AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 23, 1994
REGISTRATION NO. 33-52525
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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ENSERCH CORPORATION ENSERCH CAPITAL L.L.C. ENSERCH PREFERRED
(EXACT NAME OF REGISTRANT CAPITAL, INC.
AS SPECIFIED IN CHARTER)
TEXAS DELAWARE DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
75-0399066 75-2527254 75-2530196
(I.R.S. EMPLOYER IDENTIFICATION NO.)
ENSERCH CENTER
300 SOUTH ST. PAUL STREET
DALLAS, TEXAS 75201
214-651-8700
(ADDRESS, INCLUDING ZIP CODE AND
TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANTS'
PRINCIPAL EXECUTIVE OFFICES)
WILLIAM T. SATTERWHITE, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
ENSERCH CORPORATION
ENSERCH CENTER
300 SOUTH ST. PAUL STREET
DALLAS, TEXAS 75201
214-670-2175
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPY TO:
ARNOLD H. TRACY
MUDGE ROSE GUTHRIE ALEXANDER & FERDON
180 MAIDEN LANE
NEW YORK, NEW YORK 10038
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: From time to
time after the effective date of the Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES AMOUNT TO BE PER OFFERING PRICE REGISTRATION
TO BE REGISTERED REGISTERED(1) UNIT(1)(2)(3) (1)(2)(3) FEE(1)
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ENSERCH Corporation Debt
Securities.............
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ENSERCH Corporation
Preferred Stock, of no
par value..............
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ENSERCH Corporation
Depositary Shares......
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ENSERCH Corporation
Common Stock, par value
$4.45 per share........
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Enserch Capital L.L.C.
Preferred Securities...
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ENSERCH Corporation and
Enserch Preferred
Capital, Inc. Backup
Undertakings with
respect to Enserch
Capital L.L.C.
Preferred
Securities(5)..........
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Total................... $450,000,000 100% $450,000,000 $155,174(6)
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(1) There are being registered hereunder such presently indeterminate
principal amount or number of Debt Securities (which may be senior or
subordinated), shares of Preferred Stock, Depositary Shares and shares of
Common Stock of ENSERCH Corporation and Preferred Securities of Enserch
Capital L.L.C. with an aggregate initial offering price not to exceed
$450,000,000, plus (i) contingent share purchase rights attached to and
evidenced by the Common Stock and (ii) an indeterminate number of shares
as may be issued upon conversion of Debt Securities or Preferred Stock and
an indeterminate amount of Preferred Stock and Subordinated Debt
Securities as may be issued in exchange for Preferred Securities, for
which, in each case, no separate consideration will be received. Pursuant
to Rule 457(o) under the Securities Act of 1933 which permits the
registration fee to be calculated on the basis of the maximum offering
price of all the securities listed, the table does not specify by each
class information as to the amount to be registered, proposed maximum
offering price per Unit or proposed maximum aggregate offering price.
(2) Estimated solely for the purpose of determining the registration fee.
(3) Exclusive of accrued interest and dividends, if any.
(4) If any Debt Securities are issued (i) with a principal amount denominated
in a foreign currency, such principal amount as shall result in an
aggregate initial offering price of up to $450,000,000 at the time of
initial offering, or (ii) at an original issue discount, such greater
principal amount as shall result in an aggregate initial offering price of
up to $450,000,000.
(5) No separate consideration will be received for the Backup Undertakings.
(6) Previously paid in connection with the initial filing of the Registration
Statement.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER +
+TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF +
+THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD +
+BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS +
+OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 23, 1994
PRELIMINARY PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED MARCH , 1994
6,000,000 PREFERRED SECURITIES
ENSERCH CAPITAL L.L.C.
% CUMULATIVE MONTHLY INCOME PREFERRED SECURITIES, SERIES A ("MIPS"*)
(LIQUIDATION PREFERENCE $25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
ENSERCH Corporation
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The % Cumulative Monthly Income Preferred Securities, Series A (the "Series
A Preferred Securities") representing the preferred limited liability company
interests offered hereby are being issued by Enserch Capital L.L.C., a limited
liability company formed under the laws of the State of Delaware ("Enserch
Capital"). Enserch Capital is a wholly-owned subsidiary of ENSERCH Corporation,
a Texas corporation ("ENSERCH").
The payment of dividends, if and to the extent declared out of moneys held by
Enserch Capital, and payments on liquidation or redemption with respect to the
Series A Preferred Securities are guaranteed by ENSERCH to the extent described
herein. The Series A Preferred Securities will entitle holders to receive
cumulative preferential cash dividends, at an annual rate of % of the
liquidation preference of $25 per Series A Preferred Security, accruing from
the date of original issuance and payable monthly in arrears on the last day of
each calendar month of each year, commencing April 30, 1994.
The Series A Preferred Securities are redeemable, at the option of Enserch
Capital (with ENSERCH's consent), in whole or in part, from time to time, on or
after April 30, 1999, at $25 per Series A Preferred Security plus accumulated
and unpaid dividends to the date fixed for redemption (the "Redemption Price"),
and will be redeemed at such price from the proceeds of any repayment of the
loan of the proceeds hereof to a subsidiary of ENSERCH. In addition, if at any
time Enserch Capital or ENSERCH is or would be required to pay certain
additional amounts or to withhold or deduct certain amounts and under certain
circumstances following the occurrence of a Tax Event (as defined herein) or an
Investment Company Act Event (as defined herein), the Series A Preferred
Securities are redeemable at the Redemption Price at the option of Enserch
Capital (with ENSERCH's consent), from time to time. In addition, upon the
occurrence of such a Tax Event or an Investment Company Act Event, ENSERCH may
cause Enserch Capital to exchange % Subordinated Debentures of ENSERCH for
the Preferred Securities in whole. If issued, ENSERCH will use its best efforts
to have the % Subordinated Debentures listed on the same exchange on which
the Series A Preferred Securities are then listed. See "Description of the
Series A Preferred Securities--Optional Redemption" and "Special Event
Redemption or Exchange" and "Description of % Subordinated Debentures".
In the event of the liquidation of Enserch Capital, holders of Series A
Preferred Securities will be entitled to receive for each Series A Preferred
Security a liquidation preference of $25 plus accumulated and unpaid dividends
to the date of payment, unless the Series A Preferred Securities have
previously been exchanged for % Subordinated Debentures and subject to
certain limitations. See "Description of the Series A Preferred Securities--
Liquidation Distribution".
For a description of the various contractual backup undertakings of ENSERCH
relating to the Series A Preferred Securities, see "Description of the
Guarantee", "Description of the Loans" and "Description of the Loan Guarantee"
herein.
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See "Certain Investment Considerations" for certain considerations relevant
to an investment in the Series A Preferred Securities, including circumstances
under which payment of dividends on the Series A Preferred Securities may be
deferred.
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Application has been made to list the Series A Preferred Securities on the
New York Stock Exchange.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR 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 SUPPLEMENT OR
THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE COMMISSION(1) ENSERCH CAPITAL(2)(3)
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Per Series A Preferred Secu-
rity....................... $ (2) $
Total....................... $ (2) $
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(1) Enserch Capital and ENSERCH have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting".
(2) In view of the fact that the proceeds of the sale of the Series A Preferred
Securities will ultimately be loaned to ENSERCH, under the Underwriting
Agreement ENSERCH has agreed to pay to the Underwriters as compensation
("Underwriters' Compensation") for their arranging the loan of such
proceeds, $ per Series A Preferred Security (or $ in the
aggregate); provided that such compensation will be $ per Series A
Preferred Security sold to certain institutions. Therefore, to the extent
that Series A Preferred Securities are sold to such institutions, the
actual amount of Underwriters' Compensation will be less than the amount
specified in the preceding sentence. See "Underwriting".
(3) Expenses of the offering which are payable by ENSERCH, are estimated to be
$ .
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The Series A Preferred Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that delivery of certificates for the Series A Preferred Securities
will be made only in book-entry form through the facilities of The Depository
Trust Company on or about April , 1994.
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* An application has been filed by Goldman, Sachs & Co. with the United States
Patent and Trademark Office for the registration of the MIPS servicemark.
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
KIDDER PEABODY & CO.
INCORPORATED
LEHMAN BROTHERS
PAINEWEBBER INCORPORATED
SMITH BARNEY SHEARSON INC.
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The date of this Prospectus Supplement is , 1994.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
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FOR NORTH CAROLINA PURCHASERS: THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE COMMISSIONER OF INSURANCE FOR THE STATE OF NORTH CAROLINA,
NOR HAS THE COMMISSIONER OF INSURANCE RULED UPON THE ACCURACY OR ADEQUACY OF
THIS DOCUMENT.
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S-2
ENSERCH CAPITAL L.L.C.
Enserch Capital is a limited liability company which was formed under the
Delaware Limited Liability Company Act (the "Delaware Act") by filing a
Certificate of Formation with the Delaware Secretary of State on March 4,
1994. The initial members of Enserch Capital are ENSERCH and Enserch Preferred
Capital, Inc., a Delaware corporation ("Enserch Preferred"), a wholly owned
subsidiary of ENSERCH. ENSERCH and Enserch Preferred entered into a limited
liability company agreement dated as of March 4, 1994. Such limited liability
company agreement will be amended and restated in its entirety (as so amended
and restated, the "Limited Liability Company Agreement") substantially in the
form filed as an exhibit to the Registration Statement of which the
accompanying Prospectus forms a part prior to the sale of the Series A
Preferred Securities offered hereby. The principal executive offices of
Enserch Capital are c/o ENSERCH Corporation, 300 South St. Paul Street,
Dallas, Texas 75201, and the telephone number is (214) 651-8700.
Enserch Capital is a separate legal entity under the laws of the State of
Delaware and is distinct from its owners, who are known as "members." A
Delaware limited liability company is similar to a Delaware corporation in
providing limited liability to its members in a manner similar to that
provided to stockholders of a Delaware corporation. Therefore, unless
expressly provided in a limited liability company agreement or otherwise
agreed, under Delaware law no general liability exists for members or managers
of a Delaware limited liability company. The Limited Liability Agreement of
Enserch Capital provides that ENSERCH will have general liability for the
debts and obligations of Enserch Capital in the same manner as a general
partner of a Delaware limited partnership. Under Delaware law, members who
hold Series A Preferred Securities (other than ENSERCH) will not be liable for
the debts, obligations and liabilities of Enserch Capital, whether arising in
contract, tort or otherwise, solely by reason of being a member of Enserch
Capital.
A Delaware limited liability company is managed by its members or by a
manager. Enserch Capital is managed by ENSERCH as its Class A Member and
exists for the sole purpose of issuing its limited liability company interests
and lending the proceeds thereof to ENSERCH and/or its subsidiaries. Pursuant
to the terms of the Limited Liability Company Agreement, ENSERCH and Enserch
Preferred will continue to be members of Enserch Capital. ENSERCH will hold
the Class A common limited liability company interests and Enserch Preferred
will hold the Class B common limited liability company interests in Enserch
Capital (collectively, the "Common Securities"). The members who hold Series A
Preferred Securities will be designated as Class C Members and will hold
preferred limited liability company interests in Enserch Capital. The rights
of the Class C Members, including economic rights, rights to information and
voting rights, are set forth in the Limited Liability Company Agreement and
the Delaware Act. See "Description of the Series A Preferred Securities".
ENSERCH CORPORATION
ENSERCH is an integrated company focused on natural gas. It is the successor
to a company originally organized in 1909 for the purpose of providing natural
gas service to North Texas. ENSERCH's operations include: natural gas
transmission and distribution; natural gas and oil exploration and production;
natural gas liquids processing; and power and other.
S-3
SELECTED FINANCIAL DATA OF ENSERCH
The selected financial data for each of the five years in the period ended
December 31, 1993, is derived from the Corporation's consolidated financial
statements and selected financial data included in the Corporation's Form 8-K
dated March 4, 1994.
AS OF OR FOR YEAR ENDED DECEMBER 31,
------------------------------------------------
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
(IN MILLIONS EXCEPT RATIO AND PER SHARE
AMOUNTS)
INCOME STATEMENT DATA ON
CONTINUING OPERATIONS:
Revenues.................... $1,902.1 $1,714.6 $1,654.1 $1,701.4 $1,716.5
======== ======== ======== ======== ========
Operating Income............ $ 72.8 $ 112.2 $ 137.1 $ 147.2 $ 180.2
Other Income (Expense)--Net. .2 (12.5) 14.0 49.3 .7
Interest Expense............ (80.2) (97.0) (95.6) (101.5) (95.0)
Income (Taxes) Benefit...... (7.5) .8 (17.7) (25.6) (21.6)
-------- -------- -------- -------- --------
Income (Loss) from Continu-
ing Operations............. (14.7) 3.5 37.8 69.4 64.3
Discontinued Operations..... 73.9 (16.2) (18.7) 33.4 9.1
Extraordinary Item.......... (15.3)
-------- -------- -------- -------- --------
Net Income (Loss)........... $ 59.2 $ (28.0) $ 19.1 $ 102.8 $ 73.4
======== ======== ======== ======== ========
Income (Loss) from Continu-
ing Operations Per Share... $ (.41) $ (.14) $ .36 $ .84 $ .84
Cash Dividends Declared Per
Share of Common Stock...... $ .20 $ .80 $ .80 $ .80 $ .80
Average Common and Dilutive
Common Equivalent Shares
Outstanding................ 66.6 65.7 65.1 65.0 59.8
Consolidated Ratio of Earn-
ings to Fixed Charges (a).. .93 1.02 1.49 1.80 1.76
Consolidated Ratio of Earn-
ings to Combined
Fixed Charges and Preferred
Stock Dividends (a)........ .82 .92 1.25 1.54 1.50
BALANCE SHEET DATA:
Property, Plant and Equip-
ment--Net.................. $2,118.1 $2,065.8 $2,152.1 $2,118.0 $2,046.3
Total Assets................ $2,760.3 $3,145.7 $3,163.1 $3,264.2 $3,254.2
Net Working Capital (Defi-
ciency).................... $ (195.5) $ 2.5 $ (42.2) $ 64.3 $ (23.0)
Current Ratio............... .72 1.00 .95 1.08 .97
Unused Lines of Credit...... $ 635.0 $ 485.0 $ 650.0 $ 600.0 $ 600.0
Capitalization (includes
current maturities):
Senior long-term debt...... $ 638.8 $ 865.3 $ 757.6 $ 772.5 $ 727.1
Convertible subordinated
debentures................ 90.8 90.8 205.7 215.7 215.7
Preferred stock............ 175.0 175.0 175.0 175.0 175.0
Common shareholders' equi-
ty........................ 646.7 604.6 686.3 723.9 701.3
-------- -------- -------- -------- --------
Total Capitalization....... $1,551.3 $1,735.7 $1,824.6 $1,887.1 $1,819.1
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(a) For purposes of computing the foregoing ratios for continuing operations:
(i) "fixed charges" represent interest expense, capitalized interest and
the portion of rental expense representing the interest factor for
continuing operations, and (ii) "earnings" represent the aggregate of
income from continuing operations before extraordinary items, income
taxes, amortization of previously capitalized interest and fixed charges
deducted from earnings.
For the purposes of calculating the ratio of earnings to combined fixed
charges and preferred stock dividends, the preferred stock dividend
requirements were assumed to be equal to the pretax earnings from continuing
operations which would be required to cover such dividend requirements
computed using the effective tax rates for the applicable period to the
extent not antidilutive.
For the year ended December 31, 1993, fixed charges exceeded earnings by
$6.6 million. For the years ended December 31, 1993 and 1992, combined fixed
charges and preferred stock dividends exceeded earnings by $19.3 million and
$10.3 million, respectively.
For the year 1993, excluding unusual charges (adverse judgment in
litigation, write-off of non U.S. gas and oil assets, charge for efficiency
enhancements and severance expenses, and the effect on deferred federal
income taxes resulting from the 1% increase in the statutory federal income
tax rate on corporations) the ratio of earnings to fixed charges would have
been 1.71 and ratio of earnings to combined fixed charges and preferred
stock dividends would have been 1.42.
S-4
CAPITALIZATION OF ENSERCH
The following table sets forth the consolidated short-term borrowings and
capitalization of ENSERCH and its subsidiaries as of December 31, 1993, after
giving pro forma effect to the transactions described in Note (b) to the table
and as adjusted to give effect to the sale of the Preferred Securities offered
hereby and the application of the net proceeds therefrom to redeem ENSERCH's
Adjustable Rate Cumulative Preferred Stock, Series E, to repay a $29.3 million
bank loan due in April 1994 and to reduce commercial paper borrowings. See
"Use of Proceeds":
AS
OUTSTANDING PRO FORMA(B) ADJUSTED PERCENT
----------- ------------ ---------- -------
(IN THOUSANDS EXCEPT PERCENTS)
Commercial Paper Borrowings...... $ 31,500 $ 101,350(c) $ 81,016
========== ========== ==========
Senior Long-Term Debt(a)......... $ 638,827 $ 714,634 $ 685,318 43.6%
Convertible Subordinated Deben-
tures........................... 90,750 90,750 90,750 5.8
Series A Preferred Securities of
Enserch Capital................. 0 0 150,000 9.5
Adjustable Rate Preferred Stock.. 175,000 100,000 0
Common Shareholders' Equity...... 646,718 645,690 645,340 41.1
---------- ---------- ---------- -----
Total Capitalization........... $1,551,295 $1,551,074 $1,571,408 100.0%
========== ========== ========== =====
- --------
(a) Includes current maturities of $10,600.
(b) The pro forma column gives effect to (i) the issuance in February 1994 of
$150 million principal amount of 6 3/8% Notes Due 2004 and the application
of the net proceeds therefrom to redeem fully the outstanding Series D
Adjustable Rate Preferred Stock and all outstanding sinking fund debentures
and (ii) the increase in commercial paper during January 1994.
(c) Commercial Paper Borrowings were $169,100 at March 18, 1994.
S-5
USE OF PROCEEDS
The proceeds from the sale of the Series A Preferred Securities will be
loaned to Enserch Preferred and reloaned to ENSERCH pursuant to the Loan
Agreements described herein and, ultimately used by ENSERCH to redeem, subject
to call by ENSERCH, all of the outstanding shares of ENSERCH's Adjustable Rate
Cumulative Preferred Stock, Series E, including the Depositary Preferred
Shares, Series E represented thereby ($100 million), to repay a bank loan due
in April 1994 ($29.3 million) and to reduce commercial paper borrowings ($20.7
million). ENSERCH's commercial paper borrowings aggregated $169 million at
March 18, 1994 and had a weighted average interest rate of 3.56%. In view of
the loan of such proceeds to Enserch Preferred and the reloan to ENSERCH, the
Underwriting Agreement provides that ENSERCH will pay the Underwriters'
Compensation to the Underwriters, as set forth in Note (3) on the cover page
of this Prospectus Supplement.
CERTAIN INVESTMENT CONSIDERATIONS
Prospective purchasers of Series A Preferred Securities should carefully
review the information contained elsewhere in this Prospectus Supplement and
in the Prospectus and should particularly consider the following matters:
ENSERCH'S obligations under the Guarantee are subordinate and junior in
right of payment to all other liabilities of ENSERCH and the obligations of
ENSERCH and Enserch Preferred under the Loan Agreements and the Loan
Guarantee (as defined herein) are subordinate and junior in right of
payment to Senior Indebtedness of ENSERCH and Enserch Preferred. See
"Description of the Guarantee--Status of the Guarantee", "Description of
Loans--Subordination" and "Description of the Loan Guarantee".
ENSERCH and Enserch Preferred have the right under the Loan Agreements to
jointly extend interest payment periods for up to 60 months, and, as a
consequence, monthly dividends on the Series A Preferred Securities can be
deferred (but will continue to accumulate) by Enserch Capital during any
such extended interest payment period. In the event that ENSERCH and
Enserch Preferred exercise this right, neither ENSERCH nor Enserch
Preferred may declare dividends on any share of its capital stock. Enserch
Capital and ENSERCH currently believe that the extension of a payment
period is unlikely. See "Description of the Loans--Option to Extend
Interest Payment Period". In addition, if Enserch Capital fails to pay
dividends on the Series A Preferred Securities for 60 consecutive monthly
dividend periods, the holders of a majority of the outstanding Series A
Preferred Securities will be entitled to appoint a trustee to enforce
Enserch Capital's and Enserch Preferred's rights under the Loans (as
hereinafter defined) and ENSERCH's obligations under the Guarantee and the
Loan Guarantee and declare and pay dividends on the Series A Preferred
Securities. See "Description of the Series A Preferred Securities--Voting".
Should an extended interest payment period occur, Enserch Capital will
continue to accrue income for U.S. federal income tax purposes which will
be allocated, but not distributed, to record holders of Series A Preferred
Securities. As a result, such a holder will include such interest in gross
income for U.S. federal income tax purposes in advance of the receipt of
cash, and will not receive the cash related to such income if such a holder
disposes of the Series A Preferred Securities prior to the record date for
payment of dividends. See "United States Taxation--Potential Extension of
Interest Payment Period". However, in the event an extended interest
payment period occurs following the occurrence of a Special Loan Tax Event
under circumstances where ENSERCH elects to have the Series A Preferred
Securities remain outstanding, holders will not be required to include any
amount in gross income for U.S. federal income tax purposes in advance of
the receipt of cash.
S-6
DESCRIPTION OF THE SERIES A PREFERRED SECURITIES
GENERAL
All of the limited liability company interests of Enserch Capital other than
the Series A Preferred Securities are owned directly or indirectly by ENSERCH.
The Limited Liability Company Agreement will authorize and create the Series A
Preferred Securities and will authorize ENSERCH as holder of the Class A
common limited liability company interests of Enserch Capital (the "Class A
Member") to establish other classes of preferred limited liability company
interests having such preferred, deferred or other special rights or such
restrictions, whether in regard to dividends, voting, return of capital or
otherwise, as the Class A Member may determine. The Series A Preferred
Securities constitute a series of preferred limited liability company
interests (the "Preferred Securities") in Enserch Capital, which Preferred
Securities may be issued from time to time in one or more series as described
in the accompanying Prospectus. The Limited Liability Company Agreement will
not permit the issuance of any Preferred Securities of Enserch Capital
ranking, as to participation in profits or the assets of Enserch Capital,
senior to the Series A Preferred Securities. The summary of certain terms and
provisions of the Series A Preferred Securities set forth below does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, the Limited Liability Company Agreement. The Limited Liability
Company Agreement will be substantially in the form filed as an exhibit to the
Registration Statement of which the accompanying Prospectus forms a part.
DIVIDENDS
Dividends on the Series A Preferred Securities will be cumulative, will
accrue from April , 1994 and will be payable monthly in arrears on the last
day of each calendar month of each year, commencing April 30, 1994, when, as
and if declared by Enserch Capital, except as otherwise described below.
The dividends payable on each Series A Preferred Security will be fixed at a
rate per annum of % of the stated liquidation preference thereof ($25).
The amount of dividends payable for any period will be computed on the basis
of twelve 30-day months and a 360-day year and, for any period shorter than a
full monthly dividend period, will be computed on the basis of the actual
number of days elapsed in such period. Payment of dividends is limited in
relation to the amount of funds held by Enserch Capital and legally available
therefor.
Dividends on the Series A Preferred Securities must be declared by the Class
A Member of Enserch Capital in any calendar year or portion thereof to the
extent that the Class A Member reasonably anticipates that at the time of
payment Enserch Capital will have, and must be paid by Enserch Capital to the
extent that at the time of proposed payment it has, (x) funds legally
available for the payment of such dividends and (y) cash on hand sufficient to
permit such payments. It is anticipated that Enserch Capital's earnings will
be limited to payments under the Loans to Enserch Preferred of the proceeds
from the issuance and sale of the Series A Preferred Securities and the Common
Securities. See "Description of the Loans--Interest".
Dividends declared on the Series A Preferred Securities will be payable to
the holders thereof as they appear on the books and records of Enserch Capital
on the relevant record dates, which will be one Business Day prior to the
relevant payment dates. Subject to any applicable laws and regulations and the
provisions of the Limited Liability Company Agreement, each such payment will
be made as described under "Book-Entry-Only Issuance--The Depository Trust
Company" below. In the event that any date on which dividends are payable on
the Series A Preferred Securities is not a Business Day, then payment of the
dividend payable on such date will be made on the next succeeding day which is
a Business Day (and without any interest or other payment in respect of any
such delay) except that, if
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such Business Day is in the next succeeding calendar year, such payment shall
be made on the immediately preceding Business Day, in each case with the same
force and effect as if made on such date. A "Business Day" shall mean any day
other than a day on which banking institutions in The City of New York are
authorized or required by law to close.
