Exhibit 10(e)
Long-Term Incentive Compensation Plan
of the
Texas Utilities Company System
This document constitutes part of a prospectus covering securities that have
been registered under the Securities Act of 1933.
June 6, 1997
LONG-TERM INCENTIVE COMPENSATION PLAN
OF THE
TEXAS UTILITIES COMPANY SYSTEM
Section 1. Purpose
Texas Utilities Company, a Texas corporation (the "Company"), hereby
establishes the Long-Term Incentive Compensation Plan of the Texas Utilities
Company System (the "Plan") to promote the interests of the Company and its
shareholders through the (i) attraction and retention of executive officers
and other key employees essential to the success of the Company; (ii)
motivation of executive officers and other key employees using
performance-related incentives linked to long-range performance goals and the
interests of Company shareholders; and (iii) enabling of such employees to
share in the long-term growth and success of the Company. The Plan permits
the grant of Incentive Stock Options (intended to qualify under Section 422 of
the Code), Nonqualified Stock Options, Stock Appreciation Rights, Restricted
Stock, Restricted Stock Units, Performance Shares, Performance Units, Bonus
Stock, and any other Stock Unit Awards or stock-based forms of awards as the
Committee, in its sole and complete discretion, may determine to be
appropriate in carrying out the intent and purposes of this Plan.
Section 2. Definitions
When used in this Plan, the following terms shall have the meanings set
forth below:
2.1 "Affiliate" shall have the meaning ascribed to such term in Rule 12b-2
under the Exchange Act.
2.2"Agreement" means a written agreement between the Company and a Participant
implementing the grant, and setting forth the particular terms, conditions and
restrictions of each Award. With respect to the grant of an Option, the
Agreement may be referred to herein as an "Option Agreement," and with respect
to any other Award hereunder, the Agreement may be referred to herein as an
"Award Agreement."
2.3 "Award" means a grant under the Plan of Nonqualified Stock Options,
Incentive Stock Options, Stock Appreciation Rights, Restricted Stock,
Restricted Stock Units, Performance Units, Performance Shares, Bonus Stock, or
other Stock Unit Awards.
2.4 "Award Date" or "Grant Date" means the date on which an Award is made by
the Committee under the Plan.
2.5 "Beneficial Owner" shall have the meaning ascribed to such term in Rule
13d-3 under the Exchange Act.
2.6 "Board" or "Board of Directors" means the Board of Directors of the
Company.
2.7 "Bonus Stock" means an Award granted pursuant to Section 10 of the Plan.
2.8 "Cashless Exercise" means the exercise of an Option by the Participant
through the use of a brokerage firm to make payment to the Company of the
exercise price either from the proceeds of a loan to the Participant from the
brokerage firm or from the proceeds of the sale of Stock issued pursuant to
the exercise of the Option, and upon receipt of such payment, the Company
delivers the exercised Shares to the brokerage firm.
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2.9 "Change in Control" shall be deemed to have occurred if the conditions set
forth in any one of the following paragraphs shall have been satisfied:
(a) Any Person, corporation or other entity or group, including any "group" as
defined in Section 13(d)(3) of the Exchange Act, becomes the Beneficial Owner
of Shares of the Company having 20% or more of the total number of votes that
may be cast for the election of directors of the Company; or
(b) As the result of, or in connection with, any tender or exchange offer,
merger or other business combination, sale of assets, sale of securities,
contested election, or any combination of the foregoing (a "Transaction"), the
persons who were directors of the Company immediately before the Transaction
shall cease to constitute a majority of the Board of Directors of the Company
or any successor to the Company or its assets; or
(c) If at any time: (i) the Company shall consolidate or merge with any other
Person and the Company shall not be the continuing or surviving corporation;
(ii) any Person shall consolidate or merge with the Company, and the Company
shall be the continuing or surviving corporation and in connection therewith,
all or part of the outstanding Stock shall be converted into, or exchanged
for, stock or other securities of any other Person or cash or any other
property; (iii) the Company shall be a party to a statutory share exchange
with any other Person after which the Company is a Subsidiary of any other
Person; or (iv) the Company shall sell or otherwise transfer 50% or more of
the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to any Person or Persons.
2.10 "Code" means the Internal Revenue Code of 1986 and the rules and
regulations promulgated thereunder, or any successor law, as amended from time
to time.
2.11 "Committee" means the Organization and Compensation Committee of the
Board.
2.12 "Common Stock" or "Stock" means the Common Stock of the Company, without
par value, or such other security or right or instrument into which such
Common Stock may be changed or converted in the future.
