<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [x]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Texas Utilities Company
- -------------------------------------------------------------------------------
(Name of Registrant as specified In Its Charter)
Texas Utilities Company
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------------
(5) Total fee paid:
---------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
TEXAS UTILITIES COMPANY
Energy Plaza
1601 Bryan Street
Dallas, Texas 75201
------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
------------------
April 1, 1996
To the Shareholders of
Texas Utilities Company:
The annual meeting of shareholders of Texas Utilities Company will be held
in the Grand Ballroom of the Harvey Hotel/Downtown, Live Oak and Olive
Streets, Dallas, Texas on Friday, May 17, 1996 at 9:30 a.m. for the following
purposes:
1. To elect a Board of Directors for the ensuing year; and
2. To approve the selection of auditors for the year 1996.
The Board of Directors has fixed the close of business on March 18, 1996 as
the time as of which shareholders entitled to notice of, and to vote at, the
meeting and any adjournments shall be determined.
WHETHER OR NOT YOU WILL BE ABLE TO ATTEND THE MEETING, PLEASE SIGN AND
RETURN THE ACCOMPANYING PROXY PROMPTLY. NO POSTAGE NEED BE AFFIXED TO THE
REPLY ENVELOPE WHICH IS ENCLOSED HEREWITH FOR YOUR CONVENIENCE IF IT IS MAILED
IN THE UNITED STATES.
James H. Scott
Secretary
<PAGE>
TEXAS UTILITIES COMPANY
Energy Plaza
1601 Bryan Street
Dallas, Texas 75201
------------------
PROXY STATEMENT
------------------
April 1, 1996
A proxy in the accompanying form is solicited by the Board of Directors of
TEXAS UTILITIES COMPANY for use at the annual meeting of shareholders to be
held in the Grand Ballroom of the Harvey Hotel/Downtown, Live Oak and Olive
Streets, Dallas, Texas, on Friday, May 17, 1996, at 9:30 a.m. and any
adjournments thereof for the purposes set forth in the accompanying notice.
The close of business on March 18, 1996 has been fixed as the time as of
which shareholders entitled to notice of, and to vote with respect to, this
solicitation shall be determined. At such date there were outstanding and
entitled to vote 225,841,037 shares of common stock. Except as indicated
below, each share is entitled to one vote on all matters submitted to
shareholders.
Any shareholder may exercise the right of cumulative voting in the election
of directors provided the shareholder gives written notice of such intention
to the Secretary of the Company on or before the date preceding the election.
When exercising this right the shareholder is entitled to one vote for each
share held multiplied by the number of directors to be elected and he may cast
all of his votes for a single nominee or spread his votes among the nominees
in any manner desired.
This Notice, Proxy Statement and form of proxy are being mailed or given to
shareholders on or about April 1, 1996.
The cost of soliciting proxies will be borne by the Company. In addition to
use of the mails, proxies may be solicited by directors, officers and regular
employees of the Company in person or by telephone. The Company has hired D.
F. King & Co., Inc. to assist in the solicitation of proxies at an estimated
cost of $7,500 plus disbursements. Shareholders may assist the Company in
avoiding expenses in this connection by returning their proxies promptly.
Any proxy delivered pursuant to this solicitation is revocable at the option
of the person executing the same at any time prior to the exercise thereof.
The shares represented by any
1
<PAGE>
proxy duly given as a result of this request will be voted in the discretion
of the persons named in the proxy unless the shareholder specifies a choice by
means of the ballot space on the proxy, in which case the shares will be voted
accordingly.
The Company has adopted a confidential voting policy. Accordingly,
tabulation of proxies and votes cast at the meeting will be conducted by an
independent agent and the votes of individual shareholders will be kept
private and not disclosed to the Company, except in limited circumstances.
The presence in person or by proxy of the holders of a majority of the
shares of the common stock entitled to vote shall constitute a quorum entitled
to transact business at the meeting. Directors are elected by plurality vote
of the votes cast at the meeting; abstentions will have no effect. The
approval of the selection of auditors requires the affirmative vote of a
majority of the shares represented at the meeting; abstentions will be treated
as negative votes.
1997 ANNUAL MEETING SHAREHOLDERS' PROPOSALS
All proposals from shareholders to be considered at the next annual meeting
scheduled for May 16, 1997 must be received by the Secretary of the Company,
Energy Plaza, 1601 Bryan Street, Dallas, Texas 75201-3411, not later than the
close of business on December 3, 1996.
ELECTION OF DIRECTORS
It is the intent of the Board of Directors that the persons named in the
proxy will vote your shares in favor of the nominees for directors listed
hereafter, unless authority is withheld. All of the nominees are current
members of the Board of Directors and have been nominated by the Nominating
Committee. The persons named in the proxy may cumulate the votes represented
thereby and in case any such nominee shall become unavailable, which the Board
of Directors has no reason to anticipate, may vote for a substitute.
