Filed pursuant to Rule 424(b)(5)
File Nos. 333-79221 and
333-79221-01
PROSPECTUS SUPPLEMENT
- ---------------------
(To Prospectus dated June 9, 1999)
6,000,000 PREFERRED TRUST SECURITIES
TXU CAPITAL II
8.70% TRUST ORIGINATED PREFERRED SECURITIES SM (TOPRS SM)
(LIQUIDATION AMOUNT $25 PER PREFERRED TRUST SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED AS DESCRIBED IN
THIS PROSPECTUS SUPPLEMENT AND PROSPECTUS BY
TEXAS UTILITIES COMPANY
DOING BUSINESS AS
TXU CORP
----------------
THE PREFERRED TRUST SECURITIES:
o Preferred Trust Securities represent preferred ownership interests in the
assets of TXU Capital II. The sole assets of TXU Capital II will be the
debentures issued by TXU Corp.
o TXU Capital II will apply to have the Preferred Trust Securities trade on
the New York Stock Exchange starting within 30 days after the Preferred
Trust Securities are issued.
o TXU Corp will guarantee the Preferred Trust Securities to the extent
described in the prospectus supplement and prospectus.
o Closing Date: December 13, 1999.
DISTRIBUTIONS ON THE PREFERRED TRUST SECURITIES:
o Each Preferred Trust Security pays a quarterly distribution at an annual
rate of 8.70%, or $2.175 per Preferred Trust Security, if TXU Corp pays
interest on the debentures.
o If TXU Corp redeems the debentures held by TXU Capital II, TXU Capital II
will redeem the Preferred Trust Securities and you will receive $25 plus
accumulated distributions for each Preferred Trust Security you own.
o If TXU Capital II redeems the Preferred Trust Securities or is liquidated,
but TXU Corp does not redeem its debentures, you will receive $25 principal
amount of debentures for each Preferred Trust Security you own rather than
cash.
INVESTING IN THE PREFERRED TRUST SECURITIES INVOLVES RISKS THAT ARE
DESCRIBED IN "RISK FACTORS" BEGINNING ON PAGE S-5 OF THIS PROSPECTUS
SUPPLEMENT.
----------------
<TABLE>
<CAPTION>
<S> <C> <C>
PER PREFERRED
TRUST SECURITY TOTAL
-------- -----
Public offering price................................... $25.00 $150,000,000
Underwriters' discount to be paid by TXU Corp........... $.7875 $4,725,000
Proceeds, before expenses, to TXU Capital II............ $25.00 $150,000,000
</TABLE>
If you purchase the Preferred Trust Securities and settlement occurs after
December 13, 1999, you will be required to pay accumulated distributions of the
aggregate liquidation amount of your Preferred Trust Securities at a rate of
8.70% per year from that date. Expenses of the offering and underwriting
commissions of $.7875 per Preferred Trust Security will be paid by TXU Corp.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
TXU Capital II and TXU Corp have granted the Underwriters the right to
purchase up to an additional 600,000 Preferred Trust Securities to cover
over-allotments. The Preferred Trust Securities will be ready for delivery in
book-entry form through The Depository Trust Company on or about December 13,
1999.
----------------
MERRILL LYNCH & CO.
LEHMAN BROTHERS
MORGAN STANLEY DEAN WITTER
PAINEWEBBER INCORPORATED
SALOMON SMITH BARNEY
----------------
The date of this prospectus supplement is December 8, 1999.
(SM) "Trust Originated Preferred Securities" and "TOPrS" are service marks of
Merrill Lynch & Co.
<PAGE>
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUPPLEMENT
About this Prospectus Supplement.......................................... S-2
Summary................................................................... S-3
Risk Factors.............................................................. S-5
TXU Corp and Subsidiaries................................................. S-8
Selected Consolidated Financial Data of TXU Corp.......................... S-9
Consolidated Capitalization of TXU Corp...................................S-10
Use of Proceeds...........................................................S-11
Specific Terms of the Preferred Trust Securities..........................S-11
Specific Terms of the Junior Subordinated Debentures......................S-15
Material United States Federal Income Tax Consequences
Relating to the Preferred Trust Securities............................S-18
Underwriting..............................................................S-20
PROSPECTUS
About this Prospectus....................................................... 2
Where You Can Find More Information......................................... 2
TXU Corp.................................................................... 3
TXU Capital II, TXU Capital III and TXU Capital IV.......................... 3
Use of Proceeds............................................................. 4
Ratio of Earnings to Fixed Charges and Ratio of Earnings
to Combined Fixed Charges and Preferred Dividends....................... 4
Description of TXU Corp Preference Stock.................................... 4
Description of Debt Securities.............................................. 6
Description of TXU Capital's Preferred Trust Securities
and Common Trust Securities ............................................14
Description of the Guarantee................................................21
Description of the Junior Subordinated Debentures...........................23
Plan of Distribution........................................................32
Experts and Legality........................................................33
ABOUT THIS PROSPECTUS SUPPLEMENT
You should read this prospectus supplement along with the prospectus that
follows. You should rely only on the information provided or incorporated by
reference in this prospectus supplement and the prospectus. We have not
authorized anyone else to provide you with different information. We are not
making an offer of the Preferred Trust Securities in any state where the offer
is not permitted. You should not assume that the information in this prospectus
supplement or the prospectus is accurate as of any date other than the dates on
the front of these documents.
S-2
<PAGE>
SUMMARY
This summary may not contain all the information that may be important to
you. You should read the entire prospectus supplement and accompanying
prospectus, as well as the documents that have been incorporated into the
prospectus, before making an investment decision.
SECURITIES OF TXU CAPITAL
TXU Capital was created by TXU Corp to make this offering. TXU Capital will
sell its Preferred Trust Securities to the public and its Common Trust
Securities to TXU Corp. It will use the proceeds from these sales to buy the
Junior Subordinated Debentures, Series B, due December 31, 2034 from TXU Corp.
The Preferred Trust Securities and the Junior Subordinated Debentures will have
essentially the same terms.
TXU Corp will acquire all of the Common Trust Securities of TXU Capital.
The liquidation amount of all the Common Trust Securities will equal
approximately 3% of the total capital of TXU Capital. The Common Trust
Securities will generally rank equally with the Preferred Trust Securities.
However, in the case of specific defaults, the Common Trust Securities will rank
junior to the Preferred Trust Securities with respect to distributions,
redemption and liquidation. Except in limited circumstances specified in the
Trust Agreement, the Common Trust Securities will have sole voting power with
respect to matters to be voted upon by TXU Capital securityholders.
DISTRIBUTIONS
If you purchase the Preferred Trust Securities, you will be entitled to
receive cumulative cash distributions at an annual rate of 8.70% of the
liquidation amount of $25, or $2.175 per Preferred Trust Security. Distributions
will accumulate from the date TXU Capital issues the Preferred Trust Securities
and will be paid quarterly in arrears on March 31, June 30, September 30 and
December 31 of each year, beginning March 31, 2000.
EXTENSION OF PAYMENT PERIODS
So long as there is no default in the payment of interest on the Junior
Subordinated Debentures, TXU Corp may delay interest payments on the Junior
Subordinated Debentures for an extension period of up to 20 consecutive
quarters. TXU Corp may delay payments in this way more than once, but not beyond
the maturity date of the Junior Subordinated Debentures. If TXU Corp delays
interest payments on the Junior Subordinated Debentures, TXU Capital will also
delay distributions on the Preferred Trust Securities. During this period you
will still accumulate distributions at an annual rate of 8.70% of the
liquidation amount of $25 per Preferred Trust Security, and you will accrue
interest on unpaid distributions at the same rate, compounded quarterly. Even
though you will not receive any cash distributions on your Preferred Trust
Securities during an extension period, you will be required to include accrued
distributions and interest on unpaid distributions in your gross income for
United States federal income tax purposes, even if you are a cash basis
taxpayer.
REDEMPTION
TXU Capital must redeem the Preferred Trust Securities when the Junior
Subordinated Debentures are paid at maturity on December 31, 2034, or if the
Junior Subordinated Debentures are redeemed before they mature. At any time on
or after December 31, 2004, TXU Corp may redeem all or part of the Junior
Subordinated Debentures. In addition, TXU Corp may choose to redeem all, but not
less than all, of the Junior Subordinated Debentures if specific tax events
result in specific adverse tax consequences. If the Preferred Trust Securities
are redeemed, the holders will receive the liquidation amount of $25 per
Preferred Trust Security plus any unpaid distributions to the date of
redemption.
S-3
<PAGE>
TXU CORP'S GUARANTEE OF THE PREFERRED TRUST SECURITIES
TXU Corp will fully and unconditionally guarantee payments due on the
Preferred Trust Securities through a combination of the following:
o TXU Corp's obligations under the Junior Subordinated Debentures;
o The rights of holders of Preferred Trust Securities to enforce those
obligations;
o TXU Corp's agreement to pay the expenses of TXU Capital; and
o TXU Corp's guarantee of payments due on the Preferred Trust Securities
to the extent of TXU Capital's assets.
If TXU Corp does not make a payment on the Junior Subordinated Debentures, TXU
Capital will not have sufficient funds to make payments on the Preferred Trust
Securities. The Guarantee does not cover payments when TXU Capital does not have
sufficient funds.
CONDITIONAL RIGHT TO SHORTEN MATURITY
If interest payments on the Junior Subordinated Debentures are no longer
deductible by TXU Corp because of a Tax Event, as described in this prospectus
supplement under SPECIFIC TERMS OF THE PREFERRED SECURITIES --"Right to Redeem
upon a Tax Event," TXU Corp may shorten the stated maturity of the Junior
Subordinated Debentures to as early as December 13, 2014. This would cause a
mandatory redemption of the Preferred Trust Securities on the new maturity date.
ASSIGNMENT OF OBLIGATIONS
TXU Corp may assign all its obligations with respect to the Junior
Subordinated Debentures to a wholly-owned subsidiary which assumes those
obligations. At the time of an assignment, TXU Corp will fully and
unconditionally guarantee all payments under the assigned obligations. If TXU
Corp assigns its obligations to a subsidiary, there could be adverse tax
consequences to you. See SPECIFIC TERMS OF THE JUNIOR SUBORDINATED DEBENTURES --
"Assignment of Obligations."
LISTING OF TRUST PREFERRED SECURITIES
TXU Capital plans to list the Preferred Trust Securities on the New York
Stock Exchange under the trading symbol "TXU PrB." You should be aware that
listing of the Preferred Trust Securities will not necessarily ensure that a
liquid trading market will be available for the Preferred Trust Securities.
S-4
<PAGE>
RISK FACTORS
An investment in the Preferred Trust Securities involves a number of risks.
You should carefully consider the following information, together with the other
information in this prospectus supplement, the accompanying prospectus and the
documents that are incorporated by reference in the prospectus, about risks
concerning the Preferred Trust Securities, before buying any Preferred Trust
Securities.
TXU CAPITAL HAS NO INDEPENDENT OPERATIONS OR ASSETS. IF TXU CORP DOES NOT
PROVIDE SUFFICIENT FUNDS, TXU CAPITAL WILL NOT BE ABLE TO MAKE PAYMENTS ON THE
PREFERRED TRUST SECURITIES.
o TXU Capital's ability to pay amounts when they are due on the
Preferred Trust Securities is solely dependent upon TXU Corp's payment
of amounts when they are due on the Junior Subordinated Debentures. If
TXU Corp fails to pay principal or interest when due on the Junior
Subordinated Debentures, TXU Capital will not have funds to pay
distributions on the Preferred Trust Securities or amounts due when
the Preferred Trust Securities are redeemed or when TXU Capital is
liquidated.
o TXU Corp is a holding company, and claims of holders of preferred
stock of TXU Corp's subsidiaries and claims of creditors of TXU Corp's
subsidiaries are senior to claims of holders of the Junior
Subordinated Debentures and to claims of holders of the Preferred
Trust Securities under the Guarantee.
o The Junior Subordinated Debentures are not secured and are junior in
right of payment to TXU Corp's senior debt. As of September 30, 1999,
TXU Corp had approximately $4.3 billion of senior debt. In addition,
TXU Corp is a holding company. Substantially all of its income comes
from its operating subsidiaries. Required payments on debt and
preferred stock at the subsidiary level will be made before funds from
those subsidiaries are available to TXU Corp. The consolidated
financial statements of TXU Corp that are incorporated by reference in
the prospectus show the aggregate amount of subsidiary debt and
preferred stock as of the date of those statements. In addition, the
terms of the Preferred Trust Securities and the Junior Subordinated
Debentures do not limit the ability of TXU Corp or its subsidiaries to
incur additional debt or to issue preferred stock.
o TXU Corp's obligations under the Guarantee are not secured and are
junior in right of payment to all other liabilities of TXU Corp,
except any liabilities that expressly rank equally with the Guarantee.
See DESCRIPTION OF THE GUARANTEE -- "Status of the Guarantee" and
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES -- "Subordination"
in the prospectus.
TXU CORP CAN DELAY INTEREST PAYMENTS ON THE JUNIOR SUBORDINATED DEBENTURES. THIS
MAY AFFECT THE MARKET PRICE OF THE PREFERRED TRUST SECURITIES.
o So long as there is no default in the payment of interest on the
Junior Subordinated Debentures, TXU Corp may delay interest payments
on the Junior Subordinated Debentures, from time to time, for an
extension period of up to 20 consecutive quarters. At the end of an
extension period, if all amounts due are paid, TXU Corp could start a
new extension period of up to 20 consecutive quarters. During any
extension period, distributions on the Preferred Trust Securities
would be delayed but would accumulate at an annual rate of 8.70% and
you will accrue interest on unpaid distributions at the same rate,
compounded quarterly. No extension period may extend beyond the
maturity date of the Junior Subordinated Debentures. If TXU Corp
exercises this extension right, the market price of the Preferred
Trust Securities is likely to be affected. See SPECIFIC TERMS OF THE
PREFERRED TRUST SECURITIES-- "Extension of Payment Periods" in this
prospectus supplement and DESCRIPTION OF THE JUNIOR SUBORDINATED
DEBENTURES-- "Option to Extend Interest Payment Period" in the
prospectus.
S-5
<PAGE>
IF TXU CORP DELAYS INTEREST PAYMENTS ON THE JUNIOR SUBORDINATED DEBENTURES,
THERE WILL BE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS OF THE
PREFERRED TRUST SECURITIES.
o If TXU Corp extends the interest payment period for the Junior
Subordinated Debentures, you will accrue income as original issue
discount, referred to in this prospectus supplement as OID, in respect
of the delayed distributions on your Preferred Trust Securities. As a
result, for United States federal income tax purposes you will include
that OID in gross income before you receive distributions, regardless
of your regular method of accounting.
o If you sell your Preferred Trust Securities before the record date for
the payment of distributions at the end of an extension period, you
will not receive the distributions. Instead, the accrued distributions
will be paid to the holder of record on the record date, regardless of
who the holder of record may have been on any other date during the
extension period. Moreover, the accrued OID will be added to your
adjusted tax basis in the Preferred Trust Securities but might not be
reflected in the amount you realize on the sale. To the extent the
amount realized on a sale is less than your adjusted tax basis, you
will recognize a capital loss for United States federal income tax
purposes. The deduction of capital losses is subject to limitations.
o As a result of TXU Corp's right to extend the interest payment period,
the market price of the Preferred Trust Securities may be more
volatile than debt instruments with OID which do not afford the issuer
a similar right. See MATERIAL UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES RELATING TO THE PREFERRED TRUST SECURITIES -- "Original
Issue Discount" in this prospectus supplement.
THE GUARANTEE IS LIMITED TO THE FUNDS AVAILABLE TO TXU CAPITAL. IF TXU CORP
DEFAULTS ON ITS OBLIGATIONS UNDER THE JUNIOR SUBORDINATED DEBENTURES, TXU
CAPITAL WOULD NOT HAVE THE FUNDS NECESSARY TO MAKE PAYMENTS ON OR TO REDEEM THE
PREFERRED TRUST SECURITIES.
o The Guarantee guarantees the payment when due of distributions on the
Preferred Trust Securities, to the extent TXU Capital has funds
available to make those payments.
o The Guarantee also guarantees payment on redemption or on a bankruptcy
or dissolution of TXU Capital, except where Junior Subordinated
Debentures are distributed to the holders, of the liquidation amount
and all accrued and unpaid distributions on the Preferred Trust
Securities to the date of payment or, if less, the amount of the
assets of TXU Capital remaining available for distribution. If TXU
Corp were to default on its obligations under the Junior Subordinated
Debentures, TXU Capital would lack funds necessary for the payment of
distributions or amounts payable on liquidation of TXU Capital or
redemption of the Preferred Trust Securities. As a result, you would
then not be able to rely on the Guarantee for payment of those
amounts. Instead, the Property Trustee would have to enforce TXU
Capital's rights under the Junior Subordinated Debentures. If the
Property Trustee fails to act, you could institute a legal proceeding
directly against TXU Corp to enforce payment to you of Junior
Subordinated Debentures in a principal amount equal to the liquidation
amount of your Preferred Trust Securities and the accrued interest on
those Junior Subordinated Debentures. See DESCRIPTION OF THE GUARANTEE
-- "General Terms of the Guarantee" and DESCRIPTION OF THE JUNIOR
SUBORDINATED DEBENTURES-- "Enforcement of Certain Rights by Holders of
Preferred Trust Securities" in the prospectus.
TXU CORP HAS THE RIGHT TO REDEEM THE JUNIOR SUBORDINATED DEBENTURES IF IT
SUFFERS ADVERSE TAX CONSEQUENCES. THIS REDEMPTION WOULD SUBJECT YOU TO
ADDITIONAL TAX.
o If there is a Tax Event, as described below, TXU Corp will have the
right to redeem the Junior Subordinated Debentures, in whole, but not
in part, at any time within 90 days following the occurrence of the
Tax Event. That would, in turn, cause a mandatory redemption of all of
the Preferred Trust Securities and the Common Trust Securities at 100%
of their liquidation amount plus any accrued distributions. Under
current United States federal income tax law, that redemption of your
S-6
<PAGE>
Preferred Trust Securities would be a taxable event to you. See
SPECIFIC TERMS OF THE PREFERRED TRUST SECURITIES -- "Right to Redeem
upon a Tax Event" in this prospectus supplement.
TXU CORP MAY DISSOLVE TXU CAPITAL AT ANY TIME. THIS COULD HAVE AN ADVERSE EFFECT
ON THE MARKET PRICES OF THE PREFERRED TRUST SECURITIES OR THE JUNIOR
SUBORDINATED DEBENTURES.
o At any time, TXU Corp may dissolve TXU Capital, pay its creditors, if
any, and distribute the Junior Subordinated Debentures to the holders
of the Preferred Trust Securities.
o There is no assurance as to the market prices for Preferred Trust
Securities or Junior Subordinated Debentures that may be distributed
in exchange for Preferred Trust Securities if TXU Capital is
liquidated. The Preferred Trust Securities or the Junior Subordinated
Debentures may trade at a discount from the price that an investor
paid to purchase the Preferred Trust Securities in this offer.
o A distribution of the Junior Subordinated Debentures upon the
liquidation of TXU Capital would not be a taxable event to holders of
the Preferred Trust Securities unless that liquidation of TXU Capital
occurs because TXU Capital is subject to United States federal income
tax with respect to income on the Junior Subordinated Debentures. If
there is a Tax Event because TXU Capital's income on the Junior
Subordinated Debentures is subject to United States federal income tax
and Junior Subordinated Debentures are distributed to the holders of
the Preferred Trust Securities by TXU Capital, the holders of the
Preferred Trust Securities would likely recognize gain or loss as if
the holders of the Preferred Trust Securities had exchanged Preferred
Trust Securities for the Junior Subordinated Debentures in a taxable
exchange.
o As a prospective purchaser of Preferred Trust Securities, you are also
making an investment decision about the Junior Subordinated
Debentures. You should carefully review all the information about the
Junior Subordinated Debentures in this prospectus supplement and in
the prospectus. See SPECIFIC TERMS OF THE PREFERRED TRUST SECURITIES
-- "Distribution of the Junior Subordinated Debentures" in this
prospectus supplement.
