UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14C
(RULE 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
Information Statement Pursuant To Section 14(c) of the Securities Exchange
Act of 1934
(AMENDMENT NO. )
Check the appropriate box:
[ ] Preliminary information statement [ ] Confidential, for use of
the Commission only
(as permitted by Rule
14c-5(d)(2))
[X] Definitive information statement
ALABAMA POWER COMPANY
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(Name of Registrant as Specified in Its Charter)
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[ALABAMA POWER LOGO]
NOTICE OF 2002
ANNUAL MEETING
& INFORMATION STATEMENT
WWW.ALABAMAPOWER.COM
[ALABAMA POWER LETTERHEAD]
April 4, 2002
Dear Shareholder:
You are cordially invited to attend our 2002 Annual Meeting of
Shareholders at 8:00 a.m., Central Time, on April 26, 2002 at the Company's
Corporate Headquarters, 600 North 18th Street, Birmingham, Alabama.
At the meeting we will elect our board of directors.
Sincerely yours,
/s/ Charles D. McCrary
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Charles D. McCrary
President and Chief Executive Officer
ALABAMA POWER COMPANY
BIRMINGHAM, ALABAMA
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 26, 2002
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NOTICE IS HEREBY GIVEN that the annual meeting of the shareholders of
Alabama Power Company will be held at the Company's Corporate Headquarters, 600
North 18th Street, Birmingham, Alabama on April 26, 2002 at 8:00 a.m., Central
Time, to elect 16 members of the board of directors and to transact any other
business that may properly come before said meeting or any adjournment or
postponement thereof.
Only shareholders of record at the close of business on March 20, 2002
will be entitled to notice of and to vote at said meeting or any adjournment or
postponement thereof.
The Information Statement and the Annual Report are included in this
mailing.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US
A PROXY.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ William E. Zales, Jr
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William E. Zales, Jr.
Vice President and Corporate Secretary
Birmingham, Alabama
April 4, 2002
TABLE OF CONTENTS
PAGE
----
General Information......................................... 1
Shareholder Proposals....................................... 1
Nominees for Election as Directors.......................... 2
Corporate Governance........................................ 4
Audit Committee Report...................................... 6
Compensation and Management Succession Committee Report..... 8
Compensation Committee Interlocks and Insider
Participation............................................. 10
Certain Relationships and Related Transactions.............. 10
Executive Compensation Information.......................... 11
Stock Ownership Table....................................... 16
Appendix A -- Southern Company's Audit Committee Charter.... A-1
Appendix B -- Alabama Power Company's Audit Committee
Charter................................................... B-1
ALABAMA POWER COMPANY
INFORMATION STATEMENT
GENERAL INFORMATION
This Information Statement is furnished by Alabama Power Company (the
"Company") in connection with the 2002 Annual Meeting of Shareholders and any
adjournment or postponement thereof. The meeting will be held at 8:00 a.m., at
the Company's Corporate Headquarters, 600 North 18th Street, Birmingham,
Alabama. This Information Statement is initially being provided to shareholders
on or about April 4, 2002.
At the meeting, we will elect 16 members to the board of directors and
transact any other business that may properly come before the meeting. We are
not aware of any other matters to be presented at the meeting; however, the
holder of the Company's common stock will be entitled to vote on any other
matters properly presented.
All shareholders of record on the record date of March 20, 2002 are
entitled to notice of and to vote at the meeting. On that date, there were
6,000,000 common shares outstanding and entitled to vote, all of which are held
by The Southern Company. There were also 475,115 shares of preferred stock and
8,500,200 shares of Class A preferred stock outstanding on that date. With
respect to the election of directors, all of the outstanding shares of
preferred stock and Class A preferred stock are entitled to vote as a single
class with the Company's common stock. Each common share counts as one vote.
Each share of the 4.20% Series, the 4.52% Series, the 4.60% Series, the 4.64%
Series, the 4.72% Series and the 4.92% Series of outstanding preferred stock,
with par value of $100 per share, and each share of the 1988 Auction Series of
outstanding Class A preferred stock, with stated capital of $100 per share,
counts as two-fifths vote, each share of the 5.20% Series and the 5.83% Series
of outstanding Class A preferred stock, with stated capital of $25 per share,
counts as one-tenth vote and each share of the 1993 Auction Series of
outstanding Class A preferred stock, with stated capital of $100,000 per share,
counts as 400 votes. Neither the Company's charter nor by-laws provides for
cumulative voting rights.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US
A PROXY.
SHAREHOLDER PROPOSALS
Shareholders may present proper proposals for inclusion in the
Company's information statement and for consideration at the next annual
meeting of its shareholders by submitting their proposals to the Company in a
timely manner. In order to be so included for the 2003 Annual Meeting,
shareholder proposals must be received by the Company no later than February 3,
2003.
1
NOMINEES FOR ELECTION AS DIRECTORS
ITEM NO. 1 -- ELECTION OF DIRECTORS
A board of 16 directors is to be elected at the annual meeting, each
director to hold office until the next annual meeting of shareholders and until
the election and qualification of a successor. If any named nominee becomes
unavailable for election, the board may substitute another nominee.
On the following pages there is information concerning the nominees
for director stating, among other things, their names, ages, positions and
offices held, and brief descriptions of their business experience.
CHARLES D. MCCRARY -- Director since 2001
Mr. McCrary, 50, is president and chief executive officer of the
Company and executive vice president of Southern Company. He is a director of
AmSouth Bancorporation. He served as president and chief operating officer of
the Company from April 2001 to October 2001 and vice president of Southern
Company from February 1998 to April 2001. He served as executive vice president
of external affairs of the Company from April 1994 through February 1998.
WHIT ARMSTRONG -- Director since 1982
Mr. Armstrong, 54, is president, chairman and chief executive officer
of The Citizens Bank, Enterprise, Alabama. He is also president, chairman and
chief executive officer of Enterprise Capital Corporation, Inc.
