<PAGE> 1
Filed pursuant to rule 424(b)(2)
Registration No. 333-35549
PROSPECTUS SUPPLEMENT
(To Prospectus Dated October 7, 1997)
$250,000,000
Enron Corp.
LOGO
6.625% NOTES DUE 2005
-------------------------
Interest Payable May 15 and November 15
-------------------------
THE 6.625% NOTES DUE 2005 (THE "NOTES") OF ENRON CORP. ("ENRON") BEING OFFERED
HEREBY WILL MATURE ON NOVEMBER 15, 2005. INTEREST ON THE NOTES IS PAYABLE ON MAY
15 AND NOVEMBER 15 OF EACH YEAR, BEGINNING MAY 15, 1998. THE NOTES ARE NOT
REDEEMABLE PRIOR TO MATURITY AND WILL NOT BE SUBJECT TO ANY SINKING FUND. SEE
"DESCRIPTION OF NOTES."
THE NOTES WILL BE REPRESENTED BY ONE OR MORE GLOBAL SECURITIES REGISTERED IN THE
NAME OF THE NOMINEE OF THE DEPOSITORY TRUST COMPANY, AS DEPOSITARY ("DTC"), OR
OTHER DEPOSITARY. BENEFICIAL INTERESTS IN THE GLOBAL SECURITIES WILL BE SHOWN
ON, AND TRANSFERS THEREOF WILL BE EFFECTED ONLY THROUGH, RECORDS MAINTAINED BY
DTC AND ITS PARTICIPANTS. EXCEPT AS OTHERWISE DESCRIBED HEREIN, NOTES IN
DEFINITIVE FORM WILL NOT BE ISSUED. SETTLEMENT FOR THE NOTES WILL BE MADE IN
IMMEDIATELY AVAILABLE FUNDS. THE NOTES WILL TRADE IN DTC'S SAME-DAY FUNDS
SETTLEMENT SYSTEM, AND SECONDARY MARKET TRADING ACTIVITY IN THE NOTES WILL
THEREFORE SETTLE IN IMMEDIATELY AVAILABLE FUNDS. SEE "DESCRIPTION OF
NOTES - BOOK-ENTRY ONLY SYSTEM."
-------------------------
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.
-------------------------
PRICE 99.467% AND ACCRUED INTEREST, IF ANY
-------------------------
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public(1) Commissions(2) Enron(1)(3)
--------- -------------- -----------
<S> <C> <C> <C>
Per Note........................ 99.467% .60% 98.867%
Total........................... $248,667,500 $1,500,000 $247,167,500
</TABLE>
- ---------------
(1) Plus accrued interest, if any, from November 24, 1997.
(2) Enron has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by Enron estimated at $200,000.
-------------------------
The Notes are offered, subject to prior sale, when, as and if accepted by
the Underwriters and subject to approval of certain legal matters by Bracewell &
Patterson, L.L.P., counsel to the Underwriters. See "Underwriting." It is
expected that the Notes will be available for delivery in book-entry form only
through the facilities of DTC in New York, New York on or about November 24,
1997 against payment therefor in immediately available funds.
-------------------------
MORGAN STANLEY DEAN WITTER BANCAMERICA ROBERTSON STEPHENS
November 19, 1997
<PAGE> 2
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICES OF THE NOTES.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR, AND PURCHASE, THE NOTES IN THE OPEN MARKET. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE "UNDERWRITING."
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus Supplement and
Prospectus in connection with the offering made hereby and, if given or made,
such information or representations must not be relied upon as having been
authorized by Enron or by the Underwriters. Neither the delivery of this
Prospectus Supplement and Prospectus 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 hereof. This Prospectus Supplement and
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.
---------------
CAPITALIZATION
The following table sets forth the capitalization of Enron and its
consolidated subsidiaries as of September 30, 1997 and as adjusted to give
effect to the issuance on October 23, 1997 of $100,000,000 aggregate principal
amount of Notes due 2003, the issuance on November 12, 1997 of $200,000,000
aggregate principal amount of Remarketed Reset Notes due 2037, the issuances on
November 18, 1997 of $300,000,000 aggregate principal amount of Notes due 2001
and of $150,000,000 aggregate principal amount of Floating Rate Notes due 1999
and the issuance of the Notes offered hereby and the use of the proceeds
therefrom. See "Use of Proceeds."
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
----------------------
ACTUAL AS ADJUSTED
------- -----------
(IN MILLIONS)
<S> <C> <C>
Short-term debt
Notes payable............................................. $ -- $ --
Current maturities of long-term debt...................... -- --
------- -------
Total short-term debt............................. -- --
------- -------
Long-term debt
Enron:
Amount reclassified from short-term debt............... 2,533 1,538
Notes due 1998-2023 (6.5% to 10%)...................... 1,845 1,845
Exchangeable notes due 1998 (6 1/4%)................... 228 228
Notes due 2003 (6.625%)................................ -- 100
Notes due 2037 (floating rate)......................... -- 200
Notes due 2001 (6.45%)................................. -- 300
Notes due 1999 (floating rate)......................... -- 150
Notes due 2005 (6.625%)................................ -- 250
Subsidiary companies:
Notes due 1998-2023 (4.52% to 9.46%)................... 1,571 1,571
Notes due 1998-2031 (floating rates)................... 370 370
Other.................................................. 50 50
Enron:
Senior subordinated debentures due 2005-2012 (6.75% to
8.25%)................................................ 350 350
Unamortized debt discount and premium..................... (16) (17)
------- -------
Total long-term debt.............................. 6,931 6,935
------- -------
Minority interests.......................................... 767 767
------- -------
Company-obligated preferred securities of subsidiaries...... 993 993
------- -------
Shareholders' equity
Convertible preferred stock............................... 134 134
Common stock.............................................. 3,755 3,755
Retained earnings......................................... 1,750 1,750
Cumulative foreign currency translation adjustment........ (129) (129)
Common stock held in treasury............................. (306) (306)
Other, including Flexible Equity Trust.................... (165) (165)
------- -------
Total shareholders' equity........................ 5,039 5,039
------- -------
Total capitalization.............................. $13,730 $13,734
======= =======
</TABLE>
S-2
<PAGE> 3
USE OF PROCEEDS
The net proceeds from the sale of the Notes offered hereby will be used
principally to repay short-term indebtedness. As of November 19, 1997, the
weighted average interest rate on Enron's outstanding short-term indebtedness
was approximately 5.77%.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
1997 1996 1995 1994 1993 1992
------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges...... (1) 3.00 2.92 2.34 1.98 1.74
</TABLE>
- ---------------
(1) For the nine months ended September 30, 1997, earnings were inadequate to
cover fixed charges by $182 million.
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby (referred to in the Prospectus (the "Prospectus"), which this Prospectus
Supplement accompanies, as the "Offered Debt Securities") supplements, and to
the extent inconsistent therewith replaces, the description of the general terms
and provisions of Debt Securities set forth in the Prospectus, to which
description reference is hereby made.
GENERAL
The Notes will be limited to $250,000,000 aggregate principal amount and
will mature on November 15, 2005. The Notes will be direct, unsecured
obligations of Enron and will rank equally with each other and with all other
unsecured and unsubordinated indebtedness of Enron from time to time. The Notes
will bear interest at the rate per annum shown on the cover page of this
Prospectus Supplement from November 24, 1997 or from the most recent interest
payment date to which interest has been paid or provided for, payable semi-
annually on May 15 and November 15 of each year, commencing on May 15, 1998, to
the person in whose name the Note (or any predecessor Note) is registered at the
close of business on the May 1 or November 1, as the case may be, next preceding
such interest payment date. Interest on the Notes shall be computed on the basis
of a 360-day year consisting of twelve 30-day months. The Notes are not
redeemable prior to maturity and will not be subject to any sinking fund.
With certain exceptions and pursuant to certain requirements set forth in
the Indenture, Enron may discharge its obligations under the Indenture with
respect to the Notes as described under "Description of Debt
Securities - Discharge of Indenture" in the Prospectus. Prospective investors
are urged to consult their own advisors as to the tax consequences of any such
action.
BOOK-ENTRY ONLY SYSTEM
The Notes will be issuable only as registered securities and will be
represented by one certificate (the "Global Security") to be registered in the
name of the nominee of The Depository Trust Company ("DTC") or any successor
depositary (the "Depositary"). The Depositary will maintain the Notes in
denominations of $1,000 and integral multiples thereof through its book-entry
facilities. In accordance with its normal procedures, the Depositary will record
the interests of each Depositary participating firm ("Participant") in the
Notes, whether held for its own account or as a nominee for another person.
So long as the nominee of the Depositary is the registered owner of the
Notes, such nominee will be considered the sole owner or holder of the Notes for
all purposes under the Indenture and any applicable laws. Except as otherwise
provided below, a Beneficial Owner, as hereinafter defined, of interests in the
Notes will not be entitled to have the Notes represented by the Global Security
registered in their names, will not be
S-3
<PAGE> 4
entitled to receive a physical certificate representing such ownership interest
and will not be considered an owner or holder of the Notes under the Indenture.
A Beneficial Owner is the person who has the right to sell, transfer or
otherwise dispose of an interest in the Notes and the right to receive the
proceeds therefrom, as well as interest, principal and premium (if any) payable
in respect thereof. A Beneficial Owner's interest in the Notes will be recorded,
in integral multiples of $1,000, on the records of the Participant that
maintains such Beneficial Owner's account for such purpose. In turn, the
Participant's interest in such Notes will be recorded, in integral multiples of
$1,000, on the records of the Depositary. Therefore, the Beneficial Owner must
rely on the foregoing arrangements to evidence its interest in the Notes.
Beneficial ownership of the Notes may be transferred only by compliance with the
procedures of a Beneficial Owner's Participant (e.g, brokerage firm) and the
Depositary. 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 or pledge beneficial interests in the
Global Security.
DTC has advised Enron that it will take any action permitted to be taken by
a holder of Notes only at the direction of one or more Participants to whose
account the DTC interests in the Global Security is credited and only in respect
of such portion of the aggregate principal amount of Notes as to which such
Participant or Participants has or have given such direction. However, if there
is an Event of Default under the Notes, DTC will exchange the Global Security
for certificated Notes, which it will distribute to its Participants in
accordance with its customary procedures.
The rights of ownership must be exercised through the Depositary and the
book-entry system. Notices that are to be given to registered owners by Enron or
the Trustee will be given only to the Depositary. It is expected that the
Depositary will forward the notices to the Participants by its usual procedures,
so that Participants may forward such notices to the Beneficial Owners. Neither
Enron nor the Trustee will have any responsibility or obligation to assure that
any notices are forwarded by the Depositary to any Participant or by any
Participant to the Beneficial Owners.
DTC has advised Enron and the Underwriters as follows: 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 was
created to hold securities of Participants and to facilitate the clearance and
settlement of securities transactions among Participants in such securities
through electronic book-entry changes in accounts of Participants, thereby
eliminating the need for physical movement of securities certificates.