CERTAIN RESTRICTIONS ON ENSERCH CAPITAL
If dividends have not been paid in full on the Series A Preferred
Securities, Enserch Capital shall not:
(i) pay, or declare and set aside for payment, any dividends on any other
Preferred Securities ranking pari passu with the Series A Preferred
Securities as regards participation in profits of Enserch Capital ("Capital
Dividend Parity Securities"), unless the amount of any dividends declared
on any Capital Dividend Parity Securities is paid on the Capital Dividend
Parity Securities and the Series A Preferred Securities on a pro rata basis
on the date such dividends are paid on such Capital Dividend Parity
Securities, so that
(x) (a) the aggregate amount of dividends paid on the Series A
Preferred Securities bears to (b) the aggregate amount of dividends
paid on such Capital Dividend Parity Securities the same ratio as
(y) (a) the aggregate of all accumulated arrears of unpaid dividends
in respect of the Series A Preferred Securities bears to (b) the
aggregate of all accumulated arrears of unpaid dividends in respect of
such Capital Dividend Parity Securities;
(ii) pay, or declare and set aside for payment, any dividends or other
distribution on any limited liability company interests of Enserch Capital
ranking junior to the Series A Preferred Securities as to dividends
("Capital Dividend Junior Securities"); or
(iii) redeem, purchase or otherwise acquire any Capital Dividend Parity
Securities or any Capital Dividend Junior Securities;
until, in each case, such time as all accumulated and unpaid dividends on the
Series A Preferred Securities shall have been paid in full for all dividend
periods terminating on or prior to, in the case of clause (i) and (ii), such
payment and, in the case of clause (iii), the date of such redemption,
purchase or acquisition.
As of the date of this Prospectus Supplement, there are no Capital Dividend
Parity Securities outstanding, and Enserch Capital does not have any current
plans to issue Capital Dividend Parity Securities.
OPTIONAL REDEMPTION
The Series A Preferred Securities are redeemable, at the option of Enserch
Capital and subject to the prior consent of ENSERCH, in whole or in part from
time to time, on or after April 30, 1999, upon not less than 30 nor more than
60 days' notice, at the redemption price of $25 per Series A Preferred
Security, plus accumulated and unpaid dividends (whether or not declared) to
the date fixed for redemption (the "Redemption Price"). In the event that
fewer than all the outstanding Series A Preferred Securities are to be so
redeemed, the Series A Preferred Securities to be redeemed will be selected as
described under "Book-Entry-Only Issuance--The Depository Trust Company"
below. If a partial redemption would result in a delisting of the Series A
Preferred Securities, Enserch Capital may only redeem the Series A Preferred
Securities in whole.
If at any time after the issuance of the Series A Preferred Securities,
Enserch Capital is or would be required to pay Additional Amounts (as
hereinafter defined) or is or would be required to withhold
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or deduct certain amounts as described under "Additional Amounts" and
"Description of the Guarantee--Additional Amounts" herein, then, subject to
the prior consent of ENSERCH, Enserch Capital may, at its option, upon not
less than 30 nor more than 60 days' notice to the holders of the Series A
Preferred Securities, redeem the Series A Preferred Securities in whole or, if
such requirement relates only to certain of the Series A Preferred Securities,
the Series A Preferred Securities subject to such requirement, in each case at
the Redemption Price; provided that, in the case of such a redemption of
Series A Preferred Securities in part, Enserch Capital will (i) cause the
global certificates representing all of the Series A Preferred Securities to
be withdrawn from The Depository Trust Company or its successor securities
depository (see "Book-Entry-Only Issuance--The Depository Trust Company"
below), (ii) issue certificates in definitive form representing Series A
Preferred Securities and (iii) redeem the Series A Preferred Securities
subject to such requirement to withhold or deduct Additional Amounts; and
provided further that if a partial redemption would result in a delisting of
the Series A Preferred Securities, Enserch Capital may only redeem the Series
A Preferred Securities in whole.
SPECIAL EVENT REDEMPTION OR EXCHANGE
If a Tax Event or an Investment Company Event (as defined below)
(collectively, a "Special Event") shall occur and be continuing, ENSERCH
and/or Enserch Capital shall elect to either (i) redeem the Series A Preferred
Securities in whole (and not in part), upon not less than 30 or more than 60
days' notice at the Redemption Price within 90 days following the occurrence
of such Special Event, or (ii) dissolve Enserch Capital and cause to be
distributed to holders of Series A Preferred Securities in liquidation of such
holders' interests in Enserch Capital, within 90 days following the occurrence
of such Special Event, % Subordinated Debentures of ENSERCH described under
"Description of the % Subordinated Debentures" (the " % Subordinated
Debentures"), provided that if the Special Event is a Special Loan Tax Event
(as defined in clause (ii) of the definition of Tax Event) or an Investment
Company Event, ENSERCH and/or Enserch Capital shall have received an opinion
of nationally recognized independent counsel experienced in such matters to
the effect that the holders of the Series A Preferred Securities will not
recognize any gain or loss on the exchange of their Series A Preferred
Securities for % Subordinated Debentures, or (iii) if the Special Event is
solely a Special Loan Tax Event (as defined in clause (ii) of the definition
of Tax Event), cause the Series A Preferred Securities to remain outstanding.
"Tax Event" means that ENSERCH or Enserch Capital shall have obtained an
opinion of nationally recognized independent tax counsel experienced in such
matters to the effect that, as a result of any amendment to, or change in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein affecting taxation, or any
amendment to or change in an official interpretation or application of such
laws or regulations, which amendment or change is effective on or after ,
1994, and which change cannot be avoided by the use of any reasonable measures
available to ENSERCH or Enserch Capital, there is more than an insubstantial
risk that (i) Enserch Capital is subject to federal income tax with respect to
interest received on the Loans to Enserch Preferred or (ii) interest payable
on the Loans made to Enserch Preferred under the Preferred Loan Agreement (as
defined under "Description of the Loans") will not be deductible for Federal
income tax purposes (a Tax Event occurring solely by reason of this clause
(ii), a "Special Loan Tax Event").
"Investment Company Event" means the occurrence of a change in law or
regulation or a written change in official interpretation of law or regulation
by any legislative body, court, governmental agency or regulatory authority (a
"Change in 40 Act Law") to the effect that Enserch Capital is or will be
considered an "Investment Company" required to be registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), which Change in
40 Act Law becomes effective on or after , 1994; provided that no
Investment Company Event shall be deemed to have occurred if ENSERCH and/or
Enserch Capital delivers a written opinion of nationally recognized
independent
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counsel to Enserch Capital experienced in practice under the 1940 Act, to the
effect that ENSERCH and/or Enserch Capital has successfully taken either of
the steps set forth in (i) or (ii) below to avoid such Change in 40 Act Law so
that in the opinion of such counsel, notwithstanding such Change in 40 Act
Law, Enserch Capital is not required to be registered as an "investment
company" within the meaning of the 1940 Act. Such steps shall be either (i)
issuing an additional or supplemental irrevocable and unconditional guarantee
(x) of accumulated and unpaid dividends (whether or not declared out of moneys
legally available therefor) on the Series A Preferred Securities and (y) upon
a liquidation of Enserch Capital, of the full amount of the Liquidation
Distribution (as hereinafter defined) on the Series A Preferred Securities
(regardless of the amount of assets of Enserch Capital otherwise available for
distribution in such liquidation), or (ii) the use of any other reasonable
measures that do not adversely affect holders of Series A Preferred
Securities.
After the date fixed for any such exchange, (i) the Series A Preferred
Securities will no longer be deemed to be outstanding, (ii) DTC or its
nominee, as the record holder of the Series A Preferred Securities, will
exchange the global certificate or certificates representing the Series A
Preferred Securities for a registered global certificate or certificates
representing the % Subordinated Debentures to be delivered upon such
exchange and (iii) any certificates representing Series A Preferred Securities
not held by DTC or its nominee will be deemed to represent % Subordinated
Debentures having a principal amount equal to the stated liquidation
preference of such Series A Preferred Securities until such certificates are
presented to ENSERCH or its agent for exchange.
REDEMPTION PROCEDURES
If at any time Enserch Preferred repays the Loans made to it when due or
prepays the Loans made to it as described under "Description of the Loans--
Optional Prepayment", the proceeds from such repayment of principal on such
Loans will be applied to redeem the Series A Preferred Securities at the
Redemption Price upon not less than 30 nor more than 60 days' notice, provided
that any such amounts may be reloaned to Enserch Preferred, and not used for
such redemption, if at the time of each such loan, and as determined in the
judgment of ENSERCH, as Class A Member, and its financial advisor, (i) ENSERCH
and Enserch Preferred are not in bankruptcy, (ii) ENSERCH and Enserch
Preferred are not in default on any loan pertaining to the Series A Preferred
Securities, (iii) ENSERCH and Enserch Preferred have made timely payments on
the repaid loan for the immediately preceding 60 months, (iv) Enserch Capital
is not in arrears on payments of dividends on the Series A Preferred
Securities, (v) ENSERCH and Enserch Preferred are expected to be able to make
timely payment of principal and interest on such loan, (vi) such loan is being
made on terms, and under circumstances, that are consistent with those which a
lender would require for a loan to an unrelated party, (vii) such loan is
being made at a rate sufficient to provide payments equal to or greater than
the amount of dividends that accrue on the Series A Preferred Securities,
(viii) the senior unsecured long-term debt of ENSERCH is rated BBB- or better
by Standard & Poor's Corporation or Baa3 or better by Moody's Investors
Service, Inc. or the equivalent by any other nationally recognized statistical
rating organization, (ix) such loan is being made for a term that is
consistent with market circumstances and ENSERCH's financial condition, (x)
the final maturity of such loan is not later than the 50th anniversary of the
issuance of the Series A Preferred Securities, and (xi) such loan is
unconditionally and fully guaranteed by ENSERCH on substantially the same
basis as the Loan Guarantee and supported by a loan by Enserch Preferred to
ENSERCH on substantially the same basis as the Loans under the Preferred Loan
Agreement.
Enserch Capital may not redeem fewer than all the outstanding Series A
Preferred Securities unless all accumulated and unpaid dividends have been
paid on all Series A Preferred Securities for all monthly dividend periods
terminating on or prior to the date of redemption.
If Enserch Capital gives a notice of redemption in respect of Series A
Preferred Securities (which notice will be irrevocable), then, by 12:00 noon,
New York time, on the redemption date, Enserch Capital will irrevocably
deposit with The Depository Trust Company funds sufficient to pay the
applicable Redemption Price and will give The Depository Trust Company
irrevocable instructions and
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authority to pay the Redemption Price to the holders thereof. See "Book-Entry-
Only Issuance--The Depository Trust Company". If notice of redemption shall
have been given and funds deposited as required, then upon the date of such
deposit, all rights of holders of such Series A Preferred Securities so called
for redemption will cease, except the right of the holders of such Series A
Preferred Securities to receive the Redemption Price, but without interest. In
the event that any date fixed for redemption of Series A Preferred Securities
is not a Business Day, then payment of the Redemption Price payable on such
date will be made on the next succeeding day which is a Business Day (and
without any interest or other payment in respect of any such delay), except
that, if such Business Day falls in the next calendar year, such payment will
be made on the immediately preceding Business Day. In the event that payment
of the Redemption Price in respect of Series A Preferred Securities is
improperly withheld or refused and not paid either by Enserch Capital or by
ENSERCH pursuant to the Guarantee described under "Description of the
Guarantee", dividends on such Series A Preferred Securities will continue to
accrue at the then applicable rate, from the original redemption date to the
date of payment, in which case the actual payment date will be considered the
date fixed for redemption for purposes of calculating the Redemption Price.
Subject to the foregoing and applicable law (including, without limitation,
U.S. federal securities laws), ENSERCH or its subsidiaries may at any time and
from time to time purchase outstanding Series A Preferred Securities by
tender, in the open market or by private agreement.
LIQUIDATION DISTRIBUTION
In the event of any voluntary or involuntary dissolution, winding up or
termination of Enserch Capital, the holders of the Series A Preferred
Securities at the time outstanding will be entitled to receive out of the
assets of Enserch Capital available for distribution to securityholders,
before any distribution of assets is made to holders of Common Securities or
any other class of limited liability company interests of Enserch Capital
ranking junior to the Series A Preferred Securities as regards participation
in the assets of Enserch Capital, but together with the holders of every other
series of Preferred Securities outstanding, if any, ranking pari passu with
the Series A Preferred Securities as regards participation in the assets of
Enserch Capital ("Capital Liquidation Parity Securities"), an amount equal to,
in the case of holders of Series A Preferred Securities, the aggregate of the
stated liquidation preference of $25 per Series A Preferred Security and all
accumulated and unpaid dividends (whether or not declared) to the date of
payment (the "Liquidation Distribution").
If, upon any such liquidation, the Liquidation Distribution can be paid only
in part because Enserch Capital has insufficient assets available to pay in
full the aggregate Liquidation Distribution and the aggregate maximum
liquidation distributions on the Capital Liquidation Parity Securities, then
the amounts payable directly by Enserch Capital on the Series A Preferred
Securities and on such Capital Liquidation Parity Securities shall be paid on
a pro rata basis, so that
(i) (x) the aggregate amount paid in respect of the Liquidation
Distribution bears to (y) the aggregate amount paid as liquidation
distributions on the Capital Liquidation Parity Securities the same ratio
as
(ii) (x) the aggregate Liquidation Distribution bears to (y) the aggregate
maximum liquidation distributions on the Capital Liquidation Parity
Securities.
Pursuant to the Limited Liability Company Agreement, Enserch Capital shall be
dissolved and its affairs shall be wound up: (i) upon the expiration of the
term of Enserch Capital; (ii) upon the retirement, resignation, expulsion,
bankruptcy or dissolution of ENSERCH or the occurrence of any other event
under the Delaware Act that terminates the continued membership of ENSERCH, as
the Class A Member of Enserch Capital except for a transfer to a permitted
successor of the Class A Member as set forth in the Limited Liability Company
Agreement, (iii) the entry of decree of a judicial dissolution,
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or (iv) the written consent of all members of Enserch Capital, including the
holders of the Series A Preferred Securities.
MERGER, CONSOLIDATION, AMALGAMATION, ETC. OF ENSERCH CAPITAL
The Class A Member is authorized and directed to conduct its affairs and to
operate Enserch Capital in such a way that Enserch Capital would not be deemed
to be an "investment company" required to be registered under the Investment
Company Act of 1940 (the "1940 Act") or taxed as a corporation for federal
income tax purposes and so that the Loans will be treated as indebtedness of
ENSERCH and Enserch Preferred, respectively, for federal income tax purposes.
In this connection, the Class A Member is authorized to take any action not
inconsistent with applicable law, the Certificate of Formation or the Limited
Liability Company Agreement and that does not adversely affect the interests
of holders of Series A Preferred Securities that the Class A Member determines
in its discretion to be necessary or desirable for such purposes.
Enserch Capital may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other body, except as
described below. Enserch Capital may, for purposes of changing its state of
domicile or avoiding federal income tax or 1940 Act consequences adverse to
ENSERCH or Enserch Capital or holders of Series A Preferred Securities,
without the consent of the holders of the Series A Preferred Securities,
consolidate, amalgamate, merge with or into, or be replaced by a limited
liability company or limited partnership or trust organized as such under the
laws of any state of the United States of America, provided that (i) such
successor entity either (x) expressly assumes all of the obligations of
Enserch Capital under the Series A Preferred Securities or (y) substitutes for
the Series A Preferred Securities other securities having substantially the
same terms as the Series A Preferred Securities (the "Successor Securities")
so long as the Successor Securities rank, with respect to participation in the
profits or assets of the successor entity, at least as high as the Series A
Preferred Securities rank, with respect to participation in the profits or
assets of Enserch Capital, (ii) ENSERCH expressly acknowledges such successor
entity as the holder of the Loans to it relating to the Series A Preferred
Securities, (iii) such merger, consolidation, amalgamation or replacement does
not cause the Series A Preferred Securities to be delisted by any national
securities exchange or other organization on which the Series A Preferred
Securities are then listed, (iv) such merger, consolidation, amalgamation or
replacement does not cause the Series A Preferred Securities to be downgraded
by any "nationally recognized statistical rating organization," as that term
is defined by the Commission for purposes of Rule 436(g)(2) under the
Securities Act, (v) such merger, consolidation, amalgamation or replacement
does not adversely affect the powers, preferences and other special rights of
holders of Series A Preferred Securities in any material respect, (vi) prior
to such merger or consolidation ENSERCH has received an opinion of nationally
recognized independent counsel to Enserch Capital experienced in such matters
to the effect that (w) holders of outstanding Series A Preferred Securities
will not recognize any gain or loss for federal income tax purposes as a
result of the merger, consolidation, amalgamation or replacement, (x) such
successor entity will be treated as a partnership for federal income tax
purposes, (y) following such merger, consolidation, amalgamation or
replacement, ENSERCH and such successor entity will be in compliance with the
1940 Act without registering thereunder as an investment company, and (z) such
merger, consolidation, amalgamation or replacement will not adversely affect
the limited liability of holders of Series A Preferred Securities.
VOTING RIGHTS
Except as provided below and under "Description of the Guarantee--Amendments
and Assignments" and "Description of the Loans--Miscellaneous" and as
otherwise required by law and the Limited Liability Company Agreement, the
holders of the Series A Preferred Securities will have no voting rights.
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If (i) Enserch Capital fails to pay dividends in full on the Series A
Preferred Securities for 18 monthly dividend periods; (ii) an Event of Default
(as defined in either Loan Agreement relating to the Loans) occurs and is
continuing on the Loans; (iii) ENSERCH is in default on any of its payment or
other obligations under the Guarantee (as described under "Description of the
Guarantee--Certain Covenants of ENSERCH") or the Loan Guarantee (as described
under "Description of the Loan Guarantee--Certain Covenants of ENSERCH"), then
the holders of the outstanding Series A Preferred Securities, together with
the holders of any other series of Preferred Securities having the right to
vote for the appointment of a trustee in such event, acting as a single class
will be entitled to appoint and authorize a trustee to enforce Enserch
Capital's creditor rights under the Loans under the Capital Loan Agreement
against Enserch Preferred and Enserch Preferred's creditor rights under the
Loans under the Preferred Loan Agreement against ENSERCH, enforce the
obligations undertaken by ENSERCH under the Guarantee and the Loan Guarantee
and declare and pay dividends on the Series A Preferred Securities. For
purposes of determining whether Enserch Capital has failed to pay dividends in
full for 18 monthly dividend periods, dividends shall be deemed to remain in
arrears, notwithstanding any payments in respect thereof, until full
cumulative dividends have been or contemporaneously are declared and paid with
respect to all monthly dividend periods terminating on or prior to the date of
payment of such full cumulative dividends. Not later than 30 days after such
right to appoint a trustee arises, the Class A Member will convene a general
meeting for the above purpose. If the Class A Member fails to convene such
meeting within such 30-day period, the holders of 10% of the outstanding
Series A Preferred Securities will be entitled to convene such meeting. The
provisions of the Limited Liability Company Agreement relating to the
convening and conduct of the general meetings of securityholders will apply
with respect to any such meeting. Any trustee so appointed shall vacate office
immediately if Enserch Capital (or ENSERCH pursuant to the Guarantee) shall
have paid in full all accumulated and unpaid dividends on the Series A
Preferred Securities or such default or breach, as the case may be, shall have
been cured. Notwithstanding the appointment of any such trustee, ENSERCH and
Enserch Preferred retain all rights under the Loan Agreements, including the
right to jointly extend the interest payment period as provided under
"Description of the Loans--Option to Extend Interest Payment Period".
If any proposed amendment to the Limited Liability Company Agreement
provides for, or the Class A Member otherwise proposes to effect (pursuant to
an action or otherwise), (x) any action which would adversely affect the
powers, preferences or special rights of the Series A Preferred Securities,
whether by way of amendment to the Limited Liability Company Agreement or
otherwise (including, without limitation, the authorization or issuance of any
limited liability company interests of Enserch Capital ranking, as to
participation in the profits or assets of Enserch Capital, senior to the
Series A Preferred Securities), or (y) the dissolution, winding up or
termination of Enserch Capital, then the holders of outstanding Series A
Preferred Securities will be entitled to vote on such amendment or action of
the Class A Member (but not on any other amendment or action) and, in the case
of an amendment described in clause (x) above which would equally adversely
affect the rights, preferences or privileges of any Capital Dividend Parity
Securities or any Capital Liquidation Parity Securities, such Capital Dividend
Parity Securities or such Capital Liquidation Parity Securities, as the case
may be, or, in the case of any amendment described in clause (y) above, all
Capital Liquidation Parity Securities, will be entitled to vote together as a
class on such amendment or action of the Class A Member (but not on any other
amendment or action), and such amendment or action shall not be effective
except with the approval of the holders of 66 2/3% in liquidation preference
of such outstanding Preferred Securities; provided, however, that no such
approval shall be required if the dissolution, winding up or termination of
Enserch Capital is proposed or initiated upon the initiation of proceedings,
or after proceedings have been initiated, for the liquidation, dissolution or
winding up of ENSERCH.
The rights attached to the Series A Preferred Securities will be deemed not
to be adversely affected by the creation or issue of, and no vote will be
required for the creation of, any further limited liability
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company interests of Enserch Capital ranking pari passu with or junior to the
Series A Preferred Securities with regard to participation in the profits or
assets of Enserch Capital. Holders of Series A Preferred Securities have no
preemptive rights.
Any required approval of holders of Series A Preferred Securities may be
given at a separate meeting of such holders convened for such purpose, at a
general meeting of securityholders of Enserch Capital or pursuant to written
consent. Enserch Capital will cause a notice of any meeting at which holders
of the Series A Preferred Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be
mailed to each holder of record of Series A Preferred Securities. Each such
notice will include a statement setting forth (i) the date of such meeting or
the date by which such action is to be taken, (ii) a description of any
resolution proposed for adoption at such meeting on which such holders are
entitled to vote or of such matter upon which written consent is sought and
(iii) instructions for the delivery of proxies or consents.
No vote or consent of the holders of the Series A Preferred Securities will
be required for Enserch Capital to redeem and cancel Series A Preferred
Securities in accordance with the Limited Liability Company Agreement.
Notwithstanding that holders of Series A Preferred Securities are entitled
to vote or consent under any of the circumstances described above, any of the
Series A Preferred Securities and any other series of Preferred Securities
that are entitled to vote or consent with such Series A Preferred Securities
as a single class at such time, that are owned by ENSERCH or any entity owned
more than 50% by ENSERCH, either directly or indirectly, shall not be entitled
to vote or consent and shall, for the purposes of such vote or consent, be
treated as if they were not outstanding.
ADDITIONAL AMOUNTS
All payments in respect of the Series A Preferred Securities by Enserch
Capital will be made without withholding or deduction for or on account of any
present or future taxes, duties, assessments or governmental charges of
whatever nature imposed or levied upon or as a result of such payment by or on
behalf of the United States of America, any state thereof or any other
jurisdiction through which or from which such payment is made, or any
authority therein or thereof having power to tax, unless the withholding or
deduction of such taxes, duties, assessments or governmental charges is
required by law. In that event, Enserch Capital will pay as a dividend such
additional amounts as may be necessary in order that the net amounts received
by the holders of the Series A Preferred Securities after such withholding or
deduction will equal the amount which would have been receivable in respect of
such Series A Preferred Securities in the absence of such withholding or
deduction ("Additional Amounts"), except that no such Additional Amounts will
be payable to a holder of Series A Preferred Securities (or a third party on
his behalf) with respect to Series A Preferred Securities:
(a) if such holder is liable for such taxes, duties, assessments or
governmental charges in respect of such Series A Preferred Securities by
reason of such holder's having some connection with the United States, any
state thereof or any other jurisdiction through which or from which such
payment is made, other than being a holder of such Series A Preferred
Securities, or
(b) if Enserch Capital has notified such holder of the obligation to
withhold taxes and requested but not received from such holder a
declaration of non-residence, a valid taxpayer identification number or
other claim for exemption, and such withholding or deduction would not have
been required had such declaration, taxpayer identification number or claim
been received.
BOOK-ENTRY-ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depository for
the Series A Preferred Securities. The Series A Preferred Securities will be
issued only as fully-registered securities registered
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in the name of Cede & Co. (DTC's nominee). One or more fully-registered global
Series A Preferred Security certificates will be issued, representing in the
aggregate the total number of Series A Preferred Securities, and will be
deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934. DTC holds securities that its participants
("Participants") deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations, and certain other
organizations ("Direct Participants"). DTC is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc., and the National Association of Securities Dealers, Inc.
