Filed pursuant to Rule 424(b)(5)
Registration No. 333-56055
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JUNE 29, 1998)
$375,000,000
TEXAS UTILITIES COMPANY
5.94% MAndatory Putable/remarketable Securities (MAPSSM)
---------------
THE TERMS:
. Initial Interest Rate: 5.94% . Initial Interest Payment
Dates: April 15 and
October 15
. Initial Remarketing . Scheduled Maturity
Date: October 15, 2001 Date: October 15, 2011
. On October 15, 2001, you must sell your MAPS to Salomon
Smith Barney Inc. as the remarketing dealer at 100% of
their principal amount if the remarketing dealer
chooses to purchase the MAPS.
. If the remarketing dealer chooses to purchase the MAPS,
Texas Utilities Company may choose to have the MAPS
remarketed to other purchasers for an interim period of
up to 26 weeks. During any interim period the interest
rate on the MAPS will be reset weekly. At the end of
any interim period, holders of MAPS must sell their
MAPS to the remarketing dealer at 100% of their
principal amount.
. The MAPS are scheduled to mature on October 15, 2011,
but that maturity date will be extended by the length
of any interim period.
. If the remarketing dealer does not purchase the MAPS
for any reason on October 15, 2001 or at the end of any
interim period, holders of MAPS must sell their MAPS to
Texas Utilities Company at 100% of their principal amount.
. If the remarketing dealer chooses to purchase the MAPS,
Texas Utilities Company has the right to redeem the
MAPS from the remarketing dealer on October 15, 2001 or
at the end of any interim period. Texas Utilities
Company will not be able to redeem the MAPS at any
other time.
. Either on October 15, 2001 or, if the MAPS are
remarketed for an interim period, at the end of the
interim period, the remarketing dealer will set a new
interest rate on the MAPS. Texas Utilities Company
will pay interest at that new rate until the MAPS
mature.
. The MAPS will be traded only in book-entry form. You
will not receive certificates for the MAPS.
. The MAPS will be issued in minimum denominations of
$1,000, and in multiples of $1,000.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS ARE TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
PER MAPS TOTAL
-------- ------------
Public Offering Price . . . . . . . . . 100.00% $375,000,000
Underwriting Discount . . . . . . . . . 0.40% $ 1,500,000
Premium Paid by Remarketing Dealer . . 2.17% $ 8,137,500
Total Proceeds to Texas Utilities
Company (before expenses) . . . . . . . 101.77% $381,637,500
Interest on the MAPS will accrue from October 21, 1998 to
the date of delivery.
---------------
The underwriters are offering the MAPS subject to various
conditions. The underwriters expect to deliver the MAPS to
purchasers on or about October 21, 1998.
---------------
SALOMON SMITH BARNEY
CIBC OPPENHEIMER
LEHMAN BROTHERS
MORGAN STANLEY DEAN WITTER
October 14, 1998
"MAPSSM" is a service mark of Salomon Smith Barney Inc.
<PAGE>
You should rely only on the information contained or incorporated
by reference in this prospectus. We have not authorized anyone
to provide you with different information. We are not making an
offer of these securities in any jurisdiction where the offer is
not permitted. You should not assume that the information
contained or incorporated by reference in this prospectus is
accurate as of any date other than the date on the front of this
prospectus.
---------------
TABLE OF CONTENTS
Page
----
PROSPECTUS SUPPLEMENT
Introductory Statement . . . . . . . . . . . . . . . . . . . S-3
The Company . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . S-3
Selected Financial Data . . . . . . . . . . . . . . . . . . . S-4
Description of the MAPS . . . . . . . . . . . . . . . . . . . S-5
Certain United States Federal Income Tax Considerations . . S-14
Underwriting . . . . . . . . . . . . . . . . . . . . . . . S-17
Legal Opinions . . . . . . . . . . . . . . . . . . . . . . S-18
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . S-18
PROSPECTUS
Available Information . . . . . . . . . . . . . . . . . . . . . 2
Documents Incorporated by Reference . . . . . . . . . . . . . . 2
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Ratio of Earnings
to Fixed Charges . . . . . . . . . . . . . . . . . . . . . . 4
Description of Debt Securities . . . . . . . . . . . . . . . . 5
Description of Capital Stock . . . . . . . . . . . . . . . . 14
Description of Stock Purchase Contracts
and Stock Purchase Units . . . . . . . . . . . . . . . . . 15
Plan of Distribution . . . . . . . . . . . . . . . . . . . . 15
Experts and Legality . . . . . . . . . . . . . . . . . . . . 17
S-2
<PAGE>
INTRODUCTORY STATEMENT
The securities offered by this prospectus are $375,000,000
principal amount of the Company's 5.94% MAndatory
Putable/remarketable Securities (MAPS). In addition, the Company
expects to make a public offering of $125,000,000 principal
amount of its Floating Rate Senior Notes. Although certain
information contained herein reflects both offerings, this
prospectus relates solely to the MAPS. The offerings are not
contingent upon each other.
THE COMPANY
Texas Utilities Company (Company) is a holding company which
owns all of the outstanding common stock of Texas Energy
Industries, Inc. (TEI) and ENSERCH Corporation (ENSERCH).
Through other subsidiaries, the Company also owns all the
outstanding shares of The Energy Group Limited (TEG) and the
Eastern Group PLC (Eastern Group). TEI is a holding company
whose largest subsidiary is Texas Utilities Electric Company (TU
Electric). TU Electric is an electric utility engaged in the
generation, purchase, transmission, distribution and sale of
electric energy in the north central, eastern and western parts
of Texas. Another subsidiary of TEI is Texas Utilities Australia
Pty. Ltd. (TU Australia), owner of Eastern Energy Limited
(Eastern Energy), which is engaged in the purchase, distribution,
marketing and sale of electric energy in the State of Victoria,
Australia. TU Australia has now withdrawn its offer to purchase
Allgas Energy Limited. ENSERCH is an integrated company focused
on natural gas. ENSERCH operates primarily in the north central
and eastern parts of Texas. Its major business segments are
natural gas pipeline, processing, marketing and distribution.
TEG currently is the holding company for Eastern Group, a
diversified international energy group based in the United
Kingdom (UK). Eastern Group is one of the largest regional
electric companies in the UK, one of the largest UK generators of
electricity and one of the largest UK suppliers of natural gas.
TEG has filed with the Securities and Exchange Commission an
Annual Report on Form 20-F for its fiscal year ended March 31,
1998. See THE COMPANY in the accompanying Prospectus.
USE OF PROCEEDS
The Company currently anticipates using substantially all of
the proceeds (i) from the sale of the MAPS and from the premium
paid by the remarketing dealer for the right to remarket the MAPS
and (ii) from the expected sale by the Company of $125,000,000
principal amount of its Floating Rate Senior Notes, estimated to
total approximately $505,537,500 (after deducting the
underwriting commissions and estimated expenses of the
offerings), to repay short-term indebtedness incurred in
connection with the acquisition of TEG, with any remainder being
used for general corporate purposes.
S-3
<PAGE>
SELECTED FINANCIAL DATA
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS,
RATIOS AND PERCENTAGES)
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, the Company is treated as the
successor to TEI. References to the Company that relate to
periods prior to August 5, 1997, shall be deemed to be references
to TEI. Since the acquisitions of ENSERCH, Lufkin-Conroe
Communications Co. (LCC), TEG 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 June 30,
1998 includes adjustments to reflect the acquisitions and a
full twelve months' results of TEG, ENSERCH and LCC.
HISTORICAL
-----------------------------------------------
TWELVE MONTHS ENDED
-----------------------------------------------
DECEMBER 31,
-----------------------------------------------
1993 1994 1995 1996
---- ---- ---- ----
Income statement data:
Operating
Revenues . . . $5,434,512 $5,663,543 $5,638,688 $6,550,928
Net Income
(Loss)(a) . . . $ 368,660 $ 542,799 $ (138,645) $ 753,606
Basic Earnings
(Loss) per
share . . . . . $1.66 $2.40 $(0.61) $3.35
Diluted Earnings
(Loss) per
share . . . . . $1.66 $2.40 $(0.61) $3.35
Average shares of
common stock
outstanding . . 221,555 225,834 225,841 225,160
Ratio of Earnings
to Fixed
Charges(a) . . 1.89 2.29 0.84 2.39
HISTORICAL PRO FORMA(b)
-------------------------- ------------
TWELVE MONTHS ENDED TWELVE
-------------------------- MONTHS ENDED
DECEMBER 31, JUNE 30, JUNE 30,
-------------------------- ------------
1997 1998 1998
---- ---- ----
Income statement data:
Operating
Revenues . . . $7,945,608 $10,600,160 $16,128,943
Net Income
(Loss)(a) . . . $ 660,454 $ 594,561 $ 832,332
Basic Earnings
(Loss) per
share . . . . . $2.86 $2.45 $2.94
Diluted Earnings
(Loss) per
share . . . . . $2.85 $2.44 $2.93
Average shares of
common stock
outstanding . . 230,958 242,712 283,306
Ratio of Earnings
to Fixed
Charges(a) . . 2.25 2.00 1.85
ADJUSTED (c)
---------------------
OUTSTANDING AT
JUNE 30, 1998 AMOUNT PERCENT
-------------- ----------- -------
Capitalization:
Long-term Debt, less
amounts due currently . . $14,925,009 $16,284,971 63.2%
Preferred Stock:
Not subject to mandatory
redemption . . . . . . 190,055
Subject to mandatory 20,607
redemption . . . . . . -----------
Total Preferred Stock 210,662 210,662 0.8
Subsidiary Obligated
Mandatorily Redeemable
Preferred Securities of
Trusts Holding Solely
Debentures of
Subsidiaries(d) . . . . 823,125 973,125 3.8
Common Stock Equity . . . . 8,150,486 8,306,286 32.2%
----------- ----------- ------
Total Capitalization . . $24,109,282 $25,775,044 100.0%
=========== =========== ======
(a) The twelve-month period ended December 31, 1993 was affected
by the recording of regulatory disallowances in TU
Electric's Docket 11735. The twelve-month period ended
December 31, 1995 was affected by the impairment of several
nonperforming assets, including TU Electric'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 impairment, 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 the Company for the
twelve months ended June 30, 1998 includes results of
operations for the TEG businesses acquired, ENSERCH and LCC
from their respective acquisition dates to June 30, 1998.
Pro forma income statement data for the twelve months ended
June 30, 1998 combines income statement data for that period
of the Company with income statement data for the period
from July 1, 1997 to the respective acquisition dates of
ENSERCH, LCC and the TEG businesses acquired. See the
Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1998.
(c) To give effect to (1) the issuance of the MAPS and the expected
issuance by the Company of $125,000,000 principal amount of its
Floating Rate Senior Notes, (2) the issuance by the Company in
July and August 1998 of 14,000,000 of its equity-linked
securities and $65,000,000 principal amount of its Series D
and E Senior Notes, (3) the issuance by ENSERCH Capital I in
July 1998 of $150,000,000 aggregate liquidation amount of
its Floating Rate Capital Securities, (4) the redemption of
$100,000,000 ENSERCH 8 7/8% Notes on July 6, 1998, (5) the
issuance of $231,500,000 of the Company's common stock in
connection with the acquisition of TEG (aggregating a total
of 37,258,740 shares), (6) $469,666,000 of additional debt
incurred by a UK subsidiary of the Company in connection
with the acquisition of TEG, (7) a net reduction in long-
term debt at Eastern Group of $99,402,000, and (8) the
redemption of other subsidiaries' debt of $110,302,000.
Adjusted amounts do not reflect any possible future (1)
sales from time to time by the Company of shares of its
common stock pursuant to the Company's Direct Stock Purchase
and Dividend Reinvestment Plan and certain employee benefit
plans, (2) sales by the Company of up to $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 TU
Electric 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 1993, as amended
(Securities Act).
(d) The sole assets of such trusts consist of junior
subordinated debentures of TU Electric or ENSERCH, as the
case may be, in principal amounts, and having other payment
terms, corresponding to the securities issued by such
trusts.
S-4
<PAGE>
DESCRIPTION OF THE MAPS
The following is a summary of certain terms of the MAPS,
does not purport to be complete, and is subject to, and qualified
in its entirety by, the description of Debt Securities in the
accompanying Prospectus, the form of the Indenture (For Unsecured
Debt Securities Series F) to be entered into between the Company
and The Bank of New York, as trustee (Trustee), with respect to
the MAPS as supplemented by the Officer's Certificate
establishing the terms of the MAPS (as so supplemented and
amended, the MAPS Indenture) which is on file with the
Commission, and the Trust Indenture Act. Certain capitalized
terms used herein are defined in the MAPS Indenture. The
following descriptions of certain terms of the MAPS supplement
and, to the extent inconsistent therewith, replace the
description of the general terms and provisions of the Debt
Securities set forth in the accompanying Prospectus, to which
reference is hereby made. There can be no assurance as to
certain United States federal income tax consequences of the
purchase, ownership and disposition of the MAPS, and, prior to
making an investment in the MAPS, prospective investors are urged
to review CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
-- "Alternate Federal Income Tax Treatment" below.
GENERAL
The MAPS will be issued as senior unsecured debt under the
MAPS Indenture and will rank on a parity in right of payment with
the Company's other senior unsecured debt obligations. While the
MAPS Indenture contemplates securing indebtedness issued
thereunder in certain very limited circumstances (see, for
example, DESCRIPTION OF DEBT SECURITIES -- "Limitation on Liens"
in the accompanying Prospectus), the Company has no current
intention of so securing the MAPS. The MAPS Indenture provides
for the issuance of debt securities (including the MAPS), notes
or other unsecured evidences of indebtedness by the Company in an
unlimited amount from time to time. The MAPS Indenture provides
that the Company may not grant a lien on the capital stock of any
of its subsidiaries to secure debt obligations of the Company
without similarly securing the MAPS, with certain exceptions.
However, the MAPS Indenture does not limit the aggregate amount
of indebtedness the Company or its subsidiaries may issue nor
does it limit the ability of the Company's subsidiaries to grant
a lien on the capital stock of their respective subsidiaries.
The Company is a holding company that derives substantially
all of its income from its operating subsidiaries. The MAPS
therefore will be effectively subordinated to debt and preferred
stock at the subsidiary level. The financial statements of the
Company and its predecessors included in the Incorporated
Documents show the aggregate amount of such subsidiary debt and
preferred stock and other debt of the Company as of the date of
such statements.