2.13 "Company" means Texas Utilities Company, including all Affiliates and
wholly-owned subsidiaries, or any successor thereto.
2.14 "Covered Participant" means a Participant who is a "covered employee" as
defined in Code Section 162(m)(3) and the regulations promulgated thereunder.
2.15 "Designated Beneficiary" means the beneficiary designated by the
Participant, pursuant to procedures established by the Committee, to receive
amounts due to the Participant in the event of the Participant's death. If
the Participant does not make an effective designation, then the Designated
Beneficiary will be deemed to be the Participant's estate.
2.16 "Disability" means (i) the mental or physical disability of the
Participant defined as "Disability" under the terms of the Texas Utilities
System Employee Long-Term Disability Income Plan, as amended from time to time
in accordance with the provisions of such plan; or (ii) a determination by the
Committee, in its sole discretion, of total disability (based on medical
evidence) that precludes the Participant from engaging in any occupation or
employment for wage or profit for at least twelve months and appears to be
permanent. All decisions by the Committee relating to
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a Participant's Disability (including a decision that a Participant is
not disabled), shall be final and binding on all parties.
2.17 "Divestiture" means the sale of, or closing by, the Company of the
business operations in which the Participant is employed.
2.18 "Early Retirement" means Earlier-than-Normal Retirement of a Participant
under, and subject to, the provisions of the Retirement Plan.
2.19"Exchange Act" means the Securities Exchange Act of 1934 and the rules and
regulations promulgated thereunder, or any successor law as amended from time
to time.
2.20 "Executive Officer" means any employee considered by the Company to be an
Executive Officer.
2.21 "Fair Market Value" means, on any given date, the closing price of Stock
as reported on the New York Stock Exchange composite tape on such day or, if
no Shares were traded on the New York Stock Exchange on such day, then on the
next preceding day that Stock was traded on such exchange, all as reported by
The Wall Street Journal or such other source as the Committee may select.
2.22"Full-time Employee" means an individual who is employed by the Company or
a Subsidiary in a customary employer-employee relationship, is on the payroll
of the Company or such Subsidiary, receives compensation directly from the
Company or such Subsidiary, and is designated in the internal payroll or other
records of the Company or a Subsidiary as a regular, full-time employee. This
designation excludes all leased employees (within the meaning of Code Section
414(n)), part-time employees, temporary employees, or contract employees, as
well as all consultants to, the Company.
2.23 "Incentive Stock Option" or "ISO" means an option to purchase Stock,
granted under Section 6 herein, which is designated as an incentive stock
option and is intended to meet the requirements of Code Section 422.
2.24 "Key Employee" means a Full-time Employee who is an officer or other key
employee of the Company or its Subsidiaries as designated or determined by the
Committee.
2.25 "Nonqualified Stock Option" or "NQSO" means an option to purchase Stock,
granted under Article 6 herein, which is not intended to qualify as, or
constitute an Incentive Stock Option.
2.26 "Normal Retirement" means Normal Retirement of a Participant under, and
subject to, the provisions of the Retirement Plan.
2.27 "Option" means an Incentive Stock Option or a Nonqualified Stock Option.
2.28 "Other Stock Unit Award" means awards of Stock or other Awards that are
valued in whole or in part by reference to, or are otherwise based on, the
value of the Company's Common Stock.
2.29"Participant" means a Key Employee who has been granted an Award under the
Plan.
2.30 "Performance Criteria" means the objectives established by the Committee
for a Performance Period, for the purpose of determining when an Award subject
to such objectives has been earned.
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2.31 "Performance Award" means a performance-based Award made under Section 9
herein, which may be in the form of either Performance Shares or Performance
Units.
2.32 "Performance Period" means the time period designated by the Committee
during which performance goals must be met in order for a Participant to
obtain a performance-based Award.
2.33 "Performance Share" means an Award, designated as a Performance Share,
granted to a Participant pursuant to Section 9 herein, the value of which is
determined, in whole or in part, by the value of Company Stock in a manner
deemed appropriate by the Committee and described in the applicable Agreement.
2.34 "Performance Unit" means an Award, designated as a Performance Unit,
granted to a Participant pursuant to Section 9 herein, the value of which is
determined, in whole or in part, by the attainment of pre-established
Performance Criteria as deemed appropriate by the Committee and described in
the Agreement.
2.35 "Period of Restriction" means the period during which the transfer of
Shares of Restricted Stock is restricted, pursuant to Section 8 herein.
2.36 "Person" shall have the meaning ascribed to such term in Section 3(a)(9)
of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a
"group" as defined in Section 13(d).
