<PAGE>
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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
-- OR --
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
--------------------------------
<TABLE>
<CAPTION>
COMMISSION EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER; I.R.S. EMPLOYER
FILE NUMBER ADDRESS OF PRINCIPAL EXECUTIVE OFFICES; AND TELEPHONE NUMBER IDENTIFICATION NO.
- ----------- ------------------------------------------------------------ ------------------
<S> <C> <C>
1-3591 TEXAS UTILITIES COMPANY 75-0705930
Energy Plaza, 1601 Bryan Street
Dallas, Texas 75201-3411
(214) 812-4600
0-11442 TEXAS UTILITIES ELECTRIC COMPANY 75-1837355
Energy Plaza, 1601 Bryan Street
Dallas, Texas 75201-3411
(214) 812-4600
</TABLE>
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON
REGISTRANT TITLE OF EACH CLASS WHICH REGISTERED
---------- ------------------- ------------------------
<S> <C> <C>
Texas Utilities Company Common Stock, without par value New York Stock Exchange
The Chicago Stock Exchange
The Pacific Stock Exchange
Texas Utilities Electric Company Depositary Shares, each representing New York Stock Exchange
1/4 of a share of $8.20 Cumulative Preferred
Stock, without par value
Texas Utilities Electric Company Depositary Shares, Series A, each representing New York Stock Exchange
1/4 of a share of $7.50 Cumulative Preferred
Stock, without par value
Texas Utilities Electric Company Depositary Shares, Series B, each representing New York Stock Exchange
1/4 of a share of $7.22 Cumulative Preferred
Stock, without par value
TU Electric Capital I, a subsidiary 8.25% Trust Originated Preferred Securities New York Stock Exchange
of Texas Utilities Electric Company
TU Electric Capital II, a subsidiary 9.00% Trust Originated Preferred Securities New York Stock Exchange
of Texas Utilities Electric Company
TU Electric Capital III, a subsidiary 8.00% Quarterly Income Preferred Securities New York Stock Exchange
of Texas Utilities Electric Company
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Preferred Stock of Texas Utilities Electric Company, without par value
------------------------------------
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
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Aggregate market value of Texas Utilities Company Common Stock held by non-
affiliates, based on the last reported sale price on the composite tape on
February 28, 1997: $9,064,605,462
Aggregate market value of Texas Utilities Electric Company Common Stock held by
non-affiliates: None
Common Stock outstanding at February 28, 1997: Texas Utilities Company -
224,602,557 shares,
without par value
Texas Utilities Electric
Company - 156,800,000 shares,
without par value
------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement pursuant to Regulation 14A, which
will be mailed to the Commission for filing on or about April 1, 1997, are
incorporated by reference into Part III of this report.
------------------------------------
THIS COMBINED FORM 10-K 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
FINANCIAL STATEMENTS OF TEXAS UTILITIES ELECTRIC COMPANY, IS FILED BY EACH OF
TEXAS UTILITIES ELECTRIC COMPANY AND TEXAS UTILITIES COMPANY. NEITHER TEXAS
UTILITIES COMPANY NOR TEXAS UTILITIES ELECTRIC COMPANY MAKES REPRESENTATION AS
TO INFORMATION FILED BY THE OTHER REGISTRANT.
<PAGE>
TABLE OF CONTENTS
ITEM DESCRIPTION PAGE
- ---- ----------- ----
PART I
1 Business....................................................... 1
Texas Utilities Company and Subsidiaries..................... 1
Texas Utilities Electric Company and Subsidiaries............ 2
Peak Load and Capability..................................... 3
Fuel Supply and Purchased Power.............................. 4
Regulation and Rates......................................... 7
Competition.................................................. 10
Environmental Matters........................................ 12
2 Properties..................................................... 14
Capital Expenditures......................................... 15
3 Legal Proceedings.............................................. 16
4 Submission of Matters to a Vote of Security Holders............ 16
Executive Officers of the Company.............................. 16
PART II
5 Market for Each Registrant's Common Equity and
Related Stockholder Matters.................................. 17
6 Selected Financial Data........................................ 18
7 Management's Discussion and Analysis of Financial
Condition and Results of Operation........................... 22
8 Financial Statements and Supplementary Data.................... 30
9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure....................... 67
PART III
10 Directors and Executive Officers of Each Registrant............ 67
11 Executive Compensation......................................... 69
12 Security Ownership of Certain Beneficial Owners
and Management............................................... 75
13 Certain Relationships and Related Transactions................. 75
PART IV
14 Exhibits, Financial Statement Schedules and
Reports on Form 8-K.......................................... 76
<PAGE>
PART I
ITEM 1. BUSINESS
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
Texas Utilities Company (Company) was incorporated under the laws of the
State of Texas in 1945 and has perpetual existence under the provisions of the
Texas Business Corporation Act. The Company is a holding company which owns all
of the outstanding common stock of Texas Utilities Electric Company and
Subsidiaries (TU Electric), the principal subsidiary of the Company,
Southwestern Electric Service Company (SESCO), and Texas Utilities Australia
Pty. Ltd. (TU Australia). The Company also has seven other wholly-owned
subsidiaries which perform specialized functions within the Texas Utilities
Company system. The Company and all of its subsidiaries are referred to herein
as "System Companies". References herein to TU Electric include its financing
subsidiaries, TU Electric Capital I, II, III, IV and V.
The Company holds no franchises other than its corporate franchise. TU
Electric, SESCO and TU Australia possess all of the necessary franchises,
licenses and certificates required to enable them to conduct their respective
businesses (see Regulation and Rates).
For information concerning TU Electric, the principal subsidiary of the
Company, see TU Electric below.
In April 1996, the Company announced that it had entered into a merger
agreement with Dallas-based ENSERCH Corporation (ENSERCH). Under the terms of
the agreement, Lone Star Gas Company (Lone Star Gas) and Lone Star Pipeline
Company (Lone Star Pipeline), the local distribution and pipeline divisions of
ENSERCH, and other businesses, excluding Enserch Exploration Inc. (EEX), a
subsidiary of ENSERCH, will be acquired by a new holding company, which will be
named Texas Utilities Company and will own all of the common stock of ENSERCH
and the Company. Shares of the Company's common stock will be automatically
converted into shares of the new holding company common stock on a one-for-one
basis in a tax-free transaction. Lone Star Gas is 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 has one of the largest pipelines in the
United States that consists of 9,200 miles of gathering and transmission
pipelines in Texas. Also included in the acquisition are ENSERCH's subsidiaries
engaged in natural gas processing, natural gas marketing and independent power
production. The new holding company is expected to issue approximately $550
million of the new holding company's common stock to ENSERCH shareholders, and
approximately $1.15 billion of ENSERCH's debt and preferred stock would remain
outstanding after the merger. The transaction is subject to certain conditions
which include the approval by the Securities and Exchange Commission (SEC) and
receipt by ENSERCH of a favorable tax ruling from the Internal Revenue Service
(IRS) to the effect that its distribution of EEX stock is a tax-free
transaction. ENSERCH received this IRS ruling on March 6, 1997. The transaction
was approved at special meetings of the shareholders of ENSERCH, EEX and the
Company held separately on November 15, 1996. The Texas Railroad Commission
(TRC) has been notified of the proposed transaction and has indicated no
objection to it. On March 7, 1997, the Antitrust Division of the U.S. Department
of Justice notified the SEC that it had closed its investigation of the proposed
transaction and indicated that no further action would be required. The
acquisition of ENSERCH will be accounted for as a purchase business combination.
SESCO is engaged in the purchase, transmission, distribution and sale of
electric energy in ten counties in the eastern and central parts of Texas with a
population estimated at 126,900. SESCO generates no electric energy.
TU Australia owns all of the common stock of Eastern Energy Limited
(Eastern Energy), one of five Australian electricity distribution companies
operating in Victoria, Australia. Eastern Energy is engaged in the purchase,
distribution, marketing and sale of electric energy to approximately 481,000
customers in a 31,000 square mile service area extending from the outer eastern
suburbs of the Melbourne metropolitan area to the eastern coastal areas of
Victoria and north to the New South Wales border. Eastern Energy generates no
electric energy. References herein to TU Australia include its subsidiary,
Eastern Energy.
For consolidated energy sales and operating revenues contributed by TU
Electric, SESCO and TU Australia for each customer classification, see Item 6.
Selected Financial Data - Texas Utilities Company and Subsidiaries -Consolidated
Operating Statistics.
1
<PAGE>
Texas Utilities Fuel Company (Fuel Company) owns a natural gas pipeline
system, acquires, stores and delivers fuel gas and provides other fuel services
at cost for the generation of electric energy by TU Electric.
Texas Utilities Mining Company (Mining Company) owns, leases and operates
fuel production facilities for the surface mining and recovery of lignite at
cost for the generation of electric energy by TU Electric.
Texas Utilities Services Inc. (TU Services) provides financial, accounting,
information technology, environmental services, customer services, procurement,
personnel and other administrative services at cost to the System Companies. TU
Services acts as transfer agent, registrar and dividend paying agent with
respect to the common stock of the Company, the preferred stock and preferred
securities of TU Electric, and as agent for participants under the Company's
Automatic Dividend Reinvestment and Common Stock Purchase Plan.
Texas Utilities Properties Inc. owns, leases and manages real and personal
properties, primarily the Company's corporate headquarters.
Texas Utilities Communications Inc. was organized to provide access to
advanced telecommunications technology, primarily for the System Companies'
expected expansion of the energy services business.
Basic Resources Inc. was organized for the purpose of developing natural
resources, primarily energy sources and other business opportunities.
Chaco Energy Company (Chaco) was organized to own and operate facilities
for the acquisition, production, sale and delivery of coal and other fuels and
currently leases extensive coal reserves.
At December 31, 1996, the System Companies had 11,451 full-time employees.
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
TU Electric was incorporated under the laws of the State of Texas in 1982
and has perpetual existence under the provisions of the Texas Business
Corporation Act. TU Electric is an electric utility engaged in the generation,
purchase, transmission, distribution and sale of electric energy wholly within
the State of Texas. TU Electric possesses all of the necessary franchises and
certificates required to enable it to conduct its business (see Regulation and
Rates). TU Electric is the principal subsidiary of the Company.
TU Electric's service area is located in the north central, eastern and
western parts of Texas, with a population estimated at 5,890,000 -- about one-
third of the population of Texas. Electric service is provided in 91 counties
and 372 incorporated municipalities, including Dallas, Fort Worth, Arlington,
Irving, Plano, Waco, Mesquite, Grand Prairie, Wichita Falls, Odessa, Midland,
Carrollton, Tyler, Richardson and Killeen. The area is a diversified commercial
and industrial center with substantial banking, insurance, communications,
electronics, aerospace, petrochemical and specialized steel manufacturing, and
automotive and aircraft assembly. The territory served includes major portions
of the oil and gas fields in the Permian Basin and East Texas, as well as
substantial farming and ranching sections of the State. Its service territory
also includes the Dallas-Forth Worth International Airport and the Alliance
Airport. For energy sales and operating revenues contributed by each customer
classification, see Item 6. Selected Financial Data -- Texas Utilities Electric
Company and Subsidiaries -- Consolidated Operating Statistics.
At December 31, 1996, TU Electric had 6,474 full-time employees.
2
<PAGE>
PEAK LOAD AND CAPABILITY
THE COMPANY AND TU ELECTRIC
- ---------------------------
The peak load and net capability for the System Companies includes
those for TU Electric contained in the chart below in addition to the peak loads
for SESCO and Eastern Energy. Peak load was 249 megawatts (MW) on July 23, 1996
for SESCO and 910 MW on July 15, 1996 for Eastern Energy. SESCO and TU
Australia generate no electric energy.
TU Electric's net capability, peak load and reserve, in MW, at the
time of peak were as follows during the years indicated:
<TABLE>
<CAPTION>
PEAK LOAD (a)
----------------------
INCREASE
(DECREASE) FIRM
NET OVER PEAK
YEAR CAPABILITY AMOUNT PRIOR YEAR LOAD RESERVE(b)
---- --------------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C>
1996... 22,389(c)(d)(e) 19,668 2.5% 18,930 3,459
1995... 22,469(d)(e)(f) 19,180 6.4 18,631 3,619
1994... 22,350(e)(g) 18,030 (1.6) 17,515 4,835
</TABLE>
- -----------------------
(a) The 1996 peak load occurred on July 8. TU Electric's peak load includes
interruptible load at the time of peak of 738 MW in 1996, 744 MW in 1995
and 656 MW in 1994.
(b) Amount of net capability in excess of firm peak load at the time of peak.
(c) Included in net capability is 1,164 MW of firm purchased capacity, all of
which is cogeneration and small power production.
(d) In December 1995, TU Electric adjusted the net generating capabilities of
its existing fossil-fueled generating units to more closely reflect actual
operating capability. Included in net capability is the adjustment
amounting to a net increase of 219 MW.
(e) In November 1993, the emissions chimney serving Unit 3 (750 MW) of the
Monticello lignite-fueled generating station collapsed, rendering the unit
inoperable. The unit was rebuilt and returned to service in June 1995.
Such unit is included in net capability.
(f) Included in net capability is 1,244 MW of firm purchased capacity, of which
1,164 MW is cogeneration and small power production.
(g) Included in net capability is 1,344 MW of firm purchased capacity, of which
1,264 MW is cogeneration and small power production. In 1994, one 70 MW
natural gas-fueled unit was retired.
TU ELECTRIC
- -----------
The peak load changes for 1996 as compared to 1995 resulted primarily
from customer growth and warmer temperatures. The peak load changes for 1995 and
1994, compared in each case to the prior year, resulted primarily from customer
growth and weather factors. TU Electric expects to continue to purchase capacity
in the future from various sources. (See Fuel Supply and Purchased Power and
Note 15 to Consolidated Financial Statements.) Firm peak load increases over the
next ten years are expected to average approximately 2% annually, after
consideration of load management programs (including interruptible contracts).
Changes in utility regulation and legislation at the federal and state
levels such as the Public Utility Regulatory Policy Act of 1978 (PURPA), the
National Energy Policy Act of 1992 (Energy Policy Act) and the 1995 amendments
to the Public Utility Regulatory Act (PURA) in Texas have significantly changed
the way in which utilities plan for new resources. TU Electric believes the
results of competitive resource solicitations will be a major factor in
determining future resource additions to serve customer loads. Thus, for
planning purposes, TU Electric can no longer readily identify the ownership and
types of resources to include in its plan before the actual solicitation and
selection of those resources. TU Electric has decided to reflect this
uncertainty through the use of the term "Unspecified Resources." Except for
known contracts, all potential new resource needs are designated as "Unspecified
Resources."
In October 1994, TU Electric filed an application for approval by the
Public Utility Commission of Texas (PUC) of certain aspects of its Integrated
Resource Plan (IRP) for the ten year period 1995 - 2004. The IRP, developed as
an experimental pilot project in conjunction with regulatory and customer
groups, included the acquisition of electric energy through a competitive
bidding process of third party-supplied demand-side management resources and
renewable resources. In August 1995, the PUC remanded the case to an
Administrative Law Judge for development of a solicitation plan and to more
closely conform the TU Electric 1995 IRP to new state legislation that required
the PUC to adopt a state-wide integrated resource planning rule by September 1,
1996. In January 1996, TU Electric filed an updated IRP with the PUC along
with a proposed plan for the solicitation of resources through a competitive
bidding process. The PUC issued its final order on TU Electric's IRP in October
1996, and modified the order in
3
<PAGE>
December 1996 and February 1997. The modified order approved a flexible
solicitation plan that will allow TU Electric to conduct up to three optional
resource solicitations for a total of 2,074 MW of demand-side and supply-side
resources prior to the filing of its next IRP in June 1999. TU Electric is
currently reviewing the need and timing for conducting the first of these
resource solicitations.
In addition to its solicitation plan in the IRP docket, TU Electric
requested and received approval from the PUC to expand its Power Cost Recovery
tariff to provide current cost recovery of resource acquisition costs for
demand-side management resources acquired in the solicitations to the extent
such costs are not currently reflected in TU Electric's base rates. The PUC also
approved cost recovery for eight previously approved demand-side management
contracts entered into by TU Electric.
RESOURCE ESTIMATES
The resource additions identified in TU Electric's 1997 ten year forecast
are as follows:
<TABLE>
<CAPTION>
1997-2006
------------------
FIRM
CAPABILITY
RESOURCE ADDITIONS (MW) PERCENT
------------------ ---------- -------
<S> <C> <C>
Load Management(a).................................... 714 15.4%
Renewable Resources(b)................................ 4 0.1
Unspecified Resources................................. 3,903 84.5
----- -----
Total.............................................. 4,621 100.0%
===== =====
</TABLE>
- -----------------------
(a) TU Electric has negotiated and signed contracts with eight suppliers of
demand-side management services designed to displace a total of 72 MW by
2004.
(b) TU Electric has negotiated and signed one purchased power contract for 40
MW (4 MW firm) of wind-powered resources to be placed in service during
1998.
FUEL SUPPLY AND PURCHASED POWER
GENERAL
THE COMPANY AND TU ELECTRIC
- ---------------------------
Net input for the System Companies during 1996 totalled 106,254 million
kilowatt-hours (kWh) of which 88,130 million kWh were generated by TU Electric.
Average fuel and purchased power cost (excluding capacity charges) per kWh of
net input for the Company and TU Electric were 1.94 and 1.79 cents for 1996,
1.64 and 1.62 cents for 1995 and 1.76 and 1.76 cents for 1994, respectively. The
Company's increase for 1996 primarily reflects increased natural gas costs and
decreased nuclear generation for TU Electric, and the inclusion of Eastern
Energy. A comparison of TU Electric's resource mix for net kWh input and the
unit cost per million British thermal units (Btu) of fuel during the last three
years is as follows:
<TABLE>
<CAPTION>
MIX FOR NET UNIT COST
KWH INPUT PER MILLION BTU
----------------------- ------------------
1996 1995 1994 1996 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Fuel for Electric Generation:
Gas/Oil (a)....................... 33.0% 33.4% 34.5% $2.66 $2.31 $2.53
Lignite/Coal (b).................. 39.6 37.4 37.3 1.03 1.02 1.04
Nuclear........................... 15.0 17.9 15.7 0.56 0.59 0.67
----- ----- ----- ----- ---- ----
Total/Weighted Average Fuel Cost.. 87.6 88.7 87.5 $1.58 $1.43 $1.58
Purchased Power (c)................. 12.4 11.3 12.5
----- ----- -----
Total.......................... 100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
- -----------------------
(a) Fuel oil was an insignificant component of total fuel and purchased power
requirements.
(b) Lignite cost per ton to TU Electric was $13.22 in 1996, $13.05 in 1995 and
$13.34 in 1994.
(c) Excludes SESCO's and Eastern Energy's purchased power: 1996 - 616 million
kWh and 5,090 million kWh, respectively; 1995 - 865 million kWh and 335
million kWh, respectively.
4
<PAGE>
TU Electric, SESCO and Eastern Energy are unable to predict: (i) whether or
not problems may be encountered in the future in obtaining the fuel and
purchased power each will require, (ii) the effect upon operations of any
difficulty any of them may experience in protecting rights to fuel and purchased
power now under contract, or (iii) the cost of fuel and purchased power. The
reasonable costs of fuel and purchased power of TU Electric and SESCO are
generally recoverable subject to the rules of the PUC. (See Regulation and Rates
for information pertaining to the method of recovery of purchased power and fuel
costs.)
GAS/OIL
TU ELECTRIC
- -----------
Fuel gas for units at nineteen of the principal generating stations of TU
Electric, having an aggregate net gas/oil capability of 13,100 MW, was provided
during 1996 by Fuel Company. Fuel Company supplied approximately 21% of such
fuel gas requirements under contracts with producers at the wellhead and under
other contracts with dedicated reserves and 79% under contracts with commercial
suppliers.
THE COMPANY
- -----------
Fuel Company has acquired under contracts expiring at intervals through
2008, with producers at the wellhead, supplies of gas that are generally
expected to be produced over a ten to fifteen year period. As gas production
under contract declines and contracts expire, new contracts are expected to be
negotiated to replenish or augment such supplies. Fuel Company has negotiated
gas purchase contracts, with terms ranging from one to twenty years, with a
number of commercial suppliers. Additionally, Fuel Company has entered into a
number of short-term gas purchase contracts with other commercial suppliers at
spot market prices; however, these contracts typically do not provide for a firm
supply obligation from the seller or a firm purchase obligation from Fuel
Company. In the past, curtailments of gas deliveries have been experienced
during periods of winter peak gas demand; however, such curtailments have been
of relatively short duration, have had a minimal impact on operations and have
generally required utilization of fuel oil and gas storage inventories to
replace the gas curtailed. During 1996, no curtailments were experienced.
Fuel Company owns and operates an intrastate natural gas pipeline system
that extends from the gas-producing area of the Permian Basin in West Texas to
the East Texas gas fields and southward to the Gulf Coast area. This system
includes a one-half interest in a 36-inch pipeline that extends 395 miles from
the Permian Basin area of West Texas to a point of termination south of the
Dallas-Fort Worth area and has a total estimated capacity of 885 million cubic
feet per day with existing compression facilities. Additionally, Fuel Company
owns a 39% undivided interest in another 36-inch pipeline connecting to this
pipeline and extending 58 miles eastward to one of Fuel Company's underground
gas storage facilities. Fuel Company also owns and operates approximately 1,600
miles of various smaller capacity lines that are used to gather and transport
natural gas from other gas-producing areas. The pipeline facilities of Fuel
Company form an integrated network through which fuel gas is gathered and
transported to certain TU Electric generating stations for use in the generation
of electric energy.
Fuel Company also owns and operates three underground gas storage
facilities with a usable capacity of 27.2 billion cubic feet with approximately
17.5 billion cubic feet of gas in inventory at December 31, 1996. Gas stored in
these facilities currently can be withdrawn for use during periods of peak
demand to meet seasonal and other fluctuations or curtailment of deliveries by
gas suppliers. Under normal operating conditions, up to 400 million cubic feet
can be withdrawn each day for a ten-day period, with withdrawals at lower rates
thereafter.
Fuel oil is stored at eighteen of the principally gas-fueled generating
stations. At December 31, 1996, the System Companies had fuel oil storage
capacity sufficient to accommodate approximately 6.2 million barrels of oil,
with approximately 2.1 million barrels of oil in inventory.
LIGNITE/COAL
TU ELECTRIC
- -----------
Lignite is used as the primary fuel in two units at the Big Brown
generating station (Big Brown), three units at Monticello generating station
(Monticello), three units at the Martin Lake generating station (Martin Lake),
and one unit at the Sandow generating station (Sandow), having an aggregate net
capability of 5,825 MW. TU Electric's lignite units have been constructed
adjacent to surface minable lignite reserves. At the present time, TU Electric
owns in fee or has under lease an estimated 553 million tons of proven reserves
dedicated to the Big Brown, Monticello, and Martin Lake generating stations. TU
Electric also owns in fee or has under lease in excess of 270 million tons of
proven reserves not dedicated to specific generating stations. Mining Company
operates owned and/or leased equipment to
5
<PAGE>
remove the overburden and recover the lignite. One of TU Electric's lignite
units, Sandow Unit 4, is fueled from lignite deposits owned by Alcoa, which
furnishes fuel at no cost to TU Electric for that portion of energy generated
from such unit that is equal to the amount of energy delivered to Alcoa (see
Item 6. Selected Financial Data - Consolidated Operating Statistics).
Lignite production operations at Big Brown, Monticello, and Martin Lake are
accompanied by an extensive reclamation program that returns the land to
productive uses such as wildlife habitats, commercial timberland, and pasture
land. For information concerning federal and state laws with respect to surface
mining, see Environmental Matters.
TU Electric is currently supplementing TU Electric-owned lignite fuel at
its Monticello plant with western coal from the Powder River Basin (PRB) in
Wyoming. The coal is purchased and transported on an "as available, as required"
basis. Because current mine capacity in the PRB is greater than demand, ample
amounts of western coal are presently available at favorable prices. TU Electric
is also considering the use of western coal as a supplemental fuel at its other
existing lignite-fueled plants and as a long-term alternative fuel. For
information concerning applicable air quality standards, see Environmental
Matters.
THE COMPANY
- -----------
Chaco has a coal lease agreement for the rights to certain surface mineable
coal reserves located in New Mexico. The agreement encompasses a minimum of 228
million tons of coal with provisions for advance royalty payments to be made
annually through 2017. The Company has entered into a surety agreement to assure
the performance by Chaco with respect to this agreement. During 1996, certain
state and federal coal leases covering approximately 120 million tons of coal
were terminated. Because of the present ample availability of western coal at
favorable prices from other mines, Chaco has delayed plans to commence mining
operations, and accordingly, is reassessing its alternatives with respect to its
coal properties including seeking purchasers thereof. (See Item 2. Properties
and Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operation and Note 14 to Consolidated Financial Statements.)
NUCLEAR
TU ELECTRIC
- -----------
TU Electric owns and operates two nuclear-fueled generating units at the
Comanche Peak nuclear generating station (Comanche Peak), each of which is
designed for a net capability of 1,150 MW. (See Peak Load and Capability.)
The nuclear fuel cycle requires the mining and milling of uranium ore to
provide uranium oxide concentrate (U\\3\\O\\8\\), the conversion of U\\3\\O\\8\\
to uranium hexafluoride (UF\\6\\), the enrichment of the UF\\6\\ and the
fabrication of the enriched uranium into fuel assemblies. TU Electric has on
hand, or has contracted for, the raw materials and services it expects to need
for its nuclear units through future years as follows: uranium (2001),
conversion (2003), enrichment (2014), and fabrication (2002). Although TU
Electric cannot predict the future availability of uranium and nuclear fuel
services, TU Electric does not currently expect to have difficulty obtaining
U\\3\\O\\8\\ and the services necessary for its conversion, enrichment and
fabrication into nuclear fuel for years later than those shown above.
The Energy Policy Act has provisions for the recovery of a portion of the
costs associated with the decommissioning and decontamination of the gaseous
diffusion plants used to enrich uranium for fuel. These costs are being
recovered in annual fees paid to the United States Department of Energy (DOE) as
determined by the Secretary of Energy. The total annual assessment for all
domestic utilities is capped at $150 million per federal fiscal year assessable
for fifteen years. TU Electric's assessment for 1997, as calculated by the DOE,
is $973,000.
The Nuclear Waste Policy Act of 1982, as amended (NWPA), provides for the
development by the DOE of interim storage and permanent disposal facilities for
spent nuclear fuel and/or high level radioactive waste materials. In December
1996, the DOE notified program participants that it did not expect to meet its
obligation to begin acceptance of spent nuclear fuel by 1998. TU Electric is
unable to predict what impact, if any, the DOE delay will have on TU Electric's
future operations. Under provisions of the NWPA, funding for the program is
provided by a one-mill per kWh fee currently levied on electricity generated and
sold from nuclear reactors, including the Comanche Peak units.
Currently, TU Electric's onsite storage capability for spent nuclear fuel
is sufficient to accommodate the operation of Comanche Peak through the year
2001. TU Electric is currently pursuing options for increasing its storage
capability, subject to approval by the Nuclear Regulatory Commission (NRC).
6
<PAGE>
PURCHASED POWER
THE COMPANY AND TU ELECTRIC
- ---------------------------
In 1996, System Companies purchased a net of 18,119 million kWh or
approximately 17% of their energy requirements. TU Electric and SESCO had
available 1,337 MW of firm purchased capacity under contract. As a result of the
renewable resources solicitation that was part of the IRP filing, TU Electric
has negotiated a 15-year contract with a developer for the purchase of energy
produced from wind turbines equivalent to approximately 40 MW (or approximately
4 MW of firm capacity at peak) beginning in 1998. Recent changes in PURA and PUC
substantive rules require utilities to conduct solicitations for proposals to
provide new resources (both demand-side and supply-side) in developing their
integrated resource plans. Utility provided demand-side resources must be bid in
such solicitations. A utility will be allowed to construct new generating
facilities only if such measures will provide resources less costly than those
proposed in responses to the solicitations for proposals. Thus, it is very
likely that the Company will acquire additional amounts of purchased resources
in the future to adequately and reliably accommodate its customers' electrical
needs. For information concerning the IRP, see Peak Load and Capability and Note
13 to Consolidated Financial Statements.
Eastern Energy and the other distribution companies in Victoria purchase
their electric energy needs from a competitive power pool operated by a
statutory, independent corporation. While the spot price of electric energy from
the pool can vary substantially, Eastern Energy enters into hedging contracts
with electric energy generators and others to manage its exposure to such price
fluctuations (see Note 9 to Consolidated Financial Statements). Eastern Energy
also has arrangements with a number of cogenerators under which it is required
to purchase approximately 45 MW of capacity.
REGULATION AND RATES
THE COMPANY AND TU ELECTRIC
- ---------------------------
REGULATION
The Company is a holding company as defined in the Public Utility Holding
Company Act of 1935. However, the Company and all of its subsidiary companies
are exempt from the provisions of such Act, except Section 9(a)(2) which relates
to the acquisition of securities of public utility companies.
TU Electric and SESCO do not transmit electric energy in interstate
commerce or sell electric energy at wholesale in interstate commerce, or own or
operate facilities therefor, and their facilities are not connected directly or
indirectly to other systems which are involved in such interstate activities,
except during the continuance of emergencies permitting temporary or permanent
connections or under order of the Federal Energy Regulatory Commission (FERC)
exempting TU Electric and SESCO from jurisdiction under the Federal Power Act.
In view thereof, TU Electric and SESCO believe that they are not public
utilities as defined in the Federal Power Act and have been advised by their
counsel that they are not subject to general regulation under such Act.
The PUC has original jurisdiction over electric rates and service in
unincorporated areas and those municipalities that have ceded original
jurisdiction to the PUC and has exclusive appellate jurisdiction to review the
rate and service orders and ordinances of municipalities. Generally, PURA
prohibits the collection of any rates or charges (including charges for fuel) by
a public utility that does not have the prior approval of the PUC.
TU Electric is subject to the jurisdiction of the NRC with respect to
nuclear power plants. NRC regulations govern the granting of licenses for the
construction and operation of nuclear power plants and subject such plants to
continuing review and regulation.
Eastern Energy is subject to regulation by the Office of the Regulator
General (ORG). The ORG has the power to issue licenses for the supply,
distribution and sale of electricity within Victoria and regulates tariffs for
the use of the transmission system, distribution system, and other ancillary
services. The existing tariff under which Eastern Energy operates is in effect
through December 31, 2000. The ORG will review the existing tariff to be
effective after December 31, 2000.
The System Companies are also subject to various other federal, state and
local regulations. (See Environmental Matters.)
7
<PAGE>
TU ELECTRIC
- -----------
FUEL COST RECOVERY RULE
Pursuant to a PUC rule, the recovery of TU Electric's eligible fuel costs
is provided through fixed fuel factors. The rule allows a utility's fuel factor
to be revised upward or downward every six months, according to a specified
schedule. A utility is required to petition to make either surcharges or refunds
to ratepayers, together with interest based on a twelve month average of prime
commercial rates, for any material, as defined by the PUC, cumulative under- or
over-recovery of fuel costs. If the cumulative difference of the under- or over-
recovery, plus interest, is in excess of 4% of the annual estimated fuel costs
most recently approved by the PUC, it will be deemed to be material. In
accordance with PUC approvals, TU Electric has refunded to customers an
aggregate of approximately $154 million, including interest, in over-collected
fuel costs for the period June 1994 through September 1995. These over-
collections were primarily due to lower natural gas prices than previously
anticipated. In August 1994, TU Electric petitioned the PUC for a recovery of
approximately $93 million, including interest, in under-collected fuel costs for
the period July 1993 through June 1994. The PUC approved the recovery of this
amount through a surcharge to customers over a six-month period beginning in
January 1995. The PUC's approval of this surcharge and a previously approved
$147.5 million surcharge for fuel cost recovery for a prior period have been
appealed by certain intervenors to district courts of Travis County, Texas. In
those appeals, those parties are contending that the PUC is without authority to
allow a fuel cost surcharge without a hearing and resultant findings that the
costs are reasonable and necessary and that the prices charged to TU Electric by
supplying affiliates are no higher than the prices charged by those affiliates
to others for the same item or class of items. TU Electric is vigorously
defending its position in these appeals but is unable to predict their outcome.
The fuel cost recovery rule also contains a procedure for an expedited
change in the fixed fuel factor in the event of an emergency. Final
reconciliation of fuel costs must be made either in a reconciliation proceeding,
which may cover no more than three years and no less than one year, or in a
general rate case. In a final reconciliation, a utility has the burden of
proving that fuel costs under review were reasonable and necessary to provide
reliable electric service, that it has properly accounted for its fuel-related
revenues, and that fuel prices charged to the utility by an affiliate were
reasonable and necessary and not higher than prices charged for similar items by
such affiliate to other affiliates or nonaffiliates. In addition, for generating
utilities like TU Electric, the rule provides for recovery of purchased power
capacity costs through a power cost recovery factor (PCRF) with respect to
purchases from qualifying facilities, to the extent such costs are not otherwise
included in base rates. The energy-related costs of such purchases are included
in the fixed fuel factor. For non-generating utilities like SESCO, the rule
provides for the recovery of all costs of power purchased at wholesale
chargeable under rate schedules approved by a federal or state regulatory
authority and all amounts paid to qualifying facilities for the purchase of
capacity and/or energy, to the extent such costs are not otherwise included in
base rates. Penalties of up to 10% will be imposed in the event an emergency
increase has been granted when there was no emergency or when collections under
the PCRF exceed PCRF costs by 10% in any month or 5% in the most recent twelve
months.
FUEL RECONCILIATION PROCEEDING
On December 29, 1995, in accordance with PUC rules, TU Electric filed a
petition with the PUC seeking final reconciliation of all eligible fuel and
purchased power expenses incurred during the reconciliation period of July 1,
1992 through June 30, 1995, amounting to a total of $4.7 billion. In hearings
completed in December 1996, the PUC Staff recommended a disallowance of $71.9
million. TU Electric believes that all of its eligible fuel and purchase power
expenses have been prudently incurred and no amounts have been accrued for any
disallowance. A final decision is expected by mid-1997. TU Electric is unable to
predict the outcome of such proceeding; however, a disallowance, if any, will
result in a future loss, which could possibly have a material effect on TU
Electric's results of operation or cash flows.
In addition, and as permitted by the PUC rules, TU Electric is also seeking
an accounting order from the PUC that will allow certain costs incurred, and to
be incurred, to facilitate the use of coal as a supplemental fuel at Monticello
to be treated as eligible fuel costs and billed pursuant to TU Electric's fuel
cost factor. By incurring these expenses, TU Electric believes that it can
significantly improve the reliability of the supply of fuel to Monticello and
can, at the same time, lower the fuel costs that would be incurred in the
absence of these expenditures.
FLEXIBLE RATE INITIATIVES
TU Electric continues to offer flexible rates in over 160 cities with
original regulatory jurisdiction within its service territory (including the
cities of Dallas and Fort Worth) to existing non-residential retail and
wholesale customers that have viable alternative sources of supply and would
otherwise leave the system. TU Electric also continues to offer
8
<PAGE>
an economic development rider to attract new businesses and to encourage
existing customers to expand their facilities as well as an environmental
technology rider to encourage qualifying customers to convert to technologies
that conserve energy or improve the environment. TU Electric will continue to
pursue the expanded use of flexible rates when such rates are necessary to be
price-competitive.
DOCKET 9300
The PUC's final order (Order) in connection with TU Electric's January 1990
rate increase request (Docket 9300) was reviewed by the 250th Judicial District
Court of Travis County, Texas, and thereafter was appealed to the Court of
Appeals for the Third District of Texas and to the Supreme Court of Texas
(Supreme Court). As a result of such review and appeals, an aggregate of $909
million of disallowances with respect to TU Electric's reacquisitions of
minority owners' interests in Comanche Peak, which had previously been recorded
as a charge to the Company's and TU Electric's earnings, has been remanded to
the PUC for reconsideration on the basis of a prudent investment standard. On
remand, the PUC will also be required to reevaluate the appropriate level of TU
Electric's construction work in progress included in rate base in light of its
financial condition at the time of the initial hearing. In January 1997, the
Supreme Court denied a motion for rehearing on the Comanche Peak minority owners
issue filed by the original complainants. TU Electric cannot predict the outcome
of the reconsideration of the Order on remand by the PUC.
In its decision, the Supreme Court also affirmed the previous $472 million
prudence disallowance related to Comanche Peak. Since the Company and TU
Electric each has previously recorded a charge to earnings for this prudence
disallowance, the Supreme Court's decision did not have an effect on the
Company's or TU Electric's current financial position, results of operation or
cash flows.
DOCKET 11735
In July 1994, TU Electric filed a petition in the 200th Judicial District
Court of Travis County, Texas to seek judicial review of the final order of the
PUC granting a $449 million, or 9.0%, rate increase in connection with TU
Electric's January 1993 rate increase request of $760 million, or 15.3% (Docket
11735). Other parties to the PUC proceedings also filed appeals with respect to
various portions of the order. TU Electric is unable to predict the outcome of
such appeals.
DOCKET 15638
In May 1996, TU Electric filed with the PUC its transmission cost
information and tariffs for open-access wholesale transmission service (Docket
15638) in accordance with PUC rules adopted in February 1996. These tariffs also
provide for generation-related ancillary services necessary to support wholesale
transactions. Upon final PUC approval and the implementation of transmission
rates for each transmission provider within the Electric Reliability Council of
Texas (ERCOT), TU Electric's payments for transmission service will exceed its
revenues for providing transmission service. The PUC is required by the rules to
adopt a rate-moderation plan that will minimize the impact of the new pricing
mechanism for the first three years the rules are in effect. As such, the
current maximum impact on TU Electric for 1997 is a $4.26 million deficit,
which, in the opinion of TU Electric, is not expected to have a material effect
on its financial position, results of operation or cash flows. TU Electric
expects to have its open-access wholesale transmission tariff in place for
service within ERCOT in early 1997. (See Competition.)
OTHER
In connection with the PUC's regular earnings monitoring process, the PUC
Staff has advised the PUC that it believes TU Electric was earning in excess of
a reasonable rate of return and that it was engaged in discussions with TU
Electric concerning possible remedies for such perceived over-earnings. The city
of Sulphur Springs, Texas, which exercises original jurisdiction over TU
Electric's rates within that city's boundaries, has initiated an inquiry into
the reasonableness of TU Electric's rates. TU Electric is currently preparing
the information required by Sulphur Springs in connection with its inquiry. TU
Electric is unable to predict the outcome of either the discussions with the PUC
Staff or the inquiry of Sulphur Springs.
9
<PAGE>
COMPETITION
THE COMPANY AND TU ELECTRIC
- ---------------------------
GENERAL
As legislative, regulatory, economic and technological changes occur, the
energy and utility industries are faced with increasing pressure to become more
competitive while adhering to regulatory requirements. The level of competition
is affected by a number of variables, including price, reliability of service,
the cost of energy alternatives, new technologies and governmental regulations.
Federal legislation such as the PURPA and, more recently, the Energy Policy
Act, as well as initiatives in various states, encourage wholesale competition
among electric utility and non-utility power producers. Together with increasing
customer demand for lower-priced electricity and other energy services, these
measures have accelerated the industry's movement toward a more competitive
pricing and cost structure. Competition in the electric utility industry was
also addressed in the 1995 session of the Texas legislature. PURA was amended to
encourage greater wholesale competition and flexible retail pricing. PURA
amendments also require the PUC to report to the legislature, during each
legislative session, on competition in electric markets. Accordingly, PUC
reports were submitted to the Texas legislature in January 1997, recommending
that the legislature continue the process of expanding competition in the Texas
electricity markets, leading to expanded retail competition, and authorize the
PUC to take numerous steps toward that goal. The PUC further recommended that
full competition not occur prior to the year 2000 in order to provide an
environment through which both retail customers and utilities in Texas move more
smoothly to achieve the perceived benefits of competition. The PUC is seeking
guidance from the legislature and authority to address the issue of stranded
cost recovery. In advance of the implementation of full retail competition, the
PUC is requesting authority to create an Electric Service Reseller, a new entity
that purchases power from the incumbent utility, bundles electric service with
other services, and resells the power in the retail market. The PUC is also
requesting authority to: (i) approve or disapprove mergers and acquisitions of
Texas' electric utilities, (ii) allow alternative forms of regulation for
transmission and distribution services, (iii) mandate a minimum set of consumer
rights with regard to reliability, consumer protection and universal service,
(iv) address market power concerns, (v) use alternative fuel recovery
mechanisms, (vi) provide the PUC authority over regional reliability groups, and
(vii) develop rules for a framework of transitioning to full retail competition.
As a result of the shift in emphasis toward greater competition, large and
small industry participants are offering energy services and energy-related
products that are both economically and environmentally attractive to customers.
In Texas, aggressive marketing of competitive prices by rural electric
cooperatives, municipally-owned electric systems, and other energy providers who
are not subject to the traditional governmental regulation experienced by the
energy and utility industries has intensified competition within the state's
wholesale markets and, in multi-certificated areas, retail customer markets.
Furthermore, there is increasing pressure on utilities to reduce costs,
including the cost of power, and to tailor energy services to the specific needs
of customers. Such competitive pressures among electric utility and non-utility
power producers could result in the loss by TU Electric of customers and the
cost of certain of its assets becoming stranded costs (i.e., costs of assets
that may not be recoverable from customers as a result of competitive pricing).
To the extent stranded costs cannot be recovered from customers, it may be
necessary for such costs to be borne partially or entirely by shareholders. In
response to these competitive pressures, many utilities are implementing
significant restructuring and re-engineering initiatives designed to make them
more competitive. Since the implementation of an Operations Review and Cost
Reduction program in April 1992, the System Companies continue to take steps to
reduce costs by streamlining business processes and operating practices. (For
information pertaining to the effects of competition on the treatment of certain
regulatory assets and liabilities, see Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operation and Note 1 to
Consolidated Financial Statements.)
WHOLESALE MARKET
In the wholesale power market, TU Electric competes with a variety of
utilities and other suppliers, some of which are willing and able to sell at
rates below TU Electric's standard wholesale power service rate as approved by
the PUC. As a result, TU Electric has received notifications of termination of
approximately 750 MW of wholesale load through 1999. In 1996, wholesale revenues
represented about 3% of TU Electric's total consolidated operating revenues.
10
<PAGE>
Amendments to PURA made during the 1995 session of the Texas legislature
allow for wholesale pricing flexibility. While wholesale rates for electric
utilities are not deregulated, wholesale tariffs or contracts with charges less
than approved rates but greater than the utility's marginal cost may be approved
by the regulatory authority upon application by the utility. Competitive
wholesale power contracts have been successfully negotiated with two existing
customers, Lyntegar Electric Cooperative and Taylor Electric Cooperative, and
with the City of College Station, a new customer.
OPEN-ACCESS TRANSMISSION
In February 1996, pursuant to the 1995 amendments to PURA, the PUC adopted
rules requiring each electric utility in ERCOT to provide wholesale transmission
and related services to other utilities and non-utility power suppliers at
rates, terms and conditions that are comparable to those applicable to such
utility's use of its own transmission facilities.
Under the rules, the PUC established a transmission pricing mechanism
consisting of an ERCOT system-wide component and a distance-sensitive component.
The ERCOT system-wide component provides that each load-serving entity in ERCOT
will pay a share of the ERCOT-wide transmission cost of service based on the
entity's load. The distance-sensitive component provides that a distance-
sensitive rate will be paid to utilities that own transmission facilities, based
on the impact of transmitting generation resources to loads. The rates charged
for using the transmission system are designed to ensure that all market
participants pay on a comparable basis to use the system. While all users of the
transmission grid pay rates that are comparably designed, the impact on
individual users will differ.
In May 1996, TU Electric filed with the PUC, under Docket 15638, its
transmission cost information and tariffs for open-access wholesale transmission
service. These tariffs also provide for generation-related ancillary services
necessary to support wholesale transactions. Company-specific proceedings to
determine transmission rates were concluded in 1996, and in early 1997, TU
Electric is expected to have its open-access wholesale transmission tariff in
place for service within ERCOT. (See Regulation and Rates.)
As a result of the PUC rules, the organization and structure of ERCOT has
been changed to provide for equal governance among all wholesale electricity
market participants. These changes were made in order to facilitate wholesale
competition while ensuring continued reliability within ERCOT.
At the federal level, the Energy Policy Act empowers the FERC to require
utilities to provide transmission service for the delivery of wholesale power
from other power producers to qualified resellers, such as municipalities,
cooperatives and other utilities. In April 1996, the FERC issued Order No. 888
which requires all FERC-jurisdictional electric utilities to offer third parties
wholesale transmission services under an open-access tariff and provides a
framework for recovery of "legitimate, prudent and verifiable stranded costs"
resulting from the implementation of open-access wholesale transmission service.
RETAIL MARKET
TU Electric and SESCO are experiencing competition for retail load in areas
that are multi-certificated with rural electric cooperatives or municipal
utilities. Except in areas where there is multi-certification by the PUC, TU
Electric and SESCO currently have the exclusive right to provide electric
service to the public within their service areas.
In addition, some energy consumers have the ability to produce their own
electricity or to use alternative forms of energy. Industrial customers may also
be able to relocate their facilities to lower-cost service areas. To some
degree, there is competition among utilities with defined service areas to
attract and retain large customers. TU Electric and SESCO are pursuing efforts
to remain competitive through competitive pricing, economic development and
other initiatives. (See Regulation and Rates.)
Congress, as well as legislatures and regulatory commissions in several
states have begun to examine the possibility of mandated "retail wheeling," the
required delivery by an electric utility over its transmission and distribution
facilities of energy produced by another entity to retail customers in such
utility's service territory. If implemented, such access could allow a retail
customer to purchase electric service from any other electric service provider,
subject to the practical constraints of long distance transmission. To date,
retail wheeling has not been implemented in Texas; however, this issue is being
pursued again during the 1997 session of the Texas legislature and in the 105th
Congress.
11
<PAGE>
The Company and TU Electric do not anticipate any legislation being enacted
during the 1997 legislature to authorize competition in the retail market. The
Company and TU Electric cannot predict the ultimate outcome of the ongoing
efforts that are taking place to restructure the electric utility industry or
whether such outcome will have a material effect on their financial position,
results of operation or cash flows.
The energy supply franchise portion of Eastern Energy's business is
gradually being exposed to competition through a phase-in of customers' right to
choose their energy supplier. This phase-in is by customer class and is expected
to be complete by December 31, 2000, at which time all energy customers in
Victoria will have the right to choose their energy supplier. Eastern Energy is
required to offer distribution of electric energy in its service territory on
behalf of other electric suppliers and distribution companies to those customers
having a right to choose their supplier, and Eastern Energy can similarly supply
electric energy to such customers in other service territories by utilizing the
distribution networks of the distribution companies in those service
territories.
TU Electric, SESCO and Eastern Energy are not able to predict the extent of
future competitive developments or what impact, if any, such developments may
have on their operations.
ENVIRONMENTAL MATTERS
THE COMPANY AND TU ELECTRIC
- ---------------------------
GENERAL
The System Companies are subject to various federal, state and local
regulations dealing with air and water quality and related environmental
matters. (See Item 2. Properties - Capital Expenditures and Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operation for
environmental expenditures.)
AIR
Under the Texas Clean Air Act, the Texas Natural Resource Conservation
Commission (TNRCC) has jurisdiction over the permissible level of air
contaminant emissions from generating facilities located within the State of
Texas. In addition, the new source performance standards of the Environmental
Protection Agency (EPA) promulgated under the federal Clean Air Act, as amended
(Clean Air Act), which have also been adopted by the TNRCC, are applicable to
generating units, the construction of which commenced after August 17, 1971. TU
Electric's generating units have
been constructed to operate in compliance with current regulations and emission
standards promulgated pursuant to these Acts; however, due to variations in the
quality of the lignite fuel, operation of certain of the lignite-fueled
generating units at reduced loads is required from time to time in order to
maintain compliance with these standards.
The Clean Air Act includes provisions which, among other things, place
limits on the sulfur dioxide emissions produced by generating units. In addition
to the new source performance standards applicable to sulfur dioxide, the Clean
Air Act requires that fossil-fueled plants meet certain sulfur dioxide emission
allowances by 1995 (Phase I) and will require more restrictions on sulfur
dioxide emission allowances by 2000 (Phase II). TU Electric's generating units
were not affected by the Phase I requirements. The applicable Phase II
requirements currently are met by 52 out of the 56 of TU Electric's generating
units to which those requirements apply. Because the sulfur dioxide emissions
from the other four units are relatively low and alternatives are available to
enable these units to reduce sulfur dioxide emissions or utilize compensatory
reduction allowances achieved in other units, compliance with the applicable
Phase II sulfur dioxide requirements is not expected to have a significant
impact on TU Electric. In January 1993, the EPA issued its "core" regulations to
implement the sulfur dioxide reduction program. TU Electric is preparing
compliance plans in accordance with these regulations and expects these plans to
be implemented by January 1, 2000.
To meet these sulfur dioxide requirements, the Clean Air Act provides for
the annual allocation of sulfur dioxide emission allowances to utilities. Under
the Clean Air Act, utilities are permitted to transfer allowances within their
own systems and to buy or sell allowances from or to other utilities. The EPA
grants a maximum number of allowances annually to TU Electric based on the
amount of emissions from units in operation during the period 1985 through 1987.
The Clean Air Act also provides that TU Electric will be granted additional
annual allowances for Units 1 and 2 of the Twin Oak facility. TU Electric
intends to utilize internal allocation of emission allowances within its system
and, if cost effective, may purchase additional emission allowances to enable
both existing and future electric generating units to meet the requirements of
the Clean Air Act. TU Electric may also sell excess emission allowances. TU
Electric is unable to predict the extent to which it may generate excess
allowances or will be able to acquire allowances from others if needed but does
not anticipate any significant problems in keeping emissions within its allotted
allowances.
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<PAGE>
TU Electric's generating units meet the nitrogen oxide limits currently
required by the Clean Air Act. The TNRCC and the EPA have determined that the
requirements of the Clean Air Act for ozone nonattainment areas will not require
nitrogen oxide emission reductions at TU Electric's generating units in the
Dallas-Fort Worth area. The Clean Air Act also requires studies, which began in
1991, by the EPA to assess the potential for toxic emissions from utility
boilers. TU Electric is unable to predict either the results of such studies or
the effects of any subsequent regulations. Recently, the EPA proposed a more
stringent standard for ambient levels of ozone and of fine particulates. The
impact of these new standards, if adopted, is unknown at this time.
Only certain parts of the regulations implementing the Clean Air Act have
been published as final rules. Until more of these regulations have been
promulgated and specific state requirements developed, TU Electric will not be
able to fully determine the cost or method of compliance with these
requirements. TU Electric believes that it can meet the requirements necessary
to be in compliance with these provisions as they are developed. Estimates for
the capital requirements related to the Clean Air Act are included in TU
Electric's estimated construction expenditures. Any additional capital
expenditures, as well as any increased operating costs associated with new
requirements or compliance measures, are expected to be recoverable through
rates, as similar costs have been recovered in the past.
WATER
The TNRCC and the EPA have jurisdiction over all water discharges
(including storm water) from all System Companies' domestic facilities. The
System Companies' domestic facilities are presently in compliance with
applicable state and federal requirements relating to discharge of pollutants
into the water. TU Electric, Fuel Company, and Mining Company have obtained all
required waste water discharge permits from the TNRCC and the EPA for facilities
in operation and have applied for or obtained necessary permits for facilities
under construction. TU Electric, Fuel Company and Mining Company believe they
can satisfy the requirements necessary to obtain any required permits or
renewals.
OTHER
Diversion, impoundment and withdrawal of water for cooling and other
purposes are subject to the jurisdiction of the TNRCC. Certain System Companies,
including TU Electric, possess all necessary permits for these activities from
the TNRCC for their present operations.
Federal legislation regulating surface mining was enacted in August 1977
and regulations implementing the law have been issued. Mining Company's lignite
mining operations are currently regulated at the state level by the TRC, with
oversight by the United States Department of the Interior's Office of Surface
Mining, Reclamation and Enforcement. Surface mining permits have been issued for
current Mining Company operations that provide fuel for Big Brown, Monticello
and Martin Lake.
Treatment, storage and disposal of solid and hazardous waste are regulated
at the state level under the Texas Solid Waste Disposal Act (Texas Act) and at
the federal level under the Resource Conservation and Recovery Act of 1976, as
amended (RCRA) and the Toxic Substances Control Act (TSCA). The EPA has issued
regulations under the RCRA and TSCA, and the TNRCC and the RCT have issued
regulations under the Texas Act applicable to System Companies' domestic
facilities. The Company has registered its solid waste disposal sites and has
obtained or applied for such permits as are required by such regulations.
Under the federal Low-Level Radioactive Waste Policy Act of 1980, as
amended, the State of Texas is required to provide, either on its own or jointly
with other states in a compact, for the disposal of all low-level radioactive
waste generated within the state. The State of Texas is taking steps to site,
construct and operate a low-level radioactive waste disposal site by 1999 and
submitted a license application in March 1992 for such a facility. The license
application has been finalized and a contested Administrative Hearing on the
adequacy of the application is scheduled to begin in January 1998. The State of
Texas has agreed to a compact with the States of Maine and Vermont, which is
subject to ratification by Congress, for such a facility. Low-level waste
material will be shipped off-site as long as an alternate disposal site is
available. Otherwise the low-level waste material will be stored on-site. TU
Electric's on-site storage capacity is expected to be adequate until other
facilities are available.
Eastern Energy is subject to various Australian federal and Victorian state
environmental regulations, the most significant of which is the Victorian
Environmental Protection Act of 1970 (VEPA). VEPA regulates, in particular, the
discharge of waste into air, land and water, site contamination, the emission of
noise and the storage, recycling and disposal of solid and industrial waste.
VEPA establishes the Environmental Protection Authority (Authority) and grants
13
<PAGE>
the Authority a wide range of powers to control and prevent environmental
pollution. These powers include issuing approvals for construction of works
which may cause noise or emissions to air, water or land, waste discharge
licenses and pollution abatement notices. No licenses or works approvals from
the Authority are currently required for activities undertaken by Eastern
Energy.
ITEM 2. PROPERTIES
THE COMPANY AND TU ELECTRIC
- ---------------------------
The Company owns no utility plant or real property. At December 31,
1996, TU Electric owned or leased and operated the following generating units:
<TABLE>
<CAPTION>
ELECTRIC NET
GENERATING CAPABILITY
UNITS FUEL SOURCE (MW) %
- ---------- ----------- ---------- -------
<S> <C> <C> <C>
46 Natural Gas (a)........................ 12,105 57.0%
9 Lignite/Coal........................... 5,825 27.5
2 Nuclear................................ 2,300 10.8
15 Combustion Turbines (b)................ 975 4.6
10 Diesel................................. 20 0.1
------ -----
Total................................ 21,225 100.0%
====== =====
</TABLE>
- -----------------------
(a) Thirty-seven natural gas units are designed to operate on fuel oil for
short periods when gas supplies are interrupted or curtailed. Five natural
gas units are designed to operate on fuel oil for extended periods.
(b) Natural gas units leased and operated by TU Electric. Such units are
designed to operate on fuel oil for extended periods.
The principal generating facilities and load centers of TU Electric and
SESCO are connected by 3,863 circuit miles of 345,000 volt transmission lines
and 9,327 circuit miles of 138,000 and 69,000 volt transmission lines.
TU Electric is connected by six 345,000 volt lines to Houston Lighting &
Power Company; by three 345,000 volt, eight 138,000 volt and nine 69,000 volt
lines to West Texas Utilities Company; by two 345,000 volt and eight 138,000
volt lines to the Lower Colorado River Authority; by four 345,000 volt and eight
138,000 volt lines to the Texas Municipal Power Agency; by one asynchronous high
voltage direct current interconnection to Southwestern Electric Power Company;
and at several points with smaller systems operating wholly within Texas. SESCO
is connected to TU Electric by three 138,000 volt lines, ten 69,000 volt lines
and three lines at distribution voltage. TU Electric and SESCO are members of
ERCOT, an intrastate network of investor-owned entities, cooperatives, public
entities, non-utility generators and power marketers. ERCOT is the regional
reliability coordinating organization for member electric power systems in Texas
and is responsible for ensuring equal access to transmission service by all
wholesale market participants in the ERCOT region.
Eastern Energy's distribution network is comprised primarily of
subtransmission and distribution assets. It owns no generating or transmission
facilities. Eastern Energy's distribution system is interconnected with an
intrastate power network comprised of the operator of the electric energy pool,
Victorian Power Exchange, and each of the other distribution companies within
Victoria. Eastern Energy has entered into distribution system agreements with
each of the distribution businesses which share the boundaries of its
distribution area to provide for wheeling of electricity on behalf of those
distribution businesses and for the reciprocal provision of other distribution
services.
The generating stations and other important units of property of TU
Electric and SESCO are located on lands owned primarily in fee simple. The
greater portion of the transmission and distribution lines of TU Electric and
SESCO, and of the gas gathering and transmission lines of Fuel Company, has been
constructed over lands of others pursuant to easements or along public highways
and streets as permitted by law. The rights of the System Companies in the
realty on which their properties are located are considered by them to be
adequate for their use in the conduct of their business. Minor defects and
irregularities customarily found in titles to properties of like size and
character may exist, but any such defects and irregularities do not materially
impair the use of the properties affected thereby. TU Electric, SESCO, Fuel
Company and Eastern Energy have the right of eminent domain whereby they may, if
necessary, perfect or secure titles or gain access to privately held land used
or to be used in their operations. Utility plant of TU Electric and SESCO is
generally subject to the liens of their respective mortgages.
14
<PAGE>
CAPITAL EXPENDITURES
THE COMPANY AND TU ELECTRIC
- ---------------------------
The Company has taken steps to aggressively manage its construction
expenditures. Such construction expenditures for utility related activities,
excluding allowance for funds used during construction (see Note 1 to
Consolidated Financial Statements) are presently estimated at $513 million, $527
million and $556 million for the Company and $440 million, $470 million and $497
million for TU Electric for each of the years 1997, 1998, and 1999,
respectively. The System Companies are subject to federal, state and local
regulations dealing with environmental protection. (See Item 1. Business -
Environmental Matters.) Such expenditures for construction to meet the
requirements of environmental regulations at existing generating units are
estimated to be $10 million for 1997 (included in the 1997 construction
estimates noted above) and were approximately $14 million in 1996, $64 million
in 1995 and $40 million in 1994. Expenditures for non-utility property are
presently estimated to be $75 million, $44 million and $78 million for the
Company for each of the years 1997, 1998 and 1999, respectively. Expenditures
for nuclear fuel are presently estimated to be $66 million, $78 million and $115
million for the Company and TU Electric for each of the years 1997, 1998 and
1999, respectively.
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 in estimated construction costs and
dates of completion. Commitments in connection with the construction program are
generally revocable subject to reimbursement to manufacturers for expenditures
incurred or other cancellation penalties. (See Item 1. Business - Peak Load and
Capability.)
The Company 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.
For information regarding the financing of capital expenditures, see Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operation.
15
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
THE COMPANY
- -----------
The Antitrust Division of the U.S. Department of Justice submitted to the
Company a civil investigative demand (CID) in October 1995. This CID requests
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 have occurred in violation of certain
antitrust laws. While the Company intends to comply with requests within the
appropriate purview of the Department of Justice, it believes that it has not
violated such antitrust laws. The Company is unable to predict the outcome of
any such investigation and does not expect it to have a material effect on the
Company's financial position, results of operation or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
THE COMPANY
- -----------
A special meeting of the shareholders of the Company was held on November
15, 1996 for the purpose of approving an Amended and Restated Agreement and Plan
of Merger involving the Company and ENSERCH and the transactions contemplated
therein, including as described in the Joint Proxy Statement/Prospectus sent to
the shareholders of both companies on September 23, 1996, the merger of a wholly
owned subsidiary of TUC Holding Company, a new company owned 50% by the Company
and 50% by ENSERCH, with and into the Company, as a result of which the Company
will become a wholly owned subsidiary of TUC Holding Company. At the effective
time of the merger, TUC Holding Company will change its name to Texas Utilities
Company and the outstanding shares of the Company's Common Stock will be
converted into shares of TUC Holding Company Common Stock on a one-for-one
basis. Voting results of the special meeting were as follows: 173,214,638 shares
were voted FOR the proposal, 1,153,345 shares were voted AGAINST the proposal
and 1,196,009 shares ABSTAINED or were broker non-votes as to the proposal.
TU ELECTRIC
- -----------
None.
- -----------
EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
POSITIONS AND OFFICES DATE FIRST
PRESENTLY HELD ELECTED TO
(CURRENT TERM PRESENT BUSINESS EXPERIENCE
NAME OF OFFICER AGE EXPIRES MAY 23, 1997) OFFICE(S) (PRECEDING FIVE YEARS)
- --------------- --- --------------------- ---------- ---------------------
<S> <C> <C> <C> <C>
J. S. Farrington 62 Chairman and Director February 20, 1987 Same and Chief Executive of
the Company.
Erle Nye 59 President, Chief Executive May 19, 1995 Chairman of the Board and
and Director Chief Executive of TU Electric.
</TABLE>
There is no family relationship between either of the above named Executive
Officers.
16
<PAGE>
PART II
ITEM 5. MARKET FOR EACH REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
THE COMPANY
- -----------
The Company's common stock is listed on the New York, Chicago and Pacific
stock exchanges (symbol: TXU).
The price range of the common stock of the Company on the composite tape,
as reported by The Wall Street Journal, and the dividends paid, for each of the
calendar quarters of 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
Price Range Dividends Paid
---------------------------------------- --------------
Quarter Ended 1996 1995 1996 1995
- ------------- ------------------ ------------------ ----- -----
High Low High Low
------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
March 31...... $42 7/8 $38 7/8 $35 $30 1/8 $0.50 $0.77
June 30....... 42 3/4 38 1/2 36 1/8 31 5/8 0.50 0.77
September 30.. 43 3/4 39 3/8 35 32 5/8 0.50 0.77
December 31... 42 1/8 38 3/4 41 1/4 34 1/4 0.50 0.77
----- -----
$2.00 $3.08
===== =====
</TABLE>
The Company has declared common stock dividends payable in cash in each
year since its incorporation in 1945. The Board of Directors of the Company, at
its February 1997 meeting, declared a quarterly dividend of $0.525 a share,
payable April 1, 1997 to shareholders of record on March 7, 1997. For
information concerning the Company's dividend policy, see Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operation. Future
dividends may vary depending upon the Company's profit levels and capital
requirements as well as financial and other conditions existing at the time.
Reference is made to Note 5 to Consolidated Financial Statements regarding
limitations upon payment of dividends on common stock of TU Electric and SESCO.
The number of record holders of the common stock of the Company as of
February 28, 1997 was 87,303.
TU ELECTRIC
- -----------
All of TU Electric's common stock is owned by the Company. Reference is
made to Note 5 to Consolidated Financial Statements regarding limitations upon
payment of dividends on common stock of TU Electric.
17
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATISTICS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Total assets -- end of year............................... $ 21,375,707 $ 21,535,851 $ 20,893,408 $ 21,518,128 $ 19,428,568
- ------------------------------------------------------------------------------------------------------------------------------------
Utility plant - gross -- end of year...................... $ 24,931,239 $ 24,911,787 $ 24,206,351 $ 23,836,729 $ 23,043,778
Accumulated depreciation and amortization -- end of
year................................................... 6,496,724 5,857,580 5,228,423 4,710,398 4,251,002
Reserve for regulatory disallowances -- end of year..... 836,005 1,308,460 1,308,460 1,308,460 1,308,460
Construction expenditures (including allowance for
funds used during construction)......................... 434,139 434,338 444,245 871,450 1,136,971
- ------------------------------------------------------------------------------------------------------------------------------------
Capitalization -- end of year
Long-term debt.......................................... $ 8,668,111 $ 9,174,575 $ 7,888,413 $ 8,379,826 $ 7,931,981
TU Electric obligated, mandatorily redeemable,
preferred securities of subsidiary trusts holding
solely debentures of TU Electric...................... 381,311 381,476 -- -- --
Preferred stock of subsidiary:
Not subject to mandatory redemption................... 464,427 489,695 870,190 1,083,008 909,564
Subject to mandatory redemption....................... 238,391 263,196 387,482 396,917 418,748
Common stock equity..................................... 6,032,913 5,731,753 6,490,047 6,570,993 6,590,537
------------ ------------ ------------ ------------ ------------
Total................................................ $ 15,785,153 $ 16,040,695 $ 15,636,132 $ 16,430,744 $ 15,850,830
============ ============ ============ ============ ============
Capitalization ratios -- end of year
Long-term debt.......................................... 54.9% 57.2% 50.5% 51.0% 50.0%
TU Electric obligated, mandatorily redeemable,
preferred securities of subsidiary trusts holding
solely debentures of TU Electric....................... 2.4 2.4 -- -- --
Preferred stock of subsidiary........................... 4.5 4.7 8.0 9.0 8.4
Common stock equity..................................... 38.2 35.7 41.5 40.0 41.6
----- ----- ----- ----- -----
Total................................................ 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
- ------------------------------------------------------------------------------------------------------------------------------------
Embedded interest cost on long-term debt -- end of year... 8.1% 8.4% 8.7% 8.7% 9.2%
Embedded distribution cost on TU Electric obligated,
mandatorily redeemable, preferred securities of
subsidiary trusts holding solely debentures of TU
Electric -- end of year................................. 8.7% 8.6% --% --% --%
Embedded dividend cost on preferred stock of subsidiary
-- end of year........................................... 7.5% 7.4% 7.5% 7.6% 8.4%
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) before cumulative effect of a change
in accounting principle................................. $ 753,606 $ (138,645) $ 542,799 $ 368,660 $ 619,204
Cumulative effect of a change in accounting for unbilled
revenue (net of taxes of $41,679,000)................. -- -- -- -- 80,907
------------ ------------ ------------ ------------ ------------
Consolidated net income (loss)............................ $ 753,606 $ (138,645) $ 542,799 $ 368,660 $ 700,111
============ ============ ============ ============ ============
Dividends declared on common stock........................ $ 456,059 $ 634,613 $ 695,590 $ 682,438 $ 653,146
- ------------------------------------------------------------------------------------------------------------------------------------
Common stock data
Shares outstanding -- average........................... 225,159,846 225,841,037 225,833,659 221,555,218 214,850,225
Shares outstanding -- end of year....................... 224,602,557 225,841,037 225,841,037 224,345,422 217,316,054
Earnings (loss) per share (on average shares
outstanding):
Before cumulative effect of a change in accounting..... $ 3.35 $ (0.61) $ 2.40 $ 1.66 $ 2.88
Cumulative effect of a change in accounting
for unbilled revenue................................... -- -- -- -- 0.38
------------ ------------ ------------ ------------ ------------
Total earnings (loss) per average share.............. $ 3.35 $ (0.61) $ 2.40 $ 1.66 $ 3.26
============ ============ ============ ============ ============
Dividends declared per share............................ $ 2.025 $ 2.81 $ 3.08 $ 3.08 $ 3.04
Book value per share -- end of year..................... $ 26.86 $ 25.38 $ 28.74 $ 29.29 $ 30.33
Return on average common stock equity................... 12.8% (2.3)% 8.3% 5.6% 10.9%
Ratio of earnings to fixed charges:
Pre-tax................................................. 2.4 0.8 2.3 1.9 2.3
After-tax............................................... 2.0 0.9 1.9 1.6 2.0
Allowance for funds used during construction as
percent of consolidated net income...................... 1.7% --% 4.1% 71.4% 43.5%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Certain financial statistics for 1996 and 1995 were affected by the December
1995 acquisition of Eastern Energy; for the year 1995, were affected by
recording of the impairment of certain assets (see Note 14 to Consolidated
Financial Statements); and for the year 1993, were affected by TU Electric
recording a regulatory disallowance in a rate order issued by the Public Utility
Commission of Texas in Docket 11735 (see Note 13 to Consolidated Financial
Statements).
18
<PAGE>
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
CONSOLIDATED OPERATING STATISTICS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
ELECTRIC ENERGY GENERATED AND
PURCHASED (MWh)
<S> <C> <C> <C> <C> <C>
Generated -- net station output........... 88,129,637 83,876,565 81,320,922 79,105,495 74,652,339
Purchased and net interchange............. 18,119,171 11,880,174 12,551,167 12,785,246 11,417,251
----------- ---------- ---------- ---------- ----------
Total generated and purchased............ 106,248,808 95,756,739 93,872,089 91,890,741 86,069,590
Company use, losses and unaccounted for... 5,905,076 5,653,698 5,246,480 5,631,085 5,016,596
----------- ---------- ---------- ---------- ----------
Total electric energy sales.............. 100,343,732 90,103,041 88,625,609 86,259,656 81,052,994
=========== ========== ========== ========== ==========
ELECTRIC ENERGY SALES (MWh)
Residential............................... 35,855,314 31,284,477 30,460,307 30,504,991 27,524,621
Commercial................................ 27,946,728 25,899,942 25,073,687 24,269,456 23,176,888
Industrial................................ 25,755,045 23,586,291 23,154,145 21,586,803 21,278,889
Government and municipal.................. 6,161,150 5,752,800 5,619,135 5,427,436 5,080,440
----------- ---------- ---------- ---------- ----------
Total general business................... 95,718,237 86,523,510 84,307,274 81,788,686 77,060,838
Other electric utilities................. 4,625,495 3,579,531 4,318,335 4,470,970 3,992,156
----------- ---------- ---------- ---------- ----------
Total electric energy sales.............. 100,343,732 90,103,041 88,625,609 86,259,656 81,052,994
=========== ========== ========== ========== ==========
OPERATING REVENUES (thousands)
Base rate:
Residential.............................. $2,251,734 $1,920,087 $1,862,525 $1,704,766 $1,478,758
Commercial............................... 1,357,326 1,219,443 1,183,757 1,061,591 972,733
Industrial............................... 690,943 602,518 595,213 536,800 517,896
Government and municipal................. 322,013 287,674 283,783 245,458 209,426
----------- ---------- ---------- ---------- ----------
Total general business................. 4,622,016 4,029,722 3,925,278 3,548,615 3,178,813
Other electric utilities................. 146,358 117,904 155,389 149,289 137,051
----------- ---------- ---------- ---------- ----------
Total base rate revenues............... 4,768,374 4,147,626 4,080,667 3,697,904 3,315,864
Fuel revenue (including over/under-
recovered)............................... 1,670,844 1,418,211 1,513,929 1,657,331 1,540,667
Other operating revenues.................. 111,710 72,851 68,947 79,277 51,345
----------- ---------- ---------- ---------- ----------
Total operating revenues................ $6,550,928 $5,638,688 $5,663,543 $5,434,512 $4,907,876
=========== ========== ========== ========== ==========
ELECTRIC CUSTOMERS (end of year)
Residential............................... 2,558,025 2,504,128 2,053,235 2,020,667 1,952,916
Commercial................................ 274,076 267,579 225,479 221,422 210,185
Industrial................................ 49,390 49,558 21,673 21,954 21,969
Government and municipal................. 31,108 30,458 29,437 29,034 28,204
----------- ---------- ---------- ---------- ----------
Total general business................... 2,912,599 2,851,723 2,329,824 2,293,077 2,213,274
Other electric utilities................. 161 165 212 220 243
----------- ---------- ---------- ---------- ----------
Total electric customers................ 2,912,760 2,851,888 2,330,036 2,293,297 2,213,517
=========== ========== ========== ========== ==========
RESIDENTIAL STATISTICS (excludes
master-metered customers, kWh sales
and revenues)
Average annual kWh per customer.......... 13,551 12,003 14,192 14,594 13,463
Average revenue per kWh.................. 8.02c 8.08c 8.25c 7.56c 7.40c
- ----------------
Industrial classification includes
service to Alcoa-Sandow:
Electric energy sales (Mwh).............. 3,841,904 3,764,658 3,886,258 3,166,797 3,157,852
Operating revenues (thousands)........... $ 46,853 $ 47,739 $ 54,699 $ 53,352 $ 56,043
</TABLE>
Certain previously reported operating statistics have been reclassified to
conform to current classifications, and for 1996 and 1995, were affected by the
December 1995 acquisition of Eastern Energy.
19
<PAGE>
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATISTICS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total assets -- end of year.............................. $18,794,939 $19,003,374 $19,446,998 $19,870,990 $17,962,812
- ------------------------------------------------------------------------------------------------------------------------------------
Electric plant - gross -- end of year.................... $22,664,086 $22,747,860 $23,063,436 $22,680,508 $21,957,681
Accumulated depreciation and amortization -- end of
year................................................... 5,963,477 5,370,818 4,765,474 4,233,720 3,790,626
Reserve for regulatory disallowances -- end of year..... 836,005 1,308,460 1,308,460 1,308,460 1,308,460
Construction expenditures (including allowance for
funds used during construction)......................... 377,438 407,305 415,290 841,181 1,107,555
- ------------------------------------------------------------------------------------------------------------------------------------
Capitalization -- end of year
Long-term debt.......................................... $ 6,310,594 $ 7,212,070 $ 7,220,641 $ 7,607,090 $ 7,280,301
TU Electric obligated, mandatorily redeemable,
preferred securities of subsidiary trusts holding
solely debentures of TU Electric....................... 381,311 381,476 -- -- --
Preferred stock:
Not subject to mandatory redemption..................... 464,427 489,695 870,190 1,083,008 909,564
Subject to mandatory redemption......................... 238,391 263,196 387,482 396,917 418,748
Common stock equity..................................... 6,105,907 5,799,898 6,114,261 6,029,217 6,198,208
----------- ----------- ----------- ----------- -----------
Total............................................. $13,500,630 $14,146,335 $14,592,574 $15,116,232 $14,806,821
=========== =========== =========== =========== ===========
- ------------------------------------------------------------------------------------------------------------------------------------
Embedded interest cost on long-term debt --
end of year............................................. 8.3% 8.4% 8.7% 8.8% 9.2%
Embedded distribution cost on TU Electric obligated,
mandatorily redeemable, preferred securities of
subsidiary trusts holding solely debentures of
TU Electric -- end of year.............................. 8.7% 8.6% --% --% --%
Embedded dividend cost on preferred stock --
end of year............................................. 7.5% 7.4% 7.5% 7.6% 8.4%
- ------------------------------------------------------------------------------------------------------------------------------------
Consolidated income before cumulative effect of a change
in accounting principle................................. $ 862,695 $ 452,631 $ 658,192 $ 476,526 $ 740,216
Cumulative effect of a change in accounting for unbilled
revenue (net of taxes of $41,679,000)................. -- -- -- -- 80,907
----------- ----------- ----------- ----------- -----------
Consolidated net income.................................. $ 862,695 $ 452,631 $ 658,192 $ 476,526 $ 821,123
----------- ----------- ----------- ----------- -----------
Consolidated net income available for common stock....... $ 809,337 $ 367,717 $ 556,309 $ 361,294 $ 702,705
Dividends declared on common stock....................... $ 503,328 $ 682,080 $ 715,760 $ 707,382 $ 645,260
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of earnings to fixed charges:
Pre-tax................................................. 3.0 2.0 2.5 2.0 2.5
After-tax............................................... 2.5 1.7 2.0 1.7 2.1
Allowance for funds used during construction as a
percent of consolidated net income available for
common stock............................................ 1.6% 6.0% 4.0% 72.9% 43.3%
Return on average common stock equity.................... 13.6% 6.2% 9.2% 5.9% 11.8%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Certain financial statistics for 1995 were affected by the recording of the
impairment of certain assets (see Note 14 to Consolidated Financial Statements);
and for the year 1993, were affected by TU Electric recording a regulatory
disallowance in a rate order issued by the Public Utility Commission of Texas in
Docket 11735 (see Note 13 to Consolidated Financial Statements).
20
<PAGE>
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
CONSOLIDATED OPERATING STATISTICS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
ELECTRIC ENERGY GENERATED AND
PURCHASED (MWh)
Generated -- net station output...................... 88,129,637 83,876,565 81,320,922 79,105,495 74,652,339
Purchased and net interchange........................ 12,417,774 10,683,722 11,663,148 12,431,763 11,417,251
----------- ---------- ---------- ---------- ----------
Total generated and purchased........................ 100,547,411 94,560,287 92,984,070 91,537,258 86,069,590
Company use, losses and unaccounted for.............. 5,804,526 5,532,031 5,131,173 5,572,916 5,016,596
----------- ---------- ---------- ---------- ----------
Total electric energy sales......................... 94,742,885 89,028,256 87,852,897 85,964,342 81,052,994
=========== ========== ========== ========== ==========
ELECTRIC ENERGY SALES (MWh)
Residential.......................................... 33,038,399 30,716,241 30,065,767 30,278,230 27,524,621
Commercial........................................... 26,455,954 25,553,369 24,815,874 24,139,120 23,176,888
Industrial........................................... 24,214,960 23,301,933 22,984,218 21,506,547 21,278,889
Government and municipal............................. 5,929,249 5,615,715 5,505,298 5,365,815 5,080,440
----------- ---------- ---------- ---------- ----------
Total general business............................... 89,638,562 85,187,258 83,371,157 81,289,712 77,060,838
Other electric utilities............................. 5,104,323 3,840,998 4,481,740 4,674,630 3,992,156
----------- ---------- ---------- ---------- ----------
Total electric energy sales......................... 94,742,885 89,028,256 87,852,897 85,964,342 81,052,994
=========== ========== ========== ========== ==========
OPERATING REVENUES (thousands)
Base rate:
Residential......................................... $ 1,993,506 $ 1,875,311 $ 1,832,557 $ 1,686,692 $ 1,478,758
Commercial.......................................... 1,227,271 1,193,561 1,165,498 1,052,227 972,733
Industrial.......................................... 590,174 586,146 585,963 532,076 517,896
Government and municipal............................ 291,020 279,803 276,856 241,600 209,426
----------- ---------- ---------- ---------- ----------
Total general business.............................. 4,101,971 3,934,821 3,860,874 3,512,595 3,178,813
Other electric utilities............................ 165,619 133,359 163,134 157,173 137,051
----------- ---------- ---------- ---------- ----------
Total from base rate revenues....................... 4,267,590 4,068,180 4,024,008 3,669,768 3,315,864
Fuel revenues (including over/under-recovered)....... 1,679,009 1,421,861 1,521,029 1,662,358 1,540,667
Other operating revenues............................. 83,012 70,421 68,138 77,030 50,164
----------- ---------- ---------- ---------- ----------
Total operating revenues............................ $ 6,029,611 $ 5,560,462 $ 5,613,175 $ 5,409,156 $ 4,906,695
=========== ========== ========== ========== ==========
ELECTRIC CUSTOMERS (end of year)
Residential.......................................... 2,109,343 2,061,273 2,019,025 1,986,946 1,952,916
Commercial........................................... 230,253 225,183 219,604 215,621 210,185
Industrial........................................... 21,002 21,253 21,445 21,716 21,969
Government and municipal............................. 30,062 29,429 28,949 28,555 28,204
----------- ---------- ---------- ---------- ----------
Total general business.............................. 2,390,660 2,337,138 2,289,023 2,252,838 2,213,274
Other electric utilities............................. 173 177 219 228 243
----------- ---------- ---------- ---------- ----------
Total electric customers............................ 2,390,833 2,337,315 2,289,242 2,253,066 2,213,517
=========== ========== ========== ========== ==========
RESIDENTIAL STATISTICS (excludes master-metered
customers, kWh sales and revenues)
Average annual kWh per customer..................... 15,100 14,336 14,236 14,604 13,463
Average revenue per kWh............................. 7.91c 8.08c 8.26c 7.55c 7.40c
- -------------------------
Industrial classification includes service to Alcoa-Sandow:
Electric energy sales (Mwh)......................... 3,841,904 3,764,658 3,886,258 3,166,797 3,157,852
Operating revenues (thousands)...................... $ 46,853 $ 47,739 $ 54,699 $ 53,352 $ 56,043
</TABLE>
Certain previously reported operating statistics have been reclassified to
conform to current classifications.
21
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
FORWARD-LOOKING STATEMENTS
This report and other presentations made by Texas Utilities Company
(Company) 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 the Company 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 the Company 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 Nuclear Regulatory Commission, and, in the case of the Company, 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 pattern, (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 or in rates
of inflation, (vii) unanticipated changes in operating expenses and capital
expenditures, (viii) capital market conditions, (ix) competition for new energy
development opportunities, and (x) legal and administrative proceedings and
settlements.
Any forward-looking statement speaks only as of the date on which such
statement is made, and neither the Company 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 the Company 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.
Certain comparisons in this Annual Report on Form 10-K have been affected
by the December 1995 acquisition of Eastern Energy Limited (Eastern Energy) by
Texas Utilities Australia Pty. Ltd. (TU Australia), a wholly-owned subsidiary of
the Company. The results of Eastern Energy are included only for the periods
subsequent to acquisition.
FINANCIAL CONDITION
CAPITAL EXPENDITURES
THE COMPANY AND TU ELECTRIC
- ---------------------------
The primary capital expenditures of the Company and all of its majority-
owned subsidiaries (System Companies) in 1996 and as estimated for 1997 through
1999 are as follows:
<TABLE>
<CAPTION>
1996 1997 1998 1999
---------- ---------- ---------- ----------
THOUSANDS OF DOLLARS
<S> <C> <C> <C> <C>
Cash construction expenditures (excluding
allowance for funds used during construction)........ $ 427,000 $ 513,000 $ 527,000 $ 556,000
Nuclear fuel (excluding allowance for funds used
during construction)................................. 54,000 66,000 78,000 115,000
Non-utility property.................................. 3,000 75,000 44,000 78,000
Maturities and redemptions of long-term debt,
sinking fund requirements, redemptions of preferred
stock and reacquisitions of common stock............. 1,933,000 381,000 487,000 655,000
---------- ---------- ---------- ----------
Total $2,417,000 $1,035,000 $1,136,000 $1,404,000
========== ========== ========== ==========
</TABLE>
22
<PAGE>
The primary capital expenditures of TU Electric in 1996 and as estimated
for 1997 through 1999 are as follows:
<TABLE>
<CAPTION>
1996 1997 1998 1999
---------- -------- ---------- ----------
THOUSANDS OF DOLLARS
<S> <C> <C> <C> <C>
Cash construction expenditures (excluding
allowance for funds used during construction).... $ 370,000 $440,000 $ 470,000 $ 497,000
Nuclear fuel (excluding allowance for funds used
during construction)............................. 54,000 66,000 78,000 115,000
Maturities and redemptions of long-term debt,
sinking fund requirements and redemptions
of preferred stock............................... 910,000 363,000 468,000 636,000
---------- -------- ---------- ----------
Total $1,334,000 $869,000 $1,016,000 $1,248,000
========== ======== ========== ==========
</TABLE>
See Item 2. Properties -- Capital Expenditures and Note 15 to
Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
For 1996, the System Companies generated cash from operations sufficient to
meet operating needs, pay dividends on capital stock, pay distributions on
preferred securities of trusts and finance capital expenditures. Factors
affecting the continued ability of TU Electric to fund its capital requirements
from operations include responsive regulatory practices allowing recovery of
capital investment through adequate depreciation rates, recovery of the cost of
fuel and purchased power and the opportunity to earn competitive rates of return
required in the capital markets.
External funds of a permanent or long-term nature are obtained through the
sales of common stock, preferred stock, preferred securities and long-term debt
by the System Companies. The capitalization ratios of the Company and its
subsidiaries at December 31, 1996, consisted of approximately 55% long-term
debt, 2% TU Electric obligated, mandatorily redeemable, preferred securities of
subsidiary trusts holding solely debentures of TU Electric, 5% preferred stock
and 38% common stock equity.
The capitalization ratios of TU Electric at December 31, 1996 consisted of
approximately 47% long-term debt, 3% TU Electric obligated, mandatorily
redeemable, preferred securities of subsidiary trusts holding solely debentures
of TU Electric, 5% preferred stock and 45% common stock equity.
Financings by System Companies totaled $1,443,904,000 in 1996. Proceeds
from such financings were used primarily for the early redemption or
reacquisition of debt. The financings consisted of:
<TABLE>
<CAPTION>
PRINCIPAL CURRENT
DESCRIPTION AMOUNT INTEREST RATES MATURITY
----------- -------------- -------------- --------
<S> <C> <C> <C>
Credit Agreement - Facility C (the Company)........................... $ 300,000,000 5.825% 2001
Senior Notes (TU Australia)............................................ 343,389,000 6.75% to 7.25% 2006-2016
Term Credit Facility (TU Australia).................................... 556,290,000 6.33% 2001
Pollution Control Revenue bonds (backed by TU Electric First
Mortgage Bonds)....................................................... 244,225,000 3.25% to 3.40% 2026-2030
--------------
Total................................................................ $1,443,904,000
==============
</TABLE>
Since December 31, 1995, the System Companies redeemed, reacquired or
made principal payments of $2,049,851,000 (including $1,026,697,000 for TU
Electric) on long-term debt, preferred stock and common stock, including the
Company's June 1996 purchase for $51,636,000, and retirement of, 1,238,480
shares of its issued and outstanding common stock. Early redemptions of long-
term debt and preferred stock may occur from time to time in amounts presently
undetermined. (See Notes 6 and 8 to Consolidated Financial Statements.)
The System Companies expect to sell additional debt and equity securities
as needed including (i) the possible future sale by TU Electric of up to
$350,000,000 of First Mortgage Bonds currently registered with the Securities
and Exchange Commission (SEC) for offering pursuant to Rule 415 under the
Securities Act of 1933 and (ii) the possible future sale by TU Electric of up to
250,000 shares of Cumulative Preferred Stock ($100 liquidation value) similarly
registered. In addition, TU Electric has the ability to issue from time to time
an additional $98,850,000 of First Mortgage Bonds designated as Medium-Term
Notes, Series D.
23
<PAGE>
In April 1996, the Company and TU Electric entered into two new credit
agreements (Credit Agreements) with a group of commercial banks. The Credit
Agreements, for each of which the Company pays a fee, have three facilities.
Borrowings under these facilities are used for working capital and other
corporate purposes, including commercial paper backup. Facility A provides for
short-term borrowings of up to $375,000,000 at a variable interest rate and
terminates April 25, 1997. Facility B provides for short-term borrowings of up
to $875,000,000 at a variable interest rate and terminates April 26, 2001. The
Company's borrowings under Facilities A and B are limited to an aggregate of
$750,000,000 outstanding at any one time. Facility C is a separate five-year,
unsecured long-term loan to the Company in the principal amount of $300,000,000
at a variable interest rate.
In January 1997, statutory business trust subsidiaries of TU Electric
issued TU Electric obligated, mandatorily redeemable, preferred securities
having aggregate liquidation preferences of $500,000,000. Distributions on
$100,000,000 in aggregate liquidation preference of such securities are payable
quarterly based on an annual floating rate determined quarterly with reference
to a 3-month LIBOR plus a margin of 0.80%. Distributions on $400,000,000
aggregate liquidation preference of such securities are payable semi-annually at
an annual rate of 8.175%. The proceeds from the issuance of such securities were
used by the subsidiaries to purchase Junior Subordinated Debentures of TU
Electric. The proceeds of such purchases will be used by TU Electric for general
corporate purposes. In February 1997, TU Electric, with respect to its Capital
IV Securities, entered into an interest rate swap agreement with a notional
principal amount of $100,000,000 expiring 2002 with a fixed interest rate of
7.183% per annum. (See Note 7 to Consolidated Financial Statements.)
In February 1997, the Company announced a tender offer for any and all
outstanding shares of 20 series of TU Electric's preferred stock and depositary
shares. The Company expects to fund the purchase of shares tendered and
accepted pursuant to the tender offer through the use of its general funds and
funds borrowed through the issuance of commercial paper, and under its lines of
credit.
In addition to the above, the Company and Texas Utilities Fuel Company have
separate arrangements for uncommitted lines of credit. For more information
regarding short-term financings of the Company and TU Electric, see Note 3 to
Consolidated Financial Statements.
The Company's and TU Electric's operations involve managing market risks
related to changes in interest rates and, for the Company, foreign exchange and
commodity price exposures. Derivative instruments including swaps and forward
contracts are used to reduce and manage a portion of those risks. The Company's
and TU Electric's participations in derivative transactions have been designed
for hedging purposes and are not held or issued for trading purposes. Credit
risk relates to the risk of loss that the Company and TU Electric would incur as
a result of nonperformance by counterparties to their respective derivative
instruments. The Company and TU Electric believe the risk of nonperformance by
counterparties is minimal. (See Note 9 to Consolidated Financial Statements.)
IMPAIRMENT OF ASSETS
The Company and TU Electric are studying alternative uses for their
investment in certain assets, including TU Electric's partially completed Twin
Oak and Forest Grove lignite-fueled facilities and the New Mexico coal reserves
of Chaco Energy Company (Chaco), which, based upon management's current
expectations, might include sale of the reserves or facilities or construction
outside the traditional regulated business. In September 1995, the Company and
TU Electric determined that the partially completed Twin Oak and Forest Grove
lignite-fueled facilities were not necessary to satisfy TU Electric's capacity
requirements due to continuing changes in load growth patterns and availability
of alternative generation. Also, the Company determined that the Chaco coal
reserves would no longer be developed through traditional means due to
availability of ample alternative fuels at favorable prices. The total
impairment of the Company's assets recorded in 1995, including the partially
completed Twin Oak and Forest Grove lignite-fueled facilities and Chaco's coal
reserve, as well as several minor assets, aggregated $802 million after-tax.
(See Note 14 to Consolidated Financial Statements.)
REGULATION AND RATES
GENERAL
-------
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). This
statement applies to utilities which have cost-based rates established by a
regulator and charged to and collected from customers. In accordance with this
statement, these companies may defer the recognition of certain costs
(regulatory assets) and certain obligations (regulatory liabilities) that, as a
result of the ratemaking process, have probable corresponding increases or
decreases in future revenues. Future significant changes in regulation or
competition could affect these companies' ability to meet the criteria for
continued application of SFAS 71, and may affect these companies' ability to
recover these regulatory assets from, or refund these regulatory liabilities to
customers. These regulatory assets and liabilities, which are being amortized
over various periods (5 to 40 years), are currently included in rates, or are
expected to be included in future rates. In the event all or a portion of these
companies' operations fail to meet the criteria for application of SFAS 71,
these companies would be required to write-off all or a portion of their
regulatory assets and liabilities. Should significant changes in regulation or
competition occur, the affected System Companies would be required to assess the
recoverability of certain assets,
24
<PAGE>
including plant and regulatory assets, and, if impaired, to write down the
assets to reflect their then fair market value. (See Note 1 to Consolidated
Financial Statements.) The System Companies cannot predict the timing or extent
of changes in the business environment that may require the discontinuation of
SFAS 71 application.
Although TU Electric cannot predict future regulatory or legislative
actions or any changes in economic and securities market conditions, no changes
are expected in trends or commitments, other than those discussed in this Form
10-K, which might significantly alter its basic financial position, results of
operation or cash flows. (See Note 13 to Consolidated Financial Statements.)
DOCKET 9300
-----------
The PUC's final order (Order) in connection with TU Electric's January 1990
rate increase request (Docket 9300) was reviewed by the 250th Judicial District
Court of Travis County, Texas, and thereafter was appealed to the Court of
Appeals for the Third District of Texas and to the Supreme Court of Texas
(Supreme Court). As a result of such review and appeals, an aggregate of $909
million of disallowances with respect to TU Electric's reacquisitions of
minority owners' interests in Comanche Peak nuclear generating station (Comanche
Peak), which had previously been recorded as a charge to the Company's and TU
Electric's earnings, has been remanded to the PUC for reconsideration on the
basis of a prudent investment standard. On remand, the PUC will also be
required to reevaluate the appropriate level of TU Electric's construction work
in progress included in rate base in light of its financial condition at the
time of the initial hearing. In January 1997, the Supreme Court denied a motion
for rehearing on the Comanche Peak minority owners issue filed by the original
complainants. TU Electric cannot predict the outcome of the reconsideration of
the Order on remand by the PUC.
In its decision, the Supreme Court also affirmed the previous $472 million
prudence disallowance related to Comanche Peak. Since the Company and TU
Electric each has previously recorded a charge to earnings for this prudence
disallowance, the Supreme Court's decision did not have an effect on the
Company's or TU Electric's current financial position, results of operation or
cash flows.
DOCKET 11735
------------
In July 1994, TU Electric filed a petition in the 200th Judicial Court of
Travis County, Texas to seek judicial review of the final order of the PUC
granting a $449 million, or 9.0%, rate increase in connection with TU Electric's
January 1993 rate increase request of $760 million, or 15.3% (Docket 11735).
Other parties to the PUC proceedings also filed appeals with respect to various
portions of the order. TU Electric is unable to predict the outcome of such
appeals.
DOCKET 15638
------------
In May 1996, TU Electric filed with the PUC its transmission cost
information and tariffs for open-access wholesale transmission service (Docket
15638) in accordance with PUC rules adopted in February 1996. These tariffs also
provide for generation-related ancillary services necessary to support wholesale
transactions. Upon final PUC approval and the implementation of transmission
rates for each transmission provider within the Electric Reliability Council of
Texas (ERCOT), TU Electric's payments for transmission service will exceed its
revenues for providing transmission service. The PUC is required by the rules to
adopt a rate-moderation plan that will minimize the impact of the new pricing
mechanism for the first three years the rules are in effect. As such, the
current maximum impact on TU Electric for 1997 is a $4.26 million deficit,
which, in the opinion of TU Electric, is not expected to have a material effect
on its financial position, results of operation or cash flows. TU Electric
expects to have its open-access wholesale transmission tariff in place for
service within ERCOT in early 1997. (See Competition below.)
OTHER
-----
In connection with the PUC's regular earnings monitoring process, the PUC
Staff has advised the PUC that it believes TU Electric was earning in excess of
a reasonable rate of return and that it was engaged in discussions with TU
Electric concerning possible remedies for such perceived over-earnings. The
city of Sulphur Springs, Texas, which exercises original jurisdiction over TU
Electric's rates within that city's boundaries, has initiated an inquiry into
the reasonableness of TU Electric's rates. TU Electric is currently preparing
the information required by Sulphur Springs in connection with its inquiry. TU
Electric is unable to predict the outcome of either the discussions with the PUC
Staff or the inquiry of Sulphur Springs.
25
<PAGE>
COMPETITION
The National Energy Policy Act of 1992 (Energy Policy Act) addresses a
wide range of energy issues and is intended to increase competition in electric
generation and broaden access to electric transmission systems. In addition,
the Public Utility Regulatory Act of 1995, as amended (PURA), impacts the PUC
and its regulatory practices and encourages increased competition in some
aspects of the electric utility industry in Texas. Although the Company is
unable to predict the ultimate impact of the Energy Policy Act, PURA and any
related regulations or legislation on the System Companies' operations, it
believes that such actions are consistent with the trend toward increased
competition in the energy industry.