Access to the DTC system is also available to others such as securities
brokers and dealers, banks and trust companies that clear through or maintain
a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). The rules applicable to DTC and its
Participants are on file with the Securities and Exchange Commission.
Purchases of Series A Preferred Securities under the DTC system must be made
by or through Direct Participants, which will receive a credit for the Series
A Preferred Securities on DTC's records. The ownership interest of each actual
purchaser of each Series A Preferred Security ("Beneficial Owner") is in turn
to be recorded on the Direct and Indirect Participants' records. Beneficial
Owners will not receive written confirmation from DTC of their purchases, but
Beneficial Owners are expected to receive written confirmations providing
details of the transactions, as well as periodic statements of their holdings,
from the Direct or Indirect Participants through which the Beneficial Owners
purchased Series A Preferred Securities. Transfers of ownership interests in
the Series A Preferred Securities are to be accomplished by entries made on
the books of Participants acting on behalf of Beneficial Owners. Beneficial
Owners will not receive certificates representing their ownership interests in
Series A Preferred Securities, except in the event that use of the book-entry
system for the Series A Preferred Securities is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Series A
Preferred Securities; DTC's records reflect only the identity of the Direct
Participants to whose accounts such Series A Preferred Securities are
credited, which may or may not be the Beneficial Owners. The Participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Series A Preferred Securities are being redeemed, DTC's practice is to
determine by lot the amount of the interest of each Direct Participant in such
series to be redeemed.
Although voting with respect to the Series A Preferred Securities is
limited, in those cases where a vote is required, neither DTC nor Cede & Co.
will consent or vote with respect to Series A Preferred Securities. Under its
usual procedures, DTC would mail an Omnibus Proxy to Enserch Capital as soon
as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts the
Series A Preferred Securities are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
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Dividend payments on the Series A Preferred Securities will be made to DTC.
DTC's practice is to credit Direct Participants' accounts on the relevant
payable 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
such payable date. Payments by Participants to Beneficial Owners will be
governed by standing instructions and customary practices and will be the
responsibility of such Participant and not of DTC, Enserch Capital or ENSERCH,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of dividends to DTC is the responsibility of Enserch
Capital, disbursement of such payments to Direct Participants is the
responsibility of DTC, and disbursement of such payments to the Beneficial
Owners is the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository with
respect to the Series A Preferred Securities at any time by giving reasonable
notice to Enserch Capital. Under such circumstances, in the event that a
successor securities depository is not obtained, Series A Preferred Security
certificates are required to be printed and delivered. Additionally, Enserch
Capital (with the consent of ENSERCH) may decide to discontinue use of the
system of book-entry transfers through DTC (or a successor Depository). In
that event, certificates for the Series A Preferred Securities will be printed
and delivered. Additionally, in the event that Enserch Capital exercises its
option to redeem only a portion of the Series A Preferred Securities because
Enserch Capital or ENSERCH is or would be required to withhold or deduct
Additional Amounts in regard to such Series A Preferred Securities to be
redeemed, Enserch Capital will cause the global certificates representing all
of the Series A Preferred Securities to be withdrawn from DTC (or its
successor securities depository) and will issue certificates in definitive
form representing the Series A Preferred Securities. Thereafter, the Series A
Preferred Securities subject to such requirement to withhold or deduct
Additional Amounts will be redeemed.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that Enserch Capital believes to be reliable,
but Enserch Capital takes no responsibility for the accuracy thereof.
REGISTRAR, TRANSFER AGENT AND PAYING AGENT
ENSERCH will act as registrar, transfer agent and paying agent for the
Series A Preferred Securities (the "Paying Agent").
Registration of transfers of Series A Preferred Securities will be effected
without charge by or on behalf of Enserch Capital, but upon payment (with the
giving of such indemnity as Enserch Capital or ENSERCH may require) in respect
of any tax or other governmental charges which may be imposed in relation to
it.
Enserch Capital will not be required to register or cause to be registered
the transfer of Series A Preferred Securities after such Series A Preferred
Securities have been called for redemption.
DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the guarantee (the
"Guarantee") which will be executed and delivered by ENSERCH for the benefit
of the holders from time to time of Series A Preferred Securities. This
summary contains certain terms and provisions of the Guarantee but does not
purport to be complete. References to provisions of the Guarantee are
qualified in their entirety by reference to the text of the Guarantee, which
will be substantially in the form filed as an exhibit to the Registration
Statement of which the accompanying Prospectus forms a part.
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GENERAL
ENSERCH will irrevocably and unconditionally agree, to the extent set forth
herein, to pay in full, to the holders of the Series A Preferred Securities,
the Guarantee Payments (as defined below) (except to the extent paid by
Enserch Capital), as and when due, regardless of any defense, right of set-off
or counterclaim which Enserch Capital may have or assert. The following
payments to the extent not paid by Enserch Capital (the "Guarantee Payments")
will be subject to the Guarantee (without duplication): (i) any accumulated
and unpaid dividends which have been theretofore declared on the Series A
Preferred Securities out of moneys legally available therefor, (ii) the
Redemption Price payable out of funds legally available therefor with respect
to Series A Preferred Securities called for redemption by Enserch Capital,
(iii) upon a liquidation of Enserch Capital, the lesser of (a) the Liquidation
Distribution and (b) the amount of assets of Enserch Capital available for
distribution to holders of Series A Preferred Securities in liquidation of
Enserch Capital, and (iv) any Additional Amounts payable by Enserch Capital in
respect of the Series A Preferred Securities. ENSERCH's obligation to make a
Guarantee Payment may be satisfied by direct payment of the required amounts
by ENSERCH to the holders of Series A Preferred Securities or by causing
Enserch Capital to pay such amounts to such holders.
CERTAIN COVENANTS OF ENSERCH
In the Guarantee, ENSERCH will covenant that, so long as any Series A
Preferred Securities remain outstanding, neither ENSERCH, nor any majority-
owned subsidiary of ENSERCH, shall declare or pay any dividend on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of its
capital stock or make any guarantee payments with respect to the foregoing
(other than (i) payments under the Guarantee or the Loan Guarantee (as defined
herein), or (ii) dividends or guarantee payments to ENSERCH or a wholly-owned
subsidiary of ENSERCH) if at such time ENSERCH shall be in default with
respect to its payment or other obligations under the Guarantee or there shall
have occurred any event that, with the giving of notice or the lapse of time
or both, would constitute an Event of Default under the Loans to Enserch
Preferred or from Enserch Preferred to Enserch Capital.
In the Guarantee, ENSERCH will also covenant that, so long as any Series A
Preferred Securities remain outstanding, it will (i) maintain direct or
indirect 100% ownership of the Common Securities, (ii) cause at least 21% of
the total value of Enserch Capital and at least 21% of all interests in the
capital, income, gain, loss, deduction and credit of Enserch Capital to be
represented by Common Securities, (iii) not voluntarily dissolve, wind-up or
terminate Enserch Capital, (iv) remain the Class A Member of Enserch Capital
and timely perform all of its duties as Class A Member of Enserch Capital
(including the duty to declare and pay dividends on the Series A Preferred
Securities); provided that any permitted successor of ENSERCH under the Loan
Agreement may succeed to ENSERCH's duties as Class A Member, and (v) use
reasonable efforts to cause Enserch Capital to remain a limited life limited
liability company and otherwise continue to be treated as a partnership for
United States federal income tax purposes.
ADDITIONAL AMOUNTS
All Guarantee Payments will be made without withholding or deduction for or
on account of any present or future taxes, duties, assessments or governmental
charges of whatever nature imposed or levied upon or as a result of such
payment by or on behalf of the United States, any state thereof or any other
jurisdiction through which or from which such payment is made, or any
authority therein or thereof having power to tax, unless the withholding or
deduction of such taxes, duties, assessments or governmental charges is
required by law. In that event, ENSERCH will pay such additional amounts as
may be necessary in order that the net amounts received by the holders of the
Series A Preferred Securities after such withholding or deduction will equal
the amount which would have been receivable
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in respect of the Series A Preferred Securities in the absence of such
withholding or deduction, except that no such additional amounts will be
payable to a holder of the Series A Preferred Securities (or a third party on
his behalf) with respect to any of the Series A Preferred Securities:
(a) if such holder is liable for such taxes, duties, assessments or
governmental charges in respect of the Series A Preferred Securities by
reason of such holder's having some connection with the United States, any
state thereof or any other jurisdiction through which or from which such
payment is made, other than being a holder of the Series A Preferred
Securities, or
(b) if Enserch Capital or ENSERCH has notified such holder of the
obligation to withhold taxes and requested but not received from such
holder a declaration of non-residence, a valid taxpayer identification
number or other claim for exemption, and such withholding or deduction
would not have been required had such declaration, taxpayer identification
number or claim been received.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not adversely affect the rights
of holders of Series A Preferred Securities (in which case no vote will be
required), the Guarantee may be changed only with the prior approval of the
holders of not less than 66 2/3% of the outstanding Series A Preferred
Securities. The manner of obtaining any such approval of holders of the Series
A Preferred Securities will be as set forth under "Description of the Series A
Preferred Securities--Voting Rights". All guarantees and agreements contained
in the Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of ENSERCH and shall inure to the benefit of the holders of
the Series A Preferred Securities.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon full
payment of the Redemption Price of all Series A Preferred Securities or upon
full payment of the amounts payable upon liquidation of Enserch Capital. The
Guarantee will continue to be effective or will be reinstated, as the case may
be, if at any time any holder of Series A Preferred Securities must restore
payment of any sums paid under the Series A Preferred Securities or the
Guarantee.
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of ENSERCH and will
rank (i) subordinate and junior in right of payment to all liabilities of
ENSERCH, (ii) pari passu with the most senior preferred or preference stock
now or hereafter issued by ENSERCH and with any guarantee now or hereafter
entered into by ENSERCH in respect of any preferred or preference stock of any
affiliate of ENSERCH and (iii) senior to ENSERCH's common stock. For purposes
of clause (ii), pari passu means that any payments to which beneficiaries of
the Guarantee are entitled must be shared with holders of any preferred or
preference stock to which the Guarantee is stated to be pari passu ("Pari
Passu Stock") to the same extent as would be required under applicable law if
instead the Guarantee constituted a class of preferred or preference stock of
ENSERCH ranking pari passu with such Pari Passu Stock as to such payments.
However, beneficiaries of the Guarantee are not conversely entitled to share
in payments to which the holders of such Pari Passu Stock are entitled,
although, as described above under "Certain Covenants of ENSERCH", in the
Guarantee ENSERCH will covenant not to make payments in respect of its capital
stock if it is in default in its obligations thereunder. The Guarantee
provides that each holder of Series A Preferred Securities by acceptance
thereof agrees to the subordination provisions and other terms of the
Guarantee.
The Guarantee will constitute a guarantee of payment and not of collection.
A holder of Series A Preferred Securities may enforce the Guarantee directly
against ENSERCH, and ENSERCH will waive any right or remedy to require that
any action be brought against Enserch Capital or any other person
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or entity before proceeding against ENSERCH. The Guarantee will not be
discharged except by payment of the Guarantee Payments in full to the extent
not paid by Enserch Capital and by complete performance of all obligations
under the Guarantee.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the laws
of the State of New York.
DESCRIPTION OF THE LOANS
Set forth below is summary information concerning the loans (the "Loans")
from Enserch Capital to Enserch Preferred, and the loans from Enserch
Preferred to ENSERCH, of the proceeds of the issuance and sale of (i) the
Series A Preferred Securities and (ii) Enserch Capital's Common Securities and
related capital contributions ("Common Security Payments"). This summary
describes certain terms and provisions of the loan agreement between Enserch
Capital and Enserch Preferred (the "Capital Loan Agreement") and the loan
agreement between Enserch Preferred and ENSERCH (the "Preferred Loan
Agreement", and collectively with the Capital Loan Agreement, the "Loan
Agreements") but does not purport to be complete. Except as set forth herein,
the Loan Agreements contain substantially similar terms and conditions.
References to provisions of the Loan Agreements are qualified in their
entirety by reference to the text of the Loan Agreements, which will be
substantially in the forms filed as exhibits to the Registration Statement of
which the accompanying Prospectus forms a part.
For purposes of this section, Enserch Preferred and ENSERCH are collectively
referred to as the "Borrowers" and individually sometimes as a "Borrower". The
obligations of each Borrower under the applicable Loan Agreement will also be
for the benefit of the holders from time to time of Series A Preferred
Securities, and such holders will be entitled to enforce such Loan Agreement
directly against such Borrower.
GENERAL
Pursuant to the Loan Agreements, Enserch Capital will agree to make Loans to
Enserch Preferred and Enserch Preferred will agree to make loans to ENSERCH in
an aggregate principal amount equal to $ , such amount being the
aggregate stated liquidation preference of the Series A Preferred Securities
issued and sold by Enserch Capital and the aggregate payments for Common
Securities.
The entire principal amount of the Loans will become due and payable,
together with any accrued and unpaid interest thereon, including Additional
Interest (as hereinafter defined), on the earliest of April 30, 2024 or the
date upon which Enserch Preferred or ENSERCH is dissolved, wound-up or
liquidated or the date upon which Enserch Capital is dissolved, wound-up or
terminated. For a description of certain circumstances under which the Loans
may be renewed or replaced see "Description of Series A Preferred Securities--
Redemption Procedures".
MANDATORY PREPAYMENT
If Enserch Capital redeems Series A Preferred Securities in accordance with
the terms thereof, the Loans will become due and payable in a principal amount
equal to the aggregate stated liquidation preference of the Series A Preferred
Securities so redeemed, together with any and all accrued interest thereon.
Any payment pursuant to this provision shall be made prior to 12:00 noon, New
York time, on the date of such redemption or at such other time on such
earlier date as the parties thereto shall agree.
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OPTIONAL PREPAYMENT
Each Borrower shall have the right to prepay the Loans made to it, without
premium or penalty,
(i) in whole or in part (together with any accrued but unpaid interest,
including Additional Interest, on the portion being prepaid) at any time on
or after April 30, 1999; and
(ii) in whole (together with all accrued and unpaid interest, including
Additional Interest thereon) at any time if such Borrower is or would be
required to pay Additional Interest on the Loans or in part (together with
all accrued and unpaid interest, including Additional Interest on the
portion being prepaid) at any time if such Borrower is or would be required
to pay Additional Interest with respect to only a portion of the Loans,
provided that if a partial prepayment would, through the corresponding
partial redemption required under the terms of the Series A Preferred
Securities, result in a delisting of the Series A Preferred Securities,
such Borrower may only prepay the Loans in whole. In no event, however,
shall such Borrower have the right to prepay the Loans, or a portion
thereof, under this clause (ii) based on a de minimis obligation to pay
Additional Interest. For purposes of the foregoing, in the event that such
Borrower is advised by independent legal counsel that more than an
insubstantial risk exists that such Borrower will incur penalties, interest
or tax under the Internal Revenue Code or other applicable law if it does
not withhold, such Borrower shall have the right to repay the Loans, or a
portion thereof, under this clause (ii) unless the obligation to pay
Additional Interest if such Borrower does so withhold is a de minimis
obligation.
INTEREST
The Loans will bear interest at an annual rate equal to % from the date
they are made until maturity. Such interest will be payable on the last day of
each calendar month of each year, commencing April 30, 1994. In the event that
any date on which interest is payable on the Loans is not a Business Day, then
payment of the interest payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay) except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and
effect as if made on such date, subject to certain rights of extension
described below.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Borrowers shall have the right acting jointly at any time during the
term of the Loans, so long as the Borrowers are not in default in the payment
of interest on the Loans, to extend the interest payment period to up to 60
months, at the end of which period the Borrowers shall pay all interest then
accrued and unpaid (together with interest thereon at the rate specified for
the Loans to the extent permitted by applicable law); and provided further
that, during any such extended interest payment period neither the Borrowers,
nor any majority-owned subsidiary of the Borrowers, shall declare or pay any
dividend on, or redeem, purchase, acquire or make a liquidation payment with
respect to, any of its capital stock or make any guarantee payments with
respect to the foregoing (other than (i) payments under the Guarantee or the
Loan Guarantee, or (ii) dividends or guarantee payments to the Borrowers or a
wholly owned subsidiary of ENSERCH). Prior to the termination of any such
extended interest payment period the Borrowers acting jointly may further
extend the interest payment period, provided that such extended interest
payment period together with all such further extensions thereof may not
exceed 60 months. The Borrowers shall give Enserch Capital notice of their
selection of such extended interest payment period one Business Day prior to
the earlier of (i) the date Enserch Capital declares the related dividend or
(ii) the date Enserch Capital is required to give notice of the record or
payment date of such related dividend to the New York Stock Exchange or other
applicable self-regulatory organization or to holders of the Series A
Preferred Securities, but in any event not less than two Business Days prior
to such record date. The Borrowers shall cause Enserch Capital to give such
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notice of the Borrowers' selection of such extended interest payment period to
the holders of the Series A Preferred Securities.
ADDITIONAL INTEREST
In addition, if at any time Enserch Capital shall be required to pay any
Additional Amounts in respect of the Series A Preferred Securities pursuant to
the terms thereof, then the Borrowers will pay as interest ("Additional
Interest") an amount equal to Additional Amounts.
METHOD AND DATE OF PAYMENT
Each payment by ENSERCH of principal and interest (including Additional
Interest, if any) on the Loans made to it shall be made to Enserch Preferred
in lawful money of the United States, at such place and to such account as may
be designated by Enserch Preferred. Each payment by Enserch Preferred of
principal and interest (including Additional Interest, if any) on the Loans
made to it shall be made to Enserch Capital in lawful money of the United
States, at such place and to such account as may be designated by Enserch
Capital.
SET-OFF
Notwithstanding anything to the contrary in the Loan Agreements, each
Borrower shall have the right to set-off any payment it is otherwise required
to make thereunder with and to the extent ENSERCH has theretofore made, or is
concurrently on the date of such payment making, a payment under the
Guarantee.
SUBORDINATION
Each Loan Agreement provides that the parties thereto covenant and agree
(and each holder of Series A Preferred Securities by acceptance thereof
agrees) that each of the related Loans is subordinate and junior in right of
payment to all Senior Indebtedness of the Borrower as provided in such Loan
Agreement. The term "Senior Indebtedness" shall mean the principal, premium,
if any, and interest on (i) all indebtedness of the Borrower, whether
outstanding on the date of such Loan Agreement or thereafter created, incurred
or assumed, which is for money borrowed, or evidenced by a note or similar
instrument given in connection with the acquisition of any business,
properties or assets, including securities, (ii) any indebtedness of others of
the kinds described in the preceding clause (i) for the payment of which the
Borrower is responsible or liable (directly or indirectly, contingently or
otherwise) as guarantor or otherwise, (iii) any indebtedness secured by a lien
upon property owned by the Borrower and upon which indebtedness the Borrower
customarily pays interest, even though the Borrower has not assumed or become
liable for the payment of such indebtedness and (iv) amendments, renewals,
extensions and refundings of any such indebtedness, unless in any instrument
or instruments evidencing or securing such indebtedness or pursuant to which
the same is outstanding, or in any such amendment, renewal, extension or
refunding, it is expressly provided that such indebtedness is not superior in
right of payment to the related Loans. Such Senior Indebtedness shall continue
to be Senior Indebtedness and entitled to the benefits of the subordination
provisions irrespective of any amendment, modification or waiver of any term
of such Senior Indebtedness or extension or renewal of such Senior
Indebtedness and irrespective of certain other events specified in the related
Loan Agreement.
Upon the maturity of any Senior Indebtedness of a Borrower by lapse of time,
acceleration or otherwise, all Senior Indebtedness of such Borrower then due
and owing shall first be paid in full, or such payment duly provided for in
cash (or in securities or other property satisfactory to all of the holders of
such Senior Indebtedness), before any payment is made on account of the
related Loans.
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In the event that (i) a Borrower shall default in the payment of any
principal, or premium, if any, or interest on any Senior Indebtedness when the
same becomes due and payable, whether at maturity or at a date fixed for
prepayment or declaration or otherwise or (ii) an event of default occurs with
respect to any Senior Indebtedness permitting the holders thereof to
accelerate the maturity thereof and written notice describing such event of
default, and requesting commencement of payment blockage on the Loans as
hereinafter described, is given to such Borrower by the holders of Senior
Indebtedness, then unless and until such default in payment or event of
default shall have been cured or waived or shall have ceased to exist, no
direct or indirect payment (in cash, property, securities, by set-off or
otherwise) shall be made or agreed to be made on account of the related Loans
or interest thereon or in respect of any repayment, redemption, retirement,
purchase or other acquisition of the related Loans.
In the event of (i) any insolvency, bankruptcy, receivership, liquidation,
reorganization, composition or other similar proceeding relating to a Borrower
or its property or for the benefit of its creditors, (ii) any proceeding for
the liquidation, dissolution or other winding up of a Borrower, voluntary or
involuntary, whether or not involving insolvency or bankruptcy proceedings,
(iii) any assignment by a Borrower for the benefit of creditors, or (iv) any
other marshalling of the assets of a Borrower, all Senior Indebtedness
(including, without limitation, interest accruing thereon after the
commencement of any such proceeding, assignment or marshalling of assets)
shall first be paid in full before any payment or distribution, whether in
cash, securities or other property, shall be made on the related Loans. Any
payment or distribution, whether in cash, securities or other property (other
than securities of a Borrower or any other corporation provided for by a plan
of reorganization, the payment of which is subordinate, at least to the extent
provided in the subordination provisions of the related Loan Agreement with
respect to the indebtedness evidenced by the related Loans, to the payment of
all Senior Indebtedness of such Borrower at the time outstanding and to any
securities issued in respect thereof under any such plan of reorganization),
which would otherwise (but for the subordination provisions) be payable or
deliverable in respect of the related Loans shall be paid or delivered
directly to the holders of such Senior Indebtedness (or their representative
or trustee) in accordance with the priorities then existing among such holders
until all Senior Indebtedness of such Borrower shall have been paid in full.
No present or future holder of any Senior Indebtedness of a Borrower shall be
prejudiced in the right to enforce subordination of the indebtedness
constituting the Loans made to such Borrower by any act or failure to act on
the part of such Borrower.
Senior Indebtedness of a Borrower shall not be deemed to have been paid in
full unless the holders thereof shall have received cash (or securities or
other property satisfactory to such holders) in full payment of such Senior
Indebtedness then outstanding. Upon the payment in full of all Senior
Indebtedness of such Borrower, Enserch Capital or Enserch Preferred, as the
case may be, shall be subrogated to all the rights of any holders of such
Senior Indebtedness to receive any further payments or distributions
applicable to such Senior Indebtedness until the Loans made to such Borrower
shall have been paid in full, and such payments or distributions of cash,
securities or other property received by Enserch Capital or Enserch Preferred,
as the case may be, by reason of such subrogation, which otherwise would be
paid or distributed to the holders of such Senior Indebtedness, shall, as
between such Borrower and its creditors other than the holders of Senior
Indebtedness, on the one hand, and Enserch Capital or Enserch Preferred, as
the case may be, on the other, be deemed to be a payment by such Borrower on
account of Senior Indebtedness, and not on account of the Loans made to such
Borrower.
CERTAIN COVENANTS OF THE BORROWERS
Each Borrower will covenant that such Borrower and, in the case of ENSERCH,
any majority-owned subsidiary of ENSERCH, will not declare or pay any dividend
on, or redeem, purchase, acquire or make a liquidation payment with respect
to, any of its capital stock, or make any guarantee payments
S-22
with respect to the foregoing (other than (i) payments under the Guarantee and
the Loan Guarantee, or (ii) dividends or guarantee payments to ENSERCH or a
wholly owned subsidiary of ENSERCH), if at such time (i) there shall have
occurred any event that, with the giving of notice or the lapse of time or
both, would constitute an Event of Default under the related Loan Agreement or
(ii) ENSERCH shall be in default with respect to its payment or other
obligations under the Guarantee. ENSERCH will also covenant (i) to maintain
direct or indirect 100% ownership of the Common Securities and any other
limited liability company interests of Enserch Capital other than the Series A
Preferred Securities, (ii) to cause at least 21% of the total value of Enserch
Capital and at least 21% of all interests in the capital, income, gain, loss,
deduction and credit of Enserch Capital to be represented by Common
Securities, (iii) not to voluntarily dissolve, wind-up or terminate Enserch
Capital, (iv) to remain the Class A Member of Enserch Capital and to timely
perform all of its duties as Class A Member of Enserch Capital (including the
duty to declare and pay dividends on the Series A Preferred Securities as
described in the fourth paragraph under "Description of the Series A Preferred
Securities--Dividends"); provided that any permitted successor of ENSERCH
under the Preferred Loan Agreement may succeed to ENSERCH's duties as Class A
Member, and (v) to use its reasonable efforts to cause Enserch Capital to
remain a limited life limited liability company and otherwise continue to be
treated as a partnership for United States federal income tax purposes.
