Exhibit 10(a)87
DEFERRED COMPENSATION AGREEMENT
THIS DEFERRED COMPENSATION AGREEMENT ("Agreement") made and entered
into by and between The Southern Company ("Southern"), Southern Energy
Resources, Inc. (the "Company") and Gale E. Klappa ("Mr. Klappa").
W I T N E S S E T H:
WHEREAS, Mr. Klappa is an Officer of the Company;
WHEREAS, the Company and Southern wish to encourage Mr. Klappa to
increase the profitability of the Company and to provide Mr. Klappa an interest
in the Company's overall profitability, and to provide Mr. Klappa with
additional deferred compensation for service he has or will provide 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. Retention Bonus.
a. General Nature of Award. Subject to the terms and
conditions of this Agreement, the Company shall establish and maintain
on behalf of Mr. Klappa an account on the Company's books and records
(the "Account") which, if Mr. Klappa continues to be an employee of the
Company, or any affiliate or subsidiary of Southern (as set forth in
Paragraph 5 hereof), shall entitle Mr. Klappa to receive on July 1,
2003 (the period from the effective date of the Agreement through July
1, 2003 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 Sixty Thousand Dollars ($260,000.00) 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.
b. Investment.
(1) As of the date hereof, the Company shall credit
to Mr. Klappa's Account that number of deemed shares
(including fractional shares) of Southern's common stock
("Common Stock") as shall equal $260,000.00 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.
(2) As of the day of each calendar quarter in which
occurs the payment of dividends on Common Stock, there shall
be credited to Mr. Klappa'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:
(a) 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;
(b) 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
(c) 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.
(3) 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
Phantom 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.
c. Vesting of Account. The Market Value of Mr. Klappa's
Account shall vest on July 1, 2003 (the "Vesting Date"), provided Mr.
Klappa is then an employee of the Company, Southern, or an affiliate or
subsidiary of Southern.
d. Valuation of Account. The value of Mr. Klappa'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 profitability goals established for the
Company and for Mr. Klappa by the Chief Executive Officers of Southern
and the Company have been equaled or exceeded 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. Klappa'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 the Performance Period shall result in the
forfeiture of the Tax Gross-up, provided, however, that the Chief
Executive Officers of Southern and the Company may, in their 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, all or a portion of the value of
the Tax Gross-up shall nevertheless be paid.
e. Payment of Account Balance. Provided that Mr. Klappa 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.
Klappa the value of his Account, and, if applicable, the Tax Gross-up
amount, in cash within ten (10) days of the Vesting Date.
f. 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. Klappa 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.
g. Death, Permanent Disability, Termination Without Cause,
Termination for Good Reason, or Continued Employment Following a Change
in Control. In the event of Mr. Klappa'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 of employment by Mr. Klappa for Good Reason
following a Change in Control, or, if prior to the payout of the value
of the Account Mr. Klappa continues 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 following a Change in Control, the Company shall
pay to Mr. Klappa, or his estate in the event of death, the value of
the Account determined as of the date of such termination or Change in
Control, plus, if the Profitability Goals have been met as of such
date, the Tax Gross-up amount. For purposes of this Paragraph 1.g., the
terms Cause, Change in Control, Good Reason, and Southern Subsidiary
shall have the meaning set forth in that certain Change in Control
Agreement, dated June 17, 1999, as amended from time to time, between
Southern, the Company and Mr. Klappa (the "Change in Control
Agreement"), the defined terms of which are incorporated in this
Paragraph 1.g. by reference thereto.
h. Assignability. Neither Mr. Klappa, his estate, his
beneficiaries, nor his legal representative shall have any rights to
commute, sell, assign, transfer or otherwise convey the right to
receive the payment under this Paragraph 1, which payment and the
rights thereto are expressly declared to be nonassignable and
nontransferable. Any attempt to assign or transfer the right to such
payment shall be void and have no effect.
2. Value Creation Plan. In the event Mr. Klappa transfers his
employment to an affiliate of Southern, and pursuant to the Southern Energy
Resources, Inc. Value Creation Plan (the "Plan") he has Indexed Rights that have
not vested at the time of such transfer, and the Administrative Committee for
the Plan fails to take action to provide Mr. Klappa relief from Section 4.5 of
the Plan to the extent it provides for forfeiture of unvested Indexed Rights
upon termination from the Company for reasons other than Cause and provide that
any of Mr. Klappa's unvested Indexed Rights shall continue to vest as long as
Mr. Klappa remains employed by an affiliate of Southern, then the Company shall
pay Mr. Klappa an amount equal to what he would have received had such Indexed
Rights continued to vest following his transfer to an affiliate of Southern,
become vested and been exercised by Mr. Klappa within the time period that would
have existed under the Plan for such exercise. In determining such amount, the
method that would have applied under the Plan shall be used.
3. Publicity; No Disparaging Statement. Except as otherwise provided in
Paragraph 6 hereof, Mr. Klappa, 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.
4. Non-Disclosure.
a. Definitions. For purposes of this Paragraph 4, the
following terms shall have the following meanings:
(1) "Entity" shall mean any business, individual,
partnership, joint venture, agency, governmental subdivision,
association, firm, corporation or other entity.
(2) "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.
(3) "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 Mr. Klappa as a result of his
affiliation with the Company or its Affiliates, and other
items that the Company or its Affiliates may from time to time
mark or otherwise identify as confidential.
(4) "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.
(5) "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 Mr. Klappa for the Company or its Affiliates or by
using the Company's or its Affiliates' time, personnel,
facilities, equipment, knowledge, information, resources, or
material.
b. Nondisclosure; Ownership of Proprietary Property.