In order to remain competitive, the System Companies 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.
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 in 1996. 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. (See Item 1.
Business - Competition.)
Federal legislation such as the Public Utility Regulatory Policy Act of
1978 and, more recently, the Energy Policy Act, as well as initiatives in
various states, encourage wholesale competition among electric utility and non-
utility power producers. Together with increasing customer demand for lower-
priced electricity and other energy services, these measures have accelerated
the industry's movement toward a more competitive pricing and cost structure.
Competition in the electric utility industry was also addressed in the 1995
session of the Texas legislature. PURA was amended to encourage greater
wholesale competition and flexible retail pricing. PURA amendments also require
the PUC to report to the legislature, during each legislative session, on
competition in electric markets. Accordingly, PUC reports were submitted to the
Texas legislature in January 1997, recommending that the legislature continue
the process of expanding competition in the Texas electricity markets, leading
to expanded retail competition, and authorize the PUC to take numerous steps
toward that goal. The PUC further recommended that full competition not occur
prior to the year 2000 in order to provide an environment through which both
retail customers and utilities in Texas move more smoothly to achieve the
perceived benefits of competition. The PUC is seeking guidance from the
legislature and authority to address the issue of stranded cost recovery. In
advance of the implementation of full retail competition, the PUC is requesting
authority to create an Electric Service Reseller, a new entity that purchases
power from the incumbent utility, bundles electric service with other services,
and resells the power in the retail market. The PUC is also requesting authority
to: (i) approve or disapprove mergers and acquisitions of Texas' electric
utilities, (ii) allow alternative forms of regulation for transmission and
distribution services, (iii) mandate a minimum set of consumer rights with
regard to reliability, consumer protection and universal service, (iv) address
market power concerns, (v) use alternative fuel recovery mechanisms, (vi)
provide the PUC authority over regional reliability groups, and (vii) develop
rules for a framework of transitioning to full retail competition.
The PUC reports include estimates of potentially stranded costs (i.e.,
costs of assets that may not be recoverable from customers as a result of
competitive pricing) for all generating utilities in Texas in the event of full
retail competition. The estimates are based on, and highly dependent on,
various assumptions suggested by the PUC including, but not limited to, the
timing of retail access, future market prices of power, and electric power
generation, operation and maintenance expenses. At the total Texas retail
level, the PUC estimate of stranded costs ranged from a projected excess of net
book value over market value of $22.2 billion to a projected excess of market
value over net book value of $2.6 billion. The PUC estimate for TU Electric's
potentially stranded retail costs ranged from a projected excess of net book
value over market value of $7.7 billion to a projected excess of market value
over net book value of $2.1 billion.
The Company and TU Electric do not anticipate any legislation being enacted
during the 1997 legislature to authorize competition in the retail market. The
Company and TU Electric cannot predict the ultimate outcome of the ongoing
efforts that are taking place to restructure the electric utility industry or
whether such outcome will have a material effect on their financial position,
results of operation or cash flows.
26
<PAGE>
BUSINESS MERGERS AND ACQUISITIONS
THE COMPANY
- -----------
In April 1996, the Company announced that it had entered into a merger
agreement with Dallas-based ENSERCH Corporation (ENSERCH). Under the terms of
the agreement, Lone Star Gas Company (Lone Star Gas) and Lone Star Pipeline
Company (Lone Star Pipeline), the local distribution and pipeline divisions of
ENSERCH, and other businesses, excluding Enserch Exploration Inc. (EEX), a
subsidiary of ENSERCH, will be acquired by a new holding company, which will be
named Texas Utilities Company and will own all of the common stock of ENSERCH
and the Company. Shares of the Company's common stock will be automatically
converted into shares of the new holding company common stock on a one-for-one
basis in a tax-free transaction. Lone Star Gas is 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 has one of the largest pipelines in the
United States that consists of 9,200 miles of gathering and transmission
pipelines in Texas. Also included in the acquisition are ENSERCH's subsidiaries
engaged in natural gas processing, natural gas marketing and independent power
production. The new holding company is expected to issue approximately $550
million of the new holding company's common stock to ENSERCH shareholders, and
approximately $1.15 billion of ENSERCH's debt and preferred stock would remain
outstanding after the merger. The transaction is subject to certain conditions
which include the approval by the SEC and receipt by ENSERCH of a favorable tax
ruling from the Internal Revenue Service (IRS) to the effect that its
distribution of EEX stock is a tax-free transaction. ENSERCH received this IRS
ruling on March 6, 1997. The transaction was approved at special meetings of
the shareholders of ENSERCH, EEX and the Company held separately on November 15,
1996. The Texas Railroad Commission has been notified of the proposed
transaction and has indicated no objection to it. On March 7, 1997, the
Antitrust Division of the U.S. Department of Justice notified the SEC that it
had closed its investigation of the proposed transaction and indicated that no
further action would be required. The acquisition of ENSERCH will be accounted
for as a purchase business combination.
In December 1995, the Company's newly formed subsidiary, TU Australia,
acquired all of the common stock of Eastern Energy, one of five electricity
distribution companies operating in Victoria, Australia. Eastern Energy is
engaged in the purchase, distribution, marketing and sale of electric energy to
approximately 481,000 customers in a 31,000 square mile service area extending
from the outer eastern suburbs of the Melbourne metropolitan area to the eastern
coastal areas of Victoria and north to the New South Wales border. Eastern
Energy generates no electric energy. The acquisition by TU Australia was
accounted for as a purchase business combination. Accordingly, a portion of the
purchase price has been allocated to the assets acquired and liabilities assumed
based on their fair values. The excess of the purchase price over the fair
values of the assets acquired is being amortized over 40 years. Eastern
Energy's results of operation subsequent to December 1, 1995, the date of the
acquisition, are reflected in the consolidated financial statements. The
Company's equity investment is approximately $600 million. The remainder of the
acquisition cost was borrowed by Eastern Energy.
RESULTS OF OPERATION
THE COMPANY
- -----------
For the year ended December 31, 1996, consolidated net income for the
Company increased approximately 14% over the prior period (excluding the after-
tax effect of the September 1995 asset impairment). For the Company and TU
Electric, from which most of consolidated earnings is derived, the major factors
affecting earnings for the year ended December 31, 1996, were increased customer
growth and warmer weather.
In September 1995, the Company recorded an impairment of several non-
performing assets, including the partially completed Twin Oak and Forest Grove
lignite-fueled facilities of TU Electric, and Chaco's coal reserves in New
Mexico, as well as several minor assets. Such impairment, on an after-tax
basis, amounted to $802 million. (See Note 14 to Consolidated Financial
Statements.)
The Company's statement of consolidated income for the year ended
December 31, 1996, is affected by a full year's results of operation of Eastern
Energy, which was acquired by TU Australia in December 1995. For 1996, the
Company's statement of consolidated income includes operating revenues of $474
million, operating expenses of $379 million and interest expense of $87 million,
which represent TU Australia's results of operation.
27
<PAGE>
TU ELECTRIC
- -----------
Operating revenues increased approximately 8% and decreased approximately
1% for the years ended December 31, 1996 and 1995, respectively. The following
table details the factors contributing to these changes:
<TABLE>
<CAPTION>
INCREASE (DECREASE)
-------------------
FACTORS 1996 1995
------- -------- ---------
THOUSANDS OF DOLLARS
<S> <C> <C>
Base rate revenue (including unbilled)............... $199,410 $ 44,172
Fuel revenue and power cost recovery factor revenue.. 257,148 (99,168)
Other revenue........................................ 12,591 2,283
-------- --------
Total operating revenues.......................... $469,149 $(52,713)
======== ========
</TABLE>
Energy sales (including unbilled sales) increased approximately 6% and
1% for 1996 and 1995, respectively. The increase in energy sales for 1996 was
generally a result of customer growth, increased usage and warmer weather. The
1995 increase in energy sales was generally a result of customer growth and
increased usage, partially offset by mild weather conditions. Fuel revenue
increased in 1996 due primarily to increases in fuel costs driven by increases
in energy sales and spot market gas prices. Fuel revenue decreased in 1995 due
primarily to a reduction in gas prices and increased nuclear generation.
Fuel and purchased power expense increased approximately 16% and decreased
approximately 6% for 1996 and 1995, respectively. The increase in 1996 was
primarily due to increased energy sales and increased spot market gas prices.
The decrease in 1995 was due to a reduction in gas prices and purchased power
commitments and increased utilization of nuclear fuel. (See Item 1. Business --
Fuel Supply and Purchased Power and Item 6. Selected Financial Data--
Consolidated Operating Statistics.)
Total operating expenses, excluding fuel and purchased power, increased
approximately 4%for 1996 and decreased approximately 1% for 1995. Operation and
maintenance expense increased in 1996 due primarily to increases in employee
benefit expense and payroll expense. Operation and maintenance expense decreased
in 1995 due primarily to a decrease in uncollectible accounts expense and
employee benefit expense. Taxes other than income decreased in 1996 as a result
of a reduction in TU Electric's ad valorem tax obligation due primarily to a
property tax rate reduction, partially offset by an increase in state and local
gross receipts tax. Taxes other than income decreased in 1995 as a result of a
reduction in TU Electric's ad valorem tax obligation due primarily to a
reduction in property valuations.
Allowance for funds used during construction (AFUDC) decreased in 1996
primarily due to a decrease in the AFUDC rate and a reduction in construction
work in progress and nuclear fuel in process balances.
Federal income taxes -- other income, representing tax benefits for 1996
and 1995, decreased in 1996 and increased in 1995 due primarily to the effect of
the recording of tax benefits associated with the September 1995 asset
impairment. (See Note 10 to Consolidated Financial Statements.)
Total interest charges, excluding AFUDC and distributions on preferred
securities of subsidiary trusts, decreased approximately 5% in each of the years
1996 and 1995. Interest on mortgage bonds decreased over the prior period as a
result of reduced interest requirements due to the Company's debt refinancing
and reduction efforts. The decrease in interest on other long-term debt for
1996 was affected by the prepayment of TU Electric's promissory note to Brazos
Electric Power Cooperative in October 1995. Interest on other long-term debt
increased in 1995 due to borrowings on the term credit agreement. Other
interest expense increased in 1996 due to an interest payment related to a
settlement with the IRS, offset in part, by decreased interest on average short-
term borrowings. Other interest expense in 1995 was affected by decreased
interest on bonded rates over the prior period, increased average short-term
borrowings, and increased amortization of debt issuance expenses and redemption
premiums. The increase in distributions on preferred securities for 1996 and
1995 resulted from the issuance, in December 1995, of TU Electric obligated,
mandatorily redeemable, preferred securities of subsidiary trusts holding solely
debentures of TU Electric. (See Note 7 to Consolidated Financial Statements.)
Preferred stock dividends decreased approximately 37% and 17% for 1996 and
1995, respectively, primarily due to the partial redemption of certain series.
28
<PAGE>
POSSIBLE CHANGES IN ACCOUNTING STANDARDS AND FRANCHISE TAX STATUS
THE COMPANY AND TU ELECTRIC
- ---------------------------
The Financial Accounting Standards Board (FASB) is currently deliberating a
new accounting standard addressing the accounting for liabilities related to
closure and removal of long-lived assets, which would include nuclear
decommissioning (see Note 15 to Consolidated Financial Statements). Such new
standard is not expected to be effective until sometime after calendar year
1997. Based upon FASB's exposure draft, which is subject to change, any new
standard would likely prescribe a methodology for measuring and recognizing
liabilities related to closure and removal of long-lived assets. Any liability
required to be recognized would have a corresponding asset recognized as an
addition to plant, and depreciation of the long-lived asset would be revised
prospectively. If such new standard were adopted, the application of such
statement would increase total assets and liabilities for the Company and TU
Electric. Such requirements are not expected to have a material effect on the
Company's and TU Electric's financial position, results of operation or cash
flows.
TU Electric is projecting that its state franchise tax status will change
in 1997 from taxes based on net taxable capital to taxes based on net taxable
earned surplus. Net taxable earned surplus is based on the federal tax return.
To the extent any portion of the taxes calculated under the new tax status
method is considered a state income tax, a deferred tax liability would result
under the requirements of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (SFAS 109). Certain provisions of SFAS 109 provide
that regulated enterprises are permitted to recognize such adjustments as
regulatory tax assets if it is probable that such amounts will be recovered from
customers in future rates. Accordingly, the requirements of SFAS 109, if applied
to any portion of the state franchise tax, will increase both assets and
liabilities. The requirements of SFAS 109, if applied, are not expected to have
a material effect on the Company's and TU Electric's financial position, results
of operation or cash flows.
29
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
THOUSANDS OF DOLLARS
<S> <C> <C> <C>
OPERATING REVENUES........................................... $6,550,928 $5,638,688 $5,663,543
---------- ---------- ----------
OPERATING EXPENSES
Fuel and purchased power................................... 2,136,309 1,640,990 1,729,091
Operation and maintenance.................................. 1,256,280 1,109,644 1,177,213
Depreciation and amortization.............................. 620,505 563,819 549,539
Taxes other than income.................................... 534,844 536,608 559,144
---------- ---------- ----------
Total operating expenses.................................. 4,547,938 3,851,061 4,014,987
---------- ---------- ----------
OPERATING INCOME............................................. 2,002,990 1,787,627 1,648,556
OTHER INCOME AND (DEDUCTIONS)--NET........................... (1,148) 24,583 38,379
---------- ---------- ----------
TOTAL INCOME................................................. 2,001,842 1,812,210 1,686,935
---------- ---------- ----------
INTEREST AND OTHER CHARGES
Interest................................................... 797,893 706,182 726,876
Allowance for borrowed funds used during construction...... (11,248) (15,327) (11,261)
Impairment of assets....................................... -- 1,233,320 --
Distributions on TU Electric obligated, mandatorily
redeemable, preferred securities of subsidiary
trusts holding solely debentures of TU Electric........... 33,001 1,801 --
Preferred stock dividends of subsidiary.................... 53,358 84,914 101,883
---------- ---------- ----------
Total interest and other charges.......................... 873,004 2,010,890 817,498
---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES............................ 1,128,838 (198,680) 869,437
INCOME TAX EXPENSE (BENEFIT)................................. 375,232 (60,035) 326,638
---------- ---------- ----------
CONSOLIDATED NET INCOME (LOSS)............................... $ 753,606 $ (138,645) $ 542,799
========== ========== ==========
Average shares of common stock outstanding (thousands)....... 225,160 225,841 225,834
Earnings (loss) and dividends per share of common stock:
Earnings (loss) (on average shares outstanding)............ $ 3.35 $ (0.61) $ 2.40
Dividends declared per share of common stock............... $ 2.025 $ 2.81 $ 3.08
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CONSOLIDATED RETAINED EARNINGS
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
THOUSANDS OF DOLLARS
<S> <C> <C> <C>
BALANCE AT BEGINNING OF YEAR................................. $ 924,444 $1,691,250 $1,842,413
ADD -- Consolidated net income (loss)........................ 753,606 (138,645) 542,799
LESOP dividend deduction tax benefit.................. 4,032 6,452 6,733
DEDUCT -- Dividends declared on common stock (for amounts per
share, see Statements of Consolidated Income)..... 456,059 634,613 695,590
Common stock reacquisition and preferred
stock redemption costs -- net..................... 23,633 -- 5,105
---------- ---------- ----------
BALANCE AT END OF YEAR....................................... $1,202,390 $ 924,444 $1,691,250
========== ========== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
30
<PAGE>
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1996 1995 1994
----------- ----------- -----------
THOUSANDS OF DOLLARS
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated net income (loss)...................................... $ 753,606 $ (138,645) $ 542,799
Adjustments to reconcile consolidated net income (loss) to cash
provided by operating activities:
Depreciation and amortization (including amounts charged to fuel).. 788,295 725,646 710,196
Deferred federal income taxes -- net............................... 183,953 (204,550) 261,452
Federal investment tax credits -- net.............................. (33,075) (22,774) (26,427)
Allowance for equity funds used during construction................ (1,575) (6,680) (10,774)
Impairment of assets............................................... -- 1,233,320 --
Changes in operating assets and liabilities:
Accounts receivable.............................................. (6,501) (22,898) 10,408
Inventories...................................................... 5,846 18,701 2,673
Accounts payable................................................. 36,254 48,079 (43,684)
Interest and taxes accrued....................................... (32,988) (94,158) (77,795)
Other working capital............................................ 10,576 (25,932) (131,506)
Over/(under) - recovered fuel revenue -- net of deferred taxes... (47,368) 94,717 113,693
Other -- net..................................................... 72,136 5,902 68,549
----------- ----------- -----------
Cash provided by operating activities........................... 1,729,159 1,610,728 1,419,584
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuances of securities:
First mortgage bonds................................................ 244,225 535,055 378,340
Other long-term debt................................................ 1,199,679 300,000 --
TU Electric obligated, mandatorily redeemable, preferred securities
of subsidiary trusts holding solely debentures of TU Electric...... -- 381,476 --
Preferred stock of subsidiary....................................... -- -- 123
Common stock........................................................ -- -- 62,102
Retirements of securities:
First mortgage bonds............................................... (556,847) (684,385) (856,677)
Other long-term debt............................................... (1,273,934) (202,520) (96,578)
Preferred stock of subsidiary...................................... (50,269) (504,781) (222,768)
Common stock....................................................... (51,636) -- --
Change in notes payable.............................................. (169,755) 615,929 363,886
Common stock dividends paid.......................................... (451,063) (695,656) (694,355)
Debt premium, discount, financing and reacquisition expenses......... (44,551) (123,668) (21,799)
----------- ----------- -----------
Cash used in financing activities................................... (1,154,151) (378,550) (1,087,726)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Construction expenditures............................................ (434,139) (434,338) (444,245)
Allowance for equity funds used during construction (excluding
amount for nuclear fuel)............................................. 892 3,952 4,802
Change in construction receivables/payables -- net................... (706) 2,140 3,897
Non-utility property -- net.......................................... (3,683) (69,949) (14,967)
Nuclear fuel (excluding allowance for equity funds used
during construction)................................................. (58,895) (55,013) (62,655)
Acquisition of Eastern Energy........................................ -- (616,865) --
Other investments.................................................... (103,325) (41,226) (23,848)
----------- ----------- -----------
Cash used in investing activities.................................. (599,856) (1,211,299) (537,016)
----------- ----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH............................... 15,840 (3,452) --
----------- ----------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS............................... (9,008) 17,427 (205,158)
CASH AND CASH EQUIVALENTS -- BEGINNING BALANCE........................ 24,853 7,426 212,584
----------- ----------- -----------
CASH AND CASH EQUIVALENTS -- ENDING BALANCE........................... $ 15,845 $ 24,853 $ 7,426
=========== =========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
31
<PAGE>
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
----------- -----------
THOUSANDS OF DOLLARS
<S> <C> <C>
UTILITY PLANT
In service:
Production............................................................ $16,277,151 $16,661,053
Transmission.......................................................... 1,607,925 1,592,610
Distribution.......................................................... 5,655,677 5,333,396
General............................................................... 503,688 466,474
----------- -----------
Total................................................................ 24,044,441 24,053,533
Less accumulated depreciation.......................................... 6,127,610 5,562,190
----------- -----------
Utility plant in service, less accumulated depreciation.............. 17,916,831 18,491,343
Construction work in progress.......................................... 240,612 271,033
Nuclear fuel (net of accumulated amortization: 1996 -- $369,114,000;
1995 -- $295,390,000)................................................. 252,589 266,735
Held for future use.................................................... 24,483 25,096
----------- -----------
Utility plant, less accumulated depreciation and amortization........ 18,434,515 19,054,207
Less reserve for regulatory disallowances.............................. 836,005 1,308,460
----------- -----------
Net utility plant.................................................... 17,598,510 17,745,747
----------- -----------
INVESTMENTS............................................................. 1,158,223 1,040,004
----------- -----------
CURRENT ASSETS
Cash and cash equivalents.............................................. 15,845 24,853
Special deposits....................................................... 805 19,455
Accounts receivable:
Customers............................................................. 290,111 275,275
Other................................................................. 44,032 51,735
Allowance for uncollectible accounts.................................. (6,262) (5,965)
Inventories -- at average cost:
Materials and supplies................................................ 200,601 200,145
Fuel stock............................................................ 121,699 128,028
Prepayments............................................................ 56,324 55,528
Deferred federal income taxes.......................................... 40,021 84,410
Other current assets................................................... 13,279 14,924
----------- -----------
Total current assets................................................. 776,455 848,388
----------- -----------
DEFERRED DEBITS
Unamortized regulatory assets.......................................... 1,753,418 1,828,625
Other deferred debits.................................................. 89,101 73,087
----------- -----------
Total deferred debits................................................ 1,842,519 1,901,712
----------- -----------
Total................................................................ $21,375,707 $21,535,851
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
32
<PAGE>
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
----------- -----------
THOUSANDS OF DOLLARS
<S> <C> <C>
CAPITALIZATION
Common stock without par value -- net:
Authorized shares -- 500,000,000
Outstanding shares : 1996 -- 224,602,557; 1995 -- 225,841,037............................. $ 4,787,047 $ 4,806,912
Retained earnings......................................................................... 1,202,390 924,444
Cumulative currency translation adjustment................................................ 43,476 397
----------- -----------
Total common stock equity............................................................... 6,032,913 5,731,753
Preferred stock of subsidiary:
Not subject to mandatory redemption....................................................... 464,427 489,695
Subject to mandatory redemption........................................................... 238,391 263,196
TU Electric obligated, mandatorily redeemable, preferred securities of subsidiary trusts
holding solely debentures of TU Electric.................................................. 381,311 381,476
Long-term debt, less amounts due currently................................................. 8,668,111 9,174,575
----------- -----------
Total capitalization.................................................................... 15,785,153 16,040,695
----------- -----------
CURRENT LIABILITIES
Notes payable:
Commercial paper.......................................................................... 253,151 321,990
Banks..................................................................................... 69,788 275,000
Long-term debt due currently................................................................ 356,076 61,321
Accounts payable............................................................................ 336,391 300,726
Dividends declared.......................................................................... 129,879 125,929
Customers' deposits......................................................................... 80,390 76,963
Taxes accrued............................................................................... 143,424 167,951
Interest accrued............................................................................ 156,758 165,277
Over-recovered fuel revenue................................................................. 42,984 115,858
Other current liabilities.........,......................................................... 90,485 101,566
----------- -----------
Total current liabilities............................................................... 1,659,326 1,712,581
----------- -----------
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES
Accumulated deferred federal income taxes................................................. 2,801,626 2,669,808
Unamortized federal investment tax credits................................................ 589,713 622,786
Other deferred credits and noncurrent liabilities......................................... 539,889 489,981
----------- -----------
Total deferred credits and other noncurrent liabilities................................. 3,931,228 3,782,575
COMMITMENTS AND CONTINGENCIES
Total................................................................................... $21,375,707 $21,535,851
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
33
<PAGE>
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1996 1995 1994
---------- ---------- ----------
THOUSANDS OF DOLLARS
<S> <C> <C> <C>
OPERATING REVENUES..................................................... $6,029,611 $5,560,462 $5,613,175
---------- ---------- ----------
OPERATING EXPENSES
Fuel and purchased power.............................................. 1,965,756 1,697,091 1,798,493
Operation and maintenance............................................. 1,111,911 1,049,034 1,108,815
Depreciation and amortization......................................... 561,902 549,611 540,535
Federal income taxes.................................................. 421,012 382,315 338,465
Taxes other than income............................................... 506,432 512,045 534,430
---------- ---------- ----------
Total operating expenses............................................ 4,567,013 4,190,096 4,320,738
---------- ---------- ----------
OPERATING INCOME....................................................... 1,462,598 1,370,366 1,292,437
---------- ---------- ----------
OTHER INCOME (LOSS)
Allowance for equity funds used during construction................... 1,549 6,658 10,743
Impairment of assets.................................................. -- (486,350) --
Other income and (deductions) -- net.................................. 503 8,625 10,160
Federal income taxes.................................................. 15,513 169,362 (4,222)
---------- ---------- ----------
Total other income (loss)........................................... 17,565 (301,705) 16,681
---------- ---------- ----------
TOTAL INCOME........................................................... 1,480,163 1,068,661 1,309,118
---------- ---------- ----------
INTEREST AND OTHER CHARGES
Interest on mortgage bonds............................................ 486,791 526,977 567,363
Interest on other long-term debt...................................... 26,456 44,071 32,183
Other interest........................................................ 82,459 58,500 62,631
Distributions on TU Electric obligated, mandatorily redeemable,
preferred securities of subsidiary trusts holding solely debentures
of TU Electric....................................................... 33,001 1,801 --
Allowance for borrowed funds used during construction................. (11,239) (15,319) (11,251)
---------- ---------- ----------
Total interest and other charges.................................... 617,468 616,030 650,926
---------- ---------- ----------
CONSOLIDATED NET INCOME................................................ 862,695 452,631 658,192
PREFERRED STOCK DIVIDENDS.............................................. 53,358 84,914 101,883
---------- ---------- ----------
CONSOLIDATED NET INCOME AVAILABLE FOR
COMMON STOCK.......................................................... $ 809,337 $ 367,717 $ 556,309
========== ========== ==========
</TABLE>
STATEMENTS OF CONSOLIDATED RETAINED EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1996 1995 1994
---------- ---------- -----------
THOUSANDS OF DOLLARS
<S> <C> <C> <C>
BALANCE AT BEGINNING OF YEAR................................... $1,067,593 $ 948,136 $1,112,692
ADD -- Consolidated net income................................ 862,695 452,631 658,192
Transfer from common stock............................. -- 433,820 --
DEDUCT -- Preferred stock dividends............................ 53,358 84,914 101,883
Common stock dividends (per share: 1996 -$3.21;
1995 - $4.35; 1994 - $4.60)......................... 503,328 682,080 715,760
Preferred stock redemption costs -- net.............. -- -- 5,105
---------- ---------- -----------
BALANCE AT END OF YEAR......................................... $1,373,602 $1,067,593 $ 948,136
========== ========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
34
<PAGE>
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1996 1995 1994
----------- ----------- -----------
THOUSANDS OF DOLLARS
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated net income........................................ $ 862,695 $ 452,631 $ 658,192
Adjustments to reconcile consolidated net
income to cash provided by operating activities:
Depreciation and amortization
(including amounts charged to fuel)......................... 684,710 685,693 675,351
Deferred federal income taxes -- net......................... 149,851 83,621 280,971
Federal investment tax credits -- net........................ (31,501) (21,201) (23,698)
Allowance for equity funds used during
construction................................................ (1,549) (6,658) (10,743)
Impairment of assets......................................... -- 427,478 --
Changes in operating assets and liabilities:
Accounts receivable....................................... 9,190 (24,807) 10,827
Inventories............................................... 3,366 612 5,777
Accounts payable.......................................... 52,126 1,842 (40,009)
Interest and taxes accrued................................ (18,718) (110,455) (60,637)
Other working capital..................................... (1,255) 4,917 (140,210)
Over/(under) - recovered fuel revenue --
net of deferred taxes.................................... (47,368) 94,717 113,693
Other -- net.............................................. 39,908 (2,580) 54,877
----------- ----------- -----------
Cash provided by operating activities.................. 1,701,455 1,585,810 1,524,391
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuances of securities:
First mortgage bonds......................................... 244,225 535,055 378,340
Other long-term debt......................................... -- 300,000 --
TU Electric obligated, mandatorily redeemable,
preferred securities of subsidiary trusts
holding solely debentures of TU Electric................... -- 381,476 --
Preferred stock.............................................. -- -- 123
Common stock................................................. -- -- 249,600
Retirements of securities:
First mortgage bonds......................................... (556,820) (684,385) (856,640)
Other long-term debt......................................... (302,458) (183,947) (3,898)
Preferred stock.............................................. (50,269) (504,781) (222,768)
Change in notes receivable -- affiliates....................... (33,159) 26,238 (28,594)
Change in notes payable -- parent.............................. -- -- (88,434)
Change in notes payable -- commercial paper.................... (68,839) (41,896) 363,886
Preferred stock dividends paid................................. (54,411) (95,304) (105,572)
Common stock dividends paid.................................... (366,912) (682,080) (715,760)
Debt premium, discount, financing and
reacquisition expenses........................................ (37,898) (123,393) (21,931)
----------- ----------- -----------
Cash used in financing activities...................... (1,226,541) (1,073,017) (1,051,648)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Construction expenditures...................................... (377,438) (407,305) (415,290)
Allowance for equity funds used during
construction (excluding amount for
nuclear fuel)................................................. 867 3,929 4,771
Change in construction receivables/payables --
net........................................................... (706) (1,305) 1,343
Non-utility property -- net.................................... 199 21 (4)
Nuclear fuel (excluding allowance for equity
funds used during construction)............................... (58,895) (55,013) (62,655)
Other investments.............................................. (48,569) (37,186) (22,138)
----------- ----------- -----------
Cash used in investing activities...................... (484,542) (496,859) (493,973)
----------- ----------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS........................ (9,628) 15,934 (21,230)
CASH AND CASH EQUIVALENTS -- BEGINNING BALANCE.................. 22,633 6,699 27,929
----------- ----------- -----------
CASH AND CASH EQUIVALENTS -- ENDING BALANCE..................... $ 13,005 $ 22,633 $ 6,699
=========== =========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
35
<PAGE>
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
----------- -----------
THOUSANDS OF DOLLARS
<S> <C> <C>
ELECTRIC PLANT
In service:
Production............................................................................ $15,330,974 $15,699,488
Transmission.......................................................................... 1,601,628 1,586,547
Distribution.......................................................................... 4,442,547 4,229,794
General............................................................................... 432,178 407,897
----------- -----------
Total................................................................................ 21,807,327 21,923,726
Less accumulated depreciation......................................................... 5,594,363 5,075,428
----------- -----------
Electric plant in service, less accumulated depreciation............................. 16,212,964 16,848,298
Construction work in progress......................................................... 210,573 236,913
Nuclear fuel (net of accumulated amortization: 1996 -- $369,114,000;
1995 -- $295,390,000)................................................................ 252,589 266,735
Held for future use................................................................... 24,483 25,096
----------- -----------
Electric plant, less accumulated depreciation and amortization....................... 16,700,609 17,377,042
Less reserve for regulatory disallowances............................................. 836,005 1,308,460
----------- -----------
Net electric plant................................................................... 15,864,604 16,068,582
----------- -----------
INVESTMENTS............................................................................. 508,437 436,122
----------- -----------
CURRENT ASSETS
Cash and cash equivalents.............................................................. 13,005 22,633
Special deposits....................................................................... 552 527
Notes receivable -- affiliates......................................................... 35,515 2,356
Accounts receivable:
Customers............................................................................. 215,706 212,165
Other................................................................................. 23,282 34,906
Allowance for uncollectible accounts.................................................. (5,021) (3,914)
Inventories -- at average cost:
Materials and supplies................................................................ 181,405 179,001
Fuel stock............................................................................ 77,119 82,889
Prepayments............................................................................ 31,758 31,225
Deferred federal income taxes.......................................................... 50,882 79,629
Other current assets................................................................... 2,694 1,455
----------- -----------
Total current assets.................................................................. 626,897 642,872
----------- -----------
DEFERRED DEBITS
Unamortized regulatory assets.......................................................... 1,735,306 1,806,684
Other deferred debits.................................................................. 59,695 49,114
----------- -----------
Total deferred debits................................................................. 1,795,001 1,855,798
----------- -----------
Total................................................................................. $18,794,939 $19,003,374
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
36
<PAGE>
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
----------- -----------
THOUSANDS OF DOLLARS
<S> <C> <C>
THOUSANDS OF DOLLARS
CAPITALIZATION
Common stock without par value:
Authorized shares -- 180,000,000
Outstanding shares -- 156,800,000........................................................ $ 4,732,305 $ 4,732,305
Retained earnings......................................................................... 1,373,602 1,067,593
----------- -----------
Total common stock equity............................................................... 6,105,907 5,799,898
Preferred stock:
Not subject to mandatory redemption...................................................... 464,427 489,695
Subject to mandatory redemption.......................................................... 238,391 263,196
TU Electric obligated, mandatorily redeemable, preferred securities of subsidiary trusts
holding solely debentures of TU Electric................................................. 381,311 381,476
Long-term debt, less amounts due currently................................................ 6,310,594 7,212,070
----------- -----------
Total capitalization.................................................................... 13,500,630 14,146,335
----------- -----------
CURRENT LIABILITIES
Notes payable -- commercial paper........................................................ 253,151 321,990
Long-term debt due currently............................................................. 338,213 43,458
Accounts payable:
Affiliates.............................................................................. 126,143 101,722
Other................................................................................... 136,401 109,402
Dividends declared....................................................................... 148,379 13,210
Customers' deposits...................................................................... 70,141 63,564
Taxes accrued............................................................................ 132,514 142,364
Interest accrued......................................................................... 132,947 141,815
Over-recovered fuel revenue.............................................................. 42,984 115,858
Other current liabilities................................................................. 57,681 63,716
----------- -----------
Total current liabilities............................................................... 1,438,554 1,117,099
----------- -----------
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES
Accumulated deferred federal income taxes.................................................. 2,989,612 2,869,049
Unamortized federal investment tax credits................................................. 577,965 609,466
Other deferred credits and noncurrent liabilities............................................ 288,178 261,425
----------- -----------
Total deferred credits and other noncurrent liabilities.................................... 3,855,755 3,739,940
COMMITMENTS AND CONTINGENCIES
----------- -----------
Total................................................................................... $18,794,939 $19,003,374
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
37
<PAGE>
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
- -----------
General -- Texas Utilities Company (Company) is a holding company which
owns all of the outstanding common stock of Texas Utilities Electric Company and
its subsidiaries (TU Electric), Southwestern Electric Service Company (SESCO),
Texas Utilities Australia Pty. Ltd. (TU Australia) and seven other wholly-owned
subsidiaries which perform specialized functions within the Texas Utilities
Company system. TU Electric, the largest subsidiary of the Company, representing
88% of the total assets, is engaged in the generation, purchase, transmission,
distribution and sale of electric energy wholly within Texas.
Consolidation -- The consolidated financial statements include the accounts
of the Company and all of its majority-owned subsidiaries (System Companies).
All significant intercompany items and transactions have been eliminated in
consolidation. Investments in significant unconsolidated affiliates are
accounted for by the equity method. Certain previously reported amounts have
been reclassified to conform to current classifications.
Business Mergers and Acquisitions -- In April 1996, the Company announced
that it had entered into a merger agreement with Dallas-based ENSERCH
Corporation (ENSERCH). Under the terms of the agreement, Lone Star Gas Company
(Lone Star Gas) and Lone Star Pipeline Company (Lone Star Pipeline), the local
distribution and pipeline divisions of ENSERCH, and other businesses, excluding
Enserch Exploration Inc. (EEX), a subsidiary of ENSERCH, will be acquired by a
new holding company, which will be named Texas Utilities Company and will own
all of the common stock of ENSERCH and the Company. Shares of the Company's
common stock will be automatically converted into shares of the new holding
company common stock on a one-for-one basis in a tax-free transaction. Lone Star
Gas is 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 has one of
the largest pipelines in the United States that consists of 9,200 miles of
gathering and transmission pipelines in Texas. Also included in the acquisition
are ENSERCH's subsidiaries engaged in natural gas processing, natural gas
marketing and independent power production. The new holding company is expected
to issue approximately $550 million of the new holding company's common stock to
ENSERCH shareholders, and approximately $1.15 billion of ENSERCH's debt and
preferred stock would remain outstanding after the merger. The transaction is
subject to certain conditions which include the approval by the Securities and
Exchange Commission (SEC) and receipt by ENSERCH of a favorable tax ruling from
the Internal Revenue Service (IRS) to the effect that its distribution of EEX
stock is a tax-free transaction. ENSERCH received this IRS ruling on March 6,
1997. The transaction was approved at special meetings of the shareholders of
ENSERCH, EEX and the Company held separately on November 15, 1996. The Texas
Railroad Commission has been notified of the proposed transaction and has
indicated no objection to it. On March 7, 1997, the Antitrust Division of the
U.S. Department of Justice notified the SEC that it had closed its investigation
of the proposed transaction and indicated that no further action would be
required. The acquisition of ENSERCH will be accounted for as a purchase
business combination.
In December 1995, the Company's newly formed subsidiary, TU Australia,
acquired all of the common stock of Eastern Energy Limited (Eastern Energy), one
of five electricity distribution companies operating in Victoria, Australia.
Eastern Energy is engaged in the purchase, distribution, marketing and sale of
electric energy to approximately 481,000 customers in a 31,000 square mile
service area extending from the outer eastern suburbs of the Melbourne
metropolitan area to the eastern coastal areas of Victoria and north to the New
South Wales border. Eastern Energy generates no electric energy. The acquisition
by TU Australia was accounted for as a purchase business combination.
Accordingly, a portion of the purchase price has been allocated to the assets
acquired and liabilities assumed based on their fair values. The excess of the
purchase price over the fair values of the assets acquired is being amortized
over 40 years. Eastern Energy's results of operation subsequent to December 1,
1995, the date of acquisition, are reflected in the consolidated financial
statements.
38
<PAGE>
Income Taxes on Undistributed Earnings of Foreign Subsidiary -- The Company
intends to invest the undistributed earnings of its foreign subsidiary back into
the foreign subsidiary's business. Accordingly, no provision has been made for
taxes which would be payable if such earnings were repatriated to the United
States.
Other Investments -- The difference of $371,379,000 between the amount at
which the investments in subsidiaries is carried by the Company and the
underlying book equity of such subsidiaries at the respective dates of
acquisition is included in other investments.
Foreign Currency Translation -- The assets and liabilities of TU
Australia's operations denominated in the Australian dollar are translated at
rates in effect at year end. Revenues and expenses have been translated at
average rates for the applicable periods. Local currencies are considered to be
the functional currency, and adjustments resulting from such translation are
included in the cumulative currency translation adjustment, a separate component
of common stock equity.
TU ELECTRIC
- -----------
System of Accounts -- The accounting records of TU Electric are maintained
in accordance with the Federal Energy Regulatory Commission's Uniform System of
Accounts as adopted by the Public Utility Commission of Texas (PUC).
Consolidation -- The consolidated financial statements of TU Electric
include all of its business trusts. All significant intercompany items and
transactions have been eliminated in consolidation. Certain previously reported
amounts have been reclassified to conform to current classifications.
Amortization of Nuclear Fuel and Refueling Outage Costs -- The amortization
of nuclear fuel in the reactors (net of regulatory disallowances) is calculated
on the units of production method and, subsequent to commercial operation, is
included in nuclear fuel expense. TU Electric accrues a provision for costs
anticipated to be incurred during the next scheduled Comanche Peak nuclear
generating station (Comanche Peak) refueling outage.
THE COMPANY AND TU ELECTRIC
- ---------------------------
Use of Estimates -- The preparation of the Company's and TU Electric's
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 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 year.
Utility Plant -- Utility plant is stated at original cost less certain
regulatory disallowances. The cost of property additions to utility plant
includes labor and materials, applicable overhead and payroll-related costs and
an allowance for funds used during construction (AFUDC).
Allowance For Funds Used During Construction -- AFUDC is a cost accounting
procedure whereby amounts based upon interest charges on borrowed funds and a
return on equity capital used to finance construction are added to utility
plant. The accrual of AFUDC is in accordance with generally accepted accounting
principles for the industry, but does not represent current cash income.
TU Electric is capitalizing AFUDC, compounded semi-annually, on
expenditures for ongoing construction work in progress (CWIP) and nuclear fuel
in process not otherwise allowed in rate base by regulatory authorities. For
1996, 1995 and 1994, TU Electric used rates of 7.4%, 7.7% and 8.6%,
respectively.
Derivative Instruments -- The Company and TU Electric enter into interest
rate swaps to reduce their exposure to interest rate fluctuations. Amounts paid
or received under interest rate swap agreements are accrued as interest rates
change and are recognized over the life of the agreements as adjustments to
interest expense. The Company enters into currency swaps to reduce its foreign
currency exposure. Gains and losses on currency swap agreements are deferred and
offset against the deferred currency losses and gains of the underlying asset or
liability. Net deferred gains and losses associated with these currency swaps at
December 31, 1996 were not material. The Company also enters into derivative
contracts in connection with the wholesale purchases of electric energy by its
foreign subsidiary and defers
39
<PAGE>
the impact of changes in the market value of the contracts, which serve as
hedges, until the related transaction is completed. (See Note 9.)
Depreciation of Utility Plant -- Depreciation is generally based upon an
amortization of the original cost of depreciable properties (net of regulatory
disallowances) on a straight-line basis over the estimated service lives of the
properties. Depreciation as a percent of average depreciable property for the
Company and System Companies approximated 2.7% for 1996 and 2.6% for each of the
years 1995 and 1994. For TU Electric, depreciation as a percent of average
depreciable property approximated 2.6% for each of the years 1996, 1995 and
1994. Depreciation also includes an amount for TU Electric's Comanche Peak
decommissioning costs which is being accrued over the lives of the units and
deposited to external trust funds. (See Note 15.)
Revenues -- Revenues include billings under approved rates (including a
fixed fuel factor) applied to meter readings each month on a cycle basis and an
accrual of base rate revenue for energy provided after cycle billing but not
billed through the end of each month. Revenues also include an amount for under-
or over-recovery of fuel revenue representing the difference between actual fuel
cost and billings under the approved fixed fuel factor and a provision that
generally allows recovery through a Power Cost Recovery Factor, on a monthly
basis, of the capacity portion of purchased power cost and wheeling cost from
qualifying facilities not included in base rates. The fuel portion of purchased
power cost is included in the fixed fuel factor. A utility's fuel factor can be
revised upward or downward every six months, according to a specified schedule.
A utility is required to petition to make either surcharges or refunds to
ratepayers, together with interest based on a twelve month average of prime
commercial rates, for any material cumulative under- or over-recovery of fuel
costs. If the cumulative difference of the under- or over-recovery, plus
interest, is in excess of 4% of the annual estimated fuel costs most recently
approved by the PUC, it will be deemed to be material. A procedure exists for an
expedited change in fuel factors in the event of an emergency. Final
reconciliation of fuel costs must be made either in a reconciliation proceeding,
which may cover no more than three years and no less than one year, or in a
general rate case. In December 1995, TU Electric filed for a fuel reconciliation
proceeding for the reconciliation period of July 1992 through June 1995. (See
Note 13.)
Federal Income Taxes -- The Company and System Companies, excluding TU
Australia, file a consolidated federal income tax return and federal income
taxes are allocated to System Companies based upon their respective taxable
income or loss. Investment tax credits are normally amortized to income over the
estimated service lives of the properties. Deferred federal income taxes are
currently provided for temporary differences between the book and tax basis of
assets and liabilities (including the provision for regulatory disallowances).
The Company and TU Electric have adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (SFAS 109). Certain provisions
of SFAS 109 provide that regulated enterprises are permitted to recognize such
adjustments as regulatory tax assets or tax liabilities if it is probable that
such amounts will be recovered from or returned to customers in future rates.
Accordingly, at December 31, 1996, the consolidated balance sheets include a
regulatory tax asset of approximately $1.2 billion net of an approximate $600
million regulatory tax liability.
Consolidated Cash Flows -- For purposes of reporting cash flows, temporary
cash investments purchased with a remaining maturity of three months or less are
considered to be cash equivalents.
The supplemental schedule below details the Company's cash payments and
noncash investing and financing activities:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1996 1995 1994
---- ---- ----
THOUSANDS OF DOLLARS
<S> <C> <C> <C>
CASH PAYMENTS
Interest (net of amounts capitalized).......................... $ 757,092 $ 677,415 $ 678,682
Income taxes................................................... 246,556 208,326 220,316
NON-CASH INVESTING AND FINANCING ACTIVITIES
Acquisition of Eastern Energy:
Book value of assets acquired................................ $ -- $ 1,329,158 $ --
Goodwill acquired............................................ -- 302,497 --
Less: Liabilities incurred.................................. -- 8,503 --
Liabilities assumed................................... -- 1,006,848 --
--------- ----------- ---------
Cash paid................................................ -- 616,304 --
Less: Cash acquired.......................................... -- 7,943 --
Currency translation adjustment.............................. -- 53 --
--------- ----------- ---------
Net cash................................................. $ -- $ 608,414 $ --
========= =========== =========
</TABLE>
40
<PAGE>
The supplemental schedule below details TU Electric's cash payments:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1996 1995 1994
---- ---- ----
THOUSANDS OF DOLLARS
<S> <C> <C> <C>
CASH PAYMENTS
Interest (net of amounts capitalized).......................... $558,039 $602,524 $616,254
Income taxes................................................... 303,204 213,690 198,267
</TABLE>
Regulatory Assets and Liabilities -- 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). This statement applies to utilities which have
cost-based rates established by a regulator and charged to and collected from
customers. In accordance with this statement, these companies may defer the
recognition of certain costs (regulatory assets) and certain obligations
(regulatory liabilities) that, as a result of the rate making process, have
probable corresponding increases or decreases in future revenues. Future
significant changes in regulation or competition could affect these companies'
ability to meet the criteria for continued application of SFAS 71, and may
affect these companies' ability to recover these regulatory assets from, or
refund these regulatory liabilities to customers. These regulatory assets and
liabilities, which are being amortized over various periods (5 to 40 years), are
currently included in rates, or are expected to be included in future rates. In
the event all or a portion of these companies' operations fail to meet the
criteria for application of SFAS 71, these companies would be required to write-
off all or a portion of their regulatory assets and liabilities.
Significant net regulatory assets are as follows:
<TABLE>
<CAPTION>
THE COMPANY TU ELECTRIC
DECEMBER 31, DECEMBER 31,
----------------------- -----------------------
ITEM 1996 1995 1996 1995
---- ---- ---- ---- ----
THOUSANDS OF DOLLARS
<S> <C> <C> <C> <C>
Securities reacquisition costs............................. $ 396,335 $ 387,493 $ 394,733 $ 385,287
Cancelled lignite unit costs............................... 12,322 15,266 12,322 15,266
Rate case costs............................................ 59,444 62,211 59,444 62,211
Litigation and settlement costs............................ 72,685 72,685 72,685 72,685
Voluntary retirement/severance program..................... 128,337 156,339 108,884 132,641
Recoverable deferred federal income taxes - net............ 1,167,922 1,192,959 1,173,413 1,199,552
Other regulatory assets (liabilities)...................... (10,942) 14,357 (13,490) 11,727
---------- ---------- ---------- ----------
Unamortized regulatory assets.......................... 1,826,103 1,901,310 1,807,991 1,879,369
Less: Reserve for regulatory disallowances.............. 72,685 72,685 72,685 72,685
Unamortized federal investment tax credits........ 589,713 622,786 577,965 609,466
---------- ---------- ---------- ----------
Unamortized regulatory assets -- net............ $1,163,705 $1,205,839 $1,157,341 $1,197,218
========== ========== ========== ==========
</TABLE>
Should significant changes in regulation or competition occur, the affected
System Companies would be required to assess the recoverability of certain
assets, including plant and regulatory assets, and, if impaired, to write down
the assets to reflect their then fair market value.
The Company and TU Electric do not anticipate any legislation being enacted
during the 1997 legislature to authorize competition in the retail market. The
Company and TU Electric cannot predict the ultimate outcome of the ongoing
efforts that are taking place to restructure the electric utility industry or
whether such outcome will have a material effect on their financial position,
results of operation or cash flows.
2. AFFILIATES
TU ELECTRIC
- -----------
The Company provides common stock capital and partial requirements for
short-term financing to TU Electric. The Company has other subsidiaries which
perform specialized services for the System Companies, including TU Electric;
Texas Utilities Services Inc. (TU Services) which provides financial,
accounting, information technology, environmental services, customer services,
procurement, personnel, shareholder services and other administrative services
at cost; Texas Utilities Fuel Company (Fuel Company) which owns a natural gas
pipeline system, acquires, stores and delivers fuel gas and provides other fuel
services at cost for the generation of electric energy by TU Electric; and Texas
Utilities Mining Company (Mining Company) which owns, leases and operates fuel
production facilities for the surface mining and recovery of lignite at cost for
use at TU Electric's generating stations. TU Electric provided
41
<PAGE>
services such as energy sales, wheeling and scheduling to SESCO which is engaged
in the purchase, transmission, distribution and sale of electric energy in ten
counties in the eastern and central parts of Texas with a population estimated
at 125,000. SESCO generates no electric energy.
TU Electric has entered into agreements with Fuel Company for the
procurement of certain fuels and related services and with Mining Company for
the procurement and production of lignite. Payments are at cost for the services
received and are required by the agreements to be "at least equivalent in the
aggregate to the annual charge to income on the books" of Fuel Company and of
Mining Company. TU Electric is, in effect, obligated for the principal,
$396,428,000 at December 31, 1996, and interest on long-term notes of Mining
Company through payments described above. Such notes mature at various dates
through 2005 and have interest rates ranging from 6.50% to 9.42%. At December
31, 1996, TU Electric had recorded as a note receivable on its balance sheet,
$35,515,000 representing operating funds extended to the Fuel Company.
The schedule below details TU Electric's significant billings to and from
affiliates for services rendered and interest on short-term financings:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1996 1995 1994
---- ---- ----
THOUSANDS OF DOLLARS
<S> <C> <C> <C>
Billings from:
TU Services.......................................... $263,869 $182,334 $184,537
Fuel Company......................................... 922,200 763,346 850,825
Mining Company....................................... 368,937 327,856 329,108
Billings to:
SESCO................................................ $ 29,171 $ 20,657 $ 21,869
Fuel Company......................................... 1,619 5,669 3,205
</TABLE>
3. SHORT-TERM FINANCING
THE COMPANY
- -----------
The Company's and System Companies' amounts outstanding to banks for short-
term borrowings at December 31, 1996 consisted of the following:
<TABLE>
<CAPTION>
THOUSANDS OF DOLLARS
<S> <C>
Credit facility agreements (the Company).................................. $520,000
Uncommitted bank lines (Fuel Company)..................................... 15,000
--------
Total............................................................... $535,000
========
</TABLE>
Interest rates on such bank borrowings ranged from 5.81% to 5.99% at
December 31, 1996. During the years 1996, 1995 and 1994, the Company's average
amounts outstanding to banks for borrowings were $593,660,000, $149,806,000 and
$66,042,000, respectively. Weighted average interest rates to banks for short-
term borrowings during such periods were 5.94%, 6.33% and 4.92%, respectively.
At December 31, 1996, the total amount of short-term borrowings authorized by
the Board of Directors of the Company from banks or other lenders was
$1,250,000,000.
At December 31, 1996, the Company and TU Electric had joint lines of credit
under two credit agreements (Credit Agreements) with a group of commercial
banks. The Credit Agreements, for each of which the Company pays a fee, have
three facilities. Borrowings under these facilities will be used for working
capital and other corporate purposes, including commercial paper backup.
Facility A provides for short-term borrowings of up to $375,000,000 at a
variable interest rate and terminates April 25, 1997. Facility B provides for
short-term borrowings of up to $875,000,000 at a variable interest rate and
terminates April 26, 2001. The Company's borrowings under Facilities A and B are
limited to an aggregate of $750,000,000 outstanding at any one time. Facility C
is a separate five-year, unsecured long-term loan to the Company in the
principal amount of $300,000,000. For more information regarding long-term
financings of the Company and TU Electric, see Note 8 to Consolidated Financial
Statements. In addition to the above, the Company and Fuel Company have separate
arrangements for uncommitted lines of credit.
42
<PAGE>
The Company intends to refinance up to $525,000,000 of its current
$535,000,000 short-term borrowings from banks beyond one year of the balance
sheet date of December 31, 1996. As a result, such amount has been reclassified
from notes payable - banks to long-term debt on the Company's 1996 Balance Sheet
(see Note 8). If necessary, the Company would draw upon Facility B if such
amounts were not refinanced in the normal course of business.
TU ELECTRIC
- -----------
At December 31, 1996, TU Electric had $253,151,000 of commercial paper
outstanding with interest rates ranging from 5.48% to 7.30%. TU Electric had no
borrowings from banks in 1996. During the years 1995 and 1994, average amounts
outstanding to banks for borrowings were $11,667,000 and $32,292,000,
respectively and to holders of commercial paper were $254,027,000, $340,579,000
and $238,401,000 for 1996, 1995 and 1994, respectively. During such periods,
weighted average interest rates to banks for borrowings were 6.51% and 4.60%,
respectively, and to holders of commercial paper were 5.53%, 6.10% and 4.94%,
respectively.
4. COMMON STOCK
THE COMPANY
- -----------
During 1994, the Company issued a total of 1,495,615 shares of its
authorized but unissued common stock for $62,102,000. The total issuance was
comprised of 1,364,690 shares pursuant to the Company's Automatic Dividend
Reinvestment and Common Stock Purchase Plan (DRIP) for $56,671,000 and 130,925
shares pursuant to the Employees' Thrift Plan of the Texas Utilities Company
System (Thrift Plan) for $5,431,000. Since March 1994, requirements under the
DRIP and Thrift Plan have been met through open market purchases of the
Company's common stock. As a result, no shares of the authorized but unissued
common stock of the Company were issued in 1995 or 1996.
At December 31, 1996, 1,997,005 shares of the authorized but unissued
common stock of the Company were reserved for issuance and sale pursuant to the
above plans.
In 1990, the Thrift Plan borrowed $250,000,000 in the form of a note
payable from an outside lender and purchased 7,142,857 shares of common stock
(LESOP Shares) from the Company in connection with the leveraged employee stock
ownership provision of the Thrift Plan. LESOP Shares are held by the trustee
until allocated to Thrift Plan participants when required to meet the System
Companies' obligations under terms of the Thrift Plan. The Company has purchased
the note from the outside lender, which has been recorded as a reduction to
common stock equity. The Thrift Plan uses dividends on the LESOP Shares
purchased and contributions from the System Companies, if required, to repay
interest and principal on the note. Common stock equity increases at such time
as LESOP Shares are allocated to participants' accounts even though shares of
common stock outstanding include unallocated LESOP Shares held by the trustee.
Allocations to participants' accounts in each of the years 1996, 1995 and 1994
increased common stock equity by $8,115,000.
In June 1996, the Company purchased for $51,636,000, and retired, 1,238,480
shares of its issued and outstanding common stock.
The Company has 50,000,000 authorized shares of serial preference stock
having a par value of $25 a share, none of which has been issued.
TU ELECTRIC
- -----------
In March 1994, TU Electric issued 4,800,000 shares of its authorized but
unissued common stock to the Company for $249,600,000. No such shares were
issued in 1995 or 1996.
No shares of TU Electric's common stock are held by or for its own account,
nor are any shares of such capital stock reserved for its officers and employees
or for options, warrants, conversions and other rights in connection therewith.
43
<PAGE>
5. RETAINED EARNINGS
THE COMPANY AND TU ELECTRIC
- ---------------------------
The articles of incorporation and the mortgages, as supplemented, of TU
Electric and SESCO, contain provisions which, under certain conditions, restrict
distributions on or acquisitions of their common stock. At December 31, 1996,
$69,438,000 of retained earnings of TU Electric and $13,969,000 of retained
earnings of SESCO were thus restricted as a result of such provisions.
In 1995, TU Electric transferred approximately $433,820,000 from its
common stock account to retained earnings. Such amount represented the Company's
equity in undistributed earnings, since acquisition, included in previous
transfers by TU Electric.
6. PREFERRED STOCK OF TU ELECTRIC (CUMULATIVE, WITHOUT PAR VALUE, ENTITLED
UPON LIQUIDATION TO $100 A SHARE; AUTHORIZED 17,000,000 SHARES)
<TABLE>
<CAPTION>
REDEMPTION PRICE PER SHARE
SHARES OUTSTANDING AMOUNT (BEFORE ADDING ACCUMULATED DIVIDENDS)
--------------------------------------
DIVIDEND RATE DECEMBER 31, DECEMBER 31, DECEMBER 31,1996 EVENTUAL MINIMUM
- ---------------------------- -------------------- -------------------- ---------------- -----------------
1996 1995 1996 1995
---- ---- ---- ----
THOUSANDS OF DOLLARS
<S> <C> <C> <C> <C> <C> <C>
NOT SUBJECT TO MANDATORY REDEMPTION
- -----------------------------------
$ 4.50 series...................... 74,367 74,367 $ 7,440 $ 7,440 $110.00 $110.00
4.00 series (Dallas Power)....... 70,000 70,000 7,049 7,049 103.56 103.56
4.56 series (Texas Power)........ 133,628 133,628 13,371 13,371 112.00 112.00
4.00 series (Texas Electric)..... 110,000 110,000 11,000 11,000 102.00 102.00
4.56 series (Texas Electric)..... 64,947 64,947 6,560 6,560 112.00 112.00
4.24 series...................... 100,000 100,000 10,081 10,081 103.50 103.50
4.64 series...................... 100,000 100,000 10,016 10,016 103.25 103.25
4.84 series...................... 70,000 70,000 7,000 7,000 101.79 101.79
4.00 series (Texas Power)........ 70,000 70,000 7,000 7,000 102.00 102.00
4.76 series...................... 100,000 100,000 10,000 10,000 102.00 102.00
5.08 series...................... 80,000 80,000 8,004 8,004 103.60 103.60
4.80 series...................... 100,000 100,000 10,009 10,009 102.79 102.79
4.44 series...................... 150,000 150,000 15,061 15,061 102.61 102.61
7.20 series...................... 200,000 200,000 20,044 20,044 103.21 103.21
6.84 series...................... 200,000 200,000 20,023 20,023 103.05 103.05
7.24 series...................... 247,862 247,862 24,905 24,905 103.42 103.42
8.20 series (a).................. 338,872 338,872 32,704 32,704 (b) 100.00
7.98 series...................... 474,000 500,000 46,794 49,361 (b) 100.00
7.50 series (a).................. 392,234 392,234 38,062 38,062 (b) 100.00
7.22 series (a).................. 301,132 308,632 29,182 29,909 (b) 100.00
Adjustable rate series A (c)........ 884,700 1,000,000 86,878 98,200 100.00 100.00
Adjustable rate series B (c)........ 440,137 548,561 43,244 53,896 100.00 100.00
--------- --------- -------- --------
Total............................ 4,701,879 4,959,103 $464,427 $489,695
========= ========= ======== ========
SUBJECT TO MANDATORY REDEMPTION (D)
- -----------------------------------
$ 9.64 series (e).................. 400,000 650,000 $ 39,981 $ 64,950 (f) (f)
6.98 series...................... 1,000,000 1,000,000 99,199 99,123 (b) 100.00
6.375 series..................... 1,000,000 1,000,000 99,211 99,123 (b) 100.00
--------- --------- -------- --------
Total............................ 2,400,000 2,650,000 $238,391 $263,196
========= ========= ======== ========
</TABLE>
_________________________________________
(a) The preferred stock series is the underlying preferred stock for depositary
shares that were issued to the public. Each depositary share represents
one quarter of a share of underlying preferred stock.
(b) Preferred stock series is not redeemable at December 31, 1996.
(c) Adjustable rate series A bears a dividend rate for the period ended January
31, 1997, of $6.50 per annum and adjustable rate series B bears a dividend
rate for the period ended December 31, 1996, of $7.00 per annum.
(d) TU Electric is required to redeem at a price of $100 per share plus
accumulated dividends a specified minimum number of shares annually or
semi-annually on the initial/next dates shown below. These redeemable
shares may be called, purchased or otherwise acquired. Certain issues may
not be redeemed at the option of TU Electric prior to 2003. TU Electric
may annually call for redemption, at its option, an aggregate of up to
twice the number of shares shown below for each series at a price of $100
per share plus accumulated dividends, except for the $9.64 series which may
be redeemed in a minimum amount of 10,000 shares at any time at a price of
$100 per share plus accumulated dividends plus a component at a variable
price per share which is designed to maintain the expected yield at
issuance:
MINIMUM REDEEMABLE INITIAL/NEXT DATE OF
SERIES SHARES MANDATORY REDEMPTION
------ --------------------- --------------------
$ 9.64 125,000 semi-annually 5/1/97
6.98 50,000 annually 7/1/03
6.375 50,000 annually 10/1/03
44
<PAGE>
Preferred stock mandatory redemption requirements for the next five years
are $25 million in 1997, $15 million in 1998 and none thereafter. The
carrying value of preferred stock subject to mandatory redemption is being
increased periodically to equal the redemption amounts at the mandatory
redemption dates with a corresponding increase in preferred stock
dividends.
(e) Under certain circumstances relating to a change in federal tax law
governing the dividends received deduction applicable to eligible
corporations, the dividend rate of the $9.64 series may increase to a
maximum of $10.74.
(f) The redemption price is calculated on the business day next preceding the
settlement date at a price of $100 per share plus accumulated dividends
plus a component which is designed to maintain the expected yield at
issuance.
In February 1997, the Company announced a tender offer for any and all
outstanding shares of 20 series of TU Electric's preferred stock and depositary
shares. The Company expects to fund the purchase of shares tendered and
accepted pursuant to the tender offer through the use of its general funds and
funds borrowed through the issuance of commercial paper, and under its lines of
credit.
45
<PAGE>
7. 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). 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.
At December 31, 1996 and 1995, the following Trust Originated Preferred
Securities of TU Electric Capital I and II and Quarterly Income Preferred
Securities of TU Electric Capital III were outstanding:
<TABLE>
<CAPTION>
UNITS OUTSTANDING AMOUNT
DECEMBER 31, DECEMBER 31,
----------------------- ---------------------
1996 1995 1996 1995
---- ---- ---- ----
COMPANY Thousands of Dollars
-------
<S> <C> <C> <C> <C>
TU Electric Capital I (8.25% Series)(a).... 5,871,044 5,871,044 $140,671 $140,880
TU Electric Capital II (9.00% Series)(b)... 1,991,253 1,991,253 47,301 47,374
TU Electric Capital III (8.00% Series)(c).. 8,000,000 8,000,000 193,339 193,222
---------- --------- -------- --------
Total................................ 15,862,297 15,862,297 $381,311 $381,476
========== ========== ======== ========
</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.
The preferred trust securities are subject to mandatory redemption upon
payment of the Debentures at maturity or upon redemption. The Debentures are
subject to redemption, in whole or in part at the option of TU Electric, at 100%
of their principal amount plus accrued interest, after an initial period during
which they may not be redeemed and at any time upon the occurrence of certain
events. The carrying value of preferred securities subject to mandatory
redemption is being increased periodically to equal the redemption amounts at
the mandatory redemption dates with a corresponding increase in preferred
securities distributions.
In January 1997, two statutory business trusts, TU Electric Capital IV and
TU Electric Capital V were established for the purpose of issuing common and
preferred trust securities, with a liquidation preference of $1,000 per unit
(Capital Securities), and holding Debentures. TU Electric Capital IV issued
floating rate Capital Securities having an aggregate liquidation preference of
$100,000,000. Distributions on Capital Securities of TU Electric Capital IV are
payable quarterly based on an annual floating rate determined quarterly with
reference to a 3-month LIBOR plus a margin of 0.80%. TU Electric Capital V
issued fixed rate Capital Securities having an aggregate liquidation preference
of $400,000,000. Distributions on Capital Securities of TU Electric Capital V
are payable semi-annually at an annual rate of 8.175%. Except for certain
differences with respect to redemption rights, the Capital Securities and the
related Debentures have terms substantially similar to those of the TU Electric
Trusts described above. In February 1997, TU Electric, with respect to its
Capital IV securities, entered into an interest rate swap agreement with a
notional principal amount of $100,000,000 expiring 2002 with a fixed interest
rate of 7.183% per annum.
The Debentures held by each of these trusts are its only assets. Each of
these trusts will use interest payments received on the Debentures it holds to
make cash distributions on the trust securities. The trust assets of TU
Electric Capital IV are $103,093,000 principal amount of floating rate Junior
Subordinated Debentures, Series D, due January 30, 2037. The trust assets of TU
Electric Capital V are $412,372,000 principal amount of 8.175% Junior
Subordinated Debentures, Series E, due January 30, 2037.
The combination of the obligations of TU Electric pursuant to agreements to
pay the expenses of each of TU Electric Capital I, II, III, IV and V and TU
Electric's guarantees of distributions with respect to trust securities, to the
extent the issuing trust has funds available therefor, constitutes a full and
unconditional guarantee by TU Electric of the obligations of each trust under
the trust securities it has issued. TU Electric is the owner of all the common
trust securities of each trust, which, in each case, constitutes 3% or more of
the liquidation amount of all the trust securities issued by such trust.
46
<PAGE>
8. LONG-TERM DEBT, LESS AMOUNTS DUE CURRENTLY
<TABLE>
<CAPTION>
THE COMPANY TU ELECTRIC
DECEMBER 31, DECEMBER 31,
----------------------- -----------------------
INTEREST SERIES
RATE DUE 1996 1995 1996 1995
-------- ------ ---- ---- ---- ----
THOUSANDS OF DOLLARS
<S> <C> <C> <C> <C>
First mortgage bonds:
6-3/8% series due 1997.............................. $ -- $ 175,000 $ -- $ 175,000
7-1/8% series due 1997.............................. -- 150,000 -- 150,000
5-1/2% series due 1998.............................. 125,000 125,000 125,000 125,000
5-3/4% series due 1998.............................. 150,000 150,000 150,000 150,000
5-7/8% series due 1998.............................. 175,000 175,000 175,000 175,000
6-1/2% series due 1998.............................. 1,065 1,080 -- --
7-3/8% series due 1999.............................. 100,000 100,000 100,000 100,000
Floating rate series due 1999 (a)................... 300,000 300,000 300,000 300,000
9-1/2% series due 1999.............................. 200,000 200,000 200,000 200,000
7-3/8% series due 2001.............................. 150,000 150,000 150,000 150,000
7.95 % series due 2002.............................. 900 912 -- --
8 % series due 2002.............................. 147,000 147,000 147,000 147,000
8-1/8% series due 2002.............................. 150,000 150,000 150,000 150,000
6-3/4% series due 2003.............................. 200,000 200,000 200,000 200,000
6-3/4% series due 2003.............................. 100,000 100,000 100,000 100,000
6-1/4% series due 2004.............................. 125,000 125,000 125,000 125,000
8-1/4% series due 2004.............................. 100,000 100,000 100,000 100,000
6-3/4% series due 2005.............................. 100,000 100,000 100,000 100,000
10.44% series due 2008.............................. 3,000 150,000 3,000 150,000
9-3/4% series due 2021.............................. 280,855 300,000 280,855 300,000
8-7/8% series due 2022.............................. 175,000 175,000 175,000 175,000
9 % series due 2022.............................. 100,000 100,000 100,000 100,000
7-7/8% series due 2023.............................. 300,000 300,000 300,000 300,000
8-3/4% series due 2023.............................. 195,550 200,000 195,550 200,000
7-7/8% series due 2024.............................. 225,000 225,000 225,000 225,000
8-1/2% series due 2024.............................. 163,000 175,000 163,000 175,000
7-3/8% series due 2025.............................. 208,000 300,000 208,000 300,000
7-5/8% series due 2025.............................. 250,000 250,000 250,000 250,000
Pollution control series:
Brazos River Authority
8-1/4% series due 2016.............................. -- 111,215 -- 111,215
7-7/8% series due 2017.............................. 81,305 81,305 81,305 81,305
9-7/8% series due 2017.............................. 28,765 28,765 28,765 28,765
9-1/4% series due 2018.............................. 54,005 54,005 54,005 54,005
8-1/4% series due 2019.............................. 100,000 100,000 100,000 100,000
8-1/8% series due 2020.............................. 50,000 50,000 50,000 50,000
7-7/8% series due 2021.............................. 100,000 100,000 100,000 100,000
Taxable series due 2021(b)......................... 65,940 91,000 65,940 91,000
5-1/2% series due 2022.............................. 50,000 50,000 50,000 50,000
6-5/8% series due 2022.............................. 33,000 33,000 33,000 33,000
6.70 % series due 2022.............................. 16,935 16,935 16,935 16,935
6-3/4% series due 2022.............................. 50,000 50,000 50,000 50,000
Taxable series due 2023(b)......................... 100,000 100,000 100,000 100,000
6.05 % series due 2025.............................. 90,000 90,000 90,000 90,000
Series 1996A due 2026(d)............................ 25,060 -- 25,060 --
6-1/2% series due 2027.............................. 46,660 46,660 46,660 46,660
6.10 % series due 2028.............................. 50,000 50,000 50,000 50,000
Series 1994A due 2029(c)............................ 39,170 39,170 39,170 39,170
Series 1994B due 2029(c)............................ 39,170 39,170 39,170 39,170
Series 1995A due 2030(d)............................ 50,670 50,670 50,670 50,670
Series 1995B due 2030(d)............................ 118,355 118,355 118,355 118,355
Series 1995C due 2030(d)............................ 118,355 118,355 118,355 118,355
Series 1996B due 2030(d)............................ 61,215 -- 61,215 --
Series 1996C due 2030(d)............................ 50,000 -- 50,000 --
Sabine River Authority of Texas
9 % series due 2007.............................. 51,525 51,525 51,525 51,525
7-3/4% series due 2016.............................. -- 57,950 -- 57,950
8-1/8% series due 2020.............................. 40,000 40,000 40,000 40,000
8-1/4% series due 2020.............................. 11,000 11,000 11,000 11,000
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
THE COMPANY TU ELECTRIC
DECEMBER 31, DECEMBER 31,
----------------------- -----------------------
INTEREST SERIES
RATE DUE 1996 1995 1996 1995
-------- ------ ---- ---- ---- ----
THOUSANDS OF DOLLARS
<S> <C> <C> <C> <C>
Sabine River Authority of Texas (continued)
5.55 % series due 2022............................ $ 75,000 $ 75,000 $ 75,000 $ 75,000
6.55 % series due 2022............................. 40,000 40,000 40,000 40,000
5.85 % series due 2022............................. 33,465 33,465 33,465 33,465
Series 1996A due 2026(d).......................... 57,950 -- 57,950 --
Series 1996B due 2026(d).......................... 25,000 -- 25,000 --
Series 1995A due 2030(d).......................... 16,000 16,000 16,000 16,000
Series 1995B due 2030(d).......................... 12,050 12,050 12,050 12,050
Series 1995C due 2030(d).......................... 18,475 18,475 18,475 18,475
Trinity River Authority of Texas
9 % series due 2007................................ 12,000 12,000 12,000 12,000
Series 1996A due 2026(d).......................... 25,000 -- 25,000 --
Secured medium-term notes, series A.................... 30,000 30,000 30,000 30,000
Secured medium-term notes, series B.................... 114,200 125,000 114,200 125,000
Secured medium-term notes, series C.................... -- 47,000 -- 47,000
Secured medium-term notes, series D.................... 201,150 201,150 201,150 201,150
---------- ---------- ---------- ----------
Total first mortgage bonds....................... 6,205,790 6,813,212 6,203,825 6,811,220
General obligation bonds................................. 10,000 10,000 -- --
Debt assumed for purchase of utility plant (e)........... 156,182 158,595 156,182 158,595
Senior notes (f)......................................... 964,881 639,328 -- --
Term credit facilities (g)............................... 1,381,290 1,612,200 -- 300,000
Unamortized premium and discount......................... (50,032) (58,760) (49,413) (57,745)
---------- ---------- ---------- ----------
Total long-term debt, less amounts
due currently.................................. $8,668,111 $9,174,575 $6,310,594 $7,212,070
========== ========== ========== ==========
</TABLE>
_________________________
(a) Floating rate series due May 1, 1999 bears an interest rate for the period
November 1, 1996 to January 31, 1997 of 5.8906%. Such interest rate is
reset on a quarterly basis.
(b) Taxable pollution control series consist of two series: $65,940,000 of
flexible rate series 1991D due 2021 with interest rates on December 31,
1996 ranging from 5.43% to 5.45% and $100,000,000 of flexible rate series
1993 due 2023 at 5.45% on December 31, 1996. Series 1991D bonds were
remarketed on June 1, 1995 in a flexible mode for rate periods up to 180
days and are secured by an irrevocable letter of credit with maturities in
excess of one year. Series 1993 bonds are in a flexible mode and, while in
such mode, will be remarketed for periods of less than 270 days and are
secured by an irrevocable letter of credit with maturities in excess of one
year.
(c) Series 1994A and Series 1994B due 2029 are in a flexible mode with
interest rates on December 31, 1996 ranging from 3.45% to 3.65% and, while
in such mode, will be remarketed for periods of less than 270 days and are
secured by an irrevocable letter of credit with maturities in excess of one
year.
(d) Series 1996A, Series 1996B and Series 1996C due 2026 and Series 1995A,
Series 1995B and Series 1995C due 2030 are in a daily mode with interest
rates on December 31, 1996 ranging from 4.70% to 5.30%. The 1996 Series
are supported by municipal bond insurance policies and standby bond
purchase agreements. The 1995 Series are secured by irrevocable letters of
credit with maturities in excess of one year.
(e) In 1990, TU Electric purchased the ownership interest in Comanche Peak of
Tex-La Electric Cooperative of Texas, Inc. (Tex-La) and assumed debt of
Tex-La payable over approximately 32 years. The assumption is secured by a
mortgage on the acquired interest. The Company has guaranteed these
payments.
(f) Consists of the Company's $239,350,000 aggregate principal amount maturing
on various dates through 2010 with interest rates ranging from 10.20% to
10.58%, Mining Company's $382,142,000 aggregate principal amount maturing
on various dates through 2005 with interest rates ranging from 6.50% to
9.42% and Eastern Energy's $343,389,000 aggregate principal amount maturing
on various dates through 2016 with fixed interest rates ranging from 6.75%
to 7.25%. The Eastern Energy debt is covered under cross-currency and
interest rate swap agreements, each with an aggregate notional principal
amount of $343,389,000 expiring on concurrent dates with the underlying
fixed rate debt through 2016. Such agreements effectively convert these
fixed rate U.S. Dollar-denominated Senior Notes to a floating rate
Australian Dollar liability based on the Australian Bank Bill Swap rate
plus a margin. At December 31, 1996, such floating rates ranged from 6.8%
to 7.0%.
(g) Includes the Company's $300,000,000 Credit Agreement-Facility C due 2001
with an interest rate on December 31, 1996 of 5.95%, the Company's
$525,000,000 reclassified short-term debt (see Note 3) and Eastern Energy's
$556,290,000 Term Credit Facility due 2001 with a floating interest rate of
6.3386% on December 31, 1996 (all of which is included under an interest
rate swap agreement with a notional principal amount of $572,184,000
expiring 2002 with a fixed interest rate of 8.4475% per annum).
Long-term debt of the Company and TU Electric does not include Junior
Subordinated Debentures held by each TU Electric Trust. (See Note 7.)
48
<PAGE>
Sinking fund and maturity requirements for the years 1997 through 2001
under long-term debt instruments in effect at December 31, 1996, were as
follows:
<TABLE>
<CAPTION>
THE COMPANY TU ELECTRIC
--------------------------------- --------------------------------
SINKING MINIMUM CASH SINKING MINIMUM CASH
YEAR FUND MATURITY REQUIREMENT FUND MATURITY REQUIREMENT
- ---- -------- -------- ------------ ------- -------- ------------
THOUSANDS OF DOLLARS
<S> <C> <C> <C> <C> <C> <C>
1997............. $ 20,276 $335,800 $356,076 $2,413 $335,800 $338,213
1998............. 21,216 451,065 472,281 2,645 450,000 452,645
1999............. 24,540 630,000 654,540 5,906 630,000 635,906
2000............. 260,900 576,150 837,050 3,199 156,150 159,349
2001............. 22,275 778,290 800,565 3,502 222,000 225,502
</TABLE>
In February 1997, the Brazos River Authority issued $106,350,000 aggregate
principal amount of Pollution Control Revenue Bonds collateralized by TU
Electric's First Mortgage Bonds. All such bonds mature on February 1, 2032,
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, is
supported by municipal bond insurance policies. Interest rates on all the bonds
are determined daily. Such rates currently range from 3.25% to 3.40%.
TU Electric's first mortgage bonds are secured by the Mortgage and Deed of
Trust dated as of December 1, 1983, as supplemented, between TU Electric and
Irving Trust Company (now The Bank of New York), Trustee. SESCO's first mortgage
bonds are secured by the Mortgage and Deed of Trust dated as of May 1, 1945, as
supplemented, between SESCO and BankOne, Texas, NA, successor Trustee. Electric
plant of TU Electric and SESCO is generally subject to the liens of their
respective mortgages.
9. DERIVATIVE INSTRUMENTS
THE COMPANY AND TU ELECTRIC
- ---------------------------
The Company's and TU Electric's operations involve managing market risks
related to changes in interest rates and, for the Company, foreign exchange and
commodity price exposures. Derivative instruments including swaps and forward
contracts are used to reduce and manage a portion of those risks. The Company's
and TU Electric's participations in derivative transactions have been designed
for hedging purposes and are not held or issued for trading purposes.
INTEREST RATE RISK MANAGEMENT
At December 31, 1996, Eastern Energy had interest rate swaps outstanding
with an aggregate notional amount of $915,573,000. These swap agreements
establish a mix of fixed and variable interest rates on the outstanding debt and
have remaining terms between 6 and 20 years. (See Note 8.)
In February 1997, TU Electric entered into an interest rate swap agreement
with a notional principal amount of $100,000,000 expiring 2002 with a fixed
interest rate of 7.183% per annum. (See Note 7.)
FOREIGN EXCHANGE RISK MANAGEMENT
The Company's foreign exchange exposures result from transactions
denominated in currencies other than the local currency of its foreign
subsidiary. At December 31, 1996, Eastern Energy had cross-currency swap
agreements outstanding with an aggregate notional amount of $343,389,000
expiring on various dates through 2016. (See Note 8.)
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. During 1996, the average spot price for
electric energy from the
49
<PAGE>
pool approximated $15 per megawatt-hour (MWh) as compared to the average fixed
price of Eastern Energy's electric energy under its contracts of approximately
$31 per MWh. At December 31, 1996, 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.
CREDIT RISK
Credit risk relates to the risk of loss that the Company and TU Electric
would incur as a result of nonperformance by counterparties to their respective
derivative instruments. The Company and TU Electric believe the risk of
nonperformance by counterparties is minimal.
10. FEDERAL INCOME TAXES
The components of the Company's and TU Electric's federal income taxes are
as follows:
<TABLE>
<CAPTION>
THE COMPANY
YEAR ENDED DECEMBER 31,
-------------------------------------------
1996 1995 1994
---- ---- ----
THOUSANDS OF DOLLARS
<S> <C> <C> <C>
Charged (credited) to consolidated net income (loss):
Current........................................................ $198,522 $222,358 $152,833
Deferred -- Domestic.......................................... 196,957 (259,445) 200,232
Foreign........................................... 12,828 (174) --
Investment tax credits......................................... (33,075) (22,774) (26,427)
-------- -------- --------
Total to consolidated net income (loss)...................... 375,232 (60,035) 326,638
-------- -------- --------
Charged (credited) to consolidated retained earnings.............. (4,032) (6,452) (6,733)
-------- -------- --------
Total federal income taxes................................ $371,200 $(66,487) $319,905
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
TU ELECTRIC
YEAR ENDED DECEMBER 31,
-------------------------------------------
1996 1995 1994
---- ---- ----
THOUSANDS OF DOLLARS
<S> <C> <C> <C>
Charged (credited) to operating expenses:
Current........................................................ $291,807 $260,988 $182,107
-------- -------- --------
Deferred:
Depreciation differences and capitalized construction
costs....................................................... 151,391 205,280 222,762
Over/under-recovered fuel revenue............................ 25,506 (49,798) (59,224)
Alternative minimum tax...................................... 15,000 (30,937) (121,948)
Other........................................................ (32,024) 17,983 138,466
-------- -------- --------
Total deferred - net....................................... 159,873 142,528 180,056
-------- -------- --------
Investment tax credits......................................... (30,668) (21,201) (23,698)
-------- -------- --------
Total to operating expenses.............................. 421,012 382,315 338,465
-------- -------- --------
Charged (credited) to other income:
Current........................................................ (30,164) (59,454) (35,474)
-------- -------- --------
Deferred:
Impairment of assets......................................... -- (149,617) --
Regulatory disallowance...................................... 13,623 -- --
Other........................................................ 1,861 39,709 39,696
-------- -------- --------
Total deferred - net....................................... 15,484 (109,908) 39,696
-------- -------- --------
Investment tax credits............................................ (833) -- --
-------- -------- --------
Total to other income.................................... (15,513) (169,362) 4,222
-------- -------- --------
Total federal income taxes............................. $405,499 $212,953 $342,687
======== ======== ========
</TABLE>
50
<PAGE>
The significant components of deferred federal income tax assets and
liabilities reflected net in the balance sheets are as follows:
<TABLE>
<CAPTION>
THE COMPANY TU ELECTRIC
DECEMBER 31, DECEMBER 31,
----------------------- -----------------------
1996 1995 1996 1995
---- ---- ---- ----
THOUSANDS OF DOLLARS
<S> <C> <C> <C> <C>
CURRENT
Deferred tax assets:
Unbilled revenues......................................... $ 28,521 $ 27,323 $ 28,521 $ 27,323
Over-recovered fuel revenue............................... 15,045 40,550 15,045 40,550
Foreign operations........................................ 2,994 4,832 -- --
Other..................................................... 7,406 11,705 7,316 11,756
---------- ---------- --------- ----------
Total current deferred tax assets..................... 53,966 84,410 50,882 79,629
---------- ---------- --------- ----------
Deferred tax liabilities:
Foreign operations........................................ 13,945 -- -- --
---------- ---------- --------- ----------
Total current deferred tax liabilities................ 13,945 -- -- --
---------- ---------- --------- ----------
NET CURRENT DEFERRED TAX ASSETS............................. $ 40,021 $ 84,410 $ 50,882 $ 79,629
========== ========== ========= ==========
NON-CURRENT
Deferred tax assets:
Unamortized ITC........................................... $ 312,665 $ 329,994 $ 307,153 $ 323,685
Impairment of assets...................................... 143,210 174,003 71,791 71,968
Regulatory disallowances.................................. 222,428 237,521 222,428 237,521
Alternative minimum tax................................... 587,052 611,934 431,277 454,222
Tax rate difference....................................... 78,141 83,111 77,248 82,108
Employee benefits......................................... 100,397 38,611 76,060 22,341
Foreign operations........................................ 66,547 -- -- --
Other..................................................... 27,910 20,993 12,348 11,641
---------- ---------- --------- ----------
Total non-current deferred tax assets................ 1,538,350 1,496,167 1,198,305 1,203,486
---------- ---------- --------- ----------
Deferred tax liabilities:
Depreciation differences and capitalized
construction costs....................................... 4,010,105 3,920,888 3,938,325 3,850,545
Foreign operations........................................ 55,550 593 -- --
Redemption of long-term debt.............................. 125,601 120,290 125,123 119,608
Other..................................................... 148,720 124,204 124,469 102,382
---------- ---------- --------- ----------
Total non-current deferred tax liabilities........... 4,339,976 4,165,975 4,187,917 4,072,535
---------- ---------- --------- ----------
NET NON-CURRENT DEFERRED TAX LIABILITY...................... $2,801,626 $2,669,808 $2,989,612 $2,869,049
========== ========== ========= ==========
</TABLE>
Federal income taxes were less than the amount computed by applying the
federal statutory rate to pre-tax book income (loss) as follows:
<TABLE>
<CAPTION>
THE COMPANY TU ELECTRIC
YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31
---------------------------- ----------------------------
1996 1995 1994 1996 1995 1994
---- ---- ---- ---- ---- ----
THOUSANDS OF DOLLARS
<S> <C> <C> <C> <C> <C> <C>
Federal income taxes at statutory rate (35%)........ $413,769 $(39,188) $339,962 $443,868 $233,585 $350,308
-------- -------- -------- -------- -------- --------
Increases(decreases) in federal income taxes
resulting from:
Allowance for funds used during construction... (542) (2,330) (3,760) (542) (2,330) (3,760)
Depletion allowance............................ (25,657) (23,564) (23,361) (25,657) (23,564) (23,361)
Amortization of investment tax credits......... (23,203) (23,036) (24,213) (21,629) (21,463) (21,484)
LESOP dividend deduction....................... (5,000) (7,700) (7,700) -- -- --
Amortization of tax rate differences........... (9,084) (9,648) (9,732) (8,740) (9,288) (9,143)
Reversal of prior book/tax differences......... 35,128 38,974 43,157 34,896 38,630 42,899
Foreign operations............................. 5,670 283 -- -- -- --
Prior year adjustments......................... (25,250) (4,136) 233 (21,813) (5,669) 2,902
Other.......................................... 5,369 3,858 5,319 5,116 3,052 4,326
-------- -------- -------- -------- -------- --------
Total increase (decrease)................... (42,569) (27,299) (20,057) (38,369) (20,632) (7,621)
-------- -------- -------- -------- -------- --------
Total federal income taxes.......................... $371,200 $(66,487) $319,905 $405,499 $212,953 $342,687
======== ======== ======== ======== ======== ========
Effective tax rate.................................. 31.4% 59.4% 32.9% 32.0% 31.9% 34.2%
</TABLE>
The System Companies and TU Electric have approximately $587 million and
$431 million, respectively, of alternative minimum tax credit carryforwards
which are available to offset future taxes.
51
<PAGE>
As a part of its ongoing large case audit program, the IRS has audited the
consolidated Federal income tax returns of the System Companies for the years
1987 through 1990. During the course of the audit, the IRS proposed a number of
adjustments to the returns as filed, the most significant of which related to a
proposed reclassification of certain costs incurred in connection with the
construction of Comanche Peak Unit 1 as costs incurred to procure a nuclear
operating license. In accordance with an agreement reached by both parties in
May 1996, the Company made an additional tax payment to the IRS which resolved
all issues proposed in the audit. The additional payment did not have a material
effect on the Company's financial position, results of operation or cash flows.
11. RETIREMENT PLANS AND OTHER POSTRETIREMENT BENEFITS
The System Companies and TU Electric have defined benefit pension plans
covering substantially all employees. Generally, plan benefits are based on
years of accredited service and average annual earnings received during the
three years of highest earnings. Contributions to the domestic plans were
determined using the frozen attained age method which is one of several
actuarial methods allowed by the Employee Retirement Income Security Act of
1974. The costs of the plans were determined by independent actuaries. For
financial reporting purposes, pension cost has been determined using the
projected unit credit actuarial method. The cumulative difference between
pension cost as determined for financial reporting purposes and contributions to
the plans is recorded either as prepaid pension cost or as accrued pension
liability.
Total pension cost, including amounts charged to fuel cost, deferred and
capitalized, were comprised of the following components:
<TABLE>
<CAPTION>
THE COMPANY TU ELECTRIC
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
---------------------------- ----------------------------
1996 1995 1994 1996 1995 1994
---- ---- ---- ---- ---- ----
THOUSANDS OF DOLLARS
<S> <C> <C> <C> <C> <C> <C>
Service cost -- benefits earned during the period.. $ 36,779 $ 23,515 $ 27,185 $ 21,731 $ 16,047 $ 18,667
Interest cost on projected benefit obligation...... 75,501 65,675 64,142 55,999 53,684 52,907
Actual return on plan assets....................... (183,390) (241,887) 5,641 (143,416) (199,436) 4,772
Net amortization and deferral...................... 97,988 160,198 (72,700) 79,261 132,147 (60,560)
-------- -------- -------- -------- -------- --------
Net periodic pension cost........................ $ 26,878 $ 7,501 $ 24,268 $ 13,575 $ 2,442 $ 15,786
======== ======== ======== ======== ======== ========
</TABLE>
The table below details the plans' funded status and amount recognized in
the balance sheets:
<TABLE>
<CAPTION>
THE COMPANY TU ELECTRIC
DECEMBER 31, DECEMBER 31,
----------------------- -----------------------
1996 1995 1996 1995
---- ---- ---- ----
THOUSANDS OF DOLLARS
<S> <C> <C> <C> <C>
Actuarial present value of accumulated benefits:
Accumulated benefit obligation (including vested benefits for the
System Companies of $823,918,000 for 1996 and $809,869,000 for
1995; and for TU Electric of $638,162,000 for 1996 and $629,679,000
for 1995)................................................................. $ (889,057) $ (874,345) $(685,419) $(676,236)
=========== =========== ========= =========
Projected benefit obligation for service rendered to date................. $(1,065,396) $(1,062,619) $(797,044) $(803,815)
Plan assets at fair value -- primarily equity investments,
government bonds and corporate bonds...................................... 1,296,025 1,139,688 994,370 881,014
----------- ----------- --------- ---------
Plan assets in excess of projected benefit obligation....................... 230,629 77,069 197,326 77,199
Unrecognized net gain from past experience different from
that assumed and effects of changes in assumptions........................ (350,295) (180,444) (309,042) (168,104)
Prior service cost not yet recognized in net periodic pension expense....... 41,566 17,061 39,226 17,015
Unrecognized plan assets in excess of projected benefit obligation at
initial application....................................................... (5,708) (6,375) (3,327) (3,765)
----------- ----------- --------- ---------
Accrued pension cost...................................................... $ (83,808) $ (92,689) $ (75,817) $ (77,655)
=========== =========== ========= =========
</TABLE>
52
<PAGE>
Assumptions used in determination of the projected benefit obligation for
System Companies (excluding Eastern Energy) include a discount rate of 7.75% for
1996 and 7.25% for 1995 and an increase in compensation levels of 4.3% for 1996
and 1995. The assumed long-term rate of return on plan assets was 9.0% for 1996,
1995 and 1994.
Eastern Energy's employees participate in the Victorian Electricity
Industry Superannuation Fund (Eastern Plan). The Eastern Plan meets the
definition of a single-employer defined benefit pension plan and is included
above in the Company's plan as the economic assumptions of the Eastern Plan are
similar to those of the other System Companies. The Company's net periodic
pension cost and accrued pension cost for 1996 include $2,371,000 and $2,525,000
respectively, representing Eastern Energy's 1996 pension costs. The Company's
net periodic pension cost and accrued pension cost for 1995 include $175,000 and
$3,018,000, respectively, representing Eastern Energy's December 1995 pension
costs. Assumptions for the Eastern Plan used in the determination of the
projected benefit obligation include a discount rate of 6.50% for 1996 and 7.50%
for 1995 and an increase in compensation levels of 5.0% for 1996 and 6.0% for
1995. The assumed long-term rate of return on plan assets for the Eastern Plan
was 7.5% for 1996 and 8.5% for 1995.
In addition to the retirement plans, the System Companies, excluding
Eastern Energy, offer certain health care and life insurance benefits to
substantially all its employees and their eligible dependents at retirement
which normally is age 65 but may be as early as age 55 with 15 years of service.
Retirees currently pay a portion of the cost of providing such benefits and are
expected to continue to do so in the future. In January 1993, the Company
adopted Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions", which requires a
change in the accounting for a company's obligation to provide health care and
certain other benefits to its retirees from the "pay-as-you-go" method to an
accrual method and requires the cost of the obligation to be recognized in the
period from employment date until full eligibility for benefits.
Net periodic postretirement benefits cost other than pensions, including
amounts charged to fuel cost, deferred and capitalized, were comprised of the
following components:
<TABLE>
<CAPTION>
THE COMPANY TU ELECTRIC
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
---------------------------- ----------------------------
1996 1995 1994 1996 1995 1994
---- ---- ---- ---- ---- ----
THOUSANDS OF DOLLARS
<S> <C> <C> <C> <C> <C> <C>
Service cost -- benefits earned during the
period......................................... $13,513 $ 9,771 $11,525 $ 8,437 $ 6,559 $ 7,669
Interest cost on the accumulated postretirement
benefit obligation............................. 40,809 38,842 33,120 31,394 31,109 26,063
Amortization of the transition obligation....... 16,978 16,978 16,900 13,633 13,633 13,557
Actual return on plan assets.................... (7,079) (6,096) 44 (4,816) (4,520) 34
Net amortization and deferral................... 8,303 4,646 1,313 5,746 3,662 977
------- ------- ------- ------- ------- -------
Net postretirement benefits cost............. $72,524 $64,141 $62,902 $54,394 $50,443 $48,300
======= ======= ======= ======= ======= =======
</TABLE>
The table below details the funded status for other postretirement benefits
and amount recognized by the System Companies (excluding Eastern Energy) and TU
Electric:
<TABLE>
<CAPTION>
THE COMPANY TU ELECTRIC
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------ -------------------------
1996 1995 1996 1995
---- ---- ---- ----
THOUSANDS OF DOLLARS
<S> <C> <C> <C> <C>
Accumulated postretirement benefit obligation
(APBO):
Retirees...................................... $(325,672) $(344,045) $(280,541) $(296,996)
Fully eligible active employees............... (38,320) (27,779) (22,701) (17,241)
Other active employees........................ (187,451) (193,407) (120,452) (133,783)
--------- --------- --------- ---------
Total APBO.................................. (551,443) (565,231) (423,694) (448,020)
Plan assets at fair value....................... 81,480 56,786 60,862 43,969
--------- --------- --------- ---------
APBO in excess of plan assets............... (469,963) (508,445) (362,832) (404,051)
Unrecognized net loss........................... 92,589 144,833 68,977 119,216
Unrecognized prior service cost................. 819 902 -- --
Unrecognized transition obligation.............. 271,649 288,627 218,126 231,759
--------- --------- --------- ---------
Accrued postretirement benefits cost.......... $(104,906) $ (74,083) $ (75,729) $ (53,076)
========= ========= ========= =========
</TABLE>
53
<PAGE>
The expected increase in costs of future benefits covered by the plan is
projected using a health care cost trend rate of 5.0% in 1997 and thereafter. A
one percentage point increase in the assumed health care cost trend rate in each
future year would increase the APBO at December 31, 1996 by approximately $73.7
million for the System Companies and $56.6 million for TU Electric, and other
postretirement benefits cost for 1996 by approximately $9.4 million for System
Companies and $6.9 million for TU Electric. The assumed discount rate used to
measure the APBO is 7.75% for 1996 and 7.25% for 1995.
12. SALES OF ACCOUNTS RECEIVABLE
TU ELECTRIC
- -----------
TU Electric has a facility with financial institutions whereby it is
entitled to sell and such financial institutions may purchase, on an ongoing
basis, undivided interests in customer accounts receivable representing up to an
aggregate of $350,000,000. Additional receivables are continually sold to
replace those collected. At December 31, 1996 and 1995, accounts receivable was
reduced by $300,000,000 to reflect the sales of such receivables to financial
institutions under such agreements.
