Exhibit 10(q)
TXU
SPLIT-DOLLAR LIFE INSURANCE PROGRAM
SECTION 1. PURPOSE
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1.1 Purpose. The TXU Split-Dollar Life Insurance Program (the "Plan") was
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established effective July 1, 1995, was amended and restated effective
August 1, 1997, May 12, 2000, and August 17, 2001, and is hereby
amended and restated effective December 31, 2003. The purpose of the
Plan is to provide eligible executives of Participating Employers with
insurance on the life of each such executive in recognition of the
contributions of such executives to the Company and for the purpose of
continuing to maintain a competitive level of benefits. This Plan is
designed as an "unfunded or insured welfare" plan maintained by the
Company "for the purpose of providing benefits for a select group of
management or highly compensated employees" and, therefore, is designed
to be exempt from the reporting and disclosure requirements of Part 1
of Title I of the Employee Retirement Income Security Act of 1974
("ERISA"). Regulation Section 2520.104-24 of the Department of Labor.
SECTION 2. DEFINITIONS
2.1 Definitions. Whenever used hereinafter, the following terms shall
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have the meanings set forth below:
(a) "AIP Award" means the award provided under the TXU Annual
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Incentive Plan.
(b) "Beneficiary" means the person or persons designated by the
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Participant to receive the Benefit payable from the Policy
upon the death of the Participant.
(c) "Benefit" means the benefits payable to a Participant, under
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the terms of the Plan from the Policy of life insurance issued
on the life of the Participant pursuant to Section 5.1 hereof.
(d) "Board of Directors" means the Board of Directors of the
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Company.
(e) "Business Unit" means a subsidiary, division or operating unit
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of the Company designated by the Chief Executive of the
Company which will focus on its own unique products, services
and markets.
(f) "Change in Control" means a change in control of the
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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
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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 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.
(g) "Collateral Assignment" means the document assigning an
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interest in the Policy to the Company, as set forth in Section
4.4 herein, a form of which document is attached as Exhibit A
and incorporated herein.
(h) "Committee" means the administrative committee contemplated in
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Section 9.1 hereof whose members shall be appointed from time
to time by the Board of Directors.
(i) "Company" means TXU Corp., its successors and assigns.
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(j) "Compensation" means the annual rate of base salary,
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calculated without regard to any deferrals, as of:
(i) with respect to Plan Years beginning on or prior to
April 1, 2001, the June 1 immediately preceding the Plan
Year; and (ii) with respect to Plan Years beginning on and
after April 1, 2002, the March 1 immediately preceding the
Plan Year, plus, in either case, the average of the
AIP Award over the immediately preceding three-year period;
provided, however, no more than the Target Award Level, as
defined and provided for under the AIP will be included in
such average and, in years prior to the accumulation of AIP
Award data for the immediately preceding three-year period,
the average shall be determined with data for such shorter
period.
(k) "Disability Plan" means the TXU Long-Term Disability Income
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Plan, or any successor plan providing long-term disability
benefits and covering Participants.
(l) "Early Termination" means any one or more of the following:
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(1) termination of employment with the Company or ceasing to
meet the criteria of an Eligible Employee prior to reaching
age fifty-five and obtaining fifteen years of Accredited
Service (as defined in the Retirement Plan); (2) termination
of employment with the Company or ceasing to meet the criteria
of an Eligible Employee prior to becoming fully vested in the
Benefit as set forth in Section 5.2 hereof; or (3) termination
for cause, as determined, for purposes of the Plan, solely in
the discretion of the Plan Administrator.
(m) "Executive Officer" means an executive officer within the
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meaning of Section 402 of the Sarbanes-Oxley Act of 2002.
(n) "Eligible Employee" means: (i) for Plan Years beginning on or
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prior to April 1, 2001, an individual who is elected as a
corporate officer of a Participating Employer with a title of
Vice President or above; and (ii) for Plan Years beginning on
and after April 1, 2002, an officer of a Participating
Employer who is designated in the Company's internal records
as a category A, B, or C officer as determined by the
Company in its sole discretion; provided that no additional
employees will become Eligible Employees or Participants
in this Plan from and after December 31, 2003.
