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UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------------
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
-- OR--
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
-----------------------------
EXACT NAME OF REGISTRANT AS SPECIFIED IN
ITS CHARTER; STATE OF INCORPORATION; ADDRESS OF
COMMISSION PRINCIPLE EXECUTIVE OFFICES; AND I.R.S. EMPLOYER
FILE NUMBER TELEPHONE NUMBER IDENTIFICATION NO.
- ----------- ----------------------------------------------- ------------------
1-11668 TXU ELECTRIC COMPANY 75-1837355
a Texas Corporation
Energy Plaza, 1601 Bryan Street
Dallas, TX 75201-3411
(214) 812-4600
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
------------------------------
NAME OF EACH EXCHANGE ON
REGISTRANT TITLE OF EACH CLASS WHICH REGISTERED
---------- ------------------- ------------------------
TXU Electric Company Depositary Shares, Series A, each representing New York Stock Exchange
1/4 of a share of $7.50 Cumulative Preferred
Stock, without par value
TXU Electric Company Depositary Shares, Series B, each representing New York Stock Exchange
1/4 of a share of $7.22 Cumulative Preferred
Stock, without par value
TXU Electric Capital I, 8.25% Trust Originated Preferred Securities New York Stock Exchange
a subsidiary of TXU Electric
TXU Electric Capital III, 8.00% Quarterly Income Preferred Securities New York Stock Exchange
a subsidiary of TXU Electric
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: Preferred Stock of
TXU Electric, without par value
---------------------------------------
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No
------ -------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Aggregate market value of TXU Electric Common Stock held by non-affiliates: None
Common Stock outstanding at February 28, 2001: TXU Electric - 72,794,600 shares,
without par value
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DOCUMENTS INCORPORATED BY REFERENCE - None
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Introductory Note
-----------------
TXU Electric Company (the Company) is filing the attached Item 11 on Form 10-K/A
to reflect a change in the membership of TXU Corp.'s Organization and
Compensation Committee (the Committee) that occurred after the filing of the
Company's Annual Report on Form 10-K for the year ended December 31, 2000. On
March 21, 2001 James A. Middleton, former Chair of the Committee, retired from
the Board of TXU Corp., and J. E. Oesterreicher was appointed as the new Chair
of the Committee. To reflect this change in membership the first paragraph and
the signatures under Organization and Compensation Committee Report on Executive
Compensation herein have been revised. These are the only substantive revisions
made in the attached Item 11 when compared to the Item 11 previously filed as
part of the Company's Form 10-K for the fiscal year ended December 31, 2000.
1
ITEM 11. EXECUTIVE COMPENSATION
TXU Electric and its affiliates have paid or awarded compensation during
the last three calendar years to the following Executive Officers for services
in all capacities:
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------ ------------------------------
AWARDS PAYOUTS
--------------------- --------
OTHER RESTRICTED SECURITIES ALL OTHER
ANNUAL STOCK UNDERLYING LTIP COMPEN-
NAME AND SALARY BONUS COMPEN- AWARDS OPTIONS/ PAYOUTS SATION
PRINCIPAL POSITION YEAR ($) ($)(4) SATION ($) ($)(5) SARS (#) ($)(6) ($)(7)
- --------------------------- ---- ------- ------- ---------- ------- ---------- -------- -------
Erle Nye, (1)(8)........... 2000 950,000 380,000 --- 593,750 --- 399,793 218,101
Chairman of the Board and 1999 908,333 475,000 --- 688,750 --- 61,016 184,892
Chief Executive of 1998 818,750 350,000 --- 541,250 --- 19,674 156,906
the Company
David W. Biegler, (2)...... 2000 650,000 162,500 --- 308,750 --- 0 96,924
Group President of the 1999 641,667 164,000 --- 310,250 --- 0 81,509
Company 1998 617,500 102,500 --- 244,250 --- 0 174,208
T. L. Baker (3)(8)......... 2000 399,167 125,000 --- 219,500 --- 93,968 84,152
President of the 1999 355,833 116,000 --- 199,250 --- 23,467 71,675
Company 1998 323,083 60,000 --- 135,600 --- 8,212 62,011
W. M. Taylor (8)........... 2000 409,167 112,500 --- 209,250 --- 77,387 82,501
President, Generation 1999 375,000 98,500 --- 184,000 --- 24,969 70,720
Division 1998 360,500 75,000 --- 157,800 --- 7,733 63,421
M. S. Greene (8)........... 2000 283,333 75,000 --- 142,500 --- 6,021 59,487
President, Transmission 1999 255,833 63,500 --- 122,000 --- 18,304 51,454
Division 1998 245,833 50,000 --- 106,250 --- 5,645 45,875
- -------------------
(1) Compensation amounts represent compensation paid by TXU Corp.
(2) Mr. Biegler was elected Group President of TXU Electric effective May 12,
2000; prior thereto, he was President and Chief Operating Officer.