DAVID J. COOPER, SR. -- Director since 1998
Mr. Cooper, 56, is president of Cooper/T. Smith Corporation (a
maritime company with a core business of stevedoring and tugboats). He is a
director of Cooper/T. Smith Corporation and subsidiaries and chairman of
American Equity Underwriters, Inc., Mobile, Alabama.
H. ALLEN FRANKLIN -- Director since 1999
Mr. Franklin, 57, is chairman, president and chief executive officer
of Southern Company. He served as president and chief executive officer of
Georgia Power Company and executive vice president of Southern Company from
1994 to 1999. He served as president and chief operating officer of Southern
Company from June 1999 to March 2001 and president and chief executive officer
from March 1 to April 1 when he assumed his current position. He is a director
of SouthTrust Corporation, Vulcan Materials Company and Southern Company system
companies -- Georgia Power Company and Gulf Power Company.
R. KENT HENSLEE -- Director since 1999
Mr. Henslee, 66, is managing partner of the law firm of Henslee,
Robertson, Strawn & Knowles, L.L.C., Gadsden, Alabama.
CARL E. JONES, JR. -- Director since 1988
Mr. Jones, 61, is chairman, president and chief executive officer of
Regions Financial Corporation, Birmingham, Alabama.
PATRICIA M. KING -- Director since 1997
Ms. King, 56, is president and chief executive officer of King Motor
Co., Inc., King's Highway, Inc. and King Imports, Inc. (car dealerships),
Anniston, Alabama.
JAMES K. LOWDER -- Director since 1997
Mr. Lowder, 52, is chairman of The Colonial Company (real estate
development and sales), Montgomery, Alabama.
2
WALLACE D. MALONE, JR. -- Director since 1990
Mr. Malone, 65, is chairman and chief executive officer of SouthTrust
Corporation (bank holding company), Birmingham, Alabama. He is a director of
Mercedes-Benz U.S. International, Inc.
MAYER MITCHELL -- Director since 1999
Mr. Mitchell, 69, is president of Mitchell Brothers, Inc. (real estate
and investments), Mobile, Alabama. He is a director of The Banc Corporation,
Birmingham, Alabama.
ROBERT D. POWERS -- Director since 1992
Mr. Powers, 52, is president of The Eufaula Agency, Inc. (real estate
and insurance), Eufaula, Alabama.
ANDREAS RENSCHLER -- Director since 1998
Mr. Renschler, 44, is president of MCC smart GmbH, Germany, a division
of Daimler Chrysler. He previously served as president and chief executive
officer of Mercedes-Benz U.S. International, Inc., Tuscaloosa County, Alabama.
C. DOWD RITTER -- Director since 1997
Mr. Ritter, 54, is chairman, president and chief executive officer of
AmSouth Bancorporation and AmSouth Bank, Birmingham, Alabama.
JAMES H. SANFORD -- Director since 1983
Mr. Sanford, 57, is chairman of HOME Place Farms, Inc. (diversified
farmers), Prattville, Alabama. He is also president of Autauga Quality Cotton
Association, Prattville, Alabama. He is chairman of Sylvest Farms of Georgia,
Inc., College Park, Georgia, and chairman of Sylvest Farms, Inc., Montgomery,
Alabama.
JOHN C. WEBB, IV -- Director since 1977
Mr. Webb, 59, is president of Webb Lumber Company, Inc. (wholesale
lumber and wood products sales), Demopolis, Alabama.
JAMES W. WRIGHT -- Director since 2000
Mr. Wright, 58, is chairman and chief executive officer of First
Tuskegee Bank, Tuskegee, Alabama. He is also chairman and chief executive
officer of Birthright Incorporated (bank holding company).
Each nominee has served in his or her present position for at least
the past five years, unless otherwise noted.
The majority of the votes cast by the shares outstanding and entitled
to vote at a meeting at which a quorum is present is required for the election
of directors. Southern Company, as owner of all of the Company's outstanding
common stock, will vote for all of the nominees above.
3
CORPORATE GOVERNANCE
HOW IS THE COMPANY ORGANIZED?
The Company is managed by a core group of officers and governed by a
board of directors which has been set at a total not to exceed 25 members. The
current nominees for election as directors consist of 16 members -- 14
non-employees, one executive officer of the Company and the chief executive
officer of Southern Company.
WHAT ARE DIRECTORS PAID FOR THEIR SERVICES?
- Standard Arrangements. The following compensation was paid to
the Company's directors during 2001 for service as a member
of the board of directors and any board committee(s), except
that employee directors received no fees or compensation for
service as a member of the board of directors or any board
committee. At the election of the director, all or a portion
of the cash retainer may be payable in Southern Company
common stock, and all or a portion of the total fees may be
deferred under the Deferred Compensation Plan until
membership on the board is terminated.
Cash Retainer Fee...................... $17,000
Stock Retainer Fee..................... 80 shares of Southern Company common stock in
the first quarter of 2001 and 130 shares per
quarter thereafter
Meeting Fee............................ $900 for each board or committee meeting
attended
- Pension Plan. There is no pension plan for non-employee
directors.
- Other Arrangements. No director received other compensation
for services as a director during the year ending December
31, 2001 in addition to or in lieu of that specified by the
standard arrangements specified above.
COMMITTEES OF THE BOARD
AUDIT COMMITTEE:
- Members are Dr. Thomas C. Meredith, Chairman; Mr. Henslee;
Mr. Lowder; and Mr. Webb
- Met four times in 2001
- Oversees the Company's financial reporting and accounting
practices and internal accounting, compliance and control
systems
Southern Company's Audit Committee reviews the independent public
accountant's reports on the Company's financial statements and discusses
significant changes in accounting principles and practices, significant
proposed adjustments and any unresolved disagreements with management
concerning accounting or disclosure matters with management and the independent
public accountants. It also recommends appointment of the independent public
accountants and reviews their services and fees and the scope and timing of
audits. It also is responsible for recommending the filing of the Company's
annual financial statements with the Securities and Exchange Commission.
