<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 5, 1994
REGISTRATION NO. 33-52525
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
---------------
ENSERCH CORPORATION ENSERCH CAPITAL L.L.C. ENSERCH PREFERRED
CAPITAL, INC.
(EXACT NAME OF (EXACT NAME OF
REGISTRANT AS REGISTRANT AS (EXACT NAME OF
SPECIFIED IN ITS SPECIFIED IN ITS REGISTRANT AS
CHARTER) CHARTER) SPECIFIED IN ITS
CHARTER)
TEXAS DELAWARE DELAWARE
(STATE OR OTHER (STATE OR OTHER
(STATE OR OTHER JURISDICTION OF JURISDICTION OF
JURISDICTION OF INCORPORATION OR INCORPORATION OR
INCORPORATION OR ORGANIZATION) ORGANIZATION)
ORGANIZATION)
75-0399066 75-2527254 75-2530196
(I.R.S. EMPLOYER (I.R.S. EMPLOYER (I.R.S. EMPLOYER
IDENTIFICATION NO.) IDENTIFICATION NO.) IDENTIFICATION NO.)
ENSERCH CENTER
300 SOUTH ST. PAUL STREET
DALLAS, TEXAS 75201
214-651-8700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
WILLIAM T. SATTERWHITE, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
ENSERCH CORPORATION
ENSERCH CENTER
300 SOUTH ST. PAUL STREET
DALLAS, TEXAS 75201
214-670-2175
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPY TO:
ARNOLD H. TRACY
MUDGE ROSE GUTHRIE ALEXANDER & FERDON
180 MAIDEN LANE
NEW YORK, NEW YORK 10038
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: From time to
time after the effective date of the Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER +
+TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF +
+THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD +
+BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS +
+OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED APRIL 5, 1994
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED APRIL , 1994
PREFERRED SECURITIES
ENSERCH CAPITAL L.L.C.
% CUMULATIVE MONTHLY INCOME PREFERRED SECURITIES, SERIES A ("MIPS"*)
(LIQUIDATION PREFERENCE $25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
ENSERCH CORPORATION
----------
The % Cumulative Monthly Income Preferred Securities, Series A (the "Series
A Preferred Securities") representing the preferred limited liability company
interests offered hereby are being issued by Enserch Capital L.L.C., a limited
liability company formed under the laws of the State of Delaware ("Enserch
Capital"). All of the common limited liability company interests of Enserch
Capital are beneficially owned by ENSERCH Corporation, a Texas corporation
("ENSERCH"). Enserch Capital was formed solely for the purpose of issuing
securities and making loans (the "Loans") of the net proceeds thereof to
ENSERCH or its subsidiaries.
The Series A Preferred Securities will entitle holders to receive cumulative
preferential cash dividends, at an annual rate of % of the liquidation
preference of $25 per Series A Preferred Security, accruing from the date of
original issuance and payable monthly in arrears on the last day of each
calendar month of each year, commencing April 30, 1994. The payment of
dividends, if and to the extent declared out of moneys held by Enserch Capital,
and payments on liquidation or redemption with respect to the Series A
Preferred Securities are guaranteed by ENSERCH to the extent described herein.
If ENSERCH fails to make interest payments on the Loans, Enserch Capital will
have insufficient funds to declare or pay dividends on the Series A Preferred
Securities. The ENSERCH guarantee does not cover payment of such undeclared
dividends. In such event, the remedy of a holder of Series A Preferred
Securities is to enforce the Loans. See "Description of the Loans--
Enforcement". For a discussion of the terms and limitations of the Guarantee,
see "Description of the Guarantee."
The Series A Preferred Securities are redeemable, at the option of Enserch
Capital (with ENSERCH's consent), in whole or in part, from time to time, on or
after April 30, 1999, at $25 per Series A Preferred Security plus accumulated
and unpaid dividends to the date fixed for redemption (the "Redemption Price"),
and will be redeemed at such price from the proceeds of any repayment of the
loan of the proceeds hereof to a subsidiary of ENSERCH. In addition, if at any
time Enserch Capital or ENSERCH is or would be required to pay certain
additional amounts or to withhold or deduct certain amounts and under certain
circumstances following the occurrence of a Tax Event (as defined herein) or an
Investment Company Act Event (as defined herein), the Series A Preferred
Securities are redeemable at the Redemption Price at the option of Enserch
Capital (with ENSERCH's consent), from time to time. In addition, upon the
occurrence of such a Tax Event or an Investment Company Act Event, ENSERCH may
cause Enserch Capital to exchange % Subordinated Debentures of ENSERCH for
the Series A Preferred Securities in whole. If issued, ENSERCH will use its
best efforts to have the % Subordinated Debentures listed on the same
exchange on which the Series A Preferred Securities are then listed. See
"Description of the Series A Preferred Securities--Optional Redemption" and
"Special Event Redemption or Exchange" and "Description of % Subordinated
Debentures".
In the event of the liquidation of Enserch Capital, holders of Series A
Preferred Securities will be entitled to receive for each Series A Preferred
Security a liquidation preference of $25 plus accumulated and unpaid dividends
to the date of payment, unless the Series A Preferred Securities have
previously been exchanged for % Subordinated Debentures and subject to
certain limitations. See "Description of the Series A Preferred Securities--
Liquidation Distribution".
For a description of the various contractual backup undertakings of ENSERCH
relating to the Series A Preferred Securities, see "Description of the
Guarantee", "Description of the Loans" and "Description of the Loan Guarantee"
herein.
----------
SEE "CERTAIN INVESTMENT CONSIDERATIONS" FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE SERIES A PREFERRED SECURITIES, INCLUDING CIRCUMSTANCES
UNDER WHICH PAYMENT OF DIVIDENDS ON THE SERIES A PREFERRED SECURITIES MAY BE
DEFERRED.
----------
Application has been made to list the Series A Preferred Securities on the
New York Stock Exchange.
----------
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 COMMISSION(1) ENSERCH CAPITAL(2)(3)
-------------- ------------- ---------------------
<S> <C> <C> <C>
Per Series A Preferred Secu-
rity....................... $ (2) $
Total....................... $ (2) $
</TABLE>
- -----
(1) Enserch Capital and ENSERCH have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting".
(2) In view of the fact that the proceeds of the sale of the Series A Preferred
Securities will ultimately be loaned to ENSERCH, under the Underwriting
Agreement ENSERCH has agreed to pay to the Underwriters as compensation
("Underwriters' Compensation") for their arranging the loan of such
proceeds, $ per Series A Preferred Security (or $ in the
aggregate); provided that such compensation will be $ per Series A
Preferred Security sold to certain institutions. Therefore, to the extent
that Series A Preferred Securities are sold to such institutions, the
actual amount of Underwriters' Compensation will be less than the amount
specified in the preceding sentence. See "Underwriting".
(3) Expenses of the offering which are payable by ENSERCH, are estimated to be
$ .
----------
The Series A Preferred Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that delivery of the Series A Preferred Securities will be made only
in book-entry form through the facilities of The Depository Trust Company on or
about April , 1994.
- -----
* An application has been filed by Goldman, Sachs & Co. with the United States
Patent and Trademark Office for the registration of the MIPS servicemark.
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
KIDDER PEABODY & CO.
INCORPORATED
LEHMAN BROTHERS
PAINEWEBBER INCORPORATED
SMITH BARNEY SHEARSON INC.
----------
The date of this Prospectus Supplement is , 1994.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
----------------
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 CAPITAL L.L.C.
Enserch Capital is a limited liability company which was formed under the
Delaware Limited Liability Company Act (the "Delaware Act") by filing a
Certificate of Formation with the Delaware Secretary of State on March 4,
1994. The initial members of Enserch Capital are ENSERCH and Enserch Preferred
Capital, Inc., a Delaware corporation ("Enserch Preferred") and a wholly owned
subsidiary of ENSERCH. ENSERCH and Enserch Preferred entered into a limited
liability company agreement dated as of March 4, 1994. Such limited liability
company agreement will be amended and restated in its entirety (as so amended
and restated, the "Limited Liability Company Agreement") substantially in the
form filed as an exhibit to the Registration Statement of which the
accompanying Prospectus forms a part prior to the sale of the Series A
Preferred Securities offered hereby. The principal executive offices of
Enserch Capital are c/o ENSERCH Corporation, 300 South St. Paul Street,
Dallas, Texas 75201, and the telephone number is (214) 651-8700.
Enserch Capital is a separate legal entity under the laws of the State of
Delaware and is distinct from its owners, who are known as "members." A
Delaware limited liability company is similar to a Delaware corporation in
providing limited liability to its members in a manner similar to that
provided to stockholders of a Delaware corporation. Therefore, unless
expressly provided in a limited liability company agreement or otherwise
agreed, under Delaware law no general liability exists for members or managers
of a Delaware limited liability company. The Limited Liability Company
Agreement of Enserch Capital provides that ENSERCH will have general liability
for the debts and obligations of Enserch Capital in the same manner as a
general partner of a Delaware limited partnership. Under Delaware law, members
who hold Series A Preferred Securities (other than ENSERCH) will not be liable
for the debts, obligations and liabilities of Enserch Capital, whether arising
in contract, tort or otherwise, solely by reason of being a member of Enserch
Capital.
A Delaware limited liability company may be managed by its members or by a
manager. Enserch Capital is managed by ENSERCH as its Class A Member and
exists for the sole purpose of issuing its limited liability company interests
and lending the proceeds thereof to ENSERCH and/or its subsidiaries. Pursuant
to the terms of the Limited Liability Company Agreement, ENSERCH and Enserch
Preferred will continue to be members of Enserch Capital. ENSERCH will hold
the Class A common limited liability company interests and Enserch Preferred
will hold the Class B common limited liability company interests in Enserch
Capital (collectively, the "Common Securities"). The members who hold Series A
Preferred Securities will be designated as Class C Members and will hold
preferred limited liability company interests in Enserch Capital. The rights
of the Class C Members, including economic rights, rights to information and
voting rights, are set forth in the Limited Liability Company Agreement and
the Delaware Act. See "Description of the Series A Preferred Securities".
ENSERCH CORPORATION
ENSERCH is an integrated company focused on natural gas. It is the successor
to a company originally organized in 1909 for the purpose of providing natural
gas service to North Texas. ENSERCH's operations include: natural gas
transmission and distribution; natural gas and oil exploration and production;
natural gas liquids processing; and power and other.
S-3
<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)
INCOME STATEMENT DATA ON
CONTINUING OPERATIONS:
<S> <C> <C> <C> <C> <C>
Revenues.................... $1,902.1 $1,714.6 $1,654.1 $1,701.4 $1,716.5
======== ======== ======== ======== ========
Operating Income............ $ 72.8 $ 112.2 $ 137.1 $ 147.2 $ 180.2
Other Income (Expense)--Net. .2 (12.5) 14.0 49.3 .7
Interest Expense............ (80.2) (97.0) (95.6) (101.5) (95.0)
Income (Taxes) Benefit...... (7.5) .8 (17.7) (25.6) (21.6)
-------- -------- -------- -------- --------
Income (Loss) from Continu-
ing Operations............. (14.7) 3.5 37.8 69.4 64.3
Discontinued Operations..... 73.9 (16.2) (18.7) 33.4 9.1
Extraordinary Item.......... (15.3)
-------- -------- -------- -------- --------
Net Income (Loss)........... $ 59.2 $ (28.0) $ 19.1 $ 102.8 $ 73.4
======== ======== ======== ======== ========
Income (Loss) from Continu-
ing Operations Per Share... $ (.41) $ (.14) $ .36 $ .84 $ .84
Cash Dividends Declared Per
Share of Common Stock...... $ .20 $ .80 $ .80 $ .80 $ .80
Average Common and Dilutive
Common Equivalent
Shares Outstanding......... 66.6 65.7 65.1 65.0 59.8
Consolidated Ratio of Earn-
ings to Fixed Charges (a).. .93 1.02 1.49 1.80 1.76
Consolidated Ratio of Earn-
ings to Combined
Fixed Charges and Preferred
Stock Dividends (a)........ .82 .92 1.25 1.54 1.50
<CAPTION>
BALANCE SHEET DATA:
<S> <C> <C> <C> <C> <C>
Property, Plant and Equip-
ment--Net.................. $2,118.1 $2,065.8 $2,152.1 $2,118.0 $2,046.3
Total Assets................ $2,760.3 $3,145.7 $3,163.1 $3,264.2 $3,254.2
Net Working Capital (Defi-
ciency).................... $ (195.5) $ 2.5 $ (42.2) $ 64.3 $ (23.0)
Current Ratio............... .72 1.00 .95 1.08 .97
Unused Lines of Credit...... $ 635.0 $ 485.0 $ 650.0 $ 600.0 $ 600.0
Capitalization (includes
current maturities):
Senior long-term debt...... $ 638.8 $ 865.3 $ 757.6 $ 772.5 $ 727.1
Convertible subordinated
debentures................ 90.8 90.8 205.7 215.7 215.7
Preferred stock............ 175.0 175.0 175.0 175.0 175.0
Common shareholders' equi-
ty........................ 646.7 604.6 686.3 723.9 701.3
-------- -------- -------- -------- --------
Total Capitalization....... $1,551.3 $1,735.7 $1,824.6 $1,887.1 $1,819.1
</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>
CAPITALIZATION OF ENSERCH
The following table sets forth the consolidated short-term borrowings and
capitalization of ENSERCH and its subsidiaries as of December 31, 1993, after
giving pro forma effect to the transactions described in Note (b) to the table
and as adjusted to give effect to the sale of the Series A Preferred
Securities offered hereby and the application of the net proceeds therefrom as
described under "Use of Proceeds".
<TABLE>
<CAPTION>
AS
OUTSTANDING PRO FORMA(B) ADJUSTED PERCENT
----------- ------------ ---------- -------
(IN THOUSANDS EXCEPT PERCENTS)
<S> <C> <C> <C> <C>
Commercial Paper Borrowings(c)..... $ 31,500 $ 101,350 $
========== ========== ==========
Senior Long-Term Debt(a)........... $ 638,827 $ 714,634 $ %
Convertible Subordinated Deben-
tures............................. 90,750 90,750
Series A Preferred Securities of
Enserch Capital................... 0 0
Adjustable Rate Preferred Stock.... 175,000 100,000
Common Shareholders' Equity........ 646,718 645,690
---------- ---------- ---------- -----
Total Capitalization............. $1,551,295 $1,551,074 $ 100.0%
========== ========== ========== =====
</TABLE>
- --------
(a) Includes current maturities of $10,600.
(b) The pro forma column gives effect to (i) the issuance in February 1994 of
$150 million principal amount of 6 3/8% Notes Due 2004 and the application
of the net proceeds therefrom to redeem fully the outstanding Adjustable
Rate Cumulative Preferred Stock, Series D and all outstanding sinking fund
debentures and (ii) the increase in commercial paper during January 1994.
(c) Commercial Paper Borrowings were $169,100 at March 18, 1994.
USE OF PROCEEDS
The proceeds from the sale of the Series A Preferred Securities will be
loaned to Enserch Preferred and reloaned to ENSERCH pursuant to the Loan
Agreements described herein and, ultimately used by ENSERCH to [repay or
refinance indebtedness of ENSERCH. Pending use for these purposes, ENSERCH may
invest the proceeds from the sale of the Series A Preferred Securities in
short-term obligations.] In view of the loan of such proceeds to Enserch
Preferred and the reloan to ENSERCH, the Underwriting Agreement provides that
ENSERCH will pay the Underwriters' Compensation to the Underwriters, as set
forth in Note (3) on the cover page of this Prospectus Supplement.
S-5
<PAGE>
CERTAIN INVESTMENT CONSIDERATIONS
Prospective purchasers of Series A Preferred Securities should carefully
review the information contained elsewhere in this Prospectus Supplement and
in the Prospectus and should particularly consider the following matters.
SUBORDINATION OF ENSERCH OBLIGATIONS
ENSERCH'S obligations under the Guarantee (as defined herein) are
subordinate and junior in right of payment to all other liabilities of
ENSERCH and the obligations of ENSERCH and Enserch Preferred under the Loan
Agreements (as defined herein) and the Loan Guarantee (as defined herein)
are subordinate and junior in right of payment to Senior Indebtedness of
ENSERCH and Enserch Preferred. See "Description of the Guarantee--Status of
the Guarantee", "Description of Loans--Subordination" and "Description of
the Loan Guarantee--Status of the Loan Guarantee". At March 31, 1994,
ENSERCH had approximately $989 million of outstanding indebtedness,
including approximately $714 million of outstanding Senior Indebtedness,
$184 million of commercial paper borrowings and $91 million of outstanding
convertible subordinated indebtedness, as well as approximately $1.1
billion of other liabilities reflected on its balance sheet, all of which
would rank senior to the Guarantee. There are no provisions in the Series A
Preferred Securities, the Loan Agreements, the Loan Guarantee or the
Guarantee which limit ENSERCH's ability to incur additional indebtedness,
including indebtedness that ranks senior to the Guarantee, the Loan
Agreements and the Loan Guarantee.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
ENSERCH and Enserch Preferred have the right under the Loan Agreements to
jointly extend interest payment periods for up to 60 months, and, as a
consequence, monthly dividends on the Series A Preferred Securities can be
deferred (but will continue to accumulate) by Enserch Capital during any
such extended interest payment period. In the event that ENSERCH and
Enserch Preferred exercise this right, neither ENSERCH nor Enserch
Preferred may declare dividends on any share of its capital stock. Enserch
Capital and ENSERCH currently believe that the extension of a payment
period is unlikely. See "Description of the Loans--Option to Extend
Interest Payment Period". In addition, if Enserch Capital fails to pay
dividends on the Series A Preferred Securities for 18 monthly dividend
periods, the holders of a majority of the outstanding Series A Preferred
Securities will be entitled to appoint a trustee to enforce Enserch
Capital's and Enserch Preferred's rights under the Loans (as hereinafter
defined) and ENSERCH's obligations under the Guarantee and the Loan
Guarantee and declare and pay dividends on the Series A Preferred
Securities. Notwithstanding the appointment of any such trustee, ENSERCH
and Enserch Preferred retain all rights under the Loan Agreements,
including the right to jointly extend the interest payment period for up to
60 months as provided under "Description of the Loans--Option to Extend
Interest Payment Period". During any such extension, dividends on Series A
Preferred Securities will be deferred, but holders will be required to
include interest from the Loans in income for federal tax purposes. See
"Description of the Series A Preferred Securities--Voting".
TAX CONSEQUENCES OF EXTENDED INTEREST PAYMENT PERIOD
Should an extended interest payment period occur, Enserch Capital will
continue to accrue income for U.S. federal income tax purposes which will
be allocated, but not distributed, to record holders of Series A Preferred
Securities. As a result, such a holder will include such interest in gross
income for U.S. federal income tax purposes in advance of the receipt of
cash, and will not receive the cash related to such income if such a holder
disposes of the Series A Preferred Securities prior to the record date for
payment of dividends. See "United States Taxation--Potential Extension of
Interest Payment Period". However, in the event an extended interest
payment period occurs following the occurrence of a Special Loan Tax Event
under circumstances where ENSERCH elects to have the Series A Preferred
Securities remain outstanding, holders will not be required to include any
amount in gross income for U.S. federal income tax purposes in advance of
the receipt of cash.
S-6
<PAGE>
SPECIAL EVENT REDEMPTION OR EXCHANGE
ENSERCH has become aware that the Department of the Treasury is studying
the federal income tax treatment of the interest payable on obligations
similar to the Loans. While ENSERCH is unable to predict the outcome of
this matter, in the event that the Department of the Treasury issues an
official interpretation of law or regulation to the effect that the
consolidated tax group of which ENSERCH is the common parent shall not be
entitled to deduct interest for Federal income tax purposes with respect to
the amounts being loaned by Enserch Capital to members of such consolidated
group, the Series A Preferred Securities would be subject to redemption or
exchange at the option of ENSERCH and/or Enserch Capital, or,
alternatively, could be left outstanding, as described under "Description
of the Series A Preferred Securities--Special Event Redemption or
Exchange."
DESCRIPTION OF THE SERIES A PREFERRED SECURITIES
GENERAL
All of the limited liability company interests of Enserch Capital other than
the Series A Preferred Securities are owned directly or indirectly by ENSERCH.
The Limited Liability Company Agreement will authorize and create the Series A
Preferred Securities and will authorize ENSERCH as holder of the Class A
common limited liability company interests in Enserch Capital (the "Class A
Member") to establish other classes of preferred limited liability company
interests having such preferred, deferred or other special rights or such
restrictions, whether in regard to dividends, voting, return of capital or
otherwise, as the Class A Member may determine. The Series A Preferred
Securities constitute a series of preferred limited liability company
interests (the "Preferred Securities") in Enserch Capital, which Preferred
Securities may be issued from time to time in one or more series as described
in the accompanying Prospectus. The Limited Liability Company Agreement will
not permit the issuance of any Preferred Securities of Enserch Capital
ranking, as to participation in profits or the assets of Enserch Capital,
senior to the Series A Preferred Securities. The summary of certain terms and
provisions of the Series A Preferred Securities set forth below does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, the Limited Liability Company Agreement. The Limited Liability
Company Agreement will be substantially in the form filed as an exhibit to the
Registration Statement of which the accompanying Prospectus forms a part.
DIVIDENDS
Dividends on the Series A Preferred Securities will be cumulative, will
accrue from April , 1994 and will be payable monthly in arrears on the last
day of each calendar month of each year, commencing April 30, 1994, when, as
and if declared by Enserch Capital, except as otherwise described below.
The dividends payable on each Series A Preferred Security will be fixed at a
rate per annum of % of the stated liquidation preference thereof ($25).
The amount of dividends payable for any period will be computed on the basis
of twelve 30-day months and a 360-day year and, for any period shorter than a
full monthly dividend period, will be computed on the basis of the actual
number of days elapsed in such period. Accrued and unpaid dividends on Series
A Preferred Securities will accrue additional dividends in respect thereof
compounded monthly on the last day of each calendar month at the dividend rate
per annum on the Series A Preferred Securities. Payment of dividends is
limited in relation to the amount of funds held by Enserch Capital and legally
available therefor.
Dividends on the Series A Preferred Securities must be declared by the Class
A Member of Enserch Capital in any calendar year or portion thereof to the
extent that the Class A Member
S-7
<PAGE>
reasonably anticipates that at the time of payment Enserch Capital will have,
and must be paid by Enserch Capital to the extent that at the time of proposed
payment it has, (x) funds legally available for the payment of such dividends
and (y) cash on hand sufficient to permit such payments. It is anticipated
that Enserch Capital's earnings will be limited to payments under the Loans to
Enserch Preferred of the proceeds from the issuance and sale of the Series A
Preferred Securities and the Common Securities. See "Description of the
Loans--Interest".
Dividends declared on the Series A Preferred Securities will be payable to
the holders thereof as they appear on the books and records of Enserch Capital
on the relevant record dates, which will be one Business Day prior to the
relevant payment dates. Subject to any applicable laws and regulations and the
provisions of the Limited Liability Company Agreement, each such payment will
be made as described under "Book-Entry-Only Issuance--The Depository Trust
Company" below. In the event that any date on which dividends are payable on
the Series A Preferred Securities is not a Business Day, then payment of the
dividend payable on such date will be made on the next succeeding day which is
a Business Day (and without any interest or other payment in respect of any
such delay) except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on such
date. A "Business Day" shall mean any day other than a day on which banking
institutions in The City of New York are authorized or required by law to
close.
CERTAIN RESTRICTIONS ON ENSERCH CAPITAL
If dividends have not been paid in full on the Series A Preferred
Securities, Enserch Capital shall not:
(i) pay, or declare and set aside for payment, any dividends on any other
Preferred Securities ranking pari passu with the Series A Preferred
Securities as regards participation in profits of Enserch Capital ("Capital
Dividend Parity Securities"), unless the amount of any dividends declared
on any Capital Dividend Parity Securities is paid on the Capital Dividend
Parity Securities and the Series A Preferred Securities on a pro rata basis
on the date such dividends are paid on such Capital Dividend Parity
Securities, so that
(x) (a) the aggregate amount of dividends paid on the Series A
Preferred Securities bears to (b) the aggregate amount of dividends
paid on such Capital Dividend Parity Securities the same ratio as
(y) (a) the aggregate of all accumulated arrears of unpaid dividends
in respect of the Series A Preferred Securities bears to (b) the
aggregate of all accumulated arrears of unpaid dividends in respect of
such Capital Dividend Parity Securities;
(ii) pay, or declare and set aside for payment, any dividends or other
distribution on any limited liability company interests of Enserch Capital
ranking junior to the Series A Preferred Securities as to dividends
("Capital Dividend Junior Securities"); or
(iii) redeem, purchase or otherwise acquire any Capital Dividend Parity
Securities or any Capital Dividend Junior Securities;
until, in each case, such time as all accumulated and unpaid dividends on the
Series A Preferred Securities shall have been paid in full for all dividend
periods terminating on or prior to, in the case of clause (i) and (ii), such
payment and, in the case of clause (iii), the date of such redemption,
purchase or acquisition.
As of the date of this Prospectus Supplement, there are no Capital Dividend
Parity Securities outstanding, and Enserch Capital does not have any current
plans to issue Capital Dividend Parity Securities.
S-8
<PAGE>
OPTIONAL REDEMPTION
The Series A Preferred Securities are redeemable, at the option of Enserch
Capital and subject to the prior consent of ENSERCH, in whole or in part from
time to time, on or after April 30, 1999, upon not less than 30 nor more than
60 days' notice, at the redemption price of $25 per Series A Preferred
Security, plus accumulated and unpaid dividends (whether or not declared) to
the date fixed for redemption (the "Redemption Price"). In the event that
fewer than all the outstanding Series A Preferred Securities are to be so
redeemed, the Series A Preferred Securities to be redeemed will be selected as
described under "Book-Entry-Only Issuance--The Depository Trust Company"
below. If a partial redemption would result in a delisting of the Series A
Preferred Securities, Enserch Capital may only redeem the Series A Preferred
Securities in whole.
If at any time after the issuance of the Series A Preferred Securities,
Enserch Capital is or would be required to pay Additional Amounts (as
hereinafter defined) or ENSERCH is or would be required to withhold or deduct
certain amounts as described under "Description of the Guarantee--Additional
Amounts" herein, then, subject to the prior consent of ENSERCH, Enserch
Capital may, at its option, upon not less than 30 nor more than 60 days'
notice to the holders of the Series A Preferred Securities, redeem the Series
A Preferred Securities in whole or, if such requirement relates only to
certain of the Series A Preferred Securities, the Series A Preferred
Securities subject to such requirement, in each case at the Redemption Price;
provided that, in the case of such a redemption of Series A Preferred
Securities in part, Enserch Capital will (i) cause the global certificates
representing all of the Series A Preferred Securities to be withdrawn from The
Depository Trust Company or its successor securities depository (see "Book-
Entry-Only Issuance--The Depository Trust Company" below), (ii) issue
certificates in definitive form representing Series A Preferred Securities and
(iii) redeem the Series A Preferred Securities subject to such requirement to
withhold or deduct Additional Amounts; and provided further that if a partial
redemption would result in a delisting of the Series A Preferred Securities,
Enserch Capital may only redeem the Series A Preferred Securities in whole.
SPECIAL EVENT REDEMPTION OR EXCHANGE
If a Tax Event or an Investment Company Event (as defined below)
(collectively, a "Special Event") shall occur and be continuing, ENSERCH
and/or Enserch Capital shall elect to either (i) redeem the Series A Preferred
Securities in whole (and not in part), upon not less than 30 or more than 60
days' notice at the Redemption Price within 90 days following the occurrence
of such Special Event, or (ii) dissolve Enserch Capital and cause to be
distributed to holders of Series A Preferred Securities in liquidation of such
holders' interests in Enserch Capital, within 90 days following the occurrence
of such Special Event, % Subordinated Debentures of ENSERCH described under
"Description of the % Subordinated Debentures" (the " % Subordinated
Debentures"), provided that if the Special Event is a Special Loan Tax Event
(as defined in clause (ii) of the definition of Tax Event) or an Investment
Company Event, ENSERCH and/or Enserch Capital shall have received an opinion
of nationally recognized independent counsel experienced in such matters to
the effect that the holders of the Series A Preferred Securities will not
recognize any gain or loss on the exchange of their Series A Preferred
Securities for % Subordinated Debentures, or (iii) if the Special Event is
solely a Special Loan Tax Event (as defined in clause (ii) of the definition
of Tax Event), cause the Series A Preferred Securities to remain outstanding.
"Tax Event" means that ENSERCH or Enserch Capital shall have obtained an
opinion of nationally recognized independent tax counsel experienced in such
matters to the effect that, as a result of any amendment to, or change in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein affecting taxation, or any
amendment to or change in an official interpretation or application of such
laws or regulations, which amendment or change is effective on or after ,
1994, and which change cannot be avoided by the use of any reasonable measures
available to ENSERCH or Enserch Capital, there is a substantial increase in
risk
S-9
<PAGE>
that (i) Enserch Capital is subject to federal income tax with respect to
interest received on the Loans to Enserch Preferred or (ii) the consolidated
tax group of which ENSERCH is the common parent shall not be entitled to
deduct interest for Federal income tax purposes with respect to the amounts
being loaned by Enserch Capital to members of such consolidated group (a Tax
Event occurring solely by reason of this clause (ii), a "Special Loan Tax
Event").
"Investment Company Event" means the occurrence of a change in law or
regulation or a written change in official interpretation of law or regulation
by any legislative body, court, governmental agency or regulatory authority (a
"Change in 40 Act Law") to the effect that Enserch Capital is or will be
considered an "Investment Company" required to be registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), which Change in
40 Act Law becomes effective on or after , 1994; provided that no
Investment Company Event shall be deemed to have occurred if ENSERCH and/or
Enserch Capital delivers a written opinion of nationally recognized
independent counsel to Enserch Capital experienced in practice under the 1940
Act, to the effect that ENSERCH and/or Enserch Capital has successfully taken
either of the steps set forth in (i) or (ii) below to avoid such Change in 40
Act Law so that in the opinion of such counsel, notwithstanding such Change in
40 Act Law, Enserch Capital is not required to be registered as an "investment
company" within the meaning of the 1940 Act. Such steps shall be either (i)
issuing an additional or supplemental irrevocable and unconditional guarantee
(x) of accumulated and unpaid dividends (whether or not declared out of moneys
legally available therefor) on the Series A Preferred Securities and (y) upon
a liquidation of Enserch Capital, of the full amount of the Liquidation
Distribution (as hereinafter defined) on the Series A Preferred Securities
(regardless of the amount of assets of Enserch Capital otherwise available for
distribution in such liquidation), or (ii) the use of any other reasonable
measures that do not adversely affect holders of Series A Preferred
Securities.
If % Subordinated Debentures are issued, each holder of Series A Preferred
Securities will receive an aggregate principal amount of % Subordinated
Debentures equal to the aggregate stated liquidation preference of $25 per
Series A Preferred Security held by it, and any accrued and unpaid dividends
will constitute unpaid accrued interest on the % Subordinated Debentures. If
$150,000,000 aggregate liquidation preference of Series A Preferred Securities
are outstanding immediately prior to such exchange, then $150,000,000
aggregate principal amount of % Subordinated Debentures will be issued in
the exchange.
After the date fixed for any such exchange, (i) the Series A Preferred
Securities will no longer be deemed to be outstanding, (ii) DTC or its
nominee, as the record holder of the Series A Preferred Securities, will
exchange the global certificate or certificates representing the Series A
Preferred Securities for a registered global certificate or certificates
representing the % Subordinated Debentures to be delivered upon such
exchange and (iii) any certificates representing Series A Preferred Securities
not held by DTC or its nominee will be deemed to represent % Subordinated
Debentures having a principal amount equal to the stated liquidation
preference of such Series A Preferred Securities until such certificates are
presented to ENSERCH or its agent for exchange.
REDEMPTION PROCEDURES
If at any time Enserch Preferred repays the Loans made to it when due or
prepays the Loans made to it as described under "Description of the Loans--
Optional Prepayment", the proceeds from such repayment of principal on such
Loans will be applied to redeem the Series A Preferred Securities at the
Redemption Price upon not less than 30 nor more than 60 days' notice, provided
that any such amounts may be reloaned to Enserch Preferred, and not used for
such redemption, if at the time of each such loan, and as determined in the
judgment of ENSERCH, as Class A Member, and its financial advisor, (i) ENSERCH
and Enserch Preferred are not in bankruptcy, (ii) ENSERCH and Enserch
Preferred are not in default on any loan pertaining to the Series A Preferred
Securities, (iii) ENSERCH and Enserch Preferred have made timely payments on
the repaid loan for the immediately preceding
S-10
<PAGE>
60 months, (iv) Enserch Capital is not in arrears on payments of dividends on
the Series A Preferred Securities, (v) ENSERCH and Enserch Preferred are
expected to be able to make timely payment of principal and interest on such
loan, (vi) such loan is being made on terms, and under circumstances, that are
consistent with those which a lender would require for a loan to an unrelated
party, (vii) such loan is being made at a rate equal to or greater than the
rate at which dividends accrue on the Series A Preferred Securities, (viii)
the senior unsecured long-term debt of ENSERCH is rated BBB- or better by
Standard & Poor's Corporation or Baa3 or better by Moody's Investors Service,
Inc. or the equivalent by any other nationally recognized statistical rating
organization, (ix) such loan is being made for a term that is consistent with
market circumstances and ENSERCH's financial condition, (x) the final maturity
of such loan is not later than the 49th anniversary of the issuance of the
Series A Preferred Securities, and (xi) such loan is unconditionally and fully
guaranteed by ENSERCH on substantially the same basis as the Loan Guarantee
and supported by a loan by Enserch Preferred to ENSERCH on substantially the
same basis as the Loans under the Preferred Loan Agreement.
Enserch Capital may not redeem fewer than all the outstanding Series A
Preferred Securities unless all accumulated and unpaid dividends have been
paid on all Series A Preferred Securities for all monthly dividend periods
terminating on or prior to the date of redemption.
If Enserch Capital gives a notice of redemption in respect of Series A
Preferred Securities (which notice will be irrevocable), then, by 12:00 noon,
New York time, on the redemption date, Enserch Capital will irrevocably
deposit with The Depository Trust Company funds sufficient to pay the
applicable Redemption Price and will give The Depository Trust Company
irrevocable instructions and authority to pay the Redemption Price to the
holders thereof. See "Book-Entry-Only Issuance--The Depository Trust Company".
If notice of redemption shall have been given and funds deposited as required,
then upon the date of such deposit, all rights of holders of such Series A
Preferred Securities so called for redemption will cease, except the right of
the holders of such Series A Preferred Securities to receive the Redemption
Price, but without interest. In the event that any date fixed for redemption
of Series A Preferred Securities is not a Business Day, then payment of the
Redemption Price payable on such date will be made on the next succeeding day
which is a Business Day (and without any interest or other payment in respect
of any such delay), except that, if such Business Day falls in the next
calendar year, such payment will be made on the immediately preceding Business
Day. In the event that payment of the Redemption Price in respect of Series A
Preferred Securities is improperly withheld or refused and not paid either by
Enserch Capital or by ENSERCH pursuant to the Guarantee described under
"Description of the Guarantee", dividends on such Series A Preferred
Securities will continue to accrue at the then applicable rate, from the
original redemption date to the date of payment, in which case the actual
payment date will be considered the date fixed for redemption for purposes of
calculating the Redemption Price.
Subject to the foregoing and applicable law (including, without limitation,
U.S. federal securities laws), ENSERCH or its subsidiaries may at any time and
from time to time purchase outstanding Series A Preferred Securities by
tender, in the open market or by private agreement.
LIQUIDATION DISTRIBUTION
In the event of any voluntary or involuntary dissolution, winding up or
termination of Enserch Capital, the holders of the Series A Preferred
Securities at the time outstanding will be entitled to receive out of the
assets of Enserch Capital available for distribution to securityholders,
before any distribution of assets is made to holders of Common Securities or
any other class of limited liability company interests of Enserch Capital
ranking junior to the Series A Preferred Securities as regards participation
in the assets of Enserch Capital, but together with the holders of every other
series of Preferred Securities outstanding, if any, ranking pari passu with
the Series A Preferred Securities as regards participation in the assets of
Enserch Capital ("Capital Liquidation Parity Securities"), an amount equal to,
in the case of holders of Series A Preferred Securities, the aggregate of the
stated
S-11
<PAGE>
liquidation preference of $25 per Series A Preferred Security and all
accumulated and unpaid dividends (whether or not declared) to the date of
payment (the "Liquidation Distribution").
If, upon any such liquidation, the Liquidation Distribution can be paid only
in part because Enserch Capital has insufficient assets available to pay in
full the aggregate Liquidation Distribution and the aggregate maximum
liquidation distributions on the Capital Liquidation Parity Securities, then
the amounts payable directly by Enserch Capital on the Series A Preferred
Securities and on such Capital Liquidation Parity Securities shall be paid on
a pro rata basis, so that
(i) (x) the aggregate amount paid in respect of the Liquidation
Distribution bears to (y) the aggregate amount paid as liquidation
distributions on the Capital Liquidation Parity Securities the same ratio
as
(ii) (x) the aggregate Liquidation Distribution bears to (y) the aggregate
maximum liquidation distributions on the Capital Liquidation Parity
Securities.
Pursuant to the Limited Liability Company Agreement, Enserch Capital shall be
dissolved and its affairs shall be wound up: (i) upon the expiration of the
term of Enserch Capital; (ii) upon the retirement, resignation, expulsion,
bankruptcy or dissolution of ENSERCH or the occurrence of any other event
under the Delaware Act that terminates the continued membership of ENSERCH, as
the Class A Member of Enserch Capital except for a transfer to a permitted
successor of the Class A Member as set forth in the Limited Liability Company
Agreement, (iii) the entry of decree of a judicial dissolution, or (iv) the
written consent of all members of Enserch Capital, including the holders of
the Series A Preferred Securities.
MERGER, CONSOLIDATION, AMALGAMATION, ETC. OF ENSERCH CAPITAL
The Class A Member is authorized and directed to conduct its affairs and to
operate Enserch Capital in such a way that Enserch Capital would not be deemed
to be an "investment company" required to be registered under the Investment
Company Act of 1940 (the "1940 Act") or taxed as a corporation for federal
income tax purposes and so that the Loans will be treated as indebtedness of
ENSERCH and Enserch Preferred, respectively, for federal income tax purposes.
In this connection, the Class A Member is authorized to take any action not
inconsistent with applicable law, the Certificate of Formation or the Limited
Liability Company Agreement and that does not adversely affect the interests
of holders of Series A Preferred Securities that the Class A Member determines
in its discretion to be necessary or desirable for such purposes.
Enserch Capital may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other body, except as
described below. Enserch Capital may, for purposes of changing its state of
domicile or avoiding federal income tax or 1940 Act consequences adverse to
ENSERCH or Enserch Capital or holders of Series A Preferred Securities,
without the consent of the holders of the Series A Preferred Securities,
consolidate, amalgamate, merge with or into, or be replaced by a limited
liability company or limited partnership or trust organized as such under the
laws of any state of the United States of America, provided that (i) such
successor entity either (x) expressly assumes all of the obligations of
Enserch Capital under the Series A Preferred Securities or (y) substitutes for
the Series A Preferred Securities other securities having substantially the
same terms as the Series A Preferred Securities (the "Successor Securities")
so long as the Successor Securities rank, with respect to participation in the
profits or assets of the successor entity, at least as high as the Series A
Preferred Securities rank, with respect to participation in the profits or
assets of Enserch Capital, (ii) ENSERCH and Enserch Preferred expressly
acknowledge such successor entity as the holder of the Loans to it relating to
the Series A Preferred Securities, (iii) such merger, consolidation,
amalgamation or replacement does not cause the Series A Preferred Securities
to be delisted by any national securities exchange or other organization on
which the Series A Preferred Securities are then listed, (iv) such
S-12
<PAGE>
merger, consolidation, amalgamation or replacement does not cause the Series A
Preferred Securities to be downgraded by any "nationally recognized
statistical rating organization," as that term is defined by the Commission
for purposes of Rule 436(g)(2) under the Securities Act of 1933, (v) such
merger, consolidation, amalgamation or replacement does not adversely affect
the powers, preferences and other special rights of holders of Series A
Preferred Securities in any material respect, (vi) prior to such merger or
consolidation ENSERCH has received an opinion of nationally recognized
independent counsel to Enserch Capital experienced in such matters to the
effect that (w) holders of outstanding Series A Preferred Securities will not
recognize any gain or loss for federal income tax purposes as a result of the
merger, consolidation, amalgamation or replacement, (x) such successor entity
will be treated as a partnership for federal income tax purposes, (y)
following such merger, consolidation, amalgamation or replacement, ENSERCH and
such successor entity will be in compliance with the 1940 Act without
registering thereunder as an investment company, and (z) such merger,
consolidation, amalgamation or replacement will not adversely affect the
limited liability of holders of Series A Preferred Securities.
VOTING RIGHTS
Except as provided below and under "Description of the Guarantee--Amendments
and Assignments", "Description of the Loans--Miscellaneous" and "Description
of the Loan Guarantee--Amendments and Assignments" and as otherwise required
by law and the Limited Liability Company Agreement, the holders of the Series
A Preferred Securities will have no voting rights.
If (i) Enserch Capital fails to pay dividends in full on the Series A
Preferred Securities for 18 monthly dividend periods; (ii) an Event of Default
(as defined in either Loan Agreement relating to the Loans) occurs and is
continuing on the Loans; or (iii) ENSERCH is in default on any of its payment
or other obligations under the Guarantee (as described under "Description of
the Guarantee--Certain Covenants of ENSERCH") or the Loan Guarantee (as
described under "Description of the Loan Guarantee--Certain Covenants of
ENSERCH"), then the holders of the outstanding Series A Preferred Securities,
together with the holders of any other series of Preferred Securities having
the right to vote for the appointment of a trustee in such event, acting as a
single class, will be entitled to appoint and authorize a trustee to enforce
Enserch Capital's creditor rights under the Loans under the Capital Loan
Agreement against Enserch Preferred and Enserch Preferred's creditor rights
under the Loans under the Preferred Loan Agreement against ENSERCH, enforce
the obligations undertaken by ENSERCH under the Guarantee and the Loan
Guarantee and declare and pay dividends on the Series A Preferred Securities,
and ENSERCH and Enserch Preferred have agreed to execute and deliver such
documents as may be necessary, appropriate or convenient for the trustee to
enforce such rights and obligations.
In furtherance of the foregoing, and without limiting the powers of any
trustee so appointed and for the avoidance of any doubt concerning the powers
of the trustee, any trustee, in its own name and as trustee of an express
trust, may institute a proceeding, including, without limitation, any suit in
equity, an action at law or other judicial or administrative proceeding, to
enforce Enserch Capital's creditor rights directly against ENSERCH, Enserch
Preferred or any other obligor in connection with such obligations to the same
extent as Enserch Capital and on behalf of Enserch Capital, and may prosecute
such proceeding to judgment or final decree, and enforce the same against
ENSERCH, Enserch Preferred, or any other obligor in connection with such
obligations and collect, out of the property, wherever situated, of ENSERCH,
Enserch Preferred or any such other obligor upon such obligations, the monies
adjudged or decreed to be payable in the manner provided by law.