Participants include securities brokers and dealers (including the
Underwriters), banks, trust companies, clearing corporations and certain other
organizations, some of whom (and/or their representatives) own DTC. Access to
DTC's book-entry system is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly. Persons who are
not Participants may beneficially own securities held by DTC only through
Participants. The rules applicable to DTC and its Participants are on file with
the Securities and Exchange Commission.
Settlement for the Notes will be made in immediately available funds. So
long as the Notes are subject to DTC's book-entry system, the Notes will trade
in DTC's Same-Day Funds Settlement system until maturity, and therefore DTC will
require that secondary trading activity in the Notes be settled in immediately
available funds. No assurance can be given as to the effect, if any, of
settlement in immediately available funds on trading activity in the Notes.
S-4
<PAGE> 5
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
dated the date hereof, Enron has agreed to sell to each of the Underwriters
named below, severally, and each of the Underwriters has severally agreed to
purchase, the principal amount of the Notes set forth opposite its name below.
<TABLE>
<CAPTION>
PRINCIPAL
NAME AMOUNT OF NOTES
---- ---------------
<S> <C>
Morgan Stanley & Co. Incorporated........................... $187,500,000
BancAmerica Robertson Stephens.............................. 62,500,000
------------
Total.................................................. $250,000,000
============
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are obligated to take and pay for all the Notes if any are taken.
The Underwriters initially propose to offer the Notes directly to the
public at the public offering prices set forth on the cover page of this
Prospectus Supplement and to certain securities dealers at such price less a
concession not in excess of .250% of the principal amount of the Notes. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of .175% of the principal amount of the Notes to certain other dealers. After
the initial public offering the price and such concessions may be changed.
The Notes are a new issue of securities with no established trading market.
Enron does not intend to apply for listing of the Notes on a national securities
exchange. Enron has been advised by the Underwriters that the Underwriters
intend to make a market in the Notes, but they are not obligated to do so and
may discontinue market making at any time without notice. No assurance can be
given as to the liquidity of or any trading market for the Notes.
Enron has agreed to indemnify the Underwriters against certain civil
liabilities, including liabilities under the Securities Act of 1933, as amended,
or to contribute to payments the Underwriters may be required to make in respect
thereof.
The Underwriters may engage in over-allotment, stabilizing transactions and
covering transactions in accordance with Regulation M under the Securities Act
of 1934. Over-allotment involves an Underwriter's sales in excess of the
offering size, which creates a short position. Stabilizing transactions permit
bids to purchase the underlying security so long as the stabilizing bids do not
exceed a specified maximum. Underwriter covering transactions involve purchases
of the Notes in the open market after the distribution has been completed in
order to cover a short position. Such stabilizing transactions and covering
transactions may cause the price of the Notes to be higher than it would
otherwise be in the absence of such transactions. If commenced, these
transactions may be discontinued at any time.
The Underwriters have agreed to reimburse Enron for certain expenses
incurred in connection with the offering of the Notes.
In the ordinary course of their respective businesses, the Underwriters or
their affiliates have provided investment banking and/or general financing and
banking services to Enron, its subsidiaries or affiliates in the past, for which
they have received customary compensation and expense reimbursement, and may do
so again in the future.
VALIDITY OF THE NOTES
The validity of the Notes will be passed upon for Enron by James V.
Derrick, Jr., Senior Vice President and General Counsel of Enron. Mr. Derrick
owns substantially less than 1% of the outstanding shares of Common Stock of
Enron. The validity of the Notes will be passed upon for the Underwriters by
Bracewell & Patterson, L.L.P. Bracewell & Patterson, L.L.P. currently provides
services to Enron and certain of its subsidiaries and affiliates as outside
counsel on matters unrelated to the issuance of the Notes.
S-5
<PAGE> 6
PROSPECTUS
[ENRON CORP. LOGO]
DEBT SECURITIES
PREFERRED STOCK
COMMON STOCK
WARRANTS TO PURCHASE COMMON STOCK
------------------------
Enron Corp. ("Enron") may offer from time to time (i) secured or unsecured
debt securities ("Debt Securities") consisting of debentures, notes or other
secured or unsecured evidences of indebtedness in one or more series, and (ii)
shares of Preferred Stock, no par value ("Preferred Stock"), in one or more
series, which may be represented by depositary shares ("Depositary Shares")
evidenced by depositary receipts, or (iii) any combination of the foregoing, at
an aggregate initial public offering price not to exceed $1,000,000,000, at
prices and on terms to be determined at or prior to the time of sale. In
addition, Enron may offer from time to time up to 7.5 million shares of Enron
common stock, no par value ("Common Stock"), at prices and on terms to be
determined at or prior to the time of sale. Enron may offer from time to time
warrants to purchase up to 7.5 million shares of Common Stock ("Stock Warrants")
and Common Stock issuable upon exercise of Stock Warrants, at prices and on
terms to be determined at or prior to the time of sale.
Specific terms of the securities in respect of which this Prospectus is
being delivered ("Offered Securities") will be set forth in an accompanying
Prospectus Supplement ("Prospectus Supplement"), together with the terms of the
offering of the Offered Securities, the initial price thereof and the net
proceeds from the sale thereof. The Prospectus Supplement will set forth with
regard to the particular Offered Securities, without limitation, the following:
(i) in the case of Debt Securities, the specific designation, aggregate
principal amount, authorized denomination, maturity, rate (which may be fixed or
variable) or method of calculation of interest and dates for payment thereof,
and any exchangeability, conversion, redemption, prepayment or sinking fund
provisions and any listing on a securities exchange, and (ii) in the case of
Preferred Stock, the designation, number of shares or fractional interests
therein, liquidation preference per share, initial public offering price,
dividend rate (or method of calculation thereof), dates on which dividends shall
be payable and dates from which dividends shall accrue, any redemption or
sinking fund provisions and any listing on a securities exchange. If shares of
Preferred Stock are to be represented by Depositary Shares, the Prospectus
Supplement will set forth the fraction of a share of such Preferred Stock
represented by one Depositary Share. With regard to Stock Warrants, if any, the
Prospectus Supplement will contain a description of the Common Stock for which
each warrant is exercisable and the offering price, if any, exercise price,
duration, detachability, call provisions, and other principal terms of the
warrants.
Enron may sell the Offered Securities directly, through agents designated
from time to time or through underwriters or dealers. See "Plan of
Distribution." If any underwriters are involved in the sale of the Offered
Securities, the names of such underwriters and any applicable commissions and
discounts will be set forth in the related Prospectus Supplement.
This Prospectus may not be used to consummate sales of Offered Securities
unless accompanied by a Prospectus Supplement.
------------------------
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. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is October 7, 1997.
<PAGE> 7
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR
IN A PROSPECTUS SUPPLEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY ENRON.
NEITHER THIS PROSPECTUS NOR ANY PROSPECTUS SUPPLEMENT CONSTITUTES AN OFFER OF
ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN
OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS
OR ANY PROSPECTUS SUPPLEMENT NOR ANY SALE HEREUNDER OR THEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN
OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THEREOF.
AVAILABLE INFORMATION
Enron is subject to the informational requirements of the Securities
Exchange Act of 1934 (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 can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549; and at the following Regional Offices of the Commission: Midwest
Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511; and Northeast Regional Office, 7 World Trade Center, New
York, New York 10048. Copies of such material can also be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, at prescribed rates or from the site maintained by the
Commission on the Internet World Wide Web at http://www.sec.gov. Enron's Common
Stock is listed on the New York, Midwest and Pacific Stock Exchanges. Reports,
proxy statements and other information concerning Enron can be inspected and
copied at the respective offices of these exchanges at 20 Broad Street, New
York, New York 10005; 120 South LaSalle Street, Chicago, Illinois 60603; and 301
Pine Street, San Francisco, California 94014.
This Prospectus constitutes a part of Registration Statements on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statements") filed with the Commission under the Securities Act of 1933 (the
"Securities Act") with respect to the Offered Securities. This Prospectus does
not contain all of the information set forth in such Registration Statements,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. Reference is made to such Registration Statements and to the
exhibits relating thereto for further information with respect to Enron and the
Offered Securities. Any statements contained herein concerning the provisions of
any document filed as an exhibit to any of the Registration Statements or
otherwise filed with the Commission or incorporated by reference herein are not
necessarily complete, and in each instance reference is made to the copy of such
document so filed for a more complete description of the matter involved. Each
such statement is qualified in its entirety by such reference.
2
<PAGE> 8
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Effective July 1, 1997, Enron Corp., a Delaware corporation ("Old Enron"),
was reincorporated in Oregon by means of a merger with and into Enron Oregon
Corp., an Oregon corporation, which changed its name to Enron Corp. upon
consummation of the merger. Unless the context otherwise requires, as used
herein the term "Enron" refers to Enron Corp., an Oregon corporation, and to Old
Enron, its predecessor Delaware corporation.
The following documents filed by Enron with the Commission pursuant to the
Exchange Act are incorporated herein by reference:
(a) Annual Report on Form 10-K for the fiscal year ended December 31,
1996;
(b) Quarterly Reports on Form 10-Q for the quarters ended March 31,
1997 and June 30, 1997;
(c) Current Reports on Form 8-K dated July 15, 1997, August 29, 1997
and September 17, 1997; and
(d) The description of Enron's capital stock set forth in Enron's
Registration Statement on Form 8-B filed on July 2, 1997.
The following documents filed by Old Enron with the Commission pursuant to
the Exchange Act are incorporated herein by reference:
(a) Annual Report on Form 10-K for the fiscal year ended December 31,
1996;
(b) Current Report on Form 8-K dated March 17, 1997;
(c) Quarterly Report on Form 10-Q for the quarter ended March 31,
1997; and
(d) Current Report on Form 8-K dated June 5, 1997.
Each document filed by Enron 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 Offered Securities pursuant hereto shall be
deemed to be incorporated herein by reference and to be a part hereof from the
date of filing of such document. 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 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 statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
Enron will provide without charge to each person to whom a copy of this
Prospectus is delivered, on the request of any such person, a copy of any or all
of the foregoing documents incorporated herein by reference other than exhibits
to such documents (unless such exhibits are specifically incorporated by
reference into the documents that this Prospectus incorporates). Written or
telephone requests for such copies should be directed to Secretary Division,
Enron Corp., at its principal executive offices, 1400 Smith Street, Houston,
Texas 77002 (telephone: 713-853-6161).
3
<PAGE> 9
BUSINESS OF ENRON
Enron, an Oregon corporation, is an integrated natural gas and electricity
company headquartered in Houston, Texas. Essentially all of Enron's operations
are conducted through its subsidiaries and affiliates which are principally
engaged in the transportation and wholesale marketing of natural gas to markets
throughout the United States and internationally through approximately 36,000
miles of natural gas pipelines; the exploration for and production of natural
gas and crude oil in the United States and internationally; the production,
purchase, transportation and worldwide marketing of natural gas liquids and
refined petroleum products; the independent (i.e., non-utility) development,
promotion, construction and operation of power plants, natural gas liquids
facilities and pipelines in the United States and internationally; and the
non-price regulated purchasing and marketing of electricity and other energy
related commitments.
