EXHIBIT 4(D)
STATEMENT OF RESOLUTION,
ESTABLISHING
MANDATORILY CONVERTIBLE SINGLE RESET PREFERENCE STOCK,
SERIES C
OF TXU CORP.
(LIQUIDATION PREFERENCE $1,000.00 PER SHARE)
To the Secretary of State
of the State of Texas
Pursuant to the provisions of Article 2.13 of the Texas Business
Corporation Act, the undersigned corporation submits the following statement for
the purpose of establishing and designating the Mandatorily Convertible Single
Reset Preference Stock Series C, par value $25 per share, and fixing and
determining the relative rights and preferences thereof.
1. The name of the corporation is TXU Corp. (the "Corporation").
2. The following resolution, establishing and designating the
Mandatorily Convertible Single Reset Preference Stock Series C, par value $25
per share, and fixing and determining the relative rights and preferences
thereof, was duly adopted by the Executive Committee of the Board of Directors
of the Corporation on July 26, 2000 pursuant to delegated authority from the
Board of Directors, and was thereby duly adopted by all necessary action on the
part of the Corporation:
RESOLVED that 810,000 shares of the authorized stock classified as Serial
Preference Stock as provided in Division A of Article VI of the Amended and
Restated Articles of Incorporation, as amended, shall constitute the third
series of Serial Preference Stock and are hereby designated and established as
Mandatorily Convertible Single Reset Preference Stock, Series C (the
"Convertible Preference Stock"), which series shall have, in addition to the
general terms and characteristics of all the authorized shares of Serial
Preference Stock of the Corporation, the following distinctive terms and
characteristics:
Section 1. Definitions. The following terms shall have the following
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meanings when used herein:
"Average Trading Price" for a security for any given period means an amount
equal to (i) the sum of the Closing Price for such security on each Trading Day
in such period divided by (ii) the total number of Trading Days in such period.
"Board of Directors" shall mean the Board of Directors of the Corporation
or any duly authorized committee thereof.
"Business Day" shall mean any day other than a Saturday, Sunday, or a day
on which commercial banking institutions in the State of New York or the State
of Texas are authorized or obligated by law or executive order to close.
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"Closing Date" shall have the meaning ascribed to such term in Annex A of
the Participation Agreement.
"Closing Price" for a security means the closing price for such security on
the Trading Day in question (or if such day is not a Trading Day then as of the
Trading Day next preceding such day) as reported by Bloomberg L.P., or if not so
reported by Bloomberg L.P., as reported by another recognized source selected by
the Board of Directors.
"Common Stock" shall have the meaning specified in Subsection 5(9) hereof.
"Dividend Payment Date" shall have the meaning specified in Subsection 2(1)
hereof.
"Failed Remarketing" shall have the meaning ascribed to such term in the
Remarketing Agreement.
"Final Sale Date" shall have the meaning ascribed to such term in the
Remarketing Agreement.
"Mandatory Conversion" shall have the meaning specified in Subsection 5(1)
hereof.
"Mandatory Conversion Date" shall have the meaning specified in Subsection
5(1) hereof.
"Mandatory Conversion Date Market Price" shall have the meaning specified
in Subsection 5(1) hereof.
"Mandatory Conversion Rate" shall have the meaning specified in Subsection
5(1) hereof.
"Note Trigger Event" shall have the meaning ascribed to such term in Annex
A of the Participation Agreement.
"Notes" shall have the meaning ascribed to such term in Annex A of the
Participation Agreement.
"Optional Conversion" shall have the meaning specified in Subsection 5(2)
hereof.
"Optional Conversion Rate" shall have the meaning specified in Subsection
5(2) hereof.
"Optional Redemption" shall have the meaning ascribed to such term in the
Indenture (as such term is defined in Annex A of the Participation Agreement).
"Participation Agreement" shall mean the Participation Agreement to be
entered into among the Corporation, TXU Communications Company, Pinnacle One
Partners, L.P., Pinnacle One GP, LLC, Pinnacle One, Inc., TXU Communications
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Ventures Company, Zenith Telecom Trust, Pinnacle One Overfund Trust, Pinnacle
One Share Trust, The Bank of New York (Delaware) and The Bank of New York.
"Principal Market" shall have the meaning ascribed to such term in Annex A
of the Participation Agreement.
"Rate Reset Date" means the earlier to occur of (A) the consummation of the
remarketing of the Initial Shares (as such term is defined in the Remarketing
Agreement), which is expected to be on or about the third Trading Day following
the Successful Repricing Date, and (B) the date of a Failed Remarketing.
