THE TRANSFER OF THIS NOTE IS SUBJECT TO THE CONDITIONS SPECIFIED IN AN
EXCHANGE AGREEMENT AMONG THE COMPANY, TXU CORP. AND THE HOLDER, A COPY
OF SUCH AGREEMENT AS IN EFFECT FROM TIME TO TIME WILL BE FURNISHED
WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN
REQUEST.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION
FROM REGISTRATION THEREUNDER.
TXU ENERGY COMPANY LLC
$472,420,757.46 Exchangeable Subordinated Note
Dated as of November 22, 2002
FOR VALUE RECEIVED, the undersigned, TXU Energy Company LLC, a Delaware
limited liability company (the "COMPANY"), HEREBY PROMISES TO PAY UXT
INTERMEDIARY LLC or registered assigns (as further defined herein, the "HOLDER")
the principal amount of $472,420,757.46 on November 22, 2012.
The Company hereby promises to pay interest on the unpaid principal
amount hereof from the date hereof until such principal amount is paid in full,
payable on the dates and at the rates hereinafter set forth.
Article I
DEFINITIONS
SECTION 1.01. Definitions.
The following terms used in this Note shall have the following meanings
(unless otherwise expressly provided in this Note):
"AFFILIATE" means with respect to any Person, any other Person
controlling, controlled by, or under common control with such first Person. For
the avoidance of doubt, the Company and its Affiliates shall be considered
Affiliates of the Company and the Holders and their Affiliates shall not be
considered Affiliates of the Company.
"AFFILIATED EMPLOYEE BENEFIT TRUST" means any trust that is a successor
to the assets held by a trust established under an employee benefit plan subject
to ERISA or any other trust established directly or indirectly under such plan
or any other such plan having the same sponsor.
"AGREEMENT VALUE" means, for each hedge agreement, on any date of
determination, an amount determined in good faith by the Company equal to: (a)
in the case of any hedge agreement documented pursuant to the Master Agreement
(Multicurrency-Cross Border) published by the International Swap and Derivatives
Association, Inc. (the "MASTER AGREEMENT"), the amount, if any, that would be
payable by or to the Company or any of its Subsidiaries to or from its
counterparty to such hedge agreement, as if (i) such hedge agreement was
terminated early on such date of determination and, (ii) the Company or such
Subsidiary was the sole "Affected Party", and assumes second method and market
quotation and adjusts for collateral positions, or (b) in the case of a hedge
agreement traded on an exchange, the xxxx-to-market value of such hedge
agreement, which will be the unrealized gain or loss on such hedge agreement to
the Company or such Subsidiary to such hedge agreement determined in good faith
by the Company based on the settlement price of such hedge agreement on such
date of determination, or (c) in all other cases, the xxxx-to-market value of
such hedge agreement, which will be the unrealized gain or loss on such hedge
agreement to the Company or such Subsidiary to such hedge agreement determined
in good faith by the Company; capitalized terms used and not otherwise defined
in this definition shall have the meaning set forth in the above described
Master Agreement.
"AVERAGE CLOSING PRICE" means, for any Fiscal Quarter, the average of
closing prices of a share of TXU Common Stock on the New York Stock Exchange
Corporate Transactions Reporting System, as reported in The Wall Street Journal,
for the period commencing on the first day of such Fiscal Quarter and ending on
the last day of such Fiscal Quarter.
"BANKRUPTCY" means, with respect to a Person, (a) that such Person has
(i) made an assignment for the benefit of creditors; (ii) filed a voluntary
petition in bankruptcy; (iii) been adjudged bankrupt, or insolvent; or had
entered against such Person an order of relief in any bankruptcy or insolvency
proceeding; (iv) filed a petition or an answer seeking for such Person any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute, law or regulation or filed an answer or
other pleading admitting or failing to contest the material allegations of a
petition filed against such Person in any proceeding of such nature; or (v)
sought, consented to, or acquiesced in the appointment of a trustee, receiver or
liquidator of such Person or of all or any substantial part of such Person's
properties; (b) 60 days have elapsed after the commencement of any proceeding
against such Person seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any statute, law
or regulation and such proceeding has not been dismissed; or (c) 60 days have
elapsed since the appointment without such Person's consent or acquiescence of a
trustee, receiver or liquidator of such Person or of all or any substantial part
of such Person's properties and such appointment has not been vacated or stayed
or the appointment is not vacated within 60 days after the expiration of such
stay.
"BOARD OF MANAGERS" has the meaning set forth in the Limited Liability
Company Agreement.
"BUSINESS" means the generation of electricity, wholesale energy
trading, retail energy marketing, energy delivery and other energy-related
services by the Company or any of their respective Subsidiaries.
"BUSINESS DAY" means any day other than a Saturday, Sunday or any other
day which is a legal holiday under the laws of the States of New York or Texas
or a day on which national banking associations in such States are authorized or
required by law or other governmental action to close.
2
"CAPITAL EXPENDITURES" means expenditures made or liabilities incurred
for the acquisition of any fixed assets or improvements, replacements,
substitutions or additions thereto that are capitalized on the balance sheet of
the applicable Person prepared in accordance with GAAP.
"CERTIFICATE OF FORMATION" means the Original Certificate of Formation
as it may be amended, restated, supplemented or otherwise modified from time to
time on or after the date hereof.
"CHANGE OF CONTROL" means the consummation of any transaction or series
of related transactions that will result in any Person or group of Persons, in
each case as defined in the Exchange Act: (i) becoming the beneficial owner,
directly or indirectly, of more than 30% of the aggregate voting power of the
Company, Holdings or TXU Corp. or 30% of the aggregate fair market value of the
assets of the Company, Holdings or TXU Corp., (ii) acquiring, by contract or
otherwise, the power to direct or cause the direction of the management or
policies of the Company, Holdings or TXU Corp., or (iii) otherwise becoming the
beneficial owner, directly or indirectly, of more than 30% of the ownership
interests in the Company.
"CODE" means the United States Internal Revenue Code of 1986, as
amended from time to time.
"COMPANY" has the meaning set forth in the Preamble.
"COMPETITOR" means, with respect to the Company or any of its
Affiliates, a Person (or an Affiliate of an entity) that is significantly
involved in the generation of electricity, wholesale energy trading, retail
energy marketing or energy delivery.
"DEFAULT INTEREST" shall have the meaning set forth in Section 2.05.
"DELAWARE ACT" means the Delaware Limited Liability Company Act, 6
Xxx.xx. 18-101 et seq., as the same may be amended from time to time.
"DISTRIBUTE" means to make one or more Distributions.
"DISTRIBUTION" means the payment or distribution by the Company of any
money or property other than money to a Member (i) on account of such Member's
Membership Interest as provided in the Limited Liability Company Agreement or
(ii) in redemption or liquidation of all or any portion of such Member's
Membership Interest.
"DLJ ENTITY" or "DLJ ENTITIES" means each investor or investors listed
on Schedule II.
"DLJ VCOC FUND" means UXT AIV, L.P., a Delaware limited partnership, or
a DLJ Entity or Affiliate thereof designated by UXT AIV, L.P.
3
"EBITDA" means, without duplication, the consolidated Net Income of the
Company and its Subsidiaries determined in accordance with GAAP consistently
applied, plus any amounts subtracted in calculating Net Income in respect of
interest expense, Taxes, depreciation and amortization, less (i) any gain plus
any loss realized in connection with the sale of any assets or disposition of
any securities, other than those included in cash flow from operations, (ii) any
extraordinary or non-recurring gain plus any loss or (iii) any non-cash
extraordinary gain, plus (iv) any non-cash extraordinary loss.
"ENCUMBER" means, with respect to a Person, creating or suffering to
exist any Encumbrance against any of the property of such Person.
"ENCUMBRANCE" means any lien, mortgage, pledge, collateral assignment,
security interest, hypothecation or other encumbrance.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE AGREEMENT" means the Exchange Agreement, dated as of the date
hereof, by and among the Company, TXU Corp. and the Holders.
"EXCHANGED NOTE PRINCIPAL" means the amount of Notes exchanged into TXU
Common Stock pursuant to the Exchange Agreement.
"FISCAL QUARTER" means any three-month accounting period of the Company
in the Fiscal Year.
"FISCAL YEAR" means the annual accounting period of the Company, which
shall be the calendar year or such portion of a calendar year during which the
Company is in existence.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time, consistently applied.
"GOVERNMENTAL AUTHORITY" means any United States or non-United States
federal, national, supranational, State, provincial, local, or similar
government, governmental, regulatory or administrative authority, agency or
commission or any court, tribunal, or judicial or arbitral body.
"HOLDER" means any Person identified as the registered holder of this
Note in the Register.
"HOLDINGS" means TXU US Holdings Company, a Texas corporation.
"INDEBTEDNESS" of any Person means, without duplication, net of
restricted cash and cash equivalents off-setting Indebtedness (a) all
indebtedness of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (c)
all obligations of such Person to pay the deferred purchase price of property or
services (other than trade payables and accrued liabilities arising in the
ordinary course of business), (d) all indebtedness created or arising under any
4
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (e) all capitalized lease obligations of such Person,
(f) all obligations, contingent or otherwise, of such Person under acceptance,
letter of credit or similar facilities securing Indebtedness and all interest
rate or foreign exchange hedging transactions valued at the Agreement Value
thereof, (g) all unconditional obligations of such Person to purchase, redeem,
retire, defease or otherwise acquire for value any capital stock of such Person
or any warrants, rights or options to acquire such capital stock, (h) all
Indebtedness of any other Person of the type referred to in clauses (a) through
(g) guaranteed by such Person or for which such Person shall otherwise
(including pursuant to any keepwell, makewell or similar arrangement) become
directly or indirectly liable (other than indirectly as a result of a
performance guarantee not entered into with respect to Indebtedness), and (i)
all third party Indebtedness of the type referred to in clauses (a) through (h)
above secured by any lien or security interest on property (including accounts
and contract rights) owned by the Person whose Indebtedness is being measured,
even though such Person has not assumed or become liable for the payment of such
third party Indebtedness, the amount of such obligation being deemed to be the
lesser of the net book value of such property or the amount of the obligation so
secured; provided that (i) true sales of accounts receivable and (ii) the
obligation evidenced by this Note and the Other Notes, shall not constitute
"Indebtedness" hereunder.
"INTEREST COVERAGE RATIO" means the ratio of EBITDA of the Company to
consolidated cash interest expense of the Company and its Subsidiaries on all
Indebtedness.
"INTEREST PAYMENT DATE" means (a) prior to the occurrence of a Reset
Event in respect of which the Company has elected to make payment under Section
2.01(b), the date five (5) Business Days after each Fiscal Quarter, and if such
day is not a Business Day, then the next succeeding Business Day and (b) after
the occurrence of a Reset Event in respect of which the Company has elected to
make payment under Section 2.01(b), each date on which dividends are paid in
respect of the shares of TXU Common Stock.
"LAW" means any United States or non-United States federal, national,
supranational, state, provincial, local or similar statute, law, ordinance,
regulation, rule, code, order, requirement or rule of law (including, without
limitation, common law).
"LIMITED LIABILITY COMPANY AGREEMENT" means the limited liability
company agreement of TXU Energy Company LLC, as amended pursuant to the Purchase
Agreement.
"LOSS" has the meaning set forth in Section 7.01(a).
"MAJORITY IN VOTING INTEREST" means, at any time, a Holder or Holders
that own a majority of the principal amount of the Notes outstanding at such
time, voting together as a single class.
"MANAGER" means a member of the Board of Managers.
"MEMBER" means a "member" of the Company.
5
"MEMBERSHIP INTEREST" of any Member at any time means the entire
ownership interest of such Member in the Company at such time, including all
benefits to which the owner of such Membership Interest is entitled under the
Limited Liability Company Agreement and applicable law, together with all
obligations of such Member under the Limited Liability Company Agreement and
applicable law.
"NET INCOME" means with respect to any Fiscal Year, or part thereof,
the net income (or net loss) of the Company for such period as determined on a
consolidated basis and in accordance with GAAP.
"NOTE" means this Exchangeable Subordinated Note, each Other Note and
each additional Note issued upon any transfer of an interest in all or any part
of this Note; and "NOTES" means, collectively, all of the foregoing.
"OFFICER" means an officer of the Company.
"ORIGINAL CERTIFICATE OF FORMATION" has the meaning set forth in the
Limited Liability Company Agreement.
"OTHER NOTE" means each Exchangeable Subordinated Note in substantially
the form of this Note issued on the date hereof and each additional Note issued
upon any transfer of an interest in all or any part of such Other Note.
"PAYMENT DEFAULT" means any failure by the Company to pay principal or
interest when due under this Note.
"PERMITTED TRANSFEREE" means in the case of any DLJ Entity, (A) any
other DLJ Entity, (B) any general or limited partner of any DLJ Entity (a "DLJ
Partner"), and any Affiliated Employee Benefit Trust or Person that is an
Affiliate of any DLJ Partner (collectively, the "DLJ Affiliates"), (C) any
managing director, general partner, director, limited partner, officer or
employee of any DLJ Entity or of any DLJ Affiliate, or the heirs, executors,
administrators, testamentary trustees, legatees or beneficiaries of any of the
foregoing persons referred to in this clause (C) (collectively, "DLJ
Associates"), (D) a trust (to the extent recognized by applicable Law), the
beneficiaries of which, or a corporation, limited liability company or
partnership, all of the stockholders, members or general or limited partners of
which, include only XXX Xxxxxxxx, XXX Xxxxxxxxxx, XXX Associates, their spouses
or their lineal descendants or (E) a voting trustee for one or more DLJ
Entities, DLJ Affiliates or DLJ Associates under the terms of a voting trust (to
the extent recognized by applicable Law).
"PERSON" means any individual, corporation, partnership, limited
liability company, trust, joint venture, governmental entity or other
unincorporated entity, association or group.
"PURCHASE AGREEMENT" means the Purchase Agreement, dated as of November
18, 2002, by and between the Company and the initial Holder, as amended,
restated, supplemented or otherwise modified pursuant to the terms thereof from
time to time.
"REGISTER" has the meaning set forth in Section 6.03.
6
"REGULATION" means any rule or regulation of any Governmental Authority
having the effect of Law or any rule or regulation of any self-regulatory
organization.
"RESET AMOUNT" means with respect to the unpaid principal amount
outstanding on the Note for any Fiscal Quarter ending after the occurrence of a
Reset Event, an amount equal to the aggregate dividend that would be payable
during such Fiscal Quarter in respect of the shares of TXU Common Stock that
would be determined by dividing the outstanding principal amount of this Note by
the average closing price for TXU Common Stock for such Fiscal Quarter.
"RESET EVENT" means, for any Fiscal Quarter, an Average Closing Price
for TXU Common Stock in excess of $39.45, as adjusted to account for stock
splits, stock dividends and similar occurrences.
"RESTRICTED SECURITIES" means (a) all Membership Interests and Notes
issued by the Company and (b) any securities issued with respect to, or in
exchange for, the Membership Interests or Notes referred to in clause (a) above
in connection with a conversion, combination of units or shares, exchange,
recapitalization, merger, consolidation or other reorganization, including in
connection with the consummation of any reorganization plan.
"STATE" means any one of the 50 states of the United States of America
or the District of Columbia.
"SUBSIDIARY" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (a) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by such Person or one or more of the other
Subsidiaries of such Person or a combination thereof, or (b) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of such Person or entity or a combination thereof. For purposes of
this Note, a Person or Persons shall be deemed to have a majority ownership
interest in a limited liability company, partnership, association or other
business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control any managing director, managing member,
or general partner of such limited liability company, partnership, association
or other business entity.
"TAXES" means all federal, State, local and foreign income, profits,
franchise, gross receipts, environmental, customs duty, capital stock,
severance, stamp, windfall profit, payroll, sales, use, transfer, employment,
unemployment, disability, use, property, withholding, excise, production, value
added, occupancy and other taxes, duties or assessments of any nature
whatsoever, together with all interest, penalties and additions imposed with
respect thereto.