2.37 "Plan" means the Long-Term Incentive Compensation Plan of the Texas
Utilities Company System as herein established and as hereafter amended from
time to time.
2.38 "Restricted Stock" means an Award of Stock granted to a Participant
pursuant to Section 8 herein.
2.39"Restricted Stock Unit" means a fixed or variable dollar denominated right
to acquire Stock, which may or may not be subject to restrictions,
contingently awarded under Section 8 of the Plan.
2.40 "Retirement Plan" means the Retirement Plan for Employees of the Texas
Utilities Company System, as it may be amended from time to time.
2.41 "Rule 16b-3" means Rule 16b-3 under Section 16(b) of the Exchange Act as
adopted in Exchange Act Release No. 34-37260 (May 30, 1996), or any successor
rule as amended from time to time.
2.42 "Section 162(m)" means Section 162(m) of the Code, or any successor
section under the Code, as amended from time to time and as interpreted by
final or proposed regulations promulgated thereunder from time to time.
2.43 "Securities Act" means the Securities Act of 1933 and the rules and
regulations promulgated thereunder, or any successor law, as amended from time
to time.
2.44 "Stock" or "Shares" means the Common Stock of the Company.
2.45 "Stock Appreciation Right" means the right to receive an amount equal to
the excess of the Fair Market Value of a share of Stock (as determined on the
date of exercise) over the Exercise Price of a related Option or the Fair
Market Value of the Stock on the Grant Date of the Stock Appreciation Right.
2.46 "Stock Unit Award" means an award of Common Stock or units granted under
Section 11.
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2.47 "Subsidiary" means a corporation in which the Company owns, either
directly or through one or more of its Subsidiaries, at least 50% of the total
combined voting power of all classes of stock.
Section 3. Administration
3.1 The Committee. The Plan shall be administered and interpreted by
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the Committee which shall have full authority, discretion and power necessary
or desirable for such administration and interpretation. The express grant in
this Plan of any specific power to the Committee shall not be construed as
limiting any power or authority of the Committee. In its sole and complete
discretion the Committee may adopt, alter, suspend and repeal any such
administrative rules, regulations, guidelines, and practices governing the
operation of the Plan as it shall from time to time deem advisable. In
addition to any other powers and, subject to the provisions of the Plan, the
Committee shall have the following specific powers: (i) to determine the terms
and conditions upon which Awards may be made and exercised; (ii) to determine
the Participants to which Awards shall be made; (iii) to determine all terms
and provisions of each Agreement, which need not be identical for types of
Awards nor for the same type of Award to different Participants; (iv) to
construe and interpret all terms,conditions and provisions of the Plan and all
Agreements; (v) to establish, amend, or waive rules or regulations for the
Plan's administration; (vi) to accelerate the exercisability of any Award, the
length of a Performance Period or the termination of any Period of
Restriction; and (vii) to make all other determinations and take all other
actions necessary or advisable for the administration or interpretation of the
Plan. The Committee may seek the assistance or advice of any persons it deems
necessary to the proper administration of the Plan.
3.2 Committee Decisions. Unless strictly and expressly prohibited by
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law, all determinations and decisions made by the Committee pursuant to the
provisions of this Plan shall be final, conclusive, and binding upon all
persons, including Participants, Designated Beneficiaries, the Company, its
shareholders and employees.
3.3 Rule 16b-3 and Section 162(m) Requirements. Notwithstanding any
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other provision of the Plan, the Committee may impose such conditions on any
Award as it may deem to be advisable or required to satisfy the requirements
of Rule 16b-3 or Section 162(m).
Section 4. Eligibility
The Committee shall have sole and complete discretion in determining
those Key Employees who shall participate in the Plan. The Committee may
request recommendations for individual awards from the Company's Chief
Executive Officer and may delegate to the Chief Executive Officer the
authority to make Awards to Participants who are not Executive Officers of the
Company.
Section 5. Shares Subject to the Plan
5.1 Number of Shares. Subject to adjustment as provided for in
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Section 5.4 below, the maximum aggregate number of Shares that may be issued
pursuant to Awards made under the Plan shall not exceed 2,500,000 Shares,
which may be in any combination of Options, Restricted Stock, Restricted Stock
Units, Performance Shares, Bonus Shares, or Other Stock Unit Award. Shares of
Common Stock may be available from the authorized but unissued Shares, Shares
issued and reacquired by the Company or Shares purchased in the open market
for purposes of the Plan. Except as provided in Sections 5.2 and 5.3 herein,
the issuance of Shares in connection with the exercise of, or as other payment
for, Awards under the Plan shall reduce the number of Shares available for
future Awards under the Plan.