The MAPS Indenture permits the Company to assign its
obligations under the MAPS to a subsidiary as contemplated in
DESCRIPTION OF DEBT SECURITIES -- "Assignment of Obligations" in
the accompanying Prospectus.
The final maturity date (Maturity Date) of the MAPS is
scheduled to be October 15, 2011, but may be extended if there is
an Interim Period (as defined below). See -- "Tender of MAPS;
Remarketing - Remarketing Dates" below. Because of the mandatory
put and remarketing provisions described below, however, all
purchasers who purchase MAPS in this offering or in the open
market prior to October 15, 2001, will have those MAPS either (i)
repurchased by the Company or (ii) purchased by the Remarketing
Dealer, on October 15, 2001. Salomon Smith Barney Inc. will be
the initial Remarketing Dealer. If October 15, 2001 shall not be
a Business Day (as defined below), then all references herein to
such date shall be deemed to be references to the next Business
Day.
The MAPS will be limited to $375,000,000 aggregate principal
amount and will be issuable only in registered form. Except in
the limited circumstances described herein, the MAPS are not
subject to redemption prior to the Maturity Date at the option of
the Company. See -- "Redemption" below.
The MAPS will bear interest at the annual interest rate of
5.94% per annum to but excluding October 15, 2001. October 15,
2001 and, if that date is designated as the "Interim Period
Remarketing Date" as described below under "Tender of MAPS;
Remarketing - Remarketing Dates," the Final Period Remarketing
S-5
<PAGE>
Date (as defined below) thereafter, will be the Remarketing
Dates for the MAPS. If the Remarketing Dealer elects on the
Notification Date (as defined below) to remarket the MAPS, and
subject to the satisfaction of certain conditions described
herein, (i) the MAPS will be subject to mandatory tender to
the Remarketing Dealer at 100% of the principal amount thereof
for remarketing on each Remarketing Date, on the terms and
subject to the conditions described herein, and (ii) on and
after each Remarketing Date, the MAPS will bear interest at
the rate determined by the Remarketing Dealer in accordance
with the procedures set forth below. See -- "Tender of MAPS;
Remarketing" below.
Interest on the MAPS accruing during the period from and
including October 21, 1998 (Issue Date) to but excluding October
15, 2001 will be payable semi-annually on April 15 and October 15
of each year, commencing April 15, 1999. Interest on the MAPS
accruing from October 15, 2001 (if such date is not the Interim
Period Remarketing Date (as defined below)) or the Final Period
Remarketing Date (as defined below) (if October 15, 2001 is the
Interim Period Remarketing Date) will be paid semi-annually on
each day that is a six-month anniversary of such date. Interest
on the MAPS accruing during the period from and including October
15, 2001 (if that date is the Interim Period Remarketing Date) to
but excluding the Final Period Remarketing Date (Interim Period),
if applicable, will be payable on the Final Period Remarketing
Date. Each day on which interest is scheduled to be paid is
herein referred to as an "Interest Payment Date." Interest will
be payable on each Interest Payment Date to the persons in whose
name the MAPS are registered, subject to certain exceptions, at
the close of business on the Business Day immediately preceding
the related Interest Payment Date (each, a Record Date) except
that, in the case of the Interest Payment Date relating to the
Interim Period, interest will be payable to the persons to whom
principal is payable on the Final Period Remarketing Date.
"Business Day" means any day on which commercial banks are open
for business (including dealings in foreign exchange and foreign
currency deposits) in the City of New York and, in the case of
the determination of the Reference Rate (as defined below) that
is based upon U.S. Dollar Deposits in London, the City of London.
The amount of interest payable on the MAPS for any period
will be computed on the basis of a 360-day year consisting of
twelve 30-day months, except that interest accruing during the
Interim Period, if any, will be computed on the basis of the
actual number of days in such period over a 360-day year.
Interest payable on any Interest Payment Date and at the Maturity
Date or date of earlier redemption or repurchase will be the
amount of interest accrued from and including the most recent
Interest Payment Date to which interest has been paid or duly
provided for (or from and including the Issue Date if no interest
has been paid or duly provided for with respect to the MAPS) to
but excluding such Interest Payment Date or the Maturity Date or
date of redemption or repurchase, as the case may be. In the
event that any date on which interest is payable on the MAPS is
not a Business Day, then payment of the interest payable on such
date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any
such delay), in each case with the same force and effect as if
made on such date. Subject to any applicable laws and
regulations and the provisions of the MAPS Indenture, each such
payment will be made as described under "Book-Entry Systems"
below. With respect to MAPS not in book-entry only form, the
Company shall have the right to select relevant record dates,
which shall be at least one Business Day but not more than 60
Business Days prior to the related Interest Payment Date.
Under the circumstances described below, the MAPS are
subject to redemption by the Company from the Remarketing Dealer
on any Remarketing Date. See -- "Redemption" below. If the
Remarketing Dealer for any reason does not purchase all MAPS on
any Remarketing Date or elects not to remarket the MAPS, or in
certain other limited circumstances described herein, the Company
will be required to repurchase the MAPS from the holders thereof
on such Remarketing Date, at 100% of the principal amount thereof
plus all accrued and unpaid interest, if any. See --
"Repurchase" below.
The MAPS will be issued in denominations of $1,000 and
integral multiples thereof.
TENDER OF MAPS; REMARKETING
The following description sets forth the terms and
conditions of the tender and remarketing of the MAPS, if the
Remarketing Dealer elects to purchase the MAPS and to remarket
the MAPS on October 15, 2001.
S-6
<PAGE>
Mandatory Tender
Provided that the Remarketing Dealer gives notice to the
Company and the Trustee on a Business Day which is not earlier
than 15 nor later than five Business Days prior to October 15,
2001 (Notification Date) of its intention to purchase the MAPS
as a whole for remarketing, each MAPS will be automatically
tendered, or deemed tendered, to the Remarketing Dealer for
purchase on each of (i) October 15, 2001 and (ii) if October 15,
2001 is designated as the Interim Period Remarketing Date as
described under "Remarketing Dates," the Final Period Remarketing
Date thereafter, except in the circumstances described under
"Repurchase" or "Redemption" below. The purchase price of such
MAPS will be equal to 100% of the principal amount thereof. See
-- "Notification of Results; Settlement" below. Upon such tender
or deemed tender on a Remarketing Date, the Remarketing Dealer
may remarket the MAPS for its own account at varying prices to be
determined by the Remarketing Dealer at the time of each sale.
From and after October 15, 2001 (if such date is not the Interim
Period Remarketing Date) or the Final Period Remarketing Date (if
October 15, 2001 is the Interim Period Remarketing Date), the
MAPS will bear interest at the Interest Rate to Maturity (as
defined below), determined as set forth under "Determination of
Applicable Interest Rate." During the Interim Period, if any,
the MAPS will bear interest at the Interim Period Interest Rate
(as defined below) determined as set forth under "Determination
of Applicable Interest Rate." If the Remarketing Dealer elects
to remarket the MAPS, the obligation of the Remarketing Dealer to
purchase the MAPS on the applicable Remarketing Date is subject,
among other things, to the conditions that, since the
Notification Date, no material adverse change in the business,
property or financial condition of the Company and its
subsidiaries, considered as a whole, shall have occurred and that
no Event of Default (as defined in the MAPS Indenture), or any
event which, with the giving of notice or passage of time, or
both, would constitute an Event of Default, with respect to the
MAPS shall have occurred and be continuing. If for any reason
the Remarketing Dealer does not purchase all such MAPS on the
applicable Remarketing Date, the Company will be required to
repurchase the MAPS from the holders thereof at a price equal to
the principal amount thereof plus all accrued and unpaid
interest, if any, on the MAPS to such Remarketing Date. See --
"Repurchase" below.
Remarketing Dates
If the Remarketing Dealer gives notice of its intention to
purchase the MAPS on October 15, 2001, then not later than 4:00
p.m., New York City time, on the fourth Business Day prior to
October 15, 2001, the Company may notify the Remarketing Dealer,
the Trustee and The Depository Trust Company (DTC) by telephone,
confirmed in writing that it elects October 15, 2001 to be the
Interim Period Remarketing Date ("Interim Period Remarketing
Date"). The Company will be eligible to make such notification
if at such time its senior unsecured debt is rated at least
"Baa3" by Moody's Investors Service and "BBB-" by Standard &
Poor's Ratings Group or the equivalent thereof by such rating
agency at the time of such notification or if the Remarketing
Dealer waives this requirement in its sole discretion. If the
Company does not provide such notification, October 15, 2001 will
be the only Remarketing Date and the Maturity Date will be
October 15, 2011. If the Company provides such notification,
then (i) the Final Period Remarketing Date will be one of the 26
following one-week anniversary dates of October 15, 2001 (or if
any such day is not a Business Day, the next following Business
Day) designated by the Company not later than the fifth Business
Day prior to such one-week anniversary date (Final Period
Remarketing Date) except that, if the Company fails to so
designate the Final Period Remarketing Date, the Final Period
Remarketing Date will be the date that is 26 weeks after October
15, 2001 (or if such day is not a Business Day, the next
following Business Day) and (ii) the Maturity Date of the MAPS
will be the date that is the tenth anniversary of the Final
Period Remarketing Date (whether or not a Business Day).
Determination of Applicable Interest Rate
From and including October 15, 2001 (if such date is not the
Interim Period Remarketing Date) or the Final Period Remarketing
Date (if October 15, 2001 is the Interim Period Remarketing
Date), to but excluding the Maturity Date, the MAPS will bear
interest at the Interest Rate to Maturity (as defined below).
During the Interim Period, if any, the MAPS will bear interest at
the Interim Period Interest Rate (as defined below).
The "Interest Rate to Maturity" will be determined by the
Remarketing Dealer by 3:30 p.m., New York City time, on the third
Business Day immediately preceding October 15, 2001 (if such date
is not the Interim Period Remarketing Date) or the Final Period
S-7
<PAGE>
Remarketing Date (if October 15, 2001 is the Interim Period
Remarketing Date) (Determination Date), to the nearest one
hundred-thousandth (0.00001) of one percent per annum, and will
be equal to the sum of 4.59% per annum (Base Rate) plus the
Applicable Spread (as defined below).
The "Applicable Spread" shall be the lowest firm commitment
bid, expressed as a spread (in the form of a percentage or number
of basis points) above the Base Rate, obtained by the Remarketing
Dealer on the Determination Date from the bids quoted by five
Reference Corporate Dealers (as defined below) for the full
aggregate principal amount of the MAPS at the Dollar Price (as
defined below), but assuming (i) that the purchase date is
October 15, 2001 (if such date is not the Interim Period
Remarketing Date) or the Final Period Remarketing Date (if
October 15, 2001 is the Interim Period Remarketing Date) with
settlement on such date without accrued interest, (ii) that the
maturity date is the Maturity Date of the MAPS, and (iii) a
stated annual interest rate, payable semi-annually, equal to the
Base Rate plus the spread bid by the applicable Reference
Corporate Dealer. If fewer than five Reference Corporate Dealers
bid as described above, then the Applicable Spread shall be the
lowest of such firm commitment bids obtained as described above;
provided, however, that the Remarketing Dealer shall obtain bids
from at least three Primary Corporate Dealers. The Interest Rate
to Maturity announced by the Remarketing Dealer, absent manifest
error, shall be binding and conclusive upon the beneficial owners
and holders of the MAPS, the Company and the Trustee.
"Dollar Price" means, with respect to the MAPS, the present
value, as of October 15, 2001, of the Remaining Scheduled
Payments (as defined below) discounted to October 15, 2001 on a
semi-annual basis (assuming a 360-day year consisting of twelve
30-day months) at the Treasury Rate (as defined below), except
that (i) in the case of the Final Period Remarketing Date, the
Dollar Price will be the Adjusted Dollar Price (as defined below)
and (ii) the Dollar Price in the case of October 15, 2001 or the
Final Period Remarketing Date may be any other amount agreed to
in writing by the Remarketing Dealer and the Company.
"Adjusted Dollar Price" means, with respect to the Final
Period Remarketing Date, the Dollar Price as of October 15, 2001
(determined by the Remarketing Dealer on the third Business Day
prior to October 15, 2001) plus the product of (i) such Dollar
Price less the aggregate principal amount of MAPS outstanding as
of October 15, 2001, (ii) the weighted average per annum Interim
Period Interest Rate for the Interim Period, and (iii) the number
of days in the Interim Period divided by 360.
"Reference Corporate Dealers" means each of Salomon Smith
Barney Inc., CIBC Oppenheimer Corp., Lehman Brothers Inc., Morgan
Stanley & Co. Incorporated and a fifth Reference Corporate Dealer
to be selected by the Company and their respective successors;
provided, however, that if any of the foregoing or their
affiliates shall cease to be a leading dealer of publicly traded
debt securities of the Company in The City of New York (Primary
Corporate Dealer), the Remarketing Dealer shall substitute
therefor another Primary Corporate Dealer.
"Remaining Scheduled Payments" means, with respect to the
MAPS, the remaining scheduled payments of the principal thereof
and interest thereon calculated at the Base Rate only, that would
be due after October 15, 2001 to and including October 15, 2011,
assuming that the Company did not elect October 15, 2001 to be
the Interim Period Remarketing Date; provided, however, that if
October 15, 2001 is not an Interest Payment Date with respect to
the MAPS, the amount of the next succeeding scheduled interest
payment thereon, calculated at the Base Rate only, will be
reduced by the amount of interest accrued thereon, calculated at
the Base Rate only, to October 15, 2001.
"Treasury Rate" means the rate per annum equal to the semi-
annual equivalent yield to maturity or interpolated (on a day
count basis) yield to maturity of the Comparable Treasury Issues
(as defined below), assuming a price for the Comparable Treasury
Issues (expressed as a percentage of its principal amount), equal
to the Comparable Treasury Price (as defined below).
"Comparable Treasury Issues" means the United States
Treasury security or securities selected by the Remarketing
Dealer as having an actual or interpolated maturity or maturities
comparable to the remaining term of the MAPS being purchased.
