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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1994
OR
(_) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission file number 1-3183
ENSERCH CORPORATION
Texas 75-0399066
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
ENSERCH Center
300 South St. Paul Street
Dallas, Texas 75201-5598
(Address of principal executive office) (Zip Code)
Registrant's Telephone Number, Including Area Code - (214) 651-8700
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of Each Exchange
Title of Each Class on which Registered
------------------- ---------------------
Common Stock ($4.45 par value) New York Stock Exchange
Chicago Stock Exchange
London Stock Exchange
Preferred Stock (no par value):
Depositary Preferred Shares, New York Stock Exchange
Series E (each representing
1/10 share of the Adjustable
Rate Cumulative Preferred Stock,
Series E)
Depositary Preferred Shares, New York Stock Exchange
Series F (each representing
1/40 share of the Adjustable
Rate Cumulative Preferred Stock,
Series F) (liquidation preference
$1,000 per share)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
Indicate by check mark whether Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding twelve months
(or for such shorter period that the Registrant was required to
file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes (X) No ( )
Aggregate market value of the voting stock held by
nonaffiliates of the Registrant as of March 10, 1995:
$934,309,376.
Shares of the Registrant's Common Stock outstanding as of
March 10, 1995: 67,038,643 shares.
Documents incorporated by reference and the Part of the Form
10-K into which the document is incorporated: Proxy Statement
filed on or about March 24, 1995 (Part III).
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (X)
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FORM 10-K
ANNUAL REPORT
For the Fiscal Year Ended December 31, 1994
TABLE OF CONTENTS
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PART I
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ITEM 1. Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Business Segments . . . . . . . . . . . . . . . . . . . . . . . .1
Natural Gas Transmission and Distribution . . . . . . . . . . . .1
Competition. . . . . . . . . . . . . . . . . . . . . . . . . .2
Source and Availability of Raw Materials . . . . . . . . . . .2
Regulation . . . . . . . . . . . . . . . . . . . . . . . . . .4
Natural Gas and Oil Exploration and Production. . . . . . . . . .4
Gulf of Mexico . . . . . . . . . . . . . . . . . . . . . . . .5
Onshore. . . . . . . . . . . . . . . . . . . . . . . . . . . .6
International. . . . . . . . . . . . . . . . . . . . . . . . .6
Competition. . . . . . . . . . . . . . . . . . . . . . . . . .7
Regulation . . . . . . . . . . . . . . . . . . . . . . . . . .7
Natural Gas Liquids Processing. . . . . . . . . . . . . . . . . .7
Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Clean Air Act . . . . . . . . . . . . . . . . . . . . . . . . . .9
Patents and Licenses. . . . . . . . . . . . . . . . . . . . . . .9
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Executive Officers of Registrant. . . . . . . . . . . . . . . . .9
ITEM 2. Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ITEM 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . 13
ITEM 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . . . . . . . . . . 13
PART II
ITEM 5. Market for Registrant's Common Equity and Related
Stockholder Matters. . . . . . . . . . . . . . . . . . . . . . 13
ITEM 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . 13
ITEM 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . . . . . 13
ITEM 8. Financial Statements and Supplementary Data . . . . . . . . . . 13
ITEM 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure . . . . . . . . . . . . 14
PART III
ITEM 10. Directors and Executive Officers of
the Registrant . . . . . . . . . . . . . . . . . . . . . . . . 14
ITEM 11. Executive Compensation. . . . . . . . . . . . . . . . . . . . . 14
ITEM 12. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . . . . . . 14
ITEM 13. Certain Relationships and Related Transactions. . . . . . . . . 14
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . . . 14
APPENDIX A Financial Information. . . . . . . . . . . . . . . . . . . .A-1
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PART I
ITEM 1. Business
ENSERCH Corporation ("ENSERCH" or the "Corporation") 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,
gas marketers, pipelines 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. [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 Company, a division of the
Corporation.)
- Power--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.)
In October 1994, the Corporation completed the divestiture of
its former engineering and construction segment by the sale of
Enserch Environmental Corporation, the subsidiary that had
conducted the Corporation's environmental business. See "Financial
Review" and Note 7 of the Notes to Consolidated Financial
Statements included in Appendix A to this report.
Business Segments
Financial information required hereunder is set forth under
"Summary of Business Segments" included in Appendix A to this
report.
Natural Gas Transmission and Distribution
The Corporation's transmission and distribution business
("T&D") is composed of the regulated business of Lone Star Gas
Company ("Lone Star") and the nonregulated gas marketing operations
of Enserch Gas Company ("EGC").
Lone Star owns and operates interconnected natural-gas
transmission lines, gathering lines, underground gas storage
reservoirs, compressor stations, distribution systems and related
properties. Through and by such facilities, it purchases,
distributes and sells natural gas to about 1.28 million
residential, commercial, industrial and electric-generation
customers in approximately 550 cities and towns, including the 11-
county Dallas/Fort Worth Metroplex. Lone Star also transports
natural gas as market opportunities are available. About seven
million people in Texas, representing over 40% of the total state
population, reside in Lone Star's service area.
EGC purchases and sells natural gas to gas marketing
companies, industrial and electric-generation customers and to
unaffiliated pipeline and local distribution companies.
The Corporation holds a 50% interest in a partnership named
Gulf Coast Natural Gas Company, which operates a transmission
system in the Texas Gulf Coast area that transports and sells
natural gas primarily to industrial and unaffiliated pipeline
customers.
Operating data for the T&D segment are set forth under
"Financial Review - Natural Gas Transmission and Distribution
Operating Data" included in Appendix A to this report.
For the year ended December 31, 1994, residential and
commercial customers accounted for 46% of T&D's total gas sales
revenues and 23% of natural-gas volumes sold, industrial and
electric-generation customers accounted for 19% and 22%,
respectively, and sales to gas marketers, pipelines and other
customers accounted for 35% and 55%, respectively. In 1994, 5% of
T&D's gas sales volumes was sold to Texas Utilities Fuel Company,
compared with 10% in 1993. See "Financial Review - Natural Gas
Transmission and Distribution" included in Appendix A to this
report for a discussion of Lone Star's gas sales margin.
Revenues from Lone Star's gas sales are affected by seasonal
variations. The majority of Lone Star's residential and commercial
gas customers use gas for heating. Revenues from these customers
are affected by the mildness or severity of the heating season.
Gas sales to electric-generation customers are affected by the
mildness or severity of both cooling and heating seasons.
Competition. Natural gas continues to face varying degrees of
competition from electricity, coal, natural gas liquids, oil and
other refined products throughout Lone Star's service territory.
Pipeline systems of other companies, both intrastate and
interstate, extend into or through the areas in which Lone Star's
markets are located, creating competition from other sellers of
natural gas. Customer sensitivity to energy prices and the
availability of competitively priced gas in the nonregulated
markets continue to provide intense competition in the electric-
generation and industrial user markets. Competitive pressure from
other pipelines and alternative fuels has caused a decline in sales
by Lone Star to industrial and electric-generation customers.
Sales by the Corporation's nonregulated companies, along with
transportation services provided by Lone Star, have served to
offset much of the effects of this decline.
Competition to serve electric-generation customers was
heightened in 1994, as it was the first full year of operation of
a new nuclear-powered electric generating unit, which brought the
number of operating units in Texas to four, versus one and one-half
functioning units in 1993. These units displace about 1 billion
cubic feet ("Bcf") of gas-fired generating capacity each day.
Texas gas markets experienced the full impact of these units in
1994. This and other factors resulted in a 27% decline in volumes
sold for electric generation from the prior year. However, most of
the decline was in the lower margin sales by EGC, while margins
from Lone Star's remaining long-term contracts that extend through
the end of the decade remain intact.
The purchase and sale of gas in nonregulated markets is
accomplished through the gas marketing activities of EGC, which
actively pursues sales to customers that are tied to pipelines
other than Lone Star's. Sales are accomplished by a trading group
that sells gas to other marketers, as well as to end-users. As
natural-gas markets continue to evolve following the implementation
of the 1992 Order 636 of the Federal Energy Regulatory Commission
("FERC"), additional opportunities are created in the broader,
more active trading markets and in serving off-system customers.
Services to customers on off-system pipelines include term
contracts with interruptible and firm deliveries, aggregation of
supply, nominations, scheduling of deliveries and storage. Some
sale opportunities allow for gas to move across Lone Star's system,
thereby generating incremental transportation revenue. Trading
activities with other marketing companies have become a
significantly larger segment of the off-system business. With the
advent of essentially instant price determination, margins are
attainable only by taking positions in the monthly markets and
selling as prices move from moment to moment. ENSERCH generally
takes positions in transactions that will be concluded within a few
months and generally no longer than twelve months. ENSERCH does not
enter into multi-year, fixed-term contracts without having a
corresponding supply or sale.
A portion of the sales made by EGC requires transportation on
Lone Star's pipeline system. Additionally, Lone Star provides
transportation services not related to EGC sales (nonaffiliated
transportation). The movement of gas from the West Texas and New
Mexico producing areas to the east provides a market for
transportation across Lone Star's system. Intense competition
exists within the transportation business, which has resulted in
downward pressure on the average rate received for transportation
services. Lone Star's transportation volumes were 389 Bcf in 1994,
a 5% increase from 1993; however, transportation revenues for 1994
of $52 million were about the same as 1993.
In the current energy market, Lone Star's contracts for new
gas reserves have been at prices below its current system-wide
weighted average cost of gas and are expected to continue to be so
in the foreseeable future.
Source and Availability of Raw Materials. Lone Star's gas
supply is based on contracts for the purchase of dedicated specific
reserves and contracts with other pipeline companies in the form of
service agreements that are not related to specific reserves or
fields. Management has calculated that the total contracted gas
supply as of January 1, 1995 was 1.02 trillion cubic feet ("Tcf"),
or approximately 6 times Lone Star's purchases during 1994. Of
this total, 349 Bcf are dedicated reserves, 47 Bcf are gas in
storage, 624 Bcf (including 284 Bcf under one agreement) are
committed to Lone Star under service agreements. The January 1,
1995 total gas supply estimate is 48 Bcf greater than the
January 1, 1994 estimate. The difference resulted from new supply
additions of 202 Bcf and a net upward revision of 9 Bcf with
respect to estimates for existing sources and service agreements,
less 163 Bcf purchased from existing gas supply. New reserve
additions consisted of 92 Bcf on new dedicated reserves under old
contracts and 110 Bcf of reserves added under new service and
peaking contracts.
In 1994, about 91% of Lone Star's gas requirement was
purchased from some 270 independent producers and nonaffiliated
pipeline companies, one of which supplied approximately 14.2% of
total requirements. The remaining 9% of Lone Star's requirement
was supplied by affiliates.
Lone Star estimates its peak-day availability from presently
contracted sources, including withdrawals from underground storage,
to be 1.7 Bcf. Short-term peaking contracts raise this level to
meet anticipated sales needs.
During 1994, the average daily demand of Lone Star's
residential and commercial customers was .3 Bcf. The estimated
peak-day demand of such customers (based upon an arithmetic-mean
outside temperature of 15 degrees F.) was 2.0 Bcf. Lone Star's
greatest daily demand in 1994 was on February 10, when estimated
actual deliveries to all customers reached 1.8 Bcf and there was an
arithmetic-mean temperature of 30 degrees F. The estimated
deliveries to residential and commercial customers on that day were
1.3 Bcf and another 1.3 Bcf were transported by Lone Star.
To meet peak-day gas demands during winter months, Lone Star
utilizes its seven active underground storage fields, all of which
are located in Texas. These fields have an extraneous gas capacity
of 62 Bcf. At December 31, 1994, total extraneous gas in storage
was approximately 50 Bcf. Gas withdrawn from storage on
February 10, 1994, the date of Lone Star's greatest daily demand in
1994, was .6 Bcf, or approximately 30% of the total 2.0 Bcf of Lone
Star's sales.
Lone Star has historically maintained a contractual right to
curtail, which is designed to achieve the highest load factor
possible in the use of its pipeline system while assuring
continuous and uninterrupted service to its residential and
commercial customers. Under the program, industrial customers
select their own rates and relative priorities of service.
Interruptible service contracts include the right to curtail gas
deliveries up to 100% according to a strict priority plan. The
last curtailment was in 1990 and lasted for only 30 hours.
Estimates of gas supplies and reserves are not necessarily
indicative of Lone Star's ability to meet current or anticipated
market demands or immediate delivery requirements because of
factors such as the physical limitations of gathering and
transmission systems, the duration and severity of cold weather,
the availability of gas reserves from its suppliers, the ability to
purchase additional supplies on a short-term basis and actions by
federal and state regulatory authorities. Lone Star's curtailment
rights provide flexibility to meet the human-needs requirements of
its customers on a firm basis. Priority allocations and price
limitations imposed by federal and state regulatory agencies, as
well as other factors beyond the control of Lone Star, may affect
its ability to meet the demands of its customers.
Lone Star pursues a program designed to place new supplies of
gas under contract to its pipeline system. In addition to being
heavily concentrated in the established gas-producing areas of
central, northern and eastern Texas, Lone Star's intrastate
pipeline system also extends into or near the major gas-producing
areas of the Texas Gulf Coast and the Delaware and Val Verde Basins
of West Texas. Nine basins located in Texas are estimated to
contain a substantial portion of the nation's remaining onshore
natural-gas reserves. Lone Star's pipeline system provides access
to all of these basins.
In the past, Lone Star purchased gas under long-term,
intrastate contracts in order to assure reliable supply to its
distribution customers. Many of these contracts provided for
minimum-purchase or payment ("take-or-pay") obligations to gas
sellers. Lone Star had been unable to take delivery of all minimum
gas volumes tendered by suppliers under these contracts. Based on
Lone Star's estimated gas demand, which assumes normal weather
conditions, requisite gas purchases are expected to substantially
satisfy purchase obligations for the year 1995 and thereafter. See
"Financial Review - Natural Gas Transmission and Distribution" and
Note 1 to Consolidated Financial Statements included in Appendix A
to this report.
Generally, EGC's gas supply is contracted for on a short-term
basis at prevailing market prices for similar packages of gas. The
availability of supply is dependent on many factors, including the
overall demand for natural gas and a nonregulated market price high
enough to warrant suppliers to sell.
Regulation. Lone Star Gas is wholly intrastate in character
and performs utility operations in the state of Texas subject to
regulation by the Railroad Commission of Texas ("RRC") and
municipalities in Texas. Lone Star owns no certificated interstate
transmission facilities subject to the jurisdiction of FERC under
the Natural Gas Act, has no sales for resale under the rate
jurisdiction of FERC and does not perform any transportation
service that is subject to FERC jurisdiction under the Natural Gas
Act.
In July 1988, Lone Star became an open-access transporter
under Section 311 of the Natural Gas Policy Act of 1978 ("NGPA") on
its intrastate transmission facilities. Such transportation is
performed pursuant to Section 311(a)(2) of the NGPA and is subject
to an exemption from the jurisdiction of the FERC under the Natural
Gas Act, pursuant to Section 601 of the NGPA.
The RRC regulates the intracompany charge for gas delivered to
Texas distribution systems for sale to residential and commercial
consumers. The RRC has original jurisdiction over rates charged to
residential and commercial customers for gas delivered outside
incorporated cities and towns (environs rates). Rates within
incorporated cities and towns in Texas are subject to the original
jurisdiction of the local city council with appellate review by the
RRC.
Lone Star employs a continuing program of rate review for all
classes of customers in its regulatory jurisdictions. Rate relief
amounting to $2.5 million in annualized revenue increases over and
above changes in gas cost was achieved in Texas in 1994 through
rate case filings, the operation of cost of service adjustment
clauses, and the operation of plant investment cost adjustments.
About 128 of the 550 cities and towns served by Lone Star had
approved weather normalization adjustment clauses as part of their
rate structure by year-end 1994, representing about 20% of Lone
Star's residential and commercial sales volumes. These clauses
allow rates to be adjusted monthly to reflect the impact of warmer-
or colder-than-normal weather , minimizing the impact of variations
in weather on Lone Star's earnings.
Lone Star's sales and transportation services to industrial
and electric-generation customers is provided under competitively
negotiated contracts. Regulatory authorities in Texas have
jurisdiction to revise, review and regulate rates to industrial and
electric-generation customers but, historically, have not exercised
this jurisdiction because of the existing competitive market.
Contracts with these customers permit automatic adjustment on a
monthly basis for the full amount of increases or decreases in the
cost of gas.
Natural Gas and Oil Exploration and Production
The Corporation's natural gas and oil exploration and
production operations include geological and geophysical studies;
acquisition of gas, oil and mineral leases; drilling of exploratory
wells; development and operation of producing properties;
acquisition of interests in developed or partially developed
properties; and the marketing of natural gas, crude oil and
condensate.
The Corporation's domestic operations are currently conducted
through Enserch Exploration, Inc. ("Enserch Exploration" or "EEX"),
a newly organized, publicly traded Texas corporation listed on the
New York Stock Exchange under the symbol "EEX". During 1994,
domestic gas and oil operations were primarily conducted through
Enserch Exploration Partners, Ltd. ("EP"), a limited partnership in
which a minority interest (less than 1%) was held by the public.
At year-end 1994, pursuant to a plan for the reorganization of EP
("Reorganization"), EEX, through a series of transactions, acquired
all of the operating properties of EP from EP's 99%-owned operating
partnership, EP Operating Limited Partnership ("EPO"), in exchange
for shares of EEX common stock. On December 30, 1994, the
Reorganization was consummated, EP was dissolved, and the EEX
common stock held by EP was distributed to EP's limited and general
partners in accordance with their partnership interests. In this
report, "Enserch Exploration" or "EEX" is used to refer to either
EEX or EP, or both, when a distinction is not required.
In connection with the Reorganization, Enserch Exploration
Holdings, Inc. ("EEH"), (named Enserch Exploration, Inc. and the
Managing General Partner of EP prior to the Reorganization),
received EP's interests in and assumed EP's obligations under
certain equipment lease arrangements relative to the Garden Banks
Block 388 project and the Mississippi Canyon Block 441 project,
with the equipment being simultaneously subleased to EEX. ENSERCH
affiliates also assumed approximately $395 million principal amount
of EP's indebtedness, plus accrued interest. Upon the liquidation
of EP and distribution of EEX common stock, public unitholders of
EP received 805,914 shares of EEX common stock (.77%) and ENSERCH
and its affiliates received 103,775,328 shares (99.23%) of EEX's
104,581,242 shares then outstanding.
Enserch Exploration is engaged in the exploration for and the
development, production and marketing of natural gas and crude oil
throughout Texas, offshore in the Gulf of Mexico, onshore in the
Gulf Coast and Rocky Mountain areas and in various other areas in
the United States. Subsidiaries of the Corporation currently have
interests in three foreign countries.
Production offices are maintained in Dallas, Houston, Athens,
Bridgeport, Longview and Midland, Texas. At December 31, 1994,
Enserch Exploration had 373 employees, including 34 geologists, 20
geophysicists and 18 land representatives who investigate
prospective areas, generate drilling prospects, review submitted
prospects and acquire leasehold acreage in prospective areas. In
addition, Enserch Exploration maintains a staff of 55 engineers and
45 technologists who plan and supervise the drilling and completion
of wells, evaluate prospective gas and oil reservoirs, plan the
development and management of fields and manage the daily
production of gas and oil.
Variable-priced natural-gas sales, which include monthly and
long-term sales contracts, covered about 75% of 1994 natural-gas
sales. Enserch Exploration's natural-gas sales volumes for the
year ended December 31, 1994 represented 11% of the Corporation's
total natural-gas sales volumes. Approximately 80% of Enserch
Exploration's natural-gas sales volumes (75% of gas revenues) for
the year ended December 31, 1994 was sold to affiliated companies.
Effective March 1, 1993, EGC began marketing gas for Enserch
Exploration for all gas not covered under existing contracts.
Affiliated purchasers do not have a preferential right to purchase
natural gas produced by Enserch Exploration other than under
existing contracts.
The statistics for this business segment, which are set forth
in the table entitled "Financial Review - Natural Gas and Oil
Exploration and Production Operating Data" in Appendix A to this
report, reflect the fluctuations in product prices and volumes and
certain unusual items that affected operating income.
Following is a summary of Enserch Exploration's exploration
and development activity during 1994:
Gulf of Mexico. Exploration in the Gulf of Mexico is an
important part of Enserch Exploration's exploratory program. A
total of 14 leases (over 37,000 acres) were acquired in the Gulf of
Mexico, primarily the result of the Central Gulf lease sale in
April 1994. These leases were purchased based on prospects
principally defined by three-dimensional ("3-D") seismic acquired
before the lease sale. Typically, successful wells in the Gulf
produce at high rates compared with onshore wells, which is
important in increasing cash flow and improving the ratio of
production to reserves. State-of-the-art technology, including
specialized 3-D seismic processing and innovative production
techniques, is being utilized to help achieve this objective.
Mississippi Canyon Block 441, the first development project in
the Gulf of Mexico that Enserch Exploration has operated, is
indicative of this approach. A 3-D seismic program, prior to field
development, confirmed that the majority of the reservoir lies
beneath a shipping fairway. A production program was developed
that involved drilling highly deviated wells under the shipping
fairway, subsea completing the deep-water wells and tying the wells
back to a conventional shallow-water production platform using
bundled flowlines. The high-angle wells required special gravel-
pack completion techniques. After two years of production, the
field has been essentially maintenance free. Production from the
field, which declined from initial levels due to expected water
encroachment, has stabilized and is expected to remain at current
levels of some 35 million cubic feet ("MMcf") of natural gas and
more than 150 barrels ("Bbls") of condensate per day for the
foreseeable future. The 3-D seismic on Mississippi Canyon
Block 441 is being reprocessed, using depth migration and other
state-of-the-art techniques to aid in the identification of deeper
exploratory targets, which, if successfully drilled, could add to
the field reserves. Enserch Exploration has a 37.5% working
interest in this project.
Throughout 1994, work progressed on the conversion of a
semisubmersible rig to a floating production facility for the
development of the Garden Banks Block 388 unit. The majority of
the modification work on the major structural components has been
completed. The 24-slot subsea template has been installed, and the
two 12-inch gas and oil gathering lines have been installed and
connected to the shallow-water production facility located 54 miles
away. Completion operations on the two pre-drilled wells commenced
in early 1995 and should enable these wells to be brought on-stream
when the floating facility is moored on location and the production
riser is installed. The initial well was completed in mid-March
and tested at rates which indicate that the well will likely flow
at an initial daily rate of 6,000 barrels. The second well should
be completed in mid-1995, followed by additional development
drilling, with one such well expected to be completed in late 1995.
Initial daily oil production rates from the second pre-drilled well
is anticipated to be between 2,500 and 6,000 barrels.
Under an agreement with Mobil Producing Texas and New Mexico
Inc. ("Mobil"), an exploratory well was drilled in the third
quarter of 1994 in Enserch Exploration's Garden Banks unit on Block
387, approximately four miles from the discovery on Block 388. The
well, drilled in 2,200 feet of water to a depth of 11,893 feet,
encountered a total of 150 feet of oil pay in the two reservoirs
and added significant incremental reserve potential to the
development project. A delineation well will be drilled on Block
386 or 387 in 1995. Subsea completions tied into the production
facility on Block 388 will be utilized to produce these wells.
Mobil has an option to acquire a 40% interest in the entire
Garden Banks unit consisting of six blocks and in the unit's
production system. To obtain that option, Mobil drilled the
exploratory well on Block 387 and has conducted a new 3-D seismic
survey over the unit to further assess the deeper horizons
correlative to nearby prolific reserves and, to extend the original
option, Mobil has paid additional consideration. Enserch
Exploration, which currently owns 100% of the project, will remain
the operator.
Enserch Exploration has a 100% working interest in a
successful exploratory sidetrack well on Green Canyon Block 254,
which encountered more than 400 feet of net gas and oil pay below
12,000 feet. The well was an appraisal to a discovery well drilled
in 1991 that encountered multiple sands with a combined thickness
of more than 300 feet of net pay. Additional drilling is planned
for the first half of 1995. Enserch Exploration had a 25% working
interest in prior work on this project before assuming operations
and a 100% working interest in the sidetrack well. Enserch
Exploration also has a 25% working interest in three adjacent
blocks. Efforts are underway to acquire additional interests in
Block 254 and the adjacent blocks to raise Enserch Exploration's
interest.
Onshore. In 1994, the majority of developmental drilling
activity was focused in the Freestone, Boonsville and Fashing
fields, all in Texas, where some reserves were added by
establishing production in zones that had not produced in the past.
In Freestone, 12 successful wells were drilled. Initial potential
tests have ranged from 1.4 to 2.6 MMcf of gas per day. In the
Boonsville area, 13 wells were drilled and completed in 1994.
These include nine gas wells that had initial potentials averaging
0.8 MMcf of gas per day and four oil wells initially delivering an
average of 76 barrels per day. In Fashing field, five wells were
drilled in 1994, four of which have been completed, with initial
deliveries averaging 1.7 MMcf of gas per day. Completion
operations are in progress on the fifth well.
A large portion of the development drilling and recompletion
activity during the past several years has been in six major gas
fields in East Texas. To offset the decline rate of hundreds of
older wells, reworks, recompletions and development drilling are
required, all of which are sensitive to product prices. In East
Texas, the goal is to accelerate production while preserving or
increasing reserves and net present value of the fields. Enserch
Exploration's East Texas proved reserves are currently estimated to
be some 784 Bcf.
In 1994, Enserch Exploration and the Los Alamos National
Laboratory joined in a first-time effort to use technology
developed for energy and national defense in the field of natural-
gas exploration. Joint goals are to employ more effective and
efficient methods of recovery of resources, to increase reserves
and to develop applied science that will be available to the entire
natural-gas industry. The Enserch Exploration/Los Alamos team is
testing the extent to which producing formations have been drained
by hydraulic fracturing in the Opelika gas field located in East
Texas. Los Alamos scientists are deploying instrumentation to
verify the extent of hydraulic fracturing in the producing Travis
Peak formation. It may then be determined where additional
fracturing can be used to release trapped gas, thereby maximizing
the recovery of domestic gas reserves. The data acquisition phase
from the Opelika field has been completed, with significant
microseismic activity detected in surrounding observation wells
when the test well was hydraulically fractured. The computation
phase of the project generated encouraging preliminary results
regarding fracture orientation. Currently, Los Alamos'
instrumentation is being modified to enhance the quality of
acquired data to define fracture extent.
International. The Corporation's international activities,
conducted through Enserch International Exploration, Inc. and its
subsidiaries ("EIEI"), included participation in one exploration
project during 1994. On the island of Java in Indonesia,
delineation work continued in the Mudi field that was discovered in
1993. The discovery well was drilled to a total depth of 9,797
feet and encountered a gross oil column of approximately 600 feet
and tested at a rate of 1,350 barrels of oil per day. Further
appraisal of the structure was conducted in mid-1994 with the
successful completion of a sidetrack well. This well encountered
improved reservoir conditions and tested in excess of 2,000 barrels
of oil per day. A third well, drilled to a depth of 8,793 feet,
tested at slightly over 5,000 barrels of oil per day. The fourth
well on the structure was spudded in early 1995 and will further
assess the prospect. EIEI has a 25% working interest in this
project, which is subject to the right of Pertimina, the national
oil company of Indonesia, to assume one-half of the working
interest after EIEI recovers its capital costs.
Competition. Competition in the natural gas and oil
exploration and production business is intense and present from a
large number of firms of varying sizes and financial resources,
some of which are much larger than Enserch Exploration.
Internationally, competition is from a number of both U.S. and non-
U.S. firms, generally major national and international oil
companies. Competition involves all aspects of marketing products
(including terms, prices, volumes and length of contracts), terms
relating to lease bonus and royalty arrangements, and the schedule
of future development activity.
Regulation. Environmental Protection Agency ("EPA") rules,
regulations and orders affect the operations of Enserch
Exploration. EPA regulations promulgated under the Superfund
Amendments and Reauthorization Act of 1986 require Enserch
Exploration to report on locations and estimates of quantities of
hazardous chemicals used in Enserch Exploration's operations. The
EPA has determined that most gas and oil exploration and production
wastes are exempt from the hazardous waste management requirements
of the Resource Conservation Recovery Act. However, the EPA
determined that certain exploration and production wastes resulting
from the maintenance of production equipment and transportation are
not exempt and must be managed and disposed of as hazardous waste.
Also, regulations issued by the EPA under the Clean Water Act
require a permit for "contaminated" stormwater discharges from
exploration and production facilities.
Many states have issued new regulations under authority of the
Clean Air Act Amendments of 1990, and such regulations are in the
process of being implemented. These regulations may require
certain gas and oil related installations to obtain federally
enforceable operating permits and may require the monitoring of
emissions; however, the impact of these regulations on Enserch
Exploration is expected to be minor.
Several states have adopted regulations on the handling,
transportation, storage and disposal of naturally occurring
radioactive materials that are found in gas and oil operations.
Although applicable to certain Enserch Exploration facilities, it
is not believed that such regulations will materially impact
current or future operations.
The Oil Pollution Act of 1990 ("OPA 90") requires responsible
parties to provide evidence of financial responsibility in the
amount of $150 million to clean up oil spills into the navigable
waters of the United States. The financial responsibility
requirements apply to offshore facilities and possibly to onshore
facilities in, on or under navigable waters. The Mineral
Management Service ("MMS") is the agency charged with the
administration and enforcement of OPA 90. The ultimate impact of
the financial responsibility requirements cannot be determined
until final regulations are issued by the MMS. Further
Congressional action on these requirements is also possible, and
the final MMS regulations could be challenged in court. The
$150 million requirement will not become effective until
regulations under OPA 90 are issued, probably in 1996. The
insurance industry has indicated that insurance will not be
available to evidence financial responsibility under OPA 90 as
currently written. However, EEX has qualified as a self-insurer
using the "identified assets" test under the current $35 million
financial responsibility requirement using EEX's interest in Tri-
Cities field as the identified assets. It is believed that EEX has
sufficient assets to qualify as a self-insurer for $150 million
under the identified assets test if the current self-insurance test
is included in the OPA 90 regulations. It is unclear whether the
new regulations will allow EEX to qualify as a self-insurer.
Alternatively, EEX believes it could meet the current OPA 90
financial responsibility requirements by the purchase of a surety
bond, although the cost of such bonds is generally much higher than
insurance. The availability of surety bonds generally could also
be affected by the requirements of the final MMS regulations.
In the aggregate, compliance with federal and state
environmental rules and regulations is not expected to have a
material adverse effect on Enserch Exploration's operations.
The RRC regulates the production of natural gas and oil by
Enserch Exploration in Texas. Similar regulations are in effect in
all states in which Enserch Exploration explores for and produces
natural gas and oil. These regulations generally require permits
for the drilling of gas and oil wells and regulate the spacing of
the wells, the prevention of waste, the rate of production and the
prevention and cleanup of pollution and other materials.
Natural Gas Liquids Processing
The Corporation's operations for the processing of natural gas
for the recovery of natural gas liquids ("NGL") are currently being
conducted by Enserch Processing Company ("EPC"), a division of the
Corporation. In 1994, these operations were conducted by Enserch
Processing Partners, Ltd., a limited partnership wholly owned by
the Corporation.
EPC uses cryogenic and mechanical refrigeration processes at
its NGL extraction facilities. During these processes, NGL are
condensed at extremely low temperatures and are separated from
natural gas. The mixed NGL stream, containing the heavier
hydrocarbons, ethane, propane, butane and natural gasoline, is
pumped via pipeline to Mt. Belvieu, Texas. The remaining natural
gas, primarily methane, leaves the NGL plants in gas transmission
lines for transportation to end-use customers. See "Properties."
About 60% of NGL product sales are under term contracts of
one-to-three years, with prices established monthly. NGL prices
are influenced by a number of factors, including supply, demand,
inventory levels, the product composition of each barrel and the
price of crude oil. Profitability is highly dependent on the
relationship of NGL product prices to the cost of natural gas lost
in the extraction process--"shrinkage."
To reduce the impact of shrinkage, EPC is increasingly
emphasizing the replacement of keep-whole contracts with net-
proceeds gas processing contracts. Keep-whole contracts are
profitable during periods of high NGL prices and low gas costs
because they provide the processor with ownership of the entire gas
stream. As prices fluctuate, these contracts become less
profitable because the processor must absorb all the shrinkage
costs. Under net-proceeds contracts, the producer provides
shrinkage volumes, while the processor contributes plant facilities
and operational costs. Revenues from NGL sales are apportioned
between the parties, and the processor is no longer impacted by
natural-gas feedstock costs.
The NGL processing area is highly competitive, including
competition regarding cost-sharing and interest-sharing
arrangements among producers, third-party owners and processors.
Power
Enserch Development Corporation ("EDC") develops business
opportunities primarily in the areas of independent power,
including cogeneration. EDC evaluates the risk and rewards of
these potential ventures; selects for development those ventures
with the highest potential of success; implements and controls
development of each venture; and brings together all the resources
required to develop, finance, construct, operate and manage the
selected ventures. EDC focuses on employing a strategy of
maximizing the use of ENSERCH's resources and minimizing the
Corporation's risk and investment. As of December 1994, EDC had
several business opportunities in various phases of development
throughout the United States and internationally.
The first project completed by EDC, operating since 1989, was
a gas-fired, 255-megawatt ("MW") cogeneration plant located near
Sweetwater, Texas. The electricity produced by the plant is
purchased by Texas Utilities Electric Company, and thermal energy
is sold to United Gypsum Company under a long-term agreement. EDC
developed and arranged financing for the project and one of its
subsidiaries is the managing general partner, Enserch Exploration
and EGC provide gas to the plant, and Lone Star transports the gas.
In 1992, the second plant developed by EDC was completed. The 62-
MW natural gas-fired cogeneration facility in Buffalo, New York,
supplies electricity to Niagara Mohawk Company and thermal energy
to Outokumpu American Brass, Inc. EDC's third project, a 160-MW
plant located in Bellingham, Washington, began commercial operation
in July 1993. The electricity produced by the plant is sold under
a long-term power sales agreement with Puget Sound Power & Light,
and thermal energy in the form of steam and hot water is sold to
Georgia-Pacific Corporation. Lone Star Energy Company ("LSEC")
operates and maintains all three of the plants and has fixed-cost
operating and maintenance agreements for providing labor and
certain routine consumables at each plant. Each of the agreements
contain escalation provisions. The agreements for the Buffalo and
Bellingham plants also contain bonus or penalty provisions based
upon plant availability.
In addition to operating and maintaining the above-mentioned
cogeneration plants, LSEC owns and/or operates four central thermal
energy plants providing heating and cooling to various
institutional customers in Texas. The aggregate existing plant
capacity is 40,500 tons of chilled water and 775 MMBtu's of steam
or hot water per hour. From the three plants owned by LSEC,
institutional customers receive thermal energy under long-term
agreements that contain established rates for units of steam and
chilled water and certain escalation provisions for increases in ad
valorem taxes, utility and labor costs. When the agreements
expire, the plants become the property of the customers.
Expiration dates are in 1996 and 1997. LSEC is actively pursuing
new contracts to operate the plants after the existing agreements
expire. The expiration of the existing thermal-energy plant
agreements is not expected to have a significant impact on the
Corporation.
LSEC operates in the compressed natural-gas ("CNG") market
through its CNG Division along with two natural-gas vehicle
affiliates, Fleet Star of Texas, L.C. ("Fleet Star") and TRANSTAR
Technologies, L.C. ("TRANSTAR"), each 50% owned by LSEC. Fleet
Star and FinaStar, a partnership between Fleet Star and Fina Oil
and Chemical, had ten public natural-gas fuel stations in
commercial operation at December 31, 1994. TRANSTAR provides
turnkey natural-gas vehicle conversion and other related services
and performed over 500 vehicular natural-gas conversions in 1994,
over a 100% increase in conversions from 1993.
The operations of the CNG Division and affiliates have been
aligned under the Corporation's natural gas transmission and
distribution business segment for financial reporting purposes.
Clean Air Act
The impact of the 1990 amendments to the Clean Air Act ("CAA")
on the Corporation, its divisions, subsidiaries and affiliates,
cannot be fully ascertained until all the regulations that
implement the provisions of the Act have been promulgated. It is
expected that a number of facilities or emission sources will
require a federally enforceable operating permit, and certain
emission sources may also be required to reduce emissions or to
install enhanced monitoring equipment under proposed rules and
regulations. Management currently believes, however, that if the
rules and regulations implementing the CAA are adopted as proposed,
the cost of obtaining permits, operating costs that will be
incurred under the operating permit, new permit fee structures,
capital expenditures associated with equipment modifications to
reduce emissions, or any expenditures on enhanced monitoring
equipment, in the aggregate, will not have a material adverse
effect on the Corporation's results of operations.
The CAA has created new marketing opportunities for the sale
of natural gas that may have a positive effect on the Corporation's
results of operations. Natural gas has long been recognized as a
clean and efficient fuel. Title II (Mobile Sources) requires lower
emissions from light-duty vehicles and urban buses that should make
alternative fuels such as natural gas more attractive and
competitive. In addition, Clean Fuel Fleet programs under the CAA
will require a certain percentage of fleet vehicles to utilize
clean-burning alternative fuels such as natural gas in the near
future. Further, because chloroflurocarbon compounds ("CFCs"),
commonly used as refrigerants in large air-conditioning systems
must be phased out of production by the year 2000, interest has
increased in the use of natural gas-powered absorption cooling
systems that do not use CFC's. In those areas that do not meet the
CAA's National Ambient Air Quality Standards for ozone, natural gas
may play an important role in reducing ozone formation and may be
substituted for other fuels. Since Title IV (Acid Rain) requires
major reductions in sulphur dioxide emissions, principally from
coal-fired electric power plants, natural gas is expected to be
considered as a cost-effective alternative for achieving reduced
sulphur dioxide emissions.
Patents and Licenses
The Corporation, Lone Star and subsidiary companies have no
material patents, licenses, franchises (excluding gas-distribution
franchises) or concessions.
Employees
At December 31, 1994, the Corporation, its divisions and
subsidiaries, had approximately 4,200 employees.
Executive Officers of Registrant
<TABLE>
<CAPTION>
Name Age Office and Business Experience
<S> <C> <C>
D. W. BIEGLER 48 Chairman and President, Chief Executive
Officer since May 1993 and a Director of
the Corporation since September 1991;
President and Chief Operating Officer of
the Corporation from September 1991 to
May 1993. He also served Lone Star as
President from July 1985 and as Chairman
from January 1989.
G. R. BRYAN 50 Chairman of EDC since February 1993. He
also served Lone Star as Senior Vice
President, Transmission, from February
1987 to February 1993.
G. J. JUNCO 45 President and Chief Operating Officer of
EEX since September 1994. He also served
as President and Chief Operating Officer
of EEH since January 1991 and as Senior
Vice President, Land and Marketing, from
April 1987 to December 1990.
W. T. SATTERWHITE 61 Senior Vice President and General
Counsel, Chief Legal Officer of the
Corporation since May 1972.
S. R. SINGER 64 Senior Vice President, Finance and
Corporate Development, Chief Financial
Officer of the Corporation since
September 1968.
R. B. WILLIAMS 62 Vice President, Administration, of the
Corporation since May 1989.
</TABLE>
There are no family relationships between any of the above
officers. All officers of the Corporation, its divisions and
subsidiaries, are elected annually by their respective Board of
Directors. Officers may be removed by their respective Board of
Directors whenever, in their judgment, the best interest of the
Corporation, its divisions or subsidiaries, as the case may be,
will be served thereby.
ITEM 2. PROPERTIES
At December 31, 1994, Lone Star and certain subsidiaries of
the Corporation operated approximately 32,000 miles of transmission
and gathering lines and distribution mains and operated 35
compressor stations having a total rated horsepower of
approximately 80,000. Lone Star owns seven active gas-storage
fields, all located on Lone Star's system in Texas. Lone Star also
owns three major gas-treatment plants to remove undesirable
components from the gas stream. See "Business - Natural Gas
Transmission and Distribution - Source and Availability of Raw
Materials" for information concerning gas supply of Lone Star.
As of January 1, 1995, Enserch Exploration had net proved
reserves of 1.04 Tcf of natural gas and 50.6 MMBbls of oil and
condensate, as estimated by DeGolyer and MacNaughton, independent
petroleum consultants. See Note 8 of the Notes to Consolidated
Financial Statements included in Appendix A to this report for
additional information on gas and oil reserves. All of these
reserves, except 4.1 MMBbls of oil and condensate, are in the
United States.
See "Financial Review - Liquidity and Financial Resources"
included in Appendix A to this report for a discussion of the
Corporation's 1995 capital spending budget by segment. In light of
the recent lack of heating weather and lower gas prices, the
Corporation is proceeding cautiously in implementing its total
capital spending program until the amount of future cash flows can
be better ascertained. Announced 1995 capital expenditures of
$262 million could be reduced by up to $25 million for EEX and
$10 million for Lone Star if cash flows fail to reach budgeted
levels.
During 1994, Enserch Exploration filed Form EIA-23 with the
Department of Energy reflecting reserve estimates for the year
1993. Such reserve estimates were not materially different from
the 1993 reserve estimates reported in Note 8 of the Notes to
Consolidated Financial Statements included in Appendix A to this
report.
As of December 31, 1994, Enserch Exploration and EIEI owned
leasehold interests or licenses in 17 states, offshore Texas and
Louisiana, and three other countries as follows:
<TABLE>
<CAPTION>
Gross Acres Net Acres (a)
------------------------------------------- ----------------------------------------
Developed Undeveloped Total Developed Undeveloped Total
------------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Alabama....... 75 13,409 13,484 37 2,916 2,953
Arkansas...... 19,607 19,607 11,338 11,338
Colorado...... 10,349 15,866 26,215 3,257 10,711 13,968
Idaho......... 14,730 14,730 14,730 14,730
Kansas........ 400 8,717 9,117 200 4,512 4,712
Louisiana..... 1,861 31,009 32,870 681 17,941 18,622
Mississippi... 4,355 31,339 35,694 2,323 12,203 14,526
Montana....... 6,415 44,903 51,318 3,201 22,372 25,573
Nebraska...... 160 480 640 160 480 640
Nevada........ 90,160 90,160 39,403 39,403
New Mexico.... 2,600 7,827 10,427 1,862 4,301 6,163
North Dakota.. 1,560 6,776 8,336 1,246 4,005 5,251
Ohio.......... 102 14,950 15,052
Oklahoma...... 32,366 18,280 50,646 17,730 9,396 27,126
Texas......... 262,674 590,110 852,784 197,984 356,546 554,530
Utah.......... 3,719 109,742 113,461 533 54,081 54,614
Wyoming....... 3,558 54,559 58,117 1,641 43,565 45,206
U.S. Offshore. 56,800 272,632 329,432 12,860 133,720 146,580
------- --------- --------- ------- --------- ---------
Total U.S.... 386,994 1,345,096 1,732,090 243,715 742,220 985,935
------- --------- --------- ------- --------- ---------
Malaysia..... 1,556,755 1,556,755 389,189 389,189
U.K.......... 20,010 20,010 1,248 1,248
Indonesia.... 912,802 912,802 228,200 228,200
------- --------- --------- ------- --------- ---------
Total Non-U.S. 2,489,567 2,489,567 618,637 618,637
------- --------- --------- ------- --------- ---------
Total Company. 386,994 3,834,663 4,221,657 243,715 1,360,857 1,604,572
======= ========= ========= ======= ========= =========
<FN>
(a) Represents the proportionate interest of Enserch Exploration in the gross acres under lease.
</FN>
</TABLE>
Enserch Exploration purchased about 191,000 net acres of
leasehold interests in 1994, 37,000 of which were in the Gulf of
Mexico. Enserch Exploration's Gulf of Mexico holdings totaled some
147,000 net acres, with an average working interest of 46% in 61
blocks and an overriding royalty interest in three other blocks.
The company operates 28 offshore blocks. Enserch Exploration also
canceled or allowed to expire 21 Gulf of Mexico leases during the
year, which had been condemned following drilling on or near them
or after geophysical and geological findings.
Enserch Exploration plans further drilling on undeveloped
acreage but at this time cannot specify the extent of the drilling
or predict how successful it will be in establishing the commercial
reserves sufficient to justify retention of the acreage. The
primary terms under which the undeveloped acreage in the United
States can be retained by the payment of delay rentals without the
establishment of gas and oil reserves expire as to 20% of
undeveloped acreage in 1995, 36% in 1996, 21% in 1997, 5% in 1998,
11% in 1999, 2% in 2000 and 5% thereafter. A portion of the
undeveloped acreage may be allowed to expire prior to the
expiration of primary terms specified in this schedule by
nonpayment of delay rentals. Aside from areas in Texas, the Gulf
of Mexico, Malaysia and Indonesia, Enserch Exploration has no
material concentration of undeveloped acreage in single areas at
this time.
Undeveloped acreage in other countries, which can be retained
without the establishment of gas or oil reserves, expires as
follows: Indonesia - 50% in 1995, 30% in 1996 and 20% in 1998;
United Kingdom - 100% in 2016; Malaysia - 100% in 1996.
EEX participated in 108 wells (74 net) during 1994. Of these
wells, 58 wells (44 net) were successfully completed, resulting in
a net success rate of 59%. Of the successful wells, 13 wells (10
net) were exploratory and 45 wells (34 net) were development. At
December 31, 1994, EEX and EIEI were participating in 43 wells (24
net), which were either being drilled or in some stage of
completion.
In the 1994 domestic drilling program, 5 wells (1.5 net) were
offshore. Of these wells, 2 gas wells (.4 net) and 1 oil well (.4
net) were successfully completed. During 1993, 16 offshore wells
(4.9 net) were drilled, of which 9 gas wells (2.6 net) and 1 oil
well (.1 net) were successfully completed.
At December 31, 1994, Enserch Exploration owned interests in
1,314 gas wells (1,008 net) and 1,043 oil wells (286 net) in the
United States and 3 oil wells (1 net) in Indonesia. Of these, 173
gas wells (141 net) and 37 oil wells (32 net) were dual completions
in single boreholes.
Completed drilling activity during the three years ended
December 31, 1994 is set forth below:
<TABLE>
<CAPTION>
Exploratory Drilling Development Drilling
---------------------- -------------------
United United
States Non-U.S. States Non-U.S.
---------------------- --------------------
<S> <C> <C> <C> <C> <C>
Productive Wells
1994:
Gross Wells 13.0 45.0
Net Wells 9.8 34.3
1993:
Gross Wells 7.0 76.0
Net Wells 3.8 60.1
1992:
Gross Wells 3.0 12.0
Net Wells 2.2 6.3
Nonproductive Wells
1994:
Gross Wells 43.0 7.0
Net Wells 25.3 4.6
1993:
Gross Wells 24.0 2.0 2.0
Net Wells 13.0 .5 1.8
1992:
Gross Wells 13.0 1.0 5.0
Net Wells 8.1 .1 2.6
__________________
<FN>
Note: Productive wells are either producing wells or wells
capable of commercial production, although currently
shut-in. The term "gross" refers to the wells in which
a working interest is owned, and the term "net" refers to
gross wells multiplied by the percentage of Enserch
Exploration's working interest owned therein.
</FN>
</TABLE>
The number of wells drilled is not a significant measure or
indicator of the relative success or value of a drilling program
because the significance of the reserves and economic potential may
vary widely for each project. It is also important to recognize
that reported completions may not necessarily track capital
expenditures, since Securities and Exchange Commission guidelines
do not allow a well to be reported as complete until it is ready
for production. In the case of offshore wells, this may be several
years following initial drilling because of the timing of
construction of platforms, pipelines and other necessary
facilities.
Additional information relating to the gas and oil activities
of Enserch Exploration is set forth in Note 8 of the Notes to
Consolidated Financial Statements included in Appendix A to this
report.
EPC has interests in 18 processing plants, 13 of which are
wholly owned. The products, which in 1994 were produced at an
average of about 16,800 barrels per day, are sold to customers
primarily at the Mt. Belvieu fractionation and storage facility
near Houston for use as chemical feedstock and other purposes. The
processing plants are capable of producing an aggregate of about
27,000 barrels of NGL per day; daily production was up slightly
from the previous year. Lone Star estimates that as of January 1,
1995, 28.5 MMBbls of NGL are attributable to contractual processing
rights of EPC with respect to gas reserves owned by Enserch
Exploration or third parties and dedicated to Lone Star under
various gas-purchase contracts or are being transported by Lone
Star under various gas transportation agreements. See "Business -
Natural Gas Transmission and Distribution - Source and Availability
of Raw Materials" for additional reserves held by Lone Star.
LSEC owns three central plants providing heating and cooling
to institutional customers in Dallas, El Paso and Galveston Texas.
The Corporation owns a five-building office complex in Dallas,
containing approximately 453,000 square feet of space that the
Corporation, Lone Star and certain subsidiaries fully occupy. In
addition, the Corporation leases a 21-story, 400,000 square-foot
building in Houston under a two-year lease that is automatically
extended each year unless terminated.
ITEM 3. Legal Proceedings
The utility division of the Corporation was named as a
codefendant in a lawsuit filed on November 10, 1988 in the 200th
Judicial District Court of Travis County, Texas. Plaintiffs were
parties to gas-sale contracts that provided for direct and indirect
sale of gas to the utility division. This case was dismissed on
November 29, 1994 following a settlement of the claim at an amount
that was not material to the financial position of the Corporation.
On June 25, 1993, a lawsuit was filed against the utility
division of the Corporation in the 4th Judicial District Court of
Rusk County, Texas. The plaintiff claimed that the utility
division failed to make certain production and minimum-purchase
payments under a gas-purchase contract, that it was fraudulently
induced to enter into a gas-purchase contract, that it was
fraudulently induced and coerced into releasing the utility
division from its obligation to make minimum-purchase payments, and
that the contract was breached. The plaintiff initially sought
actual damages in excess of $100 million in addition to punitive
damages. Following subsequent discovery proceedings of plaintiff's
expert witnesses on the utility division's alleged minimum-
purchase obligation, plaintiff's claim, under alternate damage
theories, appeared to be in an asserted range of from $75 million
to $235 million, plus an additional $68 million related to alleged
secondary damages. Following a jury verdict in favor of the
utility division, the court entered a judgement on December 14,
1994 and denied Plaintiff's motion for a new trial on February 16,
1995.
Additional information required hereunder is set forth in
Note 4 of the Notes to Consolidated Financial Statements included
in Appendix A to this report. In addition, the Corporation is a
party to lawsuits arising in the ordinary course of its business.
The Corporation believes, based on its current knowledge and the
advice of counsel, that all lawsuits and claims would not have a
material adverse effect on its financial condition.
ITEM 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
ITEM 5. Market for Registrant's Common Equity and Related
Stockholder Matters
The information required hereunder is set forth under "Common
Stock Market Prices and Dividend Information" included in
Appendix A to this report.
ITEM 6. Selected Financial Data
The information required hereunder is set forth under
"Selected Financial Data" included in Appendix A to this report.
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The information required hereunder is set forth under
"Financial Review" included in Appendix A to this report.
ITEM 8. Financial Statements and Supplementary Data
The information required hereunder is set forth under
"Independent Auditors' Report," "Management Report on
Responsibility for Financial Reporting," "Statements of
Consolidated Income," "Statements of Consolidated Cash Flows,"
"Consolidated Balance Sheets," "Statements of Consolidated Common
Shareholders' Equity," "Notes to Consolidated Financial
Statements," "Summary of Business Segments" and "Quarterly Results"
included in Appendix A to this report.
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
PART III
ITEMS 10-13.
