Filed pursuant to Rule 424(b)(5)
Registration No. 333-56055
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JUNE 29, 1998)
$125,000,000
TEXAS UTILITIES COMPANY
Floating Rate Senior Notes due April 20, 2000
------------------------
The Senior Notes will mature on April 20, 2000. Interest on
the Senior Notes is payable quarterly on January 21, April 21,
July 21 and October 21, beginning January 21, 1999, and on the
date of maturity. The Senior Notes will not be redeemable prior
to maturity.
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 SENIOR
NOTE TOTAL
---------- ------------
Public Offering Price . . . . . . . . 100.00% $125,000,000
Underwriting Discount . . . . . . . . 0.20% $ 250,000
Total Proceeds to Texas Utilities
Company (before expenses) . . . . . . 99.80% $124,750,000
Interest on the Senior Notes will accrue from the date of
delivery.
------------------------------
The underwriter is offering the Senior Notes subject to
various conditions. The underwriter expects to deliver the
Senior Notes to purchasers on or about October 21, 1998.
------------------------------
SALOMON SMITH BARNEY
October 15, 1998
<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 Senior Notes . . . . . . . . . . . . . . . S-5
Certain United States Federal Income Tax Considerations . . . S-8
Underwriting . . . . . . . . . . . . . . . . . . . . . . . . S-9
Legal Opinions . . . . . . . . . . . . . . . . . . . . . . S-10
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . S-10
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 $125,000,000
principal amount of the Company's Floating Rate Senior Notes due
April 20, 2000 (Senior Notes). In addition, the Company is
making a public offering of $375,000,000 principal amount of its
5.94% MAndatory Putable/remarketable Securities (MAPS). Although
certain information contained herein reflects both offerings,
this prospectus relates solely to the Senior Notes. 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 from (i) the sale of the Senior Notes and (ii) the
sale of the MAPS and the premium paid by the remarketing dealer
for the right to remarket the MAPS, 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
PRO
HISTORICAL 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
redemption . . . . . . 20,607
-----------
Total Preferred
Stock . . . . . . 210,662 210,662 O.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 Senior Notes and
the contemporaneous issuance of $375,000,000 of the
Company's 5.94% MAndatory Putable/remarketable Securities,
(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 %
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 SENIOR NOTES
The following is a summary of certain terms of the Senior
Notes, 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 G) to be entered into between
the Company and The Bank of New York, as trustee (Trustee), with
respect to the Senior Notes, as supplemented by the Officer's
Certificate establishing the terms of the Senior Notes (as so
supplemented and amended, the Senior Notes Indenture), which is
on file with the Commission, and the Trust Indenture Act.
Certain capitalized terms used herein are defined in the Senior
Notes Indenture. The following descriptions of certain terms of
the Senior Notes 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.
GENERAL
The Senior Notes will be issued as senior unsecured debt
under the Senior Notes Indenture and will rank on a parity in
right of payment with the Company's other senior unsecured debt
obligations. While the Senior Notes 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 Senior Notes.
The Senior Notes Indenture provides for the issuance of debt
securities (including the Senior Notes), notes or other unsecured
evidences of indebtedness by the Company in an unlimited amount
from time to time. The Senior Notes 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 Senior Notes, with certain exceptions.
However, the Senior Notes 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 Senior
Notes 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 Senior Notes Indenture permits the Company to assign its
obligations under the Senior Notes to a subsidiary as
contemplated in DESCRIPTION OF DEBT SECURITIES -- "Assignment of
Obligations" in the accompanying Prospectus.
MATURITY, INTEREST AND PAYMENT
The Senior Notes will be issued as a series of Debt
Securities under the Indenture in denominations of $5,000 and
integral multiples of $1,000 in excess thereof. The Officer's
Certificate with respect to the Senior Notes limits the aggregate
principal amount of the Senior Notes to $125,000,000.