Enserch Preferred also covenants not to enter into any agreement or incur any
indebtedness or other obligation other than as specifically permitted by
Capital Loan Agreement, the Preferred Loan Agreement, and the Limited
Liability Company Agreement.
Enserch Capital may not waive compliance or waive any default in compliance
by the Borrowers of any covenant or other term in the Loan Agreement without
the approval of the same percentage of Series A Preferred Securityholders,
obtained in the same manner, as would be required for an amendment of the Loan
Agreement to the same effect.
EVENTS OF DEFAULT
Each Loan Agreement provides that if one or more of the following events
(each an "Event of Default") shall occur and be continuing:
(a) default in the payment of interest on the Loans (made pursuant to
either Loan Agreement), including any Additional Interest in respect
thereof, when due for 10 days (whether by virtue of the provisions
described above under "Subordination" or otherwise); provided that a valid
extension of the interest payment period by the related Borrower shall not
constitute a default in the payment of interest for this purpose; or
(b) default in the payment of principal on the Loans when due (whether by
virtue of the provisions described above under "Subordination" or
otherwise); or
(c) the dissolution, winding up or termination of Enserch Capital; or
(d) the bankruptcy, insolvency or liquidation of Enserch Preferred or
ENSERCH; or
(e) breach of any covenants contained in such Loan Agreement continued
for 30 days after notice to the related Borrower from any Series A
Preferred Securityholder; or
(f) an Event of Default shall have occured under the other Loan
Agreement;
then Enserch Capital or Enserch Preferred, as the case may be, will have the
right to declare the principal of and the interest on the Loans made pursuant
to such Loan Agreement (including any Additional Interest and any interest
subject to an extension election) and any other amounts payable under such
Loan Agreement to be forthwith due and payable and to enforce its other rights
as a creditor with respect to such Loans. Under the terms of the Series A
Preferred Securities, the holders of outstanding Series A Preferred Securities
will have the rights referred to under "Description of the Series A Preferred
Securities--Voting Rights", including the right to appoint a trustee, which
trustee
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shall be authorized to exercise Enserch Capital's right to accelerate the
principal amount of the Loans and to enforce Enserch Capital's other creditor
rights under the Loans.
MISCELLANEOUS
ENSERCH will have the right at all times to assign any of its rights or
obligations under the Preferred Loan Agreement and Enserch Preferred will have
the right at all times to assign any of its rights or obligations under the
Capital Loan Agreement, to a direct or indirect wholly owned subsidiary of
ENSERCH; provided that, in the event of any such assignment, ENSERCH and/or
Enserch Preferred, as the case may be, will remain jointly and severally
liable for all such obligations. Neither Enserch Capital nor Enserch Preferred
may assign any of its rights under the Loan Agreements without the prior
written consent of ENSERCH. Subject to the foregoing, the Loan Agreements will
be binding upon and inure to the benefit of the parties thereto and their
respective successors and assigns. Each Loan Agreement provides that it may
not otherwise be assigned by the parties thereto.
The Preferred Loan Agreement will provide that ENSERCH may merge with or
into another entity, may permit another entity to merge with or into ENSERCH
and may sell, transfer or lease all or substantially all of its assets to
another entity only if (i) at such time no Event of Default has occurred and
is continuing, or would occur as a result of such merger, sale, transfer or
lease, and (ii) ENSERCH is the survivor of such merger or the entity to which
ENSERCH's assets are sold, transferred or leased is an entity organized under
the laws of the United States or any state thereof, and assumes all of
ENSERCH's obligations under the Preferred Loan Agreement and becomes the Class
A Member.
The Capital Loan Agreement will provide that Enserch Preferred may merge
with or into another entity, may permit another entity to merge with or into
Enserch Preferred and may sell, transfer or lease all or substantially all of
its assets to another entity only if (i) at such time no Event of Default has
occurred and is continuing, or would occur as a result of such merger, sale,
transfer or lease, and (ii) Enserch Preferred is the survivor of such merger
or the survivor of such merger or entity to which Enserch Preferred's assets
are sold, transferred or leased is an entity organized under the laws of the
United States or any state thereof, assumes all of Enserch Preferred's
obligations under the Preferred Loan Agreement and becomes the Class A Member.
The Loan Agreements will be governed by and construed in accordance with the
laws of the State of New York.
The Loan Agreements may be amended by mutual consent of the parties in the
manner the parties shall agree, provided that, so long as any of the Series A
Preferred Securities remain outstanding, no such amendment shall be made, and
no termination of either Loan Agreement shall occur, without, the prior
approval of ENSERCH and the holders of at least 66 2/3% of the outstanding
Series A Preferred Securities.
DESCRIPTION OF THE LOAN GUARANTEE
Set forth below is a summary of information concerning the loan guarantee
(the "Loan Guarantee") which will be executed and delivered by ENSERCH for the
benefit of Enserch Capital. This summary contains certain terms and provisions
of the Loan Guarantee but does not purport to be complete. References to
provisions of the Loan Guarantee are qualified in their entirety by reference
to the text of the Loan Guarantee, which will be substantially in the form
filed as an exhibit to the Registration Statement of which the accompanying
Prospectus forms a part.
GENERAL
ENSERCH will irrevocably and unconditionally agree, to the extent set forth
herein, to pay in full, to Enserch Capital the Loan Guarantee Payments (as
defined below) (except to the extent paid by
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Enserch Preferred), as and when due, regardless of any defense, right of set-
off or counterclaim which Enserch Preferred may have or assert. The following
payments to the extent not paid by Enserch Preferred (the "Loan Guarantee
Payments") will be subject to the Loan Guarantee (without duplication): the
principal of and interest on, including any Additional Interest, on the Loans.
ENSERCH's obligation to make a Loan Guarantee Payment may be satisfied by
direct payment of the required amounts by ENSERCH to Enserch Capital or by
causing Enserch Preferred to pay such amounts to Enserch Capital.
CERTAIN COVENANTS OF ENSERCH
In the Loan Guarantee, ENSERCH will covenant that, so long as any Series A
Preferred Securities remain outstanding, neither ENSERCH, nor any wholly owned
subsidiary of ENSERCH, shall declare or pay any dividend on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of its
capital stock or make any guarantee payments with respect to the foregoing
(other than (i) payments under the Guarantee and the Loan Guarantee, or (ii)
dividends or guarantee payments to ENSERCH or a wholly owned subsidiary of
ENSERCH) if at such time ENSERCH shall be in default with respect to its
payment or other obligations under the Loan Guarantee or there shall have
occurred any event that, with the giving of notice or the lapse of time or
both, would constitute an Event of Default under the Loans to Enserch
Preferred or from Enserch Preferred to Enserch Capital.
In the Loan Guarantee, ENSERCH will also covenant that, so long as any
Series A Preferred Securities remain outstanding, it will maintain direct or
indirect 100% ownership of the Common Securities, and 100% of the outstanding
shares of capital stock of Enserch Preferred.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not adversely affect the rights
of holders of Series A Preferred Securities (in which case no vote will be
required), the Loan Guarantee may be changed only with the prior approval of
the holders of not less than 66 2/3% of the outstanding Series A Preferred
Securities. The manner of obtaining any such approval of holders of the Series
A Preferred Securities will be as set forth under "Description of the Series A
Preferred Securities--Voting Rights". All guarantees and agreements contained
in the Loan Guarantee shall bind the successors, assigns, receivers, trustees
and representatives of ENSERCH and shall inure to the benefit of the holders
of the Series A Preferred Securities.
TERMINATION OF THE LOAN GUARANTEE
The Loan Guarantee will terminate and be of no further force and effect upon
full payment of the Loan Guaranteed Amounts. The Loan Guarantee will continue
to be effective or will be reinstated, as the case may be, if at any time
Enserch Capital must restore payment of any sums paid under the Loan
Guarantee.
STATUS OF THE LOAN GUARANTEE
The Loan Guarantee will constitute an unsecured obligation of ENSERCH and
will rank subordinate and junior in right of payment to all Senior
Indebtedness of ENSERCH as defined in the Preferred Loan Agreement to the
extent and on the same basis as the Loans under the Preferred Loan Agreement.
See "Description of the Loans--Subordination".
The Loan Guarantee will constitute a guarantee of payment and not of
collection. Enserch Capital may enforce the Loan Guarantee directly against
ENSERCH, and ENSERCH will waive any right or remedy to require that any action
be brought against Enserch Preferred or any other person or entity before
proceeding against ENSERCH. The Loan Guarantee will not be discharged except
by payment
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of the Loan Guarantee Payments in full to the extent not paid by Enserch
Preferred and by complete performance of all obligations under the Loan
Guarantee.
GOVERNING LAW
The Loan Guarantee will be governed by and construed in accordance with the
laws of the State of New York.
CERTAIN TERMS OF THE % SUBORDINATED DEBENTURES
Under certain circumstances involving the dissolution of Enserch Capital
following the occurrence of a Tax Event or an Investment Company Event, the
Series A Preferred Securities may be exchanged for % Subordinated
Debentures issued by ENSERCH (the " % Subordinated Debentures"). See
"Description of the Series A Preferred Securities--Optional Redemption". The
following description of the particular terms of the % Subordinated
Debentures supplements the description of the general terms and conditions of
"Debt Securities" set forth under the heading "Description of the Debt
Securities" in the accompanying Prospectus, to which description reference is
hereby made.
GENERAL
The % Subordinated Debentures will be issued as a series of unsecured
Subordinated Debt Securities of ENSERCH under the Subordinated Indenture (the
"Subordinated Indenture") referred to in the accompanying Prospectus between
ENSERCH and The First National Bank of Chicago, as trustee (the "Subordinated
Trustee"). The % Subordinated Debentures will be limited in aggregate
principal amount to the principal amount of the Loans outstanding under the
Capital Loan Agreement immediately prior to such exchange and will mature on
the date on which such Loans mature at the time the % Subordinated
Debentures are issued.
The % Subordinated Debentures will initially be issued in book-entry form
through the facilities of the Depository (as described below). As described
herein, under certain limited circumstances % Subordinated Debentures may
be issued in certificated form in exchange for a Global Security (as defined
below). See "Book-Entry and Settlement". In the event that % Subordinated
Debentures are issued in certificated form, such % Subordinated Debentures
will be in denominations of $25.00 and integral multiples thereof and may be
transferred or exchanged at the offices described in the immediately following
paragraph.
Payments on % Subordinated Debentures issued in book-entry form will be
made to the Depository. In the event % Subordinated Debentures are issued
in certificated form, principal and interest will be payable, the transfer of
the % Subordinated Debentures will be registrable and % Subordinated
Debentures will be exchangeable for % Subordinated Debentures bearing
identical terms and provisions at the office or agency of ENSERCH in The City
of New York designated for such purpose, provided, that payment of interest
may be made at the option of ENSERCH by check mailed to the address of the
persons entitled thereto.
ENSERCH will use its best efforts to list the % Subordinated Debentures on
the New York Stock Exchange.
INTEREST
Each % Subordinated Debenture will bear interest at the rate of % per
annum from the original date of issuance, payable monthly in arrears on the
last day of each calendar month of each year (each an "Interest Payment
Date"), commencing on the original date of issuance, to the person
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in whose name such % Subordinated Debenture (or any predecessor %
Subordinated Debenture) is registered, subject to certain exceptions, at the
close of business on the business day next preceding such Interest Payment
Date.
The amount of interest payable for any period will be computed on the basis
of twelve 30-day months and a 360-day year and, for any period shorter than a
full monthly interest period, will be computed on the basis of the actual
number of days elapsed in such period. In the event that any date on which
interest is payable on the % Subordinated Debentures is not a Business Day,
then payment of the interest payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and
effect as if made on such date. A "Business Day" shall mean any day other than
a day on which banking institutions in The City of New York are authorized or
required by law to close.
INTEREST DEFERRAL
Notwithstanding anything contained herein to the contrary, ENSERCH shall
have the right at any time during the term of the % Subordinated
Debentures, so long as ENSERCH is not in default in the payment of interest on
the % Subordinated Debentures, to extend the interest payment period on the
% Subordinated Debentures to up to 60 months, at the end of which period
ENSERCH shall pay all interest then accrued and unpaid (compounded monthly to
the extent permitted by applicable law); provided that, during any such
extended interest payment period, neither ENSERCH, nor any majority-owned
subsidiary of ENSERCH, shall declare or pay any dividends on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of its
capital stock or make any guarantee payments with respect to the foregoing
(other than dividends or guarantee payments to ENSERCH or a wholly owned
subsidiary of ENSERCH). Prior to the termination of any such extended interest
payment period, ENSERCH may further extend the interest payment period;
provided that such extended interest payment period together with all such
further extensions thereof may not exceed 60 months. ENSERCH shall give the
holders of the % Subordinated Debentures notice of its selection of such
extended interest payment period ten Business Days prior to the earlier of (i)
the Interest Payment Date or (ii) the date ENSERCH is required to give notice
of the record or payment date of such related interest payment to the New York
Stock Exchange or other applicable self-regulatory organization or to holders
of the % Subordinated Debentures, but in any event not less than two
Business Days prior to such record date.
OPTIONAL REDEMPTION
The % Subordinated Debentures will be redeemable at the option of ENSERCH
at any time on or after April 30, 1999 at a Redemption Price equal to 100% of
the principal amount plus accrued interest to the Redemption Date.
COVENANTS
In the Subordinated Indenture, ENSERCH covenants that neither it, nor any of
its majority owned subsidiaries, shall declare or pay any dividend on, or
redeem, purchase, acquire or make a liquidation payment with respect to, any
of its capital stock, or make any guarantee payments with respect to the
foregoing if at such time there shall have occurred any event that, with the
giving of notice or the lapse of time or both, would constitute an Event of
Default thereunder.
BOOK-ENTRY AND SETTLEMENT
The % Subordinated Debentures will be issued in the form of one or more
global certificates (each a "Global Security") registered in the name of the
nominee of the Depository. Except under the limited circumstances described
below, % Subordinated Debentures represented by the Global
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Security will not be exchangeable for, and will not otherwise be issuable as,
% Subordinated Debentures in definitive form. The Global Securities
described above may not be transferred except by the Depository for such
Global Security to a nominee of the Depository or by a nominee of the
Depository to the Depository or another nominee of the Depository or to a
successor Depository or its nominee.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such laws may
impair the ability to transfer beneficial interests in such a Global Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of % Subordinated
Debentures in definitive form and will not be considered the Holders (as
defined in the Subordinated Indenture) thereof for any purpose under the
Subordinated Indenture, and no Global Security representing % Subordinated
Debentures shall be exchangeable, except for another Global Security of like
denomination and tenor to be registered in the name of the Depository or its
nominee or to a successor Depository or its nominee. Accordingly, each
Beneficial Owner must rely on the procedures of the Depository and, if such
person is not a participant, on the procedures of the participant through
which such person owns its interest, to exercise any rights of a Holder under
the Subordinated Indenture.
The Depository. The Depository Trust Company ("DTC"), New York, New York,
will act as security Depository for the % Subordinated Debentures. For a
description of DTC and the specific terms of the Depository arrangements, see
"Description of the Series A Preferred Securities--Book-Entry Only Issuance--
The Depository Trust Company".
None of ENSERCH, the Trustee, any paying agent or any other agent of ENSERCH
or the Trustee will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in a Global Security for such % Subordinated Debentures or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
Discontinuance of the Depository's Services. A Global Security shall be
exchangeable for % Subordinated Debentures registered in the names of
persons other than the Depository or its nominee only if (i) the Depository
notifies ENSERCH that it is unwilling or unable to continue as Depository for
such Global Security or if any time the Depository ceases to be a clearing
agency registered under the Exchange Act at a time when the Depository is
required to be so registered to act as such Depository, (ii) ENSERCH in its
sole discretion determines that such Global Security shall be so exchangeable
or (iii) there shall have occurred and be continuing a default in the payment
of principal of, or interest on, such % Subordinated Debentures or an Event
of Default or an event which, with the giving of notice or lapse of time, or
both, would constitute an Event of Default with respect to such %
Subordinated Debentures. Any Global Security that is exchangeable pursuant to
the preceding sentence shall be exchangeable for % Subordinated Debentures
registered in such names as the Depository shall direct. It is expected that
such instructions will be based upon directions received by the Depository
from its participants with respect to ownership of beneficial interests in
such Global Security.
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UNITED STATES TAXATION
GENERAL
This section is a summary of certain federal income tax considerations that
may be relevant to prospective purchasers of Series A Preferred Securities and
represents the opinion of Sullivan & Cromwell, counsel to ENSERCH and Enserch
Capital, insofar as it relates to matters of law and legal conclusions. This
section is based upon current provisions of the Internal Revenue Code of 1986,
as amended ("Code"), existing and proposed regulations thereunder and current
administrative rulings and court decisions, all of which are subject to
change. Subsequent changes may cause tax consequences to vary substantially
from the consequences described below.
No attempt has been made in the following discussion to comment on all
federal income tax matters affecting purchasers of Series A Preferred
Securities. Moreover, the discussion focuses on holders of Series A Preferred
Securities who are individual citizens or residents of the United States and
has only limited application to corporations, estates, trusts or non-resident
aliens. Accordingly, each prospective purchaser of Series A Preferred
Securities should consult, and should depend on, his own tax advisor in
analyzing the federal, state, local and foreign tax consequences of the
purchase, ownership or disposition of Series A Preferred Securities.
INCOME FROM SERIES A PREFERRED SECURITIES
In the opinion of Sullivan & Cromwell, Enserch Capital will be treated as a
partnership for federal income tax purposes. Accordingly, each holder of
Series A Preferred Securities (a "Preferred Securityholder") will be required
to include in gross income his distributive share of Enserch Capital's net
income. Such income will not exceed dividends received on such Series A
Preferred Securities, except in limited circumstances as described below under
"Potential Extension of Interest Payment Period". No portion of such income
will be eligible for the dividends received deduction.
DISPOSITION OF SERIES A PREFERRED SECURITIES
Gain or loss will be recognized on a sale of Series A Preferred Securities
including a redemption for cash equal to the difference between the amount
realized and the Series A Preferred Securityholder's tax basis for the Series
A Preferred Securities sold. Gain or loss recognized by a Series A Preferred
Securityholder on the sale or exchange of a Series A Preferred Security held
for more than one year will generally be taxable as long-term capital gain or
loss.
EXCHANGE OF THE SERIES A PREFERRED SECURITIES FOR % SUBORDINATED DEBENTURES
Under certain circumstances relating to changes in law, as described under
the caption "Description of the Series A Preferred Securities--Special Event
Redemption or Exchange", Enserch Capital may distribute % Subordinated
Debentures in exchange for the Series A Preferred Securities. Except as
described in the second succeeding sentence, such exchange generally would be
in the opinion of Sullivan & Cromwell treated as a non-taxable exchange to
each holder of Series A Preferred Securities and will result in the holder of
Series A Preferred Securities receiving an aggregate tax basis in the %
Subordinated Debentures equal to such holder's aggregate tax basis in its
Series A Preferred Securities. A holder's holding period in the %
Subordinated Debentures so received in exchange for Series A Preferred
Securities will include the period for which the Series A Preferred Securities
were held by such holder. If the exchange occurs following a determination
that Enserch Capital is subject to federal income tax with respect to interest
received on the Loans made by it, the exchange will generally be taxable to a
holder of Series A Preferred Securities who will recognize gain or loss
measured by the difference between such holder's basis in its Series A
Preferred Securities and the value of the % Subordinated Debentures received
in exchange therefor. In such a case, the
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holding period of a holder of Series A Preferred Securities for the %
Subordinated Debentures will not include the period for which the Series A
Preferred Securities were held.
ENSERCH CAPITAL INFORMATION RETURNS AND AUDIT PROCEDURES
ENSERCH, as Class A Member of Enserch Capital, will furnish each Series A
Preferred Securityholder with a Schedule K-1 each year setting forth such
Series A Preferred Securityholder's allocable share of income for the prior
calendar year. ENSERCH is required to furnish such K-1s as soon as practicable
following the end of the year, but in any event prior to March 31.
Any person who holds Series A Preferred Securities as a nominee for another
person is required to furnish to Enserch Capital (a) the name, address and
taxpayer identification number of the beneficial owner and the nominee; (b)
information as to whether the beneficial owner is (i) a person that is not a
United States person, (ii) a foreign government, an international organization
or any wholly owned agency or instrumentality of either of the foregoing, or
(iii) a tax-exempt entity; (c) the amount and description of Series A
Preferred Securities held, acquired or transferred for the beneficial owner;
and (d) certain information including the dates of acquisitions and transfers,
means of acquisitions and transfers, and acquisition cost for purchases, as
well as the amount of net proceeds from sales. Brokers and financial
institutions are required to furnish additional information, including whether
they are United States persons and certain information on Series A Preferred
Securities they acquire, hold or transfer for their own accounts. A penalty of
$50 per failure (up to a maximum of $100,000 per calendar year) is imposed by
the Code for failure to report such information to Enserch Capital. The
nominee is required to supply the beneficial owners of the Series A Preferred
Securities with the information furnished to Enserch Capital.
POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD
Under the terms of the Loans, ENSERCH will be permitted to extend the
interest payment period up to 60 months. In the event that ENSERCH exercises
this right, ENSERCH may not, among other things, declare dividends on any of
its capital stock. Enserch Capital and ENSERCH currently believe that the
extension of a payment period is unlikely. In the event that the interest
payment period is extended, Enserch Capital will continue to accrue income,
equal to the amount of the interest payment due at the end of the extended
interest payment period, over the length of the extended interest payment
period.
Accrued income will be allocated, but not distributed, to holders of record
on the Business Day preceding the last day of each calendar month. As a
result, holders of record during an extended interest payment period will
include interest in gross income in advance of the receipt of cash, and any
such holders who dispose of Series A Preferred Securities prior to the record
date for the payment of dividends following such extended interest payment
period will include interest in gross income but will not receive any cash
related thereto. The tax basis of a Series A Preferred Security will be
increased by the amount of any interest that is included in income without a
receipt of cash, and will be decreased again when and if such cash is
subsequently received from Enserch Capital.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
holder who or which is (i) a nonresident alien individual or (ii) a foreign
corporation, partnership or estate or trust, in either case not subject to
United States federal income tax on a net income basis in respect of a Series
A Preferred Security.
Under present United States federal income tax law, subject to the
discussion below with respect to backup withholding, and assuming satisfaction
by ENSERCH of its withholding tax obligations, if any:
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(i) Payments by Enserch Capital or any of its paying agents to any holder
of a Series A Preferred Security who or which is a United States Alien
Holder will not be subject to United States federal withholding tax
provided that (a) the beneficial owner of the Series A Preferred Security
does not actually or constructively own 10%, or more of the total combined
voting power of all classes of stock of ENSERCH or Enserch Preferred
entitled to vote, (b) the beneficial owner of the Series A Preferred
Security is not a controlled foreign corporation that is related to ENSERCH
or Enserch Preferred through stock ownership, and (c) either (A) the
beneficial owner of the Series A Preferred Security certifies to Enserch
Capital or its agent, under penalties of perjury, that it is a United
States Alien Holder and provides its name and address or (B) the holder of
the Series A Preferred Security is a securities clearing organization, bank
or other financial institution that holds customers' securities in the
ordinary course of its trade or business (a "financial institution"), and
such holder certifies to Enserch Capital or its agent under penalties of
perjury that such statement has been received from the beneficial owner by
it or by a financial institution between it and the beneficial owner and
furnishes the payor with a copy thereof; and
(ii) a United States Alien Holder of a Series A Preferred Security will
generally not be subject to United States federal withholding tax on any
gain realized on the sale or exchange of a Series A Preferred Security
unless such holder is present in the United States for 183 days or more in
the taxable year of sale and either has a "tax home" in the United States
or certain other requirements are met.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to payments of the
proceeds of the sale of Series A Preferred Securities within the United States
to noncorporate U.S. holders, and "backup withholding" at a rate of 31% will
apply to such payments if the United States holder fails to provide an
accurate taxpayer identification number.