On July 1, 1997, Enron acquired Portland General Corporation, the parent
company of Portland General Electric Company ("PGE"), by means of a merger of
Portland General Corporation with and into Enron. As a result of the merger, PGE
is a subsidiary of Enron. PGE is an electric utility engaged in the generation,
purchase, transmission, distribution and sale of electricity in the State of
Oregon. PGE also sells energy to wholesale customers throughout the western
United States.
TRANSPORTATION AND OPERATION. Enron's operations include interstate
transmission of natural gas, construction, management and operation of natural
gas and natural gas liquids pipelines, liquids plants, clean fuel plants and
power facilities. Enron and its subsidiaries operate domestic interstate
pipelines extending from Texas to the Canadian border and across the southern
United States from Florida to California. Included in Enron's domestic
interstate natural gas pipeline operations are Northern Natural Gas Company
("Northern"), Transwestern Pipeline Company ("Transwestern"), and Florida Gas
Transmission Company ("Florida Gas") (indirectly 50% owned by Enron), and all
such pipelines are subject to the regulatory jurisdiction of the Federal Energy
Regulatory Commission. Each pipeline serves customers in a specific geographical
area: Northern, the upper Midwest; Transwestern, principally the California
market and pipeline interconnects on the east end of Transwestern's system; and
Florida Gas, the State of Florida. In addition, Enron holds a 13% interest in
Northern Border Partners, L.P., which owns a 70% interest in the Northern Border
Pipeline system. An Enron subsidiary operates the Northern Border Pipeline
system, which transports gas from western Canada to delivery points in the
midwestern United States.
DOMESTIC GAS AND POWER SERVICES. Through its wholly owned subsidiary Enron
Capital & Trade Resources Corp. and its affiliated companies ("ECT"), Enron
purchases natural gas, natural gas liquids, electricity and other energy
products through a variety of contractual arrangements, including both short-
term and long-term contracts, the arrangement of production payment and other
financing transactions, and other contractual arrangements. ECT markets these
energy products to local distribution companies, electric utilities,
cogenerators, and both commercial and industrial end-users. ECT also provides
price risk management services in connection with natural gas, natural gas
liquids and electricity transactions through both physical delivery and
financial arrangements.
ECT offers a broad range of non-price regulated natural gas merchant
services by tailoring a variety of supply and marketing options to its
customers' specific needs. ECT's strategy is to provide predictable pricing,
reliable delivery and low cost capital to its customers. ECT provides these
services through a variety of instruments, including forward contracts, swap
agreements and other contractual commitments.
Enron recently established Enron Energy Services ("EES") to pursue the
significant growth opportunities in anticipation of a fully competitive retail
natural gas and electricity market. As states begin to deregulate their natural
gas and electricity markets, and as these markets continue to converge, EES's
goal is to provide end-users with a broad range of energy choices at more
competitive prices. EES has participated in selected natural gas and electric
retail marketing pilot programs, including a state-wide electricity pilot in New
Hampshire, where individual customers are free to select the power provider of
their choice. EES will continue to participate in such programs.
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<PAGE> 10
INTERNATIONAL OPERATIONS AND DEVELOPMENT. Enron's international activities
principally involve the independent (non-utility) development, acquisition,
financing, promotion and operation of natural gas and power projects in emerging
markets, and the marketing of natural gas liquids and other liquid fuels.
Development projects are focused on power plants, gas processing and terminaling
facilities, and gas pipelines, while marketing activities center on fuels used
by or transported through such facilities. Enron's international activities
include management of direct and indirect ownership interests in and operation
of power plants in England, Germany, Guatemala, the Dominican Republic, the
Philippines and China; pipeline systems in Argentina and Colombia; retail gas
and propane sales in the Caribbean basin; processing of natural gas liquids at
Teesside, England; and marketing of natural gas liquids and other liquid fuels
worldwide. Enron is also involved in power, pipeline and liquefied natural gas
projects in varying stages of development in China, India, Puerto Rico, Italy,
Turkey, Qatar, Vietnam, Israel, Jordan, Bolivia, Brazil, Indonesia, Poland and
elsewhere.
EXPLORATION AND PRODUCTION. Substantially all of Enron's natural gas and
crude oil exploration and production operations are conducted by its subsidiary,
Enron Oil & Gas Company ("EOG"). EOG is engaged in the exploration for, and
development and production of, natural gas and crude oil primarily in major
producing basins in the United States, as well as in Canada, Trinidad, India
and, to a lesser extent, selected other international areas. At December 31,
1996, EOG had estimated net proved natural gas reserves of 3,675 billion cubic
feet, including 1,180 billion cubic feet of proved undeveloped methane reserves
in the Big Piney, Wyoming deep Paleozoic formations, and estimated net proved
crude oil, condensate and natural gas liquids reserves of 55 million barrels,
and at such date, approximately 74% of EOG's reserves (on a natural gas
equivalent basis) was located in the United States, 9% in Canada, 10% in
Trinidad, and 7% in India. Enron currently owns 53% of the outstanding common
stock of EOG.
Enron, an Oregon corporation, has its principal executive offices at 1400
Smith Street, Houston, Texas 77002, and its telephone number is 713-853-6161.
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USE OF PROCEEDS
The net proceeds from the sale of the Offered Securities will be added to
Enron's general funds and are expected to be used to retire existing
indebtedness and for general corporate purposes, except as may be stated in a
Prospectus Supplement.
RATIO OF ENRON'S EARNINGS TO FIXED CHARGES
AND EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, --------------------------------------------------------
1997 1996 1995 1994 1993 1992
---------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges.......... (1) 3.00 2.92 2.34 1.98 1.74
Ratio of Earnings to Fixed Charges and
Preferred Stock Dividends................. (1) 2.58 2.49 2.13 1.88 1.64
</TABLE>
- ---------------
(1) For the six months ended June 30, 1997, earnings were inadequate to cover
fixed charges and combined fixed charges and preferred stock dividends by
$305 million and $371 million, respectively.
The ratios of earnings to fixed charges and preferred stock dividends are
based on continuing operations. "Earnings" represent the aggregate of (a) the
pre-tax income of Enron and its majority owned subsidiaries, (b) Enron's share
of pre-tax income of its 50% owned companies, (c) any income actually received
from less than 50% owned companies, and (d) fixed charges, net of interest
capitalized. "Fixed Charges" represent interest (whether expensed or
capitalized), amortization of debt discount and expense and that portion of
rentals considered to be representative of the interest factor. "Fixed Charges
and Preferred Stock Dividends" represent fixed charges (as described above) and
preferred stock dividend requirements of Enron and its majority owned
subsidiaries.
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<PAGE> 12
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the Debt Securities sets forth
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate (the "Offered Debt Securities"). The particular
terms of the Offered Debt Securities and the extent, if any, to which such
general provisions may apply to the Offered Debt Securities will be described in
the Prospectus Supplement relating to such Offered Debt Securities.
The Offered Debt Securities will be secured or unsecured obligations of
Enron. Any such unsecured obligations will be issued under an Indenture (the
"Indenture") between Enron and Harris Trust and Savings Bank, as Trustee (the
"Trustee"), dated as of November 1, 1985, as supplemented. The following
statements are summaries of certain provisions contained in the Indenture, the
form of which is filed as an exhibit to the Registration Statements of which
this Prospectus is a part. Reference is hereby made to the Indenture for full
and complete statements of such terms and provisions, including the definitions
of certain terms used herein. Wherever reference is made in the following
statements to a particular section of the Indenture, such section shall be
deemed to be incorporated in such statements as a part thereof. If Offered Debt
Securities will be secured obligations of Enron, they will be issued under a
separate indenture, which will be described in the Prospectus Supplement
relating to such Offered Debt Securities.
GENERAL
The Indenture does not limit the aggregate principal amount of unsecured
debentures, notes or other evidences of indebtedness of Enron (the "Indenture
Securities") which may be issued thereunder from time to time in one or more
series by Enron, and Enron may in the future issue additional Indenture
Securities (in addition to the Offered Debt Securities) under the Indenture. At
August 31, 1997, an aggregate of $1,842,000,000 principal amount of Indenture
Securities of Enron was issued and outstanding under the Indenture. Reference is
made to the Prospectus Supplement for the following terms of the Offered Debt
Securities: (i) the title of the Offered Debt Securities; (ii) any limit upon
the aggregate principal amount of the Offered Debt Securities; (iii) the date or
dates on which the principal of the Offered Debt Securities is payable; (iv) the
rate or rates (which may be fixed or variable), or the method by which such rate
or rates shall be determined, at which the Offered Debt Securities shall bear
interest, if any, the date or dates from which such interest shall accrue or the
method by which such date or dates shall be determined, the interest payment
dates on which such interest shall be payable and the regular record date for
the interest payable on any interest payment date; (v) the place or places where
the principal of (and premium, if any) and interest on Offered Debt Securities
shall be payable; (vi) the period or periods within which, the price or prices
at which and the terms and conditions upon which Offered Debt Securities may be
redeemed, in whole or in part, at the option of Enron, if Enron is to have that
option; (vii) the obligation, if any, and the option, if any, of Enron to
redeem, purchase or repay Offered Debt Securities pursuant to any sinking fund
or analogous provisions or at the option of a holder thereof and the period or
periods within which, the price or prices at which and the terms and conditions
upon which Offered Debt Securities shall be redeemed, purchased or repaid in
whole or in part, pursuant to such obligation or option; (viii) any trustees,
paying agents, transfer agents or registrars with respect to Offered Debt
Securities; and (ix) any other terms of the Offered Debt Securities (which terms
shall not be inconsistent with the provisions of the Indenture). (Section 301.)
Enron will maintain in each place specified by it for payment of any series
of Offered Debt Securities an office or agency where Offered Debt Securities of
that series may be presented or surrendered for payment, where Offered Debt
Securities of that series may be surrendered for registration of transfer or
exchange and where notices and demands to or upon Enron in respect of the
Offered Debt Securities of that series and the Indenture may be served.
Unless otherwise indicated in the Prospectus Supplement relating thereto,
the Offered Debt Securities will be issued only in fully registered form,
without coupons, in denominations of $1,000 or integral multiples thereof.
(Section 302.) No service charge will be made for any transfer or exchange of
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<PAGE> 13
such Offered Debt Securities, but Enron may require payment of a sum sufficient
to cover any tax or other governmental charge payable in relation thereto.
(Section 305.)
Debt Securities may be issued under the Indenture as Original Issue
Discount Securities to be offered and sold at a substantial discount below their
principal amount. Material federal income tax, accounting and other
considerations applicable to any such Original Issue Discount Securities will be
described in any Prospectus Supplement relating thereto. "Original Issue
Discount Security" means any security which provides for an amount less than the
principal amount thereof to be due and payable upon a declaration of
acceleration of the maturity thereof as a result of the occurrence of an Event
of Default and the continuation thereof. (Section 101.)
