained by
Southern or any Southern Subsidiary shall not
constitute a Change in Control;
(v) Consummation of a reorganization, merger or
consolidation of the Company (an "Employing Company Business
Combination"), in each case, unless, following such Employing
Company Business Combination, Southern Controls the
corporation or other entity surviving or resulting from such
Employing Company Business Combination; or
(vi) Consummation of the sale or other disposition of
all or substantially all of the assets of the Company to a
corporation or other entity which Southern does not Control.
(f) "COBRA Coverage" shall mean any continuation coverage to
which Mr. Martin or his dependents may be entitled pursuant to
Code Section 4980B.
(g) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(h) "Company" shall mean Southern Company Services, Inc., its
successors and assigns.
(i) "Consummation" shall mean the completion of the final act
necessary to complete a transaction as a matter of law, including, but
not limited to, any required approvals by the corporation's
shareholders and board of directors, the transfer of legal and
beneficial title to securities or assets and the final approval of the
transaction by any applicable domestic or foreign governments or
governmental agencies.
(j) "Control" shall mean, in the case of a corporation,
Beneficial Ownership of more than 50% of the combined voting power of
the corporation's Voting Securities, or in the case of any other
entity, Beneficial Ownership of more than 50% of such entity's voting
equity interests.
(k) "Effective Date" shall mean the date of execution of this
Agreement.
(l) "Employee Outplacement Program" shall mean the program
established by the Company from time to time for the purpose of
assisting participants covered by the plan in finding employment
outside of the Company which provides for the following services:
(i) self-assessment, career decision and goal
setting; (ii) job market research and job sources;
(iii) networking and interviewing skills; (iv)
planning and implementation strategy; (v) resume
writing, job hunting methods and salary negotiation;
and (vi) office support and job search resources.
(m) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(n) "Good Reason" shall mean, without Mr. Martin's express
written consent, after written notice to the Board, and after a thirty
(30) day opportunity for the Board to cure, the continuing occurrence
of any of the following events:
(i) Inconsistent Duties. A meaningful and detrimental
alteration in Mr. Martin's position or in the nature or status
of his responsibilities from those in effect immediately prior
to the Change in Control;
(ii) Reduced Salary. A reduction of five percent (5%)
or more by the Company in either of the following: (i) Mr.
Martin's annual base salary rate as in effect immediately
prior to the Change in Control (except for a less than ten
percent (10%), across-the-board annual base salary rate
reduction similarly affecting at least ninety-five percent
(95%) of the Executive Employees of the Company); or (ii) the
sum of Mr. Martin's annual base salary rate plus target bonus
under the PPP Plan (except for a less than ten percent (10%),
across-the-board reduction of annual base salary rate plus
target bonus under the PPP Plan similarly affecting at least
ninety-five percent (95%) of the Executive Employees of the
Company);
(iii) Pension and Compensation Plans. The failure by
the Company to continue in effect any pension or compensation
plan or agreement in which Mr. Martin participates or is a
party as of the date of the Change in Control or the
elimination of Mr. Martin's participation therein, (except for
across-the-board plan changes or terminations similarly
affecting at least ninety-five percent (95%) of the Executive
Employees of the Company); For purposes of this Paragraph
1.(n), a "pension plan or agreement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for payments upon retirement; and a
"compensation plan or arrangement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for periodic, non-discretionary compensatory
payments in the nature of bonuses.
(iv) Relocation. A change in Mr. Martin's work
location to a location more than fifty (50) miles from the
office where Mr. Martin is located at the time of the Change
in Control, unless such new work location is within fifty (50)
miles from Mr. Martin's principal place of residence at the
time of the Change in Control. The acceptance, if any, by Mr.
Martin of employment by the Company at a work location which
is outside the fifty mile radius set forth in this Paragraph
1.(n)(iv) shall not be a waiver of Mr. Martin's right to
refuse subsequent transfer by the Company to a location which
is more than fifty (50) miles from Mr. Martin's principal
place of residence at the time of the Change in Control, and
such subsequent unconsented transfer shall be "Good Reason"
under this Agreement; or
(v) Benefits and Perquisites. The taking of any
action by the Company which would directly or indirectly
materially reduce the benefits enjoyed by Mr. Martin under the
Company's retirement, life insurance, medical, health and
accident, disability, deferred compensation or savings plans
in which Mr. Martin was participating immediately prior to the
Change in Control; or the failure by the Company to provide
Mr. Martin with the number of paid vacation days to which Mr.
Martin is entitled on the basis of years of service with the
Company in accordance with the Company's normal vacation
policy in effect immediately prior to the Change in Control
(except for across-the-board plan or vacation policy changes
or plan terminations similarly affecting at least ninety-five
percent (95%) of the Executive Employees of the Company).
(vi) For purposes of this Paragraph 1.(n), the term
"Executive Employee" shall mean those employees of the Company
of Grade Level 10 or above. (o) "Group" shall have the meaning
set forth in Section 14(d) of the Exchange Act. (p) "Group
Health Plan" shall mean the group health plan covering Mr.
Martin, as such plan may be amended from time to time.
(q) "Group Life Insurance Plan" shall mean the group life
insurance program covering Mr. Martin, as such plan may be amended from
time to time.
(r) "Incumbent Board" shall mean those individuals who
constitute the Southern Board as of the Effective Date plus any
individual who shall become a director subsequent to such date whose
election or nomination for election by Southern's shareholders was
approved by a vote of at least 75% of the directors then comprising the
Incumbent Board. Notwithstanding the foregoing, no individual who shall
become a director of the Southern Board subsequent to the Effective
Date whose initial assumption of office occurs as a result of an actual
or threatened election contest (within the meaning of Rule 14a-11 of
the Regulations promulgated under the Exchange Act) with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Southern Board shall be a member of the Incumbent Board.
(s) "Month of Service" shall mean any calendar month during
which Mr. Martin has worked at least one (1) hour or was on approved
leave of absence while in the employ of the Company or any affiliate or
subsidiary of Southern.
(t) "Pension Plan" shall mean The Southern Company Pension
Plan, as such plan may be amended from time to time.
(u) "Performance Dividend Plan" shall mean the Southern
Company Performance Dividend Plan or any replacement thereto, as such
plans may be amended from time to time.
(v) "Performance Stock Plan" shall mean the Southern Company
Performance Stock Plan or any replacement thereto, as such plans may be
amended from time to time.
(w) "Person" shall mean any individual, entity or group within
the meaning of Section 13(d)(3) or 14(d)(2) of Act.
(x) "Performance Pay Plan" or "PPP Plan" shall mean the
Southern Company Performance Pay Plan or any replacement thereto, as
such plans may be amended from time to time.
(y) "Productivity Improvement Plan" or "PIP Plan" shall mean
the Southern Company Productivity Improvement Plan or replacement
thereto, as such plans may be amended from time to time.
(z) "Southern" shall mean The Southern Company, its successors
and assigns.
(aa) "Southern Board" shall mean the board of directors of
Southern.
(bb) "Southern Subsidiary" shall mean any corporation or other
entity Controlled by Southern.
(cc) "Termination for Cause" or "Cause" shall mean the
termination of Mr. Martin's employment by the Company upon the
occurrence of any of the following:
(i) The willful and continued failure by Mr. Martin
substantially to perform his duties with the Company (other
than any such failure resulting from Mr. Martin's Total
Disability or from Mr. Martin's retirement or any such actual
or anticipated failure resulting from termination by Mr.
Martin for Good Reason) after a written demand for substantial
performance is delivered to him by the Southern Board, which
demand specifically identifies the manner in which the
Southern Board believes that he has not substantially
performed his duties; or
(ii) The willful engaging by Mr. Martin in conduct
that is demonstrably and materially injurious to the Company,
monetarily or otherwise, including, but not limited to any of
the following:
(A) any willful act involving fraud or
dishonesty in the course of Mr. Martin's employment
by the Company;
(B) the willful carrying out of any activity
or the making of any statement which would materially
prejudice or impair the good name and standing of the
Company, Southern or any Southern Subsidiary or would
bring the Company, Southern or any Southern
Subsidiary into contempt, ridicule or would
reasonably shock or offend any community in which the
Company, Southern or such Southern Subsidiary is
located;
(C) attendance at work in a state of
intoxication or otherwise being found in possession
at his workplace of any prohibited drug or substance,
possession of which would amount to a criminal
offense;
(D) violation of the Company's policies on
drug and alcohol usage, fitness for duty requirements
or similar policies as may exist from time to time as
adopted by the Company's safety officer;
(E) assault or other act of violence against
any person during the course of employment; or
(F) indictment of any felony or any
misdemeanor involving moral turpitude.
No act or failure to act by Mr. Martin shall be deemed
"willful" unless done, or omitted to be done, by Mr. Martin not in good
faith and without reasonable belief that his action or omission was in
the best interest of the Company.
Notwithstanding the foregoing, Mr. Martin shall not be deemed
to have been terminated for Cause unless and until there shall have
been delivered to him a copy of a resolution duly adopted by the
affirmative vote of not less than three quarters of the entire
membership of the Southern Board at a meeting of the Southern Board
called and held for such purpose (after reasonable notice to Mr. Martin
and an opportunity for him, together with counsel, to be heard before
the Southern Board), finding that, in the good faith opinion of the
Southern Board, Mr. Martin was guilty of conduct set forth above in
clause (i) or (ii) of this Paragraph 1.(cc) and specifying the
particulars thereof in detail.
(dd) "Termination Date" shall mean the date on which Mr.
Martin's employment with the Company is terminated; provided, however,
that solely for purposes of Paragraph 2.(c) hereof, the Termination
Date shall be the effective date of his retirement pursuant to the
terms of the Pension Plan.
(ee) "Total Disability" shall mean Mr. Martin's total
disability within the meaning of the Pension Plan.
(ff) "Voting Securities" shall mean the outstanding voting
securities of a corporation entitling the holder thereof to vote
generally in the election of such corporation's directors.
(gg) "Waiver and Release" shall mean the Waiver and Release
attached hereto as Exhibit B.
(hh) "Year of Service" shall mean Mr. Martin's Months of
Service divided by twelve (12) rounded to the nearest whole year,
rounding up if the remaining number of months is seven (7) or greater
and rounding down if the remaining number of months is less than seven
(7). If Mr. Martin has a break in his service with the Company, he will
receive credit under this Agreement for service prior to the break in
service only if the break in service is less than five years.
2. Severance Benefits.
(a) Eligibility. Except as otherwise provided in this
Paragraph 2.(a), if Mr. Martin's employment is involuntarily terminated
by the Company at any time during the two year period following a
Change in Control for reasons other than Cause, or if Mr. Martin
voluntarily terminates his employment with the Company for Good Reason
at any time during the two year period following a Change in Control,
Mr. Martin shall be entitled to receive the benefits described in this
Agreement upon the Company's receipt of an effective Waiver and
Release. Notwithstanding anything to the contrary herein, Mr. Martin
shall not be eligible to receive benefits under this Agreement if Mr.
Martin:
(i) voluntarily terminates his employment with the
Company for other than Good Reason;
(ii) has his employment terminated by the Company for
Cause;
(iii) accepts the transfer of his employment to
Southern, any Southern Subsidiary or any employer that
succeeds to all or substantially all of the assets of the
Company, Southern or any Southern Subsidiary;
(iv) refuses an offer of continued employment with
the Company, any Southern Subsidiary, or any employer that
succeeds to all or substantially all of the assets of the
Company, Southern, or any Southern Subsidiary under
circumstances where such refusal would not amount to Good
Reason for voluntary termination of employment; or
(v) elects to receive the benefits of any other
voluntary or involuntary severance or separation program
maintained by the Company; provided however, that the receipt
of benefits under the terms of any retention plan or agreement
shall not be deemed to be the receipt of severance or
separation benefits for purposes of this Agreement. (b)
Severance Benefits. If Mr. Martin meets the eligibility
requirements of Paragraph 2.(a) hereof, he shall be entitled
to a cash severance benefit in an amount equal to three times
his Annual Compensation (the "Severance Amount"). If any
portion of the Severance Amount constitutes an "excess
parachute payment" (as such term is defined under Code Section
280G ("Excess Parachute Payment")), the Company shall pay to
Mr. Martin an additional amount calculated by determining the
amount of tax under Code Section 4999 that he otherwise would
have paid on any Excess Parachute Payment with respect to the
Change in Control and dividing such amount by a decimal
determined by adding the tax rate under Code Section 4999
("Excise Tax"), the hospital insurance tax under Code Section
3101(b) ("HI Tax") and federal and state income tax measured
at the highest marginal rates ("Income Tax") and subtracting
such result from the number one (1) (the "280G Gross-up");
provided, however, that no 280G Gross-up shall be paid unless
the Severance Amount plus all other "parachute payments" to
Mr. Martin under Code Section 280G exceeds three (3) times Mr.
Martin's "base amount" (as such term is defined under Code
Section 280G ("Base Amount")) by ten percent (10%) or more;
provided further, that if no 280G Gross-up is paid, the
Severance Amount shall be capped at three (3) times Mr.
Martin's Base Amount, less all other "parachute payments" (as
such term is defined under Code Section 280G) received by Mr.
Martin, less one dollar (the "Capped Amount"), if the Capped
Amount, reduced by HI Tax and Income Tax, exceeds what
otherwise would have been the Severance Amount, reduced by HI
Tax, Income Tax and Excise Tax.
For purposes of this Paragraph 2.(b), whether any amount would
constitute an Excess Parachute Payment and any other calculations of
tax, e.g., Excise Tax, HI Tax, Income Tax, etc., or other amounts,
e.g., Base Amount, Capped Amount, etc., shall be determined by the tax
department of the independent public accounting firm then responsible
for preparing Southern's consolidated federal income tax return, and
such calculations or determinations shall be binding upon the parties
hereto.
(c) Welfare Benefits. If Mr. Martin meets the eligibility
requirements of Paragraph 2.(a) hereof and is not otherwise eligible to
receive retiree medical and life insurance benefits provided to certain
retirees pursuant to the terms of the Pension Plan, the Group Health
Plan and the Group Life Insurance Plan, he shall be entitled to the
benefits set forth in this Paragraph 2.(c).
(i) Mr. Martin shall be eligible to participate in
the Company's Group Health Plan, upon payment of both the
Company's and his monthly premium under such plan, for a
period of six (6) months for each of Mr. Martin's Years of
Service, not to exceed five (5) years. If Mr. Martin elects to
receive this extended medical coverage, he shall also be
entitled to elect coverage under the Group Health Plan for his
dependents who were participating in the Group Health Plan on
Mr. Martin's Termination Date (and for such other dependents
as may be entitled to coverage under the provisions of the
Health Insurance Portability and Accountability Act of 1996)
for the duration of Mr. Martin's extended medical coverage
under this Paragraph 2.(c)(i) to the extent such dependents
remain eligible for dependent coverage under the terms of the
Group Health Plan.
(A) The extended medical coverage afforded
to Mr. Martin pursuant to Paragraph 2.(c)(i), as well
as the premiums to be paid by Mr. Martin in
connection with such coverage shall be determined in
accordance with the terms of the Group Health Plan
and shall be subject to any changes in the terms and
conditions of the Group Health Plan as well as any
future increases in premiums under the Group Health
Plan. The premiums to be paid by Mr. Martin in
connection with this extended coverage shall be due
on the first day of each month; provided, however,
that if he fails to pay his premium within thirty
(30) days of its due date, such extended coverage
shall be terminated.
(B) Any Group Health Plan coverage provided
under Paragraph 2.(c)(i) shall be a part of and not
in addition to any COBRA Coverage which Mr. Martin or
his dependents may elect. In the event that Mr.
Martin or his dependents become eligible to be
covered, by virtue of re-employment or otherwise, by
any employer-sponsored group health plan or is
eligible for coverage under any government-sponsored
health plan during the above period, coverage under
the Company's Group Health Plan available to Mr.
Martin or his dependents by virtue of the provisions
of Paragraph 2.(c)(i) shall terminate, except as may
otherwise be required by law, and shall not be
renewed. (ii) Mr. Martin shall be entitled to receive
cash in an amount equal to the Company's and Mr.
Martin's cost of premiums for three (3) years of
coverage under the Group Health Plan and Group Life
Insurance Plan in accordance with the terms of such
plans as of the date of the Change in Control. (d)
Incentive Plans. If Mr. Martin meets the eligibility
requirements of Paragraph 2.(a) hereof he shall be
entitled to the following benefits under the
Company's incentive plans:
(i) Stock Option Plan.
(A) Any of Mr. Martin's Options and Stock
Appreciation Rights under the Performance Stock Plan
(the defined terms of which are incorporated in this
Paragraph 2.(d)(i) by reference) which are
outstanding as of the Termination Date and which are
not then exercisable and vested, shall become fully
exercisable and vested to the full extent of the
original grant; provided, that in the case of a Stock
Appreciation Right, if Mr. Martin is subject to
Section 16(b) of the Exchange Act, such Stock
Appreciation Right shall not become fully vested and
exercisable at such time if such actions would result
in liability to Mr. Martin under Section 16(b) of the
Exchange Act, provided further, that any such actions
not taken as a result of the rules under Section
16(b) of the Exchange Act shall be effected as of the
first date that such activity would no longer result
in liability under Section 16(b) of the Exchange Act.
(B) The restrictions and deferral
limitations applicable to any of Mr. Martin's
Restricted Stock as of the Termination Date shall
lapse, and such Restricted Stock shall become free of
all restrictions and limitations and become fully
vested and transferable to the full extent of the
original grant.
(C) The restrictions and deferral
limitations and other conditions applicable to any
other Awards held by Mr. Martin under the Stock
Performance Plan as of the Termination Date shall
lapse, and such other Awards shall become free of all
restrictions, limitations or conditions and become
fully vested and transferable to the full extent of
the original grant. (ii) Performance Pay Plan.
Provided Mr. Martin is not entitled to benefits under
Article V of the PPP Plan, (the defined terms of
which are incorporated in this Paragraph 2.(d)(ii) by
reference), if the PPP Plan is in place through Mr.
Martin's Termination Date and to the extent Mr.
Martin is entitled to participate therein, Mr. Martin
shall be entitled to receive cash in an amount equal
to a prorated payout of his Incentive Pay Awards
under the PPP Plan for the Performance Period in
which the Termination Date shall have occurred, at
target performance under the PPP Plan and prorated by
the number of months which have passed since the
beginning of the Performance Period until the
Termination Date.
(iii) PIP Plan. Provided Mr. Martin is not entitled
to benefits under Article IV of the PIP Plan (the defined
terms of which are incorporated in this Paragraph 2.(d)(iii)
by reference), if the PIP Plan is in place through Mr.
Martin's Termination Date and to the extent Mr. Martin is
entitled to participate therein, Mr. Martin shall be entitled
to receive cash in an amount equal to his Award Opportunity
for the Computation Periods in which the Termination Date
shall have occurred at a target Value of Performance Unit of
$1.00, prorated for each Computation Period by the number of
months which have passed since the beginning of the
Computation Periods until the Termination Date.
(iv) Performance Dividend Plan. Provided Mr. Martin
is not entitled to benefits under the Performance Dividend
Plan (the defined terms of which are incorporated in this
Paragraph 2.(d)(iv) by reference), if the Performance Dividend
Plan is in place through Mr. Martin's Termination Date and to
the extent Mr. Martin is entitled to participate therein, Mr.
Martin shall be entitled to receive cash for each Award held
by Mr. Martin on his Termination Date, based on actual
performance under Section 4.1 of the Performance Dividend Plan
determined as of the most recently completed calendar quarter
of the Performance Period in which the Termination Date shall
have occurred, and the Annual Dividend declared prior to the
Termination Date.
(v) Other Short Term Incentive Plans. The provisions
of this Paragraph 2.(d)(v) shall apply if and to the extent
that Mr. Martin is a participant in any other "short term
compensation plan" not otherwise previously referred to in
this Paragraph 2.(d). Provided Mr. Martin is not otherwise
entitled to a plan payout under any change of control
provisions of such plans, if the "short term compensation
plan" is in place as of the Termination Date and to the extent
Mr. Martin is entitled to participate therein, Mr. Martin
shall receive cash in an amount equal to his award under the
Company's "short term incentive plan" for the annual
performance period in which the Termination Date shall have
occurred, at Mr. Martin's target performance level and
prorated by the number of months which have passed since the
beginning of the annual performance period until his
Termination Date. For purposes of this Paragraph 2.(d)(v) the
term "short term incentive compensation plan" shall mean any
incentive compensation plan or arrangement adopted in writing
by the Company which provides for annual, recurring
compensatory bonuses based upon articulated performance
criteria. (e) Payment of Benefits. Any amounts due under this
Agreement shall be paid in one (1) lump sum payment as soon as
administratively practicable following the later of: (i) Mr.
Martin's Termination Date, or (ii) upon Mr. Martin's tender of
an effective Waiver and Release to the Company in the form of
Exhibit B attached hereto and the expiration of any applicable
revocation period for such waiver. In the event of a dispute
with respect to liability or amount of any benefit due
hereunder, an effective Waiver and Release shall be tendered
at the time of final resolution of any such dispute when
payment is tendered by the Company.
(f) Benefits in the Event of Death. In the event of Mr.
Martin's death prior to the payment of all amounts due under this
Agreement, Mr. Martin's estate shall be entitled to receive as due any
amounts not yet paid under this Agreement upon the tender by the
executor or administrator of the estate of an effective Waiver and
Release.
(g) Legal Fees. In the event of a dispute between Mr. Martin
and the Company with regard to any amounts due hereunder, if any
material issue in such dispute is finally resolved in Mr. Martin's
favor, the Company shall reimburse Mr. Martin's legal fees incurred
with respect to all issues in such dispute in an amount not to exceed
fifty thousand dollars ($50,000).
(h) Employee Outplacement Services. Mr. Martin shall be
eligible to participate in the Employee Outplacement Program, which
program shall not be less than six (6) months duration measured from
Mr. Martin's Termination Date.
(i) Non-qualified Retirement and Deferred Compensation Plans.
The Parties agree that subsequent to a Change in Control, any claims by
Mr. Martin for benefits under any of the Company's non-qualified
retirement or deferred compensation plans shall be resolved through
binding arbitration in accordance with the provisions and procedures
set forth in Paragraph 5 hereof and if any material issue in such
dispute is finally resolved in Mr. Martin's favor, the Company shall
reimburse Mr. Martin's legal fees in the manner provided in Paragraph
2.(g) hereof. 3. Transfer of Employment. In the event that Mr. Martin's
employment by the Company is terminated during the two year period
following a Change in Control and Mr. Martin accepts employment by
Southern, a Southern Subsidiary, or any employer that succeeds to all
or substantially all of the assets of the Company, Southern or any
Southern Subsidiary, the Company shall assign this Agreement to
Southern, such Southern Subsidiary, or successor employer, Southern
shall accept such assignment or cause such Southern Subsidiary or
successor employer to accept such assignment, and such assignee shall
become the "Company" for all purposes hereunder.
4. No Mitigation. If Mr. Martin is otherwise eligible to receive
benefits under Paragraph 2 of this Agreement, he shall have no duty or
obligation to seek other employment following his Termination Date and, except
as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr. Martin
hereunder shall not be reduced or suspended if Mr. Martin accepts such
subsequent employment.
5. Arbitration.
(a) Any dispute, controversy or claim arising out of or
relating to the Company's obligations to pay severance benefits under
this Agreement, or the breach thereof, shall be settled and resolved
solely by arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association ("AAA") except as
otherwise provided herein. The arbitration shall be the sole and
exclusive forum for resolution of any such claim for severance benefits
and the arbitrators' award shall be final and binding. The provisions
of this Paragraph 5 are not intended to apply to any other disputes,
claims or controversies arising out of or relating to Mr. Martin's
employment by the Company or the termination thereof.
(b) Arbitration shall be initiated by serving a written notice
of demand for arbitration to Mr. Martin, in the case of the Company, or
to the Southern Board, in the case of Mr. Martin.
(c) The arbitration shall be held in Atlanta, Georgia. The
arbitrators shall apply the law of the State of Georgia, to the extent
not preempted by federal law, excluding any law which would require the
application of the law of another state.
(d) The parties shall appoint arbitrators within fifteen (15)
business days following service of the demand for arbitration. The
number of arbitrators shall be three. One arbitrator shall be appointed
by Mr. Martin, one arbitrator shall be appointed by the Company, and
the two arbitrators shall appoint a third. If the arbitrators cannot
agree on a third arbitrator within thirty (30) business days after the
service of demand for arbitration, the third arbitrator shall be
selected by the AAA.
(e) The arbitration filing fee shall be paid by Mr. Martin.
All other costs of arbitration shall be borne equally by Mr. Martin and
the Company, provided, however, that the Company shall reimburse such
fees and costs in the event any material issue in such dispute is
finally resolved in Mr. Martin's favor and Mr. Martin is reimbursed
legal fees under Paragraph 2.(g) hereof.
(f) The parties agree that they will faithfully observe the
rules that govern any arbitration between them, they will abide by and
perform any award rendered by the arbitrators in any such arbitration,
including any award of injunctive relief, and a judgment of a court
having jurisdiction may be entered upon an award.
(g) The parties agree that nothing in this Paragraph 5 is
intended to preclude upon application of either party any court having
jurisdiction from issuing and enforcing in any lawful manner such
temporary restraining orders, preliminary injunctions, and other
interim measures of relief as may be necessary to prevent harm to a
party's interests or as otherwise may be appropriate pending the
conclusion of arbitration proceedings pursuant to this Agreement;
regardless of whether an arbitration proceeding under this Paragraph 5
has begun. The parties further agree that nothing herein shall prevent
any court from entering and enforcing in any lawful manner such
judgments for permanent equitable relief as may be necessary to prevent
harm to a party's interests or as otherwise may be appropriate
following the issuance of arbitral awards pursuant to this Paragraph 5.
6. Miscellaneous.
(a) Funding of Benefits. Unless the Board in its discretion
shall determine otherwise, the benefits payable to Mr. Martin under
this Agreement shall not be funded in any manner and shall be paid by
the Company out of its general assets, which assets are subject to the
claims of the Company's creditors.
(b) Withholding. There shall be deducted from the payment of
any benefit due under this Agreement the amount of any tax required by
any governmental authority to be withheld and paid over by the Company
to such governmental authority for the account of Mr. Martin.
(c) Assignment. Mr. Martin shall have no rights to sell,
assign, transfer, encumber, or otherwise convey the right to receive
the payment of any benefit due hereunder, which payment and the rights
thereto are expressly declared to be nonassignable and nontransferable.