"Redemption Event" means the occurrence of any of the following: (i) any
consolidation or merger of the Corporation with or into another corporation or
entity, unless in connection with such consolidation or merger the outstanding
shares of Common Stock immediately preceding the consummation of such
consolidation or merger are converted into, exchanged for or otherwise represent
a majority of the outstanding shares of common stock of the surviving or
resulting corporation or entity immediately succeeding the consummation of such
consolidation or merger or (ii) the Corporation sells or conveys to another
entity (other than a Subsidiary) all or substantially all of the assets of the
Corporation.
"Remarketing Agent" shall have the meaning ascribed to such term in the
Remarketing Agreement.
"Remarketing Agreement" shall mean the TXU Preference Stock Remarketing and
Registration Rights Agreement to be entered into among the Corporation, Pinnacle
One Partners, L.P., Pinnacle One Share Trust, The Bank of New York, as Indenture
Trustee, and Donaldson, Lufkin & Jenrette Securities Corporation, as Initial
Remarketing Agent.
"Reset Common Yield" shall mean the quotient of (i) the product of (x) 4
and (y) the amount of the ordinary quarterly cash dividend on one share of
Common Stock most recently declared prior to the Trigger Date (as appropriately
adjusted for the events referred to in Subsection 5(3)(a)), unless subsequent to
such declaration and prior to the Trigger Date, the Corporation has publicly
announced a change to, or elimination of, its ordinary quarterly cash dividend,
in which case clause (y) above shall be the amount of such proposed ordinary
quarterly cash dividend (or $0.00 if such dividend has been or is to be
eliminated), divided by (ii) the Reset Price (provided, however, that if as of
the Trigger Date there is more than one class of Common Stock, then the Reset
Common Yield shall be calculated with respect to each then outstanding class of
Common Stock, and the Reset Common Yield (as used herein) shall be the amount
calculated with respect to the class of Common Stock resulting in the greatest
Reset Common Yield).
"Reset Dividend Rate" shall mean an amount per annum per share equal to the
product of (i) the sum of (x) the Reset Common Yield (expressed as a
percentage), plus (y) 7% and (ii) $1,000.00 (rounded to the nearest cent).
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"Reset Price" shall mean the higher of (i) the Closing Price of a share of
Common Stock on the Trigger Date or (ii) the quotient (rounded up to the nearest
cent) of the Share Trust Amount divided by the number, as of the Trigger Date,
of the authorized but unissued shares of Common Stock that have not been
reserved as of the Trigger Date by the Board of Directors for other purposes,
subject to adjustment as provided in Subsection 5(3)(a) hereof.
"Rights" means rights or warrants distributed by the Corporation under a
shareholder rights plan or agreement to all holders of Common Stock entitling
the holders thereof to subscribe for or purchase shares of the Corporation's
capital stock (either initially or under certain circumstances), which rights or
warrants, until the occurrence of a specified event or events ("Rights Events"),
(i) are deemed to be transferred with such shares of Common Stock, (ii) are not
exercisable and (iii) are also issued in respect of future issuances of Common
Stock.
"Rights Events" shall have the meaning ascribed to such term in the
definition of Rights.
"Scheduled Maturity Date" shall have the meaning ascribed to such term in
Annex A of the Participation Agreement.
"Share Trust Amount" shall have the meaning ascribed to such term in Annex
A of the Participation Agreement.
"Subsidiary" means any corporation or other entity of which the Corporation
owns, directly or indirectly sufficient securities or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other individuals performing similar functions.
"Successful Repricing Date" shall have the meaning ascribed to such term in
the Remarketing Agreement.
"Threshold Appreciation Price" means the product of (i) the Reset Price as
of the time in question and (ii) 1.10.
"Trading Day" means a day on which the Principal Market with respect to a
security is regularly scheduled to be open for trading. For purposes of this
definition, a day on which any such Principal Market is scheduled to close (as
opposed to unexpectedly closing) prior to its regular closing time shall not
constitute a Trading Day.
"Trigger Date" shall mean the earlier to occur of (A) the Successful
Repricing Date and (B) the date of a Failed Remarketing.
