PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JANUARY 6, 1998)
$425,000,000
TXU ELECTRIC COMPANY
FIRST MORTGAGE BONDS,
FLOATING RATE SERIES B DUE DECEMBER 20, 2002
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TXU Electric Company will pay interest on these securities on March 20,
June 20, September 20 and December 20 of each year, commencing March 20, 2001.
Except in certain circumstances described in this prospectus supplement, the per
annum interest rate on these securities for each interest period will be reset
quarterly based on three month LIBOR plus .75%.
These securities shall not be redeemable prior to June 20, 2001. On or
after June 20, 2001, TXU Electric Company may redeem these securities, at its
option, in whole but not in part, on the 20th day of any calendar month prior to
the maturity of these securities, upon 30 days' notice, at a redemption price
equal to 100% of the principal amount of the securities plus accrued and unpaid
interest thereon, if any.
These securities are secured by the lien of TXU Electric Company's mortgage
and rank equally with all of TXU Electric Company's first mortgage bonds.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS ARE TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
The underwriters propose to offer these securities from time to time for
sale in negotiated transactions, or otherwise, initially at 100% of the
principal amount thereof and thereafter at varying prices to be determined at
the time of each sale. The underwriters have agreed to purchase these securities
from TXU Electric Company at 99.75% of their aggregate principal amount (which
results in $423,937,500 aggregate proceeds to TXU Electric Company before
deducting its expenses), subject to the terms and conditions set forth in the
underwriting agreement. See "Underwriting" herein. The underwriters expect to
deliver these securities through the book-entry facilities of The Depository
Trust Company on or about December 20, 2000.
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Joint Bookrunners
Lehman Brothers Morgan Stanley Dean Witter
December 14, 2000
TABLE OF CONTENTS
PAGE
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PROSPECTUS SUPPLEMENT
About this Prospectus Supplement..................................... S-2
TXU Electric Company................................................. S-3
Summary of Historical Consolidated Financial Information of
TXU Electric Company and its Subsidiaries....................... S-5
Use of Proceeds...................................................... S-6
Certain Terms of the Offered Bonds................................... S-6
Material United States Federal Income Tax Consequences............... S-9
Underwriting......................................................... S-10
Experts.............................................................. S-11
PROSPECTUS
Incorporation of Certain Documents by Reference........................ 2
Available Information................................................ 2
The Company.......................................................... 3
Use of Proceeds...................................................... 4
Ratio of Earnings to Fixed Charges................................... 4
Description of New Bonds............................................. 4
Description of New Debt Securities................................... 7
Experts and Legality................................................. 13
Plan of Distribution................................................. 14
ABOUT THIS PROSPECTUS SUPPLEMENT
You should read this prospectus supplement along with the prospectus that
follows. You should rely only on the information incorporated by reference or
provided in this prospectus supplement or in the accompanying prospectus. TXU
Electric Company has not authorized anyone else to provide you with different
information. TXU Electric Company is not making an offer of these securities in
any jurisdiction where the offer or sale is not permitted. You should not assume
that the information in this prospectus supplement or in the accompanying
prospectus is accurate as of any date other than the date on the front of those
documents.
S-2
TXU ELECTRIC COMPANY
The information in this section adds to the information in the "The
Company" section on page 3 of the accompanying prospectus. Please read these two
sections together.
On June 14, 1999, Texas Utilities Electric Company changed its name to TXU
Electric Company. TXU Electric Company is an electric utility engaged in the
generation, purchase, transmission, distribution and sale of electric energy
solely within the State of Texas. TXU Electric Company is a wholly-owned
subsidiary of TXU Corp., a Texas corporation. TXU Corp. is a multinational
energy services holding company with operations primarily in the United States,
Europe and Australia. Through its direct and indirect subsidiaries, TXU Corp.
engages in the generation, purchase, transmission, distribution and sale of
electricity; the purchase, transmission, distribution and sale of natural gas;
energy marketing; and energy services, telecommunications and other businesses.
TXU Electric Company's service area is located in the north central,
eastern and western parts of Texas, with a population estimated at 6.1 million -
about one-third of the population of Texas. Electric service is provided to
approximately 2.6 million customers in 92 counties and 370 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. The service territory also includes the
Dallas-Fort Worth International Airport and the Alliance Airport.
The principal executive offices of TXU Electric Company are located at
Energy Plaza, 1601 Bryan Street, Dallas, Texas 75201; the telephone number is
(214) 812-4600.
Electric Industry Restructuring. Legislation was passed during the 1999
session of the Texas Legislature that will restructure the electric utility
industry in Texas (1999 Restructuring Legislation). Among other matters, the
legislation incorporates the concept contained in the stipulation in Docket No.
18490 that earnings in excess of the earnings cap be used as mitigation to the
cost of nuclear production assets (see Note 13 to Financial Statements in TXU
Electric Company's Annual Report on Form 10-K for the year ended December 31,
1999); authorizes competition in the retail and generation markets for
electricity beginning January 1, 2002; provides for the recovery of
generation-related and purchased power related stranded costs and
generation-related regulatory assets; requires reductions in nitrogen oxide
(NOx) and sulfur dioxide (SO2) emissions; requires a rate freeze for all retail
customers until January 1, 2002 and certain rate reductions for residential and
small commercial customers for up to five years thereafter; and sets certain
limits on capacity owned and controlled by power generation companies. Each
electric utility must separate from its regulated activities its customer energy
services business activities that are otherwise already widely available in the
competitive market. By January 1, 2002, each electric utility must separate
(unbundle) its business into the following units: a power generation company, a
retail electric provider and a transmission and distribution company or separate
transmission and distribution companies. A power generation company generates
electricity that is intended to be sold at wholesale. In general, a power
generation company may not own a transmission or distribution facility and may
not have a certificated service area. A retail electric provider sells electric
energy to retail customers and may not own or operate generation assets. A
transmission and distribution (T&D) company may only own or operate facilities
to transmit or distribute electricity. TXU Electric Company and each other
electric utility in Texas have filed with the Public Utility Commission of Texas
(PUC) a separation of their costs into competitive and regulated components,
proposed tariffs for their proposed T&D utility, and an initial estimate of
their generation-related stranded costs.
In October 1999, the TXU Electric Company filed a petition with the PUC for
a financing order (Docket No. 21527) to permit the issuance by a special purpose
entity of $1.65 billion of transition bonds secured by payments designed to
enable TXU Electric Company to recover its generation-related regulatory assets
and other qualified costs in accordance with the 1999 Restructuring Legislation.
On May 1, 2000, the PUC signed a final order rejecting TXU Electric Company's
request for the $1.65 billion and authorized only $363 million. TXU Electric
Company filed an appeal on May 2, 2000 with the Travis County, Texas District
Court.
S-3
On September 7, 2000, the Travis County, Texas District Court issued a
final judgment reversing that part of the PUC's financing order that utilized
regulated asset life (up to 40 years) for purposes of present-valuing the
benefits of securitization. Instead, the District Court ruled that a
present-value period based upon stranded cost and regulatory asset recovery
periods authorized under the 1999 Restructuring Legislation should have been
used by the PUC. The District Court also ruled that the PUC statements in its
financing order concerning the future impact of securitization of loss on
reacquired debt were only an advisory opinion. The judgment affirmed other
aspects of the PUC's financing order and ordered the case remanded to the PUC
for further proceedings consistent with the judgment. TXU Electric Company and
various other parties have appealed this judgment directly to the Texas Supreme
Court. TXU Electric Company expects that any difference between the $1.65
billion and the amount finally authorized will continue to be deferred until
recovery of generation-related assets is again addressed by the PUC, most likely
in 2001. TXU Electric Company is unable to predict the outcome of these
proceedings.
The constitutionality of the securitization provisions of the 1999
Restructuring Legislation under the Texas constitution has been challenged in
connection with a securitization request made by Central Power and Light
Company. In July 2000, the Travis County, Texas District Court issued its
judgment denying this appeal and finding that the securitization provisions are
constitutional. This judgment has been appealed directly to the Texas Supreme
Court. TXU Electric Company is unable to predict the outcome of such
proceedings.
In January 2000, TXU Electric Company filed with the PUC its business
separation plan as required by the 1999 Restructuring Legislation. This plan
described how TXU Electric Company proposed to separate, by September 1, 2000,
the provision of competitive energy services from its regulated business
activities and how it plans to unbundle its business by January 1, 2002 in
accordance with the 1999 Restructuring Legislation. Only the T&D functions will
continue to be regulated. An independent organization certified by the PUC will
oversee transmission system planning and reliability in the State of Texas.
Beginning January 1, 2002, retail electric customers in Texas will be able to
select their electricity providers. The portion of this plan that describes how
TXU Electric Company proposed to separate the provision of competitive energy
services from its regulated business activities has been severed by the PUC from
Docket No. 21950 and assigned Docket No. 21987. In April 2000, TXU Electric
Company and certain other parties to Docket No. 21987 filed with the PUC a
nonunanimous stipulation concerning matters at issue in that proceeding. In June
2000, the PUC issued an order in Docket No. 21987 approving this stipulation and
the TXU Electric Company plan, as modified by this stipulation.
As required by the 1999 Restructuring Legislation, in March 2000, TXU
Electric Company filed its transition to competition plan with the PUC (Docket
No. 22350). This plan lays the foundation for retail competition to begin in the
Texas electricity market. Under the plan as filed, the generation business unit
and the retail business unit of TXU Electric Company will become unregulated
entities and will be allowed to compete for customers. The T&D business units of
TXU Electric Company will be separated into regulated entities and will together
represent the regulated part of the business. The filing also includes proposed
T&D delivery rates to be charged to retail electric providers. In addition to
the actual T&D charges for delivering electricity, these rates include nuclear
decommissioning fund charges, system benefit fund charges and stranded cost
recovery charges. In that March 2000 filing, TXU Electric Company's stranded
costs were estimated to be approximately $3.7 billion, including the regulatory
assets that were part of the Docket No. 21527 proceedings and amounts related to
the remand of Docket No. 9300 (see TXU Electric Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 2000). TXU Electric Company filed
an updated stranded cost estimate on August 28, 2000, to reflect various PUC
decisions made since Docket No. 22350 was filed. In the August 28, 2000 filing,
TXU Electric Company's stranded costs were estimated to be $2.8 billion.