THERE IS NO ESTABLISHED TRADING MARKET FOR THE PREFERRED TRUST SECURITIES.
o The Preferred Trust Securities constitute a new issue of securities.
They have no established trading market. There is no assurance as to
the liquidity of, or the development and maintenance of trading
markets for, the Preferred Trust Securities. TXU Capital has applied
to list the Preferred Trust Securities on the New York Stock Exchange.
THERE CAN BE NO ASSURANCE THAT THERE WILL BE AN ACTIVE MARKET FOR THE PREFERRED
TRUST SECURITIES.
o The Underwriters currently plan to make a market in the Preferred
Trust Securities. However, there can be no assurance that the
Underwriters will engage in those activities or that any active market
in the Preferred Trust Securities will develop or be maintained.
EXCEPT WITH RESPECT TO AMENDMENTS TO THE TRUST AGREEMENT AND AMENDMENTS AND
ASSIGNMENT OF THE GUARANTEE, THE HOLDERS OF THE PREFERRED TRUST SECURITIES HAVE
NO VOTING RIGHTS.
o Subject to TXU Corp's right to delay payment as described under
SPECIFIC TERMS OF THE PREFERRED TRUST SECURITIES -- "Extension of
Payment Periods" in this prospectus supplement, holders will have the
right to receive distributions as and when due. However, they will
have limited voting rights, exercisable only in the event of a
proposed change in the terms of the Preferred Trust Securities. See
DESCRIPTION OF TXU CAPITAL'S PREFERRED TRUST SECURITIES AND COMMON
TRUST SECURITIES -- "Voting Rights" in the prospectus.
S-7
<PAGE>
TXU CORP MAY SHORTEN THE MATURITY OF THE JUNIOR SUBORDINATED DEBENTURES, WHICH
WOULD CAUSE A MANDATORY REDEMPTION OF THE PREFERRED TRUST SECURITIES ON THAT
DATE.
o If a Tax Event results in the non-deductibility of interest payments
on the Junior Subordinated Debentures, TXU Corp may shorten the stated
maturity of the Junior Subordinated Debentures to as early as December
13, 2014, instead of redeeming the Junior Subordinated Debentures.
This would cause a mandatory redemption of the Preferred Trust
Securities on the new maturity date.
TXU CORP AND SUBSIDIARIES
During 1999, several of TXU Corp's subsidiaries changed their names in
connection with the new TXU corporate identity program.
o Texas Utilities Electric Company became TXU Electric Company;
o ENSERCH Corporation became TXU Gas Company;
o TXU Eastern Holdings Limited became TXU Europe Limited;
o Eastern Group plc became TXU Europe Group plc; and
o TU Australia Holdings (Partnership) Limited Partnership became TXU
Australia Holdings (Partnership) Limited Partnership.
S-8
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF TXU CORP
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS AND FINANCIAL RATIOS)
The following material, which is presented in this prospectus supplement
solely to furnish limited introductory information, is qualified by, and should
be considered in conjunction with, the more detailed information appearing in
this prospectus supplement, the prospectus and the documents incorporated by
reference in the prospectus.
<TABLE>
<CAPTION>
Twelve
Months
Twelve Months Ended Ended
---------------------------------------------------------------------- ---------
September
December 31, 30,
---------------------------------------------------------------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Income statement data: 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
Operating Revenues ............... $ 5,664 $ 5,639 $ 6,551 $ 7,946 $14,736 $17,252
Net Income (Loss)(a) ............. $ 543 $ (139) $ 754 $ 660 $ 740 $ 879
Basic Earnings (Loss)
per share ...................... $ 2.40 $ (0.61) $ 3.35 $ 2.86 $ 2.79 $ 3.14
Diluted Earnings (Loss)
per share ...................... $ 2.40 $ (0.61) $ 3.35 $ 2.85 $ 2.79 $ 3.14
Average shares of
common stock
outstanding .................... 226 226 225 231 255 280
Ratio of Earnings to Fixed
Charges and Ratio of
Earnings to Combined
Fixed Charges and
Preferred Dividends(a) ........... 1.88 0.72 2.18 2.14 1.84 1.82
</TABLE>
- -----------------------
(a) For the twelve months ended December 31, 1995, fixed charges exceeded
earnings by $235 million. The twelve-month period ended December 31, 1995
was affected by the write-down in value of some nonperforming assets of TXU
Corp's subsidiaries, including TXU Electric Company's partially completed
Twin Oak and Forest Grove lignite-fueled facilities, the New Mexico coal
reserves of a subsidiary, and several minor assets. The write-down amounted
to $802 million on an after-tax basis.
S-9
<PAGE>
CONSOLIDATED CAPITALIZATION OF TXU CORP
(MILLIONS OF DOLLARS, EXCEPT PERCENTAGES)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Adjusted(a)
Outstanding at ---------------------
September 30, 1999 Amount Percent
------------------ ------ -------
Capitalization:
Long-term Debt,
less amounts due currently....................... $ 17,562 $ 17,602 64.4%
Preferred Stock of subsidiaries:
Not subject to mandatory redemption............. 190 190
Subject to mandatory redemption................. 21 21
----------- -------------
Total Preferred Stock of subsidiaries........... 211 211 0.8
Mandatorily Redeemable Preferred Securities of Trusts
Holding Solely Junior Subordinated Debentures of Obligors (b):
TXU Corp obligated 223 373 1.4
Subsidiary obligated 970 970 3.5
Common Stock Equity................................ 8,167 8,167 29.9
----------- ------------- ------
Total Capitalization............................. $ 27,133 $ 27,323 100.0%
=========== ============= =====
</TABLE>
- -----------------------
(a) To give effect to (1) the issuance of the Preferred Trust Securities,
assuming no exercise by the Underwriters of their option to purchase
additional Preferred Trust Securities to cover over-allotments, (2) a net
increase in long-term debt of $336,000,000 at TXU Europe Limited and
$24,000,000 at TXU Australia Holdings Limited Partnership, (3) the
repurchase of $107,000,000 of subsidiaries' debts, and (4) the
reclassification of $213,000,000 of long-term debt of subsidiaries into
long-term debt due currently. Adjusted amounts do not reflect any possible
future (1) sales from time to time by TXU Corp of shares of its common
stock under its Direct Stock Purchase and Dividend Reinvestment Plan and
under employee benefit plans, (2) sales by TXU Corp of up to $340 million
of debt securities and up to an aggregate of $360 million of (a) debt
securities, (b) shares of its preference stock, and (c) preferred
securities of subsidiary trusts, (3) sales by TXU Electric Company of up to
an additional $498,850,000 aggregate principal amount of its senior debt
securities and $25,000,000 of its cumulative preferred stock and (4) sales
by TXU Gas Company of up to an additional $600,000,000 aggregate principal
amount of securities, for each of which registration statements are
effective under Rule 415 of the Securities Act of 1933.
(b) The sole assets of those trusts consist of junior subordinated debentures
of TXU Corp, TXU Electric Company or TXU Gas Company, as the case may be,
in principal amounts, and having other payment terms, corresponding to the
securities issued by the trusts.
S-10
<PAGE>
USE OF PROCEEDS
The proceeds to be received by TXU Capital from the sale of the Preferred
Trust Securities will be used to purchase the Junior Subordinated Debentures of
TXU Corp. TXU Corp intends to use those proceeds to repay short-term debt,
including outstanding commercial paper, and for general corporate purposes. At
September 30, 1999, TXU Corp had an aggregate of $1.8 billion of short-term debt
and commercial paper outstanding, which had maturities of up to 181 days and
bore interest at rates ranging from 5.36% to 6.22% per annum.
SPECIFIC TERMS OF THE PREFERRED TRUST SECURITIES
Specific terms of the Preferred Trust Securities are summarized below. This
summary is not complete and should be read together with the DESCRIPTION OF TXU
CAPITAL'S PREFERRED TRUST SECURITIES AND COMMON TRUST SECURITIES in the
prospectus, where provisions of the Trust Agreement have been summarized.
The form of Trust Agreement was filed as an exhibit to the registration
statement, and you should read the Trust Agreement for provisions that may be
important to you. The Trust Agreement will be qualified as an indenture under
the Trust Indenture Act. You should also refer to the Trust Indenture Act for
provisions that apply to the Preferred Trust Securities.
DISTRIBUTIONS
Distributions on the Preferred Trust Securities will:
o Be payable in U.S. dollars at 8.70% per annum of the liquidation
amount, including interest payable on overdue distributions, on the
basis of a 360-day year of twelve 30-day months;
o Be cumulative and payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year, commencing March 31, 2000;
and
o Originally accrue from, and include, the date they are issued.
In the event that any distribution date is not a business day, payment will
be made on the next business day, and no interest or other payment will result
from the delay. However, if the delayed payment date is in the next calendar
year, the payment will be made on the last business day of the earlier year. A
business day is any day that is not a Saturday, a Sunday, a day on which banks
in The City of New York are authorized or required to remain closed, or a day on
which the Corporate Trust Office of the Property Trustee or the Debenture
Trustee is closed for business.
The record date for distributions will be, for so long as the Preferred
Trust Securities remain in book-entry only form, one business day prior to the
relevant distribution date. In the event the Preferred Trust Securities are not
in book-entry only form, the record date for distributions will be the fifteenth
day prior to the relevant distribution date, whether or not it is a business
day.
EXTENSION OF PAYMENT PERIODS
So long as there is no default in the payment of interest on the Junior
Subordinated Debentures, TXU Corp may delay interest payments on the Junior
Subordinated Debentures for an extension period of up to 20 consecutive
quarters. Distributions on the Preferred Trust Securities would not be paid
during any extension period, but would accrue, with interest on unpaid
distributions accruing at an annual rate of 8.70%, compounded quarterly. TXU
Corp could not make specified payments on its other securities during an
extension period. These payments are described under SPECIFIC TERMS OF THE
JUNIOR SUBORDINATED DEBENTURES -"Extension of Payment Periods" in this
prospectus supplement.
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Before the end of any extension period that is shorter than 20 consecutive
quarters, TXU Corp could further extend the period, so long as the entire
extension period would not exceed 20 consecutive quarters. No payments can be
delayed beyond the maturity date of the Junior Subordinated Debentures. At the
end of any extension period, if all amounts then due on the Junior Subordinated
Debentures, including additional interest on unpaid interest, have been paid,
TXU Corp could elect to begin a new extension period. See DESCRIPTION OF THE
JUNIOR SUBORDINATED DEBENTURES -- "Interest" and DESCRIPTION OF THE JUNIOR
SUBORDINATED DEBENTURES -- "Option to Extend Interest Payment Period" in the
prospectus.
REDEMPTION OF PREFERRED TRUST SECURITIES
The Junior Subordinated Debentures will mature on December 31, 2034. TXU
Corp has the right to redeem all or part of the Junior Subordinated Debentures
at 100% of their principal amount plus accrued interest, on or after December
31, 2004. TXU Corp may also redeem the Junior Subordinated Debentures if there
is a Tax Event, as described below.
When Junior Subordinated Debentures mature or are redeemed, the Property
Trustee will use the proceeds to redeem a like amount of TXU Capital's Preferred
Trust Securities and Common Trust Securities. Holders will be sent notice 30 to
60 days ahead of a redemption.
RIGHT TO REDEEM UPON A TAX EVENT
TXU Corp will have the right to redeem all, but not fewer than all, of the
Junior Subordinated Debentures, at 100% of their principal amount, plus accrued
interest, at any time within 90 days after a Tax Event happens if:
o Tax counsel with appropriate experience gives TXU Corp an opinion
that, if TXU Corp dissolved TXU Capital and distributed the Junior
Subordinated Debentures to the holders of the Preferred Trust
Securities, there would be more than an insubstantial risk that one of
the adverse tax consequences described below would continue to exist;
or
o The Junior Subordinated Debentures are not held by TXU Capital.
A Tax Event happens when TXU Capital or TXU Corp has received an opinion of
experienced tax counsel that, as a result of:
o A change, or an announced prospective change, in, or a clarification
of, the laws or treaties of the United States or any of its political
subdivisions or taxing authorities, or any regulations under those
laws or treaties;
o An administrative action, which means any judicial decision or any
official administrative pronouncement, ruling, regulatory procedure,
notice or announcement including any notice or announcement of intent
to issue or adopt any administrative pronouncement, ruling, regulatory
procedure or regulation; or
o Any amendment to, clarification of, or change in the official position
or the interpretation of any administrative action or judicial
decision or any interpretation or pronouncement that provides for a
position with respect to an administrative action or judicial decision
that differs from the previously generally accepted position, in each
case by any legislative body, court, governmental authority or
regulatory body, regardless of the time or manner in which that
amendment, clarification or change is introduced or made known;
which amendment, clarification, or change is effective or the administrative
action is taken or judicial decision is issued on or after the date of issuance
of the Preferred Trust Securities, there is more than an insubstantial risk
that:
o TXU Capital is, or will be, subject to United States federal income
tax with respect to interest received on the Junior Subordinated
Debentures;
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o Interest payable by TXU Corp on the Junior Subordinated Debentures is
not, or will not be, fully deductible by TXU Corp for United States
federal income tax purposes; or
o TXU Capital is, or will be, subject to more than a de minimis amount
of other taxes, duties or other governmental charges.
Each of the circumstances described immediately above is referred to in this
prospectus supplement as an adverse tax consequence.
DISTRIBUTION OF THE JUNIOR SUBORDINATED DEBENTURES
At any time, TXU Corp may:
o Dissolve TXU Capital; and
o Distribute Junior Subordinated Debentures to the holders of the
Preferred Trust Securities.
After that, the Preferred Trust Securities and the Common Trust Securities
will no longer be outstanding. Certificates representing Preferred Trust
Securities will then represent Junior Subordinated Debentures that:
o Have a principal amount equal to the liquidation amount of the
Preferred Trust Securities; and
o Bear accrued and unpaid interest equal to any accrued and unpaid
distributions on the Preferred Trust Securities.
If TXU Corp distributes Junior Subordinated Debentures to holders of
Preferred Trust Securities in a dissolution of TXU Capital, those Junior
Subordinated Debentures will be issued in certificated form in denominations of
$25 and integral multiples of $25. They may be transferred or exchanged at the
offices of the Debenture Trustee described in DESCRIPTION OF THE JUNIOR
SUBORDINATED DEBENTURES in the prospectus.
BOOK-ENTRY ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
The Preferred Trust Securities will trade through DTC. The Preferred Trust
Securities will be represented by a global certificate and registered in the
name of Cede & Co., DTC's nominee.
DTC is a New York clearing corporation and a clearing agency registered
under Section 17A of the Securities Exchange Act of 1934. DTC holds securities
for its participants. DTC facilitates settlement of securities transactions
among its participants through electronic computerized book-entry changes in the
participants' accounts. This eliminates the need for physical movement of
securities certificates. The participants include securities brokers and
dealers, banks, trust companies and clearing corporations. DTC is owned by a
number of its participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Others who maintain a custodial relationship with a participant
can use the DTC system. The rules that apply to DTC and those using its systems
are on file with the SEC.
DTC management is aware that some computer applications, systems, and the
like for processing data that are dependent upon calendar dates before, on, or
after January 1, 2000, may encounter "Year 2000 Problems." DTC has informed its
participants and other members of the financial community that it has developed
and is implementing a program so that those systems, as the same relate to the
timely payment of distributions to securityholders, book-entry deliveries, and
settlement of trades within DTC, continue to function appropriately. This
program includes a technical assessment and a remediation plan, each of which is
complete, and a testing phase, which is expected to be completed within
appropriate time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including, but not limited to, issuers and their agents, as
well as third party vendors from whom DTC licenses software and hardware, and
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third party vendors on whom DTC relies for information or the provision of
services, including telecommunication and electric utility service providers,
among others. DTC has informed the industry that it is contacting, and will
continue to contact, third party vendors from which DTC acquires services to:
(1) impress upon them the importance of such services being Year 2000 compliant;
and (2) determine the extent of their efforts for Year 2000 remediation, and, as
appropriate, testing, of their services. In addition, DTC is in the process of
developing such contingency plans as it deems appropriate.
DTC has established a Year 2000 Project Office and will provide information
concerning DTC's Year 2000 compliance to persons requesting that information.
The address is as follows: The Depository Trust Company, Year 2000 Project
Office, 55 Water Street, New York, New York 10041. Telephone numbers for the DTC
Year 2000 Project Office are (212) 855-8068 and (212) 855-8881. In addition,
information concerning DTC's Year 2000 compliance can be obtained from its web
site at the following address: www.dtc.org.
According to DTC, the foregoing information with respect to DTC has been
provided to the industry for informational purposes only and is not intended to
serve as a representation, warranty, or contract modification of any kind.
Purchases of Preferred Trust Securities within the DTC system must be made
through participants, which will receive a credit for the Preferred Trust
Securities on DTC's records. The beneficial ownership interest of each purchaser
will be recorded on the participants' records. Beneficial owners will not
receive written confirmation from DTC of their purchases, but beneficial owners
should receive written confirmations of the transactions, as well as periodic
statements of their holdings, from the participants through which they purchased
Preferred Trust Securities. Beneficial owners will not receive certificates for
their Preferred Trust Securities, unless use of the book-entry system for the
Preferred Trust Securities is discontinued.
To facilitate subsequent transfers, all the Preferred Trust Securities
deposited by direct participants with DTC are registered in the name of DTC's
nominee, Cede & Co. The deposit of Preferred Trust Securities with DTC and their
registration in the name of Cede & Co. effect no change in beneficial ownership.
DTC has no knowledge of the actual beneficial owners of the Preferred Trust
Securities. DTC's records reflect only the identity of the participants to whose
accounts such Preferred Trust Securities are credited. These participants may or
may not be the beneficial owners. Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to participants, and
by participants to indirect participants and beneficial owners, will be governed
by arrangements among them.
Redemption notices will be sent to Cede & Co. If less than all of the
Preferred Trust Securities are being redeemed, DTC's practice is to determine by
lot the liquidation amount of each participant to be redeemed.
Although voting with respect to the Preferred Trust Securities is limited,
in those cases where a vote is required, neither DTC nor Cede & Co. will itself
consent or vote with respect to Preferred Trust Securities. Under its usual
procedures, DTC would mail an Omnibus Proxy to TXU Capital as soon as possible
after the record date. The Omnibus Proxy assigns the consenting or voting rights
of Cede & Co. to those participants to whose accounts the Preferred Trust
Securities are credited on the record date. TXU Corp and TXU Capital believe
that these arrangements will enable the beneficial owners to exercise rights
equivalent in substance to the rights that can be directly exercised by a holder
of a beneficial interest in TXU Capital.
Distribution payments on the Preferred Trust Securities will be made to
DTC. DTC's practice is to credit participants' accounts on the relevant payment
date in accordance with their respective holdings shown on DTC's records unless
DTC has reason to believe that it will not receive payments on that payment
date. Payments by participants to beneficial owners will be governed by standing
instructions and customary practices. Payments will be the responsibility of
participants and not of DTC, TXU Capital or TXU Corp. Payment of distributions
to DTC is the responsibility of TXU Capital. Disbursement of payments to
participants is the responsibility of DTC, and disbursement of payments to the
beneficial owners is the responsibility of participants.
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Except as provided in this prospectus supplement, a beneficial owner will
not be entitled to receive physical delivery of Preferred Trust Securities.
Accordingly, each beneficial owner must rely on the procedures of DTC to
exercise any rights under the Preferred Trust Securities.
DTC may discontinue providing its services as securities depositary with
respect to the Preferred Trust Securities at any time by giving reasonable
notice to TXU Capital. In the event no successor securities depositary is
obtained, Preferred Trust Securities certificates will be printed and delivered.
