<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
-- OR --
(_) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
---------------------
TEXAS UTILITIES COMPANY
(formerly TUC Holding Company)
A Texas Corporation I.R.S. Employer Indentification
Commission File Number 1-12833 No. 75-2669310
ENERGY PLAZA, 1601 BRYAN STREET, DALLAS, TEXAS 75201-3411
(214) 812-4600
TEXAS UTILITIES ELECTRIC COMPANY
A Texas Corporation I.R.S. Employer Identification
Commission File Number 0-11442 No. 75-1837355
ENERGY PLAZA, 1601 BRYAN STREET, DALLAS, TEXAS 75201-3411
(214) 812-4600
---------------------
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days.
Yes X No________
---------
COMMON STOCK OUTSTANDING AT OCTOBER 31, 1997:
Texas Utilities Company: 237,756,829 shares, without par value.
Texas Utilities Electric Company: 147,705,600 shares, without par value.
THIS COMBINED FORM 10-Q IS FILED SEPARATELY BY TEXAS UTILITIES COMPANY AND TEXAS
UTILITIES ELECTRIC COMPANY. INFORMATION CONTAINED HEREIN RELATING TO AN
INDIVIDUAL REGISTRANT IS FILED BY THAT REGISTRANT ON ITS OWN BEHALF EXCEPT THAT
THE INFORMATION WITH RESPECT TO TEXAS UTILITIES ELECTRIC COMPANY, OTHER THAN THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF TEXAS UTILITIES ELECTRIC COMPANY,
IS FILED BY EACH OF TEXAS UTILITIES ELECTRIC COMPANY AND TEXAS UTILITIES
COMPANY. NEITHER TEXAS UTILITIES ELECTRIC COMPANY NOR TEXAS UTILITIES COMPANY
MAKES ANY REPRESENTATIONS AS TO INFORMATION FILED BY THE OTHER REGISTRANT.
================================================================================
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
----
<S> <C>
Item 1. Financial Statements
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
Condensed Statements of Consolidated Income -
Three, Nine and Twelve Months Ended September 30,
1997 and 1996..................................... 3
Condensed Statements of Consolidated Cash Flows -
Nine Months Ended September 30, 1997 and 1996..... 4
Condensed Consolidated Balance Sheets -
September 30, 1997 and December 31, 1996.......... 5
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
Condensed Statements of Consolidated Income -
Three, Nine and Twelve Months Ended September 30,
1997 and 1996..................................... 7
Condensed Statements of Consolidated Cash Flows -
Nine Months Ended September 30, 1997 and 1996..... 8
Condensed Consolidated Balance Sheets -
September 30, 1997 and December 31, 1996.......... 9
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS... 11
INDEPENDENT ACCOUNTANTS' REPORTS....................... 19
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation................ 21
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................. 28
Item 6. Exhibits and Reports on Form 8-K.................. 28
SIGNATURES............................................................ 29
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
------------------ ----------------- -------------------
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
THOUSANDS OF DOLLARS
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES.............. $2,264,945 $1,930,097 $5,347,234 $5,085,310 $6,812,852 $6,350,066
---------- ---------- ---------- ---------- ---------- ----------
OPERATING EXPENSES
Fuel and purchased power....... 670,460 600,681 1,661,855 1,637,132 2,161,032 2,004,436
Gas purchased for resale....... 205,343 -- 205,343 -- 205,343 --
Operation and maintenance...... 390,820 301,304 1,061,973 900,438 1,417,815 1,200,352
Depreciation and amortization.. 172,865 155,664 489,656 463,417 646,744 609,299
Taxes other than income........ 140,413 128,838 401,627 390,728 545,743 531,105
---------- ---------- ---------- ---------- ---------- ----------
Total operating expenses...... 1,579,901 1,186,487 3,820,454 3,391,715 4,976,677 4,345,192
---------- ---------- ---------- ---------- ---------- ----------
OPERATING INCOME................ 685,044 743,610 1,526,780 1,693,595 1,836,175 2,004,874
OTHER INCOME AND (DEDUCTIONS) -
NET............................ (3,635) 5,570 (13,504) 4,778 (19,429) 15,078
---------- ---------- ---------- ---------- ---------- ----------
TOTAL INCOME.................... 681,409 749,180 1,513,276 1,698,373 1,816,746 2,019,952
---------- ---------- ---------- ---------- ---------- ----------
INTEREST AND OTHER CHARGES
Interest...................... 201,089 193,178 564,780 610,002 752,671 789,815
Allowance for borrowed funds
used during construction..... ( 1,770) (2,716) (6,708) (9,253) (8,704) (10,171)
Distributions on TU Electric
obligated, mandatorily
redeemable, preferred securities
of subsidiary trusts holding
solely debentures
of TU Electric............... 18,127 8,250 51,423 24,749 59,675 26,550
Preferred stock dividends
of subsidiaries.............. 5,476 13,120 21,494 40,845 34,008 59,845
---------- ---------- ---------- ---------- ---------- ----------
Total interest and other
charges..................... 222,922 211,832 630,989 666,343 837,650 866,039
---------- ---------- ---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES...... 458,487 537,348 882,287 1,032,030 979,096 1,153,913
INCOME TAX EXPENSE.............. 168,877 179,365 317,132 345,016 347,348 387,671
---------- ---------- ---------- ---------- ---------- ----------
CONSOLIDATED NET INCOME......... $ 289,610 $ 357,983 $ 565,155 $ 687,014 $ 631,748 $ 766,242
========== ========== ========== ========== ========== ==========
Average shares of common stock
outstanding (thousands)......... 233,283 224,603 227,500 225,346 226,776 225,469
Earnings and dividends per share
of common stock:
Earnings (on average shares
outstanding)................... $ 1.24 $ 1.59 $ 2.48 $ 3.05 $ 2.79 $ 3.40
Dividends declared............. $ 0.525 $ 0.50 $ 1.575 $ 1.50 $ 2.10 $ 2.00
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------
1997 1996
---- ----
THOUSANDS OF DOLLARS
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated net income........................................ $ 565,155 $ 687,014
Adjustments to reconcile
consolidated net income to cash
provided by operating activities:
Depreciation and amortization
(including amounts charged to fuel).......................... 620,415 580,107
Deferred income taxes -- net.................................. 81,642 155,807
Federal investment tax credits -- net......................... (17,095) (17,504)
Allowance for equity funds used
during construction.......................................... (3,818) (1,292)
Other......................................................... 80,061 --
Changes in operating assets and liabilities:
Accounts receivable.......................................... (291,519) (132,445)
Inventories.................................................. (4,724) 20,117
Accounts payable............................................. 122,105 71,741
Interest and taxes accrued................................... 21,723 53,419
Other working capital........................................ 82,943 (32,595)
Over/(under)-recovered fuel revenue -- net of deferred
taxes....................................................... (63,245) (41,077)
Other -- net................................................. 72,932 50,301
---------- ----------
Cash provided by operating activities...................... 1,266,575 1,393,593
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuances of securities:
First mortgage bonds.......................................... 198,640 244,225
Other long-term debt.......................................... 309,964 300,000
TU Electric obligated, mandatorily redeemable, preferred
securities of subsidiary trusts holding solely debentures of
TU Electric.................................................. 493,273 --
Retirements of securities:
First mortgage bonds.......................................... (634,467) (475,847)
Other long-term debt.......................................... (623,883) (318,942)
Preferred stock of subsidiaries............................... (553,093) (37,769)
Common stock.................................................. (97,333) (51,636)
Change in notes payable:
Commercial paper.............................................. 784,739 (60,045)
Banks......................................................... (269,789) (169,590)
Common stock dividends paid.................................... (356,591) (338,761)
Debt premium, discount, financing and reacquisition
expenses...................................................... (31,399) (41,044)
---------- ----------
Cash used in financing activities.......................... (779,939) (949,409)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Construction expenditures...................................... (376,914) (304,205)
Allowance for equity funds used during construction (excluding
amount for nuclear fuel)...................................... 1,992 719
Change in construction receivables/payables -- net............. (672) 994
Non-utility property -- net.................................... (29,388) (6,431)
Nuclear fuel (excluding allowance for equity funds used during
construction)................................................. (39,637) (50,712)
Other investments.............................................. (17,774) (73,543)
---------- ----------
Cash used in investing activities.......................... (462,393) (433,178)
---------- ----------
EFFECT OF EXCHANGE RATE CHANGES................................. 1,761 (300)
---------- ----------
NET CHANGE IN CASH AND CASH EQUIVALENTS......................... 26,004 10,706
CASH AND CASH EQUIVALENTS -- BEGINNING BALANCE.................. 15,845 24,853
---------- ----------
CASH AND CASH EQUIVALENTS -- ENDING BALANCE.................... $ 41,849 $ 35,559
========== ==========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30,
1997 December 31,
(Unaudited) 1996
----------- ------------
Thousands of Dollars
<S> <C> <C>
PROPERTY, PLANT AND EQUIPMENT
In service:
Electric:
Production.................................................................... $16,282,213 $16,277,151
Transmission.................................................................. 1,664,733 1,607,925
Distribution.................................................................. 5,790,720 5,655,677
General....................................................................... 504,966 503,688
----------- -----------
Total electric............................................................. 24,242,632 24,044,441
Gas............................................................................. 1,186,363 --
----------- -----------
Total property, plant and equipment in service................................ 25,428,995 24,044,441
Less accumalated depreciation................................................... 6,572,305 6,127,610
----------- -----------
Net property, plant and equipment in service.................................. 18,856,690 17,916,831
Construction work in progress.................................................... 243,998 240,612
Nuclear fuel (net of accumulated amortization: 1997 -- $439,133,000;
1996 -- $369,114,000).......................................................... 224,033 252,589
Held for future use.............................................................. 23,966 24,483
----------- -----------
Property, plant and equipment, less accumulated depreciation and amortization.. 19,348,687 18,434,515
Less reserve for regulatory disallowances........................................ 836,005 836,005
----------- -----------
Net property, plant and equipment............................................. 18,512,682 17,598,510
----------- -----------
INVESTMENTS
Goodwill (net of accumulated amortization)....................................... 1,281,077 526,410
Other investments................................................................ 814,546 631,813
----------- -----------
Total investments............................................................. 2,095,623 1,158,223
----------- -----------
CURRENT ASSETS
Cash and cash equivalents........................................................ 41,849 15,845
Special deposits................................................................. 2,441 805
Accounts receivable:
Customers....................................................................... 749,796 290,111
Other........................................................................... 62,159 44,032
Allowance for uncollectible accounts............................................ (11,604) (6,262)
Inventories -- at average cost:
Materials and supplies.......................................................... 208,819 200,601
Fuel stock...................................................................... 74,774 77,227
Gas stored underground.......................................................... 152,314 44,472
Prepayments...................................................................... 81,783 56,324
Deferred income taxes............................................................ 61,285 40,021
Other current assets............................................................. 78,462 13,279
----------- -----------
Total current assets.......................................................... 1,502,078 776,455
----------- -----------
DEFERRED DEBITS
Unamortized regulatory assets.................................................... 1,835,746 1,753,418
Under-recovered fuel revenue..................................................... 54,373 --
Other deferred debits............................................................ 169,576 89,101
----------- -----------
Total deferred debits......................................................... 2,059,695 1,842,519
----------- -----------
Total..................................................................... $24,170,078 $21,375,707
=========== ===========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997 DECEMBER 31,
(UNAUDITED) 1996
----------- ------------
THOUSANDS OF DOLLARS
<S> <C> <C>
CAPITALIZATION
Common stock without par value -- net:
Authorized shares -- 500,000,000
Outstanding shares: 1997 - 237,756,829; 1996 - 224,602,557.............................. $ 5,296,772 $ 4,787,047
Retained earnings......................................................................... 1,374,125 1,202,390
Cumulative currency translation adjustment................................................ (16,677) 43,476
----------- -----------
Total common stock equity............................................................. 6,654,220 6,032,913
Preferred stock of subsidiaries:
Not subject to mandatory redemption..................................................... 304,194 464,427
Subject to mandatory redemption......................................................... 20,596 238,391
TU Electric obligated, mandatorily redeemable, preferred securities of subsidiary trusts
holding solely debentures of TU Electric................................................ 875,005 381,311
Long-term debt, less amounts due currently................................................ 9,094,826 8,668,111
----------- -----------
Total capitalization.................................................................. 16,948,841 15,785,153
----------- -----------
CURRENT LIABILITIES
Notes payable:
Commercial paper........................................................................ 694,697 253,151
Banks................................................................................... 43,067 69,788
Long-term debt due currently.............................................................. 348,544 356,076
Accounts payable.......................................................................... 642,516 336,391
Dividends declared........................................................................ 129,256 129,879
Customers' deposits....................................................................... 90,162 80,390
Taxes accrued............................................................................. 204,182 143,424
Interest accrued.......................................................................... 170,710 156,758
Over-recovered fuel revenue............................................................... -- 42,984
Other current liabilities................................................................. 320,741 90,485
----------- -----------
Total current liabilities............................................................. 2,643,875 1,659,326
----------- -----------
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES
Accumulated deferred income taxes......................................................... 2,983,588 2,801,626
Unamortized federal investment tax credits................................................ 576,113 589,713
Other deferred credits and noncurrent liabilities......................................... 1,017,661 539,889
----------- -----------
Total deferred credits and other noncurrent liabilities............................... 4,577,362 3,931,228
COMMITMENTS AND CONTINGENCIES
----------- -----------
Total.............................................................................. $24,170,078 $21,375,707
=========== ===========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
6
<PAGE>
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
------------------ ----------------- -------------------
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
THOUSANDS OF DOLLARS
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES.................................... $1,851,356 $1,787,412 $4,668,356 $4,694,520 $6,003,446 $5,918,587
---------- ---------- ---------- ---------- ---------- ----------
OPERATING EXPENSES
Fuel and purchased power............................. 637,943 553,077 1,540,005 1,510,370 1,995,390 1,881,821
Operation and maintenance............................ 289,096 263,929 892,983 793,286 1,211,608 1,073,520
Depreciation and amortization........................ 143,468 140,991 429,213 419,788 571,327 558,583
Income taxes......................................... 178,991 185,294 355,132 383,125 393,020 430,283
Taxes other than income.............................. 124,948 121,851 372,375 369,605 509,202 503,847
---------- ---------- ---------- ---------- ---------- ----------
Total operating expenses............................ 1,374,446 1,265,142 3,589,708 3,476,174 4,680,547 4,448,054
---------- ---------- ---------- ---------- ---------- ----------
OPERATING INCOME...................................... 476,910 522,270 1,078,648 1,218,346 1,322,899 1,470,533
---------- ---------- ---------- ---------- ---------- ----------
OTHER INCOME
Allowance for equity funds used during construction.. 3,153 373 3,800 1,272 4,077 7,988
Other income and (deductions) -- net................. (465) 6,272 (740) 1,362 (1,600) 1,732
Income tax benefit (expense)......................... (2,464) (2,236) 11,694 15,183 12,025 17,090
---------- ---------- ---------- ---------- ---------- ----------
Total other income................................. 224 4,409 14,754 17,817 14,502 26,810
---------- ---------- ---------- ---------- ---------- ----------
TOTAL INCOME.......................................... 477,134 526,679 1,093,402 1,236,163 1,337,401 1,497,343
---------- ---------- ---------- ---------- ---------- ----------
INTEREST AND OTHER CHARGES
Interest on mortgage bonds.......................... 108,654 122,285 335,891 369,762 452,921 495,671
Interest on other long-term debt.................... 6,071 6,205 13,214 22,858 16,811 32,627
Other interest...................................... 23,873 13,215 51,135 67,948 65,646 84,082
Distribution on TU Electric obligated, mandatorily
redeemable, preferred securities of subsidiary
trusts holding solely debentures of TU Electric.... 18,127 8,250 51,423 24,749 59,675 26,550
Allowance for borrowed funds used during
construction....................................... (1,583) (2,714) (6,251) (9,246) (8,245) (10,161)
---------- ---------- ---------- ---------- ---------- ----------
Total interest and other charges.................. 155,142 147,241 445,412 476,071 586,808 628,769
---------- ---------- ---------- ---------- ---------- ----------
CONSOLIDATED NET INCOME............................... 321,992 379,438 647,990 760,092 750,593 868,574
PREFERRED STOCK DIVIDENDS............................. 3,598 13,120 23,160 40,845 35,674 59,845
---------- ---------- ---------- ---------- ---------- ----------
CONSOLIDATED NET INCOME AVAILABLE FOR
COMMON STOCK......................................... $ 318,394 $ 366,318 $ 624,830 $ 719,247 $ 714,919 $ 808,729
========== ========== ========== ========== ========== ==========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
7
<PAGE>
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1997 1996
---- ----
THOUSANDS OF DOLLARS
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated net income........................................... $ 647,990 $ 760,092
Adjustments to reconcile net income to cash provided by operating
activities:
Depreciation and amortization (including amounts charged to fuel) 537,365 513,157
Deferred income taxes -- net..................................... 102,302 125,822
Federal investment tax credits -- net............................ (15,916) (16,323)
Allowance for equity funds used during construction.............. (3,800) (1,272)
Other............................................................ 80,061 --
Changes in operating assets and liabilities:
Accounts receivable............................................. (249,350) (107,196)
Inventories..................................................... 189 9,172
Accounts payable................................................ 77,639 55,465
Interest and taxes accrued...................................... 71,108 119,803
Other working capital........................................... 45,933 (35,257)
Over/(under)-recovered fuel revenue -- net of deferred taxes.... (63,282) (41,077)
Other -- net.................................................... 66,144 13,355
---------- -----------
Cash provided by operating activities......................... 1,296,383 1,395,741
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuances of securities:
First mortgage bonds............................................. 198,640 244,225
Other long-term debt............................................. 300,000 --
TU Electric obligated, mandatorily redeemable, preferred
securities of subsidiary trusts holding solely
debentures of TU Electric....................................... 493,273 --
Retirements of securities:
First mortgage bonds............................................. (634,440) (475,820)
Other long-term debt............................................. (910) (301,106)
Preferred stock.................................................. (553,093) (37,769)
Common stock..................................................... (136,416) --
Change in notes payable -- commercial paper....................... (253,151) (96,990)
Change in notes receivable -- affiliates.......................... (15,982) (36,622)
Preferred stock dividends paid.................................... (32,495) (41,659)
Common stock dividends paid....................................... (272,832) (244,608)
Debt premium, discount, financing and reacquisition expenses...... (25,742) (38,623)
---------- -----------
Cash used in financing activities............................. (933,148) (1,028,972)
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Construction expenditures......................................... (310,298) (266,411)
Allowance for equity funds used during construction (excluding
amount for nuclear fuel)......................................... 1,973 699
Change in construction receivables/payables -- net................ (672) (994)
Non-utility property -- net....................................... 1,012 --
Nuclear fuel (excluding allowance for equity funds used during
construction).................................................... (39,637) (50,712)
Other investments................................................. (12,238) (39,306)
---------- -----------
Cash used in investing activities............................. (359,860) (356,724)
---------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS............................ 3,375 10,045
CASH AND CASH EQUIVALENTS -- BEGINNING BALANCE..................... 13,005 22,633
---------- -----------
CASH AND CASH EQUIVALENTS -- ENDING BALANCE........................ $ 16,380 $ 32,678
========== ===========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
8
<PAGE>
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997 DECEMBER 31,
(UNAUDITED) 1996
--------- ------------
THOUSANDS OF DOLLARS
<S> <C> <C>
ELECTRIC PLANT
In service:
Production............................................................ $15,337,913 $15,330,974
Transmission.......................................................... 1,658,309 1,601,628
Distribution.......................................................... 4,654,064 4,442,547
General............................................................... 434,360 432,178
----------- -----------
Total............................................................... 22,084,646 21,807,327
Less accumulated depreciation......................................... 5,985,207 5,594,363
----------- -----------
Net electric plant in service....................................... 16,099,439 16,212,964
Construction work in progress.......................................... 202,267 210,573
Nuclear fuel (net of accumulated amortization: 1997 -- $439,133,000;
1996 -- $369,114,000)................................................ 224,033 252,589
Held for future use.................................................... 23,966 24,483
----------- -----------
Electric plant, less accumulated depreciation and amortization...... 16,549,705 16,700,609
Less reserve for regulatory disallowances.............................. 836,005 836,005
----------- -----------
Net electric plant.................................................. 15,713,700 15,864,604
----------- -----------
INVESTMENTS............................................................. 528,233 508,437
----------- -----------
CURRENT ASSETS
Cash and cash equivalents.............................................. 16,380 13,005
Special deposits....................................................... 552 552
Notes receivable -- affiliates......................................... 51,497 35,515
Accounts receivable:
Customers............................................................. 474,120 215,706
Other................................................................. 16,132 23,282
Allowance for uncollectible accounts.................................. (6,935) (5,021)
Inventories -- at average cost:
Materials and supplies................................................ 183,561 181,405
Fuel stock............................................................ 74,774 77,119
Prepayments............................................................ 50,319 31,758
Deferred income taxes.................................................. 51,473 50,882
Other current assets................................................... 1,052 2,694
----------- -----------
Total current assets................................................ 912,925 626,897
----------- -----------
DEFERRED DEBITS
Unamortized regulatory assets.......................................... 1,818,595 1,735,306
Under-recovered fuel revenue........................................... 54,373 --
Other deferred debits.................................................. 99,423 59,695
----------- -----------
Total deferred debits............................................... 1,972,391 1,795,001
----------- -----------
Total............................................................. $19,127,249 $18,794,939
=========== ===========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
9
<PAGE>
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997 DECEMBER 31,
(UNAUDITED) 1996
--------- ------------
THOUSANDS OF DOLLARS
<S> <C> <C>
CAPITALIZATION
Common stock without par value:
Authorized shares -- 180,000,000
Outstanding shares: 1997 - 147,705,600; 1996 - 156,800,000............................... $ 4,459,473 $ 4,732,305
Retained earnings......................................................................... 1,862,016 1,373,602
----------- -----------
Total common stock equity............................................................... 6,321,489 6,105,907
Preferred stock:
Not subject to mandatory redemption...................................................... 129,194 464,427
Subject to mandatory redemption.......................................................... 20,596 238,391
TU Electric obligated, mandatorily redeemable, preferred securities of subsidiary trusts
holding solely debentures of TU Electric................................................. 875,005 381,311
Long-term debt, less amounts due currently................................................ 6,191,555 6,310,594
----------- -----------
Total capitalization.................................................................... 13,537,839 13,500,630
----------- -----------
CURRENT LIABILITIES
Notes payable -- commercial paper......................................................... -- 253,151
Long-term debt due currently.............................................................. 327,491 338,213
Accounts payable:
Affiliates............................................................................... 306,751 126,143
Other.................................................................................... 169,176 136,401
Dividends declared........................................................................ 2,562 148,379
Customers' deposits....................................................................... 73,437 70,141
Taxes accrued............................................................................. 206,098 132,514
Interest accrued.......................................................................... 130,471 132,947
Over-recovered fuel revenue............................................................... -- 42,984
Other current liabilities................................................................. 117,236 57,681
----------- -----------
Total current liabilities............................................................... 1,333,222 1,438,554
----------- -----------
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES
Accumulated deferred income taxes......................................................... 3,238,302 2,989,612
Unamortized federal investment tax credits................................................ 562,049 577,965
Other deferred credits and noncurrent liabilities......................................... 455,837 288,178
----------- -----------
Total deferred credits and other noncurrent liabilities................................. 4,256,188 3,855,755
COMMITMENTS AND CONTINGENCIES
----------- -----------
Total................................................................................ $19,127,249 $18,794,939
=========== ===========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
10
<PAGE>
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS MERGERS AND ACQUISITIONS
TUC
- ---
On August 5, 1997, the merger transactions (Merger) provided for in a
previously announced agreement between Texas Utilities Company, now known as
Texas Energy Industries, Inc. (TEI) and ENSERCH Corporation (ENSERCH) were
completed. At the effective time of the Merger: (i) Texas Utilities Company
changed its name to TEI, (ii) TEI and ENSERCH merged with wholly-owned
subsidiaries of TUC Holding Company, which now owns all the common stock of TEI
and of ENSERCH, (iii) TUC Holding Company changed its name to Texas Utilities
Company (TUC), (iv) each share of TEI's common stock was automatically converted
into one share of common stock of TUC, and (v) each share of common stock of
ENSERCH was automatically converted into 0.225 share of common stock of TUC,
with cash issued in lieu of fractional shares. The share conversions were tax-
free transactions.
Businesses and subsidiaries acquired in the Merger were Lone Star Gas
Company (Lone Star Gas), one of the largest gas distribution companies in the
United States and the largest in Texas, serving over 1.3 million customers and
providing service through over 23,500 miles of distribution mains; Lone Star
Pipeline Company (Lone Star Pipeline), one of the largest pipelines in the
United States, consisting of 8,000 miles of gathering and transmission pipelines
in Texas; and subsidiaries engaged in natural gas processing, natural gas
marketing, independent power production and international gas distribution
systems development.
In the Merger, 15,861,272 shares of TUC common stock, valued at
approximately $565 million, were issued to former holders of ENSERCH common
stock. At the date of the Merger, ENSERCH had debt and preferred stock
outstanding of approximately $1.3 billion. (See Note 4.)
The acquisition of ENSERCH was accounted for as a purchase business
combination. The assets and liabilities of ENSERCH, at the Merger date, August
5, 1997, were adjusted to their estimated fair values, and the excess of the
purchase price paid by TUC over the estimated fair value of ENSERCH's net assets
acquired and liabilities assumed was recorded as goodwill on ENSERCH's balance
sheet and is being amortized over 40 years. The process of determining the fair
value of assets and liabilities at the Merger date is continuing, and the final
result awaits the resolution of income tax and other contingencies and
finalization of some preliminary estimates. ENSERCH's results of operation, as
of the date of the acquisition, are reflected in the consolidated financial
statements of TUC and its subsidiaries.
In August 1997, TUC announced that it had entered into a definitive
agreement to acquire Lufkin-Conroe Communications Co. (LCC). LCC is the parent
company of Lufkin-Conroe Telephone Exchange, Inc. (LCTX) and Lufkin-Conroe
Telecommunications Corporation (LCT) and its subsidiaries. LCTX is an
independent local exchange carrier which has provided telephone services for
almost 100 years, and as of September 1997, was the fourth largest telephone
company in Texas (28th largest in the United States). LCTX has sixteen exchanges
that serve approximately 100,000 access lines in the Alto, Conroe and Lufkin
areas of southeast Texas. It also provides access services to a number of
interexchange carriers, who provide long distance services. LCT and its
subsidiaries own fiber optic cable systems which they lease to interexchange
carriers, provide Internet access, radio communications tower rentals, cellular
mobile telephones and radio paging services and private branch exchange service
to local customers. LCT, through a subsidiary, also provides interexchange long
distance service, with a primary focus on business customers. TUC is expected to
issue approximately $320 million of TUC's common stock to LCC shareholders in a
stock for stock exchange, and TUC would assume approximately $8 million of LCC's
debt. The acquisition is subject to certain conditions which include the
approval of LCC shareholders. The acquisition of LCC will be accounted for as a
purchase business combination.
2. SIGNIFICANT ACCOUNTING POLICIES
TUC AND TU ELECTRIC
- -------------------
BASIS OF PRESENTATION -- The condensed consolidated financial statements of
TUC and its subsidiaries and Texas Utilities Electric Company and its
subsidiaries (TU Electric) have been prepared on the same basis as those in the
1996 Annual Reports on Form 10-K of TEI, formerly Texas Utilities Company, and
TU Electric and, in the opinion of TUC or
11
<PAGE>
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
TU Electric, as the case may be, all adjustments (constituting only normal
recurring accruals) necessary to a fair presentation of the results of operation
and financial position have been included therein. The statements are presented
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in annual
consolidated financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to such rules and regulations.
These condensed consolidated financial statements, and notes thereto,
should be considered in conjunction with the consolidated financial statements,
and the notes thereto, of TEI and TU Electric included in the 1996 Annual
Reports on Form 10-K of TEI and TU Electric, and the information under
Management's Discussion and Analysis of Financial Condition and Results of
Operation herein. TUC and TU Electric each believes that its respective
disclosures are adequate to make the information presented not misleading.
Certain previously reported amounts have been reclassified to conform to current
classifications.
USE OF ESTIMATES -- The preparation of TUC's and TU Electric's condensed
consolidated financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and assumptions
about future events that affect the reporting and disclosure of assets and
liabilities at the balance sheet dates and the reported amounts of revenue and
expense during the periods covered by the condensed consolidated financial
statements. In the event estimates and/or assumptions prove to be different from
actual amounts, adjustments are made in subsequent periods to reflect more
current information. No material adjustments were made to previous estimates
during the current period.
TUC
- ---
CONSOLIDATION -- Prior to August 5, 1997, the date of the Merger, TUC did
not have any assets or operations. Pursuant to the Merger, TUC became the parent
of each of TEI and ENSERCH. For financial reporting purposes, TUC is being
treated as the successor to TEI. Unless otherwise specified, all references to
TUC, which relate to a period prior to August 5, 1997, shall be deemed to be
references to TEI. Since the acquisition of ENSERCH has been accounted for as a
purchase business combination, no financial and other information for ENSERCH is
presented for periods prior to the date of acquisition. The condensed
consolidated financial statements for the three-, nine- and twelve-months ended
September 30, 1997 and as of September 30, 1997, include TEI and all of its
majority-owned subsidiaries for all periods and ENSERCH and all of its majority-
owned subsidiaries only from August 5, 1997 and as of September 30, 1997. The
condensed consolidated financial statements for the three-, nine- and twelve-
months ended September 30, 1996 and as of September 30, 1996, include TEI and
all of its majority-owned subsidiaries for all periods and do not include
ENSERCH or any of its subsidiaries for any periods.
All significant intercompany items and transactions have been eliminated in
consolidation. Investments in significant unconsolidated affiliates are
accounted for by the equity method.
