<PAGE> 1
FILED PURSUANT TO RULE 424(b)(2)
REGISTRATION NO. 333-70465
<TABLE>
<S> <C>
PROSPECTUS SUPPLEMENT
(To prospectus dated May 18, 2000)
</TABLE>
$325,000,000
[ENRON LOGO]
7.875% NOTES DUE 2003
--------------------------------------------------------------------------------
This is a public offering by Enron Corp. of 7.875% notes due June 15, 2003.
Interest is payable semiannually on June 15 and December 15, beginning December
15, 2000. We may redeem all or part of the notes at any time. The redemption
price is described under the heading "Description of Notes -- Optional
Redemption" on page S-4 of this prospectus supplement. The notes are unsecured
and unsubordinated debt securities, are not subject to a sinking fund and are
not convertible or exchangeable into other securities.
The notes should be delivered on or about June 6, 2000 through the
book-entry facilities of The Depository Trust Company.
<TABLE>
<CAPTION>
PER NOTE TOTAL
-------- ------------
<S> <C> <C>
Public offering price....................................... 99.806% $324,369,500
Underwriting discount....................................... .350% $ 1,137,500
Proceeds to Enron Corp. (before expenses)................... 99.456% $323,232,000
</TABLE>
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus supplement or the accompanying prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
--------------------------------------------------------------------------------
LEHMAN BROTHERS ABN AMRO INCORPORATED
June 1, 2000
<PAGE> 2
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. NO ONE
HAS BEEN AUTHORIZED TO PROVIDE YOU WITH DIFFERENT INFORMATION. IF ANYONE
PROVIDES YOU WITH DIFFERENT OR INCONSISTENT INFORMATION, YOU SHOULD NOT RELY ON
IT. SECURITIES ARE NOT BEING OFFERED IN ANY JURISDICTION WHERE THE OFFER OR SALE
IS NOT PERMITTED. YOU SHOULD ASSUME THAT THE INFORMATION CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS IS ACCURATE AS OF THE DATE ON THE FRONT COVER OF THIS PROSPECTUS
SUPPLEMENT ONLY. OUR BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND
PROSPECTS MAY HAVE CHANGED SINCE THAT DATE.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Capitalization.............................................. S-3
Use of Proceeds............................................. S-3
Ratio of Earnings to Fixed Charges.......................... S-3
Description of Notes........................................ S-4
Underwriting................................................ S-5
Validity of the Notes....................................... S-6
PROSPECTUS
Where You Can Find More Information......................... 2
Business of Enron........................................... 3
Use of Proceeds............................................. 4
Ratio of Earnings to Fixed Charges and Earnings to Fixed
Charges and Preferred Stock Dividends..................... 4
Description of Debt Securities.............................. 5
Description of Capital Stock................................ 12
Description of Depositary Shares............................ 20
Plan of Distribution........................................ 23
Validity of Securities...................................... 24
Experts..................................................... 24
</TABLE>
S-2
<PAGE> 3
CAPITALIZATION
The following table sets forth our consolidated capitalization as of March
31, 2000 and as adjusted to give effect to the issuance on May 2, 2000 of
20,000,000,000 JPY (approximately $189,500,000) aggregate principal amount of
Notes due 2001, May 17, 2000 of 20,000,000,000 JPY (approximately $182,800,000)
aggregate principal amount of Notes due 2001, May 18, 2000 of $175,000,000
aggregate principal amount of Notes due 2005 and the issuance of the notes
offered hereby, and the use of the proceeds therefrom. See "Use of Proceeds."
<TABLE>
<CAPTION>
ACTUAL AS ADJUSTED
------- -----------
(IN MILLIONS)
<S> <C> <C>
Short-term debt(a)
Notes payable............................................. $ 1,884 $ 1,015
Current maturities of long-term debt...................... -- --
------- -------
Total short-term debt.............................. 1,884 1,015
------- -------
Long-term debt
Enron:
Amount reclassified from short-term debt................ 512 512
Notes due 2000-2028 (6.40% to 9.88%).................... 4,436 4,436
Notes due 2001-2004 (floating).......................... 1,050 1,050
Exchangeable Notes due 2002............................. 244 244
Other................................................... 38 38
Notes due 2001.......................................... -- 372
Notes due 2005.......................................... -- 175
Notes due 2003.......................................... -- 325
Subsidiary companies:
Notes due 2000-2035 (4.60% to 13.25%)................... 1,449 1,449
Notes due 2000-2031 (floating).......................... 124 124
Other................................................... 170 170
Enron:
Senior subordinated debentures due 2005-2012............ 318 318
Unamortized debt discount and premium..................... (53) (54)
------- -------
Total long-term debt............................... 8,288 9,159
------- -------
Minority interests.......................................... 1,872 1,872
------- -------
Company-obligated preferred securities of subsidiaries...... 1,099 1,099
------- -------
Shareholders' equity
Convertible preferred stock............................... 129 129
Mandatorily Convertible Junior Preferred Stock, Series
B....................................................... 1,000 1,000
Common stock.............................................. 7,041 7,041
Retained earnings......................................... 2,922 2,922
Cumulative foreign currency translation adjustment........ (756) (756)
Common stock held in treasury............................. (16) (16)
Other, including Flexible Equity Trust.................... (180) (180)
------- -------
Total shareholders' equity......................... 10,140 10,140
------- -------
Total capitalization............................... $23,283 $23,285
======= =======
</TABLE>
---------------
(a) Subsequent to March 31, 2000, our short-term debt has increased by
approximately $820 million, excluding the notes issued May 2, 2000, May 17,
2000, and May 18, 2000, as a result of borrowings made under our commercial
paper program and uncommitted credit facilities.
USE OF PROCEEDS
We intend to use the net proceeds from the sale of the notes (estimated to
be approximately $323,132,000 after underwriting discounts and expenses)
principally to repay short-term indebtedness and for general corporate purposes.
As of June 1, 2000, our weighted average interest rate on the debt to be repaid
was approximately 6.75%.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, ----------------------------------
2000 1999 1998 1997 1996 1995
------------ ---- ---- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges............. 2.66 2.29 2.08 1.02 3.00 2.92
</TABLE>
S-3
<PAGE> 4
DESCRIPTION OF NOTES
We will issue the notes under the indenture referred to in the accompanying
prospectus. The following description and the description in the accompanying
prospectus is a summary of the material provisions of the notes and the
indenture. It does not restate the indenture in its entirety. We urge you to
read the indenture because it, and not this description, defines your rights as
holders of the notes. We have filed a copy of the indenture as an exhibit to the
registration statement which includes the accompanying prospectus.
