Registration No. 33-63031 and 33-63031-01
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
Amendment No. 2
to
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------------
TEXAS UTILITIES ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
Texas 4911 75-1837355
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification
incorporation or Classification No.)
organization) Code Number)
TU ELECTRIC CAPITAL I
(Exact name of registrant as specified in its charter)
Delaware To Be Applied For
(State of incorporation 1601 Bryan Street (I.R.S. Employer
or organization) Dallas, Texas 75201 Identification No.)
(214) 812-4600
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
ROBERT A. WOOLDRIDGE, Esq. PETER B. TINKHAM ROBERT J. REGER, JR.
Worsham, Forsythe Texas Utilities Electric Esq.
& Wooldridge, L.L.P. Company Reid & Priest LLP
1601 Bryan Street Secretary 40 West 57th Street
Dallas, Texas 75201 1601 Bryan Street New York, New York
(214) 979-3000 Dallas, Texas 75201 10019
(214) 812-4600 (212) 603-2000
(Names and addresses, including zip codes, and telephone numbers, including
area codes, of agents for service)
-------------------------------------
It is respectfully requested that the Commission send copies of all
notices, orders and communications to:
STEPHEN K. WAITE, Esq.
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004-1490
(212) 858-1000
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CALCULATION OF REGISTRATION FEE
==========================================================================
TITLE PROPOSED
OF EACH MAXIMUM PROPOSED
CLASS OF OFFERING MAXIMUM
SECURITIES AMOUNT PRICE AGGREGATE AMOUNT OF
TO BE TO BE PER OFFERING REGISTRATION
REGISTERED REGISTERED UNIT(1) PRICE(1)(2) FEE
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TU ELECTRIC
CAPITAL I
TRUST
ORIGINATED
PREFERRED
SECURITIES.... 14,273,000 $24.538 $350,230,874 $120,769.27
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TEXAS
UTILITIES
ELECTRIC
COMPANY
GUARANTEE
AND OTHER
OBILIGATIONS
WITH RESPECT
TO TU ELECTRIC
CAPITAL I
TRUST
ORIGINATED
PREFERRED
SECURITIES(2)..
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TEXAS
UTILITIES
ELECTRIC
COMPANY
JUNIOR
SUBORDINATED
DEBENTURES,
SERIES A(4)....
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f)(1) based on the weighted average of the
average high and low prices on the New York Stock Exchange for Texas
Utilities Electric Company $1.875 Depositary Shares and $1.805
Depositary Shares on September 25, 1995.
(2) Exclusive of accrued distributions, if any.
(3) No separate consideration will be received for the Texas Utilities
Electric Company Guarantee and such other obligations.
(4) The Junior Subordinated Debentures will be issued to TU Electric
Capital I in exchange for the Preferred Securities and the Common
Securities of TU Electric Capital I that are not registered hereunder.
No separate consideration will be received for the Junior Subordinated
Debentures.
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<PAGE>
TEXAS UTILITIES ELECTRIC COMPANY
TU ELECTRIC CAPITAL I
Cross Reference Sheet
Pursuant to Item 501(b) of Regulation S-K Showing Location
in Prospectus of Items of Form S-4
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of the Registration Facing Page of Registration
Statement and Outside Front Statement; Cross Reference
Cover Page of Prospectus..... Sheet; Outside Front
2. Inside Front and Outside Inside Front Cover Page of
Back Cover Pages of Prospectus; Outside Back
Prospectus................... Cover Page of Prospectus;
Incorporation of Certain
Documents by Reference;
Available Information; Table
of Contents
3. Risk Factors, Ratio of Prospectus Summary; Risk
Earnings to Fixed Charges, Factors; Listing and Trading
and Other Information........ of Preferred Securities and
Depositary Shares; The
Company; Selected Financial
Information
4. Terms of the Transaction..... The Exchange Offer;
Description of the Preferred
Securities; Description of the
Guarantee; Description of the
Junior Subordinated
Debentures; Certain United
States Federal Income Tax
Considerations
5. Pro Forma Financial
Information.................. Not Applicable
6. Material Contacts with
the Company Being Acquired... Not Applicable
7. Additional Information Not Applicable
Required for Reoffering by
Persons and Parties Deemed
to be Underwriters...........
8. Interests of Named Experts Experts
and Counsel..................
9. Disclosure of Commission Part II of the Registration
Position on Indemnification Statement, Item 22.
for Securities Act Liabilities Undertakings
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect Not Applicable
to S-3 Registrants...........
11. Incorporation of Certain Incorporation of Certain
Information by Reference..... Documents by Reference
12. Information with Respect Not Applicable
to S-2 or S-3 Registrants....
13. Incorporation of Certain Not Applicable
Information by Reference.....
14. Information with Respect Not Applicable
to Registrants Other Than
S-3 or S-2 Registrants.......
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect Not Applicable
to S-3 Companies.............
16. Information with Respect Not Applicable
to S-2 or S-3 Companies......
17. Information with Respect Not Applicable
to Companies Other Than
S-3 or S-2 Companies.........
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Not Applicable
Consents or Authorizations
Are To Be Solicited..........
19. Information if Proxies, Incorporation of Certain
Consents or Authorizations Documents by Reference
Are Not to Be Solicited or
in an Exchange Offer.........
<PAGE>
TEXAS UTILITIES ELECTRIC COMPANY
OFFER TO EXCHANGE FOR ANY OR ALL OF ITS
7,659,300 6,613,700
$1.875 Depositary Shares, $1.805 Depositary Shares,
Series A Series B
each representing 1/4 share of each representing 1/4 share of
$7.50 Cumulative Preferred Stock $7.22 Cumulative Preferred Stock
CUSIP 882850 44 9 CUSIP 882850 41 5
either
TU ELECTRIC CAPITAL I or Cash Only
% Trust Originated Preferred in the amount of
SecuritiesSM (TOPrSSM) $XX.XX for each $1.875
(liquidation preference $25.00 Depositary Share
per Preferred Security $XX.XX for each $1.805
and guaranteed to the extent set forth Depositary Share
herein by Texas Utilities Electric Company)
plus a cash component of
$X.XX for each $1.875 Depositary Share
$X.XX for each $1.805 Depositary Share
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME ON , 1995,
UNLESS THE EXCHANGE OFFER IS EXTENDED
Texas Utilities Electric Company (Company) hereby offers to exchange
for any and all of (A) its 7,659,300 outstanding Depositary Shares, Series
A, each representing 1/4 share of $7.50 Cumulative Preferred Stock ($1.875
Depositary Shares) and (B) its 6,613,700 outstanding Depositary Shares,
Series B, each representing 1/4 share of $7.22 Cumulative Preferred Stock
($1.805 Depositary Shares, hereinafter from time to time, together with the
$1.805 Depositary Shares, referred to as the Depositary Shares) either %
Trust Originated Preferred Securities (TOPrS SM) issued by and representing
undivided preferred beneficial interests (Preferred Securities) in the
assets of TU Electric Capital I, a Delaware statutory business trust (TU
Electric Capital) plus an additional cash component, or cash only, upon the
terms and subject to the conditions set forth in this Prospectus and the
accompanying Letter of Transmittal with respect to each series of
Depositary Shares (each a Letter of Transmittal), which together with this
Prospectus, constitutes the Exchange Offer.
At the option of the Holder thereof, the Company will exchange each
Depositary Share validly tendered and accepted by the Company for the
following consideration: either Preferred Securities with a liquidation
preference of $25.00 plus a cash component of $ or cash only in the
amount of $ for each $1.875 Depositary Share; and either Preferred
Securities with a liquidation preference of $25.00 plus a cash component of
$ or cash only in the amount of $ for each $1.805 Depositary Share.
In addition, as part of the Exchange Offer, the Holders (as defined herein)
of Depositary Shares accepted for exchange will be entitled to receive cash
equal to the accrued and unpaid dividends on such shares accumulating after
________, 1995 to the Closing Date (as defined herein), in lieu of such
dividends, on their Depositary Shares accepted for exchange, such amount,
without interest (Payment in Lieu of Accumulated Dividends), to be payable
on the Closing Date.
Holders of Depositary Shares may participate in the Exchange Offer by
properly completing and signing the applicable Letter of Transmittal and
tendering their Depositary Shares in accordance with the instructions
contained in THE EXCHANGE OFFER -- "Procedures for Tendering" herein and in
such Letter of Transmittal on or prior to the Expiration Date (as defined
herein). A Holder of Depositary Shares who desires to tender such shares
and whose certificates for such shares are not immediately available, or
who cannot comply in a timely manner with the procedure for book-entry
transfer, may tender such shares by following procedures for guaranteed
delivery set forth in THE EXCHANGE OFFER -- "Procedures for Tendering --
Guaranteed Delivery." Tenders of Depositary Shares of either series
pursuant to the Exchange Offer may be withdrawn from the Exchange Offer at
any time on or prior to the Expiration Date with respect to such series,
and, unless the Company has accepted such Depositary Shares for exchange,
at any time after December __, 1995. Depositary Shares that have been
withdrawn may be retendered prior to the Expiration Date with respect to
such series for exchange for the same or a different form of offered
consideration.
For a description of the other terms of the Exchange Offer, see THE
EXCHANGE OFFER -- "Terms of the Exchange Offer"; "Expiration Date;
Extensions; Amendments; Termination"; and "Withdrawal of Tenders" herein;
and the applicable Letter of Transmittal for each series of Depositary
Shares. The Company expressly reserves the right to extend, amend or
modify the terms of the Exchange Offer with respect to the Depositary
Shares of either series, and not to accept for exchange Depositary Shares
of either series at any time on or prior to the Expiration Date with
respect to such series, for any reason, including, without limitation, if
fewer than 100,000 Depositary Shares of such series would remain
outstanding upon acceptance of those tendered (which condition may be
waived by the Company). The Company has not set a date beyond which the
Exchange Offer will not be extended. See THE EXCHANGE OFFER -- "Expiration
Date; Extensions; Amendments; Termination."
SEE RISK FACTORS BEGINNING ON PAGE __ FOR CERTAIN INFORMATION RELEVANT
TO THE EXCHANGE OFFER AND AN INVESTMENT IN THE PREFERRED SECURITIES,
INCLUDING THE PERIOD AND CIRCUMSTANCES DURING AND UNDER WHICH PAYMENT OF
DISTRIBUTIONS ON THE PREFERRED SECURITIES MAY BE DEFERRED AND CERTAIN
RELATED FEDERAL INCOME TAX CONSEQUENCES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
The Dealer Managers for the Exchange Offer are:
MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
SMITH BARNEY INC.
---------------------
The date of this Prospectus is November__, 1995.
SM "Trust Originated Preferred Securities" and "TOPrS" are service marks of
Merrill Lynch & Co.
(cover continued on following page)
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the Registration Statement
becomes effective. This prospectus shall not constitute an offer to sell
or the solicitation of an offer to buy nor shall there be any sale of these
securities in any jurisdiction in which such offer, solicitation, or sale
would be unlawful prior to registration or qualification under the
securities laws of any such jurisdiction.
<PAGE>
The Company, a Texas corporation, is the owner of the undivided common
beneficial interests in the assets of TU Electric Capital (Common
Securities, together with the Preferred Securities herein referred to as
the Trust Securities). The Bank of New York and The Bank of New York
(Delaware) are the Property Trustee and the Delaware Trustee, respectively,
and three individuals, who are employees of the Company or its affiliates
are the Administrative Trustees of TU Electric Capital. TU Electric Capital
exists for the sole purpose of issuing Trust Securities to the Company in
exchange for, and holding as trust assets, % Junior Subordinated
Debentures, Series A, due ____________, 2030 issued by the Company (Junior
Subordinated Debentures) in an aggregate principal amount equal to the
aggregate liquidation preference of the Trust Securities. The Preferred
Securities will have a preference under certain circumstances with respect
to cash distributions and amounts payable on liquidation, redemption or
otherwise over the Common Securities. See DESCRIPTION OF THE PREFERRED
SECURITIES -- "Subordination of Common Securities."
Holders of the Preferred Securities will be entitled to receive
cumulative cash distributions accruing from the date of original issuance
and payable quarterly in arrears on the last day of March, June, September
and December of each year, commencing , 1995, at the per annum
rate of % of the liquidation preference amount thereof. Interest on
the Junior Subordinated Debentures is the sole source of income for TU
Electric Capital from which payment of distributions on the Preferred
Securities can be made. The Company has the right to defer payments of
interest on the Junior Subordinated Debentures by extending the interest
payment period thereon at any time for up to 20 consecutive quarters (each
such extended payment period, an Extension Period), provided that the
aggregate interest payment period, as so extended, may not exceed 20
consecutive quarterly interest payment periods or extend beyond the
maturity of the Junior Subordinated Debentures. Upon the termination of
any Extension Period and the payment of all amounts then due, including
interest on deferred interest payments, the Company may elect a new
Extension Period, subject to the above requirements.
If interest payments are so deferred, distributions on the Preferred
Securities will also be deferred to such extent. During an Extension
Period, distributions will continue to accrue, and Holders of Preferred
Securities will be required to accrue income for United States federal
income tax purposes. Cash distributions in arrears will bear interest
thereon at the rate per annum of % of the liquidation preference amount
of $25 per Preferred Security (to the extent permitted by applicable law),
compounded quarterly. See DESCRIPTION OF THE JUNIOR SUBORDINATED
DEBENTURES -- "Option to Extend Interest Payment Period" and CERTAIN UNITED
STATES FEDERAL INCOME TAX CONSEQUENCES -- "Original Issue Discount."
During an Extension Period, the Company may not declare or pay dividends on
(other than dividends paid in shares of Common Stock of the Company) or
redeem or acquire, any of its capital stock, redeem any indebtedness that
is pari passu with the Junior Subordinated Debentures or make any guarantee
payment with respect to the foregoing. Any Extension Period with respect
to payment of interest on the Junior Subordinated Debentures, other Debt
Securities (as defined herein) or on any similar securities will apply to
all such securities and will also apply to distributions with respect to
the Preferred Securities and all other securities with terms substantially
the same as the Preferred Securities. Based upon the Company's current
financial condition and, in light of the restriction on payment of
dividends on the Company's securities during an Extension Period, the
Company believes that an extension of a distribution payment period on the
Preferred Securities is currently unlikely and has no current intention to
cause such an extension. See DESCRIPTION OF THE PREFERRED SECURITIES --
"Distributions."
The payment of distributions out of moneys held by TU Electric Capital
and payments on liquidation of TU Electric Capital or the redemption of
Preferred Securities, as set forth below, are guaranteed by the Company to
the extent TU Electric Capital has sufficient funds available to make such
payments (Guarantee). See DESCRIPTION OF THE GUARANTEE. If the Company
fails to make interest payments on the Junior Subordinated Debentures held
by TU Electric Capital, TU Electric Capital will have insufficient funds to
pay distributions on the Preferred Securities. The Guarantee does not
cover payment of distributions when TU Electric Capital does not have
sufficient funds to pay such distributions. In such event, the Holders of
Preferred Securities would be required to rely on enforcement of the rights
of TU Electric Capital under the Junior Subordinated Debentures held by TU
Electric Capital. The Company's obligations under the Guarantee are
subordinate and junior in right of payment to all other liabilities of the
Company except any liabilities that may be made pari passu expressly by
their terms. The Company may organize trusts similar to TU Electric
Capital for the purpose of issuing securities similar to the Preferred
Securities. It is expected that junior subordinated debentures or other
Debt Securities of the Company that are pari passu with the Junior
Subordinated Debentures will be issued in connection with the issuance of
any such securities. Any extension period with respect to any such junior
subordinated debentures of the Company will apply to the Junior
Subordinated Debentures, any other Debt Securities, any similar securities,
the Preferred Securities and any securities substantially the same as the
Preferred Securities.
The Preferred Securities are subject to mandatory redemption upon
repayment of the Junior Subordinated Debentures at maturity or upon their
earlier redemption. See DESCRIPTION OF THE PREFERRED SECURITIES --
"Redemption Procedures." The Company will have the option at any time on or
after upon not less than 45 days' notice, to redeem the
Junior Subordinated Debentures, in whole or in part. The Company also will
have the right at any time, upon the occurrence of a Tax Event (as defined
herein), to cause the termination of TU Electric Capital and, in connection
therewith, after satisfaction of creditors of TU Electric Capital, if any,
to distribute Junior Subordinated Debentures to the Holders of Preferred
Securities or, under certain circumstances, to redeem, in whole or in part,
the Junior Subordinated Debentures. Any redemption of the Preferred
Securities and the Common Securities by TU Electric Capital will be, upon
not less than 30 days' nor more than 60 days' notice to the Holders
thereof, in amounts having an aggregate liquidation preference equal to the
aggregate principal of Junior Subordinated Debentures to be redeemed at a
redemption price of 100% of such liquidation preference amount, plus
accrued and unpaid distributions and interest thereon, if any, to the
redemption date. Each class of the Trust Securities will be redeemed in
proportion to the percentage they represent of all the Trust Securities.
See DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES -- "Optional
Redemption"; also, for a comparison of the redemption terms of the
Preferred Securities and the Depositary Shares, see PROSPECTUS SUMMARY --
"Comparison of Preferred Securities and Depositary Shares."
The Junior Subordinated Debentures are subordinated and junior in
right of payment to all Senior Indebtedness (as defined herein) of the
Company. As of June 30, 1995, the Company had approximately $7.8 billion of
principal amount of indebtedness for borrowed money and capital lease
obligations constituting Senior Indebtedness (as defined herein). See
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES -- "Subordination" and
DESCRIPTION OF THE PREFERRED SECURITIES.
In the event of the liquidation of TU Electric Capital, the Holders of
the Trust Securities will be entitled to receive Junior Subordinated
Debentures in an aggregate principal amount of $25.00 for each security or,
in certain circumstances, a liquidation preference of $25 for each
security, plus accrued and unpaid distributions thereon to the date of
payment, subject to certain limitations. See DESCRIPTION OF THE PREFERRED
SECURITIES -- "Liquidation Distribution upon Termination."
Application will be made to list the Preferred Securities on the New
York Stock Exchange (NYSE).
The Depositary Shares are listed and principally traded on the NYSE.
On September 27, 1995, the last full day of trading prior to the first
public announcement of the proposal to make the Exchange Offer, the closing
sales prices of the Depositary Shares on the NYSE, as reported on the
composite tape, were $24.625 per $1.875 Depositary Share and $24.25
per $1.805 Depositary Share, respectively. On , 1995, the last
full day of trading prior to the commencement of the Exchange Offer, the
closing prices on the NYSE, as reported on the composite tape, were $
per $1.875 Depositary Share and $ per $1.805 Depositary Share,
respectively. Holders of the Depositary Shares are urged to obtain current
market quotations for such Depositary Shares. To the extent that the
aggregate market value of the Depositary Shares of either series tendered
and accepted in the Exchange Offer results in the number of Holders of
outstanding Depositary Shares of such series to be less than 100,000, the
Company would be required to delist the Depositary Shares of such series
from the NYSE pursuant to NYSE rules and regulations and the trading market
for untendered Depositary Shares of such series could be adversely
affected. See LISTING AND TRADING OF PREFERRED SECURITIES AND DEPOSITARY
SHARES.
For United States federal income tax purposes, the exchange of
Depositary Shares for either Preferred Securities and a cash component or
for cash only pursuant to the Exchange Offer will be a taxable transaction.
In addition, the Junior Subordinated Debentures will be treated as having
been issued with original issue discount (OID) which will require Holders
of Preferred Securities to include their pro rata share of OID in gross
income as it accrues on the Junior Subordinated Debentures in advance of
the receipt of cash. For a discussion of these and other United States
federal income tax considerations relevant to the Exchange Offer, see
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES.
The Preferred Securities constitute a new issue of securities with no
established trading market. While the Company will apply to have the
Preferred Securities listed on the NYSE, there can be no assurance that an
active trading market for the Preferred Securities will develop or be
sustained in the future.
Merrill Lynch & Co., Goldman, Sachs & Co., Lehman Brothers and Smith
Barney Inc. have been retained as Dealer Managers to solicit tenders of
Depositary Shares pursuant to the Exchange Offer. See THE EXCHANGE
OFFER -- "Dealer Managers." The Dealer Managers may receive
additional compensation if they also perform services as a
Soliciting Dealer (as defined herein). See the next paragraph
and FEES AND EXPENSES; TRANSFER TAXES.
Subject to the receipt of a properly completed and duly executed
Notice of Solicited Tenders as described herein, the Company will pay to
any Soliciting Dealer a solicitation fee of $ per Depositary Share
validly tendered, accepted by the Company and exchanged for a Preferred
Security plus cash or $ per Depositary Share validly tendered,
accepted by the Company and exchanged for cash only, in each case pursuant
to the Exchange Offer. See FEES AND EXPENSES; TRANSFER TAXES.
D.F. King & Co. Inc. has been retained to act as Information Agent and
has been retained to act as Exchange Agent to assist
with the Exchange Offer.
Questions and requests for assistance may be directed to the Dealer
Managers or the Information Agent as set forth on the back cover of this
Prospectus. Requests for additional copies of this Prospectus, any Letter
of Transmittal and the Notice of Guaranteed Delivery may be directed to the
Information Agent.
<PAGE>
TABLE OF CONTENTS
Page
----
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . . . . . . . . . 4
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 4
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
TU ELECTRIC CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SUMMARY FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . 19
RATE PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
THE EXCHANGE OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . 21
LISTING AND TRADING OF PREFERRED SECURITIES AND DEPOSITARY SHARES . . . 28
FEES AND EXPENSES; TRANSFER TAXES . . . . . . . . . . . . . . . . . . . 29
DESCRIPTION OF THE PREFERRED SECURITIES . . . . . . . . . . . . . . . . 30
DESCRIPTION OF THE GUARANTEE . . . . . . . . . . . . . . . . . . . . . 39
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES . . . . . . . . . . . 41
DESCRIPTION OF CERTAIN TERMS OF THE DEPOSITARY SHARES . . . . . . . . . 50
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES . . . . . . . . . 51
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
LEGALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
-----------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE EXCHANGE OFFER, OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MAY NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY TU
ELECTRIC CAPITAL, THE COMPANY, THE TRUSTEES OR THE DEALER MANAGERS.
NEITHER TU ELECTRIC CAPITAL NOR THE COMPANY IS AWARE OF ANY JURISDICTION IN
WHICH THE MAKING OF THE EXCHANGE OFFER IS NOT IN COMPLIANCE WITH APPLICABLE
LAW. IF TU ELECTRIC CAPITAL OR THE COMPANY BECOMES AWARE OF ANY
JURISDICTION IN WHICH THE MAKING OF THE EXCHANGE OFFER WOULD NOT BE IN
COMPLIANCE WITH APPLICABLE LAW, TU ELECTRIC CAPITAL AND THE COMPANY WILL
MAKE A GOOD FAITH EFFORT TO COMPLY WITH SUCH LAW. IF, AFTER SUCH GOOD
FAITH EFFORT, TU ELECTRIC CAPITAL AND THE COMPANY CANNOT COMPLY WITH ANY
SUCH LAW, THE EXCHANGE OFFER WILL NOT BE MADE TO (NOR WILL TENDERS BE
ACCEPTED FROM OR ON BEHALF OF) HOLDERS RESIDING IN SUCH JURISDICTIONS. IN
ANY JURISDICTION WHERE THE SECURITIES, BLUE SKY OR OTHER LAWS REQUIRE THE
EXCHANGE OFFER TO BE MADE BY OR THROUGH A LICENSED BROKER OR DEALER, THE
EXCHANGE OFFER IS BEING MADE ON BEHALF OF TU ELECTRIC CAPITAL AND THE
COMPANY BY THE DEALER MANAGERS OR ONE OR MORE REGISTERED BROKERS OR DEALERS
LICENSED UNDER THE LAWS OF SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY EXCHANGE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE
IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF TU ELECTRIC
CAPITAL OR THE COMPANY SINCE THE DATE HEREOF.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Securities and
Exchange Commission (Commission) pursuant to the Securities Exchange Act of
1934, as amended (1934 Act), are incorporated herein by reference:
1. Annual Report on Form 10-K for the year ended December 31,
1994 (1994 10-K).
2. Quarterly Reports on Form 10-Q for the quarters ended March
31, 1995 and June 30, 1995.
3. Current Reports on Form 8-K, dated October 13, 1995 and
October 25, 1995.
All documents subsequently filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the 1934 Act and prior to the termination of
the offering hereunder shall be deemed to be incorporated by reference in
this Prospectus and to be a part hereof from the date of filing of such
documents. The documents which are incorporated by reference in this
Prospectus are sometimes hereinafter referred to as the "Incorporated
Documents."
Any statement contained in an Incorporated Document shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent
that a statement contained herein or in any other subsequently filed
document which is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a
part of this Prospectus.
