exhibit 10(nn)




Exhibit
10(nn)




NOVEMBER
22, 2004

TXU
Corp.

Energy
Plaza

1601
Bryan Street

Dallas,
TX 75201-3411




Re:
Accelerated
Repurchase




Ladies
and Gentlemen:




This
letter (the “Letter Agreement”) sets forth the agreement we have reached with
respect to a transaction between Citibank, N.A. (“Citibank”), acting through
Citigroup Global Markets Inc. (“CGMI”) as agent (collectively with Citibank,
“Citigroup”), and TXU Corp. (the “Company”) in relation to shares of the
Company’s common stock, no par value (the “Common Stock”).




THE
COUNTERPARTY TO THE COMPANY IN THIS TRANSACTION IS CITIBANK, N.A. WHICH IS NOT
REGISTERED AS A BROKER-DEALER UNDER THE SECURITIES EXCHANGE ACT OF 1934.
CITIGROUP GLOBAL MARKETS INC. IS ACTING AS AGENT FOR CITIBANK, N.A. IN
CONNECTION WITH THIS TRANSACTION. 




I.
Definitions




As used
in this Letter Agreement, the following terms shall have the following meanings:


 

“Additional
Make-Whole Amount” has the meaning specified in Section
V(c)(ii).

 

“Amortizing
Balance” means, on any Trading Day, the Purchase Price less the cumulative total
price of the repurchased shares of Common Stock paid for by Citibank to cover
its short position as of such Trading Day. For the avoidance of doubt,
repurchased shares shall be considered paid for by Citibank as of their
respective Settlement Days. 

 

“Citigroup”
means Citibank and/or CGMI.

 

“Closing
Fee” means $55,698,203.




“Company
Instructions” shall mean the instructions in the form of Annex C hereto (which
is incorporated herein) regarding the purchase of the shares of Common Stock by
Citigroup during the Pricing Period. 




“Cumulative
Net Rebate Amount” means, on any Trading Day, the sum of all the Net Rebate
Amounts for all previous Trading Days. 




“Daily
Average Disposition Price” means, for any Trading Day, the dollar volume
weighted average price per share of Common Stock received by Citigroup from
selling shares of Common Stock.










1












“Daily
Average Price” means, for any Trading Day, the dollar volume weighted average
price per share of Common Stock paid by Citigroup to purchase a portion of the
Number of Initial Shares.




“Dispute
Notice” has the meaning specified in Section XVII.




“Dividend
Event Termination” has the meaning specified in Section VIII(b).




“Excess
Cash” means, on any Trading Day, the result of (i) the Market-Valued Remaining
Short Balance minus (ii) the Amortizing Balance.




“Exchange
Act” means the Securities Exchange Act of 1934, as amended.




“Exchange”
means the New York Stock Exchange (NYSE) or any successor exchange.




“Federal
Funds Open Rate” means 2.40%.




“Fixed
Borrow Cost” means 50 basis points per annum based on the closing price per
share of Common Stock on the Trading Day immediately preceding the relevant
day.




“Indebtedness”
has the meaning specified in the Credit Agreement dated as of November 4, 2004
among TXU Corp., various lenders and Citicorp North America, Inc. as
Administrative Agent for the lenders.




“Initial
Share Price” has the meaning specified in Section II.




“Loss”
has the meaning specified in Section XI(a).




“Loss of
Borrow Termination” has the meaning specified in Section VII(b). 

 

“Loss
Notice” has the meaning specified in Section XI(a).



 

“Make-Whole
Amount” has the meaning specified in Section V(c)(ii).




“Market
Disruption Event” means any (i) suspension or limitation imposed on trading by
any exchange on which the Common Stock is listed for trading, or (ii) any
Trading Day on which there is a material decrease in the trading volume for the
Common Stock such that in the reasonable business judgment of Citigroup the
Daily Share Repurchase Amount cannot be purchased on such day as contemplated by
the Company Instructions.  




“Market-Valued
Remaining Short Balance” means on any day within the Pricing Period, the result
of (i) the Remaining Share Amount, multiplied by (ii) 102% of the closing price
of the Common Stock as reported by Bloomberg L.P. as of that day if it is a
Trading Day, otherwise as of the immediately preceding Trading Day.




“Net
Rebate Amount” means, on any day, the result of (A) the Rebate Participation
Percentage, multiplied by (B) the result of (i) the product of (x) the
Market-Valued Remaining Short Balance and (y) the Federal Funds Open Rate less
20 basis points, minus (ii) the product of the Excess Cash and the Federal Funds
Open Rate. 










2












“Number
of Initial Shares” has the meaning specified in Section II.




“Payment
Shares” has the meaning specified in Section V(a)(ii).




“Pricing
Period” means the period of up to 210 consecutive Trading Days commencing on the
Trading Day following the Settlement Date of the “Agreement to Purchase Shares
of TXU Corp. Common Stock”. If at the expiration of the Pricing Period (as set
forth above) a number of shares equal to the Number of Initial Shares have not
been repurchased, then the Pricing Period will be extended until the Number of
Initial Shares have been repurchased. 




“Prospectus”
has the meaning specified in Section VI(a).




“Purchase
Date” has the meaning specified in Section II.




“Purchase
Price” means, the product of (i) the Initial Share Price and (ii) the Number of
Initial Shares.