In June 1996, the Financial Accounting Standards Board issued Statement
No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" (SFAS 125). Its provisions relating to sales of
receivables are effective for transactions occurring after December 31, 1996.
SFAS 125 requires that in order for a transfer of receivables to be treated as a
sale, the transferor must surrender control over the receivables. This
requirement of SFAS 125 is not expected to have a material effect on the
Company's and TU Electric's financial position, results of operation or cash
flows.
13. REGULATION AND RATES
TU ELECTRIC
- -----------
DOCKET 9300
The PUC's final order (Order) in connection with TU Electric's January
1990 rate increase request (Docket 9300) was reviewed by the 250th Judicial
District Court of Travis County, Texas, and thereafter was appealed to the Court
of Appeals for the Third District of Texas and to the Supreme Court of Texas
(Supreme Court). As a result of such review and appeals, an aggregate of $909
million of disallowances with respect to TU Electric's reacquisitions of
minority owners' interests in Comanche Peak, which had previously been recorded
as a charge to the Company's and TU Electric's earnings, has been remanded to
the PUC for reconsideration on the basis of a prudent investment standard. On
remand, the PUC will also be required to reevaluate the appropriate level of TU
Electric's CWIP included in rate base in light of its financial condition at the
time of the initial hearing. In January 1997, the Supreme Court denied a motion
for rehearing on the Comanche Peak minority owners issue filed by the original
complainants. TU Electric cannot predict the outcome of the reconsideration of
the Order on remand by the PUC.
In its decision, the Supreme Court also affirmed the previous $472 million
prudence disallowance related to Comanche Peak. Since the Company and TU
Electric each has previously recorded a charge to earnings for this prudence
disallowance, the Supreme Court's decision did not have an effect on the
Company's or TU Electric's current financial position, results of operation or
cash flows.
DOCKET 11735
In July 1994, TU Electric filed a petition in the 200th Judicial District
Court of Travis County, Texas to seek judicial review of the final order of the
PUC granting a $449 million, or 9.0%, rate increase in connection with TU
Electric's January 1993 rate increase request of $760 million, or 15.3% (Docket
11735). Other parties to the PUC proceedings also filed appeals with respect to
various portions of the order. TU Electric is unable to predict the outcome of
such appeals.
54
<PAGE>
DOCKET 15638
In May 1996, TU Electric filed with the PUC its transmission cost
information and tariffs for open-access wholesale transmission service (Docket
15638) in accordance with PUC rules adopted in February 1996. These tariffs also
provide for generation-related ancillary services necessary to support wholesale
transactions. Upon final PUC approval and the implementation of transmission
rates for each transmission provider within the Electric Reliability Council of
Texas (ERCOT), TU Electric's payments for transmission service will exceed its
revenues for providing transmission service. The PUC is required by the rules to
adopt a rate-moderation plan that will minimize the impact of the new pricing
mechanism for the first three years the rules are in effect. As such, the
current maximum impact on TU Electric for 1997 is a $4.26 million deficit,
which, in the opinion of TU Electric, is not expected to have a material effect
on its results of operation or cash flows. TU Electric expects to have its open-
access wholesale transmission tariff in place for service within ERCOT in early
1997.
OTHER
In connection with the PUC's regular earnings monitoring process, the PUC
Staff has advised the PUC that it believes TU Electric was earning in excess of
a reasonable rate of return and that it was engaged in discussions with TU
Electric concerning possible remedies for such perceived over-earnings. The
city of Sulphur Springs, Texas, which exercises original jurisdiction over TU
Electric's rates within that city's boundaries, has initiated an inquiry into
the reasonableness of TU Electric's rates. TU Electric is currently preparing
the information required by Sulphur Springs in connection with its inquiry. TU
Electric is unable to predict the outcome of either the discussions with the PUC
Staff or the inquiry of Sulphur Springs.
FUEL COST RECOVERY RULE
In accordance with PUC approvals, TU Electric has refunded to customers an
aggregate of approximately $154 million, including interest, in over-collected
fuel costs for the period June 1994 through September 1995. These over-
collections were primarily due to lower natural gas prices than previously
anticipated. In August 1994, TU Electric petitioned the PUC for a recovery of
approximately $93 million, including interest, in under-collected fuel costs for
the period July 1993 through June 1994. The PUC approved the recovery of this
amount through a surcharge to customers over a six-month period beginning in
January 1995. The PUC's approval of this surcharge and a previously approved
$147.5 million surcharge for fuel cost recovery for a prior period have been
appealed by certain intervenors to the district courts of Travis County, Texas.
In those appeals, those parties are contending that the PUC is without authority
to allow a fuel cost surcharge without a hearing and resultant findings that the
costs are reasonable and necessary and that the prices charged to TU Electric by
supplying affiliates are no higher than the prices charged by those affiliates
to others for the same item or class of items. TU Electric is vigorously
defending its position in these appeals but is unable to predict their outcome.
FUEL RECONCILIATION PROCEEDING
On December 29, 1995, in accordance with PUC rules, TU Electric filed a
petition with the PUC seeking final reconciliation of all eligible fuel and
purchased power expenses incurred during the reconciliation period of July 1,
1992 through June 30, 1995, amounting to a total of $4.7 billion. In hearings
completed in December 1996, the PUC Staff recommended a disallowance of $71.9
million. TU Electric believes that all of its eligible fuel and purchased power
expenses have been prudently incurred and no amounts have been accrued for any
disallowance. A final decision is expected by mid-1997. TU Electric is unable to
predict the outcome of such proceeding; however, a disallowance, if any, will
result in a future loss, which could possibly have a material effect on TU
Electric's results of operation or cash flows.
In addition, and as permitted by the PUC rules, TU Electric is also seeking
an accounting order from the PUC that will allow certain costs incurred, and to
be incurred, to facilitate the use of coal as a supplemental fuel at its
Monticello lignite-fueled generating station (Monticello) to be treated as
eligible fuel costs and billed pursuant to TU Electric's fuel cost factor. By
incurring these expenses, TU Electric believes that it can significantly improve
the reliability of the supply of fuel to Monticello and can, at the same time,
lower the fuel cost that would be incurred in the absence of these expenditures.
55
<PAGE>
FLEXIBLE RATE INITIATIVES
TU Electric continues to offer flexible rates in over 160 cities with
original regulatory jurisdiction within its service territory (including the
cities of Dallas and Fort Worth) to existing non-residential retail and
wholesale customers that have viable alternative sources of supply and would
otherwise leave the system. TU Electric also continues to offer an economic
development rider to attract new businesses and to encourage existing customers
to expand their facilities as well as an environmental technology rider to
encourage qualifying customers to convert to technologies that conserve energy
or improve the environment. TU Electric will continue to pursue the expanded use
of flexible rates when such rates are necessary to be price-competitive.
INTEGRATED RESOURCE PLAN
In October 1994, TU Electric filed an application for approval by the PUC
of certain aspects of its Integrated Resource Plan (IRP) for the ten-year period
1995-2004. The IRP, developed as an experimental pilot project in conjunction
with regulatory and customer groups, included the acquisition of electric energy
through a competitive bidding process of third party-supplied demand-side
management resources and renewable resources. In August 1995, the PUC remanded
the case to an Administrative Law Judge for development of a solicitation plan
and to more closely conform the TU Electric 1995 IRP to new state legislation
that required the PUC to adopt a state-wide integrated resource planning rule by
September 1, 1996. In January 1996, TU Electric filed an updated IRP with the
PUC along with a proposed plan for the solicitation of resources through a
competitive bidding process. The PUC issued its final order on TU Electric's IRP
in October 1996, and modified the order in an Order on Rehearing on December 20,
1996. The modified order approved a flexible solicitation plan that will allow
TU Electric to conduct up to three optional resource solicitations for a total
of 2,074 MW of demand-side and supply-side resources prior to the filing of its
next IRP in June 1999. TU Electric is currently reviewing the need and timing
for conducting the first of these resource solicitations.
In addition to its solicitation plan in the IRP docket, TU Electric
requested and received approval from the PUC to expand its Power Cost Recovery
tariff to provide current cost recovery of resource acquisition costs for
demand-side management resources acquired in the solicitations to the extent
such costs are not currently reflected in TU Electric's base rates. The PUC also
approved cost recovery for eight previously approved demand-side management
contracts entered into by TU Electric.
THE COMPANY AND TU ELECTRIC
- ---------------------------
OPEN-ACCESS TRANSMISSION
In February 1996, pursuant to the Public Utility Regulatory Act of 1995, as
amended, the PUC adopted rules requiring each electric utility in ERCOT to to
provide wholesale transmission and related services to other utilities and non-
utility power suppliers at rates, terms and conditions that are comparable to
those applicable to such utility's use of its own transmission facilities.
Under the rules, the PUC established a transmission pricing mechanism
consisting of an ERCOT system-wide component and a distance-sensitive component.
The ERCOT system-wide component provides that each load-serving entity in ERCOT
will pay a share of the ERCOT-wide transmission cost of service based on the
entity's load. The distance-sensitive component provides that a distance-
sensitive rate will be paid to utilities that own transmission facilities, based
on the impact of transmitting generation resources to loads. The rates charged
for using the transmission system are designed to ensure that all market
participants pay on a comparable basis to use the system. While all users of the
transmission grid pay rates that are comparably designed, the impact on
individual users will differ.
14. IMPAIRMENT OF ASSETS
THE COMPANY AND TU ELECTRIC
- ---------------------------
In September 1995, the Company and TU Electric recorded the impairment of
several non-performing assets based on the provisions of Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" which prescribes a
methodology for assessing and measuring impairments in the carrying value of
certain assets.
56
<PAGE>
THE COMPANY
- -----------
The September 1995 impairment of the Company's assets, including the
partially completed Twin Oak and Forest Grove lignite-fueled facilities of TU
Electric, and Chaco Energy Company's (Chaco's) coal reserves in New Mexico, as
well as several minor assets, aggregated $802 million after tax. The Company has
determined that the Twin Oak and Forest Grove lignite-fueled facilities are not
necessary to satisfy TU Electric's capacity requirements as currently projected
due to changes in load growth patterns and availability of alternative
generation. The impairment of TU Electric's lignite-fueled facilities has been
measured based on management's current expectations that these assets will
either be sold or constructed outside the traditional regulated utility
business. The Company has determined that the Chaco coal reserves will no longer
be developed through traditional means due to ample availability of alternative
fuels at favorable prices. Chaco's impairment has been measured based on a
significant decrease in the market value of the coal reserves as determined by
an external study performed and completed in the quarter ended September 30,
1995. The external study was precipitated by a third party inquiry regarding the
possible sale of the coal reserves. A variety of options are being considered
with respect to the Chaco coal reserves. (See Note 15.) The impairment of these
assets involved a write-down to their estimated fair values using a valuation
study based on the discounted expected future cash flows from the respective
assets' use. With respect to the other assets impaired, fair values were
determined based on current market values of similar assets.
TU ELECTRIC
- -----------
The September 1995 impairment of TU Electric's assets, including its
partially completed Twin Oak and Forest Grove lignite-fueled facilities, as well
as several minor assets, aggregated $316 million after tax. TU Electric has
determined that the Twin Oak and Forest Grove lignite-fueled facilities are not
necessary to satisfy its capacity requirements as currently projected due to
changes in load growth patterns and availability of alternative generation. Such
impairment has been measured based on management's current expectations that
these assets will either be sold or constructed outside the traditional
regulated utility business. The impairment of these assets involved a write-down
to their estimated fair values using a valuation study based on the discounted
expected future cash flows from the respective assets' use. With respect to the
other assets impaired, fair values were determined based on current market
values of similar assets.
15. COMMITMENTS AND CONTINGENCIES
CAPITAL EXPENDITURES
THE COMPANY
- -----------
The Company's construction expenditures for utility related activities,
excluding AFUDC, are presently estimated at $513 million, $527 million and $556
million for 1997, 1998 and 1999, respectively. Expenditures for non-utility
property are presently estimated at $75 million for 1997, $44 million for 1998
and $78 million for 1999. Expenditures for nuclear fuel are presently estimated
at $66 million for 1997, $78 million for 1998 and $115 million for 1999.
TU ELECTRIC
- -----------
TU Electric's construction expenditures for utility related activities,
excluding AFUDC, are presently estimated at $440 million, $470 million and $497
million for 1997, 1998 and 1999, respectively. Expenditures for nuclear fuel are
presently estimated at $66 million for 1997, $78 million for 1998 and $115
million for 1999.
THE COMPANY 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 in estimated construction costs and
dates of completion. Commitments in connection with the construction program are
generally revocable subject to reimbursement to manufacturers for expenditures
incurred or other cancellation penalties.
The Company 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.
57
<PAGE>
CLEAN AIR ACT
TU ELECTRIC
- -----------
The federal Clean Air Act, as amended (Clean Air Act) includes provisions
which, among other things, place limits on the sulfur dioxide emissions produced
by generating units. To meet these sulfur dioxide requirements, the Clean Air
Act provides for the annual allocation of sulfur dioxide emission allowances to
utilities. Under the Clean Air Act, utilities are permitted to transfer
allowances within their own systems and to buy or sell allowances from or to
other utilities. The Environmental Protection Agency grants a maximum number of
allowances annually to TU Electric based on the amount of emissions from units
in operation during the period 1985 through 1987. TU Electric's capital
requirements have not been significantly affected by the requirements of the
Clean Air Act. Although TU Electric is unable to fully determine the cost of
compliance with the Clean Air Act, it is not expected to have a significant
impact on the company. Any additional capital expenditures, as well as any
increased operating costs, associated with these new requirements are expected
to be recoverable through rates, as similar costs have been recovered in the
past.
PURCHASED POWER CONTRACTS
THE COMPANY AND TU ELECTRIC
- ---------------------------
The System Companies have entered into purchased power contracts to
purchase portions of the generating output of certain qualifying cogenerators
and qualifying small power producers through the year 2005. These contracts
provide for capacity payments subject to a facility meeting certain operating
standards and energy payments based on the actual power taken under the
contracts. The cost of these and other purchased power contracts is recovered
currently through base rates, power cost and fuel recovery factors applied to
customer billings. Capacity payments under these contracts for the years ended
December 31, 1996, 1995 and 1994 were $232,915,000, $229,340,000 and
$236,991,000, respectively, for the Company, and $228,336,000, $223,910,000 and
$231,081,000, respectively, for TU Electric.
Assuming operating standards are achieved, future capacity payments under
the agreements are estimated as follows:
<TABLE>
<CAPTION>
THE COMPANY TU ELECTRIC
----------- -----------
YEARS THOUSANDS OF DOLLARS
<S> <C> <C>
1997......................... $ 240,588 $ 237,014
1998......................... 246,311 244,796
1999......................... 199,963 199,963
2000......................... 134,784 134,784
2001......................... 104,330 104,330
Thereafter................... 215,565 215,565
---------- ----------
Total capacity payments.. $1,141,541 $1,136,452
========== ==========
</TABLE>
LEASES
THE COMPANY AND TU ELECTRIC
- ---------------------------
The System Companies have entered into operating leases covering various
facilities and properties including combustion turbines, transportation, mining
and data processing equipment, and office space. Lease costs charged to
operation expense for the years ended December 31, 1996, 1995 and 1994 were
$144,553,000, $141,775,000 and $140,370,000, respectively, for the Company, and
$56,376,000, $60,156,000 and $62,704,000, respectively, for TU Electric.
Future minimum lease commitments under such operating leases that have
initial or remaining noncancellable lease terms in excess of one year as of
December 31, 1996, were as follows:
58
<PAGE>
<TABLE>
<CAPTION>
THE COMPANY TU ELECTRIC
----------- -----------
YEARS THOUSANDS OF DOLLARS
- -----
<S> <C> <C>
1997................................ $ 72,273 $ 31,145
1998................................ 59,895 30,396
1999................................ 54,830 30,522
2000................................ 52,098 30,265
2001................................ 99,937 41,189
Thereafter.......................... 568,633 471,696
-------- --------
Total minimum lease commitments... $907,666 $635,213
======== ========
</TABLE>
COOLING WATER CONTRACTS
TU ELECTRIC
- -----------
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, $32,365,000 at December 31, 1996, 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% 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, for the years 1997 through 2001 as follows: $4,435,000 for each of the
years 1997, 1998 and 1999, $4,419,000 for 2000 and $4,422,000 for 2001.
Payments made by TU Electric, net of amounts assumed by a third party under such
contracts, for 1996, 1995 and 1994 were $3,548,000, $3,628,000 and $3,615,000,
respectively. 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 December 31, 1996,
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.
CHACO COAL PROPERTIES
THE COMPANY
- -----------
Chaco has a coal lease agreement for the rights to certain surface mineable
coal reserves located in New Mexico. The agreement encompasses a minimum of 228
million tons of coal with provisions for minimum advance royalty payments of
approximately $16 million per year through 2017. The Company has entered into a
surety agreement to assure the performance by Chaco with respect to this
agreement. During 1996, certain state and federal leases covering approximately
120 million tons of coal were terminated. Because of the present ample
availability of western coal at favorable prices from other mines, Chaco has
delayed plans to commence mining operations, and accordingly, is reassessing its
alternatives with respect to its coal properties, including seeking purchasers
thereof. (See Note 14.)
NUCLEAR INSURANCE
TU ELECTRIC
- -----------
With regard to liability coverage, the Price-Anderson Act (Act) provides
financial protection for the public in the event of a significant nuclear power
plant incident. The Act sets the statutory limit of public liability for a
single nuclear incident currently at $8.9 billion and requires nuclear power
plant operators to provide financial protection for this amount. As required,
TU Electric provides this financial protection for a nuclear incident at
Comanche Peak resulting in public bodily injury and property damage through a
combination of private insurance and industry-wide retrospective payment plans.
As the first layer of financial protection, TU Electric has purchased $200
million of liability insurance from American Nuclear Insurers (ANI), which
provides such insurance on behalf of two major stock and mutual insurance pools,
Nuclear Energy Liability Insurance Association and Mutual Atomic Energy
Liability Underwriters (MAELU). The second layer of financial protection is
provided under an industry-wide retrospective payment program called Secondary
Financial Protection (SFP).
59
<PAGE>
Under the SFP, each operating licensed reactor in the United States is
subject to an assessment of up to $79.275 million, subject to increases for
inflation every five years, in the event of a nuclear incident at any nuclear
plant in the United States. Assessments are limited to $10 million per operating
licensed reactor per year per incident. All assessments under the SFP are
subject to a 3% insurance premium tax which is not included in the amounts
above.
With respect to nuclear decontamination and property damage insurance,
Nuclear Regulatory Commission (NRC) regulations require that nuclear plant
license-holders maintain not less than $1.06 billion of such insurance and
require the proceeds thereof to be used to place a plant in a safe and stable
condition, to decontaminate it pursuant to a plan submitted to and approved by
the NRC before the proceeds can be used for plant repair or restoration or to
provide for premature decommissioning. TU Electric maintains nuclear
decontamination and property damage insurance for Comanche Peak in the amount of
$3.85 billion, above which TU Electric is self-insured. The primary layer of
coverage of $500 million is provided by Nuclear Mutual Limited (NML), a nuclear
electric utility industry mutual insurance company. The remaining coverage
includes premature decommissioning coverage and is provided by ANI and MAELU in
the amount of $1.1 billion and Nuclear Electric Insurance Limited (NEIL),
another nuclear electric utility industry mutual insurance company, in the
amount of $2.25 billion. TU Electric is subject to a maximum annual assessment
from NML of $14 million and NEIL of $18 million in the event NML's and/or NEIL's
losses under this type of insurance for major incidents at nuclear plants
participating in these programs exceed the respective mutual's accumulated funds
and reinsurance.
TU Electric maintains Extra Expense Insurance through NEIL to cover the
additional costs of obtaining replacement power from another source if one or
both of the units at Comanche Peak are out of service for more than twenty-one
weeks as a result of covered direct physical damage. The coverage provides for
weekly payments of $3.5 million for the first and $2.8 million for the second
and third fifty-two week periods of each outage, respectively, after the initial
twenty-one week period. The total maximum coverage is $473 million per unit. The
coverage amounts applicable to each unit will be reduced to 80% if both units
are out of service at the same time as a result of the same accident. Under this
coverage, TU Electric is subject to a maximum assessment of $9 million per year.
GAS PURCHASE CONTRACTS
THE COMPANY
- -----------
Fuel Company buys gas under long-term intrastate contracts in order to
assure reliable supply to its customers. Many of these contracts require minimum
purchases ("take-or-pay") of gas. Based on Fuel Company's estimated gas demand,
which assumes normal weather conditions, requisite gas purchases are expected to
substantially satisfy purchase obligations for the year 1997 and thereafter.
NUCLEAR DECOMMISSIONING AND DISPOSAL OF SPENT FUEL
TU ELECTRIC
- -----------
TU Electric has established a reserve, charged to depreciation expense and
included in accumulated depreciation, for the decommissioning of Comanche Peak,
whereby decommissioning costs are being recovered from customers over the life
of the plant and deposited in external trust funds (included in other
investments). At December 31, 1996, such reserve totaled $97,114,000 which
includes an accrual of $18,179,000 for the year ended December 31, 1996. As of
December 31, 1996, the market value of deposits in the external trust for
decommissioning of Comanche Peak was $117,441,000. 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 asset or a regulatory liability. 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 Docket 11735 (see Note 13). 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.
60
<PAGE>
TU Electric has a contract with the United States Department of Energy
(DOE) for the future disposal of spent nuclear fuel. In December 1996, the DOE
notified TU Electric that it did not expect to meet its obligation to begin
acceptance of spent nuclear fuel by 1998. TU Electric is unable to predict what
impact, if any, the DOE delay will have on TU Electric's future operations. The
disposal fee is at a cost to TU Electric of one mill per kilowatt-hour of
Comanche Peak net generation and is included in nuclear fuel expense.
GENERAL
THE COMPANY AND TU ELECTRIC
- ---------------------------
In addition to the above, the Company and TU Electric are involved in
various legal and administrative proceedings which, in the opinion of each,
should not have a material effect upon its financial position, results of
operation or cash flows.
16. FAIR VALUE OF FINANCIAL INSTRUMENTS
THE COMPANY AND TU ELECTRIC
- ---------------------------
The carrying amounts and related estimated fair values of the Company and
System Companies' and TU Electric's significant financial instruments at
December 31, 1996 and 1995, are as follows:
<TABLE>
<CAPTION>
THE COMPANY
------------------------------------------------------------
DECEMBER 31, 1996 DECEMBER 31, 1995
---------------------- ----------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
----- ----- ------ -----
THOUSANDS OF DOLLARS
<S> <C> <C> <C> <C>
Long-term debt............................................... $8,668,111 $9,050,868 $9,174,575 $9,875,881
TU Electric obligated, mandatorily redeemable, preferred
securities of subsidiary trusts holding solely debentures
of TU Electric............................................. 381,311 395,091 381,476 405,729
Preferred stock of subsidiary subject to mandatory
redemption................................................. 238,391 250,098 263,196 280,106
LESOP note receivable........................................ 250,000 262,175 250,000 280,713
Interest rate and currency swaps............................. -- (33,869) -- --
Other investments............................................ 194,652 191,435 118,526 134,949
TU ELECTRIC
------------------------------------------------------------
DECEMBER 31, 1996 DECEMBER 31, 1995
---------------------- ----------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
----- ----- ------ -----
THOUSANDS OF DOLLARS
<S> <C> <C> <C> <C>
Long-term debt............................................... $6,310,594 $6,657,126 $7,212,070 $7,836,861
TU Electric obligated, mandatorily redeemable, preferred
securities of subsidiary trusts holding solely debentures
of TU Electric............................................. 381,311 395,091 381,476 405,729
Preferred stock subject to mandatory redemption.............. 238,391 250,098 263,196 280,106
Other investments............................................ 172,779 169,820 103,888 118,415
</TABLE>
The fair values of long-term debt and preferred stock subject to mandatory
redemption are estimated at the lesser of the call price or the present value of
future cash flows discounted at rates consistent with comparable maturities for
credit risk. The fair values of preferred securities are based on quoted market
prices. The carrying amounts reflected in the Consolidated Balance Sheets for
financial assets classified as current assets, and the carrying amounts for
financial liabilities classified as current liabilities, approximate fair value
due to the short maturity of such instruments. The fair values of other
financial instruments for which carrying amounts and fair values have not been
presented are not materially different than their related carrying amounts.
Other investments includes deposits in an external trust fund for nuclear
decommissioning of Comanche Peak. The trust funds are invested primarily in
equity securities which are classified as available-for-sale. Any unrealized
gains or losses are treated as regulatory assets or regulatory liabilities,
respectively.
61
<PAGE>
THE COMPANY
- -----------
Common stock -- net has been reduced by the note receivable from the
trustee of the leveraged employee stock ownership provision of the Thrift Plan.
The fair value of such note is estimated at the lesser of the Company's call
price or the present value of future cash flows discounted at rates consistent
with comparable maturities adjusted for credit risk. Fair values for the System
Companies' off-balance-sheet instruments (interest rate and currency swaps) are
based either on quotes or the cost to terminate the agreements.
TU ELECTRIC
- -----------
TU Electric has agreed, in effect, to guarantee the principal and interest
on bonds used to finance the reservoirs from which TU Electric uses cooling
water for certain generating units. TU Electric is also the guarantor for the
principal amount of certain bonds issued for similar purposes which were
assigned to a municipality. The outstanding principal at December 31, 1996 and
1995 of the bonds for which TU Electric is contingently liable is approximately
$107,000,000 and $114,000,000, respectively. The fair value of the bonds,
approximately $111,000,000 and $121,000,000 for December 31, 1996 and 1995,
respectively, is based on the present value of the instruments' approximate cash
flows discounted at the year-end risk free rate for issues of comparable
maturities adjusted for credit risk.
17. SUPPLEMENTARY FINANCIAL INFORMATION (UNAUDITED)
THE COMPANY AND TU ELECTRIC
- ---------------------------
In the opinion of the Company and TU Electric, respectively, the
information below includes all adjustments (constituting only normal recurring
accruals) necessary to a fair statement of such amounts. Quarterly results are
not necessarily indicative of expectations for a full year's operations because
of seasonal and other factors, including rate changes, variations in maintenance
and other operating expense patterns, the impact of the change in AFUDC accruals
(see Note 1) and the charges for regulatory disallowances. Certain quarterly
information has been reclassified to conform to the current year presentation.
For additional information regarding the charges for regulatory disallowances,
see Note 13.
<TABLE>
<CAPTION>
THE COMPANY
- ----------------
EARNINGS (LOSS)
CONSOLIDATED NET PER SHARE OF
OPERATING REVENUES OPERATING INCOME INCOME (LOSS) COMMON STOCK*
---------------------- ---------------------- ------------------- -----------------
QUARTER ENDED 1996 1995 1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ---- ---- ----
THOUSANDS OF DOLLARS (EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
March 31....................... $1,463,900 $1,244,265 $ 414,938 $ 311,344 $126,074 $ 75,411 $0.56 $ 0.33
June 30........................ 1,691,313 1,353,998 535,047 422,305 202,957 148,432 0.90 0.66
September 30................... 1,930,097 1,775,669 743,610 742,699 357,983 (441,716) 1.59 (1.96)
December 31.................... 1,465,618 1,264,756 309,395 311,279 66,592 79,228 0.30 0.35
---------- ---------- ---------- ---------- -------- ---------
$6,550,928 $5,638,688 $2,002,990 $1,787,627 $753,606 $(138,645)
========== ========== ========== ========== ======== =========
</TABLE>
- ---------------
* The sum of the quarters may not equal annual earnings per share due to
rounding.
<TABLE>
<CAPTION>
TU ELECTRIC
- -----------
CONSOLIDATED
OPERATING REVENUES OPERATING INCOME NET INCOME
-------------------- ------------------ ----------------
QUARTER ENDED 1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ----
THOUSANDS OF DOLLARS
<S> <C> <C> <C> <C> <C> <C>
March 31...................... $1,348,330 $1,233,772 $ 305,057 $ 255,391 $152,785 $101,758
June 30....................... 1,558,778 1,341,245 391,019 328,621 227,869 174,219
September 30.................. 1,787,412 1,761,378 522,270 534,167 379,438 68,172
December 31................... 1,335,091 1,224,067 244,252 252,187 102,603 108,482
---------- ---------- ---------- ---------- -------- --------
$6,029,611 $5,560,462 $1,462,598 $1,370,366 $862,695 $452,631
========== ========== ========== ========== ======== ========
</TABLE>
62
<PAGE>
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
STATEMENT OF RESPONSIBILITY
The management of Texas Utilities Company is responsible for the preparation,
integrity and objectivity of the consolidated financial statements of the
Company and its subsidiaries and other information included in this report. The
consolidated financial statements have been prepared in conformity with
generally accepted accounting principles. As appropriate, the statements
include amounts based on informed estimates and judgments of management.
The management of the Company has established and maintains a system of
internal control designed to provide reasonable assurance, on a cost-effective
basis, that assets are safeguarded, transactions are executed in accordance with
management's authorization and financial records are reliable for preparing
consolidated financial statements. Management believes that the system of
control provides reasonable assurance that errors or irregularities that could
be material to the consolidated financial statements are prevented or would be
detected within a timely period. Key elements in this system include the
effective communication of established written policies and procedures,
selection and training of qualified personnel and organizational arrangements
that provide an appropriate division of responsibility. This system of control
is augmented by an ongoing internal audit program designed to evaluate its
adequacy and effectiveness. Management considers the recommendations of the
internal auditors and independent certified public accountants concerning the
Company's system of internal control and takes appropriate actions which are
cost-effective in the circumstances. Management believes that, as of December
31, 1996, the Company's system of internal control was adequate to accomplish
the objectives discussed herein.
The Board of Directors of the Company addresses its oversight responsibility
for the consolidated financial statements through its Audit Committee, which is
composed of directors who are not employees of the Company. The Audit Committee
meets regularly with the Company's management, internal auditors and independent
certified public accountants to review matters relating to financial reporting,
auditing and internal control. To ensure auditor independence, both the
internal auditors and independent certified public accountants have full and
free access to the Audit Committee.
The independent certified public accounting firm of Deloitte & Touche LLP is
engaged to audit, in accordance with generally accepted auditing standards, the
consolidated financial statements of the Company and its subsidiaries and to
issue their report thereon.
/s/ J. S. FARRINGTON
-------------------------------------------------------
J. S. Farrington, Chairman of the Board
/s/ ERLE NYE
-------------------------------------------------------
Erle Nye, President and Chief Executive
/s/ PETER B. TINKHAM
-------------------------------------------------------
Peter B. Tinkham, Treasurer and Assistant
Secretary and Principal Financial Officer
/s/ MARC D. MOSELEY
-------------------------------------------------------
Marc D. Moseley, Acting Controller
and Principal Accounting Officer
63
<PAGE>
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
STATEMENT OF RESPONSIBILITY
The management of Texas Utilities Electric Company is responsible for the
preparation, integrity and objectivity of the financial statements of TU
Electric and its subsidiaries and other information included in this report. The
financial statements have been prepared in conformity with generally accepted
accounting principles. As appropriate, the statements include amounts based on
informed estimates and judgments of management.
The management of TU Electric has established and maintains a system of
internal control designed to provide reasonable assurance, on a cost-effective
basis, that assets are safeguarded, transactions are executed in accordance with
management's authorization and financial records are reliable for preparing
financial statements. Management believes that the system of control provides
reasonable assurance that errors or irregularities that could be material to the
financial statements are prevented or would be detected within a timely period.
Key elements in this system include the effective communication of established
written policies and procedures, selection and training of qualified personnel
and organizational arrangements that provide an appropriate division of
responsibility. This system of control is augmented by an ongoing internal audit
program designed to evaluate its adequacy and effectiveness. Management
considers the recommendations of the internal auditors and independent certified
public accountants concerning TU Electric's system of internal control and takes
appropriate actions which are cost-effective in the circumstances. Management
believes that, as of December 31, 1996, TU Electric's system of internal control
was adequate to accomplish the objectives discussed herein.
The independent certified public accounting firm of Deloitte & Touche LLP
is engaged to audit, in accordance with generally accepted auditing standards,
the financial statements of TU Electric and to issue their report thereon.
/s/ ERLE NYE
-------------------------------------------------------
Erle Nye, Chairman of the Board
and Chief Executive
/s/ ROBERT S. SHAPARD
-------------------------------------------------------
Robert S. Shapard, Treasurer and Assistant
Secretary and Principal Financial Officer
/s/ MARC D. MOSELEY
-------------------------------------------------------
Marc D. Moseley, Acting Controller
and Principal Accounting Officer
64
<PAGE>
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheets of Texas Utilities
Electric Company and subsidiaries (TU Electric) as of December 31, 1996 and
1995, and the related consolidated statements of income, retained earnings and
cash flows for each of the three years in the period ended December 31, 1996.
These financial statements are the responsibility of TU Electric's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of TU Electric at December 31, 1996
and 1995, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
As discussed in Note 14 to the consolidated financial statements, in 1995, TU
Electric changed its method of accounting for the impairment of long-lived
assets and for long-lived assets to be disposed of to conform with Statement of
Financial Accounting Standards No. 121.
DELOITTE & TOUCHE LLP
Dallas, Texas
March 12, 1997
65
<PAGE>
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheets of Texas Utilities
Company and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of income, retained earnings and cash flows for each of
the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at December 31, 1996
and 1995, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
As discussed in Note 14 to the consolidated financial statements, in 1995, the
Company changed its method of accounting for the impairment of long-lived assets
and for long-lived assets to be disposed of to conform with Statement of
Financial Accounting Standards No. 121.
DELOITTE & TOUCHE LLP
Dallas, Texas
March 12, 1997
66
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company and TU Electric
- ---------------------------
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF EACH REGISTRANT
THE COMPANY
- -----------
Information with respect to this item is found under the heading Election
of Directors in the definitive proxy statement to be filed by the Company with
the Commission on or about April 1, 1997.
TU ELECTRIC
- -----------
Identification of Directors, business experience and other directorships:
<TABLE>
<CAPTION>
OTHER POSITIONS AND DATE FIRST ELECTED PRESENT PRINCIPAL OCCUPATION
OFFICES PRESENTLY HELD AS DIRECTOR (CURRENT OR EMPLOYMENT AND PRINCIPAL
WITH TU ELECTRIC (CURRENT TERM EXPIRES BUSINESS (PRECEEDING FIVE YEARS),
NAME OF DIRECTOR AGE TERM EXPIRES MAY 23, 1997) MAY 23, 1997) OTHER DIRECTORSHIPS
- ---------------- --- -------------------------- -------------------- ---------------------------------
<S> <C> <C> <C> <C>
T. L. Baker 51 President, Electric February 20, 1987 President, Electric Service Division of TU
Service Division Electric; prior thereto, Executive Vice
President of TU Electric; prior thereto,
Senior Vice President of TU Electric.
J. S. Farrington 62 None September 17, 1982 Chairman of the Board of the Company;
prior thereto, Chairman of the Board and
Chief Executive of the Company; other
directorships: the Company.
H. Jarrell Gibbs 59 President May 24, 1989 President of TU Electric; prior thereto,
Vice President and Principal Financial
Officer of the Company and President of
TU Services; prior thereto, Executive
Vice President of TU Electric; prior
thereto, Executive Vice President of
Texas Electric Service Division of TU
Electric.
Michael J. McNally 42 President, Transmission February 16, 1996 President, Transmission Division of TU
Division Electric; prior thereto, Executive Vice
President of TU Electric; prior thereto,
Principal of Enron Development
Corporation; prior thereto, Managing
Director of Industrial Services (Enron
Capital and Trade Resources); President
of Houston Pipe Line; President of Enron
Gas Liquids, Inc; Vice President of
Marketing for Houston Pipe Line Company.
Erle Nye 59 Chairman and September 17, 1982 President and Chief Executive of the
Chief Executive Company; other directorships: the Company.
W. M. Taylor 54 President, Generation May 20, 1986 President, Generation Division of TU
Division Electric; prior thereto, Executive Vice
President of TU Electric; prior thereto,
President of Dallas Power Division of TU
Electric.
E. L. Watson 62 Vice Chairman February 20, 1987 Vice Chairman of TU Electric; prior
thereto, Executive Vice President of TU
Electric; prior thereto, Senior Vice
President of TU Electric.
</TABLE>
Directors of TU Electric receive no compensation in their capacity as Directors
of TU Electric.
67
<PAGE>
Identification of Executive Officers and business experience:
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
PRESENTLY HELD (CURRENT DATE FIRST ELECTED BUSINESS EXPERIENCE
NAME OF OFFICER AGE TERM EXPIRES MAY 23, 1997) TO PRESENT OFFICES (PRECEEDING FIVE YEARS)
- --------------- --- -------------------------- ------------------ -----------------------
<S> <C> <C> <C> <C>
Erle Nye 59 Chairman and February 20, 1987 Same and President and Chief
Chief Executive Executive of the Company.
H. Jarrell Gibbs 59 President February 16, 1996 President of TU Electric; prior thereto,
Vice President and Principal Financial
Officer of the Company and President of
TU Services; prior thereto, Executive
Vice President of TU Electric; prior
thereto, Executive Vice President of
Texas Electric Service Division of TU
Electric.
T. L. Baker 51 President, Electric Service February 16, 1996 President, Electric Service Division of
Division TU Electric; prior thereto, Executive
Vice President of TU Electric; prior
thereto, Senior Vice President of TU
Electric.
Michael J. McNally 42 President, Transmission February 16, 1996 President, Transmission Division of TU
Division Electric; prior thereto, Executive Vice
President of TU Electric; prior thereto,
Principal of Enron Development
Corporation; prior thereto, Managing
Director of Industrial Services (Enron
Capital and Trade Resources); President
of Houston Pipe Line; President of Enron
Gas Liquids, Inc.; Vice President of
Marketing for Houston Pipe Line Company.
W. M. Taylor 54 President, Generation Division February 16, 1996 President, Generation Division of TU
Electric; prior thereto, Executive Vice
President of TU Electric; prior thereto,
President of Dallas Power Division of TU
Electric.
E. L. Watson 62 Vice Chairman November 1, 1992 Vice Chairman of TU Electric; prior
thereto, Executive Vice President of TU
Electric; prior thereto, Senior Vice
President of TU Electric.
</TABLE>
There is no family relationship between any of the above named Directors or
Executive Officers.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
All required reports relating to changes in beneficial ownership have been
timely filed except that, as a result of an administrative oversight, a Form 3
was not filed with the Securities and Exchange Commission on a timely basis for
Robert S. Shapard, Treasurer and Assistant Secretary of TU Electric regarding
his election as TU Electric's principal financial officer. Mr. Shapard owns none
of TU Electric's equity securities.
68
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
THE COMPANY
- -----------
Information with respect to this item is found under the heading Executive
Compensation of the Company in the definitive proxy statement to be filed by the
Company with the Commission on or about April 1, 1997.
TU ELECTRIC
- -----------
TU Electric and its affiliates 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>
Annual Compensation Long Term Compensation (3)
--------------------------------------- --------------------------
Awards Payouts
---------- ----------
Name and Other Annual Restricted All Other
Principal Compensation Stock LTIP Compensa-
Position Year Salary ($) Bonus($)(2) ($) Awards ($) Payouts ($) tion ($) (4)
--------- ---- ---------- ----------- ------------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Erle Nye, 1996 723,333 185,000 - 351,500 0 117,908
Chairman of the Board 1995 679,167 140,000 - 266,000 25,602 87,810
and Chief Executive of 1994 618,750 0 - 217,000 0 67,275
TU Electric (1)
H. Jarrell Gibbs, 1996 321,250 113,000 - 189,500 0 53,203
President of 1995 282,917 67,200 - 120,300 9,102 38,702
TU Electric 1994 245,167 40,000 - 97,880 0 29,017
W. M. Taylor, President, 1996 312,500 83,500 - 156,625 0 49,530
Generation Division- 1995 282,917 64,700 - 117,800 10,809 38,278
TU Electric 1994 249,333 40,000 - 97,880 0 30,333
T. L. Baker, 1996 275,833 60,500 - 123,500 0 46,319
President, Electric Service 1995 261,667 44,900 - 93,500 11,947 34,465
Division-TU Electric 1994 245,833 25,000 - 80,000 0 28,183
Michael J. McNally, 1996 229,166 75,000 - 131,250 0 22,399
President, Transmission 1995 170,833 0 - 0 0 0
Division-TU Electric 1994 0 0 - 0 0 0
</TABLE>
(1) Amounts reported in the table for Mr. Nye consist entirely of compensation
paid by the Company.
(2) 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 below.
(3) 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
69
<PAGE>
salary. In addition, one-half of any AIP award (Incentive Award) is
deferred and 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 1996:
LONG-TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR
PERFORMANCE
OR OTHER
NUMBER OF PERIOD UNTIL
SHARES, UNITS OR MATURATION
NAME OTHER RIGHTS (#) OR PAYOUT
---- ---------------- ------------
Erle Nye 2,620 5 Years
H. Jarrell Gibbs 1,203 5 Years
W. M. Taylor 1,150 5 Years
T. L. Baker 991 5 Years
Michael J. McNally 885 5 Years
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 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, 1996
(each of which is equal to one share of common stock) held in the DICP
accounts for Messrs. Nye, Gibbs, Taylor, Baker and McNally were 30,816
($1,255,786), 14,113 ($575,142), 13,423 ($546,997), 11,455 ($466,831) and
3,136 ($127,828), 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.
(4) 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 includes these matching amounts which, for Messrs. Nye,
Gibbs, Taylor, Baker and McNally totaled $5,400, $4,500, $5,400, $5,400 and
$3,240, respectively, during 1996.
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 amount established under the Program ($91,740 for the
Program Year beginning April 1996) 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 the employee's 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,
70
<PAGE>
subject to forfeiture under certain circumstances, equal to 100% of the
salary deferred under the Program. The trustee for the Program distributes,
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 are 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 are expected to allow the Company to fully recover the cost of
the retirement option. During 1996, matching awards, which are included
under All Other Compensation in the Summary Compensation Table, were made
for Messrs. Nye, Gibbs, Taylor, Baker and McNally in the amounts of
$72,333, $32,125, $31,250, $27,583 and $17,083, respectively.
Under the Split-Dollar Life Insurance Program of the Texas Utilities
Company System (Insurance Program), 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. Effective in October 1996, new participants vest in
the policies issued under the Insurance Program over a 5 year period. 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 1996, the economic
benefit derived by Messrs. Nye, Gibbs, Taylor, Baker and McNally from the
term insurance coverage provided and the interest foregone on the remainder
of the insurance premiums paid by the Company amounted to $40,175, $16,578,
$12,880, $13,336 and $2,076, respectively.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
- ------------------------------------------------------------------------
Remuneration 20 25 30 35 40
- ------------ -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$ 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>
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,
1997, years of accredited service under the plans for Messrs. Nye, Gibbs,
Taylor, Baker and McNally were 34, 34, 29, 26 and 5 months, respectively. The
above 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 report and performance graph are presented herein for
informational purposes only. This information is not required to be included
herein and shall not be deemed to form a part of this report or be "filed" with
the Securities and Exchange Commission. The report set forth hereinafter is the
report of the Organization and Compensation Committee of the Board of Directors
of the Company and is illustrative of the methodology utilized in establishing
the compensation of executive officers of the Company and TU Electric.
71
<PAGE>
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 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 in the United States 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.
In furtherance of these policies, a nationally recognized compensation
consultant has been retained since 1994 to assist the Committee in its periodic
reviews of compensation and benefits provided to officers. The consultant's
prior recommendations, including the Annual Incentive Plan (referred to as AIP
and described hereinafter and in footnote 2 to the Summary Compensation Table),
as well as changes in life insurance coverage and retirement benefits, have
generally been implemented. The consultant has recommended, and assisted the
Committee in the development of, the Long-Term Incentive Compensation Plan (the
Long-Term Plan) which has been approved by the Committee and the Board and which
is being recommended to the shareholders for their approval.
The compensation of the officers of the Company has consisted principally
of base salaries, the opportunity to participate in the Deferred and Incentive
Compensation Plan (referred to as the DICP and described in footnote 3 to the
Summary Compensation Table) 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, and, if it
is approved by the Company's shareholders, the Long-Term Plan, will, in future
years, constitute an increasing percentage of the officers' total compensation.
The AIP is administered by the Committee and provides an objective
framework within which annual 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
evaluation of the competitive level of compensation which is appropriate for
such results, determines the amount, if any, actually awarded.
As previously noted, the Committee and the Board have adopted, subject to
shareholder approval, the Long-Term Plan. The Long-Term Plan is a
comprehensive, stock-based incentive compensation plan under which all awards
will be made in, or based on the value of the Company's common stock. The
Committee believes that the Long-Term Plan is necessary in order to continue to
be able to attract, motivate and retain officers and other key employees through
stock-based compensation. The Long-Term Plan is designed such that the value of
awards will be directly related to long-term returns to shareholders and the
Plan will, thereby, constitute an appropriate component of the Company's overall
compensation program.
72
<PAGE>
In establishing levels of executive compensation at its May 1996 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 1995, TU
Electric, the Company's principal subsidiary, was the second largest electric
utility in the United States as measured by megawatt hour sales and, compared to
other electric utilities in the United States, was seventh in electric revenues,
sixth in total assets, fourth in net generating capability, eighth in number of
customers and eleventh 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 herein.
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 1996, the Committee increased Mr. Nye's base salary as Chief
Executive to an annual rate of $740,000, representing a $40,000, or 5.7%,
increase over the amount established for Mr. Nye in May 1995. Based upon the
Committee's evaluation of individual and Company performance, as called for by
the AIP, the Committee also provided Mr. Nye with an AIP award of $370,000
compared to the prior year's award of $280,000. This level of compensation was
established based upon the Committee's subjective evaluation of the information
described in this report.
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.
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, as well as awards under the Long-Term Plan, 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 Corporate Secretary of the Company at the Company's offices.
ORGANIZATION AND COMPENSATION COMMITTEE
JAMES A. MIDDLETON, CHAIR MARGARET N. MAXEY
BAYARD H. FRIEDMAN J. E. OESTERREICHER
WILLIAM M. GRIFFIN CHARLES R. PERRY
KERNEY LADAY HERBERT H. RICHARDSON
73
<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, 1991 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.
[PERFORMANCE GRAPH APPEARS HERE]
CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Texas Utilities 100 110 119 97 134 140
- -------------------------------------------------------------------
S&P 500 Index 100 108 118 120 165 203
- -------------------------------------------------------------------
Moody's 24 Utilities 100 105 115 98 129 131
- -------------------------------------------------------------------
</TABLE>
74
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
THE COMPANY
- -----------
Information with respect to this item is found under the headings
Beneficial Ownership of Common Stock of the Company in the definitive proxy
statement to be filed by the Company with the Commission on or about April 1,
1997. Additional information with respect to Executive Officers of the
Registrant is found at the end of Part I.
TU ELECTRIC
- -----------
Security ownership of certain beneficial owners at February 28, 1997:
AMOUNT AND NATURE PERCENT
NAME AND ADDRESS OF BENEFICIAL OF
TITLE OF CLASS OF BENEFICIAL OWNER OWNERSHIP CLASS
-------------- ------------------- ----------------- -------
Common Stock, Texas Utilities Company 156,800,000 shares 100.0%
without par value, Energy Plaza, 1601 Bryan Street sole voting and
of TU Electric Dallas, Texas 75201 investment power
Security ownership of management at February 28 ,1997:
The following lists the common stock of the Company owned by the Directors
and Executive Officers of TU Electric. The named individuals have sole voting
and investment power for the shares of common stock reported. Ownership of such
common stock by the Directors and Executive Officers, individually and as a
group, constituted less than 1% of the outstanding shares at February 28, 1997.
None of the named individuals own any of the preferred stock of TU Electric or
the preferred securities of any subsidiaries of TU Electric.
NUMBER OF SHARES
-----------------------------------
BENEFICALLY DEFERRED
OFFICER OWNED PLAN * TOTALS
------- ----------- -------- -------
T. L. Baker 3,012 16,544 19,556
J. S. Farrington 19,365 50,961 70,326
H. Jarrell Gibbs 7,032 19,340 26,372
Michael J. McNally 5,462 4,084 9,546
Erle Nye 20,114 43,594 63,708
W. M. Taylor 8,304 18,703 27,007
E. L. Watson 6,225 15,333 21,558
------ ------- -------
All Directors and Executive
Officers as a group (7) 69,514 168,559 238,073
====== ======= =======
- -----------------
* Share units held in deferred compensation accounts under the Deferred and
Incentive Compensation Plan. Although this plan allows 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.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
THE COMPANY
- -----------
Information with respect to this item is found under the heading Beneficial
Ownership of Common Stock of the Company in the definitive proxy statement to be
filed by the Company with the Commission on or about April 1, 1997. Additional
information with respect to Executive Officers of the Registrant is found at the
end of Part I.
TU ELECTRIC
- -----------
None.
75
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
PAGE
----
(a) Documents filed as part of this Report:
THE COMPANY
- -----------
1. Financial Statements (included in Item 8, Financial Statements
and Supplementary Data):
Statements of Consolidated Income for each of the three years
in the period ended December 31, 1996...........................30
Statements of Consolidated Retained Earnings for each of the
three years in the period ended December 31, 1996.............. 30
Statements of Consolidated Cash Flows for each of the three
years in the period ended December 31, 1996.....................31
Consolidated Balance Sheets, December 31, 1996 and 1995...........32
Notes to Consolidated Financial Statements........................38
Statement of Responsibility.......................................63
Independent Auditors' Report......................................65
TU ELECTRIC
- -----------
2. Financial Statements (included in Item 8, Financial Statements
and Supplementary Data):
Statements of Consolidated Income for each of the three years
in the period ended December 31, 1996...........................34
Statements of Consolidated Retained Earnings for each of the three
years in the period ended December 31, 1996.......................34
Statements of Consolidated Cash Flows for each of the
three years in the period ended December 31, 1996...............35
Consolidated Balance Sheets, December 31, 1996 and 1995...........36
Notes to Consolidated Financial Statements........................38
Statement of Responsibility.......................................64
Independent Auditors' Report......................................66
All financial statement schedules are omitted because of the absence of the
conditions under which they are required or because the required information is
included in the Consolidated Financial Statements or notes thereto.
76
<PAGE>
(b) Reports on Form 8-K:
Reports on Form 8-K filed since September 30, 1996, are as follows:
THE COMPANY
- -----------
Date of Report Item Reported
-------------- -------------
None.
TU ELECTRIC
- -----------
Date of Report Item Reported
-------------- -------------
None.
(c) Exhibits:
THE COMPANY AND TU ELECTRIC
- ---------------------------
PREVIOUSLY FILED*
-----------------
WITH
FILE AS
EXHIBITS NUMBER EXHIBIT NUMBER DATED
- -------- ------ ------- ------ -----
2(a) 33-12391 2(a) - Amended and Restated Agreement and
Plan of Merger, dated as of April 13,
1996, among the Company, ENSERCH
Corporation and TUC Holding Company.
3(a) 33-48880 4(a) - Restated Articles of Incorporation
of the Company.
3(b) 33-48880 4(b) - Bylaws, as amended, of the Company.
3(c) 0-11442 3(a) - Restated Articles of Incorporation
Form 10-K of TU Electric.
(1993)
3(d) 33-64694 4(c) - Bylaws of TU Electric, as amended.
4(a) 2-90185 4(a) - Mortgage and Deed of Trust, dated as
of December 1, 1983, between TU
Electric and Irving Trust Company
(now The Bank of New York), Trustee.
4(a)(1) - Supplemental Indentures to Mortgage
and Deed of Trust:
2-90185 4(b) First April 1, 1984
2-92738 4(a)-1 Second September 1, 1984
2-97185 4(a)-1 Third April 1, 1985
2-99940 4(a)-1 Fourth August 1, 1985
2-99940 4(a)-2 Fifth September 1, 1985
33-01774 4(a)-2 Sixth December 1, 1985
33-9583 4(a)-1 Seventh March 1, 1986
33-9583 4(a)-2 Eighth May 1, 1986
33-11376 4(a)-1 Ninth October 1, 1986
33-11376 4(a)-2 Tenth December 1, 1986
33-11376 4(a)-3 Eleventh December 1, 1986
33-14584 4(a)-1 Twelfth February 1, 1987
33-14584 4(a)-2 Thirteenth March 1, 1987
33-14584 4(a)-3 Fourteenth April 1, 1987
33-24089 4(a)-1 Fifteenth July 1, 1987
33-24089 4(a)-2 Sixteenth September 1, 1987
33-24089 4(a)-3 Seventeenth October 1, 1987
33-24089 4(a)-4 Eighteenth March 1, 1988
33-24089 4(a)-5 Nineteenth May 1, 1988
33-30141 4(a)-1 Twentieth September 1, 1988
33-30141 4(a)-2 Twenty-first November 1, 1988
77
<PAGE>
PREVIOUSLY FILED*
-----------------
WITH
FILE AS
EXHIBITS NUMBER EXHIBIT NUMBER DATED
- -------- ------ ------- ------ -----
33-30141 4(a)-3 Twenty-second January 1, 1989
33-35614 4(a)-1 Twenty-third August 1, 1989
33-35614 4(a)-2 Twenty-fourth November 1, 1989
33-35614 4(a)-3 Twenty-fifth December 1, 1989
33-35614 4(a)-4 Twenty-six February 1, 1990
33-39493 4(a)-1 Twenty-seventh September 1, 1990
33-39493 4(a)-2 Twenty-eighth October 1, 1990
33-39493 4(a)-3 Twenty-ninth October 1, 1990
33-39493 4(a)-4 Thirtieth March 1, 1991
33-45104 4(a)-1 Thirty-first May 1, 1991
33-45104 4(a)-2 Thirty-second July 1, 1991
33-46293 4(a)-1 Thirty-third February 1, 1992
33-49710 4(a)-1 Thrity-fourth April 1, 1992
33-49710 4(a)-2 Thirty-fifth April 1, 1992
33-49710 4(a)-3 Thirty-sixth June 1, 1992
33-49710 4(a)-4 Thirty-seventh June 1, 1992
33-57576 4(a)-1 Thirty-eighth August 1, 1992
33-57576 4(a)-2 Thirty-ninth October 1, 1992
33-57576 4(a)-3 Fortieth November 1, 1992
33-57576 4(a)-4 Forty-first December 1, 1992
33-60528 4(a)-1 Forty-second March 1, 1993
33-64692 4(a)-1 Forty-third April 1, 1993
33-64692 4(a)-2 Forty-fourth April 1, 1993
33-64692 4(a)-3 Forty-fifth May 1, 1993
33-68100 4(a)-1 Forty-sixth July 1, 1993
33-68100 4(a)-3 Forty-seventh October 1, 1993
33-68100 4(a)-4 Forty-eighth November 1, 1993
33-68100 4(a)-5 Forty-ninth May 1, 1994
33-68100 4(a)-6 Fiftieth May 1, 1994
33-68100 4(a)-7 Fifty-first August 1, 1994
0-11442 99 Fifty-second April 1, 1995
Form 10-Q
(Quarter ended
March 31, 1995)
0-11442 99 Fifty-third June 1, 1995
Form 10-Q
(Quarter ended
June 30, 1995)
0-11442 4 Fifty-fourth October 1, 1995
Form 8-K (Dated
September 26, 1995)
0-11442 4(a) Fifty-fifth March 1, 1996
Form 10-Q
(Quarter ended
March 31, 1996)
0-11442 4(a) Fifty-sixth September 1, 1996
Form 10-Q
(Quarter ended
September 30, 1996)
4(a)(2) Fifty-seventh February 1, 1997
4(b)(1) - Agreement to furnish certain debt
instruments (the Company).
4(b)(2) - Agreement to furnish certain debt
instruments (TU Electric).
78
<PAGE>
PREVIOUSLY FILED*
-----------------
WITH
FILE AS
EXHIBITS NUMBER EXHIBIT NUMBER DATED
- -------- ------ ------- ------ -----
4(c) 33-68104 4(b)-16 - Deposit Agreement between TU Electric
and Chemical Bank, dated as of January
11, 1993.
4(d) 33-68104 4(b)-17 - Deposit Agreement between TU Electric
and Chemical Bank, dated as of August
4, 1993.
4(e) 0-11442 4(e) - Deposit Agreement between TU Electric
Form 10-K and Chemical Bank, dated as of October
(1993) 14, 1993.
4(f) 0-11442 4(f) - Indenture (For Unsecured Subordinated
Form 10-K Debt Securities relating to Trust
(1995) Securities), dated as of December 1,
1995, between TU Electric and The
Bank of New York, as Trustee.
4(g) 0-11442 4(g) - Amended and Restated Trust Agreement,
Form 10-K dated as of December 12, 1995,
(1995) between TU Electric, as Depositor,
and The Bank of New York, The Bank of
New York (Delaware) and the
Administrative Trustees thereunder,
as Trustees for TU Electric Capital I.
4(h) 0-11442 4(h) - Guarantee Agreement with respect to TU
Form 10-K Electric Capital I, dated as of
(1995) December 12, 1995, between TU
Electric, as Guarantor, and The Bank
of New York, as Trustee.
4(i) 0-11442 4(i) - Agreement as to Expenses and
Form 10-K Liabilities, dated as of December 12,
(1995) 1995, between TU Electric and TU
Electric Capital I.
4(j) - Officer's Certificate, dated as of
December 12, 1995, establishing
the terms of the Junior Subordinated
Debentures issued in connection with
the preferred securities of TU
Electric Capital I.
4(k) 0-11442 4(j) - Amended and Restated Trust Agreement,
Form 10-K dated as of December 12, 1995,
(1995) between TU Electric, as Depositor,
and The Bank of New York, The Bank
of New York (Delaware) and the
Administrative Trustees thereunder, as
Trustees for TU Electric Capital II.
4(l) 0-11442 4(k) - Guarantee Agreement with respect to TU
Form 10-K Electric Capital II, dated as of
(1995) December 12, 1995, between TU
Electric, as Guarantor, and The Bank
of New York, as Trustee.
4(m) 0-11442 4(l) - Agreement as to Expenses and
Form 10-K Liabilities, dated as of December 12,
(1995) 1995, between TU Electric and TU
Electric Capital II.
4(n) - Officer's Certificate, dated as of
December 12, 1995, establishing the
terms of the Junior Subordinated
Debentures issued in connection with
the preferred securities of TU
Electric Capital II.
4(o) 0-11442 4(m) - Amended and Restated Trust Agreement,
Form 10-K dated as of December 13, 1995,
(1995) between TU Electric, as Depositor,
and The Bank of New York, The Bank of
New York (Delaware), and the
Administrative Trustees thereunder, as
Trustees for TU Electric Capital III.
4(p) 0-11442 4(n) - Guarantee Agreement with respect to TU
Form 10-K Electric Capital III, dated as of
(1995) December 13, 1995, between TU
Electric, as Guarantor, and The Bank
of New York, as Trustee.
4(q) 0-11442 4(o) - Agreement as to Expenses and
Form 10-K Liabilities, dated as of December 13,
(1995) 1995, between TU Electric and TU
Electric Capital III.
4(r) - Officer's Certificate, dated as of
December 13, 1995, establishing the
terms of the Junior Subordinated
Debentures issued used in connection
with the preferred securities of
TU Electric Capital III.
4(s) - Amended and Restated Trust Agreement,
dated as of January 30, 1997,
between TU Electric, as Depositor,
and The Bank of New York (Delaware),
and the Administrative Trustee
thereunder, as Trustees for TU
Electric Capital IV.
79
<PAGE>
PREVIOUSLY FILED*
-----------------
WITH
FILE AS
EXHIBITS NUMBER EXHIBIT NUMBER DATED
- -------- ------ ------- ------ -----
4(t) - Guarantee Agreement with respect to TU
Electric Capital IV, dated as of
January 30, 1997, between TU Electric,
as Guarantor, and The Bank of New
York, as Trustee.
4(u) - Agreement as to Expenses and
Liabilities, dated as of January 30,
1997, between TU Electric and TU
Electric Capital IV.
4(v) - Officer's Certificate, dated as of
January 30, 1997, establishing the
terms of the Junior Subordinated
Debentures issued used in connection
with the preferred securities of TU
Electric Capital IV.
4(w) - Amended and Restated Trust Agreement,
dated as of January 30, 1997, between
TU Electric, as Depositor, and The
Bank of New York (Delaware), and the
Administrative Trustee thereunder, as
Trustees for TU Electric Capital V.
4(x) - Guarantee Agreement with respect to TU
Electric Capital V, dated as of
January 30, 1997, between TU Electric,
as Guarantor, and The Bank of New
York, as Trustee.
4(y) - Agreement as to Expenses and
Liabilities, dated as of January 30,
1997, between TU Electric and TU
Electric Capital V.
4(z) - Officer's Certificate, dated as of
January 30, 1997, establishing the
terms of the Junior Subordinated
Debentures issued in connection with
the preferred securities of TU
Electric Capital V.
10(a)** 1-3591 10(a) - Deferred and Incentive Compensation
Form 10-Q Plan of the Texas Utilities Company
(Quarter ended System, as amended January 1, 1995.
June 30, 1995)
10(b)** 1-3591 10(f) - Salary Deferral Program of Texas
Form 10-Q Utilities Company System as amended
(Quarter ended January 1, 1995.
June 30, 1995)
10(c)** 1-3591 10(c) - Restated Supplemental Retirement Plan
Form 10-Q for Employees of the Texas Utilities
(Quarter ended Company System, as restated effective
June 30, 1995) January 1, 1995.
10(d)** 1-3591 10(b) - Deferred Compensation Plan for Outside
Form 10-Q Directors of the Company, effective as
(Quarter ended of July 1, 1995.
June 30, 1995)
10(e)** 1-3591 10(d) - Annual Incentive Plan of the Texas
Form 10-Q Utilities Company System, dated as of
(Quarter ended May 19, 1995.
June 30, 1995)
10(f)** 1-3591 10(e) - Management Transition Agreement, dated
Form 10-Q as of May 19, 1995 between the Company
(Quarter ended and J. S. Farrington.
June 30, 1995)
12(a) - Computation of Ratio of Earnings to
Fixed Charges for the Company.
12(b) - Computation of Ratio of Earnings to
Fixed Charges, and to Fixed Charges
and Preferred Dividends for TU
Electric.
21 - Subsidiaries of the Company.
23(a) - Consent of Counsel to the Company.
23(b) - Consent of Counsel to TU Electric.
23(c) - Independent Auditor's Consent for the
Company.
80
<PAGE>
PREVIOUSLY FILED*
-----------------
WITH
FILE AS
EXHIBITS NUMBER EXHIBIT NUMBER DATED
- -------- ------ ------- ------ -----
23(d) - Independent Auditor's Consent for TU
Electric.
27(a) - Financial Data Schedule for the
Company.
27(b) - Financial Data Schedule for TU
Electric.
99(a) 1-3591 28(b) - Agreement, dated as of February 12,
Form 10-K 1988, between TU Electric and Texas
(1987) Municipal Power Agency.
99(b) 33-55408 99(a) - Agreement, dated as July 5, 1988,
between TU Electric and Electric and
Tex-La Electric Cooperative of Texas,
Inc.
99(d) 33-59988 2 - Agreement and plan of merger, dated as
of January 25, 1993, by and among the
Company, TUA, Inc., and Southwestern
Electric Service Company.
99(e) 33-23532 4(c)(i) - Trust Indenture, Security Agreement
and Mortgage, dated as of December 1,
1987, as supplemented by Supplement
No. 1 thereto dated as of May 1, 1988
among the Lessor, TU Electric and the
Trustee.
99(f) 33-24089 4(c)-1 - Supplement No. 2 to Trust Indenture,
Security Agreement and Mortgage, dated
as of August 1, 1988.
99(g) 33-24089 4(e)-1 - Supplement No. 3 to Trust Indenture,
Security Agreement and Mortgage, dated
as of August 1, 1988.
99(h) 0-11442 99(c) - Supplement No. 4 to Trust Indenture,
Form 10-Q Security Agreement and Mortgage,
(Quarter ended including form of Secured Facility
June 30,1993) Bond, 1993 Series.
99(i) 33-23532 4(d) - Lease Agreement, dated as of December
1, 1987 between the Lessor and TU
Electric as supplemented by Supplement
No. 1 thereto dated as of May 20, 1988
between the Lessor and TU Electric.
99(j) 33-24089 4(f) - Lease Agreement Supplement No. 2,
dated as of August 18, 1988.
99(k) 33-24089 4(f)-1 - Lease Agreement Supplement No. 3,
dated as of August 25, 1988.
99(l) 33-63434 4(d)(iv)- Lease Agreement Supplement No. 4,
dated as of December 1, 1988.
99(m) 33-63434 4(d)(v) - Lease Agreement Supplement No. 5,
dated as of June 1, 1989.
99(n) 0-11442 99(d) - Lease Agreement Supplement No. 6,
Form 10-Q dated as of July 1, 1993.
(Quarter ended
June 30,1993)
99(o) 33-23532 4(e) - Participation Agreement dated as of
December 1, 1987, as amended by a
Consent to Amendment of the
Participation Agreement, dated as of
May 20, 1988, each among the Lessor,
the Trustee, the Owner Participant,
certain banking institutions, Capcorp,
Inc. and TU Electric.
99(p) 33-24089 4(g) - Consent to Amendment of the
Participation Agreement, dated as of
August 18, 1988.
99(q) 33-24089 4(g)-1 - Supplement No. 1 to the Participation
Agreement, dated as of August 18,
1988.
99(r) 33-24089 4(g)-2 - Supplement No. 2 to the Participation
Agreement, dated as of August 18,
1988.
99(s) 33-63434 4(e)(v) - Supplement No. 3 to the Participation
Agreement, dated as of December 1,
1988.
81
<PAGE>
PREVIOUSLY FILED*
-----------------
WITH
FILE AS
EXHIBITS NUMBER EXHIBIT NUMBER DATED
- -------- ------ ------- ------ -----
99(t) 0-11442 99(e) - Supplement No. 4 to the Participation
Form 10-Q Agreement, dated as of June 17, 1993.
(Quarter ended
June 30, 1993)
99(u) 0-11442 99(t) - Competitive Advance and Revolving
Form 10-Q Credit Facility Agreement, "Facility
(Quarter ended A", dated as of April 29, 1994, among
September 31, 1994) the Company, TU Electric, certain
banks and Chemical Bank, Agent
(Facility A).
99(v) 0-11442 99(a) - Amendment, dated as of April 28, 1995,
Form 10-Q to Facility A.
(Quarter ended
March 31, 1995)
99(w) 0-11442 99(w) - Second Amendment, dated as of November
Form 10-K 24, 1995, to Facility A.
(1995)
99(x) 0-11442 99(u) - Competitive Advance and Revolving
Form 10-Q Credit Facility Agreement, "Facility
(Quarter ended B", dated as of April 29, 1994, among
September 31, 1994) the Company, TU Electric, certain
banks and Chemical Bank, Agent
(Facility B).
99(y) 0-11442 99(b) - Amendment, dated as of April 28, 1995,
Form 10-Q to Facility B.
(Quarter ended
March 31, 1995)
99(z) 0-11442 99(z) - Second Amendment, dated as of November
Form 10-K 24, 1995, to Facility B.
(1995)
99(aa) 0-11442 99(v) - Credit Agreement, dated as of February
Form 10-K 24, 1995, among TU Electric, Bank of
(1994) America and The Bank of New York.
99(bb) 0-11442 99(bb) - Competitive Advance and Revolving
Form 10-K Credit Facility Agreement, dated as of
(1995) November 22, 1995, among the Company
and Chemical Bank and Texas Commerce
Bank National Association, as Agents.
99(cc) 0-11442 99(a) - Amended and Restated Competitive
Form 10-Q Advance and Revolving Credit Facility
(Quarter ended Agreement, Facility A, dated as of
March 31, 1996) April 26, 1996, among the Company, TU
Electric, certain banks, Chemical Bank
and Texas Commerce Bank National
Association, as Agents.
99(dd) 0-11442 99(b) - Amended and Restated Term Loan and
Form 10-Q Competitive Advance and Revolving
(Quarter ended Credit Facility Agreement, Facilities
March 31, 1996) B and C, dated as of April 26, 1996,
among the Company, TU Electric,
certain banks, and Chemical Bank and
Texas Commerce Bank National
Association, as Agents.
99(ee) 0-11442 4(b) - Supplement No. 1, dated October 25,
Form 10-Q 1995, to Trust Indenture, Security
(Quarter ended Agreement and Mortgage, dated as of
March 31, 1996) December 1, 1989, among the Owner
Trustee, TU Electric and the Indenture
Trustee.
82
<PAGE>
PREVIOUSLY FILED*
-----------------
WITH
FILE AS
EXHIBITS NUMBER EXHIBIT NUMBER DATED
- -------- ------ ------- ------ -----
99(ff) 0-11442 4(c) - Supplement No. 1, dated October 19,
Form 10-Q 1995, to Amended and Restated
(Quarter ended Participation Agreement, dated as of
March 31, 1996) November 28, 1989, among the Owner
Trustee, The First National Bank of
Chicago, as Original Indenture
Trustee, the Indenture Trustee, the
Owner Participant, Mesquite Power
Corporation and TU Electric.
___________________
* Incorporated herein by reference.
** Management contract or compensation plan or arrangement required to be
filed as an exhibit to this report pursuant to item 14(c) of Form 10-K.
83
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, TEXAS UTILITIES COMPANY HAS DULY CAUSED THIS REPORT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
TEXAS UTILITIES COMPANY
Date: March 12, 1997 By: /s/ J. S. FARRINGTON
-------------------------------------
(J. S. FARRINGTON, CHAIRMAN OF
THE BOARD)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERONS ON BEHALF OF TEXAS
UTILITIES COMPANY AND IN THE CAPACITIES AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ J. S. FARRINGTON Chairman of the Board
- -------------------------------
(J. S. FARRINGTON, CHAIRMAN
OF THE BOARD)
/s/ ERLE NYE Principal Executive Officer
- ------------------------------- and Director
(ERLE NYE, PRESIDENT AND
CHIEF EXECUTIVE)
/s/ PETER B. TINKHAM Principal Financial Officer
- -------------------------------
(PETER B. TINKHAM, TREASURER
AND ASSISTANT SECRETARY)
/s/ MARC D. MOSELEY Principal Accounting Officer
- -------------------------------
(MARC D. MOSELEY, ACTING
CONTROLLER)
/s/ BAYARD H. FRIEDMAN Director
- -------------------------------
(BAYARD H. FRIEDMAN)
/s/ WILLIAM M. GRIFFIN Director March 12, 1997
- -------------------------------
(WILLIAM M. GRIFFIN)
/s/ KERNEY LADAY Director
- -------------------------------
(KERNEY LADAY)
/s/ MARGARET N. MAXEY Director
- -------------------------------
(MARGARET N. MAXEY)
/s/ JAMES A. MIDDLETON Director
- -------------------------------
(JAMES A. MIDDLETON)
/s/ J. E. OESTERREICHER Director
- -------------------------------
(J. E. OESTERREICHER)
/s/ CHARLES R. PERRY Director
- -------------------------------
(CHARLES R. PERRY)
/s/ HERBERT H. RICHARDSON Director
- -------------------------------
(HERBERT H. RICHARDSON)
84
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, TEXAS UTILITIES COMPANY HAS DULY CAUSED THIS REPORT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
TEXAS UTILITIES ELECTRIC COMPANY
Date: March 12, 1997 By: /s/ ERLE NYE
-------------------------------------
(ERLE NYE, CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERONS ON BEHALF OF THE REGISTRANT
AND IN THE CAPACITIES AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ ERLE NYE Principal Executive
- ------------------------------- Officer and Director
(ERLE NYE, CHAIRMAN OF THE
BOARD AND CHIEF EXECUTIVE)
/s/ ROBERT S. SHAPARD Principal Financial Officer
- -------------------------------
(ROBERT S. SHAPARD, TREASURER
AND ASSISTANT SECRETARY)
/s/ MARC D. MOSELEY Principal Accounting Officer
- -------------------------------
(MARC D. MOSELEY, ACTING
CONTROLLER)
/s/ T. L. BAKER Director
- -------------------------------
(T. L. BAKER)
/s/ J. S. FARRINGTON Director March 12, 1997
- -------------------------------
(J.S. FARRINGTON)
/s/ H. JARRELL GIBBS Director
- -------------------------------
(H. JARRELL GIBBS)
/s/ MICHAEL J. MCNALLY Director
- -------------------------------
(MICHAEL J. MCNALLY)
/s/ W. M. TAYLOR Director
- -------------------------------
(W. M. TAYLOR)
/s/ E. L. WATSON Director
- -------------------------------
(E. L. WATSON)
85
<PAGE>
INDEX TO EXHIBITS
THE COMPANY AND TU ELECTRIC
- ---------------------------
PREVIOUSLY FILED*
-----------------
WITH
FILE AS
EXHIBITS NUMBER EXHIBIT NUMBER DATED
- -------- ------ ------- ------ -----
2(a) 33-12391 2(a) - Amended and Restated Agreement and
Plan of Merger, dated as of April 13,
1996, among the Company, ENSERCH
Corporation and TUC Holding Company.
3(a) 33-48880 4(a) - Restated Articles of Incorporation
of the Company.
3(b) 33-48880 4(b) - Bylaws, as amended, of the Company.
3(c) 0-11442 3(a) - Restated Articles of Incorporation
Form 10-K of TU Electric.
(1993)
3(d) 33-64694 4(c) - Bylaws of TU Electric, as amended.
4(a) 2-90185 4(a) - Mortgage and Deed of Trust, dated as
of December 1, 1983, between TU
Electric and Irving Trust Company
(now The Bank of New York), Trustee.
4(a)(1) - Supplemental Indentures to Mortgage
and Deed of Trust:
2-90185 4(b) First April 1, 1984
2-92738 4(a)-1 Second September 1, 1984
2-97185 4(a)-1 Third April 1, 1985
2-99940 4(a)-1 Fourth August 1, 1985
2-99940 4(a)-2 Fifth September 1, 1985
33-01774 4(a)-2 Sixth December 1, 1985
33-9583 4(a)-1 Seventh March 1, 1986
33-9583 4(a)-2 Eighth May 1, 1986
33-11376 4(a)-1 Ninth October 1, 1986
33-11376 4(a)-2 Tenth December 1, 1986
33-11376 4(a)-3 Eleventh December 1, 1986
33-14584 4(a)-1 Twelfth February 1, 1987
33-14584 4(a)-2 Thirteenth March 1, 1987
33-14584 4(a)-3 Fourteenth April 1, 1987
33-24089 4(a)-1 Fifteenth July 1, 1987
33-24089 4(a)-2 Sixteenth September 1, 1987
33-24089 4(a)-3 Seventeenth October 1, 1987
33-24089 4(a)-4 Eighteenth March 1, 1988
33-24089 4(a)-5 Nineteenth May 1, 1988
33-30141 4(a)-1 Twentieth September 1, 1988
33-30141 4(a)-2 Twenty-first November 1, 1988
33-30141 4(a)-3 Twenty-second January 1, 1989
33-35614 4(a)-1 Twenty-third August 1, 1989
33-35614 4(a)-2 Twenty-fourth November 1, 1989
33-35614 4(a)-3 Twenty-fifth December 1, 1989
33-35614 4(a)-4 Twenty-six February 1, 1990
33-39493 4(a)-1 Twenty-seventh September 1, 1990
33-39493 4(a)-2 Twenty-eighth October 1, 1990
33-39493 4(a)-3 Twenty-ninth October 1, 1990
33-39493 4(a)-4 Thirtieth March 1, 1991
33-45104 4(a)-1 Thirty-first May 1, 1991
33-45104 4(a)-2 Thirty-second July 1, 1991
33-46293 4(a)-1 Thirty-third February 1, 1992
33-49710 4(a)-1 Thrity-fourth April 1, 1992
33-49710 4(a)-2 Thirty-fifth April 1, 1992
33-49710 4(a)-3 Thirty-sixth June 1, 1992
<PAGE>
PREVIOUSLY FILED*
-----------------
WITH
FILE AS
EXHIBITS NUMBER EXHIBIT NUMBER DATED
- -------- ------ ------- ------ -----
33-49710 4(a)-4 Thirty-seventh June 1, 1992
33-57576 4(a)-1 Thirty-eighth August 1, 1992
33-57576 4(a)-2 Thirty-ninth October 1, 1992
33-57576 4(a)-3 Fortieth November 1, 1992
33-57576 4(a)-4 Forty-first December 1, 1992
33-60528 4(a)-1 Forty-second March 1, 1993
33-64692 4(a)-1 Forty-third April 1, 1993
33-64692 4(a)-2 Forty-fourth April 1, 1993
33-64692 4(a)-3 Forty-fifth May 1, 1993
33-68100 4(a)-1 Forty-sixth July 1, 1993
33-68100 4(a)-3 Forty-seventh October 1, 1993
33-68100 4(a)-4 Forty-eighth November 1, 1993
33-68100 4(a)-5 Forty-ninth May 1, 1994
33-68100 4(a)-6 Fiftieth May 1, 1994
33-68100 4(a)-7 Fifty-first August 1, 1994
0-11442 99 Fifty-second April 1, 1995
Form 10-Q
(Quarter ended
March 31, 1995)
0-11442 99 Fifty-third June 1, 1995
Form 10-Q
(Quarter ended
June 30, 1995)
0-11442 4 Fifty-fourth October 1, 1995
Form 8-K (Dated
September 26, 1995)
0-11442 4(a) Fifty-fifth March 1, 1996
Form 10-Q
(Quarter ended
March 31, 1996)
0-11442 4(a) Fifty-sixth September 1, 1996
Form 10-Q
(Quarter ended
September 30, 1996)
4(a)(2) Fifty-seventh February 1, 1997
4(b)(1) - Agreement to furnish certain debt
instruments (the Company).
4(b)(2) - Agreement to furnish certain debt
instruments (TU Electric).
4(c) 33-68104 4(b)-16 - Deposit Agreement between TU Electric
and Chemical Bank, dated as of January
11, 1993.
4(d) 33-68104 4(b)-17 - Deposit Agreement between TU Electric
and Chemical Bank, dated as of August
4, 1993.
4(e) 0-11442 4(e) - Deposit Agreement between TU Electric
Form 10-K and Chemical Bank, dated as of October
(1993) 14, 1993.
4(f) 0-11442 4(f) - Indenture (For Unsecured Subordinated
Form 10-K Debt Securities relating to Trust
(1995) Securities), dated as of December 1,
1995, between TU Electric and The
Bank of New York, as Trustee.
4(g) 0-11442 4(g) - Amended and Restated Trust Agreement,
Form 10-K dated as of December 12, 1995,
(1995) between TU Electric, as Depositor,
and The Bank of New York, The Bank of
New York (Delaware) and the
Administrative Trustees thereunder,
as Trustees for TU Electric Capital I.
4(h) 0-11442 4(h) - Guarantee Agreement with respect to TU
Form 10-K Electric Capital I, dated as of
(1995) December 12, 1995, between TU
Electric, as Guarantor, and The Bank
of New York, as Trustee.
<PAGE>
PREVIOUSLY FILED*
-----------------
WITH
FILE AS
EXHIBITS NUMBER EXHIBIT NUMBER DATED
- -------- ------ ------- ------ -----
4(i) 0-11442 4(i) - Agreement as to Expenses and
Form 10-K Liabilities, dated as of December 12,
(1995) 1995, between TU Electric and TU
Electric Capital I.
4(j) - Officer's Certificate, dated as of
December 12, 1995, establishing
the terms of the Junior Subordinated
Debentures issued in connection with
the preferred securities of TU
Electric Capital I.
4(k) 0-11442 4(j) - Amended and Restated Trust Agreement,
Form 10-K dated as of December 12, 1995,
(1995) between TU Electric, as Depositor,
and The Bank of New York, The Bank
of New York (Delaware) and the
Administrative Trustees thereunder, as
Trustees for TU Electric Capital II.
4(l) 0-11442 4(k) - Guarantee Agreement with respect to TU
Form 10-K Electric Capital II, dated as of
(1995) December 12, 1995, between TU
Electric, as Guarantor, and The Bank
of New York, as Trustee.
4(m) 0-11442 4(l) - Agreement as to Expenses and
Form 10-K Liabilities, dated as of December 12,
(1995) 1995, between TU Electric and TU
Electric Capital II.
4(n) - Officer's Certificate, dated as of
December 12, 1995, establishing the
terms of the Junior Subordinated
Debentures issued in connection with
the preferred securities of TU
Electric Capital II.
4(o) 0-11442 4(m) - Amended and Restated Trust Agreement,
Form 10-K dated as of December 13, 1995,
(1995) between TU Electric, as Depositor,
and The Bank of New York, The Bank of
New York (Delaware), and the
Administrative Trustees thereunder, as
Trustees for TU Electric Capital III.
4(p) 0-11442 4(n) - Guarantee Agreement with respect to TU
Form 10-K Electric Capital III, dated as of
(1995) December 13, 1995, between TU
Electric, as Guarantor, and The Bank
of New York, as Trustee.
4(q) 0-11442 4(o) - Agreement as to Expenses and
Form 10-K Liabilities, dated as of December 13,
(1995) 1995, between TU Electric and TU
Electric Capital III.
4(r) - Officer's Certificate, dated as of
December 13, 1995, establishing the
terms of the Junior Subordinated
Debentures issued used in connection
with the preferred securities of
TU Electric Capital III.
4(s) - Amended and Restated Trust Agreement,
dated as of January 30, 1997,
between TU Electric, as Depositor,
and The Bank of New York (Delaware),
and the Administrative Trustee
thereunder, as Trustees for TU
Electric Capital IV.
4(t) - Guarantee Agreement with respect to TU
Electric Capital IV, dated as of
January 30, 1997, between TU Electric,
as Guarantor, and The Bank of New
York, as Trustee.
4(u) - Agreement as to Expenses and
Liabilities, dated as of January 30,
1997, between TU Electric and TU
Electric Capital IV.
4(v) - Officer's Certificate, dated as of
January 30, 1997, establishing the
terms of the Junior Subordinated
Debentures issued used in connection
with the preferred securities of TU
Electric Capital IV.
4(w) - Amended and Restated Trust Agreement,
dated as of January 30, 1997, between
TU Electric, as Depositor, and The
Bank of New York (Delaware), and the
Administrative Trustee thereunder, as
Trustees for TU Electric Capital V.
4(x) - Guarantee Agreement with respect to TU
Electric Capital V, dated as of
January 30, 1997, between TU Electric,
as Guarantor, and The Bank of New
York, as Trustee.
4(y) - Agreement as to Expenses and
Liabilities, dated as of January 30,
1997, between TU Electric and TU
Electric Capital V.
<PAGE>
PREVIOUSLY FILED*
-----------------
WITH
FILE AS
EXHIBITS NUMBER EXHIBIT NUMBER DATED
- -------- ------ ------- ------ -----
4(z) - Officer's Certificate, dated as of
January 30, 1997, establishing the
terms of the Junior Subordinated
Debentures issued in connection with
the preferred securities of TU
Electric Capital V.
10(a)** 1-3591 10(a) - Deferred and Incentive Compensation
Form 10-Q Plan of the Texas Utilities Company
(Quarter ended System, as amended January 1, 1995.
June 30, 1995)
10(b)** 1-3591 10(f) - Salary Deferral Program of Texas
Form 10-Q Utilities Company System as amended
(Quarter ended January 1, 1995.
June 30, 1995)
10(c)** 1-3591 10(c) - Restated Supplemental Retirement Plan
Form 10-Q for Employees of the Texas Utilities
(Quarter ended Company System, as restated effective
June 30, 1995) January 1, 1995.
10(d)** 1-3591 10(b) - Deferred Compensation Plan for Outside
Form 10-Q Directors of the Company, effective as
(Quarter ended of July 1, 1995.
June 30, 1995)
10(e)** 1-3591 10(d) - Annual Incentive Plan of the Texas
Form 10-Q Utilities Company System, dated as of
(Quarter ended May 19, 1995.
June 30, 1995)
10(f)** 1-3591 10(e) - Management Transition Agreement, dated
Form 10-Q as of May 19, 1995 between the Company
(Quarter ended and J. S. Farrington.
June 30, 1995)
12(a) - Computation of Ratio of Earnings to
Fixed Charges for the Company.
12(b) - Computation of Ratio of Earnings to
Fixed Charges, and to Fixed Charges
and Preferred Dividends for TU
Electric.
21 - Subsidiaries of the Company.
23(a) - Consent of Counsel to the Company.
23(b) - Consent of Counsel to TU Electric.
23(c) - Independent Auditor's Consent for the
Company.
23(d) - Independent Auditor's Consent for TU
Electric.
27(a) - Financial Data Schedule for the
Company.
27(b) - Financial Data Schedule for TU
Electric.
99(a) 1-3591 28(b) - Agreement, dated as of February 12,
Form 10-K 1988, between TU Electric and Texas
(1987) Municipal Power Agency.
99(b) 33-55408 99(a) - Agreement, dated as July 5, 1988,
between TU Electric and Electric and
Tex-La Electric Cooperative of Texas,
Inc.
99(d) 33-59988 2 - Agreement and plan of merger, dated as
of January 25, 1993, by and among the
Company, TUA, Inc., and Southwestern
Electric Service Company.
99(e) 33-23532 4(c)(i) - Trust Indenture, Security Agreement
and Mortgage, dated as of December 1,
1987, as supplemented by Supplement
No. 1 thereto dated as of May 1, 1988
among the Lessor, TU Electric and the
Trustee.
<PAGE>
PREVIOUSLY FILED*
-----------------
WITH
FILE AS
EXHIBITS NUMBER EXHIBIT NUMBER DATED
- -------- ------ ------- ------ -----
99(f) 33-24089 4(c)-1 - Supplement No. 2 to Trust Indenture,
Security Agreement and Mortgage, dated
as of August 1, 1988.
99(g) 33-24089 4(e)-1 - Supplement No. 3 to Trust Indenture,
Security Agreement and Mortgage, dated
as of August 1, 1988.
99(h) 0-11442 99(c) - Supplement No. 4 to Trust Indenture,
Form 10-Q Security Agreement and Mortgage,
(Quarter ended including form of Secured Facility
June 30,1993) Bond, 1993 Series.
99(i) 33-23532 4(d) - Lease Agreement, dated as of December
1, 1987 between the Lessor and TU
Electric as supplemented by Supplement
No. 1 thereto dated as of May 20, 1988
between the Lessor and TU Electric.
99(j) 33-24089 4(f) - Lease Agreement Supplement No. 2,
dated as of August 18, 1988.
99(k) 33-24089 4(f)-1 - Lease Agreement Supplement No. 3,
dated as of August 25, 1988.
99(l) 33-63434 4(d)(iv)- Lease Agreement Supplement No. 4,
dated as of December 1, 1988.
99(m) 33-63434 4(d)(v) - Lease Agreement Supplement No. 5,
dated as of June 1, 1989.
99(n) 0-11442 99(d) - Lease Agreement Supplement No. 6,
Form 10-Q dated as of July 1, 1993.
(Quarter ended
June 30,1993)
99(o) 33-23532 4(e) - Participation Agreement dated as of
December 1, 1987, as amended by a
Consent to Amendment of the
Participation Agreement, dated as of
May 20, 1988, each among the Lessor,
the Trustee, the Owner Participant,
certain banking institutions, Capcorp,
Inc. and TU Electric.
99(p) 33-24089 4(g) - Consent to Amendment of the
Participation Agreement, dated as of
August 18, 1988.
99(q) 33-24089 4(g)-1 - Supplement No. 1 to the Participation
Agreement, dated as of August 18,
1988.
99(r) 33-24089 4(g)-2 - Supplement No. 2 to the Participation
Agreement, dated as of August 18,
1988.
99(s) 33-63434 4(e)(v) - Supplement No. 3 to the Participation
Agreement, dated as of December 1,
1988.
99(t) 0-11442 99(e) - Supplement No. 4 to the Participation
Form 10-Q Agreement, dated as of June 17, 1993.
(Quarter ended
June 30, 1993)
99(u) 0-11442 99(t) - Competitive Advance and Revolving
Form 10-Q Credit Facility Agreement, "Facility
(Quarter ended A", dated as of April 29, 1994, among
September 31, 1994) the Company, TU Electric, certain
banks and Chemical Bank, Agent
(Facility A).
99(v) 0-11442 99(a) - Amendment, dated as of April 28, 1995,
Form 10-Q to Facility A.
(Quarter ended
March 31, 1995)
99(w) 0-11442 99(w) - Second Amendment, dated as of November
Form 10-K 24, 1995, to Facility A.
(1995)
<PAGE>
PREVIOUSLY FILED*
-----------------
WITH
FILE AS
EXHIBITS NUMBER EXHIBIT NUMBER DATED
- -------- ------ ------- ------ -----
99(x) 0-11442 99(u) - Competitive Advance and Revolving
Form 10-Q Credit Facility Agreement, "Facility
(Quarter ended B", dated as of April 29, 1994, among
September 31, 1994) the Company, TU Electric, certain
banks and Chemical Bank, Agent
(Facility B).
99(y) 0-11442 99(b) - Amendment, dated as of April 28, 1995,
Form 10-Q to Facility B.
(Quarter ended
March 31, 1995)
99(z) 0-11442 99(z) - Second Amendment, dated as of November
Form 10-K 24, 1995, to Facility B.
(1995)
99(aa) 0-11442 99(v) - Credit Agreement, dated as of February
Form 10-K 24, 1995, among TU Electric, Bank of
(1994) America and The Bank of New York.
99(bb) 0-11442 99(bb) - Competitive Advance and Revolving
Form 10-K Credit Facility Agreement, dated as of
(1995) November 22, 1995, among the Company
and Chemical Bank and Texas Commerce
Bank National Association, as Agents.
99(cc) 0-11442 99(a) - Amended and Restated Competitive
Form 10-Q Advance and Revolving Credit Facility
(Quarter ended Agreement, Facility A, dated as of
March 31, 1996) April 26, 1996, among the Company, TU
Electric, certain banks, Chemical Bank
and Texas Commerce Bank National
Association, as Agents.
99(dd) 0-11442 99(b) - Amended and Restated Term Loan and
Form 10-Q Competitive Advance and Revolving
(Quarter ended Credit Facility Agreement, Facilities
March 31, 1996) B and C, dated as of April 26, 1996,
among the Company, TU Electric,
certain banks, and Chemical Bank and
Texas Commerce Bank National
Association, as Agents.
99(ee) 0-11442 4(b) - Supplement No. 1, dated October 25,
Form 10-Q 1995, to Trust Indenture, Security
(Quarter ended Agreement and Mortgage, dated as of
March 31, 1996) December 1, 1989, among the Owner
Trustee, TU Electric and the Indenture
Trustee.
99(ff) 0-11442 4(c) - Supplement No. 1, dated October 19,
Form 10-Q 1995, to Amended and Restated
(Quarter ended Participation Agreement, dated as of
March 31, 1996) November 28, 1989, among the Owner
Trustee, The First National Bank of
Chicago, as Original Indenture
Trustee, the Indenture Trustee, the
Owner Participant, Mesquite Power
Corporation and TU Electric.
___________________
* Incorporated herein by reference.
** Management contract or compensation plan or arrangement required to be
filed as an exhibit to this report pursuant to item 14(c) of Form 10-K.