5.2 Lapsed Awards or Forfeited Shares. In the event that: (i) any
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Option or other Award granted under the Plan terminates, expires, or lapses
for any reason without having been exercised in accordance with its terms;
(ii) Shares issued pursuant to the Awards are canceled or forfeited for any
reason; or (iii) Awards are paid in cash, the Shares subject to such Award
shall thereafter be again available for grant of an Award under the Plan.
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5.3 Delivery of Shares as Payment. In the event a Participant pays
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for any Option or other Award granted under the Plan through the delivery of
previously acquired shares of Common Stock, the number of shares of Common
Stock available for Awards under the Plan shall be increased by the number of
shares surrendered by the Participant.
5.4 Capital Adjustments. The number and class of Shares subject to
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each outstanding Award, the Option Price and the aggregate number, type and
class of Shares for which Awards thereafter may be made shall be subject to
adjustment, if any, as the Committee deems appropriate, based on the
occurrence of a number of specified and non-specified events. Such specified
events are discussed in this Section 5.4, but such discussion is not intended
to provide an exhaustive list of such events which may necessitate
adjustments.
(a) If the outstanding Shares are increased, decreased or exchanged through
merger, consolidation, sale of all or substantially all of the property of the
Company, reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split or other distribution in respect to such
Shares, for a different number or type of Shares, or if additional Shares or
new or different Shares are distributed with respect to such Shares, an
appropriate and proportionate adjustment shall be made in: (i) the maximum
number of shares of Stock available for the Plan as provided in Section 5.1
herein; (ii) the type of shares or other securities available for the Plan;
(iii) the number of shares of Stock subject to any then outstanding Awards
under the Plan; and (iv) the price (including Exercise Price) for each share
of Stock (or other kind of shares or securities) subject to then outstanding
Awards, but without change in the aggregate purchase price as to which such
Options remain exercisable or Restricted Stock releasable.
(b) In the event other events not specified above in this Section 5.4, such as
any extraordinary cash dividend, split-up, reverse split, spin-off,
combination, exchange of shares, warrants or rights offering to purchase
Common Stock, or other similar corporate event, affect the Common Stock such
that an adjustment is necessary to maintain the benefits or potential benefits
intended to be provided under this Plan, then the Committee in its discretion
may make adjustments to any or all of: (i) the number and type of shares which
thereafter may be optioned and sold or awarded or made subject to Stock
Appreciation Rights under the Plan; (ii) the grant, exercise or conversion
price of any Award made under the Plan thereafter; and (iii) the number and
price (including Exercise Price) of each share of Stock (or other kind of
shares or securities) subject to the then outstanding Awards.
(c) Any adjustment made by the Committee pursuant to the provisions of this
Section 5.4 shall be final, binding and conclusive. A notice of such
adjustment, including identification of the event causing such adjustment, the
calculation method of such adjustment, and the change in price and the number
of shares of Stock, or securities, cash or property purchasable subject to
each Award shall be sent to each Participant. No fractional interests shall
be issued under the Plan based on such adjustments.
Section 6. Stock Options
6.1 Grant of Stock Options. Subject to the terms and provisions of
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the Plan and applicable law, the Committee, at any time and from time to time,
may grant Options to Key Employees as it shall determine. The Committee shall
have sole and complete discretion in determining the type of Option granted,
the Option Price (as hereinafter defined), the duration of the Option, the
number of Shares to which an Option pertains, any conditions imposed upon the
exercisability or the transferability of the Options, including vesting
conditions, the conditions under which the Option may be terminated, and any
such other provisions as may be warranted to comply with the law or rules of
any securities trading system or stock exchange. Each Option grant shall have
such specified terms
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and conditions detailed in an Option Agreement. The Option Agreement
shall specify whether the Option is intended to be an Incentive Stock
Option or a Nonqualified Stock Option.
6.2 Option Price. The exercise price per share of Stock covered by
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an Option ("Option Price") shall be determined on the Grant Date by the
Committee; provided that the Option Price shall not be less than 100% of the
Fair Market Value of the Common Stock on the Grant Date.
6.3 Exercisability. Options granted under the Plan shall be
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exercisable at such times and be subject to such restrictions and conditions
as the Committee shall determine, which will be specified in the Option
Agreement and need not be the same for each Participant. However, no Option
granted under the Plan may be exercisable until the expiration of at least six
months after the Grant Date (except that such limitations shall not apply in
the case of death or Disability of the Participant, or a Change in Control),
nor after the expiration of ten years from the Grant Date.