COMPENSATION COMMITTEE:
- Members are Mr. Malone, Chairman; Mr. Franklin, ex officio;
Mr. Armstrong; and Mr. Powers
- Met three times in 2001
- Oversees the administration of the Company's compensation
arrangements
4
Southern Company's Compensation and Management Succession Committee
approves the corporate performance goals used to determine incentive
compensation and establishes the mechanism for setting compensation levels for
the Company's executive officers. It also administers executive compensation
plans and reviews management succession plans.
NOMINATING COMMITTEE:
- Members are Mr. Ritter, Chairman; Mr. Franklin, ex officio;
Mr. Renschler; Dr. William V. Muse; and Mr. Sanford
- Met one time in 2001
- Considers and recommends nominees for election as directors
The Nominating Committee expects to identify from its own resources
qualified nominees and does not accept from shareholders recommendations of
individuals to be considered as nominees. The final selection of the board's
nominees is within the sole discretion of the board of directors.
EXECUTIVE COMMITTEE:
- Members are Mr. McCrary, Chairman; Mr. Jones; Mr. Malone; and
Mr. Ritter
- Met four times in 2001
- Acts in place of full board on matters that require board
action between meetings of the board to the extent permitted
by law and within certain limits set by the board
NUCLEAR SAFETY COMMITTEE:
- Members are Mr. Cooper, Chairman; Ms. King; Mr. Mitchell; and
Mr. Wright
- Met three times in 2001
- Reviews nuclear operations activities
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The board of directors met five times in 2001. Average director
attendance at all board and committee meetings was 85 percent. Ms. King and
Messrs. Cooper, Mitchell and Renschler attended less than 75 percent of
applicable meetings.
5
AUDIT COMMITTEE REPORT
The Audit Committee of Southern Company (the "Committee") oversees the
Company's financial reporting process on behalf of the board of directors of
each of the Company and Southern Company. The Committee members are not
professionally engaged in the practice of accounting or auditing and are not
experts in these fields. The Company's management has the primary
responsibility for the financial statements and the reporting process including
the systems of internal controls. In fulfilling its oversight responsibilities,
the Committee reviewed the audited financial statements of the Company in the
Annual Report with management. The Committee's review process included
discussions of the quality, not just the acceptability, of the accounting
principles, the reasonableness of significant judgments and the clarity of
disclosures in the financial statements.
The independent public accountants are responsible for expressing an
opinion on the conformity of those audited financial statements with accounting
principles generally accepted in the United States. The Committee reviewed with
the independent public accountants their judgments as to the quality, not just
the acceptability, of the Company's accounting principles and such other
matters as are required to be discussed with the Committee under generally
accepted auditing standards. In addition, the Committee has discussed with the
independent public accountants their independence from management and the
Company including the matters in the written disclosures required by the
Independence Standards Board. The Committee has also considered whether the
independent public accountants' provision of non-audit services to the Company
is compatible with maintaining their independence.
The Committee discussed the overall scopes and plans with the
Company's internal auditors and independent public accountants for their
respective audits. The Committee meets with the internal auditors and
independent public accountants, with and without management present, to discuss
the results of their audits, their evaluations of the Company's internal
controls and the overall quality of the Company's financial reporting. The
Committee held nine meetings during fiscal 2001.
In reliance on the reviews and discussions referred to above, the
Committee recommended to the board of directors of Southern Company (and the
board approved) that the audited financial statements be included in the
Company's Annual Report for the year ended December 31, 2001 and filed with the
Securities and Exchange Commission. The Committee also recommended to the board
of directors of Southern Company (and the board approved) the selection of the
Company's independent public accountants.
Members of the Committee:
L. G. Hardman III, Chairman
Dorrit J. Bern
Zack T. Pate
Gerald J. St. Pe
6
PRINCIPAL PUBLIC ACCOUNTING FIRM FEES
The following represents the fees billed to the Company for the last
fiscal year by Arthur Andersen LLP -- the Company's principal public accountant
for 2001:
Audit Fees.................................................. $334,200
Financial Information Systems Design and Implementation
Fees...................................................... --
All Other Fees-
Audit-Related Fees........................................ 105,000(a)
Other Fees................................................ 29,600
--------
Total............................................. $468,800
========
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(a) Audit-related fees include benefit plan audits, accounting
consultations, various attest services under professional standards,
assistance with registration statements, comfort letters and consents.
CHANGE IN PRINCIPAL PUBLIC ACCOUNTING FIRM
On March 28, 2002, the Board of Directors of Southern Company, upon
recommendation of its Audit Committee, decided not to engage Arthur Andersen
LLP ("Arthur Andersen") as the Company's principal public accountants and
engaged Deloitte & Touche LLP ("Deloitte & Touche") to serve as the Company's
principal public accountants for fiscal year 2002.
Arthur Andersen's reports on the consolidated financial statements of
the Company and its subsidiaries for the two most recent fiscal years ended
December 31, 2001, did not contain any adverse opinion or disclaimer of
opinion, nor were they qualified or modified as to uncertainty, audit scope, or
accounting principles.
During the Company's two most recent fiscal years ended December 31,
2001, and the subsequent interim period through March 28, 2002:
- there were no disagreements between the Company and Arthur
Andersen on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or
procedure, which disagreements, if not resolved to Arthur
Andersen's satisfaction, would have caused them to make
reference to the subject matter of the disagreement in
connection with their report;
- there were no reportable events as described in Item
304(a)(1)(v) of Regulation S-K; and
- the Company did not consult Deloitte & Touche with respect to
the application of accounting principles to a specified
transaction, either completed or proposed, or the type of
audit opinion that might be rendered on the Company's
consolidated financial statements, or any other matters or
reportable events as set forth in Items 304(a)(2)(i) and (ii)
of Regulation S-K.