Pursuant to Instruction G(3) to Form 10-K, the information
required in Items 10-13 (except for information set forth at the
end of Part I under "Business - Executive Officers of Registrant")
is incorporated by reference from the Corporation's definitive
proxy statement which is being filed pursuant to Regulation 14A on
or about March 24, 1995.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(a)-1 Financial Statements
The following items appear in Appendix A to this report:
<TABLE>
<CAPTION>
Item Page
<S> <C>
Selected Financial Data . . . . . . . . . . . . . . . . . . . A-2
Financial Review. . . . . . . . . . . . . . . . . . . . . . . A-3
Independent Auditors' Report. . . . . . . . . . . . . . . . . A-9
Management Report on Responsibility for
Financial Reporting. . . . . . . . . . . . . . . . . . . .A-10
Financial Statements:
Statements of Consolidated Income. . . . . . . . . . . .A-11
Statements of Consolidated Cash Flows. . . . . . . . . .A-12
Consolidated Balance Sheets. . . . . . . . . . . . . . .A-13
Statements of Consolidated Common
Shareholders' Equity. . . . . . . . . . . . . . . . .A-14
Notes to Consolidated Financial Statements. . . . . . . . . .A-15
Summary of Business Segments. . . . . . . . . . . . . . . . .A-26
Quarterly Results . . . . . . . . . . . . . . . . . . . . . .A-27
Common Stock Market Prices and Dividend Information . . . . .A-28
</TABLE>
(a)-2 Financial Statement Schedules
Consolidated financial statement schedules are omitted
because of the absence of the conditions under which they are
required or because the required information is included in the
consolidated financial statements or notes thereto.
(a)-3 Exhibits. The following exhibits are filed herewith
unless otherwise indicated:
3.1 Restated Articles of Incorporation of Registrant
currently in effect.
3.2 Bylaws of Registrant currently in effect.
4.1* Shareholder Rights Plan - Filed as an Exhibit to
Registrant's Form 8-A dated April 23, 1986.
Executive Compensation Plan and Arrangements
(Exhibits 10.01 though 10.12):
10.1* Management Incentive Program - Unit Plan and Stock Option
Plan, as amended, and currently in effect, filed as
Exhibit 10.1 to Registrant's Form 10-K for the year ended
December 31, 1991.
10.2 ENSERCH Corporation Deferred Compensation Plan for
Directors.
10.3* Director's Deferred Compensation Trust Agreement, as
amended, and currently in effect, filed as Exhibit 10.3
to Registrant's Form 10-K for the year ended December 31,
1991.
10.4* Forms of trust agreements relating to compensation and
supplemental retirement income arrangements executed by
certain executive officers of the Corporation, filed as
Exhibit 10.5 to Registrant's Form 10-K for the year ended
December 31, 1991.
10.5* ENSERCH Corporation 1981 Stock Option Plan, as amended,
and currently in effect, as filed as Exhibit 10.6 to
Registrant's Form 10-K for the year ended December 31,
1991.
10.6* Form of Change of Control Agreement executed by certain
executive officers of the Corporation filed as Exhibit
10.9 to Registrant's Form 10-K for the year ended
December 31, 1988.
10.7 ENSERCH Corporation Performance Incentive Plan - Calendar
Year 1995.
10.8* ENSERCH Corporation 1991 Stock Incentive Plan, filed as
Exhibit 10.12 to Registrant's Form 10-K for the Year
Ended December 31, 1990.
10.9 ENSERCH Corporation Deferred Compensation Plan and
Amendment No. 1 thereto dated March 28, 1995.
10.10 ENSERCH Corporation Deferred Compensation Trust.
10.11 ENSERCH Corporation Retirement Income Restoration Plan
and Amendment No. 1 thereto dated September 30, 1994.
10.12 ENSERCH Corporation Retirement Income Restoration Trust.
21 Subsidiaries of the Registrant.
23.1 Deloitte & Touche LLP consent to incorporation by
reference in Registration Statements No. 2-59259, No.
2-7572, No. 33-15623, No. 33-40589, No. 33-47911 and No.
33-52525.
23.2 DeGolyer and MacNaughton consent letter including consent
to incorporation by reference in Registration Statements
No. 2-59259, No. 2-77572, No. 33-15623, No. 33-40589,
No. 33-47911 and No. 33-52525.
24 Powers of Attorney.
27 Financial Data Schedule.
99* Proxy Statement dated at or about March 24, 1995 being
filed with the Securities and Exchange Commission on or
about March 24, 1995.
Long-term debt is described in Note 2 of the Notes to
Consolidated Financial Statements included in Appendix A to this
report. The Corporation agrees to provide the Commission, upon
request, copies of instruments defining the rights of holders of
such long-term debt, which instruments are not filed herewith
pursuant to Paragraph (b)(4)(iii)(A) of Item 601 of Regulation S-K.
___________________
*Incorporated herein by reference and made a part hereof.
(b) Reports on Form 8-K
Current Report on Form 8-K dated December 9, 1994, was filed
on December 12, 1994 (Reorganization of Enserch Exploration
Partners, Ltd. into a new corporation, Enserch Exploration, Inc.).
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ENSERCH Corporation
March 30 , 1995 By: /s/ D. W. Biegler
----- --------------------------
D. W. Biegler,
Chairman and President,
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant in the capacities and on the date
indicated.
Signature Title Date
--------- ----- ----
* Chairman and President, March 30 1995
---------------------- Chief Executive Officer, ----,
D. W. Biegler and Director
* Director March 30 1995
---------------------- ----,
Frederick S. Addy
* Director March 30 1995
---------------------- ----,
William B. Boyd
* Director March 30 1995
---------------------- ----,
B. A. Bridgewater, Jr.
Director
----------------------
Odie C. Donald
* Director March 30 1995
---------------------- ----,
Lawrence E. Fouraker
* Director March 30 1995
---------------------- ----,
Preston M. Geren, Jr.
* Director March 30 1995
---------------------- ----,
Marvin J. Girouard
* Director March 30 1995
---------------------- ----,
Joseph M. Haggar
Director
----------------------
Thomas W. Luce, III
* Director March 30 1995
---------------------- ----,
W. C. McCord
* Director March 30 1995
---------------------- ----,
Diana S. Natalicio
* Director March 30 1995
---------------------- ----,
W. Ray Wallace
* Senior Vice President, March 30 1995
---------------------- Finance and Corporate ----,
S. R. Singer Development, Chief
Financial Officer
* Vice President and March 30 1995
---------------------- Controller, Chief ----,
J. W. Pinkerton Accounting Officer
*By: /s/ D. W. Biegler
----------------------
D. W. Biegler,
Individually and as
Attorney-in-Fact
APPENDIX A
ENSERCH CORPORATION AND SUBSIDIARY COMPANIES
INDEX TO FINANCIAL INFORMATION
DECEMBER 31, 1994
Page
----
Selected Financial Data............................... A-2
Financial Review...................................... A-3
Independent Auditors' Report.......................... A-9
Management Report on Responsibility for
Financial Reporting................................. A-10
Financial Statements:
Statements of Consolidated Income................... A-11
Statements of Consolidated Cash Flows............... A-12
Consolidated Balance Sheets......................... A-13
Statements of Consolidated Common
Shareholders' Equity.............................. A-14
Notes to Consolidated Financial Statements............ A-15
Summary of Business Segments.......................... A-26
Quarterly Results..................................... A-27
Common Stock Market Prices and Dividend Information... A-28
<PAGE>
<PAGE>
<TABLE>
SELECTED FINANCIAL DATA
ENSERCH Corporation and Subsidiary Companies
<CAPTION>
As of or for Year Ended December 31
---------------------------------------------------------------------
1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ----
(In millions except ratio and per share amounts)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenues
Natural gas transmission and distribution $1,689.0 $1,547.9 $1,318.3 $1,273.3 $1,285.1 $1,361.0
Natural gas and oil exploration and production 179.1 189.8 171.5 183.6 213.9 184.0
Natural gas liquids processing. . . . . . 87.4 85.8 87.0 92.8 99.4 76.6
Power . . . . . . . . . . . . . . . . . . 45.5 48.6 45.7 37.3 28.1 28.5
Less intercompany revenues. . . . . . . . (143.6) (138.9) (53.5) (49.2) (35.6) (40.3)
Total revenues. . . . . . . . . . . . . 1,857.4 1,733.2 1,569.0 1,537.8 1,590.9 1,609.8
Operating Income (Loss)
Natural gas transmission and distribution 63.2 101.5 (a) 102.0 111.5 101.7 136.4
Natural gas and oil exploration and production 25.6(b) (37.3)(c) (6.2)(b) 10.9 31.9 43.4
Natural gas liquids processing. . . . . . 1.0 5.0 13.1 21.2 24.9 4.2
Power . . . . . . . . . . . . . . . . . . 5.8 9.8 13.4 6.1 2.5 2.4
General and other . . . . . . . . . . . . (8.2) (11.9) (16.9) (15.5) (18.3) (12.3)
Total operating income. . . . . . . . . 87.4 67.1 105.4 134.2 142.7 174.1
Other Income (Expense) - Net (d) . . . . . (6.5) .2 (12.4) 14.1 49.3 .7
Interest Expense . . . . . . . . . . . . . (68.2) (77.0) (94.3) (92.9) (99.0) (92.9)
Income (Taxes) Benefit . . . . . . . . . . 69.0(e) (6.5)(e) 2.5 (17.7) (25.7) (20.0)
Income (Loss) from Continuing Operations . 81.7 (16.2) 1.2 37.7 67.3 61.9
Income (Loss) from Discontinued Operations 20.6 75.4 (13.8) (18.6) 35.5 11.5
Extraordinary Loss on Extinguishment of Debt (15.4)
Net Income (Loss). . . . . . . . . . . . . 102.3 59.2 (28.0) 19.1 102.8 73.4
Earnings (Loss) Applicable to Common Stock 90.7 46.6 (41.0) 4.8 88.6 59.1
Per Share of Common Stock
Income (loss) from continuing operations after
provision for preferred dividends . . . 1.05 (.43) (.18) .36 .81 .80
Discontinued operations . . . . . . . . . .31 1.13 (.21) (.29) .55 .19
Extraordinary loss. . . . . . . . . . . . (.23)
Earnings (Loss) Applicable to Common Stock 1.36 .70 (.62) .07 1.36 .99
Average Common and Dilutive Common
Equivalent Shares Outstanding . . . . . . 66.8 66.6 65.7 65.1 65.0 59.8
----------------------------------------------------------------------------------------------------------------------------
COMMON STOCK DATA
Cash Dividends Declared and Paid (f) . . . $ .20 $ .20 $ .80 $ .80 $ .80 $ .80
Market Price
High. . . . . . . . . . . . . . . . . . . 19 1/8 22 5/8 16 1/2 21 3/8 28 1/8 27 1/2
Low . . . . . . . . . . . . . . . . . . . 12 1/8 14 1/8 10 3/8 12 3/4 18 1/2 18 5/8
Common Shareholders' Equity per Share. . . 10.84 9.70 9.16 10.51 11.18 10.88
Shares Outstanding at Year-end . . . . . . 67.0 66.7 66.0 65.3 64.8 64.4
----------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA
Property, Plant and Equipment - Net. . . . $2,252.6 $2,118.1 $2,065.8 $2,152.1 $2,118.0 $2,046.3
Total Assets . . . . . . . . . . . . . . . 2,846.3 2,760.3 3,145.7 3,163.1 3,264.2 3,254.2
Net Working Capital (Deficiency) . . . . . (161.0) (195.5) 2.5 (42.2) 64.3 (23.0)
Current Ratio. . . . . . . . . . . . . . . .75 .72 1.00 .95 1.08 .97
Unused Lines of Credit . . . . . . . . . . $ 600.0 $ 635.0 $ 485.0 $ 650.0 $ 600.0 $ 600.0
----------------------------------------------------------------------------------------------------------------------------
CAPITAL STRUCTURE
Senior Long-term Debt. . . . . . . . . . . $ 724.9 $ 638.8 $ 865.3 $ 757.6 $ 772.5 $ 727.1
Convertible Subordinated Debentures. . . . 90.8 90.8 90.8 205.7 215.7 215.7
Preferred Stock. . . . . . . . . . . . . . 175.0 175.0 175.0 175.0 175.0 175.0
Common Shareholders' Equity. . . . . . . . 725.4 646.7 604.6 686.3 723.9 701.3
Total Capitalization. . . . . . . . . . . 1,716.1 1,551.3 1,735.7 1,824.6 1,887.1 1,819.1
Senior Long-term and Convertible Debt
Ratio (Percent) . . . . . . . . . . . . . 47.5 47.0 55.1 52.8 52.4 51.8
---------------
<FN>
(a) Includes a $12.0 million pretax charge ($7.8 million after-tax, $.12 per share) principally for severance expenses
associated with re-engineering distribution operations.
(b) 1994 includes a $7.6 million pretax ($4.9 million after-tax, $.07 per share) gain from the sale of an inactive offshore
pipeline and facilities. 1992 includes a $16.5 million pretax write-down ($10.9 million after-tax, $.17 per share) of
an inactive offshore pipeline and facilities.
(c) Includes a $41.4 million pretax charge ($26.9 million after-tax, $.40 per share) as a result of an adverse judgment in
litigation and a $13.3 million pretax write-off ($8.6 million after-tax, $.13 per share) of non-U.S. gas and oil
assets.
(d) 1992 includes a $15.5 million pretax provision for litigation ($10.2 million after-tax, $.16 per share); 1991 includes
a $15.1 million pretax gain from the sale of Oklahoma utility properties and non-U. S. gas and oil assets ($10.0
million after-tax, $.15 per share); and 1990 includes a $34 million pretax gain ($22 million after-tax, $.34 per share)
from the sale of investment in Oceaneering International, Inc.
(e) 1994 includes a $70.0 million ($1.05 per share) reduction of deferred income taxes as a result of the conversion of
partnerships to corporate form and resulting change in tax status. 1993 includes a $10.8 million ($.16 per share)
charge from the 1% increase in the statutory federal income-tax rate on corporations.
(f) A distribution also was made in 1990 of 2 million shares of Pool Energy Services Company common stock. The approximate
value per share of ENSERCH common stock of this distribution was $.33.
</TABLE>
<PAGE>
<PAGE>
ENSERCH CORPORATION
FINANCIAL REVIEW
Earnings applicable to common stock for the year 1994 were $91 million
($1.36 per share), compared with 1993 earnings of $47 million ($.70 per share)
and a loss applicable to common stock for 1992 of $41 million ($.62 per
share).
CONTINUING OPERATIONS - Results from continuing operations, after provision
for preferred dividends, were income of $70 million ($1.05 per share) in 1994,
a loss of $29 million ($.43 per share) in 1993, and a loss of $12 million
($.18 per share) in 1992. The 1994 results from continuing operations
included a $70 million reduction of deferred income taxes associated with the
conversion of Enserch Exploration Partners, Ltd. and other partnerships to
corporate form and the resulting change in tax status (see Note 6). The 1994
results also included a $4.9 million after-tax ($7.6 million pretax) gain from
the sale of an inactive offshore pipeline. Results for 1993 were impacted by
an $8 million after-tax ($12 million pretax) charge principally for severance
expenses associated with the re-engineering of Lone Star Gas Company's
distribution operations, an $11 million charge from the 1% increase in the
statutory federal income-tax rate on corporations, a $9 million after-tax
($13 million pretax) write-off of non-U.S. gas and oil assets and a
$27 million after-tax ($41 million pretax) charge as a result of an adverse
judgment in litigation. The 1992 results included an $11 million after-tax
($17 million pretax) write-down of an inactive offshore pipeline and
facilities and a $10 million after-tax ($15 million pretax) provision for
litigation.
Operating income for 1994 was $87 million, compared with $67 million in 1993
and $105 million in 1992. Excluding the effects of the unusual items
mentioned above, operating income was $80 million for 1994, $134 million for
1993 and $122 million for 1992. Variations in operating income by business
segment are discussed below.
NATURAL GAS TRANSMISSION AND DISTRIBUTION - The table of Operating Data
reflects the effects of variable weather patterns and increasing activity in
non-utility markets. Operating income for 1994 was $63 million, compared with
$101 million in 1993 and $102 million in 1992. From 1993 to 1994, there was
a decline of $39 million in margin on gas sales, and operating expenses for
1994 increased some $6 million (2%) because transitional costs for the re-
engineering of the distribution operations exceeded savings that began to be
realized.
Lone Star's residential and commercial sales volumes of 126 billion cubic feet
(Bcf) in 1994 were 10% below the 1993 volumes of 139 Bcf. The 1993 volumes
were 16% above 1992. The fluctuations are mostly attributable to differences
in winter weather. In 1994, total heating degree days were 91% of the average
for the 30-year period ended in 1990, compared with 104% in 1993 and 82% in
1992.
<PAGE>
<PAGE>
The margin decline on sales by Lone Star included approximately $8 million
attributable to year-to-year differences in heating weather and $17 million
due to higher unrecovered gas-purchase costs. Gas-purchase expense includes
the cost of gas delivered, which is directly flowed-through to customers, plus
the cost of the excess of purchased volumes over delivered volumes. The
latter costs fluctuate from year to year due to various factors, including
temperature extremes, metering variances and billing estimates.
Sales by Enserch Gas Company (EGC), the ENSERCH gas marketing affiliate,
accounted for 72% of total gas sales volumes in 1994, 59% in 1993 and 53% in
1992. EGC's 1994 margin declined $14 million compared with 1993. Gas prices
were strong in early 1994 due to record cold weather in the Northeast and
remained somewhat stable until midyear, but prices declined rapidly later in
the year as industry storage facilities were generally full and normally
expected colder fourth-quarter weather failed to materialize throughout most
of the country. Additionally, gas demand for electric generation was lower
than expected during the summer months as a result of fewer days of above-
100-degree temperatures and an increase in nuclear generating capacity in
Texas. The combination of these market pressures eroded much of the margin on
EGC's gas sales. From time to time, EGC enters into contracts to purchase gas
for physical delivery up to one year later. The 1994 margin decline for EGC
also includes a $4 million charge recorded on forward purchase contracts to
reflect lower year-end market prices.
In the past, Lone Star was unable to take delivery of all gas tendered by
suppliers under contract minimum-purchase requirements, resulting in sizable
advance payments for gas and settlement payments. At December 31, 1994, there
was an unrecovered balance of gas-purchase contract settlements of
$61 million. The unrecovered balance has declined substantially each year
from $208 million at year-end 1991. The balances include take-or-pay settle-
ments, amounts relating to pricing and amounts related to the settlement of
other contractual matters. Of the $61 million, $31 million represented
prepayments expected to be recouped under contracts covering future gas
purchases, and $30 million represented amounts to be recovered from customers
under the existing gas-cost recovery provisions. Based on Lone Star's
estimated gas demand, which assumes normal weather conditions, requisite gas
purchases are expected to substantially satisfy purchase obligations for the
year 1995 and thereafter. Outstanding supplier claims approximated
$10 million as of December 31, 1994. A previously reported claim asserting
damages ranging from $75 million to $235 million was decided in Lone Star's
favor by a jury in the fourth quarter of 1994; the decision is subject to
plaintiff's motion for new trial and later appeal to a higher court. Lone
Star expects to recoup or recover the remaining balances of gas settlement
payments made to date, as well as any future payments made in settlement of
remaining claims.
NATURAL GAS AND OIL EXPLORATION AND PRODUCTION - Operating income closely
follows fluctuations in product prices and volumes, as shown in the table of
Operating Data. Excluding effects of the previously discussed unusual items,
operating income was $18 million for 1994, $17 million for 1993 and
$10 million for 1992.
Revenues for 1994 of $179 million were 6% lower than 1993, which was 11% above
1992. In 1994, natural-gas revenues decreased slightly to $145 million, with
<PAGE>
<PAGE>
the average natural-gas price per thousand cubic feet of $2.15 up from $2.09
in 1993 and $1.82 in 1992. Natural-gas sales volumes were 67 Bcf in 1994,
70 Bcf in 1993 and 65 Bcf in 1992. The decrease in volumes in 1994 was
principally due to reduced production from several high-volume fields in South
Texas and offshore Louisiana. The increase in volumes from 1992 to 1993 was
principally due to accelerated natural-gas development drilling in East Texas
and offshore production from Mississippi Canyon Block 441 in the Gulf of
Mexico, which went on-stream in the second quarter of 1993. Oil revenues
declined $6 million to $31 million in 1994 due to a 6% production decline and
an 11% decrease in the average sales price to $15.38 per barrel. Oil revenues
decreased to $37 million in 1993 from $45 million in 1992, as production
declined 9% and the average sales price dropped 10%. The lower volumes were
primarily the result of declining production from several North Texas
reservoirs.
Throughout 1994, work progressed on the conversion of a semisubmersible rig
to a floating production facility for the development of the Garden
Banks Block 388 unit. The majority of the modification work on the major
structural components has been completed. The 24-slot subsea template has
been installed, and the two 12-inch oil and gas gathering lines have been
installed and connected to the shallow-water production facility located
54 miles away.
Completion operations on two pre-drilled wells commenced in early 1995 and
should enable these wells to be brought on-stream when the floating facility
is moored on location and the production riser is installed. These activities
should be completed in mid-1995, followed by additional development drilling,
with one such well expected to be completed in late 1995. Initial daily oil
production rates from the pre-drilled wells are anticipated to be between
2,500 and 5,000 barrels of oil per well.
Mobil Producing Texas and New Mexico Inc. (Mobil) has an option to acquire,
for consideration, a 40% interest in the entire Garden Banks unit consisting
of six blocks and in the unit's production system. If Mobil exercises its
option, Enserch Exploration, which currently owns 100% of the project, will
remain the operator.
Operating results for 1995 are expected to be negatively impacted by the
midyear commencement of production from the two pre-drilled wells on Garden
Banks Block 388. Revenues from the early levels of production are not
expected to be sufficient to cover operating costs, amortization and the
equipment lease costs on the floating production platform and related
facilities. Some operating costs and amortization vary with production;
however, other costs and the equipment lease costs are essentially fixed.
Results are expected to improve significantly for 1996 as production begins
from several development wells and equipment lease and other fixed costs are
spread over significantly more production.
ENSERCH has budgeted $160 million for exploration and production activities
in 1995, compared with expenditures of $133 million in 1994 and $120 million
in 1993.
ENSERCH's natural-gas reserves at January 1, 1995, were 1.04 trillion cubic
feet (Tcf), compared with 1.09 Tcf the year earlier, as estimated by DeGolyer
and MacNaughton, independent petroleum consultants. Oil and condensate
<PAGE>
<PAGE>
reserves, including natural gas liquids attributable to leasehold interests,
were 51 million barrels (MMBbls), compared with the year-earlier level of
39 MMBbls. The increase is associated with Garden Banks Block 388 and the
Mudi project in Indonesia.
The Corporation follows the full-cost method of accounting for gas and oil
properties. The overall rate of amortization for U.S. properties was
$1.04 per million British thermal units produced for 1994, compared with $.98
for both 1993 and 1992. The Mississippi Canyon capital lease and higher
onshore exploratory costs largely account for the increase in 1994. Product
prices are subject to seasonal and other fluctuations. A decline in prices
from year-end 1994 or other factors, without mitigating circumstances, would
cause a future write-down of capitalized costs that could be significant and
a noncash charge against earnings.
ENSERCH uses gas and oil swaps, collars and futures agreements to hedge
volatile product prices for a portion (normally 30 to 70 percent) of
anticipated future gas and oil production. Hedges resulted in a net increase
in gas revenues of $5.0 million in 1994, compared with a decrease of
$4.1 million in 1993. Hedges reduced oil revenues $.7 million in 1994 but
added $.4 million in 1993. At December 31, 1994, ENSERCH had outstanding
swaps, collars and futures agreements extending through December 1995 to
exchange payments on some 17.8 Bcf of gas and 1.2 MMBbls of oil on which
ENSERCH had $4.1 million of net unrealized gains. At December 31, 1994,
realized gains on hedging activities of $.9 million were deferred.
On December 30, 1994, through a series of transactions, Enserch Exploration,
Inc. (EEX), a newly organized Texas corporation, acquired all of the operating
properties of Enserch Exploration Partners, Ltd. (EP), and EP received common
stock of EEX. EP was then liquidated, and its partners received one share of
EEX common stock for each limited and general partnership interest held. The
ENSERCH companies also received EP's interests in and assumed EP's obligations
under certain equipment lease arrangements (the equipment was simultaneously
subleased to EEX) and assumed approximately $395 million principal amount of
EP's indebtedness, plus accrued interest. Upon the liquidation of EP and
distribution of EEX common stock, public unitholders of EP received
805,914 shares of EEX common stock (.77%) and the ENSERCH companies received
103,775,328 shares (99.23%) of EEX's 104,581,242 shares outstanding.
NATURAL GAS LIQUIDS PROCESSING - Fluctuations in natural gas liquids (NGL)
demand caused by overall economic conditions, price volatility for NGL
products and natural-gas feedstock costs are the major factors that influence
financial results in the NGL processing business, as shown in the table of
Operating Data. Operating income was $1 million for 1994, $5 million for 1993
and $13 million for 1992. Small operating losses were incurred during the
first three quarters of 1994. However, in the last quarter, NGL prices
improved and feedstock costs declined, and the restored margins were
sufficient to more than offset the losses incurred earlier in 1994.
POWER - ENSERCH's power activities, comprised of Enserch Development
Corporation (EDC) and Lone Star Energy Company (LSE), had 1994 operating
income of $5.8 million, compared with $9.8 million for 1993 and $13.4 million
for 1992. In the second quarter of 1994, EDC and LSE began earning management
and incentive fees from operating a 160-megawatt cogeneration plant in
Bellingham, Washington, developed by EDC, which should provide a steady stream
<PAGE>
<PAGE>
of future income. EDC's 1994 operating income was $1.7 million, compared with
$5.9 million for 1993 and $9.8 million for 1992. Results for 1993 included
a $15 million gain from the sale of a position in a power project that had
been scheduled for development, and 1992 results included a $15 million fee
from development of the Bellingham project. LSE's operating income was
$4.1 million for 1994, $3.9 million for 1993 and $3.6 million for 1992.
OTHER - Other income/expense consists principally of gains on disposal of
assets, interest income and discounts on sales of receivables. In addition,
1993 includes a $5.6 million provision for interest awarded in the judgment
described earlier, and 1992 includes a $15 million provision for litigation.
Interest expense for 1994 was $68 million, compared with $77 million for 1993,
which included $8 million not related to borrowings, and $94 million for 1992.
The reduction from 1992 reflects the results of a program to refinance long-
term debt at lower rates. Over the three-year period, short-term interest
rates were at their lowest level in 1993.
DISCONTINUED OPERATIONS - The 1994 income from discontinued operations of
$21 million ($.31 per share) arose from the sale of Enserch Environmental
Corporation, partially offset by a $10 million ($17.5 million pretax) loss
provision to recognize that costs and expenses incurred for the wind-up of
other discontinued businesses would be greater than previously estimated. The
1993 results of $75 million ($1.13 per share) primarily arose from the sale
of the principal operating assets of Ebasco Services Incorporated. The
$14 million ($.21 per share) loss in 1992 primarily related to the sale of
Humphreys and Glasgow International and provisions for real estate formerly
utilized by discontinued operations. With the sale of Enserch Environmental,
the Corporation has now completed the divestiture of its engineering and
construction business. Remaining assets, including receivables, and
obligations are expected to be substantially settled by year-end 1996 (see
Note 7).
LIQUIDITY AND FINANCIAL RESOURCES - Net cash flows from operating activities
of continuing operations reflect the previously described variances in
operating income and related changes in current operating assets and
liabilities and for 1994 totaled $94 million, compared with $197 million in
1993 and $213 million in 1992. The amount provided in 1994 is after the
$62 million payment relating to the adverse judgment in litigation described
earlier. Net recoveries of gas-purchase contract settlements were some
$50 million in both 1994 and 1993, twice the 1992 amount.
Discontinued operations required cash of $.9 million in 1994, after the net
proceeds from the sale of Enserch Environmental of $98 million. Enserch
Environmental operations required cash for working capital of $32 million,
which was recovered in the sale. Also included is the remittance of
$22 million for December 1993 collections of sold receivables plus the payment
of accrued expenses, taxes and other retained obligations relating to the sale
of Ebasco. Cash provided by discontinued operations in 1993 included net
proceeds from the sale of the principal operating assets of Ebasco and
$100 million from the limited recourse sale of Ebasco receivables.
Planned property, plant and equipment additions for 1995 total $262 million
and include $96 million designated for Transmission and Distribution,
$160 million for Exploration and Production and $6 million for other
<PAGE>
<PAGE>
requirements. The planned expenditures are expected to be funded from
internal cash flow and external financings as required and exclude costs of
the floating production platform and related facilities of the Garden Banks
project, which is financed by an operating lease arrangement aggregating
$235 million. The cost of these facilities is expected to be $330 million,
which includes design modifications and other costs for Block 388 facilities
and for the recent discovery on Block 387. Financing options for the
additional costs currently are being evaluated, including an addition to the
current operating lease arrangement.
In the first quarter of 1994, $150 million of 6 3/8% Notes due 2004 were
issued in a public offering, and $74 million of sinking fund debentures and
$75 million of Series D Adjustable Rate Preferred Stock were redeemed. In
April 1994, $75 million of Series F Adjustable Rate Preferred Stock was sold,
which has a substantially lower dividend rate than the Series D. Net proceeds
were used to repay $29 million of maturing senior long-term debt and to reduce
commercial paper borrowings. In November 1994, $150 million of privately
placed variable-rate long-term debt due in 1998 was issued. The proceeds were
used to retire $100 million of maturing 9.11% debt and to reduce short-term
borrowings.
Total capitalization at December 31, 1994 was $1.7 billion, an increase of
$165 million from year-end 1993, reflecting $86 million more senior long-term
debt and $79 million growth in shareholders' equity. As a percentage of total
capitalization, common shareholders' equity increased slightly to 42.3% at
December 31, 1994. At December 31, 1994, $423 million of shareholders' equity
was free of any restrictions for payment of dividends or acquisition of
capital stock.
The current ratio at December 31, 1994 was .75 versus .72 at year-end 1993 and
1.0 at year-end 1992, with the decline from 1992 substantially attributable
to the sale of Ebasco and Enserch Environmental.
ENSERCH uses the commercial paper market and commercial banking facilities for
short-term needs. Bank lines in the form of a three-year revolving agreement
totaled $600 million, all unused at year-end 1994.
Inflation during recent years has had little effect on capital costs and
results of operations.
<PAGE>
<PAGE>
FOURTH-QUARTER RESULTS - Earnings applicable to common stock for the fourth
quarter of 1994 were $89 million ($1.33 per share), compared with $36 million
($.53 per share) for the fourth quarter of 1993. Income from continuing
operations after provision for preferred dividends for the fourth quarter of
1994 was $70 million ($1.05 per share) versus a loss of $35 million ($.52 per
share) for the year-ago period. Results for the 1994 and 1993 fourth quarters
included all of the unusual items noted for the full year, except in 1993 the
$11 million charge for the increase in the statutory federal income-tax rate
and $2.0 million of the after-tax write-offs of non-U.S. gas and oil assets
occurred earlier. Fourth-quarter income from discontinued operations was
$19 million ($.28 per share), compared with $70 million ($1.05 per share) for
the 1993 period. Excluding effects of unusual items, operating income for the
1994 fourth quarter was $14 million, compared with $27 million for the year-
earlier quarter, with the decline primarily due to lower results for the
Transmission and Distribution business segment.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
NATURAL GAS TRANSMISSION AND DISTRIBUTION OPERATING DATA
----------------------------------------------------------------------------------------------------------------------------
For Year Ended December 31 1994 1993 1992 1991 1990 1989
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating Income (in millions) . . . $ 63.2 $ 101.5(a) $ 102.0 $ 111.5 $ 101.7 $ 136.4
======== ======== ======== ======== ======== ========
Natural Gas Sales Revenues
by Customer (in millions)
Residential & commercial . . . . $ 744.3 $ 823.8 $ 716.5 $ 702.9 $ 684.3 $ 756.8
Industrial & electric generation 306.4 357.2 350.8 373.8 418.3 444.9
Gas marketers, pipelines and
other. . . . . . . . . . . . . 569.9 293.7 185.2 124.9 112.9 90.5
-------- -------- -------- -------- -------- --------
Total gas sales revenues . . . $1,620.6 $1,474.7 $1,252.5 $1,201.6 $1,215.5 $1,292.2
======== ======== ======== ======== ======== ========
Natural Gas Revenues (in millions)
Lone Star Gas Company Sales. . . . $ 861.3 $ 954.2 $ 905.1 $ 895.7 $ 916.9 $1,026.3
Enserch Gas Company Sales (b). . . 759.3 520.5 347.4 305.9 298.6 265.9
-------- -------- -------- -------- -------- --------
Total gas sales revenues . . . 1,620.6 1,474.7 1,252.5 1,201.6 1,215.5 1,292.2
Gas transportation . . . . . . . . 51.6 52.2 46.9 48.9 47.0 46.0
-------- -------- -------- -------- -------- --------
Total natural gas revenues . . 1,672.2 1,526.9 1,299.4 1,250.5 1,262.5 1,338.2
Other. . . . . . . . . . . . . . . 16.8 21.0 18.9 22.8 22.6 22.8
-------- -------- -------- -------- -------- --------
Total revenues . . . . . . . . $1,689.0 $1,547.9 $1,318.3 $1,273.3 $1,285.1 $1,361.0
======== ======== ======== ======== ======== ========
Natural Gas Sales Volumes
by Customer (Bcf)
Residential & commercial . . . . 125.7 139.3 120.6 128.5 122.6 140.3
Industrial & electric generation 122.5 138.0 130.3 163.2 164.1 171.5
Gas marketers, pipelines
and others . . . . . . . . . . 297.3 136.2 99.3 70.9 58.9 47.9
-------- -------- -------- -------- -------- --------
Total gas sales volumes. . . . 545.5 413.5 350.2 362.6 345.6 359.7
======== ======== ======== ======== ======== ========
Natural Gas Volumes (Bcf)
Lone Star Gas Company Sales. . . . 152.2 169.5 163.4 178.9 180.9 212.1
Enserch Gas Company Sales (b). . . 393.3 244.0 186.8 183.7 164.7 147.6
-------- -------- -------- -------- -------- --------
Total gas sales volumes. . . . 545.5 413.5 350.2 362.6 345.6 359.7
======== ======== ======== ======== ======== ========
Gas transportation
For associated . . . . . . . . . 133.6 139.8 129.5 133.0 118.4 115.3
For others (nonassociated) . . . 255.8 231.3 177.8 165.9 134.7 135.7
-------- -------- -------- -------- -------- --------
Total. . . . . . . . . . . . . 389.4 371.1 307.3 298.9 253.1 251.0
======== ======== ======== ======== ======== ========
Lone Star System throughput. . . . 551.3 554.0 482.6 501.6 456.8 495.4
Off-system sales (c) . . . . . . . 250.0 90.8 45.4 26.9 23.5
-------- -------- -------- -------- -------- --------
Total throughput (d) . . . . . 801.3 644.8 528.0 528.5 480.3 495.4
======== ======== ======== ======== ======== ========
Natural Gas Sales Revenues per Mcf
by Customer
Residential & commercial . . . . $ 5.92 $ 5.91 $ 5.94 $ 5.47 $ 5.58 $ 5.39
Industrial & electric generation 2.50 2.59 2.69 2.29 2.55 2.59
Gas marketers, pipeline
and others . . . . . . . . . . 1.92 2.16 1.86 1.76 1.92 1.89
-------- -------- -------- -------- -------- --------
Composite. . . . . . . . . . . $ 2.97 $ 3.57 $ 3.58 $ 3.31 $ 3.52 $ 3.59
======== ======== ======== ======== ======== ========
Natural Gas Revenues per Mcf
Lone Star Gas Company Sales. . . . $ 5.66 $ 5.63 $ 5.54 $ 5.01 $ 5.07 $ 4.84
Enserch Gas Company Sales (b). . . 1.93 2.13 1.86 1.67 1.81 1.80
Natural Gas Purchase Cost per Mcf
Lone Star Gas Company. . . . . . . $ 3.38 $ 3.54 $ 3.48 $ 3.05 $ 3.20 $ 3.10
Enserch Gas Company (b). . . . . . 1.89 2.02 1.73 1.54 1.66 1.67
Gas Transportation Rate per Mcf. . . $ .13 $ .14 $ .15 $ .16 $ .19 $ .18
Natural Gas Customers
(at December 31) (in thousands). . 1,281 1,265 1,243 1,224 1,249 1,241
Heating Degree Days. . . . . . . . . 2,201 2,508 1,980 2,179 2,015 2,632
% of normal (2,407) (e). . . . . . 91.4 104.2 82.3 90.5 83.7 109.3
Cooling Degree Days. . . . . . . . . 2,676 2,767 2,415 2,670 2,791 2,563
% of normal (2,603) (e). . . . . . 102.8 106.3 92.8 102.6 107.2 98.5
<PAGE>
------------------
<FN>
(a) Includes a $12.0 million charge principally for severance expenses associated with re-engineering distribution operations.
(b) In March 1993, Enserch Gas Company (EGC) began marketing gas for Natural Gas and Oil Exploration and Production operations.
Prior to 1992, also included Enserch Gas Transmission Company, 50% owned after 1991.
(c) Includes off-system sales never entering Lone Star's pipeline system.
(d) Total throughput is the sum of gas sales volumes and gas transportation volumes for others. Gas transported by Lone Star
for EGC is reported in both sales and associated transportation.
(e) Based on National Weather Service data for the 30 year period 1961-1990, as determined by the Department of Commerce.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
NATURAL GAS AND OIL EXPLORATION AND PRODUCTION OPERATING DATA
----------------------------------------------------------------------------------------------------------------------------
For Year Ended December 31 1994 1993 1992 1991 1990 1989
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating Income (Loss) (in millions) $ 25.6(a) $(37.3)(b) $ (6.2)(a) $ 10.9 $ 31.9 $ 43.4
====== ====== ====== ====== ====== ======
Revenues - After Royalties (in millions)
Natural gas (c). . . . . . . . . . $144.5 $146.4 $118.6 $123.4 $142.9 $139.2
Oil and condensate . . . . . . . . 30.9 36.9 45.1 56.7 68.6 58.0
Natural gas liquids. . . . . . . . 2.4 4.1 6.5 2.0 2.2 1.9
Other revenues - net . . . . . . . 1.3 2.4 1.3 1.5 .2 3.8
Less minority interest in EP . . . (18.9)
------ ------ ------ ------ ------ ------
Total revenues . . . . . . . . $179.1 $189.8 $171.5 $183.6 $213.9 $184.0
====== ====== ====== ====== ====== ======
Sales Volumes
Natural gas (Bcf) (c). . . . . . . 67.1 70.0 65.2 70.1 76.9 76.3
Oil and condensate (MMBbl) . . . . 2.0 2.1 2.3 2.8 3.1 3.3
Average Sales Price
Natural gas (per Mcf). . . . . . . $ 2.15 $ 2.09 $ 1.82 $ 1.76 $ 1.85 $ 1.81
Oil and condensate (per Bbl) . . . 15.38 17.24 19.20 20.31 22.39 17.37
Net Wells
Drilled. . . . . . . . . . . . . . 74 79 19 67 53 18
Productive . . . . . . . . . . . . 44 64 8 52 42 14
Proved Reserves (at December 31)
Gas (Bcf). . . . . . . . . . . . . 1,042 1,086 1,101 1,168 1,237 1,230
Oil and condensate (MMBbl)(d). . . 50.6 39.3 39.2 40.0 32.3 28.1
Standardized Measure of Discounted
Future Net Cash Flows (in millions) $ 827 $ 831 $ 820 $ 812 $ 963 $ 840
Data in Equivalent Energy Content
(per MMBtu) (e)
Average sales price. . . . . . . . $ 2.15 $ 2.16 $ 2.04 $ 2.03 $ 2.17 $ 2.00
Average production costs . . . . . .55 .56 .55 .60 .54 .52
U. S. amortization rate. . . . . . 1.04 .98 .98 .90 .78 .72
-------------------------------------------------
<FN>
(a) 1994 includes a $7.6 million gain from the sale of an inactive offshore pipeline and facilities. 1992 includes a $16.5
million write-down of an inactive offshore pipeline and facilities.
(b) 1993 includes a $41.4 million charge as a result of an adverse judgment in litigation and a $13.3 million write-off of
non-U. S. gas and oil assets.
(c) Excludes products purchased for resale. Includes affiliated revenues and volumes.
(d) Reserves include natural gas liquids attributable to leasehold interests.
(e) For the purpose of providing a common unit of measure, natural gas, oil and natural gas liquids are converted to an
approximate equivalent unit on the basis of relative energy content: one Mcf of natural gas equals 1.05 MMBtu, one barrel
of oil equals 5.6 MMBtu and one barrel of natural gas liquids equals 4.2 MMBtu.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
NATURAL GAS LIQUIDS PROCESSING OPERATING DATA
----------------------------------------------------------------------------------------------------------------------------
For Year Ended December 31 1994 1993 1992 1991 1990 1989
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating Income (in millions) . . . $ 1.0 $ 5.0 $ 13.1 $ 21.2 $ 24.9 $ 4.2
======== ======== ======== ======== ======== ========
Revenues (in millions)
Natural gas liquids. . . . . . . . $ 68.9 $ 73.6 $ 79.0 $ 84.8 $ 91.8 $ 71.6
Other. . . . . . . . . . . . . . . 18.5 12.2 8.0 8.0 7.6 5.0
-------- -------- -------- -------- -------- --------
Total . . . . . . . . . . . . . $ 87.4 $ 85.8 $ 87.0 $ 92.8 $ 99.4 $ 76.6
======== ======== ======== ======== ======== ========
Natural Gas Liquids
Sales volumes (MMBbl). . . . . . . 5.9 6.0 5.9 6.1 6.4 7.2
Average sales price (per Bbl). . . $ 11.65 $ 12.34 $ 13.35 $ 13.92 $ 14.27 $ 9.96
Proved Reserves of Natural Gas
Liquids Under Contractual
Processing Rights (MMBbl). . . . . 28.5 27.2 28.2 28.4 28.7 30.7
</TABLE>
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors of ENSERCH Corporation:
We have audited the accompanying consolidated balance sheets of ENSERCH
Corporation and subsidiary companies as of December 31, 1994 and 1993, and the
related statements of consolidated income, cash flows and common shareholders'
equity for each of the three years in the period ended December 31, 1994.
These financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. We have previously audited the consolidated
balance sheets of ENSERCH Corporation and subsidiary companies as of
December 31, 1992, 1991, 1990 and 1989 and the related statements of
consolidated income, cash flows and common shareholders' equity for the years
ended December 31, 1991, 1990, and 1989 (not presented herewith), and have
expressed unqualified opinions thereon.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of ENSERCH Corporation and
subsidiary companies at December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1994, in conformity with generally accepted accounting
principles. Also, in our opinion, the information set forth in the
accompanying table of selected financial data for the years 1989 through 1994
is fairly stated in all material respects in relation to the consolidated
financial statements from which such information has been derived.
DELOITTE & TOUCHE LLP
Dallas, Texas
February 10, 1995
<PAGE>
<PAGE>
MANAGEMENT REPORT ON RESPONSIBILITY FOR FINANCIAL REPORTING
The management of ENSERCH Corporation is responsible for the preparation,
presentation and integrity of the financial statements and other information
contained in this report. The financial statements have been prepared in
conformity with accounting principles generally accepted in the United States
and include amounts that represent management's best estimates and judgments.
Management has established practices and procedures designed to support the
reliability of the estimates and minimize the possibility of a material
misstatement.
Management has established and maintains internal accounting controls that
provide reasonable assurance as to the integrity and reliability of the
financial statements, the protection of assets from unauthorized use or
disposition, and the prevention and detection of fraudulent financial
reporting. The system of internal control is supported by written policies
and procedures, and the control environment is regularly evaluated by both
Deloitte & Touche LLP,the independent auditors, and the Corporation's internal
auditors. The Board of Directors maintains an Audit Committee composed of
Directors who are not employees. The Audit Committee meets periodically with
management, the independent auditors and the internal auditors to discuss
significant accounting, auditing, internal accounting control and financial
reporting matters. The independent auditors and the internal auditors have
free access to the Audit Committee.
Management believes that, as of December 31, 1994, the overall system of
internal accounting controls is sufficient to accomplish the objectives
discussed herein.
/s/ D. W. Biegler /s/ S. R. Singer /s/ J. W. Pinkerton
_______________________ ______________________ ______________________
D. W. Biegler S. R. Singer J. W. Pinkerton
Chairman, President and Senior Vice President, Vice President and
Chief Executive Officer Finance and Corporate Controller,
Development, Chief Chief Accounting Officer
Financial Officer
February 10, 1995
<PAGE>
<PAGE>
<TABLE>
ENSERCH CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED INCOME
<CAPTION>
Year Ended December 31
-----------------------------------------------------------------------------------------------------------
1994 1993 1992
-------- -------- --------
(In thousands except per share amounts)
<S> <C> <C> <C>
Revenues
Natural gas transmission and distribution. . . . . $1,689,024 $1,547,919 $1,318,258
Natural gas and oil exploration and production . . 179,140 189,796 171,544
Natural gas liquids processing . . . . . . . . . . 87,446 85,785 86,966
Power . . . . . . . . . . . . . . . . . . . . . . 45,499 48,635 45,728
Less intercompany revenues . . . . . . . . . . . . (143,678) (138,934) (53,484)
---------- ---------- ----------
Total. . . . . . . . . . . . . . . . . . . . 1,857,431 1,733,201 1,569,012
---------- ---------- ----------
Costs and Expenses
Gas purchase . . . . . . . . . . . . . . . . . . . 1,208,147 1,021,107 902,346
Operating expenses . . . . . . . . . . . . . . . . 354,390 415,331 342,584
Depreciation and amortization. . . . . . . . . . . 126,733 144,242 142,383
Gross receipts and production taxes. . . . . . . . 50,723 55,924 52,517
Payroll, ad valorem and other taxes. . . . . . . . 29,989 29,465 23,736
---------- ---------- ----------
Total. . . . . . . . . . . . . . . . . . . . 1,769,982 1,666,069 1,463,566
---------- ---------- ----------
Operating Income. . . . . . . . . . . . . . . . . . 87,449 67,132 105,446
Other Income (Expense) - Net. . . . . . . . . . . . (6,506) 174 (12,472)
Interest Expense . . . . . . . . . . . . . . . . . (68,242) (77,004) (94,313)
---------- ---------- ----------
Income (Loss) before Income Taxes . . . . . . . . . 12,701 (9,698) (1,339)
Income Taxes (Benefit). . . . . . . . . . . . . . . (68,974) 6,483 (2,502)
---------- ---------- ----------
Income (Loss) from Continuing Operations. . . . . . 81,675 (16,181) 1,163
Income (Loss) from Discontinued Operations . . . . 20,642 75,418 (13,811)
Extraordinary Loss on Extinguishment of Debt. . . . (15,358)
---------- ---------- ----------
Net Income (Loss) . . . . . . . . . . . . . . . . . 102,317 59,237 (28,006)
Provision for Dividends on Preferred Stock. . . . . 11,619 12,663 12,952
---------- ---------- ----------
Earnings (Loss) Applicable to Common Stock. . . . . $ 90,698 $ 46,574 $ (40,958)
========== ========== ==========
Per Share of Common Stock
Income (loss) from continuing operations
after provision for dividends on
preferred stock . . . . . . . . . . . . . . . . $ 1.05 $ (.43) $ (.18)
Discontinued operations . . . . . . . . . . . . . .31 1.13 (.21)
Extraordinary loss . . . . . . . . . . . . . . . . (.23)
---------- ---------- ----------
Earnings (loss) applicable to common stock . . . . $ 1.36 $ .70 $ (.62)
========== ========== ==========
Cash dividends declared. . . . . . . . . . . . . . $ .20 $ .20 $ .80
========== ========== ==========
Average Common and Dilutive Common
Equivalent Shares Outstanding. . . . . . . . . . . 66,845 66,598 65,695
========== ========== ==========
Operating Income (Loss) of Major Business Segments
(Excludes general corporate expenses)
Natural gas transmission and distribution. . . . . $ 63,178 $ 101,458 $ 101,996
Natural gas and oil exploration and production . . 25,617 (37,293) (6,175)
Natural gas liquids processing . . . . . . . . . . 1,007 5,037 13,092
Power. . . . . . . . . . . . . . . . . . . . . . . 5,761 9,795 13,379
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
ENSERCH CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
<CAPTION>
Year Ended December 31
-----------------------------------------------------------------------------------------------------------------------
1994 1993 1992
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Income (loss) from continuing operations . . . . . . . . . . . $ 81,675 $(16,181) $ 1,163
Depreciation and amortization. . . . . . . . . . . . . . . . . 126,733 144,242 142,383
Deferred income-tax benefit. . . . . . . . . . . . . . . . . . (59,167) (775) (9,682)
Recoveries of gas-purchase contract settlements. . . . . . . . 49,602 50,825 25,612
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,707) (5,563) (4,830)
Changes in current operating assets and liabilities:
Accounts receivable. . . . . . . . . . . . . . . . . . . . . 15,588 (6,205) 12,605
Other current assets . . . . . . . . . . . . . . . . . . . . (33,109) (13,455) 19,007
Accounts payable and other accrued liabilities . . . . . . . (4,029) 24,738 6,473
Other current liabilities. . . . . . . . . . . . . . . . . . (17,867) (27,358) 5,246
Litigation judgment payable. . . . . . . . . . . . . . . . . (62,498) 47,032 15,466
-------- -------- --------
Net Cash Flows from Operating Activities . . . . . . . . . 94,221 197,300 213,443
-------- -------- --------
INVESTING ACTIVITIES
Additions of property, plant and equipment . . . . . . . . . . (260,010) (218,611) (144,318)
Retirements of property, plant and equipment . . . . . . . . . 8,206 7,386 6,186
Proceeds from disposition of significant assets. . . . . . . . 8,500 7,825 16,640
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,009 (2,886) 5,828
Discontinued operations. . . . . . . . . . . . . . . . . . . . (942) 318,408 8,373
-------- -------- --------
Net Cash Flows from (used for) Investing Activities. . . . (237,237) 112,122 (107,291)
-------- -------- --------
FINANCING ACTIVITIES
Change in commercial paper and other short-term borrowings . . 119,500 (120,912) 1,743
Issuance of senior long-term debt. . . . . . . . . . . . . . . 299,117 200,000 346,897
Retirement of senior long-term debt and
convertible debentures . . . . . . . . . . . . . . . . . . . (214,983) (423,523) (361,748)
Settlement of foreign currency swap. . . . . . . . . . . . . . 23,089
Issuance of Series F Preferred Stock . . . . . . . . . . . . . 72,797
Retirement of Series D Preferred Stock . . . . . . . . . . . . (75,000)
Other financing activities - net . . . . . . . . . . . . . . . (53,113) (2,335) (8,198)
Issuance of common stock . . . . . . . . . . . . . . . . . . . 3,451 10,876 10,376
Cash dividends paid. . . . . . . . . . . . . . . . . . . . . . (25,071) (25,967) (65,650)
-------- -------- --------
Net Cash Flows from (used for) Financing Activities. . . . 126,698 (338,772) (76,580)
-------- -------- --------
Net (Decrease) Increase in Cash and Equivalents. . . . . . . . . (16,318) (29,350) 29,572
Cash and Equivalents at Beginning of Year. . . . . . . . . . . . 19,203 48,553 18,981
-------- -------- --------
Cash and Equivalents at End of Year. . . . . . . . . . . . . . . $ 2,885 $ 19,203 $ 48,553
======== ======== ========
Amounts paid
Interest (net of amount capitalized) . . . . . . . . . . . . . $ 66,378 $101,157 $108,881
======== ======== ========
Income taxes - net . . . . . . . . . . . . . . . . . . . . . . $ 5,464 $ 20,443 $ 6,087
======== ======== ========
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
ENSERCH CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31
-----------------------
1994 1993
--------- ----------
(In thousands)
<S> <C> <C>
ASSETS
Current Assets
Cash and equivalents . . . . . . . . . . . . . . . . . . $ 2,885 $ 19,203
Accounts receivable. . . . . . . . . . . . . . . . . . . 193,385 224,947
Gas stored underground . . . . . . . . . . . . . . . . . 114,862 109,615
Advances and prepayments for gas . . . . . . . . . . . . 28,622 32,951
Gas-purchase settlements recoverable from customers. . . 23,943 42,800
Other. . . . . . . . . . . . . . . . . . . . . . . . . . 126,896 78,051
---------- ----------
Total current assets . . . . . . . . . . . . . . 490,593 507,567
---------- ----------
Investments. . . . . . . . . . . . . . . . . . . . . . . 56,010 86,208
---------- ----------
Property, Plant and Equipment (at cost)
Natural gas transmission and distribution. . . . . . . . 1,596,773 1,508,531
Natural gas and oil exploration and production (full-cost
method). . . . . . . . . . . . . . . . . . . . . . . 2,070,318 1,950,516
Natural gas liquids processing . . . . . . . . . . . . . 76,333 69,028
Power. . . . . . . . . . . . . . . . . . . . . . . . . . 32,186 31,564
General and other. . . . . . . . . . . . . . . . . . . . 26,672 34,417
---------- ----------
Total. . . . . . . . . . . . . . . . . . . . . . 3,802,282 3,594,056
Less accumulated depreciation and amortization . . . . . 1,549,717 1,476,003
---------- ----------
Net property, plant and equipment. . . . . . . . 2,252,565 2,118,053
---------- ----------
Other Assets . . . . . . . . . . . . . . . . . . . . . . 47,131 48,433
---------- ----------
Total. . . . . . . . . . . . . . . . . . . . . $2,846,299 $2,760,261
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Commercial paper . . . . . . . . . . . . . . . . . . . $ 151,000 $ 31,500
Current maturities of senior long-term debt. . . . . . . 10,600 10,600
Accounts payable and other accrued liabilities . . . . 401,587 442,395
Accrued interest . . . . . . . . . . . . . . . . . . . . 35,885 34,021
Litigation judgment payable. . . . . . . . . . . . . . . 62,035
Other. . . . . . . . . . . . . . . . . . . . . . . . . 52,522 122,534
---------- ----------
Total current liabilities. . . . . . . . . . . . 651,594 703,085
---------- ----------
Senior Long-term Debt. . . . . . . . . . . . . . . . . . 714,324 628,227
---------- ----------
Convertible Subordinated Debentures. . . . . . . . . . . 90,750 90,750
---------- ----------
Other Liabilities
Deferred income taxes. . . . . . . . . . . . . . . . . 280,051 321,364
Accrued pension costs. . . . . . . . . . . . . . . . . . 53,617 43,027
Other. . . . . . . . . . . . . . . . . . . . . . . . . . 155,493 152,090
---------- ----------
Total other liabilities. . . . . . . . . . . . . 489,161 516,481
---------- ----------
Commitments and Contingent Liabilities (Note 4). . . . .