Subsequent to the August 2000 filing, the PUC has required TXU Electric Company
to revise the stranded cost estimate to remove amounts related to regulatory
assets, certain environmental expenditures, and the remand of Docket No. 9300,
which resulted in a revised stranded cost estimate of $14 million. TXU Electric
Company has appealed certain of the PUC's decisions related to this matter to
the Travis County, Texas District Court. Various parties to Docket No. 22350
have presented stranded cost estimates ranging from negative $1.5 billion to
negative $3.5 billion along with recommendations that these amounts be returned
to customers beginning in 2002. The estimate established in Docket No. 22350 is
subject to a future "true-up" in 2004. TXU Electric Company is unable to predict
the outcome of these proceedings.
S-4
SUMMARY OF HISTORICAL CONSOLIDATED FINANCIAL
INFORMATION OF TXU ELECTRIC COMPANY AND ITS SUBSIDIARIES
(MILLIONS OF DOLLARS, EXCEPT RATIOS AND PERCENTAGES)
The following material, which is presented in this prospectus supplement
solely to furnish limited introductory information, is qualified by, and should
be considered in conjunction with, the more detailed information appearing in
this prospectus supplement, the prospectus and the documents incorporated by
reference in the prospectus. In the opinion of TXU Electric Company, all
adjustments (constituting only normal recurring accruals) necessary for a fair
statement of the results of operations for the nine months ended September 30,
2000, have been made.
TWELVE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
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1995 1996 1997 1998 1999 1999 2000
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(UNAUDITED)
Income statement data:
Operating Revenues.... $5,560 $6,030 $6,135 $6,488 $6,207 $4,847 $5,479
Net Income available
for Common Stock.... $368 $809 $745 $785 $769 $695 $724
Ratio of Earnings to
Fixed Charges....... 2.0 3.0 2.9 3.3 3.2 3.6 4.0
ADJUSTED (A)
OUTSTANDING AT -------------------
SEPTEMBER 30, 2000 AMOUNT PERCENT
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Capitalization (Unaudited):
Common Stock Equity................................... $6,818 $6,818 53.0%
Preferred Stock:
Not subject to mandatory redemption.................. 115 115 0.9%
Subject to mandatory redemption...................... 21 21 0.2%
TXU Electric Company obligated, mandatorily
redeemable preferred securities of subsidiary trusts
holding solely junior subordinated debentures of
TXU Electric Company: ............................... 829 829 6.4%
Long-term debt, less amounts due currently............. 4,508 5,083 39.5%
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Total capitalization................................. $12,291 $12,866 100.0%
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(a) To give effect to the issuance of $150,000,000 in principal amount of First
Mortgage Bonds, Floating Rate Series A due December 20, 2002 and to the
issuance of $425,000,000 in principal amount of First Mortgage Bonds,
Floating Rate Series B due December 20, 2002. Adjusted amounts do not
reflect any possible future sales by TXU Electric Company of up to
$25,000,000 of its cumulative preferred stock, for which a registration
statement is effective under Rule 415 of the Securities Act of 1933.
S-5
USE OF PROCEEDS
The information in this section adds to the information in the "Use of
Proceeds" section on page 4 of the accompanying prospectus. Please read these
two sections together.
The First Mortgage Bonds, Floating Rate Series B due December 20, 2002, are
referred to in this prospectus supplement as the "Offered Bonds." By means of a
separate prospectus supplement TXU Electric Company is offering
contemporaneously herewith, $150,000,000 in principal amount of its First
Mortgage Bonds, Floating Rate Series A due December 20, 2002 (Other Bonds). The
issuance of each series is not contingent on the other.
TXU Electric Company intends to use the proceeds from the sale of the
Offered Bonds and the Other Bonds to repay borrowings from affiliates and for
other corporate purposes. At December 13, 2000, TXU Electric Company had $503
million of borrowings from affiliates outstanding at an interest rate of 7.23%.
CERTAIN TERMS OF THE OFFERED BONDS
The information in this section adds to the information in the "Description
of New Bonds" section beginning on page 4 of the accompanying prospectus. Please
read these two sections together.
General. TXU Electric Company will issue the Offered Bonds as a new series
of First Mortgage Bonds under the Mortgage (as defined in the accompanying
prospectus). The Sixtieth Supplemental Indenture, dated as of December 1, 2000,
supplements the Mortgage and establishes the specific terms of the Offered
Bonds.
Interest. Interest on the Offered Bonds will:
o Be payable in U.S. dollars at rates determined quarterly as described
below;
o Be computed for each interest period on the basis of a year consisting
of 360 days and paid for the actual number of days for which interest
is payable in that interest period;
o Be payable quarterly in arrears on March 20, June 20, September 20,
and December 20, of each year, commencing March 20, 2001, and at
maturity;
o Originally accrue from, and include, the date of initial issuance
(expected to be on or about December 20, 2000); and
o Be paid to the persons in whose names the Offered Bonds are registered
at the close of business (1) on the business day prior to each
interest payment date if the Offered Bonds remain in book-entry only
form or (2) on the 15th calendar day before each interest payment date
if the Offered Bonds do not remain in book-entry only form. See
"Book-Entry Only Issuance--The Depository Trust Company" below.
The Offered Bonds will bear interest for each interest period at a per
annum interest rate determined by The Bank of New York, or its successor
appointed by TXU Electric Company as permitted by the Mortgage, acting as
Calculation Agent. The interest rate for each interest period will be equal to
three month LIBOR on the interest determination date for that interest period
plus .75%. Promptly upon determination, the Calculation Agent will notify the
Mortgage Trustee of the interest rate for the new interest period. The interest
rate determined by the Calculation Agent, absent wilful default, bad faith or
manifest error, will be binding and conclusive upon the beneficial owners and
holders of the Offered Bonds, TXU Electric Company and the Mortgage Trustee.
The period commencing on an interest payment date and ending on the day
preceding the next succeeding interest payment date is called an "interest
period," provided that the initial interest period will commence on the date of
initial issuance. The "interest determination date" for an interest period is
the second London business day immediately preceding the first day of that
interest period.
S-6
For purposes of this calculation, "London business day" means any day on
which dealings in deposits in U.S. dollars are transacted, or, with respect to
any future date, are expected to be transacted, in the London interbank market.
"LIBOR" for any interest determination date will be the rate for deposits
in U.S. dollars having a maturity of three months for a period commencing on the
second London business day immediately following the interest determination date
(Three Month Deposits), as that rate appears on Telerate Page 3750, or a
successor reporter of such rates selected by the Calculation Agent and
acceptable to TXU Electric Company, at approximately 11:00 a.m., London time, on
the interest determination date (Reported Rate); provided, however, that in
certain circumstances described below, LIBOR will be determined in an
alternative manner.
"Telerate Page 3750" means the display designated as Page 3750 on Bridge
Telerate, Inc. or any successor service, for the purpose of displaying London
interbank rates of major banks for U.S. dollar deposits.
If the following circumstances exist on any interest determination date,
LIBOR for the Offered Bonds will be determined by the Calculation Agent as
follows:
o In the event no Reported Rate appears on Telerate Page 3750 as of
approximately 11:00 a.m., London time, on an interest determination
date, the Calculation Agent will request the principal London offices
of each of four major banks in the London interbank market selected by
the Calculation Agent (after consultation with TXU Electric Company)
to provide a quotation of the rate at which Three Month Deposits are
offered by it to prime banks in the London interbank market, as of
approximately 11:00 a.m., London time, on that interest determination
date, that is representative of single transactions at that time
(Representative Amounts). If at least two rate quotations are
provided, LIBOR will be the arithmetic mean of the rate quotations
obtained by the Calculation Agent.
o In the event no Reported Rate appears on Telerate Page 3750 and the
Calculation Agent obtains fewer than two rate quotations, LIBOR will
be the arithmetic mean of the rates quoted at approximately 11:00
a.m., New York City time, on that interest determination date, by
three major banks in New York City, selected by the Calculation Agent
(after consultation with TXU Electric Company), for Three Month
Deposits in Representative Amounts to leading European banks,
commencing on the second London business day immediately following
that interest determination date; provided, however, that if fewer
than three banks selected by the Calculation Agent are quoting those
rates, LIBOR for the applicable interest period will be the same as
LIBOR in effect for the immediately preceding interest period.
Upon the request of the holder of any of the Offered Bonds, the Calculation
Agent will provide to that holder the interest rate in effect on the date of the
request and, if determined, the interest rate for the next interest period.
Issuance of Additional Bonds. As of September 30, 2000, unfunded net
Property Additions (as defined in the accompanying prospectus) of approximately
$8.97 billion were available under the Mortgage. Up to approximately $6.28
billion aggregate principal amount of First Mortgage Bonds could be issued based
on such property additions. In addition, approximately $4.75 billion aggregate
principal amount of First Mortgage Bonds could be issued on the basis of First
Mortgage Bonds that have been retired, subject, where applicable, to the
earnings test and other requirements of the Mortgage.
Redemption. The Offered Bonds shall not be redeemable prior to June 20,
2001. On or after June 20, 2001, TXU Electric Company may redeem the Offered
Bonds, at its option, in whole but not in part on the 20th day of any calendar
month prior to the maturity of the Offered Bonds (each a Redemption Date). TXU
Electric Company will give notice of its intent to redeem the Offered Bonds 30
days prior to a Redemption Date. If TXU Electric Company redeems the Offered
Bonds, it will pay a redemption price equal to 100% of the principal amount of
the Offered Bonds plus accrued and unpaid interest thereon, if any, to the
Redemption Date.
S-7
Book-Entry Only Issuance--The Depository Trust Company. The Offered Bonds
will trade through DTC. The Offered Bonds will be represented by a global
certificate and registered in the name of Cede & Co., DTC's nominee.
DTC is a New York clearing corporation and a clearing agency registered
under Section 17A of the Securities Exchange Act of 1934. DTC holds securities
for its participants. DTC facilitates settlement of securities transactions
among its participants through electronic computerized book-entry changes in the
participants' accounts. This eliminates the need for physical movement of
securities certificates. The participants include securities brokers and
dealers, banks, trust companies and clearing corporations. DTC is owned by a
number of its participants and by the New York Stock Exchange, Inc., the
American Stock Exchange LLC, and the National Association of Securities Dealers,
Inc. Others who maintain a custodial relationship with a participant can use the
DTC system. The rules that apply to DTC and those using its systems are on file
with the Securities and Exchange Commission.