THE COMPANY HEREBY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH
PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM A COPY OF THIS PROSPECTUS
HAS BEEN DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A
COPY OF ANY OR ALL OF THE DOCUMENTS REFERRED TO ABOVE WHICH HAVE BEEN OR
MAY BE INCORPORATED IN THIS PROSPECTUS BY REFERENCE, OTHER THAN EXHIBITS TO
SUCH DOCUMENTS (UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE INTO SUCH DOCUMENTS). REQUESTS SHOULD BE DIRECTED TO PETER B.
TINKHAM, SECRETARY, TEXAS UTILITIES ELECTRIC COMPANY, 1601 BRYAN STREET,
DALLAS, TEXAS 75201, TELEPHONE NUMBER (214) 812-4600.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the 1934
Act and in accordance therewith files reports and other information with
the Commission. Such reports and other information filed by the Company
can be inspected and copied at the public reference facilities maintained
by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the following Regional Offices of the Commission: Chicago
Regional Office, Citicorp Center, 500 West Madison, Suite 1400, Chicago,
Illinois 60661; and New York Regional Office, 7 World Trade Center, 13th
Floor, New York, New York 10048. Copies of such material can also be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. The Depositary
Shares are listed on the NYSE, where reports and other information
concerning the Company may be inspected.
Securityholders of the Company may obtain, upon request, copies of an
Annual Report on Form 10-K containing financial statements as of the end of
the most recent fiscal year audited and reported upon (with an opinion
expressed) by independent auditors.
No separate financial statements of TU Electric Capital are included
herein. The Company considers that such financial statements would not be
material to Holders of the Preferred Securities because the Company is a
reporting company under the Exchange Act and TU Electric Capital has no
independent operations, but exists for the sole purpose of issuing the
Trust Securities and holding as trust assets the Junior Subordinated
Debentures.
TU Electric Capital will not file separate reports under the 1934 Act.
The obligations of the Company under the Junior Subordinated Debentures to
pay principal and interest, and the obligations of the Company under the
Junior Subordinated Debentures and pursuant to the Trust Agreement to pay
amounts equal to all expenses of TU Electric Capital, together with the
Guarantee and the rights of the Holders of Preferred Securities to
directly enforce the Company's obligations with respect to the Junior
Subordinated Debentures, constitute a full and unconditional guarantee by
the Company of payments due on the Preferred Securities. See DESCRIPTION
OF THE JUNIOR SUBORDINATED DEBENTURES - "Additional Interest" and
DESCRIPTION OF THE GUARANTEE - "Events of Default."
<PAGE>
PROSPECTUS SUMMARY
The following is a summary of certain information contained herein and
should be read in conjunction with such information contained elsewhere in
this Prospectus and is subject to and qualified by reference to such
information. Capitalized terms used herein have the respective meanings
ascribed to them elsewhere in this Prospectus.
THE COMPANY
The Company was incorporated under the laws of Texas in 1982 and is an
electric utility engaged in the generation, purchase, transmission,
distribution and sale of electric energy wholly within the state of Texas.
The principal executive offices of the Company are located at Energy Plaza,
1601 Bryan Street, Dallas, Texas 75201; and the telephone number is (214)
812-4600.
TU ELECTRIC CAPITAL
TU Electric Capital is a Delaware statutory business trust formed for
the exclusive purposes of (i) issuing the Preferred Securities and Common
Securities representing undivided beneficial interests in the assets of TU
Electric Capital, (ii) holding as trust assets the Junior Subordinated
Debentures and (iii) engaging in only those other activities necessary or
incidental thereto. Upon issuance of the Preferred Securities in exchange
for Depositary Shares, the Holders thereof will own all of the issued and
outstanding Preferred Securities. The Company has agreed to acquire Common
Securities in an amount equal to at least 3% of the total capital of TU
Electric Capital and will own all of the issued and outstanding Common
Securities.
THE EXCHANGE OFFER
Purpose of the Exchange Offer
The purpose of the Exchange Offer is to refinance with the Preferred
Securities or repurchase the Depositary Shares and to achieve certain tax
efficiencies for the Company while preserving the Company's flexibility
with respect to future financings. The Company expects to finance cash
purchases of Depositary Shares pursuant to the Exchange Offer with the
proceeds of an offer of securities similar to the Preferred Securities in a
separate transaction. This refinancing will permit the Company to deduct
interest payable on the Junior Subordinated Debentures (and any similar
debt issued in connection with the aforementioned financing) for United
States federal income tax purposes. Dividends payable on the Depositary
Shares are not tax deductible by the Company. See THE EXCHANGE OFFER --
"Purpose of the Exchange Offer." While dividends on the Depositary Shares
are eligible for the dividends received deduction for corporate Holders,
distributions on the Preferred Securities will not be eligible for the
dividends received deduction for corporate Holders. The dividends received
deduction is not available to individual, non-corporate Holders of either
Preferred Securities or Depositary Shares. See "Comparison of Preferred
Securities and Depositary Shares."
Terms of the Exchange Offer
At the option of the Holder thereof, the Company will exchange each
Depositary Share validly tendered and accepted by the Company for the
Holder's selection from the following consideration: either a Preferred
Security with a liquidation preference of $25.00 plus a cash component of
$ or cash only in the amount of $ for each $1.875 Depositary
Share, or either a Preferred Security with a liquidation preference of
$25.00 plus a cash component of $ or cash only in the amount of $
for each $1.805 Depositary Share, in each case, upon the terms and subject
to the conditions set forth herein and in the applicable Letter of
Transmittal. In addition, as part of the Exchange Offer, Holders of
Depositary Shares accepted for exchange will be entitled to receive the
applicable Payment in Lieu of Accumulated Dividends, payable on the Closing
Date. See THE EXCHANGE OFFER -- "Terms of the Exchange Offer."
Expiration Date; Withdrawals
Upon the terms and subject to the conditions of the Exchange Offer,
the Company intends to accept for exchange any and all of the Depositary
Shares validly tendered and not withdrawn prior to 12 midnight, New York
City time, on , 1995, or if the Exchange Offer is extended
with respect to either series of Depositary Shares by the Company, in its
sole discretion, the latest date and time to which the Exchange Offer with
respect to such series has been extended (with respect to each such series,
the Expiration Date). Tenders of Depositary Shares pursuant to the
Exchange Offer may be withdrawn at any time prior to the applicable
Expiration Date and, unless accepted for exchange by the Company, may be
withdrawn at any time after December ___, 1995. Depositary Shares that
have been withdrawn may be retendered for exchange for the same or a
different form of offered consideration. See THE EXCHANGE OFFER --
"Withdrawal of Tenders"; "Expiration Date; Extensions; Amendments;
Termination."
Extensions; Amendments; Termination
The Company expressly reserves the right, in its sole discretion, to
(i) extend, amend or modify the terms of the Exchange Offer with respect to
either series of Depositary Shares in any manner and (ii) withdraw or
terminate the Exchange Offer with respect to such series and not accept for
exchange any Depositary Shares, at any time on or prior to the Expiration
Date with respect to such series for any reason, including (without
limitation) if fewer than Depositary Shares of such series would
remain outstanding upon acceptance of those tendered (which condition may
be waived by the Company). The Company may therefore amend the annual
distribution rate and/or the amount of the cash component to be paid upon
the exchange of Preferred Securities for Depositary Shares and may
independently change the amount of cash only to be paid for each Depositary
Share, in each case, with respect to any or both series of Depositary
Shares. The Company has not set a date beyond which the Exchange Offer
with respect to either series of Depositary Shares will not be extended.
SeeTHE EXCHANGEOFFER-- "ExpirationDate;Extensions; Amendments;Termination."
Procedures for Tendering
Each Holder of Depositary Shares wishing to participate in the
Exchange Offer must (i) properly complete and sign the applicable Letter of
Transmittal with respect to Depositary Shares of each series to be tendered
or a facsimile thereof (all references in this Prospectus to a Letter of
Transmittal shall be deemed to include a facsimile thereof) in accordance
with the instructions contained herein and in such Letter of Transmittal,
together with any required signature guarantees, and deliver the same to
, as Exchange Agent, on or prior to the Expiration Date
and either (a) certificates for the Depositary Shares must be received by
the Exchange Agent at such address or (b) book-entry transfer, as described
herein, and a confirmation of such book-entry transfer must be received by
the Exchange Agent, in each case on or prior to the Expiration Date or (ii)
comply with the guaranteed delivery procedures described herein. See THE
EXCHANGE OFFER -- "Procedures for Tendering."
LETTERS OF TRANSMITTAL, CERTIFICATES FOR DEPOSITARY SHARES AND ANY
OTHER REQUIRED DOCUMENTS SHOULD BE SENT ONLY TO THE EXCHANGE AGENT NOT TO
THE COMPANY, THE EXCHANGE AGENT, THE DEALER MANAGERS OR THE INFORMATION
AGENT.
Special Procedure for Beneficial Owners
Any beneficial owner whose Depositary Shares are registered in the
name of a broker, dealer, commercial bank, trust company or other nominee
and who wishes to tender such Depositary Shares should contact such
registered Holder promptly and instruct such registered Holder to tender on
such beneficial owner's behalf. If, however, such beneficial owner wishes
to tender on its own behalf, such owner must, prior to completing and
executing a Letter of Transmittal and delivering its Depositary Shares,
either make appropriate arrangements to register ownership of the
Depositary Shares in such owner's name or obtain a properly completed stock
power from the registered Holder. The transfer of registered ownership may
take considerable time and may not be able to be completed on or prior to
the Expiration Date. See THE EXCHANGE OFFER -- "Procedures for Tendering."
Guaranteed Delivery Procedures
If a Holder desires to accept the Exchange Offer and time will not
permit a Letter of Transmittal or certificates for Depositary Shares to
reach the Exchange Agent on or prior to the Expiration Date or the
procedure for book-entry transfer cannot be completed on a timely basis, a
tender may be effected in accordance with the guaranteed delivery
procedures set forth in THE EXCHANGE OFFER -- "Procedures for Tendering --
Guaranteed Delivery."
Acceptance of Shares
The Company expressly reserves the right, in its sole discretion, to
delay acceptance for exchange of Depositary Shares of either series
tendered under the Exchange Offer and the delivery of the Preferred
Securities and/or cash with respect to the Depositary Shares of such series
accepted for exchange (subject to Rules 13e-4 and 14e-1 under the Exchange
Act, which require that the Company consummate the Exchange Offer or return
any Depositary Shares deposited by or on behalf of the Holders thereof
promptly after the termination or withdrawal of the Exchange Offer with
respect to such Depositary Shares) at any time on or prior to the
Expiration Date for any reason including (without limitation) if fewer than
100,000 Depositary Shares of such series would remain outstanding upon
acceptance of those tendered (which condition may be waived by the
Company). See THE EXCHANGE OFFER -- "Acceptance of Depositary Shares;
Delivery of Preferred Securities" and "Expiration Date; Extensions;
Amendments; Termination."
All Depositary Shares not accepted pursuant to the Exchange Offer will
be returned to the tendering Holders at the Company's expense as promptly
as practicable following the Expiration Date.
All Depositary Shares accepted pursuant to the Exchange Offer by the
Company will be retired and canceled.
Delivery of Preferred Securities
Subject to the terms and conditions of the Exchange Offer, the
delivery of the Preferred Securities will occur and cash payments will be
made as promptly as practicable on a settlement date with respect to each
series (Closing Date) following the Expiration Date with respect to such
series. See THE EXCHANGE OFFER -- "Acceptance of Depositary Shares;
Delivery of Preferred Securities" and "Expiration Date; Extensions;
Amendments; Termination."
Untendered Shares
Holders of Depositary Shares who do not tender their Depositary Shares
in the Exchange Offer or whose Depositary Shares are not accepted for
exchange will continue to hold such Depositary Shares and will be entitled
to all the rights and preferences, and will be subject to all of the
limitations, applicable thereto. See LISTING AND TRADING OF PREFERRED
SECURITIES AND DEPOSITARY SHARES."
Dealer Managers Market Activity
The Dealer Managers currently plan to make a market in the Preferred
Securities following the completion of the Exchange Offer and may buy and
sell the Preferred Securities on a "when and if issued" basis prior to the
completion of the Exchange Offer. However, there can be no assurance that
the Dealer Managers will engage in such activities or that any active
market in the Preferred Securities will develop or be maintained.
Exchange Agent and Information Agent
has been appointed as Exchange Agent in
connection with the Exchange Offer. Questions and requests for assistance,
requests for additional copies of this Prospectus or of the Letter of
Transmittal and requests for Notices of Guaranteed Delivery should be
directed to D.F. King & Co. Inc., which has been retained by the Company to
act as Information Agent for the Exchange Offer. The addresses and
telephone numbers of the Exchange Agent and the Information Agent are set
forth in THE EXCHANGE OFFER -- "Exchange Agent and Information Agent" and
on the outside back cover of this Prospectus.
Dealer Managers
Merrill Lynch & Co., Goldman, Sachs & Co., Lehman Brothers and Smith
Barney Inc. have been retained as Dealer Managers in connection with the
Exchange Offer. Questions with respect to the Exchange Offer may be
directed to Merrill Lynch & Co. at (800) _______, to Goldman, Sachs & Co.
at (800) _________, to Lehman Brothers at (800) ________ and to Smith
Barney Inc. at_____________________ . For information regarding fees
payable to the Dealer Managers and Soliciting Dealers (as defined herein),
see FEES AND EXPENSES; TRANSFER TAXES.
DESCRIPTION OF PREFERRED SECURITIES
The Preferred Securities are preferred undivided beneficial interests
in the assets of TU Electric Capital and will have a preference, under
certain circumstances, with respect to cash distributions and amounts
payable on liquidation, redemption or otherwise over the trust interests
represented by the Common Securities issued by TU Electric Capital.
Holders of the Preferred Securities will be entitled to receive
cumulative cash distributions accruing from the date of original issuance
and payable quarterly in arrears on the last day of March, June, September
and December of each year, commencing , 1995, at the per annum
rate of % of the liquidation preference amount thereof to the persons
in whose names the Preferred Securities are registered at the close of
business on the relevant record dates. Such distributions will originally
accrue from, and include, the Closing Date and will accrue to, and include,
the first distribution payment date, and thereafter will accrue from, and
exclude, the last distribution payment date through which distributions
have been paid. In the event that any date on which a distribution is
payable on the Preferred Securities is not a Business Day (as defined
herein), then such distribution will be made on the next succeeding
Business Day (and without any interest or other payment in respect of any
such delay), except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on
such date.
TU Electric Capital will hold Junior Subordinated Debentures in an
aggregate principal amount equal to the liquidation preference of the Trust
Securities. The Junior Subordinated Debentures are unsecured subordinated
debt securities issued under an Indenture dated as of , 1995,
between the Company and The Bank of New York, as Trustee (Indenture). TU
Electric Capital will use interest payments on the Junior Subordinated
Debentures to make distributions on the Preferred Securities. The Junior
Subordinated Debentures will be subordinate to all Senior Indebtedness of
the Company but are senior to all capital stock of the Company.
The Company has the right to defer payments of interest on the Junior
Subordinated Debentures during Extension Periods of up to 20 consecutive
quarters, provided that no single distribution payment period, as extended,
may exceed 20 consecutive quarterly interest payment periods or extend
beyond the maturity of the Junior Subordinated Debentures. Distributions
on the Preferred Securities will accrue with interest, compounded
quarterly, but will not be payable, during an Extension Period. The
Company may prepay at any time all or any portion of the interest accrued
during an Extension Period. Based upon the Company's current financial
condition and, in light of the restriction on payment of dividends during
an Extension Period, the Company believes that an extension of a
distribution payment period on the Preferred Securities is unlikely and has
no current intention to extend such a distribution payment period. Upon
the termination of any Extension Period and the payment of all amounts then
due, the Company may elect another Extension Period. The Company will give
TU Electric Capital and the Debenture Trustee notice of its election of an
Extension Period prior to the earlier of (i) one Business Day prior to the
record date for the distribution which would occur but for such election or
(ii) the date the Company is required to give notice to the NYSE or other
applicable self-regulatory organization of such record date and will cause
the Trust to send notice of such election to the Holders of Preferred
Securities.
If and to the extent the Company makes interest payments on the Junior
Subordinated Debentures deposited in TU Electric Capital as trust assets,
the Property Trustee is obligated to make distributions promptly on the
Preferred Securities. The payment of distributions on the Preferred
Securities and payments on liquidation of TU Electric Capital and the
redemption of Preferred Securities are guaranteed by the Company if and to
the extent that TU Electric Capital has funds available therefor.
The Junior Subordinated Debentures are redeemable, in whole or in
part, on or after , or at any time upon the occurrence of a
Tax Event, at the option of the Company. Upon redemption of the Junior
Subordinated Debentures, the Preferred Securities will be redeemed.
Upon the occurrence and during the continuation of a Tax Event arising
from a change in law or a change in legal interpretation or other specified
circumstance, TU Electric Capital shall, unless the Junior Subordinated
Debentures are redeemed in the limited circumstances described below and
subject to certain other limited exceptions, be terminated, with the result
that after the satisfaction of creditors of TU Electric Capital, if any,
the Junior Subordinated Debentures will be distributed to the Holders of
the Preferred Securities and the Common Securities on a pro rata basis, in
lieu of any cash distribution. In the case of a Tax Event, the Company
will have the right in certain circumstances to redeem the Junior
Subordinated Debentures at any time, in which event TU Electric Capital
will redeem the Trust Securities on a pro rata basis to the same extent as
the Junior Subordinated Debentures are redeemed. If the Junior
Subordinated Debentures are distributed to the Holders of the Preferred
Securities, the Company will use its best efforts to have the Junior
Subordinated Debentures listed on the New York Stock Exchange or on such
other exchange as the Preferred Securities are then listed. See
DESCRIPTION OF THE PREFERRED SECURITIES -- "Tax Event Redemption or
Distribution."
The Company will guarantee payment, where applicable, of accrued and
unpaid distributions, the redemption price and amounts due upon
liquidation, to the extent TU Electric Capital has funds available
therefor.
The Trust Agreement (as defined herein) provides that the Company
shall pay for all debts and obligations (other than with respect to the
Trust Securities) and all costs and expenses of TU Electric Capital,
including any taxes and all costs and expenses with respect thereto, to
which TU Electric Capital may become subject, except for United States
withholding taxes.
No Sinking Fund will be established for the benefit of the Preferred
Securities.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The exchange of Depositary Shares either for Preferred Securities plus
a cash component or for cash alone pursuant to the Exchange Offer will be a
taxable transaction. For further discussion of this and other federal
income tax matters, including the treatment of distributions with respect
to the Preferred Securities as Original Issue Discount see CERTAIN UNITED
STATES FEDERAL INCOME TAX CONSEQUENCES.
COMPARISON OF PREFERRED SECURITIES AND DEPOSITARY SHARES
The following is a brief summary of certain terms of the Preferred
Securities and Depositary Shares. For a more complete description of the
Preferred Securities, see DESCRIPTION OF THE PREFERRED SECURITIES; and for
additional information about the Depositary Shares, see DESCRIPTION OF
CERTAIN TERMS OF THE DEPOSITARY SHARES.
Preferred Securities Depositary Shares
-------------------- -----------------
Issuer........... TU Electric Capital The Company
Distribution/
Dividend Rate.... % per annum payable in Dividend, payable quart-
equal quarterly installments, erly on the first
in arrears, on the last calender day of April,
calendar day of March, June, July, October and
September and December (each January of each year,
a Distribution Payment Date) out of funds legally
and accruing originally from, available therefor,when,
and including, the date of as and if declared by
issuance thereof to, and the Company's Board of
including, the first Distri- Directors, at the rate
bution Payment Date, and there- of $1.875 with respect
after from, and excluding, the to the $1.875 Depos-
last Distribution Payment Date itary Shares and $1.805
through which distributions with respect to the
have been paid, subject to the $1.805 Depositary
Company's right to elect, from Shares.
time to time, Extension
Periods, each of which may not Dividends are
exceed 20 consecutive cumulative.
quarterly distribution Accumulated un-
payment periods. During paid dividends do
any Extension Period (to the not bear interest.
extent permitted by law), dis- While no dividends
tributions would continue to are required to be
accrue, with interest thereon paid and such payment
compounded quarterly and would could be deferred
be due and payable on the last indefinitely, all
Business Day of the Extension dividends to date
Period. have been paid when
due.
Redemption..... Upon redemption of the Junior Redeemable at the
Subordinated Debentures, which option of the
may be redeemed on or after , Company, in whole
at the option of the Company, or inpart, on or
in whole or in part, a like after August 1, 2001
amount of Trust Securities with respect to the
will be redeemed on a pro rata $1.875 Depositary
basis as between the two Shares and November
classes, upon not less than 30 1, 2001 with respect
nor more than 60 days' notice, to the $1.805 Deposit-
at 100% of the liquidation ary Shares on not less
preference amount of the than 20 days' notice,
Preferred Securities redeemed at $25.00 per share,
plus accrued distributions and plus accrued and un-
unpaid interest thereon, if any, paid dividends, if
to the redemption date. any, to the redemp-
tion date.
Tax Event
Distribution
or Redemption.... Upon occurrence of a Tax No comparable provision.
Event, after satisfaction of
creditors of TU Electric
Capital, if any, distribution of
Junior Subordinated Debentures
will be made to Holders or, in
certain circumstances at the
option of the Company, may be
redeemed in whole or in part.
In such event, a like amount of
Preferred Securities would be
redeemed.
Maturity Date.. Subject to mandatory redemption No maturity date and not
on the maturity date of the subject to mandatory
Junior Subordinated Debentures, redemption.
__________, 2030.
Subordination... Junior Subordinated Debentures Subordinated to claims
will be subordinated to all of creditors of the
existing and future Senior Company, including
Indebtedness of the Company Holders of the Comp-
and senior to all capital stock any's outstanding
of the Company, including the Senior Indebtedness
Depositary Shares. As of June and other Debt
30, 1995, approximately $7.8 Securities and the
billion of such Senior Junior Subordinated
Indebtedness was outstanding. Debentures, pari
Payments on the Preferred passu as to dividends
Securities are fully and and liquidation pre-
unconditionally guaranteed by ference with all other
the Company to the extent of Preferred Stock of
funds available to TU Electric the Company and senior
Capital. The obligations of to the Common Stock
the Company on the Guarantee of the Company.
are subordinated to all Senior
Indebtedness. The Trust
Agreement provides that the
Company shall pay for all
debts and obligations (other
than with respect to the Trust
Securities) and all costs and
expenses of TU Electric
Capital, including any income
taxes, duties and other
governmental charges, and all
costs and expenses with
respect thereto, to which TU
Electric Capital may become
subject, except for United
States withholding taxes.
Listing......... Application will be made to The Depositary Shares
list the Preferred Securities are listed on the NYSE.
on the NYSE. However, see LISTING
AND TRADING OF
PREFERRED
SECURITIES AND
DEPOSITARY
SHARES.
Dividends
Received
Deduction....... Distributions will not be Dividends are eligible
eligible for the dividends for the dividends re-
received deduction for any ceived deduction for
Holders. corporate Holders. The
dividends received
deduction is not
available to individ-
ual, non-corporate
Holders.
Voting Rights/
Enforcement..... Subject to the Company's If any four full quart-
right to extend payment erly dividends on any
as described under class of the Company's
DESCRIPTION OF THE preferred stock, includ-
PREFERRED SECURITIES -- ing the cumulative
"Distributions." preferred stock under-
Holders will have the lying the Depositary
right to receive Shares, are in default,
distributions as and the Holders of all
when due but have only preferred stock, includ-
limited voting rights, ing the Holders of the
exercisable in the event Sepositary Shares, will
of a proposed change in become entitled, voting
the terms of the as one class, to elect
Preferred Securities or a majority of the
with respect to certain Board of Directors.
actions following an When entitled to vote,
Event of Default and each Holder of Deposit-
selection of Successor ary Shares shall have
Trustees. The Property one quarter (1/4) of
Trustee has the power to one vote for each
exercise all rights share held of record
under the Indenture with by such Holder.
respect to the Junior
Subordinated Debentures
and is also authorized
to enforce the Guarantee
on behalf of holders of
the Preferred
Securities. The holders
of the Preferred
Securities will have the
right to direct the
Property Trustee with
respect to certain
matters under the Trust
Agreement and the
Guarantee and to take
action directly in
certain circumstances to
enforce their rights
thereunder.
