Exhibit 10(b)
TXU
DEFERRED COMPENSATION PLAN
for
OUTSIDE DIRECTORS
(Effective July 1, 2002)
Section 1. Purpose
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1.1 Purpose. The TXU Deferred Compensation Plan for Outside Directors
(the "Plan") was established, effective July 1, 1995, was renamed and restated
effective May 12, 2000 in connection with the corporate name change of the
Company, was further amended and restated effective August 18, 2000 and August
17, 2001, and is hereby further amended and restated effective July 1, 2002. The
primary purpose of the Plan is to provide deferred compensation to Outside
Directors which is directly related to the performance of common stock of the
Company. The Plan is designed as an unfunded arrangement under the provisions of
the Employee Retirement Income Security Act of 1974 and of the Internal Revenue
Code.
Section 2. Definitions
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2.1 Definitions. Whenever used hereinafter, the following
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terms shall have the meanings set forth below:
(a) "Beneficiary" means the person or persons named by the
Participant as the recipient(s) of any distribution remaining
to be paid to the Participant under the Plan upon the
Participant's death.
(b) "Board of Directors" means the Board of Directors of the
Company.
(c) "Change in Control" means a change in control of the Company
of a nature that would be required to be reported in response
to Item 1(a) of the Securities and Exchange Commission
Form 8-K, as in effect on the date hereof, pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934, as amended
("Exchange Act"), or would have been required to be so
reported but for the fact that such event had been
"previously reported" as that term is defined in Rule 12b-2 of
Regulation 12B under the Exchange Act; provided that, without
limitation, such a change in control shall be deemed to have
occurred if: (i) any Person is or becomes the beneficial owner
(as defined in Rule 13-d3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 20% or
more of the combined voting power of the Company's then
outstanding securities ordinarily (apart from rights accruing
under special circumstances) having the right to vote at
elections of directors ("Voting Securities"); or (ii)
individuals who constitute the Board of Directors on the date
hereof (the "Incumbent Board") cease for any reason to
constitute at least a majority thereof, provided that any
person becoming a director subsequent to the date hereof whose
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election, or nomination for election by the Company's
shareholders, was approved by a vote of at least three-quarters
of the directors comprising the Incumbent Board (either by a
specific vote or by approval of the proxy statement of the
Company in which such person is named as a nominee for
director, without objection to such nomination) shall be, for
purposes of this clause (ii), considered as though such person
were a member of the Incumbent Board; or (iii) a
recapitalization of the Company occurs which results in either
a decrease by 33% or more in the aggregate percentage
ownership of Voting Securities held by Independent
Shareholders (on a primary basis or on a fully diluted basis
after giving effect to the exercise of stock options and
warrants) or an increase in the aggregate percentage ownership
of Voting Securities held by non-Independent Shareholders
(on a primary basis or on a fully diluted basis after giving
effect to the exercise of stock options and warrants) to
greater than 50%; or (iv) all or substantially all of the
assets of the Company are liquidated or transferred to an
unrelated party; or (v) the Company is a party to a merger,
consolidation, reorganization or other business combination
transaction pursuant to which the Company is not the surviving
ultimate parent entity; or (vi) the Company is a party to a
merger, consolidation, reorganization or other business
combination transaction which requires the approval of the
shareholders of the Company and which results in an increase
of 20% or more in the number of Voting Securities outstanding.
For purposes of this definition, the term "Person" shall mean
and include any individual, corporation, partnership, group,
association or other "person", as such term is used in Section
14(d) of the Exchange Act, other than the Company, a subsidiary
of the Company or any employee benefit plan(s) sponsored or
maintained by the Company or any subsidiary thereof, and the
term "Independent Shareholder" shall mean any shareholder of
the Company except any employee(s) or director(s) of the
Company or any employee benefit plan(s) sponsored or
maintained by the Company or any subsidiary thereof.
(d) "Committee" means the Organization and Compensation Committee
of the Board of Directors.
(e) "Company" means TXU Corp., its successors and assigns.
(f) "Compensation" means the annual retainer payable to Directors.
(g) "Director" means a member of the Board of Directors of the
Company.
