<PAGE>
================================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Texas Utilities Company
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Texas Utilities Company
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
TEXAS UTILITIES COMPANY
Energy Plaza
1601 Bryan Street
Dallas, Texas 75201-3411
------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
------------------
March 19, 1998
To the Shareholders of
Texas Utilities Company:
The annual meeting of shareholders of Texas Utilities Company will be held
in the Alexandria Auditorium of the Infomart, 1950 Stemmons Freeway, Dallas,
Texas on Friday, May 8, 1998 at 9:30 a.m. for the following purposes:
1. To elect a Board of Directors for the ensuing year; and
2. To approve the selection of auditors for the year 1998.
The Board of Directors has fixed the close of business on March 9, 1998 as
the time as of which shareholders entitled to notice of, and to vote at, the
meeting and any adjournments shall be determined.
WHETHER OR NOT YOU WILL BE ABLE TO ATTEND THE MEETING, PLEASE SIGN AND
RETURN THE ACCOMPANYING PROXY PROMPTLY. NO POSTAGE NEED BE AFFIXED TO THE
REPLY ENVELOPE WHICH IS ENCLOSED HEREWITH FOR YOUR CONVENIENCE IF IT IS MAILED
IN THE UNITED STATES.
Peter B. Tinkham
Secretary
<PAGE>
TEXAS UTILITIES COMPANY
Energy Plaza
1601 Bryan Street
Dallas, Texas 75201-3411
------------------
PROXY STATEMENT
------------------
March 19, 1998
A proxy in the accompanying form is solicited by the Board of Directors of
TEXAS UTILITIES COMPANY for use at the annual meeting of shareholders to be
held in the Alexandria Auditorium of the Infomart, 1950 Stemmons Freeway,
Dallas, Texas, on Friday, May 8, 1998, at 9:30 a.m. and any adjournments
thereof for the purposes set forth in the accompanying notice.
The close of business on March 9, 1998 has been fixed as the time as of
which shareholders entitled to notice of, and to vote with respect to, this
meeting shall be determined. At such date there were outstanding and entitled
to vote 245,237,688 shares of common stock. Except as indicated below, each
share is entitled to one vote on all matters submitted to shareholders.
Any shareholder may exercise the right of cumulative voting in the election
of directors provided the shareholder gives written notice of such intention
to the Secretary of the Company on or before the date preceding the election.
When exercising this right the shareholder is entitled to one vote for each
share held multiplied by the number of directors to be elected and he may cast
all of his votes for a single nominee or spread his votes among the nominees
in any manner desired.
This Notice, Proxy Statement and form of proxy are being mailed or given to
shareholders on or about March 19, 1998.
The cost of soliciting proxies will be borne by the Company. In addition to
use of the mails, proxies may be solicited by directors, officers and regular
employees of the Company in person or by telephone. The Company has hired D.
F. King & Co., Inc. to assist in the solicitation of proxies at an estimated
cost of $7,500 plus disbursements. Shareholders may assist the Company in
avoiding expenses in this connection by returning their proxies promptly.
1
<PAGE>
Any proxy delivered pursuant to this solicitation is revocable at the option
of the person executing the same at any time prior to the exercise thereof.
The shares represented by any proxy duly given as a result of this request
will be voted in the discretion of the persons named in the proxy unless the
shareholder specifies a choice by means of the ballot space on the proxy, in
which case the shares will be voted accordingly.
The Company has adopted a confidential voting policy. Accordingly,
tabulation of proxies and votes cast at the meeting will be conducted by an
independent agent and the votes of individual shareholders will be kept
private and not disclosed to the Company, except in limited circumstances.
The presence in person or by proxy of the holders of a majority of the
shares of the common stock entitled to vote shall constitute a quorum entitled
to transact business at the meeting. Directors are elected by plurality vote
of the votes cast at the meeting; abstentions and non-votes, as described
below, will have no effect. The approval of the selection of auditors requires
the affirmative vote of a majority of the shares represented at the meeting;
abstentions and non-votes, i.e. shares held by brokers and other nominees or
fiduciaries that are present at the meeting but not voted on such matter, will
be treated as negative votes.
1999 ANNUAL MEETING SHAREHOLDERS' PROPOSALS
All proposals from shareholders to be considered at the next annual meeting
scheduled for May 21, 1999 must be received by the Secretary of the Company,
Energy Plaza, 1601 Bryan Street, Dallas, Texas 75201-3411, not later than the
close of business on November 19, 1998.
ELECTION OF DIRECTORS
It is the intent of the Board of Directors that the persons named in the
proxy will vote your shares in favor of the nominees for directors listed
hereafter, unless authority is withheld. All of the nominees are current
members of the Board of Directors and have been nominated by the Nominating
Committee. The persons named in the proxy may cumulate the votes represented
thereby and in case any such nominee shall become unavailable, which the Board
of Directors has no reason to anticipate, may vote for a substitute.
2
<PAGE>
The names of the nominees for the office of director for the ensuing year
and information about them, as furnished by the nominees themselves, are set
forth below:
<TABLE>
<CAPTION>
SERVED AS
NAME AGE DIRECTOR SINCE BUSINESS EXPERIENCE DURING PAST FIVE YEARS
---- --- -------------- ------------------------------------------
<S> <C> <C> <C>
J. S. Farrington
(2)(5)................. 63 1983 Chairman Emeritus of the Company since May
1997; prior thereto Chairman of the Board of
the Company (May 1995--May 1997); prior
thereto Chairman of the Board and Chief
Executive of the Company (February 1987--May
1995); prior thereto President of the
Company (May 1983--February 1987).