Individuals who become Eligible Employees will be notified of
their eligibility to participate in this Plan.
(o) "Insurer" means the insurance company or companies selected by
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the Committee to issue Policies pursuant to the Participation
Agreements hereunder.
(p) "Participant" means an Eligible Employee who enters into a
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Participation Agreement with the Company and whose
Participation Agreement has not terminated.
(q) "Participating Employer" means the Company and each of its
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subsidiaries, affiliates or Business Units which are approved
by the Committee for participation in the Plan. The
Participating Employers, as of the date of this restatement of
this Plan, are listed on Exhibit "C" attached hereto.
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(r) "Participation Agreement" or "Agreement" means the agreement
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between the Participant and the Company for performance of
obligations incident to the provision of Benefits, a form of
which document is attached as Exhibit B and incorporated
herein. The form of the Participation Agreement may be changed
from time to time by the Committee.
(s) "Plan Administrator" means the person(s) or entities appointed
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to assist the Committee in carrying out the operations of the
Plan.
(t) "Plan Retirement Date" means April 1 immediately following the
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Participant's attainment of age sixty-five.
(u) "Plan Year" means, with respect to Plan Years beginning on or
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prior to April 1, 2001, the twelve-month period beginning
April 1 and ending June 30. The Plan Year beginning April 1,
2001, shall be a short Plan Year ending on March 31, 2002,
and, thereafter, Plan Year shall mean the twelve-month period
beginning April 1 and ending March 31.
(v) "Policy" and "Policies" means the policy or policies of life
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insurance issued pursuant to the Participation Agreements
hereunder and shall include any substitutions, replacements,
additional or supplemental policies. In certain interim
situations, as set forth in the Participation Agreements,
"Policy" means term life insurance.
(w) "Retirement Plan" means the TXU Retirement Plan.
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(x) "Trust" means the rabbi trust established by TXU Corp. to
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assist it in meeting its obligations under the Plan.
(y) "Trustee" means the trustee appointed by the Committee to hold
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assets of the Plan.
SECTION 3. ELIGIBILITY
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Each Eligible Employee who shall not have attained the age of
sixty-five may become a Participant in the Plan effective as of: (i) with
respect to Plan Years beginning on or prior to July 1, 2001, the April 1
immediately following their becoming an Eligible Employee; and (ii) with respect
to Plan Years beginning on and after April 1, 2002, the April 1 immediately
following their becoming an Eligible Employee, in either case by executing a
Participation Agreement and filing such Participation Agreement with the Plan
Administrator, as evidenced in the records of the Plan Administrator.
Notwithstanding the foregoing, no new Participants will be admitted under the
Plan from and after December 31, 2003.
SECTION 4. POLICIES
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4.1 Issuance. Each Participant, pursuant to the Participation Agreement,
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will take the required actions set forth in the Participation Agreement
to cause a Policy to be issued by the Insurer on the life of the
Participant and to be maintained in force at all times to provide the
Benefits set forth herein.
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4.2 Ownership. Subject to the Collateral Assignment of the Policy to the
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Company, each Participant or such Participant's designee shall be the
owner of the Policy ("Owner") on such Participant's life issued
pursuant to the applicable Participation Agreement and, as such Owner
and subject to Sections 8.2 and 10.2 herein, may exercise all rights of
ownership with respect to such Policy.
4.3 Payment of Premiums. All premiums on the Policies acquired pursuant to
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Participation Agreements hereunder shall be promptly paid by the
Company when and as they become due in accordance with and subject to
the applicable Participation Agreement. The Company may pay such
premiums from general corporate assets or it may choose to pay such
premiums from Trust assets; provided that, upon and following a Change
in Control, the provisions of Section 11 hereof shall control.
Beginning August 1, 2002, no additional premiums will be paid on a
split-dollar life insurance basis with regard to Executive Officers;
provided that, from and after such date, premiums on Policies will be
paid in accordance with Addendum 1 to this Plan. The provisions of this
Plan, however, shall continue to apply, without modification, to the
Policies and premium payments made with respect to Executive Officers
prior to such date.