Shareholders' Equity
Adjustable rate preferred stock. . . . . . . . . . . . 175,000 175,000
Common shareholders' equity. . . . . . . . . . . . . . 725,470 646,718
---------- ----------
Shareholders' equity . . . . . . . . . . . . . . 900,470 821,718
---------- ----------
Total. . . . . . . . . . . . . . . . . . . . . $2,846,299 $2,760,261
========== ==========
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
ENSERCH CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED COMMON SHAREHOLDERS' EQUITY
<CAPTION>
Year Ended December 31
-----------------------------------------
1994 1993 1992
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Common Stock - $4.45 par value,
authorized 100 million shares
Balance at beginning of year. . . . . . . . . . . . . . $296,619 $293,849 $290,593
Issued for stock plans (298; 622; and 732 shares) . . 1,324 2,770 3,256
-------- -------- --------
Balance at end of year (Outstanding shares:
66,954; 66,656; and 66,034) . . . . . . . . . . . . . 297,943 296,619 293,849
-------- -------- --------
Paid in Capital
Balance at beginning of year. . . . . . . . . . . . . . 339,115 353,789 395,105
Excess of proceeds over par value of
common stock issued for stock plans . . . . . . . . 3,107 8,106 7,120
Dividends declared in excess of retained earnings . . (22,780) (48,436)
Series F preferred stock issuance costs . . . . . . . (2,203)
-------- -------- --------
Balance at end of year. . . . . . . . . . . . . . . . . 340,019 339,115 353,789
-------- -------- --------
Retained Earnings (Deficit)
Balance at beginning of year. . . . . . . . . . . . . . 10,984 (45,092)
Net income (loss) . . . . . . . . . . . . . . . . . . 102,317 59,237 (28,006)
Dividends declared. . . . . . . . . . . . . . . . . . (24,952) (25,939) (65,521)
Transfer of dividends declared in excess of
retained earnings to paid in capital. . . . . . . . 22,780 48,436
Other . . . . . . . . . . . . . . . . . . . . . . . . (1) (2) (1)
-------- -------- --------
Balance at end of year. . . . . . . . . . . . . . . . . 88,348 10,984 (45,092)
-------- -------- --------
Foreign Currency Translation Adjustment
Balance at beginning of year. . . . . . . . . . . . . . 2,092 576
Net change during the year. . . . . . . . . . . . . . (2,092) 1,516
-------- -------- --------
Balance at end of year. . . . . . . . . . . . . . . . . 2,092
-------- -------- --------
Unamortized Restricted Stock Compensation
Balance at beginning of year. . . . . . . . . . . . . .
Shares granted (88.5) . . . . . . . . . . . . . . . . (1,261)
Cancellations (13.8). . . . . . . . . . . . . . . . . 192
Amortization. . . . . . . . . . . . . . . . . . . . . 140
Market valuation adjustments. . . . . . . . . . . . . 89
-------- -------- --------
Balance at end of year. . . . . . . . . . . . . . . . . (840)
-------- -------- --------
Common Shareholders' Equity . . . . . . . . . . . . . . $725,470 $646,718 $604,638
======== ======== ========
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ENSERCH Corporation and Subsidiary Companies
All dollar amounts, except per share amounts, in the notes to the consolidated
financial statements are stated in thousands unless otherwise indicated.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The consolidated financial statements include the accounts of ENSERCH
Corporation (ENSERCH or the Corporation) and its majority owned subsidiaries.
The statements of consolidated income and cash flows for 1993 and 1992 have
been restated to reflect the environmental business sold in 1994 as a
discontinued operation.
Earnings per share applicable to common stock are based on the weighted
average number of common shares outstanding during the year, including common
equivalent shares when dilutive. Fully diluted earnings per share are not
presented since the assumed exercise of stock options and conversion of
debentures would not be dilutive.
All highly liquid investments in the United States with a maturity of three
months or less are considered to be cash equivalents.
Information by business segments is presented after the notes and is an
integral part of these financial statements. Non-U.S. operations provided
less than 10% of consolidated revenues and employed less than 10% of
consolidated assets for all periods presented. No customer provided more than
10% of consolidated revenues.
Natural Gas Transmission and Distribution - The Lone Star Gas Company (Lone
Star) division is subject to the accounting requirements prescribed by the
National Association of Regulatory Utility Commissioners. Rates are
established by the Railroad Commission of Texas and by municipal governments.
Lone Star records revenues on the basis of cycle meter readings throughout the
month and accrues revenues for gas delivered from the meter reading dates to
the end of the month. The transmission and distribution system is depreciated
by the straight-line method over approximately 40 years. Gas stored
underground is valued at average cost.
Lone Star has made accruals for payments that may be required for settlement
of gas-purchase contract claims asserted or that are probable of assertion.
Lone Star's rates provide for the recovery of the actual cost of gas,
including out-of-period costs such as gas-purchase contract settlement costs.
Lone Star continually evaluates its position relative to asserted and
unasserted take-or-pay claims, above-market prices or future commitments.
Management believes that the Corporation has not incurred losses for which
reserves should be provided at December 31, 1994.
Natural Gas and Oil Exploration and Production - The full-cost accounting
method prescribed by the Securities and Exchange Commission is followed for
gas and oil properties. Costs directly associated with the acquisition and
evaluation of unproved gas and oil properties are excluded from the
amortization base until the related properties are evaluated. Such unproved
properties are assessed periodically and a provision for impairment is made
to the full-cost amortization base when appropriate. Amortization of evaluated
gas and oil properties is computed on the unit-of-production method using
estimated proved gas and oil reserves quantified on the basis of their
<PAGE>
<PAGE>
equivalent energy content. Amortization of gas and oil properties was
approximately 5.8% in 1994, 6.0% in 1993 and 5.7% in 1992. At December 31,
1994, estimates of future site restoration, dismantlement and abandonment
costs, as assessed on an overall cost center basis, were less than estimates
of future salvage values. Therefore, no accruals were required.
Gas and oil swaps, collars and futures agreements are used to hedge volatile
product prices for a portion (normally 30 to 70 percent) of anticipated future
gas and oil production. The purpose of these hedging activities is to fix the
prices to be received. Under these agreements, payments are received or made
based on the differential between a fixed and a variable product price. These
agreements are settled in cash at or prior to expiration or exchanged for
physical delivery contracts. Realized gains and losses on hedging activities
are deferred and included in income during the month that the related physical
sale occurs. In the event of nonperformance by counterparties, ENSERCH would
be exposed to price risk. ENSERCH does not obtain collateral to support the
agreements but monitors the financial viability of counterparties. ENSERCH
has no off-balance sheet risk of accounting loss.
ENSERCH's 99.2% ownership of Enserch Exploration Partners, Ltd. (EP) was held
primarily through Enserch Processing Partners Limited (EPPL). On December 30,
1994, Enserch Exploration, Inc. (EEX), a newly organized Texas corporation,
acquired all of the partnership interests of EP Operating Limited Partnership
(EPO), the operating partnership of EP in which EP owned a 99% interest and
other ENSERCH companies owned a 1% interest. EPO was then merged into EEX and
thereafter, EP was liquidated. Following the liquidation of EP, EPPL redeemed
ENSERCH's interest in EPPL in exchange for EEX stock and EPPL's operating
assets. ENSERCH's natural gas and oil exploration and production and natural
gas liquids processing operations are now conducted in corporate form.
2. BORROWINGS AND LINES OF CREDIT
<TABLE>
<CAPTION>
Senior Long-term Debt at December 31: 1994 1993
-------- --------
<S> <C> <C>
8.7% Note due 1994 . . . . . . . . . . . . . . . . . . . . . $ $ 29,316
9.11% Average rate note due 1994 . . . . . . . . . . . . . . 100,000
8% Notes due 1997. . . . . . . . . . . . . . . . . . . . . . 100,000 100,000
Variable rate note due 1998 (Interest based on LIBOR). . . . 150,000
7% Notes due 1999. . . . . . . . . . . . . . . . . . . . . . 150,000 150,000
9.06% Note due 1995 through 1999 . . . . . . . . . . . . . . 76,200 86,800
8 7/8% Notes due 2001 . . . . . . . . . . . . . . . . . . . 100,000 100,000
6 3/8% Notes due 2004. . . . . . . . . . . . . . . . . . . . 150,000
7 1/2% to 8.95% Sinking fund debentures
due 1996 to 2002 . . . . . . . . . . . . . . . . . . . . . 73,717
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,276) (1,006)
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . 724,924 638,827
Less current maturities. . . . . . . . . . . . . . . . . . . 10,600 10,600
-------- --------
Noncurrent. . . . . . . . . . . . . . . . . . . . . $714,324 $628,227
======== ========
</TABLE>
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Maturities $10,600 $13,400 $117,400 $167,400 $167,400
</TABLE>
<PAGE>
<PAGE>
The Convertible Subordinated Debentures have an interest rate of 6 3/8%, are
due 2002 and are convertible into common stock at $26.88 per share (equal to
37.20 shares per $1 thousand principal amount). The Debentures may be
redeemed at 103.19% of the principal amount, plus accrued interest, through
March 31, 1995 and at declining premiums thereafter.
Commercial paper totaled $151 million at December 31, 1994 and $32 million at
year-end 1993. The average year-end interest rate on commercial paper
borrowings was 6.3% in 1994 versus 3.5% in 1993.
Lines of credit are maintained that provide for short- and interim-term
borrowings and also support commercial paper borrowings. The aggregate lines
of credit totaled $600 million at December 31, 1994 and expire in 1997. All
lines are on a fee basis and none require compensating balances or restrict
the use of cash. All lines provide for borrowing at prevailing market rates.
The 1992 extraordinary loss included a $10.4 million ($15.8 million pretax)
charge for the estimated cost to terminate an interest-rate swap agreement and
charges totaling $5.0 million ($7.3 million pretax) for call premiums and
other expenses associated with the early extinguishment of high interest-rate
debt. The swap, which expired in January 1995, hedged the interest rate on
$100 million of variable-rate debt.
<TABLE>
<CAPTION>
Interest Costs: 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Interest costs incurred. . . . . . . . . . . . . . . . $ 73,192 $ 81,465(a) $ 99,739
Interest capitalized . . . . . . . . . . . . . . . . . (4,950) (4,461) (5,426)
-------- -------- --------
Interest charged to expense. . . . . . . . . . . . . . $ 68,242 $ 77,004(a) $ 94,313
======== ======== ========
<FN>
(a) Includes interest not related to borrowings of $8.2 million.
</TABLE>
<TABLE>
<CAPTION>
Fair Value of Financial Instruments at December 31: 1994 1993
------------------- ---------------------
Estimated Estimated
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ---------- -------- ---------
<S> <C> <C> <C> <C>
Recoverable gas-purchase contracts (a). . . . . $ 30,264 $ 29,726 $ 47,660 $ 48,864
Senior long-term debt (b) . . . . . . . . . . . 726,200 695,981 639,833 668,878
Convertible debentures (c). . . . . . . . . . . 90,750 77,138 90,750 92,111
<FN>
Estimated fair value: (a) discounted cash flows; (b) variable-rate debt - approximates carrying amount,
exchange traded debt - quoted market prices, and other debt - discounted value using rates for debt with
similar characteristics; (c) quoted market prices.
</TABLE>
The fair value of other financial instruments consisting primarily of cash and
equivalents, accounts receivable, investments, commercial paper and other
short-term borrowings, accounts payable and other accrued liabilities and
accrued interest approximates carrying value. The estimated fair value of
senior long-term debt does not reflect prepayment penalties, which would be
incurred upon early extinguishment.
<PAGE>
<PAGE>
3. SHAREHOLDERS' EQUITY
As of December 31, 1994, 8,071,367 shares of unissued common stock were
reserved for issuance under stock plans and conversion of convertible
subordinated debentures. The Corporation is authorized to issue up to
2,000,000 shares of preferred stock and 2,000,000 shares of voting preference
stock.
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
Stated ----------------------- ------------------------
Adjustable Rate Value Shares Shares
Preferred Stock: Per Share Outstanding Amount Outstanding Amount
--------- ----------- ------ ----------- ------
<S> <C> <C> <C> <C> <C>
Series D (Redeemed) . . . . . $ 50 $ 1,500,000 $ 75,000
Series E. . . . . . . . . . . 1,000 100,000 $100,000 100,000 100,000
Series F. . . . . . . . . . . 1,000 75,000 75,000
-------- --------
Total. . . . . . . . . . . $175,000 $175,000
======== ========
</TABLE>
The Series F stock was sold in April 1994 for net proceeds of $73 million and
is represented by three million depositary shares (stated value $25 per
share). The Series E stock is represented by one million depositary shares
(stated value $100 per share).
The Series F stock is redeemable at $25 per depositary share beginning after
May 1, 1999, and the Series E stock is redeemable at the option of the
Corporation at $100 per depositary share at any time. Holders of the
preferred stock are entitled to its stated value upon involuntary liquidation.
Dividend rates are determined quarterly, in advance, based on the "Applicable
Rate" (highest of the three-month Treasury bill rate, the Treasury ten-year
constant maturity rate and either the Treasury twenty-year or thirty-year
constant maturity rate, as defined), as set forth below:
<TABLE>
<CAPTION>
Per Annum Rate (Determined Quarterly)
--------------------------------------------------------------------
Series D Series E Series F
------------- ------------ -------------
<S> <C> <C> <C>
Dividend rate 0.10% below 1.20% below 87% of
Applicable Rate Applicable Rate Applicable Rate
Minimum rate 7.50% 7.00% 4.50%
Maximum rate 15.50% 13.00% 10.50%
</TABLE>
<TABLE>
<CAPTION>
Dividends declared: 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Adjustable Rate Preferred Stock:
Series D ($.42, $3.77, $3.93 per share) $ 625 $ 5,653 $ 5,897
Series E ($7.00, $7.00, $7.01 per depositary share) 7,000 7,000 7,013
Series F ($1.32 per depositary share) 3,955
Common Stock ($.20, $.20, $.80 per share) 13,372 13,286 52,611
------- ------- -------
Total $24,952 $25,939 $65,521
======= ======= =======
</TABLE>
Dividends - Restrictions on the payment of dividends on common stock (other
than stock dividends) or acquisitions of capital stock are contained in a loan
agreement relating to senior long-term debt and in the Restated Articles of
Incorporation. At December 31, 1994, the amount of dividends on common stock
that could be paid under the most restrictive of these agreements was
$423 million.
<PAGE>
<PAGE>
Shareholder Rights Plan - The outstanding shares of common stock include one
voting preference stock contingent purchase right, which is exercisable only
under specific conditions. Under those conditions, each right could be
exercised to purchase one two-hundredth share of a new series of voting
preference stock at an exercise price of $60 or will entitle its holder to
purchase, at a specified exercise price, shares of the Corporation's common
stock (or, in certain circumstances as determined by the Board of Directors,
other consideration) having a value of twice the right's exercise price. The
rights have no voting privileges, expire on May 5, 1996 and are generally
redeemable at $.05 per right until the 15th day following public announcement
that a 20% position has been acquired.
Stock Options - Stock options have been awarded to key employees and are
outstanding under three plans. Options for 9,055 shares granted under a
former plan have an exercise option price equal to par value ($4.45). Options
granted under the other plans have an exercise price of not less than the fair
market value of the common stock on its grant date. At December 31, 1994,
there were 126 participants in the stock option plans. Options become
exercisable over four years and generally expire ten years after the date of
the grant.
<TABLE>
<CAPTION>
1994 Number of Options
Summary of stock option activity: Price ----------------------------------------
Range 1994 1993 1992
--------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding - Beginning
of year. . . . . . . . . . . . . . $ 4.45-$25.63 2,388,970 2,327,410 2,019,069
Granted. . . . . . . . . . . . . . . $18.25 144,700 257,000 342,600
Exercised (a). . . . . . . . . . . . $ 4.45-$12.50 (32,347) (115,270)
Canceled or expired. . . . . . . . . $12.50-$25.63 (192,500) (80,170) (34,259)
--------- --------- ---------
Outstanding - End of year. . . . . . $ 4.45-$25.63 2,308,823 2,388,970 2,327,410
========= ========= =========
Exercisable. . . . . . . . . . . . . $12.50-$25.63 1,838,175 1,737,127 1,294,973
========= ========= =========
<FN>
(a) Price ranges for options exercised in 1993 were $12.50 to $21.00 per share. No options were exercised
in 1992.
</TABLE>
The current stock option plan was amended in February 1994 to include
provisions for granting restricted stock. At December 31, 1994, a total of
74,700 shares of performance-based restricted stock had been issued to certain
executive officers and were outstanding. Performance criteria for lifting the
restrictions is related to three-year total shareholder return compared with
the weighted average of a peer group of companies.
4. COMMITMENTS AND CONTINGENT LIABILITIES
Legal Proceedings - A lawsuit was filed on February 24, 1987, in the 112th
Judicial District of Sutton County, Texas, against subsidiaries and affiliates
of the Corporation and its utility division. The plaintiffs have claimed that
defendants failed to make certain production and minimum-purchase payments
under a gas-purchase contract. The plaintiffs have alleged a conspiracy to
violate purchase obligations, improper accounting of amounts due, fraud,
misrepresentation, duress, failure to properly market gas and failure to act
in good faith. Plaintiffs seek actual damages in excess of $5 million and
punitive damages in an amount equal to 0.5% of the consolidated gross revenues
<PAGE>
<PAGE>
of the Corporation for the years 1982-1986 (approximately $85 million),
interest, costs and attorneys' fees.
Management of the Corporation believes it has meritorious defenses to the
claims made in this and other actions brought in the ordinary course of
business. In the opinion of management, the Corporation will incur no
liability from this and all other pending claims and suits that is material
for financial reporting purposes.
Environmental Matters - The Corporation is subject to federal, state and local
environmental laws and regulations that regulate the discharge of materials
into the environment. Environmental expenditures are expensed or capitalized
depending on their future economic benefit. The level of future expenditures
for environmental matters, including costs of obtaining operating permits,
enhanced equipment monitoring and modifications under the Clean Air Act and
cleanup obligations, cannot be fully ascertained until the regulations that
implement the applicable laws have been approved and adopted. However, the
capital expenditures required to achieve compliances with the Clean Air Act
regulations, in their current form, have been estimated to range from $5 to
$20 million, with expenditures to be made over a two-to three-year period.
It is management's opinion that all such costs, when finally determined, will
not have a material adverse effect on the consolidated financial position or
results of operations of the Corporation.
Commitments - Future minimum commitments are as follows (in millions):
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999 Thereafter
---- ---- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C>
Operating leases . . . . . . . . . . $24.0 $24.0 $12.1 $ 7.4 $5.8 $70.9
Capital leases . . . . . . . . . . . 4.2 4.0 3.9 3.7 1.7 23.3
Gas-purchase contracts . . . . . . . 170.0 110.0 110.0 80.0 30.0 10.0
</TABLE>
Lease Commitments - In 1992, the Corporation entered into operating lease
arrangements to provide financing for its portion of the offshore platforms
and related facilities for the Mississippi Canyon Block 441 (MC 441)(37.5%
owned) and Garden Banks Block 388 (GB 388) (100% owned) projects. The leases
contain fixed-priced purchase options and, if terminated, require a guaranteed
residual payment.
A total of $34 million was required for the MC 441 project. The lease was
modified in the second quarter of 1994 with terms that resulted in capital
lease accounting treatment, a noncash investing and financing transaction.
The noncurrent portion of the lease obligation of $28 million is included in
other noncurrent liabilities.
Under the GB 388 lease arrangement, the lessor will fund the construction cost
of the facilities quarterly, up to a maximum of $235 million, all of which had
been advanced under the lease at December 31, 1994. The facilities will be
leased for an initial period through March 31, 1997. The lease may be
extended for up to three successive two-year periods on such terms as the
Corporation and lessor may agree. The Corporation is constructing the leased
property and has guaranteed completion of construction. The Corporation has
the option to purchase the facilities throughout the lease period and has
guaranteed an estimated residual value for the facilities of approximately
$188 million should the lease terminate. Lease payments are deferred during
construction and will be amortized when production begins.
<PAGE>
<PAGE>
The cost of the Garden Banks facilities is expected to be $330 million, which
includes design modifications and other costs for Block 388 facilities and for
the recent discovery on Block 387. Financing options for the additional costs
currently are being evaluated, including an addition to the current operating
lease arrangement.
The Corporation had a number of other noncancelable long-term operating leases
at December 31, 1994, principally for office space and machinery and
equipment. Rental expenses incurred under all operating leases aggregated
$7.9 million in 1994, $10.8 million in 1993 and $14.2 million in 1992. Rental
income received for subleased office space was $3.6 million in 1994,
$3.4 million in 1993 and $4.7 million in 1992. Future minimum rental income
to be received for subleased office space is $7.7 million over the next five
years.
Gas-Purchase Contracts - Lone Star buys gas under long-term, intrastate
contracts in order to assure reliable supply to its customers. Many of these
contracts require minimum purchases ("take-or-pay") of gas. Based on Lone
Star's estimated gas demand, which assumes normal weather conditions,
requisite gas purchases are expected to substantially satisfy purchase
obligations for the year 1995 and thereafter.
Gas Marketing - Enserch Gas Company (EGC) enters into contracts to purchase
and sell natural gas for physical delivery in the future. At December 31,
1994, EGC had a net commitment to purchase natural gas through January 1996,
for which a $4 million charge was recorded to reflect lower year-end market
prices.
Sales of Receivables - The Corporation has an agreement until 1996 with a
commercial bank for the limited recourse sale of up to $100 million of Lone
Star's receivables. Additional receivables are continually sold to replace
those collected. In a separate agreement, a limited recourse sale of
receivables retained from the sale of Ebasco occurred. As of December 31,
1994 and 1993, the uncollected balances of receivables sold were $133 million
and $200 million, respectively.
Guarantees - The Corporation and/or its subsidiaries are the guarantor on
various commitments and obligations of others aggregating some $111 million
at December 31, 1994. The Corporation is exposed to loss in the event of
nonperformance by other parties. However, the Corporation does not anticipate
nonperformance by the counterparties.
Concentrations of Credit Risk - Natural Gas Transmission and Distribution
operations have trade receivables from a few large industrial customers in
North Central Texas arising from the sale of natural gas. A change in
economic conditions may affect the ability of customers to meet their
contractual obligations. At December 31, 1994 and 1993, the allowance for
possible losses deducted from accounts receivable was $4,686 and $4,753,
respectively. The Corporation believes that its provision for possible losses
on uncollectible accounts receivable is adequate for its credit loss exposure.
<PAGE>
<PAGE>
5. EMPLOYEE BENEFIT PLANS
Pension Plan - A defined benefit pension plan provides retirement income
benefits for substantially all employees. Accrued retirement costs are funded
to the extent such amounts are deductible for federal income tax purposes.
Plan assets include equity and fixed-income securities and cash. Benefits are
based on years of credited service and average compensation.
<TABLE>
<CAPTION>
Components of net pension expense (in millions): 1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
Service cost - benefits earned during the period . . $ 4.8 $12.5 $13.3
Interest cost on projected benefit obligation. . . . 8.1 19.5 18.4
Actual return on assets. . . . . . . . . . . . . . . (3.9) (28.0) (22.7)
Net amortization and deferral. . . . . . . . . . . . (2.3) 3.9 1.0
----- ----- -----
Net periodic pension expense . . . . . . . . . . . . $ 6.7 $ 7.9 $10.0
===== ===== =====
Valuation Assumptions:
Discount rate. . . . . . . . . . . . . . . . . . . . 9.0% 7.25% 8.5%
Rate of increase in compensation levels. . . . . . . 4.0% 4.0% 4.0%
Expected long-term rate of return on assets. . . . . 9.5% 9.5% 10.0%
</TABLE>
<TABLE>
<CAPTION>
Amounts Recognized (in millions):
<S> <C> <C>
Actuarial present value of pension benefit obligation:
Vested benefit obligation. . . . . . . . . . . . . $(237.4) $(268.5)
======= =======
Accumulated benefit obligation . . . . . . . . . . $(249.6) $(277.3)
======= =======
Projected pension benefit obligation . . . . . . . $(271.4) $(311.7)
Plan assets at fair value. . . . . . . . . . . . . . 231.7 243.2
------- -------
Projected benefit obligation in excess of plan assets (39.7) (68.5)
Unrecognized net asset at transition . . . . . . . . (8.0) (9.7)
Unrecognized prior service cost (credit) . . . . . . (2.2) 1.7
Unrecognized net actuarial (gain) loss . . . . . . . (3.7) 26.3
------- -------
Accrued pension cost . . . . . . . . . . . . . . . . $ (53.6) $ (50.2)
======= =======
</TABLE>
ENSERCH retained the pension obligations to former Ebasco and Enserch
Environmental employees, and no further benefits will accrue, thus the decline
in service cost in 1994. Plan curtailment gains of $2.2 million in 1994 and
$6.9 million in 1993 were recognized in discontinued operations. During 1994,
the Ebasco pension plan was merged with the ENSERCH plan.
Investment Plan - A voluntary contributory investment plan is available to
substantially all employees. The Corporation matches a portion of employees'
contributions with ENSERCH common stock. Costs under the plans were
$1.9 million, $3.5 million and $3.5 million in 1994, 1993 and 1992,
respectively.
<PAGE>
<PAGE>
Postretirement Benefits Other than Pensions - Some retirees, including those
of Ebasco, and their dependents receive postretirement medical benefits that
vary in level based on their years of service and retirement date. Employees
hired after July 1, 1989 are not eligible for medical benefits when they
retire. Obligations are not prefunded.
<TABLE>
<CAPTION>
Components of net periodic postretirement benefit cost (in millions): 1994 1993
------- -------
<S> <C> <C>
Service cost - benefits earned during the period . . . . . . . $ .4 $ .4
Interest cost on projected benefit obligation. . . . . . . . . 5.5 5.6
Net amortization and deferral. . . . . . . . . . . . . . . . . 4.3 4.0
------- -------
Net periodic postretirement benefit cost . . . . . . . . . . . $ 10.2 $ 10.0
======= =======
Valuation Assumptions:
Discount rate. . . . . . . . . . . . . . . . . . . . . . . . . 9.0% 7.25%
Medical cost trend rate. . . . . . . . . . . . . . . . . . . . 12.0% 12.0%
Amounts Recognized (in millions):
Accumulated postretirement benefit obligations:
Retirees and dependents. . . . . . . . . . . . . . . . . . . . $ (75.2) $ (72.9)
Fully eligible active plan participants. . . . . . . . . . . . (1.0) (1.6)
Other active plan participants . . . . . . . . . . . . . . . . (6.7) (8.4)
------- -------
Accumulated postretirement benefit obligation. . . . . . . . (82.9) (82.9)
Unrecognized obligation at transition. . . . . . . . . . . . . 62.1 66.2
Unrecognized net actuarial loss. . . . . . . . . . . . . . . . 15.1 14.8
------- -------
Accrued postretirement benefit cost. . . . . . . . . . . . . . $ (5.7) $ (1.9)
======= =======
</TABLE>
The assumed health care cost trend rate is 12.0% for 1994, declining gradually
to 6.0% in 2003, and remaining at that level thereafter. If the health care
cost trend rate were increased by 1%, the accumulated postretirement benefit
obligation as of December 31, 1994 would be increased by $4.8 million and the
net periodic postretirement benefit cost for 1994 by $.4 million.
Prior to 1993, benefit costs were expensed as paid and amounted to
$7.5 million for 1992.
<PAGE>
<PAGE>
6. INCOME TAXES
<TABLE>
<CAPTION>
Provision (benefit) for income taxes
on continuing operations: 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Current
Federal. . . . . . . . . . . . . . . . . . $(10,417) $ 7,239 $ 6,533
State. . . . . . . . . . . . . . . . . . . 560 463 197
Foreign. . . . . . . . . . . . . . . . . . 50 (444) 450
------- ------- -------
Total. . . . . . . . . . . . . . . . . . (9,807) 7,258 7,180
------- ------- -------
Deferred
Federal. . . . . . . . . . . . . . . . . . (59,167) (1,230) (9,682)
State. . . . . . . . . . . . . . . . . . . 455
------- ------- -------
Total. . . . . . . . . . . . . . . . . . (59,167) (775) (9,682)
------- ------- -------
Total . . . . . . . . . . . . . . . . $(68,974) $ 6,483 $(2,502)
======= ======= =======
</TABLE>
<TABLE>
Reconciliation of income taxes (benefit) computed at the federal statutory rate and income-tax expense
(benefit) of continuing operations:
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Income (loss) from continuing
operations before income taxes:
Domestic . . . . . . . . . . . . . . . . . . $ 15,995 $ 8,771 $ 6,768
Foreign. . . . . . . . . . . . . . . . . . . (3,294) (18,469) (8,107)
-------- -------- --------
Total. . . . . . . . . . . . . . . . . . . 12,701 (9,698) (1,339)
Federal statutory rate . . . . . . . . . . . . 35% 35% 34%
-------- -------- --------
Income taxes (benefit) computed at
the federal statutory rate . . . . . . . . 4,445 (3,394) (455)
Impact of 1% increase in
federal statutory rate . . . . . . . . . . 10,810
Change in tax status . . . . . . . . . . . . . (70,000)
State and foreign taxes. . . . . . . . . . . . 397 467 427
Other - net. . . . . . . . . . . . . . . . . . (3,816) (1,400) (2,474)
-------- -------- --------
Total income-tax
expense (benefit). . . . . . . . . . . . $(68,974) $ 6,483 $(2,502)
======== ======== ========
</TABLE>
At the completion of the conversion of EP and EPPL to corporate form, the tax
basis of certain properties of ENSERCH and subsidiary companies receiving EEX
stock in the conversion exceeded the financial basis of such properties.
Also, the financial basis of ENSERCH and subsidiary companies in EEX exceeds
their tax basis in the EEX stock. ENSERCH expects to ultimately recover the
excess financial basis tax free. As a result of the conversion and related
change in tax status, deferred income taxes applicable to the difference
between the financial and tax basis of ENSERCH and subsidiary companies'
investment in the partnerships were reduced by $70 million.
<PAGE>
<PAGE>
Deferred income taxes provided by the liability method for significant
temporary differences based on tax laws and statutory rates in effect at the
December 31, 1994 and 1993 balance sheet dates are as follows:
<TABLE>
<CAPTION>
1994 1993
---------------------------------- -------------------------------
Total Current Noncurrent Total Current Noncurrent
---------- ---------- ---------- ------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Deferred tax assets:
Loss carryforwards . . . . . . $ 71,856 $ 891 $ 70,965 $ 56,405 $ 26,326 $ 30,079
Investment and other tax-
credit carryforwards . . . . 26,726 26,726 36,835 36,835
Accrued pension costs. . . . . 16,491 16,491 17,406 17,406
Reserves for injury and damage
claims . . . . . . . . . . . 8,163 2,800 5,363 17,351 3,710 13,641
All other. . . . . . . . . . . 59,429 29,123 30,306 53,645 13,516 40,129
-------- -------- -------- ------- -------- --------
Total. . . . . . . . . . . . 182,665 32,814 149,851 181,642 43,552 138,090
-------- -------- -------- ------- -------- --------
Deferred tax liabilities:
Property-related
differences. . . . . . . . . 151,452 151,452 182,892 182,892
Exploration and intangible
development costs. . . . . . . 218,289 218,289 248,027 248,027
Deferred gas-purchase contract
settlements . . . . . . . . . . 10,145 8,398 1,747 17,832 14,999 2,833
All other. . . . . . . . . . . . 58,414 58,414 25,904 202 25,702
-------- -------- -------- -------- -------- --------
Total. . . . . . . . . . . . 438,300 8,398 429,902 474,655 15,201 459,454
-------- -------- -------- -------- -------- --------
Net deferred tax liability (asset)$255,635 $(24,416)(a) $280,051 $293,013 $(28,351)(a) $321,364
======== ======== ======= ======== ======== ========
<FN>
(a) Included in other current assets in the balance sheet.
</TABLE>
At December 31, 1994, domestic net operating-loss carryforwards total
$205 million, which begin to expire in 2003, and tax-credit carryforwards
total $27 million, which begin to expire in 1999. The tax benefits of these
carryforwards of $99 million, as shown above, are available to reduce future
income-tax payments.
<TABLE>
<CAPTION>
Cash payments (refunds) of income taxes: 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Federal:
Alternative minimum tax. . . . . . . . . . . $(1,279) $15,400 $ 6,514
Refund of prior year tax payments. . . . . . (2,462)
------- ------- -------
Total. . . . . . . . . . . . . . . . . . . . (1,279) 15,400 4,052
State. . . . . . . . . . . . . . . . . . . . . 6,743 4,193 1,427
Foreign. . . . . . . . . . . . . . . . . . . . 850 608
------- ------- -------
Total. . . . . . . . . . . . . . . . . . . . $ 5,464 $20,443 $ 6,087
======= ======= =======
</TABLE>
<PAGE>
<PAGE>
7. DISCONTINUED OPERATIONS
In October 1994, the Corporation sold Enserch Environmental Corporation, which
conducted the former environmental businesses of Ebasco, for $98 million. The
principal operating assets of Ebasco were sold in December 1993 for net
proceeds of $191 million. Also in December 1993, Dorsch Consult was sold for
$9.3 million, including the assumption of debt. In 1992, the business of H&G
Engineering was sold. Discontinued operations are summarized as follows:
<TABLE>
<CAPTION>
Operating information 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . $ 72,081 $ 1,416,450 $1,256,443
Cost and expenses. . . . . . . . . . . . . . . . . . 68,246 1,391,002 1,231,980
---------- ---------- ----------
Operating income . . . . . . . . . . . . . . . . . . 3,835 25,448 24,463
Other income (expense) - net . . . . . . . . . . . . (583) (14,378)
Interest expense . . . . . . . . . . . . . . . . . . (1,241) (12,488) (15,452)
Income taxes . . . . . . . . . . . . . . . . . . . . (1,225) (5,373) (1,368)
---------- ---------- ----------
Income (loss) from operations. . . . . . . . . . . . 1,369 7,004 (6,735)
Gain (loss) on sale, net of income-tax provision
of $15,750 in 1994 and benefits of $6,725
in 1993 and $1,713 in 1992 . . . . . . . . . . . . 29,250 68,414 (7,076)
Provision for additional costs and
expenses for the wind-up of discontinued
businesses, net of tax benefit of $7,523 . . . . . (9,977)
---------- ---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . $ 20,642 $ 75,418 $ (13,811)
========== ========== ==========
</TABLE>
The tax effect of the 1993 gain on sale differs from tax at the statutory rate
because of permanent differences in financial and tax basis of the assets
sold. The determination of the gain on the sale of the principal operating
assets of Ebasco in 1993 involved significant estimates, including the final
purchase price, realization of the estimated value of retained assets and
related income-tax matters. In 1994, a loss provision of $17.5 million pretax
($10.0 million after-tax) was recorded in recognition that costs and expenses
incurred for the wind-up of discontinued businesses would be greater than
previously estimated. At December 31, 1994, the retained assets of
discontinued businesses consisted principally of billed and unbilled accounts
receivable and retainages (net of valuation allowances) of $36 million and
liabilities of $48 million.
<PAGE>
<PAGE>
8. SUPPLEMENTARY GAS AND OIL INFORMATION
Gas and Oil Producing Activities - The following tables set forth information
relating to gas and oil producing activities. Reserve data for natural gas
liquids attributable to leasehold interests owned by the Corporation are
included in oil and condensate.
<TABLE>
<CAPTION>
Capitalized costs (in millions): 1994 1993
-------- --------
<S> <C> <C>
Proved gas and oil properties. . . . . . . . . . . $1,946.5 $1,851.6
Unproved gas and oil properties. . . . . . . . . . 108.2 84.4
-------- --------
Total . . . . . . . . . . . . . . . . . . . $2,054.7 $1,936.0
======== ========
Accumulated depreciation and
amortization . . . . . . . . . . . . . . . . . . $ 836.3 $ 792.4
======== ========
</TABLE>
<TABLE>
<CAPTION>
Costs incurred (in millions): 1994 1993 1992
------------------ ---------------- ------------------
Non- Non- Non-
U.S. U.S. U.S. U.S. U.S. U.S.
----- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Property acquisition costs:
Proved . . . . . . . . . . . . $ 1.6 $ $ 8.3 $ $ .9 $
Unproved . . . . . . . . . . . 20.6 12.6 .8 9.1 (.1)
Exploration costs. . . . . . . . 58.7 3.3 36.8 4.9 35.4 2.7
Development costs. . . . . . . . 84.2 63.0 16.6
------ ------ ------ ------ ------ ------
Total. . . . . . . . . . . . . $165.1 $ 3.3 $120.7 $ 5.7 $ 62.0 $ 2.6
====== ====== ====== ====== ====== ======
Amortization
(Per MMBtu)(a) . . . . . . . . $ 1.04 $ .98 $ .98
<FN>
(a) Amortization expense per unit of production converted to a common unit of measure, millions of British thermal
units (MMBtu).
</TABLE>
Costs excluded from the amortizable base as of December 31, 1994(in millions):
<TABLE> Total at
<CAPTION> Prior December 31,
Year Incurred 1994 1993 1992 Years 1994
---- ---- ---- ----- ------------
<S> <C> <C> <C> <C> <C>
Property acquisition costs. . . . . $20.6 $11.4 $ 4.2 $10.5 $ 46.7
Exploration costs . . . . . . . . . 19.3 3.8 6.8 9.0 38.9
Development costs . . . . . . . . . 9.9 9.9
Interest capitalized. . . . . . . . 4.5 3.4 3.0 1.8 12.7
----- ----- ----- ----- ------
Total . . . . . . . . . . . . . $54.3 $18.6 $14.0 $21.3 $108.2
===== ===== ===== ===== ======
</TABLE>
Approximately 41% of the excluded costs relates to offshore activities in the
Gulf of Mexico, about 57% is domestic onshore exploration activities and the
remainder is non-U.S. The anticipated timing of the inclusion of these costs
in the amortization computation will be determined by the rate at which
exploratory and development activities continue, which are expected to be
accomplished within ten years.
<PAGE>
<PAGE>
The following information is required and defined by the Financial Accounting
Standards Board. The disclosure does not represent the results of operations
based on historical financial statements. In addition to requiring different
determinations of revenues and costs, the disclosure excludes the impact of
interest expense and corporate overheads.
<TABLE>
<CAPTION>
1994 1993 1992
-------------- --------------- ---------------
Results of Operations Non- Non- Non-
(in millions): U.S. U.S. U.S. U.S. U.S. U.S.
----- ---- ----- ------ ---- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Affiliated. . . . . . . . $110.0 $ $110.0 $ $ 32.8 $
Nonaffiliated . . . . . . 63.5 81.0 137.5
Less:
Production costs . . . . . 45.6 48.5 46.3 .1
Exploration costs(a) . . . 7.0 1.0 6.3 1.6 8.2 1.8
Depreciation and
amortization (b) . . . . 85.6 86.0 13.3 82.0 .4
Income-tax effects . . . . 12.3 (.3) 17.5 (5.2) 11.3 (.8)
------ ------ ----- ----- ------ -----
Net producing
activities . . . . . . . . $ 23.0 $ (.7) $ 32.7 $(9.7) $ 22.5 $(1.5)
====== ====== ===== ===== ====== =====
<FN>
(a) Includes internal costs that cannot be directly identified with acquisition, exploration or development
activities.
(b) Excludes a $7.6 million gain from the sale of an inactive offshore pipeline and facilities in 1994 and the
$16.5 million write-down of that pipeline and facilities in 1992. The pipeline and facilities were not
related to gas and oil producing activities. Amounts for 1993 and 1992 include write-off of costs related
to unsuccessful non-U.S. exploratory projects of $13.3 million and $.4 million, respectively.
</TABLE>
Hedging Activities - At December 31, 1994, ENSERCH had outstanding swaps,
collars and futures agreements extending through December 31, 1995 to exchange
payments on 17.8 Bcf of natural gas and 1.2 MMBbls of oil on which ENSERCH had
$4.1 million of net unrealized gains based on the difference between the
strike price and the NYMEX futures price for the applicable trading month.
At December 31, 1994, realized gains on hedging activities of $.9 million were
deferred. The weighted average strike price and market price per Mcf of
natural gas was $2.06 and $1.84, respectively, and the weighted average strike
price and market price per barrel of oil was $17.98 and $17.82, respectively.
<PAGE>
<PAGE>
Gas and Oil Reserves (Unaudited) - The following table of estimated proved and
proved developed reserves of gas and oil has been prepared utilizing estimates
of year-end reserve quantities provided by DeGolyer and MacNaughton,
independent petroleum consultants. Reserve estimates are inherently imprecise
and estimates of new discoveries are more imprecise than those of producing
gas and oil properties. Accordingly, the reserve estimates are expected to
change as additional performance data become available.
<TABLE>
<CAPTION>
United States
----------------------------------------------------------
Gas (MMcf) Oil (MBbl)(a)
---------------------------------- -------------------------
1994 1993 1992 1994 1993 1992
--------- --------- --------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
At January 1 . . . . . . . . . . . . . 1,086,482 1,101,426 1,168,075 39,349 39,231 40,012
Changes in reserves
Revisions of previous estimates . . (25,106) 20,196 (6,811) (499) 1,344 552
Extension, discoveries
and additions. . . . . . . . . . 47,580 34,549 20,817 9,877 1,292 1,444
Purchase of minerals in place . . . 787 4,379 198 14 3 102
Sales of minerals in place. . . . . (894) (4,042) (15,665) (28) (40) (42)
Production. . . . . . . . . . . . . (67,113) (70,026) (65,188) (2,227) (2,481) (2,837)
--------- --------- --------- ------ ------ ------
At December 31 . . . . . . . . . . . . 1,041,736 1,086,482 1,101,426 46,486 39,349 39,231
========= ========= ========= ====== ====== ======
Proved Developed Reserves:
At January 1. . . . . . . . . . . . 735,093 676,851 974,822 15,380 14,844 19,738
At December 31. . . . . . . . . . . 698,643 735,093 676,851 14,437 15,380 14,844
--------------
<FN>
(a) Includes condensate and natural gas liquids attributable to leasehold interests of 911 MBbl for 1994,
1,117 MBbl for 1993, and 985 MBbl for 1992.
</TABLE>
In 1994, foreign (non-U.S.) extensions, discoveries and additions resulted in
4,105 MBbl of oil at December 31, 1994.
Standardized Measure of Discounted Future Net Cash Flows Relating to Proved
Gas and Oil Reserve Quantities (Unaudited) - has been prepared using estimated
future production rates and associated production and development costs.
Continuation of economic conditions existing at the balance sheet date was
assumed. Accordingly, estimated future net cash flows were computed by
applying contracts and prices in effect in December to estimated future
production of proved gas and oil reserves, estimating future expenditures to
develop proved reserves and estimating costs to produce the proved reserves
based on average costs for the year. Average prices used in the computations
were: Gas (per Mcf) $2.29 in 1994, $2.38 in 1993 and $2.20 in 1992; Oil (per
barrel) $14.07 in 1994, $11.73 in 1993 and $16.89 in 1992.
Because reserve estimates are imprecise and changes in the other variables are
unpredictable, the standardized measure should be interpreted as indicative
of the order of magnitude only and not as precise amounts.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Standardized Measure (in millions): 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Future cash inflows. . . . . . . . . . . . . . . . . . $3,101.1 $3,047.0 $3,080.0
Future production and development costs. . . . . . . . 1,218.5 1,057.9 1,057.2
-------- -------- --------
Future net cash flows. . . . . . . . . . . . . . . . . 1,882.6 1,989.1 2,022.8
Less 10% annual discount . . . . . . . . . . . . . . . 788.5 886.5 910.2
-------- -------- --------
Discounted future net cash flows before income tax . . 1,094.1 1,102.6 1,112.6
Future income-tax expense. . . . . . . . . . . . . . . (499.3) (528.0) (556.5)
Plus 10% annual discount on income taxes . . . . . . . 232.4 256.0 263.6
-------- -------- --------
Standardized measure of discounted future net
cash flows . . . . . . . . . . . . . . . . . . . . $ 827.2 $ 830.6 $ 819.7
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Change in Standardized Measure (in millions):
<S> <C> <C> <C>
Sales and transfers of gas and oil produced, net of
production costs. . . . . . . . . . . . . . . . . . . $(120.8) $(136.2) $(115.8)
Changes in prices, net of production and future
development costs.. . . . . . . . . . . . . . . . . . (15.6) (.5) 21.8
Extensions, discoveries and improved recovery,
less related costs. . . . . . . . . . . . . . . . . . 121.3 41.4 22.3
Other purchases of minerals in place. . . . . . . . . . 1.6 9.4 .9
Revisions of previous quantity estimates. . . . . . . . (87.1) (28.5) 17.3
Sale of minerals in place.. . . . . . . . . . . . . . . (1.3) (4.9)
Accretion of discount . . . . . . . . . . . . . . . . . 102.7 105.4 102.8
Net change in income taxes. . . . . . . . . . . . . . . 5.1 20.9 (40.2)
Other . . . . . . . . . . . . . . . . . . . . . . . . . (9.3) (1.0) 3.3
------- ------- -------
Total. . . . . . . . . . . . . . . . . . . . . . . . . $(3.4) $ 10.9 $ 7.5
======= ======= =======
</TABLE>
<PAGE>
<PAGE>
<TABLE>
SUMMARY OF BUSINESS SEGMENTS
ENSERCH Corporation and Subsidiary Companies
<CAPTION>
Natural Gas
Natural Gas and Oil
Transmission Exploration Natural Gas General
and and Liquids and
Distribution Production Processing Power Other Consolidated
------------ ---------- ----------- ------- ------- ------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues from Nonaffiliates
1994 . . . . . . . . . . . . . . . $1,669,941 $ 68,949 $73,042 $ 45,499 $ $1,857,431
1993 . . . . . . . . . . . . . . . 1,528,435 79,780 76,351 48,635 1,733,201
1992 . . . . . . . . . . . . . . . 1,302,922 138,708 81,654 45,728 1,569,012
Intersegment Revenues from
Affiliates (eliminated
in consolidation)
1994 . . . . . . . . . . . . . . . 19,083 110,191 14,404 143,678
1993 . . . . . . . . . . . . . . . 19,484 110,016 9,434 138,934
1992 . . . . . . . . . . . . . . . 15,336 32,836 5,312 53,484
Operating Income (Loss)
1994 . . . . . . . . . . . . . . . 63,178 25,617 1,007 5,761 (8,114) 87,449
1993 . . . . . . . . . . . . . . . 101,458 (37,293) 5,037 9,795 (11,865) 67,132
1992 . . . . . . . . . . . . . . . 101,996 (6,175) 13,092 13,379 (16,846) 105,446
Depreciation and Amortization
1994 . . . . . . . . . . . . . . . 40,373 79,594 4,744 1,403 619 126,733
1993 . . . . . . . . . . . . . . . 37,484 100,687 4,003 1,470 598 144,242
1992 . . . . . . . . . . . . . . . 35,711 100,167 3,805 1,578 1,122 142,383
Identifiable Assets
1994 . . . . . . . . . . . . . . . 1,326,322 1,295,231 34,112 41,794 148,840(a) 2,846,299
1993 . . . . . . . . . . . . . . . 1,313,722 1,193,525 26,123 32,632 194,259(a) 2,760,261
1992 . . . . . . . . . . . . . . . 1,333,171 1,167,349 24,761 14,706 603,693(a) 3,145,680
Gross Additions to Property,
Plant and Equipment
1994 . . . . . . . . . . . . . . . 116,599 133,254 9,042 622 493 260,010
1993 . . . . . . . . . . . . . . . 91,923 119,566 5,779 373 970 218,611
1992 . . . . . . . . . . . . . . . 75,795 65,787 1,228 432 1,076 144,318
<FN>
Certain of the business segments provide services or sell products to one or more of the other segments.
Generally, such sales are made at prices comparable with those received from nonaffiliated customers for
similar products or services.
(a) Includes $62,622 in 1994, $102,291 in 1993 and $463,136 in 1992 related to discontinued operations.
</TABLE>
<PAGE>
<PAGE>
Quarterly Results (Unaudited) - The results of operations by quarters are
summarized below and have been restated for the discontinuance of the
environmental business. In the opinion of the Corporation, after the
restatement, all adjustments (consisting only of normal recurring accruals)
necessary for a fair presentation have been made.
