Filed Pursuant to Rule 424(4)(5)
Registration Nos. 333-68663 and 333-68663-01
PROSPECTUS SUPPLEMENT
(To Prospectus dated December 18, 1998)
$200,000,000
TXU Capital I
7 1/4% Cumulative Trust Preferred Capital Securities
(Liquidation Amount $25 per Preferred Trust Security)
fully and unconditionally guaranteed as set forth herein by
TEXAS UTILITIES COMPANY
---------------------------
TXU Capital I is offering Preferred Trust Securities which will be
guaranteed, to the extent described in this Prospectus Supplement
and the accompanying Prospectus, by Texas Utilities Company.
---------------------------
For a more detailed description of the Preferred Trust
Securities, see "Certain Terms of the Preferred Trust
Securities" beginning on page S-10.
---------------------------
We plan to list the Preferred Trust Securities on the New York Stock
Exchange under the trading symbol "TXU PrA." We expect that the
Preferred Trust Securities will begin trading on
the New York Stock Exchange within 30 days after they are
first issued.
---------------------------
INVESTING IN THE PREFERRED TRUST SECURITIES INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE S-5.
---------------------------
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to TXU
Public Commissions Capital
---------------- ------------- ---------------
<S> <C> <C>
Per Preferred Trust Security................. $25 See below $25
Total........................................ $200,000,000 See below $200,000,000
</TABLE>
TXU Capital I will not pay any underwriting commissions. Texas Utilities Company
will pay underwriting commissions of $.7875 per Preferred Trust Security (or
$6,300,000 for all Preferred Trust Securities). Any accumulated distributions
from December 30, 1998 on the Preferred Trust Securities should be added to the
Price to Public.
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities or determined if this Prospectus
Supplement or the accompanying Prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
TXU Capital I has granted the Underwriters the right to purchase up to an
additional $30,000,000 liquidation amount of Preferred Trust Securities to cover
over-allotments. Morgan Stanley & Co. Incorporated expects to deliver the
Preferred Trust Securities to purchasers on or about December 30, 1998.
---------------------------
MORGAN STANLEY DEAN WITTER
CREDIT SUISSE FIRST BOSTON
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
PAINEWEBBER INCORPORATED
SALOMON SMITH BARNEY
December 21, 1998
<PAGE>
ABOUT THIS PROSPECTUS SUPPLEMENT
You should read this Prospectus Supplement along with the Prospectus that
follows. You should rely only on the information provided or incorporated by
reference in this Prospectus Supplement and the Prospectus. We have not
authorized anyone else to provide you with different information. We are not
making an offer of the Preferred Trust Securities in any state where the offer
is not permitted. You should not assume that the information in this Prospectus
Supplement or the Prospectus is accurate as of any date other than the dates on
the front of these documents.
TABLE OF CONTENTS
Page
----
PROSPECTUS SUPPLEMENT
Summary ................................................................. S-3
Risk Factors ............................................................ S-5
Selected Consolidated Financial Data .................................... S-8
Consolidated Capitalization ............................................. S-9
Use of Proceeds ......................................................... S-10
Certain Terms of the Preferred Trust Securities ......................... S-10
Certain Terms of the Junior Subordinated Debentures ..................... S-13
Certain United States Federal Income Tax Consequences
Relating to the Preferred Trust Securities ......................... S-16
Underwriters ............................................................ S-19
PROSPECTUS
About this Prospectus ................................................... 2
Where You Can Find More Information ..................................... 2
The Company ............................................................. 3
TXU Capital I ........................................................... 3
Use of Proceeds ......................................................... 4
Ratios of Earnings to Fixed Charges and Ratio of Earnings to
Combined Fixed Charges and Preferred Dividends ..................... 4
Description of Debt Securities .......................................... 4
Description of TXU Capital's Preferred Trust Securities
and Common Trust Securities ........................................ 13
Description of the Guarantee ............................................ 20
Description of the Junior Subordinated Debentures ....................... 23
Plan of Distribution .................................................... 32
Experts and Legality .................................................... 33
S-2
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY
The following information should be read together with the other
information contained in this Prospectus Supplement and in the accompanying
Prospectus.
Securities of TXU Capital
TXU Capital was created by Texas Utilities to make this offering. TXU
Capital will sell its Preferred Trust Securities to the public and its Common
Trust Securities to Texas Utilities. It will use the proceeds from these sales
to buy the Junior Subordinated Debentures due March 31, 2029 from Texas
Utilities. The Preferred Trust Securities and the Junior Subordinated Debentures
will have essentially the same terms.
Texas Utilities will acquire all of the Common Trust Securities of TXU
Capital. The Common Trust Securities will have an aggregate liquidation amount
equal to approximately 3% of the total capital of TXU Capital. The Common Trust
Securities will generally rank on a par with the Preferred Trust Securities.
However, in the case of certain defaults, the Common Trust Securities will rank
junior to the Preferred Trust Securities with respect to distributions,
redemption and liquidation. Except in certain limited circumstances, the Common
Trust Securities will have sole voting power with respect to matters to be voted
upon by TXU Capital security holders.
Distributions
If you purchase the Preferred Trust Securities, you will be entitled to
receive cumulative cash distributions at an annual rate of 7 1/4% of the
liquidation amount of $25, or $1.8125, per Preferred Trust Security.
Distributions will accumulate from the date TXU Capital issues the Preferred
Trust Securities and will be paid quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year, beginning March 31, 1999.
Deferral of Distributions
So long as no event of default in the payment of interest on the Junior
Subordinated Debentures has occurred and is continuing, Texas Utilities has the
right, at one or more times, to defer interest payments on the Junior
Subordinated Debentures for up to 20 consecutive quarters, but not beyond the
maturity date of the Junior Subordinated Debentures. If Texas Utilities defers
interest payments on the Junior Subordinated Debentures, TXU Capital will also
defer distributions on the Preferred Trust Securities. During this deferral
period, you will still accumulate distributions at an annual rate of 7 1/4% of
the liquidation amount of $25 per Preferred Trust Security, and you will
accumulate additional distributions at the same rate, compounded quarterly, on
any unpaid distributions. Even though you will not receive any cash
distributions on your Preferred Trust Securities during a deferral period, you
will be required to include accrued distributions in your gross income for
United Stated federal income tax purposes, even if you are a cash basis
taxpayer.
Redemption
TXU Capital must redeem the Preferred Trust Securities when the Junior
Subordinated Debentures are paid at maturity on March 31, 2029, or upon any
earlier redemption. Texas Utilities has the option at any time on or after
December 30, 2003 to redeem all or part of the Junior Subordinated Debentures.
In addition, Texas Utilities may redeem all but not less than all the Junior
Subordinated Debentures, at its option, if certain tax events occur. Upon any
redemption of the Preferred Trust Securities, the holder will receive the
liquidation amount of $25 per Preferred Trust Security plus any unpaid
distributions to the date of redemption.
Texas Utilities' Guarantee of the Preferred Trust Securities
Texas Utilities will fully and unconditionally guarantee payments due on
the Preferred Trust Securities through a combination of the following:
o Texas Utilities' obligations under the Junior Subordinated Debentures;
- --------------------------------------------------------------------------------
S-3
<PAGE>
- --------------------------------------------------------------------------------
o the rights of holders of Preferred Trust Securities to enforce those
obligations;
o Texas Utilities' agreement to pay the expenses of TXU Capital; and
o Texas Utilities' guarantee of payments due on the Preferred Trust
Securities to the extent of TXU Capital's assets.
If Texas Utilities does not make a payment on the Junior Subordinated
Debentures, TXU Capital will not have sufficient funds to make payments on the
Preferred Trust Securities. The Guarantee does not cover payments when TXU
Capital does not have sufficient funds.
Conditional Right to Shorten Maturity
Upon the occurrence and continuation of certain tax events relating to
non-deductibility of interest payments on the Junior Subordinated Debentures, in
lieu of redeeming the Junior Subordinated Debentures, at its option, Texas
Utilities may shorten the stated maturity of the Junior Subordinated Debentures
to as early as December 30, 2013. This would cause a mandatory redemption of the
Preferred Trust Securities at the same time.
Listing of Trust Preferred Securities
TXU Capital plans to list the Preferred Trust Securities on the New York
Stock Exchange under the trading symbol "TXU PrA." You should be aware that
listing of the Preferred Trust Securities will not necessarily ensure that a
liquid trading market will be available for the Trust Preferred Securities.
- --------------------------------------------------------------------------------
S-4
<PAGE>
RISK FACTORS
An investment in the Preferred Trust Securities involves a number of risks.
You should carefully consider the following information, together with the other
information in this Prospectus Supplement, the accompanying Prospectus and the
documents that are incorporated by reference in the Prospectus, about risks
concerning the Preferred Trust Securities, before buying any Preferred Trust
Securities.
Payment on Preferred Trust Securities Depends on Texas Utilities; Junior
Subordinated Debentures and Guarantee Subordinate to Texas Utilities Senior Debt
o TXU Capital's ability to pay amounts when due on the Preferred Trust
Securities is solely dependent upon Texas Utilities' payment of
amounts when due on the Junior Subordinated Debentures. If Texas
Utilities fails to pay principal or interest when due on the Junior
Subordinated Debentures, TXU Capital will not have funds to pay
distributions on, or amounts due on redemption of, the Preferred Trust
Securities or amounts due on the liquidation of TXU Capital.
o The Junior Subordinated Debentures are unsecured and subordinated and
junior in right of payment to Texas Utilities' senior debt. As of
September 30, 1998, Texas Utilities had approximately $4.8 billion of
senior debt. In addition, Texas Utilities is a holding company that
derives substantially all of its income from its operating
subsidiaries. Therefore, the Junior Subordinated Debentures will also
be effectively subordinated to all debt and preferred stock at the
subsidiary level. The financial statements of Texas Utilities
incorporated by reference herein show the aggregate amount of such
subsidiary debt and preferred stock as of the date of such statements.
Neither the Preferred Trust Securities nor the Junior Subordinated
Debentures limit Texas Utilities' or its subsidiaries' ability to
incur additional debt or to issue preferred stock.
o Texas Utilities' obligations under the Guarantee are unsecured and
subordinated and junior in right of payment to all other liabilities
of Texas Utilities, except any liabilities that expressly rank equally
with the Guarantee. See "Description of The Guarantee -- Status of the
Guarantee" and "Description of the Junior Subordinated Debentures --
Subordination" in the Prospectus.
Right to Delay Payments
o Texas Utilities has the right to delay payment of interest on the
Junior Subordinated Debentures, from time to time, for up to 20
consecutive quarterly periods. At the end of an extension period, if
all amounts due are paid, Texas Utilities may start a new extension
period of up to 20 consecutive quarterly periods. During any extension
period, distributions on the Preferred Trust Securities would be
deferred but would continue to accrue with interest. No extension
period may extend beyond the maturity date of the Junior Subordinated
Debentures. If Texas Utilities exercises this extension right, the
market price of the Preferred Trust Securities is likely to be
affected. See "Certain Terms of the Preferred Trust Securities--
Extension of Payment Periods" in this Prospectus Supplement and
"Description of the Junior Subordinated Debentures -- Option to Extend
Interest Payment Period" in the Prospectus.
Tax Consequences of Payment Delay; OID
o If Texas Utilities extends the interest payment period for the Junior
Subordinated Debentures, you will accrue income as original issue
discount (OID) in respect of the deferred distributions on your
Preferred Trust Securities. As a result, for United States federal
income tax purposes you would have to include OID in gross income
before you receive distributions, regardless of your regular method of
accounting.
o If you sell your Preferred Trust Securities before the record date for
the payment of distributions at the end of an extension period, you
will not receive the distributions. Instead, the accrued distributions
will be paid to the holder of record on the record date, regardless of
who the holder of record may have been on any other date during the
extension period. Moreover, accrued OID is added to your adjusted tax
basis in the
S-5
<PAGE>
Preferred Trust Securities but might not be reflected in the amount
you realized on the sale. To the extent the amount realized was less
than your adjusted tax basis, you will recognize a capital loss for
United States federal income tax purposes. The deduction of capital
losses is subject to limitations.
o As a result of Texas Utilities' right to extend the interest payment
period, the market price of the Preferred Trust Securities may be more
volatile than debt instruments with OID which do not afford the issuer
such a right. See "Certain United States Federal Income Tax
Consequences Relating to the Preferred Trust Securities -- Original
Issue Discount" in this Prospectus Supplement.
Limitation of the Guarantee to Funds Available to TXU Capital
o The Guarantee guarantees the payment when due of distributions on the
Preferred Trust Securities, to the extent TXU Capital has funds
available to make those payments.
o The Guarantee also guarantees payment on redemption or on a bankruptcy
or dissolution of TXU Capital, except where Junior Subordinated
Debentures are distributed to the holders, of the liquidation amount
and all accrued and unpaid distributions on the Preferred Trust
Securities to the date of payment or, if less, the amount of the
assets of TXU Capital remaining available for distribution. If Texas
Utilities were to default on its obligations under the Junior
Subordinated Debentures, TXU Capital would lack funds necessary for
the payment of distributions or amounts payable on liquidation of TXU
Capital or redemption of the Preferred Trust Securities. As a result
you would then not be able to rely on the Guarantee for payment of
such amounts. Instead, the Property Trustee must enforce TXU Capital's
rights under the Junior Subordinated Debentures. Alternatively, you
may institute a legal proceeding directly against Texas Utilities to
enforce payment to you of the principal of or interest on Junior
Subordinated Debentures in a principal amount equal to the liquidation
amount of your Preferred Trust Securities. See "Description of the
Guarantee-- General Terms of the Guarantee" and "Description of the
Junior Subordinated Debentures -- Enforcement of Certain Rights by
Holders of Preferred Trust Securities" in the Prospectus.
Tax Event Redemption
o If a Tax Event occurs, under certain circumstances, Texas Utilities
would have the right to redeem the Junior Subordinated Debentures, in
whole, but not in part, at any time within 90 days following the
occurrence of the Tax Event. That would, in turn, cause a mandatory
redemption of all of the Preferred Trust Securities and the Common
Trust Securities at 100% of their liquidation amount plus any accrued
distributions. Under current United States federal income tax law,
such a redemption of your Preferred Trust Securities would constitute
a taxable event to you. See "Certain Terms of the Preferred Trust
Securities -- Right to Redeem upon a Tax Event" in this Prospectus
Supplement.
o It has been reported that the Internal Revenue Service (IRS) has
challenged another company's deduction for interest paid on a debt
instrument similar in some respects to the Junior Subordinated
Debentures and issued to an entity similar in some respects to TXU
Capital. Based on available information, Texas Utilities and TXU
Capital do not believe that this challenge will affect Texas
Utilities' ability to deduct interest payments on the Junior
Subordinated Debentures. However, it should be noted that further
developments favoring the IRS's challenge, or other unrelated
developments, could cause a Tax Event.
Distribution of the Junior Subordinated Debentures; Potential Adverse Effect on
Market Price
o At any time, Texas Utilities may dissolve TXU Capital, pay its
creditors, if any, and distribute the Junior Subordinated Debentures
to the holders of the Preferred Trust Securities.
o There is no assurance as to the market prices for Preferred Trust
Securities or Junior Subordinated Debentures that may be distributed
in exchange for Preferred Trust Securities if a liquidation of TXU
Capital occurs. The Preferred Trust Securities or the Junior
Subordinated Debentures in this offer may trade at a discount to the
price that an investor paid to purchase the Preferred Trust Securities
in this offer.
S-6
<PAGE>
o As a prospective purchaser of Preferred Trust Securities, you are also
making an investment decision about the Junior Subordinated Debentures
and should carefully review all the information about the Junior
Subordinated Debentures in this Prospectus Supplement and in the
Prospectus. See "Certain Terms of the Preferred Trust Securities --
Distribution of the Junior Subordinated Debentures" in this Prospectus
Supplement.
No Established Trading Market for Preferred Trust Securities
o The Preferred Trust Securities constitute a new issue of securities.
They have no established trading market; and there is no assurance as
to the liquidity of, or the development and maintenance of trading
markets for, the Preferred Trust Securities. TXU Capital has applied
to list the Preferred Trust Securities on the New York Stock Exchange.
Underwriter Market Activity; No Assurance as to Active Market
o The Underwriters currently plan to make a market in the Preferred
Trust Securities. However, there can be no assurance that the
Underwriters will engage in such activities or that any active market
in the Preferred Trust Securities will develop or be maintained.
Preferred Trust Securities Have No Voting Rights
o Subject to Texas Utilities' right to extend payment as described under
"Certain Terms of the Preferred Trust Securities -- Extension of
Payment Periods" in this Prospectus Supplement, holders will have the
right to receive distributions as and when due. However, they will
have limited voting rights, exercisable only in the event of a
proposed change in the terms of the Preferred Trust Securities. See
"Description of TXU Capital's Preferred Trust Securities and Common
Trust Securities-- Voting Rights" in the Prospectus.
Texas Utilities May Shorten Maturity of Junior Subordinated Debentures.
o Upon the occurrence and continuation of a Tax Event relating to
non-deductibility of interest payments on the Junior Subordinated
Debentures, in lieu of redeeming the Junior Subordinated Debentures,
at its option, Texas Utilities may shorten the stated maturity of the
Junior Subordinated Debentures to as early as December 30, 2013. This
would cause a mandatory redemption of the Preferred Trust Securities
at the same time.
S-7
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(Thousands of Dollars, Except Per Share Amounts and Ratios)
The following material, which is presented herein solely to furnish limited
introductory information, is qualified in its entirety by, and should be
considered in conjunction with, the other information appearing in this
Prospectus Supplement, the accompanying Prospectus and the incorporated
documents. For financial reporting purposes, Texas Utilities is treated as the
successor to Texas Energy Industries, Inc. References to Texas Utilities that
relate to periods prior to August 5, 1997, are references to Texas Energy
Industries. Since the acquisitions of ENSERCH, Lufkin-Conroe Communications Co.,
the acquired businesses of The Energy Group PLC and Eastern Energy were purchase
business combinations, for purposes of the historical financial information, no
financial information for those companies is included for periods prior to their
dates of acquisition. Pro forma financial information for the twelve months
ended September 30, 1998 includes adjustments to reflect the acquisitions and a
full twelve months' results of The Energy Group businesses acquired and
Lufkin-Conroe.