Compensation amounts represent compensation paid by TXU Corp.
(3) Mr. Baker was elected President of TXU Electric effective May 12, 2000;
prior thereto, he was President, Electric Service Division.
(4) Amounts reported as Bonus in the Summary Compensation Table are
attributable to the named officer's participation in the Annual Incentive
Plan (AIP). Elected corporate officers of TXU Corp. and its participating
subsidiaries with a title of Vice President or above are eligible to
participate in the AIP. Under the terms of the AIP, target incentive awards
ranging from 40% to 75% of base salary, and a maximum award of 100% of base
salary, are established. The percentage of the target or the maximum
actually awarded, if any, is dependent upon the attainment of per share net
income goals established in advance by the TXU Corp. Organization and
Compensation Committee (Committee) as well as the Committee's evaluation of
the participant's and TXU Corp.'s performance. One-half of each award is
paid in cash and is reflected as Bonus in the Summary Compensation Table.
Payment of the remainder of the award is deferred and invested under the
Deferred and Incentive Compensation Plan (DICP) discussed hereinafter in
footnote (5).
(5) Amounts reported as Restricted Stock Awards in the Summary Compensation
Table are attributable to the named officer's participation in the Deferred
and Incentive Compensation Plan (DICP). Elected corporate officers of TXU
Corp. and its participating subsidiaries with the title of Vice President
or above are eligible to participate in the DICP. Participants in the DICP
may defer a percentage of their base salary not to exceed a maximum
percentage determined by the Committee for each Plan year and in any event
not to exceed 15% of the participant's base salary. Salary deferred under
the DICP is included in amounts reported as Salary in the Summary
2
Compensation Table. TXU Corp. makes a matching award (Matching Award) equal
to 150% of the participant's deferred salary. In addition, one-half of any
AIP award (Incentive Award) is deferred and invested under the DICP. The
Matching Awards and Incentive Awards are subject to forfeiture under
certain circumstances. Under the DICP, a trustee purchases TXU Corp. common
stock with an amount of cash equal to each participant's deferred salary,
Matching Award and Incentive Award, and accounts are established for each
participant containing performance units (Units) equal to such number of
common shares. DICP investments, including reinvested dividends, are
restricted to TXU Corp. common stock, and the value of each unit credited
to participants' accounts equals the value of a share of TXU Corp. common
stock. On the expiration of the applicable maturity period (three years for
Incentive Awards and five years for deferred salary and Matching Awards),
the values of the participant's accounts are paid in cash based upon the
then current value of the Units; provided, however, that in no event will a
participant's account be deemed to have a cash value which is less than the
sum of such participant's deferred salary together with 6% per annum
interest compounded annually. The maturity period is waived if the
participant dies or becomes totally and permanently disabled and may be
extended under certain circumstances.
Incentive Awards and Matching Awards that have been made under the DICP are
included under Restricted Stock Awards in the Summary Compensation Table
for each of the last three years. As a result of these awards,
undistributed Incentive Awards and Matching Awards made under the Plan in
prior years, and dividends reinvested thereon, the number and market value
at December 31, 2000 of such Units (each of which is equal to one share of
common stock) held in the DICP accounts for Messrs. Nye, Biegler, Baker,
Taylor and Greene were 62,925 ($2,788,364), 24,705 ($1,094,740), 20,236
($896,708), 20,772 ($920,459) and 14,064 ($623,211), respectively.
(6) Amounts reported as LTIP payouts in the Summary Compensation Table are
attributable to the vesting and distribution of performance based
restricted stock awards under the Long-Term Incentive Compensation Plan
(LTICP) and the distribution during the year of earnings on salaries
previously deferred under the DICP.
The LTICP is a comprehensive, stock-based incentive compensation plan
providing for discretionary grants of common stock-based awards, including
restricted stock. Outstanding awards to named executive officers vest at
the end of a three year performance period and provide for an ultimate
award of from 0% to 200% of the number of shares initially awarded based on
TXU Corp.'s total return to shareholders over the three year period
compared to the total return provided by the companies comprising the
Standard & Poor's Electric Utility Index. Dividends on the restricted stock
are reinvested in TXU Corp. common stock and are paid in cash upon release
of the restricted shares. Based on TXU Corp.'s total return to shareholders
over the three year period ending March 31, 2000 compared to the returns
provided by the companies comprising the Standard & Poor's Electric Utility
Index, Messrs. Nye, Baker and Taylor each received 50% of the restricted
shares awarded in May of 1997, which stock was valued at $380,188, $86,406
and $69,125, respectively.
Amounts reported also include earnings distributed during the year on
salaries previously deferred under the DICP for Messrs. Nye, Baker, Taylor
and Greene of $19,605, $7,561, $8,262 and $6,021, respectively.