The Senior Notes will mature on April 20, 2000 and will bear
interest from October 21, 1998, at the rates, determined
quarterly, as described below. Interest shall be payable
quarterly (commencing January 21, 1999) on January 21, April 21,
July 21 and October 21 of each year and on the date of maturity
(Interest Payment Dates). The period commencing on an Interest
Payment Date and ending on the day preceding the next succeeding
Interest Payment Date is called an "Interest Period". Interest
will be paid to the persons in whose name the Senior Notes 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). "Business Day"
means any day other than a Saturday, a Sunday or a day on which
banking institutions in The City of New York are authorized or
obligated by law, executive order or governmental decree to be
closed. With respect to Senior Notes 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 relevant Interest Payment Date.
S-5
<PAGE>
The Senior Notes will bear interest for each Interest Period
at a per annum rate (Interest Rate) determined by The Bank of New
York, or its successor appointed by the Company as permitted by
the Indenture, acting as calculation agent (Calculation Agent).
The Interest Rate will be equal to LIBOR (as defined below) on
the second London Business Day (as defined below) immediately
preceding the first day of such Interest Period (Interest
Determination Date) plus .70%; provided, however, that in certain
circumstances described below, the Interest Rate will be
determined in an alternative manner without reference to LIBOR.
Promptly upon such determination, the Calculation Agent will
notify the Trustee of the Interest Rate for the new Interest
Period. The Interest Rate determined by the Calculation Agent,
absent manifest error, shall be binding and conclusive upon the
beneficial owners and holders of the Senior Notes, the Company
and the Trustee.
For purposes of this calculation, "London Business Day" is
defined as a day on which dealings in deposits in U.S. dollars
are transacted, or with respect to any future date, are expected
to be transacted, in the London interbank market.
"LIBOR" for any Interest Determination Date will be the
offered rate for deposits in U.S. dollars having an index
maturity of three months for a period commencing on the second
London Business Day immediately following the Interest
Determination Date (Three Month Deposits) in amounts of not less
than $1,000,000, as such rate appears on Telerate Page 3750 (as
defined below), or a successor reporter of such rates selected by
the Calculation Agent and acceptable to the Company, at
approximately 11:00 a.m., London time, on the Interest
Determination Date (Reported Rate).
"Telerate Page 3750" means the display designated on page
"3750" on Dow Jones Markets Limited (or such other page as may
replace the 3750 page on that service or such other service or
services as may be nominated by the British Bankers' Association
for the purpose of displaying London interbank offered rates for
U.S. Dollar deposits).
If the following circumstances exist on any Interest
Determination Date, the Calculation Agent shall determine the
Interest Rate for the Senior Notes as follows:
(i) In the event no Reported Rate appears on Telerate Page
3750 as of approximately 11:00 a.m. London time on an
Interest Determination Date, the Calculation Agent shall
request the principal London offices of each of four major
banks in the London interbank market selected by the
Calculation Agent (after consultation with the Company) to
provide a quotation of the rate (Rate Quotation) at which
Three Month Deposits in amounts of not less than $1,000,000
are offered by it to prime banks in the London interbank
market, as of approximately 11:00 a.m. London time on such
Interest Determination Date, that is representative of
single transactions at such time (Representative Amounts).
If at least two Rate Quotations are provided, the Interest
Rate will be the arithmetic mean of the Rate Quotations
obtained by the Calculation Agent, plus .70%.
(ii) In the event no Reported Rate appears on Telerate Page
3750 and there are fewer than two Rate Quotations, the
Interest Rate will be the arithmetic mean of the rates
quoted at approximately 11:00 a.m. New York City time on
such Interest Determination Date, by three major banks in
New York City, selected by the Calculation Agent, for loans
in Representative Amounts in U.S. dollars to leading
European banks, having an index maturity of three months for
a period commencing on the second London Business Day
immediately following such Interest Determination Date, plus
.70%; provided, however, that if fewer than three banks
selected by the Calculation Agent are quoting such rates,
the Interest Rate for the applicable period will be the same
as the Interest Rate in effect for the immediately preceding
Interest Period.