Bayard H. Friedman
(1)(2)(3)(4)(6)........ 71 1991 Friedman & Uhlemeyer, Inc., Investment
Adviser, since December 1992. Prior thereto,
Senior Chairman and Director, Team Bank
(January 1990--November 1992).
A Director of Justin Industries.
William M. Griffin
(1)(3)(4)(6)(7)........ 71 1966 Principal, Griffin, Swanson & Co., Inc.
(investments). Executive Vice President
(until August 1985) and Chairman of the
Finance Committees (until March 1986) of The
Hartford Fire Insurance Company and
Subsidiaries. A Director of The Hartford
Fire Insurance Company (until March 1991)
and Shawmut National Corporation (until
April 1992).
Kerney Laday
(1)(3)(4)(6)(7)........ 56 1993 President, The Laday Company (management
consulting and business development) since
July 1995; prior thereto Vice President,
field operations, Southern Region, U. S.
Customer Operations, Xerox Corporation
(January 1991--June 1995); prior thereto
Vice President and region general manager,
Xerox (1986--1991).
Margaret N. Maxey
(1)(2)(3)(4)(6)........ 71 1984 Director, Clint W. Murchison, Sr. Chair of
Free Enterprise and Professor, Biomedical
Engineering Program, College of Engineering,
The University of Texas at Austin since
1982; prior thereto Assistant Director,
Energy Research Institute, Columbia, South
Carolina (1980--1982).
James A. Middleton
(1)(3)(4)(5)(6)(7)..... 62 1989 Chairman of the Board and Chief Executive
Officer, Crown Energy Company (oil and gas
producing and tar sands processing) since
January 1996; prior thereto Executive Vice
President (October 1987--December 1994) and
Senior Vice President (June 1981--October
1987) of Atlantic Richfield Company.
President, ARCO Oil and Gas Company,
(January 1985--October 1990). A Director of
Crown Energy Company, ARCO Chemical Company
and Berry Petroleum Co.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
SERVED AS
NAME AGE DIRECTOR SINCE BUSINESS EXPERIENCE DURING PAST FIVE YEARS
---- --- -------------- ------------------------------------------
<S> <C> <C> <C>
Erle Nye
(2)(5)(7).............. 60 1987 Chairman of the Board and Chief Executive of
the Company since May 1997; prior thereto
President and Chief Executive of the Company
(May 1995--May 1997); prior thereto
President of the Company (February 1987--May
1995); Chairman of the Board and Chief
Executive, and a Director, of TU Electric
and ENSERCH Corporation.
J. E. Oesterreicher
(1)(3)(4)(6)........... 56 1996 Chairman of the Board of J C Penney Company,
Inc. (retailer) since January 1997 and Chief
Executive Officer since January 1995; Vice
Chairman of the Board from 1995 to 1997;
President, J C Penney Stores and Catalog
from 1992 to 1995. A Director of J C Penney
Company, Inc. and Brinker International,
Inc.
Charles R. Perry
(1)(2)(3)(4)(5)(6)..... 68 1985 Oil and gas interests, private investments.
Chairman of the Board of Perry Management,
Inc., Avion Flight Centre, Inc. and Perry
Gas Companies, Inc.
Herbert H. Richardson
(1)(3)(4)(5)(6)........ 67 1992 Associate Vice Chancellor for Engineering and
Director, Texas Transportation Institute,
The Texas A&M University System; Associate
Dean of Engineering, Regents Professor and
Distinguished Professor of Engineering,
Texas A&M University; Chancellor, The Texas
A&M University System (1991--1993) and
Deputy Chancellor for Engineering, The Texas
A&M University System (1986--1991).
</TABLE>
- ---------
(1) Member of Audit Committee.
(2) Member of Executive Committee.
(3) Member of Finance Committee.
(4) Member of Nominating Committee.
(5) Member of Nuclear Committee.
(6) Member of Organization and Compensation Committee.
(7) Member of Business Development Committee.
4
<PAGE>
During 1997 the Board of Directors held five meetings. The standing
committees of the Board of Directors and the membership of each committee are
shown on the preceding pages. During 1997 each of the Directors attended more
than 92% of the aggregate of the Board of Directors meetings and the meetings
of the Committees on which they serve.
The Audit Committee nominates to the Board, for approval by the shareholders
at each annual meeting, a firm of independent auditors to audit the books of
account and records of the Company and to perform such other duties as this
Committee may prescribe or approve, receives the reports and comments from
such independent auditors, reviews the adequacy of internal controls, reviews
the accounting principles employed in financial reporting and takes any action
with respect thereto as it may deem appropriate, reports to the Board of
Directors upon its findings and recommendations and performs such other duties
as may be assigned to it from time to time by the Board; the Audit Committee
held three meetings during 1997. The Executive Committee exercises the
authority of the Board in the intervals between meetings of the Board; the
Executive Committee did not meet during 1997. The Finance Committee reviews
and recommends to the Board, for its consideration, major financial
undertakings and policies and performs such other duties as may be assigned to
it from time to time by the Board; the Finance Committee held two meetings
during 1997. The Nominating Committee selects and recommends to the Board, for
its consideration, persons as nominees for election as directors of the
Company and performs such other duties as may be assigned to it from time to
time by the Board; the Nominating Committee held one meeting in 1997.
