Exhibit 10(r)
DEFERRED COMPENSATION PLAN
for
DIRECTORS OF SUBSIDIARIES
(Effective August 17, 2001)
Section 1. Purpose
- -------------------
1.1 Purpose. The TXU Deferred Compensation Plan for Directors of
-------
Subsidiaries (the "Plan") was established, effective April 1, 1998, was renamed
and restated effective May 12, 2000 in connection with the corporate name change
of the Company, was amended and restated effective August 18, 2000, and is
hereby further amended and restated effective August 17, 2001. The primary
purpose of the Plan is to provide deferred compensation to non-employee members
of the boards of directors and/or advisory boards of directors of participating
subsidiaries who receive an annual retainer, and to allow such persons to
purchase Performance Units with such deferrals. The Plan is designed as an
unfunded arrangement under the provisions of the Employee Retirement Income
Security Act of 1974, as amended, and of the Internal Revenue Code of 1986, as
amended.
Section 2. Definitions
- -----------------------
2.1 Definitions. Whenever used hereinafter, the following terms
-----------
shall have the meanings set forth below:
(a) "Advisory Director" means a member of the advisory board of
directors of a Participating Subsidiary who is not a current
or former employee of the Company or any of its subsidiaries.
(b) "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.
(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 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 of the Company.
(e) "Company" means TXU Corp., its successors and assigns.
(f) "Compensation" means, with respect to each Participant, such
Participant's annual retainer, exclusive of any attendance fee
or other compensation paid such Participant.
(g) "Dividend Equivalent Credits" means additional Performance
Units which shall be credited to Participants' Accounts
pursuant to the provisions of Section 5.3
(h) "Outside Director" means a member of the board of directors of
a Participating Subsidiary who is not a current or former
officer or employee of the Company or any of its subsidiaries.
2
(i) "Participant" means an Outside Director or an Advisory
Director of a Participating Subsidiary who has been designated
by the Committee as eligible to participate in this Plan, who
elects to participate in the Plan, and whose account(s) has
not been completely distributed.
(j) "Participating Subsidiary" means a subsidiary of the Company
which elects to participate in this Plan. Exhibit "A" attached
hereto lists the initial Participating Subsidiaries. Exhibit
"A" may be amended from time to time without further notice
from the Company to accurately reflect the Participating
Subsidiaries.
(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(s) appointed to assist
the Committee in carrying out the day-to-day operations of the
Plan.
(m) "Plan Year" means the twelve-month period beginning April 1
and ending March 31.
(n) "Stock" means common stock of the Company.
(o) "Trust" means the irrevocable grantor trust established by the
Company, as agent for the Participating Subsidiaries, 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. Participation and Deferral Election
3.1 Participation. Each of the Company's subsidiaries may elect to
-------------
participate in the Plan by action of its board of directors. Each eligible
Outside Director and Advisory Director may elect to become a Participant by
deferring a percentage of Compensation (in 25 percent increments up to 100
percent) pursuant to an irrevocable written election which shall specify the
percentage of Compensation to be deferred for the applicable Plan Year and the
Maturity Period (as defined below) for such deferral. Such written election
shall be completed and filed with the Plan Administrator prior to the beginning
of the applicable Plan Year. 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 4.1 hereof.
3.2 Compensation Reductions. Compensation deferred under the Plan
------------------------
will be ratably deducted in each quarter of the Plan Year.
Section 4. Maturity Periods.
3
4.1 Maturity Periods. Each Compensation Deferral shall have a maturity
----------------
period ("Maturity Period") of not fewer than three nor more than ten years as
indicated in the Participant's written election. The Maturity Period shall begin
on the first day of the Plan Year in which the Compensation deferral is made.
Section 5. Participant Accounts
5.1 Separate Accounts. The Plan Administrator shall establish and
-----------------
maintain an individual account for Compensation deferrals elected by each
Participant 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.
5.2 Performance Units. Any and all amounts credited to a Participant's
-----------------
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 a number of Performance Units, including fractional
units, to individual accounts based on the relative percentage of each
Participant's credits to the total of such credits for all Participants.
