Exhibit 10(u)
 

TXU EXECUTIVE ANNUAL INCENTIVE PLAN
Plan Document

Amended, effective as of January 1, 2006

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Contents

TXU Executive Annual Incentive Plan
       
Article I.
Purpose
1
Article II.
Definitions
1
Article III.
Eligibility and Participation
4
Article IV.
Establishment of Performance Goals
4
Article V.
Establishment of Awards
4
Article VI.
Application of Individual Performance Modifier and Determination of Individual
Participant Awards
5
Article VII.
Payment of Awards
6
Article VIII.
Termination of Employment and Partial Awards
6
Article IX
Administrative Provisions
7

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TXU EXECUTIVE ANNUAL INCENTIVE PLAN
 
Article I. Purpose.
 
The TXU Executive Annual Incentive Plan (the “Plan”) is amended effective as of
January 1, 2006. The Plan, as herein amended, supersedes and replaces all other
Plan documents. The Plan provides for annual bonus incentive award opportunities
for eligible Participants payable in cash. The maximum Award payable under the
Plan to an individual shall be subject to the limitations established under the
TXU 2005 Omnibus Incentive Plan, approved by Company shareholders on May 20,
2005.
 
The principal purposes of the Plan are to attract, motivate and retain key
employees; to align the interests of Participants, Participating Employers and
Company shareholders by rewarding performance that satisfies established
performance goals; to motivate Participant behaviors that drive successful
results at the corporate, business unit and individual levels; and to support
collaboration across essential organizational interfaces.
 
Article II. Definitions.
 
When used in the Plan, the following terms shall have the meanings set forth
below:
 
(a)  “Additional Persons” means such other individuals who are not Section 16
Officers, under the Plan, but who are senior officers and key employees
identified by the O&C Committee, in consultation with the Company’s Chief
Executive Officer.
 
(b) “Aggregate Incentive Pool” means the amount equal to the Target Incentive
Pool multiplied by the Weighted Funding Percentage.
 
(c) “Allocation Criteria” means the criteria or methodology established by the
SLT, in accordance with Article IV, to allocate the Aggregate Incentive Pool
among the Participating Employers, as described in Article V.
 
(d) “Award” means the amount payable to a Participant under this Plan for any
Plan Year, as determined in accordance with the terms of the Plan.
 
(e) “Base Salary” means the annualized base salary designated for the
Participant in the applicable payroll records of the Participating Employer,
prior to any deferrals, and excluding any overtime pay, bonuses, incentive
compensation, expense reimbursements and fringe benefits of any kind for the
applicable Plan Year.
 
(f) “Business Unit” means, individually, or “Business Units” means,
collectively, the ”Energy”, “Wholesale”, “Power” and “Business Services”
business units of the Company, which are the participating Employers in this
Plan.
 
(g) “Company” means TXU Corp., and its successors and assigns, with respect to a
particular Participant, Company means such Participant’s employer.
 

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(h) “Disability” or “Disabled” means disability as determined under the TXU
Long-Term Disability Income Plan, or any successor plan covering Participants.
 
(i) “Individual Performance Modifier” means individual Participant performance
established by the SLT, in accordance with Article IV, and used in determining a
Participant’s Award. The Individual Performance Modifier may include, without
limitation, Company or Business Unit financial or operational measures,
individual management and other goals, personal job objectives and competencies,
the demonstration of team building and support attributes, and general demeanor
and behavior.
 
(j) “O&C Committee” means the Organization and Compensation Committee of the
Board of Directors of the Company.
 
(k) “Operating Cash Flow” means cash flow from operating activities as defined
in SFAS Number 95, Statement of Cash Flows, as adjusted by the O&C Committee to
reflect nonrecurring and unusual transactions or events, and the like
 
(l) “Operating Cash Flow Funding Percentage” means a percentage used to
calculate the Aggregate Incentive Pool established by the O&C Committee based on
the amount or level of Operating Cash Flow for the particular Plan Year.
 
(m) “Operational EPS” means the Company’s income from continuing operations net
of preference stock dividends and excluding special items and all effects of
recording unrealized gains and losses from cash flow hedge ineffectiveness and
other mark-to-market valuations of positions in the long-term hedging program,
divided by diluted common shares outstanding, in either case adjusted by the O&C
Committee to reflect recapitalizations, nonrecurring and unusual transactions or
events, stock dividends, and the like.
 
(n) “Operatonal EPS Funding Percentage” means a percentage used to calculate the
Aggregate Incentive Pool established by the O&C Committee based on the amount or
level of Operational EPS for the particular Plan Year.
 
(o) “Participant” means an individual who is an elected officer of a
Participating Employer having a title of vice president or above and who is
employed by the Company for a period of three full months during the Plan Year.
 
