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EXHIBIT 10.6
FORM OF
EMPLOYEE MATTERS AGREEMENT
BETWEEN
THE SOUTHERN COMPANY
AND
SOUTHERN ENERGY, INC.
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS....................................................................................1
1.01 AFFILIATED COMPANY...............................................................................1
1.02 AGREEMENT........................................................................................1
1.03 ANCILLARY AGREEMENTS.............................................................................2
1.04 ASO CONTRACTS....................................................................................2
1.05 CHANGE IN CONTROL PROGRAMS.......................................................................2
1.06 COBRA............................................................................................2
1.07 CODE.............................................................................................2
1.08 DEFERRED COMPENSATION PLAN.......................................................................2
1.09 DISTRIBUTION.....................................................................................2
1.10 DISTRIBUTION DATE................................................................................2
1.11 DOL..............................................................................................2
1.12 ERISA............................................................................................2
1.13 ESOP.............................................................................................2
1.14 ESP..............................................................................................3
1.15 FLEXIBLE BENEFITS PLAN...........................................................................3
1.16 FMLA.............................................................................................3
1.17 FOREIGN PLAN.....................................................................................3
1.18 FRINGE BENEFITS..................................................................................3
1.19 GROUP STATUS CHANGE..............................................................................3
1.19A GROUP STATUS CHANGE DATE........................................................................3
1.20 GROUP INSURANCE POLICIES.........................................................................3
1.21 HCFA.............................................................................................3
1.22 HEALTH AND WELFARE PLANS.........................................................................4
1.23 HEALTH PLANS.....................................................................................4
1.24 HMO..............................................................................................4
1.25 HMO AGREEMENTS...................................................................................4
1.26 IPO..............................................................................................4
1.27 IPO CLOSING DATE.................................................................................4
1.28 IPO REGISTRATION STATEMENT.......................................................................4
1.29 IRS..............................................................................................4
1.30 LEAVE OF ABSENCE PROGRAMS........................................................................4
1.31 LIABILITIES......................................................................................5
1.32 MASTER TRUST.....................................................................................5
1.33 NON-QUALIFIED PLANS..............................................................................5
1.34 OMNIBUS INCENTIVE COMPENSATION PLAN..............................................................5
1.35 OPTION...........................................................................................5
1.36 OUTSOURCE........................................................................................5
1.37 PARTICIPATING COMPANY............................................................................5
1.38 PBGC.............................................................................................5
1.39 PENSION PLAN.....................................................................................6
1.40 PERFORMANCE DIVIDEND PLAN........................................................................6
1.41 PERSON...........................................................................................6
1.42 PLAN.............................................................................................6
1.43 POST-EMPLOYMENT PROGRAMS.........................................................................6
1.44 PSP..............................................................................................6
1.45 QDRO.............................................................................................6
1.46 QMCSO............................................................................................6
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1.47 RABBI TRUST.....................................................................................7
1.48 RATIO...........................................................................................7
1.49 RECORD DATE.....................................................................................7
1.50 RETIREMENT PLANS................................................................................7
1.51 SEC.............................................................................................7
1.52 SEPARATION AGREEMENT............................................................................7
1.53 SERP............................................................................................7
1.54 SEVERANCE PLANS.................................................................................7
1.55 SHORT TERM INCENTIVE PLAN.......................................................................7
1.56 SOUTHERN........................................................................................7
1.57 SOUTHERN EMPLOYEE...............................................................................8
1.58 SOUTHERN ENERGY.................................................................................8
1.59 SOUTHERN ENERGY EMPLOYEE........................................................................8
1.60 SOUTHERN ENERGY GROUP...........................................................................8
1.61 SOUTHERN ENERGY RETIRED EMPLOYEE................................................................8
1.62 SOUTHERN ENERGY STOCK VALUE.....................................................................8
1.63 SOUTHERN ENERGY TERMINATED EMPLOYEE.............................................................9
1.64 SOUTHERN ENERGY WCP CLAIMS......................................................................9
1.65 SOUTHERN GROUP..................................................................................9
1.66 SOUTHERN STOCK VALUE............................................................................9
1.67 SOUTHERN TERMINATED EMPLOYEE....................................................................9
1.68 SOUTHERN WCP....................................................................................9
1.69 STOCK PLAN......................................................................................9
1.70 STOCK PURCHASE PLAN.............................................................................9
1.71 SUBSIDIARY......................................................................................9
1.72 SUPPLEMENTAL BENEFIT PLAN.......................................................................9
1.73 TAX INDEMNIFICATION AGREEMENT..................................................................10
1.74 UNION PLANS....................................................................................10
1.75 VALUE CREATION PLAN............................................................................10
ARTICLE II GENERAL PRINCIPLES..........................................................................10
2.01 ASSUMPTION OF SOUTHERN ENERGY LIABILITIES......................................................10
2.02 ESTABLISHMENT OF SOUTHERN ENERGY PLANS.........................................................11
2.03 SOUTHERN ENERGY'S PARTICIPATION IN SOUTHERN PLANS..............................................12
2.04 TERMS OF PARTICIPATION BY SOUTHERN ENERGY EMPLOYEES IN SOUTHERN ENERGY PLANS...................13
2.05 FOREIGN PLANS..................................................................................14
2.06 UNION PLANS....................................................................................14
ARTICLE III DEFINED BENEFIT PLAN.......................................................................14
3.01 ESTABLISHMENT OF MASTER PENSION PLAN TRUST.....................................................14
3.02 ASSUMPTION OF PENSION PLAN.....................................................................14
3.03 NO DISTRIBUTIONS TO SOUTHERN ENERGY EMPLOYEES..................................................15
ARTICLE IV DEFINED CONTRIBUTION PLANS..................................................................15
4.01 ESP............................................................................................15
4.02 ESOP...........................................................................................15
4.03 PSP............................................................................................16
4.04 DISCRETIONARY PLAN DESIGN......................................................................16
4.05 SOUTHERN ENERGY RETIRED EMPLOYEES..............................................................16
ARTICLE V NON-QUALIFIED AND OTHER PLANS................................................................16
5.01 SUPPLEMENTAL BENEFIT PLAN......................................................................16
5.02 DEFERRED COMPENSATION PLAN.....................................................................17
5.03 SERP...........................................................................................17
5.04 SOUTHERN ENERGY DEFERRED INCENTIVE COMPENSATION PLAN...........................................18
5.05 SOUTHERN ENERGY CHANGE IN CONTROL PROGRAMS.....................................................18
5.06 SOUTHERN ENERGY RABBI TRUST....................................................................18
5.07 SEVERANCE PLAN.................................................................................18
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ARTICLE VI HEALTH AND WELFARE PLANS....................................................................18
6.01 ASSUMPTION OF HEALTH AND WELFARE PLAN LIABILITIES..............................................18
6.02 CLAIMS FOR HEALTH AND WELFARE PLANS............................................................19
6.03 TRANSITIONAL ARRANGEMENTS......................................................................20
6.04 VENDOR AND INSURANCE ARRANGEMENTS..............................................................21
6.05 COBRA..........................................................................................22
6.06 LEAVE OF ABSENCE PROGRAMS AND FMLA.............................................................22
6.07 SOUTHERN WORKERS' COMPENSATION PROGRAM.........................................................22
ARTICLE VII EQUITY AND OTHER COMPENSATION..............................................................24
7.01 SOUTHERN OPTIONS...............................................................................24
7.02 SOUTHERN PERFORMANCE DIVIDEND PLAN.............................................................26
7.03 SOUTHERN ENERGY VALUE CREATION PLAN............................................................26
7.04 STOCK PURCHASE PLAN............................................................................26
7.05 SOUTHERN ENERGY OMNIBUS INCENTIVE COMPENSATION PLAN............................................26
7.06 SOUTHERN ENERGY SHORT TERM INCENTIVE PLAN......................................................26
7.07 SOUTHERN PERFORMANCE PAY PLAN (SHAREHOLDER APPROVED)...........................................26
7.08 PERFORMANCE IMPROVEMENT PLAN RAMP DOWN.........................................................27
ARTICLE VIII FRINGE AND OTHER BENEFITS.................................................................27
8.01 EMPLOYEE ASSISTANCE PROGRAM....................................................................27
8.02 EDUCATIONAL ASSISTANCE PROGRAM.................................................................27
8.03 CREDIT UNION...................................................................................27
8.04 SOUTHERN-OWNED CARS............................................................................27
8.05 EXECUTIVE FINANCIAL PLANNING...................................................................27
8.06 RELOCATION.....................................................................................28
8.07 OTHER BENEFITS.................................................................................28
ARTICLE IX.............................................................................................28
9.01 TRANSITIONAL SERVICES AGREEMENT................................................................28
9.02 PAYMENT OF LIABILITIES, PLAN EXPENSES AND RELATED MATTERS......................................28
9.03 SHARING OF PARTICIPANT INFORMATION.............................................................29
9.04 REPORTING AND DISCLOSURE COMMUNICATIONS TO PARTICIPANTS........................................29
9.05 AUDITS REGARDING VENDOR CONTRACTS..............................................................30
9.06 BENEFICIARY DESIGNATIONS.......................................................................30
9.07 REQUESTS FOR IRS AND DOL OPINIONS..............................................................30
9.08 FIDUCIARY MATTERS..............................................................................30
9.09 CONSENT OF THIRD PARTIES.......................................................................30
9.10 SOUTHERN INTRANET..............................................................................31
9.11 TAX COOPERATION................................................................................31
9.12 PLAN RETURNS...................................................................................31
ARTICLE X EMPLOYMENT-RELATED MATTERS...................................................................31
10.01 TERMS OF SOUTHERN ENERGY EMPLOYMENT...........................................................31
10.02 HR DATA SUPPORT SYSTEMS.......................................................................31
10.03 NON-SOLICITATION OF EMPLOYEES.................................................................31
10.04 EMPLOYMENT OF EMPLOYEES WITH U.S. WORK VISAS..................................................32
10.05 CONFIDENTIALITY AND PROPRIETARY INFORMATION...................................................32
10.06 ACCRUED PAYROLL, BONUSES, PROFIT SHARING AND COMMISSIONS......................................36
10.07 PAYROLL AND WITHHOLDING.......................................................................36
10.08 PERSONNEL RECORDS.............................................................................37
10.09 NON-TERMINATION OF EMPLOYMENT; NO THIRD-PARTY BENEFICIARIES...................................37
10.10 EMPLOYMENT LITIGATION.........................................................................38
ARTICLE XI GENERAL PROVISIONS..........................................................................38
11.01 EFFECT IF GROUP STATUS CHANGE DATE DOES NOT OCCUR.............................................38
11.02 RELATIONSHIP OF PARTIES.......................................................................38
11.03 AFFILIATED COMPANIES..........................................................................39
11.04 INCORPORATION OF SEPARATION AGREEMENT PROVISIONS..............................................39
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11.05 GOVERNING LAW................................................................................39
11.06 SEVERABILITY.................................................................................39
11.07 AMENDMENT....................................................................................39
11.08 TERMINATION..................................................................................39
11.09 CONFLICT.....................................................................................39
11.10 COUNTERPARTS.................................................................................40
SCHEDULE 1.22 HEALTH AND WELFARE PLANS................................................................42
SCHEDULE 1.23 HEALTH PLANS............................................................................43
SCHEDULE 1.43 POST-EMPLOYMENT PROGRAMS................................................................45
SCHEDULE 2.01 EMPLOYMENT LIABILITIES INDEMNIFICATION..................................................46
SCHEDULE 2.01(a) BENEFITS AND LIABILITIES FOR SOUTHERN ENERGY RETIRED EMPLOYEES.......................49
SCHEDULE 6.04(a) THIRD PARTY ASO CONTRACTS............................................................52
SCHEDULE 6.04(b) GROUP INSURANCE POLICIES.............................................................53
SCHEDULE 6.04(c) THIRD PARTY HMO CONTRACTS............................................................54
SCHEDULE 7.04 STOCK PURCHASE PLAN.....................................................................55
SCHEDULE 7.05 SOUTHERN ENERGY OMNIBUS INCENTIVE COMPENSATION PLAN.....................................56
SCHEDULE 8 FRINGE BENEFITS.............................................................................1
SCHEDULE 10.10(a) EMPLOYMENT LITIGATION - TRANSFERRED CLAIMS...........................................1
SCHEDULE 10.10(b) EMPLOYMENT LITIGATION - JOINTLY DEFEND CLAIMS........................................1
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EMPLOYEE MATTERS AGREEMENT
THIS EMPLOYEE MATTERS AGREEMENT (this "Agreement") is entered into as
of September 1, 2000, between The Southern Company ("Southern"), a Delaware
corporation and Southern Energy, Inc. ("Southern Energy"), a Delaware
corporation. Capitalized terms used herein (other than the formal names of
Southern Plans (as defined below) and related trusts of Southern) and not
otherwise defined, shall have the respective meanings assigned to them in
Article I hereof.
WHEREAS, the Board of Directors of Southern has determined that it is
in the best interests of Southern and its shareholders to separate the
businesses of Southern and Southern Energy and to cause Southern Energy to offer
its stock for public trading; and
WHEREAS, Southern currently contemplates that, within 12 months
following such public offering, Southern will distribute to the holders of its
common stock, by means of a pro rata distribution, all of the shares of Southern
Energy common stock then owned by Southern; and
WHEREAS, in furtherance of the foregoing, Southern and Southern Energy
have agreed to enter into this Agreement to allocate between them assets,
liabilities and responsibilities with respect to certain employee compensation,
benefit plans and programs, and certain employment matters.
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth below, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Wherever used in this Agreement, the following terms shall have the
meanings indicated below, unless a different meaning is plainly required by the
context. The singular shall include the plural, unless the context indicates
otherwise. Headings of sections are used for convenience of reference only, and
in case of conflict, the text of this Agreement, rather than such headings,
shall control:
1.01 AFFILIATED COMPANY. "Affiliated Company" shall have the meaning
set forth in the Separation Agreement.
1.02 AGREEMENT. "Agreement" means this Employee Matters Agreement,
including all the Addenda, Schedules and Exhibits hereto, and all amendments
made hereto from time to time.
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1.03 ANCILLARY AGREEMENTS. "Ancillary Agreements" means all of the
underlying agreements, documents and instruments referred to, contemplated by,
or made a part of the Separation Agreement.
1.04 ASO CONTRACTS. "ASO Contracts" is defined in Subsection 6.04(a)
and the Schedule 6.04(a).
1.05 CHANGE IN CONTROL PROGRAMS. "Change in Control Programs," when
immediately preceded by "Southern," means the Southern Executive Change in
Control Plan, the Southern Change in Control Plan and the individual change in
control agreements entered into with executives of Southern. When immediately
preceded by "Southern Energy," "Change in Control Programs" means the Southern
Energy change in control plans to be established by Southern Energy pursuant to
Sections 2.02 and 5.05 that correspond to the respective Southern Change in
Control Programs.
