<PAGE>
Rule No. 424(b)(2)
Registration No. 33-52525
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION AND HAS BECOME EFFECTIVE. THIS PROSPECTUS +
+SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO +
+SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF +
+THESE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR +
+SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE +
+SECURITIES LAWS OF ANY SUCH JURISDICTION. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED APRIL 7, 1994
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED APRIL 5, 1994
3,000,000 SHARES
ENSERCH CORPORATION
DEPOSITARY PREFERRED SHARES, SERIES F
EACH REPRESENTING ONE-FORTIETH SHARE OF
ADJUSTABLE RATE CUMULATIVE PREFERRED STOCK, SERIES F
(LIQUIDATION PREFERENCE $1,000 PER SHARE)
----------
Each Depositary Share represents ownership of one-fortieth share of
Adjustable Rate Preferred Stock of ENSERCH Corporation (the "Corporation" or
"ENSERCH") deposited with Harris Trust Company of New York, and entitles the
holder to all proportional rights and preferences of the Adjustable Rate
Preferred Stock. See "Certain Terms of Adjustable Rate Preferred Stock" and
"Certain Terms of Depositary Shares."
The dividend rate on the Adjustable Rate Preferred Stock and the Depositary
Shares for the initial dividend period ending April 30, 1994 and the dividend
period ending July 31, 1994 will be % per annum. For each quarterly
period thereafter, dividends will be payable at the Applicable Rate. The
Applicable Rate for any quarterly dividend period will be equal to the highest
of the "Treasury Bill Rate," the "Ten Year Constant Maturity Rate" and the
"Thirty Year Constant Maturity Rate" determined in advance of such dividend
period, multiplied by %. However, the dividend rate for any dividend period
will not be less than 4.50% per annum nor greater than 10.50% per annum.
Dividends will be payable on the first day of February, May, August and
November of each year, commencing August 1, 1994. See "Certain Terms of
Adjustable Rate Preferred Stock--Dividends."
The Adjustable Rate Preferred Stock and the Depositary Shares are redeemable,
in whole or in part, at the option of the Corporation on or after May 1, 1999
at a redemption price of $25 per Depositary Share or $1,000 per share of
Adjustable Rate Preferred Stock plus accrued and unpaid dividends to the
redemption date. See "Certain Terms of Adjustable Rate Preferred Stock" and
"Certain Terms of Depositary Shares."
Application has been made to list the Depositary Shares on the New York Stock
Exchange. See "Underwriting."
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO
WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT(1)(3) CORPORATION(2)(3)
--------------- -------------- -----------------
<S> <C> <C> <C>
Per Depositary Share.... $ $ $
Total................... $ $ $
</TABLE>
- -----
(1) The Corporation has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(2) Before deducting expenses estimated at $ payable by the Corporation.
(3) The Underwriting Discount will be $ per Depositary Share offered hereby
with respect to any share of such Depositary Share sold to certain
institutions. Therefore, to the extent of any such sales to such
institutions, the actual total Underwriting Discount will be less than, and
the actual total Proceeds to Corporation will be greater than, the amounts
shown in the table above.
----------
The Depositary Shares are offered severally by the Underwriters, as specified
herein, subject to receipt and acceptance by them and subject to their right to
reject any order in whole or in part. It is expected that Depositary Receipts
evidencing the Depositary Shares will be ready for delivery in New York, New
York on or about April , 1994.
----------
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
KIDDER PEABODY & CO.
INCORPORATED
LEHMAN BROTHERS
SMITH BARNEY SHEARSON INC.
----------
The date of this Prospectus Supplement is April , 1994
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE DEPOSITARY
SHARES OFFERED HEREBY OR OF PREFERRED STOCK OF THE CORPORATION AT LEVELS ABOVE
THOSE WHICH MAY OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE
EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH TRANSACTIONS, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
FOR NORTH CAROLINA PURCHASERS: THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE COMMISSIONER OF INSURANCE FOR THE STATE OF NORTH CAROLINA,
NOR HAS THE COMMISSIONER OF INSURANCE RULED UPON THE ACCURACY OR ADEQUACY OF
THIS DOCUMENT.
----------------
S-2
<PAGE>
ENSERCH CORPORATION
ENSERCH is an integrated company focused on natural gas. It is the successor
to a company originally organized in 1909 for the purpose of providing natural
gas service to North Texas. ENSERCH's operations include: natural gas
transmission and distribution; natural gas and oil exploration and production;
natural gas liquids processing; and power and other.
CAPITALIZATION OF ENSERCH
The following table sets forth the consolidated short-term borrowings and
capitalization of ENSERCH and its subsidiaries as of December 31, 1993, after
giving pro forma effect to the transactions described in Note (a) to the table
and as adjusted to give effect to the sale of the Adjustable Rate Cumulative
Preferred Stock, Series F (without par value), liquidation preference of
$1,000 per share (the "Adjustable Rate Preferred Stock") offered hereby and
the application of the net proceeds therefrom to repay a $29.3 million bank
loan due in April 1994 and to reduce commercial paper borrowings. See "Use of
Proceeds."
<TABLE>
<CAPTION>
AS
OUTSTANDING PRO FORMA(A) ADJUSTED PERCENT
----------- ------------ ---------- -------
(IN THOUSANDS EXCEPT PERCENTS)
<S> <C> <C> <C> <C>
Commercial Paper Borrowing(b)...... $ 31,500 $ 184,050 $ 138,566
========== ========== ==========
Senior Long-Term Debt(c)........... $ 638,827 $ 714,634 $ 685,318 42.9%
Convertible Subordinated Deben-
tures............................. 90,750 90,750 90,750 5.7
Adjustable Rate Preferred Stock.... 175,000 100,000 175,000 11.0
Common Shareholders' Equity........ 646,718 645,690 645,490 40.4
---------- ---------- ---------- -----
Total Capitalization............... $1,551,295 $1,551,074 $1,596,558 100.0%
========== ========== ========== =====
</TABLE>
- --------
(a) The pro forma column gives effect to (i) the issuance in February 1994 of
$150 million principal amount of 6 3/8% Notes Due 2004 and the application
of the net proceeds therefrom to redeem all outstanding shares of the
Corporation's Adjustable Rate Cumulative Preferred Stock, Series D and all
outstanding sinking fund debentures and (ii) the increase in commercial
paper during the first quarter of 1994.
(b) Commercial Paper Borrowings were $184,050 at March 31, 1994.
(c) Includes current maturities of $10,600.
USE OF PROCEEDS
The net proceeds from the sale of the Depositary Preferred Shares, Series F
(the "Depositary Shares"), will be used by ENSERCH to repay a $29.3 million
bank loan with an interest rate of 8.7% due in April 1994 and to reduce
commercial paper borrowings. ENSERCH's commercial paper borrowings aggregated
approximately $184 million at March 31, 1994 and had a weighted average
interest rate of 3.88%.
S-3
<PAGE>
SELECTED FINANCIAL DATA OF ENSERCH
The selected financial data for each of the five years in the period ended
December 31, 1993, is derived from ENSERCH'S consolidated financial statements
and selected financial data included in ENSERCH'S Form 10-K for the year ended
December 31, 1993.
<TABLE>
<CAPTION>
AS OF OR FOR YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1993 1992 1991 1990 1989
--------- --------- --------- --------- ---------
(IN MILLIONS EXCEPT RATIO AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues................ $ 1,902.1 $ 1,714.6 $ 1,654.1 $ 1,701.4 $ 1,716.5
========= ========= ========= ========= =========
Operating Income........ $ 72.8 $ 112.2 $ 137.1 $ 147.2 $ 180.2
Other Income (Expense)--
Net.................... .2 (12.5) 14.0 49.3 .7
Interest Expense........ (80.2) (97.0) (95.6) (101.5) (95.0)
Income (Taxes) Benefit.. (7.5) .8 (17.7) (25.6) (21.6)
--------- --------- --------- --------- ---------
Income (Loss) from
Continuing Operations.. (14.7) 3.5 37.8 69.4 64.3
Discontinued Operations
Income (Loss).......... 73.9 (16.2) (18.7) 33.4 9.1
Extraordinary Item...... (15.3)
--------- --------- --------- --------- ---------
Net Income (Loss)....... $ 59.2 $ (28.0) $ 19.1 $ 102.8 $ 73.4
========= ========= ========= ========= =========
Income (Loss) from
Continuing Operations
Per Common Share....... $ (.41) $ (.14) $ .36 $ .84 $ .84
Cash Dividends Declared
Per Share of Common
Stock.................. $ .20 $ .80 $ .80 $ .80 $ .80
Average Common and
Dilutive Common
Equivalent Shares
Outstanding............ 66.6 65.7 65.1 65.0 59.8
Consolidated Ratio of
Earnings to Fixed
Charges (a)............ .93 1.02 1.49 1.80 1.76
Consolidated Ratio of
Earnings to Combined
Fixed Charges and
Preferred Stock
Dividends (a).......... .82 .92 1.25 1.54 1.50
BALANCE SHEET DATA:
Property, Plant and
Equipment--Net......... $ 2,118.1 $ 2,065.8 $ 2,152.1 $ 2,118.0 $ 2,046.3
Total Assets............ $ 2,760.3 $ 3,145.7 $ 3,163.1 $ 3,264.2 $ 3,254.2
Net Working Capital
(Deficiency)........... $ (195.5) $ 2.5 $ (42.2) $ 64.3 $ (23.0)
Current Ratio........... .72 1.00 .95 1.08 .97
Unused Lines of Credit.. $ 635.0 $ 485.0 $ 650.0 $ 600.0 $ 600.0
Capitalization (includes
current maturities):
Senior long-term debt. $ 638.8 $ 865.3 $ 757.6 $ 772.5 $ 727.1
Convertible
subordinated
debentures........... 90.8 90.8 205.7 215.7 215.7
Preferred stock....... 175.0 175.0 175.0 175.0 175.0
Common shareholders'
equity............... 646.7 604.6 686.3 723.9 701.3
--------- --------- --------- --------- ---------
Total Capitalization. $ 1,551.3 $ 1,735.7 $ 1,824.6 $ 1,887.1 $ 1,819.1
</TABLE>
- --------
(a) For purposes of computing the ratios for continuing operations: (i) "fixed
charges" represent interest expense, capitalized interest and the portion
of rental expense representing the interest factor for continuing
operations, and (ii) "earnings" represent the aggregate of income from
continuing operations before extraordinary items, income taxes,
amortization of previously capitalized interest and fixed charges deducted
from earnings.
For the purposes of calculating the ratio of earnings to combined fixed
charges and preferred stock dividends, the preferred stock dividend
requirements were assumed to be equal to the pretax earnings from continuing
operations which would be required to cover such dividend requirements
computed using the effective tax rates for the applicable period to the
extent not antidilutive.
For the year ended December 31, 1993, fixed charges exceeded earnings by
$6.6 million. For the years ended December 31, 1993 and 1992, combined fixed
charges and preferred stock dividends exceeded earnings by $19.3 million and
$10.3 million, respectively.
For the year 1993, excluding unusual charges (adverse judgment in
litigation, write-off of non U.S. gas and oil assets, charge for efficiency
enhancements and severance expenses, and the effect on deferred federal
income taxes resulting from the 1% increase in the statutory federal income
tax rate on corporations) the ratio of earnings to fixed charges would have
been 1.71 and ratio of earnings to combined fixed charges and preferred
stock dividends would have been 1.42.
S-4
<PAGE>
CERTAIN TERMS OF ADJUSTABLE RATE PREFERRED STOCK
GENERAL
The following statements are brief summaries of certain provisions relating
to the Preferred Stock of the Corporation contained in the Corporation's
Restated Articles of Incorporation and the resolution of the Corporate
Securities Committee of the Board of Directors of the Corporation establishing
the Adjustable Rate Preferred Stock, which are filed as exhibits to the
Registration Statement of which the accompanying Prospectus is a part or the
Current Report on Form 8-K to be filed by the Corporation prior to the closing
of the offering made hereby. Such summaries do not purport to be complete, and
for a full and complete statement of the provisions thereof reference is made
to such exhibits. Such summaries are qualified in their entirety by such
reference. The following information concerning the Adjustable Rate Preferred
Stock should be read in conjunction with the information under "Description of
ENSERCH Capital Stock" in the accompanying Prospectus.
Several agreements relating to senior long-term debt contain restrictions on
distributions on capital stock of the Corporation. At December 31, 1993, the
Corporation had approximately $342 million of consolidated common
shareholders' equity which was free of such restrictions after giving pro
forma effect to the redemption by the Corporation of all of its then
outstanding sinking fund debentures and its Adjustable Rate Cumulative
Preferred Stock, Series D in March 1994.
Harris Trust Company of New York will be the Transfer Agent and Registrar
for the Adjustable Rate Preferred Stock.
DIVIDENDS
Holders of shares of Adjustable Rate Preferred Stock will be entitled to
receive, when and as declared by the Board of Directors of the Corporation out
of assets of the Corporation legally available therefor, cumulative cash
dividends at the rate per share (based on the stated value) of % per annum
for the initial dividend period ending April 30, 1994 and the dividend period
ending July 31, 1994 and at the Applicable Rate (as defined below), from time
to time in effect, for each subsequent dividend period. However, the dividend
rate for any dividend period shall in no event be less than 4.50% per annum or
greater than 10.50% per annum. Dividends on the Adjustable Rate Preferred
Stock will accrue from the date of original issuance and will be paid
quarterly on the first day of February, May, August and November of each year,
commencing August 1, 1994.