This description of the notes supplements, and, to the extent it is
inconsistent, replaces, the description of the general provisions of the notes
and the indenture in the accompanying prospectus. The notes are "Indenture
Securities" as that term is used in the accompanying prospectus.
With certain exceptions and pursuant to certain requirements set forth in
the indenture, we may discharge our obligations under the indenture with respect
to the notes as described under "Description of Debt Securities -- Discharge of
Indenture; Defeasance" in the accompanying prospectus. You are urged to consult
your own advisors as to the tax consequences of any such action.
PRINCIPAL, MATURITY AND INTEREST
The notes will mature on June 15, 2003. Although $325,000,000 principal
amount of the notes are offered hereby, we may issue and sell additional
principal amount of the notes in the future without the consent of the holders
of the notes. Any additional notes, together with these notes, will constitute a
single series of notes under the indenture.
Interest on the notes will accrue at the rate of 7.875% per year and will
be payable semiannually in arrears on June 15 and December 15 of each year,
commencing on December 15, 2000. We will make each interest payment to the
person in whose name the notes are registered at the close of business on the
immediately preceding June 1 or December 1, as the case may be, whether or not
such date is a business day.
Interest on the notes will accrue from June 6, 2000 and will be computed on
the basis of a 360-day year comprised of twelve 30-day months.
If any interest payment date, maturity date or redemption date falls on a
day that is not a business day, the payment will be made on the next business
day and no interest will accrue for the period from and after such interest
payment date, maturity date or redemption date.
OPTIONAL REDEMPTION
We may redeem some or all of the notes at any time at a price equal to the
greater of:
- 100% of the principal amount of the notes, or
- the sum of the present values of the remaining scheduled payments of
principal and interest on the notes to be redeemed discounted to the
redemption date on a semiannual basis (assuming a 360-day year consisting
of twelve 30-day months) at the applicable Treasury Rate plus 15 basis
points, plus accrued and unpaid interest on the principal amount to the
date of redemption.
We will send to each holder notice of any redemption at least 30 days but
not more than 60 days before the applicable redemption date. Unless we default
in payment of the redemption price, no interest shall accrue for the period from
and after such redemption date. If less than all of the notes are to be
redeemed, the Trustee will select the notes (or portions thereof) to be redeemed
by such method as the Trustee shall deem fair and appropriate.
"Treasury Rate" means, with respect to any redemption date, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, at a price equal to the Comparable Treasury Price.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the notes to be redeemed that
S-4
<PAGE> 5
would be utilized, at the time of selection and in accordance with customary
financial practice, in pricing new issues of corporate debt securities of
comparable maturity to the remaining term of the notes.
"Comparable Treasury Price" means, with respect to any redemption date, (1)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (2) if such release (or any successor release) is not
published or does not contain such prices on such business day, (A) the average
of the Reference Treasury Dealer Quotations for such redemption date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations, or
(B) if the Trustee obtains fewer than four such Reference Treasury Dealer
Quotations, the average of all such quotations.
"Independent Investment Banker" means an independent investment banking
institution of national standing appointed by the Trustee. The Independent
Investment Banker could be one of the underwriters.
"Reference Treasury Dealer" means at least four primary U.S. Government
securities dealers as we or the Trustee shall select. One or two of such
securities dealers could be one or two of the underwriters or their qualifying
affiliates.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third business day preceding such redemption date.
FORM, DENOMINATION AND REGISTRATION; BOOK ENTRY ONLY SYSTEM
The notes will be issued only in fully registered form, without coupons, in
minimum denominations of $1,000 and any integral multiple of $1,000 in excess
thereof. The notes will be deposited with, or on behalf of, The Depository Trust
Company ("DTC") or any successor depositary and will be represented by one or
more global notes registered in the name of Cede & Co., as nominee of DTC. The
interests of beneficial owners in the global notes will be represented through
financial institutions acting on their behalf as direct or indirect participants
in DTC in the manner described in the accompanying prospectus.
SAME-DAY PAYMENT AND SETTLEMENT
We will make all payments of principal and interest in immediately
available funds. Except in the limited circumstances described in the
accompanying prospectus under "Form, Denomination and Registration; Book Entry
Only System," the notes will trade in DTC's same-day funds settlement system
until maturity. Purchases in secondary market trading must therefore be in
immediately available funds.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
between us and the underwriters named below, we have agreed to sell to each of
the underwriters, and the underwriters have agreed, severally and not jointly,
to purchase, the principal amount of the notes set forth opposite its name
below:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
UNDERWRITER OF NOTES
----------- ------------
<S> <C>
Lehman Brothers Inc. ....................................... $260,000,000
ABN AMRO Incorporated....................................... 65,000,000
------------
Total............................................. $325,000,000
============
</TABLE>
S-5
<PAGE> 6
Under the terms of the underwriting agreement, the underwriters are
committed to purchase all of the notes if any are purchased.
The underwriters propose initially to offer the notes to the public at the
public offering price set forth on the cover page of this prospectus supplement
and to certain dealers at such price less a concession not in excess of .200% of
the principal amount of the notes. The underwriters may allow, and such dealers
may reallow, a discount not in excess of .100% of the principal amount of the
notes on sales to certain other brokers and dealers. After the initial public
offering, the public offering price, concession and discount may be changed.
The following table summarizes the compensation to be paid by us to the
underwriters and the estimated expenses payable by us.
<TABLE>
<CAPTION>
PER NOTE TOTAL
-------- ----------
<S> <C> <C>
Underwriting discount paid by us ........................... .350% $1,137,500
Estimated expenses payable by us ........................... .031% $ 100,000
</TABLE>
The notes are a new issue of securities with no established trading market.
We do not intend to apply for listing of the notes on a national securities
exchange. We have been advised by the underwriters that they intend to make a
market in the notes, but the underwriters are not obligated to do so and may
discontinue market-making at any time without notice. No assurance can be given
as to whether or not a trading market for the notes will develop or as to the
liquidity of any trading market for the notes which may develop.
The underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Securities Exchange Act of 1934. Over-allotment involves syndicate
sales in excess of the offering size, which creates a syndicate short position.
Stabilizing transactions permit bids to purchase the underlying security so long
as the stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the notes in the open market after the
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit the underwriters to reclaim a selling concession from a
syndicate member when the notes originally sold by such syndicate member are
purchased in a syndicate covering transaction to cover syndicate short
positions. Such stabilizing transactions, syndicate covering transactions and
penalty bids may cause the price of the notes to be higher than it would
otherwise be in the absence of such transactions.
