Filed pursuant to Rule 424(b)(5)
File No. 333-79221
SUBJECT TO COMPLETION DATED JUNE 13, 2000
PROSPECTUS SUPPLEMENT
(To Prospectus dated June 9, 1999)
SHARES
TXU CORP.
FLEXIBLE MONEY MARKET CUMULATIVE PREFERENCE STOCK (MMP(R)),
SERIES B (LIQUIDATION PREFERENCE $100,000 PER SHARE)
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o The dividend rate on each share of Series B preference stock will be
% until June , 2005. Until June , 2005, dividends will be
payable, if declared, on March 15, June 15, September 15 and
December 15 of each year, commencing September 15, 2000.
o After June , 2005, the dividend rate for each subsequent dividend
period will be determined according to periodic auctions conducted by
the auction agent.
o After June , 2005, unless TXU Corp. has elected not to redeem shares
of Series B preference stock during a special dividend period
following that date, TXU Corp. may redeem shares of Series B
preference stock, in whole or in part, upon payment of a redemption
price of $100,000 per share plus accumulated and unpaid dividends.
o In the event of certain changes in federal tax law enacted within 18
months after June , 2000 or, if TXU Corp. so elects, during special
dividend periods after June , 2005, TXU Corp. may also redeem all but
not less than all of the shares of Series B preference stock upon
payment of a redemption price of $105,000 per share plus accumulated
and unpaid dividends.
INVESTING IN THE SERIES B PREFERENCE STOCK INVOLVES RISKS THAT ARE DESCRIBED IN
"RISK FACTORS" BEGINNING ON PAGE S-5 OF THIS PROSPECTUS SUPPLEMENT.
PER SHARE TOTAL
------------- -------
Public Offering Price...................................
Underwriters' Discount and Commissions..................
Proceeds to TXU Corp. (before expenses).................
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.
The shares are not being listed on any securities exchange or over-the-counter
market.
Lehman Brothers expects to deliver the Series B preference stock through the
book-entry facilities of The Depository Trust Company on or about June , 2000.
--------------------------------------------------------------------------------
LEHMAN BROTHERS
June , 2000
(R)Registered Trademark of Lehman Brothers Inc.
The information in this prospectus supplement is not complete and may be
changed. A registration statement relating to these securities has been declared
effective by the Securities and Exchange Commission. Neither this prospectus
supplement nor the accompanying prospectus is an offer to sell these securities
and neither is soliciting any offer to buy these securities in any state where
the offer or sale is not permitted.
<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-6
Selected Consolidated Financial Data of TXU Corp............................S-7
Consolidated Capitalization of TXU Corp.....................................S-8
Use of Proceeds.............................................................S-9
Specific Terms of the Series B Preference Stock.............................S-9
Certain United States Federal Income Tax Consequences......................S-28
Underwriting...............................................................S-32
Auction Procedures..........................................................A-1
Settlement Procedures.......................................................B-1
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 Series B preference stock 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.
In this prospectus, we refer to TXU Corp. and its subsidiaries as "we",
"our" or "TXU Corp." unless the context clearly indicates otherwise.
We summarize the rights and preferences of the Series B preference stock
below. You should read the discussion under the heading SPECIFIC TERMS OF THE
SERIES B PREFERENCE STOCK, for more information about the Series B preference
stock.
Securities Offered................ shares of Series B preference stock.
Dividends......................... Cash dividends on the Series B
preference stock will be paid only if
declared by TXU Corp.'s board of
directors and will be cumulative if not
declared and paid. If declared,
dividends will be payable at the rate of
$ per share per year, during the
initial dividend period, which equals %
of the Series B preference stock's
liquidation preference. After the
initial dividend period, which ends on
June , 2005, the rate at which dividends
will be paid will be determined pursuant
to periodic auctions conducted in
accordance with the procedures described
in Appendix A of this prospectus
supplement. The dividend rate will be
adjusted and the Series B preference
stock may be redeemed in the event of
certain changes to federal tax law
relating to the dividends received
deduction.
Dividend Payment Dates............ During the initial dividend period,
dividends will be payable, if declared,
on March 15, June 15, September 15 and
December 15 of each year, commencing
September 15, 2000. After June , 2005,
each subsequent dividend period will be
either (a) a regular dividend period,
which shall be 49 days or a greater
number of days equal to the then current
minimum holding period required for
corporate taxpayers to be entitled to
the dividends received deduction in
respect of dividends, other than
extraordinary dividends, but in no event
longer than 98 days or (b) a special
dividend period, if TXU Corp. so
designates prior to any auction, of at
least 49 days or a greater number of
days equal to the then current minimum
holding period required for corporate
taxpayers to be entitled to the
dividends received deduction in respect
of dividends, other than extraordinary
dividends. If a special dividend period
is more than 99 days but less than one
year, dividends shall be payable, if
declared, on the 91st, 182nd and 273rd
day of the dividend period. If the
special dividend period is one year or
longer, dividends shall be payable, if
declared, on March 15, June 15,
September 15 and December 15 of each
year during the special dividend period.
See SPECIFIC TERMS OF THE SERIES B
PREFERENCE STOCK-- "Dividends."
Ranking........................... The Series B preference stock will be a
new series of TXU Corp.'s serial
preference stock, $25 par value. There
are no other outstanding shares of TXU
Corp.'s serial preference stock.
Liquidation Preference............ The Series B preference stock will have
a liquidation preference of $100,000 per
share, plus all accrued and unpaid
dividends, whether or not declared.
S-3
<PAGE>
Voting Rights..................... Except as described under DESCRIPTION OF
TXU CORP PREFERENCE STOCK in the
prospectus, the Series B preference
stock will have no voting rights.
Redemption........................ Except as described under SPECIFIC TERMS
OF THE SERIES B PREFERENCE STOCK--
"Changes in the Dividends Received
Deduction," TXU Corp. may not redeem the
Series B preference stock before June ,
2005. Beginning on that date, except
during a non-call period, TXU Corp. may
redeem all or part of the Series B
preference stock at $100,000 per share,
plus all accrued and unpaid dividends,
whether or not declared. The Series B
preference stock will not benefit from
any sinking fund.
Absence of Market for the Series B The Series B preference stock will be a
Preference Stock.................. new issue of securities for which there
currently is no market. An active market
for the Series B preference stock may
not develop. If an active market does
not develop, the market price and
liquidity of the Series B preference
stock would be adversely affected.
S-4
<PAGE>
RISK FACTORS
An investment in the Series B preference stock 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 Series B preference stock, before buying any Series B preference
stock.
HOLDERS OF SERIES B PREFERENCE STOCK HAVE LIMITED VOTING RIGHTS.
o The holders of Series B preference stock will not possess any voting
rights, except in certain limited circumstances. Accordingly, the
Series B preference stock may have no voting rights with respect to
certain matters upon which holders of common stock may be entitled to
vote. See DESCRIPTION OF TXU CORP PREFERENCE STOCK in the prospectus.
HOLDERS OF THE SERIES B PREFERENCE STOCK MAY NOT BE ABLE TO USE THE DIVIDENDS
RECEIVED DEDUCTION.
o Although we presently have accumulated earnings and profits, we may
not have sufficient current earnings and profits during future fiscal
years for the distributions on the preference stock to qualify as
dividends for federal income tax purposes. If any distributions on the
Series B preference stock with respect to any fiscal year are not
eligible for the dividends received deduction because of insufficient
current or accumulated earnings and profits, the market value of the
Series B preference stock may decline. See CERTAIN UNITED STATES
FEDERAL INCOME TAX CONSEQUENCES -- "Changes in the Dividends Received
Deduction."
SERIES B PREFERENCE STOCK IS SUBORDINATE TO OBLIGATIONS OF TXU CORP.'S
SUBSIDIARIES.
o TXU Corp. is a holding company drawing all cash from operating
subsidiaries, most of which have outstanding debt and/or preferred
stock, all of which is senior to, and reduces amounts available for
dividends on, the Series B preference stock.
THERE IS NOT A PUBLIC MARKET FOR THE SERIES B PREFERENCE STOCK.
o There is no public market for the Series B preference stock, and there
can be no assurance that such a market will develop. The Series B
preference stock is not listed on any securities exchange or
over-the-counter market.
POSSIBLE CHANGES IN TAX LAW MAY REDUCE ABILITY OF HOLDERS OF SERIES B PREFERENCE
STOCK TO USE THE DIVIDENDS RECEIVED DEDUCTION.
o In the past, legislation has been proposed that would have affected
certain corporate holders of the Series B preference stock that own
less than 20% (by vote and value) of the stock of TXU Corp. Such
legislation would have reduced the dividends received deduction and
changed the holding period required for eligibility for the dividends
received deduction applicable to the Series B preference stock. To TXU
Corp.'s knowledge, no such proposals are currently pending before the
United States Congress. Similar legislation, however, may be enacted
in the future or other legislation may be enacted that would reduce
the dividends received deduction available to corporate holders of the
Series B preference stock. See CERTAIN UNITED STATES FEDERAL INCOME
TAX CONSEQUENCES-- "Changes in the Dividends Received Deduction."
S-5
<PAGE>
TXU CORP. AND SUBSIDIARIES
During 1999 and 2000, TXU Corp. and several of TXU Corp.'s subsidiaries
changed their names in connection with the new TXU corporate identity program.
o Texas Utilities Company became TXU Corp.;
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-6
<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 Ended
-------------------------------------------------------------------
March 31,
December 31, 2000
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Income statement data: 1995 1996 1997 1998 1999 (Unaudited)
---------- -------- -------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues.......... $5,639 $6,551 $7,946 $14,736 $17,118 $17,426
Net Income (Loss)(a)........ $ (139) $ 754 $ 660 $ 740 $ 985 $ 996
Basic Earnings (Loss)
per share................. $(0.61) $ 3.35 $ 2.86 $ 2.79 $ 3.53 $ 3.60
Diluted Earnings (Loss)
per share................. $(0.61) $ 3.35 $ 2.85 $ 2.79 $ 3.53 $ 3.60
Average shares of
common stock
outstanding............... 226 225 231 255 279 276
Ratio of Earnings to Fixed
Charges and Ratio of
Earnings to Combined
Fixed Charges and
Preferred Dividends(a)...... 0.72 2.18 2.14 1.84 1.87
</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-7
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED CAPITALIZATION OF TXU CORP.
(MILLIONS OF DOLLARS, EXCEPT PERCENTAGES)
Adjusted(a)
Outstanding at -----------------
March 31, 2000 Amount Percent
-------------- ------- --------
<S> <C>
Capitalization:
Long-term Debt,
less amounts due currently....................... $ 16,302
Preferred Stock of subsidiaries:
Not subject to mandatory redemption............. $ 190
Subject to mandatory redemption................. $ 21
Preferred Securities of Subsidiary Trust of TXU
Europe Limited $ 150
Mandatorily Redeemable Preferred Securities of Trusts
Holding Solely Junior Subordinated Debentures of
Obligors (b):
TXU Corp. obligated........................... $ 368
Subsidiary obligated.......................... $ 976
Common Stock Equity................................ $ 7,930
Total Capitalization............................. $ 25,937
</TABLE>
------------------------
(a) To give effect to (1) 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, (2) the repurchase of $107,000,000 of subsidiaries' debts, and
(3) 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 $ 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 the 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-8
<PAGE>
USE OF PROCEEDS
TXU Corp. intends to use those proceeds to repay short-term debt, including
outstanding commercial paper, and for general corporate purposes. At March 31,
2000, TXU Corp. had an aggregate of $2.2 billion of short-term debt and
commercial paper outstanding, which had maturities of up to 151 days and bore
interest at rates ranging from 5.90% to 6.50% per annum.
SPECIFIC TERMS OF THE SERIES B PREFERENCE STOCK
The following is a summary of the terms of the Series B preference stock.
This summary is not complete and should be read together with the DESCRIPTION OF
TXU CORP PREFERENCE STOCK in the prospectus and is qualified in its entirety by
reference to TXU Corp.'s restated articles of incorporation, as amended, and the
statement of resolution authorizing the issuance of the shares of Series B
preference stock. Copies of the restated articles of incorporation and the
statement of resolution may be obtained upon request from TXU Corp.
GENERAL
Under the restated articles of incorporation of TXU Corp., the board of
directors is authorized, without further shareholder action, to issue from time
to time up to 50,000,000 shares of preference stock in one or more series and
with such terms and characteristics and at such times and for such consideration
as the board of directors may determine. The board of directors previously
reserved 10,000,000 shares of preference stock, Series A, for issuance pursuant
to TXU Corp.'s shareholder rights plan.
The shares of Series B preference stock will be shares of preference stock
that entitle their holders to receive dividends when, as and if declared by the
board of directors, out of the assets legally available therefor at a rate per
annum that may vary from dividend period to dividend period. In general, as
described in more detail below, each dividend period after the initial dividend
period, which ends on June , 2005, will be (a) a regular dividend period, which
will be 49 days in length or such greater number of days as is equal to the then
current minimum holding period required for corporate taxpayers to receive the
dividends received deduction in respect of dividends, other than extraordinary
dividends, but in no event longer than 98 days, unless (b) TXU Corp. has
designated a subsequent dividend period as a special dividend period, which
special dividend period shall be at least 49 days, or such greater number of
days as is equal to the then current minimum holding period required for
corporate taxpayers to receive the dividends received deduction in respect of
dividends, other than extraordinary dividends. The applicable dividend rate will
be determined by an auction after the initial dividend period conducted on the
business day immediately preceding the start of a subsequent dividend period.
Existing holders and potential holders of Series B preference stock may
participate in auctions after the initial period through broker-dealers. See
"The Auction" for a more detailed explanation of auctions and the method of
determining the applicable dividend rate.
Except as otherwise required by law or as described below, or unless there
is no securities depository, all outstanding shares of Series B preference stock
will be represented by one or more certificates deposited with and registered in
the name of The Depository Trust Company, or DTC, as securities depository, or
its nominee, Cede & Co., and no person acquiring shares will be entitled to
receive a certificate for those shares. Each certificate shall bear a legend to
the effect that such certificate is issued subject to the provisions restricting
the transfer of shares contained in the statement of resolution. During a
non-payment period, an existing holder may obtain a certificate for the shares
owned by it. DTC will maintain lists of its participants and the shares held by
each whether as an existing holder for its own account or as a nominee for
another existing holder. See "Book-Entry Only Issuance -- The Depository Trust
Company" for a more detailed explanation of DTC's book-entry only system.
When issued, the shares will have a liquidation preference per share equal
to the sum of $100,000 plus an amount equal to accumulated and unpaid dividends
thereon, whether or not declared to the date of final distribution, and will be
fully paid and nonassessable. See "Liquidation Preference." For each share
issued, the amount of $100,000 will be credited to TXU Corp.'s capital account
designated as Series B preference stock.
S-9
<PAGE>
The shares will not be convertible into shares of common stock or any other
securities of TXU Corp. and will have no preemptive rights. Except during the
initial dividend period, which ends June , 2005, and any non-call period, the
Series B preference stock will be redeemable, in whole or in part, on any
dividend payment date at the option of TXU Corp., at $100,000 per share plus
accumulated and unpaid dividends thereon, whether or not declared. TXU Corp.
also may redeem the Series B preference stock, in whole but not in part, in the
event that certain changes are made to federal tax law which reduce the
dividends received percentage. See "Changes in the Dividends Received
Deduction."
The shares will rank prior to or on a parity with any other shares of
preference stock as to dividends and upon the liquidation, dissolution or
winding up of TXU Corp., except under the circumstances described under
DESCRIPTION OF TXU CORP PREFERENCE STOCK in the prospectus.
Except in an auction or as otherwise provided herein or as limited by law,
TXU Corp. may purchase or otherwise acquire any shares of Series B preference
stock at any price. Any shares purchased or otherwise acquired by TXU Corp. may
be restored to the status of authorized but undesignated and unissued shares of
preference stock.
DIVIDENDS
General. The holders of Series B preference stock shall be entitled to
receive, when, as and if declared by the board of directors out of funds legally
available therefor, cumulative cash dividends at the applicable dividend rate,
determined in the manner described below under "Dividends -- Determination of
Dividend Rate," payable on the dates as described below.