"THIRD PARTY CLAIMS" has the meaning set forth in Section 7.01(b).
"TRANSFER" means (a) as a noun, the transfer of ownership by sale,
exchange, assignment, gift, donation, grant or other conveyance of any kind,
whether voluntary or involuntary, including Transfers by operation of law or
7
legal process (and hereby expressly including, with respect to a Holder,
assignee or other Person, any voluntary or involuntary appointment of a
receiver, trustee, liquidator, custodian or other similar official for such
Holder or all or any part of such Holder, assignee or other Person or all or any
part of the property of such Holder, assignee or other Person under any
bankruptcy, reorganization or insolvency law and (b) as a verb, the act of
making any voluntary or involuntary Transfer.
"TREASURY REGULATIONS" means the income Tax regulations promulgated
under the Code as amended.
"TXU COMMON STOCK" means the common stock of TXU Corp., without par
value.
"TXU CORP." means TXU Corp., a Texas corporation.
SECTION 1.02. Other Definitional Provisions.
(a) All terms in this Note shall have the defined meanings when used in
any certificate or other document made or delivered pursuant hereto unless
otherwise defined therein.
(b) As used in this Note and in any certificate or other documents made
or delivered pursuant hereto or thereto, accounting terms not defined in this
Note or in any such certificate or other document, and accounting terms partly
defined in this Note or in any such certificate or other document to the extent
not defined, shall have the respective meanings given to them under GAAP. To the
extent that the definitions of accounting terms in this Note or in any such
certificate or other document are inconsistent with the meanings of such terms
under GAAP, the definitions contained in this Note or in any such certificate or
other document shall control.
(c) The words "hereof," "herein," "hereunder," and words of similar
import when used in this Note shall refer to this Note as a whole and not to any
particular provision of this Note; Section references contained in this Note are
references to Sections in this Note unless otherwise specified; and the term
"including" shall mean "including without limitation."
(d) The definitions contained in this Note are applicable to the
singular as well as the plural forms of such terms.
(e) Common nouns and pronouns and any variations thereof shall be
deemed to refer to masculine, feminine, or neuter, singular or plural, as the
identity of the Person, Persons or other reference in the context requires.
Whenever used herein, "or" shall include both the conjunctive and disjunctive,
"any" shall mean "one or more."
(f) Any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
8
Article II
TERMS OF PAYMENT
SECTION 2.01. Interest Payment. (a) The Company shall pay interest on
the unpaid principal amount of this Note at a rate per annum equal to 9.00%,
payable quarterly in arrears on each Interest Payment Date; provided, however,
that, the Company may, by notice to the Holder, elect to pay all or any portion
of such interest by adding it to the principal amount of this Note, whereupon
such amount shall bear interest at the rate aforesaid and shall no longer be
considered to be interest due under this Section 2.01(a). Upon the receipt by
the Holder of a notice of such election by the Company, the Holder shall record
the amount, the date such amount is added to the principal amount of this Note
and the aggregate principal amount of this Note in accordance with its usual
practice and, prior to any transfer of this Note, such information shall be
endorsed on the grid attached hereto, which is a part of this Note.
(b) Notwithstanding anything provided in Section 2.01(a), from and
after the date of a Reset Event, the Company shall have the option to pay
interest on the unpaid principal amount of this Note (excluding any additions to
the principal amount pursuant to Section 2.01(a) which shall continue to bear
interest pursuant to Section 2.01(a) or 2.05, as the case maybe) in an amount
equal to the Reset Amount payable in arrears on each Interest Payment Date.
SECTION 2.02. No Prepayment. The Company shall not be permitted to
prepay this Note in whole or in part; provided, however, that the Company may
pay at any time any amounts added to the principal amount of this Note pursuant
to Section 2.01(a).
SECTION 2.03. Payments and Computations. The Company shall make each
payment hereunder not later than 1:00 p.m. (New York City time) on the day when
due in U.S. dollars to the Holder at its address referred to on Schedule I
attached hereto in same day funds. All computations of interest shall be made on
the basis of a year of 360 days comprised of four 90 day quarters; provided,
however, that in the case of the first interest payment under this Note,
interest shall be computed on the basis of the actual number of days elapsed
from the date of the initial funding under this Note to such first Interest
Payment Date. Whenever any payment shall be stated to be due on a day other than
a Business Day, such payment shall be made on the next succeeding Business Day,
and such extension of time shall not in such case be included in the computation
of payment of interest.
SECTION 2.04. Exchange Right. The Company shall have the right by
providing written notice to the Holder at any time prior to the date that is 180
days from the date of funding by the Holder under this Note, to require the
Holder to exchange its interest in this Note for a preferred equity interest in
the Company with substantially identical economic and other terms and otherwise
in form and substance satisfactory to the Holder; provided, that, any such
exchange must be consummated prior to the date that is 180 days from the date of
receipt of such notice by the Holder.
SECTION 2.05. Default Interest. Upon the occurrence and during the
continuance of either of (a) a Payment Default or (b) the making of any
Distribution by the Company during any Fiscal Quarter in respect of which the
Company does not pay cash interest on this Note or has not repaid all amounts
added to the principal amount of this Note pursuant to Section 2.01(a), the
Company shall pay interest on (i) the unpaid principal amount of this Note owing
9
to the Holder, payable in arrears on the dates referred to in Section 2.01(a) or
(b) above and on demand, at a rate per annum equal at all times to 5% per annum
above the rate per annum required to be paid on such principal amount pursuant
to Section 2.01(a) or (b) above and (ii) to the fullest extent permitted by law,
the amount of any interest payable under this Note that is not paid when due,
from the date such amount shall be due until such amount shall be paid in full,
payable in arrears on the date such amount shall be paid in full and on demand,
at a rate per annum equal at all times to 5% per annum above the rate per annum
required to be paid pursuant to Section 2.01(a) or (b) above ("DEFAULT
INTEREST").
Article III
COVENANTS AND REPRESENTATION AND WARRANTY
SECTION 3.01. Accounting Books and Records.
(a) The Company shall keep on site at its principal place of business
each of the following:
(i) separate books of account for the Company which shall show a true
and accurate record of all costs and expenses incurred, all charges made,
all credits made and received, and all income derived in connection with
the conduct of the Company and the operation of the Business in accordance
with this Note;
(ii) a current list of the full name and last known business,
residence, or mailing address of each Member and Holder, both past and
present;
(iii) a copy of the Certificate of Formation, together with executed
copies of any powers of attorney pursuant to which any amendment has been
executed;
(iv) copies of the Company's federal, State, local and foreign income
Tax returns and reports, if any, for the six most recent Fiscal Years;
(v) copies of the Limited Liability Company Agreement;
(vi) copies of each Note;
(vii) copies of any writings permitted or required under Section
18-502 of the Delaware Act regarding the obligation of a Member to perform
any enforceable promise to contribute cash or property or to perform
services as consideration for such Member's capital contribution; and
(viii) any written consents obtained from Members pursuant to Section
18-302 of the Delaware Act regarding action taken by Members without a
meeting.
(b) The Company shall use the accrual method of accounting for Tax
purposes and shall use GAAP in the preparation of its financial reports and
shall keep its books and records in accordance with the foregoing. Any Holder
that is a DLJ Entity (a "DLJ HOLDER") or its designated representative has the
right to have reasonable access to and inspect and copy the contents of such
books or records and shall also have reasonable access during normal business
hours to such additional financial information, documents, books and records as
such DLJ Holder may reasonably request; provided that the Company shall have no
10
obligation to provide such access if the DLJ Entities together with their
Permitted Transferees own, in the aggregate, less than 10% of the original
principal amount of the Notes. The rights granted to a DLJ Holder pursuant to
this Section 3.01 are expressly subject to compliance by such DLJ Holder with
the safety, security and confidentiality procedures and guidelines of the
Company, as such procedures and guidelines may be established from time to time.
SECTION 3.02. Reports.
(a) Periodic and Other Reports. The Company shall cause to be delivered
to each Holder and the DLJ VCOC Fund, so long as it directly or indirectly holds
any interest in the Notes, financial statements, reports and notices referred to
below. The financial statements listed in clauses (i) and (ii) below shall be
prepared, in each case on a consolidated basis in accordance with GAAP, and such
other reports as any Holder and the DLJ VCOC Fund, so long as it directly or
indirectly holds any interest in the Notes, may reasonably request from time to
time. The quarterly financial statements referred to in clause (ii) below may be
subject to normal period-end adjustments.
(i) As soon as practicable following the end of each Fiscal Year (and
in any event not later than 120 days after the end of such Fiscal Year, or
such earlier date as may be required by law), an audited balance sheet of
the Company as of the end of such Fiscal Year and the related statements of
operations, Members' capital accounts and changes therein, and cash flows
for such Fiscal Year, together with appropriate notes to such financial
statements and supporting schedules, and in each case, to the extent the
Company was in existence, setting forth in comparative form the
corresponding figures for the immediately preceding Fiscal Year end (in the
case of the balance sheet) and the two (2) immediately preceding Fiscal
Years (in the case of the statements).
(ii) As soon as practicable following the end of each of the first
three Fiscal Quarters of each Fiscal Year (and in any event not later than
60 days after the end of each such Fiscal Quarter, or such earlier date as
may be required by law), an unaudited balance sheet of the Company as of
the end of such Fiscal Quarter and the related statements of operations and
cash flows for such Fiscal Quarter and for the Fiscal Year to date, in each
case, to the extent the Company was in existence, setting forth in
comparative form the corresponding figures for the prior Fiscal Year's
Fiscal Quarter and the interim period corresponding to the Fiscal Quarter
and the interim period just completed, together with a description of all
material transactions of the Company, which shall be reviewed annually by
an independent auditor.
The statements described in clauses (i) and (ii) above shall be accompanied by
written certification of an Officer that such statements have been prepared in
accordance with GAAP.
(iii) As soon as practicable following the end of each month (and in
any event not later than 30 days after the end of each month), management
reports in a form agreed upon between a Majority in Voting Interest of the
Holders and the Company; provided that the Company shall have no obligation
to provide such management reports if the DLJ Entities together with their
Permitted Transferees own, in the aggregate, less than 10% of the original
principal amount of the Note.
11
(iv) A notice of the occurrence of any Event of Default, or to the
extent actually known by the Company, of any event that with notice, the
passage of time or both would become an Event of Default promptly, but in
any event no later than two Business Days, after an Officer of the Company
has actual knowledge of such occurrence, and a notice setting forth details
of the actions that the Company has taken or proposes to take with respect
thereto, as promptly as practicable, but in any event within ten Business
Days after such Officer obtains actual knowledge of such event.
(v) A notice of the occurrence of a Change of Control, or any event
that is reasonably likely to result in a Change of Control, promptly, but
in no event later than two Business Days, after an Officer of the Company
has actual knowledge of such occurrence.
(vi) Promptly following any such request, such other information as is
reasonably requested by any Holder or the DLJ VCOC Fund.
(b) Each Holder agrees, and the DLJ VCOC Fund shall agree, to keep any
non-public information provided to such Holder or the DLJ VCOC Fund by the
Company confidential and not to disclose such information unless required by law
and acknowledges that the receipt of such information by such Holder or the DLJ
VCOC Fund may restrict the ability of such Holder or the DLJ VCOC Fund to trade
in securities of the Company, TXU Corp. or their Affiliates; provided, that,
such information may be disclosed to such Holder's or the DLJ VCOC Fund's
advisors (in the case of financial advisors only, upon three Business Days'
advance notice to the Company), members or partners as long as they agree to
keep such information confidential.
SECTION 3.03. Separateness.
(a) The funds and other assets of the Company shall not be commingled
with those of any other entity, and the Company shall maintain its accounts
separate from each Member and any other Person.
(b) The Company shall not hold itself out as being liable for the debts
of any other entity other than the Company and its Subsidiaries (collectively,
the "COMPANY GROUP"), and shall conduct its own business in its own name or duly
adopted assumed name.
(c) The Company shall not form, or cause to be formed, any Subsidiary
other than in connection with conducting the Business.
(d) The Company shall act solely through its duly authorized Members,
Managers, Officers or agents in the conduct of the Business, and shall conduct
the Business so as not to confuse others as to the identity or assets of the
Company Group with those of any other entity.
(e) The Company shall maintain separate records, books of account and
financial statements, and shall not commingle its records and books of account
with the records and books of account of any other entity.
12
(f) The Managers shall hold appropriate meetings to authorize all of
its limited liability company actions, which meetings may be held by telephone
conference call or by unanimous written consent.
(g) Other than the obligations, guarantees or pledges existing on
November 18, 2002 and the guarantees of (A) the Energy Plaza building lease
obligations of TXU Corp., (B) an Affiliate's obligations with respect to
operations in Mexico not to exceed $15 million and (C) an Affiliate's
obligations with respect to leased equipment utilized by the Company not to
exceed $25 million, the Company shall not (i) guarantee or become obligated for
the debts of any Member or any Manager, any Affiliate thereof or any other
Person, or otherwise hold out its credit as being available to satisfy the
obligations of any Member, any Manager or any other Person, (ii) pledge its
assets for the benefit of any entity, and (iii) other than pursuant to this
Note, acquire obligations or securities of any Member, any Manager or any
Affiliate, provided, however, that the Company may do all of the foregoing for
the benefit of the Company Group.
(h) The Company shall pay its own liabilities out of its own funds.
(i) The Company Group shall maintain an arms' length relationship or
other relationship commercially reasonable under the circumstances and in
compliance with all regulatory codes of conduct with their Affiliates outside of
the Company Group.
(j) The Company Group shall use its own separate stationery, invoices,
checks
and other business forms.
(k) The Company shall correct any known material misunderstanding
regarding the separate identity of the Company Group.
Nothing in this Section 3.03 or Section 3.04 herein shall be deemed to prohibit
(i) the use of an Affiliate for the provision of services that can be performed
cost effectively on a shared services basis, including treasury, payroll,
accounting, human resources, legal, environmental, engineering, information
technology and other administrative services, or (ii) participation in TXU
Corp.'s money pool for its system companies in accordance with the guidelines
established from time to time therefore, as long as, in each case, such
activities are otherwise in compliance with the provisions of this Section 3.03
and Section 3.04.
SECTION 3.04. Limited Liability and Separateness. Without limiting the
generality of Section 3.03, the Company shall be operated in such a manner as
the Managers deem reasonable and necessary or appropriate to preserve (a) the
limited liability of each of the Members (or their successors) in the Company
and (b) the separateness of the Company from the business of each Member of the
Company or any other Affiliate thereof outside of the Company Group.
SECTION 3.05. Limitations on Distributions. Notwithstanding any
provision to the contrary contained in this Note, the Company shall not make any
Distribution if such Distribution would violate Section 18-607 of the Delaware
Act or other applicable law, any of the Company's debt financing agreements or
any other debt financing agreement of which the Company is a guarantor, but
shall instead make such Distribution as soon as practicable after such time as
the making of such Distribution would not cause such violation.
13
SECTION 3.06. Restricted Actions. The Company shall not, and shall
cause its Subsidiaries not to, without the prior written consent of the Majority
in Voting Interest of the Notes:
(a) Issue or reclassify any class or series of equity securities or
Membership Interests that are, or that are convertible into, a class or
series of equity securities, or Membership Interests of the Company or its
Subsidiaries, as the case may be, that are, senior to or on parity with
this Note.
(b) Incur any Indebtedness, if on a pro forma basis after giving
effect to the incurrence of such Indebtedness at the date of incurrence and
the application of proceeds thereof (i) the ratio of consolidated
Indebtedness of the Company to EBITDA for the four Fiscal Quarters ended
most recently prior to the date of determination thereof would exceed four
times or (ii) the Interest Coverage Ratio for the four Fiscal Quarters
ended most recently prior to the date of determination thereof would not
exceed three times.