LIMITATIONS ON MORTGAGES AND LIENS
The Indenture provides that so long as any of the Indenture Securities
issued under the Indenture (including the Offered Debt Securities) are
outstanding, Enron will not, and will not permit any Subsidiary (as defined in
the Indenture and herein) to, pledge, mortgage or hypothecate, or permit to
exist, except in favor of Enron or any Subsidiary, any mortgage, pledge or other
lien upon, any Principal Property (as defined in the Indenture and herein) at
any time owned by it, to secure any indebtedness (as defined in the Indenture),
unless effective provision is made whereby outstanding Indenture Securities
(including the Offered Debt Securities) will be equally and ratably secured with
any and all such indebtedness and with any other indebtedness similarly entitled
to be equally and ratably secured. This restriction does not apply to prevent
the creation or existence of: (a) mortgages, pledges, liens or encumbrances on
any property held or used by Enron or a Subsidiary in connection with the
exploration for, development of or production of, oil, gas, natural gas
(including liquified gas and storage gas), other hydrocarbons, helium, coal,
metals, minerals, steam, timber, geothermal or other natural resources or
synthetic fuels, such properties to include, but not be limited to, Enron's or a
Subsidiary's interest in any mineral fee interests, oil, gas or other mineral
leases, royalty, overriding royalty or net profits interests, production
payments and other similar interests, wellhead production equipment, tanks,
field gathering lines, leasehold or field separation and processing facilities,
compression facilities and other similar personal property and fixtures; (b)
mortgages, pledges, liens or encumbrances on oil, gas, natural gas (including
liquified gas and storage gas), other hydrocarbons, helium, coal, metals,
minerals, steam, timber, geothermal or other natural resources or synthetic
fuels produced or recovered from any property, an interest in which is owned or
leased by Enron or a Subsidiary; (c) mortgages, pledges, liens or encumbrances
(or certain extensions, renewals or refundings thereof) upon any property
acquired before or after the date of the Indenture, created at the time of
acquisition or within one year thereafter to secure all or a portion of the
purchase price thereof, or existing thereon at the date of acquisition, whether
or not assumed by Enron or a Subsidiary, provided that every such mortgage,
pledge, lien or encumbrance applies only to the property so acquired and fixed
improvements thereon; (d) mortgages, pledges, liens or encumbrances upon any
property acquired before or after the date of the Indenture by any corporation
that is or becomes a Subsidiary after the date of the Indenture ("Acquired
Entity"), provided that every such mortgage, pledge, lien or encumbrance (1)
shall either (i) exist prior to the time the Acquired Entity becomes a
Subsidiary or (ii) be created at the time the Acquired Entity becomes a
Subsidiary or within one year thereafter to secure all or a portion of the
acquisition price thereof and (2) shall only apply to those properties owned by
the Acquired Entity at the time it becomes a Subsidiary or thereafter acquired
by it from sources other than Enron or any other Subsidiary; (e) pledges of
current assets, in the ordinary course of business, to secure current
liabilities; (f) deposits to secure public or statutory obligations; (g) liens
to secure indebtedness other than Funded Debt (as defined in the Indenture and
herein); (h) mortgages, pledges, liens or encumbrances upon any office, data
processing or transportation equipment; (i) mortgages, pledges, liens or
encumbrances created or assumed by Enron or a Subsidiary in connection with the
issuance of debt securities the interest on which is excludable from gross
income of the holder of such security pursuant to the Internal Revenue Code of
1986, as amended, for the purpose of financing the acquisition or construction
of property to be used by Enron or a Subsidiary; (j) pledges or assignments of
accounts receivable or conditional sales contracts or chattel mortgages and
evidences of indebtedness secured thereby, received in connection with the sale
by Enron or a
8
<PAGE> 14
Subsidiary of goods or merchandise to customers; or (k) certain other liens or
encumbrances. (Section 1007.)
Notwithstanding the foregoing, Enron or a Subsidiary may issue, assume or
guarantee indebtedness secured by a mortgage which would otherwise be subject to
the foregoing restrictions in an aggregate amount which, together with all other
indebtedness of Enron or a Subsidiary secured by a mortgage which (if originally
issued, assumed or guaranteed at such time) would otherwise be subject to the
foregoing restrictions (not including secured indebtedness permitted under the
foregoing exceptions), does not at the time exceed 10% of the Consolidated Net
Tangible Assets (total assets less (a) total current liabilities, excluding
indebtedness due within 12 months, and (b) goodwill, patents and trademarks) of
Enron, as shown on the audited consolidated financial statements of Enron as of
the end of the fiscal year preceding the date of determination. (Section 1007.)
The holders of at least 50% in principal amount of the outstanding
Indenture Securities under the Indenture (including the Offered Debt Securities)
may waive compliance by Enron with the covenant contained in Section 1007 of the
Indenture (and certain other covenants of Enron). (Section 1009.)
The Indenture defines the term "Subsidiary" to mean a corporation all of
the voting shares (that is, shares entitled to vote for the election of
directors, but excluding shares entitled so to vote only upon the happening of
some contingency unless such contingency shall have occurred) of which shall be
owned by Enron or by one or more Subsidiaries or by Enron and one or more
Subsidiaries. The term "Principal Property" is defined to mean any oil or gas
pipeline, gas processing plant or chemical plant located in the United States,
except any such property, pipeline or plant that in the opinion of the Board of
Directors of Enron is not of material importance to the total business conducted
by Enron and its Subsidiaries. "Principal Property" does not include any oil or
gas property or the production or any proceeds of production from an oil or gas
producing property or the production or any proceeds of production of gas
processing plants or oil or gas or petroleum products in any pipeline. (Section
101.)
The term "indebtedness", as applied to Enron or any Subsidiary, is defined
to mean bonds, debentures, notes and other instruments representing obligations
created or assumed by any such corporation for the repayment of money borrowed
(other than unamortized debt discount or premium). All indebtedness secured by a
lien upon property owned by Enron or any Subsidiary and upon which indebtedness
any such corporation customarily pays interest, even though such corporation has
not assumed or become liable for the payment of such indebtedness, is also
deemed to be indebtedness of any such corporation. All indebtedness for money
borrowed incurred by other persons which is directly guaranteed as to payment of
principal by Enron or any Subsidiary is for all purposes of the Indenture deemed
to be indebtedness of any such corporation, but no other contingent obligation
of any such corporation in respect of indebtedness incurred by other persons is
for any purpose deemed indebtedness of such corporation. Indebtedness of Enron
or any Subsidiary does not include (i) amounts which are payable only out of all
or a portion of the oil, gas, natural gas, helium, coal, metals, minerals,
steam, timber or other natural resources produced, derived or extracted from
properties owned or developed by such corporation; (ii) any amount representing
capitalized lease obligations; (iii) any indebtedness incurred to finance oil,
gas, natural gas, helium, coal, metals, minerals, steam, timber, hydrocarbons or
geothermal or other natural resources or synthetic fuel exploration or
development, payable, with respect to principal and interest, solely out of the
proceeds of oil, gas, natural gas, helium, coal, metals, minerals, steam,
timber, hydrocarbons or geothermal or other natural resources or synthetic fuel
to be produced, sold and/or delivered by Enron or any Subsidiary; (iv) indirect
guarantees or other contingent obligations in connection with the indebtedness
of others, including agreements, contingent or otherwise, with such other
persons or with third persons with respect to, or to permit or ensure the
payment of, obligations of such other persons, including, without limitation,
agreements to purchase or repurchase obligations of such other persons,
agreements to advance or supply funds to or to invest in such other persons or
agreements to pay for property, products or services of such other persons
(whether or not conferred, delivered or rendered) and any demand charge,
throughput, take-or-pay, keep-well, make-whole, cash deficiency, maintenance of
working capital or earnings or similar agreements; and (v) any guarantees with
respect to lease or other similar periodic payments to be made by other persons.
(Section 101.)
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<PAGE> 15
The term "Funded Debt" as applied to any corporation means all indebtedness
incurred, created, assumed or guaranteed by such corporation, or upon which it
customarily pays interest charges, which matures, or is renewable by such
corporation to a date, more than one year after the date as of which Funded Debt
is being determined; provided, however, that the term "Funded Debt" shall not
include (i) indebtedness incurred in the ordinary course of business
representing borrowings, regardless of when payable, of such corporation from
time to time against, but not in excess of the face amount of, its installment
accounts receivable for the sale of appliances and equipment sold in the regular
course of business or (ii) advances for construction and security deposits
received by such corporation in the ordinary course of business. (Section 101.)
The foregoing limitations on mortgages, pledges and liens are intended to
limit other creditors of Enron from obtaining preference or priority over
holders of the Indenture Securities issued under the Indenture, but are not
intended to prevent other creditors from sharing equally and ratably and without
preference ("pari passu") over the holders of such Indenture Securities. While
such limitations on mortgages and liens do provide protection to the holders of
the Indenture Securities, there are a number of exceptions to such restrictions
which could result in certain assets of Enron and its Subsidiaries being
encumbered without equally and ratably securing the Indenture Securities issued
under the Indenture. Specifically, the restrictions apply only to pledges,
mortgages or liens upon "Principal Property" (as defined in the Indenture and
herein) to secure any "indebtedness" (as defined in the Indenture and herein),
unless effective provision is made whereby outstanding Securities will be
equally and ratably secured with any such indebtedness and with any other
indebtedness similarly entitled to be equally and ratably secured. There are
certain exceptions to the definition of "indebtedness," which are enumerated in
the Indenture and herein. In addition, the restrictions do not apply to prevent
the creation or existence of mortgages, pledges, liens or encumbrances on
certain types of properties or pursuant to certain types of transactions, all as
enumerated in the Indenture and above. Also, up to 10% of Consolidated Net
Tangible Assets (as defined in the Indenture and herein) is not subject to the
mortgage and lien limitations contained in the Indenture.
Unless otherwise indicated in a Prospectus Supplement, the covenants
contained in the Indenture and the Indenture Securities would not necessarily
afford holders of the Indenture Securities protection in the event of a highly
leveraged or other transaction involving Enron that may adversely affect
holders.
MODIFICATION OF THE INDENTURE
With certain exceptions, the Indenture provides that, with the consent of
the holders of not less than 50% in principal amount of all outstanding
Indenture Securities (including, where applicable, the Offered Debt Securities)
affected thereby, Enron and the Trustee may enter into a supplemental indenture
for the purpose of adding to, changing or eliminating any of the provisions of
the Indenture or of modifying in any manner the rights of the holders of
Indenture Securities under the Indenture. Notwithstanding the foregoing, the
consent of the holder of each outstanding Indenture Security affected thereby
will be required to: (a) change the Stated Maturity (as defined in the
Indenture) of the principal of, or any installment of principal of or interest
on, any Indenture Security, or reduce the principal amount thereof or the rate
of interest thereon or any premium payable upon the redemption thereof, or
change any Place of Payment (as defined in the Indenture) where, or change the
coin or currency in which, any Indenture Security or any premium or the interest
thereon is payable, or impair the right to institute suit for the enforcement of
any such payment on or after the Stated Maturity thereof (or, in the case of
redemption, on or after the Redemption Date, as defined in the Indenture); (b)
reduce the percentage in principal amount of the outstanding Indenture
Securities of any series, the consent of whose holders is required for any
supplemental indenture or for any waiver provided for in the Indenture; or (c)
with certain exceptions, modify any of the provisions of the sections of the
Indenture which concern waivers of past defaults, waivers of certain covenants
or consent to supplemental indentures, except to increase the percentage of
principal amount of Indenture Securities of any series, the holders of which are
required to effect such waiver or consent, or to provide that certain other
provisions of the Indenture cannot be modified or waived without the consent of
the holder of each outstanding Indenture Security affected
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<PAGE> 16
thereby. The Indenture provides that a supplemental indenture which changes or
eliminates any covenant or other provision of the Indenture which has expressly
been included solely for the benefit of one or more particular series of
Indenture Securities, or which modifies the rights of the holders of Indenture
Securities of such series with respect to such covenant or other provision,
shall be deemed not to affect the rights under the Indenture of the holders of
Indenture Securities of any other series. (Section 902.)