Neither we nor the underwriters make any representation or prediction as to
the direction or magnitude of any effect that the transactions described above
may have on the price of the notes. In addition, neither we nor the underwriters
make any representation that the underwriters will engage in such transactions
or that such transactions, once commenced, will not be discontinued without
notice.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, or to contribute to
payments the underwriters may be required to make in respect thereof.
The underwriters or their respective affiliates have engaged, are engaging
in and may in the future engage in commercial banking, investment banking and/or
financial advisory services with us and our affiliates for which they receive
customary compensation and expense reimbursement.
VALIDITY OF THE NOTES
The validity of the notes will be passed upon for us by James V. Derrick,
Jr., our Executive Vice President and General Counsel. Mr. Derrick owns
substantially less than 1% of our outstanding shares of common stock. 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 for
us and certain of our subsidiaries and affiliates as outside counsel on matters
unrelated to the issuance of the notes.
S-6
<PAGE> 7
PROSPECTUS
[ENRON LOGO]
DEBT SECURITIES
PREFERRED STOCK
COMMON STOCK
ENRON CORP.
1400 Smith Street
Houston, Texas 77002
(713) 853-6161
---------------------
We will provide specific terms of these securities in supplements to this
prospectus. This prospectus may not be used to consummate sales of these
securities unless accompanied by a prospectus supplement.
---------------------
Neither the SEC nor any state securities commission has approved these
securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
---------------------
May 18, 2000
<PAGE> 8
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Where You Can Find More Information......................... 2
Business of Enron........................................... 3
Use of Proceeds............................................. 4
Ratio of Earnings to Fixed Charges and Earnings to Fixed
Charges and Preferred Stock Dividends..................... 4
Description of Debt Securities.............................. 5
Description of Capital Stock................................ 12
Description of Depositary Shares............................ 20
Plan of Distribution........................................ 23
Validity of Securities...................................... 24
Experts..................................................... 24
</TABLE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and copy
any document we file at the SEC's public reference rooms in Washington, D.C.,
New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330
for further information on the public reference rooms.
Reports, proxy statements and other information concerning Enron can also
be inspected and copied at the offices of the New York Stock Exchange at 20
Broad Street, New York, New York 10005, the offices of the Chicago Stock
Exchange at 120 South LaSalle Street, Chicago, Illinois 60603, and the offices
of the Pacific Stock Exchange at 301 Pine Street, San Francisco, California
94014.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below and any future filings made with the SEC
under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934
until we sell all of the securities.
- Annual Report on Form 10-K for the fiscal year ended December 31, 1999;
- Quarterly Report on Form 10-Q for the quarter ended March 31, 2000; and
- The description of Enron's capital stock set forth in Enron's
Registration Statement on Form 8-B filed on July 2, 1997.
You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:
Secretary Division, Enron Corp.
1400 Smith Street
Houston, Texas 77002
(713) 853-6161
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. We are not making an
offer of these securities in any state where the offer is not permitted. You
should not assume that the information in this prospectus or any prospectus
supplement is accurate as of any date other than the date on the front of those
documents.
2
<PAGE> 9
BUSINESS OF ENRON
Headquartered in Houston, Texas, Enron Corp. provides products and services
related to natural gas, electricity and communications to wholesale and retail
customers. Our operations are conducted through our subsidiaries and affiliates,
which are principally engaged in:
- the marketing of natural gas, electricity and other commodities and
related risk management and finance services worldwide;
- the development, construction and operation of power plants, pipelines
and other energy related assets worldwide;
- the delivery of high bandwidth communication applications throughout the
United States;
- the transportation of natural gas through pipelines to markets throughout
the United States; and
- the generation and transmission of electricity to markets in the
northwestern United States.
WHOLESALE ENERGY OPERATIONS AND SERVICES
Our wholesale energy operations and services businesses operate in North
America, Europe and evolving energy markets in developing countries. These
businesses provide integrated energy-related products and services to wholesale
customers worldwide. Wholesale energy operations and services can be categorized
into two business lines: (a) Commodity Sales and Services and (b) Assets and
Investments.
Commodity Sales and Services. Our commodity sales and services operations
include:
- the purchase, sale, marketing and delivery of natural gas, electricity,
liquids and other commodities;
- the restructuring of existing long-term contracts; and
- the management of our commodity portfolios.
In addition, we provide risk management products and services to energy
customers that hedge movements in price and location-based price differentials.
Our risk management products and services are designed to provide stability to
customers in markets impacted by commodity price volatility. Also included in
this business is the management of certain operating assets that directly relate
to this business, including domestic intrastate pipeline and storage facilities.
Assets and Investments. In the assets and investments business, we manage
and operate a large portfolio of assets related to natural gas, electricity and
communications and offer financing alternatives to customers. Activities include
developing, constructing, operating and managing a large portfolio of energy
assets, including power plants and natural gas pipelines. We also provide
capital to energy and communication customers seeking debt or equity financing.
Enron Broadband Services provides high quality broadband Internet content
and applications. This business includes the Enron Intelligent Network(TM)
("EIN"), Enron's Broadband Operating System, and bandwidth trading,
intermediation and content services. Enabled with a software control layer, the
EIN provides a bandwidth-on-demand platform to deliver data, applications and
streaming rich media to the desktop. We are minimizing capital deployed in the
development of the EIN through strategic alliances with industry technology
leaders whose presence, customer access, market share and content enable us to
efficiently enter this new, emerging marketplace. We are extending the market
making and risk management skills from our energy business to develop the
bandwidth intermediation business. Content services include premium broadband
content delivery, such as video streaming, high capacity data transport and
video conferencing, that utilize the EIN platform.
RETAIL ENERGY SERVICES
Enron Energy Services is a nationwide provider of energy outsource products
to United States business customers. This includes sales of natural gas and
electricity and energy management services
3
<PAGE> 10
directly to commercial and industrial customers, as well as investments in
related businesses. Enron Energy Services provides end-users with a broad range
of energy products and services at competitive prices. These products and
services include energy tariff and information management, demand-side services
and financial services.
TRANSPORTATION AND DISTRIBUTION
Our transportation and distribution business is comprised of our North
American interstate natural gas transportation systems and our electricity
transmission and distribution operations in Oregon.
Interstate Transmission of Natural Gas. Included in our domestic interstate
natural gas pipeline operations are Northern Natural Gas Company, Transwestern
Pipeline Company and Florida Gas Transmission Company (indirectly 50% owned by
our company). Northern, Transwestern and Florida Gas are interstate pipelines
and are subject to the regulatory jurisdiction of the Federal Energy Regulatory
Commission. Each pipeline serves customers in a specific geographical area.