Any attempt to do so shall be null and void and of no effect.
(d) Amendment and Termination. The Agreement may be amended or
terminated only by a writing executed by the parties.
(e) Construction. This Agreement shall be construed in
accordance with and governed by the laws of the State of Georgia, to
the extent not preempted by federal law, disregarding any provision of
law which would require the application of the law of another state.
(f) Pooling Accounting. Notwithstanding anything to the
contrary herein, if, but for any provision of this Agreement, a Change
in Control transaction would otherwise be accounted for as a
pooling-of-interests under APB No.16 ("Pooling Accounting") (after
giving effect to any and all other facts and circumstances affecting
whether such Change in Control transaction would use Pooling
Accounting,), such provision or provisions of this Agreement which
would otherwise cause the Change in Control transaction to be
ineligible for Pooling Accounting shall be void and ineffective in such
a manner and to the extent that by eliminating such provision or
provisions of this Agreement, Pooling Accounting would be required for
such Change in Control transaction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
this ____ day of __________________, 199__.
THE SOUTHERN COMPANY
By: ____________________________________
SOUTHERN COMPANY SERVICES, INC.
By: ____________________________________
MR. MARTIN
-----------------------------
C. Alan Martin
<PAGE>
Exhibit A
CHANGE IN CONTROL AGREEMENT
Target Annual Bonus for
Mr. C. Alan Martin
45%
<PAGE>
Exhibit B
CHANGE IN CONTROL AGREEMENT
Waiver and Release
The attached Waiver and Release is to be given to Mr. C. Alan Martin
upon the occurrence of an event that triggers eligibility for severance benefits
under the Change in Control Agreement, as described in Paragraph 2(a) of such
agreement.
<PAGE>
CHANGE IN CONTROL AGREEMENT
Waiver and Release
I, C. Alan Martin, understand that I am entitled to receive the
severance benefits described in Section 2 of the Change in Control Agreement
(the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand
that the benefits I will receive under the Agreement are in excess of those I
would have received from The Southern Company and Southern Company Services,
Inc.(collectively, the "Company") if I had not elected to sign this Waiver.
I recognize that I may have a claim against the Company under the Civil
Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the
Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended,
the Americans with Disabilities Act or other federal, state and local laws.
In exchange for the benefits I elect to receive, I hereby irrevocably
waive and release all claims, of any kind whatsoever, whether known or unknown
in connection with any claim which I ever had, may have, or now have against The
Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power
Company, Mississippi Power Company, Savannah Electric and Power Company,
Southern Communication Services, Inc., Southern Company Services, Inc., Southern
Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern
Nuclear Operating Company, Inc. and other direct or indirect subsidiaries of The
Southern Company and their past, present and future officers, directors,
employees, agents and attorneys. Nothing in this Waiver shall be construed to
release claims or causes of action under the Age Discrimination in Employment
Act or the Energy Reorganization Act of 1974, as amended, which arise out of
events occurring after the execution date of this Waiver.
In further exchange for the benefits I elect to receive, I understand
and agree that I will respect the proprietary and confidential nature of any
information I have obtained in the course of my service with the Company or any
subsidiary or affiliate of The Southern Company. However, nothing in this Waiver
shall prohibit me from engaging in protected activities under applicable law or
from communicating, either voluntary or otherwise, with any governmental agency
concerning any potential violation of the law.
In signing this Waiver, I am not releasing claims to benefits that I am
already entitled to under any workers' compensation laws or under any retirement
plan or welfare benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, as amended, which is sponsored by or adopted by the
Company and/or any of its direct or indirect subsidiaries; however, I understand
and acknowledge that nothing herein is intended to or shall be construed to
require the Company to institute or continue in effect any particular plan or
benefit sponsored by the Company and the Company hereby reserves the right to
amend or terminate any of its benefit programs at any time in accordance with
the procedures set forth in such plans.
In signing this Waiver, I realize that I am waiving and releasing,
among other things, any claims to benefits under any and all bonus, severance,
workforce reduction, early retirement, outplacement, or any other similar type
plan sponsored by the Company.
I have been encouraged and advised in writing to seek advice from
anyone of my choosing regarding this Waiver, including my attorney, and my
accountant or tax advisor. Prior to signing this Waiver, I have been given the
opportunity and sufficient time to seek such advice, and I fully understand the
meaning and contents of this Waiver.
I understand that I may take up to twenty-one (21) calendar days to
consider whether or not I desire to enter this Waiver. I was not coerced,
threatened or otherwise forced to sign this Waiver. I have made my choice to
sign this Waiver voluntarily and of my own free will.
I understand that I may revoke this Waiver at any time during the seven
(7) calendar day period after I sign and deliver this Waiver to the Company. If
I revoke this Waiver, I must do so in writing delivered to the Company. I
understand that this Waiver is not effective until the expiration of this seven
(7) calendar day revocation period. I understand that upon the expiration of
such seven (7) calendar day revocation period this entire Waiver will be binding
upon me and will be irrevocable.
I understand that by signing this Waiver I am giving up rights I may
have.
IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this
____ day of ____________________, in the year _____.
C. Alan Martin
Sworn to and subscribed to me this ____ day of ____________, _____.
Notary Public
My Commission Expires:
(Notary Seal)
Acknowledged and Accepted by the Company, as defined in the Waiver.
By:
Date:
EXHIBIT 10(a)94
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT ("Agreement") made and entered into by
and between The Southern Company ("Southern"), Southern Company Services, Inc.
(the "Company") and Mr. Charles Douglas McCrary ("Mr. McCrary").
W I T N E S S E T H:
WHEREAS, Mr. McCrary is Executive Vice President of the Company;
WHEREAS, the Company wishes to provide to Mr. McCrary certain severance
benefits under certain circumstances following a change in control (as defined
herein) of Southern or the Company;
NOW, THEREFORE, in consideration of the premises, and the agreements of
the parties set forth in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) "Annual Compensation" shall mean Mr. McCrary's highest
annual base salary rate for the twelve (12) month period immediately
preceding the date of the Change in Control plus market level target
annual bonus as set forth on Exhibit A hereof.
(b) "Beneficial Ownership" shall mean beneficial ownership
within the meaning of Rule 13d-3 promulgated under the Exchange Act.
(c) "Board" shall mean the board of directors of the Company.
(d) "Business Combination" shall mean a reorganization, merger
or consolidation of Southern or sale or other disposition of all or
substantially all of the assets of Southern.
(e) "Change in Control" shall mean any of the following:
(i) The Consummation of an acquisition by any Person
of Beneficial Ownership of 20% or more of Southern's Voting
Securities; provided, however, that for purposes of this
Paragraph 1.(e)(i), the following acquisitions of Southern's
Voting Securities shall not constitute a Change in Control:
(A) any acquisition directly from Southern;
(B) any acquisition by Southern;
(C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by
Southern or any Southern Subsidiary;
(D) any acquisition by a qualified pension
plan or publicly held mutual fund;
(E) any acquisition by a Group composed
exclusively of employees of Southern, or any Southern
Subsidiary;
(F) any acquisition by Mr. McCrary or any
Group of which Mr. McCrary is a party; or
(G) any Business Combination which would not
otherwise constitute a change in control because of
the application of clauses (A), (B) and (C) of
Paragraph 1.(e)(iii);
(ii) A change in the composition of the Southern
Board whereby individuals who constitute the Incumbent Board
cease for any reason to constitute at least a majority of the
Southern Board;
(iii) Consummation of a Business Combination,
provided, however, that such a Business Combination shall not
constitute a Change in Control if all three (3) of the
following conditions are met:
(A) all or substantially all of the
individuals and entities who held Beneficial
Ownership, respectively, of Southern's Voting
Securities immediately prior to such Business
Combination beneficially own, directly or indirectly,
65% or more of the combined voting power of the
Voting Securities of the corporation surviving or
resulting from such Business Combination, (including,
without limitation, a corporation which as a result
of such transaction holds Beneficial Ownership of all
or substantially all of Southern's Voting Securities
or all or substantially all of Southern's assets)
(such surviving or resulting corporation to be
referred to as "Surviving Company"), in substantially
the same proportions as their ownership, immediately
prior to such Business Combination, of Southern's
Voting Securities;
(B) no Person (excluding any corporation
resulting from such Business Combination, any
employee benefit plan (or related trust) of Southern,
any Southern Subsidiary or Surviving Company, Mr.
McCrary, any Group of which Mr. McCrary is a party,
any Group composed exclusively of Company employees,
any qualified pension plan (or related trust) or any
publicly held mutual fund) holds Beneficial
Ownership, directly or indirectly, of 20% or more of
the combined voting power of the then outstanding
Voting Securities of Surviving Company except to the
extent that such ownership existed prior to the
Business Combination; and
(C) at least a majority of the members of
the board of directors of Surviving Company were
members of the Incumbent Board at the earlier of the
date of execution of the initial agreement, or of the
action of the Southern Board, providing for such
Business Combination. (iv) The Consummation of an
acquisition by any Person of Beneficial Ownership of
50% or more of the combined voting power of the then
outstanding Voting Securities of the Company;
provided, however, that for purposes of this
Paragraph 1.(e)(iv), any acquisition by Mr. McCrary,
any Group composed exclusively of employees of the
Company, any Group of which Mr. McCrary is a party,
any qualified pension plan (or related trust), any
publicly held mutual fund, any employee benefit plan
(or related trust) sponsored or maintained by
Southern or any Southern Subsidiary shall not
constitute a Change in Control;
(v) Consummation of a reorganization, merger or
consolidation of the Company (an "Employing Company Business
Combination"), in each case, unless, following such Employing
Company Business Combination, Southern Controls the
corporation or other entity surviving or resulting from such
Employing Company Business Combination; or
(vi) Consummation of the sale or other disposition of
all or substantially all of the assets of the Company to a
corporation or other entity which Southern does not Control.
(f) "COBRA Coverage" shall mean any continuation coverage to
which Mr. McCrary or his dependents may be entitled pursuant
to Code Section 4980B.
(g) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(h) "Company" shall mean Southern Company Services, Inc., its
successors and assigns.
(i) "Consummation" shall mean the completion of the final act
necessary to complete a transaction as a matter of law, including, but
not limited to, any required approvals by the corporation's
shareholders and board of directors, the transfer of legal and
beneficial title to securities or assets and the final approval of the
transaction by any applicable domestic or foreign governments or
governmental agencies.
(j) "Control" shall mean, in the case of a corporation,
Beneficial Ownership of more than 50% of the combined voting power of
the corporation's Voting Securities, or in the case of any other
entity, Beneficial Ownership of more than 50% of such entity's voting
equity interests.
(k) "Effective Date" shall mean the date of execution of this
Agreement.
(l) "Employee Outplacement Program" shall mean the program
established by the Company from time to time for the purpose of
assisting participants covered by the plan in finding employment
outside of the Company which provides for the following services:
(i) self-assessment, career decision and goal
setting; (ii) job market research and job sources;
(iii) networking and interviewing skills; (iv)
planning and implementation strategy; (v) resume
writing, job hunting methods and salary negotiation;
and (vi) office support and job search resources.
(m) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(n) "Good Reason" shall mean, without Mr. McCrary's express
written consent, after written notice to the Board, and after a thirty
(30) day opportunity for the Board to cure, the continuing occurrence
of any of the following events:
(i) Inconsistent Duties. A meaningful and detrimental
alteration in Mr. McCrary's position or in the nature or
status of his responsibilities from those in effect
immediately prior to the Change in Control;
(ii) Reduced Salary. A reduction of five percent (5%)
or more by the Company in either of the following: (i) Mr.
McCrary's annual base salary rate as in effect immediately
prior to the Change in Control (except for a less than ten
percent (10%), across-the-board annual base salary rate
reduction similarly affecting at least ninety-five percent
(95%) of the Executive Employees of the Company); or (ii) the
sum of Mr. McCrary's annual base salary rate plus target bonus
under the PPP Plan (except for a less than ten percent (10%),
across-the-board reduction of annual base salary rate plus
target bonus under the PPP Plan similarly affecting at least
ninety-five percent (95%) of the Executive Employees of the
Company);
(iii) Pension and Compensation Plans. The failure by
the Company to continue in effect any pension or compensation
plan or agreement in which Mr. McCrary participates or is a
party as of the date of the Change in Control or the
elimination of Mr. McCrary's participation therein, (except
for across-the-board plan changes or terminations similarly
affecting at least ninety-five percent (95%) of the Executive
Employees of the Company); For purposes of this Paragraph
1.(n), a "pension plan or agreement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for payments upon retirement; and a
"compensation plan or arrangement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for periodic, non-discretionary compensatory
payments in the nature of bonuses.
(iv) Relocation. A change in Mr. McCrary's work
location to a location more than fifty (50) miles from the
office where Mr. McCrary is located at the time of the Change
in Control, unless such new work location is within fifty (50)
miles from Mr. McCrary's principal place of residence at the
time of the Change in Control. The acceptance, if any, by Mr.
McCrary of employment by the Company at a work location which
is outside the fifty mile radius set forth in this Paragraph
1.(n)(iv) shall not be a waiver of Mr. McCrary's right to
refuse subsequent transfer by the Company to a location which
is more than fifty (50) miles from Mr. McCrary's principal
place of residence at the time of the Change in Control, and
such subsequent unconsented transfer shall be "Good Reason"
under this Agreement; or
(v) Benefits and Perquisites. The taking of any
action by the Company which would directly or indirectly
materially reduce the benefits enjoyed by Mr. McCrary under
the Company's retirement, life insurance, medical, health and
accident, disability, deferred compensation or savings plans
in which Mr. McCrary was participating immediately prior to
the Change in Control; or the failure by the Company to
provide Mr. McCrary with the number of paid vacation days to
which Mr. McCrary is entitled on the basis of years of service
with the Company in accordance with the Company's normal
vacation policy in effect immediately prior to the Change in
Control (except for across-the-board plan or vacation policy
changes or plan terminations similarly affecting at least
ninety-five percent (95%) of the Executive Employees of the
Company).
(vi) For purposes of this Paragraph 1.(n), the term
"Executive Employee" shall mean those employees of the Company
of Grade Level 10 or above. (o) "Group" shall have the meaning
set forth in Section 14(d) of the Exchange Act. (p) "Group
Health Plan" shall mean the group health plan covering Mr.
McCrary, as such plan may be amended from time to time.
(q) "Group Life Insurance Plan" shall mean the group life
insurance program covering Mr. McCrary, as such plan may be amended
from time to time.
(r) "Incumbent Board" shall mean those individuals who
constitute the Southern Board as of the Effective Date plus any
individual who shall become a director subsequent to such date whose
election or nomination for election by Southern's shareholders was
approved by a vote of at least 75% of the directors then comprising the
Incumbent Board. Notwithstanding the foregoing, no individual who shall
become a director of the Southern Board subsequent to the Effective
Date whose initial assumption of office occurs as a result of an actual
or threatened election contest (within the meaning of Rule 14a-11 of
the Regulations promulgated under the Exchange Act) with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Southern Board shall be a member of the Incumbent Board.
(s) "Month of Service" shall mean any calendar month during
which Mr. McCrary has worked at least one (1) hour or was on approved
leave of absence while in the employ of the Company or any affiliate or
subsidiary of Southern.
(t) "Pension Plan" shall mean The Southern Company Pension
Plan, as such plan may be amended from time to time.
(u) "Performance Dividend Plan" shall mean the Southern
Company Performance Dividend Plan or any replacement thereto, as such
plans may be amended from time to time.
(v) "Performance Stock Plan" shall mean the Southern Company
Performance Stock Plan or any replacement thereto, as such plans may be
amended from time to time.
(w) "Person" shall mean any individual, entity or group within
the meaning of Section 13(d)(3) or 14(d)(2) of Act.
(x) "Performance Pay Plan" or "PPP Plan" shall mean the
Southern Company Performance Pay Plan or any replacement thereto, as
such plans may be amended from time to time.
(y) "Productivity Improvement Plan" or "PIP Plan" shall mean
the Southern Company Productivity Improvement Plan or replacement
thereto, as such plans may be amended from time to time.
(z) "Southern" shall mean The Southern Company, its successors
and assigns.
(aa) "Southern Board" shall mean the board of directors of
Southern.
(bb) "Southern Subsidiary" shall mean any corporation or other
entity Controlled by Southern.
(cc) "Termination for Cause" or "Cause" shall mean the
termination of Mr. McCrary's employment by the Company upon the
occurrence of any of the following:
(i) The willful and continued failure by Mr. McCrary
substantially to perform his duties with the Company (other
than any such failure resulting from Mr. McCrary's Total
Disability or from Mr. McCrary's retirement or any such actual
or anticipated failure resulting from termination by Mr.
McCrary for Good Reason) after a written demand for
substantial performance is delivered to him by the Southern
Board, which demand specifically identifies the manner in
which the Southern Board believes that he has not
substantially performed his duties; or
(ii) The willful engaging by Mr. McCrary in conduct
that is demonstrably and materially injurious to the Company,
monetarily or otherwise, including, but not limited to any of
the following:
(A) any willful act involving fraud or
dishonesty in the course of Mr. McCrary's employment
by the Company;
(B) the willful carrying out of any activity
or the making of any statement which would materially
prejudice or impair the good name and standing of the
Company, Southern or any Southern Subsidiary or would
bring the Company, Southern or any Southern
Subsidiary into contempt, ridicule or would
reasonably shock or offend any community in which the
Company, Southern or such Southern Subsidiary is
located;
(C) attendance at work in a state of
intoxication or otherwise being found in possession
at his workplace of any prohibited drug or substance,
possession of which would amount to a criminal
offense;
(D) violation of the Company's policies on
drug and alcohol usage, fitness for duty requirements
or similar policies as may exist from time to time as
adopted by the Company's safety officer;
(E) assault or other act of violence against
any person during the course of employment; or
(F) indictment of any felony or any
misdemeanor involving moral turpitude.
No act or failure to act by Mr. McCrary shall be deemed
"willful" unless done, or omitted to be done, by Mr. McCrary not in
good faith and without reasonable belief that his action or omission
was in the best interest of the Company.
Notwithstanding the foregoing, Mr. McCrary shall not be deemed
to have been terminated for Cause unless and until there shall have
been delivered to him a copy of a resolution duly adopted by the
affirmative vote of not less than three quarters of the entire
membership of the Southern Board at a meeting of the Southern Board
called and held for such purpose (after reasonable notice to Mr.
McCrary and an opportunity for him, together with counsel, to be heard
before the Southern Board), finding that, in the good faith opinion of
the Southern Board, Mr. McCrary was guilty of conduct set forth above
in clause (i) or (ii) of this Paragraph 1.(cc) and specifying the
particulars thereof in detail.
(dd) "Termination Date" shall mean the date on which Mr.
McCrary's employment with the Company is terminated; provided, however,
that solely for purposes of Paragraph 2.(c) hereof, the Termination
Date shall be the effective date of his retirement pursuant to the
terms of the Pension Plan.
(ee) "Total Disability" shall mean Mr. McCrary's total
disability within the meaning of the Pension Plan.
(ff) "Voting Securities" shall mean the outstanding voting
securities of a corporation entitling the holder thereof to vote
generally in the election of such corporation's directors.
(gg) "Waiver and Release" shall mean the Waiver and Release
attached hereto as Exhibit B.
(hh) "Year of Service" shall mean Mr. McCrary's Months of
Service divided by twelve (12) rounded to the nearest whole year,
rounding up if the remaining number of months is seven (7) or greater
and rounding down if the remaining number of months is less than seven
(7). If Mr. McCrary has a break in his service with the Company, he
will receive credit under this Agreement for service prior to the break
in service only if the break in service is less than five years.
2. Severance Benefits.
(a) Eligibility. Except as otherwise provided in this
Paragraph 2.(a), if Mr. McCrary's employment is involuntarily
terminated by the Company at any time during the two year period
following a Change in Control for reasons other than Cause, or if Mr.
McCrary voluntarily terminates his employment with the Company for Good
Reason at any time during the two year period following a Change in
Control, Mr. McCrary shall be entitled to receive the benefits
described in this Agreement upon the Company's receipt of an effective
Waiver and Release. Notwithstanding anything to the contrary herein,
Mr. McCrary shall not be eligible to receive benefits under this
Agreement if Mr. McCrary:
(i) voluntarily terminates his employment with the
Company for other than Good Reason;
(ii) has his employment terminated by the Company for
Cause;
(iii) accepts the transfer of his employment to
Southern, any Southern Subsidiary or any employer that
succeeds to all or substantially all of the assets of the
Company, Southern or any Southern Subsidiary;
(iv) refuses an offer of continued employment with
the Company, any Southern Subsidiary, or any employer that
succeeds to all or substantially all of the assets of the
Company, Southern, or any Southern Subsidiary under
circumstances where such refusal would not amount to Good
Reason for voluntary termination of employment; or
(v) elects to receive the benefits of any other
voluntary or involuntary severance or separation program
maintained by the Company; provided however, that the receipt
of benefits under the terms of any retention plan or agreement
shall not be deemed to be the receipt of severance or
separation benefits for purposes of this Agreement. (b)
Severance Benefits. If Mr. McCrary meets the eligibility
requirements of Paragraph 2.(a) hereof, he shall be entitled
to a cash severance benefit in an amount equal to three times
his Annual Compensation (the "Severance Amount"). If any
portion of the Severance Amount constitutes an "excess
parachute payment" (as such term is defined under Code Section
280G ("Excess Parachute Payment")), the Company shall pay to
Mr. McCrary an additional amount calculated by determining the
amount of tax under Code Section 4999 that he otherwise would
have paid on any Excess Parachute Payment with respect to the
Change in Control and dividing such amount by a decimal
determined by adding the tax rate under Code Section 4999
("Excise Tax"), the hospital insurance tax under Code Section
3101(b) ("HI Tax") and federal and state income tax measured
at the highest marginal rates ("Income Tax") and subtracting
such result from the number one (1) (the "280G Gross-up");
provided, however, that no 280G Gross-up shall be paid unless
the Severance Amount plus all other "parachute payments" to
Mr. McCrary under Code Section 280G exceeds three (3) times
Mr. McCrary's "base amount" (as such term is defined under
Code Section 280G ("Base Amount")) by ten percent (10%) or
more; provided further, that if no 280G Gross-up is paid, the
Severance Amount shall be capped at three (3) times Mr.
McCrary's Base Amount, less all other "parachute payments" (as
such term is defined under Code Section 280G) received by Mr.
McCrary, less one dollar (the "Capped Amount"), if the Capped
Amount, reduced by HI Tax and Income Tax, exceeds what
otherwise would have been the Severance Amount, reduced by HI
Tax, Income Tax and Excise Tax.
For purposes of this Paragraph 2.(b), whether any amount would
constitute an Excess Parachute Payment and any other calculations of
tax, e.g., Excise Tax, HI Tax, Income Tax, etc., or other amounts,
e.g., Base Amount, Capped Amount, etc., shall be determined by the tax
department of the independent public accounting firm then responsible
for preparing Southern's consolidated federal income tax return, and
such calculations or determinations shall be binding upon the parties
hereto.
(c) Welfare Benefits. If Mr. McCrary meets the eligibility
requirements of Paragraph 2.(a) hereof and is not otherwise eligible to
receive retiree medical and life insurance benefits provided to certain
retirees pursuant to the terms of the Pension Plan, the Group Health
Plan and the Group Life Insurance Plan, he shall be entitled to the
benefits set forth in this Paragraph 2.(c).
(i) Mr. McCrary shall be eligible to participate in
the Company's Group Health Plan, upon payment of both the
Company's and his monthly premium under such plan, for a
period of six (6) months for each of Mr. McCrary's Years of
Service, not to exceed five (5) years. If Mr. McCrary elects
to receive this extended medical coverage, he shall also be
entitled to elect coverage under the Group Health Plan for his
dependents who were participating in the Group Health Plan on
Mr. McCrary's Termination Date (and for such other dependents
as may be entitled to coverage under the provisions of the
Health Insurance Portability and Accountability Act of 1996)
for the duration of Mr. McCrary's extended medical coverage
under this Paragraph 2.(c)(i) to the extent such dependents
remain eligible for dependent coverage under the terms of the
Group Health Plan.
(A) The extended medical coverage afforded
to Mr. McCrary pursuant to Paragraph 2.(c)(i), as
well as the premiums to be paid by Mr. McCrary in
connection with such coverage shall be determined in
accordance with the terms of the Group Health Plan
and shall be subject to any changes in the terms and
conditions of the Group Health Plan as well as any
future increases in premiums under the Group Health
Plan. The premiums to be paid by Mr. McCrary in
connection with this extended coverage shall be due
on the first day of each month; provided, however,
that if he fails to pay his premium within thirty
(30) days of its due date, such extended coverage
shall be terminated.
(B) Any Group Health Plan coverage provided
under Paragraph 2.(c)(i) shall be a part of and not
in addition to any COBRA Coverage which Mr. McCrary
or his dependents may elect. In the event that Mr.
McCrary or his dependents become eligible to be
covered, by virtue of re-employment or otherwise, by
any employer-sponsored group health plan or is
eligible for coverage under any government-sponsored
health plan during the above period, coverage under
the Company's Group Health Plan available to Mr.
McCrary or his dependents by virtue of the provisions
of Paragraph 2.(c)(i) shall terminate, except as may
otherwise be required by law, and shall not be
renewed. (ii) Mr. McCrary shall be entitled to
receive cash in an amount equal to the Company's and
Mr. McCrary's cost of premiums for three (3) years of
coverage under the Group Health Plan and Group Life
Insurance Plan in accordance with the terms of such
plans as of the date of the Change in Control.
(d) Incentive Plans. If Mr. McCrary meets the eligibility
requirements of Paragraph 2.(a) hereof he shall be entitled to the
following benefits under the Company's incentive plans:
(i) Stock Option Plan.
(A) Any of Mr. McCrary's Options and Stock
Appreciation Rights under the Performance Stock Plan
(the defined terms of which are incorporated in this
Paragraph 2.(d)(i) by reference) which are
outstanding as of the Termination Date and which are
not then exercisable and vested, shall become fully
exercisable and vested to the full extent of the
original grant; provided, that in the case of a Stock
Appreciation Right, if Mr. McCrary is subject to
Section 16(b) of the Exchange Act, such Stock
Appreciation Right shall not become fully vested and
exercisable at such time if such actions would result
in liability to Mr. McCrary under Section 16(b) of
the Exchange Act, provided further, that any such
actions not taken as a result of the rules under
Section 16(b) of the Exchange Act shall be effected
as of the first date that such activity would no
longer result in liability under Section 16(b) of the
Exchange Act.