“Rebate
Participation Percentage” shall equal 70%.




“Refund
Shares” has the meaning specified in Section V(a)(i).




“Registration
Statement” has the meaning specified in Section VI(a).




“Remaining
Share Amount” for any Trading Day equals (i) the Number of Initial Shares, minus
(ii) the cumulative number of shares of Common Stock that Citigroup has
repurchased to cover its short position in respect of this transaction. For the
avoidance of doubt, such shares shall be considered repurchased by Citigroup as
of their respective Settlement Days.




“Rule
10b-18” has the meaning specified in Section III(a).




“SEC” has
the meaning specified in Section VI(e)(iii).




“Securities
Act” means the Securities Act of 1933, as amended.




“Settlement
Amount” means (i) the product of (x) the Number of Initial Shares and (y) the
Initial Share Price minus the volume weighted average of the Daily Average
Prices for all Trading Days in the Pricing Period, plus (ii) the Cumulative Net
Rebate Amount, minus (iii) the Closing Fee. 




“Settlement
Day” means any day that is not a Saturday, a Sunday or a day on which banking
institutions or trust companies in the City of New York are authorized or
obligated by law or executive order to close. A Settlement Day “corresponds” to
a Trading Day if it is the day for settlement of regular-way transactions
entered into on that Trading Day.




“Share
Cap” means, as of any date of determination, three (3) times the Number of
Initial Shares minus the number of shares of Common Stock delivered by the
Company to Citigroup on or prior to such date hereunder (in each case subject to
adjustment pursuant to Section IX). 










3












“Trading
Day” means any day (i) other than a Saturday, a Sunday or a day on which the
Exchange is not open for business, and (ii) during which trading of any
securities of the Company on any national securities exchange has not been
suspended.




“Valuation
Fraction” means a fraction, the numerator of which is one and the denominator of
which is the number of Trading Days in the Valuation Period. 




“Valuation
Period” means a period of up to 50 Trading Days, the actual number to be
determined in good faith by Citigroup in consultation with the Company on the
business day that the Company provides notice to Citigroup that it intends to
deliver or receive Common Stock in settlement of this transaction. The Valuation
Period shall (subject to the occurrence of a Market Disruption Event) commence
(i) on the first Trading Day immediately following the final day of the Pricing
Period, (ii) in the case of an additional Valuation Period as described in
Section V(c)(ii), on the Trading Day following the Trading Day the additional
Payment Shares are delivered to Citigroup; provided that if
in the case of clause (i) Citigroup determines that resale by it of Payment
Shares would constitute a distribution for purposes of Regulation M under the
Exchange Act (“Regulation M”), on the first Trading Day immediately following
the “restricted period” (as defined under Regulation M) measuring such
restricted period from the final day the Pricing Period; provided,
further, this
delay in commencement of the Valuation Period shall not apply in the event that
the Shares constitute “excepted securities” as defined in Rule 101(c) of
Regulation M.




“Valuation
Share Amount” means, for any Trading Day, the quotient of (i) the Valuation
Fraction multiplied by the absolute value of the portion of the Settlement
Amount elected by the Company to be paid in shares of Common Stock, divided by
(ii) the Daily Average Disposition Price for that Trading Day.




II.
Initial
Shares




Citigroup
will hedge this transaction by entering into a short sale of 52,500,000 shares
of Common Stock (the “Number of Initial Shares”) at a price of $64.57 per
Initial Share (the “Initial Share Price”) (such date the “Purchase Date”). Such
hedge shall be effected in accordance with Citigroup’s customary procedures. The
foregoing notwithstanding, if TXU Corp. does not receive net proceeds of at
least $3.0 billion pursuant to one or more debt offerings by Friday, November
26, 2004 then TXU Corp. will have the right to extend settlement of this
transaction by 5 Business Days. If TXU Corp. still has not received such net
proceeds by the close of business on the 5th Business Day then TXU Corp. shall
have the right to cancel this transaction if the Company has also agreed to
cancel the Agreement to Purchase Shares between Citibank, N.A. and the
Company.




III.
Citigroup
Purchases and the Pricing Period 




(a)
During the Pricing Period, Citigroup will purchase shares of Common Stock in
accordance with the terms of the Company Instructions to cover all or a portion
of such short sale.  Citigroup
intends to effect such purchases of Common Stock in accordance with Rule 10b-18
under the Exchange Act (“Rule 10b-18”) or otherwise in a manner that Citigroup
believes in its reasonable discretion is in compliance with all applicable
securities laws. 










4












(b) In
the event that Citigroup reasonably concludes in good faith, that it is
appropriate with respect to any legal, regulatory or self-regulatory
requirements or related policies and procedures (whether or not such
requirements, policies or procedures are imposed by law or have been voluntarily
adopted by Citigroup), for it to refrain from purchasing Common Stock on any
Trading Day during the Pricing Period, the Pricing Period shall be suspended for
such day. Citigroup shall promptly notify the Company upon exercising its rights
pursuant to this Section III(b) and shall subsequently notify the Company in
writing on the day Citigroup believes that it may resume purchasing Common
Stock. Citigroup shall not be required to communicate to the Company the reason
for Citigroup’s exercise of its rights pursuant to this Section III(b) if
Citigroup reasonably determines in good faith that disclosing such reason may
result in a violation of any legal, regulatory, or self-regulatory requirements
or related policies and procedures. 