ADJUSTABLE DIVIDENDS
Except as provided below in this paragraph, the "Applicable Rate" for any
dividend period will be (a) the highest of the Treasury Bill Rate, the Ten
Year Constant Maturity Rate and the Thirty Year Constant Maturity Rate (each
as hereinafter defined) for such dividend period, multiplied by (b) %. In
the event that the Corporation determines in good faith that for any reason
one or more of such rates cannot be determined for any dividend period, then
the Applicable Rate for such dividend period shall be (a) the higher of
whichever of such rates can be so determined, multiplied by (b) %. In the
event that the Corporation determines in good faith that for any reason none
of such rates can be determined for any dividend period, then the Applicable
Rate in effect for the preceding dividend period shall be continued for such
dividend period.
Except as provided below in this paragraph, the "Treasury Bill Rate" for
each dividend period will be the arithmetic average of the two most recent
weekly per annum market discount rates (or the one weekly per annum market
discount rate, if only one such rate shall be published during the relevant
Calendar Period (as defined below)) for three-month U.S. Treasury bills, as
published weekly by the Federal Reserve Board during the Calendar Period
immediately prior to the last ten calendar days of January, April, July or
October, as the case may be, prior to the dividend period for which the
dividend rate on the Adjustable Rate Preferred Stock is being determined. In
the event that the Federal Reserve
S-5
<PAGE>
Board does not publish such a weekly per annum market discount rate during any
such Calendar Period, then the Treasury Bill Rate for the related dividend
period shall be the arithmetic average of the two most recent weekly per annum
market discount rates (or the one weekly per annum market discount rate, if
only one such rate shall be published during the relevant Calendar Period) for
three-month U.S. Treasury bills, as published weekly during such Calendar
Period by any Federal Reserve Bank or by any U.S. Government department or
agency selected by the Corporation. In the event that a per annum market
discount rate for three-month U.S. Treasury bills shall not be published by
the Federal Reserve Board or by any Federal Reserve Bank or by any U.S.
Government department or agency during such Calendar Period, then the Treasury
Bill Rate for such dividend period shall be the arithmetic average of the two
most recent weekly per annum market discount rates (or the one weekly per
annum market discount rate, if only one such rate shall be published during
the relevant Calendar Period) for all of the U.S. Treasury bills then having
maturities of not less than 80 nor more than 100 days, as published during
such Calendar Period by the Federal Reserve Board or, if the Federal Reserve
Board shall not publish such rates, by any Federal Reserve Bank or by any U.S.
Government department or agency selected by the Corporation. In the event that
the Corporation determines in good faith that for any reason no such U.S.
Treasury bill rates are published as provided above during such Calendar
Period, then the Treasury Bill Rate for such dividend period shall be the
arithmetic average of the per annum market discount rates based upon the
closing bids during such Calendar Period for each of the issues of marketable
non-interest bearing U.S. Treasury securities with a maturity of not less than
80 nor more than 100 days from the date of each such quotation, as quoted
daily for each business day in New York City (or less frequently if daily
quotations shall not be generally available) to the Corporation by at least
three recognized U.S. Government securities dealers selected by the
Corporation. In the event that the Corporation determines in good faith that
for any reason the Corporation cannot determine the Treasury Bill Rate for any
dividend period as provided above in this paragraph, the Treasury Bill Rate
for such dividend period shall be the arithmetic average of the per annum
market discount rates based upon the closing bids during the related Calendar
Period for each of the issues of marketable interest-bearing U.S. Treasury
securities with a maturity of no less than 80 nor more than 100 days from the
date of each such quotation, as quoted daily for each business day in New York
City (or less frequently if daily quotations shall not be generally available)
to the Corporation by at least three recognized U.S. Government securities
dealers selected by the Corporation.
Except as provided below in this paragraph, the "Ten Year Constant Maturity
Rate" for each dividend period shall be the arithmetic average of the two most
recent weekly per annum Ten Year Average Yields (or the one weekly per annum
Ten Year Average Yield, if only one such yield shall be published during the
relevant Calendar Period as provided below), as published weekly by the
Federal Reserve Board during the Calendar Period immediately prior to the last
ten calendar days of January, April, July or October, as the case may be,
prior to the dividend period for which the dividend rate on the Adjustable
Rate Preferred Stock is being determined. In the event that the Federal
Reserve Board does not publish such a weekly per annum Ten Year Average Yield
during such Calendar Period, then the Ten Year Constant Maturity Rate for such
dividend period shall be the arithmetic average of the two most recent weekly
per annum Ten Year Average Yields (or the one weekly per annum Ten Year
Average Yield, if only one such yield shall be published during such Calendar
Period), as published weekly during such Calendar Period by any Federal
Reserve Bank or by any U.S. Government department or agency selected by the
Corporation. In the event that a per annum Ten Year Average Yield shall not be
published by the Federal Reserve Board or by any Federal Reserve Bank or by
any U.S. Government department or agency during such Calendar Period, then the
Ten Year Constant Maturity Rate for such dividend period shall be the
arithmetic average of the two most recent weekly per annum average yields to
maturity (or the one weekly average yield to maturity, if only one such yield
shall be published during such Calendar Period) for all of the actively traded
marketable U.S. Treasury fixed interest rate securities (other than Special
Securities (as defined below)) then having maturities of not less than eight
nor more than twelve years, as published during such Calendar Period
S-6
<PAGE>
by the Federal Reserve Board or, if the Federal Reserve Board shall not
publish such yields, by any Federal Reserve Bank or by any U.S. Government
department or agency selected by the Corporation. In the event that the
Corporation determines in good faith that for any reason the Corporation
cannot determine the Ten Year Constant Maturity Rate for any dividend period
as provided above in this paragraph, then the Ten Year Constant Maturity Rate
for such dividend period shall be the arithmetic average of the per annum
average yields to maturity based upon the closing bids during such Calendar
Period for each of the issues of actively traded marketable U.S. Treasury
fixed interest rate securities (other than Special Securities) with a final
maturity date not less than eight nor more than twelve years from the date of
each such quotation, as quoted daily for each business day in New York City
(or less frequently if daily quotations shall not be generally available) to
the Corporation by at least three recognized U.S. Government securities
dealers selected by the Corporation.
Except as provided below in this paragraph, the "Thirty Year Constant
Maturity Rate" for each dividend period shall be the arithmetic average of the
two most recent weekly per annum Thirty Year Average Yields (or the one weekly
per annum Thirty Year Average Yield, if only one such yield shall be published
during the relevant Calendar Period), as published weekly by the Federal
Reserve Board during the Calendar Period immediately prior to the last ten
calendar days of January, April, July or October, as the case may be, prior to
the dividend period for which the dividend rate on the Adjustable Rate
Preferred Stock is being determined. In the event that the Federal Reserve
Board does not publish such a weekly per annum Thirty Year Average Yield
during such Calendar Period, then the Thirty Year Constant Maturity Rate for
such dividend period shall be the arithmetic average of the two most recent
weekly per annum Thirty Year Average Yields (or the one weekly per annum
Thirty Year Average Yield, if only one such yield shall be published during
such Calendar Period), as published weekly during such Calendar Period by any
Federal Reserve Bank or by any U.S. Government department or agency selected
by the Corporation. In the event that a per annum Thirty Year Average Yield
shall not be published by the Federal Reserve Board or by any Federal Reserve
Bank or by any U.S. Government department or agency during such Calendar
Period, then the Thirty Year Constant Maturity Rate for such dividend period
shall be the arithmetic average of the two most recent weekly per annum
average yields to maturity (or the one weekly average yield to maturity, if
only one such yield shall be published during such Calendar Period) for all of
the actively traded marketable U.S. Treasury fixed interest rate securities
(other than Special Securities) then having maturities of not less than
twenty-eight nor more than thirty years, as published during such Calendar
Period by the Federal Reserve Board or, if the Federal Reserve Board shall not
publish such yields, by any Federal Reserve Bank or by any U.S. Government
department or agency selected by the Corporation. In the event that per annum
average yields to maturity for all of the actively traded marketable U.S.
Treasury fixed interest rate securities (other than Special Securities) then
having maturities of not less than twenty-eight nor more than thirty years
shall not be published by the Federal Reserve Board or by any Federal Reserve
Bank or by any U.S. Government department or agency during such Calendar
Period, then the Thirty Year Constant Maturity Rate for such dividend period
shall be determined in the manner specified in the preceding sentence based
upon all of the actively traded marketable U.S. Treasury fixed interest rate
securities (other than Special Securities) then having maturities of not less
than twenty-five years or, in the absence of which, twenty years. In the event
that the Corporation determines in good faith that for any reason the
Corporation cannot determine the Thirty Year Constant Maturity Rate for any
dividend period as provided above in this paragraph, then the Thirty Year
Constant Maturity Rate for such dividend period shall be the arithmetic
average of the per annum average yields to maturity based upon the closing
bids during such Calendar Period for each of the issues of actively traded
marketable U.S. Treasury fixed interest rate securities (other than Special
Securities) with a final maturity date not less than twenty-eight nor more
than thirty years (or, in the absence of which, having maturities of not less
than twenty-five years or, in the further absence of which, twenty years) from
the date of each such quotation, as quoted daily for each business day in New
York City (or less frequently if daily quotations shall not be generally
available) to the Corporation by at least three recognized U.S. Government
securities dealers selected by the Corporation.
S-7
<PAGE>
The Treasury Bill Rate, the Ten Year Constant Maturity Rate and the Thirty
Year Constant Maturity Rate shall each be rounded to the nearest one hundredth
of a percentage point.
The amount of dividends per share payable for each dividend period shall be
computed by dividing the dividend rate for such dividend period by four and
applying such rate against the stated value per share of the Adjustable Rate
Preferred Stock. The amount of dividends payable for the initial dividend
period or any period shorter than a full quarterly dividend period shall be
computed on the basis of 30-day months and a 360-day year.
The dividend rate with respect to each dividend period will be calculated as
promptly as practicable by the Corporation according to the appropriate method
described herein. The mathematical accuracy of each such calculation will be
confirmed in writing by independent accountants of recognized standing. Except
for the dividend rate for the initial dividend period and for the dividend
period commencing May 1, 1994, the Corporation will cause each dividend rate
to be published in a newspaper of general circulation in New York City prior
to the commencement of the new dividend period to which it applies and will
cause notice of such dividend rate to be enclosed with the dividend payment
checks next mailed to the holders of the Adjustable Rate Preferred Stock.
As used herein, the term "Calendar Period" means a period of fourteen
calendar days; the term "Special Securities" means securities which can, at
the option of the holder, be surrendered at face value in payment of any
Federal estate tax or which provide tax benefits to the holder and are priced
to reflect such tax benefits or which were originally issued at a deep or
substantial discount; the term "Ten Year Average Yield" means the average
yield to maturity for actively traded marketable U.S. Treasury fixed interest
rate securities (adjusted to constant maturities of ten years); and the term
"Thirty Year Average Yield" means the average yield to maturity for actively
traded marketable U.S. Treasury fixed interest rate securities (adjusted to
constant maturities of thirty years). In March 1994, the weekly per annum
market discount rate for three month U.S. Treasury bills, the Ten Year Average
Yield and the Thirty Year Average Yield were published weekly by the Federal
Reserve Board in "Federal Reserve Statistical Release H.15(519)--Selected
Interest Rates."
The Adjustable Rate Preferred Stock may not be redeemed prior to May 1,
1999. Thereafter, the Corporation, at its option, may redeem the Adjustable
Rate Preferred Stock in whole or in part at any time at $1,000 per share, in
each case together with unpaid accumulated dividends to the redemption date.
All rights of the holder of any share of the Adjustable Rate Preferred Stock
which is called for redemption (other than the right to receive the redemption
price plus accumulated dividends) will terminate upon the deposit in trust of
funds sufficient for the redemption thereof and the giving of appropriate
notice of redemption. See "Certain Terms of Depositary Shares--Redemption of
Depositary Shares."
LIQUIDATION RIGHTS
In the event of any involuntary dissolution, liquidation or winding up of
the Corporation, the holders of the Adjustable Rate Preferred Stock shall be
entitled to receive in cash out of the assets of the Corporation an amount
equal to $1,000 per share plus accrued dividends, or in the event of any
voluntary dissolution, liquidation or winding up, the amount fixed by the
Board of Directors as the then applicable optional redemption price plus
accrued dividends, before any distribution of the assets is made to the
holders of the Corporation's Voting Preference Stock and Common Stock. If the
assets are not sufficient to pay in full the amounts payable on all shares of
Preferred Stock in the event of voluntary or involuntary dissolution,
liquidation or winding up, then the assets available for payment will be
distributed ratably among the holders of the Preferred Stock of all series in
proportion to the full preferential amounts to which they are respectively
entitled.
S-8
<PAGE>
CERTAIN TERMS OF DEPOSITARY SHARES
Each Depositary Share represents one-fortieth of one share of Adjustable
Rate Preferred Stock deposited under the Deposit Agreement, to be dated as of
April , 1994 (the "Deposit Agreement"), among the Corporation, Harris Trust
Company of New York (the "Depositary") and the holders from time to time of
the Depositary Receipts (as defined below) issued thereunder. Subject to the
terms of the Deposit Agreement, each owner of a Depositary Share is entitled,
proportionately, to all of the rights and preferences of the Adjustable Rate
Preferred Stock represented thereby (including dividend, redemption,
liquidation and voting rights) contained in the Corporation's Restated
Articles of Incorporation and summarized above under "Certain Terms of
Adjustable Rate Preferred Stock."
The Depositary Shares are evidenced by depositary receipts issued pursuant
to the Deposit Agreement (the "Depositary Receipts"). Copies of the forms of
Deposit Agreement and Depositary Receipts are filed as an exhibit to the
Registration Statement of which the accompanying Prospectus is a part, and the
following summary of certain of the provisions thereof is qualified in its
entirety by reference to the Deposit Agreement. The following information
concerning the Deposit Agreement and the Depositary Shares should be read in
conjunction with the information under "Description of ENSERCH Capital Stock--
Depositary Shares" in the accompanying Prospectus.
