Exhibit 10(a)1

COMPENSATION AND RETENTION AGREEMENT

THIS COMPENSATION AND RETENTION AGREEMENT (the “Agreement”), made and entered
into by and between SOUTHERN COMPANY SERVICES, INC. (the “Company”) and C. ALAN
MARTIN (“Employee”), shall be effective as of February 1, 2008 (the “Effective
Date”).

W I T N E S S E T H:

WHEREAS, Employee has been named the President of the Company effective February
1, 2008;

WHEREAS, the Company wishes to encourage Employee to continue employment with
the Company for a three year term and to provide Employee with compensation and
retention awards for service he will provide to the Company; and

WHEREAS, this Agreement should be treated as an Award made by the Compensation
and Management Succession Committee of the Southern Company Board (the
“Compensation Committee”) under the Southern Company 2006 Omnibus Incentive
Compensation Plan (the “Omnibus Plan”).

NOW, THEREFORE, in consideration of the premises, and the agreement of the
parties set forth in this Agreement, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:

 

1.

Retention Payment Amounts.

(a)       Employee shall become vested in the following amounts provided
Employee is actively employed and serving as President of the Company on the
designated Employment Vesting Date set forth below:

 

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Amount

Employment Vesting Date

$100,000

12/31/2008

$100,000

12/31/2009

$100,000

12/31/2010

An annual amount vested under this Paragraph 1(a) shall earn interest until paid
to Employee in accordance with Paragraph 2 of this Agreement as if invested on
each respective Employment Vesting Date in the prime interest rate investment
described in Section 6.2 of the Southern Company Deferred Compensation Plan (the
“DCP”). No other provision of the DCP shall apply to any award under this
Paragraph 1(a). The award under this Paragraph 1(a) shall be treated as a
cash-based award under the terms of the Omnibus Plan, and therefore, governed by
the terms of that Plan.

(b)       Employee shall become vested in up to the following additional amounts
provided Employee is actively employed and serving as President of the Company
on the Performance Vesting Date and satisfies annual written performance
criteria established by the Chief Executive Officer of the Southern Company
(“CEO”):

Maximum Restricted Stock
Unit Base Value

Performance
Vesting Date

$200,000

12/31/2008

$200,000

12/31/2009

$200,000

12/31/2010

The annual performance criteria to achieve a full payout under this Paragraph
1(b) shall be established in writing by the CEO as soon as practicable at the
beginning of each annual performance period (typically within ninety (90) days)
and such written annual performance criteria shall be a part hereof of this
Agreement. The performance criteria shall permit Employee to earn less than the
maximum base value based on a scale also established in writing by the CEO. If
Employee fails to maintain an effective team of officers and senior managers at
the Company during each annual performance period, the CEO, in its sole
judgment, may exercise

 

 

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negative discretion to reduce by all or a percentage the payout earned by the
Employee pursuant to this Paragraph 1(b) through his achievement of the written
performance criteria. The CEO shall notify Employee of the decision to exercise
negative discretion and the amount of such exercise for any annual performance
period before December 31st of each respective annual performance period. The
CEO and Employee shall meet by July 31st during each annual performance period
to generally discuss the mid-term status of Employee’s achievement of the annual
performance criteria.

An annual amount vested under this Paragraph 1(b) shall be treated until paid to
Employee in accordance with Paragraph 2 of this Agreement as if invested on the
Performance Vesting Date in a deemed investment in the common stock of the
Southern Company. As such, the award under this Paragraph 1(b) shall be treated
as restricted stock units provided under the terms of the Omnibus Plan and,
therefore, governed by the terms of that Plan. Deemed dividends associated with
the restricted stock units shall be treated as reinvested until the award earned
under this Paragraph 1(b) is paid to Employee pursuant to Paragraph 2.

 

2.

Timing and Form of Payment of Retention Amount.

(a)       Generally. Unless modified by the provisions set forth in Paragraphs
2(b)-2(f), all amounts vested, plus earning thereon, shall be paid to Employee
in a lump sum on February 1, 2011. Amounts provided under Paragraph 1(a) shall
be paid in cash. Amounts provided in Paragraph 1(b) shall be paid in stock.

(b)       Death. If Employee dies while in active service while serving as
President of the Company prior to December 31, 2010, amounts vested under
Paragraphs 1(a) and 1(b) shall be paid on the earlier of (i) February 1, 2011,
or (ii) on March 15th of the year following the Employee’s date of death. With
respect to any amount which would have been vested under

 

 

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Paragraph 1(b) for an annual performance period based on Employee’s actual
satisfaction of the written annual performance criteria except for Employee’s
failure to be actively employed as President of the Company on the Performance
Vesting Date because of his death, Employee’s beneficiary shall be entitled to
be paid the amount attributable to this annual performance period based on
actual performance plus amounts provided under Paragraphs 1(a) and 1(b)
previously vested as provided in the preceding sentence. (For example, if
Employee had in fact achieved 100% of the written annual performance criteria at
his death during the 2008 annual performance period, Employee’s beneficiary
would be entitled to the maximum base value payout of restricted stock units
measured against the 2008 performance period even though Employee was not
employed as President of the Company on December 31, 2008.) Employee shall
designate his beneficiary(ies) in the beneficiary designation form set forth in
Exhibit 1 to this Agreement.