Purchases of the Offered Bonds within the DTC system must be made through
participants, which will receive a credit for the Offered Bonds on DTC's
records. The beneficial ownership interest of each purchaser will be recorded on
the participants' records. Beneficial owners will not receive written
confirmation from DTC of their purchases, but beneficial owners should receive
written confirmations of the transactions, as well as periodic statements of
their holdings, from the participants through which they purchased Offered
Bonds. Beneficial owners will not receive certificates for their Offered Bonds,
except if use of the book-entry system for the Offered Bonds is discontinued.
To facilitate subsequent transfers, all Offered Bonds deposited by
participants with DTC are registered in the name of DTC's nominee, Cede & Co.
The deposit of the Offered Bonds with DTC and their registration in the name of
Cede & Co. effects no change in beneficial ownership. DTC has no knowledge of
the actual beneficial owners of the Offered Bonds. DTC's records reflect only
the identity of the participants to whose accounts such Offered Bonds are
credited. These participants may or may not be the beneficial owners.
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
Conveyance of notices and other communications by DTC to participants, and
by participants to beneficial owners, will be governed by arrangements among
them. Redemption notices will be sent to Cede & Co.
Neither DTC nor Cede & Co. will itself consent or vote with respect to
Offered Bonds. Under its usual procedures, DTC would mail an omnibus proxy to
TXU Electric Company as soon as possible after the record date. The omnibus
proxy assigns the consenting or voting rights of Cede & Co. to those
participants to whose accounts the Offered Bonds are credited on the record
date. TXU Electric Company believes that these arrangements will enable the
beneficial owners to exercise rights equivalent in substance to the rights that
can be directly exercised by a registered holder of the Offered Bonds.
Payments of redemption proceeds, principal of, and interest on the Offered
Bonds will be made to DTC. DTC's practice is to credit participants' accounts on
the relevant payment date in accordance with their respective holdings shown on
DTC's records unless DTC has reason to believe that it will not receive payments
on that payment date. Payments by participants to beneficial owners will be
governed by standing instructions and customary practices. Payments will be the
responsibility of participants and not of DTC, The Bank of New York or TXU
Electric Company. Payment of redemption proceeds, principal and interest to DTC
is the responsibility of TXU Electric Company. Disbursement of payments to
participants is the responsibility of DTC, and disbursement of payments to the
beneficial owners is the responsibility of participants.
Except as provided in this prospectus supplement, a beneficial owner will
not be entitled to receive physical delivery of the Offered Bonds. Accordingly,
each beneficial owner must rely on the procedures of DTC to exercise any rights
under the Offered Bonds.
DTC may discontinue providing its services as securities depository with
respect to the Offered Bonds at any time by giving reasonable notice to TXU
Electric Company. In the event no successor securities depository is obtained,
certificates for the Offered Bonds will be printed and delivered. If TXU
Electric Company decides to discontinue use of the DTC system of book-entry
transfers, certificates for the Offered Bonds will be printed and delivered.
S-8
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that TXU Electric Company believes to be
reliable, but TXU Electric Company does not take responsibility for the accuracy
of this information.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary describes certain United States federal income tax
consequences of the purchase, ownership and disposition of the Offered Bonds as
of the date hereof and represents the opinion of Thelen Reid & Priest LLP,
counsel to TXU Electric Company, insofar as it relates to matters of law or
legal conclusions. Except where noted, it deals only with Offered Bonds held as
capital assets and does not deal with special situations, such as those of
dealers in securities or currencies, financial institutions, life insurance
companies, persons holding Offered Bonds as a part of a hedging or conversion
transaction or a straddle, or persons who are not United States Holders (as
defined herein). In addition, this discussion does not address the tax
consequences to persons who purchase Offered Bonds other than pursuant to their
initial issuance and distribution. Furthermore, the discussion below is based
upon the provisions of the Internal Revenue Code of 1986 and regulations,
rulings and judicial decisions thereunder as of the date hereof, and such
authorities may be repealed, revoked or modified at any time, with either
forward-looking or retroactive effect, so as to result in United States federal
income tax consequences different from those discussed below. The opinion of
Thelen Reid & Priest LLP is not binding on the Internal Revenue Service (IRS) or
the courts.
PROSPECTIVE PURCHASERS OF OFFERED BONDS, INCLUDING PERSONS WHO ARE NOT
UNITED STATES HOLDERS (AS DEFINED HEREIN) AND PERSONS WHO PURCHASE OFFERED BONDS
IN THE SECONDARY MARKET, ARE ADVISED TO CONSULT WITH THEIR TAX ADVISORS AS TO
THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF OFFERED BONDS IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, AS WELL
AS THE EFFECT OF ANY STATE, LOCAL OR OTHER TAX LAWS.
United States Holders. As used herein, a "United States Holder" means a
beneficial owner of an Offered Bond that (i) is a citizen or resident of the
United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or any political subdivision
thereof, (iii) an estate the income of which is subject to United States federal
income taxation regardless of its source, or (iv) a trust the administration of
which is subject to the primary supervision of a court within the United States
and for which one or more United States persons have the authority to control
all substantial decisions.
Payments of Interest. Stated interest on an Offered Bond will generally be
taxable to a United States Holder as ordinary income at the time it is paid or
accrued in accordance with the United States Holder's method of accounting for
tax purposes.
Sale, Exchange and Redemption of the Offered Bonds. Upon the sale, exchange
or redemption of Offered Bonds, a United States Holder will recognize gain or
loss equal to the difference between such holder's adjusted tax basis in the
Offered Bonds and the amount realized upon the sale, exchange or redemption,
other than amounts attributable to accrued but unpaid interest. Such gain or
loss will be capital gain or loss. A United States Holder's adjusted tax basis
will be, in general, the issue price of the Offered Bonds. In the case of an
individual United States Holder, any capital gain recognized upon the sale,
exchange or redemption of the Offered Bonds will generally be subject to United
States federal income tax at a maximum rate of (i) 20%, if the United States
Holder's holding period in the Offered Bonds is more than one year at the time
of such sale, exchange or redemption, and (ii) ordinary graduated rates if the
United States Holder's holding period in the Offered Bonds is one year or less
at the time of the sale, exchange or redemption. The ability to use capital
losses to offset ordinary income in determining taxable income is generally
limited.
Information Reporting and Backup Withholding. Subject to the qualification
discussed below, income on the Offered Bonds will be reported to United States
Holders on Forms 1099, which should be mailed to such holders by January 31
following each calendar year.
If required by law, TXU Electric Company will report annually to the
holders of record of the Offered Bonds the interest income paid or accrued
during the year with respect to the Offered Bonds. TXU Electric Company
S-9
currently intends to report that information on Form 1099 by January 31
following each calendar year. Under current law, holders of record of the
Offered Bonds who hold as nominees for beneficial holders will not have any
obligation to report information regarding the beneficial holders to TXU
Electric Company. TXU Electric Company, moreover, will not have any obligation
to report to beneficial holders who are not also record holders. Thus,
beneficial holders of the Offered Bonds who hold their Offered Bonds through
nominee holders will typically receive Forms 1099 reflecting the income on their
Offered Bonds from the nominee holders rather than from TXU Electric Company.
Payments made in respect of, and proceeds from the sale of, the Offered
Bonds may be subject to "backup" withholding tax of 31% if the United States
Holder fails to comply with specified identification requirements, or has
previously failed to report in full dividend and interest income, or does not
otherwise establish its entitlement to an exemption. Any withheld amounts will
be allowed as a refund or a credit against such holder's United States federal
income tax liability, provided the required information is provided to the IRS.
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
dated the date of this prospectus supplement among TXU Electric Company and the
underwriters named below, TXU Electric Company has agreed to sell to each of the
underwriters, and each of the underwriters has severally agreed to purchase, the
respective principal amount of Offered Bonds set forth opposite that
underwriter's name in the table below:
PRINCIPAL AMOUNT
UNDERWRITER OF OFFERED BONDS
----------- ----------------
Lehman Brothers Inc.......................... $212,500,000
Morgan Stanley & Co. Incorporated............ $212,500,000
------------
Total........................................ $425,000,000
============
In the underwriting agreement, the underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Offered Bonds
offered hereby if any of the Offered Bonds are purchased. The underwriting
agreement provides that the obligations of the underwriters pursuant thereto are
subject to certain conditions. In the event of a default by an underwriter, the
underwriting agreement provides that, in certain circumstances, the purchase
commitment of the non-defaulting underwriter may be increased or the
underwriting agreement may be terminated. The underwriters will sell the Offered
Bonds to the public when and if the underwriters buy the Offered Bonds from TXU
Electric Company.
The underwriters propose to offer these securities from time to time for
sale in negotiated transactions, or otherwise, initially at 100% of the
principal amount thereof and thereafter at varying prices to be determined at
the time of each sale. The underwriters have agreed to purchase the Offered
Bonds from TXU Electric Company at 99.75% of their aggregate principal amount.
In connection with the sale of the Offered Bonds, the underwriters may be deemed
to have received compensation from TXU Electric Company in the form of
underwriting discounts. The underwriting discount computed as the difference
between the initial offering price and the purchase price paid to TXU Electric
Company by the underwriters is .25% of the aggregate principal amount of the
Offered Bonds.
TXU Electric Company does not plan to list the Offered Bonds on any
securities exchange and there is no established trading market for the Offered
Bonds. The underwriters have advised TXU Electric Company that they intend to
make a market in the Offered Bonds. The underwriters are not obligated to do so,
however, and may discontinue their market making at any time without notice. No
assurance can be given as to the liquidity of the trading market for the Offered
Bonds.
In order to facilitate the offering of the Offered Bonds, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Offered Bonds. Specifically, the underwriters may overallot in
S-10
connection with the offering, creating a short position in the Offered Bonds for
their own account. In addition, to cover overallotments or to stabilize the
price of the Offered Bonds, the underwriters may bid for, and purchase, Offered
Bonds in the open market. Any of these activities may stabilize or maintain the
market price for the Offered Bonds above independent market levels. The
underwriters are not required to engage in these activities and may end any of
these activities at any time.