Section 2. Dividends. The holders of the Convertible Preference Stock
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shall not be entitled to receive any dividends (nor shall dividends commence to
accrue) prior to, or with respect to any period ending prior to, the Rate Reset
Date. The holders of the Convertible Preference Stock shall be entitled to
receive, when and as declared by the Board of Directors out of the assets of the
Corporation legally available therefor, cumulative cash dividends from the Rate
Reset Date at the Reset Dividend Rate, and no more, payable on the dates as set
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forth in this Section 2. Dividends shall accrue on the Convertible Preference
Stock from the Rate Reset Date. Dividends shall be payable quarterly in arrears
on each January 1, April 1, July 1, and October 1 commencing on the first such
date following the Rate Reset Date and on the Mandatory Conversion Date (each
such date being hereinafter referred to as a "Dividend Payment Date"); provided,
that if any such Dividend Payment Date is not a Business Day, then any payment
with respect to such Dividend Payment Date shall be payable on the next
succeeding Business Day. A dividend period shall commence on a Dividend Payment
Date or the Rate Reset Date, as the case may be, and continue to the day next
preceding the next succeeding Dividend Payment Date. Accumulated unpaid
dividends shall not accrue interest. Dividends (or cash amounts equal to accrued
and unpaid dividends) payable on the Convertible Preference Stock for any period
less than or more than a full quarterly period shall be computed on the basis of
a 360-day year of twelve 30-day months and the actual number of days elapsed in
any period less than one month. Dividends on the Convertible Preference Stock
shall accrue whether or not the Corporation has earnings, whether or not there
are assets legally available for the payment of such dividends and whether or
not such dividends are declared. Dividends in arrears for any past dividend
periods or portions thereof may be declared and paid at any time without
reference to any regular Dividend Payment Date to holders of record on such date
as shall be fixed by the Board of Directors, subject to applicable law.
Section 3. Liquidation Preference. The amount payable upon the shares
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of Convertible Preference Stock in the event of voluntary or involuntary
dissolution, liquidation or winding up of the Corporation shall be $1,000.00 per
share plus an amount equivalent to the unpaid and accumulated dividends thereon,
if any, to the date of such voluntary or involuntary dissolution, liquidation or
winding up.
Section 4. Redemption. The Corporation shall have the right to redeem
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all, but not less than all, of the outstanding Convertible Preference Stock (x)
at any time following a Redemption Event and prior to a Trigger Date and (y) at
any time prior to a Note Trigger Event, in each case in cash at the redemption
price of $1,000.00 per share (the "Redemption Price"). Except as set forth in
the preceding sentence, the Corporation shall not have the right to redeem any
or all of the Convertible Preference Stock at any other time.
Section 5. Conversion.
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(1) Unless previously converted at the option of the holder in
accordance with the provisions hereof, on the earlier to occur of (i) the third
anniversary of the Rate Reset Date and (ii) the third anniversary of the
Scheduled Maturity Date, or if such date is not a Business Day, the next
succeeding day that is a Business Day (the "Mandatory Conversion Date"), each
outstanding share of Convertible Preference Stock shall, without additional
notice to holders thereof, convert automatically (the "Mandatory Conversion")
into a number of fully paid and non-assessable shares of Common Stock at the
Mandatory Conversion Rate (as defined herein) in effect on the Mandatory
Conversion Date. The "Mandatory Conversion Rate" is equal to the following
number of shares of Common Stock per share of Convertible Preference Stock: (a)
if the Mandatory Conversion Date Market Price is greater than or equal to the
Threshold Appreciation Price, the quotient of (i) $1,000 divided by (ii) the
Threshold Appreciation Price, (b) if the Mandatory Conversion Date Market Price
is less than the Threshold Appreciation Price but is greater than the Reset
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Price, the quotient of $1,000 divided by the Mandatory Conversion Date Market
Price and (c) if the Mandatory Conversion Date Market Price is less than or
equal to the Reset Price, the quotient of $1,000 divided by the Reset Price,
subject to adjustment as provided in this Section 5. "Mandatory Conversion Date
Market Price" shall mean the Average Trading Price per share of Common Stock for
the 20 consecutive Trading Days immediately prior to, but not including, the
Mandatory Conversion Date; provided, however, that if an event occurs during
such 20 consecutive Trading Days that would require an adjustment to the
Mandatory Conversion Rate pursuant to Subsections 5(3) or 5(5), the Board of
Directors may make such adjustments to the Average Trading Price for shares of
Common Stock for such 20 Trading Day period as it reasonably deems appropriate
to effectuate the intent of the adjustments in Subsections 5(3) and 5(5), in
which case any such determination by the Board of Directors shall be set forth
in a resolution of the Board of Directors and shall be conclusive absent
manifest error.
Dividends on the Convertible Preference Stock shall cease to accrue on the
day immediately preceding, and the Convertible Preference Stock shall cease to
be outstanding on, the Mandatory Conversion Date. The Corporation shall make
arrangements as it deems appropriate for the issuance of certificates
representing Common Stock and for the payment of cash in respect of such accrued
and unpaid dividends, if any, or cash in lieu of fractional shares, if any, in
exchange for and contingent upon surrender of certificates representing the
Convertible Preference Stock, and the Corporation may defer the payment of
dividends on such Common Stock and the voting thereof until, and make such
payment and voting contingent upon, the surrender of such certificates
representing the Convertible Preference Stock, provided that the Corporation
shall give the holders of the Convertible Preference Stock such notice of any
such actions as the Corporation deems appropriate and upon such surrender such
holders shall be entitled to receive such dividends declared and paid on such
Common Stock subsequent to the Mandatory Conversion Date. Amounts payable in
cash in respect of the Convertible Preference Stock or in respect of such Common
Stock shall not bear interest.