(1) Nondisclosure. In recognition of the Company's
need to protect its legitimate business interests, Mr. Klappa
hereby acknowledges that he has been given access to valuable
Trade Secrets and Confidential Information; and he 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 three (3) years from his termination.
(2) Notification of Unauthorized Disclosure. Mr.
Klappa shall exercise his best efforts to ensure the continued
confidentiality of all Trade Secrets and Confidential
Information known by, disclosed or made available to him. He
shall immediately notify the Company of any unauthorized
disclosure or use of any Trade Secrets or Confidential
Information of which he becomes aware. Mr. Klappa 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.
(3) 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 Mr. Klappa hereby unconditionally and
irrevocably transfers and assigns to the Company or its
Affiliates all rights, title and interest he 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 Mr. Klappa and the
Company, its Affiliates or otherwise. Mr. Klappa 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.
(4) Return of Materials. Upon Mr. Klappa's
termination, or at any point after that time upon the specific
request of the Company, he 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 his possession.
5. Transfer of Employment to Southern or a Southern Subsidiary or
Affiliate. In the event that Mr. Klappa's employment by the Company is
terminated and he 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 Paragraph 1 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 Mr. Klappa is employed by the
Company, and/or Southern and/or such affiliate or subsidiary of Southern, as the
case may be, but the expense of Paragraph 2 shall be the sole responsibility of
the Company.
6. Confidentiality and Legal Process. Mr. Klappa 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
Mr. Klappa from performing any duty or obligation that shall arise as a matter
of law. Specifically, Mr. Klappa shall continue to be under a duty to truthfully
respond to matter of law. Specifically, Mr. Klappa 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 Mr. Klappa's
right and ability to provide information to any federal, state or local
government in the lawful exercise of such governments' governmental functions.
7. Successors And Assigns; Applicable Law. Except as otherwise provided
in Paragraph 1.h., this Agreement shall be binding upon and inure to the benefit
of Mr. Klappa 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).
8. 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 Mr. Klappa and
an authorized representative of Southern and the Company.
9. 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.
10. 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.
11. 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. Klappa may be entitled to receive the
value of his benefit under the terms and conditions of this Agreement, the
assets from which such amount may be paid shall at all times be subject to the
claims of the Company's creditors.
12. 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. Klappa may be entitled or for
which he may be eligible, whether funded or unfunded, by reason of his
employment with the Company.
13. 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. Klappa.
14. Compensation. Any compensation contributed on behalf of Mr. Klappa
under this Agreement shall not be considered "compensation," as the term is
defined in The Southern Company Employee Savings Plan, The Southern Company
Employee Stock Ownership Plan, The Southern Company Performance Sharing Plan or
The Southern Company Pension Plan. Payments under this Agreement shall not be
considered wages, salaries or compensation under any other employee benefit
plan.
15. 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. Klappa and the Company.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
first listed above, effective this ____ day of ___________, 1999.
THE SOUTHERN COMPANY
By: ______________________________
SOUTHERN ENERGY RESOURCES, INC.
By:
Mr. Klappa
------------------------------
Exhibit A
Deferred Compensation Agreement
Schedule of Profitability Goals
For Performance Period
The Southern Company shall earn its Earnings Per Share Goal for each of
the calendar years in the Performance Period.
Achievement of the goals shall be assessed annually by the Chief
Executive Officers of Southern and the Company and documented in Exhibit B of
this Agreement.
Exhibit B
Deferred Compensation Agreement
Annual Documentation of Profitability Goals
For Performance Period
FIRST AMENDMENT TO AND ASSIGNMENT OF
DEFERRED COMPENSATION AGREEMENT
THIS FIRST AMENDMENT TO AND ASSIGMENT OF DEFERRED COMPENSATION
AGREEMENT ("Amendment") made and entered into by and between The Southern
Company ("Southern"), Southern Energy Resources, Inc. (the "Company"), Southern
Company Services, Inc. ("SCS") and Gale F. Klappa ("Mr. Klappa"), effective as
of the 6th day of October, 1999.
W I T N E S S E T H:
WHEREAS, the parties entered into that certain Deferred Compensation
Agreement (the "Agreement") effective October 5, 1999;
WHEREAS, the employment of Mr. Klappa has been transferred to SCS;
WHEREAS, the parties wish to amend and assign the Agreement in
connection with such transfer of employment;
NOW, THEREFORE, in consideration of the premises, and the agreements of
the parties set forth in this Amendment, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Pursuant to Section 5 of the Agreement, the Company assigns
the Agreement to SCS and SCS shall be the Company for all purposes
thereunder. Notwithstanding the foregoing, as provided in Sections 2
and 5 of the Agreement with respect to the Value Creation Plan,
Southern Energy Resources, Inc. shall retain the expense related to
Section 2.
2. Pursuant to Section 5 of the Agreement, Exhibit A is
amended to provide that achievement of the profitability goal shall be
documented by the Chairman of The Southern Company.
IN WITNESS WHEREOF, this First Amendment to and Assignment of Deferred
Compensation Agreement has been executed by the parties, this ___ day of
_____________, 2000.
THE SOUTHERN COMPANY
By: ______________________________
SOUTHERN COMPANY SERVICES, INC.
By:
SOUTHERN ENERGY RESOURCES, INC.
By: ______________________________
MR. KLAPPA
------------------------------
Gale F. Klappa
Exhibit A
Deferred Compensation Agreement
Schedule of Profitability Goals
For Performance Period
The Southern Company shall earn its Earnings Per Share Goal for each of
the calendar years in the Performance Period. Achievement of the goal shall be
assessed annually by the Chairman of The Southern Company and documented in
Exhibit B.
Exhibit B
Deferred Compensation Agreement
Annual Documentation of Profitability Goals
For Performance Period