SOUTHERN COMPANY
PERFORMANCE DIVIDEND PLAN
Amended and Restated
TROUTMAN SANDERS LLP
Bank of America Plaza
600 Peachtree Street, N.E., Suite 5200
Atlanta, Georgia 30308
(404) 885-3000
Effective December 11, 2000
SOUTHERN COMPANY
PERFORMANCE DIVIDEND PLAN
Purposes
The purposes of the Southern Company Performance Dividend Plan are to
provide a financial incentive which will focus the efforts of certain key
employees on areas which will have a direct and significant influence on
corporate performance and to provide the potential for levels of compensation
which will enhance the Employing Companies' abilities to attract, retain and
motivate such key employees. In order to achieve these objectives, the Plan will
be based upon corporate performance as measured by total shareholder return or
such other performance measure which the Committee may determine under the terms
of the Plan. This Plan is intended to meet the requirements of Code Section
162(m) related to the deductibility of Awards paid to Participants subject
thereto.
ARTICLE I
Definitions
For purposes of the Plan, the following terms shall have the following
meanings unless a different meaning is plainly required by the context:
1.1 "Annual Dividend" shall mean the aggregate, annual dividend
declared by Southern Company on Common Stock for the Plan Year in which an Award
is made.
1.2 "Award" shall mean the awards granted pursuant to Article IV
hereof.
1.3 "Board of Directors" shall mean the Board of Directors of Southern
Company Services, Inc.
1.4 "Change in Control Benefit Plan Determination Policy" shall mean
the change in control benefit plan determination policy, as approved by the
Board of Directors, as it may be amended from time to time in accordance with
the provisions therein.
1.5 "Committee" shall mean the Compensation Committee of the Board of
Directors of Southern Company.
1.6 "Common Stock" shall mean the common stock of Southern Company.
1.7 "Computation Period" shall mean a four-year period commencing the
first day of January of each year, provided, however, that the Computation
Period for the first three years beginning in the year of the effective date of
the Plan shall be one year, two years and three years, respectively, beginning
January 1, 1997.
1.8 "Employing Company" shall mean Southern Company Services, Inc., or
any other affiliate or subsidiary (direct or indirect) of Southern Company,
which the Board of Directors may from time to time determine to bring under the
Plan and which shall adopt the Plan, and any successor of any of them.
1.9 "Key Employee" shall mean any person who is or was employed by an
Employing Company who has been granted Stock Options.
1.10 Fair Market Value" shall mean the average of the high and low
prices at which a share of Common Stock shall have been traded on the respective
measurement date, such as the first and last days of a Computation Period or
Restriction Period, or on the next preceding trading day if such date was not a
trading date, as reported on the New York Stock Exchange Composite Transactions
Listing, or as otherwise determined by the Committee. In no event shall the Fair
Market Value equal less than the par value of the Common Stock.
1.11 "Participant" shall mean a Key Employee who satisfies the criteria
set forth in Article III.
1.12 "Payment Date" shall mean the date the check evidencing an Award
is endorsed by an authorized person of an Employing Company.
1.13 "Peer Group Common Stock" shall mean the common stock of the Peer
Group Companies.
1.14 "Peer Group Companies" shall mean those companies considered part
of the peer group of Southern Company for a Computation Period as determined and
designated by the Committee and as set forth on a Schedule adopted by the
Committee and provided to the Plan Administrator. The Committee shall establish
the Peer Group Companies within the first ninety (90) days of a Computation
Period. The Committee shall have the discretion to change the Peer Group
Companies at any time during a Computation Period. The Committee shall also have
the discretion to determine whether or not such change shall apply to
Participants subject to the limitations of Section 162(m) of the Code.
1.15 "Performance Based" shall mean compensation which qualifies as
"performance based" within the meaning of Code Section 162(m)(4)(c) and the
regulations thereunder.
1.16 "Permanent Disability" shall mean such permanent disability as
defined in The Southern Company Pension Plan.
1.17 "Phantom Stock" shall mean phantom shares of Common Stock as
defined by The Southern Company Deferred Compensation Plan.
1.18 "Plan" shall mean the Southern Company Performance Dividend Plan.
1.19 "Plan Year" shall mean the calendar year.