TXU Electric Company estimates that its expenses in connection with the
offer and sale of the Offered Bonds will be $250,000.
TXU Electric Company has agreed to indemnify the underwriters against, or
contribute to payments the underwriters may be required to make in respect of,
certain liabilities, including liabilities under the Securities Act of 1933.
Certain of the underwriters and their respective affiliates have, from time
to time, performed various investment or commercial banking and financial
advisory services for TXU Electric Company and its affiliates in the ordinary
course of business. In addition the underwriters are acting as the underwriters
of TXU Electric Company's contemporaneous offering of $150,000,000 in principal
amount of First Mortgage Bonds, Floating Rate Series A due December 20, 2002.
EXPERTS
The information in this section adds to the information in the "Experts and
Legality" section beginning on page 13 of the accompanying prospectus. Please
read these two sections together.
The consolidated financial statements of TXU Electric Company and
subsidiaries included in the Annual Report of TXU Electric Company on Form 10-K
for the year ended December 31, 1999, incorporated herein by reference, have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
report included in said latest Annual Report of TXU Electric Company on Form
10-K, and have been incorporated by reference herein in reliance upon the report
of such firm given upon their authority as experts in accounting and auditing.
S-11
PROSPECTUS
$498,850,000
TEXAS UTILITIES ELECTRIC COMPANY
FIRST MORTGAGE BONDS
DEBT SECURITIES
Texas Utilities Electric Company (Company) intends to offer from time to
time up to $498,850,000 in aggregate principal amount of (i) its First Mortgage
Bonds (New Bonds), (ii) unsecured debt securities of the Company consisting of
debentures, notes or other unsecured evidence of indebtedness (New Debt
Securities), or (iii) any combination of the foregoing, in one or more series at
prices and on terms to be determined at the time of sale. New Bonds and New Debt
Securities are collectively referred to herein as "Securities."
For each issue of Securities for which this Prospectus is being delivered
(Offered Bonds or Offered Debt Securities, as the case may be, and, together,
Offered Securities) there will be an accompanying Prospectus Supplement
(Prospectus Supplement) that sets forth, without limitation and to the extent
applicable, the specific designation, aggregate principal amount, denomination,
maturity, premium, if any, rate of interest (which may be fixed or variable) or
method of calculation thereof, time of payment of interest, any terms for
redemption, any sinking fund provisions, the initial public offering price, the
principal amounts, if any, to be purchased by underwriters and any other special
terms of the Offered Securities.
The Company may sell the Securities through underwriters, dealers or
agents, or directly to one or more of a limited number of purchasers. If any
agents of the Company or any underwriters are involved in the sales of the
Offered Securities, the names of such agents or such underwriters and any
applicable commissions or discounts will be set forth in the Prospectus
Supplement. See PLAN OF DISTRIBUTION for possible indemnification arrangements
for underwriters and agents.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is January 6, 1998.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Securities and
Exchange Commission (Commission) pursuant to the Securities Exchange Act of
1934, as amended (1934 Act), are incorporated herein by reference:
1. Annual Report on Form 10-K for the year ended December 31, 1996 (1996
10-K).
2. Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997,
June 30, 1997 and September 30, 1997.
3. Current Reports on Form 8-K, dated March 31, 1997 and December 17,
1997.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the 1934 Act and prior to the termination of the offering
hereunder shall be deemed to be incorporated by reference in this Prospectus and
to be a part hereof from the date of filing of such documents; provided,
however, that the documents enumerated above or subsequently filed by the
Company pursuant to Section 13 of the 1934 Act prior to the filing with the
Commission of the Company's most recent Annual Report on Form 10-K shall not be
incorporated by reference in this Prospectus or be a part hereof from and after
the filing of such Annual Report on Form 10-K. The documents which are
incorporated by reference in this Prospectus are sometimes hereinafter referred
to as the "Incorporated Documents."
Any statement contained in an Incorporated Document shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which is
deemed to be incorporated by reference herein or in the Prospectus Supplement
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
THE COMPANY HEREBY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH PERSON,
INCLUDING ANY BENEFICIAL OWNER, TO WHOM A COPY OF THIS PROSPECTUS HAS BEEN
DELIVERED, UPON WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A COPY OF ANY AND
ALL OF THE INCORPORATED DOCUMENTS WHICH HAVE BEEN OR MAY BE INCORPORATED IN THIS
PROSPECTUS BY REFERENCE, OTHER THAN EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH
EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS).
REQUESTS SHOULD BE DIRECTED TO: SECRETARY, TEXAS UTILITIES ELECTRIC COMPANY,
ENERGY PLAZA, 1601 BRYAN STREET, DALLAS, TEXAS 75201, TELEPHONE NUMBER (214)
812-4600.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the 1934 Act
and in accordance therewith files reports, proxy and information statements and
other information with the Commission. Such reports, proxy and information
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following
Regional Offices of the Commission: Chicago Regional Office, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511; and New York Regional Office,
7 World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material can also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. In addition, the Commission maintains a World Wide Web site
(http://www.sec.gov) that contains reports, proxy and information statements,
and other information filed by the Company. Certain Depositary Shares
representing fractional interests in shares of cumulative preferred stock of the
Company and preferred securities of certain subsidiary trusts of the Company are
listed on the New York Stock Exchange, where reports and other information
concerning the Company may be inspected.
2
Securityholders of the Company may obtain, upon request, copies of an
Annual Report on Form 10-K containing financial statements as of the end of the
most recent fiscal year audited and reported upon (with an opinion expressed) by
independent auditors.
THE COMPANY
The Company was incorporated under the laws of the State of Texas in 1982
and has perpetual existence under the provisions of the Texas Business
Corporation Act. The Company is an electric utility engaged in the generation,
purchase, transmission, distribution and sale of electric energy wholly within
the State of Texas. The principal executive offices of the Company are located
at Energy Plaza, 1601 Bryan Street, Dallas, Texas 75201; the telephone number is
(214) 812-4600.
The Company's service area covers 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. It also includes the
Dallas-Fort Worth International Airport and the Alliance Airport.
The Company is the principal subsidiary of Texas Energy Industries, Inc.
(TEI), which is a subsidiary of the newly formed holding company, Texas
Utilities Company (Texas Utilities). The other electric utility subsidiaries of
TEI are Southwestern Electric Service Company, which is engaged in the purchase,
transmission, distribution and sale of electric energy in ten counties in the
eastern and central parts of Texas with a population estimated at 126,900, and
Texas Utilities Australia Pty. Ltd., owner of Eastern Energy Limited, which is
engaged in the purchase, distribution, marketing and sale of electric energy to
approximately 481,000 customers in the State of Victoria, Australia. TEI also
has three other subsidiaries which perform specialized functions within the
Texas Utilities system: Texas Utilities Fuel Company owns a natural gas pipeline
system, acquires, stores and delivers fuel gas and provides other fuel services
at cost for the generation of electric energy by the Company; Texas Utilities
Mining Company owns, leases and operates fuel production facilities for the
surface mining and recovery of lignite at cost for the generation of electric
energy by the Company; and Texas Utilities Services Inc. provides financial,
accounting, information technology, environmental services, customer services,
personnel, procurement and other administrative services at cost. In August
1997, Texas Utilities became the holding company for both TEI and ENSERCH
Corporation (ENSERCH). Pursuant to the transaction, Lone Star Gas Company and
Lone Star Pipeline Company, the local distribution and pipeline divisions of
ENSERCH, and other businesses, excluding Enserch Exploration Inc. and Lone Star
Energy Plant Operations, Inc., formerly subsidiaries of ENSERCH , were acquired
by Texas Utilities. In addition, in November 1997, Texas Utilities acquired
Lufkin-Conroe Communications Co. (LCC). LCC offers long-distance, cellular,
internet and other services and provides local telephone services in Southeast
Texas.
3
USE OF PROCEEDS
The Company is offering hereby a maximum of $498,850,000 aggregate
principal amount of Securities. The net proceeds to be received by the Company
from the sale of the Securities, together with funds from operations, are
expected to be used for the redemption or repurchase of certain of its
outstanding debt and preferred stock, and may also be used to meet expenditures
for its construction program and for other corporate purposes, including the
repayment of short-term borrowings incurred for similar purposes and outstanding
at the time of any such sale. Proceeds may be temporarily invested in short-term
instruments pending their application to the foregoing purposes.
Reference is made to the Incorporated Documents with respect to the
Company's estimated capital expenditures and its general financing plan and
capabilities. Reference is also made to the Prospectus Supplement applicable to
each series of Offered Securities.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for each of the years ended December
31, 1992 through 1996 and the twelve months ended September 30, 1997 was 2.48,
2.00, 2.45, 2.02, 2.95 and 2.84, respectively. The computation of the ratio of
earnings to fixed charges does not include interest payments made by affiliated
companies on senior notes, which are recovered currently through the fuel
component of rates.
DESCRIPTION OF NEW BONDS
General. The New Bonds are to be issued under the Company's Mortgage and
Deed of Trust, dated as of December 1, 1983, as supplemented, with The Bank of
New York, Trustee (Mortgage Trustee), referred to herein as the "Mortgage."
Whenever particular provisions or defined terms in the Mortgage are referred to
under this DESCRIPTION OF NEW BONDS, such provisions or defined terms are
incorporated by reference herein.
As herein summarized, bonds now or hereafter issued under the Mortgage
(Bonds) are, or will be, secured by a first mortgage Lien on certain property of
the Company. Bonds issued under the Mortgage are equally secured and pari passu.
The Mortgage is an exhibit to the Registration Statement. The statements
herein concerning the Mortgage, the New Bonds and the Bonds are merely an
outline and do not purport to be complete. Such statements include terms defined
in the Mortgage and are qualified in their entirety by reference to the
Mortgage.
The New Bonds will be issuable in the form of fully registered bonds in
denominations of $1,000 and any multiple thereof, unless otherwise specified in
the Prospectus Supplement. The New Bonds may be transferred without charge,
other than for applicable taxes or other governmental charges, at The Bank of
New York, New York, New York.