"Comparable Treasury Price" means (a) the offer prices for
the Comparable Treasury Issues (expressed in each case as a
percentage of its principal amount) on the third business day
S-8
<PAGE>
prior to October 15, 2001, as set forth on Telerate Page 500 (as
defined below) or (b) if such page (or any successor page) is not
displayed or does not contain such offer prices on such date, (i)
the average of the Reference Treasury Dealer Quotations, after
excluding the highest and lowest of such Reference Treasury
Dealer Quotations, or (ii) if the Remarketing Dealer obtains
fewer than four such Reference Treasury Dealer Quotations, the
average of all such Reference Treasury Dealer Quotations.
"Telerate Page 500" means the display designated as
"Telerate Page 500" on Dow Jones Markets Limited (or such other
page as may replace Telerate Page 500 on such service) or such
other service displaying the offer prices specified in (a) above
as may replace Dow Jones Markets Limited.
"Reference Treasury Dealer Quotations" means, with respect
to each Reference Treasury Dealer, the offer prices for the
Comparable Treasury Issues (expressed in each case as a
percentage of its principal amount) quoted in writing to the
Remarketing Dealer by such Reference Treasury Dealer by 3:30
p.m., on the Determination Date.
"Reference Treasury Dealer" means each of Salomon Smith
Barney Inc., CIBC Oppenheimer Corp., Lehman Brothers Inc., Morgan
Stanley & Co. Incorporated and a fifth Reference Treasury Dealer
to be selected by the Company and their respective successors;
provided, however, that if any of the foregoing or their
affiliates shall cease to be a primary United States Government
securities dealer in The City of New York (Primary Treasury
Dealer), the Remarketing Dealer shall substitute therefor another
Primary Treasury Dealer.
The interest rate for the Interim Period, if any, will be
reset on each Interest Reset Date (as defined below) during the
Interim Period and will be equal to the Reference Rate (as
defined below) in respect of the applicable Interest Reset Date
plus the Basic Spread (as defined below), in each case as
calculated by the Remarketing Dealer (Interim Period Interest
Rate). The Wednesday of each week during the Interim Period will
be an "Interest Reset Date." The "Interest Determination Date"
applicable to an Interest Reset Date will be the second Business
Day preceding such Interest Reset Date. The interest rate in
effect from and including the Interim Period Remarketing Date
(which is the first day of the Interim Period) to but excluding
the first Interest Reset Date during such Interim Period will be
determined as if the Interim Period Remarketing Date were an
Interest Reset Date and the Interest Determination Date for such
Interest Reset Date were the second Business Day prior to the
Interim Period Remarketing Date.
The "Reference Rate" means, with respect to the Interim
Period, one of the following reference rates selected by the
Company and notified to the Remarketing Dealer no later than four
Business Days prior to the Interim Period Remarketing Date: (i)
the per annum rate for deposits in U.S. dollars for a period of
one week shown on Telerate page 3750 (or any successor page) at
11:00 a.m., London time, on the applicable Interest Determination
Date, (ii) the per annum rate equal to the average of the federal
funds rates shown on Telerate page 5 (or any successor page) as
of 11:00 a.m., New York City time, on the applicable Interest
Determination Date and each of the four Business Days prior to
such Interest Determination Date, or (iii) the one-week "AA"
non-financial commercial paper rate shown on the Internet world
wide web page of the Board of Governors of the Federal Reserve
System at www.bog.frb.fed.us/releases/CP/ (or any successor page)
as of 11:00 a.m., New York City time, on the applicable Interest
Determination Date.
The "Basic Spread" will be the lowest firm commitment bid
expressed as a spread (in the form of a percentage or a number of
basis points) above the Reference Rate, obtained by the
Remarketing Dealer on the third Business Day prior to the Interim
Period Remarketing Date from the bids quoted from five Reference
Money Market Dealers (as defined below) on such date for the full
aggregate principal amount of the MAPS at a dollar price equal to
par, but assuming (i) that the purchase date is the Interim
Period Remarketing Date, with settlement on such date without
accrued interest, (ii) that the maturity date is the day that is
26 weeks from the Interim Period Remarketing Date, (iii) that the
MAPS are callable by the Remarketing Dealer on a weekly basis
after the Interim Period Remarketing Date, (iv) that the MAPS
will be repurchased by the Company at par on the day that is 26
weeks from the Interim Period Remarketing Date if not previously
called by the Remarketing Dealer, and (v) a stated annual
interest rate, payable on the Final Period Remarketing Date,
equal to the Reference Rate plus the spread bid by the applicable
Reference Money Market Dealer.
S-9
<PAGE>
"Reference Money Market Dealers" means each of Salomon Smith
Barney Inc., CIBC Oppenheimer Corp., Lehman Brothers Inc., Morgan
Stanley & Co. Incorporated and a fifth Reference Money Market
Dealer to be selected by the Company and their respective
successors; provided, however, that if any of the foregoing or
their affiliates shall cease to be a leading dealer of publicly
traded debt securities of the Company in The City of New York
which is also a leading dealer in money market instruments
(Primary Money Market Dealer), the Remarketing Dealer shall
substitute therefore another Primary Money Market Dealer.
The Interim Period Interest Rates and the amount of interest
payable on the Final Period Remarketing Date shall each be
determined by the Remarketing Dealer and, absent manifest error,
shall be binding and conclusive upon the beneficial owners and
holders of the MAPS, the Company and the Trustee.
Notification of Results; Settlement
If the Remarketing Dealer has previously notified the
Company and the Trustee on the Notification Date of its intention
to purchase all MAPS tendered (or deemed to have been tendered)
to the Remarketing Dealer on October 15, 2001, the Remarketing
Dealer will notify the Company, the Trustee and DTC by telephone,
confirmed in writing, by 4:00 p.m., New York City time, on the
Determination Date, of the Interest Rate to Maturity. If October
15, 2001 is the Interim Period Remarketing Date, the Remarketing
Dealer will provide the Company, the Trustee and DTC notice in
accordance with the preceding sentence, on the second Business
Day prior to October 15, 2001, of the Interim Period Interest
Rate which will initially be in effect.
All of the MAPS will be automatically delivered to the
account of the Trustee, by book-entry through DTC pending payment
of the purchase price therefor, on each Remarketing Date.
The Remarketing Dealer will make or cause the Trustee to
make payment of the purchase price for such MAPS through DTC by
the close of business on each Remarketing Date against delivery
through DTC of the MAPS. The purchase price of such MAPS will be
equal to 100% of the principal amount thereof. If the
Remarketing Dealer does not purchase all of the MAPS on a
Remarketing Date, it will be the obligation of the Company to
make or cause to be made such payment for the entire principal
amount of the MAPS, as described below under "Repurchase." In any
case, the Company will make or cause the Trustee to make payment
of interest due on a Remarketing Date by book-entry through DTC
by the close of business on such Remarketing Date. In the event
that the Company elects to redeem the MAPS from the Remarketing
Dealer on a Remarketing Date (following the Remarketing Dealer's
purchase of the MAPS from the Holders on such Remarketing Date),
the Company will make or cause the Trustee to make payment to the
Remarketing Dealer by book-entry through DTC by the close of
business on such date against delivery through DTC of such MAPS.
The transactions described above will be executed on the
applicable Remarketing Date through DTC in accordance with the
procedures of DTC, and the accounts of the respective DTC
participants will be debited and credited and the MAPS delivered
by book entry as necessary to effect the purchases and sales
thereof. See -- "Book-Entry Systems" below.
Transactions involving the sale and purchase of MAPS
remarketed by the Remarketing Dealer on and after the applicable
Remarketing Date will settle in immediately available funds
through DTC's Same-Day Funds Settlement System.
The tender and settlement procedures described above,
including provisions for payment by purchasers of MAPS in the
remarketing or for payment to sellers of MAPS, may be modified,
notwithstanding any contrary terms of the MAPS Indenture (i) to
the extent required by DTC or a successor securities depositary,
(ii) if the book-entry system is no longer available for the MAPS
at the time of the remarketing, to the extent required to
facilitate the remarketing of MAPS in certificated form, or (iii)
to the extent required in the reasonable opinion of the
Remarketing Dealer, to facilitate the settlement process.
As long as the DTC or its nominee holds the certificates
representing any MAPS in the book-entry system of DTC, no
certificates for such MAPS will be delivered by any holder to
reflect any transfer of such MAPS effected in a remarketing or
otherwise. In addition, under the terms of the MAPS and the
S-10
<PAGE>
Remarketing Agreement (as defined below), the Company has agreed
that, prior to the day immediately succeeding October 15, 2001
(if such date is not the Interim Period Remarketing Date) or the
Final Period Remarketing Date (if October 15, 2001 is the Interim
Period Remarketing Date) and notwithstanding any provision to the
contrary set forth in the MAPS Indenture, (i) it will use its
best efforts to maintain the MAPS in book-entry form with DTC or
any successor thereto and to appoint a successor to DTC to the
extent necessary to maintain the MAPS in book-entry form and (ii)
it will waive any discretionary right it otherwise has under the
MAPS Indenture to cause the MAPS to be issued in certificated
form. See -- "Book-Entry Systems" below.
The Remarketing Dealer
On or prior to the date of original issuance of the MAPS,
the Company and the Remarketing Dealer will enter into a
Remarketing Agreement with respect to the MAPS (Remarketing
Agreement).
The Remarketing Dealer will not receive any fees or
reimbursement of expenses from the Company in connection with the
remarketing. See UNDERWRITING below.
The Company will agree to indemnify the Remarketing Dealer
against certain liabilities, including liabilities under the
Securities Act, arising out of or in connection with transactions
contemplated by the Remarketing Agreement, or to make
contribution to certain payments in respect thereof.
In the event that the Remarketing Dealer elects to remarket
the MAPS as described herein, the obligation of the Remarketing
Dealer to purchase MAPS will be subject to several conditions
precedent set forth in the Remarketing Agreement, including
certain conditions that are customary in the Company's public
offerings and the conditions that, since the Notification Date,
no material adverse change in the business, property or financial
condition of the Company and its subsidiaries, considered as a
whole, shall have occurred, and that no Event of Default (as
defined in the MAPS Indenture), or any event which, with the
giving of notice or passage of time, or both, would constitute an
Event of Default, with respect to the MAPS shall have occurred
and be continuing. In addition, the Remarketing Agreement will
provide for either the termination of such agreement or the
redetermination of the Interest Rate to Maturity by the
Remarketing Dealer on or before October 15, 2001 (if such date is
not the Interim Period Remarketing Date) or the Final Period
Remarketing Date (if October 15, 2001 is the Interim Period
Remarketing Date) upon the occurrence of certain events that are
also customary in the Company's public securities offerings.
No holder of any MAPS shall have any rights or claims under
the Remarketing Agreement or against the Company or the
Remarketing Dealer as a result of the Remarketing Dealer not
purchasing such MAPS.
The Remarketing Agreement will also provide that the
Remarketing Dealer may resign at any time prior to the twentieth
Business Day prior to October 15, 2001, such resignation to be
effective 10 Business Days after the delivery to the Company and
the Trustee of written notice of such resignation. In such case,
it shall be the sole obligation of the Company to appoint a
successor Remarketing Dealer.
The Remarketing Dealer, in its individual or any other
capacity, may buy, sell, hold and deal in any of the MAPS. If
the Remarketing Dealer holds MAPS, it may exercise any vote or
join in any action which any holder of MAPS may be entitled to
exercise or take with like effect as if the Remarketing Dealer
did not act in any capacity under the Remarketing Agreement. The
Remarketing Dealer, in its individual capacity, either as
principal or agent, may also engage in or have an interest in any
financial or other transaction with the Company as freely as if
it did not act in any capacity under the Remarketing Agreement.
REPURCHASE
In the event that (i) the Remarketing Dealer for any reason
does not notify the Company of the Interest Rate to Maturity or
the Interim Period Interest Rate by (a) in the case of the
Interest Rate to Maturity, 4:00 p.m., New York City time, on the
Determination Date, or (b) in the case of the Interim Period
Interest Rate, 4:00 p.m., New York City time, on the second
Business Day prior to October 15, 2001, or (ii) prior to the
fifth Business Day immediately preceding October 15, 2001, the
Remarketing Dealer has resigned or been terminated and no
S-11
<PAGE>
successor has been appointed on or before the third Business Day
immediately preceding October 15, 2001, or (iii) since the
Notification Date, a material adverse change in the business,
property and financial condition of the Company and its
subsidiaries, considered as a whole, shall have occurred or an
Event of Default, or any event which, with the giving of notice
or passage of time, or both, would constitute an Event of
Default, with respect to the MAPS shall have occurred and be
continuing, or any other event constituting a termination event
under the Remarketing Agreement shall have occurred and the
Remarketing Dealer elects to terminate the Remarketing Agreement,
or (iv) the Remarketing Dealer elects not to remarket the MAPS,
or (v) the Remarketing Dealer for any reason does not purchase
all MAPS tendered to it on any Remarketing Date, the Company will
repurchase the MAPS as a whole on any Remarketing Date at a price
equal to 100% of the principal amount of the MAPS plus all
accrued and unpaid interest, if any, on the MAPS to any
Remarketing Date. In any such case, payment will be made by the
Company by book-entry through DTC upon delivery through the DTC
of the MAPS on or after the close of business on such Remarketing
Date.
REDEMPTION
If the Remarketing Dealer elects to remarket the MAPS on a
Remarketing Date, the MAPS will be subject to mandatory tender to
the Remarketing Dealer for remarketing on such date, in each case
subject to the conditions described above under "Tender of MAPS;
Remarketing" and "Repurchase" and to the Company's right to
redeem the MAPS from the Remarketing Dealer as described in the
next sentence. The Company will notify the Remarketing Dealer
and the Trustee, not later than the fourth Business Day
immediately preceding the applicable Remarketing Date, if the
Company irrevocably elects to exercise its right to redeem the
MAPS, in whole but not in part, from the Remarketing Dealer on
such date at the Optional Redemption Price (as defined below).
In any such case, payment will be made by the Company to the
Remarketing Dealer by book-entry transfer through DTC by the
close of business on such Remarketing Date against delivery
through DTC of the MAPS.
The "Optional Redemption Price" shall be the sum of (i) the
greater of (a) 100% of the full aggregate principal amount of the
MAPS and (b) the Dollar Price as of the applicable Remarketing
Date (which, if the applicable Remarketing Date is the Final
Period Remarketing Date, will equal the Adjusted Dollar Price)
plus (ii) in the case of either (a) or (b) above, accrued and
unpaid interest on the principal amount being redeemed to the
applicable Remarketing Date.