6.4 Method of Exercise. Options shall be exercised by the delivery
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of a written notice from the Participant to the Company in a form prescribed
by the Committee setting forth the number of Shares with respect to which the
Option is to be exercised, accompanied by full payment or provision for full
payment for the Shares. The Option Price shall be payable to the Company in
full in cash, or its equivalent, or by delivery of Shares of Stock (not
subject to any security interest or pledge) having a Fair Market Value at the
time of exercise equal to the exercise price of the Shares, or by a
combination of the foregoing. In addition, at the request of the Participant,
and subject to applicable laws and regulations, the Company may (but shall not
be required to) cooperate in a Cashless Exercise of the Option. As soon as
practicable, after receipt of written notice and full payment of the Option
Price, the Company shall deliver to the Participant a stock certificate,
issued in the Participant's name, evidencing the number of Shares with respect
to which the Option was exercised.
Section 7. Stock Appreciation Rights
7.1 Grant of Stock Appreciation Rights. Subject to the terms and
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provisions of the Plan and applicable law, the Committee, at any time and from
time to time, may grant freestanding Stock Appreciation Rights, Stock
Appreciation Rights in tandem with an Option, or Stock Appreciation Rights in
addition to an Option. Stock Appreciation Rights granted in tandem with an
Option or in addition to an Option may be granted at the time of the Option or
at a later time. No Stock Appreciation Rights granted under the Plan may be
exercisable until the expiration of at least six months after the Grant Date
(except that such limitations shall not apply in the case of death or
Disability of the Participant, or a Change in Control), nor after the
expiration of ten years from the Grant Date.
7.2 Price. The exercise price of each Stock Appreciation Right shall
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be determined at the time of grant by the Committee, subject to the limitation
that the grant price shall not be less than 100% of Fair Market Value of the
Common Stock on the Grant Date.
7.3 Exercise. Stock Appreciation Rights shall be exercised by the
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delivery of a written notice from the Participant to the Company in a form
prescribed by the Committee. Upon such exercise, the Participant shall be
entitled to receive an amount equal to the excess of the Fair Market Value of
a Share over the grant price thereof on the date of exercise of the Stock
Appreciation Right multiplied by the number of Shares for which the Stock
Appreciation Right was granted.
7.4 Payment. Payment upon exercise of the Stock Appreciation Right
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shall be in the amount of the full exercise price therefor, and shall be made
in the form of cash, cash installments, Shares of Common Stock, or a
combination thereof, as determined in the sole and complete discretion of the
Committee. However, if any payment in the form of Shares results in a
fractional share, such payment for the fractional share shall be made in cash.
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Section 8. Restricted Stock and Restricted Stock Units
8.1 Grant of Restricted Stock. Subject to the terms and provisions
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of the Plan and applicable law, the Committee, at any time and from time to
time, may grant shares of Restricted Stock and Restricted Stock Units under
the Plan to such Participants, and in such amounts and for such duration
and/or consideration as it shall determine.
8.2 Restricted Stock Award Agreement. Each Restricted Stock and
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Restricted Stock Unit granted hereunder shall be evidenced by an Award
Agreement that shall specify the Period of Restriction, the conditions which
must be satisfied prior to removal of the restriction, the number of Shares of
Restricted Stock or Restricted Stock Units granted, payment terms for each
such Award (e.g. whether the Award will be paid in shares of Stock, cash or a
combination thereof, and whether payment will be in a lump sum or
installments), and such other provisions as the Committee shall determine.
The Committee may specify, but is not limited to, the following types of
restrictions in the Award Agreement: (i) restrictions on acceleration or
achievement of terms or vesting based on any Performance Criteria, including,
but not limited to, absolute or relative increases in total shareholder
return, revenues, sales, net income, or net worth of the Company, any of its
Subsidiaries, divisions, business units or other areas of the Company; and
(ii) any other restrictions which the Committee may deem advisable, including
requirements established pursuant to the Securities Act, the Exchange Act, the
Code and any securities trading system or stock exchange upon which such
Shares under the Plan are listed.
8.3 Nontransferability. Except as provided in this Section 8, the
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Shares of Restricted Stock or Restricted Stock Units granted under the Plan
may not be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated until the termination of the applicable Period of Restriction or
upon earlier satisfaction of other conditions as specified by the Committee in
its sole discretion and set forth in the applicable Award Agreement. All
rights with respect to the Restricted Stock and Restricted Stock Units granted
to a Participant under the Plan shall be exercisable during his or her
lifetime only by such Participant or his or her guardian or legal
representative.
