Document:

ex10_2.htm

    
      

    

    Exhibit
10.2

     

    January
2009

    

    TVA
DEFERRED COMPENSATION PLAN

    

    This
Deferred Compensation Plan (“Plan”) constitutes an agreement between TVA and its
managerial employees who are subject to it (“Participants”).  The
purposes of this Plan are to provide Participants (i) with deferrals of
compensation in order to provide income to supplement retirement benefits, (ii)
an additional means of deferring taxes on deferred compensation, and (iii) an
opportunity to earn a notational investment return on deferred
compensation.

     

     

    Section
1  Definitions

    

    “Account”
means the account established on TVA’s books in the name of each Participant to
which compensation deferred by the Participant pursuant to any of TVA’s
compensation plans, or deferred compensation awarded to the Participant by TVA,
as well as any notational investment earnings on such compensation, is accounted
for in the form of credits.

    

    “Board”
means the Board of Directors of the Tennessee Valley Authority.

    

    “Committee”
means a group of three persons appointed by the Board or its delegatee to
administer the Plan.

    

    “Dependent”
means the same as the term “dependent” as defined in Internal Revenue Code
section 152, without regard to section 152(b)(1), (b)(2), and
(d)(1)(B).

    

    “Interest”
means the notational interest on a Participant’s Account balance based on an
annual interest rate set from time to time by TVA’s Chief Financial Officer or
his or her designee.

    

    “Participant”
shall mean any employee of the Tennessee Valley Authority who is eligible under
any of TVA’s other compensation plans (i) to defer compensation earned during a
year to a later year, or (ii) to receive deferred compensation
credits.  Participants shall not include the members of the TVA Board
of Directors.

    

    “Return”
means the notational investment return on a Participant’s Account balance based
on the change in the value of the mutual funds designated by the
Participant.

    

    “Recordkeeper”
means the organization selected by TVA to recordkeep the notational investment
return alternatives from which the Participant may choose.

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    “Separation
from Service” or “separates from service” means the same as the term “separation
from service” as defined in 26 CFR §1.409A-1(h) of the Internal Revenue Code
section 409A final regulations.

    

    “Source”
means a division within each Participant’s Account to which deferred
compensation credits are assigned based on the form of payment for such deferred
compensation.

    

    “Unforeseeable
Emergency” means the same as the term “unforeseeable” as defined in 26 CFR
§1.409A-3(i)(3) of the Internal Revenue Code section 409A final
regulations.

    

    

    Section
2  Deferred
Compensation Plan Credits

    

    
      	
              A.

            	
              There
      shall be established for each Participant an Account in the name of the
      Participant.  Each Participant’s Account will consist of one or
      more Sources.

            

    

    

    
      	
              B.

            	
              A
      Participant’s Account shall be credited with any compensation amounts that
      the Participant earns during any year and properly elects to defer to a
      later year pursuant to any TVA compensation plan that allows deferral
      elections.

            

    

    

    
      	
              C.

            	
              From
      time to time the Board or the Board’s delegatee , in the sole discretion
      of the Board or its delegatee , may award deferred compensation credits to
      a Participant’s Account.  At the time of award, the Board or its
      delegatee shall designate the manner in which such deferred compensation
      credits shall be paid out to the Participant.  In the absence of
      such a designation, such deferred compensation credits shall be paid out
      to the Participant in a lump sum upon Separation from Service in
      accordance with Section 3.A.1a
below.

            

    

    

    
      	
              D.

            	
              The
      Board (or its delegatee) may consider such factors as the following in
      determining whether to award deferred compensation credits to a
      Participant and the amount of deferred compensation credits to be awarded
      pursuant to Section 2.C above:

            

    

    

    
      	
               
      

            	
              1.

            	
              meritorious
      performance;

            

    

    

    
      	
               
      

            	
              2.

            	
              providing
      Participants with total compensation equivalent to prevailing rates in
      corporate, professional, and other public
  organizations;

            

    

    

    
      	
               
      

            	
              3.

            	
              the
      need to use deferred compensation credits for recruitment
      purposes;

            

    

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              4.

            	
              lost
      annual leave; and

            

    

    

    
      	
               
      

            	
              5.

            	
              such
      other factors as may be deemed
appropriate.