Shareholders may recommend nominees for directors to the Nominating Committee
by writing to the Secretary of the Company, Energy Plaza, 1601 Bryan Street,
Dallas, Texas 75201-3411. The Nuclear Committee reviews, generally oversees,
and makes reports and recommendations to the Board in connection with, the
operation of the Company's nuclear generating units; the Nuclear Committee
held seven meetings during 1997. The Organization and Compensation Committee
reviews and establishes the duties, titles and remuneration of officers of the
Company; the Organization and Compensation Committee held three meetings in
1997. A Business Development Committee was established by the Board in 1997.
The Business Development Committee reviews and recommends to the Board, for
its consideration, new business opportunities, proposed acquisitions and other
transactions and performs such other duties as may be assigned to it from time
to time by the Board; the Business Development Committee held three meetings
during 1997.
Non-officer directors were compensated in 1997 by a retainer fee at the
annual rate of $25,000 plus $1,500 for each Board meeting attended and $1,000
for each committee meeting attended. Additionally, non-officer directors who
are members of the Nuclear Committee receive an annual retainer fee of $10,000
for their services on that Committee. Directors who are officers of the
Company do not receive any fees for service as a director.
5
<PAGE>
All directors are reimbursed for expenses. Non-officer directors may elect to
defer, in increments of 25%, all or a portion of their annual Board retainer
pursuant to the Deferred Compensation Plan for Outside Directors (Directors'
Plan). Amounts deferred are matched by the Company. Under the Directors' Plan,
a trustee purchases Company common stock with an amount of cash equal to each
participant's deferred retainer and matching amount, and accounts are
established for each participant containing performance units equal to such
number of common shares. Directors' Plan investments, including reinvested
dividends, are restricted to Company common stock. On the expiration of the
applicable maturity period (not fewer than three nor more than ten years, as
selected by the participant) or upon death or disability while serving as a
director, the value of the participant's accounts is paid in cash based on the
then current value of the performance units.
BENEFICIAL OWNERSHIP OF COMMON STOCK OF THE COMPANY
Each nominee for director and certain executive officers reported beneficial
ownership of common stock of the Company, as of the date hereof, as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
-------------------------------
BENEFICIALLY DEFERRED
NAME OWNED PLANS (1) TOTAL
- ---- ------------- --------- -------
<S> <C> <C> <C>
J. S. Farrington............................... 20,418 52,275 72,693
Bayard H. Friedman (2)......................... 2,416 4,421 6,837
William M. Griffin............................. 30,000 4,421 34,421
Kerney Laday................................... 600 4,421 5,021
Margaret N. Maxey.............................. 5,097 4,421 9,518
James A. Middleton............................. 3,000 4,421 7,421
Erle Nye....................................... 49,466 54,462 103,928
J. E. Oesterreicher............................ 1,600 2,013 3,613
Charles R. Perry............................... 1,000 4,421 5,421
Herbert H. Richardson.......................... 1,700 1,791 3,491
H. Jarrell Gibbs............................... 14,323 23,494 37,817
W. M. Taylor................................... 14,847 21,850 36,697
Michael J. McNally............................. 20,551 10,688 31,239
All Directors and Executive Officers as a group
(14 persons).................................. 180,290 193,099 373,389
</TABLE>
- ---------
6
<PAGE>
(1) Share units held in deferred compensation accounts under the Deferred and
Incentive Compensation Plan or the Directors' Plan. Although these plans
allow such units to be paid only in the form of cash, investments in such
units create essentially the same investment stake in the performance of
the Company's common stock as do investments in actual shares of common
stock.
(2) In addition to the shares reported above, clients of Mr. Friedman's
investment advisory firm own 1,480 shares of the common stock of the
Company. Mr. Friedman disclaims any beneficial interest in such shares.
The named individuals have voting and investment power for the shares of
common stock reported as Beneficially Owned. Ownership of such common stock by
each individual director and executive officer and for all directors and
executive officers as a group constituted less than 1% of the Company's
outstanding shares.
The Company has no knowledge of any person who beneficially owned more than
5% of the common stock of the Company as of December 31, 1997. Mellon Bank,
N.A. (Mellon), held as of such date in its capacity as Trustee of the
Employees' Thrift Plan of the Texas Utilities Company System (Thrift Plan), a
total of 12,259,617 shares of the Company's common stock, or 5.0% of the
outstanding common shares, of which 6,879,589 shares, or 2.8% of the
outstanding shares, have been allocated to Thrift Plan participants' accounts.
Thrift Plan participants are entitled to direct Mellon as to how to vote
shares allocated to their accounts and Mellon disclaims beneficial ownership
of such allocated shares.