ISSUANCE OF DEPOSITARY RECEIPTS
The Depositary will, upon deposit with it of Adjustable Rate Preferred Stock
and subject to the terms of the Deposit Agreement, execute and deliver to the
depositor or to a person specified by the depositor one or more Depositary
Receipts evidencing the aggregate number of Depositary Shares representing the
number of shares of Adjustable Rate Preferred Stock so deposited. The
Depositary may also require the assignment of any dividend or other property
which may be or become payable in respect of the Adjustable Rate Preferred
Stock presented for deposit.
WITHDRAWAL OF STOCK
Upon surrender of the Depositary Receipts evidencing Depositary Shares at
the corporate trust office of the Depositary, the owner of Depositary Shares
is entitled to delivery at such office, to or upon his order, of the number of
whole shares of Adjustable Rate Preferred Stock and any money or other
property represented by such Depositary Shares. Owners of Depositary Shares
will be entitled to receive only whole shares of Adjustable Rate Preferred
Stock on the basis of one share of Adjustable Rate Preferred Stock for forty
Depositary Shares. In no event will fractional shares of Adjustable Rate
Preferred Stock (or cash in lieu thereof) be distributed by the Depositary.
REDEMPTION OF DEPOSITARY SHARES
The Depositary Shares will be redeemed, upon not less than 30 nor more than
60 days' notice, from the proceeds received by the Depositary resulting from
the redemption, in whole or in part, at the Corporation's option, on or after
May 1, 1999, of Adjustable Rate Preferred Stock, at a redemption price of $25
per Depositary Share plus accrued and unpaid dividends to the redemption date.
Whenever the Corporation redeems shares of Adjustable Rate Preferred Stock
from the Depositary, the Depositary will redeem the number of Depositary
Shares representing shares of Adjustable Rate Preferred Stock so redeemed.
If less than all of the Depositary Shares are to be redeemed, the Depositary
Shares to be redeemed shall be selected by lot or pro rata or in any other
equitable manner determined by the Depositary.
S-9
<PAGE>
THE DEPOSITARY
The Depositary will make available for inspection by holders of Depositary
Receipts at its corporate trust office in New York City, currently located at
77 Water Street, New York, New York 10005, all reports and communications from
the Corporation which are delivered to the Depositary and made generally
available to the holders of its Adjustable Rate Preferred Stock.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following brief description of certain Federal income tax considerations
of the ownership of Depositary Shares representing the Adjustable Rate
Preferred Stock reflects the opinion of Mudge Rose Guthrie Alexander & Ferdon,
counsel to the Underwriters. Hereinafter, references in this section to
Adjustable Rate Preferred Stock will mean either the Adjustable Rate Preferred
Stock or Depositary Shares representing the Adjustable Rate Preferred Stock,
as the case may be. This description is a summary only, and each purchaser of
Adjustable Rate Preferred Stock offered by this Prospectus Supplement and the
accompanying Prospectus should consult his own tax adviser as to the tax
consequences to him of acquiring, holding and disposing of shares of
Adjustable Rate Preferred Stock in his particular circumstances, including the
effect of the alternative minimum tax and the application of state, local and
other tax laws.
Owners of the Depositary Shares will be treated for Federal income tax
purposes as if they were owners of the Adjustable Rate Preferred Stock
represented by such Depositary Shares and, accordingly, must take into account
for Federal income tax purposes the income and deductions to which they would
be entitled if they were holders of such Adjustable Rate Preferred Stock.
Dividends declared and paid by the Corporation with respect to the
Adjustable Rate Preferred Stock will be dividends for Federal income tax
purposes to the extent of the current or accumulated earnings and profits of
the Corporation as determined for Federal income tax purposes. Accordingly,
such dividends will be eligible for the 70% dividends-received deduction
allowed to corporate shareholders. In determining entitlement to the
dividends-received deduction, corporate holders of shares of Adjustable Rate
Preferred Stock should consider the effects of (i) Section 246(c) of the
Internal Revenue Code of 1986, as amended (the "Code"), which, among other
things, disallows the dividends-received deduction in respect of any dividend
on a share of stock held or deemed held for 45 days or less; (ii) Section 246A
of the Code, which reduces the dividends-received deduction allowed to a
corporate shareholder that has indebtedness "directly attributable" to an
investment in portfolio stock; and (iii) Section 1059 of the Code, which,
under certain circumstances, reduces the tax basis of stock, for the purposes
of calculating gain or loss in a subsequent disposition, by the portion of any
"extraordinary dividend" eligible for the dividends-received deduction.
Dividends on the Adjustable Rate Preferred Stock will not be increased as a
result of any reduction in or elimination of the 70% dividends-received
deduction.
S-10
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Corporation has agreed to sell to each of the Underwriters named below,
and each of the Underwriters has severally agreed to purchase from the
Corporation, the number of shares of Adjustable Rate Preferred Stock
represented by the number of Depositary Shares set forth opposite its name
below:
<TABLE>
<CAPTION>
NUMBER OF
DEPOSITARY
UNDERWRITER SHARES
----------- ----------
<S> <C>
Goldman, Sachs & Co............................................
Bear, Stearns & Co. Inc........................................
Kidder, Peabody & Co. Incorporated.............................
Lehman Brothers Inc............................................
Smith Barney Shearson Inc......................................
---------
Total.................................................... 3,000,000
=========
</TABLE>
The Underwriting Agreement provides that the Underwriters will be obligated
to purchase all the Depositary Shares offered hereby if any are purchased.
The Underwriters have advised the Corporation that they propose initially to
offer the Depositary Shares offered hereby 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 $ per
share. The Underwriters may allow, and such dealers may reallow, a discount
not in excess of $ per share on sales to certain other dealers. After the
initial public offering, the public offering price, concession and reallowance
may be changed.
Certain of the Underwriters are customers of, or engage in transactions
with, and from time to time have performed services for, the Corporation and
its subsidiaries and associated companies in the ordinary course of business.
The Depositary Shares are a new issue of securities with no established
trading market. Application has been made to list the Depositary Shares on the
New York Stock Exchange. There can be no assurance that the Depositary Shares
will be so listed or will continue to be listed. There can be no assurance as
to the liquidity of the trading market for the Depositary Shares.
The Corporation has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended.
The Corporation has agreed that it will not, directly or indirectly, offer
or sell, or determine to offer or sell, any Preferred Stock or any equity
securities that are substantially similar to the Depositary Shares or the
Adjustable Rate Preferred Stock during the period ending on the earlier of the
closing date or 10 business days after the date of this Prospectus Supplement
without the prior written consent of the Underwriters.
S-11
<PAGE>
PROSPECTUS
U.S. $450,000,000
ENSERCH CORPORATION
DEBT SECURITIES, PREFERRED STOCK
AND COMMON STOCK
ENSERCH CAPITAL L.L.C. PREFERRED SECURITIES
ENSERCH Corporation ("ENSERCH" or the "Corporation") may offer from time to
time in one or more series, together or separately, as shall be designated by
ENSERCH (i) debt securities (the "Debt Securities") which may be either senior
debt securities (the "Senior Debt Securities") or subordinated debt securities
(the "Subordinated Debt Securities") which, in the case of Subordinated Debt
Securities, may be convertible into the Corporation's Common Stock, $4.45 par
value (the "Common Stock"), (ii) shares of its preferred stock, of no par value
(the "Preferred Stock"), which may be issued in the form of Depositary Shares
evidenced by Depositary Receipts, and (iii) shares of its Common Stock. Enserch
Capital L.L.C. ("Enserch Capital"), a Delaware limited liability company and a
special purpose subsidiary of ENSERCH, may also offer, from time to time, its
preferred limited liability company interests ("EC Preferred Securities"), in
one or more series. In connection therewith, ENSERCH and Enserch Preferred
Capital, Inc., a Delaware corporation ("Enserch Preferred"), may offer back-up
undertakings ("Backup Undertakings") with respect to the EC Preferred
Securities, as described herein under "Enserch Capital and Enserch Preferred."
The Debt Securities, Preferred Stock, Common Stock, and EC Preferred Securities
and any related Backup Undertakings are collectively called the "Securities."
The Securities may be offered in amounts, at prices and on terms to be
determined at the time of offering, provided, however, that the aggregate
initial public offering price of all Securities shall not exceed U.S.
$450,000,000 (or its equivalent, based on the applicable exchange rate at the
time of sale, in one or more foreign currencies, currency units or composite
currencies). Certain specific terms of the particular Securities in respect of
which this Prospectus is being delivered will be set forth in the accompanying
Prospectus Supplement (the "Prospectus Supplement"), including where
applicable, in the case of Debt Securities: the specific title, aggregate
principal amount, the denomination, maturity, premium, if any, the interest
rate (which may be fixed, floating or adjustable), the time and method of
calculating payment of interest, if any, the place or places where principal of
(and premium, if any) and interest, if any, on such Debt Securities will be
payable, the currency in which principal of (and premium, if any) and interest,
if any, on such Debt Securities shall be payable, any terms of redemption at
the option of ENSERCH or the holder, any sinking fund provisions, terms for any
conversion or exchange into other securities, the initial public offering price
and other special terms; and, in the case of Preferred Stock and EC Preferred
Securities, the specific title, the aggregate amount, any dividends (including
the method of calculating payment of such dividends), liquidation, redemption,
any voting and other rights, terms for any conversion or exchange into other
securities, the initial public offering price and any other special terms. The
Senior Debt Securities when issued will rank on a parity with all other
unsecured and unsubordinated indebtedness of the Corporation. The Subordinated
Debt Securities when issued will be unsecured and subordinated to all present
and future Senior Indebtedness of the Corporation. If so specified in the
applicable Prospectus Supplement, Debt Securities of a series may be issued in
whole or in part in the form of one or more temporary or permanent global
Securities. ENSERCH's Common Stock is listed on the New York Stock Exchange,
the Midwest Stock Exchange and the London Stock Exchange. Any Common Stock sold
pursuant to a Prospectus Supplement will be listed on such exchanges, subject
to official notice of issuance.
The Prospectus Supplement will contain information concerning certain United
States federal income tax considerations, if applicable to the Securities
offered.
The Securities will be sold directly, through agents, underwriters or dealers
as designated from time to time, or through a combination of such methods. If
agents of ENSERCH or any dealers or underwriters are involved in the sale of
the Securities in respect of which this Prospectus is being delivered, the
names of such agents, dealers or underwriters and any applicable commissions or
discounts will be set forth in or may be calculated from the Prospectus
Supplement with respect to such Securities.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURI-
TIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is April 5, 1994.
<PAGE>
AVAILABLE INFORMATION
ENSERCH is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Corporation can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, and at the following Regional
Offices of the Commission: 7 World Trade Center, New York, New York 10048; and
500 West Madison Street, Chicago, Illinois 60661-2511. Copies of such material
can be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Corporation's Common Stock is listed on, and reports, proxy statements and
other information concerning the Corporation may also be inspected at the
offices of, the New York Stock Exchange, 20 Broad Street, New York, New York
and the Midwest Stock Exchange, 440 South LaSalle Street, Chicago, Illinois
60605.
This Prospectus does not contain all the information set forth in the
Registration Statement on Form S-3 (herein, together with all amendments and
exhibits thereto, referred to as the "Registration Statement"), which the
Corporation has filed with the Commission under the Securities Act of 1933 (the
"Securities Act"). Statements contained or incorporated by reference herein
concerning the provisions of documents are necessarily summaries of such
documents, and each statement is qualified in its entirety by reference to the
Registration Statement.
No separate financial statements of Enserch Capital or Enserch Preferred have
been included herein. ENSERCH, Enserch Capital and Enserch Preferred do not
consider that such financial statements would be material to holders of EC
Preferred Securities because Enserch Capital and Enserch Preferred are newly
organized special purpose entities, have no operating history and no
independent operations and are not engaged in, and do not propose to engage in,
any activity other than as set forth below. See "Enserch Capital and Enserch
Preferred." Enserch Capital is a limited liability company organized under the
laws of the State of Delaware and will be managed by ENSERCH, which
beneficially owns all of Enserch Capital's limited liability company interests
(other than the EC Preferred Securities) which are non-transferable. Enserch
Capital exists solely for the purpose of issuing its limited liability company
interests and lending the proceeds thereof to ENSERCH or Enserch Preferred.
Enserch Preferred is a Delaware corporation and a wholly-owned subsidiary of
ENSERCH. Enserch Preferred exists solely for the purpose of holding the Class B
limited liability company interests of Enserch Capital, borrowing the proceeds
from the sale of the limited liability company interests of Enserch Capital and
reloaning such proceeds to ENSERCH.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Corporation with the
Commission pursuant to the Exchange Act (File No. 1-3183) and are incorporated
herein by reference:
1. The Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993; and
2. The Corporation's Current Reports on Form 8-K dated January 18, 1994,
February 9, 1994, and March 3, 1994.
All documents filed by the Corporation pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the securities offered hereby shall
be deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the date of filing such documents. Any statement contained herein
or in a document all or a portion of which is incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or
2
<PAGE>
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or
is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
Any person receiving a copy of this Prospectus may obtain without charge,
upon request, a copy of any of the documents incorporated herein by reference
(not including the exhibits to such documents, unless such exhibits are
specifically incorporated by reference in such documents). Requests for such
copies should be directed to Mr. M. G. Fortado, Vice President, Corporate
Secretary and Assistant General Counsel, at 300 South St. Paul Street, Dallas,
Texas 75201-5589 (tel. 214-670-2649).
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT, IN CONNECTION WITH THE OFFERING
CONTAINED HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE CORPORATION OR BY ANY
UNDERWRITER, DEALER OR AGENT. THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT DOES
NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES
OR AN OFFER TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER WOULD BE
UNLAWFUL OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE THEREOF OR, IN THE CASE OF INFORMATION INCORPORATED HEREIN BY
REFERENCE, THE DATE OF FILING WITH THE COMMISSION.