(h) "Maturity Period" means the period over which compensation
deferrals and Matching Awards are deferred as elected by a
Participant in accordance with the provisions of this Plan.
(i) "Outside Director" means a Director who is not a current or
former officer or employee of the Company or any of its
subsidiaries.
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(j) "Participant" means an Outside Director who elects to
participate in the Plan and whose account(s) has not been
completely distributed.
(k) "Performance Unit" means a measure of participation under the
Plan having a value equal to the value of a share of Stock, as
determined by the value of such Stock in the Trust.
(l) "Plan Administrator" means the person appointed to assist the
Committee in carrying out the operations of the Plan.
(m) "Plan Year" means the twelve-month period beginning July 1 and
ending June 30.
(n) "Retirement" means the first day of the month following the
later of (i) attaining age sixty-five or (ii) termination of
service on the Board for any reason other than death or
disability.
(o) "Stock" means common stock of the Company.
(p) "Trust" means the irrevocable grantor trust established by the
Company to purchase, hold, and sell shares of Stock so as to
establish the number and value of Performance Units allocable
to Participants' accounts and from which benefits under the
Plan will be paid.
Section 3. Deferral Participation and Election
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3.1 Participation. Each Outside Director may elect to defer a
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percentage of Compensation (in 25 percent increments up to 100 percent) by
filing with the Plan Administrator, prior to the applicable Plan Year, an
irrevocable written election to defer such amount and to elect the Maturity
Period for such deferral. A Participant may, subject to, and in accordance with,
procedures and guidelines approved from time to time by the Plan Administrator,
modify the Maturity Period relating to any such deferral provided that: (i) any
such modification must be made at least twelve (12) months prior to: (a) the
date that the deferrals would otherwise mature, in the case of a requested
extension of the Maturity Period, or (b) the desired maturity date, in the case
of a requested reduction of the Maturity Period; and (ii) the Maturity Period
must continue to be within the limits provided for in Section 4.2 hereof.
3.2 Compensation Reductions. Compensation deferred under the
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Plan will be ratably deducted in each quarter of the Plan Year.
Section 4. Company Matching Award
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4.1 Matching Award. A Matching Award shall be credited to each
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Participant's account by the Company in an amount equal to 150 percent of the
amount deferred by the Participant. Such Matching Award shall be deemed to occur
on the first day of the Plan Year.
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4.2 Maturity Period. Compensation deferrals and Matching Awards shall
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have a Maturity Period of not fewer than three nor more than ten years as
indicated in the written election. The Maturity Period shall begin on the first
day of the Plan Year in which the Compensation deferral and Matching Award is
made.
Section 5. Participant Accounts
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5.1 Separate Accounts. The Plan Administrator shall establish and
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maintain an individual account for Compensation deferrals elected by each
Participant and the Matching Awards for each Plan Year. The account shall be
credited as of the first day of the Plan Year with the amount of Compensation to
be deferred during the Plan Year and the related Matching Award.
5.2 Performance Units. Any and all amounts credited to a Participant's
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account shall be converted into Performance Units as of the applicable date.
After notification of the number of shares acquired by the Trust with the
aggregate credits to Participants, as provided in Subsection 6.2, the Plan
Administrator will allocate an equal number of Performance Units, including
fractional units, to individual accounts based on the percentage relationship of
each Participant's credits to the total of such credits for all Participants.
5.3 Dividend Equivalent Credits. Additional Performance Units shall be
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credited to a Participant's account as Dividend Equivalent Credits. Such amount
shall be determined by multiplying the Performance Units recorded in a
Participant's account by the amount of any regular or special cash dividend
declared on each share of the Stock and dividing the product by the amount paid
by the Trust for a share of Stock with the dividend amounts.
5.4 Date of Credit. Dividend Equivalent Credits shall be credited to a
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Participant's account as of the same date as the cash dividend on the Stock is
paid to shareholders.
5.5 Unsecured Interest. All Performance Units credited to the account
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of each Participant shall be for record purposes only. No Participant or
Beneficiary shall have any security interest whatsoever in any assets of the
Company. To the extent that any person acquires a right to receive payments
under the Plan, such right shall not be secured or represented by any issued
Stock or common stock to be issued.