<TABLE>
<CAPTION>
Historical Pro forma(b)
-------------------------------------------------------------------------------------- -------------
Twelve Months Ended
-------------------------------------------------------------------------------------- Twelve Months
Ended
December 31, September 30, September 30,
---------------------------------------------------------------------- ------------- -----------
Income statement data: 1993 1994 1995 1996 1997 1998 1998
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues ......... $5,434,512 $5,663,543 $5,638,688 $6,550,928 $7,945,608 $12,714,490 $17,035,444
Net Income (Loss)(a) ....... $0,368,660 $0,542,799 $(138,645) $0,753,606 $0,660,454 $00,598,540 $00,890,940
Basic Earnings (Loss)
per share ................. $1.66 $2.40 $(0.61) $3.35 $2.86 $2.35 $3.15
Diluted Earnings (Loss)
per share ................. $1.66 $2.40 $(0.61) $3.35 $2.85 $2.34 $3.14
Average shares of
common stock
outstanding ............... 221,555 225,834 225,841 225,160 230,958 254,940 282,630
Ratio of Earnings to Fixed
Charges and Ratio of
Earnings to Combined
Fixed Charges and
Preferred Dividends(a) .... 1.53 1.88 0.72 2.18 2.14 1.79 1.89
</TABLE>
(a) The twelve-month period ended December 31, 1993 was affected by the
recording of regulatory disallowances of approximately $265 million after
tax in Texas Utilities Electric Company's Docket 11735. For the twelve
months ended December 31, 1995, fixed charges exceeded earnings by $235
million. The twelve-month period ended December 31, 1995 was affected by
the write-down in value of some nonperforming assets of Texas Utilities'
subsidiaries, including Texas Utilities Electric Company's partially
completed Twin Oak and Forest Grove lignite-fueled facilities and the New
Mexico coal reserves of a subsidiary, as well as several minor assets. Such
write-down, on an after-tax basis, amounted to $802 million. The twelve
months ended December 31, 1997 include a one time base revenue refund of
$81 million as a result of a settlement with the Public Utility Commission
of Texas (PUC) and a fuel disallowance charge of $80 million as a result of
a fuel reconciliation proceeding before the PUC. (See the 1997 10-K.)
(b) Historical income statement data of Texas Utilities for the twelve months
ended September 30, 1998 includes results of operations for The Energy
Group businesses acquired and Lufkin-Conroe from their respective
acquisition dates to September 30, 1998. Pro forma income statement data
for that twelve months ended September 30, 1998 combines income statement
data for that period of Texas Utilities with income statement data for the
period from October 1, 1997 to the respective acquisition dates of
Lufkin-Conroe and the Energy Group businesses acquired. See Texas
Utilities' Quarterly Report on Form 10-Q for the period ended September 30,
1998.
S-8
<PAGE>
CONSOLIDATED CAPITALIZATION
(Thousands of Dollars, Except Percentages)
<TABLE>
<CAPTION>
Adjusted(a)
-------------------
Outstanding at
September 30, 1998 Amount Percent
------------------ ------ -------
<S> <C> <C> <C>
Capitalization:
Long-term Debt,
less amounts due currently ................. $15,300,307 $13,995,642 59.3%
Preferred Stock of subsidiaries:
Not subject to mandatory redemption ......... 190,055 190,055
Subject to mandatory redemption ............. 20,611 20,611
----------- -----------
Total Preferred Stock of subsidiaries ...... 210,666 210,666 0.9
Mandatorily Redeemable Preferred
Securities of Trusts Holding Solely Junior
Subordinated Debentures of Obligors (b):
Texas Utilities obligated ............... -- 200,000 0.8
Subsidiary obligated .................... 969,756 969,756 4.1
Common Stock Equity .......................... 8,269,471 8,244,471 34.9%
----------- ----------- -----
Total Capitalization ........................ $24,750,200 $23,620,535 100.0%
=========== =========== =====
</TABLE>
(a) To give effect to (1) the issuance of the Preferred Trust Securities,
assuming no exercise by the Underwriters of their option to purchase
additional Preferred Trust Securities to cover over-allotments, (2) the
issuance in October 1998 of $375,000,000 of 5.94% Mandatorily
Putable/Remarketable Securities and $125,000,000 principal amount of
Floating Rate Senior Notes, (3) the use of $1,819,200,000 (primarily
proceeds from the sale of discontinued businesses of The Energy Group) to
pay down the borrowings incurred in connection with the acquisition of The
Energy Group businesses acquired, (4) Texas Utilities common stock
repurchases of $25,000,000, (5) a net increase in long-term debt at Eastern
Group of $36,573,000, (6) an increase in long-term borrowings of another
subsidiary of $13,325,000, and (7) the redemption of subsidiaries' debts of
$35,363,000. Adjusted amounts do not reflect any possible future (1) sales
from time to time by Texas Utilities of shares of its common stock pursuant
to its Direct Stock Purchase and Dividend Reinvestment Plan and certain
employee benefit plans, (2) sales by Texas Utilities of up to $200 million
of debt securities and $170 million of (a) debt securities, (b) shares of
its common stock, (c) contracts to purchase shares of common stock and (d)
units pledged to secure the holders' obligation to purchase common stock
under stock purchase contracts, (3) sales by Texas Utilities Electric
Company of up to an additional $498,850,000 principal amount of its Senior
Debt and $25,000,000 of its cumulative preferred stock and (4) sales by
ENSERCH of up to $100,000,000 aggregate principal amount of securities, for
each of which registration statements are effective pursuant to Rule 415
under the Securities Act of 1933, as amended (Securities Act).
(b) The sole assets of such trusts consist of junior subordinated debentures of
Texas Utilities, Texas Utilities Electric Company or ENSERCH, as the case
may be, in principal amounts, and having other payment terms, corresponding
to the securities issued by such trusts.
S-9
<PAGE>
USE OF PROCEEDS
The proceeds to be received by TXU Capital from the sale of the Preferred
Trust Securities will be used to purchase the Junior Subordinated Debentures of
Texas Utilities. The proceeds to Texas Utilities of such purchase will be used
for the repayment of short-term debt, including outstanding commercial paper,
and for general corporate purposes.
CERTAIN TERMS OF THE PREFERRED TRUST SECURITIES
Specific terms of the Preferred Trust Securities are summarized below. This
summary is not complete and should be read together with the "Description of TXU
Capital's Preferred Trust Securities and Common Trust Securities" in the
Prospectus, where provisions of the Trust Agreement have been summarized.
The form of Trust Agreement was filed as an exhibit to the registration
statement, and you should read the Trust Agreement for provisions that may be
important to you. The Trust Agreement will be qualified as an indenture under
the Trust Indenture Act of 1939, as amended. You should also refer to the Trust
Indenture Act of 1939, as amended, for provisions that apply to the Preferred
Trust Securities.
Distributions
Distributions on the Preferred Trust Securities will:
o be payable in U.S. dollars at 7 1/4% per annum of the liquidation
amount, including interest payable on overdue distributions, on the
basis of a 360-day year of twelve 30-day months.
o be cumulative and payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year, commencing March 31, 1999.
o originally accrue from, and include, the date of initial issuance.
In the event that any distribution date is not a business day, payment will
be made on the next business day, and no interest or other payment will result
from the delay. A business day is any day that is not a Saturday, a Sunday, a
day on which banks in The City of New York are authorized or required to remain
closed or a day on which the Corporate Trust Office of the Property Trustee or
the Debenture Trustee is closed for business.
The record date for distributions will be, for so long as the Preferred
Trust Securities remain in book-entry only form, one business day prior to the
relevant distribution date. In the event the Preferred Trust Securities are not
in book-entry only form, the record date for distributions will be the fifteenth
day prior to the relevant distribution date, whether or not it is a business
day.
Extension of Payment Periods
So long as there is no default in the payment of interest on the Junior
Subordinated Debentures, Texas Utilities may extend the interest payment period
from time to time on the Junior Subordinated Debentures for up to 20 consecutive
quarterly periods. As a consequence, distributions on the Preferred Trust
Securities would be deferred, but would continue to accrue, during any such
extension period. Texas Utilities could not make certain payments on its other
securities during an extension period.
Prior to the termination of any extension period, Texas Utilities may
further extend the interest payment period, provided that the new extension
period, together with all such previous and further extensions of that payment
S-10
<PAGE>
period, may not exceed 20 consecutive quarterly periods or extend beyond the
maturity of the Junior Subordinated Debentures. Upon the termination of any
extension period and the payment of all amounts then due, including interest on
deferred distributions, Texas Utilities may elect to begin a new extended
interest payment period. See "Description of the Junior Subordinated Debentures
- -- Interest" and "Description of the Junior Subordinated Debentures -- Option to
Extend Interest Payment Period" in the Prospectus.
Redemption of Preferred Trust Securities
The Junior Subordinated Debentures will mature on March 31, 2029. Texas
Utilities has the right to redeem all or part of the Junior Subordinated
Debentures at the principal amount thereof plus accrued interest, on or after
December 30, 2003. Texas Utilities may also redeem the Junior Subordinated
Debentures in certain circumstances on the occurrence of a Tax Event.
When Junior Subordinated Debentures mature or are redeemed, the Property
Trustee will use the proceeds to redeem a like amount of TXU Capital securities.
Holders will be sent notice 30 to 60 days ahead of a redemption.
Right to Redeem upon a Tax Event
Texas Utilities shall have the right to redeem all but not fewer than all
of the Junior Subordinated Debentures, at the principal amount thereof plus
accrued interest at any time within 90 days following the occurrence of a Tax
Event if:
o counsel to Texas Utilities experienced in such matters gives an
opinion that, after dissolving TXU Capital and distributing the Junior
Subordinated Debentures to the holders of the Preferred Trust
Securities, there would be more than an insubstantial risk that an
Adverse Tax Consequence would continue to exist; or
o the Junior Subordinated Debentures are not held by TXU Capital.
See "Certain Terms of the Preferred Trust Securities -- Redemption of Preferred
Trust Securities" and "Certain Terms of the Junior Subordinated Debentures --
Redemption" in this Prospectus Supplement.
"Tax Event" means that TXU Capital or Texas Utilities has received an
opinion of counsel experienced in such matters to the effect that, as a result
of
o an amendment to, clarification of, or change (including any announced
prospective change) in, the laws or treaties (or any regulations
thereunder) of the United States or any political subdivision or
taxing authority,
o any judicial decision or any official administrative pronouncement,
ruling, regulatory procedure, notice or announcement including any
notice or announcement of intent to issue or adopt any such
administrative pronouncement, ruling, regulatory procedure or
regulation (each called an Administrative Action in this Prospectus
Supplement), or
o any amendment to, clarification of, or change in the official position
or the interpretation of any Administrative Action or judicial
decision or any interpretation or pronouncement that provides for a
position with respect to an Administrative Action or judicial decision
that differs from the previously generally accepted position, in each
case by any legislative body, court, governmental authority or
regulatory body, regardless of the time or manner in which such
amendment, clarification or change is introduced or made known,
provided that such amendment, clarification, or change is effective or
such Administrative Action is taken or judicial decision is issued on
or after the date of issuance of the Preferred Trust Securities,
S-11
<PAGE>
there is more than an insubstantial risk that (i) TXU Capital is, or will be,
subject to United States federal income tax with respect to interest received on
the Junior Subordinated Debentures, (ii) interest payable by Texas Utilities on
the Junior Subordinated Debentures is not, or will not be, fully deductible by
Texas Utilities for United States federal income tax purposes, or (iii) TXU
Capital is, or will be, subject to more than a de minimis amount of other taxes,
duties or other governmental charges (each of the circumstances described in
clauses (i), (ii), and (iii) being an Adverse Tax Consequence).
It has been reported that the Internal Revenue Service (IRS) has challenged
another company's deduction for interest paid on a debt instrument similar in
some respects to the Junior Subordinated Debentures and issued to an entity
similar in some respects to TXU Capital. Based on available information, Texas
Utilities and TXU Capital do not believe that this challenge will affect Texas
Utilities' ability to deduct interest payments on the Junior Subordinated
Debentures. However, it should be noted that further developments favoring the
IRS's challenge, or other unrelated developments, could cause a Tax Event.
Distribution of the Junior Subordinated Debentures
At any time, Texas Utilities may dissolve TXU Capital, pay the creditors,
if any, of TXU Capital and distribute Junior Subordinated Debentures to the
holders of the Preferred Trust Securities. Upon distribution of Junior
Subordinated Debentures and dissolution of TXU Capital, (i) the Preferred Trust
Securities and the Common Trust Securities will no longer be deemed to be
outstanding and (ii) certificates representing Preferred Trust Securities will
represent Junior Subordinated Debentures having a principal amount equal to the
stated liquidation amount of, and bearing accrued and unpaid interest equal to,
any accrued and unpaid distributions on, the Preferred Trust Securities.
If Texas Utilities distributes Junior Subordinated Debentures to holders of
Preferred Trust Securities in a dissolution of TXU Capital, those Junior
Subordinated Debentures will be issued in certificated form in denominations of
$25 and integral multiples of $25. They may be transferred or exchanged at the
offices of the Debenture Trustee described in "Description of the Junior
Subordinated Debentures" in the Prospectus.
Book-Entry Only Issuance -- The Depository Trust Company
The Preferred Trust Securities will trade through DTC. The Preferred Trust
Securities will be represented by a global certificate and registered in the
name of Cede & Co., DTC's nominee.
DTC is a New York clearing corporation and a clearing agency registered
under Section 17A of the Securities Exchange Act of 1934. DTC holds securities
for its participants. DTC facilitates settlement of securities transactions
among its participants, through electronic computerized book-entry changes in
the participants' accounts. This eliminates the need for physical movement of
securities certificates. The participants include securities brokers and
dealers, banks, trust companies and clearing corporations. DTC is owned by a
number of its participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Others who maintain a custodial relationship with a participant
can use the DTC system. The rules that apply to DTC and those using its systems
are on file with the SEC.
Purchases of Preferred Trust Securities within the DTC system must be made
through participants, which will receive a credit for the Preferred Trust
Securities on DTC's records. The beneficial ownership interest of each purchaser
will be recorded on the participants' records. Beneficial owners will not
receive written confirmation from DTC of their purchases, but beneficial owners
should receive written confirmations of the transactions, as well as periodic
statements of their holdings, from the participants through which they purchased
Preferred Trust Securities. Beneficial owners will not receive certificates for
their Preferred Trust Securities, unless use of the book-entry system for the
Preferred Trust Securities is discontinued.
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To facilitate subsequent transfers, all the Preferred Trust Securities
deposited by direct participants with DTC are registered in the name of DTC's
nominee, Cede & Co. The deposit of Preferred Trust Securities with DTC and their
registration in the name of Cede & Co. effect no change in beneficial ownership.
DTC has no knowledge of the actual beneficial owners of the Preferred Trust
Securities. DTC's records reflect only the identity of the participants to whose
accounts such Preferred Trust Securities are credited. These participants may or
may not be the beneficial owners. Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to participants, and
by participants to indirect participants and beneficial owners, will be governed
by arrangements among them.
Redemption notices shall be sent to Cede & Co. If less than all of the
Preferred Trust Securities are being redeemed, DTC's practice is to determine by
lot the liquidation amount of each participant to be redeemed.
Although voting with respect to the Preferred Trust Securities is limited,
in those cases where a vote is required, neither DTC nor Cede & Co. will itself
consent or vote with respect to Preferred Trust Securities. Under its usual
procedures, DTC would mail an Omnibus Proxy to TXU Capital as soon as possible
after the record date. The Omnibus Proxy assigns the consenting or voting rights
of Cede & Co. to those participants to whose accounts the Preferred Trust
Securities are credited on the record date. Texas Utilities and TXU Capital
believe that these arrangements will enable the beneficial owners to exercise
rights equivalent in substance to the rights that can be directly exercised by a
holder of a beneficial interest in TXU Capital.
Distribution payments on the Preferred Trust Securities will be made to
DTC. DTC's practice is to credit participants' accounts on the relevant payment
date in accordance with their respective holdings shown on DTC's records unless
DTC has reason to believe that it will not receive payments on such payment
date. Payments by participants to beneficial owners will be governed by standing
instructions and customary practices. Payments will be the responsibility of
participants and not of DTC, TXU Capital or Texas Utilities. Payment of
distributions to DTC is the responsibility of TXU Capital. Disbursement of such
payments to participants is the responsibility of DTC, and disbursement of such
payments to the beneficial owners is the responsibility of participants.
Except as provided herein, a beneficial owner will not be entitled to
receive physical delivery of Preferred Trust Securities. Accordingly, each
beneficial owner must rely on the procedures of DTC to exercise any rights under
the Preferred Trust Securities.
DTC may discontinue providing its services as securities depositary with
respect to the Preferred Trust Securities at any time by giving reasonable
notice to TXU Capital. In the event no successor securities depositary is
obtained, Preferred Trust Securities certificates will be printed and delivered.
If the Administrative Trustees and Texas Utilities decide to discontinue use of
the DTC system of book-entry transfers, certificates for the Preferred Trust
Securities will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that Texas Utilities and TXU Capital believe to
be reliable, but neither Texas Utilities nor TXU Capital takes responsibility
for the accuracy of such information.
CERTAIN TERMS OF THE JUNIOR SUBORDINATED DEBENTURES
Specific terms of the Junior Subordinated Debentures are summarized below.
This summary is not complete and should be read together with the "Description
of the Junior Subordinated Debentures" in the Prospectus, where provisions of
the Subordinated Indenture have been summarized.
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<PAGE>
The form of the Subordinated Indenture was filed as an exhibit to the
registration statement, and you should read the Subordinated Indenture for
provisions that may be important to you. The Subordinated Indenture is qualified
as an indenture under the Trust Indenture Act of 1939, as amended. You should
also refer to the Trust Indenture Act of 1939, as amended, for provisions that
apply to the Junior Subordinated Debentures.
Interest
Interest on the Junior Subordinated Debentures will:
o be payable in U.S. dollars at 7 1/4% per annum, including interest
payable on overdue interest, on the basis of a 360-day year of twelve
30-day months;
o be cumulative and payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year, commencing March 31, 1999;
and
o originally accrue from, and include, the date of initial issuance.
In the event that any payment date is not a business day, payment will be
made on the next succeeding business day, and no interest or other payment will
result from the delay.
The record date for interest will be, for so long as the Preferred Trust
Securities or Junior Subordinated Debentures distributed to holders of Preferred
Trust Securities remain in book-entry only form, one business day prior to the
relevant distribution or interest payment date. In the event those securities
are not in book-entry only form, the record date for distributions will be the
fifteenth day prior to the relevant distribution or interest payment date
whether or not it is a business day.
Extension of Payment Periods
So long as there is no default in the payment of interest on the Junior
Subordinated Debentures, Texas Utilities may extend the interest payment period
from time to time on the Junior Subordinated Debentures for up to 20 consecutive
quarterly periods. As a consequence, distributions on the Preferred Trust
Securities would be deferred, but would continue to accrue, during any such
extension period. Texas Utilities may not make certain payments on its other
securities during an extension period. See "Description of the Junior
Subordinated Debentures - Option to Extend Interest Payment Period" in the
Prospectus.