(c)       Disability. If Employee separates from service from the Company on
account of becoming totally disabled as defined under the Company’s long term
disability plan, Employee shall be paid the amounts vested under Paragraphs 1(a)
and 1(b) on the earlier of (i) February 1, 2011, or (ii) March 15th of the year
following the year in which the Employee separates from service provided that in
any event such payment must not occur until at least six (6) months following
Employee’s separation from service. With respect to any amount which would have
been vested under Paragraph 1(b) for an annual performance period based on
Employee’s actual satisfaction of the written annual performance criteria except
for Employee’s failure to be actively employed as President of the Company on
the Performance Vesting Date because of his disability, Employee shall be
entitled to be paid the amount attributable to this annual performance period
based on actual performance plus amounts provided under Paragraphs 1(a) and 1(b)
previously vested as provided in the preceding sentence. (For example, if
Employee

 

 

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had in fact achieved 100% of the written annual performance criteria at his
separation from service date on account of disability measured against the 2008
annual performance period, Employee would be entitled to the maximum base value
payout of restricted stock units for the 2008 performance period even though
Employee was not employed as President of the Company on December 31, 2008.)

(d)       Retirement. If Employee separates from service on account of
retirement, Employee shall be paid the amounts vested under Paragraphs 1(a) and
1(b) as of such separation from service on the earlier of (1) February 1, 2011
or (ii) March 15th of the year following the year in which the Employee
separates from service provided that in any event such payment must not occur
until at least six (6) months following Employee’s separation from service. With
respect to any amount which would have been vested under Paragraph 1(b) for an
annual performance period based on Employee’s actual satisfaction of the written
annual performance criteria except for Employee’s failure to be actively
employed as President of the Company on the Performance Vesting Date because of
his retirement, Employee shall be entitled to be paid the amount attributable to
this annual performance period based on actual performance plus amounts provided
under Paragraphs 1(a) and 1(b) previously vested as provided in the preceding
sentence. (For example, if Employee had in fact achieved 100% of the written
annual performance criteria at his separation from service date on account of
disability measured against the 2008 annual performance period, Employee would
be entitled to the maximum base value payout of restricted stock units for the
2008 performance period even though Employee was not employed as President of
the Company on December 31, 2008.)

 

 

 

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(e)       Involuntary Termination. If Employee separates from service from the
Company on account of being involuntarily terminated by the Company for reasons
other than Cause, Employee shall be paid the amounts vested under Paragraphs
1(a) and 1(b) on the earlier of (i) February 1, 2011, or (ii) March 15th of the
year following the year in which the Employee separates from service provided
that in any event such payment must not occur until at least six (6) months
following Employee’s separation from service. For purposes of this Paragraph
2(e) only, Employee shall be deemed to be vested in the annual amount provided
for in Paragraph 1(a) for purposes of payment under the preceding sentence which
would have been earned in the calendar year in which the Employee is
involuntarily te minated from employment by the Company even though Employee
fails to be employed as President of the Company on the Employment Vesting Date
for that calendar year. In addition, with respect to any amount which would have
been vested under Paragraph 1(b) for the annual performance period during which
Employee is involuntarily terminated based on Employee’s actual satisfaction of
the written annual performance criteria except for Employee’s failure to be
actively employed as President of the Company on the Performance Vesting Date
because of his involuntary termination from employment, Employee shall be vested
and entitled to be paid the amount attributable to this annual performance
period based on actual performance. In addition, Employee is also entitled to be
paid amounts provided under Paragraphs 1(a) and 1(b) previously vested at the
time of his involuntary termination of service from the Company. (For example,
if Employee had in fact achieved 100% of the written annual performance criteria
at his separation from service date on account of involuntary termination
measured against the 2008 annual performance period, Employee would be entitled
to the maximum base value payout of restricted stock units for the

 

 

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2008 performance period and the amount of $100,000 even though Employee was not
employed as President of the Company on December 31, 2008.)

(f)        Termination for Cause. If Employee is terminated for cause solely
determined by the Company prior to the payment of the amounts earned and vested
under Paragraphs 1(a) and 1(b), Employee forfeits all such amounts under this
Agreement and all amounts which could have been paid under this Agreement.
“Cause” or “Termination for Cause” shall include the following conditions:

(1)       Failure to Discharge Duties. Employee willfully neglects or refuses to
discharge his duties hereunder or refuses to comply with any lawful or
reasonable instructions given to his by the Company without reasonable excuse;

(2)       Breach. Employee has commits any material breach or repeats or
continues (after written warning) any breach of his obligations hereunder;

(3)       Gross Misconduct. The Employee is guilty of gross misconduct. For the
purposes of this Agreement, the following acts shall constitute gross misconduct
as solely determined by the Company:

(i)        Any act involving fraud or dishonesty or breach of appropriate
regulations of competent authorities in relation to trading or dealing with
stocks, securities, investments and the like;

(ii)       The carrying out of any activity or the making of any statement which
would prejudice and/or reduce the good name and standing of the Company,
Southern Company or any of its affiliates or would bring any one of these into
contempt, ridicule or would reasonably shock or offend any community in which
these companies are located;

 

 

 

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(iii)       Attendance at a Company worksite in a state of intoxication or
otherwise being found in possession on Company property of any prohibited drug
or substance, possession of which would amount to a criminal offense;

(iv)      Assault or other act of violence against any employee of the Company
or other person during the course of his employment; or

(v)       Conviction of any felony or misdemeanor involving moral turpitude.