Upon the request of the holder of any Senior Note, the
Calculation Agent will provide to such holder the Interest Rate
in effect on the date of such request and, if determined, the
Interest Rate for the next Interest Period.
Interest on the Senior Notes will be calculated on the basis
of the actual number of days for which interest is payable in the
relevant Interest Period, divided by 360. All dollar amounts
resulting from such calculation will be rounded, if necessary, to
the nearest cent with one-half cent rounded upward.
S-6
<PAGE>
REDEMPTION
The Senior Notes will not be redeemable prior to maturity.
BOOK-ENTRY SYSTEMS
The Senior Notes 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 Senior Notes in the aggregate principal amount of the
Senior Notes. 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 Underwriter 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,
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 Senior Notes under the DTC system must be
made by or through Direct Participants, which will receive a
credit for the Senior Notes 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 Senior Notes 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 Senior Notes, except in the event that use
of the book-entry system for the Senior Notes is
discontinued.
To facilitate subsequent transfers, all Senior Notes
deposited by Participants with DTC are registered in the
name of DTC's partnership nominee, Cede & Co. The deposit of
Senior Notes 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
Senior Notes; DTC's records reflect only the identity of the
Direct Participants to whose accounts such Senior Notes 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.
S-7
<PAGE>
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 Senior Notes 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 Senior Notes at any time by
giving reasonable notice to the Company or the Trustee.
Under such circumstances, if a successor securities
depositary is not obtained, Senior Notes certificates in
fully registered form are required to be printed and
delivered to beneficial owners of the Global Securities
representing such Senior Notes.
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 Underwriter 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 Senior Notes, or
payments to, or the providing of notice to Participants or
beneficial owners.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Senior Notes will be made by the
Underwriter in immediately available funds. So long as the
Senior Notes 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 Senior Notes are represented
by such Global Securities, the Senior Notes will trade in DTC's
Same-Day Funds Settlement System, and secondary market trading
activity in the Senior Notes 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 Senior Notes.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes certain United States
federal income tax consequences of the purchase, ownership and
disposition of the Senior Notes as of the date hereof and
represents the opinion of Thelen Reid & Priest LLP, counsel to
the Company, insofar as it relates to matters of law or legal
conclusions. Except where noted, it deals only with Senior Notes
held as capital assets and does not deal with special situations,
such as those of dealers in securities or currencies, financial
institutions, life insurance companies, persons holding Senior
Notes as a part of a hedging or conversion transaction or a
straddle, or persons who are not United States Holders (as
defined herein). In addition, this discussion does not address
the tax consequences to persons who purchase Senior Notes other
than pursuant to their initial issuance and distribution.
Furthermore, the discussion below is based upon the provisions of
the Internal Revenue Code of 1986, as amended, and regulations,
rulings and judicial decisions thereunder as of the date hereof,
and such authorities may be repealed, revoked or modified at any
S-8
<PAGE>
time, with either forward-looking or retroactive effect, so as to
result in United States federal income tax consequences different
from those discussed below.
PROSPECTIVE PURCHASERS OF SENIOR NOTES, INCLUDING PERSONS
WHO ARE NOT UNITED STATES HOLDERS AND PERSONS WHO PURCHASE SENIOR
NOTES IN THE SECONDARY MARKET, ARE ADVISED TO CONSULT WITH THEIR
TAX ADVISORS AS TO THE UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF SENIOR
NOTES IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, AS WELL AS THE
EFFECT OF ANY STATE, LOCAL OR OTHER TAX LAWS.
UNITED STATES HOLDERS
As used herein, a "United States Holder" means a Holder of a
Senior Note that (i) is 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 any
political subdivision thereof, (iii) an estate the income of
which is subject to United States federal income taxation
regardless of its source, or (iv) a trust the administration of
which is subject to the primary supervision of a court within the
United States and for which one or more United States persons
have the authority to control all substantial decisions.
