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first lien on all pledged assets of the TCEH Pledged Entities including the Martin Lake, Big Brown and Oak Grove electric generation plants (the three electric generation facilities from which the unit contingent electric energy under the PPA are to be provided and collectively refened to as the "PPA Facilities") as well as Comanche Peak, the two unit nuclear electric generation plant near Glen Rose, Texas and other electric generating facilities owned by the TCEH Pledged Entities. 2. Each TCEH Pledged Entity has executed the Guarantee, guaranteeing the Secured Obligations of any other TCEH Pledged Entity, and such guarantee obligation is also a Secured Obligation. The PPA, as a Secured Obligation, is entitled to the benefits of the Guarantee. 3. The obligations of Seller under the PPA will be secured by an additional guaranty from TCEH. If Seller defaults under the PPA, CAPP would have a right to allege a default (under the LBO Financing Documents, e.g., the Credit Agreement) pursuant to the Intercreditor Agreement. (A payment default by Seller under the PPA is an event of default under the Credit Agreement to the extent such default exceeds $200 million; it is assumed that a Seller default under the PPA would exceed such amount through the term of the Credit Agreement of October 2014.) The Intercreditor Agreement provides, however, that it will be up to the Collateral Agent to declare a default. The Collateral Agent could be overruled or as the case may be, directed to initiate proceedings, by a majority of the secured lenders, but CAPP will likely have no real influence over such vote. If Seller defaults under the PPA, CAPP, it is assumed, may proceed against Seller, and against TCEH under its guaranty as an unsecured claim. The Credit Agreement provides certain protections to the various secured parties under the LBO Financing Documents, including CAPP, wherein the TCEH Pledged Entities have covenanted and agreed to certain borrowing and lien structure restrictions giving the secured parties (and permitted future secured parties) some degree of anti- dilution protection. Reference is made to Article 10 of the Credit Agreement for the various negative covenants of the TCEH Pledged Entities relating to future borrowings and lien structures. The remaining term of the Credit Agreement is approximately six (6) years and ends in October 2014. Therefore, prior to October 2014, the EFH LBO must be refinanced and the secured parties paid (or otherwise participate in such refinancing), with the exception of CAPP. CAPP, through the PPA, will be the sole secured party under the LBO Financing Documents whose agreement extends past October 2014 (the term of the PPA is through December 2032). TCEH has represented that, under the LBO Financing Documents, the TCEH Pledged Entities have an obligation to repay at least one percent (1 of the secured debt annually. It is not known how much additional debt the TCEH Pledged Entities may incur between now and 2014, and CAPP can make no assurances with respect thereto. 3 u U0001'k