(2) Shares of Convertible Preference Stock shall be convertible, at
the option of the holders thereof ("Optional Conversion") at any time on or
after the Rate Reset Date and before the Mandatory Conversion Date, into Common
Stock at a rate equal to the number of shares of Common Stock per share of
Convertible Preference Stock (the "Optional Conversion Rate") equal to the
quotient of (i) $1,000 divided by (ii) the Threshold Appreciation Price, subject
to adjustment as set forth in this Section 5. Prior to the Rate Reset Date, the
Optional Conversion Rate shall be a number of shares of Common Stock equal to
the quotient of (i) $1,000 divided by (ii) the Average Trading Price of the
Common Stock for the 10 consecutive Trading Days immediately preceding the
Closing Date for each share of Convertible Preference Stock, subject to
adjustment as set forth in this Section 5. Optional Conversion of shares of
Convertible Preference Stock may be effected by delivering certificates
evidencing such shares of Convertible Preference Stock, together with written
notice of conversion and, if required by the Corporation, a proper assignment of
such certificates to the Corporation or in blank (and, if applicable as provided
in the following paragraph, cash payment of an amount equal to the dividends
attributable to the current dividend period payable on such shares), to the
office of the transfer agent for the shares of Convertible Preference Stock or
to any other office or agency maintained by the Corporation for that purpose and
otherwise in accordance with Optional Conversion procedures established by the
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Corporation. Each Optional Conversion shall be deemed to have been effected
immediately before the close of business on the date on which the foregoing
requirements shall have been satisfied. The Optional Conversion shall be at the
Optional Conversion Rate in effect at such time and on such date.
Holders of shares of Convertible Preference Stock at the close of business
on a record date for any payment of declared dividends shall be entitled to
receive the dividend payable on such shares on the corresponding Dividend
Payment Date or other date fixed for payment of dividends notwithstanding the
Optional Conversion of such shares following such record date and on or prior to
such Dividend Payment Date or other date fixed for payment of dividends.
However, shares of Convertible Preference Stock surrendered for Optional
Conversion after the close of business on a record date for any payment of
declared dividends and before the opening of business on the next succeeding
Dividend Payment Date or other date fixed for payment of dividends must be
accompanied by payment in cash of an amount equal to the dividends attributable
to the current dividend period payable on such shares on such next succeeding
Dividend Payment Date or other date fixed for payment of dividends. Except as
provided in this Subsection 5(2), upon any Optional Conversion, the Corporation
shall make no payment of or allowance for unpaid dividends, whether or not in
arrears, on such converted shares of Convertible Preference Stock as to which
Optional Conversion has been effected or for previously declared dividends or
distributions on the shares of Common Stock issued upon such Optional
Conversion.
(3) The Optional Conversion Rate shall be adjusted from time to time
and the Mandatory Conversion Rate shall be adjusted from time to time after the
Rate Reset Date in respect of events occurring after the Rate Reset Date, as
follows:
(a) In case the Corporation shall (i) pay a dividend on its Common Stock in
other Common Stock, (ii) subdivide or split its outstanding Common Stock into a
greater number of shares, (iii) combine its outstanding Common Stock into a
smaller number of Common Stock, or (iv) issue by reclassification of its Common
Stock any other Common Stock (including in connection with a merger in which the
Corporation is a surviving corporation), then, in any such event, (1) the
Mandatory Conversion Rate in effect immediately prior to such event shall be
adjusted such that the Reset Price shall be adjusted by multiplying it by a
fraction (which fraction and all other fractions referred to herein may be
improper fractions), the numerator of which is one and the denominator of which
is the number of shares of Common Stock that a holder of one share of Common
Stock prior to any event described above would hold after such event (assuming
the issuance of fractional shares) (the "Recapitalization Adjustment Ratio"),
and (2) the Optional Conversion Rate in effect immediately prior to such event
shall be adjusted by multiplying it by a fraction, the numerator of which is one
and the denominator of which is the Recapitalization Adjustment Ratio. Such
adjustment shall become effective immediately after the effective date of any
such event (or the earlier record date in the case of any such dividend)
whenever any of the events listed above shall occur.