If the Administrative Trustees and TXU Corp decide to discontinue use of the DTC
system of book-entry transfers, certificates for the Preferred Trust Securities
will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that TXU Corp and TXU Capital believe to be
reliable, but neither TXU Corp nor TXU Capital takes responsibility for the
accuracy of this information.
SPECIFIC TERMS OF THE JUNIOR SUBORDINATED DEBENTURES
Specific terms of the Junior Subordinated Debentures are summarized below.
This summary is not complete and should be read together with the DESCRIPTION OF
THE JUNIOR SUBORDINATED DEBENTURES in the prospectus, where provisions of the
Subordinated Indenture have been summarized.
The form of the Subordinated Indenture was filed as an exhibit to the
registration statement, and you should read the Subordinated Indenture for
provisions that may be important to you. The Subordinated Indenture is qualified
as an indenture under the Trust Indenture Act. You should also refer to the
Trust Indenture Act for provisions that apply to the Junior Subordinated
Debentures.
INTEREST
Interest on the Junior Subordinated Debentures will:
o Be payable in U.S. dollars at 8.70% per annum, including interest
payable on overdue interest, on the basis of a 360-day year of twelve
30-day months;
o Be cumulative and payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year, beginning March 31, 2000;
and
o Originally accrue from, and include, the date they are issued.
If any payment date is not a business day, payment will be made on the next
following business day, and no interest or other payment will result from the
delay.
For so long as the Preferred Trust Securities or Junior Subordinated
Debentures distributed to holders of Preferred Trust Securities remain in
book-entry only form, the record date for interest will be one business day
prior to the scheduled distribution or interest payment date. For any of the
securities not in book-entry only form, the record date for distributions will
be the fifteenth day before the scheduled distribution or interest payment date,
whether or not it is a business day.
EXTENSION OF PAYMENT PERIODS
So long as there is no default in the payment of interest on the Junior
Subordinated Debentures, TXU Corp may delay interest payments on the Junior
Subordinated Debentures for an extension period of up to 20 consecutive
quarters. During this period, the interest on the Junior Subordinated Debentures
will still accrue at a per annum rate of 8.70%. In addition, interest on the
unpaid interest will accrue at an annual rate of 8.70%, compounded quarterly.
Distributions on the Preferred Trust Securities would not be paid during any
extension period with respect to the Junior Subordinated Debentures, but would
accumulate at the per annum rate of 8.70%. In addition, interest on unpaid
distributions will accrue at an annual rate of 8.70%, compounded quarterly.
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Before the end of any extension period that is shorter than 20 consecutive
quarters, TXU Corp could further extend the period, so long as the entire
extension period would not exceed 20 consecutive quarters. No payments can be
delayed beyond the maturity date of the Junior Subordinated Debentures. At the
end of any extension period, if all amounts then due on the Junior Subordinated
Debentures, including additional interest on unpaid interest, have been paid,
TXU Corp could elect to begin a new extension period. See DESCRIPTION OF THE
JUNIOR SUBORDINATED DEBENTURES -- "Interest" and DESCRIPTION OF THE JUNIOR
SUBORDINATED DEBENTURES -- "Option to Extend Interest Payment Period" in the
prospectus.
If TXU Corp delays payment or is in default with respect to payments on the
Junior Subordinated Debentures or under the Guarantee, TXU Corp may not:
o Declare or pay any dividend or distribution on its capital stock,
other than dividends paid in shares of common stock of TXU Corp;
o Redeem, purchase, acquire or make a liquidation payment with respect
to, any of its capital stock;
o Redeem any indebtedness that is equal in right of payment with, or
subordinated to, the Junior Subordinated Debentures; or
o Make any guarantee payments with respect to any of the above.
However, scheduled payments with respect to all indebtedness, including
indebtedness that is equal in right of payment or subordinated to the Junior
Subordinated Debentures, could continue to be paid.
Any extension of the payment period for interest on the Junior Subordinated
Debentures, or on any other securities issued under the Subordinated Indenture
or on any similar securities, will apply to all securities of the same type.
Those extensions will also apply to distributions on Preferred Trust Securities
and Common Trust Securities and all other securities with terms substantially
the same as Preferred Trust Securities and Common Trust Securities. TXU Corp
will give TXU Capital and the Debenture Trustee notice of its election of an
extension period before the earlier of:
o One business day before the record date for the scheduled
distribution; and
o The date TXU Corp is required to give notice of an extension period to
the NYSE.
TXU Corp will cause TXU Capital to send notice of that election to the holders
of Preferred Trust Securities.
TXU CORP MAY SHORTEN MATURITY OF JUNIOR SUBORDINATED DEBENTURES
If a Tax Event results in the non-deductibility of interest payments on the
Junior Subordinated Debentures, TXU Corp may shorten the stated maturity of the
Junior Subordinated Debentures to as early as December 13, 2014, instead of
redeeming the Junior Subordinated Debentures. This would cause a mandatory
redemption of the Preferred Trust Securities on the new maturity date.
ASSIGNMENT OF OBLIGATIONS OF TXU CORP
TXU Corp may assign its obligations under the Junior Subordinated
Debentures and the Subordinated Indenture to a wholly-owned subsidiary, provided
that there is no continuing 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.
If TXU Corp exercises its right to assign its obligations under the Junior
Subordinated Debentures and the Subordinated Indenture to a subsidiary, TXU Corp
must fully and unconditionally guarantee all payments under the assigned
obligations. TXU Corp has agreed that even if it has assigned its obligations to
a subsidiary, TXU Corp will not make specified payments on its other securities
if the subsidiary to which the obligations have been assigned extends the
interest payment period on the Junior Subordinated Debentures. See DESCRIPTION
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OF THE JUNIOR SUBORDINATED DEBENTURES -- "Option to Extend Interest Payment
Period" in the prospectus for a detailed description of the kinds of payments
TXU Corp will not be able to make during any extension of an interest payment
period. These restrictions will not apply to the subsidiary to which TXU Corp
has assigned its obligations.
If TXU Corp assigns its obligations under the Junior Subordinated
Debentures and the Subordinated Indenture to a subsidiary, the guarantee of
assigned obligations will provide that if there is an Event of Default and the
holders are prevented by applicable law from exercising their rights to
accelerate the maturity of the securities, to collect interest on the
securities, or to enforce any other right or remedy with respect to the
securities, TXU Corp will pay, upon demand, the amount that would otherwise have
been due and payable had the exercise of such rights and remedies been
permissible.
If TXU Corp assigns its obligations under the Subordinated Indenture to a
foreign subsidiary, all payments made by the foreign subsidiary under the Junior
Subordinated Debentures will be made without withholding or deduction for any
foreign taxes or other foreign governmental charges, unless the withholding or
deduction is required by law. If any withholding or deduction is made, the
foreign subsidiary will pay to each holder of Junior Subordinated Debentures
additional amounts as may be necessary so that the net amount received by each
holder after the withholding or deduction equals the amount that the holder
would have received in the absence of the withholding or deduction, after any
additional taxes or other charges payable by the foreign subsidiary in respect
of those additional amounts. However, these additional amounts will not be
payable in the following situations:
o To or for a holder who is liable for those foreign taxes or charges
because of the holder's connection with the relevant jurisdiction,
whether as a citizen, a resident or a national of the jurisdiction, or
because the holder carries on a business or maintains a permanent
establishment there or is physically present there;
o To or for a holder who presents a security required to be presented
for payment more than 30 days after the date on which payment first
becomes due, unless that holder would have been entitled to those
additional amounts by presenting the security during the 30 day
period;
o To or for a holder who presents a security, where presentation is
required, at any place other than in The City of New York, unless TXU
Corp does not provide a place for presentation within The City of New
York; or
o To or for a holder who is liable for the tax or charge because the
holder failed to take appropriate and available steps to declare
non-residence or request exemption from the relevant tax authority.
No additional amounts will be payable with respect to any security if the
beneficial owner would not have been entitled to that payment if that beneficial
owner had been a holder.
TXU Corp's guarantee of payments owed to the holders of Junior Subordinated
Debentures that are assigned are intended to include any related additional
amounts.
IF TXU CORP ASSIGNS ITS OBLIGATIONS UNDER THE JUNIOR SUBORDINATED
DEBENTURES TO A SUBSIDIARY, THE JUNIOR SUBORDINATED DEBENTURES COULD BE TREATED
AS HAVING BEEN EXCHANGED FOR NEW DEBENTURES IN A TAXABLE EXCHANGE. AS A RESULT,
HOLDERS OF PREFERRED TRUST SECURITIES COULD RECOGNIZE GAIN OR LOSS FOR UNITED
STATES FEDERAL INCOME TAX PURPOSES EVEN THOUGH THEY RECEIVE NO CASH. IF TXU CORP
ASSIGNS ITS OBLIGATIONS, HOLDERS OF PREFERRED TRUST SECURITIES COULD ALSO
RECOGNIZE INCOME ON THE PREFERRED TRUST SECURITIES IN AMOUNTS, AT TIMES, AND IN
A MANNER DIFFERENT FROM THE AMOUNTS, TIMES AND MANNER THAT WOULD HAVE APPLIED IF
THE OBLIGATIONS UNDER THE JUNIOR SUBORDINATED DEBENTURES HAD NOT BEEN ASSIGNED.
INVESTORS ARE ADVISED TO CONSULT THEIR TAX ADVISORS REGARDING THE TAX
CONSEQUENCES OF AN ASSIGNMENT BY TXU CORP OF ITS OBLIGATIONS UNDER THE JUNIOR
SUBORDINATED DEBENTURES.
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REDEMPTION
TXU Corp may redeem all or part of the Junior Subordinated Debentures on or
after December 31, 2004, at any time. TXU Corp also may redeem, at 100% of their
principal amount plus accrued interest, all, but not less than all of, the
Junior Subordinated Debentures at any time within 90 days after there is a Tax
Event. TXU Capital would use the proceeds of any redemption to redeem its
Preferred Trust Securities and Common Trust Securities.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
RELATING TO THE PREFERRED TRUST SECURITIES
The following summary describes material United States federal income tax
consequences of the ownership and disposition of Preferred Trust Securities as
of the date of this prospectus supplement and represents the opinion of Thelen
Reid & Priest LLP, counsel to TXU Corp and TXU Capital, insofar as it relates to
matters of law or legal conclusions. Except where noted, it deals only with
Preferred Trust Securities held as capital assets within the meaning of ss.1221
of the Internal Revenue Code of 1986, or the Code, and does not deal with
special situations, such as those of dealers in securities or currencies,
financial institutions, life insurance companies, tax exempt entities, persons
holding Preferred Trust Securities as a part of a hedging or conversion
transaction or a straddle, United States holders (as defined in this prospectus
supplement) whose "functional currency" is not the United States dollar, or
persons who are not United States holders. In addition, this discussion does not
address the tax consequences to persons who purchase Preferred Trust Securities
other than in their initial issuance and distribution. Furthermore, the
discussion below is based upon the provisions of the Code and Treasury
regulations, administrative rulings and judicial decisions under the Code and
those regulations as of the date of this prospectus supplement. Those
authorities may be repealed, revoked or modified so as to result in United
States federal income tax consequences different from those discussed below.
PROSPECTIVE PURCHASERS OF PREFERRED TRUST SECURITIES, INCLUDING PERSONS WHO
ARE NOT UNITED STATES HOLDERS AND PERSONS WHO PURCHASE PREFERRED TRUST
SECURITIES IN THE SECONDARY MARKET, ARE ADVISED TO CONSULT WITH THEIR TAX
ADVISORS AS TO THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE
OWNERSHIP AND DISPOSITION OF PREFERRED TRUST SECURITIES IN LIGHT OF THEIR
PARTICULAR CIRCUMSTANCES, AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR OTHER TAX
LAWS.
UNITED STATES HOLDERS
As used in this prospectus supplement, a "United States holder" means a
beneficial owner of a Preferred Trust Security that is:
o A citizen or resident of the United States;
o A corporation, partnership or other entity created or organized in or
under the laws of the United States or any political subdivision of
the United States;
o An estate the income of which is subject to United States federal
income taxation regardless of its source; or
o A trust the administration of which is subject to the primary
supervision of a court within the United States and for which one or
more United States persons have the authority to control all
substantial decisions.
CLASSIFICATION OF TXU CAPITAL
Thelen Reid & Priest LLP is of the opinion that, under current law and
assuming full compliance with the terms of the Subordinated Indenture and the
instruments establishing TXU Capital and other documents, TXU Capital will be
classified as a "grantor trust" for United States federal income tax purposes
and will not be classified as an association taxable as a corporation. Each
United States holder will be treated as owning an undivided beneficial interest
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in the Junior Subordinated Debentures. Investors should be aware that the
opinion of Thelen Reid & Priest LLP is not binding on the Internal Revenue
Service or the courts.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
Based on the advice of Thelen Reid & Priest LLP, TXU Corp believes and
intends to take the position that the Junior Subordinated Debentures will
constitute indebtedness for United States federal income tax purposes. No
assurance can be given that this position will not be challenged by the Internal
Revenue Service or, if challenged, that such a challenge will not be successful.
By purchasing and accepting Preferred Trust Securities, each United States
holder covenants to treat the Junior Subordinated Debentures as indebtedness and
the Preferred Trust Securities as evidence of an indirect beneficial ownership
in the Junior Subordinated Debentures. The remainder of this discussion assumes
that the Junior Subordinated Debentures will be classified as indebtedness of
TXU Corp for United States federal income tax purposes.
PAYMENTS OF INTEREST
Except as described below, stated interest on a Junior Subordinated
Debenture will generally be taxable to a United States holder as ordinary income
at the time it is paid or accrued in accordance with the United States holder's
method of accounting for tax purposes.
ORIGINAL ISSUE DISCOUNT
Under applicable Treasury regulations, TXU Corp believes that the Junior
Subordinated Debentures will not be treated as issued with OID. It should be
noted that these regulations have not yet been addressed in any rulings or other
interpretations by the Internal Revenue Service. Accordingly, it is possible
that the Internal Revenue Service could take a position contrary to the
interpretation described in this prospectus supplement.
Under the Subordinated Indenture, TXU Corp has the right to defer the
payment of interest on the Junior Subordinated Debentures at any time or from
time to time for a period not exceeding 20 consecutive quarterly periods with
respect to each extension period. If TXU Corp exercises its rights to defer
payments of interest, the Junior Subordinated Debentures would at that time be
treated as reissued with OID for so long as they remained outstanding. A United
States holder would be required to include OID in income on an economic accrual
basis, although TXU Corp will not make any interest payments during that period
on the Junior Subordinated Debentures. As a result, all United States holders
would be required to accrue interest income even if they used a cash method of
accounting.
RECEIPT OF JUNIOR SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF TXU
CAPITAL
The Junior Subordinated Debentures may be distributed to United States
holders in exchange for the Preferred Trust Securities upon liquidation of TXU
Capital. Unless the liquidation of TXU Capital occurs as a result of TXU Capital
being subject to United States federal income tax with respect to interest on
the Junior Subordinated Debentures, for United States federal income tax
purposes, the distribution would be treated as a non-taxable event to each
United States holder, and each United States holder would receive an aggregate
tax basis in the Junior Subordinated Debentures equal to the holder's aggregate
tax basis in its Preferred Trust Securities. A United States holder's holding
period for the Junior Subordinated Debentures received would include the period
during which the holder held the Preferred Trust Securities. If, however, the
liquidation of TXU Capital were to occur because TXU Capital was subject to
United States federal income tax with respect to interest on the Junior
Subordinated Debentures, the distribution of the Junior Subordinated Debentures
to a United States holder by TXU Capital would likely be a taxable event to the
holder, and the holder would recognize gain or loss as if the holder had
exchanged its Preferred Trust Securities for Junior Subordinated Debentures in a
taxable exchange. See "Sale, Exchange and Redemption of the Preferred Trust
Securities."
In specific situations, the Junior Subordinated Debentures may be redeemed
for cash and the proceeds of the redemption distributed to holders of Preferred
Trust Securities in redemption of the Preferred Trust Securities. The redemption
would, for United States federal income tax purposes, constitute a taxable
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disposition of the Preferred Trust Securities, and a holder would recognize gain
or loss as if the holder had sold such redeemed Preferred Trust Securities. See
"Sale, Exchange and Redemption of the Preferred Trust Securities."
SALE, EXCHANGE AND REDEMPTION OF THE PREFERRED TRUST SECURITIES
Upon the sale, exchange or redemption of Preferred Trust Securities, a
United States holder will recognize gain or loss equal to the difference between
the amount realized upon the sale, exchange or redemption, except for amounts
attributable to accrued and unpaid interest, and the holder's adjusted tax basis
in the Preferred Trust Securities. A holder's adjusted tax basis in the
Preferred Trust Securities will generally equal the amount paid for the
Preferred Trust Securities, increased by any OID included in income and
decreased by any subsequent distributions on the Preferred Trust Securities. The
gain or loss will be capital gain or loss and will be long-term capital gain or
loss if, at the time of sale, exchange or redemption, the Preferred Trust
Securities have been held for more than one year. Generally, for non-corporate
United States holders, net long-term capital gains are subject to United States
federal income tax at a maximum rate of 20%. Under current law, deductibility of
capital losses is subject to limitations.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Subject to the qualification discussed below, income on the Preferred Trust
Securities will be reported to United States holders on Forms 1099, which should
be mailed to holders by January 31 following each calendar year.
If required by law, TXU Capital will report annually to the holders of
record of the Preferred Trust Securities the interest income paid or OID accrued
during the year with respect to the Junior Subordinated Debentures. TXU Capital
currently intends to report that information on Form 1099 prior to January 31
following each calendar year. Under current law, holders of record of Preferred
Trust Securities who hold as nominees for beneficial holders will not have any
obligation to report information regarding the beneficial holders to TXU
Capital. TXU Capital, moreover, will not have any obligation to report to
beneficial holders who are not also record holders. Thus, beneficial holders of
Preferred Trust Securities who hold their Preferred Trust Securities through
nominee holders will typically receive Forms 1099 reflecting the income on their
Preferred Trust Securities from the nominee holders rather than from TXU
Capital.
Payments made in respect of, and proceeds from the sale of, Preferred
Trust Securities (or Junior Subordinated Debentures distributed to holders of
Preferred Trust Securities) may be subject to "backup" withholding tax of 31% if
the holder fails to comply with specified identification requirements, or has
previously failed to report in full dividend and interest income, or does not
otherwise establish its entitlement to an exemption. Any withheld amounts will
be allowed as a refund or a credit against the holder's United States federal
income tax liability, provided the required information is provided to the
Internal Revenue Service.