(B) The restrictions and deferral
limitations applicable to any of Mr. McCrary's
Restricted Stock as of the Termination Date shall
lapse, and such Restricted Stock shall become free of
all restrictions and limitations and become fully
vested and transferable to the full extent of the
original grant.
(C) The restrictions and deferral
limitations and other conditions applicable to any
other Awards held by Mr. McCrary under the Stock
Performance Plan as of the Termination Date shall
lapse, and such other Awards shall become free of all
restrictions, limitations or conditions and become
fully vested and transferable to the full extent of
the original grant. (ii) Performance Pay Plan.
Provided Mr. McCrary is not entitled to benefits
under Article V of the PPP Plan, (the defined terms
of which are incorporated in this Paragraph 2.(d)(ii)
by reference), if the PPP Plan is in place through
Mr. McCrary's Termination Date and to the extent Mr.
McCrary is entitled to participate therein, Mr.
McCrary shall be entitled to receive cash in an
amount equal to a prorated payout of his Incentive
Pay Awards under the PPP Plan for the Performance
Period in which the Termination Date shall have
occurred, at target performance under the PPP Plan
and prorated by the number of months which have
passed since the beginning of the Performance Period
until the Termination Date.
(iii) PIP Plan. Provided Mr. McCrary is not entitled
to benefits under Article IV of the PIP Plan (the defined
terms of which are incorporated in this Paragraph 2.(d)(iii)
by reference), if the PIP Plan is in place through Mr.
McCrary's Termination Date and to the extent Mr. McCrary is
entitled to participate therein, Mr. McCrary shall be entitled
to receive cash in an amount equal to his Award Opportunity
for the Computation Periods in which the Termination Date
shall have occurred at a target Value of Performance Unit of
$1.00, prorated for each Computation Period by the number of
months which have passed since the beginning of the
Computation Periods until the Termination Date.
(iv) Performance Dividend Plan. Provided Mr. McCrary
is not entitled to benefits under the Performance Dividend
Plan (the defined terms of which are incorporated in this
Paragraph 2.(d)(iv) by reference), if the Performance Dividend
Plan is in place through Mr. McCrary's Termination Date and to
the extent Mr. McCrary is entitled to participate therein, Mr.
McCrary shall be entitled to receive cash for each Award held
by Mr. McCrary on his Termination Date, based on actual
performance under Section 4.1 of the Performance Dividend Plan
determined as of the most recently completed calendar quarter
of the Performance Period in which the Termination Date shall
have occurred, and the Annual Dividend declared prior to the
Termination Date.
(v) Other Short Term Incentive Plans. The provisions
of this Paragraph 2.(d)(v) shall apply if and to the extent
that Mr. McCrary is a participant in any other "short term
compensation plan" not otherwise previously referred to in
this Paragraph 2.(d). Provided Mr. McCrary is not otherwise
entitled to a plan payout under any change of control
provisions of such plans, if the "short term compensation
plan" is in place as of the Termination Date and to the extent
Mr. McCrary is entitled to participate therein, Mr. McCrary
shall receive cash in an amount equal to his award under the
Company's "short term incentive plan" for the annual
performance period in which the Termination Date shall have
occurred, at Mr. McCrary's target performance level and
prorated by the number of months which have passed since the
beginning of the annual performance period until his
Termination Date. For purposes of this Paragraph 2.(d)(v) the
term "short term incentive compensation plan" shall mean any
incentive compensation plan or arrangement adopted in writing
by the Company which provides for annual, recurring
compensatory bonuses based upon articulated performance
criteria. (e) Payment of Benefits. Any amounts due under this
Agreement shall be paid in one (1) lump sum payment as soon as
administratively practicable following the later of: (i) Mr.
McCrary's Termination Date, or (ii) upon Mr. McCrary's tender
of an effective Waiver and Release to the Company in the form
of Exhibit B attached hereto and the expiration of any
applicable revocation period for such waiver. In the event of
a dispute with respect to liability or amount of any benefit
due hereunder, an effective Waiver and Release shall be
tendered at the time of final resolution of any such dispute
when payment is tendered by the Company.
(f) Benefits in the Event of Death. In the event of Mr.
McCrary's death prior to the payment of all amounts due under this
Agreement, Mr. McCrary's estate shall be entitled to receive as due any
amounts not yet paid under this Agreement upon the tender by the
executor or administrator of the estate of an effective Waiver and
Release.
(g) Legal Fees. In the event of a dispute between Mr. McCrary
and the Company with regard to any amounts due hereunder, if any
material issue in such dispute is finally resolved in Mr. McCrary's
favor, the Company shall reimburse Mr. McCrary's legal fees incurred
with respect to all issues in such dispute in an amount not to exceed
fifty thousand dollars ($50,000).
(h) Employee Outplacement Services. Mr. McCrary shall be
eligible to participate in the Employee Outplacement Program, which
program shall not be less than six (6) months duration measured from
Mr. McCrary's Termination Date.
(i) Non-qualified Retirement and Deferred Compensation Plans.
The Parties agree that subsequent to a Change in Control, any claims by
Mr. McCrary for benefits under any of the Company's non-qualified
retirement or deferred compensation plans shall be resolved through
binding arbitration in accordance with the provisions and procedures
set forth in Paragraph 5 hereof and if any material issue in such
dispute is finally resolved in Mr. McCrary's favor, the Company shall
reimburse Mr. McCrary's legal fees in the manner provided in Paragraph
2.(g) hereof. 3. Transfer of Employment. In the event that Mr.
McCrary's employment by the Company is terminated during the two year
period following a Change in Control and Mr. McCrary accepts employment
by Southern, a Southern Subsidiary, or any employer that succeeds to
all or substantially all of the assets of the Company, Southern or any
Southern Subsidiary, the Company shall assign this Agreement to
Southern, such Southern Subsidiary, or successor employer, Southern
shall accept such assignment or cause such Southern Subsidiary or
successor employer to accept such assignment, and such assignee shall
become the "Company" for all purposes hereunder.
4. No Mitigation. If Mr. McCrary is otherwise eligible to receive
benefits under Paragraph 2 of this Agreement, he shall have no duty or
obligation to seek other employment following his Termination Date and, except
as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr.
McCrary hereunder shall not be reduced or suspended if Mr. McCrary accepts such
subsequent employment.
5. Arbitration.
(a) Any dispute, controversy or claim arising out of or
relating to the Company's obligations to pay severance benefits under
this Agreement, or the breach thereof, shall be settled and resolved
solely by arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association ("AAA") except as
otherwise provided herein. The arbitration shall be the sole and
exclusive forum for resolution of any such claim for severance benefits
and the arbitrators' award shall be final and binding. The provisions
of this Paragraph 5 are not intended to apply to any other disputes,
claims or controversies arising out of or relating to Mr. McCrary's
employment by the Company or the termination thereof.
(b) Arbitration shall be initiated by serving a written notice
of demand for arbitration to Mr. McCrary, in the case of the Company,
or to the Southern Board, in the case of Mr. McCrary.
(c) The arbitration shall be held in Atlanta, Georgia. The
arbitrators shall apply the law of the State of Georgia, to the extent
not preempted by federal law, excluding any law which would require the
application of the law of another state.
(d) The parties shall appoint arbitrators within fifteen (15)
business days following service of the demand for arbitration. The
number of arbitrators shall be three. One arbitrator shall be appointed
by Mr. McCrary, one arbitrator shall be appointed by the Company, and
the two arbitrators shall appoint a third. If the arbitrators cannot
agree on a third arbitrator within thirty (30) business days after the
service of demand for arbitration, the third arbitrator shall be
selected by the AAA.
(e) The arbitration filing fee shall be paid by Mr. McCrary.
All other costs of arbitration shall be borne equally by Mr. McCrary
and the Company, provided, however, that the Company shall reimburse
such fees and costs in the event any material issue in such dispute is
finally resolved in Mr. McCrary's favor and Mr. McCrary is reimbursed
legal fees under Paragraph 2.(g) hereof.
(f) The parties agree that they will faithfully observe the
rules that govern any arbitration between them, they will abide by and
perform any award rendered by the arbitrators in any such arbitration,
including any award of injunctive relief, and a judgment of a court
having jurisdiction may be entered upon an award.
(g) The parties agree that nothing in this Paragraph 5 is
intended to preclude upon application of either party any court having
jurisdiction from issuing and enforcing in any lawful manner such
temporary restraining orders, preliminary injunctions, and other
interim measures of relief as may be necessary to prevent harm to a
party's interests or as otherwise may be appropriate pending the
conclusion of arbitration proceedings pursuant to this Agreement;
regardless of whether an arbitration proceeding under this Paragraph 5
has begun. The parties further agree that nothing herein shall prevent
any court from entering and enforcing in any lawful manner such
judgments for permanent equitable relief as may be necessary to prevent
harm to a party's interests or as otherwise may be appropriate
following the issuance of arbitral awards pursuant to this Paragraph 5.
6. Miscellaneous.
(a) Funding of Benefits. Unless the Board in its discretion
shall determine otherwise, the benefits payable to Mr. McCrary under
this Agreement shall not be funded in any manner and shall be paid by
the Company out of its general assets, which assets are subject to the
claims of the Company's creditors.
(b) Withholding. There shall be deducted from the payment of
any benefit due under this Agreement the amount of any tax required by
any governmental authority to be withheld and paid over by the Company
to such governmental authority for the account of Mr. McCrary.
(c) Assignment. Mr. McCrary shall have no rights to sell,
assign, transfer, encumber, or otherwise convey the right to receive
the payment of any benefit due hereunder, which payment and the rights
thereto are expressly declared to be nonassignable and nontransferable.
Any attempt to do so shall be null and void and of no effect.
(d) Amendment and Termination. The Agreement may be amended or
terminated only by a writing executed by the parties.
(e) Construction. This Agreement shall be construed in
accordance with and governed by the laws of the State of Georgia, to
the extent not preempted by federal law, disregarding any provision of
law which would require the application of the law of another state.
(f) Pooling Accounting. Notwithstanding anything to the
contrary herein, if, but for any provision of this Agreement, a Change
in Control transaction would otherwise be accounted for as a
pooling-of-interests under APB No.16 ("Pooling Accounting") (after
giving effect to any and all other facts and circumstances affecting
whether such Change in Control transaction would use Pooling
Accounting), such provision or provisions of this Agreement which would
otherwise cause the Change in Control transaction to be ineligible for
Pooling Accounting shall be void and ineffective in such a manner and
to the extent that by eliminating such provision or provisions of this
Agreement, Pooling Accounting would be required for such Change in
Control transaction.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
this ____ day of __________________, 199__.
THE SOUTHERN COMPANY
By: ____________________________________
SOUTHERN COMPANY SERVICES, INC.
By: ____________________________________
MR. MCCRARY
-----------------------------
Charles Douglas McCrary
<PAGE>
Exhibit A
CHANGE IN CONTROL AGREEMENT
Target Annual Bonus for
Mr. Charles Douglas McCrary
50%
<PAGE>
Exhibit B
CHANGE IN CONTROL AGREEMENT
Waiver and Release
The attached Waiver and Release is to be given to Mr. Charles Douglas
McCrary upon the occurrence of an event that triggers eligibility for severance
benefits under the Change in Control Agreement, as described in Paragraph 2(a)
of such agreement.
<PAGE>
CHANGE IN CONTROL AGREEMENT
Waiver and Release
I, Charles Douglas McCrary , understand that I am entitled to receive
the severance benefits described in Section 2 of the Change in Control Agreement
(the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand
that the benefits I will receive under the Agreement are in excess of those I
would have received from The Southern Company and Southern Company Services,
Inc. (collectively, the "Company") if I had not elected to sign this Waiver.
I recognize that I may have a claim against the Company under the Civil
Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the
Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended,
the Americans with Disabilities Act or other federal, state and local laws.
In exchange for the benefits I elect to receive, I hereby irrevocably
waive and release all claims, of any kind whatsoever, whether known or unknown
in connection with any claim which I ever had, may have, or now have against The
Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power
Company, Mississippi Power Company, Savannah Electric and Power Company,
Southern Communication Services, Inc., Southern Company Services, Inc., Southern
Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern
Nuclear Operating Company, Inc. and other direct or indirect subsidiaries of The
Southern Company and their past, present and future officers, directors,
employees, agents and attorneys. Nothing in this Waiver shall be construed to
release claims or causes of action under the Age Discrimination in Employment
Act or the Energy Reorganization Act of 1974, as amended, which arise out of
events occurring after the execution date of this Waiver.
In further exchange for the benefits I elect to receive, I understand
and agree that I will respect the proprietary and confidential nature of any
information I have obtained in the course of my service with the Company or any
subsidiary or affiliate of The Southern Company. However, nothing in this Waiver
shall prohibit me from engaging in protected activities under applicable law or
from communicating, either voluntary or otherwise, with any governmental agency
concerning any potential violation of the law.
In signing this Waiver, I am not releasing claims to benefits that I am
already entitled to under any workers' compensation laws or under any retirement
plan or welfare benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, as amended, which is sponsored by or adopted by the
Company and/or any of its direct or indirect subsidiaries; however, I understand
and acknowledge that nothing herein is intended to or shall be construed to
require the Company to institute or continue in effect any particular plan or
benefit sponsored by the Company and the Company hereby reserves the right to
amend or terminate any of its benefit programs at any time in accordance with
the procedures set forth in such plans.
In signing this Waiver, I realize that I am waiving and releasing,
among other things, any claims to benefits under any and all bonus, severance,
workforce reduction, early retirement, outplacement, or any other similar type
plan sponsored by the Company.
I have been encouraged and advised in writing to seek advice from
anyone of my choosing regarding this Waiver, including my attorney, and my
accountant or tax advisor. Prior to signing this Waiver, I have been given the
opportunity and sufficient time to seek such advice, and I fully understand the
meaning and contents of this Waiver.
I understand that I may take up to twenty-one (21) calendar days to
consider whether or not I desire to enter this Waiver. I was not coerced,
threatened or otherwise forced to sign this Waiver. I have made my choice to
sign this Waiver voluntarily and of my own free will.
I understand that I may revoke this Waiver at any time during the seven
(7) calendar day period after I sign and deliver this Waiver to the Company. If
I revoke this Waiver, I must do so in writing delivered to the Company. I
understand that this Waiver is not effective until the expiration of this seven
(7) calendar day revocation period. I understand that upon the expiration of
such seven (7) calendar day revocation period this entire Waiver will be binding
upon me and will be irrevocable.
I understand that by signing this Waiver I am giving up rights I may
have.
IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this
____ day of ____________________, in the year _____.
Charles Douglas McCrary
Sworn to and subscribed to me this ____ day of ____________, _____.
Notary Public
My Commission Expires:
(Notary Seal)
Acknowledged and Accepted by the Company, as defined in the Waiver.
By:
Date:
EXHIBIT 10(a)95
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT ("Agreement") made and entered into by
and between The Southern Company ("Southern"), Georgia Power Company (the
"Company") and Mr. David M. Ratcliffe ("Mr. Ratcliffe").
W I T N E S S E T H:
WHEREAS, Mr. Ratcliffe is the Executive Vice President and Chief
Financial Officer of the Company;
WHEREAS, the Company wish to provide to Mr. Ratcliffe certain severance
benefits under certain circumstances following a change in control (as defined
herein) of Southern or the Company;
NOW, THEREFORE, in consideration of the premises, and the agreements of
the parties set forth in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) "Annual Compensation" shall mean Mr. Ratcliffe's highest
annual base salary rate for the twelve (12) month period immediately
preceding the date of the Change in Control plus market level target
annual bonus as set forth on Exhibit A hereof.
(b) "Beneficial Ownership" shall mean beneficial ownership
within the meaning of Rule 13d-3 promulgated under the Exchange Act.
(c) "Board" shall mean the board of directors of the Company.
(d) "Business Combination" shall mean a reorganization, merger
or consolidation of Southern or sale or other disposition of all or
substantially all of the assets of Southern.
(e) "Change in Control" shall mean any of the following:
(i) The Consummation of an acquisition by any Person
of Beneficial Ownership of 20% or more of Southern's Voting
Securities; provided, however, that for purposes of this
Paragraph 1.(e)(i), the following acquisitions of Southern's
Voting Securities shall not constitute a Change in Control:
(A) any acquisition directly from Southern;
(B) any acquisition by Southern;
(C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by
Southern or any Southern Subsidiary.
(D) any acquisition by a qualified pension
plan or publicly held mutual fund;
(E) any acquisition by a Group composed
exclusively of employees of Southern, or any Southern
Subsidiary;
(F) any acquisition by Mr. Ratcliffe or any
Group of which Mr. Ratcliffe is a party; or
(G) any Business Combination which would not
otherwise constitute a change in control because of
the application of clauses (A), (B) and (C) of
Paragraph 1.(e)(iii);
(ii) A change in the composition of the Southern
Board whereby individuals who constitute the Incumbent Board
cease for any reason to constitute at least a majority of the
Southern Board;
(iii) Consummation of a Business Combination,
provided, however, that such a Business Combination shall not
constitute a Change in Control if all three (3) of the
following conditions are met:
(A) all or substantially all of the
individuals and entities who held Beneficial
Ownership, respectively, of Southern's Voting
Securities immediately prior to such Business
Combination beneficially own, directly or indirectly,
65% or more of the combined voting power of the
Voting Securities of the corporation surviving or
resulting from such Business Combination, (including,
without limitation, a corporation which as a result
of such transaction holds Beneficial Ownership of all
or substantially all of Southern's Voting Securities
or all or substantially all of Southern's assets)
(such surviving or resulting corporation to be
referred to as "Surviving Company"), in substantially
the same proportions as their ownership, immediately
prior to such Business Combination, of Southern's
Voting Securities;
(B) no Person (excluding any corporation
resulting from such Business Combination, any
employee benefit plan (or related trust) of Southern,
any Southern Subsidiary or Surviving Company, Mr.
Ratcliffe, any Group of which Mr. Ratcliffe is a
party, any Group composed exclusively of Company
employees, any qualified pension plan (or related
trust) or any publicly held mutual fund) holds
Beneficial Ownership, directly or indirectly, of 20%
or more of the combined voting power of the then
outstanding Voting Securities of Surviving Company
except to the extent that such ownership existed
prior to the Business Combination; and
(C) at least a majority of the members of
the board of directors of Surviving Company were
members of the Incumbent Board at the earlier of the
date of execution of the initial agreement, or of the
action of the Southern Board, providing for such
Business Combination. (iv) The Consummation of an
acquisition by any Person of Beneficial Ownership of
50% or more of the combined voting power of the then
outstanding Voting Securities of the Company;
provided, however, that for purposes of this
Paragraph 1.(e)(iv), any acquisition by Mr.
Ratcliffe, any Group composed exclusively of
employees of the Company, any Group of which Mr.
Ratcliffe is a party, any qualified pension plan (or
related trust), any publicly held mutual fund, any
employee benefit plan (or related trust) sponsored or
maintained by Southern or any Southern Subsidiary
shall not constitute a Change in Control;
(v) Consummation of a reorganization, merger or
consolidation of the Company (an "Employing Company Business
Combination"), in each case, unless, following such Employing
Company Business Combination, Southern Controls the
corporation or other entity surviving or resulting from such
Employing Company Business Combination; or
(vi) Consummation of the sale or other disposition of
all or substantially all of the assets of the Company to
corporation or other entity which Southern does not Control.
(f) "COBRA Coverage" shall mean any continuation coverage to
which Mr. Ratcliffe or his dependents may be entitled pursuant
to Code Section 4980B.
(g) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(h) "Company" shall mean Georgia Power Company, its successors
and assigns.
(i) "Consummation" shall mean the completion of the final act
necessary to complete a transaction as a matter of law, including, but
not limited to, any required approvals by the corporation's
shareholders and board of directors, the transfer of legal and
beneficial title to securities or assets and the final approval of the
transaction by any applicable domestic or foreign governments or
agencies.
(j) "Control" shall mean, in the case of a corporation,
Beneficial Ownership of more than 50% of the combined voting power of
the corporation's Voting Securities, or in the case of any other
entity, Beneficial Ownership of more than 50% of such entity's voting
equity interests.
(k) "Effective Date" shall mean the date of execution of this
Agreement.
(l) "Employee Outplacement Program" shall mean the program
established by the Company from time to time for the purpose of
assisting participants covered by the plan in finding employment
outside of the Company which provides for the following services:
(i) self-assessment, career decision and goal
setting; (ii) job market research and job sources;
(iii) networking and interviewing skills; (iv)
planning and implementation strategy; (v) resume
writing, job hunting methods and salary negotiation;
and (vi) office support and job search resources.
(m) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(n) "Good Reason" shall mean, without Mr. Ratcliffe's express
written consent, after written notice to the Board, and after a thirty
(30) day opportunity for the Board to cure, the continuing occurrence
of any of the following events:
(i) Inconsistent Duties. A meaningful and detrimental
alteration in Mr. Ratcliffe's position or in the nature or
status of his responsibilities from those in effect
immediately prior to the Change in Control;
(ii) Reduced Salary. A reduction of five percent (5%)
or more by the Company in either of the following: (i) Mr.
Ratcliffe's annual base salary rate as in effect immediately
prior to the Change in Control (except for a less than ten
percent (10%), across-the-board annual base salary rate
reduction similarly affecting at least ninety-five percent
(95%) of the Executive Employees of the Company); or (ii) the
sum of Mr. Ratcliffe's annual base salary rate plus target
bonus under the PPP Plan (except for a less than ten percent
(10%), across-the-board reduction of annual base salary rate
plus target bonus under the PPP Plan similarly affecting at
least ninety-five percent (95%) of the Executive Employees of
the Company);
(iii) Pension and Compensation Plans. The failure by
the Company to continue in effect any pension or compensation
plan or agreement in which Mr. Ratcliffe participates or is a
party as of the date of the Change in Control or the
elimination of Mr. Ratcliffe's participation therein, (except
for across-the-board plan changes or terminations similarly
affecting at least ninety-five percent (95%) of the Executive
Employees of the Company); For purposes of this Paragraph
1.(n), a "pension plan or agreement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for payments upon retirement; and a
"compensation plan or arrangement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for periodic, non-discretionary compensatory
payments in the nature of bonuses.
(iv) Relocation. A change in Mr. Ratcliffe's work
location to a location more than fifty (50) miles from the
office where Mr. Ratcliffe is located at the time of the
Change in Control, unless such new work location is within
fifty (50) miles from Mr. Ratcliffe's principal place of
residence at the time of the Change in Control. The
acceptance, if any, by Mr. Ratcliffe of employment by the
Company at a work location which is outside the fifty mile
radius set forth in this Paragraph 1.(n)(iv) shall not be a
waiver of Mr. Ratcliffe's right to refuse subsequent transfer
by the Company to a location which is more than fifty (50)
miles from Mr. Ratcliffe's principal place of residence at the
time of the Change in Control, and such subsequent unconsented
transfer shall be "Good Reason" under this Agreement; or
(v) Benefits and Perquisites. The taking of any
action by the Company which would directly or indirectly
materially reduce the benefits enjoyed by Mr. Ratcliffe under
the Company's retirement, life insurance, medical, health and
accident, disability, deferred compensation or savings plans
in which Mr. Ratcliffe was participating immediately prior to
the Change in Control; or the failure by the Company to
provide Mr. Ratcliffe with the number of paid vacation days to
which Mr. Ratcliffe is entitled on the basis of years of
service with the Company in accordance with the Company's
normal vacation policy in effect immediately prior to the
Change in Control (except for across-the-board plan or
vacation policy changes or plan terminations similarly
affecting at least ninety-five percent (95%) of the Executive
Employees of the Company).
(vi) For purposes of this Paragraph 1.(n), the term
"Executive Employee" shall mean those employees of the Company
of Grade Level 10 or above. (o) "Group" shall have the meaning
set forth in Section 14(d) of the Exchange Act. (p) "Group
Health Plan" shall mean the group health plan covering Mr.
Ratcliffe, as such plan may be amended from time to time.
(q) "Group Life Insurance Plan" shall mean the group life
insurance program covering Mr. Ratcliffe, as such plan may be amended
from time to time.
(r) "Incumbent Board" shall mean those individuals who
constitute the Southern Board as of the Effective Date plus any
individual who shall become a director subsequent to such date whose
election or nomination for election by Southern's shareholders was
approved by a vote of at least 75% of the directors then comprising the
Incumbent Board. Notwithstanding the foregoing, no individual who shall
become a director of the Southern Board subsequent to the Effective
Date whose initial assumption of office occurs as a result of an actual
or threatened election contest (within the meaning of Rule 14a-11 of
the Regulations promulgated under the Exchange Act) with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Southern Board shall be a member of the Incumbent Board.
(s) "Month of Service" shall mean any calendar month during
which Mr. Ratcliffe has worked at least one (1) hour or was on approved
leave of absence while in the employ of the Company or any affiliate or
subsidiary of Southern.
(t) "Pension Plan" shall mean The Southern Company Pension
Plan, as such plan may be amended from time to time.
(u) "Performance Dividend Plan" shall mean the Southern
Company Performance Dividend Plan or any replacement thereto, as such
plans may be amended from time to time.
(v) "Performance Stock Plan" shall mean the Southern Company
Performance Stock Plan or any replacement thereto, as such plans may be
amended from time to time.
(w) "Person" shall mean any individual, entity or group within
the meaning of Section 13(d)(3) or 14(d)(2) of Act.
(x) "Performance Pay Plan" or "PPP Plan" shall mean the
Southern Company Performance Pay Plan or any replacement thereto, as
such plans may be amended from time to time.
(y) "Productivity Improvement Plan" or "PIP Plan" shall mean
the Southern Company Executive Productivity Improvement Plan or
replacement thereto, as such plans may be amended from time to time.
(z) "Southern" shall mean The Southern Company, its successors
and assigns.
(aa) "Southern Board" shall mean the board of directors of
Southern.
(bb) "Southern Subsidiary" shall mean any corporation or other
entity Controlled by Southern.
(cc) "Termination for Cause" or "Cause" shall mean the
termination of Mr. Ratcliffe's employment by the Company upon the
occurrence of any of the following:
(i) The willful and continued failure by Mr.