BOOK-ENTRY SYSTEMS
The MAPS will be issued in fully registered form in the name
of Cede & Co., as nominee of DTC. One or more fully registered
global certificates (Global Securities) will be issued for the
MAPS in the aggregate principal amount of the MAPS. Such Global
Securities will be deposited with DTC and may not be transferred
except as a whole by DTC to a nominee of DTC or by a nominee of
DTC to DTC or another nominee of DTC or by DTC or any nominee to
a successor of DTC or a nominee of such successor.
DTC has advised the Company and the Underwriters as follows:
DTC is a limited-purpose trust company organized under
the New York Banking Law, a "banking organization" under the
New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the
New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934, as amended. DTC holds
securities that its participants (Participants) deposit with
DTC. DTC also facilitates the settlement among Participants
of securities transactions, such as transfers and pledges,
in deposited securities, through electronic computerized
book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities
certificates. Direct Participants (Direct Participants)
include securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other
organizations. DTC is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc. and the National Association
of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and
dealers, banks, and trust companies that clear through or
maintain a custodial relationship with a Direct Participant,
S-12
<PAGE>
either directly or indirectly (Indirect Participants). The
rules applicable to DTC and its Participants are on file
with the Securities and Exchange Commission.
Purchases of MAPS under the DTC system must be made by
or through Direct Participants, which will receive a credit
for the MAPS on DTC's records. The ownership interest of
each beneficial owner is in turn to be recorded on the
Direct and Indirect Participants' records. Beneficial
owners will not receive written confirmation from DTC of
their purchase, but beneficial owners are expected to
receive written confirmations providing details of the
transaction, as well as periodic statements of their
holdings, from the Direct and Indirect Participant through
which the beneficial owner entered into the transaction.
Transfers of ownership interests in the MAPS are to be
accomplished by entries made on the books of Participants
acting on behalf of beneficial owners. Beneficial owners
will not receive certificates representing their ownership
interests in the MAPS, except in the event that use of the
book-entry system for the MAPS is discontinued.
To facilitate subsequent transfers, all MAPS deposited
by Participants with DTC are registered in the name of DTC's
partnership nominee, Cede & Co. The deposit of MAPS 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 MAPS; DTC's records reflect
only the identity of the Direct Participants to whose
accounts such MAPS are credited, which may or may not be the
beneficial owners. The Participants will remain responsible
for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC
to Direct Participants, by Direct Participants to Indirect
Participants, and by Direct Participants and Indirect
Participants to beneficial owners will be governed by
arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to
time.
Redemption notices shall be sent to DTC.
Neither DTC nor Cede & Co. will consent or vote with
respect to the Global Securities. Under its usual
procedures DTC will mail an omnibus proxy to the Company as
soon as possible after the record date. The omnibus proxy
assigns Cede & Co.'s consenting or voting rights to those
Direct Participants to whose accounts the MAPS are credited
on the record date (identified in the listing attached to
the omnibus proxy).
Principal and interest payments on the Global
Securities will be made to DTC. The Company expects that
DTC, upon receipt of any payment of principal or interest in
respect of a Global Security, will credit immediately
Participants' accounts with payments in amounts
proportionate to their respective beneficial interests in
the principal amount of such Global Security as shown on
DTC's records. The Company also expects that payments by
Participants to beneficial owners will be governed by
standing instructions and customary practices, as is the
case with securities held for the accounts of customers in
bearer form or registered in "street name", and will be the
responsibility of such Participant and not of DTC, the
Company or the Trustee, subject to any statutory or
regulatory requirements as may be in effect from time to
time.
DTC may discontinue providing its service as securities
depositary with respect to the MAPS at any time by giving
reasonable notice to the Company or the Trustee. In
addition, after October 15, 2001 (if such date is not the
Interim Period Remarketing Date) or the Final Period
Remarketing Date (if October 15, 2001 is the Interim Period
Remarketing Date), the Company may decide to discontinue use
of the system of book-entry transfers through DTC (or a
successor securities depositary). Under such circumstances,
if a successor securities depositary is not obtained, MAPS
certificates in fully registered form are required to be
printed and delivered to beneficial owners of the Global
Securities representing such MAPS.
S-13
<PAGE>
The information in this section concerning DTC and DTC's
book-entry system has been obtained from sources that the Company
believes to be reliable (including DTC), but the Company takes no
responsibility for the accuracy thereof.
Neither the Company, the Trustee nor the Underwriters will
have any responsibility or obligation to Participants, or the
persons for whom they act as nominees, with respect to the
accuracy of the records of DTC, its nominee or any Participant
with respect to any ownership interest in the MAPS, or payments
to, or the providing of notice to Participants or beneficial
owners.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the MAPS will be made by the Underwriters in
immediately available funds. So long as the MAPS are represented
by Global Securities registered in the name of DTC or its
nominee, all payments of principal and interest will be made by
the Company in immediately available funds. In addition, so long
as the MAPS are represented by such Global Securities, the MAPS
will trade in DTC's Same-Day Funds Settlement System, and
secondary market trading activity in the MAPS will therefore be
required by DTC to settle in immediately available funds. No
assurance can be given as to the effect, if any, of settlement in
immediately available funds on trading activity in the MAPS.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
INTRODUCTION
The following is a summary of certain United States federal
income tax consequences of the purchase, ownership and
disposition of the MAPS and is based upon the Internal Revenue
Code of 1986, as amended (Code), Treasury regulations, rulings
and decisions now in effect, all of which are subject to change
(including changes in effective dates) or possible differing
interpretations. Unless otherwise stated, this summary deals
only with United States Holders (defined below) who are initial
purchasers and who hold the MAPS as capital assets within the
meaning of Code Section 1221. This summary does not purport to
deal with persons in special tax situations, such as financial
institutions, tax-exempt entities, insurance companies, regulated
investment companies, dealers in securities or currencies,
persons holding the MAPS as a hedge against currency risk or a
position in a "straddle" for tax purposes, or persons whose
functional currency is not the United States dollar. In addition,
this discussion only addresses the federal income tax
consequences of the MAPS until October 15, 2001. PERSONS
CONSIDERING THE PURCHASE OF THE MAPS SHOULD CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE APPLICATION OF UNITED STATES FEDERAL
INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY
CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
MAPS ARISING UNDER ANY OTHER TAX JURISDICTION.
Prospective investors should note that no rulings have been
or are expected to be sought from the Internal Revenue Service
(Service) with respect to any of the Federal income tax
considerations discussed below, and no assurance can be given
that the Service will not take contrary positions.
As used herein, the term "United States Holder" means a
beneficial owner of the MAPS that is for United States federal
income tax purposes (i) a citizen or resident of the United
States, (ii) a corporation, partnership or other entity created
or organized in or under the laws of the United States or of any
political subdivision thereof (other than a partnership that is
not treated as a United States person under any applicable
Treasury Regulations), (iii) an estate whose income is subject to
United States federal income tax regardless of its source, or
(iv) a trust if a court within the United States is able to
exercise primary supervision over the administration of the trust
and one or more United States persons have the authority to
control all substantial decisions of the trust. As used herein,
the term "Non-United States Holder" means a beneficial owner of
the MAPS that is not a United States Holder.
S-14
<PAGE>
UNITED STATES HOLDERS
Interest
For United States federal income tax purposes, the MAPS will
be regarded as indebtedness of the Company. However, the tax
accounting treatment of interest payable on the MAPS is not
entirely certain. The Company intends to treat the MAPS as
maturing on October 15, 2001. Based on this treatment, interest
on the MAPS 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 regular method of
accounting.
Sale or Disposition of the MAPS
Upon the sale, exchange or retirement of the MAPS, the
United States Holder generally will recognize gain or loss equal
to the difference between the amount realized on the sale,
exchange or retirement (excluding amounts attributable to accrued
but unpaid interest on the MAPS that the United States Holder has
not previously included in gross income) and such United States
Holder's adjusted tax basis in the MAPS. A United States
Holder's adjusted tax basis in the MAPS will equal the U.S.
Holder's cost therefor, reduced by any principal payments
received with respect to the MAPS. Such gain or loss will be
capital gain or loss, and will be long-term capital gain or loss
if at the time of the sale, exchange or retirement, the MAPS have
been held for more than one year. The net capital gains of
individuals are taxed, under certain circumstances, at lower
rates than ordinary income. The deductibility of capital losses
is subject to limitations.
Alternate Federal Income Tax Treatment
There can be no assurance that the Service will agree with,
or a court will uphold, the Company's treatment of the MAPS as
maturing on October 15, 2001, and it is possible that the Service
will assert an alternate treatment. For example, the Service may
seek to treat the MAPS as maturing on the Maturity Date. In such
case, Treasury regulations relating to contingent payment debt
obligations could be read to be applicable. The effect of such
regulations would be to require United States Holders, regardless
of their regular method of accounting, to accrue income based on
the "comparable yield" of the MAPS (i.e., the yield at which the
Company would issue a fixed rate debt instrument maturing on the
Maturity Date, with terms and conditions otherwise similar to
those of the MAPS) which could be higher than the stated interest
rate on the MAPS prior to October 15, 2001. As a result, United
States Holders could accrue income in excess of cash payments
actually received. Furthermore, any gain realized with respect
to the MAPS would generally be treated as ordinary income, and
any loss realized with respect to the MAPS would generally be
treated as ordinary loss to the extent of the United States
Holder's prior ordinary income inclusions with respect to the
MAPS.
NON-UNITED STATES HOLDERS
A Non-United States Holder will generally not be subject to
United States federal income tax on payments of interest
(including accruals under Treasury Regulations relating to
contingent payment debt obligations) on the MAPS , provided that
such interest is not effectively connected with a United States
trade or business of the Non-United States Holder, unless (i)
such Non-United States Holder owns, directly or indirectly, more
than 10% of the total combined voting power of the Company, (ii)
the Non-United States Holder is a controlled foreign corporation
that is related to the Company through stock ownership, or (iii)
the Non-United States Holder is a bank receiving interest
described in Code Section 881(c)(3)(A). A Non-United States
Holder qualifying under the above conditions will not be subject
to withholding on payments of interest if such person provides
the Company with a statement certifying that such person is not a
United States person (on Service Form W-8 or a substantially
similar form signed under penalties of perjury) or a financial
institution holding the MAPS on behalf of the beneficial owner
certifies, under penalties of perjury,that such financial
institution has received such statement and furnishes the Company
with a copy thereof.
A Non-United States Holder generally will not be subject to
United States federal income tax on any gain recognized upon the
sale, redemption or other disposition of the MAPS unless (i) such
gain is effectively connected with a United States trade or
business of the holder, (ii) in the case of an individual such
S-15
<PAGE>
Non-United States Holder is present in the United States for 183
or more days in the taxable year of the sale, redemption or other
disposition, or (iii) the MAPS are treated as subject to the
Treasury regulations relating to contingent payment debt
instruments discussed above.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Generally, information reporting will apply to certain
payments of principal and interest on the MAPS, including
proceeds of a sale of the MAPS to United States Holders, other
than certain exempt recipients within the meaning of applicable
Treasury regulations. United States Holders generally will not
be subject to backup withholding tax of 31% unless (i) the payee
fails to provide his or her taxpayer identification number to the
payor, (ii) the payee fails to provide certification as to exempt
status, or (iii) certain other conditions exist.
Non-United States Holders will not be subject to information
reporting or backup withholding on payments made by the Company
or its paying agent if such Non-United States Holder certifies to
the Company that such person is not a United States person on
Form W-8 or a substantially similar form signed under penalties
of perjury by the beneficial owner of the MAPS, and the Company
has no actual knowledge that the beneficial owner is a United
States person.
In addition, backup withholding and information reporting
will not apply to principal or interest on the MAPS paid or
collected by a foreign office of a custodian, nominee or other
foreign agent on behalf of a Non-United States Holder, or to the
proceeds of the sale of a MAPS paid by a foreign office of a
broker to a Non-United States Holder. If, however, such nominee,
custodian, agent or broker is, for United States federal income
tax purposes, a United States person, a controlled foreign
corporation or a foreign person that derives 50% or more of its
gross income for certain periods from the conduct of a United
States trade or business, or, beginning on January 1, 2000, if
such nominee, custodian, agent or broker is a foreign partnership
in which one or more United States persons own, in the aggregate,
more than 50% of the income or capital interests or if such
partnership is engaged in a United States trade or business, such
payments will not be subject to backup withholding but will be
subject to information reporting unless (i) such custodian,
nominee, agent or broker has documentary evidence that the
beneficial owner is not a United States person and certain other
conditions are met or (ii) the beneficial owner otherwise
establishes an exemption.
Backup withholding and information reporting will apply to
principal or interest on the MAPS paid to a Non-United States
Holder by a United States office of a custodian, nominee or
agent, or to the proceeds of the sale of a MAPS paid by the
United States office of a broker to a Non-United States Holder,
unless (i) the Non-United States Holder provides the statement
described above that such holder is not a United States person
and the payor does not have actual knowledge to the contrary or
(ii) the beneficial owner otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules will
be allowed as a credit or a refund against a holder's United
States federal income tax liability, provided that certain
required information is provided to the Service.
S-16
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the
Underwriting Agreement (Underwriting Agreement) dated October 14,
1998 among the Company and the several Underwriters named below
(Underwriters), the Company has agreed to sell to the
Underwriters, and the Underwriters have severally agreed to
purchase from the Company, the following respective principal
amounts of the MAPS:
Principal
Amount of
Underwriter MAPS
----------- ---------
Salomon Smith Barney Inc. . . . . . . . . $187,500,000
CIBC Oppenheimer Corp. . . . . . . . . . . 62,500,000
Lehman Brothers Inc. . . . . . . . . . . . 62,500,000
Morgan Stanley & Co. Incorporated . . . . 62,500,000
------------
Total . . . . . . . . . . . . . . . . $375,000,000
============
In the Underwriting Agreement, the Underwriters have agreed,
subject to the terms and conditions set forth therein, to
purchase all of the MAPS offered hereby if any MAPS are
purchased. The Underwriters have advised the Company that the
Underwriters propose to offer the MAPS to the public initially at
the offering price set forth on the cover page of this Prospectus
Supplement, and to certain dealers initially at such price less a
discount not in excess of 0.25% of the principal amount of the
MAPS. The Underwriters may allow, and such dealers may reallow,
a concession to certain other dealers not in excess of 0.25% of
the principal amount of the MAPS. After the initial offering of
the MAPS to the public, the public offering price and such
concessions may be changed. In addition, in consideration for
the right to require the mandatory tender of all outstanding MAPS
as described above, the Remarketing Dealer will pay to the
Company, on the same date the Underwriters pay the purchase price
for the MAPS, an amount equal to 2.17% of the principal amount of
the MAPS.