RISK FACTORS
None of TU Electric Capital, its Trustees, the Company or the
Company's Board of Directors makes any recommendation to Holders of
Depositary Shares as to whether to tender all or any shares of Depositary
Shares in the Exchange Offer or to elect to receive as consideration for
any Depositary Shares tendered either Preferred Securities plus a cash
component or cash only. Holders of Depositary Shares should carefully
consider the following risk factors with respect to the Exchange Offer and
the Preferred Securities:
Exchange is Taxable Event
The exchange of Depositary Shares for either Preferred Securities and
a cash component or for cash only pursuant to the Exchange Offer will be a
taxable event. Accordingly, in the event of an exchange for Preferred
Securities and cash, gain or loss will be recognized in an amount equal to
the difference between the fair market value of the Preferred Securities
received in the exchange plus the cash received in the exchange, including
the Payment in Lieu of Accumulated Dividends, and the exchanging
shareholder's tax basis in the Depositary Shares surrendered. In the event
of an exchange for cash only, gain or loss will be recognized in an amount
equal to the difference between the cash received and the shareholder's tax
basis in the Depositary Shares surrendered. See CERTAIN UNITED STATES
FEDERAL INCOME TAX CONSEQUENCES. Exchanging Holders who elect to receive
Preferred Securities and who have a taxable gain could incur a tax
liability that exceeds the amount of cash received in the exchange. All
Holders of Depositary Shares are advised to consult their own tax advisors
regarding the federal, state, local and other tax consequences of the
exchange of Preferred Securities for Depositary Shares.
Dependence of TU Electric Capital on the Company for Funds; Subordination
of Guarantee and Junior Subordinated Debentures
The ability of TU Electric Capital to pay amounts due on the Preferred
Securities is solely dependent upon the Company making payments on the
Junior Subordinated Debentures as and when required.
The Company's obligations under the Guarantee are subordinated and
junior in right of payment to all other liabilities of the Company, except
any liabilities that may be made pari passu expressly by their terms. The
obligations of the Company under the Junior Subordinated Debentures are
subordinated and junior in right of payment to Senior Indebtedness of the
Company. As of June 30, 1995, Senior Indebtedness of the Company
aggregated approximately $7.8 billion. There are no terms of the
Preferred Securities, the Junior Subordinated Debentures or the Guarantee
that limit the Company's ability to incur additional indebtedness,
including indebtedness that would rank senior to the Junior Subordinated
Debentures and the Guarantee. See DESCRIPTION OF THE GUARANTEE -- "Status
of the Guarantee", DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES --
"Subordination" and PROSPECTUS SUMMARY -- "Comparison of Preferred
Securities and Depositary Shares."
Payment Delay upon Exercise of Option to Extend Interest Payment Period
The Company has the right under the Indenture to extend the interest
payment period from time to time on the Junior Subordinated Debentures, for
a period not exceeding 20 consecutive quarters. Upon the termination of any
such Extension Period and the payment of all amounts then due, the Company
may select an additional Extension Period, subject to the requirements
described herein. During any such Extension Period, quarterly distributions
on the Preferred Securities would be deferred (but would continue to accrue
with interest thereon compounded quarterly) by TU Electric Capital. In the
event that the Company exercises this right, during the Extension Period
the Company may not declare or pay dividends or distributions (other than
dividends or distributions in Common Stock of the Company) on, or redeem,
purchase, acquire, or make a liquidation payment with respect to any of its
capital stock, redeem any indebtedness that is pari passu with the Junior
Subordinated Debentures or make any guarantee payment with respect to the
foregoing. Prior to the termination of any such Extension Period, the
Company may further extend the interest payment period, provided that such
Extension Period together with all such previous and further extensions
thereof may not exceed 20 consecutive quarters and that such extended
interest payment period may not extend beyond the maturity date of the
Junior Subordinated Debentures. Any extension period with respect to
payment of interest on the Junior Subordinated Debentures, other Debt
Securities or on any similar securities will apply to all such securities
and will also apply to distributions with respect to the Preferred
Securities and all other securities with terms substantially the same as
the Preferred Securities. If the Company should determine to exercise its
extension right in the future, the market price of the Preferred Securities
is likely to be affected. Based upon the Company's current financial
condition and, in light of the restriction on payment of dividends during
an Extension Period, TU Electric Capital and the Company believe that such
an extension of an interest payment period on the Junior Subordinated
Debentures is unlikely to occur. See DESCRIPTION OF THE PREFERRED
SECURITIES -- "Distributions" and DESCRIPTION OF THE JUNIOR SUBORDINATED
DEBENTURES -- "Option to Extend Interest Payment Period."
Adverse Tax Consequense of Extensions of Interest Payment Period; OID
Because the Company has the right to extend the interest payment
period for the Junior Subordinated Debentures, the Junior Subordinated
Debentures will be treated as having been issued with OID for United States
federal income tax purposes. As a result, Holders of Preferred Securities
will be required to include in their gross income distributions with
respect to the Preferred Securities as they accrue, rather than when they
are paid, regardless of the Holders' regular method of accounting. OID on
the Preferred Securities will be treated as interest and will generally be
equal to the amount of stated distributions accruing on the Preferred
Securities each year. During an Extension Period, a Holder of Preferred
Securities that is subject to United States federal income tax would be
required to continue to include in gross income an amount of OID in respect
of the distributions accruing on the Preferred Securities for United States
federal income tax purposes in advance of the receipt of cash regardless of
such Holder's regular method of accounting. See CERTAIN UNITED STATES
FEDERAL INCOME TAX CONSEQUENCES -- "Original Issue Discount." A Holder
that disposed of its Preferred Securities prior to the record date for the
payment of interest at the end of an Extension Period would not receive
cash from TU Electric Capital related to such interest because the accrued
distributions related to such interest will be paid to the Holder of record
on such record date, regardless of who the Holder of record may have been
on other dates during the Extension Period. In addition, as a result of
the Company's right to extend the interest payment period, the market price
of the Preferred Securities may be more volatile than debt instruments with
OID which do not afford the issuer such a right. See CERTAIN UNITED STATES
FEDERAL INCOME TAX CONSEQUENCES -- "Original Issue Discount."
In addition, if the issue price of the Junior Subordinated Debentures
(fair market value of the Preferred Securities at the time of their
exchange of Depositary Shares, not including any cash received) at the time
of issuance of the Preferred Securities is less than their stated principal
amount, the difference will be additional OID, a pro rata share of which
will be includable in the gross income of the Holders over the term of such
Preferred Securities.
Rights Under the Guarantee; Limitation as to Funds Available to TU
Electric Capital
The Guarantee will be qualified as an indenture under the Trust
Indenture Act of 1939, as amended (Trust Indenture Act). The Bank of New
York will act as indenture trustee under the Guarantee for the purposes of
compliance with the Trust Indenture Act (Guarantee Trustee). The Bank of
New York will also act as trustee for the Junior Subordinated Debentures
and will hold the Guarantee for the benefit of the Holders of the Preferred
Securities.
The Guarantee guarantees to the Holders of the Preferred Securities
the payment (but not the collection) of (i) any accrued and unpaid
distributions required to be paid on the Preferred Securities, to the
extent TU Electric Capital has funds available therefor, (ii) the
redemption price, including all accrued and unpaid distributions, with
respect to Preferred Securities called for redemption by the Issuer, to the
extent TU Electric Capital has funds available therefor and (iii) upon a
voluntary or involuntary dissolution, winding-up or termination of TU
Electric Capital (other than in connection with a redemption of all of the
Preferred Securities), the lesser of (a) the aggregate of the liquidation
preference and all accrued and unpaid distributions on the Preferred
Securities to the date of payment and (b) the amount of assets of TU
Electric Capital remaining available for distribution to Holders of the
Preferred Securities in liquidation of TU Electric Capital. The Holders of
a majority in liquidation preference of the Preferred Securities have the
right to direct the time, method and place of conducting any proceeding for
any remedy available to the Guarantee Trustee or to direct the exercise of
any trust or power conferred upon the Guarantee Trustee under the
Guarantee. If the Company were to default on its obligations under the
Junior Subordinated Debentures, TU Electric Capital would lack available
funds for the payment of distributions or amounts payable on redemption of
the Preferred Securities or otherwise, and in such event Holders of the
Preferred Securities would not be able to rely upon the Guarantee for
payment of such amounts. Instead, Holders of the Preferred Securities would
be required to rely on the enforcement by the Property Trustee of its
rights, as registered Holder of the Junior Subordinated Debentures, against
the Company pursuant to the terms of the Junior Subordinated Debentures.
See DESCRIPTION OF THE GUARANTEE -- "Status of the Guarantee" and
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES -- "Subordination"
herein. The Trust Agreement pursuant to which TU Electric Capital has been
formed provides that each Holder of Preferred Securities by acceptance
thereof agrees to the provisions of the Guarantee and the Indenture.
The Preferred Securities are subject to mandatory redemption upon
repayment of the Junior Subordinated Debentures at maturity or upon their
earlier redemption. See DESCRIPTION OF THE PREFERRED SECURITIES --
"Redemption Procedures." The Company will have the option at any time on or
after upon not less than 45 days' notice, to redeem the
Junior Subordinated Debentures, in whole or in part.
Tax Event Redemption or Distribution; Potential Adverse Effect on Market
Price
Upon the occurrence of a Tax Event, the Company shall cause the
termination TU Electric Capital and, in connection therewith, after
satisfaction of creditors of TU Electric Capital, if any, distribute Junior
Subordinated Debentures to the Holders of Trust Securities; provided that,
under certain circumstances the Company shall have the right to redeem the
Junior Subordinated Debentures, in whole or in part, in which event TU
Electric Capital will redeem the Preferred Securities. There can be no
assurance as to the market prices for the Junior Subordinated Debentures
which may be distributed in exchange for Preferred Securities if a
termination and liquidation of TU Electric Capital were to occur.
Accordingly, such Junior Subordinated Debentures could, if distributed,
trade at a discount to the price of the Depositary Shares exchanged. See
DESCRIPTION OF THE PREFERRED SECURITIES -- "Tax Event Redemption or
Distribution" and CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES.
No Established Trading Market for Preferred Securities
The Preferred Securities constitute a new issue of securities with no
established trading market. While the Company will apply to list the
Preferred Securities on the NYSE, a minimum of 400 beneficial holders and
1,000,000 outstanding securities is required for listing a new class of
securities on the NYSE. Accordingly, no assurance can be given as to the
liquidity of, or the development and maintenance of trading markets for,
the Preferred Securities or whether the sales price of the Preferred
Securities on the NYSE at the time of issuance thereof (or at any time
thereafter) will be greater than or less than either the stated liquidation
preference thereof or the closing sales price of the Depositary Shares on
the NYSE on the Expiration Date. See LISTING AND TRADING OF PREFERRED
SECURITIES AND DEPOSITARY SHARES.
Dealer Managers Market Activity; No Assurance as to Active Market
The Dealer Managers currently plan to make a market in the Preferred
Securities following the completion of the Exchange Offer and may buy and
sell the Preferred Securities on a "when and if issued" basis prior to the
completion of the Exchange Offer. However, there can be no assurance that
the Dealer Managers will engage in such activities or that any active
market in the Preferred Securities will develop or be maintained.
Depositary Shares May be Delisted; Market for Depositary Shares May Become
Illiquid
To the extent that more than 7,559,300 of the $1.875 Depositary Shares
or 6,513,700 of the $1.805 Depositary Shares are tendered and accepted in
the Exchange Offer and the market value of publicly held Depositary Shares
of such series is reduced to less than $2,000,000, the Company would be
required to delist the Depositary Shares from the NYSE pursuant to the
rules and regulations of the NYSE, and the trading market for shares of
Depositary Shares which are not tendered and accepted could be adversely
affected. See LISTING AND TRADING OF PREFERRED SECURITIES AND DEPOSITARY
SHARES.
Trading Price; Potential Adverse Income Tax Effect
The Preferred Securities may trade at a price that does not fully
reflect the value of accrued but unpaid interest with respect to the
underlying Junior Subordinated Debentures. A Holder that disposes of
Preferred Securities between record dates for payments of distributions
thereon will be required to include in his or her income accrued but unpaid
interest on the Junior Subordinated Debentures through the date of
disposition, and to add such amount to such Holder's adjusted tax basis in
his or her pro rata share of the underlying Junior Subordinated Debentures
deemed disposed of. To the extent the selling price is less than the
Holder's adjusted tax basis (which will include, in the form of OID, all
accrued and unpaid interest), a Holder will recognize a capital loss.
Subject to certain limited exceptions, capital losses cannot be applied to
offset ordinary income for United States federal income tax purposes. See
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES -- "Original Issue
Discount" and "Sale, Exchange and Retirement of the Preferred Securities."
Preferred Securities Have No Voting Rights
The Preferred Securities will not have any of the voting rights of the
Depositary Shares. Subject to the Company's right to extend payment as
described under DESCRIPTION OF THE PREFERRED SECURITIES -- "Distributions,"
Holders will have the right to receive distributions as and when due but
will have only limited voting rights, exercisable only in the event of a
proposed change in the terms of the Preferred Securities. See DESCRIPTION
OF CERTAIN TERMS OF THE DEPOSITARY SHARES -- "Voting Rights."
Untendered Shares; Potential Illiquidity
Holders of Depositary Shares who do not tender their Depositary Shares
in the Exchange Offer or whose Depositary Shares are not accepted for
exchange will continue to hold such Depositary Shares and will be entitled
to all the rights and preferences, and will be subject to all of the
limitations, as have heretofore been applicable thereto.
To the extent that Depositary Shares are tendered and accepted in the
Exchange Offer, the terms on which untendered Depositary Shares could
subsequently be sold could be adversely affected. See "No Established
Trading Market for Preferred Securities" and "Depositary Shares May be
Delisted; Depositary Shares May Become Illiquid."
THE COMPANY
The Company was incorporated under the laws of the State of Texas
in 1982 and has perpetual existence under the provisions of the Texas
Business Corporation Act. The Company is an electric utility engaged in the
generation, purchase, transmission, distribution and sale of electric
energy wholly within the State of Texas. The principal executive offices of
the Company are located at Energy Plaza, 1601 Bryan Street, Dallas, Texas
75201; the telephone number is (214) 812-4600.
The Company is the principal subsidiary of Texas Utilities
Company (Texas Utilities). The other electric utility subsidiary of Texas
Utilities is Southwestern Electric Service Company, which is engaged in the
purchase, transmission, distribution and sale of electric energy in ten
counties in the eastern and central parts of Texas with a population
estimated at 125,000. Texas Utilities also has five other subsidiaries
which perform specialized functions within the Texas Utilities Company
System: Texas Utilities Fuel Company owns a natural gas pipeline system,
acquires, stores and delivers fuel gas and provides other fuel services at
cost for the generation of electric energy by the Company; Texas Utilities
Mining Company owns, leases and operates fuel production facilities for the
surface mining and recovery of lignite at cost for the generation of
electric energy by the Company; Texas Utilities Properties Inc. owns,
leases and manages real and personal properties; Texas Utilities
Communications Inc. was recently organized to provide access to advanced
telecommunications technology, primarily for the System Companies' expected
expanding energy service business in the future; and Texas Utilities
Services Inc. provides financial, accounting, information technology,
personnel, procurement and other administrative services at cost.
The Company's service area covers the north central, eastern and
western parts of Texas, with a population estimated at 5,730,000 -- about
one-third of the population of Texas. Electric service is provided in 91
counties and 372 incorporated municipalities, including Dallas, Fort Worth,
Arlington, Irving, Plano, Waco, Mesquite, Grand Prairie, Wichita Falls,
Odessa, Midland, Carrollton, Tyler, Richardson and Killeen. The area is a
diversified commercial and industrial center with substantial banking,
insurance, communications, electronics, aerospace, petrochemical and
specialized steel manufacturing, and automotive and aircraft assembly. The
territory served includes major portions of the oil and gas fields in the
Permian Basin and East Texas, as well as substantial farming and ranching
sections of the State. It also includes the Dallas-Fort Worth International
Airport and the Alliance Airport.
TU ELECTRIC CAPITAL
TU Electric Capital is a statutory business trust created under
Delaware law pursuant to (i) a trust agreement executed by the Company, as
depositor for TU Electric Capital, and the Property Trustee and the
Delaware Trustee and the Administrative Trustees (each as defined herein)
of such trust (Original Trust Agreement) and (ii) the filing of a
certificate of trust with the Delaware Secretary of State on ,
1995. Such trust agreement will be amended and restated in its entirety
(as so amended and restated, the Trust Agreement) substantially in the form
filed as an exhibit to the Registration Statement of which this Prospectus
forms a part. The Trust Agreement will be qualified as an indenture under
the Trust Indenture Act. TU Electric Capital exists for the exclusive
purposes of (i) issuing Trust Securities representing undivided beneficial
interests in the assets of TU Electric Capital, (ii) holding the Junior
Subordinated Debentures as trust assets and (iii) engaging in only those
other activities necessary or incidental thereto. All of the Common
Securities will be owned by the Company. The Common Securities will rank
pari passu, and payments will be made thereon pro rata, with the Preferred
Securities, except that upon the occurrence and continuance of a default
under, the Trust Agreement, the rights of the Holder of the Common
Securities to payment in respect of distributions and payments upon
liquidation, redemption and otherwise will be subordinated to the rights of
the Holders of the Preferred Securities. The Company will acquire Common
Securities having an aggregate liquidation preference amount equal to 3% of
the total capital of TU Electric Capital. TU Electric Capital has a term
of approximately __ years, but may terminate earlier as provided in the
Trust Agreement. TU Electric Capital's business and affairs will be
conducted by the Administrative Trustees (as defined herein). 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 TU
Electric Capital is c/o Texas Utilities Electric Company, Energy Plaza,
1601 Bryan Street, Dallas, Texas 75201.
SUMMARY FINANCIAL INFORMATION
(Thousands of Dollars, Except Ratios and Percentages)
The following material, which is presented herein solely to furnish
limited introductory information, is qualified in its entirety by, and
should be considered in conjunction with, the other information appearing
in this Prospectus, including the Incorporated Documents. In the opinion
of the Company, all adjustments (constituting only normal recurring
accruals) necessary for a fair statement of the results of operations for
the twelve months ended June 30, 1995, have been made.
Twelve Months Ended
-----------------------------------------------
December 31,
-----------------------------------------------
1990 1991 1992
---- ---- ----
Income statement
data:
Operating
Revenues............ $4,540,915 $4,891,522 $4,906,695
Net income
(Loss)(a)........... 964,276 (289,173) 821,123
Ratio of Earnings
to Fixed
Charges(a)(b)....... 2.54 0.34 2.48
Ratio of Earnings
to Fixed Charges
and Preferred
Dividends(a)(b)..... 2.13 0.27 2.05
Twelve Months Ended
------------------------------------
December 31, June 30,
------------------- 1995
1993 1994 (Unaudited)
---- ---- -----------
Income Statement
data:
Operating
Revenues..........$5,409,156 $5,613,175 $5,471,212
Net income
(Loss)(a)........ 476,526 658,192 661,057
Ratio of Earnings
to Fixed Charges
(a)(b)........... 2.00 2.45 2.50
Ratio of Earnings
to Fixed Charges
and Preferred
Dividends(a)(b)... 1.62 1.97 2.10
Adjusted(c)
--------
Outstanding at
June 30, 1995 Amount Percent
-------------- ------ -------
Capitalization (Unaudited):
Long-term debt............ $ 7,465,841 $ 7,215,841 50.3%
Preferred stock
Not subject to
mandatory
redemption............ 855,869 374,044
Subject to
mandatory
redemption............ 300,457 275,457
----------- -----------
Total preferred stock. 1,156,326 649,501 4.5
Company obligated mandatorily
redeemable preferred
securities of trusts(d)..... -- 481,825 3.4
Common stock equity......... 5,984,001 5,984,001 41.8
----------- ---------- ----
Total capitalization...... $14,606,168 $14,331,168 100.0%
========== ========== ======
_________________
(a) The net loss for the twelve-month period ended December 31, 1991 was
due primarily to the recognition of a charge against earnings, representing
a provision for regulatory disallowances and for fuel gas costs disallowed
in the Company's Docket 9300 rate case. Additionally, the twelve-month
periods ended December 31, 1990, December 31, 1991 and December 31, 1992
were affected by the discontinuation of the accrual of allowance for funds
used during construction (AFUDC) and the commencement of depreciation on
approximately $1.3 billion of investment in Unit 1 of the Comanche Peak
nuclear generating station (Comanche Peak) and facilities which are common
to Comanche Peak Units 1 and 2 incurred after the end of the June 30, 1989
test year and, therefore, not included in the Company's Docket 9300 rate
case. Effective January 1992, the Company began recording base rate
revenue for energy sold but not billed to achieve a better matching of
revenues and expenses. The effect of this change in accounting increased
net income for the twelve months ended December 31, 1992, by approximately
$102 million, of which approximately $80 million represents the cumulative
effect of the change in accounting at January 1, 1992. The twelve-month
period ended December 31, 1993 was affected by the recording of regulatory
disallowances in Docket 11735 (See the 1994 10-K.)
(b) The Company's earnings were inadequate to cover its fixed charges and
its fixed charges and preferred dividends for the twelve month period ended
December 31, 1991. The deficiencies in such coverage were $499,062,000 and
$706,809,000, respectively. The computations of the ratios of earnings to
fixed charges and earnings to fixed charges and preferred dividends do not
include interest payments made by affiliated companies on senior notes,
which are recovered currently through the fuel component of rates.
(c) To give effect to (1) this transaction and the contemporaneous filing
of an offer by the Company to exchange for preferred securities plus cash
or for cash only 5,000,000 outstanding shares of $2.05 depositary shares,
assuming that all such depositary shares and all the Depositary Shares are
validly tendered and accepted by the Company for exchange for preferred
securities, (2) the redemption in September 1995 of $250,000,000 of First
Mortgage and Collateral Trust Bonds, and (3) the redemption in October 1995
of $25,000,000 of Preferred Stock. Adjusted amounts do not reflect any
possible future sales from time to time by TU Electric of up to
$650,000,000 principal amount of First Mortgage Bonds and $25,000,000 of
the Company's cumulative preferred stock (Preferred Stock), for which
registration statements are effective pursuant to Rule 415 under the
Securities Act of 1933 (1933 Act).
(d) The sole assets of such trusts consist of junior subordinated
debentures of the Company in principal amounts, and having other
payment terms, corresponding to the securities issued by such trusts.
RATE PROCEEDINGS
In July 1994, the Company filed a petition in the 200th Judicial
District Court of Travis County, Texas to seek judicial review of the final
order of the Public Utility Commission of Texas (PUC) granting a $449
million, or 9.0% rate increase in connection with the Company's January
1993 rate increase request of $760 million, or 15.3% (Docket 11735). Other
parties to the PUC proceedings also filed appeals with respect to various
portions of the order. The Company is unable to predict the outcome of
such appeals.
The PUC's final order (Order) in connection with the Company's January
1990 rate increase request (Docket 9300) was reviewed by the 250th Judicial
District Court of Travis County, Texas (District Court) and thereafter was
appealed to the Court of Appeals for the Third District of Texas (Court of
Appeals). In June 1994, the Court of Appeals affirmed a prudence
disallowance of $472 million provided for in the Order with respect to the
Company's Comanche Peak nuclear generating station (Comanche Peak),
reversed and remanded the portion of the District Court's judgment that had
affirmed a disallowance of $25 million relating to the Company's
reacquisitions of the minority owner interests in Comanche Peak nuclear
fuel, and affirmed the District Court's remand of the remainder of the
disallowance of $884 million relating to the reacquisitions of such
minority owner interests. Therefore, the Court of Appeals remanded an
aggregate of $909 million of disallowances with respect to the Company's
reacquisitions of minority owner interests in Comanche Peak to the PUC for
reconsideration and ordered that such reconsideration be on the basis of a
prudent investment standard.
In addition, the Court of Appeals reversed the District Court's
finding that the PUC erred in ordering a refund of $2.5 million with
respect to certain fuel gas costs. Also, the Court of Appeals specified
that, on remand, the PUC will be required to re-evaluate the appropriate
level of the Company's construction work in progress included in rate base
in light of its financial condition at the time of the initial hearing and
to reconsider whether the $442 million revenue increase provided for in the
PUC's final order remains the benchmark in light of this re-examination.
The Court of Appeals also ruled in the appeal of the Company's Docket
9300 rate case that prior court rulings required that the tax benefits
generated by costs, including capital costs, not allowed in rates, must be
used to reduce rates charged to customers, reversing the District Court's
decision. The Company believes that such ruling is erroneous and not
consistent with the Texas Public Utility Regulatory Act. The Company
contended that, according to a Private Letter Ruling issued to the Company
by the Internal Revenue Service (IRS) with respect to investment tax
credits, such ratemaking treatment, to the extent related to property
classified for tax purposes as public utility property, would result in a
violation of the normalization rules under the Internal Revenue Code of
1986, as amended. Violation of the normalization rules would result in a
significant adverse effect on the Company's results of operation and
liquidity. If there are normalization violations, the Company will forfeit
its investment tax credits that remain unamortized as of the date of the
violation, and will also forfeit the ability to take advantage of
accelerated tax depreciation in years to which the violative order relates.