Prior to the termination of any such extension period, Texas Utilities may
further extend the interest payment period, provided that the new extension
period, together with all such previous and further extensions of that payment
period, may not exceed 20 consecutive quarterly periods or extend beyond the
maturity of the Junior Subordinated Debentures. Upon the termination of any
extension period and the payment of all amounts then due, including interest on
deferred interest payments, Texas Utilities may elect to begin a new extended
interest payment period. See "Description of the Junior Subordinated Debentures
- -- Interest" and "Description of the Junior Subordinated Debentures -- Option to
Extend Interest Payment Period" in the Prospectus.
If Texas Utilities extends the interest payment period or is in default
under the Guarantee or with respect to payments on the Junior Subordinated
Debentures, Texas Utilities may not:
o declare or pay any dividend or distribution on its capital stock,
other than dividends paid in shares of common stock of Texas
Utilities;
o redeem, purchase, acquire or make a liquidation payment with respect
to, any of its capital stock;
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o redeem any indebtedness that is equal in right of payment with the
Junior Subordinated Debentures; or
o make any guarantee payments with respect to any of the above.
Any extension period with respect to payment of interest on the Junior
Subordinated Debentures, or any extended interest payment period in respect of
other securities issued under the Subordinated Indenture or on any similar
securities, will apply to all securities of the same type. Such extensions will
also apply to distributions on Preferred Trust Securities and Common Trust
Securities and all other securities with terms substantially the same as
Preferred Trust Securities and Common Trust Securities. Texas Utilities will
give TXU Capital and the Debenture Trustee notice of its election of an
extension period prior to the earlier of (i) one business day before the record
date for the distribution which would occur if Texas Utilities did not make the
election to extend or (ii) the date Texas Utilities is required to give notice
to the NYSE. Texas Utilities will cause TXU Capital to send notice of such
election to the holders of Preferred Trust Securities.
Texas Utilities May Shorten Maturity of Junior Subordinated Debentures.
Upon the occurrence and continuation of a Tax Event relating to
non-deductibility of interest payments on the Junior Subordinated Debentures, in
lieu of redeeming the Junior Subordinated Debentures, at its option, Texas
Utilities may shorten the stated maturity of the Junior Subordinated Debentures
to as early as December 30, 2013. This would cause a mandatory redemption of the
Preferred Trust Securities at the same time.
Assignment of Obligations of Texas Utilities
Texas Utilities may assign its obligations under the Junior Subordinated
Debentures and the Subordinated Indenture to a wholly-owned subsidiary, provided
that no Event of Default, or event which with the passage of time or the giving
of required notice, or both, would become an Event of Default, has occurred and
is continuing.
If Texas Utilities exercises its right to assign its obligations under the
Subordinated Indenture to a subsidiary, Texas Utilities will guarantee the
payment of those assigned obligations. Texas Utilities has agreed that even if
it has assigned its obligations to a subsidiary, Texas Utilities will not make
certain payments on its other securities if the subsidiary to which the
obligations have been assigned extends the interest payment period on the Junior
Subordinated Debentures. See "Description of the Junior Subordinated Debentures
- -- Option to Extend Interest Payment Period" in the Prospectus for a detailed
description of the kinds of payments Texas Utilities will not be able to make
during any extension of an interest payment period. These restrictions will not
apply to the subsidiary to which Texas Utilities has assigned its obligations.
If Texas Utilities assigns its obligations under the Subordinated Indenture
to a subsidiary, the guarantee will provide that if there is an Event of Default
and the holders are prevented by applicable law from exercising their rights to
accelerate the maturity of the securities, to collect interest on the
securities, or to enforce any other right or remedy with respect to the
securities, Texas Utilities will pay, upon demand, the amount that would
otherwise have been due and payable had the exercise of such rights and remedies
been permissible.
If Texas Utilities assigns its obligations under the Subordinated Indenture
to a subsidiary that is organized in a foreign jurisdiction, it will also agree
that all payments made pursuant to its guarantee or either the Preferred Trust
Securities or the Junior Subordinated Debentures will be made without
withholding or deduction for any foreign taxes or other foreign governmental
charges imposed with respect to payments on the Preferred Trust Securities or
the Junior Subordinated Debentures, unless such withholding or deduction is
required by law. If any such withholding or deduction is made, Texas Utilities
shall pay to each holder of either Preferred Trust Securities or Junior
Subordinated Debentures the amount that would otherwise have been due to that
holder in the absence of such withholding or deduction, after any additional
taxes or other charges payable in respect of such Texas Utilities payment,
except that no such additional amounts shall be payable:
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<PAGE>
o to or for a holder who is liable for those foreign taxes or charges
because of the holder's connection with the relevant jurisdiction,
whether as a citizen, a resident or a national of the jurisdiction or
because the holder carries on a business or maintains a permanent
establishment there or is physically present there;
o to or for a holder who presents a security required to be presented
for payment more than 30 days after the date on which payment first
becomes due, unless that holder would have been entitled to such
additional amounts by presenting such security during the 30 day
period;
o to or for a holder who presents a security, where presentation is
required, at any place other than in The City of New York, unless
Texas Utilities does not provide a place for presentation within The
City of New York; or
o to or for a holder who is liable for the tax or charge because the
holder failed to take appropriate and available steps to declare
non-residence or request exemption from the relevant tax authority.
No additional amounts will be payable with respect to any security if the
beneficial owner would not have been entitled to such payment if that beneficial
owner had been a holder.
References in this Prospectus Supplement to any payments pursuant to the
Texas Utilities guarantee shall include any such additional amounts payable in
connection therewith.
If Texas Utilities assigns its obligations under the Junior Subordinated
Debentures to a subsidiary, such Junior Subordinated Debentures could be treated
as exchanged for new debentures in a taxable exchange. As a result, holders of
Preferred Trust Securities could recognize gain or loss for United States
federal income tax purposes. Investors are advised to consult their tax advisors
regarding the tax consequences of an assignment by Texas Utilities of its
obligations under the Junior Subordinated Debentures.
Redemption
Texas Utilities may redeem all or part of the Junior Subordinated
Debentures on or after December 30, 2003, at any time. Texas Utilities also may
redeem, at their principal amount plus accrued interest, all but not fewer than
all, the Junior Subordinated Debentures at any time within 90 days following the
occurrence of a Tax Event in certain circumstances as described under "Certain
Terms of the Preferred Trust Securities -- Right to Redeem upon a Tax Event" in
this Prospectus Supplement. The proceeds of any such redemption will be used by
TXU Capital to redeem its preferred and common securities.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
RELATING TO THE PREFERRED TRUST SECURITIES
The following summary describes certain United States federal income tax
consequences of the ownership of Preferred Trust Securities as of the date
hereof and represents the opinion of Thelen Reid & Priest LLP, counsel to the
Company, insofar as it relates to matters of law or legal conclusions. Except
where noted, it deals only with Preferred Trust Securities held as capital
assets within the meaning of ss.1221 of the Internal Revenue Code of 1986, as
amended (Code) and does not deal with special situations, such as those of
dealers in securities or currencies, financial institutions, life insurance
companies, persons holding Preferred Trust Securities as a part of a hedging or
conversion transaction or a straddle, United States holders (as defined herein)
whose "functional currency" is not the U.S. dollar, or persons who are not
United States holders. In addition, this discussion does not address the tax
consequences to persons who purchase Preferred Trust Securities other than
pursuant to their initial issuance and distribution. Furthermore, the discussion
below is based upon the provisions of the Code and Treasury regulations,
administrative rulings and judicial decisions thereunder as of the date hereof,
and such authorities may be repealed,
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revoked or modified so as to result in United States federal income tax
consequences different from those discussed below.
PROSPECTIVE PURCHASERS OF PREFERRED TRUST SECURITIES, INCLUDING PERSONS WHO
ARE NOT UNITED STATES HOLDERS AND PERSONS WHO PURCHASE PREFERRED TRUST
SECURITIES IN THE SECONDARY MARKET, ARE ADVISED TO CONSULT WITH THEIR TAX
ADVISORS AS TO THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE
OWNERSHIP AND DISPOSITION OF PREFERRED TRUST SECURITIES IN LIGHT OF THEIR
PARTICULAR CIRCUMSTANCES, AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR OTHER TAX
LAWS.
United States Holders
As used herein, a "United States holder" means a beneficial owner of a
Preferred Trust Security that is a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, an estate the
income of which is subject to United States federal income taxation regardless
of its source, or a trust the administration of which is subject to the primary
supervision of a court within the United States and for which one or more United
States persons have the authority to control all substantial decisions.
Classification of TXU Capital
Thelen Reid & Priest LLP, counsel to Texas Utilities and TXU Capital, is of
the opinion that, under current law and assuming full compliance with the terms
of the Subordinated Indenture and the instruments establishing TXU Capital (and
certain other documents), TXU Capital will be classified as a "grantor trust"
for federal income tax purposes and will not be classified as an association
taxable as a corporation. Each United States holder will be treated as owning an
undivided beneficial interest in the Junior Subordinated Debentures. Investors
should be aware that the opinion of Thelen Reid & Priest LLP does not address
any other issue and is not binding on the Internal Revenue Service or the
courts.
Classification of the Junior Subordinated Debentures
Based on the advice of Thelen Reid & Priest LLP, Texas Utilities believes
and intends to take the position that the Junior Subordinated Debentures will
constitute indebtedness for United States federal income tax purposes. No
assurance can be given that such position will not be challenged by the Internal
Revenue Service or, if challenged, that such a challenge will not be successful.
By purchasing and accepting Preferred Trust Securities, each United States
holder covenants to treat the Junior Subordinated Debentures as indebtedness and
the Preferred Trust Securities as evidence of an indirect beneficial ownership
in the Junior Subordinated Debentures. The remainder of this discussion assumes
that the Junior Subordinated Debentures will be classified as indebtedness of
Texas Utilities for United States federal income tax purposes.
Payments of Interest
Except as set forth below, stated interest on a Junior Subordinated
Debenture will generally be taxable to a United States holder as ordinary income
at the time it is paid or accrued in accordance with the United States holder's
method of accounting for tax purposes.
Original Issue Discount
Under applicable Treasury regulations, Texas Utilities believes that the
Junior Subordinated Debentures will not be treated as issued with OID. It should
be noted that these regulations have not yet been addressed in any rulings
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or other interpretations by the IRS. Accordingly, it is possible that the IRS
could take a position contrary to the interpretation described herein.
Under the Subordinated Indenture, Texas Utilities has the right to defer
the payment of interest on the Junior Subordinated Debentures at any time or
from time to time for a period not exceeding 20 consecutive quarterly periods
with respect to each extension period, provided, however, that no extension
period may extend beyond the Stated Maturity (as defined in the Subordinated
Indenture) of the Junior Subordinated Debentures. Should Texas Utilities
exercise its rights to defer payments of interest, the Junior Subordinated
Debentures would at that time be treated as issued with OID for so long as they
remained outstanding. As a result, all United States holders would, in effect,
be required to accrue interest income even if such United States holders are on
a cash method of accounting. Consequently, in the event that the payment of
interest is deferred, a United States holder will be required to include OID in
income on an economic accrual basis, notwithstanding that Texas Utilities will
not make any interest payments during such period on the Junior Subordinated
Debentures.
Receipt of Junior Subordinated Debentures or Cash Upon Liquidation of TXU
Capital
As described under the caption "Certain Terms of the Preferred Trust
Securities -- Distribution of the Junior Subordinated Debentures" in this
Prospectus Supplement, the Junior Subordinated Debentures may be distributed to
United States holders in exchange for the Preferred Trust Securities upon
liquidation of TXU Capital. Under current law, for United States federal income
tax purposes, such a distribution would be treated as a non-taxable event to
each United States holder, and each United States holder would receive an
aggregate tax basis in the Junior Subordinated Debentures equal to such holder's
aggregate tax basis in its Preferred Trust Securities. A United States holder's
holding period for the Junior Subordinated Debentures received in liquidation of
TXU Capital would include the period during which such holder held the Preferred
Trust Securities.
Under certain circumstances, as described under the caption "Certain Terms
of the Preferred Trust Securities -- Redemption of Preferred Trust Securities",
the Junior Subordinated Debentures may be redeemed for cash and the proceeds of
such redemption distributed to holders of Preferred Trust Securities in
redemption of the Preferred Trust Securities. Under current law, such a
redemption would, for United States federal income tax purposes, constitute a
taxable disposition of the Preferred Trust Securities, and a holder would
recognize gain or loss as if such holder had sold such redeemed Preferred Trust
Securities. See "Sale, Exchange and Redemption of the Preferred Trust
Securities."
Sale, Exchange and Redemption of the Preferred Trust Securities
Upon the sale, exchange or redemption of Preferred Trust Securities, a
United States holder will recognize gain or loss equal to the difference between
the amount realized upon the sale, exchange or redemption, other than amounts
attributable to accrued and unpaid interest and such holder's adjusted tax basis
in the Preferred Trust Securities. Such gain or loss will be capital gain or
loss and will be long-term capital gain or loss if at the time of sale, exchange
or redemption, the Preferred Trust Securities have been held for more than one
year. Generally, for non-corporate United States holders, net long-term capital
gains are subject to United States federal income tax at a maximum rate of 20%.
Under current law, deductibility of capital losses is subject to limitations.
Information Reporting and Backup Withholding
Subject to the qualification discussed below, income on the Preferred Trust
Securities will be reported to United States holders on Forms 1099, which should
be mailed to such holders by January 31 following each calendar year.
If required by law, TXU Capital will report annually to the holders of
record of the Preferred Trust Securities the interest income paid or OID accrued
during the year with respect to the Junior Subordinated Debentures. TXU Capital
currently intends to report such information on Form 1099 prior to January 31
following each calendar year. Under current law, holders of record of Preferred
Trust Securities who hold as nominees for beneficial holders will
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not have any obligation to report information regarding the beneficial holders
to TXU Capital. TXU Capital, moreover, will not have any obligation to report to
beneficial holders who are not also record holders. Thus, beneficial holders of
Preferred Trust Securities who hold their Preferred Trust Securities through
nominee holders will typically receive Forms 1099 reflecting the income on their
Preferred Trust Securities from such nominee holders rather than from TXU
Capital.
Payments made in respect of, and proceeds from the sale of, Preferred Trust
Securities (or Junior Subordinated Debentures distributed to holders of
Preferred Trust Securities) may be subject to "backup" withholding tax of 31% if
the holder fails to comply with certain identification requirements, or has
previously failed to report in full dividend and interest income, or does not
otherwise establish its entitlement to an exemption. Any withheld amounts will
be allowed as a refund or a credit against the holder's United States federal
income tax liability, provided the required information is provided to the
Internal Revenue Service.
UNDERWRITERS
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof, each of the Underwriters named below has
severally agreed to purchase, and TXU Capital has agreed to sell to each of
them, severally, the number of Preferred Trust Securities set forth opposite the
name of each such Underwriter below:
<TABLE>
<CAPTION>
Number of
Preferred
Trust
Name Securities
- ---- ----------
<S> <C>
Morgan Stanley & Co. Incorporated ............................... 1,050,000
Credit Suisse First Boston Corporation .......................... 1,049,800
Goldman, Sachs & Co. ............................................ 1,049,800
Merrill Lynch, Pierce, Fenner & Smith
Incorporated ..................................... 1,049,800
PaineWebber Incorporated ........................................ 1,049,800
Salomon Smith Barney Inc. ....................................... 1,049,800
ABN AMRO Incorporated ........................................... 54,000
Bear, Stearns & Co. Inc. ........................................ 54,000
BT Alex. Brown Incorporated ..................................... 54,000
CIBC Oppenheimer Corp. .......................................... 54,000
Donaldson, Lufkin & Jenrette Securities Corporation ............. 54,000
A.G. Edwards & Sons, Inc. ....................................... 54,000
Legg Mason Wood Walker, Incorporated ............................ 54,000
Lehman Brothers Inc. ............................................ 54,000
Prudential Securities Incorporated .............................. 54,000
Schroder & Co. Inc. ............................................. 54,000
SG Cowen Securities Corporation ................................. 54,000
Warburg Dillon Read LLC ......................................... 54,000
Advest, Inc. .................................................... 27,000
Robert W. Baird & Co. Incorporated .............................. 27,000
George K. Baum & Company ........................................ 27,000
William Blair & Company, L.L.C .................................. 27,000
J.C. Bradford & Co. ............................................. 27,000
</TABLE>
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The Chapman Company ............................................. 27,000
Craigie Incorporated ............................................ 27,000
Crowell, Weedon & Co. ........................................... 27,000
D.A. Davidson & Co. Incorporated ................................ 27,000
Dain Rauscher Wessels ........................................... 27,000
Davenport & Company LLC ......................................... 27,000
Fahnestock & Co. Inc. ........................................... 27,000
Ferris, Baker Watts, Incorporated ............................... 27,000
Fidelity Capital Markets, A Division of National
Financial Services Corporation ................... 27,000
Fifth Third/The Ohio Company .................................... 27,000
First Albany Corporation ........................................ 27,000
First of Michigan Corporation ................................... 27,000
Fleet Securities, Inc. .......................................... 27,000
Gibraltar Securities Co. ........................................ 27,000
J.J.B. Hilliard, W.L. Lyons, Inc. ............................... 27,000
Interstate/Johnson Lane Corporation ............................. 27,000
Janney Montgomery Scott Inc. .................................... 27,000
Kirkpatrick, Pettis, Smith, Polian Inc. ......................... 27,000
McDonald Investments Inc., A Keycorp Company .................... 27,000
Mesirow Financial, Inc. ......................................... 27,000
Morgan Keegan & Company, Inc. ................................... 27,000
Olde Discount Corporation ....................................... 27,000
Pershing/Division of Donaldson, Lufkin & Jenrette
Securities Corporation ........................... 27,000
Piper Jaffray Inc. .............................................. 27,000
Raymond James & Associates, Inc. ................................ 27,000
The Robinson-Humphrey Company, LLC .............................. 27,000
Roney Capital Markets, A Division of First Chicago
Capital Markets, Inc. ............................ 27,000
Charles Schwab & Co., Inc. ...................................... 27,000
Scott & Stringfellow, Inc. ...................................... 27,000
Southwest Securities, Inc. ...................................... 27,000
Stifel, Nicolaus & Company, Incorporated ........................ 27,000
Tucker Anthony Incorporated ..................................... 27,000
Wedbush Morgan Securities ....................................... 27,000
Wheat First Securities, Inc. .................................... 27,000
=========
Total ........................................................... 8,000,000
=========
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Preferred Trust Securities
are subject to the approval of certain legal matters by their counsel and to
certain other conditions. In the Underwriting Agreement, the several
Underwriters have agreed, subject to the terms and conditions set forth therein,
to purchase all the Preferred Trust Securities offered hereby if any of the
Preferred Trust Securities are purchased. In the event of default by an
Underwriter, the Underwriting Agreement provides that, in certain circumstances,
the purchase commitments of the nondefaulting Underwriters may be increased or
the Underwriting Agreement may be terminated.