Ratcliffe substantially to perform his duties with the Company
(other than any such failure resulting from Mr. Ratcliffe's
Total Disability or from Mr. Ratcliffe's retirement or any
such actual or anticipated failure resulting from termination
by Mr. Ratcliffe for Good Reason) after a written demand for
substantial performance is delivered to him by the Southern
Board, which demand specifically identifies the manner in
which the Southern Board believes that he has not
substantially performed his duties; or
(ii) The willful engaging by Mr. Ratcliffe in conduct
that is demonstrably and materially injurious to the Company,
monetarily or otherwise, including, but not limited to any of
the following:
(A) any willful act involving fraud or
dishonesty in the course of Mr. Ratcliffe's
employment by the Company;
(B) the willful carrying out of any activity
or the making of any statement which would materially
prejudice or impair the good name and standing of the
Company, Southern or any Southern Subsidiary or would
bring the Company, Southern or any Southern
Subsidiary into contempt, ridicule or would
reasonably shock or offend any community in which the
Company, Southern or such Southern Subsidiary is
located;
(C) attendance at work in a state of
intoxication or otherwise being found in possession
at his workplace of any prohibited drug or substance,
possession of which would amount to a criminal
offense;
(D) violation of the Company's policies on
drug and alcohol usage, fitness for duty requirements
or similar policies as may exist from time to time as
adopted by the Company's safety officer;
(E) assault or other act of violence against
any person during the course of employment; or
(F) indictment of any felony or any
misdemeanor involving moral turpitude.
No act or failure to act by Mr. Ratcliffe shall be deemed
"willful" unless done, or omitted to be done, by Mr. Ratcliffe not in
good faith and without reasonable belief that his action or omission
was in the best interest of the Company.
Notwithstanding the foregoing, Mr. Ratcliffe shall not be
deemed to have been terminated for Cause unless and until there shall
have been delivered to him a copy of a resolution duly adopted by the
affirmative vote of not less than three quarters of the entire
membership of the Southern Board at a meeting of the Southern Board
called and held for such purpose (after reasonable notice to Mr.
Ratcliffe and an opportunity for him, together with counsel, to be
heard before the Southern Board), finding that, in the good faith
opinion of the Southern Board, Mr. Ratcliffe was guilty of conduct set
forth above in clause (i) or (ii) of this Paragraph 1.(cc) and
specifying the particulars thereof in detail.
(dd) "Termination Date" shall mean the date on which Mr.
Ratcliffe's employment with the Company is terminated; provided,
however, that solely for purposes of Paragraph 2.(c) hereof, the
Termination Date shall be the effective date of his retirement pursuant
to the terms of the Pension Plan.
(ee) "Total Disability" shall mean Mr. Ratcliffe's total
disability within the meaning of the Pension Plan.
(ff) "Voting Securities" shall mean the outstanding voting
securities of a corporation entitling the holder thereof to vote
generally in the election of such corporation's directors.
(gg) "Waiver and Release" shall mean the Waiver and Release
attached hereto as Exhibit B.
(hh) "Year of Service" shall mean Mr. Ratcliffe's Months of
Service divided by twelve (12) rounded to the nearest whole year,
rounding up if the remaining number of months is seven (7) or greater
and rounding down if the remaining number of months is less than seven
(7). If Mr. Ratcliffe has a break in his service with the Company, he
will receive credit under this Agreement for service prior to the break
in service only if the break in service is less than five years.
2. Severance Benefits.
(a) Eligibility. Except as otherwise provided in this
Paragraph 2.(a), if Mr. Ratcliffe's employment is involuntarily
terminated by the Company at any time during the two year period
following a Change in Control for reasons other than Cause, or if Mr.
Ratcliffe voluntarily terminates his employment with the Company for
Good Reason at any time during the two year period following a Change
in Control, Mr. Ratcliffe shall be entitled to receive the benefits
described in this Agreement upon the Company's receipt of an effective
Waiver and Release. Notwithstanding anything to the contrary herein,
Mr. Ratcliffe shall not be eligible to receive benefits under this
Agreement if Mr. Ratcliffe:
(i) voluntarily terminates his employment with the
Company for other than Good Reason;
(ii) has his employment terminated by the Company for
Cause;
(iii) accepts the transfer of his employment to
Southern, any Southern Subsidiary or any employer that
succeeds to all or substantially all of the assets of the
Company, Southern or any Southern Subsidiary;
(iv) refuses an offer of continued employment with
the Company, any Southern Subsidiary, or any employer that
succeeds to all or substantially all of the assets of the
Company, Southern, or any Southern Subsidiary under
circumstances where such refusal would not amount to Good
Reason for voluntary termination of employment; or
(v) elects to receive the benefits of any other
voluntary or involuntary severance or separation program
maintained by the Company; provided however, that the receipt
of benefits under the terms of any retention plan or agreement
shall not be deemed to be the receipt of severance or
separation benefits for purposes of this Agreement. (b)
Severance Benefits. If Mr. Ratcliffe meets the eligibility
requirements of Paragraph 2.(a) hereof, he shall be entitled
to a cash severance benefit in an amount equal to three times
his Annual Compensation (the "Severance Amount"). If any
portion of the Severance Amount constitutes an "excess
parachute payment" (as such term is defined under Code Section
280G ("Excess Parachute Payment")), the Company shall pay to
Mr. Ratcliffe an additional amount calculated by determining
the amount of tax under Code Section 4999 that he otherwise
would have paid on any Excess Parachute Payment with respect
to the Change in Control and dividing such amount by a decimal
determined by adding the tax rate under Code Section 4999
("Excise Tax"), the hospital insurance tax under Code Section
3101(b) ("HI Tax") and federal and state income tax measured
at the highest marginal rates ("Income Tax") and subtracting
such result from the number one (1) (the "280G Gross-up");
provided, however, that no 280G Gross-up shall be paid unless
the Severance Amount plus all other "parachute payments" to
Mr. Ratcliffe under Code Section 280G exceeds three (3) times
Mr. Ratcliffe's "base amount" (as such term is defined under
Code Section 280G ("Base Amount")) by ten percent (10%) or
more; provided further, that if no 280G Gross-up is paid, the
Severance Amount shall be capped at three (3) times Mr.
Ratcliffe's Base Amount, less all other "parachute payments"
(as such term is defined under Code Section 280G) received by
Mr. Ratcliffe, less one dollar (the "Capped Amount"), if the
Capped Amount, reduced by HI Tax and Income Tax, exceeds what
otherwise would have been the Severance Amount, reduced by HI
Tax, Income Tax and Excise Tax.
For purposes of this Paragraph 2.(b), whether any amount would
constitute an Excess Parachute Payment and any other calculations of
tax, e.g., Excise Tax, HI Tax, Income Tax, etc., or other amounts,
e.g., Base Amount, Capped Amount, etc., shall be determined by the tax
department of the independent public accounting firm then responsible
for preparing Southern's consolidated federal income tax return, and
such calculations or determinations shall be binding upon the parties
hereto.
(c) Welfare Benefits. If Mr. Ratcliffe meets the eligibility
requirements of Paragraph 2.(a) hereof and is not otherwise eligible to
receive retiree medical and life insurance benefits provided to certain
retirees pursuant to the terms of the Pension Plan, the Group Health
Plan and the Group Life Insurance Plan, he shall be entitled to the
benefits set forth in this Paragraph 2.(c).
(i) Mr. Ratcliffe shall be eligible to participate in
the Company's Group Health Plan, upon payment of both the
Company's and his monthly premium under such plan, for a
period of six (6) months for each of Mr. Ratcliffe's Years of
Service, not to exceed five (5) years. If Mr. Ratcliffe elects
to receive this extended medical coverage, he shall also be
entitled to elect coverage under the Group Health Plan for his
dependents who were participating in the Group Health Plan on
Mr. Ratcliffe's Termination Date (and for such other
dependents as may be entitled to coverage under the provisions
of the Health Insurance Portability and Accountability Act of
1996) for the duration of Mr. Ratcliffe's extended medical
coverage under this Paragraph 2.(c)(i) to the extent such
dependents remain eligible for dependent coverage under the
terms of the Group Health Plan.
(A) The extended medical coverage afforded
to Mr. Ratcliffe pursuant to Paragraph 2.(c)(i), as
well as the premiums to be paid by Mr. Ratcliffe in
connection with such coverage shall be determined in
accordance with the terms of the Group Health Plan
and shall be subject to any changes in the terms and
conditions of the Group Health Plan as well as any
future increases in premiums under the Group Health
Plan. The premiums to be paid by Mr. Ratcliffe in
connection with this extended coverage shall be due
on the first day of each month; provided, however,
that if he fails to pay his premium within thirty
(30) days of its due date, such extended coverage
shall be terminated.
(B) Any Group Health Plan coverage provided
under Paragraph 2.(c)(i) shall be a part of and not
in addition to any COBRA Coverage which Mr. Ratcliffe
or his dependents may elect. In the event that Mr.
Ratcliffe or his dependents become eligible to be
covered, by virtue of re-employment or otherwise, by
any employer-sponsored group health plan or is
eligible for coverage under any government-sponsored
health plan during the above period, coverage under
the Company's Group Health Plan available to Mr.
Ratcliffe or his dependents by virtue of the
provisions of Paragraph 2.(c)(i) shall terminate,
except as may otherwise be required by law, and shall
not be renewed. (ii) Mr. Ratcliffe shall be entitled
to receive cash in an amount equal to the Company's
and Mr. Ratcliffe's cost of premiums for three (3)
years of coverage under the Group Health Plan and
Group Life Insurance Plan in accordance with the
terms of such plans as of the date of the Change in
Control.
(d) Incentive Plans. If Mr. Ratcliffe meets the
eligibility requirements of Paragraph 2.(a) hereof he shall be
entitled to the following benefits under the Company's
incentive plans:
(i) Stock Option Plan.
(A) Any of Mr. Ratcliffe's Options and Stock
Appreciation Rights under the Performance Stock Plan
(the defined terms of which are incorporated in this
Paragraph 2.(d)(i) by reference) which are
outstanding as of the Termination Date and which are
not then exercisable and vested, shall become fully
exercisable and vested to the full extent of the
original grant; provided, that in the case of a Stock
Appreciation Right, if Mr. Ratcliffe is subject to
Section 16(b) of the Exchange Act, such Stock
Appreciation Right shall not become fully vested and
exercisable at such time if such actions would result
in liability to Mr. Ratcliffe under Section 16(b) of
the Exchange Act, provided further, that any such
actions not taken as a result of the rules under
Section 16(b) of the Exchange Act shall be effected
as of the first date that such activity would no
longer result in liability under Section 16(b) of the
Exchange Act.
(B) The restrictions and deferral
limitations applicable to any of Mr. Ratcliffe's
Restricted Stock as of the Termination Date shall
lapse, and such Restricted Stock shall become free of
all restrictions and limitations and become fully
vested and transferable to the full extent of the
original grant.
(C) The restrictions and deferral
limitations and other conditions applicable to any
other Awards held by Mr. Ratcliffe under the Stock
Performance Plan as of the Termination Date shall
lapse, and such other Awards shall become free of all
restrictions, limitations or conditions and become
fully vested and transferable to the full extent of
the original grant. (ii) Performance Pay Plan.
Provided Mr. Ratcliffe is not entitled to benefits
under Article V of the PPP Plan, (the defined terms
of which are incorporated in this Paragraph 2.(d)(ii)
by reference), if the PPP Plan is in place through
Mr. Ratcliffe's Termination Date and to the extent
Mr. Ratcliffe is entitled to participate therein, Mr.
Ratcliffe shall be entitled to receive cash in an
amount equal to a prorated payout of his Incentive
Pay Awards under the PPP Plan for the Performance
Period in which the Termination Date shall have
occurred, at target performance under the PPP Plan
and prorated by the number of months which have
passed since the beginning of the Performance Period
until the Termination Date.
(iii) PIP Plan. Provided Mr. Ratcliffe is not
entitled to benefits under Article IV of the PIP Plan (the
defined terms of which are incorporated in this Paragraph
2.(d)(iii) by reference), if the PIP Plan is in place through
Mr. Ratcliffe's Termination Date and to the extent Mr.
Ratcliffe is entitled to participate therein, Mr. Ratcliffe
shall be entitled to receive cash in an amount equal to his
Award Opportunity for the Computation Periods in which the
Termination Date shall have occurred at a target Value of
Performance Unit of $1.00, prorated for each Computation
Period by the number of months which have passed since the
beginning of the Computation Periods until the Termination
Date.
(iv) Performance Dividend Plan. Provided Mr.
Ratcliffe is not entitled to benefits under the Performance
Dividend Plan (the defined terms of which are incorporated in
this Paragraph 2.(d)(iv) by reference), if the Performance
Dividend Plan is in place through Mr. Ratcliffe's Termination
Date and to the extent Mr. Ratcliffe is entitled to
participate therein, Mr. Ratcliffe shall be entitled to
receive cash for each Award held by Mr. Ratcliffe on his
Termination Date, based on actual performance under Section
4.1 of the Performance Dividend Plan determined as of the most
recently completed calendar quarter of the Performance Period
in which the Termination Date shall have occurred, and the
Annual Dividend declared prior to the Termination Date.
(v) Other Short Term Incentive Plans. The provisions
of this Paragraph 2.(d)(v) shall apply if and to the extent
that Mr. Ratcliffe is a participant in any other "short term
compensation plan" not otherwise previously referred to in
this Paragraph 2.(d). Provided Mr. Ratcliffe is not otherwise
entitled to a plan payout under any change of control
provisions of such plans, if the "short term compensation
plan" is in place as of the Termination Date and to the extent
Mr. Ratcliffe is entitled to participate therein, Mr.
Ratcliffe shall receive cash in an amount equal to his award
under the Company's "short term incentive plan" for the annual
performance period in which the Termination Date shall have
occurred, at Mr. Ratcliffe's target performance level and
prorated by the number of months which have passed since the
beginning of the annual performance period until his
Termination Date. For purposes of this Paragraph 2.(d)(v) the
term "short term incentive compensation plan" shall mean any
incentive compensation plan or arrangement adopted in writing
by the Company which provides for annual, recurring
compensatory bonuses based upon articulated performance
criteria. (e) Payment of Benefits. Any amounts due under this
Agreement shall be paid in one (1) lump sum payment as soon as
administratively practicable following the later of: (i) Mr.
Ratcliffe's Termination Date, or (ii) upon Mr. Ratcliffe's
tender of an effective Waiver and Release to the Company in
the form of Exhibit B attached hereto and the expiration of
any applicable revocation period for such waiver. In the event
of a dispute with respect to liability or amount of any
benefit due hereunder, an effective Waiver and Release shall
be tendered at the time of final resolution of any such
dispute when payment is tendered by the Company.
(f) Benefits in the Event of Death. In the event of Mr.
Ratcliffe's death prior to the payment of all amounts due under this
Agreement, Mr. Ratcliffe's estate shall be entitled to receive as due
any amounts not yet paid under this Agreement upon the tender by the
executor or administrator of the estate of an effective Waiver and
Release.
(g) Legal Fees. In the event of a dispute between Mr.
Ratcliffe and the Company with regard to any amounts due hereunder, if
any material issue in such dispute is finally resolved in Mr.
Ratcliffe's favor, the Company shall reimburse Mr. Ratcliffe's legal
fees incurred with respect to all issues in such dispute in an amount
not to exceed fifty thousand dollars ($50,000).
(h) Employee Outplacement Services. Mr. Ratcliffe shall be
eligible to participate in the Employee Outplacement Program, which
program shall not be less than six (6) months duration measured from
Mr. Ratcliffe's Termination Date.
(i) Non-qualified Retirement and Deferred Compensation Plans.
The Parties agree that subsequent to a Change in Control, any claims by
Mr. Ratcliffe for benefits under any of the Company's non-qualified
retirement or deferred compensation plans shall be resolved through
binding arbitration in accordance with the provisions and procedures
set forth in Paragraph 5 hereof and if any material issue in such
dispute is finally resolved in Mr. Ratcliffe's favor, the Company shall
reimburse Mr. Ratcliffe's legal fees in the manner provided in
Paragraph 2.(g) hereof. 3. Transfer of Employment. In the event that
Mr. Ratcliffe's employment by the Company is terminated during the two
year period following a Change in Control and Mr. Ratcliffe accepts
employment by Southern, Southern Subsidiary, or any employer that
succeeds to all or substantially all of the assets of the Company,
Southern or any Southern Subsidiary, the Company shall assign this
Agreement to Southern, such Southern Subsidiary, or successor employer,
Southern shall accept such assignment or cause such Southern Subsidiary
or successor employer to accept such assignment, and such assignee
shall become the "Company" for all purposes hereunder.
4. No Mitigation. If Mr. Ratcliffe is otherwise eligible to receive
benefits under Paragraph 2 of this Agreement, he shall have no duty or
obligation to seek other employment following his Termination Date and, except
as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr.
Ratcliffe hereunder shall not be reduced or suspended if Mr. Ratcliffe accepts
such subsequent employment.
5. Arbitration.
(a) Any dispute, controversy or claim arising out of or
relating to the Company's obligations to pay severance benefits under
this Agreement, or the breach thereof, shall be settled and resolved
solely by arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association ("AAA") except as
otherwise provided herein. The arbitration shall be the sole and
exclusive forum for resolution of any such claim for severance benefits
and the arbitrators' award shall be final and binding. The provisions
of this Paragraph 5 are not intended to apply to any other disputes,
claims or controversies arising out of or relating to Mr. Ratcliffe's
employment by the Company or the termination thereof.
(b) Arbitration shall be initiated by serving a written notice
of demand for arbitration to Mr. Ratcliffe, in the case of the Company,
or to the Southern Board, in the case of Mr. Ratcliffe.
(c) The arbitration shall be held in Atlanta, Georgia. The
arbitrators shall apply the law of the State of Georgia, to the extent
not preempted by federal law, excluding any law which would require the
application of the law of another state.
(d) The parties shall appoint arbitrators within fifteen (15)
business days following service of the demand for arbitration. The
number of arbitrators shall be three. One arbitrator shall be appointed
by Mr. Ratcliffe, one arbitrator shall be appointed by the Company, and
the two arbitrators shall appoint a third. If the arbitrators cannot
agree on a third arbitrator within thirty (30) business days after the
service of demand for arbitration, the third arbitrator shall be
selected by the AAA.
(e) The arbitration filing fee shall be paid by Mr. Ratcliffe.
All other costs of arbitration shall be borne equally by Mr. Ratcliffe
and the Company, provided, however, that the Company shall reimburse
such fees and costs in the event any material issue in such dispute is
finally resolved in Mr. Ratcliffe's favor and Mr. Ratcliffe is
reimbursed legal fees under Paragraph 2.(g) hereof.
(f) The parties agree that they will faithfully observe the
rules that govern any arbitration between them, they will abide by and
perform any award rendered by the arbitrators in any such arbitration,
including any award of injunctive relief, and a judgment of a court
having jurisdiction may be entered upon an award.
(g) The parties agree that nothing in this Paragraph 5 is
intended to preclude upon application of either party any court having
jurisdiction from issuing and enforcing in any lawful manner such
temporary restraining orders, preliminary injunctions, and other
interim measures of relief as may be necessary to prevent harm to a
party's interests or as otherwise may be appropriate pending the
conclusion of arbitration proceedings pursuant to this Agreement;
regardless of whether an arbitration proceeding under this Paragraph 5
has begun. The parties further agree that nothing herein shall prevent
any court from entering and enforcing in any lawful manner such
judgments for permanent equitable relief as may be necessary to prevent
harm to a party's interests or as otherwise may be appropriate
following the issuance of arbitral awards pursuant to this Paragraph 5.
6. Miscellaneous.
(a) Funding of Benefits. Unless the Board in its discretion
shall determine otherwise, the benefits payable to Mr. Ratcliffe under
this Agreement shall not be funded in any manner and shall be paid by
the Company out of its general assets, which assets are subject to the
claims of the Company's creditors.
(b) Withholding. There shall be deducted from the payment of
any benefit due under this Agreement the amount of any tax required by
any governmental authority to be withheld and paid over by the Company
to such governmental authority for the account of Mr. Ratcliffe.
(c) Assignment. Mr. Ratcliffe shall have no rights to sell,
assign, transfer, encumber, or otherwise convey the right to receive
the payment of any benefit due hereunder, which payment and the rights
thereto are expressly declared to be nonassignable and nontransferable.
Any attempt to do so shall be null and void and of no effect.
(d) Amendment and Termination. The Agreement may be amended or
terminated only by a writing executed by the parties.
(e) Construction. This Agreement shall be construed in
accordance with and governed by the laws of the State of Georgia, to
the extent not preempted by federal law, disregarding any provision of
law which would require the application of the law of another state.
(f) Pooling Accounting. Notwithstanding anything to the
contrary herein, if, but for any provision of this Agreement, a Change
in Control transaction would otherwise be accounted for as a
pooling-of-interests under APB No.16 ("Pooling Accounting") (after
giving effect to any and all other facts and circumstances affecting
whether such Change in Control transaction would use Pooling
Accounting), such provision or provisions of this Agreement which would
otherwise cause the Change in Control transaction to be ineligible for
Pooling Accounting shall be void and ineffective in such a manner and
to the extent that by eliminating such provision or provisions of this
Agreement, Pooling Accounting would be required for such Change in
Control transaction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
this ____ day of __________________, 199__.
THE SOUTHERN COMPANY
By: ____________________________________
GEORGIA POWER COMPANY
By: ____________________________________
MR. RATCLIFFE
-----------------------------
David M. Ratcliffe
<PAGE>
Exhibit A
CHANGE IN CONTROL AGREEMENT
Target Annual Bonus for
Mr. David M. Ratcliffe
50%
<PAGE>
Exhibit B
CHANGE IN CONTROL AGREEMENT
Waiver and Release
The attached Waiver and Release is to be given to Mr. David M.
Ratcliffe upon the occurrence of an event that triggers eligibility for
severance benefits under the Change in Control Agreement, as described in
Paragraph 2(a) of such agreement.
<PAGE>
CHANGE IN CONTROL AGREEMENT
Waiver and Release
I, David M. Ratcliffe, understand that I am entitled to receive the
severance benefits described in Section 2 of the Change in Control Agreement
(the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand
that the benefits I will receive under the Agreement are in excess of those I
would have received from The Southern Company and Georgia Power Company
(collectively, the "Company") if I had not elected to sign this Waiver.
I recognize that I may have a claim against the Company under the Civil
Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the
Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended,
the Americans with Disabilities Act or other federal, state and local laws.
In exchange for the benefits I elect to receive, I hereby irrevocably
waive and release all claims, of any kind whatsoever, whether known or unknown
in connection with any claim which I ever had, may have, or now have against The
Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power
Company, Mississippi Power Company, Savannah Electric and Power Company,
Southern Communication Services, Inc., Southern Company Services, Inc., Southern
Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern
Nuclear Operating Company, Inc. and other direct or indirect subsidiaries of The
Southern Company and their past, present and future officers, directors,
employees, agents and attorneys. Nothing in this Waiver shall be construed to
release claims or causes of action under the Age Discrimination in Employment
Act or the Energy Reorganization Act of 1974, as amended, which arise out of
events occurring after the execution date of this Waiver.
In further exchange for the benefits I elect to receive, I understand
and agree that I will respect the proprietary and confidential nature of any
information I have obtained in the course of my service with the Company or any
subsidiary or affiliate of The Southern Company. However, nothing in this Waiver
shall prohibit me from engaging in protected activities under applicable law or
from communicating, either voluntary or otherwise, with any governmental agency
concerning any potential violation of the law.
In signing this Waiver, I am not releasing claims to benefits that I am
already entitled to under any workers' compensation laws or under any retirement
plan or welfare benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, as amended, which is sponsored by or adopted by the
Company and/or any of its direct or indirect subsidiaries; however, I understand
and acknowledge that nothing herein is intended to or shall be construed to
require the Company to institute or continue in effect any particular plan or
benefit sponsored by the Company and the Company hereby reserves the right to
amend or terminate any of its benefit programs at any time in accordance with
the procedures set forth in such plans.
In signing this Waiver, I realize that I am waiving and releasing,
among other things, any claims to benefits under any and all bonus, severance,
workforce reduction, early retirement, outplacement, or any other similar type
plan sponsored by the Company.
I have been encouraged and advised in writing to seek advice from
anyone of my choosing regarding this Waiver, including my attorney, and my
accountant or tax advisor. Prior to signing this Waiver, I have been given the
opportunity and sufficient time to seek such advice, and I fully understand the
meaning and contents of this Waiver.
I understand that I may take up to twenty-one (21) calendar days to
consider whether or not I desire to enter this Waiver. I was not coerced,
threatened or otherwise forced to sign this Waiver. I have made my choice to
sign this Waiver voluntarily and of my own free will.
I understand that I may revoke this Waiver at any time during the seven
(7) calendar day period after I sign and deliver this Waiver to the Company. If
I revoke this Waiver, I must do so in writing delivered to the Company. I
understand that this Waiver is not effective until the expiration of this seven
(7) calendar day revocation period. I understand that upon the expiration of
such seven (7) calendar day revocation period this entire Waiver will be binding
upon me and will be irrevocable.
I understand that by signing this Waiver I am giving up rights I may
have.
IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this
____ day of ____________________, in the year _____.
David M. Ratcliffe
Sworn to and subscribed to me this ____ day of ____________, _____.
Notary Public
My Commission Expires:
(Notary Seal)
Acknowledged and Accepted by the Company, as defined in the Waiver.
By:
Date:
EXHIBIT 10(a)96
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT ("Agreement") made and entered into by
and between The Southern Company ("Southern"), Southern Company Services, Inc.
(the "Company") and Mr. Stephen A. Wakefield ("Mr. Wakefield").
W I T N E S S E T H:
WHEREAS, Mr. Wakefield is the Senior Vice President and General Counsel
of the Company;
WHEREAS, the Company wish to provide to Mr. Wakefield certain severance
benefits under certain circumstances following a change in control (as defined
herein) of Southern or the Company;
NOW, THEREFORE, in consideration of the premises, and the agreements of
the parties set forth in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) "Annual Compensation" shall mean Mr. Wakefield's highest
annual base salary rate for the twelve (12) month period immediately
preceding the date of the Change in Control plus market level target
annual bonus as set forth on Exhibit A hereof.
(b) "Beneficial Ownership" shall mean beneficial ownership
within the meaning of Rule 13d-3 promulgated under the Exchange Act.
(c) "Board" shall mean the board of directors of the Company.
(d) "Business Combination" shall mean a reorganization, merger
or consolidation of Southern or sale or other disposition of all or
substantially all of the assets of Southern.