For purposes of determining whether Enserch Capital has failed to pay
dividends in full for 18 monthly dividend periods, dividends shall be deemed
to remain in arrears, notwithstanding any payments in respect thereof, until
full cumulative dividends have been or contemporaneously are declared and paid
with respect to all monthly dividend periods terminating on or prior to the
date of payment of such full cumulative dividends. Not later than 30 days
after such right to appoint a trustee
S-13
<PAGE>
arises, the Class A Member will convene a general meeting for the above
purpose. If the Class A Member fails to convene such meeting within such 30-
day period, the holders of 10% of the outstanding Series A Preferred
Securities will be entitled to convene such meeting. The provisions of the
Limited Liability Company Agreement relating to the convening and conduct of
the general meetings of securityholders will apply with respect to any such
meeting. Any trustee so appointed shall vacate office immediately if Enserch
Capital (or ENSERCH pursuant to the Guarantee) shall have paid in full all
accumulated and unpaid dividends on the Series A Preferred Securities or such
default or breach, as the case may be, shall have been cured. Notwithstanding
the appointment of any such trustee, ENSERCH and Enserch Preferred retain all
rights under the Loan Agreements, including the right to jointly extend the
interest payment period for up to 60 months as provided under "Description of
the Loans--Option to Extend Interest Payment Period". During any such
extension, dividends on Series A Preferred Securities will be deferred, but
holders will be required to include interest from the Loans in income for
federal tax purposes. However, in the event an extended interest payment
period occurs following the occurrence of a Special Loan Tax Event under
circumstances where ENSERCH elects to have the Series A Preferred Securities
remain outstanding, holders will not be required to include any amount in
gross income for U.S. federal income tax purposes in advance of the receipt of
cash.
If any proposed amendment to the Limited Liability Company Agreement
provides for, or the Class A Member otherwise proposes to effect (pursuant to
an action or otherwise), (x) any action which would adversely affect the
powers, preferences or special rights of the Series A Preferred Securities,
whether by way of amendment to the Limited Liability Company Agreement or
otherwise (including, without limitation, the authorization or issuance of any
limited liability company interests of Enserch Capital ranking, as to
participation in the profits or assets of Enserch Capital, senior to the
Series A Preferred Securities), or (y) the dissolution, winding up or
termination of Enserch Capital, then the holders of outstanding Series A
Preferred Securities will be entitled to vote on such amendment or action of
the Class A Member (but not on any other amendment or action) and, in the case
of an amendment described in clause (x) above which would equally adversely
affect the rights, preferences or privileges of any Capital Dividend Parity
Securities or any Capital Liquidation Parity Securities, such Capital Dividend
Parity Securities or such Capital Liquidation Parity Securities, as the case
may be, or, in the case of any amendment described in clause (y) above, all
Capital Liquidation Parity Securities, will be entitled to vote together as a
class on such amendment or action of the Class A Member (but not on any other
amendment or action), and such amendment or action shall not be effective
except with the approval of the holders of 66 2/3% in liquidation preference
of such outstanding Preferred Securities; provided, however, that no such
approval shall be required if the dissolution, winding up or termination of
Enserch Capital is proposed or initiated upon the initiation of proceedings,
or after proceedings have been initiated, for the liquidation, dissolution or
winding up of ENSERCH or Enserch Preferred.
The rights attached to the Series A Preferred Securities will be deemed not
to be adversely affected by the creation or issue of, and no vote will be
required for the creation of, any further limited liability company interests
of Enserch Capital ranking pari passu with or junior to the Series A Preferred
Securities with regard to participation in the profits or assets of Enserch
Capital. Holders of Series A Preferred Securities have no preemptive rights.
The Limited Liability Company Agreement provides that the Class A Member
will not permit or cause Enserch Capital to file a voluntary petition in
bankruptcy without the affirmative vote of the holders of 66 2/3% of the
outstanding Series A Preferred Securities.
Any required approval of holders of Series A Preferred Securities may be
given at a separate meeting of such holders convened for such purpose, at a
general meeting of securityholders of Enserch Capital or pursuant to written
consent. Enserch Capital will cause a notice of any meeting at which holders
of the Series A Preferred Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be
mailed to each holder of record of Series A Preferred Securities. Each such
notice will include a statement setting forth (i) the date of such
S-14
<PAGE>
meeting or the date by which such action is to be taken, (ii) a description of
any matter upon which written consent is sought and (iii) instructions for the
delivery of proxies or consents.
No vote or consent of the holders of the Series A Preferred Securities will
be required for Enserch Capital to redeem and cancel Series A Preferred
Securities in accordance with the Limited Liability Company Agreement.
Notwithstanding that holders of Series A Preferred Securities are entitled
to vote or consent under any of the circumstances described above, any of the
Series A Preferred Securities and any other series of Preferred Securities
that are entitled to vote or consent with such Series A Preferred Securities
as a single class at such time, that are owned by ENSERCH or any entity owned
more than 50% by ENSERCH, either directly or indirectly, shall not be entitled
to vote or consent and shall, for the purposes of such vote or consent, be
treated as if they were not outstanding.
ADDITIONAL AMOUNTS
All payments in respect of the Series A Preferred Securities by Enserch
Capital will be made without withholding or deduction for or on account of any
present or future taxes, duties, assessments or governmental charges of
whatever nature imposed or levied upon or as a result of such payment by or on
behalf of the United States of America, any state thereof or any other
jurisdiction through which or from which such payment is made, or any
authority therein or thereof having power to tax, unless the withholding or
deduction of such taxes, duties, assessments or governmental charges is
required by law. In that event, Enserch Capital will pay as a dividend such
additional amounts as may be necessary in order that the net amounts received
by the holders of the Series A Preferred Securities after such withholding or
deduction will equal the amount which would have been receivable in respect of
such Series A Preferred Securities in the absence of such withholding or
deduction ("Additional Amounts"), except that no such Additional Amounts will
be payable to a holder of Series A Preferred Securities (or a third party on
his behalf) with respect to Series A Preferred Securities:
(a) if such holder is liable for such taxes, duties, assessments or
governmental charges in respect of such Series A Preferred Securities by
reason of such holder's having some connection with the United States, any
state thereof or any other jurisdiction through which or from which such
payment is made, other than being a holder of such Series A Preferred
Securities, or
(b) if Enserch Capital has notified such holder of the obligation to
withhold taxes and requested but not received from such holder a
declaration of non-residence, a valid taxpayer identification number or
other claim for exemption, and such withholding or deduction would not have
been required had such declaration, taxpayer identification number or claim
been received.
BOOK-ENTRY-ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depository for
the Series A Preferred Securities. The Series A Preferred Securities will be
issued only as fully-registered securities registered in the name of Cede &
Co. (DTC's nominee). One or more fully-registered global Series A Preferred
Security certificates will be issued, representing in the aggregate the total
number of Series A Preferred Securities, and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934. DTC holds securities that its participants
("Participants") deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations, and certain other
organizations ("Direct Participants"). DTC is owned by a number of its Direct
Participants and by the
S-15
<PAGE>
New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks and
trust companies that clear through or maintain a custodial relationship with a
Direct Participant, either directly or indirectly ("Indirect Participants").
The rules applicable to DTC and its Participants are on file with the
Securities and Exchange Commission.
Purchases of Series A Preferred Securities under the DTC system must be made
by or through Direct Participants, which will receive a credit for the Series
A Preferred Securities on DTC's records. The ownership interest of each actual
purchaser of each Series A Preferred Security ("Beneficial Owner") is in turn
to be recorded on the Direct and Indirect Participants' records. Beneficial
Owners will not receive written confirmation from DTC of their purchases, but
Beneficial Owners are expected to receive written confirmations providing
details of the transactions, as well as periodic statements of their holdings,
from the Direct or Indirect Participants through which the Beneficial Owners
purchased Series A Preferred Securities. Transfers of ownership interests in
the Series A Preferred Securities are to be accomplished by entries made on
the books of Participants acting on behalf of Beneficial Owners. Beneficial
Owners will not receive certificates representing their ownership interests in
Series A Preferred Securities, except in the event that use of the book-entry
system for the Series A Preferred Securities is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Series A
Preferred Securities; DTC's records reflect only the identity of the Direct
Participants to whose accounts such Series A Preferred Securities are
credited, which may or may not be the Beneficial Owners. The Participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Series A Preferred Securities are being redeemed, DTC's practice is to
determine by lot the amount of the interest of each Direct Participant in such
series to be redeemed.
Although voting with respect to the Series A Preferred Securities is
limited, in those cases where a vote is required, neither DTC nor Cede & Co.
will consent or vote with respect to Series A Preferred Securities. Under its
usual procedures, DTC would mail an Omnibus Proxy to Enserch Capital as soon
as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts the
Series A Preferred Securities are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
Dividend payments on the Series A Preferred Securities will be made to DTC.
DTC's practice is to credit Direct Participants' accounts on the relevant
payable date in accordance with their respective holdings shown on DTC's
records unless DTC has reason to believe that it will not receive payments on
such payable date. Payments by Participants to Beneficial Owners will be
governed by standing instructions and customary practices and will be the
responsibility of such Participant and not of DTC, Enserch Capital or ENSERCH,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of dividends to DTC is the responsibility of Enserch
Capital, disbursement of such payments to Direct Participants is the
responsibility of DTC, and disbursement of such payments to the Beneficial
Owners is the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository with
respect to the Series A Preferred Securities at any time by giving reasonable
notice to Enserch Capital. Under such circumstances, in the event that a
successor securities depository is not obtained, Series A Preferred
S-16
<PAGE>
Security certificates are required to be printed and delivered. Additionally,
Enserch Capital (with the consent of ENSERCH) may decide to discontinue use of
the system of book-entry transfers through DTC (or a successor Depository). In
that event, certificates for the Series A Preferred Securities will be printed
and delivered. Additionally, in the event that Enserch Capital exercises its
option to redeem only a portion of the Series A Preferred Securities because
Enserch Capital or ENSERCH is or would be required to withhold or deduct
Additional Amounts in regard to such Series A Preferred Securities to be
redeemed, Enserch Capital will cause the global certificates representing all
of the Series A Preferred Securities to be withdrawn from DTC (or its
successor securities depository) and will issue certificates in definitive
form representing the Series A Preferred Securities. Thereafter, the Series A
Preferred Securities subject to such requirement to withhold or deduct
Additional Amounts will be redeemed.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that Enserch Capital and ENSERCH believe to be
reliable, but neither Enserch Capital nor ENSERCH take any responsibility for
the accuracy thereof.
REGISTRAR, TRANSFER AGENT AND PAYING AGENT
ENSERCH will act as registrar, transfer agent and paying agent for the
Series A Preferred Securities (the "Paying Agent").
Registration of transfers of Series A Preferred Securities will be effected
without charge by or on behalf of Enserch Capital, but upon payment (with the
giving of such indemnity as Enserch Capital or ENSERCH may require) in respect
of any tax or other governmental charges which may be imposed in relation to
it.
Enserch Capital will not be required to register or cause to be registered
the transfer of Series A Preferred Securities after such Series A Preferred
Securities have been called for redemption.
DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the guarantee (the
"Guarantee") which will be executed and delivered by ENSERCH for the benefit
of the holders from time to time of Series A Preferred Securities. This
summary contains certain terms and provisions of the Guarantee but does not
purport to be complete. References to provisions of the Guarantee are
qualified in their entirety by reference to the text of the Guarantee, which
will be substantially in the form filed as an exhibit to the Registration
Statement of which the accompanying Prospectus forms a part.
GENERAL
ENSERCH will irrevocably and unconditionally agree, to the extent set forth
herein, to pay in full, to the holders of the Series A Preferred Securities,
the Guarantee Payments (as defined below) (except to the extent paid by
Enserch Capital), as and when due, regardless of any defense, right of set-off
or counterclaim which Enserch Capital may have or assert. The following
payments to the extent not paid by Enserch Capital (the "Guarantee Payments")
will be subject to the Guarantee (without duplication): (i) any accumulated
and unpaid dividends which have been theretofore declared on the Series A
Preferred Securities out of moneys legally available therefor, (ii) the
Redemption Price payable out of funds legally available therefor with respect
to Series A Preferred Securities called for redemption by Enserch Capital,
(iii) upon a liquidation of Enserch Capital, the amount of the Liquidation
Distribution, and (iv) any Additional Amounts payable by Enserch Capital in
respect of the Series A Preferred Securities. ENSERCH's obligation to make a
Guarantee Payment may be satisfied by direct payment of the required amounts
by ENSERCH to the holders of Series A Preferred Securities or by causing
Enserch Capital to pay such amounts to such holders.
S-17
<PAGE>
If ENSERCH and Enserch Preferred fail to make interest payments required
under the Loan Agreements, Enserch Capital will not have sufficient funds to
declare or pay dividends on the Series A Preferred Securities. The Guarantee
does not cover payment of such undeclared and unpaid dividends. In such event,
the remedies of a holder of Series A Preferred Securities are described under
"Description of the Loans--Enforcement".
CERTAIN COVENANTS OF ENSERCH
In the Guarantee, ENSERCH will covenant that, so long as any Series A
Preferred Securities remain outstanding, neither ENSERCH, nor any majority-
owned subsidiary of ENSERCH, shall declare or pay any dividend on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of its
capital stock or make any guarantee payments with respect to the foregoing
(other than (i) payments under the Guarantee or the Loan Guarantee, or (ii)
dividends or guarantee payments to ENSERCH or a wholly owned subsidiary of
ENSERCH) if at such time ENSERCH shall be in default with respect to its
payment or other obligations under the Guarantee or there shall have occurred
any event that, with the giving of notice or the lapse of time or both, would
constitute an Event of Default under the Loans to Enserch Preferred or from
Enserch Preferred to ENSERCH.
In the Guarantee, ENSERCH will also covenant that, so long as any Series A
Preferred Securities remain outstanding, it will (i) maintain direct or
indirect 100% ownership of the Common Securities, (ii) not voluntarily
dissolve, wind-up or terminate Enserch Capital, (iii) remain the Class A
Member of Enserch Capital and timely perform all of its duties as Class A
Member of Enserch Capital (including the duty to declare and pay dividends on
the Series A Preferred Securities) in all material respects; provided that any
permitted successor of ENSERCH under the Preferred Loan Agreement may succeed
to ENSERCH's duties as Class A Member, and (iv) use reasonable efforts to
cause Enserch Capital to remain a limited life limited liability company and
otherwise continue to be treated as a partnership for United States federal
income tax purposes.
ADDITIONAL AMOUNTS
All Guarantee Payments will be made without withholding or deduction for or
on account of any present or future taxes, duties, assessments or governmental
charges of whatever nature imposed or levied upon or as a result of such
payment by or on behalf of the United States, any state thereof or any other
jurisdiction through which or from which such payment is made, or any
authority therein or thereof having power to tax, unless the withholding or
deduction of such taxes, duties, assessments or governmental charges is
required by law. In that event, ENSERCH will pay such additional amounts as
may be necessary in order that the net amounts received by the holders of the
Series A Preferred Securities after such withholding or deduction will equal
the amount which would have been receivable in respect of the Series A
Preferred Securities in the absence of such withholding or deduction, except
that no such additional amounts will be payable to a holder of the Series A
Preferred Securities (or a third party on his behalf) with respect to any of
the Series A Preferred Securities:
(a) if such holder is liable for such taxes, duties, assessments or
governmental charges in respect of the Series A Preferred Securities by
reason of such holder's having some connection with the United States, any
state thereof or any other jurisdiction through which or from which such
payment is made, other than being a holder of the Series A Preferred
Securities, or
(b) if Enserch Capital or ENSERCH has notified such holder of the
obligation to withhold taxes and requested but not received from such
holder a declaration of non-residence, a valid taxpayer identification
number or other claim for exemption, and such withholding or deduction
would not have been required had such declaration, taxpayer identification
number or claim been received.
S-18
<PAGE>
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not adversely affect the rights
of holders of Series A Preferred Securities (in which case no vote will be
required), the Guarantee may be amended only with the prior approval of the
holders of not less than 66 2/3% of the outstanding Series A Preferred
Securities. ENSERCH may not assign its obligations under the Guarantee without
the prior approval of holders of not less than 66 2/3% of the outstanding
Series A Preferred Securities. The manner of obtaining any such approval of
holders of the Series A Preferred Securities will be as set forth under
"Description of the Series A Preferred Securities--Voting Rights". All
guarantees and agreements contained in the Guarantee shall bind the
successors, assigns, receivers, trustees and representatives of ENSERCH and
shall inure to the benefit of the holders of the Series A Preferred
Securities.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon full
payment of the Redemption Price of all Series A Preferred Securities or upon
full payment of the amounts payable upon liquidation of Enserch Capital. The
Guarantee will continue to be effective or will be reinstated, as the case may
be, if at any time any holder of Series A Preferred Securities must restore
payment of any sums paid under the Series A Preferred Securities or the
Guarantee.
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of ENSERCH and will
rank (i) subordinate and junior in right of payment to all liabilities of
ENSERCH, (ii) pari passu with any guarantee entered into by ENSERCH in respect
of Preferred Securities of Enserch Capital ranking pari passu with the Series
A Preferred Securities as to participation in the profits or assets of Enserch
Capital unless such guarantee provides that it is subordinated to the
Guarantee, and (iii) senior to any preferred or preference stock now or
hereafter issued by ENSERCH and any guarantee now or hereafter entered into by
ENSERCH in respect of any preferred or preference stock of any affiliate of
ENSERCH (other than any guarantee ranking pari passu with the Guarantee as
described in clause (ii) above). The Guarantee provides that each holder of
Series A Preferred Securities by acceptance thereof agrees to the
subordination provisions and other terms of the Guarantee.
The Guarantee will constitute a guarantee of payment and not of collection.
A holder of Series A Preferred Securities may enforce the Guarantee directly
against ENSERCH, and ENSERCH will waive any right or remedy to require that
any action be brought against Enserch Capital or any other person or entity
before proceeding against ENSERCH. The Guarantee will not be discharged except
by payment of the Guarantee Payments in full to the extent not paid by Enserch
Capital and by complete performance of all obligations under the Guarantee.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the laws
of the State of New York.
DESCRIPTION OF THE LOANS
Set forth below is summary information concerning the loans from Enserch
Capital to Enserch Preferred, and the loans from Enserch Preferred to ENSERCH
(collectively, the "Loans"), of the proceeds of the issuance and sale of (i)
the Series A Preferred Securities and (ii) Enserch Capital's Common Securities
and related capital contributions ("Common Security Payments"). This summary
describes certain terms and provisions of the loan agreement between Enserch
Capital and Enserch
S-19
<PAGE>
Preferred (the "Capital Loan Agreement") and the loan agreement between
Enserch Preferred and ENSERCH (the "Preferred Loan Agreement", and
collectively with the Capital Loan Agreement, the "Loan Agreements") but does
not purport to be complete. Except as set forth herein, the Loan Agreements
contain substantially similar terms and conditions. References to provisions
of the Loan Agreements are qualified in their entirety by reference to the
text of the Loan Agreements, which will be substantially in the forms filed as
exhibits to the Registration Statement of which the accompanying Prospectus
forms a part.
For purposes of this section, Enserch Preferred and ENSERCH are collectively
referred to as the "Borrowers" and individually sometimes as a "Borrower". The
obligations of each Borrower under the applicable Loan Agreement will also be
for the benefit of the holders from time to time of Series A Preferred
Securities, and such holders will be entitled to enforce such Loan Agreement
directly against such Borrower.
GENERAL
Pursuant to the Loan Agreements, Enserch Capital will agree to make Loans to
Enserch Preferred and Enserch Preferred will agree to make Loans to ENSERCH in
an aggregate principal amount equal to $ , such amount being the
aggregate stated liquidation preference of the Series A Preferred Securities
issued and sold by Enserch Capital and the aggregate payments for Common
Securities.
The entire principal amount of the Loans will become due and payable,
together with any accrued and unpaid interest thereon, including Additional
Interest (as hereinafter defined), on the earliest of April 30, 2024 or the
date upon which Enserch Preferred or ENSERCH is dissolved, wound-up or
liquidated or the date upon which Enserch Capital is dissolved, wound-up or
terminated. For a description of certain circumstances under which the Loans
may be renewed or replaced see "Description of the Series A Preferred
Securities--Redemption Procedures".
MANDATORY PREPAYMENT
If Enserch Capital redeems Series A Preferred Securities in accordance with
the terms thereof, the Loans will become due and payable in a principal amount
equal to the aggregate stated liquidation preference of the Series A Preferred
Securities so redeemed, together with any and all accrued interest thereon.
Any payment pursuant to this provision shall be made prior to 12:00 noon, New
York time, on the date of such redemption or at such other time on such
earlier date as the parties thereto shall agree.
OPTIONAL PREPAYMENT
Each Borrower shall have the right to prepay the Loans made to it, without
premium or penalty,
(i) in whole or in part (together with any accrued but unpaid interest,
including Additional Interest, on the portion being prepaid) at any time on
or after April 30, 1999; and
(ii) in whole (together with all accrued and unpaid interest, including
Additional Interest thereon) at any time if such Borrower is or would be
required to pay Additional Interest on the Loans or in part (together with
all accrued and unpaid interest, including Additional Interest on the
portion being prepaid) at any time if such Borrower is or would be required
to pay Additional Interest with respect to only a portion of the Loans,
provided that if a partial prepayment would, through the corresponding
partial redemption required under the terms of the Series A Preferred
Securities, result in a delisting of the Series A Preferred Securities,
such Borrower may only prepay the Loans in whole.
S-20
<PAGE>
INTEREST
The Loans will bear interest at an annual rate equal to % from the date
they are made until maturity. Such interest will be payable on the last day of
each calendar month of each year, commencing April 30, 1994. In the event that
any date on which interest is payable on the Loans is not a Business Day, then
payment of the interest payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay) except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and
effect as if made on such date, subject to certain rights of extension
described below.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Borrowers shall have the right acting jointly at any time during the
term of the Loans, so long as the Borrowers are not in default in the payment
of interest on the Loans, to extend the interest payment period to up to 60
months, at the end of which period the Borrowers shall pay all interest then
accrued and unpaid (together with interest thereon at the rate specified for
the Loans to the extent permitted by applicable law); and provided further
that, during any such extended interest payment period neither the Borrowers,
nor any majority-owned subsidiary of the Borrowers, shall declare or pay any
dividend on, or redeem, purchase, acquire or make a liquidation payment with
respect to, any of its capital stock or make any guarantee payments with
respect to the foregoing (other than (i) payments under the Guarantee or the
Loan Guarantee, or (ii) dividends or guarantee payments to the Borrowers or a
wholly owned subsidiary of ENSERCH). Prior to the termination of any such
extended interest payment period the Borrowers acting jointly may further
extend the interest payment period, provided that such extended interest
payment period together with all such further extensions thereof may not
exceed 60 months. The Borrowers shall give Enserch Capital notice of their
selection of such extended interest payment period one Business Day prior to
the earlier of (i) the date Enserch Capital declares the related dividend or
(ii) the date Enserch Capital is required to give notice of the record or
payment date of such related dividend to the New York Stock Exchange or other
applicable self-regulatory organization or to holders of the Series A
Preferred Securities, but in any event not less than two Business Days prior
to such record date. The Borrowers shall cause Enserch Capital to give such
notice of the Borrowers' selection of such extended interest payment period to
the holders of the Series A Preferred Securities.
ADDITIONAL INTEREST
In addition, if at any time Enserch Capital shall be required to pay any
Additional Amounts in respect of the Series A Preferred Securities pursuant to
the terms thereof, then the Borrowers will pay as interest ("Additional
Interest") an amount equal to Additional Amounts. Furthermore, if at any time
following the date of this Prospectus Supplement, Enserch Capital shall be
required to pay,with respect to its income derived from the interest payments
on the Loans to Enserch Preferred, any amounts for or on account of any taxes,
duties, assessments or governmental charges of whatever nature imposed by the
United States, or any other taxing authority, then, in any such case, each
Borrower will pay such Additional Interest under the related Loan Agreement as
may be necessary in order that the net amounts received and retained by
Enserch Capital after the payment of such taxes, duties, assessments or
governmental charges shall result in Enserch Capital's having such funds as it
would have had in the absence of the payment of such taxes, duties,
assessments or governmental charges.
METHOD AND DATE OF PAYMENT
Each payment by ENSERCH of principal and interest (including Additional
Interest, if any) on the Loans made to it shall be made to Enserch Preferred
in lawful money of the United States, at such place and to such account as may
be designated by Enserch Preferred. Each payment by Enserch
S-21
<PAGE>
Preferred of principal and interest (including Additional Interest, if any) on
the Loans made to it shall be made to Enserch Capital in lawful money of the
United States, at such place and to such account as may be designated by
Enserch Capital.
SET-OFF
Notwithstanding anything to the contrary in the Loan Agreements, each
Borrower shall have the right to set-off any payment it is otherwise required
to make thereunder with and to the extent ENSERCH has theretofore made, or is
concurrently on the date of such payment making, a payment under the Guarantee
or the Loan Guarantee.
SUBORDINATION
Each Loan Agreement provides that the parties thereto covenant and agree
(and each holder of Series A Preferred Securities by acceptance thereof
agrees) that each of the related Loans is subordinate and junior in right of
payment to all Senior Indebtedness of the Borrower as provided in such Loan
Agreement. The term "Senior Indebtedness" shall mean the principal, premium,
if any, and interest on (i) all indebtedness of the Borrower, whether
outstanding on the date of such Loan Agreement or thereafter created, incurred
or assumed, which is for money borrowed, or evidenced by a note or similar
instrument given in connection with the acquisition of any business,
properties or assets, including securities, (ii) any indebtedness of others of
the kinds described in the preceding clause (i) for the payment of which the
Borrower is responsible or liable (directly or indirectly, contingently or
otherwise) as guarantor or otherwise, (iii) any indebtedness secured by a lien
upon property owned by the Borrower and upon which indebtedness the Borrower
customarily pays interest, even though the Borrower has not assumed or become
liable for the payment of such indebtedness and (iv) amendments, renewals,
extensions and refundings of any such indebtedness, unless in any instrument
or instruments evidencing or securing such indebtedness or pursuant to which
the same is outstanding, or in any such amendment, renewal, extension or
refunding, it is expressly provided that such indebtedness is not superior in
right of payment to the related Loans. Such Senior Indebtedness shall continue
to be Senior Indebtedness and entitled to the benefits of the subordination
provisions irrespective of any amendment, modification or waiver of any term
of such Senior Indebtedness or extension or renewal of such Senior
Indebtedness and irrespective of certain other events specified in the related
Loan Agreement.
Upon the maturity of any Senior Indebtedness of a Borrower by lapse of time,
acceleration or otherwise, all Senior Indebtedness of such Borrower then due
and owing shall first be paid in full, or such payment duly provided for in
cash (or in securities or other property satisfactory to all of the holders of
such Senior Indebtedness), before any payment is made on account of the
related Loans.
In the event that (i) a Borrower shall default in the payment of any
principal, or premium, if any, or interest on any Senior Indebtedness when the
same becomes due and payable, whether at maturity or at a date fixed for
prepayment or declaration or otherwise or (ii) an event of default occurs with
respect to any Senior Indebtedness permitting the holders thereof to
accelerate the maturity thereof and written notice describing such event of
default, and requesting commencement of payment blockage on the Loans as
hereinafter described, is given to such Borrower by the holders of Senior
Indebtedness, then unless and until such default in payment or event of
default shall have been cured or waived or shall have ceased to exist, no
direct or indirect payment (in cash, property, securities, by set-off or
otherwise) shall be made or agreed to be made on account of the related Loans
or interest thereon or in respect of any repayment, redemption, retirement,
purchase or other acquisition of the related Loans.
In the event of (i) any insolvency, bankruptcy, receivership, liquidation,
reorganization, composition or other similar proceeding relating to a Borrower
or its property or for the benefit of its
S-22
<PAGE>
creditors, (ii) any proceeding for the liquidation, dissolution or other
winding up of a Borrower, voluntary or involuntary, whether or not involving
insolvency or bankruptcy proceedings, (iii) any assignment by a Borrower for
the benefit of creditors, or (iv) any other marshalling of the assets of a
Borrower, all Senior Indebtedness (including, without limitation, interest
accruing thereon after the commencement of any such proceeding, assignment or
marshalling of assets) shall first be paid in full before any payment or
distribution, whether in cash, securities or other property, shall be made on
the related Loans. Any payment or distribution, whether in cash, securities or
other property (other than securities of a Borrower or any other corporation
provided for by a plan of reorganization, the payment of which is subordinate,
at least to the extent provided in the subordination provisions of the related
Loan Agreement with respect to the indebtedness evidenced by the related
Loans, to the payment of all Senior Indebtedness of such Borrower at the time
outstanding and to any securities issued in respect thereof under any such
plan of reorganization), which would otherwise (but for the subordination
provisions) be payable or deliverable in respect of the related Loans shall be
paid or delivered directly to the holders of such Senior Indebtedness (or
their representative or trustee) in accordance with the priorities then
existing among such holders until all Senior Indebtedness of such Borrower
shall have been paid in full. No present or future holder of any Senior
Indebtedness of a Borrower shall be prejudiced in the right to enforce
subordination of the indebtedness constituting the Loans made to such Borrower
by any act or failure to act on the part of such Borrower.
Senior Indebtedness of a Borrower shall not be deemed to have been paid in
full unless the holders thereof shall have received cash (or securities or
other property satisfactory to such holders) in full payment of such Senior
Indebtedness then outstanding. Upon the payment in full of all Senior
Indebtedness of such Borrower, Enserch Capital or Enserch Preferred, as the
case may be, shall be subrogated to all the rights of any holders of such
Senior Indebtedness to receive any further payments or distributions
applicable to such Senior Indebtedness until the Loans made to such Borrower
shall have been paid in full, and such payments or distributions of cash,
securities or other property received by Enserch Capital or Enserch Preferred,
as the case may be, by reason of such subrogation, which otherwise would be
paid or distributed to the holders of such Senior Indebtedness, shall, as
between such Borrower and its creditors other than the holders of Senior
Indebtedness, on the one hand, and Enserch Capital or Enserch Preferred, as
the case may be, on the other, be deemed to be a payment by such Borrower on
account of Senior Indebtedness, and not on account of the Loans made to such
Borrower.
CERTAIN COVENANTS OF THE BORROWERS
Each Borrower will covenant that such Borrower and, in the case of ENSERCH,
any majority-owned subsidiary of ENSERCH, will not declare or pay any dividend
on, or redeem, purchase, acquire or make a liquidation payment with respect
to, any of its capital stock, or make any guarantee payments with respect to
the foregoing (other than (i) payments under the Guarantee and the Loan
Guarantee, or (ii) dividends or guarantee payments to ENSERCH or a wholly
owned subsidiary of ENSERCH), if at such time (i) there shall have occurred
any event that, with the giving of notice or the lapse of time or both, would
constitute an Event of Default under the related Loan Agreement or (ii)
ENSERCH shall be in default with respect to its payment or other obligations
under the Guarantee or the Loan Guarantee. ENSERCH will also covenant in the
Preferred Loan Agreement (i) to maintain direct or indirect 100% ownership of
the Common Securities, (ii) not to voluntarily dissolve, wind-up or terminate
Enserch Capital, (iii) to remain the Class A Member of Enserch Capital and to
timely perform all of its duties as Class A Member of Enserch Capital
(including the duty to declare and pay dividends on the Series A Preferred
Securities as described in the fourth paragraph under "Description of the
Series A Preferred Securities--Dividends") in all material respects; provided
that any permitted successor of ENSERCH under the Preferred Loan Agreement may
succeed to ENSERCH's duties as Class A Member, and (iv) to use its reasonable
efforts to cause Enserch Capital to remain a limited life limited liability
company and otherwise continue to be treated as a partnership for United
States federal income tax purposes.
S-23
<PAGE>
In the Preferred Loan Agreement, Enserch Preferred will covenant (i) to
maintain direct ownership of the Common Securities held by it, (ii) not to
voluntarily dissolve, wind-up or terminate Enserch Capital, (iii) to remain
the Class B Member of Enserch Capital, and (iv) to use its reasonable efforts
to cause Enserch Capital to remain a limited life limited liability company
and otherwise continue to be treated as a partnership for United States
federal income tax purposes. In the Capital Loan Agreement, Enserch Preferred
will also covenant not to enter into any agreement or incur any indebtedness
or other obligation other than as contemplated by the Loan Agreements, the
Guarantee, the Loan Guarantee Agreement, the Limited Liability Company
Agreement and the Underwriting Agreement with the Underwriters named herein.
Enserch Capital may not waive compliance or waive any default in compliance
by the Borrowers of any covenant or other term in the Loan Agreements without
the approval of 66 2/3% of Series A Preferred Securityholders, obtained in the
same manner as would be required for an amendment of the Loan Agreements to
the same effect.
EVENTS OF DEFAULT
Each Loan Agreement provides that if one or more of the following events
(each an "Event of Default") shall occur and be continuing:
(a) default in the payment of interest on the Loans (made pursuant to
either Loan Agreement), including any Additional Interest in respect
thereof, when due for 10 days (whether by virtue of the provisions
described above under "Subordination" or otherwise); provided that a valid
extension of the interest payment period by the related Borrower shall not
constitute a default in the payment of interest for this purpose; or
(b) default in the payment of principal on the Loans when due (whether by
virtue of the provisions described above under "Subordination" or
otherwise); or
(c) the dissolution, winding up or termination of Enserch Capital; or
(d) the bankruptcy, insolvency or liquidation of Enserch Preferred or
ENSERCH; or
(e) breach of any covenants contained in such Loan Agreement continued
for 30 days after notice to the related Borrower from the other party to
the related Loan Agreement or the holders of 25% or more of the outstanding
Series A Preferred Securities; or
(f) an Event of Default shall have occurred under the other Loan
Agreement;
then each of Enserch Capital and Enserch Preferred will have the right to
declare the principal of and the interest on the Loans made pursuant to such
Loan Agreement (including any Additional Interest and any interest subject to
an extension election) and any other amounts payable under the related Loan
Agreement to be forthwith due and payable and to enforce its other rights as a
creditor with respect to such Loans. Under the terms of the Series A Preferred
Securities, the holders of outstanding Series A Preferred Securities will have
the rights referred to under "Description of the Series A Preferred
Securities--Voting Rights", including the right to appoint a trustee, which
trustee shall be authorized to exercise Enserch Capital's right to accelerate
the principal amount of the Loans and to enforce Enserch Capital's other
creditor rights under the Loans; provided, that no holder of Series A
Preferred Securities shall be entitled to institute any proceeding, judicial
or otherwise, under the Loan Agreements unless such proceeding has been
brought by or with the consent of the holders of at least 25% of the
outstanding Series A Preferred Securities; and provided, further, that
notwithstanding the immediately preceding proviso, the holder of any Series A
Preferred Security shall have the right to institute suit for the enforcement
of any payment of principal or interest on the Loans.
ENFORCEMENT
Each Borrower agrees in the related Loan Agreement that its obligations
under such Loan Agreement are for the benefit of the holders of the Series A
Preferred Securities. The holders, or a
S-24
<PAGE>
trustee appointed by and acting on behalf of the holders, may enforce each
Borrower's obligations under the related Loan Agreement directly against such
Borrower as third party beneficiary of the Borrower's obligations thereunder
without first proceeding against Enserch Capital. However, except in the event
of a payment default as described in the next sentence, no holder of Series A
Preferred Securities is entitled to institute any proceeding under such Loan
Agreement to enforce the covenants therein unless such proceeding has been
brought by or with the consent of the holders of at least 25% of the
outstanding Series A Preferred Securities. Notwithstanding the immediately
preceding sentence, the holder of any Series A Preferred Security has the
right to institute suit for the enforcement of any payment of principal or
interest on the Loans.
The holder's claims under the Loan Agreements will rank subordinate and
junior in right of payment to all Senior Indebtedness of such Borrower as
described under "Subordination". Upon payment of such claims, any Trustee
appointed as described above would be authorized to declare and cause Enserch
Capital to pay dividends on the Series A Preferred Securities as described
under "Description of the Series A Preferred Securities--Voting."
MISCELLANEOUS
ENSERCH will have the right at all times to assign any of its rights or
obligations under the Preferred Loan Agreement and Enserch Preferred will have
the right at all times to assign any of its rights or obligations under the
Capital Loan Agreement, to a direct or indirect wholly owned subsidiary of
ENSERCH; provided that, in the event of any such assignment, ENSERCH and/or
Enserch Preferred, as the case may be, will remain jointly and severally
liable for all such obligations. Neither Enserch Capital nor Enserch Preferred
may assign any of its rights under the Loan Agreements without the prior
written consent of ENSERCH. Subject to the foregoing, the Loan Agreements will
be binding upon and inure to the benefit of the parties thereto and their
respective successors and assigns. Each Loan Agreement provides that it may
not otherwise be assigned by the parties thereto.
The Preferred Loan Agreement will provide that ENSERCH may merge with or
into another entity, may permit another entity to merge with or into ENSERCH
and may sell, transfer or lease all or substantially all of its assets to
another entity only if (i) at such time no Event of Default has occurred and
is continuing, or would occur as a result of such merger, sale, transfer or
lease, and (ii) ENSERCH is the survivor of such merger or the entity to which
ENSERCH's assets are sold, transferred or leased is an entity organized under
the laws of the United States or any state thereof, and assumes all of
ENSERCH's obligations under the Preferred Loan Agreement and becomes the Class
A Member.
The Capital Loan Agreement will provide that Enserch Preferred may merge
with or into another entity, may permit another entity to merge with or into
Enserch Preferred and may sell, transfer or lease all or substantially all of
its assets to another entity only if (i) at such time no Event of Default has
occurred and is continuing, or would occur as a result of such merger, sale,
transfer or lease, and (ii) Enserch Preferred is the survivor of such merger
or the survivor of such merger or entity to which Enserch Preferred's assets
are sold, transferred or leased is an entity organized under the laws of the
United States or any state thereof, assumes all of Enserch Preferred's
obligations under the Capital Loan Agreement and becomes the Class B Member.
The Loan Agreements will be governed by and construed in accordance with the
laws of the State of New York.
The Loan Agreements may be amended by mutual consent of the parties in the
manner the parties shall agree, provided that, so long as any of the Series A
Preferred Securities remain outstanding, no such amendment shall be made, and
no termination of either Loan Agreement shall occur, without, the prior
approval of ENSERCH and the holders of at least 66 2/3% of the outstanding
Series A Preferred Securities.
S-25
<PAGE>
DESCRIPTION OF THE LOAN GUARANTEE
Set forth below is a summary of information concerning the loan guarantee
(the "Loan Guarantee") which will be executed and delivered by ENSERCH for the
benefit of Enserch Capital and the holders of the Series A Preferred
Securities. This summary contains certain terms and provisions of the Loan
Guarantee but does not purport to be complete. References to provisions of the
Loan Guarantee are qualified in their entirety by reference to the text of the
Loan Guarantee, which will be substantially in the form filed as an exhibit to
the Registration Statement of which the accompanying Prospectus forms a part.
GENERAL
ENSERCH will irrevocably and unconditionally agree, to the extent set forth
herein, to pay in full, to Enserch Capital the Loan Guarantee Payments (as
defined below) (except to the extent paid by Enserch Preferred), as and when
due, regardless of any defense, right of set-off or counterclaim which Enserch
Preferred may have or assert. The following payments to the extent not paid by
Enserch Preferred (the "Loan Guarantee Payments") will be subject to the Loan
Guarantee (without duplication): the principal of and interest, including any
Additional Interest, on the Loans made to Enserch Preferred. ENSERCH's
obligation to make a Loan Guarantee Payment may be satisfied by direct payment
of the required amounts by ENSERCH to Enserch Capital or by causing Enserch
Preferred to pay such amounts to Enserch Capital.
CERTAIN COVENANTS OF ENSERCH
In the Loan Guarantee, ENSERCH will covenant that, so long as any Series A
Preferred Securities remain outstanding, neither ENSERCH, nor any majority-
owned subsidiary of ENSERCH, shall declare or pay any dividend on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of its
capital stock or make any guarantee payments with respect to the foregoing
(other than (i) payments under the Guarantee and the Loan Guarantee, or (ii)
dividends or guarantee payments to ENSERCH or a wholly owned subsidiary of
ENSERCH) if at such time ENSERCH shall be in default with respect to its
payment or other obligations under the Loan Guarantee or there shall have
occurred any event that, with the giving of notice or the lapse of time or
both, would constitute an Event of Default under the Loans to Enserch
Preferred or from Enserch Preferred to ENSERCH.
In the Loan Guarantee, ENSERCH will also covenant that, so long as any
Series A Preferred Securities remain outstanding, it will (i) maintain direct
or indirect 100% ownership of the Common Securities, and 100% of the
outstanding shares of capital stock of Enserch Preferred, (ii) not voluntarily
dissolve, wind-up or terminate Enserch Capital, (iii) remain the Class A
Member of Enserch Capital and timely perform all of its duties as Class A
Member of Enserch Capital (including the duty to declare and pay dividends on
the Series A Preferred Securities) in all material respects; provided that any
permitted successor of ENSERCH under the Preferred Loan Agreement may succeed
to ENSERCH's duties as Class A Member, and (iv) use reasonable efforts to
cause Enserch Capital to remain a limited life limited liability company and
otherwise continue to be treated as a partnership for United States federal
income tax purposes.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not adversely affect the rights
of holders of Series A Preferred Securities (in which case no vote will be
required), the Loan Guarantee may be amended only with the prior approval of
Enserch Capital and the holders of not less than 66 2/3% of the outstanding
Series A Preferred Securities. ENSERCH may not assign its obligations under
the Loan Guarantee without the prior approval of Enserch Capital and the
holders of not less than 66 2/3% of the outstanding Series A Preferred
Securities. The manner of obtaining any such approval of holders of the Series
A Preferred Securities will be as set forth under "Description of the Series A
Preferred Securities--Voting Rights". All guarantees and agreements contained
in the Loan Guarantee shall bind the successors, assigns, receivers, trustees
and representatives of ENSERCH and shall inure to the benefit of Enserch
Capital and the holders of the Series A Preferred Securities.
S-26
<PAGE>
TERMINATION OF THE LOAN GUARANTEE
The Loan Guarantee will terminate and be of no further force and effect upon
full payment of the Loan Guaranteed Amounts. The Loan Guarantee will continue
to be effective or will be reinstated, as the case may be, if at any time
Enserch Capital must restore payment of any sums paid under the Loans or the
Loan Guarantee.
STATUS OF THE LOAN GUARANTEE
The Loan Guarantee will constitute an unsecured obligation of ENSERCH and
will rank subordinate and junior in right of payment to all Senior
Indebtedness of ENSERCH as defined in the Preferred Loan Agreement to the
extent and on the same basis as the Loans under the Preferred Loan Agreement.
See "Description of the Loans--Subordination".