7
<PAGE>
EXECUTIVE COMPENSATION
The Company and its subsidiaries have paid or awarded compensation during
the last three calendar years to the following executive officers for services
in all capacities:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION (2)
----------------------- -----------------------------
AWARDS PAYOUTS
--------------------- -------
OTHER ALL
ANNUAL SECURITIES OTHER
COMPEN- RESTRICTED UNDERLYING LTIP COMPEN-
NAME AND SALARY BONUS SATION STOCK OPTIONS/ PAYOUTS SATION
PRINCIPAL POSITION YEAR ($) ($) (1) ($) AWARDS ($) SARS (#) ($) ($) (3)
------------------ ---- ------- ------- ------- ---------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Erle Nye, .............. 1997 760,417 325,000 -- 499,375 -- 23,928 143,963
Chairman of the Board 1996 723,333 185,000 -- 351,500 -- 0 117,908
and Chief Executive of 1995 679,167 140,000 -- 266,000 -- 25,602 87,810
the Company
J. S. Farrington, ...... 1997 639,891 150,000 -- 284,114 -- 31,905 140,821
Chairman of the Board 1996 752,813 157,782 -- 315,563 -- 0 128,336
of the Company (until 1995 825,000 165,000 -- 313,500 -- 34,135 105,671
May 1997) (4)
H. Jarrell Gibbs, ...... 1997 354,583 103,000 -- 185,125 -- 8,432 66,226
Vice Chairman of the 1996 321,250 113,000 -- 189,500 -- 0 53,203
Board of the Company 1995 282,917 67,200 -- 120,300 -- 9,102 38,702
W. M. Taylor, .......... 1997 339,583 83,000 -- 161,750 -- 9,343 59,948
President, Generation 1996 312,500 83,500 -- 156,625 -- 0 49,530
Division--TU Electric 1995 282,917 64,700 -- 117,800 -- 10,809 38,278
Michael J. McNally, .... 1997 279,167 105,000 -- 172,500 -- 0 103,630
Executive Vice 1996 229,166 75,000 -- 131,250 -- 0 97,949
President and Chief 1995 170,833 0 -- 0 -- 0 0
Financial Officer of
the Company
</TABLE>
- ---------
(1) Amounts reported as Bonus in the Summary Compensation Table are
attributable to the named officer's participation in the Annual Incentive
Plan (AIP). Elected corporate officers of the Company and its
participating subsidiaries with a title of Vice President or above are
eligible to participate in the AIP. Under the terms of the AIP, target
incentive awards ranging from 35% to 50% of base salary, and a maximum
award of 100% of base salary, are established. The percentage of the
target or the maximum actually awarded, if any, is dependent upon the
attainment of per share net income goals established in advance by the
Organization and Compensation Committee
8
<PAGE>
(Committee) as well as the Committee's evaluation of the participant's and
the Company's performance. One-half of each such award is paid in cash and
is reflected as Bonus in the Summary Compensation Table. Payment of the
remainder of the award is deferred under the Deferred and Incentive
Compensation Plan (DICP) discussed hereinafter in footnote (2).
(2) Amounts reported as Long-Term Compensation are attributable to the named
officer's participation in the DICP. Elected corporate officers of the
Company and its participating subsidiaries with the title of Vice
President or above are eligible to participate in the DICP. Participants
in the DICP may defer a percentage of their base salary not to exceed a
maximum percentage determined by the Committee for each Plan year and in
any event not to exceed 15% of the participant's base salary. The Company
makes a matching award (Matching Award) equal to 150% of the participant's
deferred salary. In addition, one-half of any AIP award (Incentive Award)
is deferred and invested under the DICP. The Matching Awards and Incentive
Awards are subject to forfeiture under certain circumstances. Under the
DICP, a trustee purchases Company common stock with an amount of cash
equal to each participant's deferred salary, Matching Award and Incentive
Award, and accounts are established for each participant containing
performance units (Units) equal to such number of common shares. DICP
investments, including reinvested dividends, are restricted to Company
common stock. On the expiration of the applicable maturity period (three
years for the Incentive Awards and five years for deferred salary and
Matching Awards), the values of the participant's accounts are paid in
cash based upon the then current value of the Units; provided, however,
that in no event will a participant's account be deemed to have a cash
value which is less than the sum of such participant's deferred salary
together with a 6% per annum (compounded annually) interest equivalent
thereon. The maturity period is waived if the participant dies or becomes
totally and permanently disabled and may be extended under certain
circumstances.
Incentive Awards and Matching Awards that have been made under the DICP are
included under Restricted Stock Awards in the Summary Compensation Table for
each of the last three years. As a result of these awards, undistributed
Incentive Awards and Matching Awards made under the DICP in prior years, and
dividends reinvested thereon, the number and market value of such Units at
December 31, 1997 (each of which is equal to one share of common stock) held
in the DICP accounts for Messrs. Nye, Farrington, Gibbs, Taylor and McNally
were 39,725 ($1,648,588), 36,466 ($1,513,339), 17,134 ($711,061), 15,597
($647,276) and 8,299 ($344,409), respectively.
9
<PAGE>
The Long-Term Incentive Compensation Plan (LTICP) is a comprehensive, stock-
based incentive compensation plan providing for discretionary grants of
common stock-based awards, including restricted stock. Outstanding awards to
named executive officers vest over a three year period and such executive
officers may earn from 0% to 200% of the number of shares awarded based on
the Company's total return to shareholders over such three year period
compared to the total return provided by the companies comprising the
Standard & Poor's Electric Utility Index. Dividends are paid and reinvested
on such restricted stock awards at the same rate as dividends on the
Company's common stock. As a result of restricted stock awards under the
LTICP, and dividends reinvested thereon, the number of shares of restricted
stock and the value of such shares at December 31, 1997 held for Messrs.
Nye, Farrington, Gibbs, Taylor and McNally were 22,666 ($940,639),-0-
($-0-), 5,151 ($213,767), 4,121 ($171,022) and 11,333 ($470,320),
respectively.