Dividends on the Series B preference stock will accumulate, whether or not
declared, at the applicable dividend rate for the shares from the date on which
TXU Corp. originally issues the shares. Dividends on the shares will be payable
for the initial dividend period with respect thereto on March 15, June 15,
September 15 and December 15 of each year, commencing September 15, 2000, or, if
any such date is not a business day, on the next business day. For subsequent
dividend periods, dividends on shares will be payable (1) on the business day
following the last day of each dividend period with respect thereto, regardless
of its length, and (2) in addition, in the case of dividend periods of more than
99 days, on the following additional dates:
o if such dividend period is from 100 to 190 days, on the 91st day
of such dividend period;
o if such dividend period is from 191 to 281 days, on the 91st and
182nd days of such dividend period;
o if such dividend period is from 282 days to 364 days, on the
91st, 182nd and 273rd days of such dividend period; and
o if such dividend period is one year or longer, on March 15, June
15, September 15 and December 15 of each year,
provided that in all such cases, if such date is not a business day, the
dividend payment date will be the next business day.
Notwithstanding the foregoing, if any date on which dividends on the Series
B preference stock would be payable as described in the preceding paragraph is a
day that would result in the number of days in the then current dividend period
not being at least equal to the then current minimum holding period required for
corporate taxpayers to be entitled to the dividends received deduction in
respect of dividends, other than extraordinary dividends, paid on preference
stock held by nonaffiliated corporations, then dividends with respect to such
dividend period shall be payable on the first business day following such date
on which dividends would be so payable that results in the number of days in
such dividend period being at least equal to that minimum holding period or, if
earlier, the 98th day of such dividend period.
Moreover, notwithstanding the foregoing, in the event of a change in law
altering the minimum holding period, the board of directors shall adjust, if
necessary, the number of days in each regular dividend period and the minimum
number of days of each special dividend period commencing after the date of such
change in law to equal or exceed the minimum holding period, provided that the
number of dividend period days in a regular dividend period shall not exceed by
S-10
<PAGE>
more than nine days the length of the minimum holding period and shall be evenly
divisible by seven, and the maximum number of dividend period days in a regular
dividend period, as adjusted pursuant to this provision, shall in no event
exceed 98 days.
On any change in the number of dividend period days in any then current
dividend period or in a regular dividend period or special dividend period as a
result of a change in the minimum holding period, TXU Corp. will mail notice of
such change to all holders of record of Series B preference stock. In addition,
under the broker-dealer agreements described below, each broker-dealer will be
required to mail notice of such change to each existing holder who acquired
shares of Series B preference stock through such broker-dealer and, to the
knowledge of such broker-dealer, has not disposed of such shares.
Each date on which dividends on the shares of Series B preference stock
shall be payable as determined as set forth above is referred to herein as a
"Dividend Payment Date." Although any particular Dividend Payment Date for the
shares of Series B preference stock may not occur on the day of the week or the
date originally scheduled as a Dividend Payment Date for the shares because of
the adjustments set forth above, each succeeding Dividend Payment Date for the
shares shall occur, subject to such adjustments, on the day of the week or the
date originally scheduled as a Dividend Payment Date for the shares as if each
preceding Dividend Payment Date had occurred on such day of the week or date.
On or prior to any Dividend Payment Date for the Series B preference stock,
TXU Corp. is required to pay to the auction agent sufficient funds for the
payment in full of all accumulated dividends with respect to the Series B
preference stock payable on such Dividend Payment Date.
Each dividend on the Series B preference stock shall be payable to the
holder or holders of record of the shares as they appear on the share books of
TXU Corp. on the date which is 10 days prior to the applicable Dividend Payment
Date. Dividends in arrears for any past dividend period may be declared and paid
at any time, without reference to any regular Dividend Payment Date, to the
holder or holders of such shares as they appear on the share books of TXU Corp.
on a date, not exceeding 15 days prior to the payment date therefor, as may be
fixed by the board of directors. Any dividend payment made on Series B
preference stock shall first be credited against the accumulated dividends with
respect to the earliest dividend period for the Series B preference stock for
which dividends have not been paid.
So long as the shares of Series B preference stock are held of record by
the nominee of the securities depository, dividends will be paid to the nominee
of the securities depository on each Dividend Payment Date for the shares. The
securities depository will credit the accounts of the DTC participants in
accordance with the securities depository's normal procedures, which now provide
for payments in same-day funds. The DTC participant will be responsible for
holding or disbursing such payments to such existing holder in accordance with
the instructions of such existing holder.
Except as described below under "Dividends -- Determination of Dividend
Rate," (1) holders of Series B preference stock shall not be entitled to any
dividends, whether payable in cash, property or stock, in excess of full
cumulative dividends on the Series B preference stock as provided herein, and
(2) no interest or sum of money in lieu of interest shall be payable in respect
of any dividend payment on the Series B preference stock which may be in
arrears.
So long as any shares of Series B preference stock are outstanding,
o no dividend, other than a dividend in common stock or any other
capital stock of TXU Corp. ranking junior to the Series B
preference stock as to dividends and upon liquidation and other
than as provided in the next paragraph, shall be declared or made
upon any shares of preference stock of TXU Corp. ranking on a
parity with the Series B preference stock as to dividends and
upon the liquidation, dissolution or winding up of TXU Corp.,
o the common stock or any other shares of capital stock of TXU
Corp. ranking junior to the Series B preference stock as to
dividends and upon liquidation, nor shall any preference stock
ranking on a parity with the Series B preference stock, common
stock or any other shares of capital stock of TXU Corp. ranking
S-11
<PAGE>
junior to the Series B preference stock as to dividends and upon
liquidation, be redeemed, purchased or otherwise acquired for any
consideration, nor
o shall any funds be paid to, or made available for, a sinking fund
for the redemption of any shares of such stock, by TXU Corp.,
except by conversion into or exchange for common stock or shares
of capital stock of TXU Corp. ranking junior to the Shares as to
dividends or upon liquidation,
unless, in each case, the full cumulative dividends on the outstanding Series B
preference stock shall have been or contemporaneously are, paid or declared and
a sum sufficient for the payment thereof has been or is set apart for such
payment. In addition, TXU Corp. may not declare or pay any dividend or
distribution on its capital stock, other than dividends paid in shares of its
common stock, if TXU Corp.:
o extends interest payment periods on its junior subordinated
debentures issued to trusts; or
o is in default with respect to payments on the junior subordinated
debentures or under related guarantees.
See DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES -- "Option to Extend
Interest Payment Period" in the prospectus.
When dividends are not paid or declared and set aside for payment in full,
as described in the previous paragraph, upon the Series B preference stock and
any preference stock ranking on a parity with the Series B preference stock, all
dividends declared upon the Series B preference stock and any preference stock
ranking on a parity with the Series B preference stock shall be declared pro
rata so that the amount of dividends declared per share on such shares and
parity preference stock shall in all cases bear to each other the same ratio
that accumulated dividends per share on such shares and parity preference stock
bear to each other.
Subsequent Dividend Periods. After the initial dividend period for the
Series B preference stock, each subsequent dividend period for the shares will
be a regular dividend period; provided that, subject to the statement of
resolution and except as described in the next paragraph and under "Dividends --
Determination of Dividend Rate," TXU Corp. may specify the duration for any
special dividend period and other special provisions for the Series B preference
stock by a notice delivered or mailed by TXU Corp. to the holders of the Series
B preference stock to the address of each such holder appearing in the share
books of TXU Corp., not less than 10 days nor more than 60 days prior to the
auction date for such subsequent dividend period, which notice will specify:
o TXU Corp.'s determination of the length of the special dividend
period, which shall be at least 49 days and equal to or longer
than the then current minimum holding period required for
corporate taxpayers to be entitled to receive the dividends
received deduction in respect of dividends, other than
extraordinary dividends,
o in the case of any special dividend period in excess of 99 days
in duration, any subsequent dividend payment date or dates other
than the subsequent period-end dividend payment date for such
dividend period,
o if TXU Corp. has elected that the Series B preference stock
should not be subject to redemption during all or any specified
portion of the special dividend period, a non-call period, a
statement to that effect,
o if TXU Corp. has elected that the dividends received deduction
gross-up provision shall apply during the special dividend
period, a statement to that effect, and
o if TXU Corp. has elected to redeem the Series B preference stock
during such special dividend period as a result of any amendment
to the Internal Revenue Code of 1986, or the Code, that has the
effect of reducing the dividends received percentage to 50% or
less as described in "Redemption," a statement to that effect.
In the event TXU Corp. has elected a special dividend period for a subsequent
dividend period as described in "Changes in the Dividend Received Deduction,"
TXU Corp. may withdraw its election by giving notice to holders of Series B
preference stock by no later than 3:00 p.m., New York City time, on the business
day before the auction date with respect to which the notice was delivered, and
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thereafter the election by TXU Corp. of a special dividend period shall be of no
force and effect. Copies of all notices related to special dividend periods
shall be delivered in person, by telecopier or by other written electronic
communication to the auction agent by TXU Corp. at the same time they are
transmitted to the holders of Series B preference stock. The auction agent will
thereupon provide copies of the notices to the broker-dealer as soon as
practicable after receiving the notice. In the event TXU Corp. has effectively
revoked its election of a special dividend period, the following dividend period
will be a regular dividend period. No defect in the notice or in the mailing
thereof shall affect the validity of any change in any dividend period.
In the event that sufficient clearing bids have not been made in any
auction, as described in "The Auction," such that the dividend rate for the next
dividend period will be equal to the maximum applicable rate, then the
subsequent dividend period will be a regular dividend period, regardless of
whether TXU Corp. has elected a special dividend period, and the maximum
applicable rate shall be determined based upon such dividend period. In such
event, existing holders of Series B preference stock that have submitted sell
orders will not be able to sell in the auction all, and may not be able to sell
any, shares subject to such sell orders. Thus, under certain circumstances,
existing holders of Series B preference stock may not have liquidity of
investment.
Determination of Dividend Rate. The initial dividend rate for the initial
dividend period for the Series B preference stock will be % per annum. The
initial dividend period begins on and includes the date that TXU Corp.
originally issues the Series B preference stock and ends on June , 2005. The
dividend rate for each subsequent dividend period for the Series B preference
stock will be, except as provided below, the rate per annum that the auction
agent advises TXU Corp. has resulted from the implementation of the auction
procedures. As used in this prospectus supplement, applicable dividend rate
means the rate per annum at which dividends are payable on the Series B
preference stock for any dividend period. See "The Auction -- Determination of
Sufficient Clearing Bids, Winning Bid Rate and Applicable Rate."
If an auction for any subsequent dividend period for the Series B
preference stock is not held for any reason, other than as a result of the
existence of a failure of TXU Corp. to pay dividends or amounts payable upon
redemption as described below, the subsequent dividend period shall be a regular
dividend period and the dividend rate on the shares for such subsequent dividend
period will be the maximum applicable dividend rate on the business day
immediately prior to the commencement of the subsequent dividend period. See
"The Auction -- Orders by Existing and Potential Holders."
During the initial dividend period and any special dividend period in
excess of 364 days in duration, the amount of dividends accumulated and payable,
if declared, on each share for each period that begins on a Dividend Payment
Date and ends on the day before the next Dividend Payment Date will be computed
by (1) multiplying the applicable dividend rate for such dividend period by 25%
and (2) multiplying $100,000 by the rate so obtained. The amount of dividends
accumulated and payable, if declared, on each share on any Dividend Payment Date
with respect to any regular dividend period and any period during the initial
dividend period and any special dividend period in excess of 364 days that is
not set forth in clause (1) above will be computed by (x) multiplying the
applicable dividend rate for such dividend period by a fraction, the numerator
of which is the actual number of days in the portion of such dividend period
prior to such Dividend Payment Date as to which dividends have not been paid and
the denominator of which is 360, and (y) multiplying $100,000 by the rate so
obtained.
If TXU Corp. fails to pay to the auction agent on or prior to any
period-end Dividend Payment Date for the Series B preference stock the full
amount of all accumulated and unpaid dividends payable on the Series B
preference stock on such period-end Dividend Payment Date, then:
o if such failure to pay is cured as provided below, the applicable
dividend rate for the Series B preference stock for the dividend
period commencing on the period-end Dividend Payment Date on
which TXU Corp. failed to pay shall be equal to the dividend rate
determined on the auction date immediately preceding such
period-end Dividend Payment Date; and
o if such failure to pay is not cured as provided below, then, for
the period (the "Dividend Non-Payment Period") commencing on and
including such period-end Dividend Payment Date and ending on and
including the business day on which, by 12:00 noon, New York City
time, all unpaid cash dividends shall have been deposited with
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the auction agent or otherwise made available for payment to the
applicable holders in same day funds (provided that, at least two
business days but no more than 30 days prior to such business
day, TXU Corp. shall have given the auction agent, the securities
depository and the applicable holders written notice of such
deposit or availability):
- each subsequent dividend period shall be a regular dividend
period, regardless of any special dividend period election
made by TXU Corp., and auctions for the Series B preference
stock shall be suspended and shall not resume, in each case
until all accumulated and unpaid dividends on the Series B
preference stock for all past dividend periods shall have
been paid to the auction agent, not later than the second
business day before an auction date for the Series B
preference stock; and
- the applicable dividend rate for the Series B preference
stock during such dividend non-payment period shall be equal
to the maximum applicable dividend rate for the Series B
preference stock, as determined on the business day prior to
the first day of each such subsequent dividend period, but
with the credit ratings for the Series B preference stock,
for purposes of determining such maximum applicable rate,
being deemed to be below "baa3" by Moody's Investors
Service, Inc., or Moody's, and below BBB- by Standard &
Poor's Ratings Services, or S&P.
If TXU Corp. fails to pay to the auction agent on or prior to any date set
for redemption of less than all of the shares of Series B preference stock the
full amount payable upon redemption of the shares of Series B preference stock
called for redemption, then:
o auctions for the Series B preference stock shall be suspended and
shall not resume until all amounts payable upon the redemption of
the Series B preference stock called for redemption shall have
been paid to the auction agent not later than the second business
day prior to an auction date for the outstanding Series B
preference stock;
o if such failure to pay is cured as provided below, the applicable
dividend rate for the dividend period commencing after the
redemption date on which TXU Corp. failed to pay shall be equal
to the maximum applicable dividend rate for the Series B
preference stock, as determined on the business day before the
first day of such dividend period, and such dividend period shall
be a regular dividend period, regardless of any special dividend
period election made by TXU Corp., unless on the auction date for
such dividend period, auctions for the shares may be resumed as
provided above; and
o if such failure to pay is not cured as provided below, then:
- each subsequent dividend period shall be a regular dividend
period, regardless of any special dividend period election
made by TXU Corp., and the applicable dividend rate for the
Series B preference stock not called for redemption for each
dividend period, commencing on the day immediately
succeeding the redemption date on which TXU Corp. failed to
pay, but excluding the dividend period, if any, following
the auction date on which auctions for the Series B
preference stock may be resumed as provided above, shall be
equal to the non-payment period dividend rate for the Series
B preference stock, as determined on the business day prior
to the first day of each such dividend period; and
- the applicable dividend rate for the Series B preference
stock called for redemption for each dividend period for the
Series B preference stock commencing after the redemption
date on which TXU Corp. failed to pay shall be equal to the
non-payment period rate for the Series B preference stock,
as determined on the business day prior to the first day of
each such dividend period.
For purposes of the two previous paragraphs, any failure to pay dividends
or amounts payable upon redemption with respect to the Series B preference stock
shall be deemed cured if, not later than 12:00 noon, New York City time, on the
third business day following such failure to pay, there shall have been paid to
the auction agent (1) all accumulated and unpaid dividends on the Series B
preference stock including the full amount of any dividends to be paid on the
period-end payment date with respect to which such failure to pay occurred but
excluding amounts accumulated after such period-end dividend payment date, plus
additional dividends in an amount computed by multiplying (A) the non-payment
period rate for the Series B preference stock, as determined on the business day
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before such Dividend Payment Date, by (B) a fraction, the numerator of which
shall be the number of days for which such failure to pay is not cured in
accordance herewith, including the day such failure to pay occurs and excluding
the day such failure to pay is cured, and the denominator of which is 360, and
multiplying the rate so obtained by the product of $100,000 and the number of
shares of Series B preference stock then outstanding and (2) the full amount
payable upon redemption of the shares of Series B preference stock called for
redemption that have not been so redeemed, plus (except to the extent such
amount has been paid pursuant to clause (1) above) an amount computed by
multiplying (X) the non-payment period rate for the Series B preference stock,
as determined on the business day prior to the first day of the current dividend
period, and (Y) a fraction, the numerator of which shall be the number of days
for which such failure to pay is not cured in accordance herewith, including the
day such failure to pay occurs and excluding the day such failure to pay is
cured, and the denominator of which is 360, and multiplying the rate obtained
against the product of $100,000 and the number of shares of Series B preference
stock called for redemption that have not been so redeemed.