2
<PAGE>
The names of the nominees for the office of director for the ensuing year
and information about them, as furnished by the nominees themselves, are set
forth below:
<TABLE>
<CAPTION>
SERVED AS
NAME AGE DIRECTOR SINCE BUSINESS EXPERIENCE DURING PAST FIVE YEARS
---- --- -------------- ------------------------------------------
<S> <C> <C> <C>
J. S. Farrington
(2)(5)................. 61 1983 Chairman of the Board of the Company since
May 1995; prior thereto Chairman of the
Board and Chief Executive of the Company
(February 1987-May 1995); prior thereto
President of the Company (May 1983-February
1987). A Director of TU Electric.
Bayard H. Friedman
(1)(2)(3)(4)(6)........ 69 1991 Bayard H. Friedman, Inc., Investment Adviser,
since December 1992. Prior thereto, Senior
Chairman and Director, Team Bank (January
1990-November 1992). A Director of Justin
Industries.
William M. Griffin
(1)(3)(4)(6)........... 69 1966 President, The WMG Company, investments.
Executive Vice President (until August 1985)
and Chairman of the Finance Committees
(until March 1986) of The Hartford Fire
Insurance Company and Subsidiaries. A
Director of The Hartford Fire Insurance
Company (until March 1991) and Shawmut
National Corporation (until April 1992).
Kerney Laday
(1)(3)(4)(6)........... 54 1993 President, The Laday Company (management
consulting and business development) since
July 1995; prior thereto Vice President,
field operations, Southern Region, U. S.
Customer Operations, Xerox Corporation
(office equipment manufacturer) (January
1991-June 1995); prior thereto Vice
President and region general manager, Xerox
(1986 to 1991). A Director of NationsBank
Texas Corporation.
Margaret N. Maxey
(1)(2)(3)(4)(6)........ 69 1984 Director, Clint W. Murchison, Sr. Chair of
Free Enterprise and Professor, Biomedical
Engineering Program, College of Engineering,
The University of Texas at Austin since
1982; Assistant Director, Energy Research
Institute, Columbia, South Carolina, 1980-
82.
James A. Middleton
(1)(3)(4)(5)(6)........ 60 1989 Chairman of the Board and Chief Executive
Officer, Crown Energy Company (oil and gas
producing and tar sands processing) since
January 1996; prior thereto Executive Vice
President (October 1987-December 1994) and
Senior Vice President (June 1981-October
1987) of Atlantic Richfield Company.
President, ARCO Oil and Gas Company,
(January 1985-October 1990). A Director of
Crown Energy Company and ARCO Chemical
Company.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
SERVED AS
NAME AGE DIRECTOR SINCE BUSINESS EXPERIENCE DURING PAST FIVE YEARS
---- --- -------------- ------------------------------------------
<S> <C> <C> <C>
Erle Nye
(2)(5)................. 58 1987 President and Chief Executive of the Company
since May 1995; prior thereto President of
the Company (February 1987-May 1995).
Chairman of the Board and Chief Executive,
and a Director of TU Electric.
J. E. Oesterreicher
(1)(3)(4)(6)........... 54 1996 Vice Chairman of the Board and Chief
Executive Officer of J.C. Penney Company,
Inc. (department store chain) since January
1995; prior thereto, President, J.C. Penney
Stores and Catalog (1992-1995); and
Executive Vice President of J.C. Penney
Stores (1988-1992). A Director of J.C.
Penney Company, Inc. and Brinker
International, Inc.
Charles R. Perry
(1)(2)(3)(4)(5)(6)..... 66 1985 Oil and gas interests, private investments.
Chairman of the Board of Perry Management,
Inc., Avion Flight Centre, Inc., Rivercourse
Development, Inc. and Perry Gas Companies,
Inc.
Herbert H. Richardson
(1)(3)(4)(5)(6)........ 65 1992 Associate Vice Chancellor for Engineering and
Director, Texas Transportation Institute,
The Texas A&M University System; Associate
Dean of Engineering, Regents Professor and
Distinguished Professor of Engineering,
Texas A&M University; Chancellor, The Texas
A&M University System, 1991-1993 and Deputy
Chancellor for Engineering, The Texas A&M
University System, 1986-1991.
</TABLE>
- ---------
(1)Member of Audit Committee.
(2)Member of Executive Committee.
(3)Member of Finance Committee.
(4)Member of Nominating Committee.
(5)Member of Nuclear Committee.
(6)Member of Organization and Compensation Committee.
4
<PAGE>
During 1995 the Board of Directors held five meetings. The standing
committees of the Board of Directors and the membership of each committee are
shown on the preceding pages. During 1995 each of the Directors attended 75%
or more of the aggregate of the Board of Directors meetings and the meetings
of the Committees on which they serve.