The MAPS are a new issue of securities with no established
trading market. The Company has been advised by the Underwriters
that the Underwriters intend to make a market in the MAPS, but
they 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 MAPS.
The Underwriters are permitted to engage in certain
transactions that maintain or otherwise affect the price of the
MAPS. Such transactions may include over-allotment transactions
and purchases to cover short positions created by the
Underwriters in connection with the offering. If the
Underwriters create a short position in the MAPS in connection
with the offering, i.e., if they sell MAPS in an aggregate
principal amount exceeding that set forth on the cover page of
this Prospectus Supplement, the Underwriters may reduce that
short position by purchasing MAPS in the open market.
In general, purchases of a security to reduce a short
position could cause the price of the security to be higher than
it might be in the absence of such purchases.
Neither the Company nor the Underwriters make any
representation or prediction as to the direction or magnitude of
any effect that the transactions described above may have on the
price of the MAPS. In addition, neither the Company nor the
Underwriters make any representation that the Underwriters will
engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
In the ordinary course of business, the Underwriters and
their affiliates have engaged and may in the future engage in
investment banking transactions with the Company and certain of
its affiliates.
The Company has agreed to indemnify the Underwriters and
certain other persons against certain liabilities, including
liabilities under the Securities Act, or to make contribution to
certain payments in respect thereof.
S-17
<PAGE>
LEGAL OPINIONS
The validity of the MAPS will be passed upon for the Company
by Worsham, Forsythe & Wooldridge, L.L.P., Dallas, Texas, General
Counsel to the Company, and Thelen Reid & Priest LLP, New York,
New York, of counsel to the Company, and for the Underwriters by
Winthrop, Stimson, Putnam & Roberts, New York, New York. Certain
federal income tax matters will be passed upon for the Company by
Thelen Reid & Priest LLP.
EXPERTS
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 herein 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 the Company's 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 the
Company's 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 Securities 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 Securities
Act with respect to the Securities prepared or certified by an
accountant within the meaning of Sections 7 and 11 of the
Securities Act.
The consolidated financial statements of TEG as of September
30, 1996, and for each of the three years in the period then
ended, and as of March 31, 1997, and for the six-months then
ended, appearing in Amendment No. 1 to the Company's Current
Report on Form 8-K dated May 19, 1998, have been audited by Ernst
& Young, independent auditors, as set forth in their report
thereon included therein and incorporated herein by reference in
reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
S-18
<PAGE>
PROSPECTUS
$2,070,000,000
TEXAS UTILITIES COMPANY
DEBT SECURITIES, COMMON STOCK,
STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS
Texas Utilities Company (Company), directly or through such
agents, dealers or underwriters as may be designated from time to
time, may offer, issue and sell, together or separately, (i) its
debt securities (Debt Securities), (ii) shares of its common
stock, without par value (Common Stock), (iii) contracts to
purchase shares of Common Stock (Stock Purchase Contracts) and
(iv) units, each representing ownership of a Stock Purchase
Contract and Debt Securities or debt obligations of third
parties, including U.S. Treasury securities, pledged to secure
the holder's obligation to purchase Common Stock under the Stock
Purchase Contracts (Stock Purchase Units).
The Debt Securities, Common Stock, Stock Purchase Contracts
and Stock Purchase Units are herein collectively referred to as
the "Securities," and Securities having an aggregate public
offering price of up to $2,070,000,000 (or its equivalent in
foreign currencies or foreign currency units based on the
applicable exchange rate at the time of offering) will be issued
in amounts, at prices and on terms to be determined at the time
of sale.
The form in which the Securities are to be issued, their
specific designation, aggregate principal amount or aggregate
initial offering price, maturity, if any, rate and times of
payment of interest or dividends, if any, redemption, conversion,
and sinking fund terms or other rights, if any, exercise price
and detachability, if any, and other specific terms may also be
set forth in a Prospectus Supplement, together with the terms of
an offering of such Securities. Any such Prospectus Supplement
will also contain information, as applicable, about certain
material United States Federal income tax considerations relating
to the particular Securities offered thereby.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMIS-
SION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The Securities may be sold directly by the Company, through
agents designated from time to time or to or through underwriters
or dealers. The Company reserves the sole right to accept, and
together with its agents, from time to time, to reject in whole
or in part any proposed purchase of Securities to be made
directly or through agents. If any agents or underwriters are
involved in the sale of any Securities, the names of such agents
or underwriters and any applicable fees, commissions or discounts
will be set forth in Prospectus Supplement with respect to such
Securities (Prospectus Supplement). See PLAN OF DISTRIBUTION.
This Prospectus may not be used to consummate any sale of
Securities unless accompanied by a Prospectus Supplement.
The Common Stock of the Company is listed on the New York,
Chicago and Pacific stock exchanges under the symbol "TXU". Any
Prospectus Supplement will also contain information, where
applicable, as to any other listing on a securities exchange of
the Securities covered by such Prospectus Supplement.
The date of this Prospectus is June 29, 1998
<PAGE>
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN
AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR INCORPORATED
HEREIN BY REFERENCE IN CONNECTION WITH THE OFFERING DESCRIBED
HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY UNDERWRITER, DEALER OR AGENT INVOLVED IN
THE OFFERING DESCRIBED HEREIN. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY
ANY SECURITIES OTHER THAN THOSE SPECIFICALLY OFFERED HEREBY OR OF
ANY SECURITIES OFFERED HEREBY IN ANY JURISDICTION WHERE, OR TO
ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
AVAILABLE INFORMATION
On August 5, 1997, the Company became a holding company
which owns all of the outstanding common stock of Texas Energy
Industries, Inc. (formerly Texas Utilities Company) (TEI)
(Commission File No. 1-3591) and ENSERCH Corporation (ENSERCH)
(Commission File No. 1-3183). The Company is, and TEI and
ENSERCH have been, subject to the informational requirements of
the Securities and Exchange Act of 1934, as amended (Exchange
Act), and in accordance therewith the Company files, and its
predecessors have filed, reports, proxy statements and other
information with the Commission. Such reports, proxy statements
and other information filed by the Company and its predecessors
can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the following Regional
Offices of the Commission: Chicago Regional Office, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661; and New York
Regional Office, 7 World Trade Center, Suite 1300, New York, New
York 10048. Copies of such material can also be obtained from
the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. In
addition, the Commission maintains a World Wide Web site
(http://www.sec.gov) that contains reports and other information
filed by the Company, TEI and ENSERCH. The Common Stock of the
Company is listed on the New York, Chicago and Pacific stock
exchanges, where reports, proxy statements and other information
concerning the Company and TEI may be inspected. Reports, proxy
statements and other information concerning ENSERCH may be
inspected at the New York and Chicago stock exchanges.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents, previously filed with the
Commission (Commission File No. 1-12833), pursuant to the
Exchange Act, are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the year
ended December 31, 1997 (1997 10-K).
2. The Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998.
3. The Company's Current Reports on Form 8-K dated February
26, 1998, March 13, 1998, April 8, 1998, April 9, 1998, April 17,
1998 and May 27, 1998 (as amended on June 25, 1998).
All documents filed by the Company pursuant to the Exchange
Act after the date of filing of the Registration Statement in
which this Prospectus is included and prior to effectiveness of
such Registration Statement shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the
date of filing of such documents. All documents filed by the
Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this Prospectus and prior to the
termination of the offering hereunder shall be deemed to be
incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such documents; provided,
-2-
<PAGE>
however, that the documents enumerated above or subsequently
filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act prior to the filing with the Commission
of the Company's most recent Annual Report on Form 10-K shall not
be incorporated by reference in this Prospectus or be a part
hereof from and after the filing of such Annual Report on Form
10-K. The documents which are incorporated by reference in this
Prospectus are sometimes hereinafter referred to as the
"Incorporated Documents."
Any statement contained in an Incorporated Document shall be
deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in
any other subsequently filed document which is deemed to be
incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute
a part of this Prospectus.
THE COMPANY HEREBY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO
EACH PERSON, INCLUDING ANY BENEFICIAL OWNER OF SECURITIES, TO
WHOM A COPY OF THIS PROSPECTUS HAS BEEN DELIVERED, ON THE WRITTEN
OR ORAL REQUEST OF ANY SUCH PERSON, A COPY OF ANY AND ALL OF THE
INCORPORATED DOCUMENTS, OTHER THAN EXHIBITS TO SUCH DOCUMENTS
(UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE
INTO SUCH DOCUMENTS) AND ANY APPLICABLE INDENTURE AND OFFICER'S
CERTIFICATE, EACH AS DESCRIBED HEREIN. REQUESTS FOR SUCH COPIES
SHOULD BE DIRECTED TO: SECRETARY, TEXAS UTILITIES COMPANY,
ENERGY PLAZA, 1601 BRYAN STREET, DALLAS, TEXAS 75201; TELEPHONE
NUMBER (214) 812-4600.
THE COMPANY
The Company is a Texas corporation organized in 1996 for the
purpose of becoming the holding company for TEI, formerly Texas
Utilities Company, and ENSERCH upon the mergers of TEI and
ENSERCH with wholly owned subsidiaries of the Company.
TEI, a Texas corporation, is a holding company whose
principal subsidiary, Texas Utilities Electric Company (TU
Electric), is an operating public utility company engaged in the
generation, purchase, transmission, distribution and sale of
electric energy in the north central, eastern and western
portions of Texas, an area with a population estimated at
6,020,000. TU Electric's operating revenues and consolidated net
income available for common stock for the twelve months ended
December 31, 1997 were $6,135,417,000 and $745,024,000,
respectively. TU Electric's total capitalization at December 31,
1997 was $12,798,832,000. Two other subsidiaries of TEI are
engaged directly or indirectly in electric utility operations:
(i) Southwestern Electric Service Company (SESCO), which is
engaged in the purchase, transmission, distribution and sale of
electric energy in ten counties in the eastern and central parts
of Texas, with a population estimated at 126,900 and (ii) Texas
Utilities Australia Pty. Ltd. (TU Australia), which in 1995
acquired the common stock of Eastern Energy Limited, a company
engaged in the purchase, distribution, marketing and sale of
electric energy to approximately 489,000 customers in the
Melbourne area of Australia. Neither SESCO nor Eastern Energy
Limited generates any electricity. In November 1997, the Company
consummated the acquisition of Lufkin Conroe Communications Co.
(LCC), a privately held, independent local exchange telephone
company, which subsequently became a subsidiary of TEI. LCC has
sixteen exchanges that serve approximately 100,000 access lines
in the Alto, Conroe and Lufkin areas of southeast Texas and also
provides access services to a number of interexchange carriers
who provide long distance services. TEI also has other wholly
owned subsidiaries which perform specialized functions within the
Texas Utilities Company system.
ENSERCH, a Texas corporation, is an integrated company
focused on natural gas. ENSERCH operates primarily in the north
central and eastern parts of Texas. Its major business
operations are natural gas pipeline, processing, marketing and
distribution. Through these business operations, ENSERCH is
engaged in owning and operating interconnected natural gas
transmission lines, underground storage reservoirs, compressor
stations and related properties in Texas; gathering and
processing natural gas to remove impurities and extract liquid
-3-
<PAGE>
hydrocarbons for sale, and the wholesale and retail marketing of
natural gas in several areas of the United States, and owning and
operating approximately 550 local gas utility distribution
systems in Texas.
In March 1998, the Company announced an offer by its wholly
owned subsidiary, TU Acquisitions PLC (TU Acquisitions), to
acquire 100% of the ordinary shares of The Energy Group PLC
(TEG), including the ordinary shares evidenced by American
Depository Receipts, for L8.40 per share. Under the Company's
offer, up to 20% of the TEG shares may be exchanged for Company
Common Stock with a value of approximately L8.65 per TEG share.
TEG is the holding company for The Eastern Group PLC, which is
one of the largest regional electric companies in the United
Kingdom (U.K.), one of the largest U.K. generators of electricity
and one of the largest U.K. suppliers of natural gas. On May 19,
1998, the Company declared its offer unconditional. At June 22,
1998 the Company had acquired approximately 94.43% of TEG's
issued share capital and is in the process of acquiring the
remaining shares.
The TEG businesses acquired by the Company (which exclude
TEG's Peabody Coal and Citizens Power businesses, which were sold
by TEG to an unaffiliated party in connection with the Company's
offer) had assets of approximately $10.2 billion at September 30,
1997 and $5.5 billion of revenues for the twelve months ended
December 31, 1997. Such businesses had debt outstanding at
September 30, 1997 of approximately $3.8 billion. The estimated
purchase price for the TEG shares is approximately $7.2 billion.
The Company and TU Acquisitions and other intermediate U.K.
holding companies have entered into credit facilities with
banking institutions in the United States (U.S.) and the U.K.,
respectively, which will provide committed financing sufficient
to purchase the outstanding TEG shares and pay related expenses.
In February 1998, the Company announced an offer through its
wholly-owned subsidiary, TU Australia, to acquire Allgas Energy
Limited (Allgas), a publicly held gas distribution company in
Queensland, Australia. The original offer, a combined cash and
option offer of approximately $138 million, which was increased
to approximately $145 million in April 1998, is subject to
acceptance by holders of at least 51% of Allgas outstanding
shares and the waiver by the Queensland government of the current
12.5% limit on individual share holdings in Allgas. The
Queensland government has announced that this limitation will be
lifted on July 1, 1998. TU Australia has acquired 12.49% of the
outstanding shares of Allgas. The Company's bid has already
received all necessary Australian and U.S. regulatory approvals.
Two competing bids are still outstanding. One competing bid is
at a lower price than TU Australia's and the other is at a higher
price. Both competing bids are subject to additional regulatory
approvals. Shareholders of Allgas now have through July 10, 1998
to accept the Company's offer. The offer will be funded by TU
Australia's cash flows and bank lines.