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date of this prospectus supplement, each of the Underwriters
named below has severally agreed to purchase, and TXU Capital has agreed to sell
to each of the Underwriters, for whom Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Lehman Brothers Inc., Morgan Stanley & Co. Incorporated,
PaineWebber Incorporated and Salomon Smith Barney Inc. are acting as the
representatives, severally, the number of Preferred Trust Securities listed
opposite its name below:
<TABLE>
<CAPTION>
<S> <C>
NUMBER OF
PREFERRED
UNDERWRITER TRUST SECURITIES
----------- ----------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................................................... 968,000
Lehman Brothers Inc.......................................................................... 968,000
Morgan Stanley & Co. Incorporated............................................................ 968,000
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PaineWebber Incorporated..................................................................... 968,000
Salomon Smith Barney Inc..................................................................... 968,000
ABN AMRO Incorporated........................................................................ 40,000
Robert W. Baird & Co. Incorporated........................................................... 40,000
Banc of America Securities LLC............................................................... 40,000
Bear, Stearns & Co. Inc...................................................................... 40,000
J.C. Bradford & Co........................................................................... 40,000
CIBC World Markets Corp...................................................................... 40,000
Dain Rauscher Incorporated................................................................... 40,000
Deutsche Bank Securities Inc................................................................. 40,000
Doley Securities, Inc........................................................................ 40,000
Donaldson, Lufkin & Jenrette Securities Corporation.......................................... 40,000
A.G. Edwards & Sons, Inc..................................................................... 40,000
Fahnestock & Co. Inc......................................................................... 40,000
First Union Securities, Inc.................................................................. 40,000
Fleet Securities, Inc........................................................................ 40,000
Goldman, Sachs & Co.......................................................................... 40,000
Gruntal & Co., L.L.C......................................................................... 40,000
Legg Mason Wood Walker, Incorporated......................................................... 40,000
McDonald Investments Inc., A KeyCorp Company................................................. 40,000
Muriel Siebert & Co., Inc.................................................................... 40,000
OLDE Discount Corporation.................................................................... 40,000
Pryor, McClendon, Counts & Co., Inc.......................................................... 40,000
Raymond James & Associates, Inc.............................................................. 40,000
The Robinson-Humphrey Company, LLC........................................................... 40,000
SG Cowen Securities Corporation.............................................................. 40,000
TD Securities (USA) Inc...................................................................... 40,000
Tucker Anthony Incorporated.................................................................. 40,000
U.S. Bancorp Piper Jaffray Inc............................................................... 40,000
Utendahl Capital Partners, L.P............................................................... 40,000
Warburg Dillon Read LLC...................................................................... 40,000
---------
Total................................................................... 6,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Preferred Trust Securities
are subject to the approval of specified legal matters by their counsel and to
other conditions. In the Underwriting Agreement, the several Underwriters have
agreed, subject to the terms and conditions described in the Underwriting
Agreement, to purchase all the Preferred Trust Securities offered in this
issuance if any of the Preferred Trust Securities are purchased. In the event of
default by an Underwriter, the Underwriting Agreement provides that, in some
circumstances, the purchase commitments of the nondefaulting Underwriters may be
increased or the Underwriting Agreement may be terminated.
The Underwriters initially propose to offer part of the Preferred Trust
Securities directly to the public at the initial public offering price set forth
on the cover page of this prospectus supplement and all or part to dealers at a
price that represents a concession not in excess of $.50 per Preferred Trust
Security under the public offering price. Any Underwriter may allow, and the
dealers may reallow, a concession not in excess of $.48 per Preferred Trust
Security to other Underwriters or to other dealers. After the initial offering
of the Preferred Trust Securities, the offering price and other selling terms
may from time to time be varied by the Underwriters named on the cover page of
this prospectus supplement.
Because the proceeds of the sale of the Preferred Trust Securities will
ultimately be used to purchase the Junior Subordinated Debentures of TXU Corp,
the Underwriting Agreement provides that TXU Corp will pay to the Underwriters
as compensation for their services $.7875 per Preferred Trust Security, or
$4,725,000 in the aggregate.
TXU Corp and TXU Capital have agreed that, without the prior written
consent of the representatives, on behalf of the Underwriters, they will not,
during the period between the date of this prospectus supplement and the
delivery of the Preferred Trust Securities, directly or indirectly, publicly
issue, sell, offer or contract to sell, in the market in which the Preferred
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Trust Securities are being offered and sold, any securities of TXU Corp or any
of its subsidiaries or of TXU Capital which are of the same class as the
Preferred Trust Securities.
Prior to this offering, there has been no market for the Preferred Trust
Securities. TXU Capital plans to list the Preferred Trust Securities on the New
York Stock Exchange, and trading of the Preferred Trust Securities on the New
York Stock Exchange is expected to begin within a 30-day period after the
Preferred Trust Securities are first issued. The Underwriters have advised TXU
Corp that they intend to make a market in the Preferred Trust Securities prior
to the commencement of trading on the New York Stock Exchange but are not
obligated to do so and may discontinue market making at any time without notice.
No assurance can be given as to the liquidity of the trading market for the
Preferred Trust Securities.
In order to facilitate the offering of the Preferred Trust Securities, the
Underwriters may engage in transactions that stabilize, maintain, or otherwise
affect the price of the Preferred Trust Securities. Specifically, the
Underwriters may over-allot in connection with the offering, creating a short
position in the Preferred Trust Securities for their own account. In addition,
to cover over-allotments or to stabilize the price of the Preferred Trust
Securities, the Underwriters may bid for, and purchase, the Preferred Trust
Securities in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an Underwriter or a dealer for distributing the
Preferred Trust Securities in the offering, if the syndicate repurchases
previously distributed Preferred Trust Securities in transactions to cover
syndicate short positions, in stabilization transactions, or otherwise. Any of
these activities may stabilize or maintain the market price of the Preferred
Trust Securities above independent market levels. The Underwriters are not
required to engage in these activities, and may end any of these activities at
any time.
TXU Corp and TXU Capital have granted to the Underwriters an option,
exercisable for 30 days following the date of this prospectus supplement, to
purchase additional Preferred Trust Securities from TXU Capital in an amount up
to 10% of the total initial Preferred Trust Securities listed above at the
public offering price listed on the cover page of this prospectus supplement.
TXU Corp will pay to the Underwriters a commission of $.7875 per additional
Preferred Trust Security purchased. The Underwriters may exercise this option
only to cover over-allotments, if any, made on the sale of the Preferred Trust
Securities. To the extent the option is exercised, each Underwriter has agreed
to purchase approximately the same percentage of Preferred Trust Securities that
the number listed opposite their names in the table above bears to the total
number of Preferred Trust Securities initially offered.
TXU Corp and TXU Capital have agreed to indemnify the Underwriters
against, or contribute to payments the Underwriters may be required to make in
respect of, certain liabilities, including liabilities under the Securities Act.
Some of the Underwriters engage in transactions with, and from time to
time have performed services for, TXU Corp and its subsidiaries in the ordinary
course of business.
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<PAGE>
PROSPECTUS
$850,000,000
AGGREGATE AMOUNT
---------------
TEXAS UTILITIES COMPANY
(DOING BUSINESS AS TXU CORP)
PREFERENCE STOCK
AND
DEBT SECURITIES
-------------
TXU CAPITAL II
TXU CAPITAL III
TXU CAPITAL IV
PREFERRED TRUST SECURITIES
FULLY AND UNCONDITIONALLY GUARANTEED AS SET
FORTH HEREIN BY
TXU CORP
-----------------------------------------------------
We will provide specific terms of these securities,
their offering prices and how they will be offered
in supplements to this prospectus.
You should read this prospectus and any supplement carefully
before you invest.
-----------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAVE THESE ORGANIZATIONS
DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
This prospectus is dated June 9, 1999.
<PAGE>
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission, or SEC, using a "shelf" registration
process. Under this shelf process, we may, over the next two years, sell
combinations of the securities described in this prospectus in one or more
offerings up to a total dollar amount of $850,000,000. This amount includes
$340,000,000 of Debt Securities registered under earlier registration
statements. This prospectus provides you with a general description of the
securities we may offer. Each time we sell securities, we will provide a
prospectus supplement that will contain specific information about the terms of
that offering. The prospectus supplement may also add, update or change
information contained in this prospectus. You should read both this prospectus
and any prospectus supplement together with additional information described
under the heading WHERE YOU CAN FIND MORE INFORMATION.
For more detailed information about the securities, you can read the
exhibits to the registration statement. Those exhibits have been either filed
with the registration statement or incorporated by reference to earlier SEC
filings listed in the registration statement.
WHERE YOU CAN FIND MORE INFORMATION
Texas Utilities Company, a Texas corporation doing business as TXU Corp,
was formed in 1997 as a holding company. TXU Corp owns all of the outstanding
common stock of its predecessor company, Texas Energy Industries, Inc. now doing
business as TXU Energy Industries Company. Texas Utilities Company files annual,
quarterly and special reports, proxy statements and other information with the
SEC under File No. 1-12833. Before TXU Corp began filing quarterly and annual
reports with the SEC, TXU Energy Industries Company filed those reports under
its old name, Texas Utilities Company, File No. 1-3591. These SEC filings are
available to the public over the Internet at the SEC's website at
http://www.sec.gov. You may also read and copy any of these SEC filings at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below and any future filings we make with the
SEC under Section 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of
1934, as amended, until we sell all of the securities described in this
prospectus.
o Texas Utilities Company's Annual Report on Form 10-K for the year ended
December 31, 1998 (1998 10-K).
o Texas Utilities Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999.
You may request a copy of these filings at no cost, by writing or
contacting Texas Utilities Company, now doing business as TXU Corp, at the
following address: Secretary, TXU Corp, Energy Plaza, 1601 Bryan Street, Dallas,
Texas 75201; telephone number (214) 812-4600.
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<PAGE>
TXU CORP
TXU Corp is a holding company engaged through various subsidiary companies
primarily in providing energy and other related services, both domestically and
internationally. Its principal direct and indirect subsidiaries are:
Texas Utilities Electric Company, doing business as TXU Electric Company,
an operating electric utility company engaged in the generation, purchase,
transmission, distribution and sale of electric energy in the north
central, eastern and western parts of Texas.
ENSERCH Corporation, doing business as TXU Gas Company, an integrated
company focused on natural gas. Its major business operations are
gathering, processing, transmission and distribution of natural gas and the
marketing of natural gas and electricity. It operates primarily in the
north central, eastern and western parts of Texas and engages in the
wholesale and retail marketing of natural gas and electricity in several
areas of the United States.
Eastern Group plc, which includes Eastern Electricity plc, the largest
supplier (retailer) and distributor of electricity in England and Wales.
Eastern Group companies also include one of the largest generators of
electricity and one of the largest retail suppliers of natural gas in the
United Kingdom.
Other subsidiaries include:
TU Australia Holding L.P. Its principal operating subsidiaries include
Eastern Energy Limited, which is engaged in the purchase, distribution,
marketing and sale of electric energy in the State of Victoria, Australia,
and Westar and Kinetik Energy, gas retail and distribution businesses.
Lufkin-Conroe Communications Co., doing business as TXU Communications
Company, an independent local exchange carrier providing regulated
telephone service through access lines in southeast Texas. It also provides
access services to a number of interexchange carriers who provide long
distance services.
Other wholly owned subsidiaries which perform specialized functions within
the TXU Corp system.
TXU Corp's principal place of business is Energy Plaza, 1601 Bryan Street,
Dallas, Texas 75201.
TXU CAPITAL II, TXU CAPITAL III AND TXU CAPITAL IV
TXU Capital II, TXU Capital III and TXU Capital IV are identical Delaware
business trusts and each will be described in this prospectus as TXU Capital.
TXU Capital was created pursuant to a Trust Agreement among TXU Corp, The Bank
of New York as the Property Trustee and The Bank of New York (Delaware) as the
Delaware Trustee and an employee of TXU Corp as Administrative Trustee. The
Trust Agreement will be amended and restated substantially in the form filed as
an exhibit to the registration statement. TXU Capital exists only to issue its
Preferred Trust Securities and Common Trust Securities and to hold the Junior
Subordinated Debentures of TXU Corp as trust assets. All of the Common Trust
Securities will be owned by TXU Corp. The Common Trust Securities will represent
at least 3% of the total capital of TXU Capital. Payments will be made on the
Common Trust Securities pro rata with the Preferred Trust Securities, except
that the Common Trust Securities' right to payment will be subordinated to the
rights of the Preferred Trust Securities if there is a default under the Trust
Agreement. TXU Capital has a term of approximately 40 years, but may dissolve
earlier as provided in the Trust Agreement. TXU Capital's business and affairs
will be conducted by its Administrative Trustees. The office of the Delaware
Trustee in the State of Delaware is White Clay Center, Route 273, Newark,
Delaware 19711. The principal place of business of TXU Capital is c/o TXU Corp,
Energy Plaza, 1601 Bryan Street, Dallas, Texas 75201.
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<PAGE>
USE OF PROCEEDS
Unless otherwise set forth in a prospectus supplement, the net proceeds
from the offering of the securities will be used for general corporate purposes
of TXU Corp, which may include the repayment of short-term indebtedness.
RATIO OF EARNINGS TO FIXED CHARGES AND
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS
The ratio of earnings to fixed charges and the ratio of earnings to
combined fixed charges and preferred dividends for TXU Corp for each of the
years ended December 31, 1994 through 1998 and for the twelve months ended March
31, 1999 were, in each case, 1.88, 0.72, 2.18, 2.14, 1.84 and 1.79,
respectively. For the year ended December 31, 1995, fixed charges exceeded
earnings by $235 million. The year ended December 31, 1995 was affected by the
write-down in value of some of the nonperforming assets of TXU Corp's
subsidiaries, including TXU Electric Company's partially completed Twin Oak and
Forest Grove lignite-fueled facilities and the New Mexico coal reserves of a
subsidiary, as well as several minor assets. That write-down, on an after-tax
basis, amounted to $802 million.
DESCRIPTION OF TXU CORP PREFERENCE STOCK
TXU Corp is authorized to issue 50,000,000 shares of Preference Stock, $25
par value, none of which is outstanding.
TXU Corp has adopted a share rights plan pursuant to which shareholders
were given rights to purchase TXU Corp's Series A Preference Stock. These rights
have certain anti-takeover effects. Unless and until certain events occur, these
rights are not exercisable and trade with shares of the common stock.
Because TXU Corp is a holding company that conducts all of its operations
through subsidiaries, holders of Preference Stock will generally have a position
junior to claims of creditors and preferred stockholders of the subsidiaries of
TXU Corp as well as to all holders of debt of TXU Corp. All these subsidiaries
have outstanding indebtedness, and ENSERCH Corporation and Texas Utilities
Electric Company have outstanding shares of preferred stock.
The Texas Business Corporation Act and the Restated Articles of
Incorporation and Bylaws of TXU Corp determine the rights and privileges of
holders of Preference Stock. The information below is a summary of those terms.
For a fuller understanding of those terms, you should read the corporate
documents, which have been filed with the SEC, and the Texas corporate law.
TXU Corp may issue one or more series of Preference Stock without the
approval of its shareholders. The Preference Stock of all series will rank
equally as to dividends and distributions upon liquidation or dissolution of TXU
Corp.
Some terms of a series may differ from those of another series. A
prospectus supplement will describe those different terms. They will also be
described in a Statement of Resolution Establishing a Series of Preference
Stock. That document also will be filed in Texas and with the SEC, and you
should read it for a full understanding of any special terms of a series. These
terms will include any of the following that apply to that series:
o The title of that series of Preference Stock;
o The number of shares in the series;
o The dividend rate or how such rate will be determined and the dividend
payment dates for the series of Preference Stock;
o Whether the series will be listed on a national exchange;
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<PAGE>
o The date or dates on which the series of Preference Stock may be
redeemed at the option of TXU Corp and any restrictions on such
redemptions;
o Any sinking fund or other provisions that would obligate TXU Corp to
repurchase, redeem or retire the series of Preference Stock;
o The amount payable on the series of Preference Stock in case of the
liquidation, dissolution or winding up of TXU Corp and any additional
amount, or method of determining such amount, payable in case any such
event is voluntary; and
o Any rights to convert the shares of that series of Preference Stock
into shares of another series or into shares of any other class of
capital stock.
Shares of Preference Stock issued by TXU Corp will be fully paid and
non-assessable.
TXU Corp must first pay all dividends due on Preference Stock before it
pays dividends to holders of its common stock. Upon any dissolution or
liquidation of TXU Corp, amounts due to holders of Preference Stock will be paid
before any distribution of assets to holders of common stock.
TXU Corp has issued junior subordinated debentures in connection with
preferred trust securities previously issued by a subsidiary, TXU Capital I. TXU
Corp has a right, from time to time, to delay interest payments for those junior
subordinated debentures for up to 20 consecutive quarters. TXU Corp may issue,
from time to time, additional junior subordinated debentures in connection with
the Preferred Trust Securities described in this prospectus. TXU Corp may have a
similar right to delay interest payments for those additional junior
subordinated debentures. If TXU Corp exercises any right to delay an interest
payment, it would not be able to pay dividends on its common stock or Preference
Stock during the extension period. For a further description of TXU Corp's
rights to delay payment, read DESCRIPTION OF TXU CAPITAL'S PREFERRED TRUST
SECURITIES AND COMMON TRUST SECURITIES and DESCRIPTION OF THE JUNIOR
SUBORDINATED DEBENTURES in this prospectus.
The holders of Preference Stock have voting rights only in the following
circumstances:
o If dividends have not been paid for four full quarters, holders of
Preference Stock may elect one-third of TXU Corp's Board of Directors
or two directors, whichever is greater;
o If dividends have not been paid for eight full quarters, holders of
Preference Stock may elect a majority of TXU Corp's full Board of
Directors;
o TXU Corp needs the approval of the holders of two-thirds of the
outstanding shares of the Preference Stock in order to make the
following changes in its capital structure:
- Authorizing a new class of stock that ranks senior to the
Preference Stock as to dividends or liquidation rights or any
security that could be converted into or exercised to acquire any
new senior class of stock, and
- Materially altering the Restated Articles of Incorporation in
such a way as to change the terms of the Preference Stock, unless
the change does not affect every series of Preference Stock, in
which case holders of only those series affected may vote.
TXU Corp will notify holders of Preference Stock of any meeting at which they
may vote. Shares of Preference Stock will have no preemptive rights.
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<PAGE>
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be TXU Corp's direct unsecured general
obligations. The Debt Securities will be senior debt securities. The Debt
Securities will be issued under one or more separate indentures between TXU Corp
and The Bank of New York as Trustee under each indenture.
Selected provisions of each indenture are summarized below. This summary is
not complete and should be read together with the prospectus supplement
describing specific terms of the Debt Securities. The form of the indenture was
filed with the SEC and you should read the indenture for provisions that may be
important to you. The indenture will be qualified under the Trust Indenture Act
of 1939, as amended. You should refer to the Trust Indenture Act for provisions
that apply to the Debt Securities. Whenever particular provisions or defined
terms in the indenture are referred to under this DESCRIPTION OF DEBT
SECURITIES, those provisions or defined terms are incorporated by reference
herein.
The Debt Securities will rank equally with all of TXU Corp's other senior
and unsubordinated debt.
Because TXU Corp is a holding company that conducts all of its operations
through subsidiaries, holders of Debt Securities will generally have a position
junior to claims of creditors and preferred stockholders of the subsidiaries of
TXU Corp. All these subsidiaries have outstanding indebtedness, and ENSERCH
Corporation and Texas Utilities Electric Company have outstanding shares of
preferred stock.
A prospectus supplement and an officer's certificate relating to any series
of Debt Securities being offered will include specific terms relating to that
offering. These terms will include any of the following terms that apply to that
series:
o The title of the Debt Securities;
o The total principal amount of the Debt Securities;
o The dates on which the principal of the Debt Securities will be
payable and how it will be paid;
o The interest rate or rates which the Debt Securities will bear, or how
the rate or rates will be determined, the interest payment dates for
the Debt Securities and the regular record dates for interest
payments;
o Any right to delay the interest payments for the Debt Securities;
o The percentage, if less than 100%, of the principal amount of the Debt
Securities that will be payable if the maturity of the Debt Securities
is accelerated;
o Any date or dates on which the Debt Securities may be redeemed at the
option of TXU Corp and any restrictions on those redemptions;
o Any sinking fund or other provisions that would obligate TXU Corp to
repurchase or otherwise redeem the Debt Securities;
o Any changes or additions to the Events of Default under the indenture
or changes or additions to the covenants of TXU Corp under the
indenture;
o If the Debt Securities will be issued in denominations other than
$1,000;
o If payments on the Debt Securities may be made in a currency or
currencies other than United States dollars;
o Any rights or duties of another person to assume the obligations of
TXU Corp with respect to the Debt Securities;
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o Any collateral, security, assurance or guarantee for the Debt
Securities; and
o Any other terms of the Debt Securities not inconsistent with the terms
of the indenture.
The indenture does not limit the principal amount of Debt Securities that
TXU Corp may issue.
TXU Corp may sell Debt Securities at a discount below their principal
amount. United States federal income tax considerations applicable to Debt
Securities sold at an original issue discount may be described in the prospectus
supplement. In addition, important United States federal income tax or other tax
considerations applicable to any Debt Securities denominated or payable in a
currency or currency unit other than United States dollars may be described in
the prospectus supplement.