The Audit Committee nominates to the Board, for approval by the shareholders
at each annual meeting, a firm of independent auditors to audit the books of
account and records of the Company and to perform such other duties as this
Committee may prescribe or approve, receives the reports and comments from
such independent auditors, reviews the adequacy of internal controls, reviews
the accounting principles employed in financial reporting and takes any action
with respect thereto as it may deem appropriate, reports to the Board of
Directors upon its findings and recommendations and performs such other duties
as may be assigned to it from time to time by the Board; the Audit Committee
held two meetings during 1995. The Executive Committee exercises the authority
of the Board in the intervals between meetings of the Board; the Executive
Committee did not meet during 1995. The Finance Committee reviews and
recommends to the Board, for its consideration, major financial undertakings
and policies and performs such other duties as may be assigned to it from time
to time by the Board; the Finance Committee held four meetings during 1995.
The Nominating Committee selects and recommends to the Board, for its
consideration, persons as nominees for election as directors of the Company
and performs such other duties as may be assigned to it from time to time by
the Board; the Nominating Committee held one meeting in 1995. Shareholders may
recommend nominees for directors to the Nominating Committee by writing to the
Secretary of the Company, Energy Plaza, 1601 Bryan Street, Dallas, Texas
75201-3411. The Nuclear Committee reviews, generally oversees, and makes
reports and recommendations to the Board in connection with, the operation of
the Company's nuclear generating units; the Nuclear Committee held four
meetings during 1995. The Organization and Compensation Committee reviews and
establishes the duties, titles and remuneration of officers of the Company;
this Committee held two meetings in 1995.
Non-officer directors were compensated in 1995 by a retainer fee at the
annual rate of $25,000 plus $1,500 for each Board meeting attended and $1,000
for each committee meeting attended. Additionally, non-officer directors who
are members of the Nuclear Committee receive an annual retainer fee of $10,000
for their services on that Committee. Directors who are officers of the
Company do not receive any fees for service as a director. All directors are
reimbursed for expenses. Effective July 1, 1995, non-officer directors may
elect to defer, in 25% increments, all or a portion of their annual Board
retainer pursuant to the Deferred Compensation Plan for Outside Directors
(Director's Plan). Amounts deferred are matched by the Company. Under the
Director's Plan, a trustee purchases Company common stock with an amount of
cash equal to each participant's deferred retainer and matching amount, and
accounts are established for each participant containing performance
5
<PAGE>
units equal to such number of common shares. Director's Plan investments,
including reinvested dividends, are restricted to Company common stock. On the
expiration of the applicable maturity period (not fewer than three nor more
than ten years, as selected by the participant) or upon death or disability,
the value of the participant's accounts is paid in cash based on the then
current value of the performance units.
BENEFICIAL OWNERSHIP OF COMMON STOCK OF THE COMPANY
Each nominee for director and certain executive officers reported beneficial
ownership of common stock of the Company, as of the date hereof, as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
-----------------------------
DEFERRED
BENEFICIALLY PLANS
NAME OWNED (1) TOTAL
---- ------------ -------- -------
<S> <C> <C> <C>
J. S. Farrington............................... 18,575 42,178 60,753
Bayard H. Friedman (2)......................... 2,416 1,507 3,923
William M. Griffin............................. 10,000 1,507 11,507
Kerney Laday................................... 800 1,507 2,307
Margaret N. Maxey.............................. 4,642 1,507 6,149
James A. Middleton............................. 3,000 1,507 4,507
Erle Nye....................................... 19,053 33,531 52,584
J. E. Oesterreicher............................ 1,200 -- 1,200
Charles R. Perry............................... 1,000 1,507 2,507
Herbert H. Richardson.......................... 1,000 376 1,376
H. Jarrell Gibbs............................... 6,254 13,408 19,662
W. M. Taylor................................... 7,807 13,611 21,418
T. L. Baker.................................... 2,749 12,341 15,090
All Directors and Executive Officers
as a group (13)............................... 78,496 124,487 202,983
</TABLE>
- ---------
(1) Share units held in deferred compensation accounts under the Deferred and
Incentive Compensation Plan or the Director's Plan. Although these plans
allow such units to be paid only in the form of cash, investments in such
units create essentially the same investment stake in the performance of
the Company's common stock as do investments in actual shares of common
stock.
(2) In addition to the shares reported above, clients of Mr. Friedman's
investment advisory firm own 4,200 shares of the common stock of the
Company. Mr. Friedman disclaims any beneficial interest in such shares.
6
<PAGE>
The named individuals have voting and investment power for the shares of
common stock reported as Beneficially Owned. Ownership of such common stock by
each individual director and executive officer and for all directors and
executive officers as a group constituted less than 1% of the Company's
outstanding shares. All required reports relating to changes in beneficial
ownership were timely filed except that, as the result of an inadvertent
oversight, Herbert H. Richardson, a Director of the Company, did not timely
file a report with the Securities and Exchange Commission (SEC) regarding an
open market sale of Common Stock of the Company.