(p) “Participating Employer” means, the Company and each of the Business Units.
Additional Participating Employers may be added with the approval of the O&C
Committee, and participation in the Plan by any such additional Participating
Employers will commence as of the effective date designated by the O&C
Committee.
 
(q) “Plan” means this TXU Executive Annual Incentive Plan.
 
(r) “Plan Year” means the twelve (12) month period beginning January 1 and
ending December 31.
 

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(s) “Retirement” means retirement from active employment with the Company upon
attaining at least age 55, completing at least 15 years of accredited service,
or otherwise meeting the criteria for retiring under the TXU Retirement Plan, or
a successor plan.
 
(t) “Section 16 Officers” means the Company’s Chief Executive Officer and other
Section 16 Officers, as defined under the charter of the O&C Committee.

(u) “SLT” means the group of executive officers of the Company referred to
internally as the Senior Leadership Team.

(v) “Target Award” means an Award level of an individual Participant, expressed
as a percentage of the Participant’s Base Salary, which is anticipated based on
target performance of Company, Business Unit and individual Participant
performance. The Target Award shall be used in calculating an individual’s
actual Award for a Plan year.
 
(w) “Target Incentive Pool” means the amount equal to the aggregate of the
Target Awards for all Participants, or a selected group of Participants, as the
context may require.
 
(x) “Target Operating Cash Flow” means the target amount of Operating Cash Flow
established by the O&C Committee and used in determining the Aggregate Incentive
Pool.
 
(y) “Target Operational EPS” means the target amount of Operational EPS
established by the O&C Committee and used in determining the Aggregate Incentive
Pool.
 
(z) “Threshold Operating Cash Flow” means an amount of Operating Cash Flow
established by the O&C Committee, which is necessary to fund any portion of the
Aggregate Incentive Pool.
 
(aa) “Threshold Operational EPS” means an amount of Operational earnings per
share established by the O&C Committee, which is necessary to fund any portion
of the Aggregate Incentive Pool attributable to Operational EPS.
 
(bb) “Weighted Funding Percentage” means the percentage that is the average of
the Operating Cash Flow Funding Percentage and the Operational EPS Funding
Percentage.
 

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Article III. Eligibility and Participation.
 
All individuals who, as of the first day of a Plan Year, meet the definition of
a Participant hereunder, shall be eligible to participate in this Plan for such
Plan Year. Awards, if any, for individuals who become Participants during the
Plan Year or whose participation in this Plan is terminated during the Plan
Year, shall be determined under, and in accordance with, Article VIII hereof.
Participation in this Plan for any Plan Year shall not entitle an individual to
future participation.

Article IV. Establishment of Performance Goals.
 
For each Plan Year, the O&C Committee, will establish (i) the Threshold
Operational EPS, (ii) the Threshold Operating Cash Flow, (iii) the Target
Incentive Pool Amount, and (iv) the Target Award Level for Section 16 Officers
and Additional Persons. For each Plan Year, the SLT, with input from the Chief
Executive Officer of the applicable Business Unit, will determine the (i) the
Allocation Criteria, (ii) the Individual Performance Modifier, and (iii) the
Target Award Level for each Participant, other than for Section 16 Officers and
Additional Persons. Such determinations by the O&C Committee and the SLT shall
be made at such times and shall be based on such criteria as the O&C Committee
and the SLT shall determine, respectively, in their sole discretion. The O&C
Committee and the SLT shall each have full authority and discretion, for any
particular Plan Year, to modify any of their respective determinations
hereunder, with respect to all Participants or any individual Participant,
including determinations which affect the calculation or amount of Awards, in
order to take into consideration other benefits programs and/or extraordinary
events affecting the financial results of the Company or a Business Unit. Once
determined, or modified, such determinations shall be communicated to the
affected Participants in such form and manner as the SLT determines to be
appropriate.
 
Article V. Establishment of Awards.
 
A. Determining Performance Results and Aggregate Incentive Pool.
 
After the end of the Plan Year, the O&C Committee shall certify the amount or
level of the Company’s Operating Cash Flow and Operational EPS, and determine
whether the Threshold level of each such measure have been attained for such
Plan Year. The O&C Committee shall also determine the Operating Cash Flow
Funding Percentage, the Operational EPS Funding Percentage, the Weighted Funding
Percentage, and the resulting Aggregate Incentive Pool for the Plan Year.
 

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B. Allocation of Aggregate Incentive Pool Among Participating Employers.
 