1.06 COBRA. "COBRA" means the continuation coverage requirements for
"group health plans" under Title X of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended from time to time, and as codified in
Code Section 4980B and ERISA Sections 601 through 608.
1.07 CODE. "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
1.08 DEFERRED COMPENSATION PLAN. "Deferred Compensation Plan," when
immediately preceded by "Southern," means the Southern Deferred Compensation
Plan. When immediately preceded by "Southern Energy," "Deferred Compensation
Plan" means the Southern Energy deferred compensation plan to be established by
Southern Energy pursuant to Sections 2.02 and 5.02 that corresponds to the
Southern Deferred Compensation Plan.
1.09 DISTRIBUTION. "Distribution" means a pro rata distribution by
Southern to the holders of its common stock of all the shares of Southern Energy
common stock owned by Southern, as the same is further described in the
Separation Agreement.
1.10 DISTRIBUTION DATE. "Distribution Date" means the date that the
Distribution is effective.
1.11 DOL. "DOL" means the United States Department of Labor.
1.12 ERISA. "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended from time to time.
1.13 ESOP. "ESOP," when immediately preceded by "Southern," means the
Southern Employee Stock Ownership Plan, a defined contribution plan.
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1.14 ESP. "ESP," when immediately preceded by "Southern," means the
Southern Employee Savings Plan, a defined contribution plan. When immediately
preceded by "Southern Energy," "ESP" means the employee savings plan to be
established by Southern Energy pursuant to Sections 2.02 and 4.01 that
corresponds to the Southern Employee Savings Plan.
1.15 FLEXIBLE BENEFITS PLAN. "Flexible Benefits Plan," when immediately
preceded by "Southern," means the Southern Flexible Benefits Plan. When
immediately preceded by "Southern Energy," Flexible Benefits Plan means the
Southern Energy flexible benefits plan to be established by Southern Energy
pursuant to Sections 2.02 and Article VI that corresponds to the Southern
Flexible Benefits Plan.
1.16 FMLA. "FMLA" means the Family and Medical Leave Act of 1993, as
amended from time to time.
1.17 FOREIGN PLAN. "Foreign Plan" means those Southern Energy Plans
maintained by Southern Energy for the benefit of its non-expatriate employees
outside the U.S.
1.18 FRINGE BENEFITS. "Fringe Benefits," when immediately preceded by
"Southern," means the Southern employee assistance program and other fringe
benefits, plans, programs and arrangements sponsored and maintained by Southern
(as set forth in Article VIII and the Schedule attached thereto). When
immediately preceded by "Southern Energy," "Fringe Benefits" means the fringe
benefits, plans, programs and arrangements established or to be established by
Southern Energy pursuant to Section 2.02 and Article VIII that correspond to the
respective Southern Fringe Benefits.
1.19 GROUP STATUS CHANGE. "Group Status Change" means the earlier to
occur of: (a) the Distribution, or (b) Southern ceasing to own at least 80% of
the combined voting power of all classes of stock entitled to vote or the total
value of all shares of all classes of stock of Southern Energy then outstanding.
Southern's ownership of outstanding Southern Energy stock shall be determined
pursuant to Sections 414 and 1563 of the Code.
1.19A GROUP STATUS CHANGE DATE. "Group Status Change Date" means the
date on which the Group Status Change occurs, or such other date as Southern and
Southern Energy shall mutually agree upon.
1.20 GROUP INSURANCE POLICIES. "Group Insurance Policies" is defined in
Subsection 6.04(b) and the Schedule thereto.
1.21 HCFA. "HCFA" means the United States Health Care Financing
Administration.
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1.22 HEALTH AND WELFARE PLANS. "Health and Welfare Plans," when
immediately preceded by "Southern," means the Southern Health Plans, the
Southern Flexible Benefits Plan, and the health and welfare plans listed on
Schedule 1.22 established and maintained by Southern for the benefit of
employees and retirees of the Southern Group, and such other welfare plans or
programs as may apply to such employees and retirees as of the Group Status
Change Date. When immediately preceded by "Southern Energy," "Health and Welfare
Plans" means the Southern Energy Health Plans, the Southern Energy Flexible
Benefits Plan, and the health and welfare plans to be established by Southern
Energy pursuant to Section 2.02 and Article VI that correspond to the respective
Southern Health and Welfare Plans.
1.23 HEALTH PLANS. "Health Plans," when immediately preceded by
"Southern," means the Plans set forth on Schedule 1.23, and any similar or
successor plans, programs or arrangements. When immediately preceded by
"Southern Energy," "Health Plans" means the health plans, programs and
arrangements to be established by Southern Energy pursuant to Section 2.02 and
Article VI that correspond to the respective Southern Health Plans.
1.24 HMO. "HMO" means a health maintenance organization that provides
benefits under the Southern Health Plans or the Southern Energy Health Plans.
1.25 HMO AGREEMENTS. "HMO Agreements" is defined in Subsection 6.04(c)
and Schedule 6.04(c).
1.26 IPO. "IPO" means the initial public offering of Southern Energy
common stock pursuant to a registration statement on Form S-1 pursuant to the
Securities Act of 1933, as amended.
1.27 IPO CLOSING DATE. "IPO Closing Date" means the date of the closing
of the IPO, as further defined in the Separation Agreement.
1.28 IPO REGISTRATION STATEMENT. "IPO Registration Statement" means the
registration statement on Form S-1 pursuant to the Securities Act of 1933 as
amended, to be filed with the SEC registering the shares of common stock of
Southern Energy to be issued in the IPO, together with all amendments thereto.
1.29 IRS. "IRS" means the United States Internal Revenue Service.
1.30 LEAVE OF ABSENCE PROGRAMS. "Leave of Absence Programs," when
immediately preceded by "Southern," means the personal, medical, military and
FMLA leave offered from time to time under the personnel policies and practices
of Southern. When immediately preceded by "Southern Energy," "Leave of Absence
Programs" means the leave of absence programs established and maintained by
Southern Energy.
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1.31 LIABILITIES. "Liabilities" means all debts, liabilities,
guarantees, assurances, commitments, and obligations, whether fixed, contingent
or absolute, asserted or unasserted, matured or unmatured, liquidated or
unliquidated, accrued or not accrued, known or unknown, due or to become due,
whenever or however arising (including, without limitation, whether arising out
of any Contract or tort based on negligence or strict liability) and whether or
not the same would be required by generally accepted principles and accounting
policies to be reflected in financial statements or disclosed in the notes
thereto. "Contract" means any contract, agreement, lease, license, sales order,
purchase order, instrument or other commitment that is binding on any Person or
any part of its property under applicable law.
1.32 MASTER TRUST. "Master Trust," when immediately preceded by
"Southern," means the Southern Master Trust. When immediately preceded by
"Southern Energy," "Master Trust" means the Southern Energy Master Trust
described in Section 3.01.
1.33 NON-QUALIFIED PLANS. "Non-Qualified Plans," when immediately
preceded by "Southern," means the Southern Supplemental Benefit Plan, the
Southern SERP and the Southern Deferred Compensation Plan. When immediately
preceded by "Southern Energy," "Non-Qualified Plans" means the deferred
compensation, supplemental executive retirement and supplemental benefit plans,
programs, or arrangements established or to be established by Southern Energy
pursuant to Section 2.02 and Article V.
1.34 OMNIBUS INCENTIVE COMPENSATION PLAN. "Omnibus Incentive
Compensation Plan" means the Southern Energy Omnibus Incentive Compensation Plan
as described in Section 7.05.
1.35 OPTION. "Option," when immediately preceded by "Southern," means
an option to purchase Southern common stock pursuant to a Stock Plan. When
immediately preceded by "Southern Energy," "Option" means an option to purchase
Southern Energy common stock pursuant to a plan providing such benefits to be
established by Southern Energy pursuant to Section 2.02 and Article VII.
1.36 OUTSOURCE. "Outsource" is defined in Subsection 6.02(b).
1.37 PARTICIPATING COMPANY. "Participating Company" means: (a)
Southern; (b) any Person (other than an individual) that Southern has approved
for participation in, has accepted participation in, and which is participating
in, a Plan sponsored by Southern; or (c) any Person (other than an individual)
which, by the terms of such Plan, participates in such Plan or any employees of
which, by the terms of such Plan, participate in or are covered by such Plan.
1.38 PBGC. "PBGC" means the Pension Benefit Guaranty Corporation.
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1.39 PENSION PLAN. "Pension Plan," when immediately preceded by
"Southern," means the Southern Pension Plan, a defined benefit plan. When
immediately preceded by "Southern Energy," "Pension Plan" means the pension plan
to be established by Southern Energy pursuant to Section 2.02 and Article III
that corresponds to the Southern Pension Plan.
1.40 PERFORMANCE DIVIDEND PLAN. "Performance Dividend Plan," when
immediately preceded by "Southern," means the Southern Performance Dividend
Plan. When immediately preceded by "Southern Energy," "Performance Dividend
Plan" means the dividend plan, if any, established by Southern Energy pursuant
to Section 2.02 and Article VII that corresponds to the Southern Performance
Dividend Plan.
1.41 PERSON. "Person" means an individual, a partnership, a
corporation, a limited liability company, an association, a joint stock company,
a trust, a joint venture, an unincorporated organization, and a governmental
entity or any department, agency or political subdivision thereof.
1.42 PLAN. "Plan," means any plan, policy, program, payroll practice,
arrangement, contract, trust, insurance policy, or any agreement or funding
vehicle providing compensation or benefits to employees, former employees or
directors of Southern or Southern Energy.
1.43 POST-EMPLOYMENT PROGRAMS. "Post-Employment Programs," when
immediately preceded by "Southern," means the Plans set forth on Schedule 1.43
that permit certain retirees and former employees of the Southern Group and
their eligible spouses and dependents to continue to receive coverage and
benefits under certain Southern Health and Welfare Plans for a designated period
of time. When immediately preceded by "Southern Energy," "Post-Employment
Programs" means such continuation programs to be established by Southern Energy
pursuant to Sections 2.02 and Article VI that correspond to the Southern
Post-Employment Programs.
1.44 PSP. "PSP," when immediately preceded by "Southern," means the
Southern Performance Sharing Plan, a defined contribution plan. When immediately
preceded by "Southern Energy," "PSP" means the performance sharing plan, if any,
to be established by Southern Energy pursuant to Sections 2.02 and 4.03 that
corresponds to the Southern Performance Sharing Plan.
1.45 QDRO. "QDRO" means a domestic relations order which qualifies
under Code Section 414(p) and ERISA Section 206(d) and which creates or
recognizes an alternate payee's right to, or assigns to an alternate payee, all
or a portion of the benefits payable to a participant under any of the Southern
Retirement Plans.
1.46 QMCSO. "QMCSO" means a medical child support order which qualifies
under ERISA Section 609(a) and which creates or recognizes the existence of an
alternate
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recipient's right to, or assigns to an alternate recipient the right to, receive
benefits for which a participant or beneficiary is eligible under any of the
Health Plans.
1.47 RABBI TRUST. "Rabbi Trust," when immediately preceded by
"Southern," means the rabbi trust established for purposes of holding assets
under the Southern Executive Deferred Compensation Trust. When immediately
preceded by "Southern Energy," "Rabbi Trust" means the rabbi trust to be
established by Southern Energy pursuant to Section 5.06 that corresponds to the
Southern Rabbi Trust.
1.48 RATIO. "Ratio" means the ratio determined by dividing the Southern
Energy Stock Value by the Southern Stock Value.
1.49 RECORD DATE. "Record Date" means the close of business on the date
to be determined by the Board of Directors of Southern as the record date for
determining the stockholders of Southern entitled to receive shares of common
stock of Southern Energy in the Distribution.
1.50 RETIREMENT PLANS. "Retirement Plans," when immediately preceded by
"Southern," means the Southern Pension Plan, the Southern ESP, the Southern ESOP
and the Southern PSP. When immediately preceded by "Southern Energy,"
"Retirement Plans" means all defined contribution and defined benefit plans
established or to be established by Southern Energy pursuant to Section 2.02,
and Articles III and IV that correspond to, or receive assets from, the
respective Southern Retirement Plans.
1.51 SEC. "SEC" means the United States Securities and Exchange
Commission.
1.52 SEPARATION AGREEMENT. "Separation Agreement" means the Master
Separation and Distribution Agreement dated as of September 1, 2000, of which
this Agreement is an Exhibit.
1.53 SERP. "SERP," when immediately preceded by "Southern," means the
Southern Supplemental Executive Retirement Plan. When immediately preceded by
"Southern Energy," "SERP" means the Southern Energy Supplemental Executive
Retirement Plan.
1.54 SEVERANCE PLANS. "Severance Plans," when immediately preceded by
"Southern," means the severance pay plans established and maintained by
Southern. When immediately preceded by "Southern Energy," "Severance Plans"
means the severance pay plans established and maintained by Southern Energy.
1.55 SHORT TERM INCENTIVE PLAN. "Short Term Incentive Plan" means the
Southern Energy Short Term Incentive Plan described in Section 7.06.
1.56 SOUTHERN. "Southern" means The Southern Company, a Delaware
corporation. In all such instances in which Southern is referred to in this
Agreement, it
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shall also be deemed to include a reference to each member of the Southern
Group, unless it specifically provides otherwise; Southern shall be solely
responsible to Southern Energy for ensuring that each member of the Southern
Group complies with the applicable terms of this Agreement.
1.57 SOUTHERN EMPLOYEE. "Southern Employee" means an individual who, on
the Group Status Change Date, is or was employed within the Southern Group and
is not a Southern Energy Employee.
1.58 SOUTHERN ENERGY. "Southern Energy" means Southern Energy, Inc., a
Delaware corporation. In all such instances in which Southern Energy is referred
to in this Agreement, it shall also be deemed to include a reference to each
member of the Southern Energy Group, unless it specifically provides otherwise;
Southern Energy shall be solely responsible to Southern for ensuring that each
member of the Southern Energy Group complies with the applicable terms of this
Agreement.
1.59 SOUTHERN ENERGY EMPLOYEE. "Southern Energy Employee" means any
individual who, as of the Group Status Change Date, is: (a) either actively
employed by, or on a leave of absence from, the Southern Energy Group; (b) a
Southern Energy Terminated Employee; (c) an alternate payee under a QDRO,
alternate recipient under a QMCSO, beneficiary, covered dependent, or qualified
beneficiary (as such term is defined under COBRA), of an employee described in
Subsection (a) or (b) above; or (d) an employee or group of employees designated
by Southern and Southern Energy, by mutual agreement, as Southern Energy
Employees; but not (e) a Southern Energy Retired Employee. An employee may be a
Southern Energy Employee pursuant to this Section regardless of whether such
employee is, as of the Group Status Change Date, alive, actively employed, on a
temporary leave of absence from active employment, on layoff, terminated from
employment, retired or on any other type of employment or post-employment status
relative to a Southern Plan, and regardless of whether, as of the Group Status
Change Date, such employee is then receiving any benefits from a Southern Plan.