This could result in payments to the IRS of up to $1.3 billion. The
Company disagrees with certain portions of the decision of the Court of
Appeals, including specifically its decision with respect to federal income
taxes, and has filed an appeal to the Supreme Court of Texas. Other
parties have also filed appeals of this decision to the Supreme Court of
Texas. The Company cannot predict whether such appeals will be accepted by
the Supreme Court of Texas and cannot predict the outcome of any such
appeals or any resulting reconsideration of these issues on remand by the
PUC.
In April 1995, in an appeal of a rate case involving another utility,
the Supreme Court of Texas held that the PUC has considerable discretion in
determining the fair share of consolidated tax savings to be allocated to a
utility and, accordingly, is not required to include losses of unregulated
affiliates in determining such fair share. The Supreme Court also held
that the PUC could not use the tax benefits generated by disallowed
expenses to reduce rates.
THE EXCHANGE OFFER
Purpose of the Exchange Offer
The purpose of the Exchange Offer is to refinance all or a portion of
the Depositary Shares with the Preferred Securities or repurchase all or a
portion of the Depositary Shares and to achieve certain tax efficiencies
for the Company while preserving the Company's flexibility with respect to
future financings. The Company expects to finance cash purchases of
Depositary Shares pursuant to the Exchange Offer with the proceeds of an
offer of securities similar to the Preferred Securities. This refinancing
will permit the Company to deduct interest payable on the Junior
Subordinated Debentures (and any similar debt issued in connection with the
aforementioned financing) for United States federal income tax purposes.
Dividends payable on the Depositary Shares are not tax deductible to the
Company.
General
Participation in the Exchange Offer is voluntary, and Holders of
Depositary Shares should carefully consider whether to tender their
Depositary Shares. Neither the Company nor its Board of Directors makes
any recommendation to Holders of Depositary Shares as to whether to tender
all or any portion of the Depositary Shares owned by such Holder in the
Exchange Offer to elect to receive, as consideration for any Depositary
Shares tendered, either Preferred Securities plus a cash component or a
purchase price in cash only. Holders of Depositary Shares are urged to
consult their financial and tax advisors in making their decisions on what
action to take in light of their own particular circumstances.
Unless the context requires otherwise, the term Holder (a) with
respect to the Depositary Shares, means (i) any person in whose name any
Depositary Shares are registered on the books of Chemical Bank, N.A., as
Depositary, or (ii) any other person who has obtained a properly completed
stock power from the registered Holder or (iii) any person whose
beneficially owned Depositary Shares are held of record by a Book-Entry
Transfer Facility (as defined herein) who desires to deliver such
Depositary Shares by book-entry transfer at a Book-Entry Transfer Facility,
and (b) with respect to any other security, means the person in whose name
such security is registered on the books of the security registrar with
respect thereto.
Terms of the Exchange Offer
At the option of the Holder thereof, the Company will exchange each
Depositary Share validly tendered and accepted by the Company for the
Holder's selection from the following consideration: either a Preferred
Security with a liquidation preference of $25.00 plus a cash component of
$ or cash only in the amount of $ for each $1.875 Depositary
Share; or either a Preferred Security with a liquidation preference of
$25.00 plus a cash component of $ or cash only in the amount of $
for each $1.805 Depositary Share, in each case, upon the terms and subject
to the conditions set forth herein and in the applicable Letter of
Transmittal, See "Procedures for Tendering." In addition, as part of its
Exchange Offer, Holders of Depositary Shares accepted for exchange will be
entitled to receive the applicable Payment in Lieu of Accumulated
Dividends. Under the terms of the Exchange Offer, the Company intends to
accept any of the Depositary Shares of each series validly tendered and not
withdrawn on or prior to the Expiration Date and, unless the Exchange Offer
has been withdrawn or terminated, the Company will deliver Preferred
Securities and/or any cash payment in exchange therefor on the Closing Date
for such series to the tendering Holders of Depositary Shares, subject to
the right of the Company to extend, terminate or amend the Exchange Offer
for such series. The Company expressly reserves the right, in its sole
discretion, to delay acceptance for exchange of Depositary Shares tendered
under the Exchange Offer and the delivery of the Preferred Securities
and/or cash payments with respect to the Depositary Shares accepted for
exchange (subject to Rules 13e-4 and 14e-1 under the Exchange Act, which
require that the Company consummate the Exchange Offer or return the
Depositary Shares deposited by or on behalf of the Holders thereof promptly
after the termination or withdrawal of the Exchange Offer) at any time
prior to the Expiration Date for any reason including (without limitation)
if fewer than Depositary Shares of either series would remain
outstanding upon acceptance of those tendered (which condition may be
waived by the Company).
In all cases, except to the extent waived by the Company, delivery of
Preferred Securities and/or cash payments issued with respect to the
Depositary Shares accepted for exchange pursuant to the Exchange Offer will
be made only after timely receipt by the Exchange Agent of Depositary
Shares (or confirmation of book-entry transfer thereof), a properly
completed and duly executed Letter of Transmittal and any other documents
required thereby.
As of June 30, 1995, there were 7,659,300 $1.875 Depositary Shares and
6,613,700 $1.805 Depositary Shares outstanding. This Prospectus, together
with the applicable Letters of Transmittal, are being sent to all
registered Holders of Depositary Shares of each series as of
______________, 1995.
The Company shall be deemed to have accepted validly tendered
Depositary Shares (or Depositary Shares which the Company has, in its sole
discretion, determined to be defectively tendered, with respect to which
the Company has waived such defect) when, as and if the Company has given
oral or written notice thereof to the Exchange Agent. The Exchange Agent
will act as agent for the tendering Holders for the purpose of receiving
the Preferred Securities from the Company and remitting such Preferred
Securities to tendering Holders who are participating in the Exchange
Offer. Upon the terms and subject to the conditions of the Exchange Offer,
delivery of Preferred Securities will be made to the Exchange Agent on the
Closing Date.
If any tendered Depositary Shares are not accepted for exchange
because of an invalid tender, the occurrence of certain other events set
forth herein or otherwise, unless otherwise requested by the Holder under
"Special Delivery Instructions" in the Letter of Transmittal, such
Depositary Shares will be returned, without expense, to the tendering
Holder thereof (or in the case of Depositary Shares tendered by book-entry
transfer into the Exchange Agent's account at DTC, such Depositary Shares
will be credited to an account maintained at DTC designated by the
participant therein who so delivered such Depositary Shares), as promptly
as practicable after the Expiration Date with respect to such shares or the
withdrawal or termination of the Exchange Offer.
Holders of Depositary Shares will not have any appraisal or
dissenters' rights under the Texas Business Corporation Act in connection
with the Exchange Offer. The Company intends to conduct the Exchange Offer
in accordance with the applicable requirements of the Exchange Act and the
rules and regulations of the Commission thereunder.
Holders who tender Depositary Shares in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the
instructions in the Letter of Transmittal, transfer taxes with respect to
the exchange of Depositary Shares pursuant to the Exchange Offer. See FEES
AND EXPENSES; TRANSFER TAXES.
Expiration Date; Extensions; Amendments; Termination
The Exchange Offer will expire on the Expiration Date. The Company
reserves the right to extend the Exchange Offer with respect to either
series of Depositary Shares in its sole discretion at any time and from
time to time by giving oral or written notice to the Exchange Agent and by
timely public announcement communicated, unless another means is required
by applicable law or regulation, by making a release to the Dow Jones News
Service. During any extension of the Exchange Offer with respect to either
series of Depositary Shares, all Depositary Shares of such series
previously tendered pursuant to the Exchange Offer and not withdrawn will
remain subject to the Exchange Offer. The Company has not established a
date beyond which the Exchange Offer with respect to either series of
Depositary Shares may not be extended. The Company expressly reserves the
right to (i) extend, amend or modify the terms of the Exchange Offer with
respect to either series of Depositary Shares in any manner and (ii)
withdraw or terminate the Exchange Offer with respect to either series of
Depositary Shares and not accept for exchange any such Depositary Shares,
at any time prior to the Expiration Date with respect to such Depositary
Shares for any reason, including (without limitation) if fewer than 100,000
Depositary Shares of such series would remain outstanding upon acceptance
of those tendered in the Exchange Offer (which condition may be waived by
the Company). The Company may therefore amend the annual distribution rate
and/or the amount of the cash component to be paid upon the exchange of
Preferred Securities for Depositary Shares and may independently change the
amount of cash only to be paid for each Depositary Share, in each case,
with respect to either or both series of Depositary Shares. If the Company
makes a material change in the terms of the Exchange Offer with respect to
either series of Depositary Shares or if it waives a material condition of
the Exchange Offer with respect to such series, the Company will extend the
Exchange Offer with respect to such series. Any withdrawal or termination
of the Exchange Offer with respect to such series will be followed as
promptly as practicable by public announcement thereof through the Dow
Jones News Service. If the Company withdraws or terminates the Exchange
Offer with respect to either series of Depositary Shares, it will give
immediate notice to the Exchange Agent, and all Depositary Shares of such
series theretofore tendered pursuant to the Exchange Offer will be returned
promptly to the tendering Holders thereof. See "Withdrawal of Tenders."
The minimum period for which the Exchange Offer with respect to either
series will be extended following a material change or waiver will depend
upon the facts and circumstances, including the relative materiality of the
change or waiver. With respect to a change in the amount of Depositary
Shares sought, a change in the consideration offered or a change in the fee
to be paid to Soliciting Dealers, the Exchange Offer with respect to such
series will be extended for a minimum of 10 Business Days following the
date that notice of such change is first published, sent or given to
Holders of Depositary Shares.
Procedures for Tendering
A separate Letter of Transmittal must be submitted for the tender of
Depositary Shares of each series. Depositary Shares of each series may be
tendered for exchange by indicating on the applicable Letter of Transmittal
the number of shares of such series being tendered. Each tendering Holder
must elect whether to receive Preferred Securities plus an additional cash
component, or cash only, for the Depositary Shares of each series by so
indicating on the applicable Letter of Transmittal for such series.
The tender of Depositary Shares by a Holder thereof pursuant to one of
the procedures described below will constitute an agreement between such
Holder and the Company in accordance with the terms and subject to the
conditions set forth in the Exchange Offer and in the Letter of
Transmittal.
Each Holder of the Depositary Shares wishing to participate in the
Exchange Offer must (i) properly complete and sign the applicable Letter of
Transmittal in accordance with the instructions contained herein and in
such Letter of Transmittal, including such Holder's election to receive
Preferred Securities plus an additional cash component or cash only for all
the Depositary Shares tendered in connection with such Letter of
Transmittal, together with any required signature guarantees, and deliver
the same to the Exchange Agent, at one of its addresses set forth in
"Exchange Agent and Information Agent" prior to the Expiration Date and
either (a) certificates for the Depositary Shares must be received by the
Exchange Agent at such address or (b) such Depositary Shares must be
transferred pursuant to the procedures for book-entry transfer described
below and a confirmation of such book-entry transfer must be received by
the Exchange Agent, in each case prior to the Expiration Date or
(ii) comply with the guaranteed delivery procedures described below.
In order to participate in the Exchange Offer, Holders of Depositary
Shares must comply with the other procedures for tendering in accordance
with the instructions contained herein and in the Letter of Transmittal
prior to the Expiration Date. Except as otherwise noted herein, after the
Expiration Date with respect to a series of Depositary Shares, tendering
Holders of Depositary Shares of such series may not withdraw tendered
shares from the Exchange Offer.
LETTERS OF TRANSMITTAL, CERTIFICATES FOR DEPOSITARY SHARES AND ANY
OTHER REQUIRED DOCUMENTS SHOULD BE SENT ONLY TO THE EXCHANGE AGENT; NOT TO
THE COMPANY, TU ELECTRIC CAPITAL, THE DEALER MANAGERS OR THE INFORMATION
AGENT.
Signature Guarantees. If tendered Depositary Shares are registered in
the name of the signer of a Letter of Transmittal and beneficial ownership
of the Preferred Securities to be issued in exchange therefor is to be
issued (and any untendered Depositary Shares are to be reissued) in the
name of the registered Holder (which term, for the purposes described
herein, shall include any participant in DTC whose name appears on a
security listing as the owner of Depositary Shares), the signature of such
signer need not be guaranteed. If the tendered Depositary Shares are
registered in the name of someone other than the signer of such Letter of
Transmittal, such tendered Depositary Shares must be endorsed or
accompanied by written instruments of transfer in a form satisfactory to
the Company and duly executed by the registered Holder, and the signature
on the endorsement or instrument of transfer must be guaranteed by a
financial institution (including a bank, savings and loans association or
brokerage house) that is a participant in the Security Transfer Agents
Medallion Program or the Stock Exchange Medallion Program (any of the
foregoing hereinafter referred to as an Eligible Institution). If the
Preferred Securities and/or the Depositary Shares not exchanged are to be
delivered to an address other than that of the registered Holder appearing
on the register for the Depositary Shares, the signature in the Letter of
Transmittal must be guaranteed by an Eligible Institution.
Book-Entry Transfer. As used herein, a Book-Entry Transfer Facility
shall mean any of DTC, Midwest Securities Trust Company or Philadelphia
Depository Trust Company. The Company understands that the Exchange Agent
will make a request promptly after the date of this Prospectus to establish
an account with respect to the Depositary Shares at each Book-Entry
Transfer Facility for the purpose of facilitating the Exchange Offer, and
subject to the establishment thereof, any financial institution that is a
participant in a Book-Entry Transfer Facility's system may make book-entry
delivery of Depositary Shares by causing such Book-Entry Transfer Facility
to transfer such Depositary Shares in accordance with such Book-Entry
Transfer Facility's Automated Tender Offer Program or other similar
procedures (ATOP) for such book-entry transfers. However, the exchange for
the Depositary Shares so tendered will only be made after timely
confirmation (Book-Entry Confirmation) of such Book-Entry Transfer of
Depositary Shares into the Exchange Agent's account and timely receipt by
the Exchange Agent of an Agent's Message (as such term is defined in the
next sentence), the Letter of Transmittal and any other documents required
by the Letter of Transmittal. The term Agent's Message means a message,
transmitted by a Book-Entry Transfer Facility and received by the Exchange
Agent and forming a part of a Book-Entry Confirmation, which states that
such Book-Entry Transfer Facility has received an express acknowledgment
from a participant tendering Depositary Shares that is the subject of such
Book-Entry Confirmation that such participant has received and agrees to be
bound by the terms of the Letter of Transmittal, and that the Company may
enforce such agreement against such participant.
Guaranteed Delivery. If a Holder desires to participate in the
Exchange Offer and time will not permit a Letter of Transmittal or
certificates for Depositary Shares to reach the Exchange Agent before the
Expiration Date or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if the Exchange Agent
has received at its office prior to the Expiration Date, a letter, telegram
or facsimile transmission from an Eligible Institution setting forth the
name and address of the tendering Holder, the name(s) in which the
Depositary Shares are registered and, if the Depositary Shares are held in
certificated form, the certificate numbers of the Depositary Shares to be
tendered, and stating that the tender is being made thereby and
guaranteeing that within three NYSE trading days after the date of
execution of such letter, telegram or facsimile transmission by the
Eligible Institution, the Depositary Shares in proper form for transfer
together with a properly completed and duly executed Letter of Transmittal
(and any other required documents), or a confirmation of book-entry
transfer of such Depositary Shares into the Exchange Agent's account at a
Book-Entry Transfer Facility, will be delivered by such Eligible
Institution. Unless the Depositary Shares being tendered by the above-
described method are deposited with the Exchange Agent within the time
period set forth above (accompanied or preceded by a properly completed
Letter of Transmittal and any other required documents) or a confirmation
of book-entry transfer of such Depositary Shares into the Exchange Agent's
account at a Book-Entry Transfer Facility in accordance with such Book-
Entry Transfer Facility's ATOP procedures is received, the Company may, at
its option, reject the tender. In addition to the copy being transmitted
herewith, copies of a Notice of Guaranteed Delivery which may be used by
Eligible Institutions for the purposes described in this paragraph are
available from the Exchange Agent and the Information Agent.
Miscellaneous. All questions as to the validity, form, eligibility
(including time of receipt) and acceptance for exchange of any tender of
Depositary Shares will be determined by the Company, in its sole
discretion, and such determination will be final and binding. The Company
reserves the absolute right to reject any or all tenders that it determines
are not in proper form or the acceptance for exchange of which may, in the
opinion of the Company's counsel, be unlawful. The Company also reserves
the absolute right to waive any defect or irregularity in the tender of any
Depositary Shares, and the Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter
of Transmittal) will be final and binding. None of the Company, the
Exchange Agent, the Dealer Managers, the Information Agent or any other
person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any
such notification.
Tenders of Depositary Shares involving any irregularities will not be
deemed to have been made until such irregularities have been cured or
waived. Depositary Shares received by the Exchange Agent that are not
validly tendered and as to which the irregularities have not been cured or
waived will be returned by the Exchange Agent to the tendering Holder (or
in the case of Depositary Shares tendered by book-entry transfer into the
Exchange Agent's account at a Book-Entry Transfer Facility, such Depositary
Shares will be credited to an account maintained at such Book-Entry
Transfer Facility designated by the participant therein who so delivered
such Depositary Shares), unless otherwise requested by the Holder in the
Letter of Transmittal, as promptly as practicable after the Expiration Date
or the withdrawal or termination of the Exchange Offer.
Letter of Transmittal
The Letter of Transmittal with respect to each series of Depositary
Shares contains, among other things, the following terms and conditions,
which are part of the Exchange Offer:
The party tendering Depositary Shares for exchange (Transferor)
exchanges, assigns and transfers such Depositary Shares to the Company and
irrevocably constitutes and appoints the Exchange Agent as the Transferor's
agent and attorney-in-fact to cause such Depositary Shares to be assigned,
transferred and exchanged. The Transferor represents and warrants that it
has full power and authority to tender, exchange, assign and transfer such
Depositary Shares and, in the event such an election has been made, to
acquire beneficial ownership of Preferred Securities issuable upon the
exchange of such tendered Depositary Shares, and that, when such
Transferor's Depositary Shares are accepted for exchange, the Company will
acquire good and unencumbered title to such tendered Depositary Shares free
and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim. The Transferor also represents that it will,
upon request, execute and deliver any additional documents deemed by the
Company to be necessary or desirable to complete the exchange, assignment
and transfer of the tendered Depositary Shares or transfer ownership of
such Depositary Shares on the account books maintained by a Book-Entry
Transfer Facility. All authority conferred by the Transferor will survive
the death, bankruptcy or incapacity of the Transferor and every obligation
of the Transferor shall be binding upon the heirs, legal representative,
successors, assigns, executors and administrators of such Transferor.
Withdrawal of Tenders
Tenders of Depositary Shares of either series pursuant to the Exchange
Offer may be withdrawn at any time prior to the Expiration Date with
respect to such series and, unless accepted for exchange by the Company,
may be withdrawn at any time after December ___, 1995. Depositary Shares
of either series that have been withdrawn may be retendered prior to the
Expiration Date with respect to such series for exchange for the same or a
different form of offered consideration.
To be effective, a written notice of withdrawal delivered by mail,
hand delivery or facsimile transmission must be timely received by the
Exchange Agent at the address set forth below under "Exchange Agent and
Information Agent." The method of notification is at the risk and election
of the Holder. Any such notice of withdrawal must specify (i) the series
of the Depositary Shares to be withdrawn (ii) the Holder named in the
Letter of Transmittal as having tendered Depositary Shares to be withdrawn,
(iii) if the Depositary Shares are held in certificated form, the
certificate numbers of the Depositary Shares to be withdrawn, (iv) that
such Holder is withdrawing his election to have such Depositary Shares
exchanged and (v) the name of the registered Holder of such Depositary
Shares, and must be signed by the Holder in the same manner as the original
signature on the Letter of Transmittal (including any required signature
guarantees) or be accompanied by evidence satisfactory to the Company that
the person withdrawing the tender has succeeded to the beneficial ownership
of the Depositary Shares being withdrawn. The Exchange Agent will return
the properly withdrawn Depositary Shares promptly following receipt of
notice of withdrawal. If Depositary Shares have been tendered pursuant to
the procedure for book-entry transfer, any notice of withdrawal must
specify the name and number of the account at a Book-Entry Transfer
Facility to be credited with the withdrawn Depositary Shares and otherwise
comply with such Book-Entry Transfer Facility's procedures. All questions
as to the validity of notice of withdrawal, including time of receipt, will
be determined by the Company, in its sole discretion, and such
determination will be final and binding on all parties. Properly withdrawn
Depositary Shares, however, may be retendered by following the procedures
therefor described elsewhere herein at any time prior to the Expiration
Date with respect thereto. See "Procedures for Tendering."
Acceptance of Depositary Shares; Delivery of Preferred Securities
The Company expressly reserves the right, in its sole discretion, to
delay acceptance for exchange of Depositary Shares of either series
tendered under the Exchange Offer and the delivery of the Preferred
Securities with respect to the Depositary Shares of such series accepted
for exchange (subject to Rules 13e-4 and 14e-1 under the Exchange Act,
which require that the Company consummate the Exchange Offer or return the
Depositary Shares deposited by or on behalf of the Holders thereof promptly
after the termination or withdrawal of the Exchange Offer) at any time
prior to the Expiration Date with respect thereto for any reason including
(without limitation) if fewer than Depositary Shares of
such series would remain outstanding upon acceptance of those tendered
(which condition may be waived by the Company).
All Depositary Shares not accepted pursuant to the Exchange Offer will
be returned to the tendering Holders at the Company's expense as promptly
as practicable following the Expiration Date.
All Depositary Shares of either series accepted pursuant to the
Exchange Offer will be delivered to the Company in exchange for Preferred
Securities and will be retired and canceled and a corresponding number of
shares of the series of Preferred Stock underlying such series of
Depositary Shares (in each case, Underlying Preferred) will be withdrawn
from the Depositary and canceled.
Exchange Agent and Information Agent
The Exchange Agent is:
BY HAND: BY OVERNIGHT COURIER:
Office Hours: 9:00 a.m. 5:00 p.m. c/o
(New York City Time)
New York, New York
BY MAIL:
Facsimile Transmission
(For Eligible Institutions Only)
Confirm Receipt of Notice of Guaranteed Delivery by Telephone:
Shareholder Inquiries:
(Toll Free)
D.F. King & Co. Inc. has been retained by the Company as the
Information Agent to assist in connection with the Exchange Offer.
Questions and requests for assistance regarding the Exchange Offer,
requests for additional copies of this Prospectus or of Letters of
Transmittal and requests for Notice of Guaranteed Delivery may be directed
to D.F. King & Co. Inc. at . Banks and
brokers call collect (212) . All others call toll free
(800) .
The Company will pay the Exchange Agent and Information Agent
reasonable and customary fees for their services and will reimburse them
for all their reasonable out-of-pocket expenses in connection therewith.
Dealer Managers
Merrill Lynch & Co., Goldman, Sachs & Co. and Lehman Brothers are
acting as Dealer Managers for the Exchange Offer under a Dealer Managers
Agreement dated , 1995 (Dealer Managers Agreement).
Pursuant to the Dealer Managers Agreement, the Company has agreed to pay
the Dealer Managers, upon acceptance for payment of Depositary Shares
pursuant to the Exchange Offer, a fee of $___ per Depositary Share
purchased in the Exchange Offer. The Dealer Managers will also be
reimbursed by the Company for their reasonable out-of-pocket expenses,
including certain attorneys' fees. The Company has agreed to indemnify the
Dealer Managers against certain liabilities in connection with the Exchange
Offer, including certain liabilities under the federal securities laws.
See FEES AND EXPENSES; TRANSFER TAXES.
The Dealer Managers will perform those services in connection with the
Exchange Offer as are customarily performed by investment banking concerns
acting as dealer managers in connection with offers of like nature,
including, but not limited to, soliciting tenders of Depositary Shares
pursuant to the Exchange Offer and communicating generally, and responding
to requests for information and material, regarding the Exchange Offer and
the Preferred Securities with brokers, dealers, commercial banks and trust
companies and other persons, including the Holders of Depositary Shares.
Each of Merrill Lynch & Co., Goldman, Sachs & Co. and Lehman Brothers
engages in transactions with, and from time to time has performed services
for, the Company.
LISTING AND TRADING OF PREFERRED SECURITIES AND DEPOSITARY SHARES
The Preferred Securities constitute a new issue of securities with no
established trading market. While the Company will apply to list the
Preferred Securities on the NYSE, there can be no assurance that an active
market for the Preferred Securities will develop or be sustained in the
future. The Dealer Managers currently plan to make a market in the
Preferred Securities following the completion of the Exchange Offer and may
buy and sell the Preferred Securities on a "when and if issued" basis prior
to the completion of the Exchange Offer. However, there can be no
assurance that the Dealer Managers will engage in such activities or that
any active market in the Preferred Securities will develop or be
maintained. Accordingly, no assurance can be given as to the liquidity of,
or trading markets for, the Preferred Securities.