Section 6. Investment and Funding
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6.1 Grantor Trust. The benefits to be derived by Participants in the
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Plan will be funded through the Trust; provided, however, that any Stock, cash,
or other property held by the Trust that was contributed by the Company shall at
all times be subject to the claims of general creditors of the Company.
6.2 Funding of Trust. Upon determination of the total credits to
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Participants' accounts for a Plan Year, the Company shall promptly provide the
Trust with resources in the aggregate of such amounts. The Trustee will invest
such aggregate amounts in shares of the Stock and promptly notify the Plan
Administrator of the number of shares so acquired. The Trustee will use any cash
dividends received on Stock held in the Trust to buy additional shares of Stock
and promptly notify the Plan Administrator of the number of shares so acquired.
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6.3 Distributions from Trust. The Trustee, upon notification from the
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Plan Administrator, will make the distributions of matured benefits to
Participants or their Beneficiaries as provided in the Plan. If Trust assets are
insufficient to pay the amount of a matured benefit, the Company will pay such
deficiency directly to the Participant or Beneficiary. Any assets held in the
Trust which the Trustee determines to be in excess of those required to pay the
benefits when due to Participants may be returned to the Company.
6.4 Voting of Stock Held in Trust. Stock held in the Trust
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shall be voted by the Trustee in its discretion.
Section 7. Distribution of Account Values
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7.1 Value of a Participant's Account. The value of a Participant's
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account will equal the net proceeds received by the Trust from the sale of
shares equal in number to the number of Performance Units representing the
Participant's deferred amount and Matching Award applicable to the designated
Maturity Period, together with all Dividend Equivalent Credits earned thereon.
7.2 Form and Timing of Distribution. The value of a Participant's
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account at maturity shall be determined as provided in Subsection 7.1. The value
of the Participant's account at maturity shall be paid in cash. Payment shall be
made as soon as practicable, but in no event later than thirty (30) days,
following maturity of the Participant's account. No interest shall accrue or be
paid from date of maturity to date of payment on such amounts.
Section 8. Termination of Service
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8.1 Termination of Service Due to Death or Disability. In the event a
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Participant's service is terminated by reason of death or disability, all
amounts credited to the account shall mature upon such termination. The
Participant or the Participant's Beneficiary shall then receive, as soon as
practicable after the date of such termination, a distribution of the
Participant's account based on the value of the account as provided in
Subsection 7.1.
8.2 Termination of Service Prior to the End of the Plan Year. In the
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event a Participant's service is terminated for any reason prior to the end of
the Plan Year, the deferred amount, Matching Award, and Dividend Equivalent
Credits for such Plan Year will be recomputed as of the date of termination. The
value of the recomputed account shall be an amount equal to the product of the
value of the Performance Units at the date of termination credited to the
Participant's account multiplied by a fraction, the numerator of which is the
actual Compensation reduction for the portion of the Plan Year preceding
termination, and the denominator of which is the Compensation reduction elected
for the entire Plan Year.
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Section 9. Nontransferability
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9.1 Nontransferability. In no event shall the Company make any
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distribution or payment under this Plan to any assignee or creditor of a
Participant or a Beneficiary. Prior to the time of a distribution or payment
hereunder, a Participant or a Beneficiary shall have no rights by way of
anticipation or otherwise to assign or otherwise dispose of any interest under
this Plan.
Section 10. Designation of Beneficiaries
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10.1 Specified Beneficiary. A Participant shall designate a Beneficiary
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or Beneficiaries who, upon the Participant's death, are to receive the amounts
which otherwise would have been paid to the Participant. All Beneficiary
designations shall be in writing and signed by the Participant, and shall be
effective only if and when delivered to the Plan Administrator during the
lifetime of the Participant. A Participant may, from time to time during the
Participant's lifetime, change the Beneficiary or Beneficiaries by a signed,
written instrument delivered to the Plan Administrator. The payment of amounts
shall be in accordance with the last unrevoked written designation of the
Beneficiary that has been signed and so delivered.