EVENTS OF DEFAULT AND RIGHTS UPON DEFAULT
Under the Indenture, the term "Event of Default" with respect to any series
of Indenture Securities, means any one of the following events which shall have
occurred and is continuing: (a) default in the payment of any interest upon any
Indenture Security of that series when it becomes due and payable or default in
the payment of any mandatory sinking fund payment provided for by the terms of
any series of Indenture Securities, and continuance of such default for a period
of 30 days; (b) default in the payment of the principal of (or premium, if any,
on) any Indenture Security of that series at its maturity; (c) default in the
performance, or breach, of any covenant or warranty of Enron in the Indenture
(other than a covenant or warranty a default in the performance of which or the
breach of which is otherwise specifically dealt with in the Indenture or which
has been expressly included in the Indenture solely for the benefit of one or
more series of Indenture Securities other than that series), and continuance of
such default or breach for 60 days after there has been given to Enron by the
Trustee, or to Enron and the Trustee by the holders of at least 25% in principal
amount of all outstanding Indenture Securities, a written notice specifying such
default or breach and requiring it to be remedied and stating that such notice
is a "Notice of Default" under the Indenture; or (d) certain events involving
Enron in bankruptcy, receivership or other insolvency proceedings or an
assignment for the benefit of creditors. (Section 501.)
If an Event of Default described in clause (a) or (b) in the foregoing
paragraph has occurred and is continuing with respect to Indenture Securities of
any series, the Indenture provides that the Trustee or the holders of not less
than 25% in principal amount of the outstanding Indenture Securities of that
series may declare the principal amount of all of the Indenture Securities of
that series to be due and payable immediately, and upon any such declaration
such principal amount shall become immediately due and payable. If an Event of
Default described in clause (c) or (d) of the foregoing paragraph occurs and is
continuing, the Trustee or the holders of not less than 25% in principal amount
of all of the Indenture Securities then outstanding may declare the principal
amount of all of the Indenture Securities to be due and payable immediately, and
upon any such declaration such principal amount shall become immediately due and
payable. (Section 502.)
A default under other indebtedness of Enron is not an Event of Default
under the Indenture, and an Event of Default under one series of Indenture
Securities will not necessarily be an Event of Default under another series.
At any time after such a declaration of acceleration with respect to
Indenture Securities of any series (or of all series, as the case may be) has
been made and before judgment or decree for payment of the money due has been
obtained by the Trustee, the holders of a majority in principal amount of the
outstanding Indenture Securities of that series (or of all series, as the case
may be) may rescind and annul such declaration and its consequences, if, subject
to certain conditions, all Events of Default with respect to Indenture
Securities of that series (or of all series, as the case may be), other than the
non-payment of the principal of the Indenture Securities due solely by such
declaration of acceleration, have been cured or waived and all payments due
(other than by acceleration) have been paid or deposited with the Trustee.
(Section 502.) With certain exceptions, the holders of not less than a majority
in principal amount of the outstanding Indenture Securities of any series, on
behalf of the holders of all the Indenture Securities of such series, may waive
any past default described in clause (a) or (b) of the first paragraph of this
heading "Events of Default and Rights Upon Default" (or, in the case of a
default described in clause (c) or (d) of such paragraph, the holders of a
majority in principal amount of all outstanding Indenture Securities may waive
any such past default), and its consequences, except a default (a) in the
payment of the principal of (or premium, if any) or interest on any Indenture
Security, or (b) in respect of a covenant or provision of the Indenture which
under the Indenture cannot be
11
<PAGE> 17
modified or amended without the consent of the holder of each outstanding
Indenture Security of such series affected. (Section 513.)
The holders of not less than a majority in principal amount of the
Indenture Securities of any series at the time outstanding are empowered under
the terms of the Indenture, subject to certain limitations, to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on the Trustee. (Section
512.)
The Indenture further provides that no holder of an Indenture Security of
any series may enforce the Indenture except in the case of failure by the
Trustee to act for 60 days after notice of a continuing Event of Default with
respect to the Indenture Securities of that series and after request by the
holders of not less than 25% in principal amount of the outstanding Indenture
Securities of such series and the offer to the Trustee of reasonable indemnity,
but this provision will not prevent a holder of any Indenture Security from
enforcing the payment of the principal of, and interest on, such holder's
Indenture Security. (Sections 507 and 508.)
The Indenture requires that Enron deliver to the Trustee, within 120 days
after the end of each fiscal year, an Officer's Certificate, stating whether to
the best knowledge of the signers thereof Enron is in default in the performance
and observance of certain of the terms of the Indenture and, if so, specifying
each such default and the nature and status thereof of which the signers may
have knowledge. (Section 1008.)
DISCHARGE OF INDENTURE
With certain exceptions, Enron may discharge its obligations under the
Indenture with respect to any series of Indenture Securities by (i) paying or
causing to be paid the principal of (and premium, if any) and interest on all
the Indenture Securities of such series outstanding, as and when the same shall
become due and payable; (ii) delivering to the Trustee all outstanding Indenture
Securities of such series for cancellation; or (iii) entering into an agreement
in form and substance satisfactory to Enron and the Trustee providing for the
creation of an escrow fund and depositing in trust with the Trustee, as escrow
agent of such fund, sufficient funds in cash and/or Eligible Obligations and/or
U.S. Government Obligations, maturing as to principal and interest in such
amounts and at such times as will be sufficient to pay at the Stated Maturity or
Redemption Date all such Indenture Securities of such series not previously
delivered to the Trustee for cancellation, including principal (and premium, if
any) and interest to the Stated Maturity or Redemption Date. (Section 401.)
The Indenture defines "Eligible Obligations" to mean interest bearing
obligations as a result of the deposit of which the Indenture Securities are
rated in the highest generic long-term debt rating category assigned to legally
defeased debt by one or more nationally recognized rating agencies. (Section
101.)
For federal income tax purposes, there is a substantial risk that a legal
defeasance of a series of Indenture Securities by the deposit of cash, Eligible
Obligations or U.S. Government Obligations in a trust would be characterized by
the Internal Revenue Service or a court as a taxable exchange by the holders of
the Indenture Securities of that series for either (i) an issue of obligations
of the defeasance trust or (ii) a direct interest in the cash and/or Eligible
Obligations and/or U.S. Government Obligations held in the defeasance trust. If
the defeasance were so characterized, then a holder of an Indenture Security of
the series defeased would be: (i) required to recognize gain or loss (which
would be capital gain or loss if the Indenture Securities were held as a capital
asset) at the time of the defeasance as if the Indenture Security had been sold
at such time for an amount equal to the amount of cash and the fair market value
of the Eligible Obligations and/or U.S. Government Obligations held in the
defeasance trust; (ii) required to include in income in each taxable year the
interest and any original issue discount or gain or loss attributable to either
such defeasance trust obligations or such securities, as the case may be; and
(iii) subject to the market discount provisions of the Internal Revenue Code as
they may pertain to such defeasance trust obligations or such securities. As a
result, a holder of an Indenture Security may be required to pay taxes on any
such gain or income even though such holder may not have received any cash
therefrom. Prospective investors are urged to consult their own advisors as to
the tax consequences
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of an actual or legal defeasance, including the applicability and effect of tax
laws other than federal income tax law.
CONCERNING THE TRUSTEE
Harris Trust and Savings Bank is the Trustee under the Indenture. Such bank
also acts as a depository of funds for, makes loans to, and performs other
services for, Enron in the normal course of business, including acting as
trustee under other indentures of Enron. The corporate trust office of the
Trustee is located at 311 West Monroe, Chicago, Illinois, 60690.
The Trustee may resign from its duties with respect to the Indenture at any
time or may be removed by Enron. If the Trustee resigns, is removed or becomes
incapable of acting as Trustee or a vacancy occurs in the office of the Trustee
for any reason, a successor Trustee shall be appointed in accordance with the
provisions of the Indenture. (Article Six.)
The Indenture contains the provisions required by the Trust Indenture Act
of 1939 with reference to the disqualification of the Trustee if it shall have
or acquire any "conflicting interest", as therein defined. (Section 608.) The
Indenture also contains certain limitations on the right of the Trustee, as a
creditor of Enron, to obtain payment of claims in certain cases, or to realize
on certain property received by it in respect of any such claims, as security or
otherwise. (Section 613.)
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DESCRIPTION OF ENRON CORP. CAPITAL STOCK
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
At August 31, 1997, the authorized capital stock of Enron was 616,500,000
shares, consisting of:
(a) 16,500,000 shares of Preferred Stock, no par value, of which:
(i) 1,338,168 shares of Cumulative Second Preferred Convertible Stock
were outstanding, and (ii) 35.568509 shares of 9.142% Perpetual Second
Preferred Stock were issued and held by an Enron subsidiary; and
(b) 600,000,000 shares of Common Stock, no par value (the "Common
Stock"), of which 298,533,747 shares were outstanding.
The following descriptions of certain of the provisions of the Amended and
Restated Articles of Incorporation of Enron (the "Enron Charter") and the Bylaws
of Enron ("Enron Bylaws") are summaries and do not purport to be complete, and
are qualified in their entirety by reference to the Enron Charter and the Enron
Bylaws filed as exhibits to this Registration Statement.
COMMON STOCK
Enron is authorized to issue up to 600,000,000 shares of Enron Common
Stock. The holders of Enron Common Stock are entitled to one vote for each share
on all matters submitted to a vote of shareholders and do not have cumulative
voting rights in the election of directors. The holders of Enron Common Stock
are entitled to receive ratably such dividends, if any, as may be declared by
the Board of Directors of Enron out of legally available funds subject to the
rights of any preferred stock. In the event of liquidation, dissolution or
winding up of Enron, the holders of Enron Common Stock are entitled to share
ratably in all assets of Enron remaining after provision for payment of
liabilities and satisfaction of the liquidation preference of any shares of
Enron Preferred Stock that may be outstanding. The holders of Enron Common Stock
have no preemptive, subscription, redemption or conversion rights. The rights,
preferences and privileges of holders of Enron Common Stock are subject to those
of holders of Enron Preferred Stock, including any series of Enron Preferred
Stock issued in the future.
PREFERRED STOCK
The following is a general description of the terms of the Preferred Stock
of Enron. The particular terms of any series of Preferred Stock offered hereby
("Offered Preferred Stock") will be set forth in the Prospectus Supplement
relating thereto. The rights, preferences, privileges and restrictions,
including dividend rights, voting rights, terms of redemption and liquidation
preferences, of the Offered Preferred Stock of each series will be fixed or
designated pursuant to a certificate of designations adopted by the Board of
Directors or a duly authorized committee thereof. The description of Preferred
Stock set forth below and the description of the terms of a particular series of
Offered Preferred Stock that will be set forth in a Prospectus Supplement do not
purport to be complete and are qualified in their entirety by reference to the
certificate of designations relating to such series.