The Depositary Shares are currently listed on the NYSE. The following
table sets forth for the calendar quarters indicated the high and low sale
prices as reported by the NYSE.
High Low
---- ---
Depositary Shares Depositary Shares
----------------- -----------------
$1.875 Series $1.805 Series $1.875 Series $1.805
Series
1993:
Third Quarter *$26 1/4 *$25 1/8
Fourth Quarter 26 3/8 *$25 1/2 24 1/2 *$24
1994:
First Quarter 25 7/8 25 3/4 23 22 1/4
Second Quarter 23 1/2 22 3/4 21 7/8 20 1/2
Third Quarter 22 7/8 21 7/8 20 1/2 20
Fourth Quarter 21 1/4 21 19 3/8 18 1/2
1995:
First Quarter 23 22 1/4 20 3/8 19 7/8
Second Quarter 24 7/8 24 3/8 22 21 3/8
Third Quarter
(through
September 26,
1995) 25 5/8 24 3/4 25 5/8 22 7/8
____________
*From date of issuance to end of period.
Holders of Depositary Shares who do not tender their Depositary Shares
in the Exchange Offer or whose Depositary Shares are not accepted for
exchange will continue to hold such Depositary Shares and will be entitled
to all the rights and preferences, and will be subject to all of the
limitations, as heretofore have been applicable thereto. To the extent
that a certain number of shares of Depositary Shares of either series are
tendered and accepted in the Exchange Offer and/or the number of Holders of
Depositary Shares of either series is reduced to below certain levels, the
Company, pursuant to NYSE rules and regulations, would be required to
delist the Depositary Shares of such series from the NYSE, and the trading
market for untendered Depositary Shares of such series could be adversely
affected. The Company does not believe that the Exchange Offer has a
reasonable likelihood of causing the Depositary Shares of either series to
be delisted from the NYSE.
FEES AND EXPENSES; TRANSFER TAXES
The expenses of soliciting tenders of the Depositary Shares will be
borne by the Company. For compensation to be paid to the Dealer Managers,
see THE EXCHANGE OFFER -- "Dealer Managers." The total cash expenditures
to be incurred by the Company, other than fees payable to the Dealer
Managers, but including the expenses of the Dealer Managers, printing,
accounting and certain legal fees, and the fees and expenses of the
Exchange Agent, the Information Agent and the Trustee under the Indenture,
are estimated to be approximately $______________.
Subject to the receipt of a properly completed and duly executed
notice included in the materials provided to brokers and dealers (Notice of
Solicited Tenders), the Company will pay to any Soliciting Dealer a
solicitation fee of $ per Depositary Share validly tendered, accepted
by the Company and exchanged for Preferred Securities plus cash or $
per Depositary Share validly tendered, accepted by the Company and
exchanged for cash only, in each case pursuant to the Exchange Offer.
"Soliciting Dealer" includes (i) any broker or dealer in securities,
including the Dealer Manager in its capacity as a broker or dealer, who is
a member of any national securities exchange or of the National Association
of Securities Dealers, Inc. (NASD), (ii) any foreign broker or dealer not
eligible for membership in the NASD who agrees to conform to the NASD's
Rules of Fair Practice in soliciting tenders outside the United States to
the same extent as though it were an NASD member, or (iii) any bank or
trust company, any one of whom has solicited and obtained a tender pursuant
to the Exchange Offer. No such fee shall be payable to a Soliciting Dealer
in respect of Depositary Shares registered in the name of such Soliciting
Dealer unless such Depositary Shares are being held by such Soliciting
Dealer as nominee and such Depositary Shares are being tendered for the
benefit of one or more beneficial owners identified in the applicable
Letter of Transmittal or in the applicable Notice of Solicited Tenders. No
such fee shall be payable to a Soliciting Dealer with respect to the tender
of Depositary Shares by a Holder of record, for the benefit of the
beneficial owner, unless the beneficial owner has designated such
Soliciting Dealer. No such fee shall be payable to a Soliciting Dealer
unless the Soliciting Dealer returns a Notice of Solicited Tenders to the
Depositary within five Business Days after the applicable Expiration Date.
No such fee shall be payable to a Soliciting Dealer to the extent such
Soliciting Dealer is required for any reason to transfer the amount of such
fee to any person (other than itself). The Dealer Managers may not, until
the Expiration Date with respect to either series of Depositary Shares,
buy, sell, deal or trade in the Depositary Shares of such series for their
own account.
No broker, dealer, bank, trust company or fiduciary shall be deemed to
be the agent of the Company, TU Electric Capital, the Dealer Managers, the
Exchange Agent or the Information Agent for purposes of the Exchange Offer
except that, in any jurisdiction where the securities, blue sky, or other
laws require the Exchange Offer to be made by or through a licensed broker
or dealer, the Exchange Offer is being made on behalf of the Company, by
the Dealer Managers or one or more registered brokers or dealers licensed
under the law of such jurisdiction.
The Company will pay all transfer taxes, if any, applicable to the
exchange of Depositary Shares pursuant to the Exchange Offer. If, however,
beneficial ownership of Preferred Securities or shares of Depositary Shares
not tendered or accepted for exchange, are to be issued in the name of, or
are to be delivered to, any person other than the registered Holder of the
Depositary Shares tendered or if a transfer tax is imposed for any reason
other than the exchange of Depositary Shares pursuant to the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered Holder or any other person) will be payable by the tendering
Holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with a Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering Holder. Tendering
Holders will not be obligated to pay brokerage commissions or fees to the
Dealer Managers, the Exchange Agent, the Information Agent, the Company or
TU Electric Capital.
DESCRIPTION OF THE PREFERRED SECURITIES
TU Electric Capital was authorized and created by the Original Trust
Agreement. The Preferred Securities and the Common Securities will be
created pursuant to the terms of the Trust Agreement. The Preferred
Securities represent undivided beneficial interests in the assets of TU
Electric Capital and entitle the Holders thereof to a preference over the
Common Securities in certain circumstances with respect to distributions
and amounts payable on redemption or liquidation, as well as other benefits
as described in the Trust Agreement. The following summaries of certain
provisions of the Trust Agreement do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, the
provisions of the Trust Agreement, including the definitions therein of
certain terms, and the Trust Indenture Act. Wherever particular sections
or defined terms of the Trust Agreement are referred to, such sections or
defined terms are incorporated herein by reference. The Trust Agreement
has been filed as an exhibit to the Registration Statement of which this
Prospectus forms a part.
General
All of the Common Securities are owned by the Company. The Common
Securities rank pari passu, and payments will be made thereon pro rata,
with the Preferred Securities based on the liquidation preference of the
Trust Securities, except as described under "Subordination of Common
Securities." (Section 4.03) The Junior Subordinated Debentures will be
owned by TU Electric Capital and held by the Property Trustee in trust for
the benefit of the Holders of the Trust Securities. (Section 2.09). The
Guarantee is a full and unconditional guarantee with respect to the
Preferred Securities but does not guarantee payment of distributions or
amounts payable on redemption or liquidation of the Preferred Securities
when TU Electric Capital does not have funds available to make such
payments.
Distributions
The distributions payable on the Preferred Securities will be fixed at
a rate per annum of % of the stated liquidation preference amount
thereof. The term "distributions" as used herein includes interest payable
on overdue distributions, unless otherwise stated. The amount of
distributions 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.
(Section 4.01(b)).
Distributions on the Preferred Securities will be cumulative, will
accrue from the date of initial issuance thereof, and will be payable
quarterly in arrears, on March 31, June 30, September 30 and December 31 of
each year, commencing , 1995, except as otherwise described
below. Such distributions will originally accrue from, and include, the
Closing Date and will accrue to, and include, the first distribution
payment date, and thereafter will accrue from, and exclude, the last
distribution payment date through which distributions have been paid. In
the event that any date on which distributions are otherwise payable on the
Preferred Securities is not a Business Day, payment of the distribution
payable on such date will be made on the next succeeding Business Day (and
without any interest or other payment in respect of any such delay) except
that, if such Business Day is in the next succeeding calendar year, payment
of such distribution shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such date
(each date on which distributions are otherwise payable in accordance with
the foregoing, a distribution payment date). (Section 4.01(a)). A
Business Day is used herein to mean any day other than a Saturday or a
Sunday or a day on which banking institutions in The City of New York are
authorized or required by law or executive order to remain closed or a day
on which the Corporate Trust Office of the Property Trustee or the
Debenture Trustee (as defined herein) is closed for business.
It is anticipated that the income of TU Electric Capital available for
distribution to the Holders of the Preferred Securities will be limited to
payments on the Junior Subordinated Debentures for which TU Electric
Capital will exchange the Preferred Securities and the Common Securities.
See DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES. If the Company does
not make interest payments on the Junior Subordinated Debentures, the
Property Trustee will not have funds available to pay distributions on the
Preferred Securities. The payment of distributions (if and to the extent
TU Electric Capital has sufficient funds available for the payment of such
distributions) is guaranteed on a limited basis by the Company as set forth
herein under DESCRIPTION OF THE GUARANTEE.
Distributions on the Preferred Securities will be payable to the
Holders thereof as they appear on the register of TU Electric Capital on
the relevant record dates, which is 15 days prior to the relevant
distribution payment date or if such date is not a Business Day, the next
succeeding Business Day. (Section 4.01(d)).
The Company has the right under the Indenture pursuant to which it
will issue the Junior Subordinated Debentures to extend the interest
payment period from time to time on the Junior Subordinated Debentures to a
period not exceeding 20 consecutive quarters, with the consequence that
quarterly distributions on the Preferred Securities would be deferred (but
would continue to accrue with interest payable on unpaid distributions
at the rate per annum set forth above, compounded quarterly) by TU
Electric Capital during any such Extension Period. In the event that
the Company exercises this right, during such period the Company
may not declare or pay any dividend or distribution on (other than
dividends paid in shares of Common Stock of the Company), or redeem,
purchase, acquire or make a liquidation payment with respect to, any of its
capital stock, or make any guarantee payments with respect to the foregoing
or redeem any indebtedness that is pari passu with the Junior Subordinated
Debentures. Any Extension Period with respect to payment of interest on
the Junior Subordinated Debentures, or any extended interest payment period
in respect of other Debt Securities or on any similar securities will apply
to all such securities and will also apply to distributions with respect to
the Preferred Securities and all other securities with terms substantially
the same as the Preferred Securities. Prior to the termination of any such
Extension Period, the Company may further extend the interest payment
period, provided that such Extension Period together with all such previous
and further extensions thereof may not exceed 20 consecutive quarters or
extend beyond the maturity of the Junior Subordinated Debentures. Upon the
termination of any Extension Period and the payment of all amounts then
due, the Company may select a new extended interest payment period, subject
to the foregoing requirements. See DESCRIPTION OF THE JUNIOR SUBORDINATED
DEBENTURES -- "Interest" and "Option to Extend Interest Payment Period."
The Holders of Preferred Securities do not have a right to appoint a
special representative in the event that the Company defers interest on the
Junior Subordinated Debentures.
Redemption of Preferred Securities
The Junior Subordinated Debentures will mature on _________, 2030 and
the Company has the right to redeem the Junior Subordinated Debentures in
whole or in part on or after , or earlier in certain
circumstances upon the occurrence of a Tax Event, subject to the conditions
described under DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES --
"Optional Redemption."
Upon the repayment of the Junior Subordinated Debentures, whether at
maturity or upon earlier redemption as provided in the Indenture, the
proceeds from such repayment shall be applied by the Property Trustee to
redeem a Like Amount (as defined herein) of Trust Securities, upon not less
than 30 nor more than 60 days' notice, at the redemption price plus accrued
and unpaid distributions. See DESCRIPTION OF THE JUNIOR SUBORDINATED
DEBENTURES -- "Optional Redemption."
Like Amount means (i) with respect to a redemption of Trust
Securities, Preferred Securities and Common Securities, each in amounts
having a liquidation value equal to the proportion all such securities have
to the liquidation value of all the Trust Securities, together having an
aggregate liquidation value equal to the principal amount of Junior
Subordinated Debentures to be contemporaneously redeemed in accordance with
the Indenture, the proceeds of which are to be used to pay the redemption
price plus accrued and unpaid distributions of such Trust Securities and
(ii) with respect to a distribution of Junior Subordinated Debentures to
Holders of Trust Securities in connection with a liquidation of TU Electric
Capital upon the occurrence of a Tax Event or the bankruptcy, termination
or liquidation of the Company, Junior Subordinated Debentures having a
principal amount equal to the liquidation value of the Trust Securities of
the Holders to which such Junior Subordinated Debentures are distributed.
Tax Event Redemption or Distribution
If at any time, a Tax Event shall occur and be continuing, TU Electric
Capital shall, unless the Junior Subordinated Debentures are redeemed in
the limited circumstances described below, be terminated with the result
that, after satisfaction of creditors of TU Electric Capital, if any,
Junior Subordinated Debentures in a Like Amount of the Preferred Securities
and the Common Securities would be distributed on a pro rata basis to the
Holders of the Preferred Securities and the Common Securities in
liquidation of such Holders' interests in TU Electrical Capital, within 90
days following the occurrence of such Tax Event; provided, however, that as
a condition of such termination and distribution, the Administrative
Trustees shall have received an opinion of nationally recognized
independent tax counsel experienced in such matters (No Recognition
Opinion), which opinion may rely on any then applicable published revenue
rulings of the Internal Revenue Service, to the effect that the Holders of
the Preferred Securities will not recognize any gain or loss for United
States federal income tax purposes as a result of such termination and
distribution of Junior Subordinated Debentures; and, provided, further,
that, if at the time there is available to TU Electric Capital the
opportunity to eliminate, within such 90-day period, the Tax Event by
taking some ministerial action, such as filing a form or making an
election, or pursuing some other similar reasonable measure, which has no
adverse effect on TU Electric Capital or the Company or the Holders of the
Preferred Securities, TU Electric Capital will pursue such measure in lieu
of termination. Furthermore, if (i) the Administrative Trustees have
received an opinion of nationally recognized independent tax counsel
experienced in such matters (Redemption Tax Opinion) that, as a result of a
Tax Event, there is more than an insubstantial risk that the Company would
be precluded from deducting the interest on the Junior Subordinated
Debentures for United States federal income tax purposes even if the Junior
Subordinated Debentures were distributed to the Holders of Preferred
Securities and Common Securities in liquidation of such Holders' interests
in TU Electric Capital as described above or (ii) the Administrative
Trustees shall have been informed by such tax counsel that a No Recognition
Opinion cannot be delivered to TU Electric Capital, the Company shall have
the right, upon not less than 30 nor more than 60 days' notice, to redeem
the Junior Subordinated Debentures in whole or in part for cash within 90
days following the occurrence of such Tax Event, and promptly following
such redemption Preferred Securities and Common Securities with an
aggregate liquidation preference amount equal to the aggregate principal
amount of the Junior Subordinated Debentures so redeemed will be redeemed
by TU Electric Capital at the Redemption Price on a pro rata basis,
provided, however, that if at the time there is available to the Company or
the Administrative Trustees the opportunity to eliminate, within such 90-
day period, the Tax Event by taking some ministerial action, such as filing
a form or making an election, or pursuing some other similar reasonable
measure, which has no adverse effect on TU Electric Capital, the Company or
the Holders of the Preferred Securities, the Company will pursue such
measure in lieu of redemption and provided further that the Company shall
have no right to redeem the Junior Subordinated Debentures while the
Administrative Trustees on behalf of TU Electric Capital are pursuing any
such ministerial action. The Common Securities will be redeemed on a pro
rata basis with the Preferred Securities, except that if an Event of
Default under the Trust Agreement has occurred and is continuing, the
Preferred Securities will have a priority over the Common Securities with
respect to payment of the Redemption Price.
"Tax Event" means the receipt by TU Electric Capital of an opinion of
counsel experienced in such matters to the effect that, as a result of (a)
any amendment to, clarification of, or change (including any announced
prospective change) in, the laws or treaties (or any regulations
thereunder) of the United States or any political subdivision or taxing
authority thereof or therein affecting taxation, (b) any judicial decision
or any official administrative pronouncement, ruling, regulatory procedure,
notice or announcement (including any notice or announcement of intent to
issue or adopt any such administrative pronouncement, ruling, regulatory
procedure or regulation) (each, an Administrative Action), or (c) any
amendment to, clarification of, or change in the official position or the
interpretation of any such Administrative Action or judicial decision or
any interpretation or pronouncement that provides for a position with
respect to such Administrative Action or judicial decision that differs
from the theretofore generally accepted position, in each case by any
legislative body, court, governmental authority or regulatory body,
irrespective of the manner in which such amendment, clarification or change
is made known, which amendment, clarification, or change is effective,
which Administrative Action is taken or which judicial decision is issued,
in each case on or after the date of issuance of the Preferred Securities,
there is more than an insubstantial risk that (i) TU Electric Capital is,
or will be, subject to United States federal income tax with respect to
interest received on the Junior Subordinated Debentures, (ii) interest
payable by the Company on the Junior Subordinated Debentures is not, or
will not be, fully deductible for United States federal income tax
purposes, or (iii) TU Electric Capital is, or will be, subject to more than
a de minimis amount of other taxes, duties or other governmental charges.
On the date fixed for any distribution of Junior Subordinated
Debentures, upon termination of TU Electric Capital (i) the Preferred
Securities and the Common Securities will no longer be deemed to be
outstanding and (ii) certificates representing Preferred Securities will be
deemed to represent Junior Subordinated Debentures having an aggregate
principal amount equal to the stated liquidation preference amount of, and
bearing accrued and unpaid interest equal to accrued and unpaid
distributions on, such Preferred Securities until such certificates are
presented to the Company or its agent for transfer or reissuance.
There can be no assurance as to the market price for the Junior
Subordinated Debentures which may be distributed in exchange for Preferred
Securities if a termination and liquidation of TU Electric Capital were to
occur. Accordingly, the Junior Subordinated Debentures which the investor
may subsequently receive on termination and liquidation of TU Electric
Capital, may trade at a discount to the price of the Preferred Securities
exchanged. If the Junior Subordinated Debentures are distributed to the
Holders of Preferred Securities upon the termination of TU Electric
Capital, the Company will use its best efforts to list the Junior
Subordinated Debentures on the NYSE or on such other exchange on which the
Preferred Securities are then listed.
Redemption Procedures
The Company may not redeem fewer than all the Junior Subordinated
Debentures and TU Electric Capital may not redeem fewer than all the
outstanding Preferred Securities unless all accrued and unpaid
distributions have been paid on all Preferred Securities for all quarterly
distribution periods terminating on or prior to the date of redemption or
if a partial redemption of the Preferred Securities would result in the
delisting of the Preferred Securities by any national securities exchange
on which the Preferred Securities are then listed.
Preferred Securities redeemed on each redemption date 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 Securities shall be made and the
redemption price plus accrued and unpaid distributions shall be deemed
payable on each date selected for redemption (Redemption Date) only to the
extent that TU Electric Capital has funds available for the payment of such
redemption price plus accrued and unpaid distributions. (Section 4.02(c)).
See also "Subordination of Common Securities."
If TU Electric Capital gives a notice of redemption in respect of
Preferred Securities (which notice will be irrevocable), then, on or before
the Redemption Date, TU Electric Capital will irrevocably deposit with the
paying agent for the Preferred Securities funds sufficient to pay the
applicable redemption price plus accrued and unpaid distributions and will
give such paying agent irrevocable instructions and authority to pay the
redemption price plus accrued and unpaid distributions to the Holders
thereof upon surrender of their certificates evidencing Preferred
Securities. Notwithstanding the foregoing, distributions payable on or
prior to the redemption date for any Preferred Securities called for
redemption shall be payable to the Holders of such Preferred Securities on
the relevant record dates for the related distribution payment dates. If
notice of redemption shall have been given and funds deposited as required,
then on the Redemption Date, all rights of Holders of such Preferred
Securities so called for redemption will cease, except the right of the
Holders of such Preferred Securities to receive the redemption price plus
accrued and unpaid distributions, but without interest thereon, and such
Preferred Securities will cease to be outstanding. In the event that any
date fixed for redemption of Preferred Securities is not a Business Day,
then payment of the amount payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay). In the event that payment of the
redemption price plus accrued and unpaid distributions in respect of
Preferred Securities called for redemption is improperly withheld or
refused and not paid either by TU Electric Capital or by the Company
pursuant to the Guarantee described herein under DESCRIPTION OF THE
GUARANTEE, distributions on such Preferred Securities will continue to
accrue at the then applicable rate, from the original redemption date to
the date of payment, in which case the actual payment 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, without limitation, United
States federal securities law), the Company may at any time and from time
to time purchase outstanding Preferred Securities by tender, in the open
market or by private agreement.
If less than all the Trust Securities are to be redeemed on a
Redemption Date, then the aggregate liquidation preference of such
securities to be redeemed shall be allocated on a pro rata basis to the
Common Securities and the Preferred Securities. The particular Preferred
Securities to be redeemed shall be selected not more than 60 days prior to
the Redemption Date by the Property Trustee from the outstanding Preferred
Securities not previously called for redemption, by such method as the
Property Trustee shall deem fair and appropriate and which may provide for
the selection for redemption of Preferred Securities in liquidation
preference amounts equal to $25 or integral multiples thereof. The
Property Trustee shall promptly notify the security registrar in writing of
the Preferred Securities selected for redemption and, in the case of any
Preferred Securities selected for partial redemption, the liquidation
preference amount thereof to be redeemed. For all purposes of the Trust
Agreement, unless the context otherwise requires, all provisions relating
to the redemption of Preferred Securities shall relate, in the case of any
Preferred Securities redeemed or to be redeemed only in part, to the
portion of the liquidation preference amount of Preferred Securities that
has been or is to be redeemed. (Section 4.02(f)).
Subordination of Common Securities
Payment of distributions on, and the redemption price plus accrued and
unpaid distributions of, the Trust Securities, shall be made pro rata based
on the liquidation preference of the Trust Securities; provided, however,
that if on any distribution payment date or Redemption Date a default (as
described below, see "Events of Default; Notice") under the Trust Agreement
shall have occurred and be continuing, no payment of any Distribution on,
or redemption price plus accrued and unpaid distributions of, any Common
Security, and no other payment on account of the redemption, liquidation or
other acquisition of Common Securities, shall be made unless payment in
full in cash of all accumulated and unpaid distributions on all outstanding
Preferred Securities for all distribution periods terminating on or prior
thereto, or in the case of payment of the redemption price plus accrued and
unpaid distributions, the full amount of such redemption price plus accrued
and unpaid distributions on all outstanding Preferred Securities, shall
have been made or provided for, and all funds available to the Property
Trustee shall first be applied to the payment in full of all distributions
on, or redemption price plus accrued and unpaid distributions of, Preferred
Securities then due and payable. (Section 4.03(a)).
In the case of any default under the Trust Agreement resulting from an
Event of Default under the Indenture, the Holder of Common Securities will
be deemed to have waived any such default under the Trust Agreement until
the effect of all such Defaults with respect to the Preferred Securities
have been cured, waived or otherwise eliminated. Until any such default
under such Trust Agreement with respect to the Preferred Securities has
been so cured, waived or otherwise eliminated, the Property Trustee shall
act solely on behalf of the Holders of the Preferred Securities and not the
Holders of the Common Securities, and only Holders of Preferred Securities
will have the right to direct the Property Trustee to act on their behalf.
(Section 4.03(b)).
Liquidation Distribution upon Termination
Pursuant to the Trust Agreement, TU Electric Capital shall terminate
and shall be liquidated by the Property Trustee on the first to occur of:
(i) December 31, [ ], the expiration of the term of TU Electric Capital;
(ii) the bankruptcy, dissolution or liquidation of the Company; (iii) the
occurrence of a Tax Event; and (iv) the redemption of all of the Preferred
Securities. (Sections 9.01 and 9.02).
If an early termination occurs as described in clause (ii) and (iii)
above, TU Electric Capital shall be liquidated by the Property Trustee as
expeditiously as the Property Trustee determines to be appropriate by
adequately providing for the satisfaction of liabilities of creditors , if
any, and by distributing to each Holder of Preferred Securities and Common
Securities a Like Amount of Junior Subordinated Debentures, unless such
distribution is determined by the Property Trustee not to be practical, in
which event such Holders will be entitled to receive, out of the assets of
TU Electric Capital available for distribution to Holders after adequate
provision, as determined by the Property Trustee, has been made for the
satisfaction of liabilities of creditors, if any, an amount equal to, in
the case of Holders of Preferred Securities, the aggregate liquidation
preference of the Preferred Securities plus accrued and unpaid
distributions thereon to the date of payment (such amount being the
Liquidation Distribution). If such Liquidation Distribution can be paid
only in part because TU Electric Capital has insufficient assets available
to pay in full the aggregate Liquidation Distribution, then the amounts
payable directly by TU Electric Capital on the Preferred Securities shall
be paid on a pro rata basis. The Company as Holder of the Common
Securities, will be entitled to receive distributions upon any such
termination pro rata with the Holders of the Preferred Securities, except
that if default has occurred and is continuing under the Trust Agreement,
the Preferred Securities shall have a preference over the Common
Securities. (Sections 9.04(a) and 9.04(d)).