(c) Make any amendment to the Limited Liability Company Agreement.
(d) Make any investments, other than ordinary course investments
relating to the Business; provided, however, that no investments shall be
made in the City of New York that shall cause the Company to be deemed to
be conducting operations in the City of New York for the purposes of the
New York City Tax Law.
(e) Enter into operations significantly differing from the Business as
conducted on the date hereof or enter into any new lines of business.
(f) Unless otherwise required by law, merge, consolidate or otherwise
combine the Company with any other Person if such merger, consolidation or
combination would result in the disposition of more than 25% of the
aggregate voting power of the Company or acquire or dispose of assets that
would result in the acquisition or disposition, as the case may be, of more
than 25% of the value of the Company.
(g) Alter the number of Managers comprising the Board of Managers.
(h) Allow any Person to be admitted as a member of the Company.
SECTION 3.07. Treatment for Tax Purposes. (a) The Company agrees that,
for all U.S. federal, state, local and foreign income Tax purposes, this Note
shall be treated as a preferred equity interest in the Company, and unless
prohibited by applicable law, the Company shall elect to be classified as a
partnership (and not as an association, or publicly-traded partnership, taxable
as a corporation). Accordingly, a capital account shall be maintained for the
Holder in accordance with section 1.704-2(b)(2) of the Treasury Regulations,
which shall be increased to reflect the amounts invested by the Holder in the
Company (including amounts deducted from the Purchase Price in respect of the
Structuring Fee and Transaction Expenses pursuant to Section 2.04(a) of the
Purchase Agreement) and allocations of net profits (or, to the extent required,
items of income and gain), and which shall be reduced to reflect distributions
by the Company to the Holder (including amounts payable pursuant to the terms of
this Note) and allocations of net losses (or, to the extent required, items of
deduction or loss). Promptly following the end of each Fiscal Year of the
Company (and in no event later than 90 days after the close of such Fiscal
14
Year), the Company shall provide the Holder with IRS Schedule K-1, reporting the
Holder's share of the taxable income or loss of the Company, and such separately
stated items of income, gain, loss, deduction or credit as required by U.S.
federal income Tax law, and the Company also shall provide such information as
shall be required or reasonably requested by the Holder for purposes of allowing
the Holder to prepare and file its U.S. federal, state, local and foreign income
Tax returns. In the event that this Note is exchanged by the Holder for a
Membership Interest in the Company (at the option of the Company or otherwise),
the Company agrees that, consistent with the U.S. federal, state, local and
foreign income Tax treatment of this Note as a preferred equity interest in the
Company, such an exchange shall be treated as a "nonrecognition transaction"
under section 721 of the Code. Other than any elections made upon the conversion
of the Company to a partnership for federal Tax purposes (which shall be made
consistent with past practice, where applicable), the Company (including any Tax
matters member thereof in its capacity as such) shall not make, revoke or change
any express or deemed Tax election or change any method of Tax accounting if
objected to in writing by the Holders' Tax Representative within 15 days of
receiving notice thereof from the Company (which objection shall not be
unreasonably made, and the Company shall consult with the Holders' Tax
Representative and keep such Holder reasonably informed as to any material Tax
claim, audit or proceeding that, in any case, the Company determines in good
faith could affect the tax treatment of a Holder as owner of a preferred equity
interest in the Company or the amount or Tax character of any Tax item allocated
or to be allocated to the Holder in its capacity as owner. "Holders' Tax
Representative" means a representative designated as such by a Majority in
Voting Interest.
(b) For each Fiscal Year of the Company, net profits (or, if required,
items of income and gain) shall be allocated to the Holder for U.S. federal,
state, local and foreign income Tax purposes only to the extent of the amount of
interest actually paid to the Holder in respect of this Note during such Fiscal
Year. No other net profits or losses (or items of income, gain, loss or
deduction) shall be allocated to the Holder for such purposes, except that, if
no Member of the Company has a positive capital account balance, the Holder may
be allocated a proportionate share of the net losses of the Company, if any,
until its capital account has been reduced to zero. In the event that the Holder
receives an allocation of net losses hereunder, the Holder thereafter shall be
entitled to allocations of net profits (and, if required, items of income or
gain) so that the Holder's capital account will equal the amount that the Holder
would be entitled to receive pursuant to the terms of this Note in connection
with the liquidation or winding up of the Company. Notwithstanding anything to
the contrary herein, the Holder shall not be allocated any capital losses of the
Company.
(c) Notwithstanding anything to the contrary herein, prior to any
exchange of this Note for a Membership Interest in the Company, the Holder shall
not be considered a Member of the Company by reason of its ownership of this
Note for any purpose other than U.S. federal, state, local and foreign income
Tax purposes, and shall not have the rights and obligations of a Member pursuant
to the Limited Liability Company Agreement.
SECTION 3.08. Directors. Subject to and to the extent permitted by
applicable Law and Regulation, for so long as at least 30% of the original
principal amount of the Notes remains held by the DLJ Entities and their
Permitted Transferees, the Board of Managers of the Company shall at all times
include one Manager (the "HOLDER MANAGER") chosen by the DLJ VCOC Fund.
15
SECTION 3.09. Consultation Rights. (a) During any period for which
there is no Holder Manager serving on the Board of Managers, the DLJ VCOC Fund,
if it directly or indirectly holds any interest in the Notes, and is intended to
qualify as a "venture capital operating company" within the meaning of the
regulations of the United States Department of Labor set forth in 29 C.F.R.
Section 2510.3-101 (the "Plan Asset Regulations") shall, upon prior written
notice to the Company, be entitled to consult with and advise the management and
Board of Managers of the Company on significant business issues, including
management's proposed annual business, strategic and operating budgets and
plans, and management will meet with the DLJ VCOC Fund periodically during each
year (but no more frequently than once each calendar quarter) at the Company's
executive offices at mutually agreeable times for such consultation and advice.
(b) The Company agrees to consider, in good faith, the recommendations
of the DLJ VCOC Fund in connection with the matters on which it is consulted as
described above, it being understood and agreed that the ultimate discretion
with respect to all such matters shall be retained by the Company.
(c) The rights granted to the DLJ VCOC Fund under this Agreement
(including, without limitation, under Article III) are intended to enable the
DLJ VCOC Fund to be operated, where applicable, as a "venture capital operating
company" within the meaning of the Plan Asset Regulations, and this Note shall
be interpreted accordingly.
SECTION 3.10. Change of Control Offer. (a) No Member of the Company or
any subsequent transferee may Transfer all or any part of its interests in the
Company without the prior written consent of the Majority in Voting Interest of
the Notes unless the Company offers to purchase all of the outstanding Notes at
a price equal to 101% of the sum of the unpaid principal amount thereof;
provided, however, that a Member may transfer all or any part of its interest to
any direct or indirect wholly-owned subsidiary of TXU Corp.
(b) The Company will give written notice of any Transfer by a Member or
any subsequent transferee, stating the substance and the intended date of the
consummation thereof and irrevocably offering to purchase all of the outstanding
Notes at a price equal to 101% of the unpaid principal amount thereof, not more
than 20 Business Days nor less than 15 Business Days prior to the date of the
consummation thereof, to each Holder of the Notes. Each Holder of the Notes
shall have ten Business Days from the date of the receipt of such notice to
elect (by written notice to the Company or any subsequent transferee, as
applicable) to sell all or any portion of the Notes held by such Holder to the
Class Member or such subsequent transferee, as applicable.
SECTION 3.11. Representation and Warranty Regarding Nature of
Operations. Except as set forth on Section 3.02 of the Disclosure Schedule to
the Purchase Agreement, the Company owns more than 50% of (a) the economic
interest in the assets, earnings or cash flow and (b) the total voting power of
shares of capital stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof,
of each of the entities in which it owns an equity interest. The Company is
primarily engaged, directly or through such entities, in the production or sale
of a product or service other than the investment of capital.
16
Article IV
EVENTS OF DEFAULT
SECTION 4.01. Events of Default. If any of the following events
("EVENTS OF DEFAULT") shall occur and be continuing:
(a) The Company shall fail to pay any installment of principal of, or
interest on, this Note when the same becomes due and payable which in the
case of a failure to pay interest continues for 5 days; or
(b) The Company shall fail to perform or observe (i) any term,
covenant or agreement contained in Section 3.05, 3.06, 3.10 or 7.01 or (ii)
any other term covenant or agreement contained in this Note if such failure
shall remain unremedied for 30 days after written notice thereof shall have
been given to the Company by any Holder; or
(c) The representation and warranty contained in Section 3.10 shall
prove to have been incorrect in any material respect when made; or
(d) The Company or any of its Subsidiaries shall generally not pay its
debts as such debts become due, or shall admit in writing its inability to
pay its debts generally, or shall make a general assignment for the benefit
of creditors; or any proceeding shall be instituted by or against the
Company or any of its Subsidiaries seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts under any
law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of
a receiver, trustee, custodian or other similar official for it or for any
substantial part of its property and, in the case of any such proceeding
instituted against it (but not instituted by it), either such proceeding
shall remain undismissed or unstayed for a period of 60 days, or any of the
actions sought in such proceeding (including, without limitation, the entry
of an order for relief against, or the appointment of a receiver, trustee,
custodian or other similar official for, it or for any substantial part of
its property) shall occur; or the Company or any of its Subsidiaries shall
take any corporate action to authorize any of the actions set forth above
in this subsection (d);
then, and in any such event, a Majority in Voting Interest of the Notes may, by
notice to the Company, declare the Notes, all interest hereon and all other
amounts payable thereunder to be forthwith due and payable, whereupon the Notes,
all such interest and all such amounts shall become and be forthwith due and
payable, without presentment, demand, protest or further notice of any kind, all
of which are hereby expressly waived by the Company; provided, however, that in
the event of an actual or deemed entry of an order for relief with respect to
the Company under the Federal Bankruptcy Code, the Notes, all such interest and
all such amounts shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Company.
17
Article V
SUBORDINATION
SECTION 5.01. Note Subordinate to Senior Indebtedness. The Company
agrees, and each Holder, by his acceptance of this Note, also agrees, that this
Note is and shall be subordinate, to the extent and in the manner hereinafter
set forth, to the prior payment in full of all obligations of the Company now or
hereafter existing, whether for principal, interest (including, without
limitation, interest, as provided in such indebtedness, accruing after the
filing of a petition initiating any proceeding referred to in Section 5.02,
whether or not such interest accrues after the filing of such petition for
purposes of the Bankruptcy Code or is an allowed claim in such proceeding),
fees, expenses or otherwise (all such obligations being the "SENIOR
INDEBTEDNESS").
SECTION 5.02. Events of Subordination. In the event of any dissolution,
winding up, liquidation, arrangement, reorganization, adjustment, protection,
relief or composition of the Company or its debts, whether voluntary or
involuntary, in any bankruptcy, insolvency, arrangement, reorganization,
receivership, relief or other similar case or proceeding under any Federal or
State bankruptcy or similar law or upon an assignment for the benefit of
creditors or any other marshalling of the assets and liabilities of the Company
or otherwise, Senior Indebtedness shall first be paid in full before the Holder
shall be entitled to receive any payment of this Note, and any payment or
distribution of any kind (whether in cash, property or securities) that
otherwise would be payable or deliverable upon or with respect to this Note in
any such case, proceeding, assignment, marshalling or otherwise (including any
payment that may be payable by reason of any other indebtedness of the Company
being subordinated to payment of this Note) shall be paid or delivered directly
to the holders or representatives of the Senior Indebtedness for application (in
the case of cash) to, or as collateral (in the case of non-cash property or
securities) for, the payment or prepayment of the Senior Indebtedness until the
Senior Indebtedness shall have been paid in full.
SECTION 5.03. In Furtherance of Subordination.
(a) All payments or distributions upon or with respect to this Note
that are received by the Holder contrary to the provisions of this Article shall
be received in trust for the benefit of the Holders and owners of Senior
Indebtedness, shall be segregated from other funds and property held by the
Holder and shall be forthwith paid over to the holders and owners of Senior
Indebtedness in the same form as so received (with any necessary endorsement) to
be applied (in the case of cash) to, or held as collateral (in the case of
non-cash property or securities) for, the payment or prepayment of the Senior
Indebtedness in accordance with its terms.
(b) The holders and owners of Senior Indebtedness are hereby authorized
to demand specific performance of the provisions of this Article, whether or not
the Company shall have complied with any of the provisions hereof applicable to
it, at any time when the Holder shall have failed to comply with any of the
provisions of this Article applicable to it. The Holder of this Note hereby
irrevocably waives any defense based on the adequacy of a remedy at law that
might be asserted as a bar to such remedy of specific performance.
18
SECTION 5.04. No Commencement of Any Proceeding. So long as payments or
distributions for or on account of this Note are not permitted pursuant to
Section 5.02, the Holder will not commence, or join with any creditor other than
the holders and owners of Senior Indebtedness in commencing, directly or
indirectly cause the Company to commence, or assist the Company in commencing,
any proceeding referred to in Section 5.02.
SECTION 5.05. Rights of Subrogation. No payment or distribution to the
holders and owners of Senior Indebtedness pursuant to the provisions of this
Article shall entitle the Holder to exercise any right of subrogation in respect
thereof until the Senior Indebtedness shall have been paid in full.
SECTION 5.06. Further Assurances. The Holders and the Company each
will, at the Company's expense and at any time and from time to time, promptly
execute and deliver all further instruments and documents, and take all further
action, that may be necessary or desirable, or that any holder or owner of
Senior Indebtedness may request, in order to protect any right or interest
granted or purported to be granted hereby or to enable any holder or owner of
Senior Indebtedness to exercise and enforce its rights and remedies hereunder.
SECTION 5.07. Agreements in Respect of Subordinated Debt. No amendment,
waiver or other modification of this Note, and no agreement supplemental to this
Note, may adversely affect the rights or interests of any holder or owner of
Senior Indebtedness hereunder.
SECTION 5.08. Agreement by the Company. The Company agrees that it will
not make any payment of this Note, or take any other action, in contravention of
the provisions of this Article.
SECTION 5.09. Obligations Hereunder Not Affected. All rights and
interests of the holders and owners of Senior Indebtedness hereunder, and all
agreements and obligations of the Holder of this Note and the Company under this
Article, shall remain in full force and effect irrespective of:
(i) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Senior Indebtedness, or any other
amendment or waiver of or any consent to any departure from any Senior
Indebtedness, including, without limitation, any increase in the Company's
obligations resulting from the extension of additional credit to the
Company or any of its subsidiaries or otherwise;
(ii) ny taking, exchange, release or non-perfection of any
collateral, or any taking, release or amendment or waiver of or consent to
departure from any guaranty, for all or any of the Senior Indebtedness;
(iii) any manner of application of collateral, or proceeds thereof, to
all or any of the Senior Indebtedness, or any manner of sale or other
disposition of any collateral for all or any of the Senior Indebtedness or
any other assets of the Company or any of its subsidiaries;
(iv) any change, restructuring or termination of the corporate
structure or existence of the Company or any of its subsidiaries; or
19
(v) any other circumstance that might otherwise constitute a defense
available to, or a discharge of, the Company or a subordinated creditor.
The provisions of this Article Five shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any of the Senior
Indebtedness is rescinded or must otherwise be returned by any holder or owner
of Senior Indebtedness upon the insolvency, bankruptcy or reorganization of the
Company or otherwise, all as though such payment had not been made.
SECTION 5.10. Waiver. The Holder of this Note and the Company each
hereby waives promptness, diligence, notice of acceptance and any other notice
with respect to any of the Senior Indebtedness and this Article and any
requirement that any holder or owner of Senior Indebtedness protect, secure,
perfect or insure any security interest or lien or any property subject thereto
or exhaust any right or take any action against the Company or any other person
or entity or any collateral.