Maturity and Interest Payments. Reference is made to the Prospectus
Supplement for the date or dates on which the Offered Bonds will mature; the
rate or rates per annum at which the Offered Bonds will bear interest; and the
times at which such interest will be payable.
Redemption, Repayment or Purchase of New Bonds. The New Bonds may be
redeemable, in whole or in part, on not less than 30 days' notice either at the
option of the Company or as required by the Mortgage.
Reference is made to the Prospectus Supplement for the redemption terms, if
any, and other specific terms of the Offered Bonds.
If, at the time notice of redemption is given, the redemption moneys are
not held by the Mortgage Trustee, the redemption may be made subject to their
receipt on or before the date fixed for redemption and such notice shall be of
no effect unless such moneys are so received.
4
While the Mortgage contains provisions for the maintenance of the Mortgaged
and Pledged Property, the Mortgage does not permit redemption of Bonds pursuant
to these provisions. There is no sinking fund under the Mortgage.
Cash deposited under any provisions of the Mortgage may be applied (with
certain exceptions) to the purchase or redemption of Bonds of any series.
(Mortgage, Arts. XII and XIII.)
In addition to or in lieu of any terms of redemption, the Company may grant
holders of a particular series of New Bonds the right to tender their bonds
prior to maturity to the Company for repayment at stated prices and at stated
times. Reference is made to the Prospectus Supplement for the terms of any such
right to tender New Bonds.
Security and Priority. The Bonds issued under the Mortgage will be secured
by a first mortgage Lien of the Mortgage. Substantially all of the Company's
property is subject to the Lien of the Mortgage.
The Lien of the Mortgage is subject to Excepted Encumbrances, including tax
and construction liens, purchase money liens and certain other exceptions.
There are excepted from the Lien of the Mortgage all cash and securities
(except those specifically deposited); equipment, materials or supplies held for
sale or other disposition; any fuel and similar consumable materials and
supplies; automobiles, other vehicles, aircraft and vessels; timber, minerals,
mineral rights and royalties; receivables, contracts, leases and operating
agreements; electric energy, gas, water, steam, ice and other products for sale,
distribution or other use; natural gas wells; and gas transportation lines or
other property used in the sale of natural gas to customers or to a natural gas
distribution or pipeline company, up to the point of connection with any
distribution system.
The Mortgage contains provisions subjecting after-acquired property to the
Lien thereof. These provisions may be limited, at the option of the Company, in
the case of consolidation, merger or sale of substantially all of the Company's
assets. (Mortgage, Sec. 18.03.) In addition, after-acquired property may be
subject to purchase money mortgages and other liens or defects in title.
The Mortgage provides that the Mortgage Trustee shall have a lien upon the
mortgaged property, prior to the Bonds, for the payment of its reasonable
compensation and expenses and for indemnity against certain liabilities.
(Mortgage, Sec. 19.09.)
Issuance of Additional Bonds. The maximum principal amount of Bonds which
may be issued under the Mortgage is not limited. Bonds of any series may be
issued from time to time on the basis of: (1) 70% of qualified Property
Additions after adjustments to offset retirements; (2) retirement of Bonds or
certain prior lien bonds; and/or (3) deposits of cash. With certain exceptions
in the case of (2) above, the issuance of Bonds is subject to Adjusted Net
Earnings of the Company (before income taxes) being, for 12 out of the preceding
15 months, equal to at least twice the Annual Interest Requirements on all Bonds
at the time outstanding, including the additional issue and all other
indebtedness of prior rank. In general, interest on variable interest bonds, if
any, is calculated using the average rate in effect during such 12 month period.
Property Additions generally include electric, gas, steam and/or hot water
utility property but not fuel, securities, automobiles, other vehicles or
aircraft, or property used principally for the production or gathering of
natural gas.
Unfunded net Property Additions, at cost, of approximately
$7,544,000,000.00 were available under the Mortgage as of October 31, 1997. Up
to approximately $5,281,000,000.00 aggregate principal amount of Bonds could be
issued based on such Property Additions. In addition, approximately
$1,738,000,000.00 aggregate principal amount of Bonds could be issued on the
basis of Bonds that have been retired, subject, where applicable, to the
earnings test and other requirements of the Mortgage.
5
The issuance of Bonds on the basis of Property Additions subject to prior
liens is restricted. (Mortgage, Secs. 1.04 to 1.07 and 3.01 to 7.01.)
Release and Substitution of Property. Property subject to the Lien of the
Mortgage may be released upon the basis of: (1) the deposit of cash or, to a
limited extent, purchase money mortgages, (2) Property Additions, after making
adjustments for certain prior lien bonds outstanding against Property Additions,
and/or (3) waiver of the right to issue Bonds. Cash may be withdrawn upon the
bases stated in (2) and (3) above. When property released is not funded
property, Property Additions used to effect the release may be available as
credits under the Mortgage. Similar provisions are in effect as to cash proceeds
of such property. The Mortgage contains special provisions with respect to
certain prior lien bonds deposited and disposition of moneys received on
deposited prior lien bonds. (Mortgage, Secs. 1.05, 7.02, 7.03, 9.05, 10.01 to
10.04 and 13.03 to 13.09.)
Dividend Restrictions. The Mortgage provides that the Company may declare
or pay dividends (other than dividends payable solely in shares of its common
stock) on any shares of its common stock only out of the unreserved and
unrestricted retained earnings of the Company and will not make any such
declaration or payment when the Company is insolvent, or when the payment
thereof would render the Company insolvent. (Mortgage, Sec. 9.07.) The amount
restricted is subject to being increased or decreased on the basis of various
factors, and any restricted retained earnings can be otherwise used by the
Company. Reference is made to the Incorporated Documents for information
relating to other restrictions.
Special Provisions for Retirement of Bonds. If mortgaged property is
condemned or sold (other than in a project to be jointly owned by the Company
and others) to any governmental authority resulting in the receipt of
$50,000,000 or more as proceeds, the Company (subject to certain conditions)
must apply such proceeds, less certain deductions, to the retirement of Bonds.
(Mortgage, Sec. 9.14.)
Modification. The rights of bondholders may be modified with the consent of
holders of 60% of the Bonds, or, if less than all series of Bonds are adversely
affected, the consent of the holders of 60% of the Bonds adversely affected and
(unless Bonds issued prior to 1989 are retired or the holders thereof otherwise
consent) of the holders of a majority of all Bonds. In general, no modification
of the terms of payment of principal, premium, if any, or interest and no
modification affecting the Lien or reducing the percentage required for
modification is effective against any bondholder without such holder's consent.
(Mortgage, Art. XXI.)
Defaults and Notice Thereof. Defaults are defined in the Mortgage as:
default in payment of principal; default for 60 days in payment of interest or
an installment of any fund required to be applied to the purchase or redemption
of any Bonds; default in payment of principal or interest with respect to
certain prior lien bonds; certain events in bankruptcy, insolvency or
reorganization; and default in other covenants for 90 days after notice.
(Mortgage, Sec. 15.01.) The Mortgage Trustee may withhold notice of default
(except in the case of a default in the payment of principal, interest or an
installment of any fund required to be applied to the purchase or redemption of
any Bonds) if it determines that it is in the best interest of the bondholders.
(Mortgage, Sec. 15.02.)
The Mortgage Trustee or the holders of 25% of the Bonds may declare the
principal and interest due and payable on Default, but a majority may annul such
declaration if such Default has been cured. (Mortgage, Sec. 15.03.) No holder of
Bonds may enforce the Lien of the Mortgage without giving the Mortgage Trustee
written notice of a Default and unless the holders of 25% of the Bonds have
requested the Mortgage Trustee to act and have offered it reasonable opportunity
to act and indemnity satisfactory to it against the costs, expenses and
liabilities to be incurred thereby and the Mortgage Trustee shall have failed to
act. (Mortgage, Sec. 15.16.) The holders of a majority of the Bonds may direct
the time, method and place of conducting any proceedings for any remedy
available to the Mortgage Trustee or exercising any trust or power conferred on
the Mortgage Trustee. (Mortgage, Sec. 15.07.) The Mortgage Trustee is not
required to risk its funds or incur personal liability if there is reasonable
ground for believing that repayment is not reasonably assured. (Mortgage, Sec.
19.08.)
Satisfaction and Discharge of Mortgage. Upon the Company's making due
provision for the payment of all of the Bonds and paying all other sums due
under the Mortgage, the Mortgage shall cease to be of further effect and may be
satisfied and discharged of record. (Mortgage, Art. XX.)
6
Evidence to be Furnished to the Mortgage Trustee. Compliance with Mortgage
provisions is evidenced by written statements of Company officers or persons
selected or paid by the Company. In certain cases, opinions of counsel and
certification of an engineer, accountant, appraiser or other expert (who in some
cases must be independent) must be furnished. The Company must give the Mortgage
Trustee an annual statement as to whether or not the Company has fulfilled its
obligations under the Mortgage throughout the preceding calendar year.
DESCRIPTION OF NEW DEBT SECURITIES
The New Debt Securities will be issued in one or more series under an
Indenture (For Unsecured Debt Securities) dated as of August 1, 1997, between
the Company and The Bank of New York, Trustee (Indenture Trustee), referred to
herein as the "Indenture." The following description of the terms of the New
Debt Securities does not purport to be complete and is qualified in its entirety
by reference to (i) the Indenture and (ii) one or more officer's certificates
establishing the New Debt Securities to which a form of Debt Security is
attached. Whenever particular provisions or defined terms in the Indenture are
referred to under this DESCRIPTION OF NEW DEBT SECURITIES, such provisions or
defined terms are incorporated by reference herein.
General. The Indenture provides for the issuance of debentures, notes or
other unsecured evidence of indebtedness, including the New Debt Securities, by
the Company (each a Debt Security and together the Debt Securities) in an
unlimited amount from time to time. All Debt Securities will be unsecured
obligations of the Company. All Debt Securities issued under the Indenture will
rank equally and ratably with all other Debt Securities issued under the
Indenture. The Indenture does not limit other unsecured debt. The Company's
financial statements included in the Incorporated Documents show the total
amount of unsecured debt, including Debt Securities, and of the Company's First
Mortgage Bonds outstanding at the date of such statements. See the Prospectus
Supplement applicable to each series of Offered Debt Securities.