No representative of Deloitte & Touche is expected to be present at
the meeting unless prior to the day of the meeting the Company's Corporate
Secretary has received written notice from a shareholder addressed to the
Corporate Secretary at Alabama Power Company, 600 North 18th Street,
Birmingham, Alabama 35291, that such shareholder will attend the meeting and
wishes to ask questions of a representative of Deloitte & Touche.
Representatives from Arthur Andersen will not be present.
7
COMPENSATION AND MANAGEMENT SUCCESSION COMMITTEE REPORT
WHAT IS THE EXECUTIVE COMPENSATION PHILOSOPHY?
Southern Company's Compensation and Management Succession Committee's
intent is to provide a competitive compensation program that is linked directly
to Southern Company's and the Company's strategic business objectives and their
short- and long-term operating performance. With the objective of maximizing
Southern Company's stockholder value over time, this policy serves to align the
interests of executives and Southern Company's stockholders.
WHAT COMPRISES TOTAL EXECUTIVE COMPENSATION?
- Base pay,
- Short-term incentives (annual performance bonuses), and
- Long-term incentives.
TOTAL EXECUTIVE COMPENSATION
Total executive compensation targets are set at the size-adjusted
median of the marketplace. The marketplace is defined as a group of large
companies in the electric and gas utility industries. Fourteen of these
companies are included in the 28 companies that comprise the Standard & Poor's
Electric Utility Index.
BASE PAY
A range for base pay is determined for each executive by comparing the
base pay at the appropriate peer group of companies described previously. Base
pay is set at a level that is at or below the size-adjusted median paid at
those companies because of Southern Company's emphasis on incentive
compensation in its executive compensation program.
ANNUAL PERFORMANCE BONUSES
Annual bonuses are paid through the Omnibus Incentive Compensation
Plan. All named executives participated in this plan in 2001.
PERFORMANCE GOALS
Annual performance bonus levels are based on a percentage of Southern
Company's net income from operations. In addition, the annual performance
bonuses are reviewed in comparison to the attainment of corporate performance
and short-term business unit goals, individual goals and new products and
services goals. All performance goals were set at the beginning of the year.
For 2001, the corporate performance goals included specific targets
for:
- Southern Company earnings -- earnings per share of Southern
Company from operations ("EPS") and
- The Company's net income and return on equity ("ROE").
We believe that accomplishing the corporate goals is essential for the
Company's continued success and sustained performance. A target performance
level is set for each corporate performance goal. Performance above or below
the targets results in proportionately higher or lower bonus payments. The
bonus amount is then adjusted, up or down, based on the degree of achievement
of the short-term business unit goals related to capital expenditures, cash
flow, customer service, plant availability, diversity and individual goals.
8
A target percentage of base pay is established for each executive
officer based on position level for target-level performance. Annual
performance bonuses based on the achievement of the corporate performance
goals, as adjusted for the short-term business unit goals and individual
performance, may range from 0 percent of the target to 240 percent. An
additional amount of up to 10 percent of the executive's annual performance
bonus may be paid for achievement of the new products and services goal at his
or her business unit.
No bonuses are paid if performance is below a threshold level or if a
minimum earnings level is not reached. Also, no bonuses are paid if Southern
Company's current earnings are not sufficient to fund the common stock dividend
at the same level as the prior year. We also capped the maximum amount for the
annual performance bonus for each named executive officer at 0.6 percent of net
income from operations.
ANNUAL BONUS PAYMENTS
Performance met or exceeded the target levels in all areas in 2001,
resulting in bonuses that exceeded the target levels.
Mr. Harris' and Mr. McCrary's annual performance bonuses under the
Omnibus Incentive Compensation Plan for target-level performance was 75% of
each individual's base pay. Each individual's bonus paid for 2001 performance
was based 30% on the degree of achievement of the Southern Company EPS goal and
70% on the degree of achievement of the Company's net income and ROE goal.
Performance for both goals exceeded the target, resulting in bonus payments to
Mr. Harris and Mr. McCrary that exceeded the target. Mr. McCrary also received
an award based on achievement of the new products and service goal.
LONG-TERM INCENTIVES
We based a significant portion of our total compensation program on
long-term incentives including Southern Company stock options and performance
dividend equivalents.
Stock Options -- Executives are granted options with ten-year terms to
purchase Southern Company's common stock at the market price on the date of the
grant under the terms of the Omnibus Incentive Compensation Plan. The estimated
annualized value represented approximately 40 percent of Mr. Harris' total
compensation, approximately 30 percent of Mr. McCrary's and 25 to 35 percent
for the other executives. The size of prior grants was not considered in
determining the size of the grants made in 2001. These options vest over a
three-year period.
Performance Dividends -- Executives also are paid performance-based
dividend equivalents on most stock options held at the end of the year.
Dividend equivalents can range from 25 percent of the common stock dividend
rate if total shareholder return, compared to a group of other utility
companies, is at the 30th percentile to 100 percent of the dividend rate if it
reaches the 90th percentile.
For eligible stock options held on December 31, 2001, all executives
received 100 percent of the dividend rate, or $1.34 per share.
POLICY ON INCOME TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code limits the deductibility
of certain executive's compensation that exceeds $1 million per year unless the
compensation is paid under a performance-based plan as defined in the Internal
Revenue Code and that has been approved by shareholders. Southern Company has
obtained shareholder approval for its Omnibus Incentive Compensation Plan.
However, the policy is to maximize long-term stockholder value, and tax
deductibility is only one factor considered in setting compensation.
9
SUMMARY
We believe that the policies and programs described in this report
link pay and performance and serve the best interest of Southern Company
stockholders. We frequently review the various pay plans and policies and
modify them as we deem necessary to continue to attract, retain and motivate
talented executives.