<PAGE>
Exhibit 4(a)(2)
[CONFORMED COPY]
================================================================================
TEXAS UTILITIES ELECTRIC COMPANY
TO
THE BANK OF NEW YORK,
(FORMERLY IRVING TRUST COMPANY)
TRUSTEE UNDER THE TEXAS UTILITIES
ELECTRIC COMPANY MORTGAGE AND
DEED OF TRUST, DATED AS OF
DECEMBER 1, 1983
__________________
FIFTY-SEVENTH SUPPLEMENTAL INDENTURE
PROVIDING AMONG OTHER THINGS FOR
FIRST MORTGAGE BONDS,
POLLUTION CONTROL SERIES AE
FIRST MORTGAGE BONDS,
POLLUTION CONTROL SERIES AF
AND
FIRST MORTGAGE BONDS,
POLLUTION CONTROL SERIES AG
__________________
DATED AS OF FEBRUARY 1, 1997
THIS INSTRUMENT GRANTS A SECURITY INTEREST BY A UTILITY
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS
<PAGE>
THIS INSTRUMENT GRANTS A SECURITY INTEREST BY A UTILITY
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS
FIFTY-SEVENTH SUPPLEMENTAL INDENTURE
_________________________________
INDENTURE, dated as of February 1, 1997, between TEXAS UTILITIES ELECTRIC
COMPANY, a corporation of the State of Texas, whose address is Energy Plaza,
1601 Bryan Street, Dallas, Texas 75201 (hereinafter sometimes called the
Company), and THE BANK OF NEW YORK (formerly Irving Trust Company), a
corporation of the State of New York, whose address is 101 Barclay Street, New
York, New York 10286 (hereinafter sometimes called the Trustee), Trustee under
the Mortgage and Deed of Trust, dated as of December 1, 1983 (hereinafter called
the Original Indenture, the Original Indenture and any and all indentures and
instruments supplemental thereto being hereinafter sometimes collectively called
the Mortgage), which Original Indenture was executed and delivered by the
Company to secure the payment of bonds issued or to be issued under and in
accordance with the provisions of the Mortgage, reference to which Mortgage is
made, this Indenture (hereinafter called the Fifty-seventh Supplemental
Indenture) being supplemental thereto;
WHEREAS, said Original Indenture was recorded or filed as required in the
State of Texas; and
WHEREAS, the Company executed and delivered to the Trustee the following
supplemental indentures:
<TABLE>
<CAPTION>
DESIGNATION DATED AS OF
----------- -----------
<S> <C>
First Supplemental Indenture............................. April 1, 1984
Second Supplemental Indenture............................ September 1, 1984
Third Supplemental Indenture............................. April 1, 1985
Fourth Supplemental Indenture............................ August 1, 1985
Fifth Supplemental Indenture............................. September 1, 1985
Sixth Supplemental Indenture............................. December 1, 1985
Seventh Supplemental Indenture........................... March 1, 1986
Eighth Supplemental Indenture............................ May 1, 1986
Ninth Supplemental Indenture............................. October 1, 1986
Tenth Supplemental Indenture............................. December 1, 1986
Eleventh Supplemental Indenture.......................... December 1, 1986
Twelfth Supplemental Indenture........................... February 1, 1987
Thirteenth Supplemental Indenture........................ March 1, 1987
Fourteenth Supplemental Indenture........................ April 1, 1987
Fifteenth Supplemental Indenture......................... July 1, 1987
Sixteenth Supplemental Indenture......................... September 1, 1987
Seventeenth Supplemental Indenture....................... October 1, 1987
Eighteenth Supplemental Indenture........................ March 1, 1988
Nineteenth Supplemental Indenture........................ May 1, 1988
</TABLE>
<PAGE>
2
<TABLE>
<CAPTION>
DESIGNATION DATED AS OF
----------- -----------
<S> <C>
Twentieth Supplemental Indenture......................... September 1, 1988
Twenty-first Supplemental Indenture...................... November 1, 1988
Twenty-second Supplemental Indenture..................... January 1, 1989
Twenty-third Supplemental Indenture...................... August 1, 1989
Twenty-fourth Supplemental Indenture..................... November 1, 1989
Twenty-fifth Supplemental Indenture...................... December 1, 1989
Twenty-sixth Supplemental Indenture...................... February 1, 1990
Twenty-seventh Supplemental Indenture.................... September 1, 1990
Twenty-eighth Supplemental Indenture..................... October 1, 1990
Twenty-ninth Supplemental Indenture...................... October 1, 1990
Thirtieth Supplemental Indenture......................... March 1, 1991
Thirty-first Supplemental Indenture...................... May 1, 1991
Thirty-second Supplemental Indenture..................... July 1, 1991
Thirty-third Supplemental Indenture...................... February 1, 1992
Thirty-fourth Supplemental Indenture..................... April 1, 1992
Thirty-fifth Supplemental Indenture...................... April 1, 1992
Thirty-sixth Supplemental Indenture...................... June 1, 1992
Thirty-seventh Supplemental Indenture.................... June 1, 1992
Thirty-eighth Supplemental Indenture..................... August 1, 1992
Thirty-ninth Supplemental Indenture...................... October 1, 1992
Fortieth Supplemental Indenture.......................... November 1, 1992
Forty-first Supplemental Indenture....................... December 1, 1992
Forty-second Supplemental Indenture...................... March 1, 1993
Forty-third Supplemental Indenture....................... April 1, 1993
Forty-fourth Supplemental Indenture...................... April 1, 1993
Forty-fifth Supplemental Indenture....................... May 1, 1993
Forty-sixth Supplemental Indenture....................... July 1, 1993
Forty-seventh Supplemental Indenture..................... October 1, 1993
Forty-eighth Supplemental Indenture...................... November 1, 1993
Forty-ninth Supplemental Indenture....................... May 1, 1994
Fiftieth Supplemental Indenture.......................... May 1, 1994
Fifty-first Supplemental Indenture....................... August 1, 1994
Fifty-second Supplemental Indenture...................... April 1, 1995
Fifty-third Supplemental Indenture....................... June 1, 1995
Fifty-fourth Supplemental Indenture...................... October 1, 1995
Fifty-fifth Supplemental Indenture....................... March 1, 1996
Fifty-sixth Supplemental Indenture....................... September 1, 1996
</TABLE>
which supplemental indentures were or are to be recorded or filed as required in
the State of Texas; and
WHEREAS, by the Original Indenture, the Company covenanted that it would
execute and deliver such supplemental indenture or indentures and such further
instruments and do such further acts as may be necessary or proper to carry out
more effectually the purposes of the Mortgage and to make subject to the Lien of
the Mortgage any property thereafter acquired and intended to be subject to the
Lien thereof; and
<PAGE>
3
WHEREAS, in addition to the property described in the Original Indenture,
the Company has acquired certain other property, rights and interests in
property; and
WHEREAS, the Company has heretofore issued as of January 31, 1997, in
accordance with the provisions of the Original Indenture, as heretofore
supplemented, the following series of First Mortgage and Collateral Trust Bonds
and First Mortgage Bonds:
<TABLE>
<CAPTION>
Principal Principal
Amount Amount
Series Issued Outstanding
----- ---------- -----------
<S> <C> <C>
12% Series due March 1, 1985.......................... $ 1,000,000 $ None
13 5/8% Series due April 1, 2014...................... 100,000,000 None
13 1/2% Series due September 1, 2014.................. 150,000,000 None
12 7/8% Series due April 1, 2015...................... 150,000,000 None
12% Series due August 1, 2015......................... 100,000,000 None
12% Series due September 1, 2015...................... 75,000,000 None
11 1/8% Series due December 1, 2015................... 150,000,000 None
9 3/8% Series due March 1, 2016....................... 200,000,000 None
9 3/4% Series due May 1, 2016......................... 200,000,000 None
7 3/4% Pollution Control Series C..................... 70,000,000 None
8 1/4% Pollution Control Series D..................... 200,000,000 None
9 1/2% Series due December 1, 2016.................... 300,000,000 None
9 1/4% Series due February 1, 2017.................... 250,000,000 None
7 7/8% Pollution Control Series E..................... 100,000,000 81,305,000
10 1/2% Series due April 1, 2017...................... 250,000,000 None
9 1/2% Series due July 1, 1997........................ 150,000,000 None
10 1/2% Series due July 1, 2017....................... 150,000,000 None
9% Pollution Control Series F......................... 55,000,000 51,525,000
9% Pollution Control Series G......................... 12,000,000 12,000,000
9 7/8% Pollution Control Series H..................... 112,000,000 28,765,000
9 1/4% Pollution Control Series I..................... 100,000,000 54,005,000
10 3/8% Series due May 1, 1998........................ 150,000,000 None
11 3/8% Series due May 1, 2018........................ 150,000,000 None
Secured Medium-Term Notes, Series A................... 300,000,000 30,000,000
10.44% Series due November 1, 2008.................... 150,000,000 3,000,000
8 1/4% Pollution Control Series J..................... 100,000,000 100,000,000
9 1/2% Series due August 1, 1999...................... 200,000,000 200,000,000
10% Series due August 1, 2019......................... 100,000,000 None
9 7/8% Series due November 1, 2019.................... 150,000,000 None
Secured Medium-Term Notes, Series B................... 150,000,000 125,000,000
8 1/8% Pollution Control Series K..................... 50,000,000 50,000,000
8 1/8% Pollution Control Series L..................... 40,000,000 40,000,000
10 5/8% Series due September 1, 2020.................. 250,000,000 None
Secured Medium-Term Notes, Series C................... 150,000,000 None
8 1/4% Pollution Control Series due October 1, 2020... 11,000,000 11,000,000
7 7/8% Pollution Control Series due March 1, 2021..... 100,000,000 100,000,000
9 3/4% Series due May 1, 2021......................... 300,000,000 280,855,000
0% Pollution Control Series M due June 1, 2021........ 86,250,000 None
0% Pollution Control Series N due June 1, 2021........ 57,500,000 None
0% Pollution Control Series O due June 1, 2021........ 57,500,000 None
</TABLE>
<PAGE>
4
<TABLE>
<S> <C> <C>
0% Pollution Control Series P due June 1, 2021........ $ 115,000,000 $ 75,831,000
8 1/8% Series due February 1, 2002.................... 150,000,000 150,000,000
8 7/8% Series due February 1, 2022.................... 175,000,000 175,000,000
8 1/4% Series due April 1, 2004....................... 100,000,000 100,000,000
9% Series due April 1, 2022........................... 100,000,000 100,000,000
6 3/4% Pollution Control Series due April 1, 2022..... 50,000,000 50,000,000
7 1/8% Series due June 1, 1997........................ 150,000,000 150,000,000
8% Series due June 1, 2002............................ 147,000,000 147,000,000
6 5/8% Pollution Control Series due June 1, 2022...... 33,000,000 33,000,000
6 3/8% Series due August 1, 1997...................... 175,000,000 175,000,000
7 3/8% Series due August 1, 2001...................... 150,000,000 150,000,000
8 1/2% Series due August 1, 2024...................... 175,000,000 163,000,000
6.70% Pollution Control Series due October 1, 2022.... 16,935,000 16,935,000
6.55% Pollution Control Series due October 1, 2022.... 40,000,000 40,000,000
7 3/8% Series due November 1, 1999.................... 100,000,000 100,000,000
8 3/4% Series due November 1, 2023.................... 200,000,000 195,550,000
6 1/2% Pollution Control Series due December 1, 2027.. 46,660,000 46,660,000
6 3/4% Series due March 1, 2003....................... 200,000,000 200,000,000
7 7/8% Series due March 1, 2023....................... 300,000,000 300,000,000
6.05% Pollution Control Series due April 1, 2025...... 90,000,000 90,000,000
6.10% Pollution Control Series due April 1, 2028...... 50,000,000 50,000,000
5 7/8% Series due April 1, 1998....................... 175,000,000 175,000,000
6 3/4% Series due April 1, 2003....................... 100,000,000 100,000,000
7 7/8% Series due April 1, 2024....................... 225,000,000 225,000,000
0% Pollution Control Series due June 1, 2023.......... 115,000,000 115,000,000
5 3/4% Series due July 1, 1998........................ 150,000,000 150,000,000
6 3/4% Series due July 1, 2005........................ 100,000,000 100,000,000
7 5/8% Series due July 1, 2025........................ 250,000,000 250,000,000
5 1/2% Series due October 1, 1998..................... 125,000,000 125,000,000
6 1/4% Series due October 1, 2004..................... 125,000,000 125,000,000
7 3/8% Series due October 1, 2025..................... 300,000,000 208,000,000
5 1/2% Pollution Control Series due May 1, 2022....... 50,000,000 50,000,000
5.55% Pollution Control Series due May 1, 2022........ 75,000,000 75,000,000
5.85% Pollution Control Series due May 1, 2022........ 33,465,000 33,465,000
Floating Rate Series due May 1, 1999.................. 300,000,000 300,000,000
Pollution Control Series Q due May 1, 2029............ 45,045,500 45,045,500
Pollution Control Series R due May 1, 2029............ 45,045,500 45,045,500
0% Series due 1994.................................... 1,013,831,000 None
Pollution Control Series S due April 1, 2030.......... 58,270,500 58,270,500
Pollution Control Series T due April 1, 2030.......... 18,400,000 18,400,000
Pollution Control Series U............................ 136,108,250 136,108,250
Pollution Control Series V............................ 136,108,250 136,108,250
Pollution Control Series W............................ 13,857,500 13,857,500
Pollution Control Series X............................ 21,246,250 21,246,250
Secured Medium-Term Notes, Series D................... 201,150,000 201,150,000
Pollution Control Series Y............................ 28,819,000 28,819,000
Pollution Control Series Z............................ 66,642,500 66,642,500
Pollution Control Series AA........................... 28,750,000 28,750,000
Pollution Control Series AB........................... 28,750,000 28,750,000
Pollution Control Series AC........................... 70,397,250 70,397,250
Pollution Control Series AD........................... 57,500,000 57,500,000
</TABLE>
<PAGE>
5
which bonds are also hereinafter sometimes called bonds of the First through
Ninety-first Series, respectively; and
WHEREAS, Section 2.01 of the Original Indenture provides that the form of
each series of bonds (other than the First Series) issued thereunder and of the
coupons to be attached to coupon bonds of such series shall be established by
Resolution of the Board of Directors of the Company, and that the form of such
series, as established by said Board of Directors, shall specify the descriptive
title of the bonds and various other terms thereof, and may also have such
omissions or modifications or contain such provisions not prohibited by the
provisions of the Mortgage as the Board of Directors may, in its discretion,
cause to be inserted therein expressing or referring to the terms and conditions
upon which such bonds are to be issued and/or secured under the Mortgage;
and
WHEREAS, Section 22.04 of the Original Indenture provides, among other
things, that any power, privilege or right expressly or impliedly reserved to or
in any way conferred upon the Company by any provision of the Mortgage, whether
such power, privilege or right is in any way restricted or is unrestricted, may
be in whole or in part waived or surrendered or subjected to any restriction if
at the time unrestricted, or to additional restriction if already restricted,
and the Company may enter into any further covenants, limitations, restrictions
or provisions for the benefit of any one or more series of bonds issued
thereunder, or the Company may cure any ambiguity contained therein, or in any
supplemental indenture, or may establish the terms and provisions of any series
of bonds other than the First Series, by an instrument in writing executed and
acknowledged by the Company in such manner as would be necessary to entitle a
conveyance of real estate to be recorded in all of the states in which any
property at the time subject to the Lien of the Mortgage shall be situated; and
WHEREAS, the Company now desires to create three new series of bonds and to
add to its covenants and agreements contained in the Mortgage certain other
covenants and agreements to be observed by it and to alter and amend in certain
respects the covenants and provisions contained in the Mortgage; and
WHEREAS, the execution and delivery by the Company of this Fifty-seventh
Supplemental Indenture, and the terms of the bonds of the Ninety-second, Ninety-
third and Ninety-fourth Series, hereinafter referred to, have been duly
authorized by the Board of Directors of the Company by appropriate resolutions
of said Board of Directors;
NOW, THEREFORE, THIS INDENTURE WITNESSETH: That the Company, in
consideration of the premises and of Ten Dollars to it duly paid by the Trustee
at or before the ensealing and delivery of these presents, the receipt whereof
is hereby acknowledged, and in order to secure the payment of both the principal
of and interest and premium, if any, on the bonds from time to time issued under
the Mortgage, according to their tenor and effect and the performance of all the
provisions of the Mortgage (including any instruments supplemental thereto and
any modification made as in the Mortgage provided) and of said bonds, hath
granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged,
hypothecated, affected, pledged, set over and confirmed and
<PAGE>
6
granted a security interest in and by these presents doth grant, bargain, sell,
release, convey, assign, transfer, mortgage, hypothecate, affect, pledge, set
over and confirm and grant a security interest in (subject, however, to Excepted
Encumbrances as defined in Section 1.06 of the Original Indenture) unto The Bank
of New York, Trustee under the Mortgage, and to its successor or successors in
said trust, and to said Trustee and its successors and assigns forever, all
properties of the Company, real, personal and mixed, of the kind or nature
specifically mentioned in the Original Indenture, as heretofore supplemented, or
of any other kind or nature acquired by the Company on or after the date of the
execution and delivery of the Original Indenture (except any herein or in the
Original Indenture expressly excepted), now owned or, subject to the provisions
of Section 18.03 of the Original Indenture, hereafter acquired by the Company
(by purchase, consolidation, merger, donation, construction, erection or in any
other way) and wheresoever situated, including (without in anywise limiting or
impairing by the enumeration of the same, the scope and intent of the foregoing
or of any general description contained in this Fifty-seventh Supplemental
Indenture) all real estate, lands, easements, servitudes, licenses, permits,
franchises, privileges, rights of way and other rights in or relating to real
estate or the occupancy of the same; all power sites, flowage rights, water
rights, water locations, water appropriations, ditches, flumes, reservoirs,
reservoir sites, canals, raceways, waterways, dams, dam sites, aqueducts, and
all other rights or means for appropriating, conveying, storing and supplying
water; all rights of way and roads; all plants for the generation of electricity
by steam, water and/or other power; all power houses, gas plants, street
lighting systems, standards and other equipment incidental thereto; all
telephone, radio and television systems, air-conditioning systems and equipment
incidental thereto, water wheels, water works, water systems, steam heat and hot
water plants, substations, lines, service and supply systems, bridges, culverts,
tracks, ice or refrigeration plants and equipment, offices, buildings and other
structures and the equipment thereof; all machinery, engines, boilers, dynamos,
turbines, electric, gas and other machines, prime movers, regulators, meters,
transformers, generators (including, but not limited to, engine driven
generators and turbo-generator units), motors, electrical, gas and mechanical
appliances, conduits, cables, water, steam heat, gas or other pipes, gas mains
and pipes, service pipes, fittings, valves and connections, pole and
transmission lines, towers, overhead conductors and devices, underground
conduits, underground conductors and devices, wires, cables, tools, implements,
apparatus, storage battery equipment, and all other fixtures and personalty; all
municipal and other franchises, consents or permits; all lines for the
transmission and distribution of electric current, gas, steam heat or water for
any purpose including towers, poles, wires, cables, pipes, conduits, ducts and
all apparatus for use in connection therewith and (except as herein or in the
Original Indenture expressly excepted) all the right, title and interest of the
Company in and to all other property of any kind or nature appertaining to
and/or used and/or occupied and/or enjoyed in connection with any property
hereinbefore or in the Original Indenture described.
TOGETHER WITH all and singular the tenements, hereditaments, prescriptions,
servitudes and appurtenances belonging or in anywise appertaining to the
aforesaid property or any part thereof, with the reversion and reversions,
remainder and remainders and (subject to the provisions of Section 13.01 of the
Original Indenture) the tolls, rents,
<PAGE>
7
revenues, issues, earnings, income, product and profits thereof, and all the
estate, right, title and interest and claim whatsoever, at law as well as in
equity, which the Company now has or may hereafter acquire in and to the
aforesaid property and franchises and every part and parcel thereof.
IT IS HEREBY AGREED by the Company that, subject to the provisions of
Section 18.03 of the Original Indenture, all the property, rights and franchises
acquired by the Company (by purchase, consolidation, merger, donation,
construction, erection or in any other way) after the date hereof, except any
herein or in the Original Indenture expressly excepted, shall be and are as
fully granted and conveyed hereby and as fully embraced within the Lien of the
Original Indenture and the Lien hereof as if such property, rights and
franchises were now owned by the Company and were specifically described herein
and conveyed hereby.
PROVIDED that the following are not and are not intended to be now or
hereafter granted, bargained, sold, released, conveyed, assigned, transferred,
mortgaged, hypothecated, affected, pledged, set over or confirmed hereunder, nor
is a security interest therein hereby or by the Original Indenture, as
heretofore supplemented, granted or intended to be granted, and the same are
hereby expressly excepted from the Lien and operation of the Original Indenture,
as heretofore supplemented, and from the Lien and operation of this Fifty-
seventh Supplemental Indenture, viz.: (1) cash, shares of stock, bonds, notes
and other obligations and other securities not hereinbefore or hereafter
specifically pledged, paid, deposited, delivered or held under the Mortgage or
covenanted so to be; (2) merchandise, equipment, apparatus, materials or
supplies held for the purpose of sale or other disposition in the usual course
of business or for the purpose of repairing or replacing (in whole or in part)
any rolling stock, buses, motor coaches, automobiles or other vehicles or
aircraft or boats, ships, or other vessels and any fuel, oil and similar
materials and supplies consumable in the operation of any of the properties of
the Company; rolling stock, buses, motor coaches, automobiles and other vehicles
and all aircraft; boats, ships and other vessels; all timber, minerals, mineral
rights and royalties; (3) bills, notes and other instruments and accounts
receivable, judgments, demands, general intangibles and choses in action, and
all contracts, leases and operating agreements not specifically pledged
hereunder or under the Mortgage or covenanted so to be; (4) the last day of the
term of any lease or leasehold which may hereafter become subject to the Lien of
the Mortgage; (5) electric energy, gas, water, steam, ice, and other materials
or products generated, manufactured, produced, or purchased by the Company for
sale, distribution or use in the ordinary course of its business; (6) any
natural gas wells or natural gas leases or natural gas transportation lines or
other works or property used primarily and principally in the production of
natural gas or its transportation, primarily for the purpose of sale to natural
gas customers or to a natural gas distribution or pipeline company, up to the
point of connection with any distribution system; and (7) the Company's
franchise to be a corporation; provided, however, that the property and rights
expressly excepted from the Lien and operation of the Original Indenture and
this Fifty-seventh Supplemental Indenture in the above subdivisions (2) and (3)
shall (to the extent permitted by law) cease to be so excepted in the event and
as of the date that the Trustee or a receiver or trustee shall enter upon and
take possession of the Mortgaged and Pledged
<PAGE>
8
Property in the manner provided in Article XV of the Original Indenture by
reason of the occurrence of a Default.
TO HAVE AND TO HOLD all such properties, real, personal and mixed, granted,
bargained, sold, released, conveyed, assigned, transferred, mortgaged,
hypothecated, affected, pledged, set over or confirmed or in which a security
interest has been granted by the Company as aforesaid, or intended so to be
(subject, however, to Excepted Encumbrances as defined in Section 1.06 of the
Original Indenture), unto The Bank of New York, Trustee, and its successors and
assigns forever.
IN TRUST NEVERTHELESS, for the same purposes and upon the same terms,
trusts and conditions and subject to and with the same provisos and covenants as
are set forth in the Original Indenture, as heretofore supplemented, this Fifty-
seventh Supplemental Indenture being supplemental to the Original Indenture.
AND IT IS HEREBY COVENANTED by the Company that all the terms, conditions,
provisos, covenants and provisions contained in the Original Indenture, as
heretofore supplemented, shall affect and apply to the property hereinbefore
described and conveyed and to the estate, rights, obligations and duties of the
Company and the Trustee and the beneficiaries of the trust with respect to said
property, and to the Trustee and its successors as Trustee of said property, in
the same manner and with the same effect as if said property had been owned by
the Company at the time of the execution of the Original Indenture, and had been
specifically and at length described in and conveyed to said Trustee by the
Original Indenture as a part of the property therein stated to be conveyed.
The Company further covenants and agrees to and with the Trustee and its
successors in said trust under the Mortgage, as follows:
ARTICLE I
NINETY-SECOND SERIES OF BONDS
SECTION 1. There shall be a series of bonds designated "Pollution Control
Series AE" (herein sometimes referred to as the "Ninety-second Series"), each of
which shall also bear the descriptive title "First Mortgage Bond", and the form
thereof, which shall be established in accordance with a Resolution of the Board
of Directors of the Company, shall contain suitable provisions with respect to
the matters hereinafter in this Section specified. Bonds of the Ninety-second
Series shall mature on February 1, 2032, shall not bear interest and shall be
issued as fully registered bonds in denominations of Two Hundred Fifty Dollars
and, at the option of the Company, in any multiple or multiples thereof (the
exercise of such option to be evidenced by the execution and delivery thereof);
the principal of each said bond to be payable at the office or agency of the
Company in the Borough of Manhattan, The City of New York, New York, or at the
office or agency of the Company in the City of Dallas, Texas, as the holder of
any said bond may elect, in such coin or currency of the United States of
America as at the time of payment is legal
<PAGE>
9
tender for public and private debts. Bonds of the Ninety-second Series shall be
dated as in Section 2.03 of the Original Indenture provided.
(I) The bonds of the Ninety-second Series shall be initially issued in the
aggregate principal amount of $57,500,000 to, and registered in the name of, the
trustee under the Trust Indenture, dated as of February 1, 1997 (hereinafter
sometimes called the "1997A, 1997B and 1997C Brazos Bond Indenture"), of the
Brazos River Authority (hereinafter sometimes called the "Brazos Authority"),
under which its Collateralized Pollution Control Revenue Refunding Bonds (Texas
Utilities Electric Company Project) Series 1997A (hereinafter sometimes called
the "Series 1997A Brazos Revenue Bonds") are to be issued, in order to provide
the benefit of a lien to secure the obligation of the Company to make the
Installment Payments and Purchase Price payments pursuant to, and as such terms
are defined in, the Series 1997A Installment Sale and Bond Amortization
Agreement, dated as of February 1, 1997 (hereinafter sometimes called the "1997A
Brazos Agreement"), between the Brazos Authority and the Company.
The Company shall receive a credit against its obligation to make any
payment of the principal of the bonds of the Ninety-second Series, whether at
maturity, upon redemption or otherwise, in an amount equal to 115% of the sum of
(a) the amount, if any, on deposit in the Debt Service Fund maintained under the
1997A, 1997B and 1997C Brazos Bond Indenture which reduces the corresponding
Installment Payment and (b) the amount, if any, paid by the Company pursuant to
Section 5.04 of the 1997A Brazos Agreement in respect of the corresponding
Installment Payment.
The Trustee may conclusively presume that the obligation of the Company to
pay the principal of the bonds of the Ninety-second Series as the same shall
become due and payable shall have been fully satisfied and discharged unless and
until it shall have received a written notice from the trustee under the 1997A,
1997B and 1997C Brazos Bond Indenture, signed by the President, a Vice President
or a Trust Officer of such trustee, stating that the corresponding Installment
Payment or Purchase Price payment has become due and payable and has not been
fully paid and specifying the amount of funds required to make such payment.
(II) In the event that any Series 1997A Brazos Revenue Bonds outstanding
under the 1997A, 1997B and 1997C Brazos Bond Indenture shall become immediately
due and payable pursuant to Section 6.02 of the 1997A, 1997B and 1997C Brazos
Bond Indenture, upon the occurrence of an Event of Default under Section 6.01(a)
of the 1997A, 1997B and 1997C Brazos Bond Indenture, all bonds of the Ninety-
second Series, then Outstanding, shall be redeemed by the Company, on the date
such Series 1997A Brazos Revenue Bonds shall have become immediately due and
payable, at the principal amount thereof.
The Trustee may conclusively presume that no redemption of bonds of the
Ninety-second Series is required pursuant to the first paragraph of this
subsection (II) unless and until it shall have received a written notice from
the trustee under the 1997A, 1997B and 1997C Brazos Bond Indenture, signed by
the President, a Vice President or a Trust Officer
<PAGE>
10
of such trustee, stating that Series 1997A Brazos Revenue Bonds have become
immediately due and payable pursuant to Section 6.02 of the 1997A, 1997B and
1997C Brazos Bond Indenture, upon the occurrence of an Event of Default under
Section 6.01(a) of the 1997A, 1997B and 1997C Brazos Bond Indenture and
specifying the principal amount thereof. Said notice shall also contain a waiver
of notice of such redemption by the trustee under the 1997A, 1997B and 1997C
Brazos Bond Indenture, as the holder of all bonds of the Ninety-second Series
then Outstanding.
(III) The Company hereby waives its right to have any notice of redemption
pursuant to subsection (II) of this Section 1 state that such notice is subject
to the receipt of the redemption moneys by the Trustee on or before the date
fixed for redemption. Notwithstanding the provisions of Section 12.02 of the
Mortgage, any such notice under such subsection shall not be conditional.
(IV) At the option of the registered owner, any bonds of the Ninety-second
Series, upon surrender thereof for cancellation at the office or agency of the
Company in the Borough of Manhattan, The City of New York, New York, shall be
exchangeable for a like aggregate principal amount of bonds of the same series
of other authorized denominations.
Bonds of the Ninety-second Series shall not be transferrable except to any
successor trustee under the 1997A, 1997B and 1997C Brazos Bond Indenture, any
such transfer to be made at the office or agency of the Company in the Borough
of Manhattan, The City of New York, New York.
The Company hereby waives any right to make a charge for any exchange or
transfer of bonds of the Ninety-second Series.
ARTICLE II
NINETY-THIRD SERIES OF BONDS
SECTION 2. There shall be a series of bonds designated "Pollution Control
Series AF" (herein sometimes referred to as the "Ninety-third Series"), each of
which shall also bear the descriptive title "First Mortgage Bond", and the form
thereof, which shall be established in accordance with a Resolution of the Board
of Directors of the Company, shall contain suitable provisions with respect to
the matters hereinafter in this Section specified. Bonds of the Ninety-third
Series shall mature on February 1, 2032, shall not bear interest and shall be
issued as fully registered bonds in denominations of Two Hundred Fifty Dollars
and, at the option of the Company, in any multiple or multiples thereof (the
exercise of such option to be evidenced by the execution and delivery thereof);
the principal of each said bond to be payable at the office or agency of the
Company in the Borough of Manhattan, The City of New York, New York, or at the
office or agency of the Company in the City of Dallas, Texas, as the holder of
any said bond may elect, in
<PAGE>
11
such coin or currency of the United States of America as at the time of payment
is legal tender for public and private debts. Bonds of the Ninety-third Series
shall be dated as in Section 2.03 of the Original Indenture provided.
(I) The bonds of the Ninety-third Series shall be initially issued in the
aggregate principal amount of $36,000,750 to, and registered in the name of, the
trustee under the 1997A, 1997B and 1997C Brazos Bond Indenture, under which the
Brazos Authority's Collateralized Pollution Control Revenue Refunding Bonds
(Texas Utilities Electric Company Project) Series 1997B (hereinafter sometimes
called the "Series 1997B Brazos Revenue Bonds") are to be issued, in order to
provide the benefit of a lien to secure the obligation of the Company to make
the Installment Payments and Purchase Price payments pursuant to, and as such
terms are defined in, the Series 1997B Installment Sale and Bond Amortization
Agreement, dated as of February 1, 1997 (hereinafter sometimes called the "1997B
Brazos Agreement"), between the Brazos Authority and the Company.
The Company shall receive a credit against its obligation to make any
payment of the principal of the bonds of the Ninety-third Series, whether at
maturity, upon redemption or otherwise, in an amount equal to 115% of the sum of
(a) the amount, if any, on deposit in the Debt Service Fund maintained under the
1997A, 1997B and 1997C Brazos Bond Indenture which reduces the corresponding
Installment Payment and (b) the amount, if any, paid by the Company pursuant to
Section 5.04 of the 1997B Brazos Agreement in respect of the corresponding
Installment Payment.
The Trustee may conclusively presume that the obligation of the Company to
pay the principal of the bonds of the Ninety-third Series as the same shall
become due and payable shall have been fully satisfied and discharged unless and
until it shall have received a written notice from the trustee under the 1997A,
1997B and 1997C Brazos Bond Indenture, signed by the President, a Vice President
or a Trust Officer of such trustee, stating that the corresponding Installment
Payment or Purchase Price payment has become due and payable and has not been
fully paid and specifying the amount of funds required to make such payment.
(II) In the event that any Series 1997B Brazos Revenue Bonds outstanding
under the 1997A, 1997B and 1997C Brazos Bond Indenture shall become immediately
due and payable pursuant to Section 6.02 of the 1997A, 1997B and 1997C Brazos
Bond Indenture, upon the occurrence of an Event of Default under Section 6.01(a)
of the 1997A, 1997B and 1997C Brazos Bond Indenture, all bonds of the Ninety-
third Series, then Outstanding, shall be redeemed by the Company, on the date
such Series 1997B Brazos Revenue Bonds shall have become immediately due and
payable, at the principal amount thereof.
The Trustee may conclusively presume that no redemption of bonds of the
Ninety-third Series is required pursuant to the first paragraph of this
subsection (II) unless and until it shall have received a written notice from
the trustee under the 1997A, 1997B and 1997C Brazos Bond Indenture, signed by
the President, a Vice President or a Trust Officer of such trustee, stating that
Series 1997B Brazos Revenue Bonds have become immediately due and payable
pursuant to Section 6.02 of the 1997A, 1997B and 1997C Brazos Bond
<PAGE>
12
Indenture, upon the occurrence of an Event of Default under Section 6.01(a) of
the 1997A, 1997B and 1997C Brazos Bond Indenture and specifying the principal
amount thereof. Said notice shall also contain a waiver of notice of such
redemption by the trustee under the 1997A, 1997B and 1997C Brazos Bond
Indenture, as the holder of all bonds of the Ninety-third Series then
Outstanding.
(III) The Company hereby waives its right to have any notice of redemption
pursuant to subsection (II) of this Section 2 state that such notice is subject
to the receipt of the redemption moneys by the Trustee on or before the date
fixed for redemption. Notwithstanding the provisions of Section 12.02 of the
Mortgage, any such notice under such subsection shall not be conditional.
(IV) At the option of the registered owner, any bonds of the Ninety-third
Series, upon surrender thereof for cancellation at the office or agency of the
Company in the Borough of Manhattan, The City of New York, New York, shall be
exchangeable for a like aggregate principal amount of bonds of the same series
of other authorized denominations.
Bonds of the Ninety-third Series shall not be transferrable except to any
successor trustee under the 1997A, 1997B and 1997C Brazos Bond Indenture, any
such transfer to be made at the office or agency of the Company in the Borough
of Manhattan, The City of New York, New York.
The Company hereby waives any right to make a charge for any exchange or
transfer of bonds of the Ninety-third Series.
ARTICLE III
NINETY-FOURTH SERIES OF BONDS
SECTION 3. There shall be a series of bonds designated "Pollution Control
Series AG" (herein sometimes referred to as the "Ninety-fourth Series"), each of
which shall also bear the descriptive title "First Mortgage Bond", and the form
thereof, which shall be established in accordance with a Resolution of the Board
of Directors of the Company, shall contain suitable provisions with respect to
the matters hereinafter in this Section specified. Bonds of the Ninety-fourth
Series shall mature on February 1, 2032, shall not bear interest and shall be
issued as fully registered bonds in denominations of Two Hundred Fifty Dollars
and, at the option of the Company, in any multiple or multiples thereof (the
exercise of such option to be evidenced by the execution and delivery thereof);
the principal of each said bond to be payable at the office or agency of the
Company in the Borough of Manhattan, The City of New York, New York, or at the
office or agency of the Company in the City of Dallas, Texas, as the holder of
any said bond may elect, in such coin or currency of the United States of
America as at the time of payment is legal
<PAGE>
13
tender for public and private debts. Bonds of the Ninety-fourth Series shall be
dated as in Section 2.03 of the Original Indenture provided.
(I) The bonds of the Ninety-fourth Series shall be initially issued in the
aggregate principal amount of $28,801,750 to, and registered in the name of, the
trustee under the 1997A, 1997B and 1997C Brazos Bond Indenture, under which the
Brazos Authority's Collateralized Pollution Control Revenue Refunding Bonds
(Texas Utilities Electric Company Project) Series 1997C (hereinafter sometimes
called the "Series 1997C Brazos Revenue Bonds") are to be issued, in order to
provide the benefit of a lien to secure the obligation of the Company to make
the Installment Payments and Purchase Price payments pursuant to, and as such
terms are defined in, the Series 1997C Installment Sale and Bond Amortization
Agreement, dated as of February 1, 1997 (hereinafter sometimes called the "1997C
Brazos Agreement"), between the Brazos Authority and the Company.
The Company shall receive a credit against its obligation to make any
payment of the principal of the bonds of the Ninety-fourth Series, whether at
maturity, upon redemption or otherwise, in an amount equal to 115% of the sum of
(a) the amount, if any, on deposit in the Debt Service Fund maintained under the
1997A, 1997B and 1997C Brazos Bond Indenture which reduces the corresponding
Installment Payment and (b) the amount, if any, paid by the Company pursuant to
Section 5.04 of the 1997C Brazos Agreement in respect of the corresponding
Installment Payment.
The Trustee may conclusively presume that the obligation of the Company to
pay the principal of the bonds of the Ninety-fourth Series as the same shall
become due and payable shall have been fully satisfied and discharged unless and
until it shall have received a written notice from the trustee under the 1997A,
1997B and 1997C Brazos Bond Indenture, signed by the President, a Vice President
or a Trust Officer of such trustee, stating that the corresponding Installment
Payment or Purchase Price payment has become due and payable and has not been
fully paid and specifying the amount of funds required to make such payment.
(II) In the event that any Series 1997C Brazos Revenue Bonds outstanding
under the 1997A, 1997B and 1997C Brazos Bond Indenture shall become immediately
due and payable pursuant to Section 6.02 of the 1997A, 1997B and 1997C Brazos
Bond Indenture, upon the occurrence of an Event of Default under Section 6.01(a)
of the 1997A, 1997B and 1997C Brazos Bond Indenture, all bonds of the Ninety-
fourth Series, then Outstanding, shall be redeemed by the Company, on the date
such Series 1997C Brazos Revenue Bonds shall have become immediately due and
payable, at the principal amount thereof.
The Trustee may conclusively presume that no redemption of bonds of the
Ninety-fourth Series is required pursuant to the first paragraph of this
subsection (II) unless and until it shall have received a written notice from
the trustee under the 1997A, 1997B and 1997C Brazos Bond Indenture, signed by
the President, a Vice President or a Trust Officer of such trustee, stating that
Series 1997C Brazos Revenue Bonds have become immediately due and payable
pursuant to Section 6.02 of the 1997A, 1997B and 1997C Brazos Bond
<PAGE>
14
Indenture, upon the occurrence of an Event of Default under Section 6.01(a) of
the 1997A, 1997B and 1997C Brazos Bond Indenture and specifying the principal
amount thereof. Said notice shall also contain a waiver of notice of such
redemption by the trustee under the 1997A, 1997B and 1997C Brazos Bond
Indenture, as the holder of all bonds of the Ninety-fourth Series then
Outstanding.
(III) The Company hereby waives its right to have any notice of redemption
pursuant to subsection (II) of this Section 3 state that such notice is subject
to the receipt of the redemption moneys by the Trustee on or before the date
fixed for redemption. Notwithstanding the provisions of Section 12.02 of the
Mortgage, any such notice under such subsection shall not be conditional.
(IV) At the option of the registered owner, any bonds of the Ninety-fourth
Series, upon surrender thereof for cancellation at the office or agency of the
Company in the Borough of Manhattan, The City of New York, New York, shall be
exchangeable for a like aggregate principal amount of bonds of the same series
of other authorized denominations.
Bonds of the Ninety-fourth Series shall not be transferrable except to any
successor trustee under the 1997A, 1997B and 1997C Brazos Bond Indenture, any
such transfer to be made at the office or agency of the Company in the Borough
of Manhattan, The City of New York, New York.
The Company hereby waives any right to make a charge for any exchange or
transfer of bonds of the Ninety-fourth Series.
ARTICLE IV
MISCELLANEOUS PROVISIONS
SECTION 4. Subject to the amendments provided for in this Fifty-seventh
Supplemental Indenture, the terms defined in the Original Indenture, as
heretofore supplemented, shall for all purposes of this Fifty-seventh
Supplemental Indenture have the meanings specified in the Original Indenture, as
heretofore supplemented.
SECTION 5. The Trustee hereby accepts the trusts herein declared,
provided, created or supplemented and agrees to perform the same upon the terms
and conditions herein and in the Original Indenture, as heretofore supplemented,
set forth and upon the following terms and conditions:
The Trustee shall not be responsible in any manner whatsoever for or in
respect of the validity or sufficiency of this Fifty-seventh Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made by the Company
<PAGE>
15
solely. In general, each and every term and condition contained in Article XIX
of the Original Indenture shall apply to and form part of this Fifty-seventh
Supplemental Indenture with the same force and effect as if the same were herein
set forth in full with such omissions, variations and insertions, if any, as may
be appropriate to make the same conform to the provisions of this Fifty-seventh
Supplemental Indenture.
SECTION 6. Whenever in this Fifty-seventh Supplemental Indenture either of
the parties hereto is named or referred to, this shall, subject to the
provisions of Articles XVIII and XIX of the Original Indenture, be deemed to
include the successors and assigns of such party, and all the covenants and
agreements in this Fifty-seventh Supplemental Indenture contained, by or on
behalf of the Company, or by or on behalf of the Trustee, shall, subject as
aforesaid, bind and inure to the respective benefits of the respective
successors and assigns of such parties, whether so expressed or not.
SECTION 7. Nothing in this Fifty-seventh Supplemental Indenture expressed
or implied, is intended, or shall be construed to confer upon, or to give to,
any person, firm or corporation, other than the parties hereto and the holders
of the bonds and coupons Outstanding under the Mortgage, any right, remedy or
claim under or by reason of this Fifty-seventh Supplemental Indenture or any
covenant, condition, stipulation, promise or agreement hereof, and all the
covenants, conditions, stipulations, promises and agreements in this Fifty-
seventh Supplemental Indenture contained, by or on behalf of the Company, shall
be for the sole and exclusive benefit of the parties hereto, and of the holders
of the bonds and coupons Outstanding under the Mortgage.
SECTION 8. This Fifty-seventh Supplemental Indenture shall be executed in
several counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
<PAGE>
16
IN WITNESS WHEREOF, TEXAS UTILITIES ELECTRIC COMPANY has caused its
corporate name to be hereunto affixed, and this instrument to be signed and
sealed by its Chairman of the Board and Chief Executive, President or one of its
Vice Presidents, and its corporate seal to be attested by its Secretary or one
of its Assistant Secretaries for and in its behalf, and THE BANK OF NEW YORK has
caused its corporate name to be hereunto affixed, and this instrument to be
signed and sealed by one of its Vice Presidents or Assistant Vice Presidents and
its corporate seal to be attested by one of its Assistant Vice Presidents,
Assistant Secretaries or Assistant Treasurers, all as of the day and year first
above written.
TEXAS UTILITIES ELECTRIC COMPANY
By /s/ RON SEIDEL
------------------------------
RON SEIDEL
Vice President
Attest:
/s/ GLEN H. HIBBS [CORPORATE SEAL]
- --------------------------------------------
GLEN H. HIBBS
Assistant Secretary
Executed, sealed and delivered by
TEXAS UTILITIES ELECTRIC COMPANY
in the presence of:
/s/ W. E. PATTERSON
------------------------------------------
/s/ JUSTUS B. RHODES
-------------------------------------------
<PAGE>
17
THE BANK OF NEW YORK,
Trustee
By /s/ W. N. GITLIN
--------------------------
W. N. GITLIN
Vice President
Attest:
/s/ STEPHEN J. GIURLANDO [CORPORATE SEAL]
- ------------------------------------
STEPHEN J. GIURLANDO
Assistant Vice President
Executed, sealed and delivered by
THE BANK OF NEW YORK
in the presence of:
/s/ KATHLEEN BOYLE
- ----------------------------------------
/s/ JASON G. GREGORY
- ----------------------------------------
<PAGE>
18
STATE OF TEXAS )
) SS.:
COUNTY OF DALLAS )
Before me, a Notary Public in and for said State, on this day personally
appeared RON SEIDEL, known to me to be the person whose name is subscribed to
the foregoing instrument and known to me to be a Vice President of TEXAS
UTILITIES ELECTRIC COMPANY, a Texas corporation, and acknowledged to me that
said person executed said instrument for the purposes and consideration therein
expressed, and as the act of said corporation.
Given under my hand and seal of office this ____ day of February, 1997.
[NOTARIAL SEAL] /s/ LENAE B. DAVIS
----------------------------------------
LENAE B. DAVIS
Notary Public, State of Texas
My Commission Expires June 23, 2000
<PAGE>
19
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
Before me, a Notary Public in and for said State, on this day personally
appeared W.N. GITLIN, known to me to be the person whose name is subscribed to
the foregoing instrument and known to me to be a Vice President of THE BANK OF
NEW YORK, a New York corporation, and acknowledged to me that said person
executed said instrument for the purposes and consideration therein expressed,
and as the act of said corporation.
Given under my hand and seal of office this _____ day of February, 1997.
[NOTARIAL SEAL] /s/ WILLIAM J. CASSELS
------------------------------------
WILLIAM J. CASSELS
Notary Public, State of New York
No. 01CA5027729
Qualified in Bronx County
Certificate filed in New York County
Commission Expires May 16, 1998
<PAGE>
20
SUMMARY OF RECORDING DATA
Fifty-seventh Supplemental Indenture
Filed February 13, 1997
Office of the Secretary of the State of Texas,
Utility Security Instrument File No. 83-281286
<PAGE>
Exhibit 4(b)(1)
March 12, 1997
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Texas Utilities Company
1996 Annual Report on Form 10-K
-------------------------------
Gentlemen:
Pursuant to the exemption afforded by Item 601(b)(4)(iii)(A) of Regulation
S-K, Texas Utilities Company (Company) is not filing as exhibits to its Annual
Report on Form 10-K for 1996 instruments with respect to its long-term debt of
the Company and/or its subsidiaries. These instruments include (i) agreements
with respect to pollution control revenue bonds and (ii) agreements with respect
to senior notes. Each item of long-term debt referenced above does not exceed
10% of the total assets of the Company and its subsidiaries on a consolidated
basis. Reference is made to Note 8 to Consolidated Financial Statements (Item 8
of the Company's Annual Report on Form 10-K for 1996).
The Company agrees to furnish a copy of the above instruments to the
Securities and Exchange Commission upon request.
Sincerely,
/s/ Peter B. Tinkham
---------------------------------
Peter B. Tinkham
Treasurer and Assistant Secretary
and Principal Financial Officer
PBT:tr
<PAGE>
Exhibit 4(b)(2)
March 12, 1997
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Texas Utilities Electric Company
1996 Annual Report on Form 10-K
-------------------------------
Gentlemen:
Pursuant to the exemption afforded by Item 601(b)(4)(iii)(A) of Regulation
S-K, Texas Utilities Electric Company (Company) is not filing as exhibits to its
Annual Report on Form 10-K for 1996 instruments with respect to its long-term
debt consisting of pollution control revenue bonds, as the aggregate amounts
represented thereby do not exceed 10% of the total assets of the Company and its
subsidiaries on a consolidated basis. Reference is made to Note 8 to
Consolidated Financial Statements (Item 8 of the Company's Annual Report on Form
10-K for 1996).
The Company agrees to furnish a copy of the above instruments to the
Securities and Exchange Commission upon request.
Sincerely,
/s/ Robert S. Shapard
---------------------------------
Robert S. Shapard
Treasurer and Assistant Secretary
and Principal Financial Officer
RSS:tr
<PAGE>
Exhibit 4(j)
TEXAS UTILITIES ELECTRIC COMPANY
OFFICER'S CERTIFICATE
Cathryn Hulen, the Treasurer of Texas Utilities Electric Company (the
"Company"), pursuant to the authority granted in the Board Resolutions of the
Company dated October 17, 1995, 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 Subordinated Debt
Securities relating to Trust Securities) dated as of December 1, 1995 (the
"Indenture") that:
1. The securities of the first series to be issued under the Indenture
shall be designated "8.25% Junior Subordinated Debentures, Series A,
due September 30, 2030" (the "Debentures of the First Series"). The
Debentures of the First Series are to be issued to TU Electric Capital
I, a Delaware statutory business trust (the "Trust"). 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 $154,869,150 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 September 30, 2030;
4. The Debentures of the First Series shall bear interest from, and
including, the date of original issuance, at the rate of 8.25% per
annum payable quarterly in arrears on March 31, June 30, September 30
and December 31 of each year (each, an "Interest Payment Date")
commencing December 31, 1995. 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 and on the basis of the actual number of days elapsed
within any month in relation to the deemed 30 days of such month.
Interest on the Debentures of the First Series will accrue from, and
including, the date of original issuance but if interest has been paid
on such Debentures of the First Series, then from, and excluding, the
most recent Interest Payment Date through 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),
except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such
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 15 days
preceding the corresponding Interest Payment Date (the
<PAGE>
"Regular Record Date") for the Debentures of the First Series;
provided, however, that if the Debentures of the First Series are held
neither by the Trust nor by a
<PAGE>
securities depositary, the Company shall have the right to change the
Regular Record Date by one or more Officer's Certificates. Any
installment of interest on the Debentures of the First Series not
punctually paid or duly provided for shall forthwith cease to be
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, 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 Trustee
will initially be the agency of the Company for such service of
notices and demands; provided, however, that the Company reserves the
right to change, by one or more Officer's Certificates any such office
or agency. 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 on or after
November 1, 2001 at the option of the Company, at any time and from
time to time in whole or in part, at a redemption price equal to 100%
of the principal amount of the Debentures of the First Series being
redeemed, together with any accrued interest, including Additional
Interest, if any, to the redemption date, upon not less than 30 nor
more than 60 days' notice given as provided in the Indenture. The
Company, however, may not redeem less than all Outstanding Debentures
of the First Series unless the conditions specified in the last
paragraph of this item are met;
The Debentures of the First Series will also be redeemable at the
option of the Company if a Tax Event shall occur and be continuing and
the circumstance described in the penultimate sentence of Section
9.04(d) of the Amended and Restated Trust Agreement relating to the
Trust shall apply, in whole or in part, at a redemption price plus
accrued and unpaid distributions equal to 100% of the principal amount
of the Debentures of the First Series then Outstanding plus any
accrued and unpaid interest, including Additional Interest, if any, to
the redemption date, upon not less than 30 nor more than 60 days'
notice given as provided in the Indenture. "Tax Event" means the
receipt by the Trust of an opinion of nationally recognized
independent tax counsel experienced in such matters to the effect
that, as a result of (a) any amendment to, clarification of, or change
(including any announced prospective change) in, the laws
-3-
<PAGE>
or treaties (or any regulations thereunder) of the United States or
any political subdivision or taxing authority thereof or therein
affecting taxation, (b) any judicial decision or any official
administrative pronouncement, ruling, regulatory procedure, notice or
announcement (including any notice or announcement of intent to issue
or adopt any such administrative pronouncement, ruling, regulatory
procedure or regulation) (each, for purposes of this definition, an
"Administrative Action"), or (c) any amendment to, clarification of,
or change in the official position or the interpretation of any such
Administrative Action or judicial decision or any interpretation or
pronouncement that provides for a position with respect to such
Administrative Action or judicial decision that differs from the
theretofore generally accepted position, in each case by the
legislative body, court, governmental authority or regulatory body,
irrespective of the manner in which such amendment, clarification or
change is made known, which amendment, clarification, or change is
effective, which Administrative Action is taken or which judicial
decision is issued, in each case on or after December 12, 1995, there
is more than an insubstantial risk that (i) the Trust is, or will be,
subject to United States federal income tax with respect to interest
received on the Debentures, (ii) interest payable by the Company on
the Debentures is not, or will not be, fully deductible by the Company
for United States federal income tax purposes, or (iii) the Trust is,
or will be, subject to more than a de minimis amount of other taxes,
duties or other governmental charges;
The Company may not redeem less than all the Debentures of the First
Series unless all accrued and unpaid interest (including any
Additional Interest) has been paid in full on all Debentures
Outstanding under the Indenture for all quarterly interest periods
terminating on or prior to the date of redemption or if a partial
redemption of 8.25% Trust Originated Preferred Securities would result
in a delisting of such securities by any national securities exchange
on which they are then listed.
8. So long as any Debentures of the First Series are Outstanding, the
failure of the Company to pay interest on any Debentures of the First
Series within 30 days after the same becomes due and payable (whether
or not payment is prohibited by the provisions of Article Fifteen of
the Indenture) shall constitute an Event of Default; provided,
however, that a valid extension of the interest payment period by the
Company as contemplated in Section 311 of the Indenture and paragraph
(9) of this Certificate shall not constitute a failure to pay interest
for this purpose;
9. Pursuant to Section 311 of the Indenture, the Company shall have the
right, at any time and from time to time during the term of the
Debentures of the First Series, to extend the interest payment period
to a period not exceeding 20 consecutive quarters (an "Extension
Period") during which period interest will be compounded quarterly. At
the end of the Extension Period, the Company shall pay all interest
accrued and unpaid (together with interest thereon at the rate
specified for the Debentures of the First Series, compounded
quarterly, to the extent permitted by applicable law). However, during
any such Extension Period, the Company shall not declare or pay any
dividend or distribution (other than a dividend or distribution in
common stock of the Company) on, or redeem, purchase, acquire or make
a liquidation payment with respect to, any of its capital stock,
redeem any indebtedness that is pari passu with the Debentures of the
First Series, or make any guarantee payments with respect to the
foregoing. Prior to the termination of any such Extension Period, the
Company may
-4-
<PAGE>
further extend the interest payment period, provided that such
Extension Period together with all such previous and further
extensions thereof shall not exceed 20 consecutive quarters at any one
time or extend beyond the maturity date of the Debentures of the First
Series. Upon the termination of any such Extension Period and the
payment of all amounts then due, the Company may select a new
Extension Period, subject to the above requirements. No interest shall
be due and payable during an Extension Period, except at the end
thereof. The Company will give the Trust or other Holders and the
Trustee notice of its election of an Extension Period prior to the
earlier of (i) one Business Day prior to the record date for the
distribution which would occur but for such election or (ii) the date
the Company is required to give notice to the New York Stock Exchange
or other applicable self-regulatory organization of the record date;
10. In the event that, at any time subsequent to the initial
authentication and delivery of the Debentures of the First Series, the
Debentures of the First Series are to be held by a securities
depositary, the Company may at such time establish the matters
contemplated in clause (r) in the second paragraph of Section 301 of
the Indenture in an Officer's Certificate supplemental to this
Certificate;
11. 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;
12. 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;
13. In the event that the Debentures of the First Series are distributed
to holders of 8.25% Trust Originated Preferred Securities as a result
of the occurrence of a Tax Event, the Company will use its best
efforts to list the Debentures of the First Series on the New York
Stock Exchange;
14. 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 defini tions in the Indenture relating thereto
and in respect of which this certificate is made;
15. 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;
16. In the opinion of the undersigned, he has made such examination or
investigation as is necessary to express an informed opinion whether
or not such covenants and conditions have been complied with; and
17. In the opinion of the undersigned, such conditions and covenants and
the 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 12th
day of December, 1995.
/s/ Cathryn Hulen
------------------
Cathryn Hulen
Treasurer
-6-
<PAGE>
NO._______________
CUSIP NO.__________
EXHIBIT A
[FORM OF FACE OF JUNIOR SUBORDINATED DEBENTURE]
TEXAS UTILITIES ELECTRIC COMPANY
8.25% JUNIOR SUBORDINATED DEBENTURES, SERIES A,
DUE SEPTEMBER 30, 2030
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 ____________________________________, or registered
assigns, the principal sum of ____________________ Dollars on September 30,
2030, and to pay interest on said principal sum from, and including, December
12, 1995 or from, and excluding, the most recent Interest Payment Date through
which interest has been paid or duly provided for, quarterly on March 31, June
30, September 30 and December 31 of each year, commencing December 31, 1995 at
the rate of 8.25% 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, and including, December 12, 1995
through the first Interest Payment Date, and thereafter will accrue, from, and
excluding, the last Interest Payment Date through 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), except that, if such Business Day is in the
next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on the 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 15 days 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:
____________________________
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 JUNIOR SUBORDINATED 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 December 1, 1995 (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 December 12, 1995 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 $154,869,150.
The Securities of this series are subject to redemption upon not less
than 30 nor more than 60 days' notice by mail, at any time on or after November
1, 2001 as a whole or in part, at the election of the Company, at a Redemption
Price equal to 100% of the principal amount, together in the case of any such
redemption with accrued interest to, but not including, the Redemption Date, but
interest installments whose Stated Maturity is on or prior to such Redemption
Date will be payable to the Holder of such Security, or one or more Predecessor
Securities, of record at the close of business on the related Regular Record
Date referred to on the face hereof, all as provided in the Indenture.
The Securities of this series will also be redeemable at the option of
the Company if a Tax Event shall occur and be continuing and the circumstance
described in the penultimate sentence of Section 9.04(d) of the Amended and
Restated Trust Agreement relating to TU Electric Capital I, a Delaware statutory
business trust, shall apply, in whole or in part, at a redemption price plus
accrued and unpaid distributions equal to 100% of the principal amount of the
Securities of this series then Outstanding plus any accrued and unpaid interest,
including Additional Interest, if any, to the redemption date, upon not less
than 30 nor more than 60 days' notice given as provided in the Indenture. "Tax
Event" means the receipt by the Trust of an opinion of nationally recognized
independent tax counsel experienced in such matters to the effect that, as a
result of (a) any amendment to, clarification of, or change (including any
announced prospective change) in, the laws or treaties (or any regulations
thereunder) of the United States or any political subdivision or taxing
authority thereof or therein affecting taxation, (b) any judicial decision or
any official administrative pronouncement, ruling, regulatory procedure, notice
or announcement (including any notice or announcement of intent to issue or
adopt any such administrative pronouncement, ruling, regulatory procedure or
regulation) (each, for purposes of this definition, an "Administrative Action"),
or (c) any amendment to, clarification of, or change in the official position or
the interpretation of any such Administrative Action or judicial decision or any
interpretation or pronouncement that provides for a position with respect to
such Administrative Action or judicial decision that differs from the
theretofore generally accepted position, in each case by the legislative body,
court, governmental authority or regulatory body, irrespective of the manner in
which such amendment, clarification or change is made known, which amendment,
clarification, or change is effective, which Administrative Action is taken or
which judicial decision is issued, in each case on or after December 12, 1995,
there is more than an insubstantial risk that (i) the Trust is, or will be,
subject to United States federal income tax with respect to interest received on
the Debentures, (ii) interest payable by the Company on the Debentures is not,
or will not be, fully deductible by the Company for United States federal income
tax purposes, or (iii) the Trust is, or will be, subject to more than a de
minimis amount of other taxes, duties or other governmental charges;
-3-
<PAGE>
In the event of redemption of this Security in part only, a new
Security or Securities of this series and of like tenor for the unredeemed
portion hereof will be issued in the name of the Holder hereof upon the
cancellation hereof.
The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, subordinated and subject in right of payment to the prior
payment in full of all Senior Indebtedness, and this Security is issued subject
to the provisions of the Indenture with respect thereto. Each Holder of this
Security, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to acknowledge or effectuate the
subordination so provided and (c) appoints the Trustee his attorney-in-fact for
any and all such purposes. Each Holder hereof, by his acceptance hereof, hereby
waives all notice of the acceptance of the subordination provisions contained
herein and in the Indenture by each holder of Senior Indebtedness, whether now
outstanding or hereafter incurred, and waives reliance by each such Holder upon
said provisions.
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.
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 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 compliance by the Company
with certain provisions of the Indenture and 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 not less than 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 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
-4-
<PAGE>
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 Company shall have the right at any time and from time to time
during the term of the Securities of this series to extend the interest payment
period to a period not exceeding 20 consecutive quarters (an "Extended Interest
Payment Period"), and at the end of such Extended Interest Payment Period, the
Company shall pay all interest then accrued and unpaid (together with interest
thereon at the same rate as specified for the Securities of this series,
compounded quarterly, to the extent permitted by applicable law); provided,
however, that during such Extended Interest Payment Period the Company shall not
declare or pay any dividend or distribution (other than a dividend or
distribution in common stock of the Company) on, or redeem, purchase, acquire or
make a liquidation payment with respect to, any of its capital stock, redeem any
indebtedness that is pari passu with the Securities of this series, or make any
guarantee payments with respect to the foregoing. Prior to the termination of
any such Extended Interest Payment Period, the Company may further extend the
interest payment period, provided that such Extended Interest Payment Period,
together with all such previous and further extensions thereof, may not exceed
20 consecutive quarters or extend beyond the Stated Maturity of the Securities
of this series. Upon the termination of any such Extended Interest Payment
Period and the payment of all amounts then due, the Company may select a new
Extended Interest Payment Period, subject to the above requirements. No
interest during the Extended Interest Payment Period, except at the end thereof,
shall be due and payable. The Company shall give the Holder of this Security
notice of its selection of such Extended Interest Payment Period as provided in
or pursuant to the Indenture.
The Securities of this series are issuable only in registered form
without coupons in denominations of $25 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>
Exhibit 4(n)
TEXAS UTILITIES ELECTRIC COMPANY
OFFICER'S CERTIFICATE
Cathryn Hulen, the Treasurer of Texas Utilities Electric Company (the
"Company"), pursuant to the authority granted in the Board Resolutions of the
Company dated October 17, 1995, 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 Subordinated Debt
Securities relating to Trust Securities) dated as of December 1, 1995 (the
"Indenture") that:
1. The securities of the second series to be issued under the Indenture
shall be designated "9.00% Junior Subordinated Debentures, Series B,
due September 30, 2030" (the "Debentures of the Second Series"). The
Debentures of the Second Series are to be issued to TU Electric
Capital II, a Delaware statutory business trust (the "Trust"). 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 Second Series shall be limited in aggregate
principal amount to $51,418,575 at any time Outstanding, except as
contemplated in Section 301(b) of the Indenture;
3. The Debentures of the Second Series shall mature and the principal
shall be due and payable together with all accrued and unpaid interest
thereon on September 30, 2030;
4. The Debentures of the Second Series shall bear interest from, and
including, the date of original issuance, at the rate of 9.00% per
annum payable quarterly in arrears on March 31, June 30, September 30
and December 31 of each year (each, an "Interest Payment Date")
commencing December 31, 1995. 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 and on the basis of the actual number of days elapsed
within any month in relation to the deemed 30 days of such month.
Interest on the Debentures of the Second Series will accrue from, and
including, the date of original issuance but if interest has been paid
on such Debentures of the Second Series, then from, and excluding, the
most recent Interest Payment Date through 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),
except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such
Interest Payment Date;
5. Each installment of interest on a Debenture of the Second Series shall
be payable to the Person in whose name such Debenture of the Second
Series is registered at the close of business on the day 15 days
preceding the corresponding Interest Payment Date (the "Regular Record
Date") for the Debentures of the Second Series; provided, however,
that if the Debentures of the Second Series are held neither by the
Trust nor by a securities depositary, the Company shall have the right
to change the Regular Record Date by one or more Officer's
Certificates. Any installment of interest on the
<PAGE>
Debentures of the Second Series not punctually paid or duly provided
for shall forthwith cease to be payable to the Holders of such
Debentures of the Second Series on such Regular Record Date, and may
be paid to the Persons in whose name the Debentures of the Second
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 Second 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
Second 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 Second Series shall be payable at, and registration and
registration of transfers and exchanges in respect of the Debentures
of the Second 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, demands to or upon the Company
in respect of the Debentures of the Second Series may be served at the
office or agency of the Company in The City of New York. The Trustee
will initially be the agency of the Company for such service of
notices and demands; provided, however, that the Company reserves the
right to change, by one or more Officer's Certificates any such office
or agency. The Trustee will be the Security Registrar and the Paying
Agent for the Debentures of the Second Series;
7. The Debentures of the Second Series will be redeemable on or after
January 1, 1998 at the option of the Company, at any time and from
time to time in whole or in part, at a redemption price equal to 100%
of the principal amount of the Debentures of the Second Series being
redeemed, together with any accrued interest, including Additional
Interest, if any, to the redemption date, upon not less than 30 nor
more than 60 days' notice given as provided in the Indenture. The
Company, however, may not redeem less than all Outstanding Debentures
of the Second Series unless the conditions specified in the last
paragraph of this item are met;
The Debentures of the Second Series will also be redeemable at the
option of the Company if a Tax Event shall occur and be continuing and
the circumstance described in the penultimate sentence of Section
9.04(d) of the Amended and Restated Trust Agreement relating to the
Trust shall apply, in whole or in part, at a redemption price plus
accrued and unpaid distributions equal to 100% of the principal amount
of the Debentures of the Second Series then Outstanding plus any
accrued and unpaid interest, including Additional Interest, if any, to
the redemption date, upon not less than 30 nor more than 60 days'
notice given as provided in the Indenture. "Tax Event" means the
receipt by the Trust of an opinion of nationally recognized
independent tax counsel experienced in such matters to the effect
that, as a result of (a) any amendment to, clarification of, or change
(including any announced prospective change) in, the laws or treaties
(or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein affecting taxation,
(b) any judicial decision or any official administrative
pronouncement, ruling, regulatory procedure, notice or announcement
(including any notice or announcement of intent to issue or adopt any
such administrative
-2-
<PAGE>
pronouncement, ruling, regulatory procedure or regulation) (each, for
purposes of this definition, an "Administrative Action"), or (c) any
amendment to, clarification of, or change in the official position or
the interpretation of any such Administrative Action or judicial
decision or any interpretation or pronouncement that provides for a
position with respect to such Administrative Action or judicial
decision that differs from the theretofore generally accepted
position, in each case by the legislative body, court, governmental
authority or regulatory body, irrespective of the manner in which such
amendment, clarification or change is made known, which amendment,
clarification, or change is effective, which Administrative Action is
taken or which judicial decision is issued, in each case on or after
December 12, 1995, there is more than an insubstantial risk that (i)
the Trust is, or will be, subject to United States federal income tax
with respect to interest received on the Debentures, (ii) interest
payable by the Company on the Debentures is not, or will not be, fully
deductible by the Company for United States federal income tax
purposes, or (iii) the Trust is, or will be, subject to more than a de
minimis amount of other taxes, duties or other governmental charges;
The Company may not redeem less than all the Debentures of the Second
Series unless all accrued and unpaid interest (including any
Additional Interest) has been paid in full on all Debentures
Outstanding under the Indenture for all quarterly interest periods
terminating on or prior to the date of redemption or if a partial
redemption of 9% Trust Originated Preferred Securities would result in
a delisting of such securities by any national securities exchange on
which they are then listed;
8. So long as any Debentures of the Second Series are Outstanding, the
failure of the Company to pay interest on any Debentures of the Second
Series within 30 days after the same becomes due and payable (whether
or not payment is prohibited by the provisions of Article Fifteen of
the Indenture) shall constitute an Event of Default; provided,
however, that a valid extension of the interest payment period by the
Company as contemplated in Section 311 of the Indenture and paragraph
(9) of this Certificate shall not constitute a failure to pay interest
for this purpose;
9. Pursuant to Section 311 of the Indenture, the Company shall have the
right, at any time and from time to time during the term of the
Debentures of the Second Series, to extend the interest payment period
to a period not exceeding 20 consecutive quarters (an "Extension
Period") during which period interest will be compounded quarterly. At
the end of the Extension Period, the Company shall pay all interest
accrued and unpaid (together with interest thereon at the rate
specified for the Debentures of the Second Series, compounded
quarterly, to the extent permitted by applicable law). However, during
any such Extension Period, the Company shall not declare or pay any
dividend or distribution (other than a dividend or distribution in
common stock of the Company) on, or redeem, purchase, acquire or make
a liquidation payment with respect to, any of its capital stock,
redeem any indebtedness that is pari passu with the Debentures of the
Second Series, or make any guarantee payments with respect to the
foregoing. Prior to the termination of any such Extension Period, the
Company may further extend the interest payment period, provided that
such Extension Period together with all such previous and further
extensions thereof shall not exceed 20 consecutive quarters at any one
time or extend beyond the maturity date of the Debentures of the
Second Series. Upon the termination of any such Extension Period and
the payment of all amounts then due, the Company may select a new
Extension Period, subject to the above requirements. No interest shall
be due and payable
-3-
<PAGE>
during an Extension Period, except at the end thereof. The Company
will give the Trust or other Holders and the Trustee notice of its
election of an Extension Period prior to the earlier of (i) one
Business Day prior to the record date for the distribution which would
occur but for such election or (ii) the date the Company is required
to give notice to the New York Stock Exchange or other applicable
self-regulatory organization of the record date;
10. In the event that, at any time subsequent to the initial
authentication and delivery of the Debentures of the Second Series,
the Debentures of the Second Series are to be held by a securities
depositary, the Company may at such time establish the matters
contemplated in clause (r) in the second paragraph of Section 301 of
the Indenture in an Officer's Certificate supplemental to this
Certificate;
11. No service charge shall be made for the registration of transfer or
exchange of the Debentures of the Second 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;
12. The Debentures of the Second 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;
13. In the event that the Debentures of the Second Series are distributed
to holders of 9% Trust Originated Preferred Securities as a result of
the occurrence of a Tax Event, the Company will use its best efforts
to list the Debentures of the Second Series on the New York Stock
Exchange;
14. The undersigned has read all of the covenants and conditions contained
in the Indenture relating to the issuance of the Debentures of the
Second Series and the definitions in the Indenture relating thereto
and in respect of which this certificate is made;
15. 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;
16. In the opinion of the undersigned, he has made such examination or
investigation as is necessary to express an informed opinion whether
or not such covenants and conditions have been complied with; and
17. 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 Second Series requested in the
accompanying Company Order have been complied with.
-4-
<PAGE>
IN WITNESS WHEREOF, I have executed this Officer's Certificate this 12th
day of December, 1995.
/s/ Cathryn Hulen
------------------
Cathryn Hulen
Treasurer
-5-
<PAGE>
NO._______________
CUSIP NO.__________
EXHIBIT A
[FORM OF FACE OF JUNIOR SUBORDINATED DEBENTURE]
TEXAS UTILITIES ELECTRIC COMPANY
9.00% JUNIOR SUBORDINATED DEBENTURES, SERIES B,
DUE SEPTEMBER 30, 2030
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 ____________________________________, or registered
assigns, the principal sum of ____________________ Dollars on September 30,
2030, and to pay interest on said principal sum from, and including, December
12, 1995 or from, and excluding, the most recent Interest Payment Date through
which interest has been paid or duly provided for, quarterly on March 31, June
30, September 30 and December 31 of each year, commencing December 31, 1995 at
the rate of 9.00% 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, and including, December 12, 1995
through the first Interest Payment Date, and thereafter will accrue, from, and
excluding, the last Interest Payment Date through 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), except that, if such Business Day is in the
next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on the 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 15 days 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 JUNIOR SUBORDINATED 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 December 1, 1995 (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 December 12, 1995 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 $51,418,575.
The Securities of this series are subject to redemption upon not less
than 30 nor more than 60 days' notice by mail, at any time on or after January
1, 1998 as a whole or in part, at the election of the Company, at a Redemption
Price equal to 100% of the principal amount, together in the case of any such
redemption with accrued interest to, but not including, the Redemption Date, but
interest installments whose Stated Maturity is on or prior to such Redemption
Date will be payable to the Holder of such Security, or one or more Predecessor
Securities, of record at the close of business on the related Regular Record
Date referred to on the face hereof, all as provided in the Indenture.
The Securities of this series will also be redeemable at the option of
the Company if a Tax Event shall occur and be continuing and the circumstance
described in the penultimate sentence of Section 9.04(d) of the Amended and
Restated Trust Agreement relating to TU Electric Capital II, a Delaware
statutory business trust, shall apply, in whole or in part, at a redemption
price plus accrued and unpaid distributions equal to 100% of the principal
amount of the Securities of this series then Outstanding plus any accrued and
unpaid interest, including Additional Interest, if any, to the redemption date,
upon not less than 30 nor more than 60 days' notice given as provided in the
Indenture. "Tax Event" means the receipt by the Trust of an opinion of
nationally recognized independent tax counsel experienced in such matters to the
effect that, as a result of (a) any amendment to, clarification of, or change
(including any announced prospective change) in, the laws or treaties (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein affecting taxation, (b) any judicial
decision or any official administrative pronouncement, ruling, regulatory
procedure, notice or announcement (including any notice or announcement of
intent to issue or adopt any such administrative pronouncement, ruling,
regulatory procedure or regulation) (each, for purposes of this definition, an
"Administrative Action"), or (c) any amendment to, clarification of, or change
in the official position or the interpretation of any such Administrative Action
or judicial decision or any interpretation or pronouncement that provides for a
position with respect to such Administrative Action or judicial decision that
differs from the theretofore generally accepted position, in each case by the
legislative body, court, governmental authority or regulatory body, irrespective
of the manner in which such amendment, clarification or change is made known,
which amendment, clarification, or change is effective, which Administrative
Action is taken or which judicial decision is issued, in each case on or after
December 12, 1995, there is more than an insubstantial risk that (i) the Trust
is, or will be, subject to United States federal income tax with respect to
interest received on the Debentures, (ii) interest payable by the Company on the
Debentures is not, or will not be, fully deductible by the Company for United
States federal income tax purposes, or (iii) the Trust is, or will be, subject
to more than a de minimis amount of other taxes, duties or other governmental
charges;
-3-
<PAGE>
In the event of redemption of this Security in part only, a new
Security or Securities of this series and of like tenor for the unredeemed
portion hereof will be issued in the name of the Holder hereof upon the
cancellation hereof.
The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, subordinated and subject in right of payment to the prior
payment in full of all Senior Indebtedness, and this Security is issued subject
to the provisions of the Indenture with respect thereto. Each Holder of this
Security, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to acknowledge or effectuate the
subordination so provided and (c) appoints the Trustee his attorney-in-fact for
any and all such purposes. Each Holder hereof, by his acceptance hereof, hereby
waives all notice of the acceptance of the subordination provisions contained
herein and in the Indenture by each holder of Senior Indebtedness, whether now
outstanding or hereafter incurred, and waives reliance by each such Holder upon
said provisions.
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.
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 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 compliance by the Company
with certain provisions of the Indenture and 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 not less than 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 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.
-4-
<PAGE>
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 Company shall have the right at any time and from time to time
during the term of the Securities of this series to extend the interest payment
period to a period not exceeding 20 consecutive quarters (an "Extended Interest
Payment Period"), and at the end of such Extended Interest Payment Period, the
Company shall pay all interest then accrued and unpaid (together with interest
thereon at the same rate as specified for the Securities of this series,
compounded quarterly, to the extent permitted by applicable law); provided,
however, that during such Extended Interest Payment Period the Company shall not
declare or pay any dividend or distribution (other than a dividend or
distribution in common stock of the Company) on, or redeem, purchase, acquire or
make a liquidation payment with respect to, any of its capital stock, redeem any
indebtedness that is pari passu with the Securities of this series, or make any
guarantee payments with respect to the foregoing. Prior to the termination of
any such Extended Interest Payment Period, the Company may further extend the
interest payment period, provided that such Extended Interest Payment Period,
together with all such previous and further extensions thereof, may not exceed
20 consecutive quarters or extend beyond the Stated Maturity of the Securities
of this series. Upon the termination of any such Extended Interest Payment
Period and the payment of all amounts then due, the Company may select a new
Extended Interest Payment Period, subject to the above requirements. No
interest during the Extended Interest Payment Period, except at the end thereof,
shall be due and payable. The Company shall give the Holder of this Security
notice of its selection of such Extended Interest Payment Period as provided in
or pursuant to the Indenture.
The Securities of this series are issuable only in registered form
without coupons in denominations of $25 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>
Exhibit 4(r)
TEXAS UTILITIES ELECTRIC COMPANY
OFFICER'S CERTIFICATE
Cathryn Hulen, the Treasurer of Texas Utilities Electric Company (the
"Company"), pursuant to the authority granted in the Board Resolutions of the
Company dated October 17, 1995, 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 Subordinated Debt
Securities relating to Trust Securities) dated as of December 1, 1995 (the
"Indenture") that:
1. The securities of the third series to be issued under the Indenture
shall be designated "8.00% Junior Subordinated Debentures, Series C,
due December 31, 2035" (the "Debentures of the Third Series"). The
Debentures of the Third Series are to be issued to TU Electric Capital
III, a Delaware statutory business trust (the "Trust"). 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 Third Series shall be limited in aggregate
principal amount to $206,185,575 at any time Outstanding, except as
contemplated in Section 301(b) of the Indenture;
3. The Debentures of the Third Series shall mature and the principal
shall be due and payable together with all accrued and unpaid interest
thereon on December 31, 2035;
4. The Debentures of the Third Series shall bear interest from, and
including, the date of original issuance, at the rate of 8.00% per
annum payable quarterly in arrears on March 31, June 30, September 30
and December 31 of each year (each, an "Interest Payment Date")
commencing December 31, 1995. 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 and on the basis of the actual number of days elapsed
within any month in relation to the deemed 30 days of such month.
Interest on the Debentures of the Third Series will accrue from, and
including, the date of original issuance but if interest has been paid
on such Debentures of the Third Series, then from, and excluding, the
most recent Interest Payment Date through 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),
except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such
Interest Payment Date;
5. Each installment of interest on a Debenture of the Third Series shall
be payable to the Person in whose name such Debenture of the Third
Series is registered at the close of business on the day 15 days
preceding the corresponding Interest Payment Date (the "Regular Record
Date") for the Debentures of the Third Series; provided, however,
<PAGE>
that if the Debentures of the Third Series are held neither by the
Trust nor by a securities depositary, the Company shall have the right
to change the Regular Record Date by one or more Officer's
Certificates. Any installment of interest on the Debentures of the
Third Series not punctually paid or duly provided for shall forthwith
cease to be payable to the Holders of such Debentures of the Third
Series on such Regular Record Date, and may be paid to the Persons in
whose name the Debentures of the Third 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 Third 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 Third 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 Third Series shall be payable at, and registration and
registration of transfers and exchanges in respect of the Debentures
of the Third 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, demands to or upon the Company
in respect of the Debentures of the Third Series may be served at the
office or agency of the Company in The City of New York. The Trustee
will initially be the agency of the Company for such service of
notices and demands; provided, however, that the Company reserves the
right to change, by one or more Officer's Certificates any such office
or agency. The Trustee will be the Security Registrar and the Paying
Agent for the Debentures of the Third Series;
7. The Debentures of the Third Series will be redeemable on or after
January 1, 2001 at the option of the Company, at any time and from
time to time in whole or in part, at a redemption price equal to 100%
of the principal amount of the Debentures of the Third Series being
redeemed, together with any accrued interest, including Additional
Interest, if any, to the redemption date, upon not less than 30 nor
more than 60 days' notice given as provided in the Indenture. The
Company, however, may not redeem less than all Outstanding Debentures
of the Third Series unless the conditions specified in the last
paragraph of this item are met;
The Debentures of the Third Series will also be redeemable at the
option of the Company if a Tax Event shall occur and be continuing and
the circumstance described in the penultimate sentence of Section
9.04(d) of the Amended and Restated Trust Agreement relating to the
Trust shall apply, in whole or in part, at a redemption price plus
accrued and unpaid distributions equal to 100% of the principal amount
of the Debentures of the Third Series then Outstanding plus any
accrued and unpaid interest, including Additional Interest, if any, to
the redemption date, upon not less than 30 nor more than 60 days'
notice given as provided in the Indenture. "Tax Event" means the
receipt by the Trust of an opinion of nationally recognized
independent tax counsel experienced in such matters to the effect
that, as a result of (a) any amendment to,
-2-
<PAGE>
clarification of, or change (including any announced prospective
change) in, the laws or treaties (or any regulations thereunder) of
the United States or any political subdivision or taxing authority
thereof or therein affecting taxation, (b) any judicial decision or
any official administrative pronouncement, ruling, regulatory
procedure, notice or announcement (including any notice or
announcement of intent to issue or adopt any such administrative
pronouncement, ruling, regulatory procedure or regulation) (each, for
purposes of this definition, an "Administrative Action"), or (c) any
amendment to, clarification of, or change in the official position or
the interpretation of any such Administrative Action or judicial
decision or any interpretation or pronouncement that provides for a
position with respect to such Administrative Action or judicial
decision that differs from the theretofore generally accepted
position, in each case by the legislative body, court, governmental
authority or regulatory body, irrespective of the manner in which such
amendment, clarification or change is made known, which amendment,
clarification, or change is effective, which Administrative Action is
taken or which judicial decision is issued, in each case on or after
December 13, 1995, there is more than an insubstantial risk that (i)
the Trust is, or will be, subject to United States federal income tax
with respect to interest received on the Debentures, (ii) interest
payable by the Company on the Debentures is not, or will not be, fully
deductible by the Company for United States federal income tax
purposes, or (iii) the Trust is, or will be, subject to more than a de
minimis amount of other taxes, duties or other governmental charges;
The Company may not redeem less than all the Debentures of the Third
Series unless all accrued and unpaid interest (including any
Additional Interest) has been paid in full on all Debentures
Outstanding under the Indenture for all quarterly interest periods
terminating on or prior to the date of redemption or if a partial
redemption of 8% Cumulative Quarterly Income Preferred Securities
would result in a delisting of such securities by any national
securities exchange on which they are then listed;
8. So long as any Debentures of the Third Series are Outstanding, the
failure of the Company to pay interest on any Debentures of the Third
Series within 30 days after the same becomes due and payable (whether
or not payment is prohibited by the provisions of Article Fifteen of
the Indenture) shall constitute an Event of Default; provided,
however, that a valid extension of the interest payment period by the
Company as contemplated in Section 311 of the Indenture and paragraph
(9) of this Certificate shall not constitute a failure to pay interest
for this purpose;
9. Pursuant to Section 311 of the Indenture, the Company shall have the
right, at any time and from time to time during the term of the
Debentures of the Third Series, to extend the interest payment period
to a period not exceeding 20 consecutive quarters (an "Extension
Period") during which period interest will be compounded quarterly. At
the end of the Extension Period, the Company shall pay all interest
accrued and unpaid (together with interest thereon at the rate
specified for the Debentures of the Third Series, compounded
quarterly, to the extent permitted by applicable law). However, during
any such Extension Period, the Company shall not declare or pay any
dividend or distribution (other than a dividend or distribution in
common stock of
-3-
<PAGE>
the Company) on, or redeem, purchase, acquire or make
a liquidation payment with respect to, any of its capital stock,
redeem any indebtedness that is pari passu with the
-4-
<PAGE>
Debentures of the Third Series, or make any guarantee payments with
respect to the foregoing. Prior to the termination of any such
Extension Period, the Company may further extend the interest payment
period, provided that such Extension Period together with all such
previous and further extensions thereof shall not exceed 20
consecutive quarters at any one time or extend beyond the maturity
date of the Debentures of the Third Series. Upon the termination of
any such Extension Period and the payment of all amounts then due, the
Company may select a new Extension Period, subject to the above
requirements. No interest shall be due and payable during an Extension
Period, except at the end thereof. The Company will give the Trust or
other Holders and the Trustee notice of its election of an Extension
Period prior to the earlier of (i) one Business Day prior to the
record date for the distribution which would occur but for such
election or (ii) the date the Company is required to give notice to
the New York Stock Exchange or other applicable self-regulatory
organization of the record date;
10. In the event that, at any time subsequent to the initial
authentication and delivery of the Debentures of the Third Series, the
Debentures of the Third Series are to be held by a securities
depositary, the Company may at such time establish the matters
contemplated in clause (r) in the second paragraph of Section 301 of
the Indenture in an Officer's Certificate supplemental to this
Certificate;
11. No service charge shall be made for the registration of transfer or
exchange of the Debentures of the Third 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;
12. The Debentures of the Third 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;
13. In the event that the Debentures of the Third Series are distributed
to holders of 8% Cumulative Quarterly Income Preferred Securities as a
result of the occurrence of a Tax Event, the Company will use its best
efforts to list the Debentures of the Third Series on the New York
Stock Exchange;
14. The undersigned has read all of the covenants and conditions contained
in the Indenture relating to the issuance of the Debentures of the
Third Series and the definitions in the Indenture relating thereto and
in respect of which this certificate is made;
15. 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;
16. In the opinion of the undersigned, he has made such examination or
investigation as is necessary to express an informed opinion whether
or not such covenants and conditions have been complied with; and
17. 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 Third Series requested in the
accompanying Company Order have been complied with.
-5-
<PAGE>
IN WITNESS WHEREOF, I have executed this Officer's Certificate this 13th
day of December, 1995.
/s/ Cathryn Hulen
------------------
Cathryn Hulen
Treasurer
-6-
<PAGE>
NO._______________
CUSIP NO.__________
EXHIBIT A
[FORM OF FACE OF JUNIOR SUBORDINATED DEBENTURE]
TEXAS UTILITIES ELECTRIC COMPANY
8.00% JUNIOR SUBORDINATED DEBENTURES, SERIES C,
DUE DECEMBER 31, 2035
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 ____________________________________, or registered
assigns, the principal sum of ____________________ Dollars on December 31, 2035,
and to pay interest on said principal sum, from and including, December 13, 1995
or from, and excluding, the most recent Interest Payment Date through which
interest has been paid or duly provided for, quarterly on March 31, June 30,
September 30 and December 31 of each year, commencing December 31, 1995 at the
rate of 8.00% 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, and including, December 13, 1995
through the first Interest Payment Date, and thereafter will accrue, from, and
excluding, the last Interest Payment Date through 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), except that, if such Business Day is in the
next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on the 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 15 days 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 JUNIOR SUBORDINATED 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 December 1, 1995 (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 December 13, 1995 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 $ 206,185,575.
The Securities of this series are subject to redemption upon not less
than 30 nor more than 60 days' notice by mail, at any time on or after January
1, 2001 as a whole or in part, at the election of the Company, at a Redemption
Price equal to 100% of the principal amount, together in the case of any such
redemption with accrued interest to, but not including, the Redemption Date, but
interest installments whose Stated Maturity is on or prior to such Redemption
Date will be payable to the Holder of such Security, or one or more Predecessor
Securities, of record at the close of business on the related Regular Record
Date referred to on the face hereof, all as provided in the Indenture.
The Securities of this series will also be redeemable at the option of
the Company if a Tax Event shall occur and be continuing and the circumstance
described in the penultimate sentence of Section 9.04(d) of the Amended and
Restated Trust Agreement relating to TU Electric Capital III, a Delaware
statutory business trust, shall apply, in whole or in part, at a redemption
price plus accrued and unpaid distributions equal to 100% of the principal
amount of the Securities of this series then Outstanding plus any accrued and
unpaid interest, including Additional Interest, if any, to the redemption date,
upon not less than 30 nor more than 60 days' notice given as provided in the
Indenture. "Tax Event" means the receipt by the Trust of an opinion of
nationally recognized independent tax counsel experienced in such matters to the
effect that, as a result of (a) any amendment to, clarification of, or change
(including any announced prospective change) in, the laws or treaties (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein affecting taxation, (b) any judicial
decision or any official administrative pronouncement, ruling, regulatory
procedure, notice or announcement (including any notice or announcement of
intent to issue or adopt any such administrative pronouncement, ruling,
regulatory procedure or regulation) (each, for purposes of this definition, an
"Administrative Action"), or (c) any amendment to, clarification of, or change
in the official position or the interpretation of any such Administrative Action
or judicial decision or any interpretation or pronouncement that provides for a
position with respect to such Administrative Action or judicial decision that
differs from the theretofore generally accepted position, in each case by the
legislative body, court, governmental authority or regulatory body, irrespective
of the manner in which such amendment, clarification or change is made known,
which amendment, clarification, or change is effective, which Administrative
Action is taken or which judicial decision is issued, in each case on or after
December 13, 1995, there is more than an insubstantial risk that (i) the Trust
is, or will be, subject to United States federal income tax with respect to
interest received on the Debentures, (ii) interest payable by the Company on the
Debentures is not, or will not be, fully deductible by the Company for United
States federal income tax purposes, or (iii) the Trust is, or will be, subject
to more than a de minimis amount of other taxes, duties or other governmental
charges;
-3-
<PAGE>
In the event of redemption of this Security in part only, a new
Security or Securities of this series and of like tenor for the unredeemed
portion hereof will be issued in the name of the Holder hereof upon the
cancellation hereof.
The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, subordinated and subject in right of payment to the prior
payment in full of all Senior Indebtedness, and this Security is issued subject
to the provisions of the Indenture with respect thereto. Each Holder of this
Security, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to acknowledge or effectuate the
subordination so provided and (c) appoints the Trustee his attorney-in-fact for
any and all such purposes. Each Holder hereof, by his acceptance hereof, hereby
waives all notice of the acceptance of the subordination provisions contained
herein and in the Indenture by each holder of Senior Indebtedness, whether now
outstanding or hereafter incurred, and waives reliance by each such Holder upon
said provisions.
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.
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 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 compliance by the Company
with certain provisions of the Indenture and 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 not less than 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 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.
-4-
<PAGE>
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 Company shall have the right at any time and from time to time
during the term of the Securities of this series to extend the interest payment
period to a period not exceeding 20 consecutive quarters (an "Extended Interest
Payment Period"), and at the end of such Extended Interest Payment Period, the
Company shall pay all interest then accrued and unpaid (together with interest
thereon at the same rate as specified for the Securities of this series,
compounded quarterly, to the extent permitted by applicable law); provided,
however, that during such Extended Interest Payment Period the Company shall not
declare or pay any dividend or distribution (other than a dividend or
distribution in common stock of the Company) on, or redeem, purchase, acquire or
make a liquidation payment with respect to, any of its capital stock, redeem any
indebtedness that is pari passu with the Securities of this series, or make any
guarantee payments with respect to the foregoing. Prior to the termination of
any such Extended Interest Payment Period, the Company may further extend the
interest payment period, provided that such Extended Interest Payment Period,
together with all such previous and further extensions thereof, may not exceed
20 consecutive quarters or extend beyond the Stated Maturity of the Securities
of this series. Upon the termination of any such Extended Interest Payment
Period and the payment of all amounts then due, the Company may select a new
Extended Interest Payment Period, subject to the above requirements. No
interest during the Extended Interest Payment Period, except at the end thereof,
shall be due and payable. The Company shall give the Holder of this Security
notice of its selection of such Extended Interest Payment Period as provided in
or pursuant to the Indenture.
The Securities of this series are issuable only in registered form
without coupons in denominations of $25 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>
Exhibit 4(s)
================================================================================
AMENDED AND RESTATED
TRUST AGREEMENT
between
TEXAS UTILITIES ELECTRIC COMPANY, as Depositor
and
THE BANK OF NEW YORK,
THE BANK OF NEW YORK (DELAWARE),
Robert S. Shapard,
John Casey,
Michael Perkins,
Glenn D. Kirby
and
Wayne E. Patterson, as Trustees
Dated as of January 30, 1997
TU ELECTRIC CAPITAL IV
================================================================================
<PAGE>
TU ELECTRIC CAPITAL IV
======================
Certain Sections of this Trust Agreement relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
<TABLE>
<CAPTION>
Trust Indenture Trust Agreement
Act Section Section
- --------------- ---------------
<S> <C>
Section 310(a)(1) .................................... 8.07
(a)(2) .................................... 8.07
(a)(3) .................................... 8.09
(a)(4) .................................... Not Applicable
(b) .................................... 8.08
Section 311(a) .................................... 8.13
(b) .................................... 8.13
Section 312(a) .................................... 5.07
(b) .................................... 5.07
(c) .................................... 5.07
Section 313(a) .................................... 8.14(a)
(a)(4) .................................... 8.14(b)
(b) .................................... 8.14(b)
(c) .................................... 8.14(a)
(d) .................................... 8.14(a), 8.14(b)
Section 314(a) .................................... Not Applicable
(b) .................................... Not Applicable
(c)(1) .................................... Not Applicable
(c)(2) .................................... Not Applicable
(c)(3) .................................... Not Applicable
(d) .................................... Not Applicable
(e) .................................... Not Applicable
Section 315(a) .................................... 8.01
(b) .................................... 8.02, 8.14(b)
(c) .................................... 8.01(a)
(d) .................................... 8.01, 8.03
(e) .................................... Not Applicable
Section 316(a) .................................... Not Applicable
(a)(1)(A) .................................... Not Applicable
(a)(1)(B) .................................... Not Applicable
(a)(2) .................................... Not Applicable
(b) .................................... Not Applicable
(c) .................................... Not Applicable
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 317(a)(1) .................................... Not Applicable
(a)(2) .................................... Not Applicable
(b) .................................... 5.09
Section 318(a) .................................... 10.10
</TABLE>
________________________
Note: This reconciliation and tie shall not, for any purpose, be deemed to be
a part of the Trust Agreement.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I.
Defined Terms
Section 1.01. Definitions......................................................... 2
ARTICLE II.
Establishment of the Trust
Section 2.01. Name................................................................. 11
Section 2.02. Office of the Delaware Trustee; Principal Place of Business.......... 11
Section 2.03. Initial Contribution of Trust Property; Organizational Expenses...... 11
Section 2.04. Issuance of the Capital Securities................................... 11
Section 2.05. Subscription and Purchase of Debentures; Issuance
of the Common Securities........................................... 11
Section 2.06. Declaration of Trust; Appointment of Additional
Administrative Trustees............................................ 12
Section 2.07. Authorization to Enter into Certain Transactions..................... 12
Section 2.08. Assets of Trust...................................................... 16
Section 2.09. Title to Trust Property.............................................. 16
ARTICLE III.
Payment Account
Section 3.01. Payment Account...................................................... 16
ARTICLE IV.
Distributions; Redemption
Section 4.01. Distributions........................................................ 17
Section 4.02. Redemption........................................................... 18
Section 4.03. Subordination of Common Securities................................... 19
Section 4.04. Payment Procedures................................................... 20
Section 4.05. Tax Returns and Reports.............................................. 20
Section 4.06. Payments under Indenture............................................. 21
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE V.
Trust Securities Certificates
Section 5.01. Initial Ownership.................................................... 21
Section 5.02. The Trust Securities Certificates.................................... 21
Section 5.03. Execution and Delivery of Trust Securities Certificates.............. 21
Section 5.04. Registration of Transfer and Exchange of Capital
Securities Certificates............................................ 22
Section 5.05. Mutilated, Destroyed, Lost or Stolen Trust
Securities Certificates............................................ 23
Section 5.06. Persons Deemed Securityholders....................................... 23
Section 5.07. Access to List of Securityholders' Names and Addresses............... 23
Section 5.08. Maintenance of Office or Agency...................................... 24
Section 5.09. Appointment of Paying Agent.......................................... 24
Section 5.10. Ownership of Common Securities by Depositor.......................... 25
Section 5.11. Definitive Capital Securities Certificates........................... 25
Section 5.12. Book-Entry System.................................................... 25
Section 5.13. Rights of Securityholders............................................ 26
Section 5.14. Cancellation by Transfer Agent and Registrar......................... 26
ARTICLE VI.
Acts of Securityholders; Meetings; Voting
Section 6.01. Limitations on Voting Rights......................................... 27
Section 6.02. Notice of Meetings................................................... 28
Section 6.03. Meetings of Holders of Capital Securities............................ 28
Section 6.04. Voting Rights........................................................ 28
Section 6.05. Proxies, etc......................................................... 28
Section 6.06. Securityholder Action by Written Consent............................. 29
Section 6.07. Record Date for Voting and Other Purposes............................ 29
Section 6.08. Acts of Securityholders.............................................. 29
Section 6.09. Inspection of Records................................................ 30
ARTICLE VII.
Representations and Warranties of the Property
Trustee and the Delaware Trustee
Section 7.01. Property Trustee..................................................... 31
Section 7.02. Delaware Trustee..................................................... 31
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
ARTICLE VIII.
The Trustees
Section 8.01. Certain Duties and Responsibilities.................................. 32
Section 8.02. Notice of Defaults................................................... 33
Section 8.03. Certain Rights of Property Trustee................................... 34
Section 8.04. Not Responsible for Recitals or Issuance of Securities............... 37
Section 8.05. May Hold Securities.................................................. 37
Section 8.06. Compensation; Fees; Indemnity........................................ 37
Section 8.07. Certain Trustees Required; Eligibility............................... 38
Section 8.08. Conflicting Interests................................................ 38
Section 8.09. Co-Trustees and Separate Trustee..................................... 39
Section 8.10. Resignation and Removal; Appointment of Successor.................... 40
Section 8.11. Acceptance of Appointment by Successor............................... 41
Section 8.12. Merger, Conversion, Consolidation or Succession to Business.......... 42
Section 8.13. Preferential Collection of Claims Against Depositor or Trust......... 42
Section 8.14. Reports by Property Trustee.......................................... 42
Section 8.15. Reports to the Property Trustee...................................... 43
Section 8.16. Evidence of Compliance With Conditions Precedent..................... 43
Section 8.17. Number of Trustees................................................... 43
Section 8.18. Delegation of Power.................................................. 43
Section 8.19. Fiduciary Duty....................................................... 44
ARTICLE IX.
Termination and Liquidation
Section 9.01. Termination Upon Expiration Date..................................... 45
Section 9.02. Early Termination.................................................... 45
Section 9.03. Termination.......................................................... 46
Section 9.04. Liquidation.......................................................... 46
ARTICLE X.