1.60 SOUTHERN ENERGY GROUP. "Southern Energy Group" shall have the
meaning set forth in the Separation Agreement.
1.61 SOUTHERN ENERGY RETIRED EMPLOYEE. "Southern Energy Retired
Employee" means any Southern Energy Employee who retired on or before the Group
Status Change Date and who is identified as a Southern Energy Retired Employee
by mutual agreement between Southern Energy and Southern on or before the Group
Status Change Date.
1.62 SOUTHERN ENERGY STOCK VALUE. "Southern Energy Stock Value" means
the opening per-share price of Southern Energy common stock as listed on the
NYSE or NASDAQ, as applicable, on the first trading day after the Distribution
Date.
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1.63 SOUTHERN ENERGY TERMINATED EMPLOYEE. "Southern Energy Terminated
Employee" means any individual who is a former employee of the Southern Group
who was terminated from the Southern Energy Group on or before the Distribution.
Notwithstanding the foregoing, "Southern Energy Terminated Employee" shall not,
unless otherwise expressly provided to the contrary in this Agreement, include:
(a) an individual who is a Southern Employee at the Group Status Change Date;
(b) an individual who is otherwise a Southern Energy Terminated Employee, but
who is subsequently employed by the Southern Group on or prior to the Group
Status Change Date; or (c) a Southern Energy Retired Employee.
1.64 SOUTHERN ENERGY WCP CLAIMS. "Southern Energy WCP Claims" is
defined in Subsection 6.07(a)(i).
1.65 SOUTHERN GROUP. "Southern Group" shall have the meaning set forth
in the Separation Agreement.
1.66 SOUTHERN STOCK VALUE. "Southern Stock Value" means the closing
per-share price of Southern common stock as listed on the NYSE on the last
trading day before the Distribution Date.
1.67 SOUTHERN TERMINATED EMPLOYEE. "Southern Terminated Employee" means
any individual who is a former employee of the Southern Group and who, on the
Group Status Change Date, is not a Southern Energy Employee.
1.68 SOUTHERN WCP. "Southern WCP" means the Southern Workers'
Compensation Program, comprised of the various arrangements established by a
member of the Southern Group to comply with the workers' compensation
requirements of the states in which the Southern Group conducts business.
1.69 STOCK PLAN. "Stock Plan," when immediately preceded by "Southern,"
means the Southern Performance Stock Plan, pursuant to which employees and other
service providers hold Options.
1.70 STOCK PURCHASE PLAN. "Stock Purchase Plan" means the employee
stock purchase plan to be established by Southern Energy pursuant to Section
7.04.
1.71 SUBSIDIARY. "Subsidiary" shall have the meaning set forth in the
Separation Agreement.
1.72 SUPPLEMENTAL BENEFIT PLAN. "Supplemental Benefit Plan," when
immediately preceded by "Southern," means the Southern Supplemental Benefit
Plan. When immediately preceded by "Southern Energy," "Supplemental Benefit
Plan" means the Southern Energy supplemental benefit plan to be established
pursuant to Sections 2.02 and 5.01 that corresponds to the respective Southern
Supplemental Benefit Plan.
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1.73 TAX INDEMNIFICATION AGREEMENT. "Tax Indemnification Agreement"
means the Ancillary Agreement which is attached as an exhibit to the Separation
Agreement.
1.74 UNION PLANS. "Union Plans," when immediately preceded by "Southern
Energy," means all Plans maintained by Southern Energy exclusively for the
benefit of certain of its bargaining unit employees.
1.75 VALUE CREATION PLAN. "Value Creation Plan," when immediately
preceded by "Southern Energy," means the Southern Energy Value Creation Plan, as
maintained by Southern Energy as of the date of the Agreement.
ARTICLE II
GENERAL PRINCIPLES
2.01 ASSUMPTION OF SOUTHERN ENERGY LIABILITIES. Except as specified
otherwise in this Agreement, or as mutually agreed upon by Southern Energy and
Southern from time to time, Southern Energy hereby assumes and agrees to pay,
perform, fulfill and discharge, in accordance with their respective terms, all
of the following: (a) subject to Section 9.02 and to the indemnification
provisions of Schedule 2.01, all Liabilities to or relating to Southern Energy
Employees, in each case relating to, arising out of or resulting from employment
by the Southern Group before the Group Status Change Date, (including
Liabilities arising under or relating to Southern Plans and Southern Energy
Plans); (b) subject to Section 9.02 and to the indemnification provisions of
Schedule 2.01, all other Liabilities to or relating to Southern Energy
Employees, to the extent relating to, arising out of or resulting from future,
present or former employment with the Southern Energy Group (including
Liabilities arising under or relating to Southern Plans and Southern Energy
Plans); (c) subject to Section 9.02 and to the indemnification provisions of
Schedule 2.01, all Liabilities relating to, arising out of or resulting from any
other actual or alleged employment relationship with the Southern Energy Group;
and (d) subject to Section 9.02 and to the indemnification provisions of
Schedule 2.01, all other Liabilities relating to, arising out of or resulting
from obligations, liabilities and responsibilities expressly assumed or retained
by the Southern Energy Group or a Southern Energy Plan, pursuant to this
Agreement. Except as specified otherwise in this Agreement or as otherwise
mutually agreed upon by Southern and Southern Energy from time to time, Southern
shall transfer to Southern Energy amounts equal to trust assets and other
related assets as consistent with the applicable Plan transition that arises out
of or relates to Southern Energy's interest in each Southern Plan. Except as
specified otherwise in this Agreement or as otherwise mutually agreed upon by
Southern and Southern Energy from time to time, Southern Energy, shall transfer
to Southern, when appropriate, amounts equal to trust assets and other assets,
as consistent with the applicable Southern Plans, that arise out of or relate to
Southern Energy's Liabilities for or relating to Southern Energy Retired
Employees' interests in Southern
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and/or Southern Energy Plans or with respect to Southern Employees who
previously accrued Liabilities under either Southern Energy Plans or Southern
Plans while an employee of Southern Energy. Notwithstanding the foregoing, the
Liabilities and/or assets attributable to Southern Energy Retired Employees and
certain Southern Energy Terminated Employees mutually agreed upon by Southern
Energy and Southern shall be determined as provided in Schedule 2.01(a).
2.02 ESTABLISHMENT OF SOUTHERN ENERGY PLANS.
(a) Health and Welfare Plans. Except as specified
otherwise in this Agreement, effective as of the Group Status Change
Date or such other date(s) as Southern and Southern Energy may mutually
agree, Southern Energy shall adopt the Southern Energy Health and
Welfare Plans and Southern Energy Post-Employment Programs. The
foregoing Southern Energy Plans as in effect as of the Group Status
Change Date shall be comparable to the Southern Plans as in effect on
the Group Status Change Date.
(b) Retirement Plans and Fringe Benefits. Except as
specified otherwise in this Agreement, effective as of the Group Status
Change Date or such other date(s) as Southern and Southern Energy may
mutually agree, Southern Energy shall adopt the Southern Energy
Retirement Plans and the Southern Energy Fringe Benefits. The foregoing
Southern Energy Plans as in effect as of the Group Status Change Date
shall be comparable to the Southern Plans as in effect on the Group
Status Change Date.
(c) Equity and Other Compensation. Except as specified
otherwise in this Agreement, effective as of the IPO Closing Date or
such other date(s) as Southern and Southern Energy may mutually agree,
Southern Energy shall adopt such Plans as may be determined to be
appropriate, including, without limitation, the Southern Energy Omnibus
Incentive Compensation Plan and the Southern Energy Stock Purchase
Plan. Except as specified otherwise in this Agreement, effective as of
the Group Status Change Date or such other date(s) as Southern and
Southern Energy may mutually agree, Southern Energy shall adopt such
Plans as may be determined to be appropriate, including, without
limitation, the Southern Energy Deferred Compensation Plan, the
Southern Energy Supplemental Benefit Plan, the Southern Energy Change
in Control Programs and the Southern Energy Deferred Compensation
Trust. The foregoing Southern Energy Plans as in effect as of the Group
Status Change Date shall be comparable to the Southern Plans as in
effect on the Group Status Change Date.
(d) Southern Energy Under No Obligation to Maintain
Plans. Except as specified otherwise in this Agreement, nothing in this
Agreement shall preclude Southern Energy, at any time from amending,
merging, modifying, terminating, eliminating, reducing, or otherwise
altering in any respect any Southern Energy Plan, any benefit under any
Southern Energy Plan or any trust, insurance policy or
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funding vehicle related to any Southern Energy Plan (to the extent
permitted by law).
2.03 SOUTHERN ENERGY'S PARTICIPATION IN SOUTHERN PLANS.
(a) Participation in Southern Plans.
(i) Except as specified otherwise in this Agreement,
or as Southern and Southern Energy may mutually agree,
Southern Energy shall continue as a Participating Company in
the Southern Plans in effect as of the IPO Closing Date, to
the extent that Southern Energy has not yet established
comparable Plans. Effective as of any date on or after the IPO
Closing Date and before the Group Status Change Date, any
member of the Southern Energy Group not described in the
preceding sentence may, at its request and with the consent of
Southern and Southern Energy, become a Participating Company
in any or all of the Southern Plans, to the extent that
Southern Energy has not yet established a comparable Plan.
(ii) On and after the Group Status Change Date,
Southern Energy Retired Employees shall continue to
participate in the Southern Plans for which they are eligible
as of the Group Status Change Date, including, but not limited
to, the Southern Post-Employment Programs, Southern Pension
Plan and any Southern Plan as provided in Article V.
(b) Southern's General Obligations as Plan Sponsor.
(i) To the extent that Southern Energy is a
Participating Company in any Southern Plan(s), Southern shall
continue to administer, or cause to be administered, in
accordance with their terms and applicable law, such Southern
Plan(s), and shall have the sole and absolute discretion and
authority to interpret the Southern Plan(s), as set forth
therein. Southern shall not, without first consulting with
Southern Energy, amend any material feature of any Southern
Plan in which Southern Energy is a Participating Company,
except to the extent such amendment would not affect any
benefits of Southern Energy Employees under such Plan or as
may be necessary or appropriate to comply with applicable law.
(ii) With regard to Southern Energy Retired Employees
participating in Southern Plans after the Group Status Change
Date, Southern shall continue to administer, or cause to be
administered, in accordance with their terms and applicable
law, such Southern Plans, and shall have sole and absolute
discretion and authority to interpret such Plans or amend such
plans, as set forth therein.
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(c) Southern Energy's General Obligations as
Participating Company. Southern Energy shall perform with respect to
its participation in the Southern Plans, the duties of a Participating
Company as set forth in each such Plan or any procedures adopted
pursuant thereto, including (without limitation): (i) assisting in the
administration of claims, to the extent requested by the claims
administrator of the applicable Southern Plan; (ii) cooperating fully
with Southern Plan auditors, benefit personnel and benefit vendors;
(iii) preserving the confidentiality of all financial arrangements
Southern has or may have with any vendors, claims administrators,
trustees or any other entity or individual with whom Southern has
entered into an agreement relating to the Southern Plans; and (iv)
preserving the confidentiality of participant information (including,
without limitation, health information in relation to FMLA leaves) to
the extent not specified otherwise in this Agreement.
(d) Termination of Participating Company Status. Except
as otherwise may be mutually agreed upon by Southern and Southern
Energy, effective as of the Group Status Change Date or such other date
as Southern Energy establishes a comparable Plan (as specified in
Section 2.02 or otherwise in this Agreement), Southern Energy shall
automatically cease to be a Participating Company in the corresponding
Southern Plan.
2.04 TERMS OF PARTICIPATION BY SOUTHERN ENERGY EMPLOYEES IN SOUTHERN
ENERGY PLANS.
(a) Non-Duplication of Benefits. As of the Group Status
Change Date or such later date that applies to the particular Southern
Energy Plan established thereafter, the Southern Energy Plans shall be,
with respect to Southern Energy Employees, in all respects the
successors in interest to, and shall not provide benefits that
duplicate benefits provided by, the corresponding Southern Plans.
Southern and Southern Energy shall mutually agree, if necessary, on
methods and procedures, including amending the respective Plan
documents, to prevent Southern Energy Employees from receiving
duplicate benefits from the Southern Plans and the Southern Energy
Plans.
(b) Service Credit. Except as specified otherwise in this
Agreement, with respect to Southern Energy Employees, each Southern
Energy Plan shall provide that all service, all compensation and all
other benefit-affecting determinations that, as of the Group Status
Change Date, were recognized under the corresponding Southern Plan
shall, as of the Group Status Change Date, receive full recognition and
credit and be taken into account under such Southern Energy Plan to the
same extent as if such items occurred under such Southern Energy Plan,
except to the extent that duplication of benefits would result. The
service crediting provisions shall be subject to any respectively
applicable "service bridging," "break in
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service," "employment date," or "eligibility date" rules under the
Southern Energy Plans and the Southern Plans.
2.05 FOREIGN PLANS. Southern Energy intends to maintain all Foreign
Plans in existence as of the IPO Closing Date up to and through the Group Status
Change Date.
2.06 UNION PLANS. Southern and/or Southern Energy shall continue to
maintain all Union Plans in existence as of the IPO Closing Date up to and after
the Group Status Change Date in accordance with the terms of those plans and
subject to collective bargaining.
ARTICLE III
DEFINED BENEFIT PLAN
3.01 ESTABLISHMENT OF MASTER PENSION PLAN TRUST. Southern Energy Master
Trust. Effective as of or before the Group Status Change Date, Southern Energy
shall establish, or cause to be established, a separate master trust which is
intended to be qualified under Code Section 401(a) and exempt from taxation
under Code Section 501(a)(1) (the "Southern Energy Master Trust"), to hold the
assets of the Southern Energy Pension Plan, the Southern Energy Resources, Inc.
Pension Plan for Bargaining Unit Employees and the Southern Energy Resources,
Inc. Hourly Operations Pension Plan.
3.02 ASSUMPTION OF PENSION PLAN.
(a) Assumption of Liabilities by Southern Energy Pension
Plan. Effective as of the Group Status Change Date, all accrued
benefits of Southern Energy Employees under the Southern Pension Plan
will be transferred to the Southern Energy Pension Plan. The Southern
Energy Pension Plan shall assume and be solely responsible for all
Liabilities for or relating to the accrued benefits of the Southern
Energy Employees under the Southern Pension Plan as of the Group Status
Change Date.
(b) Asset Allocation and Transfers.
(i) As soon as reasonably practicable, but in any
case before the Group Status Change Date, Southern shall
engage actuaries and cause to be determined for the Southern
Pension Plan the amount of assets to be transferred from the
Southern Pension Plan to the Southern Energy Pension Plan.