THE CORPORATION
GENERAL
ENSERCH is an integrated company focused on natural gas. It is the successor
to a company originally organized in 1909 for the purpose of providing natural
gas service to North Texas. The Corporation's operations include the following:
. Natural Gas Transmission and Distribution--Owning and operating
interconnected natural gas transmission pipelines, gathering lines,
underground gas storage reservoirs, compressor stations, distribution
systems and related properties; transporting, distributing and selling
natural gas to residential, commercial, industrial, electric-generation,
pipeline and other customers; and compressing natural gas for motor vehicle
usage. (Lone Star Gas Company, a division of the Corporation, Enserch Gas
Company, and related operations.)
. Natural Gas and Oil Exploration and Production--Exploring for,
developing, producing and marketing natural gas and oil. (Enserch
Exploration, Inc., Enserch Exploration Partners, Ltd. [more than 99%
owned], Enserch International Exploration, Inc., and related operations.)
. Natural Gas Liquids Processing--Gathering natural gas, processing
natural gas to produce liquids and marketing the products. (Enserch
Processing Partners, Ltd.)
. Power and Other--Developing, operating and maintaining independent
electric generation power plants and cogeneration facilities; and
furnishing energy services under long-term contracts to large building
complexes, such as universities and medical centers. (Enserch Development
Corporation and Lone Star Energy Company) Providing environmental
engineering and contracting services from initial site assessment and
feasibility studies to designs, actions and remediation (Enserch
Environmental Corporation).
The Corporation's principal executive offices are located at 300 South St.
Paul Street, Dallas, Texas 75201, and its telephone number is (214) 651-8700.
3
<PAGE>
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
AND EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
The following ratios have been restated to give effect to the discontinuance
of the Corporation's engineering and construction business segment:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Consolidated ratio of earnings to fixed charges....... .93 1.02 1.49 1.80 1.76
Consolidated ratio of earnings to combined fixed
charges and preferred stock dividends................ .82 .92 1.25 1.54 1.50
</TABLE>
For purposes of computing the foregoing ratios for continuing operations: (i)
"fixed charges" represent interest expense, capitalized interest and the
portion of rental expense representing the interest factor for continuing
operations, and (ii) "earnings" represent the aggregate of income from
continuing operations before extraordinary items, income taxes, amortization of
previously capitalized interest and fixed charges deducted from earnings.
For the purposes of calculating the ratio of earnings to combined fixed
charges and preferred stock dividends, the preferred stock dividend
requirements were assumed to be equal to the pretax earnings from continuing
operations which would be required to cover such dividend requirements computed
using the effective tax rates for the applicable period to the extent not
antidilutive.
For the year ended December 31, 1993, fixed charges exceeded earnings by $6.6
million. For the years ended December 31, 1993 and 1992, combined fixed charges
and preferred stock dividends exceeded earnings by $19.3 million and $10.3
million, respectively.
For the year 1993, excluding unusual charges (adverse judgment in litigation,
write-off of non U.S. gas and oil assets, charge for efficiency enhancements
and severance expenses, and the effect on deferred federal income taxes
resulting from the 1% increase in the statutory federal income tax rate on
corporations) the ratio of earnings to fixed charges would have been 1.71 and
ratio of earnings to combined fixed charges and preferred stock dividends would
have been 1.42.
USE OF PROCEEDS
Unless otherwise specified in the Prospectus Supplement, the net proceeds to
be received by the Corporation from the sale of the Securities will be used to
repay and refinance indebtedness of the Corporation. Pending use for these
purposes, the Corporation may invest proceeds from the sale of the Securities
in short-term obligations. Enserch Capital will loan to ENSERCH or Enserch
Preferred all proceeds received by Enserch Capital from the sale of EC
Preferred Securities.
DESCRIPTION OF THE DEBT SECURITIES
Senior Debt Securities may be issued from time to time in one or more series
under an Indenture dated as of February 15, 1992 (the "Senior Indenture"),
between the Corporation and The First National Bank of Chicago, as Trustee (the
"Senior Trustee"). Subordinated Debt Securities may be issued from time to time
in one or more series under an indenture (the "Subordinated Indenture") to be
entered into between the Corporation and The First National Bank of Chicago, as
Trustee (the "Subordinated Trustee"). The Senior Indenture and the Subordinated
Indenture are sometimes referred to collectively as the "Indentures," and the
Senior Trustee and the Subordinated Trustee are sometimes referred to
collectively as the "Trustees." As used under this caption, unless the context
otherwise requires, "debt securities" in lower case shall mean all debt
securities issued or issuable, as the case may be, under the respective
Indentures, and "Debt Securities" with initial capital letters shall mean the
Debt Securities covered by this Prospectus and any Prospectus Supplement. The
statements under this caption are brief summaries of certain provisions
contained in the Indentures, do not purport to be complete and are qualified in
their entirety by reference to the Indentures, including the definition therein
of certain terms, copies of which are filed as exhibits to the Registration
Statement, as amended, of which this Prospectus is a part.
4
<PAGE>
Whenever particular provisions or defined terms in the Indentures are
referred to therein, such provisions or defined terms are incorporated by
reference herein. Section and Article references used herein are references to
provisions of both the Senior Indenture and Subordinated Indenture unless
otherwise noted.
GENERAL
Each Indenture provides for the issuance of debt securities in one or more
series, and does not limit the principal amount of debt securities which may be
issued thereunder.
Reference is made to the Prospectus Supplement for the following terms of the
Debt Securities being offered hereby: (1) the specific title of the Debt
Securities; (2) whether the Debt Securities are Senior Debt Securities or
Subordinated Debt Securities; (3) the aggregate principal amount of the Debt
Securities; (4) the percentage of their principal amount at which the Debt
Securities will be issued; (5) the date on which the Debt Securities will
mature; (6) the rate or rates per annum or the method for determining such rate
or rates, if any, at which the Debt Securities will bear interest; (7) the
times at which any such interest will be payable; (8) any provisions relating
to optional or mandatory redemption of the Debt Securities; (9) the
denominations in which the Debt Securities are authorized to be issued; (10)
any provisions relating to the conversion or exchange of the Debt Securities
into debt securities of another series; (11) the foreign currency or units of
two or more of such foreign currencies in which the Debt Securities are
denominated, if other than United States dollars, and the currency in which
interest is payable if other than the currency in which the Debt Securities are
denominated; (12) the place or places at which the Corporation will make
payments of principal (and premium, if any) and interest, if any, and the
method of such payment; (13) whether the Debt Securities will be issued in
whole or in part in the form of one or more global Debt Securities and, in such
case, the depository for such Debt Security or Debt Securities; (14) the person
to whom any interest on a Debt Security of such series will be payable, if
other than the person in whose name that Debt Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest; (15) the extent to which, or the manner in
which, any interest payable on a global Debt Security on an Interest Payment
Date will be paid; (16) with respect to the Subordinated Debt Securities only,
whether such Securities will be convertible into or exchangeable for Common
Stock or any other shares of the capital stock or securities of the Corporation
and, if so, the terms and conditions upon which such conversion will be
effected including the initial conversion price or rate and the conversion
period; (17) any additional covenants and Events of Default and the remedies
with respect thereto not currently set forth in the respective Indenture; and
(18) any other specific terms of the Debt Securities. (Section 301).
If the principal of, premium, if any, or interest on Debt Securities of any
series are payable in a foreign or composite currency, or if any index or
formula is used to determine the amount of payment of principal of, premium, if
any, or interest on any series of Debt Securities, any specific federal income
tax, accounting and other considerations applicable thereto will be described
in the Prospectus Supplement relating to that series.
One or more series of Debt Securities may be sold at a substantial discount
below its or their stated principal amount, bearing no interest or interest at
a rate that at the time of issuance is below market rate. Federal income tax
consequences and other special considerations applicable to any such series
will be described in the Prospectus Supplement relating thereto.
SUBORDINATED DEBT SECURITIES
Subordination. The obligations of the Corporation pursuant to the
Subordinated Debt Securities will be subordinate in right of payment, to the
extent set forth in the Subordinated Indenture, to all Senior Indebtedness of
the Corporation. (Subordinated Indenture--Article XIV). Upon the maturity of
principal of any Senior Indebtedness by lapse of time, acceleration or
otherwise, no payments, including sinking fund payments, may be made on the
Subordinated Debt Securities and no Subordinated Debt Securities may be
acquired until all principal of and premium, if any, and interest on all such
matured Senior Indebtedness
5
<PAGE>
shall have been paid in full. (Subordinated Indenture--Section 1403). "Senior
Indebtedness" of the Corporation is defined to mean the principal of and
premium, if any, and interest on the indebtedness (other than the Subordinated
Debt Securities) of the Corporation, whether outstanding on the date of the
Subordinated Indenture or thereafter created, incurred, assumed or guaranteed
to others, (a) for money borrowed from or guaranteed to others, (b) under
promissory notes or debentures, bonds or other instruments of indebtedness
issued under the provisions of or pursuant to an indenture, agreement, or
similar instrument, or (c) for the payment of money relating to the lease of
any property which lease may be capitalized on the consolidated balance sheet
of the Corporation and its Subsidiaries in accordance with generally accepted
accounting principles as in effect from time to time and, in each such case,
all renewals, extensions, refundings, amendments or modifications thereof,
except for the Corporation's 6 3/8% Convertible Subordinated Debentures due
2002; unless, in each case, by the terms of the instrument creating or
evidencing the indebtedness it is provided that such indebtedness is not
superior in right of payment to the Subordinated Debt Securities. (Subordinated
Indenture--Section 101). The Subordinated Indenture does not limit the
aggregate amount of Senior Indebtedness which may be issued. As of December 31,
1993, Senior Indebtedness of the Corporation aggregated approximately $639
million.
Conversion of Subordinated Debt. The applicable Prospectus Supplement will
provide whether the Subordinated Debt Securities of a series will be
convertible and, if so, the initial conversion price per share at which such
convertible Subordinated Debt Securities will be convertible into Common Stock.
Subject to prior redemption of the convertible Subordinated Debt Securities,
the holders of such Subordinated Debt Securities will be entitled at any time
on or before the close of business on the maturity date thereof to convert such
Subordinated Debt Securities (or, in the case of convertible Subordinated Debt
Securities of denominations in excess of $1,000 any portion of which is $1,000
or an integral multiple of $1,000) into shares of Common Stock at the initial
conversion price set forth in the applicable Prospectus Supplement. No
adjustment will be made on conversion of any convertible Subordinated Debt
Securities for interest accrued thereon or, except as set forth below, for
dividends on any securities issued upon such conversion. (Subordinated
Indenture--Section 1301).
In order to exercise the right of conversion, the holder of any such
convertible Subordinated Debt Securities must surrender his convertible
Subordinated Debt Securities to the Corporation at any office or agency of the
Corporation maintained for such purpose. The convertible Subordinated Debt
Securities to be surrendered must be accompanied by written notice to the
Corporation that the holder elects to convert such Subordinated Debt
Securities.
If any convertible Subordinated Debt Security, whether or not called for
redemption, is converted between a record date for the payment of interest and
the next succeeding interest payment date, such convertible Subordinated Debt
Security must be accompanied by funds payable to the Corporation equal to the
interest payable to the registered holder on such interest payment date on the
principal amount so converted. In the case of any convertible Subordinated Debt
Security or portion thereof called for redemption, conversion rights expire at
the close of business on the Redemption Date, even if such redemption occurs at
a time when conversion of the Subordinated Debt Security portion thereof is in
the best interests of the holder. (Subordinated Indenture--Section 1302).
No fractional shares of Common Stock will be issued upon conversion but, in
lieu thereof, an adjustment in cash will be made based on the market price of
Common Stock at the close of business on the date of conversion. (Subordinated
Indenture--Section 1303).
The Conversion Price will be subject to adjustment in the event of: (i) the
payment of certain stock dividends on the Common Stock; (ii) the issuance of
certain rights or warrants to all holders of the Common Stock entitling them to
subscribe for or purchase Common Stock at a price less than the market price;
(iii) the subdivision of Common Stock into a greater number of shares of Common
Stock or the combination of Common Stock into a smaller number of shares of
Common Stock; (iv) the distribution by the Corporation to all holders of the
Common Stock of evidences of indebtedness or assets of the Corporation
(excluding rights
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or warrants and any dividends or distributions mentioned above); and (v) the
reclassification of Common Stock into other securities. However, no adjustment
in the Conversion Price will be required unless such adjustment would require
an increase or decrease of at least 1% in the Conversion Price. (Subordinated
Indenture--Section 1304).
In case of certain consolidations or mergers to which the Corporation is a
party or the transfer of substantially all of the assets of the Corporation,
each convertible Subordinated Debt Security then outstanding would, without the
consent of any holders of the convertible Subordinated Debt Securities, become
convertible only into the kind and amount of securities, cash and other
property receivable upon the consolidation, merger or transfer by a holder of
the number of shares of Common Stock into which such convertible Subordinated
Debt Security might have been converted immediately prior to such
consolidation, merger or transfer (assuming such holder of Common Stock failed
to exercise any rights of election and received per share the kind and amount
received per share by a plurality of non-electing shares). (Subordinated
Indenture--Section 1311).
FORM, EXCHANGE, REGISTRATION AND TRANSFER
Debt Securities of a series may be issuable in certificated or global form.
Debt Securities may be presented for registration of transfer (with the form of
transfer endorsed thereon duly executed), at the office of the Security
Registrar or at the office of any transfer agent designated by the Corporation
for such purpose with respect to any series of Debt Securities and referred to
in an applicable Prospectus Supplement, without service charge and upon payment
of any taxes and other governmental charges as described in the relevant
Indenture. Such transfer or exchange will be effected upon the Security
Registrar or such transfer agent, as the case may be, being satisfied with the
documents of title and identity of the person making the request. The
Corporation has appointed the Senior Trustee as Security Registrar with respect
to the Senior Debt Securities and the Subordinated Trustee as Security
Registrar with respect to the Subordinated Debt Securities. (Section 305). If a
Prospectus Supplement refers to any transfer agents (in addition to the
Security Registrar) initially designated by the Corporation with respect to any
series of Debt Securities, the Corporation may at any time rescind the
designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts, except that the Corporation will be
required to maintain a transfer agent in each Place of Payment for such series.