The principal executive offices of the Company are located
at 1601 Bryan Street, Dallas, Texas 75201-3411; the telephone
number is (214) 812-4600.
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, including the repayment of short-term
indebtedness incurred in connection with the purchase of TEG
shares.
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for each of the years
ended December 31, 1993 through 1997 and the twelve months ended
March 31, 1998 was 1.89, 2.29, 0.84, 2.39, 2.25 and 2.24,
respectively. The twelve-month period ended December 31, 1993
was affected by the recording of regulatory disallowances of
approximately $265 million after tax in TU Electric's Docket
11735. The twelve-month period ended December 31, 1995 was
-4-
<PAGE>
affected by the impairment of several nonperforming assets,
including TU Electric'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
impairment, on an after-tax basis, amounted to $802 million. The
twelve-month period ended December 31, 1997 includes a one time
base revenue refund of $80 million as a result of a settlement
with the Public Utility Commission of Texas.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued in one or more series
under an indenture or indentures (each an Indenture) between the
Company and The Bank of New York or other financial institutions
to be named, as Trustee (each an Indenture Trustee), a form of
which is filed as an exhibit to the Registration Statement of
which this Prospectus forms a part. The following description of
the terms of the Debt Securities does not purport to be complete
and is qualified in its entirety by reference to (i) the
respective Indenture and (ii) one or more officer's certificates
establishing the Debt Securities to which a form of Debt Security
will be attached. Whenever particular provisions or defined
terms in an Indenture are referred to under this DESCRIPTION OF
DEBT SECURITIES, such provisions or defined terms are
incorporated by reference herein.
General. Each Indenture will provide for the issuance of
Debt Securities in an unlimited amount from time to time. All
Debt Securities will be unsecured obligations of the Company.
All Debt Securities issued under an Indenture will rank equally
and ratably with all other Debt Securities issued under such
Indenture. An Indenture will not limit other unsecured debt.
The Company's financial statements included in the Incorporated
Documents show the amount of such other debt at the date of such
statements. See the Prospectus Supplement applicable to each
series of offered Debt Securities.
The applicable Prospectus Supplement or Prospectus
Supplements will describe the following terms of the Debt
Securities: (1) the title of the Debt Securities; (2) any limit
upon the aggregate principal amount of the Debt Securities; (3)
the date or dates on which the principal of the Debt Securities
is payable or the method of determination thereof; (4) the rate
or rates, if any, or the method by which such rate will be
determined, at which the Debt Securities will bear interest, if
any, the date or dates from which any such interest will accrue,
the Interest Payment Dates on which any such interest will be
payable, the Regular Record Date for any interest payable on any
Interest Payment Date and the Person or Persons to whom interest
on such Debt Securities will be payable on any Interest Payment
Date, if other than the Persons in whose names such Debt
Securities are registered at the close of business on the Regular
Record Date for such interest; (5) any right under the Indenture
to extend the interest payment period from time to time on the
Debt Securities; (6) the place or places where, subject to the
terms of the respective Indenture as described below under
"Payment and Paying Agents," the principal of and premium, if
any, and interest on the Debt Securities will be payable and
where, subject to the terms of such Indenture as described below
under "Registration and Transfer," the Debt Securities may be
presented for registration of transfer or exchange and the place
or places where notices and demands to or upon the Company in
respect of the Debt Securities and such Indenture may be served;
the Security Registrar for such Debt Securities; and, if such is
the case, that the principal of such Debt Securities will be
payable without presentment or surrender thereof; (7) the period
or periods within, or date or dates on, which, the price or
prices at which and the terms and conditions upon which Debt
Securities may be redeemed, in whole or in part, at the option of
the Company; (8) the obligation or obligations, if any, of the
Company to redeem or purchase any of the Debt Securities pursuant
to any sinking fund or other mandatory redemption provisions or
at the option of the Holder thereof, and the period or periods
within which, or the date or dates on which, the price or prices
at which and the terms and conditions upon which the Debt
Securities will be redeemed or purchased, in whole or in part,
pursuant to such obligation, and applicable exceptions to the
requirements of a notice of redemption in the case of mandatory
redemption or redemption at the option of the Holder; (9) the
denominations in which any Debt Securities will be issuable, if
other than denominations of $1,000 and any integral multiple
thereof; (10) the currency or currencies, including composite
-5-
<PAGE>
currencies in which the principal of or any premium or interest
on the Debt Securities will be payable (if other than in
Dollars); (11) if the principal of or any premium or interest on
the Debt Securities is to be payable, at the election of the
Company or the Holder thereof, in a coin or currency other than
that in which the Debt Securities are stated to be payable, the
period or periods within which and the terms and conditions upon
which, such election is to be made; (12) if the principal of or
premium or interest on the Debt Securities is to be payable, or
is to be payable at the election of the Company or a Holder
thereof, in securities or other property, the type and amount of
such securities or other property, or the method or other means
by which such amount will be determined, and the period or
periods within which, and the terms and conditions upon which,
any such election may be made; (13) if the amount payable in
respect of principal of or any premium or interest on the Debt
Securities may be determined with reference to an index or other
fact or event ascertainable outside of the respective Indenture,
the manner in which such amounts will be determined; (14) if
other than the principal amount thereof, the portion of the
principal amount of the Debt Securities which will be payable
upon declaration of acceleration of the Maturity thereof; (15)
any Events of Default, in addition to those specified in the
respective Indenture, with respect to the Debt Securities and any
covenants of the Company for the benefit of the Holders of the
Debt Securities, in addition to those specified in such
Indenture; (16) the terms, if any, pursuant to which the Debt
Securities may be converted into or exchanged for shares of
capital stock or other securities of the Company or any other
Person; (17) the obligations or instruments, if any, which will
be considered to be Eligible Obligations in respect of such Debt
Securities denominated in a currency other than Dollars or in a
composite currency, and any additional or alternative provisions
for the reinstatement of the Company's indebtedness in respect of
such Debt Securities after the satisfaction and discharge
thereof; (18) if the Debt Securities are to be issued in global
form, (i) any limitations on the rights of the Holder or Holders
of such Debt Securities to transfer or exchange the same or to
obtain the registration of transfer thereof, (ii) any limitations
on the rights of the Holder or Holders thereof to obtain
certificates therefor in definitive form in lieu of temporary
form and (iii) any and all other matters incidental to such Debt
Securities; (19) if the Debt Securities are to be issuable as
bearer securities, any and all matters incidental thereto; (20)
to the extent not addressed in item (18) above, any limitations
on the rights of the Holders of the Debt Securities to transfer
or exchange the Debt Securities or to obtain the registration of
transfer thereof, and if a service charge will be made for the
registration of transfer or exchange of the Debt Securities, the
amount or terms thereof; (21) any exceptions to the provisions
governing payments due on legal holidays or any variations in the
definition of Business Day with respect to such Debt Securities;
(22) any collateral security, assurance or guarantee for the Debt
Securities; (23) the non-applicability of the limitation on liens
provisions to the Debt Securities; (24) any rights or duties of
another Person to assume the obligations of the Company with
respect to the Debt Securities and any rights or duties to
discharge and release any obligor with respect to such Debt
Securities or the Indenture to the extent related to such Debt
Securities; and (25) any other terms of the Debt Securities, not
inconsistent with the provisions of the respective Indenture
(Indenture, Section 301).
Debt Securities may be sold at a discount below their
principal amount. Certain special United States federal income
tax considerations, if any, applicable to Debt Securities sold at
an original issue discount may be described in the applicable
Prospectus Supplement. In addition, certain special United States
federal income tax or other considerations, if any, applicable to
any Debt Securities which are denominated in a currency or
currency unit other than Dollars may be described in the
applicable Prospectus Supplement.
Except as may otherwise be described in the applicable
Prospectus Supplement, the covenants contained in an Indenture
will not afford Holders of Debt Securities protection in the
event of a highly-leveraged transaction involving the Company.
Payment and Paying Agents. Except as may be provided in the
applicable 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 relating to such
Interest Payment Date; provided, however, that interest payable
at maturity (whether at stated maturity, upon redemption or
otherwise, herein a Maturity) will be paid to the Person to whom
principal is paid. However, if there has been a default in the
payment of interest on any Debt Security, such defaulted interest
-6-
<PAGE>
may be payable to the Holder of such Debt Security as of the
close of business on a date selected by the respective Indenture
Trustee which is not more than 15 days and not less than 10 days
prior to the date proposed by the Company for payment on such
defaulted interest or in any other lawful manner not inconsistent
with the requirements of any securities exchange on which such
Debt Security may be listed, if such Indenture Trustee deems such
manner of payment practicable (Indenture, Section 307).
Unless otherwise specified in the applicable Prospectus
Supplement, the principal of and 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 the Company. The Company may change the Place of Payment on
the Debt Securities, may appoint one or more additional Paying
Agents (including the Company) and may remove any Paying Agent,
all at its discretion (Indenture, Section 602).
Registration and Transfer. Unless otherwise specified in
the applicable 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 of like tenor and
aggregate principal amount, at the corporate trust office of The
Bank of New York in The City of New York, as Security Registrar
for the Debt Securities. The Company may change the place for
registration of transfer and exchange of the Debt Securities and
may designate one or more additional places for such registration
and exchange, all at its discretion. Except as otherwise provided
in the applicable Prospectus Supplement, no service charge will
be made for any transfer or exchange of the Debt Securities, but
the Company may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of the
Debt Securities. The Company 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 in whole or in part, except the unredeemed portion
of any Debt Security being redeemed in part (Indenture, Section
305).
Defeasance. The principal amount of any series of Debt
Securities issued under an Indenture will be deemed to have been
paid for purposes of such Indenture and the entire indebtedness
of the Company in respect thereof will be deemed to have been
satisfied and discharged if there shall have been irrevocably
deposited with the respective Indenture Trustee or any paying
agent, in trust: (a) money in an amount which will be
sufficient, or (b) in the case of a deposit made prior to the
maturity of the Debt Securities, Eligible Obligations (as defined
below), the principal of and the interest on which when due,
without any regard to reinvestment thereof, will provide moneys
which, together with the money, if any, deposited with or held by
such Indenture Trustee, will be sufficient, or (c) a combination
of (a) and (b) which will be sufficient, to pay when due the
principal of and premium, if any, and interest, if any, due and
to become due on the Debt Securities of such series that are
Outstanding. For this purpose, Eligible Obligations include
direct obligations of, or obligations unconditionally guaranteed
by, the United States of America entitled to the benefit of the
full faith and credit thereof and certificates, depositary
receipts or other instruments which evidence a direct ownership
interest in such obligations or in any specific interest or
principal payments due in respect thereof and which do not
contain provisions permitting the redemption or other prepayment
thereof at the option of the issuer thereof (Indenture, Section
701).
Limitiation on Liens. The Indenture provides that, except as
otherwise specified with respect to a particular series of Debt
Securities, so long as any Debt Securities of any series are
Outstanding, the Company 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 (hereinafter defined) now or hereafter owned by the
Company to secure any Indebtedness (hereinafter defined), without
making effective provision whereby the Outstanding Debt
Securities shall (so long as such other Indebtedness shall be so
secured) be equally and ratably secured with any and all such
other Indebtedness and any other indebtedness similarly entitled
to be equally and ratably secured. This restriction does not
apply to, or prevent the creation or existence of, (i) any
mortgage, pledge, security interest, lien or encumbrance upon any
such capital stock created at the time of the acquisition of such
capital stock by the Company or within one year after such time
to secure all or a portion of the purchase price for such capital
-7-
<PAGE>
stock; (ii) any mortgage, pledge, security interest, lien or
encumbrance upon any such capital stock existing thereon at the
time of the acquisition thereof by the Company (whether or not
the obligations secured thereby are assumed by the Company); or
(iii) any extension, renewal or refunding of any mortgage,
pledge, security interest, lien or encumbrance described in (i)
or (ii) above on capital stock of any Subsidiary theretofore
subject thereto (or substantially the same capital stock) or any
portion thereof. In addition, this restriction will not apply
to, and there will be excluded in computing secured Indebtedness
for the purpose of such restriction, Indebtedness secured by any
judgment, levy, execution, attachment or other similar lien
arising in connection with court proceedings, provided that
either (i) the execution or enforcement of each such 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; (ii) the
payment of each such lien is covered in full by insurance and the
insurance company has not denied or contested coverage thereof;
or (iii) 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
such proceedings may be initiated shall not have expired
(Indenture, Section 608).
For purposes of the restriction described in the preceding
paragraph, "Indebtedness" means (i) all indebtedness, whether or
not represented by bonds, debentures, notes or other securities,
created or assumed by the Company for the repayment of money
borrowed; (ii) all indebtedness for money borrowed secured by a
lien upon property owned by the Company and upon which
indebtedness for money borrowed the Company customarily pays
interest, although the Company has not assumed or become liable
for the payment of such indebtedness for money borrowed; and
(iii) all indebtedness of others for money borrowed which is
guaranteed as to payment of principal by the Company or in effect
guaranteed by the Company through a contingent agreement to
purchase such indebtedness for money borrowed, but excluding from
this definition any other contingent obligation of the Company in
respect of indebtedness for money borrowed or other obligations
incurred by others (Indenture, Section 608). "Subsidiary" means
a corporation more than 50% of the outstanding voting stock of
which is owned, directly or indirectly, by the Company or by one
or more other Subsidiaries, or by the Company and 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 (Indenture, Section 101).
Notwithstanding the foregoing, except as otherwise specified
in the Officer's Certificate with respect to a particular series
of Debt Securities, the Company 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 second preceding paragraph) upon, capital stock of any
Subsidiary now or hereafter owned by the Company 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 obtained by adding (i) Consolidated Shareholders'
Equity, (ii) Consolidated Indebtedness for money borrowed
(exclusive of any thereof which is due and payable within one
year of the date such sum is determined) and, without
duplication, (iii) any preference or preferred stock of the
Company or any Consolidated Subsidiary which is subject to
mandatory redemption or sinking fund provisions (Indenture,
Section 608).