If TXU Corp. fails to pay to the auction agent on or prior to any date set
for redemption of all the shares of Series B preference stock the full amount
payable upon the redemption of the shares, then the applicable dividend rate for
the shares for each dividend period or portion thereof commencing on or after
the redemption date on which TXU Corp. failed to pay shall be equal to the
non-payment period rate for the shares, as determined on the business day prior
to the first day of each such dividend period.
CHANGES IN THE DIVIDENDS RECEIVED DEDUCTION
If, at any time prior to the date that is 18 months after June , 2000, any
amendment to the Code is enacted that has the effect of reducing the percentage
of dividends received by corporate taxpayers which may be deducted for federal
income tax purposes (currently 70%) pursuant to Section 243(a)(1) of the Code or
any successor provision (the "Dividends Received Percentage"), then the
applicable dividend rate with respect to the Series B preference stock for the
dividend period in which the effective date of such change occurs will, to the
extent such amendment applies to such dividend period, be adjusted on and after
its effective date for the remainder of such dividend period by multiplying the
applicable dividend rate, determined before any adjustment described in this
paragraph, by a factor, which will be the number determined in accordance with
the following formula (the "DRD Formula"), and rounding the results to the
nearest basis point:
1-[.35(1-.70)]
------------------
1-[.35(1-DRP)]
For purposes of this formula, "DRP" means the adjusted Dividends Received
Percentage applicable to the relevant dividend in question. No amendment to the
Code other than a change in the percentage of the dividends received deduction
set forth in Section 243(a)(1) of the Code (or any successor provision) will
give rise to an adjustment described in the previous paragraph. Notwithstanding
the foregoing provisions, if, with respect to any such amendment, TXU Corp.
receives either an opinion of independent tax counsel or a private letter ruling
or similar form of guidance from the IRS to the effect that such amendment to
the Code would not apply to dividends payable on the Series B preference stock,
then such amendment will not result in the adjustment otherwise provided for
above. TXU Corp.'s calculation of the dividends payable, as so adjusted and as
certified accurate as to calculation and reasonable as to method by the
independent certified public accountants then regularly engaged by TXU Corp.,
shall be final and not subject to review. Notwithstanding the foregoing, in no
event will DRP be less than 50%.
If any such amendment to the Code which reduces the Dividends Received
Percentage is enacted and becomes effective after a dividend payable on a
Dividend Payment Date has been declared but before such dividend has been paid,
the amount of dividends payable on such Dividend Payment Date shall not be
increased; but instead, an amount equal to the excess, if any, of (1) the
product of the dividends paid by TXU Corp. on such Dividend Payment Date and the
DRD Formula (where the DRP used in the DRD Formula would be equal to the greater
of the reduced Dividends Received Percentage or 50%) less (2) the dividends paid
by TXU Corp. on such Dividend Payment Date, will be payable, if declared, on the
following Dividend Payment Date to holders of the Series B preference stock for
such succeeding Dividend Payment Date, in addition to any other amounts payable
on such Dividend Payment Date.
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If the applicable dividend rate is adjusted as described above, TXU Corp.
will send notice of such adjustment to each holder of Series B preference stock
and the auction agent on or prior to the next Dividend Payment Date. Unless the
context requires otherwise, all references to dividends in this prospectus mean
dividends adjusted as described above.
After the date that is 18 months after June , 2000, the foregoing
provisions shall not apply to any regular dividend period and will only apply to
any special dividend period if and to the extent elected by TXU Corp. and
specified in the applicable special dividend period notice.
In addition, if an amendment to the Code is enacted that reduces the
Dividends Received Percentage and this reduction retroactively applies to a
Dividend Payment Date as to which TXU Corp. previously paid dividends on the
Series B preference stock (each, an "Affected Dividend Payment Date"), TXU Corp.
will pay, if declared, additional dividends on the immediately succeeding
Dividend Payment Date (or if such amendment is enacted after the dividend
payable on such Dividend Payment Date has been declared, on the second
immediately succeeding Dividend Payment Date following the date of enactment),
to holders of the Series B preference stock for such succeeding Dividend Payment
Date, in an amount equal to the excess, if any, of (1) the product of the
dividends paid by TXU Corp. on each Affected Dividend Payment Date and the DRD
Formula (where the DRP used in the DRD Formula would be equal to the greater of
the reduced Dividends Received Percentage and 50%, applied to each Affected
Dividend Payment Date) over (2) the dividends paid by TXU Corp. on each Affected
Dividend Payment Date. Retroactive dividends, along with all other dividends on
the Series B preference stock, will be cumulative.
Retroactive dividends will not be paid with respect to the enactment of any
amendment to the Code if the amendment would not result in an adjustment due to
TXU Corp. having received either an opinion of counsel or tax ruling referred to
above. TXU Corp. will make only one payment of retroactive dividends.
No adjustments in the dividends payable by TXU Corp. will be made, and no
retroactive dividends will be payable by TXU Corp., because of any amendment to
the Code that reduces the Dividends Received Percentage effective at any time
after the date that is 18 months after June , 2000 or other than during any
special dividend period if and to the extent elected by TXU Corp. and specified
in the applicable special dividend notice.
In the event that the amount of dividends payable per share of the Series B
preference stock shall be adjusted pursuant to the DRD Formula and/or
retroactive dividends are to be paid, TXU Corp. will cause notice of each
adjustment and, if applicable, any retroactive dividends, to be sent to each
holder of the Series B preference stock.
In addition, if the Dividends Received Percentage is reduced to 50% or less
at any time prior to the date that is 18 months after June , 2000, or, if the
Dividends Received Percentage is so reduced and TXU Corp. so elects, during
special dividend periods after June , 2005, TXU Corp. may at its option redeem
the Series B preference stock, in whole but not in part, at a redemption price
of $105,000 per share, plus accumulated and unpaid dividends, whether or not
declared and including any increase in dividends payable due to changes in the
Dividends Received Percentage. See "Redemption."
REDEMPTION
Optional Redemption. At the option of TXU Corp., the Series B preference
stock may be redeemed after June , 2005, other than during a non-call period, in
whole or from time to time in part, out of funds legally available therefor, on
any Dividend Payment Date, upon at least 20 but not more than 50 days' notice,
at a redemption price per share of $100,000, upon payment of accumulated and
unpaid dividends as described in the next sentence. TXU Corp. shall be required
to declare and pay on the redemption date all accumulated and unpaid dividends
thereon, whether or not declared, to the date that TXU Corp. pays or duly
provides for the payment of the full amount payable upon redemption of such
shares. Notwithstanding the foregoing, if any dividends on Series B preference
stock are in arrears, no shares shall be redeemed unless all outstanding Series
B preference stock is simultaneously redeemed and TXU Corp. shall not purchase
or otherwise acquire any Series B preference stock; provided, however, that the
foregoing shall not prevent the purchase or acquisition of Series B preference
stock pursuant to an otherwise lawful purchase or exchange offer made on the
same terms to holders of all outstanding Series B preference stock.
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If at any time prior to the date that is 18 months after June , 2000, one
or more amendments to the Code are enacted that have the effect of reducing the
Dividends Received Percentage to 50% or less, and, as a result, the amount of
dividends on the Series B preference stock payable on any Dividend Payment Date
may be adjusted upwards as described above under "Changes in the Dividends
Received Deduction," TXU Corp., at its option, may redeem all, but not less than
all, of the outstanding Series B preference stock, provided that, within 60 days
of the date on which an amendment to the Code is enacted that reduces the
Dividends Received Percentage to 50% or less, TXU Corp. sends notice to holders
of the Series B preference stock of such redemption. Any redemption of the
Series B preference stock pursuant to this paragraph will take place on the date
specified in the notice, which will be not less than 20 nor more than 50 days
from the date such notice is sent to holders of the Series B preference stock.
This redemption of the Series B preference stock will be at a redemption price
of $105,000 per share, plus accumulated and unpaid dividends, whether or not
declared and including any increase in dividends payable due to changes in the
Dividends Received Percentage.
After the date ending 18 months after June , 2000, TXU Corp.'s option to
redeem the Series B preference stock upon a reduction in the Dividends Received
Percentage shall not apply to any regular dividend period and will only apply to
any special dividend period if and to the extent elected by TXU Corp. and
specified in the applicable special dividend period notice.
Redemption Procedures. If shares of Series B preference stock are to be
redeemed, TXU Corp. will cause to be delivered or mailed within the applicable
notice period specified above, a written notice of redemption to each holder of
record of shares of Series B preference stock, initially, the nominee of the
securities depository, and the auction agent. Each redemption notice will state
o the redemption date,
o the redemption price,
o the number of shares to be redeemed,
o the place where shares are to be surrendered for payment of the
redemption price,
o that dividends on the shares will cease to accumulate on the date
that TXU Corp. pays the full amount payable upon redemption of
shares, and
o the provision of the statement of resolution under which the
redemption is being made.
No defect in the redemption notice or in the mailing thereof shall affect the
validity of the redemption proceedings, except as required by applicable law. A
redemption notice shall be deemed given on the day that it is delivered or
mailed in accordance with this paragraph.
If less than all of the outstanding shares of Series B preference stock are
to be redeemed, the number of shares to be redeemed will be determined by the
board of directors of TXU Corp. and communicated to the auction agent. So long
as the securities depository's nominee is the record holder of all outstanding
shares, the auction agent will give notice to the securities depository, and the
securities depository will determine the number of shares to be redeemed from
each DTC participant's account in accordance with its normal procedures. If
neither the securities depository nor its nominee is the record holder of all of
the shares of Series B preference stock, the particular shares to be redeemed
shall be redeemed ratably or by lot from the holders of record of the shares of
Series B preference stock in proportion to the number of such shares held by
such holders, with adjustments to avoid redemption of fractional shares. Any
such redemption will be made in accordance with applicable securities laws and
rules.
On or prior to a date set for redemption of shares, TXU Corp. shall be
required to pay to the auction agent sufficient funds for the payment of the
full amount payable upon redemption of such shares.
If TXU Corp. gives or causes to be given a redemption notice, timely pays
to the auction agent a sum sufficient to redeem the shares of Series B
preference stock as to which such redemption notice has been given and gives the
auction agent irrevocable instructions and authority to pay the full amount
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payable on redemption of such shares to the holders of such shares, then on the
date of such payment, all rights of the holders of the shares to be redeemed, as
such, will terminate (except the right of the holders of such shares to receive
the full amount payable upon redemption thereof upon surrender of the
certificate or certificates therefor, but without interest) and such shares will
no longer be deemed to be outstanding for any purpose (including, without
limitation, the right of holders of such shares to vote on any matter or to
participate, with respect to such shares, in any subsequent auction for the
outstanding Series B preference stock). In addition, any shares as to which a
redemption notice has been given by TXU Corp. will be deemed to be not
outstanding for purposes of any auction for the Series B preference stock held
subsequent to the date of such redemption notice. TXU Corp. will be entitled to
receive from time to time from the auction agent the income, if any, derived
from the investment of monies or other assets paid it, to the extent that such
income is not required to pay the redemption price of the shares to be redeemed,
and the holders of any shares to be redeemed will not have any claim to such
income. Any funds so paid to the auction agent which are unclaimed at the end of
six years from the redemption date will be returned to TXU Corp., after which
the holders of the shares so called for redemption will look only to TXU Corp.
for payment of the redemption price of such shares.
So long as all of the outstanding Series B preference stock is held of
record by a nominee of the securities depository, the amounts payable upon
redemption of the Series B preference stock will be paid to the securities
depository on the redemption date. The normal procedures of the securities
depository currently provide for it to distribute amounts payable upon
redemption to DTC participants, who, in turn, are to distribute such funds to
the persons for whom they are acting as agent.
No sinking fund will be provided for the purchase or redemption of the
Series B preference stock.
LIQUIDATION PREFERENCE
Upon the dissolution, liquidation or winding up of TXU Corp., voluntary or
involuntary, the holders of the then outstanding Series B preference stock shall
be entitled to receive and be paid out of the assets of TXU Corp. available for
distribution to its shareholders, before any payment or distribution of assets
shall be made on the common stock, the amount of $100,000 per share, plus an
amount equal to the sum of all accumulated and unpaid dividends, whether or not
declared, on such shares to the date of final distribution. Neither the sale or
transfer of all or substantially all the assets of TXU Corp. nor the merger or
consolidation of TXU Corp. into or with any other corporation or the merger or
consolidation of any other corporation into or with TXU Corp., shall be deemed
to be a dissolution, liquidation or winding up, voluntary or involuntary, for
the purposes of this paragraph. After the payment to the holders of the Series B
preference stock of the full preferential amounts provided for in this
paragraph, such holders shall have no right or claim to any of the remaining
assets of TXU Corp. In the event the assets of TXU Corp. available for
distribution to the holders of the Series B preference stock and any preference
stock ranking on a parity with the Series B preference stock shall be
insufficient to pay in full all preferential amounts to which such holders are
entitled, no such distribution shall be made on account of such Series B
preference stock and preference stock ranking on a parity with the Series B
preference stock, unless proportionate distributive amounts shall be paid on
account of such Series B preference stock and preference stock ranking on a
parity with the Series B preference stock ratably, in proportion to the full
preferential amounts for which holders of all such shares are respectively
entitled upon dissolution, liquidation or winding up of TXU Corp.
THE AUCTION
General. The applicable dividend rate for the Series B preference stock for
each dividend period commencing after June , 2005 shall be equal to the rate per
annum that the auction agent advises TXU Corp. has resulted on the business day
preceding the first day of such subsequent dividend period from implementation
of the auction procedures set forth in the statement of resolution and attached
as Appendix A to this prospectus supplement. Each periodic implementation of the
auction procedures, under which persons determine to hold or, based upon
dividend rates bid by them, offer to sell or to purchase Series B preference
stock, is referred to herein as an "auction." If, however, TXU Corp. should fail
to pay the full amount of all accumulated and unpaid dividends on Series B
preference stock on any Dividend Payment Date or the redemption price of shares
of Series B preference stock called for redemption, the applicable dividend rate
for the Series B preference stock will be determined as described under
"Dividends -- Determination of Dividend Rate."
As used in this prospectus supplement, an existing holder of any Series B
preference stock means a person who is presently listed as the beneficial owner
of such shares in the records of the auction agent. The auction agent may rely
upon, as evidence of the identities of the existing holders, a list of the
owners of the Series B preference stock provided by TXU Corp. or the
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broker-dealers, the results of auctions and notices from any existing holder,
the DTC participant of any existing holder or the broker-dealer of any existing
holder with respect to such existing holder's transfer of Series B preference
stock to another person. References in this prospectus supplement to existing
holders and potential holders shall, unless the context otherwise requires, be
deemed to include beneficial owners and potential beneficial owners acting
through their broker-dealers.
The auction agent will be required to register a transfer of Series B
preference stock from an existing holder to another person only if (1) such
transfer is pursuant to an auction or (2) the auction agent has been notified in
writing (A) by such existing holder, the DTC participant of such existing holder
or the broker-dealer of such existing holder of such transfer or (B) by the
broker-dealer of any person that purchased such Series B preference stock in an
auction of the failure of such Series B preference stock to be transferred as a
result of such auction. The auction agent is not required to accept any such
notice of transfer delivered prior to an auction unless it is received by the
auction agent by 3:00 p.m. (New York City time) on the business day prior to the
auction.
Auction Agent Agreement. TXU Corp. will enter into an agreement with The
Bank of New York, the auction agent, and TXU Business Services Company, the
transfer agent and registrar, which provides, among other things, that the
auction agent will follow the auction procedures for the purposes of determining
the applicable dividend rate for the Series B preference stock for so long as
the applicable dividend rate for the Series B preference stock is to be based on
the results of an auction. See "Concerning the Auction Agent."