8.4 Removal of Restrictions. Except as otherwise noted in this
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Section 8, Restricted Stock and Restricted Stock Units covered by each Award
made under the Plan shall become freely transferable by the Participant after
the last day of the Period of Restriction and/or upon the satisfaction of
other conditions as determined by the Committee.
8.5 Voting Rights. During the Period of Restriction, Participants in
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whose name Restricted Stock is granted under the Plan may exercise full voting
rights with respect to those shares.
8.6 Dividends and Other Distributions. During the Period of
---------------------------------
Restriction, Participants in whose name Restricted Stock is granted under the
Plan shall be entitled to receive all dividends and other distributions paid
with respect to those Shares. If any such dividends or distributions are paid
in Shares, the Shares shall be subject to the same restrictions on
transferability and forfeitability as the Restricted Stock with respect to
which they were distributed.
Section 9. Performance Awards
9.1 Grant of Performance Awards. Subject to the terms and provisions
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of the Plan and applicable law, the Committee, at any time and from time to
time, may issue Performance Awards in the form of either Performance Units or
Performance Shares to Participants subject to the Performance Criteria,
Performance Period and other consideration or restrictions as it shall
determine. The Committee shall have complete discretion in determining the
number and value of Performance Units or Performance Shares granted to each
Participant.
9.2 Value of Performance Awards. The Committee shall determine the
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number and value of Performance Units or Performance Shares granted to each
Participant as a Performance Award. The Committee shall set Performance
Criteria in its discretion for each Participant who is granted a Performance
Award. The extent
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to which such Performance Criteria are met will determine
the value of the Performance Unit or Performance Share to the Participant.
Such Performance Criteria may be particular to a Participant, may relate to
the performance of the Company or Subsidiary which employs him or her, may be
based on the division or business unit which employs him or her, may be based
on the performance of the Company and its Subsidiaries generally, or any
combination of the foregoing. The Performance Criteria may be based on
achievement of balance sheet or income statement objectives, or any other
objectives established by the Committee. The Performance Criteria may be
absolute in their terms or measured against, or in relationship to, other
companies comparably, similarly or otherwise situated. The terms and
conditions of each Performance Award will be set forth in an Award Agreement.
9.3 Settlement of Performance Awards. After a Performance Period has
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ended, the holder of a Performance Unit or Performance Share shall be entitled
to receive the value thereof based on the degree to which the Performance
Criteria established by the Committee and set forth in the Award Agreement
have been satisfied.
9.4 Form of Payment. Payment of the amount to which a Participant
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shall be entitled upon the settlement of the Performance Award shall be made
in cash, Stock, or a combination thereof and may be made in a lump sum or
installments all as determined by the Committee and set forth in the related
Award Agreement.
Section 10. Bonus Stock
Subject to the terms and provisions of the Plan and applicable law, the
Committee may, at any time and from time to time, award shares of Bonus Stock
to participants under the Plan without cash consideration. The Committee
shall determine and indicate in the related Award Agreement whether such
shares of Bonus Stock shall be unencumbered of any restrictions (other than
those which the Committee deems necessary or advisable to comply with law) or
shall be subject to restrictions and limitations similar to those referred to
in Section 9. In the event the Committee assigns any restrictions on the
shares of Bonus Stock, then such shares shall be subject to at least the
following restrictions:
(a) No Shares of Bonus Stock may be sold, transferred, pledged, assigned or
otherwise alienated or hypothecated if such Shares are subject to restrictions
which have not lapsed or been satisfied.
(b) If any condition of vesting of the shares of Bonus Stock are not met, all
such Shares subject to such vesting shall be delivered to the Company (in a
manner determined by the Committee) within 60 days of the failure to meet such
conditions without any payment from the Company.
Section 11. Other Stock Based Awards
11.1 Grant of Other Stock Based Awards. Subject to the terms and
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provisions of the Plan and applicable law, the Committee may, at any time and
from time to time, issue to Participants, either alone or in addition to other
Awards made under the Plan, Stock Unit Awards which may be in the form of
Common Stock or other securities. The value of each such Award shall be
based, in whole or in part, on the value of the underlying Common Stock on the
Grant Date. The Committee, in its sole and complete discretion, may determine
that an Award, either in the form of a Stock Unit Award under this Section 11
or as an Award granted pursuant to Sections 6 through 10, may provide to the
Participant (i) dividends or dividend equivalents (payable on a current or
deferred basis) and (ii) cash payments in lieu of or in addition to an Award.
Subject to the provisions of the Plan, the Committee, in its sole and complete
discretion, shall determine the terms, restrictions, conditions, vesting
requirements, and payment rules of the Award. The Award Agreement shall
specify the rules of each Award as determined by the Committee. However, each
Stock Unit Award need not be subject to identical rules.