 

IV.
Company
Purchases

 




The
Company agrees that it will notify Citigroup two Trading Days prior to the day
on which the Company intends to purchase any shares of Common Stock on the open
market, or enter into any accelerated share repurchase program, or a derivative
share repurchase transaction (each a “Third Party Transaction”), during the
Pricing Period through a broker other than Citigroup or an affiliate of
Citigroup. The Company agrees that the number of shares purchased by or through
any such broker in a Third Party Transaction shall (i) not exceed the difference
between the maximum number of shares available to be purchased under Rule 10b-18
for such day and the maximum number of shares that Citigroup may purchase on
such day pursuant to the Company Instructions, and (ii) comply with the timing
and price requirements of Rule 10b-18. 




V.
Pricing
Adjustment and Settlement




(a) After
the expiration of the Pricing Period,




(i) if
the Settlement Amount is greater than zero, Citigroup shall make a cash payment
to the Company in an amount equal to the Settlement Amount or, if the Company so
elects pursuant to Section V(b) and (c), in lieu of such full cash payment
Citigroup shall (A) transfer to the Company through its agent, for no additional
consideration, a number of shares of Common Stock equal to the portion of the
Settlement Amount elected by the Company to be paid in shares of Common Stock
divided by the weighted average price at which Citigroup purchases shares of
Common Stock during the Valuation Period (the “Refund Shares”) and (B) make a
cash payment to the Company in an amount equal to the portion of the Settlement
Amount elected by the Company to be paid in cash, if any, and 




(ii) if
the Settlement Amount is less than zero, the Company shall make a cash payment
to Citigroup in an amount equal to the absolute value of the Settlement Amount
or, if the Company so elects pursuant to Section V(b) and (c) and Section VI, in
lieu of such full cash payment the Company shall either (A) transfer to
Citibank through its agent, for no additional consideration, a number of shares
of Common Stock equal to the sum of the Valuation Share Amounts for each of the
Trading Days in the Valuation Period (the “Payment Shares”); provided that in no
event shall the Company be required to deliver a number of shares of Common
Stock that exceeds the Share Cap or (B) (1) transfer to Citibank through its
agent, for no additional consideration, the Payment Shares; provided that in no
event shall the Company be required to deliver a number of shares of Common
Stock that exceeds the Share Cap and (2) make a cash payment to Citibank in an
amount equal to the portion of the Settlement Amount elected by the Company to
be paid in cash, if any.










5












(b) The
Company shall notify Citigroup in writing of its election (i) to receive
the Settlement Amount as (A) Refund Shares or (B) a combination of Refund Shares
and cash, in either case in lieu of receiving a full cash payment or
(ii) to pay the absolute value of the Settlement Amount by delivery of
(A) Payment Shares or (B) a combination of Payment Shares and cash, in
either case in lieu of making a full cash payment; such notification to be made
by the Company at least five Trading Days prior to the final Trading Day of the
Pricing Period. The failure to make such election and notify Citigroup in
accordance with the preceding sentence shall constitute an irrevocable election
by the Company to make or receive a cash payment as settlement. Cash payments
shall be made on the second Trading Day following the end of the Pricing
Period.





	(c)
        	
      Delivery
      of Refund Shares or Payment Shares shall be made as follows:
    







(i) if
Refund Shares are to be transferred to the Company, Citigroup shall deliver the
shares to the Company on the fourth Trading Day following the last day of the
Valuation Period; and 




(ii) if
Payment Shares are to be transferred to Citigroup, the Company shall deliver to
Citigroup on each Settlement Day corresponding to a Trading Day in the Valuation
Period a number of Payment Shares equal to the Valuation Share Amount for such
Trading Day; provided that, if Citigroup concludes, in its reasonable
discretion, that a transfer of Payment Shares on a Trading Day will, on such
day, cause Citigroup’s aggregate holding of the Common Stock to exceed 4.9% of
the outstanding shares of the Common Stock (the “Stock Threshold”) then (i) the
Company will defer the transfer of any Payment Shares in excess of the Stock
Threshold to the next following Trading Day provided that such transfer would
not cause Citigroup to exceed the Stock Threshold. In the event the procedures
of the previous sentence apply, Citigroup may extend the number of Trading Days
in the Valuation Period. Citigroup may, but shall not be obligated to, resell
Payment Shares during the Valuation Period. To the extent that Citigroup elects
not to resell Payment Shares during the Valuation Period, no adjustment shall be
made in the number or value of those Payment Shares or to the Settlement Amount
paid through such Payment Shares. In the event that Citigroup chooses to resell
the Payment Shares during the Valuation Period, then, if the proceeds from the
sale of the Payment Shares (net of brokerage costs) exceed the absolute value of
the Settlement Amount elected by the Company to be paid in Payment Shares (or if
less than all of the Payment Shares are resold, the applicable pro rata portion
of such amount), Citigroup shall refund in cash to the Company an amount equal
to such excess by the close of business on the third Trading Day following the
last day of the Valuation Period. In the event that the proceeds of such sales
(net of brokerage costs) are less than the absolute value of the Settlement
Amount elected by the Company to be paid in Payment Shares (or if less than all
of the Payment Shares are resold, the applicable pro rata portion thereof),
Citigroup shall provide notice thereof to the Company and the Company shall, by
the close of business on the third Trading Day following the last day of the
applicable Valuation Period, at the Company’s option, either (A) pay in
cash an amount equal to such deficit (the “Make-Whole Amount”) or
(B) deliver to Citigroup a number of additional Payment Shares equal to
(x) the Make-Whole Amount divided by (y) the closing price of the Common
Stock on the Exchange on the final day of the applicable Valuation Period;
provided,
however, that in
no event shall the Company be required to deliver a number of shares of Common
Stock that exceeds the Share Cap. 