PAYMENTS OF INTEREST
Except as set forth below, stated interest on a Senior Note
will generally be taxable to a United States Holder as ordinary
income at the time it is paid or accrued in accordance with the
United States Holder's method of accounting for tax purposes.
SALE, EXCHANGE OR RETIREMENT OF THE SENIOR NOTES
Upon the sale, exchange or retirement of Senior Notes, a
United States Holder will recognize gain or loss equal to the
difference between such Holder's adjusted tax basis in the Senior
Notes and the amount realized upon the sale, exchange or
retirement, other than amounts attributable to accrued but unpaid
interest. A United States Holder's adjusted tax basis in the
Senior Notes will equal the United States Holder's cost therefor.
Such gain or loss will be capital gain or loss and will be long-
term capital gain or loss if at the time of sale, exchange or
retirement, the Senior Notes 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
ability to use capital losses to offset ordinary income in
determining taxable income is generally limited.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Generally, information reporting will apply to payments of
principal and interest on the Senior Notes, including the
proceeds of a sale of the Senior Notes, to United States Holders,
other than certain exempt recipients within the meaning of
applicable Treasury Regulations.
Payments made in respect of, and proceeds from the sale of,
Senior Notes may be subject to "backup" withholding tax of 31% if
the United States Holder fails to comply with certain
identification requirements, or has previously failed to report
in full dividend and interest income, or does not otherwise
establish its entitlement to an exemption. Any withheld amounts
will be allowed as a refund or a credit against the United States
Holder's federal income tax liability provided that certain
required information is provided to the Internal Revenue Service.
UNDERWRITING
Subject to the terms and conditions set forth in the
Underwriting Agreement (Underwriting Agreement) dated October 15,
1998 between the Company and Salomon Smith Barney Inc.
(Underwriter), the Company has agreed to sell the Senior Notes to
the Underwriter and the Underwriter has agreed to purchase all of
the Senior Notes offered hereby if any Senior Notes are
purchased. The Underwriter has advised the Company that the
S-9
<PAGE>
Underwriter proposes to offer the Senior Notes 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 0.10% of the
principal amount of the Senior Notes. The Underwriter may allow,
and such dealers may reallow, a concession to certain other
dealers not in excess of 0.10% of the principal amount of the
Senior Notes. After the initial offering of the Senior Notes to
the public, the public offering price and such concessions may be
changed.
The Senior Notes are a new issue of securities with no
established trading market. The Company has been advised by the
Underwriter that the Underwriter intends to make a market in the
Senior Notes, but it is 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 Senior Notes.
The Underwriter is permitted to engage in certain
transactions that maintain or otherwise affect the price of the
Senior Notes. Such transactions may include over-allotment
transactions and purchases to cover short positions created by
the Underwriter in connection with the offering. If the
Underwriter creates a short position in the Senior Notes in
connection with the offering, i.e., if it sells Senior Notes in
an aggregate principal amount exceeding that set forth on the
cover page of this Prospectus Supplement, the Underwriter may
reduce that short position by purchasing Senior Notes 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 Underwriter makes 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 Senior Notes. In addition, neither the Company nor
the Underwriter makes any representation that the Underwriter
will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
In the ordinary course of business, the Underwriter and its
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 Underwriter and
certain other persons against certain liabilities, including
liabilities under the Securities Act, or to make contribution to
certain payments in respect thereof.
LEGAL OPINIONS
The validity of the Senior Notes 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
Underwriter 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
S-10
<PAGE>
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-11
<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
-11-
<PAGE>
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).
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
-12-
<PAGE>
into one or more supplemental indentures to evidence or effect
such amendment (Indenture, Section 1201).
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>
================================================================
$125,000,000
TEXAS UTILITIES COMPANY
FLOATING RATE SENIOR NOTES DUE APRIL 20, 2000
---------------
PROSPECTUS SUPPLEMENT
October 15, 1998
---------------
SALOMON SMITH BARNEY
================================================================