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The Underwriters initially propose to offer part of the Preferred Trust
Securities directly to the public at the initial public offering price set forth
on the cover page hereof and all or part to certain dealers at a price that
represents a concession not in excess of $.50 per Preferred Trust Security under
the public offering price. Any Underwriter may allow, and such dealers may
reallow, a concession not in excess of $.40 per Preferred Trust Security to
other Underwriters or to certain dealers. After the initial offering of the
Preferred Trust Securities, the offering price and other selling terms may from
time to time be varied by the Underwriters named on the cover page of this
Prospectus Supplement.
Because the proceeds of the sale of the Preferred Trust Securities will
ultimately be used to purchase the Junior Subordinated Debentures of Texas
Utilities, the Underwriting Agreement provides that Texas Utilities will pay to
the Underwriters as compensation for their services $.7875 per Preferred Trust
Security (or $6,300,000 in the aggregate).
Texas Utilities and TXU Capital have agreed that, without the prior written
consent of Morgan Stanley & Co. Incorporated, on behalf of the Underwriters,
they will not, during the period between the date of this Prospectus Supplement
and the delivery of the Preferred Trust Securities, directly or indirectly,
publicly issue, sell, offer or contract to sell, in the market in which the
Preferred Trust Securities are being offered and sold, any securities of Texas
Utilities or any of its subsidiaries or of TXU Capital which are of the same
class as the Preferred Trust Securities.
Prior to this offering, there has been no market for the Preferred Trust
Securities. TXU Capital plans to list the Preferred Trust Securities on the New
York Stock Exchange, and trading of the Preferred Trust Securities on the New
York Stock Exchange is expected to commence within a 30-day period after the
Preferred Trust Securities are first issued. The Underwriters have advised Texas
Utilities that they intend to make a market in the Preferred Trust Securities
prior to the commencement of trading on the New York Stock Exchange but are not
obligated to do so and may discontinue market making at any time without notice.
No assurance can be given as to the liquidity of the trading market for the
Preferred Trust Securities.
In order to facilitate the offering of the Preferred Trust Securities, the
Underwriters may engage in transactions that stabilize, maintain, or otherwise
affect the price of the Preferred Trust Securities. Specifically, the
Underwriters may over allot in connection with the offering, creating a short
position in the Preferred Trust Securities for their own account. In addition,
to cover over-allotments or to stabilize the price of the Preferred Trust
Securities, the Underwriters may bid for, and purchase, the Preferred Trust
Securities in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an Underwriter or a dealer for distributing the
Preferred Trust Securities in the offering, if the syndicate repurchases
previously distributed Preferred Trust Securities in transactions to cover
syndicate short positions, in stabilization transactions, or otherwise. Any of
these activities may stabilize or maintain the market price of the Preferred
Trust Securities above independent market levels. The Underwriters are not
required to engage in these activities, and may end any of these activities at
any time.
Texas Utilities and TXU Capital have granted to the Underwriters an option,
exercisable for 30 days following the date of this Prospectus Supplement, to
purchase additional Preferred Trust Securities from TXU Capital in an amount up
to 15% of the total initial Preferred Trust Securities set forth above at the
Price to Public set forth on the cover page of this Prospectus Supplement. Texas
Utilities will pay to the Underwriters a commission of $.7875 per additional
Preferred Trust Security purchased. The Underwriters may exercise this option
only to cover over-allotments, if any, made on the sale of the Preferred Trust
Securities. To the extent the option is exercised, each Underwriter has agreed
to purchase approximately the same percentage of such Preferred Trust Securities
that the number set forth opposite their names in the table above bears to the
total number of Preferred Trust Securities initially offered.
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Texas Utilities and TXU Capital have agreed to indemnify the Underwriters
against, or contribute to payments the Underwriters may be required to make in
respect of, certain liabilities, including liabilities under the Securities Act.
Certain of the Underwriters engage in transactions with, and from time to
time have performed services for, Texas Utilities and its subsidiaries in the
ordinary course of business.
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PROSPECTUS
$400,000,000
TEXAS UTILITIES COMPANY
DEBT SECURITIES
TXU CAPITAL I
PREFERRED TRUST SECURITIES
FULLY AND UNCONDITIONALLY GUARANTEED AS SET
FORTH HEREIN BY
TEXAS UTILITIES COMPANY
-----------------------------------------------------
We will provide specific terms of these securities, their
offering prices and
how they will be offered in supplements to this prospectus.
You should read this prospectus and any supplement carefully
before you invest.
-----------------------------------------------------
These securities have not been approved by the Securities and
Exchange Commission or any state securities commission, nor have
these organizations determined that this prospectus is accurate
or complete. Any representation to the contrary is a criminal
offense.
This prospectus is dated December 18, 1998.
<PAGE>
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we
filed with the Securities and Exchange Commission using a "shelf"
registration process. Under this shelf process, we may, over the
next two years, sell any combination of the securities described
in this prospectus in one or more offerings up to a total dollar
amount of $400,000,000. This prospectus provides you with a
general description of the securities we may offer. Each time we
sell securities, we will provide a prospectus supplement that
will contain specific information about the terms of that
offering. The prospectus supplement may also add, update or
change information contained in this prospectus. You should read
both this prospectus and any prospectus supplement together with
additional information described under the heading "Where You Can
Find More Information."
For more detailed information about the securities, you can
read the exhibits filed with the registration statement.
WHERE YOU CAN FIND MORE INFORMATION
Texas Utilities Company (Texas Utilities), a Texas
corporation, was formed in 1997 as a holding company. Texas
Utilities owns all of the outstanding common stock of Texas
Energy Industries, Inc. and ENSERCH Corporation. Texas Utilities
files annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission
under File No. 1-12833. Before Texas Utilities began filing
quarterly and annual reports with the Securities and Exchange
Commission, Texas Energy Industries, Inc. filed those reports
under its old name, Texas Utilities Company, File No. 1-3591.
ENSERCH Corporation also files those reports under File No. 1-
3183. These Securities and Exchange Commission filings are
available to the public over the Internet at the Securities and
Exchange Commission's web site at http://www.sec.gov. You may
also read and copy any of these Securities and Exchange
Commission filings at the Securities and Exchange Commission's
public reference rooms in Washington, D.C., New York, New York
and Chicago, Illinois. Please call the Securities and Exchange
Commission at 1-800-SEC-0330 for further information on the
public reference rooms.
The Securities and Exchange Commission allows us to
"incorporate by reference" the information we file with them,
which means that we can disclose important information to you by
referring you to those documents. The information incorporated
by reference is an important part of this prospectus, and
information that we file later with the Securities and Exchange
Commission will automatically update and supersede this
information. We incorporate by reference the documents listed
below and any future filings we make with the Securities and
Exchange Commission under Section 13(a), 13(c), 14, or 15(d) of
the Securities Exchange Act of 1934, as amended, until we sell
all of the securities described in this prospectus.
. Texas Utilities' Annual Report on Form 10-K for the
year ended December 31, 1997 (1997 10-K).
. Texas Utilities' Quarterly Reports on Form 10-Q for the
quarters ended March 31, June 30 and September 30,
1998.
. Texas Utilities' Current Reports on Form 8-K dated
February 26, 1998, March 13, 1998, April 8, 1998, April
9, 1998, April 17, 1998, May 19, 1998 (as amended on
June 25, 1998 and July 17, 1998), August 6, 1998,
August 31, 1998 and December 10, 1998.
You may request a copy of these filings at no cost, by
writing or contacting Texas Utilities at the following address:
Secretary, Texas Utilities Company, Energy Plaza, 1601 Bryan
Street, Dallas, Texas 75201; telephone number (214) 812-4600.
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THE COMPANY
Texas Utilities is a holding company engaged through various
subsidiary companies primarily in providing energy and other
related services, both domestically and internationally. Its
principal direct and indirect subsidiaries are:
Texas Utilities Electric Company, an operating public
utility company engaged in the generation, purchase,
transmission, distribution and sale of electric energy
in the north central, eastern and western parts of
Texas.
ENSERCH Corporation, an integrated company focused on
natural gas. Its major business operations are natural
gas pipeline, processing, marketing and distribution.
It operates primarily in the north central, eastern and
western parts of Texas and engages in the wholesale and
retail marketing of natural gas in several areas of the
United States.
Eastern Group plc, which includes Eastern Electricity
plc, the largest supplier and distributor of
electricity in England and Wales. Eastern Group
companies also include one of the largest generators of
electricity and one of the largest suppliers of natural
gas in the United Kingdom.
Other subsidiaries include:
Texas Utilities Australia Pty. Ltd., owner of Eastern
Energy Limited, which is engaged in the purchase,
distribution, marketing and sale of electric energy in
the State of Victoria, Australia.
Southwestern Electric Service Company, which is engaged
in the purchase, transmission, distribution and sale of
electric energy in ten counties in the eastern and
central parts of Texas.
Lufkin-Conroe Communications Co., an independent local
exchange telephone company serving access lines in
southeast Texas and providing access services to a
number of interexchange carriers who provide long
distance services.
Other wholly owned subsidiaries which perform
specialized functions within the Texas Utilities
system.
Texas Utilities' principal place of business is Energy
Plaza, 1601 Bryan Street, Dallas, Texas 75201.
TXU CAPITAL I
TXU Capital I (TXU Capital) is a Delaware business trust
created pursuant to a Trust Agreement among Texas Utilities, The
Bank of New York as the Property Trustee and The Bank of New York
(Delaware) as the Delaware Trustee and an employee of Texas
Utilities as Administrative Trustee. The Trust Agreement will be
amended and restated substantially in the form filed as an
exhibit to the registration statement. TXU Capital exists only
to issue its Preferred Trust Securities and Common Trust
Securities and to hold the Junior Subordinated Debentures of
Texas Utilities as trust assets. All of the Common Trust
Securities will be owned by Texas Utilities. The Common Trust
Securities will represent at least 3% of the total capital of TXU
Capital. Payments will be made on the Common Trust Securities
pro rata with the Preferred Trust Securities, except that the
right to payment will be subordinated to the rights of the
holders of the Preferred Trust Securities if there is a default
under the Trust Agreement. TXU Capital has a term of
approximately 40 years, but may dissolve earlier as provided in
the Trust Agreement. TXU Capital's business and affairs will be
conducted by its Administrative Trustee. The office of the
Delaware Trustee in the State of Delaware is White Clay Center,
Route 273, Newark, Delaware 19711. The principal place of
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business of TXU Capital is c/o Texas Utilities, Energy Plaza,
1601 Bryan Street, Dallas, Texas 75201.
USE OF PROCEEDS
Unless otherwise set forth in a prospectus supplement, the
net proceeds from the offering of the securities will be used for
general corporate purposes of Texas Utilities, which may include
the repayment of short-term indebtedness.
RATIO OF EARNINGS TO FIXED CHARGES AND
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED
DIVIDENDS
The ratio of earnings to fixed charges and the ratio of
earnings to combined fixed charges and preferred dividends for
Texas Utilities for each of the years ended December 31, 1993
through 1997 and the twelve months ended September 30, 1998 were,
in each case, 1.53, 1.88, 0.72, 2.18, 2.14, and 1.79,
respectively. The year ended December 31, 1993 was affected by
the recording of regulatory disallowances of approximately $265
million after tax in Texas Utilities Electric Company's Docket
11735. For the year ended December 31, 1995, fixed charges
exceeded earnings by $235 million. The year ended December 31,
1995 was affected by the write-down in value of some of the
nonperforming assets of Texas Utilities' subsidiaries, including
Texas Utilities Electric Company's partially completed Twin Oak
and Forest Grove lignite-fueled facilities and the New Mexico
coal reserves of a subsidiary, as well as several minor assets.
Such write-down, on an after-tax basis, amounted to $802 million.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be Texas Utilities' direct
unsecured general obligations. The Debt Securities will be
senior debt securities. The Debt Securities will be issued under
one or more separate Indentures between Texas Utilities and The
Bank of New York as Trustee under each Indenture.
Selected provisions of the Indenture are summarized below.
This summary is not complete. The form of the Indenture was
filed as an exhibit to the registration statement, and you should
read the Indenture for provisions that may be important to you.
The Indenture will be qualified under the Trust Indenture Act of
1939, as amended. You should refer to the Trust Indenture Act of
1939, as amended, for provisions that apply to the Debt
Securities. Whenever particular provisions or defined terms in
the Indenture are referred to under this "Description of Debt
Securities", such provisions or defined terms are incorporated by
reference herein.
The Debt Securities will rank equally with all of Texas
Utilities' other senior and unsubordinated debt.
Because Texas Utilities is a holding company that conducts
all of its operations through subsidiaries, holders of Debt
Securities will generally have a position junior to claims of
creditors and preferred stockholders of the subsidiaries of Texas
Utilities. Both ENSERCH Corporation and Texas Utilities Electric
Company have outstanding shares of preferred stock.
A prospectus supplement and an officer's certificate
relating to any series of Debt Securities being offered will
include specific terms relating to that offering. These terms
will include any of the following terms that apply to that
series:
. The title of the Debt Securities;
. The total principal amount of the Debt Securities;
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. The dates on which the principal of the Debt Securities
will be payable and how it will be paid;
. The interest rate or rates which the Debt Securities
will bear, or how such rate or rates will be
determined, the interest payment dates for the Debt
Securities and the regular record dates for interest
payments;
. Any right to extend the interest payment periods for the
Debt Securities;
. The percentage, if less than 100%, of the principal
amount of the Debt Securities that will be payable if
the maturity of the Debt Securities is accelerated;
. Any date or dates on which the Debt Securities may be
redeemed at the option of Texas Utilities and any
restrictions on such redemptions;
. Any sinking fund or other provisions that would
obligate Texas Utilities to repurchase or otherwise
redeem the Debt Securities;
. Any changes or additions to the Events of Default under
the Indenture or changes or additions to the covenants
of Texas Utilities under the Indenture;
. If the Debt Securities will be issued in denominations other
than $1,000;
. If payments on the Debt Securities may be made in a
currency or currencies other than United States
dollars;
. Any rights or duties of another person to assume the
obligations of Texas Utilities with respect to the Debt
Securities;
. Any collateral, security, assurance or guarantee for the
Debt Securities; and
. Any other terms of the Debt Securities not inconsistent
with the terms of the Indenture.
The Indenture does not limit the principal amount of Debt
Securities that may be issued. The Indenture allows Debt
Securities to be issued up to the principal amount that may be
authorized by Texas Utilities.
Debt Securities may be sold at a discount below their
principal amount. United States federal income tax
considerations applicable to Debt Securities sold at an original
issue discount may be described in the prospectus supplement. In
addition, certain United States federal income tax or other
considerations applicable to any Debt Securities which are
denominated or payable in a currency or currency unit other than
United States dollars may be described in the prospectus
supplement.
Except as may otherwise be described in the applicable
prospectus supplement, the covenants contained in the Indenture
will not afford holders of Debt Securities protection in the
event of a highly-leveraged transaction involving Texas
Utilities.
PAYMENT AND PAYING AGENTS
Except as may be provided in the prospectus supplement,
interest, if any, on each Debt Security payable on each Interest
Payment Date will be paid to the person in whose name such Debt
Security is registered as of the close of business on the regular
record date for the Interest Payment Date. However, interest
payable at maturity will be paid to the person to whom the
principal is paid. If there has been a default in the payment of
interest on any Debt Security, the defaulted interest may be paid
to the holder of such Debt Security as of the close of business
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on a date between 10 and 15 days prior to the date proposed by
Texas Utilities for payment of such defaulted interest or in any
other manner permitted by any securities exchange on which such
Debt Security may be listed, if the Trustee finds it workable.
Unless otherwise specified in the prospectus supplement,
principal, premium, if any, and interest on the Debt Securities
at maturity will be payable upon presentation of the Debt
Securities at the corporate trust office of The Bank of New York,
in The City of New York, as Paying Agent for Texas Utilities.
Texas Utilities may change the place of payment on the Debt
Securities, may appoint one or more additional Paying Agents
(including Texas Utilities) and may remove any Paying Agent, all
at the discretion of Texas Utilities.
REGISTRATION AND TRANSFER
Unless otherwise specified in the prospectus supplement, the
transfer of Debt Securities may be registered, and Debt
Securities may be exchanged for other Debt Securities of the same
series or tranche, of authorized denominations and with the same
terms and principal amount, at the corporate trust office of The
Bank of New York in The City of New York. Texas Utilities may
change the place for registration of transfer and exchange of the
Debt Securities and may designate additional places for such
registration and exchange. Unless otherwise provided in the
prospectus supplement, no service charge will be made for any
transfer or exchange of the Debt Securities. However, Texas
Utilities may require payment to cover any tax or other
governmental charge that may be imposed. Texas Utilities will
not be required to execute or to provide for the registration of
transfer of, or the exchange of, (a) any Debt Security during a
period of 15 days prior to giving any notice of redemption or (b)
any Debt Security selected for redemption except the unredeemed
portion of any Debt Security being redeemed in part.
DEFEASANCE
Texas Utilities will be discharged from its obligations on
the Debt Securities of a particular series if it deposits with
the Trustee sufficient cash or government securities to pay the
principal, interest, any premium and any other sums when due on
the stated maturity date or a redemption date of such series of
Debt Securities.
LIMITATION ON LIENS
The Indenture provides that, except as otherwise specified
with respect to a particular series of Debt Securities, Texas
Utilities will not pledge, mortgage, hypothecate or grant a
security interest in, or permit any mortgage, pledge, security
interest or other lien upon, any capital stock of any Subsidiary,
as defined below, now or hereafter owned by Texas Utilities to
secure any Indebtedness, as defined below, without also securing
the outstanding Debt Securities, and all other Indebtedness
entitled to be so secured, equally and ratably with the
Indebtedness and any other indebtedness similarly entitled to be
equally and ratably secured.
This restriction does not apply to, or prevent the creation
or any extension, renewal or refunding of:
(1) any mortgage, pledge, security interest, lien or
encumbrance upon any capital stock created at the time
it is acquired by Texas Utilities or within one year
after that time to secure the purchase price for the
capital stock;
(2) any mortgage, pledge, security interest, lien or
encumbrance upon any capital stock existing at the time
it is acquired by Texas Utilities, whether or not the
secured obligations are assumed by Texas Utilities; or
(3) any judgment, levy, execution, attachment or other
similar lien arising in connection with court
proceedings, provided that either:
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(a) the execution or enforcement of the lien is
effectively stayed within 30 days after entry of
the corresponding judgment, or the corresponding
judgment has been discharged within such 30 day
period, and the claims secured thereby are being
contested in good faith by appropriate proceedings
timely commenced and diligently prosecuted;
(b) the payment of each lien is covered in full by
insurance and the insurance company has not denied
or contested coverage thereof; or
(c) so long as each such lien is adequately bonded,
any appropriate legal proceedings that may have
been duly initiated for the review of the
corresponding judgment, decree or order shall not
have been fully terminated or the period within
which these proceedings may be initiated shall not
have expired.