Salary deferred under the DICP is included in amounts reported as Salary in
the Summary Compensation Table. Amounts shown in the table below represent
the number of shares purchased under the DICP with such deferred salaries
for 1997 and the number of shares awarded under the LTICP:
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
DEFERRED AND INCENTIVE
COMPENSATION PLAN LONG-TERM INCENTIVE COMPENSATION PLAN
----------------------- ----------------------------------------------------
NUMBER OF PERFORMANCE NUMBER OF PERFORMANCE
SHARES, OR OTHER SHARES, OR OTHER
NAME UNITS OR PERIOD UNTIL UNITS OR PERIOD UNTIL ESTIMATED FUTURE PAYOUTS
---- OTHER MATURATION OTHER MATURATION ----------------------------
RIGHTS (#) OR PAYOUT RIGHTS (#) OR PAYOUT MINIMUM (#) MAXIMUM (#)
---------- ------------ ---------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Erle Nye................ 3,305 5 Years 22,000 3 Years 0 44,000
J. S. Farrington........ 2,542 5 Years 0 -- 0 0
H. Jarrell Gibbs........ 1,556 5 Years 5,000 3 Years 0 10,000
W. M. Taylor............ 1,492 5 Years 4,000 3 Years 0 8,000
Michael J. McNally...... 1,279 5 Years 11,000 3 Years 0 22,000
</TABLE>
Amounts reported as LTIP Payouts in the Summary Compensation Table
represent payouts maturing during such years of earnings on salary deferred
under the DICP in prior years.
(3) Amounts reported as All Other Compensation are attributable to the named
officer's participation in certain plans and as otherwise described
hereinafter in this footnote.
10
<PAGE>
Under the Employees' Thrift Plan of the Texas Utilities Company System
(Thrift Plan) all employees with at least six months of eligible service
with the Company or any of its participating subsidiaries may invest up to
16% of their regular salary or wages in common stock of the Company, or in a
variety of selected mutual funds. Under the Thrift Plan, the Company matches
a portion of an employee's savings in an amount equal to 40%, 50% or 60%
(depending on the employee's length of service) of the first 6% of such
employee's savings. All matching amounts are invested in common stock of the
Company. The amounts reported under All Other Compensation in the Summary
Compensation Table include these matching amounts which, for Messrs. Nye,
Farrington, Gibbs, Taylor and McNally amounted to $5,760, $5,760, $4,800,
$5,760 and $3,840, respectively, during 1997.
The Company has a Salary Deferral Program (Program) under which each
employee of the Company and its participating subsidiaries whose annual
salary is equal to or greater than an amount established under the Program
($94,760 for the Program Year beginning April 1997) may elect to defer a
percentage of annual salary for a period of seven years, a period ending
with the retirement of such employee, or for a combination thereof. Such
deferrals may not exceed in the aggregate 10% of the employee's annual
salary. Salary deferred under the Program is included in amounts reported
under Salary in the Summary Compensation Table. The Company makes a matching
award, subject to forfeiture under certain circumstances, equal to 100% of
the salary deferred under the Program. The trustee for the Program
distributes, at the end of the applicable maturity period, cash equal to the
greater of the actual earnings of Program assets, or the average yield
during the applicable maturity period of U. S. Treasury Notes with a
maturity of ten years. The distribution of the amounts due under the Program
is in a lump sum if the maturity period is seven years or, if the retirement
option is elected, in twenty annual installments. The Company is financing
the retirement portion of the Program through the purchase of corporate-
owned life insurance on the lives of the participants. The proceeds from
such insurance are expected to allow the Company to fully recover the cost
of the retirement option. During 1997, matching awards, which are included
under All Other Compensation in the Summary Compensation Table, were made
for Messrs. Nye, Farrington, Gibbs, Taylor and McNally in the amounts of
$76,042, $63,989, $35,458, $33,958 and $27,917, respectively.
Under the Split-Dollar Life Insurance Program of the Texas Utilities Company
System (Insurance Program), split-dollar life insurance policies are
purchased for elected corporate officers of the Company and its
participating subsidiaries with a title of Vice President or above, with a
death benefit equal to four times their annual Insurance Program
compensation. New participants vest in the policies issued under the
11
<PAGE>
Insurance Program over a six year period. The Company pays the premiums for
these policies and has received a collateral assignment of the policies
equal in value to the sum of all of its insurance premium payments. Although
the Insurance Program is terminable at any time, it is designed so that if
it is continued, the Company will fully recover all of the insurance premium
payments it has made either upon the death of the participant or, if the
assumptions made as to policy yield are realized, upon the later of fifteen
years of participation or the participant's attainment of age sixty-five.
During 1997, the economic benefit derived by Messrs. Nye, Farrington, Gibbs,
Taylor and McNally from the term insurance coverage provided and the
interest foregone on the remainder of the insurance premiums paid by the
Company amounted to $62,161, $71,072, $25,968, $20,230 and $5,582,
respectively.
The amount of $66,291 included in the All Other Compensation column of the
Summary Compensation Table for Mr. McNally for 1997 represents additional
compensation that the Company agreed to pay Mr. McNally incident to his
employment with the Company in lieu of payments he would have received from
a prior employer.
(4) Mr. Farrington has a management transition agreement with the Company
pursuant to which he remained as Chairman of the Board until May 1997, at
which time he was named Chairman Emeritus. He will retire as an active
employee in May 1998 and serve thereafter as a consultant to the Company
for a two year period. In accordance with the agreement, during the period
from May 1996 until his retirement, Mr. Farrington's salary will be
reduced by 15% each year, and he will be eligible to participate in all
employee benefit plans of the Company. As a consultant, he will receive
$200,000 annually.