CONSOLIDATED CASH FLOWS -- The supplemental schedule below details TUC's
noncash investing and financing activities:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1997 1996
---- ----
THOUSANDS OF DOLLARS
<S> <C> <C>
NON-CASH INVESTING AND FINANCING ACTIVITIES
Acquisition of ENSERCH:
Book value of net assets (liabilities) acquired.. $(228,076) $ --
Goodwill acquired................................ 806,056 --
Less: Stock issued............................... 577,992 --
--------- --------
Cash paid...................................... 12 --
Less: Cash acquired.............................. 12 --
--------- --------
Net cash....................................... $ -- $ --
========= ========
</TABLE>
12
<PAGE>
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
ENERGY MARKETING ACTIVITIES -- Certain System Companies enter into a
variety of transactions and derivative financial instruments, including swaps,
options, futures and other contractual arrangements. These activities are
accounted for using the mark-to-market method, under which, changes in the
market value of outstanding financial instruments are recognized as gains or
losses in the period of change.
GOODWILL -- The difference of $1,140,701,000 between the amount at which
the investments in subsidiaries is carried by TUC and the underlying book equity
of such subsidiaries is included in goodwill.
TU ELECTRIC
- -----------
CONSOLIDATION -- The condensed consolidated financial statements of TU
Electric include its subsidiaries, all of which are business trusts. All
significant intercompany items and transactions have been eliminated in
consolidation.
INCOME TAXES -- Effective January 1, 1997, TU Electric's state franchise
tax status changed from taxes based on net taxable capital to taxes based on net
taxable earned surplus. Net taxable earned surplus is based on the federal
income tax return. TU Electric has determined that a portion of the taxes
calculated under the new tax status method is, in effect, a state income tax. As
a result, TU Electric recorded an accumulated deferred tax liability, partially
offset by a corresponding regulatory asset.
3. SHORT-TERM FINANCING
TUC AND TU ELECTRIC
- -------------------
At September 30, 1997, TUC, TU Electric and ENSERCH had joint lines of
credit under credit facility agreements (Credit Agreements) with a group of
commercial banks. The Credit Agreements have two facilities. Facility A provides
for short-term borrowings aggregating up to $570,000,000 outstanding at any one
time at variable interest rates and terminates April 23, 1998. Facility B
provides for short-term borrowings aggregating up to $1,330,000,000 outstanding
at any one time at variable interest rates and terminates April 24, 2002. The
combined borrowings of TUC, TU Electric and ENSERCH under both facilities are
limited to an aggregate of $1,900,000,000 outstanding at any one time. ENSERCH's
borrowings under both facilities are limited to an aggregate of up to
$650,000,000 outstanding at any one time. Borrowings under these facilities will
be used for working capital and other corporate purposes, including commercial
paper backup. The total of short-term borrowings authorized by the Board of
Directors of TUC at September 30, 1997, from banks or other lenders, was
$2,150,000,000.
Following the Merger, ENSERCH's commercial paper program and bank lines in
the form of a revolving credit agreement were discontinued. ENSERCH retired its
$204,500,000 commercial paper balance and its $260,400,000 long-term debt
balance outstanding under the credit agreement. TUC advances to ENSERCH
to fund these retirements and to provide for other cash needs totalled $512,
300,000 at September 30, 1997.
In addition, two ENSERCH subsidiaries have revolving credit agreements
aggregating $30,000,000, of which $25,000,000 was outstanding at September 30,
1997. These revolving credit agreements expire on March 31, 2000.
4. CAPITALIZATION
TUC
- ---
COMMON STOCK --During the nine months ended September 30, 1997, common
stock equity increased by $6,070,000 due to an allocation to the accounts of
participants in TUC's Employee Thrift Plan (Thrift Plan) of TUC common stock
held by the Thrift Plan Trustee.
In August 1997, TUC issued 15,861,272 shares of its authorized but unissued
common stock to former holders of ENSERCH common stock pursuant to provisions of
the Merger (see Note 1). In June and September 1997, TUC sold, for
approximately $1,926,000, 58,000 shares of its authorized but unissued common
stock under the Long-Term Incentive Compensation Plan of Texas Utilities Company
System.
13
<PAGE>
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In connection with the Merger, TUC agreed that options for shares of
ENSERCH'S common stock outstanding under ENSERCH'S stock option plans would
become exercisable for shares of TUC common stock after the Merger. On August 5,
1997, options for a total of 532,948 shares of TUC common stock with an
estimated value of $3,214,000 were outstanding.
During the nine months ended September 30, 1997, TUC purchased and retired
an aggregate of 2,765,000 shares of its issued and outstanding common stock for
$97,333,000.
PREFERRED STOCK -- At September 30, 1997, ENSERCH had issued and
outstanding two series of preferred stock having an aggregate liquidation
preference of $175,000,000.
LONG-TERM DEBT -- In October 1997, TUC issued $125,000,000 aggregate
principal amount of its 6.20% Series A Senior Notes due 2002, and $175,000,000
aggregate principal amount of its 6.375% Series B Senior Notes due 2004. Payment
of the principal of and interest on the Senior Notes, when due or at maturity,
is guaranteed by a financial guaranty insurance policy.
At September 30, 1997, ENSERCH had approximately $675,000,000 of long-term
debt outstanding.
TU ELECTRIC
- -----------
COMMON STOCK -- During the nine months ended September 30, 1997, TU
Electric purchased and retired a total of 9,094,400 shares of its issued and
outstanding common stock at a total cost of approximately $272,832,000.
PREFERRED STOCK -- At September 30, 1997 and December 31, 1996, TU Electric
had 17,000,000 shares of preferred stock authorized by its Articles of
Incorporation of which 1,523,062 and 7,101,879 shares were issued and
outstanding, respectively.
During the nine months ended September 30, 1997, TU Electric redeemed or
purchased 5,578,817 shares of its preferred stock (including 3,989,640 shares
purchased by TEI in March 1997 pursuant to a tender offer and subsequently sold
to TU Electric) with annual dividend rates ranging from 4.00% to 9.64% at a
total cost of approximately $553,093,000.
TU ELECTRIC OBLIGATED, MANDATORILY REDEEMABLE, PREFERRED SECURITIES OF
SUBSIDIARY TRUSTS HOLDING SOLELY DEBENTURES OF TU ELECTRIC -- Three statutory
business trusts, TU Electric Capital I, TU Electric Capital II and TU Electric
Capital III (each a TU Electric Trust) were established in 1995 as financing
subsidiaries of TU Electric for the purposes, in each case, of issuing common
and preferred trust securities, with a liquidation preference of $25 per unit,
and holding Junior Subordinated Debentures issued by TU Electric (Debentures).
In January 1997, two additional TU Electric Trusts, TU Electric Capital IV and
TU Electric Capital V, were established for the purposes, in each case, of
issuing common and preferred trust securities, with a liquidation preference of
$1,000 per unit, and holding Debentures. The Debentures held by each TU Electric
Trust are its only assets. Each TU Electric Trust will use interest payments
received on the Debentures it holds to make cash distributions on the trust
securities it has issued.
At September 30, 1997 and December 31, 1996, preferred trust securities of
each TU Electric Trust were outstanding as follows:
<TABLE>
<CAPTION>
PREFERRED SECURITIES OUTSTANDING AMOUNT
--------------------------------------- ---------------------------------------
COMPANY SEPTEMBER 30, 1997 DECEMBER 31, 1996 SEPTEMBER 30, 1997 DECEMBER 31, 1996
------- ------------------ ----------------- ------------------ -----------------
THOUSANDS OF DOLLARS
<S> <C> <C> <C> <C>
TU Electric Capital I (a)................. 5,871,044 5,871,044 $140,806 $140,671
TU Electric Capital II (b)................ 1,991,253 1,991,253 47,356 47,301
TU Electric Capital III (c)............... 8,000,000 8,000,000 193,467 193,339
TU Electric Capital IV (d)................ 100,000 -- 97,562 --
TU Electric Capital V (e)................. 400,000 -- 395,814 --
---------- ---------- -------- --------
Total................................ 16,362,297 15,862,297 $875,005 $381,311
========== ========== ======== ========
</TABLE>
________________
(a) Trust assets are $154,869,150 principal amount, Junior Subordinated
Debentures Series A, 8.25% due 9/30/30.
(b) Trust assets are $51,418,575 principal amount, Junior Subordinated
Debentures Series B, 9.00% due 9/30/30.
(c) Trust assets are $206,185,575 principal amount, Junior Subordinated
Debentures Series C, 8.00% due 12/31/35.
(d) Trust assets are $103,093,000 principal amount, Junior Subordinated
Debentures Series D, Floating Interest Rate due 1/30/37.
(e) Trust assets are $412,372,000 principal amount, Junior Subordinated
Debentures Series E, 8.175% due 1/30/37.
14
<PAGE>
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
LONG-TERM DEBT -- TU Electric issued the following long-term debt during
the nine months ended September 30, 1997:
<TABLE>
<CAPTION>
PRINCIPAL CURRENT
DESCRIPTION AMOUNT INTEREST RATE MATURITY
----------- ------------ --------------- ----------
<S> <C> <C> <C>
Collateralized pollution control revenue bonds (a).............. $198,640,000 3.95% to 4.25% 2022-2032
Unsecured debentures............................................ 300,000,000 7.17% 2007
------------
Total...................................................... $498,640,000
============
</TABLE>
________________
(a) All such bonds have variable interest rates and are subject to mandatory
tender and remarketing from time to time. The remarketing of the bonds is
supported by standby bond purchase agreements. Scheduled payments of
interest and of principal at maturity or on mandatory redemption, upon the
occurrence of certain events, are supported by insurance policies. Interest
rates on the bonds are determined weekly and daily.
In October 1997, the Trinity River Authority of Texas (Trinity Authority)
issued $14,075,000 aggregate principal amount of Pollution Control Revenue Bonds
due October 1, 2032. The bonds have variable interest rates and are subject to
mandatory or optional tender and remarketing from time to time. Pursuant to an
Installment Payment and Bond Amortization Agreement with the Trinity Authority,
TU Electric is obligated to make payment of the purchase price of the bonds upon
mandatory or optional tender and of the principal of and interest on the bonds.
Such payments are supported by an irrevocable letter of credit. Draws under the
letter of credit are reimbursable by TU Electric. Interest rates on the bonds
are determined at varying intervals. At the time of issuance, the interest rate
was 5.60%.
During the nine months ended September 30, 1997, TU Electric redeemed,
reacquired or made principal payments on the following long-term debt:
<TABLE>
<CAPTION>
PRINCIPAL CURRENT
DESCRIPTION AMOUNT INTEREST RATE MATURITY
----------- ------------ --------------- ----------
<S> <C> <C> <C>
First mortgage bonds............................................ $435,800,000 6-3/8% to 9.20% 1997-2022
Collateralized pollution control revenue bonds.................. 198,640,000 5.41% to 9-7/8% 2007-2021
Promissory note................................................. 910,000 8-1/4% 2022
------------
Total...................................................... $635,350,000
============
</TABLE>
In October 1997, TU Electric reacquired, on the open market, $5,000,000 of
its 9-3/4% First Mortgage and Collateral Trust Bonds due May 1, 2021. In
November 1997, TU Electric redeemed $300,000,000 of its Floating Rate Series
First Mortgage and Collateral Trust Bonds due May 1, 1999.
5. DERIVATIVE INSTRUMENTS
TUC AND TU ELECTRIC
- -------------------
TUC's and TU Electric's operations involve managing market risks related to
changes in interest rates and, for TUC, foreign exchange and commodity price
exposures. Derivative instruments including swaps and forward contracts are
used to reduce and manage a portion of those risks. TUC's, with the exception
of the marketing activities of an ENSERCH subsidiary, Enserch Energy Services,
Inc. (EES), and TU Electric's participations in derivative transactions are
designed for hedging purposes; and derivative instruments are not held or issued
for trading purposes.
INTEREST RATE RISK MANAGEMENT -- At September 30, 1997, Eastern Energy
Limited (Eastern Energy), a wholly-owned indirect subsidiary of TUC, had
interest rate swaps outstanding with respect to certain of its debt with an
aggregate notional amount of $836,193,000. These swap agreements establish a mix
of fixed and variable interest rates on the outstanding debt and have remaining
terms between 5 and 20 years.
In February 1997, TU Electric entered into an interest rate swap agreement
with respect to preferred securities of TU Electric Capital IV, with a notional
principal amount of $100,000,000 expiring 2002 and a fixed interest rate of
7.183% per annum.
15
<PAGE>
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOREIGN EXCHANGE RISK MANAGEMENT -- TUC's foreign exchange exposures result
from transactions denominated in currencies other than the local currency of its
foreign subsidiary. At September 30, 1997, Eastern Energy had cross-currency
swap agreements outstanding with an aggregate notional amount of $313,617,000
expiring on various dates through 2016.
ELECTRICITY PRICE RISK MANAGEMENT -- Eastern Energy and the other
distribution companies in Victoria purchase their power from a competitive power
pool operated by a statutory, independent corporation. Eastern Energy purchases
about 95% of its energy from this pool, the cost of which is based on spot
market prices. Eastern Energy has entered into wholesale market contracts to
cover a substantial majority of its forecasted load through the end of 2000.
These contracts fix the price of energy within a certain range for the purpose
of hedging or protecting against fluctuations in the spot market price. Eastern
Energy's contracts related to its forecasted contestable and franchise load
cover a notional volume of approximately 18 million MWh's for 1997 through 2000.
Under these contracts, payments are made between Eastern Energy and the
generators representing the difference between the wholesale electricity market
price and the contract price. The net payable or receivable is recognized in
earnings as adjustments to purchased power expense in the period the related
transactions are completed.
NATURAL GAS MARKETING ACTIVITIES -- TUC, through EES, is a marketer of
natural gas and natural gas services. As part of these business activities, EES
enters into a variety of transactions, including forward contracts that
principally involve physical delivery of natural gas, and derivative financial
instruments, including swaps, options, futures and other contractual
arrangements. The derivative transactions are concentrated with established
energy companies and major financial institutions.
EES's marketing activities involve price commitments into the future and,
therefore, give rise to market risk, which represents the potential loss that
can be caused by a change in the market value of a particular commitment. Net
open portfolio positions often result from the origination of new transactions
or in response to changing market conditions.
EES enters into contracts to purchase and sell natural gas for physical
delivery in the future. At September 30, 1997, EES had net commitments to sell
approximately 41.0 billion cubic feet (Bcf) of natural gas through the year 2003
with offsetting net financial positions to purchase approximately 48.1 Bcf.
CREDIT RISK -- Credit risk relates to the risk of loss that TUC, TU
Electric and ENSERCH would incur as a result of nonperformance by counterparties
to their respective derivative instruments. TUC and TU Electric believe the risk
of nonperformance by counterparties is minimal.
6. REGULATION AND RATES
TU ELECTRIC
- -----------
In late 1996, as part of its regular earnings monitoring process, the
Public Utility Commission of Texas (PUC) staff, after reviewing the 1995
Electric Investor-Owned Utilities Earnings Report of TU Electric, advised the
PUC that it believed TU Electric was earning in excess of a reasonable rate of
return, and the PUC and TU Electric subsequently began discussions concerning
possible remedies. It was decided to limit negotiations to a resolution of
issues concerning TU Electric's earnings through 1997, and discussion of a long-
term resolution was deferred. In July 1997, the PUC issued its final written
order approving TU Electric's proposal to make a one-time $80 million refund to
its customers and to leave rates unchanged during the remainder of 1997. TU
Electric recorded the charge to revenues in July 1997 and included the refunds
in August 1997 billings. The proposal was the result of a joint stipulation in
which TU Electric was joined by the PUC General Counsel, on behalf of the PUC
Staff and the public interest, the Office of Public Utility Counsel, the state
agency charged with representing the interests of residential and small
commercial customers, and the Coalition of Cities served by TU Electric. TU
Electric is continuing its negotiations with respect to a longer-term settlement
of the issues and, at this time, is unable to predict the outcome of any of
these negotiations.
16
<PAGE>
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Also in July 1997, the PUC ruled on TU Electric's petition seeking final
reconciliation of all eligible fuel and purchased power expenses incurred during
the reconciliation period of July 1, 1992 through June 30, 1995 (approximately
$4.7 billion). In the ruling, the PUC disallowed approximately $80 million of
eligible fuel related costs (including interest) incurred during the
reconciliation period (Fuel Disallowance). The majority of the Fuel Disallowance
(approximately $67 million) is related to replacement fuel costs as a result of
the November 1993 collapse of the emissions chimney serving Unit 3 of the
Monticello lignite-fueled generating station. In addition, the PUC ruled that
approximately $10 million from the gain on sale of sulfur dioxide allowances
should be deferred and reconsidered at a future date. TU Electric received a
final written order from the PUC and recorded the charge to revenues in August
1997. TU Electric strongly disagrees with the Fuel Disallowance and continues to
vigorously defend its position. TU Electric has appealed the PUC's order to the
District Court of Travis County, Texas.
TU Electric, in July 1997, petitioned the PUC for and received interim
approval of a fuel refund to customers of approximately $67 million, including
interest, in over-collected fuel costs for the period October 1995 through May
1997 (Fuel Refund). Such over-collection was primarily due to TU Electric's
ability to use less expensive nuclear fuel and purchased power to offset a
higher-priced natural gas market during the period. Customer refunds were
included in August 1997 billings. A final order confirming the Fuel Refund was
entered by the PUC in October 1997.
TUC
- ---
In October 1996, Lone Star Pipeline (a division of ENSERCH), filed a
request with the Railroad Commission of Texas (RRC) to increase the rate it
charges Lone Star Gas (a division of ENSERCH), to store and transport gas
ultimately destined for residential and commercial customers in the 550 Texas
cities and towns served by Lone Star Gas. Lone Star Gas also requested that the
RRC separately set rates for costs to aggregate gas supply for these cities.
Rates currently in effect were set by the RRC in 1982. The purpose of the rate
request was to allow for the recovery of a substantial increase in the cost of
doing business since 1982 and to cover significant capital investments of
approximately $420 million made during the past 14 years to maintain and improve
the reliability and safety of the pipeline system and help reduce natural-gas
supply costs.
In May 1997, the RRC issued an order setting new rates for ENSERCH that
would have reduced the current margin by approximately 7 percent. The order
would allow 100 percent recovery of gas cost subject to a reconciliation
procedure after three years and would impose certain restrictions on the
recovery of gas purchased from affiliates. ENSERCH and other parties to the case
filed motions for rehearing of the order. In August 1997, the RRC issued an
order partially granting and partially denying the motions for rehearing. The
August order reduces the current margin an additional 3 percent beyond the May
20 order.
The August order was met with additional motions for rehearing which were
granted in part and denied in part. On September 30, 1997, the RRC issued a
second order on rehearing, which did not change the margin set in the prior
order. On November 4, 1997, the RRC acted on the motions for rehearing filed in
response to the September 30, 1997 order by denying the motions. Pursuant to
the tariffs approved by the RRC, the new rates will become effective on December
1, 1997, if no further changes to the order are made. ENSERCH has 30 days to
appeal the decision.
Prior to the ENSERCH filing of a request for a rate increase, the RRC
ordered a general inquiry into the rates and services of Lone Star Gas. The
scope of the inquiry has not been defined fully, but it will focus initially on
historical gas costs and unbundling issues. A hearing on the gas cost issues is
set to begin in August 1998. TUC management is unable to determine at this time
the ultimate outcome of this inquiry.
7. COMMITMENTS AND CONTINGENCIES
TU ELECTRIC
- -----------
COOLING WATER CONTRACTS -- TU Electric has entered into contracts with
public agencies to purchase cooling water for use in the generation of electric
energy. In connection with certain contracts, TU Electric has agreed, in
effect, to guarantee the principal, $30,475,000 at September 30, 1997, and
interest on bonds issued to finance the reservoirs from which the water is
supplied. The bonds mature at various dates through 2011 and have interest
rates ranging from 5-1/2%
17
<PAGE>
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
to 7%. TU Electric is required to make periodic payments equal to such principal
and interest, including amounts assumed by a third party and reimbursed to TU
Electric. In addition, TU Electric is obligated to pay certain variable costs of
operating and maintaining the reservoirs. TU Electric has assigned to a
municipality all contract rights and obligations of TU Electric in connection
with $74,780,000 remaining principal amount of bonds at September 30, 1997,
issued for similar purposes which had previously been guaranteed by TU Electric.
TU Electric is, however, contingently liable in the unlikely event of default by
the municipality.
NUCLEAR DECOMMISSIONING AND DISPOSAL OF SPENT FUEL -- TU Electric has
established a reserve, charged to depreciation expense and included in
accumulated depreciation, for the decommissioning of the Comanche Peak nuclear
generating station (Comanche Peak), whereby decommissioning costs are being
recovered from customers over the life of the plant and deposited in an external
trust fund (included in other investments). At September 30, 1997, such reserve
totaled $114,393,000 which includes an accrual of $13,634,000 and $18,179,000
for the nine and twelve months ended September 30, 1997, respectively. As of
September 30, 1997, the market value of assets in the external trust fund for
decommissioning of Comanche Peak was $151,131,000. Any difference between the
market value of the external trust fund and the decommissioning reserve that
represents unrealized gains or losses of the trust fund is treated as a
regulatory liability or a regulatory asset. Realized earnings on funds deposited
in the external trust are recognized in the reserve. Based on a site-specific
study during 1992 using the prompt dismantlement method and then-current
dollars, decommissioning costs for Comanche Peak Unit 1, and Unit 2 and common
facilities, were estimated to be $255,000,000 and $344,000,000, respectively.
Decommissioning activities are projected to begin in 2030 and 2033 for Comanche
Peak Unit 1, and Unit 2 and common facilities, respectively. TU Electric is
recovering such costs based upon the 1992 study through rates placed in effect
under its January 1993 rate increase request. An updated site-specific study
will be performed and completed by the end of 1997. Actual decommissioning costs
are expected to differ from estimates due to changes in the assumed dates of
decommissioning activities, regulatory requirements, technology and costs of
labor, materials and equipment.
TUC AND TU ELECTRIC
- -------------------
GENERAL
In addition to the above, TUC and TU Electric are involved in various legal
and administrative proceedings which, in the opinion of the management of each,
should not have a material effect upon its financial position, results of
operation or cash flows.
18
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
Texas Utilities Company:
We have reviewed the accompanying condensed consolidated balance sheet of Texas
Utilities Company and subsidiaries (the Company) as of September 30, 1997, and
the related condensed statements of consolidated income for the three-month,
nine-month and twelve-month periods ended September 30, 1997 and 1996, and of
consolidated cash flows for the nine-month periods ended September 30, 1997 and
1996. These financial statements are the responsibility of TUC's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial accounting
matters. It is substantially less in scope than an audit in accordance with
generally accepted auditing standards, the objective of which is the expression
of an opinion regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such condensed consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Texas Energy Industries, Inc.
(TEI), formerly Texas Utilities Company as of December 31, 1996, and the related
consolidated statements of income, retained earnings and cash flows for the year
then ended (not presented herein); and in our report dated March 12, 1997, we
expressed an unqualified opinion on those consolidated financial statements,
which opinion included an explanatory paragraph concerning TEI's change in
accounting for the impairment of long-lived assets and long-lived assets to be
disposed of. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 1996, is fairly stated
in all material respects in relation to the consolidated balance sheet from
which it has been derived.
Deloitte & Touche LLP
Dallas, Texas
November 12, 1997
19
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
Texas Utilities Electric Company:
We have reviewed the accompanying condensed consolidated balance sheet of Texas
Utilities Electric Company and subsidiaries (TU Electric) as of September 30,
1997, and the related condensed statements of consolidated income for the three-
month, nine-month and twelve-month periods ended September 30, 1997 and 1996,
and of consolidated cash flows for the nine-month periods ended September 30,
1997 and 1996. These financial statements are the responsibility of TU
Electric's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial accounting
matters. It is substantially less in scope than an audit in accordance with
generally accepted auditing standards, the objective of which is the expression
of an opinion regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such condensed consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of TU Electric as of December 31,
1996, and the related consolidated statements of income, retained earnings and
cash flows for the year then ended (not presented herein); and in our report
dated March 12, 1997, we expressed an unqualified opinion on those consolidated
financial statements, which opinion included an explanatory paragraph concerning
TU Electric's change in accounting for the impairment of long-lived assets and
long-lived assets to be disposed of. In our opinion, the information set forth
in the accompanying condensed consolidated balance sheet as of December 31,
1996, is fairly stated in all material respects in relation to the consolidated
balance sheet from which it has been derived.
Deloitte & Touche LLP
Dallas, Texas
November 12, 1997
20
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
FORWARD-LOOKING STATEMENTS
TUC AND TU ELECTRIC
- -------------------
This report and other presentations made by Texas Utilities Company (TUC)
and its direct and indirect subsidiaries (System Companies) or Texas Utilities
Electric Company and its subsidiaries (TU Electric) contain forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended. Although TUC and TU Electric each believes that in making any
such statement its expectations are based on reasonable assumptions, any such
statement involves uncertainties and is qualified in its entirety by reference
to the following important factors that could cause the actual results of TUC or
TU Electric to differ materially from those projected in such forward-looking
statement: (i) prevailing governmental policies and regulatory actions,
including those of the Federal Energy Regulatory Commission, the Public Utility
Commission of Texas (PUC), the Railroad Commission of Texas (RRC), the Nuclear
Regulatory Commission, and, in the case of TUC, the Office of the Regulator
General of Victoria, Australia, with respect to allowed rates of return,
industry and rate structure, purchased power and investment recovery, operations
of nuclear generating facilities, acquisitions and disposal of assets and
facilities, operation and construction of plant facilities, decommissioning
costs, present or prospective wholesale and retail competition, changes in tax
laws and policies and changes in and compliance with environmental and safety
laws and policies, (ii) weather conditions and other natural phenomena, (iii)
unanticipated population growth or decline, and changes in market demand and
demographic patterns, (iv) competition for retail and wholesale customers, (v)
pricing and transportation of crude oil, natural gas and other commodities, (vi)
unanticipated changes in interest rates, rates of inflation or in foreign
exchange rates, (vii) unanticipated changes in operating expenses and capital
expenditures, (viii) capital market conditions, (ix) competition for new energy
development opportunities, (x) legal and administrative proceedings and
settlements, (xi) inability of the various counterparties to meet their
obligations with respect to TUC's and TU Electric's financial instruments, (xii)
changes in technology used and services offered by TUC and TU Electric, and
(xiii) significant changes in TUC's relationship with its employees and the
potential adverse effects if labor disputes or grievances were to occur.
Any forward-looking statement speaks only as of the date on which such
statement is made, and neither TUC nor TU Electric undertakes any obligation to
update any forward-looking statement to reflect events or circumstances after
the date on which such statement is made or to reflect the occurrence of
unanticipated events. New factors emerge from time to time and it is not
possible for TUC or TU Electric to predict all of such factors, nor can they
assess the impact of each such factor or the extent to which any factor, or
combination of factors, may cause results to differ materially from those
contained in any forward-looking statement.
BUSINESS MERGERS AND ACQUISITIONS
TUC
- ---
On August 5, 1997, the merger transactions (Merger) provided for in a
previously announced agreement between Texas Utilities Company, now known as
Texas Energy Industries, Inc. (TEI) and ENSERCH Corporation (ENSERCH) were
completed. At the effective time of the Merger: (i) Texas Utilities Company
changed its name to TEI, (ii) TEI and ENSERCH merged with wholly-owned
subsidiaries of TUC Holding Company, which now owns all the common stock of TEI
and of ENSERCH, (iii) TUC Holding Company changed its name to TUC, (iv) each
share of TEI's common stock was automatically converted into one share of common
stock of TUC, and (v) each share of common stock of ENSERCH was automatically
converted into 0.225 share of common stock of TUC, with cash issued in lieu of
fractional shares. The share conversions were tax-free transactions.
Businesses and subsidiaries acquired in the Merger were Lone Star Gas
Company (Lone Star Gas), one of the largest gas distribution companies in the
United States and the largest in Texas, serving over 1.3 million customers and
providing service through over 23,500 miles of distribution mains; Lone Star
Pipeline Company (Lone Star Pipeline), one of the largest pipelines in the
United States, consisting of 8,000 miles of gathering and transmission pipelines
in Texas; and subsidiaries engaged in natural gas processing, natural gas
marketing, independent power production and international gas distribution
systems development.
In the Merger, 15,861,272 shares of TUC common stock, valued at
approximately $565 million, were issued to former holders of ENSERCH common
stock. At the date of the Merger, ENSERCH had debt and preferred stock
outstanding of approximately $1.3 billion. (See Note 4 to Condensed Consolidated
Financial Statements.)
21
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
The acquisition of ENSERCH was accounted for as a purchase business
combination. The assets and liabilities of ENSERCH, at the Merger date, August
5, 1997, were adjusted to their estimated fair values, and the excess of the
purchase price paid by TUC over the estimated fair value of ENSERCH's net assets
acquired and liabilities assumed was recorded as goodwill on ENSERCH's balance
sheet and is being amortized over 40 years. The process of determining the fair
value of assets and liabilities at the Merger date is continuing, and the final
result awaits the resolution of income tax and other contingencies and
finalization of some preliminary estimates. ENSERCH's results of operation, from
the date of the acquisition, are reflected in the consolidated financial
statements of TUC and its subsidiaries.
In August 1997, TUC announced that it had entered into a definitive
agreement to acquire Lufkin-Conroe Communications Co. (LCC). LCC is the parent
company of Lufkin-Conroe Telephone Exchange, Inc. (LCTX) and Lufkin-Conroe
Telecommunications Corporation (LCT) and its subsidiaries. LCTX is an
independent local exchange carrier which has provided telephone services for
almost 100 years, and as of September 1997, was the fourth largest telephone
company in Texas (28th largest in the United States). LCTX has sixteen exchanges
that serve approximately 100,000 access lines in the Alto, Conroe and Lufkin
areas of southeast Texas. It also provides access services to a number of
interexchange carriers, who provide long distance services. LCT and its
subsidiaries own fiber optic cable systems which they lease to interexchange
carriers, provide Internet access, radio communications tower rentals, cellular
mobile telephones and radio paging services and private branch exchange service
to local customers. LCT, through a subsidiary, also provides interexchange long
distance service, with a primary focus on business customers. TUC is expected to
issue approximately $320 million of TUC's common stock to LCC shareholders in a
stock for stock exchange, and TUC would assume approximately $8 million of LCC's
debt. The acquisition is subject to certain conditions which include the
approval of LCC shareholders. The acquisition of LCC will be accounted for as a
purchase business combination.