5.3 Dividend Equivalent Credits. Additional Performance Units shall be
---------------------------
credited to a Participant's account as Dividend Equivalent Credits. Such
Dividend Equivalent Credits 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 Stock and dividing the product
by the amount paid by the Trust for a share of such Stock with the dividend
amounts.
5.4 Date of Credit. Dividend Equivalent Credits shall be credited to a
--------------
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
------------------
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 or any Participating Subsidiary. 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
6.1 Grantor Trust. The benefits to be derived by Participants in the
-------------
Plan will be funded through the Trust; provided, however, that any Stock, cash,
or other property held by the Trust that was contributed by a Participating
Subsidiary shall at all times be subject to the claims of general creditors of
such Participating Subsidiary.
6.2 Funding of Trust. Upon determination of the total amount to be
----------------
credited to the accounts of the Participants of each Participating Subsidiary
for a Plan Year, each Participating Subsidiary shall promptly provide the Trust
with funds in the aggregate of such amounts. The Trustee will invest such
aggregate amount in shares of the Stock and promptly notify the Plan
Administrator of the number of shares 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.
4
6.3 Distributions from Trust. The Trustee, upon notification from the
------------------------
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 of any Participant, the
Participating Subsidiary of such Participant 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 Participating Subsidiaries.
6.4 Voting of Stock Held in Trust. Stock held in the Trust shall be
-----------------------------
voted by the Trustee in its discretion.
Section 7. Distribution of Account Values
7.1 Value of a Participant's Account. The value of a Participant's
--------------------------------
account will equal the value of shares of Common Stock acquired with the
Participant's Compensation deferrals and represented in Performance Units
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
-------------------------------
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 whole shares of Stock
or in cash at the election of the Participant. 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
8.1 Termination of Service Due to Death or Disability. In the event a
-------------------------------------------------
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 in the form elected by the Participant 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
--------------------------------------------------------
event a Participant's service is terminated for any reason prior to the end of
the Plan Year, the deferred amount 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.
Section 9. Nontransferability
9.1 Nontransferability. In no event shall any distribution or payment
------------------
under this Plan be made 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.
5
Section 10. Designation of Beneficiaries
10.1 Specified Beneficiary. A Participant shall designate a Beneficiary
---------------------
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
---------------------
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
11.1 Board Membership. All Participants who are Directors understand
----------------
that they are elected by the shareholders of a Participating Subsidiary and
nothing in this 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. All
Participants who are Advisory Directors understand that they are appointed by
the management of a Participating Subsidiary and nothing in this Plan shall
interfere with or limit the manner in which an Advisory Director is appointed
and serves in such capacity nor confer upon a Participant any additional right
to continue to serve as an Advisory Director.
11.2 No Inference. Nothing herein shall be construed to create any
------------
employment relationship between any Participant and the Company or any
Participating Subsidiary nor infer that any Advisory Director performs any
policy-making function for, or participation in the control of, the Company or
any Participating Subsidiary.
Section 12. Administration
12.1 Administration. The Committee 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 the Participating Subsidiaries, and to make all
other determinations necessary or advisable for the administration of the Plan
or to delegate such duties to the Plan Administrator. Any determination of the
Committee or interpretation or other action made or taken by the Committee with
respect to 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.
6
12.2 Annual Reports. The Plan Administrator shall render annually a
--------------
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
-----
by the Trust related to the purchase and sale of Stock by the Trust. The
Participating Subsidiaries shall pay all other costs of the Plan and the Trust.
Section 13. Amendment or Termination of the Plan
13.1 Amendment or Termination of the Plan. The board of directors of
------------------------------------
the Company may 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 such 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
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
15.1 Governing Law. The Plan, and all agreements hereunder, shall be
-------------
construed in accordance with and governed by the laws of the State of Texas.
Section 16. Withholding Taxes
16.1 Withholding Taxes. The Company and the Participating Subsidiaries
-----------------
shall have the right to deduct from 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.
EXECUTED effective as of the 17th day of August, 2001.
7
TXU CORP.
By: /s/ Peter B. Tinkham
--------------------------------------
Peter B. Tinkham,
Secretary and Assistant Treasurer
8
EXHIBIT "A"
PARTICIPATING SUBSIDIARIES
TXU Electric Company
9