It is the Company's intention that the Company's financial obligation
with respect to each Policy will be structured to be terminated upon
the later of: (1) the Participant's fifteenth year of full
participation in the Plan, as set forth in Section 5.4 herein; or (2)
the Participant's attainment of age sixty-five, at which time the
Policy is expected to have a cash surrender value sufficient, at least,
to maintain the Policy in force at its level at such time.
4.4 Collateral Assignment of Policy. As security for the Participant's
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obligations under the Participation Agreement, each Participant shall
assign to the Company, by Collateral Assignment, an interest in the
cash value and Benefits of the Policy on such Participant's life. The
Collateral Assignment of any Policy shall be in the form(s) approved,
from time to time, by the Company in its sole discretion.
SECTION 5. BENEFITS
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5.1 Level. Benefits, subject to the Collateral Assignment and, for
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individuals who become Eligible Employees on or after October 15, 1996,
to the vesting schedule set forth in Section 5.2 below, shall be
payable from the Policy. The amount of the Benefit provided under the
Policy with respect to each Participant shall be determined in
accordance with provisions of subsection 5.1(a) or 5.1(b) below, as
applicable.
(a) Individuals who Become Participants after January 1, 2002. For
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Eligible Employees who become Participants after January 1,
2002, the Benefit provided for under the Policy shall be an
amount equal to a multiple of the Participant's Compensation
depending on the Participant's officer category as set forth
in the following table:
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Participant's Officer Category Benefit
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A 4 x Compensation
B 3 x Compensation
C 2 x Compensation
The determination of a Participant's officer category shall be
made by the Company in its sole discretion using such factors
as it may deem appropriate and all decisions of the Company
shall be final and binding on all parties. Each Participant's
Benefit amount shall be communicated to him upon his becoming
a Participant hereunder, and shall be subject to change in
accordance with the table set forth above in the event, and to
the extent, that a Participant's officer category changes.
(b) Individuals who Become Participants before January 1, 2002.
For Eligible Employees who become Participants before
January 1, 2002, a determination will be made as to the
vested portion of each such Participant's Benefit as of
January 1, 2002. The Benefit which shall be available to
such Participants hereunder shall be the greater of:
(i) such vested Benefit amount; or (ii) the Benefit provided
for in the table set forth in subsection 5.1(a) above,
provided that each such Participant shall be entitled to a
Benefit of not less than 2 x Compensation. If, pursuant to
the preceding sentence, a Participant is entitled to a Benefit
greater than his vested Benefit as of January 1, 2002, he
shall be required to vest in the difference between
such vested Benefit and the Benefit to which he is entitled
under the preceding sentence in accordance with the vesting
schedule set forth in Section 5.2 below. Notwithstanding
any other provision herein, an Early Termination shall not be
deemed to have occurred merely because a Participant covered
under this subsection 5.1(b) is not, as of January 1, 2002,
designated as a category A, B or C officer or he ceases at
any time thereafter to be so designated.
A Participant's Benefit shall not be decreased because of
lower Compensation; provided that, the Company reserves the
right to adjust the face amount of any Policy which cannot be
issued by the Insurer under standard cost in the following
manner: to the extent that the premium would exceed one
hundred and fifty percent (150%) of the standard cost
("Premium Amount"), the Committee may reduce the face amount
of coverage to the level such Premium Amount would purchase or
in such other manner as the Committee deems appropriate.
5.2 Vesting. Individuals who become Eligible Employees on or after October
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15, 1996, shall not be immediately fully vested in the Benefit, but
shall vest in the Benefit periodically over time based on the number of
years of their participation in the Plan in accordance with the vesting
schedule set forth below:
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Number of Full Years of Percentage of Death Benefit of Policy
Participation In the Plan To Which Participant is Vested
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Under 2 Full Years 0%
Completion of 2 Years 25%
Completion of 3 Years 50%
Completion of 4 Years 75%
Completion of 5 Years 100%
5.3 Company's Limited Obligation. The Company shall have no further
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obligation to provide Benefits other than to pay premiums under Section
4.3 herein to maintain the Policy at the level set forth in Section 5.1
herein. Notwithstanding the foregoing, the Company shall not pay
premiums on Policies for Executive Officers on a split-dollar basis
from and after August 1, 2002. Premium payments on Policies for
Executive Officers shall, from and after August 1, 2002, be made only
in accordance with the provisions of Addendum 1 to this Plan. The
Participant, other Owner, or, in the event of the Participant's death,
the Beneficiary shall look solely to the Insurer and the Policy for
payment of Benefits under the Plan.