GENERAL
TUC
- ---
Prior to August 5, 1997, the date of the Merger, TUC did not have any
assets or operations. Pursuant to the Merger, TUC became the parent of each of
TEI and ENSERCH. For financial reporting purposes, TUC is being treated as the
successor to TEI. Unless otherwise specified, all references to TUC, which
relate to a period prior to August 5, 1997, shall be deemed to be references to
TEI. Since the acquisition of ENSERCH has been accounted for as a purchase
business combination, no financial and other information for ENSERCH is
presented for periods prior to the date of acquisition. The condensed
consolidated financial statements for the three-, nine- and twelve-months ended
September 30, 1997 and as of September 30, 1997, include TEI and all of its
majority-owned subsidiaries for all periods and ENSERCH and all of its majority-
owned subsidiaries only from August 5, 1997 and as of September 30, 1997. The
condensed consolidated financial statements for the three-, nine- and twelve-
months ended September 30, 1996 and as of September 30, 1996, include TEI and
all of its majority-owned subsidiaries for all periods and does not include
ENSERCH or any of its subsidiaries for any periods.
Certain TUC comparisons in this Quarterly Report on Form 10-Q have been
affected by the August 1997 acquisition of ENSERCH by TUC and the December 1995
acquisition of Eastern Energy Limited (Eastern Energy) by Texas Utilities
Australia Pty. Ltd. (TU Australia), a wholly-owned subsidiary of TEI. The
results of operation of ENSERCH and Eastern Energy are included only for the
periods subsequent to their respective dates of acquisition.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
TUC AND TU ELECTRIC
- -------------------
For information concerning liquidity and capital resources, see Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operation in TEI's and TU Electric's Annual Reports on Form 10-K for the year
1996 (1996 Form 10-K). Quarterly results presented herein are not necessarily
indicative of expectations for a full year's operations because of seasonal and
other factors, including variations in maintenance and other operating expense
patterns. No significant changes or events which might affect the financial
condition of the System Companies have occurred subsequent to year-end other
than as disclosed in other reports of TUC, TEI, TU Electric and ENSERCH or
included herein.
22
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
External funds of a permanent or long-term nature are obtained through the
issuance of common stock, preferred stock, preferred securities and long-term
debt by the System Companies. The capitalization ratios of the System Companies
at September 30, 1997 consisted of approximately 54% long-term debt, 5%
preferred securities of trusts, 2% preferred stock and 39% common stock equity.
The capitalization ratios of TU Electric at September 30, 1997 consisted of
approximately 46% long-term debt, 6% preferred securities of trusts, 1%
preferred stock and 47% common stock equity.
In October 1997, TUC issued $125,000,000 aggregate principal amount of its
6.20% Series A Senior Notes due 2002, and $175,000,000 aggregate principal
amount of its 6.375% Series B Senior Notes due 2004. Payment of the principal
of and interest on the Senior Notes, when due or at maturity, is guaranteed by a
financial guaranty insurance policy.
In October 1997, the Trinity River Authority of Texas issued $14,075,000
aggregate principal amount of Pollution Control Revenue Bonds due October 1,
2032 (Taxable Bonds). In July 1997, the Brazos River Authority, the Sabine River
Authority of Texas and the Trinity River Authority of Texas issued $92,290,000
aggregate principal amount of Pollution Control Revenue Refunding Bonds due July
1, 2022 collateralized by TU Electric's First Mortgage Bonds. In February 1997,
the Brazos River Authority issued $106,350,000 aggregate principal amount of
Pollution Control Revenue Refunding Bonds due February 1, 2032 collateralized by
TU Electric's First Mortgage Bonds. All such bonds have variable interest rates
and are subject to mandatory tender and/or remarketing from time to time. The
remarketing of the bonds is supported by standby bond purchase agreements, or in
the case of the Taxable Bonds, a direct-pay letter of credit. Scheduled payments
of interest and of principal at maturity or on mandatory redemption, upon the
occurrence of certain events with respect to such bonds are supported by
insurance policies or, in the case of the Taxable Bonds, a direct-pay letter of
credit. Interest rates on the bonds are determined daily, weekly and/or
multiannually or for variable rate periods . Currently, such rates range from
3.70% to 5.60%.
In August 1997, TU Electric issued $300,000,000 aggregate principal amount
of 7.17% Unsecured Debentures due 2007.
To date in 1997, the System Companies have redeemed, reacquired or made
principal payments of $2,339,407,000 (including $1,766,275,000 for TU Electric)
on long-term debt and preferred stock.
In March 1997, TEI completed its tender offer for any and all shares of 20
series of TU Electric's preferred stock, including preferred stock underlying
depositary shares. TEI funded the purchase of 3,989,640 shares of preferred
stock at a total cost of approximately $404,000,000 primarily through the
issuance of commercial paper. In May and June 1997, TEI sold such shares to TU
Electric for approximately $408,000,000. Upon purchase by TU Electric, the
shares were retired. TU Electric's purchase of the shares was funded with a
portion of proceeds from the sale of capital securities in January 1997.
At September 30, 1997, TUC, TU Electric and ENSERCH had joint lines of
credit under credit facility agreements (Credit Agreements) with a group of
commercial banks. The Credit Agreements have two facilities. Facility A provides
for short-term borrowings aggregating up to $570,000,000 outstanding at any one
time at variable interest rates and terminates April 23, 1998. Facility B
provides for short-term borrowings aggregating up to $1,330,000,000 outstanding
at any one time at variable interest rates and terminates April 24, 2002. The
combined borrowings of TUC, TU Electric and ENSERCH under both facilities are
limited to an aggregate of $1,900,000,000 outstanding at any one time. ENSERCH's
borrowings under both facilities are limited to an aggregate of up to
$650,000,000 outstanding at any one time. Borrowings under these facilities will
be used for working capital and other corporate purposes, including commercial
paper backup. The total of short-term borrowings authorized by the Board of
Directors of TUC at September 30, 1997, from banks or other lenders, was
$2,150,000,000.
Following the Merger, ENSERCH's commercial paper program and and bank lines
in the form of a revolving credit agreement were discontinued. ENSERCH retired
its $204,500,000 commercial paper balance and its $260,400,000 long-term debt
balance outstanding under the credit agreement. TUC advances to ENSERCH to fund
these retirements and to provide for other cash needs totalled $512,300,000 at
September 30, 1997.
In addition, two ENSERCH subsidiaries have revolving credit agreements
aggregating $30,000,000, of which $25,000,000 was outstanding at September 30,
1997. These revolving credit agreements expire on March 31, 2000.
23
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
The System Companies may issue additional debt and equity securities as
needed, including the possible future sale: (i) by TU Electric of up to
$148,850,000 principal amount of debt securities, (ii) by TU Electric of up to
250,000 shares of Cumulative Preferred Stock ($100 liquidation value), and (iii)
by ENSERCH of up to $225,000,000 aggregate principal amount of securities, all
of which are currently registered with the Securities and Exchange Commission
(SEC) for offering pursuant to Rule 415 under the Securities Act of 1933.
TUC's and TU Electric's operations involve managing market risks related to
changes in interest rates and, for TUC, foreign exchange and commodity price
exposures. Derivative instruments including swaps and forward contracts are used
to reduce and manage a portion of those risks. TUC's, with the exception of the
marketing activities of an ENSERCH subsidiary, Enserch Energy Services, Inc.
(EES), and TU Electric's participations in derivative transactions are designed
for hedging purposes; and derivative instruments are not held or issued for
trading purposes. TUC's foreign exchange exposures result from transactions
denominated in currencies other than the local currency of its foreign
subsidiary. As of September 30, 1997, the aggregate notional amount of such
exposure was $313,617,000. TUC enters into currency swaps to reduce foreign
exchange exposure. As of September 30, 1997, net deferred gains and losses
associated with the currency swaps were not material. As part of its natural gas
marketing activities, EES enters into forward contracts that principally involve
physical delivery of natural gas and derivative financial instruments, including
swaps, options, futures and other contractual arrangements to offset price risks
of gas supply. These activities involve price commitments into the future and,
therefore, give rise to market risk. EES applies mark-to-market accounting to
its business activities. At September 30, 1997, natural gas marketing operations
had net commitments to sell approximately 41.0 billion cubic feet (Bcf) of
natural gas through the year 2003 with offsetting net financial positions to
purchase approximately 48.1 Bcf. Credit risk relates to the risk of loss that
TUC, TU Electric and ENSERCH would incur as a result of nonperformance by
counterparties to their respective derivative instruments. TUC and TU Electric
believe the risk of nonperformance by counterparties is minimal. For other
information regarding derivative instruments, see Note 5 to Condensed
Consolidated Financial Statements.
REGULATION, RATES AND COMPETITION
TUC AND TU ELECTRIC
- -------------------
Under the current regulatory environment, certain System Companies are
subject to the provisions of Statement of Financial Accounting Standards No. 71,
"Accounting for the Effects of Certain Types of Regulation" (SFAS 71). In the
event a company no longer meets the criteria for application of SFAS 71 due to
significant changes in regulation or competition, the affected company would
discontinue the application of SFAS 71. If a portion of the affected company's
operations continues to meet the criteria for application of SFAS 71, only that
portion would be subject to SFAS 71 treatment. Should significant changes in
regulation or competition occur, the affected company would be required to
assess the recoverability of certain assets, including plant, and, if impaired,
to write down the assets to reflect their fair market value. The System
Companies cannot predict whether or to what extent changes may occur requiring
the partial or complete discontinuation of SFAS 71 application.
In order to remain competitive, TUC and TU Electric are aggressively
managing their operating costs and capital expenditures through streamlined
business processes and are developing and implementing strategies to address an
increasingly competitive environment. These strategies include initiatives to
improve their return on corporate assets and to maximize shareholder value
through new marketing programs, creative rate design, and new business
opportunities. Additional initiatives under consideration include the potential
disposition or alternative utilization of existing assets and the restructuring
of strategic business units.
TU ELECTRIC
- -----------
In late 1996, as part of its regular earnings monitoring process, the
Public Utility Commission of Texas (PUC) staff, after reviewing the 1995
Electric Investor-Owned Utilities Earnings Report of TU Electric, advised the
PUC that it believed TU Electric was earning in excess of a reasonable rate of
return, and the PUC and TU Electric subsequently began discussions concerning
possible remedies. It was decided to limit negotiations to a resolution of
issues concerning TU Electric's earnings through 1997, and discussion of a long-
term resolution was deferred. In July 1997, the PUC issued its final written
order approving TU Electric's proposal to make a one-time $80 million refund to
its customers (Rate Settlement), and to leave rates unchanged during the
remainder of 1997. TU Electric recorded the charge to revenues in
24
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
July 1997 and included the refunds in August 1997 billings. The proposal was
the result of a joint stipulation in which TU Electric was joined by the PUC
General Counsel, on behalf of the PUC Staff and the public interest, the Office
of Public Utility Counsel, the state agency charged with representing the
interests of residential and small commercial customers, and the Coalition of
Cities served by TU Electric. TU Electric is continuing its negotiations with
respect to a longer-term settlement of the issues and, at this time, is unable
to predict the outcome of any of these negotiations.
Also in July 1997, the PUC ruled on TU Electric's petition seeking final
reconciliation of all eligible fuel and purchased power expenses incurred during
the reconciliation period of July 1, 1992 through June 30, 1995 (approximately
$80 billion). In the ruling, the PUC disallowed approximately $80 million of
eligible fuel related costs (including interest) incurred during the
reconciliation period (Fuel Disallowance). The majority of the Fuel Disallowance
(approximately $67 million) is related to replacement fuel costs as a result of
the November 1993 collapse of the emissions chimney serving Unit 3 of the
Monticello lignite-fueled generating station. In addition, the PUC ruled that
approximately $10 million from the gain on sale of sulfur dioxide allowances
should be deferred and reconsidered at a future date. TU Electric received a
final written order from the PUC and recorded the charge to revenues in August
1997. TU Electric strongly disagrees with the Fuel Disallowance and continues to
vigorously defend its position. TU Electric has appealed the PUC's order to the
District Court of Travis County, Texas.
TU Electric, in July 1997, petitioned the PUC for and received interim
approval of a fuel refund to customers of approximately $67 million, including
interest, in over-collected fuel costs for the period October 1995 through May
1997 (Fuel Refund). Such over-collection was primarily due to TU Electric's
ability to use less expensive nuclear fuel and purchased power to offset a
higher-priced natural gas market during the period. Customer refunds were
included in August 1997 billings. A final order confirming the Fuel Refund was
entered by the PUC in October 1997.
While TU Electric has experienced competitive pressures in the wholesale
market resulting in a small loss of load since the beginning of 1993, wholesale
sales represented a relatively low percentage of TU Electric's consolidated
operating revenues for the three-, nine- and twelve-month periods ended
September 30, 1997. TU Electric is unable to predict the extent of future
competitive developments in either the wholesale or retail markets or what
impact, if any, such developments may have on its operations.
TUC
- ---
In October 1996, Lone Star Pipeline (a division of ENSERCH), filed a
request with the RRC to increase the rate it charges Lone Star Gas (a division
of ENSERCH), to store and transport gas ultimately destined for residential and
commercial customers in the 550 Texas cities and towns served by Lone Star Gas.
Lone Star Gas also requested that the RRC separately set rates for costs to
aggregate gas supply for these cities. Rates currently in effect were set by the
RRC in 1982. The purpose of the rate request was to allow for the recovery of a
substantial increase in the cost of doing business since 1982 and to cover
significant capital investments of approximately $420 million made during the
past 14 years to maintain and improve the reliability and safety of the pipeline
system and help reduce natural-gas supply costs.
In May 1997, the RRC issued an order setting new rates for ENSERCH that
would have reduced the current margin by approximately 7 percent. The order
would allow 100 percent recovery of gas cost subject to a reconciliation
procedure after three years and would impose certain restrictions on the
recovery of gas purchased from affiliates. ENSERCH and other parties to the case
filed motions for rehearing of the order. In August 1997, the RRC issued an
order partially granting and partially denying the motions for rehearing. The
August order reduces the current margin an additional 3 percent beyond the May
20 order.
The August order was met with additional motions for rehearing which were
granted in part and denied in part. On September 30, 1997, the RRC issued a
second order on rehearing, which did not change the margin set in the prior
order. On November 4, 1997, the RRC acted on the motions for rehearing filed in
response to the September 30, 1997 order by denying the motions. Pursuant to
the tariffs approved by the RRC, the new rates will become effective on December
1, 1997, if no further changes to the order are made. ENSERCH has 30 days to
appeal the decision.
25
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
Prior to the ENSERCH filing of a request for a rate increase, the RRC
ordered a general inquiry into the rates and services of Lone Star Gas. The
scope of the inquiry has not been defined fully, but it will focus initially on
historical gas costs and unbundling issues. A hearing on the gas cost issues is
set to begin in August 1998. TUC Management is unable to determine at this time
the ultimate outcome of this inquiry.
CAPITAL EXPENDITURES
TUC AND TU ELECTRIC
- -------------------
The re-evaluation of growth expectations, the effects of inflation,
additional regulatory requirements and the availability of fuel, labor,
materials and capital may result in changes to the estimated construction costs
and dates of completion in TUC's and TU Electric's construction programs (see
Item 2. Properties -- Capital Expenditures in the 1996 Form 10-K). Commitments
in connection with the construction program are generally revocable subject to
reimbursement to manufacturers for expenditures incurred or other cancellation
penalties.
TUC and TU Electric each plans to seek new investment opportunities from
time to time when it concludes that such investments are consistent with its
business strategies and will likely enhance the long-term returns to
shareholders. The timing and amounts of any specific new business investment
opportunities are presently undetermined.
RESULTS OF OPERATION
TUC
- ---
For the three-, nine- and twelve-month periods ended September 30, 1997,
TUC's consolidated net income decreased approximately 19%, 18% and 18% as
compared to the respective periods ended September 30, 1996. For TUC and TU
Electric, from which most of TUC's consolidated earnings is derived, the major
factors affecting earnings for all current periods were more normal weather
conditions as compared to the respective prior periods, the Rate Settlement and
the Fuel Disallowance.
TUC's condensed statement of consolidated income for the three-, nine- and
twelve-month periods ended September 30, 1997, is affected by the results of
operation of ENSERCH which are included for the periods subsequent to August 5,
1997. For the twelve months ended September 30, 1997, TUC's condensed statement
of consolidated income includes operating revenues of $277 million, operating
expenses of $278 million (including income tax benefits) and interest expense
and preferred stock dividends of $15 million, which represent ENSERCH's results
of operation.
TUC's condensed statement of consolidated income for the twelve-month
period ended September 30, 1997, is also affected by a full twelve month's
results of operation of Eastern Energy, which was acquired by TU Australia in
December 1995. For the twelve months ended September 30, 1997, TUC's condensed
statement of consolidated income includes operating revenues of $496 million,
operating expenses of $404 million (including income tax expense) and interest
expense of $79 million, which represent Eastern Energy's results of operation.
TU ELECTRIC
- -----------
For the three- and twelve-month periods, operating revenues increased
approximately 4% and 1%, respectively. Operating revenues decreased
approximately 1% for the nine-month period. The following table details the
factors contributing to these changes:
<TABLE>
<CAPTION>
INCREASE (DECREASE)
----------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
------------------ ----------------- -------------------
FACTORS THOUSANDS OF DOLLARS
-------
<S> <C> <C> <C>
Base rate revenue....................................... $ 34,758 $(48,885) $(27,724)
Fuel revenue and power cost recovery factor revenue..... 20,387 (30,503) 53,012
Transmission service revenue............................ 28,195 84,683 84,683
Other revenue........................................... (19,396) (31,459) (25,112)
-------- -------- --------
Total.............................................. $ 63,944 $(26,164) $ 84,859
======== ======== ========
</TABLE>
26
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
Total energy sales for the three-, nine-and twelve-month periods increased
by approximately 8%, 1% and 2%, respectively. Total energy sales for the three-
month period increased primarily as a result of warmer weather conditions as
compared to the prior period. Total energy sales did not change significantly
for the nine- and twelve-month periods. The increase in base rate revenue for
the three-month period is due primarily to warmer weather conditions partially
offset by the Rate Settlement. The decrease in base rate revenue for the nine-
and twelve-month periods was due primarily to the Rate Settlement and milder
weather, partially offset by customer growth. Increases in transmission service
revenue for the three-, nine- and twelve-month periods are due to the
recognition of revenues from implementing the PUC's Open Access Transmission
Rule effective January 1, 1997. Other revenues decreased for all periods due
primarily to the deferral in August 1997 of previous gains on the sale of sulfur
dioxide allowances and the classification of wheeling revenues as other revenues
in prior periods.
Fuel revenue for the three-month and twelve-month periods increased as a
result of increases in energy sales, partially offset by the Fuel Disallowance.
The decrease in fuel revenue for the nine-month period was primarily due to the
Fuel Disallowance.
Fuel and purchased power expense for the three-, nine- and twelve-month
periods increased 15%, 2% and 6%, respectively, primarily due to increased
energy sales as compared to the prior periods and increases in spot market gas
prices.
Operation and maintenance expenses increased for the three-, nine-, and
twelve-month periods due primarily to transmission tariffs implemented in
January 1997.
Other income and (deductions) -- net was affected for the three-, nine- and
twelve-month periods, as compared to prior periods, by a gain on disposition of
property in July 1996.
Income tax benefits related to other income decreased for the nine-month
and twelve-month periods primarily due to an IRS audit adjustment reflected in
the respective prior periods and was partially offset by the initial effect of
the implementation of a change in TU Electric's state franchise tax status
effective January 1, 1997 (see Note 2 to Condensed Consolidated Financial
Statements). The resulting increase in TU Electric's effective income tax rate
increased the value of its unamortized regulatory assets.
Interest on mortgage bonds decreased as compared to the prior periods due
to reduced interest requirements resulting from TU Electric's refinancing
efforts. Decreases in interest on other long-term debt for the three-, nine- and
twelve-month periods were affected by the prepayment in August and September
1996 of TU Electric's borrowings under a term credit agreement. Other interest
increased for the three-month period due primarily to interest related to the
PUC's disallowance of eligible fuel related costs in 1997. Other interest
decreased for the nine- and twelve-month periods due primarily to an interest
payment related to a settlement with the Internal Revenue Service in June 1996,
partially offset by interest related to the Fuel Disallowance. Increases in
distribution on preferred securities of trusts resulted from the issuance, in
December 1995 and January 1997, of TU Electric obligated, mandatorily
redeemable, preferred securities of trusts.
For the three-, nine- and twelve-month periods, preferred stock dividends
decreased due primarily to the redemption of significant portions of TU
Electric's preferred stock.
ACCOUNTING CHANGE
TUC
- ---
TUC intends to adopt Financial Accounting Standards Board Statement No.
131, "Disclosures About Segments of an Enterprise and Related Information," in
its 1998 annual report when it is required. This statement establishes standards
for defining and reporting business segments. TUC is currently determining the
appropriate segments to be covered by this disclosure.
27
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
TUC
- ---
As previously reported in the 1996 Annual Report on Form 10-K of TEI, in
October 1995, the Antitrust Division of the U.S. Department of Justice (DOJ)
submitted a civil investigative demand (CID) to TEI. The CID requested
documents and information relating to an investigation of whether alleged tying
arrangements or other actions that unreasonably deny or condition access to TU
Electric's transmission system by others had occurred in violation of certain
antitrust laws. In response, TEI submitted various documents and information to
the DOJ. By letter dated November 4, 1997, the DOJ has advised TEI that the CID
investigation has been closed and the documents will be returned.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
TUC AND TU ELECTRIC
- -------------------
(a) Exhibits filed as a part of Part II are:
2 - Agreement and Plan of Merger dated as of August 23, 1997 among
TUC, TUCOM Acquisition Co. and LCC. (Previously filed in file
number 333-37131 as Exhibit 2).
4(a) - Indenture (For Unsecured Debt Securities), dated as of August
1, 1997, between TU Electric and The Bank of New York, Trustee.
4(b) - Officer's Certificate, dated August 18, 1997, establishing
terms of TU Electric's 7.17% Debentures due August 1, 2007.
15 - Letters from Deloitte & Touche LLP as to unaudited interim
financial information
15(a) Texas Utilities Company
15(b) Texas Utilities Electric Company
27 - Financial Data Schedules
27(a) Texas Utilities Company
27(b) Texas Utilities Electric Company
(b) Reports on Form 8-K filed since June 30, 1997:
Date of Report Item Reported
-------------- -------------
TUC
---
August 5, 1997 Item 5. Other Events
August 25, 1997 Item 5. Other Events
28
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TEXAS UTILITIES COMPANY
By /s/ Marc D. Moseley
---------------------------------
Marc D. Moseley
Controller and Principal
Accounting Officer
Date: November 12, 1997
________________________________________________________________________________
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TEXAS UTILITIES ELECTRIC COMPANY
By /s/ Marc D. Moseley
--------------------------------
Marc D. Moseley
Controller and Principal
Accounting Officer
Date: November 12, 1997
29
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ------- ----------------------
2 - Agreement and Plan of Merger dated as of August 23, 1997 among
TUC, TUCOM Acquisition Co. and LCC. (Previously filed in file
number 333-37131 as Exhibit 2).
4(a) - Indenture (For Unsecured Debt Securities), dated as of August 1,
1997, between TU Electric and The Bank of New York, Trustee.
4(b) - Officer's Certificate, dated August 18, 1997, establishing terms
of TU Electric's 7.17% Debentures due August 1, 2007.
15 - Letters from Deloitte & Touche LLP as to unaudited interim
financial information
15(a) Texas Utilities Company
15(b) Texas Utilities Electric Company
27 - Financial Data Schedules
27(a) Texas Utilities Company
27(b) Texas Utilities Electric Company
<PAGE>
EXHIBIT 4(a)
__________________________________________
TEXAS UTILITIES ELECTRIC COMPANY
TO
THE BANK OF NEW YORK
TRUSTEE
_________
INDENTURE
(FOR UNSECURED DEBT SECURITIES)
DATED AS OF AUGUST 1, 1997
__________________________________________
<PAGE>
i
TABLE OF CONTENTS
<TABLE>
<S> <C>
PARTIES........................................................................................ 1
RECITAL OF THE COMPANY......................................................................... 1
ARTICLE ONE.................................................................................... 1
Definitions and Other Provisions of General Application........................................ 1
SECTION 101. Definitions................................................................. 1
Act.................................................................................. 2
Affiliate............................................................................ 2
Authenticating Agent................................................................. 2
Authorized Officer................................................................... 2
Board of Directors................................................................... 2
Board Resolution..................................................................... 2
Business Day......................................................................... 2
Commission........................................................................... 3
Company.............................................................................. 3
Company Request or Company Order..................................................... 3
Corporate Trust Office............................................................... 3
corporation.......................................................................... 3
Defaulted Interest................................................................... 3
Discount Security.................................................................... 3
Dollar or $.......................................................................... 3
Eligible Obligations................................................................. 3
Event of Default..................................................................... 3
Governmental Authority............................................................... 4
Government Obligations............................................................... 4
Holder............................................................................... 4
Indenture............................................................................ 4
Interest Payment Date................................................................ 4
Maturity............................................................................. 4
Officer's Certificate................................................................ 4
Opinion of Counsel................................................................... 4
Outstanding.......................................................................... 5
Paying Agent......................................................................... 6
Periodic Offering.................................................................... 6
Person............................................................................... 6
Place of Payment..................................................................... 6
Predecessor Security................................................................. 6
Redemption Date...................................................................... 6
Redemption Price..................................................................... 6
Regular Record Date.................................................................. 6
Required Currency.................................................................... 6
Responsible Officer.................................................................. 6
</TABLE>
NOTE: THIS TABLE OF CONTENTS SHALL NOT, FOR ANY PURPOSE, BE DEEMED TO BE PART OF
THE INDENTURE.