(Section 1002). The Corporation may at any time designate additional transfer
agents with respect to any series of Debt Securities.
In the event of any redemption in part, the Corporation shall not be required
to (i) issue, register the transfer of or exchange any Debt Security during a
period beginning at the opening of business 15 days before any selection for
redemption of Debt Securities of like tenor and of the series of which such
Debt Security is a part, and ending at the close of business on the earliest
date in which the relevant notice of redemption is deemed to have been given to
all holders of Debt Securities of like tenor and of such series to be redeemed
and (ii) register the transfer of or exchange any Debt Security so selected for
redemption, in whole or in part, except the unredeemed portion of any Debt
Security being redeemed in part. (Sections 305 and 1103).
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in an applicable Prospectus Supplement, payment of
principal of and premium (if any) on any Debt Security will be made only
against surrender to the Paying Agent of such Debt Security. Unless otherwise
indicated in an applicable Prospectus Supplement, principal of and any premium
and interest, if any, on Debt Securities will be payable, subject to any
applicable laws and regulations, at the office of such Paying Agent or Paying
Agents as the Corporation may designate from time to time, except that at the
option of the Corporation payment of any interest may be made by check mailed
to the address of the person entitled thereto as such address shall appear in
the Security Register with respect to such Debt Securities. (Section 1002).
Unless otherwise indicated in an applicable Prospectus Supplement, payment of
interest on a Debt Security on any Interest Payment Date will be made to the
person in whose name such Debt Security (or Predecessor Security) is registered
at the close of business on the Regular Record Date for such interest. (Section
307).
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Unless otherwise indicated in an applicable Prospectus Supplement, the
Corporate Trust Office of the related Trustee in the City of Chicago will be
designated as the Corporation's sole Paying Agent for payments with respect to
Debt Securities of each series. (Sections 101 and 1002). Any Paying Agents
outside the United States and any other Paying Agents in the United States
initially designated by the Corporation for the respective Debt Securities will
be named in an applicable Prospectus Supplement. (Section 301). The Corporation
may at any time designate additional Paying Agents or rescind the designation
of any Paying Agent or approve a change in the office through which any Paying
Agent acts, except that the Corporation will be required to maintain a Paying
Agent in each Place of Payment for each series of the respective Debt
Securities. (Section 1002).
All moneys paid by the Corporation to a Paying Agent for the payment of the
principal of and premium or interest, if any, on any Debt Security of any
series which remain unclaimed at the end of two years after such principal,
premium, if any, or interest shall have become due and payable will be repaid
to the Corporation and the holder of such Debt Security will thereafter look
only to the Corporation for payment thereof. (Section 1003).
GLOBAL DEBT SECURITIES
If any Debt Securities of a series are issuable in global form, the
applicable Prospectus Supplement will describe the circumstances, if any, under
which beneficial owners of interests in any such global Debt Security may
exchange such interests for Debt Securities of such series and of like tenor
and principal amount in any authorized form and denomination. Principal of and
any premium and interest on a global Debt Security will be payable in the
manner described in the applicable Prospectus Supplement. (Section 301).
The specific terms of the depository arrangement with respect to any portion
of a series of Debt Securities to be represented by a global Debt Security will
be described in the applicable Prospectus Supplement.
MODIFICATION OF THE INDENTURES
The Indentures contain provisions permitting the Corporation and the
respective Trustees, with the consent of the holders of not less than a
majority in principal amount of the debt securities which are affected by the
modification, to modify the particular Indenture or any supplemental indenture
or the rights of the holders of the debt securities issued under such
Indenture; provided that no such modification may, without the consent of the
holder of each outstanding debt security affected thereby, (a) change the
stated maturity date of the principal of, or any installment of principal of or
interest, if any, on, any Debt Security, (b) reduce the principal amount of, or
premium or rate of interest, if any, on, any Debt Security, (c) reduce the
amount of principal of an original issue discount Debt Security payable upon
acceleration of the maturity thereof, (d) change the place or currency of
payment of principal of, or premium or interest, if any, on, any Debt Security,
(e) impair the right to institute suit for the enforcement of any payment on or
with respect to any Debt Security, or (f) reduce the percentage in principal
amount of Outstanding Debt Securities of any series, the consent of the holders
of which is required for modification or amendment of the Indenture or for
waiver of compliance with certain provisions of the Indenture or for waiver of
certain defaults. (Section 902).
EVENTS OF DEFAULT
An Event of Default with respect to Debt Securities of any series is defined
in the Indentures as being; default for 30 days in payment of any interest on
Debt Securities of such series; default in payment of principal of (or premium,
if any, on) Debt Securities of such series; default in payment of any mandatory
sinking fund payment required by the Debt Securities of such series; default
for 60 days after notice in the performance of any other covenant in the Debt
Securities of such series or in the Indentures or certain events of bankruptcy,
insolvency or reorganization. The Senior Indenture (but not the Subordinated
Indenture) also defines an Event of Default with respect to Senior Debt
Securities of any series to be a default which involves the failure by the
Corporation to pay when due the principal of any indebtedness for money
borrowed by the
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Corporation in excess of $25 million or which results in the acceleration of
any such indebtedness in excess of $25 million, if such indebtedness is not
discharged, or such acceleration is not rescinded or annulled, within 10 days
after written notice as provided in the Senior Indenture. In case an Event of
Default with respect to Debt Securities of any series shall occur and be
continuing, the respective Trustees or the holders of not less than 25% in
principal amount of the Debt Securities of such series then outstanding may
declare the principal of all such Debt Securities to be due and payable. The
Corporation is required to furnish to the Senior Trustee and the Subordinated
Trustee annually a statement as to the performance by the Corporation of its
obligations under the respective Indentures and as to any default in such
performance. Under certain circumstances any declaration of acceleration with
respect to Debt Securities of any series may be rescinded and past defaults
(except, unless theretofore cured, a default in the payment of principal of or
interest on the Debt Securities) may be waived by the holders of a majority in
the aggregate principal amount of the Debt Securities of such series then
outstanding. The Indentures provide that the Trustees may withhold notice to
the holders of the respective Debt Securities of any series of any continuing
default (except in the payment of the principal (other than any mandatory
sinking fund payment) of (or premium, if any) or interest on any Debt
Securities of such series) if such Trustee considers it in the interest of
holders of such series of Debt Securities to do so. (Section 501).
SENIOR INDENTURE RESTRICTIVE COVENANT--LIMITATION ON LIENS
The Senior Indenture (but not the Subordinated Indenture) provides that the
Corporation will not create, assume or suffer to exist, and will not permit any
subsidiary to create, assume or suffer to exist, except in favor of the
Corporation, any mortgage, pledge or other lien or encumbrance on any of its
properties or assets (including stock and other securities of subsidiaries)
without making effective provision to secure equally and ratably the Senior
Debt Securities then outstanding and other indebtedness entitled to be so
secured, except that the Corporation or a subsidiary, without so securing the
Senior Debt Securities, may create, assume or suffer to exist (a) certain
purchase money and existing liens in connection with property acquisitions and
the extension, renewal or refunding of the same, (b) pledges of current assets,
in the ordinary course of business to secure current liabilities, (c) liens on
property to secure obligations to pay all or part of the purchase price of such
property only out of or measured by oil or gas production or the proceeds
thereof, or liens upon production from oil or gas property or the proceeds of
such production, to secure obligations to pay all or part of the expenses of
exploration, drilling or development of such property only out of such
production or proceeds, (d) mechanics' or materialmen's liens, certain good
faith deposits, deposits to secure public or statutory obligations, deposits to
secure, or in lieu of, surety, stay or appeal bonds, and deposits as security
for payment of taxes, assessments or similar charges and liens or security
interests created in connection with bid or completion bonds, (e) liens arising
by reason of deposits with, or the giving of security to, a governmental agency
as a condition to the transaction of business or the exercise of a privilege,
or deposits to enable the Corporation or a subsidiary to maintain self-
insurance or participate in any funds established to cover any insurance risks,
or in connection with workmen's compensation, unemployment insurance, old age
pension or other social security, (f) pledges or assignments of accounts
receivable, including customers' instalment paper, to banks or others
(including to or by any subsidiary which is principally engaged in the business
of financing the business of the Corporation and its subsidiaries) made in the
ordinary course of business, (g) liens of taxes or assessments for the current
year or not due or being contested in good faith and against which an adequate
reserve has been established, (h) judgments or liens the finality of which is
being contested and execution on which is stayed, (i) assessments or similar
encumbrances the existence of which does not impair the use of the property
subject thereto for the purposes for which it was acquired, (j) certain
landlords' liens so long as the rent secured thereby is not in default, and (k)
liens on the assets of any limited liability company organized under a limited
liability company act of any State which limited liability company is treated
as a partnership for federal income tax purposes. (Senior Indenture--Section
1006).
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
The Indentures provide that the Corporation may not consolidate with or merge
into any other Person or convey or transfer its properties and assets
substantially as an entirety to any Person, unless (i) the
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successor Person shall be organized and existing under the laws of the United
States or any State thereof or the District of Columbia, and shall expressly
assume by a supplemental indenture the due and punctual payment of the
principal of, any premium on, and any interest on, all the Debt Securities and
the performance of every covenant in such Indenture on the part of the
Corporation to be performed or observed; (ii) immediately after giving effect
to such transaction, no Event of Default, and no event which, after notice or
lapse of time or both, would become an Event of Default, shall have happened
and be continuing; and (iii) the Corporation shall have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger, conveyance or transfer and such supplemental
indenture comply with the foregoing provisions relating to such transaction. In
case of any such consolidation, merger, conveyance or transfer, such successor
Person will succeed to and be substituted for the Corporation as obligor on the
Debt Securities, with the same effect as if it had been named in the Indenture
as the Corporation. (Section 801).
The Indentures do not contain any other covenant which restricts the
Corporation's ability to merge or consolidate with any other corporation, sell
or convey all or substantially all of its assets to any persons, firm or
corporation or otherwise engage in restructuring transactions. Further, the
Indentures do not contain any provisions which would provide protection to
holders of Debt Securities against a sudden and dramatic decline in credit
quality resulting from a takeover, a recapitalization or similar restructuring
of the Corporation.
TITLE
The Corporation, the Trustees and any agent of the Corporation or the
relevant Trustee may treat the registered owner of any Debt Security as the
absolute owner thereof (whether or not such Debt Security shall be overdue and
notwithstanding any notice to the contrary) for the purpose of making payment
and for all other purposes. (Section 308).
DEFEASANCE AND DISCHARGE
Under the terms of the Indentures, the Corporation will be discharged from
any and all obligations in respect of the Debt Securities of any series (except
in each case for certain obligations to register the transfer or exchange of
Debt Securities, replace stolen, lost or mutilated Debt Securities, maintain
paying agencies and hold moneys for payment in trust) if the Corporation
deposits with the Trustee, in trust, (i) money; (ii) U.S. Government Securities
(as defined) or, in the case of Debt Securities denominated in a foreign
currency, Foreign Government Securities (as defined) which through the payment
of Interest thereon and principal thereof in accordance with their terms will
provide money; or (iii) any combination of (i) and (ii) above, in an amount
sufficient to pay all the principal (including any mandatory sinking fund
payments) of, and interest on, the Debt Securities of such series on the dates
such payments are due in accordance with the terms of such Debt Securities.
Such defeasance and discharge will become effective 91 days after the
Corporation, among other things, has delivered to the Trustee an Opinion of
Counsel to the effect that (i) the deposit and related defeasance would not
cause the holders of the Debt Securities of such series to recognize income,
gain or loss for Federal income tax purposes, or a copy of a ruling or other
formal statement or action to such effect received from or published by the
United States Internal Revenue Service; and (ii) the trust resulting from the
defeasance will not constitute, or is qualified as, a regulated investment
company under the Investment Company Act of 1940, as amended. (Section 403).
REPLACEMENT OF DEBT SECURITIES
Any mutilated Debt Security will be replaced by the Corporation at the
expense of the holder upon surrender of such Debt Security to the relevant
Trustee. Debt Securities that become destroyed, lost or stolen will be replaced
by the Corporation at the expense of the holder upon delivery to the relevant
Trustee of evidence of the destruction, loss or theft thereof satisfactory to
the Corporation and the relevant Trustee. In the case of a destroyed, lost or
stolen Debt Security, an indemnity satisfactory to the relevant Trustee and the
Corporation may be required at the expense of the holder of such Debt Security
before a replacement Debt Security will be issued. (Section 306).
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GOVERNING LAW
The Senior Indenture is, and the Subordinated Indenture and the Debt
Securities will be, governed by, and construed in accordance with, the laws of
the State of Texas. (Section 112).
INFORMATION CONCERNING THE TRUSTEES
Subject to the provisions of the relevant Indenture relating to its duties,
each Trustee will be under no obligation to exercise any of its rights or
powers under such Indenture at the request, order or direction of any of the
holders thereunder, unless such holders shall have offered to such Trustee
reasonable indemnity. Subject to such provision for indemnification, the
holders of a majority in principal amount of the debt securities then
outstanding thereunder will have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee
thereunder, or exercising any trust or power conferred on such Trustee.
(Section 601).
The Indentures contain limitations on the right of the Trustee, as a creditor
of the Corporation to obtain payment of claims in certain cases, or to realize
on certain property received in respect of any such claim as security or
otherwise. In addition, the Trustee may be deemed to have a conflicting
interest and may be required to resign as Trustee if at the time of a default
under the Indentures it is a creditor of the Corporation.