As of December 31, 1995, based on information reported in filings made by
the following person with the SEC, the following person was known to be the
beneficial owner of more than 5% of the Company's common stock:
<TABLE>
<CAPTION>
SHARES
NAME AND ADDRESS OF BENEFICIALLY PERCENT
BENEFICIAL OWNER OWNED OF CLASS
------------------- ------------ --------
<S> <C> <C>
Mellon Bank Corporation
One Mellon Bank Center
Pittsburgh, Pennsylvania 14,635,561 6.5%
</TABLE>
Mellon Bank, N.A. (Mellon), a wholly-owned subsidiary of Mellon Bank
Corporation, as trustee under the Employees' Thrift Plan of the Texas
Utilities Company System (Thrift Plan) was the record owner of 12,181,561
shares of the Company's common stock. Each employee participating in the
Thrift Plan is entitled to instruct the Trustee how to vote all shares of
common stock allocated to the employee's account. To the extent that this
right is not exercised or shares are held by the Trustee which are not
allocated to participant accounts, the Trustee may vote these shares in its
discretion. Mellon Bank Corporation (including its subsidiaries) reported
(excluding Thrift Plan shares) an aggregate of 2,454,000 other shares of
common stock of the Company, including 19,000 shares with respect to which it
shared voting power, 839,000 shares with respect to which it shared
dispositive power, 2,400,000 shares with respect to which it has sole voting
power and 1,550,000 shares with respect to which it has sole dispositive
power.
7
<PAGE>
EXECUTIVE COMPENSATION
The Company and its subsidiaries have paid or awarded compensation during the
last three calendar years to the following executive officers for services in
all capacities:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION (2)
-----------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------- --------------------- -------
OTHER ALL
ANNUAL SECURITIES OTHER
COMPEN- RESTRICTED UNDERLYING LTIP COMPEN-
NAME AND SALARY BONUS SATION STOCK OPTIONS/ PAYOUTS SATION
PRINCIPAL POSITION YEAR ($) ($) (1) ($) AWARDS ($) SARS (#) ($) ($) (3)
------------------ ---- ------- ------- ------- ---------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J. S. Farrington,....... 1995 825,000 165,000 -- 313,500 -- 34,135 105,671
Chairman of the Board 1994 804,167 0 -- 273,500 -- 0 85,817
of the Company (4) 1993 743,750 125,000 -- 264,500 -- 82,584 82,865
Erle Nye, .............. 1995 679,167 140,000 -- 266,000 -- 25,602 87,810
President and Chief 1994 618,750 0 -- 217,000 -- 0 67,275
Executive of the 1993 554,167 100,000 -- 203,500 -- 61,938 63,907
Company
H. Jarrell Gibbs,....... 1995 282,917 67,200 -- 120,300 -- 9,102 38,702
President of 1994 245,167 40,000 -- 97,880 -- 0 29,017
TU Electric 1993 203,083 45,000 -- 58,880 -- 15,989 25,070
W. M. Taylor,........... 1995 282,917 64,700 -- 117,800 -- 10,809 38,278
President, Generation 1994 249,333 40,000 -- 97,880 -- 0 30,333
Division-TU Electric 1993 217,250 65,000 -- 60,680 -- 28,815 21,296
T. L. Baker,............ 1995 261,667 44,900 -- 93,500 -- 11,947 34,465
President, Electric 1994 245,833 25,000 -- 80,000 -- 0 28,183
Service Division 1993 237,083 25,000 -- 58,200 -- 29,720 26,042
-TU Electric
</TABLE>
- ---------
(1) Amounts reported as Bonus in the Summary Compensation Table are
attributable, beginning in 1995, to the named officer's participation in the
Annual Incentive Plan (AIP). Officers of the Company and its subsidiaries
with a title of Vice President or above are eligible to participate in the
AIP. Under the terms of the AIP, target incentive awards ranging from 35% to
50% of base salary, and a maximum award of 100% of base salary, are
established. The percentage of the target or the maximum actually awarded,
if any, is dependent upon the attainment of per share net income goals
established in advance by the Organization and Compensation Committee
(Committee) as well as the Committee's evaluation of the participant's and
the Company's performance. One-half of each such award is paid in cash and
is reflected as Bonus in the Summary Compensation Table. Payment of the
remainder of the award is deferred under the Deferred and Incentive
Compensation Plan (DICP) discussed hereinafter.
8
<PAGE>
(2) Amounts reported as Long-Term Compensation are attributable to the named
officer's participation in the DICP. Officers of the Company and its
subsidiaries with the title of Vice President or above are eligible to
participate in the DICP. Participants in the DICP may defer a percentage of
their base salary not to exceed a maximum percentage determined by the
Committee for each Plan year and in any event not to exceed 15% of the
participant's base salary. The Company makes a matching award (Matching
Award) equal to 150% of the participant's deferred salary. In addition, the
deferred portion of any AIP award (Incentive Award) is invested under the
DICP. The Matching Awards and Incentive Awards are subject to forfeiture
under certain circumstances. Under the DICP, a trustee purchases Company
common stock with an amount of cash equal to each participant's deferred
salary, Matching Award and Incentive Award and accounts are established for
each participant containing performance units (Units) equal to such number
of common shares. DICP investments, including reinvested dividends, are
restricted to Company common stock. On the expiration of the applicable
maturity period (three years for the Incentive Awards and five years for
deferred salary and Matching Awards) the values of the participant's
accounts are paid in cash based upon the then current value of the Units;
provided, however, that in no event will a participant's account be deemed
to have a cash value which is less than the sum of such participant's
deferred salary together with a 6% per annum (compounded annually) interest
equivalent thereon. The maturity period is waived if the participant dies or
becomes totally and permanently disabled and may be extended under certain
circumstances.