Members of the committee:
G. J. St. Pe, Chairman
D. P. Amos
T. F. Chapman
L. G. Hardman III
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Southern Company's Compensation and Management Succession Committee is
made up of non-employee directors who have never served as executive officers
of Southern Company or the Company. During 2001, none of Southern Company's or
the Company's executive officers served on the board of directors of any
entities whose directors or officers serve on Southern Company's Compensation
and Management Succession Committee.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Whit Armstrong is president, chairman and chief executive officer
of The Citizens Bank, Enterprise, Alabama; Mr. Carl E. Jones, Jr. is chairman,
president and chief executive officer of Regions Financial Corporation,
Birmingham, Alabama; Mr. Wallace D. Malone is chairman and chief executive
officer of SouthTrust Corporation, Birmingham, Alabama; Mr. C. Dowd Ritter is
chairman, president and chief executive officer of AmSouth Bancorporation and
AmSouth Bank, Birmingham, Alabama; and Mr. James W. Wright is chairman and
chief executive officer of First Tuskegee Bank, Tuskegee, Alabama. During 2001,
these banks furnished a number of regular banking services in the ordinary
course of business to the Company. The Company intends to maintain normal
banking relations with all the aforesaid banks in the future.
10
EXECUTIVE COMPENSATION INFORMATION
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN
CONTROL ARRANGEMENTS
The Company has adopted Southern Company's Change in Control Plan,
which is applicable to certain of its officers, and has entered into individual
change in control agreements with Messrs. Harris, McCrary and Martin. If an
executive is involuntarily terminated, other than for cause, within two years
following a change in control of Southern Company or the Company, the
agreements provide for:
- lump sum payment of two or three times annual compensation,
- up to five years' coverage under group health and life
insurance plans,
- immediate vesting of all stock options, stock appreciation
rights and restricted stock previously granted,
- payment of any accrued long-term and short-term bonuses and
dividend equivalents and
- payment of any excise tax liability incurred as a result of
payments made under any individual agreements.
A Southern Company change in control is defined under the agreements
as:
- acquisition of at least 20 percent of Southern Company's
stock,
- a change in the majority of the members of Southern Company's
board of directors,
- a merger or other business combination that results in
Southern Company's shareholders immediately before the merger
owning less than 65 percent of the voting power after the
merger or
- a sale of substantially all the assets of Southern Company.
A change in control of the Company is defined under the agreements as:
- acquisition of at least 50 percent of the Company's stock,
- a merger or other business combination unless Southern
Company controls the surviving entity or
- a sale of substantially all of the assets of the Company.
Southern Company also has amended its short- and long-term incentive
plans to provide for pro-rata payments at not less than target-level
performance if a change in control occurs and the plans are not continued or
replaced with comparable plans.
Mr. Harris retired from the Company on January 11, 2002. In connection
with his retirement, the Company entered into an agreement with Mr. Harris.
This agreement provides for a severance payment payable in a lump sum of
$2,500,000 and 87 payments of $17,640 per month. This agreement also contains
customary releases by the Company and Mr. Harris and an agreement by Mr. Harris
to not engage in specified competitive activities for two years.
11
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the Chief
Executive Officers and the other four most highly compensated executive
officers of the Company serving during 2001.
LONG-TERM COMPENSATION
-----------------------------------------------------
ANNUAL COMPENSATION NUMBER OF
-------------------------------------------- RESTRICTED SECURITIES LONG-TERM
OTHER ANNUAL STOCK UNDERLYING INCENTIVE ALL OTHER
NAME AND OTHER PRINCIPAL COMPENSATION AWARDS STOCK OPTIONS PAYOUTS COMPENSATION
POSITION YEAR SALARY ($) BONUS ($) ($) ($)(1) (SHARES) ($)(2) ($)(3)
------------------------ ---- ---------- --------- ------------ ---------- ------------- --------- ------------
ELMER B. HARRIS(4)......... 2001 596,026 522,206 21,371 -- 257,098 -- 29,182
Chairman, Chief Executive 2000 573,187 643,046 129,834 167,476 62,064 -- 27,858
Officer, Director 1999 550,674 97,125 15,301 -- 31,341 330,618 29,800
CHARLES D. MCCRARY......... 2001 391,647 438,652 91,403 -- 92,338 -- 118,975
President, Chief Executive 2000 -- -- -- -- -- -- --
Officer, Director 1999 -- -- -- -- -- -- --
C. ALAN MARTIN(5).......... 2001 314,887 231,178 1,157 -- 64,908 -- 16,342
Executive Vice President 2000 293,490 279,905 64,498 -- 25,395 -- 95,488
1999 -- -- -- -- -- -- --
WILLIAM B. HUTCHINS, III... 2001 290,103 180,167 37,141 -- 75,124 -- 53,847
Executive Vice President, 2000 279,392 258,657 38,240 -- 24,167 -- 18,159
Chief Financial Officer
and Treasurer 1999 256,665 36,365 9,573 -- 11,246 152,585 13,804
STEVEN R. SPENCER (5)...... 2001 250,082 180,049 46,695 -- 47,289 -- 61,735
Executive Vice 2000 -- -- -- -- -- -- --
President 1999 -- -- -- -- -- -- --
JERRY L. STEWART(5)........ 2001 210,870 178,418 112,574 -- 44,789 -- 111,280
Senior Vice President 2000 199,305 189,069 3,193 -- 17,293 -- 10,558
1999 182,097 26,996 1,884 -- 6,340 122,003 9,794
---------
(1) In 2000, this amount for Mr. Harris reflected the value on the date of
the grant, July 17, 2000 of restricted stock. The restricted stock
vested on July 17, 2001.
(2) Payouts made in 2000 for the four-year performance period ending
December 31, 1999.