For purposes of the restriction described in the preceding
paragraph, "Indebtedness" means:
(1) all indebtedness created or assumed by Texas Utilities
for the repayment of money borrowed;
(2) all indebtedness for money borrowed secured by a lien
upon property owned by Texas Utilities and upon which
indebtedness for money borrowed Texas Utilities
customarily pays interest, although Texas Utilities has
not assumed or become liable for the payment of such
indebtedness for money borrowed; and
(3) all indebtedness of others for money borrowed which is
guaranteed as to payment of principal by Texas
Utilities or in effect guaranteed by Texas Utilities
through a contingent agreement to purchase such
indebtedness for money borrowed, but excluding from
this definition any other contingent obligation of
Texas Utilities in respect of indebtedness for money
borrowed or other obligations incurred by others.
"Subsidiary" means a corporation in which more than 50% of
the outstanding voting stock is owned, directly or indirectly, by
Texas Utilities and/or by one or more other Subsidiaries. For
the purposes of this definition, "voting stock" means stock that
ordinarily has voting power for the election of directors,
whether at all times or only so long as no senior class of stock
has such voting power by reason of any contingency.
Notwithstanding the foregoing, except as otherwise specified
in the officer's certificate setting out the terms of a
particular series of Debt Securities, Texas Utilities may,
without securing the Debt Securities, pledge, mortgage,
hypothecate or grant a security interest in, or permit any
mortgage, pledge, security interest or other lien, in addition to
liens expressly permitted as described in the preceding
paragraphs, upon, capital stock of any Subsidiary now or
hereafter owned by Texas Utilities to secure any Indebtedness,
which would otherwise be subject to the foregoing restriction, in
an aggregate amount which, together with all other such
Indebtedness, does not exceed 5% of Consolidated Capitalization.
For this purpose, "Consolidated Capitalization" means the sum of:
(1) Consolidated Shareholders' Equity;
(2) Consolidated Indebtedness for money borrowed, exclusive
of any that is due and payable within one year of the
date the sum is determined; and, without duplication
(3) any preference or preferred stock of Texas Utilities or
any Consolidated Subsidiary which is subject to
mandatory redemption or sinking fund provisions.
The term "Consolidated Shareholders' Equity" as used above
means the total Assets of Texas Utilities and its Consolidated
Subsidiaries less all liabilities of Texas Utilities and its
Consolidated Subsidiaries that would, in accordance with
generally accepted accounting principles in the United States, be
classified on a balance sheet as liabilities, including without
limitation:
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(1) indebtedness secured by property of Texas Utilities or
any of its Consolidated Subsidiaries whether or not
Texas Utilities or such Consolidated Subsidiary is
liable for the payment thereof unless, in the case that
Texas Utilities or such Consolidated Subsidiary is not
so liable, such property has not been included among
the Assets of Texas Utilities or such Consolidated
Subsidiary on such balance sheet;
(2) deferred liabilities; and
(3) indebtedness of Texas Utilities or any of its
Consolidated Subsidiaries that is expressly
subordinated in right and priority of payment to other
liabilities of Texas Utilities or such Consolidated
Subsidiary.
As used in this definition, "liabilities" includes
preference or preferred stock of Texas Utilities or any
Consolidated Subsidiary only to the extent of any such preference
or preferred stock that is subject to mandatory redemption or
sinking fund provisions.
The term "Consolidated Subsidiary", as used above, means at
any date any Subsidiary the financial statements of which under
generally accepted accounting principles would be consolidated
with those of Texas Utilities in its consolidated financial
statements as of such date.
The "Assets" of any person means the whole or any part of
its business, property, assets, cash and receivables. The term
"Consolidated Indebtedness" means total indebtedness as shown on
the consolidated balance sheet of Texas Utilities and its
Consolidated Subsidiaries.
As of September 30, 1998, the Consolidated Capitalization of
Texas Utilities was approximately $24.8 billion.
ASSIGNMENT OF OBLIGATIONS
Texas Utilities may assign its obligations under the Debt
Securities to a wholly-owned subsidiary, provided that no Event
of Default, or event which with the passage of time or the giving
of required notice, or both, would become an Event of Default,
has occurred and is continuing. This subsidiary must assume in
writing Texas Utilities' obligations on the Debt Securities and
under the Indenture. Texas Utilities must fully and
unconditionally guarantee payment of the obligations of the
assuming subsidiary under the Debt Securities and the Indenture.
If such an assignment is made, Texas Utilities will be
released and discharged from all its other obligations under the
Debt Securities and Indenture.
CONSOLIDATION, MERGER, AND SALE OF ASSETS
Under the terms of the Indenture, Texas Utilities may not
consolidate with or merge into any other entity or convey,
transfer or lease its properties and assets substantially as an
entirety to any entity, unless:
. the surviving or successor entity is organized and
validly existing under the laws of any domestic
jurisdiction and it expressly assumes Texas Utilities'
obligations on all Debt Securities and under the
Indenture;
. immediately after giving effect to the transaction, no
Event of Default and event which, after notice or lapse
of time or both, would become an Event of Default,
shall have occurred and be continuing; and
. Texas Utilities shall have delivered to the Trustee an
officer's certificate and an opinion of counsel as
provided in the Indenture.
The terms of the Indenture do not restrict Texas Utilities
in a merger in which Texas Utilities is the surviving entity.
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EVENTS OF DEFAULT
"Event of Default" when used in the Indenture with respect
to any series of Debt Securities, means any of the following:
. failure to pay interest on any Debt Security for
30 days after it is due;
. failure to pay the principal of or any premium on
any Debt Security when due;
. failure to perform any other covenant in the
Indenture, other than a covenant that does not
relate to that series of Debt Securities, that
continues for 90 days after Texas Utilities
receives written notice from the Trustee, or Texas
Utilities and the Trustee receive a written notice
from 33% of the holders of the Debt Securities of
such series;
. certain events in bankruptcy, insolvency or
reorganization of Texas Utilities; or
. any other event of default included in any
supplemental indenture or officer's certificate
for a specific series of Debt Securities.
An Event of Default for a particular series of Debt
Securities does not necessarily constitute an Event of Default
for any other series of Debt Securities issued under the
Indenture. The Trustee may withhold notice to the holders of
Debt Securities of any default, except default in the payment of
principal or interest, if it considers such withholding of notice
to be in the interests of the holders.
REMEDIES
If an Event of Default with respect to fewer than all the
series of Debt Securities occurs and continues, the Trustee or
the holders of at least 33% in aggregate principal amount of all
affected Debt Securities may declare the entire principal amount
of all the Debt Securities of such series, together with accrued
interest, to be due and payable immediately. However, if the
Event of Default is applicable to all outstanding Debt Securities
under the Indenture, only the Trustee or holders of at least 33%
in aggregate principal amount of all outstanding Debt Securities
of all series, voting as one class, and not the holders of any
one series, may make such a declaration of acceleration.
At any time after a declaration of acceleration with respect
to the Debt Securities of any series has been made and before a
judgment or decree for payment of the money due has been
obtained, the Event of Default giving rise to such declaration of
acceleration will be considered waived, and such declaration and
its consequences will be considered rescinded and annulled, if:
. Texas Utilities has paid or deposited with the Trustee
a sum sufficient to pay:
(1) all overdue interest on all Debt Securities of the
series;
(2) the principal of and premium, if any, on any Debt
Securities of the series which have otherwise
become due and interest that is currently due;
(3) interest on overdue interest; and
(4) all amounts due to the Trustee under the
Indenture.
. any other Event of Default with respect to the Debt
Securities of that series has been cured or waived as
provided in the Indenture.
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There is no automatic acceleration, even in the event of
bankruptcy, insolvency or reorganization of Texas Utilities.
Other than its duties in case of an Event of Default, the
Trustee is not obligated to exercise any of its rights or powers
under the Indenture at the request, order or direction of any of
the holders, unless the holders offer the Trustee a reasonable
indemnity. If they provide this reasonable indemnity, the
holders of a majority in principal amount of any series of Debt
Securities will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to
the Trustee, or exercising any power conferred upon the Trustee.
However, if the Event of Default relates to more than one series,
only the holders of a majority in aggregate principal amount of
all affected series will have the right to give this direction.
The Trustee is not obligated to comply with directions that
conflict with law or other provisions of the Indenture.
No holder of Debt Securities of any series will have any
right to institute any proceeding under the Indenture, or any
remedy under the Indenture, unless:
. the holder has previously given to the Trustee written
notice of a continuing Event of Default;
. the holders of a majority in aggregate principal amount
of the outstanding Debt Securities of all series in
respect of which an Event of Default shall have
occurred and be continuing have made a written request
to the Trustee, and have offered reasonable indemnity
to the Trustee to institute proceedings; and
. the Trustee has failed to institute any proceeding for
60 days after notice.
However, such limitations do not apply to a suit by a holder of a
Debt Security for payment of the principal, premium, if any, or
interest on a Debt Security on or after the applicable due date.
Texas Utilities will provide to the Trustee an annual
statement by an appropriate officer as to Texas Utilities'
compliance with all conditions and covenants under the Indenture.
MODIFICATION AND WAIVER
Without the consent of any holder of Debt Securities, Texas
Utilities and the Trustee may enter into one or more supplemental
indentures for any of the following purposes:
. to evidence the assumption by any permitted
successor of the covenants of Texas Utilities
in the Indenture and in the Debt Securities;
. to add additional covenants of Texas
Utilities or to surrender any right or power
of Texas Utilities under the Indenture;
. to add additional Events of Default;
. to change or eliminate or add any provision
to the Indenture; provided, however, if the
change will adversely affect the interests of
the holders of Debt Securities of any series
in any material respect, such change,
elimination or addition will become effective
only:
(1) when the consent of the holders of
Debt Securities of such series has
been obtained in accordance with
the Indenture; or
(2) when no Debt Securities of the
affected series remain outstanding
under the Indenture;
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. to provide collateral security for all but
not part of the Debt Securities;
. to establish the form or terms of Debt
Securities of any other series as permitted
by the Indenture;
. to provide for the authentication and
delivery of bearer securities and coupons
appertaining thereto;
. to evidence and provide for the acceptance of
appointment of a successor trustee;
. to provide for the procedures required for
use of a noncertificated system of
registration for the Debt Securities of all
or any series;
. to change any place where principal, premium,
if any, and interest shall be payable, Debt
Securities may be surrendered for
registration of transfer or exchange and
notices to Texas Utilities may be served; or
. to cure any ambiguity or inconsistency or to make any
other provisions with respect to matters and questions
arising under the Indenture; provided that such action
shall not adversely affect the interests of the holders
of Debt Securities of any series in any material
respect.
The holders of at least a majority in aggregate principal
amount of the Debt Securities of all series then outstanding may
waive compliance by Texas Utilities with certain restrictive
provisions of the Indenture. The holders of not less than a
majority in principal amount of the outstanding Debt Securities
of any series may waive any past default under the Indenture with
respect to that series, except a default in the payment of
principal, premium, if any, or interest and certain covenants and
provisions of the Indenture that cannot be modified or be amended
without the consent of the holder of each outstanding Debt
Security of the series affected.
If the Trust Indenture Act of 1939, as amended, is amended
after the date of the Indenture in such a way as to require
changes to the Indenture, the Indenture will be deemed to be
amended so as to conform to such amendment of Trust Indenture Act
of 1939, as amended. Texas Utilities and the Trustee may,
without the consent of any holders, enter into one or more
supplemental indentures to evidence such an amendment.
The consent of the holders of a majority in aggregate
principal amount of the Debt Securities of all series then
outstanding is required for all other modifications to the
Indenture. However, if less than all of the series of Debt
Securities outstanding are directly affected by a proposed
supplemental indenture, then the consent only of the holders of a
majority in aggregate principal amount of all series that are
directly affected will be required. No such amendment or
modification may:
. change the stated maturity of the principal
of, or any installment of principal of or
interest on, any Debt Security, or reduce the
principal amount of any Debt Security or its
rate of interest or change the method of
calculating such interest rate or reduce any
premium payable upon redemption, or change
the currency in which payments are made, or
impair the right to institute suit for the
enforcement of any payment on or after the
stated maturity of any Debt Security, without
the consent of the holder;
. reduce the percentage in principal amount of
the outstanding Debt Securities of any series
whose consent is required for any
supplemental indenture or any waiver of
compliance with a provision of the Indenture
or any default thereunder and its
consequences, or reduce the requirements for
quorum or voting, without the consent of all
the holders of the series; or
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. modify certain of the provisions of the
Indenture relating to supplemental
indentures, waivers of certain covenants and
waivers of past defaults with respect to the
Debt Securities of any series, without the
consent of the holder of each outstanding
Debt Security affected thereby.
A supplemental indenture which changes the Indenture solely
for the benefit of one or more particular series of Debt
Securities, or modifies the rights of the holders of Debt
Securities of one or more series, will not affect the rights
under the Indenture of the holders of the Debt Securities of any
other series.
The Indenture provides that Debt Securities owned by Texas
Utilities or anyone else required to make payment on the Debt
Securities shall be disregarded and considered not to be
outstanding in determining whether the required holders have
given a request or consent.
Texas Utilities may fix in advance a record date to
determine the required number of holders entitled to give any
request, demand, authorization, direction, notice, consent,
waiver or other such act of the holders, but Texas Utilities
shall have no obligation to do so. If such a record date is
fixed, such request, demand, authorization, direction, notice,
consent, waiver or other act of the holders may be given before
or after such record date, but only the holders of record at the
close of business on that record date will be considered holders
for the purposes of determining whether holders of the required
percentage of the outstanding Debt Securities have authorized or
agreed or consented to such request, demand, authorization,
direction, notice, consent, waiver or other act of the holders.
For that purpose, the outstanding Debt Securities shall be
computed as of the record date. Any request, demand,
authorization, direction, notice, consent, election, waiver or
other act of a holder shall bind every future holder of the same
Debt Securities and the holder of every Debt Security issued upon
the registration of transfer of or in exchange of these Debt
Securities. A transferee will be bound by acts of the Trustee or
Texas Utilities taken in reliance thereon, whether or not
notation of such action is made upon such Debt Security.
RESIGNATION OF A TRUSTEE
A Trustee may resign at any time by giving written notice to
Texas Utilities or may be removed at any time by act of the
holders of a majority in principal amount of all series of Debt
Securities then outstanding delivered to the Trustee and Texas
Utilities. No resignation or removal of a Trustee and no
appointment of a successor trustee will effective until the
acceptance of appointment by a successor trustee. So long as no
Event of Default or event which, after notice or lapse of time,
or both, would become an Event of Default has occurred and is
continuing and except with respect to a Trustee appointed by act
of the holders, if Texas Utilities has delivered to the Trustee a
resolution of its Board of Directors appointing a successor
trustee and such successor has accepted such appointment in
accordance with the terms of the respective Indenture, the
Trustee will be deemed to have resigned and the successor will be
deemed to have been appointed as trustee in accordance with such
Indenture.
NOTICES
Notices to holders of Debt Securities will be given by mail
to the addresses of such holders as they may appear in the
security register therefor.
TITLE
Texas Utilities, the Trustee, and any agent of Texas
Utilities or the Trustee, may treat the person in whose name Debt
Securities are registered as the absolute owner thereof, whether
or not such Debt Securities may be overdue, for the purpose of
making payments and for all other purposes irrespective of notice
to the contrary.
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GOVERNING LAW
Each Indenture and the Debt Securities will be governed by,
and construed in accordance with, the laws of the State of New
York.
REGARDING THE TRUSTEE
The Trustee will be The Bank of New York. In addition to
acting as Trustee, The Bank of New York acts, and may act, as
trustee under various indentures and trusts of Texas Utilities
and its affiliates.
DESCRIPTION OF TXU CAPITAL'S PREFERRED TRUST SECURITIES AND
COMMON TRUST SECURITIES
TXU Capital will issue Preferred Trust Securities and Common
Trust Securities under a Trust Agreement. The Preferred Trust
Securities will represent preferred undivided beneficial
interests in the assets of TXU Capital and will entitle holders
thereof to a preference over the Common Trust Securities with
respect to distributions and amounts payable on redemption or
liquidation. Selected provisions of the Trust Agreement are
summarized below. This summary is not complete. The form of
Trust Agreement was filed as an exhibit to the registration
statement and you should read the Trust Agreement for provisions
that may be important to you. The Trust Agreement will be
qualified as an indenture under the Trust Indenture Act of 1939,
as amended. You should also refer to the Trust Indenture Act of
1939, as amended, for provisions that apply to the Preferred
Trust Securities. Wherever particular defined terms of the Trust
Agreement are referred to, such defined terms are incorporated
herein by reference.
The Preferred Trust Securities and Common Trust Securities
issued by TXU Capital will be substantially the same except that,
if TXU Capital fails to make required payments, the rights of the
holders of the Common Trust Securities to payment of
distributions and upon liquidation or redemption will be
subordinated to the rights of the holders of the Preferred Trust
Securities. Holders of the Common Trust Securities and the
Preferred Trust Securities may both vote to appoint, remove or
replace any of trustees of TXU Capital. All of the Common Trust
Securities of TXU Capital will be owned by Texas Utilities.
Texas Utilities will fully and unconditionally guarantee
payments due on the Preferred Trust Securities through a
combination of the following:
. Texas Utilities' obligations under the Junior
Subordinated Debentures;
. The rights of holders of Preferred Trust Securities to
enforce those obligations;
. Texas Utilities' agreement to pay the expenses of TXU
Capital; or
. Texas Utilities' guarantee of payments due on the
Preferred Trust Securities to the extent of TXU
Capital's assets.
TXU Capital will use the proceeds from the sale of the
Preferred Trust Securities and Common Trust Securities to
purchase Junior Subordinated Debentures from Texas Utilities.
The Junior Subordinated Debentures will be held in trust for the
benefit of holders of the Preferred Trust Securities and Common
Trust Securities.
A prospectus supplement relating to the Preferred Trust
Securities will include specific terms of those securities and of
the Junior Subordinated Debentures. For a description of some
specific terms that will affect both the Preferred Trust
Securities and the Junior Subordinated Debentures and your rights
under each see "Description of the Junior Subordinated Debentures"
below.
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DISTRIBUTIONS
The only income of TXU Capital available for distribution to
the holders of Preferred Trust Securities will be payments on the
Junior Subordinated Debentures. If Texas Utilities does not make
interest payments on the Junior Subordinated Debentures, TXU
Capital will not have funds available to pay distributions on
Preferred Trust Securities. The payment of distributions, if and
to the extent TXU Capital has sufficient funds available for the
payment of such distributions, is guaranteed on a limited basis
by Texas Utilities.