The Offered Preferred Stock shall rank in preference to the Common Stock as
to payment of dividends and as to distribution of assets of Enron upon the
liquidation, dissolution or winding up of Enron. Upon issuance against full
payment of the purchase price therefor, shares of Offered Preferred Stock will
be fully paid and nonassessable.
Enron is authorized to issue up to 16,500,000 shares of Preferred Stock. An
aggregate of 1,370,000 shares of Enron Preferred Stock are designated the
Cumulative Second Preferred Convertible Stock ("Enron Convertible Preferred
Stock"), and an aggregate of 35.568509 shares of Enron Preferred Stock are
designated the 9.142% Perpetual Second Preferred Stock ("Enron 9.142% Preferred
Stock").
In addition to the Enron Convertible Preferred Stock and the Enron 9.142%
Preferred Stock, the Enron Board of Directors has authority, without shareholder
approval (except to the extent that holders of
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any series of Enron Preferred Stock are entitled by their terms to class voting
rights), to issue shares of Enron Preferred Stock in one or more series and to
determine the number of shares, designations, dividend rights, conversion
rights, voting power, redemption rights, liquidation preferences and other terms
of any such series. The issuance of Enron Preferred Stock, while providing
desired flexibility in connection with possible acquisitions and other corporate
purposes, could adversely affect the voting power of holders of Enron Common
Stock and the likelihood that such holders will receive dividend payments and
payments upon liquidation and could have the effect of delaying, deferring or
preventing a change in control of Enron.
ENRON CONVERTIBLE PREFERRED STOCK
The following summary of the terms of the Enron Convertible Preferred Stock
is qualified in its entirety by reference to the form of series designation for
the Enron Convertible Preferred Stock filed as an exhibit to this registration
statement.
The annual rate of dividends payable on shares of the Enron Convertible
Preferred Stock is the greater of $10.50 per share or the dividend amount
payable on the number of shares of Enron Common Stock into which one share of
Enron Convertible Preferred Stock are convertible (currently 13.652 shares,
subject to adjustment). Such dividends are payable quarterly on the first days
of January, April, July and October. These dividend rights are superior to the
dividend rights of the Enron Common Stock and rank equally with the dividend
rights on the Enron 9.142% Preferred Stock.
The amount payable on shares of the Enron Convertible Preferred Stock in
the event of any involuntary or voluntary liquidation, dissolution or winding up
of the affairs of Enron is $100 per share, together with accrued dividends to
the date of distribution or payment. The liquidation rights of the Enron
Convertible Preferred Stock are superior to the Enron Common Stock and rank
equally with the liquidation rights of the Enron 9.142% Preferred Stock. The
Enron Convertible Preferred Stock is redeemable at the option of Enron at any
time, in whole or in part, at a redemption price of $100 per share, together
with accrued dividends to the date of distribution or payment. Each share of
Enron Convertible Preferred Stock is convertible initially into 13.652 shares of
Enron Common Stock at any time at the option of the holder (which conversion
rate is and will be subject to certain adjustments).
Holders of Enron Convertible Preferred Stock are entitled to vote together
with the Enron Common Stock on all matters submitted to a vote of Enron
shareholders, with each share of Enron Convertible Preferred Stock having a
number of votes equal to the number of shares of Enron Common Stock into which
one share of Enron Convertible Preferred Stock is convertible. In addition,
holders of Enron Convertible Preferred Stock are entitled to certain class
voting rights, including (unless provision is made for redemption of such
shares) (a) the requirement for approval by the holders of at least two-thirds
of the Enron Convertible Preferred Stock (voting together with all other shares
of parity stock similarly affected) to effect (i) an amendment to the Enron
Charter or Bylaws that would affect adversely the voting powers, rights or
preferences of the holders of the Enron Convertible Preferred Stock or reduces
the time for any notice to which the holders of the Enron Convertible Preferred
Stock may be entitled, (ii) the authorization, creation or issuance of, or the
increase in the authorized amount of, any stock of any class or series or any
security convertible into stock of any class or series ranking prior to the
Enron Convertible Preferred Stock, (iii) the voluntary dissolution, liquidation
or winding up of the affairs of Enron, or the sale, lease or conveyance by Enron
of all or substantially all of its property or assets, or (iv) the purchase or
redemption (for sinking fund purposes or otherwise) of less than all of the
Enron Convertible Preferred Stock and other parity stock at the time outstanding
unless the full dividends on all shares of Enron Convertible Preferred Stock
then outstanding shall have been paid or declared and a sum sufficient for
payment thereof set apart, and (b) the requirement for approval by the holders
of at least a majority of the Enron Convertible Preferred Stock (voting together
with all other shares of parity stock similarly affected), to effect (i) the
authorization, creation or issuance of, or the increase in the authorized amount
of, any stock of any class or series or any security convertible into stock of
any class or series, ranking on a parity with the Enron Convertible Preferred
Stock, provided that no such consent shall be required for the authorization,
creation or issuance by Enron of a number of shares of one or more
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series of Preferred Stock ranking on parity with the Enron Convertible Preferred
Stock that, together with number of shares of Enron Convertible Preferred Stock
and other Preferred Stock ranking on parity with the Enron Convertible Preferred
Stock then outstanding, would equal 5,000,000, or (ii) the merger or
consolidation of Enron with or into any other corporation, unless the
corporation resulting from such merger or consolidation will have after such
merger or consolidation no class of stock and no other securities either
authorized or outstanding ranking prior to or on a parity with the Enron
Convertible Preferred Stock, except the same number of shares of stock and the
same amount of other securities with the same rights and preferences as the
stock and securities of Enron respectively authorized and outstanding
immediately preceding such merger or consolidation, and each holder of Enron
Convertible Preferred Stock immediately preceding such merger or consolidation
shall receive the same number of shares, with the same rights and preferences,
of the resulting corporation. In addition, if dividend payments on the Enron
Convertible Preferred Stock are in default in an amount equivalent to six
quarterly dividends on such shares, then the holders of the Enron Convertible
Preferred Stock (together with holders of any parity stock similarly affected)
shall have certain voting rights to elect two directors to Enron's Board of
Directors until such dividends have been paid or funds sufficient therefor
deposited in trust.
9.142% PREFERRED STOCK
The following summary of the terms of the Enron 9.142% Preferred Stock is
qualified in its entirety by reference to the form of series designation for the
Enron 9.142% Preferred Stock included as an exhibit to this registration
statement.
The annual rate of dividends payable on shares of the Enron 9.142%
Preferred Stock is $91,420 per share. Such dividends are payable quarterly on
the first days of January, April, July and October. These dividend rights are
superior to the dividend rights of the Enron Common Stock and rank equally with
the dividend rights on the Enron Convertible Preferred Stock.
The amount payable on shares of the Enron 9.142% Preferred Stock in the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of Enron is $1,000,000 per share, together with accrued dividends.
The liquidation rights of the Enron 9.142% Preferred Stock are superior to the
Enron Common Stock and rank equally with the liquidation rights of the Enron
Convertible Preferred Stock.
The Enron 9.142% Preferred Stock is not redeemable at the option of Enron.
Pursuant to an agreement between Enron and its subsidiary, however, such
subsidiary will have the rights, exercisable at any time, in whole or in part,
for a 180-day period commencing January 31, 2004, to cause Enron to redeem 18
shares for $1,000,000 per share, together with accrued dividends.
The holders of Enron 9.142% Preferred Stock generally have no voting rights
but are entitled to certain class voting rights, including (unless provision is
made for redemption of such shares) (a) the requirement for approval by the
holders of at least two-thirds of the Enron 9.142% Preferred Stock (voting
together with the holders of all other shares of parity stock similarly
affected), to effect (i) an amendment to the Enron Charter or Bylaws that would
affect adversely the voting powers, rights or preferences of the holders of the
Enron 9.142% Preferred Stock or would reduce the time for any notice to which
the holders of the Enron 9.142% Preferred Stock may be entitled, (ii) the
authorization, creation or issuance of, or the increase in the authorized amount
of, any stock of any class or series or any security convertible into stock of
any class or series ranking prior to the Enron 9.142% Preferred Stock, (iii) the
voluntary dissolution, liquidation or winding up of the affairs of Enron, or the
sale, lease or conveyance by Enron of all or substantially all of its property
or assets, or (iv) the purchase or redemption (for sinking fund purposes or
otherwise) of less than all of the Enron 9.142% Preferred Stock and other parity
stock at the time outstanding unless the full dividends on all shares of Enron
9.142% Preferred Stock then outstanding shall have been paid or declared and a
sum sufficient for payment thereof set apart, and (b) the requirement for
approval by the holders of at least a majority of the Enron 9.142% Preferred
Stock (voting together with all other shares of parity stock similarly
affected), to effect (i) the
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authorization, creation or issuance of, or the increase in the authorized amount
of, any stock of any class or series or any security convertible into stock of
any class or series, ranking on a parity with the Enron 9.142% Preferred Stock,
provided that no such consent shall be required for the authorization, creation
or issuance by Enron of a number of shares of one or more series of Preferred
Stock ranking on parity with the Enron 9.142% Preferred Stock that, together
with number of shares of Enron 9.142% Preferred Stock and other Preferred Stock
ranking on parity with the Enron 9.142% Preferred Stock then outstanding, would
equal 5,000,000, or (ii) the merger or consolidation of Enron with or into any
other corporation, unless the corporation resulting from such merger or
consolidation will have after such merger or consolidation no class of stock and
no other securities either authorized or outstanding ranking prior to or on a
parity with the Enron 9.142% Preferred Stock, except the same number of shares
of stock and the same amount of other securities with the same rights and
preferences as the stock and securities of Enron respectively authorized and
outstanding immediately preceding such merger or consolidation, and each holder
of Enron 9.142% Preferred Stock immediately preceding such merger or
consolidation shall receive the same number of shares, with the same rights and
preferences, of the resulting corporation. In addition, if dividend payments on
the Enron 9.142% Preferred Stock are in default in an amount equivalent to six
quarterly dividends on such shares, then the holders of the Enron 9.142%
Preferred Stock (together with holders of any other parity stock similarly
affected) shall have certain voting rights to elect two directors to Enron's
Board of Directors until such dividends have been paid or funds sufficient
therefor deposited in trust.
CERTAIN PROVISIONS OF THE ENRON CHARTER AND BYLAWS
Fair Price Provision. The Enron Charter contains a "fair price" provision
which generally requires that certain mergers, business combinations and similar
transactions with a "Related Person" (generally the beneficial owner of at least
10 percent of Enron's voting stock) be approved by the holders of at least 80
percent of Enron's voting stock, unless (a) the transaction is approved by at
least 80 percent of the "Continuing Directors" of Enron, who constitute a
majority of the entire board, (b) the transaction occurs more than five years
after the last acquisition of Enron voting stock by the Related Person or (c)
certain "fair price" and procedural requirements are satisfied.