(3) Company contributions in 2001 to the Employee Savings Plan (ESP),
Employee Stock Ownership Plan (ESOP), non-pension related accruals
under the Supplemental Benefit Plan (SBP) and tax sharing benefits
paid to participants who elected receipt of dividends on Southern
Company's common stock held in the ESP are provided in the following
table:
ESP TAX SHARING
NAME ESP ESOP SBP BENEFITS
---- ------ ---- ------- -----------------------
Elmer B. Harris........................... $5,958 $764 $22,460 $ --
Charles D. McCrary........................ 5,958 764 12,253 --
C. Alan Martin............................ 7,331 764 8,247 --
William B. Hutchins, III.................. 6,853 764 7,772 3,458
Steven R. Spencer......................... 5,958 764 5,013 --
Jerry L. Stewart.......................... 7,650 764 2,866 --
In 2001, these amounts for Messrs. McCrary, Hutchins, Spencer and
Stewart also include additional incentive compensation of $100,000,
$35,000, $50,000 and $100,000, respectively. In 2000, for Mr. Martin
this amount also included additional relocation assistance of $80,000.
(4) Mr. Harris retired as Chairman of the Company on January 11, 2002.
(5) Messrs. Spencer, Stewart and Martin were named executive officers
effective May 2001, July 1999 and January 2000, respectively.
12
STOCK OPTION GRANTS IN 2001
The following table sets forth all stock option grants to the named
executive officers of the Company during the year ending December 31, 2001.
% OF TOTAL
OPTIONS
# OF SECURITIES GRANTED TO EXERCISE OR GRANT DATE
UNDERLYING OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED(1) FISCAL YEAR(2) ($/SH)(1) DATE(1) VALUE($)(3)
---- ------------------ -------------- ----------- ---------- -----------
Elmer B. Harris................. 78,669 3.2 19.0762 01/11/2007 417,000
178,429
7.3 22.4250 01/11/2007 945,674
Charles D. McCrary.............. 37,725 1.5 19.0762 02/16/2011 199,968
54,613
2.2 22.4250 04/16/2011 289,449
C. Alan Martin.................. 32,190 1.3 19.0762 02/16/2011 170,629
32,718
1.3 22.4250 04/16/2001 173,405
William B. Hutchins, III........ 30,632 1.3 19.0762 02/16/2011 162,371
44,492
1.8 22.4250 04/16/2011 235,808
Steven R. Spencer............... 24,596 1.0 19.0762 02/16/2011 130,376
22,693
1.0 22.4250 04/16/2011 120,273
Jerry L. Stewart................ 22,341 1.0 19.0762 02/16/2011 118,423
22,448
1.0 22.4250 04/16/2011 118,974
---------
(1) Under the terms of the Omnibus Incentive Compensation Plan, stock
option grants were made on February 16, 2001 and April 16, 2001, and
vest annually at a rate of one-third on the anniversary date of the
grant. Grants fully vest upon termination as a result of death, total
disability, or retirement and expire five years after retirement,
three years after death or total disability, or their normal
expiration date if earlier. The exercise price is the average of the
high and low price of Southern Company's common stock on the date
granted. Options may be transferred to certain family members, family
trusts, and family limited partnerships. The number of options granted
on February 16, 2001, and the exercise price thereof were adjusted
after the spin-off of Mirant Corporation under the antidilution
provisions of the plan such that the options had the same aggregate
intrinsic value on the day of the spin-off as the day before.
(2) A total of 2,435,457 stock options were granted in 2001.
(3) Value was calculated using the Black-Scholes option valuation model.
The actual value, if any, ultimately realized depends on the market
value of Southern Company common stock at a future date. Significant
assumptions are shown below:
DISCOUNT FOR
FORFEITURE RISK
--------------------
RISK-FREE DIVIDEND BEFORE AFTER
GRANT DATE VOLATILITY RATE OF RETURN OPPORTUNITY TERM VESTING EXPIRATION
---------- ---------- -------------- ----------- ---- ------- ----------
2/16/01........................ 27.34% 5.10% 50% 10 7.79% 12.45%
4/16/01........................ 26.11% 5.14% 50% 10 7.79% 11.77%
---------
These assumptions reflect the effects of cash dividend equivalents paid to
participants under the Omnibus Incentive Compensation Plan assuming targets are
met.
13
AGGREGATED STOCK OPTION EXERCISES IN 2001 AND YEAR-END OPTION VALUES
The following table sets forth information concerning options
exercised during the year ending December 31, 2001 by the named executive
officers and the value of unexercised options held by them as of December 31,
2001.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
SHARES VALUE FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)(2)
ACQUIRED ON REALIZED ------------------------- --------------------------
NAME EXERCISE (#) ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------ -------------- ------------------------- --------------------------
Elmer B. Harris............ 195,751 2,323,161 257,951/160,792 2,795,645/1,335,899
Charles D. McCrary......... 44,007 511,851 81,824/130,511 833,171/788,743
C. Alan Martin............. -- -- 65,122/98,039 646,372/638,268
William B. Hutchins, III... 30,951 312,650 71,189/106,595 747,038/645,965
Steven R. Spencer.......... 19,268 188,763 26,768/69,403 246,138/449,131
Jerry L. Stewart........... 18,101 139,798 36,826/66,407 371,111/429,671
---------
(1) The "Value Realized" is ordinary income, before taxes, and represents
the amount equal to the excess of the fair market value of the shares
at the time of exercise above the exercise price.
(2) This column represents the excess of the fair market value of Southern
Company common stock of $25.35 per share, as of December 31, 2001,
above the exercise price of the options. The amounts under the
Exercisable column reports the "value" of options that are vested and
therefore could be exercised. The amounts under the Unexercisable
column reports the "value" of options that are not vested and
therefore could not be exercised as of December 31, 2001.
DEFINED BENEFIT OR ACTUARIAL PLAN DISCLOSURE
The following table sets forth the estimated annual pension benefits
payable at normal retirement age under Southern Company's qualified Pension
Plan, as well as non-qualified supplemental benefits, based on the stated
compensation and years of service with the Southern Company system for the
named executive officers at the Company. Compensation for pension purposes is
limited to the average of the highest three of the final 10 years'
compensation. Compensation is base salary plus the excess of annual incentive
compensation over 15 percent of base salary. The compensation components are
reported under columns titled "Salary" and "Bonus" in the Summary Compensation
Table detailed earlier in this Information Statement.