Except as may otherwise be described in the applicable prospectus
supplement, the covenants contained in the indenture will not afford holders of
Debt Securities protection in the event of a highly-leveraged transaction
involving TXU Corp.
PAYMENT AND PAYING AGENTS
Except as may be provided in the prospectus supplement, interest, if any,
on each Debt Security payable on each Interest Payment Date will be paid to the
person in whose name that Debt Security is registered as of the close of
business on the regular record date for the Interest Payment Date. However,
interest payable at maturity will be paid to the person to whom the principal is
paid. If there has been a default in the payment of interest on any Debt
Security, the defaulted interest may be paid to the holder of such Debt Security
as of the close of business on a date between 10 and 15 days prior to the date
proposed by TXU Corp for payment of such defaulted interest or in any other
manner permitted by any securities exchange on which that Debt Security may be
listed, if the Trustee finds it workable.
Unless otherwise specified in the prospectus supplement, principal,
premium, if any, and interest on the Debt Securities at maturity will be payable
upon presentation of the Debt Securities at the corporate trust office of The
Bank of New York, in The City of New York, as Paying Agent for TXU Corp. TXU
Corp may change the place of payment on the Debt Securities, may appoint one or
more additional Paying Agents (including TXU Corp) and may remove any Paying
Agent, all at the discretion of TXU Corp.
REGISTRATION AND TRANSFER
Unless otherwise specified in the prospectus supplement, the transfer of
Debt Securities may be registered, and Debt Securities may be exchanged for
other Debt Securities of the same series or tranche, of authorized denominations
and with the same terms and principal amount, at the corporate trust office of
The Bank of New York in The City of New York. TXU Corp may change the place for
registration of transfer and exchange of the Debt Securities and may designate
additional places for registration and exchange. Unless otherwise provided in
the prospectus supplement, no service charge will be made for any transfer or
exchange of the Debt Securities. However, TXU Corp may require payment to cover
any tax or other governmental charge that may be imposed. TXU Corp will not be
required to execute or to provide for the registration of transfer of, or the
exchange of, (a) any Debt Security during the 15 days prior to giving any notice
of redemption or (b) any Debt Security selected for redemption except the
unredeemed portion of any Debt Security being redeemed in part.
DEFEASANCE
TXU Corp will be discharged from its obligations on the Debt Securities of
a particular series if it deposits with the trustee sufficient cash or
government securities to pay the principal, interest, any premium and any other
sums when due on the stated maturity date or a redemption date of that series of
Debt Securities.
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LIMITATION ON LIENS
The indenture provides that, except as otherwise specified with respect to
a particular series of Debt Securities, TXU Corp will not pledge, mortgage,
hypothecate or grant a security interest in, or permit any mortgage, pledge,
security interest or other lien upon, any capital stock of any Subsidiary, as
defined below, now or hereafter owned by TXU Corp, to secure any Indebtedness,
as defined below, without also securing the outstanding Debt Securities, and all
other Indebtedness entitled to be so secured, equally and ratably with the
Indebtedness and any other indebtedness similarly entitled to be equally and
ratably secured.
This restriction does not apply to, or prevent the creation or any
extension, renewal or refunding of:
(1) any mortgage, pledge, security interest, lien or encumbrance upon any
capital stock created at the time it is acquired by TXU Corp or within
one year after that time to secure the purchase price for the capital
stock;
(2) any mortgage, pledge, security interest, lien or encumbrance upon any
capital stock existing at the time it is acquired by TXU Corp, whether
or not the secured obligations are assumed by TXU Corp; or
(3) any judgment, levy, execution, attachment or other similar lien
arising in connection with court proceedings, provided that either:
(a) the execution or enforcement of the lien is effectively stayed
within 30 days after entry of the corresponding judgment, or the
corresponding judgment has been discharged within that 30 day
period, and the claims secured by the lien are being contested in
good faith by appropriate proceedings timely commenced and
diligently prosecuted;
(b) the payment of each lien is covered in full by insurance and the
insurance company has not denied or contested coverage thereof;
or
(c) so long as each lien is adequately bonded, any appropriate and
duly initiated legal proceedings for the review of the
corresponding judgment, decree or order shall not have been fully
terminated or the period within which these proceedings may be
initiated shall not have expired.
For purposes of the restriction described in the preceding paragraph,
"Indebtedness" means:
(1) all indebtedness created or assumed by TXU Corp for the repayment of
money borrowed;
(2) all indebtedness for money borrowed secured by a lien upon property
owned by TXU Corp and upon which indebtedness for money borrowed TXU
Corp customarily pays interest, although TXU Corp has not assumed or
become liable for the payment of the indebtedness for money borrowed;
and
(3) all indebtedness of others for money borrowed which is guaranteed as
to payment of principal by TXU Corp or in effect guaranteed by TXU
Corp through a contingent agreement to purchase the indebtedness for
money borrowed, but excluding from this definition any other
contingent obligation of TXU Corp in respect of indebtedness for money
borrowed or other obligations incurred by others.
"Subsidiary" means a corporation in which more than 50% of the outstanding
voting stock is owned, directly or indirectly, by TXU Corp and/or by one or more
other Subsidiaries. For the purposes of this definition, "voting stock" means
stock that ordinarily has voting power for the election of directors, whether at
all times or only so long as no senior class of stock has that voting power by
reason of any contingency.
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Notwithstanding the foregoing, except as otherwise specified in the
officer's certificate setting out the terms of a particular series of Debt
Securities, TXU Corp may, without securing the Debt Securities, pledge,
mortgage, hypothecate or grant a security interest in, or permit any mortgage,
pledge, security interest or other lien, in addition to liens expressly
permitted as described in the preceding paragraphs, upon, capital stock of any
Subsidiary now or hereafter owned by TXU Corp to secure any Indebtedness, which
would otherwise be subject to the foregoing restriction, in an aggregate amount
which, together with all other such Indebtedness, does not exceed 5% of
Consolidated Capitalization. For this purpose, "Consolidated Capitalization"
means the sum of:
(1) Consolidated Shareholders' Equity;
(2) Consolidated Indebtedness for money borrowed, which is total
indebtedness as shown on the consolidated balance sheet of the Company
and its Subsidiaries, exclusive of any that is due and payable within
one year of the date the sum is determined; and, without duplication
(3) any preference or preferred stock of TXU Corp or any Consolidated
Subsidiary which is subject to mandatory redemption or sinking fund
provisions.
The term "Consolidated Shareholders' Equity" as used above means the total
Assets of TXU Corp and its Consolidated Subsidiaries less all liabilities of TXU
Corp and its Consolidated Subsidiaries that would, in accordance with generally
accepted accounting principles in the United States, be classified on a balance
sheet as liabilities, including without limitation:
(1) indebtedness secured by property of TXU Corp or any of its
Consolidated Subsidiaries whether or not TXU Corp or the Consolidated
Subsidiary is liable for the payment of the indebtedness unless, in
the case that TXU Corp or the Consolidated Subsidiary is not so
liable, the property has not been included among the Assets of TXU
Corp or the Consolidated Subsidiary on the balance sheet;
(2) deferred liabilities; and
(3) indebtedness of TXU Corp or any of its Consolidated Subsidiaries that
is expressly subordinated in right and priority of payment to other
liabilities of TXU Corp or such Consolidated Subsidiary.
As used in this definition, "liabilities" includes preference or preferred
stock of TXU Corp or any Consolidated Subsidiary only to the extent of any
preference or preferred stock that is subject to mandatory redemption or sinking
fund provisions.
The term "Consolidated Subsidiary", as used above, means at any date any
Subsidiary the financial statements of which under generally accepted accounting
principles would be consolidated with those of TXU Corp in its consolidated
financial statements as of that 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 TXU Corp
and its Consolidated Subsidiaries.
As of December 31, 1998, the Consolidated Capitalization of TXU Corp was
approximately $24.8 billion.
For situations in which the limitation on liens will not apply, see
"Assignment of Obligations" below.
ASSIGNMENT OF OBLIGATIONS
TXU Corp may assign its obligations under the Debt Securities and the
indenture to a wholly-owned subsidiary, provided that no Event of Default, or
event which with the passage of time or the giving of required notice, or both,
would become an Event of Default, has occurred and is continuing. The subsidiary
must assume in writing TXU Corp's payment obligations under the Debt Securities
and under the indenture. TXU Corp must fully and unconditionally guarantee
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payment of the obligations of the assuming subsidiary under the Debt Securities
and the indenture.
If such an assignment is made, unless the terms of the assigned Debt
Securities state otherwise, TXU Corp will be released and discharged from all
its other obligations under the Debt Securities and the indenture. In that case,
any covenants made by TXU Corp with respect to the Debt Securities would become
solely covenants of, and would relate only to, the subsidiary. Unless the terms
of the assigned Debt Securities state otherwise, there would be no limitation on
liens on the capital stock of TXU Corp's subsidiaries.
CONSOLIDATION, MERGER, AND SALE OF ASSETS
Under the terms of the indenture, TXU Corp 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:
o The surviving or successor entity is organized and validly existing
under the laws of any domestic jurisdiction and it expressly assumes
TXU Corp's obligations on all Debt Securities and under the indenture;
o Immediately after giving effect to the transaction, no Event of
Default or no event which, after notice or lapse of time or both,
would become an Event of Default, shall have occurred and be
continuing; and
o TXU Corp shall have delivered to the Trustee an officer's certificate
and an opinion of counsel as provided in the indenture.
The terms of the indenture do not restrict TXU Corp in a merger in which
TXU Corp is the surviving entity.
EVENTS OF DEFAULT
"Event of Default" when used in the indenture with respect to any series of
Debt Securities, means any of the following:
o Failure to pay interest on any Debt Security of that series for 30
days after it is due;
o Failure to pay the principal of or any premium on any Debt Security of
that series when due;
o Failure to perform any other covenant in the indenture, other than a
covenant that does not relate to that series of Debt Securities, that
continues for 90 days after TXU Corp receives written notice from the
Trustee, or TXU Corp and the Trustee receive a written notice from the
holders of 33% in aggregate principal amount of the Debt Securities of
that series;
o Events in bankruptcy, insolvency or reorganization of TXU Corp
specified in the indenture; or
o Any other event of default included in any supplemental indenture or
officer's certificate for a specific series of Debt Securities.
An Event of Default for a particular series of Debt Securities does not
necessarily constitute an Event of Default for any other series of Debt
Securities issued under the indenture. The Trustee may withhold notice to the
holders of Debt Securities of any default, except default in the payment of
principal or interest, if it considers the withholding of notice to be in the
interests of the holders.
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REMEDIES
If an Event of Default for any series of Debt Securities occurs and
continues, the Trustee or the holders of at least 33% in aggregate principal
amount of all the Debt Securities of the series may declare the entire principal
amount of all the Debt Securities of that series, together with accrued
interest, to be due and payable immediately. However, if the Event of Default is
applicable to all outstanding Debt Securities under the indenture, only the
Trustee or holders of at least 33% in aggregate principal amount of all
outstanding Debt Securities of all series, voting as one class, and not the
holders of any one series, may make that declaration of acceleration.
At any time after a declaration of acceleration with respect to the Debt
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained, the Event of Default giving rise to
the declaration of acceleration will be considered waived, and the declaration
and its consequences will be considered rescinded and annulled, if:
o TXU Corp has paid or deposited with the Trustee a sum sufficient to
pay:
(1) all overdue interest on all Debt Securities of the series;
(2) the principal of and premium, if any, on any Debt Securities of
the series which have otherwise become due and interest that is
currently due;
(3) interest on overdue interest; and
(4) all amounts due to the Trustee under the indenture; and
o Any other Event of Default with respect to the Debt Securities of that
series has been cured or waived as provided in the indenture.
There is no automatic acceleration, even in the event of bankruptcy,
insolvency or reorganization of TXU Corp.
Other than its duties in case of an Event of Default, the Trustee is not
obligated to exercise any of its rights or powers under the indenture at the
request, order or direction of any of the holders, unless the holders offer the
Trustee a reasonable indemnity. If they provide this reasonable indemnity, the
holders of a majority in principal amount of any series of Debt Securities will
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any power conferred upon
the Trustee. However, if the Event of Default relates to more than one series,
only the holders of a majority in aggregate principal amount of all affected
series will have the right to give this direction. The Trustee is not obligated
to comply with directions that conflict with law or other provisions of the
indenture.
No holder of Debt Securities of any series will have any right to institute
any proceeding under the indenture, or any remedy under the indenture, unless:
o The holder has previously given to the Trustee written notice of a
continuing Event of Default;
o The holders of a majority in aggregate principal amount of the
outstanding Debt Securities of all series in respect of which an Event
of Default shall have occurred and be continuing have made a written
request to the Trustee, and have offered reasonable indemnity to the
Trustee to institute proceedings; and
o The Trustee has failed to institute any proceeding for 60 days after
notice.
However, these limitations do not apply to a suit by a holder of a Debt Security
for payment of the principal, premium, if any, or interest on the Debt Security
on or after the applicable due date.
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TXU Corp will provide to the Trustee an annual statement by an appropriate
officer as to TXU Corp's compliance with all conditions and covenants under the
indenture.
MODIFICATION AND WAIVER
Without the consent of any holder of Debt Securities issued under an
indenture, TXU Corp and the Trustee may enter into one or more supplemental
indentures for any of the following purposes:
o To evidence the assumption by any permitted successor of the covenants
of TXU Corp in the indenture and in the Debt Securities;
o To add additional covenants of TXU Corp or to surrender any right or
power of TXU Corp under the indenture;
o To add additional Events of Default;
o To change or eliminate or add any provision to the indenture;
provided, however, if the change will adversely affect the interests
of the holders of Debt Securities of any series in any material
respect, the change, elimination or addition will become effective
only:
(1) when the consent of the holders of Debt Securities of such series
has been obtained in accordance with the indenture; or
(2) when no Debt Securities of the affected series remain outstanding
under the indenture;
o To provide collateral security for all but not part of the Debt
Securities;
o To establish the form or terms of Debt Securities of any other series
as permitted by the indenture;
o To provide for the authentication and delivery of bearer securities
and coupons appertaining thereto;
o To evidence and provide for the acceptance of appointment of a
successor trustee;
o To provide for the procedures required for use of a noncertificated
system of registration for the Debt Securities of all or any series;
o To change any place where principal, premium, if any, and interest
shall be payable, Debt Securities may be surrendered for registration
of transfer or exchange and notices to TXU Corp may be served; or
o To cure any ambiguity or inconsistency or to make any other provisions
with respect to matters and questions arising under the indenture;
provided that the action does not adversely affect the interests of
the holders of Debt Securities of any series in any material respect.
The holders of at least a majority in aggregate principal amount of the
Debt Securities of all series then outstanding may waive compliance by TXU Corp
with some restrictive provisions of the indenture. The holders of not less than
a majority in principal amount of the outstanding Debt Securities of any series
may waive any past default under the indenture with respect to that series,
except a default in the payment of principal, premium, if any, or interest and
certain covenants and provisions of the indenture that cannot be modified or be
amended without the consent of the holder of each outstanding Debt Security of
the series affected.
If the Trust Indenture Act is amended after the date of the indenture in
such a way as to require changes to the indenture, the indenture will be deemed
to be amended so as to conform to that amendment to the Trust Indenture Act. TXU
Corp and the Trustee may, without the consent of any holders, enter into one or
more supplemental indentures to evidence the amendment.
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The consent of the holders of a majority in aggregate principal amount of
the Debt Securities of all series then outstanding is required for all other
modifications to the indenture. However, if less than all of the series of Debt
Securities outstanding are directly affected by a proposed supplemental
indenture, then the consent only of the holders of a majority in aggregate
principal amount of all series that are directly affected will be required. No
such amendment or modification may:
o Change the stated maturity of the principal of, or any installment of
principal of or interest on, any Debt Security, or reduce the
principal amount of any Debt Security or its rate of interest or
change the method of calculating the interest rate or reduce any
premium payable upon redemption, or change the currency in which
payments are made, or impair the right to institute suit for the
enforcement of any payment on or after the stated maturity of any Debt
Security, without the consent of the holder;
o Reduce the percentage in principal amount of the outstanding Debt
Securities of any series whose consent is required for any
supplemental indenture or any waiver of compliance with a provision of
the indenture or any default thereunder and its consequences, or
reduce the requirements for quorum or voting, without the consent of
all the holders of the series; or
o Modify some of the provisions of the indenture relating to
supplemental indentures, waivers of some covenants and waivers of past
defaults with respect to the Debt Securities of any series, without
the consent of the holder of each outstanding Debt Security affected
thereby.
A supplemental indenture which changes the indenture solely for the benefit
of one or more particular series of Debt Securities, or modifies the rights of
the holders of Debt Securities of one or more series, will not affect the rights
under the indenture of the holders of the Debt Securities of any other series.
The indenture provides that Debt Securities owned by TXU Corp or anyone
else required to make payment on the Debt Securities shall be disregarded and
considered not to be outstanding in determining whether the required holders
have given a request or consent.
TXU Corp may fix in advance a record date to determine the required number
of holders entitled to give any request, demand, authorization, direction,
notice, consent, waiver or other such act of the holders, but TXU Corp shall
have no obligation to do so. If TXU Corp fixes a record date, that request,
demand, authorization, direction, notice, consent, waiver or other act of the
holders may be given before or after that record date, but only the holders of
record at the close of business on that record date will be considered holders
for the purposes of determining whether holders of the required percentage of
the outstanding Debt Securities have authorized or agreed or consented to the
request, demand, authorization, direction, notice, consent, waiver or other act
of the holders. For that purpose, the outstanding Debt Securities shall be
computed as of the record date. Any request, demand, authorization, direction,
notice, consent, election, waiver or other act of a holder will bind every
future holder of the same Debt Securities and the holder of every Debt Security
issued upon the registration of transfer of or in exchange of these Debt
Securities. A transferee will be bound by acts of the Trustee or TXU Corp in
reliance thereon, whether or not notation of that action is made upon the Debt
Security.
RESIGNATION OF A TRUSTEE
A Trustee may resign at any time by giving written notice to TXU Corp or
may be removed at any time by act of the holders of a majority in principal
amount of all series of Debt Securities then outstanding delivered to the
Trustee and TXU Corp. No resignation or removal of a Trustee and no appointment
of a successor trustee will be effective until the acceptance of appointment by
a successor trustee. So long as no Event of Default or event which, after notice
or lapse of time, or both, would become an Event of Default has occurred and is
continuing and except with respect to a Trustee appointed by act of the holders,
if TXU Corp has delivered to the Trustee a resolution of its Board of Directors
appointing a successor trustee and such successor has accepted the appointment
in accordance with the terms of the respective indenture, the Trustee will be
deemed to have resigned and the successor will be deemed to have been appointed
as trustee in accordance with the indenture.
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NOTICES
Notices to holders of Debt Securities will be given by mail to the
addresses of such holders as they may appear in the security register therefor.
TITLE
TXU Corp, the Trustee, and any agent of TXU Corp or the Trustee, may treat
the person in whose name Debt Securities are registered as the absolute owner
thereof, whether or not the Debt Securities may be overdue, for the purpose of
making payments and for all other purposes irrespective of notice to the
contrary.
GOVERNING LAW
Each indenture and the Debt Securities will be governed by, and construed
in accordance with, the laws of the State of New York.
REGARDING THE TRUSTEE
The Trustee will be The Bank of New York. In addition to acting as Trustee,
The Bank of New York acts, and may act, as trustee under various indentures and
trusts of TXU Corp and its affiliates.
DESCRIPTION OF TXU CAPITAL'S PREFERRED TRUST SECURITIES AND COMMON TRUST
SECURITIES
TXU Capital will issue Preferred Trust Securities and Common Trust
Securities under a Trust Agreement. The Preferred Trust Securities will
represent preferred undivided beneficial interests in the assets of TXU Capital
and will entitle holders thereof to a preference over the Common Trust
Securities with respect to distributions and amounts payable on redemption or
liquidation. Selected provisions of the Trust Agreement are summarized below.
