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.
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:
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.
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
Exhibit B
Deferred Compensation Agreement
Annual Documentation of Performance Goals
For Performance Period