Miscellaneous Provisions
Section 10.01. Guarantee by the Depositor and Assumption of Obligations............ 48
Section 10.02. Limitation of Rights of Securityholders............................. 48
Section 10.03. Amendment........................................................... 48
Section 10.04. Separability........................................................ 49
Section 10.05. Governing Law....................................................... 50
Section 10.06. Successors.......................................................... 50
Section 10.07. Headings............................................................ 50
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C>
Section 10.08. Notice and Demand................................................... 50
Section 10.09. Agreement Not to Petition........................................... 51
Section 10.10. Conflict with Trust Indenture Act................................... 51
</TABLE>
-iv-
<PAGE>
AMENDED AND RESTATED TRUST AGREEMENT, dated as of January 30, 1997,
between (i) Texas Utilities Electric Company, a Texas corporation (the
"Depositor"), (ii) The Bank of New York, a banking corporation duly organized
and existing under the laws of New York, as trustee (the "Property Trustee" and,
in its separate capacity and not in its capacity as Property Trustee, the
"Bank"), (iii) The Bank of New York (Delaware), a banking corporation duly
organized under the laws of Delaware, as Delaware trustee (the "Delaware
Trustee") (iv) Robert S. Shapard, John Casey, Michael Perkins, Glenn D. Kirby
and Wayne E. Patterson, each an individual, and each of whose address is c/o
Texas Utilities Services Inc., 1601 Bryan Street, Dallas, Texas 75201 (each, an
"Administrative Trustee" and collectively the "Administrative Trustees") (the
Property Trustee, the Delaware Trustee and the Administrative Trustees referred
to collectively as the "Trustees") and (v) the several Holders, as hereinafter
defined.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Depositor, the Property Trustee, the Delaware Trustee and
Wayne Patterson, as the Administrative Trustee, have heretofore duly declared
and established a business trust pursuant to the Delaware Business Trust Act by
the entering into of that certain Trust Agreement, dated as of January 8, 1997
(the "Original Trust Agreement"), and by the execution by the Property Trustee,
the Delaware Trustee and Wayne Patterson, as Administrative Trustee and filing
with the Secretary of State of the State of Delaware of the Certificate of
Trust, dated January 14, 1997, a copy of which is attached as Exhibit A; and
WHEREAS, the Depositor, the Property Trustee, Delaware Trustee and
Wayne Patterson, as Administrative Trustee, desire to amend and restate the
Original Trust Agreement in its entirety as set forth herein to provide for,
among other things, (i) the acquisition by the Trust from the Depositor of all
of the right, title and interest in the Debentures, (ii) the issuance of the
Common Securities by the Trust to the Depositor, (iii) the issuance of the
Capital Securities by the Trust and (iv) the appointment of additional
Administrative Trustees of the Trust;
NOW THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the sufficiency of
which is hereby acknowledged, each party, for the benefit of the other party and
for the benefit of the Securityholders, hereby amends and restates the Original
Trust Agreement in its entirety and agrees as follows:
<PAGE>
ARTICLE I.
DEFINED TERMS
SECTION 1.01. DEFINITIONS. For all purposes of this Trust Agreement,
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 other terms used herein that are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(c) unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the
case may be, of this Trust Agreement; and
(d) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Trust Agreement as a whole and not to
any particular Article, Section or other subdivision.
"Act" has the meaning specified in Section 6.08.
"Additional Amount" means, with respect to Trust Securities of a given
Liquidation Amount for a given period, the amount of Additional Interest (as
defined in the Subordinated Indenture) paid by the Depositor on a Like Amount of
Debentures for such period.
"Administrative Trustee" means each of the individuals identified as
an "Administrative Trustee" in the preamble to this Trust Agreement solely in
their capacities as Administrative Trustees of the Trust created hereunder and
not in their individual capacities, or such trustee's successor in interest in
such capacity, or any successor trustee appointed as herein provided.
"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 indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Bank" has the meaning specified in the preamble to this Trust
Agreement.
-2-
<PAGE>
"Bankruptcy Event" means, with respect to any Person:
(i) the entry of a decree or order by a court having jurisdiction
in the premises judging such Person a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization,
arrangement, adjudication or composition of or in respect of such
Person under Federal bankruptcy law or any other applicable Federal or
State law, or appointing a receiver, liquidator, assignee, trustee
sequestrator or other similar official of such Person or of any
substantial part of its property, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or
order unstayed and in effect for a period of 60 consecutive days; or
(ii) the institution by such Person of proceedings to be
adjudicated a bankrupt or insolvent, or of the consent by it to the
institution of bankruptcy or insolvency proceedings against it, or the
filing by it of a petition or answer or consent seeking reorganization
or relief under Federal bankruptcy law or any other applicable Federal
or State law, or the consent by it to the filing of such petition or
to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator or similar official of such Person 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.
"Bankruptcy Laws" has the meaning specified in Section 10.09.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Depositor to have been duly adopted
by the Depositor's Board of Directors or a duly authorized committee thereof and
to be in full force and effect on the date of such certification, and delivered
to the appropriate Trustee.
"Business Day" means a day other than (x) a Saturday or a Sunday, (y)
a day on which banks in New York, New York are authorized or obligated by law or
executive order to remain closed or (z) a day on which the Property Trustee's
Corporate Trust Office or the Debenture Trustee's principal corporate trust
office is closed for business.
"Capital Security" means a security representing an undivided
beneficial interest in the assets of the Trust having a Liquidation Amount of
$1,000 and having rights provided therefor in this Trust Agreement, including
the right to receive Distributions and a Liquidation Distribution as provided
herein and, in certain circumstances, a preference over the Common Securities.
"Capital Securities Certificate" means a certificate evidencing
ownership of Capital Securities, substantially in the form attached as Exhibit
D.
-3-
<PAGE>
"Certificate of Trust" has the meaning specified in Section 2.07(d).
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act. The Depository Trust
Company will be the initial Clearing Agency.
"Closing Date" means the date of execution and delivery of this Trust
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or, if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Common Security" means an undivided beneficial interest in the assets
of the Trust having a Liquidation Amount of $1,000 and having the rights
provided therefor in this Trust Agreement, including the right to receive
Distributions and a Liquidation Distribution as provided herein.
"Common Securities Certificate" means a certificate evidencing
ownership of Common Securities, substantially in the form attached as Exhibit B.
"Corporate Trust Office" means the principal corporate trust office of
the Property Trustee located in New York, New York.
"Covered Person" means: (a) any officer, director, shareholder,
partner, member, representative, employee or agent of the Trust or the Trust's
Affiliates; and (b) any Holder of Trust Securities.
"Debenture Event of Default" means an "Event of Default" as defined in
the Subordinated Indenture.
"Debenture Issuer" means Texas Utilities Electric Company, a Texas
corporation, in its capacity as issuer of the Debentures.
"Debenture Redemption Date" means "Redemption Date" as defined in the
Subordinated Indenture with respect to the Debentures.
"Debenture Trustee" means The Bank of New York, as trustee under the
Subordinated Indenture, and its permitted successors and assigns as such
trustee.
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"Debentures" means the $103,093,000 aggregate principal amount of the
Depositor's Floating Rate Junior Subordinated Debentures, Series D, issued
pursuant to the Subordinated Indenture which will mature on January 30, 2037.
"Definitive Capital Securities Certificates" means Capital Securities
Certificates issued in certificated, fully registered form as provided in
Section 5.11.
"Delaware Business Trust Act" means Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code Section 3801 et seq., as it may be amended from time
to time.
"Delaware Trustee" means the banking corporation identified as the
"Delaware Trustee" in the preamble to this Trust Agreement solely in its
capacity as Delaware Trustee of the Trust formed hereunder and not in its
individual capacity, or its successor in interest in such capacity, or any
successor trustee appointed as herein provided.
"Depositor" has the meaning specified in the preamble to this Trust
Agreement and includes Texas Utilities Electric Company in its capacity as
Holder of the Common Securities.
"Distribution Date" has the meaning specified in Section 4.01(a).
"Distributions" means amounts payable in respect of the Trust
Securities as provided in Section 4.01.
"Early Termination Event" has the meaning specified in Section 9.02.
"Event of Default" means any one of the following events (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) the occurrence of a Debenture Event of Default; or
(ii) default by the Trust in the payment of any Distribution when
it becomes due and payable, and continuation of such default for a
period of 30 days; or
(iii) default by the Trust in the payment of any Redemption
Price, plus accumulated and unpaid distributions, of any Trust
Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material
respect of any covenant or warranty of the Trustees in this Trust
Agreement (other than a covenant or warranty a default in whose
performance or breach is specifically
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dealt with in clause (ii) or (iii), above) and continuation of such
default or breach for a period of 60 days after there has been given,
by registered or certified mail, to the Trust by the Holders of at
least 10% in Liquidation Amount of the Outstanding Capital Securities
a written notice specifying such default or breach and requiring it to
be remedied and stating that such notice is a "Notice of Default"
hereunder; or
(v) the occurrence of a Bankruptcy Event with respect to the
Trust.
"Exchange Act" has the meaning specified in Section 2.07(c).
"Expense Agreement" means the Agreement as to Expenses and Liabilities
between the Depositor and the Trust, substantially in the form attached as
Exhibit C, as amended from time to time.
"Expiration Date" shall have the meaning specified in Section 9.01.
"Guarantee" means the Guarantee Agreement executed and delivered by
the Depositor and The Bank of New York, a New York banking corporation, as
trustee, contemporaneously with the execution and delivery of this Trust
Agreement, for the benefit of the Holders of the Capital Securities, as amended
from time to time.
"Indemnified Person" means any Trustee, any Affiliate of any Trustee,
or any officer, director, shareholder, member, partners, employee,
representative or agent of any Trustee, or any employee or agent of the Trust or
its Affiliates.
"Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of
trust, adverse ownership interest, hypothecation, assignment, security interest
or preference, priority or other security agreement or preferential arrangement
of any kind or nature whatsoever.
"Like Amount" means (i) Trust Securities having a Liquidation Amount
equal to the principal amount of Debentures to be contemporaneously redeemed in
accordance with the Subordinated Indenture and the proceeds of which will be
used to pay the Redemption Price of such Trust Securities plus accumulated and
unpaid Distributions to the date of such payment and (ii) Debentures having a
principal amount equal to the Liquidation Amount of the Trust Securities of the
Holder to whom such Debentures are distributed.
"Liquidation Amount" means the stated amount of $1,000 per Trust
Security.
"Liquidation Date" means the date on which Debentures are to be
distributed to Holders of Trust Securities in connection with a termination and
liquidation of the Trust pursuant to Section 9.04.
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"Liquidation Distribution" has the meaning specified in Section
9.04(e).
"No Recognition Opinion" has the meaning specified in Section 9.04(d).
"Offer" has the meaning specified in Section 2.07(c).
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, a Vice Chairman of the Board, the President or a Vice President, and
by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary, of the Depositor, and delivered to the appropriate Trustee. One of
the officers signing an Officers' Certificate given pursuant to Section 8.16
shall be the principal executive, financial or accounting officer of the
Depositor. Any Officers' Certificate delivered with respect to compliance with a
condition or covenant provided for in this Trust Agreement shall include:
(a) a statement that each officer signing the Officers' Certificate
has read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers'
Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer 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 officer,
such condition or covenant has been complied with.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Trust, the Property Trustee, the Delaware Trustee or the
Depositor, but not an employee of the Trust, the Property Trustee, the Delaware
Trustee or the Depositor, and who shall be reasonably acceptable to the Property
Trustee.
"Original Trust Agreement" has the meaning specified in the recitals
to this Trust Agreement.
"Outstanding," when used with respect to Capital Securities, means, as
of the date of determination, all Capital Securities theretofore delivered under
this Trust Agreement, except:
(i) Capital Securities theretofore canceled by the Transfer Agent
and Registrar or delivered to the Transfer Agent and Registrar for
cancellation;
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(ii) Capital Securities for whose payment or redemption money in
the necessary amount has been theretofore deposited with the Property
Trustee or any Paying Agent for the Holders of such Capital
Securities; provided that, if such Capital Securities are to be
redeemed, notice of such redemption has been duly given pursuant to
this Trust Agreement; and
(iii) Capital Securities in exchange for or in lieu of which
other Capital Securities have been delivered pursuant to this Trust
Agreement, including pursuant to Sections 5.04, 5.05 or 5.11;
provided, however, that in determining whether the Holders of the requisite
Liquidation Amount of the Outstanding Capital Securities have given any request,
demand, authorization, direction, notice, consent or waiver hereunder, Capital
Securities owned by the Depositor, any Trustee or any Affiliate of the Depositor
or any Trustee shall be disregarded and deemed not to be Outstanding, except
that (a) in determining whether any Trustee shall be protected in relying upon
any such request, demand, authorization, direction, notice, consent or waiver,
only Capital Securities which such Trustee knows to be so owned shall be so
disregarded and (b) the foregoing shall not apply at any time when all of the
Outstanding Capital Securities are owned by the Depositor, one or more of the
Trustees and/or any such Affiliate. Capital Securities so owned which have been
pledged in good faith may be regarded as Outstanding if the pledgee establishes
to the satisfaction of the Administrative Trustee the pledgee's right so to act
with respect to such Capital Securities and that the pledgee is not the
Depositor or any Affiliate of the Depositor.
"Owner" means each Person who is the beneficial owner of a Securities
Certificate as reflected in the records of the Securities Depository or, if a
Securities Depository participant is not the beneficial owner, then as reflected
in the records of a Person maintaining an account with such Securities
Depository (directly or indirectly), in accordance with the rules of such
Securities Depository.
"Paying Agent" means any paying agent or co-paying agent appointed
pursuant to Section 5.09 and shall initially be Texas Utilities Services Inc.
"Payment Account" means a segregated non-interest-bearing corporate
trust account maintained by the Property Trustee with The Chase Manhattan Bank,
or such other banking institution as the Depositor shall select for the benefit
of the Securityholders in which all amounts paid in respect of the Debentures
will be held and from which the Paying Agent, pursuant to Section 5.09, shall
make payments to the Securityholders in accordance with Sections 4.01 and 4.02.
"Person" means any individual, corporation, partnership, joint
venture, trust, limited liability company or corporation, unincorporated
organization or government or any agency or political subdivision thereof.
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"Property Trustee" means the commercial bank or trust company
identified as the "Property Trustee" in the preamble to this Trust Agreement
solely in its capacity as Property Trustee of the Trust formed and continued
hereunder and not in its individual capacity, or its successor in interest in
such capacity, or any successor trustee appointed as herein provided.
"Redemption Date" means, with respect to any Trust Security to be
redeemed, the date fixed for such redemption by or pursuant to this Trust
Agreement; provided that each Debenture Redemption Date shall be a Redemption
Date for a Like Amount of Trust Securities.
"Redemption Price" means, with respect to any date fixed for
redemption of any Trust Security, the Liquidation Amount of such Trust Security.
"Relevant Trustee" shall have the meaning specified in Section 8.10.
"Responsible Officer," when used with respect to the Property Trustee
means an officer of the Property Trustee assigned by the Property Trustee to
administer its corporate trust matters.
"Securities Depository" shall have the meaning specified in Section
5.12.
"Securities Register" shall mean the Securities Register as described
in Section 5.04.
"Securityholder" or "Holder" means a Person in whose name a Trust
Security or Securities is registered in the Securities Register; any such Person
shall be a beneficial owner of such security within the meaning of the Delaware
Business Trust Act.
"Subordinated Indenture" means the Indenture, dated as of December 1,
1995, between the Depositor and the Debenture Trustee, as trustee, as amended or
supplemented from time to time.
"Tax Event" means the receipt by the Trust or the Depositor of an
opinion of counsel experienced in such matters to the effect that, as a result
of (a) any amendment to, clarification of, or change (including any announced
prospective change) in, the laws or treaties (or any regulations thereunder) of
the United States or any political subdivision or taxing authority thereof or
therein affecting taxation, (b) any judicial decision or any official
administrative pronouncement, ruling, regulatory procedure, notice or
announcement (including any notice or announcement of intent to issue or adopt
any such administrative pronouncement, ruling, regulatory procedure or
regulation) (each, an Administrative Action), or (c) any amendment to,
clarification of, or change in the official position or the interpretation of
any such Administrative Action or judicial decision or any interpretation or
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pronouncement that provides for a position with respect to such Administrative
Action or judicial decision that differs from the theretofore generally accepted
position, in each case by any legislative body, court, governmental authority or
regulatory body, irrespective of the time or manner in which such amendment,
clarification or change is introduced or made known, which amendment,
clarification, or change is effective, which Administrative Action is taken or
which judicial decision is issued, in each case on or after the date of issuance
of the Capital Securities, there is more than an insubstantial risk that (i) the
Trust is, or will be, subject to United States federal income tax with respect
to interest received on the Series D Debentures, (ii) interest payable by the
Depositor on the Debentures is not, or will not be, fully deductible for United
States federal income tax purposes, or (iii) the Trust is, or will be, subject
to more than a de minimis amount of other taxes, duties or other governmental
charges.
"Transfer Agent and Registrar" shall mean the transfer agent and
registrar for the Capital Securities appointed by the Trust and shall be
initially Texas Utilities Services Inc.
"Trust" means the Delaware business trust created by the Original
Trust Agreement and continued hereby and identified on the cover page to this
Trust Agreement.
"Trust Agreement" means this Amended and Restated Trust Agreement, as
the same may be modified, amended or supplemented in accordance with the
applicable provisions hereof, including all exhibits hereto, including, for all
purposes of this Amended and Restated Trust Agreement and any such modification,
amendment or supplement, the provisions of the Trust Indenture Act that are
deemed to be a part of and govern this Amended and Restated Trust Agreement and
any such modification, amendment or supplement, respectively.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed; provided, however,
that in the event the Trust Indenture Act of 1939 is amended after such date,
"Trust Indenture Act" means, to the extent required by any such amendment, the
Trust Indenture Act of 1939 as so amended.
"Trust Property" means (i) the Debentures, (ii) any cash on deposit
in, or owing to, the Payment Account and (iii) all proceeds and rights in
respect of the foregoing and any other property and assets for the time being
held by the Property Trustee pursuant to the trusts of this Trust Agreement.
"Trust Security" means any one of the Common Securities or the Capital
Securities.
"Trust Securities Certificate" means any one of the Common Securities
Certificates or the Capital Securities Certificates.
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"Underwriting Agreement" means the Underwriting Agreement, dated as of
January 23, 1997, among the Trust, the Depositor and the underwriters named
therein.
ARTICLE II.
ESTABLISHMENT OF THE TRUST
SECTION 2.01. NAME. The Trust created hereby shall be known as "TU
Electric Capital IV", in which name the Trustees may conduct the business of the
Trust, make and execute contracts and other instruments on behalf of the Trust
and sue and be sued.
SECTION 2.02. OFFICE OF THE DELAWARE TRUSTEE; PRINCIPAL PLACE OF
BUSINESS. The office of the Delaware Trustee in the State of Delaware is White
Clay Center, Route 273, Newark, Delaware 19711, or at such other address in
Delaware as the Delaware Trustee may designate by written notice to the
Securityholders and the Depositor. The principal place of business of the Trust
is c/o Texas Utilities Electric Company, Energy Plaza, 1601 Bryan Street,
Dallas, Texas 75201.
SECTION 2.03. INITIAL CONTRIBUTION OF TRUST PROPERTY; ORGANIZATIONAL
EXPENSES. The Property Trustee acknowledges receipt in trust from the Depositor
in connection with the Original Trust Agreement of the sum of $10, which
constituted the initial Trust Property. The Depositor shall pay organizational
expenses of the Trust as they arise or shall, upon request of any Trustee,
promptly reimburse such Trustee for any such expenses paid by such Trustee. The
Depositor shall make no claim upon the Trust Property for the payment of such
expenses.
SECTION 2.04. ISSUANCE OF THE CAPITAL SECURITIES. On January 23, 1997
an authorized representative of the Depositor and the Trust, both executed and
delivered the Underwriting Agreement. Contemporaneously with the execution and
delivery of this Trust Agreement, one of the Administrative Trustees, on behalf
of the Trust in accordance with Section 5.02, executed and delivered a Capital
Securities Certificate, registered in the name of the nominee of The Depositary
Trust Company, having an aggregate Liquidation Amount of $100,000,000.
SECTION 2.05. SUBSCRIPTION AND PURCHASE OF DEBENTURES; ISSUANCE OF THE
COMMON SECURITIES. Contemporaneously with the execution and delivery of this
Trust Agreement, the Administrative Trustees, on behalf of the Trust, shall
subscribe to and purchase from the Depositor Debentures, registered in the name
of the Property Trustee and having an aggregate principal amount equal to
$103,093,000 and, in satisfaction of the purchase price for such Debentures, (x)
one of the Administrative Trustees, on behalf of the Trust, shall execute and
deliver to the Depositor Common Securities Certificates, registered in the name
of the Depositor, in an aggregate amount of 3,093 Common Securities having an
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aggregate Liquidation Amount of $3,093,000, and (y) the Property Trustee, on
behalf of the Trust, shall deliver to the Depositor the sum of $98,804,300
representing the proceeds from the sale of the Capital Securities pursuant to
the Underwriting Agreement.
SECTION 2.06. DECLARATION OF TRUST; APPOINTMENT OF ADDITIONAL
ADMINISTRATIVE TRUSTEES. (a) The exclusive purposes and functions of the Trust
are (i) to issue Trust Securities and invest the proceeds thereof in Debentures,
and (ii) to engage in those activities necessary, convenient or incidental
thereto. The Depositor hereby appoints the Trustees as trustees of the Trust, to
have all the rights, powers and duties to the extent set forth herein. The
Property Trustee hereby declares that it will hold the Trust Property in trust
upon and subject to the conditions set forth herein for the benefit of the
Securityholders. The Trustees shall have all rights, powers and duties set forth
herein and in accordance with applicable law with respect to accomplishing the
purposes of the Trust. Anything in this Trust Agreement to the contrary
notwithstanding, the Delaware Trustee shall not be entitled to exercise any
powers, nor shall the Delaware Trustee have any of the duties and
responsibilities of the Property Trustee or the Administrative Trustees set
forth herein. The Delaware Trustee shall be one of the Trustees of the Trust for
the sole and limited purpose of fulfilling the requirements of Section 3807 of
the Delaware Business Trust Act.
SECTION 2.07. AUTHORIZATION TO ENTER INTO CERTAIN TRANSACTIONS. (a)
The Trustees shall conduct the affairs of the Trust in accordance with the terms
of this Trust Agreement. Subject to the limitations set forth in paragraph (b)
of this Section and Article VIII and in accordance with the following provisions
(A) and (B), the Trustees shall have the authority to enter into all
transactions and agreements determined by the Trustees to be appropriate in
exercising the authority, express or implied, otherwise granted to the Trustees
under this Trust Agreement, and to perform all acts in furtherance thereof,
including without limitation, the following:
(A) As among the Trustees, the Administrative Trustees, acting singly or
together, shall have the power, duty and authority to act on behalf of the Trust
with respect to the following matters:
(i) the issuance and sale of the Trust Securities;
(ii) without the consent of any Person, to cause the Trust to
enter into and to execute, deliver and perform on behalf of the Trust,
the Expense Agreement, and such other agreements as may be necessary
or desirable in connection with the consummation of the Underwriting
Agreement;
(iii) to qualify the Trust to do business in any jurisdiction as
may be necessary or desirable;
(iv) the collection of interest, principal and any other payments
made in respect of the Debentures in the Payment Account;
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(v) the registration of the Capital Securities under the
Securities Act of 1933, as amended, and under state securities or blue
sky laws, and the qualification of this Trust Agreement as a trust
indenture under the Trust Indenture Act;
(vi) the appointment of a Paying Agent and Transfer Agent and
Registrar in accordance with this Trust Agreement;
(vii) registering transfers of the Trust Securities in accordance
with this Trust Agreement;
(viii) the establishment of a record date for any of the purposes
contemplated by Section 6.07 hereof;
(ix) to the extent provided in this Trust Agreement, the winding
up of the affairs of and liquidation of the Trust and the preparation,
execution and filing of the certificate of cancellation with the
Secretary of State of Delaware; and
(x) the taking of any action incidental to the foregoing as the
Administrative Trustees may from time to time determine is necessary
or advisable to protect and conserve the Trust Property for the
benefit of the Securityholders (without consideration of the effect of
any such action on any particular Securityholder).
(B) As among the Trustees, the Property Trustee shall have the power, duty
and authority to act on behalf of the Trust with respect to the following
ministerial matters:
(i) the establishment of the Payment Account;
(ii) the receipt of the Debentures;
(iii) the deposit of interest, principal and any other payments
made in respect of the Debentures in the Payment Account;
(iv) the distribution of amounts owed to the Securityholders in
respect of the Trust Securities in accordance with the terms of this
Trust Agreement;
(v) the sending of notices of default and other information
regarding the Trust Securities and the Debentures to the
Securityholders in accordance with the terms of this Trust Agreement;
(vi) the distribution of the Trust Property in accordance with
the terms of this Trust Agreement;
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(vii) as provided in this Trust Agreement, the winding up of the
affairs of and liquidation of the Trust and the execution of the
certificate of cancellation to be prepared and filed by the
Administrative Trustees with the Secretary of State of the State of
Delaware; and
(viii) the taking of any ministerial action incidental to the
foregoing as the Property Trustee may from time to time determine is
necessary or advisable to protect and conserve the Trust Property for
the benefit of the Securityholders (without consideration of the
effect of any such action on any particular Securityholder).
Subject to this Section 2.07(a)(B), the Property Trustee shall have
none of the duties, powers or authority of the Administrative Trustees set forth
in Sections 2.07(a)(A) and 2.07(c) or the Depositor set forth in Section
2.07(c). The Property Trustee shall have the power and authority to exercise
all of the rights, powers and privileges of a holder of Debentures under the
Subordinated Indenture and, if an Event of Default occurs and is continuing, the
Property Trustee may, for the benefit of Holders of the Trust Securities, in its
discretion, proceed to protect and enforce its rights as holder of the
Debentures subject to the rights of the Holders pursuant to the terms of this
Trust Agreement.
(b) So long as this Trust Agreement remains in effect, the Trust (or
the Trustees acting on behalf of the Trust) shall not undertake any business,
activities or transaction except as expressly provided herein or contemplated
hereby. In particular, the Trustees shall not (i) acquire any investments or
engage in any activities not authorized by this Trust Agreement, (ii) sell,
assign, transfer, exchange, pledge, set-off or otherwise dispose of any of the
Trust Property or interests therein, including to Securityholders, except as
expressly provided herein, (iii) take any action that would cause the Trust to
fail or cease to qualify as a "grantor trust" for United States federal income
tax purposes and not as an association taxable as a corporation, (iv) incur any
indebtedness for borrowed money or (v) take or consent to any action that would
result in the placement of a Lien on any of the Trust Property. The Trustees
shall defend all claims and demands of all Persons at any time claiming any Lien
on any of the Trust Property adverse to the interest of the Trust or the
Securityholders in their capacity as Securityholders.
(c) In connection with the issue of the Capital Securities, the
Depositor and the Administrative Trustees, acting singly or together, (and, in
the case of (v) below, Robert J. Reger, Jr., as authorized representative of the
Trust) shall have the right and responsibility to assist the Trust with respect
to, or effect on behalf of the Trust, the following (and any actions taken by
the Depositor in furtherance of the following prior to the date of this Trust
Agreement are hereby ratified and confirmed in all respects):
(i) to prepare for filing by the Trust with the Commission and to
execute a registration statement on Form S-3 in relation to the
Capital Securities, including any amendments thereto;
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(ii) to determine the States in which to take appropriate action
to qualify or register for sale all or part of the Capital Securities
and to do any and all such acts, other than actions which must be
taken by or on behalf of the Trust, and advise the Trustees of actions
they must take on behalf of the Trust, and prepare for execution and
filing any documents to be executed and filed by the Trust or on
behalf of the Trust, as the Depositor deems necessary or advisable in
order to comply with the applicable laws of any such States;
(iii) to execute and deliver on behalf of the Trust the
Underwriting Agreement and such other agreements as may be necessary
or desirable in connection with the consummation thereof;
(iv) to select the investment banker or bankers to act as
underwriters with respect to the offer and sale by the Trust of
Capital Securities ("Offer") and negotiate the terms of an
Underwriting Agreement and pricing agreement providing for the Offer;
(v) to take any other actions necessary or desirable to carry out
any of the foregoing activities; and
(vi) to designate itself or an Affiliate to be the Transfer Agent
and Registrar.
(d) Notwithstanding anything herein to the contrary, the
Administrative Trustees are authorized and directed to conduct the affairs of
the Trust and to operate the Trust so that the Trust will not be deemed to be an
"investment company" required to be registered under the Investment Company Act
of 1940, as amended, or classified other than as a "grantor trust" for United
States federal income tax purposes and not as an association taxable as a
corporation and so that the Debentures will be treated as indebtedness of the
Depositor for United States federal income tax purposes. In this connection, the
Depositor and the Administrative Trustees are authorized to take any action, not
inconsistent with applicable law, the certificate of trust filed with the
Secretary of State of the State of Delaware with respect to the Trust (as
amended or restated from time to time, the "Certificate of Trust") or this Trust
Agreement, that each of the Depositor and the Administrative Trustees determines
in its discretion to be necessary or desirable for such purposes, as long as
such action does not materially adversely affect the interests of the Holders of
the Capital Securities.
SECTION 2.08. ASSETS OF TRUST. The assets of the Trust shall consist
of the Trust Property.
SECTION 2.09. TITLE TO TRUST PROPERTY. Legal title to all Trust
Property shall be vested at all times in the Property Trustee (in its capacity
as such) and shall be held and
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administered by the Property Trustee for the benefit of the Securityholders in
accordance with this Trust Agreement.
ARTICLE III
PAYMENT ACCOUNT
SECTION 3.01 PAYMENT ACCOUNT.
(a) On or prior to the Closing Date, the Property Trustee shall
establish the Payment Account. The Property Trustee and the Paying Agent
appointed by the Administrative Trustees shall have exclusive control and sole
right of withdrawal with respect to the Payment Account for the purpose of
making deposits in and withdrawals from the Payment Account in accordance with
this Trust Agreement. All monies and other property deposited or held from time
to time in the Payment Account shall be held by the Property Trustee in the
Payment Account for the exclusive benefit of the Holders of Trust Securities and
for distribution as herein provided, including (and subject to) any priority of
payments provided for herein. The Property Trustee shall have no liability in
any respect whatsoever in regards to any moneys or other property deposited in
the Payment Account at an institution other than the Property Trustee.
(b) The Property Trustee shall deposit in the Payment Account,
promptly upon receipt, all payments of principal or interest on, and any other
payments or proceeds with respect to, the Debentures. Amounts held in the
Payment Account shall not be invested by the Property Trustee pending
distribution thereof.
ARTICLE IV.
DISTRIBUTIONS; REDEMPTION
SECTION 4.01. DISTRIBUTIONS.
(a) Distributions on the Trust Securities shall be cumulative, and
will accumulate whether or not there are funds of the Trust available for the
payment of Distributions. Distributions shall accrue from the Closing Date,
and, except in the event that the Depositor exercises its right to extend the
interest payment period for the Debentures pursuant to Section 311 of the
Subordinated Indenture, shall be payable quarterly in arrears on February 1, May
1, August 1 and November 1 of each year, commencing on May 1, 1997. If any date
on which Distributions are otherwise payable on the Trust Securities is not a
Business Day, then the payment of such Distribution shall be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay) in each case, with the same force and
effect as if made on such date (each date
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on which Distributions are payable in accordance with this Section 4.01(a) a
"Distribution Date").
(b) Distributions payable on the Trust Securities shall be fixed at
the per annum floating rate to be determined quarterly by an agent of the
Company with respect to the Debentures. Upon receipt of notice of the
determination of any such rate, the Property Trustee shall notify the Holders of
Capital Securities of such rate, the distribution payable per Capital Security
and the Distribution Date therefor. The amount of Distributions payable for any
full quarterly period shall be computed on the basis of twelve 30-day months and
a 360-day year and, for any period shorter than a full month, on the basis of
the actual number of days elapsed. If the interest payment period for the
Debentures is extended pursuant to Section 311 of the Subordinated Indenture,
then Distributions on the Capital Securities will be deferred for the period
equal to the extension of the interest payment period for the Debentures and the
rate per annum at which Distributions on the Trust Securities accumulate shall
be increased by an amount such that the aggregate amount of Distributions that
accumulate on all Trust Securities during any such extended interest payment
period is equal to the aggregate amount of interest (including, to the extent
permitted by law, interest payable on unpaid interest at the percentage rate per
annum set forth above, compounded quarterly) that accrues during any such
extended interest payment period on the Debentures. The amount of Distributions
payable for any period shall include the Additional Amounts, if any.
(c) Distributions on the Trust Securities shall be made and shall be
deemed payable on each Distribution Date only to the extent that the Trust has
funds available in the Payment Account for the payment of such Distributions.
(d) Distributions on the Trust Securities with respect to a
Distribution Date shall be payable to the Holders thereof as they appear on the
Securities Register for the Trust Securities on the relevant record date, which
will be, for so long as the Capital Securities remain in book-entry form, one
Business Day prior to the relevant Distribution Date, and in the event that the
Capital Securities are not in book-entry form, shall be 15 days prior to the
relevant Distribution Date.
SECTION 4.02. REDEMPTION. (a) On each Debenture Redemption Date
(including a Debenture Redemption Date with respect to a Tax Event) and at the
maturity date for the Debentures (as defined in the Subordinated Indenture), the
Property Trustee will be required to redeem a Like Amount of Trust Securities at
the Redemption Price plus accumulated and unpaid Distributions to the date of
such payment.
(b) Notice of redemption shall be given by the Property Trustee by
first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days
prior to the Redemption Date to each Holder of Trust Securities to be redeemed,
at such Holder's address appearing in the Security Register. All notices of
redemption or liquidation shall state:
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(i) the Redemption Date;
(ii) the Redemption Price and the amount of accumulated and
unpaid Dividends to be paid on the Redemption Date;
(iii) the CUSIP number;
(iv) if less than all the Outstanding Trust Securities are to be
redeemed, the identification and the total Liquidation Amount of the
particular Trust Securities to be redeemed; and
(v) that on the Redemption Date the Redemption Price plus
accumulated and unpaid Distributions to the date of such payment will
become due and payable upon each such Trust Security to be redeemed
and that interest thereon will cease to accrue on and after said date.
(c) The Trust Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price plus accumulated and unpaid Distributions to
the date of such payment with the proceeds from the contemporaneous redemption
of Debentures. Redemptions of the Trust Securities shall be made and the
Redemption Price plus accumulated and unpaid Distributions to the date of such
payment shall be deemed payable on each Redemption Date only to the extent that
the Trust has funds immediately available in the Payment Account for such
payment.
(d) If the Property Trustee gives a notice of redemption in respect
of any Capital Securities, then, by 12:00 noon, New York time, on the Redemption
Date, subject to Section 4.02(c), the Property Trustee shall irrevocably deposit
with the Paying Agent funds sufficient to pay the applicable Redemption Price
plus accumulated and unpaid Distributions to the date of such payment and will
give the Paying Agent irrevocable instructions and authority to pay the
Redemption Price plus accumulated and unpaid Distributions to the date of such
payment to the Holders thereof upon surrender of their Capital Securities
Certificates. Notwithstanding the foregoing, Distributions payable on or prior
to the Redemption Date for any Trust Securities called for redemption shall be
payable to the Holders of such Trust Securities as they appear on the Securities
Register for the Trust Securities on the relevant record dates for the related
Distribution Dates. If notice of redemption shall have been given and funds
deposited as required, then on the Redemption Date, all rights of
Securityholders holding Trust Securities so called for redemption will cease,
except the right of such Securityholders to receive the Redemption Price plus
accumulated and unpaid Distributions to the date of payment thereof, but without
interest thereon, and such Trust Securities will cease to be outstanding. In
the event that any Redemption Date is not a Business Day, then payment of the
Redemption Price payable on such date plus accumulated and unpaid Distributions
to such Redemption Date shall be made on the next succeeding day which is a
Business Day (and without any interest or other payment in respect of any such
delay). In the event that payment of the Redemption Price
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plus accumulated and unpaid Distributions in respect of any Trust Securities
called for redemption is improperly withheld or refused and not paid either by
the Trust or by the Depositor pursuant to the Guarantee, Distributions on such
Trust Securities will continue to accrue, at the then applicable rate, from the
Redemption Date originally established by the Trust for such Trust Securities to
the date such Redemption Price plus accumulated and unpaid Distributions is
actually paid, in which case the actual payment date will be deemed the date
fixed for redemption for purposes of calculating the Redemption Price plus
accumulated and unpaid Distributions to such date.
(e) Payment of the Redemption Price on the Trust Securities shall be
made to the Holders thereof as they appear on the Securities Register for the
Trust Securities on the relevant record date, which shall be the fifteenth day
prior to the Redemption Date.
(f) If less than all the Outstanding Trust Securities are to be
redeemed on a Redemption Date, then the aggregate Liquidation Amount of Trust
Securities to be redeemed shall be allocated to the Common Securities and to the
Capital Securities in the proportion that the aggregate Liquidation Amount of
each is to the aggregate Liquidation Amount of all outstanding Trust Securities.
The particular Capital Securities to be redeemed shall be selected not more than
60 days prior to the Redemption Date by the Property Trustee from the
Outstanding Capital Securities not previously called for redemption, by such
method as the Property Trustee shall deem fair and appropriate and which may
provide for the selection for redemption of portions (equal to $1,000 or
integral multiples thereof) of the Liquidation Amount of Capital Securities of a
denomination larger than $1,000. The Property Trustee shall promptly notify the
Transfer Agent and Registrar in writing of the Capital Securities selected for
redemption and, in the case of any Capital Securities selected for partial
redemption, the Liquidation Amount thereof to be redeemed. For all purposes of
this Trust Agreement, unless the context otherwise requires, all provisions
relating to the redemption of Capital Securities shall relate, in the case of
any Capital Securities redeemed or to be redeemed only in part, to the portion
of the Liquidation Amount of Capital Securities which has been or is to be
redeemed.
SECTION 4.03. SUBORDINATION OF COMMON SECURITIES. (a) Payment of
Distributions (including Additional Amounts, if applicable) on, and the
Redemption Price plus accumulated and unpaid distributions of, the Trust
Securities, as applicable, shall be made pro rata based on the Liquidation
Amount of the Trust Securities; provided, however, that if on any Distribution
Date or Redemption Date an Event of Default shall have occurred and be
continuing, no payment of any Distribution (including Additional Amounts, if
applicable) on, or Redemption Price of, any Common Security, and no other
payment on account of the redemption, liquidation or other acquisition of Common
Securities, shall be made unless payment in full in cash of all accumulated and
unpaid Distributions (including Additional Amounts, if applicable) on all
Outstanding Capital Securities for all distribution periods terminating on or
prior thereto, or in the case of payment of the Redemption Price plus
accumulated and unpaid Distributions the full amount of such Redemption Price
plus accumulated and unpaid Distributions on all Outstanding Capital Securities,
shall have been
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made or provided for, and all funds immediately available to the Property
Trustee shall first be applied to the payment in full in cash of all
Distributions (including Additional Amounts, if applicable) on, or Redemption
Price of plus accumulated and unpaid Distributions of, Capital Securities then
due and payable.
(b) In the case of the occurrence of any Event of Default resulting
from a Debenture Event of Default, the Holder of Common Securities will be
deemed to have waived any such Event of Default under this Trust Agreement until
the effect of all such Events of Default with respect to the Capital Securities
have been cured, waived or otherwise eliminated. Until any such Events of
Default under this Trust Agreement with respect to the Capital Securities have
been so cured, waived or otherwise eliminated, the Property Trustee shall act
solely on behalf of the Holders of the Capital Securities and not the Holder of
the Common Securities, and only the Holders of the Capital Securities will have
the right to direct the Property Trustee to act on their behalf.
SECTION 4.04. PAYMENT PROCEDURES. Payments in respect of the
Capital Securities shall be made by check mailed to the address of the Person
entitled thereto as such address shall appear on the Securities Register or, if
the Capital Securities are held by a Securities Depository, such Distributions
shall be made to the Securities Depository, which shall credit the relevant
Persons' accounts at such Securities Depository on the applicable distribution
dates. Payments in respect of the Common Securities shall be made in such
manner as shall be mutually agreed between the Administrative Trustees and the
Holder of the Common Securities.
SECTION 4.05. TAX RETURNS AND REPORTS. The Administrative Trustees
shall prepare (or cause to be prepared), at the Depositor's expense and
direction, and file all United States federal, state and local tax and
information returns and reports required to be filed by or in respect of the
Trust. In this regard, the Administrative Trustees shall (a) prepare and file
(or cause to be prepared or filed) the Internal Revenue Service Form 1041 (or
any successor form) required to be filed in respect of the Trust in each taxable
year of the Trust and (b) prepare and furnish (or cause to be prepared and
furnished) to each Securityholder the related Internal Revenue Service Form
1099, or any successor form or the information required to be provided on such
form. The Administrative Trustees shall provide the Depositor and the Property
Trustee with a copy of all such returns, reports and schedules promptly after
such filing or furnishing. The Trustees shall comply with United States federal
withholding and backup withholding tax laws and information reporting
requirements with respect to any payments to Securityholders under the Trust
Securities.
SECTION 4.06. PAYMENTS UNDER INDENTURE. Any amount payable hereunder
to any Holder of Capital Securities shall be reduced by the amount of any
corresponding payment such Holder has directly received pursuant to Section 808
of the Subordinated Indenture. Notwithstanding the provisions hereunder to the
contrary, Securityholders acknowledge that any Holder of Capital Securities that
receives payment under Section 808
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of the Subordinated Indenture may receive amounts greater than the amount such
Holder may be entitled to receive pursuant to the other provisions of this Trust
Agreement.
ARTICLE V.
TRUST SECURITIES CERTIFICATES
SECTION 5.01. INITIAL OWNERSHIP. Upon the creation of the Trust by
the contribution by the Depositor pursuant to Section 2.03 and until the
issuance of the Trust Securities, and at any time during which no Trust
Securities are outstanding, the Depositor shall be the sole beneficial owner of
the Trust.
SECTION 5.02. THE TRUST SECURITIES CERTIFICATES. The Trust Securities
Certificates shall be issued in denominations of $1,000 Liquidation Amount and
integral multiples thereof. The Trust Securities Certificates shall be executed
on behalf of the Trust by manual or facsimile signature of at least one
Administrative Trustee and, if executed on behalf of the Trust by facsimile
signature, countersigned by the Transfer Agent and Registrar or its agent.
Trust Securities Certificates bearing the manual signatures of individuals who
were, at the time when such signatures shall have been affixed, authorized to
sign on behalf of the Trust and, if executed on behalf of the Trust by facsimile
signature, countersigned by the Transfer Agent and Registrar or its agent, shall
be validly issued and entitled to the benefits of this Trust Agreement,
notwithstanding that such individuals or any of them shall have ceased to be so
authorized prior to the delivery of such Trust Securities Certificates or did
not hold such offices at the date of delivery of such Trust Securities
Certificates. A transferee of a Trust Securities Certificate shall become a
Securityholder, and shall be entitled to the rights and subject to the
obligations of a Securityholder hereunder, upon due registration of such Trust
Securities Certificate in such transferee's name pursuant to Section 5.04 or
5.11.
SECTION 5.03. EXECUTION AND DELIVERY OF TRUST SECURITIES CERTIFICATES.
On the Closing Date, the Administrative Trustees shall cause Trust Securities
Certificates, in an aggregate Liquidation Amount as provided in Sections 2.04
and 2.05, to be executed on behalf of the Trust, and in the case of Capital
Securities executed by facsimile signature, countersigned by the Transfer Agent
and Registrar, or its agent, and delivered to or upon the written order of the
Depositor signed by its chairman of the board, any of its vice presidents or its
Treasurer, without further corporate action by the Depositor, in authorized
denominations. The Depositor agrees to indemnify, defend and hold The Bank of
New York harmless against any and all costs and liabilities incurred without
negligence arising out of or in connection with any such countersigning by it.
SECTION 5.04. REGISTRATION OF TRANSFER AND EXCHANGE OF CAPITAL
SECURITIES CERTIFICATES. The Transfer Agent and Registrar shall keep or cause
to be kept, at the office or agency maintained pursuant to Section 5.08, a
Securities Register in which, subject to
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such reasonable regulations as it may prescribe, the Transfer Agent and
Registrar shall provide for the registration of Capital Securities Certificates
and the Common Securities Certificates (subject to Section 5.10 in the case of
the Common Securities Certificates) and registration of transfers and exchanges
of Capital Securities Certificates as herein provided. Texas Utilities Services
Inc. shall be the initial Transfer Agent and Registrar.
Upon surrender for registration of transfer of any Capital Securities
Certificate at the office or agency maintained pursuant to Section 5.08, the
Administrative Trustees, or any one of them, shall execute on behalf of the
Trust by manual or facsimile signature and, if executed on behalf of the Trust
by facsimile signature, cause the Transfer Agent and Registrar or its agent to
countersign and deliver, in the name of the designated transferee or
transferees, one or more new Capital Securities Certificates in authorized
denominations of a like aggregate Liquidation Amount. At the option of a
Holder, Capital Securities Certificates may be exchanged for other Capital
Securities Certificates in authorized denominations of the same class and of a
like aggregate Liquidation Amount upon surrender of the Capital Securities
Certificates to be exchanged at the office or agency maintained pursuant to
Section 5.08.
Every Capital Securities Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in form satisfactory to the Administrative Trustees and
the Transfer Agent and Registrar duly executed by the Holder or such Holder's
attorney duly authorized in writing. Each Capital Securities Certificate
surrendered for registration of transfer or exchange shall be canceled and
subsequently disposed of by the Administrative Trustees in accordance with
customary practice. The Trust shall not be required to (i) issue, register the
transfer of, or exchange any Capital Securities during a period beginning at the
opening of business 15 calendar days before the day of mailing of a notice of
redemption of any Capital Securities called for redemption and ending at the
close of business on the day of such mailing or (ii) register the transfer of or
exchange any Capital Securities so selected for redemption, in whole or in part,
except the unredeemed portion of any such Capital Securities being redeemed in
part.
No service charge shall be made for any registration of transfer or
exchange of Capital Securities Certificates, but the Transfer Agent and
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Capital Securities Certificates.
SECTION 5.05. MUTILATED, DESTROYED, LOST OR STOLEN TRUST SECURITIES
CERTIFICATES. If (a) any mutilated Trust Securities Certificate shall be
surrendered to the Transfer Agent and Registrar, or if the Transfer Agent and
Registrar shall receive evidence to its satisfaction of the destruction, loss or
theft of any Trust Securities Certificate and (b) there shall be delivered to
the Transfer Agent and Registrar and the Administrative Trustees such security
or indemnity as may be required by them to save each of them and the Depositor
harmless, then in the absence of notice that such Trust Securities Certificate
shall have been acquired by a bona fide purchaser, the Administrative Trustees,
or any one of
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them, on, behalf of the Trust shall execute by manual or facsimile signature
and, if execution on behalf of the Trust is by facsimile signature,
countersigned by a Transfer Agent and Registrar or its agent; and the
Administrative Trustees, or any one of them, and, if executed on behalf of the
Trust by facsimile signature, countersigned by the Transfer Agent and Registrar
or its agent shall make available for delivery, in exchange for or in lieu of
any such mutilated, destroyed, lost or stolen Trust Securities Certificate, a
new Trust Securities Certificate of like class, tenor and denomination. In
connection with the issuance of any new Trust Securities Certificate under this
Section, the Administrative Trustees or the Transfer Agent and Registrar may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection therewith. Any duplicate Trust
Securities Certificate issued pursuant to this Section shall constitute
conclusive evidence of an ownership interest in the Trust, as if originally
issued, whether or not the lost, stolen or destroyed Trust Securities
Certificate shall be found at any time.
SECTION 5.06. PERSONS DEEMED SECURITYHOLDERS. Prior to due
presentation of a Trust Securities Certificate for registration of transfer, the
Trustees and the Transfer Agent and Registrar shall be entitled to treat the
Person in whose name any Trust Securities Certificate shall be registered in the
Securities Register as the owner of such Trust Securities Certificate for the
purpose of receiving Distributions and for all other purposes whatsoever, and
neither the Trustees nor the Transfer Agent and Registrar shall be bound by any
notice to the contrary.
SECTION 5.07. ACCESS TO LIST OF SECURITYHOLDERS' NAMES AND ADDRESSES.
The Administrative Trustees shall furnish or cause to be furnished (x) to the
Depositor, within 15 days after receipt by any Administrative Trustee of a
request therefor from the Depositor in writing and (y) to the Property Trustee,
promptly after receipt by any Administrative Trustee of a request therefor from
the Property Trustee in writing in order to enable the Property Trustee to
discharge its obligations under this Trust Agreement, a list, in such form as
the Depositor or the Property Trustee may reasonably require, of the names and
addresses of the Securityholders as of a recent date. If Holders of Trust
Securities Certificates evidencing ownership at such time and for the previous
six months of not less than 25% of the outstanding aggregate Liquidation Amount
apply in writing to any Administrative Trustee, and such application states that
the applicants desire to communicate with other Securityholders with respect to
their rights under this Trust Agreement or under the Trust Securities
Certificates and such application is accompanied by a copy of the communication
that such applicants propose to transmit, then the Administrative Trustees
shall, within five Business Days after the receipt of such application, afford
such applicants access during normal business hours to the current list of
Securityholders. Each Holder, by receiving and holding a Trust Securities
Certificate, shall be deemed to have agreed not to hold either the Depositor or
the Administrative Trustees accountable by reason of the disclosure of its name
and address, regardless of the source from which such information was derived.
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SECTION 5.08. MAINTENANCE OF OFFICE OR AGENCY. The Depositor shall or
shall cause the Transfer Agent and Registrar to maintain in the Borough of
Manhattan, The City of New York, an office or offices or agency or agencies
where Capital Securities Certificates may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Depositor or
the Transfer Agent and Registrar in respect of the Trust Securities Certificates
may be served. The Depositor initially designates Midwest Clearing Corporation,
40 Broad Street, New York, New York 10004 as its principal corporate trust
office for such purposes. The Depositor shall or shall cause the Transfer Agent
and Registrar to give prompt written notice to the Depositor, the Property
Trustee and to the Securityholders of any change in the location of the
Securities Register or any such office or agency.
SECTION 5.09. APPOINTMENT OF PAYING AGENT. The Paying Agent shall
make distributions to Securityholders from the Payment Account and shall report
the amounts of such distributions to the Administrative Trustees and the
Property Trustee. Any Paying Agent shall have the revocable power to withdraw
funds from the Payment Account for the purpose of making the Distributions
referred to above. The Property Trustee shall be entitled to rely upon a
certificate of the Paying Agent stating in effect the amount of such funds so to
be withdrawn and that same are to be applied by the Paying Agent in accordance
with this Section 5.09. The Administrative Trustees or any one of them may
revoke such power and remove the Paying Agent if the Administrative Trustee or
any one of them determines in its sole discretion that the Paying Agent shall
have failed to perform its obligations under this Trust Agreement in any
material respect. The Paying Agent shall initially be Texas Utilities Services
Inc., and it may choose any co-paying agent that is acceptable to the
Administrative Trustees and the Depositor. The Paying Agent shall be permitted
to resign upon 30 days' written notice to the Administrative Trustees and the
Depositor. In the event of the removal or resignation of Texas Utilities
Services, Inc. as Paying Agent, the Administrative Trustees shall appoint a
successor that is reasonably acceptable to the Property Trustee and the
Depositor to act as Paying Agent (which shall be a bank, trust company or an
Affiliate of the Depositor). The Administrative Trustees shall cause such
successor Paying Agent or any additional Paying Agent appointed by the
Administrative Trustees to execute and deliver to the Trustees an instrument in
which such successor Paying Agent or additional Paying Agent shall agree with
the Trustees that as Paying Agent, such successor Paying Agent or additional
Paying Agent will hold all sums, if any, held by it for payment to the
Securityholders in trust for the benefit of the Securityholders entitled thereto
until such sums shall be paid to such Securityholders. The Paying Agent shall
return all unclaimed funds to the Property Trustee and upon resignation or
removal of a Paying Agent such Paying Agent shall also return all funds in its
possession to the Property Trustee. The provisions of Sections 8.01, 8.03 and
8.06 shall apply to the Paying Agent appointed hereunder, and the Paying Agent
shall be bound by the requirements with respect to paying agents of securities
issued pursuant to the Trust Indenture Act. Any reference in this Trust
Agreement to the Paying Agent shall include any co-paying agent unless the
context requires otherwise.
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SECTION 5.10. OWNERSHIP OF COMMON SECURITIES BY DEPOSITOR. On the
Closing Date, the Depositor shall acquire, and thereafter retain, beneficial and
record ownership of the Common Securities. Any attempted transfer of the Common
Securities shall be void. The Administrative Trustees shall cause each Common
Securities Certificate issued to the Depositor to contain a legend stating "THIS
CERTIFICATE IS NOT TRANSFERABLE". Common Securities Certificates representing
the Common Securities shall be issued to the Depositor in the form of a
typewritten or definitive Common Securities Certificate.
SECTION 5.11. DEFINITIVE CAPITAL SECURITIES CERTIFICATES. Upon
initial issuance of the Capital Securities, the Definitive Capital Securities
Certificates shall be typewritten, printed, lithographed or engraved or may be
produced in any other manner as is reasonably acceptable to the Administrative
Trustees, as evidenced by the execution thereof by the Administrative Trustees,
or any one of them. The Administrative Trustees, or any one of them, shall
execute on behalf of the Trust by manual or facsimile signature, and, if
executed by facsimile on behalf of the Trust, countersigned by the Transfer
Agent and Registrar or its agent, the Definitive Capital Securities Certificates
initially in accordance with the instructions of the Depositor. Neither the
Transfer Agent and Registrar nor any of the Administrative Trustees shall be
liable for any delay in delivery of such instructions and may conclusively rely
on, and shall be protected in relying on, such instructions.
SECTION 5.12. BOOK-ENTRY SYSTEM. Some or all of the Capital
Securities may be registered in the name of a securities depository ("Securities
Depository") or a nominee therefor, and held in the custody of the Securities
Depository. In such event, a single certificate will be issued and delivered to
the Securities Depository for such Capital Securities, in which case the Owners
of such Capital Securities will not receive physical delivery of certificates
for Capital Securities. Except as provided herein, all transfers of beneficial
ownership interests in such Capital Securities will be made by book-entry only,
and no investor or other party purchasing, selling or otherwise transferring
beneficial ownership of the Capital Securities will receive, hold or deliver any
certificate for Capital Securities. The Depositor, the Trustees and the Paying
Agent will recognize the Securities Depository or its nominee as the Holder of
Capital Securities for all purposes, including notices and voting.
The Administrative Trustees, at the direction and expense of the
Depositor, may from time to time appoint a Securities Depository or a successor
thereto and enter into a letter of representations or other agreement with such
Securities Depository to establish procedures with respect to the Capital
Securities. Any Securities Depository shall be a Clearing Agency.
The Depositor and the Trustees covenant and agree to meet the
requirements of a Securities Depository for the Capital Securities with respect
to required notices and other provisions of the letter of representations or
agreement executed with respect to such Capital Securities.
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Whenever the beneficial ownership of any Capital Securities is
determined through the books of a Securities Depository, the requirements in
this Trust Agreement of holding, delivering or transferring such Capital
Securities shall be deemed modified with respect to such Capital Securities to
meet the requirements of the Securities Depository with respect to actions of
the Trustees, the Depositor and the Paying Agent. Any provisions hereof
permitting or requiring delivery of such Capital Securities shall, while such
Capital Securities are in a book-entry system, be satisfied by the notation on
the books of the Securities Depository in accordance with applicable state law.
SECTION 5.13. RIGHTS OF SECURITYHOLDERS. The legal title to the Trust
Property is vested exclusively in the Property Trustee (in its capacity as such)
in accordance with Section 2.09, and the Securityholders shall not have any
right or title therein other than an undivided beneficial interest in the assets
of the Trust conferred by their Trust Securities and they shall have no right to
call for any partition or division of property, profits or rights of the Trust
except as described below. The Trust Securities shall be personal property
giving only the rights specifically set forth therein and in this Trust
Agreement. The Capital Securities shall have no preemptive or similar rights and
when issued and delivered to Securityholders against payment of the purchase
price therefor will be fully paid and nonassessable undivided beneficial
interests in the assets of the Trust.
SECTION 5.14. CANCELLATION BY TRANSFER AGENT AND REGISTRAR. All Trust
Securities Certificates surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the Transfer
Agent and Registrar, be delivered to the Transfer Agent and Registrar and, if
not theretofore cancelled, shall be promptly cancelled by the Transfer Agent and
Registrar. No Trust Securities Certificates shall be issued in lieu of or in
exchange for any Trust Securities Certificates cancelled as provided in this
Section, except as expressly permitted by this Trust Agreement. All cancelled
Trust Securities Certificates held by the Transfer Agent and Registrar shall be
disposed of in accordance with customary practices.
ARTICLE VI.
ACTS OF SECURITYHOLDERS; MEETINGS; VOTING
SECTION 6.01. LIMITATIONS ON VOTING RIGHTS. (a) Except as provided in
this Section 6.01, in Section 10.03 and as otherwise required by law, no Holder
of Capital Securities shall have any right to vote or in any manner otherwise
control the administration, operation and management of the Trust or the
obligations of the parties hereto, nor shall anything herein set forth, or
contained in the terms of the Trust Securities Certificates, be construed so as
to constitute the Securityholders from time to time as partners or members of an
association. If the Property Trustee fails to enforce its rights under the
Debentures or this Trust Agreement, a Holder of Capital Securities may institute
a legal proceeding directly against the Depositor to enforce the Property
Trustee's rights under the Debentures or this
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Trust Agreement, to the fullest extent permitted by law, without first
instituting any legal proceeding against the Property Trustee or any other
person. Notwithstanding the foregoing, a Holder of Capital Securities may
directly institute a proceeding for enforcement of payment to such Holder of
principal of or interest on the Debentures having a principal amount equal to
the aggregate liquidation preference amount of the Capital Securities of such
Holder on or after the due dates specified in the Debentures.
(b) So long as any Debentures are held by the Property Trustee, the
Trustees shall not (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee, or executing any
trust or power conferred on the Debenture Trustee with respect to such
Debentures, (ii) waive any past default which is waivable under Section 813 of
the Subordinated Indenture, (iii) exercise any right to rescind or annul a
declaration that the principal of all the Debentures shall be due and payable or
(iv) consent to any amendment, modification or termination of the Subordinated
Indenture or the Debentures, where such consent shall be required, without, in
each case, obtaining the prior approval of the Holders of at least 66 2/3% of
the aggregate Liquidation Amount of the Outstanding Capital Securities;
provided, however, that where a consent under the Subordinated Indenture would
require the consent of each Holder of Debentures affected thereby, no such
consent shall be given by any Trustee without the prior written consent of each
Holder of Capital Securities. The Trustees shall not revoke any action
previously authorized or approved by a vote of the Capital Securities, except
pursuant to a subsequent vote of the Capital Securities. The Property Trustee
shall notify all Holders of the Capital Securities of any notice of default
received from the Debenture Trustee with respect to the Debentures. In addition
to obtaining the foregoing approvals of the Holders of the Capital Securities,
prior to taking any of the foregoing actions, the Property Trustee shall, at the
expense of the Depositor, obtain an Opinion of Counsel experienced in such
matters to the effect that the Trust will be classified as a "grantor trust" and
not as an association taxable as a corporation for United States federal income
tax purposes on account of such action.
(c) If any proposed amendment to the Trust Agreement provides for, or
the Trustees otherwise propose to effect, (i) any action that would materially
adversely affect the powers, preferences or special rights of the Capital
Securities, whether by way of amendment to the Trust Agreement or otherwise, or
(ii) the dissolution, winding-up or termination of the Trust, other than
pursuant to the terms of this Trust Agreement, then the Holders of Outstanding
Capital Securities as a class will be entitled to vote on such amendment or
proposal and such amendment or proposal shall not be effective except with the
approval of the Holders of at least 66 2/3% in Liquidation Amount of the
Outstanding Capital Securities. No amendment to this Trust Agreement may be
made if, as a result of such amendment, the Trust would not be classified as a
"grantor trust" but an association taxable as a corporation for United States
federal income tax purposes.
SECTION 6.02. NOTICE OF MEETINGS. Notice of all meetings of the
Holders of Capital Securities, stating the time, place and purpose of the
meeting, shall be given by the Administrative Trustees pursuant to Section 10.08
to each Holder of a Capital Security, at
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his registered address, at least 15 days and not more than 90 days before the
meeting. At any such meeting, any business properly before the meeting may be so
considered whether or not stated in the notice of the meeting. Any adjourned
meeting may be held as adjourned without further notice.
SECTION 6.03. MEETINGS OF HOLDERS OF CAPITAL SECURITIES. No annual
meeting of Securityholders is required to be held. The Administrative Trustees,
however, shall call a meeting of Securityholders to vote on any matter upon the
written request of the Holders of 25% of the then Outstanding Capital Securities
(based upon their aggregate Liquidation Amount) and may, at any time in their
discretion, call a meeting of Holders of Capital Securities to vote on any
matters as to which the Holders of Capital Securities are entitled to vote.
Holders of 50% of the then Outstanding Capital Securities (based upon
their aggregate Liquidation Amount), present in person or by proxy, shall
constitute a quorum at any meeting of Securityholders.
If a quorum is present at a meeting, an affirmative vote by the
Holders of Capital Securities present, in person or by proxy, holding more than
the lesser of (x) 66 2/3% of the then Outstanding Capital Securities (based upon
their aggregate Liquidation Amount) held by the Holders of then Outstanding
Capital Securities present, either in person or by proxy, at such meeting and
(y) 50% of the Outstanding Capital Securities (based upon their aggregate
Liquidation Amount) shall constitute the action of the Securityholders, unless
this Trust Agreement requires a greater number of affirmative votes.
SECTION 6.04. VOTING RIGHTS. Securityholders shall be entitled to one
vote for each $1,000 of Liquidation Amount represented by their Trust Securities
in respect of any matter as to which such Securityholders are entitled to vote.
SECTION 6.05. PROXIES, ETC. At any meeting of Securityholders, any
Securityholder entitled to vote thereat may vote by proxy, provided that no
proxy shall be voted at any meeting unless it shall have been placed on file
with the Administrative Trustees, or with such other officer or agent of the
Trust as the Administrative Trustees may direct, for verification prior to the
time at which such vote shall be taken. Only Securityholders of record shall be
entitled to vote. When Trust Securities are held jointly by several Persons,
any one of them may vote at any meeting in person or by proxy in respect of such
Trust Securities, but if more than one of them shall be present at such meeting
in person or by proxy, and such joint owners or their proxies so present
disagree as to any vote to be cast, such vote shall not be received in respect
of such Trust Securities. A proxy purporting to be executed by or on behalf of
a Securityholder shall be deemed valid unless challenged at or prior to its
exercise, or, if earlier, until eleven months after it is sent and the burden of
proving invalidity shall rest on the challenger.
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SECTION 6.06. SECURITYHOLDER ACTION BY WRITTEN CONSENT. Any action
which may be taken by Securityholders at a meeting may be taken without a
meeting if Securityholders holding more than a majority of all Outstanding Trust
Securities entitled to vote in respect of such action (or such larger proportion
thereof as shall be required by any express provision of this Trust Agreement)
shall consent to the action in writing (based upon their aggregate Liquidation
Amount).
SECTION 6.07. RECORD DATE FOR VOTING AND OTHER PURPOSES. For the
purposes of determining the Securityholders who are entitled to notice of and to
vote at any meeting or by written consent, or to participate in any Distribution
on the Trust Securities in respect of which a record date is not otherwise
provided for in this Trust Agreement, or for the purpose of any other action,
the Administrative Trustees may from time to time fix a date, not more than 90
days prior to the date of any meeting of Securityholders or the payment of
Distribution or other action, as the case may be, as a record date for the
determination of the identity of the Securityholders of record for such
purposes.
SECTION 6.08. ACTS OF SECURITYHOLDERS. Any request, demand,
authorization, direction, notice, consent, waiver or other action provided or
permitted by this Trust Agreement to be given, made or taken by Securityholders
may be embodied in and evidenced by one or more instruments of substantially
similar tenor signed by such Securityholders in person or by an agent duly
appointed in writing; and, except as otherwise expressly provided herein, such
action shall become effective when such instrument or instruments are delivered
to the Administrative Trustees. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as the
"Act" of the Securityholders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Trust Agreement and (subject to Section
8.01) conclusive in favor of the Trustees, if made in the manner provided in
this Section.
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 acknowledgements of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. 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. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which any Trustee deems sufficient.
The ownership of Capital Securities shall be proved by the Securities
Register.
Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Securityholder of any Trust Security shall bind every future
Securityholder of the same Trust Security and the Securityholder of every Trust
Security issued upon the
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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 Trustees or the
Trust in reliance thereon, whether or not notation of such action is made upon
such Trust Security.
Without limiting the foregoing, a Securityholder entitled hereunder to
take any action hereunder with regard to any particular Trust Security may do so
with regard to all or any part of the Liquidation Amount of such Trust Security
or by one or more duly appointed agents each of which may do so pursuant to such
appointment with regard to all or any part of such Liquidation Amount.
If any dispute shall arise between or among the Securityholders and
the Administrative Trustees with respect to the authenticity, validity or
binding nature of any request, demand, authorization, direction, consent, waiver
or other Act of such Securityholder or Trustee under this Article VI, then the
determination of such matter by the Property Trustee shall be conclusive with
respect to such matter.
SECTION 6.09. INSPECTION OF RECORDS. Subject to Section 5.07
concerning access to the list of Securityholders, upon reasonable notice to the
Administrative Trustees and the Property Trustee, the other records of the Trust
shall be open to inspection by Securityholders during normal business hours for
any purpose reasonably related to such Securityholder's interest as a
Securityholder.
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ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF THE PROPERTY
TRUSTEE AND THE DELAWARE TRUSTEE
SECTION 7.01. PROPERTY TRUSTEE. The Property Trustee hereby
represents and warrants for the benefit of the Depositor and the Securityholders
that:
(a) the Property Trustee is a banking corporation or trust company
duly organized, validly existing and in good standing under the laws of the
State of New York;
(b) the Property Trustee has full corporate power, authority and
legal right to execute, deliver and perform its obligations under this Trust
Agreement and has taken all necessary action to authorize the execution,
delivery and performance by it of this Trust Agreement;
(c) this Trust Agreement has been duly authorized, executed and
delivered by the Property Trustee and constitutes the valid and legally binding
agreement of the Property Trustee enforceable against it in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles;
(d) the execution, delivery and performance by the Property Trustee
of this Trust Agreement will not violate, conflict with or constitute a breach
of the Property Trustee's charter or by-laws; and
(e) the execution, delivery and performance by the Property Trustee
of this Trust Agreement does not require the consent or approval of, the giving
of notice to, or the registration with any Federal or New York banking
authority.
SECTION 7.02. DELAWARE TRUSTEE. The Delaware Trustee represents and
warrants for the benefit of the Depositor and the Securityholders that:
(a) the Delaware Trustee is a banking corporation or trust company
duly organized, validly existing and in good standing under the laws of the
State of Delaware;
(b) the Delaware Trustee has full corporate power, authority and
legal right to execute, deliver and perform its obligations under this Trust
Agreement and has taken all necessary action to authorize the execution,
delivery and performance by it of this Trust Agreement;
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(c) this Trust Agreement has been duly authorized, executed and
delivered by the Delaware Trustee and constitutes the valid and legally binding
agreement of the Delaware Trustee enforceable against it in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles;
(d) the execution, delivery and performance by the Delaware Trustee
of this Trust Agreement will not violate the Delaware Trustee's charter or by-
laws; and
(e) the execution, delivery and performance by the Delaware Trustee
of this Trust Agreement does not require the consent or approval of, the giving
of notice to, or the registration with any Federal or Delaware banking
authority.
ARTICLE VII
THE TRUSTEES
SECTION 8.01. CERTAIN DUTIES AND RESPONSIBILITIES.
(a) The duties and responsibilities of the Trustees shall be
restricted to those set forth in the express provisions of this Trust Agreement
and, in the case of the Property Trustee, as provided in the Trust Indenture
Act, and no implied covenants or obligations shall be read into this Trust
Agreement against any of the Trustees. Notwithstanding the foregoing, no
provision of this Trust Agreement shall require any of the Trustees 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. Notwithstanding anything contained in this Trust Agreement to
the contrary, the duties and responsibilities of the Property Trustee under this
Trust Agreement shall be subject to the protections, exculpations and
limitations on liability afforded to the Property Trustee under this Trust
Agreement, the Trust Indenture Act, the Delaware Business Trust Act and, to the
extent applicable, Rule 3a-7 under the Investment Company Act of 1940, as
amended, or any successor rule thereunder. Whether or not therein expressly so
provided, every provision of this Trust Agreement relating to the conduct or
affecting the liability of or affording protection to the Trustees shall be
subject to the provisions of this Section.
(b) All payments made by the Property Trustee or a Paying Agent in
respect of the Trust Securities shall be made only from the income and proceeds
from the Trust Property and only to the extent that there shall be sufficient
income or proceeds from the Trust Property to enable the Property Trustee or
Paying Agent to make payments in accordance with the terms hereof. Each
Securityholder, by its acceptance of a Trust Security, agrees that it will look
solely to the income and proceeds from the Trust Property
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to the extent available for distribution to it as herein provided and that the
Trustees are not personally liable to it for any amount distributable in respect
of any Trust Security or for any other liability in respect of any Trust
Security. This Section 8.01(b) does not limit the liability of the Trustees
expressly set forth elsewhere in this Trust Agreement or, in the case of the
Property Trustee, in the Trust Indenture Act.
(c) All duties and responsibilities of the Property Trustee contained
in this Trust Agreement are subject to the following:
(i) the Property Trustee's sole duty with respect to the custody,
safe keeping and physical preservation of the Trust Property shall be
to deal with such property in a similar manner as the Property Trustee
deals with similar property for its own account, subject to the
protections, exculpations and limitations on liability afforded to the
Property Trustee under this Trust Agreement, the Trust Indenture Act,
the Delaware Business Trust Act and, to the extent applicable, Rule
3a-7 under the Investment Company Act of 1940, as amended, or any
successor rule thereunder;
(ii) the Property Trustee shall have no duty or liability for or
with respect to the value, genuineness, existence or sufficiency of
the Trust Property or the payment of any taxes or assessments levied
thereon or in connection therewith;
(iii) the Property Trustee shall not be liable for any interest
on any money received by it except as it may otherwise agree with the
Depositor. Money held by the Property Trustee need not be segregated
from other funds held by it except in relation to the Payment Account
established by the Property Trustee pursuant to this Trust Agreement
and except to the extent otherwise required by law; and
(iv) the Property Trustee shall not be responsible for monitoring
the compliance by the Administrative Trustees or the Depositor with
their respective duties under this Trust Agreement, nor shall the
Property Trustee be liable for the default or misconduct of the
Administrative Trustees or the Depositor.
SECTION 8.02. NOTICE OF DEFAULTS. Within ninety (90) days after the
occurrence of any default known to the Property Trustee, the Property Trustee
shall transmit, in the manner and to the extent provided in Section 10.08,
notice of such default to the Securityholders and the Depositor, unless such
default shall have been cured or waived. 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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(b) Within Five Business Days after receipt of notice of the
Depositor's exercise of its right to defer the payment of interest on the
Debentures pursuant to the Subordinated Indenture, an Administrative Trustee
shall transmit, in the manner and to the extent provided in Section 10.08,
notice of such exercise to the Securityholders and the Property Trustee.
SECTION 8.03. CERTAIN RIGHTS OF PROPERTY TRUSTEE. Subject to the
provisions of Section 8.01 and except as provided by law:
(i) the Property Trustee may rely and shall be protected in
acting or refraining from acting in good faith upon any resolution,
Opinion of Counsel, certificate, written representation of a Holder or
transferee, certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, appraisal, 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;
(ii) if (A) in performing its duties under this Trust Agreement
the Property Trustee is required to decide between alternative courses
of action or (B) in construing any of the provisions in this Trust
Agreement the Property Trustee finds the same ambiguous or
inconsistent with any other provisions contained herein or (C) the
Property Trustee is unsure of the application of any provision of this
Trust Agreement, then, except as to any matter as to which the Capital
Securityholders are entitled to vote under the terms of this Trust
Agreement, the Property Trustee shall deliver a notice to the
Depositor requesting written instructions of the Depositor as to the
course of action to be taken. The Property Trustee shall take such
action, or refrain from taking such action, as the Property Trustee
shall be instructed in writing to take, or to refrain from taking, by
the Depositor; provided, however, that if the Property Trustee does
not receive such instructions of the Depositor within ten Business
Days after it has delivered such notice, or such reasonably shorter
period of time set forth in such notice (which to the extent
practicable shall not be less than two Business Days), it may, but
shall be under no duty to, take or refrain from taking such action not
inconsistent with this Trust Agreement as it shall deem advisable and
in the best interests of the Securityholders, in which event the
Property Trustee shall have no liability except for its own bad faith,
negligence or willful misconduct;
(iii) whenever in the administration of this Trust Agreement the
Property Trustee shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any action
hereunder, the Property Trustee (unless other evidence be herein
specifically prescribed) may, in the absence of bad faith on its part,
request and rely upon an Officers' Certificate which,
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upon receipt of such request, shall be promptly delivered by the
Depositor or the Administrative Trustees;
(iv) the Property Trustee may consult with counsel of its
selection 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;
(v) the Property Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Trust Agreement at
the request or direction of any Securityholder pursuant to this Trust
Agreement, unless such Securityholder shall have offered to the
Property Trustee reasonable security or indemnity against the costs,
expenses (including reasonable attorneys' fees and expenses) and
liabilities which might be incurred by it in complying with such
request or direction;
(vi) the Property 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, approval, bond, debenture, note or other
evidence of indebtedness or other paper or document, but the Property
Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit, and, if
the Property Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and
premises of the Depositor personally or by agent or attorney;
(vii) the Property Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through its agents or attorneys, and the Property 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;
(viii) the Property Trustee shall not be liable for any action
taken, suffered, or omitted to be taken by it in good faith and
reasonably believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Trust Agreement;
(ix) the Property Trustee shall not be charged with knowledge of
any default or Event of Default with respect to the Trust Securities
unless either (A) a Responsible Officer of the Property Trustee shall
have actual knowledge of the default or Event of Default or (B)
written notice of such default or Event of Default shall have been
given to the Property Trustee by the Depositor, the Administrative
Trustees or by any Holder of the Trust Securities;
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(x) no provision of this Trust Agreement shall be deemed to
impose any duty or obligation on the Property Trustee to perform any
act or acts or exercise any right, power, duty or obligation conferred
or imposed on it in any jurisdiction in which it shall be illegal, or
in which the Property Trustee shall be unqualified or incompetent in
accordance with applicable law, to perform any such act or acts or to
exercise any such right, power, duty or obligation; and no permissive
or discretionary power or authority available to the Property Trustee
shall be construed to be a duty;
(xi) no provision of this Trust Agreement shall require the
Property Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties
or in the exercise of any of its rights or powers, if the Property
Trustee shall have reasonable grounds for believing that the repayment
of such funds or liability is not reasonably assured to it under the
terms of this Trust Agreement or adequate indemnity against such risk
or liability is not reasonably assured to it;
(xii) the Property Trustee shall have no duty to see to any
recording, filing or registration of any instrument (including any
financing or continuation statement or any tax or securities form) (or
any rerecording, refiling or registration thereof);
(xiii) the Property Trustee shall have the right at any time to
seek instructions concerning the administration of this Trust
Agreement from any court of competent jurisdiction; and
(xiv) whenever in the administration of this Trust Agreement the
Property Trustee shall deem it desirable to receive instructions with
respect to enforcing any remedy or right or taking any other action
hereunder, the Property Trustee (A) may request instructions from the
Holders of the Trust Securities, which instructions may only be given
by the Holders of the same Liquidation Amount of the Trust Securities
as would be entitled to direct the Property Trustee under the terms of
this Trust Agreement in respect of such remedies, rights or actions,
(B) may refrain from enforcing such remedy or right or taking such
other action until such instructions are received, and (C) shall be
protected in acting in accordance with such instructions.
SECTION 8.04. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The recitals contained herein and in the Trust Securities Certificates shall be
taken as the statements of the Trust, and the Trustees do not assume any
responsibility for their correctness. The Trustees make no representations as
to the title to, or value or condition of, the property of the Trust or any part
thereof, nor as to the validity or sufficiency of this Trust Agreement, the
Debentures or the Trust Securities. The Trustees shall not be
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accountable for the use or application by the Trust of the proceeds of the Trust
Securities in accordance with Section 2.05.
SECTION 8.05. MAY HOLD SECURITIES. Any Trustee or any agent of any
Trustee or the Trust, in its individual or any other capacity, may become the
owner or pledgee of Trust Securities and, except as provided in the definition
of the term "Outstanding" in Article I, may otherwise deal with the Trust with
the same rights it would have if it were not a Trustee or such agent.
SECTION 8.06. COMPENSATION; FEES; INDEMNITY.
The Depositor agrees
(i) to pay to the Trustees from time to time reasonable compensation
for all services rendered by the Trustees hereunder (which compensation
shall not be limited by any provision of law in regard to the compensation
of a trustee of an express trust);
(ii) except as otherwise expressly provided herein, to reimburse the
Trustees upon request for all reasonable expenses, disbursements and
advances reasonably incurred or made by the Trustees in accordance with any
provision of this Trust Agreement (including the reasonable compensation
and the expenses and disbursements of its agents and counsel), except any
such expense, disbursement or advance as may be attributable to its
negligence (gross negligence, in the case of any Administrative Trustee),
bad faith or willful misconduct; and
(iii) to indemnify each Trustee for, and to hold each Trustee
harmless against, any and all loss, damage, claims, liability or expense
incurred without negligence (gross negligence, in the case of any
Administrative Trustee), bad faith or willful misconduct on its part,
arising out of or in connection with the acceptance or administration of
the trust or trusts under this Trust Agreement, 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.
As security for the performance of the obligations of the Depositor
under this Section, each of the Trustees shall have a lien prior to the Trust
Securities upon all property and funds held or collected by such Trustee as
such, except funds held in trust for the payment of Distributions on the Trust
Securities.
In addition to the rights provided to each Trustee pursuant to the
provisions of the immediately preceding paragraph of this Section 8.06, when a
Trustee incurs expenses or renders services in connection with an Event of
Default resulting from a Bankruptcy Event with respect to the Trust, the
expenses (including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
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administration under any applicable Federal or State bankruptcy, insolvency or
other similar law.
The provisions of this Section shall survive the termination of this
Trust Agreement.
SECTION 8.07. CERTAIN TRUSTEES REQUIRED; ELIGIBILITY. (a) There shall
at all times be a Property Trustee hereunder with respect to the Trust
Securities. The Property Trustee shall be a Person that has a combined capital
and surplus of at least $50,000,000. If any such Person publishes reports of
condition at least annually, pursuant to law or to the requirements of its
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such Person 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 Property Trustee with respect to the Trust
Securities 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 VIII.
(b) There shall at all times be one or more Administrative Trustees
hereunder with respect to the Trust Securities. Each Administrative
Trustee shall be either a natural person who is at least 21 years of age or
a legal entity that shall act through one or more persons authorized to
bind such entity.
(c) There shall at all times be a Delaware Trustee with respect to
the Trust Securities. The Delaware Trustee shall either be (i) a natural
person who is at least 21 years of age and a resident of the State of
Delaware or (ii) a legal entity with its principal place of business in the
State of Delaware that otherwise meets the requirements of applicable
Delaware law and that shall act through one or more persons authorized to
bind such entity.
SECTION 8.08. CONFLICTING INTERESTS.
If the Property Trustee has or shall acquire a conflicting interest
within the meaning of the Trust Indenture Act, the Property Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to the provisions of, the Trust Indenture Act and this Trust
Agreement. The Subordinated Indenture and the Guarantee Agreement shall be
deemed to be specifically described in this Trust Agreement for the purposes of
clause (i) of the first proviso contained in Section 310(b) of the Trust
Indenture Act.
SECTION 8.09. CO-TRUSTEES AND SEPARATE TRUSTEE.
Unless an Event of Default shall have occurred and be continuing, at
any time or times, for the purpose of meeting the legal requirements of the
Trust Indenture Act or of any jurisdiction in which any part of the Trust
Property may at the time be located, the
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Depositor and the Property Trustee shall have power to appoint, and upon the
written request of the Property Trustee, the Depositor shall for such purpose
join with the Property Trustee in the execution, delivery, and performance of
all instruments and agreements necessary or proper to appoint, one or more
Persons approved by the Property Trustee either to act as co-trustee, jointly
with the Property Trustee, of all or any part of such Trust Property, or to act
as separate trustee of any such property, in either case with such powers as may
be provided in the instrument of appointment, and to vest in such Person or
Persons in the capacity aforesaid, any property, title, right or power deemed
necessary or desirable, subject to the other provisions of this Section. If the
Depositor does not join in such appointment within 15 days after the receipt by
it of a request so to do, or in case an Event of Default under the Subordinated
Indenture has occurred and is continuing, the Property Trustee alone shall have
power to make such appointment.
Should any written instrument from the Depositor be required by any
co-trustee or separate trustee so appointed for more fully confirming 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 Depositor.
Every co-trustee or separate trustee shall, to the extent permitted by
law, but to such extent only, be appointed subject to the following terms,
namely:
(1) The Trust Securities shall be executed 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 Trustees designated for such purpose
hereunder, shall be exercised, solely by such Trustees.
(2) The rights, powers, duties, and obligations hereby conferred or
imposed upon the Property Trustee in respect of any property covered by
such appointment shall be conferred or imposed upon and exercised or
performed by the Property Trustee or by the Property 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 Property 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.
(3) The Property Trustee at any time, by an instrument in writing
executed by it, with the written concurrence of the Depositor, may accept
the resignation of or remove any co-trustee or separate trustee appointed
under this Section 8.09, and, in case an Event of Default under the
Subordinated Indenture has occurred and is continuing, the Property Trustee
shall have power to accept the resignation of, or remove, any such co-
trustee or separate trustee without the concurrence of the Depositor. Upon
the written request of the Property Trustee, the Depositor shall join
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with the Property Trustee in the execution, delivery, and performance 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.
(4) 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.
(5) The Property Trustee shall not be liable by reason of any act of
a co-trustee or separate trustee.
(6) Any Act of Holders delivered to the Property Trustee shall be
deemed to have been delivered to each such co-trustee and separate trustee.
SECTION 8.10. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. No
resignation or removal of any Trustee (as the case may be, the "Relevant
Trustee") and no appointment of a successor Relevant Trustee pursuant to this
Article shall become effective until the acceptance of appointment by the
successor Relevant Trustee in accordance with the applicable requirements of
Section 8.11.
The Relevant Trustee may resign at any time by giving written notice
thereof to the Securityholders. If the instrument of acceptance by a successor
Relevant Trustee required by Section 8.11 shall not have been delivered to the
resigning Relevant Trustee within 30 days after the giving of such notice of
resignation, the resigning Relevant Trustee may petition any court of competent
jurisdiction for the appointment of a successor Relevant Trustee.
Unless a Debenture Event of Default shall have occurred and be
continuing, the Relevant Trustee may be removed at any time by Act of the Common
Securityholder. If a Debenture Event of Default shall have occurred and be
continuing, the Relevant Trustee may be removed at such time by Act of the
Securityholders of a majority of the aggregate Liquidation Amount of the
Outstanding Capital Securities, delivered to the Relevant Trustee (in its
individual capacity and on behalf of the Trust).
If the Relevant Trustee shall resign, be removed or become incapable
of continuing to act as Relevant Trustee at a time when no Debenture Event of
Default shall have occurred and be continuing, the Common Securityholder, by Act
of the Common Securityholder delivered to the retiring Relevant Trustee, shall
promptly appoint a successor Relevant Trustee or Trustees, and the retiring
Relevant Trustee shall comply with the applicable requirements of Section 8.11.
If the Relevant Trustee shall resign, be removed or become incapable of
continuing to act as the Relevant Trustee at a time when a Debenture Event of
Default shall have occurred and be continuing, the Capital Securityholders, by
Act of the Capital Securityholders of a majority in Liquidation Amount of the
Outstanding Capital Securities delivered to the retiring Relevant Trustee, shall
promptly appoint a
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successor Relevant Trustee or Trustees, and the Relevant Trustee shall comply
with the applicable requirements of Section 8.11. If no successor Relevant
Trustee shall have been so appointed by the Common Securityholders or the
Capital Securityholders and accepted appointment in the manner required by
Section 8.11, any Securityholder who has been a Securityholder of Trust
Securities for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Relevant Trustee.
The retiring Relevant Trustee shall give notice of each resignation
and each removal of the Relevant Trustee and each appointment of a successor
Trustee to all Securityholders in the manner provided in Section 10.08 and shall
give notice to the Depositor. Each notice shall include the name and address of
the successor Relevant Trustee and, in the case of the Property Trustee, the
address of its Corporate Trust Office.
Notwithstanding the foregoing or any other provision of this Trust
Agreement, in the event any Administrative Trustee or a Delaware Trustee who is
a natural person dies or becomes incompetent or incapacitated, the vacancy
created by such death, incompetence or incapacity may be filled by (i) the
unanimous act of remaining Administrative Trustees if there are at least two of
them or (ii) otherwise by the Depositor (with the successor in each case being
an individual who satisfies the eligibility requirements for Administrative
Trustees or Delaware Trustee, as the case may be, set forth in Section 8.07).
Additionally, notwithstanding the foregoing or any other provision of this Trust
Agreement, in the event the Depositor reasonably believes that any
Administrative Trustee who is a natural person has become incompetent or
incapacitated, the Depositor, by notice to the remaining Trustees, may terminate
the status of such Person as an Administrative Trustee (in which case the
vacancy so created will be filled in accordance with the preceding sentence).
No Property Trustee or Delaware Trustee shall be liable for the acts
or omissions to act of any successor Property Trustee or Delaware Trustee.
SECTION 8.11. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. In case of the
appointment hereunder of a successor Relevant Trustee, the retiring Relevant
Trustee and each successor Trustee shall execute and deliver an amendment hereto
wherein each successor Relevant Trustee 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 Relevant Trustee all the rights,
powers, trusts and duties of the retiring Relevant Trustee and (2) shall add to
or change any of the provisions of this Trust Agreement as shall be necessary to
provide for or facilitate the administration of the trusts hereunder by more
than one Relevant Trustee, it being understood that nothing herein or in such
amendment shall constitute such Relevant Trustees co-trustees of the same trust
and that each such Relevant Trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such Relevant Trustee and upon the execution and delivery of such
amendment the resignation or removal of the retiring Relevant Trustee shall
become effective to the extent provided therein and each such successor
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Relevant Trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, trusts and duties of the retiring Relevant
Trustee; but, on request of the Trust or any successor Relevant Trustee such
retiring Relevant Trustee shall duly assign, transfer and deliver to such
successor Trustee all Trust Property, all proceeds thereof and money held by
such retiring Relevant Trustee hereunder with respect to the Trust Securities
and the Trust.
Upon request of any such successor Relevant Trustee, the retiring
Relevant Trustee shall execute any and all instruments for more fully and
certainly vesting in and confirming to such successor Relevant Trustee all such
rights, powers and trusts referred to in the first or second preceding
paragraph, as the case may be.
No successor Relevant Trustee shall accept its appointment unless at
the time of such acceptance such successor Relevant Trustee shall be qualified
and eligible under this Article VIII.
SECTION 8.12. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS. Any Person into which the Property Trustee or the Delaware Trustee or
any Administrative Trustee or any Trustee that is not a natural person may be
merged or converted or with which it may be consolidated, or any Person
resulting from any merger, conversion or consolidation to which such Relevant
Trustee shall be a party, or any Person succeeding to all or substantially all
the corporate trust business of such Relevant Trustee, shall be the successor of
such Relevant Trustee hereunder, provided such Person shall be otherwise
qualified and eligible under this Article VIII, without the execution or filing
of any paper, the giving of any notice or any further act on the part of any of
the parties hereto.
SECTION 8.13. PREFERENTIAL COLLECTION OF CLAIMS AGAINST DEPOSITOR OR
TRUST. If and when the Property Trustee shall be or become a creditor of the
Depositor or the Trust (or any other obligor upon the Debentures or the Trust
Securities), the Property Trustee shall be subject to the provisions of the
Trust Indenture Act regarding the collection of claims against the Depositor or
Trust (or any such other obligor).
SECTION 8.14. REPORTS BY PROPERTY TRUSTEE. (a) the Property Trustee
shall transmit to Securityholders such reports concerning the Property Trustee
and its actions under this Trust Agreement as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto.
Such of those reports as are required to be transmitted by the Property Trustee
pursuant to Section 313(a) of the Trust Indenture Act shall be so transmitted
within 60 days after July 31 of each year, commencing July 31, 1997.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Property Trustee with each stock
exchange upon which the Trust Securities are listed, with the Commission and
with the Depositor. The Depositor will notify the Property Trustee when any
Trust Securities are listed on any stock exchange.
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SECTION 8.15. REPORTS TO THE PROPERTY TRUSTEE. The Depositor and the
Administrative Trustees on behalf of the Trust shall provide to the Property
Trustee such documents, reports and information, if any, and the compliance
certificate required by Section 314 of the Trust Indenture Act, in the form, in
the manner and at the times required by Section 314 of the Trust Indenture Act.
SECTION 8.16. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT. Each
of the Depositor and the Administrative Trustees on behalf of the Trust shall
provide to the Property Trustee such evidence of compliance with any conditions
precedent, if any, provided for in this Trust Agreement (including any covenants
compliance with which constitutes a condition precedent) that relate to any of
the matters set forth in Section 314(c) of the Trust Indenture Act. Any
certificate or opinion required to be given by an officer pursuant to Section
314(c)(1) of the Trust Indenture Act may be given in the form of an Officers'
Certificate.
SECTION 8.17. NUMBER OF TRUSTEES.
(a) The number of Trustees shall be five, provided that Depositor, by
written instrument, may increase or decrease the number of Administrative
Trustees.
(b) If a Trustee ceases to hold office for any reason and the number
of Administrative Trustees is not reduced pursuant to Section 8.17(a), or if the
number of Trustees is increased pursuant to Section 8.17(a), a vacancy shall
occur. The vacancy shall be filled with a Trustee appointed in accordance with
Section 8.10.
(c) The death, resignation, retirement, removal, bankruptcy,
incompetence or incapacity to perform the duties of a Trustee shall not operate
to annul the Trust. Whenever a vacancy in the number of Administrative Trustees
shall occur, until such vacancy is filled by the appointment of an
Administrative Trustee in accordance with Section 8.10, the Administrative
Trustees in office, regardless of their number (and notwithstanding any other
provision of this Agreement), shall have all the powers granted to the
Administrative Trustees and shall discharge all the duties imposed upon the
Administrative Trustees by this Trust Agreement.
SECTION 8.18. DELEGATION OF POWER.
(a) Any Administrative Trustee may, by power of attorney consistent
with applicable law, delegate to any other natural person over the age of 21 his
or her power for the purpose of executing any documents contemplated in Sections
2.07(a) and 2.07(c), including any registration statement or amendment thereto
filed with the Commission, or making any other governmental filing; and
(b) the Administrative Trustees shall have power to delegate from
time to time to such of their number the doing of such things and the execution
of such instruments
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either in the name of the Trust or the names of the Administrative Trustees or
otherwise as the Administrative Trustees may deem expedient, to the extent such
delegation is not prohibited by applicable law or contrary to the provisions of
the Trust, as set forth herein.
SECTION 8.19. FIDUCIARY DUTY.
(a) To the extent that, at law or in equity, an Indemnified Person
has duties (including fiduciary duties) and liabilities relating thereto to the
Trust or to any other Covered Person, an Indemnified Person acting under this
Trust Agreement shall not be liable to the Trust or to any other Covered Person
for its good faith reliance on the provisions of this Trust Agreement. The
provisions of this Trust Agreement, to the extent that they restrict the duties
and liabilities of an Indemnified Person otherwise existing at law or in equity
(other than the duties imposed on the Property Trustee under the Trust Indenture
Act), are agreed by the parties hereto to replace such other duties and
liabilities of such Indemnified Person;
(b) Unless otherwise expressly provided herein and subject to the
provisions of the Trust Indenture Act:
(i) whenever a conflict of interest exists or arises between an
Indemnified Person and any Covered Person; or
(ii) whenever this Trust Agreement or any other agreement
contemplated herein or therein provides that an Indemnified Person
shall act in a manner that is, or provides terms that are, fair and
reasonable to the Trust or any Holder of Trust Securities, the
Indemnified Person shall resolve such conflict of interest, take such
action or provide such terms, considering in each case the relative
interest of each party (including its own interest) to such conflict,
agreement, transaction or situation and the benefits and burdens
relating to such interests, any customary or accepted industry
practices, and any applicable generally accepted accounting practices
or principles. In the absence of bad faith by the Indemnified Person,
the resolution, action or term so made, taken or provided by the
Indemnified Person shall not constitute a breach of this Trust
Agreement or any other agreement contemplated herein or of any duty or
obligation of the Indemnified Person at law or in equity or otherwise;
and
(c) Unless otherwise expressly provided herein and subject to the
provisions of the Trust Indenture Act, whenever in this Trust Agreement an
Indemnified Person is permitted or required to make a decision
(i) in its "discretion" or under a grant of similar authority,
the Indemnified Person shall be entitled to consider such interests
and factors as it reasonably desires, including its own interests, and
shall have no duty or
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obligation to give any consideration to any interest of or factors
affecting the Trust or any other Person; or
(ii) in its "good faith" or under another express standard, the
Indemnified Person shall act under such express standard and shall not
be subject to any other or different standard imposed by this Trust
Agreement or by applicable law.
ARTICLE IX.
TERMINATION AND LIQUIDATION
SECTION 9.01. TERMINATION UPON EXPIRATION DATE. The Trust shall
automatically terminate on December 31, 2040 (the "Expiration Date") and the
Trust Property shall be distributed in accordance with Section 9.04.
SECTION 9.02. EARLY TERMINATION. Upon the first to occur of any of
the following events (such first occurrence, an "Early Termination Event"):
(i) the occurrence of a Bankruptcy Event in respect of, or the
dissolution or liquidation of, the Depositor;
(ii) the redemption of all of the Capital Securities;
(iii) an order for judicial termination of the Trust having been
entered by a court of competent jurisdiction;
(iv) the election by the Depositor to terminate the Trust and,
after satisfaction of liabilities to creditors of the Trust,
distribute the Debentures to the Holders of Preferred Securities in
liquidation of the Trust;
the Trust shall terminate and the Trustees shall take such action as is required
by Section 9.04.
