ex10_4.htm


    
      

    

    Exhibit
10.4

     

    January
2009

    


    TENNESSEE
VALLEY AUTHORITY

    EXECUTIVE
LONG-TERM INCENTIVE PLAN

    


    


    PURPOSE

    


    The
Executive Long-Term Incentive Plan (“ELTIP” or “Plan”) is designed to provide
Manager/Specialist employees in “especially critical” positions with incentive
opportunities based on successful achievement of established financial and/or
operational goals measured over a multi-year period.  The Plan, in
conjunction with salary, annual incentive compensation, and long-term deferred
compensation, provides total direct compensation opportunities similar to those
found at competing companies.

    


    


    PARTICIPATION

    


    Participation
is limited to “especially critical” positions that have the ability to directly
impact TVA’s long-term strategic objectives.  The Board of Directors,
the Chief Executive Officer (“CEO”), or their delegatees, approve the
Participants in the Plan in accordance with then existing delegations of
authority.

    


    


    PERFORMANCE
CYCLE

    


    Each
performance cycle extends for a period of three consecutive fiscal
years.

    


    A new
performance cycle begins at the start of each TVA fiscal year (October
1).

    


    An
example of the three-year performance cycle with overlapping cycles is
illustrated below:

    


    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      
                                                        
                                                          
                                                            
                                                              
                                                                
                                                                  
                                                                    
                                                                      	 
      	 
      	 
      	 
      	 
      	 
      
	
                                                                              Performance
      Cycle

                                                                            	
                                                                              FY
      2008

                                                                            	
                                                                              FY
      2009

                                                                            	
                                                                              FY
      2010

                                                                            	
                                                                              FY
      2011

                                                                            	
                                                                              FY
      2012

                                                                            
	 
      	 
      	 
      	 
      	 
      	 
      
	
                                                                              1
      - FY08

                                                                            	 
      	 
      	 
      	 
      	 
      
	
                                                                              2
      - FY09

                                                                            	 
      	 
      	 
      	 
      	 
      
	
                                                                              3
      - FY10

                                                                            	 
      	 
      	 
      	 
      	 
      


                                                                    

                                                                  

                                                                

                                                              

                                                            

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    


    


    PERFORMANCE
MEASURES AND GOALS

    


    The Plan
incorporates the use of Performance Measures that focus primarily on the
achievement of TVA’s long-term financial and/or operational
goals.  Performance Measures and Goals are measured over the
three-year period of the performance cycle.

    


    Performance
Measures, Performance Measure weighting, and the identification of Performance
Goals for each Performance Measure, will be established for each performance
cycle in accordance with reservations and delegations of authority under the TVA
Compensation Plan and communicated in administration of the Plan by the Vice
President, Human Resources.

    


    


    ELTIP
INCENTIVE OPPORTUNITY

    


    ELTIP
Incentive Opportunities for each Participant are established based on market
data, level of responsibility, and relationship with other TVA positions in
order to ensure a consistent approach among TVA organizations.  ELTIP
Incentive Opportunities under the Plan are designed to align each Participant’s
Total Direct Compensation with relevant labor market practices.


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    The basis
of a target award opportunity is a percentage of the Participant’s salary, which
is established based on the Participant’s position within TVA.

    


    


    AWARD
DETERMINATION

    


    ELTIP
Awards are based on achieved level of performance compared to the established
Performance Measures and Goals over the Performance Cycle and the ELTIP
Incentive Opportunity for each Participant calculated as follows:

    


    
      
        
          	
                  ELTIP
      Award

                	
                  =

                	
                  Salary

                	
                  x

                	
                  ELTIP
      Incentive

                	
                  x

                	
                  Percent
      of Opportunity

                
	 
      	 
      	 
      	 
      	
                  Opportunity

                	 
      	
                  Achieved

                


        

      

    

    


    ELTIP
Awards are calculated based on Participants’ salaries at the end of the
performance cycle.  Final ELTIP Awards for each Participant may be
adjusted by the Board of Directors, the CEO, or other appropriate delegated
officer based on the evaluation of the Participant’s individual achievements,
peer group comparisons, and performance results over the Performance
Cycle.  The maximum ELTIP Award allowed under this Plan is 150 percent
of the ELTIP Incentive Opportunity for each Participant, unless a
different maximum is approved by the Board of Directors or its
delegatee.