(e) "Change in Control" shall mean any of the following:
(i) The Consummation of an acquisition by any Person
of Beneficial Ownership of 20% or more of Southern's Voting
Securities; provided, however, that for purposes of this
Paragraph 1.(e)(i), the following acquisitions of Southern's
Voting Securities shall not constitute a Change in Control:
(A) any acquisition directly from Southern;
(B) any acquisition by Southern;
(C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by
Southern or any Southern Subsidiary;
(D) any acquisition by a qualified pension
plan or publicly held mutual fund;
(E) any acquisition by a Group composed
exclusively of employees of Southern, or any Southern
Subsidiary;
(F) any acquisition by Mr. Wakefield or any
Group of which Mr. Wakefield is a party; or
(G) any Business Combination which would not
otherwise constitute a change in control because of
the application of clauses (A), (B) and (C) of
Paragraph 1.(e)(iii);
(ii) A change in the composition of the Southern
Board whereby individuals who constitute the Incumbent Board
cease for any reason to constitute at least a majority of the
Southern Board;
(iii) Consummation of a Business Combination,
provided, however, that such a Business Combination shall not
constitute a Change in Control if all three (3) of the
following conditions are met:
(A) all or substantially all of the
individuals and entities who held Beneficial
Ownership, respectively, of Southern's Voting
Securities immediately prior to such Business
Combination beneficially own, directly or indirectly,
65% or more of the combined voting power of the
Voting Securities of the corporation surviving or
resulting from such Business Combination, (including,
without limitation, a corporation which as a result
of such transaction holds Beneficial Ownership of all
or substantially all of Southern's Voting Securities
or all or substantially all of Southern's assets)
(such surviving or resulting corporation to be
referred to as "Surviving Company"), in substantially
the same proportions as their ownership, immediately
prior to such Business Combination, of Southern's
Voting Securities;
(B) no Person (excluding any corporation
resulting from such Business Combination, any
employee benefit plan (or related trust) of Southern,
any Southern Subsidiary or Surviving Company, Mr.
Wakefield, any Group of which Mr. Wakefield is a
party, any Group composed exclusively of Company
employees, any qualified pension plan (or related
trust) or any publicly held mutual fund) holds
Beneficial Ownership, directly or indirectly, of 20%
or more of the combined voting power of the then
outstanding Voting Securities of Surviving Company
except to the extent that such ownership existed
prior to the Business Combination; and
(C) at least a majority of the members of
the board of directors of Surviving Company were
members of the Incumbent Board at the earlier of the
date of execution of the initial agreement, or of the
action of the Southern Board, providing for such
Business Combination. (iv) The Consummation of an
acquisition by any Person of Beneficial Ownership of
50% or more of the combined voting power of the then
outstanding Voting Securities of the Company;
provided, however, that for purposes of this
Paragraph 1.(e)(iv), any acquisition by Mr.
Wakefield, any Group composed exclusively of
employees of the Company, any Group of which Mr.
Wakefield is a party, any qualified pension plan (or
related trust), any publicly held mutual fund, any
employee benefit plan (or related trust) sponsored or
maintained by Southern or any Southern Subsidiary
shall not constitute a Change in Control;
(v) Consummation of a reorganization, merger or
consolidation of the Company (an "Employing Company Business
Combination"), in each case, unless, following such Employing
Company Business Combination, Southern Controls the
corporation or other entity surviving or resulting from such
Employing Company Business Combination; or
(vi) Consummation of the sale or other disposition of
all or substantially all of the assets of the Company to a
corporation or other entity which Southern does not Control.
(f) "COBRA Coverage" shall mean any continuation coverage to
which Mr. Wakefield or his dependents may be entitled pursuant
to Code Section 4980B.
(g) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(h) "Company" shall mean Southern Company Services, Inc., its
successors and assigns.
(i) "Consummation" shall mean the completion of the final act
necessary to complete a transaction as a matter of law, including, but
not limited to, any required approvals by the corporation's
shareholders and board of directors, the transfer of legal and
beneficial title to securities or assets and the final approval of the
transaction by any applicable domestic or foreign governments or
governmental agencies.
(j) "Control" shall mean, in the case of a corporation,
Beneficial Ownership of more than 50% of the combined voting power of
the corporation's Voting Securities, or in the case of any other
entity, Beneficial Ownership of more than 50% of such entity's voting
equity interests.
(k) "Effective Date" shall mean the date of execution of this
Agreement.
(l) "Employee Outplacement Program" shall mean the program
established by the Company from time to time for the purpose of
assisting participants covered by the plan in finding employment
outside of the Company which provides for the following services:
(i) self-assessment, career decision and goal
setting; (ii) job market research and job sources;
(iii) networking and interviewing skills; (iv)
planning and implementation strategy; (v) resume
writing, job hunting methods and salary negotiation;
and (vi) office support and job search resources.
(m) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(n) "Good Reason" shall mean, without Mr. Wakefield's express
written consent, after written notice to the Board, and after a thirty
(30) day opportunity for the Board to cure, the continuing occurrence
of any of the following events:
(i) Inconsistent Duties. A meaningful and detrimental
alteration in Mr. Wakefield's position or in the nature or
status of his responsibilities from those in effect
immediately prior to the Change in Control;
(ii) Reduced Salary. A reduction of five percent (5%)
or more by the Company in either of the following: (i) Mr.
Wakefield's annual base salary rate as in effect immediately
prior to the Change in Control (except for a less than ten
percent (10%), across-the-board annual base salary rate
reduction similarly affecting at least ninety-five percent
(95%) of the Executive Employees of the Company); or (ii) the
sum of Mr. Wakefield's annual base salary rate plus target
bonus under the PPP Plan (except for a less than ten percent
(10%), across-the-board reduction of annual base salary rate
plus target bonus under the PPP Plan similarly affecting at
least ninety-five percent (95%) of the Executive Employees of
the Company);
(iii) Pension and Compensation Plans. The failure by
the Company to continue in effect any pension or compensation
plan or agreement in which Mr. Wakefield participates or is a
party as of the date of the Change in Control or the
elimination of Mr. Wakefield's participation therein, (except
for across-the-board plan changes or terminations similarly
affecting at least ninety-five percent (95%) of the Executive
Employees of the Company); For purposes of this Paragraph
1.(n), a "pension plan or agreement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for payments upon retirement; and a
"compensation plan or arrangement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for periodic, non-discretionary compensatory
payments in the nature of bonuses.
(iv) Relocation. A change in Mr. Wakefield's work
location to a location more than fifty (50) miles from the
office where Mr. Wakefield is located at the time of the
Change in Control, unless such new work location is within
fifty (50) miles from Mr. Wakefield's principal place of
residence at the time of the Change in Control. The
acceptance, if any, by Mr. Wakefield of employment by the
Company at a work location which is outside the fifty mile
radius set forth in this Paragraph 1.(n)(iv) shall not be a
waiver of Mr. Wakefield's right to refuse subsequent transfer
by the Company to a location which is more than fifty (50)
miles from Mr. Wakefield's principal place of residence at the
time of the Change in Control, and such subsequent unconsented
transfer shall be "Good Reason" under this Agreement; or
(v) Benefits and Perquisites. The taking of any
action by the Company which would directly or indirectly
materially reduce the benefits enjoyed by Mr. Wakefield under
the Company's retirement, life insurance, medical, health and
accident, disability, deferred compensation or savings plans
in which Mr. Wakefield was participating immediately prior to
the Change in Control; or the failure by the Company to
provide Mr. Wakefield with the number of paid vacation days to
which Mr. Wakefield is entitled on the basis of years of
service with the Company in accordance with the Company's
normal vacation policy in effect immediately prior to the
Change in Control (except for across-the-board plan or
vacation policy changes or plan terminations similarly
affecting at least ninety-five percent (95%) of the Executive
Employees of the Company).
(vi) For purposes of this Paragraph 1.(n), the term
"Executive Employee" shall mean those employees of the Company
of Grade Level 10 or above. (o) "Group" shall have the meaning
set forth in Section 14(d) of the Exchange Act. (p) "Group
Health Plan" shall mean the group health plan covering Mr.
Wakefield, as such plan may be amended from time to time.
(q) "Group Life Insurance Plan" shall mean the group life
insurance program covering Mr. Wakefield, as such plan may be amended
from time to time.
(r) "Incumbent Board" shall mean those individuals who
constitute the Southern Board as of the Effective Date plus any
individual who shall become a director subsequent to such date whose
election or nomination for election by Southern's shareholders was
approved by a vote of at least 75% of the directors then comprising the
Incumbent Board. Notwithstanding the foregoing, no individual who shall
become a director of the Southern Board subsequent to the Effective
Date whose initial assumption of office occurs as a result of an actual
or threatened election contest (within the meaning of Rule 14a-11 of
the Regulations promulgated under the Exchange Act) with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Southern Board shall be a member of the Incumbent Board.
(s) "Month of Service" shall mean any calendar month during
which Mr. Wakefield has worked at least one (1) hour or was on approved
leave of absence while in the employ of the Company or any affiliate or
subsidiary of Southern.
(t) "Pension Plan" shall mean The Southern Company Pension
Plan, as such plan may be amended from time to time.
(u) "Performance Dividend Plan" shall mean the Southern
Company Performance Dividend Plan or any replacement thereto, as such
plans may be amended from time to time.
(v) "Performance Stock Plan" shall mean the Southern Company
Performance Stock Plan or any replacement thereto, as such plans may be
amended from time to time.
(w) "Person" shall mean any individual, entity or group within
the meaning of Section 13(d)(3) or 14(d)(2) of Act.
(x) "Performance Pay Plan" or "PPP Plan" shall mean the
Southern Company Performance Pay Plan or any replacement thereto, as
such plans may be amended from time to time.
(y) "Productivity Improvement Plan" or "PIP Plan" shall mean
the Southern Company Productivity Improvement Plan or replacement
thereto, as such plans may be amended from time to time.
(z) "Southern" shall mean The Southern Company, its successors
and assigns.
(aa) "Southern Board" shall mean the board of directors of
Southern.
(bb) "Southern Subsidiary" shall mean any corporation or other
entity Controlled by Southern.
(cc) "Termination for Cause" or "Cause" shall mean the
termination of Mr. Wakefield's employment by the Company upon the
occurrence of any of the following:
(i) The willful and continued failure by Mr.
Wakefield substantially to perform his duties with the Company
(other than any such failure resulting from Mr. Wakefield's
Total Disability or from Mr. Wakefield's retirement or any
such actual or anticipated failure resulting from termination
by Mr. Wakefield for Good Reason) after a written demand for
substantial performance is delivered to him by the Southern
Board, which demand specifically identifies the manner in
which the Southern Board believes that he has not
substantially performed his duties; or
(ii) The willful engaging by Mr. Wakefield in conduct
that is demonstrably and materially injurious to the Company,
monetarily or otherwise, including, but not limited to any of
the following:
(A) any willful act involving fraud or
dishonesty in the course of Mr. Wakefield's
employment by the Company;
(B) the willful carrying out of any activity
or the making of any statement which would materially
prejudice or impair the good name and standing of the
Company, Southern or any Southern Subsidiary or would
bring the Company, Southern or any Southern
Subsidiary into contempt, ridicule or would
reasonably shock or offend any community in which the
Company, Southern or such Southern Subsidiary is
located;
(C) attendance at work in a state of
intoxication or otherwise being found in possession
at his workplace of any prohibited drug or substance,
possession of which would amount to a criminal
offense;
(D) violation of the Company's policies on
drug and alcohol usage, fitness for duty requirements
or similar policies as may exist from time to time as
adopted by the Company's safety officer;
(E) assault or other act of violence against
any person during the course of employment; or
(F) indictment of any felony or any
misdemeanor involving moral turpitude.
No act or failure to act by Mr. Wakefield shall be deemed
"willful" unless done, or omitted to be done, by Mr. Wakefield not in
good faith and without reasonable belief that his action or omission
was in the best interest of the Company.
Notwithstanding the foregoing, Mr. Wakefield shall not be
deemed to have been terminated for Cause unless and until there shall
have been delivered to him a copy of a resolution duly adopted by the
affirmative vote of not less than three quarters of the entire
membership of the Southern Board at a meeting of the Southern Board
called and held for such purpose (after reasonable notice to Mr.
Wakefield and an opportunity for him, together with counsel, to be
heard before the Southern Board), finding that, in the good faith
opinion of the Southern Board, Mr. Wakefield was guilty of conduct set
forth above in clause (i) or (ii) of this Paragraph 1.(dd) and
specifying the particulars thereof in detail.
(ee) "Termination Date" shall mean the date on which Mr.
Wakefield's employment with the Company is terminated; provided,
however, that solely for purposes of Paragraph 2.(c) hereof, the
Termination Date shall be the effective date of his retirement pursuant
to the terms of the Pension Plan.
(ff) "Total Disability" shall mean Mr. Wakefield's total
disability within the meaning of the Pension Plan.
(gg) "Voting Securities" shall mean the outstanding voting
securities of a corporation entitling the holder thereof to vote
generally in the election of such corporation's directors.
(hh) "Waiver and Release" shall mean the Waiver and Release
attached hereto as Exhibit B.
(ii) "Year of Service" shall mean Mr. Wakefield's Months of
Service divided by twelve (12) rounded to the nearest whole year,
rounding up if the remaining number of months is seven (7) or greater
and rounding down if the remaining number of months is less than seven
(7). If Mr. Wakefield has a break in his service with the Company, he
will receive credit under this Agreement for service prior to the break
in service only if the break in service is less than five years.
2. Severance Benefits.
(a) Eligibility. Except as otherwise provided in this
Paragraph 2.(a), if Mr. Wakefield's employment is involuntarily
terminated by the Company at any time during the two year period
following a Change in Control for reasons other than Cause, or if Mr.
Wakefield voluntarily terminates his employment with the Company for
Good Reason at any time during the two year period following a Change
in Control, Mr. Wakefield shall be entitled to receive the benefits
described in this Agreement upon the Company's receipt of an effective
Waiver and Release. Notwithstanding anything to the contrary herein,
Mr. Wakefield shall not be eligible to receive benefits under this
Agreement if Mr. Wakefield:
(i) voluntarily terminates his employment with the
Company for other than Good Reason;
(ii) has his employment terminated by the Company for
Cause;
(iii) accepts the transfer of his employment to
Southern, any Southern Subsidiary or any employer that
succeeds to all or substantially all of the assets of the
Company, Southern or any Southern Subsidiary;
(iv) refuses an offer of continued employment with
the Company, any Southern Subsidiary, or any employer that
succeeds to all or substantially all of the assets of the
Company, Southern, or any Southern Subsidiary under
circumstances where such refusal would not amount to Good
Reason for voluntary termination of employment; or
(v) elects to receive the benefits of any other
voluntary or involuntary severance or separation program
maintained by the Company; provided however, that the receipt
of benefits under the terms of any retention plan or agreement
shall not be deemed to be the receipt of severance or
separation benefits for purposes of this Agreement.
(b) Severance Benefits. If Mr. Wakefield meets the eligibility
requirements of Paragraph 2.(a) hereof, he shall be entitled to a cash
severance benefit in an amount equal to three times his Annual
Compensation (the "Severance Amount"). If any portion of the Severance
Amount constitutes an "excess parachute payment" (as such term is
defined under Code Section 280G ("Excess Parachute Payment")), the
Company shall pay to Mr. Wakefield an additional amount calculated by
determining the amount of tax under Code Section 4999 that he otherwise
would have paid on any Excess Parachute Payment with respect to the
Change in Control and dividing such amount by a decimal determined by
adding the tax rate under Code Section 4999 ("Excise Tax"), the
hospital insurance tax under Code Section 3101(b) ("HI Tax") and
federal and state income tax measured at the highest marginal rates
("Income Tax") and subtracting such result from the number one (1) (the
"280G Gross-up"); provided, however, that no 280G Gross-up shall be
paid unless the Severance Amount plus all other "parachute payments" to
Mr. Wakefield under Code Section 280G exceeds three (3) times Mr.
Wakefield's "base amount" (as such term is defined under Code Section
280G ("Base Amount")) by ten percent (10%) or more; provided further,
that if no 280G Gross-up is paid, the Severance Amount shall be capped
at three (3) times Mr. Wakefield's Base Amount, less all other
"parachute payments" (as such term is defined under Code Section 280G)
received by Mr. Wakefield, less one dollar (the "Capped Amount"), if
the Capped Amount, reduced by HI Tax and Income Tax, exceeds what
otherwise would have been the Severance Amount, reduced by HI Tax,
Income Tax and Excise Tax.
For purposes of this Paragraph 2.(b), whether any amount would
constitute an Excess Parachute Payment and any other calculations of
tax, e.g., Excise Tax, HI Tax, Income Tax, etc., or other amounts,
e.g., Base Amount, Capped Amount, etc., shall be determined by the tax
department of the independent public accounting firm then responsible
for preparing Southern's consolidated federal income tax return, and
such calculations or determinations shall be binding upon the parties
hereto.
(c) Welfare Benefits. If Mr. Wakefield meets the eligibility
requirements of Paragraph 2.(a) hereof and is not otherwise eligible to
receive retiree medical and life insurance benefits provided to certain
retirees pursuant to the terms of the Pension Plan, the Group Health
Plan and the Group Life Insurance Plan, he shall be entitled to the
benefits set forth in this Paragraph 2.(c).
(i) Mr. Wakefield shall be eligible to participate in
the Company's Group Health Plan, upon payment of both the
Company's and his monthly premium under such plan, for a
period of six (6) months for each of Mr. Wakefield's Years of
Service, not to exceed five (5) years. If Mr. Wakefield elects
to receive this extended medical coverage, he shall also be
entitled to elect coverage under the Group Health Plan for his
dependents who were participating in the Group Health Plan on
Mr. Wakefield's Termination Date (and for such other
dependents as may be entitled to coverage under the provisions
of the Health Insurance Portability and Accountability Act of
1996) for the duration of Mr. Wakefield's extended medical
coverage under this Paragraph 2.(c)(i) to the extent such
dependents remain eligible for dependent coverage under the
terms of the Group Health Plan.
(A) The extended medical coverage afforded
to Mr. Wakefield pursuant to Paragraph 2.(c)(i), as
well as the premiums to be paid by Mr. Wakefield in
connection with such coverage shall be determined in
accordance with the terms of the Group Health Plan
and shall be subject to any changes in the terms and
conditions of the Group Health Plan as well as any
future increases in premiums under the Group Health
Plan. The premiums to be paid by Mr. Wakefield in
connection with this extended coverage shall be due
on the first day of each month; provided, however,
that if he fails to pay his premium within thirty
(30) days of its due date, such extended coverage
shall be terminated.
(B) Any Group Health Plan coverage provided
under Paragraph 2.(c)(i) shall be a part of and not
in addition to any COBRA Coverage which Mr. Wakefield
or his dependents may elect. In the event that Mr.
Wakefield or his dependents become eligible to be
covered, by virtue of re-employment or otherwise, by
any employer-sponsored group health plan or is
eligible for coverage under any government-sponsored
health plan during the above period, coverage under
the Company's Group Health Plan available to Mr.
Wakefield or his dependents by virtue of the
provisions of Paragraph 2.(c)(i) shall terminate,
except as may otherwise be required by law, and shall
not be renewed. (ii) Mr. Wakefield shall be entitled
to receive cash in an amount equal to the Company's
and Mr. Wakefield's cost of premiums for three (3)
years of coverage under the Group Health Plan and
Group Life Insurance Plan in accordance with the
terms of such plans as of the date of the Change in
Control.
(d) Incentive Plans. If Mr. Wakefield meets the eligibility
requirements of Paragraph 2.(a) hereof he shall be entitled to the
following benefits under the Company's incentive plans:
(i) Stock Option Plan.
(A) Any of Mr. Wakefield's Options and Stock
Appreciation Rights under the Performance Stock Plan
(the defined terms of which are incorporated in this
Paragraph 2.(d)(i) by reference) which are
outstanding as of the Termination Date and which are
not then exercisable and vested, shall become fully
exercisable and vested to the full extent of the
original grant; provided, that in the case of a Stock
Appreciation Right, if Mr. Wakefield is subject to
Section 16(b) of the Exchange Act, such Stock
Appreciation Right shall not become fully vested and
exercisable at such time if such actions would result
in liability to Mr. Wakefield under Section 16(b) of
the Exchange Act, provided further, that any such
actions not taken as a result of the rules under
Section 16(b) of the Exchange Act shall be effected
as of the first date that such activity would no
longer result in liability under Section 16(b) of the
Exchange Act.
(B) The restrictions and deferral
limitations applicable to any of Mr. Wakefield's
Restricted Stock as of the Termination Date shall
lapse, and such Restricted Stock shall become free of
all restrictions and limitations and become fully
vested and transferable to the full extent of the
original grant.
(C) The restrictions and deferral
limitations and other conditions applicable to any
other Awards held by Mr. Wakefield under the Stock
Performance Plan as of the Termination Date shall
lapse, and such other Awards shall become free of all
restrictions, limitations or conditions and become
fully vested and transferable to the full extent of
the original grant. (ii) Performance Pay Plan.
Provided Mr. Wakefield is not entitled to benefits
under Article V of the PPP Plan, (the defined terms
of which are incorporated in this Paragraph 2.(d)(ii)
by reference), if the PPP Plan is in place through
Mr. Wakefield's Termination Date and to the extent
Mr. Wakefield is entitled to participate therein, Mr.
Wakefield shall be entitled to receive cash in an
amount equal to a prorated payout of his Incentive
Pay Awards under the PPP Plan for the Performance
Period in which the Termination Date shall have
occurred, at target performance under the PPP Plan
and prorated by the number of months which have
passed since the beginning of the Performance Period
until the Termination Date.
(iii) PIP Plan. Provided Mr. Wakefield is not
entitled to benefits under Article IV of the PIP Plan (the
defined terms of which are incorporated in this Paragraph
2.(d)(iii) by reference), if the PIP Plan is in place through
Mr. Wakefield's Termination Date and to the extent Mr.
Wakefield is entitled to participate therein, Mr. Wakefield
shall be entitled to receive cash in an amount equal to his
Award Opportunity for the Computation Periods in which the
Termination Date shall have occurred at a target Value of
Performance Unit of $1.00, prorated for each Computation
Period by the number of months which have passed since the
beginning of the Computation Periods until the Termination
Date.
(iv) Performance Dividend Plan. Provided Mr.
Wakefield is not entitled to benefits under the Performance
Dividend Plan (the defined terms of which are incorporated in
this Paragraph 2.(d)(iv) by reference), if the Performance
Dividend Plan is in place through Mr. Wakefield's Termination
Date and to the extent Mr. Wakefield is entitled to
participate therein, Mr. Wakefield shall be entitled to
receive cash for each Award held by Mr. Wakefield on his
Termination Date, based on actual performance under Section
4.1 of the Performance Dividend Plan determined as of the most
recently completed calendar quarter of the Performance Period
in which the Termination Date shall have occurred, and the
Annual Dividend declared prior to the Termination Date.
(v) Other Short Term Incentive Plans. The provisions
of this Paragraph 2.(d)(v) shall apply if and to the extent
that Mr. Wakefield is a participant in any other "short term
compensation plan" not otherwise previously referred to in
this Paragraph 2.(d). Provided Mr. Wakefield is not otherwise
entitled to a plan payout under any change of control
provisions of such plans, if the "short term compensation
plan" is in place as of the Termination Date and to the extent
Mr. Wakefield is entitled to participate therein, Mr.
Wakefield shall receive cash in an amount equal to his award
under the Company's "short term incentive plan" for the annual
performance period in which the Termination Date shall have
occurred, at Mr. Wakefield's target performance level and
prorated by the number of months which have passed since the
beginning of the annual performance period until his
Termination Date. For purposes of this Paragraph 2.(d)(v) the
term "short term incentive compensation plan" shall mean any
incentive compensation plan or arrangement adopted in writing
by the Company which provides for annual, recurring
compensatory bonuses based upon articulated performance
criteria. (e) Payment of Benefits. Any amounts due under this
Agreement shall be paid in one (1) lump sum payment as soon as
administratively practicable following the later of: (i) Mr.
Wakefield's Termination Date, or (ii) upon Mr. Wakefield's
tender of an effective Waiver and Release to the Company in
the form of Exhibit B attached hereto and the expiration of
any applicable revocation period for such waiver. In the event
of a dispute with respect to liability or amount of any
benefit due hereunder, an effective Waiver and Release shall
be tendered at the time of final resolution of any such
dispute when payment is tendered by the Company.
(f) Benefits in the Event of Death. In the event of Mr.
Wakefield's death prior to the payment of all amounts due under this
Agreement, Mr. Wakefield's estate shall be entitled to receive as due
any amounts not yet paid under this Agreement upon the tender by the
executor or administrator of the estate of an effective Waiver and
Release.
(g) Legal Fees. In the event of a dispute between Mr.
Wakefield and the Company with regard to any amounts due hereunder, if
any material issue in such dispute is finally resolved in Mr.
Wakefield's favor, the Company shall reimburse Mr. Wakefield's legal
fees incurred with respect to all issues in such dispute in an amount
not to exceed fifty thousand dollars ($50,000).
(h) Employee Outplacement Services. Mr. Wakefield shall be
eligible to participate in the Employee Outplacement Program, which
program shall not be less than six (6) months duration measured from
Mr. Wakefield's Termination Date.
(i) Non-qualified Retirement and Deferred Compensation Plans.
The Parties agree that subsequent to a Change in Control, any claims by
Mr. Wakefield for benefits under any of the Company's non-qualified
retirement or deferred compensation plans shall be resolved through
binding arbitration in accordance with the provisions and procedures
set forth in Paragraph 5 hereof and if any material issue in such
dispute is finally resolved in Mr. Wakefield's favor, the Company shall
reimburse Mr. Wakefield's legal fees in the manner provided in
Paragraph 2.(g) hereof. 3. Transfer of Employment. In the event that
Mr. Wakefield's employment by the Company is terminated during the two
year period following a Change in Control and Mr. Wakefield accepts
employment by Southern, a Southern Subsidiary, or any employer that
succeeds to all or substantially all of the assets of the Company,
Southern or any Southern Subsidiary, the Company shall assign this
Agreement to Southern, such Southern Subsidiary, or successor employer,
Southern shall accept such assignment or cause such Southern Subsidiary
or successor employer to accept such assignment, and such assignee
shall become the "Company" for all purposes hereunder.
4. No Mitigation. If Mr. Wakefield is otherwise eligible to receive
benefits under Paragraph 2 of this Agreement, he shall have no duty or
obligation to seek other employment following his Termination Date and, except
as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr.