So long as there is no default in the payment of interest on
the Junior Subordinated Debentures, Texas Utilities may extend
the interest payment period from time to time on the Junior
Subordinated Debentures for one or more periods. As a
consequence, distributions on Preferred Trust Securities would be
deferred during any such period. Interest would, however,
continue to accrue. If Texas Utilities extends the interest
period or is in default under a Guarantee or with respect to
payments on the Junior Subordinated Debentures, Texas Utilities
may not:
. declare or pay any dividend or distribution on its
capital stock, other than dividends paid in shares of
common stock of Texas Utilities;
. redeem, purchase, acquire or make a liquidation payment
with respect to, any of its capital stock;
. redeem any indebtedness that is equal in right of
payment with the Junior Subordinated Debentures; or
. make any guarantee payments with respect to any of the
above.
Any extension period with respect to payment of interest on
the Junior Subordinated Debentures, or any extended interest
payment period in respect of other securities issued under the
Subordinated Indenture or on any similar securities, will apply
to all securities of the same type. Such extensions will also
apply to distributions on Preferred Trust Securities and Common
Securities and all other securities with terms substantially the
same as Preferred Trust Securities and Common Securities. Before
an extension period ends, Texas Utilities may further extend the
interest payment period. No extension period as further extended
may exceed 20 consecutive quarters. After any extension period
and the payment of all amounts then due, Texas Utilities may
select a new extended interest payment period. No interest
period may be extended beyond the maturity of the Junior
Subordinated Debentures.
REDEMPTION OF PREFERRED TRUST SECURITIES AND COMMON
TRUST SECURITIES
Whenever Junior Subordinated Debentures are repaid, whether
at maturity or earlier redemption, the proceeds shall be applied
to redeem a like amount of Preferred Trust Securities and Common
Trust Securities. Holders of Junior Subordinated Debentures will
be given not less than 30 nor more than 60 days' notice of any
redemption.
REDEMPTION PROCEDURES
Preferred Trust Securities shall be redeemed at the
redemption price plus accrued and unpaid distributions with the
proceeds from the contemporaneous redemption of Junior
Subordinated Debentures. Redemptions of the Preferred Trust
Securities shall be made on a redemption date only if TXU Capital
has funds available for the payment of the redemption price plus
accrued and unpaid distributions.
Notice of redemption of Preferred Trust Securities will be
irrevocable. On or before the redemption date, TXU Capital will
irrevocably deposit with the paying agent for Preferred Trust
Securities sufficient funds and will give the paying agent
irrevocable instructions and authority to pay the redemption
price plus accrued and unpaid distributions to the holders upon
surrender of their Preferred Trust Securities. Distributions
payable on or before a redemption date shall be payable to the
holders on the record date for the distribution payment. If
notice is given and funds are deposited as required, then on the
redemption date all rights of holders of the Preferred Trust
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Securities called for redemption will cease, except the right of
the holders to receive the redemption price plus accrued and
unpaid distributions, and the Preferred Trust Securities will
cease to be outstanding. No interest will accrue on amounts
payable on the redemption date. In the event that any date fixed
for redemption of Preferred Trust Securities is not a business
day, then payment will be made on the next business day. No
interest will be payable because of any such delay. If payment
of Preferred Trust Securities called for redemption is improperly
withheld or refused and not paid either by TXU Capital or by
Texas Utilities pursuant to the Guarantee, distributions on such
Preferred Trust Securities will continue to accrue to the date of
payment. That date will be considered the date fixed for
redemption for purposes of calculating the redemption price plus
accrued and unpaid distributions.
Subject to applicable law, including United States federal
securities law, Texas Utilities may purchase outstanding
Preferred Trust Securities by tender, in the open market or by
private agreement.
If Preferred Trust Securities are partially redeemed on a
redemption date, a corresponding percentage of the Common Trust
Securities will be redeemed. The particular Preferred Trust
Securities to be redeemed shall be selected not more than 60 days
prior to the redemption date by the Property Trustee by such
method as the Property Trustee shall deem fair, taking into
account the denominations in which they were issued. The
Property Trustee shall promptly notify the Preferred Trust
Security registrar in writing of the Preferred Trust Securities
selected for redemption and, where applicable, the partial amount
to be redeemed.
SUBORDINATION OF COMMON TRUST SECURITIES
Payment of distributions on, and the redemption price, plus
accrued and unpaid distributions, of, the Preferred Trust
Securities and Common Trust Securities shall be made pro rata
based on the liquidation preference amount. However, if on any
distribution payment date or redemption date an event of default
under the Trust Agreement has occurred and is continuing, no
payment on any Common Trust Security shall be made until all
payments due on the Preferred Trust Securities have been made.
In that case, funds available to the Property Trustee shall first
be applied to the payment in full of all distributions on, or the
redemption price plus accrued and unpaid distributions, of,
Preferred Trust Securities then due and payable.
If an event of default under the Trust Agreement results
from an event of default under the Subordinated Indenture, the
holder of Common Trust Securities cannot take action with respect
to the Trust Agreement default until the effect of all such
defaults with respect to Preferred Trust Securities has been
cured, waived or otherwise eliminated. Until the event of
default under the Trust Agreement with respect to Preferred Trust
Securities has been cured, waived or otherwise eliminated, the
Property Trustee shall act solely on behalf of the holders of
Preferred Trust Securities and not the holders of the Common
Trust Securities. Only holders of Preferred Trust Securities
will have the right to direct the Property Trustee to act on
their behalf.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
TXU Capital shall dissolve and shall be liquidated by the
Property Trustee on the first to occur of:
. the expiration of the term of TXU Capital;
. the bankruptcy, dissolution or liquidation of Texas
Utilities;
. redemption of all of the Preferred Trust Securities;
. the entry of an order for dissolution of TXU Capital by
a court of competent jurisdiction; and
. at any time, at the election of Texas Utilities.
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If an early dissolution occurs because of bankruptcy,
dissolution or liquidation of Texas Utilities, TXU Capital shall
be liquidated by the Property Trustee as expeditiously as the
Property Trustee determines to be appropriate. The Property
Trustee will provide for the satisfaction of liabilities of
creditors, if any, and distribute to each holder of the Preferred
Trust Securities and Common Trust Securities a proportionate
amount of Junior Subordinated Debentures. If a distribution of
Junior Subordinated Debentures is determined by the Property
Trustee not to be practical, holders will be entitled to receive,
out of the assets of TXU Capital after adequate provision for the
satisfaction of liabilities of creditors, if any, an amount equal
to the aggregate liquidation preference of the Preferred Trust
Securities plus accrued and unpaid distributions thereon to the
date of payment. If this liquidation distribution can be paid
only in part because TXU Capital has insufficient assets
available to pay in full the aggregate liquidation distribution,
then the amounts payable directly by TXU Capital on the Preferred
Trust Securities shall be paid on a pro rata basis. Texas
Utilities, as holder of the Common Trust Securities, will be
entitled to receive distributions upon any such dissolution pro
rata with the holders of the Preferred Trust Securities, except
that if an event of default has occurred and is continuing under
the Trust Agreement, the Preferred Trust Securities shall have a
preference over the Common Trust Securities.
EVENTS OF DEFAULT; NOTICE
Any one of the following events will be an event of default
under the Trust Agreement whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body:
. the occurrence of an Event of Default as described in
the Subordinated Indenture; or
. default by TXU Capital in the payment of any
distribution when it becomes due and payable, and
continuation of such default for a period of 30 days;
or
. default by TXU Capital in the payment of any redemption
price, plus accrued and unpaid distributions, of any
Preferred Trust Security or Common Trust Security when
it becomes due and payable; or
. default in the performance, or breach, in any material
respect, of any covenant or warranty of the Trustees in
the Trust Agreement which is not dealt with above, and
the continuation of such default or breach for a period
of 60 days after notice to TXU Capital by the holders
of Preferred Trust Securities having at least 10% of
the total liquidation preference amount of the
outstanding Securities; or
. the occurrence of certain events of bankruptcy or
insolvency with respect to TXU Capital.
Within ninety business days after the occurrence of any
event of default, the Property Trustee shall transmit to the
holders of Preferred Trust Securities and Common Trust Securities
and Texas Utilities notice of any such default actually known to
the Property Trustee, unless such default shall have been cured
or waived.
A holder of Preferred Trust Securities may directly
institute a proceeding to enforce payment when due directly to
the holder of the Preferred Trust Securities of the principal of
or interest on Junior Subordinated Debentures having a principal
amount equal to the aggregate liquidation preference amount of
the holder's Preferred Trust Securities. The holders of
Preferred Trust Securities have no other rights to exercise
directly any other remedies available to the holder of the Junior
Subordinated Debentures unless the Trustees under the Trust
Agreement fail to do so.
Unless an Event of Default under the Subordinated Debenture
has occurred and is continuing, the holder of the Common Trust
Securities may remove the Property Trustee at any time. If an event
of default has occurred and is continuing, the holders of a majority
of the total liquidation preference amount of the outstanding
Preferred Trust Securities may remove the Property Trustee. Any
resignation or removal of the Property Trustee will take effect only
on the acceptance of appointment by the successor Property Trustee.
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If a default has occurred under the Subordinated Indenture
but has not become an event of default solely because of the
requirement that time lapse or notice be given, the Preferred
Trust Securities shall have a preference over the Common Trust
Securities upon dissolution of TXU Capital.
MERGER OR CONSOLIDATION OF THE PROPERTY TRUSTEE OR THE
DELAWARE TRUSTEE
If the Property Trustee or the Delaware Trustee merge,
consolidate with another entity, or if any entity succeeds to all
or substantially all the corporate trust business of the Property
Trustee or the Delaware Trustee, the successor or surviving
company shall be the successor to the Property Trustee or the
Delaware Trustee under the Trust Agreement, so long as it is
otherwise qualified and eligible.
VOTING RIGHTS
Except with respect to amendments to the Trust Agreement and
amendments and assignment of the Guarantee, the holders of
Preferred Trust Securities will have no voting rights not
otherwise required by law or the Trust Agreement.
While Junior Subordinated Debentures are held by the
Property Trustee, the Property Trustee shall not:
. direct the time, method and place to conduct any
proceeding for any remedy available to the Debenture
Trustee, or to execute any trust or power conferred on
the Debenture Trustee with respect to the Junior
Subordinated Debentures;
. waive any past default under the Subordinated
Indenture;
. exercise any right to rescind or annul a declaration
that the principal of all the Junior Subordinated
Debentures shall be due and payable; or
. consent to any amendment, modification or termination
of the Subordinated Indenture or the Junior
Subordinated Debentures, where such consent shall be
required;
without, in each case, obtaining the prior approval of the
holders of Preferred Trust Securities having at least 66 2/3% of
the liquidation preference amount of the outstanding Preferred
Trust Securities. Where a consent of each holder of Junior
Subordinated Debentures affected is required, no consent shall be
given by the Property Trustee without the prior consent of each
holder of the Preferred Trust Securities. The Property Trustee
shall not revoke any action previously authorized or approved by
a vote of the holders of Preferred Trust Securities. If the
Property Trustee fails to enforce its rights under the Junior
Subordinated Debentures or the Trust Agreement, to the fullest
extent permitted by law, a holder of the Preferred Trust
Securities may institute a legal proceeding directly against
Texas Utilities to enforce the Property Trustee's rights under
the Junior Subordinated Debentures or the Trust Agreement without
first instituting any legal proceeding against the Property
Trustee or any one else. The Property Trustee shall notify all
holders of Preferred Trust Securities of any notice of default
received from the Debenture Trustee. The Property Trustee shall
not take any action approved by the consent of the holders
without an opinion of counsel experienced in such matters to the
effect that TXU Capital will not be classified as an association
taxable as a corporation for United States federal income tax
purposes on account of such action.
Holders of Preferred Trust Securities may give any required
approval at a meeting convened for such purpose or by written
consent. The Administrative Trustees will give notice of any
meeting at which holders of Preferred Trust Securities are
entitled to vote, or of any matter upon which action by written
consent of such holders is to be taken.
No vote or consent of the holders of Preferred Trust
Securities will be required for TXU Capital to redeem and cancel
Preferred Trust Securities in accordance with the Trust
Agreement.
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Notwithstanding that holders of Preferred Trust Securities
are entitled to vote or consent under any of the circumstances
described above, any of Preferred Trust Securities that are owned
by Texas Utilities, any Trustee under the Trust Agreement or any
affiliate of Texas Utilities, shall be treated as if they were
not outstanding, for purposes of such vote or consent.
Holders of Preferred Trust Securities will have no rights to
appoint or remove the Administrative Trustees of TXU Capital, who
may be appointed, removed or replaced solely by Texas Utilities
as the holder of the Common Trust Securities.
AMENDMENTS
The Trust Agreement may be amended from time to time by TXU
Capital and Texas Utilities, without the consent of any holders
of Preferred Trust Securities and Common Trust Securities:
. to cure any ambiguity, correct inconsistent provisions,
make any other provisions with respect to matters or
questions arising under the Trust Agreement that do not
conflict with the other provisions of the Trust
Agreement or any amendments of the Trust Agreement; or
. to modify, eliminate or add to any provisions of the
Trust Agreement to such extent as shall be necessary to
ensure that TXU Capital will not be classified for
United States federal income tax purposes as an
association taxable as a corporation at any time that
any Preferred Trust Securities and Common Trust
Securities are outstanding or to ensure TXU Capital's
exemption from the status of an "investment company"
under the Investment Company Act of 1940, as amended.
No such amendment may materially adversely affect interests of
any holder of Preferred Trust Securities and Common Trust
Securities. Any such amendments of the Trust Agreement shall
become effective when notice of the amendment is given to the
holders of Preferred Trust Securities and Common Trust
Securities.
Except as provided below, any provision of the Trust
Agreement may be amended by the Trustees and Texas Utilities
with:
. the consent of holders of Preferred Trust Securities
and Common Trust Securities representing not less than
a majority in aggregate liquidation preference amount
of such Preferred Trust Securities and Common Trust
Securities then outstanding; and
. receipt by the Trustees of an opinion of counsel to the
effect that such amendment or the exercise of any power
granted to the Trustees in accordance with such
amendment will not cause TXU Capital to be classified
for federal income tax purposes as an association
taxable as a corporation or affect TXU Capital's
exemption from status of an "investment company" under
the Investment Company Act of 1940, as amended.
Each holder of Preferred Trust Securities or Common Trust
Securities must have consented to any amendment to the Trust
Agreement that:
. changes the amount or timing of any distribution with
respect to Preferred Trust Securities or Common Trust
Securities or otherwise adversely affects the amount of
any distribution required to be made in respect of
Preferred Trust Securities and Common Trust Securities
as of a specified date; or
. restricts the right of a holder of Preferred Trust
Securities and Common Trust Securities to institute
suit for the enforcement of any such payment on or
after such date.
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CO-TRUSTEES AND SEPARATE TRUSTEE
If no event of default under the Trust Agreement has
occurred and is continuing, for the purpose of meeting the legal
requirements of the Trust Indenture Act of 1939, as amended, or
of any jurisdiction in which any part of the trust property of
TXU Capital may at the time be located, Texas Utilities, as
depositor, and the Property Trustee may appoint one or more
persons approved by the Property Trustee either to act as
co-trustee, jointly with the Property Trustee, of all or any part
of the trust property, or to act as separate trustee of any trust
property. Upon the written request of the Property Trustee,
Texas Utilities, as depositor, shall for such purpose join with
the Property Trustee in the execution, delivery and performance
of all instruments necessary or proper to make such appointment.
The appointment will vest in such person or persons in such
capacity, any property, title, right or power deemed necessary or
desirable, subject to the provisions of the Trust Agreement. If
Texas Utilities, as depositor, does not join in such appointment
within 15 days after the receipt by it of a request so to do, or
in case an event of default under the Subordinated Indenture has
occurred and is continuing, the Property Trustee alone shall have
power to make such appointment.
FORM, EXCHANGE, AND TRANSFER
Preferred Trust Securities may be exchanged for other
Preferred Trust Securities in any authorized denomination and of
like tenor and aggregate liquidation preference.
Subject to the terms of the Trust Agreement, Preferred Trust
Securities may be presented for exchange as provided above or for
registration of transfer, duly endorsed or accompanied by a duly
executed instrument of transfer, at the office of the Preferred
Trust Security registrar or at the office of any transfer agent
designated by Texas Utilities for such purpose. Texas Utilities
may designate itself the Preferred Trust Security registrar. No
service charge will be made for any registration of transfer or
exchange of Preferred Trust Securities, but Texas Utilities may
require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection with the transfer. A
transfer or exchange will be made when the transfer agent is
satisfied with the documents of title and identity of the person
making the request. Texas Utilities may at any time designate
additional transfer agents or rescind the designation of any
transfer agent or approve a change in the office through which
any transfer agent acts, except that Texas Utilities will be
required to maintain a transfer agent in each place of payment
for Preferred Trust Securities.
TXU Capital will not be required to (1) issue, register the
transfer of, or exchange any Preferred Trust Securities during a
period beginning at the opening of business 15 calendar days
before the day of mailing of a notice of redemption of any
Preferred Trust Securities called for redemption and ending at
the close of business on the day of such mailing or (2) register
the transfer of or exchange any Preferred Trust Securities so
selected for redemption, in whole or in part, except the
unredeemed portion of any Preferred Trust Securities being
redeemed in part.
REGISTRAR AND TRANSFER AGENT
Texas Utilities Services Inc. will act as registrar and
transfer agent for the Preferred Trust Securities.
Registration of transfers of the Preferred Trust Securities
will be made without charge by TXU Capital, unless tax or other
governmental charges are imposed. In that case, the holder
requesting transfer must pay the tax or charges and give such
indemnity as TXU Capital or Texas Utilities may require.
CONCERNING THE PROPERTY TRUSTEE
The Property Trustee acts as trustee under other indentures
with respect to Texas Utilities' obligations. Texas Utilities
maintains deposit accounts and credit and liquidity facilities
and conducts other banking transactions with the Property Trustee
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in the ordinary course of their businesses. The Property Trustee
also acts as the Guarantee Trustee under the Guarantee and the
Debenture Trustee under the Subordinated Indenture.
DUTIES OF THE TRUSTEES
The Delaware Trustee will act as the resident trustee in the
State of Delaware and will have no other significant duties. The
Property Trustee will hold the Junior Subordinated Debentures on
behalf of TXU Capital and will maintain a payment account with
respect to the Preferred Trust Securities and Common Trust
Securities, and will also act as trustee under the Trust
Agreement for the purposes of the Trust Indenture Act of 1939, as
amended.