<TABLE>
<CAPTION>
Quarter Ended
-----------------------------------------------------------
March 31 June 30 September 30 December 31
----------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
1994:
Revenues. . . . . . . . . . . . . . . . . . . . . . . $565,702 $350,149 $439,726 $501,854
Operating Income (Loss) . . . . . . . . . . . . . . . 70,909 (775) (4,135) 21,450(a)
Income (Loss) from Continuing Operations. . . . . . . 35,364 (11,971) (14,966) 73,248(a)(b)
Income from Discontinued Operations . . . . . . . . . 562 743 399 18,938
Net Income (Loss) . . . . . . . . . . . . . . . . . . 35,926 (11,228) (14,567) 92,186
Earnings (Loss) Applicable to Common Stock. . . . . . 33,082 (14,000) (17,547) 89,163
Per Share of Common Stock:
Income (loss) from continuing operations after
provision for dividends on preferred stock . . . . $ .49 $ (.22) $ (.27) $ 1.05
Discontinued operations. . . . . . . . . . . . . . . .01 .01 .01 .28
-------- -------- -------- --------
Earnings (loss) applicable to
common stock. . . . . . . . . . . . . . . . . . . . $ .50 $ (.21) $ (.26) $ 1.33
======== ======== ======== ========
1993:
Revenues. . . . . . . . . . . . . . . . . . . . . . . $552,512 $353,190 $331,101 $496,398
Operating Income (Loss) . . . . . . . . . . . . . . . 78,461 25,556 188 (37,073)(d)(e)
Income (Loss) from Continuing Operations. . . . . . . 37,989 5,067 (27,688)(c) (31,549)(d)(e)
Income (Loss) from Discontinued Operations. . . . . . 221 (12) 4,874 70,335
Net Income (Loss) . . . . . . . . . . . . . . . . . . 38,210 5,055 (22,814) 38,786
Earnings (Loss) Applicable to Common Stock. . . . . . 35,026 1,889 (25,970) 35,629
Per Share of Common Stock:
Income (loss) from continuing operations after
provision for dividends on preferred stock. . . . $ .53 $ .03 $ (.46) $ (.52)
Discontinued operations. . . . . . . . . . . . . . . .07 1.05
-------- -------- -------- --------
Earnings (loss) applicable to
common stock. . . . . . . . . . . . . . . . . . . . $ .53 $ .03 $ (.39) $ .53
======== ======== ======== ========
<FN>
(a) Includes a $4.9 million gain from the sale of an inactive offshore pipeline and facilities ($7.6 million pretax).
(b) Includes a $70 million reduction of deferred income taxes as a result of the conversion of partnerships to corporate
form and resulting change in tax status.
(c) Includes a $10.8 million charge from the 1% increase in the statutory federal income-tax rate on corporations.
(d) Includes a $7.8 million charge principally for severance expenses associated with re-engineering Lone Star Gas Company's
distribution operations ($12.0 million pretax).
(e) Includes a $26.9 million charge as a result of an adverse judgment in litigation ($41.4 million pretax) and a $6.7
million write-off of non-U.S. gas and oil assets ($10.3 million pretax).
</TABLE>
Reconciliation of Previously Reported Quarterly Information
<TABLE>
Quarterly amounts previously reported for 1993 and the first two quarters of 1994 have
been decreased to give effect to the sale of the environmental business as follows:
<CAPTION>
Quarter Ended
----------------------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
1994:
Revenues. . . . . . . . . . . . . . . . . . . . . $(40,015) $(45,742)
Operating Income (Loss) . . . . . . . . . . . . . (1,933) (856)
Income (Loss) from Continuing Operations. . . . . (562) (743)
1993:
Revenues. . . . . . . . . . . . . . . . . . . . . $(41,037) $(41,037) $(41,039) $(45,811)
Operating Income (Loss) . . . . . . . . . . . . . (1,266) (1,275) (1,268) (1,871)
Income (Loss) from Continuing Operations. . . . . (287) (286) (325) (571)
</TABLE>
<PAGE>
<PAGE>
COMMON STOCK MARKET PRICES AND DIVIDEND INFORMATION
MARKET PRICES - ENSERCH COMMON STOCK
The Corporation's common stock is traded principally on the New York Stock
Exchange. The following table shows the high and low sales prices per share
of the common stock of the Corporation reported in the New York Stock Exchange
- Composite Transactions report for the periods shown as quoted in The Wall
Street Journal.
<TABLE>
<CAPTION>
1994 1993 1992
------------------- ------------------- --------------------
High Low High Low High Low
------------------- ------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
First Quarter . . . . . $19 1/8 $12 7/8 $19 1/8 $14 1/8 $14 3/8 $10 3/8
Second Quarter. . . . . 15 1/4 12 5/8 19 5/8 16 7/8 16 3/8 12 1/8
Third Quarter . . . . . 16 1/2 13 1/8 22 5/8 17 1/2 16 1/8 14
Fourth Quarter. . . . . 15 12 1/8 21 1/4 15 1/2 16 1/2 13 3/4
1991 1990 1989
------------------- ------------------- --------------------
High Low High Low High Low
------------------- ------------------- --------------------
First Quarter . . . . . $20 1/2 $16 7/8 $28 $23 3/8 $22 1/8 $18 5/8
Second Quarter. . . . . 21 3/8 17 1/8 27 7/8 23 24 7/8 19 1/4
Third Quarter . . . . . 18 3/4 15 5/8 28 1/8 24 26 1/4 22 7/8
Fourth Quarter. . . . . 17 1/2 12 3/4 27 5/8 18 1/2 27 1/2 20 7/8
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCK DATA AT YEAR END 1994 1993 1992 1991 1990 1989
----- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Shareholders of Record 19,614 20,406 22,832 23,979 25,090 27,062
------ ------ ------ ------ ------ -------
Shares Outstanding (000's) 66,954 66,656 66,034 65,302 64,764 64,436
------ ------ ------ ------ ------ ------
</TABLE>
DIVIDENDS PER SHARE OF COMMON STOCK
As of December 31, 1994, the Corporation had paid 202 consecutive quarterly
cash dividends on its common stock. At December 31, 1994, $423 million of
common shareholders' equity was free of restrictions as to the payment of
dividends and redemption of capital stock. The declaration of future
dividends will be dependent upon business conditions, earnings, cash
requirements and other relevant factors. In February 1995, a quarterly cash
dividend of $.05 per share was declared, payable March 6, 1995, to
shareholders of record on February 24, 1995. Quarterly cash dividends on
common stock were $.05 per share (annual rate of $.20 per share) in both 1994
and 1993 and $.20 per share (annual rate of $.80 per share) for the four
preceeding years.
In November 1990, two million shares of PESC common stock obtained in
connection with the sale of Pool Company were distributed to ENSERCH
shareholders, which had a value equivalent to $.33 per share of ENSERCH common
stock.
<PAGE>
EXHIBIT 3.1
RESTATED ARTICLES OF INCORPORATION
(Without Amendment)
OF
ENSERCH CORPORATION
1. ENSERCH CORPORATION, pursuant to the provisions of Article
4.07 of the Texas Business Corporation Act, hereby adopts Restated
Articles of Incorporation which accurately copy the Articles of
Incorporation and all Amendments thereto that are in effect to date
and such Restated Articles of Incorporation contain no change in
any provision thereof.
2. The Restated Articles of Incorporation were adopted by the
Board of Directors of the Corporation on the 12th day of May, 1987.
3. The Articles of Incorporation and all Amendments and
Supplements thereto are hereby superseded by the following Restated
Articles of Incorporation which accurately copy the entire text
thereof:
ARTICLE ONE
The name of the corporation is ENSERCH CORPORATION.
ARTICLE TWO
The purposes for which the corporation is organized are:
(1) To store, transport, buy and sell oil, gas, salt,
brine and other mineral solutions and liquefied minerals; also
sand and clay for the manufacture and sale of clay products;
except that the corporation shall not engage directly in the
oil pipeline business within the State of Texas;
(2) To engage in all phases of the gas public utility
business, including but not limited to the purchase and sale,
transportation and distribution of natural gas, butanes,
propanes and the various component parts and constituents
thereof;
(3) To explore for, produce, purchase and sell, store,
process and manufacture, transport and distribute oil, gas and
all other minerals except that the corporation shall not
engage directly in the oil pipeline business within the State
of Texas;
(4) To engage in all phases of the business of
developing, producing, purchasing, storing, transporting,
distributing and selling all forms of energy, including but
not limited to gas, electric and atomic energy;
(5) To engage in all phases of the chemical business,
including but not limited to the purchase and sale,
production, manufacture, transportation and distribution of
all kinds of chemicals and the raw materials from which they
are derived;
(6) To manufacture, produce, purchase or otherwise
acquire, sell or dispose of, distribute, mortgage, pledge,
lease, repair, install, operate, deal in and with, whether as
principal or agent, products, goods, appliances, wares,
merchandise, fixtures, plants, structures, machinery, and
materials of every kind and description, and to lend money for
the carrying out of such purposes and to take and hold real
and personal property for the payment of such funds so loaned;
(7) To operate a gas, electric current and power
corporation, which shall have power to generate, make and
manufacture, transport and sell gas, electric current and
power to individuals, the public and municipalities for light,
heat, power and other purposes, and to make reasonable charges
therefor; to construct, maintain and operate power plants and
substations and such machinery, apparatus, pipes, poles,
wires, devices and arrangements as may be necessary to operate
said lines at and between different points in this state; to
own, hold and use such lands, rights-of-way, easements,
franchises, buildings and structures as may be necessary for
the purpose of such corporation;
(8) To own all or any part of the stock of other
corporations including but not limited to one or more
corporations engaged in the oil and gas producing business and
one or more corporations engaged in the oil pipeline business;
(9) To engage in all phases of practical and scientific
research;
(10) To do all and everything necessary, suitable, and
proper for the accomplishment of any of the purposes or the
attainment of any of the objects hereinabove set forth, either
alone or in association with other corporations, firms or
individuals, and to do every other act or acts, thing or
things incidental or pertinent to or growing out of or
connected with the aforesaid objects or purposes or any part
or parts thereof, provided the same be not inconsistent with
the laws under which this corporation is organized;
(11) In connection with the doing of all and everything
or of anything necessary, suitable or proper for the
accomplishment of any of the purposes or the attainment of any
of the objects hereinabove set forth, to exercise all or any
and to exercise each of the powers granted to corporations by
the Texas Business Corporation Act or by any other statutes or
laws of the State of Texas.
ARTICLE THREE
The places where the business of the corporation is to be
transacted are: the City of Dallas in Dallas County, Texas, and
elsewhere within or without the State of Texas in accordance with
the laws of said State; and its principal place of business and
domicile is to be in the city of Dallas, County of Dallas, State of
Texas. The post office address of the Company's initial registered
office is 300 South St. Paul Street, Dallas, Texas, and the name of
the Company's registered agent at such address is Michael G.
Fortado.
ARTICLE FOUR
The period of its duration is perpetual.
ARTICLE FIVE
The number of Directors constituting the Board of Directors is
nine, subject to being increased or decreased as the by-laws of the
corporation may provide, but in no event shall there be less than
three Directors; and the names and residences of the existing
Directors of the Company who are to serve until the next regular
Annual Meeting of the Stockholders or until their successors are
elected and qualify are:
<TABLE>
<S> <C> <C>
W. C. McCord 300 South St. Paul Street Dallas,
Texas
William B. Boyd 40 West 40th Street New York,
New York
B. A. Bridgewater, Jr. 8400 Maryland Avenue St. Louis,
Missouri
T. C. Cochran, Jr. 40 Standish Boulevard Pittsburgh,
Pennsylvania
Preston M. Geren, Jr. 619 Overton Park Bank Fort Worth,
4200 South Hulen Texas
Edmond R. Haggar 6113 Lemmon Avenue Dallas,
Texas
Edward J. Ledder 6342 Canterbury Lane Mariner Sands,
Stuart, Florida
Lord Nelson 1 Stanhope Gate London, England
of Stafford
W. Ray Wallace 2525 Stemmons Expressway Dallas,
Texas
</TABLE>
ARTICLE SIX
The total number of shares of all classes of stock which the
Company shall have authority to issue is 104,000,000 of which
2,000,000 shares are of no par value and are of a class designated
Preferred Stock, 2,000,000 shares are of no par value and of a
class designated Voting Preference Stock and 100,000,000 shares of
which are of the par value of $4.45 per share and are of a class
designated Common Stock. The preferences, limitations and relative
rights of the Preferred Stock, Voting Preference Stock and the
Common Stock shall be as follows:
DIVISION A
THE PREFERRED STOCK
1. The shares of Preferred Stock may be divided into and
issued in series. Each such series shall be so designated as to
distinguish the shares thereof from the shares of all other series
and classes, and all shares of the Preferred Stock shall be
identical, except as to the following relative rights and
preferences, as to which there may be variations between different
series:
a. The rate of dividend;
b. The price at and the terms and conditions on which
shares may be redeemed;
c. The amount payable upon shares in the event of
involuntary liquidation;
d. The amount payable upon shares in the event of
voluntary liquidation;
e. Sinking fund provisions for the redemption or purchase
of shares;
f. The terms and conditions on which shares may be
converted, if the shares of any series are issued with the
privilege of conversion;
g. Voting rights.
No change shall be made in any of the rights and preferences
of any series of Preferred Stock at the time outstanding in those
respects in which the shares thereof vary from the shares of other
series of Preferred Stock at the time outstanding without the
affirmative vote at a meeting of the holders of shares representing
at least two-thirds of the votes entitled to be cast with respect
to the shares of such series of Preferred Stock outstanding on the
record date for such meeting in addition to such other vote, if
any, as may be required for such change under the applicable
provisions of these articles or of the laws of the State of Texas
at the time applicable thereto.
2. To the extent that series of Preferred Stock have not been
established and variations in the relative rights and preferences
as between series have not been fixed and determined in these
articles, authority is vested in the Board of Directors of the
Company, by resolution or resolutions providing for the issuance
thereof, to divide the shares of Preferred Stock into and to
establish series of Preferred Stock, to fix and determine the
relative rights and preferences of the shares of any series so
established, and to issue and sell any and all of the authorized
and unissued shares of Preferred Stock as shares of any series
thereof established by action of the Board of Directors pursuant
hereto.
3. The following provisions shall apply to all shares of the
Preferred Stock irrespective of series:
a. To the extent that the resolution or resolutions
creating any series of Preferred Stock shall provide that any
dividends shall be paid thereon, the holders of Preferred
Stock of each series shall be entitled to receive on the dates
and for the periods hereinafter set forth, dividends in cash,
payable when and as declared by the Board of Directors, at
such rates as shall be determined for the respective series,
from the date upon which such shares shall have been
originally issued. Such dividends, if any, shall be cumulative
so that no dividend (other than a dividend payable in Common
Stock of the Company) or other distribution shall be paid or
declared or made on, and no amounts shall be applied to the
purchase or redemption of, the Common Stock or any other class
of stock ranking junior to the Preferred Stock as to dividends
or assets unless (i) full cumulative dividends for all past
dividend periods shall have been paid or declared and set
apart for payment, and full cumulative dividends for the then
current dividend period shall have been or simultaneously
therewith shall be paid or declared, on outstanding Preferred
Stock of all series entitled thereto at the rates determined
for the respective series, and (ii) after giving effect to
such payment of dividend, other distribution, purchase or
redemption, the aggregate capital of the Company 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 Company and its subsidiaries shall
exceed the aggregate amount payable on involuntary
dissolution, liquidation or winding up of the Company 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 dividend, other
distribution, purchase or redemption. Dividends shall not be
paid or declared and set apart for payment on the Preferred
Stock of any one series for any dividend period unless
dividends have been or are contemporaneously paid or declared
and set apart for the payment on the Preferred Stock of all
series entitled thereto for all dividend periods terminating
on the same or earlier date. The term "dividend period" shall
mean any of the four calendar quarters in each year commencing
respectively on the first day of February, May, August and
November. The first day of each such calendar quarter shall be
the dividend payment date for the regular quarterly dividend
payable for the preceding dividend period of such series,
except that the first dividend on shares of each series shall
be payable 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.
b. In the event of any dissolution, liquidation or
winding up of the Company, whether voluntarily or
involuntarily, the holders of Preferred Stock of each series,
without any preference of the shares of any series of
Preferred Stock over the shares of any other series of
Preferred Stock, shall be entitled to receive in cash out of
the assets of the Company, whether capital, surplus, or other,
before any distribution of the assets shall be made to the
holders of Common Stock or of any other class of stock ranking
junior to the Preferred Stock as to dividends or assets, the
amount determined pursuant to paragraphs "1,c" and "1,d" of
this Division A to be payable on the shares of such series in
the event of voluntary or involuntary dissolution, liquidation
or winding up, as the case may be, together in all cases with
unpaid accumulated dividends, if any, to the date fixed for
such payment. If the assets shall not be sufficient to pay in
full the amounts so determined to be payable on all shares of
the Preferred Stock in the event of such voluntary or
involuntary dissolution, liquidation or winding up, as the
case may be, then the assets available for payment shall be
distributed ratably among the holders of the Preferred Stock
of all series in accordance with the amounts so determined to
be payable on the shares of each series in the event of
voluntary or involuntary dissolution, liquidation or winding
up, as the case may be, in proportion to the full preferential
amounts to which they are respectively entitled. After payment
to the holders of the Preferred Stock of the full preferential
amounts hereinbefore provided for, the holders of Preferred
Stock will have no other rights or claims to any of the
remaining assets of the Company either upon distribution of
such assets or upon dissolution, liquidation or winding up.
The sale of all or substantially all the property of the
Company to, or the merger or consolidation of the Company into
or with, any other corporation, or the purchase or redemption
by the Company of any shares of its Preferred Stock or its
Common Stock or any other class of its stock shall not be
deemed to be a distribution of assets or a dissolution,
liquidation or winding up for the purposes of this paragraph.
c. So long as full cumulative dividends on all
outstanding shares of Preferred Stock for all dividend periods
ending on or prior to the date fixed for redemption shall have
been paid or declared and set apart for payment and subject to
any applicable requirements of Texas law, the Company may, (i)
at the option of the Board of Directors of the Company, redeem
the whole or any part of any series of Preferred Stock
determined by it to be redeemable pursuant to paragraph "1,b"
of this Division A, or (ii) redeem the whole or any part of
any series of Preferred Stock to meet any sinking fund
requirement determined pursuant to paragraph "1,e" of this
Division A, in each case on the terms and conditions and at
the redemption price so determined for such series plus the
amount of unpaid accumulated dividends, if any, to the date of
such redemption. All such redemptions of Preferred Stock shall
be effected in accordance with the Procedure for Redemptions
as set forth in the Texas Business Corporation Act.
d. So long as full cumulative dividends on all
outstanding shares of Preferred Stock for all dividend periods
ending on or prior to the date of purchase shall have been
paid or declared and set apart for payment and subject to any
applicable requirements of Texas law, the Company may
purchase, directly or indirectly, shares of Preferred Stock of
any series to the extent of the aggregate of unrestricted
capital surplus available therefore and unrestricted reduction
surplus available therefore.
e. So long as any shares of the Preferred Stock are
outstanding, the Company shall not, without the affirmative
vote at a meeting of the holders of shares representing at
least two-thirds of the votes entitled to be cast with respect
to the shares of Preferred Stock outstanding on the record
date for such meeting, adopt an amendment to these Articles if
such amendment would (i) authorize or create, or increase the
authorized amount of, any class of stock which is entitled to
dividends or assets in priority to or on a parity with the
Preferred Stock, (ii) increase the authorized number of shares
of Preferred Stock, or (iii) change any of the rights or
preferences of the then outstanding Preferred Stock or any
series thereof.
f. So long as any shares of the Preferred Stock shall be
outstanding, the Company shall not, without the affirmative
vote at a meeting of the holders of shares representing a
majority of the votes entitled to be cast with respect to the
shares of the Preferred Stock outstanding on the record date
for such meeting, 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 of the Company and
its subsidiaries as hereinafter in this paragraph "f"
defined, 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 Company and its subsidiaries, as
hereinafter in this paragraph "f" defined, (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 will be outstanding
immediately after the issuance of such shares; and
(ii) the aggregate capital of the Company 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 Company
and its subsidiaries, shall be at least equal to the
aggregate amount payable upon involuntary dissolution,
liquidation or winding up of the Company 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.
Whenever used in the paragraph "f", the following terms shall
have the following meanings:
The term "consolidated gross income of the Company and
its subsidiaries" shall mean the consolidated net income of
the Company and its subsidiaries, as hereinafter defined, plus
the amounts deducted in the computation of such consolidated
net income for interest charges on indebtedness of the Company
and its subsidiaries and for dividends paid or accrued on the
Preferred Stock of the Company and on any class of stock
ranking prior to or on a parity with the Preferred Stock as to
dividends or assets.
The term "consolidated net income of the Company and its
subsidiaries" shall mean the consolidated gross earnings of
the Company and its subsidiaries from all sources less all
proper deductions for operating expenses, taxes (including
income, excess profits and other taxes based on or measured by
income or undistributed earnings or income), interest charges
and other appropriate items, including provision for
maintenance, depreciation and depletion, and less all
dividends paid or accrued on the Preferred Stock of the
Company and all shares of stock, if any, ranking prior thereto
or on a parity therewith as to dividends or assets, which are
applicable to the period in question, and otherwise determined
in accordance with generally accepted accounting principles.
The term "indebtedness of the Company and its
subsidiaries" shall mean all obligations of the Company and
its subsidiaries, whether or not represented by bonds,
debentures or notes, for the repayment of money borrowed by
the Company and its subsidiaries, all deferred obligations of
the Company and its subsidiaries for the payment of the
purchase price of property or assets purchased by the Company
and its subsidiaries and all such obligations assumed by the
Company and its subsidiaries, but shall not include any
customers' deposits or employees' deposit accounts or
employees' pension or other accounts.
g. Shares of any series of Preferred Stock which have
been redeemed (whether through the operation of a sinking fund
or otherwise) or purchased by the Company (whether or not used
or to be used as a credit with respect to any sinking fund
obligation), or which, if convertible or exchangeable, have
been converted or exchanged for shares of stock of any other
class or classes shall, upon the filing of any required
certificate, have the status of authorized and unissued shares
of Preferred Stock and may be reclassified and reissued as
part of a new series of Preferred Stock to be created by
resolution or resolutions of the Board of Directors or as a
part of any other series of Preferred Stock, all subject to
the conditions and restrictions on issuance set forth in
paragraph "f" hereof and in the resolution or resolutions
adopted by the Board of Directors providing for the issue of
any series of Preferred Stock and to any filing required by
law.
h. Upon any issue for money or other consideration of any
stock of the Company that may be authorized from time to time,
or treasury stock, no holder of Preferred Stock shall have any
preemptive or other right to subscribe for, purchase, or
receive any proportionate or other share of the stock so
issued, but the Board of Directors may dispose of all or any
portion of such stock as and when it may determine, free of
any such rights, whether by offering the same to shareholders
or by sale or other disposition as said Board of Directors may
deem advisable.
4. Voting Powers.
a. Except as otherwise provided by law, the holders of
Preferred Stock shall not have any right to vote for the
election of Directors or for any other purpose except as
heretofore set forth in this Division A or as may be provided
with respect to any series pursuant to paragraph "1,g" hereof
or as set forth below. For the purpose of the following
provisions, the Preferred Stock of all series shall be deemed
to be a single class.
Whenever and as often as the full amount of cumulative
dividends payable on the Preferred Stock shall not have been
paid, or declared and a sum sufficient for payment thereof set
apart, for six quarterly dividend periods, the number of
Directors of the Company shall be increased by two and the
holders of the Preferred Stock shall have exclusive right,
voting separately and as a single class, to vote for and elect
such additional directors and the holders of the Common Stock
shall have the exclusive rights, voting separately and as a
class, to elect the remaining number of directors of the
Company. The election of additional directors by holders of
Preferred Stock shall be held at the next annual meeting of
shareholders or may be held at a special meeting of
shareholders, which shall be held upon notice as provided in
the bylaws of the Company for a special meeting of the
shareholders, at the request of the holders of shares
representing not less than ten percent (10%) of the votes
entitled to be cast by the shares of the then outstanding
Preferred Stock, addressed to the Secretary of the Company at
the principal business office. Any vacancy in the Board of
Directors occurring during any period when the Preferred Stock
shall have elected representatives on the Board shall be
filled by a majority vote of the remaining directors (or the
one director) representing the class of stock theretofore
represented by the director causing the vacancy. In the event
of simultaneous vacancies among directors elected by the
holders of the Preferred Stock an election, pursuant to the
provisions of this paragraph, will be held. The right of the
holders of Preferred Stock to elect additional directors shall
cease and the terms of any additional directors elected by the
holders of the Preferred Stock voting as a separate class
shall terminate forthwith whenever full cumulative dividends
on the Preferred Stock shall have been paid, or declared and
a sum sufficient for payment thereof set apart.
b. At all meetings of the shareholders held for the
purpose of electing directors during such times as the holders
of Preferred Stock shall have the exclusive right to elect any
directors of the Company, the presence in person or by proxy
of the holders of a majority of the outstanding shares of
Common Stock shall be required to constitute a quorum of such
class for the election of directors, and the presence in
person or by proxy of the holders of shares representing a
majority of the votes entitled to be cast by the outstanding
shares of Preferred Stock shall be required to constitute a
quorum of such class for the election of directors; provided,
however, that the absence of a quorum of the holders of stock
of either class shall not prevent the election at any such
meeting, or adjournment thereof, of directors by the other
class if the necessary quorum of the holders of stock of such
class is present in person or by proxy at such meeting; and
provided, further, that in the absence of a quorum of the
holders of stock of either class, a majority of those holders
of such stock who are present in person or by proxy shall have
the power to adjourn the election of those directors to be
elected by that class from time to time without notice, other
than announcement at the meeting, until the requisite amount
of holders of stock of such class shall be present in person
or by proxy.
c. Holders of Preferred Stock shall not be entitled to
receive notice of any meeting of shareholders at which they
are not entitled to vote or consent.
DIVISION B
THE VOTING PREFERENCE STOCK
1. Voting Preference Stock shall rank junior to the Preferred
Stock as to dividends and assets. The shares of Voting Preference
Stock may be divided into and issued in series. Each such series
shall be so designated as to distinguish the shares thereof from
the shares of all other series and classes, and all shares of the
Voting Preference Stock shall be identical, except as to the
following relative rights and preferences, as to which there may be
variations between different series:
a. The rate of dividend;
b. The price at and the terms and conditions on which
shares may be redeemed;
c. The amount payable upon shares in the event of
involuntary liquidation;
d. The amount payable upon shares in the event of
voluntary liquidation;
e. Sinking fund provisions for the redemption or
purchase of shares;
f. The terms and conditions on which shares may be
converted, if the shares of any series are issued
with the privilege of conversion;
g. Voting rights.
No change shall be made in any of the rights and preferences
of any series of Voting Preference Stock at the time outstanding in
those respects in which the shares thereof vary from the shares of
other series of Voting Preference Stock at the time outstanding
without the affirmative vote at a meeting of the holders of shares
representing at least two-thirds of the votes entitled to be cast
with respect to the shares of such series of Voting Preference
Stock outstanding on the record date for such meeting in addition
to such other vote, if any, as may be required for such change
under the applicable provisions of these articles or of the laws of
the State of Texas at the time applicable thereto.
2. To the extent that series of Voting Preference Stock have
not been established and variations in the relative rights and
preferences as between series have not been fixed and determined in
these articles, authority is vested in the Board of Directors of
the Company, by resolution or resolutions providing for the
issuance thereof, to divide the shares of Voting Preference Stock
into and to establish series of Voting Preference Stock, to fix and
determine the relative rights and preferences of the shares of any
series so established, and to issue and sell any and all of the
authorized and unissued shares of Voting Preference Stock as shares
of any series thereof established by action of the Board of
Directors pursuant hereto.
3. The following provisions shall apply to all shares of the
Voting Preference Stock irrespective of series:
a. To the extent that the resolution or resolutions
creating any series of Voting Preference Stock shall provide
that any dividends shall be paid thereon, and subject to the
prior preference with respect to dividends upon Preferred
Stock set forth in paragraph "3,a" of Division A but in
preference to the holders of any other class of shares ranking
junior to the Voting Preference Stock, the holders of Voting
Preference Stock of each series shall be entitled to receive
on the dates and for the periods hereinafter set forth,
dividends in cash, payable when and as declared by the Board
of Directors, at such rates as shall be determined for the
respective series, from the date upon which such shares shall
have been originally issued. Such dividends, if any, shall be
cumulative so that no dividend (other than a dividend payable
in Common Stock of the Company) or other distribution shall be
paid or declared or made on, and no amounts shall be applied
to the purchase or redemption of, the Common Stock or any
other class of stock ranking junior to the Voting Preference
Stock as to dividends or assets unless (i) full cumulative
dividends for all past dividend periods shall have been paid
or declared and set apart for payment, and full cumulative
dividends for the then current dividend period shall have been
or simultaneously therewith shall be paid or declared, on
outstanding Voting Preference Stock of all series entitled
thereto at the rates determined for the respective series, and
(ii) after giving effect to such payment of dividend, other
distribution, purchase or redemption, the aggregate capital of
the Company applicable to all capital stock outstanding
ranking junior to the Voting Preference Stock as to dividends
or assets plus the consolidated earned and capital surplus of
the Company and its subsidiaries shall exceed the aggregate
amount payable on involuntary dissolution, liquidation or
winding up of the Company on all shares of the Voting
Preference Stock and all stock ranking prior to or on a parity
with the Voting Preference Stock as to dividends or assets to
be outstanding after such payment of dividend, other
distribution, purchase or redemption. Dividends shall not be
paid or declared and set apart for payment on the Voting
Preference Stock of any one series for any dividend period
unless dividends have been or are contemporaneously paid or
declared and set apart for the payment on the Voting
Preference Stock of all series entitled thereto for all
dividend periods terminating on the same or earlier date. The
term "dividend period" shall mean any of the four calendar
quarters in each year commencing respectively on the first day
of February, May, August and November. The first day of each
such calendar quarter shall be the dividend payment date for
the regular quarterly dividend payable for the preceding
dividend period of such series, except that the first dividend
on shares of each series shall be payable 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.
b. In the event of any dissolution, liquidation or
winding up of the Company, whether voluntarily or
involuntarily, the holders of Voting Preference Stock of each
series, without any preference of the shares of any series of
Voting Preference Stock over the shares of any other series of
Voting Preference Stock, but subject to the prior preference
of the holders of Preferred Stock as set forth in paragraph
"3,b" of Division A, shall be entitled to receive in cash out
of the assets of the Company, whether capital, surplus, or
other, before any distribution of the assets shall be made to
the holders of Common Stock or of any other class of stock
ranking junior to the Voting Preference Stock as to dividends
or assets, the amount determined pursuant to paragraphs "1,c"
and "1,d" of this Division B to be payable on the shares of
such series in the event of voluntary or involuntary
dissolution, liquidation or winding up, as the case may be,
together in all cases with unpaid accumulated dividends, if
any, to the date fixed for such payment. If the assets
available for distribution to holders of shares of Voting
Preference Stock shall not be sufficient to pay in full the
amounts so determined to be payable on all shares of the
Voting Preference Stock in the event of such voluntary or
involuntary dissolution, liquidation or winding up, as the
case may be, then the assets available for payment shall be
distributed ratably among the holders of the Voting Preference
Stock of all series in accordance with the amounts so
determined to be payable on the shares of each series in the
event of voluntary or involuntary dissolution, liquidation or
winding up, as the case may be, in proportion to the full
preferential amounts to which they are respectively entitled.
After payment to the holders of the Voting Preference Stock of
the full preferential amounts hereinbefore provided for, the
holders of Voting Preference Stock will have no other rights
or claims to any of the remaining assets of the Company either
upon distribution of such assets or upon dissolution,
liquidation or winding up. The sale of all or substantially
all of the property of the Company to, or the merger or
consolidation of the Company into or with, any other
corporation, or the purchase or redemption by the Company of
any shares of its Preferred Stock, or its Voting Preference
Stock or its Common Stock or any other class of its stock
shall not be deemed to be a distribution of assets or a
dissolution, liquidation or winding up for the purposes of
this paragraph.
c. So long as full cumulative dividends on all
outstanding shares of Voting Preference Stock for all dividend
periods ending on or prior to the date fixed for redemption
shall have been paid or declared and set apart for payment and
subject to the provisions of paragraph "3,a" of Division A and
further subject to any applicable requirements of Texas law,
the Company may, (i) at the option of the Board of Directors
of the Company, redeem the whole or any part of any series of
Voting Preference Stock determined by it to be redeemable
pursuant to paragraph "1,b" of this Division B, or (ii) redeem
the whole or any part of any series of Voting Preference Stock
to meet any sinking fund requirement determined pursuant to
paragraph "1,e" of this Division B, in each case on the terms
and conditions and at the redemption price so determined for
such series plus the amount of unpaid accumulated dividends,
if any, to the date of such redemption. All such redemptions
of Voting Preference Stock shall be effected in accordance
with the Procedure for Redemptions as set forth in the Texas
Business Corporation Act.
d. So long as full cumulative dividends on all
outstanding shares of Voting Preference Stock for all dividend
periods ending on or prior to the date of purchase shall have
been paid or declared and set apart for payment and subject to
the provisions of paragraph "3,a" of Division A and further
subject to any applicable requirements of Texas law, the
Company may purchase, directly or indirectly, shares of Voting
Preference Stock of any series to the extent of the aggregate
of unrestricted capital surplus available therefor and
unrestricted reduction surplus available therefor.
e. So long as any shares of the Voting Preference Stock
are outstanding, the Company shall not, without the
affirmative vote at a meeting of the holders of shares
representing at least two-thirds of the votes entitled to be
cast with respect to the shares of Voting Preference Stock
outstanding on the record date for such meeting, adopt an
amendment to these Articles if such amendment would (i)
authorize or create, or increase the authorized amount of, any
class of stock which is entitled to dividends or assets in
priority to or on a parity with the Voting Preference Stock,
(ii) increase the authorized number of shares of Voting
Preference Stock, or (iii) change any of the rights or
preferences of the then outstanding Voting Preference Stock or
any series thereof.
f. Shares of any series of Voting Preference Stock which
have been redeemed (whether through the operation of a sinking
fund or otherwise) or purchased by the Company (whether or not
used or to be used as a credit with respect to any sinking
fund obligation), or which, if convertible or exchangeable,
have been converted or exchanged for shares of stock of any
other class or classes shall, upon the filing of any required
certificate, have the status of authorized and unissued shares
of Voting Preference Stock and may be reclassified and
reissued as part of a new series of Voting Preference Stock to
be created by resolution or resolutions of the Board of
Directors or as a part of any other series of Voting
Preference Stock, all subject to the conditions and
restrictions on issuance set forth in the resolution or
resolutions adopted by the Board of Directors providing for
the issue of any series of Voting Preference Stock and to any
filing required by law.
g. Upon any issue for money or other consideration of any
stock of the Company that may be authorized from time to time,
or treasury stock, no holder of Voting Preference Stock shall
have any preemptive or other right to subscribe for, purchase,
or receive any proportionate or other share of the stock so
issued, but the Board of Directors may dispose of all or any
portion of such stock as and when it may determine, free of
any such rights, whether by offering the same to shareholders
or by sale or other disposition as said Board of Directors may
deem advisable.
DIVISION C
THE COMMON STOCK
1. Dividends. Subject to the provisions of paragraph "3,a" of
Division A and paragraph "3,a" of Division B, and after making
such provision, if any, as may be required for any sinking fund
applicable to any series of Preferred Stock and Voting Preference
Stock determined as provided in paragraph "1,e" of Division A and
paragraph "1,e" of Division B hereof, dividends may be paid upon
the Common Stock to the exclusion of the Preferred Stock and Voting
Preference Stock out of any assets of the Company available
therefor.
2. Distribution of Assets. In the event of any dissolution,
liquidation or winding up of the Company, after there shall have
been paid or set aside in cash for the holders of Preferred Stock
and Voting Preference Stock the full preferential amounts to which
they are entitled under the provisions of the foregoing Division A
and Division B, respectively, the holders of the Common Stock shall
then be entitled to receive pro rata all of the remaining assets of
the Company available for distribution to its shareholders.
3. Preemptive Rights. Upon any issue for money or other
consideration of any stock of the Company that may be authorized
from time to time, or treasury stock, no holder of Common Stock
shall have any preemptive or other right to subscribe for,
purchase, or receive any proportionate or other share of the stock
so issued, but the Board of Directors may dispose of all or any
portion of such stock as and when it may determine, free of any
such rights, whether by offering the same to shareholders or by
sale or other disposition as said Board of Directors may deem
advisable.
DIVISION D
PROVISIONS APPLICABLE TO THE
PREFERRED, VOTING PREFERENCE AND THE COMMON STOCK
1. Except as specifically provided in this Article Six, and as
may be required in statutory proceedings, if any, as to which the
vote of the holders of the Preferred Stock is required by the then
existing laws of the State of Texas, the holders of the Voting
Preference Stock and Common Stock, voting together as a single
class, shall have the exclusive voting rights for the election of
Directors and for all other purposes; provided, however, that
except as specifically provided in Article 4.03B of the Texas
Business Corporation Act and in Paragraph "3,e" of Division B,
holders of the Voting Preference Stock shall not be entitled to
vote, as a class or otherwise, upon any amendment to the
Corporation's Restated Articles of Incorporation.
2. Any Director may be removed from office by vote of the
holders of shares representing a majority of the votes entitled to
be cast by the shares of the class or classes of stock by which his
successor would be elected. A special meeting of the holders of
shares of such class or classes may be called by a majority vote of
the Board of Directors for the purpose of removing a Director in
accordance with the provisions of this paragraph. The President of
the Company shall, in any event, within ten days after delivery to
the Company at its principal office of a request to such effect
signed by the holders of shares representing at least five percent
(5%) of the votes entitled to be cast by the outstanding shares of
Preferred Stock or twenty-five percent (25%) of the votes entitled
to be cast by the outstanding shares of Voting Preference Stock and
Common Stock, combined, as the case may be, call a special meeting
of the holders of the shares of such class or classes for such
purpose to be held within 40 days after the delivery of such
request.
3. Each holder of the Common Stock of the Company entitled to
vote shall be entitled to one vote for each share held. Each holder
of shares of any series of the Preferred Stock of the Company
entitled to vote which has a stated value of $100 on involuntary
liquidation shall be entitled to one vote for each share held. Each
holder of shares of any series of the Preferred Stock of the
Company entitled to vote which has a stated value other than $100
on involuntary liquidation shall be entitled to as many full votes
or a fractional vote, as the case may be, for each share held as
determined by the ratio of the stated value on involuntary
liquidation of a share of each such series to the sum of $100. Each
holder of shares of any series of the Voting Preference Stock of
the Company entitled to vote which has a stated value of $10,000 on
involuntary liquidation shall be entitled to one vote for each
share held or fractional vote for each fractional share held, as
the case may be. Each holder of shares of any series of the Voting
Preference Stock of the Company entitled to vote which has a stated
value other than $10,000 on involuntary liquidation shall be
entitled to as many full votes or a fractional vote, as the case
may be, for each share held as determined by the ratio of the
stated value on involuntary liquidation of a share of each such
series to the sum of $10,000.
4. At each election of Directors every shareholder entitled to
vote at such election shall have the right to cast, in accordance
with the provisions of the Texas Business Corporation Act, the
number of votes represented by the shares owned by him for as many
persons as there are Directors to be elected and for whose election
he has the right to vote; provided that cumulative voting is
expressly prohibited.
__________________
As adopted by the Board of Directors of the Corporation on
September 2, 1982:
"RESOLVED, That pursuant to the authority conferred upon the
Board of Directors of this Company by Article Six of the Restated
Articles of Incorporation of this Company, the Board of Directors
hereby creates a new series of Preferred Stock of the Company which
shall consist of One Million Five Hundred Thousand (1,500,000)
shares of no par value (stated value of $50 per share), which shall
be designated and known as 'Adjustable Rate Cumulative Preferred
Stock, Series D' (herein call 'Adjustable Rate Preferred Stock'),
and that in addition to the preferences, rights, voting powers and
the restrictions or qualifications of all shares of Preferred
Stock, regardless of series, described and expressed in the
Restated Articles of Incorporation of the Company, the Board of
Directors hereby declares that the shares of the Adjustable Rate
Preferred Stock shall have the terms, conditions, rights and
preferences, as follows:
1. Dividend Rate
(a) Dividend rates on the shares of Adjustable Rate Preferred
Stock shall be (i) for the period (the 'Initial Dividend Period')
from the date of their original issue to and including January
31,1983, at a rate per annum of the stated value thereof equal to
13.5%, and (ii) for each quarterly dividend period (hereinafter
referred to as a 'Quarterly Dividend Period'; and the Initial
Dividend Period or any Quarterly Dividend Period being hereinafter
individually referred to as a 'Dividend Period' and collectively
referred to as 'Dividend Periods') thereafter, which quarterly
dividend periods shall commence on February 1, May 1, August 1 and
November 1 in each year and shall end on and include the day next
preceding the first day of the next quarterly dividend period, at
a rate per annum of the Stated Value thereof equal to 0.10% below
the Applicable Rate (as hereinafter defined) in respect of such
quarterly dividend period; provided, however, that the dividend
rate per annum on the shares of Adjustable Rate Preferred Stock for
any Quarterly Dividend Period shall in no event be less than 7.50%
per annum or greater than 15.50% per annum. Such dividends shall be
cumulative from the date of original issue of such shares. The
amount of dividends payable for the Initial Dividend Period or any
period shorter than a full Quarterly Dividend Period shall be
computed on the basis of 30-day months and a 360-day year.
(b) The 'Applicable Rate' for any Quarterly Dividend Period
shall be the highest of the Treasury Bill Rate, the Ten Year
Constant Maturity Rate and the Twenty Year Constant Maturity Rate
(each as hereinafter defined) for such Dividend Period. In the
event that the Company determines in good faith that for any reason
one or more of such rates cannot be determined for any Quarterly
Dividend Period, then the Applicable Rate for such Dividend Period
shall be the higher of whichever of such rates can be so
determined. In the event that the Company determines in good faith
that none of such rates can be determined for any Quarterly
Dividend Period, then the Applicable Rate in effect for the
preceding Dividend Period shall be continued for such Dividend
Period.
(i) Except as provided below in this paragraph, the
'Treasury Bill Rate' for each Quarterly Dividend Period will
be the arithmetic average of the two most recent weekly per
annum market discount rates (or the one weekly per annum
market discount rate, if only one such rate shall be published
during the relevant Calendar Period, as defined below) for
three-month U.S. Treasury bills, as published weekly by the
Federal Reserve Board during the Calendar Period immediately
prior to the last ten calendar days of January, April, July or
October, as the case may be, prior to the Quarterly Dividend
Period for which the dividend rate on the Adjustable Rate
Preferred Stock is being determined. In the event that the
Federal Reserve Board does not publish such a weekly per annum
market discount rate during any such Calendar Period, then the
Treasury Bill Rate for the related Dividend Period shall be
the arithmetic average of the two most recent weekly per annum
market discount rates (or the one weekly per annum market
discount rate, if only one such rate shall be published during
the relevant Calendar Period) for three-month U.S. Treasury
bills, as published weekly during such Calendar Period by any
Federal Reserve Bank or by any U.S. Government department or
agency selected by the Company. In the event that a per annum
market discount rate for three-month U.S. Treasury bills shall
not be published by the Federal Reserve Board or by any
Federal Reserve Bank or by any U.S. Government department or
agency during such Calendar Period, then the Treasury Bill
Rate for such Dividend Period shall be the arithmetic average
of the two most recent weekly per annum market discount rates
(or the one weekly per annum market discount rate, if only one
such rate shall be published during the relevant Calendar
Period) for all of the U.S. Treasury bills then having
maturities of not less than 80 nor more than 100 days, as
published during such Calendar Period by the Federal Reserve
Board or, if the Federal Reserve Board shall not publish such
rates, by any Federal Reserve Bank or by any U.S. Government
department or agency selected by the Company. In the event
that the Company determines in good faith that for any reason
no such U.S. Treasury bill rates are published as provided
above during such Calendar Period then the Treasury Bill Rate
for such Dividend Period shall be the arithmetic average of
the per annum market discount rates based upon the closing
bids during such Calendar Period for each of the issues of
marketable noninterest bearing U.S. Treasury securities with
a maturity of not less than 80 nor more than 100 days from the
date of each such quotation, as quoted daily for each business
day in New York City (or less frequently if daily quotations
shall not be generally available) to the Company by at least
three recognized U.S. Government securities dealers selected
by the Company. In the event that the Company determines in
good faith that for any reason the Company cannot determine
the Treasury Bill Rate for any Quarterly Dividend Period as
provided above in this paragraph, the Treasury Bill Rate for
such Dividend Period shall be the arithmetic average of the
per annum market discount rates based upon the closing bids
during the related Calendar Period for each of the issues of
marketable interest-bearing U.S. Treasury securities with a
maturity of not less than 80 nor more than 100 days from the
date of each such quotation, as quoted daily for each business
day in New York City (or less frequently if daily quotations
shall not be generally available) to the Company by at least
three recognized U.S. Government securities dealers selected
by the Company.
(ii) Except as provided below in this paragraph, the 'Ten
Year Constant Maturity Rate' for each Quarterly Dividend
Period shall be the arithmetic average of the two most recent
weekly per annum Ten Year Average Yields (or the one weekly
per annum Ten Year Average Yield, if only one such Yield shall
be published during the relevant Calendar Period as provided
below), as published weekly by the Federal Reserve Board
during the Calendar Period immediately prior to the last ten
calendar days of January, April, July or October, as the case
may be, prior to the Quarterly Dividend Period for which the
dividend rate on the Adjustable Rate Preferred Stock is being
determined. In the event that the Federal Reserve Board does
not publish such a weekly per annum Ten Year Average Yield
during such Calendar Period, then the Ten Year Constant
Maturity Rate for such Dividend Period shall be the arithmetic
average of the two most recent weekly per annum Ten Year
Average Yields (or the one weekly per annum Ten Year Average
Yield, if only one such Yield shall be published during such
Calendar Period), as published weekly during such Calendar
Period by any Federal Reserve Bank or by any U.S. Government
department or agency selected by the Company. In the event
that a per annum Ten Year Average Yield shall not be published
by the Federal Reserve Board or by any Federal Reserve Bank or
by any U.S. Government department or agency during such
Calendar Period, then the Ten Year Constant Maturity Rate for
such Dividend Period shall be the arithmetic average of the
two most recent weekly per annum average yields to maturity
(or the one weekly average yield to maturity, if only one such
yield shall be published during such Calendar Period) for all
of the actively traded marketable U.S. Treasury fixed interest
rate securities (other than Special Securities, as defined
below) then having maturities of not less than eight nor more
than twelve years, as published during such Calendar Period by
the Federal Reserve Board or, if the Federal Reserve Board
shall not publish such yields, by any Federal Reserve Bank or
by any U.S. Government department or agency selected by the
Company. In the event that the Company determines in good
faith that for any reason the Company cannot determine the Ten
Year Constant Maturity Rate for any Quarterly Dividend Period
as provided above in this paragraph, then the Ten Year
Constant Maturity Rate for such Dividend Period shall be the
arithmetic average of the per annum average yields to maturity
based upon the closing bids during such Calendar Period for
each of the issues of actively traded marketable U.S. Treasury
fixed interest rate securities (other than Special Securities)
with a final maturity date not less than eight nor more than
twelve years from the date of each such quotation, as quoted
daily for each business day in New York City (or less
frequently if daily quotations shall not be generally
available) to the Company by at least three recognized U.S.
Government securities dealers selected by the Company.
(iii) Except as provided below in this paragraph, the
'Twenty Year Constant Maturity Rate' for each Quarterly
Dividend Period shall be the arithmetic average of the two
most recent weekly per annum Twenty Year Average Yields (or
the one weekly per annum Twenty Year Average Yield, if only
one such Yield shall be published during the relevant Calendar
Period), as published weekly by the Federal Reserve Board
during the Calendar Period immediately prior to the last ten
calendar days of January, April, July or October, as the case
may be, prior to the Quarterly Dividend Period for which the
dividend rate on the Adjustable Rate Preferred Stock is being
determined. In the event that the Federal Reserve Board does
not publish such a weekly per annum Twenty Year Average Yield
during such Calendar Period, then the Twenty Year Constant
Maturity Rate for such Dividend Period shall be the arithmetic
average of the two most recent weekly per annum Twenty Year
Average Yields (or the one weekly per annum Twenty Year
Average Yield, if only one such Yield shall be published
during such Calendar Period), as published weekly during such
Calendar Period by any Federal Reserve Bank or by any U.S.
Government department or agency selected by the Company. In
the event that a per annum Twenty Year Average Yield shall not
be published by the Federal Reserve Board or by any Federal
Reserve Bank or by any U.S. Government department or agency
during such Calendar Period, then the Twenty Year Constant
Maturity Rate for such Dividend Period shall be the arithmetic
average of the two most recent weekly per annum average yields
to maturity (or the one weekly average yield to maturity, if
only one such yield shall be published during such Calendar
Period) for all of the actively traded marketable U.S.
Treasury fixed interest rate securities (other than Special
Securities) then having maturities of not less than eighteen
nor more than twenty-two years, as published during such
Calendar Period by the Federal Reserve Board, or, if the
Federal Reserve Board shall not publish such yields, by any
Federal Reserve Bank or by any U.S. Government department or
agency selected by the Company. In the event that the Company
determines in good faith that for any reason the Company
cannot determine the Twenty Year Constant Maturity Rate for
any Quarterly Dividend Period as provided above in this
paragraph, then the Twenty Year Constant Maturity Rate for
such Dividend Period shall be the arithmetic average of the
per annum average yields to maturity based upon the closing
bids during such Calendar Period for each of the issues of
actively traded marketable U.S. Treasury fixed interest rate
securities (other than Special Securities) with a final
maturity date not less than eighteen nor more than twenty-two
years from the date of each such quotation, as quoted daily
for each business day in New York City (or less frequently if
daily quotations shall not be generally available) to the
Company by at least three recognized U.S. Government
securities dealers selected by the Company.
(iv) The Treasury Bill Rate, the Ten Year Constant
Maturity Rate and the Twenty Year Constant Maturity Rate shall
each be rounded to the nearest five hundredths of a percentage
point.
(v) The amount of dividends per share payable for each
Quarterly Dividend Period shall be computed by dividing the
dividend rate for such dividend period by four and applying
such rate against the stated value per share of the Adjustable
Rate Preferred Stock.
(vi) The dividend rate with respect to each Quarterly
Dividend Period will be calculated as promptly as practicable
by the Company according to the appropriate method described
herein. The mathematical accuracy of each such calculation
will be confirmed in writing by independent accountants of
recognized standing. The Company will cause each dividend rate
to be published in a newspaper of general circulation in New
York City prior to the commencement of the new Quarterly
Dividend Period to which it applies and will cause notice of
such dividend rate to be enclosed with the dividend payment
checks next mailed to the holders of the Adjustable Rate
Preferred Stock.
(vii) As used herein, the term 'Calendar Period' means a
period of fourteen calendar days; the term 'Special
Securities' means securities which can, at the option of the
holder, be surrendered at face value in payment of any Federal
estate tax or which provide tax benefits to the holder and are
priced to reflect such tax benefits or which were originally
issued at a deep or substantial discount; the term 'Ten Year
Average Yield' means the average yield to maturity for
actively traded marketable U.S. Treasury fixed interest rate
securities (adjusted to constant maturities of ten years); and
the term 'Twenty Year Average Yield' means the average yield
to maturity for actively traded marketable U.S. Treasury fixed
interest rate securities (adjusted to constant maturities of
twenty years).
2. Involuntary Liquidation. In the event of any involuntary
liquidation, dissolution or winding up of the Company, the holders
of the Adjustable Rate Preferred Stock shall be entitled to receive
Fifty Dollars ($50.00) for each share (which amount shall be deemed
to be its stated value on involuntary liquidation) plus accrued
dividends to the date of distribution, whether or not earned or
declared.