Broker-Dealer Agreements. The auctions require the participation of one or
more broker-dealers. The auction agent will enter into an agreement with Lehman
Brothers Inc. and may enter into other agreements with one or more other
broker-dealers selected by TXU Corp., which will provide for the participation
of such broker-dealers in auctions. See "Broker-Dealers." A broker-dealer
agreement may be terminated by the auction agent or a broker-dealer on five
days' notice to the other party.
Securities Depository. DTC will act as securities depository for its
participants with respect to shares. One or more registered certificates
representing all of the shares of Series B preference stock to be issued in this
offering initially will be registered in the name of Cede & Co., as nominee of
DTC. Such certificates will bear a legend to the effect that such certificate is
issued subject to the provisions restricting transfers of shares contained in
the statement of resolution. Cede & Co. will be the initial holder of record of
all Series B preference stock, and existing holders of the Series B preference
stock will not receive certificates representing their ownership interest in
such Series B preference stock. See "Book-Entry Only Issuance -- The Depository
Trust Company."
Auction Procedures. The following summary of the auction procedures does
not purport to be complete and is qualified in its entirety by reference to the
auction procedures, which are attached to this prospectus supplement as Appendix
A. The settlement procedures to be used with respect to auctions are set forth
in Appendix B to this prospectus supplement.
Auction Dates. After June , 2005, an auction to determine the applicable
dividend rate for the Series B preference stock for a particular dividend period
for the Series B preference stock will be held on the business day before the
first day of such dividend period. The term business day means a day on which
the New York Stock Exchange is open for trading and which is not a Saturday,
Sunday or other day on which banks in Dallas, Texas or New York, New York are
authorized or obligated by law to close. Both the auction date and the first day
of the related dividend period, also a period-end Dividend Payment Date, must be
business days but need not be consecutive calendar days. For example, in most
cases, if the date or day that would normally be an auction date is not a
business day, then such auction date will be the next preceding day that is a
business day even though such period-end Dividend Payment Date remains the same.
See "Dividends" for information concerning the circumstances under which a
Dividend Payment Date may fall on a date other than a date that would normally
be such Dividend Payment Date.
The first auction date for the shares will be June , 2005.
Orders by Existing and Potential Holders. Prior to the submission deadline
on each auction date:
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o each existing holder of Series B preference stock may submit to
its broker-dealer by telephone or otherwise a:
- Hold Order -- indicating the number of outstanding shares of
Series B preference stock, if any, held by such existing
holder that such existing holder desires to continue to hold
without regard to the applicable dividend rate for the next
dividend period for such Series B preference stock;
- Bid -- indicating the number of outstanding shares of Series
B preference stock, if any, held by such existing holder
that such existing holder desires to continue to hold if the
applicable dividend rate for the next dividend period for
such Series B preference stock is not less than the rate
specified by such existing holder; and/or
- Sell Order -- indicating the number of outstanding shares of
Series B preference stock, if any, held by such existing
holder that such existing holder desires to sell without
regard to the applicable dividend rate for the next dividend
period for such Series B preference stock; and
o broker-dealers will contact prospective purchasers of Series B
preference stock by telephone or otherwise to determine whether
such potential holders desire to submit bids in which such
potential holders will indicate the number of outstanding shares
of Series B preference stock that they offer to purchase if the
applicable dividend rate for the next dividend period for the
Series B preference stock is not less than the rates per annum
specified in such bids.
The communication to a broker-dealer by an existing holder of the
information referred to in the first bullet point above and by a potential
holder of the information referred to in the second bullet point above, and the
communication by a broker-dealer, whether or not for its own account, to the
auction agent of the foregoing information, is hereinafter referred to as an
order. An existing holder or a potential holder placing an order, including a
broker-dealer acting in such capacity for its own account, is referred to herein
as a bidder. Any order submitted by an existing holder or a potential holder to
its broker-dealer, or by a broker-dealer to the auction agent, prior to the
submission deadline on any auction date shall be irrevocable.
An existing holder may submit different types of orders in an auction with
respect to Series B preference stock then held by such existing holder, as well
as bids for additional shares. An existing holder that offers to purchase
additional shares is, for purposes of such offer, treated as a potential holder.
For information concerning the priority given to different types of orders
placed by an existing holder, see "The Auction -- Submission of Orders by
Broker-Dealers to Auction Agent."
Any bid for shares of Series B preference stock by an existing holder
specifying a rate higher than the maximum applicable dividend rate will be
treated as a sell order, and any bid for shares of Series B preference stock by
a potential holder specifying a rate higher than the maximum applicable dividend
rate for the shares will not be accepted. Accordingly, the auction procedures
establish the maximum applicable dividend rate as the maximum rate per annum
that can result from an auction. See "The Auction -- Determination of Sufficient
Clearing Bids, Winning Bid Rate and Applicable Rate" and "The Auction --
Acceptance and Rejection of Submitted Bids and Submitted Sell Orders and
Allocation of Shares."
Neither TXU Corp. nor the auction agent will be responsible for a
broker-dealer's failure to comply with any of the foregoing.
The maximum applicable dividend rate on any auction date for the Series B
preference stock will be the rate obtained by multiplying the reference rate on
such auction date by a percentage determined by the auction agent, with each
maximum applicable dividend rate being rounded to the nearest one thousandth
(0.001) of one percent per annum, with any such number ending in five
ten-thousandths of one percent rounded upwards to the nearest one thousandth
(0.001) of one percent, as set forth below based on the lower of the credit
ratings assigned to the Series B preference stock by Moody's and S&P (or if
Moody's or S&P, or both, shall not make such a rating available, the equivalent
of either or both of such ratings by a substitute rating agency or two
substitute rating agencies or, in the event that only one such rating shall be
available, the percentage based on such available rating) at the close of
business on the business day prior to such auction date:
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CREDIT RATING APPLICABLE PERCENTAGE
------------------------------------------------ OF REFERENCE RATE
MOODY'S S&P ---------------------
----------------------- ----------------------
"aa3" or above AA- or above 150%
"a3" to "a1" A- to A+ 200%
"baa3" to "baa1" BBB- to BBB+ 250%
Below "baa3" Below BBB- 275%
There is no minimum applicable dividend rate in respect of any dividend
period.
The reference rate with respect to a dividend period of 49 days to 183
days, is the "AA" Composite Commercial Paper Rate; with respect to a dividend
period of 184 days to 364 days, is the comparable U.S. Treasury Bill Rate; with
respect to a dividend period of one year to ten years, is the comparable U.S.
Treasury Note Rate; and, with respect to a dividend period in excess of ten
years, is the comparable U.S. Treasury Bond Rate.
"'AA' Composite Commercial Paper Rate" on any date means (1) the Interest
Equivalent of the rate on commercial paper placed on behalf of issuers whose
corporate bonds are rated "AA" by S&P or "Aa" by Moody's or the equivalent of
such rating by another nationally recognized statistical rating organization, as
such rate is made available on a discount basis or otherwise by the Federal
Reserve Bank of New York for the business day immediately preceding such date,
or (2) in the event that the Federal Reserve Bank of New York does not make
available such a rate, then the arithmetic average of the Interest Equivalent of
the rate on commercial paper placed on behalf of such issuers, as quoted on a
discount basis or otherwise by Lehman Brothers Inc. or its successors (the
"Commercial Paper Dealer") to the auction agent for the close of business on the
business day immediately preceding such date. If the Commercial Paper Dealer
does not quote a rate required to determine the "AA" Composite Commercial Paper
Rate, the "AA" Composite Commercial Paper Rate will be determined on the basis
of the quotation or quotations furnished by any substitute Commercial Paper
Dealer or substitute Commercial Paper Dealers. If the number of dividend period
days shall be (1) seven or more but fewer than 49 days, such rate shall be the
Interest Equivalent of the 30-day rate on such commercial paper; (2) 49 or more
but fewer than 70 days, such rate shall be the Interest Equivalent of the 60-day
rate on such commercial paper; (3) 70 or more but fewer than 85 days, such rate
shall be the arithmetic average of the Interest Equivalent of the 60-day and
90-day rate on such commercial paper; (4) 85 or more days but fewer than 99
days, such rate shall be the Interest Equivalent of the 90-day rate on such
commercial paper; or (5) 99 or more days but fewer than 183 days, such rate
shall be determined by linear interpolation between the Interest Equivalents of
the 90-day rate and the 180-day rate on such commercial paper.
"Interest Equivalent" means a yield on a 360-day basis of a discount basis
security which is equal to the yield on an equivalent interest-bearing security.
"U.S. Treasury Bill Rate" on any date means (1) the Interest Equivalent of
the rate on the actively traded Treasury Bill with a maturity most nearly
comparable to the length of the related dividend period, as such rate is made
available on a discount basis or otherwise by the Federal Reserve Bank of New
York in its Composite 3:30 P.M. Quotations for U.S. Government Securities report
for such business day, or (2) if such yield as so calculated is not available,
the Alternate Treasury Bill Rate on such date. "Alternate Treasury Bill Rate" on
any date means the Interest Equivalent of the yield as calculated by reference
to the arithmetic average of the bid price quotations of the actively traded
Treasury Bill with a maturity most nearly comparable to the length of the
related dividend period, as determined by bid price quotations as of any time on
the business day immediately preceding such date, obtained from at least three
recognized primary U.S. Government securities dealers selected by the auction
agent.
"U.S. Treasury Bond Rate" on any date means (1) the yield as calculated by
reference to the bid price quotation of the actively traded, current coupon
Treasury Bond with a maturity most nearly comparable to the length of the
related dividend period, as such bid price quotation is published on the
business day immediately preceding such date by the Federal Reserve Bank of New
York in its Composite 3:30 P.M. Quotations for U.S. Government Securities report
for such business day, or (2) if such yield as so calculated is not available,
the Alternate Treasury Bond Rate on such date. "Alternate Treasury Bond Rate" on
any date means the yield as calculated by reference to the arithmetic average of
the bid price quotations of the actively traded, current coupon Treasury Bond
with a maturity most nearly comparable to the length of the related dividend
period, as determined by the bid price quotations as of any time on the business
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day immediately preceding such date, obtained from at least three recognized
primary U.S. Government securities dealers selected by the auction agent.
"U.S. Treasury Note Rate" on any date means (1) the yield as calculated by
reference to the bid price quotation of the actively traded, current coupon
Treasury Note with a maturity most nearly comparable to the length of the
related dividend period, as such bid price quotation is published on the
business day immediately preceding such date by the Federal Reserve Bank of New
York in its Composite 3:30 P.M. Quotations for U.S. Government Securities report
for such business day, or (2) if such yield as so calculated is not available,
the Alternate Treasury Note Rate on such date. "Alternate Treasury Note Rate" on
any date means the yield as calculated by reference to the arithmetic average of
the bid price quotations of the actively traded, current coupon Treasury Note
with a maturity most nearly comparable to the length of the related dividend
period, as determined by the bid price quotations as of any time on the business
day immediately preceding such date, obtained from at least three recognized
primary U.S. Government securities dealers selected by the auction agent.
Notwithstanding the foregoing, if at 9:00 a.m., New York City time, on any
auction date, (1) the rating of the Series B preference stock by Moody's shall
be on the "Corporate Credit Watch List" of Moody's with a designation of
"downgrade" or "uncertain," (2) the rating of the Series B preference stock by
S&P shall be on the "Credit Watch" of S&P with a designation of "negative
implications" or "developing" or (3) if Moody's or S&P, or both, shall not make
such a rating available, the rating of the Series B preference stock by any
substitute rating agency shall be the substantial equivalent of clause (1) or
(2), then the maximum applicable dividend rate for the Series B preference stock
to which such auction date relates will be determined as described above but as
if the credit rating assigned to the Series B preference stock by Moody's and
S&P (or, as appropriate, by a substitute rating agency) each fell within a range
one full level lower in the above table.
TXU Corp. will take all reasonable action necessary to enable Moody's and
S&P (and, as appropriate, any substitute rating agency or substitute rating
agencies referred to below) to provide a rating for the Series B preference
stock. If neither Moody's nor S&P shall make such a rating available, TXU Corp.
will select, after consultation with the broker-dealers or their affiliates and
successors, a nationally recognized statistical rating organization, as a
substitute rating agency, or two nationally recognized statistical rating
organizations as substitute rating agencies, as the case may be. If an
alternative nationally recognized securities rating agency or agencies are not
available, the applicable rating shall be the highest rating last published by
Moody's, S&P or such substitute rating agency or agencies.
A broker-dealer also may hold Series B preference stock for its own
account. A broker-dealer thus may submit orders to the auction agent as an
existing holder or a potential holder and therefore participate in an auction on
behalf of both itself and its customers. An order placed with the auction agency
by a broker-dealer as an existing holder or a potential holder as or on behalf
of a customer will be treated in the same manner as an order placed with a
broker-dealer by such customer. Similarly, any failure by a broker-dealer to
submit to the auction agent an order in respect of any Series B preference stock
held by its customers will be treated in the same manner as such customer's
failure to submit to its broker-dealer an order in respect of Series B
preference stock held by it, as described above. Inasmuch as a broker-dealer
participates in an auction as an existing holder or a potential holder only to
represent the interest of its customers, all discussion herein relating to the
consequences of an auction for existing holders and potential holders also
applies to the underlying beneficial ownership interests.
The number of shares of Series B preference stock purchased or sold may be
subject to proration procedures. See "The Auction -- Acceptance and Rejection of
Submitted Bids and Submitted Sell Orders and Allocation of Shares." Each
purchase or sale of shares shall be made for settlement on the business day
(also a period-end Dividend Payment Date) following the auction date at a price
per share equal to $100,000, and such settlement will be made regardless of
whether or not TXU Corp. shall have paid on such business day or on any other
day the full amount of any dividends or any other amounts payable in respect of
any Series B preference stock. See "The Auction -- Notification of Results;
Settlement."
If any order or orders covering in the aggregate all of the outstanding
Series B preference stock held by an existing holder is not submitted to the
auction agent prior to the submission deadline for any reason, including the
failure of a broker-dealer to contact such existing holder or to submit such
existing holder's order or orders, such existing holder shall be deemed to have
submitted a hold order, in the case of an auction relating to a regular dividend
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period, or a sell order, in the case of an auction relating to a special
dividend period, covering the number of outstanding shares of Series B
preference stock held by such existing holder that are not subject to orders
submitted to the auction agent.
For purposes of an auction, shares of Series B preference stock for which
TXU Corp. shall have given notice of redemption and deposited moneys therefor
with the auction agent will not be considered as outstanding and will not be
included in such auction.
Neither TXU Corp. nor any affiliate of TXU Corp. may submit an order in any
auction except as described below under the caption "Broker-Dealers."
Submission of Orders by Broker-Dealers to Auction Agent. Prior to 1:00
p.m., New York City time, on each auction date, or such other time on the
auction date as may be specified by the auction agent, each broker-dealer will
submit in writing or through the auction agent's auction processing system to
the auction agent all orders obtained by it for the auction to be conducted on
such auction date, designating itself, unless otherwise permitted by TXU Corp.,
as the existing holder or potential holder in respect of the shares subject to
such orders. Any order submitted by an existing holder or a potential holder to
its broker-dealer, or by a broker-dealer to the auction agent, prior to the
submission deadline on an auction date, shall be irrevocable.
If any rate specified in any submitted bid contains more than three figures
to the right of the decimal point, then the auction agent shall round such rate
up to the next highest one thousandth (0.001) of one percent.