As a result of restricted stock awards under the LTICP, and reinvested
dividends thereon, the number of shares of restricted stock and the value
of such shares at December 31, 2000 held for Messrs. Nye, Biegler, Baker,
Taylor and Greene were 147,396 ($6,531,485), 29,539 ($1,308,947), 28,120
($1,246,067), 22,735 ($1,007,445) and 8,490 ($376,213), respectively.
As noted, salaries deferred under the DICP are included in amounts reported
as Salary in the Summary Compensation Table. Amounts shown in the table
below represent the number of shares purchased under the DICP with these
deferred salaries for 2000 and the number of shares awarded under the
LTICP:
3
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
DEFERRED AND INCENTIVE
COMPENSATION PLAN (DICP) LONG-TERM INCENTIVE COMPENSATION PLAN (LTICP)
------------------------ ---------------------------------------------------
NUMBER OF PERFORMANCE PERFORMANCE
SHARES, OR OTHER NUMBER OF OR OTHER
UNITS OR PERIOD UNTIL SHARES, UNITS PERIOD UNTIL ESTIMATED FUTURE PAYOUTS
OTHER MATURATION OR OTHER MATURATION OR ------------------------
NAME RIGHTS (#) OR PAYOUT RIGHTS(#) PAYOUT MINIMUM(#) MAXIMUM(#)
- ------------------ ---------- ----------- ---------- ------------ ---------- ----------
Erle Nye.......... 4,503 5 Years 75,000 3 Years 0 150,000
David W. Biegler.. 3,081 5 Years 10,000 3 Years 0 20,000
T. L. Baker....... 1,990 5 Years 12,000 3 Years 0 24,000
W. M. Taylor...... 2,038 5 Years 10,000 3 Years 0 20,000
M. S. Greene...... 1,422 5 Years 5,000 3 Years 0 10,000
(7) Amounts reported as All Other Compensation in the Summary Compensation
Table are attributable to the named officer's participation in certain
plans and as otherwise described hereinafter in this footnote.
Under the TXU Thrift Plan (Thrift Plan) all eligible employees of TXU Corp.
and any of its participating subsidiaries may invest up to 16% of their
regular salary or wages in common stock of TXU Corp., or in a variety of
selected mutual funds. Under the Thrift Plan, TXU Corp. and its
participating subsidiaries match a portion of an employee's contributions
in an amount equal to 40%, 50% or 60% (depending on the employee's length
of service) of the first 6% of such employee's contributions. All matching
amounts are invested in common stock of TXU Corp. The amounts reported
under All Other Compensation in the Summary Compensation Table include
these matching amounts which, for Messrs. Nye, Biegler, Baker, Taylor and
Greene were $6,120, $6,120, $6,120, $6,120 and $6,120, respectively, during
2000.
TXU Corp. has a Salary Deferral Program (Program) under which each employee
of TXU Corp. and its participating subsidiaries whose annual salary is
equal to or greater than an amount established under the Program ($100,550
for the Program Year beginning April 1, 2000) may elect to defer a
percentage of annual base salary, or any bonus or other special cash
compensation for a period of seven years, for a period ending with the
retirement of such employee, or for a combination thereof. Such deferrals
may be up to a maximum of 50% of the employee's annual salary and/or 100%
of the employee's bonus or other special cash compensation. TXU Corp. makes
a matching award, subject to forfeiture under certain circumstances, equal
to 100% of up to the first 8% of salary deferred under the Program. Salary
and bonuses deferred under the Program are included in amounts reported
under Salary and Bonus, respectively, in the Summary Compensation Table.
Deferrals are credited with earnings or losses based on the performance of
investment alternatives selected by each participant. At the end of the
applicable maturity period, the trustee for the Program distributes the
deferrals and the applicable earnings in cash. The distribution is in a
lump sum if the applicable maturity period is seven years. If the
retirement option is elected, the distribution is made in twenty annual
installments. TXU Corp. is financing the retirement option portion of the
Program through the purchase of corporate-owned life insurance on the lives
of participants. The proceeds from such insurance are expected to allow TXU
Corp. to fully recover the cost of the retirement option. During 2000,
matching awards, which are included under All Other Compensation in the
Summary Compensation Table, were made for Messrs. Nye, Biegler, Baker,
Taylor and Greene in the amounts of $76,000, $52,000, $31,933, $32,733 and
$28,333, respectively.
Under TXU Corp.'s Split-Dollar Life Insurance Program (Insurance Program),
split-dollar life insurance policies are purchased for elected corporate
officers of TXU Corp. and its participating subsidiaries with a title of
Vice President or above, with a death benefit equal to four times their
annual Insurance Program compensation. New participants vest in the
policies issued under the Insurance Program over a six year period. TXU
Corp. pays the premiums for these policies and has received a collateral
assignment of the policies equal in value to the sum of all of its
insurance premium payments. Although the Insurance Program is terminable at
any time, it is designed so that if it is continued, TXU Corp. will fully
recover all of the insurance premium payments it has made either upon the
death of the participant or, if the assumptions made as to policy yield are
realized, upon the later of fifteen years of participation or the
4
participant's attainment of age sixty-five. During 2000, the economic
benefit derived by Messrs. Nye, Biegler, Baker, Taylor and Greene from the
term insurance coverage provided and the interest foregone on the remainder
of the insurance premiums paid by TXU Corp. amounted to $135,981, $38,804,
$46,698, $43,647 and $25,034, respectively.