6












Upon
delivery of additional Payment Shares, an additional Valuation Period shall
apply to the shares so delivered. To the extent that Citigroup elects not to
resell the additional Payment Shares during the additional Valuation Period,
then no further adjustment shall be made in the number or value of those
additional Payment Shares or to the Make-Whole Amount paid through such
additional Payment Shares. In the event that Citigroup chooses to resell the
additional Payment Shares delivered to Citigroup in payment of the Make-Whole
Amount during the additional Valuation Period, then, if the proceeds from the
sale of such additional Payment Shares (net of brokerage costs) exceed the
Make-Whole Amount (or the applicable pro rata portion thereof), Citigroup shall
refund in cash to the Company an amount equal to such excess by the close of
business on the third Trading Day following the last day of the additional
Valuation Period. In the event that the proceeds of all such sales (net of
brokerage costs) are less than the Make-Whole Amount (or the applicable pro rata
portion thereof), Citigroup shall provide notice thereof to the Company and the
Company shall, by the close of business on the third Trading Day following the
last day of the applicable Valuation Period, at the Company’s option, either
(A) pay in cash an amount equal to such deficit (an “Additional Make-Whole
Amount”) or (B) deliver to Citigroup a number of additional Payment Shares
equal to (x) the Additional Make-Whole Amount divided by (y) the closing
price of the Common Stock on the Exchange on the final day of the applicable
Valuation Period; provided,
however, that in
no event shall the Company be required to deliver a number of shares of Common
Stock that exceeds the then applicable Share Cap. The provisions of this
paragraph shall be applied successively until the aggregate proceeds (net of
brokerage costs) received by Citigroup equal the Make-Whole Amount (or the
applicable pro rata portion thereof).




(d) During
any Valuation Period, Citigroup shall have the discretion to control the sale of
Payment Shares or the purchase of Refund Shares (which purchase Citigroup
intends to execute in conformity with Rule 10b-18 or otherwise in a manner that
Citigroup believes in its reasonable discretion is in compliance with all
applicable securities laws), as the case may be, including without limitation
the right to control the time, manner, and volume of such sales or purchases.
Prior to the close of business in New York on any day in the Valuation Period in
which Payment Shares have been sold or Refund Shares purchased, Citigroup will
advise the Company, in a notice sent to the Company by telecopier, of the number
of shares sold or purchased on such day and the prices obtained in such
transactions. The Company represents and warrants, as of each Trading Day in a
Valuation Period for which the Company has elected to receive Refund Shares,
that each of its filings under the Securities Act, the Exchange Act or other
applicable securities laws that are required to be filed have been filed and
that, as of the date of this representation, there is no misstatement of
material fact contained therein or omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
circumstances under which made. 

 

VI.
Payment
Shares  




The
following provisions are applicable if the Company elects to deliver Payment
Shares pursuant to Sections V or XI of this Letter Agreement: 




(a) The
Company agrees to take all actions within its control, including, without
limitation, the procedures set forth in Annex A, to make available to Citigroup
and its affiliates an effective registration statement under the Securities Act
and one or more prospectuses as necessary to allow Citigroup and its affiliates
to comply with the applicable prospectus delivery requirements (the
“Prospectus”) for the resale by Citigroup and its affiliates of the shares of
Common Stock delivered by the Company hereunder (the “Registration Statement”),
such Registration Statement to be effective and Prospectus to be current on each
Trading Day in any Valuation Period and until all such resales by Citigroup (or
its affiliates) have been settled. It is understood that the Registration
Statement and Prospectus may cover a number of shares of Common Stock equal to
all shares to be delivered by the Company hereunder. Citigroup shall provide, by
a reasonable time in advance, such information regarding Citigroup and its
affiliates as shall be required to be included in the Prospectus. The Company
shall pay the applicable registration fee and all costs in connection with the
preparation of the Registration Statement and the Prospectus including, without
limitation, the cost of printing the Prospectus. In addition, the Company agrees
to take all actions set forth in Annex B and otherwise to take such actions
reasonably requested by Citigroup to facilitate the disposition of the Payment
Shares.










7












(b)
The
Company represents,
on each day described in subsection (a), that each of its filings under the
Securities Act, the Exchange Act or other applicable securities laws that are
required to be filed have been filed and that, as of the date of this
representation and as supplemented by any information provided by the Company to
Citigroup in connection with sales on a private placement basis pursuant to
subsection (e) below, there is no misstatement of material fact contained
therein or omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading.