1.20 "Restricted Stock Units" shall mean the number of shares of Common
Stock deemed to have been awarded to a Participant at the end of a Computation
Period for the purpose of providing the Participant with the opportunity to
receive an Award which incorporates the appreciation on the Common Stock during
the Restriction Period. The Award shall not be invested in actual Common Stock
of the Company.
1.21 "Restriction Period" shall mean the period during which the
Restricted Stock Units are subject to employment restrictions as provided in
Section 4.3.
1.22 "Retirement" shall mean the termination of employment with an
Employing Company under the terms of The Southern Company Pension Plan or such
other retirement or early retirement plan or arrangement which the Committee
shall adopt and make available to a Participant.
1.23 "Southern Company" shall mean The Southern Company.
1.24 "Stock Option" shall mean those options to acquire Common Stock
awarded to Participants pursuant to the Southern Company Performance Stock Plan,
including, but not limited to, any nonqualified stock option which has been
transferred to a Transferee. "Stock Option" shall also mean that portion of
options to acquire Common Stock awarded to Participants pursuant to the Southern
Company Executive Stock Plan attributable to additional shares of Common Stock
granted to the Participant in the event of a spin-off of Southern Energy, Inc.,
from Southern Company. Notwithstanding the preceding sentence, "Stock Option"
shall not mean that portion of options to acquire Common Stock awarded to the
Participant under the Southern Company Executive Stock Plan attributable to
grants of Common Stock awarded prior to 1997.
1.25 "Termination for Cause" or "Cause" shall mean the termination of a
Participant's employment by an Employing Company under any of the following
circumstances:
(a) The Participant willfully neglects or refuses to discharge
his or her duties to the Employing Company as an employee or refuses to
comply with any lawful or reasonable instructions given to him or her
by the Employing Company without reasonable excuse;
(b) The Participant is guilty of gross misconduct. For
purposes of this Plan, the following acts shall constitute gross
misconduct:
(i) any act involving fraud or dishonesty or breach
of appropriate regulations of competent authorities;
(ii) the carrying out of any activity or the making
of any statement which would prejudice and/or reduce the good
name and standing of Southern Company or an Employing Company
or would bring Southern Company or an Employing Company into
contempt, ridicule or would reasonably shock or offend any
community in which Southern Company or an Employing Company is
located;
(iii) attendance at work in a state of intoxication
or otherwise being found in possession at his or her workplace
of any prohibited drug or substance, possession of which would
amount to a criminal offense;
(iv) assault or other act of violence against any
employee or other person during the course of the
Participant's employment; and
(v) conviction of any felony or misdemeanor involving
moral turpitude.
1.26 "Total Shareholder Return" or "TSR" shall mean the total amount an
investor would receive by investing $100 per quarter in Common Stock or in Peer
Group Common Stock, as the case may be, as determined by measuring the total
dividends which would have been paid on such Common Stock or Peer Group Common
Stock by reinvesting such dividends on a quarterly basis in additional shares of
Common Stock or Peer Group Common Stock as the case may be and the total gain or
loss on such Common Stock or Peer Group Common Stock as if such stock had been
sold at the closing price on the last day of the respective Computation Period.
1.27 "Transferee" shall mean the person, trust, partnership or limited
liability company to whom or to which Stock Options have been transferred
pursuant to Section 8.6 of the Southern Company Performance Stock Plan.
Where the context requires, words in the masculine gender shall include the
feminine and neuter genders, words in the singular shall include the plural, and
words in the plural shall include the singular.
ARTICLE II
Plan Administration.
2.1 Committee. The Plan shall be administered by the Committee. The
Committee is authorized to establish such rules and to appoint such agents as it
deems appropriate for the proper administration of the Plan, and to make such
determinations and to take such steps in connection with the Plan or the
benefits provided hereunder as it deems necessary or advisable.
2.2 Plan Interpretation. The Committee shall have the exclusive
authority to interpret the Plan. The decision of the Committee with respect to
any question arising as to the grant of an Award to a Participant in the Plan,
the amount, term, form, and time of payment of Awards under the Plan, or any
other matter concerning the Plan shall be final, conclusive, and binding on both
Southern Company and the Participants.