The amounts shown in the table were calculated according to the final
average pay formula and are based on a single life annuity without reduction
for joint and survivor annuities or computation of the Social Security offset
which would apply in most cases. See "Executive Compensation Information"
detailed earlier in this Information Statement for a description of the
additional supplemental pension payable to Mr. Harris under an agreement with
the Company.
YEARS OF ACCREDITED SERVICE
------------------------------------------------------------------------------
REMUNERATION 15 20 25 30 35 40 45
------------ -------- -------- -------- -------- -------- ---------- ----------
$ 100,000............. $ 25,500 $ 34,000 $ 42,500 $ 51,000 $ 59,500 $ 68,000 $ 76,500
300,000............ 76,500 102,000 127,500 153,000 178,500 204,000 229,500
500,000............ 127,500 170,000 212,500 255,000 297,500 340,000 382,500
700,000............ 178,500 238,000 297,500 357,000 416,500 476,000 535,500
900,000............ 229,500 306,000 382,500 459,000 535,500 612,000 688,500
1,100,000............ 280,500 374,000 467,500 561,000 654,500 748,000 841,500
1,300,000............ 331,500 442,000 552,500 663,000 773,500 884,000 994,500
1,500,000............ 382,500 510,000 637,500 765,000 892,500 1,020,000 1,147,500
14
As of December 31, 2001, the applicable compensation levels and
accredited service for determination of pension benefits would have been:
COMPENSATION ACCREDITED YEARS OF
NAME LEVEL SERVICE
---- ------------ -------------------
Elmer B. Harris............................................. $1,042,992 42
Charles D. McCrary.......................................... 663,248 27
C. Alan Martin.............................................. 483,460 29
William B. Hutchins, III.................................... 432,000 35
Steven R. Spencer........................................... 355,336 22
Jerry L. Stewart............................................ 338,656 28
15
STOCK OWNERSHIP TABLE
Southern Company is the beneficial owner of 100% of the outstanding
common stock of the Company. The following table shows the number of shares of
Southern Company common stock owned by directors, nominees and executive
officers as of December 31, 2001. It is based on information furnished by the
directors, nominees and executive officers. The shares owned by all directors,
nominees and executive officers as a group constitute less than one percent of
the total number of shares of Southern Company common stock outstanding on
December 31, 2001.
NUMBER OF
SHARES
BENEFICIALLY
NAME OF DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS OWNED(1)(2)
-------------------------------------------------- ------------
Whit Armstrong.............................................. 20,776
David J. Cooper, Sr......................................... 3,600
H. Allen Franklin........................................... 489,080
Elmer B. Harris............................................. 464,433
R. Kent Henslee............................................. 5,566
Carl E. Jones............................................... 14,175
Patricia M. King............................................ 1,172
James K. Lowder............................................. 8,395
Wallace D. Malone, Jr....................................... 833
Charles D. McCrary.......................................... 112,440
Mayer Mitchell.............................................. 854
Robert D. Powers............................................ 1,638
Andreas Renschler........................................... 3,636
C. Dowd Ritter.............................................. 1,172
James H. Sanford............................................ 1,563
John C. Webb, IV............................................ 11,538
James W. Wright............................................. 1,282
William B. Hutchins, III.................................... 110,835
C. Alan Martin.............................................. 92,387
Steven R. Spencer........................................... 50,788
Jerry L. Stewart............................................ 60,460
The directors, nominees, and executive officers as a
group..................................................... 1,456,623
---------
(1) "Beneficial ownership" means the sole or shared power to vote, or to
direct the voting of, a security, and/or investment power with respect
to a security (i.e., the power to dispose of, or to direct the
disposition of, a security).
(2) Includes shares of Southern Company common stock that certain
executive officers have the right to acquire within 60 days as
follows: Mr. Franklin, 451,840 shares; Mr. Harris, 418,743 shares; Mr.
Hutchins, 94,165 shares; Mr. Martin, 89,266 shares; Mr. McCrary,
109,823 shares; Mr. Spencer, 44,182 shares; and Mr. Stewart, 53,407
shares. Also, included are shares of Southern Company common stock
held by the spouse of the following director: Mr. Harris, 310 shares.
16
APPENDIX A
SOUTHERN COMPANY
AUDIT COMMITTEE CHARTER
This Charter identifies the composition, purpose, authority, meeting
requirements and responsibilities of the Southern Company Audit Committee (the
"Committee") as approved by the Southern Company Board of Directors.
COMPOSITION OF THE AUDIT COMMITTEE
The Audit Committee will be comprised of at least three independent
directors, each of whom will have a basic understanding of financial statements
and at least one of whom will have prior accounting and related financial
management expertise. Such requirements, for independence and financial
literacy, are interpreted by the Board of Directors in its best business
judgment in accordance with the rules of the Securities and Exchange Commission
(SEC) and the New York Stock Exchange.
PURPOSE OF THE AUDIT COMMITTEE
The purpose of the Audit Committee is to provide, on behalf of the
Southern Company Board of Directors, oversight of:
- The Southern Company's accounting and financial reporting
practices and policies and internal audit activities and
procedures, including the assessment of the adequacy of
internal accounting, compliance and controls systems.
- The Southern Company's financial statements and the
independent audit thereof, including quarterly and annual
reporting. This includes financial information for all
Southern Company first-tier, consolidated subsidiaries.
- The independent public accountants, including their selection
or nomination for Board of Directors, their performance
evaluation and, where appropriate, their replacement.
- The independence of the external public accountants through
evaluation and discussion of their annual written "Statement
as to Independence" and consideration of non-audit services
provided.
AUTHORITY OF THE AUDIT COMMITTEE
The Committee reports to the Board of Directors and has unrestricted
access and authorization to obtain assistance from Southern Company personnel
to accomplish its purpose. In addition, the Committee has the discretion to
initiate and supervise investigations within the scope of its duties, as it may
deem appropriate and to employ whatever additional advisors and consultants it
deems necessary for the fulfillment of its duties.