The Loan Guarantee will constitute a guarantee of payment and not of
collection. Enserch Capital may enforce the Loan Guarantee directly against
ENSERCH, and ENSERCH will waive any right or remedy to require that any action
be brought against Enserch Preferred or any other person or entity before
proceeding against ENSERCH. The Loan Guarantee will not be discharged except
by payment of the Loan Guarantee Payments in full to the extent not paid by
Enserch Preferred and by complete performance of all obligations under the
Loan Guarantee.
GOVERNING LAW
The Loan Guarantee will be governed by and construed in accordance with the
laws of the State of New York.
CERTAIN TERMS OF THE % SUBORDINATED DEBENTURES
Under certain circumstances involving the dissolution of Enserch Capital
following the occurrence of a Tax Event or an Investment Company Event, the
Series A Preferred Securities may be exchanged for % Subordinated
Debentures issued by ENSERCH (the " % Subordinated Debentures"). See
"Description of the Series A Preferred Securities--Special Event Redemption or
Exchange". The following description of the particular terms of the %
Subordinated Debentures supplements the description of the general terms and
conditions of "Debt Securities" set forth under the heading "Description of
the Debt Securities" in the accompanying Prospectus, to which description
reference is hereby made.
GENERAL
The % Subordinated Debentures will be issued as a series of unsecured
Subordinated Debt Securities of ENSERCH under the Subordinated Indenture (the
"Subordinated Indenture") referred to in the accompanying Prospectus between
ENSERCH and The First National Bank of Chicago, as trustee (the "Subordinated
Trustee"). The % Subordinated Debentures will be limited in aggregate
principal amount to the principal amount of the Loans outstanding under the
Capital Loan Agreement immediately prior to such exchange and will mature on
the date on which such Loans mature at the time the % Subordinated
Debentures are issued.
The % Subordinated Debentures will initially be issued in book-entry form
through the facilities of the Depository (as described below). As described
herein, under certain limited circumstances % Subordinated Debentures may
be issued in certificated form in exchange for a Global Security (as defined
below). See "Book-Entry and Settlement". In the event that % Subordinated
Debentures are issued in certificated form, such % Subordinated Debentures
will be in denominations of $25.00
S-27
<PAGE>
and integral multiples thereof and may be transferred or exchanged at the
offices described in the immediately following paragraph.
Payments on % Subordinated Debentures issued in book-entry form will be
made to the Depository. In the event % Subordinated Debentures are issued
in certificated form, principal and interest will be payable, the transfer of
the % Subordinated Debentures will be registrable and % Subordinated
Debentures will be exchangeable for % Subordinated Debentures bearing
identical terms and provisions at the office or agency of ENSERCH in The City
of New York designated for such purpose, provided, that payment of interest
may be made at the option of ENSERCH by check mailed to the address of the
persons entitled thereto.
ENSERCH will use its best efforts to list the % Subordinated Debentures on
the same exchange on which the Series A Preferred Securities are then listed.
INTEREST
Each % Subordinated Debenture will bear interest at the rate of % per
annum from the original date of issuance, payable monthly in arrears on the
last day of each calendar month of each year (each an "Interest Payment
Date"), commencing on the original date of issuance, to the person in whose
name such % Subordinated Debenture (or any predecessor % Subordinated
Debenture) is registered, subject to certain exceptions, at the close of
business on the business day next preceding such Interest Payment Date.
The amount of interest payable for any period will be computed on the basis
of twelve 30-day months and a 360-day year and, for any period shorter than a
full monthly interest period, will be computed on the basis of the actual
number of days elapsed in such period. In the event that any date on which
interest is payable on the % Subordinated Debentures is not a Business Day,
then payment of the interest payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and
effect as if made on such date. A "Business Day" shall mean any day other than
a day on which banking institutions in The City of New York are authorized or
required by law to close.
INTEREST DEFERRAL
Notwithstanding anything contained herein to the contrary, ENSERCH shall
have the right at any time during the term of the % Subordinated
Debentures, so long as ENSERCH is not in default in the payment of interest on
the % Subordinated Debentures, to extend the interest payment period on the
% Subordinated Debentures to up to 60 months, at the end of which period
ENSERCH shall pay all interest then accrued and unpaid (compounded monthly to
the extent permitted by applicable law); provided that, during any such
extended interest payment period, neither ENSERCH, nor any majority-owned
subsidiary of ENSERCH, shall declare or pay any dividends on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of its
capital stock or make any guarantee payments with respect to the foregoing
(other than dividends or guarantee payments to ENSERCH or a wholly owned
subsidiary of ENSERCH). Prior to the termination of any such extended interest
payment period, ENSERCH may further extend the interest payment period;
provided that such extended interest payment period together with all such
further extensions thereof may not exceed 60 months. ENSERCH shall give the
holders of the % Subordinated Debentures notice of its selection of such
extended interest payment period ten Business Days prior to the earlier of (i)
the Interest Payment Date or (ii) the date ENSERCH is required to give notice
of the record or payment date of such related interest payment to the New York
Stock Exchange or other applicable self-regulatory
S-28
<PAGE>
organization or to holders of the % Subordinated Debentures, but in any
event not less than two Business Days prior to such record date.
OPTIONAL REDEMPTION
The % Subordinated Debentures will be redeemable at the option of
ENSERCH, in whole or in part, at any time on or after April 30, 1999 at a
Redemption Price equal to 100% of the principal amount plus accrued interest
to the Redemption Date.
COVENANTS
In the % Subordinated Debentures, ENSERCH will covenant that neither it
nor any of its majority owned subsidiaries shall declare or pay any dividend
on, or redeem, purchase, acquire or make a liquidation payment with respect
to, any of its capital stock, or make any guarantee payments with respect to
the foregoing (other than dividends or guarantee payments to ENSERCH or a
wholly owned subsidiary of ENSERCH) if at such time there shall have occurred
any event that, with the giving of notice or the lapse of time or both, would
constitute an Event of Default under the Subordinated Indenture.
BOOK-ENTRY AND SETTLEMENT
The % Subordinated Debentures will be issued in the form of one or more
global certificates (each a "Global Security") registered in the name of the
nominee of the Depository. Except under the limited circumstances described
below, % Subordinated Debentures represented by the Global Security will not
be exchangeable for, and will not otherwise be issuable as, % Subordinated
Debentures in definitive form. The Global Securities described above may not
be transferred except by the Depository for such Global Security to a nominee
of the Depository or by a nominee of the Depository to the Depository or
another nominee of the Depository or to a successor Depository or its nominee.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such laws may
impair the ability to transfer beneficial interests in such a Global Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of % Subordinated
Debentures in definitive form and will not be considered the Holders (as
defined in the Subordinated Indenture) thereof for any purpose under the
Subordinated Indenture, and no Global Security representing % Subordinated
Debentures shall be exchangeable, except for another Global Security of like
denomination and tenor to be registered in the name of the Depository or its
nominee or to a successor Depository or its nominee. Accordingly, each
Beneficial Owner must rely on the procedures of the Depository and, if such
person is not a participant, on the procedures of the participant through
which such person owns its interest, to exercise any rights of a Holder under
the Subordinated Indenture.
The Depository. The Depository Trust Company ("DTC"), New York, New York,
will act as security Depository for the % Subordinated Debentures. For a
description of DTC and the specific terms of the Depository arrangements, see
"Description of the Series A Preferred Securities--Book-Entry Only Issuance--
The Depository Trust Company".
None of ENSERCH, the Trustee, any paying agent or any other agent of ENSERCH
or the Trustee will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in a Global Security for such % Subordinated Debentures or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
Discontinuance of the Depository's Services. A Global Security shall be
exchangeable for % Subordinated Debentures registered in the names of
persons other than the Depository or its nominee
S-29
<PAGE>
only if (i) the Depository notifies ENSERCH that it is unwilling or unable to
continue as Depository for such Global Security or if any time the Depository
ceases to be a clearing agency registered under the Exchange Act at a time
when the Depository is required to be so registered to act as such Depository,
(ii) ENSERCH in its sole discretion determines that such Global Security shall
be so exchangeable or (iii) there shall have occurred and be continuing a
default in the payment of principal of, or interest on, such % Subordinated
Debentures or an Event of Default or an event which, with the giving of notice
or lapse of time, or both, would constitute an Event of Default with respect
to such % Subordinated Debentures. Any Global Security that is exchangeable
pursuant to the preceding sentence shall be exchangeable for % Subordinated
Debentures registered in such names as the Depository shall direct. It is
expected that such instructions will be based upon directions received by the
Depository from its participants with respect to ownership of beneficial
interests in such Global Security.
UNITED STATES TAXATION
GENERAL
This section is a summary of certain federal income tax considerations that
may be relevant to prospective purchasers of Series A Preferred Securities and
represents the opinion of Sullivan & Cromwell, counsel to ENSERCH and Enserch
Capital, insofar as it relates to matters of law and legal conclusions. This
section is based upon current provisions of the Internal Revenue Code of 1986,
as amended ("Code"), existing and proposed regulations thereunder and current
administrative rulings and court decisions, all of which are subject to
change. Subsequent changes may cause tax consequences to vary substantially
from the consequences described below.
No attempt has been made in the following discussion to comment on all
federal income tax matters affecting purchasers of Series A Preferred
Securities. Moreover, the discussion focuses on holders of Series A Preferred
Securities who are individual citizens or residents of the United States and
has only limited application to corporations, estates, trusts or non-resident
aliens. Accordingly, each prospective purchaser of Series A Preferred
Securities should consult, and should depend on, his own tax advisor in
analyzing the federal, state, local and foreign tax consequences of the
purchase, ownership or disposition of Series A Preferred Securities.
INCOME FROM SERIES A PREFERRED SECURITIES
In the opinion of Sullivan & Cromwell, Enserch Capital will be treated as a
partnership for federal income tax purposes. Accordingly, each holder of
Series A Preferred Securities (a "Preferred Securityholder") will be required
to include in gross income his distributive share of Enserch Capital's net
income. Such income will not exceed dividends received on such Series A
Preferred Securities, except in limited circumstances as described below under
"Potential Extension of Interest Payment Period". No portion of such income
will be eligible for the dividends received deduction.
DISPOSITION OF SERIES A PREFERRED SECURITIES
Gain or loss will be recognized on a sale of Series A Preferred Securities,
including a complete redemption for cash, equal to the difference between the
amount realized and the Series A Preferred Securityholder's tax basis for the
Series A Preferred Securities sold. Gain or loss recognized by a Series A
Preferred Securityholder on the sale or exchange of a Series A Preferred
Security held for more than one year will generally be taxable as long-term
capital gain or loss.
EXCHANGE OF THE SERIES A PREFERRED SECURITIES FOR % SUBORDINATED DEBENTURES
Under certain circumstances relating to changes in law, as described under
the caption "Description of the Series A Preferred Securities--Special Event
Redemption or Exchange", Enserch
S-30
<PAGE>
Capital may distribute % Subordinated Debentures in exchange for the Series A
Preferred Securities. In the opinion of Sullivan & Cromwell, except as
described in the second succeeding sentence, such exchange generally would be
treated as a non-taxable exchange to each holder of Series A Preferred
Securities and will result in the holder of Series A Preferred Securities
receiving an aggregate tax basis in the % Subordinated Debentures equal to
such holder's aggregate tax basis in its Series A Preferred Securities. A
holder's holding period in the % Subordinated Debentures so received in
exchange for Series A Preferred Securities will include the period for which
the Series A Preferred Securities were held by such holder. If the exchange
occurs following a determination that Enserch Capital is subject to federal
income tax with respect to interest received on the Loans made by it, the
exchange will generally be taxable to a holder of Series A Preferred
Securities who will recognize gain or loss measured by the difference between
such holder's basis in its Series A Preferred Securities and the value of the
% Subordinated Debentures received in exchange therefor. In such a case, the
holding period of a holder of Series A Preferred Securities for the %
Subordinated Debentures will not include the period for which the Series A
Preferred Securities were held.
ENSERCH CAPITAL INFORMATION RETURNS AND AUDIT PROCEDURES
ENSERCH, as Class A Member of Enserch Capital, will furnish each Series A
Preferred Securityholder with a Schedule K-1 each year setting forth such
Series A Preferred Securityholder's allocable share of income for the prior
calendar year. ENSERCH is required to furnish such K-1s as soon as practicable
following the end of the year, but in any event prior to March 31.
Any person who holds Series A Preferred Securities as a nominee for another
person is required to furnish to Enserch Capital (a) the name, address and
taxpayer identification number of the beneficial owner and the nominee; (b)
information as to whether the beneficial owner is (i) a person that is not a
United States person, (ii) a foreign government, an international organization
or any wholly owned agency or instrumentality of either of the foregoing, or
(iii) a tax-exempt entity; (c) the amount and description of Series A
Preferred Securities held, acquired or transferred for the beneficial owner;
and (d) certain information including the dates of acquisitions and transfers,
means of acquisitions and transfers, and acquisition cost for purchases, as
well as the amount of net proceeds from sales. Brokers and financial
institutions are required to furnish additional information, including whether
they are United States persons and certain information on Series A Preferred
Securities they acquire, hold or transfer for their own accounts. A penalty of
$50 per failure (up to a maximum of $100,000 per calendar year) is imposed by
the Code for failure to report such information to Enserch Capital. The
nominee is required to supply the beneficial owners of the Series A Preferred
Securities with the information furnished to Enserch Capital.
POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD
Under the terms of the Loans, ENSERCH will be permitted to extend the
interest payment period up to 60 months. In the event that ENSERCH exercises
this right, ENSERCH may not, among other things, declare dividends on any of
its capital stock. Enserch Capital and ENSERCH currently believe that the
extension of a payment period is unlikely. In the event that the interest
payment period is extended, Enserch Capital will continue to accrue income,
equal to the amount of the interest payment due at the end of the extended
interest payment period, over the length of the extended interest payment
period.
Accrued income will be allocated, but not distributed, to holders of record
on the Business Day preceding the last day of each calendar month. As a
result, holders of record during an extended interest payment period will
include interest in gross income in advance of the receipt of cash, and any
such holders who dispose of Series A Preferred Securities prior to the record
date for the payment of dividends following such extended interest payment
period will include interest in gross income but
S-31
<PAGE>
will not receive any cash related thereto. The tax basis of a Series A
Preferred Security will be increased by the amount of any interest that is
included in income without a receipt of cash, and will be decreased again when
and if such cash is subsequently received from Enserch Capital.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
holder who or which is (i) a nonresident alien individual or (ii) a foreign
corporation, partnership or estate or trust, in either case not subject to
United States federal income tax on a net income basis in respect of a Series
A Preferred Security.
Under present United States federal income tax law, subject to the
discussion below with respect to backup withholding, and assuming satisfaction
by ENSERCH of its withholding tax obligations, if any:
(i) Payments by Enserch Capital or any of its paying agents to any holder
of a Series A Preferred Security who or which is a United States Alien
Holder will not be subject to United States federal withholding tax
provided that (a) the beneficial owner of the Series A Preferred Security
does not actually or constructively own 10%, or more of the total combined
voting power of all classes of stock of ENSERCH or Enserch Preferred
entitled to vote, (b) the beneficial owner of the Series A Preferred
Security is not a controlled foreign corporation that is related to ENSERCH
or Enserch Preferred through stock ownership, and (c) either (A) the
beneficial owner of the Series A Preferred Security certifies to Enserch
Capital or its agent, under penalties of perjury, that it is a United
States Alien Holder and provides its name and address or (B) the holder of
the Series A Preferred Security is a securities clearing organization, bank
or other financial institution that holds customers' securities in the
ordinary course of its trade or business (a "financial institution"), and
such holder certifies to Enserch Capital or its agent under penalties of
perjury that such statement has been received from the beneficial owner by
it or by a financial institution between it and the beneficial owner and
furnishes the payor with a copy thereof; and
(ii) a United States Alien Holder of a Series A Preferred Security will
generally not be subject to United States federal withholding tax on any
gain realized on the sale or exchange of a Series A Preferred Security
unless such holder is present in the United States for 183 days or more in
the taxable year of sale and either has a "tax home" in the United States
or certain other requirements are met.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to payments of the
proceeds of the sale of Series A Preferred Securities within the United States
to noncorporate U.S. holders, and "backup withholding" at a rate of 31% will
apply to such payments if the United States holder fails to provide an
accurate taxpayer identification number.
Payments of the proceeds from the sale by a United States Alien Holder of
Series A Preferred Securities made to or through a foreign office of a broker
will not be subject to information reporting or backup withholding, except
that, if the broker is a United States person, a controlled foreign
corporation for United States tax purposes or a foreign person 50% or more of
whose gross income is effectively connected with a United States trade or
business for a specified three-year period, information reporting may apply to
such payments. Payments of the proceeds from the sale of Series A Preferred
Securities to or through the United States office of a broker is subject to
information reporting and backup withholding unless the holder or beneficial
owner certifies as to its non-United States status or otherwise establishes an
exemption from information reporting and backup withholding.
S-32
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, Enserch
Capital has agreed to sell to each of the Underwriters named below, and each
of the Underwriters, for whom Goldman, Sachs & Co., Bear, Stearns & Co. Inc.,
Kidder, Peabody & Co. Incorporated, Lehman Brothers Inc., PaineWebber
Incorporated and Smith Barney Shearson Inc., are acting as Representatives,
has severally agreed to purchase from Enserch Capital the respective number of
Series A Preferred Securities set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
PREFERRED
UNDERWRITER SECURITIES
----------- ----------
<S> <C>
Goldman, Sachs & Co. ..........................................
Bear, Stearns & Co. Inc. ......................................
Kidder, Peabody & Co. Incorporated.............................
Lehman Brothers Inc. ..........................................
PaineWebber Incorporated.......................................
Smith Barney Shearson Inc. ....................................
----
Total........................................................
====
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all such Series A Preferred
Securities offered hereby, if any are taken.
The Underwriters propose to offer the Series A Preferred Securities in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus Supplement, and in part to certain securities
dealers at such price less a concession of $ per Series A Preferred
Security. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per Series A Preferred Security to
certain brokers and dealers. After the Series A Preferred Securities are
released for sale to the public, the offering price and other selling terms
may from time to time be varied by the Representatives.
In view of the fact that the proceeds of the sale of the Series A Preferred
Securities will ultimately be loaned to ENSERCH, under the Underwriting
Agreement, ENSERCH has agreed to pay as compensation ("Underwriters'
Compensation") for the Underwriters' arranging the Loans of such proceeds, an
amount in New York Clearing House (next day) funds of $ per Series A
Preferred Security ($ per Series A Preferred Security sold to certain
institutions) for the accounts of the several Underwriters.
Certain of the Underwriters are customers of, or engage in transactions
with, and from time to time have performed services for, ENSERCH and its
subsidiaries and associated companies in the ordinary course of business.
Prior to this offering, there has been no public market for the Series A
Preferred Securities. In order to meet one of the requirements for listing the
Series A Preferred Securities on the New York Stock Exchange, the Underwriters
will undertake to sell the Series A Preferred Securities to a minimum of 400
beneficial holders.
Enserch Capital and ENSERCH have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the United States
Securities Act of 1933, as amended.
ENSERCH and Enserch Capital have agreed, during the period beginning from
the date of the Underwriting Agreement and continuing to and including the
earlier of (i) the date, after the closing date, on which the distribution of
the Series A Preferred Securities and related Backup Undertakings ceases, as
determined by the Underwriters, or (ii) 90 days after the closing date, not to
offer, sell, contract to sell or otherwise dispose of any Series A Preferred
Securities, related Backup Undertakings,
S-33
<PAGE>
any limited liability company interests of Enserch Capital, or any preferred
stock of ENSERCH or any other securities (including any backup undertakings)
of Enserch Capital or ENSERCH which are substantially similar to the Series A
Preferred Securities or related Backup Undertakings, or any securities
convertible into or exchangeable for Series A Preferred Securities, related
Backup Undertakings, limited liability company interests, preferred stock or
such substantially similar securities of either Enserch Capital or ENSERCH
without the prior written consent of the Underwriters.
VALIDITY OF SECURITIES
Certain matters of Delaware law relating to the validity of the Series A
Preferred Securities, the validity of the obligations of ENSERCH under the
Limited Liability Company Agreement and the formation of Enserch Capital, are
being passed upon by Richards, Layton & Finger, P.A., special Delaware counsel
to Enserch Capital. The validity of the Series A Preferred Securities, the
Loan Agreements, the Guarantee, the Loan Guarantee and any % Subordinated
Debentures issuable in exchange for Series A Preferred Securities, will be
passed upon on behalf of Enserch Capital and ENSERCH by William T.
Satterwhite, Senior Vice President and General Counsel of ENSERCH, and on
behalf of the Underwriters by Mudge Rose Guthrie Alexander & Ferdon, counsel
to the Underwriters. Mr. Satterwhite and Mudge Rose Guthrie Alexander & Ferdon
may rely on the opinion of Richards, Layton & Finger, P.A. as to certain
matters of Delaware law. Mudge Rose Guthrie Alexander & Ferdon may rely on the
opinion of Mr. Satterwhite as to all matters of Texas law.
S-34
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION--DATED APRIL 5, 1994
PROSPECTUS
U.S. $450,000,000
ENSERCH CORPORATION
DEBT SECURITIES, PREFERRED STOCK
AND COMMON STOCK
ENSERCH CAPITAL L.L.C. PREFERRED SECURITIES
ENSERCH Corporation ("ENSERCH" or the "Corporation") may offer from time to
time in one or more series, together or separately, as shall be designated by
ENSERCH (i) debt securities (the "Debt Securities") which may be either senior
debt securities (the "Senior Debt Securities") or subordinated debt securities
(the "Subordinated Debt Securities") which, in the case of Subordinated Debt
Securities, may be convertible into the Corporation's Common Stock, $4.45 par
value (the "Common Stock"), (ii) shares of its preferred stock, of no par value
(the "Preferred Stock"), which may be issued in the form of Depositary Shares
evidenced by Depositary Receipts, and (iii) shares of its Common Stock. Enserch
Capital L.L.C. ("Enserch Capital"), a Delaware limited liability company and a
special purpose subsidiary of ENSERCH, may also offer, from time to time, its
preferred limited liability company interests ("EC Preferred Securities"), in
one or more series. In connection therewith, ENSERCH and Enserch Preferred
Capital, Inc., a Delaware corporation ("Enserch Preferred"), may offer back-up
undertakings ("Backup Undertakings") with respect to the EC Preferred
Securities, as described herein under "Enserch Capital and Enserch Preferred."
The Debt Securities, Preferred Stock, Common Stock, and EC Preferred Securities
and any related Backup Undertakings are collectively called the "Securities."
The Securities may be offered in amounts, at prices and on terms to be
determined at the time of offering, provided, however, that the aggregate
initial public offering price of all Securities shall not exceed U.S.
$450,000,000 (or its equivalent, based on the applicable exchange rate at the
time of sale, in one or more foreign currencies, currency units or composite
currencies). Certain specific terms of the particular Securities in respect of
which this Prospectus is being delivered will be set forth in the accompanying
Prospectus Supplement (the "Prospectus Supplement"), including where
applicable, in the case of Debt Securities: the specific title, aggregate
principal amount, the denomination, maturity, premium, if any, the interest
rate (which may be fixed, floating or adjustable), the time and method of
calculating payment of interest, if any, the place or places where principal of
(and premium, if any) and interest, if any, on such Debt Securities will be
payable, the currency in which principal of (and premium, if any) and interest,
if any, on such Debt Securities shall be payable, any terms of redemption at
the option of ENSERCH or the holder, any sinking fund provisions, terms for any
conversion or exchange into other securities, the initial public offering price
and other special terms; and, in the case of Preferred Stock and EC Preferred
Securities, the specific title, the aggregate amount, any dividends (including
the method of calculating payment of such dividends), liquidation, redemption,
any voting and other rights, terms for any conversion or exchange into other
securities, the initial public offering price and any other special terms. The
Senior Debt Securities when issued will rank on a parity with all other
unsecured and unsubordinated indebtedness of the Corporation. The Subordinated
Debt Securities when issued will be unsecured and subordinated to all present
and future Senior Indebtedness of the Corporation. If so specified in the
applicable Prospectus Supplement, Debt Securities of a series may be issued in
whole or in part in the form of one or more temporary or permanent global
Securities. ENSERCH's Common Stock is listed on the New York Stock Exchange,
the Midwest Stock Exchange and the London Stock Exchange. Any Common Stock sold
pursuant to a Prospectus Supplement will be listed on such exchanges, subject
to official notice of issuance.
The Prospectus Supplement will contain information concerning certain United
States federal income tax considerations, if applicable to the Securities
offered.
The Securities will be sold directly, through agents, underwriters or dealers
as designated from time to time, or through a combination of such methods. If
agents of ENSERCH or any dealers or underwriters are involved in the sale of
the Securities in respect of which this Prospectus is being delivered, the
names of such agents, dealers or underwriters and any applicable commissions or
discounts will be set forth in or may be calculated from the Prospectus
Supplement with respect to such Securities.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURI-
TIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1994.
<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
6
<PAGE>
or warrants and any dividends or distributions mentioned above); and (v) the
reclassification of Common Stock into other securities. However, no adjustment
in the Conversion Price will be required unless such adjustment would require
an increase or decrease of at least 1% in the Conversion Price. (Subordinated
Indenture--Section 1304).
In case of certain consolidations or mergers to which the Corporation is a
party or the transfer of substantially all of the assets of the Corporation,
each convertible Subordinated Debt Security then outstanding would, without the
consent of any holders of the convertible Subordinated Debt Securities, become
convertible only into the kind and amount of securities, cash and other
property receivable upon the consolidation, merger or transfer by a holder of
the number of shares of Common Stock into which such convertible Subordinated
Debt Security might have been converted immediately prior to such
consolidation, merger or transfer (assuming such holder of Common Stock failed
to exercise any rights of election and received per share the kind and amount
received per share by a plurality of non-electing shares). (Subordinated
Indenture--Section 1311).
FORM, EXCHANGE, REGISTRATION AND TRANSFER
Debt Securities of a series may be issuable in certificated or global form.
Debt Securities may be presented for registration of transfer (with the form of
transfer endorsed thereon duly executed), at the office of the Security
Registrar or at the office of any transfer agent designated by the Corporation
for such purpose with respect to any series of Debt Securities and referred to
in an applicable Prospectus Supplement, without service charge and upon payment
of any taxes and other governmental charges as described in the relevant
Indenture. Such transfer or exchange will be effected upon the Security
Registrar or such transfer agent, as the case may be, being satisfied with the
documents of title and identity of the person making the request. The
Corporation has appointed the Senior Trustee as Security Registrar with respect
to the Senior Debt Securities and the Subordinated Trustee as Security
Registrar with respect to the Subordinated Debt Securities. (Section 305). If a
Prospectus Supplement refers to any transfer agents (in addition to the
Security Registrar) initially designated by the Corporation with respect to any
series of Debt Securities, the Corporation may at any time rescind the
designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts, except that the Corporation will be
required to maintain a transfer agent in each Place of Payment for such series.
(Section 1002). The Corporation may at any time designate additional transfer
agents with respect to any series of Debt Securities.
In the event of any redemption in part, the Corporation shall not be required
to (i) issue, register the transfer of or exchange any Debt Security during a
period beginning at the opening of business 15 days before any selection for
redemption of Debt Securities of like tenor and of the series of which such
Debt Security is a part, and ending at the close of business on the earliest
date in which the relevant notice of redemption is deemed to have been given to
all holders of Debt Securities of like tenor and of such series to be redeemed
and (ii) register the transfer of or exchange any Debt Security so selected for
redemption, in whole or in part, except the unredeemed portion of any Debt
Security being redeemed in part. (Sections 305 and 1103).
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in an applicable Prospectus Supplement, payment of
principal of and premium (if any) on any Debt Security will be made only
against surrender to the Paying Agent of such Debt Security. Unless otherwise
indicated in an applicable Prospectus Supplement, principal of and any premium
and interest, if any, on Debt Securities will be payable, subject to any
applicable laws and regulations, at the office of such Paying Agent or Paying
Agents as the Corporation may designate from time to time, except that at the
option of the Corporation payment of any interest may be made by check mailed
to the address of the person entitled thereto as such address shall appear in
the Security Register with respect to such Debt Securities. (Section 1002).
Unless otherwise indicated in an applicable Prospectus Supplement, payment of
interest on a Debt Security on any Interest Payment Date will be made to the
person in whose name such Debt Security (or Predecessor Security) is registered
at the close of business on the Regular Record Date for such interest. (Section
307).
7
<PAGE>
Unless otherwise indicated in an applicable Prospectus Supplement, the
Corporate Trust Office of the related Trustee in the City of Chicago will be
designated as the Corporation's sole Paying Agent for payments with respect to
Debt Securities of each series. (Sections 101 and 1002). Any Paying Agents
outside the United States and any other Paying Agents in the United States
initially designated by the Corporation for the respective Debt Securities will
be named in an applicable Prospectus Supplement. (Section 301). The Corporation
may at any time designate additional Paying Agents or rescind the designation
of any Paying Agent or approve a change in the office through which any Paying
Agent acts, except that the Corporation will be required to maintain a Paying
Agent in each Place of Payment for each series of the respective Debt
Securities. (Section 1002).
All moneys paid by the Corporation to a Paying Agent for the payment of the
principal of and premium or interest, if any, on any Debt Security of any
series which remain unclaimed at the end of two years after such principal,
premium, if any, or interest shall have become due and payable will be repaid
to the Corporation and the holder of such Debt Security will thereafter look
only to the Corporation for payment thereof. (Section 1003).
GLOBAL DEBT SECURITIES
If any Debt Securities of a series are issuable in global form, the
applicable Prospectus Supplement will describe the circumstances, if any, under
which beneficial owners of interests in any such global Debt Security may
exchange such interests for Debt Securities of such series and of like tenor
and principal amount in any authorized form and denomination. Principal of and
any premium and interest on a global Debt Security will be payable in the
manner described in the applicable Prospectus Supplement. (Section 301).
The specific terms of the depository arrangement with respect to any portion
of a series of Debt Securities to be represented by a global Debt Security will
be described in the applicable Prospectus Supplement.
MODIFICATION OF THE INDENTURES
The Indentures contain provisions permitting the Corporation and the
respective Trustees, with the consent of the holders of not less than a
majority in principal amount of the debt securities which are affected by the
modification, to modify the particular Indenture or any supplemental indenture
or the rights of the holders of the debt securities issued under such
Indenture; provided that no such modification may, without the consent of the
holder of each outstanding debt security affected thereby, (a) change the
stated maturity date of the principal of, or any installment of principal of or
interest, if any, on, any Debt Security, (b) reduce the principal amount of, or
premium or rate of interest, if any, on, any Debt Security, (c) reduce the
amount of principal of an original issue discount Debt Security payable upon
acceleration of the maturity thereof, (d) change the place or currency of
payment of principal of, or premium or interest, if any, on, any Debt Security,
(e) impair the right to institute suit for the enforcement of any payment on or
with respect to any Debt Security, or (f) reduce the percentage in principal
amount of Outstanding Debt Securities of any series, the consent of the holders
of which is required for modification or amendment of the Indenture or for
waiver of compliance with certain provisions of the Indenture or for waiver of
certain defaults. (Section 902).
EVENTS OF DEFAULT
An Event of Default with respect to Debt Securities of any series is defined
in the Indentures as being; default for 30 days in payment of any interest on
Debt Securities of such series; default in payment of principal of (or premium,
if any, on) Debt Securities of such series; default in payment of any mandatory
sinking fund payment required by the Debt Securities of such series; default
for 60 days after notice in the performance of any other covenant in the Debt
Securities of such series or in the Indentures or certain events of bankruptcy,
insolvency or reorganization. The Senior Indenture (but not the Subordinated
Indenture) also defines an Event of Default with respect to Senior Debt
Securities of any series to be a default which involves the failure by the
Corporation to pay when due the principal of any indebtedness for money
borrowed by the
8
<PAGE>
Corporation in excess of $25 million or which results in the acceleration of
any such indebtedness in excess of $25 million, if such indebtedness is not
discharged, or such acceleration is not rescinded or annulled, within 10 days
after written notice as provided in the Senior Indenture. In case an Event of
Default with respect to Debt Securities of any series shall occur and be
continuing, the respective Trustees or the holders of not less than 25% in
principal amount of the Debt Securities of such series then outstanding may
declare the principal of all such Debt Securities to be due and payable. The
Corporation is required to furnish to the Senior Trustee and the Subordinated
Trustee annually a statement as to the performance by the Corporation of its
obligations under the respective Indentures and as to any default in such
performance. Under certain circumstances any declaration of acceleration with
respect to Debt Securities of any series may be rescinded and past defaults
(except, unless theretofore cured, a default in the payment of principal of or
interest on the Debt Securities) may be waived by the holders of a majority in
the aggregate principal amount of the Debt Securities of such series then
outstanding. The Indentures provide that the Trustees may withhold notice to
the holders of the respective Debt Securities of any series of any continuing
default (except in the payment of the principal (other than any mandatory
sinking fund payment) of (or premium, if any) or interest on any Debt
Securities of such series) if such Trustee considers it in the interest of
holders of such series of Debt Securities to do so. (Section 501).
SENIOR INDENTURE RESTRICTIVE COVENANT--LIMITATION ON LIENS
The Senior Indenture (but not the Subordinated Indenture) provides that the
Corporation will not create, assume or suffer to exist, and will not permit any
subsidiary to create, assume or suffer to exist, except in favor of the
Corporation, any mortgage, pledge or other lien or encumbrance on any of its
properties or assets (including stock and other securities of subsidiaries)
without making effective provision to secure equally and ratably the Senior
Debt Securities then outstanding and other indebtedness entitled to be so
secured, except that the Corporation or a subsidiary, without so securing the
Senior Debt Securities, may create, assume or suffer to exist (a) certain
purchase money and existing liens in connection with property acquisitions and
the extension, renewal or refunding of the same, (b) pledges of current assets,
in the ordinary course of business to secure current liabilities, (c) liens on
property to secure obligations to pay all or part of the purchase price of such
property only out of or measured by oil or gas production or the proceeds
thereof, or liens upon production from oil or gas property or the proceeds of
such production, to secure obligations to pay all or part of the expenses of
exploration, drilling or development of such property only out of such
production or proceeds, (d) mechanics' or materialmen's liens, certain good
faith deposits, deposits to secure public or statutory obligations, deposits to
secure, or in lieu of, surety, stay or appeal bonds, and deposits as security
for payment of taxes, assessments or similar charges and liens or security
interests created in connection with bid or completion bonds, (e) liens arising
by reason of deposits with, or the giving of security to, a governmental agency
as a condition to the transaction of business or the exercise of a privilege,
or deposits to enable the Corporation or a subsidiary to maintain self-
insurance or participate in any funds established to cover any insurance risks,
or in connection with workmen's compensation, unemployment insurance, old age
pension or other social security, (f) pledges or assignments of accounts
receivable, including customers' instalment paper, to banks or others
(including to or by any subsidiary which is principally engaged in the business
of financing the business of the Corporation and its subsidiaries) made in the
ordinary course of business, (g) liens of taxes or assessments for the current
year or not due or being contested in good faith and against which an adequate
reserve has been established, (h) judgments or liens the finality of which is
being contested and execution on which is stayed, (i) assessments or similar
encumbrances the existence of which does not impair the use of the property
subject thereto for the purposes for which it was acquired, (j) certain
landlords' liens so long as the rent secured thereby is not in default, and (k)
liens on the assets of any limited liability company organized under a limited
liability company act of any State which limited liability company is treated
as a partnership for federal income tax purposes. (Senior Indenture--Section
1006).
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
The Indentures provide that the Corporation may not consolidate with or merge
into any other Person or convey or transfer its properties and assets
substantially as an entirety to any Person, unless (i) the
9
<PAGE>
successor Person shall be organized and existing under the laws of the United
States or any State thereof or the District of Columbia, and shall expressly
assume by a supplemental indenture the due and punctual payment of the
principal of, any premium on, and any interest on, all the Debt Securities and
the performance of every covenant in such Indenture on the part of the
Corporation to be performed or observed; (ii) immediately after giving effect
to such transaction, no Event of Default, and no event which, after notice or
lapse of time or both, would become an Event of Default, shall have happened
and be continuing; and (iii) the Corporation shall have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger, conveyance or transfer and such supplemental
indenture comply with the foregoing provisions relating to such transaction. In
case of any such consolidation, merger, conveyance or transfer, such successor
Person will succeed to and be substituted for the Corporation as obligor on the
Debt Securities, with the same effect as if it had been named in the Indenture
as the Corporation. (Section 801).
The Indentures do not contain any other covenant which restricts the
Corporation's ability to merge or consolidate with any other corporation, sell
or convey all or substantially all of its assets to any persons, firm or
corporation or otherwise engage in restructuring transactions. Further, the
Indentures do not contain any provisions which would provide protection to
holders of Debt Securities against a sudden and dramatic decline in credit
quality resulting from a takeover, a recapitalization or similar restructuring
of the Corporation.
TITLE
The Corporation, the Trustees and any agent of the Corporation or the
relevant Trustee may treat the registered owner of any Debt Security as the
absolute owner thereof (whether or not such Debt Security shall be overdue and
notwithstanding any notice to the contrary) for the purpose of making payment
and for all other purposes. (Section 308).
DEFEASANCE AND DISCHARGE
Under the terms of the Indentures, the Corporation will be discharged from
any and all obligations in respect of the Debt Securities of any series (except
in each case for certain obligations to register the transfer or exchange of
Debt Securities, replace stolen, lost or mutilated Debt Securities, maintain
paying agencies and hold moneys for payment in trust) if the Corporation
deposits with the Trustee, in trust, (i) money; (ii) U.S. Government Securities
(as defined) or, in the case of Debt Securities denominated in a foreign
currency, Foreign Government Securities (as defined) which through the payment
of Interest thereon and principal thereof in accordance with their terms will
provide money; or (iii) any combination of (i) and (ii) above, in an amount
sufficient to pay all the principal (including any mandatory sinking fund
payments) of, and interest on, the Debt Securities of such series on the dates
such payments are due in accordance with the terms of such Debt Securities.
Such defeasance and discharge will become effective 91 days after the
Corporation, among other things, has delivered to the Trustee an Opinion of
Counsel to the effect that (i) the deposit and related defeasance would not
cause the holders of the Debt Securities of such series to recognize income,
gain or loss for Federal income tax purposes, or a copy of a ruling or other
formal statement or action to such effect received from or published by the
United States Internal Revenue Service; and (ii) the trust resulting from the
defeasance will not constitute, or is qualified as, a regulated investment
company under the Investment Company Act of 1940, as amended. (Section 403).
REPLACEMENT OF DEBT SECURITIES
Any mutilated Debt Security will be replaced by the Corporation at the
expense of the holder upon surrender of such Debt Security to the relevant
Trustee. Debt Securities that become destroyed, lost or stolen will be replaced
by the Corporation at the expense of the holder upon delivery to the relevant
Trustee of evidence of the destruction, loss or theft thereof satisfactory to
the Corporation and the relevant Trustee. In the case of a destroyed, lost or
stolen Debt Security, an indemnity satisfactory to the relevant Trustee and the
Corporation may be required at the expense of the holder of such Debt Security
before a replacement Debt Security will be issued. (Section 306).
10
<PAGE>
GOVERNING LAW
The Senior Indenture is, and the Subordinated Indenture and the Debt
Securities will be, governed by, and construed in accordance with, the laws of
the State of Texas. (Section 112).
INFORMATION CONCERNING THE TRUSTEES
Subject to the provisions of the relevant Indenture relating to its duties,
each Trustee will be under no obligation to exercise any of its rights or
powers under such Indenture at the request, order or direction of any of the
holders thereunder, unless such holders shall have offered to such Trustee
reasonable indemnity. Subject to such provision for indemnification, the
holders of a majority in principal amount of the debt securities then
outstanding thereunder will have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee
thereunder, or exercising any trust or power conferred on such Trustee.
(Section 601).
The Indentures contain limitations on the right of the Trustee, as a creditor
of the Corporation to obtain payment of claims in certain cases, or to realize
on certain property received in respect of any such claim as security or
otherwise. In addition, the Trustee may be deemed to have a conflicting
interest and may be required to resign as Trustee if at the time of a default
under the Indentures it is a creditor of the Corporation.
The First National Bank of Chicago, the Trustee under each Indenture, has
from time to time engaged in transactions with, or performed services for
ENSERCH in the ordinary course of business.
DESCRIPTION OF ENSERCH CAPITAL STOCK
The following description of the capital stock does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the more complete descriptions thereof set forth in (a) the Corporation's
Restated Articles of Incorporation, as amended, and the Rights Agreement, dated
as of April 15, 1986, between the Corporation and Harris Trust Company of New
York, as Rights Agent, both of which have been filed as exhibits to the
Registration Statement of which this Prospectus is a part, and (b) the
Statement of Resolutions relating to each series of Preferred Stock, which will
be filed with the Commission at or prior to the time of the offering of such
series of Preferred Stock. A form of Statement of Resolutions is filed as an
exhibit to the Registration Statement of which this Prospectus is a part.
The Corporation is currently authorized by its Restated Articles of
Incorporation to issue 100,000,000 shares of Common Stock, of $4.45 par value,
2,000,000 shares of preferred stock, of no par value (the "preferred stock"),
and 2,000,000 shares of Voting Preference Stock, of no par value. The Board of
Directors has authority to divide the preferred stock and Voting Preference
Stock into one or more series and has broad authority to fix and determine the
relative rights and preferences of the shares of each such series.
COMMON STOCK
The Corporation is authorized by its Restated Articles of Incorporation to
issue up to 100,000,000 shares of Common Stock, par value $4.45 per share.
Subject to the rights of the holders of the preferred stock and Voting
Preference Stock which may be outstanding from time to time, holders of Common
Stock are entitled to receive such dividends as are declared by the Board of
Directors from any funds legally available therefor, to one vote for each share
on all matters voted upon by shareholders, including election of directors
(cumulative voting being prohibited), and to share ratably in assets available
for distribution upon any liquidation. Common Stock has no preemptive rights
and is not subject to redemption or to any further call or assessment.
11
<PAGE>
In April 1986, the Corporation's Board declared a dividend of one Voting
Preference Stock contingent purchase right on each outstanding share of Common
Stock. All shares of Common Stock issued subsequently also include these
rights. Under certain conditions, each right may be exercised to purchase one
two-hundredth of a share of a new series of Voting Preference Stock at an
exercise price of $60. The rights are exercisable only if a person or group
acquires beneficial ownership of 20% or more of the Common Stock or commences a
tender or exchange offer upon consummation of which such person or group would
beneficially own 30% or more of the Common Stock. If any person becomes the
beneficial owner of 30% or more of the Common Stock, or if a 20%-or-more
shareholder engages in certain self-dealing transactions, or if in a merger
transaction with the Corporation in which the Corporation is the surviving
corporation and its Common Stock is not changed or converted, then each right
not owned by such person or related parties will entitle its holder to
purchase, at the right's then current exercise price, shares of Common Stock
(or, in certain circumstances as determined by the Board, other consideration)
having a value of twice the right's exercise price. In addition, if the
Corporation is involved in a merger or other business combination transaction
with another person in which its Common Stock is changed or converted, or sells
50% or more of its assets or earning power to another person, each right will
entitle its holder to purchase, at the right's then-current exercise price,
Common Stock of such other person having a value of twice the right's exercise
price. The rights, which have no voting rights, expire on May 5, 1996. the
Corporation generally will be entitled to redeem the rights at $.05 per right
at any time until the 15th day following public announcement that a 20%
position has been acquired.