<PAGE>
ii
<TABLE>
<S> <C>
Securities........................................................................... 7
Security Register and Security Registrar............................................. 7
Special Record Date.................................................................. 7
Stated Interest Rate................................................................. 7
Stated Maturity...................................................................... 7
Tranche.............................................................................. 7
Trust Indenture Act.................................................................. 7
Trustee.............................................................................. 7
United States........................................................................ 7
SECTION 102. Compliance Certificates and Opinions........................................ 7
SECTION 103. Form of Documents Delivered to Trustee...................................... 8
SECTION 104. Acts of Holders............................................................. 9
SECTION 105. Notices, etc. to Trustee and Company........................................ 11
SECTION 106. Notice to Holders of Securities; Waiver..................................... 12
SECTION 107. Conflict with Trust Indenture Act........................................... 12
SECTION 108. Effect of Headings and Table of Contents.................................... 12
SECTION 109. Successors and Assigns...................................................... 12
SECTION 110. Separability Clause......................................................... 13
SECTION 111. Benefits of Indenture....................................................... 13
SECTION 112. Governing Law............................................................... 13
SECTION 113. Legal Holidays.............................................................. 13
ARTICLE TWO.................................................................................... 13
Security Forms................................................................................. 13
SECTION 201. Forms Generally............................................................. 13
SECTION 202. Form of Trustee's Certificate of Authentication............................. 14
ARTICLE THREE.................................................................................. 14
The Securities................................................................................. 14
SECTION 301. Amount Unlimited; Issuable in Series........................................ 14
SECTION 302. Denominations............................................................... 18
SECTION 303. Execution, Authentication, Delivery and Dating.............................. 18
SECTION 304. Temporary Securities........................................................ 21
SECTION 305. Registration, Registration of Transfer and Exchange......................... 22
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities............................ 23
SECTION 307. Payment of Interest; Interest Rights Preserved.............................. 24
SECTION 308. Persons Deemed Owners....................................................... 25
SECTION 309. Cancellation by Security Registrar.......................................... 25
SECTION 310. Computation of Interest..................................................... 26
SECTION 311. Payment to Be in Proper Currency............................................ 26
ARTICLE FOUR................................................................................... 26
Redemption of Securities....................................................................... 26
SECTION 401. Applicability of Article.................................................... 26
</TABLE>
<PAGE>
iii
<TABLE>
<S> <C>
SECTION 402. Election to Redeem; Notice to Trustee....................................... 27
SECTION 403. Selection of Securities to Be Redeemed...................................... 27
SECTION 404. Notice of Redemption........................................................ 27
SECTION 405. Securities Payable on Redemption Date....................................... 29
SECTION 406. Securities Redeemed in Part................................................. 29
ARTICLE FIVE................................................................................... 30
Sinking Funds.................................................................................. 30
SECTION 501. Applicability of Article.................................................... 30
SECTION 502. Satisfaction of Sinking Fund Payments with Securities....................... 30
SECTION 503. Redemption of Securities for Sinking Fund................................... 30
ARTICLE SIX.................................................................................... 31
Covenants...................................................................................... 31
SECTION 601. Payment of Principal, Premium and Interest.................................. 31
SECTION 602. Maintenance of Office or Agency............................................. 31
SECTION 603. Money for Securities Payments to Be Held in Trust........................... 32
SECTION 604. Corporate Existence......................................................... 34
SECTION 605. Maintenance of Properties................................................... 34
SECTION 606. Annual Officer's Certificate as to Compliance............................... 34
SECTION 607. Waiver of Certain Covenants................................................. 34
ARTICLE SEVEN.................................................................................. 35
Satisfaction and Discharge..................................................................... 35
SECTION 701. Satisfaction and Discharge of Securities.................................... 35
SECTION 702. Satisfaction and Discharge of Indenture..................................... 37
SECTION 703. Application of Trust Money.................................................. 38
ARTICLE EIGHT.................................................................................. 39
Events of Default; Remedies.................................................................... 39
SECTION 801. Events of Default........................................................... 39
SECTION 802. Acceleration of Maturity; Rescission and Annulment.......................... 40
SECTION 803. Collection of Indebtedness and Suits for Enforcement by Trustee............. 41
SECTION 804. Trustee May File Proofs of Claim............................................ 42
SECTION 805. Trustee May Enforce Claims Without Possession of Securities................. 43
SECTION 806. Application of Money Collected.............................................. 43
SECTION 807. Limitation on Suits......................................................... 43
SECTION 808. Unconditional Right of Holders to Receive Principal,
Premium and Interest........................................................ 44
SECTION 809. Restoration of Rights and Remedies.......................................... 44
SECTION 810. Rights and Remedies Cumulative.............................................. 45
SECTION 811. Delay or Omission Not Waiver................................................ 45
SECTION 812. Control by Holders of Securities............................................ 45
</TABLE>
<PAGE>
iv
<TABLE>
<S> <C>
SECTION 813. Waiver of Past Defaults..................................................... 45
SECTION 814. Undertaking for Costs....................................................... 46
SECTION 815. Waiver of Stay or Extension Laws............................................ 46
ARTICLE NINE................................................................................... 47
The Trustee.................................................................................... 47
SECTION 901. Certain Duties and Responsibilities......................................... 47
SECTION 902. Notice of Defaults.......................................................... 47
SECTION 903. Certain Rights of Trustee................................................... 48
SECTION 904. Not Responsible for Recitals or Issuance of Securities...................... 49
SECTION 905. May Hold Securities......................................................... 49
SECTION 906. Money Held in Trust......................................................... 49
SECTION 907. Compensation and Reimbursement.............................................. 49
SECTION 908. Disqualification; Conflicting Interests..................................... 50
SECTION 909. Corporate Trustee Required; Eligibility..................................... 51
SECTION 910. Resignation and Removal; Appointment of Successor........................... 51
SECTION 911. Acceptance of Appointment by Successor...................................... 53
SECTION 912. Merger, Conversion, Consolidation or Succession to Business................. 54
SECTION 913. Preferential Collection of Claims Against Company........................... 55
SECTION 914. Co-trustees and Separate Trustees........................................... 55
SECTION 915. Appointment of Authenticating Agent......................................... 56
ARTICLE TEN.................................................................................... 58
Holders' Lists and Reports by Trustee and Company.............................................. 58
SECTION 1001. Lists of Holders........................................................... 58
SECTION 1002. Reports by Trustee and Company............................................. 59
ARTICLE ELEVEN................................................................................. 59
Consolidation, Merger, Conveyance or Other Transfer............................................ 59
SECTION 1101. Company May Consolidate, etc., Only on Certain Terms....................... 59
SECTION 1102. Successor Corporation Substituted.......................................... 60
ARTICLE TWELVE................................................................................. 60
Supplemental Indentures........................................................................ 60
SECTION 1201. Supplemental Indentures Without Consent of Holders......................... 60
SECTION 1202. Supplemental Indentures With Consent of Holders............................ 62
SECTION 1203. Execution of Supplemental Indentures....................................... 64
SECTION 1204. Effect of Supplemental Indentures.......................................... 64
SECTION 1205. Conformity With Trust Indenture Act........................................ 64
SECTION 1206. Reference in Securities to Supplemental Indentures......................... 64
SECTION 1207. Modification Without Supplemental Indenture................................ 64
</TABLE>
<PAGE>
v
<TABLE>
<S> <C>
ARTICLE THIRTEEN............................................................................... 65
Meetings of Holders; Action Without Meeting.................................................... 65
SECTION 1301. Purposes for Which Meetings May Be Called.................................. 65
SECTION 1302. Call, Notice and Place of Meetings......................................... 65
SECTION 1303. Persons Entitled to Vote at Meetings....................................... 66
SECTION 1304. Quorum; Action............................................................. 66
SECTION 1305. Attendance at Meetings; Determination of Voting Rights;
Conduct and Adjournment of Meetings........................................ 67
SECTION 1306. Counting Votes and Recording Action of Meetings............................ 68
SECTION 1307. Action Without Meeting..................................................... 69
ARTICLE FOURTEEN............................................................................... 69
Immunity of Incorporators, Shareholders, Officers and Directors................................ 69
SECTION 1401. Liability Solely Corporate................................................. 69
Testimonium.................................................................................... 70
Signatures..................................................................................... 70
Acknowledgements............................................................................... 71
</TABLE>
<PAGE>
TEXAS UTILITIES ELECTRIC COMPANY
RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT OF 1939
AND INDENTURE, DATED AS OF AUGUST 1, 1997
<TABLE>
<CAPTION>
TRUST INDENTURE ACT SECTION INDENTURE SECTION
<S> <C>
(S)310 (a)(1).......................................................................... 909
(a)(2).......................................................................... 909
(a)(3).......................................................................... 914
(a)(4).......................................................................... Not Applicable
(b)............................................................................. 908
910
(S)311 (a)............................................................................. 913
(b)............................................................................. 913
(c)............................................................................. 913
(S)312 (a)............................................................................. 1001
(b)............................................................................. 1001
(c)............................................................................. 1001
(S)313 (a)............................................................................. 1002
(b)............................................................................. 1002
(c)............................................................................. 1002
(S)314 (a)............................................................................. 1002
(a)(4).......................................................................... 606
(b)............................................................................. Not Applicable
(c)(1).......................................................................... 102
(c)(2).......................................................................... 102
(c)(3).......................................................................... Not Applicable
(d)............................................................................. Not Applicable
(e)............................................................................. 102
(S)315 (a)............................................................................. 901
903
(b)............................................................................. 902
(c)............................................................................. 901
(d)............................................................................. 901
(e)............................................................................. 814
(S)316 (a)............................................................................. 812
813
(a)(1)(A)....................................................................... 802
812
(a)(1)(B)....................................................................... 813
(a)(2).......................................................................... Not Applicable
(b)............................................................................. 808
(S)317 (a)(1).......................................................................... 803
(a)(2).......................................................................... 804
(b)............................................................................. 603
(S)318 (a)............................................................................. 107
</TABLE>
<PAGE>
INDENTURE, dated as of August 1, 1997, between TEXAS UTILITIES
ELECTRIC COMPANY, a corporation duly organized and existing under the laws of
the State of Texas (herein called the "Company"), having its principal office at
Energy Plaza, 1601 Bryan Street, Dallas, Texas 75201, and THE BANK OF NEW YORK,
a corporation of the State of New York, having its principal corporate trust
office at 101 Barclay Street, New York, New York 10286, as Trustee (herein
called the "Trustee").
RECITAL OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
debentures, notes or other evidences of indebtedness (herein called the
"Securities"), in an unlimited aggregate principal amount to be issued in one or
more series as contemplated herein; and all acts necessary to make this
Indenture a valid agreement of the Company have been performed.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires, capitalized terms used herein
shall have the meanings assigned to them in Article One of this Indenture.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Securities or of any
series thereof, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. DEFINITIONS.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(b) all terms used herein without definition which are defined in the
Trust Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(c) all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles
in the United States, and, except as otherwise herein expressly provided, the
term "generally accepted accounting principles" with respect to any
computation required or permitted hereunder shall mean such
<PAGE>
-2-
accounting principles as are generally accepted in the United States at the
date of such computation or, at the election of the Company from time to
time, at the date of the execution and delivery of this Indenture; provided,
however, that in determining generally accepted accounting principles
applicable to the Company, the Company shall, to the extent required, conform
to any order, rule or regulation of any administrative agency, regulatory
authority or other governmental body having jurisdiction over the Company;
and
(d) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
Certain terms, used principally in Article Nine, are defined in that
Article.
"ACT", when used with respect to any Holder of a Security, has the
meaning specified in Section 104.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"CONTROL" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or through one or
more intermediaries, whether through the ownership of voting securities, by
contract or otherwise; and the terms "CONTROLLING" and "CONTROLLED" have
meanings correlative to the foregoing.
"AUTHENTICATING AGENT" means any Person (other than the Company or an
Affiliate of the Company) authorized by the Trustee pursuant to Section 915 to
act on behalf of the Trustee to authenticate one or more series of Securities.
"AUTHORIZED OFFICER" means the Chairman of the Board, the President,
any Vice President, the Treasurer, any Assistant Treasurer, or any other officer
or agent of the Company duly authorized by the Board of Directors to act in
respect of matters relating to this Indenture.
"BOARD OF DIRECTORS" means either the board of directors of the
Company or any committee thereof duly authorized to act in respect of matters
relating to this Indenture.
"BOARD RESOLUTION" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"BUSINESS DAY", when used with respect to a Place of Payment or any
other particular location specified in the Securities or this Indenture, means
any day, other than a Saturday or Sunday, which is not a day on which banking
institutions or trust companies in such Place of Payment or other location are
generally authorized or required by law, regulation or
<PAGE>
-3-
executive order to remain closed, except as may be otherwise specified as
contemplated by Section 301.
"COMMISSION" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, as
amended, or, if at any time after the date of execution and delivery of this
Indenture such Commission is not existing and performing the duties now assigned
to it under the Trust Indenture Act, then the body, if any, performing such
duties at such time.
"COMPANY" means the Person named as the "Company" in the first
paragraph of this Indenture until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"COMPANY REQUEST" or "COMPANY ORDER" means a written request or order
signed in the name of the Company by an Authorized Officer and delivered to the
Trustee.
"CORPORATE TRUST OFFICE" means the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered, which office at the date of execution and delivery of this
Indenture is located at 101 Barclay Street, New York, New York 10286.
"CORPORATION" means a corporation, association, company, joint stock
company or business trust.
"DEFAULTED INTEREST" has the meaning specified in Section 307.
"DISCOUNT SECURITY" means any Security which provides for an amount
less than the principal amount thereof to be due and payable upon a declaration
of acceleration of the Maturity thereof pursuant to Section 802. "Interest" with
respect to a Discount Security means interest, if any, borne by such Security at
a Stated Interest Rate.
"DOLLAR" or "$" means a dollar or other equivalent unit in such coin
or currency of the United States as at the time shall be legal tender for the
payment of public and private debts.
"ELIGIBLE OBLIGATIONS" means:
(a) with respect to Securities denominated in Dollars, Government
Obligations; or
(b) with respect to Securities denominated in a currency other than
Dollars or in a composite currency, such other obligations or instruments
as shall be specified with respect to such Securities, as contemplated by
Section 301.
"EVENT OF DEFAULT" has the meaning specified in Section 801.
<PAGE>
-4-
"GOVERNMENTAL AUTHORITY" means the government of the United States or of
any State or Territory thereof or of the District of Columbia or of any county,
municipality or other political subdivision of any of the foregoing, or any
department, agency, authority or other instrumentality of any of the foregoing.
"GOVERNMENT OBLIGATIONS" means:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States and
entitled to the benefit of the full faith and credit thereof; and
(b) certificates, depositary receipts or other instruments which
evidence a direct ownership interest in obligations described in clause (a)
above or in any specific interest or principal payments due in respect
thereof; provided, however, that the custodian of such obligations or
specific interest or principal payments shall be a bank or trust company
(which may include the Trustee or any Paying Agent) subject to Federal or
state supervision or examination with a combined capital and surplus of at
least $50,000,000; and provided, further, that except as may be otherwise
required by law, such custodian shall be obligated to pay to the holders of
such certificates, depositary receipts or other instruments the full amount
received by such custodian in respect of such obligations or specific
payments and shall not be permitted to make any deduction therefrom.
"HOLDER" means a Person in whose name a Security is registered in the
Security Register.
"INDENTURE" means this instrument as originally executed and delivered and
as it may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof
and shall include the terms of a particular series of Securities established as
contemplated by Section 301.
"INTEREST PAYMENT DATE", when used with respect to any Security, means the
Stated Maturity of an installment of interest on such Security.
"MATURITY", when used with respect to any Security, means the date on which
the principal of such Security or an installment of principal becomes due and
payable as provided in such Security or in this Indenture, whether at the Stated
Maturity, by declaration of acceleration, upon call for redemption or otherwise.
"OFFICER'S CERTIFICATE" means a certificate signed by an Authorized Officer
and delivered to the Trustee.
"OPINION OF COUNSEL" means a written opinion of counsel, who may be counsel
for the Company, or other counsel acceptable to the Trustee.
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"OUTSTANDING", when used with respect to Securities, means, as of the date
of determination, all Securities theretofore authenticated and delivered under
this Indenture, except:
(a) Securities theretofore canceled or delivered to the Security
Registrar for cancellation;
(b) Securities deemed to have been paid in accordance with Section
701; and
(c) Securities which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities in
respect of which there shall have been presented to the Trustee proof
satisfactory to it and the Company that such Securities are held by a bona
fide purchaser or purchasers in whose hands such Securities are valid
obligations of the Company;
provided, however, that in determining whether or not the Holders of the
requisite principal amount of the Securities Outstanding under this Indenture,
or the Outstanding Securities of any series or Tranche, have given any request,
demand, authorization, direction, notice, consent or waiver hereunder or whether
or not a quorum is present at a meeting of Holders of Securities,
(x) Securities owned by the Company or any other obligor upon the
Securities or any Affiliate of the Company or of such other obligor (unless
the Company, such Affiliate or such obligor owns all Securities Outstanding
under this Indenture, or (except for the purposes of actions to be taken by
Holders of (i) more than one series voting as a class under Section 812 or
(ii) more than one series or more than one Tranche, as the case may be,
voting as a class under Section 1202) all Outstanding Securities of each
such series and each such Tranche, as the case may be, determined without
regard to this clause (x)) shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be
protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver or upon any such determination as to
the presence of a quorum, only Securities which the Trustee knows to be so
owned shall be so disregarded; provided, however, that Securities so owned
which have been pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the satisfaction of the Trustee the pledgee's right
so to act with respect to such Securities and that the pledgee is not the
Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor; and
(y) the principal amount of a Discount Security that shall be deemed
to be Outstanding for such purposes shall be the amount of the principal
thereof that would be due and payable as of the date of such determination
upon a declaration of acceleration of the Maturity thereof pursuant to
Section 802;
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provided, further, that, in the case of any Security the principal of which is
payable from time to time without presentment or surrender, the principal amount
of such Security that shall be deemed to be Outstanding at any time for all
purposes of this Indenture shall be the original principal amount thereof less
the aggregate amount of principal thereof theretofore paid.
"PAYING AGENT" means any Person, including the Company, authorized by the
Company to pay the principal of, and premium, if any, or interest, if any, on
any Securities on behalf of the Company.
"PERIODIC OFFERING" means an offering of Securities of a series from time
to time any or all of the specific terms of which Securities, including without
limitation the rate or rates of interest, if any, thereon, the Stated Maturity
or Maturities thereof and the redemption provisions, if any, with respect
thereto, are to be determined by the Company or its agents upon the issuance of
such Securities.
"PERSON" means any individual, corporation, partnership, joint venture,
trust or unincorporated organization or any Governmental Authority.
"PLACE OF PAYMENT", when used with respect to the Securities of any series,
or any Tranche thereof, means the place or places, specified as contemplated by
Section 301, at which, subject to Section 602, principal of and premium, if any,
and interest, if any, on the Securities of such series or Tranche are payable.
"PREDECESSOR SECURITY" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed (to the extent
lawful) to evidence the same debt as the mutilated, destroyed, lost or stolen
Security.
"REDEMPTION DATE", when used with respect to any Security to be redeemed,
means the date fixed for such redemption by or pursuant to this Indenture.
"REDEMPTION PRICE", when used with respect to any Security to be redeemed,
means the price at which it is to be redeemed pursuant to this Indenture.
"REGULAR RECORD DATE" for the interest payable on any Interest Payment Date
on the Securities of any series means the date specified for that purpose as
contemplated by Section 301.
"REQUIRED CURRENCY" has the meaning specified in Section 311.
"RESPONSIBLE OFFICER", when used with respect to the Trustee, means any
officer of the Trustee assigned by the Trustee to administer its corporate trust
matters.
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"SECURITIES" has the meaning stated in the first recital of this Indenture
and more particularly means any securities authenticated and delivered under
this Indenture.
"SECURITY REGISTER" and "SECURITY REGISTRAR" have the respective meanings
specified in Section 305.
"SPECIAL RECORD DATE" for the payment of any Defaulted Interest on the
Securities of any series means a date fixed by the Trustee pursuant to Section
307.
"STATED INTEREST RATE" means a rate (whether fixed or variable) at which an
obligation by its terms is stated to bear simple interest. Any calculation or
other determination to be made under this Indenture by reference to the Stated
Interest Rate on a Security shall be made without regard to the effective
interest cost to the Company of such Security and without regard to the Stated
Interest Rate on, or the effective cost to the Company of, any other
indebtedness in respect of which the Company's obligations are evidenced or
secured in whole or in part by such Security.
"STATED MATURITY", when used with respect to any obligation or any
installment of principal thereof or interest thereon, means the date on which
the principal of such obligation or such installment of principal or interest is
stated to be due and payable (without regard to any provisions for redemption,
prepayment, acceleration, purchase or extension).
"TRANCHE" means a group of Securities which (a) are of the same series and
(b) have identical terms except as to principal amount and/or date of issuance.
"TRUST INDENTURE ACT" means, as of any time, the Trust Indenture Act of
1939, or any successor statute, as in effect at such time.
"TRUSTEE" means the Person named as the "Trustee" in the first paragraph of
this Indenture until a successor Trustee shall have become such with respect to
one or more series of Securities pursuant to the applicable provisions of this
Indenture, and thereafter "Trustee" shall mean or include each Person who is
then a Trustee hereunder, and if at any time there is more than one such Person,
"Trustee" as used with respect to the Securities of any series shall mean the
Trustee with respect to Securities of that series.
"UNITED STATES" means the United States of America, its Territories, its
possessions and other areas subject to its political jurisdiction.
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS.
Except as otherwise expressly provided in this Indenture, upon any
application or request by the Company to the Trustee to take any action under
any provision of this Indenture, the Company shall, if requested by the Trustee,
furnish to the Trustee an Officer's Certificate stating that all conditions
precedent, if any, provided for in this Indenture relating
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to the proposed action (including any covenants compliance with which
constitutes a condition precedent) have been complied with and an Opinion of
Counsel stating that in the opinion of such counsel all such conditions
precedent, if any, have been complied with, except that in the case of any such
application or request as to which the furnishing of such documents is
specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(a) a statement that each Person signing such certificate or opinion
has read such covenant or condition and the definitions herein relating
thereto;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of each such Person, such Person
has made such examination or investigation as is necessary to enable such
Person to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement as to whether, in the opinion of each such Person,
such condition or covenant has been complied with.
SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which such Officer's Certificate or opinion are
based are erroneous. Any such certificate or Opinion of Counsel may be based,
insofar as it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
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Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever, subsequent to the receipt by the Trustee of any Board
Resolution, Officer's Certificate, Opinion of Counsel or other document or
instrument, a clerical, typographical or other inadvertent or unintentional
error or omission shall be discovered therein, a new document or instrument may
be substituted therefor in corrected form with the same force and effect as if
originally filed in the corrected form and, irrespective of the date or dates of
the actual execution and/or delivery thereof, such substitute document or
instrument shall be deemed to have been executed and/or delivered as of the date
or dates required with respect to the document or instrument for which it is
substituted. Anything in this Indenture to the contrary notwithstanding, if any
such corrective document or instrument indicates that action has been taken by
or at the request of the Company which could not have been taken had the
original document or instrument not contained such error or omission, the action
so taken shall not be invalidated or otherwise rendered ineffective but shall be
and remain in full force and effect, except to the extent that such action was a
result of willful misconduct or bad faith. Without limiting the generality of
the foregoing, any Securities issued under the authority of such defective
document or instrument shall nevertheless be the valid obligations of the
Company entitled to the benefits of this Indenture equally and ratably with all
other Outstanding Securities, except as aforesaid.
SECTION 104. ACTS OF HOLDERS.
(a) Any request, demand, authorization, direction, notice, consent,
election, waiver or other action provided by this Indenture to be made,
given or taken by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in person
or by an agent duly appointed in writing or, alternatively, may be embodied
in and evidenced by the record of Holders voting in favor thereof, either
in person or by proxies duly appointed in writing, at any meeting of
Holders duly called and held in accordance with the provisions of Article
Thirteen, or a combination of such instruments and any such record. Except
as herein otherwise expressly provided, such action shall become effective
when such instrument or instruments or record or both are delivered to the
Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments and any such record (and the action embodied
therein and evidenced thereby) are herein sometimes referred to as the
"Act" of the Holders signing such instrument or instruments and so voting
at any such meeting. Proof of execution of any such instrument or of a
writing appointing any such agent, or of the holding by any Person of a
Security, shall be sufficient for any purpose of this Indenture and
(subject to Section 901) conclusive in favor of the Trustee and the
Company, if made in the manner provided in this Section. The record of any
meeting of Holders shall be proved in the manner provided in Section 1306.
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(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the
execution thereof or may be proved in any other manner which the Trustee
and the Company deem sufficient. Where such execution is by a signer
acting in a capacity other than his individual capacity, such certificate
or affidavit shall also constitute sufficient proof of his authority.
(c) The principal amount (except as otherwise contemplated in clause
(y) of the first proviso to the definition of Outstanding) and serial
numbers of Securities held by any Person, and the date of holding the same,
shall be proved by the Security Register.
(d) Any request, demand, authorization, direction, notice, consent,
election, waiver or other Act of a Holder shall bind every future Holder of
the same Security and the Holder of every 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 Trustee
or the Company in reliance thereon, whether or not notation of such action
is made upon such Security.
(e) Until such time as written instruments shall have been delivered
to the Trustee with respect to the requisite percentage of principal amount
of Securities for the action contemplated by such instruments, any such
instrument executed and delivered by or on behalf of a Holder may be
revoked with respect to any or all of such Securities by written notice by
such Holder or any subsequent Holder, proven in the manner in which such
instrument was proven.
(f) Securities of any series, or any Tranche thereof, authenticated
and delivered after any Act of Holders may, and shall if required by the
Trustee, bear a notation in form approved by the Trustee as to any action
taken by such Act of Holders. If the Company shall so determine, new
Securities of any series, or any Tranche thereof, so modified as to
conform, in the opinion of the Trustee and the Company, to such action may
be prepared and executed by the Company and authenticated and delivered by
the Trustee in exchange for Outstanding Securities of such series or
Tranche.
(g) If the Company shall solicit from Holders any request, demand,
authorization, direction, notice, consent, 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 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
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the close of business on the record date shall be deemed to be Holders for
the purposes of determining whether Holders of the requisite proportion of
the Outstanding 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 Securities shall be computed as
of the record date.
SECTION 105. NOTICES, ETC. TO TRUSTEE AND COMPANY.
Any request, demand, authorization, direction, notice, consent,
election, waiver or Act of Holders or other document provided or permitted by
this Indenture to be made upon, given or furnished to, or filed with, the
Trustee by any Holder or by the Company, or the Company by the Trustee or by any
Holder, shall be sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and delivered personally to an officer or
other responsible employee of the addressee, or transmitted by facsimile
transmission or other direct written electronic means to such telephone number
or other electronic communications address as the parties hereto shall from time
to time designate, or transmitted by certified or registered mail, charges
prepaid, to the applicable address set opposite such party's name below or to
such other address as either party hereto may from time to time designate:
If to the Trustee, to:
The Bank of New York
101 Barclay Street - 21W
New York, New York 10286
Attention: Vice President, Corporate Trust Administration
Telephone: (212) 815-5375
Telecopy: (212) 815-5915
If to the Company, to:
Texas Utilities Electric Company
Energy Plaza
1601 Bryan Street
Dallas, Texas 75201
Attention: Treasurer
Telephone: (214) 812-4600
Telecopy: (214) 812-3366
Any communication contemplated herein shall be deemed to have been
made, given, furnished and filed if personally delivered, on the date of
delivery, if transmitted by
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facsimile transmission or other direct written electronic means, on the date of
transmission, and if transmitted by certified or registered mail, on the date of
receipt.
SECTION 106. NOTICE TO HOLDERS OF SECURITIES; WAIVER.
Except as otherwise expressly provided herein, where this Indenture
provides for notice to Holders of any event, such notice shall be sufficiently
given, and shall be deemed given, to Holders if in writing and mailed, first-
class postage prepaid, to each Holder affected by such event, at the address of
such Holder as it appears in the Security Register, not later than the latest
date, if any, and not earlier than the earliest date, if any, prescribed for the
giving of such notice.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice to
Holders by mail, then such notification as shall be made with the approval of
the Trustee shall constitute a sufficient notification for every purpose
hereunder. In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders.
Any notice required by this Indenture may be waived in writing by the
Person entitled to receive such notice, either before or after the event
otherwise to be specified therein, and such waiver shall be the equivalent of
such notice. Waivers of notice by Holders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
SECTION 107. CONFLICT WITH TRUST INDENTURE ACT.
If any provision of this Indenture limits, qualifies or conflicts with
another provision hereof which is required or deemed to be included in this
Indenture by, or is otherwise governed by, any of the provisions of the Trust
Indenture Act, such other provision shall control; and if any provision hereof
otherwise conflicts with the Trust Indenture Act, the Trust Indenture Act shall
control.
SECTION 108. EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings in this Indenture and the Table of
Contents are for convenience only and shall not affect the construction hereof.
SECTION 109. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the Company and
Trustee shall bind their respective successors and assigns, whether so expressed
or not.
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SECTION 110. SEPARABILITY CLAUSE.
In case any provision in this Indenture or the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 111. BENEFITS OF INDENTURE.
Nothing in this Indenture or the Securities, express or implied, shall
give to any Person, other than the parties hereto, their successors hereunder
and the Holders, any benefit or any legal or equitable right, remedy or claim
under this Indenture.
SECTION 112. GOVERNING LAW.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT
THE LAW OF ANY OTHER JURISDICTION SHALL BE MANDATORILY APPLICABLE.
SECTION 113. LEGAL HOLIDAYS.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day at any Place of Payment,
then (notwithstanding any other provision of this Indenture or of the Securities
other than a provision in Securities of any series, or any Tranche thereof, or
in the Board Resolution or Officer's Certificate which establishes the terms of
the Securities of such series or Tranche, which specifically states that such
provision shall apply in lieu of this Section) payment of interest or principal
and premium, if any, need not be made at such Place of Payment on such date, but
may be made on the next succeeding Business Day at such Place of Payment, with
the same force and effect, and in the same amount, as if made on the Interest
Payment Date or Redemption Date, or at the Stated Maturity, as the case may be,
and, if such payment is made or duly provided for on such Business Day, no
interest shall accrue on the amount so payable for the period from and after
such Interest Payment Date, Redemption Date or Stated Maturity, as the case may
be, to such Business Day.
ARTICLE TWO
SECURITY FORMS
SECTION 201. FORMS GENERALLY.
The definitive Securities of each series shall be in substantially the
form or forms thereof established in the indenture supplemental hereto
establishing such series or in a Board Resolution establishing such series, or
in an Officer's Certificate pursuant to such
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supplemental indenture or Board Resolution, in each case with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution of the Securities. If the form or forms of
Securities of any series are established in a Board Resolution or in an
Officer's Certificate pursuant to a Board Resolution, such Board Resolution and
Officer's Certificate, if any, shall be delivered to the Trustee at or prior to
the delivery of the Company Order contemplated by Section 303 for the
authentication and delivery of such Securities.
Unless otherwise specified as contemplated by Sections 301 or 1201(g),
the Securities of each series shall be issuable in registered form without
coupons. The definitive Securities shall be produced in such manner as shall be
determined by the officers executing such Securities, as evidenced by their
execution thereof.
SECTION 202. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
The Trustee's certificate of authentication shall be in substantially
the form set forth below:
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
Dated:
_________________________________
as Trustee
By: _____________________________
Authorized Signatory
ARTICLE THREE
THE SECURITIES
SECTION 301. AMOUNT UNLIMITED; ISSUABLE IN SERIES.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is unlimited.