Wakefield hereunder shall not be reduced or suspended if Mr. Wakefield accepts
such subsequent employment.
5. Arbitration.
(a) Any dispute, controversy or claim arising out of or
relating to the Company's obligations to pay severance benefits under
this Agreement, or the breach thereof, shall be settled and resolved
solely by arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association ("AAA") except as
otherwise provided herein. The arbitration shall be the sole and
exclusive forum for resolution of any such claim for severance benefits
and the arbitrators' award shall be final and binding. The provisions
of this Paragraph 5 are not intended to apply to any other disputes,
claims or controversies arising out of or relating to Mr. Wakefield's
employment by the Company or the termination thereof.
(b) Arbitration shall be initiated by serving a written notice
of demand for arbitration to Mr. Wakefield, in the case of the Company,
or to the Southern Board, in the case of Mr. Wakefield.
(c) The arbitration shall be held in Atlanta, Georgia. The
arbitrators shall apply the law of the State of Georgia, to the extent
not preempted by federal law, excluding any law which would require the
application of the law of another state.
(d) The parties shall appoint arbitrators within fifteen (15)
business days following service of the demand for arbitration. The
number of arbitrators shall be three. One arbitrator shall be appointed
by Mr. Wakefield, one arbitrator shall be appointed by the Company, and
the two arbitrators shall appoint a third. If the arbitrators cannot
agree on a third arbitrator within thirty (30) business days after the
service of demand for arbitration, the third arbitrator shall be
selected by the AAA.
(e) The arbitration filing fee shall be paid by Mr. Wakefield.
All other costs of arbitration shall be borne equally by Mr. Wakefield
and the Company, provided, however, that the Company shall reimburse
such fees and costs in the event any material issue in such dispute is
finally resolved in Mr. Wakefield's favor and Mr. Wakefield is
reimbursed legal fees under Paragraph 2.(g) hereof.
(f) The parties agree that they will faithfully observe the
rules that govern any arbitration between them, they will abide by and
perform any award rendered by the arbitrators in any such arbitration,
including any award of injunctive relief, and a judgment of a court
having jurisdiction may be entered upon an award.
(g) The parties agree that nothing in this Paragraph 5 is
intended to preclude upon application of either party any court having
jurisdiction from issuing and enforcing in any lawful manner such
temporary restraining orders, preliminary injunctions, and other
interim measures of relief as may be necessary to prevent harm to a
party's interests or as otherwise may be appropriate pending the
conclusion of arbitration proceedings pursuant to this Agreement;
regardless of whether an arbitration proceeding under this Paragraph 5
has begun. The parties further agree that nothing herein shall prevent
any court from entering and enforcing in any lawful manner such
judgments for permanent equitable relief as may be necessary to prevent
harm to a party's interests or as otherwise may be appropriate
following the issuance of arbitral awards pursuant to this Paragraph 5.
6. Miscellaneous.
(a) Funding of Benefits. Unless the Board in its discretion
shall determine otherwise, the benefits payable to Mr. Wakefield under
this Agreement shall not be funded in any manner and shall be paid by
the Company out of its general assets, which assets are subject to the
claims of the Company's creditors.
(b) Withholding. There shall be deducted from the payment of
any benefit due under this Agreement the amount of any tax required by
any governmental authority to be withheld and paid over by the Company
to such governmental authority for the account of Mr. Wakefield.
(c) Assignment. Mr. Wakefield shall have no rights to sell,
assign, transfer, encumber, or otherwise convey the right to receive
the payment of any benefit due hereunder, which payment and the rights
thereto are expressly declared to be nonassignable and nontransferable.
Any attempt to do so shall be null and void and of no effect.
(d) Amendment and Termination. The Agreement may be amended or
terminated only by a writing executed by the parties.
(e) Construction. This Agreement shall be construed in
accordance with and governed by the laws of the State of Georgia, to
the extent not preempted by federal law, disregarding any provision of
law which would require the application of the law of another state.
(f) Pooling Accounting. Notwithstanding anything to the
contrary herein, if, but for any provision of this Agreement, a Change
in Control transaction would otherwise be accounted for as a
pooling-of-interests under APB No.16 ("Pooling Accounting") (after
giving effect to any and all other facts and circumstances affecting
whether such Change in Control transaction would use Pooling
Accounting), such provision or provisions of this Agreement which would
otherwise cause the Change in Control transaction to be ineligible for
Pooling Accounting shall be void and ineffective in such a manner and
to the extent that by eliminating such provision or provisions of this
Agreement, Pooling Accounting would be required for such Change in
Control transaction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
this ____ day of __________________, 199__.
THE SOUTHERN COMPANY
By: ____________________________________
SOUTHERN COMPANY SERVICES, INC.
By: ____________________________________
MR. WAKEFIELD
-----------------------------
Stephen A. Wakefield
<PAGE>
Exhibit A
CHANGE IN CONTROL AGREEMENT
Target Annual Bonus for
Mr. Stephen A. Wakefield
50%
<PAGE>
Exhibit B
CHANGE IN CONTROL AGREEMENT
Waiver and Release
The attached Waiver and Release is to be given to Mr. Stephen A.
Wakefield upon the occurrence of an event that triggers eligibility for
severance benefits under the Change in Control Agreement, as described in
Paragraph 2(a) of such agreement.
<PAGE>
CHANGE IN CONTROL AGREEMENT
Waiver and Release
I, Stephen A. Wakefield, understand that I am entitled to receive the
severance benefits described in Section 2 of the Change in Control Agreement
(the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand
that the benefits I will receive under the Agreement are in excess of those I
would have received from The Southern Company and Southern Company Services,
Inc. (collectively, the "Company") if I had not elected to sign this Waiver.
I recognize that I may have a claim against the Company under the Civil
Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the
Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended,
the Americans with Disabilities Act or other federal, state and local laws.
In exchange for the benefits I elect to receive, I hereby irrevocably
waive and release all claims, of any kind whatsoever, whether known or unknown
in connection with any claim which I ever had, may have, or now have against The
Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power
Company, Mississippi Power Company, Savannah Electric and Power Company,
Southern Communication Services, Inc., Southern Company Services, Inc., Southern
Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern
Nuclear Operating Company, Inc. and other direct or indirect subsidiaries of The
Southern Company and their past, present and future officers, directors,
employees, agents and attorneys. Nothing in this Waiver shall be construed to
release claims or causes of action under the Age Discrimination in Employment
Act or the Energy Reorganization Act of 1974, as amended, which arise out of
events occurring after the execution date of this Waiver.
In further exchange for the benefits I elect to receive, I understand
and agree that I will respect the proprietary and confidential nature of any
information I have obtained in the course of my service with the Company or any
subsidiary or affiliate of The Southern Company. However, nothing in this Waiver
shall prohibit me from engaging in protected activities under applicable law or
from communicating, either voluntary or otherwise, with any governmental agency
concerning any potential violation of the law.
In signing this Waiver, I am not releasing claims to benefits that I am
already entitled to under any workers' compensation laws or under any retirement
plan or welfare benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, as amended, which is sponsored by or adopted by the
Company and/or any of its direct or indirect subsidiaries; however, I understand
and acknowledge that nothing herein is intended to or shall be construed to
require the Company to institute or continue in effect any particular plan or
benefit sponsored by the Company and the Company hereby reserves the right to
amend or terminate any of its benefit programs at any time in accordance with
the procedures set forth in such plans.
In signing this Waiver, I realize that I am waiving and releasing,
among other things, any claims to benefits under any and all bonus, severance,
workforce reduction, early retirement, outplacement, or any other similar type
plan sponsored by the Company.
I have been encouraged and advised in writing to seek advice from
anyone of my choosing regarding this Waiver, including my attorney, and my
accountant or tax advisor. Prior to signing this Waiver, I have been given the
opportunity and sufficient time to seek such advice, and I fully understand the
meaning and contents of this Waiver.
I understand that I may take up to twenty-one (21) calendar days to
consider whether or not I desire to enter this Waiver. I was not coerced,
threatened or otherwise forced to sign this Waiver. I have made my choice to
sign this Waiver voluntarily and of my own free will.
I understand that I may revoke this Waiver at any time during the seven
(7) calendar day period after I sign and deliver this Waiver to the Company. If
I revoke this Waiver, I must do so in writing delivered to the Company. I
understand that this Waiver is not effective until the expiration of this seven
(7) calendar day revocation period. I understand that upon the expiration of
such seven (7) calendar day revocation period this entire Waiver will be binding
upon me and will be irrevocable.
I understand that by signing this Waiver I am giving up rights I may
have.
IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this
____ day of ____________________, in the year _____.
Stephen A. Wakefield
Sworn to and subscribed to me this ____ day of ____________, _____.
Notary Public
My Commission Expires:
(Notary Seal)
Acknowledged and Accepted by the Company, as defined in the Waiver.
By:
Date:
EXHIBIT 10(a)97
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT ("Agreement") made and entered into by
and between The Southern Company ("Southern"), Southern Company Services, Inc.
(the "Company") and Mr. W. Lawrence Westbrook ("Mr. Westbrook").
W I T N E S S E T H:
WHEREAS, Mr. Westbrook is the Executive Vice President and Chief
Financial Officer of the Company;
WHEREAS, the Company wish to provide to Mr. Westbrook certain severance
benefits under certain circumstances following a change in control (as defined
herein) of Southern or the Company;
NOW, THEREFORE, in consideration of the premises, and the agreements of
the parties set forth in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) "Annual Compensation" shall mean Mr. Westbrook's highest
annual base salary rate for the twelve (12) month period immediately
preceding the date of the Change in Control plus market level target
annual bonus as set forth on Exhibit A hereof.
(b) "Beneficial Ownership" shall mean beneficial ownership
within the meaning of Rule 13d-3 promulgated under the Exchange Act.
(c) "Board" shall mean the board of directors of the Company.
(d) "Business Combination" shall mean a reorganization, merger
or consolidation of Southern or sale or other disposition of all or
substantially all of the assets of Southern.
(e) "Change in Control" shall mean any of the following:
(i) The Consummation of an acquisition by any Person
of Beneficial Ownership of 20% or more of Southern's Voting
Securities; provided, however, that for purposes of this
Paragraph 1.(e)(i), the following acquisitions of Southern's
Voting Securities shall not constitute a Change in Control:
(A) any acquisition directly from Southern;
(B) any acquisition by Southern;
(C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by
Southern or any Southern Subsidiary;
(D) any acquisition by a qualified pension
plan or publicly held mutual fund;
(E) any acquisition by a Group composed
exclusively of employees of Southern, or any Southern
Subsidiary;
(F) any acquisition by Mr. Westbrook or any
Group of which Mr. Westbrook is a party; or
(G) any Business Combination which would not
otherwise constitute a change in control because of
the application of clauses (A), (B) and (C) of
Paragraph 1.(e)(iii);
(ii) A change in the composition of the Southern
Board whereby individuals who constitute the Incumbent Board
cease for any reason to constitute at least a majority of the
Southern Board;
(iii) Consummation of a Business Combination,
provided, however, that such a Business Combination shall not
constitute a Change in Control if all three (3) of the
following conditions are met:
(A) all or substantially all of the
individuals and entities who held Beneficial
Ownership, respectively, of Southern's Voting
Securities immediately prior to such Business
Combination beneficially own, directly or indirectly,
65% or more of the combined voting power of the
Voting Securities of the corporation surviving or
resulting from such Business Combination, (including,
without limitation, a corporation which as a result
of such transaction holds Beneficial Ownership of all
or substantially all of Southern's Voting Securities
or all or substantially all of Southern's assets)
(such surviving or resulting corporation to be
referred to as "Surviving Company"), in substantially
the same proportions as their ownership, immediately
prior to such Business Combination, of Southern's
Voting Securities;
(B) no Person (excluding any corporation
resulting from such Business Combination, any
employee benefit plan (or related trust) of Southern,
any Southern Subsidiary or Surviving Company, Mr.
Westbrook, any Group of which Mr. Westbrook is a
party, any Group composed exclusively of Company
employees, any qualified pension plan (or related
trust) or any publicly held mutual fund) holds
Beneficial Ownership, directly or indirectly, of 20%
or more of the combined voting power of the then
outstanding Voting Securities of Surviving Company
except to the extent that such ownership existed
prior to the Business Combination; and
(C) at least a majority of the members of
the board of directors of Surviving Company were
members of the Incumbent Board at the earlier of the
date of execution of the initial agreement, or of the
action of the Southern Board, providing for such
Business Combination. (iv) The Consummation of an
acquisition by any Person of Beneficial Ownership of
50% or more of the combined voting power of the then
outstanding Voting Securities of the Company;
provided, however, that for purposes of this
Paragraph 1.(e)(iv), any acquisition by Mr.
Westbrook, any Group composed exclusively of
employees of the Company, any Group of which Mr.
Westbrook is a party, any qualified pension plan (or
related trust), any publicly held mutual fund, any
employee benefit plan (or related trust) sponsored or
maintained by Southern or any Southern Subsidiary
shall not constitute a Change in Control;
(v) Consummation of a reorganization, merger or
consolidation of the Company (an "Employing Company Business
Combination"), in each case, unless, following such Employing
Company Business Combination, Southern Controls the
corporation or other entity surviving or resulting from such
Employing Company Business Combination; or
(vi) Consummation of the sale or other disposition of
all or substantially all of the assets of the Company to a
corporation or other entity which Southern does not Control.
(f) "COBRA Coverage" shall mean any continuation coverage to
which Mr. Westbrook or his dependents may be entitled pursuant
to Code Section 4980B.
(g) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(h) "Company" shall mean Southern Company Services, Inc., its
successors and assigns.
(i) "Consummation" shall mean the completion of the final act
necessary to complete a transaction as a matter of law, including, but
not limited to, any required approvals by the corporation's
shareholders and board of directors, the transfer of legal and
beneficial title to securities or assets and the final approval of the
transaction by any applicable domestic or foreign governments or
governmental agencies.
(j) "Control" shall mean, in the case of a corporation,
Beneficial Ownership of more than 50% of the combined voting power of
the corporation's Voting Securities, or in the case of any other
entity, Beneficial Ownership of more than 50% of such entity's voting
equity interests.
(k) "Effective Date" shall mean the date of execution of this
Agreement.
(l) "Employee Outplacement Program" shall mean the program
established by the Company from time to time for the purpose of
assisting participants covered by the plan in finding employment
outside of the Company which provides for the following services:
(i) self-assessment, career decision and goal
setting; (ii) job market research and job sources;
(iii) networking and interviewing skills; (iv)
planning and implementation strategy; (v) resume
writing, job hunting methods and salary negotiation;
and (vi) office support and job search resources.
(m) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(n) "Good Reason" shall mean, without Mr. Westbrook's express
written consent, after written notice to the Board, and after a thirty
(30) day opportunity for the Board to cure, the continuing occurrence
of any of the following events:
(i) Inconsistent Duties. A meaningful and detrimental
alteration in Mr. Westbrook's position or in the nature or
status of his responsibilities from those in effect
immediately prior to the Change in Control;
(ii) Reduced Salary. A reduction of five percent (5%)
or more by the Company in either of the following: (i) Mr.
Westbrook's annual base salary rate as in effect immediately
prior to the Change in Control (except for a less than ten
percent (10%), across-the-board annual base salary rate
reduction similarly affecting at least ninety-five percent
(95%) of the Executive Employees of the Company); or (ii) the
sum of Mr. Westbrook's annual base salary rate plus target
bonus under the PPP Plan (except for a less than ten percent
(10%), across-the-board reduction of annual base salary rate
plus target bonus under the PPP Plan similarly affecting at
least ninety-five percent (95%) of the Executive Employees of
the Company);
(iii) Pension and Compensation Plans. The failure by
the Company to continue in effect any pension or compensation
plan or agreement in which Mr. Westbrook participates or is a
party as of the date of the Change in Control or the
elimination of Mr. Westbrook's participation therein, (except
for across-the-board plan changes or terminations similarly
affecting at least ninety-five percent (95%) of the Executive
Employees of the Company); For purposes of this Paragraph
1.(n), a "pension plan or agreement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for payments upon retirement; and a
"compensation plan or arrangement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for periodic, non-discretionary compensatory
payments in the nature of bonuses.
(iv) Relocation. A change in Mr. Westbrook's work
location to a location more than fifty (50) miles from the
office where Mr. Westbrook is located at the time of the
Change in Control, unless such new work location is within
fifty (50) miles from Mr. Westbrook's principal place of
residence at the time of the Change in Control. The
acceptance, if any, by Mr. Westbrook of employment by the
Company at a work location which is outside the fifty mile
radius set forth in this Paragraph 1.(n)(iv) shall not be a
waiver of Mr. Westbrook's right to refuse subsequent transfer
by the Company to a location which is more than fifty (50)
miles from Mr. Westbrook's principal place of residence at the
time of the Change in Control, and such subsequent unconsented
transfer shall be "Good Reason" under this Agreement; or
(v) Benefits and Perquisites. The taking of any
action by the Company which would directly or indirectly
materially reduce the benefits enjoyed by Mr. Westbrook under
the Company's retirement, life insurance, medical, health and
accident, disability, deferred compensation or savings plans
in which Mr. Westbrook was participating immediately prior to
the Change in Control; or the failure by the Company to
provide Mr. Westbrook with the number of paid vacation days to
which Mr. Westbrook is entitled on the basis of years of
service with the Company in accordance with the Company's
normal vacation policy in effect immediately prior to the
Change in Control (except for across-the-board plan or
vacation policy changes or plan terminations similarly
affecting at least ninety-five percent (95%) of the Executive
Employees of the Company).
(vi) For purposes of this Paragraph 1.(n), the term
"Executive Employee" shall mean those employees of the Company
of Grade Level 10 or above. (o) "Group" shall have the meaning
set forth in Section 14(d) of the Exchange Act. (p) "Group
Health Plan" shall mean the group health plan covering Mr.
Westbrook, as such plan may be amended from time to time.
(q) "Group Life Insurance Plan" shall mean the group life
insurance program covering Mr. Westbrook, as such plan may be amended
from time to time.
(r) "Incumbent Board" shall mean those individuals who
constitute the Southern Board as of the Effective Date plus any
individual who shall become a director subsequent to such date whose
election or nomination for election by Southern's shareholders was
approved by a vote of at least 75% of the directors then comprising the
Incumbent Board. Notwithstanding the foregoing, no individual who shall
become a director of the Southern Board subsequent to the Effective
Date whose initial assumption of office occurs as a result of an actual
or threatened election contest (within the meaning of Rule 14a-11 of
the Regulations promulgated under the Exchange Act) with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Southern Board shall be a member of the Incumbent Board.
(s) "Month of Service" shall mean any calendar month during
which Mr. Westbrook has worked at least one (1) hour or was on approved
leave of absence while in the employ of the Company or any affiliate or
subsidiary of Southern.
(t) "Pension Plan" shall mean The Southern Company Pension
Plan, as such plan may be amended from time to time. (u) "Performance
Dividend Plan" shall mean the Southern Company Performance Dividend
Plan or any replacement thereto, as such plans may be amended from time
to time.
(v) "Performance Stock Plan" shall mean the Southern Company
Performance Stock Plan or any replacement thereto, as such plans may be
amended from time to time.
(w) "Person" shall mean any individual, entity or group within
the meaning of Section 13(d)(3) or 14(d)(2) of Act.
(x) "Performance Pay Plan" or "PPP Plan" shall mean the
Southern Company Performance Pay Plan or any replacement thereto, as
such plans may be amended from time to time.
(y) "Productivity Improvement Plan" or "PIP Plan" shall mean
the Southern Company Productivity Improvement Plan or replacement
thereto, as such plans may be amended from time to time.
(z) "Southern" shall mean The Southern Company, its successors
and assigns.
(aa) "Southern Board" shall mean the board of directors of
Southern.
(bb) "Southern Subsidiary" shall mean any corporation or other
entity Controlled by Southern.
(cc) "Termination for Cause" or "Cause" shall mean the
termination of Mr. Westbrook's employment by the Company upon the
occurrence of any of the following:
(i) The willful and continued failure by Mr.
Westbrook substantially to perform his duties with the Company
(other than any such failure resulting from Mr. Westbrook's
Total Disability or from Mr. Westbrook's retirement or any
such actual or anticipated failure resulting from termination
by Mr. Westbrook for Good Reason) after a written demand for
substantial performance is delivered to him by the Southern
Board, which demand specifically identifies the manner in
which the Southern Board believes that he has not
substantially performed his duties; or
(ii) The willful engaging by Mr. Westbrook in conduct
that is demonstrably and materially injurious to the Company,
monetarily or otherwise, including, but not limited to any of
the following:
(A) any willful act involving fraud or
dishonesty in the course of Mr. Westbrook's
employment by the Company;
(B) the willful carrying out of any activity
or the making of any statement which would materially
prejudice or impair the good name and standing of the
Company, Southern or any Southern Subsidiary or would
bring the Company, Southern or any Southern
Subsidiary into contempt, ridicule or would
reasonably shock or offend any community in which the
Company, Southern or such Southern Subsidiary is
located;
(C) attendance at work in a state of
intoxication or otherwise being found in possession
at his workplace of any prohibited drug or substance,
possession of which would amount to a criminal
offense;
(D) violation of the Company's policies on
drug and alcohol usage, fitness for duty requirements
or similar policies as may exist from time to time as
adopted by the Company's safety officer;
(E) assault or other act of violence against
any person during the course of employment; or
(F) indictment of any felony or any
misdemeanor involving moral turpitude.
No act or failure to act by Mr. Westbrook shall be deemed
"willful" unless done, or omitted to be done, by Mr. Westbrook not in
good faith and without reasonable belief that his action or omission
was in the best interest of the Company.
Notwithstanding the foregoing, Mr. Westbrook shall not be
deemed to have been terminated for Cause unless and until there shall
have been delivered to him a copy of a resolution duly adopted by the
affirmative vote of not less than three quarters of the entire
membership of the Southern Board at a meeting of the Southern Board
called and held for such purpose (after reasonable notice to Mr.
Westbrook and an opportunity for him, together with counsel, to be
heard before the Southern Board), finding that, in the good faith
opinion of the Southern Board, Mr. Westbrook was guilty of conduct set
forth above in clause (i) or (ii) of this Paragraph 1.(cc) and
specifying the particulars thereof in detail.
(dd) "Termination Date" shall mean the date on which Mr.
Westbrook's employment with the Company is terminated; provided,
however, that solely for purposes of Paragraph 2.(c) hereof, the
Termination Date shall be the effective date of his retirement pursuant
to the terms of the Pension Plan.
(ee) "Total Disability" shall mean Mr. Westbrook's total
disability within the meaning of the Pension Plan.
(ff) "Voting Securities" shall mean the outstanding voting
securities of a corporation entitling the holder thereof to vote
generally in the election of such corporation's directors.
(gg) "Waiver and Release" shall mean the Waiver and Release
attached hereto as Exhibit B.
(hh) "Year of Service" shall mean Mr. Westbrook's Months of
Service divided by twelve (12) rounded to the nearest whole year,
rounding up if the remaining number of months is seven (7) or greater
and rounding down if the remaining number of months is less than seven
(7). If Mr. Westbrook has a break in his service with the Company, he
will receive credit under this Agreement for service prior to the break
in service only if the break in service is less than five years.
2. Severance Benefits.
(a) Eligibility. Except as otherwise provided in this
Paragraph 2.(a), if Mr. Westbrook's employment is involuntarily
terminated by the Company at any time during the two year period
following a Change in Control for reasons other than Cause, or if Mr.
Westbrook voluntarily terminates his employment with the Company for
Good Reason at any time during the two year period following a Change
in Control, Mr. Westbrook shall be entitled to receive the benefits
described in this Agreement upon the Company's receipt of an effective
Waiver and Release. Notwithstanding anything to the contrary herein,
Mr. Westbrook shall not be eligible to receive benefits under this
Agreement if Mr. Westbrook:
(i) voluntarily terminates his employment with the
Company for other than Good Reason;
(ii) has his employment terminated by the Company for
Cause;
(iii) accepts the transfer of his employment to
Southern, any Southern Subsidiary or any employer that
succeeds to all or substantially all of the assets of the
Company, Southern or any Southern Subsidiary;
(iv) refuses an offer of continued employment with
the Company, any Southern Subsidiary, or any employer that
succeeds to all or substantially all of the assets of the
Company, Southern, or any Southern Subsidiary under
circumstances where such refusal would not amount to Good
Reason for voluntary termination of employment; or
(v) elects to receive the benefits of any other
voluntary or involuntary severance or separation program
maintained by the Company; provided however, that the receipt
of benefits under the terms of any retention plan or agreement
shall not be deemed to be the receipt of severance or
separation benefits for purposes of this Agreement. (b)
Severance Benefits. If Mr. Westbrook meets the eligibility
requirements of Paragraph 2.(a) hereof, he shall be entitled
to a cash severance benefit in an amount equal to three times
his Annual Compensation (the "Severance Amount"). If any
portion of the Severance Amount constitutes an "excess
parachute payment" (as such term is defined under Code Section
280G ("Excess Parachute Payment")), the Company shall pay to
Mr. Westbrook an additional amount calculated by determining
the amount of tax under Code Section 4999 that he otherwise
would have paid on any Excess Parachute Payment with respect
to the Change in Control and dividing such amount by a decimal
determined by adding the tax rate under Code Section 4999
("Excise Tax"), the hospital insurance tax under Code Section
3101(b) ("HI Tax") and federal and state income tax measured
at the highest marginal rates ("Income Tax") and subtracting
such result from the number one (1) (the "280G Gross-up");
provided, however, that no 280G Gross-up shall be paid unless
the Severance Amount plus all other "parachute payments" to
Mr. Westbrook under Code Section 280G exceeds three (3) times
Mr. Westbrook's "base amount" (as such term is defined under
Code Section 280G ("Base Amount")) by ten percent (10%) or
more; provided further, that if no 280G Gross-up is paid, the
Severance Amount shall be capped at three (3) times Mr.
Westbrook's Base Amount, less all other "parachute payments"
(as such term is defined under Code Section 280G) received by
Mr. Westbrook, less one dollar (the "Capped Amount"), if the
Capped Amount, reduced by HI Tax and Income Tax, exceeds what
otherwise would have been the Severance Amount, reduced by HI
Tax, Income Tax and Excise Tax.