Salary deferred under the DICP is included in amounts reported as Salary in
the Summary Compensation Table. Amounts shown in the table below represent
the number of shares purchased under the DICP with such deferred salaries
for 1995:
LONG-TERM INCENTIVE PLAN--AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE
OR OTHER
PERIOD
NUMBER OF UNTIL
SHARES, UNITS OR MATURATION
NAME OTHER RIGHTS (#) OR PAYOUT
---- ---------------- -----------
<S> <C> <C>
J. S. Farrington................................ 2,884 5 Years
Erle Nye........................................ 2,447 5 Years
H. Jarrell Gibbs................................ 1,031 5 Years
W. M. Taylor.................................... 1,031 5 Years
T. L. Baker..................................... 944 5 Years
</TABLE>
Incentive Awards and Matching Awards that have been made under the DICP are
included under Restricted Stock Awards in the Summary Compensation Table.
As a
9
<PAGE>
result of these awards, undistributed Incentive Awards and Matching Awards
made under the Plan in prior years, and dividends reinvested thereon, the
number and market value of such Units at December 31, 1995 (each of which is
equal to one share of common stock) held in the DICP accounts for Messrs.
Farrington, Nye, Gibbs, Taylor and Baker were 30,045 ($1,231,872), 24,006
($984,260), 9,662 ($396,149), 9,752 ($399,861) and 8,500 ($348,509),
respectively.
Amounts reported as LTIP Payouts in the Summary Compensation Table represent
payouts maturing during such years of earnings on salary deferred under the
DICP in prior years.
(3) Amounts reported as All Other Compensation are attributable to the named
officer's participation in certain plans described hereinafter in this
footnote:
Under the Employees' Thrift Plan of the Texas Utilities Company System
(Thrift Plan) all employees with at least six months of eligible service
with the Company or any of its subsidiaries may invest up to 16% of their
regular salary or wages in common stock of the Company, or in a variety of
selected mutual funds. Under the Thrift Plan, the Company matches a portion
of an employee's savings in an amount equal to 40%, 50% or 60% (depending on
the employee's length of service) of the first 6% of such employee's
savings. All matching amounts are invested in common stock of the Company.
The amounts reported under All Other Compensation in the Summary
Compensation Table include these matching amounts which, for Messrs.
Farrington, Nye, Gibbs, Taylor and Baker amounted to $5,400, $5,400, $4,500,
$5,400 and $3,686, respectively, during 1995.
The Company has a Salary Deferral Program (Program) under which each
employee of the Company and its subsidiaries whose annual salary is equal to
or greater than an amount established under the Program ($89,510 for the
Program Year beginning April 1995) may elect to defer a percentage of annual
salary for a period of seven years, a period ending with the retirement of
such employee, or for a combination thereof. Such deferrals may not exceed
in the aggregate 10% of such annual salary. Salary deferred under the
Program is included in amounts reported under Salary in the Summary
Compensation Table. The Company makes a matching award, subject to
forfeiture under certain circumstances, equal to 100% of the deferred
salary. A trustee will distribute at the end of the applicable maturity
period cash equal to the greater of the actual earnings of Program assets,
or the average yield during the applicable maturity period of U.S. Treasury
Notes with a maturity of ten years. The distribution of the amounts due
under the Program will be in a lump sum if the maturity period is seven
years or, if the retirement option is elected, in twenty annual
installments. The Company is financing the retirement portion of the Program
through the purchase of corporate-owned life insurance on the lives of the
participants. The proceeds from such insurance
10
<PAGE>
are expected to allow the Company to fully recover the cost of the
retirement option. During 1995, matching awards, which are included under
All Other Compensation in the Summary Compensation Table, were made for
Messrs. Farrington, Nye, Gibbs, Taylor and Baker in the amounts of $82,500,
$67,917, $28,292, $28,292 and $26,167, respectively.
Under the Split-Dollar Life Insurance Program (Insurance Program) of the
Texas Utilities Company System, split-dollar life insurance policies are
purchased for officers of the Company and its subsidiaries with a title of
Vice President or above, with a death benefit equal to four times their
annual compensation. The Company pays the premiums for these policies and
has received a collateral assignment of the policies equal in value to the
sum of all of its insurance premium payments. Although the Insurance Program
is terminable at any time, it is designed so that if it is continued, the
Company will fully recover all of the insurance premium payments it has made
either upon the death of the participant or, if the assumptions made as to
policy yield are realized, upon the later of fifteen years of participation
or the participant's attainment of age sixty-five. During 1995, the economic
benefit derived by Messrs. Farrington, Nye, Gibbs, Taylor and Baker from the
term insurance coverage provided and the interest foregone on the remainder
of the insurance premiums paid by the Company amounted to $17,771, $14,493,
$5,910, $4,586 and $4,612.