 

(c) The
Company agrees to provide to Citigroup and its affiliates on (or, if requested
by Citigroup, reasonably in advance of) the final Trading Day of the Pricing
Period or other date the number of shares of Common Stock to be delivered is
determined, opinions of counsel, comfort letters, officers’ certificates and
such other documents as may be reasonably requested by Citigroup. The Company
also agrees that Citigroup and its affiliates shall be entitled to perform such
diligence as Citigroup may reasonably request in advance of such date and the
results thereof must be reasonably satisfactory to Citigroup. The Company agrees
to reimburse Citigroup for all reasonable out-of-pocket expenses it incurs in
connection with such diligence and otherwise in connection with the preparation
of the Registration Statement and Prospectus (or any offering document for sales
on a private placement basis pursuant to subsection (e) below), including,
without limitation, the reasonable fees and expenses of one outside counsel to
Citigroup incurred in connection therewith.




(d) The
Company shall, prior to the start of the applicable Valuation Period, enter into
an agreement (the “Transfer Agreement”) with Citigroup in connection with the
public resale of the Payment Shares by Citigroup or its affiliates substantially
similar to underwriting agreements entered into by the Company with respect to
equity securities in which CGMI was a member of the underwriting syndicate; the
Transfer Agreement shall include, without limitation, provisions substantially
similar to those contained in such underwriting agreements relating to the
indemnification of, and contribution in connection with the liability of,
Citigroup and its affiliates. 




(e) If on
any date during the period referred to in subsection (a) the requirements of
subsection (a), (c) or (d) are not satisfied (determined without regard to
whether the cause is within the control of the Company) or the representations
and warranties contained herein with respect to the Company (including, without
limitation, in subsection (b)) are not true and correct, 

 

(i) the
Company shall immediately notify Citigroup thereof;

 

(ii) (A)
Citigroup shall be entitled to cease selling shares of Common Stock pursuant to
the Registration Statement; and (B) if the Registration Statement is not
effective on such date or a stop order suspending the effectiveness of the
Registration Statement has been issued or proceedings for that purpose have been
instituted or threatened, or if the representations and warranties contained in
subsection (b) are not true and correct, and in any such case the Company so
requests, Citigroup shall cease selling shares of Common Stock pursuant to the
Registration Statement; and 

 







8












(iii) if
Citigroup ceases selling shares of Common Stock pursuant to clause (ii), the
Company shall, at its election, (A) purchase from Citigroup any shares of
Common Stock delivered to Citigroup hereunder that remain unsold for an amount
in the aggregate that equals the difference between the absolute value of the
Settlement Amount and any proceeds (net of brokerage costs) received by
Citigroup (or an affiliate of Citigroup) from resales of shares of Common Stock
delivered to Citigroup by the Company hereunder; or (B) direct Citigroup
and its affiliates, in a commercially reasonable manner (or absent any such
election by the Company, Citigroup and its affiliates shall be entitled) to sell
Shares received from the Company hereunder as otherwise provided hereunder on a
private placement basis in compliance with the Securities Act, and the rules and
regulations of the Securities and Exchange Commission (the “SEC”) promulgated
thereunder; provided that if clause (B) applies, the Company shall perform its
obligations under subsection (c) and shall cause its representations in
subsection (b) to be true and correct. If shares are so sold, the Company shall
deliver, promptly upon request from Citigroup, the number of shares of Common
Stock Citigroup determines in a commercially reasonable manner is adequate to
realize aggregate actual proceeds (net of brokerage costs) equal to the absolute
value of the applicable Settlement Amount, and the Company’s obligation to
deliver Shares under this subsection (e) shall be a continuing one until
Citigroup or its affiliates have received actual net proceeds equal to such
amount; provided, however, that in no event shall the Company be required to
deliver a number of shares of Common Stock that exceeds the Share Cap. Upon
receipt of prior written consent of the Company (such consent not to be
unreasonably withheld or delayed) Citigroup and its affiliates shall be entitled
to disclose any material non-public information regarding the Company in their
possession to prospective purchasers in such a private placement, provided that
any such purchaser agrees with Citigroup to maintain such information on a
confidential basis.




VII.
Borrow
Events

 

(a)
Borrow
Cost Increase. If at
any time during the Transaction, Citigroup does not, after using commercially
reasonable efforts, successfully borrow Common Stock (up to a number equal to
the number of Remaining Shares) on terms that require Citigroup to pay or bear
costs in connection with such borrow in an amount less than or equal to the
Fixed Borrow Cost, then Citigroup will act in good faith and in a commercially
reasonable manner (and in consultation with the Company) to (a) make the
corresponding adjustment(s), if any, to any variable relevant to the exercise,
valuation, settlement or payment terms as Citigroup determines appropriate to
account for any excess borrowing costs and (b) determine the effective date(s)
of the adjustment(s). The foregoing notwithstanding Citigroup may not make any
adjustment to the Federal Funds Open Rate or the Closing Fee.




(b)
Loss
of Borrow Termination.
 On any
Trading Day, Citigroup may elect to terminate (“Loss of Borrow Termination”)
this transaction, in whole or in part, as the case may be, in the event and pro
rata to the extent it is no longer able, after commercially reasonable efforts,
to borrow (or maintain a borrowing of) shares of Common Stock in an amount equal
to the number of Remaining Shares. Upon the
occurrence of a Loss of Borrow Termination the Affected Party shall be the
Company and Citigroup shall be the Non-Affected Party.