ARTICLE III
Participants
3.1 Participation in the Plan shall be limited to Key Employees of the
Employing Companies, or in the case of death, their estates or beneficiaries,
holding Stock Options as of the last day of any Computation Period. Key
Employees who do not hold Stock Options as of the last day of any Computation
Period solely because such Stock Options have been transferred to a Transferee
shall also participate in the Plan, provided the Transferee holds such Stock
Options as of the last day of any Computation Period.
3.2 Any Participant who terminates his or her employment with an
Employing Company and who is not immediately re-employed with an affiliate of an
Employing Company prior to the Payment Date of any Award due under this Plan for
reasons other than death, Permanent Disability, or Retirement shall forfeit any
Award due under this Plan. If a Participant terminates his or her employment by
reason of death or Permanent Disability, such Participant or his or her estate
or representative shall continue to be eligible to receive Awards with respect
to any Stock Options which remain outstanding in accordance with their terms. If
a Participant terminates his or her employment by reason of Retirement, such
Participant shall continue to be eligible to receive Awards with respect to any
Stock Options which remain outstanding in accordance with their terms for the
Computation Period ending during the year of his or her Retirement and the next
two (2) succeeding Computation Periods.
3.3 Notwithstanding any other provision of this Plan, no Participant
whose employment is terminated by an Employing Company for Cause shall be
eligible to receive an Award under this Plan.
3.4 Notwithstanding any other provision of this Plan, the maximum Award
for any Plan Year payable to any Participant with respect to Stock Options
awarded during such Plan Year shall be six million dollars ($6,000,000).
3.5 In the case of an individual who becomes a Participant subsequent
to January 1, 2000, such Participant shall participate in the Computation Period
that ends during the year that he is hired and in each Computation Period
thereafter. A new four-year measuring period shall begin each year in order to
recognize the need to link objectives over longer periods of time, to recognize
changes in the operating environment, and to encourage Participants to make
long-term decisions.
ARTICLE IV
Performance Dividend Award
4.1 Each Participant shall receive an Award on the last day of each
Computation Period which shall be based upon the number of vested and unvested,
outstanding Stock Options held by the Participant or the Transferee on the last
day of such Computation Period multiplied by the Annual Dividend multiplied by
the Payout Percentage determined in accordance with the following schedule:
Percentile of Southern TSR Payout Percentage
Versus Peer Group TSR
90th and above 100%
70th 75%
50th 50%
30th 25%
Below 30th 0%
The Payout Percentage for performance levels falling between the percentiles
listed above shall be interpolated on a straight line basis for any given Plan
Year. The Committee may also increase the Payout Percentage by up to a factor of
two (2) with respect to such Participants and under such circumstances as the
Committee in its discretion shall deem appropriate. The Committee may in its
sole discretion change the Payout Percentage during a Computation Period if it
deems such change appropriate. The Committee may also in its sole discretion
determine whether such change to the Payout Percentage applies to Participants
subject to the limitations of Section 162(m) of the Code.
4.2 The Payout Percentage set forth herein shall be based on Southern
Company's Total Shareholder Return during a Computation Period as compared to
the Total Shareholder Return ranking of the Peer Group Companies for such
Computation Period. The Total Shareholder Return of the Peer Group Companies
shall be determined annually by an independent certified public accountant and
shall be properly adjusted and annualized by such accountant so that the Peer
Group Companies' Total Shareholder Return may be accurately compared to that of
Southern Company.
4.3 If the Committee has increased the Payout Percentage by up to a
factor of two (2) for an Award to a Participant under Section 4.1 of the Plan,
the amount of such Award in excess of one hundred percent (100%) of the Annual
Dividend shall be converted into Restricted Stock Units using the Fair Market
Value of the Common Stock on the last day of the Computation Period. The
Restricted Stock Units shall not be paid to the Participant at the end of the
Computation Period and shall, instead, be subject to a Restriction Period
determined by the Committee. Unless determined otherwise by the Committee, in
the event the employment of a Participant is terminated by reason of Death,
Permanent Disability, or Retirement during the Restriction Period, the
Participant (or his estate or representative) shall receive an immediate cash
payment equal to the number of Restricted Stock Units held by the Participant
multiplied times the Fair Market Value of the Common Stock on the date of death,
Permanent Disability or Retirement, whichever applicable. In the event that a
Participant's employment terminates for any reason other than Death, Permanent
Disability or Retirement during the Restriction Period, all Restricted Stock
Units shall be immediately forfeited by the Participant to the Company unless
determined otherwise by the Committee. At the end of the Restriction Period, the
Restricted Stock Units shall be converted into cash using the Fair Market Value
of the Common Stock on the last day of the Restriction Period and shall be paid
in accordance with Section 4.5.