10.2 Estate as Beneficiary. If a Participant designates a Beneficiary
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without providing in the designation that the Beneficiary must be living at the
time of each distribution, the designation shall vest in the Beneficiary all of
the distributions whether payable before or after the Beneficiary's death, and
any distributions remaining upon the Beneficiary's death shall be made to the
Beneficiary's estate. In the event a Participant shall not designate a
Beneficiary or Beneficiaries, or if for any reason such designation shall be
ineffective, in whole or in part, as determined solely in the discretion of the
Plan Administrator, the distribution that otherwise would have been paid to such
Participant shall be paid to the Participant's estate and in such event the term
"Beneficiary" shall include the Participant's estate.
Section 11. Rights of Participants
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11.1 Board Membership. All Participants understand that they are
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elected by the shareholders; therefore, nothing in the Plan shall interfere with
or limit in any way the manner in which a Director is elected and serves in such
capacity nor confer upon a Participant any additional right to continue to serve
as a Director.
Section 12. Administration
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12.1 Administration. The Committee, in accordance with administrative
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guidelines, shall be responsible for the administration of the Plan. The
Committee is authorized to interpret the Plan, to prescribe, amend, and rescind
rules and regulations relating to the Plan, provide for conditions and
assurances deemed necessary or advisable to protect the interests of the
Company, and to make all other determinations necessary or advisable for the
administration of the Plan or to delegate such duties to the Plan Administrator.
The determination of the Committee, interpretation or other action made or taken
pursuant to the provisions of the Plan, shall be final, binding and conclusive
for all purposes and upon all persons whomsoever. The Committee shall appoint a
Plan Administrator to assist in carrying out the operations of the Plan.
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12.2 Annual Reports. The Plan Administrator shall render annually a
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written report to each Participant which shall set forth, at a minimum, the
Participant's account balances as of the end of the most recent Plan Year.
12.3 Costs. Participants shall bear costs equal to the costs incurred
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by the Trust related to the purchase and sale of Stock by the Trust. The Company
shall pay all other costs of the Plan and the Trust.
Section 13. Amendment or Termination of the Plan
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13.1 Amendment or Termination of the Plan. The Board of Directors may
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amend, terminate, or suspend the Plan at any time. Any such amendment,
termination, or suspension of the Plan shall be effective on such date as the
Board of Directors may determine. An amendment or modification of the Plan may
affect Participants at the time thereof as well as future Participants, but no
amendment or modification of the Plan for any reason may diminish any
Participant's account as of the effective date thereof. Upon Plan termination,
Subsection 8.2 shall apply as if the Plan termination date were the termination
of service date.
Section 14. Change in Control
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14.1 Notwithstanding anything in this Plan to the contrary, in the
event of a Change in Control: (a) the provisions set forth in Section 8.2
relating to the recomputation of a Participant's account shall no longer apply
such that, upon distribution of a Participant's account, such Participant shall
be entitled to the full value of all Performance Units being distributed without
forfeiture or recomputation of any kind; (b) all amounts that would mature
within twelve (12) months of such Change in Control shall be deemed to have
matured and be paid in full promptly, and in any event within thirty (30) days,
following such Change in Control; and (c) with respect to all amounts that would
mature more than twelve (12) months following such Change in Control,
Participants shall be entitled to elect, as of the date of such Change in
Control, to have such amounts mature and be paid on the first anniversary of
such Change in Control or as of the date they would otherwise mature under the
terms of the Plan.
Section 15. Requirements of Law
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15.1 Governing Law. The Plan, and all agreements hereunder,
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shall be construed in accordance with and governed by the laws of the State
of Texas.
Section 16. Withholding Taxes
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16.1 Withholding Taxes. The Company shall have the right to deduct from
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all cash payments under the Plan or from a Participant's compensation an amount
necessary to satisfy any Federal, state, or local withholding tax requirements.
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EXECUTED effective as of the 1st day of July, 2002.
TXU CORP.
By: /s/ Peter B. Tinkham
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Peter B. Tinkham,
Secretary and Assistant Treasurer
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