The applicable Prospectus Supplement or Prospectus Supplements will
describe the following terms of the New Debt Securities of the related series:
(1) the title of such New Debt Securities; (2) any limit upon the aggregate
principal amount of such New Debt Securities; (3) the date or dates on which the
principal of such New Debt Securities is payable or the method of determination
thereof; (4) the rate or rates, if any, or the method by which such rate will be
determined, at which such New Debt Securities will bear interest, if any, the
date or dates from which any such interest will accrue, the Interest Payment
Dates on which any such interest will be payable and the Regular Record Date for
any interest payable on any Interest Payment Date and the Person or Persons to
whom interest on such New Debt Securities will be payable on any Interest
Payment Date, if other than the Persons in whose names such New Debt Securities
are registered at the close of business on the Regular Record Date for such
interest; (5) the place or places where, subject to the terms of the Indenture
as described below under Payment and Paying Agents, the principal of and
premium, if any, and interest on such New Debt Securities will be payable and
where, subject to the terms of the Indenture as described below under
Registration and Transfer, such New Debt Securities may be presented for
registration of transfer or exchange and the place or places where notices and
demands to or upon the Company in respect of such New Debt Securities and the
Indenture may be served; the Security Registrar for such New Debt Securities;
and, if such is the case, that the principal of such New Debt Securities will be
payable without presentment or surrender thereof; (6) the period or periods
within, or date or dates on, which, the price or prices at which and the terms
and conditions upon which such New Debt Securities may be redeemed, in whole or
in part, at the option of the Company; (7) the obligation or obligations, if
any, of the Company to redeem or purchase any of such New Debt Securities
pursuant to any sinking fund or other mandatory redemption provisions or at the
option of the Holder thereof, and the period or periods within which, or the
date or dates on which, the price or prices at which and the terms and
conditions upon which such New Debt Securities will be redeemed or purchased, in
whole or in part, pursuant to such obligation, and applicable exceptions to the
requirements of a notice of redemption in the case of mandatory redemption or
redemption at the option of the Holder; (8) the denominations in which any such
New Debt Securities will be issuable, if other than denominations of $1,000 and
any integral multiple thereof; (9) the currency or currencies, including
composite currencies in which the principal of or any premium or interest on
such New Debt Securities will be payable (if other than in Dollars); (10) if the
principal of or any premium or interest on such New Debt Securities is to be
payable, at the election of the Company or the Holder thereof, in a coin or
currency other than that in which such New Debt Securities are stated to be
payable, the period or periods within which and the terms and conditions upon
7
which, such election is to be made; (11) if the principal of or premium or
interest on such New Debt Securities is to be payable, or is to be payable at
the election of the Company or a Holder thereof, in securities or other
property, the type and amount of such securities or other property, or the
method or other means by which such amount will be determined, and the period or
periods within which, and the terms and conditions upon which, any such election
may be made; (12) if the amount payable in respect of principal of or any
premium or interest on such New Debt Securities may be determined with reference
to an index or other fact or event ascertainable outside of the Indenture, the
manner in which such amounts will be determined; (13) if other than the
principal amount thereof, the portion of the principal amount of such New Debt
Securities which will be payable upon declaration of acceleration of the
Maturity thereof; (14) any Events of Default, in addition to those specified in
the Indenture, with respect to such New Debt Securities and any covenants of the
Company for the benefit of the Holders of such New Debt Securities, in addition
to those specified in the Indenture; (15) the terms, if any, pursuant to which
such New Debt Securities may be converted into or exchanged for shares of
capital stock or other securities of the Company or any other Person; (16) the
obligations or instruments, if any, which will be considered to be Eligible
Obligations in respect of such New Debt Securities denominated in a currency
other than Dollars or in a composite currency, and any additional or alternative
provisions for the reinstatement of the Company's indebtedness in respect of
such New Debt Securities after the satisfaction and discharge thereof; (17) if
such New Debt Securities are to be issued in global form, (i) any limitations on
the rights of the Holders of such New Debt Securities to transfer or exchange
the same or to obtain the registration of transfer thereof, (ii) any limitations
on the rights of the Holders thereof to obtain certificates therefor in
definitive form in lieu of temporary form and (iii) any and all other matters
incidental to such New Debt Securities; (18) if such New Debt Securities are to
be issuable as bearer securities any and all matters incidental thereto; (19) to
the extent not addressed in item (17) above, any limitations on the rights of
the Holders of such New Debt Securities to transfer or exchange such New Debt
Securities or to obtain the registration of transfer thereof, and if a service
charge will be made for the registration of transfer or exchange of such New
Debt Securities, the amount or terms thereof; (20) any exceptions to the
provisions governing payments due on legal holidays or any variations in the
definition of Business Day with respect to such New Debt Securities; and (21)
any other terms of such New Debt Securities, not inconsistent with the
provisions of the Indenture. (Indenture, Section 301).
New Debt Securities may be sold at a discount below their principal amount.
Certain special United States Federal income tax considerations, if any,
applicable to New Debt Securities sold at an original issue discount may be
described in the applicable Prospectus Supplement. In addition, certain special
United States Federal income tax or other considerations, if any, applicable to
any New Debt Securities which are denominated in a currency or currency unit
other than Dollars may be described in the applicable Prospectus Supplement.
Except as may otherwise be described in the applicable Prospectus
Supplement, the covenants contained in the Indenture would not afford Holders of
New Debt Securities protection in the event of a highly-leveraged transaction
involving the Company.
Payment and Paying Agents. Except as may be provided in the applicable
Prospectus Supplement, interest, if any, on each Debt Security payable on each
Interest Payment Date will be paid to the Person in whose name such Debt
Security is registered as of the close of business on the Regular Record Date
relating to such Interest Payment Date; provided, however, that interest payable
at maturity (whether at stated maturity, upon redemption or otherwise,
hereinafter a Maturity) will be paid to the Person to whom principal is paid.
However, if there has been a default in the payment of interest on any Debt
Security, such defaulted interest may be payable to the Holder of such Debt
Security as of the close of business on a date selected by the Indenture Trustee
which is not more than 15 days and not less than 10 days prior to the date
proposed by the Company for payment on such defaulted interest or in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which such Debt Security may be listed, if the Indenture Trustee deems such
manner of payment practicable (Indenture, Section 307).
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of and premium, if any, and interest on, the Debt Securities at
Maturity will be payable upon presentation of the Debt Securities at the
corporate trust office of The Bank of New York, in The City of New York, as
Paying Agent for the Company. The Company may change the Place of Payment on the
Debt Securities, may appoint one or more additional Paying Agents (including the
Company) and may remove any Paying Agent, all at its discretion (Indenture,
Section 602).
8
Registration and Transfer. Unless otherwise specified in the applicable
Prospectus Supplement, the transfer of Debt Securities may be registered, and
Debt Securities may be exchanged for other Debt Securities of the same series or
tranche, of authorized denominations and of like tenor and aggregate principal
amount, at the corporate trust office of The Bank of New York in The City of New
York, as Security Registrar for the Debt Securities. The Company may change the
place for registration of transfer and exchange of the Debt Securities and may
designate one or more additional places for such registration and exchange, all
at its discretion. Except as otherwise provided in the applicable Prospectus
Supplement, no service charge will be made for any transfer or exchange of the
Debt Securities, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of the Debt Securities. The
Company will not be required to execute or to provide for the registration of
transfer of, or the exchange of, (a) any Debt Security during a period of 15
days prior to giving any notice of redemption or (b) any Debt Security selected
for redemption in whole or in part, except the unredeemed portion of any Debt
Security being redeemed in part (Indenture, Section 305).
Defeasance. The principal amount of any series of Debt Securities issued
under the Indenture will be deemed to have been paid for purposes of the
Indenture and the entire indebtedness of the Company in respect thereof will be
deemed to have been satisfied and discharged if there shall have been
irrevocably deposited with the Indenture Trustee or any paying agent, in trust:
(a) money in an amount which will be sufficient, or (b) in the case of a deposit
made prior to the maturity of such Debt Securities, Eligible Obligations (as
defined below), the principal of and the interest on which when due, without any
regard to reinvestment thereof, will provide moneys which, together with the
money, if any, deposited with or held by the Indenture Trustee, will be
sufficient, or (c) a combination of (a) and (b) which will be sufficient, to pay
when due the principal of and premium, if any, and interest, if any, due and to
become due on the Debt Securities of such series that are Outstanding. For this
purpose, Eligible Obligations include direct obligations of, or obligations
unconditionally guaranteed by, the United States entitled to the benefit of the
full faith and credit thereof and certificates, depositary receipts or other
instruments which evidence a direct ownership interest in such obligations or in
any specific interest or principal payments due in respect thereof and which do
not contain provisions permitting the redemption or other prepayment thereof at
the option of the issuer thereof.
Consolidation, Merger, and Sale of Assets. Under the terms of the
Indenture, the Company may not consolidate with or merge into any other entity
or convey, transfer or lease its properties and assets substantially as an
entirety to any entity, unless (i) the corporation formed by such consolidation
or into which the Company is merged or the entity which acquires by conveyance
or transfer, or which leases, the property and assets of the Company
substantially as an entirety shall be an entity organized and validly existing
under the laws of any domestic jurisdiction and such entity expressly assumes
the Company's obligations on all Debt Securities and under the Indenture, (ii)
immediately after giving effect to the transaction, no Event of Default, and no
event which, after notice or lapse of time or both, would become an Event of
Default, shall have occurred and be continuing, and (iii) the Company shall have
delivered to the Indenture Trustee an Officer's Certificate and an Opinion of
Counsel as provided in the Indenture (Indenture, Section 1101). The terms of the
Indenture do not restrict the Company in a merger in which the Company is the
surviving entity.