Northern serves the upper Midwest, Transwestern serves principally the
California market and pipeline interconnects on the east end of the Transwestern
system, and Florida Gas serves the State of Florida. In addition, we hold an
interest in Northern Border Partners, L.P., which owns a 70% interest in the
Northern Border Pipeline system. One of our subsidiaries operates the Northern
Border Pipeline system, which transports gas from Western Canada to delivery
points in the midwestern United States.
Electricity Transmission and Distribution Operations. We conduct our
electric utility operations through our wholly-owned subsidiary, Portland
General Electric Company. Portland General is engaged in the generation,
purchase, transmission, distribution and sale of electricity in the State of
Oregon. Portland General also sells energy to wholesale customers throughout the
western United States. Portland General's Oregon service area is approximately
3,170 square miles. At December 31, 1999, Portland General served approximately
719,000 customers. On November 8, 1999, we announced that we have entered into
an agreement to sell Portland General to Sierra Pacific Resources for $2.1
billion, comprised of $2.02 billion in cash and the assumption of our
approximately $80 million Portland General merger payment obligation. Sierra
Pacific Resources will also assume $1 billion in Portland General debt and
preferred stock. The proposed transaction, which is subject to customary
regulatory approvals, is expected to close in late 2000.
USE OF PROCEEDS
The net proceeds from the sale of the offered securities will be added to
our general funds and will be used to repay debt and for general corporate
purposes. Other uses may be stated in a prospectus supplement.
RATIO OF EARNINGS TO FIXED CHARGES
AND EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, ---------------------------------
2000 1999 1998 1997 1996 1995
------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges............ 2.66 2.29 2.08 1.02 3.00 2.92
Ratio of Earnings to Fixed Charges and
Preferred Stock Dividends................... 2.43 2.13 2.03 (a) 2.85 2.76
</TABLE>
---------------
(a) For the year ended December 31, 1997, earnings were inadequate to cover
combined fixed charges and preferred stock dividends by $6 million.
4
<PAGE> 11
The ratios of earnings to fixed charges and preferred stock dividends are
based on continuing operations. "Earnings" is determined by adding:
- the pre-tax income of Enron and its majority owned subsidiaries,
- Enron's share of pre-tax income of its 50% owned companies,
- any income actually received from less than 50% owned companies, and
- fixed charges, net of interest capitalized.
"Fixed Charges" represent (1) interest (whether expensed or capitalized), (2)
amortization of debt discount and expense and (3) 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.
DESCRIPTION OF DEBT SECURITIES
The following description highlights the general terms and provisions of
the debt securities. When debt securities are offered in the future, the
prospectus supplement will explain the particular terms of those securities and
the extent to which these general provisions may apply.
The debt securities will be secured or unsecured obligations of Enron. Any
unsecured obligations will be issued under an "Indenture" between Enron and The
Bank of New York, as Trustee, dated as of November 1, 1985, as supplemented. Any
secured obligations will be issued under a separate indenture, which will be
described in the prospectus supplement relating to those debt securities.
We have summarized selected provisions of the Indenture below. The summary
is not complete. The form of the Indenture has been filed as an exhibit to the
registration statement and you should read the Indenture for any provisions that
may be important to you. In the summary below, we have included references to
section numbers of the Indenture so that you can easily locate these provisions.
Capitalized terms used in the summary have the meanings specified in the
Indenture.
GENERAL
The Indenture does not limit the principal amount of unsecured debentures,
notes or other obligations of Enron (the "Indenture Securities") which we may
issue from time to time in one or more series, and we may issue additional
Indenture Securities (in addition to the debt securities) in the future under
the Indenture. At May 17, 2000, we had approximately $5,145,913,000 principal
amount of Indenture Securities issued and outstanding under the Indenture.
A prospectus supplement relating to any series of debt securities being
offered will include specific terms relating to the offering. These terms will
include some or all of the following:
- The title of the debt securities;
- The total principal amount of the debt securities;
- The date on which the principal of the debt securities is payable;
- The interest rate which the debt securities will bear and the interest
payment dates for the debt securities;
- The place where the principal of (and premium, if any) and interest on
debt securities will be payable;
- Any optional redemption periods and the terms of that option;
- Any sinking fund or other provisions that would obligate us to repurchase
or otherwise redeem the debt securities;
- Any trustees, paying agents, transfer agents or registrars with respect
to debt securities; and
- Any other terms of the debt securities. (Section 301.)
5
<PAGE> 12
LIMITATIONS ON MORTGAGES AND LIENS
The Indenture provides that so long as any of the Indenture Securities
(including the debt securities) are outstanding, Enron will not, and will not
permit any Subsidiary 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 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 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:
- 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;
- 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;
- 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;
- 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 (a) exist prior to the time the Acquired Entity becomes a
Subsidiary or (b) 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;
- Pledges of current assets, in the ordinary course of business, to secure
current liabilities;
- Deposits to secure public or statutory obligations;
- Liens to secure indebtedness other than Funded Debt (as defined in the
Indenture and herein);
- Mortgages, pledges, liens or encumbrances upon any office, data
processing or transportation equipment;
- 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;
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- 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 Subsidiary of
goods or merchandise to customers; or
- 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 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.)
"Subsidiary" is defined 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 (1) 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; (2) any amount representing
capitalized lease obligations; (3) 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; (4) 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)
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and any demand charge, throughput, take-or-pay, keep-well, make-whole, cash
deficiency, maintenance of working capital or earnings or similar agreements;
and (5) any guarantees with respect to lease or other similar periodic payments
to be made by other persons. (Section 101.)
"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 (1) 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 (2) 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 Enron and the Trustee
may modify the Indenture or the rights of the holders of Indenture Securities if
they have the consent of the holders of at least 50% in principal amount of all
outstanding Indenture Securities affected thereby. However, no modification of
the principal or interest payment terms, no modification of provisions
concerning waivers of past defaults or waivers of certain covenants, and no
modification reducing the percentage required for any modifications, is
effective against any holder without its consent. (Section 902.)
EVENTS OF DEFAULT AND RIGHTS UPON DEFAULT
"Event of Default" means any one of the following with respect to any
series of Indenture Securities:
(a) failure to pay interest on any Indenture Security of that series
for 30 days;
(b) failure to deposit any sinking fund payment for 30 days;
(c) failure to pay the principal or any premium on any Indenture
Security of that series when due;
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(d) failure to perform any other covenant in the Indenture for 60 days
after being given written notice by the Trustee or the holders of at least
25% in principal amount of all outstanding Indenture Securities; or
(e) certain events in bankruptcy, receivership or other insolvency
proceedings or an assignment for the benefit of creditors. (Section 501.)