The Administrative Trustees of TXU Capital are authorized
and directed to conduct the affairs of TXU Capital and to operate
TXU Capital so that TXU Capital will not be deemed to be an
"investment company" required to be registered under the 1940 Act
or taxed as a corporation for United States federal income tax
purposes and so that the Junior Subordinated Debentures will be
treated as indebtedness of Texas Utilities for United States
federal income tax purposes. In this regard, the Administrative
Trustees are authorized to take any action, not inconsistent with
applicable law, the certificate of trust or the Trust Agreement,
that the Administrative Trustees determine in their discretion to
be necessary or desirable for such purposes, as long as the
action does not materially adversely affect the interests of the
holders of the Preferred Trust Securities.
MISCELLANEOUS
Holders of the Preferred Trust Securities have no preemptive
or similar rights.
DESCRIPTION OF THE GUARANTEE
Selected provisions of the Guarantee that Texas Utilities
will execute and deliver for the benefit of the holders of the
Preferred Trust Securities are summarized below. The summary is
not complete. The form of Guarantee was filed as an exhibit to
the registration statement and you should read the Guarantee for
provisions that may be important to you. The Guarantee will be
qualified as an indenture under the Trust Indenture Act of 1939,
as amended. You should refer to the Trust Indenture Act of 1939,
as amended, for provisions that apply to the Guarantee. Whenever
particular defined terms of the Guarantee are referred to, such
defined terms are incorporated herein by reference.
The Bank of New York will act as Guarantee Trustee under the
Guarantee. The Guarantee Trustee will hold the Guarantee for the
benefit of the holders of the Preferred Trust Securities.
GENERAL TERMS OF THE GUARANTEE
Texas Utilities will fully and unconditionally agree to make
the guarantee payments listed below in full to the holders of the
Preferred Trust Securities if they are not made by TXU Capital,
as and when due, regardless of any defense, right of set-off or
counterclaim that Texas Utilities may have or assert. The
following payments will be subject to the Guarantee (without
duplication):
. any accrued and unpaid distributions required to be
paid on Preferred Trust Securities, to the extent TXU
Capital has funds available therefor;
. the redemption price, plus all accrued and unpaid
distributions, for any Preferred Trust Securities
called for redemption by TXU Capital, to the extent TXU
Capital has funds available therefor; and
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. upon a voluntary or involuntary dissolution, winding-up
or termination of TXU Capital except in connection with
the distribution of Junior Subordinated Debentures to
the holders in exchange for Preferred Trust Securities
as provided in the Trust Agreement or upon a redemption
of all of the Preferred Trust Securities upon maturity
or redemption of the Junior Subordinated Debentures as
provided in the Trust Agreement, the lesser of:
(1) the aggregate of the liquidation preference and
all accrued and unpaid distributions on Preferred
Trust Securities to the date of payment; and
(2) the amount of assets of TXU Capital remaining
available for distribution to holders of Preferred
Trust Securities in liquidation of TXU Capital.
Texas Utilities' obligation to make a guarantee payment may be
satisfied by direct payment of the required amounts by Texas
Utilities to the holders of Preferred Trust Securities or by
causing TXU Capital to pay such amounts to those holders.
The Guarantee will be a guarantee with respect to the
Preferred Trust Securities, but will not apply to any payment of
distributions if and to the extent that TXU Capital does not have
funds available to make such payments or to any collection of
payment.
If Texas Utilities does not make interest payments on the
Junior Subordinated Debentures held by TXU Capital, TXU Capital
will not have funds available to pay distributions on the
Preferred Trust Securities. The Guarantee will rank subordinate
and junior in right of payment to all liabilities of Texas
Utilities except liabilities that are equal in right of payment
by their terms.
Texas Utilities will enter into an Agreement as to Expenses
and Liabilities with TXU Capital, to provide funds to TXU Capital
as needed to pay obligations of TXU Capital to parties other than
holders of Preferred Trust Securities. The Junior Subordinated
Debentures and the Guarantee, together with the obligations of
Texas Utilities with respect to the Preferred Trust Securities
under the Subordinated Indenture, the Trust Agreement, the
Guarantee and the Agreement as to Expenses and Liabilities,
constitute a full and unconditional guarantee of the Preferred
Trust Securities by Texas Utilities. No single document standing
alone or operating in conjunction with fewer than all of the
other documents constitutes such guarantee. It is only the
combined operation of these documents that has the effect of
providing a full and unconditional guarantee by Texas Utilities
of the Preferred Trust Securities.
AMENDMENTS AND ASSIGNMENT
No vote is required for changes to the Trust Agreement that
do not materially adversely affect the rights of holders of
Preferred Trust Securities. Other terms of the Guarantee may be
changed only with the prior approval of the holders of the
Preferred Trust Securities having at least 66 2/3% of the
liquidation preference amount of the outstanding Preferred Trust
Securities. All guarantees and agreements contained in the
Guarantee shall bind the successors, assigns, receivers, trustees
and representatives of Texas Utilities and shall inure to the
benefit of the holders of the Preferred Trust Securities then
outstanding.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur if Texas
Utilities fails to perform any of its payment obligations under
the Guarantee. The holders of the Preferred Trust Securities
having a majority of the liquidation preference of the Preferred
Trust Securities have the right to direct the time, method and
place of conducting any proceeding for any remedy available to
the Guarantee Trustee under the Guarantee or to direct the
exercise of any trust or power conferred upon the Guarantee
Trustee under the Guarantee.
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If the Guarantee Trustee fails to enforce the Guarantee, any
holder of the Preferred Trust Securities may enforce the
Guarantee, or institute a legal proceeding directly against Texas
Utilities to enforce the Guarantee Trustee's rights under the
Guarantee without first instituting a legal proceeding against
TXU Capital, the Guarantee Trustee or anyone else.
Texas Utilities will be required to provide an annual
statement to the Guarantee Trustee about Texas Utilities'
performance of certain of its obligations under the Guarantee and
any default in its performance of the obligations.
Texas Utilities will also be required to file annually with
the Guarantee Trustee an officer's certificate as to Texas
Utilities' compliance with all conditions under the Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee will undertake to perform only those
duties specifically set forth in the Guarantee until a default
occurs. After a default under the Guarantee, the Guarantee
Trustee must exercise the same degree of care in its duties as a
prudent individual would exercise in the conduct of his or her
own affairs. Otherwise, the Guarantee Trustee is under no
obligation to exercise any of the powers vested in it by the
Guarantee at the request of any holder of the Preferred Trust
Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that it might incur.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and
effect upon:
. full payment of the redemption price, plus accrued and
unpaid distributions, for all the Preferred Trust
Securities;
. the distribution of Junior Subordinated Debentures to
holders of the Preferred Trust Securities in exchange
for all of the Preferred Trust Securities; or
. full payment of the amounts payable upon liquidation of
TXU Capital.
The Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of
Preferred Trust Securities must restore payment of any sums paid
under the Preferred Trust Securities or the Guarantee.
STATUS OF THE GUARANTEE
The Guarantee will be an unsecured obligation of Texas
Utilities and will rank:
. subordinate and junior in right of payment to all
liabilities of Texas Utilities, except any liabilities
that are equal in right of payment by their terms;
. equal in right of payment with the most senior
preferred or preference stock that may be issued by
Texas Utilities and with any guarantee that may be
entered into by Texas Utilities in respect of any
preferred or preference stock of any affiliate of Texas
Utilities; and
. senior to Texas Utilities' common stock.
The Trust Agreement provides that by accepting Preferred
Trust Securities, a holder agrees to the subordination provisions
and other terms of the Guarantee.
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The Guarantee will be a guarantee of payment and not of
collection, that is, the guaranteed party may institute a legal
proceeding directly against Texas Utilities to enforce its rights
under the Guarantee without first instituting a legal proceeding
against anyone else.
GOVERNING LAW
The Guarantee will be governed by and construed in
accordance with the laws of the State of New York.
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures which the Property
Trustee will hold on behalf of TXU Capital as trust assets will
be subordinated obligations of Texas Utilities. The Junior
Subordinated Debentures will be issued under the Subordinated
Indenture between Texas Utilities and The Bank of New York, as
Debenture Trustee with respect to the Junior Subordinated
Debentures.
Selected provisions of the Subordinated Indenture are
summarized below. This summary is not complete. The form of the
Subordinated Indenture has been filed as an exhibit to the
registration statement, and you should read the Subordinated
Indenture for provisions that may be important to you. The
Subordinated Indenture will be qualified under the Trust
Indenture Act of 1939, as amended. You should refer to the Trust
Indenture Act for provisions that apply to the Junior
Subordinated Debentures. Whenever particular provisions or
defined terms in a Subordinated Indenture are referred to under
the "Description of the Junior Subordinated Debentures", such
provisions or defined terms are incorporated by reference herein.
The Subordinated Indenture provides for the issuance of
subordinated debt other than the Junior Subordinated Debentures
in an unlimited amount from time to time. The Junior
Subordinated Debentures issued to TXU Capital will constitute a
separate series under the Subordinated Indenture.
A prospectus supplement and an officer's certificate
relating to the Junior Subordinated Debentures will include
specific terms of the securities. These terms will include some
or all of the following:
. The title of the Junior Subordinated Debentures;
. The total principal amount of the Junior Subordinated
Debentures;
. The dates on which the principal of the Junior
Subordinated Debentures will be payable and how it will
be paid;
. The interest rate or rates which the Junior
Subordinated Debentures will bear, or how such rate or
rates will be determined, the interest payment dates
for the Junior Subordinated Debentures and the regular
record dates for interest payments;
. Any right to extend the interest payment periods for the
Junior Subordinated Debentures;
. The percentage, if less than 100%, of the principal
amount of the Junior Subordinated Debentures, which
will be payable if the maturity of the Junior
Subordinated Debentures is accelerated;
. Any date or dates on which the Junior Subordinated
Debentures may be redeemed at the option of Texas
Utilities and any restrictions on such redemptions;
. Any sinking fund or other provisions that would
obligate Texas Utilities to repurchase or otherwise
redeem the Junior Subordinated Debentures;
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. Any changes or additions to the Events of Default under
the Subordinated Indenture or changes or additions to
the covenants of Texas Utilities under the Subordinated
Indenture;
. If the Junior Subordinated Debentures will be issued in
denominations other than $25;
. If payments on the Junior Subordinated Debentures may
be made in a currency or currencies other than United
States dollars;
. Any rights or duties of another person to assume the
obligations of Texas Utilities with respect to the Junior
Subordinated Debentures;
. Any collateral, security, assurance or guarantee for the
Junior Subordinated Debentures; and
. Any other terms of the Junior Subordinated Debentures
not inconsistent with the terms of the Subordinated
Indenture.
The Junior Subordinated Debentures will be limited in
aggregate principal amount to the sum of the aggregate
liquidation preference amount of the Preferred Trust Securities
and the consideration paid by Texas Utilities for the Common
Trust Securities. The Junior Subordinated Debentures are
unsecured, subordinated obligations of Texas Utilities which rank
junior to all of Texas Utilities' Senior Indebtedness. The
amounts payable as principal and interest on the Junior
Subordinated Debentures will be sufficient to provide for payment
of distributions payable on Preferred Trust Securities and Common
Trust Securities.
If Junior Subordinated Debentures are distributed to holders
of Preferred Trust Securities in a dissolution of TXU Capital,
such Junior Subordinated Debentures will be issued in fully
registered certificated form in the denominations and integral
multiples thereof in which such Preferred Trust Securities have
been issued and they may be transferred or exchanged at the
offices of the Debenture Trustee.
Payments of principal and interest on Junior Subordinated
Debentures will be payable, the transfer of Junior Subordinated
Debentures will be registrable, and Junior Subordinated
Debentures will be exchangeable for Junior Subordinated
Debentures of other denominations of the same aggregate principal
amount, at the corporate trust office of the Debenture Trustee in
The City of New York. However, Texas Utilities may choose to
make payment of interest by check mailed to the address of the
persons entitled to it and may require that the payment in full
of principal with respect to any Junior Subordinated Debenture be
made only upon surrender of the Junior Subordinated Debenture to
the Debenture Trustee.
OPTIONAL REDEMPTION
For so long as TXU Capital is the holder of all the related
outstanding Junior Subordinated Debentures, the proceeds of any
optional redemption will be used by TXU Capital to redeem
Preferred Trust Securities and Common Trust Securities in
accordance with their terms.
The Debenture Trustee will give notice to the holders of any
optional redemption of Junior Subordinated Debentures, not less
than 30 nor more than 60 days prior to such redemption. All
notices of redemption shall state the redemption date and the
redemption price plus accrued and unpaid interest. If less than
all the Junior Subordinated Debentures are to be redeemed, the
notice will identify those to be redeemed and the portion of the
principal amount of any Junior Subordinated Debentures to be
redeemed in part. The notice will state that on the redemption
date, subject to the Debenture Trustee's receipt of the
redemption monies, the redemption price plus accrued and unpaid
interest will become due and payable on each such Junior
Subordinated Debenture to be redeemed and that interest thereon
will cease to accrue on and after said date. It will name the
place or places where such Junior Subordinated Debentures are to
be surrendered for payment of the redemption price plus accrued
and unpaid interest.
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INTEREST
The amount of interest payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months
and for any period shorter than a full month, on the basis of the
actual number of days elapsed. In the event that any date on
which interest is payable on a series of the Junior Subordinated
Debentures is not a business day, then payment will be made on
the next business day. No interest will be paid in respect of
any such delay. However, if the delayed payment date is in the
next calendar year, the payment shall be made on the last
business day of the earlier year. These payments shall have the
same force and effect as if made on the date the payment was
originally payable.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as there is no default in the payment of interest on
the Junior Subordinated Debentures, Texas Utilities may extend
the interest payment period from time to time on the Junior
Subordinated Debentures for one or more periods. As a
consequence, distributions on Preferred Trust Securities would be
deferred during any such period. Interest would, however,
continue to accrue. If Texas Utilities extends the interest
period or is in default under a Guarantee or with respect to
payments on the Junior Subordinated Debentures, Texas Utilities
may not:
. declare or pay any dividend or distribution on its
capital stock, other than dividends paid in shares of
common stock of Texas Utilities;
. redeem, purchase, acquire or make a liquidation payment
with respect to, any of its capital stock;
. redeem any indebtedness that is equal in right of
payment with the Junior Subordinated Debentures; or
. make any guarantee payments with respect to any of the
above.
Any extension period with respect to payment of interest on
the Junior Subordinated Debentures, or any extended interest
payment period in respect of other securities issued under the
Subordinated Indenture or on any similar securities, will apply
to all securities of the same type. Such extensions will also
apply to distributions on Preferred Trust Securities and Common
Securities and all other securities with terms substantially the
same as Preferred Trust Securities and Common Securities. Before
an extension period ends, Texas Utilities may further extend the
interest payment period. No extension period as further extended
may exceed 20 consecutive quarters. After any extension period
and the payment of all amounts then due, Texas Utilities may
select a new extended interest payment period. No interest
period may be extended beyond the maturity of the Junior
Subordinated Debentures. Texas Utilities will give TXU Capital
and the Debenture Trustee notice of its election of an extension
period prior to the earlier of (i) one business day before the
record date for the distribution which would occur if Texas
Utilities did not make the election to extend or (ii) the date
Texas Utilities is required to give notice to the NYSE or any
other applicable self-regulatory organization of the record date.
Texas Utilities will cause TXU Capital to send notice of such
election to the holders of Preferred Trust Securities.
ADDITIONAL INTEREST
So long as any Preferred Trust Securities remain
outstanding, if TXU Capital is required to pay any taxes, duties,
assessments or governmental charges imposed by the United States
or any other taxing authority on income derived from the
interest payments on the Junior Subordinated Debentures, then
Texas Utilities will pay as interest on the Junior Subordinated
Debentures any additional interest that may be necessary in order
that the net amounts retained by TXU Capital after the payment of
such taxes, duties, assessments or governmental charges will be
the same as TXU Capital would have had in the absence of the
payment of such taxes, duties, assessments or governmental
charges.
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ASSIGNMENT OF OBLIGATIONS
Texas Utilities may assign its obligations under the Junior
Subordinated Debentures and the Subordinated Indenture to a
wholly-owned subsidiary, provided that no Event of Default, or
event which with passage of time or the giving of required
notice, or both, would become an Event of Default, has occurred
and is continuing. The subsidiary must assume in writing such
obligations. Texas Utilities must fully and unconditionally
guarantee payment of the obligations of the assuming subsidiary
under the Junior Subordinated Debentures and the Subordinated
Indenture.
If such an assignment is made, Texas Utilities will be
released and discharged from all its other obligations under the
Junior Subordinated Debentures and the Subordinated Indenture.
DEFEASANCE
Texas Utilities will be discharged from its obligations on
the subordinated debentures of a particular series if it deposits
with the Debenture Trustee sufficient cash or government
securities to pay the principal, interest, any premium and any
other sums when due on the stated maturity date or a redemption
date of such series of the subordinated debentures.
SUBORDINATION
The Junior Subordinated Debentures will be subordinate and
junior in right of payment to all senior indebtedness of Texas
Utilities. No payment of the principal of the Junior
Subordinated Debentures (including redemption and sinking fund
payments), or interest on the Junior Subordinated Debentures may
be made until all holders of Senior Indebtedness have been paid,
if any of the following occurs:
. certain events of bankruptcy, insolvency or
reorganization of Texas Utilities;
. any Senior Indebtedness is not paid when due
and that default continues without waiver;
. any other default has occurred and continues
without waiver pursuant to which the holders
of Senior Indebtedness have accelerated the
maturity of such indebtedness; or
. the maturity of any other series of
subordinated debentures under the
Subordinated Indenture has been accelerated,
because of an event of default which remains
uncured.
Upon any distribution of assets of Texas Utilities to
creditors in connection with any insolvency, bankruptcy or
similar proceeding, all principal of, and premium, if any, and
interest due or to become due on, all Senior Indebtedness must be
paid in full before the holders of the Junior Subordinated
Debentures are entitled to receive or retain any payment.
Senior Indebtedness is defined in the Subordinated Indenture
to include all notes and other obligations including guarantees
of Texas Utilities for borrowed money that is not subordinate or
junior in right of payment to any other indebtedness of Texas
Utilities unless by its terms it is equal in right of payment to
the Junior Subordinated Debentures. The obligations of Texas
Utilities under the Guarantee and the Junior Subordinated
Debentures shall not be deemed to be Senior Indebtedness.
The Subordinated Indenture does not limit the aggregate
amount of Senior Indebtedness that may be issued. As of
September 30, 1998 Texas Utilities had approximately $4.8 billion
principal amount of indebtedness for borrowed money constituting
Senior Indebtedness.
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CONSOLIDATION, MERGER, AND SALE OF ASSETS
Under the terms of the Subordinated Indenture, Texas
Utilities may not consolidate with or merge into any other entity
or convey, transfer or lease its properties and assets
substantially as an entirety to any entity, unless:
. the surviving or successor entity is organized and
validly existing under the laws of any domestic
jurisdiction and it expressly assumes Texas
Utilities' obligations on all subordinated
debentures issued under the Subordinated
Indenture;
. immediately after giving effect to the
transaction, no Event of Default or no event
which, after notice or lapse of time or both,
would become an Event of Default, shall have
occurred and be continuing; and
. Texas Utilities shall have delivered to the
Debenture Trustee an officer's certificate and an
opinion of counsel as provided in the Subordinated
Indenture.