Events of Default. Each of the following will constitute an Event of
Default under the Indenture with respect to the Debt Securities of any series:
(a) failure to pay any interest on the Debt Securities of such series within 30
days after the same becomes due and payable; (b) failure to pay principal or
premium, if any, on the Debt Securities of such series when due and payable; (c)
failure to perform, or breach of, any other covenant or warranty of the Company
in the Indenture (other than a covenant or warranty of the Company in the
Indenture solely for the benefit of one or more series of Debt Securities other
than such series) for 90 days after written notice to the Company by the
Indenture Trustee, or to the Company and the Indenture Trustee by the Holders of
at least 33% in principal amount of the Debt Securities of such series
Outstanding under the Indenture as provided in the Indenture; (d) the entry by a
court having jurisdiction in the premises of (1) a decree or order for relief in
respect of the Company in an involuntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other similar law or
(2) a decree or order adjudging the Company a bankrupt or insolvent, or
approving as properly filed a petition by one or more Persons other than the
Company seeking reorganization, arrangement, adjustment or composition of or in
respect of the Company under any applicable Federal or State law, or appointing
9
a custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official for the Company or for any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and any such decree or
order for relief or any such other decree or order shall have remained unstayed
and in effect for a period of 90 consecutive days; and (e) the commencement by
the Company of a voluntary case or proceeding under any applicable Federal or
State bankruptcy, insolvency, reorganization or other similar law or of any
other case or proceeding to be adjudicated a bankrupt or insolvent, or the
consent by it to the entry of a decree or order for relief in respect of the
Company in a case or other similar proceeding or to the commencement of any
bankruptcy or insolvency case or proceeding against it under any applicable
Federal or State law or the filing by it of a petition or answer or consent
seeking reorganization or relief under any applicable Federal or State law, or
the consent by it to the filing of such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or similar official of the Company of any substantial part of its
property, or the making by it of an assignment for the benefit of creditors, or
the admission by it in writing of its inability to pay its debts generally as
they become due, or the authorization of such action by the Board of Directors
(Indenture, Section 801).
An Event of Default with respect to the Debt Securities of a particular
series may not necessarily constitute an Event of Default with respect to Debt
Securities of any other series issued under the Indenture.
Remedies. If an Event of Default due to the default in payment of principal
of or interest on any series of Debt Securities or due to the default in the
performance or breach of any other covenant or warranty of the Company
applicable to the Debt Securities of such series but not applicable to all
series occurs and is continuing, then either the Indenture Trustee or the
Holders of 33% in principal amount of the Outstanding Debt Securities of such
series may declare the principal of all of the Debt Securities of such series
and interest accrued thereon to be due and payable immediately. If an Event of
Default due to the default in the performance of any other covenants or
agreements in the Indenture applicable to all Outstanding Debt Securities or due
to certain events of bankruptcy, insolvency or reorganization of the Company has
occurred and is continuing, either the Indenture Trustee or the Holders of not
less than 33% in principal amount of all Outstanding Debt Securities, considered
as one class, and not the Holders of the Debt Securities of any one of such
series, may make such declaration of acceleration. There is no automatic
acceleration, even in the event of bankruptcy, insolvency or reorganization of
the Company.
At any time after the declaration of acceleration with respect to the Debt
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained, the Event or Events of Default
giving rise to such declaration of acceleration will, without further act, be
deemed to have been waived, and such declaration and its consequences will,
without further act, be deemed to have been rescinded and annulled, if
(a) the Company has paid or deposited with the Indenture Trustee a sum
sufficient to pay
(1) all overdue interest on all Debt Securities of such series;
(2) the principal of and premium, if any, on any Debt Securities of
such series which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate or rates prescribed therefor in
such Debt Securities;
(3) interest upon overdue interest at the rate or rates prescribed
therefor in such Debt Securities, to the extent that payment of such interest is
lawful; and
(4) all amounts due to the Indenture Trustee under the Indenture; and
(b) any other Event or Events of Default with respect to Debt Securities
of such series, other than the nonpayment of the principal of the Debt
Securities of such series which has become due solely by such declaration of
acceleration, have been cured or waived as provided in the Indenture (Indenture,
Section 802).
Subject to the provisions of the Indenture relating to the duties of the
Indenture Trustee in case an Event of Default shall occur and be continuing, the
Indenture Trustee will be under no obligation to exercise any of its rights or
powers under the Indenture at the request or direction of any of the Holders,
unless such Holders shall have offered to the Indenture Trustee reasonable
10
indemnity (Indenture, Section 903). If an Event of Default has occurred and is
continuing in respect of a series of Debt Securities, subject to such provisions
for the indemnification of the Indenture Trustee, the Holders of a majority in
principal amount of the Outstanding Debt Securities of such series will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Indenture Trustee, or exercising any trust or power
conferred on the Indenture Trustee, with respect to the Debt Securities of such
series; provided, however, that if an Event of Default occurs and is continuing
with respect to more than one series of Debt Securities, the Holders of a
majority in aggregate principal amount of the Outstanding Debt Securities of all
such series, considered as one class, will have the right to make such
direction, and not the Holders of the Debt Securities of any one of such series;
and provided, further, that such direction will not be in conflict with any rule
of law or with the Indenture (Indenture, Section 812).
No Holder of Debt Securities of any series will have any right to institute
any proceeding with respect to the Indenture, or for the appointment of a
receiver or a trustee, or for any other remedy thereunder, unless (i) such
Holder has previously given to the Indenture Trustee written notice of a
continuing Event of Default with respect to the Debt Securities of such series,
(ii) the Holders of a majority in aggregate principal amount of the Outstanding
Debt Securities of all series in respect of which an Event of Default has
occurred and is continuing, considered as one class, have made written request
to the Indenture Trustee, and such Holders have offered reasonable indemnity to
the Indenture Trustee, to institute such proceeding in respect of such Event of
Default in its own name as Indenture Trustee and (iii) the Indenture Trustee has
failed to institute any proceeding, and has not received from the Holders of a
majority in aggregate principal amount of the Outstanding Debt Securities of
such series a direction inconsistent with such request, within 60 days after
such notice, request and offer (Indenture, Section 807). However, such
limitations do not apply to a suit instituted by a Holder of a Debt Security for
the enforcement of payment of the principal of or any premium or interest on
such Debt Security on or after the applicable due date specified in such Debt
Security (Indenture, Section 808).
The Company will be required to furnish to the Indenture Trustee annually a
statement by an appropriate officer as to such officer's knowledge of the
Company's compliance with all conditions and covenants under the Indenture, such
compliance to be determined without regard to any period of grace or requirement
of notice under the Indenture (Indenture, Section 606).
Modification and Waiver. Without the consent of any Holder of Debt
Securities, the Company and the Indenture Trustee may enter into one or more
supplemental indentures for any of the following purposes: (a) to evidence the
assumption by any permitted successor to the Company of the covenants of the
Company in the Indenture and in the Debt Securities; or (b) to add one or more
covenants of the Company or other provisions for the benefit of all Holders or
for the benefit of the Holders of, or to remain in effect only so long as there
shall be Outstanding, Debt Securities of one or more specified series, or one or
more specified Tranches thereof, or to surrender any right or power conferred
upon the Company by the Indenture; or (c) to add any additional Events of
Default with respect to Outstanding Debt Securities; or (d) to change or
eliminate any provision of the Indenture or to add any new provision to the
Indenture, provided that if such change, elimination or addition will adversely
affect the interests of the Holders of Debt Securities of any series or Tranche
in any material respect, such change, elimination or addition will become
effective with respect to such series or Tranche only (1) when the consent of
the Holders of Debt Securities of such series or Tranche has been obtained in
accordance with the Indenture, or (2) when no Debt Securities of such series or
Tranche remain Outstanding under the Indenture; or (e) to provide collateral
security for all but not part of the Debt Securities; or (f) to establish the
form or terms of Debt Securities of any other series or Tranche as permitted by
the Indenture; or (g) to provide for the authentication and delivery of bearer
securities and coupons appertaining thereto representing interest, if any,
thereon and for the procedures for the registration, exchange and replacement
thereof and for the giving of notice to, and the solicitation of the vote or
consent of, the Holders thereof, and for any and all other matters incidental
thereto; or (h) to evidence and provide for the acceptance of appointment of a
successor Indenture Trustee with respect to the Debt Securities of one or more
series and to add to or change any of the provisions of the Indenture as shall
be necessary to provide for or to facilitate the administration of the trusts
under the Indenture by more than one trustee; or (i) to provide for the
procedures required to permit the utilization of a noncertificated system of
registration for the Debt Securities of all or any series or Tranche; or (j) to
change any place where (1) the principal of and premium, if any, and interest,
if any, on all or any series or Tranche of Debt Securities shall be payable, (2)
all or any series or Tranche of Debt Securities may be surrendered for
11
registration of transfer or exchange and (3) notices and demands to or upon the
Company in respect of Debt Securities and the Indenture may be served; or (k) to
cure any ambiguity or inconsistency or to add or change any other provisions
with respect to matters and questions arising under the Indenture, provided such
changes or additions shall not adversely affect the interests of the Holders of
Debt Securities of any series or Tranche in any material respect (Indenture,
Section 1201).
The Holders of a majority in aggregate principal amount of the Debt
Securities of all series then Outstanding may waive compliance by the Company
with certain restrictive provisions of the Indenture (Indenture, Section 607).
The Holders of a majority in principal amount of the Outstanding Debt Securities
of any series may waive any past default under the Indenture with respect to
such series, except a default in the payment of principal, premium, or interest
and certain covenants and provisions of the Indenture that cannot be modified or
be amended without the consent of the Holder of each Outstanding Debt Security
of such series affected (Indenture, Section 813).
Without limiting the generality of the foregoing, if the Trust Indenture
Act is amended after the date of the Indenture in such a way as to require
changes to the Indenture or the incorporation therein of additional provisions
or so as to permit changes to, or the elimination of, provisions which, at the
date of the Indenture or at any time thereafter, were required by the Trust
Indenture Act to be contained in the Indenture, the Indenture will be deemed to
have been amended so as to conform to such amendment of the Trust Indenture Act
or to effect such changes, additions or elimination, and the Company and the
Indenture Trustee may, without the consent of any Holders, enter into one or
more supplemental indentures to evidence or effect such amendment (Indenture,
Section 1201).