SECTION 5.11. No Waiver; Remedies. No failure on the part of any holder
or owner of Senior Indebtedness to exercise, and no delay in exercising, any
right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
SECTION 5.12. Continuing Agreement. The provisions of this Article Five
constitute a continuing agreement and shall (i) remain in full force and effect
until the payment in full of all Senior Indebtedness, (ii) be binding upon the
Holder of this Note, the Company and their respective successors and assigns,
and (iii) inure to the benefit of, and be enforceable by, the holders and owners
of Senior Indebtedness and their respective successors, transferees and assigns.
Article VI
TRANSFER OF NOTE
SECTION 6.01. Restrictions. The Holder acknowledges and agrees that it
shall not Transfer this Note (i) to any Competitor or (ii) in violation of the
Securities Act of 1933, as amended. Any attempted Transfer in violation of the
preceding sentence shall be deemed void ab initio and of no force or effect
whatsoever, and the Company will not record any such Transfer on its books or
treat any purported transferee as the owner of this Note for any purpose. Except
as specifically set forth in this Section 6.01, the Holder shall not be
restricted from any Transfer of the Note.
SECTION 6.02. Legend.
(a) Each Note issued upon any Transfer will bear the following
legend:
"THE TRANSFER OF THIS NOTE IS SUBJECT TO THE CONDITIONS SPECIFIED IN AN
EXCHANGE AGREEMENT AMONG THE COMPANY, TXU CORP. AND THE HOLDER, A COPY
OF SUCH AGREEMENT AS IN EFFECT FROM TIME TO TIME WILL BE FURNISHED
20
WITHOUT CHARGE BY THE ISSUER TO THE HOLDER HEREOF UPON WRITTEN
REQUEST."
(b) Each certificate or instrument evidencing Restricted Securities and
each certificate or instrument issued in exchange for or upon the transfer of
any Restricted Securities (if such securities remain Restricted Securities after
such Transfer) shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION
THEREUNDER."
(c) In addition, each certificate or instrument evidencing Restricted
Securities and each certificate or instrument issued in exchange for or upon the
Transfer of any Restricted Securities (if such securities remain Restricted
Securities after such Transfer) shall be stamped or otherwise imprinted with any
additional legends as may be required by the Company, as applicable to the
holder of such certificate or instrument.
SECTION 6.03. Registration of Notes. The Company shall keep at its
principal executive office a register (the "REGISTER") for the registration and
registration of transfers of Notes. The name and address of each Holder of one
or more Notes, each transfer thereof and the name and address of each transferee
of one or more Notes shall be registered in the Register. Prior to due
presentation for registration of transfer, the Person in whose name any Note
shall be registered shall be deemed and treated as the owner and Holder thereof
for all purposes hereof, and the Company shall not be affected by any notice to
the contrary.
SECTION 6.04. New Notes. Upon surrender of any Note for registration of
Transfer or exchange (and in the case of a surrender for registration of
transfer, duly endorsed or accompanied by a written instrument of transfer duly
executed by the registered Holder of such Note or such Holder's attorney duly
authorized in writing and accompanied by the address for notices of each
transferee of such Note or part thereof), the Company shall execute and deliver,
at the Company's expense, one or more new Notes (as requested by the Holder
thereof) in exchange therefor, in an aggregate principal amount equal to the
unpaid principal amount of the surrendered Note. Each such new Note shall be
payable to such Person as such Holder may request. Each such new Note shall be
dated and bear interest from the date to which interest shall have been paid on
the surrendered Note or dated the date of the surrendered Note if no interest
shall have been paid thereon. Notes shall not be transferred in denominations of
less than $500,000, in the event that the Holder is transferring to an Affiliate
of such Holder, and $10,000,000, in the event that the Holder is transferring to
any other Person; provided, that, if necessary to enable the registration of
transfer by a Holder of its entire holding of Notes, one Note may be in a
21
denomination of less than the foregoing amounts.
Article VII
INDEMNIFICATION
SECTION 7.01. Indemnification of Holders.
(a) The Company hereby agrees to indemnify and hold harmless the Holder
of this Note and its respective shareholders and managers (including any
administrative agent or sub-agent) and each of its respective Affiliates,
officers, directors, employees, agents, successors and assigns but excluding the
Person serving as a Manager pursuant to Section 3.08 hereof to the extent such
Person is indemnified by the Company pursuant to the LLC Agreement (each an
"INDEMNITEE"), for and against all claims, losses, damages, costs, expenses,
awards, judgments and penalties (including, without limitation, attorneys' fees
and expenses) (hereinafter, a "LOSS") arising out of, resulting from or with
respect to, directly or indirectly, the conduct of the business or affairs of
the Company, including without limitation, the operation of the Business.
(b) An Indemnitee shall give the Company notice of any matter that an
Indemnitee has determined has given or could give rise to a right of
indemnification under this Note (a "CLAIM NOTICE"), within 25 days after such
determination, stating the amount of the Loss, if known, and method of
computation thereof. The obligations and liabilities of the Company under this
Article VII with respect to Losses arising from claims of any third party that
are subject to the indemnification provided for in this Article VII ("THIRD
PARTY CLAIMS") shall be governed by the following additional terms and
conditions: if an Indemnitee shall receive notice of any Third Party Claim, the
Indemnitee shall give the Company notice of such Third Party Claim within 25
days after the receipt by the Indemnitee of such notice; provided, however, that
the failure to provide such notice shall not release the Company from any of its
obligations under this Article VII and shall not relieve the Company from any
other obligation or liability that it may have to any Indemnitee otherwise than
under this Article VII. If the Company acknowledges in writing its obligation to
indemnify the Indemnitee hereunder against any Losses that may result from such
Third Party Claim, then the Company shall be entitled to assume and control the
defense of such Third Party Claim at its expense and through counsel of its
choice if it gives notice of its intention to do so to the Indemnitee within
five (5) days of the receipt of such Claim Notice from the Indemnitee; provided,
however, that if there exists or is reasonably likely to exist a conflict of
interest that would make it inappropriate in the judgment of the Indemnitee in
its sole and absolute discretion for the same counsel to represent both the
Indemnitee and the Company, then the Indemnitee shall be entitled to retain its
own counsel in each jurisdiction for which the Indemnitee determines counsel is
required, at the expense of the Company. In the event that the Company exercises
the right to undertake any such defense against any such Third Party Claim as
provided above, the Indemnitee shall cooperate with the Company in such defense
and make available to the Company, at the Company's expense, all witnesses,
pertinent records, materials and information in the Indemnitee's possession or
under the Indemnitee's control relating thereto as is reasonably required by the
Company. Similarly, in the event the Indemnitee is, directly or indirectly,
conducting the defense against any such Third Party Claim, the Company shall
cooperate with the Indemnitee in such defense and make available to the
Indemnitee, at the Company's expense, all such witnesses, records, materials and
information in the Company's possession or under the Company's control relating
thereto as is reasonably required by the Indemnitee. No such Third Party Claim
may be settled by the Company without: (a) the prior written consent (which
consent shall not be unreasonably withheld, delayed or conditioned) of the
Indemnitee unless such settlement contains a full and unconditional release of
the Indemnitee with respect thereto.
22
SECTION 7.02. Nonexclusivitiy of Rights. The indemnification and
advancement and payment of expenses provided by this Article VII: (a) shall not
be deemed exclusive of any other rights to which a Holder or other Person
seeking indemnification may be entitled under any statute, agreement or
otherwise both as to action in such Person's official capacity and as to action
in another capacity while holding such office, (b) shall continue as to any
Person who has ceased to serve in the capacity which initially entitled such
Person to indemnity and advancement and payment of expenses, and (c) shall inure
to the benefit of the heirs, executors, administrators, successors and assigns
of such Holder or such other Person.
SECTION 7.03. Contract Rights. The rights granted pursuant to this
Article VII shall be deemed to be contract rights, and no amendment,
modification or repeal of this Article VII shall have the effect of limiting or
denying any such rights with respect to actions taken or Proceedings arising
prior to any such amendment, modification or repeal.
SECTION 7.04. Savings Clause. If this Article VII or any portion of
this Note shall be invalidated on any ground by any court of competent
jurisdiction, then the Company shall nevertheless indemnify and hold harmless
each Holder or any other Person indemnified pursuant to this Article VII as to
costs, charges and expenses (including, without limitation, attorneys' fees),
judgments, fines and amounts paid in settlement with respect to any action, suit
or proceeding, whether civil, criminal, administrative or investigative, to the
fullest extent permitted by any applicable portion of this Article VII that
shall not have been invalidated and to the fullest extent permitted by
applicable law.
SECTION 7.05. Other Arrangements Not Excluded. The indemnification and
advancement of expenses authorized in or ordered by a court pursuant to this
Article VII:
(a) Does not exclude any other rights to which a Person seeking
indemnification or advancement of expenses may be entitled under any other
agreement, or otherwise, for either an action of any Holder, officer,
employee or agent in the official capacity of such Person or an action in
another capacity while holding such position, except that indemnification,
unless ordered by a court, may not be made to or on behalf of any Holder if
a final adjudication established that its acts or omissions involved
intentional misconduct, fraud or gross negligence and was material to the
cause of action; and
(b) Continues for a person who has ceased to be a Holder, officer,
employee or agent and inures to the benefit of the successors, heirs,
executors and administrators of such a person.
Article VIII
MISCELLANEOUS
SECTION 8.01. Notices.
23
(a) All notices, requests, claims, demands and other communications
under or in connection with this Note shall be given to or made upon: (i) the
Holder, at the Holder's address set forth on Schedule I attached hereto and (ii)
the Company at the following addresses (or in any case to such other address as
the addressee may from time to time designate in writing to the sender):
TXU Corp.
0000 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Treasurer
Facsimile: 000-000-0000
with copies to:
Hunton & Xxxxxxxx
0000 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx, Esq.
Facsimile: 000-000-0000
and
Xxxxxx Xxxx & Priest LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Facsimile: 000-000-0000
(b) All notices, requests, claims, demands and other communications
under or in connection with this Note shall be in writing and shall be deemed
effectively given: (i) upon personal delivery or delivery by courier to the
party to be notified, (ii) three Business Days after deposit with the United
States Post Office, by registered or certified mail, return receipt requested,
postage prepaid and addressed as provided in Section 8.01(a) and (iii) one
Business Day after receipt of confirmation if such notice is sent by facsimile.
SECTION 8.02. Headings and Sections. The descriptive headings in this
Note are inserted for convenience only and are in no way intended to describe,
interpret, define, or limit the scope, extent or intent of this Note or any
provision of this Note. Unless the context requires otherwise, all references in
this Note to Sections, Articles, Exhibits or Schedules shall be deemed to mean
and refer to Sections, Articles, Exhibits or Schedules of or to this Note.
SECTION 8.03. Amendments. This Note may not be amended, supplemented,
modified or restated nor may any provision herein be waived without the express
unanimous written consent of a Majority in Voting Interest of the Holders. Any
waiver of any term or condition shall not be construed as a waiver of any
subsequent breach or a subsequent waiver of the same term or condition, or a
waiver of any other term or condition of this Note. The failure of the Holder to
assert any of its rights hereunder shall not constitute a waiver of any of such
rights. All rights and remedies existing under this Note are cumulative to, and
not exclusive of, any rights or remedies otherwise available.
24
SECTION 8.04. Binding Effect. Except as otherwise provided in this
Note, every covenant, term and provision of this Note shall be binding upon the
Company and shall inure to the benefit of the Holder, the DLJ VCOC Fund and
their distributees, heirs, legal representatives, executors, administrators,
successors and permitted assigns and designees.
SECTION 8.05. Remedies. The Holder shall be entitled to enforce its
rights under this Note specifically, to recover damages and costs (including
reasonable attorneys' fees) caused by any breach of any provision of this Note
and to exercise all other rights existing in its favor. The Company agrees and
acknowledges that money damages may not be an adequate remedy for any breach of
the provisions of this Note and that the Holder may in its sole discretion apply
to any court of law or equity of competent jurisdiction (without posting any
bond or deposit) for specific performance or other injunctive relief in order to
enforce or prevent any violations of the provisions of this Note. If any time
period for giving notice or taking action under this Note expires on a day that
is not a Business Day, the time period shall be extended automatically to the
immediately succeeding Business Day.
SECTION 8.06. Waiver of Jury Trial. THE COMPANY AND, BY ACCEPTING THE
BENEFITS OF THIS NOTE, THE HOLDER HEREBY WAIVE, TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO
ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF UNDER OR, IN CONNECTION
WITH THIS NOTE.
SECTION 8.07. Interpretation. The Holder and the Company have
participated jointly in the negotiation and drafting of this Note. In the event
an ambiguity or question of intent or interpretation arises, this Note shall be
construed as if drafted jointly by the Holder and the Company, and no
presumption or burden of proof shall arise favoring or disfavoring the Holder or
the Company by virtue of the authorship of any of the provisions of this Note.
SECTION 8.08. Governing Law; Consent to Jurisdiction. This Note will be
governed by, and construed in accordance with, the laws of the State of New
York. In any action or proceeding arising out of, related to, or in connection
with this Note, the Company consents to be subject to the jurisdiction and venue
of (a) the Supreme Court of the State of New York in and for the County of New
York, and (b) the United States District Court for the Southern District of New
York. The Company consents to the service of process in any action commenced
hereunder by any method or service acceptable under federal law or the laws of
the State of New York.
SECTION 8.09. Additional Documents and Acts. The Company agrees to
execute and deliver such additional documents and instruments and to perform
such additional acts as may be reasonably necessary or appropriate to
effectuate, carry out and perform all of the terms, provisions and conditions of
this Note and the transactions contemplated hereby.
SECTION 8.10. No Third Party Beneficiaries. Except for the provisions
of Article VII relating to indemnification, this Note shall inure solely to the
benefit of the Holder, the DLJ VCOC Fund and their successors, assigns and
designees, nothing herein, express or implied, is intended to or shall confer
upon any other Person any legal or equitable right, interest, claim or benefit,
of any nature whatsoever, under or on account of this Note.
SECTION 8.11. Holder ERISA Representation. The Holder represents and
warrants that either (i) it is not an "employee benefit plan" within the meaning
25
of Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), a "plan" within the meaning of Section 4975(e)(1) of the
Internal Revenue Code of 1986, as amended (the "Code"), or an entity whose
assets are treated as "plan assets" under the Plan Asset Regulations or (ii) the
purchase and holding of this Note by such Holder will not result in a nonexempt
prohibited transaction under Section 406 of ERISA or Section 4975 of the Code.
26
IN WITNESS WHEREOF, the Company has caused this Note to be executed by
its officers or other representatives thereunto duly authorized, as of the date
first above written.
TXU ENERGY COMPANY LLC
By: /s/ Xxxx X. Xxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxx
Title: Treasurer and Assistant Secretary
27
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Amount Added to Principal Date Added to Principal Aggregate Principal
Amount of Note Under Amount of Note Amount of Note
Section 2.01(a)
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28
SCHEDULE I
ADMINISTRATIVE DETAILS
SCHEDULE II
DLJ ENTITIES
NAME
UXT Holdings-2, LLC
UXT Intermediary, LLC
UXT Holdings (Offshore)
UXT Holdings LLC
UXT-1 Blocker, Inc.
UXT-2 Blocker, Inc.
UXT-3 Blocker, Inc.
UXT-4 Blocker, Inc.
UXT-5 Blocker, Inc.
UXT AIV, L.P.
UXT AIV Blocker, Inc.
DLJ Merchant Banking Partners III, L.P.
DLJ Offshore Partners III, C.V.
DLJ Offshore Partners III-1, C.V.
DLJ Offshore Partners III-2, C.V.
Millennium Partners II, L.P.
DLJMB Partners III GmbH & Co. KG
MBP III Plan Investors, L.P.