VIII.
Dividend
Event. 




(a) If
any cash dividend payable to holders of the Common Stock is declared for which
the aggregate cash dividends per share having an ex-dividend date during the
period from and including any Dividend Reference Date to but excluding the
subsequent Dividend Reference Date exceeds the Maximum Dividends Amount set
forth opposite the first date of such period, as defined by the following
schedule, a Dividend Event shall be deemed to have occurred.

 

 







9













 

 


	
      Dividend
      Reference Date
	
      Maximum
      Dividends Amount

	
      November
      24, 2004
	
      $0.5625

	
      February
      24, 2005
	
      $0.5625

	
      May
      24, 2005
	
      $0.5625
      

	
      August
      24, 2005
	
       







(b)
Dividend
Event Termination.
 On any
Trading Day, Citigroup may elect to terminate (a “Dividend Event Termination”)
this transaction upon the occurrence of a Dividend Event. Upon the
occurrence of a Dividend Event Termination the Affected Party shall be the
Company and
Citigroup shall be the Non-Affected Party.




IX.
Adjustment
of Terms




(a)  In the
event an offer is made to the holders of Common Stock to tender in excess of 10%
of the outstanding shares of Common Stock for cash, Citigroup may, in its
reasonable discretion, (i) reduce the number of Trading Days in the Pricing
Period by an amount Citigroup deems appropriate or (ii) adjust the terms of the
transaction so that (A) the final day of the Pricing Period shall be the earlier
of the scheduled final Trading Day of the Pricing Period and the date the tender
offer is consummated and (B) for each of the Trading Days in the Pricing Period
following the date on which the offer is made, the Daily Average Price shall
equal the price per share of Common Stock at which the tender offer is to be
consummated. Citigroup shall notify the Company in writing as to the terms of
any adjustment made pursuant to this Section IX (a) no later than 5 days after
the tender offer is made. The foregoing notwithstanding Citigroup may not make
any adjustment to the Federal Funds Open Rate or the Closing Fee.




(b)  [This
section intentionally left blank.]




(c)  In the
event of any corporate event involving the Company or the Common Stock not
specifically addressed in subsection (a) of this Section IX (including, without
limitation, a non-cash dividend, stock split, reorganization, merger, offer to
tender Common Stock for consideration other than cash, rights offering,
recapitalization or spin-off) or in the event that Citigroup, in its reasonable
good faith judgment, determines that the adjustments described in subsection (a)
of this Section IX will not result in an equitable adjustment of the terms of
the transaction described herein, the terms of the transaction described herein
shall be subject to adjustment by Citigroup (including, without limitation, with
respect to the number of Trading Days in the Pricing Period) as in the exercise
of its good faith judgment it deems appropriate under the circumstances, which
adjustment shall be subject to the approval of the Company. If the parties,
after negotiating in good faith, are unable to determine such adjustments, the
provisions of Section XVII (Dispute Resolution) below shall apply.




X.
Events
of Default




The
occurrence of any of the following events with respect to a party which party
shall be the Defaulting Party (the other party, the “Non-Defaulting Party”)
shall be an Event of Default:




(a)  The
failure to make any payment or any delivery of shares pursuant to the terms of
the Letter Agreement; or










10












(b)  Any
representation or warranty made in this Letter Agreement shall prove to have
been false in any material respect at the time it was made, given or reaffirmed;
or 

 

(c)  The
failure to perform or comply in any material respect with any other obligation
in this Letter Agreement which failure shall continue for 5 business days after
written notice of such failure has been sent to the Defaulting Party;
or

 

(d)  (A) The
initiation of any case, proceeding or other action (1) under any existing or
future law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or other relief of debtors, seeking to have an order
for relief entered with respect to it, or seeking to have itself adjudicated as
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution or composition or other relief under
bankruptcy or insolvency law with respect to it or its debts or (2) which seeks
appointment of a receiver, trustee, custodian, conservator or other similar
official for it or for all or any substantial part of its assets; (B) a general
assignment for the benefit of its creditors; (C) the initiation of any case,
proceeding or other action of a nature referred to in clause (A) hereof which
(1) results in the entry of an order for relief or any such adjudication or
appointment with respect to the party or any of its assets or (2) is not
dismissed, stayed, discharged or bonded for a period of 5 days; (D) the
initiation of any case, proceeding or other action seeking issuance of a warrant
of attachment, execution, or similar process against all or any substantial part
of its assets, which case, proceeding or other action results in the entry of an
order for any such relief which shall not have been vacated, discharged, or
stayed or bonded pending appeal within 30 days from the entry thereof; (E) a
party shall take any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the acts set forth in clauses (A) - (D)
hereof; or (F) either party shall generally not, or shall admit in writing its
inability to, pay its debts as they become due; or 




(e) The
Company shall (A) fail to pay any principal or interest, regardless of amount,
due in respect of any Indebtedness in a principal amount in excess of
$50,000,000, when and as the same shall become due and payable, subject to any
applicable grace periods, or (ii) fail to observe or perform any other term,
covenant, condition or agreement contained in any agreement or instrument
evidencing or governing any such Indebtedness if the effect of any failure
referred to in this clause (B) is to cause, or to permit the holder or holders
of such Indebtedness or a trustee on its or their behalf to cause, such
Indebtedness to become due prior to its stated maturity.