Such amount shall be equal to the greater of (A) the amount
required under Code Section 414(l), or (B) the amount in the
sub-account within the Southern Master Trust that has been
separately maintained and accounted for on behalf of Southern
Energy Employees less the amount attributable to
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Southern Energy Retired Employees. The actuarial assumptions
that will be used to value the benefit Liabilities described
in the preceding sentence shall be consistent with the
actuarial assumptions used by Southern in prior valuations and
shall be mutually agreed to by Southern and Southern Energy
prior to the Group Status Change Date.
(ii) The Southern Energy Pension Plan and the
Southern Energy Master Trust shall not receive a transfer of
any assets currently held in a Code Section 401(h) sub-account
within the Southern Master Trust.
(iii) As soon as reasonably practicable, the amount
determined in Subsection 3.02(b)(i) above of the assets of the
Southern Pension Plan valued as of the Group Status Change
Date shall be transferred to the Southern Energy Pension Plan.
3.03 NO DISTRIBUTIONS TO SOUTHERN ENERGY EMPLOYEES. The Southern
Pension Plan and the Southern Energy Pension Plan shall provide that no
distribution of retirement benefits shall be made to any Southern Energy
Employee on account of the Southern Energy Group ceasing to be a Subsidiary of
the Southern Group as of the Group Status Change Date.
ARTICLE IV
DEFINED CONTRIBUTION PLANS
4.01 ESP. Effective as of the Group Status Change Date, Southern Energy
shall establish, or cause to be established, a trust, which is intended to be
qualified under Code Section 401(a), exempt from taxation under Code Section
501(a)(1), and forming the Southern Energy ESP. Such Southern Energy ESP shall
be comparable to the Southern ESP. Upon the mutual agreement of Southern and
Southern Energy, the Southern Energy ESP shall accept asset transfers from the
Southern ESP, PSP and/or ESOP. As soon as reasonably practicable after the Group
Status Change Date, Southern Energy shall use its commercially reasonable best
efforts to enter into agreements to accomplish such asset transfer(s), to engage
a trustee and recordkeeper and to transfer and maintain the necessary
participant records. Southern Energy and Southern each agree to use their
commercially reasonable best efforts to accomplish any transfer of assets.
4.02 ESOP. After the 1999 plan year contribution is made to the
Southern ESOP, no further contributions will be made to accounts for Southern
Energy Employees. After the Group Status Change Date, Southern Energy shall not
establish a Plan comparable to the Southern ESOP, but may, at its discretion,
allow transfers of assets in the Southern ESOP to another tax qualified Plan
maintained by Southern Energy.
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4.03 PSP. Effective as of the Group Status Change Date, Southern Energy
may, at its discretion, establish, or cause to be established, a trust, which is
intended to be qualified under Code Section 401(a), exempt from taxation under
Code Section 501(a)(1), and forming the Southern Energy PSP. Such Southern
Energy PSP, if established, shall be comparable to the Southern PSP. Upon the
mutual agreement of Southern and Southern Energy, the Southern Energy PSP shall
accept asset transfers from the Southern PSP. Notwithstanding the foregoing, it
is Southern Energy's intent that no action will cause a Southern Energy employee
to lose his or her unvested right to an account balance in the Southern PSP.
4.04 DISCRETIONARY PLAN DESIGN. Notwithstanding the foregoing,
effective as of the Group Status Change Date or such other date as mutually
agreed upon by Southern and Southern Energy, Southern Energy shall have the
discretion to consolidate the aforementioned Southern Energy defined
contribution plans provided at least one such plan is established and that plan
is tax qualified.
4.05 SOUTHERN ENERGY RETIRED EMPLOYEES. Notwithstanding the above,
account balances of Southern Energy Retired Employees, if any, shall remain in
the Southern ESP, ESOP and PSP after the Group Status Change Date.
ARTICLE V
NON-QUALIFIED AND OTHER PLANS
5.01 SUPPLEMENTAL BENEFIT PLAN.
(a) Establishment of Southern Energy Supplemental Benefit
Plan. Effective as of the Group Status Change Date, Southern Energy
shall establish the Southern Energy Supplemental Benefit Plan which
shall be comparable to the Southern Supplemental Benefit Plan. As of
the Group Status Change Date, Southern Energy shall assume all
Liabilities to or relating to the Southern Energy Employees under the
Southern Supplemental Benefit Plan. As of the Group Status Change Date,
Southern shall assume all Liabilities to or relating to Southern Energy
Retired Employees under the Southern Supplemental Benefit Plan.
(b) Participation in Supplemental Benefit Plan. Effective
as of the Group Status Change Date, eligible Southern Energy Employees
determined in accordance with the requirements of ERISA shall only be
eligible to participate in the Southern Energy Supplemental Benefit
Plan.
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5.02 DEFERRED COMPENSATION PLAN.
(a) Establishment of Southern Energy Deferred
Compensation Plan. Effective as of the Group Status Change Date,
Southern Energy shall establish the Southern Energy Deferred
Compensation Plan which shall be comparable to the Southern Deferred
Compensation Plan. As of the Group Status Change Date, Southern Energy
shall assume all Liabilities to or relating to the Southern Energy
Employees under the Southern Deferred Compensation Plan. As of the
Group Status Change Date, Southern shall assume all Liabilities to or
relating to Southern Energy Retired Employees under the Southern
Deferred Compensation Plan.
(b) Participation in Deferred Compensation Plans.
Effective as of the Group Status Change Date, eligible Southern Energy
Employees determined in accordance with the requirements of ERISA shall
only be eligible to participate in the Southern Energy Deferred
Compensation Plan.
5.03 SERP.
(a) Southern Energy SERP.
(i) Maintenance of the Southern Energy SERP. After
the Group Status Change Date, Southern Energy shall continue
to maintain the Southern Energy SERP, but Southern Energy
shall amend the plan to eliminate the transitional provisions
between the Southern SERP and the Southern Energy SERP. As of
the Group Status Change Date, Southern Energy shall assume all
Liabilities to or relating to the Southern Energy Employees
under the Southern SERP.
(ii) Participation in the Southern Energy SERP.
Effective as of the Group Status Change Date, eligible
Southern Energy Employees determined in accordance with the
requirements of ERISA shall only be eligible to participate in
the Southern Energy SERP.
(b) Southern SERP. Effective as of the Group Status
Change Date, Southern shall assume all Liabilities to or relating to
Southern Energy Retired Employees under the Southern Energy SERP and
thereafter Southern Energy Retired Employees shall participate in the
Southern SERP.
(i) Maintenance of the Southern SERP. After the Group
Status Change Date, Southern shall continue to maintain the
Southern SERP, but Southern shall amend the plan to eliminate
the transitional provisions between the Southern SERP and the
Southern Energy SERP to address participation in the Southern
SERP by Southern Energy Retired Employees.
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5.04 SOUTHERN ENERGY DEFERRED INCENTIVE COMPENSATION PLAN. Maintenance
of the Southern Energy Deferred Incentive Compensation Plan. After the Group
Status Change Date, Southern Energy shall continue to maintain the Southern
Energy Deferred Incentive Compensation Plan with comparable features to the
current Southern Energy Deferred Incentive Compensation Plan. No new
participants will be added to this Plan. After the IPO Closing Date, deferred
amounts under the Southern Energy Deferred Incentive Compensation Plan shall be
deemed to be invested in Southern Energy common stock.
5.05 SOUTHERN ENERGY CHANGE IN CONTROL PROGRAMS. Establishment of the
Southern Energy Change in Control Programs. Effective as of the Group Status
Change Date, Southern Energy shall establish the Southern Energy Change in
Control Programs subject to its Board of Director's approval which shall be
comparable to the Southern Change in Control Programs.
5.06 SOUTHERN ENERGY RABBI TRUST. Adoption of the Southern Energy Rabbi
Trust. Effective as of the Group Status Change Date, Southern Energy shall adopt
the Southern Energy Rabbi Trust which shall be spun off from the Southern Rabbi
Trust. Trust assets attributable to Southern Energy contributions shall be
transferred to the Southern Energy Rabbi Trust.
5.07 SEVERANCE PLAN. Southern Energy shall continue to maintain the
Southern Energy Severance Plan after the Group Status Change Date. The Southern
Energy Severance Plan shall provide that no Southern Energy Employee shall
become eligible for severance benefits on account of the Southern Energy Group
ceasing to be a subsidiary of the Southern Group as of the Group Status Change
Date.
ARTICLE VI
HEALTH AND WELFARE PLANS
6.01 ASSUMPTION OF HEALTH AND WELFARE PLAN LIABILITIES.
(a) General - Health and Welfare Plans. Except as
provided in Subsection 6.01(b), each Southern Health and Welfare Plan
shall retain all Liabilities incurred through the Group Status Change
Date under such Southern Health and Welfare Plan, whether or not claims
are filed before the Group Status Change Date, by or on behalf of
Southern Energy Employees or their spouses or dependents. Southern
Energy shall indemnify such plan against the pre- Group Status Change
Date Liabilities by paying the current cost of coverage associated with
such Southern Energy Employee or his or her spouse or beneficiaries, to
the extent not already paid.
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(b) Substantially Similar Self-Insured Plans. Unless the
affected Southern Energy Employee elects continued coverage under a
Southern Health and Welfare Plan pursuant to Subsection 6.03(a)(i), any
Health and Welfare Plan self-insured by Southern and substantially
similar to any Southern Energy Health and Welfare Plan established as
of the Group Status Change Date, or such later date as agreed upon by
Southern and Southern Energy, shall cease to be responsible for
Liabilities to or relating to Southern Energy Employees under the
Southern Health and Welfare Plans as of such date and the corresponding
Southern Energy Health and Welfare Plans shall assume such Liabilities
as of that date.
(c) Pending Treatments. Notwithstanding Subsection
6.01(a) above, all treatments which have been pre-certified for or are
being provided to a Southern Energy Employee or his or her spouse or
dependents as of the Group Status Change Date shall be provided without
interruption under the appropriate Southern Health and Welfare Plan
until such treatment is concluded or discontinued pursuant to
applicable Plan rules and limitations provided the affected Southern
Energy Employee (or his or her spouse or dependents) elect to continue
coverage after the Group Status Change Date as provided in Subsection
6.03(a)(i) below and timely pay the cost of coverage associated with
such election.
6.02 CLAIMS FOR HEALTH AND WELFARE PLANS.
(a) Administration of Southern Claims. Southern shall
administer claims incurred under the Southern Health and Welfare Plans
by Southern Energy Employees before the Group Status Change Date, but
only to the extent that Southern Energy has not, before the Group
Status Change Date, established and assumed administrative
responsibility for a comparable Plan. Southern also shall administer
claims incurred under the Southern Health and Welfare Plans by Southern
Energy Employees who elect continued coverage pursuant to Subsection
6.03(a)(i) below. Any determination made or settlements entered into by
Southern with respect to such claims shall be final and binding.
(b) Outsourcing of Claims by Southern. Southern shall
have the right to engage a third party administrator, vendor, or
insurance company to administer ("Outsource") claims incurred under the
Southern Health and Welfare Plans, including claims incurred by
Southern Energy Employees before the Group Status Change Date, or after
the Group Status Change Date if the Southern Energy Employees elect
continued coverage pursuant to Section 6.03(a)(i) below. Southern may
determine the manner and extent of such Outsourcing, including the
selection of one or more third party administrators, vendors, or
insurance companies and the ability to transfer the liability for such
claims to one or more independent insurance companies. Southern has
Outsourced administration of many Southern Health and Welfare Plans, as
set forth in Section 6.04 and the Schedule thereto.
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(c) Outsourcing of Claims by Southern Energy. Southern
shall use its commercially reasonable best efforts for and on behalf of
Southern Energy to negotiate for Outsourcing arrangements with its
third party administrators, vendors, or insurance companies with
comparable features to each of Southern's current Outsourcing
arrangements.
6.03 TRANSITIONAL ARRANGEMENTS.
(a) Continuance of Elections, Co-Payments and Maximum
Benefits.
(i) As of the Group Status Change Date, Southern
Energy shall cause the Southern Energy Health and Welfare
Plans to maintain comparable coverage and contribution
elections made by Southern Energy Employees under the Southern
Health and Welfare Plans and apply such elections under the
Southern Energy Health and Welfare Plans for the remainder of
the period or periods for which such elections are by their
terms applicable. The transfer or other movement of employment
between Southern and Southern Energy at any time upon or
before the Group Status Change Date shall constitute neither a
"status change" under the Southern Health and Welfare Plans or
the Southern Energy Health and Welfare Plans nor a "qualifying
event," as defined under COBRA. To facilitate continuity of
coverage following the transfer or other movement of
employment between Southern and Southern Energy on the Group
Status Change Date, however, Southern Energy Employees, their
spouses and dependents shall be offered continued coverage
under the Southern Health Plans which shall be substantially
similar to the coverage that would be provided if the Group
Status Change was a "qualifying event" under COBRA. Southern
shall extend such continued coverage to Southern Energy
Employees, their spouses and/or dependents who elect coverage
provided the covered individual timely pays a premium equal to
the premium charged to qualified beneficiaries under COBRA for
such coverage (i.e., 102% of the cost of coverage).
Notwithstanding the foregoing, for purposes of this continued
coverage only, the term "Southern Health Plans" shall not
include the Southern Company Medical Reimbursement Plan.
Southern agrees that it will not consider coverage under the
Southern Energy Health Plans to be group health coverage that
will terminate continued coverage to a Southern Energy
Employee elected pursuant to this Subsection 6.03(a)(i).
Moreover, Southern agrees to amend its plan, or cause its plan
to be amended, to provide that such coverage shall be primary
to any coverage provided under the Southern Energy Health
Plans.
(ii) On and after the Group Status Change Date,
Southern Energy shall cause the Southern Energy Health Plans
to recognize and give
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credit for (A) all amounts applied to deductibles,
out-of-pocket maximums, co-payments and other applicable
benefit coverage limits with respect to which such expenses
have been incurred by Southern Energy Employees under the
Southern Health Plans for the remainder of the calendar year
in which the Group Status Change Date occurs, and (B) all
benefits paid to Southern Energy Employees under the Southern
Health Plans for purposes of determining when such persons
have reached their lifetime maximum benefits under the
Southern Energy Health Plans. Notwithstanding the above,
Southern Energy's obligations under this Subsection
6.03(a)(ii) shall be limited by the market availability of
health insurance products or other arrangements satisfying the
criteria described above. Southern Energy shall use its
commercially reasonable best efforts to locate and engage the
services of a vendor whose policies or other arrangements meet
the requirements above.
(b) HCFA Administration. As of the Group Status Change
Date, Southern Energy shall assume all Liabilities relating to, arising
out of or resulting from claims verified by Southern or Southern Energy
under the HCFA data match reports that relate to Southern Energy
Employees.