EVENTS OF DEFAULT
"Event of Default" when used in the Subordinated Indenture
with respect to any series of subordinated debentures, will mean
any of the following:
(1) failure to pay interest on any subordinated
debenture for 30 days after it is due;
(2) failure to pay the principal of or any premium on
any subordinated debenture when due;
(3) failure to perform any other covenant in the
Subordinated Indenture, other than a covenant that
does not relate to that series of subordinated
debentures, that continues for 90 days after Texas
Utilities receives written notice from the
Debenture Trustee or Texas Utilities and the
Debenture Trustee receive a written notice from
33% of the holders of the subordinated debentures
of such series;
(4) certain events in bankruptcy, insolvency or
reorganization of Texas Utilities; or
(5) any other event of default included in any
supplemental indenture or officer's certificate
for a specific series of subordinated debentures.
An Event of Default for a particular series of subordinated
debentures does not necessarily constitute an Event of Default
for any other series of subordinated debentures issued under the
Subordinated Indenture. The Debenture Trustee may withhold
notice to the holders of subordinated debentures of any default
except a default in the payment of principal or interest if it
considers such withholding of notice to be in the best interests
of the holders.
REMEDIES
If an Event of Default for any series of subordinated
debentures occurs and continues, the Debenture Trustee or the
holders of at least 33% in aggregate principal amount of the
subordinated debentures of the series may declare the entire
principal amount of all the subordinated debentures of such
series, together with accrued interest thereon, to be due and
payable immediately. However, if the Event of Default is
applicable to all outstanding subordinated debentures under the
Subordinated Indenture, only the Debenture Trustee or holders of
at least 33% in aggregate principal amount of all outstanding
subordinated debentures of all series, voting as one class, and
not the holders of any one series, may make such a declaration of
acceleration.
At any time after a declaration of acceleration with respect
to the subordinated debentures of any series has been made and
before a judgment or decree for payment of the money due has been
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obtained, the Event of Default giving rise to such declaration of
acceleration will be considered waived, and the declaration and
its consequences will be considered rescinded and annulled, if:
. Texas Utilities has paid or deposited with the
Debenture Trustee a sum sufficient to pay:
(1) all overdue interest on all subordinated
debentures of such series;
(2) the principal of and premium, if any, on any
subordinated debentures of such series which have
otherwise become due and interest that is
currently due;
(3) interest on overdue interest; and
(4) all amounts due to the Debenture Trustee under the
Subordinated Indenture; and
. any other Event of Default with respect to the
subordinated debentures of that series has been cured
or waived as provided in the Subordinated Indenture.
There is no automatic acceleration, even in the event of
bankruptcy, insolvency or reorganization of Texas Utilities.
Other than its duties in case of an Event of Default, the
Debenture Trustee is not obligated to exercise any of its rights
or powers under the Subordinated Indenture at the request, order
or direction of any of the holders, unless the holders offer the
Debenture Trustee a reasonable indemnity. If they provide this
reasonable indemnity, the holders of a majority in principal
amount of any series of subordinated debentures will have the
right to direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee or
exercising any power conferred upon the Debenture Trustee.
However, if the Event of Default relates to more than one series,
only the holders of a majority in aggregate principal amount of
all affected series will have the right to make this direction.
The Debenture Trustee is not obligated to comply with directions
that conflict with law or other provisions of the Subordinated
Indenture.
No holder of subordinated debentures of any series will have
any right to institute any proceeding under the Subordinated
Indenture, or any remedy under the Subordinated Indenture,
unless:
. the holder has previously given to the Debenture
Trustee written notice of a continuing Event of
Default;
. the holders of a majority in aggregate principal amount
of the outstanding subordinated debentures of all
series in respect of which an Event of Default shall
have occurred and be continuing have made a written
request to the Debenture Trustee, and have offered
reasonable indemnity to the Debenture Trustee to
institute proceedings; and
. the Debenture Trustee has failed to institute any
proceeding for 60 days after notice.
However, such limitations do not apply to a suit by a holder of a
subordinated debenture for payment of the principal, premium or
interest on a subordinated debenture on or after the applicable
due date.
Texas Utilities will provide to the Debenture Trustee an
annual statement by an appropriate officer as to Texas Utilities'
compliance with all conditions and covenants under the
Subordinated Indenture.
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ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED TRUST
SECURITIES
If there is an Event of Default, then the holders of
Preferred Trust Securities will rely on the Property Trustee or
the Debenture Trustee, acting for the benefit of the Property
Trustee, to enforce the Property Trustee's rights against Texas
Utilities as a holder of the Junior Subordinated Debentures.
However, a holder of Preferred Trust Securities may enforce the
Subordinated Indenture directly against Texas Utilities to the
same extent as if the holder of Preferred Trust Securities held a
principal amount of Junior Subordinated Debentures equal to the
aggregate liquidation amount of its Preferred Trust Securities.
The holders of Preferred Trust Securities would not be able
to exercise directly against Texas Utilities any other rights
unless the Property Trustee or the Debenture Trustee failed to do
so for 60 days. Upon such failure, the holders of a majority of
the aggregate liquidation amount of the outstanding Preferred
Trust Securities would have the right to directly institute
proceedings for enforcement of all other rights against Texas
Utilities to the fullest extent permitted by law.
MODIFICATION AND WAIVER
Without the consent of any holder of subordinated
debentures, Texas Utilities and the Debenture Trustee may enter
into one or more supplemental indentures for any of the following
purposes:
. to evidence the assumption by any permitted
successor of the covenants of Texas Utilities
in the Subordinated Indenture and in the
subordinated debentures;
. to add additional covenants of Texas
Utilities or to surrender any right or power
of Texas Utilities under the Subordinated
Indenture;
. to add additional events of default;
. to change or eliminate or add any provision
to the Subordinated Indenture; provided,
however, if the change will adversely affect
the interests of the holders of subordinated
debentures of any series in any material
respect, such change, elimination or addition
will become effective only:
(1) when the consent of the holders of
subordinated debentures of such
series has been obtained in
accordance with the Subordinated
Indenture; or
(2) when no subordinated debentures of
the affected series remain
outstanding under the Subordinated
Indenture;
. to provide collateral security for all but
not part of the subordinated debentures;
. to establish the form or terms of
subordinated debentures of any other series
as permitted by the Subordinated Indenture;
. to provide for the authentication and
delivery of bearer securities and coupons
appertaining thereto;
. to evidence and provide for the acceptance of
appointment of a successor trustee;
. to provide for the procedures required for
use of a noncertificated system of
registration for the subordinated debentures
of all or any series;
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. to change any place where principal, premium,
and interest shall be payable, subordinated
debentures may be surrendered for
registration of transfer or exchange and
notices to Texas Utilities may be served; or
. to cure any ambiguity or inconsistency or to
make any other provisions with respect to
matters and questions arising under the
Subordinated Indenture; provided that such
action shall not adversely affect the
interests of the holders of subordinated
debentures of any series in any material
respect.
The holders of at least a majority in aggregate principal
amount of the subordinated debentures of all series then
outstanding may waive compliance by Texas Utilities with certain
restrictive provisions of the Subordinated Indenture. The
holders of not less than a majority in principal amount of the
outstanding subordinated debentures of any series may waive any
past default under the Subordinated Indenture with respect to
that series, except a default in the payment of principal,
premium, if any, or interest and certain covenants and provisions
of the Subordinated Indenture that cannot be modified or be
amended without the consent of the holder of each outstanding
subordinated debenture of the series affected.
If the Trust Indenture Act of 1939, as amended, is amended
after the date of the Subordinated Indenture in such a way as to
require changes to the Subordinated Indenture, the Subordinated
Indenture will be deemed to be amended so as to conform to such
amendment of the Trust Indenture Act of 1939, as amended. Texas
Utilities and the Debenture Trustee may, without the consent of
any holders, enter into one or more supplemental indentures to
evidence such an amendment.
The consent of the holders of a majority in aggregate
principal amount of the subordinated debentures of all series
then outstanding is required for all other modifications to the
Subordinated Indenture. However, if less than all of the series
of subordinated debentures outstanding are directly affected by a
proposed supplemental indenture, then the consent only of the
holders of a majority in aggregate principal amount of all series
that are directly affected will be required. No such amendment
or modification may:
. change the stated maturity of the principal
of, or any installment of principal of or
interest on, any subordinated debenture, or
reduce the principal amount of any
subordinated debenture or its rate of
interest or change the method of calculating
such interest rate or reduce any premium
payable upon redemption, or change the
currency in which payments are made, or
impair the right to institute suit for the
enforcement of any payment on or after the
stated maturity of any subordinated
debenture, without the consent of the holder;
. reduce the percentage in principal amount of
the outstanding subordinated debentures of
any series whose consent is required for any
supplemental indenture, or any waiver of
compliance with a provision of the
Subordinated Indenture or any default
thereunder and its consequences, or reduce
the requirements for quorum or voting,
without the consent of all the holders of the
series; or
. modify certain of the provisions of the
Subordinated Indenture relating to
supplemental indentures, waivers of certain
covenants and waivers of past defaults with
respect to the subordinated debentures of any
series, without the consent of the holder of
each outstanding subordinated debenture
affected thereby.
A supplemental indenture which changes the Subordinated
Indenture solely for the benefit of one or more particular series
of subordinated debentures, or modifies the rights of the holders
of subordinated debentures of one or more series, will not affect
the rights under the Subordinated Indenture of the holders of the
subordinated debentures of any other series. So long as any of
Preferred Trust Securities remain outstanding, the Debenture
Trustee may not consent to a supplemental indenture without the
prior consent of the holders of a majority in aggregate
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liquidation preference of all Preferred Trust Securities or, in
the case of changes described in the clauses immediately above,
100% in aggregate liquidation preference of all such Preferred
Trust Securities then outstanding which would be affected
thereby.
The Subordinated Indenture provides that subordinated
debentures owned by Texas Utilities or anyone else required to
make payments on the subordinated debentures shall be disregarded
and considered not to be outstanding in determining whether the
required holders have given a request or consent.
Texas Utilities may fix in advance a record date to
determine the required number of holders entitled to give any
request, demand, authorization, direction, notice, consent,
waiver or other such act of holders, but Texas Utilities shall
have no obligation to do so. If such a record date is fixed,
such request, demand, authorization, direction, notice, consent,
waiver or other act of holders may be given before or after such
record date, but only the holders of record at the close of
business on such record date will be considered to be holders for
the purposes of determining whether holders of the required
percentage of the outstanding subordinated debentures have
authorized or agreed or consented to such request, demand,
authorization, direction, notice, consent, waiver or other act,
and for that purpose the outstanding subordinated debentures
shall be computed as of the record date. Any request, demand,
authorization, direction, notice, consent, election, waiver or
other act of a holder shall bind every future holder of the same
subordinated debenture and the holder of every subordinated
debenture issued upon the registration of transfer of or exchange
of subordinated debentures. A transferee will be bound by acts
of the Debenture Trustee or Texas Utilities in reliance thereon,
whether or not notation of such action is made upon such
subordinated debenture.
RESIGNATION OF DEBENTURE TRUSTEE
The Debenture Trustee may resign at any time by giving
written notice to Texas Utilities or may be removed at any time
by act of the holders of a majority in principal amount of all
series of subordinated debentures then outstanding delivered to
such Debenture Trustee and Texas Utilities. No resignation or
removal of the Debenture Trustee and no appointment of a
successor trustee will be effective until the acceptance of
appointment by a successor trustee. So long as no Event of
Default or event which, after notice or lapse of time, or both,
would become an Event of Default has occurred and is continuing
and except with respect to a trustee appointed by act of the
holders, if Texas Utilities has delivered to the Debenture
Trustee a resolution of its Board of Directors appointing a
successor trustee and such successor has accepted such
appointment in accordance with the terms of the respective
Subordinated Indenture, the Debenture Trustee will be deemed to
have resigned and the successor will be deemed to have been
appointed as trustee in accordance with such Subordinated
Indenture.
NOTICES
Notices to holders of subordinated debentures will be given
by mail to the addresses of such holders as they may appear in
the security register therefor.
TITLE
Texas Utilities, the Debenture Trustee, and any agent of
Texas Utilities or the Debenture Trustee, may treat the person in
whose name subordinated debentures are registered as the absolute
owner thereof, whether or not such subordinated debt may be
overdue, for the purpose of making payments and for all other
purposes irrespective of notice to the contrary.
GOVERNING LAW
The Subordinated Indenture and the subordinated debentures
will be governed by, and construed in accordance with, the laws
of the State of New York.
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CONCERNING THE DEBENTURE TRUSTEE
The Debenture Trustee under the Subordinated Indenture will
be The Bank of New York. In addition to acting as Debenture
Trustee, The Bank of New York will act as Property Trustee under
the Trust Agreement and as Guarantee Trustee under the Guarantee.
The Bank of New York (Delaware) will act as the Delaware Trustee
under the Trust Agreement. In addition, The Bank of New York
acts, and may act, as trustee under various indentures and trusts
of Texas Utilities and its affiliates.
PLAN OF DISTRIBUTION
The Debt Securities and the Preferred Trust Securities may
be offered (a) through agents; (b) through underwriters or
dealers; or (c) directly to purchasers.
BY AGENTS
The Debt Securities and Preferred Trust Securities may be
sold through agents designated by Texas Utilities.
BY UNDERWRITERS
If underwriters are used in the sale, the Debt Securities
and Preferred Trust Securities will be acquired by the
underwriters for their own account. The underwriters may resell
the Debt Securities and Preferred Trust Securities in one or more
transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the time
of sale. Underwriters may sell the Debt Securities and Preferred
Trust Securities directly or through underwriting syndicates
represented by managing underwriters. The obligations of the
underwriters to purchase the Debt Securities and Preferred Trust
Securities will be subject to certain conditions. The
underwriters will be obligated to purchase all the offered Debt
Securities and Preferred Trust Securities if any are purchased.
If a dealer is used in the sale, Texas Utilities or TXU Capital
will sell the Debt Securities and Preferred Trust Securities to
the dealer as principal. The dealer may then resell the Debt
Securities and Preferred Trust Securities at varying prices
determined at the time of resale.
DIRECT SALES
The Debt Securities and Preferred Trust Securities may also
be sold directly by Texas Utilities. In this case, no
underwriters or agents would be involved.
GENERAL INFORMATION
Underwriters, dealers and agents that participate in the
distribution of the Debt Securities and Preferred Trust
Securities may be underwriters as defined in the Securities Act
of 1933, as amended (1933 Act), and any discounts or commissions
received by them from Texas Utilities or TXU Capital and any
profit on the resale of the Debt Securities and Preferred Trust
Securities by them may be treated as underwriting discounts under
the 1933 Act. Any underwriters, dealers or agents will be
identified and their compensation described in a prospectus
supplement.
Texas Utilities or TXU Capital may authorize agents and
underwriters to solicit offers by certain institutions to
purchase Debt Securities and Preferred Trust Securities at the
public offering price and on terms described in the applicable
prospectus supplement.
Texas Utilities may have agreements with agents,
underwriters and dealers to indemnify them against certain civil
liabilities, including liabilities under the 1933 Act, or to
contribute with respect to payments which the agents,
underwriters, dealers and remarketing firms may be required to
make.
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None of the Debt Securities or Preferred Trust Securities
has an established trading market. Texas Utilities may decide to
list any series of Securities on an exchange. However, Texas
Utilities will not be obligated to list securities on an exchange
unless it states otherwise in a prospectus supplement. Texas
Utilities cannot assure that there will be any liquidity of the
trading market for any of the Debt Securities and Preferred Trust
Securities.
Agents, underwriters and dealers may engage in transactions
with, or perform services for, Texas Utilities or its
subsidiaries in the ordinary course of business.
EXPERTS AND LEGALITY
The consolidated financial statements included in the latest
Annual Report of the Company on Form 10-K, incorporated herein by
reference, have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report included in said
latest Annual Report of the Company on Form 10-K, and have been
incorporated by reference in reliance upon such report given upon
authority of the firm as experts in accounting and auditing.
With respect to any unaudited condensed consolidated interim
financial information included in Texas Utilities' Quarterly
Reports on Form 10-Q which are or will be incorporated herein by
reference, Deloitte & Touche LLP has applied limited procedures
in accordance with professional standards for reviews of such
information. As stated in any of their reports included in Texas
Utilities' Quarterly Reports on Form 10-Q, which are or will be
incorporated herein by reference, Deloitte & Touche LLP did not
audit and did not express an opinion on such interim financial
information. Deloitte & Touche LLP is not subject to the
liability provisions of Section 11 of the 1933 Act for any of
their reports on such unaudited condensed consolidated interim
financial information because such reports are not "reports" or a
"part" of the Registration Statement filed under the 1933 Act
with respect to the Debt and Preferred Trust Securities prepared
or certified by an accountant within the meaning of Sections 7
and 11 of the 1933 Act.
Ernst & Young, independent auditors, audited the
consolidated financial statements of The Energy Group Limited as
of March 31, 1998 and 1997, and for the year ended March 31,
1998, the six-months ended March 31, 1997, and for the two years
in the period ended September 30, 1996. These statements have
been incorporated herein by reference in reliance upon the
authority of Ernst & Young as experts in accounting and auditing
in giving the report.
The Statements made as to matters of law and legal
conclusions in Texas Utilities' Annual Report on Form 10-K for
the year ended December 31, 1997 under Part I, Item 1 -- Business
Regulation and Rates, and Environmental Matters, incorporated
herein by reference, have been reviewed by Worsham, Forsythe &
Wooldridge, L.L.P., Dallas, Texas, General Counsel for Texas
Utilities. All of such statements have been incorporated by
reference, herein in reliance upon the opinion of that firm given
upon their authority as experts. At March 31, 1998, members of
the firm of Worsham, Forsythe & Wooldridge, L.L.P., owned
approximately 41,200 shares of the Common Stock of Texas
Utilities.
Richards, Layton & Finger, P. A., Special Delaware counsel
for Texas Utilities and TXU Capital will issue an opinion as to
certain matters of Delaware law relating to the validity of the
Preferred Trust Securities, the enforceability of the Trust
Agreement and the creation of TXU Capital.
Worsham Forsythe & Wooldridge, L.L.P. and Thelen Reid &
Priest LLP for Texas Utilities and Winthrop, Stimson, Putnam &
Roberts, New York, New York for the Underwriters will each issue
an opinion as to the legality of the other securities offered
hereby. Worsham Forsythe & Wooldridge, L.L.P. will issue an
opinion as to all matters pertaining to incorporation of Texas
Utilities and all other matters of Texas law.
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