Dividend restrictions on Common Stock are contained in several agreements
relating to senior long-term debt and in the Restated Articles of Incorporation
of the Corporation. Pursuant to the Restated Articles of Incorporation, no
dividend (other than a dividend payable in Common Stock) or other distribution
is permitted to be declared or paid on, and no amount is permitted to be
applied to the purchase of, the Common Stock unless (i) full cumulative
dividends for all past dividend periods have been paid or declared and set
apart for payment, and full cumulative dividends for the then current dividend
period have been, or simultaneously therewith are, paid or declared on
outstanding preferred stock and Voting Preference Stock and (ii) after giving
effect to such payment of dividend, other distribution or purchase, the
aggregate capital of the Corporation applicable to all capital stock
outstanding ranking junior to the preferred stock and Voting Preference Stock
as to dividends or assets plus the consolidated earned and capital surplus of
the Corporation and its subsidiaries shall exceed the aggregate amount payable
on involuntary dissolution, liquidation or winding up of the Corporation on all
outstanding shares of the preferred stock and the Voting Preference Stock and
all stock ranking prior to or on a parity with such stock as to dividends or
assets to be outstanding after such payment of dividend, other distribution or
purchase. At December 31, 1993, the Corporation had approximately $342 million
of consolidated common shareholders' equity which was free of such restrictions
after giving pro forma effect to the redemption by the Corporation of all of
its then outstanding sinking fund debentures and its Adjustable Rate Cumulative
Preferred Stock, Series D in March, 1994.
The Transfer Agent and Registrar of the Corporation's Common Stock is Harris
Trust Company of New York, New York, New York.
PREFERRED STOCK
The Corporation is currently authorized by its Restated Articles of
Incorporation to issue 2,000,000 shares of preferred stock, of no par value, of
which 100,000 shares of Adjustable Rate Cumulative Preferred Stock, Series E,
were outstanding on the date of this Prospectus. The Board of Directors has
authority to divide the preferred stock into one or more series and to fix and
determine relative rights and preferences of the shares of each such series.
All series of preferred stock, including any series of Preferred Stock to
which any Prospectus Supplement may relate, shall have the dividend,
liquidation, redemption and voting rights set forth below. Reference is made to
the Prospectus Supplement relating to the particular series of the Preferred
Stock offered thereby for
12
<PAGE>
specific terms, including: (i) the title of such Preferred Stock and the number
of shares offered; (ii) the amount of liquidation preference per share; (iii)
the price at which such Preferred Stock will be issued; (iv) whether dividends
shall be payable and, if payable, the dividend rate (or method of calculation);
(v) any redemption or sinking fund provisions of such Preferred Stock; (vi) the
terms of any right to convert the Preferred Stock into other securities of the
Corporation; (vii) whether the Corporation has elected to offer Depositary
Shares (as defined below); and (viii) any additional voting, dividend,
liquidation, redemption, sinking fund and other rights, preferences,
privileges, limitations and restrictions of such Preferred Stock.
The Preferred Stock offered by any Prospectus Supplement will, when issued,
be fully paid and nonassessable and have no preemptive rights.
As described under "Depositary Shares" below, the Corporation may, at its
option, elect to offer depositary shares evidenced by depositary receipts, each
representing a fraction (to be specified in the Prospectus Supplement relating
to the particular series of Preferred Stock) of a share of the particular
series of the Preferred Stock issued and deposited with a depositary, in lieu
of offering full shares of such series of the Preferred Stock.
Dividends. To the extent that the applicable Prospectus Supplement provides
that dividends shall be paid on a series of Preferred Stock, the holders of
shares of such series of Preferred Stock will be entitled to receive, when and
as declared by the Board of Directors of the Corporation out of assets of the
Corporation legally available therefor, cumulative cash dividends at the rate
per share set forth in the applicable Prospectus Supplement. Dividends on such
series of Preferred Stock will accrue from the date of original issuance and
will be paid quarterly on the first day of February, May, August and November
(the "Quarterly Dividend Payment Dates") commencing on the Quarterly Dividend
Payment Date next succeeding the expiration of 30 days after the date of
initial issue of any shares of such series.
No dividends (other than a dividend payable in Common Stock) shall be paid or
other distribution made on shares of the Common Stock or on any other class of
stock ranking junior to the preferred stock as to dividends or assets, nor
shall any shares of the Common Stock or other junior stock be purchased or
redeemed, unless (i) all dividends on the outstanding preferred stock for all
past quarterly dividend periods have been paid or declared and set apart for
payment, and all dividends on the preferred stock for the current period have
been paid or declared and set apart for payment, and (ii) after giving effect
to such payment of dividends, other distributions, purchase or redemption, the
aggregate capital of the Corporation applicable to all capital stock
outstanding ranking junior to the preferred stock as to dividends or assets,
plus the consolidated earned and capital surplus of the Corporation and its
subsidiaries, shall exceed the aggregate amount payable on involuntary
dissolution, liquidation or winding up of the Corporation on all shares of the
preferred stock and all stock ranking prior to or on a parity with the
preferred stock as to dividends or assets to be outstanding after such payment
of dividends, other distribution, purchase or redemption. Dividends may not be
paid on any one series of preferred stock unless dividends have been or are
contemporaneously paid or declared on the preferred stock on all series
entitled thereto.
Several agreements relating to senior long-term debt also contain
restrictions on distributions on capital stock of the Corporation. At December
31, 1993, the Corporation had approximately $342 million of consolidated common
shareholders' equity which was free of such restrictions after giving pro forma
effect to the redemption by the Corporation of all of its then outstanding
sinking fund debentures and its Adjustable Rate Cumulative Preferred Stock,
Series D in March 1994.
Voting Rights. Except as indicated in the Prospectus Supplement relating to a
particular series of Preferred Stock, or except as expressly required by
applicable law, the holders of shares of each series of Preferred Stock will
have no ordinary voting rights. However, without the approval of the holders of
shares representing at least two-thirds of the votes entitled to be cast by the
preferred stock, the Corporation may not amend its Restated Articles of
Incorporation to (1) create, or increase the number of authorized shares of, a
class of stock ranking prior to or on a parity with the preferred stock as to
dividends or assets; (2)
13
<PAGE>
increase the authorized number of shares of preferred stock; and (3) change any
of the rights or preferences of outstanding preferred stock or any series
thereof. Rights and preferences of any outstanding series, which vary from the
rights and preferences of other outstanding series, may not be changed without
the approval of the holders of shares representing at least two-thirds of the
votes entitled to be cast by such series. In addition, holders of preferred
stock have the right to elect two directors if cumulative dividend payments
shall not have been paid for six quarterly dividend periods, and this right
shall continue until such time as the default in payment of dividends shall
have been cured.
So long as any shares of any series of preferred stock shall be outstanding,
the Corporation shall not, without the approval of the holders of shares
representing a majority of the votes entitled to be cast, issue any additional
shares, or reissue any reacquired shares, of preferred stock or of any other
class of stock ranking prior to or on a parity with the outstanding shares of
the preferred stock as to dividends or assets for any purpose other than to
purchase or redeem an equal par or stated value on involuntary liquidation of
preferred stock or of stock ranking prior to or on a parity with the preferred
stock as to dividends or assets at the time outstanding unless
(i) the consolidated gross income (as defined) of the Corporation and its
subsidiaries for 12 consecutive calendar months within a period of 15
calendar months immediately preceding the calendar month of such issuance
is equal to at least 1 1/2 times the aggregate of the annual interest
charges on indebtedness of the Corporation and its subsidiaries (excluding
interest charges on indebtedness to be retired by the application of the
proceeds from the issuance of such shares) and the annual dividend
requirements on all preferred stock (including dividend requirements on any
class of stock ranking prior to or on a parity with the shares to be issued
as to dividends or assets but excluding any dividend requirements on any
stock to be retired by the application of the proceeds from the issuance of
such shares), which shall be outstanding immediately after the issuance of
such shares; and
(ii) the aggregate capital of the Corporation applicable to all capital
stock outstanding ranking junior to the preferred stock as to dividends and
assets, plus the consolidated earned and capital surplus of the Corporation
and its subsidiaries, shall be at least equal to the aggregate amount
payable upon involuntary dissolution, liquidation or winding up of the
Corporation on all shares of the preferred stock, and all stock ranking
prior to or on a parity with the preferred stock as to dividends or assets,
to be outstanding immediately after the issuance of such shares of
preferred stock or such stock ranking prior to or on a parity therewith and
the application of the proceeds thereof.
Each share of preferred stock of any series having a stated value of $100 on
involuntary liquidation shall, to the extent it is entitled to vote, be
entitled to one vote per share. Each share of preferred stock of any series
having a stated value other than $100 on involuntary liquidation shall be
entitled to as many votes or a fractional vote, as the case may be, as
determined by the ratio of the stated value on involuntary liquidation of a
share of each such series to $100.
Redemption. A series of the Preferred Stock may be redeemable, in whole or in
part, at the option of the Corporation, and may be subject to mandatory
redemption pursuant to a sinking fund, in each case upon terms, at the times
and at the redemption prices set forth in the Prospectus Supplement relating to
such series.
The Corporation's Restated Articles of Incorporation prohibit the Corporation
from redeeming (at its option or through operation of a sinking fund) or
purchasing shares of any series of preferred stock unless full cumulative
dividends on all outstanding shares of preferred stock for all dividend periods
ending on or prior to the date of redemption or purchase shall have been paid
or declared and set apart for payment.
Shares of any series of preferred stock which shall have been redeemed or
purchased by the Corporation shall, upon the filing of any required
certificate, be restored to the status of authorized but unissued shares of
preferred stock without designation and may be reissued from time to time,
unless the statement of resolution relating to such series of preferred stock
provides otherwise.
14
<PAGE>
Liquidation Rights. In the event of any voluntary or involuntary dissolution,
liquidation or winding up of the Corporation the holders of each series of
Preferred Stock shall be entitled to receive out of the assets of the
Corporation available for distribution to shareholders, before any distribution
of the assets is made to the holders of the Voting Preference Stock or the
Common Stock, cash in the amount or amounts set forth in the Prospectus
Supplement relating to such series of Preferred Stock plus accrued and unpaid
dividends. If the assets are not sufficient to pay in full the amounts payable
on all shares of preferred stock in the event of voluntary or involuntary
dissolution, liquidation or winding up, then the assets available for payment
will be distributed ratably among the holders of the preferred stock of all
series in proportion to the full preferential amounts to which they are
respectively entitled.
Transfer Agent and Registrar. The transfer agent for each series of Preferred
Stock will be described in the related Prospectus Supplement.
Adjustable Rate Cumulative Preferred Stock, Series E. The Corporation also
has outstanding 100,000 shares of Adjustable Rate Cumulative Preferred Stock,
Series E (the "Series E Preferred Stock"). These shares are of no par value per
share but have a stated value on liquidation of $1,000 per share. Series E
Preferred Stock is redeemable at the option of the Corporation at $1,030 per
share through April 30, 1994, and at $1,000 per share thereafter. The Series E
Preferred Stock is deposited with a bank under a depositary agreement and is
represented by 1,000,000 Depositary Shares. The First Chicago Trust Company of
New York, New York, New York, is the Transfer Agent for the Series E Depositary
Shares.
VOTING PREFERENCE STOCK
The Corporation has authorized 500,000 shares of a series of Voting
Preference Stock in connection with the shareholders rights plan described
under "Common Stock" above. To date none of such shares have been issued or are
outstanding.
The Voting Preference Stock is junior to Preferred Stock but has a preference
over Common Stock as to dividends and assets on liquidation. Dividends (other
than dividends payable in Common Stock) cannot be paid on Common Stock if the
Corporation has not met the requirements for dividend payments or for any
sinking fund created with respect to any series of Voting Preference Stock. In
general, holders of Voting Preference Stock have the same voting rights as
holders of Common Stock for the election of directors and all other purposes
(voting with the Common Stock together as a single class) as well as voting
rights specified by Texas law, except that holders of Voting Preference Stock
have no voting rights on amendments to the Restated Articles of Incorporation
other than as provided under Texas law and by the Restated Articles of
Incorporation. Voting Preference Stock is entitled to one vote for each $10,000
of stated value attributable to such shares subject, however, to adjustments
for shares having a stated value other than $10,000. Voting Preference Stock
has no preemptive rights.
DEPOSITARY SHARES
General. The Corporation may, at its option, elect to offer fractional shares
of Preferred Stock, rather than full shares of Preferred Stock. If such option
is exercised, the Corporation will issue to the public receipts for Depositary
Shares, each of which will represent a fraction (to be set forth in the
Prospectus Supplement relating to a particular series of Preferred Stock) of a
share of a particular series of Preferred Stock as described below.
The shares of any series of Preferred Stock represented by Depositary Shares
will be deposited under a Deposit Agreement (the "Deposit Agreement") between
the Corporation and a bank or trust company selected by the Corporation having
its principal office in the United States and having a combined capital and
surplus of at least $50,000,000 (the "Depositary"). The Prospectus Supplement
relating to a series of Depositary Shares will set forth the name and address
of the Depositary. Subject to the terms of the Deposit Agreement, each owner of
a Depositary Share will be entitled, in proportion to the applicable fraction
of a share of Preferred Stock represented by such Depositary Share, to all the
rights and preferences of the Preferred Stock represented thereby (including
dividend, voting, redemption and liquidation rights).
15
<PAGE>
The Depositary Shares will be evidenced by depositary receipts issued
pursuant to the Deposit Agreement ("Depositary Receipts"). Depositary Receipts
will be distributed to those persons purchasing the fractional shares of
Preferred Stock in accordance with the terms of the offering. Copies of the
forms of Deposit Agreement and Depositary Receipts are filed as exhibits to the
Registration Statement of which this Prospectus is a part, and the following
summary is qualified in its entirety by reference to such exhibits.
Pending the preparation of definitive Depositary Receipts, the Depositary
may, upon the written order of the Corporation or any holder of Preferred
Stock, execute and deliver temporary Depositary Receipts substantially
identical to (and entitling the holders thereof to all the benefits pertaining
to) definitive Depositary Receipts but not in definitive form. Definitive
Depositary Receipts will be prepared thereafter without unreasonable delay, and
temporary Depositary Receipts will be exchangeable for definitive Depositary
Receipts at the Corporation's expense.
Upon surrender of Depositary Receipts at the office of the Depositary and
upon payment of the charges provided in the Deposit Agreement and subject to
the terms thereof, a holder of Depositary Receipts is entitled to have the
Depositary deliver to such holder the whole shares of Preferred Stock and all
money and other property, if any, relating to the surrendered Depositary
Receipts.
Dividends and Other Distributions. The Depositary will distribute all cash
dividends or other cash distributions received in respect of the Preferred
Stock to the record holders of Depositary Shares relating to such Preferred
Stock in proportion to the number of such Depositary Shares owned by such
holders.
In the event of a distribution other than in cash or rights, preferences or
privileges upon the Preferred Stock, the Depositary will distribute securities
or property received by it to the record holders of Depositary Shares entitled
thereto in proportion to the number of such Depositary Shares owned by such
holders, unless the Depositary determines such distribution cannot be made
proportionately among such holders or that it is not feasible to make such
distribution, in which case the Depositary may, with the approval of the
Corporation, sell such securities or property or adopt such other method as it
deems equitable and practicable for effecting such distribution and distribute
the net proceeds from such sale to such holders.
Redemption of Depositary Shares. If a series of Preferred Stock represented
by Depositary Shares is subject to redemption, the Depositary Shares will be
redeemed from the proceeds received by the Depositary resulting from the
redemption, in whole or in part, of such series of Preferred Stock held by the
Depositary. The Depositary will mail notice of redemption not less than 30 and
not more than 60 days prior to the date fixed for redemption to the record
holders of the Depositary Shares to be so redeemed at their respective
addresses appearing in the Depositary's books. The redemption price per
Depositary Share will be equal to the applicable fraction of the redemption
price per share payable with respect to such series of the Preferred Stock plus
all money and other property, if any, represented by such Depositary Shares.
Whenever the Corporation redeems shares of Preferred Stock held by the
Depositary, the Depositary will redeem as of the same redemption date the
number of Depositary Shares representing shares of Preferred Stock so redeemed.
If less than all the Depositary Shares are to be redeemed, the Depositary
Shares to be redeemed will be selected by lot or pro rata or in any other
manner, as may be determined by the Depositary to be equitable.
Voting. Upon receipt of notice of any meeting at which the holders of the
Preferred Stock are entitled to vote, the Depositary will mail a notice
containing the information contained in such notice of meeting to the record
holders of the Depositary Shares relating to such Preferred Stock. Such notice
will also state that each record holder of such Depositary Shares on the record
date (which will be the same date as the record date for the Preferred Stock)
will be entitled to instruct the Depositary as to the exercise of the voting
rights pertaining to the amount of the Preferred Stock represented by such
holder's Depositary Shares and will contain a brief statement as to the manner
in which such instructions may be given. The Depositary will endeavor, insofar
as practicable, to vote the amount of the Preferred Stock represented by such
Depositary Shares in accordance with such instructions, and the Corporation
will agree to take all action which may be deemed necessary by the Depositary
in order to enable the Depositary to do so. The Depositary will abstain from
voting shares of the Preferred Stock (but, in its discretion, not from
appearing at any meeting with respect to such Preferred Stock unless directed
to the contrary by the holders of all the Depositary Receipts) to the extent it
does not receive specific instructions from the holders of Depositary Shares
representing such Preferred Stock.
16
<PAGE>
Amendment and Termination of the Depositary Agreement. The form of Depositary
Receipt evidencing the Depositary Shares and any provision of the Deposit
Agreement may at any time be amended by agreement between the Corporation and
the Depositary. However, any amendment which materially and adversely alters
the rights of the holders of Depositary Shares will not be effective unless
such amendment has been approved by the holders of at least a majority of the
Depositary Shares then outstanding. The Deposit Agreement may be terminated by
the Corporation or the Depositary only if (i) all outstanding Depositary Shares
have been redeemed or (ii) there has been a final distribution in respect of
the Preferred Stock in connection with any liquidation, dissolution or winding
up of the Corporation and such distribution has been distributed to the holders
of Depositary Shares.
Charges of Depositary. The Corporation will pay all transfer and other taxes
and governmental charges arising solely from the existence of the depositary
arrangements. The Corporation will pay all charges of the Depositary in
connection with the initial deposit of the Preferred Stock and the initial
issuance of the Depositary Shares, redemption of the Preferred Stock at the
option of the Corporation and withdrawal of shares of Preferred Stock by
holders of Depositary Shares. Holders of Depositary Shares will pay all other
transfer and other taxes and governmental charges.
Miscellaneous. The Depositary will make available for inspection by holders
of Depositary Receipts, at the Depositary's office, any reports and
communications received from the Corporation which are received by the
Depositary as the holder of Preferred Stock.
Neither the Depositary, any Depositary's Agent, any Registrar nor the
Corporation will incur any liability if it is prevented or delayed by law or
any circumstance beyond its control from performing its obligations under the
Deposit Agreement. Neither the Depositary, any Depositary's Agent, any
Registrar nor the Corporation assumes any obligation or shall be subject to any
liability under the Deposit Agreement to holders of Depositary Receipts other
than for their gross negligence, willful misconduct, or bad faith. Neither the
Depositary, any Depositary's Agent, any Registrar nor the Corporation shall be
under any obligation to appear in, prosecute or defend any action, suit or
other proceeding in respect of the Preferred Stock, the Depositary Shares or
the Depositary Receipts which in its opinion may involve it in expense or
liability unless indemnity satisfactory to it against all expense and liability
be furnished as often as may be required. Neither the Depositary, any
Depositary's Agent, any Registrar nor the Corporation shall be liable for any
action or any failure to act by it in reliance upon the written advice of legal
counsel or accountants or upon information from any person presenting Stock for
deposit, any holder of a Depositary Receipt or any other person believed by it
in good faith to be competent to give such information. The Depositary, any
Depositary's Agent, any Registrar and the Corporation may each rely and shall
each be protected in acting upon any written notice, request, direction or
other document believed by it to be genuine and to have been signed or
presented by the proper party or parties.
Resignation and Removal of Depositary. The Depositary may resign at any time
by delivering to the Corporation written notice of its election to do so, and
the Corporation may at any time remove the Depositary, any such resignation or
removal to take effect upon the appointment of a successor Depositary and its
acceptance of such appointment. Such successor Depositary must be appointed
within 60 days after delivery of the notice of resignation or removal and must
be a bank or trust company having its principal office in the United States and
having a combined capital and surplus of at least $50,000,000.
ENSERCH CAPITAL AND ENSERCH PREFERRED
GENERAL
Enserch Capital, a subsidiary of ENSERCH, is a limited liability company
organized under the laws of the State of Delaware. All of its limited liability
company interests (other than EC Preferred Securities) are beneficially owned
by ENSERCH and are non-transferable. ENSERCH will be the only Class A Member of
Enserch Capital and will hold all of the Class A common limited liability
interests. Enserch Preferred will be the only Class B Member of Enserch Capital
(the "Class B Member") and will hold all of the Class B common
17
<PAGE>
limited liability company interests. Enserch Capital's registered office in the
State of Delaware is c/o The Corporation Trust Company, Corporate Trust Center,
1209 Orange Street, Wilmington, New Castle County, Delaware 19801, telephone:
(302) 658-7581. Enserch Capital has no board of directors, and all of its
business and affairs will be conducted by ENSERCH, as the sole Class A Member.
The location of the principal executive offices of the Class A Member is set
forth above under "The Corporation." Enserch Capital exists solely for the
purpose of issuing its limited liability company interests and lending the net
proceeds thereof to ENSERCH or Enserch Preferred.
Enserch Preferred, a wholly-owned subsidiary of ENSERCH, was incorporated in
Texas and reincorporated in Delaware in March 1994. Enserch Preferred's
principal executive offices are located at 300 South St. Paul Street, Dallas,
Texas 75201. Enserch Preferred exists solely for the purpose of holding the
Class B limited liability company interests of Enserch Capital, borrowing the
proceeds from the sale of the limited liability company interests of Enserch
Capital and reloaning the proceeds to ENSERCH.
EC PREFERRED SECURITIES
Enserch Capital may, from time to time, issue EC Preferred Securities, in one
or more series, having terms described in the Prospectus Supplement relating
thereto. The EC Preferred Securities may be exchangeable for Subordinated Debt
Securities or Preferred Stock of ENSERCH under circumstances described in the
Prospectus Supplement relating to such EC Preferred Securities. Enserch
Capital's Amended and Restated Limited Liability Company Agreement (the
"Limited Liability Company Agreement") will authorize the establishment of one
or more classes or series of EC Preferred Securities, having such terms,
including dividend, redemption, exchange, voting, liquidation rights and such
other preferred, deferred or other special rights or such restrictions, as
shall be set forth therein or otherwise established by the Class A Member
pursuant thereto. Reference is made to the Prospectus Supplement relating to
the EC Preferred Securities of a particular series for specific terms,
including (i) the distinctive designation of such series which shall
distinguish it from other series; (ii) the number of EC Preferred Securities
included in such series, which number may be increased or decreased from time
to time unless otherwise provided by the Class A Member in creating the series;
(iii) the annual dividend rate (or method of determining such rate) for EC
Preferred Securities of such series and the date or dates upon which such
dividends shall be payable; (iv) whether dividends on EC Preferred Securities
of such series shall be cumulative, and, in the case of EC Preferred Securities
of any series having cumulative dividend rights, the date or dates or method of
determining the date or dates from which dividends on EC Preferred Securities
of such series shall be cumulative; (v) the amount or amounts which shall be
paid out of the assets of Enserch Capital to the holders of EC Preferred
Securities of such series upon voluntary or involuntary dissolution, winding up
or termination of Enserch Capital; (vi) the price or prices at which, the
period or periods within which and the terms and conditions upon which EC
Preferred Securities of such series may be redeemed or purchased, in whole or
in part, at the option of Enserch Capital; (vii) the obligation, if any, of
Enserch Capital to purchase or redeem EC Preferred Securities of such series
pursuant to a sinking fund or otherwise and the price or prices at which, the
period or periods within which and the terms and conditions upon which EC
Preferred Securities of such series shall be redeemed, in whole or in part,
pursuant to such obligation; (viii) the period or periods within which and the
terms and conditions, if any, including the price or prices or the rate or
rates of conversion or exchange and the terms and conditions of any adjustments
thereof, upon which EC Preferred Securities of such series shall be convertible
or exchangeable at the option of the holder or Enserch Capital or ENSERCH into
any other Interests or securities or other property or cash or into any other
series of EC Preferred Securities; (ix) the voting rights, if any, of EC
Preferred Securities of such series in addition to those required by law,
including the number of votes per EC Preferred Security and any requirement for
the approval by the holders of EC Preferred Securities, or of EC Preferred
Securities of one or more series, or of both, as a condition to specified
action or amendments to the Limited Liability Company Agreement; (x) the
ranking of EC Preferred Securities of the series as compared with Preferred
Securities of other series in respect of the right to receive dividends and the
right to receive payments out of the assets of Enserch Capital upon voluntary
or involuntary dissolution, winding up or termination of Enserch Capital; (xi)
the nature and terms of any backup undertakings of ENSERCH and/or Enserch
Preferred or another subsidiary of ENSERCH to
18
<PAGE>
be provided to holders of EC Preferred Securities of such series; and (xii) any
other relative rights, powers, preferences or limitations of EC Preferred
Securities of the series not inconsistent with the Limited Liability Company
Agreement or with applicable law. All EC Preferred Securities offered hereby
will be guaranteed by ENSERCH to the limited extent set forth below under
"Guarantee" and may also be entitled to the benefits of certain undertakings of
ENSERCH and Enserch Preferred as described below under "Backup Undertakings."
Holders of EC Preferred Securities will be Class C Members of Enserch Capital.
Any special federal income tax, accounting and other considerations applicable
to any offering of EC Preferred Securities and related Backup Undertakings will
be described in the Prospectus Supplement relating thereto.
GUARANTEE
ENSERCH will irrevocably and unconditionally agree (the "Guarantee"), to the
extent set forth herein, to pay in full, to the holders of EC Preferred
Securities of any class or series, the Guarantee Payments (as defined below),
as and when due, regardless of any defense, right of set-off or counterclaim
which Enserch Capital may have or assert. The Guarantee will constitute a
guarantee of payment and not of collection, and may be enforced by holders of
EC Preferred Securities directly against ENSERCH. The following payments to the
extent not paid by Enserch Capital (the "Guarantee Payments") will be subject
to the Guarantee (without duplication): (i) any accumulated arrears and
accruals of unpaid dividends which have heretofore been declared on the EC
Preferred Securities of such class or series out of moneys legally available
therefor, (ii) the redemption price including all accumulated arrears and
accruals of unpaid dividends payable, out of moneys legally available therefor,
with respect to any EC Preferred Securities of such class or series called for
redemption, (iii) upon a liquidation of Enserch Capital, the lesser of (a) the
aggregate of the liquidation preference and all accumulated arrears and
accruals of unpaid dividends (whether or not declared) on the EC Preferred
Securities of such class or series to the date of payment and (b) the amount of
assets of Enserch Capital remaining available for distribution in liquidation
to the holders of EC Preferred Securities of such class or series, and (iv) any
Additional Amounts payable to Enserch Capital as described in the accompanying
Prospectus Supplement. In addition, the Prospectus Supplement relating to a
class or series of EC Preferred Securities will describe the rank of the
Guarantee and any additional covenants or other terms of the Guarantee of
ENSERCH with respect to such class or series, including any Additional Amounts
payable under the Guarantee with respect thereto.
BACKUP UNDERTAKINGS
In connection with any class or series of EC Preferred Securities, ENSERCH
may enter into additional arrangements with Enserch Capital, including
intercompany loan agreements involving Enserch Capital or Enserch Preferred and
amendments to Enserch Capital's Limited Liability Company Agreement, that
operate directly or indirectly for the benefit of holders of the EC Preferred
Securities. ENSERCH will also irrevocably and unconditionally agree to
guarantee, to the extent set forth in the Prospectus Supplement, to pay in
full, to Enserch Capital for the benefit of the holders of the EC Preferred
Securities of any class or series, certain obligations of Enserch Preferred
under any intercompany loan agreements with Enserch Capital, as and when due,
regardless of any defense, right of set-off or counterclaim which Enserch
Preferred may have or assert. The terms and provisions of, including the rank
of any such guarantee and any additional covenants, will be described in the
Prospectus Supplement. Such guarantee, the Guarantee described above under
"Guarantee," and any such other arrangements are herein collectively referred
to as "Backup Undertakings" and will be described in the Prospectus Supplement
relating to any class or series of EC Preferred Securities to which they apply.
VALIDITY OF EC PREFERRED SECURITIES
Certain matters of Delaware law relating to the validity of the EC Preferred
Securities of Enserch Capital offered hereby will be passed upon by Richards,
Layton & Finger, P.A., as special Delaware counsel for Enserch Capital. In
rendering their opinions with respect to the EC Preferred Securities as
described under "Legal Opinions," Mr. Satterwhite and Mudge Rose Guthrie
Alexander & Ferdon may rely on Richards, Layton & Finger, P.A. as to certain
matters of Delaware law.
19
<PAGE>
PLAN OF DISTRIBUTION
ENSERCH and/or Enserch Capital may offer or sell Securities to one or more
underwriters for public offering and sale by them or may sell Securities to
investors directly or through agents. ENSERCH and/or Enserch Capital may sell
Securities as soon as practicable after effectiveness of the Registration
Statement, provided that favorable market conditions exist. Any such
underwriter or agent involved in the offer and sale of the Securities will be
named in an applicable Prospectus Supplement.
Underwriters may offer and sell the Securities at a fixed price or prices,
which may be changed, or from time to time at market prices prevailing at the
time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Corporation also may offer and sell the Securities in
exchange for one or more of its outstanding issues of equity or debt or
convertible debt securities. ENSERCH and/or Enserch Capital also may, from time
to time, authorize firms acting as the Corporation's or Enserch Capital's
agents to offer and sell the Securities upon the terms and conditions as shall
be set forth in any Prospectus Supplement. In connection with the sale of
Securities, underwriters may be deemed to have received compensation from
ENSERCH and/or Enserch Capital in the form of underwriting discounts or
commissions and may also receive commissions from purchasers of Securities for
whom they may act as agent. Underwriters may sell Securities to or through
dealers, and such dealers may receive compensation in the form of discounts,
concessions or commissions from the underwriters and/or commissions (which may
be changed from time to time) from the purchasers for whom they may act as
agent.
Any underwriting compensation paid by ENSERCH and/or Enserch Capital to
underwriters or agents in connection with the offering of Securities, and any
discounts, concessions or commissions allowed by underwriters to participating
dealers, will be set forth in an applicable Prospectus Supplement.
Underwriters, dealers and agents participating in the distribution of the
Securities may be deemed to be underwriters, and any discounts and commissions
received by them and any profit realized by them on resale of the Securities
may be deemed to be underwriting discounts and commissions, under the
Securities Act. Underwriters, dealers and agents may be entitled, under
agreements with the Corporation, to indemnification against and contribution
toward certain civil liabilities, including liabilities under the Securities
Act, and to reimbursement by the Corporation for certain expenses.
Underwriters, dealers and agents may engage in transactions with, or perform
services for, or be customers of, ENSERCH and/or Enserch Capital in the
ordinary course of business.
If so indicated in an applicable Prospectus Supplement, ENSERCH will
authorize dealers acting as ENSERCH's agents to solicit offers by certain
institutions to purchase Debt Securities from ENSERCH at the public offering
price set forth in such Prospectus Supplement pursuant to Delayed Delivery
Contracts ("Contracts") providing for payment and delivery on the date or dates
stated in such Prospectus Supplement. Each Contract will be for an amount not
less than, and the aggregate principal amount of Debt Securities sold pursuant
to Contracts shall be not less nor more than, the respective amounts stated in
such Prospectus Supplement. Institutions with whom Contracts, when authorized,
may be made include commercial and savings banks, insurance companies, pension
funds, investment companies, educational and charitable institutions and other
institutions, but will in all cases be subject to the approval of ENSERCH.
Contracts will not be subject to any conditions except (i) the purchase by an
institution of the Debt Securities covered by its Contracts shall not at the
time of delivery be prohibited under the laws of any jurisdiction in the United
States to which such institution is subject, and (ii) if the Debt Securities
are being sold to underwriters, the Corporation shall have sold to such
underwriters the total principal amount of the Debt Securities less the
principal amount thereof covered by Contracts. Agents and underwriters will
have no responsibility in respect of the delivery or performance of Contracts.
Each series of Debt Securities, Preferred Stock and EC Preferred Securities
will be a new issue of securities and will have no established trading market.
Any underwriters to whom Securities are sold by the Corporation or Enserch
Capital for public offering and sale may make a market in such Securities, but
such underwriters will not be obligated to do so and may discontinue any market
making at any time without notice. The Securities may or may not be listed on a
national securities exchange or a foreign securities exchange, except that the
Common Stock is listed on the New York Stock Exchange, Midwest Stock
20
<PAGE>
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>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, IN CONNECTION WITH THE OFFER
CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY ENSERCH, ENSERCH CAPITAL OR ANY UNDERWRITER. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF ENSERCH OR ENSERCH CAPITAL SINCE THE DATE
HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN
OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
---------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Enserch Capital L.L.C. .................................................... S-3
ENSERCH Corporation........................................................ S-3
Selected Financial Data of ENSERCH......................................... S-4
Capitalization of ENSERCH.................................................. S-5
Use of Proceeds............................................................ S-5
Certain Investment Considerations.......................................... S-6
Description of the Series A Preferred Securities........................... S-7
Description of the Guarantee............................................... S-17
Description of the Loans................................................... S-19
Description of the Loan Guarantee.......................................... S-26
Certain Terms of the % Subordinated Debentures........................... S-27
United States Taxation..................................................... S-30
Underwriting............................................................... S-33
Validity of Securities..................................................... S-34
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>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PREFERRED SECURITIES
ENSERCH CAPITAL L.L.C.
GUARANTEED TO THE EXTENT SET FORTH
HEREIN BY
ENSERCH CORPORATION
% CUMULATIVE
MONTHLY INCOME PREFERRED SECURITIES, SERIES A
---------------
PROSPECTUS SUPPLEMENT
---------------
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
KIDDER, PEABODY & CO.
INCORPORATED
LEHMAN BROTHERS
PAINEWEBBER INCORPORATED
SMITH BARNEY SHEARSON INC.
REPRESENTATIVES OF THE UNDERWRITERS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth those expenses to be incurred by ENSERCH in
connection with the issuance and distribution of the securities being
registered. Except for the Securities and Exchange Commission registration fee,
all amounts shown are estimates.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee............. $155,174
Accounting Fees and Expenses.................................... 75,000
Printing and Engraving Expenses................................. 110,000
Trustee's and Depositary's Fees and Expenses.................... 10,000
Stock Exchange Listing Fees..................................... 93,300
Legal Fees and Expenses......................................... 115,000
Blue Sky Expenses, Including Counsel Fees....................... 20,000
Rating Agency Fees.............................................. 218,750
Miscellaneous Expenses.......................................... 2,776
--------
Total....................................................... $800,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 2.02-1 of the Texas Business Corporation Act authorizes, inter alia,
a corporation to indemnify any person who was, is, or is threatened to be made
a named defendant or respondent to any action, suit, inquiry or investigation
(a "proceedings") because such person is or was a director if it is determined
that such person conducted himself in good faith and reasonably believed that,
(i) in the case of conduct in his official capacity as a director of the
corporation, that his conduct was in the corporation's best interests; (ii) in
all other cases, except for a criminal proceeding, that his conduct was not
opposed to the corporation's best interests; and (iii) in the case of any
criminal proceeding, that he had no reasonable cause to believe his conduct was
unlawful. A determination that such indemnification is permissible, and the
authorization of indemnification and the determination as to reasonableness of
expenses must be made by either the disinterested shareholders, disinterested
directors, or by special legal counsel selected by disinterested directors. A
director is not entitled to such indemnification if he is found liable on the
basis that personal benefit was improperly received by him or if he is found
liable to the corporation. A corporation is required to indemnify a director or
officer of the corporation against reasonable expenses incurred by him in
connection with a proceeding in which he is a named defendant or respondent
because he is or was a director or officer of the corporation if he has been
wholly successful, on the merits or otherwise, in the defense of the
proceedings. Reasonable expenses may be advanced by the corporation if the
director or officer who was, is or is threatened to be named a defendant or
respondent in a proceeding delivers to the corporation a written statement of
his good faith belief that he has met the standard of conduct necessary for
indemnification under the Act and a written undertaking by him, or on his
behalf, to repay the amount paid or reimbursed if it is ultimately determined
that he has not met that standard or if it is ultimately determined that
indemnification is prohibited by this section. This section provides that if a
director or officer of a corporation is found liable to the corporation or is
found liable on the basis that personal benefit was improperly received by such
director or officer, the indemnification (1) is limited to reasonable expenses
actually incurred by such director or officer in condition with the proceeding
and (2) shall not be made in respect of any proceeding in which such director
or officer shall have been found liable for willful or intentional misconduct
in the performance of his duty to the corporation. In addition, a court of
competent jurisdiction may determine that a director or officer is entitled to
indemnification under this section of the Texas Business Corporation Act.
Section 2.02-1 of the Texas Business Corporation Act empowers a corporation
to purchase and maintain insurance on behalf of directors and officers and
certain other persons whether or not the corporation would have the power under
such section to indemnify such person against liability.
II-1
<PAGE>
Article XIII of ENSERCH's Bylaws authorizes ENSERCH to indemnify any person
who (i) is or was a director, officer, employee or agent of ENSERCH, or (ii)
while a director, officer, employee or agent of ENSERCH, is or was serving at
the request of ENSERCH as a director, officer, partner, venturer, proprietor,
trustee, employee, agent or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan, or other enterprise to the fullest extent that a corporation may
or is required to grant indemnification to a director under the Texas Business
Corporation Act. ENSERCH also may indemnify any person to such further extent
as permitted by law.
Additionally, Article Eight of ENSERCH's Restated Articles of Incorporation
eliminates in certain circumstances the monetary liability of directors of
ENSERCH for an act or omission in the director's capacity as a director. This
provision does not eliminate or limit the liability for (i) a breach of a
director's duty of loyalty to ENSERCH or its shareholder; (ii) an act or
omission not in good faith or that involves intentional misconduct or a knowing
violation of the law; (iii) a transaction from which the director received an
improper benefit, whether or not the benefit resulted from an action taken
within the scope of the director's office; (iv) an act or omission for which
the liability of the director is expressly provided for by statute; or (v) an
act related to an unlawful stock repurchase or payment of a dividend.
ENSERCH carries directors' and officers' liability insurance which insures
ENSERCH's directors and officers against liability for any "wrongful act"
arising out of their position, and which is not reimbursable under the
ENSERCH's Bylaws or which, if reimbursable, ENSERCH has not paid or is unable
to pay. These provisions of the policy pertaining to officers and directors are
also subject to several exclusions, including losses covered under other forms
of insurance, losses occasioned by violations of governmental regulations and
ordinances, losses for which insurance would be against public policy and
others recited therein.
ITEM 16. EXHIBITS
Unless otherwise noted, the following exhibits have been previously filed:
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENT
------- --------
<C> <S>
1.1 Form of Debt Underwriting Agreement including Form of Letter
to prospective underwriters of Debt Securities.
1.2 Form of Equity Underwriting Agreement.
1.3 Form of Agency Agreement.
1.4 Form of Equity Underwriting Agreement of Enserch Capital.
4.1* Form of Debt Securities.
4.2* Form of Medium-Term Note (fixed rate).
4.3* Form of Medium-Term Note (floating rate).
4.4 Senior Indenture, dated as of February 15, 1992, between the
Corporation and The First National Bank of Chicago, as Trust-
ee.
4.5 Form of Subordinated Indenture between the Corporation and The
First National Bank of Chicago, as Trustee.
4.6 Form of resolution of the Securities Committee of the Board of
Directors of the Corporation authorizing and creating a series
of Preferred Stock.
4.7 Form of specimen certificate representing shares of Preferred
Stock.
4.8 Form of specimen certificate representing shares of Common
Stock.
4.9 Form of Deposit Agreement.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENT
------- --------
<C> <S>
4.10 Form of Depositary Receipt (included in Exhibit 4.9).
4.11 Restated Articles of Incorporation of the Corporation, as
amended (incorporated by reference to Exhibit 3.1 of the Cor-
poration's Form 10-K for the Year Ended December 31, 1988
[File No. 1-3183]).
4.12 Rights Agreement, dated as of April 15, 1986, between the Cor-
poration and Harris Trust Company of New York (incorporated by
reference to Exhibit 4.5 of the Corporation's Registration
Statement on Form S-3 [No. 33-45688]).
4.13 Bylaws of the Corporation, as amended.
4.14 Certificate of Formation of Enserch Capital L.L.C. ("Enserch
Capital").
4.15 Limited Liability Company Agreement of Enserch Capital.
4.16 Certificate of Incorporation of Enserch Preferred Capital,
Inc. ("Enserch Preferred").
4.17 Bylaws of Enserch Preferred.
4.18** Form of Amended and Restated Limited Liability Company Agree-
ment of Enserch Capital.
4.19 Form of Amended and Restated Certificate of Incorporation of
Enserch Preferred.
4.20 Form of EC Preferred Securities (included in Exhibit 4.18
hereto).
4.21** Form of Capital Loan Agreement between Enserch Preferred and
Enserch Capital.
4.22** Form of Preferred Loan Agreement between ENSERCH and Enserch
Preferred.
4.23** Form of Preferred Securities Payment and Guarantee Agreement.
4.24** Form of Loan Payment and Guarantee Agreement.
4.25** Form of Subordinated Debenture issuable in exchange for EC
Preferred Securities.
5.1 Opinion of William T. Satterwhite, Esquire, as to the legality
of the Securities of ENSERCH.
5.2 Opinion of Richards, Layton & Finger, P.A. as to validity of
EC Preferred Securities of Enserch Capital.
5.3 Opinion of William T. Satterwhite, Esquire, as to validity of
Securities of Enserch Preferred.
5.4** Opinion of Sullivan & Cromwell as to tax matters.
12 Computations of ratio of earnings to fixed charges and ratio
of earnings to combined fixed charges and preferred stock div-
idends.
15 Letter of Deloitte & Touche regarding unaudited interim finan-
cial information.
23.1 Consent of Deloitte & Touche.
23.2 Consent of DeGolyer and MacNaughton.
23.3 Consent of William T. Satterwhite (included in Exhibits 5.1
and 5.3 hereto).
23.4 Consent of Richards, Layton & Finger, P.A. (included in Ex-
hibit 5.2 hereto).
23.5** Consent of Sullivan & Cromwell (included in Exhibit 5.4 here-
to).