(8) TXU Corp. has entered into employment agreements with Messrs. Nye, Baker,
Taylor and Greene as hereinafter described in this footnote.
Effective June 1, 2000, TXU Corp. entered into an employment agreement with
Mr. Nye. The agreement provides for Mr. Nye's continued service, through
June 1, 2004 (Term), as TXU Corp.'s Chairman of the Board and Chief
Executive. Under the terms of the agreement, Mr. Nye will, during the Term,
be entitled to a minimum annual base salary of $950,000, eligibility for an
annual bonus under the terms of the AIP, and minimum annual restricted
stock awards of 40,000 shares under the LTICP. The agreement also provides
for the funding of the retirement benefit to which Mr. Nye will be entitled
under TXU Corp.'s supplemental retirement plan in an amount determined in
accordance with the standard formula under such plan. Additionally, the
agreement entitles Mr. Nye to certain severance benefits in the event he is
terminated without cause during the Term, including a payment equal to the
greater of his annualized base salary and target bonus, or the total amount
of base salary and bonuses he would have received for the remainder of the
Term; a payment in lieu of foregone and forfeited incentive compensation;
and health care benefits. The agreement also provides for compensation and
benefits under certain circumstances following a change-in-control of TXU
Corp. during the Term, including a payment equal to the greater of three
times his annualized base salary and target bonus, or the total base salary
and bonus he would have received for the remainder of the Term; a payment
in lieu of foregone and forfeited incentive compensation; health care
benefits and a tax gross-up payment to offset any excise tax which may
result from such change-in-control payments.
TXU Corp. entered into an employment agreement with Mr. Baker effective
July 1, 2000. The employment agreement provides for the continued service
by Mr. Baker through June 30, 2003 (Term). Under the terms of the
agreement, Mr. Baker will, during the Term, be entitled to a minimum annual
base salary of $420,000, eligibility for an annual bonus under the terms of
the AIP, and minimum restricted stock awards of 12,000 shares under the
LTICP. Additionally, the agreement entitles Mr. Baker to certain severance
benefits in the event he is terminated without cause during the Term,
including a payment equal to the greater of his annualized base salary and
target bonus, or the total amount of base salary and bonuses he would have
received for the remainder of the Term; a payment in lieu of foregone and
forfeited incentive compensation; and health care benefits. The agreement
also provides for compensation and benefits under certain circumstances
following a change-in-control of TXU Corp. during the Term, including a
payment equal to the greater of three times his annual base salary and
target bonus, or the total base salary and bonus he would have received for
the remainder of the Term; a payment in lieu of foregone and forfeited
incentive compensation; health care benefits and a tax gross-up payment to
offset any excise tax which may result from such change-in-control payment.
TXU Corp. entered into an employment agreement with Mr. Taylor effective
July 1, 2000. The employment agreement provides for the continued service
by Mr. Taylor through June 30, 2003 (Term). Under the terms of the
agreement, Mr. Taylor will, during the Term, be entitled to a minimum
annual base salary of $430,000, eligibility for an annual bonus under the
terms of the AIP, and minimum restricted stock awards of 10,000 shares
under the LTICP. Additionally, the agreement entitles Mr. Taylor to certain
severance benefits in the event he is terminated without cause during the
Term, including a payment equal to the greater of his annualized base
salary and target bonus, or the total amount of base salary and bonuses he
would have received for the remainder of the Term; a payment in lieu of
foregone and forfeited incentive compensation; and health care benefits.
The agreement also provides for compensation and benefits under certain
circumstances following a change-in-control of TXU Corp. during the Term,
including a payment equal to the greater of three times his annual base
salary and target bonus, or the total base salary and bonus he would have
received for the remainder of the Term; a payment in lieu of foregone and
forfeited incentive compensation; health care benefits and a tax gross-up
payment to offset any excise tax which may result from such
change-in-control payment.
TXU Corp. entered into an employment agreement with Mr. Greene effective
July 1, 2000. The employment agreement provides for the continued service
by Mr. Greene through June 30, 2003 (Term). Under the terms of the
5
agreement, Mr. Greene will, during the Term, be entitled to a minimum
annual base salary of $300,000, eligibility for an annual bonus under the
terms of the AIP, and minimum restricted stock awards of 5,000 shares under
the LTICP. Additionally, the agreement entitles Mr. Greene to certain
severance benefits in the event he is terminated without cause during the
Term, including a payment equal to the greater of his annualized base
salary and target bonus, or the total amount of base salary and bonuses he
would have received for the remainder of the Term; a payment in lieu of
foregone and forfeited incentive compensation; and health care benefits.