(c) Transfer of Medical Reimbursement Accounts. Effective
as of or before the Group Status Change Date, Southern Energy shall
establish or cause to be established, a medical reimbursement plan
comparable to the Southern Company Medical Reimbursement Plan (the
"Southern MRP"). As soon as reasonably practicable on or after the
Group Status Change Date, Southern shall cause the account balances of
Southern Energy Employees under the Southern MRP, if any, to be
transferred to the Southern Energy medical reimbursement plan. The
elections of Southern Energy Employees made under the Southern MRP
shall apply to the Southern Energy medical reimbursement plan for the
remainder of the period for which such elections are by their terms
applicable. Southern Energy agrees that the account balances so
transferred will be available for health reimbursements to the Southern
Energy Employees pursuant to the terms of the Southern Energy medical
reimbursement plan.
6.04 VENDOR AND INSURANCE ARRANGEMENTS. Southern shall use its
commercially reasonable best efforts for and on behalf of Southern Energy to
negotiate for, effective as of the Group Status Change Date: (a) third party ASO
Contracts with comparable features and costs to the ASO Contracts entered into
by Southern, as set forth in Schedule 6.04(a) (the "ASO Contracts"); (b) Group
Insurance Policies with comparable features and costs to the Group Insurance
Policies entered into by Southern, as set forth in Schedule 6.04(b) (the "Group
Insurance Policies"); (c) HMO Agreements with comparable features and costs to
the HMO Agreements entered into by Southern, as set forth in Schedule 6.04(c)
(the "HMO Agreements"), and (d) competitive premium rates for all Southern
Energy Health and Welfare Plans. In each case, Southern Energy shall, as of the
Group Status Change Date, establish, adopt and/or implement acceptable
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contracts, agreements or arrangements. In accordance with Section 9.03, Southern
shall on or before the Group Status Change Date provide upon the request of
Southern Energy copies of such contracts or successor arrangements thereto
identified in Schedules 6.04(a), (b) and (c).
6.05 COBRA. Southern shall be responsible through the Group Status
Change Date, for compliance with the health care continuation coverage
requirements of COBRA and the Southern Health and Welfare Plans with respect to
Southern Energy Employees and qualified beneficiaries (as such term is defined
under COBRA). Southern shall provide, or cause the notices to be provided, as
soon as administratively practical, but in no event later than required under
COBRA. Southern Energy shall be responsible for providing Southern or its agents
with all necessary employee change notices and related information for covered
dependents, spouses, qualified beneficiaries (as such term is defined under
COBRA), and alternate recipients pursuant to QMCSO, in accordance with
applicable Southern COBRA policies and procedures. As soon as administratively
practicable after the Group Status Change Date, Southern shall provide Southern
Energy, through hard copy, electronic format or such other mechanism as is
appropriate under the circumstances, with a list of all qualified beneficiaries
(as such term is defined under COBRA) that relate to the Southern Energy Group
and the relevant information pertaining to their coverage elections. Effective
immediately after the Group Status Change Date, Southern Energy shall be solely
responsible for compliance with the health care continuation coverage
requirements of COBRA for the Southern Energy Health and Welfare Plans for
Southern Energy Employees and their qualified beneficiaries (as such term is
defined under COBRA).
6.06 LEAVE OF ABSENCE PROGRAMS AND FMLA.
(a) Allocation of Responsibilities After Group Status
Change Date. Effective as of the Group Status Change Date, Southern
Energy shall continue to maintain its Leave of Absence Programs and
FMLA programs and shall continue to be responsible for administering
leaves of absence and complying with FMLA with respect to Southern
Energy Employees.
(b) Disclosure. As soon as administratively practicable
after the Group Status Change Date, Southern shall provide to Southern
Energy copies of all records pertaining to the leaves of absence and
FMLA with respect to all Southern Energy Employees to the extent such
records have not been previously provided.
6.07 SOUTHERN WORKERS' COMPENSATION PROGRAM.
(a) ADMINISTRATION OF CLAIMS.
(i) Through the earlier of (A) the Distribution Date, or
(B) the first date on which Southern owns less than
50% of Southern Energy's outstanding common stock
(the "Insurance Transition Date") or such other date
as
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Southern and Southern Energy may mutually agree,
Southern shall continue to be responsible for the
administration of all claims that (x) are, or have
been, incurred under the Southern WCP before the
Insurance Transition Date by Southern Energy
Employees ("Southern Energy WCP Claims"), and (y)
have been historically administered by Southern or
its third party administrator. However, Southern will
advise Southern Energy and secure approval for any
material changes to current policy or practice with
respect to the administration of Southern Energy WCP
claims.
(ii) Effective as of the Insurance Transition Date or such
other date as Southern and Southern Energy may
mutually agree, Southern Energy shall be responsible
for the administration of all Southern Energy WCP
Claims.
(iii) Each party shall fully cooperate with the other with
respect to the administration and reporting of
Southern Energy WCP Claims, the payment of Southern
Energy WCP Claims determined to be payable, and the
transfer of the administration of any Southern Energy
WCP Claims to the other party.
(b) SELF-INSURANCE STATUS.
Southern shall maintain and amend, as necessary, its
certificates of self-insurance or bonding arrangements with respect to
workers' compensation and any other applicable policies to include
Southern Energy until the Insurance Transition Date, and Southern
Energy shall fully cooperate with Southern in obtaining such
amendments. Southern shall use its commercially reasonable best efforts
to obtain self-insurance status for workers' compensation for Southern
Energy effective as of the Insurance Transition Date in those
jurisdictions in which Southern Energy conducts business, in which
Southern is self-insured, and where Southern and Southern Energy
mutually agree that such status is beneficial to Southern Energy.
Southern Energy hereby authorizes Southern to take all actions
necessary and appropriate on its behalf in order to obtain such self-
insurance status. All costs incurred by Southern in amending such
certificates, including without limitation filing fees, adjustments of
security and excess loss policies and amendments of safety programs,
shall be shared pro rata by Southern and Southern Energy.
(c) INSURANCE POLICY.
(i) Effective as of the Insurance Transition Date, in
all states other than those states where Southern Energy is to
be self-insured pursuant to Subsection 6.07(b) above, Southern
shall use its commercially reasonable best efforts to
negotiate for workers' compensation insurance policies on
behalf of Southern Energy from the issuing insurance companies
(as set forth in the
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relevant portion of Schedule 6.04(b)) or different insurance
companies which are comparable to the policies previously
maintained by Southern; provided that the retention under such
Southern Energy policies shall be as determined by Southern
Energy.
(ii) Southern shall use its commercially reasonable
best efforts to maintain the premium rates for all workers'
compensation insurance policies for both Southern and Southern
Energy in effect for periods through the Insurance Transition
Date to be based on the aggregate number of employees covered
under the workers' compensation insurance policies of both
Southern and Southern Energy. Any premiums due under the
separate workers' compensation insurance issued to Southern
Energy shall be payable by Southern Energy.
ARTICLE VII
EQUITY AND OTHER COMPENSATION
7.01 SOUTHERN OPTIONS.
(a) Option Assumption by Southern Energy.
(i) All options held by Southern Energy
Employees issued under the Southern Executive Stock Plan and
Performance Stock Plan (the "Southern Stock Plans") will be
canceled on the Distribution Date. The Southern Energy Omnibus
Incentive Compensation Plan shall provide for the replacement
of all canceled options as of the Distribution Date with
options for Southern Energy stock ("Replacement Options") on
the same material terms and conditions as the Southern Stock
Plans, except with respect to the adjustment for number of
shares and prices referred to below, in a manner that will be
compliant with FASB Interpretation No. 44 in order to retain
the same aggregate intrinsic value.
(1) The number of Replacement Options
for each affected Southern Energy Employee will be
determined by dividing the number of unexercised
Southern options on the date prior to the
Distribution Date that the New York Stock Exchange
declares the Southern stock "ex-dividend" (the
"Ex-Dividend Date") by the ratio calculated as the
Fair Market Value of each share of Southern Energy
stock divided by the Fair Market Value of Southern
stock on the Ex-Dividend Date.
(2) The Replacement Options exercise
prices shall be calculated by multiplying the
exercise prices of each grant of
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Southern options prior to the Ex-Dividend Date by the
ratio of Fair Market Value of Southern Energy stock
divided by the Fair Market Value of Southern stock on
the Ex-Dividend Date.
(ii) All options held by Southern Employees and
Southern Energy Retired Employees issued under the Southern
Stock Plans shall be adjusted ("Adjusted Options") in a manner
that will be compliant with FASB Interpretation No. 44 in
order to retain the same aggregate intrinsic value.
(1) The number of Adjusted Options for
each affected Southern Employee and Southern Energy
Retired Employee will be determined by dividing the
number of unexercised Southern options on the
Ex-Dividend Date by the ratio calculated as the Fair
Market Value of each share of Southern stock on the
Ex-Dividend Date divided by the Fair Market Value of
Southern stock prior to the Ex-Dividend Date.
(2) The Adjusted Option exercise prices
shall be determined by multiplying the exercise
prices of each grant of Southern options, prior to
the Ex-Dividend Date, by the ratio of Fair Market
Value of Southern stock on the Ex-Dividend Date
divided by the Fair Market Value of Southern stock
prior to the Ex-Dividend Date.
The ratios used to calculate the
number of Replacement Options and Adjusted
Options and their respective option exercise
prices shall be rounded to four decimal
places. The number of Replacement Options
and Adjusted Options, as calculated above,
shall be rounded down to the nearest whole
number of shares. The exercise prices shall
be rounded to four decimal places.
For purposes of this section, in
the case of the Southern Energy stock, Fair
Market Value is the closing sale price of
the Southern Energy stock on the Ex-Dividend
Date. In the case of the Southern stock, (i)
Fair Market Value prior to the Ex-Dividend
Date, is the closing sale price of Southern
stock on the day prior to the Ex-Dividend
Date and (ii) Fair Market Value on the
Ex-Dividend Date is the closing sale price
of Southern stock on the Ex-Dividend Date.
(iii) In the event that Southern or Southern Energy desire
to cancel Southern options after the IPO but prior to the Distribution
Date and replace such canceled options with Southern Energy options,
the parties may amend this provision in accordance with Section 11.07
of this Agreement.
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(b) Certain Non-U.S. Optionees. Except as may otherwise
be agreed upon by Southern and Southern Energy, this Section 7.01 shall
govern the treatment of Southern Options held by non-U.S. Southern
Energy Employees. In the event it is determined that the local law of
any Non-U.S. Optionee requires a different treatment, Southern and
Southern Energy shall take such steps as is required to comply with
local law or may cash-out those Options that cannot reasonably be
conformed.
7.02 SOUTHERN PERFORMANCE DIVIDEND PLAN. On or before the Distribution
Date, Southern Energy Employees shall cease to participate in the Southern
Performance Dividend Plan, but Southern Energy Retired Employees shall continue
to participate after the Group Status Change Date. Accordingly, Southern Energy
shall not maintain a comparable plan after the Distribution Date. After such
termination of participation in the Southern Performance Dividend Plan, Southern
Energy may in its discretion grant awards under the Southern Energy Omnibus
Incentive Compensation Plan to eligible employees to take into account the lost
benefit opportunity under the Southern Performance Dividend Plan.
7.03 SOUTHERN ENERGY VALUE CREATION PLAN. On or before the IPO Closing
Date, Southern Energy shall terminate the Southern Energy Value Creation Plan
and make a final conversion of awards in accordance with the Southern Energy
Value Creation Plan's terms as determined by the Compensation Committee of the
Southern Board of Directors.
7.04 STOCK PURCHASE PLAN. Effective on or before the IPO Closing Date,
Southern Energy shall establish a Stock Purchase Plan for the benefit of
Southern Energy Employees which shall be comparable to the plan set forth in
Schedule 7.04.
7.05 SOUTHERN ENERGY OMNIBUS INCENTIVE COMPENSATION PLAN. Effective on
or before the IPO Closing Date, Southern and Southern Energy shall establish the
Southern Energy Omnibus Incentive Compensation Plan for the benefit of Southern
Energy Employees which shall be comparable to the plan set forth in Schedule
7.05. The Plan is intended to comply with Code Section 162(m).
7.06 SOUTHERN ENERGY SHORT TERM INCENTIVE PLAN. Effective on or before
the IPO Closing Date, Southern Energy shall terminate the Southern Energy Short
Term Incentive Plan in accordance with its terms such that no awards shall be
made on or after the IPO Closing Date. The final award shall be for the calendar
year 2000 and shall be paid out by no later than March 15, 2001. Future short
term incentive awards, if any, shall be provided through the Southern Energy
Omnibus Incentive Compensation Plan.
7.07 SOUTHERN PERFORMANCE PAY PLAN (SHAREHOLDER APPROVED). Effective
December 31, 2000, Southern Energy shall cease participation in the Southern
Performance Pay Plan (Shareholder Approved). The only Southern Energy employee
that participates in the Southern Performance Pay Plan (Shareholder Approved)
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is the chief executive officer who does so rather than participate in the
Southern Energy Short Term Incentive Plan for the 2000 performance period. The
final year 2000 award shall be paid out by no later than March 15, 2001.
7.08 PERFORMANCE IMPROVEMENT PLAN RAMP DOWN. With respect to any
Southern Energy Employee who transferred from Southern on or after January 1,
1997, Southern and Southern Energy shall share equally (i.e., 50% each) in the
cost at target of the Performance Improvement Plan ("PIP") ramp down as
determined by the PIP Plan in effect December 31, 1999.
ARTICLE VIII
FRINGE AND OTHER BENEFITS
8.01 EMPLOYEE ASSISTANCE PROGRAM. Southern shall use its commercially
reasonable best efforts for and on behalf of Southern Energy to negotiate for,
effective as of the Group Status Change Date, contracts and/or arrangements with
Southern's vendors that contain comparable features to Southern's contracts
and/or arrangements providing for an employee assistance program. Prior to the
Group Status Change Date, Southern Energy shall, unless Southern and Southern
Energy otherwise agree, remain a participating Company in Southern's employee
assistance program. Southern Energy shall enter into such acceptable contracts
and/or arrangements as negotiated by Southern.
8.02 EDUCATIONAL ASSISTANCE PROGRAM. Southern Energy shall continue to
provide a Southern Energy educational assistance program to Southern Energy
Employees prior to and after the Group Status Change Date.
8.03 CREDIT UNION. Southern shall use its commercially reasonable best
efforts to make a credit union available to Southern Energy Employees on
substantially similar terms and conditions as are offered to employees of the
Southern Group, through such date as Southern Energy and Southern mutually
agree.
8.04 SOUTHERN-OWNED CARS. Southern and Southern Energy shall continue
any lease of Southern-owned cars in accordance with the terms of any lease in
effect as of the date of this Agreement up to the Group Status Change Date.
