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EXHIBIT 10.11
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 S. Xxxxx Xxxxxx ("Xx. Xxxxxx").
WITNESSETH:
WHEREAS, Xx. Xxxxxx is an Officer of the Company;
WHEREAS, the Company and Southern wish to encourage Xx. Xxxxxx to
increase the profitability of the Company and to provide Xx. Xxxxxx an interest
in the Company's overall profitability, and to provide Xx. Xxxxxx with
additional deferred compensation for service she 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 Xx. Xxxxxx an account on the Company's books and records
(the "Account") which, if Xx. Xxxxxx continues to be an employee of the
Company, or any affiliate or subsidiary of Southern (as set forth in
Paragraph 4 hereof), shall entitle Xx. Xxxxxx 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 Four
Hundred Thousand Dollars ($400,000.00) of Market Value of
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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 Xx. Xxxxxx'x Account that number of deemed shares
(including fractional shares) of Southern's common stock
("Common Stock") as shall equal $400,000.00 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 Xx. Xxxxxx'x 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
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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 Xx. Xxxxxx'x
Account shall vest on July 1, 2003 (the "Vesting Date"), provided Xx.
Xxxxxx is then an employee of the Company, Southern, or an affiliate or
subsidiary of Southern.
d. Valuation of Account. The value of Xx. Xxxxxx'x
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 Xx. Xxxxxx by the Chief Executive
Officer of Southern have been equaled or exceeded during the
Performance Period as set forth on
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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 Xx. Xxxxxx'x 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 Officer of
Southern 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, all or
a portion of the value of the Tax Gross-up shall nevertheless be paid.
e. Payment of Account Balance. Provided that Xx. Xxxxxx
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 Xx.
Xxxxxx the value of her 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, Xx. Xxxxxx may defer all or a portion
of the amount to be received under this Agreement by having such amount
contributed on her 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 Xx. Xxxxxx'x 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
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without Cause, or termination of employment by Xx. Xxxxxx for Good
Reason following a Change in Control, or, if prior to the payout of the
value of the Account Xx. Xxxxxx 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 Xx. Xxxxxx, or her 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 Xx. Xxxxxx (the "Change in Control
Agreement"), the defined terms of which are incorporated in this
Paragraph 1.g. by reference thereto.
h. Assignability. Neither Xx. Xxxxxx, her estate, her
beneficiaries, nor her 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. Publicity; No Disparaging Statement. Except as otherwise
provided in Paragraph 5 hereof, Xx. Xxxxxx, 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.
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3. Non-Disclosure.
a. Definitions. For purposes of this Paragraph 3, 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 Xx.
Xxxxxx as a result of her affiliation with the Company or its
Affiliates, and other
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items that the Company or its Affiliates may from time to time
xxxx 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 xxxx, relating in any way to
the Company or its Affiliates and its or their business
prepared, conceived, revised, discovered, developed, or
created by Xx. Xxxxxx for the Company or its Affiliates or by
using the Company's or its Affiliates' time, personnel,
facilities, equipment, knowledge, information, resources, or
material.
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b. Nondisclosure; Ownership of Proprietary Property.
(1) Nondisclosure. In recognition of the
Company's need to protect its legitimate business interests,
Xx. Xxxxxx hereby acknowledges that she has been given access
to valuable Trade Secrets and Confidential Information; and
she hereby covenants and agrees that she will use the Trade
Secrets and Confidential Information for the Company's
business purposes only, and that she 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 her termination.
(2) Notification of Unauthorized Disclosure. Xx.
Xxxxxx shall exercise her best efforts to ensure the continued
confidentiality of all Trade Secrets and Confidential
Information known by, disclosed or made available to her. She
shall immediately notify the Company of any unauthorized
disclosure or use of any Trade Secrets or Confidential
Information of which she becomes aware. Xx. Xxxxxx 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.
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(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.
xx.xx. 101 et seq.), and Xx. Xxxxxx hereby unconditionally and
irrevocably transfers and assigns to the Company or its
Affiliates all rights, title and interest she 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 Xx. Xxxxxx and the
Company, its Affiliates or otherwise. Xx. Xxxxxx 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 Xx. Xxxxxx'x
termination, or at any point after that time upon the specific
request of the Company, she 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 her possession.
4. Transfer of Employment to Southern or a Southern Subsidiary or
Affiliate. In the event that Xx. Xxxxxx'x employment by the Company is
terminated and she shall become
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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 after the effective date of this Agreement that Xx. Xxxxxx is employed by
the Company, and/or Southern and/or such affiliate or subsidiary of Southern, as
the case may be.
5. Confidentiality and Legal Process. Xx. Xxxxxx represents and
agrees that she will keep the terms, amount and fact of this Agreement
confidential and that she will not hereafter disclose any information concerning
this Agreement to any one other than her 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 Xx. Xxxxxx from performing any duty or
obligation that shall arise as a matter of law. Specifically, Xx. Xxxxxx shall
continue to be under a duty to truthfully respond to matter of law.
Specifically, Xx. Xxxxxx 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 Xx. Xxxxxx'x right and ability to provide
information to any federal, state or local government in the lawful exercise of
such governments' governmental functions.
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6. Successors And Assigns; Applicable Law. Except as otherwise
provided in Paragraph l.h., this Agreement shall be binding upon and inure to
the benefit of Xx. Xxxxxx and her 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).
7. 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 Xx. Xxxxxx and
an authorized representative of Southern and the Company.
8. 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.
9. 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 her 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 her 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
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and that any party may in its or her 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.
10. 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 Xx. Xxxxxx may be entitled to receive the
value of her 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.
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 Xx. Xxxxxx may be
entitled or for which she may be eligible, whether funded or unfunded, by reason
of her 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 Xx. Xxxxxx.
13. Compensation. Any compensation contributed on behalf of Xx.
Xxxxxx 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.
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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 Xx. Xxxxxx and the Company.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
first listed above, effective this 5th day of October, 1999.
THE SOUTHERN COMPANY
By: /s/ X.X. Xxxxxxxx
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SOUTHERN ENERGY RESOURCES, INC.
By: /s/ V.N. Xxxxxx
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Xx. Xxxxxx
/s/ S. Xxxxx Xxxxxx
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EXHIBIT A
DEFERRED COMPENSATION AGREEMENT
SCHEDULE OF PROFITABILITY GOALS
FOR PERFORMANCE PERIOD
The Company shall achieve a Corporate Performance Factor under the
Southern Energy Resources, Inc. Short Term Incentive Plan of at least 1.0 for
each of the calendar years 2000, 2001 and 2002 and an average of 1.5 for such
three-year period.
Achievement of the goals shall be assessed annually by the Chief
Executive Officer of Southern and documented in Exhibit B of this Agreement.
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EXHIBIT B
DEFERRED COMPENSATION AGREEMENT
ANNUAL DOCUMENTATION OF PROFITABILITY GOALS
FOR PERFORMANCE PERIOD
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