A submitted order or submitted orders of an existing holder that cover in
the aggregate more than the number of outstanding shares of Series B preference
stock held by such existing holder shall be considered valid in the following
order of priority:
(1) any submitted hold order of such existing holder shall be
considered valid up to and including the number of outstanding shares held
by such existing holder; provided that if there is more than one submitted
hold order of such existing holder and the number of shares of Series B
preference stock subject to such submitted hold orders exceeds the number
of outstanding shares of Series B preference stock held by such existing
holder, the number of such shares subject to each such submitted hold order
shall be reduced pro rata so that such submitted hold orders will cover the
number of outstanding shares held by such existing holder;
(2) (A) any submitted bids of such existing holder shall be considered
valid if more than one such submitted bid is submitted, up to and including
the excess of the number of outstanding shares of Series B preference stock
held by such existing holder over the number of shares of Series B
preference stock subject to any submitted hold order referred to in clause
(1) above, and (B) subject to subclause (A), if there is more than one
submitted bid of such existing holder specifying the same rate and the
number of outstanding shares of Series B preference stock subject to such
submitted bids is greater than such excess, such submitted bids shall be
considered valid up to and including the amount of such excess, and the
number of such shares subject to such submitted bids shall be reduced pro
rata so that such submitted bids, in the aggregate shall cover the number
of outstanding shares equal to such excess, and (C) subject to subclauses
(A) and (B), if there are two or more submitted bids of such existing
holder specifying different rates, such submitted bids shall be considered
valid in the ascending order of their respective rates and in any such
event the number, if any, of such shares subject to submitted bids not
valid under this clause (2) shall be treated as subject to a submitted bid
by a potential holder; and
(3) any submitted sell order of an existing holder shall be considered
valid up to and including the excess of the number of outstanding shares of
Series B preference stock held by such existing holder over the number of
shares subject to submitted hold orders referred to in clause (1) and valid
submitted bids referred to in clause (2) above; provided that if there is
more than one submitted sell order of such existing holder and the number
of such shares subject to such submitted sell orders is greater than such
excess, the number of such shares subject to such submitted sell orders
shall be reduced pro rata so that such submitted sell orders, in the
aggregate, shall cover the number of outstanding shares of Series B
preference stock equal to such excess.
If there is more than one submitted bid of any potential holder, each such
submitted bid shall be considered a separate submitted bid with the rate and
number of shares therein specified.
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Determination of Sufficient Clearing Bids, Winning Bid Rate and Applicable
Rate. Not earlier than the submission deadline on an auction date for the Series
B preference stock, the auction agent will assemble all submitted orders and
will determine the excess of the number of outstanding shares of Series B
preference stock over the number of outstanding shares of Series B preference
stock subject to submitted hold orders (such excess being referred to herein as
the "Available Shares") and whether Sufficient Clearing Bids exist. "Sufficient
Clearing Bids" will exist if the number of outstanding shares that are the
subject of submitted bids by potential holders specifying rates not higher than
the maximum applicable dividend rate equals or exceeds the number of outstanding
shares of Series B preference stock that are the subject of submitted sell
orders (including the number of such shares subject to submitted bids by
existing holders specifying a rate higher than the maximum applicable dividend
rate).
If Sufficient Clearing Bids exist, the auction agent will determine the
lowest rate specified in the submitted bids (the "Winning Bid Rate") that,
taking into account such rate and all lower rates bid by existing holders and
potential holders, would result in existing holders and potential holders owning
not less than the Available Shares. In that event, the Winning Bid Rate will be
the applicable dividend rate for the next dividend period for all Series B
preference stock then outstanding.
If Sufficient Clearing Bids do not exist, other than because all of the
outstanding shares of Series B preference stock are the subject of submitted
hold orders, the next dividend period will be a regular dividend period and the
applicable dividend rate for the next dividend period will be the maximum
applicable dividend rate. If Sufficient Clearing Bids do not exist, existing
holders that have submitted or are deemed to have submitted sell orders will not
be able to sell in the auction all, and may not be able to sell any, shares
subject to such Submitted Sell Orders. See "The Auction -- Acceptance and
Rejection of Submitted Bids and Submitted Sell Orders and Allocation of Shares"
below.
If all of the outstanding shares of Series B preference stock are subject
to submitted hold orders, the applicable dividend rate for the next dividend
period for the shares will be 59% of the reference rate in effect on the auction
date with respect to such dividend period.
Acceptance and Rejection of Submitted Bids and Submitted Sell Orders and
Allocation of Shares. Based on the determinations made under "The Auction --
Determination of Sufficient Clearing Bids, Winning Bid Rate and Applicable Rate"
above, and subject to the discretion of the auction agent to round and allocate
as described below, submitted bids and submitted sell orders shall be accepted
or rejected in the order of priority set forth in the auction procedures, with
the result that existing holders and potential holders shall sell, continue to
hold and/or purchase shares of Series B preference stock as set forth below.
Existing holders that submit or are deemed to have submitted hold orders shall
continue to hold the shares of Series B preference stock subject to such hold
orders.
If Sufficient Clearing Bids exist:
(1) each existing holder that placed a submitted sell order or a
submitted bid specifying a rate higher than the Winning Bid Rate will sell
the outstanding shares of Series B preference stock subject to such
submitted sell order or submitted bid;
(2) each existing holder that placed a submitted bid specifying a rate
lower than the Winning Bid Rate will continue to hold the outstanding
shares of Series B preference stock subject to such submitted bid;
(3) each potential holder that placed or is deemed to have placed a
submitted bid specifying a rate lower than the Winning Bid Rate will
purchase the number of outstanding shares of Series B preference stock
subject to such submitted bid;
(4) each existing holder that placed a submitted bid specifying a rate
equal to the Winning Bid Rate shall continue to hold the outstanding shares
of Series B preference stock subject to such submitted bid, unless the
number of outstanding shares subject to all such submitted bids is greater
than the excess of the Available Shares over the number of shares accounted
for in clauses (2) and (3) above, in which event each existing holder with
such a submitted bid will continue to hold a number of outstanding shares
of Series B preference stock determined on a pro rata basis based on the
number of outstanding shares subject to all such submitted bids by such
existing holders; and
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(5) each potential holder that placed a submitted bid specifying a
rate equal to the Winning Bid Rate will purchase any Available Share not
accounted for in clause (2), (3) or (4) above on a pro rata basis based on
the number of outstanding shares subject to all such submitted bids.
If Sufficient Clearing Bids do not exist, other than because all of the
outstanding shares of Series B preference stock are subject to submitted hold
orders:
(1) each existing holder that placed a submitted bid specifying a rate
equal to or lower than the maximum applicable dividend rate will continue
to hold the outstanding shares of Series B preference stock subject to such
submitted bid;
(2) each potential holder that placed a submitted bid specifying a
rate equal to or lower than the maximum applicable dividend rate will
purchase the number of outstanding shares of Series B preference stock
subject to such submitted bid; and
(3) each existing holder that placed a submitted sell order or a
submitted bid specifying a rate higher than the maximum applicable dividend
rate will sell a number of outstanding shares of Series B preference stock
determined on a pro rata basis based on the number of outstanding shares
subject to all such submitted sell orders and submitted bids.
If, as a result of the auction procedures described above, any existing
holder would be required to sell, or any potential holder would be required to
purchase, a fraction of a share, the auction agent shall, in such manner as it
shall determine in its sole discretion, (1) round up or down the number of
shares being sold or purchased on such auction date so that the number of shares
sold or purchased by each existing holder or potential holder shall be whole
shares and (2) allocate such whole shares for purchase among potential holders
even if such allocation results in one or more of such potential holders not
purchasing shares.
Notification of Results; Settlement. The auction agent will notify each
broker-dealer that submitted an order in an auction of the applicable dividend
rate for the next dividend period for the applicable shares and, if the order
was a bid or sell order, whether such bid or sell order was accepted or
rejected, in whole or in part, by telephone by approximately 3:00 p.m., New York
City time, on the auction date. Each broker-dealer that submitted a bid or sell
order on behalf of one or more bidders will then advise each bidder whether its
bid or sell order was accepted or rejected, in whole or in part, will confirm
purchases and sales with each bidder purchasing or selling Series B preference
stock as a result of the auction and will advise each bidder purchasing or
selling Series B preference stock as a result of the auction to give
instructions to its participants to pay the purchase price against delivery of
such shares by book-entry against payment therefor, as appropriate. Each
broker-dealer that submitted a hold order on behalf of an existing holder will
also advise such existing holder of the applicable dividend rate for the next
dividend period. The auction agent will record on the registry of existing
holders to be maintained by the auction agent each transfer of beneficial
ownership of shares pursuant to an auction.
If any existing holder selling Series B preference stock in an auction
fails to deliver such shares, by authorized book-entry, a broker-dealer may
deliver to the potential holder on behalf of which is submitted a bid that was
accepted a number of such shares that is less than the number of such shares
that otherwise was to be purchased by such potential holder. In such event, the
number of such shares to be so delivered will be determined by such
broker-dealer in its sole discretion; provided, however, that such delivery will
be of whole shares only. Delivery of such lesser number of shares will
constitute good delivery.
In accordance with the securities depository's normal procedures, on the
business day following the auction date, the transactions described above will
be executed through the securities depository and the accounts of the respective
participants at the securities depository will be debited and credited as
necessary to effect the purchases and sales of shares as determined in the
auction. Purchasers will make payment to the securities depository through their
participants in same-day funds and shall make payments regardless of whether or
not TXU Corp. shall have paid on such day or on any other day the full amount of
any dividends or any other amounts payable in respect of any shares. The
securities depository will make payment in accordance with its normal
procedures, which now provide for payment in same-day funds. If the procedures
of the securities depository applicable to the Series B preference stock shall
be changed to provide for payment in next-day funds, then purchasers may be
required to make payment in next-day funds. If the certificates for Series B
preference stock are not held by the securities depository or its nominee,
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payment will be made in same-day funds to the auction agent against delivery of
such certificates.
CONCERNING THE AUCTION AGENT
The auction agent will act as agent for TXU Corp. in connection with
auctions. TXU Corp. will pay the auction agent compensation for its services
under the auction agent agreement.
In the absence of bad faith or negligence on its part, the auction agent
will not be liable for any action taken, suffered or omitted in the performance
of its duties under the auction agent agreement and will not be liable for any
error of judgment made reasonably and in good faith unless the auction agent has
been negligent in ascertaining (or failing to ascertain) the pertinent facts.
Pursuant to the auction agent agreement, TXU Corp. is required to indemnify the
auction agent for certain losses and liabilities incurred by the auction agent
without negligence or bad faith on its part in connection with the performance
of its duties under such agreement.
TXU Corp. may terminate any auction agent agreement upon written notice to
the auction agent. The auction agent may resign under the auction agent
agreement upon written notice to TXU Corp. on the date specified in such notice,
which may be no earlier than six months following delivery of such notice. No
such termination by TXU Corp. or resignation by the auction agent shall be
effective until:
o TXU Corp. has entered into an agreement with a successor auction
agent containing substantially the same terms and conditions as
the then existing auction agent agreement, and
o such successor auction agent has entered into agreements with the
broker-dealers containing substantially the same terms and
conditions as the then existing broker dealer agreements.
Upon receiving a resignation notice from the auction agent, TXU Corp. will use
its best efforts to enter into an agreement with a successor auction agent
containing substantially the same terms and conditions as the then existing
auction agent agreement.
BROKER-DEALERS
The auction agent after each auction will pay a service charge from funds
provided by TXU Corp. to each broker-dealer on the basis of the purchase price
of shares of Series B preference stock placed by such broker-dealer at such
auction. The service charge:
o for any regular dividend period shall be determined from time to
time by mutual consent of TXU Corp. and any such broker-dealer or
broker-dealers, and
o for any special dividend period shall be determined by mutual
consent of TXU Corp. and any such broker-dealer or broker-dealers
and shall be based upon a selling concession that would be
applicable to an underwriting of fixed or variable rate
preference shares with a similar final maturity or variable rate
dividend period, respectively, at the commencement of the
dividend period with respect to such auction.
For the purposes of the preceding sentence, shares of Series B preference stock
shall be considered placed by a broker-dealer if such shares were
o the subject of hold orders deemed to have been made by existing
holders that were acquired by such existing holders through such
broker-dealer, or
o the subject of the following orders submitted by such
broker-dealer:
- a submitted bid of an existing holder that resulted in such
existing holder purchasing such shares as a result of the
auction,
- a submitted bid of a potential holder that resulted in such
potential holder purchasing such shares as a result of the
auction, or
- a submitted hold order.
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The broker-dealer agreements provide that a broker-dealer, other than an
affiliate of TXU Corp., may submit orders in auctions for its own account,
unless TXU Corp. notifies all broker-dealers in writing that they may no longer
do so, in which case broker-dealers may continue to submit only hold orders and
sell orders for their own accounts. Any broker-dealer that is an affiliate of
TXU Corp. may submit orders in auctions but only if such orders are not for its
own account, except that if such affiliated broker-dealer holds shares for its
own account, it must submit a sell order in the next auction with respect to
such shares. If a broker-dealer submits an order for its own account in any
auction, it may have knowledge of orders placed through it in that auction and
therefore have an advantage over other bidders; such broker-dealer, however,
would not have knowledge of orders submitted by other broker-dealers in that
auction. In the broker-dealer agreements, broker-dealers agree to handle
customer orders in accordance with their respective duties under applicable
securities laws and rules.
Each broker-dealer agreement provides that neither TXU Corp. nor the
auction agent shall have any responsibility or liability with respect to the
failure of a potential holder, existing holder or their respective DTC
participants to deliver shares or to pay for shares purchased or sold pursuant
to an auction or otherwise.
RATINGS
TXU Corp. expects that, on the date of original issue for the Series B
preference stock to be issued pursuant to this offering, such shares will be
rated "baa3" by Moody's and BBB- by S&P.
Ratings are not recommendations to purchase, hold or sell Series B
preference stock, inasmuch as the ratings do not comment as to market price or
suitability for a particular investor. The ratings are based on current
information furnished to Moody's and S&P by TXU Corp. and obtained from other
sources. The ratings may be changed, suspended or withdrawn as a result of
changes in, or unavailability of, such information. Ratings do not address the
likelihood that any auction will be successful or that an investor will be able
to resell shares in any auction or otherwise.
PREEMPTIVE AND CONVERSION RIGHTS
Holders of the Series B preference stock will not have any preemptive
rights to purchase or subscribe for any other shares, rights, options or other
securities of TXU Corp. which at any time may be sold or offered for sale by TXU
Corp. The Series B preference stock is not convertible into shares of any other
class or series of capital stock of TXU Corp.
TRANSFER AGENT, REGISTRAR, AUCTION AGENT AND PAYING AGENT
The transfer agent and registrar for the Series B preference stock is TXU
Business Services Company. The auction agent and paying agent for the Series B
preference stock is The Bank of New York.
BOOK-ENTRY ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
The Series B preference stock will trade through DTC. The Series B
preference stock will be represented by a global certificate and registered in
the name of Cede & Co., DTC's nominee.
DTC is a New York clearing corporation and a clearing agency registered
under Section 17A of the Securities Exchange Act of 1934. DTC holds securities
for its participants. DTC facilitates settlement of securities transactions
among its participants through electronic computerized book-entry changes in the
participants' accounts. This eliminates the need for physical movement of
securities certificates. The participants include securities brokers and
dealers, banks, trust companies and clearing corporations. DTC is owned by a
number of its participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Others who maintain a custodial relationship with a participant
can use the DTC system. The rules that apply to DTC and those using its systems
are on file with the SEC.
Purchases of Series B preference stock within the DTC system must be made
through participants, which will receive a credit for the Series B preference
stock 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
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statements of their holdings, from the participants through which they purchased
Series B preference stock. Beneficial owners will not receive certificates for
their Series B preference stock, except during a non-payment period or if use of
the book-entry system for the Series B preference stock is discontinued.
To facilitate subsequent transfers, all the Series B preference stock
deposited by direct participants with DTC is registered in the name of DTC's
nominee, Cede & Co. The deposit of Series B preference stock with DTC and its
registration in the name of Cede & Co. effects no change in beneficial
ownership. DTC has no knowledge of the actual beneficial owners of the Series B
preference stock. DTC's records reflect only the identity of the participants to
whose accounts such Series B preference stock is 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
Series B preference stock are being redeemed, DTC's practice is to determine by
lot the number of Series B preference stock of each participant to be redeemed.
Although voting with respect to the Series B preference stock is limited,
in those cases where a vote is required, neither DTC nor Cede & Co. will itself
consent or vote with respect to Series B preference stock. Under its usual
procedures, DTC would mail an Omnibus Proxy to TXU Corp. 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 Series B preference
stock are credited on the record date. TXU Corp. believes that these
arrangements will enable the beneficial owners to exercise rights equivalent in
substance to the rights that can be directly exercised by a registered holder of
Series B preference stock.