Events of Default; Notice
Any one of the following events constitutes an Event of Default under
the Trust Agreement (whatever the reason for such Event of Default and
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):
(i) the occurrence of an Event of Default as defined in Section 801 of
the Indenture (see DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES --
"Events of Default"); or
(ii) default by the TU Electric Capital in the payment of any
distribution when it becomes due and payable, and continuation of such
default for a period of 30 days; or
(iii) default by the TU Electric Capital in the payment of any
redemption price, plus accrued and unpaid distributions, of any Trust
Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect,
of any covenant or warranty of the Property Trustee in the Trust Agreement
(other than a covenant or warranty a default in the performance of which or
the breach of which is specifically dealt with in clause (ii) or (iii)
above), and continuation of such default or breach for a period of 60 days
after there has been given, by registered or certified mail, to the
Property Trustee by the Holders of Preferred Securities having at least 10%
of the total liquidation preference amount of the outstanding Preferred
Securities a written notice specifying such default or breach and requiring
it to be remedied and stating that such notice is a Notice of Default
thereunder; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee;
Within five Business Days after the occurrence of any Event of
Default, the Property Trustee shall transmit to the Holders of Trust
Securities and the Company notice of any such Event of Default actually
known to the Property Trustee, unless such Event of Default shall have been
cured or waived.
Unless an Event of Default shall have occurred and be continuing, the
Property Trustee may be removed at any time by act of the Holder of the
Common Securities. If an Event of Default has occurred and is continuing,
the Property Trustee may be removed at such time by act of the Holders of
Preferred Securities having a majority of the liquidation preference of the
Preferred Securities. No resignation or removal of the Property Trustee
and no appointment of a successor trustee shall be effective until the
acceptance of appointment by the successor Property Trustee in accordance
with the provisions of the Trust Agreement. (Section 8.10).
If an Event of Default described above has not occurred solely by
reason of the requirement that time lapse or notice be given, and is
continuing, the Preferred Securities shall have a preference over the
Common Securities upon termination of TU Electric Capital as described
above. See "Liquidation Distribution upon Termination."
Merger or Consolidation of the Property Trustee or the Delaware
Trustee
Any entity into which the Property Trustee or the Delaware Trustee may
be merged or with which it may be consolidated, or any entity resulting
from any merger, conversion or consolidation to which the Property Trustee
or the Delaware Trustee shall be a party, or any entity succeeding to all
or substantially all the corporate trust business of the Property Trustee
or the Delaware Trustee, shall be the successor to the Property Trustee or
the Delaware Trustee under the Trust Agreement, provided such entity shall
be otherwise qualified and eligible. (Section 8.12).
Voting Rights
Holders of Trust Securities shall be entitled to one vote for each $25
in liquidation preferences represented by their Trust Securities in respect
of any matter as to which such Holders of Trust Securities are entitled to
vote. Except as described below and under "Amendments to the Trust
Agreement," and under DESCRIPTION OF THE GUARANTEE -- "Amendments and
Assignment" and as otherwise required by law and the Trust Agreement, the
Holders of the Preferred Securities will have no voting rights. (Section
6.01(a)).
So long as any Junior Subordinated Debentures are held by the Property
Trustee, the Property Trustee shall not (i) direct the time, method and
place of conducting any proceeding for any remedy available to the
Debenture Trustee, or executing any trust or power conferred on the
Debenture Trustee with respect to the Junior Subordinated Debentures, (ii)
waive any past default which is waivable under Section 6.01 of the
Indenture, (iii) exercise any right to rescind or annul a declaration that
the principal of all the Junior Subordinated Debentures shall be due and
payable or (iv) consent to any amendment, modification or termination of
the Indenture or the Junior Subordinated Debentures, where such consent
shall be required, without, in each case, obtaining the prior approval of
the Holders of Preferred Securities having of at least 66 2/3% of the
liquidation preference amount of the outstanding Preferred Securities;
provided, however, that where a consent under the Indenture would require
the consent of each Holder of Junior Subordinated Debentures affected
thereby, no such consent shall be given by the Property Trustee without the
prior consent of each Holder of Preferred Securities. The Property Trustee
shall not revoke any action previously authorized or approved by a vote of
the Preferred 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 Preferred Securities may,
after such Holder's written request to the Property Trustee to enforce
such rights, institute a legal proceeding directly against the Company
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 other person or entity.
The Property Trustee shall notify all Holders of the Preferred
Securities of any notice of default received from the Debenture
Trustee. In addition to obtaining the foregoing approvals of the
Holders of the Preferred Securities, prior to taking any of the foregoing
actions, the Property Trustee shall receive an opinion of counsel
experienced in such matters to the effect that TU Electric Capital will not
be classified as an association taxable as a corporation for United States
federal income tax purposes on account of such action. (Section 6.01(b)).
Any required approval of Holders of Preferred Securities may be given
at a separate meeting of Holders of Preferred Securities convened for such
purpose or pursuant to written consent. The Administrative Trustees will
cause a notice of any meeting at which Holders of Preferred Securities are
entitled to vote, or of any matter upon which action by written consent of
such Holders is to be taken, to be given to each Holder of Preferred
Securities in the manner set forth in the Trust Agreement. (Section 6.02).
No vote or consent of the Holders of Preferred Securities will be
required for TU Electric Capital to redeem and cancel Preferred Securities
in accordance with the Trust Agreement.
Notwithstanding that Holders of Preferred Securities are entitled to
vote or consent under any of the circumstances described above, any of the
Preferred Securities that are owned by the Company, the Property Trustee or
any affiliate of the Company or the Property Trustee, shall, for purposes
of such vote or consent, be treated as if they were not outstanding.
Holders of the Preferred Securities will have no rights to appoint or
remove the Administrative Trustees, who may be appointed, removed or
replaced solely by the Company as the Holder of the Common Securities.
Amendments
The Trust Agreement may be amended from time to time by TU Electric
Capital (on approval of a majority of the Administrative Trustees) and the
Company, without the consent of any Holders of Trust Securities, (i) to
cure any ambiguity, correct or supplement any provision herein or therein
which may be inconsistent with any other provision herein or therein, or to
make any other provisions with respect to matters or questions arising
under the Trust Agreement, which shall not be inconsistent with the other
provisions of the Trust Agreement, provided, however, that any such
amendment shall not adversely affect in any material respect the interests
of any Holder of Trust Securities or (ii) to modify, eliminate or add to
any provisions of the Trust Agreement to such extent as shall be necessary
to ensure that TU Electric Capital will not be classified for United States
federal income tax purposes as an association taxable as a corporation at
any time that any Trust Securities are outstanding or to ensure TU Electric
Capital's exemption from the status of an "investment company" under the
Investment Company Act of 1940, as amended; provided, however, that, except
in the case of clause (ii), such action shall not adversely affect in any
material respect the interests of any Holder of Trust Securities and, in
the case of clause (i), any amendments of the Trust Agreement shall become
effective when notice thereof is given to the Holders of Trust Securities.
Except as provided below, any provision of the Trust Agreement may be
amended by the Trustees and the Company with (i) the consent of Holders of
Trust Securities representing not less than a majority in liquidation
preference of the Trust Securities then outstanding and (ii) receipt by the
Trustees of an opinion of counsel to the effect that such amendment or the
exercise of any power granted to the Trustees in accordance with such
amendment will not cause TU Electric Capital to be classified for federal
income tax purposes as an association taxable as a corporation or affect TU
Electric Capital's exemption from status of an "investment company" under
the Investment Company Act of 1940, as amended.
Without the consent of each affected Holder of Trust Securities, the
Trust Agreement may not be amended to (i) change the amount or timing of
any distribution with respect to the Trust Securities or otherwise
adversely affect the amount of any distribution required to be made in
respect of the Trust Securities as of a specified date or (ii) restrict the
right of a Holder of Trust Securities to institute suit for the enforcement
of any such payment on or after such date.
Co-trustees and Separate Trustee
Unless an Event of Default under the Trust Agreement shall have
occurred and be continuing, at any time or times, 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 (as defined in the
Trust Agreement) may at the time be located, the Holder of the Common
Securities and the Property Trustee shall have power to appoint, and upon
the written request of the Property Trustee, the Company, as Depositor,
shall for such purpose join with the Property Trustee in the execution,
delivery and performance of all instruments and agreements necessary or
proper to 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 such Trust Property, or to act as separate trustee of any such
property, in either case with such powers as may be provided in the
instrument of appointment, and to vest in such person or persons in such
capacity, any property, title, right or power deemed necessary or
desirable, subject to the provisions of the Trust Agreement. If the
Company, as Depositor, does not join in such appointment within 15 days
after the receipt by it of a request so to do, or in case an Event of
Default under the Indenture has occurred and is continuing, the Property
Trustee alone shall have power to make such appointment. (Section 8.09).
Form, Exchange, and Transfer
The Preferred Securities will be issuable only in fully registered
form in units having a liquidation preference amount of $25 and any
integral multiple thereof.
At the option of the Holder, subject to the terms of the Trust
Agreement, Preferred Securities will be exchangeable for other Preferred
Securities of the same series, of any authorized denomination and of like
tenor and aggregate liquidation preference.
Subject to the terms of the Trust Agreement, Preferred 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 Security Registrar or at the office of any transfer agent
designated by the Company for such purpose. The Company may designate
itself the Security Registrar. No service charge will be made for any
registration of transfer or exchange of Preferred Securities, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. Such transfer or
exchange will be effected upon the Security Registrar or such transfer
agent, as the case may be, being satisfied with the documents of title and
identity of the person making the request. The Company 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 the Company will be required to maintain a transfer
agent in each place of payment for the Preferred Securities.
TU Electric Capital will not be required to (i) issue, register the
transfer of, or exchange any Preferred Securities during a period beginning
at the opening of business 15 calendar days before the day of mailing of a
notice of redemption of any Preferred Securities called for redemption and
ending at the close of business on the day of such mailing or (ii) register
the transfer of or exchange any Preferred Securities so selected for
redemption, in whole or in part, except the unredeemed portion of any such
Preferred Securities being redeemed in part.
Registrar and Transfer Agent
Texas Utilities Services Inc. will act as registrar and transfer agent
for the Preferred Securities.
Registration of transfers of Preferred Securities will be effected
without charge by or on behalf of TU Electric Capital, but upon payment
(with the giving of such indemnity as TU Electric Capital or the Company
may require) in respect of any tax or other governmental charges which may
be imposed in relation to it.
TU Electric Capital will not be required to register or cause to be
registered any transfer of Preferred Securities after they have been called
for redemption except the unredeemed portion of any Preferred Securities
being redeemed in part.
Concerning the Property Trustee
The Property Trustee is trustee under the Company's Mortgage and Deed
of Trust with respect to substantially all the properties of the Company,
which secures the Company's first mortgage bonds. The Company maintains
deposit accounts 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 Indenture.
Miscellaneous
Application will be made to list the Preferred Securities on the New
York Stock Exchange.
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 TU
Electric Capital and will maintain a payment account with respect to the
Trust Securities, and will also act as trustee under the Trust Agreement
for the purposes of the Trust Indenture Act. See "Events of Default;
Notice." The Administrative Trustees will administer the day to day
operations of TU Electric Capital. See "Voting Rights."
The Administrative Trustees are authorized and directed to conduct the
affairs of TU Electric Capital and to operate TU Electric Capital so that
TU Electric Capital will not be deemed to be an "investment company"
required to be registered under the 1940 Act or taxed as a corporation for
United States federal income tax purposes and so that the Junior
Subordinated Debentures will be treated as indebtedness of the Company for
United States federal income tax purposes. In this connection, the
Administrative Trustees are authorized to take any action, not inconsistent
with applicable law, the certificate of trust or the Trust Agreement, that
the Administrative Trustees determine in their discretion to be necessary
or desirable for such purposes, as long as such action does not materially
adversely affect the interests of the Holders of the Preferred Securities.
Holders of the Preferred Securities have no preemptive rights.
DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the Guarantee
that will be executed and delivered by the Company for the benefit of the
Holders from time to time of Preferred Securities. The Guarantee will be
qualified as an indenture under the Trust Indenture Act. The Bank of New
York will act as Guarantee Trustee under the Guarantee for the purposes of
compliance with the Trust Indenture Act. The terms of the Guarantee will
be those set forth in such Guarantee and those made part of such Guarantee
by the Trust Indenture Act. The summary does not purport to be complete
and is subject in all respects to the provisions of, and is qualified in
its entirety by reference to, the Guarantee, which is filed as an exhibit
to the Registration Statement of which this Prospectus forms a part, and
the Trust Indenture Act. The Guarantee Trustee will hold the Guarantee for
the benefit of the Holders of the Preferred Securities.
General
The Company will fully and unconditionally agree, to the extent set
forth herein, to pay the Guarantee Payments (as defined herein) in full to
the Holders of the Preferred Securities (except to the extent paid by or on
behalf of TU Electric Capital), as and when due, regardless of any defense,
right of set-off or counterclaim that the Company may have or assert. The
following payments with respect to the Preferred Securities, to the extent
not paid by or on behalf of TU Electric Capital (Guarantee Payments), will
be subject to the Guarantee (without duplication): (i) any accrued and
unpaid distributions required to be paid on the Preferred Securities, to
the extent TU Electric Capital has funds available therefor, (ii) the
redemption price, including all accrued and unpaid distributions, with
respect to any Preferred Securities called for redemption by TU Electric
Capital (redemption price plus accrued and unpaid distributions), to the
extent TU Electric Capital has funds available therefor and (iii) upon a
voluntary or involuntary termination, winding-up or termination of TU
Electric Capital (other than in connection with a redemption of all of the
Preferred Securities), the lesser of (a) the aggregate of the liquidation
preference and all accrued and unpaid distributions on the Preferred
Securities to the date of payment and (b) the amount of assets of TU
Electric Capital remaining available for distribution to Holders of
Preferred Securities in liquidation of TU Electric Capital. The Company's
obligation to make a Guarantee Payment may be satisfied by direct payment
of the required amounts by the Company to the Holders of Preferred
Securities or by causing TU Electric Capital to pay such amounts to such
Holders.
The Guarantee will be a guarantee with respect to the Preferred
Securities issued by TU Electric Capital from the time of issuance of the
Preferred Securities, but will not apply to (i) any payment of
distributions if and to the extent that TU Electric Capital does not
have funds available to make such payments, or (ii) collection of payment.
If the Company does not make interest payments on the Junior Subordinated
Debentures held by TU Electric Capital, TU Electric Capital will not have
funds available to pay distributions on the Preferred Securities. The
Guarantee will rank subordinate and junior in right of payment to all
liabilities of the Company (except those made pari passu by their terms).
See "Status of the Guarantee."
Amendments and Assignment
Except with respect to any changes that do not materially adversely
affect the rights of Holders of Preferred Securities (in which case no vote
will be required), the terms of the Guarantee may be changed only with the
prior approval of the Holders of Preferred Securities having at least 66
2/3% of the liquidation preference amount of the outstanding Preferred
Securities. All guarantees and agreements contained in the Guarantee shall
bind the successors, assigns, receivers, trustees and representatives of
the Company and shall inure to the benefit of the Holders of the Preferred
Securities then outstanding.
Events of Default
An event of default under the Guarantee will occur upon the failure of
the Company to perform any of its payment obligations thereunder. The
Holders of Preferred Securities having a majority of the liquidation
preference of the Preferred Securities have the right to direct the time,
method and place of conducting any proceeding for any remedy available to
the Guarantee Trustee in respect of 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
Preferred Securities may enforce the Guarantee, institute a legal
proceeding directly against the Company to enforce the Guarantee Trustee's
rights under such Guarantee without first instituting a legal proceeding
against TU Electric Capital, the Guarantee Trustee or any other person or
entity.
The Company will be required to provide annually to the Guarantee
Trustee a statement as to the performance by the Company of certain of its
obligations under the Guarantee and as to any default in such performance.
The Company will also be required to file annually with the Guarantee
Trustee an officer's certificate as to the Company's compliance with all
conditions under the Guarantee.
Information Concerning the Guarantee Trustee
The Guarantee Trustee, prior to the occurrence of a default by the
Company in performance of the Guarantee, has undertaken to perform only
such duties as are specifically set forth in the Guarantee and, after
default with respect to the Guarantee, must exercise the same degree of
care as a prudent individual would exercise in the conduct of his or her
own affairs. Subject to this provision, 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 Preferred Securities unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might
be incurred thereby. See DESCRIPTION OF THE PREFERRED SECURITIES --
"Concerning the Property Trustee."
Termination of the Guarantee
The Guarantee will terminate and be of no further force and effect
upon full payment of the redemption price plus accrued and unpaid
distributions of all Preferred Securities, the distribution of Junior
Subordinated Debentures to Holders of Preferred Securities in exchange for
all of the Preferred Securities or full payment of the amounts payable upon
liquidation of TU Electric 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 Securities must restore payment of any sums paid under
the Preferred Securities or the Guarantee.
Status of the Guarantee
The Guarantee will constitute an unsecured obligation of the Company
and will rank (i) subordinate and junior in right of payment to all
liabilities of the Company (except liabilities that may be made pari passu
by their terms), (ii) pari passu with the most senior preferred or
preference stock now or hereafter issued by the Company and with any
guarantee now or hereafter entered into by the Company in respect of any
preferred or preference stock of any affiliate of the Company and (iii)
senior to the Company's common stock. The Trust Agreement provides that
each Holder of Preferred Securities by acceptance thereof agrees to the
subordination provisions and other terms of the Guarantee.
The Guarantee will constitute a guarantee of payment and not of
collection (i.e., the guaranteed party may institute a legal proceeding
directly against the Guarantor to enforce its rights under the Guarantee
without first instituting a legal proceeding against any other person or
entity).
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
Set forth below is a description of the specific terms of the Junior
Subordinated Debentures which TU Electric Capital will hold as trust
assets. The following description does not purport to be complete and is
qualified in its entirety by reference to the description in the Indenture
between the Company and the Trustee with respect to the Junior Subordinated
Debentures (Debenture Trustee), which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part. Whenever
particular provisions or defined terms in the Indenture are referred to
herein, such provisions or defined terms are incorporated by reference
herein. Section references used herein are references to provisions of the
Indenture unless otherwise noted.
The Indenture provides for the issuance of debentures (including the
Junior Subordinated Debentures), notes or other evidence of indebtedness by
the Company (each a Debt Security) in an unlimited amount from time to
time. The Junior Subordinated Debentures constitute a separate series
under the Indenture.
General
The Junior Subordinated Debentures will be limited in aggregate
principal amount to the sum of the aggregate liquidation preference amount
of the Preferred Securities and the consideration paid by the Company for
the Common Securities. The Junior Subordinated Debentures are unsecured,
subordinated obligations of the Company which rank junior to all of the
Company's Senior Indebtedness.
The entire outstanding principal amount of the Junior Subordinated
Debentures will become due and payable, together with any accrued and
unpaid interest thereon, including Additional Interest (as defined herein),
if any, on , . The amounts payable as principal and interest
on the Junior Subordinated Debentures will be sufficient to provide for
payment of distributions payable on the Trust Securities.
If Junior Subordinated Debentures are distributed to Holders of
Preferred Securities in a termination of TU Electric Capital, such Junior
Subordinated Debentures will be issued in fully registered certificated
form in denominations of $25 and integral multiples thereof and may be
transferred or exchanged at the offices described below.
Payments of principal and interest on Junior Subordinated Debentures
will be payable, the transfer of Junior Subordinated Debenture will be
registrable, and Junior Subordinated Debentures will be exchangeable for
Junior Subordinated Debentures of other denominations of a like aggregate
principal amount, at the corporate trust office of the Debenture Trustee in
The City of New York; provided that payment of interest may be made at the
option of the Company by check mailed to the address of the persons
entitled thereto and that the payment in full of principal with respect to
any Junior Subordinated Debenture will be made only upon surrender of such
Junior Subordinated Debenture to the Debenture Trustee.
Optional Redemption
On or after , the Company will have the right, at any
time and from time to time, to redeem the Junior Subordinated Debentures,
in whole or in part, at a redemption price equal to 100% of the principal
amount of the Junior Subordinated Debentures being redeemed, together with
any accrued but unpaid interest, including Additional Interest, if any, to
the redemption date.
If a Tax Event shall occur and be continuing, the Company shall have
the right to redeem the Junior Subordinated Debentures in whole or in part,
at a redemption price plus accrued and unpaid distributions equal to 100%
of the principal amount of Junior Subordinated Debentures then outstanding
plus any accrued and unpaid interest, including Additional Interest, if
any, to the redemption date.
For so long as TU Electric Capital is the Holder of all the
outstanding Junior Subordinated Debentures, the proceeds of any such
redemption will be used by TU Electric Capital to redeem Preferred
Securities and Common Securities in accordance with their terms. The
Company may not redeem less than all the Junior Subordinated Debentures
unless all accrued and unpaid interest (including any Additional Interest)
has been paid in full on all outstanding Junior Subordinated Debentures for
all quarterly interest periods terminating on or prior to the date of
redemption.
Any optional redemption of Junior Subordinated Debentures shall be
made upon not less than 30 nor more than 60 days' notice from the Debenture
Trustee to the Holders of Junior Subordinated Debentures, as provided in
the Indenture. All notices of redemption shall state the redemption date,
the redemption price plus accrued and unpaid distributions, if less than
all the Junior Subordinated Debentures are to be redeemed, the
identification of those to be redeemed and the portion of the principal
amount of any Junior Subordinated Debentures to be redeemed in part; that
on the redemption date, subject to the Trustee's receipt of the redemption
monies, the redemption price plus accrued and unpaid distributions will
become due and payable upon each such Junior Subordinated Debentures to be
redeemed and that interest thereon will cease to accrue on and after said
date; and the place or places where such Securities are to be surrendered
for payment of the redemption price plus accrued and unpaid distributions.
Interest
The Junior Subordinated Debentures shall bear interest at the rate of
% per annum. Such interest is payable quarterly in arrears on March 31,
June 30, September 30 and December 31 of each year (each, an Interest
Payment Date), commencing , 1995, to the person in whose name
each Junior Subordinated Debenture is registered, by the close of business
on the Business Day 15 days preceding such Interest Payment Date. It is
anticipated that TU Electric Capital will be the sole Holder of the Junior
Subordinated Debentures.
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
(Section 310). In the event that any date on which interest is payable on
the Junior Subordinated Debentures is not a Business Day, then payment of
the interest payable on such date will be made on the next succeeding day
which is a Business Day (and without any interest or other payment in
respect of any such delay), except that, if such Business Day is in the
next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and
effect as if made on the date the payment was originally payable (Section
113).
Option to Extend Interest Payment Period
The Company shall have the right under the Indenture to extend the
interest payment period from time to time on the Junior Subordinated
Debentures to a period not exceeding 20 consecutive quarters during which
period interest will be compounded quarterly. At the end of an Extension
Period, the Company must pay all interest then accrued and unpaid (together
with interest thereon at the rate specified for the Junior Subordinated
Debentures compounded quarterly, to the extent permitted by applicable
law). However, during any such Extension Period, the Company shall not
declare or pay any dividend or distribution (other than a dividend or
distribution in Common Stock of the Company) on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of its capital
stock, redeem any indebtedness that is pari passu with the Junior
Subordinated Debentures, or make any guarantee payments with respect to the
foregoing. Prior to the termination of any such Extension Period, the
Company may further extend the interest payment period, provided that such
Extension Period together with all such previous and further extensions
thereof shall not exceed 20 consecutive quarters at any one time or extend
beyond the maturity date of the Junior Subordinated Debentures. Any
extension period with respect to payment of interest on the Junior
Subordinated Debentures, other Debt Securities or on any similar securities
will apply to all such securities and will also apply to distributions with
respect to the Preferred Securities and all other securities with terms
substantially the same as the Preferred Securities. Upon the termination
of any such Extension Period and the payment of all amounts then due, the
Company may select a new Extension Period, subject to the above
requirements. No interest shall be due and payable during an Extension
Period, except at the end thereof. The Company will give TU Electric
Capital and the Debenture Trustee notice of its election of an Extension
Period prior to the earlier of (i) one Business Day prior to the record
date for the distribution which would occur but for such election or (ii)
the date the Company is required to give notice to the NYSE or other
applicable self-regulatory organization of the record date and will cause
the Trust to send notice of such election to the Holders of Preferred
Securities.