3.         Amendment and/or Termination of this Agreement. This Agreement
terminates when all amounts have been paid pursuant to Paragraph 2 to Employee
or his beneficiary. Notwithstanding the preceding sentence, the Employee and the
Company may mutually agree to amend or terminate this Agreement prior to the end
of the three year term only by written agreement signed by each party.

4.         Confidentiality. Employee represents and agrees that he will keep all
terms and provisions of this Agreement completely confidential, except for
possible disclosures to his legal and financial advisors and his spouse or to
the extent required by law, and Employee further agrees that he will not
disclose the terms, provisions or information contained in or concerning this
Agreement to anyone other than those persons named above, including, but not
limited to, any past, present, or prospective employee or applicant for
employment with the Company or any affiliate of the Company. This Agreement is
not intended in any way to proscribe Employee’s right and ability to provide
information to any federal, state or local government in the lawful exercise of
such governments’ governmental functions.

5.         Assignability. Neither Employee, his estate, his beneficiaries, nor
his legal representatives shall have any rights to commute, sell, assign,
transfer or otherwise convey the

 

 

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right to receive any payments hereunder, which payments and the rights thereto
are expressly declared to be nonassignable and nontransferable. Any attempt to
assign or transfer the right to payments under this Agreement shall be void and
have no effect.

6.         Unsecured General Creditor. The Company shall neither reserve nor
specifically set aside funds for the payment of its obligations under this
Agreement, and such obligations shall be paid solely from the general assets of
the Company. Notwithstanding that Employee may be entitled to receive payments
under the terms and conditions of this Agreement, the assets from which such
amounts may be paid shall at all times be subject to the claims of the Company’s
creditors.

7.         No Effect on Other Arrangements. It is expressly understood and
agreed that any payments made in accordance with this Agreement are in addition
to any other benefits or compensation to which Employee may be entitled or for
which he may be eligible, whether funded or unfunded, by reason of his
employment with the Company.

8.         Tax Withholding and Implications. There shall be deducted from the
amounts paid under Paragraph 2 the amount of any tax required by any
governmental authority to be withheld and paid over by the Company to such
governmental authority for the account of Employee.

9.         Compensation. Any compensation paid to Employee pursuant to this
Agreement shall not be considered “compensation,” as the term is defined in The
Southern Company Employee Savings Plan or The Southern Company Pension Plan.
Payments to Employee shall not be considered wages, salaries or compensation
under any other Company-sponsored employee benefit plan.

 

 

 

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10.         No Guarantee of Employment. No provision of this Agreement shall be
construed to affect in any manner the existing rights of the Company to suspend,
terminate, alter, or modify, whether or not for cause, the employment
relationship of Employee and the Company.

11.       Governing Law. This Agreement, and all its rights under it, shall be
governed by and construed in accordance with the laws of the State of Georgia,
without giving effect to principles of conflicts of laws.

12.       409A.  The parties agree that the terms and provisions of this
Agreement will be construed and interpreted to the maximum extent permitted in
order to comply with Section 409A of the Internal Revenue Code, and the
regulations promulgated thereunder. Neither the Employee nor the Company may
accelerate any deferred payment under this Agreement, except in compliance with
Section 409A for such events that include but may not be limited to a
termination of the Agreement.

13.       Accredited Investor. Employee understands that the Company’s
obligations under this Agreement have not been registered under the Securities
Exchange Act of 1933, as amended (the "Securities Act"), or any state securities
laws. Employee is an “accredited investor” as defined in Regulation D under the
Securities Act, and has such knowledge and experience in financial and business
matters that he is able to evaluate the risks and benefits of this Agreement.
There has been direct communication and negotiation between the Company and
Employee with respect to this Agreement. The Company has made available to
Employee information regarding the business of the Company and the risks
inherent therein, and Employee has had the opportunity to ask questions of, and
receive responses from, the Company regarding such matters and the terms and
conditions of this Agreement.

 

 

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IN WITNESS WHEREOF, this Agreement has been executed by the parties first listed
above, this 12th day of September, 2008.

 

“COMPANY”

 

SOUTHERN COMPANY SERVICES, INC.

 

By: /s/David M. Ratcliffe

Its: Chairman of the Board

 

“EMPLOYEE”

C. ALAN MARTIN

 

/s/C. Alan Martin

 

 

 

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