    


    


    AWARD
ELIGIBILITY

    


    A
Participant must be a full-time employee at the end of the Performance Cycle in
order to be eligible to receive an award.

    


    Participants
who have participated in the Plan for the entire Performance Cycle, or
Participants who are not new TVA employees at the time they become participants
in the Plan, will be eligible to receive a full award.

    


    Except as
set forth above, Participants who become participants in the Plan at a time
other than the beginning of a Performance Cycle, and who are employed at the end
of the Performance Cycle, will be eligible to receive a Prorated Award based on
the number of full months he/she has been a Participant in the Performance
Cycle.

    


    Notwithstanding
the above, if a Participant’s employment is terminated due to death or
Disability, then the Participant will receive a Prorated Award for the
Performance Cycle ending on September 30th
following the date of termination of employment, but no other Performance
Cycles.

    


    


    PAYMENT
OF AWARDS

    


    ELTIP
Awards are paid in a lump sum during the first quarter of the next fiscal year
following each performance cycle but no later than March 15th of
the next calendar year following the year in which the Awards are earned. All ELTIP
Awards will be approved by the Board of Directors, the CEO, or other delegated
officer prior to payment.

    


    In the
event a Participant’s employment is terminated due to death or Disability, the
Prorated Award will be calculated assuming target achievement and paid either
(i) by the last day of the first full calendar month following the receipt of
proper proof of the Participant’s death, or (ii) within 90 days of termination
of employment due to Disability.


    
      
         


      

      
        2

        
          

        

      

      
         


      

    


    DEFERRAL
ELECTION OPTION

    


    Performance-Based
Compensation

    


    Participants
may be eligible to elect to defer all or a portion of any eligible ELTIP Award
for a Performance Cycle to the TVA Deferred Compensation Plan under the
following conditions:

    


    
      	
               
      

            	
              ·

            	
              Deferral
      election must be made on or before the date that is six (6) months before
      the end of the Performance Cycle;

            


    

    
      	
               
      

            	
              ·

            	
              The
      deferral must be made in 25% increments of the actual ELTIP Award and is
      irrevocable as of the date set forth
above;

            


    

    
      	
               
      

            	
              ·

            	
              Deferred
      amounts will be paid out upon the Participant’s Separation from Service in
      either a lump sum or in 5 or 10 annual installments, as elected by the
      Participant; and

            


    

    
      	
               
      

            	
              ·

            	
              The
      Participant performs services at TVA continuously from the date the
      Participant’s performance criteria are established through the date a
      deferral election is made.

            


    

    


    ELTIP
Awards are eligible for deferral to the extent (i) they constitute
“performance-based compensation,” as that term is defined in 26 CFR §1.409A-1(e)
of the Internal Revenue Code section 409A final regulations, and (ii) the amount
of the awards has not become readily ascertainable at the time of the deferral
election.

    


    First Year of
Eligibility

    


    Participants
who become participants in the Plan at a time other than the beginning of the
Performance Cycle may be eligible to elect to defer a portion of any eligible
ELTIP Award for the Performance Cycle to the TVA Deferred Compensation Plan
under the following conditions:

    


    
      	
               
      

            	
              ·

            	
              Deferral
      election must be made within thirty (30) days after the date the
      Participant becomes eligible to participate in the
  Plan;

            


    

    
      	
               
      

            	
              ·

            	
              The
      deferral election choices are 25%, 50% or 75% of the actual ELTIP Award,
      to the extent such choices are available to the
    Participant;

            


    

    
      	
               
      

            	
              ·

            	
              The
      deferral is irrevocable as of the date set forth above;
  and

            


    

    
      	
               
      

            	
              ·

            	
              Deferred
      amounts will be paid out upon the Participant’s Separation from Service in
      either a lump sum or in 5 or 10 annual installments, as elected by the
      Participant.