12
<PAGE>
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------------------------
REMUNERATION 20 25 30 35 40
- ------------ -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$ 50,000 $ 14,688 $ 18,360 $ 22,032 $ 25,704 $ 29,376
100,000 29,688 37,110 44,532 51,954 59,376
200,000 59,688 74,610 89,532 104,454 119,376
400,000 119,688 149,610 179,532 209,454 239,376
800,000 239,688 299,610 359,532 419,454 479,376
1,000,000 299,688 374,610 449,532 524,454 599,376
1,400,000 419,688 524,610 629,532 734,454 839,376
</TABLE>
The Company and its subsidiaries maintain retirement plans (Plans) which are
qualified under applicable provisions of the Internal Revenue Code of 1986, as
amended (Code). Annual retirement benefits are computed as follows: for each
year of accredited service up to a total of 40 years of service, 1.3% of the
first $7,800, plus 1.5% of the excess over $7,800 of the participant's average
annual earnings during his or her three years of highest earnings. Amounts
reported under Salary for the named officers in the Summary Compensation Table
approximate earnings as defined by the Plans and the Supplemental Retirement
Plan (Supplemental Plan). Benefits paid under the Plans are not subject to any
reduction for Social Security payments but are limited by provisions of the
Code. The Supplemental Plan provides for the payment of retirement benefits
which would otherwise be limited by the Code or by the definition of earnings
in the Plans. Under the Supplemental Plan, retirement benefits are calculated
in accordance with the same formula used under the Plans, except that earnings
also include AIP awards (50% of the AIP award is reported under Bonus for the
named officers in the Summary Compensation Table). As of February 28, 1998,
years of accredited service under the plans for Messrs. Nye, Farrington, Gibbs,
Taylor and McNally were 35, 38, 35, 30 and 1, respectively. The table
illustrates the total annual benefit payable at retirement under the Plans and
Supplemental Plan prior to any reduction for a contingent beneficiary option
which may be selected by the participant.
The following information contained under the headings Organization and
Compensation Committee Report on Executive Compensation and Performance Graph
is not to be deemed to be (i) incorporated by reference into any filing under
the Securities Act of 1933 or the Securities Exchange Act of 1934 (Securities
Acts) or (ii) "soliciting material" or "filed" with the Securities and Exchange
Commission within the meaning of Item 402(a)(9) of SEC Regulation S-K of the
Securities Acts.
13
<PAGE>
ORGANIZATION AND COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Organization and Compensation Committee of the Board of Directors
(Committee) is responsible for reviewing and establishing the compensation of
the executive officers of the Company. The Committee consists of all of the
nonemployee directors of the Company and is chaired by James A. Middleton. The
Committee has directed the preparation of this report and has approved its
contents and submission to the shareholders.
As a matter of policy, the Committee believes that levels of executive
compensation should be based upon an evaluation of the performance of the
Company and its officers generally, as well as in comparison to persons with
comparable responsibilities in similar business enterprises. Compensation
plans should align executive compensation with returns to shareholders with
due consideration accorded to balancing both long-term and short-term
objectives. The overall compensation program should provide for an appropriate
and competitive balance between base salaries and performance-based annual and
long-term incentives. The Committee has determined that, as a matter of policy
to be implemented over time, the base salaries of the officers will be
established at the median, or 50th percentile, of the top ten electric
utilities in the United States and that opportunities for total direct
compensation (defined as the sum of base salaries, annual incentives and long-
term incentives) to reach the 75th percentile, or above, of such utilities
will be provided through performance-based compensation plans. Such
compensation principles and practices have allowed, and should continue to
allow, the Company to attract, retain and motivate its key executives.
In furtherance of these policies, a nationally recognized compensation
consultant has been retained since 1994 to assist the Committee in its
periodic reviews of compensation and benefits provided to officers. The
consultant's evaluations include comparisons to the largest utilities as well
as to general industry with respect both to the level and composition of
officers' compensation. The consultant's recommendations including the Annual
Incentive Plan, the Long-Term Incentive Compensation Plan and certain benefit
changes have generally been implemented. The Annual Incentive Plan, which was
approved by the shareholders in 1995, is generally referred to as the AIP and
is described in this report as well as in footnote 1 on pages 8 and 9 of this
proxy statement. The Long-Term Incentive Compensation Plan, referred to as the
Long-Term Plan or LTICP, was approved by the shareholders in 1997 and is
described in this report as well as in footnote 2 on pages 9 and 10 of this
proxy statement.
14
<PAGE>
In recent years, the compensation of the officers of the Company has
consisted principally of base salaries, the opportunity to participate in the
Deferred and Incentive Compensation Plan (referred to as the DICP and
described in footnote 2 on pages 9 and 10 of this proxy statement) and the
opportunity to earn an incentive award under the AIP. Benefits provided under
the DICP and the AIP have represented a substantial portion of officers'
compensation, and the value of future payments under the DICP, as well as the
value of the deferred portion of any award under the AIP, is directly related
to the future performance of the Company's common stock. It is anticipated
that performance-based incentive awards under the AIP and the Long-Term Plan
will, in future years, constitute an increasing percentage of the officers'
total compensation.