The Enron Charter defines "Business Transaction" as (a) any merger or
consolidation involving Enron or a subsidiary of Enron, (b) any sale, lease,
exchange, transfer or other disposition (in one transaction or a series of
transactions), including without limitation a mortgage or any other security
device, of all or any substantial part of the assets either of Enron or of a
subsidiary of Enron, (c) any sale, lease, exchange, transfer or other
disposition of all or any substantial part of the assets of an entity to Enron
or a subsidiary of Enron, (d) the issuance, sale, exchange, transfer or other
disposition by Enron or a subsidiary of Enron of any securities of Enron or any
subsidiary of Enron, (e) any recapitalization or reclassification of Enron's
securities (including without limitation, any reverse stock split) or other
transaction that would have the effect of increasing the voting power of a
Related Person, (f) any liquidation, spinoff, splitoff, splitup or dissolution
of Enron, and (g) any agreement, contract or other arrangement providing for any
of the transactions described in this definition of Business Transaction.
"Continuing Director" is defined to mean a director who either was a member of
the Board of Directors of Enron prior to the time such Related Person became a
Related Person or who subsequently became a director of Enron and whose
election, or nomination for election by Enron's shareholders, was approved by a
vote of at least 80 percent of the Continuing Directors then on the Board,
either by a specific vote or by approval of the proxy statement issued by Enron
on behalf of the Board of Directors in which such person is named as nominee for
director, without an objection to such nomination; provided, however, that in no
event shall a director be considered a "Continuing Director" if such director is
a Related Person and the Business Transaction to be voted upon is with such
Related Person or is one in which such Related Person otherwise has an interest
(except proportionately as a shareholder of Enron).
Advance Notice Requirements for Shareholder Proposals and Nominations. The
Enron Bylaws provide that for business to be properly brought before an annual
meeting of shareholders, it must be either (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of
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the Board of Directors, (b) otherwise brought before the meeting by or at the
direction of the Board of Directors or (c) otherwise properly brought before the
meeting by a shareholder of Enron who is a shareholder of record at the time of
giving of notice hereinafter provided for, who shall be entitled to vote at such
meeting and who complies with the following notice procedures. In addition to
any other applicable requirements, for business to be brought before an annual
meeting by a shareholder of Enron, the shareholder must have given to the
Secretary of Enron timely notice in writing of the business to be brought before
an annual meeting of shareholders. To be timely, a shareholder's notice must be
delivered to or mailed and received at Enron's principal executive offices not
less than 120 days prior to the anniversary date of the proxy statement for the
previous year's annual meeting of the shareholders of Enron (or Old Enron, with
respect to the first such meeting after the Effective Time). A shareholder's
notice to the Secretary must set forth as to each matter the shareholder
proposes to bring before the annual meeting (i) a brief description of the
business desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, (ii) the name and address, as
they appear on Enron's books, of the shareholder proposing such business, (iii)
the acquisition date, the class and the number of shares of voting stock of
Enron which are owned beneficially by the shareholder, (iv) any material
interest of the shareholder in such business and (v) a representation that the
shareholder intends to appear in person or by proxy at the meeting to bring the
proposed business before the meeting. No business shall be conducted at an
annual meeting except in accordance with the procedures outlined above.
The Enron Bylaws provide that only persons who are nominated for election
as a director of Enron in accordance with the following procedures shall be
eligible for election as directors. Nominations of persons for election to
Enron's Board of Directors may be made at a meeting of shareholders (a) by or at
the direction of the Board of Directors or (b) by any shareholder of Enron who
is a shareholder of record at the time of giving of notice hereinafter provided
for, who shall be entitled to vote for the election of directors at the meeting
and who complies with the following notice procedures. Such nominations, other
than those made by or at the direction of the Board of Directors, shall be made
pursuant to timely notice in writing to the Secretary of Enron. To be timely, a
shareholder's notice must be delivered to or mailed and received at Enron's
principal executive offices, (i) with respect to an election to be held at an
annual meeting of shareholders of Enron, not less than 120 days prior to the
anniversary date of the proxy statement for the previous year's annual meeting
of the shareholders of Enron (or Old Enron, with respect to the first such
meeting after the Effective Time), and (ii) with respect to an election to be
held at a special meeting of shareholders of Enron for the election of
directors, not later than the close of business on the 10th day following the
date on which notice of the date of the meeting was mailed or public disclosure
of the date of the meeting was made, whichever first occurs. Such shareholder's
notice to the Secretary shall set forth (a) as to each person whom the
shareholder proposes to nominate for election or re-election as a director, all
information relating to the person that is required to be disclosed in
solicitations for proxies for election of directors, or is otherwise required,
pursuant to Regulation 14A under the Exchange Act (including the written consent
of such person to be named in the proxy statement as a nominee and to serve as a
director if elected); and (b) as to the shareholder giving the notice, (i) the
name and address, as they appear on Enron's books, of such shareholder, and (ii)
the class and number of shares of capital stock of Enron which are beneficially
owned by the shareholder.
CERTAIN ANTI-TAKEOVER PROVISIONS OF OREGON LAW
Business Combinations with Interested Shareholders. Enron is subject to the
provisions of Sections 60.825-60.845 of the Oregon Business Corporation Act
("OBCA"), which generally provide that any person who acquires 15% or more of a
corporation's voting stock (thereby becoming an "interested shareholder") may
not engage in certain "business combinations" with the corporation for a period
of three years following the date the person became an interested stockholder,
unless (i) the board of directors has approved, prior to the date the person
became an interested shareholder, either the business combination or the
transaction that resulted in the person becoming an interested shareholder, (ii)
upon consummation of the transaction that resulted in the person becoming an
interested shareholder, that person owns at least 85% of the corporation's
voting stock outstanding at the time the
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transaction is commenced (excluding shares owned by persons who are both
directors and officers and shares owned by employee stock plans in which
participants do not have the right to determine whether shares will be tendered
in a tender or exchange offer), or (iii) on or subsequent to the date the person
became an interested shareholder, the business combination is approved by the
board of directors and authorized by the affirmative vote of at least 66 2/3% of
the outstanding voting stock not owned by the interested shareholder.
Control Share Statute. As is permitted by the OBCA, the Enron Charter
provides that Enron is not subject to the Oregon Control Share Act. The Oregon
Control Share Act restricts the ability of a shareholder of certain Oregon-based
corporations to vote shares of stock acquired in a transaction that causes the
acquiring person to control at least one-fifth, one-third or one-half of the
votes entitled to be cast in the election of directors, except as authorized by
a vote of the corporation's disinterested shareholders.
DESCRIPTION OF DEPOSITARY SHARES
GENERAL
Enron may, at its option, elect to offer fractional interests in the
Offered Preferred Stock. In the event such option is exercised, Enron will offer
depositary shares ("Depositary Shares"), each of which will represent a fraction
(to be set forth in the Prospectus Supplement relating to a particular series of
Offered Preferred Stock) of a share of a particular series of Offered Preferred
Stock as described below.
The Offered Preferred Stock of any series represented by Depositary Shares
will be deposited under a deposit agreement (the "Deposit Agreement") between
Enron and a bank or trust company selected by Enron having its principal office
in the United States and having, alone or together with its affiliates, a
combined capital and surplus of at least $50,000,000 (the "Depositary"). Subject
to the terms of the Deposit Agreement, each registered holder of a Depositary
Share will be entitled, in proportion to the applicable fraction of a share of
Offered Preferred Stock represented by such Depositary Share, to all the rights
and preferences of the Offered Preferred Stock represented thereby (including
dividend, voting, redemption and liquidation rights).
The Depositary Shares will be evidenced by depositary receipts ("Depositary
Receipts") issued pursuant to the Deposit Agreement. Depositary Receipts will be
distributed to those persons purchasing the fractional interests in Offered
Preferred Stock in accordance with the terms of the offering set forth in the
applicable Prospectus Supplement. A copy of the form of Deposit Agreement is
filed as an exhibit to the Registration Statements of which this Prospectus is a
part, and the following summary is qualified in its entirety by reference to
such exhibit.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all dividends or other cash distributions
received in respect of the Offered Preferred Stock to the record holders of
Depositary Shares relating to such Offered 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 Offered Preferred Stock, the Depositary will distribute
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 that 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 Enron, sell
such securities or property and distribute the net proceeds from such sale to
such holders or adopt such other method as it deems equitable and practicable
for effecting such distribution.
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WITHDRAWAL OF THE OFFERED PREFERRED STOCK
Upon surrender of the Depositary Receipts at the corporate trust office of
the Depositary (unless the related Offered Preferred Stock or Depositary Shares
have previously been called for redemption), and upon payment of the charges
provided in the Deposit Agreement and subject to the terms thereof, the holder
of the Depositary Shares evidenced thereby is entitled to delivery at such
office to or upon his order the number of whole shares of Offered Preferred
Stock and any money or other property represented by such Depositary Shares. If
the Depositary Receipts delivered by the holder evidence a number of Depositary
Shares in excess of the number of Depositary Shares representing the number of
whole shares of Offered Preferred Stock to be withdrawn, the Depositary will
deliver to such holder at the same time a new Depositary Receipt evidencing such
excess number of Depositary Shares. Holders of Offered Preferred Stock thus
withdrawn, and any subsequent holders of those shares, will not thereafter be
entitled to deposit such shares under the Deposit Agreement or to receive
Depositary Shares therefor.
REDEMPTION OF DEPOSITARY SHARES
Upon redemption of Offered Preferred Stock represented by Depositary
Shares, the Depositary will redeem as of the same redemption date the number of
Depositary Shares representing Offered Preferred Stock so redeemed, provided
Enron shall have paid in full to the Depositary the redemption price of the
Offered Preferred Stock to be redeemed (which redemption price shall include an
amount equal to any accrued and unpaid dividends thereon to the date fixed for
redemption). The redemption price per Depositary Share will be equal to the
applicable fraction of the redemption price and any other amounts per share
payable with respect to the Offered Preferred Stock. If fewer than all the
Depositary Shares are to be redeemed, the Depositary Shares to be redeemed will
be selected by the Depositary by lot or pro rata or by any other equitable
method, in each case as may be determined by Enron.
VOTING OF THE OFFERED PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the Offered
Preferred Stock are entitled to vote, the Depositary will mail the information
contained in such notice of meeting to the record holders of the Depositary
Shares. Each record holder of such Depositary Shares on the record date (which
will be the same date as the record date for the Offered Preferred Stock) will
be entitled to instruct the Depositary as to the exercise of the voting rights
pertaining to the amount of Offered Preferred Stock represented by such holder's
Depositary Shares. The Depositary will endeavor, insofar as practicable, to vote
the number of shares of Offered Preferred Stock represented by such Depositary
Shares in accordance with such instructions, and Enron will agree to take all
reasonable action which may be deemed necessary by the Depositary in order to
enable the Depositary to do so. The Depositary will abstain from voting Offered
Preferred Stock (but, at its discretion, not from appearing at any meeting with
respect to such Offered Preferred Stock) to the extent it does not receive
specific instructions from the holders of Depositary Shares representing Offered
Preferred Stock.