Effective for periods on and after the Group Status Change Date, Southern and
Southern Energy shall use their commercially reasonable best efforts to
determine the terms and conditions pursuant to which Southern Energy shall be
entitled to lease Southern-owned cars including those cars under lease as of the
Group Status Change Date.
8.05 EXECUTIVE FINANCIAL PLANNING. Prior to the Group Status Change
Date, Southern Energy shall, unless Southern and Southern Energy otherwise
agree, remain a participating Company in Southern's executive financial planning
program. Effective as of the Group Status Change Date, Southern Energy shall
provide a Southern
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Energy executive financial planning program to eligible Southern Energy
Employees which is comparable to the Southern executive financial planning
program. Southern shall use its commercially reasonable best efforts for and on
behalf of Southern Energy to negotiate for contracts or arrangements with
Southern's vendors, effective as of the Group Status Change Date, that contain
comparable features to Southern's contracts and/or arrangements providing for an
executive financial planning program.
8.06 RELOCATION. Prior to the Group Status Change Date, Southern Energy
shall, unless Southern and Southern Energy otherwise agree, remain a
participating Company in Southern's employee relocation program. Effective as of
the Group Status Change Date or such other date as Southern Energy and Southern
may mutually agree, Southern Energy shall provide a Southern Energy relocation
program to Southern Energy Employees which is comparable to the Southern
relocation program. Southern shall use its commercially reasonable best efforts
for and on behalf of Southern Energy to negotiate for contracts or arrangements
with Southern's vendors, effective as of the Group Status Change Date, that
contain comparable features to Southern's contracts and/or arrangements
providing for an employee relocation program.
8.07 OTHER BENEFITS. To the extent that Southern maintains, sponsors or
provides other fringe benefits for its employees not specifically identified on
a schedule to this Agreement, then Southern shall, to the extent permitted by
law, continue to make such benefits available to Southern Energy Employees on
substantially similar terms and conditions as are offered to the employees of
the Southern Group through the Group Status Change Date. Southern Energy and
Southern agree to make commercially reasonable best efforts to mutually agree on
whether, when, and on what terms any member of the Southern Energy Group shall
maintain, sponsor or offer fringe benefits.
ARTICLE IX
9.01 TRANSITIONAL SERVICES AGREEMENT. On or about the date hereof,
Southern and Southern Energy shall enter into the Transitional Services
Agreement covering the provisions of various services to be provided by Southern
to Southern Energy. The provisions of this Agreement shall be subject to the
provisions of such Transitional Services Agreement.
9.02 PAYMENT OF LIABILITIES, PLAN EXPENSES AND RELATED MATTERS.
(a) Shared Costs. Southern Energy shall pay its share, as
determined by Southern in good faith, of any contributions
made to any trust maintained in connection with a Southern
Plan while Southern Energy is a Participating Company in that
Southern Plan.
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(b) Contributions to Trusts. With respect to Southern Plans to
which Southern Energy Employees make contributions, Southern
shall use reasonable procedures to determine Southern Energy
Liabilities associated with such Plans, taking into account
such contributions, settlements, refunds and similar payments.
(c) Administrative Expenses Not Chargeable to a Trust. To the
extent not charged pursuant to Section 9.01 (including,
without limitation, an interim service level agreement as
contemplated by Section 9.01 herein and the Separation
Agreement), and to the extent not otherwise agreed to by
Southern and Southern Energy, and to the extent not chargeable
to a trust established in connection with a Southern Plan,
Southern Energy shall be responsible, through either direct
payment or reimbursement to Southern, for its allocable share
of expenses incurred by Southern in the administration of (i)
the Southern Plans while Southern Energy participates in such
Plans, and (ii) the Southern Energy Plans, to the extent
Southern administers such Plans. For this purpose, Southern
Energy's allocable share of such expenses shall be calculated
in accordance with current practice in effect as of the date
of this Agreement.
9.03 SHARING OF PARTICIPANT INFORMATION. Southern and Southern Energy
shall share, or cause to be shared, all participant information that is
necessary or appropriate for the efficient and accurate administration of each
of the Southern Plans and the Southern Energy Plans during the respective
periods applicable to such Plans as Southern Energy and Southern may mutually
agree. Southern and Southern Energy and their respective authorized agents
shall, subject to applicable laws of confidentiality and data protection, be
given reasonable and timely access to, and may make copies of, all information
relating to the subjects of this Agreement in the custody of the other party or
its agents, to the extent necessary or appropriate for such administration.
9.04 REPORTING AND DISCLOSURE COMMUNICATIONS TO PARTICIPANTS. While
Southern Energy is a Participating Company in the Southern Plans, Southern shall
take, or cause to be taken, all actions necessary or appropriate to facilitate
the distribution of all Southern Plan-related communications and materials to
employees, participants and beneficiaries, including (without limitation)
summary plan descriptions and related summaries of material modification(s),
summary annual reports, investment information, prospectuses, notices and
enrollment material for the Southern Plans. Southern Energy shall provide all
information needed by Southern to facilitate such Southern Plan-related
communications. Southern Energy shall take, or cause to be taken, all actions
necessary or appropriate to facilitate the distribution of all Southern Energy
Plan-related communications and materials to employees, participants and
beneficiaries. Southern Energy shall assist, and Southern Energy shall cause
each other applicable member of the Southern Energy Group to assist, Southern in
complying with all reporting and disclosure requirements of ERISA, including the
preparation of Form Series 5500 annual reports, for the Southern Plans, where
applicable.
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9.05 AUDITS REGARDING VENDOR CONTRACTS. From the period beginning as of
the Group Status Change Date and ending on such date as Southern and Southern
Energy may mutually agree, Southern and Southern Energy and their duly
authorized representatives shall have the right to conduct joint audits with
respect to any vendor contracts that relate to both the Southern Health and
Welfare Plans and the Southern Energy Health and Welfare Plans. The scope of
such audits shall remain consistent with the current practices and all documents
and other information currently made available for review shall continue to be
made available. Southern and Southern Energy shall agree on the performance
standards, audit methodology, auditing policy and quality measures, reporting
requirements, and the manner in which costs incurred in connection with such
audits will be shared.
9.06 BENEFICIARY DESIGNATIONS. Subject to Section 9.09, all beneficiary
designations made by Southern Energy Employees for the Southern Plans shall be
transferred to and be in full force and effect under the corresponding Southern
Energy Plans until such beneficiary designations are replaced or revoked by the
Southern Energy Employees who made the beneficiary designations. All beneficiary
designations made by Southern Energy Retired Employees for the Southern Energy
Plans shall be transferred to and be in full force and effect under the
corresponding Southern Plans until such beneficiary designations are replaced or
revoked by the Southern Energy Retired Employees who made the beneficiary
designations.
9.07 REQUESTS FOR IRS AND DOL OPINIONS. Southern and Southern Energy
shall make such applications to regulatory agencies, including the IRS and DOL,
as may be necessary or appropriate. Southern Energy and Southern shall cooperate
fully with one another on any issue relating to the transactions contemplated by
this Agreement for which Southern and/or Southern Energy elects to seek a
determination letter or private letter ruling from the IRS or an advisory
opinion from the DOL.
9.08 FIDUCIARY MATTERS. Southern and Southern Energy each acknowledge
that actions contemplated to be taken pursuant to this Agreement may be subject
to fiduciary duties or standards of conduct under ERISA or other applicable law,
and no party shall be deemed to be in violation of this Agreement if such party
fails to comply with any provisions hereof based upon such party's good faith
determination that to do so would violate such a fiduciary duty or standard.
9.09 CONSENT OF THIRD PARTIES. If any provision of this Agreement is
dependent on the consent of any third party (such as a vendor) and such consent
is withheld, Southern and Southern Energy shall use their commercially
reasonable best efforts to implement the applicable provisions of this
Agreement. If any provision of this Agreement cannot be implemented due to the
failure of such third party to consent, Southern and Southern Energy shall
negotiate in good faith to implement the provision in a mutually satisfactory
manner.
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9.10 SOUTHERN INTRANET. Through March 31, 2002 or such other date as
Southern Energy and Southern may mutually agree, Southern shall make its
intranet site available to Southern Energy Employees on substantially the same
terms as such intranet site is made available to Southern Employees. Southern
and Southern Energy shall use their commercially reasonable best efforts to
mutually agree on the appropriate methods for Southern Energy to establish its
own intranet site. Notwithstanding the foregoing, Southern Energy will cease to
have access to PeopleNet which is offered through the Southern intranet
effective as of the Group Status Change Date.
9.11 TAX COOPERATION. In connection with the interpretation and
administration of this Agreement, Southern and Southern Energy shall take into
account the agreements and policies established pursuant to the Separation
Agreement and the Tax Indemnification Agreement.
9.12 PLAN RETURNS. Plan Returns shall be filed or caused to be filed by
Southern or Southern Energy as the case may be in accordance with the principles
established in Section 2 of the Tax Indemnification Agreement. For purposes of
this Section 9.12, "Plan Return" means any return, report, certificate, form or
similar statement or document required to be filed with a government agency with
respect to an employee benefit plan governed by the Employee Retirement Income
Security Act of 1974, as amended, or a program governed by Section 6039D.
ARTICLE X
EMPLOYMENT-RELATED MATTERS
10.01 TERMS OF SOUTHERN ENERGY EMPLOYMENT. Southern Energy Employees
shall be required to execute a new agreement regarding confidential information
and proprietary developments in a form approved by Southern Energy. In addition,
nothing in the Separation Agreement, this Agreement, or any Ancillary Agreement
should be construed to change the at-will status of any of the employees of the
Southern Group or the Southern Energy Group.
10.02 HR DATA SUPPORT SYSTEMS. Southern shall provide human resources
data support for Southern Energy Employees through March 31, 2002 or such other
date as Southern and Southern Energy may mutually agree on substantially the
same terms as are in effect as of the date of this Agreement.
10.03 NON-SOLICITATION OF EMPLOYEES. Prior to the Group Status Change
Date through the earlier of (a) the Distribution Date, or (b) the first date on
which Southern owns less than 50% of Southern Energy's outstanding common stock,
Southern and Southern Energy each agree to notify and obtain authorization from
the other before initiating contact with potential employment candidates from
the other company. Moreover, no employee shall transfer from Southern to
Southern Energy, or vice versa,
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without the approval of the employee's employer. After notice of the proposed
transfer is given respectively to the Vice President, Human Resources (or the
functional equivalent) at Southern and Southern Energy, such approval shall be
granted by the Southern Energy Management Council or the Southern senior officer
responsible for the area in which the employee at issue works, as appropriate.
If such Council or officer refuses to permit contact with the potential
employee, the requesting company may appeal to the Vice President, Human
Resources (or the functional equivalent) of the employing company. Such Vice
President, Human Resources shall review the circumstances of denial and shall
have discretionary authority to change the decision.
10.04 EMPLOYMENT OF EMPLOYEES WITH U.S. WORK VISAS. Southern Energy
Employees who, on the Group Status Change Date, are employed in the U.S.
pursuant to a work or training visa which authorizes employment only by the
Southern Group shall remain employed by the Southern Group until the visa is
amended or a new visa is granted to authorize employment by the Southern Energy
Group and, at that time, shall become an employee of the Southern Energy Group
with substantially similar rights as all other Southern Energy Employees. During
the period from the Group Status Change Date until the amended or new visa is
issued, such employee shall continue to participate in Southern Plans.
10.05 CONFIDENTIALITY AND PROPRIETARY INFORMATION.
(a) No provision of the Separation Agreement or any Ancillary
Agreement shall be deemed to release any individual for any
violation of the Southern non-competition guideline or any
agreement or policy pertaining to confidential or proprietary
information of any member of the Southern Group or Southern
Energy Group, or otherwise relieve any individual of his or
her obligations under such non-competition guideline,
agreement, or policy.
(b) Employee Agreements. As used in this Section 10.05, "Employee
Agreement" means the confidentiality agreement, and
corresponding agreements in foreign countries, executed by
Southern or Southern Energy employees in connection with their
employment. Nothing in this Agreement, the Separation
Agreement or any other Ancillary Agreement shall be deemed to
supersede any provision regarding the conduct of employees
mandated by the Federal Energy Regulatory Commission or any
other applicable regulatory authority.
(i) Survival of Southern Employee Agreement Obligations
and Southern's Common Law Rights. The Southern
Employee Agreements of all Southern Energy Employees
and all former Southern employees transferred to
Southern Energy on or before the Group Status Change
Date shall remain in full force and effect according
to their terms; provided, however, that none of the
following acts committed by former Southern or
Southern Energy employees within the scope of
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their Southern Energy employment shall constitute a
breach of such Southern Employee Agreements: (i) the
use or disclosure of Confidential Information (as
that term is defined in the Southern Employee
Agreement) for or on behalf of Southern Energy, if
such disclosure is consistent with the license rights
granted to Southern Energy and restrictions imposed
on Southern Energy under the Separation Agreement,
any other Ancillary Agreement or any other agreement
between the parties, and (ii) the rendering of any
services, directly or indirectly, to Southern Energy
to the extent such services are consistent with the
assignment or license of rights granted to Southern
Energy and the restrictions imposed on Southern
Energy under the Separation Agreement, any other
Ancillary Agreement or any other agreement between
the parties. Further, Southern retains any rights it
has under statute or common law with respect to
actions by its former employees to the extent such
actions are inconsistent with the rights granted to
Southern Energy and restrictions imposed on Southern
Energy under the Separation Agreement, any other
Ancillary Agreement or any other agreement between
the parties.
(ii) Survival of Southern Energy's Employee Agreement
Obligations and Southern Energy's Common Law Rights.
The Southern Energy Employee Agreements of all
Southern Employees and all former Southern Energy
employees transferred to Southern on or before the
Group Status Change Date shall remain in full force
and effect according to their terms; provided,
however, that none of the following acts committed by
former Southern Energy or Southern employees within
the scope of their Southern employment shall
constitute a breach of such Southern Energy Employee
Agreements: (i) the use or disclosure of Confidential
Information (as that term is defined in the Southern
Employee Agreement) for or on behalf of Southern, if
such disclosure is consistent with the license rights
granted to Southern and restrictions imposed on
Southern under the Separation Agreement, any other
Ancillary Agreement or any other agreement between
the parties, and (ii) the rendering of any services,
directly or indirectly, to Southern to the extent
such services are consistent with the assignment or
license of rights granted to Southern and the
restrictions imposed on Southern under the Separation
Agreement, any other Ancillary Agreement or any other
agreement between the parties. Further, Southern
Energy retains any rights it has under statute or
common law with respect to actions by its former
employees to the extent such actions are inconsistent
with the rights granted to Southern and restrictions
imposed on Southern under the Separation Agreement,
any other Ancillary Agreement or any other agreement
between the parties.
(iii) Assignment, Cooperation for Compliance and
Enforcement.