Payments of the proceeds from the sale by a United States Alien Holder of
Series A Preferred Securities made to or through a foreign office of a broker
will not be subject to information reporting or backup withholding, except
that, if the broker is a United States person, a controlled foreign
corporation for United States tax purposes or a foreign person 50% or more of
whose gross income is effectively connected with a United States trade or
business for a specified three-year period, information reporting may apply to
such payments. Payments of the proceeds from the sale of Series A Preferred
Securities to or through the United States office of a broker is subject to
information reporting and backup withholding unless the holder or beneficial
owner certifies as to its non-United States status or otherwise establishes an
exemption from information reporting and backup withholding.
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UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, Enserch
Capital has agreed to sell to each of the Underwriters named below, and each
of the Underwriters, for whom Goldman, Sachs & Co., Bear, Stearns & Co. Inc.,
Kidder, Peabody & Co. Incorporated, Lehman Brothers Inc., PaineWebber
Incorporated and Smith Barney Shearson Inc., are acting as Representatives,
has severally agreed to purchase from Enserch Capital the respective number of
Series A Preferred Securities set forth opposite its name below:
NUMBER OF
PREFERRED
UNDERWRITER SECURITIES
----------- ----------
Goldman, Sachs & Co. ..........................................
Bear, Stearns & Co. Inc. ......................................
Kidder, Peabody & Co. Incorporated.............................
Lehman Brothers Inc. ..........................................
PaineWebber Incorporated.......................................
Smith Barney Shearson Inc. ....................................
----
Total........................................................
====
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all such Series A Preferred
Securities offered hereby, if any are taken.
The Underwriters propose to offer the Series A Preferred Securities in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus Supplement, and in part to certain securities
dealers at such price less a concession of $ per Series A Preferred
Security. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per Series A Preferred Security to
certain brokers and dealers. After the Series A Preferred Securities are
released for sale to the public, the offering price and other selling terms
may from time to time be varied by the Representatives.
In view of the fact that the proceeds of the sale of the Series A Preferred
Securities will ultimately be loaned to ENSERCH, under the Underwriting
Agreement, ENSERCH has agreed to pay as compensation ("Underwriters'
Compensation") for the Underwriters' arranging the Loan of such proceeds, an
amount in New York Clearing House (next day) funds of $ per Series A
Preferred Security ($ per Series A Preferred Security sold to certain
institutions) for the accounts of the several Underwriters.
Certain of the Underwriters are customers of, or engage in transactions
with, and from time to time have performed services for, ENSERCH and its
subsidiaries and associated companies in the ordinary course of business.
Prior to this offering, there has been no public market for the Series A
Preferred Securities. In order to meet one of the requirements for listing the
Series A Preferred Securities on the New York Stock Exchange, the Underwriters
will undertake to sell lots of 100 or more Series A Preferred Securities to a
minimum of 400 beneficial holders.
Enserch Capital and ENSERCH have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the United States
Securities Act of 1933, as amended.
ENSERCH and Enserch Capital have agreed, during the period beginning from
the date of the Underwriting Agreement and continuing to and including the
earlier of (i) the date, after the closing date, on which the distribution of
the Series A Preferred Securities and related Backup Undertakings ceases, as
determined by the Underwriters, or (ii) 90 days after the closing date, not to
offer, sell, contract to sell or otherwise dispose of any Series A Preferred
Securities, related Backup Undertakings,
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any limited liability company interests of Enserch Capital, or any preferred
stock of ENSERCH or any other securities (including any backup undertakings)
of Enserch Capital or ENSERCH which are substantially similar to the Series A
Preferred Securities or related Backup Undertakings, or any securities
convertible into or exchangeable for Series A Preferred Securities, related
Backup Undertakings, limited liability company interests, preferred stock or
such substantially similar securities of either Enserch Capital or ENSERCH
without the prior written consent of the Underwriters.
VALIDITY OF SECURITIES
Certain matters of Delaware law relating to the validity of the Series A
Preferred Securities, the validity of the obligations of ENSERCH under the
Limited Liability Company Agreement and the formation of Enserch Capital, are
being passed upon by Richards, Layton & Finger, P.A., special Delaware counsel
to Enserch Capital. The validity of the Series A Preferred Securities, the
Loan Agreements, the Guarantee, the Loan Guarantee and any % Subordinated
Debentures issuable in exchange for Series A Preferred Securities, will be
passed upon on behalf of Enserch Capital and ENSERCH by William T.
Satterwhite, Senior Vice President and General Counsel of ENSERCH, and on
behalf of the Underwriters by Mudge Rose Guthrie Alexander & Ferdon, counsel
to the Underwriters. Mr. Satterwhite and Mudge Rose Guthrie Alexander & Ferdon
may rely on the opinion of Richards, Layton & Finger, P.A. as to certain
matters of Delaware law. Mudge Rose Guthrie Alexander & Ferdon may rely on the
opinion of Mr. Satterwhite as to all matters of Texas law.
S-33
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION--DATED MARCH 23, 1994
PROSPECTUS
U.S. $450,000,000
ENSERCH CORPORATION
DEBT SECURITIES, PREFERRED STOCK
AND COMMON STOCK
ENSERCH CAPITAL L.L.C. PREFERRED SECURITIES
ENSERCH Corporation ("ENSERCH" or the "Corporation") may offer from time to
time in one or more series, together or separately, as shall be designated by
ENSERCH (i) debt securities (the "Debt Securities") which may be either senior
debt securities (the "Senior Debt Securities") or subordinated debt securities
(the "Subordinated Debt Securities") which, in the case of Subordinated Debt
Securities, may be convertible into the Corporation's Common Stock, $4.45 par
value (the "Common Stock"), (ii) shares of its preferred stock, of no par value
(the "Preferred Stock"), which may be issued in the form of Depositary Shares
evidenced by Depositary Receipts, and (iii) shares of its Common Stock. Enserch
Capital L.L.C. ("Enserch Capital"), a Delaware limited liability company and a
special purpose subsidiary of ENSERCH, may also offer, from time to time, its
preferred limited liability company interests ("EC Preferred Securities"), in
one or more series. In connection therewith, ENSERCH and Enserch Preferred
Capital, Inc., a Delaware corporation ("Enserch Preferred"), may offer back-up
undertakings ("Backup Undertakings") with respect to the EC Preferred
Securities, as described herein under "Enserch Capital and Enserch Preferred."
The Debt Securities, Preferred Stock, Common Stock, and EC Preferred Securities
and any related Backup Undertakings are collectively called the "Securities."
The Securities may be offered in amounts, at prices and on terms to be
determined at the time of offering, provided, however, that the aggregate
initial public offering price of all Securities shall not exceed U.S.
$450,000,000 (or its equivalent, based on the applicable exchange rate at the
time of sale, in one or more foreign currencies, currency units or composite
currencies). Certain specific terms of the particular Securities in respect of
which this Prospectus is being delivered will be set forth in the accompanying
Prospectus Supplement (the "Prospectus Supplement"), including where
applicable, in the case of Debt Securities: the specific title, aggregate
principal amount, the denomination, maturity, premium, if any, the interest
rate (which may be fixed, floating or adjustable), the time and method of
calculating payment of interest, if any, the place or places where principal of
(and premium, if any) and interest, if any, on such Debt Securities will be
payable, the currency in which principal of (and premium, if any) and interest,
if any, on such Debt Securities shall be payable, any terms of redemption at
the option of ENSERCH or the holder, any sinking fund provisions, terms for any
conversion or exchange into other securities, the initial public offering price
and other special terms; and, in the case of Preferred Stock and EC Preferred
Securities, the specific title, the aggregate amount, any dividends (including
the method of calculating payment of such dividends), liquidation, redemption,
any voting and other rights, terms for any conversion or exchange into other
securities, the initial public offering price and any other special terms. The
Senior Debt Securities when issued will rank on a parity with all other
unsecured and unsubordinated indebtedness of the Corporation. The Subordinated
Debt Securities when issued will be unsecured and subordinated to all present
and future Senior Indebtedness of the Corporation. If so specified in the
applicable Prospectus Supplement, Debt Securities of a series may be issued in
whole or in part in the form of one or more temporary or permanent global
Securities. ENSERCH's Common Stock is listed on the New York Stock Exchange,
the Midwest Stock Exchange and the London Stock Exchange. Any Common Stock sold
pursuant to a Prospectus Supplement will be listed on such exchanges, subject
to official notice of issuance.
The Prospectus Supplement will contain information concerning certain United
States federal income tax considerations, if applicable to the Securities
offered.
The Securities will be sold directly, through agents, underwriters or dealers
as designated from time to time, or through a combination of such methods. If
agents of ENSERCH or any dealers or underwriters are involved in the sale of
the Securities in respect of which this Prospectus is being delivered, the
names of such agents, dealers or underwriters and any applicable commissions or
discounts will be set forth in or may be calculated from the Prospectus
Supplement with respect to such Securities.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURI-
TIES 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 , 1994.
AVAILABLE INFORMATION
ENSERCH is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Corporation can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, and at the following Regional
Offices of the Commission: 7 World Trade Center, New York, New York 10048; and
500 West Madison Street, Chicago, Illinois 60661-2511. Copies of such material
can be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Corporation's Common Stock is listed on, and reports, proxy statements and
other information concerning the Corporation may also be inspected at the
offices of, the New York Stock Exchange, 20 Broad Street, New York, New York
and the Midwest Stock Exchange, 440 South LaSalle Street, Chicago, Illinois
60605.
This Prospectus does not contain all the information set forth in the
Registration Statement on Form S-3 (herein, together with all amendments and
exhibits thereto, referred to as the "Registration Statement"), which the
Corporation has filed with the Commission under the Securities Act of 1933 (the
"Securities Act"). Statements contained or incorporated by reference herein
concerning the provisions of documents are necessarily summaries of such
documents, and each statement is qualified in its entirety by reference to the
Registration Statement.
No separate financial statements of Enserch Capital or Enserch Preferred have
been included herein. ENSERCH, Enserch Capital and Enserch Preferred do not
consider that such financial statements would be material to holders of EC
Preferred Securities because Enserch Capital and Enserch Preferred are newly
organized special purpose entities, have no operating history and no
independent operations and are not engaged in, and do not propose to engage in,
any activity other than as set forth below. See "Enserch Capital and Enserch
Preferred." Enserch Capital is a limited liability company organized under the
laws of the State of Delaware and will be managed by ENSERCH, which
beneficially owns all of Enserch Capital's limited liability company interests
(other than the EC Preferred Securities) which are non-transferable. Enserch
Capital exists solely for the purpose of issuing its limited liability company
interests and lending the proceeds thereof to ENSERCH or Enserch Preferred.
Enserch Preferred is a Delaware corporation and a wholly-owned subsidiary of
ENSERCH. Enserch Preferred exists solely for the purpose of holding the Class B
limited liability company interests of Enserch Capital, borrowing the proceeds
from the sale of the limited liability company interests of Enserch Capital and
reloaning such proceeds to ENSERCH.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Corporation with the
Commission pursuant to the Exchange Act (File No. 1-3183) and are incorporated
herein by reference:
1. The Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992;
2. The Corporation's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1993, June 30, 1993, and September 30, 1993; and
3. The Corporation's Current Reports on Form 8-K dated October 18, 1993,
November 17, 1993, December 22, 1993, January 18, 1994, February 9, 1994,
and March 3, 1994.
All documents filed by the Corporation pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the securities offered hereby shall
be deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the date of filing such documents. Any statement contained herein
or in a document all or a portion of which is incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or
2
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or
is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
Any person receiving a copy of this Prospectus may obtain without charge,
upon request, a copy of any of the documents incorporated herein by reference
(not including the exhibits to such documents, unless such exhibits are
specifically incorporated by reference in such documents). Requests for such
copies should be directed to Mr. M. G. Fortado, Vice President, Corporate
Secretary and Assistant General Counsel, at 300 South St. Paul Street, Dallas,
Texas 75201-5589 (tel. 214-670-2649).
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 OR ANY PROSPECTUS SUPPLEMENT, IN CONNECTION WITH THE OFFERING
CONTAINED HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE CORPORATION OR BY ANY
UNDERWRITER, DEALER OR AGENT. THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT DOES
NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES
OR AN OFFER TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER WOULD BE
UNLAWFUL OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE THEREOF OR, IN THE CASE OF INFORMATION INCORPORATED HEREIN BY
REFERENCE, THE DATE OF FILING WITH THE COMMISSION.
THE CORPORATION
GENERAL
ENSERCH is an integrated company focused on natural gas. It is the successor
to a company originally organized in 1909 for the purpose of providing natural
gas service to North Texas. The Corporation's operations include the following:
. Natural Gas Transmission and Distribution--Owning and operating
interconnected natural gas transmission pipelines, gathering lines,
underground gas storage reservoirs, compressor stations, distribution
systems and related properties; transporting, distributing and selling
natural gas to residential, commercial, industrial, electric-generation,
pipeline and other customers; and compressing natural gas for motor vehicle
usage. (Lone Star Gas Company, a division of the Corporation, Enserch Gas
Company, and related operations.)
. Natural Gas and Oil Exploration and Production--Exploring for,
developing, producing and marketing natural gas and oil. (Enserch
Exploration, Inc., Enserch Exploration Partners, Ltd. [more than 99%
owned], Enserch International Exploration, Inc., and related operations.)
. Natural Gas Liquids Processing--Gathering natural gas, processing
natural gas to produce liquids and marketing the products. (Enserch
Processing Partners, Ltd.)
. Power and Other--Developing, operating and maintaining independent
electric generation power plants and cogeneration facilities; and
furnishing energy services under long-term contracts to large building
complexes, such as universities and medical centers. (Enserch Development
Corporation and Lone Star Energy Company) Providing environmental
engineering and contracting services from initial site assessment and
feasibility studies to designs, actions and remediation (Enserch
Environmental Corporation).
The Corporation's principal executive offices are located at 300 South St.
Paul Street, Dallas, Texas 75201, and its telephone number is (214) 651-8700.
3
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
AND EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
The following ratios have been restated to give effect to the discontinuance
of the Corporation's engineering and construction business segment:
YEAR ENDED DECEMBER 31,
------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
Consolidated ratio of earnings to fixed charges....... .93 1.02 1.49 1.80 1.76
Consolidated ratio of earnings to combined fixed
charges and preferred stock dividends................ .82 .92 1.25 1.54 1.50
For purposes of computing the foregoing ratios for continuing operations: (i)
"fixed charges" represent interest expense, capitalized interest and the
portion of rental expense representing the interest factor for continuing
operations, and (ii) "earnings" represent the aggregate of income from
continuing operations before extraordinary items, income taxes, amortization of
previously capitalized interest and fixed charges deducted from earnings.
For the purposes of calculating the ratio of earnings to combined fixed
charges and preferred stock dividends, the preferred stock dividend
requirements were assumed to be equal to the pretax earnings from continuing
operations which would be required to cover such dividend requirements computed
using the effective tax rates for the applicable period to the extent not
antidilutive.
For the year ended December 31, 1993, fixed charges exceeded earnings by $6.6
million. For the years ended December 31, 1993 and 1992, combined fixed charges
and preferred stock dividends exceeded earnings by $19.3 million and $10.3
million, respectively.
For the year 1993, excluding unusual charges (adverse judgment in litigation,
write-off of non U.S. gas and oil assets, charge for efficiency enhancements
and severance expenses, and the effect on deferred federal income taxes
resulting from the 1% increase in the statutory federal income tax rate on
corporations) the ratio of earnings to fixed charges would have been 1.71 and
ratio of earnings to combined fixed charges and preferred stock dividends would
have been 1.42.
USE OF PROCEEDS
Unless otherwise specified in the Prospectus Supplement, the net proceeds to
be received by the Corporation from the sale of the Securities will be used to
repay and refinance indebtedness of the Corporation. Pending use for these
purposes, the Corporation may invest proceeds from the sale of the Securities
in short-term obligations. Enserch Capital will loan to ENSERCH or Enserch
Preferred all proceeds received by Enserch Capital from the sale of EC
Preferred Securities.
DESCRIPTION OF THE DEBT SECURITIES
Senior Debt Securities may be issued from time to time in one or more series
under an Indenture dated as of February 15, 1992 (the "Senior Indenture"),
between the Corporation and The First National Bank of Chicago, as Trustee (the
"Senior Trustee"). Subordinated Debt Securities may be issued from time to time
in one or more series under an indenture (the "Subordinated Indenture") to be
entered into between the Corporation and The First National Bank of Chicago, as
Trustee (the "Subordinated Trustee"). The Senior Indenture and the Subordinated
Indenture are sometimes referred to collectively as the "Indentures," and the
Senior Trustee and the Subordinated Trustee are sometimes referred to
collectively as the "Trustees." As used under this caption, unless the context
otherwise requires, "debt securities" in lower case shall mean all debt
securities issued or issuable, as the case may be, under the respective
Indentures, and "Debt Securities" with initial capital letters shall mean the
Debt Securities covered by this Prospectus and any Prospectus Supplement. The
statements under this caption are brief summaries of certain provisions
contained in the Indentures, do not purport to be complete and are qualified in
their entirety by reference to the Indentures, including the definition therein
of certain terms, copies of which are filed as exhibits to the Registration
Statement, as amended, of which this Prospectus is a part.
4
Whenever particular provisions or defined terms in the Indentures are
referred to therein, such provisions or defined terms are incorporated by
reference herein. Section and Article references used herein are references to
provisions of both the Senior Indenture and Subordinated Indenture unless
otherwise noted.
GENERAL
Each Indenture provides for the issuance of debt securities in one or more
series, and does not limit the principal amount of debt securities which may be
issued thereunder.
Reference is made to the Prospectus Supplement for the following terms of the
Debt Securities being offered hereby: (1) the specific title of the Debt
Securities; (2) whether the Debt Securities are Senior Debt Securities or
Subordinated Debt Securities; (3) the aggregate principal amount of the Debt
Securities; (4) the percentage of their principal amount at which the Debt
Securities will be issued; (5) the date on which the Debt Securities will
mature; (6) the rate or rates per annum or the method for determining such rate
or rates, if any, at which the Debt Securities will bear interest; (7) the
times at which any such interest will be payable; (8) any provisions relating
to optional or mandatory redemption of the Debt Securities; (9) the
denominations in which the Debt Securities are authorized to be issued; (10)
any provisions relating to the conversion or exchange of the Debt Securities
into debt securities of another series; (11) the foreign currency or units of
two or more of such foreign currencies in which the Debt Securities are
denominated, if other than United States dollars, and the currency in which
interest is payable if other than the currency in which the Debt Securities are
denominated; (12) the place or places at which the Corporation will make
payments of principal (and premium, if any) and interest, if any, and the
method of such payment; (13) whether the Debt Securities will be issued in
whole or in part in the form of one or more global Debt Securities and, in such
case, the depository for such Debt Security or Debt Securities; (14) the person
to whom any interest on a Debt Security of such series will be payable, if
other than the person in whose name that Debt Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest; (15) the extent to which, or the manner in
which, any interest payable on a global Debt Security on an Interest Payment
Date will be paid; (16) with respect to the Subordinated Debt Securities only,
whether such Securities will be convertible into or exchangeable for Common
Stock or any other shares of the capital stock or securities of the Corporation
and, if so, the terms and conditions upon which such conversion will be
effected including the initial conversion price or rate and the conversion
period; (17) any additional covenants and Events of Default and the remedies
with respect thereto not currently set forth in the respective Indenture; and
(18) any other specific terms of the Debt Securities. (Section 301).
If the principal of, premium, if any, or interest on Debt Securities of any
series are payable in a foreign or composite currency, or if any index or
formula is used to determine the amount of payment of principal of, premium, if
any, or interest on any series of Debt Securities, any specific federal income
tax, accounting and other considerations applicable thereto will be described
in the Prospectus Supplement relating to that series.
One or more series of Debt Securities may be sold at a substantial discount
below its or their stated principal amount, bearing no interest or interest at
a rate that at the time of issuance is below market rate. Federal income tax
consequences and other special considerations applicable to any such series
will be described in the Prospectus Supplement relating thereto.
SUBORDINATED DEBT SECURITIES
Subordination. The obligations of the Corporation pursuant to the
Subordinated Debt Securities will be subordinate in right of payment, to the
extent set forth in the Subordinated Indenture, to all Senior Indebtedness of
the Corporation. (Subordinated Indenture--Article XIV). Upon the maturity of
principal of any Senior Indebtedness by lapse of time, acceleration or
otherwise, no payments, including sinking fund payments, may be made on the
Subordinated Debt Securities and no Subordinated Debt Securities may be
acquired until all principal of and premium, if any, and interest on all such
matured Senior Indebtedness
5
shall have been paid in full. (Subordinated Indenture--Section 1403). "Senior
Indebtedness" of the Corporation is defined to mean the principal of and
premium, if any, and interest on the indebtedness (other than the Subordinated
Debt Securities) of the Corporation, whether outstanding on the date of the
Subordinated Indenture or thereafter created, incurred, assumed or guaranteed
to others, (a) for money borrowed from or guaranteed to others, (b) under
promissory notes or debentures, bonds or other instruments of indebtedness
issued under the provisions of or pursuant to an indenture, agreement, or
similar instrument, or (c) for the payment of money relating to the lease of
any property which lease may be capitalized on the consolidated balance sheet
of the Corporation and its Subsidiaries in accordance with generally accepted
accounting principles as in effect from time to time and, in each such case,
all renewals, extensions, refundings, amendments or modifications thereof,
except for the Corporation's 6 3/8% Convertible Subordinated Debentures due
2002; unless, in each case, by the terms of the instrument creating or
evidencing the indebtedness it is provided that such indebtedness is not
superior in right of payment to the Subordinated Debt Securities. (Subordinated
Indenture--Section 101). The Subordinated Indenture does not limit the
aggregate amount of Senior Indebtedness which may be issued. As of December 31,
1993, Senior Indebtedness of the Corporation aggregated approximately $639
million.
Conversion of Subordinated Debt. The applicable Prospectus Supplement will
provide whether the Subordinated Debt Securities of a series will be
convertible and, if so, the initial conversion price per share at which such
convertible Subordinated Debt Securities will be convertible into Common Stock.
Subject to prior redemption of the convertible Subordinated Debt Securities,
the holders of such Subordinated Debt Securities will be entitled at any time
on or before the close of business on the maturity date thereof to convert such
Subordinated Debt Securities (or, in the case of convertible Subordinated Debt
Securities of denominations in excess of $1,000 any portion of which is $1,000
or an integral multiple of $1,000) into shares of Common Stock at the initial
conversion price set forth in the applicable Prospectus Supplement. No
adjustment will be made on conversion of any convertible Subordinated Debt
Securities for interest accrued thereon or, except as set forth below, for
dividends on any securities issued upon such conversion. (Subordinated
Indenture--Section 1301).
In order to exercise the right of conversion, the holder of any such
convertible Subordinated Debt Securities must surrender his convertible
Subordinated Debt Securities to the Corporation at any office or agency of the
Corporation maintained for such purpose. The convertible Subordinated Debt
Securities to be surrendered must be accompanied by written notice to the
Corporation that the holder elects to convert such Subordinated Debt
Securities.
If any convertible Subordinated Debt Security, whether or not called for
redemption, is converted between a record date for the payment of interest and
the next succeeding interest payment date, such convertible Subordinated Debt
Security must be accompanied by funds payable to the Corporation equal to the
interest payable to the registered holder on such interest payment date on the
principal amount so converted. In the case of any convertible Subordinated Debt
Security or portion thereof called for redemption, conversion rights expire at
the close of business on the Redemption Date, even if such redemption occurs at
a time when conversion of the Subordinated Debt Security portion thereof is in
the best interests of the holder. (Subordinated Indenture--Section 1302).
No fractional shares of Common Stock will be issued upon conversion but, in
lieu thereof, an adjustment in cash will be made based on the market price of
Common Stock at the close of business on the date of conversion. (Subordinated
Indenture--Section 1303).
The Conversion Price will be subject to adjustment in the event of: (i) the
payment of certain stock dividends on the Common Stock; (ii) the issuance of
certain rights or warrants to all holders of the Common Stock entitling them to
subscribe for or purchase Common Stock at a price less than the market price;
(iii) the subdivision of Common Stock into a greater number of shares of Common
Stock or the combination of Common Stock into a smaller number of shares of
Common Stock; (iv) the distribution by the Corporation to all holders of the
Common Stock of evidences of indebtedness or assets of the Corporation
(excluding rights
6
or warrants and any dividends or distributions mentioned above); and (v) the
reclassification of Common Stock into other securities. However, no adjustment
in the Conversion Price will be required unless such adjustment would require
an increase or decrease of at least 1% in the Conversion Price. (Subordinated
Indenture--Section 1304).