11.2 Rules. The Committee, in its sole and complete discretion, may
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grant a Stock Unit Award subject to the following rules:
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(a) Common Stock or other securities issued pursuant to Stock Unit Awards may
not be sold, transferred, pledged, assigned or otherwise alienated or
hypothecated by a Participant until the expiration of at least six months from
the Grant Date, except that such limitation shall not apply in the case of
death or Disability of the Participant or a Change in Control. To the extent
Stock Unit Awards are deemed to be derivative securities within the meaning of
Rule 16b-3, the rights of a Participant who is subject to Section 16 of the
Exchange Act with respect to such Awards shall not vest or be exercisable
until the expiration of at least six months from the Award Date. All rights
with respect to such Stock Unit Awards granted to a Participant under the Plan
shall be exercisable during his or her lifetime only by such Participant or
his or her guardian or legal representative.
(b) Stock Unit Awards may require the payment of cash consideration by the
Participant in receipt of the Award or provide that the Award, and any Common
Stock or other securities issued in conjunction with the Award, be delivered
without the payment of cash consideration.
(c) The Committee, in its sole and complete discretion, may establish certain
Performance Criteria that may relate in whole or in part to receipt of Stock
Unit Awards.
(d) Stock Unit Awards may be subject to a deferred payment schedule and/or
vesting over a specified period.
(e) The Committee, in its sole and complete discretion, as a result of certain
circumstances, may waive or otherwise remove, in whole or in part, any
restriction or condition imposed on a Stock Unit Award.
Section 12. Special Provisions Applicable to Covered Participants
Awards to Covered Participants shall be governed by the conditions of
this Section 12 in addition to the requirements of Sections 6 through 11
above. Should conditions set forth under this Section 12 conflict with the
requirements of Sections 6 through 11, the conditions of this Section 12 shall
prevail.
(a) All Performance Criteria relating to Covered Participants for a relevant
Performance Period shall be established by the Committee in writing prior to
the beginning of the Performance Period, or by such other later date for the
Performance Period as may be permitted under Section 162(m) of the Code.
Performance Criteria may include alternative and multiple Performance Criteria
and will be based on one or more of the following business criteria: business
or financial goals of the Company, including absolute or relative levels of
total shareholder return, revenues, sales, net income, or net worth of the
Company, any of its Subsidiaries, divisions, business units, or other areas of
the Company.
(b) The Performance Criteria must be objective and must satisfy third party
"objectivity" standards under Code Section 162(m), and the regulations
promulgated thereunder.
(c)The Performance Criteria shall not allow for any discretion by the
Committee as to an increase in any Award, but discretion to lower an Award is
permissible.
(d)The Award and payment of any Award under this Plan to a Covered Participant
with respect to a relevant Performance Period shall be contingent upon the
attainment of the Performance Criteria that are applicable to such Award. The
Committee shall certify in writing prior to payment of any such Award that
such applicable Performance Criteria have been satisfied. Resolutions adopted
by the Committee may be used for this purpose.
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(e) The aggregate maximum Awards that may be paid (in cash or in shares of
Stock or a combination thereof) to any Covered Participant under the Plan
pursuant to Sections 8, 9, 10 and 11 during any calendar year shall be an
amount equivalent to the fair market value of 100,000 shares of Stock, such
fair market value to be determined as of the first day of such calendar year.
(f)The aggregate maximum number of shares of Stock subject to Options and SARs
made to any Covered Participant during any calendar year shall be 100,000.
(g)All Awards to Covered Participants under this Plan shall be further subject
to such other conditions, restrictions, and requirements as the Committee may
determine to be necessary to carry out the purposes of this Section 12.
Section 13. Change In Control
Notwithstanding any other provision of this Plan, in the event of a
Change in Control: (i) all outstanding Options shall immediately become fully
vested and exercisable; (ii) all Periods of Restriction shall be deemed to
have been completed; (iii) all Performance Criteria shall be deemed to have
been satisfied in full; and (iv) all other restrictions of any kind applicable
to all outstanding Awards shall be deemed to have lapsed or been satisfied in
full; provided that none of the effects described in (i) - (iv) above shall
occur if the Change in Control, or the transaction, event or occurrence
causing the Change in Control was duly and effectively approved in advance by
the affirmative vote of a majority of the Company's Board of Directors.
Section 14. General Provisions
14.1 Plan Term. The Plan was adopted by the Board on February 21,
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1997, and became effective upon receiving shareholder approval on May 23,
1997.
The Plan shall terminate December 31, 2006; however, all Awards made
prior to, and which are outstanding on such date, shall remain valid in
accordance with their terms and conditions.