The term "Consolidated Shareholders' Equity" (as used above)
means the total Assets of the Company and its Consolidated
Subsidiaries less all liabilities of the Company and its
Consolidated Subsidiaries. As used in the foregoing definition,
"liabilities" means all obligations which would, in accordance
with generally accepted accounting principles in the United
States, be classified on a balance sheet as liabilities,
including without limitation, (i) indebtedness secured by
property of the Company or any of its Consolidated Subsidiaries
whether or not the Company or such Consolidated Subsidiary is
liable for the payment thereof unless, in the case that the
Company or such Consolidated Subsidiary is not so liable, such
property has not been included among the Assets of the Company or
such Consolidated Subsidiary on such balance sheet, (ii) deferred
liabilities and (iii) indebtedness of the Company or any of its
Consolidated Subsidiaries that is expressly subordinated in right
-8-
<PAGE>
and priority of payment to other liabilities of the Company or
such Consolidated Subsidiary. As used in this definition,
"liabilities" includes preference or preferred stock of the
Company 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 (Indenture, Section 608).
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 the Company 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 the
Company and its Consolidated Subsidiaries (Indenture, Section
608).
As of December 31, 1997, the Consolidated Capitalization of
the Company was $16,802,381,000.
Assignment of Obligations. The Company may assign its
obligations under any series of the Debt Securities to a directly
or indirectly wholly-owned subsidiary of the Company pursuant to
a written assumption of such obligations by such 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. As
conditions to such assumption, the subsidiary assuming such
obligations will be required to deliver to the Trustee and to the
Company an assumption agreement and a supplemental indenture
satisfactory in form and substance to the Trustee pursuant to
which such subsidiary (i) assumes, on a full recourse basis, the
Company's obligations on the Debt Securities and the obligations
under the Indenture relating to the Debt Securities, and
(ii) agrees that any covenants made by the Company with respect
to such Debt Securities will become solely covenants of, and
shall relate to, such subsidiary.
At the time of such assumption the Company will
unconditionally guarantee payment of such series of Debt
Securities and will execute a guarantee in form and substance
satisfactory to the Trustee. Pursuant to such guarantee, the
Company will fully and unconditionally guarantee the payment of
the obligations of the assuming subsidiary under the Debt
Securities and under the Indenture relating to the Debt
Securities, including, without limitation, payment, as and when
due, of the principal of, premium, if any, and interest on, the
Debt Securities. The Company will be released and discharged
from all its other obligations under the Indenture.
Consolidation, Merger, and Sale of Assets. Under the terms
of an Indenture, the Company 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
(i) the entity formed by such consolidation or into which the
Company is merged or the entity which acquires by conveyance or
transfer, or which leases, the property and assets of the Company
substantially as an entirety shall be a entity organized and
validly existing under the laws of any domestic jurisdiction and
such entity expressly assumes the Company's obligations on all
Debt Securities and under such Indenture, (ii) immediately after
giving effect to the transaction, no Event of Default, and no
event which, after notice or lapse of time or both, would become
an Event of Default, shall have occurred and be continuing, and
(iii) the Company shall have delivered to the respective
Indenture Trustee an Officer's Certificate and an Opinion of
Counsel as provided in such Indenture (Indenture, Section 1101).
The terms of an Indenture will not restrict the Company in a
merger in which the Company is the surviving entity.
-9-
<PAGE>
Events of Default. Each of the following will constitute an
Event of Default under the Indenture with respect to the Debt
Securities of any series: (a) failure to pay any interest on the
Debt Securities of such series within 30 days after the same
becomes due and payable; (b) failure to pay principal or premium,
if any, on the Debt Securities of such series when due and
payable; (c) failure to perform, or breach of, any other covenant
or warranty of the Company in such Indenture (other than a
covenant or warranty of the Company in such Indenture solely for
the benefit of one or more series of Debt Securities other than
such series) for 90 days after written notice to the Company by
the respective Indenture Trustee, or to the Company and such
Indenture Trustee by the Holders of at least 33% in principal
amount of the Debt Securities of such series Outstanding under
such Indenture as provided in such Indenture; (d) the entry by a
court having jurisdiction in the premises of (1) a decree or
order for relief in respect of the Company in an involuntary case
or proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or (2) a decree
or order adjudging the Company a bankrupt or insolvent, or
approving as properly filed a petition by one or more Persons
other than the Company seeking reorganization, arrangement,
adjustment or composition of or in respect of the Company under
any applicable federal or state law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other
similar official for the Company or for any substantial part of
its property, or ordering the winding up or liquidation of its
affairs, and any such decree or order for relief or any such
other decree or order shall have remained unstayed and in effect
for a period of 90 consecutive days; and (e) the commencement by
the Company of a voluntary case or proceeding under any
applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the
consent by it to the entry of a decree or order for relief in
respect of the Company in a case or other similar proceeding or
to the commencement of any bankruptcy or insolvency case or
proceeding against it under any applicable federal or state law
or the filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable federal or state
law, or the consent by it to the filing of such petition or to
the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or similar official
of the Company of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or
the admission by it in writing of its inability to pay its debts
generally as they become due, or the authorization of such action
by the Board of Directors (Indenture, Section 801).
An Event of Default with respect to the Debt Securities of a
particular series may not necessarily constitute an Event of
Default with respect to Debt Securities of any other series
issued under the same Indenture or Debt Securities issued under
any other Indenture.
Remedies. If an Event of Default due to the default in
payment of principal of or interest on any series of Debt
Securities or due to the default in the performance or breach of
any other covenant or warranty of the Company applicable to the
Debt Securities of such series but not applicable to all series
of Debt Securities issued under the same Indenture occurs and is
continuing, then either the respective Indenture Trustee or the
Holders of not less than 33% in principal amount of the
outstanding Debt Securities of such series may declare the
principal of all of the Debt Securities of such series and
interest accrued thereon to be due and payable immediately. If
an Event of Default due to the default in the performance of any
other covenants or agreements in an Indenture applicable to all
Outstanding Debt Securities under such Indenture or due to
certain events of bankruptcy, insolvency or reorganization of the
Company has occurred and is continuing, either the respective
Indenture Trustee or the Holders of not less than 33% in
principal amount of all such Outstanding Debt Securities,
considered as one class, and not the Holders of the Debt
Securities of any one of such series, may make such declaration
of acceleration.
At any time after the 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 or Events of Default giving rise to such
declaration of acceleration will, without further act, be deemed
to have been waived, and such declaration and its consequences
will, without further act, be deemed to have been rescinded and
annulled, if:
-10-
<PAGE>
(a) the Company has paid or deposited with the respective
Indenture Trustee a sum sufficient to pay
(1) all overdue interest on all Debt Securities of
such series;
(2) the principal of and premium, if any, on any Debt
Securities of such series which have become due otherwise
than by such declaration of acceleration and interest
thereon at the rate or rates prescribed therefor in such
Debt Securities;
(3) interest upon overdue interest at the rate or
rates prescribed therefor in such Debt Securities, to the
extent that payment of such interest is lawful; and
(4) all amounts due to such Indenture Trustee under
the respective Indenture; and
(b) any other Event or Events of Default with respect to
Debt Securities of such series, other than the nonpayment of the
principal of the Debt Securities of such series which has become
due solely by such declaration of acceleration, have been cured
or waived as provided in such Indenture (Indenture, Section 802).
There is no automatic acceleration, even in the event of
bankruptcy, insolvency or reorganization of the Company.
Subject to the provisions of an Indenture relating to the
duties of the Indenture Trustee in case an Event of Default shall
occur and be continuing, the respective Indenture Trustee will be
under no obligation to exercise any of its rights or powers under
such Indenture at the request or direction of any of the Holders,
unless such Holders shall have offered to such Indenture Trustee
reasonable security or indemnity (Indenture, Section 903). If an
Event of Default has occurred and is continuing in respect of a
series of Debt Securities, subject to such provisions for the
indemnification of such Indenture Trustee, the Holders of a
majority in principal amount of the Outstanding Debt Securities
of such series will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to
such Indenture Trustee, or exercising any trust or power
conferred on such Indenture Trustee, with respect to the Debt
Securities of such series; provided, however, that if an Event of
Default occurs and is continuing with respect to more than one
series of Debt Securities under an Indenture, the Holders of a
majority in aggregate principal amount of the Outstanding Debt
Securities of all such series, considered as one class, will have
the right to make such direction, and not the Holders of the Debt
Securities of any one of such series; and provided, further, that
such direction will not be in conflict with any rule of law or
with such Indenture (Indenture, Section 812).
No Holder of Debt Securities of any series will have any
right to institute any proceeding with respect to the respective
Indenture, or for the appointment of a receiver or a trustee, or
for any other remedy thereunder, unless (i) such Holder has
previously given to the respective Indenture Trustee written
notice of a continuing Event of Default with respect to the Debt
Securities of such series, (ii) the Holders of a majority in
aggregate principal amount of the Outstanding Debt Securities of
all series under such Indenture in respect of which an Event of
Default shall have occurred and be continuing, considered as one
class, have made written request to such Indenture Trustee, and
such Holder or Holders have offered reasonable indemnity to such
Indenture Trustee to institute such proceeding in respect of such
Event of Default in its own name as trustee and (iii) such
Indenture Trustee has failed to institute any proceeding, and has
not received from the Holders of a majority in aggregate
principal amount of the Outstanding Debt Securities of such
series a direction inconsistent with such request, within 60 days
after such notice, request and offer (Indenture, Section 807).
However, such limitations do not apply to a suit instituted by a
Holder of a Debt Security for the enforcement of payment of the
principal of or any premium or interest on such Debt Security on
or after the applicable due date specified in such Debt Security
(Indenture, Section 808).
The Company will be required to furnish to each Indenture
Trustee annually a statement by an appropriate officer as to such
officer's knowledge of the Company's compliance with all
conditions and covenants under the respective Indenture, such
compliance to be determined without regard to any period of grace
or requirement of notice under such Indenture (Indenture, Section
606).
-11-
<PAGE>
Modification and Waiver. Without the consent of any Holder
of Debt Securities, the Company and the Indenture Trustee under
an Indenture may enter into one or more supplemental indentures
for any of the following purposes: (a) to evidence the assumption
by any permitted successor to the Company of the covenants of the
Company in such Indenture and in any of the Debt Securities
Outstanding under such Indenture; or (b) to add one or more
covenants of the Company or other provisions for the benefit of
all Holders or for the benefit of the Holders of, or to remain in
effect only so long as there shall be Outstanding, Debt
Securities of one or more specified series, or one or more
specified Tranches thereof, or to surrender any right or power
conferred upon the Company by such Indenture; or (c) to add any
additional Events of Default with respect to Outstanding Debt
Securities; or (d) to change or eliminate any provision of such
Indenture or to add any new provision to such Indenture, provided
that if such change, elimination or addition will adversely
affect the interests of the Holders of Debt Securities of any
series or Tranche in any material respect, such change,
elimination or addition will become effective with respect to
such series or Tranche only (1) when the consent of the Holders
of Debt Securities of such series or Tranche has been obtained in
accordance with such Indenture, or (2) when no Debt Securities of
such series or Tranche remain Outstanding under such Indenture;
or (e) to provide collateral security for all but not part of the
Debt Securities issued under such Indenture; or (f) to establish
the form or terms of Debt Securities of any other series or
Tranche as permitted by such Indenture; or (g) to provide for the
authentication and delivery of bearer securities and coupons
appertaining thereto representing interest, if any, thereon and
for the procedures for the registration, exchange and replacement
thereof and for the giving of notice to, and the solicitation of
the vote or consent of, the Holders thereof, and for any and all
other matters incidental thereto; or (h) to evidence and provide
for the acceptance of appointment of a successor Indenture
Trustee or co-trustee with respect to the Debt Securities of one
or more series and to add to or change any of the provisions of
such Indenture as shall be necessary to provide for or to
facilitate the administration of the trusts under such Indenture
by more than one trustee; or (i) to provide for the procedures
required to permit the utilization of a noncertificated system of
registration for the Debt Securities of all or any series or
Tranche; or (j) to change any place where (1) the principal of
and premium, if any, and interest, if any, on all or any series
or Tranche of Debt Securities shall be payable, (2) all or any
series or Tranche of Debt Securities may be surrendered for
registration of transfer or exchange and (3) notices and demands
to or upon the Company in respect of Debt Securities and such
Indenture may be served; or (k) to cure any ambiguity or
inconsistency or to add or change any other provisions with
respect to matters and questions arising under an Indenture,
provided such changes or additions shall not adversely affect the
interests of the Holders of Debt Securities of any series or
Tranche Outstanding under such Indenture in any material respect
(Indenture, Section 1201).
The Holders of a majority in aggregate principal amount of
the Debt Securities of all series then Outstanding under an
Indenture may waive compliance by the Company with certain
restrictive provisions of such Indenture (Indenture, Section
607). The Holders of a majority in principal amount of the
Outstanding Debt Securities of any series may waive any past
default under an Indenture with respect to such series, except a
default in the payment of principal, premium, or interest and
certain covenants and provisions of such Indenture that cannot be
modified or be amended without the consent of the Holder of each
Outstanding Debt Security of such series affected (Indenture,
Section 813).
Without limiting the generality of the foregoing, if the
Trust Indenture Act is amended after the date of an Indenture in
such a way as to require changes to such Indenture or the
incorporation therein of additional provisions or so as to permit
changes to, or the elimination of, provisions which, at the date
of such Indenture or at any time thereafter, were required by the
Trust Indenture Act to be contained in such Indenture, such
Indenture will be deemed to have been amended so as to conform to
such amendment of the Trust Indenture Act or to effect such
changes, additions or elimination, and the Company and the
Indenture Trustee may, without the consent of any Holders, enter
into one or more supplemental indentures to evidence or effect
such amendment (Indenture, Section 1201).