(4) Mr. Farrington served as Chief Executive until May 1995. Mr. Farrington
has a management transition agreement with the Company pursuant to which
he will remain as Chairman of the Board until May 1997, at which time he
will be named Chairman Emeritus. He will retire as an active employee in
May 1998 and serve thereafter as a consultant to the Company for a two
year period. In accordance with the agreement, during the period from May
1996 until his retirement, Mr. Farrington will receive his current salary,
reduced by 15% each year, and be eligible to participate in all employee
benefit plans of the Company. As a consultant, he will receive $200,000
annually.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------------------------------
REMUNERATION 20 25 30 35 40
- ------------ -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$ 50,000 $ 14,688 $ 18,360 $ 22,032 $ 25,704 $ 29,376
100,000 29,688 37,110 44,532 51,954 59,376
200,000 59,688 74,610 89,532 104,454 119,376
400,000 119,688 149,610 179,532 209,454 239,376
800,000 239,688 299,610 359,532 419,454 479,376
1,000,000 299,688 374,610 449,532 524,454 599,376
1,400,000 419,688 524,610 629,532 734,454 839,376
</TABLE>
11
<PAGE>
The Company and its subsidiaries maintain retirement plans (Plans) which are
qualified under applicable provisions of the Internal Revenue Code of 1986, as
amended (Code). Annual retirement benefits are computed as follows: for each
year of accredited service up to a total of 40 years of service, 1.3% of the
first $7,800, plus 1.5% of the excess over $7,800 of the participant's average
annual earnings during his or her three years of highest earnings. Amounts
reported under Salary for the named officers in the Summary Compensation Table
approximate earnings as defined by the Plans. Benefits paid under the Plans
are not subject to any reduction for Social Security payments but are limited
by provisions of the Code. The Company maintains a Supplemental Retirement
Plan (Supplemental Plan) which provides for the payment of retirement benefits
which would otherwise be limited by the Code or by the definition of earnings
in the Plans. Under the Supplemental Plan, retirement benefits are calculated
in accordance with the same formula used under the Plans, except that earnings
also include AIP awards (50% of the AIP award is reported under Bonus for the
named officers in the Summary Compensation Table). As of February 28, 1996,
years of accredited service under the plans for Messrs. Farrington, Nye,
Gibbs, Taylor and Baker were 36, 33, 33, 28 and 25, respectively. The table
illustrates the total annual benefit payable at retirement under the Plans and
Supplemental Plan prior to any reduction for a contingent beneficiary option
which may be selected by the participant.
The following information contained under the headings Organization and
Compensation Committee Report on Executive Compensation and Performance Graph
is not to be deemed to be (i) incorporated by reference into any filing under
the Securities Act of 1933 or the Securities Exchange Act of 1934 or (ii)
soliciting material or filed with the SEC within the meaning of Item 402(a)(9)
of SEC Regulation S-K.
ORGANIZATION AND COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Organization and Compensation Committee of the Board of Directors is
responsible for reviewing and establishing the compensation of the executive
officers of the Company. The Committee consists of all of the nonemployee
directors of the Company and is chaired by James A. Middleton. The Committee
has directed the preparation of this report and has approved its contents and
submission to the shareholders.
As a matter of policy, the Committee believes that levels of executive
compensation should be based upon an evaluation of the performance of the
Company and its officers generally, as well as in comparison to persons with
comparable responsibilities in similar business enterprises. Compensation
plans should align executive compensation with returns to shareholders with
due consideration accorded to balancing both long-term and
12
<PAGE>
short-term objectives. The Committee has determined that, as a matter of
policy to be implemented over time, the base salaries of the officers will be
established at the median, or 50th percentile, of the top ten electric
utilities and that opportunities for total direct compensation to reach the
75th percentile, or above, of such utilities will be provided through
performance-based compensation plans. Such compensation principles and
practices have allowed, and should continue to allow, the Company to attract,
retain and motivate its key executives.
As previously reported, a nationally recognized compensation consultant was
retained, in 1994, to conduct a comprehensive review of the compensation and
benefits provided by the Company to its officers. The consultant's report
included recommended revisions to the Company's compensation and benefits
program principally so as to place a greater emphasis on performance-based
incentive compensation and to provide, thereby, for an appropriate and
competitive balance between base salaries, annual incentives and long-term
incentives. The consultant's recommendations, including the Annual Incentive
Plan (referred to as the AIP and described in footnote 1 on page 8 of this
proxy statement), as well as improvements in life insurance coverage and
retirement benefits, have generally been implemented.