Dividend and redemption payments on the Series B preference stock 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, The Bank of New York or TXU Corp.
Payment of dividends to DTC is the responsibility of TXU Corp. Disbursement of
payments to participants is the responsibility of DTC, and disbursement of
payments to the beneficial owners is the responsibility of participants.
Except as provided in this prospectus supplement, a beneficial owner will
not be entitled to receive physical delivery of Series B preference stock.
Accordingly, each beneficial owner must rely on the procedures of DTC to
exercise any rights under the Series B preference stock.
DTC may discontinue providing its services as securities depository with
respect to the Series B preference stock at any time by giving reasonable notice
to TXU Corp. In the event no successor securities depository is obtained, Series
B preference stock certificates will be printed and delivered. If TXU Corp.
decides to discontinue use of the DTC system of book-entry transfers,
certificates for the Series B preference stock 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. believes to be reliable, but TXU
Corp. does not take responsibility for the accuracy of this information.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion describes certain United States federal income tax
consequences of the ownership and disposition of Series B preference stock. The
discussion contained in this summary is based on the Code, existing and proposed
Treasury Regulations, judicial decisions and administrative pronouncements, all
of which are subject to change. Any such changes may be applied retroactively in
a manner that could result in federal income tax consequences different from
those discussed below.
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This summary discusses only Series B preference stock held as a capital
asset within the meaning of Section 1221 of the Code, and does not deal with
special situations, such as those of banks, thrift institutions, real estate
investment trusts, regulated investment companies, insurance companies, dealers
in securities or commodities, tax-exempt investors, holders whose functional
currency is not the U.S. dollar, persons who hold Series B preference stock as a
position in a straddle, as part of a synthetic security or hedge, as part of a
conversion transaction or other integrated investment, or persons who are not
United States Holders (as defined below). Further, the summary does not include
any description of any alternative minimum tax consequences or any state, local
or foreign tax consequences that may be applicable.
HOLDERS OF SERIES B PREFERENCE STOCK ARE URGED TO CONSULT THEIR TAX
ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE OWNERSHIP AND
DISPOSITION OF THE SERIES B PREFERENCE STOCK IN LIGHT OF THEIR PARTICULAR
CIRCUMSTANCES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND
OTHER TAX LAWS, AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR
OTHER TAX LAWS.
As used herein, a "United States Holder" means a beneficial owner of Series
B preference stock that is (i) a citizen or resident of the United States, (ii)
a corporation, partnership or other entity created or organized in or under the
laws of the United States or any State thereof or the District of Columbia,
(iii) an estate the income of which is subject to United States federal income
taxation regardless of its source, or (iv) a trust the administration of which
is subject to the primary supervision of a court within the United States and
for which one or more U.S. persons have the authority to control all substantial
decisions.
GENERAL
TXU Corp. will receive an opinion of Thelen Reid & Priest LLP, counsel to
TXU Corp., to the effect that (i) the Series B preference stock will be treated
as stock of TXU Corp. for United States federal income tax purposes and (ii)
dividends declared and paid by TXU Corp. on the Series B preference stock will
be treated as dividends for United States federal income tax purposes to the
extent paid out of current or accumulated earnings and profits of TXU Corp., as
determined for United States federal income tax purposes, and will be eligible
for the 70% dividends received deduction allowed to corporate shareholders.
DIVIDENDS
Distributions with respect to the Series B preference stock (other than
liquidating distributions and certain distributions in redemption of the Series
B preference stock) which are paid out of current or accumulated earnings and
profits, as calculated for United States federal income tax purposes, generally
will constitute dividends taxable as ordinary income. To the extent the amount
of any such distribution paid with respect to the Series B preference stock
exceeds current and accumulated earnings and profits, as calculated for United
States federal income tax purposes, such excess distribution will not constitute
a dividend for United States federal income tax purposes, but will be treated
first as a tax-free return of capital to the extent of the holder's adjusted tax
basis in its Series B preference stock (with a corresponding reduction in such
basis) and, to the extent the distribution exceeds such basis, as a capital
gain, provided the Series B preference stock is held as a capital asset for
United States federal income tax purposes.
DIVIDENDS RECEIVED DEDUCTION
Dividends received by corporate shareholders generally are eligible for the
dividends received deduction (the "DRD") as specified in Section 243(a)(1) of
the Code. Under such Section, the amount of the DRD generally will equal 70% of
the amount of the dividend received. Prospective investors should consider the
potential effects of (1) Section 246A of the Code, which reduces the DRD allowed
to a corporate shareholder that has incurred indebtedness that is directly
attributable to an investment in portfolio stock (as determined for United
States federal income tax purposes), (2) Section 1059 of the Code, which reduces
a shareholder's basis in stock in certain circumstances, (3) Section 246(b) of
the Code, which limits the amount of the DRD percentage to a percentage of the
shareholder's taxable income, and (4) Section 246(c) of the Code, which
disallows the DRD in respect of any dividend if the holder of the stock is
required to make related payments with respect to positions in substantially
similar or related property or certain holding period requirements are not met.
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Under Section 1059 of the Code, any dividend received by a corporate
shareholder that constitutes an "extraordinary dividend" may require a reduction
in the adjusted tax basis of the stock by the non-taxed portion of the dividend,
but not below zero. If such portion exceeds the corporate shareholder's adjusted
tax basis in the stock, the shareholder may be required to treat the excess as
gain from the sale of such stock in the year in which the extraordinary dividend
is received. A dividend on preference stock may be treated as "extraordinary" if
(1) it equals or exceeds 5% of the holder's adjusted tax basis in the stock
(reduced for this purpose by the non-taxed portion of any prior extraordinary
dividend), treating all dividends having ex-dividend dates within an 85-day
period as one dividend, or (2) exceeds 20% of the holder's adjusted tax basis in
the stock, treating all dividends having ex-dividend dates within a 365-day
period as one dividend. In addition, under Section 1059(f) of the Code, any
dividend with respect to "disqualified preferred stock" is treated as an
"extraordinary dividend." It does not appear that Section 1059(f) of the Code
was intended to apply to stock such as the Series B preference stock.
Accordingly, the Series B preference stock should not constitute "disqualified
preferred stock" within the meaning of Section 1059(f) of the Code. You should
consult your own tax advisors as to the application of Section 1059 of the Code
to any dividends that may be paid with respect to the Series B preference stock.
Under Section 246(c) of the Code, a corporate shareholder must hold the
dividend-paying stock for certain time periods, depending on the type of stock
and distribution, before the DRD is allowed. Ordinarily, the DRD is disallowed
if the corporate shareholder has not held the dividend-paying stock for more
than 45 days during the 90-day period beginning on the date that is 45 days
before the date on which such stock becomes ex-dividend with respect to such
dividend. Where the corporate shareholder receives dividends with respect to
stock having a preference in dividends which are attributable to a period or
periods aggregating in excess of 366 days, the DRD is disallowed if such stock
is not held for more than 90 days during the 180-day period beginning on the
date that is 90 days before the date on which such stock becomes ex-dividend
with respect to such dividend. For purposes of calculating the above holding
periods, the holding period begins on the day after the stock is acquired and
includes the day of disposition. However, the corporate shareholder's holding
period is reduced for any period in which (1) the corporate shareholder has
diminished its risk of loss by holding an option to sell, is under a contractual
obligation to sell, or has made, and not closed, a short sale of substantially
identical stock or securities, (2) the corporate shareholder is the grantor of
an option to buy substantially identical stock or securities, or (3) the
corporate shareholder has diminished its risk of loss by holding one or more
other positions with respect to substantially similar or related property as
prescribed in the Treasury Regulations.
DISPOSITIONS, INCLUDING REDEMPTIONS
Any sale, exchange, redemption (except as discussed below) or other
disposition of the Series B preference stock generally will result in taxable
gain or loss equal to the difference between the amount received and the
shareholder's adjusted tax basis in the Series B preference stock. Such gain or
loss generally will be capital gain or loss and will be long-term capital gain
or loss if the holding period for the Series B preference stock exceeds one
year.
In certain cases, a redemption of Series B preference stock may be treated
as a dividend, rather than as a payment in exchange for the Series B preference
stock. In such events, the redemption payment will be treated as ordinary
dividend income to the extent that such payment is made out of current or
accumulated earnings and profits, as calculated for United States federal income
tax purposes. The determination of whether the redemption will be treated as a
dividend rather than as payment in exchange for the Series B preference stock
will depend upon whether and to what extent the redemption reduces the holder's
percentage stock ownership interest in TXU Corp. A redemption will be treated as
an exchange of stock that produces a capital gain if the redemption either (1)
completely terminates the holder's interest in TXU Corp. under Section 302(b)(3)
of the Code, (2) is "substantially disproportionate" with respect to the holder
under Section 302(b)(2) of the Code, or (3) is "not essentially equivalent to a
dividend" under Section 302(b)(1) of the Code.
A redemption will completely terminate the holder's interest in TXU Corp.
as a result of the redemption if, as a result of the redemption, the holder no
longer has any stock interest in TXU Corp., directly or constructively after
application of the attribution rules of Section 302(c) of the Code. A redemption
will be "substantially disproportionate" with respect to the holder if (1) the
ratio of the voting stock owned by the holder (including stock attributed to the
holder under Section 302(c) of the Code) immediately after the redemption to all
the voting stock of TXU Corp. is less than 80% of the same ratio for the voting
stock owned by the holder immediately before the redemption, (2) there is a
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similar percentage reduction in the ownership by the holder of common stock of
TXU Corp., and (3) the holder owns less than 50% of the voting stock of TXU
Corp. Whether a redemption is "not essentially equivalent to a dividend" with
respect to a holder will depend upon the holder's particular circumstances. The
IRS has ruled that a minority shareholder in a publicly held corporation whose
relative stock interest is minimal and who exercises no control with respect to
corporate affairs is considered to have a "meaningful reduction" if such
shareholder has a reduction in its percentage stock ownership. In determining
whether any of the foregoing tests have been satisfied, the holder is deemed,
under the constructive ownership rules of Section 302(c) of the Code, to own any
shares in TXU Corp. owned by certain related persons and entities and any shares
which the holder or certain related persons and entities have an option to
acquire. However, because of the ambiguities in applying the foregoing rules,
you should consult your tax advisor to determine whether a redemption of Series
B preference stock will be treated as a dividend or as a payment in exchange for
the Series B preference stock. A distribution in redemption of Series B
preference stock that is treated as a dividend may also be considered an
extraordinary dividend under Section 1059 of the Code. See "Dividends Received
Deduction" above.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to payments of
dividends and the proceeds of sales of the Series B preference stock made to
holders other than certain exempt recipients (such as corporations). A 31%
backup withholding tax will apply to such payments if the holder (i) fails to
provide a taxpayer identification number ("TIN"), (ii) furnishes an incorrect
TIN, (iii) is notified by the IRS that it has failed to properly report payments
of interest and dividends, or (iv) under certain circumstances, fails to
certify, under penalty of perjury, that it has furnished a correct TIN and has
not been notified by the IRS that it is subject to backup withholding. In the
case of dividends paid after December 31, 2000, a holder generally will be
subject to backup withholding at a 31% rate unless certain IRS certification
procedures are complied with directly or through an intermediary.
Any amounts withheld under the backup withholding rules generally will be
allowed as a refund or credit against such holder's United States federal income
tax liability provided the required information is furnished to the IRS.
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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 Corp. has agreed to sell
to each of the underwriters, for whom Lehman Brothers Inc. is acting as the
representative, the number of shares of Series B preference stock listed
opposite its name below:
NUMBER OF SHARES OF
SERIES B
UNDERWRITER PREFERENCE STOCK
----------- ----------------
Lehman Brothers Inc..............................
----------------
Total.......................
================
The underwriting agreement provides that the obligations of the several
underwriters to pay for and accept delivery of the Series B preference stock 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 Series B preference stock offered in this issuance if any of
the Series B preference stock 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 Series B preference
stock 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 $ per share of Series B
preference stock under the public offering price. Any Underwriter may allow, and
the dealers may reallow, a concession not in excess of $ per share of Series B
preference stock to other underwriters or to other dealers. After the initial
offering of the Series B preference stock, 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.
TXU Corp.'s expenses associated with the offer and sale of the Series B
preference stock are estimated to be $ .
Prior to this offering, there has been no market for the Series B
preference stock. The underwriters have advised TXU Corp. that they intend to
make a market in the Series B preference stock 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 Series B preference
stock.
In order to facilitate the offering of the Series B preference stock, the
underwriters may engage in transactions that stabilize, maintain, or otherwise
affect the price of the Series B preference stock. Specifically, the
underwriters may over-allot in connection with the offering, creating a short
position in the Series B preference stock for their own account. In addition, to
cover over-allotments or to stabilize the price of the Series B preference
stock, the underwriters may bid for, and purchase, the Series B preference stock
in the open market. Finally, the underwriting syndicate may reclaim selling
concessions allowed to an underwriter or a dealer for distributing the Series B
preference stock in the offering, if the syndicate repurchases previously
distributed Series B preference stock 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 Series B preference stock
above independent market levels. The underwriters are not required to engage in
these activities, and may end any of these activities at any time.
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TXU Corp. has 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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APPENDIX A
AUCTION PROCEDURES
The following procedures will be set forth in provisions of the statement
of resolution relating to the Flexible Money Market Cumulative Preference Stock,
Series B (the "Shares"), and will be incorporated by reference in the agreement
between TXU Corp. and the Auction Agent and each agreement between
broker-dealers and the auction agent. The terms not defined below are defined in
the forepart of this prospectus supplement. Nothing contained in this Appendix A
constitutes a representation by TXU Corp. that in each Auction each party
referred to herein actually will perform the procedures described herein to be
performed by such party.
ADDITIONAL DEFINITIONS FROM PARAGRAPH 1 OF THE STATEMENT OF RESOLUTION
(a) "Applicable Rate" means, with respect to any Shares for any
Dividend Period therefor, the rate per annum at which cash dividends are payable
on such Shares for such Dividend Period.
(b) "Non-Payment Period" includes any Dividend Non-Payment Period and
Redemption Non-Payment Period.
(c) "Participant" means a participant of the Securities Depository
that will act on behalf of an Existing Holder, a beneficial owner, or a
Potential Holder or potential beneficial owner of one or more Shares.
(d) "Subsequent Period-End Dividend Payment Date," with respect to
each Subsequent Dividend Period, means the Business Day immediately succeeding
the last day of such Subsequent Dividend Period.
(e) "Substitute Rating Agency" and "Substitute Rating Agencies" mean a
nationally recognized statistical rating organization and two nationally
recognized statistical rating organizations, respectively, each term as defined
for purposes of Rule 436(g)(2) under the Securities Act of 1933, as amended,
selected by TXU Corp. after consultation with each Broker-Dealer, to act as the
substitute rating agency or substitute rating agencies, as the case may be, to
determine the credit ratings of the Shares.
PARAGRAPH 5(A) CERTAIN DEFINITIONS.
As used in this paragraph 5, the following terms shall have the following
meanings, unless the context otherwise requires:
(i) "Auction Date" means the first Business Day preceding the first
day of each Subsequent Dividend Period.
(ii) "Available Shares" has the meaning specified in paragraph 5(d)(i)
below.
(iii) "Bid" has the meaning specified in paragraph 5(b)(i) below.
(iv) "Bidder" has the meaning specified in paragraph 5(b)(i) below.
(v) "Hold Order" has the meaning specified in paragraph 5(b)(i) below.