The agreement also provides for compensation and benefits under certain
circumstances following a change-in-control of TXU Corp. during the Term,
including a payment equal to the greater of three times his annual base
salary and target bonus, or the total base salary and bonus he would have
received for the remainder of the Term; a payment in lieu of foregone and
forfeited incentive compensation; health care benefits and a tax gross-up
payment to offset any excise tax which may result from such
change-in-control payment.
As a part of the acquisition of TXU Gas, options to purchase the common
stock of TXU Gas which had been granted to various employees of TXU Gas were
converted into options to acquire common shares of TXU Corp. The table below
shows, for each of the named officers, the information specified with respect to
exercised, exercisable and unexercisable options under all existing stock option
plans, converted into shares of TXU Corp.'s common stock into which such options
became exercisable at the time of the TXU Gas acquisition.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT
ACQUIRED DECEMBER 31, 2000 DECEMBER 31, 2000
ON VALUE (#) ($)
EXERCISE REALIZED ---------------------------------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------- -------- ------ ----------- ------------- ---------- -------------
Erle Nye......... 0 0 0 0 0 0
David W. Biegler. 0 0 129,778 0 2,598,889 0
T. L. Baker...... 0 0 0 0 0 0
W. M. Taylor..... 0 0 0 0 0 0
M. S. Greene..... 0 0 0 0 0 0
TXU Corp. and its subsidiaries maintain retirement plans (TXU Retirement
Plan) which are qualified under applicable provisions of the Internal Revenue
Code of 1986, as amended (Code). Annual retirement benefits under the
traditional defined benefit formula of the TXU Retirement Plan, which applied to
each of the named officers, are computed as follows: for each year of accredited
service up to a total of 40 years, 1.3% of the first $7,800, plus 1.5% of the
excess over $7,800, of the participant's average annual earnings during his or
her three years of highest earnings. Amounts reported under Salary for the named
officers in the Summary Compensation Table approximate earnings as defined by
the TXU Retirement Plan without regard to any limitations imposed by the Code.
Benefits paid under the TXU Retirement Plan are not subject to any reduction for
Social Security payments but are limited by provisions of the Code. As of
February 28, 2001, years of accredited service under the TXU Retirement Plan for
Messrs. Nye, Biegler, Baker, Taylor and Greene were 38, 3, 30, 33 and 30,
respectively.
6
TXU PENSION PLAN TABLE
YEARS OF SERVICE
--------------------------------------------------------------
Remuneration 20 25 30 35 40
------------- ---------- ----------- ------------ ------------ ------------
$ 50,000 $ 14,688 $ 18,360 $ 22,032 $ 25,704 $ 29,376
100,000 29,688 37,110 44,532 51,954 59,376
200,000 59,688 74,610 89,532 104,454 119,376
400,000 119,688 149,610 179,532 209,454 239,376
800,000 239,688 299,610 359,532 419,454 479,376
1,000,000 299,688 374,610 449,532 524,454 599,376
1,400,000 419,688 524,610 629,532 734,454 839,376
1,800,000 539,688 674,610 809,532 944,454 1,079,376
2,000,000 599,688 749,610 899,532 1,049,454 1,199,376
Before the TXU Gas acquisition, Mr. Biegler earned retirement benefits
under the Retirement and Death Benefit Program of 1969 of ENSERCH Corporation
and Participating Subsidiary Companies (ENSERCH Retirement Plan) which was
merged into, and became a part of, the TXU Retirement Plan effective December
31, 1997. In connection with this plan merger, the TXU Retirement Plan was
amended to provide that the retirement benefit of certain TXU Gas employees will
equal the sum of (1) their accrued benefit under the ENSERCH Retirement Plan
through the last pay period of 1997 and (2) their accrued benefit under the TXU
Retirement Plan beginning with the first pay period of 1998; provided that the
aggregate retirement benefit earned under the traditional defined benefit plan
formula of the plans can be no less than the retirement benefit which would have
been earned had all service under the traditional defined benefit formula been
under the ENSERCH Retirement Plan. Mr. Biegler, whose employment with TXU Corp.
began August 5, 1997, is treated in a similar manner. Amounts reported for Mr.
Biegler under Salary and Bonus in the Summary Compensation Table approximate
earnings as defined by the ENSERCH Retirement Plan without regard to any
limitations imposed by the Code. Benefits paid under the ENSERCH Retirement Plan
are not subject to any reduction for Social Security payments but are limited by
provisions of the Code. As of February 28, 2001, Mr. Biegler had 29 years of
accredited service under the ENSERCH Retirement Plan and, as noted, 3 years of
accredited service under the TXU Retirement Plan.