-12-
<PAGE>
Except as provided above, the consent of the Holders of a
majority in aggregate principal amount of the Debt Securities of
all series then Outstanding under an Indenture, considered as one
class, is required for the purpose of adding any provisions to,
or changing in any manner, or eliminating any of the provisions
of, such Indenture or modifying in any manner the rights of the
Holders of such Debt Securities under such Indenture pursuant to
one or more supplemental indentures; provided, however, that if
less than all of the series of Debt Securities Outstanding under
an Indenture are directly affected by a proposed supplemental
indenture, then the consent only of the Holders of a majority in
aggregate principal amount of Outstanding Debt Securities of all
series under such Indenture so directly affected, considered as
one class, shall be required; and provided, further, that if the
Debt Securities of any series shall have been issued in more than
one Tranche and if the proposed supplemental indenture shall
directly affect the rights of the Holders of Debt Securities of
one or more, but less than all, of such Tranches, then the
consent only of the Holders of a majority in aggregate principal
amount of the Outstanding Debt Securities of all Tranches of such
series so directly affected, considered as one class, will be
required; and provided further, that no such amendment or
modification may (a) 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 thereof or the rate of
interest thereon (or the amount of any installment of interest
thereon) or change the method of calculating such rate or reduce
any premium payable upon the redemption thereof, or reduce the
amount of the principal of a discount Debt Security that would be
due and payable upon a declaration of acceleration of the
maturity thereof, or change the coin or currency (or other
property) in which any Debt Security or any premium or the
interest thereon is payable, or impair the right to institute
suit for the enforcement of any such payment on or after the
Stated Maturity of any Debt Security (or, in the case of
redemption, on or after the redemption date) without, in any such
case, the consent of the Holder of such Debt Security, (b) reduce
the percentage in principal amount of the Outstanding Debt
Securities of any series, or any Tranche thereof, the consent of
the Holders of which is required for any such supplemental
indenture, or the consent of the Holders of which is required for
any waiver of compliance with any provision of such Indenture or
any default thereunder and its consequences, or reduce the
requirements for quorum or voting, without, in any such case, the
consent of the Holder of each outstanding Debt Security of such
series or Tranche, or (c) modify certain of the provisions of
such Indenture relating to supplemental indentures, waivers of
certain covenants and waivers of past defaults with respect to
the Debt Securities of any series or Tranche, without the consent
of the Holder of each Outstanding Debt Security under such
Indenture affected thereby. A supplemental indenture which
changes or eliminates any covenant or other provision of an
Indenture which has expressly been included solely for the
benefit of one or more particular series of Debt Securities or
one or more Tranches thereof, or modifies the rights of the
Holders of Debt Securities of such series with respect to such
covenant or other provision, will be deemed not to affect the
rights under such Indenture of the Holders of the Debt Securities
of any other series or Tranche (Indenture, Section 1202).
Each Indenture provides that in determining whether the
Holders of the requisite principal amount of the Outstanding Debt
Securities have given any request, demand, authorization,
direction, notice, consent or waiver under such Indenture, or
whether a quorum is present at the meeting of the Holders of Debt
Securities, Debt Securities owned by the Company or any other
obligor upon the Debt Securities or any affiliate of the Company
or of such other obligor (unless the Company, such affiliate or
such obligor owns all Debt Securities Outstanding under such
Indenture, determined without regard to this provision) shall be
disregarded and deemed not to be Outstanding.
If the Company shall solicit from Holders any request,
demand, authorization, direction, notice, consent, election,
waiver or other Act, the Company may, at its option, fix in
advance a record date for the determination of Holders entitled
to give such request, demand, authorization, direction, notice,
consent, waiver or other such Act, but the Company 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 may be given before or after such record
date, but only the Holders of record at the close of business on
such record date shall be deemed to be Holders for the purposes
-13-
<PAGE>
of determining whether Holders of the requisite proportion of the
Outstanding Debt Securities have authorized or agreed or
consented to such request, demand, authorization, direction,
notice, consent, waiver or other Act, and 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 Security and the Holder of
every Debt Security issued upon the registration of transfer
thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by an Indenture
Trustee or the Company in reliance thereon, whether or not
notation of such action is made upon such Debt Security
(Indenture, Section 104).
Resignation of an Indenture Trustee. An Indenture Trustee
may resign at any time by giving written notice thereof to the
Company or may be removed at any time with respect to the
respective Indenture by Act of the Holders of a majority in
principal amount of all series of Debt Securities then
Outstanding under such Indenture delivered to such Indenture
Trustee and the Company. No resignation or removal of an
Indenture Trustee and no appointment of a successor trustee will
become effective until the acceptance of appointment by a
successor trustee in accordance with the requirements of the
respective Indenture. 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 an Indenture Trustee appointed by Act of the Holders,
if the Company has delivered to the Indenture 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, such
Indenture Trustee will be deemed to have resigned and the
successor will be deemed to have been appointed as trustee in
accordance with such Indenture (Indenture, Section 910).
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 (Indenture, Section 106).
Title. The Company, the respective Indenture Trustee, and
any agent of the Company or such Indenture 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 (Indenture,
Section 308).
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 (Indenture, Section 112).
Regarding the Indenture Trustee. The Indenture Trustee
under the first Indenture will be The Bank of New York. In
addition to acting as Indenture Trustee, The Bank of New York
acts, and may act, as trustee under various indentures and trusts
of the Company and its affiliates. The Company and its
affiliates also maintain various banking and trust relationships
with The Bank of New York.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of
Common Stock, without par value, of which 245,315,522 shares were
outstanding at May 31, 1998, and serial preference stock, par
value $25 per share, none of which has been issued. Outstanding
shares of Common Stock on May 31, 1998 did not include shares
issuable in exchange for TEG shares. The following statements
with respect to such capital stock of the Company are a summary
of certain rights and privileges attaching to the stock under the
laws of the State of Texas and the Restated Articles of
Incorporation and the Bylaws of the Company, as amended. This
summary does not purport to be complete and is qualified in its
entirety by reference to such laws, the Restated Articles of
Incorporation and the Bylaws of the Company, as amended, for
complete statements.
-14-
<PAGE>
Each holder of shares of the Common Stock is entitled to one
vote for each share of Common Stock held on all questions
submitted to holders of shares and to cumulative voting at all
elections of directors. The Common Stock has no preemptive or
conversion rights. Upon issuance and sale of the shares offered
hereby, such shares will be fully paid and nonassessable.
The holders of the shares of the preference stock are not
accorded voting rights, except that, when dividends thereon are
in default in an amount equivalent to four full quarterly
dividends, the holders of shares of the preference stock are
entitled to vote for the election of one-third of the Board of
Directors or two directors, whichever is greater, and, when
dividends are in default in an amount equivalent to eight full
quarterly dividends, for the election of the smallest number of
directors necessary so that a majority of the full Board of
Directors shall have been elected by the holders of the shares of
the preference stock. The Company must also secure the approval
of the holders of two-thirds of the outstanding shares of the
preference stock prior to effecting various changes in its
capital structure.
After the payment of full preferential dividends on the
shares of any outstanding preference stock, holders of shares of
the Common Stock are entitled to dividends when and as declared
by the Board of Directors. After payment to the holders of
shares of any outstanding preference stock of the preferential
amounts to which they are entitled, the remaining assets to be
distributed, if any, upon any dissolution or liquidation will be
distributed to the holders of shares of the Common Stock. Each
share of the Common Stock is equal to every other share of the
Common Stock with respect to dividends and also with respect to
distributions upon any dissolution or liquidation. (Reference is
made to Note 4 to Consolidated Financial Statements contained in
the 1997 10-K.)
The Common Stock of the Company is listed on the New York,
Chicago and Pacific stock exchanges. Application will be made
for the listing on such exchanges of any additional shares
offered hereby.
The transfer agent for the Common Stock is Texas Utilities
Services Inc., Dallas, Texas.
DESCRIPTION OF STOCK PURCHASE
CONTRACTS AND STOCK PURCHASE UNITS
The Company may issue Stock Purchase Contracts, including
contracts that obligate holders to purchase from the Company, and
the Company to sell to such holders, a specified number of shares
of Common Stock at a future date or dates. The consideration per
share of Common Stock may be fixed at the time the Stock Purchase
Contracts are issued or may be determined by reference to a
specific formula set forth in the Stock Purchase Contracts. The
Stock Purchase Contracts may be issued separately or as a part of
Stock Purchase Units consisting of a Stock Purchase Contract and
either Debt Securities or debt obligations of third parties,
including U.S. Treasury securities that are pledged to secure the
holders' obligations to purchase the Common Stock under the Stock
Purchase Contracts. The Stock Purchase Contracts may require the
Company to make periodic payments to the holders of the Stock
Purchase Units or vice versa, and such payments may be unsecured
or prefunded on some basis. The Stock Purchase Contracts may
require holders to secure their obligations thereunder in a
specified manner.
PLAN OF DISTRIBUTION
Any of the Securities being offered hereby may be sold in
any one or more of the following ways from time to time: (i)
through agents; (ii) to or through underwriters; (iii) through
dealers; and (iv) directly by the Company to purchasers.
-15-
<PAGE>
The distribution of the Securities may be effected from time
to time in one or more transactions at a fixed price or prices,
which may be changed, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at
negotiated prices.
Offers to purchase Securities may be solicited by agents
designated by the Company from time to time. Any such agent
involved in the offer or sale of the Securities in respect of
which this Prospectus is delivered will be named, and any
commissions payable by the Company to such agent will be set
forth, in the applicable Prospectus Supplement. Unless otherwise
indicated in such Prospectus Supplement, any such agent will be
acting on a reasonable best efforts basis for the period of its
appointment. Any such agent may be deemed to be an underwriter,
as that term is defined in the Securities Act, of the Securities
so offered and sold.
If Securities are sold by means of an underwritten offering,
the Company will execute an underwriting agreement with an
underwriter or underwriters at the time an agreement for such
sale is reached, and the names of the specific managing
underwriter or underwriters, as well as any other underwriters,
the respective amounts underwritten and the terms of the
transaction, including commissions, discounts and any other
compensation of the underwriters and dealers, if any, will be set
forth in the applicable Prospectus Supplement which will be used
by the underwriters to make resales of the Securities in respect
of which this Prospectus is being delivered to the public. If
underwriters are utilized in the sale of any Securities in
respect of which this Prospectus is being delivered, such
Securities will be acquired by the underwriters for their own
account and may be resold from time to time in one or more
transactions, including negotiated transactions, at fixed public
offering prices or at varying prices determined by the
underwriters at the time of the sale. Securities may be offered
to the public either through underwriting syndicates represented
by managing underwriters or directly by one or more underwriters.
If any underwriter or underwriters are utilized in the sale of
Securities, unless otherwise indicated in the applicable
Prospectus Supplement, the underwriting agreement will provide
that the obligations of the underwriters are subject to certain
conditions precedent and that the underwriters with respect to a
sale of such Securities will be obligated to purchase all such
Securities if any are purchased.
The Company may grant to the underwriters options to
purchase additional Securities, to cover over-allotments, if any,
at the initial public offering price (with additional
underwriting commissions or discounts), as may be set forth in
the Prospectus Supplement relating thereto. If the Company grants
any over-allotment option, the terms of such over-allotment
option will be set forth in the Prospectus Supplement for such
Securities.
If a dealer is utilized in the sale of Securities in respect
of which this Prospectus is delivered, the Company will sell such
Securities to the dealer as principal. The dealer may then resell
such Securities to the public at varying prices to be determined
by such dealer at the time of resale. Any such dealer may be
deemed to be an underwriter, as such item is defined in
Securities Act, of the Securities so offered and sold. The name
of the dealer and the terms of the transaction will be set forth
in the Prospectus Supplement relating thereto.
Offers to purchase Securities may be solicited directly by
the Company and the sale thereof may be made by the Company
directly to institutional investors or others, who may be deemed
to be underwriters within the meaning of the Securities Act with
respect to any resale thereof. The terms of any such sales will
be described in the Prospectus Supplement relating thereto.
Securities may also be offered and sold, if so indicated in
the applicable Prospectus Supplement, in connection with a
remarketing upon their purchase, in accordance with a redemption
or repayment pursuant to their terms, or otherwise, by one or
more firms ("remarketing firms"), acting as principals for their
own accounts or as agents for the Company. Any remarketing firm
will be identified and the terms of its agreement, if any, with
the Company and its compensation will be described in the
applicable Prospectus Supplement. Remarketing firms may be deemed
to be underwriters, as that term is defined in the Securities
Act, in connection with the Securities remarketed thereby.
-16-
<PAGE>
If so indicated in the applicable Prospectus Supplement, the
Company may authorize agents and underwriters to solicit offers
by certain institutions to purchase Securities from the Company
at the public offering price set forth in the applicable
Prospectus Supplement pursuant to delayed delivery contracts
providing for payment and delivery on the date or dates stated in
the applicable Prospectus Supplement. Such delayed delivery
contracts will be subject to only those conditions set forth in
the applicable Prospectus Supplement. A commission indicated in
the applicable Prospectus Supplement will be paid to underwriters
and agents soliciting purchase of Securities pursuant to delayed
delivery contracts accepted by the Company, as applicable.
Agents, underwriters, dealers and remarketing firms may be
entitled under relevant agreements with the Company, to
indemnification by the Company against certain liabilities,
including liabilities under the Securities Act, or to
contribution with respect to payments which such agents,
underwriters, dealers and remarketing firms may be required to
make in respect thereof.
Each series of Securities will be a new issue and, other
than the Common Stock, which is listed on the New York, Chicago
and Pacific stock exchanges, will have no established trading
market. The Company may elect to list any series of Securities
on an exchange, or in the case of the Common Stock, on any
additional exchange, but, unless otherwise specified in the
applicable Prospectus Supplement, the Company shall not be
obligated to do so. No assurance can be given as to the liquidity
of the trading market for any of the Securities.
Agents, underwriters, dealers and remarketing firms may be
customers of, engage in transactions with, or perform services
for, the Company and 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 herein 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 the Company's 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 the
Company's 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 Securities prepared or certified by an
accountant within the meaning of Sections 7 and 11 of the 1933
Act.
The legality of the securities offered hereby will be passed
upon for the Company by Worsham, Forsythe & Wooldridge, L.L.P.
and by Reid & Priest LLP, and for the Underwriters by Winthrop,
Stimson, Putnam & Roberts, New York, New York. However, all
matters pertaining to incorporation of the Company and all other
matters of Texas law will be passed upon only by Worsham,
Forsythe & Wooldridge, L.L.P. 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 the Company.
-17-
<PAGE>
=================================================================
$375,000,000
TEXAS UTILITIES COMPANY
5.94% MAndatory Putable/remarketable
Securities (MAPSSM)
---------------
PROSPECTUS SUPPLEMENT
October 14, 1998
---------------
SALOMON SMITH BARNEY
CIBC OPPENHEIMER
LEHMAN BROTHERS
MORGAN STANLEY DEAN WITTER
"MAPSSM" is a service mark of Salomon Smith Barney Inc.
=================================================================