This summary is not complete and should be read together with the prospectus
supplement describing the specific terms of the Preferred Trust Securities. The
form of Trust Agreement was filed with the SEC and you should read the Trust
Agreement for provisions that may be important to you. The Trust Agreement will
be qualified as an indenture under the Trust Indenture Act. You should also
refer to the Trust Indenture Act for provisions that apply to the Preferred
Trust Securities. Wherever particular defined terms of the Trust Agreement are
referred to, such defined terms are incorporated herein by reference.
The Preferred Trust Securities and Common Trust Securities issued by TXU
Capital will be substantially the same except that, if TXU Capital fails to make
required payments, the rights of the holders of the Common Trust Securities to
payment of distributions and upon liquidation or redemption will be subordinated
to the rights of the holders of the Preferred Trust Securities. If there is a
continuing Event of Default under the Subordinated Indenture for Junior
Subordinated Debentures, holders of the Common Trust Securities and the
Preferred Trust Securities may both vote to appoint, remove or replace any of
trustees of TXU Capital. All of the Common Trust Securities of TXU Capital will
be owned by TXU Corp.
TXU Corp will fully and unconditionally guarantee payments due on the
Preferred Trust Securities through a combination of the following:
o TXU Corp's obligations under the Junior Subordinated Debentures;
o The rights of holders of Preferred Trust Securities to enforce those
obligations;
o TXU Corp's agreement to pay the expenses of TXU Capital; or
o TXU Corp's guarantee of payments due on the Preferred Trust Securities
to the extent of TXU Capital's assets.
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TXU Capital will use the proceeds from the sale of the Preferred Trust
Securities and Common Trust Securities to purchase Junior Subordinated
Debentures from TXU Corp. The Junior Subordinated Debentures will be held in
trust for the benefit of holders of the Preferred Trust Securities and Common
Trust Securities.
A prospectus supplement relating to the Preferred Trust Securities will
include specific terms of those securities and of the Junior Subordinated
Debentures. For a description of some specific terms that will affect both the
Preferred Trust Securities and the Junior Subordinated Debentures and your
rights under each, see DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES below.
DISTRIBUTIONS
The only income of TXU Capital available for distribution to the holders of
Preferred Trust Securities will be payments on the Junior Subordinated
Debentures. If TXU Corp does not make interest payments on the Junior
Subordinated Debentures, TXU Capital will not have funds available to pay
distributions on Preferred Trust Securities. The payment of distributions, if
and to the extent TXU Capital has sufficient funds available for the payment of
such distributions, is guaranteed by TXU Corp.
So long as there is no default in the payment of interest on the Junior
Subordinated Debentures, TXU Corp may extend the interest payment period from
time to time on the Junior Subordinated Debentures for one or more periods. As a
consequence, distributions on Preferred Trust Securities would be deferred
during any such period. Interest would, however, continue to accrue. If TXU Corp
extends the interest period or is in default under the Guarantee or with respect
to payments on the Junior Subordinated Debentures, TXU Corp may not:
o Declare or pay any dividend or distribution on its capital stock,
other than dividends paid in shares of Common Stock of TXU Corp;
o Redeem, purchase, acquire or make a liquidation payment with respect
to any of its capital stock;
o Redeem any indebtedness that is equal in right of payment with the
Junior Subordinated Debentures; or
o Make any guarantee payments with respect to any of the above.
Any extension period with respect to payment of interest on the Junior
Subordinated Debentures, or any extended interest payment period in respect of
other securities issued under the Subordinated Indenture or on any similar
securities, will apply to all securities of the same type. Those extensions will
also apply to distributions on Preferred Trust Securities and Common Trust
Securities and all other securities with terms substantially the same as
Preferred Trust Securities and Common Trust Securities. Before an extension
period ends, TXU Corp may further extend the interest payment period. No
extension period as further extended may exceed 20 consecutive quarters. After
any extension period and the payment of all amounts then due, TXU Corp may
select a new extended interest payment period. No interest period may be
extended beyond the maturity of the Junior Subordinated Debentures.
REDEMPTION OF PREFERRED TRUST SECURITIES AND COMMON TRUST SECURITIES
Whenever Junior Subordinated Debentures are repaid, whether at maturity or
earlier redemption, the proceeds shall be applied to redeem a like amount of
Preferred Trust Securities and Common Trust Securities. Holders of Junior
Subordinated Debentures will be given not less than 30 nor more than 60 days'
notice of any redemption.
REDEMPTION PROCEDURES
Preferred Trust Securities shall be redeemed at the redemption price plus
accrued and unpaid distributions with the proceeds from the contemporaneous
redemption of Junior Subordinated Debentures. Redemptions of the Preferred Trust
Securities shall be made on a redemption date only if TXU Capital has funds
available for the payment of the redemption price plus accrued and unpaid
distributions.
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Notice of redemption of Preferred Trust Securities will be irrevocable. On
or before the redemption date, TXU Capital will irrevocably deposit with the
paying agent for Preferred Trust Securities sufficient funds and will give the
paying agent irrevocable instructions and authority to pay the redemption price
plus accrued and unpaid distributions to the holders upon surrender of their
Preferred Trust Securities. Distributions payable on or before a redemption date
shall be payable to the holders on the record date for the distribution payment.
If notice is given and funds are deposited as required, then on the redemption
date all rights of holders of the Preferred Trust Securities called for
redemption will cease, except the right of the holders to receive the redemption
price plus accrued and unpaid distributions, and the Preferred Trust Securities
will cease to be outstanding. No interest will accrue on amounts payable on the
redemption date. In the event that any date fixed for redemption of Preferred
Trust Securities is not a business day, then payment will be made on the next
business day. No interest will be payable because of any such delay. If payment
of Preferred Trust Securities called for redemption is improperly withheld or
refused and not paid either by TXU Capital or by TXU Corp pursuant to the
Guarantee, distributions on such Preferred Trust Securities will continue to
accrue to the date of payment. That date will be considered the date fixed for
redemption for purposes of calculating the redemption price plus accrued and
unpaid distributions.
Subject to applicable law, including United States federal securities law,
TXU Corp may purchase outstanding Preferred Trust Securities by tender, in the
open market or by private agreement.
If Preferred Trust Securities are partially redeemed on a redemption date,
a corresponding percentage of the Common Trust Securities will be redeemed. The
particular Preferred Trust Securities to be redeemed shall be selected not more
than 60 days prior to the redemption date by the Property Trustee by such method
as the Property Trustee shall deem fair, taking into account the denominations
in which they were issued. The Property Trustee shall promptly notify the
Preferred Trust Security registrar in writing of the Preferred Trust Securities
selected for redemption and, where applicable, the partial amount to be
redeemed.
SUBORDINATION OF COMMON TRUST SECURITIES
Payment of distributions on, and the redemption price, plus accrued and
unpaid distributions, of, the Preferred Trust Securities and Common Trust
Securities shall be made pro rata based on the liquidation preference amount.
However, if on any distribution payment date or redemption date an event of
default under the Trust Agreement has occurred and is continuing, no payment on
any Common Trust Security shall be made until all payments due on the Preferred
Trust Securities have been made. In that case, funds available to the Property
Trustee shall first be applied to the payment in full of all distributions on,
or the redemption price plus accrued and unpaid distributions, of, Preferred
Trust Securities then due and payable.
If an event of default under the Trust Agreement results from an event of
default under the Subordinated Indenture, the holder of Common Trust Securities
cannot take action with respect to the Trust Agreement default until the effect
of all defaults with respect to Preferred Trust Securities has been cured,
waived or otherwise eliminated. Until the event of default under the Trust
Agreement with respect to Preferred Trust Securities has been cured, waived or
otherwise eliminated, the Property Trustee shall act solely on behalf of the
holders of Preferred Trust Securities and not the holders of the Common Trust
Securities. Only holders of Preferred Trust Securities will have the right to
direct the Property Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
TXU Capital shall dissolve and shall be liquidated by the Property Trustee
on the first to occur of:
o The expiration of the term of TXU Capital;
o The bankruptcy, dissolution or liquidation of TXU Corp;
o Redemption of all of the Preferred Trust Securities;
o The entry of an order for dissolution of TXU Capital by a court of
competent jurisdiction; and
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o At any time, at the election of TXU Corp.
If an early dissolution occurs because of bankruptcy, dissolution or
liquidation of TXU Corp, if all the Preferred Trust Securities are redeemed, or
if TXU Corp so elects, TXU Capital shall be liquidated by the Property Trustee
as expeditiously as the Property Trustee determines to be appropriate. The
Property Trustee will provide for the satisfaction of liabilities of creditors,
if any, and distribute to each holder of the Preferred Trust Securities and
Common Trust Securities a proportionate amount of Junior Subordinated
Debentures. If a distribution of Junior Subordinated Debentures is determined by
the Property Trustee not to be practical, holders will be entitled to receive,
out of the assets of TXU Capital after adequate provision for the satisfaction
of liabilities of creditors, if any, an amount equal to the aggregate
liquidation preference of the Preferred Trust Securities plus accrued and unpaid
distributions thereon to the date of payment. If this liquidation distribution
can be paid only in part because TXU Capital has insufficient assets available
to pay in full the aggregate liquidation distribution, then the amounts payable
directly by TXU Capital on the Preferred Trust Securities shall be paid on a pro
rata basis. TXU Corp, as holder of the Common Trust Securities, will be entitled
to receive distributions upon any dissolution pro rata with the holders of the
Preferred Trust Securities, except that if an event of default has occurred and
is continuing under the Trust Agreement, the Preferred Trust Securities will
have a preference over the Common Trust Securities.
EVENTS OF DEFAULT; NOTICE
Any one of the following events will be an event of default under the Trust
Agreement whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body:
o The occurrence of an Event of Default as described in the Subordinated
Indenture;
o Default by TXU Capital in the payment of any distribution when it
becomes due and payable, and continuation of that default for a period
of 30 days;
o Default by TXU Capital in the payment of any redemption price, plus
accrued and unpaid distributions, of any Preferred Trust Security or
Common Trust Security when it becomes due and payable;
o Default in the performance, or breach, in any material respect, of any
covenant or warranty of the Trustees in the Trust Agreement which is
not dealt with above, and the continuation of that default or breach
for a period of 60 days after notice to TXU Capital by the holders of
Preferred Trust Securities having at least 10% of the total
liquidation preference amount of the outstanding Preferred Trust
Securities; or
o The occurrence of certain events of bankruptcy or insolvency with
respect to TXU Capital.
Within ninety business days after the occurrence of any event of default,
the Property Trustee shall transmit to the holders of Preferred Trust Securities
and Common Trust Securities and TXU Corp notice of any such default actually
known to the Property Trustee, unless that default will have been cured or
waived.
A holder of Preferred Trust Securities may directly institute a proceeding
to enforce payment when due directly to the holder of the Preferred Trust
Securities of the principal of or interest on Junior Subordinated Debentures
having a principal amount equal to the aggregate liquidation preference amount
of the holder's Preferred Trust Securities. The holders of Preferred Trust
Securities have no other rights to exercise directly any other remedies
available to the holder of the Junior Subordinated Debentures unless the
Trustees under the Trust Agreement fail to do so.
Unless an Event of Default under the Subordinated Indenture has occurred
and is continuing, the holder of the Common Trust Securities may remove the
Property Trustee at any time. If an event of default has occurred and is
continuing, the holders of a majority of the total liquidation preference amount
of the outstanding Preferred Trust Securities may remove the Property Trustee.
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Any resignation or removal of the Property Trustee will take effect only on the
acceptance of appointment by the successor Property Trustee.
If a default has occurred under the Subordinated Indenture but has not
become an event of default solely because of the requirement that time lapse or
notice be given, the Preferred Trust Securities shall have a preference over the
Common Trust Securities upon dissolution of TXU Capital.
MERGER OR CONSOLIDATION OF THE PROPERTY TRUSTEE OR THE DELAWARE TRUSTEE
If the Property Trustee or the Delaware Trustee merge, consolidate with
another entity, or if any entity succeeds to all or substantially all the
corporate trust business of the Property Trustee or the Delaware Trustee, the
successor or surviving company shall be the successor to the Property Trustee or
the Delaware Trustee under the Trust Agreement, so long as it is otherwise
qualified and eligible.
VOTING RIGHTS
Except with respect to amendments to the Trust Agreement and amendments and
assignment of the Guarantee, the holders of Preferred Trust Securities will have
no voting rights not otherwise required by law or the Trust Agreement.
While Junior Subordinated Debentures are held by the Property Trustee, the
Property Trustee will not:
o Direct the time, method and place to conduct any proceeding for any
remedy available to the Debenture Trustee, or to execute any trust or
power conferred on the Debenture Trustee with respect to the Junior
Subordinated Debentures;
o Waive any past default under the Subordinated Indenture;
o Exercise any right to rescind or annul a declaration that the
principal of all the Junior Subordinated Debentures will be due and
payable; or
o Consent to any amendment, modification or termination of the
Subordinated Indenture or the Junior Subordinated Debentures, where
that consent will be required;
without, in each case, obtaining the prior approval of the holders of Preferred
Trust Securities having at least 66 2/3% of the liquidation preference amount of
the outstanding Preferred Trust Securities. Where a consent of each holder of
Junior Subordinated Debentures affected is required, no consent shall be given
by the Property Trustee without the prior consent of each holder of the
Preferred Trust Securities. The Property Trustee shall not revoke any action
previously authorized or approved by a vote of the holders of Preferred Trust
Securities. If the Property Trustee fails to enforce its rights under the Junior
Subordinated Debentures or the Trust Agreement, to the fullest extent permitted
by law, a holder of the Preferred Trust Securities may institute a legal
proceeding directly against TXU Corp to enforce the Property Trustee's rights
under the Junior Subordinated Debentures or the Trust Agreement without first
instituting any legal proceeding against the Property Trustee or any one else.
The Property Trustee shall notify all holders of Preferred Trust Securities of
any notice of default received from the Debenture Trustee. The Property Trustee
shall not take any action approved by the consent of the holders without an
opinion of counsel experienced in those matters to the effect that TXU Capital
will not be classified as an association taxable as a corporation for United
States federal income tax purposes on account of that action.
Holders of Preferred Trust Securities may give any required approval at a
meeting convened for such purpose or by written consent. The Administrative
Trustees will give notice of any meeting at which holders of Preferred Trust
Securities are entitled to vote.
No vote or consent of the holders of Preferred Trust Securities will be
required for TXU Capital to redeem and cancel Preferred Trust Securities in
accordance with the Trust Agreement.
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Notwithstanding that holders of Preferred Trust Securities are entitled to
vote or consent under any of the circumstances described above, any of Preferred
Trust Securities that are owned by TXU Corp, any Trustee under the Trust
Agreement or any affiliate of TXU Corp, shall be treated as if they were not
outstanding for purposes of such vote or consent.
Holders of Preferred Trust Securities will have no rights to appoint or
remove the Administrative Trustees of TXU Capital, who may be appointed, removed
or replaced solely by TXU Corp as the holder of the Common Trust Securities.
AMENDMENTS
The Trust Agreement may be amended from time to time by TXU Capital and TXU
Corp, without the consent of any holders of Preferred Trust Securities and
Common Trust Securities:
o To cure any ambiguity, correct inconsistent provisions, make any other
provisions with respect to matters or questions arising under the
Trust Agreement that do not conflict with the other provisions of the
Trust Agreement or any amendments of the Trust Agreement; or to change
the name of the Trust; or
o To modify, eliminate or add to any provisions of the Trust Agreement
to the extent necessary to ensure that TXU Capital will not be
classified for United States federal income tax purposes as an
association taxable as a corporation at any time that any Preferred
Trust Securities and Common Trust Securities are outstanding or to
ensure TXU Capital's exemption from the status of an "investment
company" under the Investment Company Act of 1940.
No amendment described above may materially adversely affect the interests of
any holder of Preferred Trust Securities and Common Trust Securities. Any of
these amendments of the Trust Agreement shall become effective when notice of
the amendment is given to the holders of Preferred Trust Securities and Common
Trust Securities.
Except as provided below, any provision of the Trust Agreement may be
amended by the Trustees and TXU Corp with:
o The consent of holders of Preferred Trust Securities and Common Trust
Securities representing not less than a majority in aggregate
liquidation preference amount of the Preferred Trust Securities and
Common Trust Securities then outstanding; and
o Receipt by the Trustees of an opinion of counsel to the effect that
such amendment or the exercise of any power granted to the Trustees in
accordance with the amendment will not cause TXU Capital to be
classified for federal income tax purposes as an association taxable
as a corporation or affect TXU Capital's exemption from status of an
"investment company" under the Investment Company Act.
Each holder of Preferred Trust Securities or Common Trust Securities must
have consented to any amendment to the Trust Agreement that:
o Changes the amount or timing of any distribution with respect to
Preferred Trust Securities or Common Trust Securities or otherwise
adversely affects the amount of any distribution required to be made
in respect of Preferred Trust Securities and Common Trust Securities
as of a specified date; or
o Restricts the right of a holder of Preferred Trust Securities and
Common Trust Securities to institute suit for the enforcement of any
such payment on or after that date.
CO-TRUSTEES AND SEPARATE TRUSTEE
If no event of default under the Trust Agreement has occurred and is
continuing, for the purpose of meeting the legal requirements of the Trust
Indenture Act or of any jurisdiction in which any part of the trust property of
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TXU Capital may at the time be located, TXU Corp, as depositor, and the Property
Trustee may appoint one or more persons approved by the Property Trustee either
to act as co-trustee, jointly with the Property Trustee, of all or any part of
the trust property, or to act as separate trustee of any trust property. Upon
the written request of the Property Trustee, TXU Corp, as depositor, will for
that purpose join with the Property Trustee in the execution, delivery and
performance of all instruments necessary or proper to make that appointment. The
appointment will vest in that person or persons in that capacity, any property,
title, right or power deemed necessary or desirable, subject to the provisions
of the Trust Agreement. If TXU Corp, as depositor, does not join in that
appointment within 15 days after the receipt by it of a request so to do, or in
case an event of default under the Subordinated Indenture has occurred and is
continuing, the Property Trustee alone shall have power to make that
appointment.
FORM, EXCHANGE, AND TRANSFER
Preferred Trust Securities may be exchanged for other Preferred Trust
Securities in any authorized denomination and of like tenor and aggregate
liquidation preference.
Subject to the terms of the Trust Agreement, Preferred Trust Securities may
be presented for exchange as provided above or for registration of transfer,
duly endorsed or accompanied by a duly executed instrument of transfer, at the
office of the Preferred Trust Security registrar or at the office of any
transfer agent designated by TXU Corp for such purpose. TXU Corp may designate
itself the Preferred Trust Security registrar. No service charge will be made
for any registration of transfer or exchange of Preferred Trust Securities, but
TXU Corp may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection with the transfer. A transfer or
exchange will be made when the transfer agent is satisfied with the documents of
title and identity of the person making the request. TXU Corp may at any time
designate additional transfer agents or rescind the designation of any transfer
agent or approve a change in the office through which any transfer agent acts,
except that TXU Corp will be required to maintain a transfer agent in each place
of payment for Preferred Trust Securities.
TXU Capital will not be required to (1) issue, register the transfer of, or
exchange any Preferred Trust Securities during the 15 calendar days before the
mailing of a notice of redemption of any Preferred Trust Securities called for
redemption and ending at the close of business on the day the notice is mailed
or (2) register the transfer of or exchange any Preferred Trust Securities so
selected for redemption, in whole or in part, except the unredeemed portion of
any Preferred Trust Securities being redeemed in part.
REGISTRAR AND TRANSFER AGENT
Texas Utilities Services Inc., doing business as TXU Business Services
Company, will act as registrar and transfer agent for the Preferred Trust
Securities.