THE TRANSFER OF THIS NOTE IS SUBJECT TO THE CONDITIONS SPECIFIED IN AN
EXCHANGE AGREEMENT AMONG THE COMPANY, TXU CORP. AND THE HOLDER, A COPY
OF SUCH AGREEMENT AS IN EFFECT FROM TIME TO TIME WILL BE FURNISHED
WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN
REQUEST.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION
FROM REGISTRATION THEREUNDER.
TXU ENERGY COMPANY LLC
$277,579,242.54 Exchangeable Subordinated Note
Dated as of November 22, 2002
FOR VALUE RECEIVED, the undersigned, TXU Energy Company LLC, a Delaware
limited liability company (the "COMPANY"), HEREBY PROMISES TO PAY UXT
INTERMEDIARY LLC or registered assigns (as further defined herein, the "HOLDER")
the principal amount of $277,579,242.54 on November 22, 2012.
The Company hereby promises to pay interest on the unpaid principal
amount hereof from the date hereof until such principal amount is paid in full,
payable on the dates and at the rates hereinafter set forth.
Article I
DEFINITIONS
SECTION 1.01. Definitions.
The following terms used in this Note shall have the following meanings
(unless otherwise expressly provided in this Note):
"AFFILIATE" means with respect to any Person, any other Person
controlling, controlled by, or under common control with such first Person. For
the avoidance of doubt, the Company and its Affiliates shall be considered
Affiliates of the Company and the Holders and their Affiliates shall not be
considered Affiliates of the Company.
"AFFILIATED EMPLOYEE BENEFIT TRUST" means any trust that is a successor
to the assets held by a trust established under an employee benefit plan subject
to ERISA or any other trust established directly or indirectly under such plan
or any other such plan having the same sponsor.
"AGREEMENT VALUE" means, for each hedge agreement, on any date of
determination, an amount determined in good faith by the Company equal to: (a)
in the case of any hedge agreement documented pursuant to the Master Agreement
(Multicurrency-Cross Border) published by the International Swap and Derivatives
Association, Inc. (the "MASTER AGREEMENT"), the amount, if any, that would be
payable by or to the Company or any of its Subsidiaries to or from its
counterparty to such hedge agreement, as if (i) such hedge agreement was
terminated early on such date of determination and, (ii) the Company or such
Subsidiary was the sole "Affected Party", and assumes second method and market
quotation and adjusts for collateral positions, or (b) in the case of a hedge
agreement traded on an exchange, the xxxx-to-market value of such hedge
agreement, which will be the unrealized gain or loss on such hedge agreement to
the Company or such Subsidiary to such hedge agreement determined in good faith
by the Company based on the settlement price of such hedge agreement on such
date of determination, or (c) in all other cases, the xxxx-to-market value of
such hedge agreement, which will be the unrealized gain or loss on such hedge
agreement to the Company or such Subsidiary to such hedge agreement determined
in good faith by the Company; capitalized terms used and not otherwise defined
in this definition shall have the meaning set forth in the above described
Master Agreement.
"AVERAGE CLOSING PRICE" means, for any Fiscal Quarter, the average of
closing prices of a share of TXU Common Stock on the New York Stock Exchange
Corporate Transactions Reporting System, as reported in The Wall Street Journal,
for the period commencing on the first day of such Fiscal Quarter and ending on
the last day of such Fiscal Quarter.
"BANKRUPTCY" means, with respect to a Person, (a) that such Person has
(i) made an assignment for the benefit of creditors; (ii) filed a voluntary
petition in bankruptcy; (iii) been adjudged bankrupt, or insolvent; or had
entered against such Person an order of relief in any bankruptcy or insolvency
proceeding; (iv) filed a petition or an answer seeking for such Person any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute, law or regulation or filed an answer or
other pleading admitting or failing to contest the material allegations of a
petition filed against such Person in any proceeding of such nature; or (v)
sought, consented to, or acquiesced in the appointment of a trustee, receiver or
liquidator of such Person or of all or any substantial part of such Person's
properties; (b) 60 days have elapsed after the commencement of any proceeding
against such Person seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any statute, law
or regulation and such proceeding has not been dismissed; or (c) 60 days have
elapsed since the appointment without such Person's consent or acquiescence of a
trustee, receiver or liquidator of such Person or of all or any substantial part
of such Person's properties and such appointment has not been vacated or stayed
or the appointment is not vacated within 60 days after the expiration of such
stay.
"BOARD OF MANAGERS" has the meaning set forth in the Limited Liability
Company Agreement.
"BUSINESS" means the generation of electricity, wholesale energy
trading, retail energy marketing, energy delivery and other energy-related
services by the Company or any of their respective Subsidiaries.
"BUSINESS DAY" means any day other than a Saturday, Sunday or any other
day which is a legal holiday under the laws of the States of New York or Texas
or a day on which national banking associations in such States are authorized or
required by law or other governmental action to close.
2
"CAPITAL EXPENDITURES" means expenditures made or liabilities incurred
for the acquisition of any fixed assets or improvements, replacements,
substitutions or additions thereto that are capitalized on the balance sheet of
the applicable Person prepared in accordance with GAAP.
"CERTIFICATE OF FORMATION" means the Original Certificate of Formation
as it may be amended, restated, supplemented or otherwise modified from time to
time on or after the date hereof.
"CHANGE OF CONTROL" means the consummation of any transaction or series
of related transactions that will result in any Person or group of Persons, in
each case as defined in the Exchange Act: (i) becoming the beneficial owner,
directly or indirectly, of more than 30% of the aggregate voting power of the
Company, Holdings or TXU Corp. or 30% of the aggregate fair market value of the
assets of the Company, Holdings or TXU Corp., (ii) acquiring, by contract or
otherwise, the power to direct or cause the direction of the management or
policies of the Company, Holdings or TXU Corp., or (iii) otherwise becoming the
beneficial owner, directly or indirectly, of more than 30% of the ownership
interests in the Company.
"CODE" means the United States Internal Revenue Code of 1986, as
amended from time to time.
"COMPANY" has the meaning set forth in the Preamble.
"COMPETITOR" means, with respect to the Company or any of its
Affiliates, a Person (or an Affiliate of an entity) that is significantly
involved in the generation of electricity, wholesale energy trading, retail
energy marketing or energy delivery.
"DEFAULT INTEREST" shall have the meaning set forth in Section 2.05.
"DELAWARE ACT" means the Delaware Limited Liability Company Act, 6
Xxx.xx. 18-101 et seq., as the same may be amended from time to time.
"DISTRIBUTE" means to make one or more Distributions.
"DISTRIBUTION" means the payment or distribution by the Company of any
money or property other than money to a Member (i) on account of such Member's
Membership Interest as provided in the Limited Liability Company Agreement or
(ii) in redemption or liquidation of all or any portion of such Member's
Membership Interest.
"DLJ ENTITY" or "DLJ ENTITIES" means each investor or investors listed
on Schedule II.
"DLJ VCOC FUND" means UXT AIV, L.P., a Delaware limited partnership, or
a DLJ Entity or Affiliate thereof designated by UXT AIV, L.P.
3
"EBITDA" means, without duplication, the consolidated Net Income of the
Company and its Subsidiaries determined in accordance with GAAP consistently
applied, plus any amounts subtracted in calculating Net Income in respect of
interest expense, Taxes, depreciation and amortization, less (i) any gain plus
any loss realized in connection with the sale of any assets or disposition of
any securities, other than those included in cash flow from operations, (ii) any
extraordinary or non-recurring gain plus any loss or (iii) any non-cash
extraordinary gain, plus (iv) any non-cash extraordinary loss.
"ENCUMBER" means, with respect to a Person, creating or suffering to
exist any Encumbrance against any of the property of such Person.
"ENCUMBRANCE" means any lien, mortgage, pledge, collateral assignment,
security interest, hypothecation or other encumbrance.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE AGREEMENT" means the Exchange Agreement, dated as of the date
hereof, by and among the Company, TXU Corp. and the Holders.
"EXCHANGED NOTE PRINCIPAL" means the amount of Notes exchanged into TXU
Common Stock pursuant to the Exchange Agreement.
"FISCAL QUARTER" means any three-month accounting period of the Company
in the Fiscal Year.
"FISCAL YEAR" means the annual accounting period of the Company, which
shall be the calendar year or such portion of a calendar year during which the
Company is in existence.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time, consistently applied.
"GOVERNMENTAL AUTHORITY" means any United States or non-United States
federal, national, supranational, State, provincial, local, or similar
government, governmental, regulatory or administrative authority, agency or
commission or any court, tribunal, or judicial or arbitral body.
"HOLDER" means any Person identified as the registered holder of this
Note in the Register.
"HOLDINGS" means TXU US Holdings Company, a Texas corporation.
"INDEBTEDNESS" of any Person means, without duplication, net of
restricted cash and cash equivalents off-setting Indebtedness (a) all
indebtedness of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (c)
all obligations of such Person to pay the deferred purchase price of property or
services (other than trade payables and accrued liabilities arising in the
ordinary course of business), (d) all indebtedness created or arising under any
4
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (e) all capitalized lease obligations of such Person,
(f) all obligations, contingent or otherwise, of such Person under acceptance,
letter of credit or similar facilities securing Indebtedness and all interest
rate or foreign exchange hedging transactions valued at the Agreement Value
thereof, (g) all unconditional obligations of such Person to purchase, redeem,
retire, defease or otherwise acquire for value any capital stock of such Person
or any warrants, rights or options to acquire such capital stock, (h) all
Indebtedness of any other Person of the type referred to in clauses (a) through
(g) guaranteed by such Person or for which such Person shall otherwise
(including pursuant to any keepwell, makewell or similar arrangement) become
directly or indirectly liable (other than indirectly as a result of a
performance guarantee not entered into with respect to Indebtedness), and (i)
all third party Indebtedness of the type referred to in clauses (a) through (h)
above secured by any lien or security interest on property (including accounts
and contract rights) owned by the Person whose Indebtedness is being measured,
even though such Person has not assumed or become liable for the payment of such
third party Indebtedness, the amount of such obligation being deemed to be the
lesser of the net book value of such property or the amount of the obligation so
secured; provided that (i) true sales of accounts receivable and (ii) the
obligation evidenced by this Note and the Other Notes, shall not constitute
"Indebtedness" hereunder.
"INTEREST COVERAGE RATIO" means the ratio of EBITDA of the Company to
consolidated cash interest expense of the Company and its Subsidiaries on all
Indebtedness.
"INTEREST PAYMENT DATE" means (a) prior to the occurrence of a Reset
Event in respect of which the Company has elected to make payment under Section
2.01(b), the date five (5) Business Days after each Fiscal Quarter, and if such
day is not a Business Day, then the next succeeding Business Day and (b) after
the occurrence of a Reset Event in respect of which the Company has elected to
make payment under Section 2.01(b), each date on which dividends are paid in
respect of the shares of TXU Common Stock.
"LAW" means any United States or non-United States federal, national,
supranational, state, provincial, local or similar statute, law, ordinance,
regulation, rule, code, order, requirement or rule of law (including, without
limitation, common law).
"LIMITED LIABILITY COMPANY AGREEMENT" means the limited liability
company agreement of TXU Energy Company LLC, as amended pursuant to the Purchase
Agreement.
"LOSS" has the meaning set forth in Section 7.01(a).
"MAJORITY IN VOTING INTEREST" means, at any time, a Holder or Holders
that own a majority of the principal amount of the Notes outstanding at such
time, voting together as a single class.
"MANAGER" means a member of the Board of Managers.
"MEMBER" means a "member" of the Company.
5
"MEMBERSHIP INTEREST" of any Member at any time means the entire
ownership interest of such Member in the Company at such time, including all
benefits to which the owner of such Membership Interest is entitled under the
Limited Liability Company Agreement and applicable law, together with all
obligations of such Member under the Limited Liability Company Agreement and
applicable law.
"NET INCOME" means with respect to any Fiscal Year, or part thereof,
the net income (or net loss) of the Company for such period as determined on a
consolidated basis and in accordance with GAAP.
"NOTE" means this Exchangeable Subordinated Note, each Other Note and
each additional Note issued upon any transfer of an interest in all or any part
of this Note; and "NOTES" means, collectively, all of the foregoing.
"OFFICER" means an officer of the Company.
"ORIGINAL CERTIFICATE OF FORMATION" has the meaning set forth in the
Limited Liability Company Agreement.
"OTHER NOTE" means each Exchangeable Subordinated Note in substantially
the form of this Note issued on the date hereof and each additional Note issued
upon any transfer of an interest in all or any part of such Other Note.
"PAYMENT DEFAULT" means any failure by the Company to pay principal or
interest when due under this Note.
"PERMITTED TRANSFEREE" means in the case of any DLJ Entity, (A) any
other DLJ Entity, (B) any general or limited partner of any DLJ Entity (a "DLJ
Partner"), and any Affiliated Employee Benefit Trust or Person that is an
Affiliate of any DLJ Partner (collectively, the "DLJ Affiliates"), (C) any
managing director, general partner, director, limited partner, officer or
employee of any DLJ Entity or of any DLJ Affiliate, or the heirs, executors,
administrators, testamentary trustees, legatees or beneficiaries of any of the
foregoing persons referred to in this clause (C) (collectively, "DLJ
Associates"), (D) a trust (to the extent recognized by applicable Law), the
beneficiaries of which, or a corporation, limited liability company or
partnership, all of the stockholders, members or general or limited partners of
which, include only XXX Xxxxxxxx, XXX Xxxxxxxxxx, XXX Associates, their spouses
or their lineal descendants or (E) a voting trustee for one or more DLJ
Entities, DLJ Affiliates or DLJ Associates under the terms of a voting trust (to
the extent recognized by applicable Law).
"PERSON" means any individual, corporation, partnership, limited
liability company, trust, joint venture, governmental entity or other
unincorporated entity, association or group.
"PURCHASE AGREEMENT" means the Purchase Agreement, dated as of November
18, 2002, by and between the Company and the initial Holder, as amended,
restated, supplemented or otherwise modified pursuant to the terms thereof from
time to time.
"REGISTER" has the meaning set forth in Section 6.03.
6
"REGULATION" means any rule or regulation of any Governmental Authority
having the effect of Law or any rule or regulation of any self-regulatory
organization.
"RESET AMOUNT" means with respect to the unpaid principal amount
outstanding on the Note for any Fiscal Quarter ending after the occurrence of a
Reset Event, an amount equal to the aggregate dividend that would be payable
during such Fiscal Quarter in respect of the shares of TXU Common Stock that
would be determined by dividing the outstanding principal amount of this Note by
the average closing price for TXU Common Stock for such Fiscal Quarter.
"RESET EVENT" means, for any Fiscal Quarter, an Average Closing Price
for TXU Common Stock in excess of $39.45, as adjusted to account for stock
splits, stock dividends and similar occurrences.
"RESTRICTED SECURITIES" means (a) all Membership Interests and Notes
issued by the Company and (b) any securities issued with respect to, or in
exchange for, the Membership Interests or Notes referred to in clause (a) above
in connection with a conversion, combination of units or shares, exchange,
recapitalization, merger, consolidation or other reorganization, including in
connection with the consummation of any reorganization plan.
"STATE" means any one of the 50 states of the United States of America
or the District of Columbia.
"SUBSIDIARY" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (a) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by such Person or one or more of the other
Subsidiaries of such Person or a combination thereof, or (b) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of such Person or entity or a combination thereof. For purposes of
this Note, a Person or Persons shall be deemed to have a majority ownership
interest in a limited liability company, partnership, association or other
business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control any managing director, managing member,
or general partner of such limited liability company, partnership, association
or other business entity.
"TAXES" means all federal, State, local and foreign income, profits,
franchise, gross receipts, environmental, customs duty, capital stock,
severance, stamp, windfall profit, payroll, sales, use, transfer, employment,
unemployment, disability, use, property, withholding, excise, production, value
added, occupancy and other taxes, duties or assessments of any nature
whatsoever, together with all interest, penalties and additions imposed with
respect thereto.