3. Voluntary Liquidation. In the event of any voluntary
liquidation, dissolution or winding up of the Company, the holders
of the Adjustable Rate Preferred Stock shall be entitled to receive
$51.50 per share through October 31, 1992, and $50 per share
thereafter plus an amount equal to the accrued dividends thereon to
the date of distribution, whether or not earned or declared.
4. Optional Redemption. The Adjustable Rate Preferred Stock
may not be redeemed prior to November 1, 1987. Thereafter, the
Company shall have the option to redeem the whole or any part of
the Adjustable Rate Preferred Stock at any time on at least thirty
day's notice in accordance with the provisions of Paragraph 3, c,
(i) of Division A of Article Six of the Restated Articles of
Incorporation at $51.50 per share if redeemed during the period
November 1, 1987, through October 31, 1992, and $50 per share
thereafter, in each case together with any accrued dividends to the
date of such redemption.
5. So long as any shares of the Adjustable Rate Preferred
Stock are outstanding, shares of the Adjustable Rate Preferred
Stock which are purchased, redeemed or otherwise acquired by the
Company shall not be reissued, or otherwise disposed of, as shares
of Adjustable Rate Preferred Stock.
6. The Adjustable Rate Preferred Stock shall not have any
conversion, exchange or sinking fund rights.
7. The Adjustable Rate Preferred Stock shall have no voting
rights other than the voting rights set forth in the Restated
Articles of Incorporation of the Company or as otherwise provided
by Texas law.
"RESOLVED, That the President or any Vice President together
with the Secretary or any Assistant Secretary, be and hereby they
are authorized and directed to prepare, execute and deliver to the
Secretary of State of Texas for filing all certificates or other
documents as may be required under the laws of the State of Texas
in order to give effect to the foregoing resolutions."
____________________
As adopted by the Board of Directors of the Corporation on
January 26, 1984:
"RESOLVED, That pursuant to the authority conferred upon the
Board of Directors of this Company by Article Six of the Restated
Articles of Incorporation of this Company, the Board of Directors
hereby creates a new series of Preferred Stock of the Company which
shall consist of One Hundred Thousand (100,000) shares of no par
value (stated value of $1,000 per share), which shall be designated
and known as 'Adjustable Rate Cumulative Preferred Stock, Series E'
(herein called 'Adjustable Rate Preferred Stock'), and that in
addition to the preferences, rights, voting powers and the
restrictions or qualifications of all shares of Preferred Stock,
regardless of series, described and expressed in the Restated
Articles of Incorporation of the Company, the Board of Directors
hereby declares that the shares of the Adjustable Rate Preferred
Stock shall have the terms, conditions, rights and preferences, as
follows:
1. Dividend Rate
(a) Dividend rates on the shares of Adjustable Rate Preferred
Stock shall be (i) for the period (the 'Initial Dividend Period')
from the date of their original issue to and including April
30,1984, at a rate per annum of the stated value thereof equal to
10.625%, and (ii) for each quarterly dividend period (hereinafter
referred to as a 'Quarterly Dividend Period'; and the Initial
Dividend Period or any Quarterly Dividend Period being hereinafter
individually referred to as a 'Dividend Period' and collectively
referred to as 'Dividend Periods') thereafter, which quarterly
dividend periods shall commence on February 1, May 1, August 1 and
November 1 in each year and shall end on and include the day next
preceding the first day of the next quarterly dividend period, at
a rate per annum of the Stated Value thereof equal to 1.20% below
the Applicable Rate (as hereinafter defined) in respect of such
quarterly dividend period; provided, however, that the dividend
rate per annum on the shares of Adjustable Rate Preferred Stock for
any Quarterly Dividend Period shall in no event be less than 7% per
annum or greater than 13% per annum. Such dividends shall be
cumulative from the date of original issue of such shares. The
amount of dividends payable for the Initial Dividend Period or any
period shorter than a full Quarterly Dividend Period shall be
computed on the basis of 30-day months and a 360-day year.
(b) The 'Applicable Rate' for any Quarterly Dividend Period
shall be the highest of the Treasury Bill Rate, the Ten Year
Constant Maturity Rate and the Twenty Year Constant Maturity Rate
(each as hereinafter defined) for such Dividend Period. In the
event that the Company determines in good faith that for any reason
one or more of such rates cannot be determined for any Quarterly
Dividend Period, then the Applicable Rate for such Dividend Period
shall be the higher of whichever of such rates can be so
determined. In the event that the Company determines in good faith
that none of such rates can be determined for any Quarterly
Dividend Period, then the Applicable Rate in effect for the
preceding Dividend Period shall be continued for such Dividend
Period.
(i) Except as provided below in this paragraph, the
'Treasury Bill Rate' for each Quarterly Dividend Period will
be the arithmetic average of the two most recent weekly per
annum market discount rates (or the one weekly per annum
market discount rate, if only one such rate shall be published
during the relevant Calendar Period, as defined below) for
three-month U.S. Treasury bills, as published weekly by the
Federal Reserve Board during the Calendar Period immediately
prior to the last ten calendar days of January, April, July or
October, as the case may be, prior to the Quarterly Dividend
Period for which the dividend rate on the Adjustable Rate
Preferred Stock is being determined. In the event that the
Federal Reserve Board does not publish such a weekly per annum
market discount rate during any such Calendar Period, then the
Treasury Bill Rate for the related Dividend Period shall be
the arithmetic average of the two most recent weekly per annum
market discount rates (or the one weekly per annum market
discount rate, if only one such rate shall be published during
the relevant Calendar Period) for three-month U.S. Treasury
bills, as published weekly during such Calendar Period by any
Federal Reserve Bank or by any U.S. Government department or
agency selected by the Company. In the event that a per annum
market discount rate for three-month U.S. Treasury bills shall
not be published by the Federal Reserve Board or by any
Federal Reserve Bank or by any U.S. Government department or
agency during such Calendar Period, then the Treasury Bill
Rate for such Dividend Period shall be the arithmetic average
of the two most recent weekly per annum market discount rates
(or the one weekly per annum market discount rate, if only one
such rate shall be published during the relevant Calendar
Period) for all of the U.S. Treasury bills then having
maturities of not less than 80 nor more than 100 days, as
published during such Calendar Period by the Federal Reserve
Board or, if the Federal Reserve Board shall not publish such
rates, by any Federal Reserve Bank or by any U.S. Government
department or agency selected by the Company. In the event
that the Company determines in good faith that for any reason
no such U.S. Treasury bill rates are published as provided
above during such Calendar Period, then the Treasury Bill Rate
for such Dividend Period shall be the arithmetic average of
the per annum market discount rates based upon the closing
bids during such Calendar Period for each of the issues of
marketable noninterest bearing U.S. Treasury securities with
a maturity of not less than 80 nor more than 100 days from the
date of each such quotation, as quoted daily for each business
day in New York City (or less frequently if daily quotations
shall not be generally available) to the Company by at least
three recognized U.S. Government securities dealers selected
by the Company. In the event that the Company determines in
good faith that for any reason the Company cannot determine
the Treasury Bill Rate for any Quarterly Dividend Period as
provided above in this paragraph, the Treasury Bill Rate for
such Dividend Period shall be the arithmetic average of the
per annum market discount rates based upon the closing bids
during the related Calendar Period for each of the issues of
marketable interest-bearing U.S. Treasury securities with a
maturity of not less than 80 nor more than 100 days from the
date of each such quotation, as quoted daily for each business
day in New York City (or less frequently if daily quotations
shall not be generally available) to the Company by at least
three recognized U.S. Government securities dealers selected
by the Company.
(ii) Except as provided below in this paragraph, the 'Ten
Year Constant Maturity Rate' for each Quarterly Dividend
Period shall be the arithmetic average of the two most recent
weekly per annum Ten Year Average Yields (or the one weekly
per annum Ten Year Average Yield, if only one such Yield shall
be published during the relevant Calendar Period as provided
below), as published weekly by the Federal Reserve Board
during the Calendar Period immediately prior to the last ten
calendar days of January, April, July or October, as the case
may be, prior to the Quarterly Dividend Period for which the
dividend rate on the Adjustable Rate Preferred Stock is being
determined. In the event that the Federal Reserve Board does
not publish such a weekly per annum Ten Year Average Yield
during such Calendar Period, then the Ten Year Constant
Maturity Rate for such Dividend Period shall be the arithmetic
average of the two most recent weekly per annum Ten Year
Average Yields (or the one weekly per annum Ten Year Average
Yield, if only one such Yield shall be published during such
Calendar Period), as published weekly during such Calendar
Period by any Federal Reserve Bank or by any U.S. Government
department or agency selected by the Company. In the event
that a per annum Ten Year Average Yield shall not be published
by the Federal Reserve Board or by any Federal Reserve Bank or
by any U.S. Government department or agency during such
Calendar Period, then the Ten Year Constant Maturity Rate for
such Dividend Period shall be the arithmetic average of the
two most recent weekly per annum average yields to maturity
(or the one weekly average yield to maturity, if only one such
yield shall be published during such Calendar Period) for all
of the actively traded marketable U.S. Treasury fixed interest
rate securities (other than Special Securities, as defined
below) then having maturities of not less than eight nor more
than twelve years, as published during such Calendar Period by
the Federal Reserve Board or, if the Federal Reserve Board
shall not publish such yields, by any Federal Reserve Bank or
by any U.S. Government department or agency selected by the
Company. In the event that the Company determines in good
faith that for any reason the Company cannot determine the Ten
Year Constant Maturity Rate for any Quarterly Dividend Period
as provided above in this paragraph, then the Ten Year
Constant Maturity Rate for such Dividend Period shall be the
arithmetic average of the per annum average yields to maturity
based upon the closing bids during such Calendar Period for
each of the issues of actively traded marketable U.S. Treasury
fixed interest rate securities (other than Special Securities)
with a final maturity date not less than eight nor more than
twelve years from the date of each such quotation, as quoted
daily for each business day in New York City (or less
frequently if daily quotations shall not be generally
available) to the Company by at least three recognized U.S.
Government securities dealers selected by the Company.
(iii) Except as provided below in this paragraph, the
'Twenty Year Constant Maturity Rate' for each Quarterly
Dividend Period shall be the arithmetic average of the two
most recent weekly per annum Twenty Year Average Yields (or
the one weekly per annum Twenty Year Average Yield, if only
one such Yield shall be published during the relevant Calendar
Period), as published weekly by the Federal Reserve Board
during the Calendar Period immediately prior to the last ten
calendar days of January, April, July or October, as the case
may be, prior to the Quarterly Dividend Period for which the
dividend rate on the Adjustable Rate Preferred Stock is being
determined. In the event that the Federal Reserve Board does
not publish such a weekly per annum Twenty Year Average Yield
during such Calendar Period, then the Twenty Year Constant
Maturity Rate for such Dividend Period shall be the arithmetic
average of the two most recent weekly per annum Twenty Year
Average Yields (or the one weekly per annum Twenty Year
Average Yield, if only one such Yield shall be published
during such Calendar Period), as published weekly during such
Calendar Period by any Federal Reserve Bank or by any U.S.
Government department or agency selected by the Company. In
the event that a per annum Twenty Year Average Yield shall not
be published by the Federal Reserve Board or by any Federal
Reserve Bank or by any U.S. Government department or agency
during such Calendar Period, then the Twenty Year Constant
Maturity Rate for such Dividend Period shall be the arithmetic
average of the two most recent weekly per annum average yields
to maturity (or the one weekly average yield to maturity, if
only one such yield shall be published during such Calendar
Period) for all of the actively traded marketable U.S.
Treasury fixed interest rate securities (other than Special
Securities) then having maturities of not less than eighteen
nor more than twenty-two years, as published during such
Calendar Period by the Federal Reserve Board, or, if the
Federal Reserve Board shall not publish such yields, by any
Federal Reserve Bank or by any U.S. Government department or
agency selected by the Company. In the event that the Company
determines in good faith that for any reason the Company
cannot determine the Twenty Year Constant Maturity Rate for
any Quarterly Dividend Period as provided above in this
paragraph, then the Twenty Year Constant Maturity Rate for
such Dividend Period shall be the arithmetic average of the
per annum average yields to maturity based upon the closing
bids during such Calendar Period for each of the issues of
actively traded marketable U.S. Treasury fixed interest rate
securities (other than Special Securities) with a final
maturity date not less than eighteen nor more than twenty-two
years from the date of each such quotation, as quoted daily
for each business day in New York City (or less frequently if
daily quotations shall not be generally available) to the
Company by at least three recognized U.S. Government
securities dealers selected by the Company.
(iv) The Treasury Bill Rate, the Ten Year Constant
Maturity Rate and the Twenty Year Constant Maturity Rate shall
each be rounded to the nearest five hundredths of a percentage
point.
(v) The amount of dividends per share payable for each
Quarterly Dividend Period shall be computed by dividing the
dividend rate for such dividend period by four and applying
such rate against the stated value per share of the Adjustable
Rate Preferred Stock.
(vi) The dividend rate with respect to each Quarterly
Dividend Period will be calculated as promptly as practicable
by the Company according to the appropriate method described
herein. The mathematical accuracy of each such calculation
will be confirmed in writing by independent accountants of
recognized standing. The Company will cause each dividend rate
to be published in a newspaper of general circulation in New
York City prior to the commencement of the new Quarterly
Dividend Period to which it applies and will cause notice of
such dividend rate to be enclosed with the dividend payment
checks next mailed to the holders of the Adjustable Rate
Preferred Stock.
(vii) As used herein, the term 'Calendar Period' means a
period of fourteen calendar days; the term 'Special
Securities' means securities which can, at the option of the
holder, be surrendered at face value in payment of any Federal
estate tax or which provide tax benefits to the holder and are
priced to reflect such tax benefits or which were originally
issued at a deep or substantial discount; the term 'Ten Year
Average Yield' means the average yield to maturity for
actively traded marketable U.S. Treasury fixed interest rate
securities (adjusted to constant maturities of ten years); and
the term 'Twenty Year Average Yield' means the average yield
to maturity for actively traded marketable U.S. Treasury fixed
interest rate securities (adjusted to constant maturities of
twenty years).
2. Involuntary Liquidation. In the event of any involuntary
liquidation, dissolution or winding up of the Company, the holders
of the Adjustable Rate Preferred Stock shall be entitled to receive
One Thousand Dollars ($1,000.00) for each share (which amount shall
be deemed to be its stated value on involuntary liquidation) plus
accrued dividends to the date of distribution, whether or not
earned or declared.
3. Voluntary Liquidation. In the event of any voluntary
liquidation, dissolution or winding up of the Company, the holders
of the Adjustable Rate Preferred Stock shall be entitled to receive
$1,030 per share through April 30, 1994, and $1,000 per share
thereafter plus an amount equal to the accrued dividends thereon to
the date of distribution, whether or not earned or declared.
4. Optional Redemption. The Adjustable Rate Preferred Stock
may not be redeemed prior to May 1, 1989. Thereafter, the Company
shall have the option to redeem the whole or any part of the
Adjustable Rate Preferred Stock at any time on at least thirty
day's notice in accordance with the provisions of Paragraph 3,c,
(i) of Division A of Article Six of the Restated Articles of
Incorporation at $1,030.00 per share if redeemed during the period
May 1, 1989, through April 30, 1994, and $1,000.00 per share
thereafter, in each case together with any accrued dividends to the
date of such redemption.
5. So long as any shares of the Adjustable Rate Preferred
Stock are outstanding, shares of the Adjustable Rate Preferred
Stock which are purchased, redeemed or otherwise acquired by the
Company shall not be reissued, or otherwise disposed of, as shares
of Adjustable Rate Preferred Stock.
6. The Adjustable Rate Preferred Stock shall not have any
conversion, exchange or sinking fund rights.
7. The Adjustable Rate Preferred Stock shall have no voting
rights other than the voting rights set forth in the Restated
Articles of Incorporation of the Company or as otherwise provided
by Texas law.
"RESOLVED, That the President or any Vice President together
with the Secretary or any Assistant Secretary, be and hereby they
are authorized and directed to prepare, execute and deliver to the
Secretary of State of Texas for filing all certificates or other
documents as may be required under the laws of the State of Texas
in order to give effect to the foregoing resolutions.''
____________________
As adopted by the Board of Directors of the Corporation on
April 15, 1986:
"RESOLVED, That pursuant to the authority conferred upon the
Board of Directors of this Company by Article Six of the Restated
Articles of Incorporation of this Company, the Board of Directors
hereby creates a new series of Voting Preference Stock of the
Company which shall consist of five hundred thousand (500,000)
shares of no par value, which shall be designated and known as
'$200 Participating Voting Preference Stock, Series C' (herein
called 'Series C Voting Preference Stock'), and that in addition to
the preferences, rights, voting powers and the restrictions or
qualifications of all shares of Voting Preference Stock regardless
of series, described and expressed in the Restated Articles of
Incorporation of the Company, the Board of Directors hereby
declares that the shares of the Series C Voting Preference Stock
shall have the terms, conditions, rights and preferences, as
follows:
1. Dividends. The dividend rate on the shares of Series C
Voting Preference Stock for each quarterly dividend period
(hereinafter referred to as a "quarterly dividend period"), which
quarterly dividend periods shall commence on February 1, May 1,
August 1 and November 1 in each year (or in the case of original
issuance, from the date of original issuance) and shall end on and
include the day next preceding the first date of the next quarterly
dividend period, shall be equal (rounded to the nearest cent) to
the greater of (a) $20 or (b) subject to the provision for
adjustment hereinafter set forth, 200 times the aggregate per share
amount of all cash dividends, and 200 times the aggregate per share
amount (payable in cash, based upon the fair market value at the
time the non-cash dividend or other distribution is declared as
determined in good faith by the Board of Directors) of all non-cash
dividends or other distributions other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares
of Common Stock (by reclassification or otherwise), declared (but
not withdrawn) on the Common Stock, par value $4.45 per share, of
this Company (the "Common Stock") during the immediately preceding
quarterly dividend period, or, with respect to the first quarterly
dividend period, since the first issuance of any share or fraction
of a share of Series C Voting Preference Stock. In the event this
Company shall at any time after April 15, 1986 (the "Rights
Declaration Date") (i) declare any dividend on Common Stock payable
in shares of Common Stock, (ii) subdivide the outstanding Common
Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the amount to which
holders of shares of Series C Voting Preference Stock were entitled
immediately prior to such event under clause (b) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
2. Liquidation. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company, the holders
of the Series C Voting Preference Stock shall be entitled to
receive the greater of (a) $200 per share, or (b) an amount per
share, subject to the provision for adjustment hereinafter set
forth, equal to 200 times the aggregate amount to be distributed
per share to holders of Common Stock, plus in either instance
accrued dividends to the date of distribution, whether or not
earned or declared.
In the event the Company shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable
in shares of Common Stock, (ii) subdivide the outstanding Common
Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the amount to which
holders of shares of Series C Voting Preference Stock were entitled
immediately prior to such event pursuant to clause (b) of the
preceding sentence shall be adjusted by multiplying such amount by
a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were
outstanding immediately prior to such event. For purposes of
Paragraph 3 of Division D of Article Six of the Restated Articles
of Incorporation, the Series C Voting Preference Stock shall be
deemed to have a stated value per share of $200 on involuntary
liquidation until such time as a plan of liquidation shall be
adopted and the actual amount payable upon liquidation is
determined.
3. Optional Redemption. The Company shall have the option to
redeem the whole or any part of the Series C Voting Preference
Stock at any time on at least 30 days notice in accordance with the
provisions of Paragraph 3,c of Division B of Article Six of the
Restated Articles of Incorporation at a redemption price equal to
the greater of (a) $200 and (b), subject to the provision for
adjustment hereinafter set forth, 200 times the "current per share
market price" of the Common Stock on the date of mailing of the
notice of redemption, together with unpaid accumulated dividends to
the date of such redemption. In the event this Company shall at any
time after the Rights Declaration Date (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the
amount to which holders of shares of Series C Voting Preference
Stock were otherwise entitled immediately prior to such event under
the preceding sentence shall be adjusted by multiplying such amount
by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event. The "current per
share market price'' on any date shall be deemed to be the average
of the closing price per share of such Common Stock for the 10
consecutive "trading days" (as such term is hereinafter defined)
immediately prior to such date. The closing price for each day
shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock
Exchange or, if the Common Stock is not listed or admitted to
trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the principal national
securities exchange on which the Common Stock is listed or admitted
to trading or, if the Common Stock is not listed or admitted to
trading on any national securities exchange, the last quoted price
or, if not so quoted the average of the high bid and low asked
prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ") or such other system then in use or, if on any such date
the Common Stock is not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Common Stock
selected by the Board of Directors of the Company. If on such date
no such market maker is making a market in the Common Stock, the
fair value of the Common Stock on such date as determined in good
faith by the Board of Directors of the Company shall be used. The
term "trading day" shall mean a day on which the principal national
securities exchange on which the Common Stock is listed or admitted
to trading is open for the transaction of business or, if the
Common Stock is not listed or admitted to trading on any national
securities exchange, a Monday, Tuesday, Wednesday, Thursday or
Friday on which banking institutions in the State of New York are
not authorized or obligated by law or executive order to close.
4. So long as any shares of the Series C Voting Preference
Stock are outstanding, shares of the Series C Voting Preference
Stock which are purchased, redeemed or otherwise acquired by the
Company shall not be reissued, or otherwise disposed of, as shares
of Series C Voting Preference Stock.
5. Other than as set forth above, the Series C Voting
Preference Stock shall not have any conversion or exchange rights.
6. The Series C Voting Preference Stock shall have no voting
rights other than the voting rights set forth in the Restated
Articles of Incorporation of the Company or as otherwise provided
by Texas law.
"RESOLVED, That the Chairman and President or any Vice
President together with the Secretary or any Assistant Secretary,
be and hereby they are authorized and directed to prepare, execute
and deliver to the Secretary of State of Texas for filing all
certificates or other documents as may be required under the laws
of the State of Texas in order to give effect to the foregoing
resolution."
ARTICLE SEVEN
The power to alter, amend or repeal the By-Laws or to adopt
new By-Laws shall be vested in the Board of Directors; provided,
however, that any By-Law or Amendment thereto as adopted by the
Board of Directors may be altered, amended or repealed by vote of
the shareholders entitled to vote for the election of Directors or
a new By-Law in lieu thereof may be adopted by vote of such
shareholders. No By-Law which has been altered, amended or adopted
by such a vote of the shareholders may be altered, amended or
repealed by vote of the Directors until two years shall have
expired since such action by vote of such shareholders.
WITNESS THE EXECUTION HEREOF on this 8th day of November,
1987.
ENSERCH Corporation
By: /s/ W. C. McCord
W. C. McCord
Chairman and President
<PAGE>
ARTICLES OF AMENDMENT BY THE SHAREHOLDERS
TO THE RESTATED ARTICLES OF INCORPORATION OF
ENSERCH CORPORATION
Pursuant to the provisions of Article 4.04 of the Texas
Business Corporation Act, the undersigned corporation adopts the
following Articles of Amendment to its Restated Articles of
Incorporation:
ARTICLE ONE. The name of the Corporation is ENSERCH
Corporation.
ARTICLE TWO. The following amendment to the Restated Articles
of Incorporation was adopted by the Shareholders of the Corporation
on May 10, 1988:
The Restated Articles of Incorporation of the Corporation are
amended by adding a new ARTICLE EIGHT as follows:
ARTICLE EIGHT
No director of this Corporation shall be liable to
this Corporation or its shareholders for monetary damages
for an act or omission in such director's capacity as a
director of this Corporation, except this ARTICLE EIGHT
does not eliminate or limit the liability of a director
of this Corporation for (1) a breach of the director's
duty of loyalty to this Corporation or its shareholders,
(2) an act or omission not in good faith or that involves
intentional misconduct or a knowing violation of the law,
(3) 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, (4) an act or omission for which the liability of
the director is expressly provided for by statute, or (5)
an act related to an unlawful stock repurchase or payment
of a dividend.
ARTICLE THREE. The designation and number of outstanding
shares of each class entitled to vote thereon as a class were as
follows:
<TABLE>
<CAPTION>
CLASS NUMBER OF SHARES
<S> <C>
Common Stock 57,602,674
</TABLE>
ARTICLE FOUR. The number of shares of each class voted for and
against such amendment, respectively, was:
<TABLE>
<CAPTION>
CLASS NUMBER OF SHARES VOTED
For Against
<S> <C> <C>
Common Stock 42,753,448 5,721,265
</TABLE>
ENSERCH Corporation
Dated: May 10, 1988 By /s/ W. C. McCord
W. C. McCord
Its Chairman and
President
<PAGE>
ASSUMED NAME CERTIFICATE
FOR AN INCORPORATED BUSINESS OR PROFESSION
To The Secretary of State of the State of Texas:
WHEREAS, ENSERCH Corporation is a business corporation
incorporated under the laws of the State of Texas and Lone Star Gas
Company has been designated by such corporation as a division
thereof; and
WHEREAS, the Business and Commerce Code of the State of Texas
requires that any corporation which regularly conducts business or
renders professional services in such state under an assumed name
file in the office of the Secretary of State an Assumed Name
Certificate; and
WHEREAS, the name Lone Star Gas Company is an assumed name
under which ENSERCH Corporation conducts business within the State
of Texas.
NOW, THEREFORE, pursuant to Section 36.11 of the Texas Assumed
Business or Professional Name Act, the undersigned hereby files
this Assumed Name Certificate and states the following:
1. The assumed name under which the business service is
conducted is LONE STAR GAS COMPANY.
2. The name of the incorporated business as stated in its
Articles of Incorporation is ENSERCH Corporation.
3. The state jurisdiction under the laws of which the
aforesaid corporation, was incorporated in Texas, and the
address of its registered or similar office in that
jurisdiction is 300 South St. Paul Street, Dallas. Texas.
75201.
4. The period, not to exceed ten years, during which the
assumed name will be used is ten years.
5. The corporation is a business corporation.
6. The corporation is required to maintain a registered
office in Texas, the address of the registered office is
300 South St. Paul Street, Dallas, Texas 75201, and the
name of its Registered Agent at such address is Michael
G. Fortado. The address of the principal office is the
same as the registered office.
7. Business services are being conducted under such assumed
name in ALL counties within the state.
/s/ R. B. Williams
R. B. Williams
Vice President
STATE OF TEXAS )
)
COUNTY OF DALLAS )
Before me on this 24th day of January, 1989, personally
appeared R. B. Williams and acknowledged to me that he executed
the foregoing certificate for the purposes therein expressed.
/s/ Jean H. Luttrell
Jean H. Luttrell
Notary Public for the
State of Texas
My Commission expires:
November 25, 1989
<PAGE>
STATEMENT OF RESOLUTION
ESTABLISHING
ADJUSTABLE RATE CUMULATIVE PREFERRED STOCK, SERIES F
(LIQUIDATION PREFERENCE $1,000 PER SHARE)
OF ENSERCH CORPORATION
To the Secretary of State
of the State of Texas
Pursuant to the provisions of Article 2.13 of the Texas
Business Corporation Act, the undersigned corporation submits the
following statement for the purpose of establishing and designating
the Adjustable Rate Cumulative Preferred Stock, Series F
(liquidation preference $1,000 per share) of its preferred stock
and fixing and determining the relative rights and preferences
thereof:
1. The name of the corporation is ENSERCH Corporation.
2. The following resolution, establishing and designating
the Adjustable Rate Cumulative Preferred Stock, Series F, and
fixing and determining the relative rights and preferences thereof,
was duly adopted by the Corporate Securities Committee of the Board
of Directors of the Corporation on April 8, 1994:
"RESOLVED, That pursuant to the authority conferred
upon the Corporate Securities Committee by the Board of
Directors of this Company acting pursuant to Article Six
of the Restated Articles of Incorporation of this Company
and the Company's Bylaws, a new series of Preferred Stock
of the Company is hereby created which shall consist of
Seventy-Five Thousand (75,000) shares of no par value
(stated value of $1,000 per share), which shall be
designated and known as 'Adjustable Rate Cumulative
Preferred Stock, Series F (liquidation preference $1,000
per share)' (herein called 'Adjustable Rate Preferred
Stock'), and that in addition to the preferences, rights,
voting powers and the restrictions or qualifications of
all shares of Preferred Stock, regardless of series,
described and expressed in the Restated Articles of
Incorporation of the Company, the Corporate Securities
Committee of the Board of Directors hereby declares that
the shares of the Adjustable Rate Preferred Stock shall
have the terms, conditions, rights and preferences, as
follows:
1. Dividend Rate
(a) Dividend rates on the shares of Adjustable Rate
Preferred Stock shall be (i) for the period (the 'Initial
Dividend Period') from the date of their original issue
to and including July 31, 1994, at a rate per annum of
the then stated value thereof equal to 6.375%, and (ii)
for each quarterly dividend period (hereinafter referred
to as a 'Quarterly Dividend Period'; and the Initial
Dividend Period or any Quarterly Dividend Period being
hereinafter individually referred to as a 'Dividend
Period' and collectively referred to as 'Dividend
Periods') thereafter, which quarterly dividend periods
shall commence on February 1, May 1, August 1 and
November 1 in each year and shall end on and include the
day next preceding the first day of the next quarterly
dividend period, at a rate per annum of the Stated Value
thereof equal to the Applicable Rate (as hereinafter
defined) in respect of such quarterly dividend period;
provided, however, that the dividend rate per annum on
the shares of Adjustable Rate Preferred Stock for any
Quarterly Dividend Period shall in no event be less than
4.50% per annum or greater than 10.50% per annum. Such
dividends shall be cumulative from the date of original
issue of such shares. The amount of dividends payable for
the Initial Dividend Period or any period shorter than a
full Quarterly Dividend Period shall be computed on the
basis of 30-day months and a 360-day year.
(b) The 'Applicable Rate' for any Quarterly Dividend
Period shall be the highest of the Treasury Bill Rate,
the Ten Year Constant Maturity Rate and the Thirty Year
Constant Maturity Rate (each as hereinafter defined) for
such Dividend Period, multiplied by 87%. In the event
that the Company determines in good faith that for any
reason one or more of such rates cannot be determined for
any Quarterly Dividend Period, then the Applicable Rate
for such Dividend Period shall be the higher of whichever
of such rates can be so determined, multiplied by 87%.
In the event that the Company determines in good faith
that none of such rates can be determined for any
Quarterly Dividend Period, then the Applicable Rate in
effect for the preceding Dividend Period shall be
continued for such Dividend Period.
(i) Except as provided below in this paragraph, the
'Treasury Bill Rate' for each Quarterly Dividend Period
will be the arithmetic average of the two most recent
weekly per annum market discount rates (or the one weekly
per annum market discount rate, if only one such rate
shall be published during the relevant Calendar Period,
as defined below) for three-month U.S. Treasury bills, as
published weekly by the Federal Reserve Board during the
Calendar Period immediately prior to the last ten
calendar days of January, April, July or October, as the
case may be, prior to the Quarterly Dividend Period for
which the dividend rate on the Adjustable Rate Preferred
Stock is being determined. In the event that the Federal
Reserve Board does not publish such a weekly per annum
market discount rate during any such Calendar Period,
then the Treasury Bill Rate for the related Dividend
Period shall be the arithmetic average of the two most
recent weekly per annum market discount rates (or the one
weekly per annum market discount rate, if only one such
rate shall be published during the relevant Calendar
Period) for three-month U.S. Treasury bills, as published
weekly during such Calendar Period by any Federal Reserve
Bank or by any U.S. Government department or agency
selected by the Company. In the event that a per annum
market discount rate for three-month U.S. Treasury bills
shall not be published by the Federal Reserve Board or by
any Federal Reserve Bank or by any U.S. Government
department or agency during such Calendar Period, then
the Treasury Bill Rate for such Dividend Period shall be
the arithmetic average of the two most recent weekly per
annum market discount rates (or the one weekly per annum
market discount rate, if only one such rate shall be
published during the relevant Calendar Period) for all of
the U.S. Treasury bills then having maturities of not
less than 80 nor more than 100 days, as published during
such Calendar Period by the Federal Reserve Board or, if
the Federal Reserve Board shall not publish such rates,
by any Federal Reserve Bank or by any U.S. Government
department or agency selected by the Company. In the
event that the Company determines in good faith that for
any reason no such U.S. Treasury bill rates are published
as provided above during such Calendar Period, then the
Treasury Bill Rate for such Dividend Period shall be the
arithmetic average of the per annum market discount rates
based upon the closing bids during such Calendar Period
for each of the issues of marketable non-interest bearing
U.S. Treasury securities with a maturity of not less than
80 nor more than 100 days from the date of each such
quotation, as quoted daily for each business day in New
York City (or less frequently if daily quotations shall
not be generally available) to the Company by at least
three recognized U.S. Government securities dealers
selected by the Company. In the event that the Company
determines in good faith that for any reason the Company
cannot determine the Treasury Bill Rate for any Quarterly
Dividend Period as provided above in this paragraph, the
Treasury Bill Rate for such Dividend Period shall be the
arithmetic average of the per annum market discount rates
based upon the closing bids during the related Calendar
Period for each of the issues of marketable
interest-bearing U.S. Treasury securities with a maturity
of not less than 80 nor more than 100 days from the date
of each such quotation, as quoted daily for each business
day in New York City (or less frequently if daily
quotations shall not be generally available) to the
Company by at least three recognized U.S. Government
securities dealers selected by the Company.
(ii) Except as provided below in this paragraph, the 'Ten
Year Constant Maturity Rate' for each Quarterly Dividend
Period shall be the arithmetic average of the two most
recent weekly per annum Ten Year Average Yields (or the
one weekly per annum Ten Year Average Yield, if only one
such Yield shall be published during the relevant
Calendar Period as provided below), as published weekly
by the Federal Reserve Board during the Calendar Period
immediately prior to the last ten calendar days of
January, April, July or October, as the case may be,
prior to the Quarterly Dividend Period for which the
dividend rate on the Adjustable Rate Preferred Stock is
being determined. In the event that the Federal Reserve
Board does not publish such a weekly per annum Ten Year
Average Yield during such Calendar Period, then the Ten
Year Constant Maturity Rate for such Dividend Period
shall be the arithmetic average of the two most recent
weekly per annum Ten Year Average Yields (or the one
weekly per annum Ten Year Average Yield, if only one such
Yield shall be published during such Calendar Period), as
published weekly during such Calendar Period by any
Federal Reserve Bank or by any U.S. Government department
or agency selected by the Company. In the event that a
per annum Ten Year Average Yield shall not be published
by the Federal Reserve Board or by any Federal Reserve
Bank or by any U.S. Government department or agency
during such Calendar Period, then the Ten Year Constant
Maturity Rate for such Dividend Period shall be the
arithmetic average of the two most recent weekly per
annum average yields to maturity (or the one weekly
average yield to maturity, if only one such yield shall
be published during such Calendar Period) for all of the
actively traded marketable U.S. Treasury fixed interest
rate securities (other than Special Securities, as
defined below) then having maturities of not less than
eight nor more than twelve years, as published during
such Calendar Period by the Federal Reserve Board or, if
the Federal Reserve Board shall not publish such yields,
by any Federal Reserve Bank or by any U.S. Government
department or agency selected by the Company. In the
event that the Company determines in good faith that for
any reason the Company cannot determine the Ten Year
Constant Maturity Rate for any Quarterly Dividend Period
as provided above in this paragraph, then the Ten Year
Constant Maturity Rate for such Dividend Period shall be
the arithmetic average of the per annum average yields to
maturity based upon the closing bids during such Calendar
Period for each of the issues of actively traded
marketable U.S. Treasury fixed interest rate securities
(other than Special Securities) with a final maturity
date not less than eight nor more than twelve years from
the date of each such quotation, as quoted daily for each
business day in New York City (or less frequently if
daily quotations shall not be generally available) to the
Company by at least three recognized U.S. Government
securities dealers selected by the Company.
(iii) Except as provided below in this paragraph, the
'Thirty Year Constant Maturity Rate' for each Quarterly
Dividend Period shall be the arithmetic average of the
two most recent weekly per annum Thirty Year Average
Yields (or the one weekly per annum Thirty Year Average
Yield, if only one such Yield shall be published during
the relevant Calendar Period), as published weekly by the
Federal Reserve Board during the Calendar Period
immediately prior to the last ten calendar days of
January, April, July or October, as the case may be,
prior to the Quarterly Dividend Period for which the
dividend rate on the Adjustable Rate Preferred Stock is
being determined. In the event that the Federal Reserve
Board does not publish such a weekly per annum Thirty
Year Average Yield during such Calendar Period, then the
Thirty Year Constant Maturity Rate for such Dividend
Period shall be the arithmetic average of the two most
recent weekly per annum Thirty Year Average Yields (or
the one weekly per annum Thirty Year Average Yield, if
only one such Yield shall be published during such
Calendar Period), as published weekly during such
Calendar Period by any Federal Reserve Bank or by any
U.S. Government department or agency selected by the
Company. In the event that a per annum Thirty Year
Average Yield shall not be published by the Federal
Reserve Board or by any Federal Reserve Bank or by any
U.S. Government department or agency during such Calendar
Period, then the Thirty Year Constant Maturity Rate for
such Dividend Period shall be the arithmetic average of
the two most recent weekly per annum average yields to
maturity (or the one weekly average yield to maturity, if
only one such yield shall be published during such
Calendar Period) for all of the actively traded
marketable U.S. Treasury fixed interest rate securities
(other than Special Securities) then having maturities of
not less than twenty-eight nor more than thirty years, as
published during such Calendar Period by the Federal
Reserve Board, or, if the Federal Reserve Board shall not
publish such yields, by any Federal Reserve Bank or by
any U.S. Government department or agency selected by the
Company. In the event that per annum average yields to
maturity for all of the actively traded marketable U.S.
Treasury fixed interest rate securities (other than
Special Securities) then having maturities of not less
than twenty-eight nor more than thirty years shall not be
published by the Federal Reserve Board or by any Federal
Reserve Bank or by any U.S. Government department or
agency during such Calendar Period, then the Thirty Year
Constant Maturity Rate for such dividend period shall be
determined in the manner specified in the preceding
sentence based upon all of the actively traded marketable
U.S. Treasury fixed interest rate securities (other than
Special Securities) then having maturities of not less
than twenty-five years or, in the absence of which,
twenty years. In the event that the Company determines
in good faith that for any reason the Company cannot
determine the Thirty Year Constant Maturity Rate for any
Quarterly Dividend Period as provided above in this
paragraph, then the Thirty Year Constant Maturity Rate
for such Dividend Period shall be the arithmetic average
of the per annum average yields to maturity based upon
the closing bids during such Calendar Period for each of
the issues of actively traded marketable U.S. Treasury
fixed interest rate securities (other than Special
Securities) with a final maturity date not less than
twenty-eight nor more than thirty years (or, in the
absence of which, having maturities of not less than
twenty-five years or, in the further absence of which,
twenty years) from the date of each such quotation, as
quoted daily for each business day in New York City (or
less frequently if daily quotations shall not be
generally available) to the Company by at least three
recognized U.S. Government securities dealers selected by
the Company.
(iv) The Treasury Bill Rate, the Ten Year Constant
Maturity Rate and the Thirty Year Constant Maturity Rate
shall each be rounded to the nearest one hundredth of a
percentage point.
(v) The amount of dividends per share payable for each
Quarterly Dividend Period shall be computed by dividing
the dividend rate for such dividend period by four and
applying such rate against the stated value per share of
the Adjustable Rate Preferred Stock.
(vi) The dividend rate with respect to each Quarterly
Dividend Period will be calculated as promptly as
practicable by the Company according to the appropriate
method described herein. The mathematical accuracy of
each such calculation will be confirmed in writing by
independent accountants of recognized standing. After
May 1, 1994, the Company will cause each dividend rate to
be published in a newspaper of general circulation in New
York City prior to the commencement of the new Quarterly
Dividend Period to which it applies and will cause notice
of such dividend rate to be enclosed with the dividend
payment checks next mailed to the holders of the
Adjustable Rate Preferred Stock.
(vii) As used herein, the term 'Calendar Period'
means a period of fourteen calendar days; the term
'Special Securities' means securities which can, at the
option of the holder, be surrendered at face value in
payment of any Federal estate tax or which provide tax
benefits to the holder and are priced to reflect such
tax benefits or which were originally issued at a deep or
substantial discount; the term 'Ten Year Average Yield'
means the average yield to maturity for actively traded
marketable U.S. Treasury fixed interest rate securities
(adjusted to constant maturities of ten years); and the
term 'Thirty Year Average Yield' means the average yield
to maturity for actively traded marketable U.S. Treasury
fixed interest rate securities (adjusted to constant
maturities of thirty years).
2. Involuntary Liquidation. In the event of any
involuntary liquidation, dissolution or winding up of the
Company, the holders of the Adjustable Rate Preferred
Stock shall be entitled to receive One Thousand Dollars
($1,000) for each share (which amount shall be deemed to
be its stated value and liquidation preference on
involuntary liquidation) plus accrued dividends to the
date of distribution.
3. Voluntary Liquidation. In the event of any
voluntary liquidation, dissolution or winding up of the
Company, the holders of the Adjustable Rate Preferred
Stock shall be entitled to receive One Thousand Dollars
($1,000) for each share (which amount shall be deemed to
be its stated value and liquidation preference on
voluntary liquidation) plus an amount equal to the
accrued dividends thereon to the date of distribution.
4. Optional Redemption. The Adjustable Rate
Preferred Stock may not be redeemed prior to May 1, 1999.
Thereafter, the Company, at its option, may redeem all or
any part of the Adjustable Rate Preferred Stock at any
time on at least thirty days' notice in accordance with
the provisions of Paragraph 3,c,(i) of Division A of
Article Six of the Restated Articles of Incorporation at
$1,000 per share together with any unpaid accumulated
dividends to the date of such redemption.
5. So long as any shares of the Adjustable Rate
Preferred Stock are outstanding, shares of the Adjustable
Rate Preferred Stock which are purchased, redeemed or
otherwise acquired by the Company shall not be reissued,
or otherwise disposed of, as shares of Adjustable Rate
Preferred Stock.
6. The Adjustable Rate Preferred Stock shall not
have any conversion, exchange or sinking fund rights.
7. The Adjustable Rate Preferred Stock shall have
no voting rights other than the voting rights set forth
in the Restated Articles of Incorporation of the Company
or as otherwise provided by Texas law."
"RESOLVED, That the President or any Vice President
together with the Secretary or any Assistant Secretary,
be and hereby they are authorized and directed to
prepare, execute and deliver to the Secretary of State of
Texas for filing all certificates or other documents as
may be required under the laws of the State of Texas in
order to give effect to the foregoing resolutions."
WITNESS THE EXECUTION HEREOF on this 8th day of April, 1994.
ENSERCH Corporation
By: /s/ D. W. Biegler
D. W. Biegler
Chairman and President
<PAGE>
EXHIBIT 3.2
BYLAWS OF ENSERCH CORPORATION, A
CORPORATION INCORPORATED UNDER
THE LAWS OF THE STATE OF TEXAS
PURPOSE AND SCOPE OF BYLAWS
These Bylaws shall constitute the private laws of ENSERCH
CORPORATION, a corporation duly incorporated under the laws of the
State of Texas (herein called the "corporation"), for the
administration and regulation of the affairs of the corporation.
In the event any provision of these Bylaws is or may be in
conflict with any applicable law of the United States or the State
of Texas, or of any order, rule, regulation, decree or judgment of
any governmental body or power or court having jurisdiction over
this corporation, or over the subject matter to which such
provision of these Bylaws applies or may apply, such provision of
these Bylaws shall be inoperative to the extent only that the
operation thereof unavoidably conflicts with such law or order,
rule, regulation, decree or judgment, and shall in all other
respects be in full force and effect.
ARTICLE I
OFFICES
Section 1. The registered office of the corporation shall be
at ENSERCH Center, 300 South St. Paul, in the City of Dallas,
County of Dallas, State of Texas, and the registered agent of the
corporation at such address shall be such person as the Board of
Directors may from time to time designate.
Section 2. The corporation may also have offices at such
other places both within and without the State of Texas as the
Board of Directors may from time to time determine or the business
of the corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. All meetings of the shareholders shall be held at
the registered office of the corporation or at such other place
either within or without the State of Texas as shall be designated
from time to time by the Board of Directors.
Section 2. The annual meeting of the shareholders shall be
held on the second Tuesday of May in each year, at 10:00 A.M., for
the election of a Board of Directors and the transaction of such
other business as may properly be brought before the meeting.
Section 3. Special meetings of the shareholders may be called
by the Chairman and President, the Board of Directors, or the
holders of not less than one-tenth of all the shares entitled to
vote at the meetings. Business transacted at all special meetings
shall be confined to the objects stated in the notice of meeting.
Section 4. Written or printed notice stating the place, day
and hour of the meeting, and, in case of a special meeting, the
purpose or purposes for which the meeting is called, shall be
delivered not less than ten (10) nor more than sixty (60) days
before the date of the meeting, either personally or by mail, by or
at the direction of the Chairman and President, the Corporate
Secretary, or the officer or person calling the meeting, to each
shareholder of record entitled to vote at such meeting. If mailed,
such notice shall be deemed to be delivered when deposited in the
United States mail addressed to the shareholder at his address as
it appears on the stock transfer books of the corporation, with
postage thereon prepaid.
Section 5. The officer or agent having charge of the stock
transfer books for shares of the corporation shall make, at least
ten (10) days before each meeting of shareholders, a complete list
of the shareholders entitled to vote at such meeting or any
adjournment thereof, arranged in alphabetical order, with the
address of and the number of shares held by each, which list, for
a period of ten (10) days prior to such meeting, shall be kept on
file at the registered office of the corporation and shall be
subject to inspection by any shareholder at any time during usual
business hours. Such list shall also be produced and kept open at
the time and place of the meeting and shall be subject to the
inspection of any shareholder during the whole time of the meeting.
The original stock transfer books shall be prima-facie evidence as
to who are the shareholders entitled to examine such list or
transfer books or to vote at any meeting of shareholders.
Section 6. The holders of a majority of the shares issued and
outstanding and entitled to vote thereat, present in person or
represented by written proxy, shall constitute a quorum at all
meetings of the shareholders for the transaction of business. If,
however, such quorum shall not be present or represented at any
meeting of the shareholders, the shareholders entitled to vote
thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be
present or represented. At such adjourned meeting at which a
quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as
originally notified.
Section 7. Each outstanding share, of any class, shall be
entitled to as many votes per share as the Articles of
Incorporation shall provide, on each matter submitted to a vote at
a meeting of shareholders, except to the extent that the voting
rights of the shares of any class or classes are limited or denied
by the Articles of Incorporation or these Bylaws. The vote for the
election of Directors and, upon demand by any shareholder, the vote
upon any question before the meeting shall be by ballot.
Cumulative voting is expressly prohibited.
Section 8. At any meeting of the shareholders, every
shareholder having the right to vote shall be entitled to vote in
person or by proxy executed in writing by such shareholder or by
his duly authorized attorney-in-fact. No proxy shall be valid
after eleven (11) months from the date of its execution unless
otherwise provided in the proxy. All proxies shall be revocable
unless expressly provided therein to be irrevocable and are coupled
with an interest and shall be filed with the Corporate Secretary of
the corporation prior to or at the time of the meeting at which
they are to be voted.
Section 9. When a quorum is present at any meeting, the vote
of the holders of a majority of the shares having voting power
present in person or represented by proxy shall decide any question
brought before such meeting, unless the question is one upon which,
by express provision of the statutes or of the Articles of
Incorporation or of these Bylaws, a different vote is required, in
which case such express provision shall govern and control the
decision of such question. The shareholders present at a duly
organized meeting may continue to transact business until
adjournment, notwithstanding the withdrawal of enough shareholders
to leave less than a quorum.
Section 10. The Chairman and President shall preside at all
meetings of the shareholders. In his absence, an officer of the
corporation designated by the Board of Directors shall preside and
perform the duties of the Chairman and President at such meeting.
He shall appoint two inspectors of voting to serve at each such
meeting. Before acting at any meeting, the inspectors shall be
sworn faithfully to execute their duties with strict impartiality
and according to the best of their ability. The inspectors shall
determine the number of shares outstanding, the voting power of
each, the shares represented at the meeting, the existence of a
quorum, the qualification of the voters, the authenticity, validity
and effect of proxies, receive votes and ballots, hear and
determine all challenges and questions in any way arising in
connection with the vote, count and tabulate all votes and
determine and announce the result of the voting.
Section 11. At an annual meeting of the shareholders, only
such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before an
annual meeting, business must be specified in the notice of meeting
(or any supplement thereto) given by or at the direction of the
Board, otherwise properly brought before the meeting by or at the
direction of the Board, or otherwise properly brought before the
meeting by a shareholder. In addition to any other applicable
requirements, for business to be properly brought before an annual
meeting by a shareholder, the shareholder must have given timely
notice thereof in writing to the Corporate Secretary. To be
timely, a shareholder's notice must be delivered to or mailed and
received at the principal executive offices of the corporation, not
less than fifty (50) days nor more than seventy-five (75) days
prior to the meeting; provided, however, that in the event that
less than sixty-five (65) days' notice or prior public disclosure
of the date of the meeting is given or made to shareholders, notice
by the shareholder to be timely must be so received not later than
the close of business on the 15th day following the day on which
such notice of the date of the annual meeting was mailed or such
public disclosure was made. A shareholder's notice to the
Corporate Secretary shall set forth as to each matter the
shareholder proposes to bring before the annual meeting (i) a brief
description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and record address of the shareholder
proposing such business, (iii) the class and number of shares of
the corporation which are beneficially owned by the shareholder,
and (iv) any material interest of the shareholder in such business.
Notwithstanding anything in the Bylaws to the contrary, no
business shall be conducted at the annual meeting except in
accordance with the procedures set forth in this Section 11;
provided, however, that nothing in this Section 11 shall be deemed
to preclude discussion by any shareholder of any business properly
brought before the annual meeting in accordance with said
procedure.
The Chairman of an annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly
brought before the meeting in accordance with the provisions of
this Section 11, and if he should so determine, he shall so declare
to the meeting and any such business not properly brought before
the meeting shall not be transacted.
Section 12. Only persons who are nominated in accordance with
the following procedures shall be eligible for election as
Directors. Nominations of persons for election to the Board of the
corporation may be made at a meeting of shareholders by or at the
direction of the Board of Directors by any nominating committee or
person appointed by the Board or by any shareholder of the
corporation entitled to vote for the election of Directors at the
meeting who complies with the notice procedures set forth in this
Section 12. Such nominations, other than those made by or at the
direction of the Board, shall be made pursuant to timely notice in
writing to the Corporate Secretary. To be timely, a shareholder's
notice shall be delivered to or mailed and received at the
principal executive offices of the corporation not less than fifty
(50) days nor more than seventy-five (75) days prior to the
meeting; provided, however, that in the event that less than sixty-
five (65) days' notice or prior public disclosure of the date of
the meeting is given or made to shareholders, notice by the
shareholder to be timely must be so received not later than the
close of business on the 15th day following the date on which such
notice of the date of the meeting was mailed or such public
disclosure was made. Such shareholder's notice to the Corporate
Secretary shall set forth (a) as to each person whom the
shareholder proposes to nominate for election or re-election as a
Director, (i) the name, age, business address and residence address
of the person, (ii) the principal occupation or employment of the
person, (iii) the class and number of shares of capital stock of
the corporation which are beneficially owned by the person, and
(iv) any other information relating to the person that is required
to be disclosed in solicitations for proxies for election of
Directors pursuant to Rule 14a under the Securities Exchange Act of
1934 as amended; and (b) as to the shareholder giving the notice
(i) the name and record address of shareholder and (ii) the class
and number of shares of capital stock of the corporation which are
beneficially owned by the shareholder. The corporation may require
any proposed nominee to furnish such other information as may
reasonably be required by the corporation to determine the
eligibility of such proposed nominee to serve as Director of the
corporation. No person shall be eligible for election as a
Director of the corporation unless nominated in accordance with the
procedures set forth herein.
The Chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not made
in accordance with the foregoing procedure, and if he should so
determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
ARTICLE III
DIRECTORS
Section 1. The business and affairs of the corporation shall
be managed by its Board of Directors who may exercise all such
powers of the corporation and do all such lawful acts and things as
are not by statute or by the Articles of Incorporation or by these
Bylaws directed or required to be exercised or done by the
shareholders.
Section 2. The Board of Directors shall consist of not less
than six Directors, none of whom need be shareholders or residents
of the State of Texas; the exact number of Directors to be
determined from time to time by resolution adopted by the Board of
Directors. A person shall be ineligible to be a Director of the
corporation after the date of the annual meeting of shareholders of
the corporation in the year in which such person's seventy-second
birthday occurs. The Directors shall be elected at the annual
meeting of the shareholders, except as provided in Section 4 of
this Article III. Unless he shall resign or become ineligible,
each Director shall hold office until his successor shall be
elected and shall qualify.
Section 3. Any Director may resign at any time either by oral
tender of resignation at any meeting of the Board of Directors or
by giving written notice thereof to the Corporate Secretary.
Resignations shall take effect when tendered or at the time
specified in the tender and, unless otherwise specified, the
acceptance of a resignation shall not be necessary to make it
effective.
Section 4. Any Director may be removed either for or without
cause, at any special meeting of shareholders by the affirmative
vote of the holders of record of a majority of the shares present
in person or by proxy at such meeting and entitled to vote for such
removal, if notice of the intention to act upon such matter shall
have been given in the notice calling for such meeting. Any
vacancy occurring in the Board of Directors may be filled by the
affirmative vote of a majority of the remaining Directors even
though such remaining Directors shall be less than a quorum of the
Board of Directors. A Director elected to fill a vacancy shall be
elected for the unexpired term of his predecessor in office. Any
directorship to be filled by reason of an increase in the number of
directors may be filled by election at an annual meeting or at a
special meeting of shareholders called for that purpose or may be
filled by the Board of Directors for a term of office continuing
until the next election of one or more Directors by the
shareholders; provided that the Board of Directors may not fill
more than two such directorships between any two successive annual
meetings of shareholders.
Section 5. The Board of Directors, by resolution adopted by
a majority of the full Board of Directors, may designate from among
its members one or more committees, each of which shall be
comprised of one or more of its members, and may designate one or
more of its members as alternate members of any committee, who may,
subject to any limitations imposed by the Board of Directors,
replace absent or disqualified members at any meeting of that
committee. Any such committee, to the extent provided in such
resolutions or in the Articles of Incorporation or the Bylaws,
shall have and may exercise all of the authority of the Board of
Directors, provided that no committee of the Board of Directors
shall have the authority of the Board of Directors in reference to:
(1) amending the Articles of Incorporation, except that a committee
may, to the extent provided in the resolution designating that
committee or in the Articles of Incorporation or the Bylaws,
exercise the authority of the Board of Directors vested in it in
accordance with Article 2.13 of the Texas Business Corporation Act
("Act"); (2) proposing a reduction of the stated capital of the
Corporation in the manner permitted by Article 4.12 of the Act;
(3) approving a plan of merger or share exchange of the
Corporation; (4) recommending to the shareholders the sale, lease,
or exchange of all or substantially all of the property and assets
of the Corporation otherwise than in the usual and regular course
of its business; (5) recommending to the shareholders a voluntary
dissolution of the Corporation or a revocation thereof;
(6) amending, altering, or repealing the Bylaws of the Corporation
or adopting new Bylaws of the Corporation; (7) filling vacancies in
the Board of Directors; (8) filling vacancies in or designating
alternate members of any such committee; (9) filling any
directorship to be filled by reason of an increase in the number of
Directors; (10) electing or removing officers of the Corporation or
members or alternate members of any such committee; (11) fixing the
compensation of any member or alternate members of such committee;
or (12) altering or repealing any resolution of the Board of
Directors that by its terms provides that it shall not be so
amendable or repealable; and, unless such resolution designating a
particular committee, the Articles of Incorporation, or the Bylaws
expressly so provide, no committee of the Board of Directors shall
have the authority to authorize a distribution or to authorize the
issuance of shares of the Corporation.
MEETINGS OF THE BOARD OF DIRECTORS
Section 6. The Directors of the corporation may hold their
meetings, both regular and special, either within or without the
State of Texas.
Section 7. The first meeting of each newly elected Board of
Directors shall be held without further notice immediately
following the annual meeting of shareholders, and at the same
place, unless by unanimous consent of the Directors then elected
and serving such time or place shall be changed.
Section 8. Regular meetings of the Board of Directors may be
held with or without notice at such time and place as shall from
time to time be determined by the Board of Directors.
Section 9. Special meetings of the Board of Directors may be
called on twenty-four (24) hours' notice to each Director, or such
shorter period of time as the person calling the meeting deems
appropriate in the circumstances, either personally, or by mail, or
by telegram; special meetings shall be called by the Chairman and
President or, in the event of the inability of the Chairman and
President to act, the Corporate Secretary in like manner and on
like notice on the written request of two Directors. Neither the
business to be transacted at, nor the purpose of, any special
meeting need be specified in a notice or waiver of notice.
Section 10. At all meetings of the Board of Directors the
presence of a majority of the Directors shall constitute a quorum
for the transaction of business and the act of a majority of the
Directors present at any meeting at which there is a quorum shall
be the act of the Board of Directors. Any action required or
permitted to be taken at a meeting of the Board of Directors may be
taken without a meeting if a consent in writing, setting forth the
action so taken, is signed by all members of the Board of
Directors. If a quorum shall not be present at any meeting of
Directors, the Directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 11. COMPENSATION OF DIRECTORS. The Board of
Directors shall have authority to establish, from time to time, the
amount of compensation which shall be paid to its members for their
services as Directors.
ARTICLE IV
NOTICES
Section 1. Whenever under the provisions of the statutes or
of the Articles of Incorporation or of these Bylaws, notice is
required to be given to any Director or shareholder, and no
provision is made as to how such notice shall be given, it shall
not be construed to mean personal notice, but any such notice may
be given in writing, by mail, postage prepaid, addressed to such
Director or shareholder at such address as appears on the books of
the corporation. Any notice required or permitted to be given by
mail shall be deemed to be given at the time when the same shall be
thus deposited in the United States mails as aforesaid.
Section 2. Whenever any notice is required to be given to any
shareholder or Director of the corporation under the provisions of
the statutes or of the Articles of Incorporation, or of these
Bylaws, a waiver thereof in writing signed by the person or persons
entitled to such notice, whether before or after the time stated in
such notice, shall be equivalent to the giving of such notice.
Attendance of a Director at a meeting shall constitute a waiver of
notice of such meeting, except when a Director attends a meeting
for the express purpose, in writing filed at the meeting, of
objecting to the transaction of any business on the grounds that
the meeting is not lawfully called or held.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be a
Chairman and President, one or more Executive Vice Presidents,
Senior Vice Presidents or Vice Presidents, a General Counsel, a
Controller, a Corporate Secretary and a Treasurer, all of whom
shall be elected by the Board of Directors. Any two or more
offices may be held by the same person. Each such officer shall
have such authority and perform such duties in the management of
the corporation as may be determined by resolution of the Board of
Directors.
Section 2. The Board of Directors may elect or appoint such
other officers and agents as it shall deem necessary, who shall
hold their offices for such term and who shall have such authority
and perform such duties as may be prescribed by the Board of
Directors or the Chairman and President. The power to appoint such
other officers and agents may be delegated by the Board of
Directors to the Chairman and President to the extent the Board may
delineate by resolution.
Section 3. Each officer of the corporation shall hold office
until his successor is chosen and qualified in his stead or until
his death or until his resignation, retirement or removal from
office. Any officer or agent elected or appointed by the Board of
Directors may be removed by the Board of Directors whenever in its
judgment the best interests of the corporation will be served
thereby, but such removal shall be without prejudice to the
contract rights, if any, of the person so removed. Election or
appointment of an officer or agent shall not of itself create
contract rights.
Section 4. THE CHAIRMAN AND PRESIDENT. The Chairman and
President shall be the chief executive officer of the corporation.
He shall, subject to the direction and control of the Board of
Directors, be their representative and medium of communication. He
shall see that all orders, resolutions and policies adopted by the
Board of Directors are carried into effect. He shall preside at
all meetings of shareholders and at all meetings of the Board of
Directors. He shall be in complete charge with attendant
responsibility and accountability of the entire corporation and its
affairs.
Section 5. EXECUTIVE VICE PRESIDENTS. Each Executive Vice
President shall have such powers and responsibilities, and shall
perform such duties, as delineated by the Board or by the Chairman
and President. They shall be directly responsible to such officer
as the Chairman and President may from time to time prescribe.
Section 6. SENIOR VICE PRESIDENTS. Each Senior Vice
President shall have such powers and responsibilities, and shall
perform such duties, as delineated by the Board or by the Chairman
and President. They shall be directly responsible to such officer
as the Chairman and President may from time to time prescribe.
Section 7. THE GENERAL COUNSEL. The General Counsel shall
have general control over all matters of a legal nature concerning
the corporation and shall perform such duties as delineated by the
Board or by the Chairman and President. He shall be directly
responsible to the Chairman and President in said performance.
Section 8. VICE PRESIDENTS. Each Vice President shall have
such powers and responsibilities, and shall perform such duties, as
may be delineated by the Board or the Chairman and President. They
shall be directly responsible to such officer as the Chairman and
President may from time to time prescribe.
Section 9. THE CONTROLLER. The Controller shall be in
general control of the accounts of the corporation, shall be
responsible for the making of adequate audits, shall prepare and
interpret required accounting, financial and statistical
statements, and shall be directly responsible to such officer and
shall perform such other duties as the Board or Chairman and
President may from time to time prescribe.
Section 10. THE CORPORATE SECRETARY. The Corporate Secretary
shall attend all meetings of the Board of Directors and
shareholders and act as secretary thereof and shall record all
votes and the minutes of all proceedings of the Board of Directors
and shareholders in a book for that purpose maintained and kept in
his custody. He shall keep in his custody the seal of the
corporation and shall in general perform all the duties incident to
the office of Secretary of a corporation. He shall act as Transfer
Agent of the corporation and/or Registrar of its capital stock and
other securities; provided that the Board of Directors may by
resolution appoint one or more other persons or corporations as
Transfer Agents and/or Registrars or as Co-Transfer Agents and/or
Co-Registrars. He shall be directly responsible to such officer
and shall perform such other duties as the Board or Chairman and
President may from time to time prescribe.
Section 11. THE TREASURER. The Treasurer shall have custody
of all the funds and securities of the corporation and shall keep
full and accurate accounts of receipts and disbursements. He may
endorse checks, notes and other obligations on behalf of the
corporation for collection and shall deposit the same, together
with all monies and other valuable effects, to the credit of the
corporation in banks or depositories as the Board of Directors may
designate by resolution or as may be established in accordance with
Article VIII of these Bylaws. He shall be directly responsible to
such officer as the Chairman and President may from time to time
designate and shall perform all duties incident to the office of
Treasurer of a corporation or as the Board or Chairman and
President shall designate.
Section 12. ASSISTANT CORPORATE SECRETARY, ASSISTANT
TREASURER, ASSISTANT CONTROLLER. The Board of Directors may
appoint one or more Assistant Corporate Secretaries, Assistant
Treasurers and Assistant Controllers and such other appointive
officers as may be appropriate and required. They shall be
directly responsible to such officer and shall perform such duties
as the Board or Chairman and President may from time to time
designate.
ARTICLE VI
CERTIFICATES REPRESENTING SHARES
Section 1. The shares of stock of this corporation shall be
deemed personal estate, and shall be transferable only on the books
of the corporation in such manner as these Bylaws prescribe.
Section 2. Every shareholder in the corporation shall be
entitled to have a certificate or certificates representing the
number of shares owned by him. The certificates of shares of stock
of the corporation shall be numbered and shall be entered in the
books of the corporation as they are issued. They shall exhibit
the holder's name and number of shares, and shall be signed by the
Chairman and President or a Vice President, and the Treasurer or an
Assistant Treasurer and bear the corporate seal; but the signatures
of such officers and the seal of the corporation upon such
certificates may be facsimiles, engraved or printed where such
certificate is signed by a duly authorized Transfer Agent or Co-
Transfer Agent and a Registrar or Co-Registrar.
Section 3. The Board of Directors may make such rules and
regulations as it may deem expedient concerning the issue,
transfer, conversion, and registration of certificates for shares
of the capital stock of the corporation.
Section 4. LOST CERTIFICATES. The Board of Directors may
direct a new certificate representing shares to be issued in place
of any certificate theretofore issued by the corporation alleged to
have been lost or destroyed, upon the making of an affidavit of
that fact by the person claiming the certificate to be lost or
destroyed. When authorizing such issue of a new certificate, the
Board of Directors, in its discretion and as a condition precedent
to the issuance thereof, may require the owner of such lost or
destroyed certificate, or his legal representative, to advertise
the same in such manner as it shall require and/or give the
corporation a bond in such form, in such sum, and with such surety
or sureties as it may direct as indemnity against any claim that
may be made against the corporation and its Transfer Agents and
Registrars and its Co-Transfer Agents and Co-Registrars with
respect to the certificate alleged to have been lost or destroyed.
Section 5. TRANSFER OF SHARES. Transfers of shares of stock
shall be made on the books of the corporation only by the person
named in the certificate or by attorney, lawfully constituted in
writing, and upon surrender of the certificate therefor.
Section 6. The Board of Directors may close the stock
transfer books of the corporation for a period not to exceed sixty
(60) days for the purpose of determining shareholders entitled to
notice of or to vote at any meeting of shareholders or any
adjournment thereof, or entitled to receive payment of any
distribution and share dividend, or in order to make a
determination of shareholders for any purpose, provided that if
such books shall be closed for the purpose of determining
shareholders entitled to notice of or to vote at a shareholders'
meeting, such books shall be closed for at least ten (10) days
immediately preceding such meeting. In lieu of so closing the
stock transfer books, the Board of Directors may fix a date in
advance, not exceeding sixty (60) days preceding the date of any
meeting of shareholders, or the date for the payment of any
distribution and share dividend or the date for the allotment of
rights, or the date when any change or conversion or exchange of
capital stock shall go into effect, as a record date for the
respective determination of the shareholders entitled to notice of,
and to vote at, any such meeting, or entitled to receive payment of
any such distribution and share dividend, or to any such allotment
of rights, or to exercise rights in respect of any such change,
conversion or exchange of capital stock and in such case such
shareholders and only such shareholders as shall be shareholders of
record on the date so fixed shall be entitled to such notice of,
and to vote at, such meeting, or to receive payment of such
distribution and share dividend, or to receive such allotment of
rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of any shares of stock on the books of
the corporation after any such record date fixed as aforesaid. In
the absence of any designation with respect thereto by the Board of
Directors, the date upon which the notice of a meeting is mailed or
resolutions declaring a distribution and share dividend are adopted
shall be the record date for such determination in regard to
meetings of shareholders or declarations of distributions and share
dividends.
Section 7. The corporation shall be entitled to treat the
holder of record of any share or shares of stock as the holder in
fact thereof and, accordingly, shall not be bound to recognize any
equitable or other claim to or interest in such share on the part
of any other person, whether or not it shall have express or other
notice thereof, save as expressly provided by the laws of Texas.
Section 8. BONDS, DEBENTURES AND EVIDENCES OF INDEBTEDNESS.
Bonds, debentures and other evidence of indebtedness of the
corporation shall be signed by the Chairman and President or any
Vice President and the Treasurer or an Assistant Treasurer and
shall bear the corporate seal and when so executed shall be binding
upon the corporation, but not otherwise. The seal of the
corporation thereon may be facsimile, engraved or printed, and
where any such bond, debenture or other evidence of indebtedness is
authenticated with the manual signature of an authorized officer of
the corporation or trustee appointed or named by an indenture of
trust or other agreement under which such security is issued, the
signature of any of the corporation's officers authorized to
execute such security may be facsimile.
Section 9. SIGNATURES ON SHARE CERTIFICATES, BONDS,
DEBENTURES AND EVIDENCES OF INDEBTEDNESS. In case any officer who
signed, or whose facsimile signature has been placed on any
certificate representing shares of stock, bond, debenture or
evidence of indebtedness of this corporation shall cease to be an
officer of the corporation for any reason before the same has been
issued or delivered by the corporation, such certificate, bond,
debenture or evidence of indebtedness may nevertheless be issued
and delivered as though the person who signed it or whose facsimile
signature had been placed thereon had not ceased to be such
officer.
ARTICLE VII
DEEDS AND OTHER INSTRUMENTS OF CONVEYANCE
Section 1. Deeds and other instruments of the corporation
conveying land or any interest in land shall be signed by the
Chairman and President or a Vice President or attorney-in-fact of
the corporation when authorized by appropriate resolution of the
Board of Directors or shareholders, and when required by law, shall
be attested by the Corporate Secretary or an Assistant Corporate
Secretary and shall bear the corporate seal, and when so executed
shall be binding upon the corporation, but not otherwise.
ARTICLE VIII
CHECKS, DRAFTS AND BILLS OF EXCHANGE
Section 1. The Chairman and President of the corporation may
from time to time establish General Bank Accounts, Depository Bank
Accounts, and such Special Bank Accounts as in his judgment may be
needed in carrying on and dispatching the business of the
corporation. All checks, drafts and bills of exchange issued in
the name of the corporation and calling for the payment of money
out of said General Accounts, Depository Accounts, or Special
Accounts of the corporation shall be signed by the Controller or
Assistant Controller, or such agents and employees as the Chairman
and President may from time to time designate and authorize to sign
for the Controller, and countersigned by the Treasurer or any
Assistant Treasurer, or such agents and employees as the Chairman
and President may from time to time designate and authorize to sign
for the Treasurer; and when so designated by the Chairman and
President, the signature of the Treasurer or an Assistant Treasurer
may be affixed by the use of a check-signing machine; provided that
for the purpose of transferring funds from any bank or depository
at which the corporation has funds on deposit to any other bank or
depository of the corporation for credit to the corporation's
account, a form of check having plainly printed upon its face
"DEPOSITORY TRANSFER CHECK," and being by its wording payable to a
bank or depository for credit to the account of the corporation, is
hereby authorized, and such checks shall require no signature other
than the name of the corporation printed at the lower right corner;
and further provided that checks, drafts and bills of exchange
issued in the name of the corporation in the amount of $5,000.00 or
less need bear only one signature and that being the signature of
the Treasurer or an Assistant Treasurer, affixed either manually or
by the use of a check-signing machine, or the manual signature of
such agents and employees as the Chairman and President may from
time to time designate and authorize to sign for the Treasurer; and
provided further that checks and drafts issued in the name of the
corporation and calling for payment of money out of Special Bank
Accounts established for the payment of dividends need bear only
one signature and that being the signature of the Treasurer or an
Assistant Treasurer, affixed either manually or by the use of a
check-signing machine, or the manual signature of such agents and
employees as the Chairman and President may from time to time
designate and authorize to sign for the Treasurer; and further
provided that no person authorized to sign checks or drafts may
sign a check or draft payable to himself. When signed in such
applicable manner, but not otherwise, every check, draft or bill of
exchange issued in the name of the corporation and calling for the
payment of money out of the General Bank Accounts, Depository Bank
Accounts, and Special Bank Accounts of the corporation shall be
valid and enforceable according to its wording, tenor and effect,
but not otherwise. Provided, however, that for the purpose of
transferring funds between accounts of the corporation, from
accounts of the corporation to accounts of subsidiaries and
affiliates, from accounts of the corporation for the purpose of
investment of corporate funds, and from accounts of the corporation
for the payment of dividends, the Treasurer or an Assistant
Treasurer, or such agents and employees as the Chairman and
President may from time to time designate and authorize, may make
such transfer of funds by bank wire transfers through oral or
written instructions; and for the purpose of transferring funds
from accounts of the corporation to accounts of other third
parties, such funds may be transferred by bank wire transfers but
only upon written instructions from the Treasurer or an Assistant
Treasurer, or such agents and employees as the Chairman and
President may from time to time designate and authorize to sign for
the Treasurer, and countersigned by the Controller or Assistant
Controller, or such agents and employees as the Chairman and
President may from time to time designate and authorize to sign for
the Controller.
Section 2. The Treasurer of the corporation may establish
special bank accounts designated as Agent's Account in such bank or
banks as in his judgment may be needed in carrying on and
dispatching the business of the corporation, provided that the
Treasurer in establishing and maintaining such accounts shall keep
only such funds therein and in such amount as may be required for
the local needs of such accounts and provided that checks or drafts
issued against or drawn on such accounts shall be valid and binding
on the corporation according to their wording, tenor and effect
when signed by either the Treasurer of the corporation or by such
agent or employee of the corporation as may be designated by the
Treasurer in writing to such bank or when signed in such manner and
by such agent or employee of the corporation as may be designated
by the Chairman and President of the corporation; and further
provided that checks and drafts issued in the name of the
corporation against funds in such Agent's Account in the amount of
$1,000.00 or more must be countersigned by two persons authorized
to sign such checks or drafts.
ARTICLE IX
FISCAL YEAR
Section 1. The fiscal year shall begin on the first day of
January in each year.
ARTICLE X
DISTRIBUTIONS AND SHARE DIVIDENDS
Section 1. Distributions and share dividends upon the
outstanding shares of the corporation, subject to the provisions of
the Articles of Incorporation, if any, may be declared by the Board
of Directors at any regular or special meeting. Distributions may
be paid in cash or property, and share dividends may be paid in
shares of the authorized but unissued shares or in treasury shares,
of the corporation subject to the provisions of the Articles of
Incorporation.
ARTICLE XI
RESERVES
Section 1. There may be created by resolution of the Board of
Directors out of the earned surplus of the corporation such reserve
or reserves as the Directors from time to time, in their
discretion, think proper to provide for contingencies, or to
equalize dividends, or to repair or maintain any property of the
corporation, or for such other purpose as the Directors shall think
beneficial to the corporation, and the Directors may modify or
abolish any such reserve in the manner in which it was created.
ARTICLE XII
SEAL
Section 1. The corporation's seal shall have inscribed
thereon the name of the corporation, the year of the organization
and the words "Corporate Seal, Texas." Said seal may be used by
causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
ARTICLE XIII
INDEMNIFICATION
Section 1. The corporation shall indemnify any person who
(1) is or was a director, officer, employee or agent of the
corporation, or (2) while a director, officer, employee or agent
of the corporation, its divisions or subsidiaries, is or was
serving at the request of the corporation, pursuant to a resolution
adopted by the Board of Directors, 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. The
corporation, pursuant to a resolution adopted by the Board of
Directors, may indemnify any such persons to such further extent as
permitted by law.
ARTICLE XIV
AMENDMENTS
Section 1. The power to alter, amend, suspend or repeal the
Bylaws or to adopt new Bylaws shall be vested in the Board of
Directors; provided, however, that any Bylaw or Amendment thereto
as adopted by the Board of Directors may be altered, amended,
suspended or repealed by vote of the shareholders entitled to vote
for the election of Directors or a new Bylaw in lieu thereof may be
adopted by vote of such shareholders. No Bylaw which has been
altered, amended or adopted by such a vote of the shareholders may
be altered, amended, suspended or repealed by vote of the Directors
until two years after such action by vote of the shareholders.
<PAGE>
EXHIBIT 10.2
ENSERCH CORPORATION
DEFERRED COMPENSATION PLAN FOR DIRECTORS
THIS PLAN, made and executed at Dallas, Texas by ENSERCH
Corporation, a Texas corporation (the "Corporation"), is being
established primarily for the purpose of providing members of the
ENSERCH Corporation Board of Directors the ability to defer receipt
of all or part of their compensation for an ensuing calendar year.
I.
DEFINITIONS
Whenever used herein, the following terms shall have the
meaning set forth below:
(a) "Account" means the separate memorandum account
maintained by ENSERCH Corporation into which a Director's
Annual Fee will be deposited if he or she elects to
participate in the Plan.
(b) "Adjustment Date" means the last day of each calendar
quarter and such other dates as the Administrative
Committee in its discretion may prescribe.
(c) "Administrative Committee" means a committee composed of
at least three individuals appointed by the Compensation
Committee of the Board of Directors of ENSERCH
Corporation to administer the adjustment of participant
accounts as provided herein, who shall serve in such
office until death, resignation or removal by the
Compensation Committee of the Board of Directors of
ENSERCH Corporation.
(d) "Annual Fee" means the retainer and meeting fees paid to
a Director for services rendered as a member of the Board
of Directors of ENSERCH Corporation, including fees for
services on a committee.
(e) "Board of Directors" means the Board of Directors of
ENSERCH Corporation.
(f) "Competitive Business Entity" means any business,
proprietorship, partnership, or corporation engaged in
business activities in the same or similar markets in
which ENSERCH Corporation, its subsidiaries, and
affiliates operate or plan to operate.
(g) "Director" means a member of the Board of Directors.
(h) "Plan" means the ENSERCH Corporation Deferred
Compensation Plan for Directors, as set forth in this
instrument and as it may hereafter be amended from time
to time.
(i) "Termination Date" means the date upon which a Director
ceases to be a member of the Board of Directors.
II.
PLAN DESCRIPTION
A Director may elect to defer receipt of all or a specified
part of his or her Annual Fee for each calendar year. The
Corporation will maintain an Account for each participant into
which the deferred portion of earned Annual Fee payments will be
credited on the date the Director would otherwise be entitled to
receive such fee.
Each Director participating in the Plan may elect in the
manner and at the time prescribed by the Administrative Committee
to have his or her Account adjusted in one of the manners provided
below:
(a) Sums credited to the Account will accrue interest
from the date they are credited at a rate equal to the prime
rate of interest charged by Citibank, N.A., of New York City
as of the first business day following each Adjustment Date.
The accrued interest shall be credited to the Account on each
Adjustment Date, and shall be subject to subsequent interest
accruals.
(b) Sums credited to the Account will be adjusted as of
each Adjustment Date to reflect such gain, loss, and/or
expenses incurred based upon the experience of investments
selected by the Director for the investment of his or her
Account and taking into account additional deferrals credited
to and any distributions made from such Account since the last
Adjustment Date. The Administrative Committee shall have sole
and absolute discretion with respect to the number and type of
investment choices made available for selection by Directors
pursuant to this subparagraph (b) and the method by which
adjustments are made. The designation of investment choices
by the Administrative Committee shall be for the sole purpose
of adjusting Accounts and the Corporation shall be under no
obligation to invest or set aside any assets for the payment
of benefits hereunder; provided, however, that the Corporation
may invest a portion of its general assets in investments,
including investments which are the same as or similar to the
investment choices designated by the Administrative Committee
and selected by Directors, but any such investment shall
remain part of the general assets of the Corporation and shall
not be deemed or construed to create a trust fund of any kind
for or to grant a property interest of any kind to any
Director, beneficiary or estate. The Administrative Committee
shall notify the Directors of the investment choices available
and the procedures for making and changing investment
elections.
The amount payable from a participant's Account shall be
determined based upon the amount credited to such Account as of the
Adjustment Date last preceding the date of payment plus any
deferrals credited to and less any distributions made from such
Account since such Adjustment Date. The amount of each payment
made with respect to an Account and any forfeiture amounts applied
pursuant to Article X shall be deducted from the balance credited
to such Account at the time of payment or forfeiture.
The amount payable from a participant's Account, as determined
in accordance with the preceding paragraph, will be distributed to
the participant, in accordance with the participant's prior
irrevocable election either (i) in annual installments over a 10-
year period or (ii) in a lump sum, with such installments to begin
or lump sum payment to be made, as soon as practicable following
the participant's Termination Date.
The Account of a participant who, subsequent to his or her
Termination Date, becomes a proprietor, officer, partner, employee,
or otherwise affiliated with a Competitive Business Entity may, if
directed by the Board of Directors in its sole discretion, be paid
immediately in a lump sum, including accumulated interest or as
adjusted pursuant to subparagraph (b) above, to the participant.
Upon the death of a participant, the balance of the Account,
together with interest earned to date of payment or as adjusted
pursuant to subparagraph (b) above, shall be payable to such
beneficiary or beneficiaries as the participant shall have
designated in writing to the Corporation (or to his or her estate
if no such beneficiary has been designated) in full as soon as
practicable following the date of his or her death.
III.
ELECTION TO BECOME A PARTICIPANT
A Director desiring to become a participant shall execute an
"Election and Agreement to Defer Director's Compensation" as
described and set forth in the attachment to this Plan, labeled
Exhibit "A". This election shall be made in advance of the
performance of services during the calendar year for which an
election to participate in this Plan is being made and shall be
irrevocable.
Any provision of this Plan to the contrary notwithstanding,
any Director who elects to receive a lump sum payment of the amount
credited to his or her account under the ENSERCH Corporation
Director Fee Deferral Plan pursuant to Article XI thereof may not
participate in this Plan by having Annual Fee deferrals credited to
his or her Account hereunder prior to the expiration of 12 months
from the date of such election.
IV.
TERMINATION OF ELECTION
Participation in the Plan will be automatically terminated at
the end of each calendar year unless the participant executes an
election for the following year pursuant to Article III. All
amounts credited to a participant's Account shall remain in the
Account to be distributed or forfeited in accordance with the
provisions of this Plan.
V.
MAINTENANCE OF ACCOUNT
The Corporation shall maintain an Account on behalf of each
participant in the form and manner prescribed by acceptable
accounting standards, and shall make a report of same in writing
within 90 days after the end of each year to each participant.
VI.
UNFUNDED PLAN
This Plan shall be unfunded. Neither ENSERCH Corporation nor
the Board of Directors shall be deemed to be a trustee of any
amounts to be paid under this Plan. Said amounts hereunder shall
continue for all purposes to be a part of the general funds of
ENSERCH Corporation, and no person other than ENSERCH Corporation
shall, by virtue of the provisions of this Plan, have any interest
in such funds. To the extent that any person acquires a right to
receive payments from ENSERCH Corporation under this Plan, such
right shall be no greater than the right of any unsecured general
creditor of ENSERCH Corporation. Any liability of ENSERCH
Corporation to any participant with respect to a payment to be made
under this Plan shall be based solely upon any contractual
obligations which may be created by or pursuant to this Plan; no
such obligation shall be deemed to be secured by any pledge or any
encumbrance on any property of ENSERCH Corporation.
VII.
AMENDMENT AND TERMINATION OF PLAN
The Board of Directors may terminate this Plan at any time.
A termination of the Plan shall be effective at the end of the
calendar year in which the Directors vote to terminate the Plan.
The Board of Directors may amend this Plan at any time.
Any provision of this Plan to the contrary notwithstanding, no
amendment to or termination of this Plan shall reduce the amounts
actually credited to a participant's Account as of the date of such
amendment or termination, or further defer the dates for the
payment of such amounts, without the consent of the affected
participant.
The preceding provisions of this Article to the contrary
notwithstanding, no action taken on or within two years following
a Change of Control (as defined below) to amend or terminate this
Plan shall be effective unless written consent thereto is obtained
from a majority of the participants who were Directors immediately
prior to such Change of Control.
VIII.
EFFECTIVE DATE AND DURATION
This Plan shall become effective on January 1, 1995. This
Plan shall remain in effect until it is terminated by the Board of
Directors in accordance with Article VII above.
IX.
GOVERNING LAW
This Plan and the rights of all persons under the Plan shall
be construed in accordance with and governed by the laws of the
State of Texas.
X.
OPTION TO REQUEST IMMEDIATE PAYOUT
In lieu of any other benefits or payments to be made pursuant
to this Plan, each participant shall have the right at any time to
elect a lump sum payment in an amount equal to:
(a) the amount credited to the participant's Account, minus
(b) a forfeiture amount equal to 20% of (a) above, provided,
however, that if the election is made on or within two years
following the date a Change of Control occurs, such forfeiture
amount shall be determined substituting 10% for 20%.
A "Change of Control" for purposes of this Plan means a change
in control of a nature that would be required to be reported in
response to Item 1(a) of the Securities and Exchange Commission
Form 8-K, as in effect on the date hereof, pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended
("Exchange Act"), or would have been required to be so reported but
for the fact that such event had been "previously reported" as that
term is defined Rule 12b-2 of Regulation 12B under the Exchange
Act; provided that, without limitation, such a change in control
shall be deemed to have occurred if (i) any Person is or becomes
the beneficial owner (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Corporation
representing 20% or more of the combined voting power of the
Corporation's then outstanding securities ordinarily (apart from
rights accruing under special circumstances) having the right to
vote at elections of directors ("Voting Securities"), or (ii)
individuals who constitute the Board of Directors on the date
hereof (the "Incumbent Board") cease for any reason to constitute
at least a majority thereof, provided that any person becoming a
director subsequent to the date hereof whose election, or
nomination for election by the Corporation's shareholders, was
approved by a vote of at least three-quarters of the directors
comprising the Incumbent Board (either by a specific vote or by
approval of the proxy statement of the Corporation in which such
person is named as a nominee for director, without objection to
such nomination) shall be, for purposes of this clause (ii),
considered as though such person were a member of the Incumbent
Board, or (iii) a recapitalization of the Corporation occurs which
results in either a decrease by 33% or more in the aggregate
percentage ownership of Voting Securities held by Independent
Shareholders (on a primary basis or on a fully diluted basis after
giving effect to the exercise of stock options and warrants) or an
increase in the aggregate percentage ownership of Voting Securities
held by non-Independent Shareholders (on a primary basis or on a
fully diluted basis after giving effect to the exercise of stock
options and warrants) to greater than 50%. For purposes of the
preceding sentence, the term "Person" shall mean and include any
individual, corporation, partnership, group, association or other
"person", as such term is used in Section 14(d) of the Exchange
Act, other than the Corporation, a subsidiary of the Corporation or
any employee benefit plan(s) sponsored or maintained by the
Corporation or any subsidiary thereof, and the term "Independent
Shareholder" shall mean any shareholder of the Corporation except
any employee(s) or director(s) of the Corporation or any employee
benefit plan(s) sponsored or maintained by the Corporation or any
subsidiary thereof.
A participant's election for an immediate payout pursuant to
this Article must be in the form of a written notice provided to
the Administrative Committee. The Administrative Committee shall
notify the Corporation of the election and the amount so determined
shall be paid to the participant no later than 15 days following
receipt of notice by the Administrative Committee. Any amount
remaining credited to the participant's Account shall be forfeited
at the time payment is made.
IN WITNESS WHEREOF, this Plan has been executed on this 30th
day of September, 1994 to be effective as of
January 1, 1995.
ENSERCH Corporation
By /s/ D. W. Biegler
Title: Chairman, President
and Chief Executive Officer
<PAGE>
EXHIBIT 10.7
ENSERCH CORPORATION
PERFORMANCE INCENTIVE PLAN
CALENDAR YEAR 1995
I. PURPOSES
The purposes of the ENSERCH Corporation Performance Incentive
Plan (the "Plan") are to:
A. Encourage and reward improved performances by the senior
officers and managers.
B. Provide reward incentives for the achievement of specific
performance goals or objectives periodically established.
C. Provide an appropriate level of executive compensation
commensurate with that of similar businesses to retain
key officers and managers.
D. Provide an incentive for key officers and management to
perform in a manner that benefits the Corporation's
shareholders and the Company's customers.
II. ELIGIBILITY
Key executives of the Corporation and its subsidiaries as
specifically designated shall be eligible for participation in the
Plan.
The existence of this Plan does not prevent the existence of
other bonus plans within operating units or subsidiaries of the
Corporation. However, Participants in this Plan may not partici-
pate in any other cash bonus or incentive plans or programs offered
by ENSERCH or any of its subsidiaries or affiliates (other than
compensation and incentive plans made available to all executives
generally).
III. DEFINITIONS AND BONUS FACTORS
Subject to the conditions and limitations described herein,
bonus award payments may be made to the Participants under the Plan
as hereinafter set out. For purposes of the Plan, the following
definitions apply:
A. Participant
Each of the eligible key management personnel who are
designated for participation by the Chairman of ENSERCH
Corporation ("the Chairman") or by the Compensation
Committee of the Board of Directors ("the Compensation
Committee"). Each Participant will be individually
notified of his or her participation together with the
applicable factors approved for the determination of each
individual bonus opportunity.
B. Plan Year
The Plan Year and the annual bonus period shall be the
calendar year.
C. Base Salary
The annual Base Salary designated for the Participant is
that contained in the applicable payroll records,
exclusive of any payment under any bonus plan, deferred
compensation, salary deferral plan, expense reimbursement
or fringe benefit, for the annual period covered by the
bonus award.
D. Target Bonus Factor
A specified percentage of the Participant's Base Salary
which would be the bonus payable to a Participant upon
100% Goal Achievement. The Target Bonus Factor applied
to Base Salary is the Target Bonus.
E. Performance Goals
Expressed, measurable goals established as the basis for
bonus awards for the annual bonus period, each having a
corresponding Weighting Factor expressed as a percentage.
No more than four Performance Goals will be used for any
annual period. The Weighting Factors for all Performance
Goals for an annual period aggregate 100%.
F. Goal Achievement Factor
A percentage representing the level of actual achievement
of each Performance Goal, calculated at the end of each
Plan Year.
G. Performance Factor
The sum of the weighted average percentages of Goal
Achievement Factors which is applied to the Target Bonus
to derive the bonus.
H. Bonus Calculation
In summary:
Target Bonus = Base Salary x Target Factor
Bonus = Target Bonus x Performance Factor
Performance Factor = Weighting1 x Goal Achievement
Factor1
+ Weighting2 x Goal Achievement
Factor2
+ Weighting3 x Goal Achievement
Factor3
+ Weighting4 x Goal Achievement
Factor4
IV. GOAL ACHIEVEMENT
The Goal Achievement Factor pertaining to achievement of
earnings, shareholder return and operating income goals is as
follows:
If Income Ratio or Goal Achievement Factor will be:
other ratio of
achievement:
less than 0.9 0%
between 0.9 and 1.00 20% plus 8% for each .01 greater
than 0.90
above 1.00 100% plus 2.5% for each .01 greater
than 1.00, up to a maximum of 150%.
Goal Achievement Factors will be prorated between the amounts
nearest percentages specified above.
Income Ratio is the ratio of the actual earnings or operating
income for the Plan Year to the applicable budgeted income.
Budgeted earnings and operating income are adjusted to take into
account the effects of variations in heating degree days, oil and
gas production sales prices and severance tax, and NGL prices, fuel
and shrinkage.
V. BONUS PAYMENTS
A. Payment Schedule. Any bonus awarded pursuant to this
Plan shall be paid in cash (unless any executive opts by written
notice in advance of the relevant plan year to defer its receipt
under the Deferred Compensation Plan) to participating executives
not later than April 1 of the year succeeding the calendar year for
which performance is measured.
B. Discretionary Bonus. Upon recommendation by the
Chairman, the Compensation Committee, in its sole discretion, may
award special bonuses to executives or employees of the Corporation
or any of its subsidiaries or affiliates, whether or not named
Participants in this Plan, on a discretionary basis to reward
meritorious performance. The Compensation Committee's decision
relative to such award shall be final and binding on all parties.
C. Retirement, Death, Disability, Termination. All bonus
awards to a Participant under this Plan during his or her active
employment shall be paid or credited under the terms of the Plan to
any Participant who retires at age 60 or above in accordance with
his/her employer's approved retirement plan, or to any Participant
who becomes eligible for and receives disability benefits in
accordance with its long-term disability plan.
In the event of a Participant's retirement at age 60 or
above or death during a Plan Year, to the extent practicable, and
only if Participant is employed at least one-half of the Plan Year,
any bonus awarded for achievement of Goals to which the Participant
contributed shall be prorated and the appropriate portion awarded.
A decision by the Chairman as to what may be an appropriate
prorated portion shall be final and binding on all parties.
In the event of a Participant's death, any bonus awarded
to such Participant prior to the date of death but unpaid, and
which would otherwise have been received, or any awarded after the
date of death, will be paid to his beneficiary or to his estate, as
applicable.
In the event a Participant's employment terminates for
any reason other than retirement, disability or death, or as
described in (d) below, prior to the time a bonus payment is paid,
no bonus shall be payable for either a portion of or for a full
Plan year.
D. Merger. In the event that ENSERCH Corporation shall,
pursuant to action by its Board, at any time propose to merge into,
consolidate with, or sell or otherwise transfer all or substantial-
ly all of the assets of the Corporation or a segment to another
corporation in which ENSERCH or the segment would be in a minority
position, all bonus awards which have been granted but remain
unpaid and a bonus award based on a 100% performance factor for the
Plan Year in which such action occurs shall be immediately paid to
Participant and the Participant shall not be required to be
employed by the Corporation in order to receive the payment.
VI. ESTABLISHMENT OF PERFORMANCE GOALS
Performance Goals as established are described on Attach-
ment A.
VII. ADMINISTRATIVE PROVISIONS
A. Discretion. Notwithstanding any calculation of bonus in
accordance with the foregoing provisions, the Chairman may within
his sole discretion alter or eliminate any bonus award developed
under this Plan in order to achieve equity in the administration of
the Plan within ENSERCH Corporation as a whole.
B. Termination. This Plan may be terminated at any time by
the Compensation Committee. Notification of termination will be
given to the then Participants. A Plan termination will not
prevent payment of bonuses where Goal achievement has been
completed in a calendar year for which a Goal had been approved.
If the Plan is terminated by the Compensation Committee during a
Plan Year in which Goals have been established under the Plan,
performance will be prorated by the Committee and bonuses paid
proportionally. The Compensation Committee's decision relative to
such payment shall be final and binding on all parties.
C. Effective Date. This Plan is effective for the calendar
year commencing January 1, 1995, unless terminated by action of the
Compensation Committee.
D. No Contract. Nothing in this Performance Incentive Plan
shall be deemed by implication, conduct of the parties, or
otherwise to constitute a contract of employment or otherwise to
impose any limitation on any right of the Corporation or any of its
operating units to terminate a Participant's employment at any
time.
E. Under provisions of the ENSERCH Retirement and Death
Benefit Program of 1969, this bonus program qualifies as an "annual
performance based incentive plan" and is to be included in "final
average pay" for purposes of pension calculations.
<PAGE>
EXHIBIT 10.9
ENSERCH CORPORATION
DEFERRED COMPENSATION PLAN
THIS PLAN, made and executed at Dallas, Texas by ENSERCH
Corporation, a Texas corporation (the "Company"), is being
established primarily for the purpose of providing deferred
compensation for a select group of management or highly
compensated employees of the Company and its participating
affiliates.
ARTICLE I.
DEFINITIONS
Section 1.1 Definitions. Unless the context clearly
indicates otherwise, when used in this Plan:
(a) "Adjustment Date" means the last day of each
calendar quarter and such other dates as the Administrative
Committee in its discretion may prescribe.
(b) "Affiliated Company" means any corporation or
organization which together with the Company would be
treated as a single employer under Section 414 of the Code.
(c) "Administrative Committee" means the committee
designated pursuant to Section 2.1 to administer this Plan.
(d) "Board" means the Board of Directors of ENSERCH
Corporation.
(e) "Change of Control" means a change in control of a
nature that would be required to be reported in response to
Item 1(a) of the Securities and Exchange Commission Form
8-K, as in effect on the date hereof, pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended
("Exchange Act"), or would have been required to be so
reported but for the fact that such event had been
"previously reported" as that term is defined Rule 12b-2 of
Regulation 12B under the Exchange Act; provided that,
without limitation, such a change in control shall be deemed
to have occurred if (i) any Person is or becomes the
beneficial owner (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the
Company representing 20% or more of the combined voting
power of the Company's then outstanding securities
ordinarily (apart from rights accruing under special
circumstances) having the right to vote at elections of
directors ("Voting Securities"), or (ii) individuals who
constitute the Board on the date hereof (the "Incumbent
Board") cease for any reason to constitute at least a
majority thereof, provided that any person becoming a
director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was
approved by a vote of at least three-quarters of the
directors comprising the Incumbent Board (either by a
specific vote or by approval of the proxy statement of the
Company in which such person is named as a nominee for
director, without objection to such nomination) shall be,
for purposes of this clause (ii), considered as though such
person were a member of the Incumbent Board, or (iii) a
recapitalization of the Company occurs which results in
either a decrease by 33% or more in the aggregate percentage
ownership of Voting Securities held by Independent
Shareholders (on a primary basis or on a fully diluted basis
after giving effect to the exercise of stock options and
warrants) or an increase in the aggregate percentage
ownership of Voting Securities held by non-Independent
Shareholders (on a primary basis or on a fully diluted basis
after giving effect to the exercise of stock options and
warrants) to greater than 50%. For purposes of this
subsection (e), the term "Person" shall mean and include any
individual, corporation, partnership, group, association or
other "person", as such term is used in Section 14(d) of the
Exchange Act, other than the Company, a subsidiary of the
Company or any employee benefit plan(s) sponsored or
maintained by the Company or any subsidiary thereof, and the
term "Independent Shareholder" shall mean any shareholder of
the Company except any employee(s) or director(s) of the
Company or any employee benefit plan(s) sponsored or
maintained by the Company or any subsidiary thereof.
(f) "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
(g) "Company" means ENSERCH Corporation and its
successors.
(h) "Compensation Committee" means the Compensation
Committee of the Board.
(i) "Deferral Account" means the account established
and maintained on the books of an Employer to record a
Participant's interest under this Plan attributable to
amounts credited to such Participant pursuant to Plan
Section 3.1 and Section 3.2.
(j) "Disability" means total and permanent disability
of the Participant as determined under the provisions of his
or her Employer's group long-term disability plan.
(k) "Election Period" means such period immediately
prior to the beginning of a Plan Year (or, with respect to
the Plan's first Plan Year, the period immediately prior to
October 1, 1994) specified by the Administrative Committee
for the making of deferral elections for such Plan Year
pursuant to Plan Sections 3.1 and 3.2.
(l) "Eligible Employee" means any employee of an
Employer who is one of a select group of management or
highly compensated employees and (i) whose annual base
salary equals or exceeds $125,000 or (ii) whose annual base
salary equals or exceeds $100,000 and whose position is of
significant impact on the operations of his or her Employer
as determined by the Administrative Committee in its
absolute discretion.
(m) "Employer" includes the Company and any Affiliated
Company which adopts this Plan.
(n) "Participant" means an Eligible Employee or former
Eligible Employee for whom a Deferral Account is being
maintained under this Plan.
(o) "Plan" means this ENSERCH Corporation Deferred
Compensation Plan as in effect from time to time on and
after October 1, 1994.
(p) "Plan Year" means the twelve-month period
commencing January 1 and ending the following December 31.
(q) "Retirement Age" means the age used as the
retirement age for the Participant under Section 216(l) of
the Social Security Act.
ARTICLE II.
PLAN ADMINISTRATION
Section 2.1 Administrative Committee. This Plan shall be
administered by an Administrative Committee composed of at least
three individuals appointed by the Compensation Committee. Each
member of the Administrative Committee so appointed shall serve
in such office until his or her death, resignation or removal by
the Compensation Committee. The Compensation Committee may
remove any member of the Administrative Committee at any time by
giving written notice thereof to the members of the
Administrative Committee. Vacancies shall likewise be filled
from time to time by the Compensation Committee. The
Administrative Committee shall have discretionary and final
authority to interpret and implement the provisions of the Plan,
including without limitation, authority to determine eligibility
for benefits under the Plan. The Administrative Committee shall
act by a majority of its members at the time in office and such
action may be taken either by a vote at a meeting or in writing
without a meeting. The Administrative Committee may adopt such
rules and procedures for the administration of the Plan as are
consistent with the terms hereof and shall keep adequate records
of its proceedings and acts. Every interpretation, choice,
determination or other exercise by the Administrative Committee
of any power or discretion given either expressly or by
implication to it shall be conclusive and binding upon all
parties having or claiming to have an interest under the Plan or
otherwise directly or indirectly affected by such action, without
restriction, however, on the right of the Administrative
Committee to reconsider and redetermine such action.
ARTICLE III.
DEFERRED COMPENSATION PROVISIONS
Section 3.1 Compensation Deferral Election. During the
Election Period prior to the beginning of each Plan Year, an
Eligible Employee may elect to have the payment of an amount of
up to 50% of the annual base salary otherwise payable by an
Employer to such Eligible Employee for such Plan Year deferred
for payment in the manner and at the time specified in
Article IV; provided, however, that the minimum amount that may
be deferred by an Eligible Employee for a Plan Year pursuant to
this Section 3.1 is $5,000 (or such other amount as shall be
determined by the Administrative Committee in its discretion).
The amount of annual base salary a Participant elects to defer
pursuant to this Section 3.1 shall be deducted from the
Participant's pay in substantially equal amounts over all pay
periods during the Plan Year. All elections made pursuant to
this Plan Section 3.1 shall be made in writing on a form
prescribed by and filed with the Administrative Committee and
shall be irrevocable; provided, however, that effective as of the
first day of any calendar quarter during a Plan Year, an Eligible
Employee may revoke his or her deferral election and thereby
suspend further salary deferrals for the remainder of such Plan
Year by providing written notice thereof to the Administrative
Committee no later than 15 days prior to the effective date of
such suspension. Any Eligible Employee who so suspends his or
her salary deferrals pursuant to this Section shall not be
permitted to elect future salary deferrals pursuant to this
Section to be effective earlier than the first day of the next
Plan Year.
Section 3.2 Bonus Deferral Election. During the Election
Period prior to the beginning of each Plan Year (other than the
first Plan Year), an Eligible Employee may elect to have the
payment of an amount up to 100% of the cash portion of any future
bonus otherwise payable by an Employer with respect to services
to be performed by such Eligible Employee during such Plan Year
deferred for payment in the manner and at the time specified in
Article IV; provided, however, that the minimum amount that may
be deferred by an Eligible Employee pursuant to this Section 3.2
is $5,000 (or such other amount as shall be determined by the
Administrative Committee in its discretion); provided, further,
that there shall be no minimum deferral amount pursuant to this
Section 3.2 with respect to an Eligible Employee who elects to
defer in the same Plan Year at least $5,000 (or such other amount
as shall be determined by the Administrative Committee in its
discretion) pursuant to Section 3.1. All elections made pursuant
to this Plan Section 3.2 shall be made in writing on a form
prescribed by and filed with the Administrative Committee and
shall be irrevocable.
Section 3.3 Participant Deferral Accounts. An Employer
shall establish and maintain on its books a Deferral Account for
each Eligible Employee employed by such Employer who elects to
participate in this Plan. Each such Deferral Account shall be
designated by the name of the Participant for whom it is
established. The amount of any base salary and/or cash bonus
from an Employer for a Plan Year that is deferred for a
Participant pursuant to Section 3.1 and/or Section 3.2 shall be
credited by such Employer to such Participant's Deferral Account
as of the date such amount would otherwise have been paid to such
Participant by such Employer. An Employer shall continue
maintaining a Deferral Account as long as a positive balance
remains credited to such Deferral Account.
Section 3.4 Deferral Account Adjustments. As of each
Adjustment Date, the amount credited to a Deferral Account shall
be adjusted to reflect such gain, loss and/or expenses incurred
based on the experience of the investments selected by the
Participant prior to the date prescribed by the Administrative
Committee for the investment of his or her Deferral Account and
taking into account additional deferrals credited to and
distributions made from such Deferral Account since the last
Adjustment Date. The Administrative Committee shall have sole
and absolute discretion with respect to the number and type of
investment choices made available for selection by Participants
pursuant to this Section, the timing of Participant elections and
the method by which adjustments are made. The designation of
investment choices by the Administrative Committee shall be for
the sole purpose of adjusting Deferral Accounts pursuant to this
Section and this provision shall not obligate the Employers to
invest or set aside any assets for the payment of benefits
hereunder; provided, however, that an Employer may invest a
portion of its general assets in investments, including
investments which are the same as or similar to the investment
choices designated by the Administrative Committee and selected
by Participants, but any such investments shall remain part of
the general assets of such Employer and shall not be deemed or
construed to grant a property interest of any kind to any
Participant, designated beneficiary or estate. The
Administrative Committee shall notify the Participants of the
investment choices available and the procedures for making and
changing investment elections.