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(A)(1) Southern retains all rights under the
Southern Employee Agreements of all former Southern
employees necessary to permit Southern to protect the
rights and interests of Southern, but hereby
transfers and assigns to Southern Energy its rights
under the Southern Employee Agreements of all former
Southern employees to the extent required to permit
Southern Energy to enjoin, restrain, recover damages
from or obtain specific performance of the Southern
Employee Agreements or obtain other remedies against
any employee who breaches his or her Southern
Employee Agreement, and to the extent necessary to
permit Southern Energy to protect its rights and
interests.
(2) Southern and Southern Energy agree, at
their own respective cost and expense, to use their
reasonable efforts to cooperate as follows: (A)
Southern Energy shall advise Southern of: (1) any
violation(s) of the Southern Employee Agreement by
Southern Energy or former Southern employees, and (2)
any violation(s) of the Southern Energy Employee
Agreement which affect Southern's rights; and (B)
Southern shall advise Southern Energy of any
violations of the Southern Employee Agreement by
current or former Southern employees which affect
Southern Energy's rights; provided, however, that the
foregoing obligations shall only apply to violations
which become known to an attorney within the legal
department of the party obligated to provide notice
thereof.
(3) Southern and Southern Energy each may
separately enforce the Southern Employee Agreements
of Southern Energy and former Southern employees to
the extent necessary to reasonably protect their
respective interests, provided, however, that (i)
Southern Energy shall not commence any litigation
relating thereto without first consulting with
Southern's General Counsel or his or her designee and
(ii) Southern shall not commence any litigation
relating thereto against any former Southern employee
who is at the time a Southern Energy Employee without
first consulting with Southern Energy's General
Counsel or his or her designee. If either party, in
seeking to enforce any Southern Employee Agreement,
notifies the other party that it requires, or
desires, the other party to join in such action, then
the other party shall do so. In addition, if either
party commences or becomes a party to any action to
enforce a Southern Employee Agreement of a Southern
Energy Employee or former Southern employee, the
other party shall, whether or not it becomes a party
to the action, cooperate with the other party by
making available its files and employees who have
information or knowledge relevant to the dispute,
subject to appropriate measures to protect the
confidentiality of any proprietary or confidential
information that may be disclosed in the course of
such cooperation or action and subject to any
relevant privacy laws and regulations. Any such
action shall be conducted at the expense of the party
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bringing the action and the parties shall agree on a
case by case basis on compensation, if any, of the
other party for the value of the time of such other
party's employees as reasonably required in
connection with the action.
(B)(1) Southern Energy retains all rights
under the Southern Energy Employee Agreements of all
former Southern Energy employees necessary to permit
Southern Energy to protect the rights and interests
of Southern Energy, but hereby transfers and assigns
to Southern its rights under the Southern Energy
Employee Agreements of all former Southern Energy
employees to the extent required to permit Southern
to enjoin, restrain, recover damages from or obtain
specific performance of the Southern Energy Employee
Agreements or obtain other remedies against any
employee who breaches his or her Southern Energy
Employee Agreement, and to the extent necessary to
permit Southern to protect its rights and interests.
(2) Southern and Southern Energy agree, at
their own respective cost and expense, to use their
reasonable efforts to cooperate as follows: (A)
Southern shall advise Southern Energy of: (1) any
violation(s) of the Southern Energy Employee
Agreement by Southern or former Southern Energy
employees, and (2) any violation(s) of the Southern
Employee Agreement which affect Southern Energy's
rights; and (B) Southern Energy shall advise Southern
of any violations of the Southern Energy Employee
Agreement by current or former Southern Energy
employees which affect Southern's rights; provided,
however, that the foregoing obligations shall only
apply to violations which become known to an attorney
within the legal department of the party obligated to
provide notice thereof.
(3) Southern and Southern Energy each may
separately enforce the Southern Employee Agreements
of Southern and former Southern Energy employees to
the extent necessary to reasonably protect their
respective interests, provided, however, that (i)
Southern shall not commence any litigation relating
thereto without first consulting with Southern
Energy's General Counsel or his or her designee and
(ii) Southern Energy shall not commence any
litigation relating thereto against any former
Southern Energy employee who is at the time a
Southern Employee without first consulting with
Southern's General Counsel or his or her designee. If
either party, in seeking to enforce any Southern
Energy Employee Agreement, notifies the other party
that it requires, or desires, the other party to join
in such action, then the other party shall do so. In
addition, if either party commences or becomes a
party to any action to enforce a Southern Energy
Employee Agreement of a Southern Employee or former
Southern Energy employee, the other party shall,
whether or not it becomes a party to the action,
cooperate with the other party by making available
its files and
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employees who have information or knowledge relevant to the
dispute, subject to appropriate measures to protect the
confidentiality of any proprietary or confidential information
that may be disclosed in the course of such cooperation or
action and subject to any relevant privacy laws and
regulations. Any such action shall be conducted at the expense
of the party bringing the action and the parties shall agree
on a case by case basis on compensation, if any, of the other
party for the value of the time of such other party's
employees as reasonably required in connection with the
action.
(C) Southern and Southern Energy understand and
acknowledge that matters relating to the making, performance,
enforcement, assignment and termination of employee agreements
are typically governed by the laws and regulations of the
national, federal, state or local governmental unit where an
employee resides, or where an employee's services are
rendered, and that such laws and regulations may supersede or
limit the applicability or enforceability of this Section
10.05. In such circumstances, Southern and Southern Energy
agree to take action with respect to the employee agreements
that best accomplishes the parties' objectives as set forth in
this Section 10.05 and that is consistent with applicable law.
10.06 ACCRUED PAYROLL, BONUSES, PROFIT SHARING AND COMMISSIONS.
Southern Energy shall be responsible for all Liabilities relating to, arising
out of, or attributable to payroll, bonuses, profit sharing and commissions
accrued by employees of Southern Energy through the Group Status Change Date.
Southern and Southern Energy shall agree on the manner and method of payment for
all accrued payroll, bonuses, profit sharing and commissions agreed to on behalf
of employees who have been employed by Southern Energy on or before the Group
Status Change Date. Notwithstanding the foregoing, Southern shall not be
responsible for providing payroll services for new employees of Southern Energy
acquired through a corporate transaction after the date of this Agreement or for
any pension payroll attributable to the Southern Pension Plan. Effective no
later than the last day of the sixth month after the Group Status Change Date,
Southern Energy shall establish its own payroll system for Southern Energy
Employees. For Southern Energy Employees, this responsibility shall include
historical research and reporting of historical payroll information to employees
and any third parties.
10.07 PAYROLL AND WITHHOLDING.
(a) Income Reporting, Withholding. Southern shall perform in
the same manner as in effect on the date of this Agreement the income
reporting and withholding function under Southern Energy's employer
identification number for Southern Energy Employees and other service
providers, commencing with service periods beginning on or after the
Group Status Change Date and ending no later than the last day of the
sixth month following the Group Status Change Date.
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Southern Energy shall hold Southern harmless with respect to any
Liabilities arising after the Group Status Change Date as a result of
the provisions of such income reporting and withholding function as set
forth in the Transitional Services Schedule concerning payroll matters.
(b) Delivery of, and Access to, Documents and Other
Information. Concurrently with the Group Status Change Date, Southern
shall develop and implement a plan to cause to be delivered to Southern
Energy, the employee information set forth on all Forms W-4 executed by
Southern Employees designated as Southern Energy Employees as of the
Group Status Change Date. Southern shall make reasonably available to
Southern Energy all forms, documents or information, no matter in what
format stored, relating to compensation or payments made to any
employee or service provider of Southern Energy. Such information may
include, but is not limited to, information concerning employee payroll
deductions, payroll adjustments, records of time worked, tax records
(e.g., Forms W-2, W-4, 940 and 941), and information concerning
garnishment of wages or other payments. The intended result of this
plan will be that all forms will reside at Southern Energy by the
earlier of six months following the Group Status Change Date or the
assumption of payroll processing responsibilities by Southern Energy.
(c) Consistency of Tax Positions; Duplication. Southern and
Southern Energy shall individually and collectively make commercially
reasonable best efforts to avoid unnecessarily duplicated federal,
state or local payroll taxes, insurance or workers' compensation
contributions, or unemployment contributions arising on or after the
Group Status Change Date. Southern and Southern Energy shall take
consistent reporting and withholding positions with respect to any such
taxes or contributions.
10.08 PERSONNEL RECORDS. For the period beginning on the Agreement Date
and ending six months following the Group Status Change Date (and for such
additional period as Southern and Southern Energy may mutually agree), Southern
shall make reasonably available to Southern Energy, subject to applicable laws
on confidentiality and data protection, all current and historic forms,
documents or information, no matter in what format stored, relating to personnel
and medical records processed by Southern. Such forms, documents or information
may include, but is not limited to: (a) information regarding a Southern Energy
Employee's ranking or promotions; (b) the existence and nature of garnishment
orders or other judicial or administrative actions or orders affecting an
employee's or service provider's compensation; and (c) performance evaluations.
10.09 NON-TERMINATION OF EMPLOYMENT; NO THIRD-PARTY BENEFICIARIES. No
provision of this Agreement, the Separation Agreement, or any Ancillary
Agreement shall be construed to create any right, or accelerate entitlement, to
any compensation or benefit whatsoever on the part of any Southern Energy
Employee or other future, present or former employee of Southern or Southern
Energy under any
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Southern Plan or Southern Energy Plan or otherwise. Without limiting the
generality of the foregoing: (a) neither the Distribution nor the termination of
the Participating Company status of Southern Energy or any member of the
Southern Energy Group shall cause any employee to be deemed to have incurred a
termination of employment; and (b) no transfer of employment between Southern
and Southern Energy before the Group Status Change Date shall be deemed a
termination of employment for any purpose hereunder.
10.10 EMPLOYMENT LITIGATION.
(a) Claims to be Transferred to Southern Energy. Southern
Energy shall continue to be legally responsible for and continue the
defense of claims identified in Schedule 10.10(a). Southern Energy
hereby indemnifies, defends and holds harmless Southern against these
claims.
(b) Claims to be Jointly Defended by Southern and
Southern Energy. Southern and Southern Energy shall jointly defend the
claims identified in Schedule 10.10(b); provided, however, that
Southern Energy or Southern shall indemnify and hold harmless the other
against any judgments in accordance with Schedule 2.01.
(c) Unscheduled Claims. Southern Energy and Southern
shall have responsibility for all Employment liabilities in accordance
with Schedule 2.01.
ARTICLE XI
GENERAL PROVISIONS
11.01 EFFECT IF GROUP STATUS CHANGE DATE DOES NOT OCCUR.
Subject to Section 11.08, if the Group Status Change Date does not
occur, then all actions and events that are, under this Agreement, to
be taken or occur effective as of the Group Status Change Date, or
otherwise in connection with the Group Status Change Date, shall not be
taken or occur except to the extent specifically agreed by Southern
Energy and Southern.
11.02 RELATIONSHIP OF PARTIES. Nothing in this Agreement
shall be deemed or construed by the parties or any third party as
creating the relationship of principal and agent, partnership or joint
venture between the parties, the understanding and agreement being that
no provision contained herein, and no act of the parties, shall be
deemed to create any relationship between the parties other than the
relationship set forth herein. This Agreement shall be binding upon and
inure solely to the benefit of and be enforceable by each party and its
respective successors and permitted assigns. Nothing in this Agreement,
express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or
by reason of this Agreement.
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11.03 AFFILIATED COMPANIES. Each of Southern and Southern
Energy shall cause to be performed, and hereby guarantee the
performance of, any and all actions of the Southern Group or the
Southern Energy Group, respectively.
11.04 INCORPORATION OF SEPARATION AGREEMENT PROVISIONS. The
provisions of Article V and Article VI (other than Section 6.03) of the
Separation Agreement are hereby incorporated herein by reference, and
unless otherwise expressly specified herein, such provisions shall
apply as if fully set forth herein (references in this Section to an
"Article" or "Section" shall mean Articles or Sections of the
Separation Agreement, and, except as expressly set forth herein,
references in the material incorporated herein by reference shall be
references to the Separation Agreement).
11.05 GOVERNING LAW. To the extent not preempted by
applicable federal law, this Agreement shall be governed by, construed
and interpreted in accordance with the laws of the State of Georgia,
irrespective of the choice of law principles of the State of Georgia,
as to all matters, including matters of validity, construction, effect,
performance and remedies.
11.06 SEVERABILITY. If any term or other provision of this
Agreement is determined to be invalid, illegal or incapable of being
enforced by any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force
and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner
materially adverse to either party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as
closely as possible and in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the fullest possible
extent.
11.07 AMENDMENT. After the IPO Closing Date, Southern
Energy and Southern may mutually agree in writing to amend the
provisions of this Agreement at any time or times, either prospectively
or retroactively.
11.08 TERMINATION. This Agreement may be terminated and the
Distribution abandoned at any time prior to the IPO Closing Date by
Southern in its sole discretion. This Agreement may be terminated at
any time after the IPO Closing Date and before the Change of Control
Date (as defined in the Separation Agreement) by mutual consent of
Southern and Southern Energy. In the event of termination pursuant to
this Section, no party shall have any liability of any kind under this
Agreement to the other party.
11.09 CONFLICT. In the event of any conflict between the
provisions of this Agreement and the Separation Agreement, any
Ancillary Agreement, or Plan,
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the provisions of this Agreement shall control. In the event of any
conflict between the provisions of this Agreement and any Local
Agreement, the provisions of the Local Agreement shall control.
11.10 COUNTERPARTS. This Agreement may be executed in two
or more counterparts each of which shall be deemed to be an original,
but all of which together shall constitute but one and the same
Agreement.
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IN WITNESS WHEREOF, each of the parties have caused this Employee
Matters Agreement to be executed on its behalf by its officers thereunto duly
authorized on the day and year first above written.
THE SOUTHERN COMPANY
By:
----------------------------------------------
Name: H. Xxxxx Xxxxxxxx
Title: President and Chief Operating Officer
SOUTHERN ENERGY, INC.