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The Securities may be issued in one or more series. Subject to the
last paragraph of this Section, prior to the authentication and delivery of
Securities of any series there shall be established by specification in a
supplemental indenture or in a Board Resolution, or in an Officer's Certificate
pursuant to a supplemental indenture or a Board Resolution:
(a) the title of the Securities of such series (which shall
distinguish the Securities of such series from Securities of all other
series);
(b) any limit upon the aggregate principal amount of the Securities
of such series which may be authenticated and delivered under this
Indenture (except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other
Securities of such series pursuant to Section 304, 305, 306, 406 or 1206
and except for any Securities which, pursuant to Section 303, are deemed
never to have been authenticated and delivered hereunder);
(c) the Person or Persons (without specific identification) to whom
interest on Securities of such series, or any Tranche thereof, shall be
payable on any Interest Payment Date, if other than the Persons in whose
names such Securities (or one or more Predecessor Securities) are
registered at the close of business on the Regular Record Date for such
interest;
(d) the date or dates on which the principal of the Securities of
such series, or any Tranche thereof, is payable or any formulary or other
method or other means by which such date or dates shall be determined, by
reference to an index or other fact or event ascertainable outside of this
Indenture or otherwise (without regard to any provisions for redemption,
prepayment, acceleration, purchase or extension);
(e) the rate or rates at which the Securities of such series, or any
Tranche thereof, shall bear interest, if any (including the rate or rates
at which overdue principal shall bear interest, if different from the rate
or rates at which such Securities shall bear interest prior to Maturity,
and, if applicable, the rate or rates at which overdue premium or interest
shall bear interest, if any), or any formulary or other method or other
means by which such rate or rates shall be determined, by reference to an
index or other fact or event ascertainable outside of this Indenture or
otherwise; the date or dates from which such interest shall accrue; the
Interest Payment Dates on which such interest shall be payable and the
Regular Record Date, if any, for the interest payable on such Securities on
any Interest Payment Date; and the basis of computation of interest, if
other than as provided in Section 310;
(f) the place or places at which or methods by which (1) the
principal of and premium, if any, and interest, if any, on Securities of
such series, or any Tranche thereof, shall be payable, (2) registration of
transfer of Securities of such series, or any Tranche thereof, may be
effected, (3) exchanges of Securities of such series, or
<PAGE>
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any Tranche thereof, may be effected and (4) notices and demands to or upon
the Company in respect of the Securities of such series, or any Tranche
thereof, and this Indenture may be served; the Security Registrar for such
series or Tranche; and if such is the case, that the principal of such
Securities shall be payable without presentment or surrender thereof;
(g) the period or periods within which, or the date or dates on
which, the price or prices at which and the terms and conditions upon which
the Securities of such series, or any Tranche thereof, may be redeemed, in
whole or in part, at the option of the Company and any restrictions on such
redemptions, including but not limited to a restriction on a partial
redemption by the Company of the Securities of any series, or any Tranche
thereof, resulting in delisting of such Securities from any national
exchange;
(h) the obligation or obligations, if any, of the Company to redeem
or purchase the Securities of such series, or any Tranche thereof, pursuant
to any sinking fund or other mandatory redemption provisions or at the
option of a Holder thereof and the period or periods within which or the
date or dates on which, the price or prices at which and the terms and
conditions upon which such Securities shall be redeemed or purchased, in
whole or in part, pursuant to such obligation, and applicable exceptions to
the requirements of Section 404 in the case of mandatory redemption or
redemption at the option of the Holder;
(i) the denominations in which Securities of such series, or any
Tranche thereof, shall be issuable if other than denominations of $1,000
and any integral multiple thereof;
(j) the currency or currencies, including composite currencies, in
which payment of the principal of and premium, if any, and interest, if
any, on the Securities of such series, or any Tranche thereof, shall be
payable (if other than in Dollars);
(k) if the principal of or premium, if any, or interest, if any, on
the Securities of such series, or any Tranche thereof, are to be payable,
at the election of the Company or a Holder thereof, in a coin or currency
other than that in which the Securities are stated to be payable, the
period or periods within which and the terms and conditions upon which,
such election may be made;
(l) if the principal of or premium, if any, or interest, if any, on
the Securities of such series, or any Tranche thereof, are to be payable,
or are to be payable at the election of the Company or a Holder thereof, in
securities or other property, the type and amount of such securities or
other property, or the formulary or other method or other means by which
such amount shall be determined, and the period or periods
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within which, and the terms and conditions upon which, any such election
may be made;
(m) if the amount payable in respect of principal of or premium, if
any, or interest, if any, on the Securities of such series, or any Tranche
thereof, may be determined with reference to an index or other fact or
event ascertainable outside of this Indenture, the manner in which such
amounts shall be determined to the extent not established pursuant to
clause (e) of this paragraph;
(n) if other than the principal amount thereof, the portion of the
principal amount of Securities of such series, or any Tranche thereof,
which shall be payable upon declaration of acceleration of the Maturity
thereof pursuant to Section 802;
(o) any Events of Default, in addition to those specified in Section
801, with respect to the Securities of such series, and any covenants of
the Company for the benefit of the Holders of the Securities of such
series, or any Tranche thereof, in addition to those set forth in Article
Six;
(p) the terms, if any, pursuant to which the Securities of such
series, or any Tranche thereof, may be converted into or exchanged for
shares of capital stock or other securities of the Company or any other
Person;
(q) the obligations or instruments, if any, which shall be considered
to be Eligible Obligations in respect of the Securities of such series, or
any Tranche thereof, denominated in a currency other than Dollars or in a
composite currency, and any additional or alternative provisions for the
reinstatement of the Company's indebtedness in respect of such Securities
after the satisfaction and discharge thereof as provided in Section 701;
(r) if the Securities of such series, or any Tranche thereof, are to
be issued in global form, (i) any limitations on the rights of the Holder
or Holders of such Securities to transfer or exchange the same or to obtain
the registration of transfer thereof, (ii) any limitations on the rights of
the Holder or Holders thereof to obtain certificates therefor in definitive
form in lieu of temporary form and (iii) any and all other matters
incidental to such Securities;
(s) if the Securities of such series, or any Tranche thereof, are to
be issuable as bearer securities, any and all matters incidental thereto
which are not specifically addressed in a supplemental indenture as
contemplated by clause (g) of Section 1201;
(t) to the extent not established pursuant to clause (r) of this
paragraph, any limitations on the rights of the Holders of the Securities
of such Series, or any Tranche thereof, to transfer or exchange such
Securities or to obtain the registration of transfer thereof; and if a
service charge will be made for the registration of transfer
<PAGE>
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or exchange of Securities of such series, or any Tranche thereof, the
amount or terms thereof;
(u) any exceptions to Section 113, or variation in the definition of
Business Day, with respect to the Securities of such series, or any Tranche
thereof; and
(v) any other terms of the Securities of such series, or any Tranche
thereof, not inconsistent with the provisions of this Indenture.
With respect to Securities of a series subject to a Periodic Offering,
the indenture supplemental hereto or the Board Resolution which establishes such
series, or the Officer's Certificate pursuant to such supplemental indenture or
Board Resolution, as the case may be, may provide general terms or parameters
for Securities of such series and provide either that the specific terms of
Securities of such series, or any Tranche thereof, shall be specified in a
Company Order or that such terms shall be determined by the Company or its
agents in accordance with procedures specified in a Company Order as
contemplated by the clause (b) of Section 303.
SECTION 302. DENOMINATIONS.
Unless otherwise provided as contemplated by Section 301 with respect
to any series of Securities, or any Tranche thereof, the Securities of each
series shall be issuable in denominations of $1,000 and any integral multiple
thereof.
SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
Unless otherwise provided as contemplated by Section 301 with respect
to any series of Securities, or any Tranche thereof, the Securities shall be
executed on behalf of the Company by an Authorized Officer and may have the
corporate seal of the Company affixed thereto or reproduced thereon attested by
any other Authorized Officer or by the Secretary or an Assistant Secretary of
the Company. The signature of any or all of these officers on the Securities
may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at the time of execution Authorized Officers or the Secretary or an
Assistant Secretary of the Company shall bind the Company, notwithstanding that
such individuals or any of them have ceased to hold such offices prior to the
authentication and delivery of such Securities or did not hold such offices at
the date of such Securities.
<PAGE>
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The Trustee shall authenticate and deliver Securities of a series, for
original issue, at one time or from time to time in accordance with the Company
Order referred to below, upon receipt by the Trustee of:
(a) the instrument or instruments establishing the form or forms and
terms of such series, as provided in Sections 201 and 301;
(b) a Company Order requesting the authentication and delivery of
such Securities and, to the extent that the terms of such Securities shall
not have been established in an indenture supplemental hereto or in a Board
Resolution, or in an Officer's Certificate pursuant to a supplemental
indenture or Board Resolution, all as contemplated by Sections 201 and 301,
either (i) establishing such terms or (ii) in the case of Securities of a
series subject to a Periodic Offering, specifying procedures, acceptable to
the Trustee, by which such terms are to be established (which procedures
may provide, to the extent acceptable to the Trustee, for authentication
and delivery pursuant to oral or electronic instructions from the Company
or any agent or agents thereof, which oral instructions are to be promptly
confirmed electronically or in writing), in either case in accordance with
the instrument or instruments delivered pursuant to clause (a) above;
(c) the Securities of such series, executed on behalf of the Company
by an Authorized Officer;
(d) an Opinion of Counsel to the effect that:
(i) the form or forms of such Securities have been duly
authorized by the Company and have been established in conformity with
the provisions of this Indenture;
(ii) the terms of such Securities have been duly authorized by
the Company and have been established in conformity with the
provisions of this Indenture; and
(iii) such Securities, when authenticated and delivered by the
Trustee and issued and delivered by the Company in the manner and
subject to any conditions specified in such Opinion of Counsel, will
have been duly issued under this Indenture and will constitute valid
and legally binding obligations of the Company, entitled to the
benefits provided by this Indenture, and enforceable in accordance
with their terms, subject, as to enforcement, to laws relating to or
affecting generally the enforcement of creditors' rights, including,
without limitation, bankruptcy and insolvency laws and to general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law);
<PAGE>
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provided, however, that, with respect to Securities of a series subject to a
Periodic Offering, the Trustee shall be entitled to receive such Opinion of
Counsel only once at or prior to the time of the first authentication of such
Securities (provided that such Opinion of Counsel addresses the authentication
and delivery of all Securities of such series) and that in lieu of the opinions
described in clauses (ii) and (iii) above Counsel may opine that:
(x) when the terms of such Securities shall have been
established pursuant to a Company Order or Orders or pursuant to such
procedures (acceptable to the Trustee) as may be specified from time
to time by a Company Order or Orders, all as contemplated by and in
accordance with the instrument or instruments delivered pursuant to
clause (a) above, such terms will have been duly authorized by the
Company and will have been established in conformity with the
provisions of this Indenture; and
(y) such Securities, when authenticated and delivered by the
Trustee in accordance with this Indenture and the Company Order or
Orders or specified procedures referred to in paragraph (x) above and
issued and delivered by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, will have been duly
issued under this Indenture and will constitute valid and legally
binding obligations of the Company, entitled to the benefits provided
by the Indenture, and enforceable in accordance with their terms,
subject, as to enforcement, to laws relating to or affecting generally
the enforcement of creditors' rights, including, without limitation,
bankruptcy and insolvency laws, and to general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
With respect to Securities of a series subject to a Periodic Offering,
the Trustee may conclusively rely, as to the authorization by the Company of any
of such Securities, the form, terms thereof and the legality, validity, binding
effect and enforceability thereof, and compliance of the authentication and
delivery thereof with the terms and conditions of this Indenture, upon the
Opinion of Counsel and other documents delivered pursuant to Sections 201 and
301 and this Section, as applicable, at or prior to the time of the first
authentication of Securities of such series unless and until such opinion or
other documents have been superseded or revoked or expire by their terms. In
connection with the authentication and delivery of Securities of a series
subject to a Periodic Offering, the Trustee shall be entitled to assume that the
Company's instructions to authenticate and deliver such Securities do not
violate any applicable law or any applicable rule, regulation or order of any
Governmental Authority having jurisdiction over the Company.
If the form or terms of the Securities of any series have been
established by or pursuant to a Board Resolution or an Officer's Certificate as
permitted by Sections 201 or 301, the Trustee shall not be required to
authenticate such Securities if the issuance of such Securities pursuant to this
Indenture will materially or adversely affect the Trustee's own
<PAGE>
-21-
rights, duties or immunities under the Securities and this Indenture or
otherwise in a manner which is not reasonably acceptable to the Trustee.
Unless otherwise specified as contemplated by Section 301 with respect
to any series of Securities, or any Tranche thereof, each Security shall be
dated the date of its authentication.
Unless otherwise specified as contemplated by Section 301 with respect
to any series of Securities, no Security shall be entitled to any benefit under
this Indenture or be valid or obligatory for any purpose unless there appears on
such Security a certificate of authentication substantially in the form provided
for herein executed by the Trustee or an Authenticating Agent by manual
signature, and such certificate upon any Security shall be conclusive evidence,
and the only evidence, that such Security has been duly authenticated and
delivered hereunder and is entitled to the benefits of this Indenture.
Notwithstanding the foregoing, if any Security shall have been authenticated and
delivered hereunder to the Company, or any Person acting on its behalf, but
shall never have been issued and sold by the Company, and the Company shall
deliver such Security to the Trustee for cancellation as provided in Section 309
together with a written statement (which need not comply with Section 102 and
need not be accompanied by an Opinion of Counsel) stating that such Security has
never been issued and sold by the Company, for all purposes of this Indenture
such Security shall be deemed never to have been authenticated and delivered
hereunder and shall never be entitled to the benefits hereof.
SECTION 304. TEMPORARY SECURITIES.
Pending the preparation of definitive Securities of any series, or any
Tranche thereof, the Company may execute, and upon Company Order the Trustee
shall authenticate and deliver, temporary Securities which are printed,
lithographed, typewritten, mimeographed or otherwise produced, in any authorized
denomination, substantially of the tenor of the definitive Securities in lieu of
which they are issued, with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Securities may
determine, as evidenced by their execution of such Securities; provided,
however, that temporary Securities need not recite specific redemption, sinking
fund, conversion or exchange provisions.
Unless otherwise specified as contemplated by Section 301 with respect
to the Securities of any series, or any Tranche thereof, after the preparation
of definitive Securities of such series or Tranche, the temporary Securities of
such series or Tranche shall be exchangeable, without charge to the Holder
thereof, for definitive Securities of such series or Tranche upon surrender of
such temporary Securities at the office or agency of the Company maintained
pursuant to Section 602 in a Place of Payment for such Securities. Upon such
surrender of temporary Securities for such exchange, the Company shall, except
as aforesaid, execute and the Trustee shall authenticate and deliver in exchange
therefor definitive Securities of the same series and Tranche of authorized
denominations and of like tenor and aggregate principal amount.
<PAGE>
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Until exchanged in full as hereinabove provided, temporary Securities
shall in all respects be entitled to the same benefits under this Indenture as
definitive Securities of the same series and Tranche and of like tenor
authenticated and delivered hereunder.
SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.
The Company shall cause to be kept in each office designated pursuant
to Section 602, with respect to the Securities of each series, a register (all
registers kept in accordance with this Section being collectively referred to as
the "Security Register") in which, subject to such reasonable regulations as it
may prescribe, the Company shall provide for the registration of Securities of
such series, or any Tranche thereof, and the registration of transfer thereof.
The Company shall designate one Person to maintain the Security Register for the
Securities of each series on a consolidated basis, and such Person is referred
to herein, with respect to such series, as the "Security Registrar." Anything
herein to the contrary notwithstanding, the Company may designate one or more of
its offices as an office in which a register with respect to the Securities of
one or more series shall be maintained, and the Company may designate itself the
Security Registrar with respect to one or more of such series. The Security
Register shall be open for inspection by the Trustee and the Company at all
reasonable times.
Except as otherwise specified as contemplated by Section 301 with
respect to the Securities of any series, or any Tranche thereof, upon surrender
for registration of transfer of any Security of such series or Tranche at the
office or agency of the Company maintained pursuant to Section 602 in a Place of
Payment for such series or Tranche, the Company shall execute, and the Trustee
shall authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Securities of the same series and Tranche, of
authorized denominations and of like tenor and aggregate principal amount.
Except as otherwise specified as contemplated by Section 301 with
respect to the Securities of any series, or any Tranche thereof, any Security of
such series or Tranche may be exchanged at the option of the Holder, for one or
more new Securities of the same series and Tranche, of authorized denominations
and of like tenor and aggregate principal amount, upon surrender of the
Securities to be exchanged at any such office or agency. Whenever any
Securities are so surrendered for exchange, the Company shall execute, and the
Trustee shall authenticate and deliver, the Securities which the Holder making
the exchange is entitled to receive.
All Securities delivered upon any registration of transfer or exchange
of Securities shall be valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company, the Trustee or the
Security Registrar) be duly
<PAGE>
-23-
endorsed or shall be accompanied by a written instrument of transfer in form
satisfactory to the Company, the Trustee or the Security Registrar, as the case
may be, duly executed by the Holder thereof or his attorney duly authorized in
writing.
Unless otherwise specified as contemplated by Section 301 with respect
to Securities of any series, or any Tranche thereof, no service charge shall be
made for any registration of transfer or exchange of Securities, but the Company
may require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Securities, other than exchanges pursuant to Section 304, 406 or
1206 not involving any transfer.
The Company shall not be required to execute or to provide for the
registration of transfer of or the exchange of (a) Securities of any series, or
any Tranche thereof, during a period of 15 days immediately preceding the date
notice is to be given identifying the serial numbers of the Securities of such
series or Tranche called for redemption or (b) any Security so selected for
redemption in whole or in part, except the unredeemed portion of any Security
being redeemed in part.
SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES.
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of the same series and Tranche, and of like tenor and
principal amount and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (a)
evidence to their satisfaction of the ownership of and the destruction, loss or
theft of any Security and (b) such security or indemnity as may be reasonably
required by them to save each of them and any agent of either of them harmless,
then, in the absence of notice to the Company or the Trustee that such Security
is held by a Person purporting to be the owner of such Security, the Company
shall execute and the Trustee shall authenticate and deliver, in lieu of any
such destroyed, lost or stolen Security, a new Security of the same series and
Tranche, and of like tenor and principal amount and bearing a number not
contemporaneously outstanding.
Notwithstanding the foregoing, in case any such mutilated, destroyed,
lost or stolen Security has become or is about to become due and payable, the
Company in its discretion may, instead of issuing a new Security, pay such
Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
reasonable expenses (including the fees and expenses of the Trustee) connected
therewith.
<PAGE>
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Every new Security of any series issued pursuant to this Section in
lieu of any destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Security shall be at any time enforceable by anyone other than
the Holder of such new Security, and any such new Security shall be entitled to
all the benefits of this Indenture equally and proportionately with any and all
other Securities of such series duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Unless otherwise specified as contemplated by Section 301 with respect
to the Securities of any series, or any Tranche thereof, interest on any
Security which is payable, and is punctually paid or duly provided for, on any
Interest Payment Date shall be paid to the Person in whose name that Security
(or one or more Predecessor Securities) is registered at the close of business
on the Regular Record Date for such interest.
Any interest on any Security of any series which is payable, but is
not punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the related Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in clause (a) or (b) below:
(a) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities of such series (or their
respective Predecessor Securities) are registered at the close of business
on a date (herein called a "Special Record Date") for the payment of such
Defaulted Interest, which shall be fixed in the following manner. The
Company shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each Security of such series and the date
of the proposed payment, and at the same time the Company shall deposit
with the Trustee an amount of money equal to the aggregate amount proposed
to be paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit on or prior to the date of the
proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this
clause provided. Thereupon the Trustee shall fix a Special Record Date for
the payment of such Defaulted Interest which shall be not more than 15 days
and not less than 10 days prior to the date of the proposed payment and not
less than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of such
Special Record Date and, in the name and at the expense of the Company,
shall promptly cause notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor to be mailed, first-class
postage prepaid, to each Holder of
<PAGE>
-25-
Securities of such series at the address of such Holder as it appears in
the Security Register, not less than 10 days prior to such Special Record
Date. Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor having been so mailed, such Defaulted Interest
shall be paid to the Persons in whose names the Securities of such series
(or their respective Predecessor Securities) are registered at the close of
business on such Special Record Date.
(b) The Company may make payment of any Defaulted Interest on the
Securities of any series in any other lawful manner not inconsistent with
the requirements of any securities exchange on which such Securities may be
listed, and upon such notice as may be required by such exchange, if, after
notice given by the Company to the Trustee of the proposed payment pursuant
to this clause, such manner of payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section and Section 305,
each Security delivered under this Indenture upon registration of transfer of or
in exchange for or in lieu of any other Security shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Security.
SECTION 308. PERSONS DEEMED OWNERS.
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the absolute owner of
such Security for the purpose of receiving payment of principal of and premium,
if any, and (subject to Sections 305 and 307) interest, if any, on such Security
and for all other purposes whatsoever, whether or not such Security be overdue,
and neither the Company, the Trustee nor any agent of the Company or the Trustee
shall be affected by notice to the contrary.
SECTION 309. CANCELLATION BY SECURITY REGISTRAR.
All Securities surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the Security
Registrar, be delivered to the Security Registrar and, if not theretofore
canceled, shall be promptly canceled by the Security Registrar. The Company may
at any time deliver to the Security Registrar for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever or which the Company shall not have issued and
sold, and all Securities so delivered shall be promptly canceled by the Security
Registrar. No Securities shall be authenticated in lieu of or in exchange for
any Securities canceled as provided in this Section, except as expressly
permitted by this Indenture. All canceled Securities held by the Security
Registrar shall be disposed of in accordance with a Company Order delivered to
the Security Registrar and the Trustee, and the Security Registrar shall
promptly deliver a certificate of disposition to the Trustee and the Company
unless, by a Company Order, similarly delivered, the Company shall direct that
canceled Securities be
<PAGE>
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returned to it. The Security Registrar shall promptly deliver evidence of any
cancellation of a Security in accordance with this Section 309 to the Trustee
and the Company.
SECTION 310. COMPUTATION OF INTEREST.
Except as otherwise specified as contemplated by Section 301 for
Securities of any series, or any Tranche thereof, interest on the Securities of
each series shall be computed on the basis of a 360-day year consisting of
twelve 30-day months and for any period shorter than a full month, on the basis
of the actual number of days elapsed in such period.
SECTION 311. PAYMENT TO BE IN PROPER CURRENCY.
In the case of the Securities of any series, or any Tranche thereof,
denominated in any currency other than Dollars or in a composite currency (the
"Required Currency"), except as otherwise specified with respect to such
Securities as contemplated by Section 301, the obligation of the Company to make
any payment of the principal thereof, or the premium or interest thereon, shall
not be discharged or satisfied by any tender by the Company, or recovery by the
Trustee, in any currency other than the Required Currency, except to the extent
that such tender or recovery shall result in the Trustee timely holding the full
amount of the Required Currency then due and payable. If any such tender or
recovery is in a currency other than the Required Currency, the Trustee may take
such actions as it considers appropriate to exchange such currency for the
Required Currency. The costs and risks of any such exchange, including without
limitation the risks of delay and exchange rate fluctuation, shall be borne by
the Company, the Company shall remain fully liable for any shortfall or
delinquency in the full amount of Required Currency then due and payable, and in
no circumstances shall the Trustee be liable therefor except in the case of its
negligence or willful misconduct.
ARTICLE FOUR
REDEMPTION OF SECURITIES
SECTION 401. APPLICABILITY OF ARTICLE.
Securities of any series, or any Tranche thereof, which are redeemable
before their Stated Maturity shall be redeemable in accordance with their terms
and (except as otherwise specified as contemplated by Section 301 for Securities
of such series or Tranche) in accordance with this Article.
<PAGE>
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SECTION 402. ELECTION TO REDEEM; NOTICE TO TRUSTEE.
The election of the Company to redeem any Securities shall be
evidenced by a Board Resolution or an Officer's Certificate. The Company shall,
at least 45 days prior to the Redemption Date fixed by the Company (unless a
shorter notice shall be satisfactory to the Trustee), notify the Trustee in
writing of such Redemption Date and of the principal amount of such Securities
to be redeemed. In the case of any redemption of Securities (a) prior to the
expiration of any restriction on such redemption provided in the terms of such
Securities or elsewhere in this Indenture or (b) pursuant to an election of the
Company which is subject to a condition specified in the terms of such
Securities, the Company shall furnish the Trustee with an Officer's Certificate
evidencing compliance with such restriction or condition.
SECTION 403. SELECTION OF SECURITIES TO BE REDEEMED.
If less than all the Securities of any series, or any Tranche thereof,
are to be redeemed, the particular Securities to be redeemed shall be selected
by the Trustee from the Outstanding Securities of such series or Tranche not
previously called for redemption, by such method as shall be provided for any
particular series, or, in the absence of any such provision, by such method as
the Trustee shall deem fair and appropriate and which may provide for the
selection for redemption of portions (equal to the minimum authorized
denomination for Securities of such series or Tranche or any integral multiple
thereof) of the principal amount of Securities of such series or Tranche of a
denomination larger than the minimum authorized denomination for Securities of
such series or Tranche; provided, however, that if, as indicated in an Officer's
Certificate, the Company shall have offered to purchase all or any principal
amount of the Securities then Outstanding of any series, or any Tranche thereof,
and less than all of such Securities as to which such offer was made shall have
been tendered to the Company for such purchase, the Trustee, if so directed by
Company Order, shall select for redemption all or any principal amount of such
Securities which have not been so tendered.
The Trustee shall promptly notify the Company and the Security
Registrar in writing of the Securities selected for redemption and, in the case
of any Securities selected to be redeemed in part, the principal amount thereof
to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
<PAGE>
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SECTION 404. NOTICE OF REDEMPTION.
Notice of redemption shall be given in the manner provided in Section
106 to the Holders of the Securities to be redeemed not less than 30 nor more
than 60 days prior to the Redemption Date.
All notices of redemption shall state:
(a) the Redemption Date,
(b) the Redemption Price,
(c) if less than all the Securities of any series or Tranche are to
be redeemed, the identification of the particular Securities to be redeemed
and the portion of the principal amount of any Security to be redeemed in
part,
(d) that on the Redemption Date the Redemption Price, together with
accrued interest, if any, to the Redemption Date, will become due and
payable upon each such Security to be redeemed and, if applicable, that
interest thereon will cease to accrue on and after said date,
(e) the place or places where such Securities are to be surrendered
for payment of the Redemption Price and accrued interest, if any, unless it
shall have been specified as contemplated by Section 301 with respect to
such Securities that such surrender shall not be required,
(f) that the redemption is for a sinking or other fund, if such is
the case, and
(g) such other matters as the Company shall deem desirable or
appropriate.
Unless otherwise specified with respect to any Securities in
accordance with Section 301, with respect to any notice of redemption of
Securities at the election of the Company, unless, upon the giving of such
notice, such Securities shall be deemed to have been paid in accordance with
Section 701, such notice may state that such redemption shall be conditional
upon the receipt by the Paying Agent or Agents for such Securities, on or prior
to the date fixed for such redemption, of money sufficient to pay the principal
of and premium, if any, and interest, if any, on such Securities and that if
such money shall not have been so received such notice shall be of no force or
effect and the Company shall not be required to redeem such Securities. In the
event that such notice of redemption contains such a condition and such money is
not so received, the redemption shall not be made and within a reasonable time
thereafter notice shall be given, in the manner in which the notice of
redemption was given, that such money was not so received and such redemption
was not required to be made, and the Paying Agent or Agents for the Securities
otherwise to have
<PAGE>
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been redeemed shall promptly return to the Holders thereof any of such
Securities which had been surrendered for payment upon such redemption.
Notice of redemption of Securities to be redeemed at the election of
the Company, and any notice of non-satisfaction of a condition for redemption as
aforesaid, shall be given by the Company or, at the Company's request, by the
Security Registrar in the name and at the expense of the Company. Notice of
mandatory redemption of Securities shall be given by the Security Registrar in
the name and at the expense of the Company.
SECTION 405. SECURITIES PAYABLE ON REDEMPTION DATE.
Notice of redemption having been given as aforesaid, and the
conditions, if any, set forth in such notice having been satisfied, the
Securities or portions thereof so to be redeemed shall, on the Redemption Date,
become due and payable at the Redemption Price therein specified, and from and
after such date (unless, in the case of an unconditional notice of redemption,
the Company shall default in the payment of the Redemption Price and accrued
interest, if any) such Securities or portions thereof, if interest-bearing,
shall cease to bear interest. Upon surrender of any such Security for
redemption in accordance with such notice, such Security or portion thereof
shall be paid by the Company at the Redemption Price, together with accrued
interest, if any, to the Redemption Date; provided, however, that no such
surrender shall be a condition to such payment if so specified as contemplated
by Section 301 with respect to such Security; and provided, further, that except
as otherwise specified as contemplated by Section 301 with respect to such
Security, any installment of interest on any Security the Stated Maturity of
which installment is on or prior to the Redemption Date shall be payable to the
Holder of such Security, or one or more Predecessor Securities, registered as
such at the close of business on the related Regular Record Date according to
the terms of such Security and subject to the provisions of Section 307.
SECTION 406. SECURITIES REDEEMED IN PART.
Upon the surrender of any Security which is to be redeemed only in
part at a Place of Payment therefor (with, if the Company or the Trustee so
requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the Holder thereof
or his attorney duly authorized in writing), the Company shall execute, and the
Trustee shall authenticate and deliver to the Holder of such Security, without
service charge, a new Security or Securities of the same series and Tranche, of
any authorized denomination requested by such Holder and of like tenor and in
aggregate principal amount equal to and in exchange for the unredeemed portion
of the principal of the Security so surrendered.
<PAGE>
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ARTICLE FIVE
SINKING FUNDS
SECTION 501. APPLICABILITY OF ARTICLE.
The provisions of this Article shall be applicable to any sinking fund
for the retirement of the Securities of any series, or any Tranche thereof,
except as otherwise specified as contemplated by Section 301 for Securities of
such series or Tranche.
The minimum amount of any sinking fund payment provided for by the
terms of Securities of any series, or any Tranche thereof, is herein referred to
as a "mandatory sinking fund payment", and any payment in excess of such minimum
amount provided for by the terms of Securities of any series, or any Tranche
thereof, is herein referred to as an "optional sinking fund payment". If
provided for by the terms of Securities of any series, or any Tranche thereof,
the cash amount of any sinking fund payment may be subject to reduction as
provided in Section 502. Each sinking fund payment shall be applied to the
redemption of Securities of the series or Tranche in respect of which it was
made as provided for by the terms of such Securities.
SECTION 502. SATISFACTION OF SINKING FUND PAYMENTS WITH SECURITIES.
The Company (a) may deliver to the Trustee Outstanding Securities
(other than any previously called for redemption) of a series or Tranche in
respect of which a mandatory sinking fund payment is to be made and (b) may
apply as a credit Securities of such series or Tranche which have been redeemed
either at the election of the Company pursuant to the terms of such Securities
or through the application of permitted optional sinking fund payments pursuant
to the terms of such Securities, in each case in satisfaction of all or any part
of such mandatory sinking fund payment with respect to the Securities of such
series; provided, however, that no Securities shall be applied in satisfaction
of a mandatory sinking fund payment if such Securities shall have been
previously so applied. Securities so applied shall be received and credited for
such purpose by the Trustee at the Redemption Price specified in such Securities
for redemption through operation of the sinking fund and the amount of such
mandatory sinking fund payment shall be reduced accordingly.
SECTION 503. REDEMPTION OF SECURITIES FOR SINKING FUND.
Not less than 45 days prior to each sinking fund payment date for the
Securities of any series, or any Tranche thereof, the Company shall deliver to
the Trustee an Officer's Certificate specifying:
(a) the amount of the next succeeding mandatory sinking fund payment
for such series or Tranche;
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(b) the amount, if any, of the optional sinking fund payment to be
made together with such mandatory sinking fund payment;
(c) the aggregate sinking fund payment;
(d) the portion, if any, of such aggregate sinking fund payment which
is to be satisfied by the payment of cash;
(e) the portion, if any, of such aggregate sinking fund payment which
is to be satisfied by delivering and crediting Securities of such series or
Tranche pursuant to Section 502 and stating the basis for such credit and
that such Securities have not previously been so credited, and the Company
shall also deliver to the Trustee any Securities to be so delivered. If
the Company shall not deliver such Officer's Certificate, the next
succeeding sinking fund payment for such series shall be made entirely in
cash in the amount of the mandatory sinking fund payment. Not less than 30
days before each such sinking fund payment date the Trustee shall select
the Securities to be redeemed upon such sinking fund payment date in the
manner specified in Section 403 and cause notice of the redemption thereof
to be given in the name of and at the expense of the Company in the manner
provided in Section 404. Such notice having been duly given, the
redemption of such Securities shall be made upon the terms and in the
manner stated in Sections 405 and 406.
ARTICLE SIX
COVENANTS
SECTION 601. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST.
The Company shall pay the principal of and premium, if any, and
interest, if any, on the Securities of each series in accordance with the terms
of such Securities and this Indenture.