Section 3.5 Vesting. Subject to Section 4.6, all amounts
credited to a Participant's Deferral Account shall be fully
vested and nonforfeitable at all times.
ARTICLE IV.
BENEFITS
Section 4.1 Source of Benefit Payments. Benefit payments
to be made with respect to a Participant's Deferral Account
maintained pursuant to the Plan will be paid in cash and will be
the obligation solely of the Employer maintaining such Deferral
Account; provided, however, that whenever a payment hereunder is
to be made by an Employer, the Company may, in its discretion,
satisfy such payment obligation on behalf of such Employer, and
the Company will be obligated to satisfy any such payment
obligation in the event the Employer otherwise liable therefor
fails to pay such amount when due for any reason.
Section 4.2 Amount of Benefit Payments. The amount payable
from a Participant's Deferral Account shall be determined based
upon the amount credited to such Deferral Account as of the
Adjustment Date last preceding the date of payment plus any
deferrals credited to and less any distributions made from such
Deferral Account since such Adjustment Date. The amount of each
payment made with respect to a Deferral Account and any
forfeiture amounts applied pursuant to Section 4.6 shall be
deducted from the balance credited to such Deferral Account at
the time of payment or forfeiture.
Section 4.3 Early Termination. Upon a Participant's
termination of employment with an Employer or Affiliated Company
prior to the date which is ten years prior to such Participant's
Retirement Age for any reason other than death, Disability or
transfer to employment with another Employer or Affiliated
Company, the amount payable from such Participant's Deferral
Account, as determined in accordance with Section 4.2, shall be
paid by the Employer to such Participant in a single lump sum as
soon as practicable following such termination of employment.
Section 4.4 Death. Upon a Participant's termination of
employment by reason of death, the amount payable from such
Participant's Deferral Account, as determined in accordance with
Section 4.2, shall be paid by the Employer to the beneficiary or
beneficiaries designated by such Participant pursuant to Section
4.7 in one of the following forms as elected by the Participant
during the Participant's initial Election Period:
(a) a single lump sum to be paid as soon as
practicable following the Participant's death; or
(b) if the amount payable from a Deferral Account is
$50,000 or more as of the date of the Participant's death,
annual installments over the period certain selected by the
Participant not to exceed 15 years commencing in payment as
soon as practicable following the Participant's death with
each annual installment equal to the Deferral Account
balance multiplied by a fraction the numerator of which is
one and the denominator of which is the number of payments
remaining;
provided, however, that if a beneficiary of a deceased
Participant who is entitled to installment payments hereunder
encounters an unforeseeable emergency (as determined in
accordance with Section 4.8 hereof), the Administrative
Committee, in its absolute discretion, may direct the Employer to
accelerate such portion of the installment payments as the
Administrative Committee shall determine to be necessary to
alleviate the severe financial hardship of the beneficiary caused
by such unforeseeable emergency.
Section 4.5 Retirement or Disability. Upon a Participant's
termination of employment with an Employer or Affiliated Company
(i) on or after the date which is ten years prior to such
Participant's Retirement Age for any reason other than death or
transfer to employment with another Employer or Affiliated
Company or (ii) on account of his or her Disability, the amount
payable from such Participant's Deferral Account, as determined
in accordance with Section 4.2, shall be paid by the Employer to
such Participant (or, in the event of his or her subsequent
death, to the beneficiary or beneficiaries designated by such
Participant pursuant to Plan Section 4.7) in one of the following
forms as elected by the Participant during the Participant's
initial Election Period:
(a) a single lump sum to be paid as soon as
practicable following the Participant's termination of
employment or, in the case of termination of employment on
account of Disability or prior to Retirement Age and the
Participant so elects, the Participant's Retirement Age; or
(b) if the amount payable from a Deferral Account is
$50,000 or more as of the date of the Participant's
termination of employment, annual installments over the
period certain selected by the Participant not to exceed 15
years commencing in payment as soon as practicable following
the Participant's termination of employment or, in the case
of termination of employment on account of Disability or
prior to Retirement Age and the Participant so elects, the
Participant's Retirement Age, with each annual installment
equal to the Deferral Account balance multiplied by a
fraction the numerator of which is one and the denominator
of which is the number of payments remaining;
provided, however, that if a Participant who is entitled to a
delayed lump sum or installment payments hereunder encounters an
unforeseeable emergency (as determined in accordance with Section
4.8 hereof), the Administrative Committee, in its absolute
discretion, may direct the Employer to accelerate such portion of
the lump sum or installment payments as the Administrative
Committee shall determine to be necessary to alleviate the severe
financial hardship of the Participant caused by such
unforeseeable emergency.
Section 4.6 Option to Request Immediate Payout. In lieu
of any other benefits or payments to be made pursuant to this
Plan, each Participant (or beneficiary in the case of a deceased
Participant) shall have the right at any time to elect a lump sum
payment in an amount equal to:
(a) the amount payable from the Participant's Deferral
Account, determined in accordance with Section 4.2, minus
(b) a forfeiture amount equal to 20% of (a) above,
provided, however, that if the election is made on or within
two years following the date a Change of Control occurs,
such forfeiture amount shall be determined substituting 10%
for 20%.
A Participant's election for an immediate payout pursuant to this
Section must be in the form of a written notice provided to the
Administrative Committee. The Administrative Committee shall
notify any Employer maintaining a Deferral Account with respect
to such Participant of the election and the amount so determined
shall be paid to the Participant (or, in the case of a deceased
Participant, to the beneficiary or beneficiaries designated by
such Participant pursuant to Plan Section 4.7) by the Employers
no later than fifteen days following receipt of notice by the
Administrative Committee. Any amount remaining credited to the
Participant's Deferral Account shall be forfeited at the time
payment is made.
Section 4.7 Designation of Beneficiaries. Any amount
payable under this Plan on account of the death of a Participant
shall be paid when otherwise due hereunder to the beneficiary or
beneficiaries designated by such Participant. Such designation
of beneficiary or beneficiaries shall be made in writing on a
form prescribed by and filed with the Administrative Committee
and shall remain in effect until changed by such Participant by
the filing of a new beneficiary designation form with the
Administrative Committee. If a Participant fails to so designate
a beneficiary, or in the event all of the designated
beneficiaries are individuals who either predecease the
Participant or survive the Participant but die prior to receiving
the full amount payable under this Plan, any remaining amount
payable under this Plan shall be paid to such Participant's
estate when otherwise due hereunder.
Section 4.8 Hardship Distributions. If a Participant
encounters an unforeseeable emergency, the Administrative
Committee in its absolute discretion may direct the Employer
maintaining such Deferral Account to pay to such Participant and
deduct from such Deferral Account such portion of the amount then
credited to such Deferral Account (including, if appropriate, the
entire amount determined in accordance with Section 4.2) as the
Administrative Committee shall determine to be necessary to
alleviate the severe financial hardship of such Participant
caused by such unforeseeable emergency. For this purpose, an
"unforeseeable emergency" shall be a severe financial hardship to
the Participant resulting from a sudden and unexpected illness or
accident of the Participant or of a dependent of the Participant,
loss of the Participant's property due to casualty, or other
similar extraordinary and unforeseeable circumstances arising as
a result of events beyond the control of the Participant. The
circumstances that will constitute an unforeseeable emergency
will depend upon the facts of each case, but in any case, payment
may not be made to the extent that such hardship is or may be
relieved (i) through reimbursement or compensation by insurance
or otherwise, (ii) by liquidation of the Participant's assets, to
the extent liquidation of such assets would not itself cause
severe financial hardship, or (iii) by cessation of deferrals
under the Plan. No distribution shall be made to a Participant
pursuant to this Section 4.8 unless such Participant requests
such a distribution in writing and provides to the Administrative
Committee such information and documentation with respect to his
or her unforeseeable emergency as may be requested by the
Administrative Committee.
Section 4.9 Change of Distribution Form. Each Participant
may elect at any time after a Participant's initial Election
Period, but no more often than once during each calendar year, to
change the distribution forms elected with respect to all amounts
credited to such Participant's Deferral Account; provided,
however, that such election shall not be effective unless made by
the end of the second calendar year preceding the calendar year
in which distributions are to be made or commence to such
Participant pursuant to Sections 4.4 or 4.5 hereof.
ARTICLE V.
AMENDMENT AND TERMINATION
Section 5.1 Amendment and Termination. The Compensation
Committee shall have the right and power at any time and from
time to time to amend this Plan, in whole or in part, on behalf
of all Employers, and the Board shall have the right and power at
any time to terminate this Plan or any Employer's participation
hereunder. Any amendment to or termination of this Plan shall be
made by or pursuant to a resolution duly adopted by the
Compensation Committee or the Board, as the case may be, and
shall be evidenced by such resolution or by a written instrument
executed by such person as the Compensation Committee or the
Board, as the case may be, shall authorize for such purpose. Any
provision of this Plan to the contrary notwithstanding, no
amendment to or termination of this Plan shall reduce the amounts
actually credited to a Participant's Deferral Accounts as of the
date of such amendment or termination, or further defer the dates
for the payment of such amounts, without the consent of the
affected Participant. Upon termination of this Plan, the Board,
in its sole discretion, may require the Administrative Committee
to calculate final Deferral Account balances as of such
Adjustment Date as it may prescribe, and direct each Employer to
make immediate lump sum payments to each Participant (or
beneficiary in the case of a deceased Participant) with respect
to which such Employer maintains a Deferral Account in the amount
determined to be credited to such Participant's Deferral Account
as of such final Adjustment Date.
Section 5.2 Change of Control. The preceding provisions of
this Article to the contrary notwithstanding, no action taken on
or within two years following a Change of Control to amend or
terminate this Plan shall be effective unless written consent
thereto is obtained from a majority of the Participants.
ARTICLE VI.
MISCELLANEOUS PROVISIONS
Section 6.1 Nature of Plan and Rights. This Plan is
unfunded and maintained by the Employers primarily for the
purpose of providing deferred compensation for a select group of
management or highly compensated employees of the Employers. The
Deferral Accounts established and maintained under this Plan by
an Employer are for its accounting purposes only and shall not be
deemed or construed to create a trust fund or security interest
of any kind for or to grant a property interest of any kind to
any Participant, designated beneficiary or estate. The amounts
credited by an Employer to Deferral Accounts maintained under
this Plan are and for all purposes shall continue to be a part of
the general assets and liabilities of such Employer, and to the
extent that a Participant, designated beneficiary or estate
acquires a right to receive a payment from such Employer pursuant
to this Plan, such right shall be no greater than the right of
any unsecured general creditor of such Employer.
Section 6.2 Spendthrift Provision. No Deferral Account
balance or other right or interest under this Plan of a
Participant, designated beneficiary or estate may be assigned,
transferred or alienated, in whole or in part, either directly or
by operation of law, and no such balance, right or interest shall
be liable for or subject to any debt, obligation or liability of
such Participant, designated beneficiary or estate.
Section 6.3 Employment Noncontractual. The establishment
of this Plan shall not enlarge or otherwise affect the terms of
any Participant's employment with an Employer, and such Employer
may terminate the employment of such Participant as freely and
with the same effect as if this Plan had not been established.
Section 6.4 Adoption by Other Employers. With the consent
of the Compensation Committee, this Plan may be adopted by any
Affiliated Company, such adoption to be effective as of the date
specified by such Affiliated Company at the time of adoption.
Section 6.5 Claims Procedure. If any person (hereinafter
called the "Claimant") feels that he or she is being denied a
benefit to which he or she is entitled under this Plan, such
Claimant may file a written claim for said benefit with the
Administrative Committee. Within sixty days following the
receipt of such claim the Administrative Committee shall
determine and notify the Claimant as to whether he or she is
entitled to such benefit. Such notification shall be in writing
and, if denying the claim for benefit, shall set forth the
specific reason or reasons for the denial, make specific
reference to the pertinent provisions of this Plan, and advise
the Claimant that he or she may, within sixty days following the
receipt of such notice, in writing request to appear before the
Administrative Committee or its designated representative for a
hearing to review such denial. Any such hearing shall be
scheduled at the mutual convenience of the Administrative
Committee or its designated representative and the Claimant, and
at any such hearing the Claimant and/or his or her duly
authorized representative may examine any relevant documents and
present evidence and arguments to support the granting of the
benefit being claimed. The final decision of the Administrative
Committee with respect to the claim being reviewed shall be made
within sixty days following the hearing thereon, and
Administrative Committee shall in writing notify the Claimant of
said final decision, again specifying the reasons therefor and
the pertinent provisions of this Plan upon which said final
decision is based. The final decision of the Administrative
Committee shall be conclusive and binding upon all parties having
or claiming to have an interest in the matter being reviewed.
Section 6.6 Reimbursement of Expenses. In the event that a
dispute arises between a Participant or beneficiary and the
Participant's Employer or the Company with respect to the payment
of benefits hereunder and the Participant or beneficiary is
successful in pursuing a benefit to which he or she is entitled
under the terms of the Plan against the Participant's Employer,
the Company or any other party in the course of litigation or
otherwise and incurs attorneys' fees, expenses and costs in
connection therewith, the Participant's Employer and the Company
shall reimburse the Participant or beneficiary for the full
amount of any such attorneys' fees, expenses and costs.
Section 6.7 Withholding Tax. There shall be deducted from
all amounts paid under this Plan any taxes required to be
withheld by any Federal, state, local or other government. The
Participant and/or his or her beneficiary (including his or her
estate) shall bear all taxes on amounts paid under this Plan to
the extent that no taxes are withheld, irrespective of whether
withholding is required.
Section 6.8 Applicable Law. This Plan shall be governed
and construed in accordance with the internal laws (and not the
principles relating to conflicts of laws) of the State of Texas,
except where superseded by federal law.
IN WITNESS WHEREOF, this Plan has been executed on this 30th
day of September, 1994 to be effective as of October 1, 1994.
ENSERCH CORPORATION
By /s/ D. W. Biegler
Title: Chairman, President
and Chief Executive
Officer
<PAGE>
<PAGE>
AMENDMENT NO. 1 TO THE
ENSERCH CORPORATION
DEFERRED COMPENSATION PLAN
Pursuant to the provisions of Section 5.1 thereof, the
ENSERCH Corporation Deferred Compensation Plan (the "Plan") is
hereby amended in the following respect only:
Article III of the Plan is hereby amended effective as of
January 1, 1995 by adding the following new Section to the end
thereof:
Section 3.6 Deferred Compensation Awards. Effective
as of January 1, 1995, the President of ENSERCH Corporation
may enter into "Deferred Compensation Award Agreements" with
such Eligible Employees as may from time to time be approved
by the Compensation Committee. Such Agreements shall
provide for the grant of a deferred compensation award,
either fixed as to amount or determinable pursuant to a
formula, to the Eligible Employee subject to such vesting
requirements, including performance criteria, as shall be
approved by the Compensation Committee. The amount of any
deferred compensation award which vests pursuant to the
terms of a Deferred Compensation Award Agreement entered
into with an Eligible Employee shall be credited to such
Participant's Deferral Account as of the date of such
vesting, if such individual is an Eligible Employee as of
the date of vesting, and any such vested award so credited
to a Deferral Account shall for all purposes be considered
to be, and shall be treated in the same manner as, a
deferral credited to such Deferral Account. The
Administrative Committee may maintain separate subaccounts
within a Participant's Deferral Account for amounts
attributable to deferrals and deferred compensation awards
if separate identification is desired, but the amounts
credited to any subaccounts shall be treated the same for
all purposes of this Plan.
IN WITNESS WHEREOF, this Amendment has been executed this
28th day of March, 1995.
ENSERCH CORPORATION
By D. W. Biegler
Title: Chairman and
President
<PAGE>
EXHIBIT 10.10
ENSERCH CORPORATION
DEFERRED COMPENSATION TRUST
This Trust Agreement made this 30th day of September, 1994,
by and between ENSERCH Corporation, a Texas corporation (the
"Company") and Texas Commerce Bank National Association, a
national banking association ( the "Trustee");
WHEREAS, the Company and certain Affiliated Companies
have adopted nonqualified deferred compensation plans known
as the ENSERCH Corporation Deferred Compensation Plan (the
"Executive Plan") and the ENSERCH Corporation Deferred
Compensation Plan for Directors (the "Directors' Plan")
(collectively hereinafter referred to as the "Plan" or
"Plans"); and
WHEREAS, the Company has incurred or expects to incur
liability under the terms of such Plans with respect to the
individuals participating in such Plans; and
WHEREAS, the Company wishes to establish a trust
(hereinafter called the "Trust") and to contribute to the
Trust assets that shall be held therein, subject to the
claims of the Company's creditors in the event of the
Company's Insolvency, as herein defined, until paid to Plan
Participants and their beneficiaries in such manner and at
such times as specified in the Plans; and
WHEREAS, it is the intention of the parties that this
Trust shall constitute an unfunded arrangement and shall not
affect the status of the Plans as unfunded plans maintained
for the purpose of providing deferred compensation for a
select group of management or highly compensated employees
for purposes of Title I of the Employee Retirement Income
Security Act of 1974; and
WHEREAS, it is the intention of the Company to make
contributions to the Trust to provide itself with a source
of funds to assist it in the meeting of its liabilities
under the Plans;
NOW, THEREFORE, the parties do hereby establish the Trust
and agree that the Trust shall be comprised, held and disposed of
as follows:
Section 1. Establishment Of Trust.
(a) The Company hereby deposits with the Trustee in trust
$1,000.00, which shall become the principal of the Trust to be
held, administered and disposed of by the Trustee as provided in
this Trust Agreement.
(b) The Trust hereby established shall be irrevocable.
(c) The Trust is intended to be a grantor trust, of which
the Company is the grantor, within the meaning of subpart E,
part I, subchapter J, chapter 1, subtitle A of the Internal
Revenue Code of 1986, as amended, and shall be construed
accordingly.
(d) The principal of the Trust, and any earnings thereon
shall be held separate and apart from other funds of the Company
and shall be used exclusively for the uses and purposes of Plan
Participants and general creditors as herein set forth. Plan
Participants and their beneficiaries shall have no preferred
claim on, or any beneficial ownership interest in, any assets of
the Trust. Any rights created under the Plans and this Trust
Agreement shall be mere unsecured contractual rights of Plan
Participants and their beneficiaries against the Company. Any
assets held by the Trust will be subject to the claims of the
Company's general creditors under federal and state law in the
event of Insolvency, as defined in Section 4(a) herein.
(e) The Company, in its sole discretion, may at any time,
or from time to time, make additional deposits of cash or other
property in trust with the Trustee to augment the principal to be
held, administered and disposed of by the Trustee as provided in
this Trust Agreement; provided, however, that the Company shall
contribute to the Trust each calendar year an amount of cash or
property at least equal in value to the total amount of deferrals
credited to the Deferral Accounts of Participants pursuant to the
Executive Plan and the Accounts of Participants pursuant to the
Directors' Plan during such calendar year.
(f) Any provision of this Trust Agreement to the contrary
notwithstanding, upon a Change of Control, as defined in the
Plans, the Company shall (i) as soon as possible, but in no event
more than 30 days following the date of such Change of Control,
make an irrevocable contribution to the Trust in an amount, as
determined by an Independent Committee, as defined below, which
when added to the total value of the assets of the Trust at such
time equals the total amount credited to all Deferral Accounts
under the Executive Plan and all Accounts under the Directors'
Plan as of the date on which the Change of Control occurred, and
(ii) during the two-year period following the date of the Change
of Control, make monthly contributions to the Trust in amounts
sufficient, as determined by the Independent Committee, to
maintain the total value of the Trust assets at an amount equal
to the total amount credited to all Deferral Accounts under the
Executive Plan and all Accounts under the Directors' Plan.
Section 2. Payments to Plan Participants and their
Beneficiaries.
(a) The Administrative Committee shall deliver to the
Trustee a schedule (the "Payment Schedule") that indicates the
amounts payable with respect to each Plan Participant (and his or
her beneficiaries), that provides a formula or other instructions
acceptable to the Trustee for determining the amounts so payable,
the form in which such amount is to be paid (as provided for or
available under the Plan), and the time of commencement for
payment of such amounts, if known. An updated Payment Schedule
shall be provided by the Administrative Committee to the Trustee
periodically, but no less frequently than once each calendar
year. Except as otherwise provided herein, the Trustee shall
make payments to the Plan Participants and their beneficiaries in
accordance with such Payment Schedule. The Trustee shall make
provision for the reporting and withholding of any federal, state
or local taxes that may be required to be withheld with respect
to the payment of benefits pursuant to the terms of the Plans and
shall pay amounts withheld to the appropriate taxing authorities
or determine that such amounts have been reported, withheld and
paid by an Employer under the Executive Plan or by the Company
under the Directors' Plan.
(b) The entitlement of a Plan Participant or his or her
beneficiaries to benefits under the Plan shall be determined by
the Administrative Committee or such other party as may be
designated under the Plan, and any claim for such benefits shall
be considered and reviewed under the procedures set out in the
Plan.
(c) Employers participating in the Executive Plan or the
Company with respect to the Directors' Plan may make payments of
benefits directly to Plan Participants or their beneficiaries as
they become due under the terms of the Plan in lieu of payment
from the Trust. The Administrative Committee shall notify the
Trustee of an Employer's or the Company's decision to make
payments of benefits directly prior to the time amounts are
payable to Participants or their beneficiaries. In addition, if
the Trust assets are not sufficient to make payments of benefits
in accordance with the terms of the Plans, the Company shall make
the balance of each such payment as it falls due. The Trustee
shall notify the Company immediately when Trust assets are not
sufficient to satisfy all payments due.
(d) Any provision of this Section 2 to the contrary
notwithstanding, upon and after a Change of Control, the Trustee
shall make payments to Plan Participants or their beneficiaries
in accordance with the direction of the Independent Committee
rather than the Administrative Committee, regardless of whether
the Trustee has received a Payment Schedule or any other form of
direction from the Administrative Committee to make such
payments.
Section 3. Appointment of Independent Committee. Any
provision of this Trust Agreement to the contrary
notwithstanding, upon a Change of Control, an Independent
Committee consisting of at least three members shall be appointed
by the Compensation Committee of the Board of Directors of the
Company subject to the approval of a majority of the Participants
of the Plans on the date of such Change of Control. The
Independent Committee shall:
(a) determine the amount of the irrevocable
contributions to be made by the Company pursuant to Section
1(f) hereof;
(b) determine in accordance with the Plans the amounts
payable with respect to each Plan Participant (and his or
her beneficiaries), the form in which such amounts are to be
paid, and the time of commencement for payment of such
amounts pursuant to Section 2(a) hereof;
(c) determine the entitlement of Plan Participants
and beneficiaries to benefits under the terms of the Plans
pursuant to Section 2(b) hereof;
(d) direct the Trustee to make payments to Plan
Participants and their beneficiaries pursuant to Section 2
hereof; and
(e) select a successor Trustee for the Trust if a
Trustee resigns or is removed on or within two years
following the date of a Change of Control pursuant to
Section 12.
Section 4. Trustee Responsibility Regarding Payments to
Trust Beneficiary when the Company Is Insolvent.
(a) The Trustee shall cease payment of benefits to Plan
Participants and their beneficiaries if the Company is Insolvent.
The Company shall be considered "Insolvent" for purposes of this
Trust Agreement if (i) the Company is unable to pay its debts as
they become due, or (ii) the Company is subject to a pending
proceeding as a debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as
provided in Section 1(d) hereof, the principal and income of the
Trust shall be subject to claims of general creditors of the
Company under federal and state law as set forth below.
(1) The Board of Directors and the Chief Executive
Officer of the Company shall have the duty to inform the
Trustee in writing of the Company's Insolvency. If a person
claiming to be a creditor of the Company alleges in writing
to the Trustee that the Company has become Insolvent, the
Trustee shall determine whether the Company is Insolvent
and, pending such determination, the Trustee shall
discontinue payment of benefits to Plan Participants or
their beneficiaries.
(2) Unless the Trustee has actual knowledge of the
Company's Insolvency, or has received notice from the
Company or a person claiming to be a creditor alleging that
the Company is Insolvent, the Trustee shall have no duty to
inquire whether the Company is Insolvent. The Trustee may
in all events rely on such evidence concerning the Company's
solvency as may be furnished to the Trustee and that
provides the Trustee with a reasonable basis for making a
determination concerning the Company's solvency.
(3) If at any time the Trustee has determined that the
Company is Insolvent, the Trustee shall discontinue payments
to Plan Participants or their beneficiaries and shall hold
the assets of the Trust for the benefit of the Company's
general creditors. Nothing in this Trust Agreement shall in
any way diminish any rights of Plan Participants or their
beneficiaries to pursue their rights as general creditors of
the Company with respect to benefits due under the Plan or
otherwise.
(4) The Trustee shall resume the payment of benefits
to Plan Participants or their beneficiaries in accordance
with Section 2 of this Trust Agreement only after the
Trustee has determined that the Company is not Insolvent (or
is no longer Insolvent).
(c) Provided that there are sufficient assets, if the
Trustee discontinues the payment of benefits from the Trust
pursuant to Section 4(b) hereof and subsequently resumes such
payments, the first payment following such discontinuance shall
include the aggregate amount of all payments due to Plan
Participants or their beneficiaries under the terms of the Plans
for the period of such discontinuance, less the aggregate amount
of any payments made to Plan Participants or their beneficiaries
by the Employers participating in the Executive Plan or by the
Company with respect to the Directors' Plan in lieu of the
payments provided for hereunder during any such period of
discontinuance.
Section 5. Payments to the Company.
(a) Except as provided in Sections 4 and 5(b) hereof, the
Company shall have no right or power to direct the Trustee to
return to the Company or to divert to others any of the Trust
assets before payment of all benefits have been made to Plan
Participants and their beneficiaries pursuant to the terms of the
Plans.
(b) To the extent that the Administrative Committee
determines that the value of the assets in the Trust based upon
information provided to the Administrative Committee by the
Trustee, at any time, exceeds 110% of the amounts credited to
Participants' Deferral Accounts under the Executive Plan and
Accounts under the Directors' Plan as of the most recent
Adjustment Date plus any deferrals made since such date, the
Trustee shall pay such excess to the Company upon receipt of
written request therefor from the Company; provided, however,
that no such payment of excess assets to the Company shall be
made on or within two years following the date of a Change of
Control.
Section 6. Investment Authority.
(a) The Trustee shall have full power and authority to
invest and reinvest the Trust assets, or any part thereof, in
such stocks (common or preferred), bonds, mortgages, notes,
interest-bearing deposits (including such deposits with any
corporate trustee acting hereunder), options and contracts for
the future or immediate receipt or delivery of property of any
kind, or other securities, producing or nonproducing oil and gas
royalties and payments and other producing and nonproducing
interests in minerals, or in commodities, life insurance
policies, annuity contracts or other property of any kind or
nature whatsoever, whether real, personal or mixed, as the
Trustee, in the Trustee's absolute discretion and judgment, deems
appropriate for the Trust, and to hold cash uninvested at any
time and from time to time in such amounts and to such extent as
the Trustee, in the Trustee's absolute discretion and judgment,
deems appropriate for the Trust. The Trustee shall have full
power and authority to manage, handle, invest, reinvest, sell for
cash or credit, or for part cash or part credit, exchange, hold,
dispose of, lease for any period of time (whether or not longer
than the life of the Trust), improve, repair, maintain, work,
develop, use, operate, mortgage, or pledge, all or any part of
the assets and property from time to time constituting any part
of the trust funds held in trust under the Trust; borrow or loan
money or securities; write options and sell securities or other
property short or for future delivery; engage in hedging
procedures; buy and sell futures contracts; execute obligations,
negotiable and nonnegotiable; vote shares of stock in person and
by proxy, with or without power of substitution; register
investments in the name of a nominee; sell, convey, lease and/or
otherwise deal with any producing or nonproducing oil, gas and
mineral leases or mineral rights, payments and royalties; pay all
reasonable expenses; execute and deliver any deeds, conveyances,
leases, contracts, or written instruments of any character
appropriate to any of the powers or duties of the Trustee, and
shall, in general, have as broad power respecting the management,
operation and handling of the Trust assets and property as if the
Trustee were the owner of such assets and property in the
Trustee's own right. The preceding provisions of this paragraph
to the contrary notwithstanding, the Company shall have the right
and power at any time and from time to time to give the Trustee
broad guidelines within which it shall invest the assets of the
Trust; provided, however, that upon a Change of Control and
continuing for two years thereafter, the Independent Committee,
rather than the Company, shall have the sole authority to
exercise such right.
(b) All rights associated with assets of the Trust shall be
exercised by the Trustee or the person designated by the Trustee,
and shall in no event be exercisable by or rest with Plan
Participants.
(c) The Company shall have the right, at any time, and from
time to time in its sole discretion, to substitute assets of
equal fair market value for any asset held by the Trust;
provided, however, that effective upon a Change in Control and
for a period of two years thereafter, any assets transferred to
the Trust in substitution for assets held by the Trust must
consist of cash or marketable securities and the fair market
value of the respective assets shall be determined by the
Trustee. This right is exercisable by the Company in a
nonfiduciary capacity without the approval or consent of any
person in a fiduciary capacity.
Section 7. Disposition of Income. During the term of this
Trust, all income received by the Trust, net of expenses and
taxes, shall be accumulated and reinvested.
Section 8. Accounting by Trustee. The Trustee shall keep
accurate and detailed records of all investments, receipts,
disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in
writing between the Company and the Trustee. Within 30 days
following the close of each calendar year and within 30 days
after the removal or resignation of the Trustee, the Trustee
shall deliver to the Company a written account of its
administration of the Trust during such year or during the period
from the close of the last preceding year to the date of such
removal or resignation, setting forth all investments, receipts,
disbursements and other transactions effected by it, including a
description of all securities and investments purchased and sold
with the cost or net proceeds of such purchases or sales (accrued
interest paid or receivable being shown separately), and showing
all cash, securities and other property held in the Trust at the
end of such year or as of the date of such removal or
resignation, as the case may be.
Section 9. Responsibility of the Trustee.
(a) The Trustee shall act with the care, skill, prudence
and diligence under the circumstances then prevailing that a
prudent person acting in like capacity and familiar with such
matters would use in the conduct of an enterprise of a like
character and with like aims; provided, however, that the Trustee
shall incur no liability to any person for any action taken
pursuant to a direction, request or approval given by the Company
which is contemplated by, and in conformity with, the terms of
the Plan or this Trust and is given in writing by the Company.
In the event of a dispute between the Company and a party, the
Trustee may apply to a court of competent jurisdiction to resolve
the dispute.
(b) If the Trustee undertakes or defends any litigation
arising in connection with this Trust, the Company agrees to
indemnify the Trustee against the Trustee's costs, expenses and
liabilities (including, without limitation, attorneys' fees and
expenses) relating thereto and to be primarily liable for such
payments. If the Company does not pay such costs, expenses and
liabilities in a reasonably timely manner, the Trustee may obtain
payment from the Trust.
(c) The Trustee may consult with legal counsel (who may
also be counsel for the Company generally) with respect to any of
its duties or obligations hereunder.
(d) The Trustee may hire agents, accountants, actuaries,
investment advisors, financial consultants or other professionals
to assist it in performing any of its duties or obligations
hereunder.
(e) The Trustee shall have, without exclusion, all powers
conferred on trustees by applicable law, unless expressly
provided otherwise herein; provided, however, that except as
provided in Sections 5(b) and 6(c) hereof, if an insurance policy
is held as an asset of the Trust, the Trustee shall have no power
to name a beneficiary of the policy other than the Trust, to
assign the policy (as distinct from conversion of the policy to a
different form) other than to a successor Trustee, or to loan to
any person the proceeds of any borrowing against such policy.
(f) Notwithstanding any powers granted to the Trustee
pursuant to this Trust Agreement or applicable law, the Trustee
shall not have any power that could give this Trust the objective
of carrying on a business and dividing the gains therefrom,
within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal
Revenue Code.
Section 10. Compensation and Expenses of the Trustee. The
Trustee shall be paid such reasonable compensation commensurate
with the services and responsibilities involved hereunder as
shall from time to time be agreed upon by the Trustee and the
Company. The Company shall pay all administrative and the
Trustee's fees and expenses, but, if not so paid, the fees and
expenses shall be paid from the Trust.
Section 11. Resignation and Removal of the Trustee.
(a) The Trustee may resign at any time by written notice to
the Company, which shall be effective 30 days after receipt of
such notice unless the Company and the Trustee agree otherwise.
(b) The Trustee may be removed by the Company on 30 days
notice or upon shorter notice accepted by the Trustee; provided,
however, that the Trustee may not be removed by the Company on or
within two years following a Change of Control except with the
written consent of a majority of the Participants entitled to
payment of benefits pursuant to the terms of the Plans on the
date of such Change of Control.
(c) Upon resignation or removal of the Trustee and
appointment of a successor Trustee, all assets shall subsequently
be transferred to the successor Trustee. The transfer shall be
completed within 30 days after receipt of notice of resignation,
removal or transfer, unless the Company extends the time limit.
(d) If the Trustee resigns or is removed, a successor shall
be appointed, in accordance with Section 12 hereof, by the
effective date of resignation or removal under paragraph(s) (a)
or (b) of this section. If no such appointment has been made,
the Trustee may apply to a court of competent jurisdiction for
appointment of a successor or for instructions. All expenses of
the Trustee in connection with the proceeding shall be allowed as
administrative expenses of the Trust.
Section 12. Appointment of Successor.
(a) If the Trustee resigns or is removed in accordance with
Section 11(a) or (b) hereof, the Company may appoint any third
party, such as a bank trust department or other party that may be
granted corporate trustee powers under state law, as a successor
to replace the Trustee upon resignation or removal; provided,
however, that if the Trustee resigns or is removed on or within
two years following the date of a Change of Control, the
Independent Committee shall select a successor Trustee in
accordance with this Section 12. The appointment shall be
effective when accepted in writing by the new Trustee, who shall
have all of the rights and powers of the former Trustee,
including ownership rights in the Trust assets. The former
Trustee shall execute any instrument necessary or reasonably
requested by the Company or the successor Trustee to evidence the
transfer.
(b) The successor Trustee need not examine the records and
acts of any prior Trustee and may retain or dispose of existing
Trust assets, subject to Sections 8 and 9 hereof. The successor
Trustee shall not be responsible for and the Company shall
indemnify and defend the successor Trustee from any claim or
liability resulting from any action or inaction of any prior
Trustee or from any other past event, or any condition existing
at the time it becomes successor Trustee.
Section 13. Amendment or Termination.
(a) This Trust Agreement may be amended by a written
instrument executed by the Trustee and a representative of the
Company so authorized by the Compensation Committee of the Board
of Directors of the Company. Notwithstanding the foregoing, no
such amendment shall conflict with the terms of the Plans or
shall make the Trust revocable.
(b) The Trust shall not terminate until the date on which
Plan Participants and their beneficiaries are no longer entitled
to benefits pursuant to the terms of the Plans. Upon termination
of the Trust any assets remaining in the Trust shall be returned
to the Company.
(c) Upon written approval of at least two-thirds of the
Participants and beneficiaries entitled to payment of benefits
pursuant to the terms of the Plans, the Company may terminate
this Trust prior to the time all benefit payments under the Plans
have been made. All assets in the Trust at termination shall be
returned to the Company.
(d) This Trust Agreement may not be amended by the Company
on or within two years following the date of a Change of Control,
without the written consent of a majority of the Participants
entitled to payment of benefits pursuant to the terms of the
Plans on the date of such Change of Control.
Section 14. Miscellaneous.
(a) Any provision of this Trust Agreement prohibited by law
shall be ineffective to the extent of any such prohibition,
without invalidating the remaining provisions hereof.
(b) Benefits payable to Plan Participants and their
beneficiaries under this Trust Agreement may not be anticipated,
assigned (either at law or in equity), alienated, pledged,
encumbered or subjected to attachment, garnishment, levy,
execution or other legal or equitable process.
(c) This Trust Agreement shall be governed and construed in
accordance with the internal laws (and not the principles
relating to conflicts of laws) of the State of Texas, except
where superseded by federal law.
(d) Unless the context clearly indicates otherwise, when
used in this Trust Agreement:
(i) "Administrative Committee" shall mean the
"Administrative Committee" appointed pursuant to each of the
Plans.
(ii) "Participant" shall mean each "Participant" as
that term is defined in the Executive Plan and each Director
who has an amount credited to his or her Account under the
Directors' Plan or who has elected to have all or any
portion of his or her Annual Fee deferred under the terms of
that Plan.
(e) Except where otherwise defined, capitalized terms used
herein shall have the meaning given to them in the Plans.
(f) In the event that a dispute arises between a Plan
Participant or beneficiary and the Participant's Employer, the
Company or the Trustee with respect to the payment of amounts
from the Trust and the Participant or beneficiary is successful
in pursuing a benefit to which he or she is entitled under the
terms of the Plans and this Trust against the Participant's
Employer, the Company, the Trustee or any other party in the
course of litigation or otherwise and incurs attorneys' fees,
expenses and costs in connection therewith, the Company shall
reimburse the Plan Participant or beneficiary for the full amount
of any such attorneys' fees, expenses and costs.
IN WITNESS WHEREOF, this Agreement has been executed this
30th day of September, 1994, to be effective as of October 1,
1994.
ENSERCH CORPORATION
By /s/ D. W. Biegler
Title: Chairman, President
and Chief Executive
Officer
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
By /s/ Karen Epps
Title:
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, a notary public in and
for said County and State, on this day personally appeared D. W.
Biegler, known to me to be the person whose name is subscribed to
the foregoing instrument and acknowledged to me that the same was
the act of the said ENSERCH CORPORATION, a Texas corporation, and
that he/she executed the same as the act of such corporation for
the purposes and consideration therein expressed, and in the
capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 23rd day of
September, 1994.
/s/ Cherry H. Sossamon
Notary Public, State of Texas
My Commission expires:
October 31, 1996
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, a notary public in and
for said County and State, on this day personally appeared Karen
Epps, known to me to be the person whose name is subscribed to
the foregoing instrument and acknowledged to me that the same was
the act of the said TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a
national banking association, and that he/she executed the same
as the act of such banking association for the purposes and
consideration therein expressed, and in the capacity therein
stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 7th day of
October, 1994.
/s/ Barbara Betik
Notary Public, State of Texas
My Commission expires:
January 30, 1997
<PAGE>
EXHIBIT 10.11
RETIREMENT INCOME RESTORATION PLAN
OF ENSERCH CORPORATION
AND PARTICIPATING SUBSIDIARY COMPANIES
ENSERCH Corporation, a Texas corporation having its
principal executive office in Dallas, Texas, and its subsidiary,
Ebasco Services Incorporated, hereinafter referred to
collectively as the "Companies," hereby adopt the Retirement
Income Restoration Plan of ENSERCH Corporation and Participating
Subsidiary Companies, hereinafter referred to as the "Plan,"
effective January 1, 1984, as follows:
Article I
Definitions
Unless qualified by the context or otherwise defined herein,
the terms used herein shall have the meanings assigned to them as
applicable under the provisions of the Retirement and Death
Benefit Program of 1969 of ENSERCH Corporation and Participating
Subsidiary Companies and the Ebasco Services Incorporated Pension
Plan for Salaried Employees, as now in effect and as may be
amended hereafter from time to time, hereinafter referred to
collectively as the "Basic Plans"' and individually as the "Basic
P]an."
"Limitations" shall mean the reductions imposed on the
benefits provided under the Basic Plans in order to comply with
Sections 415 and 401(a)(17) of the Internal Revenue Code of 1986.
A "Participating Employee" is an employee who is entitled to
benefits under this Plan as a result of Limitations.
The terms "Change in Control," "Cause," and "Good Reason"
shall have the meanings assigned to them under the provisions of
the change in control agreements dated December 13, 1988, between
Messrs. R. G. Fowler, W. T. Satterwhite, et. al., and the
Corporation.
"Service" shall have the meaning assigned to the terms
Benefit Service or Credited Service in and by the Basic Plans.
Article II
Purpose
The purposes of this Plan are (a) to restore benefits to
those employees and their designated beneficiaries who are
entitled to receive benefits under the Basic Plans to the extent
that those benefits are, or will be, reduced by Limitations, and
(b) if a Participating Employee's employment is terminated by the
Corporation without Cause or by the Participating Employee for
Good Reason within three years of a Change in Control of the
Corporation, to provide increased retirement benefits as set
forth in Section 4.1.
Article III
Administration
This Plan shall be administered by the Compensation
Committee of the Board of Directors of ENSERCH Corporation,
hereinafter referred to as the "Committee." Subject to the
provisions of Article VI hereof, the Committee shall administer
this Plan in a manner consistent with the administration of the
1969 Plan, as from time to time amended and in effect, except
that this Plan shall be administered as a plan that is not
intended to meet the requirements of Section 401(a) of the
Internal Revenue Code of 1954. The Committee shall have full
power and authority to interpret, construe, and administer this
P]an, and the Committee's interpretations and constructions
hereof, and its actions hereunder, including all determinations
of the amounts and the recipients of payments to be made
hereunder, shall be binding and conclusive with respect to all
persons for all purposes. No member of the Committee shall be
liable to any person for any action taken or omitted in
connection with the interpretation and administration of this
Plan unless attributable to his own willful misconduct or lack of
good faith.
Article IV
Benefits
Section 4.1 Amount of Benefits. Subject to the provisions of
Section 4.3 hereof any employee or beneficiary who is entitled to
receive a benefit under a Basic Plan shall be entitled to receive
a benefit hereunder equal to the excess, if any, of:
(i) the amount of such employee's or beneficiary's benefit
under the Basic Plan, determined without regard to the
Limitations, plus the additional benefit that would be
payable under the Basic Plan if an increase in his
Service pursuant to Section 4.2 below is applicable,
less
(ii) the amount of the benefit actually payable to the
employee or beneficiary under the Basic Plan and the
amount of reduction of Plan payments described in the
agreement or agreements between the Corporation and the
employee relating to any individual annuity contracts
purchased on behalf of the employee by the Corporation.
Section 4.2 Additional Service. In the event a Participating
Employee's employment is terminated within three (3) years after
a Change in Control of the Corporation by the Corporation without
Cause or by the Participating Employee for Good Reason, his years
of Service for purposes of Section 4.1 shall mean his actual
years of Service plus
(a) in the case of the Chief Executive Officer of the
Corporation and Participating Employees reporting
directly to him, 3 additional years of Service; and
(b) in the case of Participating Employees other than the
Chief Executive Officer and Participating Employees
reporting directly to him, 2 additional years of
Service;
provided further that (i) in no case shall any Participating
Employee as a result of this Change in Control provision be
deemed to have more years of Service than he would have had if
his employment had terminated on the first of the month
coinciding with or Next following his sixty-fifth (65) birthday,
and (ii) the foregoing clauses (a) and (b) shall have no effect
on the computation of a Participating Employee's Average Monthly
Earnings or are for purposes of determining any amounts payable
to him under the Basic Plan.
Section 4. 3 Payment of Benefits. Payment of benefits to an
employee or beneficiary under this Plan shall be coincident with
the payment of benefits made to the employee or beneficiary under
the Basic Plan.
Section 4.4 Employee's Rights to Benefits. An employee's
rights under this Plan, including his rights to vested benefits,
shall be the same as his rights under the Basic Plan, except that
no payments due under this Plan shall be paid from any fund
maintained under the Basic Plan. In no event shall an individual
who is not entitled to benefits under the Basic Plan be entitled
to a benefit under this Plan. Benefits under this Plan shall be
paid sole]y from the general assets of the Companies, and no
employee or beneficiary shall have any title to or beneficial
interest in any assets of the Companies as a result of this Plan.
Article V
Amendment and Termination
While the Companies intend to maintain this Plan in
conjunction with the Basic Plans for as long as necessary, the
Board of Directors of ENSERCH Corporation reserves the right to
amend or terminate this Plan if, in its sole judgment, amendment
or termination is appropriate. However, if the Board should amend
or discontinue this Plan, the Companies shall be liable for all
benefits accrued under this Plan as of the date of such action
(determined on the basis of the assumption that on such date each
employee's employment terminated).
Article XI
Rights of Employees
The Companies may, but are not required to, set aside funds
for their convenience in order to facilitate the payment of any
benefits that may be due hereunder. However, in the event that
the Companies set aside funds, no employee or beneficiary shall
have any right, title or interest in such funds while held by the
Companies. Any employee or beneficiary who is entitled to receive
a benefit under this Plan shall have the rights solely of a
general and unsecured creditor.
Article VII
Miscellaneous
Section 7.1 Assignment. The interest of an employee or
beneficiary may not be sold, transferred, assigned, or encumbered
in any manner, either voluntarily or involuntarily, and any
attempt so to anticipate, alienate sell, transfer, assign,
pledge, encumber, or charge the same shall be null and void;
neither shall the benefits hereunder be liable for or subject to
the debts, contracts, liabilities, engagements, or torts of any
person to whom such benefits or funds are payable, nor shall they
be subject to garnishment, attachment, or other legal or
equitable process nor shall they be an asset in bankruptcy,
except that no amount shall be payable hereunder until and unless
any and all amounts representing debts or other obligations owed
to any Company by the individual to whom such amount would
otherwise be payable shall have been fully paid and satisfied.
Section 7.2 No Employment Rights. Nothing contained herein
shall be construed as conferring upon any employee the right to
continue in the employ of the Companies in any capacity.
Section 7. Binding on Companies, Employees and Their
Successors. The Plan shall be binding upon and inure to the
benefit of the Companies, their successors and assigns and the
employee and his heirs, executors, administrators, and legal
representatives. The provisions of the Plan shall be applicable
with respect to each Company separately, and amounts payable
hereunder shall be paid by the Company that employed the
individual employee in respect of whom benefits are due
hereunder.
Section 7.4 Arbitration. Any controversy arising out of, or
relating to, the Plan or any modification thereof, including any
claim for benefits, shall be settled by arbitration in Dallas,
Texas (or, if applicable law requires some other forum, then such
other forum) in accordance with the rules then obtaining of the
American Arbitration Association. The District Court of Dallas
County, Texas or, as the case may be, the United States District
Court for the Northern District of Texas shall have jurisdiction
for all purposes in connection with arbitration. Any process or
notice of motion or other application to either of said courts,
and any paper in connection with arbitration, may be served by
certified mail, return receipt requested, or by personal service
or in such other manner as may be permissible under the rules of
the applicable court or arbitration tribunal, provided a
reasonable time for appearance is allowed. Arbitration
proceedings must be instituted within one year after the claimed
breach occurred, and the failure to institute arbitration
proceedings within such period shall constitute an absolute bar
to the institution of any proceedings, and a waiver of all
claims, with respect to such breach.
Section 7. Withholding Tax. There shall be deducted from
all amounts paid under this Plan any taxes required to be
withheld by any Federal, state, local or other government. The
employee and/or his beneficiary (including his estate) shall bear
all taxes on amounts paid under this Plan to the extent that no
taxes are withheld, irrespective of whether withholding is
required.
Section 7.6 Law Applicable. The Plan shall be construed in
accordance with and governed by the laws of the State of Texas.
Restated and adopted this 28th day of December, 1990.
ENSERCH Corporation
By /s/ W. C. McCord
W. C. McCord
Chairman and President
<PAGE>
<PAGE>
EXHIBIT 10.11
AMENDMENT TO THE
RETIREMENT INCOME RESTORATION PLAN
OF ENSERCH CORPORATION
AND PARTICIPATING SUBSIDIARY COMPANIES
Pursuant to the provisions of Article V thereof, the
Retirement Income Restoration Plan of ENSERCH Corporation and
Participating Subsidiary Companies (the "Plan") is hereby amended
in the following respect only:
The definition of "Limitations" in the Plan is hereby
amended effective as of October 1, 1994 by restatement in its
entirety to read as follows:
"Limitations" shall mean the reductions imposed on the
benefits provided under the Basic Plans in order to comply
with Sections 415 and 401(a)(17) of the Internal Revenue
Code of 1986, and the reduction in "compensation" considered
for purposes of determining benefits under the Basic Plans
on account of salary and bonuses deferred by an employee
pursuant to the ENSERCH Corporation Deferred Compensation
Plan.
IN WITNESS WHEREOF, this Amendment has been executed this
30th day of September, 1994.
ENSERCH CORPORATION
By /s/ D. W. Biegler
Title: Chairman, President
and Chief Executive
Officer
<PAGE>
EXHIBIT 10.12
ENSERCH CORPORATION
RETIREMENT INCOME RESTORATION TRUST
This Trust Agreement made this 30th day of September, 1994,
by and between ENSERCH Corporation, a Texas corporation (the
"Company"), Enserch Exploration, Inc., a Delaware corporation,
New Enserch Exploration, Inc., a Texas corporation, Enserch
Development Corporation, a Texas corporation, Lone Star Energy
Company, a Texas corporation, and Enserch Gas Company, a Texas
Corporation, and Texas Commerce Bank National Association, a
national banking association (the "Trustee");
WHEREAS, the Company and the participating subsidiaries
enumerated on the attached Appendix A (the Company and such
participating subsidiaries are hereinafter referred to as
the "Employers") have adopted or may adopt a nonqualified
deferred compensation plan known as the Retirement Income
Restoration Plan of ENSERCH Corporation and Participating
Subsidiary Companies (the "Plan"); and
WHEREAS, the Employers have incurred or expect to incur
liability under the terms of such Plan with respect to their
respective eligible employees participating in such Plan and
their beneficiaries; and
WHEREAS, the Employers wish to establish a trust
(hereinafter called "Trust"), pursuant to which each
Employer will contribute assets that shall be held therein
in a Separate Account, as herein defined, subject to the
claims of such Employer's creditors in the event of the
Employer's Insolvency, as herein defined, until paid to Plan
Participants and their beneficiaries in such manner and at
such times as specified in the Plan; and
WHEREAS, it is the intention of the parties that this
Trust shall constitute an unfunded arrangement and shall not
affect the status of the Plan as an unfunded plan maintained
for the purpose of providing deferred compensation for a
select group of management or highly compensated employees
for purposes of Title I of the Employee Retirement Income
Security Act of 1974; and
WHEREAS, it is the intention of the Employers to make
contributions to the Trust to provide a source of funds to
assist them in the meeting of their liabilities under the
Plan;
NOW, THEREFORE, the parties do hereby establish the Trust
and agree that the Trust shall be comprised, held and disposed of
as follows:
Section 1. Establishment Of Trust.
(a) The Employers hereby deposit with the Trustee in trust
$1,000.00, which shall become the principal of the Trust to be
held, administered and disposed of by the Trustee as provided in
this Trust Agreement.
(b) The Trust hereby established shall be irrevocable.
(c) The Trust is intended to be a grantor trust, of which
each Employer is the grantor with respect to its Separate
Account, within the meaning of subpart E, part I, subchapter J,
chapter 1, subtitle A of the Internal Revenue Code of 1986, as
amended, and shall be construed accordingly.
(d) The principal of the Trust, and any earnings thereon
shall be held separate and apart from other funds of the
Employers and shall be used exclusively for the uses and purposes
of Plan Participants and general creditors as herein set forth.
Plan Participants and their beneficiaries shall have no preferred
claim on, or any beneficial ownership interest in, any assets of
the Trust. Any rights created under the Plan and this Trust
Agreement shall be mere unsecured contractual rights of Plan
Participants and their beneficiaries against the Employers. Any
assets held in an Employer's Separate Account under the Trust
will be subject to the claims of such Employer's general
creditors under federal and state law in the event of Insolvency,
as defined in Section 4(a) herein.