(vi) "Maximum Applicable Rate" for any Subsequent Dividend Period will
be the Applicable Percentage of the Reference Rate. The "Applicable
Percentage" will be determined based on the lower of the credit rating or
ratings assigned on such date to the Shares by Moody's and S&P (or if
Moody's or S&P or both shall not make such rating available, the equivalent
of either or both of such ratings by a Substitute Rating Agency or two
Substitute Rating Agencies or, in the event that only one such rating shall
be available, such rating) as follows:
CREDIT RATING APPLICABLE
----------------------------------------- PERCENTAGE OF
MOODY'S S&P REFERENCE RATE
--------------------- ------------------ -------------------
"aa3" or higher AA- or Higher 150%
"a3" to "a1" A- to A+ 200%
"baa3" to "baa1" BBB- to BBB+ 250%
Below "baa3" Below BBB- 275%
<PAGE>
provided, however, that, if at 9:00 A.M., New York City time, on any
Auction Date, (i) the rating of any Shares by Moody's shall be on the
"Corporate Credit Watch List" of Moody's with a designation of "downgrade"
or "uncertain," (ii) the rating of any Shares by S&P shall be on the
"CreditWatch" of S&P with a designation of "negative implications" or
"developing" or (iii) if Moody's or S&P, or both, shall not make such a
rating available, the rating of any Shares by any Substitute Rating Agency
shall be on the substantial equivalent of clause (i) or (ii) above, then
the Maximum Applicable Rate for the Shares to which such Auction Date
relates will be determined pursuant to an Applicable Percentage based on
the credit rating that is one full level lower in the above table.
TXU Corp. shall take all reasonable action necessary to enable Moody's
and S&P (and, as appropriate, any Substitute Rating Agency or Substitute
Rating Agencies) to provide a rating for the Shares. If neither S&P nor
Moody's shall make such a rating available, TXU Corp., after consultation
with the Broker-Dealers or their affiliates and successors, shall select a
nationally recognized statistical rating organization or two nationally
recognized statistical rating organizations to act as a Substitute Rating
Agency or Substitute Rating Agencies, as the case may be.
(vii) "Order" has the meaning specified in paragraph 5(b)(i) below.
(viii)"Sell Order" has the meaning specified in paragraph 5(b)(i)
below.
(ix) "Shares" means the shares of Series B preference stock subject to
the related Auction pursuant to this paragraph 5.
(x) "Submission Deadline" means 1:00 P.M., New York City time, on any
Auction Date or such other time on the Auction Date as may be specified by
the Auction Agent from time to time as the time by which each Broker-Dealer
must submit to the Auction Agent in writing all Orders obtained by it for
the Auction to be conducted on such Auction Date.
(xi) "Submitted Bid" has the meaning specified in paragraph 5(d)(i)
below.
(xii) "Submitted Hold Order" has the meaning specified in paragraph
5(d)(i) below.
(xiii)"Submitted Order" has the meaning specified in paragraph 5(d)(i)
below.
(xiv) "Submitted Sell Order" has the meaning specified in paragraph
5(d)(i) below.
(xv) "Sufficient Clearing Bids" has the meaning specified in paragraph
5(d)(i) below.
(xvi) "Winning Bid Rate" has the meaning specified in paragraph
5(d)(i) below.
PARAGRAPH 5(B) ORDERS BY EXISTING HOLDERS AND POTENTIAL HOLDERS.
(i) Beneficial owners and potential beneficial owners may only participate
in Auctions through their Broker-Dealers. Broker-Dealers will submit the Orders
of their respective customers who are beneficial owners and potential beneficial
owners to the Auction Agent, designating themselves (unless otherwise permitted
by TXU Corp.) as Existing Holders in respect of Shares subject to Orders
submitted or deemed submitted to them by beneficial owners and as Potential
Holders in respect of Shares subject to Orders submitted to them by potential
beneficial owners. A Broker-Dealer may also hold Shares in its own account as a
beneficial owner or wish to purchase Shares for its own account as a potential
beneficial owner. A Broker-Dealer may thus submit Orders to the Auction Agent as
a beneficial owner or a potential beneficial owner and therefore participate in
an Auction as an Existing Holder or Potential Holder on behalf of both itself
and its customers.
Prior to the Submission Deadline on each Auction Date:
(A) each Existing Holder may submit to its Broker-Dealer information
by telephone or otherwise as to:
(1) the number of Outstanding Shares, if any, held by such
Existing Holder which such Existing Holder desires to continue to hold
without regard to the Applicable Rate for the next succeeding
Subsequent Dividend Period;
(2) the number of Outstanding Shares, if any, held by such
Existing Holder which such Existing Holder desires to continue to
hold, provided that the Applicable Rate for the next succeeding
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Subsequent Dividend Period shall not be less than the rate per annum
specified by such Existing Holder; and/or
(3) the number of Outstanding Shares, if any, held by such
Existing Holder which such Existing Holder offers to sell without
regard to the Applicable Rate for the next succeeding Subsequent
Dividend Period; and
(B) each Broker-Dealer will contact Potential Holders by telephone or
otherwise to determine whether such Potential Holders desire to submit Bids
in which such Potential Holders will indicate the number of Outstanding
Shares, if any, which each such Potential Holder offers to purchase,
provided that the Applicable Rate for the next succeeding Subsequent
Dividend Period shall not be less than the rate per annum specified by such
Holder.
For the purposes hereof, the communication by an Existing Holder pursuant
to clause (A) above or by a Potential Holder pursuant to clause (B) above to a
Broker-Dealer, or the communication by a Broker-Dealer acting for its own
account to the Auction Agent, of information referred to in clause (A) or (B) of
this paragraph 5(b)(i) is hereinafter referred to as an "Order" and each
Existing Holder and each Potential Holder placing an Order, including a
Broker-Dealer acting in such capacity for its own account, is hereinafter
referred to as a "Bidder"; an Order containing the information referred to in
clause (A)(1) of this paragraph 5(b)(i) is hereinafter referred to as a "Hold
Order"; an Order containing the information referred to in clause (A)(2) or (B)
of this paragraph 5(b)(i) is hereinafter referred to as a "Bid"; and an Order
containing the information referred to in clause (A)(3) of this paragraph
5(b)(i) is hereinafter referred to as a "Sell Order." Inasmuch as a
Broker-Dealer participates in an Auction as an Existing Holder or a Potential
Holder only to represent the interests of its customers or itself, the
provisions herein relating to the consequences of an Auction for Existing
Holders and Potential Holders also applies to the underlying beneficial
ownership interests represented thereby.
(ii) (A) A Bid by an Existing Holder shall constitute an irrevocable offer
to sell:
(1) the number of Outstanding Shares specified in such Bid if the
Applicable Rate determined on such Auction Date shall be less than the
rate per annum specified in such Bid; or
(2) such number or a lesser number of Outstanding Shares to be
determined as set forth in paragraph 5(e)(i)(D) if the Applicable Rate
determined on such Auction Date shall be equal to the rate per annum
specified therein; or
(3) a lesser number of Outstanding Shares to be determined as set
forth in paragraph 5(e)(ii)(C) if such specified rate per annum shall
be higher than the Maximum Applicable Rate and Sufficient Clearing
Bids do not exist.
(B) A Sell Order by an Existing Holder shall constitute an irrevocable
offer to sell:
(1) the number of Outstanding Shares specified in such Sell
Order; or
(2) such number or a lesser number of Outstanding Shares to be
determined as set forth in paragraph 5(e)(ii)(C) if Sufficient
Clearing Bids do not exist.
(C) A Bid by a Potential Holder shall constitute an irrevocable offer
to purchase:
(1) the number of Outstanding Shares specified in such Bid if the
Applicable Rate determined on such Auction Date shall be higher than
the rate per annum specified in such Bid; or
(2) such number or a lesser number of Outstanding Shares to be
determined as set forth in paragraph 5(e)(i)(E) if the Applicable Rate
determined on such Auction Date shall be equal to the rate per annum
specified therein.
PARAGRAPH 5(C) SUBMISSION OF ORDERS BY BROKER-DEALERS TO AUCTION AGENT.
(i) Each Broker-Dealer shall submit in writing or through the Auction
Agent's auction processing system to the Auction Agent prior to the Submission
Deadline on each Auction Date all Orders obtained by such Broker-Dealer for the
Auction to be conducted on such Auction Date, designating itself (unless
otherwise permitted by TXU Corp.) as an Existing Holder or a Potential Holder in
respect of Shares subject to such Orders, and specifying with respect to each
Order:
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(A) the name of the Bidder placing each Order (which shall be the
Broker-Dealer unless otherwise permitted by TXU Corp.);
(B) the aggregate number of Outstanding Shares that are the subject of
such Order;
(C) to the extent that such Bidder is an Existing Holder:
(1) the number of Outstanding Shares, if any, subject to any Hold
Order placed by such Existing Holder;
(2) the number of Outstanding Shares, if any, subject to any Bid
placed by such Existing Holder and the rate per annum specified in
such Bid; and
(3) the number of Outstanding Shares, if any, subject to any Sell
Order placed by such Existing Holder; and
(D) to the extent such Bidder is a Potential Holder, the rate per
annum specified in such Potential Holder's Bid.
(ii)If any rate per annum specified in any Bid contains more than three
figures to the right of the decimal point, the Auction Agent shall round such
rate up to the next highest one-thousandth (.001) of 1%.
(iii) If an Order or Orders covering in the aggregate all of the
Outstanding Shares held by an Existing Holder are not submitted to the Auction
Agent prior to the Submission Deadline for any reason (including the failure of
a Broker-Dealer to contact any Existing Holder or to submit an Order covering
such Existing Holder's Order or Orders), the Auction Agent shall deem a Hold
Order (in the case of an Auction relating to a Regular Dividend Period) or a
Sell Order (in the case of an Auction relating to a Special Dividend Period) to
have been submitted on behalf of such Existing Holder covering the number of
Outstanding Shares held by such Existing Holder and not subject to Orders
submitted to the Auction Agent.
(iv)If one or more Orders on behalf of an Existing Holder covering in the
aggregate more than the number of Outstanding Shares held by such Existing
Holder are submitted to the Auction Agent, such Order shall be considered valid
as follows and in the following order of priority:
(A) any Hold Order submitted on behalf of such Existing Holder shall
be considered valid up to and including the number of Outstanding Shares
held by such Existing Holder; provided that if more than one Hold Order is
submitted on behalf of such Existing Holder and the number of Shares
subject to such Hold Orders exceeds the number of Outstanding Shares held
by such Existing Holder, the number of Shares subject to each of such Hold
Orders shall be reduced pro rata so that such Hold Orders, in the
aggregate, will cover exactly the number of Outstanding Shares held by such
Existing Holder;
(B) (I) any Bids submitted on behalf of such Existing Holder shall be
considered valid, up to and including the excess of the number of
Outstanding Shares held by such Existing Holder over the number of Shares
subject to any Hold Order referred to in paragraph 5(c)(iv)(A) above; (II)
if more than one Bid submitted on behalf of such Existing Holder specifies
the same rate per annum and together they cover more than the remaining
number of Shares that can be the subject of valid Bids after application of
paragraph 5(c)(iv)(A) above and of subclause (I) of this paragraph
5(c)(iv)(B) to any Bid or Bids specifying a lower rate or rates per annum,
the number of Shares subject to each of such Bids shall be reduced pro rata
so that such Bids, in the aggregate, cover exactly such remaining number of
Shares; and (III) subject to subclauses (I) and (II) above, if more than
one Bid submitted on behalf of such Existing Holder specifies different
rates per annum, such Bids shall be considered valid in the ascending order
of their respective rates per annum and in any such event the number of
Shares, if any, subject to Bids not valid under this paragraph 5(c)(iv)(B)
shall be treated as the subject of a Bid by a Potential Holder; and
(C) any Sell Order shall be considered valid up to and including the
excess of the number of Outstanding Shares held by such Existing Holder
over the number of Shares subject to Hold Orders referred to in paragraph
5(c)(iv)(A) and valid Bids referred to in paragraph 5(c)(iv)(B); provided
that if more than one Sell Order is submitted on behalf of any Existing
Holder and the number of Shares subject to such Sell Orders is greater than
such excess, the number of Shares subject to each of such Sell Orders shall
be reduced pro rata so that such Sell Orders, in the aggregate, cover
exactly the number of Shares equal to such excess.
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(v) If more than one Bid is submitted on behalf of any Potential Holder,
each Bid submitted shall be a separate Bid with the rate per annum and number of
Shares specified.
(vi)Any Order submitted by an Existing Holder or a Potential Holder to its
Broker-Dealer, and any Order submitted by a Broker-Dealer to the Auction Agent,
prior to the Submission Deadline on any Auction Date, shall be irrevocable.
PARAGRAPH 5(D) DETERMINATION OF SUFFICIENT CLEARING BIDS, WINNING BID RATE AND
APPLICABLE RATE.
(i) Not earlier than the Submission Deadline on each Auction Date, the
Auction Agent shall assemble all Orders submitted or deemed submitted by the
Broker-Dealers (each such Order as submitted or deemed submitted by a
Broker-Dealer being hereinafter referred to individually as a "Submitted Hold
Order", a "Submitted Bid" or a "Submitted Sell Order", as the case may be, or as
a "Submitted Order") and shall determine:
(A) the excess of the total number of Outstanding Shares over the
number of Outstanding Shares that are the subject to Submitted Hold Orders
(such excess being hereinafter referred to as the "Available Shares");
(B) from the Submitted Orders whether the number of Outstanding Shares
that are the subject of Submitted Bids by Potential Holders specifying one
or more rates per annum equal to or lower than the Maximum Applicable Rate
exceeds or is equal to the sum of:
(1) the number of Outstanding Shares that are the subject of
Submitted Bids by Existing Holders specifying one or more rates per
annum higher than the Maximum Applicable Rate, and
(2) the number of Outstanding Shares that are subject to
Submitted Sell Orders
(if such excess or such equality exists (other than because the number of
Outstanding Shares in clause (1) above and this clause (2) are each zero
because all of the Outstanding Shares are the subject of Submitted Hold
Orders), such Submitted Bids by Potential Holders being hereinafter
referred to collectively as "Sufficient Clearing Bids"); and
(C) if Sufficient Clearing Bids exist, the lowest rate per annum
specified in the Submitted Bids (the "Winning Bid Rate") that, if:
(1) each Submitted Bid from Existing Holders specifying the
Winning Bid Rate and all other Submitted Bids from Existing Holders
specifying lower rates per annum were rejected, thus entitling such
Existing Holders to continue to hold the Shares that are the subject
of such Submitted Bids, and
(2) each Submitted Bid from Potential Holders specifying the
Winning Bid Rate and all other Submitted Bids from Potential Holders
specifying lower rates per annum were accepted, thus entitling the
Potential Holders to purchase the Shares that are the subject of such
Submitted Bids,
would result in the number of Shares subject to all Submitted Bids specifying
the Winning Bid Rate or a lower rate per annum being at least equal to the
Available Shares.
(ii)Promptly after the Auction Agent has made the determinations pursuant
to paragraph 5(d)(i), the Auction Agent shall advise TXU Corp. of the Maximum
Applicable Rate and, based on such determinations, the Applicable Rate for the
next succeeding Dividend Period as follows:
(A) if Sufficient Clearing Bids exist, that the Applicable Rate for
the next succeeding Subsequent Dividend Period shall be equal to the
Winning Bid Rate;
(B) if Sufficient Clearing Bids do not exist (other than because all
of the Outstanding Shares are the subject of Submitted Hold Orders), that
the Subsequent Dividend Period next succeeding the Auction shall
automatically be a Regular Dividend Period and the Applicable Rate for such
next succeeding Subsequent Dividend Period shall be equal to the Maximum
Applicable Rate; or
(C) if all of the Outstanding Shares are the subject of Submitted Hold
Orders, that the Subsequent Dividend Period next succeeding the Auction
shall automatically be a Regular Dividend Period and the Applicable Rate
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for such next succeeding Subsequent Dividend Period shall be equal to 59%
of the Reference Rate in effect on the date of such Auction.
PARAGRAPH 5(E) ACCEPTANCE AND REJECTION OF SUBMITTED BIDS AND SUBMITTED SELL
ORDERS AND ALLOCATION OF SHARES.