The compensation of the officers of the Company consists principally of base
salaries, the opportunity to participate in the Deferred and Incentive
Compensation Plan (referred to as the DICP and described in footnote 2 on
pages 9 and 10 of this proxy statement) and the opportunity to earn an
incentive award under the AIP. Benefits provided under the DICP and the AIP
represent a substantial portion of officers' compensation, and the value of
future payments under the DICP, as well as the value of the deferred portion
of any award under the AIP, is directly related to the future performance of
the Company's common stock. It is anticipated that performance-based incentive
awards under the AIP will, in future years, constitute an increasing
percentage of officers' total compensation.
The AIP, as approved by shareholders at the annual meeting in May 1995, is
administered by the Committee and provides an objective framework within which
Company and individual performance can be evaluated by the Committee.
Depending on the results of such performance evaluations, and the attainment
of the per share net income goals established in advance, the Committee may
provide annual incentive compensation awards to eligible officers. The
evaluation of each individual participant's performance is based upon the
attainment of individual and business unit objectives. The Company's
performance is evaluated, compared to the ten largest electric utilities
and/or the electric utility industry, based upon its total return to
shareholders and return on invested capital, as well as other measures
relating to competitiveness, service quality and employee safety. The
combination of individual and Company performance results, together with the
Committee's
13
<PAGE>
evaluation of the competitive level of compensation which is appropriate for
such results, determines the amount, if any, actually awarded.
In establishing levels of executive compensation at its May 1995 meeting,
the Committee reviewed various performance and compensation data, including
the performance measures under the AIP and the report of its compensation
consultant. Information was also gathered from industry sources and other
published and private materials which provided a basis for comparing the
largest electric and gas utilities and other survey groups representing a
large variety of business organizations. Included in the data considered was
that, in 1994, TU Electric, the Company's principal subsidiary, was the
largest electric utility in the United States as measured by megawatt hour
sales and, compared to other electric utilities in the United States, was
sixth in electric revenues, sixth in total assets, third in net generating
capability, ninth in number of customers and fifteenth in number of employees.
This information provided a basis for comparing the Company with the largest
electric and gas utilities, including companies generally comparable in size
represented in the Moody's 24 Utilities whose comparative investment return is
depicted in the graph on page 16. Compensation amounts were established by the
Committee based upon its subjective evaluation of Company and individual
performance at levels consistent with the Committee's policy relating to total
direct compensation.
In May 1995, Mr. Farrington, formerly Chairman of the Board and Chief
Executive, was elected Chairman of the Board and Mr. Nye, formerly President,
was elected President and Chief Executive. In connection with this change, Mr.
Farrington's compensation was provided for pursuant to a management transition
agreement described in footnote 4 on page 11 of this proxy statement. Based on
its subjective evaluation of the information described herein, the Committee
also provided Mr. Farrington with an AIP award of $330,000 compared to the
prior year's Incentive Award under the DICP of $125,000. The Committee
established Mr. Nye's base salary as Chief Executive at the annual rate of
$700,000, representing a $50,000, or 7.7%, increase over the amount
established for Mr. Nye in May 1994. The Committee also provided Mr. Nye with
an AIP award of $280,000 compared to the prior year's Incentive Award under
the DICP of $100,000. This amount of compensation was established in
recognition of Mr. Nye's election as Chief Executive and was based upon the
Committee's subjective evaluation of the information described herein.
In discharging its responsibilities with respect to establishing executive
compensation, the Committee normally considers such matters at its May meeting
held in conjunction with the Annual Meeting of Shareholders. Although Company
management may be present during Committee discussions of officers'
compensation, Committee decisions with respect to the compensation of the
President and Chief Executive and the Chairman of the Board are reached in
private session without the presence of any member of Company management.
14
<PAGE>
Section 162(m) of the Code limits the deductibility of compensation which a
publicly traded corporation provides to its most highly compensated officers.
As a general policy, the Company does not intend to provide compensation which
is not deductible for federal income tax purposes. Awards under the AIP in
1996 and subsequent years are expected to be fully deductible, and the DICP
and the Salary Deferral Program have been amended to require the deferral of
distributions of amounts earned in 1995 and subsequent years until the time
when such amounts would be deductible. Awards provided under the AIP in 1995
and distributions under the DICP and the Salary Deferral Program which were
earned in plan years prior to 1995, may not be fully deductible but such
amounts are not expected to be material.
Shareholder comments to the Committee are welcomed and should be addressed
to the Secretary of the Company at the Company's offices.
ORGANIZATION AND COMPENSATION COMMITTEE
James A. Middleton, Chair Kerney Laday
Jack W. Evans Margaret N. Maxey
Bayard H. Friedman Charles R. Perry
William M. Griffin Herbert H. Richardson
15
<PAGE>
PERFORMANCE GRAPH
The following graph compares the performance of the Company's common stock to
the S&P 500 Index and to the Moody's 24 Utilities for the last five years. The
graph assumes the investment of $100 at December 31, 1990 and that all
dividends were reinvested. The amount of the investment at the end of each year
is shown in the graph and in the table which follows.