AMENDMENT AND TERMINATION OF THE DEPOSIT 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 Enron 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 Enron upon not less than 60
days' notice, whereupon the Depositary shall deliver or make available to each
holder of Depositary Receipts, upon surrender of the Depositary Receipts held by
such holder, such number of whole or fractional shares of Offered Preferred
Stock represented by such Depositary Receipts. The Deposit Agreement will
automatically terminate if (i) all outstanding Depositary Shares have been
redeemed, or (ii) there has been a final
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distribution in respect of the Offered Preferred Stock in connection with any
liquidation, dissolution or winding up of Enron and such distribution has been
made to the holders of Depositary Receipts.
CHARGES OF DEPOSITARY
Enron will pay all transfer and other taxes and governmental charges
arising solely from the existence of the Depositary arrangements. Enron will pay
the fees and expenses of the Depositary in connection with the performance of
its duties under the Deposit Agreement, to the extent specified in the Deposit
Agreement. Holders of Depositary Receipts will pay transfer and other taxes and
governmental charges.
MISCELLANEOUS
Enron will forward to holders of Depositary Shares any reports and
communications that it sends to holders of Offered Preferred Stock.
Neither the Depositary nor Enron will be liable if it is prevented from or
delayed in, by law or any circumstances beyond its control, performing its
obligations under the Deposit Agreement. The obligations of Enron and the
Depositary under the Deposit Agreement will be limited to performing their
duties thereunder without negligence or willful misconduct, and Enron and the
Depositary will not be obligated to prosecute or defend any legal proceeding in
respect of any Depositary Shares or any Offered Preferred Stock unless
satisfactory indemnity is furnished. Enron and the Depositary may rely on advice
of counsel or accountants, on information provided by holders of Depositary
Shares or other persons believed to be authorized or competent and on documents
believed to be genuine.
In the event the Depositary shall receive conflicting claims, requests or
instructions from any holders of Depositary Receipts, on the one hand, and
Enron, on the other hand, the Depositary shall be entitled to act on such
claims, requests or instructions received from Enron.
RESIGNATION AND REMOVAL OF DEPOSITARY
The Depositary may resign at any time by delivering to Enron notice of its
election to do so, and Enron 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, alone or together with its affiliates, a combined
capital and surplus of at least $50,000,000.
DESCRIPTION OF WARRANTS TO PURCHASE COMMON STOCK
The following statements with respect to the Stock Warrants are summaries
of, and subject to, the detailed provisions of a warrant agreement ("Stock
Warrant Agreement") to be entered into by Enron and a warrant agent to be
selected at the time of issue (the "Stock Warrant Agent"), and having the terms
described in the Prospectus Supplement relating thereto.
GENERAL
The Stock Warrants, evidenced by warrant certificates (the "Stock Warrant
Certificates"), may be issued under the Stock Warrant Agreement independently or
together with any Offered Securities and may be attached to or separate from
such Offered Securities. If Stock Warrants are offered, the Prospectus
Supplement will describe the terms of the warrants, including the following: (1)
the offering price, if any; (2) the number of shares of Common Stock purchasable
upon exercise of one Stock Warrant and the initial price at which such shares
may be purchased upon exercise; (3) the date on which the right to exercise the
Stock Warrants shall commence and the date on which such right shall expire; and
(4) any other terms of the Stock Warrants. The shares of Common Stock issuable
upon
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exercise of the Stock Warrants will, when issued in accordance with the Stock
Warrant Agreement, be fully paid and nonassessable.
EXERCISE OF STOCK WARRANTS
Stock Warrants may be exercised by surrendering to the Stock Warrant Agent
the Stock Warrant Certificate signed by the warrantholder, or his duly
authorized agent, indicating the warrantholder's election to exercise all or a
portion of the Stock Warrants evidenced by the certificate. Surrendered Stock
Warrant Certificates shall be accompanied by payment of the aggregate exercise
price of the Stock Warrants to be exercised, as set forth in the Prospectus
Supplement, which payment may be made in the form of cash or a check equal to
the exercise price. Certificates evidencing duly exercised Stock Warrants shall
be delivered by the Stock Warrant Agent to the transfer agent for the Common
Stock. Upon receipt thereof, the transfer agent shall deliver or cause to be
delivered, to or upon the written order of the exercising warrantholder, a
certificate representing the number of shares of Common Stock purchased. If
fewer than all of the Stock Warrants evidenced by any certificate are exercised,
the Stock Warrant Agent shall deliver to the exercising warrantholder a new
Stock Warrant Certificate representing the unexercised Stock Warrants.
ANTIDILUTION PROVISIONS
The exercise price payable and the number of shares of Common Stock
purchasable upon the exercise of each Stock Warrant will be subject to
adjustment in certain events, including (1) the issuance of a stock dividend to
holders of Common Stock or a combination, subdivision or reclassification of
Common Stock; (2) the issuance of rights, warrants or options to all holders of
Enron's Common Stock entitling the holders thereof to purchase Common Stock for
an aggregate consideration per share less than the current market price per
share of Common Stock; or (3) any distribution by Enron to the holders of its
Common Stock of evidences of indebtedness of Enron or of assets (excluding cash
dividends or distributions payable out of consolidated earnings and earned
surplus and dividends or distributions referred to in (1) above). In lieu of
adjusting the number of shares of Common Stock purchasable upon exercise of each
Stock Warrant, Enron may elect to adjust the number of Stock Warrants. No
adjustment in the number of shares purchasable upon exercise of the Stock
Warrants will be required until cumulative adjustments require an adjustment of
at least 1% thereof. Enron may, at its option, reduce the exercise price at any
time. No fractional shares will be issued upon exercise of Stock Warrants, but
Enron will pay the cash value of any fractional shares otherwise issuable.
Notwithstanding the foregoing, in case of any consolidation, merger or sale or
conveyance of the property of Enron as an entirety or substantially as an
entirety, the holder of each outstanding Stock Warrant upon exercise thereof
shall have the right to the kind and amount of shares of stock and other
securities and property (including cash) receivable by a holder of the number of
shares of Common Stock for which such Stock Warrant was exercisable immediately
prior thereto.
NO RIGHTS AS STOCKHOLDERS
Holders of Stock Warrants will not be entitled, by virtue of being such
holders, to vote, to consent, to receive dividends, to receive notice as
stockholders with respect to any meeting of stockholders for the election of
directors of Enron or any other matter or to exercise any rights whatsoever as
stockholders of Enron.
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PLAN OF DISTRIBUTION
Enron may sell the Offered Securities (i) through underwriters or dealers;
(ii) directly to purchasers; or (iii) through agents. The Prospectus Supplement
with respect to the Offered Securities will set forth the terms of the offering
of the Offered Securities, including the name or names of any underwriters or
agents, if required, the purchase price of the Offered Securities and the
proceeds to Enron from such sale, any delayed delivery arrangements, any
underwriting discounts and commissions and other items constituting
underwriters' compensation, any initial public offering price and any discounts
or concessions allowed or reallowed or paid to dealers. Any initial public
offering price and any discounts or concessions allowed or reallowed or paid to
dealers may be changed from time to time.
If underwriters are used in the sale, the Offered Securities will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
In connection with the sale of the Offered Securities, underwriters, brokers,
dealers or agents may be deemed to have received compensation from Enron in the
form of underwriting discounts or commissions and may also receive commissions
from purchasers of the Offered Securities for whom they may act as agent or to
whom they may sell as principal. Underwriters or agents may sell the Offered
Securities to or through dealers, and such dealers may receive compensation in
the form of discounts, concessions or commissions from the underwriters or
commissions from the purchasers for whom they may act as agent. The Offered
Securities may be offered to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by one or more
firms acting as underwriters. The underwriter or underwriters with respect to a
particular underwritten offering of Offered Securities will be named in the
Prospectus Supplement relating to such offering and, if an underwriting
syndicate is used, the managing underwriter or underwriters will be set forth on
the cover of such Prospectus Supplement. Unless otherwise set forth in the
Prospectus Supplement relating thereto, the obligations of the underwriters to
purchase the Offered Securities will be subject to certain conditions precedent,
and the underwriters will be obligated to purchase all the Offered Securities if
any are purchased.
If dealers are utilized in the sale of Offered Securities, Enron will sell
such Offered Securities to the dealers as principals. The dealers may then
resell such Offered Securities to the public at varying prices to be determined
by such dealers at the time of resale. To the extent required, the names of
dealers or brokers acting as dealers and the terms of the transaction will be
set forth in the Prospectus Supplement relating thereto.
The Offered Securities may be sold directly by Enron or through agents
designated by Enron from time to time. Any agent acting as an underwriter in the
offer or sale of the Offered Securities in respect to which this Prospectus is
delivered will be named, and any commissions payable by Enron to such agent will
be set forth, in the Prospectus Supplement relating thereto. Unless otherwise
indicated in the Prospectus Supplement, any such agent will be acting on a best
efforts basis for the period of its appointment.
If so indicated in the Prospectus Supplement, Enron will authorize agents,
underwriters or dealers to solicit offers from certain types of institutions to
purchase Offered Securities from Enron at the public offering price set forth in
the Prospectus Supplement pursuant to delayed delivery contracts providing for
payment and delivery on a specified date in the future. Such contracts will be
subject only to those conditions set forth in the Prospectus Supplement, and the
Prospectus Supplement will set forth the commission payable for solicitation of
such contracts.
The Offered Securities (other than the Common Stock), when first issued,
will have no established trading market. Any underwriters or agents to or
through whom Offered Securities are sold for public offering and sale may make a
market in such Offered Securities, but such underwriters or agents will not be
obligated to do so and may discontinue any market making at any time without
notice. No assurance can be given as to the liquidity of the trading market for
any such Offered Securities.
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Agents, dealers and underwriters may be entitled under agreements with
Enron to indemnification by Enron against certain civil liabilities, including
liabilities under the Securities Act, or to contribution with respect to
payments which such agents, dealers or underwriters may be required to make in
respect thereof. Agents, dealers and underwriters may be customers of, engage in
transactions with or perform services for Enron in the ordinary course of
business.
The Offered Securities may or may not be listed on a national securities
exchange. No assurances can be given that there will be a market for the Offered
Securities.
VALIDITY OF SECURITIES
The validity of the Offered Securities will be passed upon for Enron by
James V. Derrick, Jr., Esq., Senior Vice President and General Counsel of Enron.
Mr. Derrick owns substantially less than 1% of the outstanding shares of Common
Stock of Enron.
EXPERTS
The consolidated financial statements included in Enron's Current Report on
Form 8-K dated March 17, 1997 and consolidated financial statements and schedule
included in Enron's Annual Report on Form 10-K for the year ended December 31,
1996, incorporated by reference in this prospectus and elsewhere in the
registration statement, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in giving said reports.
The letter report of DeGolyer and MacNaughton, independent petroleum
consultants, included as an exhibit to Enron's Annual Report on Form 10-K for
the year ended December 31, 1996, and the estimates from the reports of that
firm appearing in such Annual Report, are incorporated by reference herein on
the authority of said firm as experts in petroleum engineering and in giving
such reports.
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