The First National Bank of Chicago, the Trustee under each Indenture, has
from time to time engaged in transactions with, or performed services for
ENSERCH in the ordinary course of business.
DESCRIPTION OF ENSERCH CAPITAL STOCK
The following description of the capital stock does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the more complete descriptions thereof set forth in (a) the Corporation's
Restated Articles of Incorporation, as amended, and the Rights Agreement, dated
as of April 15, 1986, between the Corporation and Harris Trust Company of New
York, as Rights Agent, both of which have been filed as exhibits to the
Registration Statement of which this Prospectus is a part, and (b) the
Statement of Resolutions relating to each series of Preferred Stock, which will
be filed with the Commission at or prior to the time of the offering of such
series of Preferred Stock. A form of Statement of Resolutions is filed as an
exhibit to the Registration Statement of which this Prospectus is a part.
The Corporation is currently authorized by its Restated Articles of
Incorporation to issue 100,000,000 shares of Common Stock, of $4.45 par value,
2,000,000 shares of preferred stock, of no par value (the "preferred stock"),
and 2,000,000 shares of Voting Preference Stock, of no par value. The Board of
Directors has authority to divide the preferred stock and Voting Preference
Stock into one or more series and has broad authority to fix and determine the
relative rights and preferences of the shares of each such series.
COMMON STOCK
The Corporation is authorized by its Restated Articles of Incorporation to
issue up to 100,000,000 shares of Common Stock, par value $4.45 per share.
Subject to the rights of the holders of the preferred stock and Voting
Preference Stock which may be outstanding from time to time, holders of Common
Stock are entitled to receive such dividends as are declared by the Board of
Directors from any funds legally available therefor, to one vote for each share
on all matters voted upon by shareholders, including election of directors
(cumulative voting being prohibited), and to share ratably in assets available
for distribution upon any liquidation. Common Stock has no preemptive rights
and is not subject to redemption or to any further call or assessment.
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In April 1986, the Corporation's Board declared a dividend of one Voting
Preference Stock contingent purchase right on each outstanding share of Common
Stock. All shares of Common Stock issued subsequently also include these
rights. Under certain conditions, each right may be exercised to purchase one
two-hundredth of a share of a new series of Voting Preference Stock at an
exercise price of $60. The rights are exercisable only if a person or group
acquires beneficial ownership of 20% or more of the Common Stock or commences a
tender or exchange offer upon consummation of which such person or group would
beneficially own 30% or more of the Common Stock. If any person becomes the
beneficial owner of 30% or more of the Common Stock, or if a 20%-or-more
shareholder engages in certain self-dealing transactions, or if in a merger
transaction with the Corporation in which the Corporation is the surviving
corporation and its Common Stock is not changed or converted, then each right
not owned by such person or related parties will entitle its holder to
purchase, at the right's then current exercise price, shares of Common Stock
(or, in certain circumstances as determined by the Board, other consideration)
having a value of twice the right's exercise price. In addition, if the
Corporation is involved in a merger or other business combination transaction
with another person in which its Common Stock is changed or converted, or sells
50% or more of its assets or earning power to another person, each right will
entitle its holder to purchase, at the right's then-current exercise price,
Common Stock of such other person having a value of twice the right's exercise
price. The rights, which have no voting rights, expire on May 5, 1996. the
Corporation generally will be entitled to redeem the rights at $.05 per right
at any time until the 15th day following public announcement that a 20%
position has been acquired.
Dividend restrictions on Common Stock are contained in several agreements
relating to senior long-term debt and in the Restated Articles of Incorporation
of the Corporation. Pursuant to the Restated Articles of Incorporation, no
dividend (other than a dividend payable in Common Stock) or other distribution
is permitted to be declared or paid on, and no amount is permitted to be
applied to the purchase of, the Common Stock unless (i) full cumulative
dividends for all past dividend periods have been paid or declared and set
apart for payment, and full cumulative dividends for the then current dividend
period have been, or simultaneously therewith are, paid or declared on
outstanding preferred stock and Voting Preference Stock and (ii) after giving
effect to such payment of dividend, other distribution or purchase, the
aggregate capital of the Corporation applicable to all capital stock
outstanding ranking junior to the preferred stock and Voting Preference Stock
as to dividends or assets plus the consolidated earned and capital surplus of
the Corporation and its subsidiaries shall exceed the aggregate amount payable
on involuntary dissolution, liquidation or winding up of the Corporation on all
outstanding shares of the preferred stock and the Voting Preference Stock and
all stock ranking prior to or on a parity with such stock as to dividends or
assets to be outstanding after such payment of dividend, other distribution or
purchase. At December 31, 1993, the Corporation had approximately $342 million
of consolidated common shareholders' equity which was free of such restrictions
after giving pro forma effect to the redemption by the Corporation of all of
its then outstanding sinking fund debentures and its Adjustable Rate Cumulative
Preferred Stock, Series D in March, 1994.
The Transfer Agent and Registrar of the Corporation's Common Stock is Harris
Trust Company of New York, New York, New York.
PREFERRED STOCK
The Corporation is currently authorized by its Restated Articles of
Incorporation to issue 2,000,000 shares of preferred stock, of no par value, of
which 100,000 shares of Adjustable Rate Cumulative Preferred Stock, Series E,
were outstanding on the date of this Prospectus. The Board of Directors has
authority to divide the preferred stock into one or more series and to fix and
determine relative rights and preferences of the shares of each such series.
All series of preferred stock, including any series of Preferred Stock to
which any Prospectus Supplement may relate, shall have the dividend,
liquidation, redemption and voting rights set forth below. Reference is made to
the Prospectus Supplement relating to the particular series of the Preferred
Stock offered thereby for
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specific terms, including: (i) the title of such Preferred Stock and the number
of shares offered; (ii) the amount of liquidation preference per share; (iii)
the price at which such Preferred Stock will be issued; (iv) whether dividends
shall be payable and, if payable, the dividend rate (or method of calculation);
(v) any redemption or sinking fund provisions of such Preferred Stock; (vi) the
terms of any right to convert the Preferred Stock into other securities of the
Corporation; (vii) whether the Corporation has elected to offer Depositary
Shares (as defined below); and (viii) any additional voting, dividend,
liquidation, redemption, sinking fund and other rights, preferences,
privileges, limitations and restrictions of such Preferred Stock.
The Preferred Stock offered by any Prospectus Supplement will, when issued,
be fully paid and nonassessable and have no preemptive rights.
As described under "Depositary Shares" below, the Corporation may, at its
option, elect to offer depositary shares evidenced by depositary receipts, each
representing a fraction (to be specified in the Prospectus Supplement relating
to the particular series of Preferred Stock) of a share of the particular
series of the Preferred Stock issued and deposited with a depositary, in lieu
of offering full shares of such series of the Preferred Stock.
Dividends. To the extent that the applicable Prospectus Supplement provides
that dividends shall be paid on a series of Preferred Stock, the holders of
shares of such series of Preferred Stock will be entitled to receive, when and
as declared by the Board of Directors of the Corporation out of assets of the
Corporation legally available therefor, cumulative cash dividends at the rate
per share set forth in the applicable Prospectus Supplement. Dividends on such
series of Preferred Stock will accrue from the date of original issuance and
will be paid quarterly on the first day of February, May, August and November
(the "Quarterly Dividend Payment Dates") commencing on the Quarterly Dividend
Payment Date next succeeding the expiration of 30 days after the date of
initial issue of any shares of such series.
No dividends (other than a dividend payable in Common Stock) shall be paid or
other distribution made on shares of the Common Stock or on any other class of
stock ranking junior to the preferred stock as to dividends or assets, nor
shall any shares of the Common Stock or other junior stock be purchased or
redeemed, unless (i) all dividends on the outstanding preferred stock for all
past quarterly dividend periods have been paid or declared and set apart for
payment, and all dividends on the preferred stock for the current period have
been paid or declared and set apart for payment, and (ii) after giving effect
to such payment of dividends, other distributions, purchase or redemption, the
aggregate capital of the Corporation applicable to all capital stock
outstanding ranking junior to the preferred stock as to dividends or assets,
plus the consolidated earned and capital surplus of the Corporation and its
subsidiaries, shall exceed the aggregate amount payable on involuntary
dissolution, liquidation or winding up of the Corporation on all shares of the
preferred stock and all stock ranking prior to or on a parity with the
preferred stock as to dividends or assets to be outstanding after such payment
of dividends, other distribution, purchase or redemption. Dividends may not be
paid on any one series of preferred stock unless dividends have been or are
contemporaneously paid or declared on the preferred stock on all series
entitled thereto.
Several agreements relating to senior long-term debt also contain
restrictions on distributions on capital stock of the Corporation. At December
31, 1993, the Corporation had approximately $342 million of consolidated common
shareholders' equity which was free of such restrictions after giving pro forma
effect to the redemption by the Corporation of all of its then outstanding
sinking fund debentures and its Adjustable Rate Cumulative Preferred Stock,
Series D in March 1994.
Voting Rights. Except as indicated in the Prospectus Supplement relating to a
particular series of Preferred Stock, or except as expressly required by
applicable law, the holders of shares of each series of Preferred Stock will
have no ordinary voting rights. However, without the approval of the holders of
shares representing at least two-thirds of the votes entitled to be cast by the
preferred stock, the Corporation may not amend its Restated Articles of
Incorporation to (1) create, or increase the number of authorized shares of, a
class of stock ranking prior to or on a parity with the preferred stock as to
dividends or assets; (2)
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increase the authorized number of shares of preferred stock; and (3) change any
of the rights or preferences of outstanding preferred stock or any series
thereof. Rights and preferences of any outstanding series, which vary from the
rights and preferences of other outstanding series, may not be changed without
the approval of the holders of shares representing at least two-thirds of the
votes entitled to be cast by such series. In addition, holders of preferred
stock have the right to elect two directors if cumulative dividend payments
shall not have been paid for six quarterly dividend periods, and this right
shall continue until such time as the default in payment of dividends shall
have been cured.
So long as any shares of any series of preferred stock shall be outstanding,
the Corporation shall not, without the approval of the holders of shares
representing a majority of the votes entitled to be cast, issue any additional
shares, or reissue any reacquired shares, of preferred stock or of any other
class of stock ranking prior to or on a parity with the outstanding shares of
the preferred stock as to dividends or assets for any purpose other than to
purchase or redeem an equal par or stated value on involuntary liquidation of
preferred stock or of stock ranking prior to or on a parity with the preferred
stock as to dividends or assets at the time outstanding unless
(i) the consolidated gross income (as defined) of the Corporation and its
subsidiaries for 12 consecutive calendar months within a period of 15
calendar months immediately preceding the calendar month of such issuance
is equal to at least 1 1/2 times the aggregate of the annual interest
charges on indebtedness of the Corporation and its subsidiaries (excluding
interest charges on indebtedness to be retired by the application of the
proceeds from the issuance of such shares) and the annual dividend
requirements on all preferred stock (including dividend requirements on any
class of stock ranking prior to or on a parity with the shares to be issued
as to dividends or assets but excluding any dividend requirements on any
stock to be retired by the application of the proceeds from the issuance of
such shares), which shall be outstanding immediately after the issuance of
such shares; and
(ii) the aggregate capital of the Corporation applicable to all capital
stock outstanding ranking junior to the preferred stock as to dividends and
assets, plus the consolidated earned and capital surplus of the Corporation
and its subsidiaries, shall be at least equal to the aggregate amount
payable upon involuntary dissolution, liquidation or winding up of the
Corporation on all shares of the preferred stock, and all stock ranking
prior to or on a parity with the preferred stock as to dividends or assets,
to be outstanding immediately after the issuance of such shares of
preferred stock or such stock ranking prior to or on a parity therewith and
the application of the proceeds thereof.
Each share of preferred stock of any series having a stated value of $100 on
involuntary liquidation shall, to the extent it is entitled to vote, be
entitled to one vote per share. Each share of preferred stock of any series
having a stated value other than $100 on involuntary liquidation shall be
entitled to as many votes or a fractional vote, as the case may be, as
determined by the ratio of the stated value on involuntary liquidation of a
share of each such series to $100.
Redemption. A series of the Preferred Stock may be redeemable, in whole or in
part, at the option of the Corporation, and may be subject to mandatory
redemption pursuant to a sinking fund, in each case upon terms, at the times
and at the redemption prices set forth in the Prospectus Supplement relating to
such series.
The Corporation's Restated Articles of Incorporation prohibit the Corporation
from redeeming (at its option or through operation of a sinking fund) or
purchasing shares of any series of preferred stock unless full cumulative
dividends on all outstanding shares of preferred stock for all dividend periods
ending on or prior to the date of redemption or purchase shall have been paid
or declared and set apart for payment.
Shares of any series of preferred stock which shall have been redeemed or
purchased by the Corporation shall, upon the filing of any required
certificate, be restored to the status of authorized but unissued shares of
preferred stock without designation and may be reissued from time to time,
unless the statement of resolution relating to such series of preferred stock
provides otherwise.
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Liquidation Rights. In the event of any voluntary or involuntary dissolution,
liquidation or winding up of the Corporation the holders of each series of
Preferred Stock shall be entitled to receive out of the assets of the
Corporation available for distribution to shareholders, before any distribution
of the assets is made to the holders of the Voting Preference Stock or the
Common Stock, cash in the amount or amounts set forth in the Prospectus
Supplement relating to such series of Preferred Stock plus accrued and unpaid
dividends. If the assets are not sufficient to pay in full the amounts payable
on all shares of preferred stock in the event of voluntary or involuntary
dissolution, liquidation or winding up, then the assets available for payment
will be distributed ratably among the holders of the preferred stock of all
series in proportion to the full preferential amounts to which they are
respectively entitled.
Transfer Agent and Registrar. The transfer agent for each series of Preferred
Stock will be described in the related Prospectus Supplement.