            

    

    

    
      	
              E.

            	
              Each
      Participant’s Account will receive Interest calculated on the ending daily
      balance in each Participant’s Account and credited to the Account by the
      Recordkeeper at the end of each month.  In lieu of Interest,
      each Participant may elect to have all or a portion of the Participant’s
      Account adjusted by the Return tied to one or more mutual funds available
      to Participants through the Recordkeeper as selected by the
      Participant.  TVA is not responsible for the effect on the
      Participant’s Account of decisions by any Participant who elects to
      receive the Return tied to mutual funds as provided
      herein.  Such decisions shall be the sole responsibility of the
      Participant.

            

    

    

    

    Section
3  Benefits

    

    The total
amount credited to each Participant’s Account shall be paid by TVA to the
Participant upon the Participant’s Separation from Service, or the Participant’s
death, in the manner set forth below.  In addition, certain amounts
credited to a Participant’s Account may be paid by TVA to such Participant in
the event of an Unforeseeable Emergency as set forth below.

    

    
      	
              A.

            	
              Separation from
      Service

            

    

    

    
      	
               
      

            	
              1.

            	
              Upon
      a Participant’s Separation from Service, the balance of each Source within
      the Participant’s Account shall be paid to the Participant in a lump sum
      or in 5, 10, or 15 annual installments as properly elected by the
      Participant or designated by TVA (the “Lump-Sum Source,” “5-Year Source,”
      “10-Year Source,” and “15-Year Source,”
  respectively).

            

    

    

    
      	
               
      

            	
              a.

            	
              The
      balance in the Lump-Sum Source of the Participant’s Account shall be paid
      in a lump sum to the Participant not later than the last day of the first
      full calendar month following the date of the Participant’s Separation
      from Service.

            

    

    

    
      	
               
      

            	
              b.

            	
              The
      balances in the 5-Year, 10-Year, and 15-Year Sources shall be paid in the
      following manner.  Not later than the last day of the first full
      calendar month following the date of the Participant’s Separation from
      Service, the Participant shall be paid a sum equal to balance in the
      Source divided by the number of annual installments (5, 10, or 15) tied to
      such Source.  Subsequent annual installments shall be paid each
      year through 2009 on the same date as the initial installment in each year
      through 2009 and in January in each year beginning in 2010.  The
      amount of each installment shall be determined by dividing the balance in
      the Source by the number of payments remaining to be
  made.

            

    

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              2.

            	
              Any
      Participant with an Account balance not greater than the applicable dollar
      amount under Internal Revenue Code section 402(g)(1)(B) at the time of
      Separation from Service shall be paid that balance in a lump sum not later
      than the last day of the first full calendar month following the date of
      the Participant’s Separation from Service, provided that the payment
      results in the termination and liquidation of the entirety of the
      Participant’s interest under the
Plan.

            

    

    

    
      	
              B.

            	
              Death - Upon
      receipt of proper proof of the death of a Participant who has died in
      service, or a former Participant who has been receiving payments under
      Section 3.A.1.b. above, the balance in the Participant’s Account or the
      balance remaining in the Participant’s account, as appropriate, shall be
      paid in a lump sum to the beneficiary or beneficiaries designated by the
      Participant in writing prior to the Participant’s death.  In the
      absence of any designation of beneficiary, payment shall be made in the
      following order of precedence:

            

    

    

    
      	
               
      

            	
              1)

            	
              to
      the widow or widower of the
Participant;

            

    

    

    
      	
               
      

            	
              2)

            	
              if
      there is no widow or widower, to the child or children of the Participant
      and descendants of deceased children by
  representation;

            

    

    

    
      	
               
      

            	
              3)

            	
              if
      none of the above, to the parents of the Participant or the survivor of
      them;

            

    

    

    
      	
               
      

            	
              4)

            	
              if
      none of the above, to the duly appointed legal representative of the
      estate of the Participant; and

            

    

    

    
      	
               
      

            	
              5)

            	
              if
      none of the above, to the person or persons entitled to it under the law
      of the state of domicile of the Participant at the time of
      death.

            

    

    

    Payment
shall be made by the last day of the first full calendar month following the
receipt of proper proof of the Participant’s death.

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    
      	
              C.