Additional Interest
So long as any Preferred Securities remain outstanding, if TU Electric
Capital shall be required to pay, with respect to its income derived from
the interest payments on the Junior Subordinated Debentures any amounts for
or on account of any taxes, duties, assessments or governmental charges of
whatever nature imposed by the United States, or any other taxing
authority, then, in any such case, the Company will pay as interest on such
series such additional interest (Additional Interest) as may be necessary
in order that the net amounts received and retained by TU Electric Capital
after the payment of such taxes, duties, assessments or governmental
charges shall result in the TU Electric Capital's having such funds as it
would have had in the absence of the payment of such taxes, duties,
assessments or governmental charges.
Defeasance
The principal amount of any series of Debt Securities issued under the
Indenture will be deemed to have been paid for purposes of the Indenture
and the entire indebtedness of the Company in respect thereof will be
deemed to have been satisfied and discharged, if there shall have been
irrevocably deposited with the Debenture Trustee or any paying agent, in
trust: (a) money in an amount which will be sufficient, or (b) in the case
of a deposit made prior to the maturity of the Junior Subordinated
Debentures, Government Obligations (as defined herein), which do not
contain provisions permitting the redemption or other prepayment thereof at
the option of the issuer thereof, the principal of and the interest on
which when due, without any regard to reinvestment thereof, will provide
moneys which, together with the money, if any, deposited with or held by
the Debenture Trustee, will be sufficient, or (c) a combination of (a) and
(b) which will be sufficient, to pay when due the principal of and premium,
if any, and interest, if any, due and to become due on the Debt Securities
of such series that are outstanding. For this purpose, Government
Obligations, include direct obligations of, or obligations unconditionally
guaranteed by, the United States of America entitled to the benefit of the
full faith and credit thereof and certificates, depositary receipts or
other instruments which evidence a direct ownership interest in such
obligations or in any specific interest or principal payments due in
respect thereof.
It is possible that for federal income tax purposes any deposit
contemplated in the preceding paragraph could be treated as a taxable
exchange of the Junior Subordinated Debentures outstanding for an issue of
obligations of TU Electric Capital or a direct interest in the cash and
securities held by TU Electric Capital. In that case, Holders of the
Junior Subordinated Debentures outstanding would recognize a gain or loss
for federal income tax purposes, as if their share of TU Electric Capital
obligations or the cash or securities deposited, as the case may be, had
actually been received by them in exchange for their Junior Subordinated
Debentures. In addition, such Holders thereafter would be required to
include in income a share of the income, gain or loss of TU Electric
Capital. The amount so required to be included in income could be
different from the amount that would be includable in the absence of such
deposit. Prospective investors are urged to consult their own tax advisors
as to the specific consequences to them of such deposit.
Subordination
The Junior Subordinated Debentures will be subordinate and junior in
right of payment to all Senior Indebtedness of the Company as provided in
the Indenture. No payment of principal of (including redemption and
sinking fund payments), or interest on, the Junior Subordinated Debentures
may be made (i) upon the occurrence of certain events of bankruptcy,
insolvency or reorganization, (ii) if any Senior Indebtedness is not paid
when due, (iii) if any other default has occurred pursuant to which the
Holders of Senior Indebtedness have accelerated the maturity thereof and
with respect to (ii) and (iii), such default has not been cured or waived,
or (iv) if the maturity of any Senior Indebtedness has been accelerated,
because of an event of default with respect thereto, which remains uncured.
Upon any distribution of assets of the Company to creditors upon any
dissolution, winding-up, liquidation or reorganization, whether voluntary
or involuntary or in bankruptcy, insolvency, receivership or other
proceedings, 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 thereon. (Section 1502). Subject to the prior payment
of all Senior Indebtedness, the rights of the Holders of the Junior
Subordinated Debentures will be subrogated to the rights of the Holders of
Senior Indebtedness to receive payments or distributions applicable to
Senior Indebtedness until all amounts owing on the Junior Subordinated
Debentures are paid in full. (Section 1504).
The term Senior Indebtedness is defined in the Indenture to mean all
obligations (other than non-recourse obligations and the indebtedness
issued under the Indenture) of, or guaranteed or assumed by, the Company
for borrowed money, including both senior and subordinated indebtedness for
borrowed money (other than the Debt Securities), or for the payment of
money relating to any lease which is capitalized on the consolidated
balance sheet of the Company and its subsidiaries in accordance with
generally accepted accounting principles as in effect from time to time, or
evidenced by bonds, debentures, notes or other similar instruments, and in
each case, amendments, renewals, extensions, modifications and refundings
of any such indebtedness or obligations, whether existing as of the date of
this Indenture or subsequently incurred by the Company unless, in the case
of any particular indebtedness, renewal, extension or refunding, the
instrument creating or evidencing the same or the assumption or guarantee
of the same expressly provides that such indebtedness, renewal, extension
or refunding is not superior in right of payment to or is pari passu with
the Junior Subordinated Debentures; provided that the Company's obligations
under the Guarantee shall not be deemed to be Senior Indebtedness.
(Section 101).
The Indenture does not limit the aggregate amount of Senior
Indebtedness that may be issued. As of June 30, 1995, the Company had
approximately $7.8 billion principal amount of indebtedness for borrowed
money constituting Senior Indebtedness. In addition, as of June 30, 1995,
there were approximately $84.610 million of contingent obligations
constituting Senior Indebtedness where there exists a financially viable
and unrelated primary obligor and where the risk of loss to Company is, in
the opinion of the Company, remote.
Consolidation, Merger, and Sale of Assets
Under the terms of the Indenture, the Company may not consolidate with
or merge into any other entity or convey, transfer or lease its properties
and assets substantially as an entirety to any entity, unless (i) the
corporation formed by such consolidation or into which the Company is
merged or the entity which acquires by conveyance or transfer, or which
leases, the property and assets of the Company substantially as an entirety
shall be a entity organized and validly existing under the laws of any
domestic jurisdiction and such entity expressly assumes the Company's
obligations on all Debt Securities and under the Indenture,
(ii) immediately after giving effect to the transaction, no Event of
Default, and no event which, after notice or lapse of time or both, would
become an Event of Default, shall have occurred and be continuing, and
(iii) the Company shall have delivered to the Debenture Trustee an
Officer's Certificate and an Opinion of Counsel as provided in the
Indenture (Section 1101).
Events of Default
Each of the following will constitute an Event of Default under the
Indenture with respect to the Debt Securities of any series: (a) failure
to pay any interest on the Debt Securities of such series within 30 days
after the same becomes due and payable; (b) failure to pay principal or
premium, if any, on the Debt Securities of such series when due and
payable; (c) failure to perform, or breach of, any other covenant or
warranty of the Company in the Indenture (other than a covenant or warranty
of the Company in the Indenture solely for the benefit of one or more
series of Debt Securities other than such series) for 60 days after written
notice to the Company by the Debenture Trustee, or to the Company and the
Debenture Trustee by the Holders of at least 33% in principal amount of the
Debt Securities of such series outstanding under the Indenture as provided
in the Indenture; (d) the entry by a court having jurisdiction in the
premises of (1) a decree or order for relief in respect of the Company in
an involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or (2) a decree
or order adjudging the Company a bankrupt or insolvent, or approving as
properly filed a petition by one or more Persons other than the Company
seeking reorganization, arrangement, adjustment or composition of or in
respect of the Company under any applicable Federal or State law, or
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official for the Company or for any
substantial part of its property, or ordering the winding up or liquidation
of its affairs, and any such decree or order for relief or any such other
decree or order shall have remained unstayed and in effect for a period of
90 consecutive days; and (e) the commencement by the Company of a voluntary
case or proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the consent by it
to the entry of a decree or order for relief in respect of the Company in a
case or other similar proceeding or to the commencement of any bankruptcy
or insolvency case or proceeding against it under any applicable Federal or
state law or the filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable Federal or state law, or the
consent by it to the filing of such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or similar official of the Company or of any substantial part
of its property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay its
debts generally as they become due, or the authorization of such action by
the Board of Directors (Section 801).
An Event of Default with respect to the Debt Securities of a
particular series may not necessarily constitute an Event of Default with
respect to Debt Securities of any other series issued under the Indenture.
If an Event of Default due to the default in payment of principal of
or interest on any series of Debt Securities or due to the default in the
performance or breach of any other covenant or warranty of the Company
applicable to the Debt Securities of such series but not applicable to all
series occurs and is continuing, then either the Trustee or the Holders of
33% in principal amount of the outstanding Debt Securities of such series
may declare the principal of all of the Debt Securities of such series and
interest accrued thereon to be due and payable immediately (subject to the
subordination provisions of the Indenture). If an Event of Default due to
the default in the performance of any other covenants or agreements in the
Indenture applicable to all outstanding Debt Securities or due to certain
events of bankruptcy, insolvency or reorganization of the Company has
occurred and is continuing, either the Trustee or the Holders of not less
than 33% in principal amount of all outstanding Debt Securities, considered
as one class, and not the Holders of the Debt Securities of any one of such
series may make such declaration of acceleration (subject to the
subordination provisions of the Indenture).
At any time after the declaration of acceleration with respect to the
Debt Securities of any series has been made and before a judgment or decree
for payment of the money due has been obtained, the Event or Events of
Default giving rise to such declaration of acceleration will, without
further act, be deemed to have been waived, and such declaration and its
consequences will, without further act, be deemed to have been rescinded
and annulled, if
(a) the Company has paid or deposited with the Debenture Trustee a
sum sufficient to pay
(1) all overdue interest on all Debt Securities of such series;
(2) the principal of and premium, if any, on any Debt Securities
of such series which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate or rates prescribed therefor
in such Debt Securities;
(3) interest upon overdue interest at the rate or rates
prescribed therefor in such Debt Securities, to the extent that payment of
such interest is lawful; and
(4) all amounts due to the Debenture Trustee under the
Indenture;
(b) any other Event or Events of Default with respect to Debt
Securities of such series, other than the nonpayment of the principal of
the Debt Securities of such series which has become due solely by such
declaration of acceleration, have been cured or waived as provided in the
Indenture (Section 802).
Subject to the provisions of the Indenture relating to the duties of
the Debenture Trustee in case an Event of Default shall occur and be
continuing, the Debenture Trustee will be under no obligation to exercise
any of its rights or powers under the Indenture at the request or direction
of any of the Holders, unless such Holders shall have offered to the
Debenture Trustee reasonable indemnity (Section 903). If an Event of
Default has occurred and is continuing in respect of a series of Debt
Securities, subject to such provisions for the indemnification of the
Debenture Trustee, the Holders of a majority in principal amount of the
outstanding Debt Securities of such series will have the right to direct
the time, method and place of conducting any proceeding for any remedy
available to the Debenture Trustee, or exercising any trust or power
conferred on the Debenture Trustee, with respect to the Debt Securities of
such series; provided, however, that if an Event of Default occurs and is
continuing with respect to more than one series of Debt Securities, the
Holders of a majority in aggregate principal amount of the outstanding Debt
Securities of all such series, considered as one class, will have the right
to make such direction, and not the Holders of the Debt Securities of any
one of such series; and provided, further, that such direction will not be
in conflict with any rule of law or with the Indenture. (Section 812).
No Holder of Debt Securities of any series will have any right to
institute any proceeding with respect to the Indenture, or for the
appointment of a receiver or a trustee, or for any other remedy thereunder,
unless (i) such Holder has previously given to the Debenture Trustee
written notice of a continuing Event of Default with respect to the Debt
Securities of such series, (ii) the Holders of not less than 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, considered as one class, have made written request to the
Debenture Trustee, and such Holder or Holders have offered reasonable
indemnity to the Debenture Trustee to institute such proceeding in respect
of such Event of Default in its own name as trustee and (iii) the Debenture
Trustee has failed to institute any proceeding, and has not received from
the Holders of a majority in aggregate principal amount of the outstanding
Debt Securities of such series a direction inconsistent with such request,
within 60 days after such notice, request and offer (Section 807).
However, such limitations do not apply to a suit instituted by a Holder of
a Debt Security for the enforcement of payment of the principal of or any
premium or interest on such Debt Security on or after the applicable due
date specified in such Debt Security (Section 808).
The Company will be required to furnish to the Debenture Trustee
annually a statement by an appropriate officer as to such officer's
knowledge of the Company's compliance with all conditions and covenants
under the Indenture, such compliance to be determined without regard to any
period of grace or requirement of notice under the Indenture (Section 606).
Modification and Waiver
Without the consent of any Holder of Debt Securities, the Company and
the Debenture Trustee may enter into one or more supplemental indentures
for any of the following purposes: (a) to evidence the assumption by any
permitted successor to the Company of the covenants of the Company in the
Indenture and in the Debt Securities; or (b) to add one or more covenants
of the Company or other provisions for the benefit of the Holders of
outstanding Debt Securities or to surrender any right or power conferred
upon the Company by the Indenture; or (c) to add any additional Events of
Default with respect to outstanding Debt Securities; or (d) to change or
eliminate any provision of the Indenture or to add any new provision to the
Indenture, provided that if such change, elimination or addition will
adversely affect the interests of the Holders of Debt Securities of any
series in any material respect, such change, elimination or addition will
become effective with respect to such series 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 such
series remain outstanding under the Indenture; or (e) to provide collateral
security for all but not part of the Debt Securities; (f) to establish the
form or terms of Debt Securities of any other series as permitted by the
Indenture; or (g) to provide for the authentication and delivery of bearer
securities and coupons appertaining thereto representing interest, if any,
thereon and for the procedures for the registration, exchange and
replacement thereof and for the giving of notice to, and the solicitation
of the vote or consent of, the Holders thereof, and for any and all other
matters incidental thereto; or (h) to evidence and provide for the
acceptance of appointment of a successor Debenture Trustee under the
Indenture with respect to the Debt Securities of one or more series and to
add to or change any of the provisions of the Indenture as shall be
necessary to provide for or to facilitate the administration of the trusts
under the Indenture by more than one trustee; or (i) to provide for the
procedures required to permit the utilization of a noncertificated system
of registration for the Debt Securities of all or any series; or (j) to
change any place where (1) the principal of and premium, if any, and
interest, if any, on all or any series of Debt Securities shall be payable,
(2) all or any series of Debt Securities may be surrendered for
registration of transfer or exchange and (3) notices and demands to or upon
the Company in respect of Debt Securities and the Indenture may be served;
or (k) to cure any ambiguity or inconsistency or to add or change any other
provisions with respect to matters and questions arising under the
Indenture, provided such changes or additions shall not adversely affect
the interests of the Holders of Debt Securities of any series in any
material respect (Section 1201).
The Holders of at least a majority in aggregate principal amount of
the Debt Securities of all series then outstanding may waive compliance by
the Company with certain restrictive provisions of the Indenture (Section
607). 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 such series, except a default in the payment
of principal, premium, 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 such series affected
(Section 813).
Without limiting the generality of the foregoing, if the Trust
Indenture Act is amended after the date of the Indenture in such a way as
to require changes to the Indenture or the incorporation therein of
additional provisions or so as to permit changes to, or the elimination of,
provisions which, at the date of the Indenture or at any time thereafter,
were required by the Trust Indenture Act to be contained in the Indenture,
the Indenture will be deemed to have been amended so as to conform to such
amendment of the Trust Indenture Act or to effect such changes, additions
or elimination, and the Company and the Debenture Trustee may, without the
consent of any Holders, enter into one or more supplemental indentures to
evidence or effect such amendment (Section 1201).
Except as provided above, the consent of the Holders of not less than
a majority in aggregate principal amount of the Debt Securities of all
series then outstanding, considered as one class, is required for the
purpose of adding any provisions to, or changing in any manner, or
eliminating any of the provisions of, the Indenture or modifying in any
manner the rights of the Holders of such Debt Securities under the
Indenture pursuant to one or more supplemental indentures; provided,
however, that 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
outstanding Debt Securities of all series so directly affected, considered
as one class, will be required; and provided further, that no such
amendment or modification may (a) change the Stated Maturity of the
principal of, or any installment of principal of or interest on, any Debt
Security, or reduce the principal amount thereof or the rate of interest
thereon (or the amount of any installment of interest thereon) or change
the method of calculating such rate or reduce any premium payable upon the
redemption thereof, or change the coin or currency (or other property) in
which any Debt Security or any premium or the interest thereon is payable,
or impair the right to institute suit for the enforcement of any such
payment on or after the Stated Maturity of any Debt Security (or, in the
case of redemption, on or after the redemption date) without, in any such
case, the consent of the Holder of such Debt Security, (b) reduce the
percentage in principal amount of the outstanding Debt Security of any
series, (or, if applicable, in liquidation preference of Preferred
Securities) the consent of the Holders of which is required for any such
supplemental indenture, or the consent of the Holders of which is required
for any waiver of compliance with any provision of the Indenture or any
default thereunder and its consequences, or reduce the requirements for
quorum or voting, without, in any such case, the consent of the Holder of
each outstanding Debt Security of such series, or (c) modify certain of the
provisions of the Indenture relating to supplemental indentures, waivers of
certain covenants and waivers of past defaults with respect to the Debt
Security of any series, without the consent of the Holder of each
outstanding Junior Subordinated Debenture affected thereby. A supplemental
indenture which changes or eliminates any covenant or other provision of
the Indenture which has expressly been included solely for the benefit of
one or more particular series of Debt Securities, or modifies the rights of
the Holders of Debt Securities of such series with respect to such covenant
or other provision, will be deemed not to affect the rights under the
Indenture of the Holders of the Debt Securities of any other series
(Section 1202).
The Indenture provides that in determining whether the Holders of the
requisite principal amount of the outstanding Debt Securities have given
any request, demand, authorization, direction, notice, consent or waiver
under the Indenture, or whether a quorum is present at the meeting of the
Holders of Debt Securities, Debt Securities owned by the Company or any
other obligor upon the Debt Securities or any affiliate of the Company or
of such other obligor (unless the Company, such affiliate or such obligor
owns all Debt Securities outstanding under the Indenture, determined
without regard to this provision) shall be disregarded and deemed not to be
outstanding.
If the Company shall solicit from Holders any request, demand,
authorization, direction, notice, consent, election, waiver or other Act,
the Company may, at its option, fix in advance a record date for the
determination of Holders entitled to give such request, demand,
authorization, direction, notice, consent, waiver or other such act, but
the Company shall have no obligation to do so. If such a record date is
fixed, such request, demand, authorization, direction, notice, consent,
waiver or other Act may be given before or after such record date, but only
the Holders of record at the close of business on such record date shall be
deemed to be Holders for the purposes of determining whether Holders of the
requisite proportion of the outstanding Debt Securities have authorized or
agreed or consented to such request, demand, authorization, direction,
notice, consent, waiver or other Act, and for that purpose the outstanding
Debt Securities shall be computed as of the record date. Any request,
demand, authorization, direction, notice, consent, election, waiver or
other Act of a Holder shall bind every future Holder of the same Debt
Security and the Holder of every Debt Security issued upon the registration
of transfer thereof or in exchange therefor or in lieu thereof in respect
of anything done, omitted or suffered to be done by the Debenture Trustee
or the Company in reliance thereon, whether or not notation of such action
is made upon such Debt Security (Section 104).
Resignation of Debenture Trustee
The Debenture Trustee may resign at any time by giving written notice
thereof to the Company 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 Debenture Trustee and the Company. No
resignation or removal of the Debenture Trustee and no appointment of a
successor trustee will become effective until the acceptance of appointment
by a successor trustee in accordance with the requirements of the
Indenture. So long as no Event of Default or event which, after notice or
lapse of time, or both, would become an Event of Default has occurred and
is continuing and except with respect to a Debenture Trustee appointed by
Act of the Holders, if the Company has delivered to the Debenture Trustee a
resolution of its Board of Directors appointing a successor trustee and
such successor has accepted such appointment in accordance with the terms
of the 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 (Section 910).
Notices
Notices to Holders of Debt Securities will be given by mail to the
addresses of such Holders as they may appear in the security register
therefor.
Title
The Company, the Debenture Trustee, and any agent of the Company or
the Debenture Trustee, may treat the Person in whose name Debt Securities
are registered as the absolute owner thereof (whether or not such Debt
Securities may be overdue) for the purpose of making payments and for all
other purposes irrespective of notice to the contrary.
Governing Law
The Indenture and the Debt Securities will be governed by, and
construed in accordance with, the laws of the State of New York.
Regarding the Debenture Trustee
The Debenture Trustee under the Indenture is The Bank of New York. In
addition to acting as Debenture Trustee under the Indenture, The Bank of
New York acts as trustee under the Company's Mortgage and Deed of Trust
with respect to substantially all the properties of the Company, which
secures the Company's first mortgage bonds. In addition, The Bank of New
York acts Property Trustee under the Trust Agreement and as Guarantee
Trustee under the Guarantee. The Bank of New York (Delaware) acts as the
Delaware Trustee under the Trust Agreement. See DESCRIPTION OF THE
PREFERRED SECURITIES -- "Concerning the Property Trustee."
DESCRIPTION OF CERTAIN TERMS OF THE DEPOSITARY SHARES
In addition to terms described above under PROSPECTUS SUMMARY --
"Comparison of Preferred Securities and Depositary Shares," the following
terms apply to the Depositary Shares:
Voting Rights
Texas Utilities, as the only Holder of Common Stock of the Company,
has sole voting power, except as indicated below or as otherwise required
by law. If any four full quarterly dividends on the Company's Preferred
Stock, including either series of Underlying Preferred, are in default, the
Holders of shares of all outstanding shares of the Preferred Stock become
entitled, as one class, to elect a majority of the Board of Directors,
which right does not terminate until full dividends have been provided for
all past periods. When entitled to vote, the Holders of the Preferred
Stock shall have one vote for each share held. No Preferred Stock
dividends are currently in default.
The Depositary for the Depositary Shares will endeavor insofar as
practicable to vote the Underlying Preferred in accordance with the
instructions of the Holders of the Depositary Shares. It will vote those
shares of Underlying Preferred as to which it has received no instruction
in conformity with the instructions it has received from the majority of
Holders of Depositary Shares which have given instructions.
Without the consent of the Holders of at least two-thirds of the total
number of shares of Preferred Stock, the Company may not:
(A) create or authorize any new stock ranking prior to Preferred
Stock as to dividends or in liquidation, dissolution, winding up or
distribution, or create or authorize any security convertible into shares
of any such stock; or
(B) amend, alter, change or repeal any of the express terms of
Preferred Stock then outstanding in a manner substantially prejudicial to
the Holders thereof; provided, however, that if such amendment, alteration,
or change effects less than all series of Preferred Stock, only the consent
of the Holders of two-thirds of the aggregate of the series so affected
shall be required.
In addition, without the consent of the Holders of a majority of
Preferred Stock, voting separately as a class, or if Holders of one-third
of Preferred Stock vote against such action, the Company may not:
(A) issue additional shares of Preferred Stock or stock ranking prior
to or on a parity therewith, (1)(i) unless net income (determined after
provisions for taxes and depreciation) available for the payment of all
dividends for a period of twelve consecutive calendar months within the
fifteen calendar months immediately preceding the issuance is at least 2
times the annual dividend requirements on all outstanding shares of
Preferred Stock and stock ranking equal or prior thereto, including the
shares proposed to be issued, and (ii) unless the gross income for said
period (after provisions for taxes and depreciation) available for the
payment of interest is at least 1 1/2 times the sum of the annual interest
charges on all outstanding indebtedness and the annual dividend
requirements on all outstanding shares of Preferred Stock and stock ranking
equal or prior thereto, including the shares proposed to be issued;
(2) unless the aggregate capital applicable to common stock and surplus
shall not be less than the aggregate capital applicable to Preferred Stock
and stock ranking on a parity therewith, including the shares proposed to
be issued; (3) unless for a period of twelve consecutive months out of the
immediately preceding fifteen months net earnings, before income taxes,
available for the payment of interest shall have been at least 1 1/2 times
the sum of the annual interest charges on indebtedness to be outstanding
immediately after the issuance of such shares and the annual dividend
requirement on Preferred Stock and stock ranking equal or prior thereto,
including the shares proposed to be issued; or (4) if such issuance would
bring the aggregate stated value of all shares of Preferred Stock and stock
ranking equal or prior thereto to be then outstanding to an amount in
excess of the sum of the stated value of all outstanding stock junior to
Preferred Stock and the amount of the Company's retained earnings; or
(B) create or assume any unsecured debt (other than certain refunding
debt) having a maturity of more than one year unless for a period of twelve
consecutive months out of the immediately preceding fifteen months net
earnings, before income taxes, available for the payment of interest shall
have been at least 2 times the annual interest charges on debt having a
maturity of more than one year to be then outstanding, or if the amount of
unsecured debt having a maturity of more than one year shall thereupon
exceed 25% of the Company's secured debt, capital stock and retained
earnings; or
(C) purchase or redeem any stock junior to Preferred Stock, except
junior Preferred Stock at a price not more than the current redemption
price when there is no continuing default in the payment of any dividend on
Preferred Stock and except for any purchase of stock junior to the
Preferred Stock under any employee benefit plan; or
(D) pay any dividend on any stock junior to Preferred Stock which
would reduce retained earnings to less than 1 1/2 times the annual dividend
requirement on Preferred Stock and stock ranking equal or prior thereto.