The AIP is administered by the Committee and provides an objective framework
within which annual Company and individual performance can be evaluated by the
Committee. Depending on the results of such performance evaluations, and the
attainment of the per share net income goals established in advance, the
Committee may provide annual incentive compensation awards to eligible
officers. The evaluation of each individual participant's performance is based
upon the attainment of individual and business unit objectives. The Company's
performance is evaluated, compared to the ten largest electric utilities
and/or the electric utility industry, based upon its total return to
shareholders and return on invested capital, as well as other measures
relating to competitiveness, service quality and employee safety. The
combination of individual and Company performance results, together with the
Committee's evaluation of the competitive level of compensation which is
appropriate for such results, determines the amount, if any, actually awarded.
The Long-Term Plan, which is also administered by the Committee, is a
comprehensive stock-based incentive compensation plan under which all awards
are made in, or based on the value of, the Company's common stock. The Long-
Term Plan provides that, in the discretion of the Committee, awards may be in
the form of stock options, stock appreciation rights, performance and/or
restricted stock or stock units or in any other stock-based form. The purpose
of the Long-Term Plan is to provide performance-related incentives linked to
long-term performance goals. Such performance goals may be based on individual
performance and/or may include criteria such as absolute or relative levels of
total shareholder return, revenues, sales, net income or net worth of the
Company, any of its subsidiaries, business units or other areas, all as the
Committee may determine. Awards under the Long-Term Plan are expected to
constitute the principal long-term component of officers' compensation. At its
meeting in May 1997, the Committee provided awards of performance-based
restricted stock to certain officers, including the Chief Executive. The
future value of those awards will be determined by the Company's total return
to shareholders over a three year period compared to the total return for that
period of the
15
<PAGE>
companies comprising the Standard & Poor's Electric Utility Index. Depending
upon the Company's relative return for such period, the officers may earn from
0% to 200% of the original award and their compensation is, thereby, directly
related to shareholder value. These awards, and any awards that may be made in
the future, are based upon the Committee's evaluation of the appropriate level
of long-term compensation consistent with its policy relating to total direct
compensation.
In establishing levels of executive compensation at its May 1997 meeting,
the Committee reviewed various performance and compensation data, including
the performance measures under the AIP and the report of its compensation
consultant. Information was also gathered from industry sources and other
published and private materials which provided a basis for comparing the
largest electric and gas utilities and other survey groups representing a
large variety of business organizations. Included in the data considered was
that the Company's total return to shareholders in 1996 was 4.4%, which was
the third highest total return amongst the ten largest utilities. The
comparative returns provided by the largest electric and gas utilities are
represented by the returns of the Standard & Poor's Electric Utility Index and
are reflected in the graph on page 18. The graph also reflects the returns
provided by the Moody's 24 Utilities, and that disclosure will be discontinued
after this year in light of the greater comparability of the Company to the
companies comprising such S&P index. In 1996, TU Electric, the Company's
principal subsidiary, was the largest electric utility in the United States as
measured by megawatt hour sales and, compared to other electric utilities in
the United States, was fifth in electric revenues, sixth in total assets,
fourth in net generating capability, eighth in number of customers and twelfth
in number of employees. Compensation amounts were established by the Committee
based upon its consideration of the above comparative data and its subjective
evaluation of Company and individual performance at levels consistent with the
Committee's policy relating to total direct compensation.
In May 1997 the Committee increased Mr. Nye's base salary as Chief Executive
to an annual rate of $775,000 representing a $35,000 or 4.7% increase over the
amount established for Mr. Nye in May 1996. Based upon the Committee's
evaluation of individual and Company performance, as called for by the AIP,
the Committee also provided Mr. Nye with an AIP award of $650,000 compared to
the prior year's award of $370,000. The Committee also awarded 22,000 shares
of performance-based restricted stock to Mr. Nye. Under the terms of the
award, Mr. Nye can earn from 0% to 200% of the award depending on the
Company's total return to shareholders over a three-year period (April 1, 1997
through March 31, 2000) compared to the total return provided by the companies
comprising the Standard & Poor's Electric Utility Index. This level of
compensation was established based upon the Committee's subjective evaluation
of the information described in this report.
16
<PAGE>
In discharging its responsibilities with respect to establishing executive
compensation, the Committee normally considers such matters at its May meeting
held in conjunction with the Annual Meeting of Shareholders. Although Company
management may be present during Committee discussions of officers'
compensation, Committee decisions with respect to the compensation of the
Chairman of the Board and Chief Executive and the President are reached in
private session without the presence of any member of Company management.
Section 162(m) of the Code limits the deductibility of compensation which a
publicly traded corporation provides to its most highly compensated officers.
As a general policy, the Company does not intend to provide compensation which
is not deductible for federal income tax purposes. Awards under the AIP in
1996 and subsequent years as well as awards under the Long-Term Plan are
expected to be fully deductible, and the DICP and the Salary Deferral Program
have been amended to require the deferral of distributions of amounts earned
in 1995 and subsequent years until the time when such amounts would be
deductible. Awards provided under the AIP in 1995 and distributions under the
DICP and the Salary Deferral Program which were earned in plan years prior to
1995, may not be fully deductible but such amounts are not expected to be
material.
Shareholder comments to the Committee are welcomed and should be addressed
to the Secretary of the Company at the Company's offices.