24 Powers of Attorney.
24.1 Powers of Attorney--Enserch Preferred.
25.1 Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of The First National Bank of Chicago, as
Trustee under the Senior Debt Indenture.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENT
------- --------
<C> <S>
25.2 Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of The First National Bank of Chicago, as
Trustee under the Subordinated Debt Indenture.
</TABLE>
- --------
*The Corporation will file any forms of Debt Securities, Preferred Stock or
EC Preferred Securities not previously so filed in a current Report on Form
8-K.
**Filed with this amendment.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
provided, however, that the undertakings set forth in paragraph (a)(1)(i)
and (a)(1)(ii) above do not apply if the information required to be
included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by ENSERCH pursuant to Section 13 or 15(d) of the
Securities Act of 1934 that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
ENSERCH's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
Registrants pursuant to the provision described under Item 15 above, or
otherwise, the Registrants have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrants of expenses incurred or paid by a director, officer
or controlling person of the Registrants in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrants will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
II-4
<PAGE>
The undersigned registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
PURSUANT TO REQUIREMENTS OF THE SECURITIES ACT OF 1933, ENSERCH CORPORATION
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILLING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 2
TO REGISTRATION STATEMENT NO. 33-52525 TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF DALLAS AND STATE OF
TEXAS ON THE 4TH DAY OF APRIL 1994.
ENSERCH CORPORATION
/s/ D. W. Biegler
By: _________________________________
D. W. Biegler,
Chairman and President, Chief
Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1993, ENSERCH CAPITAL
L.L.C. CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF
THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO.
2 TO REGISTRATION STATEMENT NO. 33-52525 TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF DALLAS AND STATE OF
TEXAS, ON THE 4TH DAY OF APRIL 1994.
ENSERCH CAPITAL L.L.C.
By: ENSERCH CORPORATION,
/s/ D. W. Biegler
By: _________________________________
Name:D. W. Biegler,
Title: Chairman and President, Chief
Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, ENSERCH PREFERRED
CAPITAL, INC. CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS
ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS
AMENDMENT NO. 2 TO REGISTRATION STATEMENT NO. 33-52525 TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF DALLAS AND
STATE OF TEXAS, ON THE 4TH DAY OF APRIL 1994.
ENSERCH PREFERRED CAPITAL, INC.
/s/ D. W. Biegler
By: _________________________________
Name:D. W. Biegler,
Title: Chairman and President, Chief
Executive Officer
II-6
<PAGE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 2 TO REGISTRATION STATEMENT NO. 33-52525 HAS BEEN SIGNED BELOW BY THE
FOLLOWING DIRECTORS AND OFFICERS OF ENSERCH CORPORATION IN THE CAPACITIES AND
ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE AND TITLE DATE
------------------- ----
<S> <C>
D. W. Biegler, Chairman and
President,
Chief Executive Officer, and
Director;
William B. Boyd, Director; B.
A.
Bridgewater, Jr., Director;
Lawrence E.
Fouraker, Director; Preston M.
Geren, Jr.,
Director; Marvin J. Girouard,
Director;
Joseph M. Haggar, Jr.,
Director; W. C. McCord, April 4, 1994
Director; Diana S. Natalicio,
Director;
W. Ray Wallace, Director; S. R.
Singer,
Senior Vice President, Finance
and
Corporate Development, Chief
Financial
Officer; Jerry W. Pinkerton,
Vice
President and Controller, Chief
Accounting Officer
</TABLE>
/s/ D. W. Biegler
By: _________________
D. W. Biegler,
As Attorney-in-Fact
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 2 TO REGISTRATION STATEMENT NO. 33-52525 HAS BEEN SIGNED BELOW BY THE
FOLLOWING DIRECTORS AND OFFICERS OF ENSERCH PREFERRED CAPITAL, INC. IN THE
CAPACITIES AND ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE AND TITLE DATE
------------------- ----
<S> <C>
D. W. Biegler, Chairman and
President, Chief Executive
Officer and Director
W. T. Satterwhite, Director;
S. R. Singer, Chief Financial
Officer and Director; and April 4, 1994
J.W. Pinkerton, Vice President
and Controller
</TABLE>
/s/ D. W. Biegler
By: _________________
D. W. Biegler,
As Attorney-in-Fact
II-7
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENT PAGE NO.
------- -------- --------
<C> <S> <C>
1.1 Form of Debt Underwriting Agreement including Form of
Letter to prospective underwriters of Debt Securities.
1.2 Form of Equity Underwriting Agreement.
1.3 Form of Agency Agreement.
1.4 Form of Equity Underwriting Agreement of Enserch Capital.
4.1* Form of Debt Securities.
4.2* Form of Medium-Term Note (fixed rate).
4.3* Form of Medium-Term Note (floating rate).
4.4 Senior Indenture, dated as of February 15, 1992, between
the Corporation and The First National Bank of Chicago,
as Trustee.
4.5 Form of Subordinated Indenture between the Corporation
and The First National Bank of Chicago, as Trustee.
4.6 Form of resolution of the Securities Committee of the
Board of Directors of the Corporation authorizing and
creating a series of Preferred Stock.
4.7 Form of specimen certificate representing shares of Pre-
ferred Stock.
4.8 Form of specimen certificate representing shares of Com-
mon Stock.
4.9 Form of Deposit Agreement.
4.10 Form of Depositary Receipt (included in Exhibit 4.9).
4.11 Restated Articles of Incorporation of the Corporation, as
amended (incorporated by reference to Exhibit 3.1 of the
Corporation's Form 10-K for the Year Ended December 31,
1988 [File No. 1-3183]).
4.12 Rights Agreement, dated as of April 15, 1986, between the
Corporation and Harris Trust Company of New York (incor-
porated by reference to Exhibit 4.5 of the Corporation's
Registration Statement on Form S-3 [No. 33-45688]).
4.13 Bylaws of the Corporation, as amended.
4.14 Certificate of Formation of Enserch Capital L.L.C.
("Enserch Capital").
4.15 Limited Liability Company Agreement of Enserch Capital.
4.16 Certificate of Incorporation of Enserch Preferred Capi-
tal, Inc. ("Enserch Preferred").
4.17 Bylaws of Enserch Preferred.
4.18** Form of Amended and Restated Limited Liability Company
Agreement of Enserch Capital.
4.19 Form of Amended and Restated Certificate of Incorporation
of Enserch Preferred.
4.20 Form of EC Preferred Securities (included in Exhibit 4.18
hereto).
4.21** Form of Capital Loan Agreement between Enserch Preferred
and Enserch Capital.
4.22** Form of Preferred Loan Agreement between ENSERCH and
Enserch Preferred.
4.23** Form of Preferred Securities Payment and Guarantee Agree-
ment.
4.24** Form of Loan Payment and Guarantee Agreement.
4.25** Form of Subordinated Debenture issuable in exchange for
EC Preferred Securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENT PAGE NO.
------- -------- ---------
<C> <S> <C>
5.1 Opinion of William T. Satterwhite, Esquire, as to the
legality of the Securities of ENSERCH.
5.2 Opinion of Richards, Layton & Finger, P.A. as to valid-
ity of EC Preferred Securities of Enserch Capital.
5.3 Opinion of William T. Satterwhite, Esquire, as to valid-
ity of Securities of Enserch Preferred.
5.4** Opinion of Sullivan & Cromwell as to tax matters.
12 Computations of ratio of earnings to fixed charges and
ratio of earnings to combined fixed charges and pre-
ferred stock dividends.
15 Letter of Deloitte & Touche regarding unaudited interim
financial information.
23.1 Consent of Deloitte & Touche.
23.2 Consent of DeGolyer and MacNaughton.
23.3 Consent of William T. Satterwhite (included in Exhibits
5.1 and 5.3 hereto).
23.4 Consent of Richards, Layton & Finger, P.A. (included in
Exhibit 5.2 hereto).
23.5** Consent of Sullivan & Cromwell (included in Exhibit 5.4
hereto).
24 Powers of Attorney.
24.1 Powers of Attorney--Enserch Preferred.
25.1 Statement of Eligibility under the Trust Indenture Act
of 1939, as amended, of The First National Bank of Chi-
cago, as Trustee under the Senior Debt Indenture.
25.2 Statement of Eligibility under the Trust Indenture Act
of 1939, as amended, of The First National Bank of Chi-
cago, as Trustee under the Subordinated Debt Indenture.
</TABLE>
- --------
*The Corporation will file any forms of Debt Securities, Preferred Stock or
EC Preferred Securities not previously so filed in a current Report on Form
8-K.
**Filed with this amendment.
<PAGE>
EXHIBIT 4.18
Draft of 4/4/94
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT OF
ENSERCH CAPITAL L.L.C.
This Amended and Restated Limited Liability Company Agreement of Enserch
Capital L.L.C. (the "Company") is made as of April __, 1994, among ENSERCH
Corporation and Enserch Preferred Capital, Inc., as initial members of the
Company, and the Persons who become members of the Company in accordance with
the provisions hereof.
WHEREAS, ENSERCH Corporation ("ENSERCH") and Enserch Preferred Capital,
Inc. ("Enserch Preferred") have heretofore formed a limited liability company
pursuant to the Delaware Limited Liability Company Act, 6 Del. C. (S)18-101, et
------- --
seq., as amended from time to time (the "Delaware Act"), by filing a Certificate
- ---
of Formation of the Company with the office of the Secretary of State of the
State of Delaware on March 4, 1994, and entering into a Limited Liability
Company Agreement of the Company, dated as of March 4, 1994 (the "Original
Limited Liability Company Agreement"); and
WHEREAS, the Members desire to continue the Company as a limited liability
company under the Delaware Act and to amend and restate the Original Limited
Liability Company Agreement in its entirety.
NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Members hereby agree as
follows:
ARTICLE I
DEFINED TERMS
Section 1.1 Definitions. Unless the context otherwise requires, the terms
-----------
defined in this Article I shall, for the purposes of this Agreement, have the
meanings herein specified.
"Affiliate" means with respect to a specified Person, any Person that
directly or indirectly controls, is controlled by, or is under common control
with, the specified Person. As used in this definition, the term "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities, by contract or otherwise.
"Agreement" means this Amended and Restated Limited Liability Company
Agreement, as amended, modified, supplemented or restated from time to time.
<PAGE>
"Book Entry Interests" shall mean a beneficial interest in the LLC
Certificates, ownership and transfers of which shall be made through book
entries by a Clearing Agency as described in Section 14.4.
"Certificate" means the Certificate of Formation and any and all amendments
thereto and restatements thereof filed on behalf of the Company with the office
of the Secretary of State of the State of Delaware pursuant to the Delaware Act.
"Class A Common Securities" shall mean the Interests held by the Class A
Member.
"Class A Member" means ENSERCH and any permitted successor pursuant to
Section 14.1 who holds one or more Class A Common Securities.
"Class B Common Securities" shall mean the Interests held by the Class B
Member.
"Class B Member" means Enserch Preferred and any permitted successor
pursuant to Section 14.1 who holds one or more Class B Common Securities.
"Class C Member" or "Preferred Security Holder" shall mean a Member who
holds one or more Preferred Securities.
"Clearing Agency" shall mean an organization registered as a "Clearing
Agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" shall mean a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book entry transfers and pledges of securities deposited with the
Clearing Agency.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any corresponding federal tax statute enacted after the date of this
Agreement. A reference to a specific section ((S)) of the Code refers not only
to such specific section but also to any corresponding provision of any federal
tax statute enacted after the date of this Agreement, as such specific section
or corresponding provision is in effect on the date of application of the
provisions of this Agreement containing such reference.
"Common Securities" means the Class A Common Securities and the Class B
Common Securities.
"Company" means Enserch Capital L.L.C., the limited liability company
heretofore formed and continued under and pursuant to the Delaware Act and this
Agreement.
2
<PAGE>
"Covered Person" means any Member, any Affiliate of a Member or any
officers, directors, shareholders, partners, employees, representatives or
agents of a Member or their respective Affiliates, or any employee or agent of
the Company or its Affiliates.
"Delaware Act" means the Delaware Limited Liability Company Act, 6 Del.C.
------
(S) 18-101, et seq., as amended from time to time.
-- ---
"ENSERCH Loan Agreement" means the Loan Agreement dated as of April __,
1994 between Enserch Preferred and ENSERCH.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Fiscal Year" means (i) the period commencing upon the formation of the
Company and ending on December 31, 1994, (ii) any subsequent twelve (12) month
period commencing on January l and ending on December 31.
"Guarantee" means the Preferred Securities Payment and Guarantee Agreement
dated as of April __, 1994 of ENSERCH relating to the Preferred Securities.
"Guarantor" shall have the meaning set forth in the Guarantee.
"Indemnified Person" means the Class A Member, any Affiliate of the Class A
Member or any officers, directors, shareholders, partners, employees,
representatives or agents of the Class A Member, or any employee or agent of the
Company or its Affiliates.
"Interest" shall mean the entire limited liability company interest of a
Member in the Company at any particular time whether in Common Securities or
Preferred Securities, including the right of such Member to any and all benefits
to which a Member may be entitled as provided in this Agreement, together with
the obligations of such Member to comply with all of the terms and provisions of
this Agreement.
"Investment Company Event" means the occurrence of a change in law or
regulation or a written change in official interpretation of law or regulation
by any legislative body, court, governmental agency or regulatory authority (a
"Change in 40 Act Law") to the effect that the Company is or will be considered
an "Investment Company" required to be registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), which Change in 40 Act Law becomes
effective on or after _________ __, 1994; provided that no Investment Company
Event shall be deemed to have occurred if ENSERCH and/or the Company delivers a
written opinion of nationally recognized independent counsel to the Company
experienced in practice under the 1940 Act, to the effect that ENSERCH and/or
the Company has successfully taken either of the steps set forth in (a) or (b)
below to avoid such Change in 40 Act Law so that in the opinion of such counsel,
notwithstanding such Change in 40 Act Law, the Company is not required to be
registered as an "investment company" within the meaning of the 1940 Act. Such
steps shall be either (a) issuing an additional or supplemental irrevocable and
unconditional guarantee (i) of accumulated and unpaid dividends (whether or not
declared
3
<PAGE>
out of moneys legally available therefor) on the Series A Preferred Securities
and (ii) upon a liquidation of the Company, of the full amount of the
Liquidation Distribution (as herein defined) on the Series A Preferred
Securities (regardless of the amount of assets of the Company otherwise
available for distribution in such liquidation), or (b) the use of any other
reasonable measures that do not adversely affect holders of Series A Preferred
Securities.
"LLC Certificate" shall mean a certificate substantially in the form
attached hereto as Exhibit A, evidencing the Preferred Securities held by a
Class C Member.
"Loan Agreement" means the Loan Agreement dated as of April __, 1994
between the Company and Enserch Preferred.
"Loan Agreements" means the Loan Agreement and the ENSERCH Loan Agreement.
"Loan Guarantee Agreement" means the Loan Payment and Guarantee Agreement
dated as of April __, 1994 of ENSERCH relating to the Loan Agreement.
"Loans" means the Loans as defined in the Loan Agreements.
"LP Act" means the Delaware Revised Uniform Limited Partnership Act, 6
Del.C. (S) 17-101, et seq., as amended from time to time.
- ------ -------
"Member" means any Person which is the Class A Member, the Class B Member
or a Class C Member pursuant to the provisions of this Agreement in its capacity
as a member of the Company, and "Members" means two (2) or more of such Persons
when acting in their capacities as members of the Company. For purposes of the
Delaware Act, each of the Class A Member, the Class B Member and the Class C
Members shall constitute a separate class or group of members.
"Person" includes any individual, corporation, association, partnership
(general or limited), joint venture, trust, estate, limited liability company,
or other legal entity or organization.
"Preferred Securities" means the Interests described in Article X.
"Preferred Security Owner" shall mean, with respect to a Book Entry
Interest, a Person who is the beneficial owner of such Book Entry Interest, as
reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly as a Clearing Agency
Participant or as an indirect participant, in each case in accordance with the
rules of such Clearing Agency).
"Purchase Price" shall mean the amount paid for each Preferred Security.
"Special Event" means a Tax Event or an Investment Company Act Event.
4
<PAGE>
"Special Loan Tax Event" has the meaning specified in the definition of Tax
Event.
"Subordinated Debentures" means the ___% Subordinated Debentures of ENSERCH
issued under the Indenture dated as of _______________, 1994 between ENSERCH and
The First National Bank of Chicago, as Trustee.
"Tax Event" means that ENSERCH or the Company shall have obtained an
opinion of nationally recognized independent tax counsel experienced in such
matters to the effect that, as a result of any amendment to, or change in, the
laws (or any regulations thereunder) of the United States or any political
subdivision of taxing authority thereof or therein affecting taxation, or any
amendment to or change in an official interpretation or application of such laws
or regulations, which amendment or change is effective on or after _________ __,
1994, and which change cannot be avoided by the use of any reasonable measures
available to ENSERCH or the Company, there is a substantial increase in risk
that (i) Enserch Capital is subject to federal income tax with respect to
interest received on the Loans to or (ii) the consolidated tax group of which
ENSERCH is the common parent shall not be entitled to deduct interest for
Federal income tax purposes with respect to the amounts being loaned by the
Company to members of such consolidated group (a Tax Event occurring solely by
reason of this clause (ii), a "Special Loan Tax Event").
"Tax Matters Partner" means the Class A Member designated as such in
Section 12.1 hereof.
"Treasury Regulations" means the income tax regulations, including
temporary regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
"Underwriting Agreement" means the Underwriting Agreement, dated as of
April ___, 1994, among the Company, ENSERCH and the underwriters named therein.
Section 1.2 Headings. The headings and subheadings in this Agreement are
--------
included for convenience and identification only and are in no way intended to
describe, interpret, define or limit the scope, extent or intent of this
Agreement or any provision hereof.
ARTICLE II
CONTINUATION AND TERM
Section 2.1 Continuation.
------------
(i) The Members hereby agree to continue the Company as a
limited liability company under and pursuant to the provisions of the
Delaware Act and agree that the rights, duties and liabilities of the
Members shall be as provided in the Delaware Act, except as otherwise
provided herein.
5
<PAGE>
(ii) Upon the execution of this Agreement, ENSERCH and Enserch
Preferred shall continue to be members of the Company and ENSERCH
shall be the Class A Member and Enserch Preferred shall be the Class B
Member.
(iii) Without execution of this Agreement, upon receipt by a
Person of an LLC Certificate and payment by such Person for the
Preferred Security being acquired by such Person, which payment shall
be deemed to constitute a request by such Person that the books and
records of the Company reflect its admission as a Class C Member, such
Person shall be admitted to the Company as a Class C Member and shall
become bound by this Agreement.
(iv) The name and mailing address of each Member and the amount
contributed by such Member to the capital of the Company shall be
listed on the books and records of the Company. The Class A Member
shall be required to update the books and records from time to time as
necessary to accurately reflect the information therein.
(v) The Class A Member, as an authorized person, within the
meaning of the Delaware Act, shall execute, deliver and file any and
all amendments to and restatements of the Certificate.
Section 2.2 Name. The name of the Company heretofore formed and
----
continued hereby is Enserch Capital L.L.C. The business of the Company may be
conducted upon compliance with all applicable laws under any other name
designated by the Class A Member.
Section 2.3 Term. The term of the Company commenced on the date the
----
Certificate was filed in the office of the Secretary of State of the State of
Delaware and shall continue until March 31, 2069, unless dissolved before such
date in accordance with the provisions of this Agreement.
Section 2.4 Registered Agent and Office. The Company's registered
---------------------------
agent and office in Delaware shall be The Corporation Trust Company, Corporation
Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.
At any time, the Class A Member may designate another registered agent and/or
registered office.
Section 2.5 Principal Place of Business. The principal place of
---------------------------
business of the Company shall be at 300 South St. Paul Street, Dallas, Texas
75201. Upon ten (10) days notice to the Members, the Class A Member may change
the location of the Company's principal place of business, provided that such
change has no material adverse effect upon any Member.
Section 2.6 Qualification in Other Jurisdictions. The Class A Member
------------------------------------
shall cause the Company to be qualified, formed or registered under assumed or
fictitious name statutes or similar laws in any jurisdiction in which the
Company transacts business. The Class A Member, as an authorized person, within
the meaning of the Delaware Act, shall execute, deliver and file
6
<PAGE>
any certificates (and any amendments and/or restatements thereof) necessary for
the Company to qualify to do business in a jurisdiction in which the Company may
wish to conduct business.
ARTICLE III
PURPOSE AND POWERS OF THE COMPANY
Section 3.1 Purpose. The sole purpose of the Company is to issue
-------
limited liability company interests in the Company, including, without
limitation, Common Securities and Preferred Securities, and to loan the proceeds
thereof to Enserch Preferred pursuant to the Loan Agreement and other similar
arrangements permitted by this Agreement, and to engage in any and all
activities necessary, advisable or incidental thereto.
Section 3.2 Powers of the Company.
---------------------
(i) The Company shall have the power and authority to take any
and all actions necessary, appropriate, proper, advisable, incidental
or convenient to or for the furtherance of the purpose set forth in
Section 3.1.
(ii) The Company, and the Class A Member on behalf of the
Company, may enter into and perform the Loan Agreement and the
Underwriting Agreement without any further act, vote or approval of
any Member notwithstanding any other provision of this Agreement, the
Delaware Act or other applicable law. The Class A Member is hereby
authorized to enter into and perform on behalf of the Company the Loan
Agreement and the Underwriting Agreement, but such authorization shall
not be deemed a restriction on the power of the Class A Member to
enter into other documents on behalf of the Company to the extent
specifically provided for in this Agreement.
Section 3.3 Limitations on Company Powers. Notwithstanding the
-----------------------------
foregoing provisions of Section 3.2, the Company shall have no power or
authority to borrow money or to become liable for the borrowings of any third
party or to engage in any financial or other trade or business. The Company
shall not do business in any jurisdiction other than Delaware or Texas unless
such activities would not jeopardize the limited liability of the Class C
Members under the Delaware Act or this Agreement.
7
<PAGE>
ARTICLE IV
CAPITAL CONTRIBUTIONS, SECURITIES
AND CAPITAL ACCOUNTS
Section 4.1 Capital Contributions.
---------------------
(i) Each Class A Member has contributed the amount of $_________
to the capital of the Company and shall make further contributions to
satisfy its obligations under Section 6.3.
(ii) Each Class B Member has contributed the amount of $10 to
the capital of the Company and shall not be required to make any
additional capital contributions to the Company in respect of the
Class B Common Securities held by it.
(iii) Each Class C Member has contributed to the capital of the
Company the amount of the Purchase Price for the Preferred Securities
held by it. No Class C Member shall be required to make any
additional capital contribution to the Company in respect of the
Preferred Securities held by it.
Section 4.2 Securities.
----------
(i) A Preferred Security Holder's interest in the Company shall
be represented by the Preferred Securities held by such Preferred
Security Holder. Each Preferred Security Holder's respective Preferred
Securities shall be set forth on the books and records of the Company.
Each Preferred Security Holder hereby agrees that its interest in the
Company and in its Preferred Securities shall for all purposes be
personal property. A Preferred Security Holder shall have no interest
in specific Company property.
(ii) The Class A Member's interest in the Company shall be
represented by the Class A Common Securities held by the Class A
Member. The Class A Member's Class A Common Securities shall be set
forth on the books and records of the Company. The Class A Member
hereby agrees that its interest in the Company and in its Class A
Common Securities shall for all purposes be personal property. The
Class A Member shall have no interest in specific Company property.
(iii) The Class B Member's interest in the Company shall be
represented by the Class B Common Securities held by the Class B
Member. The Class B Member's Class B Common Securities shall be set
forth on the books and records of the Company. The Class B Member
hereby agrees that its interest in the Company and in its Class B
Common Securities shall for all purposes be personal
8
<PAGE>
property. The Class B Member shall have no interest in specific
Company property.
Section 4.3 Capital Accounts. An individual Capital Account shall be
----------------
established and maintained for each Member which shall be credited with the
capital contributions made and the profits allocated to the Member (or
predecessor in interest) and debited by the distributions made and losses
allocated to the Member (or predecessor thereof).
ARTICLE V
MEMBERS
Section 5.1 Powers of Members. The Members shall have the power to
-----------------
exercise any and all rights or powers granted to the Members pursuant to the
express terms of this Agreement.
Section 5.2 Partition. Each Member waives any and all rights that it
---------
may have to maintain an action for partition of the Company's property.
Section 5.3 Resignation. A Member may not resign from the Company
-----------
prior to the dissolution and winding up of the Company except upon the
assignment of its Interests (including any redemption, repurchase or other
acquisition by the Company or ENSERCH), as the case may be, in accordance with
the provisions of this Agreement. A resigning Member shall not be entitled to
receive any distribution and shall not otherwise be entitled to receive the fair
value of its Interest except as otherwise expressly provided in this Agreement.
ARTICLE VI
MANAGEMENT
Section 6.1 Management of the Company. The Class A Member shall have
-------------------------
full, exclusive and complete discretion to manage and control the business and
affairs of the Company, to make all decisions affecting the business and affairs
of the Company and to take all such actions as it deems necessary or appropriate
to accomplish the purpose of the Company as set forth herein. The Company shall
not have a "manager" within the meaning of the Delaware Act. The actions of the
Class A Member taken in accordance with this Agreement shall bind the Company.
Section 6.2 Powers of the Class A Member. The Class A Member shall
----------------------------
have the right, power and authority, in the management of the business and
affairs of the Company, to do or cause to be done any and all acts, at the
expense of the Company, deemed by the Class A Member to be necessary or
appropriate to effectuate the business, purposes and objectives of the Company.
Without limiting the generality of the foregoing, the Class A Member shall have
the power and authority to:
9
<PAGE>
(a) issue Interests, including Common Securities, Preferred
Securities and classes and series thereof, in accordance with this Agreement;
(b) act as registrar and transfer agent for the Preferred Securities;
(c) establish a record date with respect to all actions to be taken
hereunder that require a record date be established, including with respect to
allocations, distributions (hereinafter sometimes referred to as "dividends")
and voting rights and declare dividends and make all other required payments on
Common Securities and Preferred Securities as the Company's paying agent;
(d) bring and defend on behalf of the Company actions and proceedings
at law or in equity before any court or governmental, administrative or other
regulatory agency, body or commission or otherwise; and
(e) execute all documents or instruments, perform all duties and
powers and do all things for and on behalf of the Company in all matters
necessary or desirable or incidental to the foregoing.
The expression of any power or authority of the Class A Member in this
Agreement shall not in any way limit or exclude any other power or authority
which is not specifically or expressly set forth in this Agreement.
Notwithstanding the foregoing, the Class A Member shall not have the
power to permit or cause the Company to file a voluntary petition in bankruptcy
without the affirmative vote of the holders of 66 2/3% of the outstanding
Preferred Securities.
Section 6.3 Ownership by the Class A Member and Class B Member. At
--------------------------------------------------
least twenty one percent (21%) of the total value of the Company and at least
twenty one percent (21%) of all interests in the capital, income, gain, loss,
deduction and credit of the Company shall be represented by Class A Common
Securities and the Class A Member will at all times own all of the Class A
Common Securities. The Class B Member will at all times own all of the Class B
Common Securities.
Section 6.4 No Management by Class B Member or Class C Member. Except
-------------------------------------------------
as otherwise expressly provided herein, neither the Class B Member nor any Class
C Member shall take part in the day-to-day management, operation or control of
the business and affairs of the Company. The Class B Member and the Class C
Members shall not be agents of the Company and shall not have any right, power
or authority to transact any business in the name of the Company or to act for
or on behalf of or to bind the Company.
10
<PAGE>
ARTICLE VII
AMENDMENTS AND MEETINGS
Section 7.1 Amendments. Except as otherwise provided in this Agreement
----------
or by any applicable terms of any Action (as hereinafter defined) establishing a
series of Preferred Securities, this Agreement may be amended by, and only by, a
written instrument executed by the Class A Member; provided, however, that (i)
no amendment shall be made, and any such purported amendment shall be void and
ineffective, to the extent the result thereof would be to cause the Company to
be treated as anything other than a partnership for purposes of United States
income taxation and (ii) any amendment which would adversely affect the powers,
preferences or special rights of any series of Preferred Securities may be
affected only as permitted by the terms of such series of Preferred Securities.
Section 7.2 Meetings of the Members.
-----------------------
(i) Meetings of the Members of any class or series or of all
classes or series of the Company's Interests may be called at any time
by the Class A Member or as provided in any Action establishing a
series of Preferred Securities. Except to the extent otherwise
provided in any such Action, the following provisions shall apply to
meetings of Members.
(ii) Notice of any such meeting shall be given to all Members
not less than seven (7) business days nor more than sixty (60) days
prior to the date of such meeting. Members may vote in person or by
proxy at such meeting. Whenever a vote, consent or approval of Members
is permitted or required under this Agreement, such vote, consent or
approval may be given at a meeting of Members or by written consent.
(iii) Each Member may authorize any Person to act for it by
proxy on all matters in which a Member is entitled to participate,
including waiving notice of any meeting, or voting or participating at
a meeting. Every proxy must be signed by the Member or its attorney-
in-fact. No proxy shall be valid after the expiration of eleven (11)
months from the date thereof unless otherwise provided in the proxy.
Every proxy shall be revocable at the pleasure of the Member executing
it.
(iv) Each meeting of Members shall be conducted by the Class A
Member or by such other Person that the Class A Member may designate.
(v) The Class A Member, in its sole discretion, shall establish
all other provisions relating to meetings of Members, including notice
of the time, place or purpose of any meeting at which any matter is to
be voted on by any Members, waiver of any such notice, action by
consent without a meeting, the establishment of a record date, quorum
requirements, voting in person or by
11
<PAGE>
proxy or any other matter with respect to the exercise of any such
right to vote; provided however, that unless the Class A Member has
established a lower percentage, a majority of the Members entitled to
vote thereat shall constitute a quorum at all meetings of the Members.
ARTICLE VIII
ALLOCATIONS
Section 8.1 Profits and Losses. Each fiscal period, the profits of
------------------
the Company will be allocated (i) first, to the Class C Members, pro rata to the
number of Preferred Securities held by each Class C Member, in an amount equal
to the excess of (a) the dividends accrued on the Preferred Securities since
their date of issuance through and including the close of the current fiscal
period (whether or not paid) over (b) the amount of profits allocated to the
Class C Members pursuant to this Section 8.1(i) in all prior fiscal periods;
(ii) second, to each Class C Member to whom Additional Amounts were paid during
a fiscal period, an amount equal to such Additional Amounts; and (iii)
thereafter, to the Class A Member and Class B Member, pro rata in proportion to
their capital contributions to the Company. The losses of the Company shall be
allocated each year to the Class A Member and the Class B Member, in proportion
to their capital contributions to the Company.
Section 8.2 Allocation Rules.
----------------
(i) For purposes of determining the profits, losses or any other
items allocable to any period, profits, losses and any such other
items shall be determined on a daily, monthly or other basis, as
determined by the Class A Member using any method that is permissible
under (S)706 of the Code and the Treasury Regulations thereunder.
(ii) The Members are aware of the income tax consequences of the
allocations made by this Article VIII and hereby agree to be bound by
the provisions of this Article VIII in reporting their shares of
Company income and loss for income tax purposes.
ARTICLE IX
DIVIDENDS
Section 9.1 Dividends. Class C Members shall receive periodic
---------
dividends, if any, in accordance with the applicable terms of the Preferred
Securities, as and when declared by the Class A Member. Subject to the rights
of the Preferred Securities, the Common Securities shall receive such dividends
if any as may be declared from time to time by the Class A Member.
12
<PAGE>
Section 9.2 Limitations on Distributions. Notwithstanding any
----------------------------
provision to the contrary contained in this Agreement, the Company shall not
make a distribution (including a dividend) to any Member on account of its
interest in the Company if such distribution (including a dividend) would
violate Section 18-607 of the Delaware Act or other applicable law.
ARTICLE X
THE COMMON SECURITIES AND PREFERRED SECURITIES
Section 10.1 Common Securities and Preferred Securities.
------------------------------------------
(a) The aggregate number of Class A Common Securities which the
Company shall have authority to issue is 1000 and the aggregate number of Class
B Common Securities which the Company shall have authority to issue is 1000.
(b) The aggregate number of Preferred Securities which the Company
shall have authority to issue is unlimited.
(c) The powers, preferences, special rights and limitations of the
Common Securities and the Preferred Securities shall be as follows.
1. The Preferred Securities may be issued from time to time by the
Class A Member as Preferred Securities of one or more series and the Class A
Member is expressly authorized, prior to issuance, in a written action or
actions (each, an "Action") providing for the issue of Preferred Securities of
each particular series, to fix the following:
(a) The distinctive designation of such series which shall
distinguish it from other series;
(b) The number of 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;
(c) The annual dividend rate (or method of determining such
rate) for Preferred Securities of such series and the date or dates upon
which such dividends shall be payable;
(d) Whether dividends on the Preferred Securities of such series
shall be cumulative, and, in the case of 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 the Preferred
Securities of such series shall be cumulative;
13
<PAGE>
(e) The amount or amounts which shall be paid out of the assets
of the Company to the holders of the Preferred Securities of such series
upon voluntary or involuntary dissolution, winding up or termination of the
Company;
(f) The price or prices at which, the period or periods within
which and the terms and conditions upon which the Preferred Securities of
such series may be redeemed or purchased, in whole or in part, at the
option of the Company;
(g) The obligation, if any, of the Company to purchase or redeem
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 the Preferred Securities of such series
shall be redeemed, in whole or in part, pursuant to such obligation;
(h) 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 the Preferred Securities of such series shall be
convertible or exchangeable at the option of the holder or the Company or
ENSERCH into any other Interests or securities or other property or cash or
into any other series of Preferred Securities;
(i) The voting rights, if any, of the Preferred Securities of
such series in addition to those required by law, including the number of
votes per Preferred Security and any requirement for the approval by the
holders of Preferred Securities, or of the Preferred Securities of one or
more series, or of both, as a condition to specified action or amendments
to this Agreement;
(j) The ranking of the 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
the Company upon voluntary or involuntary dissolution, winding up or
termination of the Company;
(k) the nature and terms of any backup undertakings of ENSERCH
and/or Enserch Preferred or another subsidiary of ENSERCH to be provided to
holders of the Preferred Securities of such series; and
(l) Any other relative rights, powers, preferences or
limitations of the Preferred Securities of the series not inconsistent with
this Agreement or with applicable law.
In connection with the foregoing and without limiting the generality
thereof, the Class A Member is hereby expressly authorized, without the vote or
approval of any Member,
14
<PAGE>
to take any Action to create under the provisions of this Agreement a series of
Preferred Securities that was not previously outstanding. Without the vote or
approval of any Member, the Class A Member may execute, swear to, acknowledge,
deliver, file and record whatever documents may be required in connection with
the issue from time to time of Preferred Securities in one or more series as
shall be necessary, convenient or desirable to reflect the issue of such series.
The Class A Member shall do all things it deems to be appropriate or necessary
to comply with the Delaware Act and is authorized and directed to do all things
it deems to be necessary or permissible in connection with any future issuance,
including compliance with any statute, rule, regulation or guideline of any
federal, state or other governmental agency or any securities exchange.
Any Action or Actions taken by the Class A Member pursuant to the
provisions of this paragraph (1) shall be deemed an amendment and supplement to
and part of this Agreement.
2. All Preferred Securities shall rank senior to the Common
Securities in respect of the right to receive dividends and the right to receive
payments out of the assets of the Company upon voluntary or involuntary
dissolution, winding up or termination of the Company. All Preferred Securities
redeemed, purchased or otherwise acquired by the Company (including Preferred
Securities surrendered for conversion or exchange) shall be cancelled and
thereupon restored to the status of authorized but unissued Preferred Securities
undesignated as to series.
3. No holder of Common Securities or of Preferred Securities shall be
entitled as a matter of right to subscribe for or purchase, or have any
preemptive right with respect to, any part of any new or additional issue of
Common Securities or Preferred Securities of any class whatsoever, or of
securities convertible into any Common Securities or Preferred Securities of any
class whatsoever, whether now or hereafter authorized and whether issued for
cash or other consideration or by way of dividend.
4. Except as otherwise provided in this Agreement or by the Class A
Member in accordance with paragraph 1 above in respect of any series of the
Preferred Securities and as otherwise required by law, all voting rights of the
Company shall be vested exclusively in the holders of the Common Securities who
shall be entitled to one vote per Common Security.
5. Any Person acquiring Preferred Securities shall be admitted to the
Company as a Class C Member upon compliance with Section 2.1.
Section 10.2 Series A Preferred Securities. There is hereby
-----------------------------
authorized the issuance of an initial series of Preferred Securities of the
Company and there is hereby established the number, voting powers, designation,
preferences, participating, optional or other special rights and the
qualifications, limitations or restrictions of, and other matters relating to,
said Preferred Securities as set forth below in this Section 10.2. This Section
10.2 shall constitute an Action for purposes of Section 10.1.
15
<PAGE>
1. Designation. ________ Million Interests with an aggregate
-----------
liquidation preference of $___ million ($___,000,000) of the Preferred
Securities of the Company, liquidation preference $25 per Preferred Security,
are hereby designated as "_____% Cumulative Monthly Income Preferred Securities,
Series A" (hereinafter called the "Series A Preferred Securities").
2. Ranking. So long as any Series A Preferred Securities are
-------
outstanding, the Company will not issue any Interests ranking, as to
participation in the profits or assets of the Company, senior to the Series A
Preferred Securities other than in accordance with this Agreement. The issuance
of any Interest ranking senior to the Series A Preferred Securities shall be
deemed to adversely affect the rights of the Series A Preferred Securities under
this Agreement.
3. Dividends. (a) The Class C Members who hold the Series A
---------
Preferred Securities shall be entitled to receive, when, as and if declared by
the Class A Member out of funds held by the Company and legally available
therefor, cumulative cash dividends at the annual rate of __% of the stated
liquidation preference of $25 per Preferred Security per annum, calculated on
the basis of a 360-day year consisting of 12 months of 30 days each, and for any
period shorter than a full monthly dividend period, dividends will be computed
on the basis of the actual number of days elapsed in such period, and payable in
United States dollars monthly in arrears on the last day of each calendar month
of each year, commencing April 30, 1994. Such dividends will accrue and be
cumulative whether or not they have been declared and whether or not there are
profits, surplus or other funds of the Company legally available for the payment
of dividends. Dividends on the Series A Preferred Securities shall be
cumulative from the date of original issue, and the cumulative portion from such
date to April 30, 1994 shall be payable on April 30, 1994. In the event that
any date on which dividends are payable on the Series A Preferred Securities is
not a Business Day, then payment of the dividend payable on such date will be
made on the next succeeding day which is a Business Day (and without any
interest or other payment in respect of any such delay) except that, if such
Business Day is in the next succeeding calendar year, such payment shall be made
on the immediately preceding Business Day, in each case with the same force and
effect as if made on such date. A "Business Day" shall mean any day other than
a day on which banking institutions in The City of New York are authorized or
required by law to close. Accrued and unpaid dividends on Series A Preferred
Securities shall accrue additional dividends in respect thereof compounded
monthly on the last day of each calendar month at the dividend rate per annum on
the Series A Preferred Securities.
(b) Dividends on the Series A Preferred Securities must be declared
by the Class A Member in any calendar year or portion thereof to the extent that
the Class A Member reasonably anticipates that at the time of payment the
Company will have, and must be paid by the Company to the extent that at the
time of proposed payment it has, (x) funds legally available for the payment of
such dividends and (y) cash on hand sufficient to permit such payments.
Dividends declared on the Series A Preferred Securities will be payable to the
Preferred Security Holders as they appear on the books and records of the
Company on the relevant record dates, which will be one Business Day prior to
the relevant payment dates.
16
<PAGE>
(c) The Company shall not:
(i) pay, or declare and set aside for payment, any dividends on any
other Preferred Securities ranking pari passu with the Series A Preferred
Securities as regards participation in profits of Enserch Capital ("Capital
Dividend Parity Securities"), unless the amount of any dividends declared
on any Capital Dividend Parity Securities is paid on the Capital Dividend
Parity Securities and the Series A Preferred Securities on a pro rata basis
on the date such dividends are paid on such Capital Dividend Parity
Securities, so that
(x) (a) the aggregate amount of dividends paid on the Series A
Preferred Securities bears to (b) the aggregate amount of dividends
paid on such Capital Dividend Parity Securities the same ratio as
(y) (a) the aggregate of all accumulated arrears of unpaid
dividends in respect of the Series A Preferred Securities bears to (b)
the aggregate of all accumulated arrears of unpaid dividends in
respect of such Capital Dividend Parity Securities;
(ii) pay, or declare and set aside for payment, any dividends or
other distribution on the Common Securities or any other securities of the
Company ranking junior to the Series A Preferred Securities as to dividends
(collectively, the "Capital Dividend Junior Securities"); or
(iii) redeem, purchase or otherwise acquire any Capital Dividend
Parity Securities or any Capital Dividend Junior Securities;
until, in each case, such time as all accumulated and unpaid dividends on the
Series A Preferred Securities shall have been paid in full for all dividend
periods terminating on or prior to, in the case of clause (i) and (ii), such
payment and, in the case of clause (iii), the date of such redemption, purchase
or acquisition.
4. Redemption. (a) The Series A Preferred Securities are redeemable,
----------
at the option of the Company and subject to the prior consent of the Class A
Member, in whole or in part from time to time, on or after April 30, 1999, upon
not less than 30 nor more than 60 days' notice, at the Redemption Price. If a
partial redemption would result in a delisting of the Series A Preferred
Securities, the Company may only redeem the Series A Preferred Securities in
whole.
(b) Upon any repayment or prepayment of principal on the Loans to
Enserch Preferred of the proceeds from the issuance and sale of the Series A
Preferred Securities and the Common Securities, the proceeds from such repayment
or prepayment of principal on such Loans shall be applied to redeem the Series A
Preferred Securities at the redemption price of $25 per Preferred Security plus
accumulated and unpaid dividends (whether or not declared) to the date fixed for
redemption (the "Redemption Price"); provided that any such amounts may
--------
17
<PAGE>
be reloaned to ENSERCH Preferred, and not used for redemption, if at the time of
each such loan, and as determined in the judgment of the Class A Member, and its
financial advisor, (a) ENSERCH and Enserch Preferred are not in bankruptcy, (b)
ENSERCH and Enserch Preferred are not in default on any loan pertaining to the
Series A Preferred Securities, (c) ENSERCH and Enserch Preferred have made
timely payments on the repaid loan for the immediately preceding 60 months, (d)
the Company is not in arrears on payments of dividends on the Series A Preferred
Securities, (e) ENSERCH and Enserch Preferred are expected to be able to make
timely payment of principal and interest on such loan, (f) such loan is being
made on terms, and under circumstances, that are consistent with those which a
lender would require for a loan to an unrelated party, (g) such loan is being
made at a rate equal to or greater than the rate at which dividends accrue on
the Series A Preferred Securities, (h) the senior unsecured long-term debt of
ENSERCH is rated BBB or better by Standard & Poor's Corporation or Baa3 or
better by Moody's Investors Service, Inc. or the equivalent by any other
nationally recognized statistical rating organization, (i) such loan is being
made for a term that is consistent with market circumstances and ENSERCH's
financial condition, (j) the final maturity of such loan is not later than the
49th anniversary of the issuance of the Series A Preferred Securities, and (k)
such loan to Enserch Preferred is unconditionally and fully guaranteed by
ENSERCH on substantially the same basis as the Loan Guarantee Agreement and
supported by a loan by Enserch Preferred to ENSERCH on substantially the same
basis as the loans under the ENSERCH Loan Agreement.