5.4 Termination of Agreement. As set forth in the Participation Agreement,
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the Agreement shall terminate on the earlier of (a) Early Termination,
(b) death of the Participant, (c) the April 1 following the later of
(i) obtaining age sixty-five or (ii) fifteen years of full
participation in the Plan, or (d) termination of the Plan by the Board
of Directors. Full participation in the Plan shall not include the
period during which the Policy is a policy of term life insurance.
5.5 Distribution. If the Agreement terminates because of Early Termination,
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the Participant will pay to the Company an amount equal to the lesser
of (a) the total amount of premiums paid with respect to the vested
portion of the Policy; or (b) the cash surrender value of the vested
portion of the Policy. Upon receipt of this amount, the Company will
release the Collateral Assignment with respect to the vested portion of
the Policy. If the Policy is comprised of more than one life insurance
policy, the Committee will determine in its sole discretion how and in
which order such life insurance policies will vest. The Policy or the
balance, if any, payable under the Policy will then be fully
distributable according to the terms of the Policy.
Notwithstanding anything herein seemingly to the contrary, in the event
that the Participant retires under the Retirement Plan, ceases to be an
Eligible Employee upon reaching age fifty-five and fifteen years of
Accredited Service, or becomes eligible for benefits under the
Disability Plan, such Participant will remain a Participant in the Plan
until the Participation Agreement otherwise terminates. Retirement
under the Retirement Plan, in general, is retirement upon obtaining age
fifty-five and fifteen years of Accredited Service, if early, or upon
obtaining age sixty-five.
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If the Agreement terminates because of reasons other than Early
Termination, the Company will receive the total amount of premiums paid
with respect to the Policy from the cash surrender value or, in the
event of the Participant's death, the Company will receive the amount
in excess of the level of the vested Benefits payable from the proceeds
of the Policy. The Participant, if such amount is not paid directly to
the Company by the Insurer, agrees, pursuant to the Participation
Agreement, to reimburse the Company for such amount. Upon receipt of
this amount, the Company will release the Collateral Assignment with
respect to the Policy. The Policy or the balance, if any, payable under
the Policy, or, in the event of the Participant's death, the level of
the vested Benefits payable from the proceeds of the Policy will be
fully distributable according to the terms of the Policy.
Notwithstanding any other provision of this Plan or of any Agreement,
upon a Change in Control, the provisions of Section 11 shall apply.
5.6 Tax Offset Payments. Upon reaching retirement, to the extent that a
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Participant may be deemed to realize gross income in any year for
Federal income tax purposes on the economic benefit of the Policy on
the Participant's life (or other applicable measures for income tax
purposes), the Company, in the discretion of the Plan Administrator,
may pay to each such Participant such amount as will fully compensate
the Participant for all such taxes attributable to the receipt of such
income and such payment in order to preserve for the Participant on an
after-tax basis the full Benefits intended to be conferred by this
Plan.
5.7 Claims. All claims for Benefits shall be filed with the Insurer.
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SECTION 6. TRANSFERABILITY AND SPEND THRIFT PROVISION
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6.1 Nontransferability. Any assignment of the Policy by the Participant for
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estate planning, tax planning or other purposes shall be subject to the
Collateral Assignment; and such Assignment shall so provide. Any rights
to Benefits under the Plan are not subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, attachment, or garnishment by creditors of the
Participant, other Owner or the Beneficiary.
SECTION 7. DESIGNATION OF BENEFICIARIES
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7.1 Specified Beneficiary. The Owner shall designate a Beneficiary or
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Beneficiaries who, upon the Participant's death, are to receive,
subject to the Collateral Assignment, the proceeds of the Policy. All
Beneficiary designations shall be in writing and signed by the Owner,
and shall be effective only if and when delivered to the Insurer during
the lifetime of the Participant. The Owner may, from time to time
during the Participant's lifetime, change the Beneficiary or
Beneficiaries by a signed, written instrument delivered to the Insurer.