SECTION 602. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in each Place of Payment for the Securities
of each series, or any Tranche thereof, an office or agency where payment of
such Securities shall be made, where the registration of transfer or exchange of
such Securities may be effected and where notices and demands to or upon the
Company in respect of such Securities and this Indenture may be served. The
Company shall give prompt written notice to the Trustee of the location, and any
change in the location, of each such office or agency and prompt notice to the
Holders of any such change in the manner specified in Section 106. If at any
time the Company shall fail to maintain any such required office or agency in
respect of Securities of any series, or any Tranche thereof, or shall fail to
furnish the Trustee with
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the address thereof, payment of such Securities shall be made, registration of
transfer or exchange thereof may be effected and notices and demands in respect
thereof may be served at the Corporate Trust Office of the Trustee, and the
Company hereby appoints the Trustee as its agent for all such purposes in any
such event.
The Company may also from time to time designate one or more other
offices or agencies with respect to the Securities of one or more series, or any
Tranche thereof, for any or all of the foregoing purposes and may from time to
time rescind such designations; provided, however, that, unless otherwise
specified as contemplated by Section 301 with respect to the Securities of such
series or Tranche, no such designation or rescission shall in any manner relieve
the Company of its obligation to maintain an office or agency for such purposes
in each Place of Payment for such Securities in accordance with the requirements
set forth above. The Company shall give prompt written notice to the Trustee,
and prompt notice to the Holders in the manner specified in Section 106, of any
such designation or rescission and of any change in the location of any such
other office or agency.
Anything herein to the contrary notwithstanding, any office or agency
required by this Section may be maintained at an office of the Company, in which
event the Company shall perform all functions to be performed at such office or
agency.
SECTION 603. MONEY FOR SECURITIES PAYMENTS TO BE HELD IN TRUST.
If the Company shall at any time act as its own Paying Agent with
respect to the Securities of any series, or any Tranche thereof, it shall, on or
before each due date of the principal of and premium, if any, and interest, if
any, on any of such Securities, segregate and hold in trust for the benefit of
the Persons entitled thereto a sum sufficient to pay the principal and premium
or interest so becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided. The Company shall promptly notify the
Trustee of any failure by the Company (or any other obligor on such Securities)
to make any payment of principal of or premium, if any, or interest, if any, on
such Securities.
Whenever the Company shall have one or more Paying Agents for the
Securities of any series, or any Tranche thereof, it shall, on or before each
due date of the principal of and premium, if any, and interest, if any, on such
Securities, deposit with such Paying Agents sums sufficient (without
duplication) to pay the principal and premium or interest so becoming due, such
sums to be held in trust for the benefit of the Persons entitled to such
principal, premium or interest, and (unless such Paying Agent is the Trustee)
the Company shall promptly notify the Trustee of any failure by it so to act.
The Company shall cause each Paying Agent for the Securities of any
series, or any Tranche thereof, other than the Company or the Trustee, to
execute and deliver to the
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Trustee an instrument in which such Paying Agent shall agree with the Trustee,
subject to the provisions of this Section, that such Paying Agent shall:
(a) hold all sums held by it for the payment of the principal of and
premium, if any, or interest, if any, on such Securities in trust for the
benefit of the Persons entitled thereto until such sums shall be paid to
such Persons or otherwise disposed of as herein provided;
(b) give the Trustee notice of any failure by the Company (or any
other obligor upon such Securities) to make any payment of principal of or
premium, if any, or interest, if any, on such Securities; and
(c) at any time during the continuance of any such failure, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent and furnish to the Trustee such
information as it possesses regarding the names and addresses of the
Persons entitled to such sums.
The Company may at any time pay, or by Company Order direct any Paying
Agent to pay, to the Trustee all sums held in trust by the Company or such
Paying Agent, such sums to be held by the Trustee upon the same trusts as those
upon which such sums were held by the Company or such Paying Agent and, if so
stated in a Company Order delivered to the Trustee, in accordance with the
provisions of Article Seven; and, upon such payment by any Paying Agent to the
Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of and premium, if
any, or interest, if any, on any Security and remaining unclaimed for two years
after such principal and premium, if any, or interest has become due and payable
shall be paid to the Company on Company Request, or, if then held by the
Company, shall be discharged from such trust; and, upon such payment or
discharge, the Holder of such Security shall, as an unsecured general creditor
and not as a Holder of an Outstanding Security, look only to the Company for
payment of the amount so due and payable and remaining unpaid, and all liability
of the Trustee or such Paying Agent with respect to such trust money, and all
liability of the Company as trustee thereof, shall thereupon cease; provided,
however, that the Trustee or such Paying Agent, before being required to make
any such payment to the Company, may at the expense of the Company cause to be
mailed, on one occasion only, notice to such Holder that such money remains
unclaimed and that, after a date specified therein, which shall not be less than
30 days from the date of such mailing, any unclaimed balance of such money then
remaining will be paid to the Company.
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SECTION 604. CORPORATE EXISTENCE.
Subject to the rights of the Company under Article Eleven, the Company
shall do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence.
SECTION 605. MAINTENANCE OF PROPERTIES.
The Company shall cause (or, with respect to property owned in common
with others, make reasonable effort to cause) all its properties used or useful
in the conduct of its business to be maintained and kept in good condition,
repair and working order and shall cause (or, with respect to property owned in
common with others, make reasonable effort to cause) to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, all as,
in the judgment of the Company, may be necessary so that the business carried on
in connection therewith may be properly conducted; provided, however, that
nothing in this Section shall prevent the Company from discontinuing, or causing
the discontinuance of, the operation and maintenance of any of its properties if
such discontinuance is, in the judgment of the Company, desirable in the conduct
of its business.
SECTION 606. ANNUAL OFFICER'S CERTIFICATE AS TO COMPLIANCE.
Not later than June 1, commencing June 1, 1998, the Company shall
deliver to the Trustee an Officer's Certificate which need not comply with
Section 102, executed by the principal executive officer, the principal
financial officer or the principal accounting officer of the Company, as to such
officer's knowledge of the Company's compliance with all conditions and
covenants under this Indenture, such compliance to be determined without regard
to any period of grace or requirement of notice under this Indenture.
SECTION 607. WAIVER OF CERTAIN COVENANTS.
The Company may omit in any particular instance to comply with any
term, provision or condition set forth in (a) Section 602 or any additional
covenant or restriction specified with respect to the Securities of any series,
or any Tranche thereof, as contemplated by Section 301, if before the time for
such compliance the Holders of a majority in aggregate principal amount of the
Outstanding Securities of all series and Tranches with respect to which
compliance with Section 602 or such additional covenant or restriction is to be
omitted, considered as one class, shall, by Act of such Holders, either waive
such compliance in such instance or generally waive compliance with such term,
provision or condition and (b) Section 604, 605 or Article Eleven if before the
time for such compliance the Holders of a majority in principal amount of
Securities Outstanding under this Indenture shall, by Act of such Holders,
either waive such compliance in such instance or generally waive compliance with
such term, provision or condition; but, in the case of (a) or (b), no such
waiver shall extend to or affect such term, provision or condition except to the
extent so expressly waived, and, until such waiver shall become effective, the
obligations of the Company and the duties of the
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Trustee in respect of any such term, provision or condition shall remain in full
force and effect.
ARTICLE SEVEN
SATISFACTION AND DISCHARGE
SECTION 701. SATISFACTION AND DISCHARGE OF SECURITIES.
Any Security or Securities, or any portion of the principal amount
thereof, shall be deemed to have been paid for all purposes of this Indenture,
and the entire indebtedness of the Company in respect thereof shall be deemed to
have been satisfied and discharged, if there shall have been irrevocably
deposited with the Trustee or any Paying Agent (other than the Company), in
trust:
(a) money in an amount which shall be sufficient, or
(b) in the case of a deposit made prior to the Maturity of such
Securities or portions thereof, Eligible Obligations, which shall 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 Trustee or such Paying Agent, shall be sufficient, or
(c) a combination of (a) or (b) which shall be sufficient,
to pay when due the principal of and premium, if any, and interest, if any, due
and to become due on such Securities or portions thereof on or prior to
Maturity; provided, however, that in the case of the provision for payment or
redemption of less than all the Securities of any series or Tranche, such
Securities or portions thereof shall have been selected by the Trustee as
provided herein and, in the case of a redemption, the notice requisite to the
validity of such redemption shall have been given or irrevocable authority shall
have been given by the Company to the Trustee to give such notice, under
arrangements satisfactory to the Trustee; and provided, further, that the
Company shall have delivered to the Trustee and such Paying Agent:
(x) if such deposit shall have been made prior to the Maturity
of such Securities, a Company Order stating that the money and
Eligible Obligations deposited in accordance with this Section shall
be held in trust, as provided in Section 703; and
(y) if Eligible Obligations shall have been deposited, an
Opinion of Counsel that the obligations so deposited constitute
Eligible Obligations and
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do not contain provisions permitting the redemption or other
prepayment at the option of the issuer thereof, and an opinion of an
independent public accountant of nationally recognized standing,
selected by the Company, to the effect that the requirements set forth
in clause (b) above have been satisfied; and
(z) if such deposit shall have been made prior to the Maturity
of such Securities, an Officer's Certificate stating the Company's
intention that, upon delivery of such Officer's Certificate, its
indebtedness in respect of such Securities or portions thereof will
have been satisfied and discharged as contemplated in this Section.
Upon the deposit of money or Eligible Obligations, or both, in
accordance with this Section, together with the documents required by clauses
(x), (y) and (z) above, the Trustee shall, upon receipt of a Company Request,
acknowledge in writing that the Security or Securities or portions thereof with
respect to which such deposit was made are deemed to have been paid for all
purposes of this Indenture and that the entire indebtedness of the Company in
respect thereof has been satisfied and discharged as contemplated in this
Section. In the event that all of the conditions set forth in the preceding
paragraph shall have been satisfied in respect of any Securities or portions
thereof except that, for any reason, the Officer's Certificate specified in
clause (z) shall not have been delivered, such Securities or portions thereof
shall nevertheless be deemed to have been paid for all purposes of this
Indenture, and the Holders of such Securities or portions thereof shall
nevertheless be no longer entitled to the benefits of this Indenture or of any
of the covenants of the Company under Article Six (except the covenants
contained in Sections 602 and 603) or any other covenants made in respect of
such Securities or portions thereof as contemplated by Section 301, but the
indebtedness of the Company in respect of such Securities or portions thereof
shall not be deemed to have been satisfied and discharged prior to Maturity for
any other purpose, and the Holders of such Securities or portions thereof shall
continue to be entitled to look to the Company for payment of the indebtedness
represented thereby; and, upon Company Request, the Trustee shall acknowledge in
writing that such Securities or portions thereof are deemed to have been paid
for all purposes of this Indenture.
If payment at Stated Maturity of less than all of the Securities of
any series, or any Tranche thereof, is to be provided for in the manner and with
the effect provided in this Section, the Security Registrar shall select such
Securities, or portions of principal amount thereof, in the manner specified by
Section 403 for selection for redemption of less than all the Securities of a
series or Tranche.
In the event that Securities which shall be deemed to have been paid
for purposes of this Indenture, and, if such is the case, in respect of which
the Company's indebtedness shall have been satisfied and discharged, all as
provided in this Section do not mature and are not to be redeemed within the 60
day period commencing with the date of the deposit of moneys or Eligible
Obligations, as aforesaid, the Company shall, as promptly as
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practicable, give a notice, in the same manner as a notice of redemption with
respect to such Securities, to the Holders of such Securities to the effect that
such deposit has been made and the effect thereof.
Notwithstanding that any Securities shall be deemed to have been paid
for purposes of this Indenture, as aforesaid, the obligations of the Company and
the Trustee in respect of such Securities under Sections 304, 305, 306, 404, 503
(as to notice of redemption), 602, 603, 907 and 915 and this Article Seven shall
survive.
The Company shall pay, and shall indemnify the Trustee or any Paying
Agent with which Eligible Obligations shall have been deposited as provided in
this Section against, any tax, fee or other charge imposed on or assessed
against such Eligible Obligations or the principal or interest received in
respect of such Eligible Obligations, including, but not limited to, any such
tax payable by any entity deemed, for tax purposes, to have been created as a
result of such deposit.
Anything herein to the contrary notwithstanding, (a) if, at any time
after a Security would be deemed to have been paid for purposes of this
Indenture, and, if such is the case, the Company's indebtedness in respect
thereof would be deemed to have been satisfied or discharged, pursuant to this
Section (without regard to the provisions of this paragraph), the Trustee or any
Paying Agent, as the case may be, shall be required to return the money or
Eligible Obligations, or combination thereof, deposited with it as aforesaid to
the Company or its representative under any applicable Federal or State
bankruptcy, insolvency or other similar law, such Security shall thereupon be
deemed retroactively not to have been paid and any satisfaction and discharge of
the Company's indebtedness in respect thereof shall retroactively be deemed not
to have been effected, and such Security shall be deemed to remain Outstanding
and (b) any satisfaction and discharge of the Company's indebtedness in respect
of any Security shall be subject to the provisions of the last paragraph of
Section 603.
SECTION 702. SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall upon Company Request cease to be of further
effect (except as hereinafter expressly provided), and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(a) no Securities remain Outstanding hereunder; and
(b) the Company has paid or caused to be paid all other sums payable
hereunder by the Company;
provided, however, that if, in accordance with the last paragraph of Section
701, any Security, previously deemed to have been paid for purposes of this
Indenture, shall be deemed
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retroactively not to have been so paid, this Indenture shall thereupon be deemed
retroactively not to have been satisfied and discharged, as aforesaid, and to
remain in full force and effect, and the Company shall execute and deliver such
instruments as the Trustee shall reasonably request to evidence and acknowledge
the same.
Notwithstanding the satisfaction and discharge of this Indenture as
aforesaid, the obligations of the Company and the Trustee under Sections 304,
305, 306, 404, 503 (as to notice of redemption), 602, 603, 907 and 915 and this
Article Seven shall survive.
Upon satisfaction and discharge of this Indenture as provided in this
Section, the Trustee shall assign, transfer and turn over to the Company,
subject to the lien provided by Section 907, any and all money, securities and
other property then held by the Trustee for the benefit of the Holders of the
Securities other than money and Eligible Obligations held by the Trustee
pursuant to Section 703.
SECTION 703. APPLICATION OF TRUST MONEY.
Neither the Eligible Obligations nor the money deposited pursuant to
Section 701, nor the principal or interest payments on any such Eligible
Obligations, shall be with drawn or used for any purpose other than, and shall
be held in trust for, the payment of the principal of and premium, if any, and
interest, if any, on the Securities or portions of principal amount thereof in
respect of which such deposit was made, all subject, however, to the provisions
of Section 603; provided, however, that, so long as there shall not have
occurred and be continuing an Event of Default, any cash received from such
principal or interest payments on such Eligible Obligations, if not then needed
for such purpose, shall, to the extent practicable and upon Company Request, be
invested in Eligible Obligations of the type described in clause (b) in the
first paragraph of Section 701 maturing at such times and in such amounts as
shall be sufficient, together with any other moneys and the principal of and
interest on any other Eligible Obligations then held by the Trustee, to pay when
due the principal of and premium, if any, and interest, if any, due and to
become due on such Securities or portions thereof on and prior to the Maturity
thereof, and interest earned from such reinvestment shall be paid over to the
Company as received, free and clear of any trust, lien or pledge under this
Indenture except the lien provided by Section 907; and provided, further, that,
so long as there shall not have occurred and be continuing an Event of Default,
any moneys held in accordance with this Section on the Maturity of all such
Securities in excess of the amount required to pay the principal of and premium,
if any, and interest, if any, then due on such Securities shall be paid over to
the Company free and clear of any trust, lien or pledge under this Indenture
except the lien provided by Section 907; and provided, further, that if an Event
of Default shall have occurred and be continuing, moneys to be paid over to the
Company pursuant to this Section shall be held until such Event of Default shall
have been waived or cured.
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ARTICLE EIGHT
EVENTS OF DEFAULT; REMEDIES
SECTION 801. EVENTS OF DEFAULT.
"Event of Default", wherever used herein with respect to Securities of
any series, means any one of the following events:
(a) failure to pay interest, if any, on any Security of such series
within 30 days after the same becomes due and payable; or
(b) failure to pay the principal of or premium, if any, on any
Security of such series at its Maturity; or
(c) failure to perform or breach of any covenant or warranty of the
Company in this Indenture (other than a covenant or warranty a default in
the performance of which or breach of which is elsewhere in this Section
specifically dealt with or which has expressly been included in this
Indenture solely for the benefit of one or more series of Securities other
than such series) for a period of 90 days after there has been given, by
registered or certified mail, to the Company by the Trustee, or to the
Company and the Trustee by the Holders of at least 33% in principal amount
of the Outstanding Securities of such series, a written notice specifying
such default or breach and requiring it to be remedied and stating that
such notice is a "Notice of Default" hereunder, unless the Trustee, or the
Trustee and the Holders of a principal amount of Securities of such series
not less than the principal amount of Securities the Holders of which gave
such notice, as the case may be, shall agree in writing to an extension of
such period prior to its expiration; provided, however, that the Trustee,
or the Trustee and the Holders of such principal amount of Securities of
such series, as the case may be, shall be deemed to have agreed to an
extension of such period if corrective action is initiated by the Company
within such period and is being diligently pursued; or
(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
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other decree or order shall have remained unstayed and in effect for a
period of 90 consecutive days; or
(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
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, 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; or
(f) any other Event of Default specified with respect to Securities
of such series.
SECTION 802. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default due to the default in payment of principal of,
or interest on, any series of Securities or due to the default in the
performance or breach of any other covenant or warranty of the Company
applicable to the Securities of such series but not applicable to all
Outstanding Securities shall have occurred and be continuing, either the Trustee
or the Holders of not less than 33% in principal amount of the Securities of
such series may then declare the principal amount (or, if any of the Securities
of such series are Discount Securities, such portion of the principal amount as
may be specified in the terms thereof as contemplated by Section 301) of all
Securities of such series and interest accrued thereon to be due and payable
immediately. If an Event of Default due to default in the performance of any
other of the covenants or agreements herein applicable to all Outstanding
Securities or an Event of Default specified in Section 801(d) or (e) shall have
occurred and be continuing, either the Trustee or the Holders of not less than
33% in principal amount of all Securities then Outstanding (considered as one
class), and not the Holders of the Securities of any one of such series, may
declare the principal of all Securities and interest accrued thereon to be due
and payable immediately. As a consequence of each such declaration (herein
referred to as a declaration of acceleration) with respect to Securities of any
series, the principal amount (or portion thereof in the case of Discount
Securities) of such Securities and interest accrued thereon shall become due and
payable immediately.
At any time after such a declaration of acceleration with respect to
Securities of any series shall have been made and before a judgment or decree
for payment of the money due shall have been obtained by the Trustee as
hereinafter in this Article provided, the Event or Events of Default giving rise
to such declaration of acceleration shall, without further act,
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be deemed to have been waived, and such declaration and its consequences shall,
without further act, be deemed to have been rescinded and annulled, if
(a) the Company shall have paid or deposited with the Trustee a sum
sufficient to pay
(1) all overdue interest on all Securities of such series;
(2) the principal of and premium, if any, on any 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 Securities;
(3) to the extent that payment of such interest is lawful,
interest upon overdue interest, if any, at the rate or rates
prescribed therefor in such Securities;
(4) all amounts due to the Trustee under Section 907;
and
(b) any other Event or Events of Default with respect to Securities
of such series, other than the nonpayment of the principal of Securities of
such series which shall have become due solely by such declaration of
acceleration, shall have been cured or waived as provided in Section 813.
No such rescission shall affect any subsequent Event of Default or impair any
right consequent thereon.
SECTION 803. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE.
If an Event of Default described in clause (a) or (b) of Section 801
shall have occurred and be continuing, the Company shall, upon demand of the
Trustee, pay to it, for the benefit of the Holders of the Securities of the
series with respect to which such Event of Default shall have occurred, the
whole amount then due and payable on such Securities for principal and premium,
if any, and interest, if any, and, to the extent permitted by law, interest on
any overdue principal and interest, at the rate or rates prescribed therefor in
such Securities, and, in addition thereto, such further amount as shall be
sufficient to cover any amounts due to the Trustee under Section 907.
If the Company shall fail to pay such amounts forthwith upon such
demand, the Trustee, in its own name and as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and
unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Company or any other
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obligor upon such Securities and collect the moneys adjudged or decreed to be
payable in the manner provided by law out of the property of the Company or any
other obligor upon such Securities, wherever situated.
If an Event of Default with respect to Securities of any series shall
have occurred and be continuing, the Trustee may in its discretion proceed to
protect and enforce its rights and the rights of the Holders of Securities of
such series by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 804. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal or interest) shall be entitled
and empowered, by intervention in such proceeding or otherwise,
(a) to file and prove a claim for the whole amount of principal,
premium, if any, and interest, if any, owing and unpaid in respect of the
Securities and to file such other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee (including any
claim for amounts due to the Trustee under Section 907) and of the Holders
allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amounts due it under Section 907.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
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SECTION 805. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders in respect of which such judgment has been
recovered.
SECTION 806. APPLICATION OF MONEY COLLECTED.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal or premium, if
any, or interest, if any, upon presentation of the Securities in respect of
which or for the benefit of which such money shall have been collected and the
notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
907;
SECOND: To the payment of the amounts then due and unpaid upon the
Securities for principal of and premium, if any, and interest, if any, in
respect of which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the
amounts due and payable on such Securities for principal, premium, if any,
and interest, if any, respectively; and
THIRD: To the payment of the remainder, if any, to the Company or to
whomsoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct.
SECTION 807. LIMITATION ON SUITS.
No Holder shall have any right to institute any proceeding, judicial
or otherwise, with respect to this Indenture, or for the appointment of a
receiver or trustee, or for any other remedy hereunder, unless:
(a) such Holder shall have previously given written notice to the
Trustee of a continuing Event of Default with respect to the Securities of
such series;
(b) the Holders of a majority in aggregate principal amount of the
Outstanding Securities of all series in respect of which an Event of
Default shall have occurred and be continuing, considered as one class,
shall have made written request
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to the Trustee to institute proceedings in respect of such Event of Default
in its own name as Trustee hereunder;
(c) such Holder or Holders shall have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity shall have failed to institute any such proceeding;
and
(e) no direction inconsistent with such written request shall have
been given to the Trustee during such 60-day period by the Holders of a
majority in aggregate principal amount of the Outstanding Securities of all
series in respect of which an Event of Default shall have occurred and be
continuing, considered as one class;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all of such
Holders.
SECTION 808. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL,
PREMIUM AND INTEREST.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of and premium, if any, and (subject to Section
307) interest, if any, on such Security on the Stated Maturity or Maturities
expressed in such Security (or, in the case of redemption, on the Redemption
Date) and to institute suit for the enforcement of any such payment, and such
rights shall not be impaired without the consent of such Holder.
SECTION 809. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding shall have been
discontinued or abandoned for any reason, or shall have been determined
adversely to the Trustee or to such Holder, then and in every such case, subject
to any determination in such proceeding, the Company, and Trustee and such
Holder shall be restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of the Trustee and such Holder
shall continue as though no such proceeding had been instituted.
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SECTION 810. RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided in the last paragraph of Section 306, no
right or remedy herein conferred upon or reserved to the Trustee or to the
Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 811. DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee or of any Holder to exercise any
right or remedy accruing upon any Event of Default shall impair any such right
or remedy or constitute a waiver of any such Event of Default or an acquiescence
therein. Every right and remedy given by this Article or by law to the Trustee
or to the Holders may be exercised from time to time, and as often as may be
deemed expedient, by the Trustee or by the Holders, as the case may be.
SECTION 812. CONTROL BY HOLDERS OF SECURITIES.
If an Event of Default shall have occurred and be continuing in
respect of a series of Securities, the Holders of a majority in principal amount
of the Outstanding Securities of such series shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee, with
respect to the Securities of such series; provided, however, that if an Event of
Default shall have occurred and be continuing with respect to more than one
series of Securities, the Holders of a majority in aggregate principal amount of
the Outstanding Securities of all such series, considered as one class, shall
have the right to make such direction, and not the Holders of the Securities of
any one of such series; and provided, further, that such direction shall not be
in conflict with any rule of law or with this Indenture. The Trustee may take
any other action, deemed proper by the Trustee, which is not inconsistent with
any such direction. Before proceeding to exercise any right or power hereunder
at the direction of such Holders, the Trustee shall be entitled to receive from
such Holders reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with any such direction.
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SECTION 813. WAIVER OF PAST DEFAULTS.
The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series may on behalf of the Holders of all the
Securities of such series waive any past default hereunder with respect to such
series and its consequences, except a default
(a) in the payment of the principal of or premium, if any, or
interest, if any, on any Security of such series, or
(b) in respect of a covenant or provision hereof which under Section
1202 cannot be modified or amended without the consent of the Holder of
each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any and
all Events of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
SECTION 814. UNDERTAKING FOR COSTS.
The Company and the Trustee agree, and each Holder by his acceptance
thereof shall be deemed to have agreed, that any court may in its discretion
require, in any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Company, to any suit instituted by the Trustee, to any suit instituted by any
Holder, or group of Holders, holding in the aggregate more than 10% in aggregate
principal amount of the Outstanding Securities of all series in respect of which
such suit may be brought, considered as one class, or to any suit instituted by
any Holder for the enforcement of the payment of the principal of or premium, if
any, or interest, if any, on any Security on or after the Stated Maturity or
Maturities expressed in such Security (or, in the case of redemption, on or
after the Redemption Date).
SECTION 815. WAIVER OF STAY OR EXTENSION LAWS.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution
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of any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
ARTICLE NINE
THE TRUSTEE
SECTION 901. CERTAIN DUTIES AND RESPONSIBILITIES.
(a) The Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee in the
Trust Indenture Act and no implied covenants or obligations shall be read
into this Indenture against the Trustee. For purposes of Sections 315(a)
and 315(c) of the Trust Indenture Act, the term "default" is hereby defined
as an Event of Default which has occurred and is continuing.
(b) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder, or in the exercise of any
of its rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(c) Notwithstanding anything contained in this Indenture to the
contrary, the duties and responsibilities of the Trustee under this
Indenture shall be subject to the protections, exculpations and limitations
on liability afforded to the Trustee under the provisions of the Trust
Indenture Act.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of
this Section.
SECTION 902. NOTICE OF DEFAULTS.
The Trustee shall give notice of any default hereunder with respect to
the Securities of any series to the Holders of Securities of such series in the
manner and to the extent required to do so by the Trust Indenture Act, unless
such default shall have been cured or waived; provided, however, that in the
case of any default of the character specified in Section 801(c), no such notice
to Holders shall be given until at least 45 days after the occurrence thereof.
For the purpose of this Section, the term "default" means any event which is, or
after notice or lapse of time, or both, would become, an Event of Default.
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SECTION 903. CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of Section 901 and to the applicable
provisions of the Trust Indenture Act:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting in good faith upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness or
other paper or document reasonably believed by it to be genuine and to have
been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order, or as
otherwise expressly provided herein, and any resolution of the Board of
Directors may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officer's Certificate;
(d) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any Holder pursuant to this Indenture, unless such Holder shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with
such request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall (subject to applicable legal requirements) be entitled to examine,
during normal business hours, the books, records and premises of the
Company, personally or by agent or attorney;
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(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys, and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder; and
(h) the Trustee shall not be charged with knowledge of any default or
Event of Default, as the case may be, with respect to the Securities of any
series for which it is acting as Trustee unless either (1) a Responsible
Officer of the Trustee shall have actual knowledge of the default or Event
of Default, as the case may be, or (2) written notice of such default or
Event of Default, as the case may be, shall have been given to the Trustee
by the Company, any other obligor on such Securities or by any Holder of
such Securities.
SECTION 904. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The recitals contained herein and in the Securities (except the
Trustee's certificates of authentication) shall be taken as the statements of
the Company, and neither the Trustee nor any Authenticating Agent assumes
responsibility for their correctness. The Trustee makes no representations as to
the validity or sufficiency of this Indenture or of the Securities. Neither the
Trustee nor any Authenticating Agent shall be accountable for the use or
application by the Company of Securities or the proceeds thereof.
SECTION 905. MAY HOLD SECURITIES.
Each of the Trustee, any Authenticating Agent, any Paying Agent, any
Security Registrar or any other agent of the Company, in its individual or any
other capacity, may become the owner or pledgee of Securities and, subject to
Sections 908 and 913, may otherwise deal with the Company with the same rights
it would have if it were not the Trustee, Authenticating Agent, Paying Agent,
Security Registrar or such other agent.
SECTION 906. MONEY HELD IN TRUST.
Money held by the Trustee in trust hereunder need not be segregated
from other funds, except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
expressly provided herein or otherwise agreed with, and for the sole benefit of,
the Company.
SECTION 907. COMPENSATION AND REIMBURSEMENT.
The Company shall
(a) pay to the Trustee from time to time reasonable compensation for
all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee
of an express trust);
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(b) except as otherwise expressly provided herein, reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances reasonably incurred or made by the Trustee in accordance with any
provision of this Indenture (including the reasonable compensation and the
expenses and disbursements of its agents and counsel), except to the extent
that any such expense, disbursement or advance may be attributable to the
Trustee's negligence, wilful misconduct or bad faith; and
(c) indemnify the Trustee for, and hold it harmless from and against,
any loss, liability or expense reasonably incurred by it arising out of or
in connection with the acceptance or administration of the trust or trusts
hereunder or the performance of its duties hereunder, including the
reasonable costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its
powers or duties hereunder, except to the extent any such loss, liability
or expense may be attributable to its negligence, wilful misconduct or bad
faith.
As security for the performance of the obligations of the Company
under this Section, the Trustee shall have a lien prior to the Securities upon
all property and funds held or collected by the Trustee as such other than
property and funds held in trust under Section 703 (except as otherwise provided
in Section 703). "Trustee" for purposes of this Section shall include any
predecessor Trustee; provided, however, that the negligence, wilful misconduct
or bad faith of any Trustee hereunder shall not affect the rights of any other
Trustee hereunder.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 801(d) or Section 801(e), the
expenses (including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable Federal or State bankruptcy, insolvency or
other similar law.