If the Committee so determines, the Participant shall also be awarded
an amount equal to the Annual Dividend (payable during the Restriction Period)
multiplied times the number of Restricted Stock Units held by the Participant.
Such additional amount shall be subject to the same restrictions, forfeiture
provisions and payout provisions as the Restricted Stock Units as determined by
the Committee.
4.4 Notwithstanding the above provisions, an Award shall not be granted
for any Computation Period ending with the Plan Year in which the current
earnings of Southern Company are less than the amount necessary to fund
dividends on its Common Stock at the rate such dividends were paid for the
immediately preceding Plan Year.
4.5 Awards shall be paid in cash on or before the 15th day of the third
month following the last day of the Computation Period or Restriction Period,
whichever applicable, or, with respect to those Participants who are otherwise
eligible to participate in the Southern Company Deferred Compensation Plan, may
be deferred by exercising an option to do so no later than 12 months before any
amount would otherwise be distributed pursuant to this Section 4.5.
Notwithstanding the above 12 month limitation, a new Participant in the Plan
shall be eligible to elect to defer the receipt of any Award during the first
deferral election period established by the Company that follows the date he
first becomes eligible to participate in the Plan. If an election is made to
defer the receipt of the amount of any Award, such amount shall be deemed to be
invested in Phantom Stock. Dividend equivalents earned on such Phantom Stock
shall be automatically invested in additional shares of Phantom Stock.
ARTICLE V
Change in Control
The provisions of the Change in Control Benefit Plan Determination
Policy are incorporated herein by reference to determine the occurrence of a
change in control of Southern Company or an Employing Company and the benefits
to be provided hereunder in the event of such a change in control. Any
modifications to the Change in Control Benefit Plan Determination Policy are
likewise incorporated herein.
ARTICLE VI
Miscellaneous Provisions
6.1 Neither the Participant, his or her beneficiary, nor his or her
personal representative shall have any rights to commute, sell, assign, transfer
or otherwise convey the right to receive any payments hereunder, which payments
and the rights thereto are expressly declared to be nonassignable and
nontransferable. Any attempt to assign or transfer the right to payments under
this Plan shall be void and have no effect.
6.2 An Employing Company shall neither reserve nor otherwise set aside
funds for the payments of any Awards under this Plan.
6.3 Except for the provisions of Article V, which may not be amended,
modified or terminated following a "Southern Change in Control," a "Subsidiary
Change in Control" or a "Southern Termination" (as such terms are defined in the
Change in Control Benefit Plan Determination Policy), the Plan may be amended,
modified, or terminated by the Board of Directors in its sole discretion at any
time and from time to time; provided, however, that no such amendment,
modification, or termination shall impair any rights to payments which have
accrued under the Plan prior to such amendment, modification, or termination.
6.4 It is expressly understood and agreed that Awards made in
accordance with the Plan are in addition to any other benefits or compensation
to which a Participant may be entitled or for which he or she may be eligible,
whether funded or unfunded, by reason of his or her employment with an Employing
Company.
6.5 There shall be deducted from the payment of each Award under the
Plan the amount of any tax required by any governmental authority to be withheld
and paid over by an Employing Company to such governmental authority for the
account of the person entitled to such distribution.
6.6 Any Awards paid to a Participant while employed by an Employing
Company shall not be considered in the calculation of the Participant's benefits
under any other employee welfare or pension benefit plan maintained by an
Employing Company, unless otherwise specifically provided therein.
6.7 This Plan, and all rights under it, shall be governed by and
construed in accordance with the laws of the State of Georgia.
IN WITNESS WHEREOF, Southern Company Services, Inc., through its duly
authorized officers, hereby adopts the Southern Company Performance Dividend
Plan this ____ day of _____________, ____, to be effective December 11, 2000.
SOUTHERN COMPANY SERVICES, INC.
By:
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Its:
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Attest:
By:
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Its:
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