(c) If at any time after the issuance of the Series A Preferred
Securities, the Company is or would be required to pay Additional Amounts (as
hereinafter defined) or ENSERCH is or would be required to withhold or deduct
certain amounts in respect to the Series A Preferred Securities pursuant to the
Guarantee, then, subject to the prior consent of ENSERCH, the Company may, at
its option, redeem the Series A Preferred Securities in whole or, if such
requirement relates only to certain of the Series A Preferred Securities, the
Series A Preferred Securities subject to such requirement, in each case at the
Redemption Price; provided that, in the case of such a redemption of Series A
Preferred Securities in part, the Company will (i) cause the LLC Certificates
representing all of the Series A Preferred Securities to be withdrawn from The
Depository Trust Company or its successor securities depository, (ii) issue LLC
Certificates in definitive form representing the remaining Series A Preferred
Securities and (iii) redeem the Series A Preferred Securities subject to such
requirement to withhold or deduct Additional Amounts.
(d) If a Special Event shall occur and be continuing, ENSERCH and/or
the Company shall (i) redeem the Series A Preferred Securities in whole (and not
in part), upon not less than 30 or more than 60 days' notice at the Redemption
Price within 90 days following the occurrence of such Special Event, or (ii)
dissolve the Company and cause to be distributed to holders of Series A
Preferred Securities in liquidation of such holders' interests in the Company,
within 90 days following the occurrence of such Special Event, Subordinated
Debentures, provided that, ENSERCH and/or the Company shall have received an
opinion of nationally recognized independent counsel to the Company experienced
in such matters to the effect that the holders of the Series A Preferred
Securities will not recognize any gain or loss on the exchange of their Series A
Preferred Securities for Subordinated Debentures, or (iii) if the
18
<PAGE>
Special Event is solely a Special Loan Tax Event as defined in clause (ii) of
the definition of Tax Event, cause the Series A Preferred Securities to remain
outstanding.
5. Redemption Procedure. (a) Notice of any redemption (a "Notice of
--------------------
Redemption") of the Series A Preferred Securities will be given by the Company
by mail to each record holder to be redeemed not fewer than 30 nor more than 60
days prior to the date fixed for redemption thereof. For purposes of the
calculation of the date of redemption and the dates on which notices are given
pursuant to this paragraph 5 (a), a Notice of Redemption shall be deemed to be
given on the day such notice is first mailed by first-class mail, postage
prepaid, to Preferred Security Holders who hold Series A Preferred Securities.
Each Notice of Redemption shall be addressed to the Preferred Security Holders
who hold Series A Preferred Securities at the address of the holder appearing in
the books and records of the Company. No defect in the Notice of Redemption or
in the mailing thereof or publication of its contents shall affect the validity
of the redemption proceedings.
(b) In the event that fewer than all the outstanding Series A
Preferred Securities are to be redeemed, the Series A Preferred Securities to be
redeemed (i) in the case of a redemption pursuant to paragraph 4(a), will be
selected in accordance with paragraph 5(d) hereof and (ii) in the case of a
redemption pursuant to paragraph 4(c), will be such Series A Preferred
Securities as were subject to additional amounts being paid, or amounts being
withheld or deducted, in respect thereof. The Company may not redeem fewer than
all the outstanding Series A Preferred Securities unless all accumulated and
unpaid dividends have been paid on all Series A Preferred Securities for all
monthly dividend periods terminating on or prior to the date of redemption.
(c) If the Company gives a Notice of Redemption in respect of Series
A Preferred Securities, then, by 12:00 noon, New York time, on the redemption
date, the Company will irrevocably deposit with The Depository Trust Company
funds sufficient to pay the applicable Redemption Price and will give The
Depository Trust Company irrevocable instructions and authority to pay the
Redemption Price to the holders thereof. If Notice of Redemption shall have
been given and funds deposited as required, then upon the date of such deposit,
all rights of the Preferred Security Holders who hold such Series A Preferred
Securities so called for redemption will cease, except the right of the holders
of such securities to receive the Redemption Price, but without interest. In
the event that any date fixed for redemption of Series A Preferred Securities is
not a Business Day, then payment of the Redemption Price payable on such date
will be made on the next succeeding day which is a Business Day (and without any
interest or other payment in respect of any such delay), except that, if such
Business Day falls in the next calendar year, such payment will be made on the
immediately preceding Business Day. In the event that payment of the Redemption
Price in respect of Series A Preferred Securities is improperly withheld or
refused and not paid either by the Company or by ENSERCH pursuant to the
Guarantee, dividends on such Series A Preferred Securities will continue to
accrue at the then applicable rate, from the original redemption date to the
date of payment, in which case the actual payment date will be considered the
date fixed for redemption for purposes of calculating the Redemption Price.
19
<PAGE>
(d) Redemption notices shall be sent to Cede & Co. If less than all
of the Series A Preferred Securities are being redeemed, interests to be
redeemed shall be determined in accordance with The Depository Trust Company's
practice which at the date hereof is to determine by lot the amount of the
interest of each direct participant in such series to be redeemed.
6. Liquidation Distribution. In the event of any voluntary or
------------------------
involuntary dissolution, winding up or termination of the Company, Preferred
Security Holders who hold the Series A Preferred Securities at the time
outstanding will be entitled to receive out of the assets of the Company
available for distribution to Members after satisfaction of liabilities of
creditors as required by the Delaware Act, before any distribution of assets is
made to the Class A or Class B Members or any other class of securities of the
Company ranking junior to the Preferred Securities as with respect to the
participation in the assets of the Company, but together with the holders of
every other series of Preferred Securities outstanding, if any, ranking pari
passu with the Series A Preferred Securities as regards participation in the
assets of Enserch Capital ("Capital Liquidation Parity Securities"), an amount
equal to, in the case of holders of Series A Preferred Securities, the aggregate
of the stated liquidation preference of $25 per Preferred Security and all
accumulated and unpaid dividends (whether or not declared) to the date of
payment (the "Liquidation Distribution"). If, upon any such liquidation, the
Liquidation Distribution can be paid only in part because Enserch Capital has
insufficient assets available to pay in full the aggregate Liquidation
Distribution and the aggregate maximum liquidation distributions on the Capital
Liquidation Parity Securities, then the amounts payable directly by Enserch
Capital on the Series A Preferred Securities and on such Capital Liquidation
Parity Securities shall be paid on a pro rata basis, so that
(i) (x) the aggregate amount paid in respect of the Liquidation
Distribution bears to (y) the aggregate amount paid as liquidation
distributions on the Capital Liquidation Parity Securities the same ratio
as
(ii) (x) the aggregate Liquidation Distribution bears to (y) the
aggregate maximum liquidation distributions on the Capital Liquidation
Parity Securities.
7. Voting Rights. If (i) the Company fails to pay dividends in full
-------------
on the Series A Preferred Securities for 18 monthly dividend periods; (ii) an
event of default under the Loans occurs and is continuing; or (iii) ENSERCH is
in default on any of its payment or other obligations under the Guarantee
Agreement or the Loan Guarantee Agreement, then the Class C Members, together
with the holders of any other series of Preferred Securities having the right to
vote for the appointment of a trustee in such event, acting as a single class,
will be entitled to appoint and authorize a trustee to enforce the Company's
creditor rights under the Loans against ENSERCH and Enserch Preferred, enforce
the obligations undertaken by ENSERCH under the Guarantee Agreement and the Loan
Guarantee Agreement and declare and pay dividends on the Series A Preferred
Securities, ENSERCH and Enserch Preferred agreeing to execute and deliver such
documents as may be necessary, appropriate or convenient for the trustee to
enforce such rights and obligations.
20
<PAGE>
In furtherance of the foregoing, and without limiting the powers of
any trustee so appointed and for the avoidance of any doubt concerning the
powers of the trustee, any trustee, in its own name and as trustee of an express
trust, may institute a proceeding, including, without limitation, any suit in
equity, an action at law or other judicial or administrative proceeding, to
enforce the Company's creditor rights directly against ENSERCH, Enserch
Preferred or any other obligor in connection with such obligations to the same
extent as the Company and on behalf of the Company, and may prosecute such
proceeding to judgment or final decree, and enforce the same against ENSERCH,
Enserch Preferred, or any other obligor in connection with such obligations and
collect, out of the property, wherever situated, of ENSERCH, Enserch Preferred
or any such other obligor upon such obligations, the monies adjudged or decreed
to be payable in the manner provided by law.
For purposes of determining whether the Company has failed to pay
dividends in full for 18 monthly dividend periods, dividends shall be deemed to
remain in arrears, notwithstanding any payments in respect thereof, until full
cumulative dividends have been or contemporaneously are declared and paid with
respect to all monthly dividend periods terminating on or prior to the date of
payment of such full cumulative dividends. Not later than 30 days after such
right to appoint a trustee arises, the Class A Member will convene a general
meeting for the above purpose. If the Class A Member fails to convene such
meeting within such 30-day period, the Class C Members who hold 10% in
liquidation preference of the outstanding Series A Preferred Securities will be
entitled to convene such meeting. The provisions of Section 7.2 relating to the
convening and conduct of meetings of Members will apply with respect to any such
meeting. Any trustee so appointed shall vacate office immediately if the
Company (or ENSERCH pursuant to the Guarantee) shall have paid in full all
accumulated and unpaid dividends on the Series A Preferred Securities or such
default or breach by ENSERCH, as the case may be, shall have been cured.
If any proposed amendment of this Agreement provides for, or the Class
A Member otherwise proposes to effect (pursuant to an Action or otherwise), (x)
any action which would adversely affect the powers, preferences or special
rights of the Series A Preferred Securities, whether by way of amendment of this
Agreement or otherwise (including, without limitation, the authorization or
issuance of any Interests ranking, as to participation in the profits or assets
of the Company, senior to the Series A Preferred Securities), or (y) the
dissolution, winding up or termination of the Company, then Class C Members who
hold the outstanding Series A Preferred Securities will be entitled to vote on
such amendment or action of the Class A Member (but not on any other amendment
or action) and, in the case of an amendment described in clause (x) above which
would equally adversely affect the powers, preferences or special rights of any
Capital Dividend Parity Securities or any Capital Liquidation Parity Securities,
such Capital Dividend Parity Securities or such Capital Liquidation Parity
Securities, as the case may be, or, in the case of any amendment described in
clause (y) above, all Capital Liquidation Parity Securities, will be entitled to
vote together as a class on such amendment or action of the Class A Member (but
not on any other amendment or action), and such amendment or action shall not be
effective except with the approval of Class C Members holding 66 2/3% in
liquidation preference of such outstanding Preferred Securities; provided,
however, that no such approval shall be required if the dissolution, winding up
or termination of the Company is
21
<PAGE>
proposed or initiated upon the initiation of proceedings, or after proceedings
have been initiated, for the liquidation, dissolution or winding up of ENSERCH
or Enserch Preferred.
The rights attached to the Series A Preferred Securities will be
deemed not to be adversely affected by the creation or issue of, and no vote
will be required for the creation of, any further Interests ranking junior to,
or pari passu with, the Series A Preferred Securities with regard to
---- -----
participation in the profits or assets of the Company.
Any required approval of Class C Members holding Series A Preferred
Securities may be given at a separate meeting of such holders convened for such
purpose, at a meeting of Preferred Security Holders or pursuant to written
consent. The Company will cause a notice of any meeting at which Class C
Members holding Series A Preferred Securities are entitled to vote, or of any
matter upon which action by written consent of such holders is to be taken, to
be mailed to each Class C Member holding Series A Preferred Securities. Each
such notice will include a statement setting forth (i) the date of such meeting
or the date by which such action is to be taken, (ii) a description of any
matter on which such holders are entitled to vote or upon which written consent
is sought and (iii) instructions for the delivery of proxies or consents.
No vote or consent of the Class C Members holding Series A Preferred
Securities will be required for the Company to redeem and cancel Series A
Preferred Securities in accordance with this Agreement.
Notwithstanding that Class C Members holding Series A Preferred
Securities are entitled to vote or consent under any of the circumstances
described above, any of the Series A Preferred Securities and any other series
of Preferred Securities that are entitled to vote or consent with such Series A
Preferred Securities as a single class at such time, that are owned by ENSERCH
or any entity owned more than 50% by ENSERCH, either directly or indirectly,
shall not be entitled to vote or consent and shall, for the purposes of such
vote or consent, be treated as if they were not outstanding.
8. Additional Amounts. All payments in respect of the Series A
------------------
Preferred Securities by the Company will be made without withholding or
deduction for or on account of any present or future taxes, duties, assessments
or governmental charges of whatever nature imposed or levied upon or as a result
of such payment by or on behalf of the United States of America, any state
thereof or any other jurisdiction through which or from which such payment is
made, or any authority therein or thereof having power to tax, unless the
withholding or deduction of such taxes, duties, assessments or governmental
charges is required by law. In that event, the Company will pay as a dividend
such additional amounts as may be necessary in order that the net amounts
received by the Class C Members who hold the Series A Preferred Securities after
such withholding or deduction will equal the amount which would have been
receivable in respect of such Series A Preferred Securities in the absence of
such withholding or deduction ("Additional Amounts"), except that no such
Additional Amounts will be payable to a Class C Member who holds Series A
Preferred Securities (or a third party on his behalf) with respect to Series A
Preferred Securities:
22
<PAGE>
(a) if such holder is liable for such taxes, duties, assessments or
governmental charges in respect of such Series A Preferred Securities by
reason of such holder's having some connection with the United States, any
state thereof or any other jurisdiction through which or from which such
payment is made, other than being a holder of such Series A Preferred
Securities, or
(b) if the Company has notified such holder of the obligation to
withhold taxes and requested but not received from such holder a
declaration of non-residence, a valid taxpayer identification number or
other claim for exemption, and such withholding or deduction would not have
been required had such declaration, taxpayer identification number or claim
been received.
9. Mergers. The Class A Member is authorized and directed to conduct
-------
its affairs and to operate the Company in such a way that the Company would not
be deemed to be an "investment company" required to be registered under the
Investment Company Act of 1940 (the "1940 Act") or taxed as a corporation for
federal income tax purposes and so that the Loans will be treated as
indebtedness of ENSERCH and Enserch Preferred, respectively, for federal income
tax purposes. In this connection, the Class A Member is authorized to take any
action not inconsistent with applicable law, the Certificate or this Agreement
and that does not adversely affect the interests of holders of Series A
Preferred Securities that the Class A Member determines in its discretion to be
necessary or desirable for such purposes.
The Company shall not consolidate, amalgamate, merge with or into, or
be replaced by, or convey, transfer or lease it properties and assets
substantially as an entirety to any corporation or other body, except as
described below. The Company may, for purposes of changing its state of
domicile or avoiding federal income tax or 1940 Act consequences adverse to
ENSERCH or Enserch Capital or holders of Series A Preferred Securities, without
the consent of the holders of the Series A Preferred Securities, consolidate,
amalgamate, merge with or into, or be replaced by a limited liability company,
limited partnership or trust organized as such under the laws of any state of
the United States of America, provided that (i) such successor entity either (x)
expressly assumes all of the obligations of the Company under the Series A
Preferred Securities or (y) substitutes for the Series A Preferred Securities
other securities having substantially the same terms as the Series A Preferred
Securities (the "Successor Securities") so long as the Successor Securities
rank, with respect to participation in the profits or assets of the successor
entity, at least as high as the Series A Preferred Securities rank, with respect
to participation in the profits or assets of the Company, (ii) ENSERCH and
Enserch Preferred expressly acknowledge such successor entity as the holder of
the Loans to it relating to the Series A Preferred Securities, (iii) such
merger, consolidation, amalgamation or replacement does not cause the Series A
Preferred Securities to be delisted by any national securities exchange or other
organization on which the Series A Preferred Securities are then listed, (iv)
such merger, consolidation, amalgamation or replacement does not cause the
Series A Preferred Securities to be downgraded by any "nationally recognized
statistical rating organization," as that term is defined by the Commission for
purposes of Rule 436(g)(2) under the Securities Act, (v) such merger,
consolidation, amalgamation or replacement does not adversely affect the powers,
preferences and special rights of holders of Series A Preferred
23
<PAGE>
Securities in any material respect, (vi) prior to such merger or consolidation
ENSERCH has received an opinion of nationally recognized independent counsel to
the Company experienced in such matters to the effect that (w) holders of
outstanding Series A Preferred Securities will not recognize any gain or loss
for Federal income tax purposes as a result of the merger, consolidation,
amalgamation or replacement, (x) such successor entity will be treated as a
partnership for Federal income tax purposes, (y) following such merger,
consolidation, amalgamation or replacement, ENSERCH and such successor entity
will be in compliance with the 1940 Act without registering thereunder as an
investment company, and (z) such merger, consolidation, amalgamation or
replacement will not adversely affect the limited liability of holders of Series
A Preferred Securities.
ARTICLE XI
BOOKS AND RECORDS
Section 11.1 Books, Records and Financial Statements.
---------------------------------------
(i) At all times during the continuance of the Company, the
Company shall maintain, at its principal place of business, separate
books of account for the Company that shall show a true and accurate
record of all costs and expenses incurred, all charges made, all
credits made and received and all income derived in connection with
the operation of the Company business in accordance with generally
accepted accounting principles consistently applied, and, to the
extent inconsistent therewith, in accordance with this Agreement.
Such books of account, together with a certified copy of this
Agreement and of the Certificate, shall at all times be maintained at
the principal place of business of the Company and shall be open to
inspection and examination at reasonable times by each Member and its
duly authorized representative for any purpose reasonably related to
such Member's interest in the Company. The books of account and the
records of the Company shall be examined by and reported upon as of
the end of each Fiscal Year by a firm of independent certified public
accountants selected by the Class A Member.
(ii) Notwithstanding any other provision of this Agreement, the
Class A Member may, to the maximum extent permitted by applicable law,
keep confidential from the Members any information the disclosure of
which the Class A Member reasonably believes is not in the best
interests of the Company or is adverse to the interests of the Company
or which the Company or the Class A Member is required by law or by an
agreement with any Person to keep confidential.
(iii) The Class A Member shall prepare and maintain, or cause to
be prepared and maintained, the books of account of the Company and
within three (3) months after the close of each Fiscal Year the Class
A Member shall transmit to each Member, a statement indicating such
Member's share of each item of
24
<PAGE>
Company income, gain, loss, deduction or credit for such Fiscal Year
for income tax purposes.
Section 11.2 Accounting Method. For both financial and tax reporting
-----------------
purposes and for purposes of determining profits and losses, the books and
records of the Company shall be kept on the accrual method of accounting applied
in a consistent manner and shall reflect all Company transactions and be
appropriate and adequate for the Company's business.
Section 11.3 Annual Audit. As soon as practical after the end of each
------------
Fiscal Year, but not later than ninety (90) days after such end, the financial
statements of the Company shall be audited by the independent certified public
accountants referred to in Section 11.1(i) hereof, and such financial statements
shall be accompanied by a report of such accountants containing their opinion.
The cost of such audits will be an expense of the Company.
ARTICLE XII
TAX MATTERS
Section 12.1 Tax Matters Partner
-------------------
(i) ENSERCH, as the Class A Member, is hereby designated as "Tax
Matters Partner" of the Company for purposes of (S)6231(a)(7) of the
Code and shall have the power to manage and control, on behalf of the
Company, any administrative proceeding at the Company level with the
Internal Revenue Service relating to the determination of any item of
Company income, gain, loss, deduction or credit for federal income tax
purposes.
(ii) The Tax Matters Partner shall always be the Class A Member.
Section 12.2 No Right to Make Section 754 Election. The Class A Member
-------------------------------------
shall not make an election in accordance with (S) 754 of the Code.
Section 12.3 Taxation as Partnership. The Company shall be treated as
-----------------------
a partnership for U.S. federal income tax purposes.
ARTICLE XIII
LIABILITY, EXCULPATION AND INDEMNIFICATION
Section 13.1 Liability of Class A Member to Third Party Creditors.
----------------------------------------------------
The Class A Member, by acquiring its Interest and being admitted to the Company
as a Class A Member, is liable to creditors of the Company (other than the other
Members in their capacities as Members) (hereinafter referred to each as a
"Third Party Creditor", and collectively as the "Third Party Creditors") to the
same extent that a general partner of a limited partnership formed under the LP
Act is liable under Section 17-403(b) of the LP Act to creditors of the
25
<PAGE>
limited partnership (other than the other partners in their capacities as
partners), as if the Company was a limited partnership formed under the LP Act
and the Class A Member was a general partner of the limited partnership. In
furtherance but not in limitation of the generality of the foregoing, the Class
A Member, (a) is liable for any and all debts, obligations and other liabilities
of the Company, whether arising under contract or by tort, statute, operation of
law or otherwise, enforceable directly and absolutely against the Class A Member
by each Third Party Creditor, and (b) is deemed to and does assume, as a surety
and not as a guarantor, each debt, obligation or other liability of the Company
to all Third Party Creditors.
Section 13.2 Liability.
---------
(i) Except as otherwise provided in Section 13.1 or by the
Delaware Act, (a) the debts, obligations and liabilities of the
Company, whether arising in contract, tort or otherwise, shall be
solely the debts, obligations and liabilities of the Company, and (b)
no Covered Person shall be obligated personally for any such debt,
obligation or liability of the Company solely by reason of being a
Covered Person.
(ii) Except as otherwise expressly provided in Section 13.1 or
required by law, a Member, in its capacity as such, shall have no
liability in excess of (a) the amount of its capital contributions,
(b) its share of any assets and undistributed profits of the Company,
and (c) the amount of any distributions wrongfully distributed to it.
Section 13.3 Exculpation.
-----------
(i) No Indemnified Person shall be liable to the Company or any
other Covered Person for any loss, damage or claim incurred by reason
of any act or omission performed or omitted by such Indemnified Person
in good faith on behalf of the Company and in a manner reasonably
believed to be within the scope of authority conferred on such
Indemnified Person by this Agreement, except that an Indemnified
Person shall be liable for any such loss, damage or claim incurred by
reason of such Indemnified Person's bad faith, recklessness or willful
misconduct.
(ii) An Indemnified Person shall be fully protected in relying
in good faith upon the records of the Company and upon such
information, opinions, reports or statements presented to the Company
by any Person as to matters the Indemnified Person reasonably believes
are within such other Person's professional or expert competence and
who has been selected with reasonable care by or on behalf of the
Company, including information, opinions, reports or statements as to
the value and amount of the assets, liabilities, profits, losses, or
any other facts pertinent to the existence and amount of assets from
which distributions to Members might properly be paid.
26
<PAGE>
Section 13.4 Fiduciary Duty.
--------------
(i) To the extent that, at law or in equity, an Indemnified
Person has duties (including fiduciary duties) and liabilities
relating thereto to the Company or to any other Covered Person, an
Indemnified Person acting under this Agreement shall not be liable to
the Company or to any other Covered Person for its good faith reliance
on the provisions of this Agreement. The provisions of this Agreement,
to the extent that they restrict the duties and liabilities of an
Indemnified Person otherwise existing at law or in equity, are agreed
by the parties hereto to replace such other duties and liabilities of
such Indemnified Person.
(ii) Unless otherwise expressly provided herein, (a) whenever a
conflict of interest exists or arises between Covered Persons, or (b)
whenever this Agreement or any other agreement contemplated herein or
therein provides that an Indemnified Person shall act in a manner that
is, or provides terms that are, fair and reasonable to the Company or
any Member, the Indemnified Person shall resolve such conflict of
interest, taking such action or providing such terms, considering in
each case the relative interest of each party (including its own
interest) to such conflict, agreement, transaction or situation and
the benefits and burdens relating to such interests, any customary or
accepted industry practices, and any applicable generally accepted
accounting practices or principles. In the absence of bad faith by the
Indemnified Person, the resolution, action or term so made, taken or
provided by the Indemnified Person shall not constitute a breach of
this Agreement or any other agreement contemplated herein or of any
duty or obligation of the Indemnified Person at law or in equity or
otherwise.
(iii) Whenever in this Agreement an Indemnified Person is
permitted or required to make a decision (a) in its "discretion" or
under a grant of similar authority or latitude, the Indemnified Person
shall be entitled to consider only such interests and factors as it
desires, including its own interests, and shall have no duty or
obligation to give any consideration to any interest of or factors
affecting the Company or any other Person, or (b) in its "good faith"
or under another express standard, the Indemnified Person shall act
under such express standard and shall not be subject to any other or
different standard imposed by this Agreement or other applicable law.
Section 13.5 Indemnification. To the fullest extent permitted by
---------------
applicable law, an Indemnified Person shall be entitled to indemnification from
the Company for any loss, damage or claim incurred by such Indemnified Person by
reason of any act or omission performed or omitted by such Indemnified Person in
good faith on behalf of the Company and in a manner reasonably believed to be
within the scope of authority conferred on such Indemnified Person by this
Agreement, except that no Indemnified Person shall be entitled to be indemnified
in respect of any loss, damage or claim incurred by such Indemnified Person by
reason of gross negligence or willful misconduct with respect to such acts or
omissions;
27
<PAGE>
provided, however, that any indemnity under this Section 13.5 shall be provided
- -------- -------
out of and to the extent of Company assets only, and no Covered Person shall
have any personal liability on account thereof.
Section 13.6 Expenses. To the fullest extent permitted by applicable
--------
law, expenses (including legal fees) incurred by an Indemnified Person in
defending any claim, demand, action, suit or proceeding shall, from time to
time, be advanced by the Company prior to the final disposition of such claim,
demand, action, suit or proceeding upon receipt by the Company of an undertaking
by or on behalf of the Indemnified Person to repay such amount if it shall be
determined that the Indemnified Person is not entitled to be indemnified as
authorized in Section 13.5 hereof.
Section 13.7 Outside Businesses. Any Member or Affiliate thereof may
------------------
engage in or possess an interest in other business ventures of any nature or
description, independently or with others, similar or dissimilar to the business
of the Company, and the Company and the Members shall have no rights by virtue
of this Agreement in and to such independent ventures or the income or profits
derived therefrom, and the pursuit of any such venture, even if competitive with
the business of the Company, shall not be deemed wrongful or improper. No Member
or Affiliate thereof shall be obligated to present any particular investment
opportunity to the Company even if such opportunity is of a character that, if
presented to the Company, could be taken by the Company, and any Member or
Affiliate thereof shall have the right to take for its own account (individually
or as a partner or fiduciary) or to recommend to others any such particular
investment opportunity.
ARTICLE XIV
TRANSFERS
Section 14.1 Transfer of Interests. (a) Preferred Securities shall
---------------------
be freely transferable by a Preferred Security Holder.
(b) Common Securities shall not be transferred in whole or in part
under any circumstances except to a permitted successor of ENSERCH under the
ENSERCH Loan Agreement or a permitted successor of Enserch Preferred under the
Loan Agreement.
(c) No Interest shall be transferred, in whole or in part, except in
accordance with the terms and conditions set forth in this Agreement. Any
transfer or purported transfer of any Interest not made in accordance with this
Agreement shall be null and void.
Section 14.2 Transfer of LLC Certificates. The Class A Member shall
----------------------------
provide for the registration of LLC Certificates and of transfers of LLC
Certificates. Upon surrender for registration of transfer of any LLC
Certificate, the Class A Member shall cause one or more new LLC Certificates to
be issued in the name of the designated transferee or transferees. Every LLC
Certificate surrendered for registration of transfer shall be accompanied by a
written instrument of transfer in form satisfactory to the Class A Member duly
executed by the
28
<PAGE>
Preferred Security Holder or his or her attorney duly authorized in writing.
Each LLC Certificate surrendered for registration of transfer shall be cancelled
by the Class A Member. A transferee of an LLC Certificate shall be admitted to
the Company as a Class C Member and shall be entitled to the rights and subject
to the obligations of a Preferred Security Holder hereunder upon the receipt by
a transferee of an LLC Certificate.
Section 14.3 Persons Deemed Preferred Security Holders. The Company
-----------------------------------------
may treat the Person in whose name any LLC Certificate shall be registered on
the books and records of the Company as the Preferred Security Holder and the
sole holder of such LLC Certificate for purposes of receiving dividends and for
all other purposes whatsoever and, accordingly shall not be bound to recognize
any equitable or other claim to or interest in such LLC Certificate on the part
of any other Person, whether or not the Company shall have actual or other
notice thereof.
Section 14.4 Book Entry Interests. The LLC Certificates, on original
--------------------
issuance, will be issued in the form of a global LLC Certificate or LLC
Certificates representing the Book Entry Interests, to be delivered to The
Depository Trust Company, the initial Clearing Agency, by, or on behalf of, the
Company. Such LLC Certificate or LLC Certificates shall initially be registered
on the books and records of the Company in the name of Cede & Co., the nominee
of the initial Clearing Agency, and no Preferred Security Owner will receive a
definitive LLC Certificate representing such Preferred Security Owner's
interests in such LLC Certificate, except as provided in Section 14.6. Unless
and until definitive, fully registered LLC Certificates (the "Definitive LLC
Certificates") have been issued to the Preferred Security Owners pursuant to
Section 14.6:
(i) The provisions of this Section shall be in full force and effect;
(ii) The Company and the Class A Member shall be entitled to deal
with the Clearing Agency for all purposes of this Agreement (including the
payment of dividends on the LLC Certificates and receiving approvals, votes
or consents hereunder) as the Preferred Security Holder and the sole holder
of the LLC Certificates and shall have no obligation to the Preferred
Security Owners;
(iii) To the extent that the provisions of this Section conflict with
any other provisions of this Agreement, the provisions of this Section
shall control; and
(iv) The rights of the Preferred Security Owners shall be exercised
only through the Clearing Agency and shall be limited to those established
by law and agreements between such Preferred Security Owners and the
Clearing Agency and/or the Clearing Agency Participants. Unless and until
the Definitive LLC Certificates are issued pursuant to Section 14.6, the
initial Clearing Agency will make book entry transfers among the Clearing
Agency Participants and receive and transmit payments of dividends on the
LLC Certificates to such Clearing Agency Participants.
29
<PAGE>
Section 14.5 Notices to Clearing Agency. Whenever a notice or other
--------------------------
communication to the Preferred Security Holders is required under this
Agreement, unless and until Definitive LLC Certificates shall have been issued
to the Preferred Security Holders pursuant to Section 14.6, the Class A Member
shall give all such notices and communications specified herein to be given to
the Preferred Security Holders to the Clearing Agency, and shall have no
obligations to the Preferred Security Owners.
Section 14.6 Definitive LLC Certificates. If (i) the Clearing Agency
---------------------------
elects to discontinue its services as securities depository and gives reasonable
notice to the Company, or (ii) the Company elects to terminate the book entry
system through the Clearing Agency, then Definitive LLC Certificates shall be
prepared by the Company. Upon surrender of the global LLC Certificate or LLC
Certificates representing the Book Entry Interests by the Clearing Agency,
accompanied by registration instructions, the Class A Member shall cause
Definitive LLC Certificates to be delivered to Preferred Security Owners in
accordance with the instructions of the Clearing Agency. Neither the Class A
Member nor the Company shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying on,
such instructions. Any Person receiving a Definitive LLC Certificate in
accordance with this Article XIV shall be admitted to the Company as a Class C
Member upon receipt of such Definitive LLC Certificate. The Definitive LLC
Certificates shall be printed, lithographed or engraved or may be produced in
any other manner as is reasonably acceptable to the Class A Member, as evidenced
by its execution thereof.
Additionally, in the event that the Company exercises its option to
redeem only a portion of the Series A Preferred Securities because it is or
would be required to withhold or deduct Additional Amounts in regard to such
Series A Preferred Securities to be redeemed, the Company may cause the global
LLC Certificates representing all of the Series A Preferred Securities to be
withdrawn from the Clearing Agency and issue LLC Certificates representing the
remaining Series A Preferred Securities. Thereafter, the Series A Preferred
Securities subject to such requirement to withhold or deduct Additional Amounts
will be redeemed.
ARTICLE XV
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 15.1 No Dissolution. The Company shall not be dissolved by
--------------
the admission of Members in accordance with the terms of this Agreement. Except
as provided in Section 15.2(ii), the death, retirement, resignation, expulsion,
bankruptcy or dissolution of a Member, or the occurrence of any other event
which terminates the continued membership of a member in the Company, shall not
cause the Company to be dissolved and its affairs wound up so long as the
Company at all times has at least two Members. Upon the occurrence of any such
event, the business of the Company shall be continued without dissolution.
30
<PAGE>
Section 15.2 Events Causing Dissolution. The Company shall be
--------------------------
dissolved and its affairs shall be wound up upon the occurrence of any of the
following events:
(i) The expiration of the term of the Company, as provided in
Section 2.3 hereof;
(ii) Upon the retirement, resignation, expulsion, bankruptcy or
dissolution of the Class A Member, or the occurrence of any other
event under the Delaware Act that terminates the continued membership
of the Class A Member in the Company except for a transfer to a
permitted successor of the Class A Member pursuant to Section 14.1;
(iii) the entry of a decree of judicial dissolution under
Section 18-802 of the Delaware Act; or
(iv) the written consent of all Members.
Section 15.3 Notice of Dissolution. Upon the dissolution of the
---------------------
Company, the Class A Member, as liquidating trustee, shall promptly notify the
Members of such dissolution.
Section 15.4 Liquidation. Upon dissolution of the Company, the Class
-----------
A Member, as liquidating trustee, shall immediately commence to wind up the
Company's affairs; provided, however, that a reasonable time shall be allowed
-------- -------
for the orderly liquidation of the assets of the Company and the satisfaction of
liabilities to creditors so as to enable the Members to minimize the normal
losses attendant upon a liquidation. The Preferred Security Holders shall
continue to share profits and losses during liquidation in the same proportions,
as specified in Article VIII hereof, as before liquidation. The proceeds of
liquidation shall be distributed, as realized, in the following order and
priority:
(i) to creditors of the Company, including Preferred Security
Holders who are creditors, to the extent otherwise permitted by law,
in satisfaction of the liabilities of the Company (whether by payment
or the making of reasonable provision for payment thereof), other than
liabilities for distributions (including dividends) to Members;
(ii) to the Preferred Security Holders of each series then
outstanding in the amount of their respective Liquidation
Distributions; and
(iii) to distribute to the Class A Member and the Class B Member
the remaining proceeds of liquidation in proportion to their capital
contributions, after giving effect to all contributions, distributions
and allocations for all periods.
31
<PAGE>
Section 15.5 Termination. The Company shall terminate when all of the
-----------
assets of the Company shall have been distributed in the manner provided for in
this Article XV, and the Certificate shall have been canceled in the manner
required by the Delaware Act.
ARTICLE XVI
MISCELLANEOUS
Section 16.1 Notices. All notices provided for in this Agreement
-------
shall be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied or mailed by registered or certified mail, as follows:
(i) if given to the Company, in care of the Class A Member at
the Company's mailing address set forth below;
ENSERCH Corporation
ENSERCH Center
300 South St. Paul Street
Dallas, Texas 75201
Attention: Treasurer
(ii) if given to the Class A Member, at its mailing address set
forth below;
ENSERCH Corporation
ENSERCH Center
300 South St. Paul Street
Dallas, Texas 75201
Attention: Treasurer
(iii) if given to any other Member at the address set forth on
the books and records of the Company.
All such notices shall be deemed to have been given when received.
Section 16.2 Failure to Pursue Remedies. The failure of any party to
--------------------------
seek redress for violation of, or to insist upon the strict performance of, any
provision of this Agreement shall not prevent a subsequent act, which would have
originally constituted a violation, from having the effect of an original
violation.
32
<PAGE>
Section 16.3 Cumulative Remedies. The rights and remedies provided by
-------------------
this Agreement are cumulative and the use of any one right or remedy by any
party shall not preclude or waive its right to use any or all other remedies.
Said rights and remedies are given in addition to any other rights the parties
may have by law, statute, ordinance or otherwise.
Section 16.4 Binding Effect. This Agreement shall be binding upon and
--------------
inure to the benefit of all of the parties and, to the extent permitted by this
Agreement, their successors, legal representatives and assigns.
Section 16.5 Interpretation. Throughout this Agreement, nouns,
--------------
pronouns and verbs shall be construed as masculine, feminine, neuter, singular
or plural, whichever shall be applicable. All references herein to "Articles,"
"Sections" and "paragraphs" shall refer to corresponding provisions of this
Agreement.
Section 16.6 Severability. The invalidity or unenforceability of any
------------
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provision were omitted.
Section 16.7 Counterparts. This Agreement may be executed in any
------------
number of counterparts with the same effect as if all parties hereto had signed
the same document. All counterparts shall be construed together and shall
constitute one instrument.
Section 16.8 Integration. This Agreement constitutes the entire
-----------
agreement among the parties hereto pertaining to the subject matter hereof and
supersedes all prior agreements and understandings pertaining thereto.
Section 16.9 Governing Law. This Agreement and the rights of the
-------------
parties hereunder shall be interpreted in accordance with the laws of the State
of Delaware, and all rights and remedies shall be governed by such laws without
regard to principles of conflict of laws.
33
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above stated.
CLASS A MEMBER:
ENSERCH CORPORATION
By: _______________________________
Name:
Title:
CLASS B MEMBER:
ENSERCH PREFERRED CAPITAL, INC.
By: _______________________________
Name:
Title:
34
<PAGE>
Exhibit A
Certificate Number Number of Preferred Securities
R-1
CUSIP NO.
Certificate Evidencing Preferred Securities
of
ENSERCH CAPITAL L.L.C.
__% Cumulative Monthly Income Preferred Securities, Series A
(liquidation preference $25 per Preferred Security)
Enserch Capital L.L.C., a limited liability company formed under the laws of
the State of Delaware (the "Company"), hereby certifies that Cede & Co. (the
"Holder") is the registered owner of _________ (_________) preferred securities
of the Company representing preferred limited liability company interests in the
Company of a series designated the __% Cumulative Monthly Income Preferred
Securities, Series A (liquidation preference $25 per Preferred Security) (the
"Series A Preferred Securities"). The Series A Preferred Securities are fully
paid and nonassessable limited liability company interests in the Company, as to
which the members of the Company who hold the Series A Preferred Securities (the
"Preferred Security Holders"), in their capacities as members of the Company,
will have no liability solely by reason of being Preferred Security Holders in
excess of their share of the Company's assets and undistributed profits (subject
to the obligation of a Preferred Security Holder to repay any funds wrongfully
distributed to it) and are transferable on the books and records of the Company,
in person or by a duly authorized attorney, upon surrender of this certificate
duly endorsed and in proper form for transfer. The powers, preferences and
special rights and limitations of the Series A Preferred Securities are set
forth in, and this Certificate and the Series A Preferred Securities represented
hereby are issued and shall in all respects be subject to the terms and
provisions of, the Amended and Restated Limited Liability Company Agreement of
the Company dated as of April __, 1994, as the same may, from time to time, be
amended (the "Limited Liability Company Agreement") authorizing the issuance of
the Series A Preferred Securities and determining the powers, preferences, and
other special rights and limitations, regarding dividends, voting, return of
capital and otherwise, and other matters relating to the Series A Preferred
Securities. Capitalized terms used herein but not defined shall have the
meaning given them in the Limited Liability Company Agreement. The Holder is
entitled to the benefits of the Preferred Securities Payment and Guarantee
Agreement of ENSERCH Corporation ("ENSERCH"), dated as of April __, 1994 (the
"Preferred Securities Guarantee") and the Loan Payment and Guarantee Agreement
of ENSERCH, dated as of April __, 1994 (the "Loan Guarantee", and together with
the Preferred Securities Guarantee, the "Guarantees") and is entitled to enforce
the rights of the Company under the Capital Loan Agreement dated as of April __,
1994 (the "Capital Loan Agreement") between the Company and Enserch Preferred
Capital, Inc. ("Enserch Preferred") and the Preferred Loan Agreement dated as of
April __, 1994 (the "Preferred Loan Agreement", and together with the Capital
Loan Agreement, the "Loan Agreements"), between Enserch Preferred and ENSERCH,
in each case to the extent provided therein and in the Limited Liability Company
Agreement. The Company will furnish a copy of the Limited Liability Company
Agreement, the Guarantees and the Loan Agreements to the Holder without charge
upon written request to the Company at its principal place of business or
registered office.
The Holder, by accepting this Certificate, is deemed to have agreed that (i)
the Loans under the Preferred Loan Agreement and the Loan Guarantee are
subordinate and junior in right of payment to all Senior Indebtedness of ENSERCH
as and to the extent provided in the Preferred Loan Agreement and the Loan
Guarantee, respectively, (ii) the Loans under the Capital Loan Agreement are
subordinate and junior in right of payment to all Senior Indebtedness of Enserch
Preferred as and to the extent provided in the Capital Loan Agreement, and (iii)
the Preferred Securities Guarantee is subordinate and junior in right of payment
to all liabilities of ENSERCH as and to the extent provided in the Preferred
Securities Guarantee. Upon receipt of this Certificate, the Holder is admitted
to the Company as a Class C Member, is bound by the Limited Liability Company
Agreement and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, the Company has executed this certificate this ___ day of
________, 199_.
ENSERCH CAPITAL L.L.C.
By: ENSERCH Corporation, its Class A
Member
By: ___________________________________
Vice President, Finance
and Treasurer
35
<PAGE>
EXHIBIT 4.21
Draft of 4/4/94
CAPITAL LOAN AGREEMENT
CAPITAL LOAN AGREEMENT, dated as of April __, 1994, between Enserch
Preferred Capital, Inc., a Delaware corporation ("Enserch Preferred"), and
Enserch Capital L.L.C., a Delaware limited liability company with limited life
("Capital").
WHEREAS, Capital intends to issue its common limited liability company
interests (the "Common Securities") to ENSERCH Corporation, a Delaware
corporation ("ENSERCH"), and Enserch Preferred, and receive related capital
contributions, in an aggregate amount of $________ (the "Common Security
Payments") and to issue and sell ________ preferred limited liability company
interests of a series designated the ___% Cumulative Monthly Income Preferred
Securities, Series A (the "Preferred Securities"), with a liquidation
preference equal to $25 per Preferred Security (the "Liquidation Preference");
WHEREAS, ENSERCH is guaranteeing the payment of dividends on the
Preferred Securities if and when declared to the extent that there are
sufficient funds legally available therefor, the Redemption Price (as defined in
the Guarantee Agreement) and the Liquidation Distribution (as defined in the
Guarantee Agreement) on the Preferred Securities all to the extent set forth in
the Preferred Securities Payment and Guarantee Agreement, dated as of the date
hereof (the "Guarantee Agreement");
WHEREAS, simultaneously with the execution of this agreement, ENSERCH
is entering into a loan agreement (the "Reloan Agreement") with Enserch
Preferred pursuant to which Enserch Preferred will make a loan to ENSERCH of the
proceeds of the Loans made pursuant to this Loan Agreement;
WHEREAS, Enserch Preferred has asked Capital to make a loan to Enserch
Preferred in an aggregate principal amount equal to the sum of the aggregate
Common Security Payments and the aggregate Liquidation Preference of the
Preferred Securities issued and sold by Capital;
WHEREAS, ENSERCH has agreed to guarantee the payment of principal and
interest on the aforementioned loans to Enserch Preferred to the extent set
forth in the Loan Payment and Guarantee Agreement dated as of the date hereof
(the "Loan Guarantee Agreement"); and
WHEREAS, Capital is willing to make the aforementioned loans to
Enserch Preferred, on the terms and conditions hereinafter stated.