            


    

    


    The
amount of ELTIP Award eligible for deferral depends on the number of days
remaining in the Performance Cycle after the date of the Participant’s election
over the total number of days in the Performance Cycle as set forth in 26 CFR
§1.409A-2(a)(7) of the Internal Revenue Code section 409A final
regulations

    


    


    PLAN
ADMINISTRATION

    


    ELTIP
Incentive Opportunities, Performance Measures and Goals, and the results of the
Performance Measures and Goals for each Participant are approved for each
Performance Cycle in accordance with the TVA Compensation Plan and the
delegations thereunder.

    


    The Plan
will be administered by the Vice President, Human
Resources.  Corporate Human Resources will develop and interpret all
rules for the administration of the Plan.

    


    


    TERMINATION
OR AMENDMENT OF THE PLAN

    


    The Board
of Directors, or its delegatee, may at any time modify, suspend, terminate, or
amend the Plan in whole or in part.


    
      
         


      

      
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    COMPLIANCE
WITH SECTION 409A

    At all
times, to the extent Internal Revenue Code section 409A and its implementing
regulations (collectively, “Section 409A”) applies to amounts deferred under
this Plan: (a) this Plan shall be operated in accordance with the requirements
of Section 409A; (b) any action that may be taken (and, to the extent possible,
any action actually taken) by the Board, or its delegatee, and the Participants
shall not be taken (or shall be void and without effect), if such action
violates the requirements of Section 409A; (c) any provision in this Plan that
is determined to violate the requirements of Section 409A shall be void and
without effect; and (d) any provision that is required by Section 409A to appear
in this Plan that is not expressly set forth shall be deemed to be set forth
herein, and this Plan shall be administered in all respects as if such provision
were expressly set forth herein.

    


    


    DEFINITION
OF TERMS

    


    
      
        
          	
                  Disability

                	
                  Term
      “disability” as defined in 26 CFR §1.409A-3(j)(4)(xii) of the Internal
      Revenue Code section 409A final regulations.

                
	 
      	 
      
	
                  ELTIP
      Award

                	
                  Actual
      dollar amount awarded to a Participant under the ELTIP.

                
	 
      	 
      
	
                  ELTIP
      Incentive Opportunity

                	
                  Award
      opportunity expressed as a percent of the Participant’s
      salary.

                
	 
      	 
      
	
                  Especially
      Critical

                	
                  A
      position that has the ability to significantly impact the long-term
      financial, and/or operational objectives critical to TVA’s overall
      success.

                
	 
      	 
      
	
                  Participant

                	
                  An
      officer or other Manager/Specialist employee in an Especially Critical
      position approved to be eligible to receive an award under the
      ELTIP.

                
	 
      	 
      
	
                  Performance
      Cycle

                	
                  The
      three-year period of time over which performance is measured for the
      purpose of awarding incentives.

                
	 
      	 
      
	
                  Performance
      Goals

                	
                  The
      long-term strategic goals established for each Performance Measure used to
      determine the ELTIP Award.

                
	 
      	 
      
	
                  Performance
      Measures

                	
                  The
      specific metrics used to measure performance.

                
	 
      	 
      
	
                  Prorated
      Award

                	
                  Method
      used to determine the ELTIP Award amount for an employee not eligible to
      receive a full award.  Pro-ration is based on the number of full
      months of participation in a given Performance Cycle.

                
	 
      	 
      
	
                  Separation
      from Service

                	
                  Term
      “separation from service” as defined in 26 CFR §1.409A-1(h) of the
      Internal Revenue Code section 409A final regulations.

                
	 
      	 
      
	
                  Total
      Direct Compensation

                	
                  Term
      used by TVA that includes salary plus Annual Incentive
      Award plus ELTIP
      Award plus LTDCP
      annual credits.

                


        

      

    

     

     

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