Registration of transfers of the Preferred Trust Securities will be made
without charge by TXU Capital, unless tax or other governmental charges are
imposed. In that case, the holder requesting transfer must pay the tax or
charges and give such indemnity as TXU Capital or TXU Corp may require.
CONCERNING THE PROPERTY TRUSTEE
The Property Trustee acts as trustee under other indentures with respect to
TXU Corp's obligations. TXU Corp maintains deposit accounts and credit and
liquidity facilities and conducts other banking transactions with the Property
Trustee in the ordinary course of their businesses. The Property Trustee also
acts as the Guarantee Trustee under the Guarantee and the Debenture Trustee
under the Subordinated Indenture.
DUTIES OF THE TRUSTEES
The Delaware Trustee will act as the resident trustee in the State of
Delaware and will have no other significant duties. The Property Trustee will
hold the Junior Subordinated Debentures on behalf of TXU Capital and will
maintain a payment account with respect to the Preferred Trust Securities and
Common Trust Securities, and will also act as trustee under the Trust Agreement
for the purposes of the Trust Indenture Act.
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The Administrative Trustees of TXU Capital are authorized and directed to
conduct the affairs of TXU Capital and to operate TXU Capital so that TXU
Capital will not be deemed to be an "investment company" required to be
registered under the Investment Company Act or taxed as a corporation for United
States federal income tax purposes and so that the Junior Subordinated
Debentures will be treated as indebtedness of TXU Corp for United States federal
income tax purposes. In this regard, the Administrative Trustees are authorized
to take any action, not inconsistent with applicable law, the certificate of
trust or the Trust Agreement, that the Administrative Trustees determine in
their discretion to be necessary or desirable for those purposes, as long as the
action does not materially adversely affect the interests of the holders of the
Preferred Trust Securities.
MISCELLANEOUS
Holders of the Preferred Trust Securities have no preemptive or similar
rights.
DESCRIPTION OF THE GUARANTEE
Selected provisions of the Guarantee that TXU Corp will execute and deliver
for the benefit of the holders of the Preferred Trust Securities are summarized
below. This summary should be read together with the prospectus supplement
describing the terms of the Preferred Trust Securities. The form of Guarantee
was filed with the SEC and you should read the Guarantee for provisions that may
be important to you. The Guarantee will be qualified as an indenture under the
Trust Indenture Act. You should refer to the Trust Indenture Act for provisions
that apply to the Guarantee. Whenever particular defined terms of the Guarantee
are referred to, those defined terms are incorporated herein by reference.
The Bank of New York will act as Guarantee Trustee under the Guarantee. The
Guarantee Trustee will hold the Guarantee for the benefit of the holders of the
Preferred Trust Securities.
GENERAL TERMS OF THE GUARANTEE
TXU Corp will fully and unconditionally agree to make the guarantee
payments listed below in full to the holders of the Preferred Trust Securities
if they are not made by TXU Capital, as and when due, regardless of any defense,
right of set-off or counterclaim that TXU Corp may have or assert. The following
payments will be subject to the Guarantee (without duplication):
o Any accrued and unpaid distributions required to be paid on Preferred
Trust Securities, to the extent TXU Capital has funds available
therefor;
o The redemption price, plus all accrued and unpaid distributions, for
any Preferred Trust Securities called for redemption by TXU Capital,
to the extent TXU Capital has funds available therefor; and
o Upon a voluntary or involuntary dissolution, winding-up or termination
of TXU Capital except in connection with the distribution of Junior
Subordinated Debentures to the holders in exchange for Preferred Trust
Securities as provided in the Trust Agreement or upon a redemption of
all of the Preferred Trust Securities upon maturity or redemption of
the Junior Subordinated Debentures as provided in the Trust Agreement,
the lesser of:
(1) the aggregate of the liquidation preference and all accrued and
unpaid distributions on Preferred Trust Securities to the date of
payment; and
(2) the amount of assets of TXU Capital remaining available for
distribution to holders of Preferred Trust Securities in
liquidation of TXU Capital.
TXU Corp's obligation to make a guarantee payment may be satisfied by direct
payment of the required amounts by TXU Corp to the holders of Preferred Trust
Securities or by causing TXU Capital to pay those amounts to those holders.
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The Guarantee will be a guarantee with respect to the Preferred Trust
Securities, but will not apply to any payment of distributions if and to the
extent that TXU Capital does not have funds available to make those payments or
to any collection of payment.
If TXU Corp does not make interest payments on the Junior Subordinated
Debentures held by TXU Capital, TXU Capital will not have funds available to pay
distributions on the Preferred Trust Securities. The Guarantee will rank
subordinate and junior in right of payment to all liabilities of TXU Corp except
liabilities that are equal in right of payment by their terms.
TXU Corp will enter into an Agreement as to Expenses and Liabilities with
TXU Capital, to provide funds to TXU Capital as needed to pay obligations of TXU
Capital to parties other than holders of Preferred Trust Securities. The Junior
Subordinated Debentures and the Guarantee, together with the obligations of TXU
Corp with respect to the Preferred Trust Securities under the Subordinated
Indenture, the Trust Agreement, the Guarantee and the Agreement as to Expenses
and Liabilities, constitute a full and unconditional guarantee of the Preferred
Trust Securities by TXU Corp. No single document standing alone or operating in
conjunction with fewer than all of the other documents constitutes that
guarantee. It is only the combined operation of these documents that has the
effect of providing a full and unconditional guarantee by TXU Corp of the
Preferred Trust Securities.
AMENDMENTS AND ASSIGNMENT
No vote is required for changes to the Trust Agreement that do not
materially adversely affect the rights of holders of Preferred Trust Securities.
Other terms of the Guarantee may be changed only with the prior approval of the
holders of the Preferred Trust Securities having at least 66 2/3% of the
liquidation preference amount of the outstanding Preferred Trust Securities. All
guarantees and agreements contained in the Guarantee will bind the successors,
assigns, receivers, trustees and representatives of TXU Corp and will inure to
the benefit of the holders of the Preferred Trust Securities then outstanding.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur if TXU Corp fails to
perform any of its payment obligations under the Guarantee. The holders of the
Preferred Trust Securities having a majority of the liquidation preference of
the Preferred Trust Securities have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Guarantee
Trustee under the Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under the Guarantee.
If the Guarantee Trustee fails to enforce the Guarantee, any holder of the
Preferred Trust Securities may enforce the Guarantee, or institute a legal
proceeding directly against TXU Corp to enforce the Guarantee Trustee's rights
under the Guarantee without first instituting a legal proceeding against TXU
Capital, the Guarantee Trustee or anyone else.
TXU Corp will be required to provide an annual statement to the Guarantee
Trustee about TXU Corp's performance of some of its obligations under the
Guarantee and any default in its performance of the obligations.
TXU Corp will also be required to file annually with the Guarantee Trustee
an officer's certificate as to TXU Corp's compliance with all conditions under
the Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee will undertake to perform only those duties
specifically set forth in the Guarantee until a default occurs. After a default
under the Guarantee, the Guarantee Trustee must exercise the same degree of care
in its duties as a prudent individual would exercise in the conduct of his or
her own affairs. Otherwise, the Guarantee Trustee is under no obligation to
exercise any of the powers vested in it by the Guarantee at the request of any
holder of the Preferred Trust Securities unless it is offered reasonable
indemnity against the costs, expenses and liabilities that it might incur.
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TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon:
o Full payment of the redemption price, plus accrued and unpaid
distributions, for all the Preferred Trust Securities;
o The distribution of Junior Subordinated Debentures to holders of the
Preferred Trust Securities in exchange for all of the Preferred Trust
Securities; or
o Full payment of the amounts payable upon liquidation of TXU Capital.
The Guarantee will continue to be effective or will be reinstated, as the
case may be, if at any time any holder of Preferred Trust Securities must
restore payment of any sums paid under the Preferred Trust Securities or the
Guarantee.
STATUS OF THE GUARANTEE
The Guarantee will be an unsecured obligation of TXU Corp and will rank:
o Subordinate and junior in right of payment to all liabilities of TXU
Corp, except any liabilities that are equal in right of payment by
their terms;
o Equal in right of payment with the most senior preferred or preference
stock that may be issued by TXU Corp and with any guarantee that may
be entered into by TXU Corp in respect of any preferred or preference
stock of any affiliate of TXU Corp; and
o Senior to TXU Corp's common stock.
The Trust Agreement provides that by accepting Preferred Trust Securities,
a holder agrees to the subordination provisions and other terms of the
Guarantee.
The Guarantee will be a guarantee of payment and not of collection, that
is, the guaranteed party may institute a legal proceeding directly against TXU
Corp to enforce its rights under the Guarantee without first instituting a legal
proceeding against anyone else.
Because TXU Corp is a holding company that conducts all of its operations
through subsidiaries, obligations under the Guarantee, as obligations of a
holding company, will generally have a position junior to claims of creditors
and preferred stockholders of the subsidiaries of TXU Corp.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the laws
of the State of New York.
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures which the Property Trustee will hold on
behalf of TXU Capital as trust assets will be subordinated obligations of TXU
Corp. The Junior Subordinated Debentures will be issued under the Subordinated
Indenture, dated December 1, 1998, between TXU Corp and The Bank of New York, as
Debenture Trustee with respect to the Junior Subordinated Debentures.
Selected provisions of the Subordinated Indenture are summarized below.
This summary is not complete and should be read together with the prospectus
supplement describing the specific terms of the Junior Subordinated Debentures.
The form of the Subordinated Indenture has been filed with the SEC, and you
should read the Subordinated Indenture for provisions that may be important to
you. The Subordinated Indenture will be qualified under the Trust Indenture Act.
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You should refer to the Trust Indenture Act for provisions that apply to the
Junior Subordinated Debentures. Whenever particular provisions or defined terms
in a Subordinated Indenture are referred to under the DESCRIPTION OF THE JUNIOR
SUBORDINATED DEBENTURES, those provisions or defined terms are incorporated by
reference herein.
The Subordinated Indenture provides for the issuance of subordinated debt
other than the Junior Subordinated Debentures in an unlimited amount from time
to time. The Junior Subordinated Debentures issued to TXU Capital will
constitute a separate series under the Subordinated Indenture.
A prospectus supplement and an officer's certificate relating to the Junior
Subordinated Debentures being offered will include specific terms relating to
that offering. These terms will include some or all of the following:
o The title of the Junior Subordinated Debentures;
o The total principal amount of the Junior Subordinated Debentures;
o The dates on which the principal of the Junior Subordinated Debentures
will be payable and how it will be paid;
o The interest rate or rates which the Junior Subordinated Debentures
will bear, or how the rate or rates will be determined, the interest
payment dates for the Junior Subordinated Debentures and the regular
record dates for interest payments;
o Any right to extend the interest payment periods for the Junior
Subordinated Debentures;
o The percentage, if less than 100%, of the principal amount of the
Junior Subordinated Debentures, which will be payable if the maturity
of the Junior Subordinated Debentures is accelerated;
o Any date or dates on which the Junior Subordinated Debentures may be
redeemed at the option of TXU Corp and any restrictions on those
redemptions;
o Any sinking fund or other provisions that would obligate TXU Corp to
repurchase or otherwise redeem the Junior Subordinated Debentures;
o Any changes or additions to the Events of Default under the
Subordinated Indenture or changes or additions to the covenants of TXU
Corp under the Subordinated Indenture;
o If the Junior Subordinated Debentures will be issued in denominations
other than $25;
o If payments on the Junior Subordinated Debentures may be made in a
currency or currencies other than United States dollars;
o Any rights or duties of another person to assume the obligations of
TXU Corp with respect to the Subordinated Debentures;
o Any collateral, security, assurance or guarantee for the Junior
Subordinated Debentures; and
o Any other terms of the Junior Subordinated Debentures not inconsistent
with the terms of the Subordinated Indenture.
The Junior Subordinated Debentures will be limited in aggregate principal
amount to the sum of the aggregate liquidation preference amount of the
Preferred Trust Securities and the consideration paid by TXU Corp for the Common
Trust Securities. The Junior Subordinated Debentures are unsecured, subordinated
obligations of TXU Corp which rank junior to all of TXU Corp's Senior
Indebtedness. The amounts payable as principal and interest on the Junior
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Subordinated Debentures will be sufficient to provide for payment of
distributions payable on Preferred Trust Securities and Common Trust Securities.
If Junior Subordinated Debentures are distributed to holders of Preferred
Trust Securities in a dissolution of TXU Capital, the Junior Subordinated
Debentures will be issued in fully registered certificated form in the
denominations and integral multiples thereof in which the Preferred Trust
Securities have been issued, and they may be transferred or exchanged at the
offices of the Debenture Trustee.
Payments of principal and interest on Junior Subordinated Debentures will
be payable, the transfer of Junior Subordinated Debentures will be registrable,
and Junior Subordinated Debentures will be exchangeable for Junior Subordinated
Debentures of other denominations of the same aggregate principal amount, at the
corporate trust office of the Debenture Trustee in The City of New York.
However, TXU Corp may choose to make payment of interest by check mailed to the
address of the persons entitled to it and may require that the payment in full
of principal with respect to any Junior Subordinated Debenture be made only upon
surrender of the Junior Subordinated Debenture to the Debenture Trustee.
OPTIONAL REDEMPTION
For so long as TXU Capital is the holder of all the related outstanding
Junior Subordinated Debentures, the proceeds of any optional redemption will be
used by TXU Capital to redeem Preferred Trust Securities and Common Trust
Securities in accordance with their terms.
The Debenture Trustee will give notice to the holders of any optional
redemption of Junior Subordinated Debentures, not less than 30 nor more than 60
days prior to that redemption. All notices of redemption will state the
redemption date and the redemption price plus accrued and unpaid interest. If
less than all the Junior Subordinated Debentures are to be redeemed, the notice
will identify those to be redeemed and the portion of the principal amount of
any Junior Subordinated Debentures to be redeemed in part. The notice will state
that on the redemption date, subject to the Debenture Trustee's receipt of the
redemption monies, the redemption price plus accrued and unpaid interest will
become due and payable on each Junior Subordinated Debenture to be redeemed and
that interest thereon will cease to accrue on and after that date. It will name
the place or places where the Junior Subordinated Debentures are to be
surrendered for payment of the redemption price plus accrued and unpaid
interest.
INTEREST
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months and for any period shorter than a full
month, on the basis of the actual number of days elapsed. In the event that any
date on which interest is payable on the Junior Subordinated Debentures is not a
business day, then payment will be made on the next business day. No interest
will be paid in respect of any such delay. However, if the delayed payment date
is in the next calendar year, the payment will be made on the last business day
of the earlier year. These payments will have the same force and effect as if
made on the date the payment was originally payable.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as there is no default in the payment of interest on the Junior
Subordinated Debentures, TXU Corp may extend the interest payment period from
time to time on the Junior Subordinated Debentures for one or more periods. As a
consequence, distributions on Preferred Trust Securities would be deferred
during any extension period. Interest would, however, continue to accrue. If TXU
Corp extends the interest period or is in default under the Guarantee or with
respect to payments on the Junior Subordinated Debentures, TXU Corp may not:
o Declare or pay any dividend or distribution on its capital stock,
other than dividends paid in shares of common stock of TXU Corp;
o Redeem, purchase, acquire or make a liquidation payment with respect
to any of its capital stock;
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o Redeem any indebtedness that is equal in right of payment with the
Junior Subordinated Debentures; or
o Make any guarantee payments with respect to any of the above.
Any extension period with respect to payment of interest on the Junior
Subordinated Debentures, or any extended interest payment period in respect of
other securities issued under the Subordinated Indenture or on any similar
securities, will apply to all securities of the same type. Those extensions will
also apply to distributions on Preferred Trust Securities and Common Securities
and all other securities with terms substantially the same as Preferred Trust
Securities and Common Securities. Before an extension period ends, TXU Corp may
further extend the interest payment period. No extension period as further
extended may exceed 20 consecutive quarters. After any extension period and the
payment of all amounts then due, TXU Corp may select a new extended interest
payment period. No interest period may be extended beyond the maturity of the
Junior Subordinated Debentures. TXU Corp will give TXU Capital and the Debenture
Trustee notice of its election of an extension period prior to the earlier of
(i) one business day before the record date for the distribution which would
occur if TXU Corp did not make the election to extend or (ii) the date TXU Corp
is required to give notice to the NYSE or any other applicable self-regulatory
organization of the record date. TXU Corp will cause TXU Capital to send notice
of that election to the holders of Preferred Trust Securities.
ADDITIONAL INTEREST
So long as any Preferred Trust Securities remain outstanding, if TXU
Capital is required to pay any taxes, duties, assessments or governmental
charges imposed by the United States or any other taxing authority on income
derived from the interest payments on the Junior Subordinated Debentures, then
TXU Corp will pay as interest on the Junior Subordinated Debentures any
additional interest that may be necessary in order that the net amounts retained
by TXU Capital after the payment of those taxes, duties, assessments or
governmental charges will be the same as TXU Capital would have had in the
absence of the payment of those taxes, duties, assessments or governmental
charges.
ASSIGNMENT OF OBLIGATIONS
TXU Corp may assign its obligations under the Junior Subordinated
Debentures and the Subordinated Indenture to a wholly-owned subsidiary, provided
that no Event of Default, or event which with passage of time or the giving of
required notice, or both, would become an Event of Default, has occurred and is
continuing. The subsidiary must assume in writing TXU Corp's payment obligations
under the Junior Subordinated Debentures and under the Subordinated Indenture.
TXU Corp must fully and unconditionally guarantee payment of the obligations of
the assuming subsidiary under the Junior Subordinated Debentures and the
Subordinated Indenture.
If such an assignment is made, TXU Corp will be released and discharged
from all its other obligations under the Junior Subordinated Debentures and the
Subordinated Indenture. Any covenants made by TXU Corp with respect to the
Junior Subordinated Debentures would become solely covenants of, and would
relate only to, the subsidiary.
DEFEASANCE
TXU Corp will be discharged from its obligations on the subordinated
debentures of a particular series if it deposits with the Debenture Trustee
sufficient cash or government securities to pay the principal, interest, any
premium and any other sums when due on the stated maturity date or a redemption
date of that series of the subordinated debentures.
SUBORDINATION
The Junior Subordinated Debentures will be subordinate and junior in right
of payment to all Senior Indebtedness of TXU Corp. No payment of the principal
of the Junior Subordinated Debentures (including redemption and sinking fund
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payments), or interest on the Junior Subordinated Debentures may be made until
all holders of Senior Indebtedness have been paid, if any of the following
occurs:
o Certain events of bankruptcy, insolvency or reorganization of TXU
Corp;
o Any Senior Indebtedness is not paid when due and that default
continues without waiver;
o Any other default has occurred and continues without waiver pursuant
to which the holders of Senior Indebtedness have accelerated the
maturity of the indebtedness; or
o The maturity of any other series of subordinated debentures under the
Subordinated Indenture has been accelerated, because of an event of
default which remains uncured.
Upon any distribution of assets of TXU Corp to creditors in connection with
any insolvency, bankruptcy or similar proceeding, all principal of, and premium,
if any, and interest due or to become due on all Senior Indebtedness must be
paid in full before the holders of the Junior Subordinated Debentures are
entitled to receive or retain any payment.
Senior Indebtedness is defined in the Subordinated Indenture to include all
notes and other obligations including guarantees of TXU Corp for borrowed money
that is not subordinate or junior in right of payment to any other indebtedness
of TXU Corp unless by its terms it is equal in right of payment to the Junior
Subordinated Debentures. The obligations of TXU Corp under the Guarantee and the
Junior Subordinated Debentures shall not be deemed to be Senior Indebtedness.
The Subordinated Indenture does not limit the aggregate amount of Senior
Indebtedness that may be issued. As of December 31, 1998 TXU Corp had
approximately $4.6 billion principal amount of indebtedness for borrowed money
constituting Senior Indebtedness.