(e) The Employers, in their sole discretion, may at any
time, or from time to time, make additional deposits of cash or
other property in trust with the Trustee to augment the principal
to be held, administered and disposed of by the Trustee as
provided in this Trust Agreement. Neither the Trustee nor any
Plan Participant or beneficiary shall have any right to compel
such additional deposits.
(f) Any provision of this Trust Agreement to the contrary
notwithstanding, upon a Change of Control of the Company, as
defined in the Plan, each Employer shall (i) as soon as possible,
but in no event more than 30 days following the date of such
Change of Control, make an irrevocable contribution to the Trust
in an amount, as determined by an Independent Committee, as
defined below, which when added to the total value of the assets
of the Employer's Separate Account under the Trust at such time
equals the total present value of all benefits accrued under the
Plan with respect to such Employer's respective Plan Participants
and beneficiaries as of the date on which the Change of Control
occurred, and (ii) during the two-year period following the date
of the Change of Control, make monthly contributions to the Trust
in amounts sufficient, as determined by the Independent
Committee, to maintain the total value of the assets in the
Employer's Separate Account under the Trust at an amount equal to
the total present value of all benefits accrued under the Plan
with respect to such Employer's respective Plan Participants and
beneficiaries.
(g) Any provision of this Trust Agreement to the contrary
notwithstanding, in the event that a Participant transfers
employment between Employers participating in this Trust, (i) the
Employer from which the Participant is transferred shall as soon
as possible, but in no event more than 30 days following the date
of such transfer, make an irrevocable contribution to the Trust
in an amount, as determined by the Company, which equals the
total present value of the benefits accrued under the Plan with
respect to such transferring Participant as of the date on which
the transfer occurred or, if less, an amount equal to the total
present value of all benefits accrued under the Plan with respect
to such Employer's respective Plan Participants and
beneficiaries, and (ii) immediately following the Employer's
contribution described in (i), the Trustee shall transfer assets
from the transferring Employer's Separate Account to the Separate
Account of the Employer to which the Participant is being
transferred in an amount equal to the total present value of the
benefits accrued under the Plan with respect to such transferring
Participant as of the date on which the transfer occurred.
Section 2. Payments to Plan Participants and their
Beneficiaries.
(a) The Company shall deliver to the Trustee a schedule
(the "Payment Schedule") that indicates the amounts payable with
respect to each Plan Participant (and his or her beneficiaries)
and the Separate Account of the Employer from which such amounts
are payable, that provides a formula or other instructions
acceptable to the Trustee for determining the amounts so payable,
the form in which such amount is to be paid (as provided for or
available under the Plan), and the time of commencement for
payment of such amounts. An updated Payment Schedule shall be
provided by the Company to the Trustee periodically, but no less
frequently than once each calendar year. Except as otherwise
provided herein, the Trustee shall make payments to the Plan
Participants and their beneficiaries in accordance with such
Payment Schedule. The Trustee shall make provision for the
reporting and withholding of any federal, state or local taxes
that may be required to be withheld with respect to the payment
of benefits pursuant to the terms of the Plan and shall pay
amounts withheld to the appropriate taxing authorities or
determine that such amounts have been reported, withheld and paid
by the Employer.
(b) The entitlement of a Plan Participant or his or her
beneficiaries to benefits under the Plan shall be determined by
the Company or such other party as may be designated under the
Plan, and any claim for such benefits shall be considered and
reviewed under the procedures set out in the Plan.
(c) The Employers may make payments of benefits directly to
Plan Participants or their beneficiaries as they become due under
the terms of the Plan in lieu of payment from the Trust. The
Company shall notify the Trustee of an Employer's decision to
make payments of benefits directly prior to the time amounts are
payable to Participants or their beneficiaries. In addition, if
the assets of an Employer's Separate Account under the Trust are
not sufficient to make payments of benefits to its respective
Plan Participants and beneficiaries in accordance with the terms
of the Plan, such Employer shall make the balance of each such
payment as it falls due, and the Separate Accounts of other
Employers hereunder shall not be liable for the payment of such
benefits. The Trustee shall notify the Company immediately when
the assets in an Employer's Separate Account under the Trust are
not sufficient to satisfy all payments due.
(d) Any provision of this Section 2 to the contrary
notwithstanding, upon and after a Change of Control of the
Company, the Trustee shall make payments to Plan Participants or
their beneficiaries in accordance with the direction of the
Independent Committee rather than the Company, regardless of
whether the Trustee has received a Payment Schedule or any other
form of direction from the Company to make such payments.
Section 3. Appointment of Independent Committee. Any
provision of this Trust Agreement to the contrary
notwithstanding, upon a Change of Control of the Company, an
Independent Committee consisting of at least three members shall
be appointed by the Compensation Committee of the Board of
Directors of the Company (the "Compensation Committee") subject
to the approval of a majority of the Participants in the Plan on
the date of such Change of Control. The Independent Committee
shall:
(a) determine the amount of the irrevocable
contributions to be made by each Employer pursuant to
Section 1(f) hereof;
(b) determine in accordance with the Plan the amounts
payable with respect to each Plan Participant (and his or
her beneficiaries), the form in which such amounts are to be
paid, and the time of commencement for payment of such
amounts pursuant to Section 2(a) hereof;
(c) determine the entitlement of Plan Participants
and beneficiaries to benefits under the terms of the Plan
pursuant to Section 2(b) hereof;
(d) direct the Trustee to make payments to Plan
Participants and their beneficiaries pursuant to Section 2
hereof; and
(e) select a successor Trustee for the Trust if a
Trustee resigns or is removed on or within two years
following the date of a Change of Control of the Company
pursuant to Section 12.
Section 4. Trustee Responsibility Regarding Payments to
Trust Beneficiary when an Employer Is Insolvent.
(a) The Trustee shall cease payment of benefits to Plan
Participants and their beneficiaries if the Participants'
Employer is Insolvent. An Employer shall be considered
"Insolvent" for purposes of this Trust Agreement if (i) the
Employer is unable to pay its debts as they become due, or (ii)
the Employer is subject to a pending proceeding as a debtor under
the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as
provided in Section 1(d) hereof, the principal and income of each
Employer's Separate Account under the Trust shall be subject to
claims of general creditors of the Employer under federal and
state law as set forth below.
(1) The Board of Directors and the Chief Executive
Officer of an Employer shall have the duty to inform the
Trustee in writing of the Employer's Insolvency. If a
person claiming to be a creditor of an Employer alleges in
writing to the Trustee that the Employer has become
Insolvent, the Trustee shall determine whether the Employer
is Insolvent and, pending such determination, the Trustee
shall discontinue payment of benefits to the Employer's
respective Plan Participants or their beneficiaries.
(2) Unless the Trustee has actual knowledge of an
Employer's Insolvency, or has received notice from the
Employer or a person claiming to be a creditor alleging that
the Employer is Insolvent, the Trustee shall have no duty to
inquire whether the Employer is Insolvent. The Trustee may
in all events rely on such evidence concerning the
Employer's solvency as may be furnished to the Trustee and
that provides the Trustee with a reasonable basis for making
a determination concerning the Employer's solvency.
(3) If at any time the Trustee has determined that an
Employer is Insolvent, the Trustee shall discontinue
payments to the Employer's respective Plan Participants or
their beneficiaries and shall hold the assets of the
Employer's Separate Account under the Trust for the benefit
of the Employer's general creditors. Nothing in this Trust
Agreement shall in any way diminish any rights of Plan
Participants or their beneficiaries to pursue their rights
as general creditors of an Employer with respect to benefits
due under the Plan or otherwise.
(4) The Trustee shall resume the payment of benefits
to an Employer's respective Plan Participants or their
beneficiaries in accordance with Section 2 of this Trust
Agreement only after the Trustee has determined that the
Employer is not Insolvent (or is no longer Insolvent).
(c) Provided that there are sufficient assets in an
Employer's Separate Account under the Trust, if the Trustee
discontinues the payment of benefits from the Trust pursuant to
Section 4(b) hereof and subsequently resumes such payments, the
first payment following such discontinuance shall include the
aggregate amount of all payments due to Plan Participants or
their beneficiaries under the terms of the Plan for the period of
such discontinuance, less the aggregate amount of any payments
made to Plan Participants or their beneficiaries by the Employer
in lieu of the payments provided for hereunder during any such
period of discontinuance.
Section 5. Payments to the Employers.
(a) Except as provided in Sections 4 and 5(b) hereof, the
Employers shall have no right or power to direct the Trustee to
return to the Employers or to divert to others any of the Trust
assets before payment of all benefits have been made to Plan
Participants and their beneficiaries pursuant to the terms of the
Plan.
(b) To the extent that an Employer determines that the
value of the assets in its Separate Account under the Trust based
upon information provided to the Employer by the Trustee, at any
time, exceeds 110% of the present value of the benefits accrued
under the Plan by the Employer's respective Plan Participants,
the Trustee shall pay such excess to the Employer upon receipt of
written request therefor from the Company; provided, however,
that no such payment of excess assets to the Employer shall be
made on or within two years following the date of a Change of
Control of the Company.
Section 6. Investment Authority.
(a) The Trustee shall establish and maintain a separate
account within the Trust for each Employer (the "Separate
Account"). All amounts deposited with the Trustee by an Employer
shall be allocated to such Employer's Separate Account. The
Trustee shall invest, reinvest and administer the assets
allocated to each Employer's Separate Account under the Trust as
an individual, separate fund. At the end of each calendar year
and at such other times as the Company may determine, the Trustee
shall determine the fair market value of the assets of each
Employer's Separate Account. The Separate Account of each
Employer shall be adjusted to reflect the income collected,
realized and unrealized profits and losses, expenses and all
other transactions affecting such Separate Account for the
valuation period then ended.
(b) The Trustee shall have full power and authority to
invest and reinvest the assets of each Employer's Separate
Account, or any part thereof, in such stocks (common or
preferred), bonds, mortgages, notes, interest-bearing deposits
(including such deposits with any corporate trustee acting
hereunder), options and contracts for the future or immediate
receipt or delivery of property of any kind, or other securities,
producing or nonproducing oil and gas royalties and payments and
other producing and nonproducing interests in minerals, or in
commodities, life insurance policies, annuity contracts or other
property of any kind or nature whatsoever, whether real, personal
or mixed, as the Trustee, in the Trustee's absolute discretion
and judgment, deems appropriate for the Trust, and to hold cash
uninvested at any time and from time to time in such amounts and
to such extent as the Trustee, in the Trustee's absolute
discretion and judgment, deems appropriate for the Trust. The
Trustee shall have full power and authority to manage, handle,
invest, reinvest, sell for cash or credit, or for part cash or
part credit, exchange, hold, dispose of, lease for any period of
time (whether or not longer than the life of the Trust), improve,
repair, maintain, work, develop, use, operate, mortgage, or
pledge, all or any part of the assets and property from time to
time constituting any part of the trust funds held in trust under
the Trust; borrow or loan money or securities; write options and
sell securities or other property short or for future delivery;
engage in hedging procedures; buy and sell futures contracts;
execute obligations, negotiable and nonnegotiable; vote shares of
stock in person and by proxy, with or without power of
substitution; register investments in the name of a nominee;
sell, convey, lease and/or otherwise deal with any producing or
nonproducing oil, gas and mineral leases or mineral rights,
payments and royalties; pay all reasonable expenses; execute and
deliver any deeds, conveyances, leases, contracts, or written
instruments of any character appropriate to any of the powers or
duties of the Trustee, and shall, in general, have as broad power
respecting the management, operation and handling of the Trust
assets and property as if the Trustee were the owner of such
assets and property in the Trustee's own right. The preceding
provisions of this paragraph to the contrary notwithstanding, the
Company shall have the right and power at any time and from time
to time to give the Trustee broad guidelines within which it
shall invest the assets of the Trust; provided, however, that
upon a Change of Control of the Company and continuing for two
years thereafter, the Independent Committee, rather than the
Company, shall have the sole authority to exercise such right.
(c) All rights associated with assets of the Trust shall be
exercised by the Trustee or the person designated by the Trustee,
and shall in no event be exercisable by or rest with Plan
Participants.
(d) Each Employer shall have the right, at any time, and
from time to time in its sole discretion, to substitute assets of
equal fair market value for any asset held in its Separate
Account under the Trust provided, however, that effective upon a
Change of Control of the Company and for a period of two years
thereafter, any assets transferred to the Trust in substitution
for assets held in an Employer's Separate Account under the Trust
must consist of cash or marketable securities and the fair market
value of the respective assets shall be determined by the
Trustee. This right is exercisable by the Employer in a
nonfiduciary capacity without the approval or consent of any
person in a fiduciary capacity.
Section 7. Disposition of Income. During the term of this
Trust, all income received by the Trust, net of expenses and
taxes, shall be accumulated and reinvested.
Section 8. Accounting by Trustee. The Trustee shall keep
accurate and detailed records of all investments, receipts,
disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in
writing between the Company and the Trustee. Within 30 days
following the close of each calendar year and within 30 days
after the removal or resignation of the Trustee, the Trustee
shall deliver to the Company a written account of its
administration of the Trust and to each Employer a written
account of its administration of the Employer's Separate Account
during such year or during the period from the close of the last
preceding year to the date of such removal or resignation,
setting forth all investments, receipts, disbursements and other
transactions effected by it, including a description of all
securities and investments purchased and sold with the cost or
net proceeds of such purchases or sales (accrued interest paid or
receivable being shown separately), and showing all cash,
securities and other property held in the Trust at the end of
such year or as of the date of such removal or resignation, as
the case may be.
Section 9. Responsibility of the Trustee.
(a) The Trustee shall act with the care, skill, prudence
and diligence under the circumstances then prevailing that a
prudent person acting in like capacity and familiar with such
matters would use in the conduct of an enterprise of a like
character and with like aims; provided, however, that the Trustee
shall incur no liability to any person for any action taken
pursuant to a direction, request or approval given by an Employer
which is contemplated by, and in conformity with, the terms of
the Plan or this Trust and is given in writing by the Employer.
In the event of a dispute between an Employer and a party, the
Trustee may apply to a court of competent jurisdiction to resolve
the dispute.
(b) If the Trustee undertakes or defends any litigation
arising in connection with this Trust, the Employers agree to
indemnify the Trustee against the Trustee's costs, expenses and
liabilities (including, without limitation, attorneys' fees and
expenses) relating thereto and to be primarily liable for such
payments. If the Employers do not pay such costs, expenses and
liabilities in a reasonably timely manner, the Trustee may obtain
payment from the Trust.
(c) The Trustee may consult with legal counsel (who may
also be counsel for the Employers generally) with respect to any
of its duties or obligations hereunder.
(d) The Trustee may hire agents, accountants, actuaries,
investment advisors, financial consultants or other professionals
to assist it in performing any of its duties or obligations
hereunder.
(e) The Trustee shall have, without exclusion, all powers
conferred on trustees by applicable law, unless expressly
provided otherwise herein; provided, however, that except as
provided in Sections 5(b) and 6(d) hereof, if an insurance policy
is held as an asset of the Trust, the Trustee shall have no power
to name a beneficiary of the policy other than the Trust, to
assign the policy (as distinct from conversion of the policy to a
different form) other than to a successor Trustee, or to loan to
any person the proceeds of any borrowing against such policy.
(f) Notwithstanding any powers granted to the Trustee
pursuant to this Trust Agreement or applicable law, the Trustee
shall not have any power that could give this Trust the objective
of carrying on a business and dividing the gains therefrom,
within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal
Revenue Code.
Section 10. Compensation and Expenses of the Trustee. The
Trustee shall be paid such reasonable compensation commensurate
with the services and responsibilities involved hereunder as
shall from time to time be agreed upon by the Trustee and the
Company. The Employers shall pay all administrative and the
Trustee's fees and expenses, but, if not so paid, the fees and
expenses shall be paid from the Trust.
Section 11. Resignation and Removal of the Trustee.
(a) The Trustee may resign at any time by written notice to
the Company, which shall be effective 30 days after receipt of
such notice unless the Company and the Trustee agree otherwise.
(b) The Trustee may be removed by the Company on 30 days
notice or upon shorter notice accepted by the Trustee; provided,
however, that the Trustee may not be removed by the Company on or
within two years following a Change of Control of the Company
except with the written consent of a majority of the Participants
entitled to payment of benefits pursuant to the terms of the Plan
on the date of such Change of Control.
(c) Upon resignation or removal of the Trustee and
appointment of a successor Trustee, all assets shall subsequently
be transferred to the successor Trustee. The transfer shall be
completed within 30 days after receipt of notice of resignation,
removal or transfer, unless the Company extends the time limit.
(d) If the Trustee resigns or is removed, a successor shall
be appointed, in accordance with Section 12 hereof, by the
effective date of resignation or removal under paragraph(s) (a)
or (b) of this section. If no such appointment has been made,
the Trustee may apply to a court of competent jurisdiction for
appointment of a successor or for instructions. All expenses of
the Trustee in connection with the proceeding shall be allowed as
administrative expenses of the Trust.
Section 12. Appointment of Successor.
(a) If the Trustee resigns or is removed in accordance with
Section 11(a) or (b) hereof, the Company may appoint any third
party, such as a bank trust department or other party that may be
granted corporate trustee powers under state law, as a successor
to replace the Trustee upon resignation or removal; provided,
however, that if the Trustee resigns or is removed on or within
two years following the date of a Change of Control of the
Company, the Independent Committee shall select a successor
Trustee in accordance with this Section 12. The appointment
shall be effective when accepted in writing by the new Trustee,
who shall have all of the rights and powers of the former
Trustee, including ownership rights in the Trust assets. The
former Trustee shall execute any instrument necessary or
reasonably requested by the Company or the successor Trustee to
evidence the transfer.
(b) The successor Trustee need not examine the records and
acts of any prior Trustee and may retain or dispose of existing
Trust assets, subject to Sections 8 and 9 hereof. The successor
Trustee shall not be responsible for and the Employers shall
indemnify and defend the successor Trustee from any claim or
liability resulting from any action or inaction of any prior
Trustee or from any other past event, or any condition existing
at the time it becomes successor Trustee.
Section 13. Amendment or Termination.
(a) This Trust Agreement may be amended by a written
instrument executed by the Trustee and the Company.
Notwithstanding the foregoing, no such amendment shall conflict
with the terms of the Plan or shall make the Trust revocable.
(b) The Trust shall not terminate until the date on which
Plan Participants and their beneficiaries are no longer entitled
to benefits pursuant to the terms of the Plan. Upon termination
of the Trust any assets remaining in an Employer's Separate
Account under the Trust shall be returned to such Employer.
(c) Upon written approval of at least two-thirds of the
Participants and beneficiaries entitled to payment of benefits
pursuant to the terms of the Plan, the Company may terminate this
Trust prior to the time all benefit payments under the Plan have
been made. All assets in an Employer's Separate Account under
the Trust at termination shall be returned to such Employer.
(d) The Company may terminate this Trust with respect to
the Separate Account of any Employer with the written approval of
at least two-thirds of the Employer's respective Plan
Participants and beneficiaries who are entitled to payment of
benefits pursuant to the terms of the Plan. All assets in an
Employer's Separate Account under the Trust on the date of such
termination shall be returned to such Employer.
(e) This Trust Agreement may not be amended by the Company
on or within two years following the date of a Change of Control
of the Company, without the written consent of a majority of the
Participants entitled to payment of benefits pursuant to the
terms of the Plan on the date of such Change of Control.
Section 14. Miscellaneous.
(a) Any provision of this Trust Agreement prohibited by law
shall be ineffective to the extent of any such prohibition,
without invalidating the remaining provisions hereof.
(b) Benefits payable to Plan Participants and their
beneficiaries under this Trust Agreement may not be anticipated,
assigned (either at law or in equity), alienated, pledged,
encumbered or subjected to attachment, garnishment, levy,
execution or other legal or equitable process.
(c) This Trust Agreement shall be governed and construed in
accordance with the internal laws (and not the principles
relating to conflicts of laws) of the State of Texas, except
where superseded by federal law.
(d) Except where otherwise defined, capitalized terms used
herein shall have the meaning given to them in the Plan.
(e) In the event that a dispute arises between a Plan
Participant or beneficiary and the Participant's Employer, the
Company or the Trustee with respect to the payment of amounts
from the Trust and the Participant or beneficiary is successful
in pursuing a benefit to which he or she is entitled under the
terms of the Plan and this Trust against the Participant's
Employer, the Company, the Trustee or any other party in the
course of litigation or otherwise and incurs attorneys' fees,
expenses and costs in connection therewith, the Participant's
Employer shall reimburse the Plan Participant or beneficiary for
the full amount of any such attorneys' fees, expenses and costs.
(f) Upon the written consent of the Company delivered to
the Trustee, any other affiliate of the Company which adopts the
Plan may become a party to this Trust by delivering to the
Trustee a certified copy of a resolution of its board of
directors or other governing authority adopting this Trust. For
purposes of this Trust, any such affiliate which adopts this
Trust with the written consent of the Company shall be an
Employer hereunder.
IN WITNESS WHEREOF, this Agreement has been executed this
30th day of September, 1994, to be effective as of October 1,
1994.
ENSERCH CORPORATION
By /s/ D. W. Biegler
Title: Chairman, President
and Chief Executive
Officer
ENSERCH EXPLORATION, INC.
By /s/ D. W. Biegler
Title: Chairman and Chief
Executive Officer
NEW ENSERCH EXPLORATION, INC.
By /s/ D. W. Biegler
Title: Chairman and Chief
Executive Officer
ENSERCH DEVELOPMENT CORPORATION
By /s/ G. R. Bryan
Title: Chairman
LONE STAR ENERGY COMPANY
By /s/ D. W. Biegler
Title: Chairman and Chief
Executive Officer
ENSERCH GAS COMPANY
By /s/ D. W. Biegler
Title: Chairman and Chief
Executive Officer
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
By /s/ Karen Epps
Title:
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, a notary public in and
for said County and State, on this day personally appeared D. W.
Biegler, known to me to be the person whose name is subscribed to
the foregoing instrument and acknowledged to me that the same was
the act of the said ENSERCH CORPORATION, a Texas corporation, and
that he/she executed the same as the act of such corporation for
the purposes and consideration therein expressed, and in the
capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 23rd day of
September, 1994.
/s/ Cherry H. Sossamon
Notary Public, State of Texas
My Commission expires:
October 31, 1996
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, a notary public in and
for said County and State, on this day personally appeared D. W.
Biegler, known to me to be the person whose name is subscribed to
the foregoing instrument and acknowledged to me that the same was
the act of the said ENSERCH EXPLORATION, INC., a Delaware
corporation, and that he/she executed the same as the act of such
corporation for the purposes and consideration therein expressed,
and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 23rd day of
September, 1994.
/s/ Cherry H. Sossamon
Notary Public, State of Texas
My Commission expires:
October 31, 1996
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, a notary public in and
for said County and State, on this day personally appeared D. W.
Biegler, known to me to be the person whose name is subscribed to
the foregoing instrument and acknowledged to me that the same was
the act of the said NEW ENSERCH EXPLORATION, INC., a Texas
corporation, and that he/she executed the same as the act of such
corporation for the purposes and consideration therein expressed,
and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 23rd day of
September, 1994.
/s/ Cherry H. Sossamon
Notary Public, State of Texas
My Commission expires:
October 31, 1996
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, a notary public in and
for said County and State, on this day personally appeared G. R.
Bryan, known to me to be the person whose name is subscribed to the
foregoing instrument and acknowledged to me that the same was the
act of the said ENSERCH DEVELOPMENT CORPORATION, a Texas
corporation, and that he/she executed the same as the act of such
corporation for the purposes and consideration therein expressed,
and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 23rd day of
September, 1994.
/s/ Glynnda S. Rice
Notary Public, State of Texas
My Commission expires:
February 28, 1997
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, a notary public in and
for said County and State, on this day personally appeared D. W.
Biegler, known to me to be the person whose name is subscribed to
the foregoing instrument and acknowledged to me that the same was
the act of the said LONE STAR ENERGY COMPANY, a Texas corporation,
and that he/she executed the same as the act of such corporation
for the purposes and consideration therein expressed, and in the
capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 23rd day of
September, 1994.
/s/ Cherry H. Sossamon
Notary Public, State of Texas
My Commission expires:
October 31, 1996
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, a notary public in and
for said County and State, on this day personally appeared D. W.
Biegler, known to me to be the person whose name is subscribed to
the foregoing instrument and acknowledged to me that the same was
the act of the said ENSERCH GAS COMPANY, a Texas corporation, and
that he/she executed the same as the act of such corporation for
the purposes and consideration therein expressed, and in the
capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 23rd day of
September, 1994.
/s/ Cherry H. Sossamon
Notary Public, State of Texas
My Commission expires:
October 31, 1996
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, a notary public in and
for said County and State, on this day personally appeared Karen
Epps, known to me to be the person whose name is subscribed to the
foregoing instrument and acknowledged to me that the same was the
act of the said TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a
national banking association, and that he/she executed the same as
the act of such banking association for the purposes and
consideration therein expressed, and in the capacity therein
stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 7th day of
October, 1994.
/s/ Barbara Betik
Notary Public, State of Texas
My Commission expires:
January 30, 1997
APPENDIX A
TO THE
ENSERCH CORPORATION
RETIREMENT INCOME RESTORATION TRUST
Participating Subsidiaries
1. Enserch Exploration, Inc., a Delaware corporation
2. New Enserch Exploration, Inc., a Texas corporation
3. Enserch Development Corporation, a Texas corporation
4. Lone Star Energy Company, a Texas corporation
5. Enserch Gas Company, a Texas Corporation
<PAGE>
EXHIBIT 21
ENSERCH Corporation, its subsidiaries and their subsidiaries and
affiliates, respectively, on March 15, 1995, are listed below.
<TABLE>
<CAPTION>
State or Country
Name of Company of Incorporation
<S> <C>
ENSERCH Corporation Texas
Lone Star Gas Company of Texas, Inc. Texas
National Pipeline Company Texas
Enserch Gas Company Texas
Enserch Gas Transmission Company Texas
Lone Star Energy Company Texas
Fleet Star of Texas, L.C. (1) Texas
TRANSTAR Technology, L.C. (1) Texas
Lone Star Plant Analytical Services, Inc. Texas
Lone Star Energy Plant Operations, Inc. Texas
Lone Star Gas International, Inc. Texas
LSE Canton Operations, Inc. Texas
LS Energy, Inc. Texas
LS Services, Inc. Texas
Enserch Development Corporation Texas
Enserch Development Corporation One, Inc. Delaware
EDC Catskill Cogeneration, Inc. Delaware
EDC Four Inc. Delaware
Enserch Development Corporation Hamakua, Inc.Texas
Enserch Development Corporation Hawaii, Inc. Texas
EDC International Ltd. Cayman Islands
EDC International (Karnataka No. 1) Ltd.Cayman Islands
EDC Northwest Cogeneration, Inc. Delaware
EDC Palakkad Power Ltd. Cayman Islands
EDC Power Marketing, Inc. Texas
EDC Rio Hondo, Inc. Delaware
EDC Shaoxing Power Ltd. Cayman Islands
Canton Power Partners I, Inc. Texas
Canton Power Partners II, Inc. Texas
Ensat Cogeneration Company Texas
Enserch Exploration Holdings, Inc. Delaware
Enserch Exploration, Inc.(2) Texas
Enserch Oil and Gas, Inc. Texas
Enserch Offshore, Inc. Texas
Enserch International Oil and Gas, Inc. Texas
Enserch Far East Ltd. Cayman Islands
Enserch India, Inc. Texas
Enserch Malaysia Ltd. Cayman Islands
Enserch Middle East Ltd. Texas
Enserch (U.K.) Oil and Gas Limited United Kingdom
Enserch International Investments Limited Delaware
Earl & Wright Ltd.* United Kingdom
Enserch Holdings Limited* United Kingdom
Humphreys & Glasgow Limited* United Kingdom
Humphreys & Glasgow Malaysia Sdn. Bhd. Malaysia
Aleasco, Inc. Alaska
Enserch Capital L.L.C. Delaware
ENS Claims Management, Inc. Delaware
Enserch Finance, Inc. Texas
ENSERCH Finance N.V. Netherlands Antilles
ENS Holdings I, Inc. Texas
ENS Holdings, II, Inc. Texas
Enserch House, Inc. Texas
ENS Insurance Company Vermont
Enserch Preferred Capital, Inc. Delaware
Enserch Shirley, Inc. Delaware
Enserch E&C Holdings, Inc. Nevada
Enserch E&C, Inc. Nevada
ESICORP Industries Inc. (Delaware) Delaware
Ebasco B.V. Netherlands
Industrial Assistance Corporation Delaware
Ebasco Dorsch Consultants Inc. (3) Delaware
Enserch Engineers & Constructors, Inc. Texas
Ebasco Cayman Limited Cayman Islands
Ebasco Services Singapore Pte. Ltd.Singapore
Ebasco Energy A.G. Switzerland
Ebasco Espana, S.A.* (1) Spain
ESICORP Risk Management Consultants, Inc. New York
Associated Company Management of Ebasco LimitedBermuda
Ebasco Services of Canada Limited Canada
ESICORP Sales Inc. Delaware
Frank Moolin & Associates, Inc. Alaska
ESICORP Constructors International, Inc.* Delaware
ENS (U.K.) Limited United Kingdom
ENS Limited United Kingdom
Process Engineering International LimitedUnited Kingdom
Humphreys & Glasgow (Malaysia) Sdn. Bhd.Malaysia
ENS Equipment Corporation Delaware
Hittman ESICORP Associates Inc. Delaware
INDECS Corporation Delaware
E & L Technologies Inc. Delaware
E & L Engineering Inc. Delaware
E & L Associates, Inc. California
E & L International, Inc. California
Enserch Environmental Management Company, Inc.(4)Delaware
<FN>
* Company in liquidation.
(1) 50% owned by parent corporation.
(2) 0.77% owned by public shareholders.
(3) 80% owned by parent corporation.
(4) 67% owned by parent corporation.
(5) 99.65% owned by Enserch Financing, L.P. and .35% owned by ENS Holdings Limited
Partnership.
</FN>
</TABLE>
Except as noted above, the voting stock of each subsidiary company and
their subsidiaries and affiliates is wholly owned (100%) by its parent.
The financial statements of each subsidiary are included in the consolidated
financial statements except that the equity method of accounting is used
for subsidiaries in which the Corporation has 50% or less ownership. Such
unconsolidated subsidiaries considered in the aggregate do not constitute a
significant subsidiary.
<TABLE>
Partnership Affiliates
<CAPTION>
State of
Name of Company Organization
<S> <C>
Enserch Financing, L.P. Texas
nserch SACROC, Inc. (5) Texas
Encogen One Partners, Ltd. Texas
Encogen Hawaii, L.P. Hawaii
Encogen Four Partners, L.P. Delaware
Encogen Frederickson, L.P. Delaware
Encogen Northwest, L.P. Delaware
ENS Holdings Limited Partnership Texas
Gulf Coast Natural Gas Company** Texas
Lavair Cogeneration Limited Partnership Delaware
FinaStar Partnership** Texas
Canton Power, L.P. Texas
<FN>
**General partnership.
</FN>
</TABLE>
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
ENSERCH Corporation:
We consent to the incorporation by reference in Registration
Statements No. 2-59259, No. 33-47911, No. 33-40589 and No. 2-77572
on Form S-8 and in Registration Statements No. 33-15623 and No.
33-52525 of ENSERCH Corporation on Form S-3 of our report dated
February 10, 1995, appearing in this Annual Report on Form 10-K of
ENSERCH Corporation for the year ended December 31, 1994.
DELOITTE & TOUCHE LLP
Dallas, Texas
March 29, 1995
<PAGE>
EXHIBIT 23.2
DeGolyer and MacNaughton
One Energy Square
Dallas, Texas 75206
March 29, 1995
ENSERCH Corporation
ENSERCH Center
300 South St. Paul Street
Dallas, Texas 75201
Gentlemen:
We hereby consent to (a) the use of information from our
"Report as of January 1, 1995 on Proved Reserves of the SACROC
Unit, Kelly Snyder Field in Scurry County, Texas owned by ENSERCH
Corporation," "Report as of January 1, 1995 on Proved and Probable
Reserves of Certain Properties owned by Enserch Exploration, Inc.,"
and "Report as of January 1, 1995 on the Proved, Probable, and
Possible Reserves of the MUDI Field in East Java, Republic of
Indonesia attributable to Enserch Far East, Ltd." and to references
to us in "Properties" appearing in Part I, and to the reference to
us in "Financial Review" and in Note 8 of the Notes to Consolidated
Financial Statements appearing in Appendix A, of your Annual Report
on Form 10-K for the fiscal year ended December 31, 1994, and
(b) the incorporation by reference in Registration Statements No.
2-59259, No. 2-77572, No. 33-40589, and No. 33-47911, each on Form
S-8, and Registration Statements No. 33-15623 and No. 33-52525,
each on Form S-3 of the references to us described in (a) above.
Very truly yours,
DeGOLYER and MacNAUGHTON
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
WHEREAS, ENSERCH Corporation, a Texas corporation (the
"Corporation"), intends to file with the Securities and Exchange
Commission (the "Commission") under the Securities Exchange Act of
1934, as amended, an Annual Report on Form 10-K for the year ended
December 31, 1994, with such amendment or amendments thereto in
each case as may be necessary or appropriate, together with any and
all exhibits and other documents having relation to said Form 10-K;
NOW, THEREFORE, the undersigned in his capacity as a director
or officer or both, as the case may be, of the Corporation, does
hereby appoint W. T. Satterwhite or S. R. Singer, and each of them
severally, his true and lawful attorney or attorneys with power to
act with or without the other and with full power of substitution
and resubstitution, to execute in his name, place and stead in his
capacity as a director, officer or both, as the case may be, of the
Corporation, said Form 10-K and any and all amendments thereto and
all instruments necessary or incidental in connection therewith and
to file the same with the Commission. Each of said attorneys shall
have full power and authority to do and perform in the name and on
behalf of the undersigned in any and all capacities every act
whatsoever necessary or desirable to be done in the premises as
fully and to all intents and purposes as the undersigned might or
could do in person, the undersigned hereby ratifying and approving
the acts of said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has executed this
instrument on this 14th day of February, 1995.
/s/ D. W. Biegler
______________________________
D. W. Biegler
<PAGE>
POWER OF ATTORNEY
WHEREAS, ENSERCH Corporation, a Texas corporation (the
"Corporation"), intends to file with the Securities and Exchange
Commission (the "Commission") under the Securities Exchange Act of
1934, as amended, an Annual Report on Form 10-K for the year ended
December 31, 1994, with such amendment or amendments thereto in
each case as may be necessary or appropriate, together with any and
all exhibits and other documents having relation to said Form 10-K;
NOW, THEREFORE, the undersigned in his capacity as a director
of the Corporation, does hereby appoint D. W. Biegler, W. T.
Satterwhite or S. R. Singer, and each of them severally, his true
and lawful attorney or attorneys with power to act with or without
the other and with full power of substitution and resubstitution,
to execute in his name, place and stead in his capacity as a
director of the Corporation, said Form 10-K and any and all
amendments thereto and all instruments necessary or incidental in
connection therewith and to file the same with the Commission.
Each of said attorneys shall have full power and authority to do
and perform in the name and on behalf of the undersigned in any and
all capacities every act whatsoever necessary or desirable to be
done in the premises as fully and to all intents and purposes as
the undersigned might or could do in person, the undersigned hereby
ratifying and approving the acts of said attorneys and each of
them.
IN WITNESS WHEREOF, the undersigned has executed this
instrument on this 14th day of February, 1995.
/s/ Frederick S. Addy
______________________________
Frederick S. Addy
<PAGE>
POWER OF ATTORNEY
WHEREAS, ENSERCH Corporation, a Texas corporation (the
"Corporation"), intends to file with the Securities and Exchange
Commission (the "Commission") under the Securities Exchange Act of
1934, as amended, an Annual Report on Form 10-K for the year ended
December 31, 1994, with such amendment or amendments thereto in
each case as may be necessary or appropriate, together with any and
all exhibits and other documents having relation to said Form 10-K;
NOW, THEREFORE, the undersigned in his capacity as a director
of the Corporation, does hereby appoint D. W. Biegler, W. T.
Satterwhite or S. R. Singer, and each of them severally, his true
and lawful attorney or attorneys with power to act with or without
the other and with full power of substitution and resubstitution,
to execute in his name, place and stead in his capacity as a
director of the Corporation, said Form 10-K and any and all
amendments thereto and all instruments necessary or incidental in
connection therewith and to file the same with the Commission.
Each of said attorneys shall have full power and authority to do
and perform in the name and on behalf of the undersigned in any and
all capacities every act whatsoever necessary or desirable to be
done in the premises as fully and to all intents and purposes as
the undersigned might or could do in person, the undersigned hereby
ratifying and approving the acts of said attorneys and each of
them.
IN WITNESS WHEREOF, the undersigned has executed this
instrument on this 14th day of February, 1995.
/s/ William B. Boyd
______________________________
William B. Boyd
<PAGE>
POWER OF ATTORNEY
WHEREAS, ENSERCH Corporation, a Texas corporation (the
"Corporation"), intends to file with the Securities and Exchange
Commission (the "Commission") under the Securities Exchange Act of
1934, as amended, an Annual Report on Form 10-K for the year ended
December 31, 1994, with such amendment or amendments thereto in
each case as may be necessary or appropriate, together with any and
all exhibits and other documents having relation to said Form 10-K;
NOW, THEREFORE, the undersigned in his capacity as a director
of the Corporation, does hereby appoint D. W. Biegler, W. T.
Satterwhite or S. R. Singer, and each of them severally, his true
and lawful attorney or attorneys with power to act with or without
the other and with full power of substitution and resubstitution,
to execute in his name, place and stead in his capacity as a
director of the Corporation, said Form 10-K and any and all
amendments thereto and all instruments necessary or incidental in
connection therewith and to file the same with the Commission.
Each of said attorneys shall have full power and authority to do
and perform in the name and on behalf of the undersigned in any and
all capacities every act whatsoever necessary or desirable to be
done in the premises as fully and to all intents and purposes as
the undersigned might or could do in person, the undersigned hereby
ratifying and approving the acts of said attorneys and each of
them.
IN WITNESS WHEREOF, the undersigned has executed this
instrument on this 14th day of February, 1995.
/s/ B. A. Bridgewater, Jr.
______________________________
B. A. Bridgewater, Jr.
<PAGE>
POWER OF ATTORNEY
WHEREAS, ENSERCH Corporation, a Texas corporation (the
"Corporation"), intends to file with the Securities and Exchange
Commission (the "Commission") under the Securities Exchange Act of
1934, as amended, an Annual Report on Form 10-K for the year ended
December 31, 1994, with such amendment or amendments thereto in
each case as may be necessary or appropriate, together with any and
all exhibits and other documents having relation to said Form 10-K;
NOW, THEREFORE, the undersigned in his capacity as a director
of the Corporation, does hereby appoint D. W. Biegler, W. T.
Satterwhite or S. R. Singer, and each of them severally, his true
and lawful attorney or attorneys with power to act with or without
the other and with full power of substitution and resubstitution,
to execute in his name, place and stead in his capacity as a
director of the Corporation, said Form 10-K and any and all
amendments thereto and all instruments necessary or incidental in
connection therewith and to file the same with the Commission.
Each of said attorneys shall have full power and authority to do
and perform in the name and on behalf of the undersigned in any and
all capacities every act whatsoever necessary or desirable to be
done in the premises as fully and to all intents and purposes as
the undersigned might or could do in person, the undersigned hereby
ratifying and approving the acts of said attorneys and each of
them.
IN WITNESS WHEREOF, the undersigned has executed this
instrument on this 14th day of February, 1995.
/s/ Lawrence E. Fouraker
______________________________
Lawrence E. Fouraker
<PAGE>
POWER OF ATTORNEY
WHEREAS, ENSERCH Corporation, a Texas corporation (the
"Corporation"), intends to file with the Securities and Exchange
Commission (the "Commission") under the Securities Exchange Act of
1934, as amended, an Annual Report on Form 10-K for the year ended
December 31, 1994, with such amendment or amendments thereto in
each case as may be necessary or appropriate, together with any and
all exhibits and other documents having relation to said Form 10-K;
NOW, THEREFORE, the undersigned in his capacity as a director
of the Corporation, does hereby appoint D. W. Biegler, W. T.
Satterwhite or S. R. Singer, and each of them severally, his true
and lawful attorney or attorneys with power to act with or without
the other and with full power of substitution and resubstitution,
to execute in his name, place and stead in his capacity as a
director of the Corporation, said Form 10-K and any and all
amendments thereto and all instruments necessary or incidental in
connection therewith and to file the same with the Commission.
Each of said attorneys shall have full power and authority to do
and perform in the name and on behalf of the undersigned in any and
all capacities every act whatsoever necessary or desirable to be
done in the premises as fully and to all intents and purposes as
the undersigned might or could do in person, the undersigned hereby
ratifying and approving the acts of said attorneys and each of
them.
IN WITNESS WHEREOF, the undersigned has executed this
instrument on this 14th day of February, 1995.
/s/ Preston M. Geren, Jr.
______________________________
Preston M. Geren, Jr.
<PAGE>
POWER OF ATTORNEY
WHEREAS, ENSERCH Corporation, a Texas corporation (the
"Corporation"), intends to file with the Securities and Exchange
Commission (the "Commission") under the Securities Exchange Act of
1934, as amended, an Annual Report on Form 10-K for the year ended
December 31, 1994, with such amendment or amendments thereto in
each case as may be necessary or appropriate, together with any and
all exhibits and other documents having relation to said Form 10-K;
NOW, THEREFORE, the undersigned in his capacity as a director
of the Corporation, does hereby appoint D. W. Biegler, W. T.
Satterwhite or S. R. Singer, and each of them severally, his true
and lawful attorney or attorneys with power to act with or without
the other and with full power of substitution and resubstitution,
to execute in his name, place and stead in his capacity as a
director of the Corporation, said Form 10-K and any and all
amendments thereto and all instruments necessary or incidental in
connection therewith and to file the same with the Commission.
Each of said attorneys shall have full power and authority to do
and perform in the name and on behalf of the undersigned in any and
all capacities every act whatsoever necessary or desirable to be
done in the premises as fully and to all intents and purposes as
the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorneys and each
of them.
IN WITNESS WHEREOF, the undersigned has executed this
instrument on this 14th day of February, 1995.
/s/ Marvin J. Girouard
______________________________
Marvin J. Girouard
<PAGE>
POWER OF ATTORNEY
WHEREAS, ENSERCH Corporation, a Texas corporation (the
"Corporation"), intends to file with the Securities and Exchange
Commission (the "Commission") under the Securities Exchange Act of
1934, as amended, an Annual Report on Form 10-K for the year ended
December 31, 1994, with such amendment or amendments thereto in
each case as may be necessary or appropriate, together with any and
all exhibits and other documents having relation to said Form 10-K;
NOW, THEREFORE, the undersigned in his capacity as a director
of the Corporation, does hereby appoint D. W. Biegler, W. T.
Satterwhite or S. R. Singer, and each of them severally, his true
and lawful attorney or attorneys with power to act with or without
the other and with full power of substitution and resubstitution,
to execute in his name, place and stead in his capacity as a
director of the Corporation, said Form 10-K and any and all
amendments thereto and all instruments necessary or incidental in
connection therewith and to file the same with the Commission.
Each of said attorneys shall have full power and authority to do
and perform in the name and on behalf of the undersigned in any and
all capacities every act whatsoever necessary or desirable to be
done in the premises as fully and to all intents and purposes as
the undersigned might or could do in person, the undersigned hereby
ratifying and approving the acts of said attorneys and each of
them.
IN WITNESS WHEREOF, the undersigned has executed this
instrument on this 14th day of February, 1995.
/s/ Joseph M. Haggar, Jr.
______________________________
Joseph M. Haggar, Jr.
<PAGE>
POWER OF ATTORNEY
WHEREAS, ENSERCH Corporation, a Texas corporation (the
"Corporation"), intends to file with the Securities and Exchange
Commission (the "Commission") under the Securities Exchange Act of
1934, as amended, an Annual Report on Form 10-K for the year ended
December 31, 1994, with such amendment or amendments thereto in
each case as may be necessary or appropriate, together with any and
all exhibits and other documents having relation to said Form 10-K;
NOW, THEREFORE, the undersigned in his capacity as a director
of the Corporation, does hereby appoint D. W. Biegler, W. T.
Satterwhite or S. R. Singer, and each of them severally, his true
and lawful attorney or attorneys with power to act with or without
the other and with full power of substitution and resubstitution,
to execute in his name, place and stead in his capacity as a
director of the Corporation, said Form 10-K and any and all
amendments thereto and all instruments necessary or incidental in
connection therewith and to file the same with the Commission.
Each of said attorneys shall have full power and authority to do
and perform in the name and on behalf of the undersigned in any and
all capacities every act whatsoever necessary or desirable to be
done in the premises as fully and to all intents and purposes as
the undersigned might or could do in person, the undersigned hereby
ratifying and approving the acts of said attorneys and each of
them.
IN WITNESS WHEREOF, the undersigned has executed this
instrument on this 14th day of February, 1995.
/s/ W. C. McCord
______________________________
W. C. McCord<PAGE>
POWER OF ATTORNEY
WHEREAS, ENSERCH Corporation, a Texas corporation (the
"Corporation"), intends to file with the Securities and Exchange
Commission (the "Commission") under the Securities Exchange Act of
1934, as amended, an Annual Report on Form 10-K for the year ended
December 31, 1994, with such amendment or amendments thereto in
each case as may be necessary or appropriate, together with any and
all exhibits and other documents having relation to said Form 10-K;
NOW, THEREFORE, the undersigned in her capacity as a director
of the Corporation, does hereby appoint D. W. Biegler, W. T.
Satterwhite or S. R. Singer, and each of them severally, her true
and lawful attorney or attorneys with power to act with or without
the other and with full power of substitution and resubstitution,
to execute in her name, place and stead in her capacity as a
director of the Corporation, said Form 10-K and any and all
amendments thereto and all instruments necessary or incidental in
connection therewith and to file the same with the Commission.
Each of said attorneys shall have full power and authority to do
and perform in the name and on behalf of the undersigned in any and
all capacities every act whatsoever necessary or desirable to be
done in the premises as fully and to all intents and purposes as
the undersigned might or could do in person, the undersigned hereby
ratifying and approving the acts of said attorneys and each of
them.
IN WITNESS WHEREOF, the undersigned has executed this
instrument on this 14th day of February, 1995.
/s/ Diana S. Natalicio
______________________________
Diana S. Natalicio
<PAGE>
POWER OF ATTORNEY
WHEREAS, ENSERCH Corporation, a Texas corporation (the
"Corporation"), intends to file with the Securities and Exchange
Commission (the "Commission") under the Securities Exchange Act of
1934, as amended, an Annual Report on Form 10-K for the year ended
December 31, 1994, with such amendment or amendments thereto in
each case as may be necessary or appropriate, together with any and
all exhibits and other documents having relation to said Form 10-K;
NOW, THEREFORE, the undersigned in his capacity as a director
of the Corporation, does hereby appoint D. W. Biegler, W. T.
Satterwhite or S. R. Singer, and each of them severally, his true
and lawful attorney or attorneys with power to act with or without
the other and with full power of substitution and resubstitution,
to execute in his name, place and stead in his capacity as a
director of the Corporation, said Form 10-K and any and all
amendments thereto and all instruments necessary or incidental in
connection therewith and to file the same with the Commission.
Each of said attorneys shall have full power and authority to do
and perform in the name and on behalf of the undersigned in any and
all capacities every act whatsoever necessary or desirable to be
done in the premises as fully and to all intents and purposes as
the undersigned might or could do in person, the undersigned hereby
ratifying and approving the acts of said attorneys and each of
them.
IN WITNESS WHEREOF, the undersigned has executed this
instrument on this 14th day of February, 1995.
/s/ W. Ray Wallace
______________________________
W. Ray Wallace
<PAGE>
POWER OF ATTORNEY
WHEREAS, ENSERCH Corporation, a Texas corporation (the
"Corporation"), intends to file with the Securities and Exchange
Commission (the "Commission") under the Securities Exchange Act of
1934, as amended, an Annual Report on Form 10-K for the year ended
December 31, 1994, with such amendment or amendments thereto in
each case as may be necessary or appropriate, together with any and
all exhibits and other documents having relation to said Form 10-K;
NOW, THEREFORE, the undersigned in his capacity as an officer
of the Corporation, does hereby appoint D. W. Biegler or W. T.
Satterwhite, and each of them severally, his true and lawful
attorney or attorneys with power to act with or without the other
and with full power of substitution and resubstitution, to execute
in his name, place and stead in his capacity as an officer of the
Corporation, said Form 10-K and any and all amendments thereto and
all instruments necessary or incidental in connection therewith and
to file the same with the Commission. Each of said attorneys shall
have full power and authority to do and perform in the name and on
behalf of the undersigned in any and all capacities every act
whatsoever necessary or desirable to be done in the premises as
fully and to all intents and purposes as the undersigned might or
could do in person, the undersigned hereby ratifying and approving
the acts of said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has executed this
instrument on this 14th day of February, 1995.
/s/ S. R. Singer
______________________________
S. R. Singer
<PAGE>
POWER OF ATTORNEY
WHEREAS, ENSERCH Corporation, a Texas corporation (the
"Corporation"), intends to file with the Securities and Exchange
Commission (the "Commission") under the Securities Exchange Act of
1934, as amended, an Annual Report on Form 10-K for the year ended
December 31, 1994, with such amendment or amendments thereto in
each case as may be necessary or appropriate, together with any and
all exhibits and other documents having relation to said Form 10-K;
NOW, THEREFORE, the undersigned in his capacity as an officer
of the Corporation, does hereby appoint D. W. Biegler, W. T.
Satterwhite or S. R. Singer, and each of them severally, his true
and lawful attorney or attorneys with power to act with or without
the other and with full power of substitution and resubstitution,
to execute in his name, place and stead in his capacity as an
officer of the Corporation, said Form 10-K and any and all
amendments thereto and all instruments necessary or incidental in
connection therewith and to file the same with the Commission.
Each of said attorneys shall have full power and authority to do
and perform in the name and on behalf of the undersigned in any and
all capacities every act whatsoever necessary or desirable to be
done in the premises as fully and to all intents and purposes as
the undersigned might or could do in person, the undersigned hereby
ratifying and approving the acts of said attorneys and each of
them.
IN WITNESS WHEREOF, the undersigned has executed this
instrument on this 14th day of February, 1995.
/s/ J. W. Pinkerton
______________________________
J. W. Pinkerton
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS INCLUDED IN THE CORPORATION'S FORM 10-K FOR THE YEAR ENDED DECEMBER
31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000033015
<NAME> ENSERCH CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 2,885
<SECURITIES> 0
<RECEIVABLES> 193,385
<ALLOWANCES> 4,686
<INVENTORY> 114,862
<CURRENT-ASSETS> 490,593
<PP&E> 3,802,282
<DEPRECIATION> 1,549,717
<TOTAL-ASSETS> 2,846,299
<CURRENT-LIABILITIES> 651,594
<BONDS> 714,324
<COMMON> 725,470
0
175,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,846,299
<SALES> 0
<TOTAL-REVENUES> 1,857,431
<CGS> 0
<TOTAL-COSTS> 1,769,982
<OTHER-EXPENSES> (6,506)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 68,242
<INCOME-PRETAX> 12,701
<INCOME-TAX> (68,974)
<INCOME-CONTINUING> 81,675
<DISCONTINUED> 20,642
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 102,317
<EPS-PRIMARY> 1.36
<EPS-DILUTED> 1.36
</TABLE>