SECTION 908. DISQUALIFICATION; CONFLICTING INTERESTS.
If the Trustee shall have or acquire any conflicting interest within
the meaning of the Trust Indenture Act, it shall either eliminate such
conflicting interest or resign to the extent, in the manner and with the effect,
and subject to the conditions, provided in the Trust Indenture Act and this
Indenture. For purposes of Section 310(b)(1) of the Trust Indenture Act and to
the extent permitted thereby, the Trustee, in its capacity as trustee in respect
of the Securities of any series, shall not be deemed to have a conflicting
interest arising from its capacity as trustee in respect of the Securities of
any other series.
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SECTION 909. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall at all times be a Trustee hereunder which shall be
(a) a corporation organized and doing business under the laws of the
United States, any State or Territory thereof or the District of Columbia,
authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least $50,000,000 and subject to
supervision or examination by Federal or State authority, or
(b) if and to the extent permitted by the Commission by rule,
regulation or order upon application, a corporation or other Person
organized and doing business under the laws of a foreign government,
authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least $50,000,000 or the Dollar
equivalent of the applicable foreign currency and subject to supervision or
examination by authority of such foreign government or a political
subdivision thereof substantially equivalent to supervision or examination
applicable to United States institutional trustees,
and, in either case, qualified and eligible under this Article and the Trust
Indenture Act. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of such supervising or
examining authority, then for the purposes of this Section, the combined capital
and surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
SECTION 910. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 911.
(b) The Trustee may resign at any time with respect to the Securities
of one or more series by giving written notice thereof to the Company. If
the instrument of acceptance by a successor Trustee required by Section 911
shall not have been delivered to the Trustee within 30 days after the
giving of such notice of resignation, the resigning Trustee may petition
any court of competent jurisdiction for the appointment of a successor
Trustee with respect to the Securities of such series.
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(c) The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of a majority in principal
amount of the Outstanding Securities of such series delivered to the
Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 908 after written
request therefor by the Company or by any Holder who has been a bona fide
Holder for at least six months, or
(2) the Trustee shall cease to be eligible under Section 909 and
shall fail to resign after written request therefor by the Company or by
any such Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (x) the Company by a Board Resolution may remove
the Trustee with respect to all Securities or (y) subject to Section 814,
any Holder who has been a bona fide Holder for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee with respect to all
Securities and the appointment of a successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause
(other than as contemplated in clause (y) in subsection (d) of this
Section), with respect to the Securities of one or more series, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee
or Trustees with respect to the Securities of that or those series (it
being understood that any such successor Trustee may be appointed with
respect to the Securities of one or more or all of such series and that at
any time there shall be only one Trustee with respect to the Securities of
any particular series) and shall comply with the applicable requirements of
Section 911. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee with
respect to the Securities of any series shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities of
such series delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment in accordance with the applicable requirements of Section 911,
become the successor Trustee with respect to the Securities of such series
and to that extent supersede the successor Trustee appointed by the
Company. If no successor Trustee with respect to the Securities of any
series shall have been so appointed by the Company or the Holders and
accepted appointment in the manner required by Section 911, any Holder who
has been a bona fide Holder of a Security of such series for at least six
months may, on behalf of itself
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and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect to the
Securities of such series.
(f) So long as no event which is, or after notice or lapse of time,
or both, would become, an Event of Default shall have occurred and be
continuing, and except with respect to a Trustee appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities
pursuant to subsection (e) of this Section, if the Company shall have
delivered to the Trustee (i) a Board Resolution appointing a successor
Trustee, effective as of a date specified therein, and (ii) an instrument
of acceptance of such appointment, effective as of such date, by such
successor Trustee in accordance with Section 911, the Trustee shall be
deemed to have resigned as contemplated in subsection (b) of this Section,
the successor Trustee shall be deemed to have been appointed by the Company
pursuant to subsection (e) of this Section and such appointment shall be
deemed to have been accepted as contemplated in Section 911, all as of such
date, and all other provisions of this Section and Section 911 shall be
applicable to such resignation, appointment and acceptance except to the
extent inconsistent with this subsection (f).
(g) The Company (or, should the Company fail so to act promptly, the
successor trustee at the expense of the Company) shall give notice of each
resignation and each removal of the Trustee with respect to the Securities
of any series and each appointment of a successor Trustee with respect to
the Securities of any series by mailing written notice of such event by
first-class mail, postage prepaid, to all Holders of Securities of such
series as their names and addresses appear in the Security Register. Each
notice shall include the name of the successor Trustee with respect to the
Securities of such series and the address of its corporate trust office.
SECTION 911. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
(a) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of all series, every such successor Trustee so
appointed shall execute, acknowledge and deliver to the Company and to the
retiring Trustee an instrument accepting such appointment, and thereupon
the resignation or removal of the retiring Trustee shall become effective
and such successor Trustee, without any further act, deed or conveyance,
shall become vested with all the rights, powers, trusts and duties of the
retiring Trustee; but, on the request of the Company or the successor
Trustee, such retiring Trustee shall, upon payment of all sums owed to it,
execute and deliver an instrument transferring to such successor Trustee
all the rights, powers and trusts of the retiring Trustee and shall duly
assign, transfer and deliver to such successor Trustee all property and
money held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company,
the retiring Trustee and each successor Trustee with respect to the
Securities of one or more series shall execute and deliver an indenture
supplemental hereto wherein each successor Trustee
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shall accept such appointment and which (1) shall contain such provisions
as shall be necessary or desirable to transfer and confirm to, and to vest
in, each successor Trustee all the rights, powers, trusts and duties of the
retiring Trustee with respect to the Securities of that or those series to
which the appointment of such successor Trustee relates, (2) if the
retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to
confirm that all the rights, powers, trusts and duties of the retiring
Trustee with respect to the Securities of that or those series as to which
the retiring Trustee is not retiring shall continue to be vested in the
retiring Trustee and (3) shall add to or change any of the provisions of
this Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee, it being
understood that nothing herein or in such supplemental indenture shall
constitute such Trustees co-trustees of the same trust and that each such
Trustee shall be trustee of a trust or trusts hereunder separate and apart
from any trust or trusts hereunder administered by any other such Trustee;
and upon the execution and delivery of such supplemental indenture the
resignation or removal of the retiring Trustee shall become effective to
the extent provided therein and each such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee with respect to the
Securities of that or those series to which the appointment of such
successor Trustee relates; but, on request of the Company or any successor
Trustee, such retiring Trustee, upon payment of all sums owed to it, shall
duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder with respect to the
Securities of that or those series to which the appointment of such
successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall
execute any instruments which fully vest in and confirm to such successor
Trustee all such rights, powers and trusts referred to in subsection (a) or
(b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
SECTION 912. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such
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authenticating Trustee may adopt such authentication and deliver the Securities
so authenticated with the same effect as if such successor Trustee had itself
authenticated such Securities.
SECTION 913. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
If the Trustee shall be or become a creditor of the Company or any
other obligor upon the Securities (other than by reason of a relationship
described in Section 311(b) of the Trust Indenture Act), the Trustee shall be
subject to any and all applicable provisions of the Trust Indenture Act
regarding the collection of claims against the Company or such other obligor.
For purposes of Section 311(b) of the Trust Indenture Act:
(a) the term "cash transaction" means any transaction in which full
payment for goods or securities sold is made within seven days after
delivery of the goods or securities in currency or in checks or other
orders drawn upon banks or bankers and payable upon demand;
(b) the term "self-liquidating paper" means any draft, bill of
exchange, acceptance or obligation which is made, drawn, negotiated or
incurred by the Company for the purpose of financing the purchase,
processing, manufacturing, shipment, storage or sale of goods, wares or
merchandise and which is secured by documents evidencing title to,
possession of, or a lien upon, the goods, wares or merchandise or the
receivables or proceeds arising from the sale of the goods, wares or
merchandise previously constituting the security, provided the security is
received by the Trustee simultaneously with the creation of the creditor
relationship with the Company arising from the making, drawing, negotiating
or incurring of the draft, bill of exchange, acceptance or obligation.
SECTION 914. CO-TRUSTEES AND SEPARATE TRUSTEES.
At any time or times, for the purpose of meeting the legal
requirements of any applicable jurisdiction, the Company and the Trustee shall
have power to appoint, and, upon the written request of the Trustee or of the
Holders of at least 33% in principal amount of the Securities then Outstanding,
the Company shall for such purpose join with the Trustee in the execution and
delivery of all instruments and agreements necessary or proper to appoint, one
or more Persons approved by the Trustee either to act as co-trustee, jointly
with the Trustee, or to act as separate trustee, in either case with such powers
as may be provided in the instrument of appointment, and to vest in such Person
or Persons, in the capacity aforesaid, any property, title, right or power
deemed necessary or desirable, subject to the other provisions of this Section.
If the Company does not join in such appointment within 15 days after the
receipt by it of a request so to do, or if an Event of Default shall have
occurred and be continuing, the Trustee alone shall have power to make such
appointment.
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Should any written instrument or instruments from the Company be
required by any co-trustee or separate trustee so appointed to more fully
confirm to such co-trustee or separate trustee such property, title, right or
power, any and all such instruments shall, on request, be executed, acknowledged
and delivered by the Company.
Every co-trustee or separate trustee shall, to the extent permitted by
law, but to such extent only, be appointed subject to the following conditions:
(a) the Securities shall be authenticated and delivered, and all
rights, powers, duties and obligations hereunder in respect of the custody
of securities, cash and other personal property held by, or required to be
deposited or pledged with, the Trustee hereunder, shall be exercised
solely, by the Trustee;
(b) the rights, powers, duties and obligations hereby conferred or
imposed upon the Trustee in respect of any property covered by such
appointment shall be conferred or imposed upon and exercised or performed
either by the Trustee or by the Trustee and such co-trustee or separate
trustee jointly, as shall be provided in the instrument appointing such co-
trustee or separate trustee, except to the extent that under any law of any
jurisdiction in which any particular act is to be performed, the Trustee
shall be incompetent or unqualified to perform such act, in which event
such rights, powers, duties and obligations shall be exercised and
performed by such co-trustee or separate trustee;
(c) the Trustee at any time, by an instrument in writing executed by
it, with the concurrence of the Company, may accept the resignation of or
remove any co-trustee or separate trustee appointed under this Section,
and, if an Event of Default shall have occurred and be continuing, the
Trustee shall have power to accept the resignation of, or remove, any such
co-trustee or separate trustee without the concurrence of the Company.
Upon the written request of the Trustee, the Company shall join with the
Trustee in the execution and delivery of all instruments and agreements
necessary or proper to effectuate such resignation or removal. A successor
to any co-trustee or separate trustee so resigned or removed may be
appointed in the manner provided in this Section;
(d) no co-trustee or separate trustee hereunder shall be personally
liable by reason of any act or omission of the Trustee, or any other such
trustee hereunder; and
(e) any Act of Holders delivered to the Trustee shall be deemed to
have been delivered to each such co-trustee and separate trustee.
SECTION 915. APPOINTMENT OF AUTHENTICATING AGENT.
The Trustee may appoint an Authenticating Agent or Agents with respect
to the Securities of one or more series, or Tranche thereof, which shall be
authorized to act on
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behalf of the Trustee to authenticate Securities of such series or Tranche
issued upon original issuance and upon exchange, registration of transfer or
partial redemption thereof or pursuant to Section 306, and Securities so
authenticated shall be entitled to the benefits of this Indenture and shall be
valid and obligatory for all purposes as if authenticated by the Trustee
hereunder. Wherever reference is made in this Indenture to the authentication
and delivery of Securities by the Trustee or the Trustee's certificate of
authentication, such reference shall be deemed to include authentication and
delivery on behalf of the Trustee by an Authenticating Agent and a certificate
of authentication executed on behalf of the Trustee by an Authenticating Agent.
Each Authenticating Agent shall be acceptable to the Company and shall at all
times be a corporation organized and doing business under the laws of the United
States, any State or territory thereof or the District of Columbia, authorized
under such laws to act as Authenticating Agent, having a combined capital and
surplus of not less than $50,000,000 and subject to supervision or examination
by Federal or State authority. If such Authenticating Agent publishes reports
of condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such Authenticating Agent shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time an Authenticating Agent shall cease to
be eligible in accordance with the provisions of this Section, such
Authenticating Agent shall resign immediately in the manner and with the effect
specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. Upon receiving such a notice
of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company. Any successor Authenticating
Agent upon acceptance of its appointment hereunder shall become vested with all
the rights, powers and duties of its predecessor hereunder, with like effect as
if originally named as an Authenticating Agent. No successor Authenticating
Agent shall be appointed unless eligible under the provisions of this Section.
The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section, and the
Trustee shall be entitled
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to be reimbursed for such payments, in accordance with, and subject to the
provisions of, Section 907.
The provisions of Sections 308, 904 and 905 shall be applicable to
each Authenticating Agent.
If an appointment with respect to the Securities of one or more series
shall be made pursuant to this Section, the Securities of such series may have
endorsed thereon, in addition to the Trustee's certificate of authentication, an
alternate certificate of authentication substantially in the following form:
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
Dated: ________________________
As Trustee
By______________________
As Authenticating
Agent
By______________________
Authorized Signatory
If all of the Securities of a series may not be originally issued at
one time, and if the Trustee does not have an office capable of authenticating
Securities upon original issuance located in a Place of Payment where the
Company wishes to have Securities of such series authenticated upon original
issuance, the Trustee, if so requested by the Company in writing (which writing
need not comply with Section 102 and need not be accompanied by an Opinion of
Counsel), shall appoint, in accordance with this Section and in accordance with
such procedures as shall be acceptable to the Trustee, an Authenticating Agent
having an office in a Place of Payment designated by the Company with respect to
such series of Securities.
ARTICLE TEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 1001. LISTS OF HOLDERS.
Semiannually, not later than June 1 and December 1 in each year,
commencing December 1, 1997, and at such other times as the Trustee may request
in writing, the Company shall furnish or cause to be furnished to the Trustee
information as to
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the names and addresses of the Holders, and the Trustee shall preserve such
information and similar information received by it in any other capacity and
afford to the Holders access to information so preserved by it, all to such
extent, if any, and in such manner as shall be required by the Trust Indenture
Act; provided, however, that no such list need be furnished so long as the
Trustee shall be the Security Registrar.
SECTION 1002. REPORTS BY TRUSTEE AND COMPANY.
Not later than November 1 in each year, commencing November 1, 1997,
the Trustee shall transmit to the Holders, the Commission and each securities
exchange upon which any Securities are listed, a report, dated as of the next
preceding September 15, with respect to any events and other matters described
in Section 313(a) of the Trust Indenture Act, in such manner and to the extent
required by the Trust Indenture Act. The Trustee shall transmit to the Holders,
the Commission and each securities exchange upon which any Securities are
listed, and the Company shall file with the Trustee (within 30 days after filing
with the Commission in the case of reports which pursuant to the Trust Indenture
Act must be filed with the Commission and furnished to the Trustee) and transmit
to the Holders, such other information, reports and other documents, if any, at
such times and in such manner, as shall be required by the Trust Indenture Act.
The Company shall notify the Trustee of the listing of any Securities on any
securities exchange.
ARTICLE ELEVEN
CONSOLIDATION, MERGER, CONVEYANCE OR OTHER TRANSFER
SECTION 1101. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.
The Company shall not consolidate with or merge into any other
corporation, or convey or otherwise transfer or lease its properties and assets
substantially as an entirety to any Person, unless
(a) the corporation formed by such consolidation or into which the
Company is merged or the Person which acquires by conveyance or transfer,
or which leases, the properties and assets of the Company substantially as
an entirety shall be a Person organized and validly existing under the laws
of the United States, any State thereof or the District of Columbia, and
shall expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, the due and
punctual payment of the principal of and premium, if any, and interest, if
any, on all Outstanding Securities and the performance of every covenant of
this Indenture on the part of the Company to be performed or observed;
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(b) immediately after giving effect to such 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
(c) the Company shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, or other transfer or lease and such
supplemental indenture comply with this Article and that all conditions
precedent herein provided for relating to such transactions have been
complied with.
SECTION 1102. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation by the Company with or merger by the Company
into any other corporation or any conveyance, or other transfer or lease of the
properties and assets of the Company substantially as an entirety in accordance
with Section 1101, the successor corporation formed by such consolidation or
into which the Company is merged or the Person to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such successor Person had been named as the Company herein,
and thereafter, except in the case of a lease, the predecessor Person shall be
relieved of all obligations and covenants under this Indenture and the
Securities Outstanding hereunder.
ARTICLE TWELVE
SUPPLEMENTAL INDENTURES
SECTION 1201. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holders, the Company and the Trustee, at
any time and from time to time, may enter into one or more indentures
supplemental hereto, in form satisfactory to the Trustee, for any of the
following purposes:
(a) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company herein
and in the Securities, all as provided in Article Eleven; or
(b) to add one or more covenants of the Company or other provisions
for the benefit of all Holders or for the benefit of the Holders of, or to
remain in effect only so long as there shall be Outstanding, Securities of
one or more specified series, or one or more specified Tranches thereof, or
to surrender any right or power herein conferred upon the Company; or
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(c) to add any additional Events of Default with respect to all or
any series of Securities Outstanding hereunder; or
(d) to change or eliminate any provision of this Indenture or to add
any new provision to this Indenture; provided, however, that if such
change, elimination or addition shall adversely affect the interests of the
Holders of Securities of any series or Tranche Outstanding on the date of
such indenture supplemental hereto in any material respect, such change,
elimination or addition shall become effective with respect to such series
or Tranche only pursuant to the provisions of Section 1202 hereof or when
no Security of such series or Tranche remains Outstanding; or
(e) to provide collateral security for all but not part of the
Securities; or
(f) to establish the form or terms of Securities of any series or
Tranche as contemplated by Sections 201 and 301; 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
hereunder by a separate or successor Trustee or co-trustee with respect to
the Securities of one or more series and to add to or change any of the
provisions of this Indenture as shall be necessary to provide for or
facilitate the administration of the trusts hereunder by more than one
Trustee, pursuant to the requirements of Section 911(b); or
(i) to provide for the procedures required to permit the Company to
utilize, at its option, a noncertificated system of registration for all,
or any series or Tranche of, the Securities; or
(j) to change any place or places where (1) the principal of and
premium, if any, and interest, if any, on all or any series of Securities,
or any Tranche thereof, shall be payable, (2) all or any series of
Securities, or any Tranche thereof, may be surrendered for registration of
transfer, (3) all or any series of Securities, or any Tranche thereof, may
be surrendered for exchange and (4) notices and demands to or upon the
Company in respect of all or any series of Securities, or any Tranche
thereof, and this Indenture may be served; or
(k) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision
herein, or to make any other changes to the provisions hereof or to add
other provisions with respect to matters or questions arising under this
Indenture, provided that such other changes or
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additions shall not adversely affect the interests of the Holders of
Securities of any series or Tranche in any material respect.
Without limiting the generality of the foregoing, if the Trust
Indenture Act as in effect at the date of the execution and delivery of this
Indenture or at any time thereafter shall be amended and
(x) if any such amendment shall require one or more changes to
any provisions hereof or the inclusion herein of any additional
provisions, or shall by operation of law be deemed to effect such
changes or incorporate such provisions by reference or otherwise, this
Indenture shall be deemed to have been amended so as to conform to
such amendment to the Trust Indenture Act, and the Company and the
Trustee may, without the consent of any Holders, enter into an
indenture supplemental hereto to effect or evidence such changes or
additional provisions; or
(y) if any such amendment shall permit one or more changes to,
or the elimination of, any provisions hereof which, at the date of the
execution and delivery hereof or at any time thereafter, are required
by the Trust Indenture Act to be contained herein, this Indenture
shall be deemed to have been amended to effect such changes or
elimination, and the Company and the Trustee may, without the consent
of any Holders, enter into an indenture supplemental hereto to
evidence such amendment hereof.
SECTION 1202. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.
With the consent of the Holders of a majority in aggregate principal
amount of the Securities of all series then Outstanding under this Indenture,
considered as one class, by Act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by a Board Resolution, and the Trustee may
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to, or changing in any manner or eliminating any of the
provisions of, this Indenture or modifying in any manner the rights of the
Holders of Securities of such series under the Indenture; provided, however,
that if there shall be Securities of more than one series Outstanding hereunder
and if a proposed supplemental indenture shall directly affect the rights of the
Holders of Securities of one or more, but less than all, of such series, then
the consent only of the Holders of a majority in aggregate principal amount of
the Outstanding Securities of all series so directly affected, considered as one
class, shall be required; and provided, further, that if the Securities of any
series shall have been issued in more than one Tranche and if the proposed
supplemental indenture shall directly affect the rights of the Holders of
Securities of one or more, but less than all, of such Tranches, then the consent
only of the Holders of a majority in aggregate
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principal amount of the Outstanding Securities of all Tranches so directly
affected, considered as one class, shall be required; and provided, further,
that no such supplemental indenture shall:
(a) change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any Security, or reduce the
principal amount thereof or the rate of interest thereon (or the amount of
any installment of interest thereon) or change the method of calculating
such rate or reduce any premium payable upon the redemption thereof, or
reduce the amount of the principal of a Discount Security that would be due
and payable upon a declaration of acceleration of the Maturity thereof
pursuant to Section 802, or change the coin or currency (or other
property), in which any 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 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 Security, or
(b) reduce the percentage in principal amount of the Outstanding
Securities of any series, or any Tranche thereof, the consent of the
Holders of which is required for any such supplemental indenture, or the
consent of the Holders of which is required for any waiver of compliance
with any provision of this Indenture or of any default hereunder and its
consequences, or reduce the requirements of Section 1304 for quorum or
voting, without, in any such case, the consent of the Holders of each
Outstanding Security of such series or Tranche, or
(c) modify any of the provisions of this Section, Section 607 or
Section 813 with respect to the Securities of any series, or any Tranche
thereof, except to increase the percentages in principal amount referred to
in this Section or such other Sections or to provide that other provisions
of this Indenture cannot be modified or waived without the consent of the
Holder of each Outstanding Security affected thereby; provided, however,
that this clause shall not be deemed to require the consent of any Holder
with respect to changes in the references to "the Trustee" and concomitant
changes in this Section, or the deletion of this proviso, in accordance
with the requirements of Sections 911(b), 914 and 1201(h).
A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or one or more Tranches
thereof, or which modifies the rights of the Holders of Securities of such
series with respect to such covenant or other provision, shall be deemed not to
affect the rights under this Indenture of the Holders of Securities of any other
series or Tranche.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such
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Act shall approve the substance thereof. A waiver by a Holder of such Holder's
right to consent under this Section shall be deemed to be a consent of such
Holder.
SECTION 1203. EXECUTION OF SUPPLEMENTAL INDENTURES.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 901) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties, immunities or liabilities under this Indenture or
otherwise.
SECTION 1204. EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby. Any supplemental indenture permitted by this Article
may restate this Indenture in its entirety, and, upon the execution and delivery
thereof, any such restatement shall supersede this Indenture as theretofore in
effect for all purposes.
SECTION 1205. CONFORMITY WITH TRUST INDENTURE ACT.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 1206. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES.
Securities of any series, or any Tranche thereof, authenticated and
delivered after the execution of any supplemental indenture pursuant to this
Article may, and shall if required by the Trustee, bear a notation in form
approved by the Trustee as to any matter provided for in such supplemental
indenture. If the Company shall so determine, new Securities of any series, or
any Tranche thereof, so modified as to conform, in the opinion of the Trustee
and the Company, to any such supplemental indenture may be prepared and executed
by the Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities of such series or Tranche.
SECTION 1207. MODIFICATION WITHOUT SUPPLEMENTAL INDENTURE.
If the terms of any particular series of Securities shall have been
established in a Board Resolution or an Officer's Certificate as contemplated by
Section 301, and not in an indenture supplemental hereto, additions to, changes
in or the elimination of any of such
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terms may be effected by means of a supplemental Board Resolution or Officer's
Certificate, as the case may be, delivered to, and accepted by, the Trustee;
provided, however, that such supplemental Board Resolution or Officer's
Certificate shall not be accepted by the Trustee or otherwise be effective
unless all conditions set forth in this Indenture which would be required to be
satisfied if such additions, changes or elimination were contained in a
supplemental indenture shall have been appropriately satisfied. Upon the
acceptance thereof by the Trustee, any such supplemental Board Resolution or
Officer's Certificate shall be deemed to be a "supplemental indenture" for
purposes of Section 1204 and 1206.
ARTICLE THIRTEEN
MEETINGS OF HOLDERS; ACTION WITHOUT MEETING
SECTION 1301. PURPOSES FOR WHICH MEETINGS MAY BE CALLED.
A meeting of Holders of Securities of one or more, or all, series, or
any Tranche or Tranches thereof, may be called at any time and from time to time
pursuant to this Article to make, give or take any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be made, given or taken by Holders of Securities of such
series or Tranches.
SECTION 1302. CALL, NOTICE AND PLACE OF MEETINGS.
(a) The Trustee may at any time call a meeting of Holders of
Securities of one or more, or all, series, or any Tranche or Tranches
thereof, for any purpose specified in Section 1301, to be held at such time
and at such place in the Borough of Manhattan, The City of New York, as the
Trustee shall determine, or, with the approval of the Company, at any other
place. Notice of every such meeting, setting forth the time and the place
of such meeting and in general terms the action proposed to be taken at
such meeting, shall be given, in the manner provided in Section 106, not
less than 21 nor more than 180 days prior to the date fixed for the
meeting.
(b) If the Trustee shall have been requested to call a meeting of the
Holders of Securities of one or more, or all, series, or any Tranche or
Tranches thereof, by the Company or by the Holders of 33% in aggregate
principal amount of all of such series and Tranches, considered as one
class, for any purpose specified in Section 1301, by written request
setting forth in reasonable detail the action proposed to be taken at the
meeting, and the Trustee shall not have given the notice of such meeting
within 21 days after receipt of such request or shall not thereafter
proceed to cause the meeting to be held as provided herein, then the
Company or the Holders of Securities of such series and Tranches in the
amount above specified, as the case may be, may determine the time and the
place in the Borough of Manhattan, The City of New York, or in such other
place as shall be determined or approved by the
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Company, for such meeting and may call such meeting for such purposes by
giving notice thereof as provided in subsection (a) of this Section.
(c) Any meeting of Holders of Securities of one or more, or all,
series, or any Tranche or Tranches thereof, shall be valid without notice
if the Holders of all Outstanding Securities of such series or Tranches are
present in person or by proxy and if representatives of the Company and the
Trustee are present, or if notice is waived in writing before or after the
meeting by the Holders of all Outstanding Securities of such series, or any
Tranche or Tranches thereof, or by such of them as are not present at the
meeting in person or by proxy, and by the Company and the Trustee.
SECTION 1303. PERSONS ENTITLED TO VOTE AT MEETINGS.
To be entitled to vote at any meeting of Holders of Securities of one
or more, or all, series, or any Tranche or Tranches thereof, a Person shall be
(a) a Holder of one or more Outstanding Securities of such series or Tranches,
or (b) a Person appointed by an instrument in writing as proxy for a Holder or
Holders of one or more Outstanding Securities of such series or Tranches by such
Holder or Holders. The only Persons who shall be entitled to attend any meeting
of Holders of Securities of any series or Tranche shall be the Persons entitled
to vote at such meeting and their counsel, any representatives of the Trustee
and its counsel and any representatives of the Company and its counsel.
SECTION 1304. QUORUM; ACTION.
The Persons entitled to vote a majority in aggregate principal amount
of the Outstanding Securities of the series and Tranches with respect to which a
meeting shall have been called as hereinbefore provided, considered as one
class, shall constitute a quorum for a meeting of Holders of Securities of such
series and Tranches; provided, however, that if any action is to be taken at
such meeting which this Indenture expressly provides may be taken by the Holders
of a specified percentage, which is less than a majority, in principal amount of
the Outstanding Securities of such series and Tranches, considered as one class,
the Persons entitled to vote such specified percentage in principal amount of
the Outstanding Securities of such series and Tranches, considered as one class,
shall constitute a quorum. In the absence of a quorum within one hour of the
time appointed for any such meeting, the meeting shall, if convened at the
request of Holders of Securities of such series and Tranches, be dissolved. In
any other case the meeting may be adjourned for such period as may be determined
by the chairman of the meeting prior to the adjournment of such meeting. In the
absence of a quorum at any such adjourned meeting, such adjourned meeting may be
further adjourned for such period as may be determined by the chairman of the
meeting prior to the adjournment of such adjourned meeting. Except as provided
by Section 1305(e), notice of the reconvening of any meeting adjourned for more
than 30 days shall be given as provided in Section 1302(a) not less than 10 days
prior to the date on which the meeting is scheduled to be reconvened. Notice of
the reconvening of an adjourned meeting shall state expressly the percentage, as
<PAGE>
-67-
provided above, of the principal amount of the Outstanding Securities of such
series and Tranches which shall constitute a quorum.
Except as limited by Section 1202, any resolution presented to a
meeting or adjourned meeting duly reconvened at which a quorum is present as
aforesaid may be adopted only by the affirmative vote of the Holders of a
majority in aggregate principal amount of the Outstanding Securities of the
series and Tranches with respect to which such meeting shall have been called,
considered as one class; provided, however, that, except as so limited, any
resolution with respect to any action which this Indenture expressly provides
may be taken by the Holders of a specified percentage, which is less than a
majority, in principal amount of the Outstanding Securities of such series and
Tranches, considered as one class, may be adopted at a meeting or an adjourned
meeting duly reconvened and at which a quorum is present as aforesaid by the
affirmative vote of the Holders of such specified percentage in principal amount
of the Outstanding Securities of such series and Tranches, considered as one
class.
Any resolution passed or decision taken at any meeting of Holders of
Securities duly held in accordance with this Section shall be binding on all the
Holders of Securities of the series and Tranches with respect to which such
meeting shall have been held, whether or not present or represented at the
meeting.
SECTION 1305. ATTENDANCE AT MEETINGS; DETERMINATION OF VOTING RIGHTS;
CONDUCT AND ADJOURNMENT OF MEETINGS.