SECTION 9.03. TERMINATION. The respective obligations and
responsibilities of the Trust and the Trustees created hereby shall terminate
upon the latest to occur of the following: (i) the distribution by the Property
Trustee to Securityholders upon the liquidation of the Trust pursuant to Section
9.04, or upon the redemption of all of the Trust Securities pursuant to Section
4.02 or 9.04(d), of all amounts required to be distributed hereunder upon the
final payment of the Trust Securities; (ii) the payment of any expenses owed by
the Trust; and (iii) the discharge of all administrative duties of the
Administrative Trustees, including the performance of any tax reporting
obligations with respect to the Trust or the Securityholders.
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SECTION 9.04. LIQUIDATION. (a) If an Early Termination Event
specified in clause (i) or (iii) of Section 9.02 occurs, after satisfaction of
creditors of the Trust, if any, as provided by applicable law, the Trust shall
be liquidated by the Property Trustee as expeditiously as the Property Trustee
determines to be appropriate by distributing to each Securityholder a Like
Amount of Debentures, subject to Section 9.04(e). Notice of liquidation shall be
given by the Administrative Trustees by first-class mail, postage prepaid,
mailed not later than 30 nor more than 60 days prior to the Liquidation Date to
each Holder of Trust Securities at such Holder's address appearing in the
Securities Register. All notices of liquidation shall:
(i) state the Liquidation Date;
(ii) state that from and after the Liquidation Date, the Trust
Securities will no longer be deemed to be outstanding and any Trust
Securities Certificates not surrendered for exchange will be deemed to
represent a Like Amount of Debentures; and
(iii) provide such information with respect to the mechanics by
which Holders may exchange Trust Securities Certificates for
Debentures, or, if Section 9.04(e) applies, receive a Liquidation
Distribution, as the Administrative Trustees or the Property Trustee
shall deem appropriate.
The Holder of Common Securities will be entitled to receive Liquidation
Distributions upon any such dissolution, winding-up or termination pro rata
(determined as aforesaid) with Holders of Capital Securities, except that, if a
Debenture Event of Default has occurred and is continuing or if a Debenture
Event of Default has not occurred solely by reason of a requirement that time
lapse or notice be given, the Capital Securities shall have a priority over the
Common Securities.
(b) Except where Sections 9.02(ii), 9.04(d) or 9.04(e) apply, in
order to effect the liquidation of the Trust hereunder, and any resulting
distribution of the Debentures to Securityholders, the Property Trustee shall
establish a record date for such distribution (which shall be not more than 45
days prior to the Liquidation Date) and, either itself acting as exchange agent
or through the appointment of a separate exchange agent, shall establish such
procedures as it shall deem appropriate to effect the distribution of Debentures
in exchange for the Outstanding Trust Securities Certificates.
(c) Except where Section 9.02(ii), 9.04(d) or 9.04(e) apply, after
any Liquidation Date, (i) the Trust Securities will no longer be deemed to be
Outstanding, (ii) certificates representing a Like Amount of Debentures will be
issued to Holders of Trust Securities Certificates, upon surrender of such Trust
Securities Certificates to the Administrative Trustees or their agent for
exchange, (iii) any Trust Securities Certificates not so surrendered for
exchange will be deemed to represent a Like Amount of Debentures, accruing
interest at the rate provided for in the Debentures from the last Distribution
Date on
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which a Distribution was made on such Trust Securities Certificates until such
Trust Securities Certificates are so surrendered (and until such Trust
Securities Certificates are so surrendered, no payments or interest or principal
will be made to Holders of Trust Securities Certificates with respect to such
Debentures) and (iv) all rights of Securityholders holding Trust Securities will
cease, except the right of such Securityholders to receive Debentures upon
surrender of Trust Securities Certificates.
(d) The Company shall have the right to redeem the Debentures, in
whole but not in part, at any time within 90 days following the occurrence of a
Tax Event at the Redemption Price. Whether or not a Tax Event has occurred, the
Company has the right, at any time, to terminate and, after satisfaction of
liabilities to creditors of the Trust, if any, as provided by applicable law,
cause the Debentures to be distributed to the holders of the Preferred
Securities and Common Securities in liquidation of the Trust.
(e) In the event that, notwithstanding the other provisions of this
Section 9.04, whether because of an order for termination entered by a court of
competent jurisdiction or otherwise, distribution of the Debentures in the
manner provided herein is determined by the Property Trustee not to be
practical, the Trust Property shall be liquidated, and the Trust shall be
dissolved, wound-up or terminated, by the Property Trustee in such manner as the
Property Trustee determines. In such event, on the date of the dissolution,
winding-up or other termination of the Trust, Securityholders will be entitled
to receive out of the assets of the Trust available for distribution to
Securityholders, after satisfaction of liabilities to creditors of the Trust, if
any, as provided by applicable law, an amount equal to the Liquidation Amount
per Trust Security plus accumulated and unpaid Distributions thereon to the date
of payment (such amount being the "Liquidation Distribution"). If, upon any
such dissolution, winding up or termination, the Liquidation Distribution can be
paid only in part because the Trust has insufficient assets available to pay in
full the aggregate Liquidation Distribution, then, subject to the next
succeeding sentence, the amounts payable by the Trust on the Trust Securities
shall be paid on a pro rata basis (based upon Liquidation Amounts). The Holder
of Common Securities will be entitled to receive Liquidation Distributions upon
any such dissolution, winding-up or termination pro rata (determined as
aforesaid) with Holders of Capital Securities, except that, if a Debenture Event
of Default has occurred and is continuing or if a Debenture Event of Default has
not occurred solely by reason of a requirement that time lapse or notice be
given, the Capital Securities shall have a priority over the Common Securities.
ARTICLE X.
MISCELLANEOUS PROVISIONS
SECTION 10.01. GUARANTEE BY THE DEPOSITOR AND ASSUMPTION OF
OBLIGATIONS. Subject to the terms and conditions hereof, the Depositor
irrevocably and unconditionally guarantees to each Person to whom the Trust is
now or hereafter becomes
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indebted or liable (the "Beneficiaries"), and agrees to assume liability for,
the full payment, when and as due, of any and all Obligations (as hereinafter
defined) to such Beneficiaries. As used herein, "Obligations" means any
indebtedness, expenses or liabilities of the Trust, other than obligations of
the Trust to pay to Holders the amounts due such Holders pursuant to the terms
of the Capital Securities. This guarantee and assumption is intended to be for
the benefit, of, and to be enforceable by, all such Beneficiaries, whether or
not such Beneficiaries have received notice hereof.
SECTION 10.02. LIMITATION OF RIGHTS OF SECURITYHOLDERS. The death,
incapacity, bankruptcy, dissolution or termination of any Person having an
interest, beneficial or otherwise, in a Trust Security shall not operate to
terminate this Trust Agreement, nor entitle the legal representatives or heirs
of such Person or any Securityholder for such Person, to claim an accounting,
take any action or bring any proceeding in any court for a partition or winding
up of the arrangements contemplated hereby, nor otherwise affect the rights,
obligations and liabilities of the parties hereto or any of them.
SECTION 10.03. AMENDMENT.
(a) This Trust Agreement may be amended from time to time by the
Trust (on approval of a majority of the Administrative Trustees and the
Depositor, without the consent of any Securityholders), (i) to cure any
ambiguity, correct or supplement any provision herein or therein which may be
inconsistent with any other provision herein or therein, or to make any other
provisions with respect to matters or questions arising under this Trust
Agreement, which shall not be inconsistent with the other provisions of this
Trust Agreement or (ii) to modify, eliminate or add to any provisions of this
Trust Agreement to such extent as shall be necessary to ensure that the Trust
will not be classified for United States federal income tax purposes other than
as a "grantor trust" and not as an association taxable as a corporation at any
time that any Trust Securities are outstanding or to ensure the Trust's
exemption from the status of an "investment company" under the Investment
Company Act of 1940, as amended; provided, however, that, except in the case of
clause (ii), such action shall not adversely affect in any material respect the
interests of any Securityholder and, in the case of clause (i), any amendments
of this Trust Agreement shall become effective when notice thereof is given to
the Securityholders.
(b) Except as provided in Sections 6.01(c) and 10.03(c), any
provision of this Trust Agreement may be amended by the Administrative Trustees
and the Depositor with (i) the consent of Holders of Trust Securities
representing not less than a majority (based upon Liquidation Amounts) of the
Outstanding Trust Securities and (ii) receipt by the Trustees of an Opinion of
Counsel to the effect that such amendment or the exercise of any power granted
to the Trustees in accordance with such amendment will not affect the Trust's
status as a grantor trust for federal income tax purposes or the Trust's
exemption from status of an "investment company" under the Investment Company
Act of 1940, as amended.
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(c) In addition to and notwithstanding any other provision in this
Trust Agreement, without the consent of each affected Securityholder (such
consent being obtained in accordance with Section 6.03 or 6.06), this Trust
Agreement may not be amended to (i) change the amount or timing of any
Distribution on the Trust Securities or otherwise adversely affect the amount of
any Distribution required to be made in respect of the Trust Securities as of a
specified date or (ii) restrict the right of a Securityholder to institute suit
for the enforcement of any such payment on or after such date.
(d) Notwithstanding any other provisions of this Trust Agreement, no
Trustee shall enter into or consent to any amendment to this Trust Agreement
which would cause the Trust to fail or cease to qualify for the exemption from
status of an "investment company" under the Investment Company Act of 1940, as
amended, afforded by Rule 3a-5 thereunder.
(e) Notwithstanding anything in this Trust Agreement to the contrary,
without the consent of the Depositor and the Trustees, this Trust Agreement may
not be amended in a manner which imposes any additional obligation on the
Depositor or any Trustee.
(f) In the event that any amendment to this Trust Agreement is made,
the Administrative Trustees shall promptly provide to the Depositor a copy of
such amendment.
(g) The Property Trustee is entitled to receive an Opinion of Counsel
as conclusive evidence that any amendment to this Trust Agreement executed
pursuant to this Section 10.03 is authorized or permitted by, and conforms to,
the terms of this Section 10.03, has been duly authorized by and lawfully
executed and delivered on behalf of the other requisite parties, and that it is
proper for the Property Trustee under the provisions of this Section 10.03 to
join in the execution thereof.
SECTION 10.04. SEPARABILITY. In case any provision in this Trust
Agreement or in the Trust Securities Certificates 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 10.05. GOVERNING LAW. THIS TRUST AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF EACH OF THE SECURITYHOLDERS, THE TRUST AND THE TRUSTEES WITH
RESPECT TO THIS TRUST AGREEMENT AND THE TRUST SECURITIES SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE (WITHOUT
REGARD TO CONFLICT OF LAWS PRINCIPLES).
SECTION 10.06. SUCCESSORS. This Trust Agreement shall be binding upon
and shall inure to the benefit of any successor to the Trust or the Relevant
Trustees or any of them, including any successor by operation of law.
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SECTION 10.07. HEADINGS. The Article and Section headings are for
convenience only and shall not affect the construction of this Trust Agreement.
SECTION 10.08. NOTICE AND DEMAND. Any notice, demand or other
communication which by any provision of this Trust Agreement is required or
permitted to be given or served to or upon any Securityholder or the Depositor
may be given or served in writing by deposit thereof, postage prepaid, in the
United States mail, hand delivery or facsimile transmission, in each case,
addressed, (i) in the case of a Capital Securityholder, to such Capital
Securityholder as such Securityholder's name and address may appear on the
Securities Register and (ii) in the case of the Common Securityholder or the
Depositor, to Texas Utilities Electric Company, Energy Plaza, 1601 Bryan Street,
Dallas, Texas 75201, Attention: Treasurer, facsimile no. 214-812-2488, with a
copy to the Secretary, facsimile no. 214-812-2488. Such notice, demand or other
communication to or upon a Securityholder shall be deemed to have been
sufficiently given or made, for all purposes, upon hand delivery, mailing or
transmission.
Any notice, demand or other communication which by any provision of
this Trust Agreement is required or permitted to be given or served to or upon
the Trust, the Property Trustee, the Delaware Trustee or the Administrative
Trustees shall be given in writing addressed (until another address is published
by the Trust) as follows: (i) with respect to the Property Trustee or the
Delaware Trustee, The Bank of New York, 101 Barclay Street, Floor 21 West, New
York, NY 10286, Attention: Corporate Trust Department, with a copy to: The Bank
of New York (Delaware), White Clay Center, Route 273, Newark, Delaware 19711,
Attention: Corporate Trust Department, and (ii) with respect to the Trust or the
Administrative Trustees, at the address above for notice to the Depositor,
marked "Attention: Administrative Trustees for TU Electric Capital". Such
notice, demand or other communication to or upon the Trust or the Property
Trustee shall be deemed to have been sufficiently given or made only upon actual
receipt of the writing by the Trust or the Property Trustee.
SECTION 10.09. AGREEMENT NOT TO PETITION. Each of the Trustees and
the Depositor agrees for the benefit of the Securityholders that, until at least
one year and one day after the Trust has been terminated in accordance with
Article IX, it shall not file, or join in the filing of, a petition against the
Trust under any bankruptcy, reorganization, arrangement, insolvency, liquidation
or other similar law (including, without limitation, the United States
Bankruptcy Code) (collectively, "Bankruptcy Laws") or otherwise join in the
commencement of any proceeding against the Trust under any Bankruptcy Law. In
the event the Depositor takes action in violation of this Section 10.09, the
Property Trustee agrees, for the benefit of Securityholders, that it shall file
an answer with the bankruptcy court or otherwise properly contest the filing of
such petition by the Depositor against the Trust or the commencement of such
action and raise the defense that the Depositor has agreed in writing not to
take such action and should be estopped and precluded therefrom and such other
defenses, if any, as counsel for the Property Trustee or the Trust may assert.
The provisions of this Section 10.09 shall survive the termination of this Trust
Agreement.
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SECTION 10.10. CONFLICT WITH TRUST INDENTURE ACT. (a) This Trust
Agreement is subject to the provisions of the Trust Indenture Act that are
required or deemed to be part of this Trust Agreement and shall, to the extent
applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is a trustee
for the purposes of the Trust Indenture Act.
(c) If any provision hereof limits, qualifies or conflicts with
another provision hereof which is required or deemed to be included in this
Trust Agreement by any of the provisions of the Trust Indenture Act, such
required or deemed provision shall control.
(d) The application of the Trust Indenture Act to this Trust
Agreement shall not affect the nature of the Securities as equity securities
representing interests in the Trust.
THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN BY OR ON
BEHALF OF A SECURITYHOLDER, WITHOUT ANY SIGNATURE OR FURTHER MANIFESTATION OF
ASSENT, SHALL CONSTITUTE THE UNCONDITIONAL ACCEPTANCE BY THE SECURITYHOLDER AND
ALL OTHERS HAVING A BENEFICIAL INTEREST IN SUCH TRUST SECURITY OF ALL THE TERMS
AND PROVISIONS OF THIS TRUST AGREEMENT AND THE AGREEMENT OF THE TRUST, SUCH
SECURITYHOLDER AND SUCH OTHERS THAT THOSE TERMS AND PROVISIONS SHALL BE BINDING,
OPERATIVE AND EFFECTIVE AS BETWEEN THE TRUST AND SUCH SECURITYHOLDER AND SUCH
OTHERS.
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IN WITNESS WHEREOF, the parties have caused this Amended and Restated Trust
Agreement to be duly executed, all as of the day and year first above written.
TEXAS UTILITIES ELECTRIC COMPANY
By: /s/ Robert S. Shapard
-----------------------------------------------
Title: Treasurer and Assistant Secretary
THE BANK OF NEW YORK,
as Property Trustee
By: /s/ Walter N. Gitlin
-----------------------------------------------
Title: Vice President
THE BANK OF NEW YORK (DELAWARE),
as Delaware Trustee
By: /s/ Joseph Ernst
-----------------------------------------------
Title: Assistant Vice President
/s/ Wayne E. Patterson
-------------------------------------------
Wayne E. Patterson
solely in his capacity as Administrative
Trustee
/s/ Robert S. Shapard
-------------------------------------------
Robert S. Shapard
solely in his capacity as Administrative
Trustee
/s/ John Casey
-------------------------------------------
John Casey
solely in his capacity as Administrative
Trustee
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/s/ Michael Perkins
-------------------------------------------
Michael Perkins
solely in his capacity as Administrative
Trustee
/s/ Glenn D. Kirby
-------------------
Glenn D. Kirby
solely in his capacity as Administrative
Trustee
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EXHIBIT A
CERTIFICATE OF TRUST
OF
TU ELECTRIC CAPITAL IV
THIS CERTIFICATE OF TRUST of TU Electric Capital IV (the "Trust"),
dated as of January 14, 1997, is being duly executed and filed by the
undersigned, as trustees, to form a business trust under the Delaware Business
Trust Act (12 Del. C. (S) 3801, et seq.).
------- ------
1. Name. The name of the business trust being created hereby is TU
Electric Capital.
2. Delaware Trustee. The name and business address of the trustee of
the Trust with a principal place of business in the State of Delaware are The
Bank of New York (Delaware), White Clay Center, Route 273, Newark, New Castle
County, Delaware 19711.
3. Effective Date. This Certificate of Trust shall be effective as
of its filing.
IN WITNESS WHEREOF, the undersigned, being the only trustees of the
Trust, have executed this Certificate of Trust as of the date first above
written.
THE BANK OF NEW YORK (DELAWARE), WAYNE E. PATTERSON,
not in its individual capacity not in his individual capacity
but solely as Trustee but solely as Trustee
By: /s/ Joseph G. Ernst By: /s/ Wayne E. Patterson
---------------------------- -----------------------
Name: Joseph G. Ernst
Title: Assistant Vice President
THE BANK OF NEW YORK,
not in its individual capacity
but solely as Trustee
By: /s/ Stephen J. Giurlando
----------------------------
Name: Stephen J. Giurlando
Title: Assistant Vice President
A-1
<PAGE>
EXHIBIT B
THIS CERTIFICATE IS NOT TRANSFERABLE
Certificate Number Number of Common Securities
C-[_]
Certificate Evidencing Common Securities
of
TU Electric Capital
Common Securities
(liquidation amount $1,000 per Common Security)
TU Electric Capital , a statutory business trust created under the
laws of the State of Delaware (the "Trust"), hereby certifies that Texas
Utilities Electric Company (the "Holder") is the registered owner of _____
(_____) common securities of the Trust representing undivided beneficial
interests in the assets of the Trust and designated the Common Securities
(liquidation amount $1,000 per Common Security) (the "Common Securities"). In
accordance with Section 5.10 of the Trust Agreement (as defined below) the
Common Securities are not transferable and any attempted transfer hereof shall
be void. The designations, rights, privileges, restrictions, preferences and
other terms and provisions of the Common Securities are set forth in, and this
certificate and the Common Securities represented hereby are issued and shall in
all respects be subject to the terms and provisions of, the Amended and Restated
Trust Agreement of the Trust dated as of January 30, 1997, as the same may be
amended from time to time (the "Trust Agreement"), including the designation of
the terms of the Common Securities as set forth therein. The Trust will furnish
a copy of the Trust Agreement to the Holder without charge upon written request
to the Trust at its principal place of business or registered office.
Upon receipt of this certificate, the Holder is bound by the Trust
Agreement and is entitled to the benefits thereunder.
B-1
<PAGE>
IN WITNESS WHEREOF, an Administrative Trustee of the Trust has
executed this certificate for and on behalf of the Trust this ____ day of
_________, 199_.
TU Electric Capital
By:
__________________________________________
not in his (her) individual capacity, but
solely as Administrative Trustee
B-2
<PAGE>
EXHIBIT C
AGREEMENT AS TO EXPENSES AND LIABILITIES
AGREEMENT dated as of January 30, 1997 between Texas Utilities
Electric Company, a Texas corporation ("TU Electric"), and TU Electric Capital
IV, a Delaware business trust (the "Trust").
WHEREAS, the Trust intends to issue its Common Securities (the "Common
Securities") to and receive Debentures from TU Electric and to issue its
Floating Rate Cumulative Capital Securities (the "Capital Securities") with such
powers, preferences and special rights and restrictions as are set forth in the
Amended and Restated Trust Agreement of the Trust dated as of January 30, 1997
as the same may be amended from time to time (the "Trust Agreement");
WHEREAS, TU Electric is the issuer of the Debentures;
NOW, THEREFORE, in consideration of the acceptance of the Capital
Securities by each holder thereof, which acceptance TU Electric hereby agrees
shall benefit TU Electric and which acceptance TU Electric acknowledges will be
made in reliance upon the execution and delivery of this Agreement, TU Electric,
including in its capacity as holder of the Common Securities, and the Trust
hereby agree as follows:
ARTICLE I
Section 1.01. Assumption by TU Electric. Subject to the terms and
-------------------------
conditions hereof, TU Electric hereby irrevocably and unconditionally assumes
the full payment, when and as due, of any and all Obligations (as hereinafter
defined) to each person or entity to whom the Trust is now or hereafter becomes
indebted or liable (the "Beneficiaries"). As used herein, "Obligations" means
any indebtedness, expenses or liabilities of the Trust, other than obligations
of the Trust to pay to holders of any Capital Securities the amounts due such
holders pursuant to the terms of the Capital Securities. This Agreement is
intended to be for the benefit of, and to be enforceable by, all such
Beneficiaries, whether or not such Beneficiaries have received notice hereof.
Section 1.02. Term of Agreement. This Agreement shall terminate and
-----------------
be of no further force and effect upon the date on which there are no
Beneficiaries remaining; provided, however, that this Agreement shall continue
to be effective or shall be reinstated, as the case may be, if at any time any
holder of Capital Securities or any Beneficiary must restore payment of any sums
paid under the Capital Securities, under any Obligation, under the Guarantee
Agreement dated the date hereof by TU Electric and The Bank of New York, as
guarantee trustee, or under this Agreement for any reason whatsoever. This
Agreement is continuing, irrevocable, unconditional and absolute.
C-1
<PAGE>
Section 1.03. Waiver of Notice. TU Electric hereby waives notice of
----------------
acceptance of this Agreement and of any Obligation to which it applies or may
apply, and TU Electric hereby waives presentment, demand for payment, protest,
notice of nonpayment, notice of dishonor, notice of redemption and all other
notices and demands.
Section 1.04. No Impairment. The obligations, covenants, agreements
-------------
and duties of TU Electric under this Agreement shall in no way be affected or
impaired by reason of the happening from time to time of any of the following:
(a) the extension of time for the payment by the Trust of all or any
portion of the Obligations or for the performance of any other obligation under,
arising out of, or in connection with, the Obligations;
(b) any failure, omission, delay or lack of diligence on the part of
the Beneficiaries to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Beneficiaries with respect to the Obligations or any
action on the part of the Trust granting indulgence or extension of any kind; or
(c) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Trust or any of the assets of the
Trust.
Neither the Trust nor any Beneficiary shall have any obligation to give notice
to, or obtain the consent of, TU Electric with respect to the happening of any
of the foregoing.
Section 1.05. Enforcement. A Beneficiary may enforce this Agreement
-----------
directly against TU Electric and TU Electric waives any right or remedy to
require that any action be brought against the Trust or any other person or
entity before proceeding against TU Electric.
ARTICLE II
Section 2.01. Binding Effect. All of the obligations, covenants and
--------------
agreements contained in this Agreement shall bind the successors, assigns,
receivers, trustees and representatives of TU Electric and shall inure to the
benefit of the Beneficiaries and their successors and assigns.
Section 2.02. Amendment. So long as there remains any Beneficiary or
---------
any Capital Securities of any series shall be outstanding, this Agreement shall
not be modified or amended in any manner adverse to such Beneficiary or to the
holders of the Securities.
C-2
<PAGE>
Section 2.03. Notices. Any notice, request or other communication
-------
required or permitted to be given hereunder shall be given in writing by
delivering the same against receipt therefor by facsimile transmission
(confirmed by mail), telex or by registered or certified mail, addressed as
follows (and if so given, shall be deemed given when mailed or upon receipt of
an answer-back, if sent by telex), to wit:
TU Electric Capital
c/o Robert S. Shapard, Administrative Trustee
1601 Bryan Street
Dallas, Texas 75201
Facsimile No.: 214-812-2488
Texas Utilities Electric Company
1601 Bryan Street
Dallas, Texas 75201
Facsimile No.: 214-812-2488
Attention: Treasurer
Section 2.04. THIS AGREEMENT SHALL BE GOVERNED BY AND CON STRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD
TO CONFLICT OF LAWS PRINCIPLES).
C-3
<PAGE>
THIS AGREEMENT is executed as of the day and year first above
written.
TEXAS UTILITIES ELECTRIC COMPANY
By:_________________________________________
Name:
Title:
TU ELECTRIC CAPITAL
By:_________________________________________
not in his individual capacity, but solely
as Administrative Trustee
C-4
<PAGE>
[Clearing Agency Legend]
EXHIBIT D
Certificate Number Number of Securities
P- CUSIP NO.
Certificate Evidencing Securities
of
TU Electric Capital IV
Floating Rate Capital Securities
(liquidation amount $1,000 per Capital Security)
TU Electric Capital , a statutory business trust created under the
laws of the State of Delaware (the "Trust"), hereby certifies that ____________
(the "Holder") is the registered owner of _____ (_____) Capital securities of
the Trust representing an undivided beneficial interest in the assets of the
Trust and designated the TU Electric Capital Floating Rate Cumulative Capital
Securities (liquidation amount $1,000 per Capital Security) (the "Capital
Securities"). The Capital Securities are transferable on the books and records
of the Trust, in person or by a duly authorized attorney, upon surrender of this
certificate duly endorsed and in proper form for transfer as provided in Section
5.04 or 5.11 of the Trust Agreement (as defined below). The designations,
rights, privileges, restrictions, preferences and other terms and provisions of
the Capital Securities are set forth in, and this certificate and the Capital
Securities represented hereby are issued and shall in all respects be subject to
the terms and provisions of, the Amended and Restated Trust Agreement of the
Trust dated as of January 30, 1997, as the same may be amended from time to time
(the "Trust Agreement"). The holder of this certificate is entitled to the
benefits of the Guarantee Agreement of Texas Utilities Electric Company, a Texas
corporation, and The Bank of New York, as guarantee trustee, dated as of January
30, 1997 (the "Guarantee") to the extent provided therein. The Trust will
furnish a copy of the Trust Agreement and the Guarantee to the holder of this
certificate without charge upon written request to the Trust at its principal
place of business or registered office.
Upon receipt of this certificate, the holder of this certificate is
bound by the Trust Agreement and is entitled to the benefits thereunder.
D-1
<PAGE>
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust
has executed this certificate for and on behalf of the Trust.
Dated:
TU ELECTRIC CAPITAL
By:
__________________________________________
not in his (her) individual capacity,
but solely as Administrative Trustee
Countersigned and Registered:
TEXAS UTILITIES SERVICES INC.,
Transfer Agent and Registrar
By:
__________________________________________
(Authorized Signature)
THE BANK OF NEW YORK, as agent
for the Transfer Agent and Registrar
By:
__________________________________________
(Authorized Signature)
D-2
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this
Security to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert assignee's social security or tax identification number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert address and zip code of assignee)
of the Securities represented by this Certificate and irrevocably appoints
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
attorney to transfer such Securities Certificate on the books of the
Trust. The attorney may substitute another to act for him or her.
Date:__________________
Signature:________________________
(Sign exactly as your name appears on the other side of this Securities
Certificate)
Signature:________________________
(Sign exactly as your name appears on the other side of this Securities
Certificate)
D-3
<PAGE>
Exhibit 4(t)
GUARANTEE AGREEMENT
Between
Texas Utilities Electric Company
(as Guarantor)
and
The Bank of New York
(as Trustee)
dated as of
January 30, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS..................................................... 1
SECTION 1.01 Definitions.............................................. 1
ARTICLE II TRUST INDENTURE ACT............................................. 4
SECTION 2.01 Trust Indenture Act; Application......................... 4
SECTION 2.02 Lists of Holders of Capital Securities................... 4
SECTION 2.03 Reports by the Guarantee Trustee......................... 4
SECTION 2.04 Periodic Reports to Guarantee Trustee.................... 4
SECTION 2.05 Evidence of Compliance with Conditions Precedent......... 5
SECTION 2.06 Events of Default; Waiver................................ 5
SECTION 2.07 Event of Default; Notice................................. 5
SECTION 2.08 Conflicting Interests.................................... 5
ARTICLE III POWERS, DUTIES AND RIGHTS OF GUARANTEE TRUSTEE.................. 5
SECTION 3.01 Powers and Duties of the Guarantee Trustee............... 5
SECTION 3.02 Certain Rights of Guarantee Trustee...................... 7
SECTION 3.03 Certain Rights of Guarantee Trustee...................... 9
ARTICLE IV GUARANTEE TRUSTEE............................................... 9
SECTION 4.01 Guarantee Trustee; Eligibility........................... 9
SECTION 4.02 Compensation and Reimbursement...........................10
SECTION 4.03 Appointment, Removal and Resignation of
Guarantee Trustee.......................................11
ARTICLE V GUARANTEE.......................................................11
SECTION 5.01 Guarantee................................................11
SECTION 5.02 Waiver of Notice and Demand..............................12
SECTION 5.03 Obligations Not Affected.................................12
SECTION 5.04 Rights of Holders........................................13
SECTION 5.05 Guarantee of Payment.....................................13
SECTION 5.06 Subrogation..............................................13
SECTION 5.07 Independent Obligations..................................13
ARTICLE VI SUBORDINATION...................................................14
SECTION 6.01 Subordination............................................14
ARTICLE VII TERMINATION.....................................................14
SECTION 7.01 Termination..............................................14
ARTICLE VIII MISCELLANEOUS...................................................14
SECTION 8.01 Successors and Assigns...................................14
SECTION 8.02 Amendments...............................................14
SECTION 8.03 Notices..................................................15
SECTION 8.04 Benefit..................................................16
SECTION 8.05 Interpretation...........................................16
SECTION 8.06 Governing Law............................................16
</TABLE>
<PAGE>
CROSS-REFERENCE TABLE
---------------------
<TABLE>
<CAPTION>
Section of Section of
Trust Indenture Act Guarantee
of 1939, as amended Agreement
- ------------------- ----------
<S> <C>
310(a).......................................................... 4.01(a)
310(b).......................................................... 4.01(c), 2.08
310(c).......................................................... Inapplicable
311(a).......................................................... 2.02(b)
311(b).......................................................... 2.02(b)
311(c).......................................................... Inapplicable
312(a).......................................................... 2.02(a)
312(b).......................................................... 2.02(b)
313............................................................. 2.03
314(a).......................................................... 2.04
314(b).......................................................... Inapplicable
314(c).......................................................... 2.05
314(d).......................................................... Inapplicable
314(e).......................................................... 1.01, 2.05,
3.02
314(f).......................................................... 2.01, 3.02
315(a).......................................................... 3.01(d)
315(b).......................................................... 2.07
315(c).......................................................... 3.01
315(d).......................................................... 3.01(d)
316(a).......................................................... 5.04(a), 2.06
316(b).......................................................... 5.03
316(c).......................................................... 2.02
317(a).......................................................... Inapplicable
317(b).......................................................... Inapplicable
318(a).......................................................... 2.01(b)
318(b).......................................................... 2.01
318(c).......................................................... 2.01(a)
</TABLE>
_____________
* This Cross-Reference Table does not constitute part of the Guarantee
Agreement and shall not affect the interpretation of any of its terms or
provisions.
<PAGE>
GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT ("Guarantee Agreement"), dated as of January
30, 1997, is executed and delivered by Texas Utilities Electric Company, a Texas
corporation (the "Guarantor"), and The Bank of New York, as trustee (the
"Guarantee Trustee"), for the benefit of the Holders (as defined herein) from
time to time of the Capital Securities (as defined herein) of TU Electric
Capital IV, a Delaware statutory business trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Trust Agreement (the
"Trust Agreement"), dated as of January 30, 1997 between the Trustees of the
Issuer named therein, Texas Utilities Electric Company, as Depositor, and the
several Holders (as defined therein) the Issuer is issuing as of the date hereof
$100,000,000 aggregate Liquidation Amount of its Floating Rate Securities (the
"Capital Securities") representing ownership interests in the Issuer and having
the terms set forth in the Trust Agreement;
WHEREAS, the Capital Securities are to be issued for sale by the
Issuer and the proceeds are to be invested in $100,000,000 principal amount of
Debentures (as defined in the Trust Agreement); and
WHEREAS, in order to enhance the value of the Capital Securities, the
Guarantor desires to irrevocably and unconditionally agree, to the extent set
forth herein, to pay to the Holders the Guarantee Payments (as defined herein)
and to make certain other payments on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the purchase of Debentures, which
purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor
executes and delivers this Guarantee Agreement for the benefit of the Holders
from time to time.
ARTICLE I
DEFINITIONS
SECTION 1.01 DEFINITIONS. As used in this Guarantee Agreement,
the terms set forth below shall, unless the context otherwise requires, have the
following meanings. Capitalized or otherwise defined terms used but not
otherwise defined herein shall have the meanings assigned to such terms in the
Trust Agreement as in effect on the date hereof.
"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,
<PAGE>
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Common Securities" means the securities representing common ownership
interests in the assets of the Issuer.
"Event of Default" means a default by the Guarantor on any of its
payment obligations under this Guarantee Agreement.
"Guarantee Payments" shall mean the following payments or
distributions, without duplication, with respect to the Capital Securities, to
the extent not paid or made by or on behalf of the Issuer: (i) any accrued and
unpaid Distributions that are required to be paid on such Capital Securities but
only if and to the extent that the Property Trustee has available in the Payment
Account funds sufficient to make such payment, (ii) the redemption price (the
"Redemption Price"), and all accrued and unpaid Distributions to the date of
redemption, with respect to the Capital Securities called for redemption by the
Issuer but only if and to the extent that the Property Trustee has available in
the Payment Account funds sufficient to make such payment, (iii) upon a
voluntary or involuntary dissolution, winding-up or termination of the Issuer
(other than in connection with the distribution of Debentures to the Holders in
exchange for Capital Securities as provided in the Trust Agreement or upon a
redemption of all of the Capital Securities upon maturity or redemption of the
Debentures as provided in the Trust Agreement), the lesser of (a) the aggregate
of the Liquidation Amount of all Capital Securities and all accrued and unpaid
Distributions on the Capital Securities to the date of payment but only if and
to the extent that the Property Trustee has available in the Payment Account
funds sufficient to make such payment, and (b) the amount of assets of the
Issuer remaining available for distribution to Holders in liquidation of the
Issuer (in either case, the "Liquidation Distribution").
"Guarantee Trustee" means The Bank of New York until a Successor
Guarantee Trustee has been appointed and has accepted such appointment pursuant
to the terms of this Guarantee Agreement and thereafter means each such
Successor Guarantee Trustee.
"Holder" shall mean any holder, as registered on the books and records
of the Issuer, of any Capital Securities then outstanding; provided, however,
that in determining whether the holders of the requisite percentage of Capital
Securities have given any request, notice, consent or waiver hereunder, "Holder"
shall not include the Guarantor or any Affiliate of the Guarantor.
"Indenture" means the Indenture dated as of December 1, 1995, among
the Guarantor (the "Debenture Issuer") and The Bank of New York, as trustee
pursuant to which the Debentures are issued, together with any indenture
supplemental thereto.
-2-
<PAGE>
"Majority in Liquidation Amount of the Capital Securities" means a
vote by Holders, voting separately as a class, of more than 50% of the aggregate
Liquidation Amount of all Capital Securities.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, a Vice Chairman of the Board, the President or a Vice President, and
by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary, of the Guarantor, and delivered to the Guarantee Trustee. Any
Officers' Certificate delivered with respect to compliance with a condition or
covenant provided for in this Guarantee Agreement shall include:
(a) a statement that each officer signing the Officers' Certificate
has read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers'
Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer 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 officer,
such condition or covenant has been complied with.
"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization or government, or any agency or
political subdivision thereof, or any other entity of whatever nature.
"Responsible Officer" means, with respect to the Guarantee Trustee,
any vice-president, any assistant vice-president, the secretary, any assistant
secretary, the treasurer, any assistant treasurer, any trust officer or
assistant trust officer or any other officer of the Corporate Trust Department
of the Guarantee Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a particular corporate trust matter, any other officer to whom such matter is
referred because of that officer's knowledge of and familiarity with the
particular subject.
"Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 4.01.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
-3-
<PAGE>
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.01 TRUST INDENTURE ACT; APPLICATION.
(a) This Guarantee Agreement is subject to the provisions of the
Trust Indenture Act that are required or deemed to be part of this Guarantee
Agreement and shall, to the extent applicable, be governed by such provisions;
and
(b) if and to the extent that any provision of this Guarantee
Agreement limits, qualifies or conflicts with the duties imposed by Section 310
to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control.
SECTION 2.02 LISTS OF HOLDERS OF CAPITAL SECURITIES.
(a) The Guarantor shall furnish or cause to be furnished to the
Guarantee Trustee (a) semiannually, not later than December 31 and June 30 in
each year, a list, in such form as the Guarantee Trustee may reasonably require,
of the names and addresses of the Holders ("List of Holders") as of a date not
more than 15 days prior to the delivery thereof, and (b) at such other times as
the Guarantee Trustee may request in writing, within 30 days after the receipt
by the Guarantor of any such request, a List of Holders as of a date not more
than 15 days prior to the time such list is furnished; provided that, the
Guarantor shall not be obligated to provide such List of Holders at any time the
List of Holders does not differ from the most recent List of Holders given to
the Guarantee Trustee by the Guarantor. The Guarantee Trustee may destroy any
List of Holders previously given to it on receipt of a new List of Holders.
(b) The Guarantee Trustee shall comply with its obligations under
Section 311(a) of the Trust Indenture Act, subject to the provisions of Section
311(b) and Section 312(b) of the Trust Indenture Act.
SECTION 2.03 REPORTS BY THE GUARANTEE TRUSTEE. Within 60 days after
December 31 of each year, commencing December 31, 1997, the Guarantee Trustee
shall provide to the Holders such reports, if any, as are required by Section
313(a) of the Trust Indenture Act in the form and in the manner provided by
Section 313(a) of the Trust Indenture Act. The Guarantee Trustee shall also
comply with the requirements of Sections 313(b), (c) and (d) of the Trust
Indenture Act.
SECTION 2.04 PERIODIC REPORTS TO GUARANTEE TRUSTEE. The Guarantor
shall provide to the Guarantee Trustee such documents, reports and information
as required by Section 314 (if any) and the compliance certificate required by
Section 314 of the Trust Indenture Act in the form, in the manner and at the
times required by Section 314 of the Trust Indenture Act.
-4-
<PAGE>
SECTION 2.05 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.
The Guarantor shall provide to the Guarantee Trustee such evidence of compliance
with any conditions precedent provided for in this Guarantee Agreement as and to
the extent required by Section 314(c) of the Trust Indenture Act. Any
certificate or opinion required to be given by an officer pursuant to Section
314(c)(1) of the Trust Indenture Act may be given in the form of an Officers'
Certificate.
SECTION 2.06 EVENTS OF DEFAULT; WAIVER. The Holders of a Majority in
Liquidation Amount of Capital Securities may, by vote, on behalf of all of the
Holders, waive any past Event of Default and its consequences. Upon such waiver,
any such Event of Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured, for every purpose of this
Guarantee Agreement, but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent thereon.
SECTION 2.07 EVENT OF DEFAULT; NOTICE.
(a) The Guarantee Trustee shall, within 90 days after the occurrence
of an Event of Default, transmit by mail, first class postage prepaid, to the
Holders, notices of all Events of Default known to the Guarantee Trustee, unless
such defaults have been cured or waived before the giving of such notice,
provided that, the Guarantee Trustee shall be protected in withholding such
notice if and so long as the board of directors, the executive committee, or a
trust committee of directors or Responsible Officers of the Guarantee Trustee in
good faith determines that the withholding of such notice is in the interests of
the Holders.
(b) The Guarantee Trustee shall not be deemed to have knowledge of
any Event of Default unless a Responsible Officer charged with the
administration of the Trust Agreement shall have obtained written notice of such
Event of Default.
SECTION 2.08 CONFLICTING INTERESTS. The Trust Agreement and the
Indenture shall be deemed to be specifically described in this Guarantee
Agreement for the purposes of clause (i) of the first proviso contained in
Section 310(b) of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF GUARANTEE TRUSTEE
SECTION 3.01 POWERS AND DUTIES OF THE GUARANTEE TRUSTEE.
(a) This Guarantee Agreement shall be held by the Guarantee Trustee
for the benefit of the Holders, and the Guarantee Trustee shall not transfer
this Guarantee
-5-
<PAGE>
Agreement or any rights hereunder to any Person except a Holder exercising his
or her rights pursuant to Section 5.04 or to a Successor Guarantee Trustee on
acceptance by such Successor Guarantee Trustee of its appointment to act as
Successor Guarantee Trustee. The right, title and interest of the Guarantee
Trustee shall automatically vest in any Successor Guarantee Trustee, and such
vesting and cessation of title shall be effective whether or not conveyancing
documents have been executed and delivered pursuant to the appointment of such
Successor Guarantee Trustee.
(b) The Guarantee Trustee, prior to the occurrence of any Event of
Default and after the curing or waiving of all Events of Default that may have
occurred, shall undertake to perform such duties and only such duties as are
specifically set forth in this Guarantee Agreement, and no implied covenants or
obligations shall be read into this Guarantee Agreement against the Guarantee
Trustee. In case an Event of Default has occurred (that has not been cured or
waived pursuant to Section 2.06), and is actually known to a Responsible Officer
of the Guarantee Trustee, the Guarantee Trustee shall exercise such of the
rights and powers vested in it by this Guarantee Agreement, and use the same
degree of care and skill in its exercise thereof, as a prudent person would
exercise or use under the circumstances in the conduct of his or her own
affairs.
(c) No provision of this Guarantee Agreement shall be construed to
relieve the Guarantee Trustee from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of any Event of Default and after
the curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the Guarantee
Trustee shall be determined solely by the express provisions of
this Guarantee Agreement, and the Guarantee Trustee shall not be
liable except for the performance of such duties and obligations
as are specifically set forth in this Guarantee Agreement, and no
implied covenants or obligations shall be read into this
Guarantee Agreement against the Guarantee Trustee; and
(B) in the absence of bad faith on the part of the
Guarantee Trustee, the Guarantee Trustee may conclusively rely,
as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions
furnished to the Guarantee Trustee and conforming to the
requirements of this Guarantee Agreement; but in the case of any
such certificates or opinions that by any provision hereof are
specifically required to be furnished to the Guarantee Trustee,
the Guarantee Trustee shall be under a duty to examine the same
to determine whether or not they conform to the requirements of
this Guarantee Agreement;
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<PAGE>
(ii) the Guarantee Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Guarantee
Trustee, unless it shall be proved that the Guarantee Trustee was
negligent in ascertaining the pertinent facts upon which such judgment
was made;
(iii) the Guarantee Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of a Majority in
Liquidation Amount of the Capital Securities relating to the time,
method and place of conducting any proceeding for any remedy available
to the Guarantee Trustee, or exercising any trust or power conferred
upon the Guarantee Trustee under this Guarantee Agreement; and
(iv) no provision of this Guarantee Agreement shall require the
Guarantee 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 the
Guarantee Trustee shall have reasonable grounds for believing that the
repayment of such funds or liability is not reasonably assured to it
under the terms of this Guarantee Agreement or adequate indemnity,
reasonably satisfactory to the Guarantee Trustee, against such risk or
liability is not reasonably assured to it.
(d) Whether or not therein expressly provided, every provision of
this Guarantee Agreement relating to the conduct or affecting the liability of
or affording protection to the Trustee shall be subject to the provisions of
Sections 3.01(b) and 3.01(c).
SECTION 3.02 CERTAIN RIGHTS OF GUARANTEE TRUSTEE.
(a) Subject to the provisions of Section 3.01:
(i) the Guarantee Trustee may rely and shall be fully protected
in acting or refraining from acting 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, sent or presented by the proper party or parties;
(ii) any direction or act of the Guarantor contemplated by this
Guarantee Agreement shall be sufficiently evidenced by an Officers'
Certificate;
(iii) whenever, in the administration of this Guarantee
Agreement, the Guarantee Trustee shall deem it desirable that a matter
be proved or established before taking, suffering or omitting any
action hereunder, the
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<PAGE>
Guarantee Trustee (unless other evidence is herein specifically
prescribed) may, in the absence of bad faith on its part, request and
rely upon an Officers' Certificate which, upon receipt of such
request, shall be promptly delivered by the Guarantor;
(iv) the Guarantee Trustee may consult with counsel of its
choice, and the written advice or opinion of such counsel with respect
to legal matters 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 on such advice or opinion;
such counsel may be counsel to the Guarantor or any of its Affiliates
and may include any of its employees; the Guarantee Trustee shall have
the right at any time to seek instructions concerning the
administration of this Guarantee Agreement from any court of competent
jurisdiction;
(v) the Guarantee Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Guarantee
Agreement at the request or direction of any Holder, unless such
Holder shall have provided to the Guarantee Trustee such adequate
security and indemnity as would satisfy a reasonable person in the
position of the Guarantee Trustee, against the costs, expenses
(including attorneys' fees and expenses) and liabilities that might be
incurred by it in complying with such request or direction, including
such reasonable advances as may be requested by the Guarantee Trustee;
provided that, nothing contained in this Section 3.02(a)(v) shall be
taken to relieve the Guarantee Trustee, upon the occurrence and
continuance of an Event of Default, of its obligation under the last
sentence of Section 3.01(b) to exercise the rights and powers vested
in it by this Guarantee Agreement;
(vi) the Guarantee 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 Guarantee Trustee, in
its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit;
(vii) the Guarantee 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 Guarantee 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;
(viii) whenever in the administration of this Guarantee
Agreement the Guarantee Trustee shall deem it desirable to receive
instructions with respect to enforcing any remedy or right or taking
any other action hereunder, the Guarantee Trustee (1) may request
instructions from the Holders of a majority
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<PAGE>
in Liquidation Amount of the Capital Securities, (2) may refrain from
enforcing such remedy or right or taking such other action until such
instructions are received, and (3) shall be protected in relying on or
acting in accordance with such instructions;
(ix) the Guarantee Trustee shall have no duty to see to any
recording, filing or registration of any instrument (including any
financing or continuation statement or any tax or securities form) (or
any rerecording, refiling or re-registration thereof); and
(x) the Guarantee Trustee shall not be liable for any action
taken, suffered or omitted to be taken by it in good faith and
reasonably believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Guarantee Agreement.
(b) No provision of this Guarantee Agreement shall be deemed to
impose any duty or obligation on the Guarantee Trustee to perform any act or
acts or exercise any right, power, duty or obligation conferred or imposed on it
in any jurisdiction in which it shall be illegal, or in which the Guarantee
Trustee shall be unqualified or incompetent in accordance with applicable law,
to perform any such act or acts or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Guarantee Trustee
shall be construed to be a duty.
SECTION 3.03 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF GUARANTEE.
The recitals contained in this Guarantee Agreement shall be taken as
the statements of the Guarantor, and the Guarantee Trustee does not assume any
responsibility for their correctness. The Guarantee Trustee makes no
representation as to the validity or sufficiency of this Guarantee Agreement.
ARTICLE IV
GUARANTEE TRUSTEE
SECTION 4.01 GUARANTEE TRUSTEE; ELIGIBILITY.
(a) There shall at all times be a Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under the laws
of the United States of America or any State or Territory thereof or
of the District of Columbia, or a corporation or Person permitted by
the Securities
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<PAGE>
and Exchange Commission to act as an institutional trustee under the
Trust Indenture Act, authorized under such laws to exercise corporate
trust powers, having a combined capital and surplus of at least 50
million U.S. dollars ($50,000,000), and subject to supervision or
examination by Federal, State, Territorial or District of Columbia
authority. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the supervising or
examining authority referred to above, then, for the purposes of this
Section 4.01(a)(ii), 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.
(b) If at any time the Guarantee Trustee shall cease to be eligible
to so act under Section 4.01(a), the Guarantee Trustee shall immediately
resign in the manner and with the effect set out in Section 4.03(c).
(c) If the Guarantee Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act,
the Guarantee Trustee and Guarantor shall in all respects comply with the
provisions of Section 310(b) of the Trust Indenture Act.
SECTION 4.02 COMPENSATION AND REIMBURSEMENT.
The Guarantor agrees:
(a) to pay the Guarantee Trustee from time to time such reasonable
compensation as the Guarantor and the Guarantee Trustee shall from time to time
agree in writing 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);
(b) except as otherwise expressly provided herein, to reimburse the
Guarantee Trustee upon its request for all reasonable expenses, disbursements
and advances incurred or made by the Guarantee Trustee in accordance with the
provisions of this Guarantee Agreement (including the reasonable compensation
and expenses of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to its negligence or bad faith; and
(c) to indemnify each of the Guarantee Trustee and any predecessor
Guarantee Trustee for, and to hold it harmless from and against, any and all
loss, damage, claim, liability or expense, including taxes (other than taxes
based upon the income of the Guarantee Trustee) incurred without negligence or
bad faith on its part, arising out of or in connection with the acceptance of
the trusts created by, or the administration of, this Guarantee Agreement,
including the 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.
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<PAGE>
As security for the performance of the obligations of the Guarantor
under this Section, the Guarantee Trustee shall have a lien prior to the Capital
Securities upon all the property and funds held or collected by the Guarantee
Trustee as such, except funds held in trust for the payment of principal of, and
premium (if any) or interest on, particular obligations of the Guarantor under
this Guarantee Agreement.
The provisions of this Section shall survive the termination of this
Guarantee Agreement.
SECTION 4.03 APPOINTMENT, REMOVAL AND RESIGNATION OF GUARANTEE
TRUSTEE.
(a) Subject to Section 4.03(b), unless an Event of Default shall have
occurred and be continuing, the Guarantee Trustee may be appointed or removed
without cause at any time by the Guarantor.
(b) The Guarantee Trustee shall not be removed until a Successor
Guarantee Trustee has been appointed and has accepted such appointment by
written instrument executed by such Successor Guarantee Trustee and delivered to
the Guarantor.
(c) The Guarantee Trustee appointed to office shall hold office until
a Successor Guarantee Trustee shall have been appointed or until its removal or
resignation. The Guarantee Trustee may resign from office (without need for
prior or subsequent accounting) by an instrument in writing executed by the
Guarantee Trustee and delivered to the Guarantor, which resignation shall not
take effect until a Successor Guarantee Trustee has been appointed and has
accepted such appointment by instrument in writing executed by such Successor
Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee
Trustee.
(d) If no Successor Guarantee Trustee shall have been appointed and
accepted appointment as provided in this Section 4.03 within 60 days after
delivery to the Guarantor of an instrument of resignation or removal, the
Guarantee Trustee resigning or being removed may petition any court of competent
jurisdiction for appointment of a Successor Guarantee Trustee. Such court may
thereupon, after prescribing such notice, if any, as it may deem proper, appoint
a Successor Guarantee Trustee.
(e) The Guarantor shall give notice of each resignation and each
removal of the Guarantee Trustee and each appointment of a successor Guarantee
Trustee to all Holders in the manner provided in Section 8.03 hereof. Each
notice shall include the name of the successor Guarantee Trustee and the address
of its Corporate Trust Office.
(f) No Guarantee Trustee shall be liable for the acts or omissions to
act of any Successor Guarantee Trustee.
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<PAGE>
ARTICLE V
GUARANTEE
SECTION 5.01 GUARANTEE. The Guarantor irrevocably and unconditionally
agrees to pay in full to the Holders the Guarantee Payments (without duplication
of amounts theretofore paid by the Issuer), as and when due, regardless of any
defense, right of set-off or counterclaim which the Issuer may have or assert.
The Guarantor's obligation to make a Guarantee Payment may be satisfied by
direct payment of the required amounts by the Guarantor to the Holders or by
causing the Issuer to pay such amounts to the Holders.
SECTION 5.02 WAIVER OF NOTICE AND DEMAND. The Guarantor hereby waives
notice of acceptance of this Guarantee Agreement and of any liability to which
it applies or may apply, presentment, demand for payment, any right to require a
proceeding first against the Issuer or any other Person before proceeding
against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice
of redemption and all other notices and demands.
SECTION 5.03 OBLIGATIONS NOT AFFECTED. The obligation of the
Guarantor to make the Guarantee Payments under this Guarantee Agreement shall in
no way be affected or impaired by reason of the happening from time to time of
any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied
agreement, covenant, term or condition relating to the Capital Securities
to be performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or any
portion of the Distributions, Redemption Price, Liquidation Distribution or
any other sums payable under the terms of the Capital Securities or the
extension of time for the performance of any other obligation under,
arising out of, or in connection with, the Capital Securities (other than
an extension of time for payment of Distributions, Redemption Price,
Liquidation Distribution or other sum payable that results from the
extension of any interest payment period on the Debentures permitted by the
Indenture);
(c) any failure, omission, delay or lack of diligence on the part of
the Property Trustee or the Holders to enforce, assert or exercise any
right, privilege, power or remedy conferred on the Property Trustee or the
Holders pursuant to the terms of the Capital Securities, or any action on
the part of the Issuer granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of
any collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors,
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<PAGE>
reorganization, arrangement, composition or readjustment of debt of, or
other similar proceedings affecting, the Issuer or any of the assets of the
Issuer;
(e) any invalidity of, or defect or deficiency in, the Capital
Securities;
(f) the settlement or compromise of any obligation guaranteed hereby
or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise constitute
a legal or equitable discharge or defense of a guarantor, it being the
intent of this Section 5.03 that the obligations of the Guarantor hereunder
shall be absolute and unconditional under any and all circumstances.
There shall be no obligation of the Guarantee Trustee, the Property Trustee or
the Holders to give notice to, or obtain consent of, the Guarantor or any other
Person with respect to the happening of any of the foregoing.
SECTION 5.04 RIGHTS OF HOLDERS. The Guarantor expressly acknowledges
that: (i) this Guarantee Agreement will be deposited with the Guarantee Trustee
to be held for the benefit of the Holders; (ii) if an Event of Default has
occurred and is continuing, the Guarantee Trustee has the right to enforce this
Guarantee Agreement on behalf of the Holders; (iii) the Holders of a Majority in
Liquidation Amount of the Capital Securities have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect of this Guarantee Agreement or exercising any trust
or power conferred upon the Guarantee Trustee under this Guarantee Agreement;
and (iv) any Holder may institute a legal proceeding directly against the
Guarantor to enforce its rights under this Guarantee Agreement without first
instituting a legal proceeding against the Issuer or any other Person.
SECTION 5.05 GUARANTEE OF PAYMENT. This Guarantee Agreement creates a
guarantee of payment and not of collection. This Guarantee Agreement will not be
discharged except by payment of the Guarantee Payments in full (without
duplication).
SECTION 5.06 SUBROGATION. The Guarantor shall be subrogated to all
(if any) rights of the Holders against the Issuer in respect of any amounts paid
to the Holders by the Guarantor under this Guarantee Agreement; provided,
however, that the Guarantor shall not (except to the extent required by
mandatory provisions of law) be entitled to enforce or exercise any rights which
it may acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Guarantee Agreement,
if, at the time of any such payment, any amounts of Guarantee Payments are due
and unpaid under this Guarantee Agreement. If any amount shall be paid to the
Guarantor in violation of the preceding sentence, the Guarantor agrees to hold
such amount in trust for the Holders and to pay over such amount to the Holders.
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<PAGE>
SECTION 5.07 INDEPENDENT OBLIGATIONS. The Guarantor acknowledges that
its obligations hereunder are independent of the obligations of the Issuer with
respect to the Capital Securities and that the Guarantor shall be liable as
principal and as debtor hereunder to make Guarantee Payments pursuant to the
terms of this Guarantee Agreement notwithstanding the occurrence of any event
referred to in subsections (a) through (g), inclusive, of Section 5.03.
ARTICLE VI
SUBORDINATION
SECTION 6.01 SUBORDINATION. This Guarantee Agreement will constitute
an unsecured obligation of the Guarantor and will rank (i) subordinate and
junior in right of payment to all other liabilities of the Guarantor, including
the Debentures, except those made pari passu or subordinate by their terms, (ii)
pari passu with the most senior preferred or preference stock now or hereafter
issued by the Guarantor and with any guarantee now or hereafter entered into by
the Guarantor in respect of any preferred or preference stock of any Affiliate
of the Guarantor, and (iii) senior to all common stock of the Guarantor. Nothing
in this Section 6.01 shall apply to claims of, or payments to, the Guarantee
Trustee under or pursuant to Section 4.02 hereof.
ARTICLE VII
TERMINATION
SECTION 7.01 TERMINATION. Subject to Section 4.02 hereof, this
Guarantee Agreement shall terminate and be of no further force and effect upon:
(i) full payment of the Redemption Price of all Capital Securities, and all
accrued and unpaid Distributions to the date of redemption, (ii) the
distribution of Debentures to Holders in exchange for all of the Capital
Securities or (iii) full payment of the amounts payable in accordance with the
Trust Agreement upon liquidation of the Issuer. Notwithstanding the foregoing,
this Guarantee Agreement will continue to be effective or will be reinstated, as
the case may be, if at any time any Holder must restore payment of any sums paid
with respect to Capital Securities or under this Guarantee Agreement.
ARTICLE VII
MISCELLANEOUS
SECTION 8.01 SUCCESSORS AND ASSIGNS. All guarantees and agreements
contained in this Guarantee Agreement shall bind the successors, assigns,
receivers, trustees
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<PAGE>
and representatives of the Guarantor and shall inure to the benefit of the
Holders of the Capital Securities then outstanding. Except in connection with a
consolidation, merger or sale involving the Guarantor that is permitted under
Article Eleven of the Indenture, the Guarantor shall not assign its obligations
hereunder.
SECTION 8.02 AMENDMENTS. This Guarantee Agreement may be amended only
by an instrument in writing entered into by the Guarantor and the Guarantee
Trustee. Except with respect to any changes which do not materially adversely
affect the rights of Holders (in which case no consent of Holders will be
required), this Guarantee Agreement may only be amended with the prior approval
of the Holders of not less than 66 2/3% in aggregate Liquidation Amount of all
the outstanding Capital Securities. The provisions of Article VI of the Trust
Agreement concerning meetings of Holders shall apply to the giving of such
approval. Nothing herein contained shall be deemed to require that the Guarantee
Trustee enter into any amendment of this Guarantee Agreement.
SECTION 8.03 NOTICES. Any notice, request or other communication
required or permitted to be given hereunder shall be in writing, duly signed by
the party giving such notice, and delivered, telecopied or mailed by first class
mail as follows:
(a) if given to the Guarantor, to the address set forth below or such
other address as the Guarantor may give notice of to the Guarantee Trustee
and the Holders of the Capital Securities:
Texas Utilities Electric Company
Energy Plaza
1601 Bryan Street
Dallas, Texas 75201
Facsimile No: 214-812-2488
Attention: Treasurer
(b) if given to the Issuer, in care of the Administrative Trustees,
at the Issuer's (and the Administrative Trustees') address set forth below
or such other address as the Administrative Trustees on behalf of the
Issuer may give notice of to the Guarantee Trustee and the Holders:
TU Electric Capital
c/o Texas Utilities Electric Company
Energy Plaza
1601 Bryan Street
Dallas, Texas 75201
Facsimile No: 214-812-2488
Attention: Administrative Trustees
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<PAGE>
(c) if given to the Guarantee Trustee, to the address set forth below
or such other address as the Guarantee Trustee may give notice of to the
Guarantor and the Holders of the Capital Securities:
The Bank of New York
101 Barclay Street
21 West
New York, New York 10286
Facsimile No: (212) 815-5915
Attention: Corporate Trust Trustee Administration
(d) if given to any Holder, at the address set forth on the books and
records of the Issuer.
All notices hereunder shall be deemed to have been given when received
in person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
SECTION 8.04 BENEFIT. This Guarantee Agreement is solely for the
benefit of the Holders and, subject to Section 3.01(a), is not separately
transferable from the Capital Securities.
SECTION 8.05 INTERPRETATION. In this Guarantee Agreement, unless the
context otherwise requires:
(a) a term defined anywhere in this Guarantee Agreement has the same
meaning throughout;
(b) all references to "the Guarantee Agreement" or "this Guarantee
Agreement" are to this Guarantee Agreement as modified, supplemented or
amended from time to time;
(c) all references in this Guarantee Agreement to Articles and
Sections are to Articles and Sections of this Guarantee Agreement unless
otherwise specified;
(d) a term defined in the Trust Indenture Act has the same meaning
when used in this Guarantee Agreement unless otherwise defined in this
Guarantee Agreement or unless the context otherwise requires;
(e) a reference to the singular includes the plural and vice versa;
and
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<PAGE>
(f) the masculine, feminine or neuter genders used herein shall
include the masculine, feminine and neuter genders.
SECTION 8.06 GOVERNING LAW. THIS GUARANTEE AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.
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.
THIS GUARANTEE AGREEMENT is executed as of the day and year
first above written.
Texas Utilities Electric Company
By: /s/ Robert S. Shapard
---------------------------------------------
Name: Robert S. Shapard
Title: Treasurer and Assistant Secretary
The Bank of New York,
as Guarantee Trustee
By: /s/ Walter N. Gitlin
---------------------------------------------
Name: Walter N. Gitlin
Title: Vice President
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<PAGE>
Exhibit 4(u)
AGREEMENT AS TO EXPENSES AND LIABILITIES
AGREEMENT dated as of January 30, 1997 between Texas Utilities
Electric Company, a Texas corporation ("TU Electric"), and TU Electric Capital
IV, a Delaware business trust (the "Trust").
WHEREAS, the Trust intends to issue its Common Securities (the "Common
Securities") to and receive Debentures from TU Electric and to issue its
Floating Rate Cumulative Capital Securities (the "Capital Securities") with such
powers, preferences and special rights and restrictions as are set forth in the
Amended and Restated Trust Agreement of the Trust dated as of January 30, 1997
as the same may be amended from time to time (the "Trust Agreement");
WHEREAS, TU Electric is the issuer of the Debentures;
NOW, THEREFORE, in consideration of the acceptance of the Capital
Securities by each holder thereof, which acceptance TU Electric hereby agrees
shall benefit TU Electric and which acceptance TU Electric acknowledges will be
made in reliance upon the execution and delivery of this Agreement, TU Electric,
including in its capacity as holder of the Common Securities, and the Trust
hereby agree as follows:
ARTICLE I
Section 1.01. Assumption by TU Electric. Subject to the terms and
-------------------------
conditions hereof, TU Electric hereby irrevocably and unconditionally assumes
the full payment, when and as due, of any and all Obligations (as hereinafter
defined) to each person or entity to whom the Trust is now or hereafter becomes
indebted or liable (the "Beneficiaries"). As used herein, "Obligations" means
any indebtedness, expenses or liabilities of the Trust, other than obligations
of the Trust to pay to holders of any Capital Securities the amounts due such
holders pursuant to the terms of the Capital Securities. This Agreement is
intended to be for the benefit of, and to be enforceable by, all such
Beneficiaries, whether or not such Beneficiaries have received notice hereof.
Section 1.02. Term of Agreement. This Agreement shall terminate and
-----------------
be of no further force and effect upon the date on which there are no
Beneficiaries remaining; provided, however, that this Agreement shall continue
to be effective or shall be reinstated, as the case may be, if at any time any
holder of Capital Securities or any Beneficiary must restore payment of any sums
paid under the Capital Securities, under any Obligation, under the Guarantee
Agreement dated the date hereof by TU Electric and The Bank of New York, as
guarantee trustee, or under this Agreement for any reason whatsoever. This
Agreement is continuing, irrevocable, unconditional and absolute.
<PAGE>
Section 1.03. Waiver of Notice. TU Electric hereby waives notice of
----------------
acceptance of this Agreement and of any Obligation to which it applies or may
apply, and TU Electric hereby waives presentment, demand for payment, protest,
notice of nonpayment, notice of dishonor, notice of redemption and all other
notices and demands.
Section 1.04. No Impairment. The obligations, covenants, agreements
-------------
and duties of TU Electric under this Agreement shall in no way be affected or
impaired by reason of the happening from time to time of any of the following:
(a) the extension of time for the payment by the Trust of all or any
portion of the Obligations or for the performance of any other obligation under,
arising out of, or in connection with, the Obligations;
(b) any failure, omission, delay or lack of diligence on the part of
the Beneficiaries to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Beneficiaries with respect to the Obligations or any
action on the part of the Trust granting indulgence or extension of any kind; or
(c) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Trust or any of the assets of the
Trust.
Neither the Trust nor any Beneficiary shall have any obligation to give notice
to, or obtain the consent of, TU Electric with respect to the happening of any
of the foregoing.
Section 1.05. Enforcement. A Beneficiary may enforce this Agreement
-----------
directly against TU Electric and TU Electric waives any right or remedy to
require that any action be brought against the Trust or any other person or
entity before proceeding against TU Electric.
ARTICLE II
Section 2.01. Binding Effect. All of the obligations, covenants and
--------------
agreements contained in this Agreement shall bind the successors, assigns,
receivers, trustees and representatives of TU Electric and shall inure to the
benefit of the Beneficiaries and their successors and assigns.
Section 2.02. Amendment. So long as there remains any Beneficiary or
---------
any Capital Securities of any series shall be outstanding, this Agreement shall
not be modified or amended in any manner adverse to such Beneficiary or to the
holders of the Securities.
<PAGE>
Section 2.03. Notices. Any notice, request or other communication
-------
required or permitted to be given hereunder shall be given in writing by
delivering the same against receipt therefor by facsimile transmission
(confirmed by mail), telex or by registered or certified mail, addressed as
follows (and if so given, shall be deemed given when mailed or upon receipt of
an answer-back, if sent by telex), to wit:
TU Electric Capital
c/o Robert S. Shapard, Administrative Trustee
1601 Bryan Street
Dallas, Texas 75201
Facsimile No.: 214-812-2488
Texas Utilities Electric Company
1601 Bryan Street
Dallas, Texas 75201
Facsimile No.: 214-812-2488
Attention: Treasurer
Section 2.04 THIS AGREEMENT SHALL BE GOVERNED BY AND CON STRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD
TO CONFLICT OF LAWS PRINCIPLES).
<PAGE>
THIS AGREEMENT is executed as of the day and year first above
written.
TEXAS UTILITIES ELECTRIC COMPANY
By: /s/ Robert S. Shapard
----------------------------------------------------
Name: Robert S. Shapard
Title: Treasurer and Assistant Secretary
TU ELECTRIC CAPITAL IV
By: /s/ Robert S. Shapard
----------------------------------------------------
not in his individual capacity, but solely
as Administrative Trustee
<PAGE>
EXHIBIT 4(V)
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 January 20, 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 Subordinated Debt
Securities relating to Trust Securities) dated as of December 1, 1995 (as
amended and supplemented to date, the "Indenture") that:
1. The securities of the fourth series to be issued under the Indenture
shall be designated "Floating Rate Junior Subordinated Debentures,
Series D, "(the "Debentures of the Fourth Series"). The Debentures of
the Fourth Series are to be issued to TU Electric Capital IV, a
Delaware statutory business trust (the "Trust"). 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 Fourth Series shall be limited in aggregate
principal amount to $103,093,000 at any time Outstanding, except as
contemplated in Section 301(b) of the Indenture;
3. The Debentures of the Fourth Series shall mature and the principal
shall be due and payable together with all accrued and unpaid interest
thereon on January 30, 2037;
4. Interest on the Debentures of the Fourth Series shall be payable
quarterly in arrears on February 1, May 1, August 1 and November 1 of
each year (each, an "Interest Payment Date") commencing May 1, 1997.
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, and for any
period shorter than a full month, on the basis of the actual number of
days elapsed. Interest on the Debentures of the Fourth Series will
accrue from, and including, the date of original issuance. 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), in each case with the same
force and effect as if made on such Interest Payment Date;
The Debentures of the Fourth Series shall bear interest at a per annum
floating rate ("Interest Rate") which will determined by reference to
3-Month LIBOR, as described below, plus a margin of 0.80%. "3-Month
LIBOR" means the London interbank offered rate for three-month U.S.
dollar deposits and with respect to any Interest Period will be
calculated by The Bank of New York as Calculation Agent or any major
banking establishment appointed as successor thereto by the Company
("Calculation Agent") as follows:
<PAGE>
(a) On the second Market Day (as defined below) preceding the
commencement of such Interest Period (each, a "Determination
Date"), 3-Month LIBOR will be determined on the basis of the
offered rate for deposits of not less than U.S.$1,000,000 for a
period of three months (the "Index Maturity"), commencing on the
second Market Day immediately preceding the commencement of such
Interest Period, which appears on the display designated as Page
3750 on the Dow Jones Telerate Service (or such other pages as
may replace Page 3750 on that service for the purpose of
displaying London interbank offered rates of major banks)
("Telerate Page 3750") as of 11:00 a.m., London time. If no such
offered rate appears, 3-Month LIBOR with respect to such Interest
Period will be determined as described in (b) below.
(b) With respect to a Determination Date on which no such offered
rate appears on Telerate Page 3750 as described in (a) above, 3-
Month LIBOR shall be the arithmetic mean, expressed as a
percentage, of the offered rates for deposits in U.S. dollars for
the Index Maturity which appears on the display designated as
"LIBO" on the Reuters Monitor Money Market Rates Service (or such
other page as may replace the LIBO page on that service for the
purpose of displaying London interbank offered rates of major
banks) (Reuters Screen LIBO Page) as of 11:00 a.m., London time,
on such date. If, in turn, such rate is not displayed on the
Reuters Screen LIBO Page at such time, the Calculation Agent will
obtain from each of four reference banks in London selected by
the Calculation Agent ("Reference Banks") such bank's offered
quotation (expressed as a percentage per annum) as of
approximately 11:00 a.m., London time, on such date for deposits
in U.S. dollars to prime banks in the London interbank market for
the Index Maturity. If two or more such quotations are provided
as requested, then 3-Month LIBOR for such date shall be the
arithmetic average of such quotations. If, in turn, fewer than
two such quotations are provided as requested, then 3-Month LIBOR
for such date will be obtained from the preceding Market Day for
which the Reuters Screen LIBO Page displayed a rate for the Index
Maturity.
(c) If on any Determination Date, the Calculation Agent is required
but unable to determine 3-Month LIBOR in the manner provided in
paragraphs (a) and (b) above, 3-Month LIBOR for such Interest
Period shall be 3-Month LIBOR as determined on the previous
Determination Date.
The term Market Day means any Business Day on which commercial
banks and foreign exchange markets are open for business (including
dealings in foreign exchange and foreign currency deposits) in New
York and London.
The Interest Rate for any Interest Period will at not time be
higher than the maximum rate then permitted by Texas law and any other
applicable laws.
All percentages resulting from any calculations with respect to
the Interest Rate will be rounded, if necessary, to the nearest
multiple of 1/100 of 1% and all
-2-
<PAGE>
U.S. dollar amounts used in or resulting from such calculations will
be rounded to the nearest cent (with one-half cent or more being
rounded upwards).
Determination of Interest Rate and Calculation of Interest Amount
The Calculation Agent shall, as soon as practicable after 11:00
a.m., London time, on each Determination Date, determine the Interest
Rate and calculate the amount of distributions payable in respect of
the following Interest Period (the "Interest Amount"). The Interest
Amount shall be calculated by applying the Interest Rate to the
Liquidation Amount of each Capital Security outstanding at the
commencement of the Interest Period, multiplying each such amount by
the actual number of days in the Interest Period concerned (which
actual number of days shall include the first day but exclude the last
day of such Interest Period) divided by 360 and rounding the resultant
figure to the nearest cent (with one-half cent or more being rounded
upwards). The determination of the Interest Rate and the Interest
Amount by the Calculation Agent will (in the absence of wilful
default, bad faith or manifest error) be final, conclusive and binding
on all concerned. None of the Property Trustee, the Delaware Trustee
and the Administrative Trustees with respect to the Trust (together,
Issuer Trustees), the Trustee, the Calculation Agent, the Trust or the
Company (or any of their respective officers, directors, agents,
beneficiaries, employees or affiliates) shall have any liability to
any person for (i) the selection of any Reference Bank or (ii) any
inability to retain major banks in the London interbank market, in the
case of the Calculation Agent, which is caused by circumstances beyond
its reasonable control.
The Calculation Agent will cause the Interest Rate, the Interest
Amount in respect of each Debenture of the Fourth Series and the
Interest Payment Date for each Interest Period to be notified to the
Issuer Trustees, the Trustee, each of the Paying Agents appointed by
the Trust in relation to the securities issued thereby and any
securities exchange or interdealer quotation system on which such
securities issued by the Trust or the Debentures of the Fourth Series
are listed, in each case as soon as practicable after the
determination thereof but in no event later than the second Business
Day of the relevant Interest Period. Each such Interest Rate,
Interest Amount and Interest Payment Date shall be obtainable by
Holders of the Debentures of the Fourth Series by telephoning the
Calculation Agent.
All certificates, communications, opinions, determinations,
calculations, quotations and decisions given, expressed, made or
obtained for the purposes of the provisions relating to the payment
and calculation of distributions on the Debentures of the Fourth
Series, whether by the Reference Banks (or any of them) or the
Calculation Agent, will (in the absence of wilful default, bad faith
or manifest error) be binding on the Trust, the Company, the Issuer
Trustees, the Trustee, the Calculation Agent and all of the Holders of
the Debentures of the Fourth Series, and no liability will (in the
absence of wilful default, bad faith or manifest error) attach to the
Calculation Agent in connection with the exercise or non-exercise by
it of its powers, duties and discretion.
-3-
<PAGE>
5. Each installment of interest on a Debenture of the Fourth Series shall
be payable to the Person in whose name such Debenture of the Fourth
Series is registered at the close of business on the day, so long as
either the Capital Securities of the Trust or the Debentures of the
Fourth Series remain in book-entry form, one Business Day, and
otherwise 15 days preceding the corresponding Interest Payment Date
(the "Regular Record Date") for the Debentures of the Fourth Series;
provided, however, that if the Debentures of the Fourth Series are
held neither by the Trust nor by a securities depositary, the Company
shall have the right to change the Regular Record Date by one or more
Officer's Certificates. Any installment of interest on the Debentures
of the Fourth Series not punctually paid or duly provided for shall
forthwith cease to be payable to the Holders of such Debentures of the
Fourth Series on such Regular Record Date, and may be paid to the
Persons in whose name the Debentures of the Fourth 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 Fourth 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 Fourth
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 Fourth Series shall be payable at, and registration and
registration of transfers and exchanges in respect of the Debentures
of the Fourth Series may be effected at, the office or agency of the
Company maintained therefor in The City of New York which unless and
until changed by an Officer's Certificate shall be the Corporate Trust
Office of the Trustee; 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, demands to or upon the Company in
respect of the Debentures of the Fourth Series may be served at such
office or agency of the Company in The City of New York. The Trustee
will initially be the Security Registrar and the Paying Agent for the
Debentures of the Fourth Series; provided, however, that the Company
reserves the right to change, by one or more Officer's Certificates,
any such office or agency;
7. The Debentures of the Fourth Series will be redeemable on or after
February 1, 2002 at the option of the Company, at any time and from
time to time in whole or in part, at a redemption price equal to 100%
of the principal amount of the Debentures of the Fourth Series being
redeemed, together with any accrued and unpaid interest, including
Additional Interest, if any, to the redemption date, upon not less
than 30 nor more than 60 days' notice given as provided in the
Indenture. The Company, however, may not redeem less than all
Outstanding Debentures of the Fourth Series unless the conditions
specified in the last paragraph of this item are met;
The Debentures of the Fourth Series will also be redeemable at the
option of the Company if a Tax Event shall occur and be continuing, in
whole but not in part, at a redemption price equal to 100% of the
principal amount of the Debentures of the Fourth Series being redeemed
together with any accrued and unpaid interest, including
-4-
<PAGE>
Additional Interest, if any, to the redemption date, upon not less
than 30 nor more than 60 days' notice given as provided in the
Indenture. "Tax Event" means the receipt by the Trust or the Company
of an opinion of counsel experienced in such matters to the effect
that, as a result of (a) any amendment to, clarification of, or change
(including any announced prospective change) in, the laws or treaties
(or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein affecting taxation,
(b) any judicial decision or any official administrative
pronouncement, ruling, regulatory procedure, notice or announcement
(including any notice or announcement of intent to issue or adopt any
such administrative pronouncement, ruling, regulatory procedure or
regulation) (each an "Administrative Action"), or (c) any amendment
to, clarification of, or change in the official position or the
interpretation of any such Administrative Action or judicial decision
or any interpretation or pronouncement that provides for a position
with respect to such Administrative Action or judicial decision that
differs from the theretofore generally accepted position, in each case
by the legislative body, court, governmental authority or regulatory
body, irrespective of the time or manner in which such amendment,
clarification or change is introduced or made known, which amendment,
clarification, or change is effective, which Administrative Action is
taken or which judicial decision is issued, in each case on or after
the date of original issuance of the Debentures of the Fourth Series,
there is more than an insubstantial risk that (i) the Trust is, or
will be, subject to United States federal income tax with respect to
interest received on the Debentures of the Fourth Series, (ii)
interest payable by the Company on the Debentures of the Fourth Series
is not, or will not be, fully deductible by the Company for United
States federal income tax purposes, or (iii) the Trust is, or will be,
subject to more than a de minimis amount of other taxes, duties or
other governmental charges;
The Company may not redeem less than all the Debentures of the Fourth
Series unless all accrued and unpaid interest (including any
Additional Interest) has been paid in full on all Debentures
Outstanding under the Indenture for all quarterly interest periods
terminating on or prior to the date of redemption;
8. So long as any Debentures of the Fourth Series are Outstanding, the
failure of the Company to pay interest on any Debentures of the Fourth
Series within 30 days after the same becomes due and payable (whether
or not payment is prohibited by the provisions of Article Fifteen of
the Indenture) shall constitute an Event of Default; provided,
however, that a valid extension of the interest payment period by the
Company as contemplated in Section 311 of the Indenture and paragraph
(9) of this Certificate shall not constitute a failure to pay interest
for this purpose;
9. Pursuant to Section 311 of the Indenture, the Company shall have the
right, at any time and from time to time during the term of the
Debentures of the Fourth Series, to extend the interest payment period
to a period not exceeding 20 consecutive quarters (an "Extension
Period") during which period interest will be compounded quarterly. At
the end of the Extension Period, the Company shall pay all interest
accrued and unpaid (together with interest thereon at the rate
specified for the Debentures of the Fourth Series, compounded
quarterly, to the extent permitted by applicable law).
-5-
<PAGE>
However, during any such Extension Period, the Company shall not
declare or pay any dividend or distribution (other than a dividend or
distribution in common stock of the Company) on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of its
capital stock, redeem any indebtedness that is pari passu with the
Debentures of the Fourth Series, or make any guarantee payments with
respect to the foregoing ("Restricted Payments"). Prior to the
termination of any such Extension Period, the Company may further
extend the interest payment period, provided that such Extension
Period together with all such previous and further extensions thereof
shall not exceed 20 consecutive quarters at any one time or extend
beyond the maturity date of the Debentures of the Fourth Series. Any
extension period with respect to payment of interest on the Debentures
of the Fourth Series, other Debt Securities or on any similar
securities will apply to all such securities and will also apply to
distributions with respect to the Preferred Securities and all other
securities with terms substantially the same as the Preferred
Securities. Upon the termination of any such Extension Period and the
payment of all amounts then due, the Company may select a new
Extension Period, subject to the above requirements. No interest shall
be due and payable during an Extension Period, except at the end
thereof. The Company will give the Trust or other Holders and the
Trustee notice of its election of an Extension Period prior to the
earlier of one Business Day prior to the record date for the interest
payment which would occur but for such election;
10. At any time, the Company will have the right to terminate the Trust
and cause the Debentures of the Fourth Series to be distributed to the
holders of the Preferred Securities in liquidation of the Trust;
11. So long as any Securities are outstanding under the Indenture, the
Company shall not make any Restricted Payments at any time the Company
is in default under the Guarantee with respect to the Trust or is in
default with respect to payments due on any Outstanding Securities;
12. In the event that, at any time subsequent to the initial
authentication and delivery of the Debentures of the Fourth Series,
the Debentures of the Fourth Series are to be held by a securities
depositary, the Company may at such time establish the matters
contemplated in clause (r) in the second paragraph of Section 301 of
the Indenture in an Officer's Certificate supplemental to this
Certificate;
13. No service charge shall be made for the registration of transfer or
exchange of the Debentures of the Fourth 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;
14. The Debentures of the Fourth 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;
15. The undersigned has read all of the covenants and conditions contained
in the Indenture relating to the issuance of the Debentures of the
Fourth Series and the
-6-
<PAGE>
definitions in the Indenture relating thereto and in respect of which
this certificate is made;
16. 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;
17. In the opinion of the undersigned, he has made such examination or
investigation as is necessary to enable the undersigned to express an
informed opinion whether or not such covenants and conditions have
been complied with;
18. 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 Fourth Series requested in the
accompanying Company Order have been complied with; and
19. If the Company shall make any deposit of money and/or Government
Obligations with respect to any Debentures of the Fourth 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 601 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 Fourth 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 Government Obligations (meeting the requirements of Section
601), if any, or any combination thereof, at such time or times, as
shall be necessary, together with the money and/or Government
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 Fourth 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, based on a change in law, to the
effect that the Holders of such Debentures of the Fourth 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.
-7-
<PAGE>
IN WITNESS WHEREOF, I have executed this Officer's Certificate this 30th
day of January, 1997.
/s/ Robert S. Shapard
----------------------
Robert S. Shapard,
Treasurer
-8-
<PAGE>
NO._______________
CUSIP NO.__________
EXHIBIT A
[FORM OF FACE OF JUNIOR SUBORDINATED DEBENTURE]
TEXAS UTILITIES ELECTRIC COMPANY
FLOATING RATE JUNIOR SUBORDINATED DEBENTURES, SERIES D
TEXAS UTILITIES ELECTRIC COMPANY, a corporation duly organized and existing
under the laws of the State of Texas (herein referred to as the "Company", which
term includes any successor Person under the Indenture referred to on the
reverse hereof), for value received, hereby promises to pay to
____________________________________, or registered assigns, the principal sum
of ____________________ Dollars on January 30, 2037, and, except as hereinafter
provided, to pay interest on said principal sum, from, and including, the date
of original issuance or from, and including, the most recent Interest Payment
Date to which interest has been paid or duly provided for, quarterly on February
1, May 1, August 1 and November 1 of each year, commencing May 1, 1997 at a per
annum floating rate which will be determined quarterly with reference to 3-Month
LIBOR plus a margin of 0.80% as provided in the Officer's Certificate dated
January 30,1997, setting forth the terms hereof pursuant to the Indenture, plus
Additional Interest, if any, 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, and including,
January 30, 1997. 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) in each case 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 the
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, so long as this Security
or any security for which it may by its terms be exchanged remain in book-entry
form, one Business Day, and otherwise 15 days 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.
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 JUNIOR SUBORDINATED 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 December 1, 1995 (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 January 30, 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 $103,093,000.
The Securities of this series are subject to redemption upon not less
than 30 nor more than 60 days' notice by mail, at any time on or after February
1, 2002 as a whole or in part, at the election of the Company, at a Redemption
Price equal to 100% of the principal amount hereof, together, in the case of any
such redemption, with accrued interest; including Additional Interest, if any,
to, but not including, the Redemption Date, but interest installments whose
Stated Maturity is on or prior to such Redemption Date will be payable to the
Holder of such Security, or one or more Predecessor Securities, of record at the
close of business on the related Regular Record Date referred to on the face
hereof, all as provided in the Indenture.
The Securities of this series will also be redeemable at the option of
the Company if a Tax Event shall occur and be continuing, in whole but not in
part, at a redemption price plus accrued and unpaid distributions equal to 100%
of the principal amount of Securities of this series then outstanding plus any
accrued and unpaid interest, including Additional Interest, if any, to the
redemption date, upon not less than 30 nor more than 60 days' notice given as
provided in the Indenture. "Tax Event" means the receipt by the Trust of an
opinion of counsel experienced in such matters to the effect that, as a result
of (a) any amendment to, clarification of, or change (including any announced
prospective change) in, the laws or treaties (or any regulations thereunder) of
the United States or any political subdivision or taxing authority thereof or
therein affecting taxation, (b) any judicial decision or any official
administrative pronouncement, ruling, regulatory procedure, notice or
announcement (including any notice or announcement of intent to issue or adopt
any such administrative pronouncement, ruling, regulatory procedure or
regulation) (each an "Administrative Action"), or (c) any amendment to,
clarification of, or change in the official position or the interpretation of
any such Administrative Action or judicial decision or any interpretation or
pronouncement that provides for a position with respect to such Administrative
Action or judicial decision that differs from the theretofore generally accepted
position, in each case by the legislative body, court, governmental authority or
regulatory body, irrespective of the time or manner in which such amendment,
clarification or change is introduced or made known, which amendment,
clarification, or change is effective, which Administrative Action is taken or
which judicial decision is issued, in each case on or after the date of original
issuance of the Securities of this series, there is more than an insubstantial
risk that (i) the Trust is, or will be, subject to United States federal income
tax with respect to interest received on the Securities of this series, (ii)
interest payable by the Company on the Securities of this series is not, or will
not be, fully deductible by the Company for United States federal income tax
purposes, or (iii) the Trust is, or will be, subject to more than a de minimis
amount of other taxes, duties or other governmental charges.
-3-
<PAGE>
In the event of redemption of this Security in part only, a new
Security or Securities of this series and of like tenor for the unredeemed
portion hereof will be issued in the name of the Holder hereof upon the
cancellation hereof.
The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, subordinated and subject in right of payment to the prior
payment in full of all Senior Indebtedness, and this Security is issued subject
to the provisions of the Indenture with respect thereto. Each Holder of this
Security, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to acknowledge or effectuate the
subordination so provided and (c) appoints the Trustee his attorney-in-fact for
any and all such purposes. Each Holder hereof, by his acceptance hereof, hereby
waives all notice of the acceptance of the subordination provisions contained
herein and in the Indenture by each holder of Senior Indebtedness, whether now
outstanding or hereafter incurred, and waives reliance by each such Holder upon
said provisions.
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.
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 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 compliance by the Company
with certain provisions of the Indenture and 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 not less than 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 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.
-4-
<PAGE>
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.
So long as no Event of Default under the Indenture shall have occurred
and be continuing, the Company shall have the right at any time and from time to
time during the term of the Securities of this series to extend the interest
payment period to a period not exceeding 20 consecutive quarters (an "Extended
Interest Payment Period"), and at the end of such Extended Interest Payment
Period, the Company shall pay all interest then accrued and unpaid (together
with interest thereon at the same rate as specified for the Securities of this
series, compounded quarterly, to the extent permitted by applicable law);
provided, however, that during such Extended Interest Payment Period the Company
shall not declare or pay any dividend or distribution (other than a dividend or
distribution in common stock of the Company) on, or redeem, purchase, acquire or
make a liquidation payment with respect to, any of its capital stock, redeem any
indebtedness that is pari passu with the Securities of this series, or make any
guarantee payments with respect to the foregoing. Prior to the termination of
any such Extended Interest Payment Period, the Company may further extend the
interest payment period, provided that such Extended Interest Payment Period,
together with all such previous and further extensions thereof, may not exceed
20 consecutive quarters or extend beyond the Stated Maturity of the Securities
of this series. Upon the termination of any such Extended Interest Payment
Period and the payment of all amounts then due, the Company may select a new
Extended Interest Payment Period, subject to the above requirements. No
interest during the Extended Interest Payment Period, except at the end thereof,
shall be due and payable. The Company shall give the Holder of this Security
notice of its selection of such Extended Interest Payment Period as provided in
or pursuant to the Indenture.
The Securities of this series are issuable only in registered form
without coupons in denominations of $25.00 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>
EXHIBIT 4(W)
================================================================================
AMENDED AND RESTATED
TRUST AGREEMENT
between
TEXAS UTILITIES ELECTRIC COMPANY, as Depositor
and
THE BANK OF NEW YORK,
THE BANK OF NEW YORK (DELAWARE),
Robert S. Shapard,
John Casey,
Michael Perkins,
Glenn D. Kirby
and
Wayne E. Patterson, as Trustees
Dated as of January 30, 1997
TU ELECTRIC CAPITAL V
================================================================================
<PAGE>
TU ELECTRIC CAPITAL
Certain Sections of this Trust Agreement relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
<TABLE>
<CAPTION>
Trust Indenture Trust Agreement
Act Section Section
- --------------- ---------------
<S> <C>
Section 310(a)(1) ................................... 8.07
(a)(2) ................................... 8.07
(a)(3) ................................... 8.09
(a)(4) ................................... Not Applicable
(b) ................................... 8.08
Section 311(a) ................................... 8.13
(b) ................................... 8.13
Section 312(a) ................................... 5.07
(b) ................................... 5.07
(c) ................................... 5.07
Section 313(a) ................................... 8.14(a)
(a)(4) ................................... 8.14(b)
(b) ................................... 8.14(b)
(c) ................................... 8.14(a)
(d) ................................... 8.14(a), 8.14(b)
Section 314(a) ................................... Not Applicable
(b) ................................... Not Applicable
(c)(1) ................................... Not Applicable
(c)(2) ................................... Not Applicable
(c)(3) ................................... Not Applicable
(d) ................................... Not Applicable
(e) ................................... Not Applicable
Section 315(a) ................................... 8.01
(b) ................................... 8.02, 8.14(b)
(c) ................................... 8.01(a)
(d) ................................... 8.01, 8.03
(e) ................................... Not Applicable
Section 316(a) ................................... Not Applicable
(a)(1)(A) ................................... Not Applicable
(a)(1)(B) ................................... Not Applicable
(a)(2) ................................... Not Applicable
(b) ................................... Not Applicable
(c) ................................... Not Applicable
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 317(a)(1) ................................... Not Applicable
(a)(2) ................................... Not Applicable
(b) ................................... 5.09
Section 318(a) ................................... 10.10
</TABLE>
_________________________
Note: This reconciliation and tie shall not, for any purpose, be deemed to be
a part of the Trust Agreement.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I.
Defined Terms
Section 1.01. Definitions......................................................... 2
ARTICLE II.
Establishment of the Trust
Section 2.01. Name................................................................. 11
Section 2.02. Office of the Delaware Trustee; Principal Place of Business.......... 11
Section 2.03. Initial Contribution of Trust Property; Organizational Expenses...... 11
Section 2.04. Issuance of the Capital Securities................................... 11
Section 2.05. Subscription and Purchase of Debentures; Issuance
of the Common Securities........................................... 11
Section 2.06. Declaration of Trust; Appointment of Additional
Administrative Trustees............................................ 12
Section 2.07. Authorization to Enter into Certain Transactions..................... 12
Section 2.08. Assets of Trust...................................................... 16
Section 2.09. Title to Trust Property.............................................. 16
ARTICLE III.
Payment Account
Section 3.01. Payment Account...................................................... 16
ARTICLE IV.
Distributions; Redemption
Section 4.01. Distributions........................................................ 17
Section 4.02. Redemption........................................................... 18
Section 4.03. Subordination of Common Securities................................... 19
Section 4.04. Payment Procedures................................................... 20
Section 4.05. Tax Returns and Reports.............................................. 20
Section 4.06. Payments under Indenture............................................. 21
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE V.
Trust Securities Certificates
Section 5.01. Initial Ownership.................................................... 21
Section 5.02. The Trust Securities Certificates.................................... 21
Section 5.03. Execution and Delivery of Trust Securities Certificates.............. 21
Section 5.04. Registration of Transfer and Exchange of Capital
Securities Certificates............................................ 22
Section 5.05. Mutilated, Destroyed, Lost or Stolen Trust
Securities Certificates............................................ 23
Section 5.06. Persons Deemed Securityholders....................................... 23
Section 5.07. Access to List of Securityholders' Names and Addresses............... 23
Section 5.08. Maintenance of Office or Agency...................................... 24
Section 5.09. Appointment of Paying Agent.......................................... 24
Section 5.10. Ownership of Common Securities by Depositor.......................... 25
Section 5.11. Definitive Capital Securities Certificates........................... 25
Section 5.12. Book-Entry System.................................................... 25
Section 5.13. Rights of Securityholders............................................ 26
Section 5.14. Cancellation by Transfer Agent and Registrar......................... 26
ARTICLE VI.
Acts of Securityholders; Meetings; Voting
Section 6.01. Limitations on Voting Rights......................................... 27
Section 6.02. Notice of Meetings................................................... 28
Section 6.03. Meetings of Holders of Capital Securities............................ 28
Section 6.04. Voting Rights........................................................ 28
Section 6.05. Proxies, etc......................................................... 28
Section 6.06. Securityholder Action by Written Consent............................. 29
Section 6.07. Record Date for Voting and Other Purposes............................ 29
Section 6.08. Acts of Securityholders.............................................. 29
Section 6.09. Inspection of Records................................................ 30
ARTICLE VII.
Representations and Warranties of the Property
Trustee and the Delaware Trustee
Section 7.01. Property Trustee..................................................... 31
Section 7.02. Delaware Trustee..................................................... 31
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
ARTICLE VIII.
The Trustees
Section 8.01. Certain Duties and Responsibilities.................................. 32
Section 8.02. Notice of Defaults................................................... 33
Section 8.03. Certain Rights of Property Trustee................................... 34
Section 8.04. Not Responsible for Recitals or Issuance of Securities............... 37
Section 8.05. May Hold Securities.................................................. 37
Section 8.06. Compensation; Fees; Indemnity........................................ 37
Section 8.07. Certain Trustees Required; Eligibility............................... 38
Section 8.08. Conflicting Interests................................................ 38
Section 8.09. Co-Trustees and Separate Trustee..................................... 39
Section 8.10. Resignation and Removal; Appointment of Successor.................... 40
Section 8.11. Acceptance of Appointment by Successor............................... 41
Section 8.12. Merger, Conversion, Consolidation or Succession to Business.......... 42
Section 8.13. Preferential Collection of Claims Against Depositor or Trust......... 42
Section 8.14. Reports by Property Trustee.......................................... 42
Section 8.15. Reports to the Property Trustee...................................... 43
Section 8.16. Evidence of Compliance With Conditions Precedent..................... 43
Section 8.17. Number of Trustees................................................... 43
Section 8.18. Delegation of Power.................................................. 43
Section 8.19. Fiduciary Duty....................................................... 44
ARTICLE IX.
Termination and Liquidation
Section 9.01. Termination Upon Expiration Date..................................... 45
Section 9.02. Early Termination.................................................... 45
Section 9.03. Termination.......................................................... 46
Section 9.04. Liquidation.......................................................... 46
ARTICLE X.