(b) In case the Corporation shall issue rights or warrants to all holders
of its Common Stock entitling them (for a period, except in the case of Rights,
expiring within 45 days after the record date for determination of the
shareholders entitled to receive such rights or warrants) to subscribe for or
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purchase Common Stock at a price per share of Common Stock less than the current
market price per share of Common Stock (as defined in Subsection 5(4)) on such
record date, then in each such case the Mandatory Conversion Rate on the date of
such issuance shall be adjusted such that the Reset Price shall be adjusted by
multiplying it by a fraction the numerator of which shall be the sum of (x) the
number of shares of Common Stock outstanding immediately prior to such issuance,
plus (y) the number of additional shares of Common Stock which the aggregate
offering price of the total number of shares of Common Stock so offered for
subscription or purchase would purchase at the Average Trading Price for a share
of Common Stock on the record date for such issuance, and the denominator of
which shall be the sum of (x) the number of shares of Common Stock outstanding
immediately prior to such issuance, plus (y) the number of additional shares of
Common Stock offered for subscription or purchase pursuant to such rights or
warrants (the "Anti-Dilution Adjustment Ratio"); and the Optional Conversion
Rate in effect on the record date described below shall be adjusted by
multiplying it by a fraction, the numerator of which is one and the denominator
of which is the Anti-Dilution Adjustment Ratio. For purposes of this Subsection
5(3)(b), the issuance of rights or warrants to subscribe for or purchase
securities exercisable for, convertible into, or exchangeable for, shares of
Common Stock shall be deemed to be the issuance of rights or warrants to
purchase the shares of Common Stock into which such securities are exercisable,
convertible or exchangeable at an aggregate offering price equal to the
aggregate offering price of such securities plus the minimum aggregate amount
(if any) payable upon the exercise, conversion or exchange of such securities.
Such adjustment shall become effective at the opening of business on the
Business Day next following the record date for such rights or warrants. To the
extent that any shares of Common Stock, or securities exercisable for,
convertible into, or exchangeable for, shares of Common Stock so offered for
subscription or purchase are not so subscribed or purchased by the expiration of
such rights or warrants, the Mandatory Conversion Rate and the Optional
Conversion Rate shall each be readjusted to the rates or amounts, respectively,
which would then be in effect, had the adjustment made upon the issuance of such
rights or warrants been made upon the basis of the issuance of rights or
warrants in respect of only the number of shares of Common Stock and securities
exercisable for, convertible into, or exchangeable for, shares of Common Stock
actually issued upon exercise of such rights or warrants.
(c) If the Corporation shall pay a dividend or make a distribution to all
holders of its Common Stock consisting of evidences of its indebtedness or other
assets (including capital shares of the Corporation other than Common Stock but
excluding any Ordinary Cash Dividends (as defined below)), or shall issue to all
holders of its Common Stock rights or warrants to subscribe for or purchase any
of its securities (other than those referred to in Subsection 5(3)(b)), then in
each such case the Mandatory Conversion Rate in effect immediately prior to such
event shall be adjusted such that the Reset Price shall be adjusted by
multiplying it by a fraction, the numerator of which shall be the Average
Trading Price for a share of Common Stock on such record date, minus the fair
market value as of such record date of the portion of evidences of indebtedness
or other assets so distributed, or of such subscription rights or warrants,
applicable to one share of Common Stock (provided that such numerator shall
never be less than $1.00) and the denominator of which shall be the Average
Trading Price for a share of Common Stock on such record date (the "Distribution
Adjustment Ratio"); and the Optional Conversion Rate in effect immediately prior
to such event shall be adjusted by multiplying it by a fraction, the numerator
of which is one and the denominator of which is the Distribution Adjustment
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Ratio. Such adjustment shall become effective on the opening of business on the
Business Day next following the record date for such dividend or distribution or
the determination of shareholders entitled to receive such dividend or
distribution or rights or warrants, as the case may be. "Ordinary Cash
Dividends" shall mean (i) any regular cash dividend on the Common Stock that
does not exceed the per share amount of the immediately preceding regular cash
dividend on the Common Stock (as adjusted to appropriately reflect any of the
events referred to in Subsection 5(3)(a)) by 10% and (ii) any other cash
dividend or distribution which, when combined on a per share basis with the per
share amount of all other cash dividends and distributions paid on the Common
Stock during the 365-day period ending on the date of declaration of such
dividend or distribution (as adjusted to appropriately reflect any of the events
referred to in Subsection 5(3)(a) and excluding cash dividends or distributions
that resulted in an adjustment to the Mandatory Conversion Rate or the Optional
Conversion Rate), does not exceed 15% of the current market price per share of
Common Stock (determined pursuant to Subsection 5(4)) on the Trading Day
immediately preceding the date of declaration of such dividend or distribution.