ENSERCH PENSION PLAN TABLE
YEARS OF SERVICE
------------------------------------------------------------
---------------------------------------------------------------------------
Remuneration 20 25 30 35 40 45
------------- ---------- ----------- ------------ ------------ ------------ ------------
$ 50,000 $ 12,500 $ 15,625 $ 18,750 $ 21,875 $ 23,125 $ 24,375
100,000 29,735 37,169 44,603 52,036 54,536 57,036
200,000 64,735 80,919 97,103 113,286 118,286 123,286
400,000 134,735 168,419 202,103 235,786 245,786 255,786
800,000 274,735 343,419 412,103 480,786 500,786 520,786
1,000,000 344,735 430,919 517,103 603,286 628,286 653,286
1,400,000 484,735 605,919 727,103 848,286 883,286 918,286
1,800,000 624,735 780,919 937,103 1,093,286 1,138,286 1,183,286
2,000,000 694,735 868,419 1,042,103 1,215,786 1,265,786 1,315,786
7
TXU Corp.'s supplemental retirement plans (Supplemental Plan) provide for
the payment of retirement benefits which would otherwise be limited by the Code
or the definition of earnings in the TXU Retirement Plan or the ENSERCH
Retirement Plan, as applicable. Under the Supplemental Plan, retirement benefits
are calculated in accordance with the same formula used under the applicable
qualified plan, except that, with respect to calculating the portion of the
Supplemental Plan benefit attributable to service under the TXU Retirement Plan,
earnings also include AIP awards (50% of the AIP award is reported under Bonus
for the named officers in the Summary Compensation Table). The tables set forth
above illustrate the total annual benefit payable at retirement under the TXU
Retirement Plan and the ENSERCH Retirement Plan, respectively, inclusive of
benefits payable under the Supplemental Plan, prior to any reduction for a
contingent beneficiary option which may be selected by participants.
The following report and performance graph are presented herein for
information purposes only. This information is not required to be included
herein and shall not be deemed to form a part of this report to be "filed" with
the Securities and Exchange Commission. The report set forth hereinafter is the
report of the Organization and Compensation Committee of the Board of Directors
of TXU Corp. and is illustrative of the methodology utilized in establishing the
compensation of executive officers of TXU Electric. References in the report to
the "Company" are references to TXU Corp. and references to "this proxy
statement" are references to TXU Corp.'s proxy statement in connection with TXU
Corp.'s 2001 annual meeting of shareholders.
8
ORGANIZATION AND COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Organization and Compensation Committee of the Board of Directors
(Committee) is responsible for reviewing and establishing the compensation of
the executive officers of the Company. The Committee consists of nonemployee
directors of the Company and is chaired by J. E. Oesterreicher. Prior to his
retirement from the Board in March, 2001, the Committee was chaired by James A.
Middleton. The Committee has directed the preparation of this report and has
approved its content and submission to the shareholders.
As a matter of policy, the Committee believes that levels of executive
compensation should be based upon an evaluation of the performance of the
Company and its officers generally, as well as in comparison to persons with
comparable responsibilities in similar business enterprises. Compensation plans
should align executive compensation with returns to shareholders with due
consideration accorded to balancing both long-term and short-term objectives.
The overall compensation program should provide for an appropriate and
competitive balance between base salaries and performance-based annual and
long-term incentives. The Committee has determined that, as a matter of policy
to be implemented over time, the base salaries of the officers will be
established around the median, or 50th percentile, of the top ten electric
utilities in the United States, or other relevant market, and that opportunities
for total direct compensation (defined as the sum of base salaries, annual
incentives and long-term incentives) to reach the 75th percentile, or above, of
such market or markets will be provided through performance-based incentive
compensation plans. Such compensation principles and practices have allowed, and
should continue to allow, the Company to attract, retain and motivate its key
executives.
In furtherance of these policies, a nationally recognized compensation
consultant has been retained since 1994 to assist the Committee in its periodic
reviews of compensation and benefits provided to officers. The consultant's
evaluations include comparisons to the largest utilities as well as to general
industry with respect both to the level and composition of officers'
compensation. The consultant's recommendations including the Annual Incentive
Plan, the Long-Term Incentive Compensation Plan and certain benefit plans have
generally been implemented. The Annual Incentive Plan, which was first approved
by the shareholders in 1995 and reapproved in 2000, is generally referred to as
the AIP and is described in this report and in footnote 1 on page 8 of this
proxy statement. The Long-Term Incentive Compensation Plan, referred to as the
Long-Term Plan or LTICP, was approved by the shareholders in 1997 and is
described in this report as well as in footnote 3 on pages 9 and 10 of this
proxy statement.
The compensation of the officers of the Company consists principally of
base salaries, the opportunity to earn an incentive award under the AIP, awards
of performance-based restricted shares under the Long-Term Plan and the
opportunity to participate in the Deferred and Incentive Compensation Plan
(referred to as the DICP and described in footnote 2 on pages 8 and 9 of this
proxy statement). The value of future payments under the DICP, as well as the
value of the deferred portion of any award under the AIP and the value of any
awards of performance-based restricted shares under the Long-Term Plan, are
directly related to the future performance of the Company's common stock. It is
anticipated that performance-based incentive awards under the AIP and the
Long-Term Plan, will, in future years, continue to constitute a substantial
percentage of the officers' total compensation.