In case of certain consolidations or mergers to which the Corporation is a
party or the transfer of substantially all of the assets of the Corporation,
each convertible Subordinated Debt Security then outstanding would, without the
consent of any holders of the convertible Subordinated Debt Securities, become
convertible only into the kind and amount of securities, cash and other
property receivable upon the consolidation, merger or transfer by a holder of
the number of shares of Common Stock into which such convertible Subordinated
Debt Security might have been converted immediately prior to such
consolidation, merger or transfer (assuming such holder of Common Stock failed
to exercise any rights of election and received per share the kind and amount
received per share by a plurality of non-electing shares). (Subordinated
Indenture--Section 1311).
FORM, EXCHANGE, REGISTRATION AND TRANSFER
Debt Securities of a series may be issuable in certificated or global form.
Debt Securities may be presented for registration of transfer (with the form of
transfer endorsed thereon duly executed), at the office of the Security
Registrar or at the office of any transfer agent designated by the Corporation
for such purpose with respect to any series of Debt Securities and referred to
in an applicable Prospectus Supplement, without service charge and upon payment
of any taxes and other governmental charges as described in the relevant
Indenture. Such transfer or exchange will be effected upon the Security
Registrar or such transfer agent, as the case may be, being satisfied with the
documents of title and identity of the person making the request. The
Corporation has appointed the Senior Trustee as Security Registrar with respect
to the Senior Debt Securities and the Subordinated Trustee as Security
Registrar with respect to the Subordinated Debt Securities. (Section 305). If a
Prospectus Supplement refers to any transfer agents (in addition to the
Security Registrar) initially designated by the Corporation with respect to any
series of Debt Securities, the Corporation may at any time rescind the
designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts, except that the Corporation will be
required to maintain a transfer agent in each Place of Payment for such series.
(Section 1002). The Corporation may at any time designate additional transfer
agents with respect to any series of Debt Securities.
In the event of any redemption in part, the Corporation shall not be required
to (i) issue, register the transfer of or exchange any Debt Security during a
period beginning at the opening of business 15 days before any selection for
redemption of Debt Securities of like tenor and of the series of which such
Debt Security is a part, and ending at the close of business on the earliest
date in which the relevant notice of redemption is deemed to have been given to
all holders of Debt Securities of like tenor and of such series to be redeemed
and (ii) register the transfer of or exchange any Debt Security so selected for
redemption, in whole or in part, except the unredeemed portion of any Debt
Security being redeemed in part. (Sections 305 and 1103).
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in an applicable Prospectus Supplement, payment of
principal of and premium (if any) on any Debt Security will be made only
against surrender to the Paying Agent of such Debt Security. Unless otherwise
indicated in an applicable Prospectus Supplement, principal of and any premium
and interest, if any, on Debt Securities will be payable, subject to any
applicable laws and regulations, at the office of such Paying Agent or Paying
Agents as the Corporation may designate from time to time, except that at the
option of the Corporation payment of any interest may be made by check mailed
to the address of the person entitled thereto as such address shall appear in
the Security Register with respect to such Debt Securities. (Section 1002).
Unless otherwise indicated in an applicable Prospectus Supplement, payment of
interest on a Debt Security on any Interest Payment Date will be made to the
person in whose name such Debt Security (or Predecessor Security) is registered
at the close of business on the Regular Record Date for such interest. (Section
307).
7
Unless otherwise indicated in an applicable Prospectus Supplement, the
Corporate Trust Office of the related Trustee in the City of Chicago will be
designated as the Corporation's sole Paying Agent for payments with respect to
Debt Securities of each series. (Sections 101 and 1002). Any Paying Agents
outside the United States and any other Paying Agents in the United States
initially designated by the Corporation for the respective Debt Securities will
be named in an applicable Prospectus Supplement. (Section 301). The Corporation
may at any time designate additional Paying Agents or rescind the designation
of any Paying Agent or approve a change in the office through which any Paying
Agent acts, except that the Corporation will be required to maintain a Paying
Agent in each Place of Payment for each series of the respective Debt
Securities. (Section 1002).
All moneys paid by the Corporation to a Paying Agent for the payment of the
principal of and premium or interest, if any, on any Debt Security of any
series which remain unclaimed at the end of two years after such principal,
premium, if any, or interest shall have become due and payable will be repaid
to the Corporation and the holder of such Debt Security will thereafter look
only to the Corporation for payment thereof. (Section 1003).
GLOBAL DEBT SECURITIES
If any Debt Securities of a series are issuable in global form, the
applicable Prospectus Supplement will describe the circumstances, if any, under
which beneficial owners of interests in any such global Debt Security may
exchange such interests for Debt Securities of such series and of like tenor
and principal amount in any authorized form and denomination. Principal of and
any premium and interest on a global Debt Security will be payable in the
manner described in the applicable Prospectus Supplement. (Section 301).
The specific terms of the depository arrangement with respect to any portion
of a series of Debt Securities to be represented by a global Debt Security will
be described in the applicable Prospectus Supplement.
MODIFICATION OF THE INDENTURES
The Indentures contain provisions permitting the Corporation and the
respective Trustees, with the consent of the holders of not less than a
majority in principal amount of the debt securities which are affected by the
modification, to modify the particular Indenture or any supplemental indenture
or the rights of the holders of the debt securities issued under such
Indenture; provided that no such modification may, without the consent of the
holder of each outstanding debt security affected thereby, (a) change the
stated maturity date of the principal of, or any installment of principal of or
interest, if any, on, any Debt Security, (b) reduce the principal amount of, or
premium or rate of interest, if any, on, any Debt Security, (c) reduce the
amount of principal of an original issue discount Debt Security payable upon
acceleration of the maturity thereof, (d) change the place or currency of
payment of principal of, or premium or interest, if any, on, any Debt Security,
(e) impair the right to institute suit for the enforcement of any payment on or
with respect to any Debt Security, or (f) reduce the percentage in principal
amount of Outstanding Debt Securities of any series, the consent of the holders
of which is required for modification or amendment of the Indenture or for
waiver of compliance with certain provisions of the Indenture or for waiver of
certain defaults. (Section 902).
EVENTS OF DEFAULT
An Event of Default with respect to Debt Securities of any series is defined
in the Indentures as being; default for 30 days in payment of any interest on
Debt Securities of such series; default in payment of principal of (or premium,
if any, on) Debt Securities of such series; default in payment of any mandatory
sinking fund payment required by the Debt Securities of such series; default
for 60 days after notice in the performance of any other covenant in the Debt
Securities of such series or in the Indentures or certain events of bankruptcy,
insolvency or reorganization. The Senior Indenture (but not the Subordinated
Indenture) also defines an Event of Default with respect to Senior Debt
Securities of any series to be a default which involves the failure by the
Corporation to pay when due the principal of any indebtedness for money
borrowed by the
8
Corporation in excess of $25 million or which results in the acceleration of
any such indebtedness in excess of $25 million, if such indebtedness is not
discharged, or such acceleration is not rescinded or annulled, within 10 days
after written notice as provided in the Senior Indenture. In case an Event of
Default with respect to Debt Securities of any series shall occur and be
continuing, the respective Trustees or the holders of not less than 25% in
principal amount of the Debt Securities of such series then outstanding may
declare the principal of all such Debt Securities to be due and payable. The
Corporation is required to furnish to the Senior Trustee and the Subordinated
Trustee annually a statement as to the performance by the Corporation of its
obligations under the respective Indentures and as to any default in such
performance. Under certain circumstances any declaration of acceleration with
respect to Debt Securities of any series may be rescinded and past defaults
(except, unless theretofore cured, a default in the payment of principal of or
interest on the Debt Securities) may be waived by the holders of a majority in
the aggregate principal amount of the Debt Securities of such series then
outstanding. The Indentures provide that the Trustees may withhold notice to
the holders of the respective Debt Securities of any series of any continuing
default (except in the payment of the principal (other than any mandatory
sinking fund payment) of (or premium, if any) or interest on any Debt
Securities of such series) if such Trustee considers it in the interest of
holders of such series of Debt Securities to do so. (Section 501).
SENIOR INDENTURE RESTRICTIVE COVENANT--LIMITATION ON LIENS
The Senior Indenture (but not the Subordinated Indenture) provides that the
Corporation will not create, assume or suffer to exist, and will not permit any
subsidiary to create, assume or suffer to exist, except in favor of the
Corporation, any mortgage, pledge or other lien or encumbrance on any of its
properties or assets (including stock and other securities of subsidiaries)
without making effective provision to secure equally and ratably the Senior
Debt Securities then outstanding and other indebtedness entitled to be so
secured, except that the Corporation or a subsidiary, without so securing the
Senior Debt Securities, may create, assume or suffer to exist (a) certain
purchase money and existing liens in connection with property acquisitions and
the extension, renewal or refunding of the same, (b) pledges of current assets,
in the ordinary course of business to secure current liabilities, (c) liens on
property to secure obligations to pay all or part of the purchase price of such
property only out of or measured by oil or gas production or the proceeds
thereof, or liens upon production from oil or gas property or the proceeds of
such production, to secure obligations to pay all or part of the expenses of
exploration, drilling or development of such property only out of such
production or proceeds, (d) mechanics' or materialmen's liens, certain good
faith deposits, deposits to secure public or statutory obligations, deposits to
secure, or in lieu of, surety, stay or appeal bonds, and deposits as security
for payment of taxes, assessments or similar charges and liens or security
interests created in connection with bid or completion bonds, (e) liens arising
by reason of deposits with, or the giving of security to, a governmental agency
as a condition to the transaction of business or the exercise of a privilege,
or deposits to enable the Corporation or a subsidiary to maintain self-
insurance or participate in any funds established to cover any insurance risks,
or in connection with workmen's compensation, unemployment insurance, old age
pension or other social security, (f) pledges or assignments of accounts
receivable, including customers' instalment paper, to banks or others
(including to or by any subsidiary which is principally engaged in the business
of financing the business of the Corporation and its subsidiaries) made in the
ordinary course of business, (g) liens of taxes or assessments for the current
year or not due or being contested in good faith and against which an adequate
reserve has been established, (h) judgments or liens the finality of which is
being contested and execution on which is stayed, (i) assessments or similar
encumbrances the existence of which does not impair the use of the property
subject thereto for the purposes for which it was acquired, (j) certain
landlords' liens so long as the rent secured thereby is not in default, and (k)
liens on the assets of any limited liability company organized under a limited
liability company act of any State which limited liability company is treated
as a partnership for federal income tax purposes. (Senior Indenture--Section
1006).
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
The Indentures provide that the Corporation may not consolidate with or merge
into any other Person or convey or transfer its properties and assets
substantially as an entirety to any Person, unless (i) the
9
successor Person shall be organized and existing under the laws of the United
States or any State thereof or the District of Columbia, and shall expressly
assume by a supplemental indenture the due and punctual payment of the
principal of, any premium on, and any interest on, all the Debt Securities and
the performance of every covenant in such Indenture on the part of the
Corporation to be performed or observed; (ii) immediately after giving effect
to such transaction, no Event of Default, and no event which, after notice or
lapse of time or both, would become an Event of Default, shall have happened
and be continuing; and (iii) the Corporation shall have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger, conveyance or transfer and such supplemental
indenture comply with the foregoing provisions relating to such transaction. In
case of any such consolidation, merger, conveyance or transfer, such successor
Person will succeed to and be substituted for the Corporation as obligor on the
Debt Securities, with the same effect as if it had been named in the Indenture
as the Corporation. (Section 801).
The Indentures do not contain any other covenant which restricts the
Corporation's ability to merge or consolidate with any other corporation, sell
or convey all or substantially all of its assets to any persons, firm or
corporation or otherwise engage in restructuring transactions. Further, the
Indentures do not contain any provisions which would provide protection to
holders of Debt Securities against a sudden and dramatic decline in credit
quality resulting from a takeover, a recapitalization or similar restructuring
of the Corporation.
TITLE
The Corporation, the Trustees and any agent of the Corporation or the
relevant Trustee may treat the registered owner of any Debt Security as the
absolute owner thereof (whether or not such Debt Security shall be overdue and
notwithstanding any notice to the contrary) for the purpose of making payment
and for all other purposes. (Section 308).
DEFEASANCE AND DISCHARGE
Under the terms of the Indentures, the Corporation will be discharged from
any and all obligations in respect of the Debt Securities of any series (except
in each case for certain obligations to register the transfer or exchange of
Debt Securities, replace stolen, lost or mutilated Debt Securities, maintain
paying agencies and hold moneys for payment in trust) if the Corporation
deposits with the Trustee, in trust, (i) money; (ii) U.S. Government Securities
(as defined) or, in the case of Debt Securities denominated in a foreign
currency, Foreign Government Securities (as defined) which through the payment
of Interest thereon and principal thereof in accordance with their terms will
provide money; or (iii) any combination of (i) and (ii) above, in an amount
sufficient to pay all the principal (including any mandatory sinking fund
payments) of, and interest on, the Debt Securities of such series on the dates
such payments are due in accordance with the terms of such Debt Securities.
Such defeasance and discharge will become effective 91 days after the
Corporation, among other things, has delivered to the Trustee an Opinion of
Counsel to the effect that (i) the deposit and related defeasance would not
cause the holders of the Debt Securities of such series to recognize income,
gain or loss for Federal income tax purposes, or a copy of a ruling or other
formal statement or action to such effect received from or published by the
United States Internal Revenue Service; and (ii) the trust resulting from the
defeasance will not constitute, or is qualified as, a regulated investment
company under the Investment Company Act of 1940, as amended. (Section 403).
REPLACEMENT OF DEBT SECURITIES
Any mutilated Debt Security will be replaced by the Corporation at the
expense of the holder upon surrender of such Debt Security to the relevant
Trustee. Debt Securities that become destroyed, lost or stolen will be replaced
by the Corporation at the expense of the holder upon delivery to the relevant
Trustee of evidence of the destruction, loss or theft thereof satisfactory to
the Corporation and the relevant Trustee. In the case of a destroyed, lost or
stolen Debt Security, an indemnity satisfactory to the relevant Trustee and the
Corporation may be required at the expense of the holder of such Debt Security
before a replacement Debt Security will be issued. (Section 306).
10
GOVERNING LAW
The Senior Indenture is, and the Subordinated Indenture and the Debt
Securities will be, governed by, and construed in accordance with, the laws of
the State of Texas. (Section 112).
INFORMATION CONCERNING THE TRUSTEES
Subject to the provisions of the relevant Indenture relating to its duties,
each Trustee will be under no obligation to exercise any of its rights or
powers under such Indenture at the request, order or direction of any of the
holders thereunder, unless such holders shall have offered to such Trustee
reasonable indemnity. Subject to such provision for indemnification, the
holders of a majority in principal amount of the debt securities then
outstanding thereunder will have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee
thereunder, or exercising any trust or power conferred on such Trustee.
(Section 601).
The Indentures contain limitations on the right of the Trustee, as a creditor
of the Corporation to obtain payment of claims in certain cases, or to realize
on certain property received in respect of any such claim as security or
otherwise. In addition, the Trustee may be deemed to have a conflicting
interest and may be required to resign as Trustee if at the time of a default
under the Indentures it is a creditor of the Corporation.
The First National Bank of Chicago, the Trustee under each Indenture, has
from time to time engaged in transactions with, or performed services for
ENSERCH in the ordinary course of business.
DESCRIPTION OF ENSERCH CAPITAL STOCK
The following description of the capital stock does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the more complete descriptions thereof set forth in (a) the Corporation's
Restated Articles of Incorporation, as amended, and the Rights Agreement, dated
as of April 15, 1986, between the Corporation and Harris Trust Company of New
York, as Rights Agent, both of which have been filed as exhibits to the
Registration Statement of which this Prospectus is a part, and (b) the
Statement of Resolutions relating to each series of Preferred Stock, which will
be filed with the Commission at or prior to the time of the offering of such
series of Preferred Stock. A form of Statement of Resolutions is filed as an
exhibit to the Registration Statement of which this Prospectus is a part.
The Corporation is currently authorized by its Restated Articles of
Incorporation to issue 100,000,000 shares of Common Stock, of $4.45 par value,
2,000,000 shares of preferred stock, of no par value (the "preferred stock"),
and 2,000,000 shares of Voting Preference Stock, of no par value. The Board of
Directors has authority to divide the preferred stock and Voting Preference
Stock into one or more series and has broad authority to fix and determine the
relative rights and preferences of the shares of each such series.
COMMON STOCK
The Corporation is authorized by its Restated Articles of Incorporation to
issue up to 100,000,000 shares of Common Stock, par value $4.45 per share.
Subject to the rights of the holders of the preferred stock and Voting
Preference Stock which may be outstanding from time to time, holders of Common
Stock are entitled to receive such dividends as are declared by the Board of
Directors from any funds legally available therefor, to one vote for each share
on all matters voted upon by shareholders, including election of directors
(cumulative voting being prohibited), and to share ratably in assets available
for distribution upon any liquidation. Common Stock has no preemptive rights
and is not subject to redemption or to any further call or assessment.
11
In April 1986, the Corporation's Board declared a dividend of one Voting
Preference Stock contingent purchase right on each outstanding share of Common
Stock. All shares of Common Stock issued subsequently also include these
rights. Under certain conditions, each right may be exercised to purchase one
two-hundredth of a share of a new series of Voting Preference Stock at an
exercise price of $60. The rights are exercisable only if a person or group
acquires beneficial ownership of 20% or more of the Common Stock or commences a
tender or exchange offer upon consummation of which such person or group would
beneficially own 30% or more of the Common Stock. If any person becomes the
beneficial owner of 30% or more of the Common Stock, or if a 20%-or-more
shareholder engages in certain self-dealing transactions, or if in a merger
transaction with the Corporation in which the Corporation is the surviving
corporation and its Common Stock is not changed or converted, then each right
not owned by such person or related parties will entitle its holder to
purchase, at the right's then current exercise price, shares of Common Stock
(or, in certain circumstances as determined by the Board, other consideration)
having a value of twice the right's exercise price. In addition, if the
Corporation is involved in a merger or other business combination transaction
with another person in which its Common Stock is changed or converted, or sells
50% or more of its assets or earning power to another person, each right will
entitle its holder to purchase, at the right's then-current exercise price,
Common Stock of such other person having a value of twice the right's exercise
price. The rights, which have no voting rights, expire on May 5, 1996. the
Corporation generally will be entitled to redeem the rights at $.05 per right
at any time until the 15th day following public announcement that a 20%
position has been acquired.
Dividend restrictions on Common Stock are contained in several agreements
relating to senior long-term debt and in the Restated Articles of Incorporation
of the Corporation. Pursuant to the Restated Articles of Incorporation, no
dividend (other than a dividend payable in Common Stock) or other distribution
is permitted to be declared or paid on, and no amount is permitted to be
applied to the purchase of, the Common Stock unless (i) full cumulative
dividends for all past dividend periods have been paid or declared and set
apart for payment, and full cumulative dividends for the then current dividend
period have been, or simultaneously therewith are, paid or declared on
outstanding preferred stock and Voting Preference Stock and (ii) after giving
effect to such payment of dividend, other distribution or purchase, the
aggregate capital of the Corporation applicable to all capital stock
outstanding ranking junior to the preferred stock and Voting Preference Stock
as to dividends or assets plus the consolidated earned and capital surplus of
the Corporation and its subsidiaries shall exceed the aggregate amount payable
on involuntary dissolution, liquidation or winding up of the Corporation on all
outstanding shares of the preferred stock and the Voting Preference Stock and
all stock ranking prior to or on a parity with such stock as to dividends or
assets to be outstanding after such payment of dividend, other distribution or
purchase. At December 31, 1993, the Corporation had approximately $342 million
of consolidated common shareholders' equity which was free of such restrictions
after giving pro forma effect to the redemption by the Corporation of all of
its then outstanding sinking fund debentures and its Adjustable Rate Cumulative
Preferred Stock, Series D in March, 1994.
The Transfer Agent and Registrar of the Corporation's Common Stock is Harris
Trust Company of New York, New York, New York.
PREFERRED STOCK
The Corporation is currently authorized by its Restated Articles of
Incorporation to issue 2,000,000 shares of preferred stock, of no par value, of
which 100,000 shares of Adjustable Rate Cumulative Preferred Stock, Series E,
were outstanding on the date of this Prospectus. The Board of Directors has
authority to divide the preferred stock into one or more series and to fix and
determine relative rights and preferences of the shares of each such series.
All series of preferred stock, including any series of Preferred Stock to
which any Prospectus Supplement may relate, shall have the dividend,
liquidation, redemption and voting rights set forth below. Reference is made to
the Prospectus Supplement relating to the particular series of the Preferred
Stock offered thereby for
12
specific terms, including: (i) the title of such Preferred Stock and the number
of shares offered; (ii) the amount of liquidation preference per share; (iii)
the price at which such Preferred Stock will be issued; (iv) whether dividends
shall be payable and, if payable, the dividend rate (or method of calculation);
(v) any redemption or sinking fund provisions of such Preferred Stock; (vi) the
terms of any right to convert the Preferred Stock into other securities of the
Corporation; (vii) whether the Corporation has elected to offer Depositary
Shares (as defined below); and (viii) any additional voting, dividend,
liquidation, redemption, sinking fund and other rights, preferences,
privileges, limitations and restrictions of such Preferred Stock.
The Preferred Stock offered by any Prospectus Supplement will, when issued,
be fully paid and nonassessable and have no preemptive rights.
As described under "Depositary Shares" below, the Corporation may, at its
option, elect to offer depositary shares evidenced by depositary receipts, each
representing a fraction (to be specified in the Prospectus Supplement relating
to the particular series of Preferred Stock) of a share of the particular
series of the Preferred Stock issued and deposited with a depositary, in lieu
of offering full shares of such series of the Preferred Stock.
Dividends. To the extent that the applicable Prospectus Supplement provides
that dividends shall be paid on a series of Preferred Stock, the holders of
shares of such series of Preferred Stock will be entitled to receive, when and
as declared by the Board of Directors of the Corporation out of assets of the
Corporation legally available therefor, cumulative cash dividends at the rate
per share set forth in the applicable Prospectus Supplement. Dividends on such
series of Preferred Stock will accrue from the date of original issuance and
will be paid quarterly on the first day of February, May, August and November
(the "Quarterly Dividend Payment Dates") commencing on the Quarterly Dividend
Payment Date next succeeding the expiration of 30 days after the date of
initial issue of any shares of such series.
No dividends (other than a dividend payable in Common Stock) shall be paid or
other distribution made on shares of the Common Stock or on any other class of
stock ranking junior to the preferred stock as to dividends or assets, nor
shall any shares of the Common Stock or other junior stock be purchased or
redeemed, unless (i) all dividends on the outstanding preferred stock for all
past quarterly dividend periods have been paid or declared and set apart for
payment, and all dividends on the preferred stock for the current period have
been paid or declared and set apart for payment, and (ii) after giving effect
to such payment of dividends, other distributions, purchase or redemption, the
aggregate capital of the Corporation applicable to all capital stock
outstanding ranking junior to the preferred stock as to dividends or assets,
plus the consolidated earned and capital surplus of the Corporation and its
subsidiaries, shall exceed the aggregate amount payable on involuntary
dissolution, liquidation or winding up of the Corporation on all shares of the
preferred stock and all stock ranking prior to or on a parity with the
preferred stock as to dividends or assets to be outstanding after such payment
of dividends, other distribution, purchase or redemption. Dividends may not be
paid on any one series of preferred stock unless dividends have been or are
contemporaneously paid or declared on the preferred stock on all series
entitled thereto.
Several agreements relating to senior long-term debt also contain
restrictions on distributions on capital stock of the Corporation. At December
31, 1993, the Corporation had approximately $342 million of consolidated common
shareholders' equity which was free of such restrictions after giving pro forma
effect to the redemption by the Corporation of all of its then outstanding
sinking fund debentures and its Adjustable Rate Cumulative Preferred Stock,
Series D in March 1994.