(4) For the purpose of any computation under Subsection 5(3), the
"current market price per share of Common Stock" on any date in question shall
mean the Average Trading Price for shares of Common Stock for the 15 consecutive
Trading Days ending on the earlier of the day in question and, if applicable,
the day before the "ex" date with respect to the issuance or distribution
requiring such computation; provided, however, that if another event occurs that
would require an adjustment pursuant to Subsection 5(3), the Board of Directors
may make such adjustments to the Average Trading Price for shares of Common
Stock during such 15 Trading Day period as it reasonably deems appropriate to
effectuate the intent of the adjustments in Subsection 5(3), in which case any
such determination by the Board of Directors shall be set forth in a resolution
of the Board of Directors and shall be conclusive absent manifest error. For
purposes of this Subsection, the term "ex" date, when used with respect to any
issuance or distribution, means the first date on which the shares of Common
Stock trade regular way on the relevant exchange or in the relevant market from
which the Average Trading Price was obtained without the right to receive such
issuance or distribution. For the purpose of any computation under Subsection
5(3), the "fair market value" of any assets, evidences of indebtedness,
subscription rights or warrants on any date in question: (i) in the event any
such item is a publicly traded security ("Publicly Traded Security"), shall be
determined for such date pursuant to the provisions of this Subsection 5(4) for
determination of the "current market price per share of Common Stock", except
that (x) each reference therein to "Common Stock" shall be deemed to mean such
Publicly Traded Security, and (y) if such Publicly Traded Security does not
trade on a "when issued" basis for the 15 consecutive Trading Days preceding the
"ex" date, such determination shall be made for the period of 15 consecutive
Trading Days commencing on the "ex" date; and (ii) in the event any such item is
not a Publicly Traded Security, shall be reasonably determined in good faith for
such date by the Board of Directors, as evidenced by a resolution of the Board
of Directors, whose determination shall be conclusive absent manifest error.
(5) In any case of any reclassification of Common Stock (other than a
reclassification of the Common Stock referred to in Subsection 5(3)(a)); any
consolidation or merger of the Corporation with or into another company or other
entity (other than a merger resulting in a reclassification of the Common Stock
referred to in Subsection 5(3)(a)); or any sale or conveyance to another entity
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(other than a Subsidiary) of all or substantially all of the assets of the
Corporation (any such event referred to herein as a "Transaction", then the
Optional Conversion Rate and Mandatory Conversion Rate shall be adjusted so that
after consummation of such a Transaction the holders of shares of Convertible
Preference Stock will receive, in lieu of the number of shares of Common Stock
which such holder would have received upon conversion but for such Transaction,
the kind and amount of securities, cash and other property receivable upon
consummation of such Transaction by a holder of such number of shares of Common
Stock, subject to further adjustment as provided in this Section 5, including
without limitation, an adjustment to the Optional Conversion Rate on the Rate
Reset Date if such Transaction occurs prior to the Rate Reset Date. On and after
the consummation of any such Transaction, the Mandatory Conversion Date Market
Price, which shall be used for purposes of the determination as to which of
clauses (a), (b) or (c) of the definition of Mandatory Conversion Rate applies,
shall mean the sum of (i) the product of the Average Trading Price of any
Publicly Traded Security received upon consummation of such Transaction for the
20 consecutive Trading Days immediately prior to, but not including, the
Mandatory Conversion Date multiplied by the fraction of such security received
in such Transaction per share of Common Stock (assuming the issuance of
fractional shares) plus (ii) the fair market value of the cash and other
property received upon consummation of such Transaction per share of Common
Stock as of the day preceding the Mandatory Conversion Date as determined in
accordance with Subsection 5(4). In determining the kind and amount of
securities, cash or other property receivable upon consummation of such
Transaction by a holder of shares of Common Stock, it shall be assumed that such
holder is not a person or entity with which the Corporation consolidated or into
which the Corporation was merged or which merged into the Corporation, as the
case may be, or an affiliate of any such person or entity and that such holder
of Common Stock failed to exercise rights of election, if any, as to the kind or
amount of securities, cash, or other property receivable upon consummation of
such transaction (provided that, if the kind or amount of securities, cash, or
other property receivable upon consummation of such Transaction is not the same
for each non-electing share, then the kind and amount of securities, cash, or
other property receivable upon consummation of such transaction for each
non-electing share shall be deemed to be the kind and amount so receivable per
share by a plurality of the non-electing shares). In the event of such a
reclassification, consolidation, merger, sale or conveyance, effective
provisions shall be made in the Articles of Incorporation or similar document of
the resulting or surviving company or entity so that the conversion rate
applicable to any securities or property into which the shares of the
Convertible Preference Stock shall then be convertible shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Stock contained in
Subsections 5(3)(a), 5(3)(b) and 5(3)(c), inclusive, and the other provisions of
this Section 5 with respect to the Common Stock shall apply on terms as nearly
equivalent as practicable to any such other securities and property deliverable
upon conversion of shares of Convertible Preference Stock.