"THIRD PARTY CLAIMS" has the meaning set forth in Section 7.01(b).
"TRANSFER" means (a) as a noun, the transfer of ownership by sale,
exchange, assignment, gift, donation, grant or other conveyance of any kind,
whether voluntary or involuntary, including Transfers by operation of law or
7
legal process (and hereby expressly including, with respect to a Holder,
assignee or other Person, any voluntary or involuntary appointment of a
receiver, trustee, liquidator, custodian or other similar official for such
Holder or all or any part of such Holder, assignee or other Person or all or any
part of the property of such Holder, assignee or other Person under any
bankruptcy, reorganization or insolvency law and (b) as a verb, the act of
making any voluntary or involuntary Transfer.
"TREASURY REGULATIONS" means the income Tax regulations promulgated
under the Code as amended.
"TXU COMMON STOCK" means the common stock of TXU Corp., without par
value.
"TXU CORP." means TXU Corp., a Texas corporation.
SECTION 1.02. Other Definitional Provisions.
(a) All terms in this Note shall have the defined meanings when used in
any certificate or other document made or delivered pursuant hereto unless
otherwise defined therein.
(b) As used in this Note and in any certificate or other documents made
or delivered pursuant hereto or thereto, accounting terms not defined in this
Note or in any such certificate or other document, and accounting terms partly
defined in this Note or in any such certificate or other document to the extent
not defined, shall have the respective meanings given to them under GAAP. To the
extent that the definitions of accounting terms in this Note or in any such
certificate or other document are inconsistent with the meanings of such terms
under GAAP, the definitions contained in this Note or in any such certificate or
other document shall control.
(c) The words "hereof," "herein," "hereunder," and words of similar
import when used in this Note shall refer to this Note as a whole and not to any
particular provision of this Note; Section references contained in this Note are
references to Sections in this Note unless otherwise specified; and the term
"including" shall mean "including without limitation."
(d) The definitions contained in this Note are applicable to the
singular as well as the plural forms of such terms.
(e) Common nouns and pronouns and any variations thereof shall be
deemed to refer to masculine, feminine, or neuter, singular or plural, as the
identity of the Person, Persons or other reference in the context requires.
Whenever used herein, "or" shall include both the conjunctive and disjunctive,
"any" shall mean "one or more."
(f) Any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
8
Article II
TERMS OF PAYMENT
SECTION 2.01. Interest Payment. (a) The Company shall pay interest on
the unpaid principal amount of this Note at a rate per annum equal to 9.00%,
payable quarterly in arrears on each Interest Payment Date; provided, however,
that, the Company may, by notice to the Holder, elect to pay all or any portion
of such interest by adding it to the principal amount of this Note, whereupon
such amount shall bear interest at the rate aforesaid and shall no longer be
considered to be interest due under this Section 2.01(a). Upon the receipt by
the Holder of a notice of such election by the Company, the Holder shall record
the amount, the date such amount is added to the principal amount of this Note
and the aggregate principal amount of this Note in accordance with its usual
practice and, prior to any transfer of this Note, such information shall be
endorsed on the grid attached hereto, which is a part of this Note.
(b) Notwithstanding anything provided in Section 2.01(a), from and
after the date of a Reset Event, the Company shall have the option to pay
interest on the unpaid principal amount of this Note (excluding any additions to
the principal amount pursuant to Section 2.01(a) which shall continue to bear
interest pursuant to Section 2.01(a) or 2.05, as the case maybe) in an amount
equal to the Reset Amount payable in arrears on each Interest Payment Date.
SECTION 2.02. No Prepayment. The Company shall not be permitted to
prepay this Note in whole or in part; provided, however, that the Company may
pay at any time any amounts added to the principal amount of this Note pursuant
to Section 2.01(a).
SECTION 2.03. Payments and Computations. The Company shall make each
payment hereunder not later than 1:00 p.m. (New York City time) on the day when
due in U.S. dollars to the Holder at its address referred to on Schedule I
attached hereto in same day funds. All computations of interest shall be made on
the basis of a year of 360 days comprised of four 90 day quarters; provided,
however, that in the case of the first interest payment under this Note,
interest shall be computed on the basis of the actual number of days elapsed
from the date of the initial funding under this Note to such first Interest
Payment Date. Whenever any payment shall be stated to be due on a day other than
a Business Day, such payment shall be made on the next succeeding Business Day,
and such extension of time shall not in such case be included in the computation
of payment of interest.
SECTION 2.04. Exchange Right. The Company shall have the right by
providing written notice to the Holder at any time prior to the date that is 180
days from the date of funding by the Holder under this Note, to require the
Holder to exchange its interest in this Note for a preferred equity interest in
the Company with substantially identical economic and other terms and otherwise
in form and substance satisfactory to the Holder; provided, that, any such
exchange must be consummated prior to the date that is 180 days from the date of
receipt of such notice by the Holder.
SECTION 2.05. Default Interest. Upon the occurrence and during the
continuance of either of (a) a Payment Default or (b) the making of any
Distribution by the Company during any Fiscal Quarter in respect of which the
Company does not pay cash interest on this Note or has not repaid all amounts
added to the principal amount of this Note pursuant to Section 2.01(a), the
Company shall pay interest on (i) the unpaid principal amount of this Note owing
9
to the Holder, payable in arrears on the dates referred to in Section 2.01(a) or
(b) above and on demand, at a rate per annum equal at all times to 5% per annum
above the rate per annum required to be paid on such principal amount pursuant
to Section 2.01(a) or (b) above and (ii) to the fullest extent permitted by law,
the amount of any interest payable under this Note that is not paid when due,
from the date such amount shall be due until such amount shall be paid in full,
payable in arrears on the date such amount shall be paid in full and on demand,
at a rate per annum equal at all times to 5% per annum above the rate per annum
required to be paid pursuant to Section 2.01(a) or (b) above ("DEFAULT
INTEREST").
Article III
COVENANTS AND REPRESENTATION AND WARRANTY
SECTION 3.01. Accounting Books and Records.
(a) The Company shall keep on site at its principal place of business
each of the following:
(i) separate books of account for the Company which shall show a true
and accurate record of all costs and expenses incurred, all charges made,
all credits made and received, and all income derived in connection with
the conduct of the Company and the operation of the Business in accordance
with this Note;
(ii) a current list of the full name and last known business,
residence, or mailing address of each Member and Holder, both past and
present;
(iii) a copy of the Certificate of Formation, together with executed
copies of any powers of attorney pursuant to which any amendment has been
executed;
(iv) copies of the Company's federal, State, local and foreign income
Tax returns and reports, if any, for the six most recent Fiscal Years;
(v) copies of the Limited Liability Company Agreement;
(vi) copies of each Note;
(vii) copies of any writings permitted or required under Section
18-502 of the Delaware Act regarding the obligation of a Member to perform
any enforceable promise to contribute cash or property or to perform
services as consideration for such Member's capital contribution; and
(viii) any written consents obtained from Members pursuant to Section
18-302 of the Delaware Act regarding action taken by Members without a
meeting.
(b) The Company shall use the accrual method of accounting for Tax
purposes and shall use GAAP in the preparation of its financial reports and
shall keep its books and records in accordance with the foregoing. Any Holder
that is a DLJ Entity (a "DLJ HOLDER") or its designated representative has the
right to have reasonable access to and inspect and copy the contents of such
books or records and shall also have reasonable access during normal business
hours to such additional financial information, documents, books and records as
such DLJ Holder may reasonably request; provided that the Company shall have no
10
obligation to provide such access if the DLJ Entities together with their
Permitted Transferees own, in the aggregate, less than 10% of the original
principal amount of the Notes. The rights granted to a DLJ Holder pursuant to
this Section 3.01 are expressly subject to compliance by such DLJ Holder with
the safety, security and confidentiality procedures and guidelines of the
Company, as such procedures and guidelines may be established from time to time.
SECTION 3.02. Reports.
(a) Periodic and Other Reports. The Company shall cause to be delivered
to each Holder and the DLJ VCOC Fund, so long as it directly or indirectly holds
any interest in the Notes, financial statements, reports and notices referred to
below. The financial statements listed in clauses (i) and (ii) below shall be
prepared, in each case on a consolidated basis in accordance with GAAP, and such
other reports as any Holder and the DLJ VCOC Fund, so long as it directly or
indirectly holds any interest in the Notes, may reasonably request from time to
time. The quarterly financial statements referred to in clause (ii) below may be
subject to normal period-end adjustments.
(i) As soon as practicable following the end of each Fiscal Year (and
in any event not later than 120 days after the end of such Fiscal Year, or
such earlier date as may be required by law), an audited balance sheet of
the Company as of the end of such Fiscal Year and the related statements of
operations, Members' capital accounts and changes therein, and cash flows
for such Fiscal Year, together with appropriate notes to such financial
statements and supporting schedules, and in each case, to the extent the
Company was in existence, setting forth in comparative form the
corresponding figures for the immediately preceding Fiscal Year end (in the
case of the balance sheet) and the two (2) immediately preceding Fiscal
Years (in the case of the statements).
(ii) As soon as practicable following the end of each of the first
three Fiscal Quarters of each Fiscal Year (and in any event not later than
60 days after the end of each such Fiscal Quarter, or such earlier date as
may be required by law), an unaudited balance sheet of the Company as of
the end of such Fiscal Quarter and the related statements of operations and
cash flows for such Fiscal Quarter and for the Fiscal Year to date, in each
case, to the extent the Company was in existence, setting forth in
comparative form the corresponding figures for the prior Fiscal Year's
Fiscal Quarter and the interim period corresponding to the Fiscal Quarter
and the interim period just completed, together with a description of all
material transactions of the Company, which shall be reviewed annually by
an independent auditor.
The statements described in clauses (i) and (ii) above shall be accompanied by
written certification of an Officer that such statements have been prepared in
accordance with GAAP.
(iii) As soon as practicable following the end of each month (and in
any event not later than 30 days after the end of each month), management
reports in a form agreed upon between a Majority in Voting Interest of the
Holders and the Company; provided that the Company shall have no obligation
to provide such management reports if the DLJ Entities together with their
Permitted Transferees own, in the aggregate, less than 10% of the original
principal amount of the Note.
11
(iv) A notice of the occurrence of any Event of Default, or to the
extent actually known by the Company, of any event that with notice, the
passage of time or both would become an Event of Default promptly, but in
any event no later than two Business Days, after an Officer of the Company
has actual knowledge of such occurrence, and a notice setting forth details
of the actions that the Company has taken or proposes to take with respect
thereto, as promptly as practicable, but in any event within ten Business
Days after such Officer obtains actual knowledge of such event.
(v) A notice of the occurrence of a Change of Control, or any event
that is reasonably likely to result in a Change of Control, promptly, but
in no event later than two Business Days, after an Officer of the Company
has actual knowledge of such occurrence.
(vi) Promptly following any such request, such other information as is
reasonably requested by any Holder or the DLJ VCOC Fund.
(b) Each Holder agrees, and the DLJ VCOC Fund shall agree, to keep any
non-public information provided to such Holder or the DLJ VCOC Fund by the
Company confidential and not to disclose such information unless required by law
and acknowledges that the receipt of such information by such Holder or the DLJ
VCOC Fund may restrict the ability of such Holder or the DLJ VCOC Fund to trade
in securities of the Company, TXU Corp. or their Affiliates; provided, that,
such information may be disclosed to such Holder's or the DLJ VCOC Fund's
advisors (in the case of financial advisors only, upon three Business Days'
advance notice to the Company), members or partners as long as they agree to
keep such information confidential.
SECTION 3.03. Separateness.
(a) The funds and other assets of the Company shall not be commingled
with those of any other entity, and the Company shall maintain its accounts
separate from each Member and any other Person.
(b) The Company shall not hold itself out as being liable for the debts
of any other entity other than the Company and its Subsidiaries (collectively,
the "COMPANY GROUP"), and shall conduct its own business in its own name or duly
adopted assumed name.
(c) The Company shall not form, or cause to be formed, any Subsidiary
other than in connection with conducting the Business.
(d) The Company shall act solely through its duly authorized Members,
Managers, Officers or agents in the conduct of the Business, and shall conduct
the Business so as not to confuse others as to the identity or assets of the
Company Group with those of any other entity.
(e) The Company shall maintain separate records, books of account and
financial statements, and shall not commingle its records and books of account
with the records and books of account of any other entity.
12
(f) The Managers shall hold appropriate meetings to authorize all of
its limited liability company actions, which meetings may be held by telephone
conference call or by unanimous written consent.
(g) Other than the obligations, guarantees or pledges existing on
November 18, 2002 and the guarantees of (A) the Energy Plaza building lease
obligations of TXU Corp., (B) an Affiliate's obligations with respect to
operations in Mexico not to exceed $15 million and (C) an Affiliate's
obligations with respect to leased equipment utilized by the Company not to
exceed $25 million, the Company shall not (i) guarantee or become obligated for
the debts of any Member or any Manager, any Affiliate thereof or any other
Person, or otherwise hold out its credit as being available to satisfy the
obligations of any Member, any Manager or any other Person, (ii) pledge its
assets for the benefit of any entity, and (iii) other than pursuant to this
Note, acquire obligations or securities of any Member, any Manager or any
Affiliate, provided, however, that the Company may do all of the foregoing for
the benefit of the Company Group.
(h) The Company shall pay its own liabilities out of its own funds.
(i) The Company Group shall maintain an arms' length relationship or
other relationship commercially reasonable under the circumstances and in
compliance with all regulatory codes of conduct with their Affiliates outside of
the Company Group.
(j) The Company Group shall use its own separate stationery, invoices,
checks
and other business forms.
(k) The Company shall correct any known material misunderstanding
regarding the separate identity of the Company Group.
Nothing in this Section 3.03 or Section 3.04 herein shall be deemed to prohibit
(i) the use of an Affiliate for the provision of services that can be performed
cost effectively on a shared services basis, including treasury, payroll,
accounting, human resources, legal, environmental, engineering, information
technology and other administrative services, or (ii) participation in TXU
Corp.'s money pool for its system companies in accordance with the guidelines
established from time to time therefore, as long as, in each case, such
activities are otherwise in compliance with the provisions of this Section 3.03
and Section 3.04.
SECTION 3.04. Limited Liability and Separateness. Without limiting the
generality of Section 3.03, the Company shall be operated in such a manner as
the Managers deem reasonable and necessary or appropriate to preserve (a) the
limited liability of each of the Members (or their successors) in the Company
and (b) the separateness of the Company from the business of each Member of the
Company or any other Affiliate thereof outside of the Company Group.
SECTION 3.05. Limitations on Distributions. Notwithstanding any
provision to the contrary contained in this Note, the Company shall not make any
Distribution if such Distribution would violate Section 18-607 of the Delaware
Act or other applicable law, any of the Company's debt financing agreements or
any other debt financing agreement of which the Company is a guarantor, but
shall instead make such Distribution as soon as practicable after such time as
the making of such Distribution would not cause such violation.
13
SECTION 3.06. Restricted Actions. The Company shall not, and shall
cause its Subsidiaries not to, without the prior written consent of the Majority
in Voting Interest of the Notes:
(a) Issue or reclassify any class or series of equity securities or
Membership Interests that are, or that are convertible into, a class or
series of equity securities, or Membership Interests of the Company or its
Subsidiaries, as the case may be, that are, senior to or on parity with
this Note.
(b) Incur any Indebtedness, if on a pro forma basis after giving
effect to the incurrence of such Indebtedness at the date of incurrence and
the application of proceeds thereof (i) the ratio of consolidated
Indebtedness of the Company to EBITDA for the four Fiscal Quarters ended
most recently prior to the date of determination thereof would exceed four
times or (ii) the Interest Coverage Ratio for the four Fiscal Quarters
ended most recently prior to the date of determination thereof would not
exceed three times.