Voting Rights. Except as indicated in the Prospectus Supplement relating to a
particular series of Preferred Stock, or except as expressly required by
applicable law, the holders of shares of each series of Preferred Stock will
have no ordinary voting rights. However, without the approval of the holders of
shares representing at least two-thirds of the votes entitled to be cast by the
preferred stock, the Corporation may not amend its Restated Articles of
Incorporation to (1) create, or increase the number of authorized shares of, a
class of stock ranking prior to or on a parity with the preferred stock as to
dividends or assets; (2)
13
increase the authorized number of shares of preferred stock; and (3) change any
of the rights or preferences of outstanding preferred stock or any series
thereof. Rights and preferences of any outstanding series, which vary from the
rights and preferences of other outstanding series, may not be changed without
the approval of the holders of shares representing at least two-thirds of the
votes entitled to be cast by such series. In addition, holders of preferred
stock have the right to elect two directors if cumulative dividend payments
shall not have been paid for six quarterly dividend periods, and this right
shall continue until such time as the default in payment of dividends shall
have been cured.
So long as any shares of any series of preferred stock shall be outstanding,
the Corporation shall not, without the approval of the holders of shares
representing a majority of the votes entitled to be cast, issue any additional
shares, or reissue any reacquired shares, of preferred stock or of any other
class of stock ranking prior to or on a parity with the outstanding shares of
the preferred stock as to dividends or assets for any purpose other than to
purchase or redeem an equal par or stated value on involuntary liquidation of
preferred stock or of stock ranking prior to or on a parity with the preferred
stock as to dividends or assets at the time outstanding unless
(i) the consolidated gross income (as defined) of the Corporation and its
subsidiaries for 12 consecutive calendar months within a period of 15
calendar months immediately preceding the calendar month of such issuance
is equal to at least 1 1/2 times the aggregate of the annual interest
charges on indebtedness of the Corporation and its subsidiaries (excluding
interest charges on indebtedness to be retired by the application of the
proceeds from the issuance of such shares) and the annual dividend
requirements on all preferred stock (including dividend requirements on any
class of stock ranking prior to or on a parity with the shares to be issued
as to dividends or assets but excluding any dividend requirements on any
stock to be retired by the application of the proceeds from the issuance of
such shares), which shall be outstanding immediately after the issuance of
such shares; and
(ii) the aggregate capital of the Corporation applicable to all capital
stock outstanding ranking junior to the preferred stock as to dividends and
assets, plus the consolidated earned and capital surplus of the Corporation
and its subsidiaries, shall be at least equal to the aggregate amount
payable upon involuntary dissolution, liquidation or winding up of the
Corporation on all shares of the preferred stock, and all stock ranking
prior to or on a parity with the preferred stock as to dividends or assets,
to be outstanding immediately after the issuance of such shares of
preferred stock or such stock ranking prior to or on a parity therewith and
the application of the proceeds thereof.
Each share of preferred stock of any series having a stated value of $100 on
involuntary liquidation shall, to the extent it is entitled to vote, be
entitled to one vote per share. Each share of preferred stock of any series
having a stated value other than $100 on involuntary liquidation shall be
entitled to as many votes or a fractional vote, as the case may be, as
determined by the ratio of the stated value on involuntary liquidation of a
share of each such series to $100.
Redemption. A series of the Preferred Stock may be redeemable, in whole or in
part, at the option of the Corporation, and may be subject to mandatory
redemption pursuant to a sinking fund, in each case upon terms, at the times
and at the redemption prices set forth in the Prospectus Supplement relating to
such series.
The Corporation's Restated Articles of Incorporation prohibit the Corporation
from redeeming (at its option or through operation of a sinking fund) or
purchasing shares of any series of preferred stock unless full cumulative
dividends on all outstanding shares of preferred stock for all dividend periods
ending on or prior to the date of redemption or purchase shall have been paid
or declared and set apart for payment.
Shares of any series of preferred stock which shall have been redeemed or
purchased by the Corporation shall, upon the filing of any required
certificate, be restored to the status of authorized but unissued shares of
preferred stock without designation and may be reissued from time to time,
unless the statement of resolution relating to such series of preferred stock
provides otherwise.
14
Liquidation Rights. In the event of any voluntary or involuntary dissolution,
liquidation or winding up of the Corporation the holders of each series of
Preferred Stock shall be entitled to receive out of the assets of the
Corporation available for distribution to shareholders, before any distribution
of the assets is made to the holders of the Voting Preference Stock or the
Common Stock, cash in the amount or amounts set forth in the Prospectus
Supplement relating to such series of Preferred Stock plus accrued and unpaid
dividends. If the assets are not sufficient to pay in full the amounts payable
on all shares of preferred stock in the event of voluntary or involuntary
dissolution, liquidation or winding up, then the assets available for payment
will be distributed ratably among the holders of the preferred stock of all
series in proportion to the full preferential amounts to which they are
respectively entitled.
Transfer Agent and Registrar. The transfer agent for each series of Preferred
Stock will be described in the related Prospectus Supplement.
Adjustable Rate Cumulative Preferred Stock, Series E. The Corporation also
has outstanding 100,000 shares of Adjustable Rate Cumulative Preferred Stock,
Series E (the "Series E Preferred Stock"). These shares are of no par value per
share but have a stated value on liquidation of $1,000 per share. Series E
Preferred Stock is redeemable at the option of the Corporation at $1,030 per
share through April 30, 1994, and at $1,000 per share thereafter. The Series E
Preferred Stock is deposited with a bank under a depositary agreement and is
represented by 1,000,000 Depositary Shares. The First Chicago Trust Company of
New York, New York, New York, is the Transfer Agent for the Series E Depositary
Shares.
VOTING PREFERENCE STOCK
The Corporation has authorized 500,000 shares of a series of Voting
Preference Stock in connection with the shareholders rights plan described
under "Common Stock" above. To date none of such shares have been issued or are
outstanding.
The Voting Preference Stock is junior to Preferred Stock but has a preference
over Common Stock as to dividends and assets on liquidation. Dividends (other
than dividends payable in Common Stock) cannot be paid on Common Stock if the
Corporation has not met the requirements for dividend payments or for any
sinking fund created with respect to any series of Voting Preference Stock. In
general, holders of Voting Preference Stock have the same voting rights as
holders of Common Stock for the election of directors and all other purposes
(voting with the Common Stock together as a single class) as well as voting
rights specified by Texas law, except that holders of Voting Preference Stock
have no voting rights on amendments to the Restated Articles of Incorporation
other than as provided under Texas law and by the Restated Articles of
Incorporation. Voting Preference Stock is entitled to one vote for each $10,000
of stated value attributable to such shares subject, however, to adjustments
for shares having a stated value other than $10,000. Voting Preference Stock
has no preemptive rights.
DEPOSITARY SHARES
General. The Corporation may, at its option, elect to offer fractional shares
of Preferred Stock, rather than full shares of Preferred Stock. If such option
is exercised, the Corporation will issue to the public receipts for Depositary
Shares, each of which will represent a fraction (to be set forth in the
Prospectus Supplement relating to a particular series of Preferred Stock) of a
share of a particular series of Preferred Stock as described below.
The shares of any series of Preferred Stock represented by Depositary Shares
will be deposited under a Deposit Agreement (the "Deposit Agreement") between
the Corporation and a bank or trust company selected by the Corporation having
its principal office in the United States and having a combined capital and
surplus of at least $50,000,000 (the "Depositary"). The Prospectus Supplement
relating to a series of Depositary Shares will set forth the name and address
of the Depositary. Subject to the terms of the Deposit Agreement, each owner of
a Depositary Share will be entitled, in proportion to the applicable fraction
of a share of Preferred Stock represented by such Depositary Share, to all the
rights and preferences of the Preferred Stock represented thereby (including
dividend, voting, redemption and liquidation rights).
15
The Depositary Shares will be evidenced by depositary receipts issued
pursuant to the Deposit Agreement ("Depositary Receipts"). Depositary Receipts
will be distributed to those persons purchasing the fractional shares of
Preferred Stock in accordance with the terms of the offering. Copies of the
forms of Deposit Agreement and Depositary Receipts are filed as exhibits to the
Registration Statement of which this Prospectus is a part, and the following
summary is qualified in its entirety by reference to such exhibits.
Pending the preparation of definitive Depositary Receipts, the Depositary
may, upon the written order of the Corporation or any holder of Preferred
Stock, execute and deliver temporary Depositary Receipts substantially
identical to (and entitling the holders thereof to all the benefits pertaining
to) definitive Depositary Receipts but not in definitive form. Definitive
Depositary Receipts will be prepared thereafter without unreasonable delay, and
temporary Depositary Receipts will be exchangeable for definitive Depositary
Receipts at the Corporation's expense.
Upon surrender of Depositary Receipts at the office of the Depositary and
upon payment of the charges provided in the Deposit Agreement and subject to
the terms thereof, a holder of Depositary Receipts is entitled to have the
Depositary deliver to such holder the whole shares of Preferred Stock and all
money and other property, if any, relating to the surrendered Depositary
Receipts.
Dividends and Other Distributions. The Depositary will distribute all cash
dividends or other cash distributions received in respect of the Preferred
Stock to the record holders of Depositary Shares relating to such Preferred
Stock in proportion to the number of such Depositary Shares owned by such
holders.
In the event of a distribution other than in cash or rights, preferences or
privileges upon the Preferred Stock, the Depositary will distribute securities
or property received by it to the record holders of Depositary Shares entitled
thereto in proportion to the number of such Depositary Shares owned by such
holders, unless the Depositary determines such distribution cannot be made
proportionately among such holders or that it is not feasible to make such
distribution, in which case the Depositary may, with the approval of the
Corporation, sell such securities or property or adopt such other method as it
deems equitable and practicable for effecting such distribution and distribute
the net proceeds from such sale to such holders.
Redemption of Depositary Shares. If a series of Preferred Stock represented
by Depositary Shares is subject to redemption, the Depositary Shares will be
redeemed from the proceeds received by the Depositary resulting from the
redemption, in whole or in part, of such series of Preferred Stock held by the
Depositary. The Depositary will mail notice of redemption not less than 30 and
not more than 60 days prior to the date fixed for redemption to the record
holders of the Depositary Shares to be so redeemed at their respective
addresses appearing in the Depositary's books. The redemption price per
Depositary Share will be equal to the applicable fraction of the redemption
price per share payable with respect to such series of the Preferred Stock plus
all money and other property, if any, represented by such Depositary Shares.
Whenever the Corporation redeems shares of Preferred Stock held by the
Depositary, the Depositary will redeem as of the same redemption date the
number of Depositary Shares representing shares of Preferred Stock so redeemed.
If less than all the Depositary Shares are to be redeemed, the Depositary
Shares to be redeemed will be selected by lot or pro rata or in any other
manner, as may be determined by the Depositary to be equitable.
Voting. Upon receipt of notice of any meeting at which the holders of the
Preferred Stock are entitled to vote, the Depositary will mail a notice
containing the information contained in such notice of meeting to the record
holders of the Depositary Shares relating to such Preferred Stock. Such notice
will also state that each record holder of such Depositary Shares on the record
date (which will be the same date as the record date for the Preferred Stock)
will be entitled to instruct the Depositary as to the exercise of the voting
rights pertaining to the amount of the Preferred Stock represented by such
holder's Depositary Shares and will contain a brief statement as to the manner
in which such instructions may be given. The Depositary will endeavor, insofar
as practicable, to vote the amount of the Preferred Stock represented by such
Depositary Shares in accordance with such instructions, and the Corporation
will agree to take all action which may be deemed necessary by the Depositary
in order to enable the Depositary to do so. The Depositary will abstain from
voting shares of the Preferred Stock (but, in its discretion, not from
appearing at any meeting with respect to such Preferred Stock unless directed
to the contrary by the holders of all the Depositary Receipts) to the extent it
does not receive specific instructions from the holders of Depositary Shares
representing such Preferred Stock.
16
Amendment and Termination of the Depositary Agreement. The form of Depositary
Receipt evidencing the Depositary Shares and any provision of the Deposit
Agreement may at any time be amended by agreement between the Corporation and
the Depositary. However, any amendment which materially and adversely alters
the rights of the holders of Depositary Shares will not be effective unless
such amendment has been approved by the holders of at least a majority of the
Depositary Shares then outstanding. The Deposit Agreement may be terminated by
the Corporation or the Depositary only if (i) all outstanding Depositary Shares
have been redeemed or (ii) there has been a final distribution in respect of
the Preferred Stock in connection with any liquidation, dissolution or winding
up of the Corporation and such distribution has been distributed to the holders
of Depositary Shares.
Charges of Depositary. The Corporation will pay all transfer and other taxes
and governmental charges arising solely from the existence of the depositary
arrangements. The Corporation will pay all charges of the Depositary in
connection with the initial deposit of the Preferred Stock and the initial
issuance of the Depositary Shares, redemption of the Preferred Stock at the
option of the Corporation and withdrawal of shares of Preferred Stock by
holders of Depositary Shares. Holders of Depositary Shares will pay all other
transfer and other taxes and governmental charges.
Miscellaneous. The Depositary will make available for inspection by holders
of Depositary Receipts, at the Depositary's office, any reports and
communications received from the Corporation which are received by the
Depositary as the holder of Preferred Stock.
Neither the Depositary, any Depositary's Agent, any Registrar nor the
Corporation will incur any liability if it is prevented or delayed by law or
any circumstance beyond its control from performing its obligations under the
Deposit Agreement. Neither the Depositary, any Depositary's Agent, any
Registrar nor the Corporation assumes any obligation or shall be subject to any
liability under the Deposit Agreement to holders of Depositary Receipts other
than for their gross negligence, willful misconduct, or bad faith. Neither the
Depositary, any Depositary's Agent, any Registrar nor the Corporation shall be
under any obligation to appear in, prosecute or defend any action, suit or
other proceeding in respect of the Preferred Stock, the Depositary Shares or
the Depositary Receipts which in its opinion may involve it in expense or
liability unless indemnity satisfactory to it against all expense and liability
be furnished as often as may be required. Neither the Depositary, any
Depositary's Agent, any Registrar nor the Corporation shall be liable for any
action or any failure to act by it in reliance upon the written advice of legal
counsel or accountants or upon information from any person presenting Stock for
deposit, any holder of a Depositary Receipt or any other person believed by it
in good faith to be competent to give such information. The Depositary, any
Depositary's Agent, any Registrar and the Corporation may each rely and shall
each be protected in acting upon any written notice, request, direction or
other document believed by it to be genuine and to have been signed or
presented by the proper party or parties.
Resignation and Removal of Depositary. The Depositary may resign at any time
by delivering to the Corporation written notice of its election to do so, and
the Corporation may at any time remove the Depositary, any such resignation or
removal to take effect upon the appointment of a successor Depositary and its
acceptance of such appointment. Such successor Depositary must be appointed
within 60 days after delivery of the notice of resignation or removal and must
be a bank or trust company having its principal office in the United States and
having a combined capital and surplus of at least $50,000,000.
ENSERCH CAPITAL AND ENSERCH PREFERRED
GENERAL
Enserch Capital, a subsidiary of ENSERCH, is a limited liability company
organized under the laws of the State of Delaware. All of its limited liability
company interests (other than EC Preferred Securities) are beneficially owned
by ENSERCH and are non-transferable. ENSERCH will be the only Class A Member of
Enserch Capital and will hold all of the Class A common limited liability
interests. Enserch Preferred will be the only Class B Member of Enserch Capital
(the "Class B Member") and will hold all of the Class B common
17
limited liability company interests. Enserch Capital's registered office in the
State of Delaware is c/o The Corporation Trust Company, Corporate Trust Center,
1209 Orange Street, Wilmington, New Castle County, Delaware 19801, telephone:
(302) 658-7581. Enserch Capital has no board of directors, and all of its
business and affairs will be conducted by ENSERCH, as the sole Class A Member.
The location of the principal executive offices of the Class A Member is set
forth above under "The Corporation." Enserch Capital exists solely for the
purpose of issuing its limited liability company interests and lending the net
proceeds thereof to ENSERCH or Enserch Preferred.
Enserch Preferred, a wholly-owned subsidiary of ENSERCH, was incorporated in
Texas and reincorporated in Delaware in March 1994. Enserch Preferred's
principal executive offices are located at 300 South St. Paul Street, Dallas,
Texas 75201. Enserch Preferred exists solely for the purpose of holding the
Class B limited liability company interests of Enserch Capital, borrowing the
proceeds from the sale of the limited liability company interests of Enserch
Capital and reloaning the proceeds to ENSERCH.
EC PREFERRED SECURITIES
Enserch Capital may, from time to time, issue EC Preferred Securities, in one
or more series, having terms described in the Prospectus Supplement relating
thereto. The EC Preferred Securities may be exchangeable for Subordinated Debt
Securities or Preferred Stock of ENSERCH under circumstances described in the
Prospectus Supplement relating to such EC Preferred Securities. Enserch
Capital's Amended and Restated Limited Liability Company Agreement (the
"Limited Liability Company Agreement") will authorize the establishment of one
or more classes or series of EC Preferred Securities, having such terms,
including dividend, redemption, exchange, voting, liquidation rights and such
other preferred, deferred or other special rights or such restrictions, as
shall be set forth therein or otherwise established by the Class A Member
pursuant thereto. Reference is made to the Prospectus Supplement relating to
the EC Preferred Securities of a particular series for specific terms,
including (i) the distinctive designation of such series which shall
distinguish it from other series; (ii) the number of EC Preferred Securities
included in such series, which number may be increased or decreased from time
to time unless otherwise provided by the Class A Member in creating the series;
(iii) the annual dividend rate (or method of determining such rate) for EC
Preferred Securities of such series and the date or dates upon which such
dividends shall be payable; (iv) whether dividends on EC Preferred Securities
of such series shall be cumulative, and, in the case of EC Preferred Securities
of any series having cumulative dividend rights, the date or dates or method of
determining the date or dates from which dividends on EC Preferred Securities
of such series shall be cumulative; (v) the amount or amounts which shall be
paid out of the assets of Enserch Capital to the holders of EC Preferred
Securities of such series upon voluntary or involuntary dissolution, winding up
or termination of Enserch Capital; (vi) the price or prices at which, the
period or periods within which and the terms and conditions upon which EC
Preferred Securities of such series may be redeemed or purchased, in whole or
in part, at the option of Enserch Capital; (vii) the obligation, if any, of
Enserch Capital to purchase or redeem EC Preferred Securities of such series
pursuant to a sinking fund or otherwise and the price or prices at which, the
period or periods within which and the terms and conditions upon which EC
Preferred Securities of such series shall be redeemed, in whole or in part,
pursuant to such obligation; (viii) the period or periods within which and the
terms and conditions, if any, including the price or prices or the rate or
rates of conversion or exchange and the terms and conditions of any adjustments
thereof, upon which EC Preferred Securities of such series shall be convertible
or exchangeable at the option of the holder or Enserch Capital or ENSERCH into
any other Interests or securities or other property or cash or into any other
series of EC Preferred Securities; (ix) the voting rights, if any, of EC
Preferred Securities of such series in addition to those required by law,
including the number of votes per EC Preferred Security and any requirement for
the approval by the holders of EC Preferred Securities, or of EC Preferred
Securities of one or more series, or of both, as a condition to specified
action or amendments to the Limited Liability Company Agreement; (x) the
ranking of EC Preferred Securities of the series as compared with Preferred
Securities of other series in respect of the right to receive dividends and the
right to receive payments out of the assets of Enserch Capital upon voluntary
or involuntary dissolution, winding up or termination of Enserch Capital; (xi)
the nature and terms of any backup undertakings of ENSERCH and/or Enserch
Preferred or another subsidiary of ENSERCH to
18
be provided to holders of EC Preferred Securities of such series; and (xii) any
other relative rights, powers, preferences or limitations of EC Preferred
Securities of the series not inconsistent with the Limited Liability Company
Agreement or with applicable law. All EC Preferred Securities offered hereby
will be guaranteed by ENSERCH to the limited extent set forth below under
"Guarantee" and may also be entitled to the benefits of certain undertakings of
ENSERCH and Enserch Preferred as described below under "Backup Undertakings."
Holders of EC Preferred Securities will be Class C Members of Enserch Capital.
Any special federal income tax, accounting and other considerations applicable
to any offering of EC Preferred Securities and related Backup Undertakings will
be described in the Prospectus Supplement relating thereto.
GUARANTEE
ENSERCH will irrevocably and unconditionally agree (the "Guarantee"), to the
extent set forth herein, to pay in full, to the holders of EC Preferred
Securities of any class or series, the Guarantee Payments (as defined below),
as and when due, regardless of any defense, right of set-off or counterclaim
which Enserch Capital may have or assert. The Guarantee will constitute a
guarantee of payment and not of collection, and may be enforced by holders of
EC Preferred Securities directly against ENSERCH. The following payments to the
extent not paid by Enserch Capital (the "Guarantee Payments") will be subject
to the Guarantee (without duplication): (i) any accumulated arrears and
accruals of unpaid dividends which have heretofore been declared on the EC
Preferred Securities of such class or series out of moneys legally available
therefor, (ii) the redemption price including all accumulated arrears and
accruals of unpaid dividends payable, out of moneys legally available therefor,
with respect to any EC Preferred Securities of such class or series called for
redemption, (iii) upon a liquidation of Enserch Capital, the lesser of (a) the
aggregate of the liquidation preference and all accumulated arrears and
accruals of unpaid dividends (whether or not declared) on the EC Preferred
Securities of such class or series to the date of payment and (b) the amount of
assets of Enserch Capital remaining available for distribution in liquidation
to the holders of EC Preferred Securities of such class or series, and (iv) any
Additional Amounts payable to Enserch Capital as described in the accompanying
Prospectus Supplement. In addition, the Prospectus Supplement relating to a
class or series of EC Preferred Securities will describe the rank of the
Guarantee and any additional covenants or other terms of the Guarantee of
ENSERCH with respect to such class or series, including any Additional Amounts
payable under the Guarantee with respect thereto.
BACKUP UNDERTAKINGS
In connection with any class or series of EC Preferred Securities, ENSERCH
may enter into additional arrangements with Enserch Capital, including
intercompany loan agreements involving Enserch Capital or Enserch Preferred and
amendments to Enserch Capital's Limited Liability Company Agreement, that
operate directly or indirectly for the benefit of holders of the EC Preferred
Securities. ENSERCH will also irrevocably and unconditionally agree to
guarantee, to the extent set forth in the Prospectus Supplement, to pay in
full, to Enserch Capital for the benefit of the holders of the EC Preferred
Securities of any class or series, certain obligations of Enserch Preferred
under any intercompany loan agreements with Enserch Capital, as and when due,
regardless of any defense, right of set-off or counterclaim which Enserch
Preferred may have or assert. The terms and provisions of, including the rank
of any such guarantee and any additional covenants, will be described in the
Prospectus Supplement. Such guarantee, the Guarantee described above under
"Guarantee," and any such other arrangements are herein collectively referred
to as "Backup Undertakings" and will be described in the Prospectus Supplement
relating to any class or series of EC Preferred Securities to which they apply.
VALIDITY OF EC PREFERRED SECURITIES
Certain matters of Delaware law relating to the validity of the EC Preferred
Securities of Enserch Capital offered hereby will be passed upon by Richards,
Layton & Finger, P.A., as special Delaware counsel for Enserch Capital. In
rendering their opinions with respect to the EC Preferred Securities as
described under "Legal Opinions," Mr. Satterwhite and Mudge Rose Guthrie
Alexander & Ferdon may rely on Richards, Layton & Finger, P.A. as to certain
matters of Delaware law.
19
PLAN OF DISTRIBUTION
ENSERCH and/or Enserch Capital may offer or sell Securities to one or more
underwriters for public offering and sale by them or may sell Securities to
investors directly or through agents. ENSERCH and/or Enserch Capital may sell
Securities as soon as practicable after effectiveness of the Registration
Statement, provided that favorable market conditions exist. Any such
underwriter or agent involved in the offer and sale of the Securities will be
named in an applicable Prospectus Supplement.
Underwriters may offer and sell the Securities at a fixed price or prices,
which may be changed, or from time to time at market prices prevailing at the
time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Corporation also may offer and sell the Securities in
exchange for one or more of its outstanding issues of equity or debt or
convertible debt securities. ENSERCH and/or Enserch Capital also may, from time
to time, authorize firms acting as the Corporation's or Enserch Capital's
agents to offer and sell the Securities upon the terms and conditions as shall
be set forth in any Prospectus Supplement. In connection with the sale of
Securities, underwriters may be deemed to have received compensation from
ENSERCH and/or Enserch Capital in the form of underwriting discounts or
commissions and may also receive commissions from purchasers of Securities for
whom they may act as agent. Underwriters may sell Securities to or through
dealers, and such dealers may receive compensation in the form of discounts,
concessions or commissions from the underwriters and/or commissions (which may
be changed from time to time) from the purchasers for whom they may act as
agent.