Certain of the Company's business units have developed separate annual and
long-term incentive compensation plans. Those plans focus on the results
achieved by those individual business units and the compensation opportunities
provided by those plans are considered to be competitive in the markets in which
those units compete. Generally, officers may not participate in both the
traditional incentive compensation plans as discussed herein and the business
unit plans. None of the named officers participate in the individual business
unit plans.
The AIP is administered by the Committee and provides an objective
framework within which annual Company and individual performance can be
evaluated by the Committee. Depending on the results of such performance
evaluations, and the attainment of the per share net income goals established in
advance, the Committee may provide annual incentive compensation awards to
eligible officers. The evaluation of each individual participant's performance
is based upon the attainment of individual and business unit objectives. The
9
Company's performance is evaluated, compared to the ten largest electric
utilities and/or the electric utility industry, based upon its total return to
shareholders and return on invested capital, as well as other measures relating
to competitiveness, service quality and employee safety. The combination of
individual and Company performance results, together with the Committee's
evaluation of the competitive level of compensation which is appropriate for
such results, determines the amount, if any, actually awarded.
The Long-Term Plan, which is also administered by the Committee, is a
comprehensive stock-based incentive compensation plan under which all awards are
made in, or based on the value of, the Company's common stock. The Long-Term
Plan provides that, in the discretion of the Committee, awards may be in the
form of stock options, stock appreciation rights, performance and/or restricted
stock or stock units or in any other stock-based form. The purpose of the
Long-Term Plan is to provide performance-related incentives linked to long-term
performance goals. Such performance goals may be based on individual performance
and/or may include criteria such as absolute or relative levels of total
shareholder return, revenues, sales, net income or net worth of the Company, any
of its subsidiaries, business units or other areas, all as the Committee may
determine. Awards under the Long-Term Plan constitute the principal long-term
component of officers' compensation.
In establishing levels of executive compensation at its May 2000 meeting,
the Committee reviewed various performance and compensation data, including the
performance measures under the AIP and the report of its compensation
consultant. Information was also gathered from industry sources and other
published and private materials which provided a basis for comparing the largest
electric and gas utilities and other survey groups representing a large variety
of business organizations. Included in the data considered were the comparative
returns provided by the largest electric and gas utilities as represented by the
returns of the Standard & Poor's Electric Utility Index which are reflected in
the graph on page 19. Compensation amounts were established by the Committee
based upon its consideration of the above comparative data and its subjective
evaluation of Company and individual performance at levels consistent with the
Committee's policy relating to total direct compensation.
At its meeting in May 2000, the Committee provided awards of
performance-based restricted shares under the Long-Term Plan to certain
officers, including the Chief Executive. Information relating to awards made to
the named executive officers is contained in the Table on page 10 of this proxy
statement. The ultimate value of those awards will be determined by the
Company's total return to shareholders over a three year period compared to the
total return for that period of the companies comprising the Standard & Poor's
Electric Utility Index. Depending upon the Company's relative total return for
such period, the officers may earn from 0% to 200% of the original award and
their compensation is, thereby, directly related to shareholder value. Awards
granted in May 2000 contemplate that 200% of the original award will be provided
if the Company's total return is in the 81st percentile or above of the returns
of the companies comprising the Standard & Poor's Electric Utility Index and
that such percentage of the original award will be reduced as the Company's
return compared to the Index declines so that 0% of the original award will be
provided if the Company's return is in the 40th percentile or below of returns
provided by the companies comprising the Index. These awards, and any awards
that may be made in the future, are based upon the Committee's evaluation of the
appropriate level of long-term compensation consistent with its policy relating
to total direct compensation.
Additionally with respect to the Long-Term Plan, the Committee, at its
meeting in May 2000, considered the restricted stock awards provided to certain
officers in May of 1997. Based upon its review and comparison of the Company's
total return to the returns provided by the companies comprising the Standard &
Poor's Electric Utility Index, the Committee determined that the Company's
performance during the three year performance period ending in March of 2000
permitted the payment of 50% of such 1997 awards. Payment of these awards were
made in the form of the Company's stock and cash, and, for Messrs. Nye, Gibbs
and McNally, the value of the stock at the date of distribution is included in
the LTIP Payouts column of the Summary Compensation Table on page 8 of this
proxy statement.
During the year the Committee and the Board of Directors determined that it
was in the best interests of the Company to enter into employment agreements
with certain officers, including the Chief Executive. Accordingly, the Committee
recommended, and the Board of Directors subsequently approved, an employment
agreement with Mr. Nye which contemplates his continued service through June 1,
2004 as Chairman of the Board and Chief Executive. The agreement provides, among
other things, for a minimum annual base salary, eligibility for an annual bonus
under the terms of the AIP, minimum restricted stock awards under the Long-Term
10
Plan, certain severance benefits upon termination of employment without cause
and compensation and benefits under certain circumstances following a change in
control of the Company. Additionally, the Committee ratified and approved
employment contracts with certain other officers of the Company and its
subsidiaries including agreements with Messrs. Dickie and McNally, named
executive officers. The agreements with Messrs. Nye, Dickie and McNally are
described in footnote 6 on pages 11 and 12 of this proxy statement.