(c) Make any amendment to the Limited Liability Company Agreement.
(d) Make any investments, other than ordinary course investments
relating to the Business; provided, however, that no investments shall be
made in the City of New York that shall cause the Company to be deemed to
be conducting operations in the City of New York for the purposes of the
New York City Tax Law.
(e) Enter into operations significantly differing from the Business as
conducted on the date hereof or enter into any new lines of business.
(f) Unless otherwise required by law, merge, consolidate or otherwise
combine the Company with any other Person if such merger, consolidation or
combination would result in the disposition of more than 25% of the
aggregate voting power of the Company or acquire or dispose of assets that
would result in the acquisition or disposition, as the case may be, of more
than 25% of the value of the Company.
(g) Alter the number of Managers comprising the Board of Managers.
(h) Allow any Person to be admitted as a member of the Company.
SECTION 3.07. Treatment for Tax Purposes. (a) The Company agrees that,
for all U.S. federal, state, local and foreign income Tax purposes, this Note
shall be treated as a preferred equity interest in the Company, and unless
prohibited by applicable law, the Company shall elect to be classified as a
partnership (and not as an association, or publicly-traded partnership, taxable
as a corporation). Accordingly, a capital account shall be maintained for the
Holder in accordance with section 1.704-2(b)(2) of the Treasury Regulations,
which shall be increased to reflect the amounts invested by the Holder in the
Company (including amounts deducted from the Purchase Price in respect of the
Structuring Fee and Transaction Expenses pursuant to Section 2.04(a) of the
Purchase Agreement) and allocations of net profits (or, to the extent required,
items of income and gain), and which shall be reduced to reflect distributions
by the Company to the Holder (including amounts payable pursuant to the terms of
this Note) and allocations of net losses (or, to the extent required, items of
deduction or loss). Promptly following the end of each Fiscal Year of the
Company (and in no event later than 90 days after the close of such Fiscal
14
Year), the Company shall provide the Holder with IRS Schedule K-1, reporting the
Holder's share of the taxable income or loss of the Company, and such separately
stated items of income, gain, loss, deduction or credit as required by U.S.
federal income Tax law, and the Company also shall provide such information as
shall be required or reasonably requested by the Holder for purposes of allowing
the Holder to prepare and file its U.S. federal, state, local and foreign income
Tax returns. In the event that this Note is exchanged by the Holder for a
Membership Interest in the Company (at the option of the Company or otherwise),
the Company agrees that, consistent with the U.S. federal, state, local and
foreign income Tax treatment of this Note as a preferred equity interest in the
Company, such an exchange shall be treated as a "nonrecognition transaction"
under section 721 of the Code. Other than any elections made upon the conversion
of the Company to a partnership for federal Tax purposes (which shall be made
consistent with past practice, where applicable), the Company (including any Tax
matters member thereof in its capacity as such) shall not make, revoke or change
any express or deemed Tax election or change any method of Tax accounting if
objected to in writing by the Holders' Tax Representative within 15 days of
receiving notice thereof from the Company (which objection shall not be
unreasonably made, and the Company shall consult with the Holders' Tax
Representative and keep such Holder reasonably informed as to any material Tax
claim, audit or proceeding that, in any case, the Company determines in good
faith could affect the tax treatment of a Holder as owner of a preferred equity
interest in the Company or the amount or Tax character of any Tax item allocated
or to be allocated to the Holder in its capacity as owner. "Holders' Tax
Representative" means a representative designated as such by a Majority in
Voting Interest.
(b) For each Fiscal Year of the Company, net profits (or, if required,
items of income and gain) shall be allocated to the Holder for U.S. federal,
state, local and foreign income Tax purposes only to the extent of the amount of
interest actually paid to the Holder in respect of this Note during such Fiscal
Year. No other net profits or losses (or items of income, gain, loss or
deduction) shall be allocated to the Holder for such purposes, except that, if
no Member of the Company has a positive capital account balance, the Holder may
be allocated a proportionate share of the net losses of the Company, if any,
until its capital account has been reduced to zero. In the event that the Holder
receives an allocation of net losses hereunder, the Holder thereafter shall be
entitled to allocations of net profits (and, if required, items of income or
gain) so that the Holder's capital account will equal the amount that the Holder
would be entitled to receive pursuant to the terms of this Note in connection
with the liquidation or winding up of the Company. Notwithstanding anything to
the contrary herein, the Holder shall not be allocated any capital losses of the
Company.
(c) Notwithstanding anything to the contrary herein, prior to any
exchange of this Note for a Membership Interest in the Company, the Holder shall
not be considered a Member of the Company by reason of its ownership of this
Note for any purpose other than U.S. federal, state, local and foreign income
Tax purposes, and shall not have the rights and obligations of a Member pursuant
to the Limited Liability Company Agreement.
SECTION 3.08. Directors. Subject to and to the extent permitted by
applicable Law and Regulation, for so long as at least 30% of the original
principal amount of the Notes remains held by the DLJ Entities and their
Permitted Transferees, the Board of Managers of the Company shall at all times
include one Manager (the "HOLDER MANAGER") chosen by the DLJ VCOC Fund.
15
SECTION 3.09. Consultation Rights. (a) During any period for which
there is no Holder Manager serving on the Board of Managers, the DLJ VCOC Fund,
if it directly or indirectly holds any interest in the Notes, and is intended to
qualify as a "venture capital operating company" within the meaning of the
regulations of the United States Department of Labor set forth in 29 C.F.R.
Section 2510.3-101 (the "Plan Asset Regulations") shall, upon prior written
notice to the Company, be entitled to consult with and advise the management and
Board of Managers of the Company on significant business issues, including
management's proposed annual business, strategic and operating budgets and
plans, and management will meet with the DLJ VCOC Fund periodically during each
year (but no more frequently than once each calendar quarter) at the Company's
executive offices at mutually agreeable times for such consultation and advice.
(b) The Company agrees to consider, in good faith, the recommendations
of the DLJ VCOC Fund in connection with the matters on which it is consulted as
described above, it being understood and agreed that the ultimate discretion
with respect to all such matters shall be retained by the Company.
(c) The rights granted to the DLJ VCOC Fund under this Agreement
(including, without limitation, under Article III) are intended to enable the
DLJ VCOC Fund to be operated, where applicable, as a "venture capital operating
company" within the meaning of the Plan Asset Regulations, and this Note shall
be interpreted accordingly.
SECTION 3.10. Change of Control Offer. (a) No Member of the Company or
any subsequent transferee may Transfer all or any part of its interests in the
Company without the prior written consent of the Majority in Voting Interest of
the Notes unless the Company offers to purchase all of the outstanding Notes at
a price equal to 101% of the sum of the unpaid principal amount thereof;
provided, however, that a Member may transfer all or any part of its interest to
any direct or indirect wholly-owned subsidiary of TXU Corp.
(b) The Company will give written notice of any Transfer by a Member or
any subsequent transferee, stating the substance and the intended date of the
consummation thereof and irrevocably offering to purchase all of the outstanding
Notes at a price equal to 101% of the unpaid principal amount thereof, not more
than 20 Business Days nor less than 15 Business Days prior to the date of the
consummation thereof, to each Holder of the Notes. Each Holder of the Notes
shall have ten Business Days from the date of the receipt of such notice to
elect (by written notice to the Company or any subsequent transferee, as
applicable) to sell all or any portion of the Notes held by such Holder to the
Class Member or such subsequent transferee, as applicable.
SECTION 3.11. Representation and Warranty Regarding Nature of
Operations. Except as set forth on Section 3.02 of the Disclosure Schedule to
the Purchase Agreement, the Company owns more than 50% of (a) the economic
interest in the assets, earnings or cash flow and (b) the total voting power of
shares of capital stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof,
of each of the entities in which it owns an equity interest. The Company is
primarily engaged, directly or through such entities, in the production or sale
of a product or service other than the investment of capital.
16
Article IV
EVENTS OF DEFAULT
SECTION 4.01. Events of Default. If any of the following events
("EVENTS OF DEFAULT") shall occur and be continuing:
(a) The Company shall fail to pay any installment of principal of, or
interest on, this Note when the same becomes due and payable which in the
case of a failure to pay interest continues for 5 days; or
(b) The Company shall fail to perform or observe (i) any term,
covenant or agreement contained in Section 3.05, 3.06, 3.10 or 7.01 or (ii)
any other term covenant or agreement contained in this Note if such failure
shall remain unremedied for 30 days after written notice thereof shall have
been given to the Company by any Holder; or
(c) The representation and warranty contained in Section 3.10 shall
prove to have been incorrect in any material respect when made; or
(d) The Company or any of its Subsidiaries shall generally not pay its
debts as such debts become due, or shall admit in writing its inability to
pay its debts generally, or shall make a general assignment for the benefit
of creditors; or any proceeding shall be instituted by or against the
Company or any of its Subsidiaries seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts under any
law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of
a receiver, trustee, custodian or other similar official for it or for any
substantial part of its property and, in the case of any such proceeding
instituted against it (but not instituted by it), either such proceeding
shall remain undismissed or unstayed for a period of 60 days, or any of the
actions sought in such proceeding (including, without limitation, the entry
of an order for relief against, or the appointment of a receiver, trustee,
custodian or other similar official for, it or for any substantial part of
its property) shall occur; or the Company or any of its Subsidiaries shall
take any corporate action to authorize any of the actions set forth above
in this subsection (d);
then, and in any such event, a Majority in Voting Interest of the Notes may, by
notice to the Company, declare the Notes, all interest hereon and all other
amounts payable thereunder to be forthwith due and payable, whereupon the Notes,
all such interest and all such amounts shall become and be forthwith due and
payable, without presentment, demand, protest or further notice of any kind, all
of which are hereby expressly waived by the Company; provided, however, that in
the event of an actual or deemed entry of an order for relief with respect to
the Company under the Federal Bankruptcy Code, the Notes, all such interest and
all such amounts shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Company.
17
Article V
SUBORDINATION
SECTION 5.01. Note Subordinate to Senior Indebtedness. The Company
agrees, and each Holder, by his acceptance of this Note, also agrees, that this
Note is and shall be subordinate, to the extent and in the manner hereinafter
set forth, to the prior payment in full of all obligations of the Company now or
hereafter existing, whether for principal, interest (including, without
limitation, interest, as provided in such indebtedness, accruing after the
filing of a petition initiating any proceeding referred to in Section 5.02,
whether or not such interest accrues after the filing of such petition for
purposes of the Bankruptcy Code or is an allowed claim in such proceeding),
fees, expenses or otherwise (all such obligations being the "SENIOR
INDEBTEDNESS").
SECTION 5.02. Events of Subordination. In the event of any dissolution,
winding up, liquidation, arrangement, reorganization, adjustment, protection,
relief or composition of the Company or its debts, whether voluntary or
involuntary, in any bankruptcy, insolvency, arrangement, reorganization,
receivership, relief or other similar case or proceeding under any Federal or
State bankruptcy or similar law or upon an assignment for the benefit of
creditors or any other marshalling of the assets and liabilities of the Company
or otherwise, Senior Indebtedness shall first be paid in full before the Holder
shall be entitled to receive any payment of this Note, and any payment or
distribution of any kind (whether in cash, property or securities) that
otherwise would be payable or deliverable upon or with respect to this Note in
any such case, proceeding, assignment, marshalling or otherwise (including any
payment that may be payable by reason of any other indebtedness of the Company
being subordinated to payment of this Note) shall be paid or delivered directly
to the holders or representatives of the Senior Indebtedness for application (in
the case of cash) to, or as collateral (in the case of non-cash property or
securities) for, the payment or prepayment of the Senior Indebtedness until the
Senior Indebtedness shall have been paid in full.
SECTION 5.03. In Furtherance of Subordination.
(a) All payments or distributions upon or with respect to this Note
that are received by the Holder contrary to the provisions of this Article shall
be received in trust for the benefit of the Holders and owners of Senior
Indebtedness, shall be segregated from other funds and property held by the
Holder and shall be forthwith paid over to the holders and owners of Senior
Indebtedness in the same form as so received (with any necessary endorsement) to
be applied (in the case of cash) to, or held as collateral (in the case of
non-cash property or securities) for, the payment or prepayment of the Senior
Indebtedness in accordance with its terms.
(b) The holders and owners of Senior Indebtedness are hereby authorized
to demand specific performance of the provisions of this Article, whether or not
the Company shall have complied with any of the provisions hereof applicable to
it, at any time when the Holder shall have failed to comply with any of the
provisions of this Article applicable to it. The Holder of this Note hereby
irrevocably waives any defense based on the adequacy of a remedy at law that
might be asserted as a bar to such remedy of specific performance.
18
SECTION 5.04. No Commencement of Any Proceeding. So long as payments or
distributions for or on account of this Note are not permitted pursuant to
Section 5.02, the Holder will not commence, or join with any creditor other than
the holders and owners of Senior Indebtedness in commencing, directly or
indirectly cause the Company to commence, or assist the Company in commencing,
any proceeding referred to in Section 5.02.
SECTION 5.05. Rights of Subrogation. No payment or distribution to the
holders and owners of Senior Indebtedness pursuant to the provisions of this
Article shall entitle the Holder to exercise any right of subrogation in respect
thereof until the Senior Indebtedness shall have been paid in full.
SECTION 5.06. Further Assurances. The Holders and the Company each
will, at the Company's expense and at any time and from time to time, promptly
execute and deliver all further instruments and documents, and take all further
action, that may be necessary or desirable, or that any holder or owner of
Senior Indebtedness may request, in order to protect any right or interest
granted or purported to be granted hereby or to enable any holder or owner of
Senior Indebtedness to exercise and enforce its rights and remedies hereunder.
SECTION 5.07. Agreements in Respect of Subordinated Debt. No amendment,
waiver or other modification of this Note, and no agreement supplemental to this
Note, may adversely affect the rights or interests of any holder or owner of
Senior Indebtedness hereunder.
SECTION 5.08. Agreement by the Company. The Company agrees that it will
not make any payment of this Note, or take any other action, in contravention of
the provisions of this Article.
SECTION 5.09. Obligations Hereunder Not Affected. All rights and
interests of the holders and owners of Senior Indebtedness hereunder, and all
agreements and obligations of the Holder of this Note and the Company under this
Article, shall remain in full force and effect irrespective of:
(i) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Senior Indebtedness, or any other
amendment or waiver of or any consent to any departure from any Senior
Indebtedness, including, without limitation, any increase in the Company's
obligations resulting from the extension of additional credit to the
Company or any of its subsidiaries or otherwise;
(ii) ny taking, exchange, release or non-perfection of any
collateral, or any taking, release or amendment or waiver of or consent to
departure from any guaranty, for all or any of the Senior Indebtedness;
(iii) any manner of application of collateral, or proceeds thereof, to
all or any of the Senior Indebtedness, or any manner of sale or other
disposition of any collateral for all or any of the Senior Indebtedness or
any other assets of the Company or any of its subsidiaries;
(iv) any change, restructuring or termination of the corporate
structure or existence of the Company or any of its subsidiaries; or
19
(v) any other circumstance that might otherwise constitute a defense
available to, or a discharge of, the Company or a subordinated creditor.
The provisions of this Article Five shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any of the Senior
Indebtedness is rescinded or must otherwise be returned by any holder or owner
of Senior Indebtedness upon the insolvency, bankruptcy or reorganization of the
Company or otherwise, all as though such payment had not been made.
SECTION 5.10. Waiver. The Holder of this Note and the Company each
hereby waives promptness, diligence, notice of acceptance and any other notice
with respect to any of the Senior Indebtedness and this Article and any
requirement that any holder or owner of Senior Indebtedness protect, secure,
perfect or insure any security interest or lien or any property subject thereto
or exhaust any right or take any action against the Company or any other person
or entity or any collateral.