Adjustable Rate Cumulative Preferred Stock, Series E. The Corporation also
has outstanding 100,000 shares of Adjustable Rate Cumulative Preferred Stock,
Series E (the "Series E Preferred Stock"). These shares are of no par value per
share but have a stated value on liquidation of $1,000 per share. Series E
Preferred Stock is redeemable at the option of the Corporation at $1,030 per
share through April 30, 1994, and at $1,000 per share thereafter. The Series E
Preferred Stock is deposited with a bank under a depositary agreement and is
represented by 1,000,000 Depositary Shares. The First Chicago Trust Company of
New York, New York, New York, is the Transfer Agent for the Series E Depositary
Shares.
VOTING PREFERENCE STOCK
The Corporation has authorized 500,000 shares of a series of Voting
Preference Stock in connection with the shareholders rights plan described
under "Common Stock" above. To date none of such shares have been issued or are
outstanding.
The Voting Preference Stock is junior to Preferred Stock but has a preference
over Common Stock as to dividends and assets on liquidation. Dividends (other
than dividends payable in Common Stock) cannot be paid on Common Stock if the
Corporation has not met the requirements for dividend payments or for any
sinking fund created with respect to any series of Voting Preference Stock. In
general, holders of Voting Preference Stock have the same voting rights as
holders of Common Stock for the election of directors and all other purposes
(voting with the Common Stock together as a single class) as well as voting
rights specified by Texas law, except that holders of Voting Preference Stock
have no voting rights on amendments to the Restated Articles of Incorporation
other than as provided under Texas law and by the Restated Articles of
Incorporation. Voting Preference Stock is entitled to one vote for each $10,000
of stated value attributable to such shares subject, however, to adjustments
for shares having a stated value other than $10,000. Voting Preference Stock
has no preemptive rights.
DEPOSITARY SHARES
General. The Corporation may, at its option, elect to offer fractional shares
of Preferred Stock, rather than full shares of Preferred Stock. If such option
is exercised, the Corporation will issue to the public receipts for Depositary
Shares, each of which will represent a fraction (to be set forth in the
Prospectus Supplement relating to a particular series of Preferred Stock) of a
share of a particular series of Preferred Stock as described below.
The shares of any series of Preferred Stock represented by Depositary Shares
will be deposited under a Deposit Agreement (the "Deposit Agreement") between
the Corporation and a bank or trust company selected by the Corporation having
its principal office in the United States and having a combined capital and
surplus of at least $50,000,000 (the "Depositary"). The Prospectus Supplement
relating to a series of Depositary Shares will set forth the name and address
of the Depositary. Subject to the terms of the Deposit Agreement, each owner of
a Depositary Share will be entitled, in proportion to the applicable fraction
of a share of Preferred Stock represented by such Depositary Share, to all the
rights and preferences of the Preferred Stock represented thereby (including
dividend, voting, redemption and liquidation rights).
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The Depositary Shares will be evidenced by depositary receipts issued
pursuant to the Deposit Agreement ("Depositary Receipts"). Depositary Receipts
will be distributed to those persons purchasing the fractional shares of
Preferred Stock in accordance with the terms of the offering. Copies of the
forms of Deposit Agreement and Depositary Receipts are filed as exhibits to the
Registration Statement of which this Prospectus is a part, and the following
summary is qualified in its entirety by reference to such exhibits.
Pending the preparation of definitive Depositary Receipts, the Depositary
may, upon the written order of the Corporation or any holder of Preferred
Stock, execute and deliver temporary Depositary Receipts substantially
identical to (and entitling the holders thereof to all the benefits pertaining
to) definitive Depositary Receipts but not in definitive form. Definitive
Depositary Receipts will be prepared thereafter without unreasonable delay, and
temporary Depositary Receipts will be exchangeable for definitive Depositary
Receipts at the Corporation's expense.
Upon surrender of Depositary Receipts at the office of the Depositary and
upon payment of the charges provided in the Deposit Agreement and subject to
the terms thereof, a holder of Depositary Receipts is entitled to have the
Depositary deliver to such holder the whole shares of Preferred Stock and all
money and other property, if any, relating to the surrendered Depositary
Receipts.
Dividends and Other Distributions. The Depositary will distribute all cash
dividends or other cash distributions received in respect of the Preferred
Stock to the record holders of Depositary Shares relating to such Preferred
Stock in proportion to the number of such Depositary Shares owned by such
holders.
In the event of a distribution other than in cash or rights, preferences or
privileges upon the Preferred Stock, the Depositary will distribute securities
or property received by it to the record holders of Depositary Shares entitled
thereto in proportion to the number of such Depositary Shares owned by such
holders, unless the Depositary determines such distribution cannot be made
proportionately among such holders or that it is not feasible to make such
distribution, in which case the Depositary may, with the approval of the
Corporation, sell such securities or property or adopt such other method as it
deems equitable and practicable for effecting such distribution and distribute
the net proceeds from such sale to such holders.
Redemption of Depositary Shares. If a series of Preferred Stock represented
by Depositary Shares is subject to redemption, the Depositary Shares will be
redeemed from the proceeds received by the Depositary resulting from the
redemption, in whole or in part, of such series of Preferred Stock held by the
Depositary. The Depositary will mail notice of redemption not less than 30 and
not more than 60 days prior to the date fixed for redemption to the record
holders of the Depositary Shares to be so redeemed at their respective
addresses appearing in the Depositary's books. The redemption price per
Depositary Share will be equal to the applicable fraction of the redemption
price per share payable with respect to such series of the Preferred Stock plus
all money and other property, if any, represented by such Depositary Shares.
Whenever the Corporation redeems shares of Preferred Stock held by the
Depositary, the Depositary will redeem as of the same redemption date the
number of Depositary Shares representing shares of Preferred Stock so redeemed.
If less than all the Depositary Shares are to be redeemed, the Depositary
Shares to be redeemed will be selected by lot or pro rata or in any other
manner, as may be determined by the Depositary to be equitable.
Voting. Upon receipt of notice of any meeting at which the holders of the
Preferred Stock are entitled to vote, the Depositary will mail a notice
containing the information contained in such notice of meeting to the record
holders of the Depositary Shares relating to such Preferred Stock. Such notice
will also state that each record holder of such Depositary Shares on the record
date (which will be the same date as the record date for the Preferred Stock)
will be entitled to instruct the Depositary as to the exercise of the voting
rights pertaining to the amount of the Preferred Stock represented by such
holder's Depositary Shares and will contain a brief statement as to the manner
in which such instructions may be given. The Depositary will endeavor, insofar
as practicable, to vote the amount of the Preferred Stock represented by such
Depositary Shares in accordance with such instructions, and the Corporation
will agree to take all action which may be deemed necessary by the Depositary
in order to enable the Depositary to do so. The Depositary will abstain from
voting shares of the Preferred Stock (but, in its discretion, not from
appearing at any meeting with respect to such Preferred Stock unless directed
to the contrary by the holders of all the Depositary Receipts) to the extent it
does not receive specific instructions from the holders of Depositary Shares
representing such Preferred Stock.
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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 the Corporation and
the Depositary. However, any amendment which materially and adversely alters
the rights of the holders of Depositary Shares will not be effective unless
such amendment has been approved by the holders of at least a majority of the
Depositary Shares then outstanding. The Deposit Agreement may be terminated by
the Corporation or the Depositary only if (i) all outstanding Depositary Shares
have been redeemed or (ii) there has been a final distribution in respect of
the Preferred Stock in connection with any liquidation, dissolution or winding
up of the Corporation and such distribution has been distributed to the holders
of Depositary Shares.
Charges of Depositary. The Corporation will pay all transfer and other taxes
and governmental charges arising solely from the existence of the depositary
arrangements. The Corporation will pay all charges of the Depositary in
connection with the initial deposit of the Preferred Stock and the initial
issuance of the Depositary Shares, redemption of the Preferred Stock at the
option of the Corporation and withdrawal of shares of Preferred Stock by
holders of Depositary Shares. Holders of Depositary Shares will pay all other
transfer and other taxes and governmental charges.
Miscellaneous. The Depositary will make available for inspection by holders
of Depositary Receipts, at the Depositary's office, any reports and
communications received from the Corporation which are received by the
Depositary as the holder of Preferred Stock.
Neither the Depositary, any Depositary's Agent, any Registrar nor the
Corporation will incur any liability if it is prevented or delayed by law or
any circumstance beyond its control from performing its obligations under the
Deposit Agreement. Neither the Depositary, any Depositary's Agent, any
Registrar nor the Corporation assumes any obligation or shall be subject to any
liability under the Deposit Agreement to holders of Depositary Receipts other
than for their gross negligence, willful misconduct, or bad faith. Neither the
Depositary, any Depositary's Agent, any Registrar nor the Corporation shall be
under any obligation to appear in, prosecute or defend any action, suit or
other proceeding in respect of the Preferred Stock, the Depositary Shares or
the Depositary Receipts which in its opinion may involve it in expense or
liability unless indemnity satisfactory to it against all expense and liability
be furnished as often as may be required. Neither the Depositary, any
Depositary's Agent, any Registrar nor the Corporation shall be liable for any
action or any failure to act by it in reliance upon the written advice of legal
counsel or accountants or upon information from any person presenting Stock for
deposit, any holder of a Depositary Receipt or any other person believed by it
in good faith to be competent to give such information. The Depositary, any
Depositary's Agent, any Registrar and the Corporation may each rely and shall
each be protected in acting upon any written notice, request, direction or
other document believed by it to be genuine and to have been signed or
presented by the proper party or parties.
Resignation and Removal of Depositary. The Depositary may resign at any time
by delivering to the Corporation written notice of its election to do so, and
the Corporation may at any time remove the Depositary, any such resignation or
removal to take effect upon the appointment of a successor Depositary and its
acceptance of such appointment. Such successor Depositary must be appointed
within 60 days after delivery of the notice of resignation or removal and must
be a bank or trust company having its principal office in the United States and
having a combined capital and surplus of at least $50,000,000.
ENSERCH CAPITAL AND ENSERCH PREFERRED
GENERAL
Enserch Capital, a subsidiary of ENSERCH, is a limited liability company
organized under the laws of the State of Delaware. All of its limited liability
company interests (other than EC Preferred Securities) are beneficially owned
by ENSERCH and are non-transferable. ENSERCH will be the only Class A Member of
Enserch Capital and will hold all of the Class A common limited liability
interests. Enserch Preferred will be the only Class B Member of Enserch Capital
(the "Class B Member") and will hold all of the Class B common
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limited liability company interests. Enserch Capital's registered office in the
State of Delaware is c/o The Corporation Trust Company, Corporate Trust Center,
1209 Orange Street, Wilmington, New Castle County, Delaware 19801, telephone:
(302) 658-7581. Enserch Capital has no board of directors, and all of its
business and affairs will be conducted by ENSERCH, as the sole Class A Member.
The location of the principal executive offices of the Class A Member is set
forth above under "The Corporation." Enserch Capital exists solely for the
purpose of issuing its limited liability company interests and lending the net
proceeds thereof to ENSERCH or Enserch Preferred.
Enserch Preferred, a wholly-owned subsidiary of ENSERCH, was incorporated in
Texas and reincorporated in Delaware in March 1994. Enserch Preferred's
principal executive offices are located at 300 South St. Paul Street, Dallas,
Texas 75201. Enserch Preferred exists solely for the purpose of holding the
Class B limited liability company interests of Enserch Capital, borrowing the
proceeds from the sale of the limited liability company interests of Enserch
Capital and reloaning the proceeds to ENSERCH.
EC PREFERRED SECURITIES
Enserch Capital may, from time to time, issue EC Preferred Securities, in one
or more series, having terms described in the Prospectus Supplement relating
thereto. The EC Preferred Securities may be exchangeable for Subordinated Debt
Securities or Preferred Stock of ENSERCH under circumstances described in the
Prospectus Supplement relating to such EC Preferred Securities. Enserch
Capital's Amended and Restated Limited Liability Company Agreement (the
"Limited Liability Company Agreement") will authorize the establishment of one
or more classes or series of EC Preferred Securities, having such terms,
including dividend, redemption, exchange, voting, liquidation rights and such
other preferred, deferred or other special rights or such restrictions, as
shall be set forth therein or otherwise established by the Class A Member
pursuant thereto. Reference is made to the Prospectus Supplement relating to
the EC Preferred Securities of a particular series for specific terms,
including (i) the distinctive designation of such series which shall
distinguish it from other series; (ii) the number of EC Preferred Securities
included in such series, which number may be increased or decreased from time
to time unless otherwise provided by the Class A Member in creating the series;
(iii) the annual dividend rate (or method of determining such rate) for EC
Preferred Securities of such series and the date or dates upon which such
dividends shall be payable; (iv) whether dividends on EC Preferred Securities
of such series shall be cumulative, and, in the case of EC Preferred Securities
of any series having cumulative dividend rights, the date or dates or method of
determining the date or dates from which dividends on EC Preferred Securities
of such series shall be cumulative; (v) the amount or amounts which shall be
paid out of the assets of Enserch Capital to the holders of EC Preferred
Securities of such series upon voluntary or involuntary dissolution, winding up
or termination of Enserch Capital; (vi) the price or prices at which, the
period or periods within which and the terms and conditions upon which EC
Preferred Securities of such series may be redeemed or purchased, in whole or
in part, at the option of Enserch Capital; (vii) the obligation, if any, of
Enserch Capital to purchase or redeem EC Preferred Securities of such series
pursuant to a sinking fund or otherwise and the price or prices at which, the
period or periods within which and the terms and conditions upon which EC
Preferred Securities of such series shall be redeemed, in whole or in part,
pursuant to such obligation; (viii) the period or periods within which and the
terms and conditions, if any, including the price or prices or the rate or
rates of conversion or exchange and the terms and conditions of any adjustments
thereof, upon which EC Preferred Securities of such series shall be convertible
or exchangeable at the option of the holder or Enserch Capital or ENSERCH into
any other Interests or securities or other property or cash or into any other
series of EC Preferred Securities; (ix) the voting rights, if any, of EC
Preferred Securities of such series in addition to those required by law,
including the number of votes per EC Preferred Security and any requirement for
the approval by the holders of EC Preferred Securities, or of EC Preferred
Securities of one or more series, or of both, as a condition to specified
action or amendments to the Limited Liability Company Agreement; (x) the
ranking of EC Preferred Securities of the series as compared with Preferred
Securities of other series in respect of the right to receive dividends and the
right to receive payments out of the assets of Enserch Capital upon voluntary
or involuntary dissolution, winding up or termination of Enserch Capital; (xi)
the nature and terms of any backup undertakings of ENSERCH and/or Enserch
Preferred or another subsidiary of ENSERCH to
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be provided to holders of EC Preferred Securities of such series; and (xii) any
other relative rights, powers, preferences or limitations of EC Preferred
Securities of the series not inconsistent with the Limited Liability Company
Agreement or with applicable law. All EC Preferred Securities offered hereby
will be guaranteed by ENSERCH to the limited extent set forth below under
"Guarantee" and may also be entitled to the benefits of certain undertakings of
ENSERCH and Enserch Preferred as described below under "Backup Undertakings."