Upon the O&C Committee’s determination of the Aggregate Incentive Pool under
Section V.A. above, the SLT shall allocate the Aggregate Incentive Pool among
the Participating Employers using the Allocation Criteria. In making such
allocation, the SLT may take into consideration such factors as it shall
determine to be appropriate, including without limitation, the financial and
operational performance of each Business Unit, the impact of Business Unit
performance on overall corporate goals and results, extraordinary circumstances,
and general business conditions including, but not limited to, other benefits
provided under the Company’s benefit programs, such as the excess shares
released from the Leveraged Employee Stock Ownership Plan (LESOP) suspense
account of the TXU Thrift Plan. The allocation of the Aggregate Annual Incentive
Pool among the Participating Employers shall be made by the SLT in its sole
discretion, and there is no requirement that such allocation be made
proportionally among the Business Units. However, in no case may the total
amount allocated among the Participating Employers exceed the Aggregate
Incentive Pool.
 
Article VI. Application of Individual Performance Modifier and Determination of 
Individual Participant Awards.

A. Individual Participant Awards.

The SLT shall determine each Participant’s Award, other than for Section 16
Officers and Additional Persons, for a Plan Year by: (i) multiplying the
Participant’s Target Award by the ratio of (a) the portion of the Aggregate
Incentive Pool allocated to the Participant’s Participating Employer after
application of the Allocation Criteria, to (b) the aggregate Target Incentive
Pool for all Participant’s of the Participating Employer; and (ii) multiplying
such amount by the applicable Individual Performance Modifier determined in
accordance with Section VI.B. below.

B. Application of Individual Performance Modifier.

(i) As described in Section VI.A. above, the amount determined by applying the
formula set forth in Section VI.A shall be adjusted by applying the Individual
Performance Modifier for each Participant in the sole discretion of the SLT.
 

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(ii) To determine Participant’s Individual Performance Modifier, the SLT shall
assign a performance rating to the Participant based on the Participant’s
performance against his/her performance level in accordance with the following
table:
 
Performance Rating
Rating
Individual Performance
Modifier Range
Outstanding
5
150% - 200%
Exceeds
4
110% - 150%
Meets
3
75% - 110%
Inconsistent
2
25% - 75%
Unacceptable
1
0%
Too new to rate
0
50% - 110%

 
The Participant’s Individual Performance Modifier shall be established by the
SLT in its sole discretion within the applicable range set forth in the above
table. In no event may the aggregate of the Awards determined to be payable to
all Participants of a Participating Employer, exceed the portion of the
Aggregate Incentive Pool allocated to the Participating Employer; and
 
in no event may the aggregate of all Awards determined to be payable to all
Participants exceed the Aggregate Incentive Pool.
 
Article VII. Payment of Awards.
 
A. Time and Manner of Award Payments.
 
All Awards will be paid in cash to Participants by March 15 of the year
following the applicable Plan Year, subject to applicable tax withholding
requirements.
 
B. Maximum Awards to Covered Employees.
 
Notwithstanding any provision of this Plan, the maximum Award that may be paid
to any Participant who has been determined under the provisions of the TXU 2005
Omnibus Incentive Plan (“Omnibus Plan”) to be a Covered Employee for such Plan
Year, shall not exceed the maximum annual incentive award that has been
established for such Participant for such Plan Year under the Omnibus Plan.
 
Article VIII. Termination of Employment and Partial Awards.
 
Participation in the Plan shall cease immediately upon a Participant’s
resignation or termination of employment for any reason (with or without cause),
or upon the Participant’s death, Disability or Retirement. In such event, the
Participant may be eligible for a partial award for such Plan Year in accordance
with and subject to the provisions of this Article VIII.
 

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A. Resignation or Termination.
 
If a Participant resigns or his/her employment with a Participating Employer is
terminated (with or without cause) prior to the payment of an Award for reasons
other than death, Disability, Retirement, or transfer to an affiliate of the
Company, such Participant shall forfeit any right to receive such Award.
 
B. Death, Disability or Retirement.
 
If a Participant dies, becomes Disabled or Retires during a Plan Year after
having attained at least three (3) full months of participation in the Plan
during such Plan Year, the Participant, or the Participant’s beneficiary in the
case of the Participant’s death, may, in the sole discretion of the SLT, be
entitled to receive a partial Award, prorated for the number of months that the
individual was a Participant hereunder during the Plan Year. For purposes of
applying this proration, a month shall include each month during which the
individual was employed by a Participating Employer through at least the 15th
day of such month prior to the individual’s death, Disability or Retirement. Any
such Award shall be paid at the time and in the form that all other Awards are
paid for such Plan Year. The decisions of the SLT with respect to such Awards
shall be final and binding on all parties. For purposes of this provision, a
Participant’s beneficiary shall be his/her surviving spouse or, if he/she has no
surviving spouse, his/her estate.
 