14.2 Withholding. The Company shall have the right to deduct or
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withhold, or require a Participant to remit to the Company, any taxes required
by law to be withheld from Awards made under this Plan. In the event an Award
is paid in the form of Common Stock, the Committee may require the Participant
to remit to the Company the amount of any taxes required to be withheld from
such payment in Common Stock, or, in lieu thereof, the Company may withhold
(or the Participant may be provided the opportunity to elect to tender) the
number of shares of Common Stock equal in Fair Market Value to the amount
required to be withheld.
14.3 Awards. Each Award granted under the Plan shall be evidenced in
------
a corresponding Award Agreement provided in writing to the Participant, which
shall specify the terms, conditions and any rules applicable to the Award,
including but not limited to the effect of a Change in Control, or death,
Disability, Divestiture, Early Retirement, Normal Retirement or other
termination of employment of the Participant on the Award.
14.4 Nontransferability. Except with respect to Nonqualified Stock
------------------
Options, no Award granted under the Plan may be sold, transferred, pledged,
assigned or otherwise alienated or hypothecated, except by will or the laws of
descent and distribution. Further, no lien, obligation, or liability of the
Participant may be assigned to any right or interest of any Participant in an
Award under this Plan.
14.5 No Right to Employment. Neither the Plan, nor any Award made,
----------------------
or any other action taken, hereunder shall be construed as giving any
Participant or other person any right of employment or continued employment
with the Company.
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14.6 Rights as Shareholder. Subject to the terms and conditions of
---------------------
each particular Award, no Participant or Designated Beneficiary shall be
deemed a shareholder of the Company nor have any rights as such with respect
to any shares of Common Stock to be provided under the Plan until he or she
has become the holder of such shares.
14.7 Construction of the Plan. The Plan and all Agreements shall be
------------------------
governed, construed, interpreted and administered in accordance with the laws
of the State of Texas. In the event any provision of the Plan or any
Agreement shall be held invalid, illegal or unenforceable, in whole or in
part, for any reason, such determination shall not affect the validity,
legality or enforceability of any remaining provision, portion of provision or
Plan overall, which shall remain in full force and effect as if the Plan had
been absent the invalid, illegal or unenforceable provision or portion
thereof.
14.8 Amendment of Plan. The Committee or the Board of Directors may
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amend, suspend, or terminate the Plan or any portion thereof at any time,
provided such amendment is made with shareholder approval if and to the extent
such approval is necessary to comply with any legal requirement, including for
these purposes any approval requirement which is a requirement for the
performance-based compensation exception under Code Section 162(m).
14.9 Amendment of Award. In its sole and complete discretion, the
------------------
Committee may at any time amend any Award for the following reasons: (i)
additions and/or changes are made to the Code, any federal or state securities
law, or other law or regulations applicable to the Award; or (ii) any other
event not described in clause (i) occurs and the Participant gives his or her
consent to such amendment.
14.10 Exemption from Computation of Compensation for Other Purposes.
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By acceptance of an applicable Award under this Plan, subject to the
conditions of such Award, each Participant shall be considered in agreement
that all shares of Stock sold or awarded and all Options granted under this
Plan shall be considered extraordinary, special incentive compensation and
will not be included as "earnings," "wages," "salary" or "compensation" in any
pension, welfare, life insurance, or other employee benefit arrangement of the
Company.
14.11 Legend. In its sole and complete discretion, the Committee may
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elect to legend certificates representing Shares sold or awarded under the
Plan, to make appropriate references to the restrictions imposed on such
Shares.
14.12 Certain Participants. All Award Agreements for Participants
--------------------
subject to Section 16(b) of the Exchange Act shall be deemed to include any
such additional terms, conditions, limitations and provisions as Rule 16b-3
requires, unless the Committee in its discretion determines that any such
Award should not be governed by Rule 16b-3. All performance-based Awards to
Covered Participants shall be deemed to include any such additional terms,
conditions, limitations and provisions as are necessary to comply with the
performance-based compensation exemption of Code Section 162(m), unless the
Committee, in its discretion, determines that any such Award is not intended
to qualify for the exemption for performance-based compensation under Code
Section 162(m).
14.13 Unfunded Plan. The Plan is intended to constitute an unfunded
-------------
deferred compensation arrangement for a select group of management or highly
compensated employees.
EXECUTED on this 23rd day of May, 1997.
TEXAS UTILITIES COMPANY
By: /s/ Peter B. Tinkham
------------------------
/s/ Peter B. Tinkham, Secretary and Assistant
Treasurer
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