The payment of amounts shall be in accordance with the last unrevoked
written designation of the Beneficiary that has been signed and so
delivered.
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SECTION 8. RIGHTS OF PARTICIPANTS
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8.1 Employment. All Participants understand that they are employees at
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will. Therefore, nothing in the Plan or Participation Agreement shall
interfere with or limit in any way the right of the Company to
terminate, for any or no reason, any Participant's employment at any
time, nor confer upon a Participant any right to continue in the employ
of the Company.
8.2 Loans. Prior to the termination of the Participation Agreement, the
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Participant or other Owner shall not have the right to pledge the
Policy as security for a loan or to obtain from the Insurer a loan
against the cash surrender value of the Policy.
SECTION 9. ADMINISTRATION
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9.1 Administration. The Committee shall be responsible for the
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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. 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.
SECTION 10. RIGHTS OF COMPANY
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10.1 Amendment or Termination of the Plan. The Board of Directors may amend,
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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 Benefit as of the effective
date thereof, including without limitation any of the provisions of
Section 11.1 hereof. Upon Plan termination, all Participation
Agreements shall terminate.
10.2 Loans. The Company shall have the right to obtain from the Insurer a
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loan against the cash surrender value of each Policy issued hereunder.
SECTION 11. CHANGE IN CONTROL
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11.1 Funding of Vested Portion of Benefit Upon and Following Change in
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Control. Notwithstanding any other provision of this Plan or any
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Agreement seemingly to the contrary, in the event of a Change in
Control: (i) the Company or its successor shall promptly, and in any
event within thirty (30) days following such Change in Control, make an
irrevocable contribution to the Trust in an amount determined by the
Committee sufficient to fully pay from Trust assets, the premiums on
the then vested portion of all Policies in the manner described in
Section 4.3 hereof until such time as each Policy has a cash surrender
value sufficient, at least, to continue to maintain the then vested
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portion of the Policies in force in an amount at least equal to the
vested Benefit level as of the date of the Change in Control; and (ii)
with respect to the vested portion of each Participant's Benefit as of
the date of the Change in Control, no Agreement shall terminate by
reason of Early Termination or the termination of this Plan, but each
Agreement shall continue in effect until otherwise terminated upon the
death of the Participant or the April 1 following the later of the
Participant obtaining age sixty-five or fifteen years of full
participation in the Plan and/or under the Agreement, it being the
intent of this provision that, following a Change in Control, the
vested portion of each Participant's Benefit shall be fully funded in
the Trust and nonforfeitable. Thereafter, the Committee shall direct
the Trustee to promptly pay the premiums on all Policies when and as
they become due. At least annually prior to the premium due date of the
Policies, the Committee shall evaluate the amount of assets held in the
Trust and shall make additional irrevocable contributions to the Trust,
in amounts determined by the Committee, such that, at all times, the
Trust shall maintain assets which, at a minimum, shall be sufficient to
pay the premiums on at least the vested portion of all Policies as of
the date of the Change in Control until such time as each Policy has a
cash surrender value sufficient, at least, to continue to maintain the
Policies in force in an amount at least equal to the vested level as of
the date of the Change in Control. Upon the occurrence of a Change in
Control, each outstanding Agreement shall automatically, and without
any action on the part of any party, be deemed to incorporate the
provisions of this Section 11, and the provisions of this Section 11
shall control and take precedence over any contrary or seemingly
conflicting provision (or absence of a provision) elsewhere in this
Plan or in any Agreement.
SECTION 12. REQUIREMENTS OF LAW
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12.1 Governing Law. The Plan, and all agreements hereunder, shall be
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construed in accordance with and governed by the laws of the
State of Texas.
EXECUTED effective as of December 31, 2003.
TXU CORP.
By: /s/ Peter B. Tinkham
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Peter B. Tinkham, Secretary
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EXHIBIT "C"
PARTICIPATING EMPLOYERS
TXU Corp. and each of its United States domestic
subsidiaries other than TXU
Communications Ventures Company ("Ventures")
and the subsidiaries of Ventures
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