CUMULATIVE TOTAL RETURNS FOR THE FIVE YEARS ENDED 12/31/95
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
-----------------------------
1990 1991 1992 1993 1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Texas Utilities................................... 100 123 135 147 119 166
- --------------------------------------------------------------------------------
S&P 500 Index..................................... 100 131 140 154 156 216
- --------------------------------------------------------------------------------
Moody's 24 Utilities.............................. 100 129 135 149 126 166
- --------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
SELECTION OF AUDITORS
The Audit Committee has nominated to the Board of Directors for its
consideration the firm of Deloitte & Touche LLP to act as independent auditors
for the Company for the year 1996 and, subject to the approval of shareholders
at the annual meeting, the Board has selected that firm to audit the books of
account and records of the Company and to make a report thereon to the
shareholders. The persons named in the proxy will, unless otherwise instructed
thereon, vote your shares in favor of the following resolution which will be
submitted for consideration:
RESOLVED that the selection of the firm of Deloitte & Touche LLP,
independent auditors, to audit the books of account and records of the
Company for the year 1996, to make a report thereon "To the
Shareholders of Texas Utilities Company," and to perform other
services, be, and it hereby is, approved.
The firm of Deloitte & Touche LLP, independent auditors, has been the
outside auditors for the Company since its organization in 1945 and for
certain of the subsidiaries since 1932, including the last fiscal year.
Representatives of Deloitte & Touche LLP are expected to be present at the
annual meeting and will have the opportunity to make a statement, if they
desire to do so, and to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF AUDITORS.
---
OTHER BUSINESS
Other than as stated herein, the Board of Directors does not intend to bring
any business before the meeting and it has not been informed of any matters
that may be presented to the meeting by others. However, if any other matters
properly come before the meeting, it is the intent of the Board of Directors
that the persons named in the proxy will vote pursuant to the proxy in
accordance with their judgment in such matters.
Dated: April 1, 1996.
--------------------------------------------------------
| WHETHER OR NOT YOU WILL BE ABLE TO ATTEND THE MEETING, |
| PLEASE SIGN AND RETURN THE ACCOMPANYING PROXY PROMPTLY.|
--------------------------------------------------------
17
<PAGE>
[LOGO OF TEXAS UTILITIES COMPANY APPEARS HERE]
----------------------------------------------
NOTICE OF
ANNUAL MEETING
OF SHAREHOLDERS
AND
PROXY STATEMENT
----------------------------------------------
TIME:
FRIDAY, MAY 17, 1996, AT 9:30 A.M.
PLACE:
GRAND BALLROOM
HARVEY HOTEL/DOWNTOWN
LIVE OAK AND OLIVE STREETS
DALLAS, TEXAS 75201
---------------------------------
| Whether or not you will be able |
| to attend the meeting, please |
| sign and return the enclosed |
| proxy promptly so that you may |
| be represented at the meeting. |
---------------------------------
<PAGE>
PROXY
[LOGO OF TEXAS UTILITIES COMPANY APPEARS HERE]
ENERGY PLAZA
1601 Bryan Street
Dallas, TX 75201-3411
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints J.S. Farrington and Erle Nye, and each of
them, Proxies with power to appoint a substitute, and hereby authorizes them to
represent and to vote all shares of common stock of Texas Utilities Company held
of record by the undersigned on March 18, 1996 at the annual meeting of
shareholders of the Company to be held in the Grand Ballroom of the Harvey
Hotel/Downtown, Live Oak and Olive Streets, Dallas, Texas, on Friday, May 17,
1996, and at any adjournments thereof, and to vote, as directed on the reverse
side of this card, on all specified matters coming before said meeting, and in
their discretion, upon such other matters not specified as may come before said
meeting.
(Continued, and to be signed and dated, on reverse side)
<PAGE>
This proxy when properly executed will be voted in the manner directed herein.
If no direction is made, this proxy will be voted FOR Items 1 and 2.
Please mark your votes as indicated in this example [ X ]
________________________________________________________________________________
DIRECTORS RECOMMEND A VOTE FOR ALL NOMINEES AND FOR ITEM 2.
1. Election of Directors: FOR WITHHELD
[ ] [ ]
NOMINEES:
J.S. FARRINGTON JAMES A MIDDLETON
BAYARD H. FRIEDMAN ERLE NYE
WILLIAM M. GRIFFIN J.E. OESTERREICHER
KERNEY LADAY CHARLES R. PERRY
MARGARET N. MAXEY HERBERT H. RICHARDSON
For, except vote withheld from the following nominee(s):
________________________________________________________________
2. Approval of Auditors - Deloitte & Touche LLP FOR AGAINST ABSTAIN
[ ] [ ] [ ]
________________________________________________________________________________
NOTE: Please sign names exactly as printed hereon. Joint owners should each
sign. In signing as attorney, administrator, executor, guardian or trustee,
please give full title as such. Receipt is acknowledged of the Annual Report of
the Company for 1995, notice of meeting and proxy statement.
Signature(s)____________________________________ Date_____________________