SECTION 5.11. No Waiver; Remedies. No failure on the part of any holder
or owner of Senior Indebtedness to exercise, and no delay in exercising, any
right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
SECTION 5.12. Continuing Agreement. The provisions of this Article Five
constitute a continuing agreement and shall (i) remain in full force and effect
until the payment in full of all Senior Indebtedness, (ii) be binding upon the
Holder of this Note, the Company and their respective successors and assigns,
and (iii) inure to the benefit of, and be enforceable by, the holders and owners
of Senior Indebtedness and their respective successors, transferees and assigns.
Article VI
TRANSFER OF NOTE
SECTION 6.01. Restrictions. The Holder acknowledges and agrees that it
shall not Transfer this Note (i) to any Competitor or (ii) in violation of the
Securities Act of 1933, as amended. Any attempted Transfer in violation of the
preceding sentence shall be deemed void ab initio and of no force or effect
whatsoever, and the Company will not record any such Transfer on its books or
treat any purported transferee as the owner of this Note for any purpose. Except
as specifically set forth in this Section 6.01, the Holder shall not be
restricted from any Transfer of the Note.
SECTION 6.02. Legend.
(a) Each Note issued upon any Transfer will bear the following
legend:
"THE TRANSFER OF THIS NOTE IS SUBJECT TO THE CONDITIONS SPECIFIED IN AN
EXCHANGE AGREEMENT AMONG THE COMPANY, TXU CORP. AND THE HOLDER, A COPY
OF SUCH AGREEMENT AS IN EFFECT FROM TIME TO TIME WILL BE FURNISHED
20
WITHOUT CHARGE BY THE ISSUER TO THE HOLDER HEREOF UPON WRITTEN
REQUEST."
(b) Each certificate or instrument evidencing Restricted Securities and
each certificate or instrument issued in exchange for or upon the transfer of
any Restricted Securities (if such securities remain Restricted Securities after
such Transfer) shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION
THEREUNDER."
(c) In addition, each certificate or instrument evidencing Restricted
Securities and each certificate or instrument issued in exchange for or upon the
Transfer of any Restricted Securities (if such securities remain Restricted
Securities after such Transfer) shall be stamped or otherwise imprinted with any
additional legends as may be required by the Company, as applicable to the
holder of such certificate or instrument.
SECTION 6.03. Registration of Notes. The Company shall keep at its
principal executive office a register (the "REGISTER") for the registration and
registration of transfers of Notes. The name and address of each Holder of one
or more Notes, each transfer thereof and the name and address of each transferee
of one or more Notes shall be registered in the Register. Prior to due
presentation for registration of transfer, the Person in whose name any Note
shall be registered shall be deemed and treated as the owner and Holder thereof
for all purposes hereof, and the Company shall not be affected by any notice to
the contrary.
SECTION 6.04. New Notes. Upon surrender of any Note for registration of
Transfer or exchange (and in the case of a surrender for registration of
transfer, duly endorsed or accompanied by a written instrument of transfer duly
executed by the registered Holder of such Note or such Holder's attorney duly
authorized in writing and accompanied by the address for notices of each
transferee of such Note or part thereof), the Company shall execute and deliver,
at the Company's expense, one or more new Notes (as requested by the Holder
thereof) in exchange therefor, in an aggregate principal amount equal to the
unpaid principal amount of the surrendered Note. Each such new Note shall be
payable to such Person as such Holder may request. Each such new Note shall be
dated and bear interest from the date to which interest shall have been paid on
the surrendered Note or dated the date of the surrendered Note if no interest
shall have been paid thereon. Notes shall not be transferred in denominations of
less than $500,000, in the event that the Holder is transferring to an Affiliate
of such Holder, and $10,000,000, in the event that the Holder is transferring to
any other Person; provided, that, if necessary to enable the registration of
transfer by a Holder of its entire holding of Notes, one Note may be in a
21
denomination of less than the foregoing amounts.
Article VII
INDEMNIFICATION
SECTION 7.01. Indemnification of Holders.
(a) The Company hereby agrees to indemnify and hold harmless the Holder
of this Note and its respective shareholders and managers (including any
administrative agent or sub-agent) and each of its respective Affiliates,
officers, directors, employees, agents, successors and assigns but excluding the
Person serving as a Manager pursuant to Section 3.08 hereof to the extent such
Person is indemnified by the Company pursuant to the LLC Agreement (each an
"INDEMNITEE"), for and against all claims, losses, damages, costs, expenses,
awards, judgments and penalties (including, without limitation, attorneys' fees
and expenses) (hereinafter, a "LOSS") arising out of, resulting from or with
respect to, directly or indirectly, the conduct of the business or affairs of
the Company, including without limitation, the operation of the Business.
(b) An Indemnitee shall give the Company notice of any matter that an
Indemnitee has determined has given or could give rise to a right of
indemnification under this Note (a "CLAIM NOTICE"), within 25 days after such
determination, stating the amount of the Loss, if known, and method of
computation thereof. The obligations and liabilities of the Company under this
Article VII with respect to Losses arising from claims of any third party that
are subject to the indemnification provided for in this Article VII ("THIRD
PARTY CLAIMS") shall be governed by the following additional terms and
conditions: if an Indemnitee shall receive notice of any Third Party Claim, the
Indemnitee shall give the Company notice of such Third Party Claim within 25
days after the receipt by the Indemnitee of such notice; provided, however, that
the failure to provide such notice shall not release the Company from any of its
obligations under this Article VII and shall not relieve the Company from any
other obligation or liability that it may have to any Indemnitee otherwise than
under this Article VII. If the Company acknowledges in writing its obligation to
indemnify the Indemnitee hereunder against any Losses that may result from such
Third Party Claim, then the Company shall be entitled to assume and control the
defense of such Third Party Claim at its expense and through counsel of its
choice if it gives notice of its intention to do so to the Indemnitee within
five (5) days of the receipt of such Claim Notice from the Indemnitee; provided,
however, that if there exists or is reasonably likely to exist a conflict of
interest that would make it inappropriate in the judgment of the Indemnitee in
its sole and absolute discretion for the same counsel to represent both the
Indemnitee and the Company, then the Indemnitee shall be entitled to retain its
own counsel in each jurisdiction for which the Indemnitee determines counsel is
required, at the expense of the Company. In the event that the Company exercises
the right to undertake any such defense against any such Third Party Claim as
provided above, the Indemnitee shall cooperate with the Company in such defense
and make available to the Company, at the Company's expense, all witnesses,
pertinent records, materials and information in the Indemnitee's possession or
under the Indemnitee's control relating thereto as is reasonably required by the
Company. Similarly, in the event the Indemnitee is, directly or indirectly,
conducting the defense against any such Third Party Claim, the Company shall
cooperate with the Indemnitee in such defense and make available to the
Indemnitee, at the Company's expense, all such witnesses, records, materials and
information in the Company's possession or under the Company's control relating
thereto as is reasonably required by the Indemnitee. No such Third Party Claim
may be settled by the Company without: (a) the prior written consent (which
consent shall not be unreasonably withheld, delayed or conditioned) of the
Indemnitee unless such settlement contains a full and unconditional release of
the Indemnitee with respect thereto.
22
SECTION 7.02. Nonexclusivitiy of Rights. The indemnification and
advancement and payment of expenses provided by this Article VII: (a) shall not
be deemed exclusive of any other rights to which a Holder or other Person
seeking indemnification may be entitled under any statute, agreement or
otherwise both as to action in such Person's official capacity and as to action
in another capacity while holding such office, (b) shall continue as to any
Person who has ceased to serve in the capacity which initially entitled such
Person to indemnity and advancement and payment of expenses, and (c) shall inure
to the benefit of the heirs, executors, administrators, successors and assigns
of such Holder or such other Person.
SECTION 7.03. Contract Rights. The rights granted pursuant to this
Article VII shall be deemed to be contract rights, and no amendment,
modification or repeal of this Article VII shall have the effect of limiting or
denying any such rights with respect to actions taken or Proceedings arising
prior to any such amendment, modification or repeal.
SECTION 7.04. Savings Clause. If this Article VII or any portion of
this Note shall be invalidated on any ground by any court of competent
jurisdiction, then the Company shall nevertheless indemnify and hold harmless
each Holder or any other Person indemnified pursuant to this Article VII as to
costs, charges and expenses (including, without limitation, attorneys' fees),
judgments, fines and amounts paid in settlement with respect to any action, suit
or proceeding, whether civil, criminal, administrative or investigative, to the
fullest extent permitted by any applicable portion of this Article VII that
shall not have been invalidated and to the fullest extent permitted by
applicable law.
SECTION 7.05. Other Arrangements Not Excluded. The indemnification and
advancement of expenses authorized in or ordered by a court pursuant to this
Article VII:
(a) Does not exclude any other rights to which a Person seeking
indemnification or advancement of expenses may be entitled under any other
agreement, or otherwise, for either an action of any Holder, officer,
employee or agent in the official capacity of such Person or an action in
another capacity while holding such position, except that indemnification,
unless ordered by a court, may not be made to or on behalf of any Holder if
a final adjudication established that its acts or omissions involved
intentional misconduct, fraud or gross negligence and was material to the
cause of action; and
(b) Continues for a person who has ceased to be a Holder, officer,
employee or agent and inures to the benefit of the successors, heirs,
executors and administrators of such a person.
Article VIII
MISCELLANEOUS
SECTION 8.01. Notices.
23
(a) All notices, requests, claims, demands and other communications
under or in connection with this Note shall be given to or made upon: (i) the
Holder, at the Holder's address set forth on Schedule I attached hereto and (ii)
the Company at the following addresses (or in any case to such other address as
the addressee may from time to time designate in writing to the sender):
TXU Corp.
0000 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Treasurer
Facsimile: 000-000-0000
with copies to:
Hunton & Xxxxxxxx
0000 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx, Esq.
Facsimile: 000-000-0000
and
Xxxxxx Xxxx & Priest LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Facsimile: 000-000-0000
(b) All notices, requests, claims, demands and other communications
under or in connection with this Note shall be in writing and shall be deemed
effectively given: (i) upon personal delivery or delivery by courier to the
party to be notified, (ii) three Business Days after deposit with the United
States Post Office, by registered or certified mail, return receipt requested,
postage prepaid and addressed as provided in Section 8.01(a) and (iii) one
Business Day after receipt of confirmation if such notice is sent by facsimile.
SECTION 8.02. Headings and Sections. The descriptive headings in this
Note are inserted for convenience only and are in no way intended to describe,
interpret, define, or limit the scope, extent or intent of this Note or any
provision of this Note. Unless the context requires otherwise, all references in
this Note to Sections, Articles, Exhibits or Schedules shall be deemed to mean
and refer to Sections, Articles, Exhibits or Schedules of or to this Note.
SECTION 8.03. Amendments. This Note may not be amended, supplemented,
modified or restated nor may any provision herein be waived without the express
unanimous written consent of a Majority in Voting Interest of the Holders. Any
waiver of any term or condition shall not be construed as a waiver of any
subsequent breach or a subsequent waiver of the same term or condition, or a
waiver of any other term or condition of this Note. The failure of the Holder to
assert any of its rights hereunder shall not constitute a waiver of any of such
rights. All rights and remedies existing under this Note are cumulative to, and
not exclusive of, any rights or remedies otherwise available.
24
SECTION 8.04. Binding Effect. Except as otherwise provided in this
Note, every covenant, term and provision of this Note shall be binding upon the
Company and shall inure to the benefit of the Holder, the DLJ VCOC Fund and
their distributees, heirs, legal representatives, executors, administrators,
successors and permitted assigns and designees.
SECTION 8.05. Remedies. The Holder shall be entitled to enforce its
rights under this Note specifically, to recover damages and costs (including
reasonable attorneys' fees) caused by any breach of any provision of this Note
and to exercise all other rights existing in its favor. The Company agrees and
acknowledges that money damages may not be an adequate remedy for any breach of
the provisions of this Note and that the Holder may in its sole discretion apply
to any court of law or equity of competent jurisdiction (without posting any
bond or deposit) for specific performance or other injunctive relief in order to
enforce or prevent any violations of the provisions of this Note. If any time
period for giving notice or taking action under this Note expires on a day that
is not a Business Day, the time period shall be extended automatically to the
immediately succeeding Business Day.
SECTION 8.06. Waiver of Jury Trial. THE COMPANY AND, BY ACCEPTING THE
BENEFITS OF THIS NOTE, THE HOLDER HEREBY WAIVE, TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO
ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF UNDER OR, IN CONNECTION
WITH THIS NOTE.
SECTION 8.07. Interpretation. The Holder and the Company have
participated jointly in the negotiation and drafting of this Note. In the event
an ambiguity or question of intent or interpretation arises, this Note shall be
construed as if drafted jointly by the Holder and the Company, and no
presumption or burden of proof shall arise favoring or disfavoring the Holder or
the Company by virtue of the authorship of any of the provisions of this Note.
SECTION 8.08. Governing Law; Consent to Jurisdiction. This Note will be
governed by, and construed in accordance with, the laws of the State of New
York. In any action or proceeding arising out of, related to, or in connection
with this Note, the Company consents to be subject to the jurisdiction and venue
of (a) the Supreme Court of the State of New York in and for the County of New
York, and (b) the United States District Court for the Southern District of New
York. The Company consents to the service of process in any action commenced
hereunder by any method or service acceptable under federal law or the laws of
the State of New York.
SECTION 8.09. Additional Documents and Acts. The Company agrees to
execute and deliver such additional documents and instruments and to perform
such additional acts as may be reasonably necessary or appropriate to
effectuate, carry out and perform all of the terms, provisions and conditions of
this Note and the transactions contemplated hereby.
SECTION 8.10. No Third Party Beneficiaries. Except for the provisions
of Article VII relating to indemnification, this Note shall inure solely to the
benefit of the Holder, the DLJ VCOC Fund and their successors, assigns and
designees, nothing herein, express or implied, is intended to or shall confer
upon any other Person any legal or equitable right, interest, claim or benefit,
of any nature whatsoever, under or on account of this Note.
SECTION 8.11. Holder ERISA Representation. The Holder represents and
warrants that either (i) it is not an "employee benefit plan" within the meaning
25
of Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), a "plan" within the meaning of Section 4975(e)(1) of the
Internal Revenue Code of 1986, as amended (the "Code"), or an entity whose
assets are treated as "plan assets" under the Plan Asset Regulations or (ii) the
purchase and holding of this Note by such Holder will not result in a nonexempt
prohibited transaction under Section 406 of ERISA or Section 4975 of the Code.
26
IN WITNESS WHEREOF, the Company has caused this Note to be executed by
its officers or other representatives thereunto duly authorized, as of the date
first above written.
TXU ENERGY COMPANY LLC
By: /s/ Xxxx X. Xxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxx
Title: Treasurer and Assistant Secretary
27
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Amount Added to Principal Date Added to Principal Aggregate Principal
Amount of Note Under Amount of Note Amount of Note
Section 2.01(a)
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28
SCHEDULE I
ADMINISTRATIVE DETAILS
SCHEDULE II
DLJ ENTITIES
NAME
UXT Holdings-2, LLC
UXT Intermediary, LLC
UXT Holdings (Offshore)
UXT Holdings LLC
UXT-1 Blocker, Inc.
UXT-2 Blocker, Inc.
UXT-3 Blocker, Inc.
UXT-4 Blocker, Inc.
UXT-5 Blocker, Inc.
UXT AIV, L.P.
UXT AIV Blocker, Inc.
DLJ Merchant Banking Partners III, L.P.
DLJ Offshore Partners III, C.V.
DLJ Offshore Partners III-1, C.V.
DLJ Offshore Partners III-2, C.V.
Millennium Partners II, L.P.
DLJMB Partners III GmbH & Co. KG
MBP III Plan Investors, L.P.