Based on the determinations made pursuant to paragraph 5(d)(i), the
Submitted Bids and Submitted Sell Orders shall be accepted or rejected and the
Auction Agent shall take such other action as set forth below:
(i) If Sufficient Clearing Bids have been made, subject to the
provisions of paragraph 5(e)(iii) and paragraph 5(e)(iv), Submitted Bids
and Submitted Sell Orders shall be accepted or rejected in the following
order of priority and all other Submitted Bids shall be rejected:
(A) the Submitted Sell Orders of Existing Holders shall be
accepted and the Submitted Bid of each of the Existing Holders
specifying any rate per annum that is higher than the Winning Bid Rate
shall be accepted, thus requiring each such Existing Holder to sell
the Outstanding Shares that are the subject of such Submitted Sell
Order or Submitted Bid;
(B) the Submitted Bid of each of the Existing Holders specifying
any rate per annum that is lower than the Winning Bid Rate shall be
rejected, thus entitling each such Existing Holder to continue to hold
the Outstanding Shares that are the subject of such Submitted Bid;
(C) the Submitted Bid of each of the Potential Holders specifying
any rate per annum that is lower than the Winning Bid Rate shall be
accepted, thus requiring each such Potential Holder to purchase the
Outstanding Shares subject to such Submitted Bid;
(D) the Submitted Bid of each of the Existing Holders specifying
a rate per annum that is equal to the Winning Bid Rate shall be
rejected, thus entitling each such Existing Holder to continue to hold
the Outstanding Shares that are the subject of such Submitted Bid,
unless the number of Outstanding Shares subject to all such Submitted
Bids shall be greater than the excess (the "Remaining Excess") of the
Available Shares over the number of Outstanding Shares subject to
Submitted Bids described in paragraph 5(e)(i)(B) and paragraph
5(e)(i)(C), in which event the Submitted Bids of each such Existing
Holder shall be accepted, and each such Existing Holder shall be
required to sell Outstanding Shares, but only in an amount equal to
the difference between (1) the number of Outstanding Shares then held
by such Existing Holder subject to such Submitted Bid and (2) the
number of Shares obtained by multiplying (x) the number of Remaining
Excess by (y) a fraction the numerator of which shall be the number of
Outstanding Shares held by such Existing Holder subject to such
Submitted Bid and the denominator of which shall be the sum of the
number of Outstanding Shares subject to such Submitted Bids made by
all such Existing Holders that specified a rate per annum equal to the
Winning Bid Rate; and
(E) the Submitted Bid of each of the Potential Holders specifying
a rate per annum that is equal to the Winning Bid Rate shall be
accepted but only in an amount equal to the number of Outstanding
Shares obtained by multiplying (x) the difference between the
Available Shares and the number of Outstanding Shares subject to
Submitted Bids described in paragraph 5(e)(i)(B), paragraph 5(e)(i)(C)
and paragraph 5(e)(i)(D) by (y) a fraction the numerator of which
shall be the number of Outstanding Shares subject to such Submitted
Bid and the denominator of which shall be the sum of the number of
Outstanding Shares subject to such Submitted Bids made by all such
Potential Holders that specified rates per annum equal to the Winning
Bid Rate.
(ii) If Sufficient Clearing Bids have not been made (other than
because all of the Outstanding Shares are subject to Submitted Hold
Orders), subject to the provisions of paragraph 5(e)(iii), Submitted Orders
shall be accepted or rejected as follows in the following order of priority
and all other Submitted Bids shall be rejected:
(A) the Submitted Bid of each Existing Holder specifying any rate
per annum that is equal to or lower than the Maximum Applicable Rate
shall be rejected, thus entitling such Existing Holder to continue to
hold the Outstanding Shares that are the subject of such Submitted
Bid;
(B) the Submitted Bid of each Potential Holder specifying any
rate per annum that is equal to or lower than the Maximum Applicable
Rate shall be accepted, thus requiring such Potential Holder to
purchase the Outstanding Shares that are the subject of such Submitted
Bid; and
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(C) the Submitted Bids of each Existing Holder specifying any
rate per annum that is higher than the Maximum Applicable Rate shall
be accepted and the Submitted Sell Orders of each Existing Holder
shall be accepted, in both cases only in an amount equal to the
difference between (1) the number of Outstanding Shares then held by
such Existing Holder subject to such Submitted Bid or Submitted Sell
Order and (2) the number of Shares obtained by multiplying (x) the
difference between the Available Shares and the aggregate number of
Outstanding Shares subject to Submitted Bids described in paragraph
5(e)(ii)(A) and paragraph 5(e)(ii)(B) by (y) a fraction the numerator
of which shall be the number of Outstanding Shares held by such
Existing Holder subject to such Submitted Bid or Submitted Sell Order
and the denominator of which shall be the number of Outstanding Shares
subject to all such Submitted Bids and Submitted Sell Orders.
(iii) If, as a result of the procedures described in paragraph 5(e)(i)
or paragraph 5(e)(ii), any Existing Holder would be entitled or required to
sell, or any Potential Holder would be entitled or required to purchase, a
fraction of a Share on any Auction Date, the Auction Agent shall, in such
manner as it shall determine in its sole discretion, round up or down the
number of Shares to be purchased or sold by any Existing Holder or
Potential Holder on such Auction Date so that each Outstanding Share
purchased or sold by each Existing Holder or Potential Holder on such
Auction Date shall be a whole Share.
(iv) If, as a result of the procedures described in paragraph 5(e)(i),
any Potential Holder would be entitled or required to purchase less than a
whole Share on any Auction Date, the Auction Agent shall, in such manner as
in its sole discretion it shall determine, allocate Shares for purchase
among Potential Holders so that only whole Shares are purchased on such
Auction Date by any Potential Holder, even if such allocation results in
one or more of such Potential Holders not purchasing any Shares on such
Auction Date.
(v) Based on the results of each Auction, the Auction Agent shall
determine, with respect to each Broker-Dealer that submitted Bids or Sell
Orders on behalf of Existing Holders or Potential Holders, the aggregate
number of Outstanding Shares to be purchased and the aggregate number of
the Outstanding Shares to be sold by such Potential Holders and Existing
Holders and, to the extent that such aggregate number of Outstanding Shares
to be purchased and such aggregate number of Outstanding Shares to be sold
differ, the Auction Agent shall determine to which other Broker-Dealer or
Broker-Dealers acting for one or more purchasers such Broker-Dealer shall
deliver, or from which other Broker-Dealer or Broker-Dealers acting for one
or more sellers such Broker-Dealer shall receive, as the case may be,
Outstanding Shares.
PARAGRAPH 5(F) SUSPENSION OF AUCTION DURING NON-PAYMENT PERIOD.
Upon occurrence and during the continuance of a Non-Payment Period with
respect to the Shares that has not been duly cured by TXU Corp. pursuant to
paragraph 2(b), Auctions of such Shares shall be suspended and shall not resume
in each case until (A) in the case of a Dividend Non-Payment Period, all
accumulated and unpaid dividends on such Shares for all past Dividend Periods
shall have been paid to the Auction Agent, or (B) in the case of a Redemption
Non-Payment Period in connection with an Optional Redemption of less than all of
the Shares, all amounts payable upon such Optional Redemption of such Shares
shall have been paid to the Auction Agent, in each case by 12:00 noon, New York
City time, on the relevant Auction Date with respect to such Shares, provided
that, at least two Business Days but no more than 30 days prior to such Auction
Date, TXU Corp. shall have given the Auction Agent, the Securities Depository
and the applicable holders of record written notice of such deposit or
availability.
PARAGRAPH 5(G) MISCELLANEOUS.
TXU Corp. may interpret the provisions of this paragraph 5 to resolve any
inconsistency or ambiguity, remedy any formal defect or make any other change or
modification that does not substantially adversely affect the rights of Existing
Holders of Shares. An Existing Holder (A) may sell, transfer or otherwise
dispose of Shares only pursuant to a Bid or Sell Order in accordance with the
procedures described in this paragraph 5 through a Broker-Dealer, except that
transfers of Shares may also be effected through means other than pursuant to
Auctions provided that each such transfer shall be valid and accepted by the
Auction Agent only if such Existing Holder or its Broker-Dealer or Participant,
as applicable, shall have advised the Auction Agent in writing of such transfer
by 3:00 P.M. on the Business Day next preceding the Auction Date with respect to
such Shares, and (B) except as otherwise required by law, shall have the
ownership of the Shares held by it maintained in book-entry form by the
Securities Depository in the account of its Participant, which in turn will
maintain records of such Existing Holder's beneficial ownership. Neither TXU
Corp. nor any Affiliate shall submit an Order in any Auction. Any Existing
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Holder that is an Affiliate shall not sell, transfer or otherwise dispose of
Shares to any Person other than TXU Corp. All of the Outstanding Shares shall be
represented by one or more certificates registered in the name of the nominee of
the Securities Depository unless otherwise required by law or unless there is no
Securities Depository. If there is no Securities Depository, at TXU Corp.'s
option and upon its receipt of such documents as it deems appropriate, such
Shares may be registered in the stock register in the name of the Existing
Holder thereof and such Existing Holder thereupon will be entitled to receive
certificates therefor and required to deliver certificates therefor upon
transfer or exchange thereof.
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APPENDIX B
SETTLEMENT PROCEDURES
The following summary of Settlement Procedures sets forth the procedures
expected to be followed in connection with the settlement of each Auction and
will be incorporated by reference in the agreement between TXU Corp. and the
Auction Agent and each agreement between TXU Corp. and each Broker-Dealer.
Nothing contained in this Appendix B constitutes a representation by TXU Corp.
that in each Auction each party referred to herein actually will perform the
procedures described herein to be performed by such party. Capitalized terms
used herein shall have the respective meanings specified in the prospectus
supplement or Appendix A hereto, as the case may be.
I. On each Auction Date, the Auction Agent shall notify by telephone or
through the Auction Agent's Auction Processing System the Broker-Dealers that
participated in the Auction held on such Auction Date and submitted an Order on
behalf of any Existing Holder or Potential Holder of:
(A) the Applicable Rate fixed for the next succeeding Dividend Period;
(B) whether Sufficient Clearing Bids existed for the determination of
the Applicable Rate;
(C) if such Broker-Dealer (a "Seller's Broker-Dealer") submitted a Bid
or a Sell Order on behalf of an Existing Holder, the number of Shares, if
any, to be sold by such Existing Holder;
(D) if such Broker-Dealer (a "Buyer's Broker-Dealer") submitted a Bid
on behalf of a Potential Holder, the number of Shares, if any, to be
purchased by such Potential Holder.
(E) if the aggregate number of Shares to be sold by all Existing
Holders on whose behalf such Broker-Dealer submitted a Bid or a Sell Order
exceeds the aggregate number of Shares to be purchased by all Potential
Holders on whose behalf such Broker-Dealer submitted a Bid, the name or
names of one or more Buyer's Broker-Dealers (and the name of the
Participant, if any, of each such Buyer's Broker-Dealer) acting for one or
more purchasers of such excess number of Shares and the number of such
Shares to be purchased from one or more Existing Holders on whose behalf
such Broker-Dealer acted by one or more Potential Holders on whose behalf
each of such Buyer's Broker-Dealers acted;
(F) if the aggregate number of shares to be purchased by all Potential
Holders on whose behalf such Broker-Dealer submitted a bid exceeds the
aggregate number of Shares to be sold by all Existing Holders on whose
behalf such Broker-Dealer submitted a Bid or a Sell Order, the name or
names of one or more Seller's Broker-Dealers (and the name of the
Participant, if any, of each such Seller's Broker-Dealer) acting for one or
more sellers of such excess number of Shares and the number of such Shares
to be sold to one or more Potential Holder on whose behalf such
Broker-Dealer acted by one or more Existing Holders on whose behalf each of
such Seller's Broker-Dealers acted; and
(G) the Auction Date of the next succeeding Auction with respect to
the Shares.
II. On each Auction Date, each Broker-Dealer that submitted an Order on
behalf of any Existing Holder or Potential Holder shall:
(A) in the case of a Broker-Dealer that is a Buyer's Broker-Dealer,
instruct each Potential Holder on whose behalf such Broker-Dealer submitted
a Bid that was accepted, in whole or in part, to instruct such Potential
Holder's Participant to pay to such Broker-Dealer (or its Participant)
through the Securities Depository the amount necessary to purchase the
number of Shares to be purchased pursuant to such Bid against receipt of
such Shares and advise such Potential Holder of the Applicable Rate for the
next succeeding Dividend Period;
(B) in the case of a Broker-Dealer that is a Seller's Broker-Dealer,
instruct each Existing Holder on whose behalf such Broker-Dealer submitted
a Sell Order that was accepted, in whole or in part, or a Bid that was
accepted, in whole or in part, to instruct such Existing Holder's
Participant to deliver to such Broker-Dealer (or its Participant) through
the Securities Depository the number of Shares to be sold pursuant to such
<PAGE>
Order against payment therefor and advise any such Existing Holder that
will continue to hold Shares at the Applicable Rate for the next succeeding
Dividend Period;
(C) advise each Existing Holder on whose behalf such Broker-Dealer
submitted a Hold Order of the Applicable Rate for the next succeeding
Dividend Period;
(D) advise each Existing Holder on whose behalf such Broker-Dealer
submitted an Order of the Auction Date for the next succeeding Auction; and
(E) advise each Potential Holder on whose behalf such Broker-Dealer
submitted a Bid that was accepted, in whole or in part, of the Auction Date
for the next succeeding Auction.
III. On the basis of the information provided to it pursuant to (I) above,
each Broker-Dealer that submitted a Bid or a Sell Order on behalf of a Potential
Holder or an Existing Holder shall, in such manner and at such time or times as
in its sole discretion it may determine, allocate any funds received by it
pursuant to (II)(A) above and any Shares received by it pursuant to (II)(B)
above among the Potential Holders, if any, on whose behalf such Broker-Dealer
submitted Bids, the Existing Holders, if any, on whose behalf such Broker-Dealer
submitted Bids that were accepted or Sell Orders, and any Broker-Dealer or
Broker-Dealers identified to it by the Auction Agent pursuant to (I)(E) or
(I)(F) above.
IV. On each Auction Date:
(A) each Potential Holder and Existing Holder shall instruct its
Participant as provided in (II)(A) or (B) above, as the case may be;
(B) each Seller's Broker-Dealer which is not a Participant of the
Securities Depository shall instruct its Participant to (1) pay through the
Securities Depository to the Participant of the Existing Holder delivering
Shares to such Broker-Dealer pursuant to (II)(B) above the amount necessary
to purchase such Shares against receipt of such Shares, and (2) deliver
such Shares through the Securities Depository to a Buyer's Broker-Dealer
(or its Participant) identified to such Seller's Broker-Dealer pursuant to
(I)(E) above against payment therefor; and
(C) each Buyer's Broker-Dealer which is not a Participant of the
Securities Depository shall instruct its Participant to (1) pay through the
Securities Depository to a Seller's Broker-Dealer (or its Participant)
identified pursuant to (I)(F) above the amount necessary to purchase the
Shares to be purchased pursuant to (II)(A) above against receipt of such
Shares, and (2) deliver such Shares through the Securities Depository to
the Participant of the purchaser thereof against payment therefor.
V. On the day after the Auction Date:
(A) each Bidder's Participant referred to in (IV)(A) above shall
instruct the Securities Depository to execute the transactions described in
(II)(A) or (B) above, and the Securities Depository shall execute such
transactions;
(B) each Seller's Broker-Dealer or its Participant shall instruct the
Securities Depository to execute the transactions described in (IV)(B)
above, and the Securities Depository shall execute such transactions; and
(C) each Buyer's Broker-Dealer or its Participant shall instruct the
Securities Depository to execute the transactions described in (IV)(C)
above, and the Securities Depository shall execute such transactions.
VI. If an Existing Holder selling Shares in an Auction fails to deliver
such Shares (by authorized book-entry), a Broker-Dealer may deliver to the
Potential Holder on behalf of which it submitted a Bid that was accepted a
number of whole Shares that is less than the number of Shares that otherwise was
to be purchased by such Potential Holder. In such event, the number of Shares to
be so delivered shall be determined solely by such Broker-Dealer. Delivery of
such lesser number of Shares shall constitute good delivery. Notwithstanding the
foregoing terms of this paragraph (VI), any delivery or non-delivery of Shares
which shall represent any departure from the results of an Auction, as
determined by the Auction Agent, shall be of no effect unless and until the
Auction Agent shall have been notified of such delivery or non-delivery in
accordance with the provisions of the Auction Agent Agreement and the
Broker-Dealer Agreements.
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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.
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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.
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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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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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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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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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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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Shares
TXU Corp.
Flexible Money Market Cumulative Preference Stock (MMP(R)),
Series B (Liquidation Preference $100,000 per Share)
--------------------------------------
PROSPECTUS SUPPLEMENT
June , 2000
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LEHMAN BROTHERS