XI.
Remedies





(a) Upon
the occurrence and the continuance of an Event of Default, a Loss of Borrow
Termination, or a Dividend Event Termination the obligation of the
Non-Defaulting Party or the Non-Affected Party (as the case may be) to make any
payment or delivery of shares pursuant to the terms of this Letter Agreement
will, at the option of the Non-Defaulting Party or the Non-Affected Party (as
the case may be), terminate (it being understood that such termination will not
affect or suspend any payment or other obligations of the Defaulting Party or
Affected Party). The Non-Defaulting Party or the Non-Affected Party (as the case
may be) in its sole discretion may immediately, upon notice to the Defaulting
Party or as applicable the Affected Party (a “Loss Notice”), terminate this
transaction by reducing the number of days in the Pricing Period, purchasing the
Remaining Shares to cover its short position or adjusting any other term hereof,
and may sell, liquidate, offset or take any other action with respect to any
short position established or maintained by it in connection with this
transaction. The foregoing notwithstanding Citigroup may not make any adjustment
to the Federal Funds Open Rate or the Closing Fee upon the occurrence of a
Dividend Event.










11












Following
a Loss Notice, the Non-Defaulting Party or the Non-Affected Party (as the case
may be) shall act in good faith and in a commercially reasonable manner (and in
consultation with the other Party) to determine
the amount that such party reasonably in good faith believes to be its total
unreimbursed net losses and costs in connection with this Letter Agreement (the
“Loss”). Such computation shall include any out-of-pocket losses (including but
not limited to the difference between the Initial Share Price and the average
price at which the shares are purchased during the Pricing Period (as such
Pricing Period may be amended as a result of the operation of this Section
XI(a)), and the Closing Fee) and loss or cost incurred as a result of its
terminating, liquidating, obtaining or reestablishing any hedge or related
trading position. In addition to the foregoing, the Non-Defaulting Party or the
Non-Affected Party may include in its determination of its Loss hereunder such
losses and costs (or gains) in respect of any payment or delivery required to
have been made on or before the relevant termination date. 




(b) If
Citibank is the Defaulting Party, upon receipt of a Loss Notice from the
Company, Citibank shall promptly pay to the Company the amount of such Loss in
cash.




(c) If
the Company is the Defaulting Party, or the Affected Party upon receipt of a
Loss Notice from Citibank, the Company shall, at its option, either (i) promptly
pay to Citibank the amount of such Loss in cash or (ii) deliver to Citigroup
within two Trading Days a number of shares of Common Stock equal to (A) the
amount of such Loss divided by (B) the closing price of the Common Stock on the
Exchange for the day upon which the Company receives such Loss Notice, rounded
up to the nearest whole share. Such shares shall be treated as Payment Shares
hereunder, and the provisions of Sections V(c)(ii), V(d) and VI shall apply to
the delivery of such shares (with references to the absolute value of the
Settlement Amount therein being deemed to refer to the amount of the Loss and
with such adjustments as determined by Citigroup to effectuate this provision);
provided that in
no event shall the Company be required to deliver a number of shares of Common
Stock that exceeds the then applicable Share Cap, or (iii) deliver a Dispute
Notice to Citigroup.




(d)
  In
addition to the payments set forth in subsections (b) and (c) above, the
Defaulting Party agrees to indemnify the Non-Defaulting Party from and against
any reasonable expenses (including reasonable legal fees and other expenses of
collection) it may incur as a result of any default by such party. 




(e)
  The
provisions of Section XVII (Dispute Resolution) shall apply to the calculation
of Loss.




XII.
Other
Agreements




(a) The
Company agrees that while this Letter Agreement is in effect, it shall cause
(i) the number of authorized shares of Common Stock minus (ii) the
number of outstanding shares of Common Stock minus (iii) the number of
shares of Common Stock reserved for other purposes minus (iv) without
duplication of clause (iii), the aggregate maximum number of shares of Common
Stock deliverable under warrants, options, swaps, forwards, convertible or
exchangeable securities or other similar transactions, agreements or instruments
issued by the Company or to which the Company is a party that provide for net
share settlement or otherwise may require the issuance of shares of Common Stock
by the Company to exceed the then applicable Share Cap. The parties agree that a
failure by the Company to comply with the preceding sentence shall be an Event
of Default hereunder with respect to the Company without regard to any grace
period that would otherwise be applicable. 










12












(b) The
parties agree that Citibank shall have no greater rights against the Company
hereunder in the event of a bankruptcy, insolvency or dissolution with respect
to the Company than would a holder of shares of Common Stock; provided, however,
that in pursuing a claim against the Company in the event of a bankruptcy,
insolvency or dissolution with respect to Company, Citibank’s rights hereunder
shall rank on a parity with the rights of a holder of shares of Common Stock
enforcing similar rights under a contract involving shares of Common
Stock.




(c) The
Company represents that (i) each of its filings under the Securities Act, the
Exchange Act, or other applicable securities laws that are required to be filed
have been filed and that, as of the respective dates thereof, there is no
misstatement of material fact contained therein or omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, (ii) it will not consolidate or merge with or into any person unless
the surviving person is the Company or another person formed under the laws of a
State of the United States of America and assumes or is responsible, by
operation of law, for all obligations of the Company hereunder, and (iii) that
neither the Company or any agent acting for the Company has, within the four
weeks prior to the Purchase Date, entered into a purchase of a “block” of Common
Stock (within the meaning of Rule 10b-18.