Miscellaneous Provisions
Section 10.01. Guarantee by the Depositor and Assumption of Obligations............ 48
Section 10.02. Limitation of Rights of Securityholders............................. 48
Section 10.03. Amendment........................................................... 48
Section 10.04. Separability........................................................ 49
Section 10.05. Governing Law....................................................... 50
Section 10.06. Successors.......................................................... 50
Section 10.07. Headings............................................................ 50
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C>
Section 10.08. Notice and Demand................................................... 50
Section 10.09. Agreement Not to Petition........................................... 51
Section 10.10. Conflict with Trust Indenture Act................................... 51
</TABLE>
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<PAGE>
AMENDED AND RESTATED TRUST AGREEMENT, dated as of January 30, 1997,
between (i) Texas Utilities Electric Company, a Texas corporation (the
"Depositor"), (ii) The Bank of New York, a banking corporation duly organized
and existing under the laws of New York, as trustee (the "Property Trustee" and,
in its separate capacity and not in its capacity as Property Trustee, the
"Bank"), (iii) The Bank of New York (Delaware), a banking corporation duly
organized under the laws of Delaware, as Delaware trustee (the "Delaware
Trustee") (iv) Robert S. Shapard, John Casey, Michael Perkins, Glenn D. Kirby
and Wayne E. Patterson, each an individual, and each of whose address is c/o
Texas Utilities Services Inc., 1601 Bryan Street, Dallas, Texas 75201 (each, an
"Administrative Trustee" and collectively the "Administrative Trustees") (the
Property Trustee, the Delaware Trustee and the Administrative Trustees referred
to collectively as the "Trustees") and (v) the several Holders, as hereinafter
defined.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Depositor, the Property Trustee, the Delaware Trustee and
Wayne Patterson, as the Administrative Trustee, have heretofore duly declared
and established a business trust pursuant to the Delaware Business Trust Act by
the entering into of that certain Trust Agreement, dated as of January 8, 1997
(the "Original Trust Agreement"), and by the execution by the Property Trustee,
the Delaware Trustee and Wayne Patterson, as Administrative Trustee and filing
with the Secretary of State of the State of Delaware of the Certificate of
Trust, dated January 14, 1997, a copy of which is attached as Exhibit A; and
WHEREAS, the Depositor, the Property Trustee, Delaware Trustee and
Wayne Patterson, as Administrative Trustee, desire to amend and restate the
Original Trust Agreement in its entirety as set forth herein to provide for,
among other things, (i) the acquisition by the Trust from the Depositor of all
of the right, title and interest in the Debentures, (ii) the issuance of the
Common Securities by the Trust to the Depositor, (iii) the issuance of the
Capital Securities by the Trust and (iv) the appointment of additional
Administrative Trustees of the Trust;
NOW THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the sufficiency of
which is hereby acknowledged, each party, for the benefit of the other party and
for the benefit of the Securityholders, hereby amends and restates the Original
Trust Agreement in its entirety and agrees as follows:
<PAGE>
ARTICLE I.
DEFINED TERMS
SECTION 1.01. DEFINITIONS. For all purposes of this Trust Agreement,
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 other terms used herein that are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(c) unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the
case may be, of this Trust Agreement; and
(d) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Trust Agreement as a whole and not to
any particular Article, Section or other subdivision.
"Act" has the meaning specified in Section 6.08.
"Additional Amount" means, with respect to Trust Securities of a given
Liquidation Amount for a given period, the amount of Additional Interest (as
defined in the Subordinated Indenture) paid by the Depositor on a Like Amount of
Debentures for such period.
"Administrative Trustee" means each of the individuals identified as
an "Administrative Trustee" in the preamble to this Trust Agreement solely in
their capacities as Administrative Trustees of the Trust created hereunder and
not in their individual capacities, or such trustee's successor in interest in
such capacity, or any successor trustee appointed as herein provided.
"Adverse Tax Consequence" means any of the circumstances described in
clauses (i), (ii) and (iii) of the last sentence of the definition of "Tax
Event".
"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 indirectly,
whether through the ownership of voting securities, by contract or
-2-
<PAGE>
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Bank" has the meaning specified in the preamble to this Trust
Agreement.
"Bankruptcy Event" means, with respect to any Person:
(i) the entry of a decree or order by a court having jurisdiction
in the premises judging such Person a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization,
arrangement, adjudication or composition of or in respect of such
Person under Federal bankruptcy law or any other applicable Federal or
State law, or appointing a receiver, liquidator, assignee, trustee
sequestrator or other similar official of such Person or of any
substantial part of its property, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or
order unstayed and in effect for a period of 60 consecutive days; or
(ii) the institution by such Person of proceedings to be
adjudicated a bankrupt or insolvent, or of the consent by it to the
institution of bankruptcy or insolvency proceedings against it, or the
filing by it of a petition or answer or consent seeking reorganization
or relief under Federal bankruptcy law or any other applicable Federal
or State law, or the consent by it to the filing of such petition or
to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator or similar official of such Person 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.
"Bankruptcy Laws" has the meaning specified in Section 10.09.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Depositor to have been duly adopted
by the Depositor's Board of Directors or a duly authorized committee thereof and
to be in full force and effect on the date of such certification, and delivered
to the appropriate Trustee.
"Business Day" means a day other than (x) a Saturday or a Sunday, (y)
a day on which banks in New York, New York are authorized or obligated by law or
executive order to remain closed or (z) a day on which the Property Trustee's
Corporate Trust Office or the Debenture Trustee's principal corporate trust
office is closed for business.
"Capital Security" means a security representing an undivided
beneficial interest in the assets of the Trust having a Liquidation Amount of
$1,000 and having rights provided therefor in this Trust Agreement, including
the right to receive Distributions and a
-3-
<PAGE>
Liquidation Distribution as provided herein and, in certain circumstances, a
preference over the Common Securities.
"Capital Securities Certificate" means a certificate evidencing
ownership of Capital Securities, substantially in the form attached as Exhibit
D.
"Certificate of Trust" has the meaning specified in Section 2.07(d).
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act. The Depository Trust
Company will be the initial Clearing Agency.
"Closing Date" means the date of execution and delivery of this Trust
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or, if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Common Security" means an undivided beneficial interest in the assets
of the Trust having a Liquidation Amount of $1,000 and having the rights
provided therefor in this Trust Agreement, including the right to receive
Distributions and a Liquidation Distribution as provided herein.
"Common Securities Certificate" means a certificate evidencing
ownership of Common Securities, substantially in the form attached as Exhibit B.
"Corporate Trust Office" means the principal corporate trust office of
the Property Trustee located in New York, New York.
"Covered Person" means: (a) any officer, director, shareholder,
partner, member, representative, employee or agent of the Trust or the Trust's
Affiliates; and (b) any Holder of Trust Securities.
"Debenture Event of Default" means an "Event of Default" as defined in
the Subordinated Indenture.
"Debenture Issuer" means Texas Utilities Electric Company, a Texas
corporation, in its capacity as issuer of the Debentures.
-4-
<PAGE>
"Debenture Redemption Date" means "Redemption Date" as defined in the
Subordinated Indenture with respect to the Debentures.
"Debenture Trustee" means The Bank of New York, as trustee under the
Subordinated Indenture, and its permitted successors and assigns as such
trustee.
"Debentures" means the $412,372,000 aggregate principal amount of the
Depositor's 8.175% Junior Subordinated Debentures, Series E, issued pursuant to
the Subordinated Indenture which will mature on January 30, 2037.
"Definitive Capital Securities Certificates" means Capital Securities
Certificates issued in certificated, fully registered form as provided in
Section 5.11.
"Delaware Business Trust Act" means Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code Section 3801 et seq., as it may be amended from time
to time.
"Delaware Trustee" means the banking corporation identified as the
"Delaware Trustee" in the preamble to this Trust Agreement solely in its
capacity as Delaware Trustee of the Trust formed hereunder and not in its
individual capacity, or its successor in interest in such capacity, or any
successor trustee appointed as herein provided.
"Depositor" has the meaning specified in the preamble to this Trust
Agreement and includes Texas Utilities Electric Company in its capacity as
Holder of the Common Securities.
"Distribution Date" has the meaning specified in Section 4.01(a).
"Distributions" means amounts payable in respect of the Trust
Securities as provided in Section 4.01.
"Early Termination Event" has the meaning specified in Section 9.02.
"Event of Default" means any one of the following events (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) the occurrence of a Debenture Event of Default; or
(ii) default by the Trust in the payment of any Distribution when
it becomes due and payable, and continuation of such default for a
period of 30 days; or
-5-
<PAGE>
(iii) default by the Trust in the payment of any Redemption
Price, plus accumulated and unpaid distributions, of any Trust
Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material
respect of any covenant or warranty of the Trustees in this Trust
Agreement (other than a covenant or warranty a default in whose
performance or breach is specifically dealt with in clause (ii) or
(iii), above) and continuation of such default or breach for a period
of 60 days after there has been given, by registered or certified
mail, to the Trust by the Holders of at least 10% in Liquidation
Amount of the Outstanding Capital Securities a written notice
specifying such default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder; or
(v) the occurrence of a Bankruptcy Event with respect to the
Trust.
"Exchange Act" has the meaning specified in Section 2.07(c).
"Expense Agreement" means the Agreement as to Expenses and Liabilities
between the Depositor and the Trust, substantially in the form attached as
Exhibit C, as amended from time to time.
"Expiration Date" shall have the meaning specified in Section 9.01.
"Guarantee" means the Guarantee Agreement executed and delivered by
the Depositor and The Bank of New York, a New York banking corporation, as
trustee, contemporaneously with the execution and delivery of this Trust
Agreement, for the benefit of the Holders of the Capital Securities, as amended
from time to time.
"Indemnified Person" means any Trustee, any Affiliate of any Trustee,
or any officer, director, shareholder, member, partners, employee,
representative or agent of any Trustee, or any employee or agent of the Trust or
its Affiliates.
"Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of
trust, adverse ownership interest, hypothecation, assignment, security interest
or preference, priority or other security agreement or preferential arrangement
of any kind or nature whatsoever.
"Like Amount" means (i) Trust Securities having a Liquidation Amount
equal to the principal amount of Debentures to be contemporaneously redeemed in
accordance with the Subordinated Indenture and the proceeds of which will be
used to pay the Redemption Price of such Trust Securities plus accumulated and
unpaid Distributions to the date of such payment and (ii) Debentures having a
principal amount equal to the Liquidation Amount of the Trust Securities of the
Holder to whom such Debentures are distributed.
-6-
<PAGE>
"Liquidation Amount" means the stated amount of $1,000 per Trust
Security.
"Liquidation Date" means the date on which Debentures are to be
distributed to Holders of Trust Securities in connection with a termination and
liquidation of the Trust pursuant to Section 9.04.
"Liquidation Distribution" has the meaning specified in Section
9.04(e).
"No Recognition Opinion" has the meaning specified in Section 9.04(d).
"Offer" has the meaning specified in Section 2.07(c).
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, a Vice Chairman of the Board, the President or a Vice President, and
by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary, of the Depositor, and delivered to the appropriate Trustee. One of
the officers signing an Officers' Certificate given pursuant to Section 8.16
shall be the principal executive, financial or accounting officer of the
Depositor. Any Officers' Certificate delivered with respect to compliance with a
condition or covenant provided for in this Trust Agreement shall include:
(a) a statement that each officer signing the Officers' Certificate
has read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers'
Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer 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 officer,
such condition or covenant has been complied with.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Trust, the Property Trustee, the Delaware Trustee or the
Depositor, but not an employee of the Trust, the Property Trustee, the Delaware
Trustee or the Depositor, and who shall be reasonably acceptable to the Property
Trustee.
"Original Trust Agreement" has the meaning specified in the recitals
to this Trust Agreement.
-7-
<PAGE>
"Outstanding," when used with respect to Capital Securities, means, as
of the date of determination, all Capital Securities theretofore delivered under
this Trust Agreement, except:
(i) Capital Securities theretofore canceled by the Transfer Agent
and Registrar or delivered to the Transfer Agent and Registrar for
cancellation;
(ii) Capital Securities for whose payment or redemption money in
the necessary amount has been theretofore deposited with the Property
Trustee or any Paying Agent for the Holders of such Capital
Securities; provided that, if such Capital Securities are to be
redeemed, notice of such redemption has been duly given pursuant to
this Trust Agreement; and
(iii) Capital Securities in exchange for or in lieu of which
other Capital Securities have been delivered pursuant to this Trust
Agreement, including pursuant to Sections 5.04, 5.05 or 5.11;
provided, however, that in determining whether the Holders of the requisite
Liquidation Amount of the Outstanding Capital Securities have given any request,
demand, authorization, direction, notice, consent or waiver hereunder, Capital
Securities owned by the Depositor, any Trustee or any Affiliate of the Depositor
or any Trustee shall be disregarded and deemed not to be Outstanding, except
that (a) in determining whether any Trustee shall be protected in relying upon
any such request, demand, authorization, direction, notice, consent or waiver,
only Capital Securities which such Trustee knows to be so owned shall be so
disregarded and (b) the foregoing shall not apply at any time when all of the
Outstanding Capital Securities are owned by the Depositor, one or more of the
Trustees and/or any such Affiliate. Capital Securities so owned which have been
pledged in good faith may be regarded as Outstanding if the pledgee establishes
to the satisfaction of the Administrative Trustee the pledgee's right so to act
with respect to such Capital Securities and that the pledgee is not the
Depositor or any Affiliate of the Depositor.
"Owner" means each Person who is the beneficial owner of a Securities
Certificate as reflected in the records of the Securities Depository or, if a
Securities Depository participant is not the beneficial owner, then as reflected
in the records of a Person maintaining an account with such Securities
Depository (directly or indirectly), in accordance with the rules of such
Securities Depository.
"Paying Agent" means any paying agent or co-paying agent appointed
pursuant to Section 5.09 and shall initially be Texas Utilities Services Inc.
"Payment Account" means a segregated non-interest-bearing corporate
trust account maintained by the Property Trustee with The Chase Manhattan Bank,
or such other banking institution as the Depositor shall select for the benefit
of the Securityholders in which all amounts paid in respect of the Debentures
will be held and from which the Paying
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Agent, pursuant to Section 5.09, shall make payments to the Securityholders in
accordance with Sections 4.01 and 4.02.
"Person" means any individual, corporation, partnership, joint
venture, trust, limited liability company or corporation, unincorporated
organization or government or any agency or political subdivision thereof.
"Property Trustee" means the commercial bank or trust company
identified as the "Property Trustee" in the preamble to this Trust Agreement
solely in its capacity as Property Trustee of the Trust formed and continued
hereunder and not in its individual capacity, or its successor in interest in
such capacity, or any successor trustee appointed as herein provided.
"Redemption Date" means, with respect to any Trust Security to be
redeemed, the date fixed for such redemption by or pursuant to this Trust
Agreement; provided that each Debenture Redemption Date shall be a Redemption
Date for a Like Amount of Trust Securities.
"Redemption Price" means, with respect to any date fixed for
redemption of any Trust Security:
(a) in the event of an optional redemption of the Debentures by the
Company, if redeemed during the 12-month period beginning February 1:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ---------
<S> <C>
2007............................. 104.0875%
2008............................. 103.6788
2009............................. 103.2700
2010............................. 102.8613
2011............................. 102.4525
2012............................. 102.0438
2013............................. 101.6350
2014............................. 101.2263
2015............................. 100.8175
2016............................. 100.4088
</TABLE>
and at 100% on or after February 1, 2017; and
(b) in the event of a redemption following a Tax Event, shall be equal to
100% of the principal amount plus accrued and unpaid interest thereon to
the Redemption Date.
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"Relevant Trustee" shall have the meaning specified in Section 8.10.
"Responsible Officer," when used with respect to the Property Trustee
means an officer of the Property Trustee assigned by the Property Trustee to
administer its corporate trust matters.
"Securities Depository" shall have the meaning specified in Section
5.12.
"Securities Register" shall mean the Securities Register as described
in Section 5.04.
"Securityholder" or "Holder" means a Person in whose name a Trust
Security or Securities is registered in the Securities Register; any such Person
shall be a beneficial owner of such security within the meaning of the Delaware
Business Trust Act.
"Subordinated Indenture" means the Indenture, dated as of December 1,
1995, between the Depositor and the Debenture Trustee, as trustee, as amended or
supplemented from time to time.
"Tax Event" means the receipt by the Trust or the Company of an opinion of
counsel experienced in such matters to the effect that, as a result of (a) any
amendment to, clarification of, or change (including any announced prospective
change) in, the laws or treaties (or any regulations thereunder) of the United
States or any political subdivision or taxing authority thereof or therein
affecting taxation, (b) any judicial decision or any official administrative
pronouncement, ruling, regulatory procedure, notice or announcement (including
any notice or announcement of intent to issue or adopt any such administrative
pronouncement, ruling, regulatory procedure or regulation) (each, an
Administrative Action), or (c) any amendment to, clarification of, or change in
the official position or the interpretation of any such Administrative Action or
judicial decision or any interpretation or pronouncement that provides for a
position with respect to such Administrative Action or judicial decision that
differs from the theretofore generally accepted position, in each case by any
legislative body, court, governmental authority or regulatory body, irrespective
of the time or manner in which such amendment, clarification or change is
introduced or made known, which amendment, clarification, or change is
effective, which Administrative Action is taken or which judicial decision is
issued, in each case on or after the date of issuance of the Capital Securities,
there is more than an insubstantial risk that (i) the Trust is, or will be,
subject to United States federal income tax with respect to interest received on
the Debentures, (ii) interest payable by the Company on the Debentures is not,
or will not be, fully deductible for United States federal income tax purposes,
or (iii) the Trust is, or will be, subject to more than a de minimis amount of
other taxes, duties or other governmental charges.
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"Transfer Agent and Registrar" shall mean the transfer agent and
registrar for the Capital Securities appointed by the Trust and shall be
initially Texas Utilities Services Inc.
"Trust" means the Delaware business trust created by the Original
Trust Agreement and continued hereby and identified on the cover page to this
Trust Agreement.
"Trust Agreement" means this Amended and Restated Trust Agreement, as
the same may be modified, amended or supplemented in accordance with the
applicable provisions hereof, including all exhibits hereto, including, for all
purposes of this Amended and Restated Trust Agreement and any such modification,
amendment or supplement, the provisions of the Trust Indenture Act that are
deemed to be a part of and govern this Amended and Restated Trust Agreement and
any such modification, amendment or supplement, respectively.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed; provided, however,
that in the event the Trust Indenture Act of 1939 is amended after such date,
"Trust Indenture Act" means, to the extent required by any such amendment, the
Trust Indenture Act of 1939 as so amended.
"Trust Property" means (i) the Debentures, (ii) any cash on deposit
in, or owing to, the Payment Account and (iii) all proceeds and rights in
respect of the foregoing and any other property and assets for the time being
held by the Property Trustee pursuant to the trusts of this Trust Agreement.
"Trust Security" means any one of the Common Securities or the Capital
Securities.
"Trust Securities Certificate" means any one of the Common Securities
Certificates or the Capital Securities Certificates.
"Underwriting Agreement" means the Underwriting Agreement, dated as of
January 23, 1997, among the Trust, the Depositor and the underwriters named
therein.
ARTICLE II.
ESTABLISHMENT OF THE TRUST
SECTION 2.01. NAME. The Trust created hereby shall be known as "TU
Electric Capital V", in which name the Trustees may conduct the business of the
Trust, make and execute contracts and other instruments on behalf of the Trust
and sue and be sued.
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SECTION 2.02. OFFICE OF THE DELAWARE TRUSTEE; PRINCIPAL PLACE OF
BUSINESS. The office of the Delaware Trustee in the State of Delaware is White
Clay Center, Route 273, Newark, Delaware 19711, or at such other address in
Delaware as the Delaware Trustee may designate by written notice to the
Securityholders and the Depositor. The principal place of business of the Trust
is c/o Texas Utilities Electric Company, Energy Plaza, 1601 Bryan Street,
Dallas, Texas 75201.
SECTION 2.03. INITIAL CONTRIBUTION OF TRUST PROPERTY; ORGANIZATIONAL
EXPENSES. The Property Trustee acknowledges receipt in trust from the Depositor
in connection with the Original Trust Agreement of the sum of $10, which
constituted the initial Trust Property. The Depositor shall pay organizational
expenses of the Trust as they arise or shall, upon request of any Trustee,
promptly reimburse such Trustee for any such expenses paid by such Trustee. The
Depositor shall make no claim upon the Trust Property for the payment of such
expenses.
SECTION 2.04. ISSUANCE OF THE CAPITAL SECURITIES. On January 23, 1997
an authorized representative of the Depositor and the Trust, both executed and
delivered the Underwriting Agreement. Contemporaneously with the execution and
delivery of this Trust Agreement, one of the Administrative Trustees, on behalf
of the Trust in accordance with Section 5.02, executed and delivered a Capital
Securities Certificate, registered in the name of the nominee of The Depositary
Trust Company, having an aggregate Liquidation Amount of $400,000,000.
SECTION 2.05. SUBSCRIPTION AND PURCHASE OF DEBENTURES; ISSUANCE OF THE
COMMON SECURITIES. Contemporaneously with the execution and delivery of this
Trust Agreement, the Administrative Trustees, on behalf of the Trust, shall
subscribe to and purchase from the Depositor Debentures, registered in the name
of the Property Trustee and having an aggregate principal amount equal to
$412,372,000 and, in satisfaction of the purchase price for such Debentures, (x)
one of the Administrative Trustees, on behalf of the Trust, shall execute and
deliver to the Depositor Common Securities Certificates, registered in the name
of the Depositor, in an aggregate amount of 12,372 Common Securities having an
aggregate Liquidation Amount of $12,372,000, and (y) the Property Trustee, on
behalf of the Trust, shall deliver to the Depositor the sum of $400,000,000
representing the proceeds from the sale of the Capital Securities pursuant to
the Underwriting Agreement.
SECTION 2.06. DECLARATION OF TRUST; APPOINTMENT OF ADDITIONAL
ADMINISTRATIVE TRUSTEES. (a) The exclusive purposes and functions of the Trust
are (i) to issue Trust Securities and invest the proceeds thereof in Debentures,
and (ii) to engage in those activities necessary, convenient or incidental
thereto. The Depositor hereby appoints the Trustees as trustees of the Trust, to
have all the rights, powers and duties to the extent set forth herein. The
Property Trustee hereby declares that it will hold the Trust Property in trust
upon and subject to the conditions set forth herein for the benefit of the
Securityholders. The Trustees shall have all rights, powers and duties set forth
herein and in accordance with applicable law with respect to accomplishing the
purposes of the Trust. Anything in this
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Trust Agreement to the contrary notwithstanding, the Delaware Trustee shall not
be entitled to exercise any powers, nor shall the Delaware Trustee have any of
the duties and responsibilities of the Property Trustee or the Administrative
Trustees set forth herein. The Delaware Trustee shall be one of the Trustees of
the Trust for the sole and limited purpose of fulfilling the requirements of
Section 3807 of the Delaware Business Trust Act.
SECTION 2.07. AUTHORIZATION TO ENTER INTO CERTAIN TRANSACTIONS. (a)
The Trustees shall conduct the affairs of the Trust in accordance with the terms
of this Trust Agreement. Subject to the limitations set forth in paragraph (b)
of this Section and Article VIII and in accordance with the following provisions
(A) and (B), the Trustees shall have the authority to enter into all
transactions and agreements determined by the Trustees to be appropriate in
exercising the authority, express or implied, otherwise granted to the Trustees
under this Trust Agreement, and to perform all acts in furtherance thereof,
including without limitation, the following:
(A) As among the Trustees, the Administrative Trustees, acting singly or
together, shall have the power, duty and authority to act on behalf of the Trust
with respect to the following matters:
(i) the issuance and sale of the Trust Securities;
(ii) without the consent of any Person, to cause the Trust to
enter into and to execute, deliver and perform on behalf of the Trust,
the Expense Agreement, and such other agreements as may be necessary
or desirable in connection with the consummation of the Underwriting
Agreement;
(iii) to qualify the Trust to do business in any jurisdiction as
may be necessary or desirable;
(iv) the collection of interest, principal and any other payments
made in respect of the Debentures in the Payment Account;
(v) the registration of the Capital Securities under the
Securities Act of 1933, as amended, and under state securities or blue
sky laws, and the qualification of this Trust Agreement as a trust
indenture under the Trust Indenture Act;
(vi) the appointment of a Paying Agent and Transfer Agent and
Registrar in accordance with this Trust Agreement;
(vii) registering transfers of the Trust Securities in accordance
with this Trust Agreement;
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<PAGE>
(viii) the establishment of a record date for any of the purposes
contemplated by Section 6.07 hereof;
(ix) to the extent provided in this Trust Agreement, the winding
up of the affairs of and liquidation of the Trust and the preparation,
execution and filing of the certificate of cancellation with the
Secretary of State of Delaware; and
(x) the taking of any action incidental to the foregoing as the
Administrative Trustees may from time to time determine is necessary
or advisable to protect and conserve the Trust Property for the
benefit of the Securityholders (without consideration of the effect of
any such action on any particular Securityholder).
(B) As among the Trustees, the Property Trustee shall have the power, duty
and authority to act on behalf of the Trust with respect to the following
ministerial matters:
(i) the establishment of the Payment Account;
(ii) the receipt of the Debentures;
(iii) the deposit of interest, principal and any other payments
made in respect of the Debentures in the Payment Account;
(iv) the distribution of amounts owed to the Securityholders in
respect of the Trust Securities in accordance with the terms of this
Trust Agreement;
(v) the sending of notices of default and other information
regarding the Trust Securities and the Debentures to the
Securityholders in accordance with the terms of this Trust Agreement;
(vi) the distribution of the Trust Property in accordance with
the terms of this Trust Agreement;
(vii) as provided in this Trust Agreement, the winding up of the
affairs of and liquidation of the Trust and the execution of the
certificate of cancellation to be prepared and filed by the
Administrative Trustees with the Secretary of State of the State of
Delaware; and
(viii) the taking of any ministerial action incidental to the
foregoing as the Property Trustee may from time to time determine is
necessary or advisable to protect and conserve the Trust Property for
the benefit of the Securityholders (without consideration of the
effect of any such action on any particular Securityholder).
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<PAGE>
Subject to this Section 2.07(a)(B), the Property Trustee shall have
none of the duties, powers or authority of the Administrative Trustees set forth
in Sections 2.07(a)(A) and 2.07(c) or the Depositor set forth in Section
2.07(c). The Property Trustee shall have the power and authority to exercise
all of the rights, powers and privileges of a holder of Debentures under the
Subordinated Indenture and, if an Event of Default occurs and is continuing, the
Property Trustee may, for the benefit of Holders of the Trust Securities, in its
discretion, proceed to protect and enforce its rights as holder of the
Debentures subject to the rights of the Holders pursuant to the terms of this
Trust Agreement.
(b) So long as this Trust Agreement remains in effect, the Trust (or
the Trustees acting on behalf of the Trust) shall not undertake any business,
activities or transaction except as expressly provided herein or contemplated
hereby. In particular, the Trustees shall not (i) acquire any investments or
engage in any activities not authorized by this Trust Agreement, (ii) sell,
assign, transfer, exchange, pledge, set-off or otherwise dispose of any of the
Trust Property or interests therein, including to Securityholders, except as
expressly provided herein, (iii) take any action that would cause the Trust to
fail or cease to qualify as a "grantor trust" for United States federal income
tax purposes and not as an association taxable as a corporation, (iv) incur any
indebtedness for borrowed money or (v) take or consent to any action that would
result in the placement of a Lien on any of the Trust Property. The Trustees
shall defend all claims and demands of all Persons at any time claiming any Lien
on any of the Trust Property adverse to the interest of the Trust or the
Securityholders in their capacity as Securityholders.
(c) In connection with the issue of the Capital Securities, the
Depositor and the Administrative Trustees, acting singly or together, (and, in
the case of (v) below, Robert J. Reger, Jr., as authorized representative of the
Trust) shall have the right and responsibility to assist the Trust with respect
to, or effect on behalf of the Trust, the following (and any actions taken by
the Depositor in furtherance of the following prior to the date of this Trust
Agreement are hereby ratified and confirmed in all respects):
(i) to prepare for filing by the Trust with the Commission and to
execute a registration statement on Form S-3 in relation to the
Capital Securities, including any amendments thereto;
(ii) to determine the States in which to take appropriate action
to qualify or register for sale all or part of the Capital Securities
and to do any and all such acts, other than actions which must be
taken by or on behalf of the Trust, and advise the Trustees of actions
they must take on behalf of the Trust, and prepare for execution and
filing any documents to be executed and filed by the Trust or on
behalf of the Trust, as the Depositor deems necessary or advisable in
order to comply with the applicable laws of any such States;
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<PAGE>
(iii) to execute and deliver on behalf of the Trust the
Underwriting Agreement and such other agreements as may be necessary
or desirable in connection with the consummation thereof;
(iv) to select the investment banker or bankers to act as
underwriters with respect to the offer and sale by the Trust of
Capital Securities ("Offer") and negotiate the terms of an
Underwriting Agreement and pricing agreement providing for the Offer;
(v) to take any other actions necessary or desirable to carry out
any of the foregoing activities; and
(vi) to designate itself or an Affiliate to be the Transfer Agent
and Registrar.
(d) Notwithstanding anything herein to the contrary, the
Administrative Trustees are authorized and directed to conduct the affairs of
the Trust and to operate the Trust so that the Trust will not be deemed to be an
"investment company" required to be registered under the Investment Company Act
of 1940, as amended, or classified other than as a "grantor trust" for United
States federal income tax purposes and not as an association taxable as a
corporation and so that the Debentures will be treated as indebtedness of the
Depositor for United States federal income tax purposes. In this connection,
the Depositor and the Administrative Trustees are authorized to take any action,
not inconsistent with applicable law, the certificate of trust filed with the
Secretary of State of the State of Delaware with respect to the Trust (as
amended or restated from time to time, the "Certificate of Trust") or this Trust
Agreement, that each of the Depositor and the Administrative Trustees determines
in its discretion to be necessary or desirable for such purposes, as long as
such action does not materially adversely affect the interests of the Holders of
the Capital Securities.
SECTION 2.08. ASSETS OF TRUST. The assets of the Trust shall consist
of the Trust Property.
SECTION 2.09. TITLE TO TRUST PROPERTY. Legal title to all Trust
Property shall be vested at all times in the Property Trustee (in its capacity
as such) and shall be held and administered by the Property Trustee for the
benefit of the Securityholders in accordance with this Trust Agreement.
ARTICLE III
PAYMENT ACCOUNT
SECTION 3.0 PAYMENT ACCOUNT.
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(a) On or prior to the Closing Date, the Property Trustee shall
establish the Payment Account. The Property Trustee and the Paying Agent
appointed by the Administrative Trustees shall have exclusive control and sole
right of withdrawal with respect to the Payment Account for the purpose of
making deposits in and withdrawals from the Payment Account in accordance with
this Trust Agreement. All monies and other property deposited or held from time
to time in the Payment Account shall be held by the Property Trustee in the
Payment Account for the exclusive benefit of the Holders of Trust Securities and
for distribution as herein provided, including (and subject to) any priority of
payments provided for herein. The Property Trustee shall have no liability in
any respect whatsoever in regards to any moneys or other property deposited in
the Payment Account at an institution other than the Property Trustee.
(b) The Property Trustee shall deposit in the Payment Account,
promptly upon receipt, all payments of principal or interest on, and any other
payments or proceeds with respect to, the Debentures. Amounts held in the
Payment Account shall not be invested by the Property Trustee pending
distribution thereof.
ARTICLE IV.
DISTRIBUTIONS; REDEMPTION
SECTION 4.01. DISTRIBUTIONS.
(a) Distributions on the Trust Securities shall be cumulative, and
will accumulate whether or not there are funds of the Trust available for the
payment of Distributions. Distributions shall accrue from the Closing Date, and,
except in the event that the Depositor exercises its right to extend the
interest payment period for the Debentures pursuant to Section 311 of the
Subordinated Indenture, shall be payable semi-annually in arrears on February 1
and August 1 of each year, commencing on August 1, 1997. If any date on which
Distributions are otherwise payable on the Trust Securities is not a Business
Day, then the payment of such Distribution shall be made on the next succeeding
day which is a Business Day (and without any interest or other payment in
respect of any such delay) in each case, with the same force and effect as if
made on such date (each date on which Distributions are payable in accordance
with this Section 4.01(a) a "Distribution Date").
(b) Distributions payable on the Trust Securities shall be fixed at a
rate of 8.175% per annum of the Liquidation Amount of the Trust Securities. The
amount of Distributions payable for any full semi-annual period shall be
computed on the basis of twelve 30-day months and a 360-day year and, for any
period shorter than a full month, on the basis of the actual number of days
elapsed. If the interest payment period for the Debentures is extended pursuant
to Section 311 of the Subordinated Indenture, then Distributions on the Capital
Securities will be deferred for the period equal to the extension of the
interest payment period for the Debentures and the rate per annum at which
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Distributions on the Trust Securities accumulate shall be increased by an amount
such that the aggregate amount of Distributions that accumulate on all Trust
Securities during any such extended interest payment period is equal to the
aggregate amount of interest (including, to the extent permitted by law,
interest payable on unpaid interest at the percentage rate per annum set forth
above, compounded semi-annually) that accrues during any such extended interest
payment period on the Debentures. The amount of Distributions payable for any
period shall include the Additional Amounts, if any.
(c) Distributions on the Trust Securities shall be made and shall be
deemed payable on each Distribution Date only to the extent that the Trust has
funds available in the Payment Account for the payment of such Distributions.
(d) Distributions on the Trust Securities with respect to a
Distribution Date shall be payable to the Holders thereof as they appear on the
Securities Register for the Trust Securities on the relevant record date, which
shall be 15 days prior to the relevant Distribution Date.
SECTION 4.02. REDEMPTION. (a) On each Debenture Redemption Date and
at the maturity date for the Debentures (as defined in the Subordinated
Indenture), the Property Trustee will be required to redeem a Like Amount of
Trust Securities at the Redemption Price plus accumulated and unpaid
Distributions to the date of such payment.
(b) Notice of redemption shall be given by the Property Trustee by
first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days
prior to the Redemption Date to each Holder of Trust Securities to be redeemed,
at such Holder's address appearing in the Security Register. All notices of
redemption or liquidation shall state:
(i) the Redemption Date;
(ii) the Redemption Price and the amount of accumulated and
unpaid Dividends to be paid on the Redemption Date;
(iii) the CUSIP number;
(iv) if less than all the Outstanding Trust Securities are to be
redeemed, the identification and the total Liquidation Amount of the
particular Trust Securities to be redeemed; and
(v) that on the Redemption Date the Redemption Price plus
accumulated and unpaid Distributions to the date of such payment will
become due and payable upon each such Trust Security to be redeemed
and that interest thereon will cease to accrue on and after said date.
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(c) The Trust Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price plus accumulated and unpaid Distributions to
the date of such payment with the proceeds from the contemporaneous redemption
of Debentures. Redemptions of the Trust Securities shall be made and the
Redemption Price plus accumulated and unpaid Distributions to the date of such
payment shall be deemed payable on each Redemption Date only to the extent that
the Trust has funds immediately available in the Payment Account for such
payment.
(d) If the Property Trustee gives a notice of redemption in respect
of any Capital Securities, then, by 12:00 noon, New York time, on the Redemption
Date, subject to Section 4.02(c), the Property Trustee shall irrevocably deposit
with the Paying Agent funds sufficient to pay the applicable Redemption Price
plus accumulated and unpaid Distributions to the date of such payment and will
give the Paying Agent irrevocable instructions and authority to pay the
Redemption Price plus accumulated and unpaid Distributions to the date of such
payment to the Holders thereof upon surrender of their Capital Securities
Certificates. Notwithstanding the foregoing, Distributions payable on or prior
to the Redemption Date for any Trust Securities called for redemption shall be
payable to the Holders of such Trust Securities as they appear on the Securities
Register for the Trust Securities on the relevant record dates for the related
Distribution Dates. If notice of redemption shall have been given and funds
deposited as required, then on the Redemption Date, all rights of
Securityholders holding Trust Securities so called for redemption will cease,
except the right of such Securityholders to receive the Redemption Price plus
accumulated and unpaid Distributions to the date of payment thereof, but without
interest thereon, and such Trust Securities will cease to be outstanding. In
the event that any Redemption Date is not a Business Day, then payment of the
Redemption Price payable on such date plus accumulated and unpaid Distributions
to such Redemption Date shall be made on the next succeeding day which is a
Business Day (and without any interest or other payment in respect of any such
delay). In the event that payment of the Redemption Price plus accumulated and
unpaid Distributions in respect of any Trust Securities called for redemption is
improperly withheld or refused and not paid either by the Trust or by the
Depositor pursuant to the Guarantee, Distributions on such Trust Securities will
continue to accrue, at the then applicable rate, from the Redemption Date
originally established by the Trust for such Trust Securities to the date such
Redemption Price plus accumulated and unpaid Distributions is actually paid, in
which case the actual payment date will be deemed the date fixed for redemption
for purposes of calculating the Redemption Price plus accumulated and unpaid
Distributions to such date.
(e) Payment of the Redemption Price on the Trust Securities shall be
made to the Holders thereof as they appear on the Securities Register for the
Trust Securities on the relevant record date, which shall be the fifteenth day
prior to the Redemption Date.
(f) If less than all the Outstanding Trust Securities are to be
redeemed on a Redemption Date, then the aggregate Liquidation Amount of Trust
Securities to be redeemed shall be allocated to the Common Securities and to the
Capital Securities in the proportion
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that the aggregate Liquidation Amount of each is to the aggregate Liquidation
Amount of all outstanding Trust Securities. The particular Capital Securities to
be redeemed shall be selected not more than 60 days prior to the Redemption Date
by the Property Trustee from the Outstanding Capital Securities not previously
called for redemption, by such method as the Property Trustee shall deem fair
and appropriate and which may provide for the selection for redemption of
portions (equal to $1,000 or integral multiples thereof) of the Liquidation
Amount of Capital Securities of a denomination larger than $1,000. The Property
Trustee shall promptly notify the Transfer Agent and Registrar in writing of the
Capital Securities selected for redemption and, in the case of any Capital
Securities selected for partial redemption, the Liquidation Amount thereof to be
redeemed. For all purposes of this Trust Agreement, unless the context otherwise
requires, all provisions relating to the redemption of Capital Securities shall
relate, in the case of any Capital Securities redeemed or to be redeemed only in
part, to the portion of the Liquidation Amount of Capital Securities which has
been or is to be redeemed.
SECTION 4.03. SUBORDINATION OF COMMON SECURITIES. (a) Payment of
Distributions (including Additional Amounts, if applicable) on, and the
Redemption Price plus accumulated and unpaid distributions of, the Trust
Securities, as applicable, shall be made pro rata based on the Liquidation
Amount of the Trust Securities; provided, however, that if on any Distribution
Date or Redemption Date an Event of Default shall have occurred and be
continuing, no payment of any Distribution (including Additional Amounts, if
applicable) on, or Redemption Price of, any Common Security, and no other
payment on account of the redemption, liquidation or other acquisition of Common
Securities, shall be made unless payment in full in cash of all accumulated and
unpaid Distributions (including Additional Amounts, if applicable) on all
Outstanding Capital Securities for all distribution periods terminating on or
prior thereto, or in the case of payment of the Redemption Price plus
accumulated and unpaid Distributions the full amount of such Redemption Price
plus accumulated and unpaid Distributions on all Outstanding Capital Securities,
shall have been made or provided for, and all funds immediately available to the
Property Trustee shall first be applied to the payment in full in cash of all
Distributions (including Additional Amounts, if applicable) on, or Redemption
Price of plus accumulated and unpaid Distributions of, Capital Securities then
due and payable.
(b) In the case of the occurrence of any Event of Default resulting
from a Debenture Event of Default, the Holder of Common Securities will be
deemed to have waived any such Event of Default under this Trust Agreement until
the effect of all such Events of Default with respect to the Capital Securities
have been cured, waived or otherwise eliminated. Until any such Events of
Default under this Trust Agreement with respect to the Capital Securities have
been so cured, waived or otherwise eliminated, the Property Trustee shall act
solely on behalf of the Holders of the Capital Securities and not the Holder of
the Common Securities, and only the Holders of the Capital Securities will have
the right to direct the Property Trustee to act on their behalf.
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SECTION 4.04. PAYMENT PROCEDURES. Payments in respect of the
Capital Securities shall be made by check mailed to the address of the Person
entitled thereto as such address shall appear on the Securities Register or, if
the Capital Securities are held by a Securities Depository, such Distributions
shall be made to the Securities Depository, which shall credit the relevant
Persons' accounts at such Securities Depository on the applicable distribution
dates. Payments in respect of the Common Securities shall be made in such
manner as shall be mutually agreed between the Administrative Trustees and the
Holder of the Common Securities.
SECTION 4.05. TAX RETURNS AND REPORTS. The Administrative Trustees
shall prepare (or cause to be prepared), at the Depositor's expense and
direction, and file all United States federal, state and local tax and
information returns and reports required to be filed by or in respect of the
Trust. In this regard, the Administrative Trustees shall (a) prepare and file
(or cause to be prepared or filed) the Internal Revenue Service Form 1041 (or
any successor form) required to be filed in respect of the Trust in each taxable
year of the Trust and (b) prepare and furnish (or cause to be prepared and
furnished) to each Securityholder the related Internal Revenue Service Form
1099, or any successor form or the information required to be provided on such
form. The Administrative Trustees shall provide the Depositor and the Property
Trustee with a copy of all such returns, reports and schedules promptly after
such filing or furnishing. The Trustees shall comply with United States federal
withholding and backup withholding tax laws and information reporting
requirements with respect to any payments to Securityholders under the Trust
Securities.
SECTION 4.06. PAYMENTS UNDER INDENTURE. Any amount payable hereunder
to any Holder of Capital Securities shall be reduced by the amount of any
corresponding payment such Holder has directly received pursuant to Section 808
of the Subordinated Indenture. Notwithstanding the provisions hereunder to the
contrary, Securityholders acknowledge that any Holder of Capital Securities that
receives payment under Section 808 of the Subordinated Indenture may receive
amounts greater than the amount such Holder may be entitled to receive pursuant
to the other provisions of this Trust Agreement.
ARTICLE V.
TRUST SECURITIES CERTIFICATES
SECTION 5.01. INITIAL OWNERSHIP. Upon the creation of the Trust by
the contribution by the Depositor pursuant to Section 2.03 and until the
issuance of the Trust Securities, and at any time during which no Trust
Securities are outstanding, the Depositor shall be the sole beneficial owner of
the Trust.
SECTION 5.02. THE TRUST SECURITIES CERTIFICATES. The Trust Securities
Certificates shall be issued in denominations of $1,000 Liquidation Amount and
integral multiples thereof. The Trust Securities Certificates shall be executed
on behalf of the Trust
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by manual or facsimile signature of at least one Administrative Trustee and, if
executed on behalf of the Trust by facsimile signature, countersigned by the
Transfer Agent and Registrar or its agent. Trust Securities Certificates bearing
the manual signatures of individuals who were, at the time when such signatures
shall have been affixed, authorized to sign on behalf of the Trust and, if
executed on behalf of the Trust by facsimile signature, countersigned by the
Transfer Agent and Registrar or its agent, shall be validly issued and entitled
to the benefits of this Trust Agreement, notwithstanding that such individuals
or any of them shall have ceased to be so authorized prior to the delivery of
such Trust Securities Certificates or did not hold such offices at the date of
delivery of such Trust Securities Certificates. A transferee of a Trust
Securities Certificate shall become a Securityholder, and shall be entitled to
the rights and subject to the obligations of a Securityholder hereunder, upon
due registration of such Trust Securities Certificate in such transferee's name
pursuant to Section 5.04 or 5.11.
SECTION 5.03. EXECUTION AND DELIVERY OF TRUST SECURITIES CERTIFICATES.
On the Closing Date, the Administrative Trustees shall cause Trust Securities
Certificates, in an aggregate Liquidation Amount as provided in Sections 2.04
and 2.05, to be executed on behalf of the Trust, and in the case of Capital
Securities executed by facsimile signature, countersigned by the Transfer Agent
and Registrar, or its agent, and delivered to or upon the written order of the
Depositor signed by its chairman of the board, any of its vice presidents or its
Treasurer, without further corporate action by the Depositor, in authorized
denominations. The Depositor agrees to indemnify, defend and hold The Bank of
New York harmless against any and all costs and liabilities incurred without
negligence arising out of or in connection with any such countersigning by it.
SECTION 5.04. REGISTRATION OF TRANSFER AND EXCHANGE OF CAPITAL
SECURITIES CERTIFICATES. The Transfer Agent and Registrar shall keep or cause
to be kept, at the office or agency maintained pursuant to Section 5.08, a
Securities Register in which, subject to such reasonable regulations as it may
prescribe, the Transfer Agent and Registrar shall provide for the registration
of Capital Securities Certificates and the Common Securities Certificates
(subject to Section 5.10 in the case of the Common Securities Certificates) and
registration of transfers and exchanges of Capital Securities Certificates as
herein provided. Texas Utilities Services Inc. shall be the initial Transfer
Agent and Registrar.
Upon surrender for registration of transfer of any Capital Securities
Certificate at the office or agency maintained pursuant to Section 5.08, the
Administrative Trustees, or any one of them, shall execute on behalf of the
Trust by manual or facsimile signature and, if executed on behalf of the Trust
by facsimile signature, cause the Transfer Agent and Registrar or its agent to
countersign and deliver, in the name of the designated transferee or
transferees, one or more new Capital Securities Certificates in authorized
denominations of a like aggregate Liquidation Amount. At the option of a
Holder, Capital Securities Certificates may be exchanged for other Capital
Securities Certificates in authorized denominations of the same class and of a
like aggregate Liquidation Amount upon surrender of the Capital
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Securities Certificates to be exchanged at the office or agency maintained
pursuant to Section 5.08.
Every Capital Securities Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in form satisfactory to the Administrative Trustees and
the Transfer Agent and Registrar duly executed by the Holder or such Holder's
attorney duly authorized in writing. Each Capital Securities Certificate
surrendered for registration of transfer or exchange shall be canceled and
subsequently disposed of by the Administrative Trustees in accordance with
customary practice. The Trust shall not be required to (i) issue, register the
transfer of, or exchange any Capital Securities during a period beginning at the
opening of business 15 calendar days before the day of mailing of a notice of
redemption of any Capital Securities called for redemption and ending at the
close of business on the day of such mailing or (ii) register the transfer of or
exchange any Capital Securities so selected for redemption, in whole or in part,
except the unredeemed portion of any such Capital Securities being redeemed in
part.
No service charge shall be made for any registration of transfer or
exchange of Capital Securities Certificates, but the Transfer Agent and
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Capital Securities Certificates.
SECTION 5.05. MUTILATED, DESTROYED, LOST OR STOLEN TRUST SECURITIES
CERTIFICATES. If (a) any mutilated Trust Securities Certificate shall be
surrendered to the Transfer Agent and Registrar, or if the Transfer Agent and
Registrar shall receive evidence to its satisfaction of the destruction, loss or
theft of any Trust Securities Certificate and (b) there shall be delivered to
the Transfer Agent and Registrar and the Administrative Trustees such security
or indemnity as may be required by them to save each of them and the Depositor
harmless, then in the absence of notice that such Trust Securities Certificate
shall have been acquired by a bona fide purchaser, the Administrative Trustees,
or any one of them, on behalf of the Trust shall execute by manual or facsimile
signature and, if execution on behalf of the Trust is by facsimile signature,
countersigned by a Transfer Agent and Registrar or its agent; and the
Administrative Trustees, or any one of them, and, if executed on behalf of the
Trust by facsimile signature, countersigned by the Transfer Agent and Registrar
or its agent shall make available for delivery, in exchange for or in lieu of
any such mutilated, destroyed, lost or stolen Trust Securities Certificate, a
new Trust Securities Certificate of like class, tenor and denomination. In
connection with the issuance of any new Trust Securities Certificate under this
Section, the Administrative Trustees or the Transfer Agent and Registrar may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection therewith. Any duplicate Trust
Securities Certificate issued pursuant to this Section shall constitute
conclusive evidence of an ownership interest in the Trust, as if originally
issued, whether or not the lost, stolen or destroyed Trust Securities
Certificate shall be found at any time.
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SECTION 5.06. PERSONS DEEMED SECURITYHOLDERS. Prior to due
presentation of a Trust Securities Certificate for registration of transfer, the
Trustees and the Transfer Agent and Registrar shall be entitled to treat the
Person in whose name any Trust Securities Certificate shall be registered in the
Securities Register as the owner of such Trust Securities Certificate for the
purpose of receiving Distributions and for all other purposes whatsoever, and
neither the Trustees nor the Transfer Agent and Registrar shall be bound by any
notice to the contrary.
SECTION 5.07. ACCESS TO LIST OF SECURITYHOLDERS' NAMES AND ADDRESSES.
The Administrative Trustees shall furnish or cause to be furnished (x) to the
Depositor, within 15 days after receipt by any Administrative Trustee of a
request therefor from the Depositor in writing and (y) to the Property Trustee,
promptly after receipt by any Administrative Trustee of a request therefor from
the Property Trustee in writing in order to enable the Property Trustee to
discharge its obligations under this Trust Agreement, a list, in such form as
the Depositor or the Property Trustee may reasonably require, of the names and
addresses of the Securityholders as of a recent date. If Holders of Trust
Securities Certificates evidencing ownership at such time and for the previous
six months not less than 25% of the outstanding aggregate Liquidation Amount
apply in writing to any Administrative Trustee, and such application states that
the applicants desire to communicate with other Securityholders with respect to
their rights under this Trust Agreement or under the Trust Securities
Certificates and such application is accompanied by a copy of the communication
that such applicants propose to transmit, then the Administrative Trustees
shall, within five Business Days after the receipt of such application, afford
such applicants access during normal business hours to the current list of
Securityholders. Each Holder, by receiving and holding a Trust Securities
Certificate, shall be deemed to have agreed not to hold either the Depositor or
the Administrative Trustees accountable by reason of the disclosure of its name
and address, regardless of the source from which such information was derived.
SECTION 5.08. MAINTENANCE OF OFFICE OR AGENCY. The Depositor shall or
shall cause the Transfer Agent and Registrar to maintain in the Borough of
Manhattan, The City of New York, an office or offices or agency or agencies
where Capital Securities Certificates may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Depositor or
the Transfer Agent and Registrar in respect of the Trust Securities Certificates
may be served. The Depositor initially designates Midwest Clearing Corporation,
40 Broad Street, New York, New York 10004 as its principal corporate trust
office for such purposes. The Depositor shall or shall cause the Transfer Agent
and Registrar to give prompt written notice to the Depositor, the Property
Trustee and to the Securityholders of any change in the location of the
Securities Register or any such office or agency.
SECTION 5.09. APPOINTMENT OF PAYING AGENT. The Paying Agent shall
make distributions to Securityholders from the Payment Account and shall report
the amounts of such distributions to the Administrative Trustees and the
Property Trustee. Any Paying Agent shall have the revocable power to withdraw
funds from the Payment Account for the
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purpose of making the Distributions referred to above. The Property Trustee
shall be entitled to rely upon a certificate of the Paying Agent stating in
effect the amount of such funds so to be withdrawn and that same are to be
applied by the Paying Agent in accordance with this Section 5.09. The
Administrative Trustees or any one of them may revoke such power and remove the
Paying Agent if the Administrative Trustee or any one of them determines in its
sole discretion that the Paying Agent shall have failed to perform its
obligations under this Trust Agreement in any material respect. The Paying Agent
shall initially be Texas Utilities Services Inc., and it may choose any co-
paying agent that is acceptable to the Administrative Trustees and the
Depositor. The Paying Agent shall be permitted to resign upon 30 days' written
notice to the Administrative Trustees and the Depositor. In the event of the
removal or resignation of Texas Utilities Services, Inc. as Paying Agent, the
Administrative Trustees shall appoint a successor that is reasonably acceptable
to the Property Trustee and the Depositor to act as Paying Agent (which shall be
a bank, trust company or an Affiliate of the Depositor). The Administrative
Trustees shall cause such successor Paying Agent or any additional Paying Agent
appointed by the Administrative Trustees to execute and deliver to the Trustees
an instrument in which such successor Paying Agent or additional Paying Agent
shall agree with the Trustees that as Paying Agent, such successor Paying Agent
or additional Paying Agent will hold all sums, if any, held by it for payment to
the Securityholders in trust for the benefit of the Securityholders entitled
thereto until such sums shall be paid to such Securityholders. The Paying Agent
shall return all unclaimed funds to the Property Trustee and upon resignation or
removal of a Paying Agent such Paying Agent shall also return all funds in its
possession to the Property Trustee. The provisions of Sections 8.01, 8.03 and
8.06 shall apply to the Paying Agent appointed hereunder, and the Paying Agent
shall be bound by the requirements with respect to paying agents of securities
issued pursuant to the Trust Indenture Act. Any reference in this Trust
Agreement to the Paying Agent shall include any co-paying agent unless the
context requires otherwise.
SECTION 5.10. OWNERSHIP OF COMMON SECURITIES BY DEPOSITOR. On the
Closing Date, the Depositor shall acquire, and thereafter retain, beneficial and
record ownership of the Common Securities. Any attempted transfer of the Common
Securities shall be void. The Administrative Trustees shall cause each Common
Securities Certificate issued to the Depositor to contain a legend stating "THIS
CERTIFICATE IS NOT TRANSFERABLE". Common Securities Certificates representing
the Common Securities shall be issued to the Depositor in the form of a
typewritten or definitive Common Securities Certificate.
SECTION 5.11. DEFINITIVE CAPITAL SECURITIES CERTIFICATES. Upon
initial issuance of the Capital Securities, the Definitive Capital Securities
Certificates shall be typewritten, printed, lithographed or engraved or may be
produced in any other manner as is reasonably acceptable to the Administrative
Trustees, as evidenced by the execution thereof by the Administrative Trustees,
or any one of them. The Administrative Trustees, or any one of them, shall
execute on behalf of the Trust by manual or facsimile signature, and, if
executed by facsimile on behalf of the Trust, countersigned by the Transfer
Agent and
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Registrar or its agent, the Definitive Capital Securities Certificates
initially in accordance with the instructions of the Depositor. Neither the
Transfer Agent and Registrar nor any of the Administrative Trustees shall be
liable for any delay in delivery of such instructions and may conclusively rely
on, and shall be protected in relying on, such instructions.
SECTION 5.12. BOOK-ENTRY SYSTEM. Some or all of the Capital
Securities may be registered in the name of a securities depository ("Securities
Depository") or a nominee therefor, and held in the custody of the Securities
Depository. In such event, a single certificate will be issued and delivered to
the Securities Depository for such Capital Securities, in which case the Owners
of such Capital Securities will not receive physical delivery of certificates
for Capital Securities. Except as provided herein, all transfers of beneficial
ownership interests in such Capital Securities will be made by book-entry only,
and no investor or other party purchasing, selling or otherwise transferring
beneficial ownership of the Capital Securities will receive, hold or deliver any
certificate for Capital Securities. The Depositor, the Trustees and the Paying
Agent will recognize the Securities Depository or its nominee as the Holder of
Capital Securities for all purposes, including notices and voting.
The Administrative Trustees, at the direction and expense of the
Depositor, may from time to time appoint a Securities Depository or a successor
thereto and enter into a letter of representations or other agreement with such
Securities Depository to establish procedures with respect to the Capital
Securities. Any Securities Depository shall be a Clearing Agency.
The Depositor and the Trustees covenant and agree to meet the
requirements of a Securities Depository for the Capital Securities with respect
to required notices and other provisions of the letter of representations or
agreement executed with respect to such Capital Securities.
Whenever the beneficial ownership of any Capital Securities is
determined through the books of a Securities Depository, the requirements in
this Trust Agreement of holding, delivering or transferring such Capital
Securities shall be deemed modified with respect to such Capital Securities to
meet the requirements of the Securities Depository with respect to actions of
the Trustees, the Depositor and the Paying Agent. Any provisions hereof
permitting or requiring delivery of such Capital Securities shall, while such
Capital Securities are in a book-entry system, be satisfied by the notation on
the books of the Securities Depository in accordance with applicable state law.
SECTION 5.13. RIGHTS OF SECURITYHOLDERS. The legal title to the
Trust Property is vested exclusively in the Property Trustee (in its capacity as
such) in accordance with Section 2.09, and the Securityholders shall not have
any right or title therein other than an undivided beneficial interest in the
assets of the Trust conferred by their Trust Securities and they shall have no
right to call for any partition or division of property, profits or rights of
the Trust except as described below. The Trust Securities shall be personal
property
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giving only the rights specifically set forth therein and in this Trust
Agreement. The Capital Securities shall have no preemptive or similar rights and
when issued and delivered to Securityholders against payment of the purchase
price therefor will be fully paid and nonassessable undivided beneficial
interests in the assets of the Trust.
SECTION 5.14. CANCELLATION BY TRANSFER AGENT AND REGISTRAR. All
Trust Securities Certificates surrendered for payment, redemption, registration
of transfer or exchange shall, if surrendered to any Person other than the
Transfer Agent and Registrar, be delivered to the Transfer Agent and Registrar
and, if not theretofore cancelled, shall be promptly cancelled by the Transfer
Agent and Registrar. No Trust Securities Certificates shall be issued in lieu of
or in exchange for any Trust Securities Certificates cancelled as provided in
this Section, except as expressly permitted by this Trust Agreement. All
cancelled Trust Securities Certificates held by the Transfer Agent and Registrar
shall be disposed of in accordance with customary practices.
ARTICLE VI.
ACTS OF SECURITYHOLDERS; MEETINGS; VOTING
SECTION 6.01. LIMITATIONS ON VOTING RIGHTS. (a) Except as provided
in this Section 6.01, in Section 10.03 and as otherwise required by law, no
Holder of Capital Securities shall have any right to vote or in any manner
otherwise control the administration, operation and management of the Trust or
the obligations of the parties hereto, nor shall anything herein set forth, or
contained in the terms of the Trust Securities Certificates, be construed so as
to constitute the Securityholders from time to time as partners or members of an
association. If the Property Trustee fails to enforce its rights under the
Debentures or this Trust Agreement, a Holder of Capital Securities may institute
a legal proceeding directly against the Depositor to enforce the Property
Trustee's rights under the Debentures or this Trust Agreement, to the fullest
extent permitted by law, without first instituting any legal proceeding against
the Property Trustee or any other person. Notwithstanding the foregoing, a
Holder of Capital Securities may directly institute a proceeding for enforcement
of payment to such Holder of principal of or interest on the Debentures having a
principal amount equal to the aggregate liquidation preference amount of the
Capital Securities of such Holder on or after the due dates specified in the
Debentures.
(b) So long as any Debentures are held by the Property Trustee, the
Trustees shall not (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee, or executing any
trust or power conferred on the Debenture Trustee with respect to such
Debentures, (ii) waive any past default which is waivable under Section 813 of
the Subordinated Indenture, (iii) exercise any right to rescind or annul a
declaration that the principal of all the Debentures shall be due and payable or
(iv) consent to any amendment, modification or termination of the Subordinated
Indenture or the Debentures, where such consent shall be required, without, in
each case, obtaining the prior
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approval of the Holders of at least 66 2/3% of the aggregate Liquidation Amount
of the Outstanding Capital Securities; provided, however, that where a consent
under the Subordinated Indenture would require the consent of each Holder of
Debentures affected thereby, no such consent shall be given by any Trustee
without the prior written consent of each Holder of Capital Securities. The
Trustees shall not revoke any action previously authorized or approved by a vote
of the Capital Securities, except pursuant to a subsequent vote of the Capital
Securities. The Property Trustee shall notify all Holders of the Capital
Securities of any notice of default received from the Debenture Trustee with
respect to the Debentures. In addition to obtaining the foregoing approvals of
the Holders of the Capital Securities, prior to taking any of the foregoing
actions, the Property Trustee shall, at the expense of the Depositor, obtain an
Opinion of Counsel experienced in such matters to the effect that the Trust will
be classified as a "grantor trust" and not as an association taxable as a
corporation for United States federal income tax purposes on account of such
action.
(c) If any proposed amendment to the Trust Agreement provides for, or
the Trustees otherwise propose to effect, (i) any action that would materially
adversely affect the powers, preferences or special rights of the Capital
Securities, whether by way of amendment to the Trust Agreement or otherwise, or
(ii) the dissolution, winding-up or termination of the Trust, other than
pursuant to the terms of this Trust Agreement, then the Holders of Outstanding
Capital Securities as a class will be entitled to vote on such amendment or
proposal and such amendment or proposal shall not be effective except with the
approval of the Holders of at least 66 2/3% in Liquidation Amount of the
Outstanding Capital Securities. No amendment to this Trust Agreement may be
made if, as a result of such amendment, the Trust would not be classified as a
"grantor trust" but an association taxable as a corporation for United States
federal income tax purposes.
SECTION 6.02. NOTICE OF MEETINGS. Notice of all meetings of the
Holders of Capital Securities, stating the time, place and purpose of the
meeting, shall be given by the Administrative Trustees pursuant to Section 10.08
to each Holder of a Capital Security, at his registered address, at least 15
days and not more than 90 days before the meeting. At any such meeting, any
business properly before the meeting may be so considered whether or not stated
in the notice of the meeting. Any adjourned meeting may be held as adjourned
without further notice.
SECTION 6.03. MEETINGS OF HOLDERS OF CAPITAL SECURITIES. No annual
meeting of Securityholders is required to be held. The Administrative Trustees,
however, shall call a meeting of Securityholders to vote on any matter upon the
written request of the Holders of 25% of the then Outstanding Capital Securities
(based upon their aggregate Liquidation Amount) and may, at any time in their
discretion, call a meeting of Holders of Capital Securities to vote on any
matters as to which the Holders of Capital Securities are entitled to vote.
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Holders of 50% of the then Outstanding Capital Securities (based upon
their aggregate Liquidation Amount), present in person or by proxy, shall
constitute a quorum at any meeting of Securityholders.
If a quorum is present at a meeting, an affirmative vote by the
Holders of Capital Securities present, in person or by proxy, holding more than
the lesser of (x) 66 2/3% of the then Outstanding Capital Securities (based upon
their aggregate Liquidation Amount) held by the Holders of then Outstanding
Capital Securities present, either in person or by proxy, at such meeting and
(y) 50% of the Outstanding Capital Securities (based upon their aggregate
Liquidation Amount) shall constitute the action of the Securityholders, unless
this Trust Agreement requires a greater number of affirmative votes.
SECTION 6.04. VOTING RIGHTS. Securityholders shall be entitled to
one vote for each $1,000 of Liquidation Amount represented by their Trust
Securities in respect of any matter as to which such Securityholders are
entitled to vote.
SECTION 6.05. PROXIES, ETC. At any meeting of Securityholders, any
Securityholder entitled to vote thereat may vote by proxy, provided that no
proxy shall be voted at any meeting unless it shall have been placed on file
with the Administrative Trustees, or with such other officer or agent of the
Trust as the Administrative Trustees may direct, for verification prior to the
time at which such vote shall be taken. Only Securityholders of record shall be
entitled to vote. When Trust Securities are held jointly by several Persons,
any one of them may vote at any meeting in person or by proxy in respect of such
Trust Securities, but if more than one of them shall be present at such meeting
in person or by proxy, and such joint owners or their proxies so present
disagree as to any vote to be cast, such vote shall not be received in respect
of such Trust Securities. A proxy purporting to be executed by or on behalf of
a Securityholder shall be deemed valid unless challenged at or prior to its
exercise, or, if earlier, until eleven months after it is sent and the burden of
proving invalidity shall rest on the challenger.
SECTION 6.06. SECURITYHOLDER ACTION BY WRITTEN CONSENT. Any action
which may be taken by Securityholders at a meeting may be taken without a
meeting if Securityholders holding more than a majority of all Outstanding Trust
Securities entitled to vote in respect of such action (or such larger proportion
thereof as shall be required by any express provision of this Trust Agreement)
shall consent to the action in writing (based upon their aggregate Liquidation
Amount).
SECTION 6.07. RECORD DATE FOR VOTING AND OTHER PURPOSES. For the
purposes of determining the Securityholders who are entitled to notice of and to
vote at any meeting or by written consent, or to participate in any Distribution
on the Trust Securities in respect of which a record date is not otherwise
provided for in this Trust Agreement, or for the purpose of any other action,
the Administrative Trustees may from time to time fix a date, not more than 90
days prior to the date of any meeting of Securityholders or the
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payment of Distribution or other action, as the case may be, as a record date
for the determination of the identity of the Securityholders of record for such
purposes.
SECTION 6.08. ACTS OF SECURITYHOLDERS. Any request, demand,
authorization, direction, notice, consent, waiver or other action provided or
permitted by this Trust Agreement to be given, made or taken by Securityholders
may be embodied in and evidenced by one or more instruments of substantially
similar tenor signed by such Securityholders in person or by an agent duly
appointed in writing; and, except as otherwise expressly provided herein, such
action shall become effective when such instrument or instruments are delivered
to the Administrative Trustees. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as the
"Act" of the Securityholders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Trust Agreement and (subject to Section
8.01) conclusive in favor of the Trustees, if made in the manner provided in
this Section.
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 acknowledgements of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. 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. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which any Trustee deems sufficient.
The ownership of Capital Securities shall be proved by the Securities
Register.
Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Securityholder of any Trust Security shall bind every future
Securityholder of the same Trust Security and the Securityholder of every Trust
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 Trustees or the Trust in reliance thereon, whether or not
notation of such action is made upon such Trust Security.
Without limiting the foregoing, a Securityholder entitled hereunder to
take any action hereunder with regard to any particular Trust Security may do so
with regard to all or any part of the Liquidation Amount of such Trust Security
or by one or more duly appointed agents each of which may do so pursuant to such
appointment with regard to all or any part of such Liquidation Amount.
If any dispute shall arise between or among the Securityholders and
the Administrative Trustees with respect to the authenticity, validity or
binding nature of any request, demand, authorization, direction, consent, waiver
or other Act of such
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Securityholder or Trustee under this Article VI, then the determination of such
matter by the Property Trustee shall be conclusive with respect to such matter.
SECTION 6.09. INSPECTION OF RECORDS. Subject to Section 5.07
concerning access to the list of Securityholders, upon reasonable notice to the
Administrative Trustees and the Property Trustee, the other records of the Trust
shall be open to inspection by Securityholders during normal business hours for
any purpose reasonably related to such Securityholder's interest as a
Securityholder.
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ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF THE PROPERTY
TRUSTEE AND THE DELAWARE TRUSTEE
SECTION 7.01. PROPERTY TRUSTEE. The Property Trustee hereby
represents and warrants for the benefit of the Depositor and the Securityholders
that:
(a) the Property Trustee is a banking corporation or trust company
duly organized, validly existing and in good standing under the laws of the
State of New York;
(b) the Property Trustee has full corporate power, authority and
legal right to execute, deliver and perform its obligations under this Trust
Agreement and has taken all necessary action to authorize the execution,
delivery and performance by it of this Trust Agreement;
(c) this Trust Agreement has been duly authorized, executed and
delivered by the Property Trustee and constitutes the valid and legally binding
agreement of the Property Trustee enforceable against it in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles;
(d) the execution, delivery and performance by the Property Trustee
of this Trust Agreement will not violate, conflict with or constitute a breach
of the Property Trustee's charter or by-laws; and
(e) the execution, delivery and performance by the Property Trustee
of this Trust Agreement does not require the consent or approval of, the giving
of notice to, or the registration with any Federal or New York banking
authority.
SECTION 7.02. DELAWARE TRUSTEE. The Delaware Trustee represents and
warrants for the benefit of the Depositor and the Securityholders that:
(a) the Delaware Trustee is a banking corporation or trust company
duly organized, validly existing and in good standing under the laws of the
State of Delaware;
(b) the Delaware Trustee has full corporate power, authority and
legal right to execute, deliver and perform its obligations under this Trust
Agreement and has taken all necessary action to authorize the execution,
delivery and performance by it of this Trust Agreement;
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(c) this Trust Agreement has been duly authorized, executed and
delivered by the Delaware Trustee and constitutes the valid and legally binding
agreement of the Delaware Trustee enforceable against it in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles;
(d) the execution, delivery and performance by the Delaware Trustee
of this Trust Agreement will not violate the Delaware Trustee's charter or by-
laws; and
(e) the execution, delivery and performance by the Delaware Trustee
of this Trust Agreement does not require the consent or approval of, the giving
of notice to, or the registration with any Federal or Delaware banking
authority.
ARTICLE VII
THE TRUSTEES
SECTION 8.01. CERTAIN DUTIES AND RESPONSIBILITIES.
(a) The duties and responsibilities of the Trustees shall be
restricted to those set forth in the express provisions of this Trust Agreement
and, in the case of the Property Trustee, as provided in the Trust Indenture
Act, and no implied covenants or obligations shall be read into this Trust
Agreement against any of the Trustees. Notwithstanding the foregoing, no
provision of this Trust Agreement shall require any of the Trustees 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. Notwithstanding anything contained in this Trust Agreement to
the contrary, the duties and responsibilities of the Property Trustee under this
Trust Agreement shall be subject to the protections, exculpations and
limitations on liability afforded to the Property Trustee under this Trust
Agreement, the Trust Indenture Act, the Delaware Business Trust Act and, to the
extent applicable, Rule 3a-7 under the Investment Company Act of 1940, as
amended, or any successor rule thereunder. Whether or not therein expressly so
provided, every provision of this Trust Agreement relating to the conduct or
affecting the liability of or affording protection to the Trustees shall be
subject to the provisions of this Section.
(b) All payments made by the Property Trustee or a Paying Agent in
respect of the Trust Securities shall be made only from the income and proceeds
from the Trust Property and only to the extent that there shall be sufficient
income or proceeds from the Trust Property to enable the Property Trustee or
Paying Agent to make payments in accordance with the terms hereof. Each
Securityholder, by its acceptance of a Trust Security, agrees that it will look
solely to the income and proceeds from the Trust Property
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to the extent available for distribution to it as herein provided and that the
Trustees are not personally liable to it for any amount distributable in respect
of any Trust Security or for any other liability in respect of any Trust
Security. This Section 8.01(b) does not limit the liability of the Trustees
expressly set forth elsewhere in this Trust Agreement or, in the case of the
Property Trustee, in the Trust Indenture Act.
(c) All duties and responsibilities of the Property Trustee contained
in this Trust Agreement are subject to the following:
(i) the Property Trustee's sole duty with respect to the custody,
safe keeping and physical preservation of the Trust Property shall be
to deal with such property in a similar manner as the Property Trustee
deals with similar property for its own account, subject to the
protections, exculpations and limitations on liability afforded to the
Property Trustee under this Trust Agreement, the Trust Indenture Act,
the Delaware Business Trust Act and, to the extent applicable, Rule
3a-7 under the Investment Company Act of 1940, as amended, or any
successor rule thereunder;
(ii) the Property Trustee shall have no duty or liability for or
with respect to the value, genuineness, existence or sufficiency of
the Trust Property or the payment of any taxes or assessments levied
thereon or in connection therewith;
(iii) the Property Trustee shall not be liable for any interest
on any money received by it except as it may otherwise agree with the
Depositor. Money held by the Property Trustee need not be segregated
from other funds held by it except in relation to the Payment Account
established by the Property Trustee pursuant to this Trust Agreement
and except to the extent otherwise required by law; and
(iv) the Property Trustee shall not be responsible for
monitoring the compliance by the Administrative Trustees or the
Depositor with their respective duties under this Trust Agreement, nor
shall the Property Trustee be liable for the default or misconduct of
the Administrative Trustees or the Depositor.
SECTION 8.02. NOTICE OF DEFAULTS. Within ninety (90) days after the
occurrence of any default known to the Property Trustee, the Property Trustee
shall transmit, in the manner and to the extent provided in Section 10.08,
notice of such default to the Securityholders and the Depositor, unless such
default shall have been cured or waived. 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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(b) Within Five Business Days after receipt of notice of the
Depositor's exercise of its right to defer the payment of interest on the
Debentures pursuant to the Subordinated Indenture, an Administrative Trustee
shall transmit, in the manner and to the extent provided in Section 10.08,
notice of such exercise to the Securityholders and the Property Trustee.
SECTION 8.03. CERTAIN RIGHTS OF PROPERTY TRUSTEE. Subject to the
provisions of Section 8.01 and except as provided by law:
(i) the Property Trustee may rely and shall be protected in
acting or refraining from acting in good faith upon any resolution,
Opinion of Counsel, certificate, written representation of a Holder or
transferee, certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, appraisal, 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;
(ii) if (A) in performing its duties under this Trust Agreement
the Property Trustee is required to decide between alternative courses
of action or (B) in construing any of the provisions in this Trust
Agreement the Property Trustee finds the same ambiguous or
inconsistent with any other provisions contained herein or (C) the
Property Trustee is unsure of the application of any provision of this
Trust Agreement, then, except as to any matter as to which the Capital
Securityholders are entitled to vote under the terms of this Trust
Agreement, the Property Trustee shall deliver a notice to the
Depositor requesting written instructions of the Depositor as to the
course of action to be taken. The Property Trustee shall take such
action, or refrain from taking such action, as the Property Trustee
shall be instructed in writing to take, or to refrain from taking, by
the Depositor; provided, however, that if the Property Trustee does
not receive such instructions of the Depositor within ten Business
Days after it has delivered such notice, or such reasonably shorter
period of time set forth in such notice (which to the extent
practicable shall not be less than two Business Days), it may, but
shall be under no duty to, take or refrain from taking such action not
inconsistent with this Trust Agreement as it shall deem advisable and
in the best interests of the Securityholders, in which event the
Property Trustee shall have no liability except for its own bad faith,
negligence or willful misconduct;
(iii) whenever in the administration of this Trust Agreement the
Property Trustee shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any action
hereunder, the Property Trustee (unless other evidence be herein
specifically prescribed) may, in the absence of bad faith on its part,
request and rely upon an Officers' Certificate which,
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upon receipt of such request, shall be promptly delivered by the
Depositor or the Administrative Trustees;
(iv) the Property Trustee may consult with counsel of its
selection 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;
(v) the Property Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Trust
Agreement at the request or direction of any Securityholder pursuant
to this Trust Agreement, unless such Securityholder shall have offered
to the Property Trustee reasonable security or indemnity against the
costs, expenses (including reasonable attorneys' fees and expenses)
and liabilities which might be incurred by it in complying with such
request or direction;
(vi) the Property 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, approval, bond, debenture, note or other
evidence of indebtedness or other paper or document, but the Property
Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit, and, if
the Property Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and
premises of the Depositor personally or by agent or attorney;
(vii) the Property Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through its agents or attorneys, and the Property 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;
(viii) the Property Trustee shall not be liable for any action
taken, suffered, or omitted to be taken by it in good faith and
reasonably believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Trust Agreement;
(ix) the Property Trustee shall not be charged with knowledge of
any default or Event of Default with respect to the Trust Securities
unless either (A) a Responsible Officer of the Property Trustee shall
have actual knowledge of the default or Event of Default or (B)
written notice of such default or Event of Default shall have been
given to the Property Trustee by the Depositor, the Administrative
Trustees or by any Holder of the Trust Securities;
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(x) no provision of this Trust Agreement shall be deemed to
impose any duty or obligation on the Property Trustee to perform any
act or acts or exercise any right, power, duty or obligation conferred
or imposed on it in any jurisdiction in which it shall be illegal, or
in which the Property Trustee shall be unqualified or incompetent in
accordance with applicable law, to perform any such act or acts or to
exercise any such right, power, duty or obligation; and no permissive
or discretionary power or authority available to the Property Trustee
shall be construed to be a duty;
(xi) no provision of this Trust Agreement shall require the
Property Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties
or in the exercise of any of its rights or powers, if the Property
Trustee shall have reasonable grounds for believing that the repayment
of such funds or liability is not reasonably assured to it under the
terms of this Trust Agreement or adequate indemnity against such risk
or liability is not reasonably assured to it;
(xii) the Property Trustee shall have no duty to see to any
recording, filing or registration of any instrument (including any
financing or continuation statement or any tax or securities form) (or
any rerecording, refiling or registration thereof);
(xiii) the Property Trustee shall have the right at any time to
seek instructions concerning the administration of this Trust
Agreement from any court of competent jurisdiction; and
(xiv) whenever in the administration of this Trust Agreement the
Property Trustee shall deem it desirable to receive instructions with
respect to enforcing any remedy or right or taking any other action
hereunder, the Property Trustee (A) may request instructions from the
Holders of the Trust Securities, which instructions may only be given
by the Holders of the same Liquidation Amount of the Trust Securities
as would be entitled to direct the Property Trustee under the terms of
this Trust Agreement in respect of such remedies, rights or actions,
(B) may refrain from enforcing such remedy or right or taking such
other action until such instructions are received, and (C) shall be
protected in acting in accordance with such instructions.
SECTION 8.04. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The recitals contained herein and in the Trust Securities Certificates shall be
taken as the statements of the Trust, and the Trustees do not assume any
responsibility for their correctness. The Trustees make no representations as
to the title to, or value or condition of, the property of the Trust or any part
thereof, nor as to the validity or sufficiency of this Trust Agreement, the
Debentures or the Trust Securities. The Trustees shall not be
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accountable for the use or application by the Trust of the proceeds of the Trust
Securities in accordance with Section 2.05.
SECTION 8.05. MAY HOLD SECURITIES. Any Trustee or any agent of any
Trustee or the Trust, in its individual or any other capacity, may become the
owner or pledgee of Trust Securities and, except as provided in the definition
of the term "Outstanding" in Article I, may otherwise deal with the Trust with
the same rights it would have if it were not a Trustee or such agent.
SECTION 8.06. COMPENSATION; FEES; INDEMNITY.
The Depositor agrees
(i) to pay to the Trustees from time to time reasonable compensation
for all services rendered by the Trustees hereunder (which compensation
shall not be limited by any provision of law in regard to the compensation
of a trustee of an express trust);
(ii) except as otherwise expressly provided herein, to reimburse the
Trustees upon request for all reasonable expenses, disbursements and
advances reasonably incurred or made by the Trustees in accordance with any
provision of this Trust Agreement (including the reasonable compensation
and the expenses and disbursements of its agents and counsel), except any
such expense, disbursement or advance as may be attributable to its
negligence (gross negligence, in the case of any Administrative Trustee),
bad faith or willful misconduct; and
(iii) to indemnify each Trustee for, and to hold each Trustee
harmless against, any and all loss, damage, claims, liability or expense
incurred without negligence (gross negligence, in the case of any
Administrative Trustee), bad faith or willful misconduct on its part,
arising out of or in connection with the acceptance or administration of
the trust or trusts under this Trust Agreement, 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.
As security for the performance of the obligations of the Depositor
under this Section, each of the Trustees shall have a lien prior to the Trust
Securities upon all property and funds held or collected by such Trustee as
such, except funds held in trust for the payment of Distributions on the Trust
Securities.
In addition to the rights provided to each Trustee pursuant to the
provisions of the immediately preceding paragraph of this Section 8.06, when a
Trustee incurs expenses or renders services in connection with an Event of
Default resulting from a Bankruptcy Event with respect to the Trust, the
expenses (including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
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administration under any applicable Federal or State bankruptcy, insolvency or
other similar law.
The provisions of this Section shall survive the termination of this
Trust Agreement.
SECTION 8.07. CERTAIN TRUSTEES REQUIRED; ELIGIBILITY. (a) There
shall at all times be a Property Trustee hereunder with respect to the Trust
Securities. The Property Trustee shall be a Person that has a combined capital
and surplus of at least $50,000,000. If any such Person publishes reports of
condition at least annually, pursuant to law or to the requirements of its
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such Person 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 Property Trustee with respect to the Trust
Securities 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 VIII.
(b) There shall at all times be one or more Administrative Trustees
hereunder with respect to the Trust Securities. Each Administrative
Trustee shall be either a natural person who is at least 21 years of age or
a legal entity that shall act through one or more persons authorized to
bind such entity.
(c) There shall at all times be a Delaware Trustee with respect to
the Trust Securities. The Delaware Trustee shall either be (i) a natural
person who is at least 21 years of age and a resident of the State of
Delaware or (ii) a legal entity with its principal place of business in the
State of Delaware that otherwise meets the requirements of applicable
Delaware law and that shall act through one or more persons authorized to
bind such entity.
SECTION 8.08. CONFLICTING INTERESTS.
If the Property Trustee has or shall acquire a conflicting interest
within the meaning of the Trust Indenture Act, the Property Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to the provisions of, the Trust Indenture Act and this Trust
Agreement. The Subordinated Indenture and the Guarantee Agreement shall be
deemed to be specifically described in this Trust Agreement for the purposes of
clause (i) of the first proviso contained in Section 310(b) of the Trust
Indenture Act.
SECTION 8.09. CO-TRUSTEES AND SEPARATE TRUSTEE.
Unless an Event of Default shall have occurred and be continuing, at
any time or times, for the purpose of meeting the legal requirements of the
Trust Indenture Act or of any jurisdiction in which any part of the Trust
Property may at the time be located, the
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Depositor and the Property Trustee shall have power to appoint, and upon the
written request of the Property Trustee, the Depositor shall for such purpose
join with the Property Trustee in the execution, delivery, and performance of
all instruments and agreements necessary or proper to appoint, one or more
Persons approved by the Property Trustee either to act as co-trustee, jointly
with the Property Trustee, of all or any part of such Trust Property, or to act
as separate trustee of any such property, in either case with such powers as may
be provided in the instrument of appointment, and to vest in such Person or
Persons in the capacity aforesaid, any property, title, right or power deemed
necessary or desirable, subject to the other provisions of this Section. If the
Depositor does not join in such appointment within 15 days after the receipt by
it of a request so to do, or in case an Event of Default under the Subordinated
Indenture has occurred and is continuing, the Property Trustee alone shall have
power to make such appointment.
Should any written instrument from the Depositor be required by any
co-trustee or separate trustee so appointed for more fully confirming 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 Depositor.
Every co-trustee or separate trustee shall, to the extent permitted by
law, but to such extent only, be appointed subject to the following terms,
namely:
(1) The Trust Securities shall be executed 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 Trustees designated for such purpose
hereunder, shall be exercised, solely by such Trustees.
(2) The rights, powers, duties, and obligations hereby conferred or
imposed upon the Property Trustee in respect of any property covered by
such appointment shall be conferred or imposed upon and exercised or
performed by the Property Trustee or by the Property 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 Property 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.
(3) The Property Trustee at any time, by an instrument in writing
executed by it, with the written concurrence of the Depositor, may accept
the resignation of or remove any co-trustee or separate trustee appointed
under this Section 8.09, and, in case an Event of Default under the
Subordinated Indenture has occurred and is continuing, the Property Trustee
shall have power to accept the resignation of, or remove, any such co-
trustee or separate trustee without the concurrence of the Depositor. Upon
the written request of the Property Trustee, the Depositor shall join
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with the Property Trustee in the execution, delivery, and performance 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.
(4) 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.
(5) The Property Trustee shall not be liable by reason of any act of
a co-trustee or separate trustee.
(6) Any Act of Holders delivered to the Property Trustee shall be
deemed to have been delivered to each such co-trustee and separate trustee.
SECTION 8.10. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. No
resignation or removal of any Trustee (as the case may be, the "Relevant
Trustee") and no appointment of a successor Relevant Trustee pursuant to this
Article shall become effective until the acceptance of appointment by the
successor Relevant Trustee in accordance with the applicable requirements of
Section 8.11.
The Relevant Trustee may resign at any time by giving written notice
thereof to the Securityholders. If the instrument of acceptance by a successor
Relevant Trustee required by Section 8.11 shall not have been delivered to the
resigning Relevant Trustee within 30 days after the giving of such notice of
resignation, the resigning Relevant Trustee may petition any court of competent
jurisdiction for the appointment of a successor Relevant Trustee.
Unless a Debenture Event of Default shall have occurred and be
continuing, the Relevant Trustee may be removed at any time by Act of the Common
Securityholder. If a Debenture Event of Default shall have occurred and be
continuing, the Relevant Trustee may be removed at such time by Act of the
Securityholders of a majority of the aggregate Liquidation Amount of the
Outstanding Capital Securities, delivered to the Relevant Trustee (in its
individual capacity and on behalf of the Trust).
If the Relevant Trustee shall resign, be removed or become incapable
of continuing to act as Relevant Trustee at a time when no Debenture Event of
Default shall have occurred and be continuing, the Common Securityholder, by Act
of the Common Securityholder delivered to the retiring Relevant Trustee, shall
promptly appoint a successor Relevant Trustee or Trustees, and the retiring
Relevant Trustee shall comply with the applicable requirements of Section 8.11.
If the Relevant Trustee shall resign, be removed or become incapable of
continuing to act as the Relevant Trustee at a time when a Debenture Event of
Default shall have occurred and be continuing, the Capital Securityholders, by
Act of the Capital Securityholders of a majority in Liquidation Amount of the
Outstanding Capital Securities delivered to the retiring Relevant Trustee, shall
promptly appoint a
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successor Relevant Trustee or Trustees, and the Relevant Trustee shall comply
with the applicable requirements of Section 8.11. If no successor Relevant
Trustee shall have been so appointed by the Common Securityholders or the
Capital Securityholders and accepted appointment in the manner required by
Section 8.11, any Securityholder who has been a Securityholder of Trust
Securities for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Relevant Trustee.
The retiring Relevant Trustee shall give notice of each resignation
and each removal of the Relevant Trustee and each appointment of a successor
Trustee to all Securityholders in the manner provided in Section 10.08 and shall
give notice to the Depositor. Each notice shall include the name and address of
the successor Relevant Trustee and, in the case of the Property Trustee, the
address of its Corporate Trust Office.
Notwithstanding the foregoing or any other provision of this Trust
Agreement, in the event any Administrative Trustee or a Delaware Trustee who is
a natural person dies or becomes incompetent or incapacitated, the vacancy
created by such death, incompetence or incapacity may be filled by (i) the
unanimous act of remaining Administrative Trustees if there are at least two of
them or (ii) otherwise by the Depositor (with the successor in each case being
an individual who satisfies the eligibility requirements for Administrative
Trustees or Delaware Trustee, as the case may be, set forth in Section 8.07).
Additionally, notwithstanding the foregoing or any other provision of this Trust
Agreement, in the event the Depositor reasonably believes that any
Administrative Trustee who is a natural person has become incompetent or
incapacitated, the Depositor, by notice to the remaining Trustees, may terminate
the status of such Person as an Administrative Trustee (in which case the
vacancy so created will be filled in accordance with the preceding sentence).
No Property Trustee or Delaware Trustee shall be liable for the acts
or omissions to act of any successor Property Trustee or Delaware Trustee.
SECTION 8.11. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. In case of the
appointment hereunder of a successor Relevant Trustee, the retiring Relevant
Trustee and each successor Trustee shall execute and deliver an amendment hereto
wherein each successor Relevant Trustee 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 Relevant Trustee all the rights,
powers, trusts and duties of the retiring Relevant Trustee and (2) shall add to
or change any of the provisions of this Trust Agreement as shall be necessary to
provide for or facilitate the administration of the trusts hereunder by more
than one Relevant Trustee, it being understood that nothing herein or in such
amendment shall constitute such Relevant Trustees co-trustees of the same trust
and that each such Relevant Trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such Relevant Trustee and upon the execution and delivery of such
amendment the resignation or removal of the retiring Relevant Trustee shall
become effective to the extent provided therein and each such successor
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Relevant Trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, trusts and duties of the retiring Relevant
Trustee; but, on request of the Trust or any successor Relevant Trustee such
retiring Relevant Trustee shall duly assign, transfer and deliver to such
successor Trustee all Trust Property, all proceeds thereof and money held by
such retiring Relevant Trustee hereunder with respect to the Trust Securities
and the Trust.
Upon request of any such successor Relevant Trustee, the retiring
Relevant Trustee shall execute any and all instruments for more fully and
certainly vesting in and confirming to such successor Relevant Trustee all such
rights, powers and trusts referred to in the first or second preceding
paragraph, as the case may be.
No successor Relevant Trustee shall accept its appointment unless at
the time of such acceptance such successor Relevant Trustee shall be qualified
and eligible under this Article VIII.
SECTION 8.12. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS. Any Person into which the Property Trustee or the Delaware Trustee or
any Administrative Trustee or any Trustee that is not a natural person may be
merged or converted or with which it may be consolidated, or any Person
resulting from any merger, conversion or consolidation to which such Relevant
Trustee shall be a party, or any Person succeeding to all or substantially all
the corporate trust business of such Relevant Trustee, shall be the successor of
such Relevant Trustee hereunder, provided such Person shall be otherwise
qualified and eligible under this Article VIII, without the execution or filing
of any paper, the giving of any notice or any further act on the part of any of
the parties hereto.
SECTION 8.13. PREFERENTIAL COLLECTION OF CLAIMS AGAINST DEPOSITOR OR
TRUST. If and when the Property Trustee shall be or become a creditor of the
Depositor or the Trust (or any other obligor upon the Debentures or the Trust
Securities), the Property Trustee shall be subject to the provisions of the
Trust Indenture Act regarding the collection of claims against the Depositor or
Trust (or any such other obligor).
SECTION 8.14. REPORTS BY PROPERTY TRUSTEE. (a) the Property Trustee
shall transmit to Securityholders such reports concerning the Property Trustee
and its actions under this Trust Agreement as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto.
Such of those reports as are required to be transmitted by the Property Trustee
pursuant to Section 313(a) of the Trust Indenture Act shall be so transmitted
within 60 days after July 31 of each year, commencing July 31, 1997.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Property Trustee with each stock
exchange upon which the Trust Securities are listed, with the Commission and
with the Depositor. The Depositor will notify the Property Trustee when any
Trust Securities are listed on any stock exchange.
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SECTION 8.15. REPORTS TO THE PROPERTY TRUSTEE. The Depositor and the
Administrative Trustees on behalf of the Trust shall provide to the Property
Trustee such documents, reports and information, if any, and the compliance
certificate required by Section 314 of the Trust Indenture Act, in the form, in
the manner and at the times required by Section 314 of the Trust Indenture Act.
SECTION 8.16. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT. Each
of the Depositor and the Administrative Trustees on behalf of the Trust shall
provide to the Property Trustee such evidence of compliance with any conditions
precedent, if any, provided for in this Trust Agreement (including any covenants
compliance with which constitutes a condition precedent) that relate to any of
the matters set forth in Section 314(c) of the Trust Indenture Act. Any
certificate or opinion required to be given by an officer pursuant to Section
314(c)(1) of the Trust Indenture Act may be given in the form of an Officers'
Certificate.
SECTION 8.17. NUMBER OF TRUSTEES.
(a) The number of Trustees shall be five, provided that Depositor, by
written instrument, may increase or decrease the number of Administrative
Trustees.
(b) If a Trustee ceases to hold office for any reason and the number
of Administrative Trustees is not reduced pursuant to Section 8.17(a), or if the
number of Trustees is increased pursuant to Section 8.17(a), a vacancy shall
occur. The vacancy shall be filled with a Trustee appointed in accordance with
Section 8.10.
(c) The death, resignation, retirement, removal, bankruptcy,
incompetence or incapacity to perform the duties of a Trustee shall not operate
to annul the Trust. Whenever a vacancy in the number of Administrative Trustees
shall occur, until such vacancy is filled by the appointment of an
Administrative Trustee in accordance with Section 8.10, the Administrative
Trustees in office, regardless of their number (and notwithstanding any other
provision of this Agreement), shall have all the powers granted to the
Administrative Trustees and shall discharge all the duties imposed upon the
Administrative Trustees by this Trust Agreement.
SECTION 8.18. DELEGATION OF POWER.
(a) Any Administrative Trustee may, by power of attorney consistent
with applicable law, delegate to any other natural person over the age of 21 his
or her power for the purpose of executing any documents contemplated in Sections
2.07(a) and 2.07(c), including any registration statement or amendment thereto
filed with the Commission, or making any other governmental filing; and
(b) the Administrative Trustees shall have power to delegate from
time to time to such of their number the doing of such things and the execution
of such instruments
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either in the name of the Trust or the names of the Administrative Trustees or
otherwise as the Administrative Trustees may deem expedient, to the extent such
delegation is not prohibited by applicable law or contrary to the provisions of
the Trust, as set forth herein.
SECTION 8.19. FIDUCIARY DUTY.
(a) To the extent that, at law or in equity, an Indemnified Person
has duties (including fiduciary duties) and liabilities relating thereto to the
Trust or to any other Covered Person, an Indemnified Person acting under this
Trust Agreement shall not be liable to the Trust or to any other Covered Person
for its good faith reliance on the provisions of this Trust Agreement. The
provisions of this Trust Agreement, to the extent that they restrict the duties
and liabilities of an Indemnified Person otherwise existing at law or in equity
(other than the duties imposed on the Property Trustee under the Trust Indenture
Act), are agreed by the parties hereto to replace such other duties and
liabilities of such Indemnified Person;
(b) Unless otherwise expressly provided herein and subject to the
provisions of the Trust Indenture Act:
(i) whenever a conflict of interest exists or arises between an
Indemnified Person and any Covered Person; or
(ii) whenever this Trust Agreement or any other agreement
contemplated herein or therein provides that an Indemnified Person
shall act in a manner that is, or provides terms that are, fair and
reasonable to the Trust or any Holder of Trust Securities, the
Indemnified Person shall resolve such conflict of interest, take such
action or provide such terms, considering in each case the relative
interest of each party (including its own interest) to such conflict,
agreement, transaction or situation and the benefits and burdens
relating to such interests, any customary or accepted industry
practices, and any applicable generally accepted accounting practices
or principles. In the absence of bad faith by the Indemnified Person,
the resolution, action or term so made, taken or provided by the
Indemnified Person shall not constitute a breach of this Trust
Agreement or any other agreement contemplated herein or of any duty or
obligation of the Indemnified Person at law or in equity or otherwise;
and
(c) Unless otherwise expressly provided herein and subject to the
provisions of the Trust Indenture Act, whenever in this Trust Agreement an
Indemnified Person is permitted or required to make a decision
(i) in its "discretion" or under a grant of similar authority,
the Indemnified Person shall be entitled to consider such interests
and factors as it reasonably desires, including its own interests, and
shall have no duty or
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<PAGE>
obligation to give any consideration to any interest of or factors
affecting the Trust or any other Person; or
(ii) in its "good faith" or under another express standard, the
Indemnified Person shall act under such express standard and shall not
be subject to any other or different standard imposed by this Trust
Agreement or by applicable law.
ARTICLE IX.