(6) Whenever any adjustments are required in the shares of Common
Stock into which each share of Convertible Preference Stock is convertible, the
Corporation shall forthwith (a) compute the adjusted Mandatory Conversion Rate
and Optional Conversion Rate in accordance herewith and prepare a certificate
signed by an officer of the Corporation setting forth the adjusted Mandatory
Conversion Rate and the Optional Conversion Rate, describing in reasonable
detail the method of calculation used and the facts requiring such adjustment
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and upon which such adjustment is based, which certificate shall be conclusive,
final and binding evidence of the correctness of the adjustment and file with
the transfer agent of the Convertible Preference Stock such certificate and (b)
cause a copy of such certificate to be mailed to each holder of record of the
Convertible Preference Stock as of or promptly after the effective date of such
adjustment and, with respect to adjustments applicable after the Rate Reset
Date, make a prompt public announcement of such adjustment.
(7) The Corporation shall at all times reserve and keep available,
free from preemptive rights out of its authorized but unissued shares of Common
Stock for the purpose of issuance upon conversion of the Convertible Preference
Stock a number of shares of Common Stock equal to the product of (i) the number
of shares of Common Stock then deliverable at such time upon an Optional
Conversion of all shares of the Convertible Preference Stock multiplied by (ii)
1.10.
(8) The Corporation will pay any and all documentary stamp or similar
issue or transfer taxes that may be payable in respect of the issuance or
delivery of shares of Common Stock on conversion of shares of the Convertible
Preference Stock pursuant to this Section 5. The Corporation shall not, however,
be required to pay any tax which may be payable in respect of any transfer
involving the issue and delivery of shares of Common Stock in the name other
than that in which the shares of Convertible Preference Stock so converted were
registered and no such issue and delivery shall be made unless and until the
person requesting such issue has paid to the Corporation the amount of any such
tax, or has established to the satisfaction of the Corporation, that such tax
has been paid.
(9) For the purpose of this Section 5, the term "Common Stock" shall
include any shares of the Corporation of any class or series which has no
preference or priority in the payment of dividends or in the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of the Corporation and which is not subject to redemption by the Corporation.
However, Common Stock issuable upon conversion of the Convertible Preference
Stock shall include only shares of the class designated as Common Stock as of
the original date of issuance of the Convertible Preference Stock, or shares of
the Corporation of any classes or series resulting from any reclassification or
reclassifications thereof (including reclassifications referred to in clause
(iv) of Subsection 5(3)(a)) and which have no preference or priority in the
payment of dividends or in the distribution of assets upon any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation and which
are not subject to redemption by the Corporation, provided that, if at any time,
there shall be more than one such resulting class or series, the shares of such
class and series then so issuable shall be in the same proportion, if possible,
or if not possible, in substantially the same proportion which the total number
of shares of such class and series resulting from all such reclassifications
bears to the total number of shares of all classes and series resulting from all
such reclassifications.
(10) No fractional shares or scrip representing fractional shares
shall be issued upon the conversion of the Convertible Preference Stock. If any
such conversion would otherwise require the issuance of a fractional share, an
amount equal to such fraction multiplied by the current market price per share
of Common Stock (determined as provided in Subsection 5(4)) of the Common Stock
on the date of conversion shall be paid to the holder in cash by the
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Corporation. If on such date there is no current market price per share of
Common Stock, the fair market value of a share of Common Stock (determined as
provided in Subsection 5(4)) on such date, shall be used. If more than one share
of Convertible Preference Stock shall be surrendered for conversion at one time
or for the same holder, the number of full shares of Common Stock issuable upon
conversion thereof shall be computed on the basis of the aggregate number of
shares of Convertible Preference Stock so surrendered.
(11) No adjustment in the Mandatory Conversion Rate and the Optional
Conversion Rate shall be required unless such adjustment (plus any adjustments
not previously made by reason of this Subsection 5(11)) would require an
increase or decrease of at least 1% in the number of shares of Common Stock into
which each share of the Convertible Preference Stock is then convertible;
provided, however, that any adjustments which by reason of this Subsection 5(11)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment and provided further that any adjustment shall be
required and made in accordance with the provisions of Subsection 5(3) not later
than such time as may be required in order to preserve the tax free nature of a
distribution to the holders of shares of Common Stock. If any action or
transaction would require adjustment to the Mandatory Conversion Rate or the
Optional Conversion Rate pursuant to this Section 5, only one adjustment shall
be made and such adjustment shall be the amount of the adjustment that has the
highest absolute value. All calculations under this Section 5 shall be made to
the nearest one-hundredth of a share of Common Stock.
