ACCELERATED REPURCHASE

TXU Corp.

Re: Accelerated Repurchase

Ladies and Gentlemen:

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

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

I. Definitions

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

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

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

“Citigroup” means Citibank and/or CGMI.

“Closing Fee” means $55,698,203.

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

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

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

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

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

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

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

“Federal Funds Open Rate” means 2.40%.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

“Rebate Participation Percentage” shall equal 70%.

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

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

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

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

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

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

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

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

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

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

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

II. Initial Shares

III. Citigroup Purchases and the Pricing Period  

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

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

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

V. Pricing Adjustment and Settlement

(a) After the expiration of the Pricing Period,

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

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

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

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

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

Upon delivery of additional Payment Shares, an additional Valuation Period shall apply to the shares so delivered. To the extent that Citigroup elects not to resell the additional Payment Shares during the additional Valuation Period, then no further adjustment shall be made in the number or value of those additional Payment Shares or to the Make-Whole Amount paid through such additional Payment Shares. In the event that Citigroup chooses to resell the additional Payment Shares delivered to Citigroup in payment of the Make-Whole Amount during the additional Valuation Period, then, if the proceeds from the sale of such additional Payment Shares (net of brokerage costs) exceed the Make-Whole Amount (or the applicable pro rata portion thereof), Citigroup shall refund in cash to the Company an amount equal to such excess by the close of business on the third Trading Day following the last day of the additional Valuation Period. In the event that the proceeds of all such sales (net of brokerage costs) are less than the Make-Whole Amount (or the applicable pro rata portion thereof), Citigroup shall provide notice thereof to