Except as provided above, the consent of the Holders of a majority in
aggregate principal amount of the Debt Securities of all series then
Outstanding, considered as one class, is required for the purpose of adding any
provisions to, or changing in any manner, or eliminating any of the provisions
of, the Indenture or modifying in any manner the rights of the Holders of such
Debt Securities under the Indenture pursuant to one or more supplemental
indentures; provided, however, that if less than all of the series of
Outstanding Debt Securities are directly affected by a proposed supplemental
indenture, then the consent only of the Holders of a majority in aggregate
principal amount of Outstanding Debt Securities of all series so directly
affected, considered as one class, shall be required; and provided, further,
that if the Debt Securities of any series shall have been issued in more than
one Tranche and if the proposed supplemental indenture shall directly affect the
rights of the Holders of Debt Securities of one or more, but less than all, of
such Tranches, then the consent only of the Holders of a majority in aggregate
principal amount of the Outstanding Debt Securities of all Tranches so directly
affected, considered as one class, will be required; and provided further, that
no such amendment or modification may (a) change the Stated Maturity of the
principal of, or any installment of principal of or interest on, any Debt
Security, or reduce the principal amount thereof or the rate of interest thereon
(or the amount of any installment of interest thereon) or change the method of
calculating such rate or reduce any premium payable upon the redemption thereof,
or change the coin or currency (or other property) in which any Debt Security or
any premium or the interest thereon is payable, or impair the right to institute
suit for the enforcement of any such payment on or after the Stated Maturity of
any Debt Security (or, in the case of redemption, on or after the redemption
date) without, in any such case, the consent of the Holder of such Debt
Security, (b) reduce the percentage in principal amount of the Outstanding Debt
Security of any series, or any Tranche thereof, the consent of the Holders of
which is required for any such supplemental indenture, or the consent of the
Holders of which is required for any waiver of compliance with any provision of
the Indenture or any default thereunder and its consequences, or reduce the
requirements for quorum or voting, without, in any such case, the consent of the
Holder of each outstanding Debt Security of such series or Tranche, or (c)
modify certain of the provisions of the Indenture relating to supplemental
indentures, waivers of certain covenants and waivers of past defaults with
respect to the Debt Security of any series or Tranche, without the consent of
the Holder of each Outstanding Debt Security affected thereby. A supplemental
indenture which changes or eliminates any covenant or other provision of the
Indenture which has expressly been included solely for the benefit of one or
more particular series of Debt Securities or one or more Tranches thereof, or
modifies the rights of the Holders of Debt Securities of such series with
respect to such covenant or other provision, will be deemed not to affect the
rights under the Indenture of the Holders of the Debt Securities of any other
series or Tranche (Indenture, Section 1202).
12
The Indenture provides that in determining whether the Holders of the
requisite principal amount of the Outstanding Debt Securities have given any
request, demand, authorization, direction, notice, consent or waiver under the
Indenture, or whether a quorum is present at the meeting of the Holders of Debt
Securities, Debt Securities owned by the Company or any other obligor upon the
Debt Securities or any affiliate of the Company or of such other obligor (unless
the Company, such affiliate or such obligor owns all Debt Securities Outstanding
under the Indenture, determined without regard to this provision) shall be
disregarded and deemed not to be Outstanding.
If the Company shall solicit from Holders any request, demand,
authorization, direction, notice, consent, election, waiver or other Act, the
Company may, at its option, fix in advance a record date for the determination
of Holders entitled to give such request, demand, authorization, direction,
notice, consent, waiver or other such act, but the Company shall have no
obligation to do so. If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other Act may be given
before or after such record date, but only the Holders of record at the close of
business on such record date shall be deemed to be Holders for the purposes of
determining whether Holders of the requisite proportion of the Outstanding Debt
Securities have authorized or agreed or consented to such request, demand,
authorization, direction, notice, consent, waiver or other Act, and for that
purpose the Outstanding Debt Securities shall be computed as of the record date.
Any request, demand, authorization, direction, notice, consent, election, waiver
or other Act of a Holder shall bind every future Holder of the same Debt
Security and the Holder of every Debt Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Indenture Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Debt Security (Indenture, Section 104).
Resignation of Indenture Trustee. The Indenture Trustee may resign at any
time by giving written notice thereof to the Company or may be removed at any
time by Act of the Holders of a majority in principal amount of all series of
Debt Securities then Outstanding delivered to the Indenture Trustee and the
Company. No resignation or removal of the Indenture Trustee and no appointment
of a successor trustee will become effective until the acceptance of appointment
by a successor trustee in accordance with the requirements of the Indenture. So
long as no Event of Default or event which, after notice or lapse of time, or
both, would become an Event of Default has occurred and is continuing and except
with respect to an Indenture Trustee appointed by Act of the Holders, if the
Company has delivered to the Indenture Trustee a resolution of its Board of
Directors appointing a successor trustee and such successor has accepted such
appointment in accordance with the terms of the Indenture, the Indenture Trustee
will be deemed to have resigned and the successor will be deemed to have been
appointed as trustee in accordance with the Indenture (Indenture, Section 910).
Notices. Notices to Holders of Debt Securities will be given by mail to the
addresses of such Holders as they may appear in the security register therefor.
Title. The Company, the Indenture Trustee, and any agent of the Company or
the Indenture Trustee, may treat the Person in whose name Debt Securities are
registered as the absolute owner thereof (whether or not such Debt Securities
may be overdue) for the purpose of making payments and for all other purposes
irrespective of notice to the contrary.
Governing Law. The Indenture and the Debt Securities will be governed by,
and construed in accordance with, the laws of the State of New York.
Regarding the Indenture Trustee. The Indenture Trustee under the Indenture
is The Bank of New York. In addition to acting as Indenture Trustee, The Bank of
New York acts as trustee under the Company's Mortgage. The Company and its
subsidiaries also maintain various banking and trust relationships with The Bank
of New York.
EXPERTS AND LEGALITY
The consolidated financial statements included in the latest Annual Report
of the Company on Form 10-K, incorporated herein by reference, have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their report
13
included in said latest Annual Report of the Company on Form 10-K, and have been
incorporated by reference herein in reliance upon such report given upon
authority of that firm as experts in accounting and auditing.
With respect to any unaudited condensed consolidated interim financial
information included in the Company's Quarterly Reports on Form 10-Q which are
or will be incorporated herein by reference, Deloitte & Touche LLP has applied
limited procedures in accordance with professional standards for reviews of such
information. As stated in any of their reports included in the Company's
Quarterly Reports on Form 10-Q, which are or will be incorporated herein by
reference, Deloitte & Touche LLP did not audit and did not express an opinion on
such interim financial information. Deloitte & Touche LLP is not subject to the
liability provisions of Section 11 of the 1933 Act for any of their reports on
such unaudited condensed consolidated interim financial information because such
reports were not "reports" or a "part" of the Registration Statement filed under
the 1933 Act with respect to the Securities prepared or certified by an
accountant within the meaning of Sections 7 and 11 of the 1933 Act.
The statements made in the Company's 1996 Form 10-K under Part I, Item
1--Business-Regulation and Rates and Environmental Matters, incorporated herein
by reference, have been reviewed by Worsham, Forsythe & Wooldridge, L.L.P.,
Dallas, Texas, General Counsel for the Company. All of such statements are set
forth or incorporated by reference herein in reliance upon the opinion of that
firm given upon their authority as experts. At October 31, 1997, members of the
firm of Worsham, Forsythe & Wooldridge, L.L.P. owned approximately 41,200 shares
of the common stock of Texas Utilities.
The legality of the Offered Securities will be passed upon for the Company
by Worsham, Forsythe & Wooldridge, L.L.P. and by Reid & Priest LLP, New York,
New York, of counsel to the Company, and for any underwriters or agents by
Winthrop, Stimson, Putnam & Roberts, New York, New York. However, all matters
pertaining to incorporation, franchises, licenses and permits, the Lien of the
Mortgage on property located in Texas and all other matters of Texas law will be
passed upon only by Worsham, Forsythe & Wooldridge, L.L.P.
PLAN OF DISTRIBUTION
The Company may sell the Securities in any of three ways: (i) through
underwriters or dealers; (ii) directly to a limited number of purchasers or to a
single purchaser; or (iii) through agents. The Prospectus Supplement with
respect to the Offered Securities sets forth the terms of the offering of the
Offered Securities, including the name or names of any underwriters, dealers or
agents, the purchase price of such Offered Securities and the proceeds to the
Company from such sale, any underwriting discounts and other items constituting
underwriters' compensation, any initial public offering price and any discounts
or concessions allowed or reallowed or paid to dealers. Any initial public
offering price and any discounts or concessions allowed or reallowed or paid to
dealers may be changed from time to time.
If underwriters are used in the sale, the Offered Securities will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of the
sale. The underwriter or underwriters with respect to a particular underwritten
offering of Offered Securities are named in the Prospectus Supplement relating
to such offering and, if an underwriting syndicate is used, the managing
underwriter or underwriters are set forth on the cover page of such Prospectus
Supplement. Unless otherwise set forth in the Prospectus Supplement, the
obligations of the underwriters to purchase the Offered Securities will be
subject to certain conditions precedent, and the underwriters will be obligated
to purchase all such Offered Securities if any are purchased.
Offered Securities may be sold directly by the Company or through agents
designated by the Company from time to time. The Prospectus Supplement sets
forth the name of any agent involved in the offer or sale of the Offered
Securities in respect of which the Prospectus Supplement is delivered as well as
any commissions payable by the Company to such agent. Unless otherwise indicated
in the Prospectus Supplement, any such agent will be acting on a best efforts
basis for the period of its appointment.
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If so indicated in the Prospectus Supplement, the Company will authorize
agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase Offered Securities from the Company at the public
offering price set forth in the Prospectus Supplement pursuant to delayed
delivery contracts providing for payment and delivery on a specified date in the
future. Such contracts will be subject to those conditions set forth in the
Prospectus Supplement, and the Prospectus Supplement will set forth the
commission payable for solicitation of such contracts.
Subject to certain conditions, the Company may agree to indemnify the
several underwriters or agents and their controlling persons against certain
liabilities, including liabilities under the 1933 Act arising out of or based
upon, among other things, any untrue statement or alleged untrue statement of a
material fact contained in the registration statement, this Prospectus, a
Prospectus Supplement or the Incorporated Documents or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. See the applicable Prospectus
Supplement.
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT IN CONNECTION WITH THE OFFER MADE BY
THIS PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY OTHER PERSON, UNDERWRITER, DEALER OR AGENT. NEITHER THE
DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF.
THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
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