By:
----------------------------------------------
Name: S. Xxxxx Xxxxxx
Title: President and Chief Executive Officer
[SIGNATURE PAGE TO EMPLOYEE MATTERS AGREEMENT]
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SCHEDULE 1.22
HEALTH AND WELFARE PLANS
SEE SCHEDULE 1.23 FOR HEALTH PLANS
NON-HEALTHCARE PLAN VENDOR INSURED STATUS
------------------- ------ --------------
Tax Saver AON Self (TPA)
(except Medical Reimbursement)
Group Life Insurance MetLife Fully Insured
Dependent Life Insurance MetLife Fully Insured
Retiree Life Insurance MetLife Fully Insured
Accident & Sickness Insurance Protective Fully Insured
Long Term Disability Insurance Provident Fully Insured
Total Income Protection Insurance Provident Fully Insured
(individual plans)
Business Travel Insurance Provident Fully Insured
Accidental Death & Dismemberment CNA Fully Insured
Legal Care Signature Legal Fully Insured
(individual plans)
Personal Lines MetPay Fully Insured
(individual plans)
Long Term Care Xxxx Xxxxxxx Fully Insured
(individual plans)
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SCHEDULE 1.23
HEALTH PLANS
HEALTHCARE PLAN VENDOR INSURED STATUS
--------------- ------ --------------
Kaiser HMO (GA) Kaiser Self Insured
Aetna USHC HMO (GA) Aetna USHC Self Insured
Aetna USHC HMO (DC) Aetna USHC Self Insured
BCBS of GA. Catastrophic Blue Cross of Georgia Self Insured
Blue Choice PPO Blue Cross of Georgia Self Insured
Blue Choice HMO Blue Cross of Georgia Self Insured
Blue Choice POS Blue Cross of Georgia Self Insured
BCBS of AL PMD Blue Cross of Alabama Self Insured
BCBS of AL Catastrophic Blue Cross of Alabama Self Insured
BCBS of AL POS Blue Cross of Alabama Self Insured
Health Partners HMO Health Partners (Alabama) Fully Insured
United Healthcare HMO United Healthcare (Alabama) Fully Insured
BCBS of FL Catastrophic Blue Cross of Florida Self Insured
BCBS of FL PPC Blue Cross of Florida Self Insured
BCBS of FL Care Manager Blue Cross of Florida Self Insured
BCBS of FL Health Options Blue Cross of Florida Self Insured
BCBS of MS Comprehensive Blue Cross of Mississippi Self Insured
Blue Indemnity
BCBS of MS Primary Care Blue Cross of Mississippi Self Insured
Health
Vision Insurance Superior Vision Fully Insured
(individual plans)
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CIGNA International CIGNA Fully Insured
Dental (HMO) CIGNA Fully Insured
Dental (Indemnity) Protective Fully Insured
Dental (Preventive) Protective Fully Insured
Employee Assistance Program Value Options Self Insured
Retiree Group Health Various Self or Fully Insured
based on plan
Medical Reimbursement Aon Self Insured (TPA)
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SCHEDULE 1.43
POST-EMPLOYMENT PROGRAMS
POST-EMPLOYMENT PROGRAMS VENDOR INSURED STATUS
Retiree Group Medical Various Self or Fully insured
based on plan
Retiree Life MetLife Fully Insured
Accidental Death & Dismemberment CNA Fully Insured
Employee Assistance Program Value Options Self Insured
Discount Vision Superior individual plans
Legal Care Signature Legal individual plans
Long Term Care Xxxx Xxxxxxx individual plans
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SCHEDULE 2.01
EMPLOYMENT LIABILITIES INDEMNIFICATION
Section 1 Indemnification by Southern Energy. Except as otherwise
provided in this Agreement or Section 3 of this Schedule, Southern Energy shall,
for itself and as agent for each member of the Southern Energy Group, indemnify,
defend (or, where applicable, pay the defense costs for) and hold harmless the
Southern Indemnitees from and against any and all Employment Liabilities that
any third party seeks to impose upon the Southern Indemnitees, or which are
imposed upon the Southern Indemnitees, if and to the extent such Employment
Liabilities relate to, arise out of or result from any of the following items
(without duplication):
(i) any acts or omission or alleged acts or omissions by or
on behalf of any member or person employed by a member of the Southern
Energy Group in the conduct of the Southern Energy Business;
(ii) any claim by an officer of the Southern Energy Group
(who is an officer as of the IPO Closing Date) against any member or
employee of the Southern Group; and
(iii) any breach by Southern Energy or any member or person
employed by a member of the Southern Energy Group of this Agreement,
the Separation Agreement or any other Ancillary Agreement.
In the event that any member of the Southern Energy Group makes a
payment to the Southern Indemnitees hereunder, and any of the Southern
Indemnitees subsequently diminishes the Employment Liability on account of which
such payment was made, either directly or through a third-party recovery,
Southern will promptly repay (or will procure a Southern Indemnitee to promptly
repay) such member of the Southern Energy Group the amount by which the payment
made by such member of the Southern Energy Group exceeds the actual cost of the
associated indemnified Employment Liability.
Section 2. Indemnification by Southern. Except as otherwise provided in
this Agreement or Section 3 of this Schedule, Southern shall, for itself and as
agent for each member of the Southern Group, indemnify, defend (or, where
applicable, pay the defense costs for) and hold harmless the Southern Energy
Indemnitees from and against any and all Employment Liabilities that any third
party seeks to impose upon the Southern Energy Indemnitees, or which are imposed
upon the Southern Energy Indemnitees, if and to the extent such Employment
Liabilities relate to, arise out of or result from any of the following items
(without duplication):
(i) any acts or omissions or alleged acts or omissions by
or on behalf of any member or person employed by a member of the
Southern Group in the conduct of the Southern Business;
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(ii) any claim by an officer of the Southern Group against
any member or employee of the Southern Energy Group (who is an officer
as of the IPO Closing Date); and
(iii) any breach by Southern or any member or person
employed by a member of the Southern Group of this Agreement, the
Separation Agreement or any other Ancillary Agreement.
In the event that any member of the Southern Group makes a payment to
the Southern Energy Indemnitees hereunder, and any of the Southern Energy
Indemnitees subsequently diminishes the Employment Liability on account of which
such payment was made, either directly or through a third-party recovery,
Southern Energy will promptly repay (or will procure a Southern Energy
Indemnitee to promptly repay) such member of the Southern Group the amount by
which the payment made by such member of the Southern Group exceeds the actual
cost of the indemnified Employment Liability.
Section 3. Exceptions.
In accordance with the current practice in effect as of the execution
of the Agreement, with respect to claims for benefits or compensation, if an
underlying act or omission as contemplated in Section 1 or 2 of this Schedule
occurs and such act or omission constitutes the principal basis for such a
claim, then Section 1 or 2 shall apply, as applicable, to establish
indemnification obligations. If, however, no specific act or omission occurs
that is attributable to Southern or Southern Energy and the principal underlying
basis for a claim for benefits or compensation involves plan administration or
other similar systemic type activities related to maintenance of plans,
notwithstanding Sections 1 and 2, in accordance with the current practice in
effect as of the execution of the Agreement, Southern Energy and Southern shall
be responsible for their pro rata allocated share of costs to defend such claim.
Section 4 Relationship to Indemnification and Insurance Matters
Agreement.
(i) Unless expressly modified in this Schedule, all other
provisions of Article I of the Indemnification and Insurance Matters
Agreement will apply to an indemnifiable claim.
(ii) Any claim which is not an Employment Liability will
only be subject to the provisions of the Indemnification and Insurance
Matters Agreement.
Section 5. Definitions
(i) "Employment Liabilities" means all claims, causes of
action, demands, liabilities, debts or damages (known or unknown)
related to all
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employment matters addressed in this Agreement, including but not
limited to claims arising under the Employee Retirement Income Security
Act ("ERISA"), the Internal Revenue Code, claims for breach of
contract, breach of fiduciary duty, promissory estoppel, equitable
estoppel; claims for violation of any other federal or state statute or
regulation or local ordinance; claims for lost or unpaid wages or other
employee benefits; claims under the Americans with Disabilities Act
("ADA"); claims under the Family and Medical Leave Act ("FMLA"); claims
under Title VII of the Civil Rights Act of 1964, as amended; and claims
under state law for intentional infliction of emotional distress, pain,
suffering or anxiety, negligence, outrageous conduct, invasion of
privacy, harassment, assault, battery, defamation, slander, libel,
wrongful or constructive discharge or any other actions arising in tort
or contract.
(ii) All other defined terms in this Schedule shall have
the meaning set forth in the Indemnification and Insurance Matters
Agreement.
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SCHEDULE 2.01(a)
BENEFITS AND LIABILITIES FOR SOUTHERN ENERGY RETIRED
EMPLOYEES AND CERTAIN SOUTHERN ENERGY TERMINATED
EMPLOYEES
At the Group Status Change Date, the following will occur:
1. Benefits for a designated list of Southern Energy Retired Employees(1)
and certain Southern Energy Terminated Employees mutually agreed upon by
Southern Energy and Southern determined as of the Group Status Change
Date will become the responsibility of Southern(2).
Retiree medical benefits
Retiree life benefits
Southern Pension Plan benefits
Southern Supplemental Benefit Plan benefits
Southern SERP benefits
Southern Energy SERP benefits
Southern Deferred Compensation Plan benefits
Specified benefits in individual contracts (including commitments made
under the Value Creation Plan)
2. Assets related to Southern Energy Retired Employees' Southern Pension
Plan benefits will be transferred from Southern Energy's account within
the Southern Pension Plan trust to another designated account as of the
Group Status Change Date.
The asset transfer amount will use the existing methodology for
transferring benefit obligations and assets between accounts within the
Southern Pension Plan trust. The asset transfer amount will be determined
using the following formula:
Market value of Southern Energy's Southern Pension Plan asset
account
times: (PBO for Southern Energy Retired Employees)/
(PBO for all Southern Energy participants)
equals: Asset Transfer Amount
PBO = Projected benefit obligations as determined for
Southern's FAS 87 accounting purposes as of the date of
transfer.
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Benefits = PBO will be based on benefits payable by Southern Pension
Plan.
3. Southern Energy will become fully responsible for the Southern
Supplemental Benefit Plan and SERP benefits for all Southern Energy
Employees as of the Group Status Change Date. Southern Energy will also
retain responsibility for certain Liabilities set forth in individual
contracts entered into with certain Southern Energy Terminated Employees
mutually agreed upon by Southern Energy and Southern. Specifically, the
other Southern Subsidiaries will be relieved of any responsibilities to
provide a portion of the transferred employees' ultimate Supplemental
Benefit Plan and/or SERP benefits due to periods of service the Southern
Energy Employees worked for those other Subsidiaries.
4. Southern will be fully responsible for the Southern Supplemental Benefit
Plan and SERP benefits for all Southern Employees and Southern Energy
Retired Employees as of the Group Status Change Date. Specifically,
Southern Energy will be relieved of any responsibilities to provide a
portion of the Southern Employees' and Southern Energy Retired Employees'
ultimate Supplemental Benefit Plan and SERP benefits due to periods of
service the employees worked for Southern Energy.
5. Southern Energy will remunerate Southern for the excess of (A) over (B)
below:
A. Actuarial present value of the benefit responsibilities shifted to
Southern pursuant to items 1 and 4 above, OVER
B. The sum of:
Assets to be transferred from Southern Energy's account within the
Southern Pension Plan account pursuant to item 2 above.
Actuarial present value of the benefit responsibilities shifted to
Southern Energy pursuant to item 3 above.
While not anticipated, if (B) is larger than (A), then Southern will
remunerate Southern Energy for the excess of (B) over (A).
BASIS FOR ACTUARIAL PRESENT VALUES
The actuarial present values referred to in item 5 above will be computed using
the following basis or some other basis that is mutually acceptable to Southern
Energy and Southern:
- Data as of the Group Status Change Date.
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- For account-type benefits, the account balance as of the Group Status
Change Date will be deemed the actuarial present value.
- For all other benefits, the present values will be computed using
standard actuarial techniques and the ongoing plan actuarial
assumptions(3). The assumptions will be those used to determine pension
and retiree medical/life benefit obligations required by the Statement
of Financial Accounting Standards Number 132 ("FAS 132") for the prior
year's financial statements. If the assumptions used by Southern and
Southern Energy for these purposes differ, then present values will be
the average of the results obtained by independently computing the
present values using each set of assumptions.
6. With respect to certain Southern Energy Terminated Employees mutually
agreed upon by Southern Energy and Southern, the parties may mutually
agree to assign certain Liabilities and have such Liabilities processed
in accordance with Paragraph 5 above.
------------------
(1) Currently anticipated to be all non-union retirees, but may be limited
to a select list that will be agreed to by both sides prior to the
Group Status Change Date.
(2) For purposes of this document, Southern excludes Southern Energy.
(3) Using ongoing assumptions means that when determining the present
values of Southern Supplemental/SERP benefits as of the Group Status
Change Date for active employees the following will be anticipated by
the actuarial assumptions--continued service to retirement,
termination, death, or disability; pay increases; and unknown bonus
payments at target levels.
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SCHEDULE 6.04(a)
THIRD PARTY ASO CONTRACTS
PLAN VENDOR SERVICES
ESP Xxxxxxx Xxxxx Recordkeeping
ESOP Xxxxxxx Xxxxx Recordkeeping
PSP Xxxxxxx Xxxxx Recordkeeping
Supplemental Benefit Plan Xxxxxxx Xxxxx Recordkeeping
Deferred Compensation Xxxxxxx Xxxxx Recordkeeping
Health & Welfare Plans/ Xxxxxx Associates Recordkeeping/
Pension/SERP benefit delivery/
actuarial
Tax Saver Aon Recordkeeping
Pension Chase Manhattan Trustee
ESP Xxxxxxx Xxxxx Trustee
ESOP Xxxxxxx Xxxxx Trustee
PSP Xxxxxxx Xxxxx Trustee
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SCHEDULE 6.04(b)
GROUP INSURANCE POLICIES
PLAN INSURER
Health Partners HMO Health Partners (Alabama)
United Healthcare HMO United Healthcare (Alabama)
Group Life MetLife
Dependent Life MetLife
Retiree Life MetLife
Accident & Sickness Protective
Long Term Disability Provident
Total Income Protection Provident
Business Travel Provident
Dental (Indemnity) Protective
Dental (Preventive) Protective
Accidental Death & Dismemberment CNA
Legal Care Signature Legal
Vision Superior Vision
Personal Lines MetPay
Long Term Care Xxxx Xxxxxxx
Dental (HMO) CIGNA
CIGNA International CIGNA
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SCHEDULE 6.04(c)
THIRD PARTY HMO CONTRACTS
CONTRACT VENDOR
Kaiser HMO (GA) Kaiser
Aetna USHC HMO (GA) Aetna USHC
Aetna USHC HMO (DC) Aetna USHC
Blue Choice HMO Blue Cross of Georgia
Health Partners HMO Health Partners (Alabama)
United Healthcare HMO United Healthcare (Alabama)
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SCHEDULE 7.04
STOCK PURCHASE PLAN
See Exhibit 10.9 to the IPO Registration Statement.
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SCHEDULE 7.05
SOUTHERN ENERGY OMNIBUS INCENTIVE COMPENSATION PLAN
See Exhibit 10.10 to the IPO Registration Statement.
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SCHEDULE 8
FRINGE BENEFITS
Employee Assistance
Credit Union
Southern-owned Cars
Executive Financial Planning
Relocation
63
SCHEDULE 10.10(a)
EMPLOYMENT LITIGATION
TRANSFERRED CLAIMS
None
64
SCHEDULE 10.10(b)
EMPLOYMENT LITIGATION
JOINTLY DEFEND CLAIMS
None