            	
              Unforeseeable
      Emergency - In the event of an Unforeseeable Emergency, a
      Participant may apply to the Committee for a distribution of all or part
      of the total amount credited to the Participant’s Account.  The
      distribution may be granted in the Committee’s sole discretion upon a
      determination by the Committee that the amount distributed is reasonably
      necessary to satisfy the emergency need based on the relevant facts and
      circumstances of the case.  Under Internal Revenue Code section
      409A and its implementing regulations (collectively, “Section 409A”), an
      Unforeseeable Emergency means a severe financial hardship to the
      Participant resulting from any of the
following:

            

    

    

    
      	
               
      

            	
              1)

            	
              illness
      or accident of the Participant, the Participant’s spouse, the
      Participant’s beneficiary, or the Participant’s
  Dependent;

            

    

    

    
      	
               
      

            	
              2)

            	
              loss
      of the Participant’s property due to casualty (including the need to
      rebuild a home following damage to a home not otherwise covered by
      insurance); or

            

    

    

    
      	
               
      

            	
              3)

            	
              other
      similar extraordinary and unforeseeable circumstances arising as a result
      of events beyond the control of the
Participant.

            

    

    

    Section
409A states that the purchase of a home and the payment of college tuition are
not unforeseeable emergencies.  Under Section 409A, a distribution on
account of an Unforeseeable Emergency may not be made to the extent that such
emergency is or may be relieved through reimbursement or compensation from
insurance or otherwise, by liquidation of the Participant’s assets, to the
extent the liquidation of such assets would not cause severe financial hardship,
or by cessation of deferrals under the Plan.  In other words,
Participants will not be eligible for consideration of distributions from the
Plan for an Unforeseeable Emergency under this Section 3.C if the Participant
has, or through his or her own ability has access to, any funds to help take
care of the financial issues related to the Participant’s Unforeseeable
Emergency.

    

    Unforeseeable
Emergency distributions will be deducted from the Sources within the
Participant’s Account until exhausted in the following order of precedence:
Lump-Sum Source, 5-Year Source, 10-Year Source, and 15-Year
Source.

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    Section
4  Assignments
Prohibited

    

    No
transfer, assignment, pledge, seizure, or other voluntary or involuntary
alienation or encumbrance of any benefit provided under the Plan will be
permitted or recognized other than as specifically provided in this Plan;
provided, however, that TVA may offset amounts owed to it by a Participant
against amounts payable to a Participant under this Plan.

    

    

    Section
5  No Trust
is Created

    

    No trust
in favor of any Participant is created by this Plan, and in the absence of any
attempted assignment prohibited under Section 5, Participants shall have the
rights of general unsecured creditors of TVA with respect to amounts credited
their Accounts established by this Plan.

    

    

    Section
6  Amendments to
Plan

    

    This Plan
may be amended or terminated as authorized by the Board, or its delegatee, at
any time as it deems appropriate without the consent of any Participant,
beneficiary, or other person.

    

    

    Section
7  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, the Committee, and the
Participants or their Beneficiaries 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.

     

     

    6ex10_3.htm

    
      

    

    Exhibit
10.3

     

    January
2009

    

    TENNESSEE
VALLEY AUTHORITY

    EXECUTIVE
ANNUAL INCENTIVE PLAN

     

    PURPOSE

    

    The
Executive Annual Incentive Plan (“EAIP” or “Plan”) is designed to encourage and
reward TVA officers and other participants for their performance and
contribution to the successful achievement of financial, operational, and
individual goals.

    

    This is
accomplished by linking a significant element of variable annual compensation to
the accomplishment of selected short-term financial, operational, and individual
performance standards.  The Plan, in conjunction with salary, provides
total annual compensation opportunities similar to those found at competing
companies, thus assisting TVA in retaining and recruiting executive talent
critical to TVA’s success.

    

    

    PARTICIPATION

    

    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
PERIOD

    

    Each
performance period follows TVA’s fiscal year (October 1 through September
30).

    

    

    ANNUAL
INCENTIVE OPPORTUNITY

    

    Annual
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.  Annual
Incentive Opportunities under the Plan are designed to align each Participant’s
Total Annual 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.