Holders of EC Preferred Securities will be Class C Members of Enserch Capital.
Any special federal income tax, accounting and other considerations applicable
to any offering of EC Preferred Securities and related Backup Undertakings will
be described in the Prospectus Supplement relating thereto.
GUARANTEE
ENSERCH will irrevocably and unconditionally agree (the "Guarantee"), to the
extent set forth herein, to pay in full, to the holders of EC Preferred
Securities of any class or series, the Guarantee Payments (as defined below),
as and when due, regardless of any defense, right of set-off or counterclaim
which Enserch Capital may have or assert. The Guarantee will constitute a
guarantee of payment and not of collection, and may be enforced by holders of
EC Preferred Securities directly against ENSERCH. The following payments to the
extent not paid by Enserch Capital (the "Guarantee Payments") will be subject
to the Guarantee (without duplication): (i) any accumulated arrears and
accruals of unpaid dividends which have heretofore been declared on the EC
Preferred Securities of such class or series out of moneys legally available
therefor, (ii) the redemption price including all accumulated arrears and
accruals of unpaid dividends payable, out of moneys legally available therefor,
with respect to any EC Preferred Securities of such class or series called for
redemption, (iii) upon a liquidation of Enserch Capital, the lesser of (a) the
aggregate of the liquidation preference and all accumulated arrears and
accruals of unpaid dividends (whether or not declared) on the EC Preferred
Securities of such class or series to the date of payment and (b) the amount of
assets of Enserch Capital remaining available for distribution in liquidation
to the holders of EC Preferred Securities of such class or series, and (iv) any
Additional Amounts payable to Enserch Capital as described in the accompanying
Prospectus Supplement. In addition, the Prospectus Supplement relating to a
class or series of EC Preferred Securities will describe the rank of the
Guarantee and any additional covenants or other terms of the Guarantee of
ENSERCH with respect to such class or series, including any Additional Amounts
payable under the Guarantee with respect thereto.
BACKUP UNDERTAKINGS
In connection with any class or series of EC Preferred Securities, ENSERCH
may enter into additional arrangements with Enserch Capital, including
intercompany loan agreements involving Enserch Capital or Enserch Preferred and
amendments to Enserch Capital's Limited Liability Company Agreement, that
operate directly or indirectly for the benefit of holders of the EC Preferred
Securities. ENSERCH will also irrevocably and unconditionally agree to
guarantee, to the extent set forth in the Prospectus Supplement, to pay in
full, to Enserch Capital for the benefit of the holders of the EC Preferred
Securities of any class or series, certain obligations of Enserch Preferred
under any intercompany loan agreements with Enserch Capital, as and when due,
regardless of any defense, right of set-off or counterclaim which Enserch
Preferred may have or assert. The terms and provisions of, including the rank
of any such guarantee and any additional covenants, will be described in the
Prospectus Supplement. Such guarantee, the Guarantee described above under
"Guarantee," and any such other arrangements are herein collectively referred
to as "Backup Undertakings" and will be described in the Prospectus Supplement
relating to any class or series of EC Preferred Securities to which they apply.
VALIDITY OF EC PREFERRED SECURITIES
Certain matters of Delaware law relating to the validity of the EC Preferred
Securities of Enserch Capital offered hereby will be passed upon by Richards,
Layton & Finger, P.A., as special Delaware counsel for Enserch Capital. In
rendering their opinions with respect to the EC Preferred Securities as
described under "Legal Opinions," Mr. Satterwhite and Mudge Rose Guthrie
Alexander & Ferdon may rely on Richards, Layton & Finger, P.A. as to certain
matters of Delaware law.
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PLAN OF DISTRIBUTION
ENSERCH and/or Enserch Capital may offer or sell Securities to one or more
underwriters for public offering and sale by them or may sell Securities to
investors directly or through agents. ENSERCH and/or Enserch Capital may sell
Securities as soon as practicable after effectiveness of the Registration
Statement, provided that favorable market conditions exist. Any such
underwriter or agent involved in the offer and sale of the Securities will be
named in an applicable Prospectus Supplement.
Underwriters may offer and sell the Securities at a fixed price or prices,
which may be changed, or from time to time at market prices prevailing at the
time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Corporation also may offer and sell the Securities in
exchange for one or more of its outstanding issues of equity or debt or
convertible debt securities. ENSERCH and/or Enserch Capital also may, from time
to time, authorize firms acting as the Corporation's or Enserch Capital's
agents to offer and sell the Securities upon the terms and conditions as shall
be set forth in any Prospectus Supplement. In connection with the sale of
Securities, underwriters may be deemed to have received compensation from
ENSERCH and/or Enserch Capital in the form of underwriting discounts or
commissions and may also receive commissions from purchasers of Securities for
whom they may act as agent. Underwriters may sell Securities to or through
dealers, and such dealers may receive compensation in the form of discounts,
concessions or commissions from the underwriters and/or commissions (which may
be changed from time to time) from the purchasers for whom they may act as
agent.
Any underwriting compensation paid by ENSERCH and/or Enserch Capital to
underwriters or agents in connection with the offering of Securities, and any
discounts, concessions or commissions allowed by underwriters to participating
dealers, will be set forth in an applicable Prospectus Supplement.
Underwriters, dealers and agents participating in the distribution of the
Securities may be deemed to be underwriters, and any discounts and commissions
received by them and any profit realized by them on resale of the Securities
may be deemed to be underwriting discounts and commissions, under the
Securities Act. Underwriters, dealers and agents may be entitled, under
agreements with the Corporation, to indemnification against and contribution
toward certain civil liabilities, including liabilities under the Securities
Act, and to reimbursement by the Corporation for certain expenses.
Underwriters, dealers and agents may engage in transactions with, or perform
services for, or be customers of, ENSERCH and/or Enserch Capital in the
ordinary course of business.
If so indicated in an applicable Prospectus Supplement, ENSERCH will
authorize dealers acting as ENSERCH's agents to solicit offers by certain
institutions to purchase Debt Securities from ENSERCH at the public offering
price set forth in such Prospectus Supplement pursuant to Delayed Delivery
Contracts ("Contracts") providing for payment and delivery on the date or dates
stated in such Prospectus Supplement. Each Contract will be for an amount not
less than, and the aggregate principal amount of Debt Securities sold pursuant
to Contracts shall be not less nor more than, the respective amounts stated in
such Prospectus Supplement. Institutions with whom Contracts, when authorized,
may be made include commercial and savings banks, insurance companies, pension
funds, investment companies, educational and charitable institutions and other
institutions, but will in all cases be subject to the approval of ENSERCH.
Contracts will not be subject to any conditions except (i) the purchase by an
institution of the Debt Securities covered by its Contracts shall not at the
time of delivery be prohibited under the laws of any jurisdiction in the United
States to which such institution is subject, and (ii) if the Debt Securities
are being sold to underwriters, the Corporation shall have sold to such
underwriters the total principal amount of the Debt Securities less the
principal amount thereof covered by Contracts. Agents and underwriters will
have no responsibility in respect of the delivery or performance of Contracts.
Each series of Debt Securities, Preferred Stock and EC Preferred Securities
will be a new issue of securities and will have no established trading market.
Any underwriters to whom Securities are sold by the Corporation or Enserch
Capital for public offering and sale may make a market in such Securities, but
such underwriters will not be obligated to do so and may discontinue any market
making at any time without notice. The Securities may or may not be listed on a
national securities exchange or a foreign securities exchange, except that the
Common Stock is listed on the New York Stock Exchange, Midwest Stock
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Exchange and the London Stock Exchange. Any Common Stock sold pursuant to a
Prospectus Supplement will be listed on such exchanges, subject to official
notice of issuance. No assurance can be given as to the liquidity of or the
trading markets for any Securities.
LEGAL OPINIONS
The validity of the Securities of ENSERCH will be passed upon for the
Corporation by William T. Satterwhite, Esquire, Senior Vice President and
General Counsel of the Corporation, and for any underwriters or agents by Mudge
Rose Guthrie Alexander & Ferdon, New York, New York, who will rely on the
opinion of Mr. Satterwhite as to matters of Texas law. Certain matters of
Delaware law relating to the validity of the EC Preferred Securities of Enserch
Capital will be passed upon by Richards, Layton & Finger, P.A., as special
Delaware counsel for Enserch Capital. In rendering their opinions, Mr.
Satterwhite and Mudge Rose Guthrie Alexander & Ferdon will rely upon the
opinion of Richards, Layton & Finger, P.A. as to certain matters of Delaware
law.
Mudge Rose Guthrie Alexander & Ferdon has from time to time performed legal
services for the Corporation. Mudge Rose Guthrie Alexander & Ferdon acted as
counsel to the Corporation in connection with the recent sale of the principal
assets of its engineering and construction business. In the year ended December
31, 1993, and through February 15, 1994, Mudge Rose Guthrie Alexander & Ferdon
collected approximately $604,000 in legal fees from the Corporation in
connection with such services. As of December 31, 1993, Mr. Satterwhite owned
16,415 shares of Common Stock and held options to acquire 84,622 shares of
Common Stock (of which 61,497 are presently exercisable) and 8,644 shares of
Common Stock which were held for his account under an employee benefit plan.
Mr. Satterwhite also participates in other employee benefit plans of the
Corporation.
EXPERTS
The financial statements and related financial statement schedules
incorporated in this Prospectus by reference from the Corporation's Current
Report on Form 8-K dated March 3, 1994, (containing financial statements for
the year ended December 31, 1993) and from the Corporation's Annual Report on
Form 10-K for the year ended December 31, 1993, have been audited by Deloitte &
Touche, independent auditors, as stated in their reports which are incorporated
herein by reference, and have been so incorporated in reliance upon such
reports given upon the authority of such firm as experts in auditing and
accounting.
With respect to any unaudited interim financial information included in the
Corporation's Quarterly Reports on Form 10-Q, that are or will be incorporated
herein by reference, Deloitte & Touche applies limited procedures in accordance
with professional standards for reviews of such information. As stated in any
of its reports that are included in the Corporation's Quarterly Reports on Form
10-Q, that are or will be incorporated herein by reference, Deloitte & Touche
did not audit and did not express an opinion on such interim financial
information. Accordingly, the degree of reliance on any of its reports on such
information should be restricted in light of the limited nature of the review
procedures applied. Deloitte & Touche is not subject to the liability
provisions of Section 11 of the Securities Act for any of its reports on such
unaudited interim financial information because those reports are not "reports"
or a "part" of the Registration Statement filed under the Securities Act with
respect to the Securities prepared or certified by an accountant within the
meaning of Section 7 and 11 of the Securities Act.
The estimates of reserves incorporated by reference in this Prospectus made
by DeGolyer & MacNaughton, independent petroleum consultants, as set forth
under "Properties" appearing in Part I and in Note 13 of the "Notes to
Consolidated Financial Statements" appearing in Appendix A of the Corporation's
Annual Report on Form 10-K for the year ended December 31, 1993, and in Note 13
of the Notes to Consolidated Financial Statements appearing in Appendix A of
the Corporation's Current Report on Form 8-K dated March 3, 1994, have been so
set forth and incorporated herein in reliance upon the authority of such firm
as experts.
21
<PAGE>
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS
PROSPECTUS SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION
IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR
THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ENSERCH Corporation........................................................ S-3
Capitalization of ENSERCH.................................................. S-3
Use of Proceeds............................................................ S-3
Selected Financial Data of ENSERCH......................................... S-4
Certain Terms of Adjustable Rate Preferred Stock........................... S-5
Certain Terms of Depositary Shares......................................... S-9
Certain Federal Income Tax Considerations.................................. S-10
Underwriting............................................................... S-11
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
The Corporation............................................................ 3
Use of Proceeds............................................................ 4
Description of the Debt Securities......................................... 4
Description of ENSERCH Capital Stock....................................... 11
Enserch Capital and Enserch Preferred...................................... 17
Plan of Distribution....................................................... 20
Legal Opinions............................................................. 21
Experts.................................................................... 21
</TABLE>
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3,000,000 SHARES
ENSERCH CORPORATION
DEPOSITARY PREFERRED SHARES, SERIES F
EACH REPRESENTING ONE-FORTIETH SHARE OF
ADJUSTABLE RATE CUMULATIVE
PREFERRED STOCK, SERIES F
(LIQUIDATION PREFERENCE $1,000 PER SHARE)
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PROSPECTUS SUPPLEMENT
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GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
KIDDER, PEABODY & CO.
INCORPORATED
LEHMAN BROTHERS
SMITH BARNEY SHEARSON INC.
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