Mr. Nye's base salary as Chief Executive was not increased in 2000. Based
upon the Committee's evaluation of individual and Company performance, as called
for by the AIP, the Committee provided Mr. Nye with an AIP award of $760,000
compared to the prior year's award of $950,000. The Committee also awarded
75,000 shares of performance-based restricted stock to Mr. Nye. Under the terms
of the award, Mr. Nye can earn from 0% to 200% of the award depending on the
Company's total return to shareholders over a three-year period (April 1, 2000
through March 31, 2003) compared to the total return provided by the companies
comprising the Standard & Poor's Electric Utility Index. This level of
compensation was established based upon the Committee's subjective evaluation of
the information described in this report. In addition, as previously noted in
this report, the Committee approved the payment of 50% of the 1997 restricted
stock awards under the Long-Term Plan, which for Mr. Nye was 11,000 shares.
In discharging its responsibilities with respect to establishing executive
compensation, the Committee normally considers such matters at its May meeting
held in conjunction with the Annual Meeting of Shareholders. Although Company
management may be present during Committee discussions of officers'
compensation, Committee decisions with respect to the compensation of the Chief
Executive are reached in private session without the presence of any member of
Company management.
Section 162(m) of the Code limits the deductibility of compensation which a
publicly traded corporation provides to its most highly compensated officers. As
a general policy, the Company does not intend to provide compensation which is
not deductible for federal income tax purposes. Awards under the AIP in 1996 and
subsequent years have been, and are expected to continue to be, fully
deductible. Awards under the Long-Term Plan are expected to be fully deductible,
and the DICP and the Salary Deferral Program have been amended to require the
deferral of distributions of amounts maturing in years subsequent to 1995 until
the time when such amounts would be deductible.
Shareholder comments to the Committee are welcomed and should be addressed
to the Secretary of the Company at the Company's offices.
ORGANIZATION AND COMPENSATION COMMITTEE
J. E. Oesterreicher, Chair Margaret N. Maxey
Derek C. Bonham Charles R. Perry
William M. Griffin Herbert H. Richardson
Kerney Laday
11
PERFORMANCE GRAPH
The following graph compares the performance of TXU Corp.'s common stock to
the S&P 500 Index and S&P Electric Utility Index for the last five years. The
graph assumes the investment of $100 at December 31, 1995 and that all dividends
were reinvested. The amount of the investment at the end of each year is shown
in the graph and in the table which follows.
CUMULATIVE TOTAL RETURNS
FOR THE FIVE YEARS ENDED 12/31/00
[GRAPHIC OMITTED]
------------------------------------------------
1995 1996 1997 1998 1999 2000
- -------------------------------------------------------------------------------
TXU Corp................... 100 104 113 133 108 144
- -------------------------------------------------------------------------------
S&P 500 Index.............. 100 123 164 211 255 232
- -------------------------------------------------------------------------------
S&P Electric Utility Index. 100 100 126 145 117 180
- -------------------------------------------------------------------------------
12
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, TXU ELECTRIC COMPANY HAS DULY CAUSED THIS REPORT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
TXU ELECTRIC COMPANY
Date: April 3, 2001 By: /s/ ERLE NYE
-----------------------------------
(ERLE NYE, CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF TXU ELECTRIC
COMPANY AND IN THE CAPACITIES AND ON THE DATE INDICATED.
Signature Title Date
--------- ----- ----
/s/ ERLE NYE Principal Executive
- ---------------------------------- Officer
(Erle Nye, Chairman of the Board
and Chief Executive)
/s/ KIRK R. OLIVER Principal Financial
- ---------------------------------- Officer
(Kirk R. Oliver, Vice President)
/s/ BIGGS C. PORTER Principal Accounting
- ---------------------------------- Officer
(Biggs C. Porter, Vice President)
/s/ T. L. BAKER Director
- ----------------------------------
(T. L. Baker)
/s/ DAVID W. BIEGLER Director
- ----------------------------------
(David W. Biegler)
/s/ BARBARA B. CURRY Director April 3, 2001
- ----------------------------------
(Barbara B. Curry)
/s/ H. JARRELL GIBBS Director
- ----------------------------------
(H. Jarrell Gibbs)
/s/ M. S. GREENE Director
- ----------------------------------
(M. S. Greene)
/s/ MICHAEL J. McNALLY Director
- ----------------------------------
(Michael J. McNally)
/s/ W. M. TAYLOR Director
- ----------------------------------
(W. M. Taylor)
13