ORGANIZATION AND COMPENSATION COMMITTEE
James A. Middleton, Chair Margaret N. Maxey
Bayard H. Friedman J. E. Oesterreicher
William M. Griffin Charles R. Perry
Kerney Laday Herbert H. Richardson
17
<PAGE>
PERFORMANCE GRAPH
The following graph compares the performance of the Company's common stock to
the S&P 500 Index, the Moody's 24 Utilities and the S&P Electric Utility Index
for the last five years. The graph assumes the investment of $100 at December
31, 1992 and that all dividends were reinvested. The amount of the investment
at the end of each year is shown in the graph and in the table which follows.
CUMULATIVE TOTAL RETURNS
FOR THE FIVE YEARS ENDED 12/31/97
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
---------------------------------
<CAPTION>
1992 1993 1994 1995 1996 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Texas Utilities................................. 100 109 88 123 128 138
- --------------------------------------------------------------------------------
S&P 500 Index................................... 100 110 111 153 188 251
- --------------------------------------------------------------------------------
Moody's 24 Utilities............................ 100 110 94 123 125 152
- --------------------------------------------------------------------------------
S&P Electric Utility Index...................... 100 113 98 128 128 162
- --------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
SELECTION OF AUDITORS
The Audit Committee has nominated to the Board of Directors for its
consideration the firm of Deloitte & Touche LLP to act as independent auditors
for the Company for the year 1998 and, subject to the approval of shareholders
at the annual meeting, the Board has selected that firm to audit the books of
account and records of the Company and to make a report thereon to the
shareholders. The persons named in the proxy will, unless otherwise instructed
thereon, vote your shares in favor of the following resolution which will be
submitted for consideration:
RESOLVED that the selection of the firm of Deloitte & Touche LLP,
independent auditors, to audit the books of account and records of the
Company for the year 1998, to make a report thereon "To the
Shareholders of Texas Utilities Company," and to perform other
services, be, and it hereby is, approved.
The firm of Deloitte & Touche LLP, independent auditors, has been the
outside auditors for the Company since its organization in 1996 and for Texas
Energy Industries, Inc. (formerly Texas Utilities Company) and ENSERCH
Corporation since their organization in 1945 and 1942, respectively, including
the last fiscal year. Representatives of Deloitte & Touche LLP are expected to
be present at the annual meeting and will have the opportunity to make a
statement, if they desire to do so, and to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF AUDITORS.
19
<PAGE>
OTHER BUSINESS
Other than as stated herein, the Board of Directors does not intend to bring
any business before the meeting and it has not been informed of any matters
that may be presented to the meeting by others. However, if any other matters
properly come before the meeting, it is the intent of the Board of Directors
that the persons named in the proxy will vote pursuant to the proxy in
accordance with their judgment in such matters.
Dated: March 19, 1998
WHETHER OR NOT YOU WILL BE ABLE TO ATTEND THE MEETING,
PLEASE SIGN AND RETURN THE ACCOMPANYING PROXY PROMPTLY.
20
<PAGE>
[TEXAS UTILITIES COMPANY LOGO APPEARS HERE]
- --------------------------------------------------------------------------------
NOTICE OF
ANNUAL MEETING
OF SHAREHOLDERS
AND
PROXY STATEMENT
- --------------------------------------------------------------------------------
TIME:
FRIDAY, MAY 8, 1998, AT 9:30 A.M.
PLACE:
ALEXANDRIA AUDITORIUM
INFOMART
1950 STEMMONS FREEWAY
DALLAS, TEXAS 75207
Whether or not you will be able
to attend the meeting, please
sign and return the enclosed
proxy promptly so that you may
be represented at the meeting.
<PAGE>
P TEXAS UTILITIES COMPANY
R ENERGY PLAZA
O 1601 Bryan Street
X Dallas, TX 75201-3411
Y THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints J.S. Farrington and Erle Nye, and each of
them, Proxies with power to appoint a substitute, and hereby authorizes them to
represent and to vote all shares of common stock of Texas Utilities Company held
of record by the undersigned on March 9, 1998 at the annual meeting of
shareholders of the Company to be held in the Alexandria Auditorium of the
Infomart, 1950 Stemmons Freeway, Dallas, Texas, on Friday, May 8, 1998, and at
any adjournments thereof, and to vote, as directed on the reverse side of this
card, on all specified matters coming before said meeting, and in their
discretion, upon such other matters not specified as may come before said
meeting.
(Continued, and to be signed and dated, on reverse side)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ITEMS 1 AND 2.
Please mark
your vote as X
indicated in
this example
- --------------------------------------------------------------------------------
DIRECTORS RECOMMEND A VOTE FOR
ALL NOMINEES AND FOR ITEM 2. FOR WITHHELD
1. Election of Directors:
NOMINEES:
J.S. FARRINGTON JAMES A. MIDDLETON
BAYARD H. FRIEDMAN ERLE NYE
WILLIAM M. GRIFFIN J.E. OESTERREICHER
KERNEY LADAY CHARLES R. PERRY
MARGARET N. MAXEY HERBERT H. RICHARDSON
For, except vote withhold from the following nominee(s):
- ---------------------------------------------------------
FOR AGAINST ABSTAIN
2. Approval of Auditors - Deloitte & Touche LLP
- --------------------------------------------------------------------------------
--------
NOTE: Please sign names exactly as printed
hereon. Joint owners should each sign.
In signing as attorney, administrator,
executor, guardian, officer, partner or
trustee, please give full title as such.
Receipt is acknowledged of the Annual
Report of the Company for 1997, notice of
meeting and proxy statement.
Signature(s) Date
---------------------------- ----------------------------------