For purposes of this Paragraph 2.(b), whether any amount would
constitute an Excess Parachute Payment and any other calculations of
tax, e.g., Excise Tax, HI Tax, Income Tax, etc., or other amounts,
e.g., Base Amount, Capped Amount, etc., shall be determined by the tax
department of the independent public accounting firm then responsible
for preparing Southern's consolidated federal income tax return, and
such calculations or determinations shall be binding upon the parties
hereto.
(c) Welfare Benefits. If Mr. Westbrook meets the eligibility
requirements of Paragraph 2.(a) hereof and is not otherwise eligible to
receive retiree medical and life insurance benefits provided to certain
retirees pursuant to the terms of the Pension Plan, the Group Health
Plan and the Group Life Insurance Plan, he shall be entitled to the
benefits set forth in this Paragraph 2.(c).
(i) Mr. Westbrook shall be eligible to participate in
the Company's Group Health Plan, upon payment of both the
Company's and his monthly premium under such plan, for a
period of six (6) months for each of Mr. Westbrook's Years of
Service, not to exceed five (5) years. If Mr. Westbrook elects
to receive this extended medical coverage, he shall also be
entitled to elect coverage under the Group Health Plan for his
dependents who were participating in the Group Health Plan on
Mr. Westbrook's Termination Date (and for such other
dependents as may be entitled to coverage under the provisions
of the Health Insurance Portability and Accountability Act of
1996) for the duration of Mr. Westbrook's extended medical
coverage under this Paragraph 2.(c)(i) to the extent such
dependents remain eligible for dependent coverage under the
terms of the Group Health Plan.
(A) The extended medical coverage afforded
to Mr. Westbrook pursuant to Paragraph 2.(c)(i), as
well as the premiums to be paid by Mr. Westbrook in
connection with such coverage shall be determined in
accordance with the terms of the Group Health Plan
and shall be subject to any changes in the terms and
conditions of the Group Health Plan as well as any
future increases in premiums under the Group Health
Plan. The premiums to be paid by Mr. Westbrook in
connection with this extended coverage shall be due
on the first day of each month; provided, however,
that if he fails to pay his premium within thirty
(30) days of its due date, such extended coverage
shall be terminated.
(B) Any Group Health Plan coverage provided
under Paragraph 2.(c)(i) shall be a part of and not
in addition to any COBRA Coverage which Mr. Westbrook
or his dependents may elect. In the event that Mr.
Westbrook or his dependents become eligible to be
covered, by virtue of re-employment or otherwise, by
any employer-sponsored group health plan or is
eligible for coverage under any government-sponsored
health plan during the above period, coverage under
the Company's Group Health Plan available to Mr.
Westbrook or his dependent by virtue of the
provisions of Paragraph 2.(c)(i) shall terminate,
except as may otherwise be required by law, and shall
not be renewed. (ii) Mr. Westbrook shall be entitled
to receive cash in an amount equal to the Company's
and Mr. Westbrook's cost of premiums for three (3)
years of coverage under the Group Health Plan and
Group Life Insurance Plan in accordance with the
terms of such plans as of the date of the Change in
Control.
(d) Incentive Plans. If Mr. Westbrook meets the eligibility
requirements of Paragraph 2.(a) hereof he shall be entitled to the
following benefits under the Company's incentive plans:
(i) Stock Option Plan.
(A) Any of Mr. Westbrook's Options and Stock
Appreciation Rights under the Performance Stock Plan
(the defined terms of which are incorporated in this
Paragraph 2.(d)(i) by reference) which are
outstanding as of the Termination Date and which are
not then exercisable and vested, shall become fully
exercisable and vested to the full extent of the
original grant; provided, that in the case of a Stock
Appreciation Right, if Mr. Westbrook is subject to
Section 16(b) of the Exchange Act, such Stock
Appreciation Right shall not become fully vested and
exercisable at such time if such actions would result
in liability to Mr. Westbrook under Section 16(b) of
the Exchange Act, provided further, that any such
actions not taken as a result of the rules under
Section 16(b) of the Exchange Act shall be effected
as of the first date that such activity would no
longer result in liability under Section 16(b) of the
Exchange Act..
(B) The restrictions and deferral
limitations applicable to any of Mr. Westbrook's
Restricted Stock as of the Termination Date shall
lapse, and such Restricted Stock shall become free of
all restrictions and limitations and become fully
vested and transferable to the full extent of the
original grant.
(C) The restrictions and deferral
limitations and other conditions applicable to any
other Awards held by Mr. Westbrook under the Stock
Performance Plan as of the Termination Date shall
lapse, and such other Awards shall become free of all
restrictions, limitations or conditions and become
fully vested and transferable to the full extent of
the original grant. (ii) Performance Pay Plan.
Provided Mr. Westbrook is not entitled to benefits
under Article V of the PPP Plan, (the defined terms
of which are incorporated in this Paragraph 2.(d)(ii)
by reference), if the PPP Plan is in place through
Mr. Westbrook's Termination Date and to the extent
Mr. Westbrook is entitled to participate therein, Mr.
Westbrook shall be entitled to receive cash in an
amount equal to a prorated payout of his Incentive
Pay Awards under the PPP Plan for the Performance
Period in which the Termination Date shall have
occurred, at target performance under the PPP Plan
and prorated by the number of months which have
passed since the beginning of the Performance Period
until the Termination Date.
(iii) PIP Plan. Provided Mr. Westbrook is not
entitled to benefits under Article IV of the PIP Plan (the
defined terms of which are incorporated in this Paragraph
2.(d)(iii) by reference), if the PIP Plan is in place through
Mr. Westbrook's Termination Date and to the extent Mr.
Westbrook is entitled to participate therein, Mr. Westbrook
shall be entitled to receive cash in an amount equal to his
Award Opportunity for the Computation Periods in which the
Termination Date shall have occurred at a target Value of
Performance Unit of $1.00, prorated for each Computation
Period by the number of months which have passed since the
beginning of the Computation Periods until the Termination
Date.
(iv) Performance Dividend Plan. Provided Mr.
Westbrook is not entitled to benefits under the Performance
Dividend Plan (the defined terms of which are incorporated in
this Paragraph 2.(d)(iv) by reference), if the Performance
Dividend Plan is in place through Mr. Westbrook's Termination
Date and to the extent Mr. Westbrook is entitled to
participate therein, Mr. Westbrook shall be entitled to
receive cash for each Award held by Mr. Westbrook on his
Termination Date, based on actual performance under Section
4.1 of the Performance Dividend Plan determined as of the most
recently completed calendar quarter of the Performance Period
in which the Termination Date shall have occurred, and the
Annual Dividend declared prior to the Termination Date.
(v) Other Short Term Incentive Plans. The provisions
of this Paragraph 2.(d)(v) shall apply if and to the extent
that Mr. Westbrook is a participant in any other "short term
compensation plan" not otherwise previously referred to in
this Paragraph 2.(d). Provided Mr. Westbrook is not otherwise
entitled to a plan payout under any change of control
provisions of such plans, if the "short term compensation
plan" is in place as of the Termination Date and to the extent
Mr. Westbrook is entitled to participate therein, Mr.
Westbrook shall receive cash in an amount equal to his award
under the Company's "short term incentive plan" for the annual
performance period in which the Termination Date shall have
occurred, at Mr. Westbrook's target performance level and
prorated by the number of months which have passed since the
beginning of the annual performance period until his
Termination Date. For purposes of this Paragraph 2.(d)(v) the
term "short term incentive compensation plan" shall mean any
incentive compensation plan or arrangement adopted in writing
by the Company which provides for annual, recurring
compensatory bonuses based upon articulated performance
criteria. (e) Payment of Benefits. Any amounts due under this
Agreement shall be paid in one (1) lump sum payment as soon as
administratively practicable following the later of: (i) Mr.
Westbrook's Termination Date, or (ii) upon Mr. Westbrook's
tender of an effective Waiver and Release to the Company in
the form of Exhibit B attached hereto and the expiration of
any applicable revocation period for such waiver. In the event
of a dispute with respect to liability or amount of any
benefit due hereunder, an effective Waiver and Release shall
be tendered at the time of final resolution of any such
dispute when payment is tendered by the Company.
(f) Benefits in the Event of Death. In the event of Mr.
Westbrook's death prior to the payment of all amounts due under this
Agreement, Mr. Westbrook's estate shall be entitled to receive as due
any amounts not yet paid under this Agreement upon the tender by the
executor or administrator of the estate of an effective Waiver and
Release.
(g) Legal Fees. In the event of a dispute between Mr.
Westbrook and the Company with regard to any amounts due hereunder, if
any material issue in such dispute is finally resolved in Mr.
Westbrook's favor, the Company shall reimburse Mr. Westbrook's legal
fees incurred with respect to all issues in such dispute in an amount
not to exceed fifty thousand dollars ($50,000).
(h) Employee Outplacement Services. Mr. Westbrook shall be
eligible to participate in the Employee Outplacement Program, which
program shall not be less than six (6) months duration measured from
Mr. Westbrook's Termination Date.
(i) Non-qualified Retirement and Deferred Compensation Plans.
The Parties agree that subsequent to a Change in Control, any claims by
Mr. Westbrook for benefits under any of the Company's non-qualified
retirement or deferred compensation plans shall be resolved through
binding arbitration in accordance with the provisions and procedures
set forth in Paragraph 5 hereof and if any material issue in such
dispute is finally resolved in Mr. Westbrook's favor, the Company shall
reimburse Mr. Westbrook's legal fees in the manner provided in
Paragraph 2.(g) hereof. 3. Transfer of Employment. In the event that
Mr. Westbrook's employment by the Company is terminated during the two
year period following a Change in Control and Mr. Westbrook accepts
employment by Southern, a Southern Subsidiary, or any employer that
succeeds to all or substantially all of the assets of the Company,
Southern or any Southern Subsidiary, the Company shall assign this
Agreement to Southern, such Southern Subsidiary, or successor employer,
Southern shall accept such assignment or cause such Southern Subsidiary
or successor employer to accept such assignment, and such assignee
shall become the "Company" for all purposes hereunder.
4. No Mitigation. If Mr. Westbrook is otherwise eligible to receive
benefits under Paragraph 2 of this Agreement, he shall have no duty or
obligation to seek other employment following his Termination Date and, except
as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr.
Westbrook hereunder shall not be reduced or suspended if Mr. Westbrook accepts
such subsequent employment.
5. Arbitration.
(a) Any dispute, controversy or claim arising out of or
relating to the Company's obligations to pay severance benefits under
this Agreement, or the breach thereof, shall be settled and resolved
solely by arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association ("AAA") except as
otherwise provided herein. The arbitration shall be the sole and
exclusive forum for resolution of any such claim for severance benefits
and the arbitrators' award shall be final and binding. The provisions
of this Paragraph 5 are not intended to apply to any other disputes,
claims or controversies arising out of or relating to Mr. Westbrook's
employment by the Company or the termination thereof.
(b) Arbitration shall be initiated by serving a written notice
of demand for arbitration to Mr. Westbrook, in the case of the Company,
or to the Southern Board, in the case of Mr. Westbrook.
(c) The arbitration shall be held in Atlanta, Georgia. The
arbitrators shall apply the law of the State of Georgia, to the extent
not preempted by federal law, excluding any law which would require the
application of the law of another state.
(d) The parties shall appoint arbitrators within fifteen (15)
business days following service of the demand for arbitration. The
number of arbitrators shall be three. One arbitrator shall be appointed
by Mr. Westbrook, one arbitrator shall be appointed by the Company, and
the two arbitrators shall appoint a third. If the arbitrators cannot
agree on a third arbitrator within thirty (30) business days after the
service of demand for arbitration, the third arbitrator shall be
selected by the AAA.
(e) The arbitration filing fee shall be paid by Mr. Westbrook.
All other costs of arbitration shall be borne equally by Mr. Westbrook
and the Company, provided, however, that the Company shall reimburse
such fees and costs in the event any material issue in such dispute is
finally resolved in Mr. Westbrook's favor and Mr. Westbrook is
reimbursed legal fees under Paragraph 2.(g) hereof.
(f) The parties agree that they will faithfully observe the
rules that govern any arbitration between them, they will abide by and
perform any award rendered by the arbitrators in any such arbitration,
including any award of injunctive relief, and a judgment of a court
having jurisdiction may be entered upon an award.
(g) The parties agree that nothing in this Paragraph 5 is
intended to preclude upon application of either party any court having
jurisdiction from issuing and enforcing in any lawful manner such
temporary restraining orders, preliminary injunctions, and other
interim measures of relief as may be necessary to prevent harm to a
party's interests or as otherwise may be appropriate pending the
conclusion of arbitration proceedings pursuant to this Agreement;
regardless of whether an arbitration proceeding under this Paragraph 5
has begun. The parties further agree that nothing herein shall prevent
any court from entering and enforcing any lawful manner such judgments
for permanent equitable relief as may be necessary to prevent harm to a
party's interests or as otherwise may be appropriate following the
issuance of arbitral awards pursuant to this Paragraph 5.
<PAGE>
6. Miscellaneous.
(a) Funding of Benefits. Unless the Board in its discretion
shall determine otherwise, the benefits payable to Mr. Westbrook under
this Agreement shall not be funded in any manner and shall be paid by
the Company out of its general assets, which assets are subject to the
claims of the Company's creditors.
(b) Withholding. There shall be deducted from the payment of
any benefit due under this Agreement the amount of any tax required by
any governmental authority to be withheld and paid over by the Company
to such governmental authority for the account of Mr. Westbrook.
(c) Assignment. Mr. Westbrook shall have no rights to sell,
assign, transfer, encumber, or otherwise convey the right to receive
the payment of any benefit due hereunder, which payment and the rights
thereto are expressly declared to be nonassignable and nontransferable.
Any attempt to do so shall be null and void and of no effect.
(d) Amendment and Termination. The Agreement may be amended or
terminated only by a writing executed by the parties.
(e) Construction. This Agreement shall be construed in
accordance with and governed by the laws of the State of Georgia, to
the extent not preempted by federal law, disregarding any provision of
law which would require the application of the law of another state.
(f) Pooling Accounting. Notwithstanding anything to the
contrary herein, if, but for any provision of this Agreement, a Change
in Control transaction would otherwise be accounted for as a
pooling-of-interests under APB No.16 ("Pooling Accounting") (after
giving effect to any and all other facts and circumstances affecting
whether such Change in Control transaction would use Pooling
Accounting), such provision or provisions of this Agreement which would
otherwise cause the Change in Control transaction to be ineligible for
Pooling Accounting shall be void and ineffective in such a manner and
to the extent that by eliminating such provision or provisions of this
Agreement, Pooling Accounting would be required for such Change in
Control transaction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
this ____ day of __________________, 199__.
THE SOUTHERN COMPANY
By:__________________________________
SOUTHERN COMPANY SERVICES, INC.
By: ________________________________
MR. WESTBROOK
-----------------------------
W. Lawrence Westbrook
<PAGE>
Exhibit A
CHANGE IN CONTROL AGREEMENT
Target Annual Bonus for
Mr. W. Lawrence Westbrook
45%
<PAGE>
Exhibit B
CHANGE IN CONTROL AGREEMENT
Waiver and Release
The attached Waiver and Release is to be given to Mr. W. Lawrence
Westbrook upon the occurrence of an event that triggers eligibility for
severance benefits under the Change in Control Agreement, as described in
Paragraph 2(a) of such agreement.
<PAGE>
CHANGE IN CONTROL AGREEMENT
Waiver and Release
I, W. Lawrence Westbrook, understand that I am entitled to receive the
severance benefits described in Section 2 of the Change in Control Agreement
(the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand
that the benefits I will receive under the Agreement are in excess of those I
would have received from The Southern Company and Southern Company Services,
Inc. (collectively, the "Company") if I had not elected to sign this Waiver.
I recognize that I may have a claim against the Company under the Civil
Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the
Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended,
the Americans with Disabilities Act or other federal, state and local laws.
In exchange for the benefits I elect to receive, I hereby irrevocably
waive and release all claims, of any kind whatsoever, whether known or unknown
in connection with any claim which I ever had, may have, or now have against The
Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power
Company, Mississippi Power Company, Savannah Electric and Power Company,
Southern Communication Services, Inc., Southern Company Services, Inc., Southern
Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern
Nuclear Operating Company, Inc. and other direct or indirect subsidiaries of The
Southern Company and their past, present and future officers, directors,
employees, agents and attorneys. Nothing in this Waiver shall be construed to
release claims or causes of action under the Age Discrimination in Employment
Act or the Energy Reorganization Act of 1974, as amended, which arise out of
events occurring after the execution date of this Waiver.
In further exchange for the benefits I elect to receive, I understand
and agree that I will respect the proprietary and confidential nature of any
information I have obtained in the course of my service with the Company or any
subsidiary or affiliate of The Southern Company. However, nothing in this Waiver
shall prohibit me from engaging in protected activities under applicable law or
from communicating, either voluntary or otherwise, with any governmental agency
concerning any potential violation of the law.
In signing this Waiver, I am not releasing claims to benefits that I am
already entitled to under any workers' compensation laws or under any retirement
plan or welfare benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, as amended, which is sponsored by or adopted by the
Company and/or any of its direct or indirect subsidiaries; however, I understand
and acknowledge that nothing herein is intended to or shall be construed to
require the Company to institute or continue in effect any particular plan or
benefit sponsored by the Company and the Company hereby reserves the right to
amend or terminate any of its benefit programs at any time in accordance with
the procedures set forth in such plans.
In signing this Waiver, I realize that I am waiving and releasing,
among other things, any claims to benefits under any and all bonus, severance,
workforce reduction, early retirement, outplacement, or any other similar type
plan sponsored by the Company.
I have been encouraged and advised in writing to seek advice from
anyone of my choosing regarding this Waiver, including my attorney, and my
accountant or tax advisor. Prior to signing this Waiver, I have been given the
opportunity and sufficient time to seek such advice, and I fully understand the
meaning and contents of this Waiver.
I understand that I may take up to twenty-one (21) calendar days to
consider whether or not I desire to enter this Waiver. I was not coerced,
threatened or otherwise forced to sign this Waiver. I have made my choice to
sign this Waiver voluntarily and of my own free will.
I understand that I may revoke this Waiver at any time during the seven
(7) calendar day period after I sign and deliver this Waiver to the Company. If
I revoke this Waiver, I must do so in writing delivered to the Company. I
understand that this Waiver is not effective until the expiration of this seven
(7) calendar day revocation period. I understand that upon the expiration of
such seven (7) calendar day revocation period this entire Waiver will be binding
upon me and will be irrevocable.
I understand that by signing this Waiver I am giving up rights I may
have.
IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this
____ day of ____________________, in the year _____.
W. Lawrence Westbrook
Sworn to and subscribed to me this ____ day of ____________, _____.
Notary Public
My Commission Expires:
(Notary Seal)
Acknowledged and Accepted by the Company, as defined in the Waiver.
By:
Date:
EXHIBIT 10(b)40
SUPPLEMENTAL PENSION AGREEMENT
THIS AGREEMENT, made as of the ____ day of _______, 1994, by and among
ALABAMA POWER COMPANY, a corporation organized and existing under the laws of
the State of Alabama ("Alabama"), GULF POWER COMPANY, a corporation organized
and existing under the laws of the State of Maine ("Gulf"), and TRAVIS J. BOWDEN
(the "Employee"),
WITNESSETH THAT
WHEREAS, the Employee's formal employment by Alabama began on November
3, 1975; however, his valuable services to Alabama actually commenced at a
considerably earlier date with his employment on July 1, 1960 as a certified
public accountant with Arthur Andersen & Company. The knowledge and experience
acquired by the Employee while in that capacity has proven of great value to
Alabama in the years since his formal employment;
WHEREAS, the Employee as of February 1, 1994, became employed as
President of Gulf Power Company and the knowledge and experience he obtained as
a certified public accountant at Arthur Andersen & Company will likewise be of
great value to Gulf in the future;
WHEREAS, under prevailing interpretation of the provisions of the
Internal Revenue Code applicable to "qualified" pension plans, the Pension Plan
of Alabama and of Gulf may not take into account the years of the Employee's
service prior to his formal employment by Alabama, with the result that, to the
extent such years may not be counted, the Employee's pension will be reduced
below what Alabama and Gulf believe it should be. "The Plan" as used herein
shall refer to the Pension Plan for Employees of Gulf Power Company, as amended
from time to time, or the Pension Plan for Employees of Alabama Power Company,
if he shall resume employment with Alabama and retire as an employee of Alabama.
Defined terms in the Plan are used herein with the same meaning.
WHEREAS, Alabama and Gulf (collectively the "Companies") desire not
only to recognize the valuable services rendered to Alabama and to be rendered
in the future by the Employee to Gulf but also desire to secure the continued
services of the Employee with Gulf. The Employee is willing to enter into this
Agreement if the Companies agree to pay certain amounts, all in accordance with
the provisions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties agree as follows: I1. If the
Employee shall continue to serve Gulf faithfully, diligently and
competently to the best of his ability from
the date of this Agreement until either
(a) such date his service as an employee shall terminate by
action of the Board of Directors of Gulf or should employee be last
employed by Alabama then such date his service as an employee shall
terminate by action of the Board of Directors of Alabama; or
(b) his retirement in accordance with the provisions of the
Plan; or
(c) his death while in the service of the Gulf or Alabama if
his spouse is entitled to benefits as a Provisional Payee under the
Plan;
then the provisions of Paragraphs 2 and 3 hereof shall be operative.
2. The Companies shall pay to the Employee commencing on his retirement
date under the Plan, and thereafter on the first day of each succeeding month
during the lifetime of the Employee, an amount per month equal to the difference
between the monthly amount payable to the Employee under the Plan as it shall
then be in effect at the time any monthly amount shall be payable in accordance
with this paragraph and the monthly amount which would have been payable to him
under the Plan if the Employee's period of Accredited Service under the Plan
included the ten year period between November 3, 1965 and November 3, 1975, less
any deductions hereinafter provided; provided, however, that for the purpose of
computing a monthly amount payable to the Employee under the Plan no limitation
on benefits imposed by the Internal Revenue Code as it now exists or is
hereafter amended or any other limiting legislation shall be taken into account.
The computations required for determination of monthly payments hereunder and
the periods used as periods of Accredited Service shall be calculated so as to
give appropriate effect in each instance to the exclusion of any portions of
such period on account of eligibility, military service, leave of absence, or
otherwise as may be required under the Plan as it shall be in effect at the time
such monthly payment is to be made.
3. If, in accordance with the terms of the Plan, the Employee shall
have a Provisional Payee entitled to receive payments thereunder, then the
Provisional Payee shall be entitled to payments under this Agreement which, when
added to payments to her under the Plan, would be appropriate if the Employee's
service from November 3, 1965 to November 3, 1975, had been rendered to the
Company or to a company affiliated or associated with the Company.
4. The cost of the benefit payable to Employee pursuant to Paragraph 2
hereof shall be apportioned between Alabama and Gulf based upon the total number
of years of Accredited Service earned by Employee at Alabama and at Gulf. For
example, if Employee earns eighteen (18) years of Accredited Service at Alabama
and nine (9) years of Accredited Service at Gulf, Alabama would be liable for
payment of two-thirds of the benefit and Gulf would be liable for one-third of
the benefit.
5. Neither the entering into nor the termination of this Agreement for
any cause shall affect the Employee's right to such salary, fees or other
compensation for his services as an employee, officer or director of the
Companies as they have agreed or may agree to pay him prior to or subsequent to
his termination of service nor his right to participate in and receive benefits
under any plan or plans of the Companies now existing, or which may hereafter
exist, providing benefits for its employees.
6. The Employee shall not, under any circumstances, have any option or
right to require payments hereunder otherwise than in accordance with the terms
hereof and after the terms and contingencies herein specified have been met.
Except as specifically allowed by law, neither the Employee nor any Provisional
Payee shall have any power of anticipation, alienation, mortgage, pledge,
encumbrance or assignment of payments contemplated hereunder, and all rights and
benefits of the Employee and of any Provisional Payee shall be for his or her
sole personal benefit, and no other person shall acquire any right, title or
interest hereunder by reason of any sale, assignment, mortgage, pledge,
encumbrance, transfer, claim or judgment or bankruptcy proceedings against the
Employee or his Provisional Payee.
7. Nothing contained in this Agreement shall be construed to affect in
any manner the existing rights of the Companies or the Employee to suspend,
terminate, alter or modify, whether or not for cause, the employment
relationship contemplated by Paragraph 1 hereof.
8. The failure of either party to insist in any one or more instances
upon performance of any of the terms or conditions of this Agreement shall not
be construed as a waiver or a relinquishment of any right granted hereunder or
of the future performance of any such term, covenant or condition, but the
obligation of either party with respect thereto shall continue in full force and
effect.
9. The Employee and the Companies agree that the validity of this
Agreement or any of the provisions hereof shall be determined under and
according to the laws of the State of Alabama, and that the Agreement and its
provisions shall be interpreted and construed in accordance with the laws of
that State.
10. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and any successor to the business of the Companies, but
neither this Agreement nor any right hereunder may be assigned by the Employee
and, in any event, the Agreement shall, if not sooner terminated, terminate for
all purposes upon the death of the Employee or, if his Provisional Payee shall
survive the Employee and shall be entitled to receive any payments hereunder,
upon the death of the Provisional Payee, and the satisfaction by the Companies
of their obligations arising theretofore under the Agreement.
IN WITNESS WHEREOF, the Companies have caused this Agreement to be
executed by their duly authorized officers and the Employee has executed this
Agreement in triplicate on or as of the day and year first above written.
ATTEST: ALABAMA POWER COMPANY
By:
Secretary Its:
ATTEST: GULF POWER COMPANY
By:
Secretary Its:
Witness Employee
EXHIBIT 10(c)77
SUPPLEMENTAL PENSION AGREEMENT
THIS AGREEMENT, made as of the ___ day of ___________, 1994, by and
between GEORGIA POWER COMPANY, a corporation organized and existing under the
laws of the State of Georgia (the "Company") and WARREN Y. JOBE (the
"Employee"),
WITNESSETH THAT
WHEREAS, the Employee's formal employment by the Company began on
November 1, 1975 and his employment by Southern Company Services, Inc. ("SCSI")
began on May 3, 1971; however, his valuable services to the Company actually
commenced at a considerably earlier date with his employment on September 1,
1963 as a certified public accountant with Arthur Andersen & Company. The
knowledge and experience acquired by the Employee while in this capacity has
proven of great value to the Company in the years since his formal employment
and will, in the opinion of the Company, continue to do so in the future.