The Articles of Incorporation of the Company limit the payment of
annual dividends on the common stock to (a) 50% of current net income
available for such dividends when the common stock equity, as therein
defined, is less than 20% of total capitalization, as therein defined, or
would by the dividend be reduced to less than 20% of such total
capitalization, or (b) 75% of such net income when such equity is or by the
declaration of such dividend would become less than 25% but not less than
20% of such total capitalization. The payment of such dividends is
unlimited when such equity is 25% or more of such total capitalization,
except when such dividends would bring such equity within the limits
specified in (a) and (b) above.
Liquidation Rights
In the event of any liquidation, dissolution or winding up of the
Company, the Underlying Preferred, pari passu with all series of Preferred
Stock then outstanding, shall have a preference over the Company's common
stock until an amount equal to the then current liquidation price plus
unpaid accumulated dividends shall have been paid.
Miscellaneous
The Underlying Preferred has no subscription rights, conversion rights
or preemptive rights.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary describes certain United States federal income
tax consequences, as of the date hereof, of the ownership of Preferred
Securities and the exchange of Depositary Shares for Preferred Securities
plus a cash component or for cash only and represents the opinion of Reid &
Priest LLP, counsel to the Company, insofar as it relates to matters of law
or legal conclusions. Except where noted, it deals only with Preferred
Securities held as capital assets and acquired pursuant to the Exchange
Offer and does not deal with special situations, such as those of dealers
in securities or currencies, financial institutions, life insurance
companies, persons holding Preferred Securities as a part of a hedging or
conversion transaction or a straddle, or United States Holders (as defined
herein) whose "functional currency" is not the U.S. dollar or persons who
are not United States Holders. In addition, this discussion does not
address the tax consequences to persons who purchase Preferred Securities
other than pursuant to their initial issuance and distribution.
Furthermore, the discussion below is based upon the provisions of the
Internal Revenue Code of 1986, as amended (Code), and regulations, rulings
and judicial decisions thereunder as of the date hereof, and such
authorities may be repealed, revoked or modified so as to result in federal
income tax consequences different from those discussed below.
ALL HOLDERS OF DEPOSITARY SHARES, INCLUDING PERSONS WHO ARE NOT UNITED
STATES HOLDERS, AND ALL PERSONS WHO PURCHASE PREFERRED SECURITIES IN THE
SECONDARY MARKET, ARE ADVISED TO CONSULT WITH THEIR TAX ADVISORS AS TO THE
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OF DEPOSITARY
SHARES FOR PREFERRED SECURITIES AND CASH OR FOR CASH ONLY AND OF THE
OWNERSHIP AND DISPOSITION OF PREFERRED SECURITIES IN LIGHT OF THEIR
PARTICULAR CIRCUMSTANCES, AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR
OTHER TAX LAWS.
United States Holders
As used herein, a "United States Holder" means a Holder that is a
citizen or resident of the United States, a corporation, partnership or
other entity created or organized in or under the laws of the United States
or any political subdivision thereof, or an estate or trust the income of
which is subject to United States federal income taxation regardless of its
source.
Classification of TU Electric Capital
Reid & Priest LLP, special counsel to the Company and TU Electric
Capital, is of the opinion that, under current law and assuming full
compliance with the terms of the Indenture and the Declaration (and certain
other documents), TU Electric Capital will be classified as a "grantor
trust" for federal income tax purposes and will not be classified as an
association taxable as a corporation. Each Holder will be treated as
owning an undivided beneficial interest in the Junior Subordinated
Debentures. Accordingly, each Holder will be required to include in its
gross income the OID accrued with respect to its allocable share of Junior
Subordinated Debentures as described below. Investors should be aware that
the opinion of Reid & Priest LLP does not address any other issue and is
not binding on the Internal Revenue Service or the courts.
Classification of the Junior Subordinated Debentures
Based on the advice of its counsel, the Company believes and intends
to take the position that the Junior Subordinated Debentures will
constitute indebtedness for United States federal income tax purposes. No
assurance can be given that such position will not be challenged by the
Internal Revenue Service or, if challenged, that such a challenge will not
be successful. By exchanging Depositary Shares for Preferred Securities,
each Holder covenants to treat the Junior Subordinated Debentures as
indebtedness and the Preferred Securities as evidence of an indirect
beneficial ownership in the Junior Subordinated Debentures. The remainder
of this discussion assumes that the Junior Subordinated Debentures will be
classified as indebtedness of the Company for United States federal income
tax purposes.
Exchange of Depositary Shares for Preferred Securities and Cash or for
Cash Only
The exchange of Depositary Shares either for Preferred Securities plus
a cash component or for cash alone pursuant to the Exchange Offer will be a
taxable transaction. In the event of an exchange for Preferred Securities
and cash, gain or loss will be recognized in an amount equal to the
difference between the fair market value of the Preferred Securities at the
time of the exchange plus the cash received, including the Payment in Lieu
of Accumulated Dividends, and the exchanging Holder's tax basis in the
Depositary Shares exchanged therefor. In the event of an exchange for cash
only, gain or loss will be recognized in an amount equal to the difference
between the cash received and the selling Holder's cash basis in the
Depositary Shares surrendered. In the case of a United States Holder who
owns (actually or constructively) solely Depositary Shares, or not more
than one percent of the Depositary Shares outstanding and not more than one
percent of any other class of the Company's capital stock, any such gain
recognized will be long-term capital gain or loss if the Depositary Shares
have been held for more than one year as of such date. A United States
Holder's aggregate tax basis in the Preferred Securities will be equal to
the fair market value of the Preferred Securities at the time of the
exchange.
Holders of the Depositary Shares owning (actually or constructively)
more than one percent of any class of the Company's stock are advised to
consult their own tax advisors as to the income tax consequences of
exchanging Preferred Securities for Depositary Shares.
Original Issue Discount
Under the terms of the Junior Subordinated Debentures, the Company has
the option to defer payments of interest for up to 20 consecutive quarterly
distribution payment periods and to pay as a lump sum at the end of such
period all of the interest that has accrued during such period. During any
such Extension Period, distributions on the Preferred Securities will also
be deferred. Because of this option to extend the interest payment
periods, all of the stated distribution payments on the Preferred
Securities will be treated as OID. As a result, United States Holders will
be required to accrue interest income even if they use the cash method of
tax accounting. In the event of an Extension Period, a United States
Holder will be required to continue to include OID in income on an economic
accrual basis notwithstanding that TU Electric Capital will not make any
distribution payments on the Preferred Securities.
In addition, the amount of OID will be increased or decreased if the
"issue price" of the Junior Subordinated Debentures (fair market value of
the Preferred Securities at the time of the exchange, which will not
include the additional cash component and the Payment in Lieu of
Accumulated Dividends ) is less than or greater than their stated principal
amount. In the event that the issue price of the Junior Subordinated
Debentures is less than their stated principal amount, the Treasury
Regulations may be read to require a recalculation of the amount of OID for
each period that the Company does not exercise its right to extend the
interest payment. This recalculation could result in minor adjustments to
the amount of OID taxable to the Holders for such period.
Receipt of Junior Subordinated Debentures or Cash Upon
Liquidation of TU Electric Capital
Under certain circumstances, as described under the caption
DESCRIPTION OF THE PREFERRED SECURITIES -- "Tax Event Distribution or
Redemption," Junior Subordinated Debentures may be distributed to Holders
of Preferred Securities in exchange for the Preferred Securities and in
liquidation of TU Electric Capital. Under current law, for United States
federal income tax purposes, such a distribution would be treated as a non-
taxable event to each United States Holder, and each United States Holder
would receive an aggregate tax basis in the Junior Subordinated Debentures
equal to such Holder's aggregate tax basis in its Preferred Securities. A
United States Holder's holding period for the Junior Subordinated
Debentures received in liquidation of TU Electric Capital would include the
period during which such Holder held the Preferred Securities.
Under certain circumstances, as described under the caption
DESCRIPTION OF THE PREFERRED SECURITIES -- "Redemption of Preferred
Securities," Junior Subordinated Debentures may be redeemed for cash and
the proceeds of such redemption distributed to Holders of Preferred
Securities in redemption of the Preferred Securities. Under current law
for United States federal income tax purposes, such a redemption would
constitute a taxable disposition of the redeemed Preferred Securities, and
a United States Holder would recognize gain or loss as if such Holder had
sold such redeemed Preferred Securities. See "Sale, Exchange and
Retirement of the Preferred Securities."
Sale, Exchange and Retirement of the Preferred Securities
Upon the sale, exchange or retirement of Preferred Securities, a
United States Holder will recognize gain or loss equal to the difference
between the amount realized upon the sale, exchange or retirement and such
Holder's adjusted tax basis in the Preferred Securities. A United States
Holder's adjusted tax basis in Preferred Securities will, in general, be
the United States Holder's initial basis therein, increased by OID or
market discount previously included in income by the United States Holder
and reduced by any amortized premium and any cash payments on the Preferred
Securities. Except with respect to market discount, such gain or loss will
be capital gain or loss and will be long-term capital gain or loss if at
the time of sale, exchange or retirement, the Preferred Securities have
been held for more than one year. Under current law, net capital gains of
individuals are, under certain circumstances, taxed at lower rates than
items of ordinary income. The deductibility of capital losses is subject
to limitations.
Backup Withholding and Information Reporting
In general, information reporting requirements will apply to (i)
certain payments of liquidation preference or distributions paid on the
Preferred Securities, (ii) the gross proceeds from the exchange of
Depositary Shares either for Preferred Securities plus a cash component
(including the Payment in Lieu of Accumulated Dividends) or for cash only
pursuant to the Exchange Offer, and (iii) the proceeds of sale of the
Preferred Securities made to United States Holders other than certain
exempt recipients (such as corporations). A 31% backup withholding tax
will apply to payments described in the preceding sentence if the United
States Holder fails to provide a taxpayer identification number or
certification of exempt status or fails to report in full dividend and
interest income. It is anticipated that persons who hold Preferred
Securities as nominees for beneficial holders will report the required tax
information to beneficial holders on Form 1099.
Any amounts withheld under the backup withholding rules will be
allowed as a refund or a credit against such Holder's United States federal
income tax liability provided the required information is furnished to the
IRS.
EXPERTS
The financial statements and financial statement schedules included in
the 1994 10-K, incorporated herein by reference, have been audited by
Deloitte & Touche LLP, Independent Auditors, as stated in their report
included in such 1994 10-K, and have been incorporated by reference herein
in reliance upon such report given upon the authority of that firm as
experts in accounting and auditing.
With respect to the unaudited interim financial information included
in the Company's Quarterly Reports on Form 10-Q incorporated herein by
reference, Deloitte & Touche LLP has applied limited procedures in
accordance with professional standards for reviews of such information.
However, as stated in any of their reports that are included in the
Company's Quarterly Reports on Form 10-Q, incorporated herein by reference,
they did not audit and they do not express an opinion on that interim
financial information. Deloitte & Touche LLP is not subject to the
liability provisions of Section 11 of the 1933 Act for any of its reports
on such unaudited interim financial information because those reports are
not "reports" or a "part" of the Registration Statement filed under the
1933 Act with respect to the Preferred Securities prepared or certified by
an accountant within the meaning of Sections 7 and 11 of the 1933 Act.
The statements made in the Company's latest Annual Report on Form 10-K
under Part I, Item 1 -- Business-Regulation and Rates and Environmental
Matters, incorporated herein by reference, have been reviewed by Worsham,
Forsythe & Wooldridge, L.L.P., Dallas, Texas, General Counsel for the
Company. All of such statements are set forth or incorporated by reference
herein in reliance upon the opinion of that firm given upon their authority
as experts. At June 30, 1995, members of the firm of Worsham, Forsythe &
Wooldridge, L.L.P. owned approximately 47,000 shares of the common stock of
Texas Utilities. Statements as to United States federal income taxation
under CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES herein have
been passed upon for the Company and TU Electric Capital by Reid & Priest
LLP, New York, New York, of counsel to the Company.
LEGALITY
Certain matters of Delaware law relating to the validity of the
Preferred Securities, the enforceability of the Trust Agreement and the
creation of TU Electric Capital are being passed upon by Richards, Layton &
Finger, Special Delaware counsel for the Company and TU Electric Capital.
The legality of the other securities offered hereby will be passed upon for
the Company and TU Electric Capital by Worsham, Forsythe & Wooldridge,
L.L.P. and by Reid & Priest LLP, and for the Underwriters by Winthrop,
Stimson, Putnam & Roberts, New York, New York. However, all matters
pertaining to incorporation of the Company and all other matters of Texas
law will be passed upon only by Worsham, Forsythe & Wooldridge, L.L.P.
<PAGE>
The Exchange Agent is:
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(New York City Time)
New York, New York
BY MAIL:
Facsimile Transmission
(For Eligible Institutions Only)
Confirm Receipt of Notice of Guaranteed Delivery by Telephone:
Shareholder Inquiries:
(Toll Free)
Any questions or requests for assistance or additional copies of this
Prospectus, Letters of Transmittal and the Notice of Guaranteed Delivery
may be directed to the Information Agent or the Dealer Managers at their
respective telephone numbers and locations set forth below. You may also
contact your broker, dealer, commercial bank or trust company or other
nominee for assistance concerning the Exchange Offer.
The Information Agent is:
D.F. KING & CO. INC.
Banks and Brokers call collect:
(212)
All others call toll-free:
(800)
The Dealer Managers for the Exchange Offer are:
MERRILL LYNCH & CO. GOLDMAN, SACHS & CO. LEHMAN BROTHERS
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Article IX of the Restated Articles of Incorporation of the Company
provides as follows:
"The Corporation shall reimburse or indemnify any former, present
or future director, officer or employee of the Corporation, or any
person who may have served at its request as a director, officer or
employee of another corporation, or any former, present or future
director, officer or employee of the Corporation who shall have served
or shall be serving as an administrator, agent or fiduciary for the
Corporation or for another corporation at the request of the
Corporation (and his heirs, executors and administrators) from and
against all expenses and liabilities incurred by him or them, or
imposed on him or them, including, but not limited to, judgments,
settlements, court costs and attorneys' fees, in connection with, or
arising out of, the defense of any action, suit or proceeding in which
he may be involved by reason of his being or having been such
director, officer or employee, except with respect to matters as to
which he shall be adjudged in such action, suit or proceeding to be
liable because he did not act in good faith, or because of dishonesty
or conflict of interest in the performance of his duty.
"No former, present or future director, officer or employee of
the Corporation (or his heirs, executors and administrators) shall be
liable for any act, omission, step or conduct taken or had in good
faith, which is required, authorized or approved by any order or
orders issued pursuant to the Public Utility Holding Company Act of
1935, the Federal Power Act, or any other federal or state statute
regulating the Corporation or its subsidiaries, or any amendments to
any thereof. In any action, suit or proceeding based on any act,
omission, step or conduct, as in this paragraph described, the
provisions hereof shall be brought to the attention of the court. In
the event that the foregoing provisions of this paragraph are found by
the court not to constitute a valid defense, each such director,
officer or employee (and his heirs, executors and administrators)
shall be reimbursed for, or indemnified against, all expenses and
liabilities incurred by him or them, or imposed on him or them,
including, but not limited to, judgments, settlements, court costs and
attorneys' fees, in connection with, or arising out of, any such
action, suit or proceeding based on any act, omission, step or conduct
taken or had in good faith as in this paragraph described.
"The foregoing rights shall not be exclusive of other rights to
which any such director, officer or employee (or his heirs, executors
and administrators) may otherwise be entitled under any bylaw,
agreement, vote of shareholders or otherwise, and shall be available
whether or not the director, officer or employee continues to be a
director, officer or employee at the time of incurring such expenses
and liabilities. In furtherance, and not in limitation of the
foregoing provisions of this Article IX, the Corporation may indemnify
and insure any such persons to the fullest extent permitted by the
Texas Business Corporation Act, as amended from time to time, or the
laws of the State of Texas, as in effect from time to time."
Article 2.02-1 of the Texas Business Corporation Act permits the
Company, in certain circumstances, to indemnify any present or former
director, officer, employee or agent of the Company against judgments,
penalties, fines, settlements and reasonable expenses incurred in
connection with a proceeding in which any such person was, is or is
threatened to be, made a party by reason of holding such office or
position, but only to a limited extent for obligations resulting from a
proceeding in which the person is found liable on the basis that a personal
benefit was improperly received or in circumstances in which the person is
found liable in a derivative suit brought on behalf of the Company.
Article X of the Articles of Incorporation of the Company provides as
follows:
"A director of the Corporation shall not be liable to the
Corporation or its shareholders for monetary damages for any act or
omission in the director's capacity as a director, except that this
provision does not eliminate or limit the liability of a director for:
(a) a breach of a director's duty of loyalty to the
Corporation or its shareholders;
(b) an act or omission not in good faith that constitutes a
breach of duty of a director to the Corporation or an act or
omission that involved intentional misconduct or a knowing
violation of the law;
(c) a transaction from which a director received an improper
benefit, whether or not the benefit resulted from an action taken
within the scope of the director's office; or
(d) an act or omission for which the liability of a director
is expressly provided for by statute.
If the laws of the State of Texas are amended to authorize action
further eliminating or limiting the personal liability of directors,
then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by such laws as
so amended. Any repeal or modification of this Article X shall not
adversely affect any right of protection of a director of the
Corporation existing at the time of such repeal or modification."
Section 18 of the Company's bylaws provides as follows:
"Section 18. Insurance, Indemnification and Other Arrangements.
Without further specific approval of the shareholders of the
Corporation, the Corporation may purchase, enter into, maintain or
provide insurance, indemnification or other arrangements for the
benefit of any person who is or was a director, officer, employee or
agent of the Corporation or is or was serving another entity at the
request of the Corporation as a director, officer, employee, agent or
otherwise, to the fullest extent permitted by the laws of the State of
Texas, including without limitation Art. 2.02-1 of the Texas Business
Corporation Act or any successor provision, against any liability
asserted against or incurred by any such person in any such capacity
or arising out of such person's service in such capacity whether or
not the Corporation would otherwise have the power to indemnify
against any such liability under the Texas Business Corporation Act.
If the laws of the State of Texas are amended to authorize the
purchase, entering into, maintaining or providing of insurance,
indemnification or other arrangements in the nature of those permitted
hereby to a greater extent than presently permitted, then the
Corporation shall have the power and authority to purchase, enter
into, maintain and provide any additional arrangements in such regard
as shall be permitted from time to time by the laws of the State of
Texas without further approval of the shareholders of the Corporation.
No repeal or modification of such laws or this Section 18 shall
adversely affect any such arrangement or right to indemnification
existing at the time of such repeal or modification."
The Company has entered into agreements with its officers and
directors which provide, among other things, for their indemnification by
the Company to the fullest extent permitted by Texas law, unless a final
adjudication establishes that the indemnitee's acts were committed in bad
faith, were the result of active and deliberate dishonesty or that the
indemnitee personally gained a financial profit to which the indemnitee was
not legally entitled. These agreements further provide, under certain
circumstances, for the advancement of expenses and the implementation of
other arrangements for the benefit of the indemnitee.
The Company has insurance covering its expenditures which might arise
in connection with its lawful indemnification of its directors and officers
for their liabilities and expenses. Directors and officers of the Company
also have insurance which insures them against certain other liabilities
and expenses.
Item 21. Exhibits.
Previously Filed*
-----------------
With
File As
Exhibit Number Exhibit
--------- ------- -------
**1(a) -- Form of Dealer Manager
Agreement.
3(a) 0-11442 3(a) -- Restated Articles of
Form 10-K Incorporation of the Company
1993
3(b) 33-64694 4(c) -- Bylaws of the Company, as
amended.
***3(c) -- Trust Agreement relating to the
Preferred Securities.
4(a) -- Form of Amended and Restated Trust
Agreement relating to the Preferred
Securities.
4(b) -- Form of Indenture relating to the
Junior Subordinated Debentures.
4(c) -- Form of Guarantee Agreement.
4(d) -- Form of Agreement as to
Expenses and Liabilities.
4(e) -- Form of Officers' Certificate
establishing Debentures.
4(f) -- Form of Preferred Securities.
**4(g) -- Form of Letter of Transmittal.
5(a) -- Opinion of Worsham, Forsythe &
Wooldridge, L.L.P., General Counsel
for the Company.
5(b) -- Opinion of Reid & Priest LLP, of
and 8 counsel to the Company.
5(c) -- Opinion of Richards, Layton & Finger,
Special Delaware Counsel to the
Company and TU Electric Capital.
12(a) -- Computation of Ratio of Earnings to
Fixed Charges of the Company.
12(b) -- Computation of Ratio of Earnings
to Fixed Charges and Preferred
Dividends of the Company.
***15 -- Letter of Deloitte & Touche LLP
regarding unaudited condensed interim
financial information.
***23(a) -- Independent Auditors' Consent.
23(b) -- Consents of Worsham, Forsythe &
Wooldridge, L.L.P., Reid & Priest LLP
and Richards, Layton & Finger are
contained in Exhibits 5(a), 5(b) and
5(c), respectively.
***24 -- Power of Attorney.
***25(a) -- Statement on Form T-1 of The Bank
of New York relating to the Amended
and Restated Trust Agreement.
***25(b) -- Statement on Form T-1 of The Bank
of New York relating to the
Indenture.
***25(c) -- Statement on Form T-1 of The Bank
of New York relating to the Guarantee.
**99(a) -- Form of Exchange Agent Agreement.
**99(b) -- Form of letter to Brokers,
Dealers, Commercial Banks, Trust
Companies and Other Nominees.
**99(c) -- Form of letter from Brokers,
Dealers, Commercial Banks, Trust
Companies and Other Nominees to their
clients.
**99(d) -- Form of Notice of Guaranteed Delivery.
**99(e) -- Form of letter to Holders of
$1.875 Depositary Shares.
**99(f) -- Form of letter to Holders of
$1.805 Depositary Shares.
**99(g) -- Form of Questions and Answers
relating to the Offer.
**99(h) -- Form of Notice of Offer to Exchange.
---------------------
*Incorporated herein by reference.
**To be filed by amendment.
*** Filed with Registrations Nos. 33-63031 and 33-63031-01
Item 22. Undertakings.
The undersigned registrant hereby undertakes:
(1) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange
Act of 1934 that is incorporated by reference in this Registration
Statement shall be deemed to be a new registration statement relating
to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(2) That, for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(3) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(4) That, insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant pursuant to the
provisions described under Item 15 above, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of
such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this amendment to the registration statement to
be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of New York, and State of New York, on the 1st day of
November, 1995.
Texas Utilities Electric Company
By /s/ Robert J. Reger, Jr.
--------------------------------
Robert J. Reger, Jr.
(Attorney-in-Fact)
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the registration statement has been signed below by the
following persons in the capacities and on the date indicated.
Signatures Title Date
---------- ----- ----
/s/ Erle Nye*
----------------------- Principal Executive November 1, 1995
(Erle Nye, Chairman Officer and Director
of the Board and
Chief Executive)
/s/ H. Dan Farell*
----------------------- Principal Financial November 1, 1995
(H. Dan Farell, Senior Officer and Director
Vice President
/s/ Marc D. Moseley*
----------------------- Principal Accounting November 1, 1995
(Marc D. Moseley, Officer
Controller)
/s/ T. L. Baker*
----------------------- Director November 1, 1995
(T. L. Baker)
/s/ J. S. Farrington*
----------------------- Director November 1, 1995
(J. S. Farrington)
/s/ H. Jarrell Gibbs*
----------------------- Director November 1, 1995
(H. Jarrell Gibbs)
/s/ John U. Martin*
----------------------- Director November 1, 1995
(John U. Martin)
/s/ Michael D. Spence*
----------------------- Director November 1, 1995
(Michael D. Spence)
/s/ W. M. Taylor*
----------------------- Director November 1, 1995
(W. M. Taylor)
/s/ E. L. Watson*
----------------------- Director November 1, 1995
(E. L. Watson)
*By /s/ Robert J. Reger, Jr.
---------------------------
Robert J. Reger, Jr.
(Attorney-in-Fact)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this amendment to the registration statement
to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, and State of New York, on the 1st
day of November 1995.
TU Electric Capital I
By: /s/ Robert J. Reger, Jr.
---------------------------------
Robert J. Reger, Jr.
(Attorney-in-Fact)