An Event of Default for a particular series of Indenture Securities does
not necessarily constitute an Event of Default for any other series of Indenture
Securities issued under the Indenture. A default under other indebtedness of
Enron is not an Event of Default under the Indenture.
If an Event of Default for any series of Indenture Securities occurs and
continues, the Trustee or the holders of at least 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. If an Event of Default described in clause (d) or (e) of the
foregoing paragraph occurs and is continuing, the Trustee or the holders of at
least 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. (Section 502.) If this happens, subject to
certain conditions, the holders of a majority of the aggregate 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. 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), (b) or (c) of the first paragraph under this subheading
(or, in the case of a default described in clause (d) or (e) 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 (1) in the payment of the principal of (or premium, if any) or interest
on any Indenture Security, or (2) in respect of a covenant or provision of the
Indenture which under the Indenture cannot be modified or amended without the
consent of the holder of each outstanding Indenture Security of such series
affected. (Section 513.)
DISCHARGE OF INDENTURE; DEFEASANCE
With certain exceptions, we will be discharged from our obligations under
the Indenture with respect to any series of Indenture Securities by either
paying or causing to be paid the principal of, premium, if any, and interest on
all of the Indenture Securities of such series outstanding, as and when the same
shall become due and payable, or delivering to the Trustee all outstanding
Indenture Securities of such series for cancellation. (Section 401.)
In addition, we will be discharged if at any time we defease the Indenture
Securities of a series by depositing in escrow or trust with the Trustee
sufficient cash and/or Government Obligations and/or Eligible Obligations to pay
the principal of, premium, if any, and interest on the Indenture Securities of
that series to the stated maturity date or a redemption date for the Indenture
Securities of that series. If that happens, payment of the Indenture Securities
of such series may not be accelerated because of an event specified as a default
or Event of Default with respect to such Indenture Securities, and the holders
of the Indenture Securities of such series will not be entitled to the benefits
of the Indenture, except for registration of transfer and exchange of Indenture
Securities and replacement of lost, stolen or mutilated Indenture Securities.
The Indenture defines "Eligible Securities" 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 defeased
debt by one or more nationally recognized rating agencies.
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Under Federal income tax law as of the date of this prospectus, a discharge
may be treated as an exchange of the related debt securities. Each holder might
be required to recognize gain or loss equal to the difference between the
holder's cost or other tax basis for the debt securities and the value of the
holder's interest in the trust. Holders might be required to include as income a
different amount than would be includable without the discharge. Prospective
investors are urged to consult their own advisors as to the tax consequences of
a discharge, including the applicability and effect of tax laws other than
Federal income tax law.
FORM, DENOMINATION AND REGISTRATION; BOOK ENTRY ONLY SYSTEM
Unless otherwise indicated in a prospectus supplement, the debt securities
will be issued only in fully registered form, without coupons, in denominations
of $1,000 or integral multiples thereof. (Section 302.) You will not have to pay
a service charge to transfer or exchange debt securities, but we may require you
to pay for taxes or other governmental charges due upon a transfer or exchange.
(Section 305.)
Unless otherwise indicated in a prospectus supplement, each series of
Indenture Securities will be deposited with, or on behalf of, The Depository
Trust Company ("DTC") or any successor depositary (the "Depositary") and will be
represented by one or more Global Notes registered in the name of Cede & Co., as
nominee of DTC. The interests of beneficial owners in the Global Notes will be
represented through financial institutions acting on their behalf as direct or
indirect participants in DTC.
Ownership of beneficial interests in a Global Note will be limited to
persons who have accounts with DTC ("participants") or persons who hold
interests through participants. Ownership of beneficial interests in the Global
Notes will be shown on, and the transfer of these ownership interests will be
effected only through, records maintained by DTC or its nominee (with respect to
interests of participants) and the records of participants (with respect to
interests of persons other than participants).
So long as DTC, or its nominee, is the registered owner or holder of a
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Indenture Securities of that series represented by
such Global Note for all purposes of the Indenture, the Indenture Securities of
that series and applicable law. In addition, no beneficial owner of an interest
in a Global Note will be able to transfer that interest except in accordance
with DTC's applicable procedures (in addition to those under the Indenture).
Payments on Indenture Securities represented by Global Notes will be made
to DTC or its nominee, as the registered owner thereof. Neither we, the Trustee,
any underwriter nor any paying agent will have any responsibility or liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interests in Global Notes, for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests or for any
action taken or omitted to be taken by the Depositary or any participant.
We expect that DTC or its nominee will credit participants' accounts on the
payable date with payments in respect of a Global Note in amounts proportionate
to their respective beneficial interest in the principal amount of such Global
Note as shown on the records of DTC or its nominee, unless DTC has reason to
believe that it will not receive payment on the payable date. We also expect
that payments by participants to owners of beneficial interests in such Global
Note held through such participants will be governed by standing instructions
and customary practices, as is now the case with securities held for the
accounts of customers registered in "street name." Such payments will be the
responsibility of such participants.
Transfers between participants in DTC will be effected in accordance with
DTC rules. The laws of some states require that certain persons take physical
delivery of securities in definitive form. Consequently, the ability to transfer
beneficial interests in a Global Note to such persons may be impaired. Because
DTC can only act on behalf of participants, who in turn act on behalf of others,
such as securities brokers and dealers, banks and trust companies ("indirect
participants"), the ability of a person having a beneficial interest in a Global
Note to pledge such interest to persons or entities that do not participate in
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the DTC system, or otherwise take actions in respect of such interest, may be
impaired by the lack of a physical certificate of such interest.
We believe it is the policy of DTC to take any action permitted to be taken
by a holder of Indenture Securities of a series only at the direction of one or
more participants to whose account interests in Global Notes are credited and
only in respect of such portion of the aggregate principal amount of the
Indenture Securities of a series as to which such participant or participants
has or have given such direction.
If (1) the Depositary notifies us that it is unwilling or unable to
continue as Depositary or if the Depositary ceases to be eligible under the
Indenture and a successor depositary is not appointed by us within 90 days or
(2) an event of default with respect to a series of Indenture Securities shall
have occurred and be continuing, the respective Global Notes representing the
affected series of Indenture Securities will be exchanged for Indenture
Securities in definitive form of like tenor and of an equal aggregate principal
amount, in authorized denominations. Such definitive Indenture Securities shall
be registered in such name or names as the Depositary shall instruct the
Trustee. Such instructions will most likely be based upon directions received by
the Depositary from participants with respect to ownership of beneficial
interests in Global Notes.