NOW THEREFORE, Enserch Preferred and Capital hereby agree as follows:
<PAGE>
ARTICLE I.
THE LOANS
---------
Section 1.01. The Loans. Subject to the terms and conditions herein,
---------
Capital agrees to make loans to Enserch Preferred on the date hereof in an
aggregate principal amount of $____________ in next day funds. Such loans shall
be referred to herein as the "Loans".
Section 1.02. Term of the Loans; Mandatory Prepayment. (a) If
---------------------------------------
Capital redeems Preferred Securities in accordance with the terms thereof, the
Loans shall become due and payable in a principal amount equal to the aggregate
stated Liquidation Preference of the Preferred Securities so redeemed, together
with any and all accrued interest thereon. Any payment pursuant to this Section
1.02(a) shall be made in next day funds prior to 12:00 noon, New York time, on
the date fixed for such redemption or at such other time on such earlier date as
Capital and Enserch Preferred shall agree.
(b) The entire principal amount of the Loans shall become due and
payable, together with any accrued and unpaid interest thereon, including
Additional Interest (as defined below), if any, on the earliest of (i) April 30,
2024 or (ii) the date upon which Enserch Preferred or ENSERCH is dissolved,
wound-up or liquidated or the date upon which Capital is dissolved, wound-up or
terminated.
Section 1.03. Optional Prepayment. Enserch Preferred shall have the
-------------------
right to prepay the Loans, without premium or penalty:
(i) in whole or in part (together with any accrued but unpaid
interest, including Additional Interest, if any, on the portion being
prepaid) at any time on or after April 30, 1999; and
(ii) in whole (together with all accrued and unpaid interest,
including Additional Interest thereon) at any time if Capital is or would
be required to pay any Additional Amounts (as defined herein) in respect of
the Preferred Securities or in part (together with all accrued and unpaid
interest, including Additional Interest on the portion being prepaid) at
any time if Capital is or would be required to pay Additional Amounts with
respect to only a portion of the Preferred Securities, provided that if a
partial prepayment would, through the corresponding partial redemption
required under the terms of the Preferred Securities, result in a delisting
of the Preferred Securities, Enserch Preferred may only prepay the Loans in
whole.
2
<PAGE>
ARTICLE II.
INTEREST
--------
Section 2.01. Interest on the Loans. The Loans shall bear interest
---------------------
(including Additional Interest, if any) at an annual rate equal to __% from the
date they are made until maturity. Such interest shall be payable on the last
day of each calendar month of each year, commencing April 30, 1994. Interest
shall be computed on the basis of twelve 30-day months and a 360-day year and,
for any period shorter than a full month, shall be computed on the basis of the
actual number of days elapsed in such period. In the event that any date on
which interest is payable on the Loans is not a Business Day, then payment of
the interest payable on such date will be made on the next succeeding day which
is a Business Day (and without any interest or other payment in respect of any
such delay), except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such date. A
"Business Day" shall mean any day other than a day on which banking institutions
in The City of New York are authorized or required by law to close.
Section 2.02. Additional Interest. If at any time Capital shall be
-------------------
required to pay any additional amounts ("Additional Amounts") in respect of the
Preferred Securities pursuant to the terms thereof, then Enserch Preferred will
pay as interest ("Additional Interest") an amount equal to such Additional
Amounts. Furthermore, if at any time after April __, 1994, Capital shall be
required to pay, with respect to its income derived from the interest payments
on the Loans, any amounts for or on account of any taxes, duties, assessments or
governmental charges of whatever nature imposed by the United States, or any
other taxing authority, then, in any such case, Enserch Preferred will pay as
Additional Interest such additional amounts as may be necessary in order that
the net amounts received and retained by Capital after the payment of such
taxes, duties, assessments or governmental charges shall result in Capital's
having such funds as it would have had in the absence of the payment of such
taxes, duties, assessments or governmental charges.
Section 2.03. Extension of Interest Payment Period. Notwithstanding
------------------------------------
the provisions of Section 2.01, Enserch Preferred, acting jointly with ENSERCH
under the Reloan Agreement, shall have the right at any time during the term of
the Loans, so long as Enserch Preferred is not in default in the payment of
interest on the Loans, to extend the interest payment period to up to 60 months
to the same extent that ENSERCH extends such interest payment period under the
Reloan Agreement, at the end of which period Enserch Preferred shall pay all
interest then accrued and unpaid (together with interest thereon at the rate
specified for the Loans to the extent permitted by applicable law); and provided
that,
3
<PAGE>
during any such extended interest payment period, Enserch Preferred shall not
declare or pay any dividend on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock or make any
guarantee payments with respect to the foregoing. Prior to the termination of
any such extended interest payment period, Enserch Preferred, acting jointly
with ENSERCH under the Reloan Agreement, may further extend the interest payment
period, provided that such extended interest payment period together with all
such further extensions thereof may not exceed 60 months. Enserch Preferred
shall give Capital notice of its selection of such extended interest payment
period one Business Day prior to the earlier of (i) the date Capital declares
the related dividend or (ii) the date Capital is required to give notice of the
record or payment date of such related dividend to the New York Stock Exchange
or other applicable self-regulatory organization or to holders of the Preferred
Securities, but in any event not less than two Business Days prior to such
record date. Enserch Preferred shall cause Capital to give such notice of
Enserch Preferred's selection of such extended interest payment period to the
holders of the Preferred Securities.
ARTICLE III.
PAYMENTS
--------
Section 3.01. Method and Date of Payment. Each payment by Enserch
--------------------------
Preferred of principal and interest (including Additional Interest, if any) on
the Loans shall be made to Capital in lawful money of the United States, in next
day funds for principal payments and in same day funds for interest payments, at
such place and to such account as may be designated by Capital.
Section 3.02. Set-off. Notwithstanding anything to the contrary
-------
herein, Enserch Preferred shall have the right to set-off any payment it is
otherwise required to make hereunder with and to the extent ENSERCH has
theretofore made, or is concurrently on the date of such payment making, a
payment under the Guarantee Agreement or the Loan Guarantee Agreement.
ARTICLE IV.
SUBORDINATION
-------------
Section 4.01. Subordination. Enserch Preferred and Capital covenant
-------------
and agree, and the holders of the Preferred Securities (and any trustee
appointed by such holders) by their acceptance of such Preferred Securities
likewise agree, that the Loans are subordinate and junior in right of payment to
all Senior Indebtedness as provided herein. The term "Senior Indebtedness"
shall mean the principal, premium, if any, and interest on (i) all indebtedness
of Enserch Preferred, whether outstanding on the date hereof or hereafter
created, incurred or assumed, which is for
4
<PAGE>
money borrowed, or evidenced by a note or similar instrument given in connection
with the acquisition of any business, properties or assets, including
securities, (ii) any indebtedness of others of the kinds described in the
preceding clause (i) for the payment of which Enserch Preferred is responsible
or liable (directly or indirectly, contingently or non-contingently) as
guarantor or otherwise, (iii) any indebtedness secured by a lien upon property
owned by Enserch Preferred and upon which indebtedness Enserch Preferred
customarily pays interest, even though Enserch Preferred has not assumed or
become liable for the payment of such indebtedness and (iv) amendments,
renewals, extensions and refundings of any such indebtedness, unless in any
instrument or instruments evidencing or securing such indebtedness or pursuant
to which the same is outstanding, or in any such amendment, renewal, extension
or refunding, it is expressly provided that such indebtedness is not superior in
right of payment to the Loans. Senior Indebtedness shall continue to be Senior
Indebtedness and entitled to the benefits of these subordination provisions
irrespective of (i) any amendment, modification or waiver of any term of the
Senior Indebtedness extension or renewal of the Senior Indebtedness, (ii) any
exchange or release of, or non-perfection of any lien on or security interest
in, any collateral, or any release from, amendment or waiver of or consent to
departure from any guaranty, for all or any of the Senior Indebtedness, (iii)
any other circumstance which might otherwise constitute a defense available to
or discharge of Capital to the holders of the Preferred Securities (or any
trustee appointed by such holders) in respect of the provisions of this Section
4.01, or (iv) any act or failure to act on the part of Enserch Preferred or by
any act or failure to act, in good faith, by any holder of Senior Indebtedness,
or by any noncompliance by Enserch Preferred with the terms of this Agreement,
regardless of any knowledge thereof which any person may have or be otherwise
charged with.
Upon the maturity of any Senior Indebtedness by lapse of time,
acceleration (unless waived) or otherwise (including all installments of
principal and interest), all Senior Indebtedness then due and owing shall first
be paid in full, or such payment duly provided for in cash (or in securities or
other property satisfactory to all of the holders of such Senior Indebtedness),
before any payment is made on account of the Loans.
In the event that (i) Enserch Preferred shall default in the payment
of any principal, or premium, if any, or interest on any Senior Indebtedness
when the same becomes due and payable, whether at maturity or at a date fixed
for prepayment or declaration or otherwise or (ii) an event of default occurs
with respect to any Senior Indebtedness, then unless and until such default in
payment or event of default shall have been cured or waived or shall have ceased
to exist, no direct or indirect payment (in cash, property, securities, by set-
off or otherwise) shall be made or agreed to be made on account of the Loans or
interest
5
<PAGE>
thereon or in respect of any repayment, redemption, retirement, purchase or
other acquisition of the Loans. Enserch Preferred will give prompt written
notice to ENSERCH and Capital of any default in the payment of any Senior
Indebtedness and of any dissolution, winding up or reorganization of Enserch
Preferred.
In the event of (i) any insolvency, bankruptcy, receivership,
liquidation, reorganization, composition or other similar proceeding relating to
Enserch Preferred or its property or for the benefit of its creditors, (ii) any
proceeding for the liquidation, dissolution or other winding up of Enserch
Preferred, voluntary or involuntary, whether or not involving insolvency or
bankruptcy proceedings, (iii) any assignment by Enserch Preferred for the
benefit of creditors, or (iv) any other marshalling of the assets of Enserch
Preferred, all Senior Indebtedness (including, without limitation, interest
accruing after the commencement of any such proceeding, assignment or
marshalling of assets) shall first be paid in full before any payment or
distribution, whether in cash, securities or other property, shall be made on
the Loans. Any payment or distribution, whether in cash, securities or other
property, which would otherwise (but for these subordination provisions) be
payable or deliverable in respect of the Loans (including any such payment or
distribution which may be payable or deliverable by reason of the payment of any
other indebtedness of Enserch Preferred being subordinated to the payment of the
Loans) shall be paid or delivered directly to the holders of Senior Indebtedness
or to their representative, or to the trustee under the indenture or agreement
(if any) pursuant to which such Senior Indebtedness may have been issued, in
accordance with the priorities then existing among such holders until all Senior
Indebtedness shall have been paid in full. No present or future holder of any
Senior Indebtedness shall be prejudiced in the right to enforce subordination of
the indebtedness constituting the Loans by any act or failure to act on the part
of Enserch Preferred.
Senior Indebtedness shall not be deemed to have been paid in full
unless the holders thereof shall have received cash (or securities or other
property satisfactory to such holders) in full payment of such Senior
Indebtedness then outstanding. Upon the payment in full of all Senior
Indebtedness, Capital shall be subrogated to all the rights of any holders of
Senior Indebtedness to receive any further payments or distributions applicable
to the Senior Indebtedness until the Loans shall have been paid in full, and
such payments or distributions of cash, securities or other property received by
Capital, by reason of such subrogation, which otherwise would be paid or
distributed to the holders of Senior Indebtedness, shall, as between Enserch
Preferred and its creditors other than the holders of Senior Indebtedness, on
the one hand, and Capital, on the other, be deemed to be a payment by Enserch
Preferred on account of Senior Indebtedness, and not on account of the Loans.
6
<PAGE>
In the event that notwithstanding the provisions of this Section 4.01
Enserch Preferred shall make any payment on the Loans to Capital or Capital
receives any payment or distribution of assets of Enserch Preferred (other than
securities of Enserch Preferred or any other corporation provided for by a plan
of reorganization, the payment of which is subordinate, at least to the extent
provided in these subordination provisions with respect to the indebtedness
evidenced by the Loans, to the payment of all Senior Indebtedness at the time
outstanding and to any securities issued in respect thereof under any such plan
of reorganization), at any time before all Senior Indebtedness is paid in full,
then such payment shall be held by Capital, in trust for the benefit of, and
shall be paid forthwith over and delivered to, the holders of Senior
Indebtedness or their representative or the trustee under the indenture or other
agreement (if any) pursuant to which Senior Indebtedness may have been issued,
in accordance with the priorities then existing among such holders, for
application to the payment of all Senior Indebtedness remaining unpaid to the
extent necessary to pay all Senior Indebtedness in full in accordance with its
terms, after giving effect to any concurrent payment or distribution to or for
the holders of Senior Indebtedness.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 5.01. Representations and Warranties. Enserch Preferred
------------------------------
represents and warrants to Capital that:
(a) Good Standing. Enserch Preferred is a corporation duly
incorporated and validly existing under the laws of the State of Delaware,
with power and authority (corporate and other) to own its properties and
conduct its business as now being conducted.
(b) Power and Authority. Enserch Preferred has full power and
authority to enter into this Agreement and to incur and perform the
obligations provided for herein, all of which have been duly authorized by
all proper and necessary action.
(c) No Conflict. The execution and delivery of this Agreement and
the performance by Enserch Preferred of all its obligations hereunder will
not conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument to which Enserch
Preferred is a party or by which Enserch Preferred is bound or subject, nor
will this Agreement result in a violation of the provisions of Enserch
Preferred's Certificate of Incorporation, as amended, or by-laws.
7
<PAGE>
(d) Binding Agreement. This Agreement constitutes the valid and
legally binding obligation of Enserch Preferred enforceable in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
ARTICLE VI.
COVENANTS
---------
Section 6.01. Covenants. (a) Enserch Preferred agrees that it shall
---------
not declare or pay any dividend on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock, or make any
guarantee payments with respect to the foregoing, if at such time (a) there
shall have occurred any event that, with the giving of notice or the lapse of
time or both, would constitute an Event of Default hereunder or (b) ENSERCH
shall be in default with respect to its payment or other obligations under the
Guarantee Agreement or the Loan Guarantee Agreement, (ii) to maintain direct
ownership of the Common Securities held by it, (iii) not to voluntarily
dissolve, wind-up or terminate Capital, (iv) to remain the Class B Member of
Capital, (v) to use its reasonable efforts to cause Capital to remain a limited
life limited liability company and otherwise continue to be treated as a
partnership for United States federal income tax purposes.
(b) Enserch Preferred agrees that its obligations under this
Agreement will also be for the benefit of the holders from time to time of
Preferred Securities, and Enserch Preferred acknowledges and agrees that such
holders will be entitled to enforce this Agreement directly against Enserch
Preferred; provided, that no holder of Preferred Securities shall be entitled to
institute any proceeding, judicial or otherwise, under this Agreement unless
such proceeding has been brought by or with the consent of the holders of at
least 25% of the outstanding Preferred Securities; and provided, further, that
notwithstanding the immediately preceding proviso, the holder of any Preferred
Security shall have the right to institute suit for the enforcement of any
payment of principal or interest on the Loans.
(c) Enserch Preferred agrees not to merge with or into another
entity, or permit another entity to merge with or into it, and agrees not to
sell, transfer or lease all or substantially all of its assets to another entity
unless: (i) at such time no Event of Default hereunder has occurred and is
continuing, or would occur as a result of such merger, sale, transfer or lease,
and (ii) Enserch Preferred is the survivor of such merger or the entity to which
Enserch Preferred's assets are sold, transferred or leased is an entity
organized under the laws of the United States or any
8
<PAGE>
state thereof, assumes all of Enserch Preferred's obligations under this
Agreement and becomes the Class B Member.
(d) Enserch Preferred shall not enter into any agreement or incur any
indebtedness or obligation, except as contemplated by this Loan Agreement, the
Guarantee Agreement, the Loan Guarantee Agreement, the Reloan Agreement, the
Amended and Restated Limited Liability Company Agreement and the Underwriting
Agreement among Capital and the underwriters named therein.
ARTICLE VII.
EVENTS OF DEFAULT
-----------------
Section 7.01. Events of Default. If one or more of the following
-----------------
events (each an "Event of Default") shall occur and be continuing:
(a) default in the payment of interest on the Loans, including any
Additional Interest in respect of the Loans, when due for 10 days (whether
by virtue of the provisions described under Article IV hereof or
otherwise); provided that a valid extension of the interest payment period
by Enserch Preferred pursuant to Section 2.03 hereof shall not constitute a
default in the payment of interest for this purpose; or
(b) default in the payment of principal on the Loans when due; or
(c) the dissolution, winding up or termination of Capital; or
(d) the bankruptcy, insolvency or liquidation of ENSERCH or Enserch
Preferred;
(e) breach of any covenants contained herein continued for 30 days
after notice to Enserch Preferred from Enserch Capital or the holders of
25% or more of the outstanding Preferred Securities; or
(f) an event of default shall have occurred under the Reloan
Agreement;
then, in every such event, and at any time thereafter during the continuance of
such event, Capital will have the right to declare the principal of and the
interest on the Loans (including any Additional Interest and any interest
subject to an extension of the interest payment period) and any other amounts
payable on the Loans to be forthwith due and payable, whereupon the same shall
become and be forthwith due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby expressly waived, anything in
this Agreement to the contrary
9
<PAGE>
notwithstanding. Enserch Preferred expressly acknowledges that under the terms
of the Preferred Securities, the holders of the outstanding Preferred Securities
shall have the right to appoint a trustee, which trustee shall be authorized to
exercise Capital's creditor rights under this Agreement, and Enserch Preferred
agrees to cooperate with such trustee.
ARTICLE VIII.
MISCELLANEOUS
-------------
Section 8.01. Notices. All notices hereunder shall be deemed given
-------
by a party hereto if in writing and delivered personally or by telegram or
facsimile transmission or by registered or certified mail (return receipt
requested) to the other party at the following address for such party (or at
such other address as shall be specified by like notice):
If to Capital, to:
Enserch Capital L.L.C.
c/o ENSERCH Corporation
ENSERCH Center
300 South St. Paul Street
Dallas, Texas 75201
Fax No.: (214) 573-3351
Attention: Treasurer
If to Enserch Preferred, to:
Enserch Preferred Capital, Inc.
c/o ENSERCH Corporation
ENSERCH Center
300 South St Paul Street
Dallas, Texas 75201
Fax No.: (214) 573-3351
Attention: Treasurer
Any notice given by mail or telegram or facsimile transmission shall
be effective when received.
Section 8.02. Binding Effect. Enserch Preferred shall have the right
--------------
at all times to assign any of its rights or obligations under this Agreement to
a direct or indirect wholly-owned subsidiary of ENSERCH; provided that, in the
-------- ----
event of any such assignment, Enserch Preferred shall remain jointly and
severally liable for all such obligations. Capital may not assign any of its
rights hereunder without the prior written consent of ENSERCH. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of
Enserch Preferred and Capital and
10
<PAGE>
their respective successors and assigns. This Agreement may not otherwise be
assigned by Enserch Preferred or Capital.
Section 8.03. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 8.04. Counterparts. This Agreement may be executed in
------------
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
Section 8.05. Amendments. This Agreement may be amended by mutual
----------
consent of ENSERCH and of the parties hereto in the manner ENSERCH and the
parties shall agree; provided that, so long as any of the Preferred Securities
remain outstanding, no such amendment shall be made that adversely affects the
holders of Preferred Securities, and no termination of this Agreement shall
occur, and no Event of Default or compliance with any covenant under this
Agreement may be waived by Capital, without the prior approval of the holders of
at least 66-2/3% of the outstanding Preferred Securities, unless and until the
Loans and all accrued and unpaid interest thereon (including Additional
Interest, if any) shall have been paid in full.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the day
and year first above written.
ENSERCH PREFERRED CAPITAL, INC.
By:_____________________________
Name:
Title:
ENSERCH CAPITAL L.L.C.
By: ENSERCH Corporation
By:_____________________________
Name:
Title:
12
<PAGE>
EXHIBIT 4.22
Draft of 4/4/94
PREFERRED LOAN AGREEMENT
PREFERRED LOAN AGREEMENT, dated as of April __, 1994, between ENSERCH
Corporation, a Texas corporation ("ENSERCH"), and Enserch Preferred Capital,
Inc., a Delaware corporation ("Enserch Preferred").
WHEREAS, Enserch Capital L.L.C., a Delaware limited liability company
("Capital"), intends to issue its common limited liability company interests
(the "Common Securities") to ENSERCH and Enserch Preferred, and receive related
capital contributions, in an aggregate amount of $________ (the "Common Security
Payments") and to issue and sell ________ preferred limited liability company
interests of a series designated the ___% Cumulative Monthly Income Preferred
Securities, Series A (the "Preferred Securities"), with a liquidation preference
equal to $25 per Preferred Security (the "Liquidation Preference");
WHEREAS, ENSERCH is guaranteeing the payment of dividends on the Preferred
Securities if and when declared to the extent that there are sufficient funds
legally available therefor, the Redemption Price (as defined in the Guarantee
Agreement) and the Liquidation Distribution (as defined in the Guarantee
Agreement) on the Preferred Securities all to the extent set forth in the
Preferred Securities Payment and Guarantee Agreement, dated as of the date of
hereof (the "Guarantee Agreement");
WHEREAS, simultaneously with the execution of this Agreement, Enserch
Preferred is entering into a loan agreement (the "Company Loan Agreement") with
Capital pursuant to which Capital will make a loan to Enserch Preferred in an
aggregate principal amount equal to the sum of the Common Security Payments and
the aggregate Liquidation Preference of the Preferred Securities issued and sold
by Capital (the "Company Loan");
WHEREAS, ENSERCH is guaranteeing the payment of principal and interest on
the Company Loan to the extent set forth in the Loan Payment and Guarantee
Agreement, dated as of the date hereof (the "Loan Guarantee Agreement");
WHEREAS, ENSERCH has asked Enserch Preferred to make a loan of the proceeds
of the Company Loan to ENSERCH; and
WHEREAS, Enserch Preferred is willing to make the aforementioned loans to
ENSERCH, on the terms and conditions hereinafter stated.
NOW THEREFORE, ENSERCH and Enserch Preferred hereby agree as follows:
<PAGE>
ARTICLE I.
THE LOANS
---------
Section 1.01. The Loans. Subject to the terms and conditions herein,
---------
Enserch Preferred agrees to make loans to ENSERCH on the date hereof in an
aggregate principal amount of $____________ in next day funds. Such loans shall
be referred to herein as the "Loans".
Section 1.02. Term of the Loans; Mandatory Prepayment. (a) If
---------------------------------------
Capital redeems Preferred Securities in accordance with the terms thereof, the
Loans shall become due and payable in a principal amount equal to the aggregate
stated Liquidation Preference of the Preferred Securities so redeemed, together
with any and all accrued interest thereon. Any payment pursuant to this Section
1.02(a) shall be made in next day funds prior to 12:00 noon, New York time, on
the date fixed for such redemption or at such other time on such earlier date as
Enserch Preferred and ENSERCH shall agree.
(b) The entire principal amount of the Loans shall become due and
payable, together with any accrued and unpaid interest thereon, including
Additional Interest (as defined below), if any, on the earliest of (i) April 30,
2024 or (ii) the date upon which ENSERCH or Enserch Preferred is dissolved,
wound-up or liquidated or the date upon which Capital is dissolved, wound-up or
terminated.
Section 1.03. Optional Prepayment. ENSERCH shall have the
-------------------
right to prepay the Loans, without premium or penalty:
(i) in whole or in part (together with any accrued but unpaid
interest, including Additional Interest, if any, on the portion being
prepaid) at any time on or after April 30, 1999; and
(ii) in whole (together with all accrued and unpaid interest,
including Additional Interest thereon) at any time if Enserch Preferred is
or would be required to pay any Additional Company Interest (as defined
herein) in respect of the Company Loan or in part (together with all
accrued and unpaid interest, including Additional Interest on the portion
being prepaid) at any time if Enserch Preferred is or would be required to
pay Additional Company Interest with respect to only a portion of the
Company Loan, provided that if a partial prepayment would, through the
corresponding partial repayment of the Company Loan and partial redemption
required under the terms of the Preferred Securities, result in a delisting
of the Preferred Securities, ENSERCH may only prepay the Loans in whole.
2
<PAGE>
ARTICLE II.
INTEREST
--------
Section 2.01. Interest on the Loans. The Loans shall bear interest
---------------------
(including Additional Interest, if any) at an annual rate equal to __% from the
date they are made until maturity. Such interest shall be payable on the last
day of each calendar month of each year, commencing April 30, 1994. Interest
shall be computed on the basis of twelve 30-day months and a 360-day year and,
for any period shorter than a full month, shall be computed on the basis of the
actual number of days elapsed in such period. In the event that any date on
which interest is payable on the Loans is not a Business Day, then payment of
the interest payable on such date will be made on the next succeeding day which
is a Business Day (and without any interest or other payment in respect of any
such delay), except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such date. A
"Business Day" shall mean any day other than a day on which banking institutions
in The City of New York are authorized or required by law to close.
Section 2.02. Additional Interest. If at any time Enserch Preferred
-------------------
shall be required to pay any Additional Interest (as defined in the Company Loan
Agreement, but herein referred to as the "Additional Company Interest") in
respect of the Company Loan pursuant to the terms thereof, then ENSERCH will pay
as interest ("Additional Interest") an amount equal to such Additional Company
Interest.
Section 2.03. Extension of Interest Payment Period. Notwithstanding
------------------------------------
the provisions of Section 2.01, ENSERCH, acting jointly with Enserch Preferred
under the Company Loan Agreement, shall have the right at any time during the
term of the Loans, so long as ENSERCH is not in default in the payment of
interest on the Loans, to extend the interest payment period to up to 60 months
to the same extent that Enserch Preferred extends such interest payment period
under the Company Loan Agreement, at the end of which period ENSERCH shall pay
all interest then accrued and unpaid (together with interest thereon at the rate
specified for the Loans to the extent permitted by applicable law); and
provided, that, during any such extended interest payment period, neither
ENSERCH, nor any majority owned subsidiary of ENSERCH, shall declare or pay any
dividend on, or redeem, purchase, acquire or make a liquidation payment with
respect to, any of its capital stock or make any guarantee payments with respect
to the foregoing (other than (i) payments under the Guarantee Agreement or the
Loan Guarantee Agreement, or (ii) dividends or guarantee payments to ENSERCH or
a wholly owned subsidiary). Prior to the termination of any such extended
interest payment period, ENSERCH, acting jointly with Enserch Preferred, may
further extend the interest payment period,
3
<PAGE>
provided that such extended interest payment period together with all such
further extensions thereof may not exceed 60 months. ENSERCH shall give Enserch
Preferred and Capital notice of its selection of such extended interest payment
period one Business Day prior to the earlier of (i) the date Capital declares
the related dividend or (ii) the date Capital is required to give notice of the
record or payment date of such related dividend to the New York Stock Exchange
or other applicable self-regulatory organization or to holders of the Preferred
Securities, but in any event not less than two Business Days prior to such
record date. ENSERCH shall cause Capital to give such notice of ENSERCH's
selection of such extended interest payment period to the holders of the
Preferred Securities.
ARTICLE III.
PAYMENTS
--------
Section 3.01. Method and Date of Payment. Each payment by ENSERCH of
--------------------------
principal and interest (including Additional Interest, if any) on the Loans
shall be made to Enserch Preferred in lawful money of the United States, in next
day funds for principal payments and in same day funds for interest payments, at
such place and to such account as may be designated by Enserch Preferred.
Section 3.02. Set-off. Notwithstanding anything to the contrary
-------
herein, ENSERCH shall have the right to set-off any payment it is otherwise
required to make hereunder with and to the extent ENSERCH has theretofore made,
or is concurrently on the date of such payment making, a payment under the
Guarantee Agreement or the Loan Guarantee Agreement.
ARTICLE IV.
SUBORDINATION
-------------
Section 4.01. Subordination. ENSERCH and Enserch Preferred covenant
-------------
and agree, Capital agrees and the holders of the Preferred Securities (and any
trustee appointed by such holders) by their acceptance of such Preferred
Securities likewise agree, that the Loans are subordinate and junior in right of
payment to all Senior Indebtedness as provided herein. The term "Senior
Indebtedness" shall mean the principal, premium, if any, and interest on (i) all
indebtedness of ENSERCH, whether outstanding on the date hereof or hereafter
created, incurred or assumed, which is for money borrowed, or evidenced by a
note or similar instrument given in connection with the acquisition of any
business, properties or assets, including securities, (ii) any indebtedness of
others of the kinds described in the preceding clause (i) for the payment of
which ENSERCH is responsible or liable (directly or
4
<PAGE>
indirectly, contingently or non-contingently) as guarantor or otherwise, (iii)
any indebtedness secured by a lien upon property owned by ENSERCH and upon which
indebtedness ENSERCH customarily pays interest, even though ENSERCH has not
assumed or become liable for the payment of such indebtedness and (iv)
amendments, renewals, extensions and refundings of any such indebtedness, unless
in any instrument or instruments evidencing or securing such indebtedness or
pursuant to which the same is outstanding, or in any such amendment, renewal,
extension or refunding, it is expressly provided that such indebtedness is not
superior in right of payment to the Loans. Senior Indebtedness shall continue
to be Senior Indebtedness and entitled to the benefits of these subordination
provisions irrespective of (i) any amendment, modification or waiver of any term
of the Senior Indebtedness extension or renewal of the Senior Indebtedness, (ii)
any exchange or release of, or non-perfection of any lien on or security
interest in, any collateral, or any release from, amendment or waiver of or
consent to departure from any guaranty, for all or any of the Senior
Indebtedness, (iii) any other circumstance which might otherwise constitute a
defense available to or discharge of Enserch Preferred to Capital or of Capital
to the holders of the Preferred Securities (or any trustee appointed by such
holders) in respect of the provisions of this Section 4.01, or (iv) any act or
failure to act on the part of ENSERCH or by any act or failure to act, in good
faith, by any holder of Senior Indebtedness, or by any noncompliance by ENSERCH
with the terms of this Agreement, regardless of any knowledge thereof which any
person may have or be otherwise charged with.
Upon the maturity of any Senior Indebtedness by lapse of time,
acceleration (unless waived) or otherwise (including all installments of
principal and interest), all Senior Indebtedness then due and owing shall first
be paid in full, or such payment duly provided for in cash (or in securities or
other property satisfactory to all of the holders of such Senior Indebtedness),
before any payment is made on account of the Loans.
In the event that (i) ENSERCH shall default in the payment of any
principal, or premium, if any, or interest on any Senior Indebtedness when the
same becomes due and payable, whether at maturity or at a date fixed for
prepayment or declaration or otherwise or (ii) an event of default occurs with
respect to any Senior Indebtedness, then unless and until such default in
payment or event of default shall have been cured or waived or shall have ceased
to exist, no direct or indirect payment (in cash, property, securities, by set-
off or otherwise) shall be made or agreed to be made on account of the Loans or
interest thereon or in respect of any repayment, redemption, retirement,
purchase or other acquisition of the Loans. ENSERCH will give prompt written
notice to Enserch Preferred and Capital of any default in the payment of any
Senior Indebtedness and of any dissolution, winding up or reorganization of
ENSERCH.
5
<PAGE>
In the event of (i) any insolvency, bankruptcy, receivership,
liquidation, reorganization, composition or other similar proceeding relating to
ENSERCH or its property or for the benefit of its creditors, (ii) any proceeding
for the liquidation, dissolution or other winding up of ENSERCH, voluntary or
involuntary, whether or not involving insolvency or bankruptcy proceedings,
(iii) any assignment by ENSERCH for the benefit of creditors, or (iv) any other
marshalling of the assets of ENSERCH, all Senior Indebtedness (including,
without limitation, interest accruing after the commencement of any such
proceeding, assignment or marshalling of assets) shall first be paid in full
before any payment or distribution, whether in cash, securities or other
property, shall be made on the Loans. Any payment or distribution, whether in
cash, securities or other property, which would otherwise (but for these
subordination provisions) be payable or deliverable in respect of the Loans
(including any such payment or distribution which may be payable or deliverable
by reason of the payment of any other indebtedness of ENSERCH being subordinated
to the payment of the Loans) shall be paid or delivered directly to the holders
of Senior Indebtedness or to their representative, or to the trustee under the
indenture or agreement (if any) pursuant to which such Senior Indebtedness may
have been issued, in accordance with the priorities then existing among such
holders until all Senior Indebtedness shall have been paid in full. No present
or future holder of any Senior Indebtedness shall be prejudiced in the right to
enforce subordination of the indebtedness constituting the Loans by any act or
failure to act on the part of ENSERCH.
Senior Indebtedness shall not be deemed to have been paid in full
unless the holders thereof shall have received cash (or securities or other
property satisfactory to such holders) in full payment of such Senior
Indebtedness then outstanding. Upon the payment in full of all Senior
Indebtedness, Enserch Preferred shall be subrogated to all the rights of any
holders of Senior Indebtedness to receive any further payments or distributions
applicable to the Senior Indebtedness until the Loans shall have been paid in
full, and such payments or distributions of cash, securities or other property
received by Enserch Preferred, by reason of such subrogation, which otherwise
would be paid or distributed to the holders of Senior Indebtedness, shall, as
between ENSERCH and its creditors other than the holders of Senior Indebtedness,
on the one hand, and Enserch Preferred, on the other, be deemed to be a payment
by ENSERCH on account of Senior Indebtedness, and not on account of the Loans.
In the event that notwithstanding the provisions of this Section 4.01
ENSERCH shall make any payment on the Loans to Enserch Preferred or Enserch
Preferred receives any payment or distribution of assets of ENSERCH (other than
securities of ENSERCH or any other corporation provided for by a plan of
reorganization, the payment of which is subordinate, at least to the extent
provided in these
6
<PAGE>
subordination provisions with respect to the indebtedness evidenced by the
Loans, to the payment of all Senior Indebtedness at the time outstanding and to
any securities issued in respect thereof under any such plan of reorganization),
at any time before all Senior Indebtedness is paid in full, then such payment
shall be held by Enserch Preferred, in trust for the benefit of, and shall be
paid forthwith over and delivered to, the holders of Senior Indebtedness or
their representative or the trustee under the indenture or other agreement (if
any) pursuant to which Senior Indebtedness may have been issued, in accordance
with the priorities then existing among such holders, for application to the
payment of all Senior Indebtedness remaining unpaid to the extent necessary to
pay all Senior Indebtedness in full in accordance with its terms, after giving
effect to any concurrent payment or distribution to or for the holders of Senior
Indebtedness.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 5.01. Representations and Warranties. ENSERCH
------------------------------
represents and warrants to Enserch Preferred that:
(a) Good Standing. ENSERCH is a corporation duly incorporated and
validly existing under the laws of the State of Texas, with power and
authority (corporate and other) to own its properties and conduct its
business as now being conducted.
(b) Power and Authority. ENSERCH has full power and authority to
enter into this Agreement and to incur and perform the obligations provided
for herein, all of which have been duly authorized by all proper and
necessary action.
(c) No Conflict. The execution and delivery of this Agreement and
the performance by ENSERCH of all its obligations hereunder will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument to which ENSERCH
is a party or by which ENSERCH is bound or subject, nor will this Agreement
result in a violation of the provisions of ENSERCH's Restated Articles of
Incorporation, as amended, or by-laws.
(d) Binding Agreement. This Agreement constitutes the valid and
legally binding obligation of ENSERCH enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
7
<PAGE>
ARTICLE VI.
COVENANTS
---------
Section 6.01. Covenants. (a) ENSERCH agrees (i) that neither it,
---------
nor any of its majority owned subsidiaries, shall declare or pay any dividend
on, or redeem, purchase, acquire or make a liquidation payment with respect to,
any of its capital stock, or make any guarantee payments with respect to the
foregoing (other than (i) payments under the Guarantee Agreement or the Loan
Guarantee Agreement, or (ii) dividends or guarantee payments to ENSERCH or a
wholly owned subsidiary) if at such time (a) there shall have occurred any event
that, with the giving of notice or the lapse of time or both, would constitute
an Event of Default hereunder or (b) ENSERCH shall be in default with respect to
its payment or other obligations under the Guarantee Agreement or the Loan
Guarantee Agreement, (ii) to maintain direct or indirect 100% ownership of the
Common Securities, (iii) not to voluntarily dissolve, wind-up or terminate
Capital, (iv) to remain the Class A Member of Capital and to timely perform all
of its duties as Class A Member of Capital (including the duty to declare and
pay dividends on the Preferred Securities) in all material respects; provided
--------
that any permitted successor of ENSERCH under this Agreement may succeed to
ENSERCH's duties as Class A Member, and (v) to use its reasonable efforts to
cause Capital to remain a limited life limited liability company and otherwise
continue to be treated as a partnership for United States federal income tax
purposes.
(b) ENSERCH agrees that its obligations under this Agreement will
also be for the benefit of Capital and the holders from time to time of
Preferred Securities, and ENSERCH acknowledges and agrees that Capital or such
holders will be entitled to enforce this Agreement directly against ENSERCH;
provided, that no holder of Preferred Securities shall be entitled to institute
any proceeding, judicial or otherwise, under this Agreement unless such
proceeding has been brought by or with the consent of the holders of at least
25% of the outstanding Preferred Securities; and provided, further, that
notwithstanding the immediately preceding proviso, the holder of any Preferred
Security shall have the right to institute suit for the enforcement of any
payment of principal or interest on the Loans.
(c) ENSERCH agrees not to merge with or into another entity, or
permit another entity to merge with or into it, and agrees not to sell, transfer
or lease all or substantially all of its assets to another entity unless: (i) at
such time no Event of Default hereunder has occurred and is continuing, or would
occur as a result of such merger, sale, transfer or lease, and (ii) ENSERCH is
the survivor of such merger or the entity to which ENSERCH's assets are sold,
transferred or leased is an entity organized under the laws of the United States
or any state thereof, assumes all of
8
<PAGE>
ENSERCH's obligations under this Agreement and becomes the Class A Member.
ARTICLE VII.
EVENTS OF DEFAULT
-----------------
Section 7.01. Events of Default. If one or more of the following
-----------------
events (each an "Event of Default") shall occur and be continuing:
(a) default in the payment of interest on the Loans, including any
Additional Interest in respect of the Loans, when due for 10 days (whether
by virtue of the provisions described under Article IV hereof or
otherwise); provided that a valid extension of the interest payment period
by ENSERCH pursuant to Section 2.03 hereof shall not constitute a default
in the payment of interest for this purpose; or
(b) default in the payment of principal on the Loans when due; or
(c) the dissolution, winding up or termination of Capital; or
(d) the bankruptcy, insolvency or liquidation of ENSERCH or Enserch
Preferred; or
(e) breach of any covenants contained herein continued for 30 days
after notice to ENSERCH from Enserch Preferred or the holders of 25% or
more of the outstanding Preferred Securities; or
(f) an event of default shall have occurred under the Company Loan
Agreement.
then, in every such event, and at any time thereafter during the continuance of
such event, Enserch Preferred will have the right to declare the principal of
and the interest on the Loans (including any Additional Interest and any
interest subject to an extension of the interest payment period) and any other
amounts payable on the Loans to be forthwith due and payable, whereupon the same
shall become and be forthwith due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived,
anything in this Agreement to the contrary notwithstanding. ENSERCH expressly
acknowledges that under the terms of the Preferred Securities, the holders of
the outstanding Preferred Securities shall have the right to appoint a trustee,
which trustee shall be authorized to exercise Enserch Preferred's creditor
rights under this Agreement, and ENSERCH agrees to cooperate with such trustee.
9
<PAGE>
ARTICLE VIII.
MISCELLANEOUS
-------------
Section 8.01. Notices. All notices hereunder shall be deemed given
-------
by a party hereto if in writing and delivered personally or by telegram or
facsimile transmission or by registered or certified mail (return receipt
requested) to the other party at the following address for such party (or at
such other address as shall be specified by like notice):
If to Enserch Preferred, to:
Enserch Preferred Capital, Inc.
c/o ENSERCH Corporation
ENSERCH Center
300 South St. Paul Street
Dallas, Texas 75201
Fax No.: (214) 573-3351
Attention: Treasurer
If to ENSERCH, to:
ENSERCH Corporation
ENSERCH Center
300 South St Paul Street
Dallas, Texas 75201
Fax No.: (214) 573-3351
Attention: Treasurer
Any notice given by mail or telegram or facsimile transmission shall
be effective when received.
Section 8.02. Binding Effect. ENSERCH shall have the right at all
--------------
times to assign any of its rights or obligations under this Agreement to a
direct or indirect wholly-owned subsidiary of ENSERCH; provided that, in the
-------- ----
event of any such assignment, ENSERCH shall remain jointly and severally liable
for all such obligations. Enserch Preferred may not assign any of its rights
hereunder without the prior written consent of ENSERCH. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of
ENSERCH and Enserch Preferred and their respective successors and assigns. This
Agreement may not otherwise be assigned by ENSERCH, Enserch Preferred or
Capital.
Section 8.03. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
10
<PAGE>
Section 8.04. Counterparts. This Agreement may be executed in
------------
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
Section 8.05. Amendments. This Agreement may be amended by mutual
----------
consent of Capital and of the parties hereto in the manner Capital and the
parties shall agree; provided that, so long as any of the Preferred Securities
remain outstanding, no such amendment shall be made that adversely affects the
holders of Preferred Securities, and no termination of this Agreement shall
occur, and no Event of Default or compliance with any covenant under this
Agreement may be waived by Enserch Preferred, without the prior approval of
Capital and the holders of at least 66-2/3% of the outstanding Preferred
Securities, unless and until the Loans and all accrued and unpaid interest
thereon (including Additional Interest, if any) shall have been paid in full.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the day
and year first above written.
ENSERCH CORPORATION
By:_____________________________
Name:
Title:
ENSERCH PREFERRED CAPITAL, INC.
By:_____________________________
Name:
Title:
12
<PAGE>
EXHIBIT 4.23
Draft of 4/4/94
PREFERRED SECURITIES PAYMENT AND GUARANTEE AGREEMENT
THIS PREFERRED SECURITIES PAYMENT AND GUARANTEE AGREEMENT ("Guarantee
Agreement"), dated as of April __, 1994, is executed and delivered by ENSERCH
Corporation, a Texas corporation (the "Guarantor"), for the benefit of the
Holders (as defined below) from time to time of the Preferred Securities (as
defined below) of Enserch Capital L.L.C., a Delaware limited liability company
with limited life (the "Issuer").