WHEREAS, under prevailing interpretation of the provisions of the
Internal Revenue Code applicable to "qualified" pension plans, the Company's
Pension Plan may not take into account the years of the Employee's service prior
to his formal employment by SCSI on May 3, 1971, with the result that, to the
extent such years may not be counted, the Employee's pension will be reduced
below what the Company believes it should be. "The Plan" as used herein shall
refer to the Pension Plan for Employees of Georgia Power Company, as amended
from time to time. Defined terms in the Plan are used herein with the same
meaning.
WHEREAS, the Company desires not only to recognize the valuable
services rendered and currently being rendered by the Employee, but also desires
to secure the continued services of the Employee. The Employee is willing to
enter into this Agreement if the Company agrees to pay certain amounts, all in
accordance with the provisions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties agree as follows:
1. If the Employee shall continue to serve the Company faithfully,
diligently and competently to the best of his ability from the date of this
Agreement until either
a. such date after his service as an employee shall terminate
by action of the Board of Directors; or
b. his retirement in accordance with the provisions of the
Plan; or
c. his death while in the service of the Company if his spouse
is entitled to benefits as a Provisional Payee under the Plan; then the
provisions of Paragraphs 2 and 3 hereof shall be operative.
2. The Company shall pay to the Employee commencing on his retirement
date under the Plan, if he shall retire in accordance with the provisions of the
Plan, and thereafter on the first day of each succeeding month during the
lifetime of the Employee, an amount per month equal to the difference between
the monthly amount payable to the Employee under the Plan as it shall then be in
effect at the time any monthly amount shall be payable in accordance with this
paragraph and the monthly amount which would have been payable to him under the
Plan if the Employee's period of Accredited Service under the Plan included the
period from September 1, 1963 to May 3, 1971, less any deductions hereinafter
provided; provided, however, that for the purpose of computing a monthly amount
payable to the Employee under the Plan no limitation on benefits imposed by the
Internal Revenue Code as it now exists or is hereafter amended or any other
limiting legislation shall be taken into account. The computations required for
the determination of the monthly payments hereunder and the periods used as
periods of Accredited Service shall be calculated so as to give appropriate
effect in each instance to the exclusion of any portions of such period on
account of eligibility, military service, leave of absence, or otherwise as may
be required under the Plan as it shall be in effect at the time such monthly
payment is to be made.
3. If, in accordance with the terms of the Plan, the Employee shall
have a Provisional Payee entitled to receive payments thereunder, then the
Provisional Payee shall be entitled to payments under this Agreement which,-when
added to payments to her under the Plan, would be appropriate if the Employee's
service from September 1, 1963 to May 3, 1971 had been rendered to the Company.
4. Neither the entering into nor the termination of this Agreement for
any cause shall affect the Employee's right to such salary, fees or other
compensation for his services as an employee, officer or director of the Company
as it has agreed or may agree to pay him prior to or subsequent to his
termination of service nor his right to participate in and receive benefits
under any plan or plans of the Company now existing, or which may hereafter
exist, providing benefits for its employees.
5. The Employee shall not, under any circumstances, have any option or
right to require payments hereunder otherwise than in accordance with the terms
hereof and after the terms and contingencies herein specified have been met.
Except as specifically allowed by law, neither the Employee nor any Provisional
Payee shall have any power of anticipation, alienation, mortgage, pledge,
encumbrance or assignment of payments contemplated hereunder, and all rights and
benefits of the Employee and of any Provisional Payee shall be for his or her
sole personal benefit, and no other person shall acquire any right, title or
interest hereunder by reason of any sale, assignment, mortgage, pledge,
encumbrance, transfer, claim or judgment or bankruptcy proceedings against the
Employee or his Provisional Payee.
6. Nothing contained in this Agreement shall be construed to affect in
any manner the existing rights of the Company or the Employee to suspend,
terminate, alter or modify, whether or not for cause, the employment
relationship contemplated by Paragraph 1 hereof.
7. The failure of either party to insist in any one or more instances
upon performance of any of the terms or conditions of this Agreement shall not
be construed as a waiver or a relinquishment of any right granted hereunder or
of the future performance of any such term, covenant or condition, but the
obligation of either party with respect thereto shall continue in full force and
effect.
8. The Employee and the Company agree that the validity of this
Agreement or any of the provisions hereof shall be determined under and
according to the laws of the State of Georgia, and that the Agreement and its
provisions shall be interpreted and construed in accordance with the laws of
that State.
9. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and any successor to the business of the Company, but neither
this Agreement nor, any right hereunder may be assigned by the Employee, and in
any event, the Agreement shall, if not sooner terminated, terminate for all
purposes upon the death of the Employee or, if his Provisional Payee shall
survive the Employee and shall be entitled to receive any payments hereunder,
upon the death of the Provisional Payee, and the satisfaction by the Company of
its obligations arising theretofore under the Agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and the Employee has executed this
Agreement in duplicate on or as of the day and year first above written.
ATTEST: GEORGIA POWER COMPANY
By:
Secretary Its:
Witness Employee Warren Y. Jobe
EXHIBIT 10(d)35
SUPPLEMENTAL PENSION AGREEMENT
THIS AGREEMENT made and entered into this _____ day of ______________,
1997, by and between G. Edison Holland, Jr. (hereinafter referred to as the
"Employee"), Savannah Electric and Power Company ("Savannah") and Gulf Power
Company ("Gulf"), to be effective __________________, 1997.
WHEREAS, the Employee is currently employed by Savannah as its
President;
WHEREAS, Employee was previously employed by Gulf as its Vice President
and General Counsel;
WHEREAS, pursuant to such employment, Gulf and Employee entered into an
agreement dated September 1, 1992 for the provision of certain supplemental
retirement benefits and for other retirement benefits (the "Gulf Agreement");
WHEREAS, the parties wish to amend and restate the Gulf Agreement and
to provide benefits which are not available under the qualified and
non-qualified retirement plans of Savannah; and
WHEREAS, Employee and Savannah acknowledge and agree that Employee is a
member of the management of Savannah and is a highly compensated employee;
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, Employee, Savannah and Gulf hereby agree as follows:
1. Upon Employee's retirement from Savannah, Savannah agrees to pay to
Employee an amount equal to the difference between his retirement Allowance
payable in accordance with the terms and provisions of the Employees' Retirement
Plan of Savannah Electric and Power Company as applicable to Employee on his
date of hire and as may be amended from time to time (hereinafter referred to as
the "Pension Plan"), and the amount of retirement Allowance Employee would have
been entitled to receive under the Pension Plan as applicable to him on his date
of hire if he had first been employed by Savannah on January 1, 1980. Said
amount shall be recalculated from time to time to reflect future increases, if
any, in the retirement Allowance of retirees following Employee's retirement. In
no event shall the amount provided in the preceding two sentences be less than
the amount Employee would have received if he had continued to participate in
The Southern Company Pension Plan until retirement.
2. Upon Employee's retirement from Savannah, Savannah agrees to pay
Employee an amount equal to the difference between the retirement benefits
Employee would have been entitled to receive in accordance with the terms and
provisions of the supplemental pension plan of any of Savannah's affiliates
(hereinafter referred to as the "Supplemental Pension Plan") and The Southern
Company Supplemental Executive Retirement Plan (hereinafter referred to as the
"SERP") as determined based on the Pension Plan as applicable to the Employee on
his date of hire, and the amount of retirement benefits the Employee would have
been entitled to receive under the Supplemental Pension Plan and SERP if he had
first been employed by Savannah on January 1, 1980. Said amount shall be
recalculated from time to time to reflect future increases, if any, in the
retirement benefits of retirees following the Employee's retirement. In no event
shall the amount provided in the preceding two sentences be less than the amount
Employee would have received if he had continued to participate in the
Supplemental Pension Plan and SERP until retirement.
3. The benefits provided in accordance with Paragraphs 1 and 2 shall be
paid in monthly installments on the first day of each month in the same manner
as the Employee's election to receive his retirement Allowance under the Pension
Plan in effect on his commencement of benefits under this Agreement. In the
event the Employee is married, predeceases his spouse, and his spouse is living
on the date payments would commence under this Paragraph 3, the monthly payments
shall be paid in the same manner as provided by the Provisional Payee option
available to Employee under the Pension Plan. In the event Employee is not
married or is not survived by his spouse on the date payments commence under
this Paragraph 3, the above benefit shall be paid only to Employee. Employee or
his surviving spouse shall not, under any circumstances, have any option or
right to require payments hereunder otherwise than in accordance with the terms
hereof.
4. Upon Employee's retirement from Savannah under the terms of the
Pension Plan, Gulf agrees to pay the Employee a lump sum amount equal to the
value of the number of shares of Common Stock in The Southern Company to which
Employee's account would have been allocated under The Southern Company Employee
Stock Ownership Plan had Employee been a participant in the Southern Company
Employee Stock Ownership Plan during the 1992 plan year.
5. Upon Employee's retirement from Savannah under the terms of the
Pension Plan, Gulf agrees to pay Employee a lump sum amount equal to six percent
(6%) of Employee's annual compensation multiplied by the annual percentage of
Gulf's Matching contribution allocated to employees' accounts under The Southern
Company Employee Savings Plan ("Savings Plan") that would have been allocated to
Employee's account under the Savings Plan if Employee had participated in the
Savings Plan from the period beginning April 2, 1992 and ending on April 30,
1993. For purposes of this Section 5, Employee shall be deemed to have invested
the aforesaid funds in Gulf's Stock Fund under the Savings Plan since April 25,
1992; provided however, that any payments made to Employee pursuant to this
Section 5 shall be made in cash.
6. Employee shall be entitled to that amount of vacation time, in
addition to regular holidays, to which he would be entitled if he had first been
employed by Savannah on January 1, 1980.
7. Employee shall be entitled to any service awards available to career
Employees of Savannah recognizing their long term service as if Employee had
first been employed by Savannah on January 1, 1980.
8. Neither the entering into or termination of this Agreement for any
reason shall affect Employee's right to such salary, fees or other compensation
for services as an employee, officer or director of Savannah, as may be agreed
upon from time to time, nor his right to participate in all of the employee
benefit plans maintained by Savannah on the same basis as any other regular
full-time employee of Savannah.
9. Savannah and Gulf agreed to share the cost of any payments to
Employee under Paragraphs 1, 2 and 3 of this Agreement in accordance with the
ratio which the number of years of Employee's employment at each company bears
to the total years of Employee's employment at both companies as of the date of
Employee's retirement from Savannah. For purposes of this Paragraph, the term
"years of employment" shall include partial years rounded up or down to the
nearest whole year. Gulf agrees to bear the cost of all payments to Employee
under Paragraphs 4 and 5 of this Agreement.
10. Nothing contained in this Agreement shall be construed to affect in
any manner the existing rights of Savannah to suspend, terminate, alter or
modify, whether or not for cause, Employee's employment relationship.
11. Neither Employee nor the Provisional Payee or other beneficiary
under this Agreement shall have any right to sell, assign, transfer, encumber or
otherwise convey the right to receive payment of any amounts payable hereunder,
which payment and the right thereto are expressly declared to be nonassignable
and nontransferable. Any attempt to do so shall be null and void and of no
effect.
12. Neither Savannah nor Gulf shall reserve nor otherwise set aside
funds for the payment of their obligations hereunder, which obligations shall be
paid from their respective general assets. Notwithstanding that Employee shall
be entitled to receive the entire amounts stated herein, the assets from which
such amounts shall be paid shall at all times be subject to the claims of the
respective companies' creditors.
13. This Agreement shall be construed in accordance with and governed
by the laws of the State of Georgia to the extent not preempted by ERISA.
14. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and any successor to the business of Savannah or Gulf, and in
any event, the Agreement shall, if not sooner terminated, terminate for all
purposes upon the death of the Employee or, if his spouse shall survive the
Employee and shall be entitled to receive any payments hereunder, upon the death
of the Employee's surviving spouse, and the satisfaction by Savannah or Gulf of
their obligations hereunder.
IN WITNESS WHEREOF, this Agreement has been executed by the Employee,
Savannah and Gulf, through their duly authorized officers, as of the day and
year first written above, to be effective _____________________, 1997.
EMPLOYEE:
-------------------------
G. Edison Holland
Sworn to and subscribed before
me this ____ day of __________,
1997.
- - - - - - - ------------------------------------
Notary Public, State of Georgia
My Commission Expires:
- - - - - - - ------------------------------------
(NOTARIAL SEAL)
_________ SAVANNAH ELECTRIC AND
POWER COMPANY
By:_____________________
Its:____________________
ATTEST:__________________
Its:_____________________
Sworn to and subscribed before
me this ____ day of __________,
1997.
- - - - - - - ------------------------------------
Notary Public, State of Georgia
My Commission Expires:
- - - - - - - ------------------------------------
(NOTARIAL SEAL)
_________ GULF POWER COMPANY
By:_____________________
Its:____________________
ATTEST:__________________
Its:_____________________
Sworn to and subscribed before
me this ____ day of __________,
1997.
- - - - - - - ------------------------------------
Notary Public, State of Georgia
My Commission Expires:
- - - - - - - ------------------------------------
(NOTARIAL SEAL)
EXHIBIT 10(f)17
THIRD 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 with long-term compensation incentives; and
WHEREAS, the Plan has been amended from time to time to change the
terms of these long-term incentives; and
WHEREAS, the Company desires to amend that provision in the Plan
providing severance benefits to shorten the years of service and age requirement
set forth therein; and
WHEREAS, the Company has reserved the right to amend the Plan at any
time pursuant to Article XI of the Plan.
NOW THEREFORE, effective May 1, 1997, the Company hereby amends the
Plan as follows:
1.
Section 1 of Article VII of the Plan shall be amended by deleting said
Section in its entirety and substituting therefor the following new language:
1. Severance Benefits.
(a) In the event a Participant's employment with the Company
terminates for any reason other than death, Total Disability, Early Retirement
or Normal Retirement, and at the time of such termination such Participant has
neither accrued ten (10) Years of Service nor attained age forty-eight (48) the
Participant's participation in the Plan shall cease as of the date of such
termination. In such event, the Company shall pay the former Participant the
amount of his actual gross deferrals plus interest thereon at [seven percent
(7%) per annum, compounded annually. Such amount shall be payable to the former
Participant at the option of the Committee in either a lump sum within ninety
(90) days following such termination or in up to sixty (60) equal consecutive
monthly installments with interest at seven percent (7%) per annum commencing
within ninety (90) days following such termination.]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 ten (10) or more Years of Service or attained age forty-eight
(48) such Participant shall receive a benefit identical to the Retirement
Benefits of Article IV (either the Early Retirement Benefit or Normal Retirement
Benefit, as the case may be) to which such Participant would have become
entitled if he retired upon or after attaining age sixty (60). Provided,
however, in the event a Participant dies prior to commencement of payment of
such Severance Benefit, the Participant's Designated Beneficiary shall receive,
in lieu of such Severance Benefit, the Survivor Benefit specified in Article V
hereof.
2.
All parts of the Plan not inconsistent herewith are hereby ratified and
affirmed.
IN WITNESS WHEREOF, the Board of Directors of Savannah Electric and
Power Company hereby approves this Third 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 Third Amendment this day of , 1997, to be effective
as provided herein.
SAVANNAH ELECTRIC AND POWER COMPANY
By:________________________________
Arthur M. Gignilliat, Jr.
President and Chief Executive Officer
ATTEST:
- - - - - - - --------------------
Lavonne K. Calandra
Corporate Secretary
(CORPORATE SEAL)
EXHIBIT 24(a)
February 15, 1999
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 reports
under the Securities Exchange Act of 1934, as amended, with the Securities and
Exchange Commission with respect to the following: (1) the filing of this
Company's Annual Report on Form 10-K for the year ended December 31, 1998 and
(2) the filing of Quarterly Reports on Form 10-Q and Current Reports on Form 8-K
during 1999.
The Southern Company and the undersigned directors and officers of said
Company, individually as a director and/or as an officer of the Company, hereby
make, constitute and appoint each of you our true and lawful Attorney for each
of us and in each of our names, places and steads to sign and cause to be filed
with the Securities and Exchange Commission in connection with the foregoing
said Annual Report on Form 10-K, said Quarterly Reports on Form 10-Q, any
Current Reports on Form 8-K and any necessary or appropriate amendment or
amendments to any such reports, to be accompanied in each case by any necessary
or appropriate exhibits or schedules thereto.
Yours very truly,
THE SOUTHERN COMPANY
By /s/A. W. Dahlberg
A. W. Dahlberg
Chairman, President and
Chief Executive Officer
<PAGE>
- 2 -
/s/John C. Adams /s/Zack T. Pate
John C. Adams Zack T. Pate
/s/A. D. Correll /s/William J. Rushton, III
A. D. Correll William J. Rushton, III
/s/A. W. Dahlberg /s/Gloria M. Shatto
A. W. Dahlberg Gloria M. Shatto
/s/Paul J. DeNicola /s/Gerald J. St. Pe'
Paul J. DeNicola Gerald J. St. Pe'
/s/Jack Edwards /s/Herbert Stockham
Jack Edwards Herbert Stockham
/s/H. Allen Franklin /s/Stephen A. Wakefield
H. Allen Franklin Stephen A. Wakefield
/s/Bruce S. Gordon /s/W. L. Westbrook
Bruce S. Gordon W. L. Westbrook
/s/L. G. Hardman III /s/Tommy Chisholm
L. G. Hardman III Tommy Chisholm
/s/Elmer B. Harris ________________________________
Elmer B. Harris W. Dean Hudson
<PAGE>
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, 1998, 1999 Form 10-Q's and Form
8-K's and any necessary or appropriate amendment or amendments to any such
reports, 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 February 15, 1999, 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 24, 1999 THE SOUTHERN COMPANY
By /s/Tommy Chisholm
Tommy Chisholm
Secretary
EXHIBIT 24(b)
January 22, 1999
W. L. Westbrook Wayne Boston
270 Peachtree Street, N.W. 241 Ralph McGill Blvd. NE
Atlanta, Georgia 30303 Atlanta, Georgia 30308-3374
Dear Sirs:
Alabama Power Company proposes to file with the Securities and Exchange
Commission, under the Securities Exchange Act of 1934, (1) its Annual Report on
Form 10-K for the year ended December 31, 1998, and (2) its quarterly reports on
Form 10-Q during 1999.
Alabama Power Company and the undersigned directors and officers of
said Company, individually as a director and/or as an officer of the Company,
hereby make, constitute and appoint W. L. Westbrook and Wayne Boston our true
and lawful Attorneys for each of us and in each of our names, places and steads
to sign and cause to be filed with the Securities and Exchange Commission in
connection with the foregoing said Annual Report on Form 10-K, quarterly reports
on Form 10-Q, and any appropriate amendment or amendments thereto and any
necessary exhibits.
Yours very truly,
ALABAMA POWER COMPANY
By /s/Elmer B. Harris
Elmer B. Harris
President and Chief Executive
Officer
<PAGE>
- 2 -
/s/Whit Armstrong ______________________________
Whit Armstrong William V. Muse
/s/David J. Cooper /s/John T. Porter
David J. Cooper John T. Porter
/s/A. W. Dahlberg /s/Robert D. Powers
A. W. Dahlberg Robert D. Powers
/s/Peter V. Gregerson, Sr. /s/Andreas Renschler
Peter V. Gregerson, Sr. Andreas Renschler
/s/Elmer B. Harris /s/C. Dowd Ritter, III
Elmer B. Harris C. Dowd Ritter, III
/s/Carl E. Jones, Jr. ______________________________
Carl E. Jones, Jr. William J. Rushton, III
/s/Patricia M. King /s/James H. Sanford
Patricia M. King James H. Sanford
/s/James K. Lowder /s/John Cox Webb, IV
James K. Lowder John Cox Webb, IV
/s/Wallace D. Malone, Jr. /s/William B. Hutchins, III
Wallace D. Malone, Jr. William B. Hutchins, III
/s/Thomas C. Meredith /s/Art P. Beattie
Thomas C. Meredith Art P. Beattie
<PAGE>
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, 1998, 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 January 22, 1998, 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 24, 1999 ALABAMA POWER COMPANY
By /s/Wayne Boston
Wayne Boston
Assistant Secretary
EXHIBIT 24(c)
February 17, 1999
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, 1998, and (2) the filing of
its quarterly reports on Form 10-Q during 1999.
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
H. Allen Franklin
President and Chief Executive
Officer
<PAGE>
- 2 -
______________________________ /s/G. Joseph Prendergast
Daniel P. Amos G. Joseph Prendergast
/s/Juanita P. Baranco /s/Herman J. Russell
Juanita P. Baranco Herman J. Russell
/s/A. W. Dahlberg ______________________________
A. W. Dahlberg Gloria M. Shatto
/s/William A. Fickling, Jr. /s/William Jerry Vereen
William A. Fickling, Jr. William Jerry Vereen
/s/H. Allen Franklin /s/Carl Ware
H. Allen Franklin Carl Ware
/s/L. G. Hardman III /s/Judy M. Anderson
L. G. Hardman III Judy M. Anderson
/s/Warren Y. Jobe /s/David M. Ratcliffe
Warren Y. Jobe David M. Ratcliffe
/s/James R. Lientz, Jr. /s/Cliff S. Thrasher
James R. Lientz, Jr. Cliff S. Thrasher
/s/Zell Miller
Zell Miller
<PAGE>
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, 1998, and (b) quarterly filings on Form 10-Q during
1999; 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 17, 1999, 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 24, 1999 GEORGIA POWER COMPANY
By /s/Wayne Boston
Wayne Boston
Assistant Secretary
EXHIBIT 24(d)
February 26, 1999
Mr. W. L. Westbrook Mr. Wayne Boston
The Southern Company Southern Company Services, Inc.
270 Peachtree Street, N.W. 241 Ralph McGill Blvd. NE
Atlanta GA 30303 Atlanta GA 30308-3374
Dear Sirs:
Re: Forms 10-K and 10-Q
Gulf Power Company proposes to file or join in the filing of 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, 1998, and (2) its 1999 quarterly reports on Form
10-Q.
Gulf Power Company and the undersigned Directors and Officers of said
Company, individually as a Director and/or as an Officer of the Company, hereby
make, constitute and appoint each of you our true and lawful Attorney for each
of us and in each of our names, places and steads to sign and cause to be filed
with the Securities and Exchange Commission in connection with the foregoing
said Annual Report on Form 10-K, quarterly reports on Form 10-Q and any
appropriate amendment or amendments thereto and any necessary exhibits.
Sincerely,
By /s/Travis J. Bowden
Travis J. Bowden
President and Chief Executive Officer
<PAGE>
- 2 -
/s/Travis J. Bowden /s/Barbara H. Thames
Travis J. Bowden Barbara H. Thames
/s/Paul J. DeNicola /s/Arlan E. Scarbrough
Paul J. DeNicola Arlan E. Scarbrough
/s/Fred C. Donovan /s/Ronnie R. Labrato
Fred C. Donovan Ronnie R. Labrato
/s/W. D. Hull, Jr. /s/Warren E. Tate
W. D. Hull, Jr. Warren E. Tate
/s/Joseph K. Tannehill
Joseph K. Tannehill
<PAGE>
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, 1998, and its 1999
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 26, 1999, 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 24, 1999 GULF POWER COMPANY
By /s/Wayne Boston
Wayne Boston
Assistant Secretary
EXHIBIT 24(e)
February 24, 1999
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, 1998, and (2) the filing of
its quarterly reports on Form 10-Q during 1999.
Mississippi Power Company and the undersigned directors and officers of
said Company, individually as a director and/or as an officer of the Company,
hereby make, constitute and appoint each of you our true and lawful Attorney for
each of us and in each of our names, places and steads to sign and cause to be
filed with the Securities and Exchange Commission in connection with the
foregoing said Annual Report on Form 10-K, quarterly reports on Form 10-Q and
any appropriate amendment or amendments thereto and any necessary exhibits.
Yours very truly,
MISSISSIPPI POWER COMPANY
By /s/Dwight H. Evans
Dwight H. Evans
President and Chief Executive Officer
<PAGE>
- 2 -
/s/Paul J. DeNicola /s/George A. Schloegel
Paul J. DeNicola George A. Schloegel
/s/Edwin E. Downer /s/Philip J. Terrell
Edwin E. Downer Philip J. Terrell
/s/Dwight H. Evans /s/Gene Warr
Dwight H. Evans Gene Warr
/s/Robert S. Gaddis /s/Michael W. Southern
Robert S. Gaddis Michael W. Southern
/s/Linda T. Howard /s/Frances V. Turnage
Linda T. Howard Frances V. Turnage
- - - - - - - ------------------------------
Aubrey K. Lucas
<PAGE>
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, 1998, and the filing of this Company's quarterly reports
to the Securities and Exchange Commission on Form 10-Q for the year
1999.
- - - - - - - - - -
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 24, 1999, 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 24, 1999 MISSISSIPPI POWER COMPANY
By /s/Wayne Boston
Wayne Boston
Assistant Secretary
EXHIBIT 24(f)
February 23, 1999
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, 1998, and (2)
its quarterly reports on Form 10-Q during 1999.
Savannah Electric and Power Company and the undersigned directors and
officers of said Company, individually as a director and/or as an officer of the
Company, hereby make, constitute and appoint W. L. Westbrook and Wayne Boston
our true and lawful Attorneys for each of us and in each of our names, places
and steads to sign and cause to be filed with the Securities and Exchange
Commission in connection with the foregoing said Annual Report on Form 10-K,
quarterly reports on Form 10-Q, and any appropriate amendment or amendments
thereto and any necessary exhibits.
Yours very truly,
SAVANNAH ELECTRIC AND POWER COMPANY
By /s/G. Edison Holland, Jr.
G. Edison Holland, Jr.
President and Chief Executive
Officer
<PAGE>
- 2 -
/s/Archie H. Davis /s/Robert B. Miller, III
Archie H. Davis Robert B. Miller, III
/s/Paul J. DeNicola /s/Arnold M. Tenenbaum
Paul J. DeNicola Arnold M. Tenenbaum
/s/Walter D. Gnann /s/K. R. Willis
Walter D. Gnann K. R. Willis
/s/G. Edison Holland, Jr. /s/Nancy E. Frankenhauser
G. Edison Holland, Jr. Nancy E. Frankenhauser
<PAGE>
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, 1998, and (b) quarterly reports on Form 10-Q during
calendar year 1999; 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 23, 1999, 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 24, 1999 SAVANNAH ELECTRIC AND POWER COMPANY
By /s/Wayne Boston
Wayne Boston
Assistant Secretary