    

    

    PERFORMANCE
MEASURES AND GOALS

    

    The Plan
incorporates the use of Performance Measures which focus on key areas essential
for the achievement of TVA’s strategic objectives.  These measurement
areas typically include:

    

    
      	
               
      

            	
              ·

            	
              Financial

            

    

    
      	
               
      

            	
              ·

            	
              Assets/Operations

            

    

    
      	
               
      

            	
              ·

            	
              Customers

            

    

    
      	
               
      

            	
              ·

            	
              People

            

    

    
      	
               
      

            	
              ·

            	
              Individual
      Performance

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    The
selection of Performance Measures is specific to each Participant’s
position.  Weighting of the measures, when appropriate, will be based
on the relevance of the measure to the organization, the position purpose,
accountabilities, scope and impact applicable to the Participant.

    

    Performance
Measures, Performance Measure weighting, and the identification of Performance
Goals for each Performance Measure, will be established for each performance
period 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.

    

    

    AWARD
DETERMINATION

    

    Annual
Incentive Awards are based on performance against the predefined Performance
Measures and Goals and the Annual Incentive Opportunity for each Participant
calculated as follows:

    

    
      
        
          
            	
                    Annual
      Incentive

                  	
                    =

                  	
                    Salary

                  	
                    x

                  	
                    Annual
      Incentive

                  	
                    x

                  	
                    Percent
      of Opportunity

                  
	
                    Award

                  	 
      	 
      	 
      	
                    Opportunity

                  	 
      	
                    Achieved

                  

          

        

      

    

    

    Final
Annual Incentive 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 and performance results
over the fiscal year.  The maximum Annual Incentive Award allowed
under this Plan is 125 percent of the Annual 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 Plan year in order to
be eligible to receive an award.

    

    Participants
who have been employed for the entire Plan year are 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 the Plan year, and who are employed at the end of
the Plan year, will
be eligible to receive a Prorated Award based on the number of full months
he/she has been a Participant in the Plan year.

    

    Notwithstanding
the above, if a Participant’s employment is terminated due to death or
Disability during the Plan year, then the Participant will receive a Prorated
Award.

    

    

    PAYMENT
OF AWARDS

    

    Annual
Incentive Awards are paid in a lump sum during the first quarter of the next
fiscal year but no later than March 15th of
the next calendar year following the year in which the Awards are
earned.  All Annual Incentive 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 Annual
Incentive Award for a performance period 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 period;

            

    

    
      	
               
      

            	
              ·

            	
              The
      deferral must be made in 25% increments of the actual Annual Incentive
      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.

            

    

    

    Annual
Incentive 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
Plan year may be eligible to elect to defer a portion of any eligible Annual
Incentive Award for the performance period 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 Annual
      Incentive 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 Annual Incentive Award eligible for deferral depends on the number of
days remaining in the performance period after the date of the Participant’s
election over the total number of days in the performance period as set forth in
26 CFR §1.409A-2(a)(7) of the Internal Revenue Code section 409A final
regulations

    

    

    PLAN
ADMINISTRATION

    

    Annual
Incentive Opportunities, Performance Measures and Goals, and the results of the
Performance Measures and Goals for each Participant are approved on an annual
basis 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.

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    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

    

    
      
        
          
            	
                    Annual
      Incentive Award

                  	
                    Actual
      dollar amount awarded to a Participant under the EAIP.

                  
	 
      	 
      
	
                    Annual
      Incentive Opportunity

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

                  
	 
      	 
      
	
                    Disability

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

                  
	 
      	 
      
	
                    Participant

                  	
                    An
      officer or other Manager/Specialist employee approved to be eligible to
      receive an award under the EAIP.

                  
	 
      	 
      
	
                    Performance
      Goals

                  	
                    The
      goals established for each Performance Measure used to determine the
      Annual Incentive Award.

                  
	 
      	 
      
	
                    Performance
      Measures

                  	
                    The
      specific metrics used to measure performance.

                  
	 
      	 
      
	
                    Prorated
      Award

                  	
                    Method
      used to determine the Annual Incentive Award amount for an employee not
      eligible to receive a full award.  Pro-ration is based on the
      number of full months employed.

                  
	 
      	 
      
	
                    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
      Annual Compensation

                  	
                    Term
      used by TVA that includes salary plus Annual Incentive
      Award.

                  

          

        

      

    

     

     

    4

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