(12) The Board of Directors may make such upward adjustments in the
Mandatory Conversion Rate and the Optional Conversion Rate, in addition to those
required by this Section 5, as shall be determined by the Board of Directors, as
evidenced by a resolution of the Board of Directors, to be advisable in order
that any stock dividends, subdivisions of shares, distribution of rights to
purchase stock or securities, or distribution of securities convertible into or
exchangeable for stock (or any transaction that could be treated as any of the
foregoing transactions pursuant to Section 305 of the Internal Revenue Code of
1986, as amended) made by the Corporation to its shareholders after the Rate
Reset Date shall not be taxable. The determination of the Board of Directors as
to whether an adjustment should be made pursuant to the provisions of this
Subsection 5(12), and if so, as to what adjustment should be made and when,
shall be conclusive, final and binding on the Corporation and all stockholders
of the Corporation.
(13) In any case in which this Section 5 shall require that an
adjustment as a result of any event become effective at the opening of business
on the Business Day next following a record date and the date fixed for
conversion occurs after such record date, but before the occurrence of such
event, the Corporation may, in its sole discretion, elect to defer (A) issuing
to the holder of any converted Convertible Preference Stock the additional
shares of Common Stock issuable upon such conversion over the shares of Common
Stock issuable before giving effect to such adjustments and (B) paying to such
holder any amount in cash in lieu of a fractional share of Common Stock pursuant
to Subsection 5(10), in each case until after the occurrence of such event.
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(14) Notwithstanding the foregoing provisions of this Section 5, no
adjustment of the Optional Conversion Rate or the Mandatory Conversion Rate
shall be required to be made upon the issuance of any shares of Common Stock
pursuant to any present or future plan providing for the reinvestment of
dividends or interest payable on securities of the Corporation and the
investment of optional amounts in shares of Common Stock under any such plan or
upon the issuance of shares of Common Stock (or securities, rights, warrants,
options or similar rights, which are convertible or exercisable for shares of
Common Stock) pursuant to any compensatory plan of the Corporation or its
Subsidiaries.
(15) Notwithstanding any other provision of this Section 5, the
issuance or distribution of Rights shall not be deemed to constitute an issuance
or a distribution or dividend of rights, warrants, or other securities to which
any of the adjustment provisions described above applies until the occurrence of
the earliest Rights Event.
(16) For purposes of this Section 5, shares of Common Stock owned by,
or held for the account of, the Corporation, a Subsidiary or another entity of
which a majority of the common stock or common equity interests are owned,
directly or indirectly, by the Corporation shall be deemed to be not
outstanding.
(17) Subsequent to the Rate Reset Date, at any time while any shares
of Convertible Preference Stock are outstanding, (i) the Corporation shall
declare a dividend (or any other distribution) on its Common Stock, excluding
any cash dividends, (ii) the Corporation shall authorize the issuance to all
holders of its Common Stock of rights or warrants to subscribe for or purchase
shares of Common Stock or of securities exercisable for, convertible into, or
exchangeable for, shares of Common Stock or (iii) the Corporation shall
authorize any reclassification of its Common Stock (other than a subdivision or
combination thereof) or any consolidation or merger to which the Corporation is
a party and for which approval of any shareholders of the Corporation is
required (except for a merger of the Corporation into one of its subsidiaries
solely for the purpose of changing the corporate name or corporate domicile of
the Corporation to another state of the United States and in connection with
which there is no substantive change in the rights or privileges of any
securities of the Corporation other than changes resulting from differences in
the corporate statutes of the then existing and the new state of domicile), or
the sale or transfer to another corporation of the property of the Corporation
as an entirety or substantially as an entirety, then the Corporation shall cause
to be filed at each office or agency maintained for the purpose of conversion of
the Convertible Preference Stock, and shall cause to be mailed to the holders of
Convertible Preference Stock at their last addresses as they shall appear on the
stock register, at least 10 days before the date hereinafter specified (or the
earlier of the dates hereinafter specified, in the event that more than one date
is specified), a notice stating (A) the date on which a record is to be taken
for the purpose of such dividend or distribution of rights or warrants, or, if a
record is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend or distribution of rights or warrants are
to be determined, or (B) the date on which any such reclassification,
consolidation, merger, sale or transfer is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their Common Stock for securities or other property
(including cash), if any, deliverable upon such reclassification, consolidation,
merger, sale or transfer. The failure to give or receive the notice required
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hereby or any defect therein shall not affect the legality or validity of such
dividend or distribution of rights or warrants or other action.
Dated: August 11, 2000.
TXU Corp.
By: /s/ Diane J. Kubin
------------------------------------
Diane J. Kubin
Assistant Secretary
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