DTC has advised us 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 Exchange Act. DTC holds securities that its participants deposit with
DTC and facilitates the settlement among participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
participants include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations. DTC is owned by a number
of its direct participants, including those who may act as underwriters of our
Indenture Securities, and by the New York Stock Exchange, Inc., the American
Stock Exchange, Inc. and the National Association of Securities Dealers, Inc.
Access to the DTC system is also available to others such as indirect
participants that clear through or maintain a custodial relationship with a
direct participant, either directly or indirectly. The rules applicable to DTC
and its participants are on file with the SEC.
DTC has further advised us that management of DTC is aware that some
computer applications, systems, and the like for processing data that are
dependent upon calendar dates, including dates before, on, and after January 1,
2000, may encounter "Year 2000 problems." DTC has informed its participants and
other members of the financial community that it has developed and is
implementing a program so that its systems, as the same relate to the timely
payment of distributions (including principal and interest payments) to security
holders, book-entry deliveries, and settlement of trades within DTC, continue to
function appropriately. This program includes a technical assessment and a
remediation plan, each of which DTC reports is complete. Additionally, DTC's
plan includes a testing phase, which DTC expects to be completed within
appropriate time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including but not limited to issuers and their agents, as
well as the DTC's direct and indirect participants and third party vendors from
whom DTC licenses software and hardware, and third party vendors on whom DTC
relies for information or the provision of services, including telecommunication
and electrical utility service providers, among others. DTC has informed the
industry that it is contacting (and will continue to contact) third party
vendors from whom DTC acquires services to: (1) impress upon them the importance
of such services being Year 2000 compliant; and (2) determine the extent of
their efforts for Year 2000 remediation (and, as appropriate, testing) of their
services. In addition, DTC is in the process of developing such contingency
plans as it deems appropriate.
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According to DTC, the foregoing information with respect to DTC has been
provided to the industry for informational purposes only and is not intended to
serve as a representation, warranty, or contract modification of any kind.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in Global Notes among participants of DTC, it is under no
obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. Neither we, the Trustee, any
underwriter nor any paying agent will have any responsibility for the
performance by DTC or its participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
CONCERNING THE TRUSTEE
The Bank of New York is the Trustee under the Indenture. The bank also may
act as a depository of funds for, make loans to, and perform 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 101
Barclay Street, New York, New York 10286.
The holders of a majority in principal amount of the outstanding securities
issued under the Indenture will have the right to direct the time, method and
place of conducting any proceeding for exercising any remedy available to the
Trustee, subject to certain exceptions. The Indenture provides that if an Event
of Default occurs (and it is not cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent person in the
conduct of such person's own affairs. Subject to such provisions, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request of any holder of securities issued under the Indenture,
unless such holder shall have offered to the Trustee security and indemnity
satisfactory to it against any loss, liability or expense, and then only to the
extent required by the terms of the Indenture. 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.)
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
At May 1, 2000, the authorized capital stock of Enron was 1,216,500,000
shares, consisting of:
(a) 16,500,000 shares of preferred stock, no par value, of which:
- 1,276,809 shares of Cumulative Second Preferred Convertible Stock
were outstanding;
- 35.568509 shares of 9.142% Perpetual Second Preferred Stock were
issued and are held by an Enron subsidiary;
- 250,000 shares of Mandatorily Convertible Junior Preferred Stock,
Series B, were issued and outstanding;
- 204,800 shares of Mandatorily Convertible Single Reset Preferred
Stock, Series A, were issued and held by an Enron subsidiary;
- 83,000 shares of Mandatorily Convertible Single Reset Preferred
Stock, Series B, were issued and held by an Enron subsidiary;
(b) 1,200,000,000 shares of common stock, of which 732,044,320 shares
were outstanding.
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COMMON STOCK
Enron is authorized to issue up to 1,200,000,000 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 our preferred stock.
If we offer preferred stock, the specific designations and rights will be
described in the prospectus supplement and a description will be filed with the
SEC.
The 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 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"), an aggregate of 35.568509 shares of Enron preferred stock are
designated the 9.142% Perpetual Second Preferred Stock ("Enron 9.142% Preferred
Stock"), an aggregate of 250,000 shares of Enron preferred stock are designated
the Mandatory Convertible Junior Preferred Stock, Series B ("Enron Mandatorily
Convertible Junior Preferred Stock"), an aggregate of 204,800 shares of Enron
preferred stock are designated the Mandatorily Convertible Single Reset
Preferred Stock, Series A ("Enron Mandatorily Convertible Preferred Stock,
Series A"), and 83,000 shares of Enron preferred stock are designated the
Mandatorily Convertible Single Reset Preferred Stock, Series B ("Enron
Mandatorily Convertible Preferred Stock, Series B" and together with the Enron
Mandatorily Convertible Preferred Stock, Series A, the "Enron Mandatorily
Convertible Preferred Stock").
In addition to the Enron Convertible Preferred Stock, the Enron 9.142%
Preferred Stock, the Enron Mandatorily Convertible Junior Preferred Stock and
the Enron Mandatorily Convertible Preferred Stock, the Enron Board of Directors
has authority, without shareholder approval (except to the extent that holders
of 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
We have summarized the terms of the Enron Convertible Preferred Stock
below. The summary is not complete. The form of series designation for the Enron
Convertible Preferred Stock has been filed as an exhibit to this registration
statement, and you should read the form for any terms that may be important to
you.
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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 is convertible (currently 27.304 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, the Enron Mandatorily Convertible
Junior Preferred Stock and the Enron Mandatorily Convertible Preferred 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, the Enron
Mandatorily Convertible Junior Preferred Stock and the Enron Mandatorily
Convertible Preferred 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 payment. Each share of Enron Convertible Preferred Stock is convertible into
27.304 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:
- 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 that would
reduce the time for any notice to which the holders of the Enron
Convertible Preferred Stock may be entitled,
- 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,
- 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
- 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:
- 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 series of preferred stock ranking on
parity with the Enron Convertible Preferred Stock that, together
with number of shares of Enron Convertible
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Preferred Stock and other preferred stock ranking on parity with
the Enron Convertible Preferred Stock then outstanding, would
equal 5,000,000, or
- 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 be able to elect two directors to
Enron's Board of Directors until such dividends have been paid or funds
sufficient therefor deposited in trust. If we fail to pay dividends when due on
this preferred stock, the terms of this preferred stock will prohibit us from
paying dividends on junior stock, including Enron common stock, and prohibit us
and our subsidiaries from acquiring junior stock, including Enron common stock,
subject to certain exceptions.