WHEREAS, the Issuer is issuing on the date hereof __________ preferred
limited liability company interests of a series designated the __% Cumulative
Monthly Income Preferred Securities, Series A (the "Preferred Securities"), and
the Guarantor desires to issue this Guarantee Agreement for the benefit of the
Holders, as provided herein;
WHEREAS, the Issuer pursuant to the Capital Loan Agreement (as defined
below) will loan the proceeds from the issuance and sale of the Preferred
Securities and its common limited liability company interests (the "Common
Securities") to Enserch Preferred Capital, Inc. ("Enserch Preferred") and
Enserch Preferred will reloan such proceeds to the Guarantor; and
WHEREAS, the Guarantor desires hereby irrevocably and unconditionally to
agree to the extent set forth herein to pay to the Holders the Guarantee
Payments (as defined below) and to make certain other payments on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the purchase by each Holder of the
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Guarantee Agreement for
the benefit of the Holders.
ARTICLE I.
----------
As used in this Guarantee Agreement, the terms set forth below shall,
unless the context otherwise requires, have the following meanings. Capitalized
terms used but not otherwise defined herein shall have the meanings assigned to
such terms in the Amended and Restated Limited Liability Company Agreement of
the Issuer dated as of April __, 1994 (the "Limited Liability Company
Agreement").
"Capital Loan Agreement" shall mean the agreement, dated the date hereof,
pursuant to which the Issuer will loan to Enserch
<PAGE>
Preferred the proceeds received by the Issuer from the issuance and sale of the
Preferred Securities and the Common Securities.
"Guarantee Payments" shall mean the following payments, without
duplication, to the extent not paid by the Issuer: (i) any accumulated and
unpaid dividends which have been theretofore declared on the Preferred
Securities out of moneys legally available therefor, (ii) the Redemption Price
payable with respect to any Preferred Securities called for redemption by the
Issuer out of funds legally available therefor, (iii) upon a liquidation of the
Issuer, the amount of the Liquidation Distribution and (iv) any Additional
Amounts (as defined below) payable by the Issuer in respect of the Preferred
Securities.
"Holder" shall mean any holder from time to time of any Preferred
Securities of the Issuer; provided, however, that in determining whether the
Holders of the requisite percentage of Preferred Securities have given any
request, notice, consent or waiver hereunder, "Holder" shall not include the
Guarantor or any entity owned more than 50% by the Guarantor, either directly or
indirectly.
"Liquidation Distribution" shall mean the aggregate of the liquidation
preference of $25 per Preferred Security and all accumulated and unpaid
dividends (whether or not declared) to the date of payment.
"Loan Guarantee Agreement" shall mean the Loan Payment and Guarantee
Agreement of the Guarantor dated the date hereof relating to the Loans.
"Loans" shall mean the loans from the Issuer to Enserch Preferred pursuant
to the Capital Loan Agreement.
"Paying Agent" shall mean ENSERCH Corporation, as registrar, transfer agent
and paying agent.
"Preferred Loan Agreement" shall mean the Preferred Loan Agreement dated
the date hereof between Enserch Preferred and the Guarantor.
"Redemption Price" shall mean $25 per Preferred Security plus accumulated
and unpaid dividends (whether or not declared) to the date fixed for redemption.
2
<PAGE>
ARTICLE II.
-----------
SECTION 2.01. (a) The Guarantor irrevocably and unconditionally agrees to
pay in full to the Holders the Guarantee Payments, as and when due (except to
the extent paid by the Issuer), regardless of any defense, right of set-off or
counterclaim which the Issuer may have or assert. The Guarantor's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Guarantor to the Holders or by causing the Issuer to pay such
amounts to the Holders.
(b) All Guarantee Payments shall be made without withholding or deduction
for or on account of any present or future taxes, duties, assessments or
governmental charges of whatever nature imposed or levied upon or as a result of
such payment by or on behalf of the United States, any state thereof or any
other jurisdiction through which or from which such payment is made, or any
authority therein or thereof having power to tax, unless the withholding or
deduction of such taxes, duties, assessments or governmental charges is required
by law. In that event, the Guarantor shall pay such additional amounts
("Additional Amounts") as may be necessary in order that the net amounts
received by the Holders after such withholding or deduction will equal the
amount which would have been receivable in respect of the Preferred Securities
in the absence of such withholding or deduction, except that no such additional
amounts will be payable to any Holder (or a third party on his behalf):
i) if such Holder is liable for such taxes, duties, assessments
or governmental charges in respect of the Preferred Securities by
reason of such Holder's having some connection with the United States,
any state thereof or any other jurisdiction through which or from
which such payment is made, other than being a Holder, or
ii) if the Issuer or the Guarantor has notified such Holder of
the obligation to withhold taxes and requested but not received from
such Holder a declaration of non-residence, a valid taxpayer
identification number, or other claim for exemption, and such
withholding or deduction would have not been required had such
declaration, taxpayer identification number or claim been received.
SECTION 2.02. The Guarantor hereby waives notice of acceptance of
this Guarantee Agreement and of any liability to which it applies or may apply,
presentment, demand for payment, protest, notice of nonpayment, notice of
dishonor, notice of redemption and all other notices and demands.
3
<PAGE>
SECTION 2.03. The obligations, covenants, agreements and duties of
the Guarantor under this Guarantee Agreement shall in no way be affected or
impaired by reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied
agreement, covenant, term or condition relating to the Preferred Securities
to be performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or any
portion of the dividends, Redemption Price, Liquidation Distribution or any
other sums payable under the terms of the Preferred Securities or the
extension of time for the performance of any other obligation under,
arising out of, or in connection with, the Preferred Securities;
(c) any failure, omission, delay or lack of diligence on the part of
the Holders to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Holders pursuant to the terms of the Preferred
Securities, or any action on the part of the Issuer granting indulgence or
extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of
any collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or
readjustment of debt, of or other similar proceedings affecting, the Issuer
or any of the assets of the Issuer;
(e) any invalidity of, or defect or deficiency in, any of the
Preferred Securities; or
(f) the settlement or compromise of any obligation guaranteed hereby
or hereby incurred.
There shall be no obligation of the Holders to give notice to, or obtain consent
of, the Guarantor with respect to the happening of any of the foregoing.
SECTION 2.04. This is a guarantee of payment and not of collection.
A Holder may enforce this Guarantee Agreement directly against the Guarantor,
and the Guarantor will waive any right or remedy to require that any action be
brought against the Issuer or any other person or entity before proceeding
against the Guarantor. Subject to Section 2.05, all waivers herein contained
shall be without prejudice to the Holders' right at the Holders' option to
proceed against the Issuer, whether by separate action or by joinder. The
Guarantor agrees that this Guarantee Agreement shall not be discharged except by
payment of the Guarantee Payments in
4
<PAGE>
full (to the extent not paid by the Issuer) and by complete performance of all
obligations of the Guarantor contained in this Guarantee Agreement.
SECTION 2.05. The Guarantor shall be subrogated to all (if any)
rights of the Holders against the Issuer in respect of any amounts paid to the
Holders by the Guarantor under this Guarantee Agreement and shall have the right
to waive payment of any amount of dividends in respect of which payment has been
made to the Holders by the Guarantor pursuant to Section 2.01; provided,
however, that the Guarantor shall not (except to the extent required by
mandatory provisions of law) exercise any rights which it may acquire by way of
subrogation or any indemnity, reimbursement or other agreement, in all cases as
a result of a payment under this Guarantee Agreement, if, at the time of any
such payment, any amounts are due and unpaid under this Guarantee Agreement or
the Loan Guarantee Agreement. If any amount shall be paid to the Guarantor in
violation of the preceding sentence, the Guarantor agrees to pay over such
amount to the Holders.
SECTION 2.06. The Guarantor acknowledges that its obligations
hereunder are independent of the obligations of the Issuer with respect to the
Preferred Securities and that the Guarantor shall be liable as principal and
sole debtor hereunder to make Guarantee Payments pursuant to the terms of this
Guarantee Agreement notwithstanding the occurrence of any event referred to in
subsections (a) through (f), inclusive, of Section 2.03 hereof.
ARTICLE III.
------------
SECTION 3.01. So long as any Preferred Securities remain outstanding,
neither the Guarantor nor any majority-owned subsidiary of the Guarantor shall
declare or pay any dividend on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock or make any
guarantee payments with respect to the foregoing (other than (i) payments under
this Guarantee Agreement or the Loan Guarantee Agreement, or (ii) dividends or
guarantee payments to the Guarantor or a wholly owned subsidiary of the
Guarantor) if at such time the Guarantor shall be in default with respect to its
payment or other obligations hereunder or there shall have occurred any event
that, with the giving of notice or the lapse of time or both, would constitute
an Event of Default under the Capital Loan Agreement. The Guarantor shall take
all actions necessary to ensure the compliance of its subsidiaries with this
Section 3.01.
SECTION 3.02. The Guarantor covenants, so long as any Preferred
Securities remain outstanding: (i) to maintain direct or indirect 100% ownership
of the Common Securities; (ii) not to voluntarily dissolve, wind-up or terminate
the Issuer; (iii) to remain the Class A Member (as defined in the Limited
Liability
5
<PAGE>
Company Agreement) of the Issuer and to timely perform all of its duties as
Class A Member of the Issuer (including the duty to declare and pay dividends on
the Preferred Securities) in all material respects, provided that any permitted
successor of the Guarantor under the Preferred Loan Agreement may succeed to the
Guarantor's duties as Class A Member; and (iv) to use its reasonable efforts to
cause the Issuer to remain a limited life limited liability company and
otherwise continue to be treated as a partnership for United States federal
income tax purposes.
SECTION 3.03. The Guarantor hereby covenants that (i) the corporate
formalities as to the creation, payment and performance of the respective
obligations of the Guarantor and Enserch Preferred with respect to this
Guarantee Agreement, the Capital Loan Agreement, the Preferred Loan Agreement,
the Loan Guarantee Agreement, the Limited Liability Company Agreement and the
Underwriting Agreement among the Issuer and the underwriters named therein
(herein collectively, the "Agreements") will be complied with in all material
respects, (ii) any registration statement, prospectus or other similar document
used by the Issuer for the offer and sale of its securities will clearly
delineate the separate existence of the Guarantor, Enserch Preferred and the
Issuer, (iii) the Guarantor will not, nor will it permit the Issuer to conceal
the separate existence of the other or of the Issuer, or dominate the affairs of
the other or of the Issuer or otherwise improperly control the other or the
Issuer, in any manner so as to defraud or deceive the creditors of the
Guarantor, Enserch Preferred or the Issuer, as the case may be, (iv) the
formalities of the corporate existence of the Guarantor, Enserch Preferred and
the Issuer will be maintained, and all charter, by-law and other similar
provisions will be complied with, in all material respects, (v) other than as
set forth herein and in the Agreements, no material restrictions will be placed
by the Guarantor upon the exercise by the directors and officers of Enserch
Preferred of their business judgment in managing the business and affairs of
Enserch Preferred, and (vi) to the extent that any officers or employees of
Enserch Preferred are paid salaries in their capacities as such, payment will be
made from the assets of Enserch Preferred and not by the Guarantor. The
Guarantor shall not permit Enserch Preferred to enter into any agreement or
incur any indebtedness or obligation, except as contemplated by the Agreements.
SECTION 3.04. This Guarantee Agreement will constitute an unsecured
obligation of the Guarantor and will rank (i) subordinate and junior in right of
payment to all liabilities of the Guarantor, (ii) pari passu with any guarantee
entered into by the Guarantor in respect of preferred securities of the Issuer
ranking pari passu with the Preferred Securities as to participation in the
profits or assets of the Issuer unless such guarantee provides that it is
subordinated to this Guarantee Agreement, and (iii) senior to any preferred or
preference stock
6
<PAGE>
now or hereafter issued by the Guarantor and any guarantee entered into by the
Guarantor in respect of any preferred or preference stock of any affiliate of
the Guarantor (other than any guarantee ranking pari passu with this Guarantee
Agreement pursuant to clause (ii) above).
ARTICLE IV.
-----------
This Guarantee Agreement shall terminate and be of no further force
and effect upon full payment of the Redemption Price of all Preferred Securities
or upon full payment of the amounts payable to the Holders upon liquidation of
the Issuer; provided, however, that this Guarantee Agreement shall continue to
be effective or shall be reinstated, as the case may be, if at any time any
Holder of Preferred Securities must restore payment of any sums paid under the
Preferred Securities or under this Guarantee Agreement for any reason
whatsoever.
ARTICLE V.
----------
SECTION 5.01. All guarantees and agreements contained in this
Guarantee Agreement shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders.
The Guarantor shall not assign its obligations hereunder without the prior
approval of the Holders of not less than 66-2/3% of all Preferred Securities
then outstanding.
SECTION 5.02. Except with respect to any changes which do not
adversely affect the rights of holders of Preferred Securities (in which case no
vote will be required), this Guarantee Agreement may only be amended by an
instrument in writing signed by the Guarantor with the prior approval of the
Holders of not less than 66-2/3% of all Preferred Securities then outstanding.
SECTION 5.03. Any notice, request or other communication required or
permitted to be given hereunder to the Guarantor shall be given in writing by
delivering the same against receipt therefor by facsimile transmission
(confirmed by mail) or telex, addressed to the Guarantor, as follows (and if so
given, shall be deemed given when mailed or upon receipt of an answer-back, if
sent by telex), to it:
ENSERCH Corporation
ENSERCH Center
300 South St. Paul Street
Dallas, Texas 75201
Facsimile No.: (214) 573-3351
Attention: Treasurer
7
<PAGE>
Any notice, request or other communication required or permitted to be
given hereunder to the Holders shall be given by the Guarantor in the same
manner as notices sent by the Issuer to the Holders.
SECTION 5.04. The masculine and neuter genders used herein shall
include the masculine, feminine and neuter genders.
SECTION 5.05. This Guarantee Agreement is solely for the benefit of
the Holders and is not separately transferable from the Preferred Securities.
SECTION 5.06. THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
8
<PAGE>
THIS GUARANTEE AGREEMENT is executed as of the day and year first
above written.
ENSERCH Corporation
By: ___________________________
Name:
Title:
9
<PAGE>
EXHIBIT 4.24
Draft of 4/4/94
LOAN PAYMENT AND GUARANTEE AGREEMENT
THIS LOAN PAYMENT AND GUARANTEE AGREEMENT ("Guarantee Agreement"), dated as
of April __, 1994, is executed and delivered by ENSERCH Corporation, a Texas
corporation (the "Guarantor"), for the benefit of Enserch Capital L.L.C., a
Delaware limited liability company with limited life ("Capital") and the Holders
(as defined below) from time to time of the Preferred Securities (as defined
below) of Capital.
WHEREAS, Capital is issuing on the date hereof __________ preferred limited
liability company interests of a series designated the __% Cumulative Monthly
Income Preferred Securities, Series A (the "Preferred Securities");
WHEREAS, Capital pursuant to the Capital Loan Agreement (as defined below)
will loan the proceeds from the issuance and sale of the Preferred Securities
and its common limited liability company interests (the "Common Securities") to
Enserch Preferred Capital, Inc. ("Enserch Preferred") and Enserch Preferred will
reloan the proceeds of such loan to the Guarantor, and the Guarantor desires to
issue this Guarantee Agreement for the benefit of Capital, as provided herein;
and
WHEREAS, the Guarantor desires hereby irrevocably and unconditionally to
agree to the extent set forth herein to pay to Capital the Guarantee Payments
(as defined below) on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the loan by Capital to Enserch
Preferred and the reloan of the proceeds thereof to the Guarantor, which the
Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and
delivers this Guarantee Agreement for the benefit of Capital.
ARTICLE I.
----------
As used in this Guarantee Agreement, the terms set forth below shall,
unless the context otherwise requires, have the following meanings. Capitalized
terms used but not otherwise defined herein shall have the meanings assigned to
such terms in the Amended and Restated Limited Liability Company Agreement of
Capital dated as of April __, 1994 (the "Limited Liability Company Agreement").
"Capital Loan Agreement" shall mean the agreement, dated the date hereof,
pursuant to which Capital will loan to Enserch
<PAGE>
Preferred the proceeds received by Capital from the issuance and sale of the
Preferred Securities and the Common Securities.
"Guarantee Payments" shall mean the following payments, without
duplication, to the extent not paid by Enserch Preferred: principal of and any
accrued and unpaid interest, including Additional Interest (as defined in the
Capital Loan Agreement) on the Loans.
"Holder" shall mean any holder from time to time of any Preferred
Securities of Capital; provided, however, that in determining whether the
Holders of the requisite percentage of Preferred Securities have given any
request, notice, consent or waiver hereunder, "Holder" shall not include the
Guarantor or any entity owned more than 50% by the Guarantor, either directly or
indirectly.
"Liquidation Distribution" shall mean the aggregate of the liquidation
preference of $25 per Preferred Security and all accumulated and unpaid
dividends (whether or not declared) to the date of payment.
"Loans" shall mean the loans from Capital to Enserch Preferred pursuant to
the Capital Loan Agreement.
"Preferred Loan Agreement" shall mean the agreement, dated the date hereof,
pursuant to which Enserch Preferred will loan to the Guarantor the proceeds of
the Loans.
"Preferred Securities Guarantee Agreement" shall mean the Preferred
Securities Payment and Guarantee Agreement of the Guarantor dated the date
hereof for the benefit of the holders of the Series A Preferred Securities.
ARTICLE II.
-----------
SECTION 2.01. The Guarantor irrevocably and unconditionally agrees to
pay in full to Capital the Guarantee Payments, as and when due (except to the
extent paid by Enserch Preferred), regardless of any defense, right of set-off
or counterclaim which Enserch Preferred may have or assert. The Guarantor's
obligation to make a Guarantee Payment may be satisfied by direct payment of the
required amounts by the Guarantor to Capital or by causing Enserch Preferred to
pay such amounts to Capital.
SECTION 2.02. The Guarantor hereby waives notice of acceptance of this
Guarantee Agreement and of any liability to which it applies or may apply,
presentment, demand for payment, protest, notice of nonpayment, notice of
dishonor, notice of redemption and all other notices and demands.
2
<PAGE>
SECTION 2.03. The obligations, covenants, agreements and duties of the
Guarantor under this Guarantee Agreement shall in no way be affected or impaired
by reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by Enserch Preferred of any express or implied
agreement, covenant, term or condition relating to the Loans to be
performed or observed by Enserch Preferred;
(b) the extension of time for the payment by Enserch Preferred of all
or any portion of the interest, principal, or any other sums payable under
the terms of the Capital Loan Agreement or the extension of time for the
performance of any other obligation under, arising out of, or in connection
with, the Loans;
(c) any failure, omission, delay or lack of diligence on the part of
Capital to enforce, assert or exercise any right, privilege, power or
remedy conferred on Capital pursuant to the terms of the Capital Loan
Agreement, or any action on the part of Capital granting indulgence or
extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of
any collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or
readjustment of debt, of or other similar proceedings affecting, Enserch
Preferred or any of the assets of Enserch Preferred;
(e) any invalidity of, or defect or deficiency in, Loans; or
(f) the settlement or compromise of any obligation guaranteed hereby
or hereby incurred.
There shall be no obligation of Capital to give notice to, or obtain consent of,
the Guarantor with respect to the happening of any of the foregoing.
SECTION 2.04. This is a guarantee of payment and not of collection.
Capital may enforce this Guarantee Agreement directly against the Guarantor, and
the Guarantor will waive any right or remedy to require that any action be
brought against Enserch Preferred or any other person or entity before
proceeding against the Guarantor. Subject to Section 2.05, all waivers herein
contained shall be without prejudice to Capital's right at Capital's option to
proceed against Enserch Preferred, whether by separate action or by joinder.
The Guarantor agrees that this Guarantee Agreement shall not be discharged
except by payment of the Guarantee Payments in full (to the extent not paid by
Enserch
3
<PAGE>
Preferred) and by complete performance of all obligations of the Guarantor
contained in this Guarantee Agreement.
SECTION 2.05. The Guarantor shall be subrogated to all (if any)
rights of Capital against Enserch Preferred in respect of any amounts paid to
Capital by the Guarantor under this Guarantee Agreement and shall have the right
to waive payment of any amount of interest in respect of which payment has been
made to Capital by the Guarantor pursuant to Section 2.01; provided, however,
that the Guarantor shall not (except to the extent required by mandatory
provisions of law) exercise any rights which it may acquire by way of
subrogation or any indemnity, reimbursement or other agreement, in all cases as
a result of a payment under this Guarantee Agreement, if, at the time of any
such payment, any amounts are due and unpaid under this Guarantee Agreement or
the Preferred Securities Guarantee Agreement. If any amount shall be paid to
the Guarantor in violation of the preceding sentence, the Guarantor agrees to
pay over such amount to Capital.
SECTION 2.06. The Guarantor acknowledges that its obligations
hereunder are independent of the obligations of Enserch Preferred with respect
to the Loans and that the Guarantor shall be liable as principal and sole debtor
hereunder to make Guarantee Payments pursuant to the terms of this Guarantee
Agreement notwithstanding the occurrence of any event referred to in subsections
(a) through (f), inclusive, of Section 2.03 hereof.
ARTICLE III.
------------
SECTION 3.01. So long as any Preferred Securities remain outstanding,
neither the Guarantor nor any majority-owned subsidiary of the Guarantor shall
declare or pay any dividend on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock or make any
guarantee payments with respect to the foregoing (other than (i) payments under
this Guarantee Agreement or the Preferred Securities Guarantee Agreement, or
(ii) dividends or guarantee payments to the Guarantor or a wholly owned
subsidiary of the Guarantor) if at such time the Guarantor shall be in default
with respect to its payment or other obligations hereunder or there shall have
occurred any event that, with the giving of notice or the lapse of time or both,
would constitute an Event of Default under the Capital Loan Agreement. The
Guarantor shall take all actions necessary to ensure the compliance of its
subsidiaries with this Section 3.01.
SECTION 3.02. (a) The Guarantor covenants, so long as any Preferred
Securities remain outstanding, (i) to maintain direct or indirect 100% ownership
of the Common Securities and 100% ownership of the outstanding shares of capital
stock of Enserch Preferred; (ii) not to voluntarily dissolve, wind-up or
terminate Capital; (iii) to remain the Class A Member (as defined in the
4
<PAGE>
Limited Liability Company Agreement) of Capital and to timely perform all of its
duties as Class A Member of Capital (including the duty to declare and pay
dividends on the Preferred Securities) in all material respects, provided that
any permitted successor of the Guarantor under the Preferred Loan Agreement may
succeed to the Guarantor's duties as Class A Member; and (iv) to use its
reasonable efforts to cause Capital to remain a limited life limited liability
company and otherwise continue to be treated as a partnership for United States
federal income tax purposes.
(b) The Guarantor hereby covenants that (i) the corporate formalities
as to the creation, payment and performance of the respective obligations of the
Guarantor and Enserch Preferred with respect to this Guarantee Agreement, the
Capital Loan Agreement, the Preferred Loan Agreement, the Preferred Securities
Guarantee Agreement, the Limited Liability Company Agreement and the
Underwriting Agreement among Capital and the underwriters named therein (herein
collectively, the "Agreements") will be complied with in all material respects,
(ii) any registration statement, prospectus or other similar document used by
Capital for the offer and sale of its securities will clearly delineate the
separate existence of the Guarantor, Enserch Preferred and Capital, (iii) the
Guarantor will not, nor will it permit Capital to conceal the separate existence
of the other or of Capital, or dominate the affairs of the other or of Capital
or otherwise improperly control the other or Capital, in any manner so as to
defraud or deceive the creditors of the Guarantor, Enserch Preferred or Capital,
as the case may be, (iv) the formalities of the corporate existence of the
Guarantor, Enserch Preferred and Capital will be maintained, and all charter,
by-law and other similar provisions will be complied with, in all material
respects, (v) other than as set forth herein and in the Agreements, no material
restrictions will be placed by the Guarantor upon the exercise by the directors
and officers of Enserch Preferred of their business judgment in managing the
business and affairs of Enserch Preferred, and (vi) to the extent that any
officers or employees of Enserch Preferred are paid salaries in their capacities
as such, payment will be made from the assets of Enserch Preferred and not by
the Guarantor. The Guarantor shall not permit Enserch Preferred to enter into
any agreement or incur any indebtedness or obligation, except as contemplated by
the Agreements.
SECTION 3.03. This Guarantee Agreement will constitute an unsecured
obligation of the Guarantor and will rank (i) subordinate and junior in right of
payment to all Senior Indebtedness of the Guarantor. The term "Senior
Indebtedness" shall mean the principal, premium, if any, and interest on (i) all
indebtedness of the Guarantor, whether outstanding on the date hereof or
hereafter created, incurred or assumed, which is for money borrowed, or
evidenced by a note or similar instrument given
5
<PAGE>
in connection with the acquisition of any business, properties or assets,
including securities, (ii) any indebtedness of others of the kinds described in
the preceding clause (i) for the payment of which the Guarantor is responsible
or liable (directly or indirectly, contingently or non-contingently) as
guarantor or otherwise, (iii) any indebtedness secured by a lien upon property
owned by the Guarantor and upon which indebtedness the Guarantor customarily
pays interest, even though the Guarantor has not assumed or become liable for
the payment of such indebtedness and (iv) amendments, renewals, extensions and
refundings of any such indebtedness, unless in any instrument or instruments
evidencing or securing such indebtedness or pursuant to which the same is
outstanding, or in any such amendment, renewal, extension or refunding, it is
expressly provided that such indebtedness is not superior in right of payment to
this Guarantee Agreement. Senior Indebtedness shall continue to be Senior
Indebtedness and entitled to the benefits of these subordination provisions
irrespective of (i) any amendment, modification or waiver of any term of the
Senior Indebtedness extension or renewal of the Senior Indebtedness, (ii) any
exchange or release of, or non-perfection of any lien on or security interest
in, any collateral, or any release from, amendment or waiver of or consent to
departure from any guaranty, for all or any of the Senior Indebtedness, (iii)
any other circumstance which might otherwise constitute a defense available to
or discharge of Enserch Preferred to Capital in respect of the provisions of
this Section 3.03, or (iv) any act or failure to act on the part of the
Guarantor or by any act or failure to act, in good faith, by any holder of
Senior Indebtedness, or by any noncompliance by the Guarantor with the terms of
this Guarantee Agreement, regardless of any knowledge thereof which any person
may have or be otherwise charged with.
Upon the maturity of any Senior Indebtedness by lapse of time,
acceleration (unless waived) or otherwise (including all installments of
principal and interest), all Senior Indebtedness then due and owing shall first
be paid in full, or such payment duly provided for in cash (or in Securities or
other property satisfactory to all of the holders of such Senior Indebtedness),
before any payment is made on account of this Guarantee Agreement.
In the event that (i) the Guarantor shall default in the payment of
any principal, or premium, if any, or interest on any Senior Indebtedness when
the same becomes due and payable, whether at maturity or at a date fixed for
prepayment or declaration or otherwise or (ii) an event of default occurs with
respect to any Senior Indebtedness, then unless and until such default in
payment or event of default shall have been cured or waived or shall have ceased
to exist, no direct or indirect payment (in cash, property, securities, by set-
off or otherwise) shall be made or agreed to be made on account of this
Guarantee Agreement or in respect of any repayment, redemption, retirement,
purchase or other acquisition of this Guarantee. The Guarantor will give prompt
written notice to
6
<PAGE>
Capital of any default in the payment of any Senior Indebtedness and of any
dissolution, winding up or reorganization of the Guarantor.
In the event of (i) any insolvency, bankruptcy, receivership,
liquidation, reorganization, composition or other similar proceeding relating to
the Guarantor or its property or for the benefit of its creditors, (ii) any
proceeding for the liquidation, dissolution or other winding up of the
Guarantor, voluntary or involuntary, whether or not involving insolvency or
bankruptcy proceedings, (iii) any assignment by the Guarantor for the benefit of
creditors, or (iv) any other marshalling of the assets of the Guarantor, all
Senior Indebtedness (including, without limitation, interest accruing after the
commencement of any such proceeding, assignment or marshalling of assets) shall
first be paid in full before any payment or distribution, whether in cash,
securities or other property, shall be made on this Guarantee Agreement. Any
payment or distribution, whether in cash, securities or other property, which
would otherwise (but for these subordination provisions) be payable or
deliverable in respect of this Guarantee Agreement (including any such payment
or distribution which may be payable or deliverable by reason of the payment of
any other indebtedness of the Guarantor being subordinated to the payment of
this Guarantee Agreement) shall be paid or delivered directly to the holders of
Senior Indebtedness or to their representative, or to the trustee under the
indenture or agreement (if any) pursuant to which such Senior Indebtedness may
have been issued, in accordance with the priorities then existing among such
holders until all Senior Indebtedness shall have been paid in full. No present
or future holder of any Senior Indebtedness shall be prejudiced in the right to
enforce subordination of the indebtedness constituting this Guarantee by any act
or failure to act on the part of the Guarantor.
Senior Indebtedness shall not be deemed to have been paid in full
unless the holders thereof shall have received cash (or securities or other
property satisfactory to such holders) in full payment of such Senior
Indebtedness then outstanding. Upon the payment in full of all Senior
Indebtedness, Capital shall be subrogated to all the rights of any holders of
Senior Indebtedness to receive any further payments or distributions applicable
to the Senior Indebtedness until this Guarantee shall have been paid in full,
and such payments or distributions of cash, securities or other property
received by Capital, by reason of such subrogation, which otherwise would be
paid or distributed to the holders of Senior Indebtedness, shall, as between the
Guarantor and its creditors other than the holders of Senior Indebtedness, on
the one hand, and Capital, on the other, be deemed to be a payment by the
Guarantor on account of Senior Indebtedness, and not on account of this
Guarantee Agreement.
7
<PAGE>
In the event that notwithstanding the provisions of this Section 3.03
the Guarantor shall make any payment on this Guarantee to Capital or Capital
receives any payment or distribution of assets of the Guarantor (other than
securities of the Guarantor or any other corporation provided for by a plan of
reorganization, the payment of which is subordinate, at least to the extent
provided in these subordination provisions with respect to the indebtedness
evidenced by the Loans, to the payment of all Senior Indebtedness at the time
outstanding and to any securities issued in respect thereof under any such plan
of reorganization), at any time before all Senior Indebtedness is paid in full,
then such payment shall be held by Capital, in trust for the benefit of, and
shall be paid forthwith over and delivered to, the holders of Senior
Indebtedness or their representative or the trustee under the indenture or other
agreement (if any) pursuant to which Senior Indebtedness may have been issued,
in accordance with the priorities then existing among such holders, for
application to the payment of all Senior Indebtedness remaining unpaid to the
extent necessary to pay all Senior Indebtedness in full in accordance with its
terms, after giving effect to any concurrent payment or distribution to or for
the holders of Senior Indebtedness.
ARTICLE IV.
-----------
This Guarantee Agreement shall terminate and be of no further force
and effect upon full payment of the Guaranteed Amounts; provided, however, that
this Guarantee Agreement shall continue to be effective or shall be reinstated,
as the case may be, if at any time any Capital must restore payment of any sums
paid under the Loans or under this Guarantee Agreement for any reason
whatsoever.
ARTICLE V.
----------
SECTION 5.01. All guarantees and agreements contained in this
Guarantee Agreement shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of Capital and
the Holders of the Preferred Securities. The Guarantor shall not assign its
obligations hereunder without the prior approval of Capital and the Holders of
66-2/3% of all Preferred Securities then outstanding.
SECTION 5.02. Except with respect to any changes which do not
adversely affect the rights of Holders of Preferred Securities (in which case no
vote will be required), this Guarantee Agreement may only be amended by an
instrument in writing signed by the Guarantor with the prior approval of Capital
and the Holders of not less than 66-2/3% of all Preferred Securities then
outstanding.
8
<PAGE>
SECTION 5.03. Any notice, request or other communication required or
permitted to be given hereunder to the Guarantor shall be given in writing by
delivering the same against receipt therefor by facsimile transmission
(confirmed by mail) or telex, addressed to the Guarantor, as follows (and if so
given, shall be deemed given when mailed or upon receipt of an answer-back, if
sent by telex), to it:
ENSERCH Corporation
ENSERCH Center
300 South St. Paul Street
Dallas, Texas 75201
Facsimile No.: (214) 573-3351
Attention: Treasurer
Any notice, request or other communication required or permitted to be
given hereunder to Capital shall be given by the Guarantor in the same manner as
notices sent by Enserch Preferred to Capital.
SECTION 5.04. The masculine and neuter genders used herein shall
include the masculine, feminine and neuter genders.
SECTION 5.05. The Guarantor agrees that its obligations under this
Guarantee Agreement will also be for the benefit of the Holders from time to
time of Preferred Securities. The Guarantor acknowledges and agrees that such
Holders will be entitled to enforce this Guarantee Agreement directly against
the Guarantor, and the Guarantor will waive any right or remedy to require that
any action be brought against Enserch Preferred or any other person or entity
before proceeding against the Guarantor.
SECTION 5.06. THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
9
<PAGE>
THIS GUARANTEE AGREEMENT is executed as of the day and year first
above written.
ENSERCH Corporation
By: ___________________________
Name:
Title:
10
<PAGE>
EXHIBIT 4.25
Draft of 4/4/94
[FORM OF FACE OF SUBORDINATED DEBENTURE]
[If the Security is to be a Book-Entry Debt Security, insert -- This Security is
a Book-Entry Debt Security within the meaning of the Indenture hereinafter
referred to and is registered in the name of a Depository or a nominee of a
Depository. This Security is exchangeable for Securities registered in the name
of a person other than the Depository or its nominee only in the limited
circumstances described in the Indenture, and no transfer of this Security
(other than a transfer of this Security as a whole by the Depository to a
nominee of the Depository or by a nominee of the Depository to the Depository or
another nominee of the Depository) may be registered except in such limited
circumstances.
Unless this Certificate is presented by an authorized representative of The
Depository Trust Company (55 Water Street, New York, New York) to the issuer or
its agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or such other name as requested
by an authorized representative of The Depository Trust Company and any payment
hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof,
Cede & Co., has an interest herein.]
ENSERCH CORPORATION
___% Subordinated Debentures
No. ________ $ __________
CUSIP No. ________
ENSERCH Corporation, a corporation duly organized and existing under the
laws of the State of Texas (herein called the "Company", which term includes any
successor corporation under the Indenture hereinafter referred to), for value
received, hereby promises to pay to___________________________________________,
or registered assigns, the principal sum of ___________________________________
on _______________________________________________ and to pay interest thereon
from _________ or from the most recent Interest Payment Date to which interest
has been paid or duly provided for, on the last day of each calendar month of
each year (each an "Interest Payment Date") commencing _____________, at the
rate of ___% per annum, until the principal hereof is paid or made available for
payment and (to the extent that the payment of such interest shall be legally
enforceable) at the rate of ____% per annum on any overdue principal and on any
overdue installment of interest. The amount of interest payable on any Interest
Payment Date shall be computed on the basis of a 360-day year of twelve 30-day
months. In the event that any date on which interest is payable on this Security
is not a Business Day, then payment of the interest payable on such date will be
made on the next succeeding day which is a Business Day (and without any
interest or other payment in respect of any such delay), except that, if such
Business Day is in the next succeeding calendar year, such payment shall be made
on the immediately preceding Business Day, in each case with the same force and
effect as if made on such date. A "Business Day" shall mean any day other than a
day on which banking institutions in The City of New York are authorized or
required by law to close. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in such Indenture,
be paid to the Person in whose name this Security (or one or more Predecessor
Securities) is
<PAGE>
registered at the close of business on the Regular Record Date for such Interest
Payment Date, which shall be the Business Day next preceding such Interest
Payment Date. Any such interest not so punctually paid or duly provided for
will forthwith cease to be payable to the Holder on such Regular Record Date and
may either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities of this series
not less than 10 days prior to such Special Record Date, or be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities of this series may be listed, and
upon such notice as may be required by such exchange, all as more fully provided
in said Indenture.
Notwithstanding anything contained herein to the contrary, the Company
shall have the right at any time during the term of this Security, so long as
the Company is not in default in the payment of interest on this Security, to
extend the interest payment period on this Security to up to 60 months, at the
end of which period the Company shall pay all interest then accrued and unpaid
(compounded monthly to the extent permitted by applicable law); provided that,
during any such extended interest payment period, neither the Company, nor any
majority-owned subsidiary of the Company, shall declare or pay any dividends on,
or redeem, purchase, acquire or make a liquidation payment with respect to, any
of its capital stock or make any guarantee payments with respect to the
foregoing (other than dividends or guarantee payments to ENSERCH or a wholly
owned subsidiary of ENSERCH). Prior to the termination of any such extended
interest payment period, the Company may further extend the interest payment
period; provided that such extended interest payment period together with all
such further extensions thereof may not exceed 60 months. The Company shall
give the holders of this Security notice of its selection of such extended
interest payment period ten Business Days prior to the earlier of (i) the
Interest Payment Date or (ii) the date the Company is required to give notice of
the record or payment date of such related interest payment to the New York
Stock Exchange or other applicable self-regulatory organization or to holders of
this Security, but in any event not less than two Business Days prior to such
Regular Record Date.
The Company agrees that neither it nor any of its majority-owned
subsidiaries shall declare or pay any dividend on, or redeem, purchase, acquire
or make a liquidation payment with respect to, any of its capital stock, or make
any guarantee payments with respect to the foregoing (other than dividends or
guarantee payments to ENSERCH or a wholly owned subsidiary of ENSERCH) if at
such time there shall have occurred an event that, with the giving of notice or
the lapse of time or both, would constitute an Event of Default under the
Indenture.
Payment of the principal of and any such interest on this Security will be
made at the office or agency of the Company maintained for that purpose in
________, in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts,
provided, however, that at the option of the Company payment of interest may be
- -------- -------
made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated:
ENSERCH CORPORATION
By_____________________________
By_____________________________
[CORPORATE SEAL]
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
THE FIRST NATIONAL BANK OF
CHICAGO, as Trustee
By_________________________________
Authorized Officer
3
<PAGE>
[FORM OF REVERSE OF SUBORDINATED DEBENTURE]
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series under a Subordinated Indenture, dated as of _________________ (herein
called the "Indenture"), between the Company and The First National Bank of
Chicago, as Trustee (herein called the "Trustee", which term includes any
successor trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights, limitations of rights, duties and immunities thereunder of the Company,
the Trustee, the holders of Senior Indebtedness and the Holders of the
Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered. This Security is one of the series designated on
the face hereof, limited in aggregate principal amount to $________.
The indebtedness evidenced by this Security is to the extent provided
in the Indenture, subordinate and subject in right of payment to the prior
payment in full of all Senior Indebtedness, and this Security is issued subject
to the provisions of the Indenture with respect thereto. Each Holder of this
Security, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to acknowledge or effectuate the
subordination so provided and (c) appoints the Trustee his attorney-in-fact for
any and all such purposes. Each Holder hereof, by his acceptance hereof, hereby
waives all notice of the acceptance of the subordination provisions contained
herein and in the Indenture by each holder of Senior Indebtedness, whether now
outstanding or hereafter incurred, and waives reliance by each such holder upon
said provisions.
The Securities of this series are subject to redemption upon not less
than 30 days' notice by mail, at any time on or after April 30, 1999, as a whole
or in part, at the election of the Company, at 100% of the principal amount,
together with accrued interest to the Redemption Date, but interest installments
whose Stated Maturity is on or prior to such Redemption Date will be payable to
the Holders of such Securities, or one or more Predecessor Securities, of record
at the close of business on the relevant Record Dates referred to on the face
hereof, all as provided in the Indenture.
In the event of redemption of this Security in part only, a new
Security or Securities of this series for the unredeemed portion hereof will be
issued in the name of the Holder hereof upon the cancellation hereof.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture.
The Indenture contains provisions for defeasance at any time of (a)
the entire indebtedness of this Security and (b) certain restrictive covenants,
in each case upon compliance by the Company with certain conditions set forth
therein, which provisions apply to this Security.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of at least a majority in principal amount of the
Securities at the time Outstanding of each series to be affected. The Indenture
also contains provisions permitting the Holders
4
<PAGE>
of specified percentages in principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such series,
to waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and premium and interest,
if any, on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
[herein and] therein set forth, the transfer of this Security is registrable in
the Security Register, upon surrender of this Security for registration of
transfer at the office or agency of the Company in any place where the principal
of and premium and interest, if any, on this Security are payable, duly endorsed
by, or accompanied by a written instrument of transfer in form satisfactory to
the Company and the Security Registrar duly executed by, the Holder hereof or
his attorney duly authorized in writing, and thereupon one or more new
Securities of this series, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
[The Securities of this series are issuable only in registered form
without coupons in denominations of $25 and any integral multiple thereof.]
[This global Book-Entry Security is exchangeable for Securities in definitive
form only under certain limited circumstances set forth in the Indenture.
Securities of this series so issued are issuable only in registered form without
coupons in denominations of $25 and any integral multiple thereof.] As provided
in the Indenture and subject to certain limitations [herein and] therein set
forth, Securities of this series [so issued] are exchangeable for a like
aggregate principal amount of Securities of this series of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
--------------------
5
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face
of the within Security, shall be construed as though they were written out in
full according to applicable laws or regulations.
TEN COM - as tenants in common UNIF GIFT MIN ACT - ...Custodian.....
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors Act
survivorship and not as tenants ....................................
in common (State)
Additional abbreviations may also be used though not in the above list.
--------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
the within Security of ENSERCH CORPORATION and hereby does irrevocably
constitute and appoint
- --------------------------------------------------------------------------------
Attorney to transfer the said Security on the books of the within-named
Corporation, with full power of substitution in the premises.
Dated: ------------------------------------
Signature Guaranteed by:
6
<PAGE>
[LETTERHEAD OF SULLIVAN & CROMWELL APPEARS HERE]
March 30, 1994
ENSERCH Corporation,
300 South St. Paul Street,
Dallas, Texas 75201
Gentlemen:
We have acted as special United States tax counsel for ENSERCH
Corporation, a corporation organized under the laws of the State of Texas
("Enserch"), Enserch Preferred Capital, Inc., a corporation organized under the
law of the State of Delaware ("Enserch Preferred"), and Enserch Capital L.L.C.,
a limited life company organized under the laws of Delaware (the "Company"), in
connection with the issuance by the Company of 6,000,000 of the __% Cumulative
Monthly Income Preferred Securities, Series A (the "Preferred Securities") as
described in the Prospectus Supplement relating thereto (the "Prospectus
Supplement").
We hereby confirm our opinion as set forth under the caption "United
States Taxation" in the Prospectus Supplement. Our opinion relies in part on the
opinion of Richards, Layton
<PAGE>
ENSERCH Corporation -2-
& Finger, P.A. concerning the organization of the Company and assumes that the
Company's Certificate of Formation and Amended and Restated Limited Liability
Company Agreement are enforceable in accordance with their terms.
Very truly yours,
/s/ Sullivan & Cromwell