Any underwriting compensation paid by ENSERCH and/or Enserch Capital to
underwriters or agents in connection with the offering of Securities, and any
discounts, concessions or commissions allowed by underwriters to participating
dealers, will be set forth in an applicable Prospectus Supplement.
Underwriters, dealers and agents participating in the distribution of the
Securities may be deemed to be underwriters, and any discounts and commissions
received by them and any profit realized by them on resale of the Securities
may be deemed to be underwriting discounts and commissions, under the
Securities Act. Underwriters, dealers and agents may be entitled, under
agreements with the Corporation, to indemnification against and contribution
toward certain civil liabilities, including liabilities under the Securities
Act, and to reimbursement by the Corporation for certain expenses.
Underwriters, dealers and agents may engage in transactions with, or perform
services for, or be customers of, ENSERCH and/or Enserch Capital in the
ordinary course of business.
If so indicated in an applicable Prospectus Supplement, ENSERCH will
authorize dealers acting as ENSERCH's agents to solicit offers by certain
institutions to purchase Debt Securities from ENSERCH at the public offering
price set forth in such Prospectus Supplement pursuant to Delayed Delivery
Contracts ("Contracts") providing for payment and delivery on the date or dates
stated in such Prospectus Supplement. Each Contract will be for an amount not
less than, and the aggregate principal amount of Debt Securities sold pursuant
to Contracts shall be not less nor more than, the respective amounts stated in
such Prospectus Supplement. Institutions with whom Contracts, when authorized,
may be made include commercial and savings banks, insurance companies, pension
funds, investment companies, educational and charitable institutions and other
institutions, but will in all cases be subject to the approval of ENSERCH.
Contracts will not be subject to any conditions except (i) the purchase by an
institution of the Debt Securities covered by its Contracts shall not at the
time of delivery be prohibited under the laws of any jurisdiction in the United
States to which such institution is subject, and (ii) if the Debt Securities
are being sold to underwriters, the Corporation shall have sold to such
underwriters the total principal amount of the Debt Securities less the
principal amount thereof covered by Contracts. Agents and underwriters will
have no responsibility in respect of the delivery or performance of Contracts.
Each series of Debt Securities, Preferred Stock and EC Preferred Securities
will be a new issue of securities and will have no established trading market.
Any underwriters to whom Securities are sold by the Corporation or Enserch
Capital for public offering and sale may make a market in such Securities, but
such underwriters will not be obligated to do so and may discontinue any market
making at any time without notice. The Securities may or may not be listed on a
national securities exchange or a foreign securities exchange, except that the
Common Stock is listed on the New York Stock Exchange, Midwest Stock
20
Exchange and the London Stock Exchange. Any Common Stock sold pursuant to a
Prospectus Supplement will be listed on such exchanges, subject to official
notice of issuance. No assurance can be given as to the liquidity of or the
trading markets for any Securities.
LEGAL OPINIONS
The validity of the Securities of ENSERCH will be passed upon for the
Corporation by William T. Satterwhite, Esquire, Senior Vice President and
General Counsel of the Corporation, and for any underwriters or agents by Mudge
Rose Guthrie Alexander & Ferdon, New York, New York, who will rely on the
opinion of Mr. Satterwhite as to matters of Texas law. Certain matters of
Delaware law relating to the validity of the EC Preferred Securities of Enserch
Capital will be passed upon by Richards, Layton & Finger, P.A., as special
Delaware counsel for Enserch Capital. In rendering their opinions, Mr.
Satterwhite and Mudge Rose Guthrie Alexander & Ferdon will rely upon the
opinion of Richards, Layton & Finger, P.A. as to certain matters of Delaware
law.
Mudge Rose Guthrie Alexander & Ferdon has from time to time performed legal
services for the Corporation. Mudge Rose Guthrie Alexander & Ferdon acted as
counsel to the Corporation in connection with the recent sale of the principal
assets of its engineering and construction business. In the year ended December
31, 1993, and through February 15, 1994, Mudge Rose Guthrie Alexander & Ferdon
collected approximately $604,000 in legal fees from the Corporation in
connection with such services. As of December 31, 1993, Mr. Satterwhite owned
16,415 shares of Common Stock and held options to acquire 84,622 shares of
Common Stock (of which 61,497 are presently exercisable) and 8,644 shares of
Common Stock which were held for his account under an employee benefit plan.
Mr. Satterwhite also participates in other employee benefit plans of the
Corporation.
EXPERTS
The financial statements and related financial statement schedules
incorporated in this Prospectus by reference from the Corporation's Current
Report on Form 8-K dated March 3, 1994, (containing financial statements for
the year ended December 31, 1993) and from the Corporation's Annual Report on
Form 10-K for the year ended December 31, 1992, have been audited by Deloitte &
Touche, independent auditors, as stated in their reports which are incorporated
herein by reference, and have been so incorporated in reliance upon such
reports given upon the authority of such firm as experts in auditing and
accounting.
With respect to any unaudited interim financial information included in the
Corporation's Quarterly Reports on Form 10-Q, that are or will be incorporated
herein by reference, Deloitte & Touche applies limited procedures in accordance
with professional standards for reviews of such information. As stated in any
of its reports that are included in the Corporation's Quarterly Reports on Form
10-Q, that are or will be incorporated herein by reference, Deloitte & Touche
did not audit and did not express an opinion on such interim financial
information. Accordingly, the degree of reliance on any of its reports on such
information should be restricted in light of the limited nature of the review
procedures applied. Deloitte & Touche is not subject to the liability
provisions of Section 11 of the Securities Act for any of its reports on such
unaudited interim financial information because those reports are not "reports"
or a "part" of the Registration Statement filed under the Securities Act with
respect to the Securities prepared or certified by an accountant within the
meaning of Section 7 and 11 of the Securities Act.
The estimates of reserves incorporated by reference in this Prospectus made
by DeGolyer & MacNaughton, independent petroleum consultants, as set forth
under "Properties" appearing in Part I and in Note 12 of the "Notes to
Consolidated Financial Statements" appearing in Appendix A of the Corporation's
1992 Annual Report on Form 10-K for the year ended December 31, 1992, and in
Note 13 of the Notes to Consolidated Financial Statements appearing in Appendix
A of the Corporation's Current Report on Form 8-K dated March 3, 1994, have
been so set forth and incorporated herein in reliance upon the authority of
such firm as experts.
21
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NO DEALER, SALESPERSON OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, IN CONNECTION WITH THE OFFER
CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY ENSERCH, ENSERCH CAPITAL OR ANY UNDERWRITER. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF ENSERCH OR ENSERCH CAPITAL SINCE THE DATE
HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO 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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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
----
Enserch Capital L.L.C. .................................................... S-3
ENSERCH Corporation........................................................ S-3
Selected Financial Data of ENSERCH......................................... S-4
Capitalization of ENSERCH.................................................. S-5
Use of Proceeds............................................................ S-6
Certain Investment Considerations.......................................... S-6
Description of the Series A Preferred Securities........................... S-7
Description of the Guarantee............................................... S-16
Description of the Loans................................................... S-19
Description of the Loan Guarantee.......................................... S-24
Certain Terms of the % Subordinated Debentures........................... S-26
United States Taxation..................................................... S-29
Underwriting............................................................... S-32
Validity of Securities..................................................... S-33
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
The Corporation............................................................ 3
Use of Proceeds............................................................ 4
Description of the Debt Securities......................................... 4
Description of ENSERCH Capital Stock....................................... 11
Enserch Capital and Enserch Preferred...................................... 17
Plan of Distribution....................................................... 20
Legal Opinions............................................................. 21
Experts.................................................................... 21
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6,000,000 PREFERRED SECURITIES
ENSERCH CAPITAL L.L.C.
GUARANTEED TO THE EXTENT SET FORTH
HEREIN BY
ENSERCH CORPORATION
% CUMULATIVE
MONTHLY INCOME PREFERRED SECURITIES,
SERIES A
---------------
PROSPECTUS SUPPLEMENT
---------------
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
KIDDER, PEABODY & CO.
INCORPORATED
LEHMAN BROTHERS
PAINEWEBBER INCORPORATED
SMITH BARNEY SHEARSON INC.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth those expenses to be incurred by ENSERCH in
connection with the issuance and distribution of the securities being
registered. Except for the Securities and Exchange Commission registration fee,
all amounts shown are estimates.
Securities and Exchange Commission Registration Fee............. $155,174
Accounting Fees and Expenses.................................... 75,000
Printing and Engraving Expenses................................. 110,000
Trustee's and Depositary's Fees and Expenses.................... 10,000
Stock Exchange Listing Fees..................................... 93,300
Legal Fees and Expenses......................................... 115,000
Blue Sky Expenses, Including Counsel Fees....................... 20,000
Rating Agency Fees.............................................. 218,750
Miscellaneous Expenses.......................................... 2,776
--------
Total....................................................... $800,000
========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 2.02-1 of the Texas Business Corporation Act authorizes, inter alia,
a corporation to indemnify any person who was, is, or is threatened to be made
a named defendant or respondent to any action, suit, inquiry or investigation
(a "proceedings") because such person is or was a director if it is determined
that such person conducted himself in good faith and reasonably believed that,
(i) in the case of conduct in his official capacity as a director of the
corporation, that his conduct was in the corporation's best interests; (ii) in
all other cases, except for a criminal proceeding, that his conduct was not
opposed to the corporation's best interests; and (iii) in the case of any
criminal proceeding, that he had no reasonable cause to believe his conduct was
unlawful. A determination that such indemnification is permissible, and the
authorization of indemnification and the determination as to reasonableness of
expenses must be made by either the disinterested shareholders, disinterested
directors, or by special legal counsel selected by disinterested directors. A
director is not entitled to such indemnification if he is found liable on the
basis that personal benefit was improperly received by him or if he is found
liable to the corporation. A corporation is required to indemnify a director or
officer of the corporation against reasonable expenses incurred by him in
connection with a proceeding in which he is a named defendant or respondent
because he is or was a director or officer of the corporation if he has been
wholly successful, on the merits or otherwise, in the defense of the
proceedings. Reasonable expenses may be advanced by the corporation if the
director or officer who was, is or is threatened to be named a defendant or
respondent in a proceeding delivers to the corporation a written statement of
his good faith belief that he has met the standard of conduct necessary for
indemnification under the Act and a written undertaking by him, or on his
behalf, to repay the amount paid or reimbursed if it is ultimately determined
that he has not met that standard or if it is ultimately determined that
indemnification is prohibited by this section. This section provides that if a
director or officer of a corporation is found liable to the corporation or is
found liable on the basis that personal benefit was improperly received by such
director or officer, the indemnification (1) is limited to reasonable expenses
actually incurred by such director or officer in condition with the proceeding
and (2) shall not be made in respect of any proceeding in which such director
or officer shall have been found liable for willful or intentional misconduct
in the performance of his duty to the corporation. In addition, a court of
competent jurisdiction may determine that a director or officer is entitled to
indemnification under this section of the Texas Business Corporation Act.
Section 2.02-1 of the Texas Business Corporation Act empowers a corporation
to purchase and maintain insurance on behalf of directors and officers and
certain other persons whether or not the corporation would have the power under
such section to indemnify such person against liability.
II-1
Article XIII of ENSERCH's Bylaws authorizes ENSERCH to indemnify any person
who (i) is or was a director, officer, employee or agent of ENSERCH, or (ii)
while a director, officer, employee or agent of ENSERCH, is or was serving at
the request of ENSERCH as a director, officer, partner, venturer, proprietor,
trustee, employee, agent or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan, or other enterprise to the fullest extent that a corporation may
or is required to grant indemnification to a director under the Texas Business
Corporation Act. ENSERCH also may indemnify any person to such further extent
as permitted by law.
Additionally, Article Eight of ENSERCH's Restated Articles of Incorporation
eliminates in certain circumstances the monetary liability of directors of
ENSERCH for an act or omission in the director's capacity as a director. This
provision does not eliminate or limit the liability for (i) a breach of a
director's duty of loyalty to ENSERCH or its shareholder; (ii) an act or
omission not in good faith or that involves intentional misconduct or a knowing
violation of the law; (iii) a transaction from which the director received an
improper benefit, whether or not the benefit resulted from an action taken
within the scope of the director's office; (iv) an act or omission for which
the liability of the director is expressly provided for by statute; or (v) an
act related to an unlawful stock repurchase or payment of a dividend.
ENSERCH carries directors' and officers' liability insurance which insures
ENSERCH's directors and officers against liability for any "wrongful act"
arising out of their position, and which is not reimbursable under the
ENSERCH's Bylaws or which, if reimbursable, ENSERCH has not paid or is unable
to pay. These provisions of the policy pertaining to officers and directors are
also subject to several exclusions, including losses covered under other forms
of insurance, losses occasioned by violations of governmental regulations and
ordinances, losses for which insurance would be against public policy and
others recited therein.
ITEM 16. EXHIBITS
Unless otherwise noted, the following exhibits have been previously filed:
EXHIBIT
NO. DOCUMENT
------- -------- ---
1.1 Form of Debt Underwriting Agreement including Form of Letter
to prospective underwriters of Debt Securities.
1.2 Form of Equity Underwriting Agreement.
1.3 Form of Agency Agreement.
1.4** Form of Equity Underwriting Agreement of Enserch Capital.
4.1* Form of Debt Securities.
4.2* Form of Medium-Term Note (fixed rate).
4.3* Form of Medium-Term Note (floating rate).
4.4 Senior Indenture, dated as of February 15, 1992, between the
Corporation and The First National Bank of Chicago, as Trust-
ee.
4.5 Form of Subordinated Indenture between the Corporation and The
First National Bank of Chicago, as Trustee.
4.6 Form of resolution of the Securities Committee of the Board of
Directors of the Corporation authorizing and creating a series
of Preferred Stock.
4.7 Form of specimen certificate representing shares of Preferred
Stock.
4.8 Form of specimen certificate representing shares of Common
Stock.
4.9 Form of Deposit Agreement.
II-2
EXHIBIT
NO. DOCUMENT
------- --------
4.10 Form of Depositary Receipt (included in Exhibit 4.9).
4.11 Restated Articles of Incorporation of the Corporation, as
amended (incorporated by reference to Exhibit 3.1 of the Cor-
poration's Form 10-K for the Year Ended December 31, 1988
[File No. 1-3183]).
4.12 Rights Agreement, dated as of April 15, 1986, between the Cor-
poration and Harris Trust Company of New York (incorporated by
reference to Exhibit 4.5 of the Corporation's Registration
Statement on Form S-3 [No. 33-45688]).
4.13 Bylaws of the Corporation, as amended.
4.14 Certificate of Formation of Enserch Capital L.L.C. ("Enserch
Capital").
4.15 Limited Liability Company Agreement of Enserch Capital.
4.16** Certificate of Incorporation of Enserch Preferred Capital,
Inc. ("Enserch Preferred").
4.17** Bylaws of Enserch Preferred.
4.18** Form of Amended and Restated Limited Liability Company Agree-
ment of Enserch Capital.
4.19** Form of Amended and Restated Certificate of Incorporation of
Enserch Preferred.
4.20** Form of EC Preferred Securities.
4.21** Form of Loan Agreement between Enserch Preferred and Enserch
Capital (the "Capital Loan Agreement").
4.22** Form of Loan Agreement between ENSERCH and Enserch Preferred.
4.23** Form of Payment and Guarantee Agreement with respect to EC
Preferred Securities.
4.24** Form of Payment and Guarantee Agreement with respect to the
Enserch Preferred's obligations under the Capital Loan Agree-
ment.
4.25** Form of Subordinated Debenture issuable in exchange for EC
Preferred Securities.
5.1 Opinion of William T. Satterwhite, Esquire, as to the legality
of the Securities of ENSERCH.
5.2 Opinion of Richards, Layton & Finger, P.A. as to validity of
EC Preferred Securities of Enserch Capital.
5.3** Opinion of William T. Satterwhite, Esquire, as to validity of
Securities of Enserch Preferred.
12 Computations of ratio of earnings to fixed charges and ratio
of earnings to combined fixed charges and preferred stock div-
idends.
15 Letter of Deloitte & Touche regarding unaudited interim finan-
cial information.
23.1 Consent of Deloitte & Touche.
23.2 Consent of DeGolyer and MacNaughton.
23.3 Consent of William T. Satterwhite (included in Exhibits 5.1
and 5.3 above).
23.4 Consent of Richards, Layton & Finger, P.A. (included in Ex-
hibit 5.2 hereto).
24 Powers of Attorney.
24.1** Powers of Attorney--Enserch Preferred.
25.1 Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of The First National Bank of Chicago, as
Trustee under the Senior Debt Indenture.
II-3
EXHIBIT
NO. DOCUMENT
------- -------- ---
25.2 Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of The First National Bank of Chicago, as
Trustee under the Subordinated Debt Indenture.
- --------
*The Corporation will file any forms of Debt Securities, Preferred Stock or
EC Preferred Securities not previously so filed in a current Report on Form
8-K.
**Filed with this amendment.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
provided, however, that the undertakings set forth in paragraph (a)(1)(i)
and (a)(1)(ii) above do not apply if the information required to be
included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by ENSERCH pursuant to Section 13 or 15(d) of the
Securities Act of 1934 that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
ENSERCH's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
Registrants pursuant to the provision described under Item 15 above, or
otherwise, the Registrants have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrants of expenses incurred or paid by a director, officer
or controlling person of the Registrants in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrants will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
II-4
The undersigned registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-5
SIGNATURES
PURSUANT TO REQUIREMENTS OF THE SECURITIES ACT OF 1933, ENSERCH CORPORATION
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILLING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1
TO REGISTRATION STATEMENT NO. 33-52525 TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF DALLAS AND STATE OF
TEXAS ON THE 23RD DAY OF MARCH 1994.
ENSERCH CORPORATION
/s/ D. W. Biegler
By: _________________________________
D. W. Biegler,
Chairman and President, Chief
Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1993, ENSERCH CAPITAL
L.L.C. CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF
THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO.
1 TO REGISTRATION STATEMENT NO. 33-52525 TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF DALLAS AND STATE OF
TEXAS, ON THE 23RD DAY OF MARCH 1994.
ENSERCH CAPITAL L.L.C.
By: ENSERCH CORPORATION,
/s/ D. W. Biegler
By: _________________________________
Name:D. W. Biegler,
Title: Chairman and President, Chief
Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, ENSERCH PREFERRED
CAPITAL, INC. CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS
ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS
AMENDMENT NO. 1 TO REGISTRATION STATEMENT NO. 33-52525 TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF DALLAS AND
STATE OF TEXAS, ON THE 23RD DAY OF MARCH 1994.
ENSERCH PREFERRED CAPITAL, INC.
/s/ D. W. Biegler
By: ____________________________
Name:D. W. Biegler,
Title: Chairman and President, Chief
Executive Officer
II-6
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO REGISTRATION STATEMENT NO. 33-52525 HAS BEEN SIGNED BELOW BY THE
FOLLOWING DIRECTORS AND OFFICERS OF ENSERCH CORPORATION IN THE CAPACITIES AND
ON THE DATE INDICATED.
SIGNATURE AND TITLE DATE
------------------- ----
D. W. Biegler, Chairman and President, )
Chief Executive Officer, and Director; )
William B. Boyd, Director; B. A. )
Bridgewater, Jr., Director; Lawrence E. )
Fouraker, Director; Preston M. Geren, Jr., )
Director; Marvin J. Girouard, Director; )
Joseph M. Haggar, Jr., Director; W. C. McCord, ) March 23, 1994
Director; Diana S. Natalicio, Director; )
W. Ray Wallace, Director; S. R. Singer, )
Senior Vice President, Finance and )
Corporate Development, Chief Financial )
Officer; Jerry W. Pinkerton, Vice )
President and Controller, Chief )
Accounting Officer )
/s/ D. W. Biegler
By: ____________
D. W. Biegler,
As Attorney-in-Fact
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO REGISTRATION STATEMENT NO. 33-52525 HAS BEEN SIGNED BELOW BY THE
FOLLOWING DIRECTORS AND OFFICERS OF ENSERCH PREFERRED CAPITAL, INC. IN THE
CAPACITIES AND ON THE DATE INDICATED.
SIGNATURE AND TITLE DATE
------------------- ----
D. W. Biegler, Chairman and President, Chief )
Executive Officer and Director )
W. T. Satterwhite, Director; )
S. R. Singer, Chief Financial Officer and ) March 23, 1994
Director; and )
J.W. Pinkerton, Vice President and Controller )
/s/ D. W. Biegler
By: ____________
D. W. Biegler,
As Attorney-in-Fact
II-7
EXHIBIT
NO. DESCRIPTION PAGE NO.
------- ----------- --------
1.1 Form of Debt Underwriting Agreement including Form of
Letter to prospective underwriters of Debt Securities.
1.2 Form of Equity Underwriting Agreement.
1.3 Form of Agency Agreement.
1.4** Form of Equity Underwriting Agreement of Enserch Capital.
4.1* Form of Debt Securities.
4.2* Form of Medium-Term Note (fixed rate).
4.3* Form of Medium-Term Note (floating rate).
4.4 Senior Indenture, dated as of February 15, 1992, between
the Corporation and The First National Bank of Chicago,
as Trustee.
4.5 Form of Subordinated Indenture between the Corporation
and The First National Bank of Chicago, as Trustee.
4.6 Form of resolution of the Securities Committee of the
Board of Directors of the Corporation authorizing and
creating a series of Preferred Stock.
4.7 Form of specimen certificate representing shares of Pre-
ferred Stock.
4.8 Form of specimen certificate representing shares of Com-
mon Stock.
4.9 Form of Deposit Agreement.
4.10 Form of Depositary Receipt (included in Exhibit 4.9).
4.11 Restated Articles of Incorporation of the Corporation, as
amended (incorporated by reference to Exhibit 3.1 of the
Corporation's Form 10-K for the Year Ended December 31,
1988 [File No. 1-3183]).
4.12 Rights Agreement, dated as of April 15, 1986, between the
Corporation and Harris Trust Company of New York (incor-
porated by reference to Exhibit 4.5 of the Corporation's
Registration Statement on Form S-3 [No. 33-45688]).
4.13 Bylaws of the Corporation, as amended.
4.14 Certificate of Formation of Enserch Capital L.L.C.
("Enserch Capital").
4.15 Limited Liability Company Agreement of Enserch Capital.
4.16** Certificate of Incorporation of Enserch Preferred Capi-
tal, Inc. ("Enserch Preferred").
4.17** Bylaws of Enserch Preferred.
4.18** Form of Amended and Restated Limited Liability Company
Agreement of Enserch Capital.
4.19** Form of Amended and Restated Certificate of Incorporation
of Enserch Preferred.
4.20** Form of EC Preferred Securities.
4.21** Form of Loan Agreement between Enserch Preferred and
Enserch Capital (the "Capital Loan Agreement").
4.22** Form of Loan Agreement between ENSERCH and Enserch Pre-
ferred.
4.23** Form of Payment and Guarantee Agreement with respect to
EC Preferred Securities.
4.24** Form of Payment and Guarantee Agreement with respect to
the Enserch Preferred's obligations under the Capital
Loan Agreement.
4.25** Form of Subordinated Debenture issuable in exchange for
EC Preferred Securities.
5.1 Opinion of William T. Satterwhite, Esquire, as to the le-
gality of the Securities of ENSERCH.
5.2 Opinion of Richards, Layton & Finger, P.A. as to validity
of EC Preferred Securities of Enserch Capital.
5.3** Opinion of William T. Satterwhite, Esquire, as to valid-
ity of Securities of Enserch Preferred.
12 Computations of ratio of earnings to fixed charges and
ratio of earnings to combined fixed charges and preferred
stock dividends.
15 Letter of Deloitte & Touche regarding unaudited interim
financial information.
23.1 Consent of Deloitte & Touche.
EXHIBIT
NO. DESCRIPTION PAGE NO.
------- ----------- --------
23.2 Consent of DeGolyer and MacNaughton.
23.3 Consent of William T. Satterwhite (included in Exhibits
5.1 and 5.3 above).
23.4 Consent of Richards, Layton & Finger, P.A. (included in
Exhibit 5.2 hereto).
24 Powers of Attorney.
24.1** Powers of Attorney--Enserch Preferred.
25.1 Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of The First National Bank of Chicago,
as Trustee under the Senior Debt Indenture.
25.2 Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of The First National Bank of Chicago,
as Trustee under the Subordinated Debt Indenture.
- --------
*The Corporation will file any forms of Debt Securities, Preferred Stock or EC
Preferred Securities not previously so filed in a current Report on Form 8-K.
**Filed with this amendment.