9.142% PREFERRED STOCK
We have summarized the terms of the Enron 9.142% Preferred Stock below. The
summary is not complete. The form of series designation for the Enron 9.142%
Preferred Stock has been filed as an exhibit to this registration statement, and
you should read the form for any terms that may be important to you.
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, the Enron Mandatorily
Convertible Junior Preferred Stock and the Enron Mandatorily Convertible
Preferred 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 those
of the Enron common stock, the Enron Mandatorily Convertible Junior Preferred
Stock and the Enron Mandatorily Convertible Preferred 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:
- 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,
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- 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,
- 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
- 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:
- 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 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
- 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 be able to elect two directors to
Enron's Board of Directors until such dividends have been paid or funds
sufficient therefor deposited in trust. If we fail to pay dividends when due on
this preferred stock, the terms of this preferred stock will prohibit us from
paying dividends on junior stock, including Enron common stock, and prohibit us
and our subsidiaries from acquiring junior stock, including Enron common stock,
subject to certain exceptions.
ENRON MANDATORILY CONVERTIBLE JUNIOR PREFERRED STOCK
We have summarized the terms of the Enron Mandatorily Convertible Junior
Preferred Stock below. The summary is not complete. The form of the statement of
resolutions establishing the Enron Mandatorily Convertible Junior Preferred
Stock has been filed as an exhibit to this registration statement, and you
should read the form for any terms that may be important to you.
The annual rate of dividends payable on shares of the Enron Mandatorily
Convertible Junior Preferred Stock is 6.5%. The amount payable on shares of the
Enron Mandatorily Convertible Junior Preferred Stock in the event of any
liquidation, dissolution or winding up of the affairs of Enron is $4,000 per
share, together with accrued dividends. The dividend and liquidation rights of
the Enron Mandatorily Convertible Junior Preferred Stock are superior to the
dividend and liquidation rights of the Enron common stock, but
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rank junior to the dividend and liquidation rights of all other outstanding
series of Enron preferred stock. The Enron Mandatorily Convertible Junior
Preferred Stock is not redeemable at the option of Enron. Each share of Enron
Mandatorily Convertible Junior Preferred Stock is convertible initially into 200
shares of Enron common stock (which conversion rate is subject to certain
adjustments).
The holders of Enron Mandatorily Convertible Junior Preferred Stock
generally have no voting rights but are entitled to certain class voting rights,
including the requirement for approval by the holders of at least a majority of
the Enron Mandatorily Convertible Junior Preferred Stock (voting together with
all other shares of parity stock similarly affected) to effect:
- an amendment to the Enron Charter that would adversely affect the voting
powers, rights or preferences of the holders of the Enron Mandatorily
Convertible Junior Preferred Stock,
- the sale, lease or conveyance by Enron of all or substantially all of its
assets,
- the authorization, creation, issuance or increase in the authorized
amount of securities ranking on a parity with the Enron Mandatorily
Convertible Junior Preferred Stock, or
- the merger or consolidation of Enron with or into any other corporation,
unless each holder of Enron Mandatorily Convertible Junior Preferred
Stock immediately preceding such merger or consolidation shall receive
the same number of shares, with substantially the same rights and
preferences, of the surviving corporation.
In addition, if full cumulative dividends are not paid for six consecutive
quarterly periods, the holders of the Enron Mandatorily Convertible Junior
Preferred Stock (together with the holders of any parity stock similarly
affected) will have the right to elect two directors to Enron's Board of
Directors until all dividends in arrears have been paid or funds sufficient
therefor deposited in trust. If we fail to pay dividends when due on this
preferred stock, the terms of this preferred stock will prohibit us from paying
dividends on junior stock, including Enron common stock, and prohibit us and our
subsidiaries from acquiring junior stock, including Enron common stock, subject
to certain exceptions.
ENRON MANDATORILY CONVERTIBLE PREFERRED STOCK
We have summarized the terms of the Enron Mandatorily Convertible Preferred
Stock, Series A and Series B, below. The summary is not complete. The terms of
the Series A and the Series B are generally the same except as discussed below.
The forms of the statement of resolutions establishing both series of the Enron
Mandatorily Convertible Preferred Stock have been filed as exhibits to this
registration statement, and you should read the forms for any terms that may be
important to you.
The shares of each of the two series of the Enron Mandatorily Convertible
Preferred Stock were deposited under deposit agreements, and the related
depositary shares were then deposited into trusts of which we are the beneficial
owner. The depositary shares are to be sold by the trusts only if a default
occurs under certain of our debt obligations or under certain debt obligations
that were incurred in connection with our investment in Wessex Water Plc and
Elektro-Eletricidade e Servicos S.A. (the "Obligations") or our credit ratings
fall below investment grade and, in the case of Series A, our common stock price
falls below $18.92, subject to certain adjustments. The date that the depositary
shares are sold by the trust, or under certain circumstances the date the
depositary shares were to have been sold but were unable to be sold, is the Rate
Reset Date, and the market price of Enron common stock on the day such sale is
priced is the Reset Price, subject to certain adjustments. If the Obligations,
which generally mature on or before December 2001, are timely repaid in full, we
expect the Enron Mandatorily Convertible Preferred Stock will be retired and
canceled.
No dividends are payable on the Enron Mandatorily Convertible Preferred
Stock prior to the applicable Rate Reset Date. After a Rate Reset Date, the
annual rate of dividends payable is $350 per share plus an amount which is
intended to approximate the dividend yield on the Enron common stock as of the
Rate Reset Date. Such dividends are payable quarterly and are cumulative. The
amount payable on shares of Enron Mandatorily Convertible Preferred Stock in the
event of any liquidation, dissolution or
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winding up of the affairs of Enron is $5,000 per share, together with accrued
dividends to the date of payment. These dividend and liquidation rights are
superior to the dividend and liquidation rights of the Enron common stock and
the Enron Mandatorily Convertible Junior Preferred Stock, but rank junior to the
dividend and liquidation rights of the Enron Convertible Preferred Stock and
Enron 9.142% Preferred Stock.
The Enron Mandatorily Convertible Preferred Stock is not redeemable after
the Rate Reset Date. The Enron Mandatorily Convertible Preferred Stock will be
converted into Enron common stock on the third anniversary of the Rate Reset
Date. The number of shares issuable per share of Enron Mandatorily Convertible
Preferred Stock on conversion will equal the liquidation preference ($5,000)
divided by the conversion price. The conversion price will be between 100% to
110% of the applicable Reset Price (subject to certain adjustments) depending on
the market price of Enron common stock at the time of conversion. After the Rate
Reset Date and prior to the third anniversary of the Rate Reset Date, the
holders of the Enron Mandatorily Convertible Preferred Stock will be entitled to
convert such shares into Enron common stock based on a conversion price of 110%
of the Reset Price (subject to certain adjustments).