C. Transfers.
 
If a Participant (i) transfers from a Participating Employer to an affiliate of
the Company after having attained at least three (3) full months of
participation in the Plan during the Plan Year, and (ii) continues to be
employed by an affiliate of the Company through the remainder of the Plan Year,
such individual shall, based on criteria determined by the SLT in its sole
discretion, be entitled to receive a partial Award hereunder, prorated on the
basis of the number of months such individual was employed by the Participating
Employer during the Plan Year. For purposes of applying this proration, a
Participant shall be deemed to have been employed by the Participating Employer
for a month if such Participant was employed by the Participating Employer on
the 15th day of such month. Any such Award shall be paid at the time and in the
form that all other Awards are paid for such Plan Year. The decisions of the SLT
with respect to such Awards shall be final and binding on all parties.
 

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Article IX. Administrative Provisions.
 
A. Administration.
 
The Plan shall be administered and interpreted by the Participating Employers
through the individuals who have been provided authority hereunder to carry out
the administration of this Plan. The O&C Committee and its members, the SLT and
its members, and any other individual to whom the O&C and/or SLT has delegated
their responsibilities regarding the administration of this Plan, shall have
full authority, discretion and power necessary or desirable to administer and
interpret this Plan. Without in any way limiting the foregoing, all such
individuals shall have complete authority, discretion and power to: (i)
determine the Participants for each Plan Year; (ii) determine the Individual
Performance Modifier applicable to each Participant; (iii) evaluate and
determine the performance of Participants; (iv) determine the amount of the
Award for each Participant; (v) interpret the provisions of this Plan and any
other documentation used in connection with this Plan, including documentation
specifying individual Performance Goals, Award opportunities and the like; (vi)
establish and interpret rules and procedures (written or by practice) for the
administration of the Plan; and (vii) make all other determinations and take all
other actions necessary or desirable for the administration or interpretation of
this Plan. All actions, decisions and interpretations of such individuals shall
be final, conclusive and binding on all parties.
 
B. No Right to Continued Employment.
 
Nothing in this Plan shall be deemed by implication, action or otherwise to
constitute a contract of employment, or otherwise to provide a Participant with
any right of continued employment or impose any limitation on any right of a
Participating Employer to terminate a Participant’s employment at any time.
 
C. No Assignment.
 
A Participant or Participant’s beneficiary shall have no right to anticipate,
alienate, sell, transfer, assign, pledge or encumber any right to receive any
incentive made under the Plan, nor will any Participant or Participant’s
beneficiary have any lien on any assets of any Participating Employer, or any
affiliate thereof, by reason of any award made under the Plan.
 
D. Withholding.
 
The Participating Employers shall have the right to deduct or withhold, or
require a Participant to remit to the applicable Participating Employer, any
taxes required by law to be withheld from Awards made under this Plan.
 

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E. Amendment of Plan.
 
The Plan may be amended, suspended or terminated at any time and from time to
time, by action of the O&C Committee, provided no such amendment, suspension or
termination adversely affects any Participant’s right to receive any amount to
which they have become entitled under the terms of this Plan prior to such
amendment, suspension or termination. In order to be effective, any amendment of
this Plan or any Award must be in writing. No oral statement, representation or
the like shall have the effect of amending or modifying this Plan or any Award,
or otherwise have any binding effect on the Company, the O&C Committee, the SLT,
or any individual who has been delegated authority by the O&C Committee or the
SLT to administer this Plan.
 
F. No Obligation to Continue Plan.
 
The adoption of the Plan does not imply any commitment to continue to maintain
the Plan, or any modified version of the Plan, or any other plan for incentive
compensation for any succeeding year.
 
G. Governing Law.
 
The Plan shall be construed in accordance with, and governed by, the laws of the
State of Texas. Any disputes arising under this Plan and any action to enforce
any provisions hereof, shall be maintained exclusively in the appropriate courts
of Dallas County, Texas.
 
H. Severability.
 
In case any provision of the Plan shall be held illegal or void, such illegality
or invalidity shall not affect the remaining provisions of this Plan, but shall
be fully severable, and the Plan shall be construed and enforced as if said
illegal or invalid provisions had never been inserted herein.
 
I. Limitation of Liability.
 
Except for their own gross negligence or willful misconduct regarding the
performance of the duties specifically assigned to them under, or their willful
breach of the terms of this Plan, the Participating Employer, the O&C Committee
and its members, the SLT and its members, and any other entity or individual
administering any aspect of this Plan shall be held harmless by the Participants
and their respective representatives, heirs, successors, and assigns, against
liability or losses occurring by reason of any act or omission under the Plan.
 
Executed December 29, 2006, to be effective as January 1, 2006.
 

   
TXU Corp.
           
By:
/s/ RIZ CHAND 
     
Riz Chand
     
Senior Vice President, Human Resources