MEETING REQUIREMENTS
The Audit Committee shall meet a minimum of four times each year, or
more often if warranted, to receive reports from and discuss the quarterly and
annual financial statements, including disclosures and other related
information. The Audit Committee shall meet separately, at least annually, with
the Director of Internal Auditing, the Compliance Officer, and the external
auditor to discuss matters that the Audit Committee or any of these persons
believe should be discussed privately. Meetings of the Audit Committee may
utilize conference call, Internet or other similar electronic communication
technology.
A-1
RESPONSIBILITIES OF THE AUDIT COMMITTEE
1. Financial Reporting and Accounting Practices
The oversight responsibility of the Audit Committee in the area of
financial reporting and accounting practices is to provide reasonable
assurances that financial disclosures made by management accurately
portray the financial condition, results of operations, cash flows,
plans and long-term commitments of the Company on a consolidated
basis, as well as on a separate company basis for each first-tier,
consolidated subsidiary that has publicly traded securities. To
accomplish this, the Committee will:
- Provide oversight of the external audit coverage, including:
Annual nomination or selection of independent public
accountants.
Evaluation of the independent public accountants'
performance.
Evaluation of policies covering when or whether to engage the
independent public accountants to provide non-audit services.
Review of the independent public accountants' quarterly and
annual work plans, results of the audit engagements and
proposed and actual fees for services rendered. This includes
audit and non-audit work plans and fees.
Coordination with the Internal Auditing and Accounting
functions.
Assessment of the external auditors' annual "Statement as to
Independence."
- Review and discuss the quarterly and annual consolidated
earnings announcements with management.
- Review and discuss with management and the independent public
accountants the quarterly and annual financial statements and
recommend them for filing with the SEC. The financial
statements include the Southern Company consolidated
financial statements as well as the separate financial
statements for all first-tier, consolidated subsidiaries with
publicly traded securities. The review and discussion
includes:
Significant accounting policies and policy decisions.
Significant judgments and estimates made by management.
Significant reporting or operational issues identified during
the reporting period, including how they were resolved.
Issues on which management sought second accounting opinions.
Adjustments to the financial statements proposed by the
external auditors.
Significant regulatory changes and accounting and reporting
developments proposed by Financial Accounting Standards
Board, SEC or other regulatory agency.
- Review the letters of management representation given to the
independent public accountants in connection with the audits
of the annual financial statements.
2. Internal Control
The responsibility of the Audit Committee in the area of internal
control in addition to the actions described in section (1) is to:
- Provide oversight of the internal audit functions by:
Reviewing audit plans, budgets and staffing levels.
Reviewing audit results.
A-2
Reviewing management's appointment, appraisal of, and/or removal of
the Company's Director of Internal Auditing. At least every two years,
regardless of the performance of the incumbent, the President and
Chief Executive Officer will review with the Committee the merits of
reassigning the Director of Auditing.
- Assess the extent to which the planned audit scopes of the
internal auditors and the independent public accountants can
be relied on to detect fraud or weaknesses in internal
controls.
- Assess management's response to any reported weaknesses or
compliance deficiencies.
- Provide oversight of the Company's Compliance and Ethics
Programs by:
Reviewing the plans and activities of the Company's Corporate
Compliance Officer.
Reviewing results of auditing or other monitoring programs
designed to prevent or detect violations of laws or
regulations.
Reviewing corporate policies relating to compliance with laws
and regulations, ethics, conflict of interest and the
investigation of misconduct or fraud.
Reviewing significant cases of employee conflict of interest,
unethical or illegal conduct.
- Review the quality assurance practices of the internal
auditing function and the independent public accountants.
- Review and discuss significant risks facing the Company and
the steps taken to monitor and minimize such risks.
- Review different aspects of the Company's business on a
planned basis to ensure a general understanding of the
significant operations and functional areas and to assess the
impact of these operations and functional areas on the
internal control environment.
3. Other
- Report Committee activities and findings to the Board of
Directors on a regular basis.
- Report Committee activities in the Company's annual proxy
statement to shareholders.
- Review this charter at least annually and recommend
appropriate changes.
A-3
APPENDIX B
ALABAMA POWER COMPANY
AUDIT COMMITTEE CHARTER
FUNCTION
The Audit Committee of the Board of Directors of Alabama Power Company
(the "Committee") is charged with providing review of the Company's financial
reporting and accounting practices, and the adequacy of the Company's internal
accounting, compliance, and control systems. The Committee, which is composed
solely of outside directors, has unrestricted access and authorization to
obtain assistance from Company personnel to perform its function. In addition,
the Committee has the discretion to initiate and supervise investigations
within the scope of its duties as it may deem appropriate and to employ
whatever additional advisors and consultants it deems necessary for the
fulfillment of its duties.
DUTIES AND RESPONSIBILITIES
The duties and responsibilities of the Audit Committee are as follows:
- Provide review of the Company's financial reporting and
accounting practices.
- Review financial disclosures made by management that portray
the Company's financial condition, results of operations and
plans and long-term commitments.
- Provide oversight of the Company's internal accounting,
compliance, and control systems.
- Provide reasonable assurance that the internal accounting,
compliance, and control systems established by management are
operating effectively over time.
- Adopt guidelines governing the Committee's activities.
- Report Committee activities and findings to the Board of
Directors on a regular basis.
MEMBERSHIP
The Committee shall be composed solely of non-employee directors. The
Chairman of the Committee shall be selected from among the Committee members.
The Committee and its Chairman shall be appointed annually by the Board of
Directors.
MEETINGS
The Committee shall meet quarterly, and at such additional times as
deemed appropriate by the Chairman of the Committee, any two members of the
Committee, or the Chief Executive Officer. A quorum for the transaction of any
business by the Committee shall be a majority of the members of the Committee.
The act of a majority of the directors serving at any meeting of the Committee
at which a quorum is present shall be the act of the Committee.
Approved: July 27, 2001
B-1
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