The Junior Subordinated Debentures, as debt of a holding company, will
generally have a position junior to claims of creditors and preferred
stockholders of the subsidiaries of TXU Corp.
CONSOLIDATION, MERGER, AND SALE OF ASSETS
Under the terms of the Subordinated Indenture, TXU Corp 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:
o The surviving or successor entity is organized and validly existing
under the laws of any domestic jurisdiction and it expressly assumes
TXU Corp's obligations on all subordinated debentures issued under the
Subordinated Indenture;
o Immediately after giving effect to the transaction, no Event of
Default or no event which, after notice or lapse of time or both,
would become an Event of Default, shall have occurred and be
continuing; and
o TXU Corp shall have delivered to the Debenture Trustee an officer's
certificate and an opinion of counsel as provided in the Subordinated
Indenture.
EVENTS OF DEFAULT
"Event of Default" when used in the Subordinated Indenture with respect to
any series of subordinated debentures, will mean any of the following:
(1) failure to pay interest on any subordinated debenture of that series
for 30 days after it is due;
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(2) failure to pay the principal of or any premium on any subordinated
debenture of that series when due;
(3) failure to perform any other covenant in the Subordinated Indenture,
other than a covenant that does not relate to that series of
subordinated debentures, that continues for 90 days after TXU Corp
receives written notice from the Debenture Trustee or TXU Corp and the
Debenture Trustee receive a written notice from 33% of the holders of
the subordinated debentures of that series;
(4) certain events in bankruptcy, insolvency or reorganization of TXU
Corp; or
(5) any other event of default included in any supplemental indenture or
officer's certificate for a specific series of subordinated
debentures.
An Event of Default for a particular series of subordinated debentures does
not necessarily constitute an Event of Default for any other series of
subordinated debentures issued under the Subordinated Indenture. The Debenture
Trustee may withhold notice to the holders of subordinated debentures of any
default except a default in the payment of principal or interest if it considers
such withholding of notice to be in the best interests of the holders.
REMEDIES
If an Event of Default for any series of subordinated debentures occurs and
continues, the Debenture Trustee or the holders of at least 33% in aggregate
principal amount of the subordinated debentures of the series may declare the
entire principal amount of all the subordinated debentures of that series,
together with accrued interest thereon, to be due and payable immediately.
However, if the Event of Default is applicable to all outstanding subordinated
debentures under the Subordinated Indenture, only the Debenture Trustee or
holders of at least 33% in aggregate principal amount of all outstanding
subordinated debentures of all series, voting as one class, and not the holders
of any one series, may make that declaration of acceleration.
At any time after a declaration of acceleration with respect to the
subordinated debentures of any series has been made and before a judgment or
decree for payment of the money due has been obtained, the Event of Default
giving rise to the declaration of acceleration will be considered waived, and
the declaration and its consequences will be considered rescinded and annulled,
if:
o TXU Corp has paid or deposited with the Debenture Trustee a sum
sufficient to pay:
(1) all overdue interest on all subordinated debentures of the
series;
(2) the principal of and premium, if any, on any subordinated
debentures of the series which have otherwise become due and
interest that is currently due;
(3) interest on overdue interest; and
(4) all amounts due to the Debenture Trustee under the Subordinated
Indenture; and
o Any other Event of Default with respect to the subordinated debentures
of that series has been cured or waived as provided in the
Subordinated Indenture.
There is no automatic acceleration, even in the event of bankruptcy,
insolvency or reorganization of TXU Corp.
Other than its duties in case of an Event of Default, the Debenture Trustee
is not obligated to exercise any of its rights or powers under the Subordinated
Indenture at the request, order or direction of any of the holders, unless the
holders offer the Debenture Trustee a reasonable indemnity. If they provide this
reasonable indemnity, the holders of a majority in principal amount of any
series of subordinated debentures will have the right to direct the time, method
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and place of conducting any proceeding for any remedy available to the Debenture
Trustee or exercising any power conferred upon the Debenture Trustee. However,
if the Event of Default relates to more than one series, only the holders of a
majority in aggregate principal amount of all affected series will have the
right to give this direction. The Debenture Trustee is not obligated to comply
with directions that conflict with law or other provisions of the Subordinated
Indenture.
No holder of subordinated debentures of any series will have any right to
institute any proceeding under the Subordinated Indenture, or any remedy under
the Subordinated Indenture, unless:
o The holder has previously given to the Debenture Trustee written
notice of a continuing Event of Default;
o The holders of a majority in aggregate principal amount of the
outstanding subordinated debentures of all series in respect of which
an Event of Default will have occurred and be continuing have made a
written request to the Debenture Trustee, and have offered reasonable
indemnity to the Debenture Trustee to institute proceedings; and
o The Debenture Trustee has failed to institute any proceeding for 60
days after notice.
However, these limitations do not apply to a suit by a holder of a subordinated
debenture for payment of the principal, premium or interest on a subordinated
debenture on or after the applicable due date.
TXU Corp will provide to the Debenture Trustee an annual statement by an
appropriate officer as to TXU Corp's compliance with all conditions and
covenants under the Subordinated Indenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED TRUST SECURITIES
If there is an Event of Default, then the holders of Preferred Trust
Securities will rely on the Property Trustee or the Debenture Trustee, acting
for the benefit of the Property Trustee, to enforce the Property Trustee's
rights against TXU Corp as a holder of the Junior Subordinated Debentures.
However, a holder of Preferred Trust Securities may enforce the Subordinated
Indenture directly against TXU Corp to the same extent as if the holder of
Preferred Trust Securities held a principal amount of Junior Subordinated
Debentures equal to the aggregate liquidation amount of its Preferred Trust
Securities.
The holders of Preferred Trust Securities would not be able to exercise
directly against TXU Corp any other rights unless the Property Trustee or the
Debenture Trustee failed to do so for 60 days. Upon that failure, the holders of
a majority of the aggregate liquidation amount of the outstanding Preferred
Trust Securities would have the right to directly institute proceedings for
enforcement of all other rights against TXU Corp to the fullest extent permitted
by law.
MODIFICATION AND WAIVER
Without the consent of any holder of subordinated debentures, TXU Corp and
the Debenture Trustee may enter into one or more supplemental indentures for any
of the following purposes:
o To evidence the assumption by any permitted successor of the covenants
of TXU Corp in the Subordinated Indenture and in the subordinated
debentures;
o To add additional covenants of TXU Corp or to surrender any right or
power of TXU Corp under the Subordinated Indenture;
o To add additional events of default;
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o To change or eliminate or add any provision to the Subordinated
Indenture; provided, however, if the change will adversely affect the
interests of the holders of subordinated debentures of any series in
any material respect, the change, elimination or addition will become
effective only:
(1) when the consent of the holders of subordinated debentures of
that series has been obtained in accordance with the Subordinated
Indenture; or
(2) when no subordinated debentures of the affected series remain
outstanding under the Subordinated Indenture;
o To provide collateral security for all but not part of the
subordinated debentures;
o To establish the form or terms of subordinated debentures of any other
series as permitted by the Subordinated Indenture;
o To provide for the authentication and delivery of bearer securities
and coupons appertaining thereto;
o To evidence and provide for the acceptance of appointment of a
successor trustee;
o To provide for the procedures required for use of a noncertificated
system of registration for the subordinated debentures of all or any
series;
o To change any place where principal, premium and interest shall be
payable, subordinated debentures may be surrendered for registration
of transfer or exchange and notices to TXU Corp may be served; or
o To cure any ambiguity or inconsistency or to make any other provisions
with respect to matters and questions arising under the Subordinated
Indenture; provided that the action will not adversely affect the
interests of the holders of subordinated debentures of any series in
any material respect.
The holders of at least a majority in aggregate principal amount of the
subordinated debentures of all series then outstanding may waive compliance by
TXU Corp with some restrictive provisions of the Subordinated Indenture. The
holders of not less than a majority in principal amount of the outstanding
subordinated debentures of any series may waive any past default under the
Subordinated Indenture with respect to that series, except a default in the
payment of principal, premium, if any, or interest and some covenants and
provisions of the Subordinated Indenture that cannot be modified or be amended
without the consent of the holder of each outstanding subordinated debenture of
the series affected.
If the Trust Indenture Act is amended after the date of the Subordinated
Indenture in such a way as to require changes to the Subordinated Indenture, the
Subordinated Indenture will be deemed to be amended so as to conform to that
amendment of the Trust Indenture Act. TXU Corp and the Debenture Trustee may,
without the consent of any holders, enter into one or more supplemental
indentures to evidence the amendment.
The consent of the holders of a majority in aggregate principal amount of
the subordinated debentures of all series then outstanding is required for all
other modifications to the Subordinated Indenture. However, if less than all of
the series of subordinated debentures outstanding are directly affected by a
proposed supplemental indenture, then the consent only of the holders of a
majority in aggregate principal amount of all series that are directly affected
will be required. No such amendment or modification may:
o Change the stated maturity of the principal of, or any installment of
principal of or interest on any subordinated debenture, or reduce the
principal amount of any subordinated debenture or its rate of interest
or change the method of calculating that interest rate or reduce any
premium payable upon redemption, or change the currency in which
payments are made, or impair the right to institute suit for the
enforcement of any payment on or after the stated maturity of any
subordinated debenture, without the consent of the holder;
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o Reduce the percentage in principal amount of the outstanding
subordinated debentures of any series whose consent is required for
any supplemental indenture, or any waiver of compliance with a
provision of the Subordinated Indenture or any default thereunder and
its consequences, or reduce the requirements for quorum or voting,
without the consent of all the holders of the series; or
o Modify some of the provisions of the Subordinated Indenture relating
to supplemental indentures, waivers of some covenants and waivers of
past defaults with respect to the subordinated debentures of any
series, without the consent of the holder of each outstanding
subordinated debenture affected thereby.
A supplemental indenture which changes the Subordinated Indenture solely
for the benefit of one or more particular series of subordinated debentures, or
modifies the rights of the holders of subordinated debentures of one or more
series, will not affect the rights under the Subordinated Indenture of the
holders of the subordinated debentures of any other series. So long as any
Preferred Trust Securities remain outstanding, the Debenture Trustee may not
consent to a supplemental indenture without the prior consent of the holders of
a majority in aggregate liquidation preference of all Preferred Trust Securities
or, in the case of changes described in the clauses immediately above, 100% in
aggregate liquidation preference of all such Preferred Trust Securities then
outstanding which would be affected thereby.
The Subordinated Indenture provides that subordinated debentures owned by
TXU Corp or anyone else required to make payments on the subordinated debentures
shall be disregarded and considered not to be outstanding in determining whether
the required holders have given a request or consent.
TXU Corp may fix in advance a record date to determine the required number
of holders entitled to give any request, demand, authorization, direction,
notice, consent, waiver or other such act of holders, but TXU Corp shall have no
obligation to do so. If TXU Corp fixes a record date, the request, demand,
authorization, direction, notice, consent, waiver or other act of the holders
may be given before or after that record date, but only the holders of record at
the close of business on the record date will be considered to be holders for
the purposes of determining whether holders of the required percentage of the
outstanding subordinated debentures have authorized or agreed or consented to
the request, demand, authorization, direction, notice, consent, waiver or other
act of the holders. For that purpose the outstanding subordinated debentures
shall be computed as of the record date. Any request, demand, authorization,
direction, notice, consent, election, waiver or other act of a holder will bind
every future holder of the same subordinated debenture and the holder of every
subordinated debenture issued upon the registration of transfer of or exchange
of subordinated debentures. A transferee will be bound by acts of the Debenture
Trustee or TXU Corp in reliance thereon, whether or not notation of that action
is made upon the subordinated debenture.
RESIGNATION OF DEBENTURE TRUSTEE
The Debenture Trustee may resign at any time by giving written notice to
TXU Corp or may be removed at any time by act of the holders of a majority in
principal amount of all series of subordinated debentures then outstanding
delivered to the Debenture Trustee and TXU Corp. No resignation or removal of
the Debenture Trustee and no appointment of a successor trustee will be
effective until the acceptance of appointment by a successor trustee. So long as
no Event of Default or event which, after notice or lapse of time, or both,
would become an Event of Default has occurred and is continuing and except with
respect to a trustee appointed by act of the holders, if TXU Corp has delivered
to the Debenture Trustee a resolution of its Board of Directors appointing a
successor trustee and the successor has accepted that appointment in accordance
with the terms of the respective Subordinated Indenture, the Debenture Trustee
will be deemed to have resigned and the successor will be deemed to have been
appointed as trustee in accordance with the Subordinated Indenture.
NOTICES
Notices to holders of subordinated debentures will be given by mail to the
addresses of the holders as they may appear in the security register therefor.
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TITLE
TXU Corp, the Debenture Trustee, and any agent of TXU Corp or the Debenture
Trustee, may treat the person in whose name subordinated debentures are
registered as the absolute owner thereof, whether or not the subordinated debt
may be overdue, for the purpose of making payments and for all other purposes
irrespective of notice to the contrary.
GOVERNING LAW
The Subordinated Indenture and the subordinated debentures will be governed
by, and construed in accordance with, the laws of the State of New York.
CONCERNING THE DEBENTURE TRUSTEE
The Debenture Trustee under the Subordinated Indenture will be The Bank of
New York. In addition to acting as Debenture Trustee, The Bank of New York will
act as Property Trustee under the Trust Agreement and as Guarantee Trustee under
the Guarantee. The Bank of New York (Delaware) will act as the Delaware Trustee
under the Trust Agreement. In addition, The Bank of New York acts, and may act,
as trustee under various indentures and trusts of TXU Corp and its affiliates.
PLAN OF DISTRIBUTION
The Debt Securities, the Preference Stock and the Preferred Trust
Securities may be offered (a) through agents; (b) through underwriters or
dealers; or (c) directly to purchasers.
BY AGENTS
The Debt Securities, the Preference Stock and Preferred Trust Securities
may be sold through agents designated by TXU Corp.
BY UNDERWRITERS
If underwriters are used in the sale, the Debt Securities, the Preference
Stock and Preferred Trust Securities will be acquired by the underwriters for
their own account. The underwriters may resell the Debt Securities, the
Preference Stock and Preferred Trust Securities in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices determined at the time of sale. Underwriters may sell the Debt
Securities, the Preference Stock and Preferred Trust Securities directly or
through underwriting syndicates represented by managing underwriters. The
obligations of the underwriters to purchase the Debt Securities, the Preference
Stock and Preferred Trust Securities will be subject to certain conditions. The
underwriters will be obligated to purchase all the offered Debt Securities, the
Preference Stock and Preferred Trust Securities if any are purchased. If a
dealer is used in the sale, TXU Corp or TXU Capital will sell the Debt
Securities, the Preference Stock and Preferred Trust Securities, as the case may
be, to the dealer as principal. The dealer may then resell the Debt Securities,
the Preference Stock and Preferred Trust Securities at varying prices determined
at the time of resale.
DIRECT SALES
The Debt Securities, the Preference Stock and Preferred Trust Securities
may also be sold directly by TXU Corp. In this case, no underwriters or agents
would be involved.
GENERAL INFORMATION
Underwriters, dealers and agents that participate in the distribution of
the Debt Securities, the Preference Stock and Preferred Trust Securities may be
underwriters as defined in the Securities Act and any discounts or commissions
received by them from TXU Corp or TXU Capital and any profit on the resale of
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the Debt Securities, the Preference Stock and Preferred Trust Securities by them
may be treated as underwriting discounts under the Securities Act. Any
underwriters, dealers or agents will be identified and their compensation
described in a prospectus supplement.
TXU Corp or TXU Capital may authorize agents and underwriters to solicit
offers by certain institutions to purchase Debt Securities, the Preference Stock
and Preferred Trust Securities at the public offering price and on terms
described in the applicable prospectus supplement.
TXU Corp may have agreements with agents, underwriters and dealers to
indemnify them against certain civil liabilities, including liabilities under
the Securities Act, or to contribute with respect to payments which the agents,
underwriters, dealers and remarketing firms may be required to make.
None of the Debt Securities, the Preference Stock or Preferred Trust
Securities has an established trading market. TXU Corp may decide to list any
series of Securities on an exchange. However, TXU Corp will not be obligated to
list securities on an exchange unless it states otherwise in a prospectus
supplement. TXU Corp cannot assure that there will be any liquidity of the
trading market for any of the Debt Securities, the Preference Stock and
Preferred Trust Securities.
Agents, underwriters and dealers may engage in transactions with, or
perform services for, TXU Corp or its subsidiaries in the ordinary course of
business.
EXPERTS AND LEGALITY
The consolidated financial statements of TXU Corp and subsidiaries, except
TXU Eastern Holdings Limited, included in the 1998 10-K incorporated herein by
reference, have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report included in the 1998 10-K. The consolidated financial
statements of TXU Eastern Holdings Limited have been audited by
PricewaterhouseCoopers, independent accountants, as stated in their report
included in the 1998 10-K. Those financial statements are not included in the
1998 10-K. The consolidated financial statements of TXU Corp and subsidiaries
have been incorporated by reference herein in reliance upon the respective
reports of such firms given upon their authority as experts in accounting and
auditing.
With respect to the unaudited condensed consolidated interim financial
information of TXU Corp and subsidiaries, except TXU Eastern Holdings Limited,
for the periods ended March 31, 1999 and 1998, which is incorporated herein by
reference, Deloitte & Touche LLP have applied limited procedures in accordance
with professional standards for a review of such information. However, as stated
in their report included in the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999 and incorporated by reference herein, they did not
audit and they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their reports on that information should
be restricted in light of the limited nature of the review procedures applied.
Deloitte & Touche LLP are not subject to the liability provisions of Section 11
of the Securities Act for their reports on the unaudited interim financial
information because those reports are not "reports" or a "part" of the
registration statement prepared or certified by an accountant within the meaning
of Sections 7 and 11 of the Securities Act.
The statements made as to matters of law and legal conclusions in the 1998
10-K under Part I, Item 1 -- Business -- US Electric Segment -- Regulation and
Rates and -- US Gas Segment -- Regulation and Rates, and Environmental Matters
- -- US Segments, incorporated herein by reference, have been reviewed by Worsham,
Forsythe & Wooldridge, L.L.P., Dallas, Texas, General Counsel for TXU Corp. All
those statements have been incorporated by reference herein in reliance upon the
opinion of that firm given upon their authority as experts. At December 31,
1998, members of the firm of Worsham, Forsythe & Wooldridge, L.L.P. owned
approximately 41,000 shares of the Common Stock of TXU Corp.
Richards, Layton & Finger, P. A., Special Delaware counsel for TXU Corp and
TXU Capital will issue an opinion as to certain matters of Delaware law relating
to the validity of the Preferred Trust Securities, the enforceability of the
Trust Agreement and the creation of TXU Capital.
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Worsham Forsythe & Wooldridge, L.L.P. and Thelen Reid & Priest LLP for TXU
Corp and Winthrop, Stimson, Putnam & Roberts, New York, New York, counsel for
the Underwriters, will each issue an opinion as to the legality of the other
securities offered hereby. Worsham Forsythe & Wooldridge, L.L.P. will issue an
opinion as to all matters pertaining to incorporation of TXU Corp and all other
matters of Texas law.
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================================================================================
================================================================================
6,000,000 PREFERRED TRUST SECURITIES
TXU CAPITAL II
8.70% TRUST ORIGINATED PREFERRED SECURITIES SM (TOPRS SM)
(LIQUIDATION AMOUNT $25 PER PREFERRED TRUST SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED AS DESCRIBED IN
THIS PROSPECTUS SUPPLEMENT AND PROSPECTUS BY
TEXAS UTILITIES COMPANY
DOING BUSINESS AS
TXU CORP
-----------------------
PROSPECTUS SUPPLEMENT
-----------------------
MERRILL LYNCH & CO.
LEHMAN BROTHERS
MORGAN STANLEY DEAN WITTER
PAINEWEBBER INCORPORATED
SALOMON SMITH BARNEY
DECEMBER 8, 1999
================================================================================