(d) The
material terms of this transaction (and any other similar transactions), and the
consequences of such transactions on the financial condition and results of
operations of the Company, will be disclosed by the Company in accordance with
all rules, regulations, accounting principles (including EITF Issue No. 00-19)
and laws applicable to the Company in its periodic filings under the Exchange
Act and its financial statements and notes thereto.




XIII.
Governing
Law




THIS
LETTER AGREEMENT SHALL BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK WITHOUT
REFERENCE TO THE CHOICE OF LAW RULES THEREOF.




XIV.
Non-confidentiality




Notwithstanding
anything to the contrary herein, (i) Citibank acknowledges that this Letter
Agreement may be intended to produce U.S. federal income tax benefits for the
Company and (ii) the Company and Citibank hereby agree that (A) the Company
is not obligated to Citibank to keep confidential from any and all persons or
otherwise limit the use of any aspect of this Letter Agreement relating to the
structure or tax aspects thereof, and (B) Citibank does not assert any claim of
proprietary ownership in respect of any such aspect of this Letter
Agreement.




XV.
Assignment
and Transfer




The
rights and duties under this Letter Agreement may not be assigned or transferred
by either party hereto without the prior written consent of the other party
hereto; provided,
however, that
Citibank may assign its obligation to deliver or receive delivery of Common
Stock hereunder to any of its affiliates without the prior written consent of
the Company. Upon any such assignment Citibank shall indemnify the Company from
and against any loss, cost or expense relating to the failure of such affiliate
to perform its delivery obligation.










13












XVI.
Calculations




To the
extent any calculation, adjustment or determination is required to be made by
Citibank hereunder, Citibank shall make any such calculation, adjustment, or
determination in good faith after consultation with the Company. 




XVII.
Dispute
Resolution




If the
Company disputes (i) Citibank’s calculation of the Settlement Amount or (ii) any
adjustment made pursuant to Section IX or any other adjustment made pursuant to
this Letter Agreement, then the Company shall notify Citibank of the dispute in
writing no later than the close of business on the third business day on which
both parties are open for business following the business day on which the
Company is notified of the Settlement Amount, adjustment, or the delivery of a
Loss Notice (the “Dispute Notice”). The Company and Citibank agree to use
commercially reasonable efforts in good faith to promptly reach an agreement as
to the Settlement Amount or adjustment. In the event that the Company and
Citibank are not able to reach agreement on the Settlement Amount or adjustment
within 24 hours of the Dispute Notice, the Company and Citibank shall appoint a
third party arbitrator with sufficient expertise to determine the appropriate
Settlement Amount or adjustment and the determination of such third party
arbitrator shall be final and binding on both parties provided, however, that if
the parties are unable to agree in good faith on such arbitrator within one (1)
business day then each party shall select promptly an independent arbitrator
which arbitrators shall agree on a third party arbitrator. The parties shall
bear the cost of such arbitration as the arbitrator shall
determine.




XVIII. Indemnification




The
Company agrees to indemnify Citigroup and its affiliates and their respective
directors, officers, agents and controlling parties (Citigroup and each such
affiliate or person being an “Indemnified Party”) from and against any and all
losses, claims, damages and liabilities, joint and several, incurred by or
asserted against such Indemnified Party arising out of, in connection with, or
relating to, any breach of any agreement made by the Company in Section IV of
this Letter Agreement (“Losses”) and will reimburse any Indemnified Party for
all reasonable expenses (including reasonable legal fees and expenses) as they
are incurred in connection with the investigation of, preparation for, or
defense of any pending or threatened claim or any action or proceeding arising
therefrom, whether or not such Indemnified Party is a party thereto. The Company
will not be liable under this Indemnity paragraph to the extent that any loss,
claim, damage, liability or expense is found in a final and nonappealable
judgment by a court to have resulted from Citigroup’s negligence or willful
misconduct. Citigroup shall promptly notify the Company of any
Losses.




XIX.
Notices



Unless
otherwise specified, notices under this Letter Agreement may be made by
telephone, to be confirmed in writing to the address below. Changes to the
Notices must be made in writing.




(a) If to the
Company:




TXU
Corp.

Energy
Plaza

1601
Bryan Street

Dallas,
TX 75201

Attn:
Legal Department

Telephone:
(214) 812-6005

Facsimile:
(214) 812-6032






(b) If to
Citigroup:




Citigroup
Global Markets Inc.

as agent
for Citibank, N.A.

390
Greenwich Street

New York,
NY 10013

Attn:
Equity Derivatives

Telephone:
(212) 723-7362 

Facsimile:
(212) 723-8750











14













Please
confirm your agreement to the foregoing by signing and returning to us the
enclosed duplicate of this Letter Agreement.




Very
truly yours,




CITIGROUP
GLOBAL MARKETS INC.

as agent
for 

CITIBANK,
N.A. 

By:
__________________________



                                                               
Name:

Authorized
Representative




CITIBANK,
N.A.

By:
__________________________



                       
Name:

Authorized
Representative







Acknowledged
and agreed to as of

the date
first above written,




TXU
CORP.










By:_________________________________

Name:

Title:













15