(a) Attendance at meetings of Holders of Securities may be in person
or by proxy; and, to the extent permitted by law, any such proxy shall
remain in effect and be binding upon any future Holder of the Securities
with respect to which it was given unless and until specifically revoked by
the Holder or future Holder of such Securities before being voted.
(b) Notwithstanding any other provisions of this Indenture, the
Trustee may make such reasonable regulations as it may deem advisable for
any meeting of Holders of Securities in regard to proof of the holding of
such Securities and of the appointment of proxies and in regard to the
appointment and duties of inspectors of votes, the submission and
examination of proxies, certificates and other evidence of the right to
vote, and such other matters concerning the conduct of the meeting as it
shall deem appropriate. Except as otherwise permitted or required by any
such regulations, the holding of Securities shall be proved in the manner
specified in Section 104 and the appointment of any proxy shall be proved
in the manner specified in Section 104. Such regulations may provide that
written instruments appointing proxies, regular on their face, may be
presumed valid and genuine without the proof specified in Section 104 or
other proof.
<PAGE>
-68-
(c) The Trustee shall, by an instrument in writing, appoint a
temporary chairman of the meeting, unless the meeting shall have been
called by the Company or by Holders as provided in Section 1302(b), in
which case the Company or the Holders of Securities of the series and
Tranches calling the meeting, as the case may be, shall in like manner
appoint a temporary chairman. A permanent chairman and a permanent
secretary of the meeting shall be elected by vote of the Persons entitled
to vote a majority in aggregate principal amount of the Outstanding
Securities of all series and Tranches represented at the meeting,
considered as one class.
(d) At any meeting each Holder or proxy shall be entitled to one vote
for each $1 principal amount of Securities held or represented by him;
provided, however, that no vote shall be cast or counted at any meeting in
respect of any Security challenged as not Outstanding and ruled by the
chairman of the meeting to be not Outstanding. The chairman of the meeting
shall have no right to vote, except as a Holder of a Security or proxy.
(e) Any meeting duly called pursuant to Section 1302 at which a
quorum is present may be adjourned from time to time by Persons entitled to
vote a majority in aggregate principal amount of the Outstanding Securities
of all series and Tranches represented at the meeting, considered as one
class; and the meeting may be held as so adjourned without further notice.
SECTION 1306. COUNTING VOTES AND RECORDING ACTION OF MEETINGS.
The vote upon any resolution submitted to any meeting of Holders shall
be by written ballots on which shall be subscribed the signatures of the Holders
or of their representatives by proxy and the principal amounts and serial
numbers of the Outstanding Securities, of the series and Tranches with respect
to which the meeting shall have been called, held or represented by them. The
permanent chairman of the meeting shall appoint two inspectors of votes who
shall count all votes cast at the meeting for or against any resolution and who
shall make and file with the secretary of the meeting their verified written
reports of all votes cast at the meeting. A record of the proceedings of each
meeting of Holders shall be prepared by the secretary of the meeting and there
shall be attached to said record the original reports of the inspectors of votes
on any vote by ballot taken thereat and affidavits by one or more persons having
knowledge of the facts setting forth a copy of the notice of the meeting and
showing that said notice was given as provided in Section 1302 and, if
applicable, Section 1304. Each copy shall be signed and verified by the
affidavits of the permanent chairman and secretary of the meeting and one such
copy shall be delivered to the Company, and another to the Trustee to be
preserved by the Trustee, the latter to have attached thereto the ballots voted
at the meeting. Any record so signed and verified shall be conclusive evidence
of the matters therein stated.
<PAGE>
-69-
SECTION 1307. ACTION WITHOUT MEETING.
In lieu of a vote of Holders at a meeting as hereinbefore contemplated
in this Article, any request, demand, authorization, direction, notice, consent,
waiver or other action may be made, given or taken by Holders by written
instruments as provided in Section 104.
ARTICLE FOURTEEN
IMMUNITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS AND DIRECTORS
SECTION 1401. LIABILITY SOLELY CORPORATE.
No recourse shall be had for the payment of the principal of or
premium, if any, or interest, if any, on any Securities, or any part thereof, or
for any claim based thereon or otherwise in respect thereof, or of the
indebtedness represented thereby, or upon any obligation, covenant or agreement
under this Indenture, against any incorporator, shareholder, officer or
director, as such, past, present or future of the Company or of any predecessor
or successor corporation (either directly or through the Company or a
predecessor or successor corporation), whether by virtue of any constitutional
provision, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise; it being expressly agreed and understood that this
Indenture and all the Securities are solely corporate obligations, and that no
personal liability whatsoever shall attach to, or be incurred by, any
incorporator, shareholder, officer or director, past, present or future, of the
Company or of any predecessor or successor corporation, either directly or
indirectly through the Company or any predecessor or successor corporation,
because of the indebtedness hereby authorized or under or by reason of any of
the obligations, covenants or agreements contained in this Indenture or in any
of the Securities or to be implied herefrom or therefrom, and that any such
personal liability is hereby expressly waived and released as a condition of,
and as part of the consideration for, the execution of this Indenture and the
issuance of the Securities.
_________________________
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the day and year first above written.
TEXAS UTILITIES ELECTRIC COMPANY
By: /s/ Robert S. Shapard
----------------------------------------
ROBERT S. SHAPARD
Treasurer
<PAGE>
THE BANK OF NEW YORK, Trustee
By: /s/ W. N. Gitlin
---------------------------------------
W.N. GITLIN
Vice President
<PAGE>
STATE OF TEXAS )
) ss.:
COUNTY OF DALLAS )
On the 14th day of August, 1997, before me personally came Robert S.
Shapard, to me known, who, being by me duly sworn, did depose and say that he is
the Treasurer of Texas Utilities Electric Company, one of the corporations
described in and which executed the foregoing instrument; and that he signed his
name thereto by authority of the Board of Directors of said corporation.
/s/ LeNae B. Davis
-----------------------------------
LeNae B. Davis
Notary Public, State of Texas
My Commission Expires June 23, 2000
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 15th day of August, 1997, before me personally came W.N.
Gitlin, to me known, who, being by me duly sworn, did depose and say that he is
a Vice President of The Bank of New York, one of the corporations described in
and which executed the foregoing instrument; and that he signed his name thereto
by authority of the Board of Directors of said corporation.
/s/ Moira Feeney
----------------------------------------
Moira Feeney
Notary Public, State of New York
No. 31-4991961
Qualified in New York County
Commission Expires Feb. 18, 1998
<PAGE>
EXHIBIT 4(b)
TEXAS UTILITIES ELECTRIC COMPANY
OFFICER'S CERTIFICATE
Robert S. Shapard, the Treasurer of Texas Utilities Electric Company (the
"Company"), pursuant to the authority granted in the Board Resolutions of the
Company dated May 7, 1997, and Sections 201 and 301 of the Indenture defined
herein, does hereby certify to The Bank of New York (the "Trustee"), as Trustee
under the Indenture of the Company (For Unsecured Debt Securities) dated as of
August 1, 1997 (the "Indenture") that:
1. The securities of the first series to be issued under the Indenture
shall be designated "7.17% Debentures due August 1, 2007" (the
"Debentures of the First Series"). All capitalized terms used in this
certificate which are not defined herein but are defined in the
Indenture shall have the meanings set forth in the Indenture;
2. The Debentures of the First Series shall be limited in aggregate
principal amount to $300,000,000 at any time Outstanding, except as
contemplated in Section 301(b) of the Indenture;
3. The Debentures of the First Series shall mature and the principal
shall be due and payable together with all accrued and unpaid interest
thereon on August 1, 2007;
4. The Debentures of the First Series shall bear interest from August 18,
1997, at the rate of 7.17% per annum payable semi-annually on February
1 and August 1 of each year (each, an "Interest Payment Date")
commencing February 1, 1998. The amount of interest payable for any
such period will be computed on the basis of a 360-day year of twelve
30-day months. Interest on the Debentures of the First Series will
accrue from August 18, 1997 but if interest has been paid on such
Debentures of the First Series, then from the most recent Interest
Payment Date to which interest has been paid or duly provided for. In
the event that any Interest Payment Date is not a Business Day, then
payment of 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 such delay), with the same force and
effect as if made on such Interest Payment Date;
5. Each installment of interest on a Debenture of the First Series shall
be payable to the Person in whose name such Debenture of the First
Series is registered at the close of business on the day preceding the
corresponding Interest Payment Date (the "Regular Record Date") for
the Debentures of the First Series; provided, however, that if the
Debentures of the First Series are not held by a securities
depositary, the Regular Record Date shall be the 15th day of the
calendar month next preceding the corresponding Interest Payment Date.
Any installment of interest on the Debentures of the First Series not
punctually paid or duly provided for shall forthwith cease to be
<PAGE>
payable to the Holders of such Debentures of the First Series on such
Regular Record Date, and may be paid to the Persons in whose name the
Debentures of the First Series are registered at the close of business
on a Special Record Date to be fixed by the Trustee for the payment of
such Defaulted Interest. Notice of such Defaulted Interest and
Special Record Date shall be given to the Holders of the Debentures of
the First Series not less than 10 days prior to such Special Record
Date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which
the Debentures of the First Series may be listed, and upon such notice
as may be required by such exchange, all as more fully provided in the
Indenture;
6. The principal and each installment of interest on the Debentures of
the First Series shall be payable at, and registration and
registration of transfers and exchanges in respect of the Debentures
of the First Series may be effected at, the office or agency of the
Company 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. Notices and demands to or upon the
Company in respect of the Debentures of the First Series may be served
at the office or agency of the Company in The City of New York. The
Corporate Trust Office of the Trustee will initially be the agency of
the Company for such payment, registration and registration of
transfers and exchanges and service of notices and demands and the
Company hereby appoints the Trustee as its agent for all such
purposes; provided, however, that the Company reserves the right to
change, by one or more Officer's Certificates any such office or
agency and such agent. The Trustee will be the Security Registrar and
the Paying Agent for the Debentures of the First Series;
7. The Debentures of the First Series will be redeemable as a whole at
any time or in part from time to time, at the option of the Company,
at a Redemption Price equal to the greater of (i) 100% of the
principal amount of such Debentures of the First Series, and (ii) the
sum of the present values of the remaining scheduled payments of
principal and interest thereon from the Redemption Date to the
maturity date, computed by discounting such payments, in each case, to
the Redemption Date on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Treasury Rate plus 10 basis
points, plus, in each case, accrued interest on the principal amount
thereof to the Redemption Date.
"Treasury Rate" means, with respect to any Redemption Date, the rate
per annum equal to the semiannual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable
Treasury Issue (expressed as a percentage of its principal amount)
equal to the Comparable Treasury Price for such Redemption Date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity
comparable to the remaining term of the Debentures of the First Series
to be redeemed that would be utilized, at the time of selection and in
accordance with customary financial practice, in pricing
-2-
<PAGE>
new issues of corporate debt securities of comparable maturity to the
remaining term of such Debentures of the First Series. "Independent
Investment Banker" means one of the Reference Treasury Dealers
appointed by the Trustee after consultation with the Company.
"Comparable Treasury Price" means, with respect to any Redemption
Date, (i) the average of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its
principal amount) on the third business day preceding such Redemption
Date, as set forth in the daily statistical release (or any successor
release) published by the Federal Reserve Bank of New York and
designated "Composite 3:30 p.m. Quotations for U.S. Government
Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such business day, the
average of the Reference Treasury Dealer Quotations actually obtained
by the Trustee for such Redemption Date. "Reference Treasury Dealer
Quotations" means, with respect to each Reference Treasury Dealer and
any Redemption Date, the average, as determined by the Trustee, of the
bid and asked prices for the Comparable Treasury Issue (expressed in
each case as a percentage of its principal amount) quoted in writing
to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third business day preceding such Redemption Date.
"Reference Treasury Dealer" means each of Morgan Stanley & Co.
Incorporated, Lehman Brothers, Inc. and Salomon Brothers Inc and their
respective successors; provided, however, that if any of the foregoing
shall cease to be a primary U.S. Government securities dealer in New
York city (a "Primary Treasury Dealer"), the Company shall substitute
therefor another Primary Treasury Dealer.
Notice of any redemption of Debentures of the First Series will be
mailed at least 30 days but no more than 60 days before the Redemption
Date to each holder of Debentures of the First Series to be redeemed.
Unless the Company defaults in payment of the Redemption Price, on and
after the Redemption Date interest will cease to accrue on the
Debentures of the First Series or portions thereof called for
redemption.
The Company shall deliver to the Trustee before any Redemption Date
for Debentures of the First Series its calculation of the Redemption
Price applicable to such redemption. Except with respect to the
obligations of the Trustee expressly set forth in the foregoing
definitions of "Comparable Treasury Issue" and "Comparable Treasury
Price," the Trustee shall be under no duty to inquire into, may
presume the correctness of, and shall be fully protected in acting
upon the Company's calculation of any Redemption Price of the
Debentures of the First Series.
In lieu of stating the Redemption Price, notices of redemption of
Debentures of the First Series shall state substantially the
following: "The Redemption Price of the Debentures to be redeemed
shall equal the greater of (i) 100% of the principal amount of such
Debentures, and (ii) the sum of the present values of the remaining
scheduled
-3-
<PAGE>
payments of principal and interest thereon from the Redemption Date to
the maturity date, computed by discounting such payments, in each
case, to the Redemption Date on a semiannual basis (assuming a 360-day
year consisting of twelve 30-day months) at the Treasury Rate (as
defined in the Indenture) plus 10 basis points."
Except as provided herein, Article Four of the Indenture shall apply
to redemptions of Debentures of the First Series.
8. The Debentures of the First Series will be originally issued in global
form payable to Cede & Co. and will, unless and until the Debentures
of the First Series are exchanged in whole or in part for certificated
Debentures of the First Series registered in the names of various
beneficial holders thereof (in accordance with the conditions set
forth in the legend appearing in the form of the Debentures of the
First Series, hereto attached as Exhibit A), contain restrictions on
transfer, substantially as described in such form;
9. No service charge shall be made for the registration of transfer or
exchange of the Debentures of the First Series; provided, however,
that the Company may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection
with the exchange or transfer;
10. If the Company shall make any deposit of money and/or Eligible
Obligations with respect to any Debentures of the First Series, or any
portion of the principal amount thereof, as contemplated by Section
701 of the Indenture, the Company shall not deliver an Officer's
Certificate described in clause (z) in the first paragraph of said
Section 701 unless the Company shall also deliver to the Trustee,
together with such Officer's Certificate, either:
(A) an instrument wherein the Company, notwithstanding the
satisfaction and discharge of its indebtedness in respect of the
Debentures of the First Series, shall assume the obligation (which
shall be absolute and unconditional) to irrevocably deposit with the
Trustee or Paying Agent such additional sums of money, if any, or
additional Eligible Obligations (meeting the requirements of Section
701), if any, or any combination thereof, at such time or times, as
shall be necessary, together with the money and/or Eligible
Obligations theretofore so deposited, to pay when due the principal of
and premium, if any, and interest due and to become due on such
Debentures of the First Series or portions thereof, all in accordance
with and subject to the provisions of said Section 701; provided,
however, that such instrument may state that the obligation of the
Company to make additional deposits as aforesaid shall be subject to
the delivery to the Company by the Trustee of a notice asserting the
deficiency accompanied by an opinion of an independent public
accountant of nationally recognized standing, selected by the Trustee,
showing the calculation thereof; or
(B) an Opinion of Counsel to the effect that, as a result of a
change in law occurring after the date of this certificate, the
Holders of such Debentures of the First
-4-
<PAGE>
Series, or portions of the principal amount thereof, will not
recognize income, gain or loss for United States federal income tax
purposes as a result of the satisfaction and discharge of the
Company's indebtedness in respect thereof and will be subject to
United States federal income tax on the same amounts, at the same
times and in the same manner as if such satisfaction and discharge had
not been effected.
11. The Debentures of the First Series shall have such other terms and
provisions as are provided in the form set forth in Exhibit A hereto,
and shall be issued in substantially such form;
12. The undersigned has read all of the covenants and conditions contained
in the Indenture relating to the issuance of the Debentures of the
First Series and the definitions in the Indenture relating thereto and
in respect of which this certificate is made;
13. The statements contained in this certificate are based upon the
familiarity of the undersigned with the Indenture, the documents
accompanying this certificate, and upon discussions by the undersigned
with officers and employees of the Company familiar with the matters
set forth herein;
14. In the opinion of the undersigned, he has made such examination or
investigation as is necessary to enable him to express an informed
opinion whether or not such covenants and conditions have been
complied with; and
15. In the opinion of the undersigned, such conditions and covenants and
conditions precedent, if any (including any covenants compliance with
which constitutes a condition precedent) to the authentication and
delivery of the Debentures of the First Series requested in the
accompanying Company Order have been complied with.
-5-
<PAGE>
IN WITNESS WHEREOF, I have executed this Officer's Certificate this 18th
day of August, 1997.
/s/ Robert S. Shapard
---------------------------------------
Robert S. Shapard
Treasurer and Assistant Secretary
-6-
<PAGE>
NO._______________
CUSIP NO.__________
EXHIBIT A
[FORM OF FACE OF DEBENTURE]
[(SEE LEGEND AT THE END OF THIS SECURITY FOR
RESTRICTIONS ON TRANSFERABILITY AND CHANGE OF FORM)]
TEXAS UTILITIES ELECTRIC COMPANY
7.17% DEBENTURES DUE AUGUST 1, 2007
TEXAS UTILITIES ELECTRIC COMPANY, a corporation duly organized and existing
under the laws of the State Texas (herein referred to as the "Company", which
term includes any successor Person under the Indenture), for value received,
hereby promises to pay to [Cede & Co.] or registered assigns, the principal sum
of ____________________________________________________________________________
Dollars on August 1, 2007, and to pay interest on said principal sum, semi-
annually on February 1 and August 1 of each year, commencing February 1, 1998,
at the rate of 7.17% per annum until the principal hereof is paid or made
available for payment. The amount of interest payable on any Interest Payment
Date shall be computed on the basis of a 360-day year of twelve 30-day months.
Interest on the Securities of this series will accrue from August 18, 1997, to
the first Interest Payment Date, and thereafter will accrue from the last
Interest Payment Date to which interest has been paid or duly provided for. In
the event that any Interest Payment Date is not a Business Day, then payment of
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 such
delay) with the same force and effect as if made on the Interest Payment Date.
The interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in such Indenture, be paid to the Person
in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the day preceding such Interest Payment Date; provided,
however, that if the Securities of this series are not held by a securities
depositary, the Regular Record Date shall be the 15th day of the calendar month
next preceding such Interest Payment Date. Any such interest not so punctually
paid or duly provided for will forthwith cease to be payable to the Holder on
such Regular Record Date and may either be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, notice whereof shall be given to Holders of Securities
of this series not less than 10 days prior to such Special Record Date, or be
paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities of this series
may be listed, and upon such notice as may be required by such exchange, all as
more fully provided in the Indenture referred to on the reverse hereof.
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Company maintained for that
purpose in The City of New York, the State of New York in such coin or currency
of the United States of America as at the time of payment is legal tender for
payment of public and private debts, provided, however, that, at the option of
the Company, interest on this Security may be paid by check mailed to the
address of the person entitled thereto, as such address shall appear on the
Security Register.
<PAGE>
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
TEXAS UTILITIES ELECTRIC COMPANY
By:_______________________________________
ATTEST:
____________________________
[FORM OF CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
Dated:
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK, as Trustee
By:_______________________________________
Authorized Signatory
-2-
<PAGE>
[FORM OF REVERSE OF DEBENTURE]
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series under an Indenture, dated as of August 1, 1997 (herein, together with any
amendments thereto, called the "Indenture", which term shall have the meaning
assigned to it in such instrument), between the Company and The Bank of New
York, as Trustee (herein called the "Trustee", which term includes any successor
trustee under the Indenture), and reference is hereby made to the Indenture,
including the Board Resolutions and Officer's Certificate filed with the Trustee
on August 18, 1997 creating the series designated on the face hereof, for a
statement of the respective rights, limitations of rights, duties and immunities
thereunder of the Company, the Trustee and the Holders of the Securities and of
the terms upon which the Securities are, and are to be, authenticated and
delivered. This Security is one of the series designated on the face hereof,
limited in aggregate principal amount to $300,000,000.
The Securities of this series will be redeemable as a whole at any
time or in part from time to time, at the option of the Company, at a Redemption
Price equal to the greater of (i) 100% of the principal amount of such
Securities of this series, and (ii) the sum of the present values of the
remaining scheduled payments of principal and interest thereon from the
Redemption Date to the maturity date, computed by discounting such payments, in
each case, to the Redemption Date on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Treasury Rate plus 10 basis points,
plus, in each case, accrued interest on the principal amount thereof to the
Redemption Date.
"Treasury Rate" means, with respect to any Redemption Date, the rate
per annum equal to the semiannual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable
Treasury Issue (expressed as a percentage of its principal amount)
equal to the Comparable Treasury Price for such Redemption Date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity
comparable to the remaining term of the Securities of this series to
be redeemed that would be utilized, at the time of selection and in
accordance with customary financial practice, in pricing new issues of
corporate debt securities of comparable maturity to the remaining term
of such Securities of this series. "Independent Investment Banker"
means one of the Reference Treasury Dealers appointed by the Trustee
after consultation with the Company.
"Comparable Treasury Price" means, with respect to any Redemption
Date, (i) the average of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its
principal amount) on the third business day preceding such Redemption
Date, as set forth in the daily statistical release (or any successor
release) published by the Federal Reserve Bank of New York and
designated "Composite 3:30 p.m. Quotations for U.S. Government
Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such business day, the
average of the Reference Treasury Dealer Quotations actually obtained
by the Trustee for such Redemption Date. "Reference Treasury Dealer
Quotations" means, with respect to each Reference Treasury Dealer and
any
-3-
<PAGE>
Redemption Date, the average, as determined by the Trustee, of the bid
and asked prices for the Comparable Treasury Issue (expressed in each
case as a percentage of its principal amount) quoted in writing to the
Trustee by such Reference Treasury Dealer at 5:00 p.m. on the third
business day preceding such Redemption Date.
"Reference Treasury Dealer" means each of Morgan Stanley & Co.
Incorporated, Lehman Brothers, Inc. and Salomon Brothers Inc and their
respective successors; provided, however, that if any of the foregoing
shall cease to be a primary U.S. Government securities dealer in New
York city (a "Primary Treasury Dealer"), the Company shall substitute
therefor another Primary Treasury Dealer.
Notice of any redemption will be mailed at least 30 days but no more
than 60 days before the Redemption Date to each holder of Securities
of this series to be redeemed.
Unless the Company defaults in payment of the Redemption Price, on and
after the Redemption Date interest will cease to accrue on the
Securities of this series or portions thereof called for redemption.
The Indenture contains provisions for defeasance at any time of the
entire indebtedness of this Security upon compliance with certain conditions
set forth in the Indenture, including the Officer's Certificate described above.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of a majority in principal amount of the Securities at
the time Outstanding of all series to be affected. The Indenture contains
provisions permitting the Holders of a majority in aggregate principal amount of
the Securities of all series then Outstanding to waive compliance by the Company
with certain restrictive provisions of the Indenture. The Indenture also
contains provisions permitting the Holders of specified percentages in principal
amount of the Securities of each series at the time Outstanding, on behalf of
the Holders of all Securities of such series, to waive certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the
Holder of this Security shall be conclusive and binding upon such Holder and
upon all future Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of a majority in aggregate principal
amount of the Securities of all series at the time Outstanding in respect of
which an Event of Default shall have occurred and be continuing shall have made
written request to the Trustee to institute proceedings in respect of such Event
of Default as Trustee and offered the Trustee reasonable indemnity, and the
Trustee shall not
-4-
<PAGE>
have received from the Holders of a majority in aggregate principal amount of
Securities of all series at the time Outstanding in respect of which an Event of
Default shall have occurred and be continuing a direction inconsistent with such
request, and shall have failed to institute any such proceeding, for 60 days
after receipt of such notice, request and offer of indemnity. The foregoing
shall not apply to any suit instituted by the Holder of this Security for the
enforcement of any payment of principal hereof or any premium or interest hereon
on or after the respective due dates expressed herein.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and any premium and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
The Securities of this series are issuable only in registered form
without coupons in denominations of $1,000 and any integral multiple thereof.
As provided in the Indenture and subject to certain limitations therein set
forth, Securities of this series are exchangeable for a like aggregate principal
amount of Securities of this series and of like tenor and of authorized
denominations, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
The Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the absolute
owner hereof for all purposes, whether or not this Security be overdue, and
neither the Company, the Trustee nor any such agent shall be affected by notice
to the contrary.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
-5-
<PAGE>
[LEGEND
Unless and until this Security is exchanged in whole or in part for
certificated Securities registered in the names of the various beneficial
holders hereof as then certified to the Corporate Trustee by The Depository
Trust Company (55 Water Street, New York, New York) or its successor (the
"Depositary"), this Security may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary.
Unless this certificate is presented by an authorized representative of the
Depositary to the Company or its agent for registration of transfer, exchange or
payment, and any certificate to be issued is registered in the name of Cede &
Co., or such other name as requested by an authorized representative of the
Depositary and any amount payable thereunder is made payable to Cede & Co., or
such other name, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co.,
has an interest herein.
This Security may be exchanged for certificated Securities registered in
the names of the various beneficial owners hereof if (a) the Depositary is at
any time unwilling or unable to continue as depositary and a successor
depositary is not appointed by the Company within 90 days, or (b) the Company
elects to issue certificated Securities to beneficial owners. Any such exchange
shall be made upon receipt by the Trustee of a Company Order therefor and
certificated Securities of this series shall be registered in such names and in
such denominations as shall be certified to the Company and the Trustee by the
Depositary.]
<PAGE>
EXHIBIT 15(a)
Texas Utilities Company:
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited condensed
consolidated interim financial information of Texas Utilities Company and
subsidiaries for the periods ended September 30, 1997 and 1996, as indicated in
our report dated November 12, 1997; because we did not perform an audit, we
expressed no opinion on that information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, is
incorporated by reference in Registration Statements No. 33-32831 and 33-27989
on Form S-3, Registration Statement No. 33-37131 on Form S-4 and Registration
Statements No.33-32833, 33-32835, 33-32837, 33-32839, 33-32841 and 33-32843 on
Form S-8 of TUC Holding Company (to be known as Texas Utilities Company).
We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
DELOITTE & TOUCHE LLP
Dallas, Texas
November 12, 1997
<PAGE>
EXHIBIT 15(b)
Texas Utilities Electric Company:
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited condensed
consolidated interim financial information of Texas Utilities Electric Company
and subsidiaries for the periods ended September 30, 1997 and 1996, as indicated
in our report dated November 12, 1997; because we did not perform an audit, we
expressed no opinion on that information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, is
incorporated by reference in Registration Statements No. 33-69554 and 33-69559
on Form S-3 and Post Effective Amendment No. 1 to Registration Statement No. 33-
83976 on Form S-3.
We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
DELOITTE & TOUCHE LLP
Dallas, Texas
November 12, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED STATEMENTS OF CONSOLIDATED INCOME, CONDENSED STATEMENTS OF
CONSOLIDATED CASH FLOWS, AND CONDENSED CONSOLIDATED BALANCE SHEETS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001023291
<NAME> TEXAS UTILITIES CO.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 18,512,682
<OTHER-PROPERTY-AND-INVEST> 2,095,623
<TOTAL-CURRENT-ASSETS> 1,502,078
<TOTAL-DEFERRED-CHARGES> 2,059,695
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 24,170,078
<COMMON> 5,296,772
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 1,357,448
<TOTAL-COMMON-STOCKHOLDERS-EQ> 6,654,220
895,601
304,194
<LONG-TERM-DEBT-NET> 9,094,826
<SHORT-TERM-NOTES> 43,067
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 694,697
<LONG-TERM-DEBT-CURRENT-PORT> 348,544
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 6,134,929
<TOT-CAPITALIZATION-AND-LIAB> 24,170,078
<GROSS-OPERATING-REVENUE> 5,347,234
<INCOME-TAX-EXPENSE> 317,132
<OTHER-OPERATING-EXPENSES> 0
<TOTAL-OPERATING-EXPENSES> 3,820,454
<OPERATING-INCOME-LOSS> 1,526,780
<OTHER-INCOME-NET> (13,504)
<INCOME-BEFORE-INTEREST-EXPEN> 1,513,276
<TOTAL-INTEREST-EXPENSE> 630,989
<NET-INCOME> 882,287
0
<EARNINGS-AVAILABLE-FOR-COMM> 565,155
<COMMON-STOCK-DIVIDENDS> 356,591
<TOTAL-INTEREST-ON-BONDS> 335,997
<CASH-FLOW-OPERATIONS> 1,266,575
<EPS-PRIMARY> 2.48
<EPS-DILUTED> 2.48
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED STATEMENTS OF INCOME, CONDENSED STATEMENTS OF CASH FLOWS, AND
CONDENSED BALANCE SHEETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000710182
<NAME> TEXAS UTILITIES ELECTRIC COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 15,713,700
<OTHER-PROPERTY-AND-INVEST> 528,233
<TOTAL-CURRENT-ASSETS> 912,925
<TOTAL-DEFERRED-CHARGES> 1,972,391
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 19,127,249
<COMMON> 4,459,473
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 1,862,016
<TOTAL-COMMON-STOCKHOLDERS-EQ> 6,321,489
895,601
129,194
<LONG-TERM-DEBT-NET> 6,191,555
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 327,491
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 5,261,919
<TOT-CAPITALIZATION-AND-LIAB> 19,127,249
<GROSS-OPERATING-REVENUE> 4,668,356
<INCOME-TAX-EXPENSE> 355,132
<OTHER-OPERATING-EXPENSES> 3,234,576
<TOTAL-OPERATING-EXPENSES> 3,589,708
<OPERATING-INCOME-LOSS> 1,078,648
<OTHER-INCOME-NET> 14,754
<INCOME-BEFORE-INTEREST-EXPEN> 1,093,402
<TOTAL-INTEREST-EXPENSE> 445,412
<NET-INCOME> 647,990
23,160
<EARNINGS-AVAILABLE-FOR-COMM> 624,830
<COMMON-STOCK-DIVIDENDS> 272,832
<TOTAL-INTEREST-ON-BONDS> 335,891
<CASH-FLOW-OPERATIONS> 1,296,383
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