TERMINATION AND LIQUIDATION
SECTION 9.01. TERMINATION UPON EXPIRATION DATE. The Trust shall
automatically terminate on December 31, 2040 (the "Expiration Date") and the
Trust Property shall be distributed in accordance with Section 9.04.
SECTION 9.0 EARLY TERMINATION. Upon the first to occur of any of the
following events (such first occurrence, an "Early Termination Event"):
(i) the occurrence of a Bankruptcy Event in respect of, or the
dissolution or liquidation of, the Depositor;
(ii) the redemption of all of the Capital Securities;
(iii) an order for judicial termination of the Trust having been
entered by a court of competent jurisdiction;
(iv) the election by the Depositor to terminate the Trust and,
after satisfaction of liabilities to creditors of the Trust,
distribute the Debentures to the Holders of Preferred Securities in
liquidation of the Trust;
the Trust shall terminate and the Trustees shall take such action as is required
by Section 9.04.
SECTION 9.03. TERMINATION. The respective obligations and
responsibilities of the Trust and the Trustees created hereby shall terminate
upon the latest to occur of the following: (i) the distribution by the Property
Trustee to Securityholders upon the liquidation of the Trust pursuant to Section
9.04, or upon the redemption of all of the Trust Securities pursuant to Section
4.02 or 9.04(d), of all amounts required to be distributed hereunder upon the
final payment of the Trust Securities; (ii) the payment of any expenses owed by
the Trust; and (iii) the discharge of all administrative duties of the
Administrative Trustees, including the performance of any tax reporting
obligations with respect to the Trust or the Securityholders.
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<PAGE>
SECTION 9.04. LIQUIDATION. (a) If an Early Termination Event
specified in clause (i) or (iii) of Section 9.02 occurs, after satisfaction of
creditors of the Trust, if any, as provided by applicable law, the Trust shall
be liquidated by the Property Trustee as expeditiously as the Property Trustee
determines to be appropriate by distributing to each Securityholder a Like
Amount of Debentures, subject to Section 9.04(e). Notice of liquidation shall
be given by the Administrative Trustees by first-class mail, postage prepaid,
mailed not later than 30 nor more than 60 days prior to the Liquidation Date to
each Holder of Trust Securities at such Holder's address appearing in the
Securities Register. All notices of liquidation shall:
(i) state the Liquidation Date;
(ii) state that from and after the Liquidation Date, the Trust
Securities will no longer be deemed to be outstanding and any Trust
Securities Certificates not surrendered for exchange will be deemed to
represent a Like Amount of Debentures; and
(iii) provide such information with respect to the mechanics by
which Holders may exchange Trust Securities Certificates for
Debentures, or, if Section 9.04(e) applies, receive a Liquidation
Distribution, as the Administrative Trustees or the Property Trustee
shall deem appropriate.
The Holder of Common Securities will be entitled to receive Liquidation
Distributions upon any such dissolution, winding-up or termination pro rata
(determined as aforesaid) with Holders of Capital Securities, except that, if a
Debenture Event of Default has occurred and is continuing or if a Debenture
Event of Default has not occurred solely by reason of a requirement that time
lapse or notice be given, the Capital Securities shall have a priority over the
Common Securities.
(b) Except where Sections 9.02(ii), 9.04(d) or 9.04(e) apply, in
order to effect the liquidation of the Trust hereunder, and any resulting
distribution of the Debentures to Securityholders, the Property Trustee shall
establish a record date for such distribution (which shall be not more than 45
days prior to the Liquidation Date) and, either itself acting as exchange agent
or through the appointment of a separate exchange agent, shall establish such
procedures as it shall deem appropriate to effect the distribution of Debentures
in exchange for the Outstanding Trust Securities Certificates.
(c) Except where Section 9.02(ii), 9.04(d) or 9.04(e) apply, after
any Liquidation Date, (i) the Trust Securities will no longer be deemed to be
Outstanding, (ii) certificates representing a Like Amount of Debentures will be
issued to Holders of Trust Securities Certificates, upon surrender of such Trust
Securities Certificates to the Administrative Trustees or their agent for
exchange, (iii) any Trust Securities Certificates not so surrendered for
exchange will be deemed to represent a Like Amount of Debentures, accruing
interest at the rate provided for in the Debentures from the last Distribution
Date on
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<PAGE>
which a Distribution was made on such Trust Securities Certificates until such
Trust Securities Certificates are so surrendered (and until such Trust
Securities Certificates are so surrendered, no payments or interest or principal
will be made to Holders of Trust Securities Certificates with respect to such
Debentures) and (iv) all rights of Securityholders holding Trust Securities will
cease, except the right of such Securityholders to receive Debentures upon
surrender of Trust Securities Certificates.
(d) If at any time, a Tax Event shall occur and be continuing, and
either (i) in the opinion of counsel to the Company experienced in such matters,
there would in all cases, after effecting the termination of the Trust and the
distribution of the Debentures to the holders of the Capital Securities in
exchange therefor, be more than an insubstantial risk that an Adverse Tax
Consequence would continue to exist or (ii) the Debentures are not held by the
Trust, then the Company shall have the right to redeem the Debentures, in whole
but not in part, at any time within 90 days following the occurrence of the Tax
Event at the Redemption Price. Whether or not a Tax Event has occurred, the
Company has the right, at any time, to terminate and, after satisfaction of
liabilities to creditors of the Trust, if any, as provided by applicable law,
cause the Debentures to be distributed to the holders of the Preferred
Securities and Common Securities in liquidation of the Trust.
(e) In the event that, notwithstanding the other provisions of this
Section 9.04, whether because of an order for termination entered by a court of
competent jurisdiction or otherwise, distribution of the Debentures in the
manner provided herein is determined by the Property Trustee not to be
practical, the Trust Property shall be liquidated, and the Trust shall be
dissolved, wound-up or terminated, by the Property Trustee in such manner as the
Property Trustee determines. In such event, on the date of the dissolution,
winding-up or other termination of the Trust, Securityholders will be entitled
to receive out of the assets of the Trust available for distribution to
Securityholders, after satisfaction of liabilities to creditors of the Trust, if
any, as provided by applicable law, an amount equal to the Liquidation Amount
per Trust Security plus accumulated and unpaid Distributions thereon to the date
of payment (such amount being the "Liquidation Distribution"). If, upon any
such dissolution, winding up or termination, the Liquidation Distribution can be
paid only in part because the Trust has insufficient assets available to pay in
full the aggregate Liquidation Distribution, then, subject to the next
succeeding sentence, the amounts payable by the Trust on the Trust Securities
shall be paid on a pro rata basis (based upon Liquidation Amounts). The Holder
of Common Securities will be entitled to receive Liquidation Distributions upon
any such dissolution, winding-up or termination pro rata (determined as
aforesaid) with Holders of Capital Securities, except that, if a Debenture Event
of Default has occurred and is continuing or if a Debenture Event of Default has
not occurred solely by reason of a requirement that time lapse or notice be
given, the Capital Securities shall have a priority over the Common Securities.
ARTICLE X.
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MISCELLANEOUS PROVISIONS
SECTION 10.01. GUARANTEE BY THE DEPOSITOR AND ASSUMPTION OF
OBLIGATIONS. Subject to the terms and conditions hereof, the Depositor
irrevocably and unconditionally guarantees to each Person to whom the Trust is
now or hereafter becomes indebted or liable (the "Beneficiaries"), and agrees to
assume liability for, the full payment, when and as due, of any and all
Obligations (as hereinafter defined) to such Beneficiaries. As used herein,
"Obligations" means any indebtedness, expenses or liabilities of the Trust,
other than obligations of the Trust to pay to Holders the amounts due such
Holders pursuant to the terms of the Capital Securities. This guarantee and
assumption is intended to be for the benefit, of, and to be enforceable by, all
such Beneficiaries, whether or not such Beneficiaries have received notice
hereof.
SECTION 10.02. LIMITATION OF RIGHTS OF SECURITYHOLDERS. The death,
incapacity, bankruptcy, dissolution or termination of any Person having an
interest, beneficial or otherwise, in a Trust Security shall not operate to
terminate this Trust Agreement, nor entitle the legal representatives or heirs
of such Person or any Securityholder for such Person, to claim an accounting,
take any action or bring any proceeding in any court for a partition or winding
up of the arrangements contemplated hereby, nor otherwise affect the rights,
obligations and liabilities of the parties hereto or any of them.
SECTION 10.03. AMENDMENT.
(a) This Trust Agreement may be amended from time to time by the
Trust (on approval of a majority of the Administrative Trustees and the
Depositor, without the consent of any Securityholders), (i) to cure any
ambiguity, correct or supplement any provision herein or therein which may be
inconsistent with any other provision herein or therein, or to make any other
provisions with respect to matters or questions arising under this Trust
Agreement, which shall not be inconsistent with the other provisions of this
Trust Agreement or (ii) to modify, eliminate or add to any provisions of this
Trust Agreement to such extent as shall be necessary to ensure that the Trust
will not be classified for United States federal income tax purposes other than
as a "grantor trust" and not as an association taxable as a corporation at any
time that any Trust Securities are outstanding or to ensure the Trust's
exemption from the status of an "investment company" under the Investment
Company Act of 1940, as amended; provided, however, that, except in the case of
clause (ii), such action shall not adversely affect in any material respect the
interests of any Securityholder and, in the case of clause (i), any amendments
of this Trust Agreement shall become effective when notice thereof is given to
the Securityholders.
(b) Except as provided in Sections 6.01(c) and 10.03(c), any
provision of this Trust Agreement may be amended by the Administrative Trustees
and the Depositor with (i) the consent of Holders of Trust Securities
representing not less than a majority (based upon Liquidation Amounts) of the
Outstanding Trust Securities and (ii) receipt by the Trustees of an Opinion of
Counsel to the effect that such amendment or the exercise of any power
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<PAGE>
granted to the Trustees in accordance with such amendment will not affect the
Trust's status as a grantor trust for federal income tax purposes or the Trust's
exemption from status of an "investment company" under the Investment Company
Act of 1940, as amended.
(c) In addition to and notwithstanding any other provision in this
Trust Agreement, without the consent of each affected Securityholder (such
consent being obtained in accordance with Section 6.03 or 6.06), this Trust
Agreement may not be amended to (i) change the amount or timing of any
Distribution on the Trust Securities or otherwise adversely affect the amount of
any Distribution required to be made in respect of the Trust Securities as of a
specified date or (ii) restrict the right of a Securityholder to institute suit
for the enforcement of any such payment on or after such date.
(d) Notwithstanding any other provisions of this Trust Agreement, no
Trustee shall enter into or consent to any amendment to this Trust Agreement
which would cause the Trust to fail or cease to qualify for the exemption from
status of an "investment company" under the Investment Company Act of 1940, as
amended, afforded by Rule 3a-5 thereunder.
(e) Notwithstanding anything in this Trust Agreement to the contrary,
without the consent of the Depositor and the Trustees, this Trust Agreement may
not be amended in a manner which imposes any additional obligation on the
Depositor or any Trustee.
(f) In the event that any amendment to this Trust Agreement is made,
the Administrative Trustees shall promptly provide to the Depositor a copy of
such amendment.
(g) The Property Trustee is entitled to receive an Opinion of Counsel
as conclusive evidence that any amendment to this Trust Agreement executed
pursuant to this Section 10.03 is authorized or permitted by, and conforms to,
the terms of this Section 10.03, has been duly authorized by and lawfully
executed and delivered on behalf of the other requisite parties, and that it is
proper for the Property Trustee under the provisions of this Section 10.03 to
join in the execution thereof.
SECTION 10.04. SEPARABILITY. In case any provision in this Trust
Agreement or in the Trust Securities Certificates 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 10.05. GOVERNING LAW. THIS TRUST AGREEMENT AND THE RIGHTS
AND OBLIGATIONS OF EACH OF THE SECURITYHOLDERS, THE TRUST AND THE TRUSTEES WITH
RESPECT TO THIS TRUST AGREEMENT AND THE TRUST SECURITIES SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE (WITHOUT
REGARD TO CONFLICT OF LAWS PRINCIPLES).
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<PAGE>
SECTION 10.06 SUCCESSORS. This Trust Agreement shall be binding upon
and shall inure to the benefit of any successor to the Trust or the Relevant
Trustees or any of them, including any successor by operation of law.
SECTION 10.07 HEADINGS. The Article and Section headings are for
convenience only and shall not affect the construction of this Trust Agreement.
SECTION 10.08 NOTICE AND DEMAND. Any notice, demand or other
communication which by any provision of this Trust Agreement is required or
permitted to be given or served to or upon any Securityholder or the Depositor
may be given or served in writing by deposit thereof, postage prepaid, in the
United States mail, hand delivery or facsimile transmission, in each case,
addressed, (i) in the case of a Capital Securityholder, to such Capital
Securityholder as such Securityholder's name and address may appear on the
Securities Register and (ii) in the case of the Common Securityholder or the
Depositor, to Texas Utilities Electric Company, Energy Plaza, 1601 Bryan Street,
Dallas, Texas 75201, Attention: Treasurer, facsimile no. 214-812-2488, with a
copy to the Secretary, facsimile no. 214-812-2488. Such notice, demand or other
communication to or upon a Securityholder shall be deemed to have been
sufficiently given or made, for all purposes, upon hand delivery, mailing or
transmission.
Any notice, demand or other communication which by any provision of
this Trust Agreement is required or permitted to be given or served to or upon
the Trust, the Property Trustee, the Delaware Trustee or the Administrative
Trustees shall be given in writing addressed (until another address is published
by the Trust) as follows: (i) with respect to the Property Trustee or the
Delaware Trustee, The Bank of New York, 101 Barclay Street, Floor 21 West, New
York, NY 10286, Attention: Corporate Trust Department, with a copy to: The Bank
of New York (Delaware), White Clay Center, Route 273, Newark, Delaware 19711,
Attention: Corporate Trust Department, and (ii) with respect to the Trust or the
Administrative Trustees, at the address above for notice to the Depositor,
marked "Attention: Administrative Trustees for TU Electric Capital". Such
notice, demand or other communication to or upon the Trust or the Property
Trustee shall be deemed to have been sufficiently given or made only upon actual
receipt of the writing by the Trust or the Property Trustee.
SECTION 10.9 AGREEMENT NOT TO PETITION. Each of the Trustees and the
Depositor agrees for the benefit of the Securityholders that, until at least one
year and one day after the Trust has been terminated in accordance with Article
IX, it shall not file, or join in the filing of, a petition against the Trust
under any bankruptcy, reorganization, arrangement, insolvency, liquidation or
other similar law (including, without limitation, the United States Bankruptcy
Code) (collectively, "Bankruptcy Laws") or otherwise join in the commencement of
any proceeding against the Trust under any Bankruptcy Law. In the event the
Depositor takes action in violation of this Section 10.09, the Property Trustee
agrees, for the benefit of Securityholders, that it shall file an answer with
the bankruptcy court or otherwise properly contest the filing of such petition
by the Depositor against the Trust or the
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commencement of such action and raise the defense that the Depositor has agreed
in writing not to take such action and should be estopped and precluded
therefrom and such other defenses, if any, as counsel for the Property Trustee
or the Trust may assert. The provisions of this Section 10.09 shall survive the
termination of this Trust Agreement.
SECTION 10.10. CONFLICT WITH TRUST INDENTURE ACT. (a) This Trust
Agreement is subject to the provisions of the Trust Indenture Act that are
required or deemed to be part of this Trust Agreement and shall, to the extent
applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is a trustee
for the purposes of the Trust Indenture Act.
(c) If any provision hereof limits, qualifies or conflicts with
another provision hereof which is required or deemed to be included in this
Trust Agreement by any of the provisions of the Trust Indenture Act, such
required or deemed provision shall control.
(d) The application of the Trust Indenture Act to this Trust
Agreement shall not affect the nature of the Securities as equity securities
representing interests in the Trust.
THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN BY OR ON
BEHALF OF A SECURITYHOLDER, WITHOUT ANY SIGNATURE OR FURTHER MANIFESTATION OF
ASSENT, SHALL CONSTITUTE THE UNCONDITIONAL ACCEPTANCE BY THE SECURITYHOLDER AND
ALL OTHERS HAVING A BENEFICIAL INTEREST IN SUCH TRUST SECURITY OF ALL THE TERMS
AND PROVISIONS OF THIS TRUST AGREEMENT AND THE AGREEMENT OF THE TRUST, SUCH
SECURITYHOLDER AND SUCH OTHERS THAT THOSE TERMS AND PROVISIONS SHALL BE BINDING,
OPERATIVE AND EFFECTIVE AS BETWEEN THE TRUST AND SUCH SECURITYHOLDER AND SUCH
OTHERS.
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IN WITNESS WHEREOF, the parties have caused this Amended and Restated Trust
Agreement to be duly executed, all as of the day and year first above written.
TEXAS UTILITIES ELECTRIC COMPANY
By: /s/ Robert S. Shapard
-----------------------------------------------
Title: Treasurer and Assistant Secretary
THE BANK OF NEW YORK,
as Property Trustee
By: /s/ Walter N. Gitlin
-----------------------------------------------
Title: Vice President
THE BANK OF NEW YORK (DELAWARE),
as Delaware Trustee
By: /s/ Joseph Ernst
-----------------------------------------------
Title: Assistant Vice President
/s/ Wayne E. Patterson
-------------------------------------------
Wayne E. Patterson
solely in his capacity as Administrative
Trustee
/s/ Robert S. Shapard
-------------------------------------------
Robert S. Shapard
solely in his capacity as Administrative
Trustee
/s/ John Casey
-------------------------------------------
John Casey
solely in his capacity as Administrative
Trustee
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<PAGE>
/s/ Michael Perkins
-------------------------------------------
Michael Perkins
solely in his capacity as Administrative
Trustee
/s/ Glenn D. Kirby
-------------------------------------------
Glenn D. Kirby
solely in his capacity as Administrative
Trustee
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<PAGE>
EXHIBIT A
CERTIFICATE OF TRUST
OF
TU ELECTRIC CAPITAL V
THIS CERTIFICATE OF TRUST of TU Electric Capital V (the "Trust"),
dated as of January 14, 1997, is being duly executed and filed by the
undersigned, as trustees, to form a business trust under the Delaware Business
Trust Act (12 Del. C. (S) 3801, et seq.).
------- ------
1. Name. The name of the business trust being created hereby is TU
Electric Capital.
2. Delaware Trustee. The name and business address of the trustee of
the Trust with a principal place of business in the State of Delaware are The
Bank of New York (Delaware), White Clay Center, Route 273, Newark, New Castle
County, Delaware 19711.
3. Effective Date. This Certificate of Trust shall be effective as
of its filing.
IN WITNESS WHEREOF, the undersigned, being the only trustees of the
Trust, have executed this Certificate of Trust as of the date first above
written.
THE BANK OF NEW YORK (DELAWARE), WAYNE E. PATTERSON,
not in its individual capacity not in his individual capacity
but solely as Trustee but solely as Trustee
By: /s/ Joseph G. Ernst By: /s/ Wayne E. Patterson
---------------------------- -------------------------
Name: Joseph G. Ernst
Title: Assistant Vice President
THE BANK OF NEW YORK,
not in its individual capacity
but solely as Trustee
By: /s/ Stephen J. Giurlando
----------------------------
Name: Stephen J. Giurlando
Title: Assistant Vice President
A-1
<PAGE>
EXHIBIT B
THIS CERTIFICATE IS NOT TRANSFERABLE
Certificate Number Number of Common Securities
C-[_]
Certificate Evidencing Common Securities
of
TU Electric Capital
Common Securities
(liquidation amount $1,000 per Common Security)
TU Electric Capital , a statutory business trust created under the
laws of the State of Delaware (the "Trust"), hereby certifies that Texas
Utilities Electric Company (the "Holder") is the registered owner of _____
(_____) common securities of the Trust representing undivided beneficial
interests in the assets of the Trust and designated the Common Securities
(liquidation amount $1,000 per Common Security) (the "Common Securities"). In
accordance with Section 5.10 of the Trust Agreement (as defined below) the
Common Securities are not transferable and any attempted transfer hereof shall
be void. The designations, rights, privileges, restrictions, preferences and
other terms and provisions of the Common Securities are set forth in, and this
certificate and the Common Securities represented hereby are issued and shall in
all respects be subject to the terms and provisions of, the Amended and Restated
Trust Agreement of the Trust dated as of January 30, 1997, as the same may be
amended from time to time (the "Trust Agreement"), including the designation of
the terms of the Common Securities as set forth therein. The Trust will furnish
a copy of the Trust Agreement to the Holder without charge upon written request
to the Trust at its principal place of business or registered office.
Upon receipt of this certificate, the Holder is bound by the Trust
Agreement and is entitled to the benefits thereunder.
B-1
<PAGE>
IN WITNESS WHEREOF, an Administrative Trustee of the Trust has
executed this certificate for and on behalf of the Trust this ____ day of
_________, 199_.
TU Electric Capital
By:_________________________________________
not in his (her) individual capacity, but
solely as Administrative Trustee
B-2
<PAGE>
EXHIBIT C
AGREEMENT AS TO EXPENSES AND LIABILITIES
AGREEMENT dated as of January 30, 1997 between Texas Utilities
Electric Company, a Texas corporation ("TU Electric"), and TU Electric Capital V
, a Delaware business trust (the "Trust").
WHEREAS, the Trust intends to issue its Common Securities (the "Common
Securities") to and receive Debentures from TU Electric and to issue its 5.175%
Cumulative Capital Securities (the "Capital Securities") with such powers,
preferences and special rights and restrictions as are set forth in the Amended
and Restated Trust Agreement of the Trust dated as of January 30, 1997 as the
same may be amended from time to time (the "Trust Agreement");
WHEREAS, TU Electric is the issuer of the Debentures;
NOW, THEREFORE, in consideration of the acceptance of the Capital
Securities by each holder thereof, which acceptance TU Electric hereby agrees
shall benefit TU Electric and which acceptance TU Electric acknowledges will be
made in reliance upon the execution and delivery of this Agreement, TU Electric,
including in its capacity as holder of the Common Securities, and the Trust
hereby agree as follows:
ARTICLE I
Section 1.01. Assumption by TU Electric. Subject to the terms and
-------------------------
conditions hereof, TU Electric hereby irrevocably and unconditionally assumes
the full payment, when and as due, of any and all Obligations (as hereinafter
defined) to each person or entity to whom the Trust is now or hereafter becomes
indebted or liable (the "Beneficiaries"). As used herein, "Obligations" means
any indebtedness, expenses or liabilities of the Trust, other than obligations
of the Trust to pay to holders of any Capital Securities the amounts due such
holders pursuant to the terms of the Capital Securities. This Agreement is
intended to be for the benefit of, and to be enforceable by, all such
Beneficiaries, whether or not such Beneficiaries have received notice hereof.
Section 1.02. Term of Agreement. This Agreement shall terminate and
-----------------
be of no further force and effect upon the date on which there are no
Beneficiaries remaining; provided, however, that this Agreement shall continue
to be effective or shall be reinstated, as the case may be, if at any time any
holder of Capital Securities or any Beneficiary must restore payment of any sums
paid under the Capital Securities, under any Obligation, under the Guarantee
Agreement dated the date hereof by TU Electric and The Bank of New York, as
guarantee trustee, or under this Agreement for any reason whatsoever. This
Agreement is continuing, irrevocable, unconditional and absolute.
C-1
<PAGE>
Section 1.03. Waiver of Notice. TU Electric hereby waives notice of
----------------
acceptance of this Agreement and of any Obligation to which it applies or may
apply, and TU Electric hereby waives presentment, demand for payment, protest,
notice of nonpayment, notice of dishonor, notice of redemption and all other
notices and demands.
Section 1.04. No Impairment. The obligations, covenants, agreements
-------------
and duties of TU Electric under this Agreement shall in no way be affected or
impaired by reason of the happening from time to time of any of the following:
(a) the extension of time for the payment by the Trust of all or any
portion of the Obligations or for the performance of any other obligation under,
arising out of, or in connection with, the Obligations;
(b) any failure, omission, delay or lack of diligence on the part of
the Beneficiaries to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Beneficiaries with respect to the Obligations or any
action on the part of the Trust granting indulgence or extension of any kind; or
(c) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Trust or any of the assets of the
Trust.
Neither the Trust nor any Beneficiary shall have any obligation to give notice
to, or obtain the consent of, TU Electric with respect to the happening of any
of the foregoing.
Section 1.05. Enforcement. A Beneficiary may enforce this Agreement
-----------
directly against TU Electric and TU Electric waives any right or remedy to
require that any action be brought against the Trust or any other person or
entity before proceeding against TU Electric.
ARTICLE II
Section 2.01. Binding Effect. All of the obligations, covenants and
--------------
agreements contained in this Agreement shall bind the successors, assigns,
receivers, trustees and representatives of TU Electric and shall inure to the
benefit of the Beneficiaries and their successors and assigns.
Section 2.02. Amendment. So long as there remains any Beneficiary or
---------
any Capital Securities of any series shall be outstanding, this Agreement shall
not be modified or amended in any manner adverse to such Beneficiary or to the
holders of the Securities.
C-2
<PAGE>
Section 2.03. Notices. Any notice, request or other communication
-------
required or permitted to be given hereunder shall be given in writing by
delivering the same against receipt therefor by facsimile transmission
(confirmed by mail), telex or by registered or certified mail, addressed as
follows (and if so given, shall be deemed given when mailed or upon receipt of
an answer-back, if sent by telex), to wit:
TU Electric Capital
c/o Robert S. Shapard, Administrative Trustee
1601 Bryan Street
Dallas, Texas 75201
Facsimile No.: 214-812-2488
Texas Utilities Electric Company
1601 Bryan Street
Dallas, Texas 75201
Facsimile No.: 214-812-2488
Attention: Treasurer
Section 2.04 THIS AGREEMENT SHALL BE GOVERNED BY AND CON STRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD
TO CONFLICT OF LAWS PRINCIPLES).
C-3
<PAGE>
THIS AGREEMENT is executed as of the day and year first above
written.
TEXAS UTILITIES ELECTRIC COMPANY
By:___________________________________________________
Name:
Title:
TU ELECTRIC CAPITAL
By:__________________________________________________
not in his individual capacity, but solely
as Administrative Trustee
C-4
<PAGE>
[Clearing Agency Legend]
EXHIBIT D
Certificate Number Number of Securities
P- CUSIP NO.
Certificate Evidencing Securities
of
TU Electric Capital V
% Cumulative Capital Securities
(liquidation amount $1,000 per Capital Security)
TU Electric Capital , a statutory business trust created under the
laws of the State of Delaware (the "Trust"), hereby certifies that ____________
(the "Holder") is the registered owner of _____ (_____) Capital securities of
the Trust representing an undivided beneficial interest in the assets of the
Trust and designated the TU Electric Capital % Cumulative Capital
Securities (liquidation amount $1,000 per Capital Security) (the "Capital
Securities"). The Capital Securities are transferable on the books and records
of the Trust, in person or by a duly authorized attorney, upon surrender of this
certificate duly endorsed and in proper form for transfer as provided in Section
5.04 or 5.11 of the Trust Agreement (as defined below). The designations,
rights, privileges, restrictions, preferences and other terms and provisions of
the Capital Securities are set forth in, and this certificate and the Capital
Securities represented hereby are issued and shall in all respects be subject to
the terms and provisions of, the Amended and Restated Trust Agreement of the
Trust dated as of January 30, 1997, as the same may be amended from time to time
(the "Trust Agreement"). The holder of this certificate is entitled to the
benefits of the Guarantee Agreement of Texas Utilities Electric Company, a Texas
corporation, and The Bank of New York, as guarantee trustee, dated as of January
30, 1997 (the "Guarantee") to the extent provided therein. The Trust will
furnish a copy of the Trust Agreement and the Guarantee to the holder of this
certificate without charge upon written request to the Trust at its principal
place of business or registered office.
Upon receipt of this certificate, the holder of this certificate is
bound by the Trust Agreement and is entitled to the benefits thereunder.
D-1
<PAGE>
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust
has executed this certificate for and on behalf of the Trust.
Dated:
TU ELECTRIC CAPITAL
By: ________________________________________
not in his (her) individual capacity,
but solely as Administrative Trustee
Countersigned and Registered:
TEXAS UTILITIES SERVICES INC.,
Transfer Agent and Registrar
By: _________________________________________
(Authorized Signature)
THE BANK OF NEW YORK, as agent
for the Transfer Agent and Registrar
By: __________________________________________
(Authorized Signature)
D-2
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this
Security to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert assignee's social security or tax identification number)
________________________________________________________________________________
________________________________________________________________________________
(Insert address and zip code of assignee)
of the Securities represented by this Certificate and irrevocably appoints
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
attorney to transfer such Securities Certificate on the books of the
Trust. The attorney may substitute another to act for him or her.
Date:__________________
Signature:________________________
(Sign exactly as your name appears on the other side of this Securities
Certificate)
Signature:________________________
(Sign exactly as your name appears on the other side of this Securities
Certificate)
D-3
<PAGE>
Exhibit 4(x)
GUARANTEE AGREEMENT
Between
Texas Utilities Electric Company
(as Guarantor)
and
The Bank of New York
(as Trustee)
dated as of
January 30, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS..................................................... 1
SECTION 1.01 Definitions.............................................. 1
ARTICLE II TRUST INDENTURE ACT............................................. 4
SECTION 2.01 Trust Indenture Act; Application......................... 4
SECTION 2.02 Lists of Holders of Capital Securities................... 4
SECTION 2.03 Reports by the Guarantee Trustee......................... 4
SECTION 2.04 Periodic Reports to Guarantee Trustee.................... 4
SECTION 2.05 Evidence of Compliance with Conditions Precedent......... 5
SECTION 2.06 Events of Default; Waiver................................ 5
SECTION 2.07 Event of Default; Notice................................. 5
SECTION 2.08 Conflicting Interests.................................... 5
ARTICLE III POWERS, DUTIES AND RIGHTS OF GUARANTEE TRUSTEE.................. 5
SECTION 3.01 Powers and Duties of the Guarantee Trustee............... 5
SECTION 3.02 Certain Rights of Guarantee Trustee...................... 7
SECTION 3.03 Certain Rights of Guarantee Trustee...................... 9
ARTICLE IV GUARANTEE TRUSTEE............................................... 9
SECTION 4.01 Guarantee Trustee; Eligibility........................... 9
SECTION 4.02 Compensation and Reimbursement...........................10
SECTION 4.03 Appointment, Removal and Resignation of
Guarantee Trustee.......................................11
ARTICLE V GUARANTEE.......................................................11
SECTION 5.01 Guarantee................................................11
SECTION 5.02 Waiver of Notice and Demand..............................12
SECTION 5.03 Obligations Not Affected.................................12
SECTION 5.04 Rights of Holders........................................13
SECTION 5.05 Guarantee of Payment.....................................13
SECTION 5.06 Subrogation..............................................13
SECTION 5.07 Independent Obligations..................................13
ARTICLE VI SUBORDINATION...................................................14
SECTION 6.01 Subordination............................................14
ARTICLE VII TERMINATION.....................................................14
SECTION 7.01 Termination..............................................14
ARTICLE VIII MISCELLANEOUS...................................................14
SECTION 8.01 Successors and Assigns...................................14
SECTION 8.02 Amendments...............................................14
SECTION 8.03 Notices..................................................15
SECTION 8.04 Benefit..................................................16
SECTION 8.05 Interpretation...........................................16
SECTION 8.06 Governing Law............................................16
</TABLE>
<PAGE>
CROSS-REFERENCE TABLE
---------------------
<TABLE>
<CAPTION>
Section of Section of
Trust Indenture Act Guarantee
of 1939, as amended Agreement
- ------------------- ----------
<S> <C>
310(a).......................................................... 4.01(a)
310(b).......................................................... 4.01(c), 2.08
310(c).......................................................... Inapplicable
311(a).......................................................... 2.02(b)
311(b).......................................................... 2.02(b)
311(c).......................................................... Inapplicable
312(a).......................................................... 2.02(a)
312(b).......................................................... 2.02(b)
313............................................................. 2.03
314(a).......................................................... 2.04
314(b).......................................................... Inapplicable
314(c).......................................................... 2.05
314(d).......................................................... Inapplicable
314(e).......................................................... 1.01, 2.05,
3.02
314(f).......................................................... 2.01, 3.02
315(a).......................................................... 3.01(d)
315(b).......................................................... 2.07
315(c).......................................................... 3.01
315(d).......................................................... 3.01(d)
316(a).......................................................... 5.04(a), 2.06
316(b).......................................................... 5.03
316(c).......................................................... 2.02
317(a).......................................................... Inapplicable
317(b).......................................................... Inapplicable
318(a).......................................................... 2.01(b)
318(b).......................................................... 2.01
318(c).......................................................... 2.01(a)
</TABLE>
_____________
* This Cross-Reference Table does not constitute part of the Guarantee
Agreement and shall not affect the interpretation of any of its terms or
provisions.
<PAGE>
GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT ("Guarantee Agreement"), dated as of January
30, 1997, is executed and delivered by Texas Utilities Electric Company, a Texas
corporation (the "Guarantor"), and The Bank of New York, as trustee (the
"Guarantee Trustee"), for the benefit of the Holders (as defined herein) from
time to time of the Capital Securities (as defined herein) of TU Electric
Capital IV, a Delaware statutory business trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Trust Agreement (the
"Trust Agreement"), dated as of January 30, 1997 between the Trustees of the
Issuer named therein, Texas Utilities Electric Company, as Depositor, and the
several Holders (as defined therein) the Issuer is issuing as of the date hereof
$100,000,000 aggregate Liquidation Amount of its Floating Rate Securities (the
"Capital Securities") representing ownership interests in the Issuer and having
the terms set forth in the Trust Agreement;
WHEREAS, the Capital Securities are to be issued for sale by the
Issuer and the proceeds are to be invested in $100,000,000 principal amount of
Debentures (as defined in the Trust Agreement); and
WHEREAS, in order to enhance the value of the Capital Securities, the
Guarantor desires to irrevocably and unconditionally agree, to the extent set
forth herein, to pay to the Holders the Guarantee Payments (as defined herein)
and to make certain other payments on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the purchase of Debentures, which
purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor
executes and delivers this Guarantee Agreement for the benefit of the Holders
from time to time.
ARTICLE I
DEFINITIONS
SECTION 1.01 DEFINITIONS. As used in this Guarantee Agreement,
the terms set forth below shall, unless the context otherwise requires, have the
following meanings. Capitalized or otherwise defined terms used but not
otherwise defined herein shall have the meanings assigned to such terms in the
Trust Agreement as in effect on the date hereof.
"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,
<PAGE>
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Common Securities" means the securities representing common ownership
interests in the assets of the Issuer.
"Event of Default" means a default by the Guarantor on any of its
payment obligations under this Guarantee Agreement.
"Guarantee Payments" shall mean the following payments or
distributions, without duplication, with respect to the Capital Securities, to
the extent not paid or made by or on behalf of the Issuer: (i) any accrued and
unpaid Distributions that are required to be paid on such Capital Securities but
only if and to the extent that the Property Trustee has available in the Payment
Account funds sufficient to make such payment, (ii) the redemption price (the
"Redemption Price"), and all accrued and unpaid Distributions to the date of
redemption, with respect to the Capital Securities called for redemption by the
Issuer but only if and to the extent that the Property Trustee has available in
the Payment Account funds sufficient to make such payment, (iii) upon a
voluntary or involuntary dissolution, winding-up or termination of the Issuer
(other than in connection with the distribution of Debentures to the Holders in
exchange for Capital Securities as provided in the Trust Agreement or upon a
redemption of all of the Capital Securities upon maturity or redemption of the
Debentures as provided in the Trust Agreement), the lesser of (a) the aggregate
of the Liquidation Amount of all Capital Securities and all accrued and unpaid
Distributions on the Capital Securities to the date of payment but only if and
to the extent that the Property Trustee has available in the Payment Account
funds sufficient to make such payment, and (b) the amount of assets of the
Issuer remaining available for distribution to Holders in liquidation of the
Issuer (in either case, the "Liquidation Distribution").
"Guarantee Trustee" means The Bank of New York until a Successor
Guarantee Trustee has been appointed and has accepted such appointment pursuant
to the terms of this Guarantee Agreement and thereafter means each such
Successor Guarantee Trustee.
"Holder" shall mean any holder, as registered on the books and records
of the Issuer, of any Capital Securities then outstanding; provided, however,
that in determining whether the holders of the requisite percentage of Capital
Securities have given any request, notice, consent or waiver hereunder, "Holder"
shall not include the Guarantor or any Affiliate of the Guarantor.
"Indenture" means the Indenture dated as of December 1, 1995, among
the Guarantor (the "Debenture Issuer") and The Bank of New York, as trustee
pursuant to which the Debentures are issued, together with any indenture
supplemental thereto.
-2-
<PAGE>
"Majority in Liquidation Amount of the Capital Securities" means a
vote by Holders, voting separately as a class, of more than 50% of the aggregate
Liquidation Amount of all Capital Securities.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, a Vice Chairman of the Board, the President or a Vice President, and
by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary, of the Guarantor, and delivered to the Guarantee Trustee. Any
Officers' Certificate delivered with respect to compliance with a condition or
covenant provided for in this Guarantee Agreement shall include:
(a) a statement that each officer signing the Officers' Certificate
has read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers'
Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer 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 officer,
such condition or covenant has been complied with.
"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization or government, or any agency or
political subdivision thereof, or any other entity of whatever nature.
"Responsible Officer" means, with respect to the Guarantee Trustee,
any vice-president, any assistant vice-president, the secretary, any assistant
secretary, the treasurer, any assistant treasurer, any trust officer or
assistant trust officer or any other officer of the Corporate Trust Department
of the Guarantee Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a particular corporate trust matter, any other officer to whom such matter is
referred because of that officer's knowledge of and familiarity with the
particular subject.
"Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 4.01.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
-3-
<PAGE>
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.01 TRUST INDENTURE ACT; APPLICATION.
(a) This Guarantee Agreement is subject to the provisions of the
Trust Indenture Act that are required or deemed to be part of this Guarantee
Agreement and shall, to the extent applicable, be governed by such provisions;
and
(b) if and to the extent that any provision of this Guarantee
Agreement limits, qualifies or conflicts with the duties imposed by Section 310
to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control.
SECTION 2.02 LISTS OF HOLDERS OF CAPITAL SECURITIES.
(a) The Guarantor shall furnish or cause to be furnished to the
Guarantee Trustee (a) semiannually, not later than December 31 and June 30 in
each year, a list, in such form as the Guarantee Trustee may reasonably require,
of the names and addresses of the Holders ("List of Holders") as of a date not
more than 15 days prior to the delivery thereof, and (b) at such other times as
the Guarantee Trustee may request in writing, within 30 days after the receipt
by the Guarantor of any such request, a List of Holders as of a date not more
than 15 days prior to the time such list is furnished; provided that, the
Guarantor shall not be obligated to provide such List of Holders at any time the
List of Holders does not differ from the most recent List of Holders given to
the Guarantee Trustee by the Guarantor. The Guarantee Trustee may destroy any
List of Holders previously given to it on receipt of a new List of Holders.
(b) The Guarantee Trustee shall comply with its obligations under
Section 311(a) of the Trust Indenture Act, subject to the provisions of Section
311(b) and Section 312(b) of the Trust Indenture Act.
SECTION 2.03 REPORTS BY THE GUARANTEE TRUSTEE. Within 60 days after
December 31 of each year, commencing December 31, 1997, the Guarantee Trustee
shall provide to the Holders such reports, if any, as are required by Section
313(a) of the Trust Indenture Act in the form and in the manner provided by
Section 313(a) of the Trust Indenture Act. The Guarantee Trustee shall also
comply with the requirements of Sections 313(b), (c) and (d) of the Trust
Indenture Act.
SECTION 2.04 PERIODIC REPORTS TO GUARANTEE TRUSTEE. The Guarantor
shall provide to the Guarantee Trustee such documents, reports and information
as required by Section 314 (if any) and the compliance certificate required by
Section 314 of the Trust Indenture Act in the form, in the manner and at the
times required by Section 314 of the Trust Indenture Act.
-4-
<PAGE>
SECTION 2.05 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.
The Guarantor shall provide to the Guarantee Trustee such evidence of compliance
with any conditions precedent provided for in this Guarantee Agreement as and to
the extent required by Section 314(c) of the Trust Indenture Act. Any
certificate or opinion required to be given by an officer pursuant to Section
314(c)(1) of the Trust Indenture Act may be given in the form of an Officers'
Certificate.
SECTION 2.06 EVENTS OF DEFAULT; WAIVER. The Holders of a Majority in
Liquidation Amount of Capital Securities may, by vote, on behalf of all of the
Holders, waive any past Event of Default and its consequences. Upon such waiver,
any such Event of Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured, for every purpose of this
Guarantee Agreement, but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent thereon.
SECTION 2.07 EVENT OF DEFAULT; NOTICE.
(a) The Guarantee Trustee shall, within 90 days after the occurrence
of an Event of Default, transmit by mail, first class postage prepaid, to the
Holders, notices of all Events of Default known to the Guarantee Trustee, unless
such defaults have been cured or waived before the giving of such notice,
provided that, the Guarantee Trustee shall be protected in withholding such
notice if and so long as the board of directors, the executive committee, or a
trust committee of directors or Responsible Officers of the Guarantee Trustee in
good faith determines that the withholding of such notice is in the interests of
the Holders.
(b) The Guarantee Trustee shall not be deemed to have knowledge of
any Event of Default unless a Responsible Officer charged with the
administration of the Trust Agreement shall have obtained written notice of such
Event of Default.
SECTION 2.08 CONFLICTING INTERESTS. The Trust Agreement and the
Indenture shall be deemed to be specifically described in this Guarantee
Agreement for the purposes of clause (i) of the first proviso contained in
Section 310(b) of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF GUARANTEE TRUSTEE
SECTION 3.01 POWERS AND DUTIES OF THE GUARANTEE TRUSTEE.
(a) This Guarantee Agreement shall be held by the Guarantee Trustee
for the benefit of the Holders, and the Guarantee Trustee shall not transfer
this Guarantee
-5-
<PAGE>
Agreement or any rights hereunder to any Person except a Holder exercising his
or her rights pursuant to Section 5.04 or to a Successor Guarantee Trustee on
acceptance by such Successor Guarantee Trustee of its appointment to act as
Successor Guarantee Trustee. The right, title and interest of the Guarantee
Trustee shall automatically vest in any Successor Guarantee Trustee, and such
vesting and cessation of title shall be effective whether or not conveyancing
documents have been executed and delivered pursuant to the appointment of such
Successor Guarantee Trustee.
(b) The Guarantee Trustee, prior to the occurrence of any Event of
Default and after the curing or waiving of all Events of Default that may have
occurred, shall undertake to perform such duties and only such duties as are
specifically set forth in this Guarantee Agreement, and no implied covenants or
obligations shall be read into this Guarantee Agreement against the Guarantee
Trustee. In case an Event of Default has occurred (that has not been cured or
waived pursuant to Section 2.06), and is actually known to a Responsible Officer
of the Guarantee Trustee, the Guarantee Trustee shall exercise such of the
rights and powers vested in it by this Guarantee Agreement, and use the same
degree of care and skill in its exercise thereof, as a prudent person would
exercise or use under the circumstances in the conduct of his or her own
affairs.
(c) No provision of this Guarantee Agreement shall be construed to
relieve the Guarantee Trustee from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of any Event of Default and after
the curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the Guarantee
Trustee shall be determined solely by the express provisions of
this Guarantee Agreement, and the Guarantee Trustee shall not be
liable except for the performance of such duties and obligations
as are specifically set forth in this Guarantee Agreement, and no
implied covenants or obligations shall be read into this
Guarantee Agreement against the Guarantee Trustee; and
(B) in the absence of bad faith on the part of the
Guarantee Trustee, the Guarantee Trustee may conclusively rely,
as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions
furnished to the Guarantee Trustee and conforming to the
requirements of this Guarantee Agreement; but in the case of any
such certificates or opinions that by any provision hereof are
specifically required to be furnished to the Guarantee Trustee,
the Guarantee Trustee shall be under a duty to examine the same
to determine whether or not they conform to the requirements of
this Guarantee Agreement;
-6-
<PAGE>
(ii) the Guarantee Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Guarantee
Trustee, unless it shall be proved that the Guarantee Trustee was
negligent in ascertaining the pertinent facts upon which such judgment
was made;
(iii) the Guarantee Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of a Majority in
Liquidation Amount of the Capital Securities relating to the time,
method and place of conducting any proceeding for any remedy available
to the Guarantee Trustee, or exercising any trust or power conferred
upon the Guarantee Trustee under this Guarantee Agreement; and
(iv) no provision of this Guarantee Agreement shall require the
Guarantee 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 the
Guarantee Trustee shall have reasonable grounds for believing that the
repayment of such funds or liability is not reasonably assured to it
under the terms of this Guarantee Agreement or adequate indemnity,
reasonably satisfactory to the Guarantee Trustee, against such risk or
liability is not reasonably assured to it.
(d) Whether or not therein expressly provided, every provision of
this Guarantee Agreement relating to the conduct or affecting the liability of
or affording protection to the Trustee shall be subject to the provisions of
Sections 3.01(b) and 3.01(c).
SECTION 3.02 CERTAIN RIGHTS OF GUARANTEE TRUSTEE.
(a) Subject to the provisions of Section 3.01:
(i) the Guarantee Trustee may rely and shall be fully protected
in acting or refraining from acting 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, sent or presented by the proper party or parties;
(ii) any direction or act of the Guarantor contemplated by this
Guarantee Agreement shall be sufficiently evidenced by an Officers'
Certificate;
(iii) whenever, in the administration of this Guarantee
Agreement, the Guarantee Trustee shall deem it desirable that a matter
be proved or established before taking, suffering or omitting any
action hereunder, the
-7-
<PAGE>
Guarantee Trustee (unless other evidence is herein specifically
prescribed) may, in the absence of bad faith on its part, request and
rely upon an Officers' Certificate which, upon receipt of such
request, shall be promptly delivered by the Guarantor;
(iv) the Guarantee Trustee may consult with counsel of its
choice, and the written advice or opinion of such counsel with respect
to legal matters 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 on such advice or opinion;
such counsel may be counsel to the Guarantor or any of its Affiliates
and may include any of its employees; the Guarantee Trustee shall have
the right at any time to seek instructions concerning the
administration of this Guarantee Agreement from any court of competent
jurisdiction;
(v) the Guarantee Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Guarantee
Agreement at the request or direction of any Holder, unless such
Holder shall have provided to the Guarantee Trustee such adequate
security and indemnity as would satisfy a reasonable person in the
position of the Guarantee Trustee, against the costs, expenses
(including attorneys' fees and expenses) and liabilities that might be
incurred by it in complying with such request or direction, including
such reasonable advances as may be requested by the Guarantee Trustee;
provided that, nothing contained in this Section 3.02(a)(v) shall be
taken to relieve the Guarantee Trustee, upon the occurrence and
continuance of an Event of Default, of its obligation under the last
sentence of Section 3.01(b) to exercise the rights and powers vested
in it by this Guarantee Agreement;
(vi) the Guarantee 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 Guarantee Trustee, in
its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit;
(vii) the Guarantee 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 Guarantee 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;
(viii) whenever in the administration of this Guarantee
Agreement the Guarantee Trustee shall deem it desirable to receive
instructions with respect to enforcing any remedy or right or taking
any other action hereunder, the Guarantee Trustee (1) may request
instructions from the Holders of a majority
-8-
<PAGE>
in Liquidation Amount of the Capital Securities, (2) may refrain from
enforcing such remedy or right or taking such other action until such
instructions are received, and (3) shall be protected in relying on or
acting in accordance with such instructions;
(ix) the Guarantee Trustee shall have no duty to see to any
recording, filing or registration of any instrument (including any
financing or continuation statement or any tax or securities form) (or
any rerecording, refiling or re-registration thereof); and
(x) the Guarantee Trustee shall not be liable for any action
taken, suffered or omitted to be taken by it in good faith and
reasonably believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Guarantee Agreement.
(b) No provision of this Guarantee Agreement shall be deemed to
impose any duty or obligation on the Guarantee Trustee to perform any act or
acts or exercise any right, power, duty or obligation conferred or imposed on it
in any jurisdiction in which it shall be illegal, or in which the Guarantee
Trustee shall be unqualified or incompetent in accordance with applicable law,
to perform any such act or acts or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Guarantee Trustee
shall be construed to be a duty.
SECTION 3.03 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF GUARANTEE.
The recitals contained in this Guarantee Agreement shall be taken as
the statements of the Guarantor, and the Guarantee Trustee does not assume any
responsibility for their correctness. The Guarantee Trustee makes no
representation as to the validity or sufficiency of this Guarantee Agreement.
ARTICLE IV
GUARANTEE TRUSTEE
SECTION 4.01 GUARANTEE TRUSTEE; ELIGIBILITY.
(a) There shall at all times be a Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under the laws
of the United States of America or any State or Territory thereof or
of the District of Columbia, or a corporation or Person permitted by
the Securities
-9-
<PAGE>
and Exchange Commission to act as an institutional trustee under the
Trust Indenture Act, authorized under such laws to exercise corporate
trust powers, having a combined capital and surplus of at least 50
million U.S. dollars ($50,000,000), and subject to supervision or
examination by Federal, State, Territorial or District of Columbia
authority. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the supervising or
examining authority referred to above, then, for the purposes of this
Section 4.01(a)(ii), 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.
(b) If at any time the Guarantee Trustee shall cease to be eligible
to so act under Section 4.01(a), the Guarantee Trustee shall immediately
resign in the manner and with the effect set out in Section 4.03(c).
(c) If the Guarantee Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act,
the Guarantee Trustee and Guarantor shall in all respects comply with the
provisions of Section 310(b) of the Trust Indenture Act.
SECTION 4.02 COMPENSATION AND REIMBURSEMENT.
The Guarantor agrees:
(a) to pay the Guarantee Trustee from time to time such reasonable
compensation as the Guarantor and the Guarantee Trustee shall from time to time
agree in writing 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);
(b) except as otherwise expressly provided herein, to reimburse the
Guarantee Trustee upon its request for all reasonable expenses, disbursements
and advances incurred or made by the Guarantee Trustee in accordance with the
provisions of this Guarantee Agreement (including the reasonable compensation
and expenses of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to its negligence or bad faith; and
(c) to indemnify each of the Guarantee Trustee and any predecessor
Guarantee Trustee for, and to hold it harmless from and against, any and all
loss, damage, claim, liability or expense, including taxes (other than taxes
based upon the income of the Guarantee Trustee) incurred without negligence or
bad faith on its part, arising out of or in connection with the acceptance of
the trusts created by, or the administration of, this Guarantee Agreement,
including the 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.
-10-
<PAGE>
As security for the performance of the obligations of the Guarantor
under this Section, the Guarantee Trustee shall have a lien prior to the Capital
Securities upon all the property and funds held or collected by the Guarantee
Trustee as such, except funds held in trust for the payment of principal of, and
premium (if any) or interest on, particular obligations of the Guarantor under
this Guarantee Agreement.
The provisions of this Section shall survive the termination of this
Guarantee Agreement.
SECTION 4.03 APPOINTMENT, REMOVAL AND RESIGNATION OF GUARANTEE
TRUSTEE.
(a) Subject to Section 4.03(b), unless an Event of Default shall have
occurred and be continuing, the Guarantee Trustee may be appointed or removed
without cause at any time by the Guarantor.
(b) The Guarantee Trustee shall not be removed until a Successor
Guarantee Trustee has been appointed and has accepted such appointment by
written instrument executed by such Successor Guarantee Trustee and delivered to
the Guarantor.
(c) The Guarantee Trustee appointed to office shall hold office until
a Successor Guarantee Trustee shall have been appointed or until its removal or
resignation. The Guarantee Trustee may resign from office (without need for
prior or subsequent accounting) by an instrument in writing executed by the
Guarantee Trustee and delivered to the Guarantor, which resignation shall not
take effect until a Successor Guarantee Trustee has been appointed and has
accepted such appointment by instrument in writing executed by such Successor
Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee
Trustee.
(d) If no Successor Guarantee Trustee shall have been appointed and
accepted appointment as provided in this Section 4.03 within 60 days after
delivery to the Guarantor of an instrument of resignation or removal, the
Guarantee Trustee resigning or being removed may petition any court of competent
jurisdiction for appointment of a Successor Guarantee Trustee. Such court may
thereupon, after prescribing such notice, if any, as it may deem proper, appoint
a Successor Guarantee Trustee.
(e) The Guarantor shall give notice of each resignation and each
removal of the Guarantee Trustee and each appointment of a successor Guarantee
Trustee to all Holders in the manner provided in Section 8.03 hereof. Each
notice shall include the name of the successor Guarantee Trustee and the address
of its Corporate Trust Office.
(f) No Guarantee Trustee shall be liable for the acts or omissions to
act of any Successor Guarantee Trustee.
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<PAGE>
ARTICLE V
GUARANTEE
SECTION 5.01 GUARANTEE. The Guarantor irrevocably and unconditionally
agrees to pay in full to the Holders the Guarantee Payments (without duplication
of amounts theretofore paid by the Issuer), as and when due, regardless of any
defense, right of set-off or counterclaim which the Issuer may have or assert.
The Guarantor's obligation to make a Guarantee Payment may be satisfied by
direct payment of the required amounts by the Guarantor to the Holders or by
causing the Issuer to pay such amounts to the Holders.
SECTION 5.02 WAIVER OF NOTICE AND DEMAND. The Guarantor hereby waives
notice of acceptance of this Guarantee Agreement and of any liability to which
it applies or may apply, presentment, demand for payment, any right to require a
proceeding first against the Issuer or any other Person before proceeding
against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice
of redemption and all other notices and demands.
SECTION 5.03 OBLIGATIONS NOT AFFECTED. The obligation of the
Guarantor to make the Guarantee Payments under this Guarantee Agreement shall in
no way be affected or impaired by reason of the happening from time to time of
any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied
agreement, covenant, term or condition relating to the Capital Securities
to be performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or any
portion of the Distributions, Redemption Price, Liquidation Distribution or
any other sums payable under the terms of the Capital Securities or the
extension of time for the performance of any other obligation under,
arising out of, or in connection with, the Capital Securities (other than
an extension of time for payment of Distributions, Redemption Price,
Liquidation Distribution or other sum payable that results from the
extension of any interest payment period on the Debentures permitted by the
Indenture);
(c) any failure, omission, delay or lack of diligence on the part of
the Property Trustee or the Holders to enforce, assert or exercise any
right, privilege, power or remedy conferred on the Property Trustee or the
Holders pursuant to the terms of the Capital Securities, or any action on
the part of the Issuer granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of
any collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors,
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<PAGE>
reorganization, arrangement, composition or readjustment of debt of, or
other similar proceedings affecting, the Issuer or any of the assets of the
Issuer;
(e) any invalidity of, or defect or deficiency in, the Capital
Securities;
(f) the settlement or compromise of any obligation guaranteed hereby
or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise constitute
a legal or equitable discharge or defense of a guarantor, it being the
intent of this Section 5.03 that the obligations of the Guarantor hereunder
shall be absolute and unconditional under any and all circumstances.
There shall be no obligation of the Guarantee Trustee, the Property Trustee or
the Holders to give notice to, or obtain consent of, the Guarantor or any other
Person with respect to the happening of any of the foregoing.
SECTION 5.04 RIGHTS OF HOLDERS. The Guarantor expressly acknowledges
that: (i) this Guarantee Agreement will be deposited with the Guarantee Trustee
to be held for the benefit of the Holders; (ii) if an Event of Default has
occurred and is continuing, the Guarantee Trustee has the right to enforce this
Guarantee Agreement on behalf of the Holders; (iii) the Holders of a Majority in
Liquidation Amount of the Capital Securities have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect of this Guarantee Agreement or exercising any trust
or power conferred upon the Guarantee Trustee under this Guarantee Agreement;
and (iv) any Holder may institute a legal proceeding directly against the
Guarantor to enforce its rights under this Guarantee Agreement without first
instituting a legal proceeding against the Issuer or any other Person.
SECTION 5.05 GUARANTEE OF PAYMENT. This Guarantee Agreement creates a
guarantee of payment and not of collection. This Guarantee Agreement will not be
discharged except by payment of the Guarantee Payments in full (without
duplication).
SECTION 5.06 SUBROGATION. The Guarantor shall be subrogated to all
(if any) rights of the Holders against the Issuer in respect of any amounts paid
to the Holders by the Guarantor under this Guarantee Agreement; provided,
however, that the Guarantor shall not (except to the extent required by
mandatory provisions of law) be entitled to enforce or exercise any rights which
it may acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Guarantee Agreement,
if, at the time of any such payment, any amounts of Guarantee Payments are due
and unpaid under this Guarantee Agreement. If any amount shall be paid to the
Guarantor in violation of the preceding sentence, the Guarantor agrees to hold
such amount in trust for the Holders and to pay over such amount to the Holders.
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<PAGE>
SECTION 5.07 INDEPENDENT OBLIGATIONS. The Guarantor acknowledges that
its obligations hereunder are independent of the obligations of the Issuer with
respect to the Capital Securities and that the Guarantor shall be liable as
principal and as debtor hereunder to make Guarantee Payments pursuant to the
terms of this Guarantee Agreement notwithstanding the occurrence of any event
referred to in subsections (a) through (g), inclusive, of Section 5.03.
ARTICLE VI
SUBORDINATION
SECTION 6.01 SUBORDINATION. This Guarantee Agreement will constitute
an unsecured obligation of the Guarantor and will rank (i) subordinate and
junior in right of payment to all other liabilities of the Guarantor, including
the Debentures, except those made pari passu or subordinate by their terms, (ii)
pari passu with the most senior preferred or preference stock now or hereafter
issued by the Guarantor and with any guarantee now or hereafter entered into by
the Guarantor in respect of any preferred or preference stock of any Affiliate
of the Guarantor, and (iii) senior to all common stock of the Guarantor. Nothing
in this Section 6.01 shall apply to claims of, or payments to, the Guarantee
Trustee under or pursuant to Section 4.02 hereof.
ARTICLE VII
TERMINATION
SECTION 7.01 TERMINATION. Subject to Section 4.02 hereof, this
Guarantee Agreement shall terminate and be of no further force and effect upon:
(i) full payment of the Redemption Price of all Capital Securities, and all
accrued and unpaid Distributions to the date of redemption, (ii) the
distribution of Debentures to Holders in exchange for all of the Capital
Securities or (iii) full payment of the amounts payable in accordance with the
Trust Agreement upon liquidation of the Issuer. Notwithstanding the foregoing,
this Guarantee Agreement will continue to be effective or will be reinstated, as
the case may be, if at any time any Holder must restore payment of any sums paid
with respect to Capital Securities or under this Guarantee Agreement.
ARTICLE VII
MISCELLANEOUS
SECTION 8.01 SUCCESSORS AND ASSIGNS. All guarantees and agreements
contained in this Guarantee Agreement shall bind the successors, assigns,
receivers, trustees
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<PAGE>
and representatives of the Guarantor and shall inure to the benefit of the
Holders of the Capital Securities then outstanding. Except in connection with a
consolidation, merger or sale involving the Guarantor that is permitted under
Article Eleven of the Indenture, the Guarantor shall not assign its obligations
hereunder.
SECTION 8.02 AMENDMENTS. This Guarantee Agreement may be amended only
by an instrument in writing entered into by the Guarantor and the Guarantee
Trustee. Except with respect to any changes which do not materially adversely
affect the rights of Holders (in which case no consent of Holders will be
required), this Guarantee Agreement may only be amended with the prior approval
of the Holders of not less than 66 2/3% in aggregate Liquidation Amount of all
the outstanding Capital Securities. The provisions of Article VI of the Trust
Agreement concerning meetings of Holders shall apply to the giving of such
approval. Nothing herein contained shall be deemed to require that the Guarantee
Trustee enter into any amendment of this Guarantee Agreement.
SECTION 8.03 NOTICES. Any notice, request or other communication
required or permitted to be given hereunder shall be in writing, duly signed by
the party giving such notice, and delivered, telecopied or mailed by first class
mail as follows:
(a) if given to the Guarantor, to the address set forth below or such
other address as the Guarantor may give notice of to the Guarantee Trustee
and the Holders of the Capital Securities:
Texas Utilities Electric Company
Energy Plaza
1601 Bryan Street
Dallas, Texas 75201
Facsimile No: 214-812-2488
Attention: Treasurer
(b) if given to the Issuer, in care of the Administrative Trustees,
at the Issuer's (and the Administrative Trustees') address set forth below
or such other address as the Administrative Trustees on behalf of the
Issuer may give notice of to the Guarantee Trustee and the Holders:
TU Electric Capital
c/o Texas Utilities Electric Company
Energy Plaza
1601 Bryan Street
Dallas, Texas 75201
Facsimile No: 214-812-2488
Attention: Administrative Trustees
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<PAGE>
(c) if given to the Guarantee Trustee, to the address set forth below
or such other address as the Guarantee Trustee may give notice of to the
Guarantor and the Holders of the Capital Securities:
The Bank of New York
101 Barclay Street
21 West
New York, New York 10286
Facsimile No: (212) 815-5915
Attention: Corporate Trust Trustee Administration
(d) if given to any Holder, at the address set forth on the books and
records of the Issuer.
All notices hereunder shall be deemed to have been given when received
in person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
SECTION 8.04 BENEFIT. This Guarantee Agreement is solely for the
benefit of the Holders and, subject to Section 3.01(a), is not separately
transferable from the Capital Securities.
SECTION 8.05 INTERPRETATION. In this Guarantee Agreement, unless the
context otherwise requires:
(a) a term defined anywhere in this Guarantee Agreement has the same
meaning throughout;
(b) all references to "the Guarantee Agreement" or "this Guarantee
Agreement" are to this Guarantee Agreement as modified, supplemented or
amended from time to time;
(c) all references in this Guarantee Agreement to Articles and
Sections are to Articles and Sections of this Guarantee Agreement unless
otherwise specified;
(d) a term defined in the Trust Indenture Act has the same meaning
when used in this Guarantee Agreement unless otherwise defined in this
Guarantee Agreement or unless the context otherwise requires;
(e) a reference to the singular includes the plural and vice versa;
and
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<PAGE>
(f) the masculine, feminine or neuter genders used herein shall
include the masculine, feminine and neuter genders.
SECTION 8.06 GOVERNING LAW. THIS GUARANTEE AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.
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.
THIS GUARANTEE AGREEMENT is executed as of the day and year
first above written.
Texas Utilities Electric Company
By: /s/ Robert S. Shapard
---------------------------------------------
Name: Robert S. Shapard
Title: Treasurer and Assistant Secretary
The Bank of New York,
as Guarantee Trustee
By: /s/ Walter N. Gitlin
---------------------------------------------
Name: Walter N. Gitlin
Title: Vice President
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<PAGE>
Exhibit 4(y)
AGREEMENT AS TO EXPENSES AND LIABILITIES
AGREEMENT dated as of January 30, 1997 between Texas Utilities
Electric Company, a Texas corporation ("TU Electric"), and TU Electric Capital V
, a Delaware business trust (the "Trust").
WHEREAS, the Trust intends to issue its Common Securities (the "Common
Securities") to and receive Debentures from TU Electric and to issue its 5.175%
Cumulative Capital Securities (the "Capital Securities") with such powers,
preferences and special rights and restrictions as are set forth in the Amended
and Restated Trust Agreement of the Trust dated as of January 30, 1997 as the
same may be amended from time to time (the "Trust Agreement");
WHEREAS, TU Electric is the issuer of the Debentures;
NOW, THEREFORE, in consideration of the acceptance of the Capital
Securities by each holder thereof, which acceptance TU Electric hereby agrees
shall benefit TU Electric and which acceptance TU Electric acknowledges will be
made in reliance upon the execution and delivery of this Agreement, TU Electric,
including in its capacity as holder of the Common Securities, and the Trust
hereby agree as follows:
ARTICLE I
Section 1.01. Assumption by TU Electric. Subject to the terms and
-------------------------
conditions hereof, TU Electric hereby irrevocably and unconditionally assumes
the full payment, when and as due, of any and all Obligations (as hereinafter
defined) to each person or entity to whom the Trust is now or hereafter becomes
indebted or liable (the "Beneficiaries"). As used herein, "Obligations" means
any indebtedness, expenses or liabilities of the Trust, other than obligations
of the Trust to pay to holders of any Capital Securities the amounts due such
holders pursuant to the terms of the Capital Securities. This Agreement is
intended to be for the benefit of, and to be enforceable by, all such
Beneficiaries, whether or not such Beneficiaries have received notice hereof.
Section 1.02. Term of Agreement. This Agreement shall terminate and
-----------------
be of no further force and effect upon the date on which there are no
Beneficiaries remaining; provided, however, that this Agreement shall continue
to be effective or shall be reinstated, as the case may be, if at any time any
holder of Capital Securities or any Beneficiary must restore payment of any sums
paid under the Capital Securities, under any Obligation, under the Guarantee
Agreement dated the date hereof by TU Electric and The Bank of New York, as
guarantee trustee, or under this Agreement for any reason whatsoever. This
Agreement is continuing, irrevocable, unconditional and absolute.
<PAGE>
Section 1.03. Waiver of Notice. TU Electric hereby waives notice of
----------------
acceptance of this Agreement and of any Obligation to which it applies or may
apply, and TU Electric hereby waives presentment, demand for payment, protest,
notice of nonpayment, notice of dishonor, notice of redemption and all other
notices and demands.
Section 1.04. No Impairment. The obligations, covenants, agreements
-------------
and duties of TU Electric under this Agreement shall in no way be affected or
impaired by reason of the happening from time to time of any of the following:
(a) the extension of time for the payment by the Trust of all or any
portion of the Obligations or for the performance of any other obligation under,
arising out of, or in connection with, the Obligations;
(b) any failure, omission, delay or lack of diligence on the part of
the Beneficiaries to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Beneficiaries with respect to the Obligations or any
action on the part of the Trust granting indulgence or extension of any kind; or
(c) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Trust or any of the assets of the
Trust.
Neither the Trust nor any Beneficiary shall have any obligation to give notice
to, or obtain the consent of, TU Electric with respect to the happening of any
of the foregoing.
Section 1.05. Enforcement. A Beneficiary may enforce this Agreement
-----------
directly against TU Electric and TU Electric waives any right or remedy to
require that any action be brought against the Trust or any other person or
entity before proceeding against TU Electric.
ARTICLE II
Section 2.01. Binding Effect. All of the obligations, covenants and
--------------
agreements contained in this Agreement shall bind the successors, assigns,
receivers, trustees and representatives of TU Electric and shall inure to the
benefit of the Beneficiaries and their successors and assigns.
Section 2.02. Amendment. So long as there remains any Beneficiary or
---------
any Capital Securities of any series shall be outstanding, this Agreement shall
not be modified or amended in any manner adverse to such Beneficiary or to the
holders of the Securities.
<PAGE>
Section 2.03. Notices. Any notice, request or other communication
-------
required or permitted to be given hereunder shall be given in writing by
delivering the same against receipt therefor by facsimile transmission
(confirmed by mail), telex or by registered or certified mail, addressed as
follows (and if so given, shall be deemed given when mailed or upon receipt of
an answer-back, if sent by telex), to wit:
TU Electric Capital
c/o Robert S. Shapard, Administrative Trustee
1601 Bryan Street
Dallas, Texas 75201
Facsimile No.: 214-812-2488
Texas Utilities Electric Company
1601 Bryan Street
Dallas, Texas 75201
Facsimile No.: 214-812-2488
Attention: Treasurer
Section 2.04 THIS AGREEMENT SHALL BE GOVERNED BY AND CON STRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD
TO CONFLICT OF LAWS PRINCIPLES).
<PAGE>
THIS AGREEMENT is executed as of the day and year first above
written.
TEXAS UTILITIES ELECTRIC COMPANY
By: /s/ Robert S. Shapard
---------------------------------------------
Name: Robert S. Shapard
Title: Treasurer and Assistant Secretary
TU ELECTRIC CAPITAL V
By: /s/ Robert S. Shapard
---------------------------------------------
not in his individual capacity, but solely
as Administrative Trustee
<PAGE>
EXHIBIT 4(z)
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 January 20, 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 Subordinated Debt
Securities relating to Trust Securities) dated as of December 1, 1995 (as
amended and supplemented to date, the "Indenture") that:
1. The securities of the fifth series to be issued under the Indenture
shall be designated "8.175% Junior Subordinated Debentures, Series E",
(the "Debentures of the Fifth Series"). The Debentures of the Fifth
Series are to be issued to TU Electric Capital V, a Delaware statutory
business trust (the "Trust"). 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 Fifth Series shall be limited in aggregate
principal amount to $412,372,000 at any time Outstanding, except as
contemplated in Section 301(b) of the Indenture;
3. The Debentures of the Fifth Series shall mature and the principal
shall be due and payable together with all accrued and unpaid interest
thereon on January 30, 2037;
4. The Debentures of the Fifth Series shall bear interest from, and
including, the date of original issuance, at the rate of 8.175% per
annum payable semi-annually in arrears on February 1 and August 1 of
each year (each, an "Interest Payment Date") commencing August 1,
1997. 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 and,
for any period shorter than a full month, on the basis of the actual
number of days elapsed. Interest on the Debentures of the Fifth Series
will accrue from, and including, the date of original issuance. 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), in each case with the same
force and effect as if made on such Interest Payment Date;
5. Each installment of interest on a Debenture of the Fifth Series shall
be payable to the Person in whose name such Debenture of the Fifth
Series is registered at
<PAGE>
the close of business on the day, so long as either the Capital
Securities of the Trust or the Debentures of the Fifth Series remain
in book-entry form, one Business Day, and otherwise 15 days preceding
the corresponding Interest Payment Date (the "Regular Record Date")
for the Debentures of the Fifth Series; provided, however, that if the
Debentures of the Fifth Series are held neither by the Trust nor by a
securities depositary, the Company shall have the right to change the
Regular Record Date by one or more Officer's Certificates. Any
installment of interest on the Debentures of the Fifth Series not
punctually paid or duly provided for shall forthwith cease to be
payable to the Holders of such Debentures of the Fifth Series on such
Regular Record Date, and may be paid to the Persons in whose name the
Debentures of the Fifth 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
Fifth Series not less than 10 days prior to such Special Record Date,
all as more fully provided in the Indenture;
6. The principal and each installment of interest on the Debentures of
the Fifth Series shall be payable at, and registration and
registration of transfers and exchanges in respect of the Debentures
of the Fifth Series may be effected at, the office or agency of the
Company maintained therefor in The City of New York which, unless and
until changed by an Officer's Certificate, shall be the Corporate
Trust Office of the Trustee; 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, demands to or upon the Company
in respect of the Debentures of the Fifth Series may be served at such
office or agency of the Company in The City of New York. The Trustee
will initially be the Security Registrar and the Paying Agent for the
Debentures of the Fifth Series; provided, however, that the Company
reserves the right to change, by one or more Officer's Certificates,
any such office or agency;
7. The Debentures of the Fifth Series will be redeemable on or after
February 1, 2007, at the option of the Company, at any time and from
time to time in whole or in part, upon not less than 30 nor more than
60 days' notice given as provided in the Indenture, at a Redemption
Price equal to the following prices, expressed in percentages of the
principal amount, together with accrued interest to but excluding the
Redemption Date. If redeemed during the 12-month period beginning
February 1:
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<PAGE>
Redemption
Year Price
---- ----------
2007........................... 104.0875%
2008........................... 103.6788
2009........................... 103.2700
2010........................... 102.8613
2011........................... 102.4525
2012........................... 102.0438
2013........................... 101.6350
2014........................... 101.2263
2015........................... 100.8175
2016........................... 100.4088
and at 100% on or after February 1, 2017.
If a Tax Event shall occur and be continuing and either (i) in the
opinion of counsel to the Company experienced in such matters, there
would in all cases, after effecting the termination of the Trust and
the distribution of the Debentures of the Fifth Series to the holders
of the Capital Securities in exchange therefor, be more than an
insubstantial risk that an Adverse Tax Consequence (as defined below)
would continue to exist or (ii) the Debentures of the Fifth Series are
not held by the Trust, then the Company shall have the right to redeem
the Debentures of the Fifth Series, in whole but not in part, at any
time within 90 days following the occurrence of the Tax Event 100% of
the principal amount plus accrued and unpaid interest thereon to the
Redemption Date.
"Tax Event" means the receipt by the Trust or the Company of an
opinion of counsel experienced in such matters to the effect that, as
a result of (a) any amendment to, clarification of, or change
(including any announced prospective change) in, the laws or treaties
(or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein affecting taxation,
(b) any judicial decision or any official administrative
pronouncement, ruling, regulatory procedure, notice or announcement
(including any notice or announcement of intent to issue or adopt any
such administrative pronouncement, ruling, regulatory procedure or
regulation) (each, an "Administrative Action"), or (c) any amendment
to, clarification of, or change in the official position or the
interpretation of any such Administrative Action or judicial decision
or any interpretation or pronouncement that provides for a position
with respect to such Administrative Action or judicial decision that
differs from the theretofore generally accepted position, in each case
by any legislative body, court, governmental authority or
-3-
<PAGE>
regulatory body, irrespective of the time or manner in which such
amendment, clarification or change is introduced or made known, which
amendment, clarification, or change is effective, which Administrative
Action is taken or which judicial decision is issued, in each case on
or after the date of issuance of the Capital Securities, there is more
than an insubstantial risk that (i) the Trust is, or will be, subject
to United States federal income tax with respect to interest received
on the Debentures of the Fifth Series, (ii) interest payable by the
Company on the Debentures of the Fifth Series is not, or will not be,
fully deductible for United States federal income tax purposes, or
(iii) the Trust is, or will be, subject to more than a de minimis
amount of other taxes, duties or other governmental charges (each of
the circumstances described in clauses (i), (ii) or (iii) being an
Adverse Tax Consequence);
8. So long as any Debentures of the Fifth Series are Outstanding, the
failure of the Company to pay interest on any Debentures of the Fifth
Series within 30 days after the same becomes due and payable (whether
or not payment is prohibited by the provisions of Article Fifteen of
the Indenture) shall constitute an Event of Default; provided,
however, that a valid extension of the interest payment period by the
Company as contemplated in Section 311 of the Indenture and paragraph
(9) of this Certificate shall not constitute a failure to pay interest
for this purpose;
9. Pursuant to Section 311 of the Indenture, the Company shall have the
right, at any time and from time to time during the term of the
Debentures of the Fifth Series, to extend the interest payment period
to a period not exceeding 10 semi-annual periods (an "Extension
Period") during which period interest will be compounded semi-
annually. At the end of the Extension Period, the Company shall pay
all interest accrued and unpaid (together with interest thereon at the
rate specified for the Debentures of the Fifth Series, compounded
semi-annually, to the extent permitted by applicable law). However,
during any such Extension Period, the Company shall not declare or pay
any dividend or distribution (other than a dividend or distribution in
common stock of the Company) on, or redeem, purchase, acquire or make
a liquidation payment with respect to, any of its capital stock,
redeem any indebtedness that is pari passu with the Debentures of the
Fifth Series, or make any guarantee payments with respect to the
foregoing ("Restricted Payments"). Prior to the termination of any
such Extension Period, the Company may further extend the interest
payment period, provided that such Extension Period together with all
such previous and further extensions thereof shall not exceed 10 semi-
annual periods at any one time or extend beyond the maturity date of
the Debentures of the Fifth Series. Any extension period with respect
to payment of interest on the Debentures of the Fifth Series, other
Debt Securities or on any similar securities will apply to all such
securities and will also apply to distributions with respect to the
Preferred Securities and all
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<PAGE>
other securities with terms substantially the same as the Preferred
Securities. Upon the termination of any such Extension Period and the
payment of all amounts then due, the Company may select a new
Extension Period, subject to the above requirements. No interest shall
be due and payable during an Extension Period, except at the end
thereof. The Company will give the Trust or other Holders and the
Trustee notice of its election of an Extension Period before the
Business Day prior to the record date for the interest payment which
would occur but for such election;
10. At any time, the Company will have the right to terminate the Trust
and cause the Debentures of the Fifth Series to be distributed to the
holders of the Preferred Securities in liquidation of the Trust;
11. So long as any Securities are outstanding under the Indenture, the
Company shall not make any Restricted Payments at any time the Company
is in default under the Guarantee with respect to the Trust or is in
default with respect to payments due on any Outstanding Securities;
12. In the event that, at any time subsequent to the initial
authentication and delivery of the Debentures of the Fifth Series, the
Debentures of the Fifth Series are to be held by a securities
depositary, the Company may at such time establish the matters
contemplated in clause (r) in the second paragraph of Section 301 of
the Indenture in an Officer's Certificate supplemental to this
Certificate;
13. No service charge shall be made for the registration of transfer or
exchange of the Debentures of the Fifth 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;
14. The Debentures of the Fifth 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;
15. The undersigned has read all of the covenants and conditions contained
in the Indenture relating to the issuance of the Debentures of the
Fifth Series and the definitions in the Indenture relating thereto and
in respect of which this certificate is made;
16. 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;
-5-
<PAGE>
17. In the opinion of the undersigned, he has made such examination or
investigation as is necessary to enable the undersigned to express an
informed opinion whether or not such covenants and conditions have
been complied with;
18. 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 Fifth Series requested in the
accompanying Company Order have been complied with; and
19. If the Company shall make any deposit of money and/or Government
Obligations with respect to any Debentures of the Fifth 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 601 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 Fifth 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 Government Obligations (meeting the requirements of Section
601), if any, or any combination thereof, at such time or times, as
shall be necessary, together with the money and/or Government
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 Fifth 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, based on a change in law, to the
effect that the Holders of such Debentures of the Fifth 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.
-6-
<PAGE>
IN WITNESS WHEREOF, I have executed this Officer's Certificate this 30th
day of January, 1997.
/s/ Robert S. Shapard
----------------------
Robert S. Shapard,
Treasurer
-7-
<PAGE>
NO._______________
CUSIP NO.__________
EXHIBIT A
[FORM OF FACE OF JUNIOR SUBORDINATED DEBENTURE]
TEXAS UTILITIES ELECTRIC COMPANY
8.175% JUNIOR SUBORDINATED DEBENTURES, SERIES E
TEXAS UTILITIES ELECTRIC COMPANY, a corporation duly organized and existing
under the laws of the State of Texas (herein referred to as the "Company", which
term includes any successor Person under the Indenture referred to on the
reverse hereof), for value received, hereby promises to pay to
____________________________________, or registered assigns, the principal sum
of ____________________ Dollars on January 30, 1997, and, except as hereinafter
provided, to pay interest on said principal sum, from, and including the date of
original issuance or from, and including, the most recent Interest Payment Date
to which interest has been paid or duly provided for, at the rate of 8.175% per
annum plus Additional Interest, if any, 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, and
including, , 1997. 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). The interest so payable, and punctually
paid or duly provided for, on any Interest Payment Date will, as provided in the
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, so long as this Security
or any security for which it may by its terms be exchanged remain in book-entry
form, one Business Day, and otherwise 15 days 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.
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 JUNIOR SUBORDINATED 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 December 1, 1995 (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 January 30, 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 $1,000.
The Securities of this series are subject to redemption upon not less
than 30 nor more than 60 days' notice by mail, at any time on or after February
1, 2007, as a whole or in part, at the election of the Company, at a Redemption
Price equal to the following prices, expressed in percentages of the principal
amount, together with accrued interest to but excluding the Redemption Date. If
redeemed during the 12-month period beginning February 1:
Redemption
Year Price
---- ----------
2007........................... 104.0875%
2008........................... 103.6788
2009........................... 103.2700
2010........................... 102.8613
2011........................... 102.4525
2012........................... 102.0438
2013........................... 101.6350
2014........................... 101.2263
2015........................... 100.8175
2016........................... 100.4088
and at 100% on or after February 1, 2017.
Interest installments whose Stated Maturity is on or prior to such
Redemption Date will be payable to the Holder of such Security, or one or more
Predecessor Securities, of record at the close of business on the related
Regular Record Date referred to on the face hereof, all as provided in the
Indenture.
-3-
<PAGE>
If a Tax Event shall occur and be continuing and either (i) in the
opinion of counsel to the Company experienced in such matters, there would in
all cases, after effecting the termination of the Trust and the distribution of
the Debentures of the Fifth Series to the holders of the Capital Securities in
exchange therefor, be more than an insubstantial risk that an Adverse Tax
Consequence (as defined below) would continue to exist or (ii) the Debentures of
the Fifth Series are not held by the Trust, then the Company shall have the
right to redeem the Debentures of the Fifth Series, in whole but not in part, at
any time within 90 days following the occurrence of the Tax Event, at 100% of
the principal amount plus accrued and unpaid interest thereon to the Redemption
Date.
"Tax Event" means the receipt by the Trust or the Company of an
opinion of counsel experienced in such matters to the effect that, as a result
of (a) any amendment to, clarification of, or change (including any announced
prospective change) in, the laws or treaties (or any regulations thereunder) of
the United States or any political subdivision or taxing authority thereof or
therein affecting taxation, (b) any judicial decision or any official
administrative pronouncement, ruling, regulatory procedure, notice or
announcement (including any notice or announcement of intent to issue or adopt
any such administrative pronouncement, ruling, regulatory procedure or
regulation) (each, an Administrative Action), or (c) any amendment to,
clarification of, or change in the official position or the interpretation of
any such Administrative Action or judicial decision or any interpretation or
pronouncement that provides for a position with respect to such Administrative
Action or judicial decision that differs from the theretofore generally accepted
position, in each case by any legislative body, court, governmental authority or
regulatory body, irrespective of the time or manner in which such amendment,
clarification or change is introduced or made known, which amendment,
clarification, or change is effective, which Administrative Action is taken or
which judicial decision is issued, in each case on or after the date of issuance
of the Capital Securities, there is more than an insubstantial risk that (i) the
Trust is, or will be, subject to United States federal income tax with respect
to interest received on the Debentures of the Fifth Series, (ii) interest
payable by the Company on the Debentures of the Fifth Series is not, or will not
be, fully deductible for United States federal income tax purposes, or (iii) the
Trust is, or will be, subject to more than a de minimis amount of other taxes,
duties or other governmental charges (each of the circumstances described in
clauses (i), (ii) or (iii) being an "Adverse Tax Consequence").
In the event of redemption of this Security in part only, a new Security or
Securities of this series and of like tenor for the unredeemed portion hereof
will be issued in the name of the Holder hereof upon the cancellation hereof.
The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, subordinated and subject in right of payment to the prior
payment in full of all Senior Indebtedness, and this Security is issued subject
to the provisions of the Indenture with respect thereto. Each Holder of this
Security, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to acknowledge or effectuate the
-4-
<PAGE>
subordination so provided and (c) appoints the Trustee his attorney-in-fact for
any and all such purposes. Each Holder hereof, by his acceptance hereof, hereby
waives all notice of the acceptance of the subordination provisions contained
herein and in the Indenture by each holder of Senior Indebtedness, whether now
outstanding or hereafter incurred, and waives reliance by each such Holder upon
said provisions.
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.
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 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 compliance by the Company
with certain provisions of the Indenture and 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 not less than 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 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.
-5-
<PAGE>
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.
So long as no Event of Default under the Indenture shall have occurred
and be continuing, the Company shall have the right at any time and from time to
time during the term of the Securities of this series to extend the interest
payment period to a period not exceeding 10 semi-annual periods (an "Extended
Interest Payment Period"), and at the end of such Extended Interest Payment
Period, the Company shall pay all interest then accrued and unpaid (together
with interest thereon at the same rate as specified for the Securities of this
series, compounded semi-annually, to the extent permitted by applicable law);
provided, however, that during such Extended Interest Payment Period the Company
shall not declare or pay any dividend or distribution (other than a dividend or
distribution in common stock of the Company) on, or redeem, purchase, acquire or
make a liquidation payment with respect to, any of its capital stock, redeem any
indebtedness that is pari passu with the Securities of this series, or make any
guarantee payments with respect to the foregoing. Prior to the termination of
any such Extended Interest Payment Period, the Company may further extend the
interest payment period, provided that such Extended Interest Payment Period,
together with all such previous and further extensions thereof, may not exceed
10 semi-annual periods or extend beyond the Stated Maturity of the Securities of
this series. Upon the termination of any such Extended Interest Payment Period
and the payment of all amounts then due, the Company may select a new Extended
Interest Payment Period, subject to the above requirements. No interest during
the Extended Interest Payment Period, except at the end thereof, shall be due
and payable. The Company shall give the Holder of this Security notice of its
selection of such Extended Interest Payment Period as provided in or pursuant to
the Indenture.
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.
-6-
<PAGE>
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
-7-
<PAGE>
EXHIBIT 12(a)
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
THOUSANDS OF DOLLARS, EXCEPT RATIOS
<S> <C> <C> <C> <C> <C>
EARNINGS:
Net income before preferred dividends $ 806,964 $ (53,731) $ 644,682 $ 483,892 $ 818,529
Add: Total federal income taxes 375,232 (60,035) 326,638 209,544 224,184
Fixed charges (see detail below) 851,482 732,313 752,892 782,439 785,183
---------- ---------- ----------- ----------- -----------
Total earnings $2,033,678 $ 618,547 $ 1,724,212 $ 1,475,875 $ 1,827,896
========== ========== =========== =========== ===========
FIXED CHARGES:
Interest on mortgage bonds $ 486,935 $ 527,131 $ 567,543 $ 611,090 $ 598,235
Interest on other long-term debt 96,404 102,138 92,524 109,458 122,494
Amortization of debt discount, (premium) and expense 13,239 10,649 9,591 7,080 5,235
Amortization of loss on reacquired debt 23,124 20,881 19,379 13,283 9,301
Other interest charges 178,191 45,384 37,838 11,891 19,090
Preferred trust securities distributions 33,001 1,801 -- -- --
Rentals representative of the interest factor 20,588 24,329 26,017 29,637 30,828
---------- ---------- ----------- ----------- -----------
Total fixed charges $ 851,482 $ 732,313 $ 752,892 $ 782,439 $ 785,183
========== ========== =========== =========== ===========
RATIO OF EARNINGS TO FIXED CHARGES 2.39 0.84 2.29 1.89 2.33
---- ---- ---- ---- ----
</TABLE>
<PAGE>
EXHIBIT 12(b)
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES,
AND TO FIXED CHARGES AND PREFERRED DIVIDENDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
EARNINGS:
Net income $ 862,695 $ 452,631 $ 658,192 $ 476,526 $ 821,123
Add: Total federal income taxes 405,499 212,953 342,687 241,740 241,852
Fixed charges (see detail below) 649,295 655,678 688,194 715,609 719,644
----------- ----------- ----------- ----------- -----------
Total earnings $ 1,917,489 $ 1,321,262 $ 1,689,073 $ 1,433,875 $ 1,782,619
=========== =========== =========== =========== ===========
FIXED CHARGES:
Interest on mortgage bonds $ 486,791 $ 526,977 $ 567,363 $ 610,999 $ 598,235
Interest on other long-term debt 26,456 44,071 32,183 45,787 54,379
Amortization of debt discount, (premium) and expense 11,067 9,959 8,615 6,493 4,778
Amortization of loss on reacquired debt 22,520 19,547 17,608 12,471 9,301
Other interest charges 48,872 28,994 36,408 10,222 22,123
Preferred trust securities distributions 33,001 1,801 -- -- --
Rentals representative of the interest factor 20,588 24,329 26,017 29,637 30,828
----------- ----------- ------------ ------------ -----------
Total fixed charges $ 649,295 $ 655,678 $ 688,194 $ 715,609 $ 719,644
=========== =========== ============ ============ ===========
Preferred dividends * 68,181 93,371 143,233 168,465 143,778
----------- ----------- ------------ ------------ -----------
Fixed charges and preferred dividends$ $ 717,476 $ 749,049 $ 831,427 $ 884,074 $ 863,422
=========== =========== ============ ============ ===========
RATIO OF EARNINGS TO FIXED CHARGES 2.95 2.02 2.45 2.00 2.48
---- ---- ---- ---- ----
RATIO OF EARNINGS TO FIXED CHARGES AND
PREFERRED DIVIDENDS 2.67 1.76 2.03 1.62 2.06
---- ---- ---- ---- ----
</TABLE>
* Preferred dividends represent (1) the portion of preferred dividends
deductible for federal income tax purposes, plus (2) the balance of
preferred dividend requirements multiplied by the ratio of pre-tax
income to net income.
<PAGE>
Exhibit 21
SUBSIDIARIES OF TEXAS UTILITIES COMPANY
STATE OR COUNTRY OF INCORPORATION
Texas Utilities Electric Company Texas
Southwestern Electric Service Company Texas
Texas Utilities Australia Pty. Ltd. Australia
Texas Utilities Fuel Company Texas
Texas Utilities Mining Company Texas
Texas Utilities Services, Inc. Texas
Basic Resources Inc. Texas
Chaco Energy Company New Mexico
Texas Utilities Properties Inc. Texas
Texas Utilities Communications Inc. Texas
<PAGE>
Exhibit 23(a)
CONSENT OF COUNSEL TO THE COMPANY
We hereby consent to the incorporation by reference of the statements made
as to matters of law and legal conclusions contained in this Annual Report on
Form 10-K of Texas Utilities Company and Texas Utilities Electric Company for
the fiscal year ended December 31, 1996, under Part I, Item 1--Business--
Regulation and Rules and Environmental Matters, in Texas Utilities Company's
Registration Statement on Form S-3 (No. 33-55931).
WORSHAM, FORSYTHE
& WOOLDRIDGE, L.L.P.
By: /s/ Neil D. Anderson
-----------------------
A Partner
March 12, 1997
Dallas, Texas
<PAGE>
Exhibit 23(b)
CONSENT OF COUNSEL TO THE COMPANY
We hereby consent to the incorporation by reference of the statements made
as to matters of law and legal conclusions contained in this Annual Report on
Form 10-K of Texas Utilities Company and Texas Utilities Electric Company for
the fiscal year ended December 31, 1996, under Part I, Item 1--Business--
Regulation and Rules and Environmental Matters, in Texas Utilities Company's
Registration Statements on Form S-3 (Nos. 33-83976 and 33-69554).
WORSHAM, FORSYTHE
& WOOLDRIDGE, L.L.P.
By: /s/ Neil D. Anderson
-----------------------
A Partner
March 12, 1997
Dallas, Texas
<PAGE>
EXHIBIT 23(c)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Texas Utilities Company's
Registration Statement No. 33-55931 on Form S-3 and in Registration Statement
Nos. 33-59575, 33-59759 and 33-59961 on Form S-8 of our report dated March 3,
1997, which report includes an explanatory paragraph concerning the Company's
change during 1995 in its method of accounting for the impairment of long-lived
assets and for long-lived assets to be disposed of to conform with Statement of
Financial Accounting Standards No. 121, appearing in this Annual Report on Form
10-K of Texas Utilities Company for the year ended December 31, 1996.
DELOITTE & TOUCHE LLP
Dallas, Texas
March 12, 1997
<PAGE>
EXHIBIT 23(d)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements Nos. 33-
68100 and 33-69554 of Texas Utilities Electric Company on Form S-3 of our report
dated March 3, 1997, which report includes an explanatory paragraph concerning
Texas Utilities Electric Company's change during 1995 in its method of
accounting for the impairment of long-lived assets and for long-lived assets to
be disposed of to conform with Statement of Financial Accounting Standards No.
121, appearing in the Annual Report on Form 10-K of Texas Utilities Electric
Company for the year ended December 31, 1996.
DELOITTE & TOUCHE LLP
Dallas, Texas
March 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> 0000097561
<NAME> TEXAS UTILITIES CO.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 17,598,510
<OTHER-PROPERTY-AND-INVEST> 1,158,223
<TOTAL-CURRENT-ASSETS> 776,455
<TOTAL-DEFERRED-CHARGES> 1,842,519
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 21,375,707
<COMMON> 4,787,047
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 1,245,866
<TOTAL-COMMON-STOCKHOLDERS-EQ> 6,032,913
619,702
464,427
<LONG-TERM-DEBT-NET> 8,668,111
<SHORT-TERM-NOTES> 69,788
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 253,151
<LONG-TERM-DEBT-CURRENT-PORT> 356,076
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 4,911,539
<TOT-CAPITALIZATION-AND-LIAB> 21,375,707
<GROSS-OPERATING-REVENUE> 6,550,928
<INCOME-TAX-EXPENSE> 375,232
<OTHER-OPERATING-EXPENSES> 0
<TOTAL-OPERATING-EXPENSES> 4,547,938
<OPERATING-INCOME-LOSS> 2,002,990
<OTHER-INCOME-NET> (1,148)
<INCOME-BEFORE-INTEREST-EXPEN> 2,001,842
<TOTAL-INTEREST-EXPENSE> 873,004
<NET-INCOME> 1,128,838
0
<EARNINGS-AVAILABLE-FOR-COMM> 753,606
<COMMON-STOCK-DIVIDENDS> 451,063
<TOTAL-INTEREST-ON-BONDS> 486,935
<CASH-FLOW-OPERATIONS> 1,729,159
<EPS-PRIMARY> 3.35
<EPS-DILUTED> 3.35
</TABLE>
<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> 0000710182
<NAME> TU ELECTRIC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 15,864,604
<OTHER-PROPERTY-AND-INVEST> 508,437
<TOTAL-CURRENT-ASSETS> 626,897
<TOTAL-DEFERRED-CHARGES> 1,795,001
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 18,794,939
<COMMON> 4,732,305
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 1,373,602
<TOTAL-COMMON-STOCKHOLDERS-EQ> 6,105,907
619,702
464,427
<LONG-TERM-DEBT-NET> 6,310,594
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 253,151
<LONG-TERM-DEBT-CURRENT-PORT> 338,213
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 4,702,945
<TOT-CAPITALIZATION-AND-LIAB> 18,794,939
<GROSS-OPERATING-REVENUE> 6,029,611
<INCOME-TAX-EXPENSE> 421,012
<OTHER-OPERATING-EXPENSES> 4,146,001
<TOTAL-OPERATING-EXPENSES> 4,567,013
<OPERATING-INCOME-LOSS> 1,462,598
<OTHER-INCOME-NET> 17,565
<INCOME-BEFORE-INTEREST-EXPEN> 1,480,163
<TOTAL-INTEREST-EXPENSE> 584,467
<NET-INCOME> 895,696
86,359
<EARNINGS-AVAILABLE-FOR-COMM> 809,337
<COMMON-STOCK-DIVIDENDS> 366,912
<TOTAL-INTEREST-ON-BONDS> 486,791
<CASH-FLOW-OPERATIONS> 1,701,455
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