The holders of each series of Enron Mandatorily Convertible Preferred Stock
generally have no voting rights, but are entitled to certain class voting
rights, including the requirement for approval by the holders of at least a
majority of each series to effect:
- an amendment to the Enron Charter that would adversely affect the powers,
rights or preferences of the holders of such series of Enron Mandatorily
Convertible Preferred Stock,
- the authorization or issuance of capital stock ranking senior to the
Enron Mandatorily Convertible Preferred Stock, or
- the merger or statutory exchange in which holders of the Enron
Mandatorily Convertible Preferred Stock do not receive a similar
preferred stock in the surviving entity, subject to certain exceptions.
If the Obligations are not paid when due, the holders of each series of
Enron Mandatorily Convertible Preferred Stock will have the right to elect two
directors to Enron's Board of Directors until such debt is paid or certain other
events occur. In addition, if full cumulative dividends are not paid for six
consecutive quarterly periods, the holders of the Enron Mandatorily Convertible
Preferred Stock (together with the holders of any parity stock similarly
affected) will have the right to elect two directors to Enron's Board of
Directors until all dividends in arrears have been paid. If we fail to pay
dividends when due on Enron Mandatorily Convertible Preferred Stock, the terms
of the Enron Mandatorily Convertible Preferred Stock will prohibit us from
paying dividends on junior stock, including Enron common stock, and prohibit us
and our subsidiaries from acquiring junior stock, including Enron common stock,
subject to certain exceptions.
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.
"Business Transaction" means (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
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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" means 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 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. 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, 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
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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 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
We may choose to offer fractional interests in the preferred stock. If so,
we will offer depositary shares, each of which will represent a fraction (to be
set forth in the prospectus supplement relating to a particular series of
preferred stock) of a share of a particular series of preferred stock as
described below.
The preferred stock of any series represented by depositary shares will be
deposited under a 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 preferred stock represented
by such depositary share, to all the rights and preferences of the preferred
stock represented thereby (including dividend, voting, redemption and
liquidation rights).
The depositary shares will be evidenced by depositary receipts issued
pursuant to the deposit agreement. Depositary receipts will be distributed to
those persons purchasing the fractional interests in preferred stock in
accordance with the terms of the offering set forth in the applicable prospectus
supplement.
We have summarized the terms of the depositary shares below. The summary is
not complete. 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 you should
read the exhibit for any terms that may be important to you.
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DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all dividends or other cash distributions
received in respect of the preferred stock to the record holders of depositary
shares relating to such preferred stock in proportion to the number of such
depositary shares owned by such holders.
In the event of a distribution other than in cash or rights, preferences or
privileges upon the preferred stock, the Depositary will distribute 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.
WITHDRAWAL OF THE PREFERRED STOCK
Upon surrender of the depositary receipts at the corporate trust office of
the Depositary (unless the related 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 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 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 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 preferred stock represented by depositary shares, the
Depositary will redeem as of the same redemption date the number of depositary
shares representing preferred stock so redeemed, provided Enron shall have paid
in full to the Depositary the redemption price of the 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
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 PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the 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 preferred stock) will be entitled to
instruct the Depositary as to the exercise of the voting rights pertaining to
the amount of preferred stock represented by such holder's depositary shares.
The Depositary will endeavor, insofar as practicable, to vote the number of
shares of 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 preferred stock (but, at its
discretion, not from appearing at any meeting with respect to such preferred
stock) to the extent it does not receive specific instructions from the holders
of depositary shares representing preferred stock.
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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 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 distribution in respect of the
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 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 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.
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PLAN OF DISTRIBUTION
We may sell the offered securities (a) through agents; (b) through
underwriters or dealers; (c) directly to one or more purchasers; or (d) pursuant
to delayed delivery contracts or forward contracts.
BY AGENTS
Offered securities may be sold through agents designated by us. The agents
agree to use their reasonable best efforts to solicit purchases for the period
of their appointment.
BY UNDERWRITERS
If underwriters are used in the sale, the offered securities will be
acquired by the underwriters for their own account. The underwriters may resell
the securities in one or more transactions, including negotiated transactions,
at a fixed public offering price or at varying prices determined at the time of
sale. The obligations of the underwriters to purchase the securities will be
subject to certain conditions. The underwriters will be obligated to purchase
all the securities of the series offered if any of the securities are purchased.
Any initial public offering price and any discounts or concessions allowed or
re-allowed or paid to dealers may be changed from time to time.
DIRECT SALES
Offered securities may also be sold directly by us. In this case, no
underwriters or agents would be involved. We may use electronic media, including
the Internet, to sell offered securities directly.
DELAYED DELIVERY CONTRACTS OR FORWARD CONTRACTS
If indicated in the prospectus supplement, we will authorize agents,
underwriters or dealers to solicit offers to purchase offered securities from us
at the public offering price set forth in the prospectus supplement pursuant to
delayed delivery contracts or forward contracts providing for payment or
delivery on a specified date in the future at prices determined as described in
the prospectus supplement. 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.
GENERAL INFORMATION
The offered securities (other than common stock, which is traded on the New
York Stock Exchange under the symbol "ENE"), 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.
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.
Underwriters, dealers and agents that participate in the distribution of
the offered securities may be underwriters as defined in the Securities Act of
1933, and any discounts or commissions received by them from us and any profit
on the resale of the offered securities by them may be treated as underwriting
discounts and commissions under the Act. Any underwriters or agents will be
identified and their compensation described in a prospectus supplement.
We may have agreements with the underwriters, dealers and agents to
indemnify them against certain civil liabilities, including liabilities under
the Securities Act of 1933, or to contribute with respect to payments which the
underwriters, dealers or agents may be required to make.
Underwriters, dealers and agents or their affiliates may engage in
transactions with, or perform services for, us or our subsidiaries in the
ordinary course of their businesses.
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VALIDITY OF SECURITIES
The validity of the offered securities will be passed upon for Enron by
James V. Derrick, Jr., Esq., Executive 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 and schedule included in Enron's
Annual Report on Form 10-K for the year ended December 31, 1999, 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.
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$325,000,000
[ENRON LOGO]
7.875% NOTES DUE 2003
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PROSPECTUS SUPPLEMENT
JUNE 1, 2000
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LEHMAN BROTHERS
ABN AMRO INCORPORATED
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LOGO
